AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 16, 1994
SECURITIES ACT FILE NO. 33-53887
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. 1 [X]
POST-EFFECTIVE AMENDMENT NO. [_]
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 1 [X]
(CHECK APPROPRIATE BOX OR BOXES)
----------------
|
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
(ADDRESS OF PRINCIPAL (ZIP CODE)
EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (609) 282-2800
ARTHUR ZEIKEL
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
800 SCUDDERS MILL ROAD, PLAINSBORO, NEW JERSEY
MAILING ADDRESS: P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPIES TO:
COUNSEL FOR THE PROGRAM: MARK B. GOLDFUS, ESQ.
BROWN & WOOD MERRILL LYNCH ASSET
ONE WORLD TRADE CENTER MANAGEMENT
NEW YORK, NEW YORK 10048-0557 P.O. BOX 9011
ATTENTION: THOMAS R. SMITH, JR., ESQ. PRINCETON, N.J. 08543-9011
----------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
|
the effective date of the registration statement.
THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF SHARES OF COMMON STOCK UNDER THE SECURITIES ACT OF 1933 PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT OF 1940.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
N-1A ITEM NO. LOCATION
------------- --------
PART A
Item 1. Cover Page.............. Cover Page
Item 2. Synopsis................ Fee Table
Item 3. Condensed Financial
Information............. Not Applicable
Item 4. General Description of
Registrant.............. Investment Objectives and Policies;
Additional Information
Item 5. Management of the Fund.. Fee Table; Management of the Program;
Portfolio Transactions and Brokerage;
Inside Back Cover Page
Item 5A. Management's Discussion
of Fund Performance..... Not Applicable
Item 6. Capital Stock and Other
Securities.............. Cover Page; Additional Information
Item 7. Purchase of Securities
Being Offered........... Cover Page; Fee Table; Merrill Lynch
Select Pricing SM System; Purchase of
Shares; Shareholder Services; Additional
Information; Inside Back Cover Page
Item 8. Redemption or
Repurchase.............. Fee Table; Merrill Lynch Select Pricing SM
System; Purchase of Shares; Shareholder
Services; Redemption of Shares
Item 9. Pending Legal
Proceedings............. Not Applicable
PART B
Item 10. Cover Page.............. Cover Page
Item 11. Table of Contents....... Back Cover Page
Item 12. General Information and
History................. Not Applicable
Item 13. Investment Objectives
and Policies............ Investment Objectives and Policies
Item 14. Management of the Fund.. Management of the Fund
Item 15. Control Persons and
Principal Holders of
Securities.............. Management of the Program
Item 16. Investment Advisory and
Other Services.......... Management of the Program; Purchase of
Shares; General Information
Item 17. Brokerage Allocation and
Other Practices......... Portfolio Transactions and Brokerage
Item 18. Capital Stock and Other
Securities.............. General Information
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered........... Purchase of Shares; Redemption of Shares;
Determination of Net Asset Value;
Shareholder Services
Item 20. Tax Status.............. Dividends, Distributions and Taxes
Item 21. Underwriters............ Purchase of Shares
Item 22. Calculation of
Performance Data........ Performance Data
Item 23. Financial Statements.... Independent Auditors' Reports; Statements
of Assets and Liabilities
PART C
|
Information required to be included in Part C is set forth under the appropriate Item, so numbered, in Part C to this Registration Statement.
PROSPECTUS
DECEMBER , 1994
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
FUNDAMENTAL VALUE PORTFOLIO QUALITY U.S. GOVERNMENT SECURITIES PORTFOLIO
BOND PORTFOLIO GLOBAL OPPORTUNITY PORTFOLIO
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 . PHONE NO. (609) 282-2800
Merrill Lynch Retirement Asset Builder Program, Inc. (the "Program") is a professionally managed, open-end investment company. The Program consists of four separate portfolios: the Fundamental Value Portfolio, the Quality Bond Portfolio, the U.S. Government Securities Portfolio and the Global Opportunity Portfolio (each a "Portfolio"). Each Portfolio has its own separate investment objectives and may employ a variety of instruments and techniques to enhance income and to hedge against market risk and, in the case of the Fundamental Value and Global Opportunity Portfolios, currency risk. Investments on an international basis involve risks not typically associated with investments in domestic securities. See "Risk Factors and Special Considerations". There can be no assurance that the investment objectives of any Portfolio will be achieved.
(Cover continues on next page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus is a concise statement of information about the Program that is relevant to making an investment in the Program. This Prospectus should be retained for future reference. A statement containing additional information about the Program, dated December , 1994 (the "Statement of Additional Information"), has been filed with the Securities and Exchange Commission and can be obtained without charge, by calling or by writing the Program at the above telephone number or address. The Statement of Additional Information is hereby incorporated by reference into this Prospectus.
MERRILL LYNCH ASSET MANAGEMENT--INVESTMENT ADVISER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.--DISTRIBUTOR
Each Portfolio is a separate series of the Program issuing its own shares pursuant to the Merrill Lynch Select Pricing SM System. Each Portfolio offers four classes of shares, each with a different combination of sales charges, ongoing fees and other features. The Merrill Lynch Select Pricing SM System permits an investor to choose the method of purchasing shares that the investor believes is most beneficial given the amount of the purchase, the length of time the investor expects to hold the shares and other relevant circumstances. See "Merrill Lynch Select Pricing SM System" on page 8.
Shares of each Portfolio are available for purchase solely by holders of individual retirement plans, individual retirement rollover accounts and simplified employee pension plans (collectively "IRAs") for which Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") acts as custodian. Merrill Lynch has advised the Program that it will not charge an annual account fee upon any IRA which participates in the Merrill Lynch Retirement Asset Builder SM Service, receives additional contributions of at least $250 annually and is invested solely in one or more of the Program's Portfolios or a money market fund advised by Merrill Lynch Asset Management, L.P. ("MLAM" or the "Investment Adviser"), or its affiliates. The minimum initial purchase in any Portfolio is $100 and the minimum subsequent purchase is $1. Merrill Lynch may charge its customers a processing fee (presently $4.85) for confirming purchases and repurchases. See "Purchase of Shares" and "Redemption of Shares". The holder of each IRA is responsible for making investment decisions concerning the funds contributed to his or her IRA.
To permit the Program to invest the net proceeds from the sale of its shares in an orderly manner, the Program may, from time to time, suspend the sale of its shares, except for dividend reinvestments.
FEE TABLE
A general comparison of the sales arrangements and other nonrecurring and recurring expenses applicable to shares of each of the Portfolios follows:
FUNDAMENTAL VALUE PORTFOLIO QUALITY BOND PORTFOLIO
------------------------------------------------- -------------------------------------------------
CLASS A(A) CLASS B(B) CLASS C CLASS D CLASS A(A) CLASS B(B) CLASS C CLASS D
---------- ------------------- -------- --------- ---------- ------------------- -------- ---------
SHAREHOLDER
TRANSACTION
EXPENSES:
Maximum Sales
Charge Imposed on
Purchases (as a
percentage of
offering price).... 5.25%(c) None None 5.25%(c) 4.00%(c) None None 4.00%(c)
Sales Charge
Imposed on
Dividend
Reinvestments...... None None None None None None None None
Deferred Sales
Charge (as a
percentage of None(d) 4.0% during 1.0% for None(d) None(d) 4.0% during 1.0% for None(d)
original purchase the first year, one year the first year, one year
price or decreasing 1.0% decreasing 1.0%
redemption annually thereafter annually thereafter
proceeds, to 0.0% after to 0.0% after
whichever is the fourth year the fourth year
lower).............
Exchange Fee....... None None None None None None None None
ANNUAL PROGRAM
OPERATING EXPENSES
(AS A PERCENTAGE OF
AVERAGE NET
ASSETS)(E):
Investment
Advisory Fees(f)... 0.65% 0.65% 0.65% 0.65% 0.50% 0.50% 0.50% 0.50%
12b-1 Fees(g):
Account
Maintenance Fees. None 0.25% 0.25% 0.25% None 0.25% 0.25% 0.25%
Distribution
Fees............. None 0.75%(i) 0.75% None None 0.50%(j) 0.55% None
Other Expenses:
Custodial Fees... 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02%
Shareholder Ser-
vicing Costs(h).. 0.26% 0.26% 0.26% 0.26% 0.26% 0.26% 0.26% 0.26%
Other............ 0.20% 0.20% 0.20% 0.20% 0.21% 0.21% 0.21% 0.21%
---- ---- ---- ---- ---- ---- ---- ----
Total Other Ex-
penses........... 0.48% 0.48% 0.48% 0.48% 0.49% 0.49% 0.49% 0.49%
Total Portfolio ---- ---- ---- ---- ---- ---- ---- ----
Operating Ex-
penses............. 1.13% 2.13% 2.13% 1.38% 0.99% 1.74% 1.79% 1.24%
==== ==== ==== ==== ==== ==== ==== ====
|
(footnotes appear on next page)
U.S. GOVERNMENT SECURITIES PORTFOLIO GLOBAL OPPORTUNITY PORTFOLIO
------------------------------------------------- -------------------------------------------------
CLASS A(A) CLASS B(B) CLASS C CLASS D CLASS A(A) CLASS B(B) CLASS C CLASS D
---------- ------------------- -------- --------- ---------- ------------------- -------- ---------
SHAREHOLDER
TRANSACTION
EXPENSES:
Maximum Sales
Charge Imposed on
Purchases (as a
percentage of
offering price)... 4.00%(c) None None 4.00%(c) 5.25%(c) None None 5.25%(c)
Sales Charge
Imposed on
Dividend
Reinvestments..... None None None None None None None None
Deferred Sales
Charge (as a
percentage of None(d) 4.0% during 1.0% for None(d) None(d) 4.0% during 1.0% for None(d)
original purchase the first year, one year the first year, one year
price or decreasing 1.0% decreasing 1.0%
redemption annually thereafter annually thereafter
proceeds, to 0.0% after to 0.0% after
whichever is the fourth year the fourth year
lower)............
Exchange Fee....... None None None None None None None None
ANNUAL PROGRAM
OPERATING EXPENSES
(AS A PERCENTAGE OF
AVERAGE NET
ASSETS)(E):
Investment
Advisory
Fees(f)........... 0.50% 0.50% 0.50% 0.50% 0.75% 0.75% 0.75% 0.75%
12b-1 Fees(g):
Account
Maintenance
Fees............ None 0.25% 0.25% 0.25% None 0.25% 0.25% 0.25%
Distribution
Fees............ None 0.50%(j) 0.55% None None 0.75%(i) 0.75% None
Other Expenses:
Custodial Fees... 0.02% 0.02% 0.02% 0.02% 0.08% 0.08% 0.08% 0.08%
Shareholder Ser-
vicing Costs(h). 0.26% 0.26% 0.26% 0.26% 0.26% 0.26% 0.26% 0.26%
Other............ 0.21% 0.21% 0.21% 0.21% 0.20% 0.20% 0.20% 0.20%
---- ---- ---- ---- ---- ---- ---- ----
Total Other Ex-
penses.......... 0.49% 0.49% 0.49% 0.49% 0.54% 0.54% 0.54% 0.54%
Total Portfolio ---- ---- ---- ---- ---- ---- ---- ----
Operating Ex-
penses............ 0.99% 1.74% 1.79% 1.24% 1.29% 2.29% 2.29% 1.54%
==== ==== ==== ==== ==== ==== ==== ====
|
(a) Class A shares are sold to a limited group of investors including existing Class A shareholders. See "Purchase of Shares--Initial Sales Charge Alternatives--Class A and Class D Shares"--page 34.
(b) Class B shares convert to Class D shares automatically approximately eight years after initial purchase for the Fundamental Value and Global Opportunity Portfolios and approximately ten years after initial purchase for the Quality Bond and U.S. Government Securities Portfolios. See "Purchase of Shares--Deferred Sales Charge Alternatives--Class B and Class C Shares"--page 35.
(c) Reduced for purchases of $25,000 and over decreasing to 0.00% for purchases of $1,000,000 or more. See "Purchase of Shares--Initial Sales Charge Alternatives--Class A and Class D Shares"--page 34.
(d) Under certain limited conditions, purchases of Class A and Class D shares will be subject to a contingent deferred sales charge ("CDSC") rather than an initial sales charge.
(e) Information under "Other Expenses" is estimated for the fiscal year ending January 31, 1995.
(f) See "Management of the Program--Management and Advisory Arrangements"--page 28.
(g) See "Purchase of Shares--Distribution Plans"--page 38.
(h) See "Management of the Program--Transfer Agency Services"--page 29.
(i) Class B shares convert to Class D shares automatically after approximately eight years and cease being subject to distribution fees.
(j) Class B shares convert to Class D shares automatically after approximately ten years and cease being subject to distribution fees.
EXAMPLE:
CUMULATIVE
EXPENSES PAID
OPERATING FOR THE PERIOD OF:
EXPENSE ---------------------
RATIO 1 YEAR 3 YEARS
--------- --------- ---------
An investor in the Portfolios (and classes)
listed below would pay the following
expenses on a $1,000 investment including,
for Class A and Class D shares of the
Fundamental Value and Global Opportunity
Portfolios, the maximum $52.50 initial sales
charge and, for Class A and Class D shares
of the Quality Bond and U.S. Government
Securities Portfolios, the maximum $40.00
initial sales charge and assuming (1) the
Total Program Operating Expenses for each
class set forth above; (2) a 5% annual
return throughout the periods and (3)
redemption at the end of the period:
Fundamental Value Portfolio
Class A.................................. 1.13% $63 $87
Class B.................................. 2.13% $62 $87
Class C.................................. 2.13% $32 $67
Class D.................................. 1.38% $66 $94
Quality Bond Portfolio
Class A.................................. 0.99% $50 $70
Class B.................................. 1.74% $58 $75
Class C.................................. 1.79% $28 $56
Class D.................................. 1.24% $52 $78
U.S. Government Securities Portfolio
Class A.................................. 0.99% $50 $70
Class B.................................. 1.74% $58 $75
Class C.................................. 1.79% $28 $56
Class D.................................. 1.24% $52 $78
Global Opportunity Portfolio
Class A.................................. 1.29% $65 $91
Class B.................................. 2.29% $63 $92
Class C.................................. 2.29% $33 $72
Class D.................................. 1.54% $67 $99
An investor would pay the following expenses
on the same $1,000 investment assuming no
redemption at the end of the period:
Fundamental Value Portfolio
Class A.................................. 1.13% $63 $87
Class B.................................. 2.13% $22 $67
Class C.................................. 2.13% $22 $67
Class D.................................. 1.38% $66 $94
Quality Bond Portfolio
Class A.................................. 0.99% $50 $70
Class B.................................. 1.74% $18 $55
Class C.................................. 1.79% $18 $56
Class D.................................. 1.24% $52 $78
U.S. Government Securities Portfolio
Class A.................................. 0.99% $50 $70
Class B.................................. 1.74% $18 $55
Class C.................................. 1.79% $18 $56
Class D.................................. 1.24% $52 $78
Global Opportunity Portfolio
Class A.................................. 1.29% $65 $91
Class B.................................. 2.29% $23 $72
Class C.................................. 2.29% $23 $72
Class D.................................. 1.54% $67 $99
|
The foregoing Fee Table is intended to assist investors in understanding the costs and expenses that a shareholder in a Portfolio will bear directly or indirectly. The Example set forth above assumes reinvestment of all dividends and distributions and utilizes a 5% annual rate of return as mandated by Securities and Exchange Commission ("Commission") regulations. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RATES OF RETURN, AND ACTUAL EXPENSES OR ANNUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE ASSUMED FOR PURPOSES OF THE EXAMPLE. Class B and Class C shareholders who hold their shares for an extended period of time may pay more in Rule 12b-1 distribution fees than the economic equivalent of the maximum front-end sales charges permitted under the Rules of Fair Practice of the National Association of Securities Dealers, Inc. ("NASD"). Merrill Lynch may charge its customers a processing fee (presently $4.85) for confirming purchases and redemptions. Purchases and redemptions directly through the Program's transfer agent are not subject to the processing fee. See "Purchase of Shares" and "Redemption of Shares".
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more detailed information included elsewhere in this Prospectus and the Statement of Additional Information.
THE PROGRAM
Merrill Lynch Retirement Asset Builder Program, Inc. (the "Program") is a professionally managed, open-end investment company consisting of four separate portfolios: the Fundamental Value Portfolio, the Quality Bond Portfolio, the U.S. Government Securities Portfolio and the Global Opportunity Portfolio.
INVESTMENT OBJECTIVES AND POLICIES
Each Portfolio pursues its investment objectives through the separate investment policies described below:
Fundamental Value Portfolio is a diversified portfolio seeking capital appreciation and, secondarily, income by investing in securities, primarily (i.e., at least 65% of the Portfolio's assets) in equities, that the management of the Portfolio believes are undervalued and therefore represent investment value. The Portfolio seeks special opportunities in securities that are selling at a discount either from book value or historical price-earnings ratios, or seem capable of recovering from temporarily out of favor considerations. Particular emphasis is placed on securities which provide an above-average dividend return and sell at a below-average price-earnings ratio. The Portfolio may invest up to 30% of its total assets in securities of foreign issuers. See "Risk Factors and Special Considerations".
Quality Bond Portfolio is a diversified portfolio seeking income and, secondarily, capital appreciation by investing primarily in long-term corporate bonds that are rated A or better by a nationally recognized rating agency such as Standard & Poor's Ratings Group ("S&P"), Moody's Investors Service, Inc. ("Moody's") or Fitch Investors Services, Inc. ("Fitch"), or that possess, in the judgment of the Investment Adviser, similar credit characteristics.
U.S. Government Securities Portfolio is a diversified portfolio seeking high current return by investing in U.S. Government and Government agency securities, including Government National Mortgage Association ("GNMA") mortgage-backed securities and other mortgage-backed government securities.
Global Opportunity Portfolio is a diversified portfolio seeking high total investment return through a fully-managed investment policy utilizing United States and foreign equity, debt and money market securities, the combination of which will be varied from time to time, both with respect to types of securities and markets, in response to changing market and economic trends. Total investment return is the aggregate of capital value changes and income.
RISK FACTORS AND SPECIAL CONSIDERATIONS
All of the Portfolios may invest in fixed income securities and to the extent a Portfolio does invest in fixed income securities, the net asset value of its shares will be affected by changes in the general level of interest rates.
The Fundamental Value and Global Opportunity Portfolios are authorized to invest in foreign securities. Investments in securities of foreign entities and securities denominated in foreign currencies involve risks not typically involved in domestic investment, including fluctuations in foreign exchange rates, future foreign political and economic developments, and the possible imposition of exchange controls or other foreign or U.S. governmental laws or restrictions applicable to such investments. These risks are often heightened for investments in small capital markets.
The Global Opportunity Portfolio has established no rating criteria for the fixed income securities in which it may invest and securities in the lower rated categories are predominantly speculative with respect to the capacity to pay interest and repay principal.
The Portfolios also may invest in certain derivative securities. See "Risk Factors and Special Considerations".
THE INVESTMENT ADVISER
Merrill Lynch Asset Management, L.P. (the "Investment Adviser" or "MLAM") acts as a manager for the Program and provides the Program with management services. The Investment Adviser or its affiliate, Fund Asset Management, L.P. ("FAM"), acts as the investment adviser for over 100 other registered investment companies. The Investment Adviser and FAM also offer portfolio management and portfolio analysis services to individuals and institutions. As of November 30, 1994, the Investment Adviser and FAM had a total of approximately $167.5 billion in investment company and other portfolio assets under management, including accounts of certain affiliates of the Investment Adviser. See "Management of the Program -- Management and Advisory Arrangements".
PURCHASE AND REDEMPTION OF SHARES
Shares of the Portfolios may be purchased at a price equal to the next determined net asset value per share subject to the sales charges and ongoing fee arrangements described below. See "Merrill Lynch Select Pricing SM System" and "Purchase of Shares".
DIVIDENDS AND DISTRIBUTIONS
It is the Program's intention to distribute substantially all of the net investment income, if any, of each Portfolio. All long-term and short-term capital gains, if any, including gains from option and futures contract
transactions will be distributed by each Portfolio at least annually. See "Additional Information -- Dividends and Distributions".
DETERMINATION OF NET ASSET VALUE
The net asset value of each Portfolio is determined by the Investment Adviser once daily 15 minutes after the close of business on the New York Stock Exchange (generally 4:00 P.M., New York time) on each day during which the New York Stock Exchange is open for trading and, under certain circumstances, on other days. See "Additional Information -- Determination of Net Asset Value".
MERRILL LYNCH SELECT PRICING SM SYSTEM
Each Portfolio offers four classes of shares under the Merrill Lynch Select Pricing SM System. The shares of each class may be purchased at a price equal to the next determined net asset value per share subject to the sales charges and ongoing fee arrangements described below. Shares of Class A and Class D are sold to investors choosing the initial sales charge alternatives, and shares of Class B and Class C are sold to investors choosing the deferred sales charge alternatives. The Merrill Lynch Select Pricing SM System is used by more than 50 mutual funds advised by MLAM or FAM, an affiliate of MLAM. Funds advised by MLAM or FAM are referred to herein as "MLAM-advised mutual funds".
Each Class A, Class B, Class C or Class D share of a Portfolio represents an identical interest in the investment portfolio of that Portfolio and has the same rights, except that Class B, Class C and Class D shares bear the expenses of the ongoing account maintenance fees and Class B and Class C shares bear the expenses of the ongoing distribution fees and the additional incremental transfer agency costs resulting from the deferred sales charge arrangements. The deferred sales charges and account maintenance fees that are imposed on Class B and Class C shares, as well as the account maintenance fees that are imposed on Class D shares, will be imposed directly against those classes and not against all assets of the Portfolio and, accordingly, such charges will not affect the net asset value of any other class or have any impact on investors choosing another sales charge option. Dividends paid by a Portfolio for each class of shares will be calculated in the same manner at the same time and will differ only to the extent that account maintenance and distribution fees and any incremental transfer agency costs relating to a particular class are borne exclusively by that class. Each class has different exchange privileges. See "Shareholder Services -- Exchange Privilege". If pursuant to the exchange privilege, shares of any Portfolio are exchanged for shares of a fund other than a Portfolio of the Program or a money market fund advised by the Investment Adviser or its affiliates, then the imposition of the IRA annual account fee may result. For information about current IRA fees charged by Merrill Lynch, consult the Merrill Lynch IRA disclosure statement.
Investors should understand that the purpose and function of the initial sales charges with respect to the Class A and Class D shares are the same as those of the deferred sales charges with respect to the Class B and Class C shares in that the sales charges applicable to each class provide for the financing of the distribution of the shares of the Program. The distribution- related revenues paid with respect to a class will not be used to finance the distribution expenditures of another class. Sales personnel may receive different compensation for selling different classes of shares.
The following table sets forth a summary of the distribution arrangements for each class of shares under the Merrill Lynch Select PricingSM System, followed by a more detailed description of each class and a
discussion of the factors that investors should consider in determining the method of purchasing shares under the Merrill Lynch Select PricingSM System that the investor believes is most beneficial under his particular circumstances. More detailed information as to each class of shares is set forth under "Purchase of Shares".
FUNDAMENTAL VALUE AND GLOBAL OPPORTUNITY PORTFOLIOS
ACCOUNT
MAINTENANCE DISTRIBUTION
CLASS SALES CHARGE(/1/) FEE FEE CONVERSION FEATURE
- ----------------------------------------------------------------------------------------
A Maximum 5.25% initial No No No
sales charge(/2/)(/3/)
- ----------------------------------------------------------------------------------------
B CDSC for a period of 4 0.25% 0.75% B shares convert to D shares
years at a rate of 4.0% automatically after
during the first year, approximately eight
decreasing 1.0% years(/4/)
annually to 0.0%
- ----------------------------------------------------------------------------------------
C 1.0% CDSC for one year 0.25% 0.75% No
- ----------------------------------------------------------------------------------------
D Maximum 5.25% initial 0.25% No No
sales charge(/3/)
|
(1) Initial sales charges are imposed at the time of purchase as a percentage of the offering price. Contingent deferred sales charges ("CDSCs") are imposed if the redemption occurs within the applicable CDSC time period. The charge will be assessed on an amount equal to the lesser of the proceeds of redemption or the cost of the shares being redeemed.
(2) Offered only to eligible investors. See "Purchase of Shares -- Initial Sales Charge Alternatives -- Class A and Class D Shares --Eligible Class A Investors".
(3) Reduced for purchases of $25,000 or more. Class A and Class D share purchases of $1,000,000 or more may not be subject to an initial sales charge but instead will be subject to a 1.0% CDSC for one year. See "Class A" and "Class D" below.
(4) The conversion period for dividend reinvestment shares is modified. Also, Class B shares of the Quality Bond and U.S. Government Securities Portfolios and certain other MLAM-advised mutual funds into which exchanges may be made have a ten-year conversion period. If Class B shares of a Portfolio are exchanged for Class B shares of another Portfolio or MLAM-advised mutual fund, the conversion period applicable to the Class B shares acquired in the exchange will apply, and the holding period for the shares exchanged will be tacked on to the holding period for the shares acquired.
QUALITY BOND AND U.S. GOVERNMENT SECURITIES PORTFOLIOS
ACCOUNT
MAINTENANCE DISTRIBUTION
CLASS SALES CHARGE(/1/) FEE FEE CONVERSION FEATURE
- ----------------------------------------------------------------------------------------
A Maximum 4.00% initial No No No
sales charge(/2/)(/3/)
- ----------------------------------------------------------------------------------------
B CDSC for a period of 4 0.25% 0.50% B shares convert to D shares
years at a rate of 4.0% automatically after
during the first year, approximately ten
decreasing 1.0% years(/4/)
annually to 0.0%
- ----------------------------------------------------------------------------------------
C 1.0% CDSC for one year 0.25% 0.55% No
- ----------------------------------------------------------------------------------------
D Maximum 4.00% initial 0.25% No No
sales charge(/3/)
|
(1) Initial sales charges are imposed at the time of purchase as a percentage of the offering price. CDSCs are imposed if the redemption occurs within the applicable CDSC time period. The charge will be assessed on an amount equal to the lesser of the proceeds of redemption or the cost of the shares being redeemed.
(2) Offered only to eligible investors. See "Purchase of Shares -- Initial Sales Charge Alternatives -- Class A and Class D Shares --Eligible Class A Investors".
(3) Reduced for purchases of $25,000 or more. Class A and Class D share purchases of $1,000,000 or more may not be subject to an initial sales charge but instead will be subject to a 1.0% CDSC for one year. See "Class A" and "Class D" below.
(4) The conversion period for dividend reinvestment shares is modified. Also, Class B shares of the Fundamental Value and Global Opportunity Portfolios and certain other MLAM-advised mutual funds into which exchanges may be made have an eight-year conversion period. If Class B shares of a Portfolio are exchanged for Class B shares of another Portfolio or MLAM- advised mutual fund, the conversion period applicable to the Class B shares acquired in the exchange will apply, and the holding period for the shares exchanged will be tacked on to the holding period for the shares acquired.
Class A: Class A shares of a Portfolio incur an initial sales charge when they are purchased and bear no ongoing distribution or account maintenance fees. Class A shares are offered to a limited group of investors and also will be issued upon reinvestment of dividends on outstanding Class A shares. Class A shares will be offered to Merrill Lynch & Co., Inc. ("ML&Co.") and its subsidiaries (the term "subsidiaries" when used herein with respect to ML&Co., includes MLAM, FAM and certain other entities directly or indirectly wholly-owned and controlled by ML&Co.) and their directors and employees and to members of the Boards of MLAM-advised mutual funds. The maximum initial sales charge is 5.25% for the Fundamental Value and Global Opportunity Portfolios and 4.00% for the Quality Bond and U.S. Government Securities Portfolios, which is reduced for purchases of $25,000 and over. Purchases of $1,000,000 or more may not be subject to an initial sales charge, but if the initial sales charge is waived, such purchases will be subject to a CDSC of 1.0% if the shares are redeemed within one year after purchase. Sales charges also are reduced under a right of accumulation which takes into account the investor's holdings of all classes of all MLAM-advised mutual funds. See "Purchase of Shares -- Initial Sales Charge Alternatives -- Class A and Class D Shares".
Class B: Class B shares of a Portfolio do not incur a sales charge when they are purchased, but they are subject to an ongoing account maintenance fee of 0.25% of the Portfolio's average net assets attributable to Class B shares, an ongoing distribution fee of 0.75% of average net assets attributable to Class B shares for the Fundamental Value and Global Opportunity Portfolios and 0.50% of average net assets attributable to Class B shares for the Quality Bond and U.S. Government Securities Portfolios, and a CDSC if they are redeemed within four years of purchase. Class B shares of a Portfolio will convert automatically into Class D shares of the same Portfolio approximately eight years after issuance in the case of the Fundamental Value and Global Opportunity Portfolios and approximately ten years after issuance in the case of the Quality Bond and U.S. Government Securities Portfolios. Class D shares are subject to an account maintenance fee but no distribution fee. If Class B shares of a Portfolio are exchanged for Class B shares of another Portfolio or MLAM-advised mutual fund, the conversion period applicable to the Class B shares acquired in the exchange will apply, and the holding period for the shares exchanged will be tacked on to the holding period for the shares acquired. Automatic conversion of Class B shares into Class D shares will occur at least once each month on the basis of the relative net asset values of the shares of the two classes on the conversion date, without the imposition of any sales load, fee or other charge. Conversion of Class B shares to Class D shares will not be deemed a purchase or sale of the shares for Federal income tax purposes. Shares purchased through reinvestment of dividends on Class B shares will also convert automatically to Class D shares. The conversion period for dividend reinvestment shares is modified as described under "Purchase of Shares -- Deferred Sales Charge Alternatives -- Class B and Class C Shares -- Conversion of Class B Shares to Class D Shares".
Class C: Class C shares of a Portfolio do not incur a sales charge when they are purchased, but they are subject to an ongoing account maintenance fee of 0.25% of the Portfolio's average net assets attributable to Class C shares and an ongoing distribution fee of 0.75% of the Portfolio's average net assets attributable to Class C shares in the case of the Fundamental Value and Global Opportunity Portfolios or 0.55% of the Portfolio's average net assets attributable to Class C shares in the case of the Quality Bond and U.S. Government Securities Portfolios. Class C shares are also subject to a CDSC if they are redeemed within one year of purchase. Although Class C shares are subject to a 1.0% CDSC for only one year (as compared to four years for Class B), Class C shares have no conversion feature and, accordingly, an investor that purchases Class C shares will be subject to distribution fees that will be imposed on Class C shares for an indefinite period subject to annual approval by the Program's Board of Directors and regulatory limitations.
Class D: Class D shares of a Portfolio incur an initial sales charge when they are purchased and are subject to an ongoing account maintenance fee of 0.25% of the Portfolio's average net assets attributable to Class D shares. Class D shares are not subject to an ongoing distribution fee or any CDSC when they are redeemed. Purchases of $1,000,000 or more may not be subject to an initial sales charge, but if the initial sales charge is waived, such purchases will be subject to a CDSC of 1.0% if the shares are redeemed within one year after purchases. The schedule of initial sales charges and reductions for Class D shares for each Portfolio is the same as the schedule for Class A shares of that Portfolio. Class D shares also will be issued upon conversion of Class B shares as described above under "Class B". See "Purchase of Shares -- Initial Sales Charge Alternatives -- Class A and Class D Shares".
The following is a discussion of the factors that investors should consider in determining the method of purchasing shares under the Merrill Lynch Select PricingSM System that the investor believes is most beneficial under his particular circumstances.
Initial Sales Charge Alternatives. Investors who prefer an initial sales charge alternative may elect to purchase Class D shares or, if an eligible investor, Class A shares. Investors choosing the initial sales charge alternative who are eligible to purchase Class A shares should purchase Class A shares rather than Class D shares because there is an account maintenance fee imposed on Class D shares. Investors qualifying for significantly reduced initial sales charges may find the initial sales charge alternative particularly attractive because similar sales charge reductions are not available with respect to the deferred sales charges imposed in connection with purchases of Class B or Class C shares. Investors not qualifying for reduced initial sales charges who expect to maintain their investment for an extended period of time also may elect to purchase Class A or Class D shares, because over time the accumulated ongoing account maintenance and distribution fees on Class B or Class C shares may exceed the initial sales charge on Class A shares, or may exceed the initial sales charge plus the accumulated ongoing account maintenance fee on Class D shares. Although some investors that previously purchased Class A shares may no longer be eligible to purchase Class A shares of other MLAM-advised mutual funds, those previously purchased Class A shares, together with Class B, Class C and Class D share holdings, will count toward a right of accumulation which may qualify the investor for reduced initial sales charges on new initial sales charge purchases. In addition, the ongoing Class B and Class C account maintenance and distribution fees will cause Class B and Class C shares to have higher expense ratios, pay lower dividends and have lower total returns than the initial sales charge shares. The ongoing Class D account maintenance fees will cause Class D shares to have a higher expense ratio, pay lower dividends and have a lower total return than Class A shares.
Deferred Sales Charge Alternatives. Because no initial sales charges are deducted at the time of purchase, Class B and Class C shares provide the benefit of putting all of the investor's dollars to work from the time the investment is made. The deferred sales charge alternatives may be particularly appealing to investors who do not qualify for a reduction in initial sales charges. Both Class B and Class C shares are subject to ongoing account maintenance fees and distribution fees; however, the ongoing account maintenance and distribution fees potentially may be offset to the extent any return is realized on the additional funds initially invested in Class B or Class C shares. In addition, Class B shares of a Portfolio will be converted into Class D shares of the same Portfolio after a conversion period of approximately eight years for the Fundamental Value and Global Opportunity Portfolios or ten years for the Quality Bond and U.S. Government Securities Portfolios, and thereafter investors will be subject to lower ongoing fees.
Certain investors may elect to purchase Class B shares if they determine it to be most advantageous to have all their funds invested initially and intend to hold their shares for an extended period of time. Investors in Class B shares should take into account whether they intend to redeem their shares within the CDSC period and, if not, whether they intend to remain invested until the end of the conversion period and thereby take advantage of the reduction in ongoing fees resulting from the conversion into Class D shares. Other investors, however, may elect to purchase Class C shares if they determine that it is advantageous to have all their assets invested initially and they are uncertain as to the length of time they intend to hold their assets in MLAM-advised mutual funds. Although Class C shareholders are subject to a shorter CDSC period at a lower rate, they forgo the Class B conversion feature, making their investment subject to account maintenance and distribution fees for an indefinite period of time. In addition, while both Class B and Class C distribution fees are subject to the limitations on asset- based sales charges imposed by the NASD, the Class B distribution fees are further limited under a voluntary waiver of asset-based sales charges. See "Purchase of Shares --Limitations on the Payment of Deferred Sales Charges".
RISK FACTORS AND SPECIAL CONSIDERATIONS
Investment in Fixed Income Securities. All of the Portfolios are authorized to invest in fixed income securities. To the extent a portfolio invests in fixed income securities, the net asset value of its shares will be affected by changes in the general level of interest rates. Typically, when interest rates decline, the value of a portfolio of fixed income securities can be expected to rise. Conversely, when interest rates rise typically the value of a portfolio of fixed income securities can be expected to decline. See "Other Investment Policies and Practices of the Portfolios--Investments in Debt Securities".
Investments in Foreign Securities. The Fundamental Value Portfolio may invest up to 30% of its total assets, and the Global Opportunity Portfolio may invest without limitation, in the securities of foreign issuers. Investments in securities of foreign entities and securities denominated in foreign currencies involve risks not typically involved in domestic investment, including fluctuations in foreign exchange rates, future foreign political and economic developments, and the possible imposition of exchange controls or other foreign or U.S. governmental laws or restrictions applicable to such investments. Since the Fundamental Value and Global Opportunity Portfolios may invest in securities denominated or quoted in currencies other than the U.S. dollar, changes in foreign currency exchange rates may affect the value of investments in the portfolio and the unrealized appreciation or depreciation of investments insofar as U.S. investors are concerned. Changes in foreign currency exchange rates relative to the U.S. dollar will affect the U.S. dollar value of the Fundamental Value and Global Opportunity Portfolios' assets denominated in those currencies and the corresponding Portfolio's yield on such assets. Foreign currency exchange rates are determined by forces of supply and demand on the foreign exchange markets. These forces are, in turn, affected by the international balance of payments and other economic and financial conditions, government intervention, speculation, and other factors. Moreover, individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross national product, rate of inflation, capital reinvestment, resources, self-sufficiency and balance of payments position.
With respect to certain foreign countries, there is the possibility of expropriation of assets, confiscatory taxation, political or social instability or diplomatic developments which could affect investment in those countries. There may be less publicly available information about a foreign financial instrument than about a U.S. instrument, and foreign entities may not be subject to accounting, auditing and financial reporting standards and requirements comparable to those to which U.S. entities are subject. Foreign financial markets, while growing in volume, generally have substantially less volume than U.S. markets, and securities of many foreign companies are less liquid and their prices more volatile than securities of comparable domestic companies. Foreign markets also have different clearance and settlement procedures and in certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. Delays in settlement could result in temporary periods when assets of the Fundamental Value or Global Opportunity Portfolios are uninvested and no return is earned thereon. The inability of either Portfolio to make intended security purchases due to settlement problems could cause that Portfolio to miss attractive investment opportunities. Inability to dispose of securities in a Portfolio due to settlement problems could result either in losses to that Portfolio due to subsequent declines in value of the portfolio securities or, if the Portfolio has entered into a contract to sell the security, could result in possible liability to the purchaser. Costs associated with transactions in foreign securities generally are higher than costs associated with transactions in U.S. securities. There is generally less government supervision and regulation of exchanges, financial institutions and issuers in foreign countries than there is in the United States.
The operating expense ratios of the Fundamental Value and Global Opportunity Portfolios can be expected to be higher than those of an investment company investing exclusively in U.S. securities because the expenses of each Portfolio, such as custodial costs, may be higher. See "Risk Factors and Special Considerations -- Investments in Foreign Securities".
Dividends and interest received by the Global Opportunity Portfolio and, to a lesser extent, the Fundamental Value Portfolio, may give rise to withholding and other taxes imposed by foreign countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. Because their participation in such Portfolios is in an IRA, shareholders will generally not be able to credit or deduct such taxes in computing their taxable incomes. See "Taxes".
International Investing in Countries with Smaller Capital Markets. The risks associated with investments in foreign securities discussed above are often heightened for investments in small capital markets.
There may be less publicly available information about an issuer in a smaller capital market than would be available about a U.S. company, and it may not be subject to accounting, auditing and financial reporting standards and requirements comparable to those to which U.S. companies are subject. As a result, traditional investment measurements, such as price/earnings ratios, as used in the United States, may not be applicable in certain capital markets.
Smaller capital markets, while often growing in trading volume, typically have substantially less volume than U.S. markets, and securities in many smaller capital markets are less liquid and their prices may be more volatile than securities of comparable U.S. companies. Brokerage commissions, custodial services, and other costs relating to investment in smaller capital markets are generally more expensive than in the United States. Such markets have different clearance and settlement procedures, and in certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. Further, satisfactory custodial services for investment securities may not be available in some countries having smaller capital markets, which may result in the Portfolio's incurring additional costs and delays in transporting and custodying such securities outside such countries. Delays in settlement could result in temporary periods when assets of the Portfolio are uninvested and no return is earned thereon. The inability of the Portfolio to make intended security purchases due to settlement problems could cause the Portfolio to miss attractive investment opportunities. Inability to dispose of a portfolio security due to settlement problems could result either in losses to the Portfolio due to subsequent declines in value of the portfolio security or, if the Portfolio has entered into a contract to sell the security, could result in possible liability to the purchaser. There is generally less government supervision and regulation of exchanges, brokers and issuers in countries having smaller capital markets than there is in the United States.
As a result, management of the Program may determine that, notwithstanding otherwise favorable investment criteria, it may not be practicable or appropriate to invest in a particular country. The Portfolios may invest in countries in which foreign investors, including management of the Program, have had no or limited prior experience.
Investments in Lower Rated Securities. The Global Opportunity Portfolio has established no rating criteria for the fixed income securities in which it may invest. Securities rated in the medium to lower rating
categories of nationally recognized rating agencies (commonly referred to as "junk bonds") are predominately speculative with respect to the capacity to pay interest and repay principal in accordance with the terms of the security and generally involve a greater volatility of price than securities in higher rating categories. The Portfolio does not intend to purchase securities that are in default. See "Other Investment Policies and Practices of the Portfolios--Investments in Debt Securities".
Derivative Investments. In order to seek to enhance income or to hedge various portfolio positions, including to hedge against price movements in markets in which the Portfolios anticipate increasing their exposure, the Portfolios may invest in certain instruments which may be characterized as derivative investments. These investments include various types of interest rate transactions, options and futures. Such investments also may consist of indexed securities, including inverse securities. The Program has express limitations on the percentage of its assets that may be committed to certain of such investments. Other of such investments have no express quantitative limitations, although they may be made solely for hedging purposes, not for speculation, and may in some cases require limitations as to the type of permissible counter-party to the transaction. Interest rate transactions involve the risk of an imperfect correlation between the index used in the hedging transactions and that pertaining to the securities which are the subject of such transactions. Similarly, utilization of options and futures transactions involves the risk of imperfect correlation in movements in the price of options and futures and movements in the price of the securities or interest rates which are the subject of the hedge. Investments in indexed securities, including inverse securities, subject the Portfolios to the risks associated with changes in the particular indexes, which may include reduced or eliminated interest payments and losses of invested principal. An investment in derivative instruments for the purpose of enhancing income may have certain speculative characteristics and may increase a Portfolio's volatility. For a further discussion of the risks associated with these investments, see "Other Investment Policies and Practices of the Portfolios -- Indexed and Inverse Securities" "--Portfolio Strategies Involving Options and Futures" and Appendix A--"Options and Futures Transactions". Management of the Program believes the above investments are appropriate for the Portfolios.
INVESTMENT OBJECTIVES AND POLICIES
The Program consists of four separate Portfolios: the Fundamental Value Portfolio, the Quality Bond Portfolio, the U.S. Government Securities Portfolio and the Global Opportunity Portfolio, each with its own separate investment objectives. Each of the Portfolios pursues its investment objectives through separate investment policies. Set forth below are the specific investment objectives and policies of each Portfolio, followed by a description of general investment policies applicable to some or all of the Portfolios. Management of the Program believes that all of the Portfolios' investments will be appropriate for the retirement plans for which the Program is designed.
FUNDAMENTAL VALUE PORTFOLIO
The Fundamental Value Portfolio seeks capital appreciation and, secondarily, income by investing in securities, with at least 65% of the Portfolio's assets being invested in equities. These objectives are fundamental policies of the Fundamental Value Portfolio and may not be changed without the approval of a majority of the Portfolio's outstanding voting securities. The Portfolio seeks special opportunities in securities that the Investment Adviser believes are undervalued and therefore represent investment value, including
securities that are selling at a discount, either from book value or historical price-earnings ratios, or seem capable of recovering from temporarily out of favor considerations. Particular emphasis is placed on securities which provide an above-average dividend return and sell at a below-average price-earnings ratio. There can be no assurance that the objectives of the Fundamental Value Portfolio will be achieved.
Investment emphasis is on equities, primarily common stock and, to a lesser extent, securities convertible into common stocks. The Fundamental Value Portfolio also may invest in preferred stocks and non-convertible debt securities. The Portfolio may invest up to 30% of its total assets, taken at market value at the time of acquisition, in the securities of foreign issuers.
See "Other Investment Policies and Practices of the Portfolios" below for additional investment policies applicable to the Fundamental Value Portfolio.
QUALITY BOND PORTFOLIO
The Quality Bond Portfolio seeks a high level of current income through investment in a diversified portfolio of debt obligations, such as corporate bonds and notes, convertible securities, preferred stocks and governmental obligations. The Portfolio will invest primarily in securities rated in the top three rating categories (typically "A" or better) of a nationally recognized rating agency such as Moody's, S&P or Fitch, or in securities that possess, in the judgment of the Investment Adviser, similar credit characteristics. This objective is a fundamental policy of the Quality Bond Portfolio and may not be changed without the approval of a majority of the Portfolio's outstanding voting securities. The credit risk of the Portfolio should be minimized by the quality of the bonds in which it will invest, but the long maturities that typically provide the best yields will subject the Portfolio to possible substantial price changes resulting from market yield fluctuations. Portfolio management strategy will attempt to mitigate adverse price changes and optimize favorable price changes through active trading that shifts the maturity and/or quality structure of the Portfolio within the overall investment guidelines. There can be no assurance that the objectives of the Quality Bond Portfolio will be achieved.
The Quality Bond Portfolio may continue to hold securities which, after being purchased by the Portfolio, are downgraded to a rating below the top three rating categories of a nationally recognized rating agency as well as any unrated securities which, in the Investment Adviser's judgment, have suffered a similar decline in quality.
The securities in the Quality Bond Portfolio will be varied from time to time depending upon the judgment of management as to prevailing conditions in the economy and the securities markets and the prospects for interest rate changes among different categories of fixed income securities. The Portfolio anticipates that under normal circumstances more than 90% of the assets of the Portfolio will be invested in fixed income securities, including convertible and nonconvertible debt securities and preferred stock. In addition, as a matter of operating policy, at least 65% of the assets of the Portfolio will under normal circumstances be invested in corporate bonds. The remaining assets of the Portfolio may be held in cash or, as described herein, may be used in connection with hedging transactions in futures contracts, related options, and options on debt securities, or in connection with non-hedging transactions in options on debt securities. The Portfolio does not intend to invest in common stocks, rights or other equity securities. Transactions in options on debt securities for non-hedging purposes may have certain speculative characteristics.
See "Other Investment Policies and Practices of the Portfolios" below for additional investment policies applicable to the Quality Bond Portfolio.
U.S. GOVERNMENT SECURITIES PORTFOLIO
The U.S. Government Securities Portfolio seeks a high current return through investments in U.S. Government and Government agency securities, including GNMA mortgage-backed certificates and other mortgage-backed government securities. This investment objective is a fundamental policy of the Portfolio which may not be changed without a vote of a majority of the outstanding shares of the Portfolio. There can be no assurance that the objectives of the U.S. Government Securities Portfolio will be achieved.
The securities in which the U.S. Government Securities Portfolio may invest are marketable securities issued or guaranteed by the U.S. Government, by various agencies of the U.S. Government and by various instrumentalities which have been established or sponsored by the U.S. Government ("U.S. Government securities"). Certain of these obligations, including U.S. Treasury bills, notes and bonds and securities of GNMA and the Federal Housing Administration ("FHA"), are issued or guaranteed by the U.S. Government and supported by the full faith and credit of the United States. Other U.S. Government securities are issued or guaranteed by Federal agencies or government-sponsored enterprises and are not direct obligations of the United States but involve sponsorship or guarantees by Government agencies or enterprises. The guarantee by Federal agencies or government-sponsored enterprises of their securities does not extend to the Program's shares. These obligations include securities that are supported by the right of the issuer to borrow from the Treasury, such as obligations of Federal Home Loan Banks, and securities that are supported only by the credit of the instrumentality, such as Federal National Mortgage Association ("FNMA") bonds. Because the U.S. Government is not obligated to provide support to its instrumentalities, the Portfolio will invest in obligations issued by these instrumentalities where the Portfolio is satisfied that the credit risk with respect to the issuers is minimal. In addition, the Portfolio may invest up to 5% of its assets in obligations issued or guaranteed by the International Bank for Reconstruction and Development (the "World Bank").
The Portfolio has authority to invest in all U.S. Government securities. It is anticipated that under certain circumstances as described below, a significant portion of its portfolio of U.S. Government securities may consist of GNMA mortgaged-backed certificates ("GNMA Certificates") and other U.S. Government securities representing ownership interests in mortgage pools.
The Investment Adviser will effect portfolio transactions without regard to any holding period if, in its judgment, such transactions are advisable in light of a change in general market, economic or financial conditions. While the Portfolio anticipates that its annual turnover rate should not exceed 400% under normal conditions, it is impossible to predict portfolio turnover rates. A high portfolio turnover rate involves correspondingly greater transaction costs in the form of dealer spreads and brokerage commissions, which are borne directly by the Portfolio. Such turnover also has certain tax consequences for the Portfolio.
See "Other Investment Policies and Practices of the Portfolios" below for additional investment policies applicable to the U.S. Government Securities Portfolio.
GLOBAL OPPORTUNITY PORTFOLIO
The Global Opportunity Portfolio seeks a high total investment return through a fully-managed investment policy utilizing United States and foreign equity, debt and money market securities, the combination of which will be varied from time to time, both with respect to types of securities and markets, in response to changing market and economic trends. Total investment return is the aggregate of capital value
changes and income. This objective is a fundamental policy of the Global Opportunity Portfolio and may not be changed without the approval of a majority of the Portfolio's outstanding voting securities. There can be no assurance that the objectives of the Global Opportunity Portfolio will be achieved.
The Global Opportunity Portfolio will invest in a portfolio of U.S. and foreign equity, debt and money market securities. The composition of the portfolio among these securities and markets will be varied from time to time by the Investment Adviser in response to changing market and economic trends. This fully managed investment approach provides the Portfolio with the opportunity to benefit from anticipated shifts in the relative performance of different types of securities and different capital markets. For example, at times the Portfolio may emphasize investments in equity securities in anticipation of significant advances in stock markets and at times may emphasize debt securities in anticipation of significant declines in interest rates. Similarly, the Portfolio may emphasize foreign markets in its security selection when such markets are expected to outperform, in U.S. dollar terms, the U.S. markets. The Portfolio will seek to identify longer-term structural or cyclical changes in the various economies and markets of the world which are expected to benefit certain capital markets and certain securities in those markets to a greater extent than other investment opportunities.
In determining the allocation of assets among capital markets, the Investment Adviser will consider, among other factors, the relative valuation, condition and growth potential of the various economies, including current and anticipated changes in the rates of economic growth, rates of inflation, corporate profits, capital reinvestment, resources, self-sufficiency, balance of payments, governmental deficits or surpluses and other pertinent financial, social and political factors which may affect such markets. In allocating among equity, debt and money market securities within each market, the Investment Adviser also will consider the relative opportunity for capital appreciation of equity and debt securities, dividend yields, and the level of interest rates paid on debt securities of various maturities.
While there are no prescribed limits on the geographical allocation of the Portfolio's assets, the Investment Adviser anticipates that it will invest primarily in the securities of corporate and governmental issuers domiciled or located in the U.S., Canada, Western Europe and the Far East. In addition, the Investment Adviser anticipates that a portion of the Portfolio's assets normally will be invested in the U.S. securities markets and the other major capital markets. Under normal conditions, the Portfolio's investments will be denominated in at least three currencies or multinational currency units. However, the Portfolio reserves the right to invest substantially all of its assets in U.S. markets or U.S. dollar-denominated obligations when market conditions warrant.
Similarly, there are no prescribed limits on the allocation of the Portfolio's assets among equity, debt and money market securities. Therefore, at any given time, the Portfolio's assets may be primarily invested in either equity, debt or money market securities or in any combination thereof. However, the Investment Adviser anticipates that the Portfolio's holdings generally will include both equity and debt securities.
The Global Opportunity Portfolio may invest up to 34% of the Portfolio's assets in debt securities rated below "investment grade" (i.e., Ba or lower by Moody's or BB or lower by S&P or Fitch) or which possess, in the judgment of the Investment Adviser, similar credit characteristics. Investment in debt securities rated in the medium to lower rating categories of a nationally recognized rating agency or in unrated securities of comparable quality involve special risks which are described more fully below under "Other Investment Policies and Practices of the Portfolios--Investments in Debt Securities-- Credit Quality".
See "Other Investment Policies and Practices of the Portfolios" below for additional investment policies applicable to the Global Opportunity Portfolio.
OTHER INVESTMENT POLICIES AND PRACTICES OF THE PORTFOLIOS
Set forth below are additional investment policies applicable to some or all of the Portfolios.
INVESTMENTS IN EQUITY SECURITIES
The Fundamental Value Portfolio will invest primarily (at least 65% of the Portfolio's net assets) in equity securities. A significant portion of the Global Opportunity Portfolio also may be invested in equity securities. In purchasing equity securities for these Portfolios, the Investment Adviser will seek to identify the securities of companies and industry sectors which are expected to provide high total return relative to alternative equity investments. Both Portfolios generally will seek to invest in securities the Investment Adviser believes to be undervalued. Undervalued issues include securities selling at a discount from the price-to-book value ratios and price- earnings ratios computed with respect to the relevant stock market averages. A Portfolio also may consider as undervalued securities selling at a discount from their historic price-to-book value or price-earnings ratios, even though these ratios may be above the ratios for the stock market averages. Securities offering dividend yields higher than the yields for the relevant stock market averages or higher than such securities' historic yield may also be considered to be undervalued. The Portfolios may also invest in the securities of small and emerging growth companies when such companies are expected to provide a higher total return than other equity investments. Such companies are characterized by rapid historical growth rates, above-average returns on equity or special investment value in terms of their products or services, research capabilities or other unique attributes. The Investment Adviser will seek to identify small and emerging growth companies that possess superior management, marketing ability, research and product development skills and sound balance sheets.
Investment in the securities of small and emerging growth companies involves greater risk than investment in larger, more established companies. Such risks include the fact that securities of small or emerging growth companies may be subject to more abrupt or erratic market movements than larger, more established companies or the market average in general. Also, these companies may have limited product lines, markets or financial resources, or they may be dependent on a limited management group.
There may be periods when market and economic conditions exist that favor certain types of tangible assets as compared to other types of investments.
INVESTMENTS IN DEBT SECURITIES
The Quality Bond and U.S. Government Securities Portfolios will invest primarily in debt securities. A significant portion of the Global Opportunity Portfolio also may be invested in debt securities. The average maturity of a Portfolio's holdings of debt securities will vary based on the Investment Adviser's assessment of pertinent economic and market conditions. As with all debt securities, changes in market yields will affect the value of such securities. Prices generally increase when interest rates decline and decrease when interest rates rise. Prices of longer term securities generally fluctuate more in response to interest rate changes than do shorter term securities.
The debt securities in which these Portfolios may invest include securities issued or guaranteed by the U.S. Government and its agencies or instrumentalities and debt obligations issued by U.S. corporations. Such
securities may include mortgage-backed securities issued or guaranteed by U.S. governmental entities or by private issuers. In addition, the Fundamental Value and Global Opportunity Portfolios may invest in debt securities issued by foreign corporations or issued or guaranteed by foreign governments (including foreign states, provinces and municipalities), by agencies and instrumentalities thereof or by international organizations designed or supported by multiple governmental entities (which are not obligations of the U.S. Government or foreign governments) to promote economic reconstruction or development ("supranational entities") such as the World Bank.
GNMA Certificates and Other Mortgage-Backed Government Securities. The U.S. Government Securities and Global Opportunity Portfolios may invest in GNMA Certificates and other mortgage-backed government securities. GNMA Certificates are mortgage-backed securities of the modified pass-through type, which means that both interest and principal payments (including prepayments) are passed through monthly to the holder of the Certificate. The National Housing Act provides that the full faith and credit of the United States is pledged to the timely payment of principal and interest by GNMA of amounts due on these GNMA Certificates. Each Certificate evidences an interest in a specific pool of mortgage loans insured by the FHA or the Farmers Home Administration or guaranteed by the Veterans Administration ("VA"). GNMA is a wholly-owned corporate instrumentality of the United States within the Department of Housing and Urban Development.
The average life of GNMA Certificates varies with the maturities of the underlying mortgage instruments which have maximum maturities of 30 years. The average life is likely to be substantially less than the original maturity of the mortgage pools underlying the securities as a result of prepayments or refinancing of such mortgages. Such prepayments are passed through to the registered holder with the regular monthly payments of principal and interest. In addition, GNMA offers a pass-through security backed by adjustable-rate mortgages. As prepayment rates vary widely, it is not possible to predict accurately the average life of a particular pool. The actual yield of each GNMA Certificate is influenced by the prepayment experience of the mortgage pool underlying the certificate.
In addition to GNMA Certificates, the U.S. Government Securities and Global Opportunity Portfolios may invest in mortgage-backed securities issued by FNMA and by the Federal Home Loan Mortgage Corporation ("FHLMC"). FNMA, a federally- chartered and privately-owned corporation, issues pass-through securities and certificates representing an interest in a pool of FNMA pass-through securities which are guaranteed as to payment of principal and interest by FNMA. FHLMC, a corporate instrumentality of the United States, issues participation certificates which represent an interest in mortgages from FHLMC's portfolio and securities representing an interest in a pool of FHLMC participation certificates. FHLMC guarantees the timely payment of interest and the ultimate collection of principal. As is the case with GNMA Certificates, the actual maturity of and realized yield on particular FNMA and FHLMC mortgage-backed securities will vary based on the prepayment experience of the underlying pool of mortgages. Securities guaranteed by FNMA and FHLMC are not backed by the full faith and credit of the United States.
Mortgage-backed U.S. Government securities typically provide a higher potential for current income than other types of U.S. Government securities; however, U.S. Treasury bills, notes and bonds typically provide a higher potential for capital appreciation than mortgage-backed securities.
Payments of principal of and interest on mortgage-backed securities are made more frequently than are payments on conventional debt securities. In addition, holders of mortgage-backed securities may receive unscheduled payments of principal at any time representing prepayments on the underlying mortgage loans or financial assets. Such prepayments may usually be made by the related obligor without penalty.
Prepayment rates are affected by changes in prevailing interest rates and numerous other economic, geographic, social and other factors. Changes in the rate of prepayments will generally affect the yield to maturity of the security. Moreover, when the holder of the security attempts to reinvest prepayments or even the scheduled payments of principal and interest, it may receive a rate of interest which is higher or lower than the rate on the mortgage-backed securities originally held. To the extent that mortgage-backed securities are purchased at a premium, mortgage foreclosures and principal prepayments may result in a loss to the extent of the premium paid. If such securities are bought at a discount, both scheduled payments of principal and unscheduled prepayments will increase current and total returns of the Portfolio.
Stripped Mortgage-Backed Securities. The U.S. Government Securities and Global Opportunity Portfolios may invest in stripped mortgage-backed securities ("SMBSs") issued by agencies or instrumentalities of the United States. SMBSs are derivative multiclass mortgage-backed securities. SMBS arrangements commonly involve two classes of securities that receive different proportions of the interest and principal distributions on a pool of mortgage assets. A common variety of SMBS is where one class (the principal-only or "PO" class) receives some of the interest and most of the principal from the underlying assets, while the other class (the interest-only or "IO" class) receives most of the interest and the remainder of the principal. In the most extreme case, the IO class receives all of the interest, while the PO class receives all of the principal. While a Portfolio may purchase securities of a PO class, it is more likely to purchase the securities of an IO class. The yield to maturity of an IO class is extremely sensitive to the rate of principal payments (including prepayments) on the related underlying assets, and a rapid rate of principal payments in excess of that considered in pricing the securities will have a material adverse effect on an IO security's yield to maturity. If the underlying mortgage assets experience greater than anticipated payments of principal, a Portfolio may fail to recoup fully its initial investment in IOs. In addition, there are certain types of IOs which represent the interest portion of a particular class as opposed to the interest portion of the entire pool. The sensitivity of this type of IO to interest rate fluctuations may be increased because of the characteristics of the principal portion to which they relate. As a result of the above factors, the Portfolios generally will purchase IOs only as a component of so-called "synthetic" securities. This means that purchases of IOs will be matched with certain purchases of other securities such as inverse floating rate collateralized mortgage obligations ("CMOs") or fixed rate securities; as interest rates fall, presenting a greater risk of unanticipated prepayments of principal, the negative effect on the Portfolio because of its holdings of IOs should be diminished somewhat because of the increased yield on the inverse floating rate CMOs or the increased appreciation on the fixed rate securities. IOs and POs of SMBSs are considered by the staff of the Commission to be illiquid securities and, consequently, as long as the staff maintains this position, the Portfolio will not invest in IOs or POs in an amount which, taken together with the Portfolio's other investments in illiquid securities, exceeds 15% of the Portfolio's net assets.
Foreign Debt Securities. The obligations of foreign governmental entities have various kinds of government support and include obligations issued or guaranteed by foreign governmental entities with taxing power. These obligations may or may not be supported by the full faith and credit of a foreign government. The Global Opportunity Portfolio will invest in foreign government securities of issuers considered stable by the Investment Adviser. The Investment Adviser does not believe that the credit risk inherent in the obligations of stable foreign governments is significantly greater than that of U.S. Government securities.
Portfolio Maturity. Neither the U.S. Government Securities Portfolio nor the portion of the Global Opportunity Portfolio invested in debt securities is limited as to the maturities of its portfolio investments. The Investment Adviser may adjust the average maturity of a Portfolio's investments from time to time,
depending on its assessment of the relative yields available on securities of different maturities and its assessment of future interest rate patterns. Thus, at various times the average maturity of the Portfolio may be relatively short (from under one year to five years, for example) and at other times may be relatively long (over 10 years, for example).
Credit Quality. The Quality Bond Portfolio will invest primarily in securities rated in the top three (typically "A" or better) rating categories of a nationally recognized rating agency such as Moody's, S&P or Fitch, or in securities that possess, in the judgment of the Investment Adviser, similar credit characteristics.
The Investment Adviser considers the ratings assigned by nationally recognized rating agencies as one of several factors in its independent credit analysis of issuers. If a debt security in the Quality Bond Portfolio is downgraded below A the Investment Adviser will consider factors such as price, credit risk, market conditions and interest rates and will sell such security only if, in the Investment Adviser's judgment, it is advantageous to do so.
The Global Opportunity Portfolio is authorized to invest without limitation in fixed income securities rated below Ba by Moody's or BB by S&P or Fitch or in unrated securities which, in the Investment Adviser's judgment, possess similar credit characteristics ("high yield bonds"). The Program's Board of Directors has adopted a policy that the Global Opportunity Portfolio will not invest more than 34% of its assets in obligations rated by a nationally recognized rating agency below investment grade, or in obligations deemed by the Investment Adviser to possess similar credit characteristics. Investment in high yield bonds (which are sometimes referred to as "junk" bonds) involves substantial risk. Investments in high yield bonds will be made only when, in the judgment of the Investment Adviser, such securities provide attractive total return potential, relative to the risk of such securities, as compared to higher quality debt securities. Securities rated BB or lower by S&P or Fitch or Ba or lower by Moody's are considered by those rating agencies to have varying degrees of speculative characteristics. Consequently, although high yield bonds can be expected to provide higher yields, such securities may be subject to greater market price fluctuations and risk of loss of principal than lower yielding, higher rated fixed income securities. The Global Opportunity Portfolio will not invest in debt securities in the lowest rating categories (CC or lower for S&P or Fitch or Ca or lower for Moody's) unless the Investment Adviser believes that the financial condition of the issuer or the protection afforded the particular securities is stronger than would otherwise be indicated by such low ratings. See Appendix B-- "Ratings of Corporate Debt Securities" for additional information regarding high yield bonds.
High yield bonds may be issued by less creditworthy companies or by larger, highly leveraged companies and are frequently issued in corporate restructurings such as mergers and leveraged buyouts. Such securities are particularly vulnerable to adverse changes in the issuer's industry and in general economic conditions. High yield bonds frequently are junior obligations of their issuers, so that in the event of the issuer's bankruptcy, claims of the holders of high yield bonds will be satisfied only after satisfaction of the claims of senior security holders. While the high yield bonds in which the Portfolio may invest normally do not include securities which, at the time of investment, are in default or the issuers of which are in bankruptcy, there can be no assurance that such events will not occur after the Portfolio purchases a particular security, in which case the Portfolio may experience losses and incur costs.
High yield bonds tend to be more volatile than higher rated fixed income securities so that adverse economic events may have a greater impact on the prices of high yield bonds than on higher rated fixed income securities. Like higher rated fixed income securities, high yield bonds are generally purchased and
sold through dealers who make a market in such securities for their own accounts. However, there are fewer dealers in the high yield bond market which may be less liquid than the market for higher rated fixed income securities even under normal economic conditions. Also, there may be significant disparities in the prices quoted for high yield bonds by various dealers. Adverse economic conditions or investor perceptions (whether or not based on economic fundamentals) may impair the liquidity of this market and may cause the prices the Portfolio receives for its high yield bonds to be reduced, or the Portfolio may experience difficulty in liquidating a portion of its portfolio. Under such conditions, judgment may play a greater role in valuing certain of the Portfolio's securities than in the case of securities trading in a more liquid market.
INVESTMENTS IN SECURITIES DENOMINATED IN FOREIGN CURRENCIES
Both the Fundamental Value and Global Opportunity Portfolios may invest in securities denominated in currencies other than the U.S. dollar. In selecting securities denominated in foreign currencies, the Investment Adviser will consider, among other factors, the effect of movement in currency exchange rates on the U.S. dollar value of such securities. An increase in the value of a currency will increase the total return to the Portfolio of securities denominated in such currency. Conversely, a decline in the value of the currency will reduce the total return. The Investment Adviser may seek to hedge all or a portion of a Portfolio's foreign securities through the use of forward foreign currency contracts, currency options, futures contracts and options thereon or derivative securities. See "Indexed and Inverse Securities" and "Portfolio Strategies Involving Options and Futures" below and Appendix A -- "Options and Futures Transactions".
INVESTMENTS IN MONEY MARKET SECURITIES
The Global Opportunity Portfolio may invest a significant portion of its assets in short-term, high quality debt instruments. In addition, for temporary or defensive purposes or in anticipation of redemptions, each of the Portfolios is authorized to invest up to 100% of its assets in such money market instruments, including obligations of or guaranteed by the U.S. Government or its instrumentalities or agencies, certificates of deposit, bankers' acceptances and other bank obligations, commercial paper rated in the highest category by a nationally recognized rating agency or other fixed income securities deemed by the Investment Adviser to be consistent with the objectives of the Portfolio, or the Portfolio may hold its assets in cash. The obligations of commercial banks may be issued by U.S. banks, foreign branches of U.S. banks ("Eurodollar" obligations) or U.S. branches of foreign banks ("Yankeedollar" obligations).
WHEN-ISSUED SECURITIES, FORWARD COMMITMENTS AND DELAYED DELIVERY TRANSACTIONS
Each Portfolio may purchase securities on a when-issued or forward commitment basis and may purchase or sell securities for delayed delivery. These transactions occur when securities are purchased or sold by a Portfolio with payment and delivery taking place in the future to secure what is considered an advantageous yield and price to the Portfolio at the time of entering into the transaction. Although none of the Portfolios has established limits on the percentage of its assets that may be committed in connection with such transactions, each Portfolio will maintain with the Program's custodian a segregated account of cash, cash equivalents, U.S. Government securities or other high grade liquid debt or equity securities denominated in U.S. dollars or non-U.S. currencies in an aggregate amount equal to the amount of the Portfolio's commitment in connection with such purchase transactions.
STANDBY COMMITMENT AGREEMENTS
Each Portfolio may from time to time enter into standby commitment agreements. Such agreements commit a Portfolio, for a stated period of time, to purchase a stated amount of a fixed income security which may be issued and sold to the Portfolio at the option of the issuer. The price and coupon of the security is fixed at the time of the commitment. At the time of entering into the agreement, the Portfolio is paid a commitment fee, regardless of whether or not the security is ultimately issued, which typically is approximately 0.5% of the aggregate purchase price of the security which the Portfolio has committed to purchase. A Portfolio will enter into such agreements only for the purpose of investing in the security underlying the commitment at a yield and price which is considered advantageous to the Portfolio. None of the Portfolios will enter into a standby commitment with a remaining term in excess of 45 days, and each Portfolio will limit its investment in such commitments so that the aggregate purchase price of the securities subject to such commitments, together with the value of portfolio securities subject to legal restrictions on resale, will not exceed 15% of its assets taken at the time of acquisition of such commitment or security. The Portfolio will at all times maintain a segregated account with its custodian of cash, cash equivalents, U.S. Government securities or other high grade liquid debt or equity securities denominated in U.S. dollars or non-U.S. currencies in an aggregate amount equal to the purchase price of the securities underlying the commitment.
There can be no assurance that the securities subject to a standby commitment will be issued and, if issued, the value of the security on the delivery date may be more or less than its purchase price. Since the issuance of the security underlying the commitment is at the option of the issuer, a Portfolio may bear the risk of a decline in the value of such security and may not benefit from an appreciation in the value of the security during the commitment period.
The purchase of a security subject to a standby commitment agreement and the related commitment fee will be recorded on the date on which the security reasonably can be expected to be issued, and the value of the security will thereafter be reflected in the calculation of the related Portfolio's net asset value. The cost basis of the security will be adjusted by the amount of the commitment fee. In the event the security is not issued, the commitment fee will be recorded as income on the expiration date of the standby commitment.
REPURCHASE AGREEMENTS AND PURCHASE AND SALE CONTRACTS
Each Portfolio may invest in securities pursuant to repurchase agreements or purchase and sale contracts. Repurchase agreements and purchase and sale contracts may be entered into only with financial institutions which have capital of at least $50 million or whose obligations are guaranteed by an entity having capital of at least $50 million. Under such agreements, the other party agrees, upon entering into the contract with a Portfolio, to repurchase the security at a mutually agreed upon time and price in a specified currency, thereby determining the yield during the term of the agreement. This results in a fixed rate of return insulated from market fluctuations during such period, although such return may be affected by currency fluctuations. In the case of repurchase agreements, the prices at which the trades are conducted do not reflect accrued interest on the underlying obligation; whereas, in the case of purchase and sale contracts, the prices take into account accrued interest. Such agreements usually cover short periods, such as under one week. Repurchase agreements may be construed to be collateralized loans by the purchaser to the seller secured by the securities transferred to the purchaser. In the case of a repurchase agreement, as a purchaser, a Portfolio will require the seller to provide additional collateral if the market value of the securities falls below the repurchase price at any time during the term of the repurchase agreement; the Portfolio does not have the right to seek additional collateral
in the case of purchase and sale contracts. In the event of default by the seller under a repurchase agreement construed to be a collateralized loan, the underlying securities are not owned by the Portfolio but only constitute collateral for the seller's obligation to pay the repurchase price. Therefore, a Portfolio may suffer time delays and incur costs or possible losses in connection with disposition of the collateral.
A purchase and sale contract differs from a repurchase agreement in that the contract arrangements stipulate that the securities are owned by the Portfolio. In the event of a default under such a repurchase agreement or under a purchase and sale contract, instead of the contractual fixed rate, the rate of return to the Portfolio would be dependent upon intervening fluctuations of the market values of such securities and the accrued interest on the securities. In such event, the Portfolio would have rights against the seller for breach of contract with respect to any losses arising from market fluctuations following the failure of the seller to perform. A Portfolio may not invest more than 15% of its net assets in repurchase agreements or purchase and sale contracts maturing in more than seven days.
INDEXED AND INVERSE SECURITIES
The Portfolios may invest in securities whose potential investment return is based on the change in particular measurements of value or rate (an "index"). As an illustration, the Portfolios may invest in a security that pays interest and returns principal based on the change in an index of interest rates or of the value of a precious or industrial metal. Interest and principal payable on a security may also be based on relative changes among particular indexes. In addition, the Portfolios may invest in securities whose potential investment return is inversely based on the change in particular indexes. For example, the Portfolios may invest in securities that pay a higher rate of interest and principal when a particular index decreases and pay a lower rate of interest and principal when the value of the index increases. To the extent that the Portfolios invest in such types of securities, they will be subject to the risks associated with changes in the particular indexes, which may include reduced or eliminated interest payments and losses of invested principal. Indexed and inverse securities are currently issued by a number of U.S. governmental agencies such as FHLMC and FNMA, as well as a number of other financial institutions. To the extent the Portfolios invest in such instruments, under current market conditions, they most likely will purchase indexed and inverse securities issued by the above-mentioned U.S. governmental agencies.
Certain indexed securities, including certain inverse securities, may have the effect of providing a degree of investment leverage, because they may increase or decrease in value at a rate that is a multiple of the changes in applicable indices. As a result, the market value of such securities will generally be more volatile than the market values of fixed-rate securities. The Portfolios believe that indexed securities, including inverse securities, represent flexible portfolio management instruments that may allow the Portfolios to seek potential investment return, hedge other portfolio positions, or vary the degree of portfolio leverage relatively efficiently under different market conditions.
LENDING OF PORTFOLIO SECURITIES
Each Portfolio may from time to time lend securities from its portfolio with a value not exceeding 33 1/3% of its total assets, to banks, brokers and other financial institutions and receive collateral in cash or securities issued or guaranteed by the U.S. Government. Such collateral will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. This limitation is a fundamental
policy of each Portfolio, and it may not be changed without the approval of the holders of a majority of the Portfolio's outstanding voting securities, as defined in the Investment Company Act of 1940, as amended (the "Investment Company Act"). During the period of such a loan, the Portfolio receives the income on the loaned securities and either receives the income on the collateral or other compensation, i.e., negotiated loan premium or fee, for entering into the loan and thereby increases its yield. In the event that the borrower defaults on its obligation to return borrowed securities, because of insolvency or otherwise, a Portfolio could experience delays and costs in gaining access to the collateral and could suffer a loss to the extent that the value of the collateral falls below the market value of the borrowed securities.
PORTFOLIO STRATEGIES INVOLVING OPTIONS AND FUTURES
Each Portfolio may engage in various portfolio strategies to seek to increase its return through the use of listed or over-the-counter ("OTC") options on its portfolio securities and to hedge its portfolio against adverse movements in the markets in which it invests. Each Portfolio is authorized to write (i.e., sell) covered put and call options on its portfolio securities or securities in which it anticipates investing and purchase put and call options on securities. In addition, the Fundamental Value and Global Opportunity Portfolios may engage in transactions in stock index options, stock index futures and related options on such futures and may deal in forward foreign exchange transactions and foreign currency options and futures and related options on such futures. The Quality Bond, U.S. Government Securities and Global Opportunity Portfolios may engage in transactions in interest rate futures and related options on such futures. Each of these portfolio strategies is described in more detail in "Appendix A--Options and Futures Transactions" attached to this Prospectus and in the Statement of Additional Information. Although certain risks are involved in options and futures transactions (as discussed in the Appendix), the Investment Adviser believes that, because the Portfolios will (i) write only covered options on portfolio securities or securities in which they anticipate investing and (ii) engage in other options and futures transactions only for hedging purposes, the options and portfolio strategies of the Portfolios will not subject any Portfolio to the risks frequently associated with the speculative use of options and futures transactions. While each Portfolio's use of hedging strategies is intended to reduce the volatility of the net asset value of shares of that Portfolio, each Portfolio's net asset value will fluctuate. There can be no assurance that any Portfolio's hedging transactions will be effective. Furthermore, each Portfolio will only engage in hedging activities from time to time and may not necessarily be engaging in hedging activities when movements in the equity or debt markets, interest rates or currency exchange rates occur.
ILLIQUID SECURITIES
Each Portfolio may invest up to 15% of its assets in illiquid securities, although it will limit such investments to 10% of its assets to the extent required by state law. Pursuant to that restriction, the Portfolios may not invest in securities that cannot readily be resold because of legal or contractual restrictions or which cannot otherwise be marketed, redeemed, put to the issuer or a third party, or which do not mature within seven days, or which the Board of Directors of the Program has not determined to be liquid pursuant to applicable law, if at the time of acquisition more than 15% (or 10%, if state law so requires) of that Portfolio's assets, taken at market value, would be invested in such securities. Securities subject to this restriction include repurchase agreements maturing in more than seven days and securities the disposition of which is subject to other legal restrictions, such as restrictions imposed by the Securities Act of 1933, as amended (the "Securities Act"), on the resale of securities acquired in certain private placements. If registration of these securities
under the Securities Act is required, such registration may not be readily accomplished, and if such securities may be resold without registration, such resale may be permissible only in limited quantities. In either event, a Portfolio may not be able to sell these restricted securities at a time which, in the judgment of the Investment Adviser, would be most opportune.
Although not a fundamental policy, each Portfolio will include OTC options and securities underlying such options (to the extent provided under "Restrictions on OTC Options" in Appendix A hereto) in calculating the amount of its assets subject to the limitation on restricted securities. No Portfolio will change or modify this policy prior to the change or modification by the Commission staff of its positions regarding OTC options.
