NOTES TO FINANCIAL STATEMENTS
(d) Prepaid registration fees--Prepaid registration fees are charged to expenses as the related shares are issued.
(e) Dividends and distributions--Dividends and distributions paid by the Fund are recorded on the ex-dividend
(f) Investment transactions--Investment transactions are accounted for on a trade date basis.
(g) Reclassification--Generally accepted accounting principles require that certain components of net assets be
adjusted to reflect permanent differences between financial and tax reporting. Accordingly, current year's
permanent book/tax differences of $11,105 have been reclassified between undistributed net realized capital
gains and undistributed net investment income and $25,332 has been reclassified between paid-in capital in
excess of par and undistributed net investment income. These reclassifications have no effect on net assets or net
asset values per share.
2 Transactions with Affiliates:
The Corporation has entered into an Administration Agreement with Fund Asset Management, L.P. ("FAM").
The general partner of FAM is Princeton Services, Inc. ("PSI"), a wholly-owned subsidiary of Merrill Lynch &
Co., Inc. ("ML & Co."), which is the limited partner. The Fund pays a monthly fee at an annual rate of 0.25% of
the Fund's average daily net assets for the performance of administrative services (other than investment advice
and related portfolio activities) necessary for the operation of the Fund. For the period February 26, 1999 to
May 31, 1999, FAM earned fees of $9,626, of which $1,300 was voluntarily waived.
The Corporation has also entered into a Distribution Agreement and Distribution Plans with Mercury Funds
Distributor ("MFD" or the "Distributor"), a division of Princeton Funds Distributor, Inc. ("PFD"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc. Pursuant to the Distribution Plans adopted by the Corporation in
accordance with Rule 12b-1 under the Investment Company Act of 1940, the Fund pays the Distr