Notwithstanding the above limitation, each Portfolio may purchase securities that are not registered under the Securities Act but that can be offered and sold to "qualified institutional buyers" under Rule 144A under the Securities Act, provided that the Program's Board of Directors, or the Investment Adviser pursuant to guidelines adopted by the Board, continuously determines, based on trading markets for the specific Rule 144A security, that it is liquid. The Board of Directors, however, will retain oversight and is ultimately responsible for the liquidity determinations. Since it is not possible to predict with assurance exactly how this market for restricted securities offered and sold under Rule 144A will develop, the Board of Directors will monitor carefully each Portfolio's investments in these securities, focusing on such factors, among others, as valuation, liquidity and availability of information. This investment practice could have the effect of increasing the level of illiquidity in a Portfolio to the extent that qualified institutional buyers become for a time uninterested in purchasing these securities.
INVESTMENT RESTRICTIONS
Each Portfolio's investment activities are subject to further restrictions that are described in the Statement of Additional Information. Investment restrictions and policies which are fundamental policies may not be changed without the approval of the holders of a majority of a Portfolio's outstanding voting securities (which for this purpose and under the Investment Company Act means the lesser of (a) 67% of the shares represented at a meeting at which more than 50% of the outstanding shares are represented or (b) more than 50% of the outstanding shares). Among each Portfolio's fundamental policies, a Portfolio may not invest more than 25% of its assets, taken at market value at the time of each investment, in the securities of issuers of any particular industry (excluding the U.S. Government and its agencies or instrumentalities). Investment restrictions and policies that are non-fundamental policies may be changed by the Board of Directors without shareholder approval. As a non- fundamental policy, no Portfolio may borrow amounts in excess of 10% of its total assets, taken at market value, and then only from banks as a temporary measure for extraordinary or emergency purposes, such as the redemption of Portfolio shares. No Portfolio will purchase securities while borrowings exceed 5% of its assets. None of the Portfolios has a present intention to borrow money in amounts exceeding 5% of its assets.
MANAGEMENT OF THE PROGRAM
BOARD OF DIRECTORS
The Board of Directors of the Program consists of six individuals, five of whom are not "interested persons" of the Program as defined in the Investment Company Act. The Directors of the Program are
responsible for the overall supervision of the operations of the Program and perform the various duties imposed on the directors of investment companies by the Investment Company Act.
The Directors of the Program are:
Arthur Zeikel*--President and Chief Investment Officer of the Investment Adviser and FAM; President and Director of Princeton Services, Inc. ("Princeton Services"); Executive Vice President of ML & Co. and Merrill Lynch and Director of Merrill Lynch Funds Distributor, Inc. (the "Distributor").
Joe Grills--Member of the Committee of Investment of Employee Benefit Assets of Financial Executives Institute ("CIEBA"); Member of CIEBA's Executive Committee; Member of the Investment Advisory Committee of the State of New York Common Retirement Fund; Director, Duke Management Company and Winthrop Financial Associates (real estate management).
Walter Mintz--Special Limited Partner of Cumberland Associates (an investment partnership).
Melvin R. Seiden--President of Silbanc Properties, Ltd. (real estate, investment and consulting).
Stephen B. Swensrud--Principal of Fernwood Associates (financial consultants); Director, Hitchiner Manufacturing Company.
MANAGEMENT AND ADVISORY ARRANGEMENTS
The Investment Adviser acts as the investment adviser to the Program and provides each Portfolio with management and investment advisory services. The Investment Adviser is owned and controlled by ML & Co., a financial services holding company and the parent of Merrill Lynch. The Investment Adviser or its affiliates act as investment adviser(s) to more than 100 other registered investment companies and provide investment advisory services to individuals and institutions. As of November 30, 1994, the Investment Adviser and its affiliates had a total of approximately $167.5 billion in investment company and other portfolio assets under management.
The investment advisory agreement with the Investment Adviser relating to each Portfolio (each an "Investment Advisory Agreement") provides that, subject to the direction of the Board of Directors of the Program, the Investment Adviser is responsible for the actual management of that Portfolio and for the review of that Portfolio's holdings in light of its own research analysis and analyses from other relevant sources. The responsibility for making decisions to buy, sell or hold a particular security rests with the Investment Adviser, subject to review by the Board of Directors. The Investment Adviser supplies the portfolio managers for each Portfolio, who consider analyses from various sources, make the necessary investment decisions and place transactions accordingly. The Investment Adviser also is obligated to perform certain administrative and management services for the Program and is required to provide all the office
space, facilities, equipment and personnel necessary to perform its duties under each Investment Advisory Agreement. The Investment Adviser has access to the total securities research, economic research and computer applications facilities of Merrill Lynch and makes extensive use of these facilities.
Each Portfolio pays the Investment Adviser a monthly fee based on the average daily value of that Portfolio's net assets at the following annual rates:
U.S.
FUNDAMENTAL QUALITY GOVERNMENT GLOBAL
VALUE BOND SECURITIES OPPORTUNITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- --------- ---------- -----------
0.65% 0.50% 0.50% 0.75%
|
Each Investment Advisory Agreement obligates a Portfolio to pay certain expenses incurred in its operations and a portion of the Program's general administrative expenses allocated on the basis of the asset size of the respective Portfolios. Expenses that will be borne directly by the Portfolios include redemption expenses, expenses of portfolio transactions, shareholder servicing costs, expenses of registering the shares under Federal and state securities laws, pricing costs (including the daily calculation of net asset value), interest, certain taxes, charges of the Custodian and Transfer Agent and other expenses attributable to a particular Portfolio. Expenses which will be allocated on the basis of the size of the respective Portfolios include directors' fees, legal expenses, state franchise taxes, auditing services, costs of printing proxies, stock certificates, shareholder reports and prospectuses (except to the extent paid by the Distributor), Securities and Exchange Commission fees, accounting costs and other expenses properly payable by the Program and allocable on the basis of the size of the respective Portfolios. Accounting services are provided for the Portfolios by the Investment Adviser and the Portfolios reimburse the Investment Adviser for its costs in connection with such services.
Set forth below is information about the Portfolio Manager for each of the Program's Portfolios. The Portfolio Manager is the individual who is primarily responsible for the day to day management of the Portfolio.
Fundamental Value Portfolio--Kevin Rendino. Mr. Rendino has served as Vice President of the Investment Adviser since December 1993. Prior to that he was a Senior Research Analyst from 1990 to 1992 and a Corporate Analyst from 1988 to 1990.
Quality Bond Portfolio--Jay C. Harbeck. Mr. Harbeck has served as Vice President of the Investment Adviser since 1986 and as Portfolio Manager of the Investment Adviser since 1992.
U.S. Government Securities Portfolio--Gregory Mark Maunz. Mr. Maunz has been Vice President of the Investment Adviser since 1985 and Portfolio Manager since 1984.
Global Opportunity Portfolio--Joel Heymsfeld. Mr. Heymsfeld has been a Vice President of the Investment Adviser since 1978.
TRANSFER AGENCY SERVICES
Financial Data Services, Inc. (the "Transfer Agent"), which is a wholly-owned subsidiary of ML & Co., acts as the Program's transfer agent pursuant to a transfer agency, dividend disbursing agency and shareholder servicing agency agreement (the "Transfer Agency Agreement"). Pursuant to the Transfer Agency Agreement, the Transfer Agent is responsible for the issuance, transfer and redemption of shares and the opening and maintenance of shareholder accounts. Pursuant to the Transfer Agency Agreement, each Portfolio pays the Transfer Agent a fee of $11 per Class A and Class D shareholder account and $14 per Class B and Class C shareholder account and nominal miscellaneous fees (e.g., account closing fees) and reimburses the Transfer Agent for out-of-pocket expenses incurred under the Transfer Agency Agreement.
PURCHASE OF SHARES
The Program will offer shares solely to holders of IRAs for which Merrill Lynch acts as custodian, including individual retirement rollover accounts and SEP-IRAs. The minimum initial purchase in any Portfolio is $100, and the minimum subsequent purchase in any Portfolio is $1.
The Distributor, an affiliate of both the Investment Adviser and Merrill Lynch, acts as the distributor of shares of the Portfolios. Shares of the Portfolios are offered continuously for sale by the Distributor and other eligible securities dealers (including Merrill Lynch). Shares of the Portfolios may be purchased from securities dealers or by mailing a purchase order directly to the Transfer Agent.
The Program is offering shares of the Portfolios in four classes at a public offering price equal to the next determined net asset value per share plus sales charges imposed either at the time of purchase or on a deferred basis depending upon the class of shares selected by the investor under the Merrill Lynch Select PricingSM System, as described below. The applicable offering price for purchase orders is based upon the net asset value of the Portfolio next determined after receipt of the purchase orders by the Distributor. As to purchase orders received by securities dealers prior to 15 minutes after the close of business on the New York Stock Exchange (generally, 4:00 P.M., New York time), which includes orders received after the determination of the net asset value on the previous day, the applicable offering price will be based on the net asset value as of 15 minutes after the close of business on the New York Stock Exchange, on the day the orders are placed with the Distributor, provided the orders are received by the Distributor prior to 30 minutes after the close of business on the New York Stock Exchange on that day. If the purchase orders are not received prior to 30 minutes after the close of business on the New York Stock Exchange such orders shall be deemed received on the next business day. The Program or the Distributor may suspend the continuous offering of any Portfolio's shares of any class at any time in response to conditions in the securities markets or otherwise and may thereafter resume such offering from time to time. Any order may be rejected by the Distributor or the Program. Neither the Distributor nor the dealers are permitted to withhold placing orders to benefit themselves by a price change. Merrill Lynch may charge its customers a processing fee (presently $4.85) to confirm a sale of shares to such customers. Purchases directly through the Transfer Agent are not subject to the processing fee.
Each Portfolio issues four classes of shares under the Merrill Lynch Select PricingSM System, which permits each investor to choose the method of purchasing shares that the investor believes is most beneficial given the amount of the purchase, the length of time the investor expects to hold the shares and other relevant circumstances. Shares of Class A and Class D are sold to investors choosing the initial sales charge alternatives and shares of Class B and Class C are sold to investors choosing the deferred sales charge alternatives. Investors should determine whether under their particular circumstances it is more advantageous to incur an initial sales charge or to have the entire initial purchase price invested in the Portfolio with the investment thereafter being subject to a CDSC and ongoing distribution fees. A discussion of the factors that investors should consider in determining the method of purchasing shares under the Merrill Lynch Select PricingSM System is set forth under "Merrill Lynch Select PricingSM System" on page 8.
Shareholders considering transferring a tax-deferred account such as an IRA from Merrill Lynch to another brokerage firm or financial institution should be aware that shares of the Portfolios may only be held in a Merrill Lynch custodied IRA. Prior to any such transfer, a shareholder must either redeem the shares so that the cash proceeds can be transferred to the account at the new firm or exchange the shares for shares of another MLAM-advised mutual fund pursuant to the exchange privilege. It is possible, however, that the
firm to which the IRA is to be transferred will not take delivery of shares of such fund, in which case the shareholder would have to redeem these shares (paying any applicable CDSC) so that the cash proceeds can be transferred or continue to maintain an IRA account at Merrill Lynch for those shares.
Cash balances of participants who elect to have such funds automatically invested in shares of a Portfolio will be invested as follows. Cash balances arising from the sale of securities held in the IRA account which do not settle on the day of the transaction (such as most common and preferred stock transactions) become available to the Program and will be invested in shares of a Portfolio on the business day following the day that proceeds with respect thereto are received in the IRA account. Proceeds giving rise to cash balances from the sale of securities held in the IRA account settling on a same day basis and from principal repayments on debt securities held in the account become available to the Program and will be invested in shares of a Portfolio on the next business day following receipt. Cash balances arising from dividends or interest payments on securities held in the IRA account or from a contribution to the IRA account are invested in shares of the Portfolios on the business day following the date the payment is received in the IRA account.
Merrill Lynch has advised the Program that it will not charge an annual account fee upon any IRA which is then invested solely in one or more of the Program's Portfolios or in a money market fund advised by the Investment Adviser or its affiliates. Merrill Lynch has also advised the Program that it will not charge an annual account fee upon any IRA which participates in the Merrill Lynch Retirement Asset Builder SM Service, receives additional contributions of $250 annually and is invested solely in one or more of the Program's Portfolios or a money market fund advised by the Investment Adviser or its affiliates. If, however, a shareholder of any of the Portfolios exchanges any of his or her shares of a Portfolio for shares of another MLAM- advised mutual fund, Merrill Lynch will reinstate the IRA annual account fee. For information about current IRA fees charged by Merrill Lynch, consult the Merrill Lynch IRA disclosure statement and the Merrill Lynch IRA custodial agreement.
Each Class A, Class B, Class C and Class D share of a Portfolio represents an identical interest in the same investment portfolio and has the same rights, except that Class B, Class C and Class D shares bear the expenses of the ongoing account maintenance fees, and Class B and Class C shares bear the expenses of the ongoing distribution fees and the additional incremental transfer agency costs resulting from the deferred sales charge arrangements. The deferred sales charges and account maintenance fees that are imposed on Class B and Class C shares, as well as the account maintenance fees that are imposed on Class D shares, will be imposed directly against those classes and not against all assets of the Portfolio and, accordingly, such charges will not affect the net asset value of any other class or have any impact on investors choosing another sales charge option. Dividends paid by a Portfolio for each class of shares will be calculated in the same manner at the same time and will differ only to the extent that account maintenance and distribution fees and any incremental transfer agency costs relating to a particular class are borne exclusively by that class. Class B, Class C and Class D shares each have exclusive voting rights with respect to the Rule 12b- 1 distribution plan adopted with respect to such class pursuant to which account maintenance and/or distribution fees are paid. See "Distribution Plans" below. Each class has different exchange privileges. See "Shareholder Services--Exchange Privilege". If pursuant to the exchange privilege, shares of any Portfolio are exchanged for shares of a fund other than a Portfolio of the Program or a money market fund advised by the Investment Adviser or its affiliates then the imposition of the IRA annual account fee may result. For information about current IRA fees charged by Merrill Lynch, consult the Merrill Lynch IRA disclosure statement and the Merrill Lynch IRA custodial agreement.
Investors should understand that the purpose and function of the initial sales charges with respect to Class A and Class D shares are the same as those of the deferred sales charges with respect to Class B and Class C shares in that the sales charges applicable to each class provide for the financing of the distribution of the shares of the Program. The distribution-related revenues paid with respect to a class will not be used to finance the distribution expenditures of another class. Sales personnel may receive different compensation for selling different classes of shares. Investors are advised that only Class A and Class D shares may be available for purchase through securities dealers, other than Merrill Lynch, which are eligible to sell shares.
The following table sets forth a summary of the distribution arrangements for each class of shares under the Merrill Lynch Select PricingSM System.
FUNDAMENTAL VALUE AND GLOBAL OPPORTUNITY PORTFOLIOS
ACCOUNT
MAINTENANCE DISTRIBUTION
CLASS SALES CHARGE(/1/) FEE FEE CONVERSION FEATURE
- ---------------------------------------------------------------------------------------
A Maximum 5.25% initial No No No
sales charge(/2/)(/3/)
- ---------------------------------------------------------------------------------------
B CDSC for a period of 4 0.25% 0.75% B shares convert to D shares
years, at a rate of automatically after
4.0% during the first approximately eight
year, decreasing 1.0% years(/4/)
annually to 0.0%
- ---------------------------------------------------------------------------------------
C 1.0% CDSC for one year 0.25% 0.75% No
- ---------------------------------------------------------------------------------------
D Maximum 5.25% initial 0.25% No No
sales charge(/3/)
|
(1) Initial sales charges are imposed at the time of purchase as a percentage of the offering price. CDSCs may be imposed if the redemption occurs within the applicable CDSC time period. The charge will be assessed on an amount equal to the lesser of the proceeds of redemption or the cost of the shares being redeemed.
(2) Offered only to eligible investors. See "Initial Sales Charge Alternatives -- Class A and Class D Shares -- Eligible Class A Investors".
(3) Reduced for purchases of $25,000 or more. Class A and Class D share purchases of $1,000,000 or more may not be subject to an initial sales charge but instead will be subject to a 1.0% CDSC for one year.
(4) The conversion period for dividend reinvestment shares is modified. Also, Class B shares of the Quality Bond and U.S. Government Securities Portfolios and certain other MLAM-advised mutual funds into which exchanges may be made have a ten-year conversion period. If Class B shares of a Portfolio are exchanged for Class B shares of another Portfolio or MLAM-advised mutual fund, the conversion period applicable to the Class B shares acquired in the exchange will apply, and the holding period for the shares exchanged will be tacked on to the holding period for the shares acquired.
QUALITY BOND AND U.S. GOVERNMENT SECURITIES PORTFOLIOS
ACCOUNT
MAINTENANCE DISTRIBUTION
CLASS SALES CHARGE(/1/) FEE FEE CONVERSION FEATURE
- ----------------------------------------------------------------------------------------
A Maximum 4.00% initial No No No
sales charge(/2/)(/3/)
- ----------------------------------------------------------------------------------------
B CDSC for a period of 4 0.25% 0.50% B shares convert to D shares
years at a rate of 4.0% automatically after
during the first year, approximately ten
decreasing 1.0% years(/4/)
annually to 0.0%
- ----------------------------------------------------------------------------------------
C 1.0% CDSC for one year 0.25% 0.55% No
- ----------------------------------------------------------------------------------------
D Maximum 4.00% initial 0.25% No No
sales charge(/3/)
|
(1) Initial sales charges are imposed at the time of purchase as a percentage of the offering price. CDSCs are imposed if the redemption occurs within the applicable CDSC time period. The charge will be assessed on an amount equal to the lesser of the proceeds of redemption or the cost of the shares being redeemed.
(2) Offered only to eligible investors. See "Purchase of Shares -- Initial Sales Charge Alternatives -- Class A and Class D Shares -- Eligible Class A Investors".
(3) Reduced for purchases of $25,000 or more. Class A and Class D share purchases of $1,000,000 or more may not be subject to an initial sales charge but instead will be subject to a 1.0% CDSC for one year.
(4) The conversion period for dividend reinvestment shares is modified. Also, Class B shares of the Fundamental Value and Global Opportunity Portfolios and certain other MLAM-advised mutual funds into which exchanges may be made have an eight-year conversion period. If Class B shares of a Portfolio are exchanged for Class B shares of another Portfolio or MLAM- advised mutual fund, the conversion period applicable to the Class B shares acquired in the exchange will apply, and the holding period for the shares exchanged will be tacked on to the holding period for the shares acquired.
INITIAL SALES CHARGE ALTERNATIVES -- CLASS A AND CLASS D SHARES
Investors choosing the initial sales charge alternatives who are eligible to purchase Class A shares should purchase Class A shares rather than Class D shares because there is an account maintenance fee imposed on Class D shares.
The public offering price of Class A and Class D shares for purchasers choosing the initial sales charge alternatives is the next determined net asset value plus varying sales charges (i.e., sales loads), as set forth below.
FUNDAMENTAL VALUE AND GLOBAL OPPORTUNITY
PORTFOLIOS
--------------------------------------------------
SALES LOAD AS A DISCOUNT TO
SALES LOAD AS A PERCENTAGE* OF SELECTED DEALERS
PERCENTAGE OF THE NET AMOUNT AS A PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE INVESTED OFFERING PRICE
- ------------------ --------------- --------------- ------------------
Less than $25,000........... 5.25% 5.54% 5.00%
$25,000 but less than
$50,000.................... 4.75 4.99 4.50
$50,000 but less than
$100,000................... 4.00 4.17 3.75
$100,000 but less than
$250,000................... 3.00 3.09 2.75
$250,000 but less than
$1,000,000................. 2.00 2.04 1.80
$1,000,000 and over**....... 0.00 0.00 0.00
|
QUALITY BOND AND
U.S. GOVERNMENT SECURITIES PORTFOLIOS
-----------------------------------------------------
SALES LOAD AS A DISCOUNT TO
SALES LOAD PERCENTAGE* OF SELECT DEALERS
AS A PERCENTAGE NET AMOUNT AS A PERCENTAGE
AMOUNT OF PURCHASE OF OFFERING PRICE INVESTED OF OFFERING PRICE
- ------------------ ----------------- ----------------- -----------------
Less than $25,000........ 4.00% 4.16% 3.75%
$25,000 but less than
$50,000................. 3.75 3.90 3.50
$50,000 but less than
$100,000................ 3.25 3.36 3.00
$100,000 but less than
$250,000................ 2.50 2.56 2.25
$250,000 but less than
$1,000,000.............. 1.50 1.52 1.25
$1,000,000 and more**.... 0.00 0.00 0.00
|
** Class A and Class D purchases of $1,000,000 or more will be subject to a CDSC of 1.0% if the shares are redeemed within one year after purchase. The charge will be assessed on an amount equal to the lesser of the proceeds of redemption or the cost of the shares being redeemed.
The Distributor may reallow discounts to selected dealers and retain the balance over such discounts. At times the Distributor may reallow the entire sales charge to such dealers. Since securities dealers selling Class A and Class D shares of the Program will receive a concession equal to most of the sales charge, they may be deemed to be underwriters under the Securities Act.
Eligible Class A Investors. Class A shares are offered to a limited group of investors and also will be issued upon reinvestment of dividends on outstanding Class A shares. Class A shares may be purchased at net asset value by participants in certain investment programs to which Merrill Lynch Trust Company
provides discretionary trustee services. In addition, Class A shares will be offered at net asset value to ML & Co. and its subsidiaries and their directors and employees and to members of the Boards of MLAM-advised investment companies, including the Program. Certain persons who acquired shares of certain MLAM-advised closed-end funds who wish to reinvest the net proceeds from a sale of their closed-end fund common shares in shares of the Program also may purchase Class A shares of a Portfolio if certain conditions set forth in the Statement of Additional Information are met. For example, Class A shares of the Program and certain other MLAM-advised mutual funds are offered at net asset value to shareholders of Merrill Lynch Senior Floating Rate Fund, Inc. who wish to reinvest the net proceeds from a sale of certain of their shares of common stock of Merrill Lynch Senior Floating Rate Fund, Inc. in shares of such funds.
Reduced Initial Sales Charges. No initial sales charges are imposed upon Class A and Class D shares issued as a result of the automatic reinvestment of dividends or capital gains distributions. Class A and Class D sales charges also may be reduced under a Right of Accumulation and a Letter of Intention.
Class A shares are offered at net asset value to certain eligible Class A investors as set forth above under "Eligible Class A Investors".
Class D shares are offered at net asset value without sales charge to an investor who has a business relationship with a Merrill Lynch financial consultant, if certain conditions set forth in the Statement of Additional Information are met.
Additional information concerning these reduced initial sales charges is set forth in the Statement of Additional Information.
DEFERRED SALES CHARGE ALTERNATIVES -- CLASS B AND CLASS C SHARES
Investors choosing the deferred sales charge alternatives should consider Class B shares if they intend to hold their shares for an extended period of time and Class C shares if they are uncertain as to the length of time they intend to hold their assets in MLAM-advised mutual funds.
The public offering price of Class B and Class C shares for investors choosing the deferred sales charge alternatives is the next determined net asset value per share without the imposition of a sales charge at the time of purchase. As discussed below, Class B shares are subject to a four year CDSC, while Class C shares are subject only to a one year 1.0% CDSC. On the other hand, with respect to the Fundamental Value and Global Opportunity Portfolios, approximately eight years after Class B shares are issued, and with respect to the Quality Bond and U.S. Government Securities Portfolios, approximately ten years after Class B shares are issued, such Class B shares, together with shares issued upon dividend reinvestment with respect to those shares, are automatically converted into Class D shares of the same Portfolio and thereafter will be subject to lower continuing fees. See "Conversion of Class B Shares to Class D Shares" below. Both Class B and Class C shares of each of the Portfolios are subject to ongoing account maintenance and distribution fees as discussed below under "Distribution Plans". The proceeds from the account maintenance fees are used to compensate Merrill Lynch for providing continuing account maintenance activities.
Class B and Class C shares of each Portfolio are sold without an initial sales charge so that the Portfolio will receive the full amount of the investor's purchase payment. Merrill Lynch compensates its financial
consultants for selling Class B and Class C shares at the time of purchase from its own funds. See "Distribution Plans" below.
Proceeds from the CDSC and the distribution fee are paid to the Distributor and are used in whole or in part by the Distributor to defray the expenses of dealers (including Merrill Lynch) related to providing distribution-related services to the Program in connection with the sale of the Class B and Class C shares of the Portfolios, such as the payment of compensation to financial consultants for selling Class B and Class C shares, from its own funds. The combination of the CDSC and the ongoing distribution fee facilitates the ability of the Program to sell the Class B and Class C shares without a sales charge being deducted at the time of purchase. Class B shares of a Portfolio will convert automatically into Class D shares of the same Portfolio approximately eight years after issuance in the case of the Fundamental Value and Global Opportunity Portfolios and approximately ten years after issuance in the case of the Quality Bond and U.S. Government Securities Portfolios. Class D shares are subject to an account maintenance fee but no distribution fee. Class B shares of certain MLAM-advised mutual funds into which exchanges may be made convert into Class D shares automatically after approximately eight years, and Class B shares of certain other MLAM-advised mutual funds into which exchanges may be made convert into Class D shares automatically after approximately ten years. If Class B shares of a Portfolio are exchanged for Class B shares of another Portfolio or MLAM-advised mutual fund, the conversion period applicable to Class B shares acquired in the exchange will apply, and the holding period for the shares exchanged will be tacked on to the holding period for the shares acquired.
Imposition of the CDSC and the distribution fee on Class B and Class C shares is limited by the NASD asset-based sales charge rule. See "Limitations on the Payment of Deferred Sales Charges" below. Class B shareholders of a Portfolio exercising the exchange privilege described under "Shareholder Services -- Exchange Privilege" will continue to be subject to that Portfolio's CDSC schedule if such schedule is higher than the CDSC schedule relating to the Class B shares acquired as a result of the exchange.
Contingent Deferred Sales Charges -- Class B Shares. Class B shares which are redeemed within four years of purchase may be subject to a CDSC at the rates set forth below charged as a percentage of the dollar amount subject thereto. The charge will be assessed on an amount equal to the lesser of the proceeds of redemption or the cost of the shares being redeemed. Accordingly, no CDSC will be imposed on increases in net asset value above the initial purchase price. In addition, no CDSC will be assessed on shares derived from reinvestment of dividends or capital gains distributions.
The following table sets forth the rates of the Class B CDSC:
CLASS B CDSC
AS A PERCENTAGE
YEAR SINCE PURCHASE OF DOLLAR AMOUNT
PAYMENT MADE SUBJECT TO CHARGE
------------------- -----------------
0-1........................................................ 4.00%
1-2........................................................ 3.00
2-3........................................................ 2.00
3-4........................................................ 1.00
4 and thereafter........................................... 0.00
|
In determining whether a CDSC is applicable to a redemption, the calculation will be determined in the manner that results in the lowest possible rate being charged. Therefore, it will be assumed that the
redemption is first of shares held for over four years or shares acquired pursuant to reinvestment of dividends or distributions and then of shares held longest during the four-year period. The charge will not be applied to dollar amounts representing an increase in the net asset value since the time of purchase. A transfer of shares from a shareholder's account to another account will be assumed to be made in the same order as a redemption.
To provide an example, assume an investor purchases 100 shares at $10 per share (at a cost of $1,000) and in the third year after purchase, the net asset value per share is $12 and, during such time, the investor has acquired 10 additional shares through dividend reinvestment. If at such time the investor makes his or her first redemption of 50 shares (proceeds of $600), 10 shares will not be subject to the CDSC because of dividend reinvestment. With respect to the remaining 40 shares, the CDSC is applied only to the original cost of $10 per share and not to the increase in net asset value of $2 per share. Therefore, $400 of the $600 redemption proceeds will be charged at a rate of 2.0% (the applicable rate in the third year after purchase).
The Class B CDSC is waived on redemptions of shares in connection with certain post-retirement withdrawals from an IRA or following the death or disability (as defined in the Internal Revenue Code of 1986, as amended) of a shareholder. Additional information concerning the waiver of the Class B CDSC is set forth in the Statement of Additional Information.
Contingent Deferred Sales Charges -- Class C Shares. Class C shares which are redeemed within one year after purchase may be subject to a 1.0% CDSC charged as a percentage of the dollar amount subject thereto. The charge will be assessed on an amount equal to the lesser of the proceeds of redemption or the cost of the shares being redeemed. Accordingly, no Class C CDSC will be imposed on increases in net asset value above the initial purchase price. In addition, no Class C CDSC will be assessed on shares derived from reinvestment of dividends or capital gains distributions.
In determining whether a Class C CDSC is applicable to a redemption, the calculation will be determined in the manner that results in the lowest possible rate being charged. Therefore, it will be assumed that the redemption is first of shares held for over one year or shares acquired pursuant to reinvestment of dividends or distributions and then of shares held longest during the one-year period. The charge will not be applied to dollar amounts representing an increase in the net asset value since the time of purchase. A transfer of shares from a shareholder's account to another account will be assumed to be made in the same order as a redemption.
Conversion of Class B Shares to Class D Shares. After approximately eight years in the case of the Fundamental Value and Global Opportunity Portfolios and ten years in the case of the Quality Bond and U.S. Government Securities Portfolios (the "Conversion Period"), Class B shares of a Portfolio will be converted automatically into Class D shares of the same Portfolio. Class D shares are subject to an ongoing account maintenance fee of 0.25% of net assets but are not subject to the distribution fee that is borne by Class B shares. Automatic conversion of Class B shares into Class D shares will occur at least once each month (on the "Conversion Date") on the basis of the relative net asset values of the shares of the two classes on the Conversion Date, without the imposition of any sales load fee or other charge. Conversion of Class B shares to Class D shares will not be deemed a purchase or sale of the shares for Federal income tax purposes.
In addition, shares purchased through reinvestment of dividends on Class B shares also will convert automatically to Class D shares. The Conversion Date for dividend reinvestment shares will be calculated taking into account the length of time the shares underlying such dividend reinvestment shares were
outstanding. If at a Conversion Date the conversion of Class B shares to Class D shares of a Portfolio in a single account will result in less than $50 worth of Class B shares being left in the account, all of the Class B shares of that Portfolio held in the account on the Conversion Date will be converted to Class D shares of that Portfolio.
Share certificates for Class B shares of a Portfolio to be converted must be delivered to the Transfer Agent at least one week prior to the Conversion Date applicable to those shares. In the event such certificates are not received by the Transfer Agent at least one week prior to the Conversion Date, the related Class B shares will convert to Class D shares on the next scheduled Conversion Date after such certificates are delivered.
In general, Class B shares of equity MLAM-advised mutual funds will convert approximately eight years after initial purchase, and Class B shares of taxable and tax-exempt fixed income MLAM-advised mutual funds will convert approximately ten years after initial purchase. If, during the Conversion Period, a shareholder exchanges Class B shares with an eight-year Conversion Period for Class B shares with a ten-year Conversion Period, or vice versa, the Conversion Period applicable to the Class B shares acquired in the exchange will apply, and the holding period for the shares exchanged will be tacked on to the holding period for the shares acquired.
DISTRIBUTION PLANS
The Program has adopted separate distribution plans on behalf of each of the Portfolios for Class B, Class C and Class D shares pursuant to Rule 12b-1 under the Investment Company Act (each a "Distribution Plan") with respect to the account maintenance and/or distribution fees paid by the Portfolio to the Distributor with respect to such classes. The Class B and Class C Distribution Plans provide for the payment of account maintenance fees and distribution fees, and the Class D Distribution Plan provides for the payment of account maintenance fees.
The Distribution Plans for Class B, Class C and Class D shares each provide that the Portfolio pays the Distributor an account maintenance fee relating to the shares of the relevant class, accrued daily and paid monthly, at the annual rate of 0.25% of the average daily net assets of the Portfolio attributable to shares of the relevant class in order to compensate the Distributor and Merrill Lynch (pursuant to a sub-agreement) in connection with account maintenance activities.
The Distribution Plans for Class B and Class C shares each provide that the respective Portfolio also pays the Distributor a distribution fee relating to the shares of the relevant class, accrued daily and paid monthly, (i) at the annual rate of 0.75% of the average daily net assets attributable to the Class B and Class C shares of the Fundamental Value and Global Opportunity Portfolios or (ii) at the annual rates of 0.50% and 0.55% of the average daily net assets attributable to the Class B and Class C shares, respectively, of the Quality Bond and U.S. Government Securities Portfolios, in order to compensate the Distributor and Merrill Lynch (pursuant to a sub-agreement) for providing shareholder and distribution services, and bearing certain distribution-related expenses of the Portfolios, including payments to financial consultants for selling Class B and Class C shares of that Portfolio. The Distribution Plans relating to Class B and Class C shares are designed to permit an investor to purchase Class B and Class C shares through dealers without the assessment of an initial sales charge and at the same time permit the dealer to compensate its financial consultants in connection with the sale of the Class B and Class C shares. In this regard, the purpose and
function of the ongoing distribution fees and the CDSC are the same as those of the initial sales charge with respect to the Class A and Class D shares of the Portfolios in that the deferred sales charges provide for the financing of the distribution of the Portfolio's Class B and Class C shares.
The payments under the Distribution Plans are based upon a percentage of average daily net assets attributable to the shares regardless of the amount of expenses incurred, and accordingly, distribution-related revenues from the Distribution Plans may be more or less than distribution-related expenses. Information with respect to the distribution-related revenues and expenses is presented to the Directors for their consideration in connection with their deliberations as to the continuance of the Class B and Class C Distribution Plans. This information is presented annually as of December 31 of each year on a "fully allocated accrual" basis and quarterly on a "direct expense and revenue/cash" basis. On the fully allocated accrual basis, revenues consist of the account maintenance fees, distribution fees, CDSCs and certain other related revenues, and expenses consist of financial consultant compensation, branch office and regional operation center selling and transaction processing expenses, advertising, sales promotion and marketing expenses, corporate overhead and interest expense. On the direct expense and revenue/cash basis, revenues consist of the account maintenance fees, distribution fees and CDSCs, and the expenses consist of financial consultant compensation.
The Program has no obligation with respect to distribution and/or account maintenance-related expenses incurred by the Distributor and Merrill Lynch in connection with Class B, Class C and Class D shares, and there is no assurance that the Directors of the Program will approve the continuance of the Distribution Plans from year to year. However, the Distributor intends to seek annual continuation of the Distribution Plans. In their review of the Distribution Plans, the Directors will be asked to take into consideration expenses incurred in connection with the account maintenance and/or distribution of each class of shares separately. The initial sales charges, the account maintenance fee, the distribution fee and/or the CDSCs received with respect to one class will not be used to subsidize the sale of shares of another class. Payments of the distribution fee on Class B shares will terminate upon conversion of those Class B shares into Class D shares as set forth under "Deferred Sales Charge Alternatives -- Class B and Class C Shares -- Conversion of Class B Shares to Class D Shares".
LIMITATIONS ON THE PAYMENT OF DEFERRED SALES CHARGES
The maximum sales charge rule in the Rules of Fair Practice of the NASD imposes a limitation on certain asset-based sales charges such as the Portfolios' distribution fees and the CDSCs but not the account maintenance fees. The maximum sales charge rule is applied separately to each Portfolio and to each class. As applicable to the Portfolios, the maximum sales charge rule limits the aggregate of distribution fee payments and CDSCs payable by each Portfolio to (1) 6.25% of eligible gross sales of Class B shares and Class C shares, computed separately (defined to exclude shares issued pursuant to dividend reinvestments and exchanges) plus (2) interest on the unpaid balance for the respective class, computed separately, at the prime rate plus 1% (the unpaid balance being the maximum amount payable minus amounts received from the payment of the distribution fee and the CDSC). In connection with the Class B shares, the Distributor has voluntarily agreed to waive interest charges on the unpaid balance in excess of 0.50% of eligible gross sales. Consequently, the maximum amount payable to the Distributor (referred to as the "voluntary maximum") in connection with the Class B shares is 6.75% of eligible gross sales. The Distributor retains the right to stop waiving interest charges at any time. To the extent payments would exceed the voluntary
maximum, the Portfolio in question will not make further payments of the distribution fee with respect to Class B shares, and any CDSCs will be paid to the Portfolio rather than to the Distributor; however, the Portfolio will continue to make payments of the account maintenance fee. In certain circumstances the amount payable pursuant to the voluntary maximum may exceed the amount payable under the NASD formula. In such circumstances payment in excess of the amount payable under the NASD formula will not be made.
REDEMPTION OF SHARES
Distributions from an IRA to a participant prior to the time the participant reaches age 59 1/2 may subject the participant to income and excise taxes. See "Taxes". There are no adverse tax consequences resulting from redemptions of shares of the Portfolios where the redemption proceeds remain in the IRA account and are otherwise invested. Shareholders should consult their tax advisers concerning tax consequences resulting from redemptions of shares of the Portfolios. Shareholders should be aware, however, that redemption of shares of a Portfolio and reinvestment of the proceeds in shares of another fund advised by the Investment Adviser or an affiliate may subject the investor's IRA to an annual IRA account fee. For information about the current IRA fees charged by Merrill Lynch, consult the Merrill Lynch IRA disclosure statement and the Merrill Lynch IRA custodial agreement.
The Program is required to redeem for cash shares of each Portfolio of the Program at the request of shareholders. The redemption price is the net asset value per share next determined after the initial receipt by Merrill Lynch of proper notice of redemption, as described below. If such notice is received by Merrill Lynch prior to the determination of net asset value (15 minutes after the close of business on the New York Stock Exchange), the redemption will be effective on that day and payment generally will be made on the next business day. If the notice is received after the determination of net asset value on any day, the redemption will be effective on the next business day and payment will be made on the second business day after receipt of the notice. Shareholders liquidating their holdings will receive upon redemption all dividends reinvested through the date of redemption. Accrued but unpaid dividends will be paid on the payable date next following the date of redemption.
Any shareholder may redeem shares of the Portfolios by submitting a written notice of redemption to Merrill Lynch. Participants in the Program should contact their Merrill Lynch financial consultant to effect such redemptions. Redemption requests should not be sent to the Program or to the Transfer Agent. The notice must bear the signature of the person in whose name the IRA is maintained, signed exactly as his or her name appears on the IRA adoption agreement.
SHAREHOLDER SERVICES
The Program offers a number of shareholder services and investment plans designed to facilitate investment in its shares. Full details as to each of such services, copies of the various plans described below and instructions as to how to participate in the various services or plans, or how to change options with respect thereto, can be obtained from the Program by calling the telephone number on the cover page hereof or from the Distributor or Merrill Lynch.
Exchange Privilege. Shareholders of each Portfolio have an exchange privilege with each other Portfolio of the Program, with certain money market funds advised by the Investment Adviser or its affiliates and with certain other MLAM-advised mutual funds. There is currently no limitation on the number of times a shareholder may exercise the exchange privilege. The exchange privilege may be modified or terminated in accordance with the rules of the Commission. If, however, a shareholder exchanges any of his or her shares of a Portfolio for shares of another MLAM-advised mutual fund, Merrill Lynch will reinstate the IRA annual account fee. For information about the current IRA fees charged by Merrill Lynch, consult the Merrill Lynch IRA disclosure statement and the Merrill Lynch IRA custodial agreement.
Under the Merrill Lynch Select PricingSM System, Class A shareholders may exchange Class A shares of a Portfolio for Class A shares of a second Portfolio or MLAM-advised mutual fund if the shareholder holds any Class A shares of the second Portfolio or fund in his account in which the exchange is made at the time of the exchange or is otherwise eligible to purchase Class A shares of the second Portfolio or fund. If the Class A shareholder wants to exchange Class A shares for shares of a second Portfolio or MLAM-advised mutual fund, and the shareholder does not hold Class A shares of the second Portfolio or fund in his account at the time of the exchange and is not otherwise eligible to acquire Class A shares of the second Portfolio or fund, the shareholder will receive Class D shares of the second Portfolio or fund as a result of the exchange. Class D shares also may be exchanged for Class A shares of a second Portfolio or MLAM-advised mutual fund at any time as long as, at the time of the exchange, the shareholder holds Class A shares of the second Portfolio or fund in the account in which the exchange is made or is otherwise eligible to purchase Class A shares of the second Portfolio or fund.
Exchanges of Class A and Class D shares are made on the basis of the relative net asset values per Class A or Class D share, respectively, plus an amount equal to the difference, if any, between the sales charge previously paid on the Class A or Class D shares being exchanged and the sales charge payable at the time of the exchange on the shares being acquired.
Class B, Class C and Class D shares will be exchanged with shares of the same class of another Portfolio or MLAM-advised mutual fund.
Shares of the Portfolios which are subject to a CDSC will be exchangeable on the basis of relative net asset value per share without the payment of any CDSC that might otherwise be due upon redemption of the shares of the Portfolio. For purposes of computing the CDSC that may be payable upon a disposition of the shares acquired in the exchange, the holding period for the previously owned shares of the Portfolio is tacked on to the holding period of the newly acquired shares of the other Portfolio or fund.
Class A, Class B, Class C and Class D shares also will be exchangeable for shares of certain MLAM- advised money market funds specifically designated as available for exchange by holders of Class A, Class B, Class C or Class D shares. The period of time that Class A, Class B, Class C or Class D shares are held in a money market fund, however, will not count toward satisfaction of the holding period requirement for reduction of any CDSC imposed on such shares, if any, and with respect to Class B shares, toward satisfaction of the Conversion Period.
Class B shareholders of a Portfolio exercising the exchange privilege will continue to be subject to the Portfolio's CDSC schedule if such schedule is higher than the CDSC schedule relating to the new Class B shares. In addition, Class B shares of a Portfolio acquired through use of the exchange privilege will be subject
to the Portfolio's CDSC schedule if such schedule is higher than the CDSC schedule relating to the Class B shares of the MLAM-advised mutual fund from which the exchange has been made.
Exercise of the exchange privilege is treated as a sale for Federal income tax purposes. For further information, see "Shareholder Services -- Exchange Privilege" in the Statement of Additional Information.
MERRILL LYNCH HAS ADVISED THE PROGRAM THAT IT WILL NOT CHARGE AN ANNUAL ACCOUNT FEE UPON ANY IRA WHICH IS THEN INVESTED SOLELY IN ONE OR MORE OF THE PROGRAM'S PORTFOLIOS OR A MONEY MARKET FUND ADVISED BY THE INVESTMENT ADVISER OR ITS AFFILIATES. IN THIS REGARD, EXCHANGE OF PORTFOLIO SHARES FOR SHARES OF A FUND OTHER THAN A PORTFOLIO OF THE PROGRAM OR A MONEY MARKET FUND ADVISED BY THE INVESTMENT ADVISER OR ITS AFFILIATES MAY RESULT IN THE IMPOSITION OF AN ANNUAL IRA FEE. FOR INFORMATION ABOUT THE CURRENT IRA FEES CHARGED BY MERRILL LYNCH, CONSULT THE MERRILL LYNCH IRA DISCLOSURE STATEMENT AND THE MERRILL LYNCH IRA CUSTODIAL AGREEMENT.
For further information, see "Shareholder Services--Exchange Privilege" in the Statement of Additional Information.
Automatic Reinvestment of Dividends and Capital Gains Distributions. All dividends and capital gains distributions of a Portfolio are reinvested automatically in full and fractional shares of that Portfolio, at the net asset value per share of the respective Portfolio next determined on the ex-dividend date of such dividend or distribution in the case of the Fundamental Value and Global Opportunity Portfolios and at the close of business on the monthly payment date for such dividends and distributions in the case of the Quality Bond and U.S. Government Securities Portfolios. A shareholder may, at any time, by written notification to Merrill Lynch, elect to have subsequent dividends or both dividends and capital gains distributions held in the IRA as a cash balance rather than reinvested.
Systematic Withdrawal Plans. At age 59 1/2, a Class A or Class D shareholder may elect to receive systematic redemption payments from his or her account in the form of payments by check or through automatic payment by direct deposit to his or her bank account on either a monthly or quarterly basis. A Class A or Class D shareholder may elect to have shares redeemed on a monthly, bimonthly, quarterly, semiannual or annual basis through the Systematic Redemption Program, subject to certain conditions. See "Taxes" for consequences of withdrawals from IRA accounts prior to attaining age 59 1/2.
Automatic Investment Plans. Regular additions of Class A, Class B, Class C or Class D shares may be made to an investor's account by prearranged charges of $50 or more to his regular bank account. In addition, Merrill Lynch offers an automated funding service which permits regular current year IRA contributions of up to $2,000 per year to be made to IRAs and an automated investment program which may be used for automated subsequent purchases of shares of the Program.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Directors of the Program, the Investment Adviser is primarily responsible for the Program's portfolio decisions and the execution of the Program's portfolio transactions. With respect to such transactions, the Investment Adviser seeks to obtain the best results for each Portfolio, taking into account such factors as price (including the applicable fee, brokerage commission or dealer spread), size of order, difficulty of execution and operational facilities of the firm involved, the firm's risk in positioning a block of securities and the provision of supplemental investment research by the firm. While the Investment Adviser generally seeks reasonably competitive fees, commissions or spreads, the Portfolios will not necessarily be paying the lowest fee, commission or spread available. The Board of Directors of the Program has adopted procedures to ensure that brokerage transactions with affiliated persons, including the frequency of such transactions, the receipt of commissions payable and the selection of the broker effecting the transactions, are fair and reasonable to the Program's shareholders.
The fixed income securities and certain equity securities in which the Portfolios will invest are traded in the over-the-counter markets, and where possible the Portfolios intend to deal directly with the dealers who make markets in the securities involved, except in those circumstances where better prices and execution are available elsewhere. Under the Investment Company Act, except as permitted by exemptive order, persons affiliated with the Program are prohibited from dealing with any Portfolio as principal in the purchase and sale of securities. Since transactions in the over-the-counter market usually involve transactions with dealers acting as principal for their own account, the Portfolios will not deal with affiliated persons, including Merrill Lynch and its affiliates, in connection with such transactions. In addition, the Portfolios may not purchase securities during the existence of any underwriting syndicate for such securities of which Merrill Lynch is a member except pursuant to procedures approved by the Board of Directors of the Program which comply with rules adopted by the Commission. Affiliated persons of the Program may serve as its broker in over-the-counter transactions conducted on an agency basis.
No Portfolio has any obligation to deal with any broker or dealer in the execution of its portfolio transactions. Subject to obtaining the best price and execution, securities firms, including Merrill Lynch, which provide supplemental investment research to the Investment Adviser may receive orders for transactions by the Portfolios. Information so received is in addition to and not in lieu of the services required to be performed by the Investment Adviser under the Investment Advisory Agreement, and the expenses of the Investment Adviser will not necessarily be reduced as a result of the receipt of such supplemental information. Supplemental investment research received by the Investment Adviser also may be used in connection with other investment advisory accounts of the Investment Adviser and its affiliates. Each Portfolio will pay brokerage fees to Merrill Lynch in connection with portfolio transactions executed on its behalf by Merrill Lynch.
The Program anticipates that its brokerage transactions involving securities of companies domiciled in countries other than the United States generally will be conducted primarily on the principal stock exchanges of such countries. Brokerage commissions and other transaction costs on foreign stock exchange transactions are generally higher than in the United States although the Portfolios will endeavor to achieve the best net results in effecting such transactions. There is generally less governmental supervision and regulation of foreign stock exchanges and brokers than in the United States.
PERFORMANCE DATA
From time to time the Program may include each Portfolio's average annual total return and, in the case of the Quality Bond and U.S. Government Securities Portfolios, yield for various specified time periods in advertisements or information furnished to present or prospective shareholders. Average annual total return and yield are computed separately for each Portfolio in accordance with formulas specified by the Commission.
Average annual total return quotations for each Portfolio for the specified periods will be computed by finding the average annual compounded rates of return (based on net investment income and any capital gains or losses on portfolio investments over such periods) that would equate the initial amount invested to the redeemable value of such investment at the end of each period. Average annual total return will be computed assuming all dividends and distributions are reinvested and taking into account all applicable recurring and nonrecurring expenses, including the maximum sales charge in the case of Class A and Class D shares and the CDSC that would be applicable to a complete redemption of the investment at the end of the specified period in the case of Class B and Class C shares. Dividends paid by a Portfolio with respect to all shares, to the extent any dividends are paid, will be calculated in the same manner at the same time on the same day and will be in the same amount, except that account maintenance and distribution fees and any incremental transfer agency costs relating to each class of shares will be borne exclusively by that class. The Portfolios will include performance data for all classes of shares of the Portfolio in any advertisement or information including performance data of the Portfolio.
The Program also may quote each Portfolio's total return and aggregate total return performance data for various specified time periods. Such data will be calculated substantially as described above, except that (1) the rates of return calculated will not be average annual rates, but rather, actual annual, annualized or aggregate rates of return and (2) the maximum applicable sales charges will not be included with respect to annual or annualized rates of return calculations. Aside from the impact on the performance data calculations of including or excluding the maximum applicable sales charges, actual annual or annualized total return data generally will be lower than average total return data since the average annual rates of return reflect compounding; aggregate total return data generally will be higher than average annual total return data since the aggregate rates of return reflect compounding over a longer period of time. In advertisements directed to investors whose purchases are subject to reduced sales charges in the case of Class A and Class D shares or waiver of the CDSC in the case of Class B shares, performance data may take into account the reduced, and not the maximum, sales charge or may not take into account the CDSC and therefore may reflect greater total return since, due to the reduced sales charges or waiver of the CDSC, a lower amount of expenses may be deducted. See "Purchase of Shares". Each Portfolio's total return may be expressed either as a percentage or as a dollar amount in order to illustrate the effect of such total return on a hypothetical $1,000 investment in the Program at the beginning of each specified period.
Yield quotations will be computed based on a 30-day period by dividing (a)
the net income based on the yield of each security earned during the period by
(b) the average daily number of shares outstanding in the Portfolio during the
period that were entitled to receive dividends multiplied by (c) the maximum
offering price/net asset value per share of that Portfolio on the last day of
the period.
Total return figures and yield figures are based on each Portfolio's historical performance and are not intended to indicate future performance. Each Portfolio's total return will vary depending on market
conditions, the securities comprising such Portfolio's holdings, the Portfolio's operating expenses and the amount of realized and unrealized net capital gains or losses during the period. The value of an investment in any Portfolio will fluctuate and an investor's shares, when redeemed, may be worth more or less than their original cost.
On occasion, a Portfolio may compare its performance to that of the Standard & Poor's 500 Composite Stock Price Index, the Dow Jones Industrial Average, or performance data published by Lipper Analytical Services, Inc., Morningstar Publications, Inc., Money Magazine, U.S. News & World Report, Business Week, CDA Investment Technology, Inc., Forbes Magazine and Fortune Magazine. As with other performance data, performance comparisons should not be considered indicative of the Portfolio's relative performance for any future period.
TAXES
FEDERAL
RICs. The following is a general summary of the treatment of regulated investment companies ("RICs") and their shareholders under the Internal Revenue Code of 1986, as amended (the "Code"). The Program intends to elect and to qualify each Portfolio for the special tax treatment afforded RICs under the Code. If it so qualifies, each Portfolio (but not its shareholders) will not be subject to Federal income tax on the part of its net ordinary income and net realized capital gains which it distributes to Class A, Class B, Class C and Class D shareholders. If in any taxable year a Portfolio does not qualify as a RIC, all of its taxable income will be taxed to the Program at corporate rates. The Program intends to cause each Portfolio to distribute substantially all of such income.
Dividends paid by a Portfolio from its ordinary income and distributions of a Portfolio's net realized short-term capital gains (together referred to hereafter as "ordinary income dividends") are ordinarily taxable to shareholders as ordinary income. Distributions made from a Portfolio's net realized long-term capital gains (including long-term gains from certain transactions in futures or options) ("capital gain dividends") are ordinarily taxable to shareholders as long-term capital gains, regardless of the length of time the shareholder has owned Portfolio shares. Distributions in excess of a Portfolio's earnings and profits will first reduce the adjusted tax basis of a holder's shares and, after such adjusted tax basis is reduced to zero, will constitute capital gains to such holder (assuming the shares are held as a capital asset). Dividends of a RIC are ordinarily taxable to shareholders even though they are reinvested in additional shares of the Portfolio.
Under certain provisions of the Code, some shareholders may be subject to a 31% withholding tax on ordinary income dividends, capital gain dividends and redemption payments ("backup withholding"). Generally, shareholders subject to backup withholding will be those for whom no certified taxpayer identification number is on file with the Program or who, to the Program's knowledge, have furnished an incorrect number. When establishing an account, an investor must certify under penalty of perjury that such number is correct and that such investor is not otherwise subject to backup withholding.
IRAs. Investment in the Portfolios is limited to participants in IRAs for which Merrill Lynch acts as passive custodian. Accordingly, the general description of the tax treatment of RICs as set forth above is qualified with respect to the special tax treatment afforded IRAs under the Code. Under the Code, neither
ordinary income dividends nor capital gain dividends represent current income
to shareholders if such shares are held in an IRA. Rather, distributions from
an IRA will be taxable as ordinary income at the rate applicable to the
participant at the time of the distribution. Such distributions would include
(i) any pre-tax contributions to the IRA (including pre-tax contributions that
have been rolled over from another IRA or qualified retirement plan), and (ii)
dividends (whether or not such dividends are classified as ordinary income or
capital gain dividends). In addition to ordinary income tax, participants may
be subject to the imposition of excise taxes on any distributed amount,
including: (i) a 10 percent excise tax on any amount withdrawn from an IRA
prior to the participant's attainment of age 59 1/2; and (ii) a 15 percent
excise tax on the amount of any "excess distributions" (generally, amounts in
excess of $150,000) made from the IRA and any other IRA or qualified retirement
plan annually.
Under certain limited circumstances (for example, if an individual for whose
benefit an IRA is established engages in any transaction prohibited under
Section 4975 of the Code with respect to such account), the IRA could cease to
be treated as an IRA as of the first day of such taxable year that such
transaction occurred. If an IRA through which a shareholder holds Portfolio
shares becomes ineligible for the special treatment afforded IRAs under the
Code, such shareholder will be treated as having received a distribution on
such first day of the taxable year from the IRA in an amount equal to the fair
market value of all assets in the account. Thus, the shareholder would be taxed
currently on (i) the amount of any pre-tax contributions and previously untaxed
dividends held within the account, and (ii) all ordinary income and capital
gain dividends paid by a Portfolio subsequent to such event, whether such
dividends are received in cash or reinvested in additional shares. These
ordinary income and capital gain dividends also might be subject to state and
local taxes. In the event of IRA disqualification, shareholders also could be
subject to the excise taxes described above. Additionally, IRA disqualification
may subject a nonresident alien shareholder to a 30% United States withholding
tax on ordinary income dividends paid by a Portfolio unless a reduced rate of
withholding or a withholding exemption is provided under applicable treaty law.
Dividends and interest received by the Global Opportunity Portfolio and, to a lesser extent, the Fundamental Value Portfolio may give rise to withholding and other taxes imposed by foreign countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. Because of their participation in an IRA, shareholders will not be able to credit or deduct such taxes in computing their taxable incomes. However, in the event of IRA disqualification, as discussed above, shareholders of the Global Opportunity Portfolio might be entitled to a credit or deduction with respect to their proportionate shares of foreign taxes paid by the Portfolio, subject to certain conditions and limitations in the Code, if the Portfolio is eligible and makes an election with the Internal Revenue Service. It is unlikely, however, that the Fundamental Value Portfolio will be able to make this election.
The foregoing is a general and abbreviated summary of the applicable provisions of the Code and Treasury regulations presently in effect. For the complete provisions, reference should be made to the pertinent Code sections and the Treasury regulations promulgated thereunder. The Code and the Treasury regulations are subject to change by legislative or administrative action either prospectively or retroactively.
STATE
Ordinary income and capital gain dividends on RIC shares held in a disqualified IRA or outside of an IRA also may be subject to state and local taxes. Certain states exempt from state income taxation dividends paid by RICs which are derived from interest on United States Government obligations. State law varies as
to whether dividend income attributable to United States Government obligations is exempt from state income tax. Generally, however, states exempt from state income taxation dividends on shares held within an IRA, and commence taxation on such amounts when actually distributed from an IRA. Such amounts are generally treated as ordinary income.
Shareholders are urged to consult their tax advisers regarding specific questions as to Federal, foreign, state or local taxes. Foreign investors should consider applicable foreign taxes in their evaluation of an investment in a Portfolio of the Program.
ADDITIONAL INFORMATION
DIVIDENDS AND DISTRIBUTIONS
It is the Program's intention to distribute substantially all of the net investment income, if any, of each Portfolio. The net investment income of the Quality Bond and U.S. Government Securities Portfolios is declared as dividends daily immediately prior to the determination of the net asset value of each Portfolio on that day. The net investment income of the Quality Bond and U.S. Government Securities Portfolios for dividend purposes consists of interest and dividends earned on portfolio securities, less expenses, in each case computed since the most recent determination of net asset value. Dividends from net investment income of the Fundamental Value and Global Opportunity Portfolios will be declared at least annually. All net long-term and short-term capital gains, if any, including gains from option and futures contract transactions, will be distributed by each Portfolio at least annually. Dividends and distributions on all Portfolios will be reinvested in additional full and fractional shares of the Portfolio at net asset value unless the shareholder elects to receive such dividends as cash in his or her IRA account. Expenses of each Portfolio including the investment advisory fees, distribution and account maintenance fees with respect to Class B and Class C shares, and account maintenance fees with respect to Class D shares, are accrued daily. Shares will accrue dividends as long as they are issued and outstanding. Shares are issued and outstanding as of the settlement date of a purchase order to the settlement date of a redemption order.
Premiums from expired call options written by a Portfolio and net gains from closing purchase transactions are treated as short-term capital gains for Federal income tax purposes. Dividends and distributions paid by a Portfolio may be reinvested automatically in shares of the same Portfolio, at net asset value without sales charge. Shareholders may elect in writing to receive any such dividends or distributions, or both, as cash in their IRA accounts. Dividends and distributions are, for tax purposes, treated by shareholders as described above whether they are reinvested in shares of a Portfolio or held in their IRA accounts as a cash balance.
Certain gains or losses attributable to foreign currency related gains or losses from certain of the Global Opportunity Portfolio's investments, and to a lesser extent, Fundamental Value Portfolio, may increase or decrease the amount of such Portfolio's income available for distribution. If such losses exceed other income during a taxable year, (a) the related Portfolio would not be able to make any ordinary income dividend distributions, and (b) distributions made before the losses were realized would be recharacterized as returns of capital to shareholders, rather than as ordinary dividends, reducing each shareholder's tax basis in the Portfolio shares for Federal income tax purposes. If in any fiscal year either Portfolio has net income from certain foreign currency transactions, such income will be distributed annually.
The per share dividends and distributions on Class B, Class C and Class D shares will be lower than the per share dividends and distributions on Class A shares as a result of the effect of the account maintenance, distribution and higher transfer agency fees applicable with respect to the Class B and Class C shares and the account maintenance fees with respect to the Class D shares. See "Additional Information--Determination of Net Asset Value".
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of each Portfolio is determined once daily 15 minutes after the close of business on the New York Stock Exchange (generally 4:00 p.m., New York time) on each day during which the New York Stock Exchange is open for trading and, under certain circumstances, on other days. Any assets or liabilities initially expressed in terms of non-U.S. dollar currencies are translated into U.S. dollars at the prevailing market rates as quoted by one or more banks or dealers on the day of valuation. The net asset value per share of a Portfolio is computed by dividing the sum of the value of the securities held by such Portfolio plus any cash or other assets (including interest and dividends accrued but not yet received) minus all liabilities (including accrued expenses) by the total number of shares outstanding at such time, rounded to the nearest cent. Expenses, including the investment advisory fees payable to the Investment Adviser, are accrued daily. The Program will employ Merrill Lynch Securities Pricing Service, an affiliate of the Investment Adviser, to provide certain securities prices for the Portfolios.
Portfolio securities which are traded on stock exchanges are valued at the last sale price (regular way) on the exchange on which such securities are traded, as of the close of business on the day the securities are being valued, or, lacking any sales, at the last available bid price. In cases where securities are traded on more than one exchange, the securities are valued on the exchange designated by or under the authority of the Board of Directors as the primary market. Securities traded in the over-the-counter market are valued at the last available bid price in the over-the-counter market prior to the time of valuation. When a Portfolio writes a call option, the amount of the premium received is recorded on the books of the Portfolio as an asset and an equivalent liability. The amount of the liability is subsequently valued to reflect the current market value of the option written, based upon the last sale price in the case of exchange-traded options or, in the case of options traded in the over-the-counter market, the last asked price. Options purchased by a Portfolio are valued at their last sale price in the case of exchange- traded options or, in the case of options traded in the over-the-counter market, the last bid price. Securities and assets for which market quotations are not readily available are valued at fair market value as determined in good faith by or under the direction of the Board of Directors of the Program.
The Program values corporate debt securities, mortgage-backed securities, municipal securities, asset-backed securities and other debt securities on the basis of valuations provided by dealers or by a pricing service which uses information with respect to transactions in such securities, quotations from dealers, market transactions in comparable securities, various relationships between securities and yield to maturity. Portfolio securities (other than short-term obligations but including listed issues) may be valued on the basis of prices furnished by one or more pricing services which determine prices for normal, institutional-size trading units of such securities using market information, transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders. Obligations with remaining maturities of 60 days or less are valued at amortized cost unless this method no longer produces fair valuations.
The per share net asset value of Class A shares generally will be higher than the per share net asset value of shares of the other classes, reflecting the daily expense accruals of the account maintenance, distribution and higher transfer agency fees applicable with respect to Class B and Class C shares and the
daily expense accruals of the account maintenance fees applicable with respect to Class D shares; moreover, the per share net asset value of Class D shares generally will be higher than the per share net asset value of Class B and Class C shares, reflecting the daily expense accruals of the distribution and the higher transfer agency fees applicable with respect to Class B and Class C shares. It is expected, however, that the per share net asset value of the classes will tend to converge immediately after the payment of dividends or distributions which will differ by approximately the amount of the expense accrual differentials between the classes.
Option Accounting Principles. When a Portfolio sells an option, an amount equal to the premium received by the Portfolio is included in that Portfolio's Statement of Assets and Liabilities as a deferred credit. The amount of such liability subsequently will be marked-to-market to reflect the current market value of the option written. If current market value exceeds the premium received there is an unrealized loss; conversely, if the premium exceeds current market value there is an unrealized gain. The current market value of a traded option is the last sale price or, in the absence of a sale, the last offering price. If an option expires on its stipulated expiration date or if a Portfolio enters into a closing purchase transaction, the affected Portfolio will realize a gain (or loss if the cost of a closing purchase transaction exceeds the premium received when the option was sold) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option will be extinguished. If an option is exercised, the Program will realize a gain or loss from the sale of the underlying security and the proceeds of sales are increased by the premium originally received.
ORGANIZATION OF THE PROGRAM
The Program was incorporated under Maryland law on May 12, 1994. The Program is an open-end management investment company comprised of separate series ("Series"), each of which is a separate portfolio offering shares to selected groups of purchasers. Each Series is to be managed independently. At the date of this Prospectus, the Program has authorized capital of 100,000,000 shares of Common Stock, par value $0.10 per share, divided as follows:
SHARES OF SHARES OF SHARES OF SHARES OF
CLASS A CLASS B CLASS C CLASS D
COMMON COMMON COMMON COMMON
PORTFOLIO STOCK STOCK STOCK STOCK
- --------- --------- --------- --------- ---------
Fundamental Value....................... 6,250,000 6,250,000 6,250,000 6,250,000
Quality Bond............................ 6,250,000 6,250,000 6,250,000 6,250,000
U.S. Government Securities.............. 6,250,000 6,250,000 6,250,000 6,250,000
Global Opportunity...................... 6,250,000 6,250,000 6,250,000 6,250,000
|
The Program has received an order (the "Order") from the SEC permitting the issuance and sale of multiple classes of shares, and the Directors of the Program may classify and reclassify the shares of the Program into additional Series or classes of common stock at a future date without shareholder approval. Shares of Class A, Class B, Class C and Class D Common Stock of each Portfolio represent interests in the same assets of that Portfolio and are identical in all respects except that Class B, Class C and Class D shares bear certain expenses related to the account maintenance associated with such shares, and Class B and Class C shares bear certain expenses related to the distribution of such shares. Each class has exclusive voting rights with respect to matters relating to account maintenance and distribution expenditures, as applicable. See "Purchase of Shares".
Shareholders are entitled to one vote for each full share and to fractional votes for fractional shares held in the election of Directors (to the extent hereinafter provided) and on other matters submitted to the vote of shareholders. There normally will be no meeting of shareholders for the purpose of electing Directors unless and until such time as less than a majority of the Directors holding office have been elected by shareholders, at which time the Directors then in office will call a shareholders' meeting for the election of Directors. Shareholders may, in accordance with the Articles of Incorporation of the Program, cause a meeting of shareholders to be held for the purpose of voting on the removal of Directors. Also, the Program will be required to call a special meeting of shareholders of a Series in accordance with the requirements of the Investment Company Act to seek approval of new management and advisory arrangements, of a material increase in distribution fees or of a change in the fundamental policies, objectives or restrictions of a Series. Except as set forth above, the Directors shall continue to hold office and appoint successor Directors. Each issued and outstanding share is entitled to participate equally in dividends and distributions declared by the respective Series and in net assets of such Series upon liquidation or dissolution remaining after satisfaction of outstanding liabilities except that, as noted above, Class B, Class C and Class D shares of each Series bear certain additional expenses. The obligations and liabilities of a particular Series are restricted to the assets of that Series and do not extend to the assets of the Program generally. Shares of each Series represent an interest only in that Series and not in any other Series of the Program. The shares of each Series, when issued, will be fully-paid and non-assessable by the Program.
SHAREHOLDER REPORTS
Only one copy of each shareholder report and certain shareholder communications will be mailed to each identified shareholder regardless of the number of accounts such shareholder has. If a shareholder wishes to receive separate copies of each report and communication for each of the shareholder's related accounts, the shareholder should notify in writing:
Financial Data Services, Inc.
Attn: TAMFO
P.O. Box 45289
Jacksonville, FL 32232-5289
The written notification should include the shareholder's name, address, tax identification number and Merrill Lynch, Pierce, Fenner & Smith Incorporated and/or mutual fund account numbers. If you have any questions regarding this, please call your Merrill Lynch financial consultant or Financial Data Services, Inc. at 1-800-637-3863.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Program at the address or telephone number set forth on the cover page of this Prospectus.
APPENDIX A: OPTIONS AND FUTURES TRANSACTIONS
As described under "Other Investment Policies and Practices of the Portfolios--Portfolio Strategies Involving Options and Futures", each Portfolio is authorized to engage in various portfolio management strategies involving options, futures and options on futures. These strategies are described in detail below:
Writing Covered Options. Each Portfolio is authorized to write (i.e., sell) covered call options on the securities in which it may invest and to enter into closing purchase transactions with respect to certain of such options. A covered call option is an option where a Portfolio in return for a premium gives another party a right to buy specified securities owned by the Portfolio at a specified future date and price set at the time of the contract. The principal reason for writing call options is to attempt to realize, through the receipt of premiums, a greater return than would be realized on the securities alone. By writing covered call options, a Portfolio gives up the opportunity, while the option is in effect, to profit from any price increase in the underlying security above the option exercise price. In addition, the Portfolio's ability to sell the underlying security will be limited while the option is in effect unless the Portfolio effects a closing purchase transaction. A closing purchase transaction cancels out the Portfolio's position as the writer of an option by means of an offsetting purchase of an identical option prior to the expiration of the option it has written. Covered call options serve as a partial hedge against the price of the underlying security declining.
Each Portfolio also may write put options which give the holder of the option the right to sell the underlying security to the Portfolio at the stated exercise price. A Portfolio will receive a premium for writing a put option, which increases the Portfolio's return. The Portfolios write only covered put options, which means that so long as the Portfolio is obligated as the writer of the option it will, through its custodian, have deposited and maintained cash, cash equivalents, U.S. Government securities or other high grade liquid debt or equity securities denominated in U.S. dollars or non-U.S. currencies with a securities depository with a value equal to or greater than the exercise price of the underlying securities. By writing a put, the Portfolio will be obligated to purchase the underlying security at a price that may be higher than the market value of that security at the time of exercise for as long as the option is outstanding. A Portfolio may engage in closing transactions in order to terminate put options that it has written.
Purchasing Options. Each Portfolio is authorized to purchase put options to hedge against a decline in the market value of its securities. By buying a put option, a Portfolio has a right to sell the underlying security at the exercise price, thus limiting the Portfolio's risk of loss through a decline in the market value of the security until the put option expires. The amount of any appreciation in the value of the underlying security will be partially offset by the amount of the premium paid for the put option and any related transaction costs. Prior to its expiration, a put option may be sold in a closing sale transaction, and profit or loss from the sale will depend on whether the amount received is more or less than the premium paid for the put option plus the related transaction costs. A closing sale transaction cancels out the Portfolio's position as the purchaser of an option by means of an offsetting sale of an identical option prior to the expiration of the option it has purchased. In certain circumstances, a Portfolio may purchase call options on securities held in its portfolio on which it has written call options or on securities which it intends to purchase. A Portfolio will not purchase options on securities (including stock index options discussed below) if, as a result of such purchase, the aggregate cost of all outstanding options on securities held by the Portfolio would exceed 5% of the market value of the Portfolio's total assets.
Stock Index Options. The Fundamental Value and Global Opportunity Portfolios are authorized to engage in transactions in stock index options. These Portfolios may purchase or write put and call options on stock indexes to hedge against the risks of market-wide stock price movements in the securities in which either Portfolio invests. Options on indexes are similar to options on securities, except that on exercise or assignment, the parties to the contract pay or receive an amount of cash equal to the difference between the closing value of the index and the exercise price of the option times a specified multiple. A Portfolio may invest in stock index options based on a broad market index, e.g., the S&P 500 Index, or on a narrow index representing an industry or market segment, e.g., the AMEX Oil & Gas Index.
Stock Index Futures and Interest Rate Futures Contracts. The Fundamental Value and Global Opportunity Portfolios may purchase and sell stock index futures contracts, and the Quality Bond, Global Opportunity and U.S. Government Securities Portfolios may purchase and sell interest rate futures contracts, as a hedge against adverse changes in the market value of portfolio securities, as described below. Stock index futures contracts and interest rate futures contracts are herein together referred to as "futures contracts".
A futures contract is an agreement between two parties which obligates the purchaser of the futures contract to buy and the seller of a futures contract to sell a financial instrument for a set price on a future date. The terms of a futures contract require either actual delivery of the financial instrument underlying the contract or, in the case of a stock index futures contract, a cash settlement based upon the difference in value of the index between the time the contract was entered into and the time of its settlement. The Fundamental Value and Global Opportunity Portfolios may effect transactions in stock index futures contracts in connection with the equity securities in which they invest; the Quality Bond, Global Opportunity and U.S. Government Securities Portfolios may invest in interest rate futures contracts in connection with the debt securities in which they invest. Transactions by a Portfolio in futures contracts are subject to limitations as described below under "Restrictions on the Use of Futures Transactions".
The Portfolios may sell futures contracts in anticipation of or during a market decline to attempt to offset the decrease in market value of such Portfolio's securities that might otherwise result. When a Portfolio is not fully invested in the securities markets and anticipates a significant advance, it may purchase futures in order to gain rapid market exposure. This technique generally will allow the Portfolios to gain exposure to a market in a manner which is more efficient than purchasing individual securities and may in part or entirely offset increases in the cost of securities in such market that the Portfolio ultimately purchases. As such purchases are made, an equivalent amount of futures contracts will be terminated by offsetting sales. The Program does not consider purchases of futures contracts by the Portfolios to be a speculative practice under these circumstances. It is anticipated that, in a substantial majority of these transactions, each Portfolio will purchase such securities upon termination of the long futures position, whether the long position is the purchase of a futures contract or the purchase of a call option or the writing of a put option on a future, but under unusual circumstances (e.g., a Portfolio experiences a significant amount of redemptions), a long futures position may be terminated without the corresponding purchase of securities.
Each Portfolio also has authority to purchase and write call and put options on futures contracts (and, in the case of the Fundamental Value and Global Opportunity Portfolios, stock indexes) in connection with its hedging (including anticipatory hedging) activities. Generally, these strategies are utilized under the same market and market sector conditions (i.e., conditions relating to specific types of investments) in which a Portfolio enters into futures transactions. A Portfolio may purchase put options or write call options on futures contracts or stock indexes rather than selling the underlying futures contract in anticipation of a
decrease in the market value of its securities. Similarly, a Portfolio may purchase call options, or write put options on futures contracts or stock indexes, as a substitute for the purchase of such futures contract to hedge against the increased cost resulting from an increase in the market value of securities which the Portfolio intends to purchase.
Each Portfolio may engage in options and futures transactions on U.S. (and, in the case of the Fundamental Value and Global Opportunity Portfolios, foreign) exchanges and in the over-the-counter markets ("OTC options"). In general, exchange-traded contracts are third-party contracts (i.e., performance of the parties' obligations is guaranteed by an exchange or clearing corporation) with standardized strike prices and expiration dates. OTC options are two-party contracts with prices and terms negotiated by the buyer and seller. See "Restrictions on OTC Options" below for information as to restrictions on the use of OTC options.
Foreign Currency Hedging. The Fundamental Value and Global Opportunity Portfolios are authorized to deal in forward foreign exchange among currencies of the different countries in which they will invest and multinational currency units as a hedge against possible variations in the foreign exchange rates among these currencies. Foreign currency hedging is accomplished through contractual agreements to purchase or sell a specified currency at a specified future date (up to one year) and price set at the time of the contract. The Fundamental Value and Global Opportunity Portfolios' dealings in forward foreign exchange will be limited to hedging involving either specific transactions or portfolio positions.
Transaction hedging is the purchase or sale of forward foreign currency with respect to specific receivables or payables of the Portfolio accruing in connection with the purchase and sale of its portfolio securities, the sale and redemption of shares of the Portfolio or the payment of dividends and distributions by the Portfolio. Position hedging is the sale of forward foreign currency with respect to portfolio security positions denominated or quoted in such foreign currency. No Portfolio will speculate in forward foreign exchange.
Hedging against a decline in the value of a currency does not eliminate fluctuations in the prices of portfolio securities or prevent losses if the prices of such securities decline. Such transactions also preclude the opportunity for gain if the value of the hedged currency should rise. Moreover, it may not be possible for a Portfolio to hedge against a devaluation that is so generally anticipated that the Portfolio is not able to contract to sell the currency at a price above the devaluation level it anticipates.
The Fundamental Value and Global Opportunity Portfolios also are authorized to purchase or sell listed or OTC foreign currency options, foreign currency futures and related options on foreign currency futures as a short or long hedge against possible variations in foreign exchange rates. Such transactions may be effected with respect to hedges on non-U.S. dollar denominated securities owned by the Portfolio, sold by the Portfolio but not yet delivered, or committed or anticipated to be purchased by the Portfolio. As an illustration, a Portfolio may use such techniques to hedge the stated value in U.S. dollars of an investment in a yen denominated security. In such circumstances, for example, the Portfolio may purchase a foreign currency put option enabling it to sell a specified amount of yen for dollars at a specified price by a future date. To the extent the hedge is successful, a loss in the value of the yen relative to the dollar will tend to be offset by an increase in the value of the put option. To offset, in whole or in part, the cost of acquiring such a put option, the Portfolio may also sell a call option which, if exercised, requires it to sell a specified amount of yen for dollars at a specified price by a future date (a technique called a "straddle"). By selling such call option in
this illustration, the Portfolio gives up the opportunity to profit without limit from increases in the relative value of the yen to the dollar. The Investment Adviser believes that "straddles" of the type which may be utilized by the Fundamental Value and Global Opportunity Portfolios constitute hedging transactions and are consistent with the policies described above.
Certain differences exist between these foreign currency hedging instruments. Foreign currency options provide the holder thereof the right to buy or sell a currency at a fixed price on a future date. A futures contract on a foreign currency is an agreement between two parties to buy and sell a specified amount of a currency for a set price on a future date. Futures contracts and options on futures contracts are traded on boards of trade or futures exchanges. Neither the Fundamental Value nor the Global Opportunity Portfolio will speculate in foreign currency options, futures or related options. Accordingly, neither Portfolio will hedge a currency substantially in excess of the market value of securities which it has committed or anticipates to purchase which are denominated in such currency and, in the case of securities which have been sold by the Portfolio but not yet delivered, the proceeds thereof in its denominated currency. The Fundamental Value and Global Opportunity Portfolios each are limited regarding potential net liabilities from foreign currency options, futures or related options to no more than 20% of such Portfolio's total assets.
Restrictions on the Use of Futures Transactions. Regulations of the Commodity Futures Trading Commission (the "CFTC") applicable to the Portfolios provide that the futures trading activities described herein will not result in any Portfolio being deemed a "commodity pool" as defined under such regulations if each Portfolio adheres to certain restrictions. In particular, a Portfolio may purchase and sell futures contracts and options thereon (i) for bona fide hedging purposes and (ii) for non-hedging purposes, if the aggregate initial margin and premiums required to establish positions in such contracts and options does not exceed 5% of the liquidation value of the Portfolio's holdings, after taking into account unrealized profits and unrealized losses on any such contracts and options. Margin deposits may consist of cash or securities acceptable to the broker and the relevant contract market.
When a Portfolio purchases a futures contract, or writes a put option or purchases a call option thereon, an amount of cash and cash equivalents will be deposited in a segregated account in the name of the Portfolio with the Program's custodian so that the amount so segregated, plus the amount of initial and variation margin held in the account of its broker, equals the market value of the futures contract, thereby ensuring that the use of such futures contract is unleveraged.
Restrictions on OTC Options. The Portfolios may engage in OTC options, including OTC stock index options, OTC foreign currency options and options on foreign currency futures, only with such banks or dealers which have capital of at least $50 million or whose obligations are guaranteed by an entity having capital of at least $50 million.
The staff of the SEC has taken the position that purchased OTC options and the assets used as cover for written OTC options are illiquid securities. Therefore, each Portfolio has adopted an investment policy pursuant to which it will not purchase or sell OTC options (including OTC options on futures contracts) if, as a result of such transaction, the sum of the market value of OTC options currently outstanding which are held by the Portfolio, the market value of the underlying securities covered by OTC call options currently outstanding which were sold by the Portfolio and margin deposits on the Portfolio's existing OTC options on futures contracts exceed 10% of the total assets of the Portfolio, taken at market value, together with all other assets of the Portfolio which are illiquid or are not otherwise readily marketable. However, if the OTC
option is sold by the Portfolio to a primary U.S. Government securities dealer recognized by the Federal Reserve Bank of New York and if the Portfolio has the unconditional contractual right to repurchase such OTC option from the dealer at a predetermined price, then the Portfolio will treat as illiquid such amount of the underlying securities as is equal to the repurchase price less the amount by which the option is "in-the-money" (i.e., current market value of the underlying security minus the option's strike price). The repurchase price with the primary dealers is typically a formula price which is generally based on a multiple of the premium received for the option, plus the amount by which the option is "in-the-money". This policy as to OTC options is not a fundamental policy of each Portfolio and may be amended by the Directors of the Program without the approval of the Portfolio's shareholders. However, no Portfolio will change or modify this policy prior to the change or modification by the SEC staff of its position.
Options on GNMA Certificates. The following information relates to unique characteristics of options on GNMA Certificates. Since the remaining principal balance of GNMA Certificates declines each month as a result of mortgage payments, the U.S. Government Securities Portfolio, as a writer of a GNMA call holding GNMA Certificates as "cover" to satisfy its delivery obligation in the event of exercise, may find that the GNMA Certificates it holds no longer have a sufficient remaining principal balance for this purpose. Should this occur, the Portfolio will purchase additional GNMA Certificates from the same pool (if obtainable) or other GNMA Certificates in the cash market in order to maintain its "cover".
A GNMA Certificate held by the Portfolio to cover an option position in any but the nearest expiration month may cease to represent cover for the option in the event of a decline in the GNMA coupon rate at which new pools are originated under the FHA/VA loan ceiling in effect at any given time. If this should occur, the Portfolio will no longer be covered, and the Portfolio will either enter into a closing purchase transaction or replace such Certificate with a certificate which represents cover. When the Portfolio closes its position or replaces such Certificate, it may realize an unanticipated loss and incur transaction costs.
Risk Factors in Options and Futures Transactions. Utilization of options and futures transactions to hedge a Portfolio involves the risk of imperfect correlation in movements in the price of options and futures and movements in the price of the securities or currencies which are the subject of the hedge. If the price of the options or futures moves more or less than the price of the hedged securities or currencies, the Portfolio will experience a gain or loss which will not be completely offset by movements in the price of the subject of the hedge. The successful use of options and futures also depends on the Investment Adviser's ability to correctly predict price movements in the market involved in a particular options or futures transaction. To compensate for imperfect correlations, the Portfolio may purchase or sell stock index options or futures contracts in a greater dollar amount than the hedged securities if the volatility of the hedged securities is historically greater than the volatility of the stock index options or futures contracts. Conversely, the Portfolio may purchase or sell fewer stock index options or futures contracts if the volatility of the price of the hedged securities is historically less than that of the stock index options or futures contracts. The risk of imperfect correlation generally tends to diminish as the maturity date of the stock index option or futures contract approaches.
The Portfolios intend to enter into options and futures transactions, on an exchange or in the over-the-counter market, only if there appears to be a liquid secondary market for such options or futures or, in the case of over- the-counter transactions, the Investment Adviser believes the Portfolio can receive on each business day at least two independent bids or offers. However, there can be no assurance that a liquid secondary market will exist at any specific time. Thus, it may not be possible to close an options or futures
position. The inability to close options and futures positions also could have an adverse impact on the Portfolio's ability to hedge effectively its portfolio. There is also the risk of loss by the Portfolio of margin deposits or collateral in the event of bankruptcy of a broker with whom the Portfolio has an open position in an option, a futures contract or related option.
The exchanges on which the Portfolios intend to conduct options transactions have generally established limitations governing the maximum number of call or put options on the same underlying security or currency (whether or not covered) which may be written by a single investor, whether acting alone or in concert with others (regardless of whether such options are written on the same or different exchanges or are held or written on one or more accounts or through one or more brokers). "Trading limits" are imposed on the maximum number of contracts which any person may trade on a particular trading day. The Investment Adviser does not believe that these trading and position limits will have any adverse impact on the portfolio strategies for hedging the Portfolios' holdings.
APPENDIX B: RATINGS OF CORPORATE DEBT SECURITIES
(INCLUDING MORTGAGE-BACKED AND ASSET-BACKED SECURITIES)
DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP ("STANDARD & POOR'S") CORPORATE DEBT RATINGS
A Standard & Poor's corporate or municipal rating is a current assessment of the creditworthiness of an obligor with respect to a specific obligation. This assessment may take into consideration obligors such as guarantors, insurers, or lessees.
The debt rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment as to market price or suitability for a particular investor.
The ratings are based on current information furnished by the issuer or obtained by Standard & Poor's from other sources it considers reliable. Standard & Poor's does not perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended or withdrawn as a result of changes in, or unavailability of, such information, or for other reasons.
The ratings are based, in varying degrees, on the following considerations:
(1) likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation; (2) nature of and provisions of the obligation; and
(3) protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
AAA Debt rated AAA has the highest rating assigned by Standard & Poor's. Capacity
to pay interest and repay principal is extremely strong.
AA Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest-rated issues only in small degree.
A Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
BBB Debt rated BBB is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay principal for debt in this
category than for debt in higher-rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest.
While such debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major exposures to adverse
conditions.
BB Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
|
B Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness
to pay interest and repay principal. The B rating category is also used for
debt subordinated to senior debt that is assigned an actual or implied BB or
BB- rating.
CCC Debt rated CCC has a currently identifiable vulnerability to default, and is
dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.
CC The rating CC is typically applied to debt subordinated to senior debt that is
assigned an actual or implied CCC rating.
C The rating C typically is applied to debt subordinated to senior debt which is
assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
CI The rating CI is reserved for income bonds on which no interest is being paid.
D Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless Standard & Poor's believes
that such payments will be made during such grace period. The D rating also
will be used upon the filing of a bankruptcy petition if debt service payments
are jeopardized.
Plus (+) or
minus (-): The ratings from AA to CCC may be modified by the addition of a plus or minus
sign to show relative standing within the major rating categories.
c The letter c indicates that the holder's option to tender the security for
purchase may be canceled under certain prestated conditions enumerated in the
tender option documents.
L The letter L indicates that the rating pertains to the principal amount of
those bonds to the extent that the underlying deposit collateral is federally
insured and interest is adequately collateralized. In the case of certificates
of deposit, the letter L indicates that the deposit, combined with other
deposits being held in the same right and capacity, will be honored for
principal and accrued pre-default interest up to the federal insurance limits
within 30 days after closing of the insured institution or, in the event that
the deposit is assumed by a successor insured institution, upon maturity.
p The letter p indicates that the rating is provisional. A provisional rating
assumes the successful completion of the project being financed by the debt
being rated and indicates that payment of debt service requirements is largely
or entirely dependent upon the successful and timely completion of the
project. This rating, however, while addressing credit quality subsequent to
completion of the project, makes no comment on the likelihood of, or the risk
of default upon failure of, such completion. The investor should exercise his
own judgment with respect to such likelihood and risk.
* Continuance of the rating is contingent upon Standard & Poor's receipt of an
executed copy of the escrow agreement or closing documentation confirming
investments and cash flows.
N.R. Not rated.
|
Debt obligations of issuers outside the United States and its territories are rated on the same basis as domestic corporate and municipal issues. The ratings measure the creditworthiness of the obligor but do not take into account currency exchange and related uncertainties.
Bond Investment Quality Standards: Under present commercial bank regulations issued by the Comptroller of the Currency, bonds rated in the top four categories ("AAA", "AA", "A", "BBB", commonly known as "Investment Grade" ratings) are generally regarded as eligible for bank investment. In addition, the laws of various states governing legal investments impose certain rating or other standards for obligations eligible for investment by savings banks, trust companies, insurance companies and fiduciaries generally.
DESCRIPTION OF STANDARD & POOR'S COMMERCIAL PAPER RATINGS
A Standard & Poor's commercial paper rating is a current assessment of the likelihood of timely payment of debt considered short-term in the relevant market. Ratings are graded into several categories, ranging from A-1 for the highest quality obligations to D for the lowest. These categories are as follows:
A-1 This highest category indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated A-1.
A-3 Issues carrying this designation have adequate capacity for timely payment. They are, however, more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations.
B Issues rated B are regarded as having only speculative capacity for timely payment.
C This rating is assigned to short-term debt obligations with a doubtful capacity for payment.
D Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless Standard & Poor's believes that such payments will be made during such grace period.
A commercial paper rating is not a recommendation to purchase, sell, or hold a security inasmuch as it does not comment as to market price or suitability for a particular investor. The ratings are based on current information furnished to Standard & Poor's by the issuer or obtained by Standard & Poor's from other sources it considers reliable. Standard & Poor's does not perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended, or withdrawn as a result of changes in, or unavailability of, such information, or based on other circumstances.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE RATINGS
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
Baa
Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Ba
Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of desirable investments. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest.
Ca
Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating classification from Aa through B in its corporate bond rating system. The modifier 1 indicates that the security ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks in the lower end of its generic rating category.
DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS
The term "commercial paper" as used by Moody's means promissory obligations not having an original maturity in excess of nine months. Moody's makes no representations as to whether such commercial paper is by any other definition "commercial paper" or is exempt from registration under the Securities Act of 1933, as amended.
Moody's Commercial Paper ratings are opinions of the ability of issuers to repay punctually promissory obligations not having an original maturity in excess of nine months. Moody's makes no representation that
such obligations are exempt from registration under the Securities Act of 1933, nor does it represent that any specific note is a valid obligation of a rated issuer or issued in conformity with any applicable law. Moody's employs the following three designations, all judged to be investment grade, to indicate the relative repayment ability of rated issuers.
Issuers rated PRIME-1 (or supporting institutions) have a superior ability for repayment of short-term promissory obligations. PRIME-1 repayment ability will often be evidenced by many of the following characteristics:
--Leading market positions in well-established industries.
--High rates of return on funds employed.
--Conservative capitalization structure with moderate reliance on debt and ample asset protection.
--Broad margins in earnings coverage of fixed financial charges and high internal cash generation.
--Well-established access to a range of financial markets and assured sources of alternate liquidity.
Issuers rated PRIME-2 (or supporting institutions) have a strong ability for repayment of short-term promissory obligations. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated PRIME-3 (or supporting institutions) have an acceptable ability for repayment of short-term promissory obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained.
Issuers rated NOT PRIME do not fall within any of the Prime rating categories.
If an issuer represents to Moody's that its Commercial Paper obligations are supported by the credit of another entity or entities, in assigning ratings to such issuers, Moody's evaluates the financial strength of the affiliated corporations, commercial banks, insurance companies, foreign governments or other entities, but only as one factor in the total rating assessment. Moody's makes no representation and gives no opinion on the legal validity or enforceability of any support arrangement.
DESCRIPTION OF FITCH INVESTOR SERVICE, INC.'S ("FITCH") INVESTMENT GRADE BOND RATINGS
Fitch investment grade bond ratings provide a guide to investors in determining the credit risk associated with a particular security. The ratings represent Fitch's assessment of the issuer's ability to meet the obligations of a specific debt issue or class of debt in a timely manner.
The rating takes into consideration special features of the issue, its relationship to other obligations of the issuer, the current and prospective financial condition and operating performance of the issuer and any guarantor, as well as the economic and political environment that might affect the issuer's future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by insurance policies or financial guarantees unless otherwise indicated.
Bonds that have the same rating are of similar but not necessarily identical credit quality since the rating categories do not fully reflect small differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect of any security. Fitch ratings are based on information obtained from issuers, other obligors, underwriters, their experts, and other sources Fitch believes to be reliable. Fitch does not audit or verify the truth or accuracy of such information. Ratings may be changed, suspended, or withdrawn as a result of changes in, or the unavailability of, information or for other reasons.
AAA
Bonds considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong ability to pay interest and repay principal, which is unlikely to be affected by reasonably foreseeable events.
AA
Bonds considered to be investment grade and of very high credit quality. The obligor's ability to pay interest and repay principal is very strong, although not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA categories are not significantly vulnerable to foreseeable future developments, short-term debt of these issuers is generally rated F-1+.
A Bonds considered to be investment grade and of high credit quality. The obligor's ability to pay interest and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings.
BBB
Bonds considered to be investment grade and of satisfactory credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to have adverse impact on these bonds, and therefore impair timely payment. The likelihood that the ratings of these bonds will fall below investment grade is higher than for bonds with higher ratings.
Plus (+) or Minus (-): Plus and minus signs are used with a rating symbol to indicate the relative position of a credit within the rating category. Plus and minus signs, however, are not used in the AAA category.
Credit Trend Indicator: Credit trend indicators show whether credit fundamentals are improving, stable, declining, or uncertain, as follows:
Improving [UP ARROW] Stable [LEFT/RIGHT ARROW] Declining [DOWN/ARROW] Uncertain [UP/DOWN ARROW] |
Credit trend indicators are not predictions that any rating change will occur, and have a longer-term time frame than issues placed on FitchAlert.
NR INDICATES THAT FITCH DOES NOT RATE THE SPECIFIC ISSUE
Conditional: A conditional rating is premised on the successful completion of a project or the occurrence of a specific event.
Suspended: A rating is suspended when Fitch deems the amount of information available from the issuer to be inadequate for rating purposes.
Withdrawn: A rating will be withdrawn when an issue matures or is called or refinanced and, at Fitch's discretion, when an issuer fails to furnish proper and timely information.
FitchAlert: Ratings are placed on FitchAlert to notify investors of an occurrence that is likely to result in a rating change and the likely direction of such change. These are designated as "Positive" indicating a potential upgrade. "Negative" for potential downgrade, or "Evolving" where ratings may be raised or lowered. FitchAlert is relatively short-term, and should be resolved within 12 months.
DESCRIPTION OF FITCH'S INVESTMENT GRADE SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on demand or have original maturities of generally up to three years, including commercial paper, certificates of deposit, medium-term notes, and municipal and investment notes.
The short-term rating places greater emphasis than a long-term rating on the existence of liquidity necessary to meet the issuer's obligations in a timely manner.
Fitch short-term ratings are as follows:
F-1+
Exceptionally Strong Credit Quality. Issues assigned this rating are regarded as having the strongest degree of assurance for timely payment.
Very Strong Credit Quality. Issues assigned this rating reflect an assurance of timely payment only slightly less in degree than issues rated F-1+.
Good Credit Quality. Issues assigned this rating have a satisfactory degree of assurance for timely payment, but the margin of safety is not as great as for issues assigned F-1+ and F-1 ratings.
Fair Credit Quality. Issues assigned this rating have characteristics suggesting that the degree of assurance for timely payment is adequate; however, near-term adverse changes could cause these securities to be rated below investment grade.
Weak Credit Quality. Issues assigned this rating have characteristics suggesting a minimal degree of assurance for timely payment and are vulnerable to near-term adverse changes in financial and economic conditions.
D
Default. Issues assigned this rating are in actual or imminent payment default.
LOC
The symbol "LOC" indicates that the rating is based on a letter of credit issued by a commercial bank.
[THIS PAGE IS INTENTIONALLY LEFT BLANK.]
[THIS PAGE IS INTENTIONALLY LEFT BLANK.]
[THIS PAGE IS INTENTIONALLY LEFT BLANK.]
INVESTMENT ADVISER
Merrill Lynch Asset Management
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Mailing Address:
P.O. Box 9011
Princeton, New Jersey 08543-9011
DISTRIBUTOR
Merrill Lynch Funds Distributor, Inc.
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Mailing Address:
P.O. Box 9011
Princeton, New Jersey 08543-9011
TRANSFER AGENT
Financial Data Services, Inc.
Administrative Offices:
Transfer Agency Mutual Fund Operations 4800 Deer Lake Drive East Jacksonville, Florida 32246-6484
Mailing Address:
P.O. Box 45289
Jacksonville, Florida 32232-5289
CUSTODIAN
The Bank of New York
90 Washington Street
12th Floor
New York, New York 10286
INDEPENDENT AUDITORS
Deloitte & Touche LLP
117 Campus Drive
Princeton, New Jersey 08540
COUNSEL
Brown & Wood
One World Trade Center
New York, New York 10048-0557
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE- SENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER IN- FORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE PROGRAM, THE INVESTMENT ADVISER OR THE DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY STATE IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
TABLE OF CONTENTS
PAGE
----
Fee Table................................................................. 3
Prospectus Summary........................................................ 6
Merrill Lynch Select PricingSM System..................................... 8
Risk Factors and Special Considerations................................... 13
Investment Objectives and Policies........................................ 15
Fundamental Value Portfolio.............................................. 15
Quality Bond Portfolio................................................... 16
U.S. Government Securities Portfolio..................................... 17
Global Opportunity Portfolio............................................. 17
Other Investment Policies and Practices of the Portfolios................. 19
Investments in Equity Securities......................................... 19
Investments in Debt Securities........................................... 19
Investments in Securities Denominated in Foreign Currencies.............. 23
Investments in Money Market Securities................................... 23
When-Issued Securities, Forward Commitments and Delayed Delivery Transac-
tions................................................................... 23
Standby Commitment Agreements............................................ 24
Repurchase Agreements and Purchase and Sale Contracts.................... 24
Indexed and Inverse Securities........................................... 25
Lending of Portfolio Securities.......................................... 25
Portfolio Strategies Involving Options and Futures....................... 26
Illiquid Securities...................................................... 26
Investment Restrictions.................................................. 27
Management of the Program................................................. 27
Board of Directors....................................................... 27
Management and Advisory Arrangements..................................... 28
Transfer Agency Services................................................. 29
Purchase of Shares........................................................ 30
Initial Sales Charge Alternatives--
Class A and Class D Shares.............................................. 34
Deferred Sales Charge Alternatives--
Class B and Class C Shares.............................................. 35
Distribution Plans....................................................... 38
Limitations on the Payment of Deferred Sales Charges..................... 39
Redemption of Shares...................................................... 40
Shareholder Services...................................................... 40
Portfolio Transactions and Brokerage...................................... 43
Performance Data.......................................................... 44
Taxes..................................................................... 45
Federal.................................................................. 45
State.................................................................... 46
Additional Information.................................................... 47
Dividends and Distributions.............................................. 47
Determination of Net Asset Value......................................... 48
Organization of the Program.............................................. 49
Shareholder Reports...................................................... 50
Shareholder Inquiries.................................................... 50
Appendix A--Options and Futures Transactions.............................. 51
Appendix B--Ratings of Corporate Debt Securities.......................... 57
|
Code # 18471-1294
[LOGO MERRILL LYNCH]
Merrill Lynch
Retirement Asset
Builder Program, Inc.
[ART]
PROSPECTUS
December , 1994
Distributor:
Merrill Lynch
Funds Distributor, Inc.
This prospectus should be retained for future reference.
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
FUNDAMENTAL VALUE PORTFOLIO U.S. GOVERNMENT SECURITIES
PORTFOLIO
QUALITY BOND PORTFOLIO
GLOBAL OPPORTUNITY PORTFOLIO
|
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 . PHONE NO. (609) 282-2800
Merrill Lynch Retirement Asset Builder Program, Inc. (the "Program") is a professionally managed, open-end investment company. The Program consists of four separate portfolios: the Fundamental Value Portfolio, the Quality Bond Portfolio, the U.S. Government Securities Portfolio and the Global Opportunity Portfolio (each a "Portfolio"). Each Portfolio has its own separate investment objectives and may employ a variety of instruments and techniques to enhance income and to hedge against market risk and, in the case of the Fundamental Value and Global Opportunity Portfolios, currency risk.
The Fundamental Value Portfolio is a diversified portfolio seeking capital appreciation and, secondarily, income by investing in securities, primarily equities, that the management of the Portfolio believes are undervalued and therefore represent investment value.
The Quality Bond Portfolio is a diversified portfolio seeking income and, secondarily, capital appreciation by investing primarily in long-term corporate bonds that are rated A or better by a nationally recognized rating agency such as Standard & Poor's Ratings Group ("S&P"), Moody's Investors Service, Inc. ("Moody's") and Fitch Investors Services, Inc. ("Fitch"), or that possess, in the judgment of the Investment Adviser, similar credit characteristics.
The U.S. Government Securities Portfolio is a diversified portfolio seeking high current return by investing in U.S. Government and government agency securities, including Government National Mortgage Association ("GNMA") mortgage-backed securities and other mortgage-backed government securities.
The Global Opportunity Portfolio is a diversified portfolio seeking high total investment return through a fully-managed investment policy utilizing United States and foreign equity, debt and money market securities, the combination of which will be varied from time to time, both with respect to types of securities and markets, in response to changing market and economic trends.
Each portfolio is a separate series of the Program issuing its own shares. Shares of each Portfolio are available for purchase solely by holders of the individual retirement plans, individual retirement rollover accounts and simplified employee pension plans (collectively "IRAs") for which Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") acts as custodian. For a description of the IRAs, see Appendix A to this Statement of Additional Information.
Pursuant to the Merrill Lynch Select Pricing SM System, each Portfolio offers four classes of shares each with a different combination of sales charges, ongoing fees and other features. The Merrill Lynch Select Pricing SM System permits an investor to choose the method of purchasing shares that the investor believes is most beneficial given the amount of the purchase, the length of time the investor expects to hold the shares and other relevant circumstances.
This Statement of Additional Information of the Program is not a prospectus and should be read in conjunction with the prospectus of the Program, dated December , 1994 (the "Prospectus"), which has been filed with the Securities and Exchange Commission and can be obtained, without charge, by calling or by writing the Program at the above telephone number or address. This Statement of Additional Information has been incorporated by reference into the Prospectus.
MERRILL LYNCH ASSET MANAGEMENT--INVESTMENT ADVISER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.--DISTRIBUTOR
The date of this Statement of Additional Information is December , 1994.
INVESTMENT OBJECTIVES AND POLICIES
The Program consists of four separate Portfolios: the Fundamental Value Portfolio, the Quality Bond Portfolio, the U.S. Government Securities Portfolio and the Global Opportunity Portfolio, each with its own separate investment objectives. Each of the Portfolios pursues its investment objectives through separate investment policies. Reference is made to "Investment Objectives and Policies" in the Prospectus for a discussion of the investment objectives and policies of each Portfolio.
FUNDAMENTAL VALUE PORTFOLIO
The Fundamental Value Portfolio seeks capital appreciation and, secondarily, income by investing in securities, primarily (i.e., at least 65% of the Portfolio's assets) in equities, that the Investment Adviser believes are undervalued and therefore represent investment value.
Portfolio Turnover. The rate of portfolio turnover is not a limiting factor and, given the Portfolio's investment policies, it is anticipated that there may be periods when high portfolio turnover will exist. The use of covered call options at times when the underlying securities are appreciating in value may result in higher portfolio turnover. The Portfolio pays brokerage commissions in connection with writing call options and effecting closing purchase transactions, as well as in connection with purchases and sales of portfolio securities. Although the Portfolio anticipates that its annual portfolio turnover rates should not exceed 100%, the turnover rate may vary greatly from year to year or during periods within a year. A high rate of portfolio turnover results in correspondingly greater brokerage commission expenses. The portfolio turnover rate for each of the Portfolios is calculated by dividing the lesser of the Portfolio's annual sales or purchases of portfolio securities (exclusive of purchases or sales of all securities with maturities at the time of acquisition of one year or less) by the monthly average value of the securities in the portfolio during the year.
QUALITY BOND PORTFOLIO
The Quality Bond Portfolio seeks a high level of current income through investment primarily in securities rated in the top three rating categories of a nationally recognized rating agency such as Moody's, S&P or Fitch or in securities that possess, in the judgment of the Investment Adviser, similar credit characteristics. The Quality Bond Portfolio seeks to achieve its objectives by investing in a diversified portfolio of fixed income securities, including corporate bonds and notes, convertible and nonconvertible debt securities and preferred stock and government obligations.
Portfolio Turnover. The rate of portfolio turnover is not a limiting factor when management deems it appropriate to purchase or sell securities. The Portfolio expects that its annual turnover rate should not generally exceed 100%; however, during periods when interest rates fluctuate significantly, as they have during the past few years, the portfolio turnover rate may be substantially higher. In any particular year, however, market conditions could result in portfolio activity at a greater or lesser rate than anticipated.
U.S. GOVERNMENT SECURITIES PORTFOLIO
The U.S. Government Securities Portfolio seeks a high current return through investments in U.S. Government and Government agency securities ("U.S. Government securities"), including GNMA mortgage-backed certificates, and other mortgage-backed government securities.
While the Portfolio has authority to invest in all U.S. Government securities, it is anticipated that under certain market conditions, a significant portion of its portfolio of U.S. Government securities may consist of GNMA mortgage-backed certificates ("GNMA Certificates") and other U.S. Government securities representing ownership interests in mortgage pools. The Portfolio is authorized to acquire all types of U.S. Government securities representing ownership interests in mortgage pools which are presently issued or which may be issued in the future. In this regard, GNMA recently began offering a pass-through security backed by adjustable-rate mortgages. These securities bear interest at a rate which is adjusted either quarterly or annually. The prepayment experience of the mortgages underlying these securities may vary from that for fixed-rate mortgages. These securities are eligible for purchase by the Portfolio.
Portfolio Turnover. The Investment Adviser will effect portfolio transactions without regard to any holding period if, in its judgment, such transactions are advisable in light of a change in general market, economic or financial conditions. While the Portfolio anticipates that its annual turnover rate should not exceed 400% under normal conditions, it is impossible to predict portfolio turnover rates. A high portfolio turnover rate involves correspondingly greater transaction costs in the form of dealer spreads and brokerage commissions, which are borne directly by the Portfolio. See "Portfolio Transactions and Brokerage--Portfolio Turnover".
GLOBAL OPPORTUNITY PORTFOLIO
The Portfolio's investment objective is to seek a high total investment return through a fully-managed investment policy utilizing United States and foreign equity, debt and money market securities, the combination of which will be varied from time to time both with respect to types of securities and markets, in response to changing market and economic trends.
The U.S. Government has from time to time in the past imposed restrictions, through taxation and otherwise, on foreign investments by U.S. investors such as the Portfolio. If such restrictions should be reinstituted, it might become necessary for the Portfolio to invest all or substantially all of its assets in U.S. securities. In such event, the Portfolio would review its investment objective and investment policies to determine whether changes are appropriate. Any changes in the investment objective or fundamental policies set forth under "Investment Restrictions" below would require the approval of the holders of a majority of the Portfolio's outstanding voting securities.
The Portfolio's ability and decisions to purchase or sell portfolio securities may be affected by laws or regulations relating to the convertibility and repatriation of assets. Because the shares of the Portfolio are redeemable on a daily basis on each day the Portfolio determines its net asset value in U.S. dollars, the Portfolio intends to manage its portfolio so as to give reasonable assurance that it will be able to obtain U.S. dollars to the extent necessary to meet anticipated redemptions. See "Redemption of Shares". Under present conditions, the Portfolio does not believe that these considerations will have any significant effect on its portfolio strategy, although there can be no assurance in this regard.
Portfolio Turnover. While it is the policy of the Portfolio generally not to engage in trading for short-term gains, the Investment Adviser will effect portfolio transactions without regard to holding period if, in its judgment, such transactions are advisable in light of a change in circumstances of a particular company or within a particular industry or due to general market, economic or financial conditions. Accordingly, while the Portfolio anticipates that its annual turnover rate should not exceed 200% under normal conditions, it is impossible to predict portfolio turnover rates. A high rate of portfolio turnover results in correspondingly greater brokerage commission expenses. See "Portfolio Transactions and Brokerage--Portfolio Turnover".
All of the Portfolios are subject to the Federal income tax requirement that less than 30% of the Portfolio's gross income be derived from gains from the sale or other disposition of securities held for less than three months.
OTHER INVESTMENT POLICIES AND PRACTICES OF THE PORTFOLIOS
Writing of Covered Call Options. Each Portfolio may from time to time write (i.e., sell) covered call options on its portfolio securities and enter into closing purchase transactions with respect to certain of such options. A call option is considered covered where the writer of the option owns the underlying securities. By writing a covered call option, the Portfolio, in return for the premium income realized from the sale of the option may give up the opportunity to profit from a price increase in the underlying security above the option exercise price. In addition, the Portfolio will not be able to sell the underlying security until the option expires, is exercised or the Program effects a closing purchase transaction as described below. A closing purchase transaction cancels out the Program's position as the writer of an option by means of an offsetting purchase of an identical option prior to the expiration of the option it has written. If the option expires unexercised, the Program realizes a gain in the amount of the premium received for the option which may be offset by a decline in the market price of the underlying security during the option period. The use of covered call options is not a primary investment technique of any of the Portfolios and such options normally will be written on underlying securities as to which management does not anticipate significant short-term capital appreciation. In its use of options, the Program's investment adviser has access to personnel of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") with extensive experience in options research and strategy. No Portfolio may write covered options on underlying securities exceeding 15% of that Portfolio's total assets.
All options referred to herein and in the Program's Prospectus are options issued by The Options Clearing Corporation (the "Clearing Corporation") which are currently traded on the Chicago Board Options Exchange, American Stock Exchange, Philadelphia Stock Exchange, Pacific Stock Exchange or New York Stock Exchange. An option gives the purchaser of the option the right to buy, and obligates the writer (seller) to sell the underlying security at the exercise price during the option period. The option period normally ranges from three to nine months from the date the option is written. For writing an option, the Program receives a premium, which is the price of such option on the exchange on which it is traded. The exercise price of the option may be below, equal to, or above the current market value of the underlying security at the time the option is written.
The writer may terminate its obligation prior to the expiration date of the option by executing a closing purchase transaction which is effected by purchasing on an exchange an option of the same series (i.e., same underlying security, exercise price and expiration date) as the option previously written. Such a purchase does not result in the ownership of an option. A closing purchase transaction ordinarily will be effected to realize a profit on an outstanding call option, to prevent an underlying security from being called, to permit the sale of the underlying security or to permit the writing of a new call option containing different terms on such underlying security. The cost of such a liquidation purchase plus transaction costs may be greater than the premium received upon the original option, in which event the Portfolio will have incurred a loss in the transaction. An option may be closed out only on an exchange which provides a secondary market for an option of the same series and there is no assurance that a liquid secondary market on an exchange will exist for any particular option. A covered option writer unable to effect a closing purchase transaction will not be able to sell the underlying security until the option expires or the underlying security is delivered upon
exercise, with the result that the writer will be subject to the risk of market decline in the underlying security during such period. A Portfolio will write an option on a particular security only if management believes that a liquid secondary market will exist on an exchange for options of the same series which will permit the Portfolio to make a closing purchase transaction in order to close out its position.
Due to the relatively short time that exchanges have been dealing with options, options involve risks of possible unforeseen events which can be disruptive to the option markets or could result in the institution of certain procedures, including restriction of certain types of orders.
Investment Restrictions. In addition to the investment restrictions set forth in the Prospectus, each of the Portfolios has adopted the following restrictions and policies relating to the investment of its assets and its activities, which are fundamental policies and may not be changed without the approval of the holders of a majority of the Portfolio's outstanding voting securities (which for this purpose and under the Investment Company Act of 1940, as amended (the "Investment Company Act") means the lesser of (a) 67% of the shares represented at a meeting at which more than 50% of the outstanding shares are represented or (b) more than 50% of the outstanding shares). The Portfolios may not:
1. Make any investment inconsistent with the Portfolio's classification as a diversified company under the Investment Company Act.
2. Invest more than 25% of its assets, taken at market value, in the securities of issuers in any particular industry (excluding the U.S. Government and its agencies and instrumentalities).
3. Make investments for the purpose of exercising control or management.
4. Purchase or sell real estate, except that, to the extent permitted by applicable law, a Portfolio may invest in securities directly or indirectly secured by real estate or interests therein or issued by companies which invest in real estate or interests therein.
5. Make loans to other persons, except that the acquisition of bonds, debentures or other corporate debt securities and investment in government obligations, commercial paper, pass-through instruments, certificates of deposit, bankers acceptances, repurchase agreements or any similar instruments shall not be deemed to be the making of a loan, and except further that a Portfolio may lend its portfolio securities, provided that the lending of portfolio securities may be made only in accordance with applicable law and the guidelines set forth in the Program's Prospectus and Statement of Additional Information, as they may be amended from time to time.
6. Issue senior securities to the extent such issuance would violate applicable law.
7. Borrow money, except that (i) a Portfolio may borrow from banks (as defined in the Investment Company Act) in amounts up to 33 1/3%of its total assets (including the amount borrowed), (ii) a Portfolio may borrow up to an additional 5% of its total assets for temporary purposes, (iii) a Portfolio may obtain such short-term credit as may be necessary for the clearance of purchases and sales of portfolio securities and (iv) a Portfolio may purchase securities on margin to the extent permitted by applicable law. A Portfolio may not pledge its assets other than to secure such borrowings or, to the extent permitted by such Portfolio's investment policies as set forth in the Program's Prospectus and Statement of Additional Information, as they may be amended from time to time, in connection with hedging transactions, short sales, when-issued and forward commitment transactions and similar investment strategies.
8. Underwrite securities of other issuers except insofar as a Portfolio technically may be deemed an underwriter under the Securities Act of 1933, as amended (the "Securities Act"), in selling portfolio securities.
9. Purchase or sell commodities or contracts on commodities, except to the extent that a Portfolio may do so in accordance with applicable law and the Program's Prospectus and Statement of Additional Information, as they may be amended from time to time, and without registering as a commodity pool operator under the Commodity Exchange Act.
Additional investment restrictions adopted by the Portfolios, which may be changed by the Program's Board of Directors, provide that the Portfolios may not:
a. Purchase securities of other investment companies, except to the extent such purchases are permitted by applicable law. Applicable law currently prohibits the Portfolios from purchasing the securities of other investment companies only if immediately thereafter not more than (i) 3% of the total outstanding voting stock of such company is owned by the Portfolio, (ii) 5% of the Portfolio's total assets, taken at market value, would be invested in any one such company, (iii) 10% of the Portfolio's total assets, taken at market value, would be invested in such securities, and (iv) the Portfolio, together with other investment companies having the same investment adviser and companies controlled by such companies, owns not more than 10% of the total outstanding stock of any one closed-end investment company. Investments by the Portfolios in wholly-owned investment entities created under the laws of certain countries will not be deemed an investment in other investment companies.
b. Make short sales of securities or maintain a short position, except to the extent permitted by applicable law.
c. Invest in securities which cannot be readily resold because of legal or contractual restrictions or which cannot otherwise be marketed, redeemed or put to the issuer or a third party, if at the time of acquisition more than 15% of its total assets would be invested in such securities. This restriction shall not apply to securities which mature within seven days or securities which the Board of Directors of the Program has otherwise determined to be liquid pursuant to applicable law. Notwithstanding the 15% limitation herein, to the extent the laws of any state in which a Portfolio's shares are registered or qualified for sale require a lower limitation, the Portfolio will observe such limitation. As of the date hereof, therefore, a Portfolio will not invest more than 10% of its total assets in securities which are subject to this investment restriction (c). Securities purchased in accordance with Rule 144A under the Securities Act (a "Rule 144A security") and determined to be liquid by the Program's Board of Directors are not subject to the limitations set forth in this investment restriction (c). Notwithstanding the fact that the Board may determine that a Rule 144A security is liquid and not subject to limitations set forth in this investment restriction (c), the State of Ohio does not recognize Rule 144A securities as securities that are free of restrictions as to resale. To the extent required by Ohio law, no Portfolio will invest more than 50% of its total assets in securities of issuers that are restricted as to disposition, including Rule 144A securities, or in securities of issuers described in (e) below.
d. Invest in warrants if, at the time of acquisition, its investments in warrants, valued at the lower of cost or market value, would exceed 5% of the Portfolio's net assets; included within such limitation, but not to exceed 2% of the Portfolio's net assets, are warrants which are not listed on the New York Stock Exchange or American Stock Exchange or a major foreign exchange. For purposes of this restriction, warrants acquired by the Portfolio in units or attached to securities may be deemed to be without value.
e. Invest in securities of companies having a record, together with predecessors, of less than three years of continuous operation, if more than 5% of the Portfolio's total assets would be invested in such
securities. This restriction shall not apply to mortgage-backed securities, asset-backed securities or obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
f. Purchase or retain the securities of any issuer, if those individual officers and directors of the Program, the officers and general partner of the Manager, the directors of such general partner or the officers and directors of any subsidiary thereof each owning beneficially more than one- half of one percent of the securities of such issuer own in the aggregate more than 5% of the securities of such issuer.
g. Invest in real estate limited partnership interests or interests in oil, gas or other mineral leases, or exploration or development programs, except that a Portfolio may invest in securities issued by companies that engage in oil, gas or other mineral exploration or development activities.
h. Write, purchase or sell puts, calls, straddles, spreads or combinations thereof, except to the extent permitted in the Program's Prospectus and Statement of Additional Information, as they may be amended from time to time.
i. Notwithstanding fundamental investment restriction (7) above, borrow amounts in excess of 10% of its total assets, taken at market value, and then only from banks as a temporary measure for extraordinary or emergency purposes such as the redemption of Portfolio shares. A Portfolio will not purchase securities while borrowings exceed 5% (taken at market value) of its total assets.
Portfolio securities of the Portfolios generally may not be purchased from, sold or loaned to the Investment Adviser or its affiliates or any of their directors, officers or employees, acting as principal, unless pursuant to a rule or exemptive order under the Investment Company Act.
Because of the affiliation of the Investment Adviser with the Program, the Portfolios are prohibited from engaging in certain transactions involving the Investment Adviser's affiliate, Merrill Lynch, or its affiliates except for brokerage transactions permitted under the Investment Company Act involving only usual and customary commissions or transactions pursuant to an exemptive order under the Investment Company Act. See "Portfolio Transactions and Brokerage". Without such an exemptive order, the Portfolios are prohibited from engaging in portfolio transactions with Merrill Lynch or its affiliates acting as principal and from purchasing securities in public offerings which are not registered under the Securities Act in which such firms or any of their affiliates participate as an underwriter or dealer.
Investment in Foreign Issuers. The Fundamental Value and Global Opportunity Portfolios may invest in securities of foreign issuers. Foreign companies may not be subject to uniform accounting and auditing and financial reporting standards or to practices and requirements comparable to those applicable to domestic issuers. Securities of foreign issuers may be less liquid and more volatile than securities of United States issuers. Investment in foreign securities also involves certain risks, including fluctuations in foreign exchange rates, political and economic developments and the possible imposition of exchange controls.
MANAGEMENT OF THE PROGRAM
DIRECTORS AND OFFICERS
The Directors and executive officers of the Program and their principal occupations for at least the last five years are set forth below. Unless otherwise noted, the address of each executive officer and Director is P.O. Box 9011, Princeton, New Jersey 08543-9011.
Arthur Zeikel--President and Director(1)(2)--President of the Investment Adviser (which term as used herein includes its corporate predecessors) since 1977 and Chief Investment Officer since 1976; President and Chief Investment Officer of Fund Asset Management, L.P. ("FAM") (which term as used herein includes its corporate predecessors) since 1977; President and Director of Princeton Services, Inc. ("Princeton Services") since 1993; Executive Vice President of Merrill Lynch & Co., Inc. ("ML & Co.") since 1990; Executive Vice President of Merrill Lynch since 1990 and Senior Vice President from 1985 to 1990; Director of Merrill Lynch Funds Distributor, Inc. (the "Distributor").
Joe Grills--Director(2)--183 Soundview Lane, New Canaan, Connecticut 06840. Member of the Committee of Investment of Employee Benefit Assets of the Financial Executives Institute ("CIEBA") since 1986, member of CIEBA's Executive Committee since 1988 and its Chairman from 1991 to 1992; Assistant Treasurer of International Business Machines Corporation ("IBM") and Chief Investment Officer of IBM Retirement Funds from 1986 until 1993; Member of the Investment Advisory Committee of the State of New York Common Retirement Fund; Director, Duke Management Company and Winthrop Financial Associates (real estate management).
Walter Mintz--Director(2)--1114 Avenue of the Americas, New York, New York 10036. Special Limited Partner of Cumberland Associates (investment partnership) since 1982.
Melvin R. Seiden--Director(2)--780 Third Avenue, New York, New York 10017. President of Silbanc Properties, Ltd. (real estate, investments and consulting) since 1987; Chairman and President of Seiden & de Cuevas, Inc. (private investment firm) from 1964 to 1987.
Stephen B. Swensrud--Director(2)--24 Federal Street, Boston, Massachusetts 02110. Principal of Fernwood Associates (financial consultants); Director, Hitchiner Manufacturing Company.
Harry Woolf--Director(2)--The Institute for Advanced Study, Olden Lane, Princeton, New Jersey 08540. Member of the editorial board of Interdisciplinary Science Reviews; Director, Alex. Brown Mutual Funds, Advanced Technology Laboratories, Family Health International, Inc. and SpaceLabs Medical (medical equipment manufacturing and marketing).
Terry K. Glenn--Executive Vice President(1)(2)--Executive Vice President of the Investment Adviser and FAM since 1983; Executive Vice President and Director of Princeton Services since 1993; President and Director of the Distributor since 1986.
N. John Hewitt--Senior Vice President(1)(2)--Senior Vice President of the Investment Adviser and FAM since 1976; Senior Vice President of Princeton Services since 1993.
Bernard J. Durnin--Senior Vice President(1)(2)--Senior Vice President of the Investment Adviser and FAM since 1981; Senior Vice President of Princeton Services since 1993.
Norman R. Harvey--Senior Vice President(1)(2)--Senior Vice President of the Investment Adviser and FAM since 1982; Senior Vice President of Princeton Services since 1993.
Joel Heymsfeld--Vice President(1)(2)--Vice President of the Investment Adviser since 1978.
Jay C. Harbeck--Vice President(1)(2)--Vice President of the Investment Adviser since 1986.
Kevin Rendino--Vice President(1)(2)--Vice President of the Investment Adviser since December 1993; Senior Research Analyst from 1990 to 1992; Corporate Analyst from 1988 to 1990.
Gregory Mark Maunz--Vice President(1)(2)--Vice President of the Investment Adviser since 1985 and Portfolio Manager since 1984.
Donald C. Burke--Vice President(2)--Vice President and Director of Taxation of MLAM since 1990; employee of Deloitte & Touche LLP from 1982 to 1990.
Gerald M. Richard--Treasurer(1)(2)--Senior Vice President and Treasurer of the Investment Adviser and FAM since 1984; Senior Vice President and Treasurer of Princeton Services since 1993; Vice President of the Distributor since 1981 and Treasurer since 1984.
At November 30, 1994, the Directors and officers of the Program as a group (17 persons) owned an aggregate of less than 1% of the outstanding shares of the Program. At that date, Mr. Zeikel, a Director of the Program, and the officers of the Program owned less than 1% of the outstanding Common Stock of ML & Co.
Pursuant to the terms of the Program's investment advisory agreement with the Investment Adviser relating to each Portfolio (each an "Investment Advisory Agreement"), the Investment Adviser pays all compensation of officers and employees of the Program as well as the fees of all Directors of the Program who are affiliated persons of ML & Co. or its subsidiaries. Each unaffiliated Director is paid a fee by the Program plus actual out-of-pocket expenses for each meeting of the Board of Directors which he attends. The Program also compensates each member of the Audit Committee, which consists of the unaffiliated Directors.
MANAGEMENT AND ADVISORY ARRANGEMENTS
Reference is made to "Management of the Program--Management and Advisory Arrangements" in the Prospectus for certain information concerning the management and advisory arrangements of the Program.
The Investment Advisory Agreements provide that, subject to the direction of the Board of Directors of the Program, the Investment Adviser is responsible for the actual management of that Portfolio and for the review of that Portfolio's holdings in light of its own research analysis and analyses from other relevant sources. The responsibility for making decisions to buy, sell or hold a particular security rests with the
Investment Adviser, subject to review by the Board of Directors. The Investment Adviser supplies the portfolio managers for each Portfolio, who consider analyses from various sources, make the necessary investment decisions and place transactions accordingly. The Investment Adviser also is obligated to perform certain administrative and management services for the Portfolios and is required to provide all the office space, facilities, equipment and personnel necessary to perform its duties under the Investment Advisory Agreement. The Investment Adviser has access to the total securities research, economic research and computer applications facilities of Merrill Lynch and makes extensive use of these facilities.
Securities held by the Portfolios also may be held by or be appropriate investments for other funds for which the Investment Adviser or its affiliates act as adviser or by investment advisory clients of the Investment Adviser. Because of different investment objectives or other factors, a particular security may be bought for one or more clients when one or more clients are selling the same security. If purchases or sales of securities for the Program or other funds for which the Investment Adviser or its affiliates act as investment adviser or for their advisory clients arise for consideration at or about the same time, transactions in such securities will be made, insofar as feasible, for the respective funds and clients in a manner deemed equitable to all. To the extent that transactions on behalf of more than one client of the Investment Adviser or its affiliates during the same period may increase the demand for securities being purchased or the supply of securities being sold, there may be an adverse effect on price.
As compensation for its services to the Portfolios, the Investment Adviser will receive from each Portfolio a monthly fee based on the average daily value of that Portfolio's net assets at the following annual rates:
U.S. GOVERNMENT GLOBAL
FUNDAMENTAL VALUE QUALITY BOND SECURITIES OPPORTUNITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------- ------------ --------------- -----------
0.65% 0.50% 0.50% 0.75%
|
The State of California imposes limitations on the expenses of the Program. At the date of this Statement of Additional Information, the limitations require that the Investment Adviser reimburse the Program in an amount necessary to prevent the aggregate ordinary operating expenses of the Program (excluding interest, taxes, brokerage fees and commissions and extraordinary charges such as litigation costs) from exceeding in any fiscal year 2.5% of the Program's first $30 million of average daily net assets, 2.0% of the next $70 million of average daily net assets and 1.5% of the remaining average daily net assets. No fee payment will be made to the Investment Adviser during any fiscal year which will cause such expenses to exceed the pro rata expense limitation at the time of such payment.
Each Investment Advisory Agreement obligates the Investment Adviser to provide investment advisory services and to pay all compensation of and furnish office space for officers and employees of the Portfolios connected with investment and economic research, trading and investment management of the Portfolios, as well as the fees of all Directors of the Program who are affiliated persons of ML & Co. or any of its subsidiaries. Each Portfolio pays all other expenses incurred in its operations and a portion of the Program's general administrative expenses allocated on the basis of the asset size of the respective Portfolios. Expenses that will be borne directly by the Portfolios include redemption expenses, expenses of portfolio transactions; shareholder servicing costs, expenses of registering the shares under Federal and state securities laws, pricing costs (including the daily calculation of net asset value), interest, certain taxes, charges of the Custodian and
Transfer Agent and other expenses attributable to the particular Portfolio. Expenses which will be allocated on the basis of the size of the respective Portfolios include directors' fees, legal expenses, state franchise taxes, auditing services, costs of printing proxies, stock certificates, shareholder reports and prospectuses (except to the extent paid by the Distributor), Securities and Exchange Commission fees, accounting costs and other expenses properly payable by the Portfolios and allocable on the basis of the size of the respective Portfolios. Accounting services are provided for the Portfolios by the Investment Adviser and the Portfolios reimburse the Investment Adviser for its costs in connection with such services. As required by the Distribution Agreements, the Distributor will pay certain of the expenses of the Portfolios incurred in connection with the offering of shares of each Portfolio, including the expenses of printing the prospectuses and statements of additional information used in connection with the continuous offering of shares by the Portfolios.
Duration and Termination. Unless earlier terminated as described below, the Investment Advisory Agreement for each Portfolio will remain in effect from year to year if approved annually (a) by the Board of Directors of the Program or by a majority of the outstanding shares of the subject Portfolio and (b) by a majority of the Directors who are not parties to such contract or interested persons (as defined in the Investment Company Act) of any such party. Such contract is not assignable and may be terminated without penalty on 60 days' written notice at the option of either party or by the vote of the shareholders of the Portfolios.
PURCHASE OF SHARES
Reference is made to "Purchase of Shares" and "Redemption of Shares" in the Prospectus for certain information as to the purchase of shares of the Portfolios.
The Program will offer shares solely to holders of IRAs for which Merrill Lynch acts as custodian. The minimum initial purchase in any Portfolio is $100 and the minimum subsequent purchase in any Portfolio is $1.
The Distributor, a subsidiary of the Investment Adviser, acts as the distributor of the shares of the Program. The applicable offering price for purchase orders is based on the net asset value of the Portfolio next determined after receipt of the purchase orders by the Distributor. As to purchase orders received by securities dealers prior to 4:15 P.M., New York time, which includes orders received after the determination of net asset value on the previous day, the applicable offering price will be based on the net asset value determined as of 4:15 P.M., New York time, on the day the orders are placed with the Distributor, provided the orders are received by the Distributor prior to 4:30 P.M., New York time, on that day. If the purchase orders are not received by the Distributor prior to 4:30 P.M., New York time, such orders shall be deemed received on the next business day. Any order may be rejected by the Distributor or the Program. The Program or the Distributor may suspend the continuous offering of any Portfolio's shares at any time in response to conditions in the securities markets or otherwise and may thereafter resume such offering from time to time. Neither the Distributor nor the dealers are permitted to withhold placing orders to benefit themselves by a price change. Merrill Lynch may charge its customers a processing fee (presently $4.85) to confirm a sale of shares to such customers.
Each Portfolio issues four classes of shares under the Merrill Lynch Select PricingSM System: shares of Class A and Class D are sold to investors choosing the initial sales charge alternatives, and shares of Class B
and Class C are sold to investors choosing the deferred sales charge alternatives. Each Class A, Class B, Class C and Class D share of each Portfolio represents identical interests in the investment portfolio of that Portfolio and has the same rights, except that Class B, Class C and Class D shares bear the expenses of the ongoing account maintenance fees, and Class B and Class C shares bear the expenses of the ongoing distribution fees and the additional incremental transfer agency costs resulting from the deferred sales charge arrangements. Class B, Class C and Class D shares each have exclusive voting rights with respect to the Rule 12b-1 distribution plan adopted with respect to such class pursuant to which account maintenance and/or distribution fees are paid. Each class has different exchange privileges. See "Shareholder Services -- Exchange Privilege".
The Merrill Lynch Select PricingSM System is used by more than 50 mutual funds advised by the Investment Adviser, or its affiliate, FAM. Funds advised by the Investment Adviser or FAM are referred to herein as "MLAM-advised mutual funds".
The Program has entered into separate distribution agreements with the Distributor on behalf of each Portfolio in connection with the continuous offering of each class of shares of each of the Portfolios (the "Distribution Agreements"). The Distribution Agreements obligate the Distributor to pay certain expenses in connection with the offering of each class of shares of the Portfolios. After the prospectuses, statements of additional information and periodic reports have been prepared, set in type and mailed to shareholders, the Distributor pays for the printing and distribution of copies thereof used in connection with the offering to dealers and investors. The Distributor also pays for other supplementary sales literature and advertising costs. The Distribution Agreements are subject to the same renewal requirements and termination provisions as the Management Agreement described above.
INITIAL SALES CHARGE ALTERNATIVES--CLASS A AND CLASS D SHARES
The term "purchase", as used in the Prospectus and this Statement of Additional Information in connection with an investment in Class A and Class D shares of the Portfolios, refers to a single purchase by an individual, or to concurrent purchases, which in the aggregate are at least equal to the prescribed amounts, by an individual, his spouse and their children under the age of 21 years purchasing shares for his or their own account and to single purchases by a trustee or other fiduciary purchasing shares for a single trust estate or single fiduciary account (including a pension, profit-sharing or other employee benefit trust created pursuant to a plan qualified under Section 401 of the Code) although more than one beneficiary is involved. The term "purchase" also includes purchases by any "company", as that term is defined in the Investment Company Act, but does not include purchases by any such company which has not been in existence for at least six months or which has no purpose other than the purchase of shares of the Portfolio or shares of other registered investment companies at a discount; provided, however, that it shall not include purchases by any group of individuals whose sole organizational nexus is that the participants therein are credit cardholders of a company, policyholders of an insurance company, customers of either a bank or broker- dealer or clients of an investment adviser.
Closed-End Fund Investment Option. Class A shares of the Portfolios and other MLAM-advised mutual funds ("Eligible Class A Shares") are offered at net asset value to shareholders of certain closed-end funds advised by MLAM or the Investment Adviser who purchased such closed-end fund shares prior to October 21, 1994, and wish to reinvest the net proceeds from a sale of their closed-end fund shares of common stock in Eligible Class A Shares, if the conditions set forth below are satisfied. Alternatively, closed-end fund
shareholders who purchased such shares on or after October 21, 1994, and wish to reinvest the net proceeds from a sale of their closed-end fund shares are offered Class A shares (if eligible to buy Class A shares) or Class D shares of the Portfolios and other MLAM-advised mutual funds ("Eligible Class D Shares"), if the following conditions are met. First, the sale of the closed-end fund shares must be made through Merrill Lynch, and the net proceeds therefrom must be immediately reinvested in Eligible Class A or Class D shares. Second, the closed-end fund shares must either have been acquired in the initial public offering or be shares representing dividends from shares of common stock acquired in such offering. Third, the closed-end fund shares must have been continuously maintained in a Merrill Lynch securities account. Fourth, there must be a minimum purchase of $250 to be eligible for the investment option. Class A shares of the Portfolio are offered at net asset value to shareholders of Merrill Lynch Senior Floating Rate Fund, Inc. ("Senior Floating Rate Fund") who wish to reinvest the net proceeds from a sale of certain of their shares of common stock of Senior Floating Rate Fund in shares of the Portfolio. In order to exercise this investment option, Senior Floating Rate Fund shareholders must sell their Senior Floating Rate Fund shares to the Senior Floating Rate Fund in connection with a tender offer conducted by the Senior Floating Rate Fund and reinvest the proceeds immediately in a Portfolio. This investment option is available only with respect to the proceeds of Senior Floating Rate Fund shares as to which no Early Withdrawal Charge (as defined in the Senior Floating Rate Fund prospectus) is applicable. Purchase orders from Senior Floating Rate Fund shareholders wishing to exercise this investment option will be accepted only on the day that the related Senior Floating Rate Fund tender offer terminates and will be effected at the net asset value of the Portfolio at such day.
REDUCED INITIAL SALES CHARGES
Right of Accumulation. Reduced sales charges are applicable through a right of accumulation under which eligible investors are permitted to purchase shares of the Portfolios subject to an initial sales charge at the offering price applicable to the total of (a) the public offering price of the shares then being purchased plus (b) an amount equal to the then current net asset value or cost, whichever is higher, of the purchaser's combined holdings of all classes of shares of the Program and of other MLAM-advised mutual funds. For any such right of accumulation to be made available, the Distributor must be provided at the time of purchase, by the purchaser or the purchaser's securities dealer, with sufficient information to permit confirmation of qualification. Acceptance of the purchase order is subject to such confirmation. The right of accumulation may be amended or terminated at any time. Shares held in the name of a nominee or custodian under pension, profit-sharing, or other employee benefit plans may not be combined with other shares to qualify for the right of accumulation.
Letter of Intention. Reduced sales charges are applicable to purchases aggregating $25,000 or more of Class A or Class D shares of the Program or any other MLAM-advised mutual funds made within a 13-month period starting with the first purchase pursuant to a Letter of Intention. The Letter of Intention is available only to investors whose accounts are maintained at the Program's transfer agent. The Letter of Intention is not available to employee benefit plans for which Merrill Lynch provides plan-participant record-keeping services. The Letter of Intention is not a binding obligation to purchase any amount of Class A or Class D shares; however, its execution will result in the purchaser paying a lower sales charge at the appropriate quantity purchase level. A purchase not originally made pursuant to a Letter of Intention may be included under a subsequent Letter of Intention executed within 90 days of such purchase if the Distributor is informed in writing of this intent within such 90-day period. The value of Class A and Class D shares of the Program and of other MLAM-advised mutual funds presently held, at cost or maximum offering price
(whichever is higher), on the date of the first purchase under the Letter of Intention, may be included as a credit toward completion of such Letter, but the reduced sales charge applicable to the amount covered by such Letter will be applied only to new purchases. If the total amount of shares purchased does not equal the amount stated in the Letter of Intention (minimum of $25,000), the investor will be notified and must pay, within 20 days of the expiration of such Letter, the difference between the sales charge on the Class A or Class D shares purchased at the reduced rate and the sales charge applicable to the shares actually purchased through the Letter. Class A or Class D shares equal to five percent of the intended amount will be held in escrow during the 13-month period (while remaining registered in the name of the purchaser) for this purpose. The first purchase under the Letter of Intention must be at least five percent of the dollar amount of such Letter. If a purchase during the term of such Letter would otherwise be subject to a further reduced sales charge based on the right of accumulation, the purchaser will be entitled on that purchase and subsequent purchases to the reduced percentage sales charge which would be applicable to a single purchase equal to the total dollar value of the Class A or Class D shares then being purchased under such Letter, but there will be no retroactive reduction of the sales charges on any previous purchase.
The value of any shares redeemed or otherwise disposed of by the purchaser prior to termination or completion of the Letter of Intention will be deducted from the total purchases made under such Letter. An exchange from a MLAM- advised money market fund into a Portfolio that creates a sales charge will count toward completing a new or existing Letter of Intention from the Portfolio.
Purchase Privilege of Certain Persons. Directors of the Program, directors and trustees of other MLAM-advised investment companies, ML & Co. and its subsidiaries (the term "subsidiaries" when used herein with respect to ML & Co. includes MLAM, FAM and certain other entities directly or indirectly wholly owned and controlled by ML & Co.) and their directors and employees may purchase Class A shares of the Portfolios at net asset value.
Class D shares of the Portfolios will be offered at net asset value, without a sales charge, to an investor who has a business relationship with a financial consultant who joined Merrill Lynch from another investment firm within six months prior to the date of purchase by such investor if the following conditions are satisfied. First, the investor must advise Merrill Lynch that it will purchase Class D shares of the Portfolio with proceeds from a redemption of a mutual fund that was sponsored by the financial consultant's previous firm and was subject to a sales charge either at the time of purchase or on a deferred basis. Second, the investor also must establish that such redemption had been made within 60 days prior to the investment in the Portfolio, and the proceeds from the redemption had been maintained in the interim in cash or a money market fund.
Class D shares of the Portfolios are also offered at net asset value, without sales charge, to an investor who has a business relationship with a Merrill Lynch financial consultant and who has invested in a mutual fund sponsored by a non-Merrill Lynch company for which Merrill Lynch has served as a selected dealer and where Merrill Lynch has either received or given notice that such arrangement will be terminated, if the following conditions are satisfied: first, the investor must purchase Class D shares of a Portfolio with proceeds from a redemption of shares of such other mutual fund and such fund was subject to a sales charge either at the time of purchase or on a deferred basis; second, such purchase of Class D shares must be made within 90 days after such notice of termination.
Class D shares of the Portfolios will be offered at net asset value, without a sales charge, to an investor who has a business relationship with a Merrill Lynch financial consultant and who has invested in a mutual fund for which Merrill Lynch has not served as a selected dealer if the following conditions are satisfied: First, the investor must advise Merrill Lynch that it will purchase Class D shares of a Portfolio with proceeds from the redemption of such shares of other mutual funds and that such shares have been outstanding for a period of no less than six months. Second, such purchase of Class D shares must be made within 60 days after the redemption and the proceeds from the redemption must be maintained in the interim in cash or a money market fund.
Reductions in or exemptions from the imposition of a sales load are due to the nature of the investors and/or the reduced sales efforts that will be needed in obtaining such investments.
DISTRIBUTION PLANS
Reference is made to "Purchase of Shares -- Distribution Plans" in the Prospectus for certain information with respect to the separate distribution plans for Class B, Class C and Class D shares pursuant to Rule 12b-1 under the Investment Company Act (each a "Distribution Plan").
Payments of the account maintenance fees and/or distribution fees are subject to the provisions of Rule 12b-1 under the Investment Company Act. Among other things, each Distribution Plan provides that the Distributor shall provide and the Directors shall review quarterly reports of the disbursement of the account maintenance fees and/or distribution fees paid the Distributor. In their consideration of each Distribution Plan, the Directors must consider all factors they deem relevant, including information as to the benefits of the Distribution Plan to the Portfolio and its related class of shareholder. Each Distribution Plan further provides that, so long as the Distribution Plan remains in effect, the selection and nomination of Directors who are not "interested persons" of the Program, as defined in the Investment Company Act (the "Independent Directors"), shall be committed to the discretion of the Independent Directors then in office. In approving each Distribution Plan in accordance with Rule 12b-1, the Independent Directors concluded that there is a reasonable likelihood that such Distribution Plan will benefit the Portfolio and its related class of shareholders. Each Distribution Plan can be terminated at any time, without penalty, by the vote of a majority of the Independent Directors or by the vote of the holders of a majority of the outstanding related class of voting securities of the Portfolio. A Distribution Plan cannot be amended to increase materially the amount to be spent by the Portfolio without the approval of the related class of shareholders, and all material amendments are required to be approved by the vote of the Directors, including a majority of the Independent Directors who have no direct or indirect financial interest in such Distribution Plan, cast in person at a meeting called for that purpose. Rule 12b-1 further requires that the Portfolio preserve copies of each Distribution Plan and any report made pursuant to such plan for a period of not less than six years from the date of such Distribution Plan or such report, the first two years in an easily accessible place.
LIMITATIONS ON THE PAYMENT OF DEFERRED SALES CHARGES
The maximum sales charge rule in the Rules of Fair Practice of the National Association of Securities Dealers, Inc. ("NASD") imposes a limitation on certain asset-backed sales charges such as the distribution fee and the CDSC borne by the Class B and Class C shares but not the account maintenance fee. The
maximum sales charge rule is applied separately to each class. As applicable to the Portfolios, the maximum sales charge rule limits the aggregate of distribution fee payments and CDSCs payable by the Portfolios to (1) 6.25% of eligible gross sales of Class B shares and Class C shares, computed separately (defined to exclude shares issued pursuant to dividend reinvestments and exchanges), plus (2) interest on the unpaid balance for the respective class, computed separately, at the prime rate plus 1% (the unpaid balance being the maximum amount payable minus amounts received from the payment of the distribution fee and the CDSC). In connection with the Class B shares, the Distributor has voluntarily agreed to waive interest charges on the unpaid balance in excess of 0.50% of eligible gross sales. Consequently, the maximum amount payable to the Distributor (referred to as the "voluntary maximum") in connection with the Class B shares is 6.75% of eligible gross sales. The Distributor retains the right to stop waiving the interest charges at any time. To the extent payments would exceed the voluntary maximum, the Portfolio will not make further payments of the distribution fee with respect to Class B shares, and any CDSCs will be paid to the Portfolio rather than to the Distributor, however, the Portfolio will continue to make payments of the account maintenance fee. In certain circumstances the amount payable pursuant to the voluntary maximum may exceed the amount payable under the NASD formula. In such circumstances payment in excess of the amount payable under the NASD formula will not be made.
As described in Appendix A, there are three types of self-directed plans which are eligible to invest in the Portfolios: the individual retirement account, the individual retirement rollover account ("IRRA") and the Simplified Employee Pension Plan ("SEP-IRA") (collectively, "IRAs"). Although the amount which may be contributed to an IRA account in any one year is subject to certain limitations, assets already in an IRA account may be invested in the Portfolios without regard to such limitations.
Shareholders considering transferring a tax-deferred account such as an IRA from Merrill Lynch to another brokerage firm or financial institution should be aware that Program shares may only be held in a Merrill Lynch custodied IRA. Prior to any such transfer, a shareholder must either redeem the shares (paying any applicable CDSC), so that the cash proceeds can be transferred to the account at the new firm or exchange the shares for shares of another mutual fund advised by the Investment Adviser or its affiliates pursuant to the exchange privilege. It is possible, however, that the firm to which the retirement account is to be transferred will not take delivery of shares of such fund, and then the shareholder would have to redeem these shares so that the cash proceeds can be transferred or continue to maintain an IRA account at Merrill Lynch for those shares.
Cash balances of participants who elect to have such funds automatically invested in shares of a Portfolio will be invested as follows. Cash balances arising from the sale of securities held in the IRA account which do not settle on the day of the transaction (such as most common and preferred stock transactions) become available to the Program and will be invested in shares of a Portfolio on the business day following the day that proceeds with respect thereto are received in the IRA account. Proceeds giving rise to cash balances from the sale of securities held in the IRA account settling on a same day basis and from principal repayments on debt securities held in the account become available to the Program and will be invested in shares of a Portfolio on the next business day following receipt. Cash balances arising from dividends or interest payments on securities held in the IRA account or from a contribution to the IRA account are invested in shares of the Portfolios on the business day following the date the payment is received in the IRA account.
Merrill Lynch has advised the Program that it will not charge an annual account fee upon any IRA which is then invested solely in one or more of the Program's Portfolios or in a money market fund advised by the Investment Adviser or its affiliates. If, however, a shareholder of any of the Portfolios exchanges any of his or her shares of a Portfolio for shares of another fund advised by the Investment Adviser or its affiliates, other than shares of a Portfolio or a money market fund advised by the Investment Adviser or its affiliates, then Merrill Lynch will reinstate the IRA annual account fee. For information about the current IRA fees charged by Merrill Lynch, consult the Merrill Lynch IRA disclosure statement and the Merrill Lynch IRA custodial agreement.
REDEMPTION OF SHARES
Reference is made to "Redemption of Shares" in the Prospectus for certain information as to the redemption and repurchase of shares of the Portfolios.
The right to redeem shares or to receive payment with respect to any such redemption may be suspended only for any period during which trading on the New York Stock Exchange is restricted as determined by the Securities and Exchange Commission (the "Commission") or such Exchange is closed (other than customary weekend and holiday closings), for any period during which an emergency exists as defined by the Commission as a result of which disposal of portfolio securities or determination of the net asset value of any Portfolio is not reasonably practicable, and for such other periods as the Commission may by order permit for the protection of shareholders of the Portfolios.
Distributions from an IRA account to a participant prior to the time the participant reaches age 59 1/2 may subject the participant to income and excise taxes. See "Dividends, Distributions and Taxes". There are, however, no adverse tax consequences resulting from redemptions of shares of the Portfolios where the redemption proceeds remain in the IRA account and are otherwise invested.
The Program is required to redeem for cash all shares of each Portfolio of the Program. The redemption price is the net asset value per share next determined after the initial receipt of proper notice of redemption as described below. If such notice is received by Merrill Lynch prior to the determination of net asset value on any day (15 minutes after the close of business on the New York Stock Exchange), the redemption will be effective on that day and payment generally will be made on the next business day. If the notice is received after the determination of net asset value on any day, the redemption will be effective on the next business day and payment will be made on the second business day after receipt of the notice. Shareholders liquidating their holdings will receive upon redemption all dividends reinvested through the date of redemption. Accrued but unpaid dividends will be paid on the payable date next following the date of redemption.
Any shareholder may redeem shares of the Portfolios by submitting a written notice of redemption to Merrill Lynch. Participants in the Program should contact their Merrill Lynch financial consultant to effect such redemptions. Redemption requests should not be sent to the Program or to its Transfer Agent. The notice must bear the signature of the person in whose name the IRA is maintained, signed exactly as his or her name appears on the IRA adoption agreement.
DEFERRED SALES CHARGES--CLASS B SHARES
As discussed in the Prospectus under "Purchase of Shares--Deferred Sales
Charge Alternatives--Class B and Class C Shares", while Class B shares redeemed
within four years of purchase are subject to a CDSC, under most circumstances,
the charge is waived (i) on redemptions of Class B shares in connection with
certain post-retirement withdrawals from an IRA or other retirement plan or
(ii) on redemptions of Class B shares following the death or disability of a
Class B shareholder. Redemptions for which the waiver applies are: (a) any
partial or complete redemption in connection with a tax-free distribution
following retirement under a tax-deferred retirement plan or attaining age 59
1/2 in the case of an IRA or other retirement plan, or part of a series of
equal periodic payments (not less frequently than annually) made for the life
(or life expectancy) or any redemption resulting from the tax-free return of an
excess contribution to an IRA or (b) any partial or complete redemption
following the death or disability (as defined in the Code) of a Class B
shareholder (including one who owns the Class B shares as joint tenant with his
or her spouse), provided the redemption is requested within one year of the
death or initial determination of disability.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Reference is made to "Portfolio Transactions and Brokerage" in the Prospectus. Subject to policies established by the Board of Directors of the Program, the Investment Adviser is primarily responsible for the portfolio decisions of each of the Portfolios and the placing of the portfolio transactions for each of the Portfolios. With respect to such transactions, the Investment Adviser seeks to obtain the best net results for each Portfolio, taking into account such factors as price (including the applicable brokerage commission or dealer spread), size of order, difficulty of execution and operational facilities of the firm involved and the firm's risk in positioning a block of securities. While the Investment Adviser generally seeks reasonably competitive commission rates, the Portfolios will not necessarily be paying the lowest commission or spread available. Transactions with respect to the securities of small and emerging growth companies in which the Fundamental Value Portfolio may invest may involve specialized services on the part of the broker or dealer and thereby entail higher commissions or spreads than would be the case with transactions involving more widely traded securities of more established companies. The Portfolios have no obligation to deal with any broker in the execution of transactions for their portfolio securities. In addition, consistent with the Rules of Fair Practice of the NASD and policies established by the Directors of the Program, the Investment Adviser may consider sales of shares of the Portfolios as a factor in the selection of brokers or dealers to execute portfolio transactions for the Portfolios.
The Program has been informed by Merrill Lynch that it will in no way, at any time, attempt to influence or control the placing by the Investment Adviser or by the Program of orders for brokerage transactions. Brokers and dealers, including Merrill Lynch, who provide supplemental investment research (such as securities and economic research and market forecasts) to the Investment Adviser may receive orders for transactions by the Portfolios. If, in the judgment of the Investment Adviser, a Portfolio will be benefited by such supplemental research services, the Investment Adviser is authorized to pay commissions to brokers furnishing such services which are in excess of commissions which another broker may charge for the same
transaction. Information so received is in addition to and not in lieu of the services required to be performed by the Investment Adviser under the Investment Advisory Agreement with the Program, and the expenses of the Investment Adviser will not necessarily be reduced as a result of the receipt of such supplemental information. Supplemental investment research received by the Investment Adviser may also be used in connection with other investment advisory accounts of the Investment Adviser and its affiliates.
The Portfolios also may invest in securities traded in the over-the-counter market. Transactions in the over-the-counter market generally are principal transactions with dealers and the costs of such transactions involve dealer spreads. With respect to the over-the-counter transactions, the Portfolios, where possible, will deal directly with the dealers who make a market in the securities involved except in those circumstances where better prices and execution are available elsewhere. Such dealers usually act as principals for their own account. On occasion, securities may be purchased directly from the issuer. Bonds and money market securities are generally traded on a net basis and do not normally involve either brokerage commissions or transfer taxes. The cost of portfolio securities transactions of the Quality Bond and the U.S. Government Securities Portfolios will consist primarily of dealer or underwriter spreads.
Under the Investment Company Act, persons affiliated with the Program are prohibited from dealing with the Portfolios as a principal in the purchase and sale of securities unless a permissive order allowing such transactions is obtained from the Commission. Since transactions in the over-the-counter market usually involve transactions with dealers acting as principal for their own account, affiliated persons of the Program, including Merrill Lynch, may not serve as the Program's dealer in connection with such transactions. See "Investment Objectives and Policies--Investment Restrictions". However, affiliated persons of the Program may serve as its broker in the over-the- counter transactions conducted on an agency basis.
The ability and decisions of the Global Opportunity and Fundamental Value Portfolios to purchase or sell portfolio securities may be affected by laws or regulations relating to the convertibility and repatriation of assets. Because the shares of the Portfolios are redeemable on a daily basis in U.S. dollars, the Global Opportunity and Fundamental Value Portfolios intend to manage their portfolios so as to give reasonable assurance that they will be able to obtain U.S. dollars to the extent necessary to meet anticipated redemptions. Under present conditions, it is not believed that these considerations will have any significant effect on portfolio strategies.
The Global Opportunity and Fundamental Value Portfolios anticipate that brokerage transactions involving securities of companies domiciled in countries other than the U.S. will be conducted primarily on the principal stock exchanges of such countries. Brokerage commissions and other transaction costs on foreign stock exchange transactions are generally higher than in the U.S., although the Global Opportunity and Fundamental Value Portfolios will endeavor to achieve the best net results in effecting the transactions. There is generally less governmental supervision and regulation of foreign stock exchanges and brokers than in the U.S.
The Board of Directors of the Program has considered the possibilities of seeking to recapture for the benefit of the Program brokerage commissions, dealer spreads and other expenses of possible portfolio transactions, such as underwriting commissions and tender offer solicitation fees, by conducting such portfolio transactions through affiliated entities, including Merrill Lynch. For example, brokerage
commissions received by Merrill Lynch could be offset against the advisory fee payable by the Program to the Investment Adviser. After considering all factors deemed relevant, the Board made a determination not to seek such recapture. The Board will reconsider this matter from time to time. The Investment Adviser has arranged for the Program's custodian to receive any tender offer solicitation fees on behalf of the Program payable with respect to portfolio securities of the Program.
The Global Opportunity and Fundamental Value Portfolios may invest in the securities of foreign issuers in the form of American Depositary Receipts (ADRs), European Depositary Receipts (EDRs) or other securities convertible into securities of foreign issuers. These securities may not necessarily be denominated in the same currency as the securities into which they may be converted. ADRs are receipts typically issued by an American bank or trust company which evidence ownership of underlying securities issued by a foreign corporation. EDRs are receipts issued in Europe which evidence a similar ownership arrangement. Generally, ADRs, which are issued in registered form, are designed for use in the United States securities markets and EDRs, which are issued in bearer form, are designed for use in European securities markets.
Section 11(a) of the Securities Exchange Act of 1934 generally prohibits members of the national securities exchanges from executing exchange transactions for their affiliates and institutional accounts which they manage unless the member (i) has obtained prior express authorization from the account to effect such transactions, (ii) at least annually furnishes the account with the aggregate compensation received by the member in effecting such transactions, and (iii) complies with any rules the Commission has prescribed with respect to the requirements of clauses (i) and (ii). To the extent Section 11(a) would apply to Merrill Lynch acting as a broker for the Portfolios in any of the portfolio transactions executed on any such securities exchange of which it is a member, appropriate consents have been obtained from the Program, and annual statements as to aggregate compensation will be provided to the Portfolios. The Commission has the authority to issue regulations to broaden the prohibition contained in Section 11(a) to extend to transactions executed otherwise than on a national securities exchange. While there is no indication that it will do so, the Commission could under this authority issue regulations at any time which would prohibit affiliates from executing portfolio transactions for the Portfolios on foreign securities exchanges.
PORTFOLIO TURNOVER
Each Portfolio intends to comply with the various requirements of the Internal Revenue Code so as to qualify as a "regulated investment company" thereunder. See "Dividends, Distributions and Taxes." Among such requirements is a limitation to less than 30% on the amount of gross income which the Portfolios may derive from gain on the sale or other disposition of securities held for less than three months. Accordingly, the Portfolios' ability to effect certain portfolio transactions may be limited.
DETERMINATION OF NET ASSET VALUE
Reference is made to "Additional Information--Determination of Net Asset Value" in the Prospectus concerning the determination of net asset value. The net asset value of the shares of each Portfolio is determined once daily Monday through Friday 15 minutes after the close of business on the New York Stock Exchange (generally, 4:00 P.M., New York time) on each day during which the New York Stock Exchange is open for trading. The New York Stock Exchange is not open on New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Any assets
or liabilities initially expressed in terms of non-U.S. dollar currencies are translated into U.S. dollars at the prevailing market rates as quoted by one or more banks or dealers on the day of valuation. Each Portfolio also will determine its net asset value on any day in which there is sufficient trading in its portfolio securities that the net asset value might be affected materially, but only if on any such day the Portfolio is required to sell or redeem shares. The net asset value per share of a Portfolio is computed by dividing the sum of the value of the securities held by the Portfolio plus any cash or other assets (including interest and dividends accrued but not yet received) minus all liabilities (including accrued expenses) by the total number of shares outstanding at such time, rounded to the nearest cent. Expenses, including the investment advisory fees and distribution fees, are accrued daily. The per share net asset value of the Class B, Class C and Class D shares of a Portfolio generally will be lower than the per share net asset value of the Class A shares of the same Portfolio reflecting the daily expense accruals of the account maintenance, distribution and higher transfer agency fees applicable with respect to the Class B and Class C shares and the daily expense accruals of the account maintenance fees applicable with the respect to the Class D shares; moreover, the per share net asset value of the Class B and Class C shares generally will be lower than the per share net asset value of its Class D shares reflecting the daily expense accruals of the distribution fees and higher transfer agency fees applicable with respect to the Class B and Class C shares of the Portfolio. It is expected, however, that the per share net asset value of the four classes will tend to converge immediately after the payment of dividends or distributions, which will differ by approximately the amount of the expense accrual differential between the classes.
Portfolio securities which are traded on stock exchanges are valued at the last sale price (regular way) on the exchange on which such securities are traded, as of the close of business on the day the securities are being valued, or, lacking any sales, at the last available bid price. In cases where securities are traded on more than one exchange, the securities are valued on the exchange designated by or under the authority of the Board of Directors as the primary market. Securities traded in the over-the-counter market are valued at the last available bid price in the over-the-counter market prior to the time of valuation. Securities and assets for which market quotations are not readily available are valued at fair market value as determined in good faith by or under the direction of the Board of Directors of the Program.
Option Accounting Principles. When a Portfolio writes a call option, the amount of the premium received is recorded on the books of the Portfolio as an asset and an equivalent liability. The amount of the liability is subsequently valued to reflect the current market value of the option written, based upon the last sale price in the case of exchange-traded options or, in the case of options traded in the over-the-counter market, the last asked price. Options purchased by a Portfolio are valued at their last sale price in the case of exchange-traded options or, in the case of options traded in the over-the- counter market, the last bid price.
SHAREHOLDER SERVICES
The Program offers a number of shareholder services and investment plans designed to facilitate investment in its shares. Full details as to each of such services, copies of the various plans described below and instructions as to how to participate in the various services or plans, or how to change options with respect thereto, can be obtained from the Program by calling the telephone number on the cover page hereof or from the Distributor or Merrill Lynch.
INVESTMENT ACCOUNT
A shareholder must maintain his or her account through a Merrill Lynch- custodied IRA and will receive information regarding activity in his or her Merrill Lynch IRA as part of the Merrill Lynch retirement account statement. Shareholders also will receive separate confirmations for each purchase or sale transaction other than reinvestments of ordinary income dividends and long-term capital gains distributions. Shareholders considering transferring a tax- deferred retirement account such as an IRA from Merrill Lynch to another brokerage firm or financial institution should be aware that Program shares may only be held in a Merrill Lynch-custodied IRA. Prior to any such transfer, a shareholder must either redeem the shares (paying any applicable CDSC) so that the cash proceeds can be transferred to the account at the new firm or exchange the shares for shares of another mutual fund advised by the Investment Adviser or its affiliates pursuant to the exchange privilege. It is possible, however, that the firm to which the retirement account is to be transferred will not take delivery of shares of such fund, and then the shareholder would have to redeem these shares so that the cash proceeds can be transferred or such shareholder must continue to maintain a retirement account at Merrill Lynch for those shares. In addition, shareholders considering transferring the holdings in their Merrill Lynch custodied IRA to a Merrill Lynch brokerage account should be aware that because Program shares may only be held in a Merrill Lynch-custodied IRA, the shares will also in this instance have to be redeemed prior to such transfer or exchanged for another mutual fund advised by the Investment Adviser or its affiliates.
AUTOMATIC REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
All dividends and capital gains distributions of a Portfolio are reinvested automatically in full and fractional shares of that Portfolio, at the net asset value per share, of the respective Portfolio next determined on the ex-dividend date of such dividend or distribution. A shareholder may, at any time, by written notification to Merrill Lynch, elect to have subsequent dividends or both dividends and capital gains distributions paid in cash and held in such shareholder's IRA account rather than reinvested.
SYSTEMATIC REDEMPTION AND AUTOMATIC INVESTMENT PLANS
At age 59 1/2, a Class A or Class D shareholder may elect to receive systematic redemption payments from his or her Investment Account in the form of payments by check or through automatic payment by direct deposit to his or her bank account on either a monthly or quarterly basis. Regular additions of Class A, Class B, Class C or Class D shares may be made to an investor's Investment Account by prearranged charges of $50 or more to his or her regular bank account. See "Dividends, Distributions and Taxes" for consequences of withdrawals from IRA accounts prior to age 59 1/2. In addition, Merrill Lynch offers an automated funding service which permits regular current year IRA contributions of up to $2,000 per year to be made to IRAs and an automated investment program which may be used for automated subsequent purchases of shares of the Program.
EXCHANGE PRIVILEGE
Shareholders of each class of shares of each of the Portfolios have an exchange privilege with certain other MLAM-advised mutual funds listed below. If, however, a shareholder of any of the Portfolios exchanges any of his or her shares of a Portfolio for shares of another MLAM-advised mutual fund, Merrill Lynch will
reinstate the IRA annual account fee. Under the Merrill Lynch Select PricingSM System, Class A shareholders may exchange Class A shares of a Portfolio for Class A shares of another MLAM-advised mutual fund if the shareholder holds any Class A shares of the second fund in his account in which the exchange is made at the time of the exchange or is otherwise eligible to purchase Class A shares of the second fund. If the Class A shareholder wants to exchange Class A shares for shares of a second MLAM-advised mutual fund, but does not hold Class A shares of the second fund in his account at the time of the exchange and is not otherwise eligible to acquire Class A shares of the second fund, the shareholder will receive Class D shares of the second fund as a result of the exchange. Class D shares also may be exchanged for Class A shares of a second MLAM-advised mutual fund at any time as long as, at the time of the exchange, the shareholder holds Class A shares of the second fund in the account in which the exchange is made or is otherwise eligible to purchase Class A shares of the second fund. Class B, Class C and Class D shares will be exchangeable with shares of the same class of other MLAM-advised mutual funds. For purposes of computing the CDSC that may be payable upon a disposition of the shares acquired in the exchange, the holding period for the previously owned shares of the Program is tacked on to the holding period of the newly acquired shares of the other fund as more fully described below. Class A, Class B, Class C and Class D shares also will be exchangeable for shares of certain MLAM-advised money market funds specifically designated below as available for exchange by holders of Class A, Class B, Class C or Class D shares. Shares with a net asset value of at least $100 are required to qualify for the exchange privilege, and any shares utilized in an exchange must have been held by the shareholder for 15 days. It is contemplated that the exchange privilege may be applicable to other new mutual funds whose shares may be distributed by the Distributor.
Exchanges of Class A or Class D shares outstanding ("outstanding Class A or Class D shares") for Class A or Class D shares of another MLAM-advised mutual fund ("new Class A or Class D shares") are transacted on the basis of relative net asset value per Class A or Class D share, respectively, plus an amount equal to the difference, if any, between the sales charge previously paid on the outstanding Class A or Class D shares and the sales charge payable at the time of the exchange on the new Class A or Class D shares. With respect to outstanding Class A or Class D shares as to which previous exchanges have taken place, the "sales charge previously paid" shall include the aggregate of the sales charge paid with respect to such Class A or Class D shares in the initial purchase and any subsequent exchange. Class A or Class D shares issued pursuant to dividend reinvestment are sold on a no-load basis in each of the funds offering Class A or Class D shares. For purposes of the exchange privilege, Class A and Class D shares acquired through dividend reinvestment shall be deemed to have been sold with a sales charge equal to the sales charge previously paid on the Class A or Class D shares on which the dividend was paid. Based on this formula, Class A and Class D shares of a Portfolio generally may be exchanged into the Class A or Class D shares of the other funds or into shares of the Class A and Class D money market funds with a reduced or without a sales charge.
In addition, each of the funds with Class B and Class C shares outstanding ("outstanding Class B or Class C shares") offers to exchange its Class B or Class C shares for Class B or Class C shares, respectively, of another MLAM- advised mutual fund ("new Class B or Class C shares") on the basis of relative net asset value per Class B or Class C share, without the payment of any CDSC that might otherwise be due on redemption of the outstanding shares. Class B shareholders of a Portfolio exercising the exchange privilege will continue to be subject to the Portfolio's CDSC schedule if such schedule is higher than the CDSC schedule relating to the new Class B shares acquired through use of the exchange privilege. In addition, Class B shares of a Portfolio acquired through use of the exchange privilege will be subject to the Portfolio's CDSC
schedule if such schedule is higher than the CDSC schedule relating to the Class B shares of the fund from which the exchange has been made. For purposes of computing the sales charge that may be payable on a disposition of the new Class B or Class C shares, the holding period for the outstanding Class B or Class C shares is tacked on to the holding period of the new Class B or Class C shares. For example, an investor may exchange Class B shares of a Portfolio for those of Merrill Lynch Special Value Fund, Inc. ("Special Value Fund") after having held the Portfolio Class B shares for two and a half years. The 2% CDSC that generally would apply to a redemption would not apply to the exchange. Three years later the investor may decide to redeem the Class B shares of Special Value Fund and receive cash. There will be no CDSC due on this redemption, since by tacking the two and a half year holding period of Portfolio Class B shares to the three year holding period for the Special Value Fund Class B shares, the investor will be deemed to have held the new Class B shares for more than five years.
Shareholders also may exchange shares of a Portfolio into shares of a money market fund advised by the Investment Adviser or its affiliates, but the period of time that Class B or Class C shares are held in a money market fund will not count towards satisfaction of the holding period requirement for purposes of reducing the CDSC or with respect to Class B shares, towards satisfaction of the conversion period. However, shares of a money market fund which were acquired as a result of an exchange for Class B or Class C shares of a Portfolio may, in turn, be exchanged back into Class B or Class C shares, respectively, of any fund offering such shares, in which event the holding period for Class B or Class C shares of the fund will be aggregated with previous holding periods for purposes of reducing the CDSC. Thus, for example, an investor may exchange Class B shares of a Portfolio for shares of Merrill Lynch Institutional Fund ("Institutional Fund") after having held the Portfolio Class B shares for two and a half years and three years later decide to redeem the shares of Institutional Fund for cash. At the time of this redemption, the 2% CDSC that would have been due had the Class B shares of the Portfolio been redeemed for cash rather than exchanged for shares of Institutional Fund will be payable. If instead of such redemption the shareholder exchanged such shares for Class B shares of a fund which the shareholder continued to hold for an additional two and half years, any subsequent redemption will not incur a CDSC.
Set forth below is a description of the investment objectives of the other funds into which exchanges can be made:
Funds Issuing Class A, Class B, Class C and Class D Shares:
Merrill Lynch Adjustable Rate
Securities Fund, Inc..........
High current income consistent with a policy
of limiting the degree of fluctuation in net
asset value by investing primarily in a
portfolio of adjustable rate securities,
consisting principally of mortgage-backed
and asset-backed securities.
Merrill Lynch Americas Income
Fund, Inc.....................
A high level of current income, consistent
with prudent investment risk, by investing
primarily in debt securities denominated in
a currency of a country located in the
Western Hemisphere (i.e., North and South
America and the surrounding waters).
Merrill Lynch Arizona Limited
Maturity Municipal Bond Fund..
A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
as high a level of income exempt from
Federal and Arizona income taxes as is
consistent with prudent investment
management through investment in a portfolio
primarily of intermediate-term investment
grade Arizona Municipal Bonds.
Merrill Lynch Arizona
Municipal Bond Fund...........
A portfolio of Merrill Lynch Multi-State Municipal Series Trust, a series fund, whose objective is to provide as high a level of income exempt from Federal and Arizona income taxes as is consistent with prudent investment management.
Merrill Lynch Arkansas
Municipal Bond Fund......
A portfolio of Merrill Lynch Multi-State Municipal Series Trust, a series fund, whose objective is to provide as high a level of income exempt from Federal and Arkansas income taxes as is consistent with prudent investment management.
Merrill Lynch Asset Growth
Fund, Inc. ..............
High total investment return, consistent with
prudent risk, from investment in United
States and foreign equity, debt and money
market securities the combination of which
will be varied both with respect to types of
securities and markets in response to
changing market and economic trends.
Merrill Lynch Asset Income
Fund, Inc. ..............
A high level of current income through investment primarily in United States fixed income securities.
Merrill Lynch Balanced Fund
for Investment and
Retirement....................
As high a level of total investment return as
is consistent with reasonable risk by
investing in common stocks and other types
of securities, including fixed income
securities and convertible securities.
Merrill Lynch Basic Value
Fund, Inc.....................
Capital appreciation and, secondarily, income
through investment in securities, primarily
equities, that are undervalued and therefore
represent basic investment value.
Merrill Lynch California
Insured Municipal Bond Fund...
A portfolio of Merrill Lynch California
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and California
income taxes as is consistent with prudent
investment management through investment in
a portfolio consisting primarily of insured
California Municipal Bonds.
Merrill Lynch California
Limited Maturity Municipal
Bond Fund.....................
A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
as high a level of income exempt from
Federal and California income taxes as is
consistent with prudent investment
management through investment in a portfolio
primarily of intermediate-term investment
grade California Municipal Bonds.
Merrill Lynch California
Municipal Bond Fund...........
A portfolio of Merrill Lynch California
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and California
income taxes as is consistent with prudent
investment management.
Merrill Lynch Capital Fund, The highest total investment return
Inc........................... consistent with prudent risk through a fully
managed investment policy utilizing equity,
debt and convertible securities.
Merrill Lynch Colorado
Municipal Bond Fund...........
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Colorado
income taxes as is consistent with prudent
investment management.
Merrill Lynch Connecticut
Municipal Bond Fund...........
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Connecticut
income taxes as is consistent with prudent
investment management.
Merrill Lynch Corporate Bond
Fund, Inc.....................
Current income from three separate
diversified portfolios of fixed income
securities.
|
Merrill Lynch Developing
Capital Markets Fund, Inc..... Long-term appreciation through investment in
securities, principally equities, of issuers
in countries having smaller capital markets.
Merrill Lynch Dragon Fund,
Inc........................... Capital appreciation primarily through
investment in equity and debt securities of
issuers domiciled in developing countries
located in Asia and the Pacific Basin.
Merrill Lynch Eurofund......... Capital appreciation primarily through
investment in equity securities of
corporations domiciled in Europe.
Merrill Lynch Federal
Securities Trust..............
High current return through investments in
U.S. Government and Government agency
securities, including GNMA mortgage-backed
certificates and other mortgage-backed
Government securities.
Merrill Lynch Florida Limited
Maturity Municipal Bond Fund..
A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
as high a level of income exempt from
Federal income taxes as is consistent with
prudent investment management while serving
to offer shareholders the opportunity to own
securities exempt from Florida intangible
personal property taxes through investment
in a portfolio primarily of intermediate-
term investment grade Florida Municipal
Bonds.
Merrill Lynch Florida
Municipal Bond Fund...........
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal income taxes as
is consistent with prudent investment
management, while seeking to offer
shareholders the opportunity to own
securities exempt from Florida intangible
personal property taxes.
Merrill Lynch Fund For
Tomorrow, Inc.................
Long-term growth through investment in a
portfolio of good quality securities,
primarily common stock, potentially
positioned to benefit from demographic and
cultural changes as they affect consumer
markets.
27
|
Merrill Lynch Fundamental
Growth Fund, Inc..............
Long-term growth of capital through
investment in a diversified portfolio of
equity securities placing particular
emphasis on companies that have exhibited an
above-average growth rate in earnings.
Merrill Lynch Global
Allocation Fund, Inc. ...
High total return, consistent with prudent
risk, through a fully managed investment
policy utilizing U.S. and foreign equity,
debt and money market securities, the
combination of which will be varied from
time to time both with respect to the types
of securities and markets in response to
changing market and economic trends.
Merrill Lynch Global Bond Fund
for Investment and
Retirement....................
High total investment return from investment
in government and corporate bonds
denominated in various currencies and
multinational currency units.
Merrill Lynch Global
Convertible Fund, Inc.........
High total return from investment primarily
in an internationally diversified portfolio
of convertible debt securities, convertible
preferred stock and "synthetic" convertible
securities consisting of a combination of
debt securities or preferred stock and
warrants or options.
Merrill Lynch Global Holdings,
Inc. (residents of Arizona
must meet investor
suitability standards)........
The highest total investment return
consistent with prudent risk through
worldwide investment in an internationally
diversified portfolio of securities.
Merrill Lynch Global Resources
Trust.........................
Long-term growth and protection of capital
from investment in securities of domestic
and foreign companies that possess
substantial natural resource assets.
Merrill Lynch Global SmallCap
Fund, Inc. ..............
Long-term growth of capital by investing
primarily in equity securities of companies
with relatively small market capitalizations
located in various foreign countries and in
the United States.
28
|
Merrill Lynch Global Utility
Fund, Inc.....................
Capital appreciation and current income
through investment of at least 65% of its
total assets in equity and debt securities
issued by domestic and foreign companies
primarily engaged in the ownership or
operation of facilities used to generate,
transmit or distribute electricity,
telecommunications, gas or water.
Merrill Lynch Growth Fund for
Investment and Retirement.....
Growth of capital and, secondarily, income
from investment in a diversified portfolio
of equity securities placing principal
emphasis on those securities which
management of the fund believes to be
undervalued.
Merrill Lynch Healthcare Fund,
Inc. (residents of Wisconsin
must meet investor
suitability standards)........
Capital appreciation through worldwide
investment in equity securities of companies
that derive or are expected to derive a
substantial portion of their sales from
products and services in healthcare.
Merrill Lynch International
Equity Fund...................
Capital appreciation and, secondarily, income
by investing in a diversified portfolio of
equity securities of issuers located in
countries other than the United States.
Merrill Lynch Latin America
Fund, Inc.....................
Capital appreciation by investing primarily
in Latin American equity and debt
securities.
Merrill Lynch Maryland
Municipal Bond Fund...........
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Maryland
income taxes as is consistent with prudent
investment management.
Merrill Lynch Massachusetts
Limited Maturity Municipal
Bond Fund.....................
A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
as high a level of income exempt from
Federal and Massachusetts income taxes as is
consistent with prudent investment
management through investment in a portfolio
primarily of intermediate-term investment
grade Massachusetts Municipal Bonds.
29
|
Merrill Lynch Massachusetts
Municipal Bond Fund...........
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Massachusetts
income taxes as is consistent with prudent
investment management.
Merrill Lynch Michigan Limited
Maturity Municipal Bond Fund..
A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
as high a level of income exempt from
Federal and Michigan income taxes as is
consistent with prudent investment
management through investment in a portfolio
primarily of intermediate-term investment
grade Michigan Municipal Bonds.
Merrill Lynch Michigan
Municipal Bond Fund...........
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Michigan
income taxes as is consistent with prudent
investment management.
Merrill Lynch Minnesota
Municipal Bond Fund...........
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Minnesota
personal income taxes as is consistent with
prudent investment management.
Merrill Lynch Municipal Bond
Fund, Inc.....................
Tax-exempt income from three separate
diversified portfolios of municipal bonds.
Merrill Lynch Municipal
Intermediate Term Fund........
Currently the only portfolio of Merrill Lynch
Municipal Series Trust, a series fund, whose
objective is to provide as high a level as
possible of income exempt from Federal
income taxes by investing in investment
grade obligations with a dollar weighted
average maturity of five to twelve years.
30
|
Merrill Lynch New Jersey
Limited Maturity Municipal
Bond Fund.....................
A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
as high a level of income exempt from
Federal and New Jersey income taxes as is
consistent with prudent investment
management through a portfolio primarily of
intermediate-term investment grade New
Jersey Municipal Bonds.
Merrill Lynch New Jersey
Municipal Bond Fund...........
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and New Jersey
income taxes as is consistent with prudent
investment management.
Merrill Lynch New Mexico
Municipal Bond Fund......
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and New Mexico
income taxes as is consistent with prudent
investment management.
Merrill Lynch New York Limited
Maturity Municipal Bond Fund..
A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
as high a level of income exempt from
Federal, New York State and New York City
income taxes as is consistent with prudent
investment management through investment in
a portfolio primarily of intermediate-term
investment grade New York Municipal Bonds.
Merrill Lynch New York
Municipal Bond Fund...........
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal, New York State
and New York City income taxes as is
consistent with prudent investment
management.
Merrill Lynch North Carolina
Municipal Bond Fund...........
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and North
Carolina income taxes as is consistent with
prudent investment management.
31
|
Merrill Lynch Ohio Municipal
Bond Fund.....................
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Ohio income
taxes as is consistent with prudent
investment management.
Merrill Lynch Oregon Municipal
Bond Fund.....................
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Oregon income
taxes as is consistent with prudent
investment management.
Merrill Lynch Pacific Fund, Capital appreciation by investing in equity
Inc........................... securities of corporations domiciled in Far
Eastern and Western Pacific countries,
including Japan, Australia, Hong Kong and
Singapore.
Merrill Lynch Pennsylvania
Limited Maturity Municipal
Bond Fund.....................
A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
as high a level of income exempt from
Federal and Pennsylvania income taxes as is
consistent with prudent investment
management through investment in a portfolio
of intermediate-term investment grade
Pennsylvania Municipal Bonds.
Merrill Lynch Pennsylvania
Municipal Bond Fund...........
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Pennsylvania
personal income taxes as is consistent with
prudent investment management.
Merrill Lynch Phoenix Fund, Long-term growth of capital by investing in
Inc........................... equity and fixed income securities,
including tax-exempt securities, of issuers
in weak financial condition or experiencing
poor operating results believed to be
undervalued relative to the current or
prospective condition of such issuer.
Merrill Lynch Short-Term
Global Income Fund, Inc.......
As high a level of current income as is
consistent with prudent investment
management from a global portfolio of high
quality debt securities denominated in
various currencies and multinational
currency units and having remaining
maturities not exceeding three years.
32
|
Merrill Lynch Special Value
Fund, Inc.....................
Long-term growth of capital from investments
in securities, primarily common stock, of
relatively small companies believed to have
special investment value and emerging growth
companies regardless of size.
Merrill Lynch Strategic
Dividend Fund.................
Long-term total return from investment in
dividend paying common stocks which yield
more than Standard & Poor's 500 Composite
Stock Price Index.
Merrill Lynch Technology Fund,
Inc...........................
Capital appreciation through worldwide
investment in equity securities of companies
that derive or are expected to derive a
substantial portion of their sales from
products and services in technology.
Merrill Lynch Texas Municipal
Bond Fund.....................
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal income taxes as
is consistent with prudent investment
management by investing primarily in a
portfolio of long-term, investment grade
obligations issued by the State of Texas,
its political subdivisions, agencies and
instrumentalities.
Merrill Lynch Utility Income
Fund, Inc.....................
High current income through investment in
equity and debt securities issued by
companies which are primarily engaged in the
ownership or operation of facilities used to
generate, transmit or distribute
electricity, telecommunications, gas or
water.
Merrill Lynch World Income
Fund, Inc.....................
High current income by investing in a global
portfolio of fixed income securities
denominated in various currencies, including
multinational currencies.
Class A Share Money Market Funds:
Merrill Lynch Ready
AssetsTrust..............
Preservation of capital, liquidity and the
highest possible current income consistent
with the foregoing objectives from the
short-term money market securities in which
the Trust invests.
|
Merrill Lynch Retirement
Reserves Money Fund
(available only for exchanges
within certain retirement
plans)...................
Currently the only portfolio of Merrill Lynch Retirement Series Trust, a series fund, whose objectives are current income, preservation of capital and liquidity available from investing in a diversified portfolio of short-term money market securities.
Merrill Lynch U.S.A.
Government Reserves......
Preservation of capital, current income and
liquidity available from investing in direct
obligations of the U.S. Government and
repurchase agreements relating to such
securities.
Merrill Lynch U.S. Treasury
Money Fund...............
Preservation of capital, liquidity and current income through investment exclusively in a diversified portfolio of short-term marketable securities which are direct obligations of the U.S. Treasury.
Class B, Class C and Class D Share Money Market Funds:
Merrill Lynch Government Fund.. A portfolio of Merrill Lynch Funds for
Institutions Series, a series fund, whose
objective is to provide current income
consistent with liquidity and security of
principal from investment in securities
issued or guaranteed by the U.S. Government,
its agencies and instrumentalities and in
repurchase agreements secured by such
obligations.
Merrill Lynch Institutional
Fund.....................
A portfolio of Merrill Lynch Funds for
Institutions Series, a series fund, whose
objective is to provide maximum current
income consistent with liquidity and the
maintenance of a high quality portfolio of
money market securities.
Merrill Lynch Institutional
Tax-Exempt Fund..........
A portfolio of Merrill Lynch Funds for
Institutions Series, a series fund, whose
objective is to provide current income
exempt from Federal income taxes,
preservation of capital and liquidity
available from investing in a diversified
portfolio of short-term, high quality
municipal bonds.
Merrill Lynch Treasury Fund.... A portfolio of Merrill Lynch Funds for
Institutions Series, a series fund, whose
objective is to provide current income
consistent with liquidity and security of
principal from investment in direct
obligations of the U.S. Treasury and up to
10% of its total assets in repurchase
agreements secured by such obligations.
|
Before effecting an exchange, shareholders should obtain a currently effective prospectus of the fund into which the exchange is to be made.
To exercise the exchange privilege, shareholders should contact their Merrill Lynch financial consultant, who will advise the Program of the exchange. Shareholders of the Portfolios, and shareholders of the other funds described above with shares for which certificates have not been issued, may exercise the exchange privilege by wire through their securities dealers. The Program reserves the right to require a properly completed Exchange Application. This exchange privilege may be modified or terminated in accordance with the rules of the Commission. The Program reserves the right to limit the number of times an investor may exercise the exchange privilege. Certain funds may suspend the continuous offering of their share at any time and thereafter may resume such offering from time to time. The exchange privilege is available only to U.S. shareholders in states where the exchange legally may be made.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Reference is made to "Additional Information--Dividends and Distributions" in the Prospectus.
FEDERAL TAX
RICs. The following is a general summary of the treatment of regulated investment companies ("RICs") and their shareholders under the Internal Revenue Code of 1986, as amended (the "Code"). The Program intends to elect and to qualify each Portfolio for the special tax treatment afforded RICs under the Code. If it so qualifies, each Portfolio (but not its shareholders) will be subject to Federal income tax with respect to the net ordinary income and net realized capital gains which it distributes to Class A, Class B, Class C and Class D shareholders. The Program intends to cause each Portfolio to distribute substantially all of such income.
Each Portfolio of the Program is treated as a separate corporation for Federal income tax purposes. Each Portfolio therefore is considered to be a separate entity in determining its treatment under the rules for RICs described in the Prospectus. Losses in one Portfolio do not offset gains in another Portfolio, and the requirements (other than certain organizational requirements) for qualifying for RIC status will be determined at the Portfolio level rather than the Program level.
The Code requires a RIC to pay a nondeductible 4% excise tax to the extent the RIC does not distribute, during each calendar year, 98% of its ordinary income, determined on a calendar year basis, and 98% of its capital gains, determined, in general, on an October 31 year end, plus certain undistributed amounts from previous years. While the Program intends to cause each Portfolio to distribute its income and capital gains in the manner necessary to avoid imposition of the 4% excise tax, there can be no assurance that sufficient amounts of each Portfolio's taxable income and capital gains will be distributed to avoid entirely the imposition of the tax. In such event, the Portfolios will be liable for the tax only on the amount by which they do not meet the foregoing distribution requirements.
Dividends paid by a Portfolio from its ordinary income and distributions of a Portfolio's net realized short-term capital gains (together referred to hereafter as "ordinary income dividends") are ordinarily taxable
to shareholders as ordinary income. Distributions made from a Portfolio's net realized long-term capital gains (including long-term gains from certain transactions in futures or options) ("capital gain dividends") are ordinarily taxable to shareholders as long-term capital gains, regardless of the length of time the shareholder has owned Portfolio shares. Distributions in excess of a Portfolio's earnings and profits will first reduce the adjusted tax basis of a holder's shares and, after such adjusted tax basis is reduced to zero, will ordinarily constitute capital gains to such holder (assuming the shares are held as a capital asset). Dividends of a RIC are ordinarily taxable to shareholders even though they are reinvested in additional shares of the Portfolio.
Under certain provisions of the Code, some shareholders may be subject to a 31% withholding tax on ordinary income dividends, capital gain dividends and redemption payments ("backup withholding"). Generally, shareholders subject to backup withholding will be those for whom no certified taxpayer identification number is on file with the Program or who, to the Program's knowledge, have furnished an incorrect number. When establishing an account, an investor must certify under penalty of perjury that such number is correct and that such investor is not otherwise subject to backup withholding.
IRAs. Investment in the Portfolios is limited to participants in IRAs for which Merrill Lynch acts as passive custodian. Accordingly, the general description of the tax treatment of RICs as set forth above is qualified with respect to the special tax treatment afforded IRAs under the Code. Under the Code, neither ordinary income dividends nor capital gain dividends represent current income to shareholders if such shares are held in an IRA. Rather, distributions from an IRA will be taxable as ordinary income at the rate applicable to the participant at the time of the distribution. Such distributions would include (i) any pre-tax contributions to the IRA (including pre-tax contributions that have been rolled over from another IRA or qualified retirement plan), and (ii) dividends (whether or not such dividends are classified as ordinary income or capital gain dividends). In addition to ordinary income tax, participants may be subject to the imposition of excise taxes on any distributed amount, including: (i) a 10 percent excise tax on any amount withdrawn from an IRA prior to the participant's attainment of age 59 1/2; and (ii) a 15 percent excise tax on the amount of any "excess distributions" (generally, amounts in excess of $150,000) made from the IRA and any other IRA or qualified retirement plan annually.
Under certain limited circumstances (for example, if an individual for whose
benefit an IRA is established engages in any transaction prohibited under
Section 4975 of the Code with respect to such account), the IRA could cease to
be treated as an IRA as of the first day of such taxable year that such
transaction occurred. If an IRA through which a shareholder holds Portfolio
shares becomes ineligible for the special treatment afforded IRAs under the
Code, such shareholder will be treated as having received a distribution on
such first day of the taxable year from the IRA in an amount equal to the fair
market value of all assets in the account. Thus, the shareholder would be taxed
currently on (i) the amount of any pre-tax contributions and previously untaxed
dividends held within the account, and (ii) all ordinary income and capital
gain dividends paid by the Portfolios subsequent to such event, whether such
dividends are received in cash or reinvested in additional shares. These
ordinary income and capital gain dividends also might be subject to state and
local taxes. In the event of IRA disqualification, shareholders also could be
subject to the excise taxes described above. Additionally, IRA disqualification
may subject a nonresident alien shareholder to a 30% United States withholding
tax on ordinary income dividends paid by a Portfolio unless a reduced rate of
withholding or a withholding exemption is provided under applicable treaty law.
Dividends and interest received by the Global Opportunity Portfolio and, to a lesser extent, the Fundamental Value Portfolio, may give rise to withholding and other taxes imposed by foreign countries.
Tax conventions between certain countries and the United States may reduce or eliminate such taxes. Because of their participation in an IRA, shareholders will not be able to credit or deduct such taxes in computing their taxable incomes. However, in the event of IRA disqualification, as discussed above, shareholders of the Global Opportunity Portfolio might be entitled to a credit or deduction with respect to their proportionate shares of foreign taxes paid by the Portfolio, subject to certain conditions and limitations in the Code, if the Portfolio is eligible and makes an election with the Internal Revenue Service. It is unlikely, however, that the Fundamental Value Portfolio will be able to make this election.
The foregoing is a general and abbreviated summary of the applicable provisions of the Code and Treasury regulations presently in effect. For the complete provisions, reference should be made to the pertinent Code sections and the Treasury regulations promulgated thereunder. The Code and the Treasury regulations are subject to change by legislative or administrative action either prospectively or retroactively.
STATE TAX
Ordinary income and capital gain dividends on RIC shares held in a disqualified IRA or outside of an IRA may also be subject to state and local taxes. Certain states exempt from state income taxation dividends paid by RICs which are derived from interest on United States Government obligations. State law varies as to whether dividend income attributable to United States Government obligations is exempt from state income tax. Generally, however, states exempt from state income taxation dividends on shares held within an IRA, and commence taxation on amounts actually distributed from an IRA. Such amounts are generally treated as ordinary income.
Shareholders are urged to consult their own tax advisers regarding specific questions as to Federal, foreign, state or local taxes. Foreign investors should consider applicable foreign taxes in their evaluation of an investment in the Program.
PERFORMANCE DATA
From time to time the Program may include each Portfolio's average total return and other total return data, as well as yield for the Quality Bond and U.S. Government Securities Portfolios, in advertisements or information furnished to present or prospective shareholders. Total return and yield figures will be based on each Portfolio's historical performance and are not intended to indicate future performance. Average annual total return and yield are determined separately for Class A, Class B, Class C and Class D shares of each Portfolio in accordance with formulae specified by the Commission.
Average annual total return quotations for each Portfolio for the specified periods will be computed by finding the average annual compounded rates of return (based on net investment income and any realized and unrealized capital gains or losses on portfolio investments over such periods) that would equate the initial amount invested to the redeemable value of such investment at the end of each period. Average annual total return will be computed assuming all dividends and distributions are reinvested and taking into account all applicable recurring and nonrecurring expenses, including the maximum sales charge in the case of Class A and Class D shares and the CDSC that would be applicable to a complete redemption of the investment at the end of the specified period in the case of Class B and Class C shares.
The Program also may quote each Portfolio's total return and aggregate total return performance data for various specified time periods. Such data will be computed as described above, except that (1) the rates of return calculated will not be average annual rates, but rather, actual annual, annualized or aggregate rates of return and (2) the maximum applicable sales charges will not be included with respect to annual or annualized rates of return calculations. Aside from the impact on the performance data calculations of including or excluding the maximum applicable sales charges, actual annual or annualized total return data generally will be lower than average annual total return data since the average rates of return reflect compounding of return; aggregate total return data generally will be higher than average annual total return since the aggregate rates of return reflect compounding over a longer period of time. The Program's total return may be expressed either as a percentage or as a dollar amount in order to illustrate the effect of such total return on a hypothetical $1,000 investment in a Portfolio at the beginning of each specified period.
Yield quotations for each Portfolio will be computed based on a 30-day period by dividing (a) the net income based on the yield of each security earned during the period by (b) the average daily number of shares outstanding in each Portfolio during the period that were entitled to receive dividends (c) multiplied by the maximum offering price/net asset value per share of that Portfolio on the last day of the period.
Total return figures and yield figures are based on each Portfolio's historical performance and are not intended to indicate future performance. Each Portfolio's total return will vary depending on market conditions, the securities comprising such Portfolio's holdings, the Portfolio's operating expenses and the amount of realized and unrealized net capital gains or losses during the period. The value of an investment in any Portfolio will fluctuate and an investor's shares, when redeemed, may be worth more or less than their original cost.
On occasion, a Portfolio may compare its performance to that of the Standard & Poor's 500 Composite Stock Price Index, the Dow Jones Industrial Average, or performance data published by Lipper Analytical Services, Inc., Morningstar Publications, Inc., Money Magazine, U.S. News & World Report, Business Week, CDA Investment Technology, Inc., Forbes Magazine and Fortune Magazine. As with other performance data, performance comparisons should not be considered representative of the Portfolio's relative performance for any future period.
GENERAL INFORMATION
DESCRIPTION OF SHARES
The Program was incorporated under Maryland law on May 12, 1994. It has an authorized capital of 100,000,000 shares of Common Stock, par value $0.10 per share. The shares are divided as follows: Fundamental Value Portfolio Series Common Stock which consists of 6,250,000 Class A shares, 6,250,000 Class B shares, 6,250,000 Class C shares and 6,250,000 Class D shares; Quality Bond Portfolio Series Common Stock which consists of 6,250,000 Class A shares, 6,250,000 Class B shares, 6,250,000 Class C shares and 6,250,000 Class D shares; U.S. Government Securities Portfolio Series Common Stock which consists of 6,250,000 Class A shares, 6,250,000 Class B shares, 6,250,000 Class C shares and 6,250,000 Class D shares; and Global Opportunity Portfolio Series Common Stock which consists of 6,250,000 Class A shares, 6,250,000 Class B shares, 6,250,000 Class C shares and 6,250,000 Class D shares. The Board of Directors of the Program may classify and reclassify the shares of a Portfolio into additional classes of Common Stock at a future date.
Shareholders are entitled to one vote for each share held and fractional votes for fractional shares held and will vote on the election of Directors and any other matter submitted to a shareholder vote. The Program does not intend to hold meetings of shareholders in any year in which the Investment Company Act does not require shareholders to act on any of the following matters: (i) election of Directors; (ii) approval of an investment advisory agreement; (iii) approval of a distribution agreement; and (iv) ratification of selection of independent auditors. Generally, under Maryland law, a meeting of shareholders may be called for any purpose on the written request of the holders of at least 10% of the outstanding shares of the Program. Voting rights for Directors are not cumulative. Shares issued are fully paid and non- assessable and have no preemptive or conversion rights. Redemption rights are discussed elsewhere herein and in the Prospectus. Each share is entitled to participate equally in dividends and distributions declared by the Program and in the net assets of the Program on liquidation or dissolution after satisfaction of outstanding liabilities. Stock certificates are issued by the Transfer Agent only on specific request. Certificates for fractional shares are not issued in any case.
COMPUTATION OF OFFERING PRICE PER SHARE
An illustration of the computation of the initial offering price for Portfolio shares, based on the projected value of each Portfolio's estimated net assets and projected number of shares outstanding on the date its shares are first offered for sale to public investors is as follows:
FUNDAMENTAL VALUE PORTFOLIO QUALITY BOND PORTFOLIO
------------------------------------------ -------------------------------
CLASS A CLASS B CLASS C CLASS D CLASS A CLASS B CLASS C CLASS D
--------- --------- --------- --------- ------- ------- ------- -------
Net Assets.............. $ 6,250 $ 6,250 $ 6,250 $ 6,250 $6,250 $6,250 $6,250 $6,250
========= ========= ========= ========= ====== ====== ====== ======
Number of Shares Out-
standing............... 625 625 625 625 625 625 625 625
========= ========= ========= ========= ====== ====== ====== ======
Net Asset Value Per
Share (net assets
divided by number of
shares outstanding).... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $10.00 $10.00 $10.00 $10.00
Sales Charge(1)*........ .55 ** ** .55 .42 ** ** .42
--------- --------- --------- --------- ------ ------ ------ ------
Offering Price.......... $ 10.55 $ 10.00 $ 10.00 $ 10.55 $10.42 $10.00 $10.00 $10.42
========= ========= ========= ========= ====== ====== ====== ======
U.S. GOVERNMENT SECURITIES PORTFOLIO GLOBAL OPPORTUNITY PORTFOLIO
------------------------------------------ -------------------------------
CLASS A CLASS B CLASS C CLASS D CLASS A CLASS B CLASS C CLASS D
--------- --------- --------- --------- ------- ------- ------- -------
Net Assets.............. $ 6,250 $ 6,250 $ 6,250 $ 6,250 $6,250 $6,250 $6,250 $6,250
========= ========= ========= ========= ====== ====== ====== ======
Number of Shares Out-
standing............... 625 625 625 625 625 625 625 625
========= ========= ========= ========= ====== ====== ====== ======
Net Asset Value Per
Share (net assets
divided by number of
shares outstanding).... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $10.00 $10.00 $10.00 $10.00
Sales Charge(1)*........ .42 ** ** .42 .55 ** ** .55
--------- --------- --------- --------- ------ ------ ------ ------
Offering Price.......... $ 10.42 $ 10.00 $ 10.00 $ 10.42 $10.55 $10.00 $10.00 $10.55
========= ========= ========= ========= ====== ====== ====== ======
|
(1) For Class A and Class D shares of each Portfolio as follows: Fundamental Value and Global Opportunity Portfolios, 5.25% of offering price (5.54% of net asset value per share); Quality Bond and U.S. Government Securities Portfolios, 4.00% of offering price (4.17% of net asset value per share).
* Rounded to the nearest one-hundredth percent, assumes maximum sales charge is applicable.
** Class B and Class C shares are not subject to an initial sales charge but may be subject to a CDSC on redemption of shares. See "Purchase of Shares-- Deferred Sales Charge Alternatives--Class B and Class C Shares" in the Prospectus.
INDEPENDENT AUDITORS
Deloitte & Touche LLP, 117 Campus Drive, Princeton, New Jersey 08540, has been selected as the independent auditors of the Program. The selection of independent auditors is subject to ratification by the shareholders of the Program. The independent auditors are responsible for auditing the annual financial statements of the Program.
CUSTODIAN
The Bank of New York, 90 Washington Street, 12th Floor, New York, New York 10286, acts as Custodian of the Program's assets. The Custodian is responsible for safeguarding and controlling the Program's cash and securities, handling the receipt and delivery of securities and collecting interest and dividends on the Program's investments.
TRANSFER AGENT
Financial Data Services, Inc., 4800 Deer Lake Drive East, Jacksonville, Florida 32246-6484, acts as the Program's transfer agent. The Transfer Agent is responsible for the issuance, transfer and redemption of shares and the opening, maintenance and servicing of shareholder accounts. See "Management of the Program--Transfer Agency Services" in the Prospectus.
LEGAL COUNSEL
Brown & Wood, One World Trade Center, New York, New York 10048-0557, is counsel for the Program.
REPORTS TO SHAREHOLDERS
The fiscal year of the Program ends on January 31 of each year. The Program will send to its shareholders at least semiannually reports showing the Program's portfolio and other information. An annual report, containing financial statements audited by independent auditors, is sent to shareholders each year. After the end of each year, shareholders will receive Federal income tax information regarding dividends and capital gains distributions.
ADDITIONAL INFORMATION
The Prospectus and this Statement of Additional Information do not contain all the information set forth in the Registration Statement and the exhibits relating thereto which the Program has filed with the Commission, Washington, D.C., under the Securities Act and the Investment Company Act to which reference is hereby made.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder,
Fundamental Value Portfolio of
Merrill Lynch Retirement Asset Builder Program, Inc.:
We have audited the accompanying statement of assets and liabilities of the Fundamental Value Portfolio (the "Portfolio") of Merrill Lynch Retirement Asset Builder Program, Inc. as of November 16, 1994. This financial statement is the responsibility of the Portfolio's management. Our responsibility is to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such statement of assets and liabilities presents fairly, in all material respects, the financial position of the Portfolio as of November 16, 1994, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
November 22, 1994
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
FUNDAMENTAL VALUE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 16, 1994
Assets:
Cash................................................................ $ 25,000
Prepaid Registration Fees........................................... 84,546
Deferred organization costs......................................... 15,500
--------
Total assets.......................................................... $125,046
Liabilities:
Liabilities and accrued expenses.................................... 100,046
--------
Net Assets............................................................ $ 25,000
========
Net Assets Consist Of:
Class A Shares of Common Stock, $.10 par value, 6,250,000 shares au-
thorized........................................................... $ 63
Class B Shares of Common Stock, $.10 par value, 6,250,000 shares au-
thorized........................................................... 63
Class C Shares of Common Stock, $.10 par value, 6,250,000 shares au-
thorized........................................................... 63
Class D Shares of Common Stock, $.10 par value, 6,250,000 shares au-
thorized........................................................... 63
Paid-in Capital in excess of par.................................... 24,748
--------
Net Assets............................................................ $ 25,000
========
Net Asset Value Per Share:
Class A--Based on net assets of $6,250 and 625 shares outstanding... $10.00
========
Class B--Based on net assets of $6,250 and 625 shares outstanding... $10.00
========
Class C--Based on net assets of $6,250 and 625 shares outstanding... $10.00
========
Class D--Based on net assets of $6,250 and 625 shares outstanding... $10.00
========
|
Notes to Statement of Assets and Liabilities
(1) Fundamental Value Portfolio (the "Portfolio") is one of the four
portfolios of Merrill Lynch Retirement Asset Builder Program, Inc. (the
"Program") which was organized as a Maryland corporation on May 12, 1994.
The Program is registered under the Investment Company Act of 1940 as an
open-end investment company.
(2) The Portfolio has entered into an Investment Advisory Agreement (the
"Investment Advisory Agreement") with Merrill Lynch Asset Management (the
"Investment Adviser"), and distribution agreements (the "Distribution
Agreements") with Merrill Lynch Funds Distributor, Inc. (the
"Distributor"). (See "Management and Advisory Arrangements" in the
Statement of Additional Information.) Certain officers and/or directors of
the Program are officers and/or directors of the Investment Adviser and/or
the Distributor.
(3) Prepaid registration fees are charged to income as the related shares are
issued.
(4) Deferred organization expenses will be amortized over a period from the
date the Portfolio commences operations not exceeding five years. In the
event that the Investment Adviser (or any subsequent holder) redeems any
of its original shares prior to the end of the five-year period, the
proceeds of the redemption payable in respect of such shares shall be
reduced by the pro rata share (based on the proportionate share of the
original shares redeemed to the total number of original shares
outstanding at the time of redemption) of the unamortized deferred
organization expenses as of the date of such redemption. In the event that
the Portfolio is liquidated prior to the end of the five-year period, the
Investment Adviser (or any subsequent holder) shall bear the unamortized
deferred organization expenses.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder,
Quality Bond Portfolio of
Merrill Lynch Retirement Asset Builder Program, Inc.:
We have audited the accompanying statement of assets and liabilities of the Quality Bond Portfolio (the "Portfolio") of Merrill Lynch Retirement Asset Builder Program, Inc. as of November 16, 1994. This financial statement is the responsibility of the Portfolio's management. Our responsibility is to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such statement of assets and liabilities presents fairly, in all material respects, the financial position of the Portfolio as of November 16, 1994, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
November 22, 1994
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
QUALITY BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 16, 1994
Assets:
Cash................................................................ $ 25,000
Prepaid Registration Fees........................................... 84,546
Deferred organization costs......................................... 15,500
--------
Total assets.......................................................... 125,046
Liabilities:
Liabilities and accrued expenses.................................... 100,046
--------
Net Assets............................................................ $ 25,000
========
Net Assets Consist Of:
Class A Shares of Common Stock, $.10 par value, 6,250,000 shares au-
thorized........................................................... $ 63
Class B Shares of Common Stock, $.10 par value, 6,250,000 shares au-
thorized........................................................... 63
Class C Shares of Common Stock, $.10 par value, 6,250,000 shares au-
thorized........................................................... 63
Class D Shares of Common Stock, $.10 par value, 6,250,000 shares au-
thorized........................................................... 63
Paid-in Capital in excess of par.................................... 24,748
--------
Net Assets............................................................ $ 25,000
========
Net Asset Value Per Share:
Class A--Based on net assets of $6,250 and 625 shares outstanding .. $ 10.00
========
Class B--Based on net assets of $6,250 and 625 shares outstanding .. $ 10.00
========
Class C--Based on net assets of $6,250 and 625 shares outstanding .. $ 10.00
========
Class D--Based on net assets of $6,250 and 625 shares outstanding .. $ 10.00
========
|
Notes to Statement of Assets and Liabilities
(1) Quality Bond Portfolio (the "Portfolio") is one of the four portfolios of
Merrill Lynch Retirement Asset Builder Program, Inc. (the "Program") which
was organized as a Maryland corporation on May 12, 1994. The Program is
registered under the Investment Company Act of 1940 as an open-end
investment company.
(2) The Portfolio has entered into an Investment Advisory Agreement (the
"Investment Advisory Agreement") with Merrill Lynch Asset Management (the
"Investment Adviser"), and distribution agreements (the "Distribution
Agreements") with Merrill Lynch Funds Distributor, Inc. (the
"Distributor"). (See "Management and Advisory Arrangements" in the
Statement of Additional Information.) Certain officers and/or directors of
the Program are officers and/or directors of the Investment Adviser and/or
the Distributor.
(3) Prepaid registration fees are charged to income as the related shares are
issued.
(4) Deferred organization expenses will be amortized over a period from the
date the Portfolio commences operations not exceeding five years. In the
event that the Investment Adviser (or any subsequent holder) redeems any
of its original shares prior to the end of the five-year period, the
proceeds of the redemption payable in respect of such shares shall be
reduced by the pro rata share (based on the proportionate share of the
original shares redeemed to the total number of original shares
outstanding at the time of redemption) of the unamortized deferred
organization expenses as of the date of such redemption. In the event that
the Portfolio is liquidated prior to the end of the five-year period, the
Investment Adviser (or any subsequent holder) shall bear the unamortized
deferred organization expenses.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder,
U.S. Government Securities Portfolio of
Merrill Lynch Retirement Asset Builder Program, Inc.:
We have audited the accompanying statement of assets and liabilities of the U.S. Government Securities Portfolio (the "Portfolio") of Merrill Lynch Retirement Asset Builder Program, Inc. as of November 16, 1994. This financial statement is the responsibility of the Portfolio's management. Our responsibility is to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such statement of assets and liabilities presents fairly, in all material respects, the financial position of the Portfolio as of November 16, 1994, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
November 22, 1994
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
U.S. GOVERNMENT SECURITIES PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 16, 1994
Assets:
Cash................................................................ $ 25,000
Prepaid Registration Fees........................................... 84,546
Deferred organization costs......................................... 15,500
--------
Total assets.......................................................... 125,046
Liabilities:
Liabilities and accrued expenses.................................... 100,046
--------
Net Assets............................................................ $ 25,000
========
Net Assets Consist Of:
Class A Shares of Common Stock, $.10 par value, 6,250,000 shares
authorized.......................................................... $ 63
Class B Shares of Common Stock, $.10 par value, 6,250,000 shares
authorized.......................................................... 63
Class C Shares of Common Stock, $.10 par value, 6,250,000 shares
authorized.......................................................... 63
Class D Shares of Common Stock, $.10 par value, 6,250,000 shares
authorized.......................................................... 63
Paid-in Capital in excess of par.................................... 24,748
--------
Net Assets............................................................ $ 25,000
========
Net Asset Value Per Share:
Class A--Based on net assets of $6,250 and 625 shares outstanding... $ 10.00
========
Class B--Based on net assets of $6,250 and 625 shares outstanding... $ 10.00
========
Class C--Based on net assets of $6,250 and 625 shares outstanding... $ 10.00
========
Class D--Based on net assets of $6,250 and 625 shares outstanding... $ 10.00
========
|
Notes to Statement of Assets and Liabilities
(1) U.S. Government Securities Portfolio (the "Portfolio") is one of the four
portfolios of Merrill Lynch Retirement Asset Builder Program, Inc. (the
"Program") which was organized as a Maryland corporation on May 12, 1994.
The Program is registered under the Investment Company Act of 1940 as an
open-end investment company.
(2) The Portfolio has entered into an Investment Advisory Agreement (the
"Investment Advisory Agreement") with Merrill Lynch Asset Management (the
"Investment Adviser"), and distribution agreements (the "Distribution
Agreements") with Merrill Lynch Funds Distributor, Inc. (the
"Distributor"). (See "Management and Advisory Arrangements" in the
Statement of Additional Information.) Certain officers and/or directors of
the Program are officers and/or directors of the Investment Adviser and/or
the Distributor.
(3) Prepaid registration fees are charged to income as the related shares are
issued.
(4) Deferred organization expenses will be amortized over a period from the
date the Portfolio commences operations not exceeding five years. In the
event that the Investment Adviser (or any subsequent holder) redeems any
of its original shares prior to the end of the five-year period, the
proceeds of the redemption payable in respect of such shares shall be
reduced by the pro rata share (based on the proportionate share of the
original shares redeemed to the total number of original shares
outstanding at the time of redemption) of the unamortized deferred
organization expenses as of the date of such redemption. In the event that
the Portfolio is liquidated prior to the end of the five-year period, the
Investment Adviser (or any subsequent holder) shall bear the unamortized
deferred organization expenses.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder,
Global Opportunity Portfolio of
Merrill Lynch Retirement Asset Builder Program, Inc.:
We have audited the accompanying statement of assets and liabilities of the Global Opportunity Portfolio (the "Portfolio") of Merrill Lynch Retirement Asset Builder Program, Inc. as of November 16, 1994. This financial statement is the responsibility of the Portfolio's management. Our responsibility is to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such statement of assets and liabilities presents fairly, in all material respects, the financial position of the Portfolio as of November 16, 1994, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
November 22, 1994
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
GLOBAL OPPORTUNITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 16, 1994
Assets:
Cash................................................................ $ 25,000
Prepaid Registration Fees .......................................... 84,546
Deferred organization costs......................................... 15,500
--------
Total assets.......................................................... 125,046
Liabilities:
Liabilities and accrued expenses.................................... 100,046
--------
Net Assets ........................................................... $ 25,000
========
Net Assets Consist Of:
Class A Shares of Common Stock, $.10 par value, 6,250,000 shares au- $ 63
thorized...........................................................
Class B Shares of Common Stock, $.10 par value, 6,250,000 shares au- 63
thorized...........................................................
Class C Shares of Common Stock, $.10 par value, 6,250,000 shares au- 63
thorized...........................................................
Class D Shares of Common Stock, $.10 par value, 6,250,000 shares au- 63
thorized...........................................................
Paid-in Capital in excess of par.................................... 24,748
--------
Net Assets ........................................................... $ 25,000
========
Net Asset Value Per Share:
Class A--Based on net assets of $6,250 and 625 shares outstanding... $ 10.00
========
Class B--Based on net assets of $6,250 and 625 shares outstanding... $ 10.00
========
Class C--Based on net assets of $6,250 and 625 shares outstanding... $ 10.00
========
Class D--Based on net assets of $6,250 and 625 shares outstanding... $ 10.00
========
|
Notes to Statement of Assets and Liabilities
(1) Global Opportunity Portfolio (the "Portfolio") is one of the four
portfolios of Merrill Lynch Retirement Asset Builder Program, Inc. (the
"Program") which was organized as a Maryland corporation on May 12, 1994.
The Program is registered under the Investment Company Act of 1940 as an
open-end investment company.
(2) The Portfolio has entered into an Investment Advisory Agreement (the
"Investment Advisory Agreement") with Merrill Lynch Asset Management (the
"Investment Adviser"), and distribution agreements (the "Distribution
Agreements") with Merrill Lynch Funds Distributor, Inc. (the
"Distributor"). (See "Management and Advisory Arrangements" in the
Statement of Additional Information.) Certain officers and/or directors of
the Program are officers and/or directors of the Investment Adviser and/or
the Distributor.
(3) Prepaid registration fees are charged to income as the related shares are
issued.
(4) Deferred organization expenses will be amortized over a period from the
date the Portfolio commences operations not exceeding five years. In the
event that the Investment Adviser (or any subsequent holder) redeems any
of its original shares prior to the end of the five-year period, the
proceeds of the redemption payable in respect of such shares shall be
reduced by the pro rata share (based on the proportionate share of the
original shares redeemed to the total number of original shares
outstanding at the time of redemption) of the unamortized deferred
organization expenses as of the date of such redemption. In the event that
the Portfolio is liquidated prior to the end of the five-year period, the
Investment Adviser (or any subsequent holder) shall bear the unamortized
deferred organization expenses.
APPENDIX A
DESCRIPTION OF THE SELF-DIRECTED PLANS
This Appendix describes in summary form the various types of self-directed retirement plans for which Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") acts as custodian (the "Self-Directed Plans"). This description does not purport to be complete, and it should be read in conjunction with the materials concerning the Self-Directed Plans, including copies of the Plans and the forms necessary to establish a plan, which are available from Merrill Lynch. Investors should read such materials carefully before establishing a Self-Directed Plan and should consult with their attorney or tax adviser to determine if any of the Self-Directed Plans are suited to their needs and circumstances. The laws applicable to the Self-Directed Plans, including the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and the Internal Revenue Code of 1986, as amended (the "Code") are complex and include a variety of transitional rules which may be applicable to some investors. These laws should be reviewed by investors' attorneys to determine their applicability. Investors are further advised that the discussion of taxation contained in this Appendix relates solely to federal tax laws but generally does not address the numerous transitional rules and that the tax treatment of the Self-Directed Plans under applicable state law may vary.
Shares of the Merrill Lynch Retirement Asset Builder Program, Inc. are available for purchase solely by participants in an IRA (individual retirement account), an IRRA (individual retirement rollover account) or SEP (simplified employee pension plan) and, accordingly, the description set forth below will describe only such arrangements.
ESTABLISHMENT OF A SELF-DIRECTED PLAN ACCOUNT
Self-Directed Plan accounts may be established by qualified individuals and businesses through Merrill Lynch.
Generally, Self-Directed Plans afford participants the opportunity to take a tax deduction, up to the maximum amount permitted under the Code for the particular Self-Directed Plan, for amounts contributed to the Plan. Each Self- Directed Plan is "self-directed"; that is, each participant is responsible for making investment decisions concerning the funds contributed to his Self- Directed Plan.
Merrill Lynch charges an annual custodial fee for each account established pursuant to the Self-Directed Plans. These fees, which are contained in the Self-Directed Plan documents, vary according to the type of account. Brokerage fees will be assessed separately for each transaction to which they apply.
PERMISSIBLE SELF-DIRECTED PLAN INVESTMENTS
The type of investments that may be made depends on the type of Self-Directed Plan established.
Participants and employers that maintain IRAs, IRRAs or SEPs may invest in securities through Merrill Lynch or its affiliates, including stocks traded "over-the-counter" or on a recognized exchange, government or corporate debt obligations, certain mutual funds, certain limited partnership interests in real estate, and bank money instruments. Participants and employers may also invest in annuity contracts issued by a life insurance company (including Merrill Lynch Life Insurance Company and Merrill Lynch Life Insurance Company of New York). Those participants and employers desiring a diversified portfolio but not wishing to actively manage the portfolio may elect to invest all or a portion of their account in certain mutual funds
advised by Merrill Lynch Asset Management, L.P. (the "Investment Adviser") or its affiliate. Participants and employers may vary their investment portfolio as often as they wish.
Cash balances arise in a Self-Directed Plan account from contributions to the Plan, the sale of securities held in the account and the receipt of dividends, interest and principal repayments on securities held in the account. Cash balances for which no other investment directions are given will, in accordance with the option previously selected by the participant or employer, be invested in full shares of the Portfolios or in certain money market funds advised by the Investment Adviser or its affiliate, or maintained uninvested in the Self- Directed Plan account. If such amounts are not invested, no return will be earned. All cash balances will be invested or maintained in accordance with the option selected by the participant or employer, pending instructions as to further investment.
There can be no assurance, that the yield on an investment in the Portfolios or a money market fund will be or will remain greater than that available on any interest-bearing account. In addition, a money market fund is not a bank, and shares of a money market fund are not equivalent to a bank account. As with any investment in securities, the value of an investment in the Portfolios will fluctuate. Amounts deposited in an interest-bearing bank account will be insured as to principal in an amount of up to $100,000 per account by the Federal Deposit Insurance Corporation. Cash balances maintained in a Self- Directed Plan account will be insured, up to $100,000, by the Securities Investor Protection Corporation.
CONTRIBUTIONS AND DISTRIBUTIONS
The amount which may be contributed to a Self-Directed Plan in any one year is subject to certain limitations under the Code; however, assets already in a Self-Directed Plan account may be invested without regard to such limitations on contributions. With the exception of pretax contributions made by participants in their IRAs or employer contributions to a SEP, a Self-Directed Plan participant may deduct from his annual gross income, up to the maximum permitted under the Code, amounts contributed to his Self-Directed Plan. These amounts, plus any additional income earned on such contributions, will ordinarily not be taxed until distributed to the participant.
Generally, under the Code, distributions may be made at any time but, as discussed below, distributions made prior to the date on which the participant reaches age 59 1/2 may be subject to a penalty and may be subject to mandatory federal income tax withholding at a 20 percent rate (as described below). Distributions will be taxed as ordinary income at the rate applicable to the participant in the year in which distributed.
Excess Contributions. Under Section 4973 of the Code, contributions to an IRA, IRRA or SEP in excess of those allowed by law are subject to a six percent excise tax if not withdrawn, together with additional income attributable to such excess contributions, prior to the date the participant files his income tax return for the year in which the excess contribution was made. If an excess amount is contributed in one year and is not eliminated in later years, the excess amount will be subject to a cumulative six percent excise tax each year until it is eliminated. Elimination of the excess may be accomplished either by reducing the contribution (and deduction) for a succeeding year, or by withdrawal of the excess amount plus the income attributable to it. Such income will be considered a premature distribution subject to the ten percent penalty tax on premature distributions under Section 72(f) of the Code discussed below, and will additionally be taxable as ordinary income at the applicable rate for the year in which it is distributed.
Timing of Retirement Benefits. Generally, a participant, upon reaching age 59 1/2, may make such distributions from his Self-Directed Plan account as he chooses without tax penalties. Generally, the Code
requires that amounts in all Self-Directed Plans must commence being distributed to a participant on or before April 1 of the calendar year following the calendar year in which he reaches age 70 1/2, even if the employee has not retired.
Such distributions may be made in a lump sum or in installments over the life of the participant, or the joint lives of the participant and a designated beneficiary, or over a period not to exceed the life expectancy (determined, generally, by IRS life expectancy tables) of the participant or the joint life expectancy of the participant and designated beneficiary. If the employee dies before his entire interest has been distributed, the remaining portion of his interest must be distributed at least as rapidly as the method of distribution in effect prior to his death. Special rules apply under the Code to spousal beneficiaries.
If the minimum payout required from a Self-Directed Plan for a particular year is not made, a 50% excise tax will be imposed on the amount representing the difference between the minimum payout required from the Self-Directed Plan and the amount actually distributed under Section 4974 of the Code.
Treatment of Lump Sum Distributions and Annuities. The recipient of a "lump sum distribution" (generally a distribution or payment within one taxable year to the recipient of the balance to the credit of the employee on account of the employee's death, attainment of age 59 1/2, disability or separation from service (except in the case of a self-employed individual)) from a qualified retirement plan may compute his tax liability using the five-year income averaging tax computation, subject to certain requirements. However, no lump sum income averaging methods apply to distributions from IRAs, IRRAs or SEPs.
Excise Tax on Large Distributions. To limit the total tax-deferred benefits any individual can receive annually, Section 4980A of the Code imposes a 15 percent excise tax on certain "excess distributions" from qualified retirement plans. All distributions from "qualified retirement plans" including IRAs, IRRAs or SEPs made within one year are aggregated for this purpose. Total benefits paid in a year exceeding the greater of $112,500, indexed for inflation ($148,500 for 1994), or $150,000 (unindexed) are subject to the tax to the extent of the excess. For lump sum distributions eligible to be taxed under the five-year averaging provisions, the penalty will be applied separately with respect to the lump sum distribution and other retirement distributions. The penalty will be applied on the portion of the lump sum distribution which exceeds five times the otherwise applicable limit for the year.
Unless an election is made by a spouse, distributions made to beneficiaries after the death of an individual are disregarded for purposes of applying this tax; instead, an additional estate tax may be payable. The penalty tax on excess distributions is reduced by an excise tax on early withdrawals.
Benefits accrued before August 1, 1986 may have been grandfathered and may not be subject to the excise tax.
Premature Distributions. 1. Excise Tax: Distributions from an IRA, IRRA or SEP prior to the time the participant reaches age 59 1/2 generally are subject to penalty unless the participant has died or has become disabled (within the meaning of Code Section 72(m)(7)). The penalty for early distributions is an excise tax equivalent to ten percent of the amount so distributed, in addition to the applicable ordinary income tax payable on such amount for the year in which it is distributed. The tax will be waived for any distribution that is part of a scheduled series of substantially level payments under an annuity for the life or life expectancy of the taxpayer or the joint lives of the taxpayer and his designated beneficiary. Distributions can also be made, without penalty, to cover deductible medical expenses, for certain payments in a divorce settlement, or
to an employee who is age 55 or older, has separated from service, and has satisfied the requirements of the employer's plan for early retirement (if the plan permits such payments). In certain cases, the penalty will not be waived if the distribution is from an IRA or retirement annuity. The penalty is also not waived for distributions from a qualified retirement plan, if the employee is a more than five percent owner or has been a more than five-percent owner at any time during the five plan years preceding the plan year ending in the tax year in which the amount is received. A five percent owner is a person who, in the case of a corporate employer, actually or constructively owns more than five percent of the outstanding stock of the employer or stock possessing more than five percent of the total combined voting power of all stock of the employer, or who, in the case of a non-corporate employer, owns more than five percent of the capital or profits interest in the employer. A rollover will avoid imposition of the excise tax. However, for distributions prior to 1993, the Code restricts the rollover of partial distributions to distributions received on account of an employee's separation from service, death or disability.
2. Mandatory Income Tax Withholding. Generally, any portion of an "eligible
rollover distribution" made from a qualified retirement plan after December 31,
1992 qualifies for tax-free rollover into an eligible retirement plan under
Section 402(c) of the Code. Under Section 402(c), as amended, all distributions
from a qualified retirement plan (including in-service distributions) are
eligible rollover distributions, except for certain periodic payments, required
amounts distributed to a participant who is over age 70 1/2 as described above,
and amounts otherwise not includible in gross income. Rollovers may be made by
the participant in one of two ways: first, by direct transfers from the
qualified retirement plan to an IRA (including an individual retirement annuity
other than endowment contract), a qualified defined contribution plan or an
annuity under Section 403(a) of the Code (a "direct rollover") or, in the case
of the RSA plan to another 403(b) plan, a tax sheltered annuity; or second, by
rolling over an eligible rollover distribution within 60 days of receipt to any
of the arrangements described above. In the event a direct rollover is not
chosen by the participant, a mandatory 20 percent of the distribution is
withheld to satisfy any federal tax liability that may be assessed. The
mandatory 20 percent withholding tax is not assessed against any distributions
that may not be rolled over (including, but not limited to, distributions to
beneficiaries other than a surviving spouse, or a present or former spouse
under a qualified domestic relations order).
Participants should consult with their attorneys or tax advisers in order to determine the application of the new rollover and mandatory withholding requirements to their own circumstances.
The foregoing rules are of general applicability to the Self-Directed Plans. The following section discusses specific considerations applicable to the different types of Self-Directed Plans.
TYPES OF SELF-DIRECTED PLANS
Individual Retirement Accounts. As a result of changes made by the Tax Reform Act of 1986, the allowable deductions for contributions to IRAs are restricted for certain taxpayers who are (or their spouses are) active participants in employer-sponsored retirement plans and whose adjusted gross income exceeds certain levels. An individual will be considered an active participant in a defined contribution plan if any employer contribution or forfeiture is added to his account for the year. In the case of a defined benefit plan, an individual will be considered an active participant if he is not excluded under the eligibility rules for the year. The determination of whether an individual is an active participant is made without regard to whether the individual's rights under a plan are vested. If an unmarried taxpayer, or either spouse in the case of married taxpayers, is an "active participant" in an employer- sponsored retirement plan, deductible contributions are permitted subject to a pro rata phase-out rule where adjusted gross income (before the IRA
deduction) is over $40,000 on a joint return or $25,000 for an unmarried individual. The allowable deduction is completely eliminated for such taxpayers when adjusted gross income (before the IRA deduction) reaches $50,000 on a joint return or $35,000 for an unmarried person. For this purpose, an employer- sponsored retirement plan means a pension, profit-sharing or stock bonus plan qualified under Code section 401(a) (including a Keogh plan or 401(k) plan), an annuity plan qualified under Section 403(a), a SEP, a tax-sheltered Code section 403(b) annuity and retirement plans covering federal, state or local government employees. A minimum deductible contribution of $200 is provided for any taxpayer whose adjusted gross income is not above the phase-out range even if the phase-out rules would provide for a lower deduction.
Subject to the above limitations, any individual with compensation may establish an IRA. Generally, the maximum yearly tax deduction that may be taken for an IRA contribution is the lesser of $2,000 or 100% of the individual's compensation. If a husband and wife are both employed, they may take a deduction of up to $4,000 on a joint return. If only one spouse is employed, a separate IRA, called a "spousal IRA", may be established for the benefit of the non-working spouse or a spouse that elects to be treated as having no compensation for the year. The deduction for a spousal IRA may only be taken if a joint return is filed, and the maximum contribution and aggregate deduction for the two IRAs for any year is $2,250. Allocations may be made between the two accounts in any manner so long as no more than $2,000 is contributed to either of the accounts. No deduction for IRA contributions may be made for or after the tax year in which a participant reaches age 70 1/2. In addition, no deduction will be allowed for amounts paid to an "inherited IRA" (i.e., an IRA acquired on account of the death of another individual other than by the surviving spouse of the original owner).
Active participants in employer-sponsored plans who are not eligible to make deductible contributions to IRAs (or whose deductions are limited) may make nondeductible contributions to a separate account. The nondeductible contribution is subject to the same dollar limitations (the lesser of $2,000 or 100% of compensation) as deductible contributions described above. Income in the separate account will accumulate tax-free until distributed; however, only the account earnings will be included in taxable income upon distribution.
The Self-Directed IRA program allows for the establishment of IRRAs, which are "rollover IRAs". Prior to 1993, a rollover IRA could have only been established with a distribution received from a qualified employer-sponsored pension plan that was of an amount equal to at least 50% of the balance to the credit of the employee in the plan; after December 31, 1992, this 50% requirement no longer applies. This distribution would ordinarily be subject to income tax; however, tax may be deferred to the extent that all or part of the rollover amount, less any voluntary contributions made to the employer- sponsored plans, is put into an IRA within 60 days of receiving the distribution. With respect to a distribution of less than the entire balance to the credit of the employee in the plan prior to 1993 (a "partial rollover"), the distribution was eligible for rollover treatment only if the distribution was made on account of the employee's death, separation from service or disability and was not one of a series of periodic payments and the employee elected, in a manner to be prescribed by regulations, to have rollover treatment apply to such distribution. However, as described above, effective for rollovers made after December 31, 1992, the limitations described with respect to partial rollovers have been eliminated, and new mandatory federal income tax withholding requirements have been imposed for any rollover that is not a direct rollover. The amounts in a rollover IRA are taxed only upon distribution, as with other IRAs. However, tax-free rollover treatment will be denied for amounts received from an "inherited IRA".
Simplified Employee Pension Plans. A SEP is essentially a collection of IRA accounts established by employers for their employees, and any employer, whether it is a sole proprietorship, a partnership or a corporation, may set up a SEP. To qualify as a SEP, certain requirements must be met; in particular, the plan must cover all current employees age 21 years or older who have worked for the business in three of the last five calendar years and have received at least $300 in compensation from the employer. Up to $30,000 or 15% of the employee's compensation up to $150,000 (effective for plan years beginning after December 31, 1993), subject to inflation adjustments may be paid by the employer to the employee's SEP. The same percentage of compensation (determined under a written formula) must be contributed on behalf of each employee. Such contributions are deductible by the employer and excluded from the employee's income. The tax-free elective deferral of an employee's income for a taxable year cannot exceed $7,000, as adjusted for inflation (currently, $9,240 in 1994). This cap limits all tax-free elective deferrals by an employee under all cash and deferred arrangements, SEPs and tax sheltered annuities.
Because the SEP is also an IRA, the employee may, if otherwise eligible under the rules applicable to IRAs discussed above, make up to a $2,000 contribution to the SEP or make rollover contributions (see "Individual Retirement Accounts" above). Amounts contributed to a participant's SEP account vest immediately. If the participant should cease to be employed by the business maintaining the SEP, the participant retains full rights to and investment power over the account. In such case, the account should be changed to a regular IRA so that the participant may make additional permissible contributions.
Tax-deductible employer contributions may continue to be made to a SEP participant's account even after he has reached age 70 1/2.
Each of the foregoing Self-Directed Plans is designed to meet differing needs and has varying financial and tax consequences. An investor should thoroughly review all of the materials available from Merrill Lynch concerning the Self- Directed Plans and consult with his attorney or tax adviser in determining whether any of these Plans is suited to his needs and circumstances.
Top-Heavy Plan Requirements. The Code imposes special rules with respect to qualified plans that are considered to be "top-heavy" plans (individual retirement plans are not subject to the Code's rules relating to "top-heavy" plans). A defined contribution plan (for purposes of these rules, a SEP is deemed to be a defined contribution plan) is considered to be "top-heavy" where the account balances of "key employees" exceed 60% of the account balances of all employees. "Key employees" include all employees who, at any time during the plan year or the four preceding plan years (1) are officers having annual compensation of more than $45,000, as adjusted for inflation, (2) are one of the ten employees with annual compensation of more than $30,000 that actually or constructively own the largest interests in the employer, (3) are "five- percent owners", or (4) own more than a one percent interest in the employer and have annual compensation in excess of $150,000. The account balance of an individual that has not received compensation as an employee during the five preceding plan years is not taken into account.
When a plan favoring key employees is determined to be "top-heavy", its continued qualification under the Code depends on its compliance with certain requirements, which (1) limit the amount of a participant's compensation that may be taken into account, (2) provide stringent vesting schedules, (3) provide minimum contributions or benefits for non-key employees, and (4) reduce the aggregate limit on benefits and contributions for certain key employees who participate in both a defined benefit plan and a defined contribution plan.
[THIS PAGE IS INTENTIONALLY LEFT BLANK.]
TABLE OF CONTENTS
PAGE
----
Investment Objectives and Policies......................................... 2
Fundamental Value Portfolio............................................... 2
Quality Bond Portfolio.................................................... 2
U.S. Government Securities Portfolio...................................... 2
Global Opportunity Portfolio.............................................. 3
Other Investment Policies and Practices of the Portfolios................. 4
Management of the Program.................................................. 8
Directors and Officers.................................................... 8
Management and Advisory Arrangements...................................... 9
Purchase of Shares......................................................... 11
Initial Sales Charge Alternatives--
Class A and Class D Shares............................................... 12
Reduced Initial Sales Charges............................................. 13
Distribution Plans ....................................................... 15
Limitations on the Payment of Deferred Sales Charges ..................... 15
Redemption of Shares....................................................... 17
Deferred Sales Charges--
Class B Shares........................................................... 17
Portfolio Transactions and Brokerage....................................... 18
Portfolio Turnover........................................................ 20
Determination of Net Asset Value........................................... 20
Shareholder Services....................................................... 21
Investment Account........................................................ 22
Automatic Reinvestment of Dividends and Capital Gains Distributions....... 22
Systematic Redemption and Automatic Investment Plans...................... 22
Exchange Privilege........................................................ 22
Dividends, Distributions and Taxes......................................... 35
Dividends and Distributions............................................... 35
Federal Tax............................................................... 35
State Tax................................................................. 37
Performance Data........................................................... 37
General Information........................................................ 38
Description of Shares..................................................... 38
Computation of Offering Price Per Share................................... 39
Independent Auditors...................................................... 40
Custodian................................................................. 40
Transfer Agent............................................................ 40
Legal Counsel............................................................. 40
Reports to Shareholders................................................... 40
Additional Information.................................................... 40
Independent Auditors' Report
Fundamental Value Portfolio............................................... 41
Quality Bond Portfolio.................................................... 43
U.S. Government Securities Portfolio...................................... 45
Global Opportunity Portfolio.............................................. 47
Statement of Assets and Liabilities
Fundamental Value Portfolio............................................... 42
Quality Bond Portfolio.................................................... 44
U.S. Government Securities Portfolio...................................... 46
Global Opportunity Portfolio.............................................. 48
Appendix A--Description of the Self Directed Plans........................ 49
|
Code # 18471-1294
[LOGO MERRILL LYNCH]
Merrill Lynch
Retirement Asset
Builder Program, Inc.
[ART]
STATEMENT OF
ADDITIONAL
INFORMATION
December , 1994
Distributor:
Merrill Lynch
Funds Distributor, Inc.
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
Contained in Part B:
Statement of Assets and Liabilities as of November 16, 1994.
Fundamental Value Portfolio
Quality Bond Portfolio
U.S. Government Securities Portfolio
Global Opportunity Portfolio
(b) Exhibits:
EXHIBIT
NUMBER
-------
1(a) --Articles of Incorporation of Registrant.
(b) --Articles of Amendment of Articles of Incorporation of Registrant.
2 --By-Laws of Registrant, (a).
3 --None.
4(a) --Portions of the Articles of Incorporation and By-Laws of Registrant
defining the rights of holders of shares of common stock of Registrant
(b).
(b) --Form of specimen certificate for shares of Class A common stock of
Registrant.
(c) --Form of specimen certificate for shares of Class B common stock of
Registrant.
(d) --Form of specimen certificate for shares of Class C common stock of
Registrant.
(e) --Form of specimen certificate for shares of Class D common stock of
Registrant.
5 --Form of Management Agreement between Registrant and Merrill Lynch Asset
Management.
6(a) --Form of Class A Shares Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc. (including Form of Selected Dealers
Agreement).
(b) --Form of Class B Shares Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc. (including Form of Selected Dealers
Agreement).
(c) --Form of Class C Shares Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc. (including Form of Selected Dealers
Agreement).
(d) --Form of Class D Shares Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc. (including Form of Selected Dealers
Agreement).
7 --None.
8 --Form of Custody Agreement between Registrant and The Bank of New York.
9(a) --Transfer Agency, Dividend Disbursing Agency and Shareholder Servicing
Agency Agreement between Registrant and Financial Data Services, Inc.
(b) --Agreement between Merrill Lynch & Co., Inc. and Registrant relating to
Registrant's use of Merrill Lynch name.
10 --Opinion letter of Brown & Wood, counsel for Registrant.
11 --Consent of Deloitte & Touche LLP, independent auditors for Registrant.
12 --None.
13 --Certificate of Merrill Lynch Asset Management.
14 --None.
|
EXHIBIT
NUMBER
-------
15(a) --Form of Class B Shares Distribution Plan of Registrant and Class B
Shares Distribution Plan Sub-Agreement.
(b) --Form of Class C Shares Distribution Plan of Registrant and Class C
Shares Distribution Plan Sub-Agreement.
(c) --Form of Class D Shares Distribution Plan of Registrant and Class D
Shares Distribution Plan Sub-Agreement.
16 --None.
17(a) --Financial Data Schedules for Fundamental Value Portfolio.
(b) --Financial Data Schedules for Quality Bond Portfolio.
(c) --Financial Data Schedules for U.S. Government Securities Portfolio.
(d) --Financial Data Schedules for Global Opportunity Portfolio.
|
(a) Filed on May 27, 1994, as an Exhibit to the Registrants' Registration Statement on Form N-1A (File No. 33-53887) under the Securities Act of 1933.
(b) Reference is made to Article IV, Article V (Sections 2, 3, 4, 5 and 6), Article VI, Article VII and Article IX, of the Registrant's Articles of Incorporation, as amended, filed as Exhibits 1(a) and 1(b) to the Registration Statement, and to Article II, Article III (Sections 1, 3, 5, 6 and 17), Article VI, Article VII, Article XII, Article XIII and Article XIV of the Registrant's By-Laws, filed as Exhibit 2 to the Registration Statement.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Registrant is not controlled by or under common control with any other person.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
NUMBER OF RECORD
HOLDERS AT
TITLE OF CLASS DECEMBER 5, 1994
-------------- ----------------
Class A Shares of Common Stock, par value $0.10 per share:
Fundamental Value Portfolio................................. 1
Quality Bond Portfolio...................................... 1
U.S. Government Securities Portfolio........................ 1
Global Opportunity Portfolio................................ 1
Class B Shares of Common Stock, par value $0.10 per share:
Fundamental Value Portfolio................................. 1
Quality Bond Portfolio...................................... 1
U.S. Government Securities Portfolio........................ 1
Global Opportunity Portfolio................................ 1
Class C Shares of Common Stock, par value $0.10 per share:
Fundamental Value Portfolio................................. 1
Quality Bond Portfolio...................................... 1
U.S. Government Securities Portfolio........................ 1
Global Opportunity Portfolio................................ 1
Class D Shares of Common Stock, par value $0.10 per share:
Fundamental Value Portfolio................................. 1
Quality Bond Portfolio...................................... 1
U.S. Government Securities Portfolio........................ 1
Global Opportunity Portfolio................................ 1
|
ITEM 27. INDEMNIFICATION.
Reference is made to Article V of Registrant's Articles of Incorporation, Article VI of Registrant's By-Laws, Section 2-418 of the Maryland General Corporation Law and Section 9 of the Class A, Class B, Class C and Class D Distribution Agreements.
Insofar as the conditional advancing of indemnification moneys for actions based on the Investment Company Act of 1940 may be concerned, Article VI of the Registrant's By-Laws provides that the person seeking indemnification shall provide to the Registrant a written affirmation of his good faith belief that the standard of conduct necessary for indemnification by the Registrant has been met and a written undertaking to repay any such advance if it should ultimately be determined that the standard of conduct has not been met, and provided further that at least one of the following additional conditions is met: (a) the person seeking indemnification shall provide a security in form and amount acceptable to the Registrant for his undertaking; (b) the Registrant is insured against losses arising by reason of the advance; and (c) a majority of a quorum of the Registrant's disinterested non-party Directors, or an independent legal counsel in a written opinion, shall determine, based upon a review of readily available facts, that there is reason to believe that the person seeking indemnification will ultimately be found to be entitled to indemnification.
In Section 9 of the Class A, Class B, Class C and Class D Distribution Agreements relating to the securities being offered hereby, the Registrant agrees to indemnify the Distributor and each person, if any, who controls the Distributor within the meaning of the Securities Act of 1933 (the "Act"), against certain types of civil liabilities arising in connection with the Registration Statement or Prospectus and Statement of Additional Information.
Insofar as indemnification for liabilities arising under the Act may be permitted to Directors, officers and controlling persons of the Registrant and the principal underwriter pursuant to the foregoing provisions or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a Director, officer, or controlling person of the Registrant and the principal underwriter in connection with the successful defense of any action, suit or proceeding) is asserted by such Director, officer or controlling person or the principal underwriter in connection with the shares being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Merrill Lynch Asset Management, L.P. (the "Investment Adviser") acts as
investment adviser for the following registered investment companies:
Convertible Holdings, Inc., Merrill Lynch Adjustable Rate Securities Fund,
Inc., Merrill Lynch Americas Income Fund, Inc., Merrill Lynch Asset Growth
Fund, Inc., Merrill Lynch Asset Income Fund, Inc., Merrill Lynch Balanced Fund
for Investment and Retirement, Merrill Lynch Capital Fund, Inc., Merrill Lynch
Developing Capital Markets Fund, Inc., Merrill Lynch Dragon Fund, Inc., Merrill
Lynch EuroFund, Merrill Lynch Fundamental Growth Fund, Inc., Merrill Lynch Fund
For Tomorrow, Inc., Merrill Lynch Global Allocation Fund, Inc., Merrill Lynch
Global Bond Fund for Investment and Retirement, Merrill Lynch Global
Convertible Fund, Inc., Merrill Lynch Global Holdings, Inc., Merrill Lynch
Global Resources Trust, Merrill Lynch Global Utility Fund, Inc., Merrill
Lynch Growth Fund for Investment and Retirement, Merrill Lynch Healthcare Fund, Inc., Merrill Lynch High Income Municipal Bond Fund, Inc., Merrill Lynch Institutional Intermediate Fund, Merrill Lynch International Equity Fund, Merrill Lynch Latin America Fund, Inc., Merrill Lynch Municipal Series Trust, Merrill Lynch Pacific Fund, Inc., Merrill Lynch Ready Assets Trust, Merrill Lynch Retirement Series Trust, Merrill Lynch Senior Floating Rate Fund, Inc., Merrill Lynch Series Fund, Inc., Merrill Lynch Short-Term Global Income Fund, Inc., Merrill Lynch Strategic Dividend Fund, Merrill Lynch Technology Fund, Inc., Merrill Lynch U.S. Treasury Money Fund, Merrill Lynch U.S.A. Government Reserves, Merrill Lynch Utility Income Fund, Inc., and Merrill Lynch Variable Series Funds, Inc. Fund Asset Management, L.P. ("FAM"), an affiliate of the Investment Adviser, acts as the investment adviser for the following investment companies: Apex Municipal Fund, Inc., CBA Money Fund, CMA Government Securities Fund, CMA Money Fund, CMA Multi-State Municipal Series Trust, CMA Tax-Exempt Fund, CMA Treasury Fund, The Corporate Fund Accumulation Program, Inc., Corporate High Yield Fund, Inc., Corporate High Yield Fund II, Inc., Emerging Tigers Fund, Inc., Financial Institutions Series Trust, Income Opportunities Fund 1999, Inc., Income Opportunities Fund 2000, Inc., Merrill Lynch Basic Value Fund, Inc., Merrill Lynch California Municipal Series Trust, Merrill Lynch Corporate Bond Fund, Inc., Merrill Lynch Federal Securities Trust, Merrill Lynch Funds for Institutions Series, Merrill Lynch Multi-State Limited Maturity Municipal Series Trust, Merrill Lynch Multi-State Municipal Series Trust, Merrill Lynch Municipal Bond Fund, Inc., Merrill Lynch Phoenix Fund, Inc., Merrill Lynch Special Value Fund, Inc., Merrill Lynch World Income Fund, Inc., MuniAssets Fund, Inc., MuniBond Income Fund, Inc., The Municipal Fund Accumulation Program, Inc., MuniEnhanced Fund, Inc., MuniInsured Fund, Inc., MuniVest Fund, Inc., MuniVest Fund II, Inc., MuniVest California Insured Fund, Inc., MuniVest Florida Fund, MuniVest Michigan Insured Fund, Inc., MuniVest New Jersey Fund, Inc., MuniVest New York Insured Fund, Inc., MuniVest Pennsylvania Insured Fund, MuniYield Arizona Fund, Inc., MuniYield Arizona Fund II, Inc., MuniYield California Fund, Inc., MuniYield California Insured Fund, Inc., MuniYield California Insured Fund II, Inc., MuniYield Florida Fund, MuniYield Florida Insured Fund, MuniYield Fund, Inc., MuniYield Insured Fund, Inc., MuniYield Insured Fund II, Inc., MuniYield Michigan Fund, Inc., MuniYield Michigan Insured Fund, Inc., MuniYield New Jersey Fund, Inc., MuniYield New Jersey Insured Fund, Inc., MuniYield New York Insured Fund, Inc., MuniYield New York Insured Fund II, Inc., MuniYield New York Insured Fund III, Inc., MuniYield Pennsylvania Fund, MuniYield Quality Fund, Inc., MuniYield Quality Fund II, Inc., Senior High Income Portfolio, Inc., Senior High Income Portfolio II, Inc., Senior Strategic Income Fund, Inc., Taurus MuniCalifornia Holdings, Inc., Taurus MuniNewYork Holdings, Inc. and Worldwide DollarVest Fund, Inc.
The address of each of these investment companies is P.O. Box 9011, Princeton, New Jersey 08543-9011, except that the address of Merrill Lynch Funds for Institutions Series and Merrill Lynch Institutional Intermediate Fund is One Financial Center, 15th Floor, Boston, Massachusetts 02111-2646. The address of the Investment Adviser, FAM, Princeton Services, Inc. ("Princeton Services"), Merrill Lynch Funds Distributor, Inc. ("MLFD") and Princeton Administrators, L.P. is also P.O. Box 9011, Princeton, New Jersey 08543-9011. The address of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and Merrill Lynch & Co., Inc. ("ML & Co.") is World Financial Center, North Tower, 250 Vesey Street, New York, New York 10281. The address of Financial Data Services, Inc. ("FDS") is 4800 Deer Lake Drive East, Jacksonville, Florida 32246-6484.
Set forth below is a list of each executive officer and partner of the Investment Adviser indicating each business, profession, vocation or employment of a substantial nature in which each such person or entity has been engaged since September 30, 1992, for his or its own account or in the capacity of director, officer, partner or trustee. In addition, Mr Zeikel is President, Mr. Richard is Treasurer and Mr. Glenn is Executive Vice President of substantially all of the investment companies described in the first paragraph of Item 28, and Messrs. Geiger, Durnin, Giordano, Harvey, Kirstein, Monagle and Ms. Griffin are directors, trustees or officers of one or more of such companies.
POSITION(S) WITH THE OTHER SUBSTANTIAL BUSINESS, PROFESSION,
NAME INVESTMENT ADVISER VOCATION OR EMPLOYMENT
---- --------------------- ---------------------------------------
ML & Co................. Limited Partner Financial Services Holding Company
Merrill Lynch Investment
Management, Inc........ Limited Partner Investment Advisory Services
Princeton Services...... General Partner General Partner of FAM
Arthur Zeikel........... President President of FAM; President and
Director of Princeton Services;
Director of MLFD; Executive Vice
President of ML & Co.; Executive Vice
President of Merrill Lynch
Terry K. Glenn.......... Executive Vice Executive Vice President of FAM;
President Executive Vice President and Director
of Princeton Services; President and
Director of MLFD; Director of FDS;
President of Princeton
Administrators, L.P.
Bernard J. Durnin....... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
Vincent R. Giordano..... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
Elizabeth Griffin....... Senior Vice President Senior Vice President of FAM
Norman R. Harvey........ Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
N. John Hewitt.......... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
Philip L. Kirstein...... Senior Vice Senior Vice President, General Counsel
President, General and Secretary of FAM; Senior Vice
Counsel and President, General Counsel, Director
Secretary and Secretary of Princeton Services;
Director of MLFD
Ronald M. Kloss......... Senior Vice President Senior Vice President and Controller
and Controller of FAM; Senior Vice President and
Controller of Princeton Services
Stephen M.M. Miller..... Senior Vice President Executive Vice President of Princeton
Administrators, L.P.;
Joseph T. Monagle, Jr... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
|
OTHER SUBSTANTIAL BUSINESS, PROFESSION,
NAME POSITION(S) WITH THE MANAGER VOCATION OR EMPLOYMENT
---- ---------------------------- ---------------------------------------
Gerald M. Richard....... Senior Vice President Senior Vice President and Treasurer of
and Treasurer FAM; Senior Vice President and
Treasurer of Princeton Services; Vice
President and Treasurer of MLFD
Richard L. Rufener...... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services;
Vice President of MLFD
Ronald L. Welburn....... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
Anthony Wiseman......... Senior Vice President Senior Vice President of FAM: Senior
Vice President of Princeton Services
|
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) MLFD acts as the principal underwriter for the Registrant and for each of the investment companies referred to in the first paragraph of Item 28 except Apex Municipal Fund, Inc., CBA Money Fund, CMA Government Securities Fund, CMA Money Fund, CMA Multi-State Municipal Series Trust, CMA Tax-Exempt Fund, CMA Treasury Fund, Convertible Holdings, Inc., The Corporate Fund Accumulation Program, Inc., Corporate High Yield Fund, Inc., Corporate High Yield Fund II, Inc., Emerging Tigers Fund, Inc., Income Opportunities Fund 1999, Inc., Income Opportunities Fund 2000, Inc., MuniAssets Fund, Inc., MuniBond Income Fund, Inc., The Municipal Fund Accumulation Program, Inc., MuniEnhanced Fund, Inc., MuniInsured Fund, Inc., MuniVest Fund, Inc., MuniVest Fund II, Inc., MuniVest California Insured Fund, Inc., MuniVest Florida Fund, MuniVest Michigan Insured Fund, Inc., MuniVest New Jersey Fund, Inc., MuniVest New York Insured Fund, Inc., MuniVest Pennsylvania Fund, MuniYield Arizona Fund, MuniYield Arizona Fund II, Inc., MuniYield California Fund, Inc., MuniYield California Insured Fund, Inc., MuniYield Florida Fund, MuniYield Florida Insured Fund, MuniYield Fund, Inc., MuniYield Insured Fund, Inc., MuniYield Insured Fund II, Inc., MuniYield Michigan Fund, Inc., MuniYield Michigan Insured Fund, Inc., MuniYield New Jersey Fund, Inc., MuniYield New Jersey Insured Fund, Inc., MuniYield New York Insured Fund, Inc., MuniYield New York Insured Fund II, Inc., MuniYield New York Insured Fund III, Inc., MuniYield Pennsylvania Fund, MuniYield Quality Fund, Inc., MuniYield Quality Fund II, Inc., Senior High Income Portfolio II, Inc., Senior Strategic Income Fund, Inc., Taurus MuniCalifornia Holdings, Inc., Taurus MuniNewYork Holdings, Inc. and Worldwide DollarVest Fund, Inc.
(b) Set forth below is information concerning each director and officer of MLFD. The principal business address of each such person is P.O. Box 9011, Princeton, New Jersey 08543-9011, except that the address of Messrs. Crook, Aldrich, Breen, Graczyk, Fatseas, and Wasel is One Financial Center, Boston, Massachusetts 02111-2646.
(2) (3)
(1) POSITION(S) AND OFFICE(S) POSITION(S) AND OFFICE(S)
NAME WITH MLFD WITH REGISTRANT
------ ------------------------- --------------------------------------
Terry K. Glenn...... President and Executive Vice President
Director
Arthur Zeikel....... Director President and Director
Philip L. Kirstein.. Director None
|
(2) (3)
(1) POSITION(S) AND OFFICE(S) POSITION(S) AND OFFICE(S)
NAME WITH MLFD WITH REGISTRANT
------ ------------------------- -------------------------
William E. Aldrich.......... Senior Vice President None
Robert W. Crook............. Senior Vice President None
Kevin P. Boman.............. Vice President None
Michael J. Brady............ Vice President None
William M. Breen............ Vice President None
Sharon Creveling............ Vice President and None
Assistant Treasurer
Mark A. DeSario............. Vice President None
James T. Fatseas............ Vice President None
Stanley Graczyk............. Vice President None
Michelle T. Lau............. Vice President None
Debra W. Landsman-Yaros..... Vice President None
Gerald M. Richard........... Vice President and Treasurer
Treasurer
Richard L. Rufener.......... Vice President None
Salvatore Venezia........... Vice President None
William Wasel............... Vice President None
Robert Harris............... Secretary None
|
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940, as amended, and the rules thereunder are maintained at the offices of the Registrant, 800 Scudders Mill Road, Plainsboro, New Jersey 08536, and its transfer agent, Financial Data Services, Inc., 4800 Deer Lake Drive East, Jacksonville, Florida 32246-6484.
ITEM 31. MANAGEMENT SERVICES.
Other than as set forth under the caption "Management of the Fund--Management and Advisory Arrangements" in the Prospectus constituting Part A of the Registration Statement and under "Management of the Fund--Management and Advisory Arrangements" in the Statement of Additional Information constituting Part B of the Registration Statement, the Registrant is not a party to any management-related service contract.
ITEM 32. UNDERTAKINGS.
(a) Registrant undertakes to file a post effective amendment using financial statements, which need not be certified, within four to six months from the effective date of this registration statement.
(b) Registrant undertakes to furnish each person to whom a prospectus is delivered with a copy of the Registrant's latest annual report to shareholders, upon request and without charge.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF PLAINSBORO, AND THE STATE OF NEW JERSEY, ON THE 15TH DAY OF DECEMBER, 1994.
Merrill Lynch Retirement Asset Builder Program, Inc.
(Registrant)
/s/ Arthur Zeikel
By __________________________________
(Arthur Zeikel, President)
|
EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY AUTHORIZES ARTHUR ZEIKEL, TERRY K. GLENN AND GERALD M. RICHARD, OR ANY OF THEM, AS ATTORNEY-IN-FACT, TO SIGN ON HIS BEHALF, INDIVIDUALLY AND IN EACH CAPACITY STATED BELOW, ANY AMENDMENTS TO THIS REGISTRATION STATEMENT (INCLUDING POST-EFFECTIVE AMENDMENTS) AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, WITH THE SECURITIES AND EXCHANGE COMMISSION.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATE(S) INDICATED.
SIGNATURES TITLE DATE
---------- ----- ----
/s/ Arthur Zeikel December 15, 1994
- -------------------------------------------
(Arthur Zeikel) President (Principal
Executive Officer) and
Director
/s/ Walter Mintz December 15, 1994
- -------------------------------------------
(Walter Mintz) Director
/s/ Melvin R. Seiden December 15, 1994
- -------------------------------------------
(Melvin R. Seiden) Director
/s/ Harry Woolf December 15, 1994
- -------------------------------------------
(Harry Woolf) Director
/s/ Stephen B. Swensrud December 15, 1994
- -------------------------------------------
(Stephen B. Swensrud) Director
/s/ Joe Grills December 15, 1994
- -------------------------------------------
(Joe Grills) Director
/s/ Gerald M. Richard December 15, 1994
- -------------------------------------------
(Gerald M. Richard) Treasurer (Principal
Financial and
Accounting Officer)
|
EXHIBIT INDEX
EXHIBIT
NUMBER
- -------
1(a) --Articles of Incorporation of Registrant.
(b) --Articles of Amendment of Articles of Incorporation of Registrant.
4(b) --Form of specimen certificate for shares of Class A common stock of
Registrant.
(c) --Form of specimen certificate for shares of Class B common stock of
Registrant.
(d) --Form of specimen certificate for shares of Class C common stock of
Registrant.
(e) --Form of specimen certificate for shares of Class D common stock of
Registrant.
5 --Form of Management Agreement between Registrant and Merrill Lynch Asset
Management.
6(a) --Form of Class A Shares Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc. (including Form of Selected Dealers
Agreement).
(b) --Form of Class B Shares Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc. (including Form of Selected Dealers
Agreement).
(c) --Form of Class C Shares Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc. (including Form of Selected Dealers
Agreement).
(d) --Form of Class D Shares Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc. (including Form of Selected Dealers
Agreement).
8 --Form of Custody Agreement between Registrant and The Bank of New York.
9(a) --Transfer Agency, Dividend Disbursing Agency and Shareholder Servicing
Agency Agreement between Registrant and Financial Data Services, Inc.
(b) --Agreement between Merrill Lynch & Co., Inc. and Registrant relating to
Registrant's use of Merrill Lynch name.
10 --Opinion letter of Brown & Wood, counsel for Registrant.
11 --Consent of Deloitte & Touche LLP, independent auditors for Registrant.
13 --Certificate of Merrill Lynch Asset Management.
15(a) --Form of Class B Shares Distribution Plan of Registrant and Class B
Shares Distribution Plan Sub-Agreement.
(b) --Form of Class C Shares Distribution Plan of Registrant and Class C
Shares Distribution Plan Sub-Agreement.
(c) --Form of Class D Shares Distribution Plan of Registrant and Class D
Shares Distribution Plan Sub-Agreement.
17(a) --Financial Data Schedules for Fundamental Value Portfolio.
(b) --Financial Data Schedules for Quality Bond Portfolio.
(c) --Financial Data Schedules for U.S. Government Securities Portfolio.
(d) --Financial Data Schedules for Global Opportunity Portfolio.
|
APPENDIX FOR GRAPHIC AND IMAGE MATERIAL
Pursuant to Rule 304 of Regulation S-T, the following table presents fair and accurate narrative descriptions of graphic and image material omitted from this material to the location of each occurrence in the text.
DESCRIPTION OF OMITTED LOCATION OF GRAPHIC GRAPHIC OR IMAGE OR IMAGE IN TEXT - ---------------------- ------------------- Compass plate, circular Back cover of Prospectus and graph paper and Merrill Lynch back cover of Statement of logo including stylized market Additional Information bull |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 1 |
| NAME: FUNDAMENTAL VALUE PORTFOLIO CLASS A |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1996 |
| PERIOD START | NOV 16 1994 |
| PERIOD END | NOV 16 1994 |
| INVESTMENTS AT COST | 0 |
| INVESTMENTS AT VALUE | 0 |
| RECEIVABLES | 0 |
| ASSETS OTHER | 125046 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 125046 |
| PAYABLE FOR SECURITIES | 0 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 100046 |
| TOTAL LIABILITIES | 100046 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 25000 |
| SHARES COMMON STOCK | 625 |
| SHARES COMMON PRIOR | 0 |
| ACCUMULATED NII CURRENT | 0 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 0 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 0 |
| NET ASSETS | 6250 |
| DIVIDEND INCOME | 0 |
| INTEREST INCOME | 0 |
| OTHER INCOME | 0 |
| EXPENSES NET | 0 |
| NET INVESTMENT INCOME | 0 |
| REALIZED GAINS CURRENT | 0 |
| APPREC INCREASE CURRENT | 0 |
| NET CHANGE FROM OPS | 0 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 0 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 0 |
| NUMBER OF SHARES REDEEMED | 0 |
| SHARES REINVESTED | 0 |
| NET CHANGE IN ASSETS | 0 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 0 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 0 |
| AVERAGE NET ASSETS | 6250 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | 0 |
| PER SHARE GAIN APPREC | 0 |
| PER SHARE DIVIDEND | 0 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 10.00 |
| EXPENSE RATIO | 0 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 2 |
| NAME: FUNDAMENTAL VALUE PORTFOLIO CLASS B |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1996 |
| PERIOD START | NOV 16 1994 |
| PERIOD END | NOV 16 1994 |
| INVESTMENTS AT COST | 0 |
| INVESTMENTS AT VALUE | 0 |
| RECEIVABLES | 0 |
| ASSETS OTHER | 125046 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 125046 |
| PAYABLE FOR SECURITIES | 0 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 100046 |
| TOTAL LIABILITIES | 100046 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 25000 |
| SHARES COMMON STOCK | 625 |
| SHARES COMMON PRIOR | 0 |
| ACCUMULATED NII CURRENT | 0 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 0 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 0 |
| NET ASSETS | 6250 |
| DIVIDEND INCOME | 0 |
| INTEREST INCOME | 0 |
| OTHER INCOME | 0 |
| EXPENSES NET | 0 |
| NET INVESTMENT INCOME | 0 |
| REALIZED GAINS CURRENT | 0 |
| APPREC INCREASE CURRENT | 0 |
| NET CHANGE FROM OPS | 0 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 0 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 0 |
| NUMBER OF SHARES REDEEMED | 0 |
| SHARES REINVESTED | 0 |
| NET CHANGE IN ASSETS | 0 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 0 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 0 |
| AVERAGE NET ASSETS | 6250 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | 0 |
| PER SHARE GAIN APPREC | 0 |
| PER SHARE DIVIDEND | 0 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 10.00 |
| EXPENSE RATIO | 0 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 3 |
| NAME: FUNDAMENTAL VALUE PORTFOLIO CLASS C |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1996 |
| PERIOD START | NOV 16 1994 |
| PERIOD END | NOV 16 1994 |
| INVESTMENTS AT COST | 0 |
| INVESTMENTS AT VALUE | 0 |
| RECEIVABLES | 0 |
| ASSETS OTHER | 125046 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 125046 |
| PAYABLE FOR SECURITIES | 0 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 100046 |
| TOTAL LIABILITIES | 100046 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 25000 |
| SHARES COMMON STOCK | 625 |
| SHARES COMMON PRIOR | 0 |
| ACCUMULATED NII CURRENT | 0 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 0 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 0 |
| NET ASSETS | 6250 |
| DIVIDEND INCOME | 0 |
| INTEREST INCOME | 0 |
| OTHER INCOME | 0 |
| EXPENSES NET | 0 |
| NET INVESTMENT INCOME | 0 |
| REALIZED GAINS CURRENT | 0 |
| APPREC INCREASE CURRENT | 0 |
| NET CHANGE FROM OPS | 0 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 0 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 0 |
| NUMBER OF SHARES REDEEMED | 0 |
| SHARES REINVESTED | 0 |
| NET CHANGE IN ASSETS | 0 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 0 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 0 |
| AVERAGE NET ASSETS | 6250 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | 0 |
| PER SHARE GAIN APPREC | 0 |
| PER SHARE DIVIDEND | 0 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 10.00 |
| EXPENSE RATIO | 0 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 4 |
| NAME: FUNDAMENTAL VALUE PORTFOLIO CLASS D |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1996 |
| PERIOD START | NOV 16 1994 |
| PERIOD END | NOV 16 1994 |
| INVESTMENTS AT COST | 0 |
| INVESTMENTS AT VALUE | 0 |
| RECEIVABLES | 0 |
| ASSETS OTHER | 125046 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 125046 |
| PAYABLE FOR SECURITIES | 0 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 100046 |
| TOTAL LIABILITIES | 100046 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 25000 |
| SHARES COMMON STOCK | 625 |
| SHARES COMMON PRIOR | 0 |
| ACCUMULATED NII CURRENT | 0 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 0 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 0 |
| NET ASSETS | 6250 |
| DIVIDEND INCOME | 0 |
| INTEREST INCOME | 0 |
| OTHER INCOME | 0 |
| EXPENSES NET | 0 |
| NET INVESTMENT INCOME | 0 |
| REALIZED GAINS CURRENT | 0 |
| APPREC INCREASE CURRENT | 0 |
| NET CHANGE FROM OPS | 0 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 0 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 0 |
| NUMBER OF SHARES REDEEMED | 0 |
| SHARES REINVESTED | 0 |
| NET CHANGE IN ASSETS | 0 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 0 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 0 |
| AVERAGE NET ASSETS | 6250 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | 0 |
| PER SHARE GAIN APPREC | 0 |
| PER SHARE DIVIDEND | 0 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 10.00 |
| EXPENSE RATIO | 0 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 5 |
| NAME: QUALITY BOND PORTFOLIO CLASS A |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1996 |
| PERIOD START | NOV 16 1994 |
| PERIOD END | NOV 16 1994 |
| INVESTMENTS AT COST | 0 |
| INVESTMENTS AT VALUE | 0 |
| RECEIVABLES | 0 |
| ASSETS OTHER | 125046 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 125046 |
| PAYABLE FOR SECURITIES | 0 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 100046 |
| TOTAL LIABILITIES | 100046 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 25000 |
| SHARES COMMON STOCK | 625 |
| SHARES COMMON PRIOR | 0 |
| ACCUMULATED NII CURRENT | 0 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 0 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 0 |
| NET ASSETS | 6250 |
| DIVIDEND INCOME | 0 |
| INTEREST INCOME | 0 |
| OTHER INCOME | 0 |
| EXPENSES NET | 0 |
| NET INVESTMENT INCOME | 0 |
| REALIZED GAINS CURRENT | 0 |
| APPREC INCREASE CURRENT | 0 |
| NET CHANGE FROM OPS | 0 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 0 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 0 |
| NUMBER OF SHARES REDEEMED | 0 |
| SHARES REINVESTED | 0 |
| NET CHANGE IN ASSETS | 0 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 0 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 0 |
| AVERAGE NET ASSETS | 6250 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | 0 |
| PER SHARE GAIN APPREC | 0 |
| PER SHARE DIVIDEND | 0 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 10.00 |
| EXPENSE RATIO | 0 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 6 |
| NAME: QUALITY BOND PORTFOLIO CLASS B |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1996 |
| PERIOD START | NOV 16 1994 |
| PERIOD END | NOV 16 1994 |
| INVESTMENTS AT COST | 0 |
| INVESTMENTS AT VALUE | 0 |
| RECEIVABLES | 0 |
| ASSETS OTHER | 125046 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 125046 |
| PAYABLE FOR SECURITIES | 0 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 100046 |
| TOTAL LIABILITIES | 100046 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 25000 |
| SHARES COMMON STOCK | 625 |
| SHARES COMMON PRIOR | 0 |
| ACCUMULATED NII CURRENT | 0 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 0 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 0 |
| NET ASSETS | 6250 |
| DIVIDEND INCOME | 0 |
| INTEREST INCOME | 0 |
| OTHER INCOME | 0 |
| EXPENSES NET | 0 |
| NET INVESTMENT INCOME | 0 |
| REALIZED GAINS CURRENT | 0 |
| APPREC INCREASE CURRENT | 0 |
| NET CHANGE FROM OPS | 0 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 0 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 0 |
| NUMBER OF SHARES REDEEMED | 0 |
| SHARES REINVESTED | 0 |
| NET CHANGE IN ASSETS | 0 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 0 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 0 |
| AVERAGE NET ASSETS | 6250 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | 0 |
| PER SHARE GAIN APPREC | 0 |
| PER SHARE DIVIDEND | 0 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 10.00 |
| EXPENSE RATIO | 0 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 7 |
| NAME: QUALITY BOND PORTFOLIO CLASS C |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1996 |
| PERIOD START | NOV 16 1994 |
| PERIOD END | NOV 16 1994 |
| INVESTMENTS AT COST | 0 |
| INVESTMENTS AT VALUE | 0 |
| RECEIVABLES | 0 |
| ASSETS OTHER | 125046 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 125046 |
| PAYABLE FOR SECURITIES | 0 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 100046 |
| TOTAL LIABILITIES | 100046 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 25000 |
| SHARES COMMON STOCK | 625 |
| SHARES COMMON PRIOR | 0 |
| ACCUMULATED NII CURRENT | 0 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 0 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 0 |
| NET ASSETS | 6250 |
| DIVIDEND INCOME | 0 |
| INTEREST INCOME | 0 |
| OTHER INCOME | 0 |
| EXPENSES NET | 0 |
| NET INVESTMENT INCOME | 0 |
| REALIZED GAINS CURRENT | 0 |
| APPREC INCREASE CURRENT | 0 |
| NET CHANGE FROM OPS | 0 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 0 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 0 |
| NUMBER OF SHARES REDEEMED | 0 |
| SHARES REINVESTED | 0 |
| NET CHANGE IN ASSETS | 0 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 0 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 0 |
| AVERAGE NET ASSETS | 6250 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | 0 |
| PER SHARE GAIN APPREC | 0 |
| PER SHARE DIVIDEND | 0 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 10.00 |
| EXPENSE RATIO | 0 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 8 |
| NAME: QUALITY BOND PORTFOLIO CLASS D |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1996 |
| PERIOD START | NOV 16 1994 |
| PERIOD END | NOV 16 1994 |
| INVESTMENTS AT COST | 0 |
| INVESTMENTS AT VALUE | 0 |
| RECEIVABLES | 0 |
| ASSETS OTHER | 125046 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 125046 |
| PAYABLE FOR SECURITIES | 0 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 100046 |
| TOTAL LIABILITIES | 100046 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 25000 |
| SHARES COMMON STOCK | 625 |
| SHARES COMMON PRIOR | 0 |
| ACCUMULATED NII CURRENT | 0 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 0 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 0 |
| NET ASSETS | 6250 |
| DIVIDEND INCOME | 0 |
| INTEREST INCOME | 0 |
| OTHER INCOME | 0 |
| EXPENSES NET | 0 |
| NET INVESTMENT INCOME | 0 |
| REALIZED GAINS CURRENT | 0 |
| APPREC INCREASE CURRENT | 0 |
| NET CHANGE FROM OPS | 0 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 0 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 0 |
| NUMBER OF SHARES REDEEMED | 0 |
| SHARES REINVESTED | 0 |
| NET CHANGE IN ASSETS | 0 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 0 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 0 |
| AVERAGE NET ASSETS | 6250 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | 0 |
| PER SHARE GAIN APPREC | 0 |
| PER SHARE DIVIDEND | 0 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 10.00 |
| EXPENSE RATIO | 0 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 9 |
| NAME: U.S. GOVERNMENT SECURITIES PORTFOLIO CLASS A |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1996 |
| PERIOD START | NOV 16 1994 |
| PERIOD END | NOV 16 1994 |
| INVESTMENTS AT COST | 0 |
| INVESTMENTS AT VALUE | 0 |
| RECEIVABLES | 0 |
| ASSETS OTHER | 125046 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 125046 |
| PAYABLE FOR SECURITIES | 0 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 100046 |
| TOTAL LIABILITIES | 100046 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 25000 |
| SHARES COMMON STOCK | 625 |
| SHARES COMMON PRIOR | 0 |
| ACCUMULATED NII CURRENT | 0 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 0 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 0 |
| NET ASSETS | 6250 |
| DIVIDEND INCOME | 0 |
| INTEREST INCOME | 0 |
| OTHER INCOME | 0 |
| EXPENSES NET | 0 |
| NET INVESTMENT INCOME | 0 |
| REALIZED GAINS CURRENT | 0 |
| APPREC INCREASE CURRENT | 0 |
| NET CHANGE FROM OPS | 0 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 0 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 0 |
| NUMBER OF SHARES REDEEMED | 0 |
| SHARES REINVESTED | 0 |
| NET CHANGE IN ASSETS | 0 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 0 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 0 |
| AVERAGE NET ASSETS | 6250 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | 0 |
| PER SHARE GAIN APPREC | 0 |
| PER SHARE DIVIDEND | 0 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 10.00 |
| EXPENSE RATIO | 0 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 10 |
| NAME: U.S. GOVERNMENT SECURITIES PORTFOLIO CLASS B |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1996 |
| PERIOD START | NOV 16 1994 |
| PERIOD END | NOV 16 1994 |
| INVESTMENTS AT COST | 0 |
| INVESTMENTS AT VALUE | 0 |
| RECEIVABLES | 0 |
| ASSETS OTHER | 125046 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 125046 |
| PAYABLE FOR SECURITIES | 0 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 100046 |
| TOTAL LIABILITIES | 100046 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 25000 |
| SHARES COMMON STOCK | 625 |
| SHARES COMMON PRIOR | 0 |
| ACCUMULATED NII CURRENT | 0 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 0 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 0 |
| NET ASSETS | 6250 |
| DIVIDEND INCOME | 0 |
| INTEREST INCOME | 0 |
| OTHER INCOME | 0 |
| EXPENSES NET | 0 |
| NET INVESTMENT INCOME | 0 |
| REALIZED GAINS CURRENT | 0 |
| APPREC INCREASE CURRENT | 0 |
| NET CHANGE FROM OPS | 0 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 0 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 0 |
| NUMBER OF SHARES REDEEMED | 0 |
| SHARES REINVESTED | 0 |
| NET CHANGE IN ASSETS | 0 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 0 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 0 |
| AVERAGE NET ASSETS | 6250 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | 0 |
| PER SHARE GAIN APPREC | 0 |
| PER SHARE DIVIDEND | 0 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 10.00 |
| EXPENSE RATIO | 0 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 11 |
| NAME: U.S. GOVERNMENT SECURITIES PORTFOLIO CLASS C |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1996 |
| PERIOD START | NOV 16 1994 |
| PERIOD END | NOV 16 1994 |
| INVESTMENTS AT COST | 0 |
| INVESTMENTS AT VALUE | 0 |
| RECEIVABLES | 0 |
| ASSETS OTHER | 125046 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 125046 |
| PAYABLE FOR SECURITIES | 0 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 100046 |
| TOTAL LIABILITIES | 100046 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 25000 |
| SHARES COMMON STOCK | 625 |
| SHARES COMMON PRIOR | 0 |
| ACCUMULATED NII CURRENT | 0 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 0 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 0 |
| NET ASSETS | 6250 |
| DIVIDEND INCOME | 0 |
| INTEREST INCOME | 0 |
| OTHER INCOME | 0 |
| EXPENSES NET | 0 |
| NET INVESTMENT INCOME | 0 |
| REALIZED GAINS CURRENT | 0 |
| APPREC INCREASE CURRENT | 0 |
| NET CHANGE FROM OPS | 0 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 0 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 0 |
| NUMBER OF SHARES REDEEMED | 0 |
| SHARES REINVESTED | 0 |
| NET CHANGE IN ASSETS | 0 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 0 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 0 |
| AVERAGE NET ASSETS | 6250 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | 0 |
| PER SHARE GAIN APPREC | 0 |
| PER SHARE DIVIDEND | 0 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 10.00 |
| EXPENSE RATIO | 0 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 12 |
| NAME: U.S. GOVERNMENT SECURITIES PORTFOLIO CLASS D |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1996 |
| PERIOD START | NOV 16 1994 |
| PERIOD END | NOV 16 1994 |
| INVESTMENTS AT COST | 0 |
| INVESTMENTS AT VALUE | 0 |
| RECEIVABLES | 0 |
| ASSETS OTHER | 125046 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 125046 |
| PAYABLE FOR SECURITIES | 0 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 100046 |
| TOTAL LIABILITIES | 100046 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 25000 |
| SHARES COMMON STOCK | 625 |
| SHARES COMMON PRIOR | 0 |
| ACCUMULATED NII CURRENT | 0 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 0 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 0 |
| NET ASSETS | 6250 |
| DIVIDEND INCOME | 0 |
| INTEREST INCOME | 0 |
| OTHER INCOME | 0 |
| EXPENSES NET | 0 |
| NET INVESTMENT INCOME | 0 |
| REALIZED GAINS CURRENT | 0 |
| APPREC INCREASE CURRENT | 0 |
| NET CHANGE FROM OPS | 0 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 0 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 0 |
| NUMBER OF SHARES REDEEMED | 0 |
| SHARES REINVESTED | 0 |
| NET CHANGE IN ASSETS | 0 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 0 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 0 |
| AVERAGE NET ASSETS | 6250 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | 0 |
| PER SHARE GAIN APPREC | 0 |
| PER SHARE DIVIDEND | 0 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 10.00 |
| EXPENSE RATIO | 0 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 13 |
| NAME: GLOBAL OPPORTUNITY PORTFOLIO CLASS A |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1995 |
| PERIOD START | NOV 16 1994 |
| PERIOD END | NOV 16 1994 |
| INVESTMENTS AT COST | 0 |
| INVESTMENTS AT VALUE | 0 |
| RECEIVABLES | 0 |
| ASSETS OTHER | 125046 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 125046 |
| PAYABLE FOR SECURITIES | 0 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 100046 |
| TOTAL LIABILITIES | 100046 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 25000 |
| SHARES COMMON STOCK | 625 |
| SHARES COMMON PRIOR | 0 |
| ACCUMULATED NII CURRENT | 0 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 0 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 0 |
| NET ASSETS | 6250 |
| DIVIDEND INCOME | 0 |
| INTEREST INCOME | 0 |
| OTHER INCOME | 0 |
| EXPENSES NET | 0 |
| NET INVESTMENT INCOME | 0 |
| REALIZED GAINS CURRENT | 0 |
| APPREC INCREASE CURRENT | 0 |
| NET CHANGE FROM OPS | 0 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 0 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 0 |
| NUMBER OF SHARES REDEEMED | 0 |
| SHARES REINVESTED | 0 |
| NET CHANGE IN ASSETS | 0 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 0 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 0 |
| AVERAGE NET ASSETS | 6250 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | 0 |
| PER SHARE GAIN APPREC | 0 |
| PER SHARE DIVIDEND | 0 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 10.00 |
| EXPENSE RATIO | 0 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 14 |
| NAME: GLOBAL OPPORTUNITY PORTFOLIO CLASS B |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1995 |
| PERIOD START | NOV 16 1994 |
| PERIOD END | NOV 16 1994 |
| INVESTMENTS AT COST | 0 |
| INVESTMENTS AT VALUE | 0 |
| RECEIVABLES | 0 |
| ASSETS OTHER | 125046 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 125046 |
| PAYABLE FOR SECURITIES | 0 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 100046 |
| TOTAL LIABILITIES | 100046 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 25000 |
| SHARES COMMON STOCK | 625 |
| SHARES COMMON PRIOR | 0 |
| ACCUMULATED NII CURRENT | 0 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 0 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 0 |
| NET ASSETS | 6250 |
| DIVIDEND INCOME | 0 |
| INTEREST INCOME | 0 |
| OTHER INCOME | 0 |
| EXPENSES NET | 0 |
| NET INVESTMENT INCOME | 0 |
| REALIZED GAINS CURRENT | 0 |
| APPREC INCREASE CURRENT | 0 |
| NET CHANGE FROM OPS | 0 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 0 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 0 |
| NUMBER OF SHARES REDEEMED | 0 |
| SHARES REINVESTED | 0 |
| NET CHANGE IN ASSETS | 0 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 0 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 0 |
| AVERAGE NET ASSETS | 6250 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | 0 |
| PER SHARE GAIN APPREC | 0 |
| PER SHARE DIVIDEND | 0 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 10.00 |
| EXPENSE RATIO | 0 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 15 |
| NAME: GLOBAL OPPORTUNITY PORTFOLIO CLASS C |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1995 |
| PERIOD START | NOV 16 1994 |
| PERIOD END | NOV 16 1994 |
| INVESTMENTS AT COST | 0 |
| INVESTMENTS AT VALUE | 0 |
| RECEIVABLES | 0 |
| ASSETS OTHER | 125046 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 125046 |
| PAYABLE FOR SECURITIES | 0 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 100046 |
| TOTAL LIABILITIES | 100046 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 25000 |
| SHARES COMMON STOCK | 625 |
| SHARES COMMON PRIOR | 0 |
| ACCUMULATED NII CURRENT | 0 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 0 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 0 |
| NET ASSETS | 6250 |
| DIVIDEND INCOME | 0 |
| INTEREST INCOME | 0 |
| OTHER INCOME | 0 |
| EXPENSES NET | 0 |
| NET INVESTMENT INCOME | 0 |
| REALIZED GAINS CURRENT | 0 |
| APPREC INCREASE CURRENT | 0 |
| NET CHANGE FROM OPS | 0 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 0 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 0 |
| NUMBER OF SHARES REDEEMED | 0 |
| SHARES REINVESTED | 0 |
| NET CHANGE IN ASSETS | 0 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 0 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 0 |
| AVERAGE NET ASSETS | 6250 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | 0 |
| PER SHARE GAIN APPREC | 0 |
| PER SHARE DIVIDEND | 0 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 10.00 |
| EXPENSE RATIO | 0 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 16 |
| NAME: GLOBAL OPPORTUNITY PORTFOLIO CLASS D |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1995 |
| PERIOD START | NOV 16 1994 |
| PERIOD END | NOV 16 1994 |
| INVESTMENTS AT COST | 0 |
| INVESTMENTS AT VALUE | 0 |
| RECEIVABLES | 0 |
| ASSETS OTHER | 125046 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 125046 |
| PAYABLE FOR SECURITIES | 0 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 100046 |
| TOTAL LIABILITIES | 100046 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 25000 |
| SHARES COMMON STOCK | 625 |
| SHARES COMMON PRIOR | 0 |
| ACCUMULATED NII CURRENT | 0 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 0 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 0 |
| NET ASSETS | 6250 |
| DIVIDEND INCOME | 0 |
| INTEREST INCOME | 0 |
| OTHER INCOME | 0 |
| EXPENSES NET | 0 |
| NET INVESTMENT INCOME | 0 |
| REALIZED GAINS CURRENT | 0 |
| APPREC INCREASE CURRENT | 0 |
| NET CHANGE FROM OPS | 0 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 0 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 0 |
| NUMBER OF SHARES REDEEMED | 0 |
| SHARES REINVESTED | 0 |
| NET CHANGE IN ASSETS | 0 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 0 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 0 |
| AVERAGE NET ASSETS | 6250 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | 0 |
| PER SHARE GAIN APPREC | 0 |
| PER SHARE DIVIDEND | 0 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 10.00 |
| EXPENSE RATIO | 0 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
EXHIBIT 99.1(a)
ARTICLES OF INCORPORATION
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
THE UNDERSIGNED, CHRISTIAN J. VESPER, whose post office address is Brown & Wood, One World Trade Center, New York, New York 10048-0557, being at least eighteen years of age, does hereby act as an incorporator, under and by virtue of the General Laws of the State of Maryland authorizing the formation of corporations and with the intention of forming a corporation.
The purpose or purposes for which the Corporation is formed, the powers, rights and privileges that the Corporation shall be authorized to exercise and enjoy, and the business or objects to be transacted, carried on and promoted by it are as follows:
(1) To conduct and carry on the business of an investment company of the management type.
(2) To hold, invest and reinvest its assets in securities, and in connection therewith to hold part or all of its assets in cash.
(3) To issue and sell shares of its own capital stock in such amounts and on such terms and conditions, for such purposes and for such amount or kind of consideration now or hereafter permitted by the General Laws of the State of Maryland and by these Articles of Incorporation, as its Board of Directors may determine; provided, however, that the value of the consideration per share to be received by the Corporation upon the sale or other disposition of any shares of its capital stock shall not be less than the net asset value per share of such capital stock outstanding at the time of such event.
(4) To exchange, classify, reclassify, change the designation of, convert, rename, redeem, purchase or otherwise acquire, hold, dispose of, resell, transfer, reissue or cancel (all without the vote or consent of the stockholders of the Corporation) shares of its issued or unissued capital stock of any class or series, as its Board of Directors may determine, in any manner and to the extent now or hereafter permitted by the General Laws of the State of Maryland and by these Articles of Incorporation.
(5) To do any and all such further acts or things and to exercise any and all such further powers or rights as may be necessary, incidental, relative, conducive, appropriate or desirable for the accomplishment, carrying out or attainment of all or any of the foregoing purposes or objects.
The Corporation shall be authorized to exercise and enjoy all of the powers, rights and privileges granted to, or conferred
upon, corporations by the General Laws of the State of Maryland now or hereafter in force, and the enumeration of the foregoing purposes, powers, rights and privileges shall not be deemed to exclude any powers, rights or privileges so granted or conferred.
The post office address of the principal office of the Corporation in the State of Maryland is c/o The Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland 21202. The name of the resident agent of the Corporation in this State is The Corporation Trust Incorporated, a corporation of this State, and the post office address of the resident agent is 32 South Street, Baltimore, Maryland 21202.
Class A Class B
Common Stock Common Stock
------------------ ------------------
Fundamental 12,500,000 shares 12,500,000 shares
|
Value Portfolio Quality Bond 12,500,000 shares 12,500,000 shares Portfolio U.S. Government 12,500,000 shares 12,500,000 shares Portfolio Global Opportunity 12,500,000 shares 12,500,000 shares Portfolio |
(2) The Board of Directors may classify and reclassify any unissued shares of capital stock, of any class or series, into one or more additional or other classes or series as may be established from time to time by setting or changing in any one or more respects the designations, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions of redemption of such shares of stock and pursuant to such classification or reclassification to increase or decrease the number of authorized shares of any existing class or series.
(3) The Board of Directors may classify and reclassify any issued shares of capital stock, of any class or series, into one or more additional or other classes or series as may be established from time to time by setting or changing in any one or more respects the designations, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions of redemption of such shares of stock and pursuant to such classification or reclassification to increase or decrease the number of authorized shares of any existing class or series; provided, however, that
any such classification or reclassification shall not substantially adversely affect the rights of holders of such issued shares.
(4) Unless otherwise expressly provided in the charter of the Corporation, including any Articles Supplementary creating any class or series of capital stock, the holders of each class or series of capital stock shall be entitled to dividends and distributions in such amounts and at such times as may be determined by the Board of Directors, and the dividends and distributions paid with respect to the various classes or series of capital stock may vary among such classes and series. Dividends on a class or series may be declared or paid only out of the net assets of that class or series. Expenses related to the distribution of, and other identified expenses that should properly be allocated to, the shares of a particular class or series of capital stock may be charged to and borne solely by such class or series and the bearing of expenses solely by a class or series of capital stock may be appropriately reflected (in a manner determined by the Board of Directors) and cause differences in the net asset value attributable to, and the dividend, redemption and liquidation rights of, the shares of each class or series of capital stock.
(5) Unless otherwise expressly provided in the charter of the Corporation, including those matters set forth in Article II, Section (4) hereof and including any Articles Supplementary creating any class or series of capital stock, on each matter
submitted to a vote of stockholders, each holder of a share of capital stock of the Corporation shall be entitled to one vote for each share standing in such holder's name on the books of the Corporation, irrespective of the class or series thereof, and all shares of all classes and series shall vote together as a single class; provided, however, that (a) as to any matter with respect to which a separate vote of any class or series is required by the Investment Company Act of 1940, as amended, and in effect from time to time, or any rules, regulations or orders issued thereunder, or by the Maryland General Corporation Law, such requirement as to a separate vote by that class or series shall apply in lieu of a general vote of all classes and series as described above, (b) in the event that the separate vote requirements referred to in (a) above apply with respect to one or more classes or series, then, subject to paragraph (c) below, the shares of all other classes and series not entitled to a separate class vote shall vote as a single class, and (c) as to any matter which does not affect the interest of a particular class or series, such class or series shall not be entitled to any vote and only the holders of shares of the affected classes and series, if any, shall be entitled to vote.
(6) Notwithstanding any provision of the Maryland General Corporation Law requiring a greater proportion than a majority of the votes of all classes or series of capital stock of the Corporation (or of any class or series entitled to vote thereon as a separate class or series) to take or authorize any action,
the Corporation is hereby authorized (subject to the requirements of the Investment Company Act of 1940, as amended, and in effect from time to time, and any rules, regulations and orders issued thereunder) to take such action upon the concurrence of a majority of the votes entitled to be cast by holders of capital stock of the Corporation (or a majority of the votes entitled to be cast by holders of a class or series entitled to vote thereon as a separate class or series).
(7) Unless otherwise expressly provided in the charter of the Corporation, including any Articles Supplementary creating any class or series of capital stock, in the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of each class or series of capital stock of the Corporation shall be entitled, after payment or provision for payment of the debts and other liabilities of the Corporation, to share ratably in the remaining net assets of the Corporation applicable to that class or series.
(8) Any fractional shares shall carry proportionately all the rights of a whole share, excepting any right to receive a certificate evidencing such fractional share, but including, without limitation, the right to vote and the right to receive dividends.
(9) The presence in person or by proxy of the holders of shares entitled to cast one-third of the votes entitled to be cast shall constitute a quorum at any meeting of stockholders, except with respect to any matter which requires approval by a
separate vote of one or more classes of stock, in which case the presence in person or by proxy of the holders of shares entitled to cast one-third of the votes entitled to be cast by each class entitled to vote as a separate class shall constitute a quorum.
(10) All persons who shall acquire stock in the Corporation, of any class or series, shall acquire the same subject to the provisions of the charter and By-Laws of the Corporation. As used in the charter of the Corporation, the terms "charter" and "Articles of Incorporation" shall mean and include the Articles of Incorporation of the Corporation as amended, supplemented and restated from time to time by Articles of Amendment, Articles Supplementary, Articles of Restatement or otherwise.
(1) The number of directors of the Corporation shall be three, which number may be increased pursuant to the By-Laws of the Corporation but shall never be less than three. The names of the directors who shall act until their successors are duly elected and qualify are:
Philip L. Kirstein Jerry Weiss Mark B. Goldfus
(2) The Board of Directors of the Corporation is hereby empowered to authorize the issuance from time to time of shares
of capital stock, of any class or series, whether now or hereafter authorized, for such consideration as the Board of Directors may deem advisable, subject to such limitations as may be set forth in these Articles of Incorporation or in the By-Laws of the Corporation or in the General Laws of the State of Maryland.
(3) No holder of stock of the Corporation shall, as such holder, have any right to purchase or subscribe for any shares of the capital stock of the Corporation or any other security of the Corporation which it may issue or sell (whether out of the number of shares authorized by these Articles of Incorporation, or out of any shares of the capital stock of the Corporation, of any class or series, acquired by it after the issue thereof, or otherwise) other than such right, if any, as the Board of Directors, in its discretion, may determine.
(4) Each director and each officer of the Corporation shall be indemnified by the Corporation to the full extent permitted by the General Laws of the State of Maryland, subject to the requirements of the Investment Company Act of 1940, as amended. No amendment of these Articles of Incorporation or repeal of any provision hereof shall limit or eliminate the benefits provided to directors and officers under this provision in connection with any act or omission that occurred prior to such amendment or repeal.
(5) To the fullest extent permitted by the General Laws of the State of Maryland, subject to the requirements of the
Investment Company Act of 1940, as amended, no director or officer of the Corporation shall be personally liable to the Corporation or its security holders for money damages. No amendment of these Articles of Incorporation or repeal of any provision hereof shall limit or eliminate the benefits provided to directors and officers under this provision in connection with any act or omission that occurred prior to such amendment or repeal.
(6) The Board of Directors of the Corporation is vested with the sole power, to the exclusion of the stockholders, to make, alter or repeal from time to time any of the By-Laws of the Corporation except any particular By-Law which is specified as not subject to alteration or repeal by the Board of Directors, subject to the requirements of the Investment Company Act of 1940, as amended.
(7) The Board of Directors of the Corporation from time to time may change the Corporation's name, without the vote or consent of the stockholders of the Corporation, in any manner and to the extent now or hereafter permitted by the General Laws of the State of Maryland and by these Articles of Incorporation.
Each holder of shares of capital stock of the Corporation shall be entitled to require the Corporation to redeem all or any part of the shares of capital stock of the Corporation standing
in the name of such holder on the books of the Corporation, and all shares of capital stock issued by the Corporation shall be subject to redemption by the Corporation, at the redemption price of such shares as in effect from time to time as may be determined by the Board of Directors of the Corporation in accordance with the provisions hereof, subject to the right of the Board of Directors of the Corporation to suspend the right of redemption of shares of capital stock of the Corporation or postpone the date of payment of such redemption price in accordance with provisions of applicable law. The redemption price of shares of capital stock of the Corporation shall be the net asset value thereof as determined by the Board of Directors of the Corporation from time to time in accordance with the provisions of applicable law, less such redemption fee or other charge, if any, as may be fixed by resolution of the Board of Directors of the Corporation. Payment of the redemption price shall be made in cash by the Corporation at such time and in such manner as may be determined from time to time by the Board of Directors of the Corporation.
Any determination made in good faith, so far as accounting matters are involved, in accordance with accepted accounting practice by or pursuant to the direction of the Board of Directors, as to the amount of assets, obligations or liabilities
of the Corporation, as to the amount of net income of the Corporation from dividends and interest for any period or amounts at any time legally available for the payment of dividends, as to the amount of any reserves or charges set up and the propriety thereof, as to the time of or purpose for creating reserves or as to the use, alteration or cancellation of any reserves or charges (whether or not any obligation or liability for which such reserves or charges shall have been created, shall have been paid or discharged or shall be then or thereafter required to be paid or discharged), as to the price of any security owned by the Corporation or as to any other matters relating to the issuance, sale, redemption or other acquisition or disposition of securities or shares of capital stock of the Corporation, and any reasonable determination made in good faith by the Board of Directors as to whether any transaction constitutes a purchase of securities on "margin," a sale of securities "short," or an underwriting or the sale of, or a participation in any underwriting or selling group in connection with the public distribution of, any securities, shall be final and conclusive, and shall be binding upon the Corporation and all holders of its capital stock, past, present and future, and shares of the capital stock of the Corporation are issued and sold on the condition and understanding, evidenced by the purchase of shares of capital stock or acceptance of share certificates, that any and all such determinations shall be binding as aforesaid. No provision of these Articles of Incorporation shall be effective
to (a) require a waiver of compliance with any provision of the Securities Act of 1933, as amended, or the Investment Company Act of 1940, as amended, or of any valid rule, regulation or order of the Securities and Exchange Commission thereunder or (b) protect or purport to protect any director or officer of the Corporation against any liability to the Corporation or its security holders to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office.
The Corporation reserves the right to amend, alter, change or repeal any provision contained in these Articles of Incorporation, in any manner now or hereafter prescribed by statute, including any amendment which alters the contract rights, as expressly set forth in the charter, of any outstanding stock and substantially adversely affects the stockholder's rights, and all rights conferred upon stockholders herein are granted subject to this reservation.
IN WITNESS WHEREOF, the undersigned incorporator of MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC. hereby executes the foregoing Articles of Incorporation and acknowledges the same to be his act.
Dated this 11th day of May, 1994
/s/ Christian J. Vesper --------------------------- Christian J. Vesper |
EXHIBIT 99.1(b)
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC., a Maryland corporation having its principal Maryland office c/o The Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland 21202 (hereinafter called the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: The charter of the Corporation is hereby amended by deleting
Article IV, Section 1 in its entirety and substituting the following therefor:
(1) The total number of shares of capital stock which the Corporation shall have authority to issue is One Hundred Million (100,000,000) shares, of the par value of Ten Cents ($.10) per share, and of the aggregate par value of Ten Million Dollars ($10,000,000). The capital stock is divided into four series, each of which consists of four classes of common stock, as follows:
Class A Class B
Common Stock Common Stock
----------------- -----------------
Fundamental 6,250,000 shares 6,250,000 shares
Value Portfolio
Quality Bond 6,250,000 shares 6,250,000 shares
Portfolio
U.S. Government 6,250,000 shares 6,250,000 shares
Securities Portfolio
Global Opportunity 6,250,000 shares 6,250,000 shares
Portfolio
|
Class C Class D
Common Stock Common Stock
----------------- -----------------
Fundamental 6,250,000 shares 6,250,000 shares
Value Portfolio
Quality Bond 6,250,000 shares 6,250,000 shares
Portfolio
U.S. Government 6,250,000 shares 6,250,000 shares
Securities Portfolio
Global Opportunity 6,250,000 shares 6,250,000 shares
Portfolio
|
SECOND: The charter of the Corporation is hereby amended by adding the following provision at the end of Article IV, Section 3:
The Board's authority pursuant to this paragraph shall include, but not be limited to, the power to vary among all the holders of a particular class or series (a) the length of time shares must be held prior to reclassification to shares of another class or series (the "Holding Period(s)"), (b) the manner in which the time for such Holding Period(s) is determined and (c) the class or series into which the particular class or series is being reclassified; provided, however, that, subject to the first sentence of this section, with respect to holders of the Corporation's shares issued on or after the date of the Corporation's first effective prospectus which sets forth Holding Period(s) (the "First Holding Period Prospectus"), the Holding Period(s), the manner in which the time for such Holding Period(s) is determined and the class or series into which the particular class or series is being reclassified shall be disclosed in the Corporation's prospectus or statement of additional information in effect at the time such shares, which are the subject of the reclassification, were issued.
THIRD: The foregoing amendments have been effected in the manner and by the vote required by the Corporation's charter and the laws of the State of Maryland. The amendments were duly approved by a majority of the entire Board of Directors of the Corporation at a meeting held on August 3, 1994; and at the time of approval by the Directors there were no shares of stock of the Corporation entitled to vote on the matter either outstanding or subscribed for.
FOURTH: The charter of the Corporation is hereby amended by adding the following provision at the end of Article IV:
FIFTH: The foregoing amendment has been effected in the manner and by the vote required by the Corporation's charter and the laws of the State of Maryland. The amendment was duly approved by a majority of the entire Board of Directors of the Corporation at a meeting held on July 13, 1994; and at the time of approval by the Directors there were no shares of stock of the Corporation entitled to vote on the matter either outstanding or subscribed for.
SIXTH: Except as amended hereby, the Corporation's charter shall remain in full force and effect.
SEVENTH: The authorized capital stock of the Corporation has not been increased by these Articles of Amendment.
The President acknowledges these Articles of Amendment to be the corporate act of the Corporation and states that to the best of his knowledge, information and belief, the matters set forth in these Articles of Amendment with respect to the authorization and approval of the amendment of the Corporation's charter are true in all material respects, and that this statement is made under the penalties for perjury.
IN WITNESS WHEREOF, MERRILL LYNCH RETIREMENT ASSET BUILDER
PROGRAM, INC. has caused these Articles of Amendment to be signed
in its name and on its behalf by its President and attested by its
Secretary on this 4th day of November, 1994.
MERRILL LYNCH RETIREMENT ASSET
BUILDER PROGRAM, INC.
/s/ Arthur Zeikel
--------------------------------
Arthur Zeikel
President
Attest:
/s/ Mark B. Goldfus
----------------------------
Mark B. Goldfus
Secretary
|
EXHIBIT 99.4(b)
[Name of Portfolio]
NUMBER SHARES
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
INCORPORATED UNDER THE LAWS
OF THE STATE OF MARYLAND
CUSIP
SEE REVERSE FOR
CERTAIN DEFINITIONS
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES, PAR VALUE TEN CENTS ($0.10) PER SHARE, OF
[NAME OF PORTFOLIO] CLASS A COMMON STOCK OF THE
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
TRANSFERABLE ON THE BOOKS OF THE CORPORATION BY THE HOLDER HEREOF IN PERSON OR BY DULY AUTHORIZED ATTORNEY UPON SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED.
THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY ARE ISSUED AND SHALL BE HELD SUBJECT TO ALL THE PROVISIONS OF THE ARTICLES OF INCORPORATION AND OF THE BY- LAWS OF THE CORPORATION, AND ALL OF THE AMENDMENTS FROM TIME TO TIME MADE THERETO.
THIS CERTIFICATE IS NOT VALID UNTIL COUNTERSIGNED BY THE TRANSFER AGENT.
WITNESS THE SEAL OF THE CORPORATION AND THE SIGNATURES OF ITS DULY AUTHORIZED OFFICERS.
Dated:
Countersigned:
FINANCIAL DATA SERVICES, INC.
Transfer Agent
By:
/s/ Arthur Zeikel /s/ Mark B. Goldfus
- ------------------------- ---------------------- -----------------------------
President Secretary Authorized Signature
[SEAL]
|
A full statement of the designations and any preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption of the shares of each class and series of stock which the Corporation is authorized to issue and the differences in the relative rights and preferences between the shares of each class and series to the extent that they have been set, and the authority of the Board of Directors to set the relative rights and preferences of subsequent classes and series, will be furnished by the Corporation to any stockholder, without charge, upon request to the Secretary of the Corporation at its principal office.
The following abbreviations, when used in the inscription on the face of this Certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN ACT-- ____ Custodian ____
TEN ENT--as tenants by the entireties (Cust) (Minor)
JT TEN--as joint tenants with right under Uniform Gifts to
of survivorship and not as Minors Act _______
tenants in common (State)
|
Additional abbreviations also may be used though not in the above list.
For value received, _______________ hereby sell, assign and transfer unto
Please insert social security or other identifying number of assignee
[________________________________________]
__________________________________________________________________________Shares
Dated:____________________
_______________________________________________________
NOTICE: The Signature to this assignment must correspond with
the name as written upon the face of the Certificate,
in every particular, without alteration or enlargement,
or any change whatsoever.
|
Signatures must be guaranteed by an "eligible guarantor institution" as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of
1934.
EXHIBIT 99.4(c)
[Name of Portfolio]
NUMBER SHARES
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
INCORPORATED UNDER THE LAWS
OF THE STATE OF MARYLAND
CUSIP
SEE REVERSE FOR
CERTAIN DEFINITIONS
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES, PAR VALUE TEN CENTS ($0.10) PER SHARE, OF
[NAME OF PORTFOLIO] CLASS B COMMON STOCK OF THE
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
TRANSFERABLE ON THE BOOKS OF THE CORPORATION BY THE HOLDER HEREOF IN PERSON OR BY DULY AUTHORIZED ATTORNEY UPON SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED.
THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY ARE ISSUED AND SHALL BE HELD SUBJECT TO ALL THE PROVISIONS OF THE ARTICLES OF INCORPORATION AND OF THE BY- LAWS OF THE CORPORATION, AND ALL OF THE AMENDMENTS FROM TIME TO TIME MADE THERETO.
THIS CERTIFICATE IS NOT VALID UNTIL COUNTERSIGNED BY THE TRANSFER AGENT.
WITNESS THE SEAL OF THE CORPORATION AND THE SIGNATURES OF ITS DULY AUTHORIZED OFFICERS.
Dated:
Countersigned:
FINANCIAL DATA SERVICES, INC.
Transfer Agent
By:
/s/ Arthur Zeikel /s/ Mark B. Goldfus
- ------------------------- --------------------- ------------------------------
President Secretary Authorized Signature
[SEAL]
|
A full statement of the designations and any preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption of the shares of each class and series of stock which the Corporation is authorized to issue and the differences in the relative rights and preferences between the shares of each class and series to the extent that they have been set, and the authority of the Board of Directors to set the relative rights and preferences of subsequent classes and series, will be furnished by the Corporation to any stockholder, without charge, upon request to the Secretary of the Corporation at its principal office.
The following abbreviations, when used in the inscription on the face of this Certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN ACT-- ____ Custodian ____
TEN ENT--as tenants by the entireties (Cust) (Minor)
JT TEN--as joint tenants with right under Uniform Gifts to
of survivorship and not as Minors Act _______
tenants in common (State)
|
Additional abbreviations also may be used though not in the above list.
For value received, _______________ hereby sell, assign and transfer unto
Please insert social security or other identifying number of assignee
[________________________________________]
_________________________________________________________________________ Shares represented by the within Certificate, and do hereby irrevocably constitute and appoint
Dated:____________________
_______________________________________________________
NOTICE: The Signature to this assignment must correspond with
the name as written upon the face of the Certificate,
in every particular, without alteration or enlargement,
or any change whatsoever.
|
Signatures must be guaranteed by an "eligible guarantor institution" as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of
1934.
EXHIBIT 99.4(d)
[Name of Portfolio]
NUMBER SHARES
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
INCORPORATED UNDER THE LAWS
OF THE STATE OF MARYLAND
CUSIP
SEE REVERSE FOR
CERTAIN DEFINITIONS
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES, PAR VALUE TEN CENTS ($0.10) PER SHARE, OF
[NAME OF PORTFOLIO] CLASS C COMMON STOCK OF THE
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
TRANSFERABLE ON THE BOOKS OF THE CORPORATION BY THE HOLDER HEREOF IN PERSON OR BY DULY AUTHORIZED ATTORNEY UPON SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED.
THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY ARE ISSUED AND SHALL BE HELD SUBJECT TO ALL THE PROVISIONS OF THE ARTICLES OF INCORPORATION AND OF THE BY- LAWS OF THE CORPORATION, AND ALL OF THE AMENDMENTS FROM TIME TO TIME MADE THERETO.
THIS CERTIFICATE IS NOT VALID UNTIL COUNTERSIGNED BY THE TRANSFER AGENT.
WITNESS THE SEAL OF THE CORPORATION AND THE SIGNATURES OF ITS DULY AUTHORIZED OFFICERS.
Dated:
Countersigned:
FINANCIAL DATA SERVICES, INC.
Transfer Agent
By:
/s/ Arthur Zeikel /s/ Mark B. Goldfus
- ------------------------- --------------------- -----------------------------
President Secretary Authorized Signature
[SEAL]
|
A full statement of the designations and any preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption of the shares of each class and series of stock which the Corporation is authorized to issue and the differences in the relative rights and preferences between the shares of each class and series to the extent that they have been set, and the authority of the Board of Directors to set the relative rights and preferences of subsequent classes and series, will be furnished by the Corporation to any stockholder, without charge, upon request to the Secretary of the Corporation at its principal office.
The following abbreviations, when used in the inscription on the face of this Certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN ACT-- ____ Custodian ____
TEN ENT--as tenants by the entireties (Cust) (Minor)
JT TEN--as joint tenants with right under Uniform Gifts to
of survivorship and not as Minors Act _______
tenants in common (State)
|
Additional abbreviations also may be used though not in the above list.
For value received, _______________ hereby sell, assign and transfer unto
Please insert social security or other identifying number of assignee
[________________________________________]
_________________________________________________________________________ Shares represented by the within Certificate, and do hereby irrevocably constitute and appoint
Dated:____________________
_______________________________________________________
NOTICE: The Signature to this assignment must correspond with
the name as written upon the face of the Certificate,
in every particular, without alteration or enlargement,
or any change whatsoever.
|
Signatures must be guaranteed by an "eligible guarantor institution" as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of
1934.
EXHIBIT 99.4(e)
[Name of Portfolio]
NUMBER SHARES
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
INCORPORATED UNDER THE LAWS
OF THE STATE OF MARYLAND
CUSIP
SEE REVERSE FOR
CERTAIN DEFINITIONS
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES, PAR VALUE TEN CENTS ($0.10) PER SHARE, OF
[NAME OF PORTFOLIO] CLASS D COMMON STOCK OF THE
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
TRANSFERABLE ON THE BOOKS OF THE CORPORATION BY THE HOLDER HEREOF IN PERSON OR BY DULY AUTHORIZED ATTORNEY UPON SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED.
THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY ARE ISSUED AND SHALL BE HELD SUBJECT TO ALL THE PROVISIONS OF THE ARTICLES OF INCORPORATION AND OF THE BY- LAWS OF THE CORPORATION, AND ALL OF THE AMENDMENTS FROM TIME TO TIME MADE THERETO.
THIS CERTIFICATE IS NOT VALID UNTIL COUNTERSIGNED BY THE TRANSFER AGENT.
WITNESS THE SEAL OF THE CORPORATION AND THE SIGNATURES OF ITS DULY AUTHORIZED OFFICERS.
Dated:
Countersigned:
FINANCIAL DATA SERVICES, INC.
Transfer Agent
By:
/s/ Arthur Zeikel /s/ Mark B. Goldfus
- ----------------------- ----------------------- ------------------------------
President Secretary Authorized Signature
[SEAL]
|
A full statement of the designations and any preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption of the shares of each class and series of stock which the Corporation is authorized to issue and the differences in the relative rights and preferences between the shares of each class and series to the extent that they have been set, and the authority of the Board of Directors to set the relative rights and preferences of subsequent classes and series, will be furnished by the Corporation to any stockholder, without charge, upon request to the Secretary of the Corporation at its principal office.
The following abbreviations, when used in the inscription on the face of this Certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN ACT-- ____ Custodian ____
TEN ENT--as tenants by the entireties (Cust) (Minor)
JT TEN--as joint tenants with right under Uniform Gifts to
of survivorship and not as Minors Act _______
tenants in common (State)
|
Additional abbreviations also may be used though not in the above list.
For value received, _______________ hereby sell, assign and transfer unto
Please insert social security or other identifying number of assignee
[_____________________________________________]
_________________________________________________________________________ Shares represented by the within Certificate, and do hereby irrevocably constitute and appoint
Dated:____________________
_______________________________________________________
NOTICE: The Signature to this assignment must correspond with
the name as written upon the face of the Certificate,
in every particular, without alteration or enlargement,
or any change whatsoever.
|
Signatures must be guaranteed by an "eligible guarantor institution" as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of
1934.
EXHIBIT 99.5
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this by and between MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC., a Maryland corporation (hereinafter referred to as the "Program"), and MERRILL LYNCH ASSET MANAGEMENT, L.P., a Delaware limited partnership (hereinafter referred to as the "Investment Adviser").
WHEREAS, the Program intends to engage in business as an open-end investment company registered under the Investment Company Act of 1940, as amended (hereinafter referred to as the "Investment Company Act"); and
WHEREAS, the Directors of the Program (the "Directors") are authorized to establish separate series relating to separate portfolios of securities, each of which will offer separate classes of shares; and
WHEREAS, the Investment Adviser is engaged principally in rendering management and investment advisory services and is registered as an investment adviser under the Investment Advisers
Act of 1940, as amended; and
WHEREAS, the Program desires to retain the Investment Adviser to render management and investment advisory services to the Program and the Portfolio in the manner and on the terms hereinafter set forth; and
WHEREAS, the Investment Adviser is willing to provide management and investment advisory services to the Program and the Portfolio on the terms and conditions hereinafter set forth;
The Program hereby employs the Investment Adviser to act as an investment manager and investment adviser of the Portfolio and to furnish, or arrange for affiliates to furnish, the management and investment advisory services described below, subject to policies of, review by and overall control of the Directors, for the period and on the terms and conditions set forth in this Agreement. The Investment Adviser hereby accepts such employment and agrees during such period, at its own expense, to render, or arrange for the rendering of, such services and to assume the obligations herein set forth for the compensation provided for herein. The Investment Adviser and its affiliates shall for all
purposes herein be deemed to be independent contractors and shall, unless otherwise expressly provided or authorized, have no authority to act for or represent the Program or the Portfolio in any way or otherwise be deemed agents of the Program or the Portfolio.
of additional information relating to the shares of the Portfolio under the Securities Act of 1933, as amended (the "Prospectus" and "Statement of Additional Information", respectively). The Investment Adviser shall make reports to the Directors of its performance of obligations hereunder and furnish advice and recommendations with respect to such other aspects of the business and affairs of the Program and the Portfolio as it shall determine to be desirable.
voting rights, rights to consent to corporate action and any other rights pertaining to the portfolio securities held by the Portfolio shall be exercised. Should the Directors at any time, however, make any definite determination as to investment policy and notify the Investment Adviser thereof in writing, the Investment Adviser shall be bound by such determination for the period, if any, specified in such notice or until similarly notified that such determination has been revoked. The Investment Adviser shall take, on behalf of the Portfolio, all actions which it deems necessary to implement the investment policies determined as provided above, and in particular to place all orders for the purchase or sale of portfolio securities for the Portfolio's account with brokers or dealers selected by it, and to this end the Investment Adviser is authorized as the agent of the Program to give instructions to the custodian of the Portfolio as to deliveries of securities and payments of cash for the account of the Portfolio. In connection with the selection of such brokers or dealers and the placing of such orders with respect to assets of the Portfolio, the Investment Adviser is directed at all times to seek to obtain execution and price within the policy guidelines determined by the Directors as set forth in the Prospectus and Statement of Additional Information. Subject to this requirement and the provisions of the Investment Company Act, the Securities Exchange Act of 1934, as amended, and
other applicable provisions of law, the Investment Adviser may select brokers or dealers with which it or the Program is affiliated.
The Investment Adviser is a limited partnership and its limited partners are Merrill Lynch & Co., Inc. and Merrill Lynch Investment Management, Inc. and its general partner is Princeton Services, Inc. The Investment Adviser will notify the Program and the Portfolio of any change in the membership of the partnership within a reasonable time after such change.
state securities laws, pricing costs (including the daily calculation of net asset value), expenses of printing shareholder reports, prospectuses and statements of additional information, Securities and Exchange Commission fees, interest, taxes, fees and actual out-of-pocket expenses of Directors who are not affiliated persons of the Investment Adviser, fees for legal and auditing services, litigation expenses, costs of printing proxies and other expenses related to shareholder meetings, and other expenses properly payable by the Program and the Portfolio. It also is understood that the Program will reimburse the Investment Adviser for its costs in providing accounting services to the Program and the Portfolio. The Distributor will pay certain of the expenses of the Portfolio incurred in connection with the continuous offering of Portfolio shares.
(.050%) of the average daily net assets of the Portfolio commencing on the day following effectiveness hereof. If this Agreement becomes effective subsequent to the first day of a month or shall terminate before the last day of a month, compensation for the part of the month that this Agreement is in effect shall be prorated in a manner consistent with the calculation of the fee as set forth above. Subject to the provisions of subsection (b) hereof, payment of the Investment Adviser's compensation for the preceding month shall be made as promptly as possible after completion of the computations contemplated by subsection (b) hereof. During any period when the determination of net asset value is suspended by the Directors, the net asset value as of the last business day prior to such suspension shall for this purpose be deemed to be the net asset value at the close of each succeeding business day until it is again determined.
fee by the extent of such excess and, if required pursuant to any such laws or regulations, will reimburse the Portfolio in the amount of such excess, provided, however, to the extent permitted by law, there shall be excluded from such expenses the amount of any interest, taxes, brokerage commissions and extraordinary expenses (including but not limited to legal claims and liabilities and litigation costs and any indemnification related thereto) paid or payable by the Program with respect to the Portfolio. Whenever the expenses of the Portfolio exceed a pro rata portion of the applicable annual expense limitations, the estimated amount of reimbursement under such limitations shall be applicable as an offset against the monthly payment of the management fee due to the Investment Adviser. Should two or more such expense limitations be applicable as of the end of the last business day of the month, that expense limitation which results in the largest reduction in the Investment Adviser's fee shall be applicable.
The Investment Adviser shall not be liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission in the management of the Program and the Portfolio, except for willful misfeasance, bad faith or gross negligence in the performance of its duties, or by
reason of reckless disregard of its obligations and duties hereunder. As used in this Article IV, the term "Investment Adviser" shall include any affiliates of the Investment Adviser performing services for the Program or the Portfolio contemplated hereby and directors, officers and employees of the Investment Adviser and such affiliates.
The services of the Investment Adviser to the Program and the Portfolio are not to be deemed to be exclusive, and the Investment Adviser and any person controlled by or under common control with the Investment Adviser (for purposes of Article V referred to as "affiliates") are free to render services to others. It is understood that Directors, officers, employees and shareholders of the Program and the Portfolio are or may become interested in the Investment Adviser and its affiliates, as directors, officers, employees and shareholders or otherwise, and that directors, officers, employees and shareholders of the Investment Adviser and its affiliates are or may become similarly interested in the Program and the Portfolio, and that the Investment Adviser may become interested in the Program and the Portfolio as a shareholder or otherwise.
This Agreement shall become effective as of the date first above written and shall remain in force until June 30, 1996 and thereafter, but only for so long as such continuance is specifically approved at least annually by (i) the Directors, or by the vote of a majority of the outstanding voting securities of the Portfolio, and (ii) by the vote of a majority of those Directors who are not parties to this Agreement or interested persons of any such party cast in person at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any penalty, by the Directors or by vote of a majority of the outstanding voting securities of the Portfolio, or by the Investment Adviser, on sixty days' written notice to the other party. This Agreement shall terminate automatically in the event of its assignment.
This Agreement may be amended by the parties only if such amendment is specifically approved by the vote of (i) a majority of the outstanding voting securities of the Portfolio, and (ii) a majority of those Directors who are not parties to this Agreement
or interested persons of any such party cast in person at a meeting called for the purpose of voting on such approval.
The terms "vote of a majority of the outstanding voting securities", "assignment", "affiliated person" and "interested person", when used in this Agreement, shall have the respective meanings specified in the Investment Company Act and the Rules and Regulations thereunder, subject, however, to such exemptions as may be granted by the Securities and Exchange Commission under the Investment Company Act.
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 day and year first above written.
MERRILL LYNCH RETIREMENT ASSET BUILDER
PROGRAM, INC.
By_________________________________
Title:
MERRILL LYNCH ASSET MANAGEMENT, L.P.
By_________________________________
Title:
EXHIBIT 99.6(a)
CLASS A SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the ____ day of , 1994, between MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC., a Maryland corporation (the "Program"), and MERRILL LYNCH FUNDS DISTRIBUTOR, INC., a Delaware corporation (the "Distributor").
WHEREAS, the Program is registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"), as an open-end investment
company, and it is affirmatively in the interest of the Program to offer its
shares for sale continuously;
and
WHEREAS, the Directors of the Program (the "Directors") are authorized to
establish separate series (the "Series") relating to separate portfolios of
securities, each of which will offer separate classes of shares of common stock,
par value $0.10 per share (collectively referred to as "shares"), to holders of
certain retirement accounts for which Merrill Lynch, Pierce, Fenner & Smith
Incorporated acts as custodian;
WHEREAS, the Directors have established and designated the [Name of Portfolio] (the "Portfolio") as a series of the Program; and
WHEREAS, the Distributor is a securities firm engaged in the business of selling shares of investment companies either directly to purchasers or through other securities dealers; and
WHEREAS, the Program and the Distributor wish to enter into an agreement with each other with respect to the continuous offering of the Class A shares of the Portfolio.
NOW, THEREFORE, the parties agree as follows:
(a) The Program may, upon written notice to the Distributor, from time to time designate other principal underwriters and distributors of Class A shares with respect to areas other than the United States as to which the Distributor may have expressly waived in writing its right to act as such. If such designation is deemed exclusive, the right of the Distributor under this Agreement to sell Class A shares in the areas so designated shall terminate, but this Agreement shall
remain otherwise in full effect until terminated in accordance with the other provisions hereof.
(b) The exclusive right granted to the Distributor to purchase Class A shares from the Program shall not apply to Class A shares issued in connection with the merger or consolidation of any other investment company or personal holding company with the Program or the acquisition by purchase or otherwise of all (or substantially all) the assets or the outstanding Class A shares of any such company by the Program.
(c) Such exclusive right also shall not apply to Class A shares issued pursuant to reinvestment of dividends or capital gains distributions.
(d) Such exclusive right also shall not apply to Class A shares issued pursuant to any conversion, exchange or reinstatement privilege afforded redeeming shareholders or to any other Class A shares as shall be agreed between the Program and the Distributor from time to time.
(a) The Distributor shall have the right to buy from the Program the Class A shares needed, but not more than the Class A shares needed (except for clerical errors in transmission) to fill unconditional orders for Class A shares of the Portfolio placed with the Distributor by eligible investors or securities dealers. Investors eligible to purchase Class A shares shall be those persons so identified in the currently effective prospectus and statement of additional information relating to the Portfolio
(the "prospectus" and "statement of additional information", respectively) under the Securities Act of 1933, as amended (the "Securities Act"), relating to such Class A shares ("eligible investors"). The price which the Distributor shall pay for the Class A shares so purchased from the Program shall be the net asset value, determined as set forth in Section 3(d) hereof, used in determining the public offering price on which such orders were based.
(b) The Class A shares are to be resold by the Distributor to eligible investors at the public offering price, as set forth in Section 3(c) hereof, or to securities dealers having agreements with the Distributor upon the terms and conditions set forth in Section 7 hereof.
additional information, without a sales charge or at a reduced sales charge,
upon terms and conditions set forth in the prospectus and statement of
additional information. If the public offering price does not equal an even
cent, the public offering price may be adjusted to the nearest cent. All
payments to the Program hereunder shall be made in the manner set forth in
Section 3(f).
(d) The net asset value of Class A shares shall be determined by the Program or any agent of the Program in accordance with the method set forth in the prospectus and statement of additional information and guidelines established by the Directors.
(e) The Program shall have the right to suspend the sale of its Class A shares at times when redemption is suspended pursuant to the conditions set forth in Section 4(b) hereof. The Program shall also have the right to suspend the sale of its Class A shares if trading on the New York Stock Exchange shall have been suspended, if a banking moratorium shall have been declared by Federal or New York authorities, or if there shall have been some other event, which, in the judgment of the Program, makes it impracticable or inadvisable to sell the Class A shares.
(f) The Program, or any agent of the Program designated in writing by the Program, shall be promptly advised of all purchase orders for Class A shares received by the Distributor. Any order may be rejected by the Program; provided, however, that the Program will not arbitrarily or without reasonable cause refuse
to accept or confirm orders for the purchase of Class A shares from eligible investors. The Program (or its agent) will confirm orders upon their receipt, will make appropriate book entries and, upon receipt by the Program (or its agent) of payment therefor, will deliver deposit receipts or certificates for such Class A shares pursuant to the instructions of the Distributor. Payment shall be made to the Program in New York Clearing House funds. The Distributor agrees to cause such payment and such instructions to be delivered promptly to the Program (or its agent).
(a) Any of the outstanding Class A shares may be tendered for redemption at any time, and the Program agrees to repurchase or redeem the Class A shares so tendered in accordance with its obligations as set forth in Article VI of its Articles of Incorporation, as amended from time to time, and in accordance with the applicable provisions set forth in the prospectus and statement of additional information. The price to be paid to redeem or repurchase the Class A shares shall be equal to the net asset value calculated in accordance with the provisions of Section 3(d) hereof, less any contingent deferred sales charge ("CDSC"), redemption fee or other charge(s), if any, set forth in the prospectus and statement of additional information relating to the Portfolio. All payments by the Program hereunder shall be made in the manner set forth below. The redemption or repurchase
by the Program of any of the Class A shares purchased by or through the Distributor will not affect the sales charge secured by the Distributor or any selected dealer in the course of the original sale, except that if any Class A shares are tendered for redemption or repurchase within seven business days after the date of the confirmation of the original purchase, the right to the sales charge shall be forfeited by the Distributor and the selected dealer which sold such Class A shares.
The Program shall pay the total amount of the redemption price as defined in the above paragraph pursuant to the instructions of the Distributor in New York Clearing House funds on or before the seventh business day subsequent to its having received the notice of redemption in proper form. The proceeds of any redemption of shares shall be paid by the Program as follows: (i) any applicable CDSC shall be paid to the Distributor, and (ii) the balance shall be paid to or for the account of the shareholder, in each case in accordance with the applicable provisions of the prospectus and statement of additional information.
(b) Redemption of Class A shares or payment may be suspended at times when the New York Stock Exchange is closed, when trading on said Exchange is suspended, when trading on said Exchange is restricted, when an emergency exists as a result of which disposal by the Program of securities owned by it is not reasonably practicable or it is not reasonably practicable for the Program fairly to determine the value of the net assets of
the Portfolio, or during any other period when the Securities and Exchange Commission, by order, so permits.
(a) The Program shall furnish to the Distributor copies of all information, financial statements and other papers which the Distributor may reasonably request for use in connection with the distribution of Class A shares of the Portfolio, and this shall include, upon request by the Distributor, one certified copy of all financial statements prepared for the Program by independent public accountants. The Program shall make available to the Distributor such number of copies of the prospectus and statement of additional information relating to the Portfolio as the Distributor shall reasonably request.
(b) The Program shall take, from time to time, but subject to any necessary approval of the Class A shareholders, all necessary action to fix the number of authorized Class A shares and such steps as may be necessary to register the same under the Securities Act, to the end that there will be available for sale such number of Class A shares as the Distributor may reasonably be expected to sell.
(c) The Program shall use its best efforts to qualify and maintain the qualification of an appropriate number of its Class A shares for sale under the securities laws of such states as the Distributor and the Program may approve. Any such qualification may be withheld, terminated or withdrawn by the Program at any time in its discretion. As provided in Section 8(c) hereof, the
expense of qualification and maintenance of qualification shall be borne by the Program. The Distributor shall furnish such information and other material relating to its affairs and activities as may be required by the Program in connection with such qualification.
(a) The Distributor shall devote reasonable time and effort to effect sales of Class A shares of the Portfolio but shall not be obligated to sell any specific number of Class A shares. The services of the Distributor to the Program hereunder are not to be deemed exclusive and nothing herein contained shall prevent the Distributor from entering into like arrangements with other investment companies so long as the performance of its obligations hereunder is not impaired thereby.
(b) In selling the Class A shares of the Portfolio, the Distributor shall use its best efforts in all respects duly to conform with the requirements of all Federal and state laws relating to the sale of such securities. Neither the Distributor nor any selected dealer, as defined in Section 7 hereof, nor any other person is authorized by the Program to give any information or to make any representations, other than those contained in the registration statement or related prospectus and statement of
additional information and any sales literature specifically approved by the Program.
(c) The Distributor shall adopt and follow procedures, as approved by the officers of the Program, for the confirmation of sales to eligible investors and selected dealers, the collection of amounts payable by eligible investors and selected dealers on such sales, and the cancellation of unsettled transactions, as may be necessary to comply with the requirements of the National Association of Securities Dealers, Inc. (the "NASD"), as such requirements may from time to time exist.
(a) The Distributor shall have the right to enter into selected dealers agreements with securities dealers of its choice ("selected dealers") for the sale of Class A shares and fix therein the portion of the sales charge which may be allocated to the selected dealers; provided that the Program shall approve the forms of agreements with dealers and the dealer compensation set forth therein. Class A shares sold to selected dealers shall be for resale by such dealers only at the public offering price(s) set forth in the prospectus and statement of additional information. The form of agreement with selected dealers to be used during the continuous offering of the Class A shares is attached hereto as Exhibit A.
(b) Within the United States, the Distributor shall offer and sell Class A shares only to such selected dealers as are members in good standing of the NASD.
(a) The Program shall bear all costs and expenses of the Portfolio, including fees and disbursements of its counsel and auditors, in connection with the preparation and filing of any required registration statements and/or prospectuses and statements of additional information under the Investment Company Act, the Securities Act, and all amendments and supplements thereto, and preparing and mailing annual and interim reports and proxy materials to Class A shareholders (including but not limited to the expense of setting in type any such registration statements, prospectuses, statements of additional information, annual or interim reports or proxy materials).
(b) The Distributor shall be responsible for any payments made to selected dealers as reimbursement for their expenses associated with payments of sales commissions to financial consultants. In addition, after the prospectuses, statements of additional information and annual and interim reports have been prepared and set in type, the Distributor shall bear the costs and expenses of printing and distributing any copies thereof which are to be used in connection with the offering of Class A shares to selected dealers or eligible investors pursuant to this Agreement. The Distributor shall bear the costs and expenses of preparing, printing and distributing any other literature used by the Distributor or furnished by it for use by selected dealers in connection with the offering of the Class A shares for sale to
eligible investors and any expenses of advertising incurred by the Distributor in connection with such offering.
(c) The Program shall bear the cost and expenses of qualification of the Class A shares for sale pursuant to this Agreement and, if necessary or advisable in connection therewith, of qualifying the Program as a broker or dealer in such states of the United States or other jurisdictions as shall be selected by the Program and the Distributor pursuant to Section 5(c) hereof and the cost and expenses payable to each such state for continuing qualification therein until the Portfolio decides to discontinue such qualification pursuant to Section 5(c) hereof.
(a) The Program shall indemnify and hold harmless the Distributor and each person, if any, who controls the Distributor against any loss, liability, claim, damage or expense (including the reasonable cost of investigating or defending any alleged loss, liability, claim, damage or expense and reasonable counsel fees incurred in connection therewith), as incurred, arising by reason of any person acquiring any Class A shares, which may be based upon the Securities Act, or on any other statute or at common law, on the ground that the registration statement or related prospectus and statement of additional information relating to the Portfolio, as from time to time amended and supplemented, or an annual or interim report to shareholders relating to the Portfolio, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading, unless such statement or omission was made in reliance upon, and in conformity with, information furnished to the Program in connection therewith by or on behalf of the Distributor; provided, however, that in no case (i) is the indemnity of the Program in favor of the Distributor and any such controlling persons to be deemed to protect such Distributor or any such controlling persons thereof against any liability to the Program or its security holders to which the Distributor or any such controlling persons would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of their duties or by reason of the reckless disregard of their obligations and duties under this Agreement; or (ii) is the Program to be liable under its indemnity agreement contained in this paragraph with respect to any claim made against the Distributor or any such controlling persons, unless the Distributor or such controlling persons, as the case may be, shall have notified the Program in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon the Distributor or such controlling persons (or after the Distributor or such controlling persons shall have received notice of such service on any designated agent), but failure to notify the Program of any such claim shall not relieve it from any liability which it may have to the person against whom such action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. The Program will be entitled to participate at its own expense in the defense or, if it so elects, to assume the defense of any suit brought to enforce any such liability, but if the Program elects to assume the defense, such defense shall be conducted by counsel chosen by it and satisfactory to the Distributor or such controlling person or persons, defendant or defendants in the suit. In the event the Program elects to assume the defense of any such suit and retain such counsel, the Distributor or such controlling person or persons, defendant or defendants in the suit shall bear the fees and expenses of any additional counsel retained by them, but in case the Program does not elect to assume the defense of any such suit, it will reimburse the Distributor or such controlling person or persons, defendant or defendants in the suit, for the reasonable fees and expenses of any counsel retained by them. The Program shall promptly notify the Distributor of the commencement of any litigation or proceedings against it or any of its officers or Directors in connection with the issuance or sale of any of the Class A shares.
(b) The Distributor shall indemnify and hold harmless the Program and each of its Directors and officers and each person, if any, who controls the Program against any loss, liability, claim, damage or expense described in the foregoing indemnity contained in subsection (a) of this Section, but only with respect to statements or omissions made in reliance upon, and in conformity with, information furnished to the Program in writing
by or on behalf of the Distributor for use in connection with the registration
statement or related prospectus and statement of additional information, as from
time to time amended, or the annual or interim reports to Class A shareholders.
In case any action shall be brought against the Program or any person so
indemnified, in respect of which indemnity may be sought against the
Distributor, the Distributor shall have the rights and duties given to the
Program, and the Program and each person so indemnified shall have the rights
and duties given to the Distributor by the provisions of subsection (a) of this
Section 9.
by the vote of a majority of the outstanding Class A voting securities of the Portfolio and (ii) by the vote of a majority of those Directors who are not parties to this Agreement or interested persons of any such party cast in person at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any penalty, by the Directors or by vote of a majority of the outstanding Class A voting securities of the Portfolio, or by the Distributor, on sixty days' written notice to the other party. This Agreement shall automatically terminate in the event of its assignment.
The terms "vote of a majority of the outstanding voting securities", "assignment", "affiliated person" and "interested person", when used in this Agreement, shall have the respective meanings specified in the Investment Company Act.
the applicable provisions of the Investment Company Act. To the extent that the applicable law of the State of New York, or any of the provisions herein, conflict with the applicable provisions of the Investment Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
MERRILL LYNCH RETIREMENT ASSET BUILDER
PROGRAM, INC.
By_____________________________________
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By_____________________________________
Title:
EXHIBIT A
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
CLASS A SHARES OF COMMON STOCK
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement with MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC., a Maryland corpration (the "Program"), pursuant to which it acts as the distributor for the sale of Class A shares of common stock, par value $0.10 per share (herein referred to as "Class A shares"), of the Program relating to the [Name of Portfolio] (the "Portfolio"), and as such has the right to distribute Class A shares of the Portfolio for resale. The Program is an open-end investment company registered under the Investment Company Act of 1940, as amended, and the Portfolio's Class A shares are registered under the Securities Act of 1933, as amended. You have received a copy of the Class A shares Distribution Agreement (the "Distribution Agreement") between ourself and the Program and reference is made herein to certain provisions of such Distribution Agreement. The terms "Prospectus" and "Statement of Additional Information" used herein refer to the prospectus and statement of additional information, respectively, on file with the Securities and Exchange Commission which is part of the most recent effective registration statement pursuant to the Securities Act of 1933, as amended. We offer to sell to you, as a member of the Selected Dealers Group, Class A shares of the Portfolio for resale to investors identified in the Prospectus and Statement of Additional Information as eligible to purchase Class A shares ("eligible investors") upon the following terms and conditions:
1. In all sales of these Class A shares to eligible investors, you shall act as dealer for your own account and in no transaction shall you have any authority to act as agent for the Program, for us or for any other member of the Selected Dealers Group, except in connection with the Merrill Lynch Mutual Portfolio Adviser program and such other special programs as we from time to time agree, in which case you shall have authority to offer and sell shares, as agent for the Program, to participants in such program.
2. Orders received from you will be accepted through us only at the public offering price applicable to each order, as set forth in the current Prospectus and Statement of Additional Information relating to the Portfolio. The procedure relating to the handling of orders shall be subject to Section 5 hereof and instructions which we or the Program shall forward from time to time to you. All orders are subject to acceptance or rejection by the Distributor or the Program in the sole discretion of either. The minimum initial and subsequent purchase requirements are as set forth in the current Prospectus and Statement of Additional Information relating to the Portfolio.
3. The sales charges for sales to eligible investors, computed as percentages of the public offering price and the amount invested, and the related discount to Selected Dealers are as follows:
Discount to
Sales Charge Selected
Sales Charge as Percentage* Dealers as
as Percentage of the Net Percentage
of the Amount of the
Amount of Purchase Offering Price Invested Offering Price
- ----------------------- --------------- --------------- ---------------
Less than
$25,000............... % % %
$25,000 but less
than $50,000.......... % % %
$50,000 but less
than $100,000......... % % %
$100,000 but less
than $250,000......... % % %
$250,000 but less
than $1,000,000....... % % %
$1,000,000 and over**.. % % %
|
* Rounded to the nearest one-hundredth percent.
** Initial sales charges may be waived for certain classes of offerees as set forth in the current Prospectus and Statement of Additional Information relating to the Portfolio. Such purchase may be subject to a contingent deferred sales charge as set forth in the current Prospectus and Statement of Additional Information.
The term "purchase" refers to a single purchase by an individual, or to concurrent purchases, which in the aggregate are at least equal to the prescribed amounts, by an individual, his spouse and their children under the age of 21 years purchasing Class A shares for his or their own account and to single purchases by a trustee or other fiduciary purchasing Class A shares for a single trust estate or single fiduciary account although more than one beneficiary is involved. The term "purchase" also includes purchases by any "company" as that term is defined in the Investment Company Act of 1940, as amended, but does not include purchases by any such company which has not been in existence for at least six months or which has no purpose other than the purchase of Class A shares of the Portfolio or Class A shares of other registered investment companies at a discount; provided, however, that it shall not include purchases by any group of individuals whose sole organizational nexus is that the participants therein are credit cardholders of a company, policyholders of an insurance company, customers of either a bank or broker- dealer or clients of an investment adviser.
The reduced sales charges are applicable through a right of accumulation under which certain eligible investors are permitted to purchase Class A shares of the Portfolio at the offering price applicable to the total of (a) the public offering price of the shares then being purchased plus (b) an amount equal to the then current net asset value or cost, whichever is higher, of the purchaser's combined holdings of Class A, Class B, Class C and Class D shares of the Portfolio and of any other series of the Program or investment company with an initial sales charge for which the Distributor acts as the distributor. For any such right of accumulation to be made available, the Distributor must be provided at the time of purchase, by the purchaser or you, with sufficient information to permit confirmation of qualification, and acceptance of the purchase order is subject to such confirmation.
The reduced sales charges are applicable to purchases aggregating $25,000 or more of Class A shares or of Class D shares of any other series of the Program or investment company with an initial sales charge for which the Distributor acts as the distributor made through you within a thirteen-month period starting with the first purchase pursuant to a Letter of Intention. A purchase not originally made pursuant to a Letter of Intention may be included under a subsequent letter executed within 90 days of such purchase if the Distributor is informed in writing of this intent within such 90-day period. If the intended amount of shares is not purchased within the
thirteen-month period, an appropriate price adjustment will be made pursuant to the terms of the Letter of Intention.
You agree to advise us promptly at our request as to amounts of any sales made by you to eligible investors qualifying for reduced sales charges. Further information as to the reduced sales charges pursuant to the right of accumulation or a Letter of Intention is set forth in the Prospectus and Statement of Additional Information.
4. You shall not place orders for any of the Class A shares unless you have already received purchase orders for such Class A shares at the applicable public offering prices and subject to the terms hereof and of the Distribution Agreement. You agree that you will not offer or sell any of the Class A shares except under circumstances that will result in compliance with the applicable Federal and state securities laws and that in connection with sales and offers to sell Class A shares you will furnish to each person to whom any such sale or offer is made a copy of the Prospectus and, if requested, the Statement of Additional Information (as then amended or supplemented) and will not furnish to any person any information relating to the Class A shares of the Portfolio which is inconsistent in any respect with the information contained in the Prospectus and Statement of Additional Information (as then amended or supplemented) or cause any advertisement to be published in any newspaper or posted in any public place without our consent and the consent of the Program.
5. As a selected dealer, you are hereby authorized (i) to place orders directly with the Program for Class A shares of the Portfolio to be resold by us to you subject to the applicable terms and conditions governing the placement of orders by us set forth in Section 3 of the Distribution Agreement and subject to the compensation provisions of Section 3 hereof and (ii) to tender Class A shares directly to the Program or its agent for redemption subject to the applicable terms and conditions set forth in Section 4 of the Distribution Agreement.
7. If any Class A shares sold to you under the terms of this Agreement are repurchased by the Program or by us for the account of the Program or are tendered for redemption within seven business days after the date of the confirmation of the
original purchase by you, it is agreed that you shall forfeit your right to, and refund to us, any discount received by you on such Class A shares.
8. No person is authorized to make any representations concerning Class A shares of the Portfolio except those contained in the current Prospectus and Statement of Additional Information relating to the Portfolio and in such printed information subsequently issued by us or the Program as information supplemental to such Prospectus and Statement of Additional Information. In purchasing Class A shares through us you shall rely solely on the representations contained in the Prospectus and Statement of Additional Information and supplemental information above mentioned. Any printed information which we furnish you other than the Prospectus, Statement of Additional Information, periodic reports and proxy solicitation material of the Program with respect to the Portfolio is our sole responsibility and not the responsibility of the Program with respect to the Portfolio, and you agree that the Program shall have no liability or responsibility to you in these respects unless expressly assumed in connection therewith.
9. You agree to deliver to each of the purchasers making purchases from you a copy of the then current Prospectus and, if requested, the Statement of Additional Information at or prior to the time of offering or sale and you agree thereafter to deliver to such purchasers copies of the annual and interim reports and proxy solicitation materials of the Program with respect to the Portfolio. You further agree to endeavor to obtain proxies from such purchasers. Additional copies of such Prospectus and Statement of Additional Information, annual or interim reports and proxy solicitation materials will be supplied to you in reasonable quantities upon request.
10. We reserve the right in our discretion, without notice, to suspend sales or withdraw the offering of Class A shares entirely or to certain persons or entities in a class or classes specified by us. Each party hereto has the right to cancel this agreement upon notice to the other party.
11. We shall have full authority to take such action as we may deem advisable in respect of all matters pertaining to the continuous offering. We shall be under no liability to you except for lack of good faith and for obligations expressly assumed by us herein. Nothing contained in this paragraph is intended to operate as, and the provisions of this paragraph shall not in any way whatsoever constitute, a waiver by you of compliance with any provision of the Securities Act of 1933, as
amended, or of the rules and regulations of the Securities and Exchange Commission issued thereunder.
12. You represent that you are a member of the National Association of Securities Dealers, Inc. and, with respect to any sales in the United States, we both hereby agree to abide by the Rules of Fair Practice of such Association.
13. Upon application to us, we will inform you as to the states in which we believe the Class A shares have been qualified for sale under, or are exempt from the requirements of, the respective securities laws of such states, but we assume no responsibility or obligation as to your right to sell Class A shares in any jurisdiction. We will file with the Department of State in New York a Further State Notice with respect to the Class A shares, if necessary.
14. All communications to us should be sent to the address below. Any notice to you shall be duly given if mailed or telegraphed to you at the address specified by you below.
15. Your first order placed pursuant to this Agreement for the purchase of Class A shares of the Portfolio will represent your acceptance of this Agreement.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By __________________________________
(Authorized Signature)
Please return one signed copy
of this agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
P.O. Box 9011
Princeton, New Jersey 08543-9011
Accepted:
Firm Name:____________________________________________
By:___________________________________________________
Address:______________________________________________
Date:_________________________________________________
EXHIBIT 99.6(b)
CLASS B SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the ____ day of __________ 1994, between MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, a Maryland corporation (the "Program"), and MERRILL LYNCH FUNDS DISTRIBUTOR, INC., a Delaware corporation (the "Distributor").
WHEREAS, the Program is registered under the Investment Company Act of 1940, as amended (the "Investment Company Act"), as an open-end investment company, and it is affirmatively in the interest of the Program to offer its shares for sale continuously; and
WHEREAS, the Directors of the Program (the "Directors") are authorized to establish separate series (the "Series") relating to separate portfolios of securities, each of which will offer separate classes of shares of common stock, par value $0.10 per share (collectively referred to as "shares"), to holders of certain retirement accounts for which Merrill Lynch, Pierce, Fenner & Smith Incorporated acts as custodian; and
WHEREAS, the Directors have established and designated the [Name of Portfolio] (the "Portfolio") as a series of the Program; and
WHEREAS, the Distributor is a securities firm engaged in the business of selling shares of investment companies either directly to purchasers or through other securities dealers; and
WHEREAS, the Program and the Distributor wish to enter into an agreement with each other with respect to the continuous offering of the Portfolio's Class B shares in order to promote the growth of the Portfolio and facilitate the distribution of its Class B shares.
NOW, THEREFORE, the parties agree as follows:
(a) The Program may, upon written notice to the Distributor, from time to time designate other principal underwriters and distributors of Class B shares with respect to areas other than the United States as to which the Distributor may have expressly waived in writing its right to act as such.
If such designation is deemed exclusive, the right of the Distributor under this Agreement to sell Class B shares in the areas so designated shall terminate, but this Agreement shall remain otherwise in full effect until terminated in accordance with the other provisions hereof.
(b) The exclusive right granted to the Distributor to purchase Class B shares from the Program shall not apply to Class B shares of the Portfolio issued in connection with the merger or consolidation of any other investment company or personal holding company with the Program or the acquisition by purchase or otherwise of all (or substantially all) the assets or the outstanding Class B shares of any such company by the Program.
(c) Such exclusive right also shall not apply to Class B shares issued pursuant to reinvestment of dividends or capital gains distributions.
(d) Such exclusive right also shall not apply to Class B shares issued pursuant to any conversion, exchange or reinstatement privilege afforded redeeming shareholders or to any other Class B shares as shall be agreed between the Program and the Distributor from time to time.
(a) The Distributor shall have the right to buy from the Program the Class B shares needed, but not more than the Class B shares needed (except for clerical errors in transmission) to fill unconditional orders for Class B shares of the Portfolio
placed with the Distributor by eligible investors or securities dealers. Investors eligible to purchase Class B shares shall be those persons so identified in the currently effective prospectus and statement of additional information relating to the Portfolio (the "prospectus" and "statement of additional information", respectively) under the Securities Act of 1933, as amended (the "Securities Act"), relating to such Class B shares. The price which the Distributor shall pay for the Class B shares so purchased from the Program shall be the net asset value, determined as set forth in Section 3(c) hereof.
(b) The Class B shares are to be resold by the Distributor to investors at net asset value, as set forth in Section 3(c) hereof, or to securities dealers having agreements with the Distributor upon the terms and conditions set forth in Section 7 hereof.
(c) The net asset value of Class B shares of the Portfolio shall be determined by the Program or any agent of the Program in accordance with the method set forth in the prospectus and statement of additional information and guidelines established by the Board of Directors.
(d) The Program shall have the right to suspend the sale of its Class B shares at times when redemption is suspended pursuant to the conditions set forth in Section 4(b) hereof. The Program shall also have the right to suspend the sale of its Class B shares if trading on the New York Stock Exchange shall have been
suspended, if a banking moratorium shall have been declared by Federal or New York authorities, or if there shall have been some other event, which, in the judgment of the Program, makes it impracticable or inadvisable to sell the Class B shares.
(e) The Program, or any agent of the Program designated in writing by the Program, shall be promptly advised of all purchase orders for Class B shares received by the Distributor. Any order may be rejected by the Program; provided, however, that the Program will not arbitrarily or without reasonable cause refuse to accept or confirm orders for the purchase of Class B shares. The Program (or its agent) will confirm orders upon their receipt, will make appropriate book entries and, upon receipt by the Program (or its agent) of payment therefor, will deliver deposit receipts or certificates for such Class B shares pursuant to the instructions of the Distributor. Payment shall be made to the Program in New York Clearing House funds. The Distributor agrees to cause such payment and such instructions to be delivered promptly to the Program (or its agent).
(a) Any of the outstanding Class B shares may be tendered for redemption at any time, and the Program agrees to repurchase or redeem the Class B shares so tendered in accordance with its obligations as set forth in Article VI of its Articles of Incorporation, as amended from time to time, and in accordance
with the applicable provisions set forth in the prospectus and statement of additional relating to the Portfolio. The price to be paid to redeem or repurchase the Class B shares shall be equal to the net asset value calculated in accordance with the provisions of Section 3(c) hereof, less any contingent deferred sales charge ("CDSC"), redemption fee or other charge(s), if any, set forth in the prospectus and statement of additional information relating to the Portfolio. All payments by the Program hereunder shall be made in the manner set forth below.
The Program shall pay the total amount of the redemption price as defined in the above paragraph pursuant to the instructions of the Distributor on or before the seventh business day subsequent to its having received the notice of redemption in proper form. The proceeds of any redemption of shares shall be paid by the Program as follows: (i) any applicable CDSC shall be paid to the Distributor, and (ii) the balance shall be paid to or for the account of the shareholder, in each case in accordance with the applicable provisions of the prospectus and statement of additional information.
(b) Redemption of Class B shares or payment may be suspended at times when the New York Stock Exchange is closed, when trading on said Exchange is suspended, when trading on said Exchange is restricted, when an emergency exists as a result of which disposal by the Program of securities owned by it is not reasonably practicable or it is not reasonably practicable for
the Program fairly to determine the value of its net assets, or during any other period when the Securities and Exchange Commission, by order, so permits.
(a) The Program shall furnish to the Distributor copies of all information, financial statements and other papers which the Distributor may reasonably request for use in connection with the distribution of Class B shares of the Portfolio, and this shall include, upon request by the Distributor, one certified copy of all financial statements prepared for the Program by independent public accountants. The Program shall make available to the Distributor such number of copies of its prospectus and statement of additional information as the Distributor shall reasonably request.
(b) The Program shall take, from time to time, but subject to any necessary approval of the shareholders, all necessary action to fix the number of authorized shares and such steps as may be necessary to register the same under the Securities Act to the end that there will be available for sale such number of Class B shares as the Distributor reasonably may be expected to sell.
(c) The Program shall use its best efforts to qualify and maintain the qualification of an appropriate number of its Class B shares for sale under the securities laws of such states as the Distributor and the Program may approve. Any such qualification
may be withheld, terminated or withdrawn by the Program at any time in its discretion. As provided in Section 8(c) hereof, the expense of qualification and maintenance of qualification shall be borne by the Program. The Distributor shall furnish such information and other material relating to its affairs and activities as may be required by the Program in connection with such qualification.
(d) The Program will furnish, in reasonable quantities upon request by the Distributor, copies of annual and interim reports of the Portfolio.
(a) The Distributor shall devote reasonable time and effort to effect sales of Class B shares of the Portfolio but shall not be obligated to sell any specific number of shares. The services of the Distributor to the Program hereunder are not to be deemed exclusive and nothing herein contained shall prevent the Distributor from entering into like arrangements with other investment companies so long as the performance of its obligations hereunder is not impaired thereby.
(b) In selling the Class B shares of the Portfolio, the Distributor shall use its best efforts in all respects duly to conform with the requirements of all Federal and state laws relating to the sale of such securities. Neither the Distributor nor any selected dealer, as defined in Section 7 hereof, nor any other person is authorized by the Program to give any information
or to make any representations, other than those contained in the registration statement or related prospectus and statement of additional information and any sales literature specifically approved by the Program.
(c) The Distributor shall adopt and follow procedures, as approved by the officers of the Program, for the confirmation of sales to investors and selected dealers, the collection of amounts payable by investors and selected dealers on such sales, and the cancellation of unsettled transactions, as may be necessary to comply with the requirements of the National Association of Securities Dealers, Inc. (the "NASD"), as such requirements may from time to time exist.
(a) The Distributor shall have the right to enter into selected dealer
agreements with securities dealers of its choice ("selected dealers") for the
sale of Class B shares; provided, that the Program shall approve the forms of
agreements with dealers. Class B shares sold to selected dealers shall be for
resale by such dealers only at net asset value determined as set forth in
Section 3(c) hereof. The form of agreement with selected dealers to be used
during the continuous offering of the shares is attached hereto as Exhibit A.
(b) Within the United States, the Distributor shall offer and sell Class B shares only to such selected dealers that are members in good standing of the NASD.
(a) The Program shall bear all costs and expenses of the Portfolio, including fees and disbursements of its counsel and auditors, in connection with the preparation and filing of any required registration statements and/or prospectuses and statements of additional information under the Investment Company Act, the Securities Act, and all amendments and supplements thereto, and preparing and mailing annual and interim reports and proxy materials to Class B shareholders (including but not limited to the expense of setting in type any such registration statements, prospectuses, statements of additional information, annual or interim reports or proxy materials).
(b) The Distributor shall be responsible for any payments made to selected dealers as reimbursement for their expenses associated with payments of sales commissions to financial consultants. In addition, after the prospectuses, statements of additional information and annual and interim reports have been prepared and set in type, the Distributor shall bear the costs and expenses of printing and distributing any copies thereof which are to be used in connection with the offering of Class B shares to selected dealers or investors pursuant to this Agreement. The Distributor shall bear the costs and expenses of preparing, printing and distributing any other literature used by the Distributor or furnished by it for use by selected dealers in connection with the offering of the Class B shares for sale to
the public and any expenses of advertising incurred by the Distributor in connection with such offering. It is understood and agreed that so long as the Portfolio's Class B Shares Distribution Plan pursuant to Rule 12b-1 under the Investment Company Act remains in effect, any expenses incurred by the Distributor hereunder may be paid from amounts recovered by it from the Portfolio under such Plan.
(c) The Program shall bear the cost and expenses of qualification of the
Class B shares for sale pursuant to this Agreement and, if necessary or
advisable in connection therewith, of qualifying the Program as a broker or
dealer in such states of the United States or other jurisdictions as shall be
selected by the Program and the Distributor pursuant to Section 5(c) hereof and
the cost and expenses payable to each such state for continuing qualification
therein until the Program decides to discontinue such qualification pursuant to
Section 5(c) hereof.
(a) The Program shall indemnify and hold harmless the Distributor and each person, if any, who controls the Distributor against any loss, liability, claim, damage or expense (including the reasonable cost of investigating or defending any alleged loss, liability, claim, damage or expense and reasonable counsel fees incurred in connection therewith), as incurred, arising by reason of any person acquiring any Class B shares, which may be based upon the Securities Act, or on any other statute or at
common law, on the ground that the registration statement or related prospectus and statement of additional information relating to the Portfolio, as from time to time amended and supplemented, or an annual or interim report to Class B shareholders relating to the Portfolio, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, unless such statement or omission was made in reliance upon, and in conformity with, information furnished to the Program in connection therewith by or on behalf of the Distributor; provided, however, that in no case (i) is the indemnity of the Program in favor of the Distributor and any such controlling persons to be deemed to protect such Distributor or any such controlling persons thereof against any liability to the Program or its security holders to which the Distributor or any such controlling persons would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of their duties or by reason of the reckless disregard of their obligations and duties under this Agreement; or (ii) is the Program to be liable under its indemnity agreement contained in this paragraph with respect to any claim made against the Distributor or any such controlling persons, unless the Distributor or such controlling persons, as the case may be, shall have notified the Program in writing within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been served upon the Distributor or such controlling persons (or after the Distributor or such controlling persons shall have received notice of such service on any designated agent), but failure to notify the Program of any such claim shall not relieve it from any liability which it may have to the person against whom such action is brought otherwise than on account of its indemnity agreement contained in this paragraph. The Program will be entitled to participate at its own expense in the defense or, if it so elects, to assume the defense of any suit brought to enforce any such liability, but if the Program elects to assume the defense, such defense shall be conducted by counsel chosen by it and satisfactory to the Distributor or such controlling person or persons, defendant or defendants in the suit. In the event the Program elects to assume the defense of any such suit and retain such counsel, the Distributor or such controlling person or persons, defendant or defendants in the suit shall bear the fees and expenses, as incurred, of any additional counsel retained by them, but in case the Program does not elect to assume the defense of any such suit, it will reimburse the Distributor or such controlling person or persons, defendant or defendants in the suit, for the reasonable fees and expenses, as incurred, of any counsel retained by them. The Program shall promptly notify the Distributor of the commencement of any litigation or proceedings against it or any of its officers or
Directors in connection with the issuance or sale of any of the Class B shares.
(b) The Distributor shall indemnify and hold harmless the Program and each of its Directors and officers and each person, if any, who controls the Program against any loss, liability, claim, damage or expense, as incurred, described in the foregoing indemnity contained in subsection (a) of this Section, but only with respect to statements or omissions made in reliance upon, and in conformity with, information furnished to the Program in writing by or on behalf of the Distributor for use in connection with the registration statement or related prospectus and statement of additional information, as from time to time amended, or the annual or interim reports to shareholders. In case any action shall be brought against the Program or any person so indemnified, in respect of which indemnity may be sought against the Distributor, the Distributor shall have the rights and duties given to the Program, and the Program and each person so indemnified shall have the rights and duties given to the Distributor by the provisions of subsection (a) of this Section 9.
particpants in such program. The terms of this Agreement shall apply to such sales, including terms as to the offering price of shares, the proceeds to be paid to the Portfolio, the duties of the Distributor, the payment of expenses and indemnification obligations of the Program and the Distributor.
This Agreement may be terminated at any time, without the payment of any penalty, by the Directors or by vote of a majority of the outstanding voting securities of the Portfolio, or by the Distributor, on sixty days' written notice to the other party. This Agreement shall automatically terminate in the event of its assignment.
The terms "vote of a majority of the outstanding voting securities", "assignment", "affiliated person" and "interested person", when used in this Agreement, shall have the respective meanings specified in the Investment Company Act.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
MERRILL LYNCH RETIREMENT ASSET BUILDER
PROGRAM, INC.
By ____________________________________
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By ____________________________________
Title:
EXHIBIT A
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
CLASS B SHARES OF COMMON STOCK
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement with Merrill Lynch Retirement Asset Builder Program, Inc. a Maryland corporation (the "Program"), pursuant to which it acts as the distributor for the sale of Class B shares of common stock, par value $0.10 per share (herein referred to as the "Class B shares"), of the Program relating to the [Name of Portfolio] (the "Portfolio") and as such has the right to distribute Class B shares of the Program for resale. The Program is an open-end investment company registered under the Investment Company Act of 1940, as amended, and its Class B shares being offered to the public are registered under the Securities Act of 1933, as amended. You have received a copy of the Class B Shares Distribution Agreement (the "Distribution Agreement") between ourself and the Program and reference is made herein to certain provisions of such Distribution Agreement. The terms "Prospectus" and "Statement of Additional Information" as used herein refer to the prospectus and statement of additional information, respectively, on file with the Securities and Exchange Commission which is part of the most recent effective registration statement pursuant to the Securities Act of 1933, as amended. We offer to sell to you, as a member of the Selected Dealers Group, Class B shares of the Portfolio upon the following terms and conditions:
1. In all sales of these Class B shares to the public, you shall act as dealer for your own account and in no transaction shall you have any authority to act as agent for the Program, for us or for any other member of the Selected Dealers Group, except in connection with the Merrill Lynch Mutual Program Adviser program and such other special programs as we from time to time agree, in which case you shall have authority to offer and sell shares, as agent for the Program, to participants in such program.
2. Orders received from you will be accepted through us only at the public offering price applicable to each order, as set forth in the current Prospectus and Statement of Additional Information relating to the Portfolio. The procedure relating to the handling of orders shall be subject to Section 4 hereof and instructions which we or the Program shall forward from time to
time to you. All orders are subject to acceptance or rejection by the Distributor or the Program in the sole discretion of either. The minimum initial and subsequent purchase requirements are as set forth in the current Prospectus and Statement of Additional Information relating to the Portfolio.
3. You shall not place orders for any of the Class B shares unless you have already received purchase orders for such Class B shares at the applicable public offering prices and subject to the terms hereof and of the Distribution Agreement. You agree that you will not offer or sell any of the Class B shares except under circumstances that will result in compliance with the applicable Federal and state securities laws and that in connection with sales and offers to sell Class B shares you will furnish to each person to whom any such sale or offer is made a copy of the Prospectus and, if requested, the Statement of Additional Information (as then amended or supplemented) and will not furnish to any person any information relating to the Class B shares of the Portfolio which is inconsistent in any respect with the information contained in the Prospectus and Statement of Additional Information (as then amended or supplemented) or cause any advertisement to be published in any newspaper or posted in any public place without our consent and the consent of the Program.
4. As a selected dealer, you are hereby authorized (i) to place orders directly with the Program for Class B shares of the Portfolio to be resold by us to you subject to the applicable terms and conditions governing the placement of orders by us set forth in Section 3 of the Distribution Agreement and (ii) to tender Class B shares directly to the Program or its agent for redemption subject to the applicable terms and conditions set forth in Section 4 of the Distribution Agreement.
6. No person is authorized to make any representations concerning Class B shares of the Portfolio except those contained in the current Prospectus and Statement of Additional Information of the Portfolio and in such printed information subsequently issued by us or the Program as information supplemental to such Prospectus and Statement of Additional Information. In purchasing Class B shares through us you shall rely solely on the representations contained in the Prospectus and Statement of Additional Information and supplemental information above mentioned. Any printed information which we furnish you other than the Prospectus, Statement of Additional Information,
periodic reports and proxy solicitation material of the Program relating to the Portfolio is our sole responsibility and not the responsibility of the Program and you agree that the Program shall have no liability or responsibility to you in these respects unless expressly assumed in connection therewith.
7. You agree to deliver to each of the purchasers making purchases from you a copy of the then current Prospectus and, if requested, the Statement of Additional Information at or prior to the time of offering or sale and you agree thereafter to deliver to such purchasers copies of the annual and interim reports and proxy solicitation materials of the Program relating to the Portfolio. You further agree to endeavor to obtain proxies from such purchasers. Additional copies of such Prospectus and Statement of Additional Information, annual or interim reports and proxy solicitation materials will be supplied to you in reasonable quantities upon request.
8. We reserve the right in our discretion, without notice, to suspend sales or withdraw the offering of Class B shares entirely or to certain persons or entities in a class or classes specified by us. Each party hereto has the right to cancel this Agreement upon notice to the other party.
9. We shall have full authority to take such action as we may deem advisable in respect of all matters pertaining to the continuous offering. We shall be under no liability to you except for lack of good faith and for obligations expressly assumed by us herein. Nothing contained in this paragraph is intended to operate as, and the provisions of this paragraph shall not in any way whatsoever constitute, a waiver by you of compliance with any provision of the Securities Act of 1933, as amended, or of the rules and regulations of the Securities and Exchange Commission issued thereunder.
10. You represent that you are a member of the National Association of Securities Dealers, Inc. and, with respect to any sales in the United States, we both hereby agree to abide by the Rules of Fair Practice of such Association.
11. Upon application to us, we will inform you as to the states in which we believe the Class B shares have been qualified for sale under, or are exempt from the requirements of, the respective securities laws of such states, but we assume no responsibility or obligation as to your right to sell Class B shares in any jurisdiction. We will file with the Department of State in New York a Further State Notice with respect to the Class B shares, if necessary.
12. All communications to us should be sent to the address below. Any notice to you shall be duly given if mailed or telegraphed to you at the address specified by you below.
13. Your first order placed pursuant to this Agreement for the purchase of Class B shares of the Portfolio will represent your acceptance of this Agreement.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By __________________________________
(Authorized Signature)
Please return one signed copy
of this Agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
P.O. Box 9011
Princeton, New Jersey 08543-9011
Accepted:
Firm Name: ____________________________________________
By: ___________________________________________________
Address: ______________________________________________
Date: _________________________________________________
EXHIBIT 99.6(c)
CLASS C SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the ______ day of December 1994, between MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC., a Maryland corporation (the "Program"), and MERRILL LYNCH FUNDS DISTRIBUTOR, INC., a Delaware corporation (the "Distributor").
WHEREAS, the Program is registered under the Investment Company Act of 1940, as amended (the "Investment Company Act"), as an open-end investment company, and it is affirmatively in the interest of the Program to offer its shares for sale continuously; and
WHEREAS, the Directors of the Program (the "Directors") are authorized to establish separate series (the "Series") relating to separate portfolios of securities, each of which will offer separate classes of shares of common stock, par value $0.10 per share (collectively referred to as "shares"), to holders of certain retirement accounts for which Merrill Lynch, Pierce, Fenner & Smith Incorporated acts as custodian; and
WHEREAS, the Directors have established and designated the [Name of Portfolio] (the "Portfolio") as a series of the Program; and
WHEREAS, the Distributor is a securities firm engaged in the business of selling shares of investment companies either directly to purchasers or through other securities dealers; and
WHEREAS, the Program and the Distributor wish to enter into an agreement with each other with respect to the continuous offering of the Portfolio's Class C shares in order to promote the growth of the Portfolio and facilitate the distribution of its Class C shares.
NOW, THEREFORE, the parties agree as follows:
(a) The Program may, upon written notice to the Distributor, from time to time designate other principal underwriters and distributors of Class C shares with respect to areas other than the United States as to which the Distributor may have expressly waived in writing its right to act as such.
If such designation is deemed exclusive, the right of the Distributor under this Agreement to sell Class C shares in the areas so designated shall terminate, but this Agreement shall remain otherwise in full effect until terminated in accordance with the other provisions hereof.
(b) The exclusive right granted to the Distributor to purchase Class C shares from the Program shall not apply to Class C shares of the Portfolio issued in connection with the merger or consolidation of any other investment company or personal holding company with the Program or the acquisition by purchase or otherwise of all (or substantially all) the assets or the outstanding Class C shares of any such company by the Program.
(c) Such exclusive right also shall not apply to Class C shares issued pursuant to reinvestment of dividends or capital gains distributions.
(d) Such exclusive right also shall not apply to Class C shares issued pursuant to any conversion, exchange or reinstatement privilege afforded redeeming shareholders or to any other Class C shares as shall be agreed between the Program and the Distributor from time to time.
placed with the Distributor by eligible investors or securities dealers. Investors eligible to purchase Class C shares shall be those persons so identified in the currently effective prospectus and statement of additional information relating to the Portfolio (the "prospectus" and "statement of additional information", respectively) under the Securities Act of 1933, as amended (the "Securities Act"), relating to such Class C shares. The price which the Distributor shall pay for the Class C shares so purchased from the Program shall be the net asset value, determined as set forth in Section 3(c) hereof.
(b) The Class C shares are to be resold by the Distributor to investors at net asset value, as set forth in Section 3(c) hereof, or to securities dealers having agreements with the Distributor upon the terms and conditions set forth in Section 7 hereof.
(c) The net asset value of Class C shares of the Portfolio shall be determined by the Program or any agent of the Program in accordance with the method set forth in the prospectus and statement of additional information and guidelines established by the Board of Directors.
(d) The Program shall have the right to suspend the sale of its Class C shares at times when redemption is suspended pursuant to the conditions set forth in Section 4(b) hereof. The Program shall also have the right to suspend the sale of its Class C shares if trading on the New York Stock Exchange shall have been
suspended, if a banking moratorium shall have been declared by Federal or New York authorities, or if there shall have been some other event, which, in the judgment of the Program, makes it impracticable or inadvisable to sell the Class C shares.
(e) The Program, or any agent of the Program designated in writing by the Program, shall be promptly advised of all purchase orders for Class C shares received by the Distributor. Any order may be rejected by the Program; provided, however, that the Program will not arbitrarily or without reasonable cause refuse to accept or confirm orders for the purchase of Class C shares. The Program (or its agent) will confirm orders upon their receipt, will make appropriate book entries and, upon receipt by the Program (or its agent) of payment therefor, will deliver deposit receipts or certificates for such Class C shares pursuant to the instructions of the Distributor. Payment shall be made to the Program in New York Clearing House funds. The Distributor agrees to cause such payment and such instructions to be delivered promptly to the Program (or its agent).
(a) Any of the outstanding Class C shares may be tendered for redemption at any time, and the Program agrees to repurchase or redeem the Class C shares so tendered in accordance with its obligations as set forth in Article VI of its Articles of Incorporation, as amended from time to time, and in accordance
with the applicable provisions set forth in the prospectus and statement of additional information relating to the Portfolio. The price to be paid to redeem or repurchase the Class C shares shall be equal to the net asset value calculated in accordance with the provisions of Section 3(c) hereof, less any contingent deferred sales charge ("CDSC"), redemption fee or other charge(s), if any, set forth in the prospectus and statement of additional information relating to the Portfolio. All payments by the Program hereunder shall be made in the manner set forth below.
The Program shall pay the total amount of the redemption price as defined in the above paragraph pursuant to the instructions of the Distributor on or before the seventh business day subsequent to its having received the notice of redemption in proper form. The proceeds of any redemption of shares shall be paid by the Program as follows: (i) any applicable CDSC shall be paid to the Distributor, and (ii) the balance shall be paid to or for the account of the shareholder, in each case in accordance with the applicable provisions of the prospectus and statement of additional information.
(b) Redemption of Class C shares or payment may be suspended at times when the New York Stock Exchange is closed, when trading on said Exchange is suspended, when trading on said Exchange is restricted, when an emergency exists as a result of which disposal by the Program of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Program fairly to determine the value of the net assets of the Portfolio, or during any other period when the Securities and Exchange Commission, by order, so permits.
(a) The Program shall furnish to the Distributor copies of all information, financial statements and other papers which the Distributor may reasonably request for use in connection with the distribution of Class C shares of the Portfolio, and this shall include, upon request by the Distributor, one certified copy of all financial statements prepared for the Program by independent public accountants. The Program shall make available to the Distributor such number of copies of the prospectus and statement of additional information relating to the Portfolio as the Distributor shall reasonably request.
(b) The Program shall take, from time to time, but subject to any necessary approval of the shareholders, all necessary action to fix the number of authorized shares and such steps as may be necessary to register the same under the Securities Act to the end that there will be available for sale such number of Class C shares as the Distributor reasonably may be expected to sell.
(c) The Program shall use its best efforts to qualify and maintain the qualification of an appropriate number of its Class C shares for sale under the securities laws of such states as the
Distributor and the Program may approve. Any such qualification may be withheld, terminated or withdrawn by the Program at any time in its discretion. As provided in Section 8(c) hereof, the expense of qualification and maintenance of qualification shall be borne by the Program. The Distributor shall furnish such information and other material relating to its affairs and activities as may be required by the Program in connection with such qualification.
(a) The Distributor shall devote reasonable time and effort to effect sales of Class C shares of the Portfolio but shall not be obligated to sell any specific number of shares. The services of the Distributor to the Program hereunder are not to be deemed exclusive and nothing herein contained shall prevent the Distributor from entering into like arrangements with other investment companies so long as the performance of its obligations hereunder is not impaired thereby.
(b) In selling the Class C shares of the Portfolio, the Distributor shall use its best efforts in all respects duly to conform with the requirements of all Federal and state laws relating to the sale of such securities. Neither the Distributor nor any selected dealer, as defined in Section 7 hereof, nor any
other person is authorized by the Program to give any information or to make any representations, other than those contained in the registration statement or related prospectus and statement of additional information and any sales literature specifically approved by the Program.
(c) The Distributor shall adopt and follow procedures, as approved by the officers of the Program, for the confirmation of sales to investors and selected dealers, the collection of amounts payable by investors and selected dealers on such sales, and the cancellation of unsettled transactions, as may be necessary to comply with the requirements of the National Association of Securities Dealers, Inc. (the "NASD"), as such requirements may from time to time exist.
(a) The Distributor shall have the right to enter into selected dealer
agreements with securities dealers of its choice ("selected dealers") for the
sale of Class C shares; provided, that the Program shall approve the forms of
agreements with dealers. Class C shares sold to selected dealers shall be for
resale by such dealers only at net asset value determined as set forth in
Section 3(c) hereof. The form of agreement with selected dealers to be used
during the continuous offering of the shares is attached hereto as Exhibit A.
(a) The Program shall bear all costs and expenses of the Portfolio, including fees and disbursements of its counsel and auditors, in connection with the preparation and filing of any required registration statements and/or prospectuses and statements of additional information under the Investment Company Act, the Securities Act, and all amendments and supplements thereto, and preparing and mailing annual and interim reports and proxy materials to Class C shareholders (including but not limited to the expense of setting in type any such registration statements, prospectuses, statements of additional information, annual or interim reports or proxy materials).
(b) The Distributor shall be responsible for any payments made to selected dealers as reimbursement for their expenses associated with payments of sales commissions to financial consultants. In addition, after the prospectuses, statements of additional information and annual and interim reports have been prepared and set in type, the Distributor shall bear the costs and expenses of printing and distributing any copies thereof which are to be used in connection with the offering of Class C shares to selected dealers or investors pursuant to this Agreement. The Distributor shall bear the costs and expenses of
preparing, printing and distributing any other literature used by the Distributor or furnished by it for use by selected dealers in connection with the offering of the Class C shares for sale to the public and any expenses of advertising incurred by the Distributor in connection with such offering. It is understood and agreed that so long as the Portfolio's Class C Shares Distribution Plan pursuant to Rule 12b-1 under the Investment Company Act remains in effect, any expenses incurred by the Distributor hereunder may be paid from amounts recovered by it from the Portfolio under such Plan.
(c) The Program shall bear the costs and expenses of qualification of the
Class C shares for sale pursuant to this Agreement and, if necessary or
advisable in connection therewith, of qualifying the Program as a broker or
dealer in such states of the United States or other jurisdictions as shall be
selected by the Program and the Distributor pursuant to Section 5(c) hereof and
the cost and expenses payable to each such state for continuing qualification
therein until the Program decides to discontinue such qualification pursuant to
Section 5(c) hereof.
(a) The Program shall indemnify and hold harmless the Distributor and each person, if any, who controls the Distributor against any loss, liability, claim, damage or expense (including the reasonable cost of investigating or defending any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith), as incurred, arising by reason of any person acquiring any Class C shares, which may be based upon the Securities Act, or on any other statute or at common law, on the ground that the registration statement or related prospectus and statement of additional information relating to the Portfolio, as from time to time amended and supplemented, or an annual or interim report to Class C shareholders relating to the Portfolio, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, unless such statement or omission was made in reliance upon, and in conformity with, information furnished to the Program in connection therewith by or on behalf of the Distributor; provided, however, that in no case (i) is the indemnity of the Program in favor of the Distributor and any such controlling persons to be deemed to protect such Distributor or any such controlling persons thereof against any liability to the Program or its security holders to which the Distributor or any such controlling persons would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of their duties or by reason of the reckless disregard of their obligations and duties under this Agreement; or (ii) is the Program to be liable under its indemnity agreement contained in this paragraph with respect to any claim made against the Distributor or any such controlling
persons, unless the Distributor or such controlling persons, as the case may be, shall have notified the Program in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon the Distributor or such controlling persons (or after the Distributor or such controlling persons shall have received notice of such service on any designated agent), but failure to notify the Program of any such claim shall not relieve it from any liability which it may have to the person against whom such action is brought otherwise than on account of its indemnity agreement contained in this paragraph. The Program will be entitled to participate at its own expense in the defense or, if it so elects, to assume the defense of any suit brought to enforce any such liability, but if the Program elects to assume the defense, such defense shall be conducted by counsel chosen by it and satisfactory to the Distributor or such controlling person or persons, defendant or defendants in the suit. In the event the Program elects to assume the defense of any such suit and retain such counsel, the Distributor or such controlling person or persons, defendant or defendants in the suit shall bear the fees and expenses, as incurred, of any additional counsel retained by them, but in case the Program does not elect to assume the defense of any such suit, it will reimburse the Distributor or such controlling person or persons, defendant or defendants in the suit, for the reasonable fees and expenses, as
incurred, of any counsel retained by them. The Program shall promptly notify the Distributor of the commencement of any litigation or proceedings against it or any of its officers or Directors in connection with the issuance or sale of any of the Class C shares.
(b) The Distributor shall indemnify and hold harmless the Program and each of its Directors and officers and each person, if any, who controls the Program against any loss, liability, claim, damage or expense, as incurred, described in the foregoing indemnity contained in subsection (a) of this Section, but only with respect to statements or omissions made in reliance upon, and in conformity with, information furnished to the Program in writing by or on behalf of the Distributor for use in connection with the registration statement or related prospectus and statement of additional information, as from time to time amended, or the annual or interim reports to shareholders. In case any action shall be brought against the Program or any person so indemnified, in respect of which indemnity may be sought against the Distributor, the Distributor shall have the rights and duties given to the Program, and the Program and each person so indemnified shall have the rights and duties given to the Distributor by the provisions of subsection (a) of this Section 9.
Program, the Distributor and its affiliate, Merrill Lynch, Pierce, Fenner & Smith Incorporated, are authorized to offer and sell shares of the Portfolio, as agent for the Portfolio, to participants in such program. The terms of this Agreement shall apply to such sales, including terms as to the offering price of shares, the proceeds to be paid to the Portfolio, the duties of the Distributor, the payment of expenses and indemnification obligations of the Portfolio and the Distributor.
This Agreement may be terminated at any time, without the payment of any penalty, by the Directors or by vote of a majority of the outstanding Class C voting securities of the Portfolio, or by the Distributor, on sixty days' written notice to the other party. This Agreement shall automatically terminate in the event of its assignment.
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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
MERRILL LYNCH RETIREMENT ASSET
BUILDER PROGRAM, INC.
By ____________________________________
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By ____________________________________
Title:
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
CLASS C SHARES OF COMMON STOCK
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement with Merrill Lynch Retirement Asset Builder Program, Inc., a Maryland corporation (the "Program"), pursuant to which it acts as the distributor for the sale of Class C shares of common stock, par value $0.10 per share (herein referred to as the "Class C shares"), of the Program relating to the [Name of Portfolio] (the "Portfolio") and as such has the right to distribute Class C shares of the Portfolio for resale. The Program is an open-end investment company registered under the Investment Company Act of 1940, as amended, and the Portfolio's Class C shares being offered to the public are registered under the Securities Act of 1933, as amended. You have received a copy of the Class C Shares Distribution Agreement (the "Distribution Agreement") between ourself and the Program and reference is made herein to certain provisions of such Distribution Agreement. The terms "Prospectus" and "Statement of Additional Information" as used herein refer to the prospectus and statement of additional information, respectively, on file with the Securities and Exchange Commission which is part of the most recent effective registration statement pursuant to the Securities Act of 1933, as amended. We offer to sell to you, as a member of the Selected Dealers Group, Class C shares of the Portfolio upon the following terms and conditions:
1. In all sales of these Class C shares to the public, you shall act as dealer for your own account and in no transaction shall you have any authority to act as agent for the Program, for us or for any other member of the Selected Dealers Group, except in connection with the Merrill Lynch Mutual Portfolio Adviser program and such other special programs as we from time to time agree, in which case you shall have authority to offer and sell shares, as agent for the Program, to participants in such program.
2. Orders received from you will be accepted through us only at the public offering price applicable to each order, as set forth in the current Prospectus and Statement of Additional Information relating to the Portfolio. The procedure relating to the handling of orders shall be subject to Section 4 hereof and
instructions which we or the Program shall forward from time to time to you. All orders are subject to acceptance or rejection by the Distributor or the Program in the sole discretion of either. The minimum initial and subsequent purchase requirements are as set forth in the current Prospectus and Statement of Additional Information relating to the Portfolio.
3. You shall not place orders for any of the Class C shares unless you have already received purchase orders for such Class C shares at the applicable public offering prices and subject to the terms hereof and of the Distribution Agreement. You agree that you will not offer or sell any of the Class C shares except under circumstances that will result in compliance with the applicable Federal and state securities laws and that in connection with sales and offers to sell Class C shares you will furnish to each person to whom any such sale or offer is made a copy of the Prospectus and, if requested, the Statement of Additional Information (as then amended or supplemented) and will not furnish to any person any information relating to the Class C shares of the Portfolio which is inconsistent in any respect with the information contained in the Prospectus and Statement of Additional Information (as then amended or supplemented) or cause any advertisement to be published in any newspaper or posted in any public place without our consent and the consent of the Program.
4. As a selected dealer, you are hereby authorized (i) to place orders directly with the Program for Class C shares of the Portfolio to be resold by us to you subject to the applicable terms and conditions governing the placement of orders by us set forth in Section 3 of the Distribution Agreement and (ii) to tender Class C shares directly to the Program or its agent for redemption subject to the applicable terms and conditions set forth in Section 4 of the Distribution Agreement.
6. No person is authorized to make any representations concerning Class C shares of the Portfolio except those contained in the current Prospectus and Statement of Additional Information relating to the Portfolio and in such printed information subsequently issued by us or the Program as information supplemental to such Prospectus and Statement of Additional Information. In purchasing Class C shares through us you shall rely solely on the representations contained in the Prospectus and Statement of Additional Information and supplemental information above mentioned. Any printed information which we
furnish you other than the Prospectus, Statement of Additional Information, periodic reports and proxy solicitation material of the Program relating to the Portfolio is our sole responsibility and not the responsibility of the Program, and you agree that the Program shall have no liability or responsibility to you in these respects unless expressly assumed in connection therewith.
7. You agree to deliver to each of the purchasers making purchases from you a copy of the then current Prospectus and, if requested, the Statement of Additional Information at or prior to the time of offering or sale and you agree thereafter to deliver to such purchasers copies of the annual and interim reports and proxy solicitation materials of the Program relating to the Portfolio. You further agree to endeavor to obtain proxies from such purchasers. Additional copies of the Prospectus and Statement of Additional Information, annual or interim reports and proxy solicitation materials of the Program relating to the Portfolio will be supplied to you in reasonable quantities upon request.
8. We reserve the right in our discretion, without notice, to suspend sales or withdraw the offering of Class C shares entirely or to certain persons or entities in a class or classes specified by us. Each party hereto has the right to cancel this Agreement upon notice to the other party.
9. We shall have full authority to take such action as we may deem advisable in respect of all matters pertaining to the continuous offering. We shall be under no liability to you except for lack of good faith and for obligations expressly assumed by us herein. Nothing contained in this paragraph is intended to operate as, and the provisions of this paragraph shall not in any way whatsoever constitute, a waiver by you of compliance with any provision of the Securities Act of 1933, as amended, or of the rules and regulations of the Securities and Exchange Commission issued thereunder.
10. You represent that you are a member of the National Association of Securities Dealers, Inc. and, with respect to any sales in the United States, we both hereby agree to abide by the Rules of Fair Practice of such Association.
11. Upon application to us, we will inform you as to the states in which we believe the Class C shares have been qualified for sale under, or are exempt from the requirements of, the respective securities laws of such states, but we assume no responsibility or obligation as to your right to sell Class C shares in any jurisdiction. We will file with the Department of State in New York a Further State Notice with respect to the Class C shares, if necessary.
12. All communications to us should be sent to the address below. Any notice to you shall be duly given if mailed or telegraphed to you at the address specified by you below.
13. Your first order placed pursuant to this Agreement for the purchase of Class C shares of the Portfolio will represent your acceptance of this Agreement.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By __________________________________
(Authorized Signature)
Please return one signed copy
of this Agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
P.O. Box 9011
Princeton, New Jersey 08543-9011
Accepted:
Firm Name:_____________________________________________
By:____________________________________________________
Address:_______________________________________________
Date: _________________________________________________
EXHIBIT 99.6(d)
CLASS D SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the ____ day of December, 1994, between MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC., a Maryland corporation (the "Program"), and MERRILL LYNCH FUNDS DISTRIBUTOR, INC., a Delaware corporation (the "Distributor").
WHEREAS, the Program is registered under the Investment Company Act of 1940, as amended (the "Investment Company Act"), as an open-end investment company, and it is affirmatively in the interest of the Program to offer its shares for sale continu-ously; and
WHEREAS, the Directors of the Program (the "Directors") are authorized to establish separate series (the "Series") relating to separate portfolios of securities, each of which will offer separate classes of shares of beneficial interest, par value $0.10 per share (collectively referred to as "shares") to holders of certain retirement accounts for which Merrill Lynch, Pierce, Fenner & Smith Incorporated acts as custodian; and
WHEREAS, the Directors have established and designated the [Name of Portfolio] (the "Portfolio") as a series of the Program; and
WHEREAS, the Distributor is a securities firm engaged in the business of selling shares of investment companies either directly to purchasers or through other securities dealers; and
WHEREAS, the Program and the Distributor wish to enter into an agreement with each other with respect to the continuous offering of the Class D shares of beneficial interest in the Portfolio.
NOW, THEREFORE, the parties agree as follows:
(a) The Program may, upon written notice to the Distributor, from time to time designate other principal underwriters and distributors of Class D shares with respect to areas other than the United States as to which the Distributor may have expressly waived in writing its right to act as such. If such designation is deemed exclusive, the right of the Distributor under this Agreement to sell Class D shares in the
areas so designated shall terminate, but this Agreement shall remain otherwise in full effect until terminated in accordance with the other provisions hereof.
(b) The exclusive right granted to the Distributor to purchase Class D shares from the Program shall not apply to Class D shares issued in connection with the merger or consolidation of any other investment company or personal holding company with the Program or the acquisition by purchase or otherwise of all (or substantially all) the assets or the outstanding Class D shares of any such company by the Program.
(c) Such exclusive right also shall not apply to Class D shares issued pursuant to reinvestment of dividends or capital gains distributions.
(d) Such exclusive right also shall not apply to Class D shares issued pursuant to any conversion, exchange or reinstatement privilege afforded redeeming shareholders or to any other Class D shares as shall be agreed between the Program and the Distributor from time to time.
(a) The Distributor shall have the right to buy from the Program the Class D shares needed, but not more than the Class D shares needed (except for clerical errors in transmission) to fill unconditional orders for Class D shares of the Portfolio placed with the Distributor by eligible investors or securities dealers. Investors eligible to purchase Class D shares shall be those persons so identified in the currently effective prospectus
and statement of additional information relating to the Portfolio (the "prospectus" and "statement of additional information", respectively) under the Securities Act of 1933, as amended (the "Securities Act"), relating to such Class D shares. The price which the Distributor shall pay for the Class D shares so purchased from the Program shall be the net asset value, determined as set forth in Section 3(d) hereof, used in determining the public offering price on which such orders were based.
(b) The Class D shares are to be resold by the Distributor to investors at the public offering price, as set forth in Section 3(c) hereof, or to securities dealers having agreements with the Distributor upon the terms and conditions set forth in Section 7 hereof.
other persons described in the prospectus and statement of additional information, without a sales charge or at a reduced sales charge, upon terms and conditions set forth in the prospectus and statement of additional information. If the public offering price does not equal an even cent, the public offering price may be adjusted to the nearest cent. All payments to the Program hereunder shall be made in the manner set forth in Section 3(f).
(d) The net asset value of Class D shares shall be determined by the Program or any agent of the Program in accordance with the method set forth in the prospectus and statement of additional information and guidelines established by the Directors.
(e) The Program shall have the right to suspend the sale of its Class D shares at times when redemption is suspended pursuant to the conditions set forth in Section 4(b) hereof. The Program shall also have the right to suspend the sale of its Class D shares if trading on the New York Stock Exchange shall have been suspended, if a banking moratorium shall have been declared by Federal or New York authorities, or if there shall have been some other event, which, in the judgment of the Program, makes it impracticable or inadvisable to sell the Class D shares.
(f) The Program, or any agent of the Program designated in writing by the Program, shall be promptly advised of all purchase orders for Class D shares received by the Distributor. Any order may be rejected by the Program; provided, however, that the
Program will not arbitrarily or without reasonable cause refuse to accept or confirm orders for the purchase of Class D shares. The Program (or its agent) will confirm orders upon their receipt, will make appropriate book entries and, upon receipt by the Program (or its agent) of payment therefor, will deliver deposit receipts or certificates for such Class D shares pursuant to the instructions of the Distributor. Payment shall be made to the Program in New York Clearing House funds. The Distributor agrees to cause such payment and such instructions to be delivered promptly to the Program (or its agent).
(a) Any of the outstanding Class D shares may be tendered for redemption at any time, and the Program agrees to repurchase or redeem the Class D shares so tendered in accordance with its obligations as set forth in Article VI of its Articles of Incorporation, as amended from time to time, and in accordance with the applicable provisions set forth in the prospectus and statement of additional information. The price to be paid to redeem or repurchase the Class D shares shall be equal to the net asset value calculated in accordance with the provisions of Section 3(d) hereof, less any contingent deferred sales charge ("CDSC"), redemption fee or other charge(s), if any, set forth in the prospectus and statement of additional information relating to the Portfolio. All payments by the Program hereunder shall be made in the manner set forth below. The redemption or repurchase
by the Program of any of the Class D shares purchased by or through the Distributor will not affect the sales charge secured by the Distributor or any selected dealer in the course of the original sale, except that if any Class D shares are tendered for redemption or repurchase within seven business days after the date of the confirmation of the original purchase, the right to the sales charge shall be forfeited by the Distributor and the selected dealer which sold such Class D shares.
The Program shall pay the total amount of the redemption price as defined in the above paragraph pursuant to the instructions of the Distributor in New York Clearing House funds on or before the seventh business day subsequent to its having received the notice of redemption in proper form. The proceeds of any redemption of shares shall be paid by the Program as follows: (i) any applicable CDSC shall be paid to the Distributor, and (ii) the balance shall be paid to or for the account of the shareholder, in each case in accordance with the applicable provisions of the prospectus and statement of additional information.
(b) Redemption of Class D shares or payment may be suspended at times when the New York Stock Exchange is closed, when trading on said Exchange is suspended, when trading on said Exchange is restricted, when an emergency exists as a result of which disposal by the Program of securities owned by it is not reasonably practicable or it is not reasonably practicable for the Program fairly to determine the value of the net assets of
the Portfolio, or during any other period when the Securities and Exchange Commission, by order, so permits.
(a) The Program shall furnish to the Distributor copies of all information, financial statements and other papers which the Distributor may reasonably request for use in connection with the distribution of Class D shares of the Portfolio, and this shall include, upon request by the Distributor, one certified copy of all financial statements prepared for the Program by independent public accountants. The Program shall make available to the Distributor such number of copies of the prospectus and statement of additional information relating to the Portfolio as the Distributor shall reasonably request.
(b) The Program shall take, from time to time, but subject to any necessary approval of the Class D shareholders, all necessary action to fix the number of authorized Class D shares and such steps as may be necessary to register the same under the Securities Act, to the end that there will be available for sale such number of Class D shares as the Distributor may reasonably be expected to sell.
(c) The Program shall use its best efforts to qualify and maintain the qualification of an appropriate number of its Class
D shares for sale under the securities laws of such states as the Distributor
and the Program may approve. Any such qualification may be withheld, terminated
or withdrawn by the Program at any time in its discretion. As provided in
Section 8(c) hereof, the
expense of qualification and maintenance of qualification shall be borne by the Program. The Distributor shall furnish such information and other material relating to its affairs and activities as may be required by the Program in connection with such qualification.
(a) The Distributor shall devote reasonable time and effort to effect sales of Class D shares of the Portfolio but shall not be obligated to sell any specific number of Class D shares. The services of the Distributor to the Program hereunder are not to be deemed exclusive and nothing herein contained shall prevent the Distributor from entering into like arrangements with other investment companies so long as the performance of its obligations hereunder is not impaired thereby.
(b) In selling the Class D shares of the Portfolio, the Distributor shall use its best efforts in all respects duly to conform with the requirements of all Federal and state laws relating to the sale of such securities. Neither the Distributor nor any selected dealer, as defined in Section 7 hereof, nor any other person is authorized by the Program to give any information or to make any representations, other than those contained in the registration statement or related prospectus and statement of
additional information and any sales literature specifically approved by the Program.
(c) The Distributor shall adopt and follow procedures, as approved by the officers of the Program, for the confirmation of sales to investors and selected dealers, the collection of amounts payable by investors and selected dealers on such sales, and the cancellation of unsettled transactions, as may be necessary to comply with the requirements of the National Association of Securities Dealers, Inc. (the "NASD"), as such requirements may from time to time exist.
(a) The Distributor shall have the right to enter into selected dealers agreements with securities dealers of its choice ("selected dealers") for the sale of Class D shares and fix therein the portion of the sales charge which may be allocated to the selected dealers; provided that the Program shall approve the forms of agreements with dealers and the dealer compensation set forth therein. Class D shares sold to selected dealers shall be for resale by such dealers only at the public offering price(s) set forth in the prospectus and statement of additional information. The form of agreement with selected dealers to be used during the continuous offering of the Class D shares is attached hereto as Exhibit A.
(b) Within the United States, the Distributor shall offer and sell Class D shares only to such selected dealers as are members in good standing of the NASD.
(a) The Program shall bear all costs and expenses of the Portfolio, including fees and disbursements of its counsel and auditors, in connection with the preparation and filing of any required registration statements and/or prospectuses and statements of additional information under the Investment Company Act, the Securities Act, and all amendments and supplements thereto, and preparing and mailing annual and interim reports and proxy materials to Class D shareholders (including but not limited to the expense of setting in type any such registration statements, prospectuses, statements of additional information, annual or interim reports or proxy materials).
(b) The Distributor shall be responsible for any payments made to selected dealers as reimbursement for their expenses associated with payments of sales commissions to financial consultants. In addition, after the prospectuses, statements of additional information and annual and interim reports have been prepared and set in type, the Distributor shall bear the costs and expenses of printing and distributing any copies thereof which are to be used in connection with the offering of Class D shares to selected dealers or investors pursuant to this Agreement. The Distributor shall bear the costs and expenses of preparing, printing and distributing any other literature used by the Distributor or furnished by it for use by selected dealers in connection with the offering of the Class D shares for sale to the public and any expenses of advertising incurred by the
Distributor in connection with such offering. It is understood and agreed that so long as the Portfolio's Class D Shares Distribution Plan pursuant to Rule 12b-1 under the Investment Company Act remains in effect, any expenses incurred by the Distributor hereunder in connection with account maintenance activities may be paid from amounts recovered by it from the Portfolio under such plan.
(c) The Program shall bear the cost and expenses of qualification of the
Class D shares for sale pursuant to this Agreement and, if necessary or
advisable in connection therewith, of qualifying the Program as a broker or
dealer in such states of the United States or other jurisdictions as shall be
selected by the Program and the Distributor pursuant to Section 5(c) hereof and
the cost and expenses payable to each such state for continuing qualification
therein until the Program decides to discontinue such qualification pursuant to
Section 5(c) hereof.
(a) The Program shall indemnify and hold harmless the Distributor and each person, if any, who controls the Distributor against any loss, liability, claim, damage or expense (including the reasonable cost of investigating or defending any alleged loss, liability, claim, damage or expense and reasonable counsel fees incurred in connection therewith), as incurred, arising by reason of any person acquiring any Class D shares, which may be based upon the Securities Act, or on any other statute or at common law, on the ground that the registration statement or related
prospectus and statement of additional information relating to the Portfolio, as from time to time amended and supplemented, or an annual or interim report to shareholders relating to the Portfolio, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, unless such statement or omission was made in reliance upon, and in conformity with, information furnished to the Program in connection therewith by or on behalf of the Distributor; provided, however, that in no case (i) is the indemnity of the Program in favor of the Distributor and any such controlling persons to be deemed to protect such Distributor or any such controlling persons thereof against any liability to the Program or its security holders to which the Distributor or any such controlling persons would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of their duties or by reason of the reckless disregard of their obligations and duties under this Agreement; or (ii) is the Program to be liable under its indemnity agreement contained in this paragraph with respect to any claim made against the Distributor or any such controlling persons, unless the Distributor or such controlling persons, as the case may be, shall have notified the Program in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon the Distributor or such controlling persons (or after the
Distributor or such controlling persons shall have received notice of such service on any designated agent), but failure to notify the Program of any such claim shall not relieve it from any liability which it may have to the person against whom such action is brought otherwise than on account of its indemnity agreement contained in this paragraph. The Program will be entitled to participate at its own expense in the defense or, if it so elects, to assume the defense of any suit brought to enforce any such liability, but if the Program elects to assume the defense, such defense shall be conducted by counsel chosen by it and satisfactory to the Distributor or such controlling person or persons, defendant or defendants in the suit. In the event the Program elects to assume the defense of any such suit and retain such counsel, the Distributor or such controlling person or persons, defendant or defendants in the suit shall bear the fees and expenses of any additional counsel retained by them, but in case the Program does not elect to assume the defense of any such suit, it will reimburse the Distributor or such controlling person or persons, defendant or defendants in the suit, for the reasonable fees and expenses of any counsel retained by them. The Program shall promptly notify the Distributor of the commencement of any litigation or proceedings against it or any of its officers or Directors in connection with the issuance or sale of any of the Class D shares.
(b) The Distributor shall indemnify and hold harmless the Program and each of its Directors and officers and each person,
if any, who controls the Program against any loss, liability, claim, damage or expense described in the foregoing indemnity contained in subsection (a) of this Section, but only with respect to statements or omissions made in reliance upon, and in conformity with, information furnished to the Program in writing by or on behalf of the Distributor for use in connection with the registration statement or related prospectus and statement of additional information, as from time to time amended, or the annual or interim reports to Class D shareholders. In case any action shall be brought against the Program or any person so indemnified, in respect of which indemnity may be sought against the Distributor, the Distributor shall have the rights and duties given to the Program, and the Program and each person so indemnified shall have the rights and duties given to the Distributor by the provisions of subsection (a) of this Section 9.
This Agreement may be terminated at any time, without the payment of any penalty, by the Directors or by vote of a majority of the outstanding Class D voting securities of the Portfolio, or by the Distributor, on sixty days' written notice to the other party. This Agreement shall automatically terminate in the event of its assignment.
The terms "vote of a majority of the outstanding voting securities", "assignment", "affiliated person" and "interested person", when used in this Agreement, shall have the respective meanings specified in the Investment Company Act.
any such party cast in person at a meeting called for the purpose of voting on such approval.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
MERRILL LYNCH RETIREMENT ASSET BUILDER
PROGRAM, INC.
By_____________________________________
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By_____________________________________
Title:
EXHIBIT A
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
CLASS D SHARES OF COMMON STOCK
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement with MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC., a Maryland corporation (the "Program"), pursuant to which it acts as the distributor for the sale of Class D shares of common stock, par value $0.10 per share (herein referred to as "Class D shares"), of the Program relating to the [Name of Portfolio] (the "Portfolio"), and as such has the right to distribute Class D shares of the Portfolio for resale. The Program is an open-end investment company registered under the Investment Company Act of 1940, as amended, and the Portfolio's Class D shares being offered to the public are registered under the Securities Act of 1933, as amended. You have received a copy of the Class D Shares Distribution Agreement (the "Distribution Agreement") between ourself and the Program and reference is made herein to certain provisions of such Distribution Agreement. The terms "Prospectus" and "Statement of Additional Information" used herein refer to the prospectus and statement of additional information, respectively, on file with the Securities and Exchange Commission which is part of the most recent effective registration statement pursuant to the Securities Act of 1933, as amended. We offer to sell to you, as a member of the Selected Dealers Group, Class D shares of the Portfolio upon the following terms and conditions:
1. In all sales of these Class D shares to the public, you shall act as dealer for your own account and in no transaction shall you have any authority to act as agent for the Program, for us or for any other member of the Selected Dealers Group, except in connection with the Merrill Lynch Mutual Portfolio Adviser Program and such other special programs as we from time to time agree, in which case you shall have authority to offer and sell shares, as agent for the Program, to participants in such program.
2. Orders received from you will be accepted through us only at the public offering price applicable to each order, as set forth in the current Prospectus and Statement of Additional Information relating to the Portfolio. The procedure relating to
the handling of orders shall be subject to Section 5 hereof and instructions which we or the Program shall forward from time to time to you. All orders are subject to acceptance or rejection by the Distributor or the Program in the sole discretion of either. The minimum initial and subsequent purchase requirements are as set forth in the current Prospectus and Statement of Additional Information relating to the Portfolio.
3. The sales charges for sales to the public, computed as percentages of the public offering price and the amount invested, and the related discount to Selected Dealers are as follows:
Discount to
Sales Charge Selected
Sales Charge as Percentage* Dealers as
as Percentage of the Net Percentage
of the Amount of the
Amount of Purchase Offering Price Invested Offering Price
- ------------------ -------------- -------------- --------------
Less than
$25,000............ % % %
$25,000 but less
than $50,000....... % % %
$50,000 but less
than $100,000...... % % %
100,000 but less
than $250,000...... % % %
$250,000 but less
than $1,000,000.... % % %
$1,000,000 and
over**............. % % %
|
* Rounded to the nearest one-hundredth percent.
** Initial sales charges will be waived for certain classes of offerees as set forth in the current Prospectus and Statement of Additional Information relating to the Portfolio. Such purchase may be subject to a contingent deferred sales charge as set forth in the current Prospectus and Statement of Additional Information.
The term "purchase" refers to a single purchase by an individual, or to concurrent purchases, which in the aggregate are at least equal to the prescribed amounts, by an individual, his
spouse and their children under the age of 21 years purchasing Class D shares for his or their own account and to single purchases by a trustee or other fiduciary purchasing Class D shares for a single trust estate or single fiduciary account although more than one beneficiary is involved. The term "purchase" also includes purchases by any "company" as that term is defined in the Investment Company Act of 1940, as amended, but does not include purchases by any such company which has not been in existence for at least six months or which has no purpose other than the purchase of Class D shares of the Portfolio or Class D shares of other registered investment companies at a discount; provided, however, that it shall not include purchases by any group of individuals whose sole organizational nexus is that the participants therein are credit cardholders of a company, policyholders of an insurance company, customers of either a bank or broker-dealer or clients of an investment adviser.
The reduced sales charges are applicable through a right of accumulation under which eligible investors are permitted to purchase Class D shares of the Portfolio at the offering price applicable to the total of (a) the dollar amount then being purchased plus (b) an amount equal to the then current net asset value or cost, whichever is higher, of the purchaser's combined holdings of Class A, Class B, Class C and Class D shares of the Portfolio and of any other series of the Program or investment company with an initial sales charge for which the Distributor acts as the distributor. For any such right of accumulation to be made available, the Distributor must be provided at the time of purchase, by the purchaser or you, with sufficient information to permit confirmation of qualification, and acceptance of the purchase order is subject to such confirmation.
The reduced sales charges are applicable to purchases aggregating $25,000 or more of Class A shares or of Class D shares of any other series of the Program or investment company with an initial sales charge for which the Distributor acts as the distributor made through you within a thirteen-month period starting with the first purchase pursuant to a Letter of Intention. A purchase not originally made pursuant to a Letter of Intention may be included under a subsequent letter executed within 90 days of such purchase if the Distributor is informed in writing of this intent within such 90-day period. If the intended amount of shares is not purchased within the thirteen-month period, an appropriate price adjustment will be made pursuant to the terms of the Letter of Intention.
You agree to advise us promptly at our request as to amounts of any sales made by you to the public qualifying for reduced sales charges. Further information as to the reduced sales charges pursuant to the right of accumulation or a Letter of
Intention is set forth in the Prospectus and Statement of Additional Information.
4. You shall not place orders for any of the Class D shares unless you have already received purchase orders for such Class D shares at the applicable public offering prices and subject to the terms hereof and of the Distribution Agreement. You agree that you will not offer or sell any of the Class D shares except under circumstances that will result in compliance with the applicable Federal and state securities laws and that in connection with sales and offers to sell Class D shares you will furnish to each person to whom any such sale or offer is made a copy of the Prospectus and, if requested, the Statement of Additional Information (as then amended or supplemented) and will not furnish to any person any information relating to the Class D shares of the Portfolio which is inconsistent in any respect with the information contained in the Prospectus and Statement of Additional Information (as then amended or supplemented) or cause any advertisement to be published in any newspaper or posted in any public place without our consent and the consent of the Program.
5. As a selected dealer, you are hereby authorized (i) to place orders directly with the Program for Class D shares of the Portfolio to be resold by us to you subject to the applicable terms and conditions governing the placement of orders by us set forth in Section 3 of the Distribution Agreement and subject to the compensation provisions of Section 3 hereof and (ii) to tender Class D shares directly to the Program or its agent for redemption subject to the applicable terms and conditions set forth in Section 4 of the Distribution Agreement.
7. If any Class D shares sold to you under the terms of this Agreement are repurchased by the Program or by us for the account of the Program or are tendered for redemption within seven business days after the date of the confirmation of the original purchase by you, it is agreed that you shall forfeit your right to, and refund to us, any discount received by you on such Class D shares.
8. No person is authorized to make any representations concerning Class D shares of the Portfolio except those contained in the current Prospectus and Statement of Additional Information relating to the Portfolio and in such printed information subsequently issued by us or the Program as information
supplemental to such Prospectus and Statement of Additional Information. In purchasing Class D shares through us you shall rely solely on the representations contained in the Prospectus and Statement of Additional Information and supplemental information above mentioned. Any printed information which we furnish you other than the Prospectus, Statement of Additional Information, periodic reports and proxy solicitation material of the Program relating to the Portfolio is our sole responsibility and not the responsibility of the Program, and you agree that the Program shall have no liability or responsibility to you in these respects unless expressly assumed in connection therewith.
9. You agree to deliver to each of the purchasers making purchases from you a copy of the then current Prospectus and, if requested, the Statement of Additional Information at or prior to the time of offering or sale and you agree thereafter to deliver to such purchasers copies of the annual and interim reports and proxy solicitation materials of the Program relating to the Portfolio. You further agree to endeavor to obtain proxies from such purchasers. Additional copies of such Prospectus and Statement of Additional Information, annual or interim reports and proxy solicitation materials will be supplied to you in reasonable quantities upon request.
10. We reserve the right in our discretion, without notice, to suspend sales or withdraw the offering of Class D shares entirely or to certain persons or entities in a class or classes specified by us. Each party hereto has the right to cancel this agreement upon notice to the other party.
11. We shall have full authority to take such action as we may deem advisable in respect of all matters pertaining to the continuous offering. We shall be under no liability to you except for lack of good faith and for obligations expressly assumed by us herein. Nothing contained in this paragraph is intended to operate as, and the provisions of this paragraph shall not in any way whatsoever constitute, a waiver by you of compliance with any provision of the Securities Act of 1933, as amended, or of the rules and regulations of the Securities and Exchange Commission issued thereunder.
12. You represent that you are a member of the National Association of Securities Dealers, Inc. and, with respect to any sales in the United States, we both hereby agree to abide by the Rules of Fair Practice of such Association.
13. Upon application to us, we will inform you as to the states in which we believe the Class D shares have been qualified for sale under, or are exempt from the requirements of, the respective securities laws of such states, but we assume no
responsibility or obligation as to your right to sell Class D shares in any jurisdiction. We will file with the Department of State in New York a Further State Notice with respect to the Class D shares, if necessary.
14. All communications to us should be sent to the address below. Any notice to you shall be duly given if mailed or telegraphed to you at the address specified by you below.
15. Your first order placed pursuant to this Agreement for the purchase of Class D shares of the Portfolio will represent your acceptance of this Agreement.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By __________________________________
(Authorized Signature)
Please return one signed copy
of this agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
P.O. Box 9011
Princeton, New Jersey 08543-9011
Accepted:
Firm Name:____________________________________________
By:___________________________________________________
Address:______________________________________________
Date:_________________________________________________
EXHIBIT 99.8
CUSTODY AGREEMENT
Agreement made as of this day of , 1994, between MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC., a corporation organized and existing under the laws of the State of Maryland having its principal office and place of business at (hereinafter called the "Fund"), and THE BANK OF NEW YORK, a New York corporation authorized to do a banking business, having its principal office and place of business at 48 Wall Street, New York, New York 10286 (hereinafter called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter set forth, the Fund and the Custodian agree as follows:
ARTICLE I.
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings:
1. "Book-Entry System" shall mean the Federal Reserve/Treasury book-entry system for United States and federal agency securities, its successor or successors and its nominee or nominees.
2. "Call Option" shall mean an exchange traded option with respect to Securities other than Stock Index Options, Futures Contracts, and Futures Contract Options entitling the holder, upon timely exercise and payment of the exercise price, as specified therein, to purchase from the writer thereof the specified underlying Securities.
3. "Certificate" shall mean any notice, instruction, or other instrument in writing, authorized or required by this Agreement to be given to the Custodian which is actually received by the Custodian and signed on behalf of the Fund by any two Officers, and the term Certificate shall also include instructions by the Fund to the Custodian communicated by a Terminal Link.
4. "Clearing Member" shall mean a registered broker-dealer which is a clearing member under the rules of O.C.C. and a member of a national securities exchange qualified to act as a custodian for an investment company, or any broker-dealer reasonably believed by the Custodian to be such a clearing member.
5. "Collateral Account" shall mean a segregated account so denominated which is specifically allocated to a Series and pledged to the Custodian as security for, and in consideration of, the Custodian's issuance of (a) any Put Option guarantee letter or similar document described in paragraph 8 of Article V herein, or (b) any receipt described in Article V or VIII herein.
6. "Covered Call Option" shall mean an exchange traded option entitling the holder, upon timely exercise and payment of the exercise price, as specified therein, to purchase from the writer thereof the specified underlying Securities (excluding Futures Contracts) which are owned by the writer thereof and subject to appropriate restrictions.
7. "Depository" shall mean The Depository Trust Company ("DTC"), a clearing agency registered with the Securities and Exchange Commission, its successor or successors and its nominee or nominees. The term "Depository" shall further mean and include any other person authorized to act as a depository under the Investment Company Act of 1940, its successor or successors and its nominee or nominees, specifically identified in a certi- fied copy of a resolution of the Fund's Board of Directors specifically approving deposits therein by the Custodian.
8. "Financial Futures Contract" shall mean the firm commitment to buy or sell fixed income securities including, without limitation, U.S. Treasury Bills, U.S. Treasury Notes, U.S. Treasury Bonds, domestic bank certificates of deposit, and Eurodollar certificates of deposit, during a specified month at an agreed upon price.
9. "Futures Contract" shall mean a Financial Futures Contract and/or Stock Index Futures Contracts.
10. "Futures Contract Option" shall mean an option with respect to a Futures Contract.
11. "Margin Account" shall mean a segregated account in the name of a broker, dealer, futures commission merchant, or a Clearing Member, or in the name of the Fund for the benefit of a broker, dealer, futures commission merchant, or Clearing Member, or otherwise, in accordance with an agreement between the Fund, the Custodian and a broker, dealer, futures commission merchant or a Clearing Member (a "Margin Account Agreement"), separate and distinct from the custody account, in which certain Securi- ties and/or money of the Fund shall be deposited and withdrawn from time to time in connection with such transactions as the Fund may from time to time determine. Securities held in the Book-Entry System or the Depository shall be deemed to have been deposited in, or withdrawn from, a Margin Account upon the Custodian's effecting an appropriate entry in its books and records.
12. "Money Market Security" shall be deemed to include, without limitation, certain Reverse Repurchase Agreements, debt obligations issued or guaranteed as to interest and principal by the government of the United States or agencies or instrumentalities thereof, any tax, bond or revenue anticipation note issued by any state or municipal government or public authority, commercial paper, certificates of deposit and bank- ers' acceptances, repurchase agreements with respect to the same and bank time deposits, where the purchase and sale of such securities normally requires settlement in federal funds on the same day as such purchase or sale.
13. "O.C.C." shall mean the Options Clearing Corpora- tion, a clearing agency registered under Section 17A of the Securities Exchange Act of 1934, its successor or successors, and its nominee or nominees.
14. "Officers" shall be deemed to include the President, any Vice President, the Secretary, the Treasurer, the Control- ler, any Assistant Secretary, any Assistant Treasurer, and any other person or persons, whether or not any such other person is an officer of the Fund, duly authorized by the Board of Direc- tors of the Fund to execute any Certificate, instruction, notice or other instrument on behalf of the Fund and listed in the Certificate annexed hereto as Appendix A or such other Certificate as may be received by the Custodian from time to time.
15. "Option" shall mean a Call Option, Covered Call Op- tion, Stock Index Option and/or a Put Option.
16. "Oral Instructions" shall mean verbal instructions actually received by the Custodian from an Officer or from a person reasonably believed by the Custodian to be an Officer.
17. "Put Option" shall mean an exchange traded option with respect to Securities other than Stock Index Options, Futures Contracts, and Futures Contract Options entitling the holder, upon timely exercise and tender of the specified underlying Securities, to sell such Securities to the writer thereof for the exercise price.
18. "Reverse Repurchase Agreement" shall mean an agree- ment pursuant to which the Fund sells Securities and agrees to repurchase such Securities at a described or specified date and price.
19. "Security" shall be deemed to include, without limitation, Money Market Securities, Call Options, Put Options, Stock Index Options, Stock Index Futures Contracts, Stock Index Futures Contract Options, Financial Futures Contracts, Financial Futures Contract Options, Reverse Repurchase Agreements, common stocks and other securities having characteristics similar to common stocks, preferred stocks, debt obligations issued by state or municipal governments and by public authorities,
(including, without limitation, general obligation bonds, revenue bonds, industrial bonds and industrial development bonds), bonds, debentures, notes, mortgages or other obliga- tions, and any certificates, receipts, warrants or other instru- ments representing rights to receive, purchase, sell or subscribe for the same, or evidencing or representing any other rights or interest therein, or any property or assets.
20. "Senior Security Account" shall mean an account maintained and specifically allocated to a Series under the terms of this Agreement as a segregated account, by recordation or otherwise, within the custody account in which certain Securities and/or other assets of the Fund specifically al- located to such Series shall be deposited and withdrawn from time to time in accordance with Certificates received by the Custodian in connection with such transactions as the Fund may from time to time determine.
21. "Series" shall mean the various portfolios, if any, of the Fund as described from time to time in the current and effective prospectus for the Fund listed on Schedule 1 hereto as amended from time to time.
22. "Shares" shall mean the shares of capital stock of the Fund, each of which is, in the case of a Fund having Series, allocated to a particular Series.
23. "Stock Index Futures Contract" shall mean a bilateral agreement pursuant to which the parties agree to take or make delivery of an amount of cash equal to a specified dol- lar amount times the difference between the value of a particular stock index at the close of the last business day of the contract and the price at which the futures contract is originally struck.
24. "Stock Index Option" shall mean an exchange traded option entitling the holder, upon timely exercise, to receive an amount of cash determined by reference to the difference between the exercise price and the value of the index on the date of exercise.
25. "Terminal Link" shall mean an electronic data transmission link between the Fund and the Custodian requiring in connection with each use of the Terminal Link by or on behalf of the Fund use of an authorization code provided by the Custodian and at least two access codes established by the Fund.
ARTICLE II.
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian of the Securities and moneys at any time owned by the Fund during the period of this Agreement.
2. The Custodian hereby accepts appointment as such custodian and agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III.
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article and in Article VIII, the Fund will deliver or cause to be delivered to the Custodian all Securities and all moneys owned by it, at any time during the period of this Agreement, and shall specify with respect to such Securities and money the Series to which the same are specifically allocated. The Custodian shall segregate, keep and maintain the assets of the Series separate and apart. The Custodian will not be responsible for any Securities and moneys not actually received by it. The Custodian will be entitled to reverse any credits made on the Fund's behalf where such credits have been previ- ously made and moneys are not finally collected. The Fund shall deliver to the Custodian a certified resolution of the Board of Directors of the Fund, substantially in the form of Exhibit A hereto, approving, authorizing and instructing the Custodian on a continuous and on-going basis to deposit in the Book-Entry System all Securities eligible for deposit therein, regardless of the Series to which the same are specifically allocated and to utilize the Book-Entry System to the extent possible in con- nection with its performance hereunder, including, without limitation, in connection with settlements of purchases and sales of Securities, loans of Securities and deliveries and returns of Securities collateral. Prior to a deposit of Securi- ties specifically allocated to a Series in the Depository, the Fund shall deliver to the Custodian a certified resolution of the Board of Directors of the Fund, substantially in the form of Exhibit B hereto, approving, authorizing and instructing the Custodian on a continuous and ongoing basis until instructed to the contrary by a Certificate actually received by the Custodian to deposit in the Depository all Securities specifically al- located to such Series eligible for deposit therein, and to utilize the Depository to the extent possible with respect to such Securities in connection with its performance hereunder, including, without limitation, in connection with settlements of purchases and sales of Securities, loans of Securities, and deliveries and returns of Securities collateral. Securities and moneys deposited in either the Book-Entry System or the Depository will be represented in accounts which include only assets held by the Custodian for customers, including, but not limited to, accounts in which the Custodian acts in a fiduciary or representative capacity and will be specifically allocated on the Custodian's books to the separate account for the applicable Series. Prior to the Custodian's accepting, utilizing and act- ing with respect to Clearing Member confirmations for Options and transactions in Options for a Series as provided in this
Agreement, the Custodian shall have received a certified resolu- tion of the Fund's Board of Directors, substantially in the form of Exhibit C hereto, approving, authorizing and instructing the Custodian on a continuous and on-going basis, until instructed to the contrary by a Certificate actually received by the Custodian, to accept, utilize and act in accordance with such confirmations as provided in this Agreement with respect to such Series.
2. The Custodian shall establish and maintain separate accounts, in the name of each Series, and shall credit to the separate account for each Series all moneys received by it for the account of the Fund with respect to such Series. Money credited to a separate account for a Series shall be disbursed by the Custodian only:
(a) As hereinafter provided;
(b) Pursuant to Certificates setting forth the name and address of the person to whom the payment is to be made, the Series account from which payment is to be made and the purpose for which payment is to be made; or
(c) In payment of the fees and in reimbursement of the expenses and liabilities of the Custodian attributable to such Series.
3. Promptly after the close of business on each day, the Custodian shall furnish the Fund with confirmations and a summary, on a per Series basis, of all transfers to or from the account of the Fund for a Series, either hereunder or with any co-custodian or sub-custodian appointed in accordance with this Agreement during said day. Where Securities are transferred to the account of the Fund for a Series, the Custodian shall also by book-entry or otherwise identify as belonging to such Series a quantity of Securities in a fungible bulk of Securities registered in the name of the Custodian (or its nominee) or shown on the Custodian's account on the books of the Book-Entry System or the Depository. At least monthly and from time to time, the Custodian shall furnish the Fund with a detailed statement, on a per Series basis, of the Securities and moneys held by the Custodian for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article and in Article VIII, all Securities held by the Custodian hereunder, which are issued or issuable only in bearer form, except such Securities as are held in the Book-Entry System, shall be held by the Custodian in that form; all other Securities held hereunder may be registered in the name of the Fund, in the name of any duly appointed registered nominee of the Custodian as the Custodian may from time to time determine, or in the name of the Book-Entry System or the Depository or their successor or successors, or their nominee or nominees. The Fund agrees to furnish to the Custodian appropriate instru- ments to enable the Custodian to hold or deliver in proper form
for transfer, or to register in the name of its registered nominee or in the name of the Book-Entry System or the Depository any Securities which it may hold hereunder and which may from time to time be registered in the name of the Fund. The Custodian shall hold all such Securities specifically al- located to a Series which are not held in the Book-Entry System or in the Depository in a separate account in the name of such Series physically segregated at all times from those of any other person or persons.
5. Except as otherwise provided in this Agreement and unless otherwise instructed to the contrary by a Certificate, the Custodian by itself, or through the use of the Book-Entry System or the Depository with respect to Securities held hereunder and therein deposited, shall with respect to all Securities held for the Fund hereunder in accordance with preceding paragraph 4:
(a) Collect all income due or payable;
(b) Present for payment and collect the amount payable upon such Securities which are called, but only if either (i) the Custodian receives a written notice of such call, or (ii) notice of such call appears in one or more of the publications listed in Appendix B annexed hereto, which may be amended at any time by the Custodian without the prior notification or consent of the Fund;
(c) Present for payment and collect the amount payable upon all Securities which mature;
(d) Surrender Securities in temporary form for definitive Securities;
(e) Execute, as custodian, any necessary declarations or certificates of ownership under the Federal Income Tax Laws or the laws or regulations of any other taxing authority now or hereafter in effect; and
(f) Hold directly, or through the Book-Entry System or the Depository with respect to Securities therein deposited, for the account of a Series, all rights and similar securities issued with respect to any Securities held by the Custodian for such Series hereunder.
6. Upon receipt of a Certificate and not otherwise, the Custodian, directly or through the use of the Book-Entry System or the Depository, shall:
(a) Execute and deliver to such persons as may be designated in such Certificate proxies, consents, authoriza- tions, and any other instruments whereby the authority of the Fund as owner of any Securities held by the Custodian hereunder for the Series specified in such Certificate may be exercised;
(b) Deliver any Securities held by the Custodian hereunder for the Series specified in such Certificate in exchange for other Securities or cash issued or paid in con- nection with the liquidation, reorganization, refinancing, merger, consolidation or recapitalization of any corporation, or the exercise of any conversion privilege and receive and hold hereunder specifically allocated to such Series any cash or other Securities received in exchange;
(c) Deliver any Securities held by the Custodian hereunder for the Series specified in such Certificate to any protective committee, reorganization committee or other person in connection with the reorganization, refinancing, merger, consolidation, recapitalization or sale of assets of any corporation, and receive and hold hereunder specifically al- located to such Series such certificates of deposit, interim receipts or other instruments or documents as may be issued to it to evidence such delivery;
(d) Make such transfers or exchanges of the assets of the Series specified in such Certificate, and take such other steps as shall be stated in such Certificate to be for the purpose of effectuating any duly authorized plan of liquidation, reorganization, merger, consolidation or recapitalization of the Fund; and
(e) Present for payment and collect the amount payable upon Securities not described in preceding paragraph 5(b) of this Article which may be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the Custodian shall not be required to obtain possession of any instrument or certificate representing any Futures Contract, any Option, or any Futures Contract Option until after it shall have determined, or shall have received a Certificate from the Fund stating, that any such instruments or certificates are available. The Fund shall deliver to the Custodian such a Certificate no later than the business day preceding the avail- ability of any such instrument or certificate. Prior to such availability, the Custodian shall comply with Section 17(f) of the Investment Company Act of 1940, as amended, in connection with the purchase, sale, settlement, closing out or writing of Futures Contracts, Options, or Futures Contract Options by mak- ing payments or deliveries specified in Certificates received by the Custodian in connection with any such purchase, sale, writ- ing, settlement or closing out upon its receipt from a broker, dealer, or futures commission merchant of a statement or confirmation reasonably believed by the Custodian to be in the form customarily used by brokers, dealers, or future commission merchants with respect to such Futures Contracts, Options, or Futures Contract Options, as the case may be, confirming that such Security is held by such broker, dealer or futures com- mission merchant, in book-entry form or otherwise, in the name of the Custodian (or any nominee of the Custodian) as custodian
for the Fund, provided, however, that notwithstanding the foregoing, payments to or deliveries from the Margin Account, and payments with respect to Securities to which a Margin Ac- count relates, shall be made in accordance with the terms and conditions of the Margin Account Agreement. Whenever any such instruments or certificates are available, the Custodian shall, notwithstanding any provision in this Agreement to the contrary, make payment for any Futures Contract, Option, or Futures Contract Option for which such instruments or such certificates are available only against the delivery to the Custodian of such instrument or such certificate, and deliver any Futures Contract, Option or Futures Contract Option for which such instruments or such certificates are available only against receipt by the Custodian of payment therefor. Any such instru- ment or certificate delivered to the Custodian shall be held by the Custodian hereunder in accordance with, and subject to, the provisions of this Agreement.
ARTICLE IV.
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Fund, other than a purchase of an Option, a Futures Contract, or a Futures Contract Option, the Fund shall deliver to the Custodian (i) with respect to each purchase of Securities which are not Money Market Securities, a Certificate, and (ii) with respect to each purchase of Money Market Securities, a Certificate or Oral Instructions, specifying with respect to each such purchase: (a) the Series to which such Securities are to be specifically allocated; (b) the name of the issuer and the title of the Securities; (c) the number of shares or the principal amount purchased and accrued interest, if any; (d) the date of purchase and settlement; (e) the purchase price per unit; (f) the total amount payable upon such purchase; (g) the name of the person from whom or the broker through whom the purchase was made, and the name of the clearing broker, if any; and (h) the name of the broker to whom payment is to be made. The Custodian shall, upon receipt of Securities purchased by or for the Fund, pay to the broker specified in the Certificate out of the moneys held for the account of such Series the total amount payable upon such purchase, provided that the same conforms to the total amount payable as set forth in such Certificate or Oral Instructions.
2. Promptly after each sale of Securities by the Fund, other than a sale of any Option, Futures Contract, Futures Contract Option, or any Reverse Repurchase Agreement, the Fund shall deliver to the Custodian (i) with respect to each sale of Securities which are not Money Market Securities, a Certificate, and (ii) with respect to each sale of Money Market Securities, a
Certificate or Oral Instructions, specifying with respect to each such sale: (a) the Series to which such Securities were specifically allocated; (b) the name of the issuer and the title of the Security; (c) the number of shares or principal amount sold, and accrued interest, if any; (d) the date of sale; (e) the sale price per unit; (f) the total amount payable to the Fund upon such sale; (g) the name of the broker through whom or the person to whom the sale was made, and the name of the clearing broker, if any; and (h) the name of the broker to whom the Securities are to be delivered. The Custodian shall deliver the Securities specifically allocated to such Series to the broker specified in the Certificate against payment of the total amount payable to the Fund upon such sale, provided that the same conforms to the total amount payable as set forth in such Certificate or Oral Instructions.
ARTICLE V.
OPTIONS
1. Promptly after the purchase of any Option by the Fund, the Fund shall deliver to the Custodian a Certificate specifying with respect to each Option purchased: (a) the Series to which such Option is specifically allocated; (b) the type of Option (put or call); (c) the name of the issuer and the title and number of shares subject to such Option or, in the case of a Stock Index Option, the stock index to which such Option relates and the number of Stock Index Options purchased; (d) the expira- tion date; (e) the exercise price; (f) the dates of purchase and settlement; (g) the total amount payable by the Fund in connec- tion with such purchase; (h) the name of the Clearing Member through whom such Option was purchased; and (i) the name of the broker to whom payment is to be made. The Custodian shall pay, upon receipt of a Clearing Member's statement confirming the purchase of such Option held by such Clearing Member for the account of the Custodian (or any duly appointed and registered nominee of the Custodian) as custodian for the Fund, out of moneys held for the account of the Series to which such Option is to be specifically allocated, the total amount payable upon such purchase to the Clearing Member through whom the purchase was made, provided that the same conforms to the total amount payable as set forth in such Certificate.
2. Promptly after the sale of any Option purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian a Certificate specifying with respect to each such sale: (a) the Series to which such Option was specifically allocated; (b) the type of Option (put or call); (c) the name of the issuer and the title and number of shares subject to such Option or, in the case of a Stock Index Option, the stock index to which such Option relates and the number of Stock Index Op- tions sold; (d) the date of sale; (e) the sale price; (f) the date of settlement; (g) the total amount payable to the Fund upon such sale; and (h) the name of the Clearing Member through
whom the sale was made. The Custodian shall consent to the delivery of the Option sold by the Clearing Member which previ- ously supplied the confirmation described in preceding paragraph 1 of this Article with respect to such Option against payment to the Custodian of the total amount payable to the Fund, provided that the same conforms to the total amount payable as set forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian a Certificate specifying with respect to such Call Option: (a) the Series to which such Call Option was specifically allocated; (b) the name of the is- suer and the title and number of shares subject to the Call Op- tion; (c) the expiration date; (d) the date of exercise and settlement; (e) the exercise price per share; (f) the total amount to be paid by the Fund upon such exercise; and (g) the name of the Clearing Member through whom such Call Option was exercised. The Custodian shall, upon receipt of the Securities underlying the Call Option which was exercised, pay out of the moneys held for the account of the Series to which such Call Option was specifically allocated the total amount payable to the Clearing Member through whom the Call Option was exercised, provided that the same conforms to the total amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian a Certificate specifying with respect to such Put Option: (a) the Series to which such Put Option was specifically allocated; (b) the name of the is- suer and the title and number of shares subject to the Put Op- tion; (c) the expiration date; (d) the date of exercise and settlement; (e) the exercise price per share; (f) the total amount to be paid to the Fund upon such exercise; and (g) the name of the Clearing Member through whom such Put Option was exercised. The Custodian shall, upon receipt of the amount pay- able upon the exercise of the Put Option, deliver or direct the Depository to deliver the Securities specifically allocated to such Series, provided the same conforms to the amount payable to the Fund as set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Stock Index Option purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian a Certificate specifying with respect to such Stock Index Option: (a) the Series to which such Stock Index Option was specifically al- located; (b) the type of Stock Index Option (put or call); (c) the number of Options being exercised; (d) the stock index to which such Option relates; (e) the expiration date; (f) the exercise price; (g) the total amount to be received by the Fund in connection with such exercise; and (h) the Clearing Member from whom such payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the
Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Covered Call Option: (a) the
Series for which such Covered Call Option was written; (b) the
name of the issuer and the title and number of shares for which
the Covered Call Option was written and which underlie the same;
(c) the expiration date; (d) the exercise price; (e) the premium
to be received by the Fund; (f) the date such Covered Call Op-
tion was written; and (g) the name of the Clearing Member
through whom the premium is to be received. The Custodian shall
deliver or cause to be delivered, in exchange for receipt of the
premium specified in the Certificate with respect to such
Covered Call Option, such receipts as are required in accordance
with the customs prevailing among Clearing Members dealing in
Covered Call Options and shall impose, or direct the Depository
to impose, upon the underlying Securities specified in the
Certificate specifically allocated to such Series such restric-
tions as may be required by such receipts. Notwithstanding the
foregoing, the Custodian has the right, upon prior written
notification to the Fund, at any time to refuse to issue any
receipts for Securities in the possession of the Custodian and
not deposited with the Depository underlying a Covered Call Op-
tion.
7. Whenever a Covered Call Option written by the Fund and described in the preceding paragraph of this Article is exercised, the Fund shall promptly deliver to the Custodian a Certificate instructing the Custodian to deliver, or to direct the Depository to deliver, the Securities subject to such Covered Call Option and specifying: (a) the Series for which such Covered Call Option was written; (b) the name of the issuer and the title and number of shares subject to the Covered Call Option; (c) the Clearing Member to whom the underlying Securi- ties are to be delivered; and (d) the total amount payable to the Fund upon such delivery. Upon the return and/or cancella- tion of any receipts delivered pursuant to paragraph 6 of this Article, the Custodian shall deliver, or direct the Depository to deliver, the underlying Securities as specified in the Certificate against payment of the amount to be received as set forth in such Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall promptly deliver to the Custodian a Certificate specifying with respect to such Put Option: (a) the Series for which such Put Option was written; (b) the name of the issuer and the title and number of shares for which the Put Option is written and which underlie the same; (c) the expiration date; (d) the exercise price; (e) the premium to be received by the Fund; (f) the date such Put Option is written; (g) the name of the Clear- ing Member through whom the premium is to be received and to whom a Put Option guarantee letter is to be delivered; (h) the amount of cash, and/or the amount and kind of Securities, if any, specifically allocated to such Series to be deposited in the Senior Security Account for such Series; and (i) the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be deposited into the Collateral Account for such Series. The Custodian shall, after making the deposits into the Collateral Account specified in the Certificate, issue a Put Option guarantee letter substantially in the form utilized by the Custodian on the date hereof, and deliver the same to the Clearing Member specified in the Certificate against receipt of the premium specified in said Certificate. Notwithstanding the foregoing, the Custodian shall be under no obligation to issue any Put Option guarantee letter or similar document if it is unable to make any of the representations contained therein.
9. Whenever a Put Option written by the Fund and described in the preceding paragraph is exercised, the Fund shall promptly deliver to the Custodian a Certificate specify- ing: (a) the Series to which such Put Option was written; (b) the name of the issuer and title and number of shares subject to the Put Option; (c) the Clearing Member from whom the underlying Securities are to be received; (d) the total amount payable by the Fund upon such delivery; (e) the amount of cash and/or the amount and kind of Securities specifically allocated to such Series to be withdrawn from the Collateral Account for such Series and (f) the amount of cash and/or the amount and kind of Securities, specifically allocated to such Series, if any, to be withdrawn from the Senior Security Account. Upon the return and/or cancellation of any Put Option guarantee letter or similar document issued by the Custodian in connection with such Put Option, the Custodian shall pay out of the moneys held for the account of the Series to which such Put Option was specifically allocated the total amount payable to the Clearing Member specified in the Certificate as set forth in such Certificate against delivery of such Securities, and shall make the withdrawals specified in such Certificate.
10. Whenever the Fund writes a Stock Index Option, the
Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Stock Index Option: (a) the
Series for which such Stock Index Option was written; (b)
whether such Stock Index Option is a put or a call; (c) the
number of options written; (d) the stock index to which such
Option relates; (e) the expiration date; (f) the exercise price;
(g) the Clearing Member through whom such Option was written;
(h) the premium to be received by the Fund; (i) the amount of
cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the
Senior Security Account for such Series; (j) the amount of cash
and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in the Collateral Ac-
count for such Series; and (k) the amount of cash and/or the
amount and kind of Securities, if any, specifically allocated to
such Series to be deposited in a Margin Account, and the name in
which such account is to be or has been established. The
Custodian shall, upon receipt of the premium specified in the
Certificate, make the deposits, if any, into the Senior Security
Account specified in the Certificate, and either (1) deliver
such receipts, if any, which the Custodian has specifically agreed to issue, which are in accordance with the customs prevailing among Clearing Members in Stock Index Options and make the deposits into the Collateral Account specified in the Certificate, or (2) make the deposits into the Margin Account specified in the Certificate.
11. Whenever a Stock Index Option written by the Fund
and described in the preceding paragraph of this Article is
exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to such Stock Index Option:
(a) the Series for which such Stock Index Option was written;
(b) such information as may be necessary to identify the Stock
Index Option being exercised; (c) the Clearing Member through
whom such Stock Index Option is being exercised; (d) the total
amount payable upon such exercise, and whether such amount is to
be paid by or to the Fund; (e) the amount of cash and/or amount
and kind of Securities, if any, to be withdrawn from the Margin
Account; and (f) the amount of cash and/or amount and kind of
Securities, if any, to be withdrawn from the Senior Security
Account for such Series; and the amount of cash and/or the
amount and kind of Securities, if any, to be withdrawn from the
Collateral Account for such Series. Upon the return and/or
cancellation of the receipt, if any, delivered pursuant to the
preceding paragraph of this Article, the Custodian shall pay out
of the moneys held for the account of the Series to which such
Stock Index Option was specifically allocated to the Clearing
Member specified in the Certificate the total amount payable, if
any, as specified therein.
12. Whenever the Fund purchases any Option identical to a previously written Option described in paragraphs, 6, 8 or 10 of this Article in a transaction expressly designated as a "Closing Purchase Transaction" in order to liquidate its posi- tion as a writer of an Option, the Fund shall promptly deliver to the Custodian a Certificate specifying with respect to the Option being purchased: (a) that the transaction is a Closing Purchase Transaction; (b) the Series for which the Option was written; (c) the name of the issuer and the title and number of shares subject to the Option, or, in the case of a Stock Index Option, the stock index to which such Option relates and the number of Options held; (d) the exercise price; (e) the premium to be paid by the Fund; (f) the expiration date; (g) the type of Option (put or call); (h) the date of such purchase; (i) the name of the Clearing Member to whom the premium is to be paid; and (j) the amount of cash and/or the amount and kind of Securi- ties, if any, to be withdrawn from the Collateral Account, a specified Margin Account, or the Senior Security Account for such Series. Upon the Custodian's payment of the premium and the return and/or cancellation of any receipt issued pursuant to paragraphs 6, 8 or 10 of this Article with respect to the Option being liquidated through the Closing Purchase Transaction, the Custodian shall remove, or direct the Depository to remove, the previously imposed restrictions on the Securities underlying the Call Option.
13. Upon the expiration, exercise or consummation of a Closing Purchase Transaction with respect to any Option purchased or written by the Fund and described in this Article, the Custodian shall delete such Option from the statements delivered to the Fund pursuant to paragraph 3 Article III herein, and upon the return and/or cancellation of any receipts issued by the Custodian, shall make such withdrawals from the Collateral Account, and the Margin Account and/or the Senior Security Account as may be specified in a Certificate received in connection with such expiration, exercise, or consummation.
ARTICLE VI.
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the Fund shall deliver to the Custodian a Certificate specifying with respect to such Futures Contract, (or with respect to any number of identical Futures Contract(s)): (a) the Series for which the Futures Contract is being entered; (b) the category of Futures Contract (the name of the underlying stock index or financial instrument); (c) the number of identical Futures Contracts entered into; (d) the delivery or settlement date of the Futures Contract(s); (e) the date the Futures Contract(s) was (were) entered into and the maturity date; (f) whether the Fund is buying (going long) or selling (going short) on such Futures Contract(s); (g) the amount of cash and/or the amount and kind of Securities, if any, to be deposited in the Senior Security Account for such Series; (h) the name of the broker, dealer, or futures commission merchant through whom the Futures Contract was entered into; and (i) the amount of fee or commission, if any, to be paid and the name of the broker, dealer, or futures commission merchant to whom such amount is to be paid. The Custodian shall make the deposits, if any, to the Margin Account in accordance with the terms and conditions of the Margin Account Agreement. The Custodian shall make payment out of the moneys specifically allocated to such Series of the fee or commission, if any, specified in the Certificate and deposit in the Senior Security Account for such Series the amount of cash and/or the amount and kind of Securities specified in said Certificate.
2. (a) Any variation margin payment or similar payment required to be made by the Fund to a broker, dealer, or futures commission merchant with respect to an outstanding Futures Contract, shall be made by the Custodian in accordance with the terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment from a broker, dealer, or futures commission merchant to the Fund with respect to an outstanding Futures Contract, shall be received and dealt with by the Custodian in accordance with the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is retained by the Fund until delivery or settlement is made on such Futures Contract, the Fund shall deliver to the Custodian a Certificate specifying: (a) the Futures Contract and the Series to which the same relates; (b) with respect to a Stock Index Futures Contract, the total cash settlement amount to be paid or received, and with respect to a Financial Futures Contract, the Securities and/or amount of cash to be delivered or received; (c) the broker, dealer, or futures commission merchant to or from whom payment or delivery is to be made or received; and (d) the amount of cash and/or Securities to be withdrawn from the Senior Security Account for such Series. The Custodian shall make the payment or delivery specified in the Certificate, and delete such Futures Contract from the state- ments delivered to the Fund pursuant to paragraph 3 of Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to offset a Futures Contract held by the Custodian hereunder, the Fund shall deliver to the Custodian a Certificate specifying: (a) the items of information required in a Certificate described in paragraph 1 of this Article, and (b) the Futures Contract being offset. The Custodian shall make payment out of the money specifically allocated to such Series of the fee or commission, if any, specified in the Certificate and delete the Futures Contract being offset from the statements delivered to the Fund pursuant to paragraph 3 of Article III herein, and make such withdrawals from the Senior Security Ac- count for such Series as may be specified in such Certificate. The withdrawals, if any, to be made from the Margin Account shall be made by the Custodian in accordance with the terms and conditions of the Margin Account Agreement.
ARTICLE VII.
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract Option by the Fund, the Fund shall promptly deliver to the Custodian a Certificate specifying with respect to such Futures Contract Option: (a) the Series to which such Option is specifically allocated; (b) the type of Futures Contract Option (put or call); (c) the type of Futures Contract and such other information as may be necessary to identify the Futures Contract underlying the Futures Contract Option purchased; (d) the expiration date; (e) the exercise price; (f) the dates of purchase and settlement; (g) the amount of premium to be paid by the Fund upon such purchase; (h) the name of the broker or futures commission merchant through whom such option was purchased; and (i) the name of the broker, or futures commission merchant, to whom payment is to be made. The Custodian shall pay out of the moneys specifically allocated to such Series, the total amount to be paid upon such purchase to the broker or
futures commissions merchant through whom the purchase was made, provided that the same conforms to the amount set forth in such Certificate.
2. Promptly after the sale of any Futures Contract Op- tion purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall promptly deliver to the Custodian a Certificate specifying with respect to each such sale: (a) Series to which such Futures Contract Option was specifically allocated; (b) the type of Future Contract Option (put or call); (c) the type of Futures Contract and such other information as may be necessary to identify the Futures Contract underlying the Futures Contract Option; (d) the date of sale; (e) the sale price; (f) the date of settlement; (g) the total amount payable to the Fund upon such sale; and (h) the name of the broker of futures commission merchant through whom the sale was made. The Custodian shall consent to the cancellation of the Futures Contract Option being closed against payment to the Custodian of the total amount pay- able to the Fund, provided the same conforms to the total amount payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the
Fund pursuant to paragraph 1 is exercised by the Fund, the Fund
shall promptly deliver to the Custodian a Certificate specify-
ing: (a) the Series to which such Futures Contract Option was
specifically allocated; (b) the particular Futures Contract Op-
tion (put or call) being exercised; (c) the type of Futures
Contract underlying the Futures Contract Option; (d) the date of
exercise; (e) the name of the broker or futures commission
merchant through whom the Futures Contract Option is exercised;
(f) the net total amount, if any, payable by the Fund; (g) the
amount, if any, to be received by the Fund; and (h) the amount
of cash and/or the amount and kind of Securities to be deposited
in the Senior Security Account for such Series. The Custodian
shall make, out of the moneys and Securities specifically al-
located to such Series, the payments, if any, and the deposits,
if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin
Account shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund shall promptly deliver to the Custodian a Certificate specifying with respect to such Futures Contract Option: (a) the Series for which such Futures Contract Option was written; (b) the type of Futures Contract Option (put or call); (c) the type of Futures Contract and such other information as may be neces- sary to identify the Futures Contract underlying the Futures Contract Option; (d) the expiration date; (e) the exercise price; (f) the premium to be received by the Fund; (g) the name of the broker or futures commission merchant through whom the premium is to be received; and (h) the amount of cash and/or the amount and kind of Securities, if any, to be deposited in the Senior Security Account for such Series. The Custodian shall, upon receipt of the premium specified in the Certificate, make
out of the moneys and Securities specifically allocated to such Series the deposits into the Senior Security Account, if any, as specified in the Certificate. The deposits, if any, to be made to the Margin Account shall be made by the Custodian in ac- cordance with the terms and conditions of the Margin Account Agreement.
5. Whenever a Futures Contract Option written by the
Fund which is a call is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying: (a) the
Series to which such Futures Contract Option was specifically
allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract
Option; (d) the name of the broker or futures commission
merchant through whom such Futures Contract Option was
exercised; (e) the net total amount, if any, payable to the Fund
upon such exercise; (f) the net total amount, if any, payable by
the Fund upon such exercise; and (g) the amount of cash and/or
the amount and kind of Securities to be deposited in the Senior
Security Account for such Series. The Custodian shall, upon its
receipt of the net total amount payable to the Fund, if any,
specified in such Certificate make the payments, if any, and the
deposits, if any, into the Senior Security Account as specified
in the Certificate. The deposits, if any, to be made to the
Margin Account shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
6. Whenever a Futures Contract Option which is written
by the Fund and which is a put is exercised, the Fund shall
promptly deliver to the Custodian a Certificate specifying: (a)
the Series to which such Option was specifically allocated; (b)
the particular Futures Contract Option exercised; (c) the type
of Futures Contract underlying such Futures Contract Option; (d)
the name of the broker or futures commission merchant through
whom such Futures Contract Option is exercised; (e) the net
total amount, if any, payable to the Fund upon such exercise;
(f) the net total amount, if any, payable by the Fund upon such
exercise; and (g) the amount and kind of Securities and/or cash
to be withdrawn from or deposited in, the Senior Security Ac-
count for such Series, if any. The Custodian shall, upon its
receipt of the net total amount payable to the Fund, if any,
specified in the Certificate, make out of the moneys and Securi-
ties specifically allocated to such Series, the payments, if
any, and the deposits, if any, into the Senior Security Account
as specified in the Certificate. The deposits to and/or
withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
7. Whenever the Fund purchases any Futures Contract Option identical to a previously written Futures Contract Option described in this Article in order to liquidate its position as a writer of such Futures Contract Option, the Fund shall promptly deliver to the Custodian a Certificate specifying with respect to the Futures Contract Option being purchased: (a) the
Series to which such Option is specifically allocated; (b) that the transaction is a closing transaction; (c) the type of Future Contract and such other information as may be necessary to identify the Futures Contract underlying the Futures Option Contract; (d) the exercise price; (e) the premium to be paid by the Fund; (f) the expiration date; (g) the name of the broker or futures commission merchant to whom the premium is to be paid; and (h) the amount of cash and/or the amount and kind of Securi- ties, if any, to be withdrawn from the Senior Security Account for such Series. The Custodian shall effect the withdrawals from the Senior Security Account specified in the Certificate. The withdrawals, if any, to be made from the Margin Account shall be made by the Custodian in accordance with the terms and conditions of the Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a closing transaction with respect to, any Futures Contract Option written or purchased by the Fund and described in this Article, the Custodian shall (a) delete such Futures Contract Option from the statements delivered to the Fund pursuant to paragraph 3 of Article III herein and, (b) make such withdrawals from and/or in the case of an exercise such deposits into the Senior Security Account as may be specified in a Certificate. The deposits to and/or withdrawals from the Margin Account, if any, shall be made by the Custodian in accordance with the terms and condi- tions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise of a Futures Contract Option described in this Article shall be subject to Article VI hereof.
ARTICLE VIII.
SHORT SALES
1. Promptly after any short sales by any Series of the Fund, the Fund shall promptly deliver to the Custodian a Certificate specifying: (a) the Series for which such short sale was made; (b) the name of the issuer and the title of the Security; (c) the number of shares or principal amount sold, and accrued interest or dividends, if any; (d) the dates of the sale and settlement; (e) the sale price per unit; (f) the total amount credited to the Fund upon such sale, if any, (g) the amount of cash and/or the amount and kind of Securities, if any, which are to be deposited in a Margin Account and the name in which such Margin Account has been or is to be established; (h) the amount of cash and/or the amount and kind of Securities, if any, to be deposited in a Senior Security Account, and (i) the name of the broker through whom such short sale was made. The Custodian shall upon its receipt of a statement from such broker confirming such sale and that the total amount credited to the Fund upon such sale, if any, as specified in the Certificate is held by such broker for the account of the Custodian (or any nominee of the Custodian) as custodian of the Fund, issue a
receipt or make the deposits into the Margin Account and the Senior Security Account specified in the Certificate.
2. In connection with the closing-out of any short
sale, the Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to each such closing out:
(a) the Series for which such transaction is being made; (b) the
name of the issuer and the title of the Security; (c) the number
of shares or the principal amount, and accrued interest or
dividends, if any, required to effect such closing-out to be
delivered to the broker; (d) the dates of closing-out and
settlement; (e) the purchase price per unit; (f) the net total
amount payable to the Fund upon such closing-out; (g) the net
total amount payable to the broker upon such closing-out; (h)
the amount of cash and the amount and kind of Securities to be
withdrawn, if any, from the Margin Account; (i) the amount of
cash and/or the amount and kind of Securities, if any, to be
withdrawn from the Senior Security Account; and (j) the name of
the broker through whom the Fund is effecting such closing-out.
The Custodian shall, upon receipt of the net total amount pay-
able to the Fund upon such closing-out, and the return and/ or
cancellation of the receipts, if any, issued by the Custodian
with respect to the short sale being closed-out, pay out of the
moneys held for the account of the Fund to the broker the net
total amount payable to the broker, and make the withdrawals
from the Margin Account and the Senior Security Account, as the
same are specified in the Certificate.
ARTICLE IX.
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase Agreement with respect to Securities and money held by the Custodian hereunder, the Fund shall deliver to the Custodian a Certificate, or in the event such Reverse Repurchase Agreement is a Money Market Security, a Certificate or Oral Instructions specifying: (a) the Series for which the Reverse Repurchase Agreement is entered; (b) the total amount payable to the Fund in connection with such Reverse Repurchase Agreement and specifically allocated to such Series; (c) the broker or dealer through or with whom the Reverse Repurchase Agreement is entered; (d) the amount and kind of Securities to be delivered by the Fund to such broker or dealer; (e) the date of such Reverse Repurchase Agreement; and (f) the amount of cash and/or the amount and kind of Securities, if any, specifically allocated to such Series to be deposited in a Senior Security Account for such Series in connection with such Reverse Repurchase Agreement. The Custodian shall, upon receipt of the total amount payable to the Fund specified in the Certificate, Oral Instructions, or Written Instructions make the delivery to the broker or dealer, and the deposits, if any, to the Senior Security Account, specified in such Certificate or Oral Instructions.
2. Upon the termination of a Reverse Repurchase Agree-
ment described in preceding paragraph 1 of this Article, the
Fund shall promptly deliver a Certificate or, in the event such
Reverse Repurchase Agreement is a Money Market Security, a
Certificate or Oral Instructions to the Custodian specifying:
(a) the Reverse Repurchase Agreement being terminated and the
Series for which same was entered; (b) the total amount payable
by the Fund in connection with such termination; (c) the amount
and kind of Securities to be received by the Fund and
specifically allocated to such Series in connection with such
termination; (d) the date of termination; (e) the name of the
broker or dealer with or through whom the Reverse Repurchase
Agreement is to be terminated; and (f) the amount of cash and/or
the amount and kind of Securities to be withdrawn from the
Senior Securities Account for such Series. The Custodian shall,
upon receipt of the amount and kind of Securities to be received
by the Fund specified in the Certificate or Oral Instructions,
make the payment to the broker or dealer, and the withdrawals,
if any, from the Senior Security Account, specified in such
Certificate or Oral Instructions.
ARTICLE X.
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically allocated to a Series held by the Custodian hereunder, the Fund shall deliver or cause to be delivered to the Custodian a Certificate specifying with respect to each such loan: (a) the Series to which the loaned Securities are specifically allocated; (b) the name of the issuer and the title of the Securities, (c) the number of shares or the principal amount loaned, (d) the date of loan and delivery, (e) the total amount to be delivered to the Custodian against the loan of the Securities, including the amount of cash collateral and the premium, if any, separately identified, and (f) the name of the broker, dealer, or financial institution to which the loan was made. The Custodian shall deliver the Securities thus designated to the broker, dealer or financial institution to which the loan was made upon receipt of the total amount designated as to be delivered against the loan of Securities. The Custodian may accept payment in connection with a delivery otherwise than through the Book-Entry System or Depository only in the form of a certified or bank cashier's check payable to the order of the Fund or the Custodian drawn on New York Clear- ing House funds and may deliver Securities in accordance with the customs prevailing among dealers in securities.
2. Promptly after each termination of the loan of Securities by the Fund, the Fund shall deliver or cause to be delivered to the Custodian a Certificate specifying with respect to each such loan termination and return of Securities: (a) the
Series to which the loaned Securities are specifically al- located; (b) the name of the issuer and the title of the Securi- ties to be returned, (c) the number of shares or the principal amount to be returned, (d) the date of termination, (e) the total amount to be delivered by the Custodian (including the cash collateral for such Securities minus any offsetting credits as described in said Certificate), and (f) the name of the broker, dealer, or financial institution from which the Securi- ties will be returned. The Custodian shall receive all Securi- ties returned from the broker, dealer, or financial institution to which such Securities were loaned and upon receipt thereof shall pay, out of the moneys held for the account of the Fund, the total amount payable upon such return of Securities as set forth in the Certificate.
ARTICLE XI.
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such deposits to, or withdrawals from, a Senior Security Account as specified in a Certificate received by the Custodian. Such Certificate shall specify the Series for which such deposit or withdrawal is to be made and the amount of cash and/or the amount and kind of Securities specifically allocated to such Series to be deposited in, or withdrawn from, such Senior Security Account for such Series. In the event that the Fund fails to specify in a Certificate the Series, the name of the issuer, the title and the number of shares or the principal amount of any particular Securities to be deposited by the Custodian into, or withdrawn from, a Senior Securities Account, the Custodian shall be under no obligation to make any such deposit or withdrawal and shall so notify the Fund.
2. The Custodian shall make deliveries or payments from a Margin Account to the broker, dealer, futures commission merchant or Clearing Member in whose name, or for whose benefit, the account was established as specified in the Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions with respect to Securities deposited in any Margin Account shall be dealt with in accordance with the terms and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and security interest in and to any property at any time held by the Custodian in any Collateral Account described herein. In ac- cordance with applicable law the Custodian may enforce its lien and realize on any such property whenever the Custodian has made payment or delivery pursuant to any Put Option guarantee letter or similar document or any receipt issued hereunder by the Custodian. In the event the Custodian should realize on any
such property net proceeds which are less than the Custodian's obligations under any Put Option guarantee letter or similar document or any receipt, such deficiency shall be a debt owed the Custodian by the Fund within the scope of Article XIV herein.
5. On each business day the Custodian shall furnish the Fund with a statement with respect to each Margin Account in which money or Securities are held specifying as of the close of business on the previous business day: (a) the name of the Margin Account; (b) the amount and kind of Securities held therein; and (c) the amount of money held therein. The Custodian shall make available upon request to any broker, dealer, or futures commission merchant specified in the name of a Margin Account a copy of the statement furnished the Fund with respect to such Margin Account.
6. Promptly after the close of business on each busi- ness day in which cash and/or Securities are maintained in a Collateral Account for any Series, the Custodian shall furnish the Fund with a statement with respect to such Collateral Ac- count specifying the amount of cash and/or the amount and kind of Securities held therein. No later than the close of business next succeeding the delivery to the Fund of such statement, the Fund shall furnish to the Custodian a Certificate or Written Instructions specifying the then market value of the Securities described in such statement. In the event such then market value is indicated to be less than the Custodian's obligation with respect to any outstanding Put Option guarantee letter or similar document, the Fund shall promptly specify in a Certificate the additional cash and/or Securities to be deposited in such Collateral Account to eliminate such deficiency.
ARTICLE XII.
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the resolution of the Board of Directors of the Fund, certified by the Secretary or any Assistant Secretary, either (i) setting forth with respect to the Series specified therein the date of the declaration of a dividend or distribution, the date of pay- ment thereof, the record date as of which shareholders entitled to payment shall be determined, the amount payable per Share of such Series to the shareholders of record as of that date and the total amount payable to the Dividend Agent and any sub-dividend agent or co-dividend agent of the Fund on the pay- ment date, or (ii) authorizing with respect to the Series specified therein the declaration of dividends and distributions on a daily basis and authorizing the Custodian to rely on Oral Instructions or a Certificate setting forth the date of the declaration of such dividend or distribution, the date of payment thereof, the record date as of which shareholders
entitled to payment shall be determined, the amount payable per Share of such Series to the shareholders of record as of that date and the total amount payable to the Dividend Agent on the payment date.
2. Upon the payment date specified in such resolution, Oral Instructions or Certificate, as the case may be, the Custodian shall pay out of the moneys held for the account of each Series the total amount payable to the Dividend Agent and any sub-dividend agent or co-dividend agent of the Fund with respect to such Series.
ARTICLE XIII.
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver to the Custodian a Certificate duly specifying:
(a) The Series, the number of Shares sold, trade date, and price; and
(b) The amount of money to be received by the Custodian for the sale of such Shares and specifically allocated to the separate account in the name of such Series.
2. Upon receipt of such money from the Transfer Agent, the Custodian shall credit such money to the separate account in the name of the Series for which such money was received.
3. Upon issuance of any Shares of any Series described in the foregoing provisions of this Article, the Custodian shall pay, out of the money held for the account of such Series, all original issue or other taxes required to be paid by the Fund in connection with such issuance upon the receipt of a Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund desires the Custodian to make payment out of the money held by the Custodian hereunder in connection with a redemption of any Shares, it shall furnish to the Custodian a Certificate specify- ing:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice setting forth the Series and number of Shares received by the Transfer Agent for redemption and that such Shares are in good form for redemption, the Custodian shall make payment to the Transfer Agent out of the moneys held in the separate account in the name of the Series the total amount specified in the
Certificate issued pursuant to the foregoing paragraph 4 of this Article.
6. Notwithstanding the above provisions regarding the redemption of any Shares, whenever any Shares are redeemed pursuant to any check redemption privilege which may from time to time be offered by the Fund, the Custodian, unless otherwise instructed by a Certificate, shall, upon receipt of an advice from the Fund or its agent setting forth that the redemption is in good form for redemption in accordance with the check redemp- tion procedure, honor the check presented as part of such check redemption privilege out of the moneys held in the separate ac- count of the Series of the Shares being redeemed.
ARTICLE XIV.
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion advance funds on behalf of any Series which results in an overdraft because the moneys held by the Custodian in the separate account for such Series shall be insufficient to pay the total amount payable upon a purchase of Securities specifically allocated to such Series, as set forth in a Certificate or Oral Instructions, or which results in an overdraft in the separate account of such Series for some other reason, or if the Fund is for any other reason indebted to the Custodian with respect to a Series, including any indebtedness to The Bank of New York under the Fund's Cash Management and Related Services Agreement, (except a borrowing for investment or for temporary or emergency purposes using Securities as collateral pursuant to a separate agreement and subject to the provisions of paragraph 2 of this Article), such overdraft or indebtedness shall be deemed to be a loan made by the Custodian to the Fund for such Series payable on demand and shall bear interest from the date incurred at a rate per annum (based on a 360-day year for the actual number of days involved) equal to 1/2% over Custodian's prime commercial lending rate in effect from time to time, such rate to be adjusted on the effective date of any change in such prime commercial lending rate but in no event to be less than 6% per annum. In addition, the Fund hereby agrees that the Custodian shall have a continuing lien and security interest in and to any property specifically allocated to such Series at any time held by it for the benefit of such Series or in which the Fund may have an interest which is then in the Custodian's possession or control or in posses- sion or control of any third party acting in the Custodian's behalf. The Fund authorizes the Custodian, in its sole discre- tion, at any time to charge any such overdraft or indebtedness together with interest due thereon against any balance of ac- count standing to such Series' credit on the Custodian's books. In addition, the Fund hereby covenants that on each Business Day on which either it intends to enter a Reverse Repurchase Agree- ment and/or otherwise borrow from a third party, or which next
succeeds a Business Day on which at the close of business the Fund had outstanding a Reverse Repurchase Agreement or such a borrowing, it shall prior to 9 a.m., New York City time, advise the Custodian, in writing, of each such borrowing, shall specify the Series to which the same relates, and shall not incur any indebtedness not so specified other than from the Custodian.
2. The Fund will cause to be delivered to the Custodian
by any bank (including, if the borrowing is pursuant to a
separate agreement, the Custodian) from which it borrows money
for investment or for temporary or emergency purposes using
Securities held by the Custodian hereunder as collateral for
such borrowings, a notice or undertaking in the form currently
employed by any such bank setting forth the amount which such
bank will loan to the Fund against delivery of a stated amount
of collateral. The Fund shall promptly deliver to the Custodian
a Certificate specifying with respect to each such borrowing:
(a) the Series to which such borrowing relates; (b) the name of
the bank, (c) the amount and terms of the borrowing, which may
be set forth by incorporating by reference an attached promis-
sory note, duly endorsed by the Fund, or other loan agreement,
(d) the time and date, if known, on which the loan is to be
entered into, (e) the date on which the loan becomes due and
payable, (f) the total amount payable to the Fund on the borrow-
ing date, (g) the market value of Securities to be delivered as
collateral for such loan, including the name of the issuer, the
title and the number of shares or the principal amount of any
particular Securities, and (h) a statement specifying whether
such loan is for investment purposes or for temporary or
emergency purposes and that such loan is in conformance with the
Investment Company Act of 1940 and the Fund's prospectus. The
Custodian shall deliver on the borrowing date specified in a
Certificate the specified collateral and the executed promissory
note, if any, against delivery by the lending bank of the total
amount of the loan payable, provided that the same conforms to
the total amount payable as set forth in the Certificate. The
Custodian may, at the option of the lending bank, keep such col-
lateral in its possession, but such collateral shall be subject
to all rights therein given the lending bank by virtue of any
promissory note or loan agreement. The Custodian shall deliver
such Securities as additional collateral as may be specified in
a Certificate to collateralize further any transaction described
in this paragraph. The Fund shall cause all Securities released
from collateral status to be returned directly to the Custodian,
and the Custodian shall receive from time to time such return of
collateral as may be tendered to it. In the event that the Fund
fails to specify in a Certificate the Series, the name of the
issuer, the title and number of shares or the principal amount
of any particular Securities to be delivered as collateral by
the Custodian, the Custodian shall not be under any obligation
to deliver any Securities.
ARTICLE XV.
TERMINAL LINK
1. At no time and under no circumstances shall the Fund be obligated to have or utilize the Terminal Link, and the provisions of this Article shall apply if, but only if, the Fund in its sole and absolute discretion elects to utilize the Terminal Link to transmit Certificates to the Custodian.
2. The Terminal Link shall be utilized by the Fund only for the purpose of the Fund providing Certificates to the Custodian with respect to transactions involving Securities or for the transfer of money to be applied to the payment of dividends, distributions or redemptions of Fund Shares, and shall be utilized by the Custodian only for the purpose of providing notices to the Fund. Such use shall commence only after the Fund shall have delivered to the Custodian a Certificate substantially in the form of Exhibit D and shall have established access codes. Each use of the Terminal Link by the Fund shall constitute a representation and warranty that the Terminal Link is being used only for the purposes permitted hereby, that at least two Officers have each utilized an access code, that such safekeeping procedures have been established by the Fund, and that such use does not contravene the Investment Company Act of 1940, as amended, or the rules or regulations thereunder.
3. The Fund shall obtain and maintain at its own cost and expense all equipment and services, including, but not limited to communications services, necessary for it to utilize the Terminal Link, and the Custodian shall not be responsible for the reliability or availability of any such equipment or services.
4. The Fund acknowledges that any data bases made available as part of, or through the Terminal Link and any proprietary data, software, processes, information and docu- mentation (other than any such which are or become part of the public domain or are legally required to be made available to the public) (collectively, the "Information"), are the exclusive and confidential property of the Custodian. The Fund shall, and shall cause others to which it discloses the Information, to keep the Information confidential by using the same care and discretion it uses with respect to its own confidential property and trade secrets, and shall neither make nor permit any disclosure without the express prior written consent of the Custodian.
5. Upon termination of this Agreement for any reason, the Fund shall return to the Custodian any and all copies of the Information which are in the Fund's possession or under its control, or which the Fund distributed to third parties. The provisions of this Article shall not affect the copyright status
of any of the Information which may be copyrighted and shall apply to all Information whether or not copyrighted.
6. The Custodian reserves the right to modify the Ter- minal Link from time to time without notice to the Fund except that the Custodian shall give the Fund notice not less than 75 days in advance of any modification which would materially adversely affect the Fund's operation, and the Fund agrees that the Fund shall not modify or attempt to modify the Terminal Link without the Custodian's prior written consent. The Fund acknowledges that any software or procedures provided the Fund as part of the Terminal Link are the property of the Custodian and, accordingly, the Fund agrees that any modifications to the Terminal Link, whether by the Fund, or by the Custodian and whether with or without the Custodian's consent, shall become the property of the Custodian.
7. Neither the Custodian nor any manufacturers and suppliers it utilizes or the Fund utilizes in connection with the Terminal Link makes any warranties or representations, express or implied, in fact or in law, including but not limited to warranties of merchantability and fitness for a particular purpose.
8. The Fund will cause its Officers and employees to treat the authorization codes and the access codes applicable to Terminal Link with extreme care, and irrevocably authorizes the Custodian to act in accordance with and rely on Certificates received by it through the Terminal Link. The Fund acknowledges that it is its responsibility to assure that only its Officers use the Terminal Link on its behalf, and that a Custodian shall not be responsible nor liable for use of the Terminal Link on the Fund's behalf by persons other than such persons or Officers, or by only a single Officer, nor for any alteration, omission, or failure to promptly forward.
9(a). Except as otherwise specifically provided in Section
9(b) of this Article, the Custodian shall have no liability for
any losses, damages, injuries, claims, costs or expenses arising
out of or in connection with any failure, malfunction or other
problem relating to the Terminal Link except for money damages
suffered as the direct result of the negligence of the Custodian
in an amount not exceeding for any incident $25,000 provided,
however, that the Custodian shall have no liability under this
Section 9 if the Fund fails to comply with the provisions of
Section 11.
9(b). The Custodian's liability for its negligence in executing or failing to execute in accordance with a Certificate received through Terminal Link shall be only with respect to a transfer of funds which is not made in accordance with such Certificate after such Certificate shall have been duly acknowledged by the Custodian, and shall be contingent upon the Fund complying with the provisions of Section 12 of this Article, and shall be limited to (i) restoration of the
principal amount mistransferred, if and to the extent that the Custodian would be required to make such restoration under applicable law, and (ii) the lesser of (A) a Fund's actual pecuniary loss incurred by reason of its loss of use of the mistransferred funds or the funds which were not transferred, as the case may be, or (B) compensation for the loss of the use of the mistransferred funds or the funds which were not transferred, as the case may be, at a rate per annum equal to the average federal funds rate as computed from the Federal Reserve Bank of New York's daily determination of the effective rate for federal funds, for the period during which a Fund has lost use of such funds. In no event shall the Custodian have any liability for failing to execute in accordance with a Certificate a transfer of funds where the Certificate is received by the Custodian through Terminal Link other than through the applicable transfer module for the particular instructions contained in such Certificate.
10. Without limiting the generality of the foregoing, in
no event shall the Custodian or any manufacturer or supplier of
its computer equipment, software or services relating to the
Terminal Link be responsible for any special, indirect,
incidental or consequential damages which the Fund may incur or
experience by reason of its use of the Terminal Link even if the
Custodian or any manufacturer or supplier has been advised of
the possibility of such damages, nor with respect to the use of
the Terminal Link shall the Custodian or any such manufacturer
or supplier be liable for acts of God, or with respect to the
following to the extent beyond such person's reasonable control:
machine or computer breakdown or malfunction, interruption or
malfunction of communication facilities, labor difficulties or
any other similar or dissimilar cause.
11. The Fund shall notify the Custodian of any errors,
omissions or interruptions in, or delay or unavailability of,
the Terminal Link as promptly as practicable, and in any event
within 24 hours after the earliest of (i) discovery thereof,
(ii) the Business Day on which discovery should have occurred
through the exercise of reasonable care and (iii) in the case of
any error, the date of actual receipt of the earliest notice
which reflects such error, it being agreed that discovery and
receipt of notice may only occur on a business day. The
Custodian shall promptly advise the Fund whenever the Custodian
learns of any errors, omissions or interruption in, or delay or
unavailability of, the Terminal Link.
12. The Custodian shall verify to the Fund, by use of the Terminal Link, receipt of each Certificate the Custodian receives through the Terminal Link, and in the absence of such verification the Custodian shall not be liable for any failure to act in accordance with such Certificate and the Fund may not claim that such Certificate was received by the Custodian. Such verification, which may occur after the Custodian has acted upon
such Certificate, shall be accomplished on the same day on which such Certificate is received.
ARTICLE XVI.
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
1. The Custodian is authorized and instructed to employ, as sub-custodian for each Series' Foreign Securities (as such term is defined in paragraph (c)(1) of Rule 17f-5 under the Investment Company Act of 1940, as amended) and other assets, the foreign banking institutions and foreign securities depositories and clearing agencies designated on Schedule I hereto ("Foreign Sub-Custodians") to carry out their respective responsibilities in accordance with the terms of the sub- custodian agreement between each such Foreign Sub-Custodian and the Custodian, copies of which have been previously delivered to the Fund and receipt of which is hereby acknowledged (each such agreement, a "Foreign Sub-Custodian Agreement"). The Custodian shall be liable for the acts and omissions of each Foreign Sub- Custodian constituting negligence or willful misconduct in the conduct of its responsibilities under the terms of the Foreign Sub-Custodian Agreement. Upon receipt of a Certificate, together with a certified resolution substantially in the form attached as Exhibit E of the Fund's Board of Directors, the Fund may designate any additional foreign sub-custodian with which the Custodian has an agreement for such entity to act as the Custodian's agent, as its sub-custodian and any such additional foreign sub-custodian shall be deemed added to Schedule I. Upon receipt of a Certificate from the Fund, the Custodian shall cease the employment of any one or more Foreign Sub-Custodians for maintaining custody of the Fund's assets and such Foreign Sub-Custodian shall be deemed deleted from Schedule I.
2. Each Foreign Sub-Custodian Agreement shall be substantially in the form previously delivered to the Fund and will not be amended in a way that materially adversely affects the Fund without the Fund's prior written consent.
3. The Custodian shall identify on its books as belonging to each Series of the Fund the Foreign Securities of such Series held by each Foreign Sub-Custodian. At the election of the Fund, it shall be entitled to be subrogated to the rights of the Custodian with respect to any claims by the Fund or any Series against a Foreign Sub-Custodian as a consequence of any loss, damage, cost, expense, liability or claim sustained or incurred by the Fund or any Series if and to the extent that the Fund or such Series has not been made whole for any such loss, damage, cost, expense, liability or claim.
4. Upon request of the Fund, the Custodian will, consistent with the terms of the applicable Foreign Sub- Custodian Agreement, use reasonable efforts to arrange for the independent accountants of the Fund to be afforded access to the books and records of any Foreign Sub-Custodian insofar as such books and records relate to the performance of such Foreign Sub- Custodian under its agreement with the Custodian on behalf of the Fund.
5. The Custodian will supply to the Fund from time to time, as mutually agreed upon, statements in respect of the securities and other assets of each Series held by Foreign Sub- Custodians, including but not limited to, an identification of entities having possession of each Series' Foreign Securities and other assets, and advices or notifications of any transfers of Foreign Securities to or from each custodial account maintained by a Foreign Sub-Custodian for the Custodian on behalf of the Series.
6. The Custodian shall furnish annually to the Fund, as mutually agreed upon, information concerning the Foreign Sub- Custodians employed by the Custodian. Such information shall be similar in kind and scope to that furnished to the Fund in connection with the Fund's initial approval of such Foreign Sub- Custodians and, in any event, shall include information pertaining to (i) the Foreign Custodians' financial strength, general reputation and standing in the countries in which they are located and their ability to provide the custodial services required, and (ii) whether the Foreign Sub-Custodians would provide a level of safeguards for safekeeping and custody of securities not materially different form those prevailing in the United States. The Custodian shall monitor the general operating performance of each Foreign Sub-Custodian, and at least annually obtain and review the annual financial report published by such Foreign Sub-Custodian to determine that it meets the financial criteria of an "Eligible Foreign Custodian" under Rule 17f-5(c)(2)(i) or (ii). The Custodian will promptly inform the Fund in the event that the Custodian learns that a Foreign Sub-Custodian no longer satisfies the financial criteria of an "Eligible Foreign Custodian" under such Rule. The Custodian agrees that it will use reasonable care in monitoring compliance by each Foreign Sub-Custodian with the terms of the relevant Foreign Sub-Custodian Agreement and that if it learns of any breach of such Foreign Sub-Custodian Agreement believed by the Custodian to have a material adverse effect on the Fund or any Series it will promptly notify the Fund of such breach. The Custodian also agrees to use reasonable and diligent efforts to enforce its rights under the relevant Foreign Sub-Custodian Agreement.
7. The Custodian shall transmit promptly to the Fund all notices, reports or other written information received pertaining to the Fund's Foreign Securities, including without limitation, notices of corporate action, proxies and proxy solicitation materials.
8. Notwithstanding any provision of this Agreement to the contrary, settlement and payment for securities received for the account of any Series and delivery of securities maintained for the account of such Series may be effected in accordance with the customary or established securities trading or securities processing practices and procedures in the jurisdiction or market in which the transaction occurs, including, without limitation, delivery of securities to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) against a receipt with the expectation of receiving later payment for such securities from such purchaser or dealer.
ARTICLE XVII.
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, or as provided in Article XVI neither the Custodian nor its nominee shall be liable for any loss or damage, including counsel fees, resulting from its action or omission to act or otherwise, either hereunder or under any Margin Account Agreement, except for any such loss or damage arising out of its own negligence or willful misconduct. In no event shall the Custodian be liable to the Fund or any third party for special, indirect or consequential damages or lost profits or loss of business, arising under or in connection with this Agreement, even if previously informed of the possibility of such damages and regardless of the form of action. The Custodian may, with respect to questions of law arising hereunder or under any Margin Account Agreement, apply for and obtain the advice and opinion of counsel to the Fund or of its own counsel, at the expense of the Fund, and shall be fully protected with respect to anything done or omitted by it in good faith in conformity with such advice or opinion. The Custodian shall be liable to the Fund for any loss or damage resulting from the use of the Book-Entry System or any Depository arising by reason of any negligence or willful misconduct on the part of the Custodian or any of its employees or agents.
2. Without limiting the generality of the foregoing, the Custodian shall be under no obligation to inquire into, and shall not be liable for:
(a) The validity of the issue of any Securities purchased, sold, or written by or for the Fund, the legality of the purchase, sale or writing thereof, or the propriety of the amount paid or received therefor;
(b) The legality of the sale or redemption of any Shares, or the propriety of the amount to be received or paid therefor;
(c) The legality of the declaration or payment of any dividend by the Fund;
(d) The legality of any borrowing by the Fund using Securities as collateral;
(e) The legality of any loan of portfolio Securities, nor shall the Custodian be under any duty or obligation to see to it that any cash collateral delivered to it by a broker, dealer, or financial institution or held by it at any time as a result of such loan of portfolio Securities of the Fund is adequate collateral for the Fund against any loss it might sustain as a result of such loan. The Custodian specifically, but not by way of limitation, shall not be under any duty or obligation periodically to check or notify the Fund that the amount of such cash collateral held by it for the Fund is suf- ficient collateral for the Fund, but such duty or obligation shall be the sole responsibility of the Fund. In addition, the Custodian shall be under no duty or obligation to see that any broker, dealer or financial institution to which portfolio Securities of the Fund are lent pursuant to Article XIV of this Agreement makes payment to it of any dividends or interest which are payable to or for the account of the Fund during the period of such loan or at the termination of such loan, provided, however, that the Custodian shall promptly notify the Fund in the event that such dividends or interest are not paid and received when due; or
(f) The sufficiency or value of any amounts of money and/or Securities held in any Margin Account, Senior Security Account or Collateral Account in connection with transactions by the Fund. In addition, the Custodian shall be under no duty or obligation to see that any broker, dealer, futures commission merchant or Clearing Member makes payment to the Fund of any variation margin payment or similar payment which the Fund may be entitled to receive from such broker, dealer, futures commission merchant or Clearing Member, to see that any payment received by the Custodian from any broker, dealer, futures commission merchant or Clearing Member is the amount the Fund is entitled to receive, or to notify the Fund of the Custodian's receipt or non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be the Custodian of, any money, whether or not represented by any check, draft, or other instrument for the payment of money, received by it on behalf of the Fund until the Custodian actu- ally receives and collects such money directly or by the final crediting of the account representing the Fund's interest at the Book-Entry System or the Depository.
4. The Custodian shall have no responsibility and shall not be liable for ascertaining or acting upon any calls, conver- sions, exchange offers, tenders, interest rate changes or similar matters relating to Securities held in the Depository, unless the Custodian shall have actually received timely notice
from the Depository. In no event shall the Custodian have any responsibility or liability for the failure of the Depository to collect, or for the late collection or late crediting by the Depository of any amount payable upon Securities deposited in the Depository which may mature or be redeemed, retired, called or otherwise become payable. However, upon receipt of a Certificate from the Fund of an overdue amount on Securities held in the Depository the Custodian shall make a claim against the Depository on behalf of the Fund, except that the Custodian shall not be under any obligation to appear in, prosecute or defend any action suit or proceeding in respect to any Securi- ties held by the Depository which in its opinion may involve it in expense or liability, unless indemnity satisfactory to it against all expense and liability be furnished as often as may be required.
5. The Custodian shall not be under any duty or obliga- tion to take action to effect collection of any amount due to the Fund from the Transfer Agent of the Fund nor to take any action to effect payment or distribution by the Transfer Agent of the Fund of any amount paid by the Custodian to the Transfer Agent of the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obliga- tion to take action to effect collection of any amount, if the Securities upon which such amount is payable are in default, or if payment is refused after due demand or presentation, unless and until (i) it shall be directed to take such action by a Certificate and (ii) it shall be assured to its satisfaction of reimbursement of its costs and expenses in connection with any such action.
7. The Custodian may in addition to the employment of Foreign Sub-Custodians pursuant to Article XVI appoint one or more banking institutions as Depository or Depositories, as Sub-Custodian or Sub-Custodians, or as Co-Custodian or Co-Custodians including, but not limited to, banking institutions located in foreign countries, of Securities and moneys at any time owned by the Fund, upon such terms and conditions as may be approved in a Certificate or contained in an agreement executed by the Custodian, the Fund and the appointed institution.
8. The Custodian shall not be under any duty or obliga-
tion (a) to ascertain whether any Securities at any time
delivered to, or held by it or by any Foreign Sub-Custodian,
for the account of the Fund and specifically allocated to a
Series are such as properly may be held by the Fund or such
Series under the provisions of its then current prospectus, or
(b) to ascertain whether any transactions by the Fund, whether
or not involving the Custodian, are such transactions as may
properly be engaged in by the Fund.
9. The Custodian shall be entitled to receive and the Fund agrees to pay to the Custodian all out-of-pocket expenses
and such compensation as may be agreed upon from time to time between the Custodian and the Fund. The Custodian may charge such compensation and any expenses with respect to a Series incurred by the Custodian in the performance of its duties pursuant to such agreement against any money specifically al- located to such Series. Unless and until the Fund instructs the Custodian by a Certificate to apportion any loss, damage, li- ability or expense among the Series in a specified manner, the Custodian shall also be entitled to charge against any money held by it for the account of a Series such Series' pro rata share (based on such Series net asset value at the time of the charge to the aggregate net asset value of all Series at that time) of the amount of any loss, damage, liability or expense, including counsel fees, for which it shall be entitled to reimbursement under the provisions of this Agreement. The expenses for which the Custodian shall be entitled to reimburse- ment hereunder shall include, but are not limited to, the expenses of sub-custodians and foreign branches of the Custodian incurred in settling outside of New York City transactions involving the purchase and sale of Securities of the Fund.
10. The Custodian shall be entitled to rely upon any Certificate, notice or other instrument in writing received by the Custodian and reasonably believed by the Custodian to be a Certificate. The Custodian shall be entitled to rely upon any Oral Instructions actually received by the Custodian hereinabove provided for. The Fund agrees to forward to the Custodian a Certificate or facsimile thereof confirming such Oral Instructions in such manner so that such Certificate or facsimile thereof is received by the Custodian, whether by hand delivery, telecopier or other similar device, or otherwise, by the close of business of the same day that such Oral Instruc- tions are given to the Custodian. The Fund agrees that the fact that such confirming instructions are not received by the Custodian shall in no way affect the validity of the transac- tions or enforceability of the transactions hereby authorized by the Fund. The Fund agrees that the Custodian shall incur no liability to the Fund in acting upon Oral Instructions given to the Custodian hereunder concerning such transactions provided such instructions reasonably appear to have been received from an Officer.
11. The Custodian shall be entitled to rely upon any instrument, instruction or notice received by the Custodian and reasonably believed by the Custodian to be given in accordance with the terms and conditions of any Margin Account Agreement. Without limiting the generality of the foregoing, the Custodian shall be under no duty to inquire into, and shall not be liable for, the accuracy of any statements or representations contained in any such instrument or other notice including, without limitation, any specification of any amount to be paid to a broker, dealer, futures commission merchant or Clearing Member.
12. The books and records pertaining to the Fund which are in the possession of the Custodian shall be the property of
the Fund. Such books and records shall be prepared and maintained as required by the Investment Company Act of 1940, as amended, and other applicable securities laws and rules and regulations. The Fund, or the Fund's authorized representa- tives, shall have access to such books and records during the Custodian's normal business hours. Upon the reasonable request of the Fund, copies of any such books and records shall be provided by the Custodian to the Fund or the Fund's authorized representative, and the Fund shall reimburse the Custodian its expenses of providing such copies. Upon reasonable request of the Fund, the Custodian shall provide in hard copy or on micro- film, whichever the Custodian elects, any records included in any such delivery which are maintained by the Custodian on a computer disc, or are similarly maintained, and the Fund shall reimburse the Custodian for its expenses of providing such hard copy or micro-film.
13. The Custodian shall provide the Fund with any report obtained by the Custodian on the system of internal accounting control of the Book-Entry System, the Depository or O.C.C., and with such reports on its own systems of internal accounting control as the Fund may reasonably request from time to time.
14. The Fund agrees to indemnify the Custodian against and save the Custodian harmless from all liability, claims, losses and demands whatsoever, including attorney's fees, howsoever arising or incurred because of or in connection with this Agreement, including the Custodian's payment or non-payment of checks pursuant to paragraph 6 of Article XIII as part of any check redemption privilege program of the Fund, except for any such liability, claim, loss and demand arising out of the Custodian's own negligence or willful misconduct.
15. Subject to the foregoing provisions of this Agree- ment, including, without limitation, those contained in Article XVI the Custodian may deliver and receive Securities, and receipts with respect to such Securities, and arrange for pay- ments to be made and received by the Custodian in accordance with the customs prevailing from time to time among brokers or dealers in such Securities. When the Custodian is instructed to deliver Securities against payment, delivery of such Securities and receipt of payment therefor may not be completed simultaneously. The Fund assumes all responsibility and li- ability for all credit risks involved in connection with the Custodian's delivery of Securities pursuant to instructions of the Fund, which responsibility and liability shall continue until final payment in full has been received by the Custodian.
16. The Custodian shall have no duties or responsibilities whatsoever except such duties and responsibilities as are specifically set forth in this Agree- ment, and no covenant or obligation shall be implied in this Agreement against the Custodian.
ARTICLE XVIII.
TERMINATION
1. Either of the parties hereto may terminate this Agreement by giving to the other party a notice in writing specifying the date of such termination, which shall be not less than ninety (90) days after the date of giving of such notice. In the event such notice is given by the Fund, it shall be ac- companied by a copy of a resolution of the Board of Directors of the Fund, certified by the Secretary or any Assistant Secretary, electing to terminate this Agreement and designating a successor custodian or custodians, each of which shall be a bank or trust company having not less than $2,000,000 aggregate capital, surplus and undivided profits. In the event such notice is given by the Custodian, the Fund shall, on or before the termination date, deliver to the Custodian a copy of a resolu- tion of the Board of Directors of the Fund, certified by the Secretary or any Assistant Secretary, designating a successor custodian or custodians. In the absence of such designation by the Fund, the Custodian may designate a successor custodian which shall be a bank or trust company having not less than $2,000,000 aggregate capital, surplus and undivided profits. Upon the date set forth in such notice this Agreement shall terminate, and the Custodian shall upon receipt of a notice of acceptance by the successor custodian on that date deliver directly to the successor custodian all Securities and moneys then owned by the Fund and held by it as Custodian, after deducting all fees, expenses and other amounts for the payment or reimbursement of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or the Custodian in accordance with the preceding paragraph, the Fund shall upon the date specified in the notice of termination of this Agreement and upon the delivery by the Custodian of all Securities (other than Securities held in the Book-Entry System which cannot be delivered to the Fund) and moneys then owned by the Fund be deemed to be its own custodian and the Custodian shall thereby be relieved of all duties and responsibilities pursuant to this Agreement, other than the duty with respect to Securities held in the Book Entry System which cannot be delivered to the Fund to hold such Securities hereunder in accordance with this Agreement.
ARTICLE XIX.
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the present Officers of the Fund under its corporate seal, setting forth the names and the signatures of the present Officers of the Fund. The Fund agrees to furnish to the Custodian a new Certificate in similar form in the event any such present Officer ceases to be an Officer of the Fund, or in
the event that other or additional Officers are elected or ap- pointed. Until such new Certificate shall be received, the Custodian shall be fully protected in acting under the provi- sions of this Agreement upon the signatures of the Officers as set forth in the last delivered Certificate.
2. Any notice or other instrument in writing, authorized or required by this Agreement to be given to the Custodian, shall be sufficiently given if addressed to the Custodian and mailed or delivered to it at its offices at 90 Washington Street, New York, New York 10286, or at such other place as the Custodian may from time to time designate in writ- ing.
3. Any notice or other instrument in writing, authorized or required by this Agreement to be given to the Fund shall be sufficiently given if addressed to the Fund and mailed or delivered to it at its office at the address for the Fund first above written, or at such other place as the Fund may from time to time designate in writing.
4. This Agreement may not be amended or modified in any manner except by a written agreement executed by both parties with the same formality as this Agreement and approved by a resolution of the Board of Directors of the Fund.
5. This Agreement shall extend to and shall be binding upon the parties hereto, and their respective successors and assigns; provided, however, that this Agreement shall not be assignable by the Fund without the written consent of the Custodian, or by the Custodian without the written consent of the Fund, authorized or approved by a resolution of the Fund's Board of Directors.
6. This Agreement shall be construed in accordance with the laws of the State of New York without giving effect to conflict of laws principles thereof. Each party hereby consents to the jurisdiction of a state or federal court situated in New York City, New York in connection with any dispute arising hereunder and hereby waives its right to trial by jury.
7. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but such counterparts shall, together, constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective corporate Officers, thereunto duly authorized and their respective corporate seals to be hereunto affixed, as of the day and year first above writ- ten.
MERRILL LYNCH RETIREMENT
ASSET BUILDER PROGRAM,
INC.
[SEAL] By: _____________________
Attest:
THE BANK OF NEW YORK
[SEAL] By: _____________________
Attest:
APPENDIX A
I, , and I, , of Merrill Lynch Retirement Asset Builder Program, Inc., a Maryland corporation (the "Fund"), do hereby certify that:
The following individuals serve in the following positions with the Fund and each has been duly elected or appointed by the Board of Directors of the Fund to each such position and qualified therefor in conformity with the Fund's Articles of Incorporation and By-Laws, and the signatures set forth opposite their respective names are their true and correct signatures:
Name Position Signature
APPENDIX B
I, Jorge Ramos, a Vice President with THE BANK OF NEW YORK do hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
EXHIBIT A
CERTIFICATION
The undersigned, , hereby certifies that he or she is the duly elected and acting of Merrill Lynch Retirement Asset Builder Program, Inc., a Maryland corporation (the "Fund"), and further certifies that the following resolution was adopted by the Board of Directors of the Fund at a meeting duly held on , 1994, at which a quorum was at all times present and that such resolution has not been modified or rescinded and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody Agreement between The Bank of New York and the Fund dated as of , 1994, (the "Custody Agreement") is authorized and instructed on a continuous and ongoing basis to deposit in the Book-Entry System, as defined in the Custody Agreement, all securities eligible for deposit therein, regard- less of the Series to which the same are specifically allocated, and to utilize the Book-Entry System to the extent possible in connection with its performance thereunder, including, without limitation, in connection with settlements of purchases and sales of securities, loans of securities, and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of Merrill Lynch Retirement Asset Builder Program, Inc. as of the day of , 1994.
[SEAL]
EXHIBIT B
CERTIFICATION
The undersigned, , hereby certifies that he or she is the duly elected and acting of Merrill Lynch Retirement Asset Builder Program, Inc., a Maryland corporation (the "Fund"), and further certifies that the fol- lowing resolution was adopted by the Board of Directors of the Fund at a meeting duly held on , 1994, at which a quorum was at all times present and that such resolution has not been modified or rescinded and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody Agreement between The Bank of New York and the Fund dated as of , 1994, (the "Custody Agreement") is authorized and instructed on a continuous and ongoing basis until such time as it receives a Certificate, as defined in the Custody Agreement, to the contrary to deposit in the Depository, as defined in the Custody Agreement, all securities eligible for deposit therein, regardless of the Series to which the same are specifically allocated, and to utilize the Depository to the extent possible in connection with its performance thereunder, including, without limitation, in connection with settlements of purchases and sales of securities, loans of securities, and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of Merrill Lynch Retirement Asset Builder Program, Inc. as of the day of , 1994.
[SEAL]
EXHIBIT B-1
CERTIFICATION
The undersigned, , hereby certifies that he or she is the duly elected and acting of Merrill Lynch Retirement Asset Builder Program, Inc., a Maryland corporation (the "Fund"), and further certifies that the following resolution was adopted by the Board of Trustees of the Fund at a meeting duly held on , 1994, at which a quorum was at all times present and that such resolution has not been modified or rescinded and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody Agreement between The Bank of New York and the Fund dated as of , 1994, (the "Custody Agreement") is authorized and instructed on a continuous and ongoing basis until such time as it receives a Certificate, as defined in the Custody Agreement, to the contrary to deposit in the Participants Trust Company as Depository, as defined in the Custody Agreement, all securities eligible for deposit therein, regardless of the Series to which the same are specifically allocated, and to utilize the Participants Trust Company to the extent possible in connection with its performance thereunder, including, without limitation, in connection with settlements of purchases and sales of securities, loans of securities, and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of Merrill Lynch Retirement Asset Builder Program, Inc., as of the day of , 1994.
[SEAL]
EXHIBIT C
CERTIFICATION
The undersigned, , hereby certifies that he is the duly elected and acting of Merrill Lynch Retirement Asset Builder Program, Inc., a Maryland corporation (the "Fund"), and further certifies that the following resolution was adopted by the Board of Directors of the Fund at a meeting duly held on , 1994, at which a quorum was at all times present and that such resolution has not been modified or rescinded and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody Agreement between The Bank of New York and the Fund dated as of , 1994, (the "Custody Agreement") is authorized and instructed on a continuous and ongoing basis until such time as it receives a Certificate, as defined in the Custody Agreement, to the contrary, to accept, utilize and act with respect to Clearing Member confirmations for Options and transaction in Options, regardless of the Series to which the same are specifically allocated, as such terms are defined in the Custody Agreement, as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of Merrill Lynch Retirement Asset Builder Program, Inc. as of the day of , 1994.
[SEAL]
EXHIBIT D
The undersigned, , hereby cer- tifies that he or she is the duly elected and acting of Merrill Lynch Retirement Asset Builder Program, Inc., a Maryland corporation (the "Fund"), further certifies that the following resolutions were adopted by the Board of Directors of the Fund at a meeting duly held on , 1994, at which a quorum was at all times present and that such resolutions have not been modified or rescinded and are in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to the Custody Agreement between The Bank of New York and the Fund dated as of , 1994 (the "Custody Agreement") is authorized and instructed on a continuous and ongoing basis to act in accordance with, and to rely on Certificates (as defined in the Custody Agreement) given by the Fund to the Custodian by a Terminal Link (as defined in the Custody Agreement).
RESOLVED, that the Fund shall establish access codes and grant use of such access codes only to Officers of the Fund as defined in the Custody Agreement, shall establish internal safekeeping procedures to safeguard and protect the confiden- tiality and availability of such access codes, shall limit its use of the Terminal Link to those purposes permitted by the Custody Agreement, shall require at least two such Officers to utilize their respective access codes in connection with each such Certificate, and shall use the Terminal Link only in a manner that does not contravene the Investment Company Act of 1940, as amended, or the rules and regulations thereunder.
RESOLVED, that Officers of the Fund shall, following the establishment of such access codes and such internal safekeeping procedures, advise the Custodian that the same have been established by delivering a Certificate, as defined in the Custody Agreement, and the Custodian shall be entitled to rely upon such advice.
IN WITNESS WHEREOF, I hereunto set my hand and the seal of Merrill Lynch Retirement Asset Builder Program, Inc., as of the day of , 1994.
[SEAL]
EXHIBIT E
The undersigned, , hereby cer- tifies that he or she is the duly elected and acting of Merrill Lynch Retirement Asset Builder Program, Inc., a Maryland corporation (the "Fund"), further certifies that the following resolutions were adopted by the Board of Directors of the Fund at a meeting duly held on
, 1994, at which a quorum was at all times present and that such resolutions have not been modified or rescinded and are in full force and effect as of the date hereof.
RESOLVED, that the maintenance of the Fund's assets in each country listed in Schedule I hereto be, and hereby is, approved by the Board of Directors as consistent with the best interests of the Fund and its shareholders; and further
RESOLVED, that the maintenance of the Fund's assets with the foreign branches of The Bank of New York (the "Bank") listed in Schedule I located in the countries specified therein, and with the foreign subcustodians and despositories listed in Schedule I located in the countries specified therein be, and hereby is, approved by the Board of Directors as consistent with the best interest of the Fund and its shareholders; and further
RESOLVED, that the Subcustodian Agreements presented to this meeting between the Bank and each of the foreign subcustodians and depositories listed in Schedule I providing for the maintenance of the Fund's assets with the applicable entity, be and hereby are, approved by the Board of Directors as consistent with the best interests of the Fund and its shareholders; and further
RESOLVED, that the appropriate officers of the Fund are hereby authorized to place assets of the Fund with the aforementioned foreign branches and foreign subcustodians and depositories as hereinabove provided; and further
RESOLVED, that the appropriate officers of the Fund, or any of them, are authorized to do any and all other acts, in the name of the Fund and on its behalf, as they, or any of them, may determine to be necessary or desirable and proper in connection with or in furtherance of the foregoing resolutions.
IN WITNESS WHEREOF, I hereunto set my hand and the seal of Merrill Lynch Retirement Asset Builder Program, Inc., as of the day of , 1994.
[SEAL]
SCHEDULE 1
SERIES
Global Opportunity Portfolio
Fundamental Value Portfolio
Quality Bond Portfolio
US Government Securities Portfolio
SCHEDULE I
Bank of New York Branches
and
Eligible Foreign Custodians
Country Bank Name and Address Status
Argentina The First National Bank of Boston Correspondent
Florida 99, 1005 Buenos Aires,
Argentina
Australia Australia and New Zealand Banking Correspondent
Group, Limited
35 Elizabeth Street,
Melbourne, Australia
Austria GiroCredit Bank Aktiengesellschaft Correspondent
der Sparkassen
A-1011 Wien, Schubertring 5,
Vienna, Austria
Belgium Banque Bruxelles Lambert, S.A. Correspondent
Cours Saint Michel 60
Brussels 1040
Belgium
Brazil The First National Bank of Boston Correspondent
Rua Libero Badaro, 497,
01009 - Sao - SP (Alt 226)
Brazil
Canada Royal Trust Corporation of Canada Correspondent
55 King Street West
Royal Trust Tower, Toronto,
Ontario M5W 1P9, Canada
Chile Banco de Chile Correspondent
Departamento Comisiones de Confianza
Ahumada 251, Piso 3
Santiago
China Standard Chartered Bank Correspondent
8/F Edinburgh Tower
The Landmark, 15 Queens Road Central
Hong Kong
|
Denmark Den Danske Bank Correspondent
2-12 Holmens Kanal
DK - 1092 Copenhagen K.
Denmark
Euromarket Cedel, S.A. Depository
67 Boulevard Grande-Duchesse
Charlotte
L-1010, Luxembourg
Finland Union Bank of Finland Ltd. Correspondent
Aleksanterinkatu 30,
Helsinki, Finland
France Banque Paribas Correspondent
BP 141
3 Rue D'Antin
75078 Paris, France
Germany Dresdner Bank A.G. Correspondent
Jurgen-Ponto-Platz 1 (Alt 207)
6000 Frankfurt 11,
Federal Republic of Germany
Greece Creditbank Correspondent
Banking Relations Division
40 Stadiou Street
GR10252 Athens
Hong Kong The HongKong & Shanghai Banking Correspondent
Corporation
1 Queen's Road Central,
Hong Kong
India The HongKong & Shanghai Banking Correspondent
Corporation
52/60 Mahatma Gandi Road
Bombay 400 001
Indonesia The HongKong & Shanghai Banking Correspondent
Corporation
P.O. Box 2307, Jakarta 1001,
Indonesia
Ireland Allied Irish Bank Correspondent
P.O. Box 518
I.F.S.C.
Dublin 1
Israel Israel Discount Bank Limited Correspondent
27-31 Yehuda Halevi Street
65-546 Tel Aviv
|
Italy Citibank, N.A. Correspondent
Foro Buonaparte, 16
20121 Milano
Italy
Japan The Yasuda Trust & Banking Correspondent
Company, Limited
2-1 Yaesu, 1-Chome
Chuo-ku, Tokyo 103,
Japan
Korea Bank of Seoul Correspondent
10-1, Namdaeman-Ro 2-Ka
Chung-ku, Seoul, 100-092,
Korea
Malaysia The HongKong & Shanghai Banking Correspondent
Corporation Ltd.
2 Leboh Ampang
Kuala Lumpur, Malaysia
Mexico Citibank, N.A. Correspondent
Paseo de la Reforma 390,
Mexico City, 06695
Mexico
Netherlands Amsterdam-Rotterdam Bank, N.V. Correspondent
Kemelstede 2, 4817 St. Breda
New Zealand Australia and New Zealand Banking Correspondent
Group Ltd.
UDC Tower
113-119, The Terrace
Wellington, l
New Zealand
Norway Den norske Bank AS Correspondent
P.O. Box 1171 Sentrum
0107 OSLO 1
Pakistan Standard Chartered Bank Correspondent
Box 4896
Ismail Ibrahim Chundrigar Road
Karachi 2
|
Philippines The HongKong & Shangahi Correspondent
Corporation Ltd.
San Miguel Avenue
Ortigas Centre
Pasig, Metro Manila
Portugal Banco Comercial Portugues Correspondent
Avienda Jose Malhoa
Lote 1686, 7th Floor
1000 Lisbon
Singapore United Overseas Bank Limited Correspondent
1 Bonham Street,
Raffles Place
Singapore
South Africa Standard Bank of South Africa Correspondent
Limited
P.O. Box 3720
Johannesburg 2000
Spain Banco Bilbao Vizcaya, S.A. Correspondent
Clara Del Ray, 26-3 Floor
28002 Madrid
Sri Lanka Standard Chartered Bank Correspondent
P.O. Box 27
17 Janadhipathi Mawatha
Colombo 1
Sweden Skandinaviska Enskilda Banken Correspondent
Jakobsgatan 6
Stockholm, S-106 40
Switzerland Union Bank of Switzerland Correspondent
Bahnhofstrasse, 45
8021 Zurich
Taiwan The HongKong & Shanghai Banking Correspondent
Corporation
333 Section 1, Keelung Road
Taipei 10548
Thailand The Siam Commercial Bank, Ltd. Correspondent
1060 Phetchaburi Road,
Bangkok 10400, Thailand
Turkey Citibank, N.A. Correspondent
Abdi Ipekci Cad. 65
80200 Macka
Istanbul
|
United The Bank of New York Branch
Kingdom 3 Birchin Lane
London EC3V 9BY
Uruguay The Bank of Boston Correspondent
Zabala 1463
Casilla de Correo 90
Montevideo
Venezuela Citibank, N.A. Correspondent
Carmelitas a Altagracia,
Edificio Citibank,
Caracas, 1010, Venezuela
|
EXHIBIT 99.9(a)
TRANSFER AGENCY, DIVIDEND DISBURSING AGENCY
AND SHAREHOLDER SERVICING AGENCY AGREEMENT
THIS AGREEMENT made as of the day of 1994, by and between Merrill Lynch Retirement Asset Builder Program, Inc., on behalf of itself and its constituent Portfolios (the "Program") and Financial Data Services, Inc. ("FDS"), a New Jersey corporation.
WITNESSETH:
WHEREAS, the Program wishes to appoint FDS to be the Transfer Agent, Dividend Disbursing Agent and Shareholder Servicing Agent upon, and subject to, the terms and provisions of this Agreement, and FDS is desirous of accepting such appointment upon, and subject to, such terms and provisions:
NOW THEREFORE, in consideration of mutual covenants contained in this Agreement, the Program and FDS agree as follows:
A. The Program hereby appoints FDS to act as Transfer Agent, Dividend Disbursing Agent and Shareholder Servicing Agent for the Program upon, and subject to, the terms and provisions of this Agreement.
B. FDS hereby accepts the appointment as Transfer Agent, Dividend Disbursing Agent and Shareholder Servicing Agent for the Program, and agrees to act as such upon, and subject to, the terms and provisions of this Agreement.
In this Agreement:
A. The term "Act" means the Investment Company Act of 1940, as amended from time to time, and any rule or regulation thereunder;
B. The term "Account" means any account of a Shareholder which shall be a retirement account for which MLPF&S acts as custodian for benefit of an identified customer;
C. The term "application" means an application made by a Shareholder or prospective Shareholder respecting the opening of an Account;
D. The term "MLFD" means Merrill Lynch Funds Distributor, Inc., a Delaware corporation;
E. The term "MLPF&S" means Merrill Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation;
F. The term "Officer's Instruction" means an instruction in writing given on behalf of the Program to FDS, and signed on behalf of the Program by the President, any Vice President, the Secretary or the Treasurer of the Program;
G. The term "Prospectus" means the Prospectus and the Statement of Additional Information of the Program as from time to time in effect;
H. The term "Shares" means shares of stock of the Program, irrespective of class or series;
I. The term "Shareholder" means the holder of record of Shares;
J. The term "Plan Account" means an account opened by a Shareholder or prospective Shareholder in respect to an open account, monthly payment or withdrawal plan (in each case by whatever name referred to in the Prospectus), and may also include an account relating to any other Plan if and when provision is made for such plan in the Prospectus.
A. Subject to the succeeding provisions of the Agreement, FDS hereby agrees to perform the following functions as Transfer Agent, Dividend Disbursing Agent and Shareholder Servicing Agent for the Program;
1. Issuing, transferring and redeeming Shares;
2. Opening, maintaining, servicing and closing Accounts;
3. Acting as agent for the Program Shareholders and/or customers of MLPF&S in connection with Plan Accounts, upon the terms and subject to the conditions contained in the Prospectus and application relating to the specific Plan Account;
4. Acting as agent of the Program and/or MLPF&S, maintaining such records as may permit the imposition of such contingent deferred sales charges as may be described in the Prospectus, including such reports as may be reasonably requested by the Program with respect to such Shares as may be subject to a contingent deferred sales charge;
5. Upon the redemption of Shares subject to such a contingent deferred sales charge, calculating and deducting from the redemption proceeds thereof the amount of such charge in the manner set forth in the Prospectus. FDS shall pay, on behalf of MLFD, to MLPF&S such deducted contingent deferred sales charges imposed upon all Shares maintained in the name of MLPF&S, or maintained in the name of an account identified as a customer account of MLPF&S. Sales charges imposed upon any other Shares shall be paid by FDS to MLFD.
6. Exchanging the investment of an investor into, or from the shares of other open-end investment companies or other series portfolios of the Program, if any, if and to the extent permitted by the Prospectus at the direction of such investor.
7. Processing redemptions;
8. Examining and approving legal transfers;
9. Replacing lost, stolen or destroyed certificates representing Shares, in accordance with, and subject to, procedures and conditions adopted by the Program;
10. Furnishing such confirmations of transactions relating to their Shares as required by applicable law;
11. Acting as agent for the Program and/or MLPF&S, furnishing such appropriate periodic statements relating to Accounts, together with additional enclosures, including appropriate income tax information and income tax forms duly completed, as required by applicable law;
12. Acting as agent for the Program and/or MLPF&S, mailing annual, semi-annual and quarterly reports prepared by or on behalf of the Program, and mailing new Prospectuses upon their issue to Shareholders as required by applicable law;
13. Furnishing such periodic statements of transactions effected by FDS, reconciliations, balances and summaries as the Program may reasonably request;
14. Maintaining such books and records relating to transactions effected by FDS as are required by the Act, or by any other applicable provision of law, rule or regulation, to be maintained by the Program or its transfer agent with respect to such transactions, and preserving, or causing to be preserved any such books and records for such periods as may be required by any such law, rule or regulation and as may be agreed upon from time to time between FDS and the Program. In addition, FDS agrees to maintain and preserve master files and historical computer tapes on a daily basis in multiple separate locations a sufficient distance apart to insure preservation of at least one copy of such information;
15. Withholding taxes on non-resident alien Accounts, preparing and filing U.S. Treasury Department Form 1099 and other appropriate forms as required by applicable law with respect to dividends and distributions; and
16. Reinvesting dividends for full and fractional shares and disbursing cash dividends, as applicable.
B. FDS agrees to act as proxy agent in connection with the holding of annual, if any, and special meetings of Shareholders, mailing such notices, proxies and proxy
statements in connection with the holding of such meetings as may be required by applicable law, receiving and tabulating votes cast by proxy and communicating to the Program the results of such tabulation accompanied by appropriate certifications, and preparing and furnishing to the Program certified lists of Shareholders as of such date, in such form and containing such information as may be required by the Program.
C. FDS agrees to deal with, and answer in a timely manner, all correspondence and inquiries relating to the functions of FDS under this Agreement with respect to Accounts.
D. FDS agrees to furnish to the Program such information and at such intervals as is necessary for the Program to comply with the registration and/or the reporting requirements (including applicable escheat laws) of the Securities and Exchange Commission, Blue Sky authorities or other governmental authorities.
E. FDS agrees to provide to the Program such information as may reasonably be required to enable the Program to reconcile the number of outstanding Shares between FDS's records and the account books of the Program.
F. Notwithstanding anything in the foregoing provisions of this paragraph, FDS agrees to perform its functions thereunder subject to such modification (whether in respect of particular cases or in any particular class of cases) as may from time to time be contained in an Officer's Instruction.
The charges for services described in this Agreement, including "out-of- pocket" expenses, will be set forth in the Schedule of Fees attached hereto.
FDS agrees that it will in a timely manner make available to, and permit, any officer, accountant, attorney or authorized agent of the Program to examine and make transcripts and copies (including photocopies and computer or other electronic information storage media and print-outs) of any and all of its books and records which relate to any transaction or function performed by FDS under or pursuant to this Agreement.
FDS agrees that it will, on behalf of itself and its officers and employees, treat all transactions contemplated by this Agreement, and all information germane thereto, as confidential and not to be disclosed to any person (other than the Shareholder concerned, or the Program, or as may be disclosed in the examination of any books or records by any person lawfully entitled to examine the same) except as may be authorized by the Program by way of an Officer's Instruction.
The Program shall indemnify and hold FDS harmless from any loss, costs, damage and reasonable expenses, including reasonable attorney's fees (provided that such attorney is appointed with the Program's consent, which consent shall not be unreasonably withheld), incurred by it resulting from any claim, demand, action, or suit in connection with the performance of its duties hereunder, provided that this indemnification shall not apply to actions or omissions of FDS in cases of willful misconduct, failure to act in good faith or negligence by FDS, its officers, employees or agents, and further provided, that prior to confessing any claim against it which may be subject to this indemnification, FDS shall give the Program reasonable opportunity to defend against said claim in its own name or in the name of FDS. An action taken by FDS upon any Officer's Instruction reasonably believed by it to have been properly executed shall not constitute willful misconduct, failure to act in good faith or negligence under this Agreement.
A. FDS hereby agrees to hire, purchase, develop and maintain such dedicated personnel, facilities, equipment, software, resources and capabilities as may be reasonably determined by the Program to be necessary for the satisfactory performance of the duties and responsibilities of FDS. FDS warrants and represents that its officers and supervisory personnel charged with carrying out its functions as Transfer Agent, Dividend Disbursing Agent and Shareholder Servicing Agent for the Program possess the special skill and technical knowledge appropriate for that purpose. FDS shall at all times exercise due care and diligence in the performance of its functions as Transfer Agent, Dividend Disbursing Agent and Shareholder Servicing Agent for the Program. FDS agrees that, in determining whether it has exercised due care and diligence, its conduct
shall be measured by the standard applicable to persons possessing such special skill and technical knowledge.
B. FDS warrants and represents that it is duly authorized and permitted to act as Transfer Agent, Dividend Disbursing Agent and Shareholder Servicing Agent under all applicable laws and that it will immediately notify the Program of any revocation of such authority or permission or of the commencement of any proceeding or other action which may lead to such revocation.
A. This Agreement shall become effective as of the date first above written and shall thereafter continue from year to year. This Agreement may be terminated by the Program or FDS (without penalty to the Program or FDS) provided that the terminating party gives the other party written notice of such termination at least sixty (60) days in advance, except that the Program may terminate this Agreement immediately upon written notice to FDS if the authority or permission of FDS to act as Transfer Agent, Dividend Disbursing Agent and Shareholder Servicing Agent has been revoked or if any proceeding or other action which the Program reasonably believes will lead to such revocation has been commenced.
B. Upon termination of this Agreement, FDS shall deliver all unissued and canceled stock certificates representing Shares remaining in its possession, and all Shareholder records, books, stock ledgers, instruments and other documents (including computerized or other electronically stored information) made or accumulated in the performance of its duties as Transfer Agent, Dividend Disbursing Agent and Shareholder Servicing Agent for the Program along with a certified locator document clearly indicating the complete contents therein, to such successor as may be specified in a notice of termination or Officer's Instruction; and the Program assumes all responsibility for failure thereafter to produce any paper, record or documents so delivered and identified in the locator document, if and when required to be produced.
Except to the extent that the performance by FDS or its functions under this Agreement may from time to time be modified by an Officer's Instruction, this Agreement may be amended or modified only by further written Agreement between the parties.
This Agreement shall be governed by the laws of the State of New Jersey.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their respective duly authorized officers and their respective corporate seals hereunto duly affixed and attested, as of the day and year above written.
MERRILL LYNCH RETIREMENT ASSET
BUILDER PROGRAM, INC.
By:___________________________
Title:________________________
FINANCIAL DATA SERVICES, INC.
By:___________________________
Title:________________________
The Fund will pay to FDS an annual fee of $11.00 per Class A and Class D Shareholder Account and $14.00 per Class C and Class D Shareholder Account in addition to reimbursement for the out-of-pocket expenses incurred by FDS
pursuant to this Agreement.
EXHIBIT 99.9(b)
LICENSE AGREEMENT RELATING TO USE OF NAME
AGREEMENT made as of the day of 1994, by and between MERRILL LYNCH & CO., INC., a Delaware corporation ("ML&Co."), and MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC., a Maryland corporation (the "Fund");
WHEREAS, ML&Co. was incorporated under the laws of the State of Delaware on March 27, 1973 under the corporate name "Merrill Lynch & Co., Inc." and has used such name at all times thereafter;
WHEREAS, ML&Co. was duly qualified as a foreign corporation under the laws
of the State of New York on April 25, 1973 and has remained so qualified at all
times thereafter;
WHEREAS, the Fund was incorporated under the laws of the State of Maryland
on May 12, 1994; and
WHEREAS, the Fund desires to qualify as a foreign corporation under the laws of the State of New York and has requested ML&Co. to give its consent to the use of the name "Merrill Lynch" in the Fund's corporate name.
NOW, THEREFORE, in consideration of the premises and of the covenants hereinafter contained, ML&Co. and the Fund hereby agree as follows:
1. ML&Co. hereby grants the Fund a non-exclusive license to use the words "Merrill Lynch" in its corporate name.
2. ML&Co. hereby consents to the qualification of the Fund as a foreign corporation under the laws of the State of New York with the words "Merrill Lynch" in its corporate name and agrees to execute such formal consents as may be necessary in connection with such filing.
3. The non-exclusive license hereinabove referred to has been given and is given by ML&Co. on the condition that it may at any time, in its sole and absolute discretion, withdraw the non-exclusive license to the use of the words "Merrill Lynch" in the name of the Fund; and, as soon as practicable after receipt by the Fund of written notice of the withdrawal of such non-exclusive license, and in no event later than ninety days thereafter, the Fund will change its name so that such name will not thereafter include the words "Merrill Lynch" or any variation thereof.
4. ML&Co. reserves and shall have the right to grant to any other company, including without limitation, any other investment company, the right to use the words "Merrill Lynch" or variations thereof in its name and no consent or permission of the Fund shall be necessary; but, if required by an applicable law of any state, the Fund will forthwith grant all requisite consents.
5. The Fund will not grant to any other company the right to use a name similar to that of the Fund or ML&Co. without the written consent of ML&Co.
6. Regardless of whether the Fund should hereafter change its name and eliminate the words "Merrill Lynch" or any variation thereof from such name, the Fund hereby grants to ML&Co. the right to cause the incorporation of other corporations or the organization of voluntary associations which may have names similar to that of the Fund or to that to which the Fund may change its name and to own all or any portion of the shares of such other corporations or associations and to enter into contractual relationships with such other corporations or associations, subject to any requisite approval of a majority of the Fund's shareholders and the Securities and Exchange Commission and subject to the payment of a reasonable amount to be determined at the time of use, and the Fund agrees to give and execute any such formal consents or agreements as may be necessary in connection therewith.
7. This Agreement may be amended at any time by a writing signed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
MERRILL LYNCH & CO., INC.
By_____________________________
MERRILL LYNCH RETIREMENT ASSET
BUILDER PROGRAM, INC.
By_____________________________
EXHIBIT 99.10
December 16, 1994
Merrill Lynch Retirement Asset Builder Program, Inc.
800 Scudders Mill Road
Plainsboro, NJ 08536
Dear Sir or Madam:
We have acted as counsel for Merrill Lynch Retirement Asset Builder Program, Inc., a corporation organized under the laws of the State of Maryland (the "Program"), in connection with the organization of the Program and its registration as an open-end investment company under the Investment Company Act of 1940. This opinion is being furnished in connection with the registration of an indefinite number of shares of common stock, designated Class A, Class B, Class C and Class D, par value $0.10 per share, of the Program (the "Shares") under the Securities Act of 1933, which registration is being effected pursuant to a registration statement on Form N-1A (File No. 33-53887), as amended (the "Registration Statement").
As counsel for the Program, we are familiar with the proceedings taken by it in connection with the authorization, issuance and sale of the Shares. In addition, we have examined and are familiar with the Articles of Incorporation of the Program, as amended, the By-Laws of the Program, as amended, and such other documents as we have deemed relevant to the matters referred to in this opinion.
Based upon the foregoing, we are of the opinion that the Shares, upon issuance and sale in the manner referred to in the Registration Statement for consideration not less than the par value thereof, will be legally issued, fully paid and non-assessable shares of common stock of the Program.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name in the prospectus and statement of additional information constituting parts thereof.
Very truly yours,
/s/ Brown & Wood |
EXHIBIT 99.11
INDEPENDENT AUDITORS' CONSENT
Merrill Lynch, Retirement Asset Builder, Inc.
We consent to the use in Pre-Effective Amendment No. 1 to Registration Statement No. 33-53887 of our reports dated November 22, 1994 appearing in the Statement of Additional Information, which is a part of such Registration Statement.
DELOITTE & TOUCHE LLP
Princeton, New Jersey
December 16, 1994
EXHIBIT 99.13
CERTIFICATE OF SOLE STOCKHOLDER
Merrill Lynch Asset Management, L.P. ("MLAM"), the holder of 5,000 Class A shares of common stock, par value $0.10 per share, 5,000 Class B shares of common stock, par value $0.10 per share, 5,000 Class C shares of common stock, par value $0.10 per share and 5,000 Class D shares of common stock, par value $0.10 per share of each of the Fundamental Value, Quality Bond, U.S. Government Securities and Global Opportunity Portfolios (each a "Portfolio") of Merrill Lynch Retirement Asset Builder Program, Inc. (the "Program"), a Maryland corporation, hereby does confirm to the Program its representation that it purchased such shares for investment purposes, with no present intention of redeeming or reselling any portion thereof, and further does agree that if it redeems any portion of such shares prior to the amortization of the organizational expenses of each of the Portfolios, the proceeds thereof will be reduced by the proportionate amount of unamortized organizational expenses which the number of shares being redeemed bears to the number of shares initially purchased and outstanding at the time of redemption. MLAM further agrees that in the event such shares are sold or otherwise transferred to any other party, that prior to such sale or transfer MLAM will obtain on behalf of each of the Portfolios an agreement from such other party to comply with the foregoing as to the reduction of redemption proceeds and to obtain a similar agreement from any transferee of such party.
MERRILL LYNCH ASSET MANAGEMENT, L.P.
By: /s/ Mark B. Goldfus
---------------------------
Vice President
Dated: November 16, 1994
|
EXHIBIT 99.15(a)
CLASS B DISTRIBUTION PLAN
OF
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
PURSUANT TO RULE 12B-1
DISTRIBUTION PLAN made as of the __ day of December, 1994, by and between Merrill Lynch Retirement Asset Builder Program, Inc., a Maryland corporation (the "Program"), and Merrill Lynch Funds Distributor, Inc., a Delaware corporation ("MLFD").
WHEREAS, the Program intends to engage in business as an open-end investment company registered under the Investment Company Act of 1940, as amended (the "Investment Company Act"); and
WHEREAS, the Program is authorized to establish separate ("Series") each of which will offer separate classes of shares of common stock, par value $0.10 per share (the "Shares"), to retirement accounts for which Merrill Lynch, Pierce Fenner & Smith Incorporated acts as custodian; and
WHEREAS, MLFD is a securities firm engaged in the business of selling shares of investment companies either directly to purchasers or through other securities dealers; and
WHEREAS, the Program proposes to enter into a Class B Shares Distribution Agreement with MLFD, pursuant to which MLFD will act as the exclusive distributor and representative of the Program in the offer and sale of Class B shares of Beneficial Interest, par value $0.10 per share (the "Class B shares"), of the [Name of Portfolio] [the "Portfolio"] series of the Program to the public; and
WHEREAS, the Fund desires to adopt this Class B Shares Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act, pursuant to which the Fund will pay an account maintenance fee and a distribution fee to MLFD with respect to the Fund's Class B Shares; and
WHEREAS, the Directors of the Fund have determined that there is a reasonable likelihood that adoption of the Plan will benefit the Portfolio and its shareholders.
NOW, THEREFORE, the Program hereby adopts, and MLFD hereby agrees to the terms of the Plan in accordance with Rule 12b-1 under the Investment Company Act on the following terms and conditions:
1. The Program shall pay MLFD an account maintenance fee under the Plan at the end of each month at the annual rate of _____% of average daily net assets of the Portfolio relating to Class B shares to compensate MLFD and securities firms with which MLFD enters into related agreements pursuant to Paragraph 3 hereof ("SubAgreements") for providing account maintenance activities with respect to Class B shareholders of the Portfolio. Expenditures under the Plan may consist of payments to financial consultants for maintaining accounts in connection with Class B shares of the Portfolio and payment of expenses incurred in connection with such account maintenance activities including the costs of making services available to shareholders including assistance in connection with inquiries related to shareholder accounts.
2. The Program shall pay MLFD a distribution fee under the Plan at the end of each month at the annual rate of _____% of average daily net assets of the Portfolio relating to Class B shares to compensate MLFD and securities firms with which MLFD enters into related Sub-Agreements for providing sales and promotional activities and services. Such activities and services will relate to the sale, promotion and marketing of the Class B shares of the Portfolio. Such expenditures may consist of sales commissions to financial consultants for selling Class B shares of the Fund, compensation, sales incentives and payments to sales and marketing personnel, and the payment of expenses incurred in its sales and promotional activities, including advertising expenditures related to the Portfolio and the costs of preparing and distributing promotional materials. The distribution fee may also be used to pay the financing costs of carrying the unreimbursed expenditures described in this Paragraph 2. Payment of the distribution fee described in this Paragraph 2 shall be subject to any limitations set forth in any applicable regulation of the National Association of Securities Dealers, Inc.
3. The Program hereby authorizes MLFD to enter into Sub-Agreements with certain securities firms ("Securities Firms"), including Merrill Lynch, Pierce, Fenner & Smith Incorporated, to provide compensation to such Securities Firms for activities and services of the type referred to in Paragraphs 1 and 2 hereof. MLFD may reallocate all or a portion of its account maintenance fee or distribution fee to such Securities Firms as compensation for the above- mentioned activities and services. Such Sub-Agreement shall provide that the Securities Firms shall provide MLFD with such information as is reasonably necessary to permit MLFD to comply with the reporting requirements set forth in Paragraph 4 hereof.
4. MLFD shall provide the Program for review by the Board of Directors, and the Directors shall review, at least quarterly, a written report complying with the requirements of Rule 12b-1
regarding the disbursement of the account maintenance fee and the distribution fee during such period.
5. This Plan shall not take effect until it has been approved by a vote of at least a majority, as defined in the Investment Company Act, of the outstanding Class B voting securities of the Program.
6. This Plan shall not take effect until it has been approved, together with any related agreements, by votes of a majority of both (a) the Directors of the Program and (b) those Directors of the Program who are not "interested persons" of the Program, as defined in the Investment Company Act, and have no direct or indirect financial interest in the operation of this Plan or any agreements related to it (the "Rule 12b-1 Directors"), cast in person at a meeting or meetings called for the purpose of voting on this Plan and such related agreements.
7. This Plan shall continue in effect for so long as such continuance is specifically approved at least annually in the manner provided for approval of this Plan in Paragraph 6.
8. This Plan may be terminated at any time by vote of a majority of the Rule 12b-1 Directors, or by vote of a majority of the outstanding Class B voting securities of the Portfolio.
9. The Plan may not be amended to increase materially the rate of payments provided for herein unless such amendment is approved by at least a majority, as defined in the Investment Company Act, of the outstanding Class B voting securities of the Portfolio, and by the Directors of the Program in the manner provided for in Paragraph 6 hereof, and no material amendment to the Plan shall be made unless approved in the manner provided for approval and annual renewal in Paragraph 6 hereof.
10. While this Plan is in effect, the selection and nomination of Directors who are not interested persons, as defined in the Investment Company Act, of the Program shall be committed to the discretion of the Directors who are not interested persons.
11. The Fund shall preserve copies of this Plan and any related agreements and all reports made pursuant to Paragraph 4 hereof, for a period of not less than six years from the date of this Plan, or the agreements or such report, as the case may be, the first two years in an easily accessible place.
IN WITNESS WHEREOF, the parties hereto have executed this Plan as of the date first above written.
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
By______________________________________
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By______________________________________
Title:
CLASS B SHARES DISTRIBUTION PLAN SUB-AGREEMENT
AGREEMENT made as of the ___ day of ___________, 1994 by and between Merrill Lynch Funds Distributor, Inc. (the "MLFD"), and Merrill Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation ("Securities Firm").
WHEREAS, MLFD has entered into an agreement with Merrill Lynch Retirement Asset Builder Program, Inc., a Maryland corporation (the "Program"), pursuant to which it acts as the exclusive distributor for the sale of Class B shares of common stock, par value $0.10 per share (the "Class B shares"), of the [Name of Portfolio] [the "Portfolio"] Series of the Program; and
WHEREAS, MLFD and the Program have entered into a Class B Shares Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") pursuant to which MLFD receives an account maintenance fee from the Portfolio at the annual rate of ___% of average daily net assets of the Portfolio relating to Class B shares for account maintenance services related to the Class B shares of the Portfolio and a distribution fee from the Portfolio at the annual rate of ___% of average daily net assets of the Portfolio relating to Class B shares for providing sales and promotional activities and services related to the distribution of Class B shares; and
WHEREAS, MLFD desires the Securities Firm to perform certain account maintenance activities and sales and promotional activities and services for the Portfolio Class B shareholders and the Securities Firm is willing to perform such services;
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereby agree as follows:
1. The Securities Firm shall provide account maintenance activities with respect to the Class B shares of the Portfolio of the types referred to in Paragraph 1 of the Plan.
2. The Securities Firm shall provide sales and promotional activities and services with respect to the sale of the Class B shares of the Portfolio, and incur distribution expenditures of the types referred to in paragraph 2 of the Plan.
3. As compensation for its activities and services performed under this Agreement, MLFD shall pay the Securities
Firm an account maintenance fee and a distribution fee at the end of each calendar month in an amount agreed upon by the parties hereto.
4. The Securities Firm shall provide MLFD, at least quarterly, such information as reasonably requested by MLFD to enable MLFD to comply with the reporting requirements of Rule 12b-1 regarding the disbursement of the account maintenance fee and the distribution fee during such period referred to in Paragraph 4 of the Plan.
5. This Agreement shall not take effect until it has been approved by votes of a majority of both (a) the Directors of the Program and (b) those Directors of the Fund who are not "interested persons" of the Program, as defined in the Act, and have no direct or indirect financial interest in the operation of this Plan or any agreements related to it (the "Rule 12b-1 Directors"), cast in person at a meeting or meetings called for the purpose of voting on this Agreement.
6. This Agreement shall continue in effect for as long as such continuance is specifically approved at least annually in the manner provided for approval of the Plan in Paragraph 6.
7. This Agreement shall automatically terminate in the event of its assignment or in the event of the termination of the Plan or any amendment to the Plan that requires such termination.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first above written.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By___________________________________
Title:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By___________________________________
Title:
EXHIBIT 99.15(b)
CLASS C DISTRIBUTION PLAN
OF
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
PURSUANT TO RULE 12b-1
DISTRIBUTION PLAN made as of the day of , 1994, by and between Merrill Lynch Retirement Asset Builder Program, Inc., a Maryland corporation (the "Program"), and Merrill Lynch Funds Distributor, Inc., a Delaware corporation ("MLFD").
WHEREAS, the Program is engaged in business as an open-end investment company registered under the Investment Company Act of 1940, as amended (the "Investment Company Act"); and
WHEREAS, the Program is authorized to establish separate ("Series") each of which will offer separate classes of shares of common stock, par value $0.10 per share (the "Shares"), to retirement accounts for which Merrill Lynch, Pierce, Fenner & Smith Incorporated acts as custodian; and
WHEREAS, MLFD is a securities firm engaged in the business of selling shares of investment companies either directly to purchasers or through other securities dealers; and
WHEREAS, the Program proposes to enter into a Class C Shares Distribution Agreement with MLFD, pursuant to which MLFD will act as the exclusive distributor and representative of the Program in the offer and sale of Class C shares of beneficial interest, par value $0.10 per share (the "Class C shares"), of the [Name of Portfolio] (the "Portfolio") series of the Program to the public; and
WHEREAS, the Program desires to adopt this Class C Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act, pursuant to which the Program will pay an account maintenance fee and a distribution fee to MLFD with respect to the Portfolio's Class C shares; and
WHEREAS, the Directors of the Program have determined that there is a reasonable likelihood that adoption of the Plan will benefit the Portfolio and its shareholders.
NOW, THEREFORE, the Program hereby adopts, and MLFD hereby agrees to the terms of, the Plan in accordance with Rule 12b-1
under the Investment Company Act on the following terms and conditions:
1. The Program shall pay MLFD an account maintenance fee under the Plan at the end of each month at the annual rate of 0.25% of average daily net assets of the Portfolio relating to Class C shares to compensate MLFD and securities firms with which MLFD enters into related agreements pursuant to Paragraph 3 hereof ("Sub-Agreements") for providing account maintenance activities with respect to Class C shareholders of the Portfolio. Expenditures under the Plan may consist of payments to financial consultants for maintaining accounts in connection with Class C shares of the Portfolio and payment of expenses incurred in connection with such account maintenance activities including the costs of making services available to shareholders including assistance in connection with inquiries related to shareholder accounts.
2. The Program shall pay MLFD a distribution fee under the Plan at the end of each month at the annual rate of ____% of average daily net assets of the Portfolio relating to Class C shares to compensate MLFD and securities firms with which MLFD enters into related Sub-Agreements for providing sales and promotional activities and services. Such activities and services will relate to the sale, promotion and marketing of the Class C shares of the Portfolio. Such expenditures may consist of sales commissions to financial consultants for selling Class C shares of the Portfolio, compensation, sales incentives and payments to sales and marketing personnel, and the payment of expenses incurred in its sales and promotional activities, including advertising expenditures related to the Portfolio and the costs of preparing and distributing promotional materials. The distribution fee may also be used to pay the financing costs of carrying the unreimbursed expenditures described in this Paragraph 2. Payment of the distribution fee described in this Paragraph 2 shall be subject to any limitations set forth in any applicable regulation of the National Association of Securities Dealers, Inc.
3. The Program hereby authorizes MLFD to enter into Sub-Agreements with certain securities firms ("Securities Firms"), including Merrill Lynch, Pierce, Fenner & Smith Incorporated, to provide compensation to such Securities Firms for activities and services of the type referred to in Paragraphs 1 and 2 hereof. MLFD may reallocate all or a portion of its account maintenance fee or distribution fee to such Securities Firms as compensation for the above- mentioned activities and services. Such Sub-Agreement shall provide that the Securities Firms shall provide MLFD with such information as is reasonably
necessary to permit MLFD to comply with the reporting requirements set forth in Paragraph 4 hereof.
4. MLFD shall provide the Program for review by the Board of Directors, and the Directors shall review, at least quarterly, a written report complying with the requirements of Rule 12b-1 regarding the disbursement of the account maintenance fee and the distribution fee during such period.
5. This Plan shall not take effect until it has been approved by a vote of at least a majority, as defined in the Investment Company Act, of the outstanding Class C voting securities of the Portfolio.
6. This Plan shall not take effect until it has been approved, together with any related agreements, by votes of a majority of both (a) the Directors of the Program and (b) those Directors of the Program who are not "interested persons" of the Program, as defined in the Investment Company Act, and have no direct or indirect financial interest in the operation of this Plan or any agreements related to it (the "Rule 12b-1 Directors") cast in person at a meeting or meetings called for the purpose of voting on the Plan and such related agreements.
7. The Plan shall continue in effect for so long as such continuance is specifically approved at least annually in the manner provided for approval of the Plan in Paragraph 6.
8. The Plan may be terminated at any time by vote of a majority of the Rule 12b-1 Directors, or by vote of a majority of the outstanding Class C voting securities of the Portfolio.
9. The Plan may not be amended to increase materially the rate of payments provided for herein unless such amendment is approved by at least a majority, as defined in the Investment Company Act, of the outstanding Class C voting securities of the Portfolio, and by the Directors of the Program in the manner provided for in Paragraph 6 hereof, and no material amendment to the Plan shall be made unless approved in the manner provided for approval and annual renewal in Paragraph 6 hereof.
10. While the Plan is in effect, the selection and nomination of Directors who are not interested persons, as defined in the Investment Company Act, of the Program shall be committed to the discretion of the Directors who are not interested persons.
11. The Portfolio shall preserve copies of the Plan and any related agreements and all reports made pursuant to Paragraph 4 hereof, for a period of not less than six years from the date of
the Plan, or the agreements or such report, as the case may be, the first two years in an easily accessible place.
IN WITNESS WHEREOF, the parties hereto have executed this Distribution Plan as of the date first above written.
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
By_____________________________________
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By_____________________________________
Title:
CLASS C SHARES DISTRIBUTION PLAN SUB-AGREEMENT
AGREEMENT made as of the day of , 1994, by and between Merrill Lynch Funds Distributor, Inc., a Delaware corporation ("MLFD"), and Merrill Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation ("Securities Firm").
WHEREAS, MLFD has entered into an agreement with Merrill Lynch
Retirement Asset Builder Program, Inc., a Maryland corporation (the "Program"),
pursuant to which it acts as the exclusive distributor for the sale of Class C
shares of common stock, par value $0.10 per share (the "Class C shares"), of the
[Name of Portfolio] (the "Portfolio") series of the Program; and
WHEREAS, MLFD and the Program have entered into a Class C Shares Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended (the "Act"), pursuant to which MLFD receives an account maintenance fee from the Portfolio at the annual rate of ____% of average daily net assets of the Portfolio relating to Class C shares for account maintenance activities related to Class C shares of the Portfolio and a distribution fee from the Portfolio at the annual rate of ____% of average daily net assets of the Portfolio relating to Class C shares for providing sales and promotional activities and services related to the distribution of Class C shares of the Portfolio; and
WHEREAS, MLFD desires the Securities Firm to perform certain account maintenance activities and sales and promotional activities and services for the Portfolio's Class C shareholders and the Securities Firm is willing to perform such activities and services;
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereby agree as follows:
1. The Securities Firm shall provide account maintenance activities and services with respect to the Class C shares of the Portfolio and incur expenditures in connection with such activities and services of the types referred to in Paragraph 1 of the Plan.
2. The Securities Firm shall provide sales and promotional activities and services with respect to the sale of the Class C shares of the Portfolio, and incur distribution expenditures, of the types referred to in Paragraph 2 of the Plan.
3. As compensation for its activities and services performed under this Agreement, MLFD shall pay the Securities Firm an account maintenance fee and a distribution fee at the end of each calendar month in an amount agreed upon by the parties hereto.
4. The Securities Firm shall provide MLFD, at least quarterly, such information as reasonably requested by MLFD to enable MLFD to comply with the reporting requirements of Rule 12b-1 regarding the disbursement of the account maintenance fee and the distribution fee during such period referred to in Paragraph 4 of the Plan.
5. This Agreement shall not take effect until it has been approved by votes of a majority of both (a) the Directors of the Program and (b) those Directors of the Program who are not "interested persons" of the Program, as defined in the Act, and have no direct or indirect financial interest in the operation of the Plan, this Agreement or any agreements related to the Plan or this Agreement (the "Rule 12b-1 Directors"), cast in person at a meeting or meetings called for the purpose of voting on this Agreement.
6. This Agreement shall continue in effect for as long as such continuance is specifically approved at least annually in the manner provided for approval of the Plan in Paragraph 6.
7. This Agreement shall automatically terminate in the event of its assignment or in the event of the termination of the Plan or any amendment to the Plan that requires such termination.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first above written.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By_____________________________________
Title:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By_____________________________________
Title:
EXHIBIT 99.15(c)
CLASS D DISTRIBUTION PLAN
OF
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
PURSUANT TO RULE 12b-1
DISTRIBUTION PLAN made as of the day of , 1994, by and between Merrill Lynch Retirement Asset Builder Program, Inc., a Maryland corporation (the "Program"), and Merrill Lynch Portfolios Distributor, Inc., a Delaware corporation ("MLFD").
WHEREAS, the Program is engaged in business as an open-end investment company registered under the Investment Company Act of 1940, as amended (the "Investment Company Act"); and
WHEREAS, the Program is authorized to establish separate ("Series") each of which will offer separate classes of shares of common stock, par value $0.10 per share (the "Shares"), to retirement plans for which Merrill Lynch, Pierce, Fenner & Smith Incorporated acts as custodian; and
WHEREAS, MLFD is a securities firm engaged in the business of selling shares of investment companies either directly to purchasers or through other securities dealers; and
WHEREAS, the Program proposes to enter into a Class D Shares Distribution Agreement with MLFD, pursuant to which MLFD will act as the exclusive distributor and representative of the Program in the offer and sale of Class D shares of beneficial interest, par value $0.10 per share (the "Class D shares"), of the [NAME OF PORTFOLIO] (the "Portfolio") series of the Program to the public; and
WHEREAS, the Program desires to adopt this Class D Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act, pursuant to which the Program will pay an account maintenance fee to MLFD with respect to the Portfolio's Class D shares; and
WHEREAS, the Directors of the Program have determined that there is a reasonable likelihood that adoption of the Plan will benefit the Portfolio and its shareholders.
NOW, THEREFORE, the Program hereby adopts, and MLFD hereby agrees to the terms of, the Plan in accordance with Rule 12b-1
under the Investment Company Act on the following terms and conditions:
1. The Program shall pay MLFD an account maintenance fee under the Plan at the end of each month at the annual rate of 0.25% of average daily net assets of the Portfolio relating to Class D shares to compensate MLFD and securities firms with which MLFD enters into related agreements ("Sub-Agreements") pursuant to Paragraph 2 hereof for providing account maintenance activities with respect to Class D shareholders of the Portfolio. Expenditures under the Plan may consist of payments to financial consultants for maintaining accounts in connection with Class D shares of the Portfolio and payment of expenses incurred in connection with such account maintenance activities including the costs of making services available to shareholders including assistance in connection with inquiries related to shareholder accounts.
2. The Program hereby authorizes MLFD to enter into Sub-Agreements with certain securities firms ("Securities Firms"), including Merrill Lynch, Pierce, Fenner & Smith Incorporated, to provide compensation to such Securities Firms for activities of the type referred to in Paragraph 1. MLFD may reallocate all or a portion of its account maintenance fee to such Securities Firms as compensation for the above-mentioned activities. Such Sub-Agreement shall provide that the Securities Firms shall provide MLFD with such information as is reasonably necessary to permit MLFD to comply with the reporting requirements set forth in Paragraph 3 hereof.
3. MLFD shall provide the Program for review by the Board of Directors, and the Directors shall review, at least quarterly, a written report complying with the requirements of Rule 12b-1 regarding the disbursement of the account maintenance fee during such period.
4. This Plan shall not take effect until it has been approved by a vote of at least a majority, as defined in the Investment Company Act, of the outstanding Class D voting securities of the Portfolio.
5. This Plan shall not take effect until it has been approved, together with any related agreements, by votes of a majority of both (a) the Directors of the Program and (b) those Directors of the Program who are not "interested persons" of the Program, as defined in the Investment Company Act, and have no direct or indirect financial interest in the operation of this Plan or any agreements related to it (the "Rule 12b-1 Directors"), cast in person at a meeting or meetings called for the purpose of voting on the Plan and such related agreements.
6. The Plan shall continue in effect for so long as such continuance is specifically approved at least annually in the manner provided for approval of the Plan in Paragraph 5.
7. The Plan may be terminated at any time by vote of a majority of the Rule 12b-1 Directors, or by vote of a majority of the outstanding Class D voting securities of the Portfolio.
8. The Plan may not be amended to increase materially the rate of payments provided for in Paragraph 1 hereof unless such amendment is approved by at least a majority, as defined in the Investment Company Act, of the outstanding Class D voting securities of the Portfolio, and by the Directors of the Program in the manner provided for in Paragraph 5 hereof, and no material amendment to the Plan shall be made unless approved in the manner provided for approval and annual renewal in Paragraph 5 hereof.
9. While the Plan is in effect, the selection and nomination of Directors who are not interested persons, as defined in the Investment Company Act, of the Program shall be committed to the discretion of the Directors who are not interested persons.
10. The Portfolio shall preserve copies of the Plan and any related agreements and all reports made pursuant to Paragraph 3 hereof, for a period of not less than six years from the date of the Plan, or the agreements or such report, as the case may be, the first two years in an easily accessible place.
IN WITNESS WHEREOF, the parties hereto have executed this Distribution Plan as of the date first above written.
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
By_____________________________________
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By_____________________________________
Title:
CLASS D SHARES DISTRIBUTION PLAN SUB-AGREEMENT
AGREEMENT made as of the day of , 1994, by and between Merrill Lynch Funds Distributor, Inc. a Delaware corporation ("MLFD"), and Merrill Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation ("Securities Firm").
WHEREAS, MLFD has entered into an agreement with Merrill Lynch Retirement Asset Builder Program, Inc., a Maryland corporation (the "Program"), pursuant to which it acts as the exclusive distributor for the sale of Class D shares of common stock, par value $0.10 per share (the "Class D shares"), of [NAME OF PORTFOLIO] (the "Portfolio") series of the Program; and
WHEREAS, MLFD and the Program have entered into a Class D Shares Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended (the "Act"), pursuant to which MLFD receives an account maintenance fee from the Portfolio at the annual rate of 0.25% of average daily net assets of the Portfolio relating to Class D shares for providing account maintenance activities and services with respect to Class D shares; and
WHEREAS, MLFD desires the Securities Firm to perform certain account maintenance activities and services, including assistance in connection with inquiries related to shareholder accounts, for the Portfolio's Class D shareholders and the Securities Firm is willing to perform such services;
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereby agree as follows:
1. The Securities Firm shall provide account maintenance activities and services with respect to the Class D shares of the Portfolio and incur expenditures in connection with such activities and services, of the types referred to in Paragraph 1 of the Plan.
2. As compensation for its services performed under this Agreement, MLFD shall pay the Securities Firm a fee at the end of each calendar month in an amount agreed upon by the parties hereto.
3. The Securities Firm shall provide MLFD, at least quarterly, such information as reasonably requested by MLFD to enable MLFD to comply with the reporting requirements of Rule
12b-1 regarding the disbursement of the fee during such period referred to in Paragraph 3 of the Plan.
4. This Agreement shall not take effect until it has been approved by votes of a majority of both (a) the Directors of the Program and (b) those Directors of the Program who are not "interested persons" of the Program, as defined in the Act, and have no direct or indirect financial interest in the operation of the Plan, this Agreement or any agreements related to the Plan or this Agreement (the "Rule 12b-1 Directors"), cast in person at a meeting or meetings called for the purpose of voting on this Agreement.
5. This Agreement shall continue in effect for as long as such continuance is specifically approved at least annually in the manner provided for approval of the Plan in Paragraph 5.
6. This Agreement shall automatically terminate in the event of its assignment or in the event of the termination of the Plan or any amendment to the Plan that requires such termination.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first above written.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By_____________________________________
Title:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By_____________________________________
Title: