<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 28, 1994
FILE NOS. 2-91329
811-4035
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [_]
[X]
POST-EFFECTIVE AMENDMENT NO. 11
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 14
MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT PROGRAM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
BOX 9011, PRINCETON, NEW JERSEY 08543-9011
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (609) 282-2800
ARTHUR ZEIKEL
BOX 9011
PRINCETON, NEW JERSEY 08543-9011
(NAME AND ADDRESS OF AGENT FOR SERVICE)
----------------
COPIES TO:
JOEL H. GOLDBERG, ESQ. SHEREFF, and PHILIP L. KIRSTEIN, ESQ. MERRILL
FRIEDMAN, HOFFMAN & GOODMAN 919 LYNCH ASSET MANAGEMENT P.O. BOX 9011
THIRD AVENUE NEW YORK, NEW YORK PRINCETON, NEW JERSEY 08543-9011
10022
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE:
[X] Immediately upon filing pursuant to paragraph (b),
or
[_] 60 days after filing pursuant to paragraph (a), or
[_] on (date) pursuant to paragraph (b), or
[_] on (date) pursuant to paragraph (a), of Rule 485
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SECURITIES AMOUNT BEING OFFERING PRICE OFFERING REGISTRATION
BEING REGISTERED REGISTERED PER UNIT PRICE* FEE
- --------------------------------------------------------------------------------
- -
<S> <C> <C> <C> <C>
Shares of Common Stock par
value $0.01 per share... 16,200,701 $13.40 $289,989.40 $100
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* The calculation of the maximum aggregate offering price was made pursuant to
Rule 24e-2 and was based upon an offering price of $13.40 per share, equal to
the net asset value per share as of the close of business on January 21, 1994
pursuant to Rule 457(c). The total number of shares redeemed during the
fiscal year ended September 30, 1993 amounted to 16,179,060 shares. Of this
number, no shares have been used for reduction pursuant to paragraph (a) of
Rule 24e-2 in all previous filings of post-effective amendments during the
current year, and no shares have been used for reduction pursuant to
paragraph (c) of Rule 24f-2 in all previous filings during the current year.
16,179,060 of the redeemed shares for the fiscal year ended September 30,
1993 are being used for the reductions in the post-effective amendment being
filed herein.
THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES OF CLASS A
AND CLASS B COMMON STOCK UNDER THE SECURITIES ACT OF 1933 PURSUANT TO RULE 24F-
2 UNDER THE INVESTMENT COMPANY ACT OF 1940. THE NOTICE REQUIRED BY SUCH RULES
FOR THE REGISTRANT'S MOST RECENT FISCAL YEAR WAS FILED ON NOVEMBER 12, 1993.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT PROGRAM, INC.
POST-EFFECTIVE AMENDMENT NO. 11 ON FORM N-1A
CROSS REFERENCE SHEET PURSUANT TO RULE 481(A) UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
------------- --------
<C> <S> <C>
PART A
Item 1. Cover Page..................... Cover Page
Item 2. Synopsis....................... Fee Table
Item 3. Condensed Financial
Information................... Financial Highlights; Performance
Item 4. General Description of Data
Registrant.................... Investment Objective and Policies;
The Fund and Its Management;
Investment Practices and
Restrictions; Additional
Information
Item 5. Management of the Registrant... Fee Table; The Fund and Its
Management; Investment Practices
Item 5A. Management's Discussion of Fund and Restrictions
Performance................... Not Applicable
Item 6. Capital Stock and Other
Securities.................... Additional Information
Item 7. Purchase of Securities Being
Offered....................... Cover Page; Alternative Sales
Arrangements; Purchase of Shares;
Shareholder Services; Additional
Information
Item 8. Redemption or Repurchase....... Alternative Sales Arrangements;
Purchase of Shares; Redemption of
Shares
Item 9. Pending Legal Proceedings...... Not Applicable
PART B
Item 10. Cover Page..................... Cover Page
Item 11. Table of Contents.............. Back Cover Page
Item 12. General Information and
History....................... General Information
Item 13. Investment Objectives and
Policies...................... Investment Objective and Policies;
Investment Practices and
Restrictions
Item 14. Management of the Fund......... Management of the Fund
Item 15. Control Persons and Principal
Holders of Securities......... Management of the Fund
Item 16. Investment Advisory and Other
Services...................... Management of the Fund; Purchase of
Shares; General Information
Item 17. Brokerage Allocation........... Investment Practices and
Restrictions
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........... Financial Statements
</TABLE>
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.
<PAGE>
PROSPECTUS
JANUARY 28, 1994 MERRILL LYNCH BALANCED FUND
FOR INVESTMENT AND RETIREMENT
BOX 9011, PRINCETON, NEW JERSEY 08543-9011 . PHONE NO. (609) 282-2800
----------------
Merrill Lynch Retirement Benefit Investment Program, Inc., doing business as
Merrill Lynch Balanced Fund for Investment and Retirement, is a mutual fund of
the type permitted to have a number of different portfolios, or series. The
fund and its only series, the Full Investment Portfolio, are referred to as
the "Fund." The Fund seeks to provide shareholders with as high a level of
total investment return as is consistent with reasonable risk. The Fund seeks
to achieve its objective through investment in common stocks and other types
of securities, including fixed-income securities and convertible securities.
Because the Fund is designed for investors for whom current tax liability is
not a consideration, such as certain tax qualified employee benefit plans, the
Fund (and any other series that may be added in the future) will invest
without regard to tax considerations.
----------------
The Fund offers two classes of shares which may be purchased at a price
equal to the next determined net asset value per share, plus a sales charge
which, at the election of the purchaser, may be imposed (i) at the time of
purchase (the "Class A shares"), or (ii) on a deferred basis (the "Class B
shares"). The deferred sales charges to which the Class B shares are subject
shall consist of a contingent deferred sales charge which may be imposed on
redemptions made within four years of purchase and an ongoing account
maintenance fee and distribution fee. Class A shares pay no ongoing fees;
Class B shares pay ongoing fees at an annual rate of 1.00% of the Fund's
average daily net assets attributable to the Class B shares, comprised of a
0.25% account maintenance fee for account maintenance services and a 0.75% fee
for distribution services. These alternatives permit an investor to choose the
method of purchasing shares that is most beneficial given the amount of the
purchase, the length of time the investor expects to hold the shares and other
circumstances. Investors should understand that the purpose and function of
the deferred sales charges with respect to the Class B shares are the same as
those of the initial sales charge with respect to the Class A shares.
Investors should also understand that over time the deferred sales charges
related to Class B shares may exceed the initial sales charge with respect to
Class A shares. See "Alternative Sales Arrangements" on page 3.
Each share of Class A and Class B represents identical interests in the Fund
and has the same rights, except that Class B shares bear the expenses of the
account maintenance fee and the distribution fee and certain other costs
resulting from the deferred sales charge arrangement, which will cause Class B
shares to have a higher expense ratio and to pay lower dividends than those
related to Class A shares, and that Class B shares have exclusive voting
rights with respect to the account maintenance fee and the distribution fee.
The two classes also have different exchange privileges.
Shares may be purchased directly from Merrill Lynch Funds Distributor, Inc.
(the "Distributor"), Box 9011, Princeton, New Jersey 08543-9011 (609) 282-
2800, or from securities dealers which have entered into dealer agreements
with the Distributor, including Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch"). The minimum initial purchase price is $1,000
($250 for retirement plans) and the minimum subsequent purchase is $50 ($1.00
for retirement plans). Merrill Lynch may charge its customers a processing fee
(presently $4.85) for confirming purchases and repurchases. Purchases and
redemptions directly through the Fund's transfer agent are not subject to
processing fees. See "The Fund and its Management," "Purchase of Shares" and
"Redemption of Shares".
----------------
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 REP-
RESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
This Prospectus is a concise statement of information about the Fund that is
relevant to making an investment in the Fund. This Prospectus should be
retained for future reference. A statement containing additional information
about the Fund, dated January 28, 1994 (the "Statement of Additional
Information"), has been filed with the Securities and Exchange Commission and
is available, without charge, by calling or by writing the Fund at the above
telephone number or address. The Statement of Additional Information is hereby
incorporated by reference into this Prospectus.
----------------
MERRILL LYNCH ASSET MANAGEMENT--INVESTMENT ADVISER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.--DISTRIBUTOR
<PAGE>
FEE TABLE
A general comparison of the sales arrangements and other nonrecurring and
recurring expenses applicable to Class A shares and Class B shares follows.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
INITIAL SALES DEFERRED SALES
CHARGE CHARGE
ALTERNATIVE ALTERNATIVE
-------------- --------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EX-
PENSES:
Maximum Sales Charge
Imposed on Purchases (as a
percentage of offering
price)..................... 6.50%(a) None
Sales Charge Imposed on
Dividend Reinvestments..... None None
Deferred Sales Charge (as a
percentage of original None 4.0% during the first
purchase price or year, decreasing 1.0%
redemption proceeds, annually to 0.0% after
whichever is lower)........ the fourth year(b)
Exchange Fee................ None None
ANNUAL FUND OPERATING
EXPENSES (AS A PERCENTAGE OF
AVERAGE NET ASSETS) FOR THE
YEAR ENDED SEPTEMBER 30,
1993:
Management Fees(c).......... 0.55% 0.55%
12b-1 Fees.................. None 1.00%(d)
Other Expenses
Custodial Fees............ 0.02% 0.02%
Shareholder Servicing
Costs(e)................. 0.12% 0.14%
Miscellaneous............. 0.14% 0.14%
Total Other Expenses.... 0.28% 0.30%
---- ----
Total Fund Operating Ex-
penses..................... 0.83% 1.85%
==== ====
</TABLE>
- --------
(a) Reduced for purchases of $10,000 and over, decreasing to 0.75% for
purchases of $1,000,000 and over. Certain purchasers of Class A shares
investing $1,000,000 or more may, in lieu of a front-end sales load, be
assessed a deferred sales charge on redemptions within the first year of
such investment. See "Purchase of Shares--Initial Sales Charge
Alternative--Class A Shares" page 10.
(b) See "Purchase of Shares--Deferred Sales Charge Alternative--Class B Shares"
page 12.
(c) See "The Fund and Its Management--Advisory Fee" page 8.
(d) Includes both the 0.25% account maintenance fee and the 0.75% distribution
fee. See "Purchase of Shares--Deferred Sales Charge Alternative--Class B
Shares--Distribution Plan" page 14.
(e) See "The Fund and Its Management--Transfer Agency Services" page 8.
EXAMPLE:
<TABLE>
<CAPTION>
CUMULATIVE EXPENSES PAID FOR THE PERIOD OF:
----------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
An investor would pay the fol-
lowing expenses on a $1,000
investment including, for
Class A shares, the maximum
$65 front-end sales charge and
assuming (1) an operating ex-
pense ratio of 0.83% for Class
A shares and 1.85% for Class B
shares, (2) a 5% annual return
throughout the periods and (3)
redemption at the end of the
period:
Class A....................... $ 72.92 $ 89.77 $ 108.06 $ 160.87
Class B....................... $ 58.79 $ 78.17 $ 100.07 $ 216.92
An investor would pay the fol-
lowing expenses on the same
$1,000 investment assuming no
redemption at the end of the
period:
Class A....................... $ 72.92 $ 89.77 $ 108.06 $ 160.87
Class B....................... $ 18.79 $ 58.17 $ 100.07 $ 216.92
</TABLE>
The foregoing Fee Table is intended to assist investors in understanding the
costs and expenses that a shareholder in the Fund will bear directly or
indirectly. The Example set forth above assumes reinvestment of all dividends
and distributions and utilizes a 5% annual rate of return as mandated by
Securities and Exchange Commission regulations. The Example should not be
considered a representation of past or future expenses or annual rate of
return, and actual expenses or annual rate of return may be more or less than
those assumed for purposes of the Example. Class B shareholders who own their
shares for an extended period of time may pay more in account maintenance and
distribution fees than the economic equivalent of the maximum front-end sales
charge permitted under the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. Merrill Lynch may charge its customers a processing
fee (presently $4.85) for confirming purchases and repurchases. Purchases and
redemptions directly through the Fund's transfer agent are not subject to the
processing fee. See "Purchase of Shares" and "Redemption of Shares."
2
<PAGE>
ALTERNATIVE SALES ARRANGEMENTS
Shares of the Fund may be purchased at a price equal to the next determined
net asset value per share, plus a sales charge which, at the election of the
purchaser, may be imposed either (i) at the time of the purchase (the "initial
sales charge alternative"), or (ii) on a deferred basis (the "deferred sales
charge alternative").
Class A Shares. An investor who elects the initial sales charge alternative
acquires Class A shares. Although Class A shares incur a sales charge when
they are purchased, they enjoy the benefit of not being subject to any ongoing
account maintenance fee or distribution fee or, with the exception of certain
purchases for which initial sales charges may be waived, any sales charge when
they are redeemed. Certain purchases of Class A shares qualify for reduced
initial sales charges. See "Purchase of Shares--Initial Sales Charge
Alternative--Class A Shares".
Class B Shares. An investor who elects the deferred sales charge alternative
acquires Class B shares. Class B shares do not incur a sales charge when they
are purchased, but they are subject to ongoing account maintenance and
distribution fees and a sales charge if they are redeemed within four years of
purchase. Class B shares enjoy the benefit of permitting all of the investor's
dollars to work from the time the investment is made. The ongoing account
maintenance and distribution fees paid by Class B shares will cause such
shares to have a higher expense ratio and to pay lower dividends than those
related to Class A shares. Payment of the distribution fee is subject to
certain limits set forth under "Purchase of Shares--Deferred Sales Charge
Alternative--Class B Shares".
As an illustration, investors who qualify for significantly reduced sales
charges might elect the initial sales charge alternative because similar sales
charge reductions are not available for purchases under the deferred sales
charge alternative. Moreover, shares acquired under the initial sales charge
alternative would not be subject to ongoing account maintenance and
distribution fees. However, because initial sales charges are deducted at the
time of purchase, such investors would not have all their funds invested
initially. Investors not qualifying for reduced initial sales charges who
expect to maintain their investment for an extended period of time might also
elect the initial sales charge alternative because over time the accumulated
continuing account maintenance and distribution fees may exceed the initial
sales charge. Again, however, such investors must weigh this consideration
against the fact that not all their funds will be invested initially.
Furthermore, the ongoing account maintenance and distribution fees will be
offset to the extent any return is realized on the additional funds initially
invested under the deferred sales charge alternative. However, there can be no
assurance as to the return, if any, which will be realized on such additional
funds. Certain other investors might determine it to be more advantageous to
have all their funds invested initially, although remaining subject to
continued account maintenance and distribution fees and, for a four-year
period of time, a contingent deferred sales charge.
The distribution expenses incurred by the Distributor and dealers (primarily
Merrill Lynch) in connection with the sale of the shares will be paid, in the
case of Class A shares, from the proceeds of the initial sales charge and, in
the case of the Class B shares, from the proceeds of the ongoing distribution
fee and, if applicable, the contingent deferred sales charge incurred upon
redemption within four years of purchase. Expenses incurred by the Distributor
and dealers (primarily Merrill Lynch) in connection with account maintenance
activities with respect to the Class B shares will be paid from the proceeds
of the account maintenance fee. Sales personnel may receive different
compensation for selling Class A or Class B shares. Investors should
understand that the purpose and function of the deferred sales charges with
respect to the Class B shares are the same as those of the initial sales
charge with respect to the Class A shares. The account maintenance fees to
which Class B shareholders are subject will be used to compensate financial
consultants and other personnel for providing personal services to
shareholders and to pay administration costs related to maintenance of
shareholder accounts.
3
<PAGE>
Dividends paid by the Fund with respect to Class A and Class B 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 the
account maintenance and distribution fees and any incremental transfer agency
costs relating to Class B shares will be borne exclusively by that class. See
"Additional Information--Determination of Net Asset Value". Class A and Class B
shareholders of the Fund each have an exchange privilege for Class A and Class
B shares, respectively, with certain other mutual funds sponsored by Merrill
Lynch. Class A and Class B shareholders of the Fund also may exchange their
shares for shares of certain money market funds sponsored by Merrill Lynch. See
"Shareholder Services--Exchange Privilege".
The Directors of the Fund have determined that currently no conflict of
interest exists between the Class A and Class B shares. On an ongoing basis,
the Directors of the Fund, pursuant to their fiduciary duties under the
Investment Company Act of 1940 and state laws, will seek to assure that no such
conflict arises.
THE ALTERNATIVE SALES ARRANGEMENTS PERMIT AN INVESTOR TO CHOOSE THE METHOD
OF PURCHASING SHARES THAT IS MOST BENEFICIAL GIVEN THE AMOUNT OF THE
PURCHASE, THE LENGTH OF TIME THE INVESTOR EXPECTS TO HOLD THE SHARES AND
OTHER CIRCUMSTANCES. INVESTORS SHOULD DETERMINE WHETHER UNDER THEIR
PARTICULAR CIRCUMSTANCES IT IS MORE ADVANTAGEOUS TO INCUR AN INITIAL SALES
CHARGE AND NOT BE SUBJECT TO ONGOING CHARGES, OR TO HAVE THE ENTIRE INITIAL
PURCHASE PRICE INVESTED IN THE FUND WITH THE INVESTMENT THEREAFTER BEING
SUBJECT TO ONGOING CHARGES. TO ASSIST INVESTORS IN MAKING THIS
DETERMINATION, THE FEE TABLE ON PAGE 2 SETS FORTH THE CHARGES APPLICABLE TO
EACH CLASS OF SHARES AND A DISCUSSION OF RELEVANT FACTORS IN MAKING SUCH
DETERMINATION IS SET FORTH UNDER "PURCHASE OF SHARES--ALTERNATIVE SALES
ARRANGEMENTS" ON PAGE 9.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The financial information in the table below has been audited in conjunction
with the audits of the financial statements of the Fund by Deloitte & Touche,
independent auditors. Financial statements for the year ended September 30,
1993, and the independent auditors' report thereon are included in the
Statement of Additional Information.
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN DERIVED FROM INFORMATION
PROVIDED IN THE FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------
FOR THE YEAR ENDED SEPTEMBER 30,
--------------------------------------------
1993 1992 1991 1990 1989+
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
INCREASE (DE-
CREASE) IN NET
ASSET VALUE:
PER SHARE OPERAT-
ING PERFORMANCE:
Net asset value,
beginning of
period........... $ 12.57 $ 11.94 $ 10.61 $ 11.93 $ 11.18
------- ------- ------- ------- -------
Investment In-
come--net........ .47 .46 .64 .64 .24
Realized and
unrealized gain
(loss) on
investments--net. 1.25 .62 1.69 (1.41) 1.42
------- ------- ------- ------- -------
Total from
investment
operations....... 1.72 1.08 2.33 (.77) 1.66
------- ------- ------- ------- -------
Less dividends
and
distributions:
Investment
income--net...... (.39) (.45) (.62) (.55) (.90)
Realized gain on
investments--
net............. (.88) -- (.38) -- (.01)
------- ------- ------- ------- -------
Total dividends
and
distributions.... (1.27) (.45) (1.00) (.55) (.91)
------- ------- ------- ------- -------
Net asset value,
end of period.... $ 13.02 $ 12.57 $ 11.94 $ 10.61 $ 11.93
======= ======= ======= ======= =======
TOTAL INVESTMENT
RETURN:**
Based on net as-
set value per
share............ 14.62% 9.23% 23.14% (6.86%) 15.54%@@
======= ======= ======= ======= =======
RATIOS TO AVERAGE
NET ASSETS:
Expenses,
excluding
distribution
fees............. .83% .81% .85% .83% .78%*
======= ======= ======= ======= =======
Expenses......... .83% .81% .85% .83% .78%*
======= ======= ======= ======= =======
Investment in-
come--net........ 3.09% 3.18% 3.64% 5.12% 4.23%*
======= ======= ======= ======= =======
SUPPLEMENTAL DA-
TA:
Net assets, end
of period (in
thousands)....... $40,688 $20,320 $12,839 $ 4,511 $ 2,080
======= ======= ======= ======= =======
Portfolio turn-
over............. 79.55% 65.40% 173.76% 163.56% 175.47%
======= ======= ======= ======= =======
<CAPTION>
CLASS B
----------------------------------------------------------------------------------------------
FOR THE YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988 1987 1986++
--------- --------- --------- ------------ ----------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DE-
CREASE) IN NET
ASSET VALUE:
PER SHARE OPERAT-
ING PERFORMANCE:
Net asset value,
beginning of
period........... $ 12.62 $ 11.99 $ 10.60 $ 11.91 $ 10.94 $ 12.54 $ 11.17 $ 10.00
--------- --------- --------- ------------ ----------- ------------ ----------- --------------
Investment In-
come--net........ .27 .28 .41 .50 .53 .57 .39 .25
Realized and
unrealized gain
(loss) on
investments--net. 1.34 .67 1.81 (1.39) 1.25 (1.40) 1.64 .98
--------- --------- --------- ------------ ----------- ------------ ----------- --------------
Total from
investment
operations....... 1.61 .95 2.22 (.89) 1.78 (.83) 2.03 1.23
--------- --------- --------- ------------ ----------- ------------ ----------- --------------
Less dividends
and
distributions:
Investment
income--net...... (.26) (.32) (.45) (.42) (.80) (.55) (.38) (.06)
Realized gain on
investments--
net............. (.88) -- (.38) -- (.01) (.22) (.28) --
--------- --------- --------- ------------ ----------- ------------ ----------- --------------
Total dividends
and
distributions.... (1.14) (.32) (.83) (.42) (.81) (.77) (.66) (.06)
--------- --------- --------- ------------ ----------- ------------ ----------- --------------
Net asset value,
end of period.... $ 13.09 $ 12.62 $ 11.99 $ 10.60 $ 11.91 $ 10.94 $ 12.54 $ 11.17
========= ========= ========= ============ =========== ============ =========== ==============
TOTAL INVESTMENT
RETURN:**
Based on net as-
set value per
share............ 13.49% 8.01% 21.91% (7.79%) 16.93% (6.36%) 18.98% 12.29%@@
========= ========= ========= ============ =========== ============ =========== ==============
RATIOS TO AVERAGE
NET ASSETS:
Expenses,
excluding
distribution
fees............. .85% .85% .90% .86% .84% .82% .73% .82%*
========= ========= ========= ============ =========== ============ =========== ==============
Expenses......... 1.85% 1.85% 1.90% 1.86% 1.84% 1.82% 1.73% 1.82%*
========= ========= ========= ============ =========== ============ =========== ==============
Investment in-
come--net........ 1.99% 2.10% 3.37% 3.90% 3.73% 4.66% 3.60% 4.23%*
========= ========= ========= ============ =========== ============ =========== ==============
SUPPLEMENTAL DA-
TA:
Net assets, end
of period (in
thousands)....... $830,955 $886,920 $986,895 $1,171,567 $1,735,873 $2,264,429 $3,384,647 $ 2,065,752
========= ========= ========= ============ =========== ============ =========== ==============
Portfolio turn-
over............. 79.55% 65.40% 173.76% 163.56% 175.47% 239.78% 145.17% 143.78%
========= ========= ========= ============ =========== ============ =========== ==============
</TABLE>
- ----
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Class A shares commenced operations on October 27, 1988.
++ Class B shares commenced operations on November 29, 1985.
@@ Aggregate total investment return.
See Notes to Financial Statements.
5
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund is designed to provide investors with a convenient and
professionally managed vehicle for seeking as high a level of total investment
return as is consistent with a relatively low level of risk. This is a
fundamental investment objective. The Fund seeks to achieve its objective
through investment in high quality, larger capitalization common stocks
(generally companies with $500,000,000 or more of market capitalization) and
other types of securities, including fixed-income securities (preferred stock
and debt securities) and convertible securities, as well as through the writing
of covered call options and the lending of portfolio securities. It is
anticipated that, except under unusual circumstances, the Fund will maintain at
least 25% of the value of its assets in fixed-income senior securities. In its
common stock investments, it is anticipated that the Fund will seek to
emphasize issues with relatively low price earnings ratios, above average
dividend yields, and relatively low price to book value ratios, as compared to
prevailing market conditions. With respect to debt securities, the Fund will
invest only in instruments which are rated Aa or better by Moody's Investors
Service, Inc. ("Moody's") or AA or better by Standard & Poor's Corporation ("S
& P"), or which are determined by the Fund's investment adviser to be of
quality comparable to instruments so rated. To a limited extent, the Fund also
may write covered call options and lend its portfolio securities. The Fund
attempts to reduce overall exposure to risk from declines in securities prices
by spreading its investments over many different companies in a variety of
industries. No assurance can be given that the Fund will be able to achieve its
investment objective.
Total investment return is the sum of current income and capital gains
received from portfolio investments, as well as the capital appreciation of
investments retained in the portfolio. It is anticipated that ordinarily the
Fund's emphasis on current income and capital appreciation will be relatively
equal, although from time to time the Fund may vary its emphasis between these
two elements as market or economic conditions change. In this regard, the
composition of the Fund is largely unrestricted. In furtherance of its efforts
to reduce overall exposure to investment and income risk through adequate
diversification of its portfolio, the Fund may invest up to 20% of its total
assets in securities issued by foreign companies.
The Fund also reserves the right to invest all or a portion of its assets in
high quality money market securities (such as U.S. Treasury bills, certificates
of deposit issued by U.S. banks having more than $1 billion in assets,
commercial paper and repurchase agreements with respect to U.S. government
securities and U.S. government agency securities) for purposes of enhancing
liquidity and avoiding the effects of declining securities prices when it seems
advisable to do so in light of prevailing market or economic conditions. The
Fund will invest only in commercial paper that is rated A-1 or A-2 by S & P, or
P-1 or P-2 by Moody's, or, if not rated, issued by companies having an
outstanding debt issue rated AA or better by S & P, or Aa or better by Moody's.
The proportion of the Fund's assets that is invested in money market securities
will vary from time to time.
Because the Fund is designed for investors for whom current tax liability is
not a consideration, the Fund may realize capital gains without regard to
whether they will qualify as long-term capital gains. This means that the Fund
has the flexibility to take advantage of short-term investment opportunities
when determined appropriate by Merrill Lynch Asset Management, L.P., doing
business as Merrill Lynch Asset Management ("MLAM" or the "Investment
Adviser").
6
<PAGE>
THE FUND AND ITS MANAGEMENT
The Fund is a mutual fund, technically known as an open-end diversified
management investment company. It was incorporated under the laws of the State
of Maryland on May 21, 1984. The Fund is a company of the series type. At the
present time it consists of only one portfolio. The Fund is designed as an
investment vehicle for investors who seek a high level of total investment
return without regard to tax considerations, such as certain tax-qualified
employee benefit plans, including Individual Retirement Accounts ("IRAs") and
corporate, governmental and other retirement plans qualified under sections
401, 403(b) or 408 of the Internal Revenue Code (the "Code").
The Directors of the Fund consist of six individuals, five of whom are not
"interested persons" of the Fund as defined in the Investment Company Act of
1940. The Directors of the Fund are responsible for the overall supervision of
the operations of the Fund and perform the various duties imposed on the
directors of investment companies by the Investment Company Act of 1940.
The Directors are:
Arthur Zeikel*--President and Chief Investment Officer of Merrill Lynch
Asset Management and Fund Asset Management, L.P. ("FAM"); President and
Director of Princeton Services, Inc.; Executive Vice President of Merrill
Lynch & Co., Inc. and Executive Vice President of Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch") since 1990 and Senior Vice
President thereof from 1985 to 1990; Director of Merrill Lynch Funds
Distributor, Inc.
Kenneth S. Axelson--Former Executive Vice President and Director, J.C.
Penney Company, Inc.
Herbert I. London--Former Dean, Gallatin Division of New York University.
Robert R. Martin--Former Chairman, Kinnard Investments, Inc.
Joseph L. May--Attorney in private practice.
Andre F. Perold--Professor, Harvard Business School.
- --------
* Interested person, as defined in the Investment Company Act of 1940, of the
Fund.
MLAM, with offices at 800 Scudders Mill Road, Plainsboro, New Jersey (mailing
address: Box 9011, Princeton, New Jersey 08543-9011), is the investment adviser
for the Fund. MLAM is a Delaware limited partnership and is owned and
controlled by Merrill Lynch & Co., Inc. MLAM manages the investment of the
Fund's assets, provides administrative services and manages the Fund's business
affairs. These services are subject to general oversight by the Fund's Board of
Directors. The Investment Adviser has been engaged in the investment advisory
business since 1976, and, together with its affiliate, FAM, currently serves as
the investment adviser to more than 90 other registered investment companies,
as well as to numerous pension plans and other institutions. As of December 31,
1993, the Investment Adviser and FAM had a total of approximately $159.9
billion in investment company and other portfolio assets under management,
including accounts of certain affiliates of the Investment Adviser.
7
<PAGE>
Merrill Lynch & Co., Merrill Lynch Investment Management, Inc. and Princeton
Services, Inc. are "controlling persons" of the Investment Adviser as defined
under the Investment Company Act because of their power to exercise a
controlling influence over its management policies.
Denis B. Cummings is primarily responsible for the day-to-day management of
the Fund's portfolio and has served in that capacity since 1991. Mr. Cummings
has served as a Vice President of the Investment Adviser since 1978.
Advisory Fee. The Fund pays the Investment Adviser a monthly fee based upon
the average daily value of the portfolio's net assets at the following annual
rates: 0.65% of the average daily net assets not exceeding $500 million; 0.60%
of the average daily net assets exceeding $500 million but not exceeding $1.5
billion; 0.55% of the average daily net assets exceeding $1.5 billion but not
exceeding $2.5 billion; 0.50% of the average daily net assets exceeding $2.5
billion but not exceeding $3.5 billion; and 0.45% of the average daily net
assets exceeding $3.5 billion. For the fiscal year ended September 30, 1993,
the total management fee payable by the Fund to the Investment Adviser was
$5,620,993 (based upon average net assets of approximately $902.2 million). For
the fiscal year ended September 30, 1993, the annualized ratio of total
expenses (excluding distribution fees) to average net assets was 0.83% for the
Class A shares and 0.85% for the Class B shares.
Transfer Agency Services. Financial Data Services, Inc. ("Transfer Agent"),
which is a wholly-owned subsidiary of Merrill Lynch & Co., Inc., acts as the
Fund's Transfer Agent pursuant to a Transfer Agency, Dividend Disbursing Agency
and Shareholder Servicing Agency Agreement (the "Transfer Agency Agreement").
Pursuant to the Transfer Agency Agreement, the Transfer Agent is responsible
for the issuance, transfer and redemption of shares and the opening and
maintenance of shareholder accounts. Pursuant to the Transfer Agency Agreement,
the Transfer Agent receives a fee of $7.00 per Class A shareholder account and
$9.00 per Class B shareholder account and is entitled to reimbursement for out-
of-pocket expenses incurred by it under the Transfer Agency Agreement. For the
fiscal year ended September 30, 1993, the total fee paid by the Fund to the
Transfer Agent was $1,324,708.
Reimbursement for Portfolio Accounting Services. The Fund reimburses the
Investment Adviser for its costs in providing portfolio accounting services to
the Fund. For the fiscal year ended September 30, 1993, the Fund reimbursed the
Investment Adviser $143,231 for accounting services.
PURCHASE OF SHARES
Merrill Lynch Funds Distributor, Inc. (the "Distributor"), a subsidiary of
the Investment Adviser and an affiliate of Merrill Lynch, acts as the
Distributor of the shares of the Fund.
Shares of the Fund are offered continuously for sale by the Distributor and
other eligible securities dealers (including Merrill Lynch). Shares of the Fund
may be purchased from securities dealers or by mailing a purchase order
directly to the Transfer Agent. The minimum initial investment is $1,000, and
the minimum subsequent purchase is $50, except that for retirement plans the
minimum initial purchase is $250 and the minimum subsequent purchase is $1.00.
Different minimums may apply to purchases through the Merrill Lynch BlueprintSM
Program. See "Purchases of Shares--Reduced Initial Sales Charges--Class A
Shares--Merrill Lynch BlueprintSM Program" in the Statement of Additional
Information.
8
<PAGE>
The Fund is offering its shares at a public offering price equal to the next
determined net asset value per share plus sales charges which, at the option of
the purchaser, may be imposed either at the time of purchase (the "initial
sales charge alternative") or on a deferred basis (the "deferred sales charge
alternative"), as described below. The applicable offering price for purchase
orders is based on the net asset value of the Fund next determined after
receipt of the purchase order 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. on the day the order is placed with the
Distributor, provided the order is 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 Fund. The Fund or the Distributor may suspend the continuous offering of
the Fund's shares to the general public 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. Purchases directly through the Fund's Transfer
Agent are not subject to the processing fee.
The Fund issues two classes of shares: Class A shares are sold to investors
choosing the initial sales charge alternative and Class B shares are sold to
investors choosing the deferred sales charge alternative. The two classes of
shares each represent an interest in the same portfolio of investments of the
Fund, have the same rights and are identical in all respects, except that Class
B shares bear the expenses of the account maintenance fees and deferred sales
arrangements and any expenses (including incremental transfer agency costs)
resulting from such sales arrangements, and have exclusive voting rights with
respect to the Rule 12b-1 distribution plan pursuant to which the account
maintenance and distribution fees are paid. See "Deferred Sales Charge
Alternative--Class B Shares--Distribution Plan". The two classes also have
different exchange privileges. See "Shareholder Services--Exchange Privilege".
The net income attributable to Class B shares and the dividends payable on
Class B shares will be reduced by the amount of the account maintenance and
distribution fees and incremental expenses associated with such account
maintenance and distribution fees; likewise, the net asset value of the Class B
shares will be reduced by such amount to the extent the Fund has undistributed
net income. Sales personnel may receive different compensation for selling
Class A or Class B shares. Investors are advised that only Class A shares may
be available for purchase through securities dealers, other than Merrill Lynch,
which are eligible to sell shares.
ALTERNATIVE SALES ARRANGEMENTS
The alternative sales arrangements of the Fund permit investors to choose the
method of purchasing shares that is most beneficial given the amount of their
purchase, the length of time the investor expects to hold the shares and other
relevant circumstances. Investors should determine whether under their
particular circumstances it is more advantageous to incur an initial sales
charge and not be subject to ongoing charges, as discussed below, or to have
the entire initial purchase price invested in the Fund with the investment
thereafter being subject to ongoing account maintenance and distribution fees.
As an illustration, investors who qualify for significantly reduced sales
charges, as described below, might elect the initial sales charge alternative
because similar sales charge reductions are not available for purchases under
the deferred sales charge alternative. Moreover, shares acquired under the
initial sales charge alternative would not be subject to an ongoing account
maintenance fee and distribution fee as described below. However, because
initial sales charges are deducted at the time of purchase, such investors
would not have all their funds invested initially.
9
<PAGE>
Investors not qualifying for reduced initial sales charges who expect to
maintain their investment for an extended period of time might also elect the
initial sales charge alternative because over time the accumulated continuing
account maintenance and distribution fees may exceed the initial sales charge.
Again, however, such investors must weigh this consideration against the fact
that not all their funds will be invested initially. Furthermore, the ongoing
account maintenance and distribution fees will be offset to the extent any
return is realized on the additional funds initially invested under the
deferred sales charge alternative. Another factor that may be applicable under
certain circumstances is that the payment of the Class B distribution fee and
contingent deferred sales charge is subject to certain limits as set forth
under "Deferred Sales Charge Alternative--Class B Shares".
Certain other investors might determine it to be more advantageous to have
all their funds invested initially, although remaining subject to continued
account maintenance and distribution fees and, for a four-year period of time,
a contingent deferred sales charge as described below. For example, an investor
subject to the Class A 6.50% initial sales charge will have to hold his
investment at least 6 1/2 years for the aggregate 0.25% account maintenance fee
and 0.75% distribution fee of the Class B shares to exceed the initial sales
charge of the Class A shares. This example does not take into account the time
value of money which further reduces the impact of the account maintenance and
distribution fees on the investment, fluctuations in the net asset value, the
effect of the return on the investment over this period of time or the effect
of any limits that may be imposed upon payment of the distribution fee and the
contingent deferred sales charge.
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
The public offering price of Class A shares for purchasers choosing the
initial sales charge alternative is the next determined net asset value plus
varying sales charges (i.e., sales load), as set forth below.
<TABLE>
<CAPTION>
DISCOUNT TO
SALES CHARGE SALES CHARGE SELECTED DEALERS
AS PERCENTAGE AS PERCENTAGE* AS PERCENTAGE OF
OF OFFERING OF THE NET THE OFFERING
AMOUNT OF PURCHASE PRICE AMOUNT INVESTED PRICE
------------------ ------------- --------------- ----------------
<S> <C> <C> <C>
Less than $10,000............... 6.50% 6.95% 6.25%
$10,000 but less than $25,000... 6.00 6.38 5.75
$25,000 but less than $50,000... 5.00 5.26 4.75
$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............. .75 .76 .65
</TABLE>
- --------
* Rounded to the nearest one-hundredth percent.
10
<PAGE>
The Distributor may reallow discounts to such 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 shares of the
Fund will receive a concession equal to most of the sales charge, they may be
deemed to be underwriters under the Securities Act of 1933, as amended.
Class A shares of the Fund are offered at net asset value to shareholders of
Merrill Lynch Senior Floating Rate Fund (formerly known as the "Merrill Lynch
Prime 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 in shares of the Fund. In order to exercise this investment option,
Merrill Lynch Senior Floating Rate Fund shareholders must sell their Merrill
Lynch Senior Floating Rate Fund shares to the Merrill Lynch Senior Floating
Rate Fund in connection with a tender offer conducted by the Merrill Lynch
Senior Floating Rate Fund and reinvest the proceeds immediately in the Fund.
This investment option is available only with respect to the proceeds of
Merrill Lynch Senior Floating Rate Fund shares as to which no Early Withdrawal
Charge (as defined in the Merrill Lynch Senior Floating Rate Fund prospectus)
is applicable. Purchase orders from Merrill Lynch Senior Floating Rate Fund
shareholders wishing to exercise this investment option will be accepted only
on the day that the related Merrill Lynch Senior Floating Rate Fund tender
offer terminates and will be effected at the net asset value of the Fund at
such day.
Reduced Initial Sales Charges. Sales charges are reduced under a Right of
Accumulation and a Letter of Intention. Class A shares of the Fund are offered
at net asset value to Directors of the Fund, to participants in certain
benefit plans, to directors or trustees of certain other Merrill Lynch-
sponsored investment companies, 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 if certain conditions set
forth in the Statement of Additional Information are met, to directors of
Merrill Lynch & Co., Inc. and to employees of Merrill Lynch & Co., Inc. and
its subsidiaries. Also, Class A shares may be offered at net asset value in
connection with the acquisition of assets of other investment companies. No
initial sales charges are imposed upon Class A shares issued as a result of
the automatic reinvestment of dividends or capital gains distributions. Class
A shares are offered with reduced sales charges and, in certain circumstances,
at net asset value to participants in the Merrill Lynch Blueprint SM Program.
Class A shares are offered to TMA SM Managed Trusts to which Merrill Lynch
Trust Company provides discretionary trustee services at net asset value plus
a reduced sales charge. A transaction of $1,000,000 or more by a TMA SM
Managed Trust to purchase Class A shares of the Fund will not be subject to an
initial sales charge. Class A shares are offered at net asset value to certain
retirement plans, including eligible 401(k) plans, provided such plans meet
the required number of eligible employees or required amount of assets advised
by the Investment Adviser or its affiliate FAM. Class A shares are offered at
net asset value, without a sales charge, to an investor who has a business
relationship with a Merrill Lynch financial consultant 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 A shares of
the Fund with the proceeds from a redemption of shares of such other mutual
fund and such fund must have imposed a sales charge either at the time of
purchase or on a deferred basis; second, such purchase of Class A shares must
be made within 90 days after such notice of termination of the arrangement. In
addition, purchases of Class A shares of the Fund made in connection with a
single investment of $1 million or more under the Merrill Lynch Mutual Fund
Adviser Program will not be subject to an initial sales charge.
Orders for purchases and redemptions of Class A shares of the Fund may be
grouped for execution purposes which, in some circumstances, may involve the
execution of such orders two business days following
11
<PAGE>
the day such orders are placed. The minimum initial purchase price is $100,
with a $50 minimum for subsequent purchases through Blueprint. There are no
minimum initial or subsequent purchase requirements for participants who are
part of an automatic investment plan. Additional information concerning
purchases through Blueprint, including any annual fees and transaction charges,
is available from Merrill Lynch, Pierce, Fenner & Smith Incorporated, The
Blueprint SM Program, P.O. Box 30441, New Brunswick, New Jersey 08989-0441.
Class A shares are offered at net asset value, with a waiver of the front-end
sales charge, to participants in the Merrill Lynch Blueprint Program through
the Merrill Lynch Directed IRA Rollover Program ("IRA Rollover Program")
available from Merrill Lynch Business Financial Services, a business unit of
Merrill Lynch. The IRA Rollover Program is available to custodian rollover
assets from Eligible Retirement Plans (see definition below) whose Trustee
and/or Plan Sponsor offers the Merrill Lynch Directed IRA Rollover Program.
Eligible Retirement Plans include: (a) plans qualified under Section 401(k) of
the Code, with a salary reduction feature offering a menu of investments to
plan participants, provided such plan initially has 1,000 or more employees
eligible to participate in the plan (employees eligible to participate in
retirement plans of the same sponsoring employer or its affiliates may be
aggregated); or (b) tax qualified retirement plans within the meaning of
Section 401(a) of the Code or deferred compensation plans within the meaning of
Section 403(b) of the Code, provided the plan (i) initially invested $5 million
or more in existing plan assets in portfolios, mutual funds or trusts advised
by MLAM or its subsidiaries or (ii) has accumulated $5 million or more in
existing plan assets invested in mutual funds advised by MLAM or its
subsidiaries, which charge a front-end sales charge or contingent deferred
sales charge (assets of retirement plans with the same sponsor or an affiliated
sponsor may be aggregated).
Initial sales charges may be waived for shareholders purchasing $1 million or
more in a single transaction (other than a tax qualified retirement plan under
Section 401 of the Code, or a deferred compensation plan under Section 403(b)
and Section 457 of the Code), or a purchase by a TMA SM Managed Trust, of Class
A shares of the Fund. In addition, purchases of Class A shares of the Fund made
in connection with a single investment of $1 million or more under the Merrill
Lynch Mutual Fund Adviser Program will not be subject to an initial sales
charge. Purchases described in this paragraph will be subject to a contingent
deferred sales charge if the shares are redeemed within one year after purchase
at the following rates:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE OF
AMOUNT OF PURCHASE DOLLAR AMOUNT SUBJECT TO CHARGE
------------------ -------------------------------
<S> <C>
$1 million up to $2.5 million.............. 1.00%
Over $2.5 million up to $3.5 million....... 0.60%
Over $3.5 million up to $5 million......... 0.40%
Over $5 million............................ 0.25%
</TABLE>
Additional information concerning these reduced initial sales charges is set
forth in the Statement of Additional Information.
DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES
Investors choosing the deferred sales charge alternative purchase Class B
shares at net asset value per share without the imposition of a sales charge at
the time of purchase. The Class B shares are being sold without an initial
sales charge so that the Fund will receive the full amount of the investor's
purchase payment. Merrill Lynch compensates its financial consultants for
selling Class B shares at the time of
12
<PAGE>
purchase from its own funds. The proceeds of the contingent deferred sales
charge and the ongoing distribution fee discussed below are used to defray
Merrill Lynch's expenses, including compensating its financial consultants. The
proceeds from the ongoing account maintenance fee are used to compensate
Merrill Lynch for providing continuing account maintenance activities.
Proceeds from the contingent deferred sales charge are paid to the
Distributor and are used in whole or in part by the Distributor to defray the
expenses of dealers (including Merrill Lynch) related to providing
distribution-related services to the Fund in connection with the sale of the
Class B shares, such as the payment of compensation of financial consultants
for selling Class B shares, from its own funds. Payments of the distribution
fee by the Fund to the Distributor under the distribution plan described below
also may be used in whole or in part by the Distributor for this purpose. The
combination of the contingent deferred sales charge and the ongoing
distribution fee facilitates the ability of the Fund to sell the Class B shares
without a sales charge being deducted at the time of purchase. Class B
shareholders of the Fund exercising the exchange privilege described under
"Shareholder Services--Exchange Privilege" will continue to be subject to the
Fund's contingent deferred sales charge schedule if such schedule is higher
than the deferred sales charge schedule relating to the Class B shares acquired
as a result of the exchange.
Contingent Deferred Sales Charge. Class B shares which are redeemed within
four years of purchase may be subject to a contingent deferred sales charge 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
current market value or the cost of the shares being redeemed. Accordingly, no
contingent deferred sales charge will be imposed on increases in net asset
value above the initial purchase price. In addition, no contingent deferred
sales charge will be assessed on shares derived from reinvestment of dividends
or capital gains distributions.
The following table sets forth the rates of the contingent deferred sales
charge:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF
YEAR SINCE PURCHASE DOLLAR AMOUNT
PAYMENT MADE SUBJECT TO CHARGE
------------------- -------------------
<S> <C>
0-1.................................................... 4.0%
1-2.................................................... 3.0%
2-3.................................................... 2.0%
3-4.................................................... 1.0%
4 and thereafter....................................... None
</TABLE>
In determining whether a contingent deferred sales charge 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 will be
assumed to be made in the same order as a redemption.
To provide an example, assume an investor purchased 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 upon dividend reinvestment. If at such time the investor
makes his first
13
<PAGE>
redemption of 50 shares (proceeds of $600), 10 shares will not be subject to
charge because of dividend reinvestment. With respect to the remaining 40
shares, the charge 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 contingent deferred sales charge is waived on redemptions of shares in
connection with certain post-retirement withdrawals from an IRA or other
retirement plan or following the death or disability (as defined in the
Internal Revenue Code) of a shareholder.
The contingent deferred sales charge is waived on redemption of shares by
certain eligible 401(a) and eligible 401(k) plans and in connection with
certain group plans placing orders through the Merrill Lynch Blueprint SM
Program. The contingent deferred sales charge is also waived for any Class B
shares which are purchased by an eligible 401(k) or eligible 401(a) plan and
are rolled over into a Merrill Lynch or Merrill Lynch Trust Company custodied
Individual Retirement Account and held in such account at the time of
redemption. Additional information concerning the waiver of the contingent
deferred sales charge is set forth in the Statement of Additional Information.
Distribution Plan. Pursuant to a Distribution Plan adopted by the Fund
pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the
"Distribution Plan"), the Fund pays the Distributor an ongoing account
maintenance fee and distribution fee, which are accrued daily and paid monthly,
at the annual rate of 0.25% and 0.75%, respectively, of the average daily net
assets of the Class B shares of the Fund. Pursuant to a sub-agreement with the
Distributor, Merrill Lynch provides account maintenance and distribution
services to the Fund with respect to Class B shares. The ongoing account
maintenance fee compensates the Distributor and Merrill Lynch for providing
account maintenance services to Class B shareholders. Account maintenance fees
will be used to compensate financial consultants and other personnel for
providing personal service to shareholders and to pay administrative costs
related to the maintenance of the shareholder accounts. The ongoing
distribution fee compensates the Distributor and Merrill Lynch for providing
shareholder and distribution services and bearing certain distribution-related
expenses of the Fund, including payment to financial consultants for selling
Class B shares of the Fund. For the year ended September 30, 1993, the Fund
paid the Distributor $8,587,740 pursuant to the Distribution Plan, all of which
was paid to Merrill Lynch for providing account maintenance and distribution-
related services in connection with the Class B shares. The Distribution Plan
is designed to permit an investor to purchase Class B shares through dealers
without the assessment of a front-end sales load and at the same time permit
the dealer to compensate its financial consultants in connection with the sale
of the Class B shares. In this regard, the purpose and function of the ongoing
account maintenance and distribution fees and the contingent deferred sales
charge are the same as those of the initial sales charge with respect to the
Class A shares of the Fund in that the deferred sales charges provide for the
financing of the distribution of the Fund's Class B shares. Because the
deferred sales charges provide an alternative method of financing the
distribution of the Fund's shares, the Directors believe that there is a
reasonable likelihood that the Distribution Plan benefits the Fund and its
shareholders.
The payments under the Distribution Plan are based upon a percentage of
average daily net assets of Class B shares regardless of the amount of expenses
incurred and, accordingly, distribution-related revenues 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 Distribution Plan. This information is presented annually as
of
14
<PAGE>
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 distribution fees, the contingent deferred sales
charges 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 distribution fees and contingent
deferred sales charges and the expenses consist of financial consultant
compensation. As of December 31, 1992, the last date for which fully allocated
accrual data is available, the fully allocated accrual revenues incurred by the
Distributor and Merrill Lynch since the Fund commenced operations on November
29, 1985 exceeded expenses for such period by $19,061,000 (2.17% of net assets
at that date). As of December 31, 1992, direct cash revenues for the period
since the commencement of operations exceeded direct cash expenses by
$102,217,195 (11.65% of net assets at that date); as of September 30, 1993,
direct cash revenues for the period since the commencement of operations
exceeded direct cash expenses by $107,960,392 (12.99% of net assets at that
date). The Fund has no obligation with respect to distribution-related expenses
incurred by the Distributor and Merrill Lynch in connection with the Class B
shares, and there is no assurance that the Board of Directors of the Fund will
approve the continuance of the Distribution Plan from year to year. However,
the Distributor intends to seek annual continuation of the Distribution Plan.
In their review of the Distribution Plan, the Directors will not be asked to
take into consideration expenses incurred in connection with the distribution
of Class A shares or of shares of other funds for which the Distributor acts as
distributor. The distribution fee and the contingent deferred sales charge in
the case of Class B shares will not be used to subsidize the sale of Class A
shares.
LIMITATIONS ON THE PAYMENT OF 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-based sales charges such as the Fund's distribution fee and the
contingent deferred sales charge, but not the account maintenance fee. As
applicable to the Fund, the maximum sales charge rule limits the aggregate of
distribution fee payments and contingent deferred sales charges payable by the
Fund to (1) 6.25% of eligible gross sales of Class B shares (defined to exclude
shares issued pursuant to dividend reinvestments and exchanges) plus (2)
interest on the unpaid balance 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 contingent deferred sales charge. 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") is 6.75% of eligible gross
sales. The Distributor retains the right to stop waiving the interest charges
at any time. To the extent payments would exceed the voluntary maximum, the
Fund will not make further payments of the distribution fee and any contingent
deferred sales charges will be paid to the Fund rather than to the Distributor;
however, the Fund will continue to make payments of the account maintenance
fee. In certain circumstances, the amount payable pursuant to the voluntary
maximum may exceed the amount payable under the NASD formula. In such
circumstances payment in excess of the amount payable under the NASD formula
will not be made.
The following table sets forth comparative information as of September 30,
1993 with respect to the Class B shares of the Fund indicating the maximum
allowable payments that can be made under the NASD maximum sales charge rule
and the Distributor's voluntary maximum for the period November 29, 1985
(commencement of operations of Class B shares) to September 30, 1993.
15
<PAGE>
DATA CALCULATED AS OF SEPTEMBER 30, 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
ANNUAL
ALLOWABLE ALLOWABLE AMOUNTS DISTRIBUTION
ELIGIBLE AGGREGATE INTEREST ON MAXIMUM PREVIOUSLY AGGREGATE FEE AT CURRENT
GROSS SALES UNPAID AMOUNT PAID TO UNPAID NET ASSET
SALES(1) CHARGES BALANCE(2) PAYABLE DISTRIBUTOR(3) BALANCE LEVEL(4)
-------- --------- ----------- ------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Under NASD Rule As
Adopted................ $3,600,444 $225,028 $124,708 $349,736 $142,650 $207,086 $6,232
Under Distributor's
Voluntary Waiver....... $3,600,444 $225,028 $ 18,002 $243,030 $142,650 $100,380 $6,232
</TABLE>
- --------
(1) Purchase price of all eligible Class B shares sold since November 29, 1985
(commencement of operations of Class B shares) other than shares acquired
through dividend reinvestment and the exchange privilege.
(2) Interest is computed on a monthly basis based upon the prime rate, as
reported in the Wall Street Journal, plus 1%, as permitted under the NASD
Rule.
(3) Consists of contingent deferred sales charge payments, distribution fee
payments and accruals.
(4) Provided to illustrate the extent to which the current level of
distribution fee payments (not including any contingent deferred sales charge
payments) is amortizing the unpaid balance. No assurance can be given that
payments of the distribution fee will reach either the voluntary maximum or
the NASD maximum.
SHAREHOLDER SERVICES
The Fund offers a number of shareholder services and investment plans
designed to facilitate investment in its shares. Certain of such services are
not available to investors who place orders for the Fund through the Merrill
Lynch Blueprint SM Program. 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 Fund, the Distributor or Merrill Lynch. Included in
such services are the following:
Investment Account. Each shareholder whose account is maintained at the
Transfer Agent has an Investment Account and will receive monthly statements
from the Transfer Agent after each share transaction, including reinvestments
of dividends and capital gains distributions, showing the activity in the
account since the beginning of the year. Shareholders also will receive
separate confirmations for each purchase or sale transaction other than
reinvestments of dividends and capital gains distributions. Shareholders may
make additions to their Investment Accounts at any time by mailing a check
directly to the Transfer Agent. Shareholders may also maintain their accounts
through Merrill Lynch. Upon the transfer of shares out of a Merrill Lynch
brokerage account, an Investment Account in the transferring shareholder's name
will be automatically opened, without charge, at the Transfer Agent.
Shareholders considering transferring their Class A shares from Merrill Lynch
to another brokerage firm or financial institution should be aware that, if the
firm to which the shares are to be transferred will not take delivery of shares
of the Fund, a shareholder either must redeem the Class A shares so that the
cash proceeds can be transferred to the account at the new firm or such
shareholder must continue to maintain an Investment Account at the Transfer
Agent for those Class A shares. Shareholders interested in transferring their
Class B shares from Merrill Lynch and who do not wish to have an Investment
Account maintained for such shares at the Transfer Agent may request their new
brokerage firm to maintain such shares in an account registered in the name of
the brokerage firm for the benefit of the shareholder. If the new brokerage
firm is willing to accommodate the shareholder in this manner, the shareholder
must request that he be issued certificates for his shares, and then must turn
the certificates over to the new firm for re-registration as described in the
preceding sentence.
16
<PAGE>
Exchange Privilege. Shareholders of the Fund each have an exchange privilege
with certain other mutual funds sponsored by Merrill Lynch. 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 at any time in
accordance with the rules of the Securities and Exchange Commission. Class A
shareholders of the Fund may exchange their shares ("outstanding Class A
shares") for Class A shares of another fund ("new Class A shares") on the basis
of relative net asset value per Class A share, plus an amount equal to the
difference, if any, between the sales charge previously paid on the outstanding
Class A shares and the sales charge payable at the time of the exchange on the
new Class A shares. The Fund's exchange privilege is modified with respect to
purchases of Class A shares under the Merrill Lynch Mutual Fund Adviser
program. First, the initial allocation of assets is made under the program.
Then, any subsequent exchange under the program of Class A shares of a fund for
Class A shares of the Fund will be made solely on the basis of the relative net
asset values of the shares being exchanged. Therefore, there will not be a
charge for any difference between the sales charge previously paid on the
shares of the other fund and the sales charge payable on the shares of the Fund
being acquired in the exchange under this program. Also, Directors of Merrill
Lynch & Co., Inc. may purchase Class A shares of the Fund at net asset value.
Class B shareholders of the Fund may exchange their shares ("outstanding
Class B shares") for Class B shares of another fund ("new Class B shares") on
the basis of relative net asset value per share, without the payment of any
contingent deferred sales charge that might otherwise be due upon redemption of
the outstanding Class B shares. Class B shareholders of the Fund exercising the
exchange privilege will continue to be subject to the Fund's contingent
deferred sales charge schedule if such schedule is higher than the deferred
sales charge schedule relating to the new Class B shares. In addition, Class B
shares of the Fund acquired through use of the exchange privilege will be
subject to the Fund's contingent deferred sales charge schedule if such
schedule is higher than the Fund's deferred sales charge schedule relating to
the Class B shares of the Fund from which the exchange has been made. For
purposes of computing the contingent deferred sales charge that may be payable
upon a disposition of the new Class B shares, the holding period for the
outstanding Class B shares is "tacked" to the holding period of the new Class B
shares. Class A and Class B shareholders of the Fund may also exchange their
shares for shares of certain money market funds, but in the case of an exchange
from Class B shares the period of time that shares are held in a money market
fund will not count toward satisfaction of the holding period requirement for
purposes of reducing the contingent deferred sales charge. Exercise of the
exchange privilege is treated as a sale for federal income tax purposes. The
exchange privilege is available only in states where the exchange legally may
be made. 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 are reinvested automatically in full
and fractional shares of the Fund, without sales charge, at the net asset value
per share next determined on the ex-dividend date of such dividend or
distribution. A shareholder may at any time, by written notification or by
telephone (1-(800)-MER-FUND) to the Transfer Agent, elect to have subsequent
dividends or both dividends and capital gains distributions paid in cash rather
than reinvested, in which event payment will be mailed on or about the payment
date.
Automatic Investment Plan. An Automatic Investment Plan is available under
which a shareholder can authorize the Transfer Agent to charge the
shareholder's bank account on a regular basis to invest predetermined amounts
(minimum of $50) in the Fund. Shareholders are advised that further information
with respect to this plan can be obtained from the shareholder's securities
dealer or the Distributor.
17
<PAGE>
Shareholders whose shares of the Fund are maintained in a Merrill Lynch
CMA (R) account may participate in the Merrill Lynch CMA Automated Investment
Program, through which investments in the Fund may be made on a regularly
scheduled basis ranging from weekly to semiannually in amounts of $250 or more.
Systematic Withdrawal Plans. A Class A shareholder may elect to receive
systematic withdrawal payments from his Investment Account in the form of
payments by check or through automatic payment by direct deposit to his bank
account on either a monthly or quarterly basis. A Class A shareholder whose
shares are held within a CMA (R), CBA (R) or Retirement Account may elect to
have shares redeemed on a monthly, bi-monthly, quarterly, semiannual or annual
basis through the Systematic Redemption Program, subject to certain conditions.
Regular additions of both Class A and Class B shares may be made to an
investor's Investment Account by prearranged charges of $50 or more to such
investor's regular bank account. Investors who maintain CMA (R) accounts may
arrange to have periodic investments made in the Fund in their CMA (R) account
or in certain related accounts in amounts of $250 or more through the CMA
Automated Investment Program. The Automated Investment Program is not available
to shareholders whose shares are held in a brokerage account with Merrill Lynch
(other than a CMA (R) account).
Retirement Plans. Self-directed individual retirement accounts and other
retirement plans are available from Merrill Lynch. Under these plans,
investments may be made in the Fund and in certain of the other mutual funds
whose shares are distributed by the Distributor as well as in other securities.
Merrill Lynch charges an initial establishment fee and an annual custodial fee
for each account. The minimum initial purchase to establish any such plan is
$250.
Shareholders considering transferring a tax-deferred retirement account such
as an individual retirement account from Merrill Lynch to another brokerage
firm or financial institution should be aware that, if the firm to which the
retirement account is to be transferred will not take delivery of shares of the
Fund, the shareholder must either redeem the shares so that the cash proceeds
can be transferred to the account at the new firm, or continue to maintain a
retirement account at Merrill Lynch for those shares.
REDEMPTION OF SHARES
The Fund is required to redeem for cash all full and fractional shares of the
Fund on receipt of a written request in proper form. The redemption price is
the net asset value per share next determined after the initial receipt of
proper notice of redemption. Except for any contingent deferred sales charge
which may be applicable to Class B shares, there will be no charge for
redemption if the redemption request is sent directly to the Transfer Agent.
Shareholders liquidating their holdings will receive upon redemption all
dividends reinvested through the date of redemption. The value of shares at the
time of redemption may be more or less than the shareholder's cost, depending
on the market value of the securities held by the Fund at such time.
REDEMPTION
A shareholder wishing to redeem shares may do so without charge by tendering
the shares directly to the Fund's Transfer Agent, Financial Data Services,
Inc., Transfer Agency Operations Department, P.O. Box 45289, Jacksonville,
Florida 32232-5289. Redemption requests delivered other than by mail should be
delivered to Financial Data Services, Inc., Transfer Agency Operations
Department, 4800 Deer Lake Drive East, Jacksonville, Florida 32246-6484. Proper
notice of redemption in the case of shares deposited with the
18
<PAGE>
Transfer Agent may be accompanied by a written letter requesting redemption.
Proper notice of redemption in the case of shares for which certificates have
been issued may be accomplished by a written letter as noted above accompanied
by certificates for the shares to be redeemed. The notice in either event
requires the signatures of all persons in whose names the shares are
registered, signed exactly as their names appear on the Transfer Agent's
register or on the certificate, as the case may be. The signature(s) on the
redemption request must be guaranteed by an "eligible guarantor institution" as
such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934,
the existence and validity of which may be verified by the Transfer Agent
through the use of industry publications. Notarized signatures are not
sufficient. In certain instances, the Transfer Agent may require additional
documents, such as, but not limited to, trust instruments, death certificates,
appointments as executor or administrator, or certificates of corporate
authority. For shareholders redeeming directly with the Transfer Agent, payment
will be mailed within seven days of receipt of a proper notice of redemption.
At various times the Fund may be requested to redeem shares for which it has
not yet received good payment. The Fund may delay or cause to be delayed the
mailing of a redemption check until such time as it has assured itself that
good payment (e.g., cash or certified check drawn on a United States bank) has
been collected for the purchase of such shares. Normally, this delay will not
exceed 10 days.
REPURCHASE
The Fund also will repurchase shares through a shareholder's listed
securities dealer. The Fund normally will accept orders to repurchase shares by
wire or telephone from dealers for their customers at the net asset value next
computed after receipt of the order by the dealer, less any contingent deferred
sales charge applicable to Class B shares, provided that the request for
repurchase is received by the dealer prior to the close of business on the New
York Stock Exchange on the day received.
Dealers have the responsibility of submitting such repurchase requests to the
Fund not later than 4:30 P.M., New York time, in order to obtain that day's
closing price. These repurchase arrangements are for the convenience of
shareholders and do not involve a charge by the Fund (other than the applicable
contingent deferred sales charge in the case of Class B shares). Securities
firms which do not have selected dealer agreements with the Distributor,
however, may impose a transaction charge on the shareholder for transmitting
the notice of repurchase to the Fund. Merrill Lynch may charge its customers a
processing fee (presently $4.85) to confirm a repurchase of shares to such
customers. Redemptions directly through the Fund's Transfer Agent are not
subject to the processing fee. The Fund reserves the right to reject any order
for repurchase, which right of rejection might adversely affect shareholders
seeking redemption through the repurchase procedure. However, a shareholder
whose order for repurchase is rejected by the Fund may redeem shares as set
forth above.
REINSTATEMENT PRIVILEGE--CLASS A SHARES
Shareholders who have redeemed their Class A shares have a one-time privilege
to reinstate their accounts by purchasing Class A shares of the Fund at net
asset value without a sales charge up to the dollar amount redeemed. The
reinstatement privilege may be exercised by sending a notice of exercise along
with a check for the amount to be reinstated to the Transfer Agent within 30
days after the date the request for redemption was accepted by the Transfer
Agent or the Distributor. The reinstatement will be made at the net asset value
per share next determined after the notice of reinstatement is received and
cannot exceed the amount of the redemption proceeds. The reinstatement
privilege is a one-time privilege and may be exercised by the Class A
shareholder only the first time such shareholder makes a redemption.
19
<PAGE>
INVESTMENT PRACTICES AND RESTRICTIONS
Lending of Portfolio Securities. The Fund may from time to time lend
securities which it holds, with a value not exceeding 33 1/3% of its total
assets, to approved borrowers such as brokers and financial institutions. All
loans of portfolio securities will be fully collateralized by cash or U.S.
government securities. During the period of this loan, the Fund receives the
income on the loaned securities and either receives the income on the
collateral or other compensation, i.e., negotiated loan premium or fee, for
entering into the loan and thereby increases its yield. In the event that the
borrower defaults on its obligation to return borrowed securities, because of
insolvency or otherwise, the Fund 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 fell below the market value of the borrowed securities.
Writing of Covered Call Options. The Fund may, from time to time, sell
("write") covered call options in order to attempt to increase the yield on its
portfolio or to protect against declines in the value of its portfolio
securities. A covered call option is an option whereby the Fund, in return for
a premium, gives another party a right to buy particular securities owned by
the Fund at a specified price for a certain period of time. By writing a
covered call option, the Fund, in return for the premium income realized from
the sale of the option, gives up the opportunity to profit from a price
increase in the underlying security above the option exercise price, where the
price increase occurs while the option is in effect. In addition, the Fund's
ability to sell the underlying security will be limited while the option is in
effect. The Fund may not write covered call options on underlying securities in
an amount exceeding 25% of the value of its total assets.
Foreign Securities. The Fund may invest up to 20% of its total assets in
securities issued by foreign companies. Investments in such securities involve
certain additional risks not associated with investments in domestic companies,
including the risks of fluctuation in exchange rates, the possibility of
political or economic instability in the country of issue and the possible
imposition of exchange controls or other foreign governmental laws or
restrictions.
For purposes of this investment restriction, an issuer ordinarily will be
considered to be located in the country under the laws of which it is organized
or where the primary trading market of its securities is located. The Fund,
however, may consider a company to be located in a country, without reference
to its domicile or to the primary trading market of its securities, when at
least 50% of its non-current assets, capitalization, gross revenues or profits
in any one of the two most recent fiscal years represents (directly or
indirectly through subsidiaries) assets or activities located in such country.
Forward Foreign Exchange Transactions. The Fund has authority to deal in
forward foreign exchange between currencies of the different countries in which
it will invest as a hedge against possible variations in the foreign exchange
rate among these currencies. This is accomplished through contractual
agreements to purchase or sell a specified currency at a specified future date
(up to one year) and price set at the time of the contract. The Fund's dealings
in forward foreign exchange will be limited to hedging involving either
specific transactions or portfolio positions. Transaction hedging is the
purchase or sale of forward foreign currency with respect to specific
receivables or payables of the Fund accruing in connection with the purchase
and sale of its portfolio securities, the sale and redemption of shares of the
Fund or the payment of dividends and distributions by the Fund. Position
hedging is the sale of forward foreign currency with respect to portfolio
security positions denominated or quoted in such foreign currency. The Fund
will not speculate in forward foreign exchange. The Fund will not attempt to
hedge all of its foreign portfolio positions. The Fund may not commit more than
15% of its assets to position hedging contracts.
20
<PAGE>
Options on Foreign Currencies. The Fund also is authorized to purchase or
sell listed or over-the-counter ("OTC") foreign currency options as a short or
long hedge against possible variations in foreign exchange rates. Such
transactions may be effected with respect to hedges on non-U.S. dollar
denominated securities owned by the Fund, sold by the Fund but not yet
delivered, or committed or anticipated to be purchased by the Fund. As an
illustration, the Fund may use such techniques to hedge the stated value in
United States dollars of an investment in a Japanese yen-denominated security.
In such circumstances for example, the Fund 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 Fund 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 Fund 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 Fund constitute hedging transactions and are consistent with
the policies described above.
Foreign currency options provide the holder thereof the right to buy or to
sell a currency at a fixed price on a future date. Listed options are third-
party contracts (i.e., performance of the parties' obligations is guaranteed by
an exchange or clearing corporation) which are issued by a clearing
corporation, traded on an exchange and have standardized strike prices and
expiration dates. OTC options are two-party contracts and have negotiated
strike prices and expiration dates. The Fund will engage in OTC options only
with member banks of the Federal Reserve System or primary dealers in U.S.
government securities, or with affiliates of such banks or dealers which have
capital of $50 million or whose obligations are guaranteed by an entity having
capital of at least $50 million. The Fund will acquire only those OTC options
for which management believes the Fund can receive on each business day at
least two independent bids or offers (one of which will be from an entity other
than a party to the option). The Fund will not speculate in foreign currency
options. Accordingly, the Fund will not hedge a currency substantially in
excess of the market value of the securities denominated in such currency which
it owns, the expected acquisition price of securities which it has committed or
anticipates to purchase which are denominated in such currency, and, in the
case of securities which have been sold by the Fund but not yet delivered, the
proceeds thereof in its denominated currency. Further, the Fund will segregate
at its Custodian U.S. government securities having a market value substantially
representing any subsequent decrease in the market value of such hedged
security. The Fund may not incur potential net liabilities of more than 33 1/3%
of its total assets from foreign currency options.
Repurchase Agreements. In repurchase transactions, the Fund purchases a
collaterized debt security from a bank, broker-dealer or financial institution
which agrees to repurchase such security on a certain date and at a fixed price
calculated to produce a previously agreed upon return to the Fund. If the bank
or financial institution were to default upon its repurchase obligation and the
debt security were sold for a lesser amount, the Fund would realize a loss.
Portfolio Brokerage. The Fund has no obligation with any broker or group of
brokers in the execution of transactions in portfolio securities. Orders for
transactions in portfolio securities are placed for the Fund with a number of
brokers and dealers, including Merrill Lynch. In placing orders it is the
policy of the Fund to obtain the most favorable net results, taking into
account various factors including price, commission, if any, size of the
transaction, and difficulty of execution. Where practicable, the Investment
Adviser surveys a number of brokers and dealers in connection with proposed
portfolio transactions and selects the broker or dealer which offers the Fund
the best price and execution or other services which are of benefit to the
Fund.
21
<PAGE>
Investment Restrictions. The Fund has adopted certain investment restrictions
which may not be changed without a vote of the Fund's shareholders, including a
majority of the shares of the Fund and any other portfolio which might be added
in the future. The Statement of Additional Information contains a description
of those restrictions.
PERFORMANCE DATA
From time to time the Fund may include its average annual total return for
various specified time periods in advertisements or information furnished to
present or prospective shareholders. Average annual total return is computed
separately for Class A and Class B shares in accordance with a formula
specified by the Securities and Exchange Commission (the "Commission").
Average annual total return quotations for the specified periods will be
computed by finding the average annual compounded rates of return (based on net
investment income and any capital gains or losses on portfolio investments over
such periods) that would equate the initial amount invested to the redeemable
value of such investment at the end of each period. Average annual total return
will be computed assuming all dividends and distributions are reinvested and
taking into account all applicable recurring and nonrecurring expenses,
including the maximum sales charge in the case of Class A shares and the
contingent deferred sales charge that would be applicable to a complete
redemption of the investment at the end of the specified period in the case of
Class B shares. Dividends paid by the Fund with respect to Class A and Class B
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 distribution charges and any incremental transfer agency costs relating to
Class B shares will be borne exclusively by that class. The Fund will include
performance data for both Class A and Class B shares of the Fund in any
advertisement or information including performance data of the Fund.
The Fund also may quote total return and aggregate total return performance
data for various specified time periods. Such data will be calculated
substantially as described above, except that (1) the rates of return
calculated will not be average annual rates, but rather, actual annual,
annualized or aggregate rates of return and (2) the maximum applicable sales
charges will not be included with respect to annual or annualized rates of
return calculations. Aside from the impact on the performance data calculations
of including or excluding the maximum applicable sales charges, actual annual
or annualized total return data generally will be lower than average annual
total return data since the average annual rates of return reflect compounding;
aggregate total return data generally will be higher than average annual total
return data since the aggregate rates of return reflect compounding over a
longer period of time. In advertisements directed to investors whose purchases
are subject to reduced sales charges in the case of Class A shares or waiver of
the contingent deferred sales charge in the case of Class B shares (such as
investors in certain retirement plans), performance data may take into account
the reduced, and not the maximum, sales charge or may not take into account the
contingent deferred sales charge and therefore may reflect greater total return
since, due to the reduced sales charges or waiver of the contingent deferred
sales charge, a lower amount of expenses may be deducted. See "Purchase of
Shares". The Fund's total return may be expressed either as a percentage or as
a dollar amount in order to illustrate the effect of such total return on a
hypothetical $1,000 investment in the Fund at the beginning of each specified
period.
Total return figures are based on the Fund's historical performance and are
not intended to indicate future performance. The Fund's total return will vary
depending on market conditions, the securities
22
<PAGE>
comprising the Fund's portfolio, the Fund's operating expenses and the amount
of realized and unrealized net capital gains or losses during the period. The
value of an investment in the Fund will fluctuate and an investor's shares,
when redeemed, may be worth more or less than their original cost.
On occasion, the Fund may compare its performance to that of the Standard &
Poor's 500 Composite Stock Price Index, the Value Line Composite Index or the
Dow Jones Industrial Average, or to data contained in publications such as
Lipper Analytical Services, Inc., Morningstar Publications, Inc.
("Morningstar"), Money Magazine, U.S. News & World Report, Business Week, CDA
Investment Technology, Inc., Forbes Magazine and Fortune Magazine. From time to
time, the Fund may include the Fund's Morningstar risk-adjusted performance
ratings in advertisements or supplemental sales literature. As with other
performance data, performance comparisons should not be considered
representative of the Fund's relative performance for any future period.
The Fund's annual report contains additional performance information and is
available upon request, without charge.
ADDITIONAL INFORMATION
DIVIDENDS AND DISTRIBUTIONS
It is the Fund's intention to distribute all of its net investment income, if
any. Dividends from such net investment income are paid semi-annually. All net
realized long- or short-term capital gains, if any, are distributed to the
Fund's shareholders at least annually. Premiums from expired call options
written by the Fund and net gains from closing purchase transactions are
treated as short-term capital gains for Federal income tax purposes. The per
share dividends and distributions on Class B shares will be lower than the per
share dividends and distributions on Class A shares as a result of the account
maintenance fee and the higher distribution and transfer agency fees applicable
with respect to the Class B shares. See "Additional Information--Determination
of Net Asset Value". Dividends and distributions may be automatically
reinvested in shares of the Fund, at the net asset value without a sales
charge. Shareholders may elect in writing to receive any such dividends or
distributions, or both, in cash. Dividends and distributions are taxable to
shareholders as described below whether they are reinvested in shares of the
Fund or received in cash.
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of the Fund is determined once daily as of
the time of the regular close of trading on the New York Stock Exchange on each
day during which such Exchange is open for trading and, under certain
circumstances, on other days. The net asset value per share is computed by
dividing the sum of the value of the securities held by the Fund plus any cash
or other assets (including interest and dividends accrued but not yet received)
minus all liabilities (including accrued expenses) by the total number of
shares outstanding at such time, rounded to the nearest cent. Expenses,
including the investment advisory fees payable to the Investment Adviser and
the account maintenance and distribution fee payable to the Distributor, are
accrued daily. The per share net asset value of the Class B shares generally
will be lower than the per share net asset value of the Class A shares
reflecting the daily expense accruals of the account maintenance, distribution
and transfer agency fees applicable with respect to the Class B shares. It is
expected, however, that the per share net asset value of the two classes will
tend to converge immediately after the
23
<PAGE>
payment of dividends or distributions, which will differ by approximately the
amount of the expense accrual differential between the classes.
Portfolio securities and options which are traded on stock exchanges are
valued at the last sale price as of the close of business on the day the
securities are being valued, or, lacking any sales, at the last available bid
price. Securities traded in the over-the-counter market are valued at the last
quoted bid prices as at the close of trading on the New York Stock Exchange on
each day by brokers that make markets in the securities. Portfolio securities
which are traded both in the over-the-counter market and on a stock exchange
are valued according to the broadest and most representative market. Securities
and assets for which market quotations are not readily available are valued at
fair value as determined in good faith by or under the direction of the Board
of Directors of the Fund.
TAXES
The Fund has elected and intends to continue to qualify for the special tax
treatment afforded regulated investment companies ("RICs") under the Internal
Revenue Code of 1986, as amended (the "Code"). If it so qualifies, the Fund
will not be subject to Federal income tax on the part of its net ordinary
income and net realized capital gains which it distributes to Class A and Class
B shareholders ("shareholders").
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. If the Fund pays a dividend in January which was
declared in the previous October, November or December to shareholders of
record on a specified date in one of such months, then such dividend or
distribution will be treated for federal tax purposes as being paid on December
31, and will be taxable to shareholders as if received on December 31.
The following discussion applies generally to shareholders of the Fund and,
in particular, to those shareholders of the Fund whose income is subject to
tax.
Dividends paid by the Fund from its ordinary income, and distributions of the
Fund's net realized short-term capital gains (together referred to hereafter as
"ordinary income dividends") are taxable to shareholders as ordinary income.
Distributions made from the Fund's net realized long-term capital gains
(including long-term gains from certain transactions in options) are taxable to
shareholders as long-term capital gains, regardless of the length of time the
shareholder has owned Fund shares.
Dividends and distributions are taxable to shareholders even though they are
reinvested in additional shares of the Fund. Not later than 60 days after the
close of its taxable year, the Fund will provide its shareholders with a
written notice designating the amounts of any dividends or capital gains
distributions. A portion of the Fund's ordinary income dividends will be
eligible for the dividends received deduction allowed to corporations under the
Code, if certain requirements are met.
Ordinary income dividends paid by the Fund to shareholders who are non-
resident aliens or foreign entities generally will be subject to a 30% United
States withholding tax under existing provisions of the Code applicable to
foreign individuals and entities unless a reduced rate of withholding or a
withholding exemption is provided under applicable treaty law. Non-resident
shareholders are urged to consult their own tax advisers concerning the
applicability of the United States withholding tax.
24
<PAGE>
Pursuant to the Fund's investment objectives, the Fund may invest in foreign
securities. Foreign taxes may be paid by the Fund as a result of tax laws of
countries in which the Fund may invest. Income tax treaties between certain
countries and the United States may reduce or eliminate such taxes. It is
impossible to determine in advance the effective rate of foreign tax to which
the Fund will be subject, since the amount of Fund assets to be invested in
various countries is not known. Because the Fund limits its investment in
foreign securities, shareholders will not be entitled to claim foreign tax
credits with respect to their share of foreign taxes paid by the Fund on income
from investments of foreign securities held by the Fund.
Under certain provisions of the Code, some shareholders may be subject to a
31% withholding tax on reportable dividends, capital gains distributions and
redemption payments ("backup withholding"). Generally, shareholders subject to
backup withholding will be those for whom a certified taxpayer identification
number is not on file with the Fund, those who, to the Fund's knowledge, have
furnished an incorrect number or those who are subject to backup withholding
because of a failure to report income. When establishing an account, an
investor must certify under penalty of perjury that such number is correct and
that such investor is not subject to backup withholding.
A shareholder who holds shares as a capital asset generally will recognize a
capital gain or loss upon the sale of such shares, which will be a long-term
capital gain or loss if such shares were held for more than one year. However,
any loss realized by a shareholder who held shares for six months or less will
be treated as a long-term capital loss to the extent of any distributions of
net capital gains received by the shareholder with respect to such shares.
Further, a shareholder cannot recognize a loss on the sale of Class A or Class
B shares for federal income tax purposes to the extent that the shareholder
acquires other shares in the Fund during the 61-day period beginning 30 days
before and ending 30 days after the sale.
For Class A shares of the Fund, if a shareholder exercises the exchange
privilege within 90 days of acquiring such shares, then the loss the
shareholder can recognize on the exchange will be reduced (or the gain
increased) to the extent the sales charge paid to the Fund reduces any sales
charge the shareholder would have owed upon purchase of the new Class A shares
in the absence of the exchange privilege. Instead, such sales charge will be
treated as an amount paid for the new Class A shares. See "Shareholder
Services--Exchange Privilege".
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections
and the Treasury regulations promulgated thereunder. The Code and these
Treasury regulations are subject to change by legislative or administrative
action either prospectively or retroactively.
The Fund intends to provide shareholders annually with information relating
to the Fund's income and assets necessary to permit shareholders to determine
whether and to what extent their dividend income from the Fund is exempt from
their state income tax.
Shareholders are urged to consult their tax advisers as to whether any
portion of the dividends they receive from the Fund are exempt from state
income tax and as to any other specific questions as to Federal, foreign, state
or local taxes. Foreign investors should consider applicable foreign taxes in
their evaluation of an investment in the Fund.
25
<PAGE>
ORGANIZATION OF THE FUND
The Fund was incorporated under Maryland law on May 21, 1984. It has an
authorized capital of 1,000,000,000 shares of Common Stock, par value $0.01 per
share, divided into two classes, designated Class A and Class B Common Stock,
each of which consists of 500,000,000 shares. Both Class A and Class B Common
Stock represent an interest in the same assets of the Fund and are identical in
all respects except that the Class B shares bear certain expenses related to
the account maintenance and distribution of such shares and have exclusive
voting rights with respect to matters relating to such distribution
expenditures and account maintenance fee. See "Purchase of Shares". The Fund
has received an order from the Commission permitting the issuance and sale of
two classes of Common Stock. The Directors of the Fund may classify and
reclassify the shares of the Fund into additional classes of Common Stock at a
future date. The creation of additional classes would require an additional
order from the Commission. There is no assurance that such an additional order
will be granted.
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 Fund does not intend to
hold meetings of shareholders in any year in which the Investment Company Act
of 1940 does not require shareholders to act upon 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 accountants. Voting rights for Directors are not cumulative.
Shares issued are fully paid and non-assessable and have no preemptive or
conversion rights. Each share of Class A and Class B Common Stock is entitled
to participate equally in dividends and distributions declared by the Fund and
in the net assets of the Fund upon liquidation or dissolution after
satisfaction of outstanding liabilities, except, as noted above, the Class B
shares bear certain expenses related to the distribution and account
maintenance of such shares.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Fund at the address or
telephone number set forth on the cover page of this Prospectus.
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: Documents Evaluation Unit
P.O. Box 45290
Jacksonville, Florida 32232-5290
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 800-637-3863.
26
<PAGE>
MERRILL LYNCH BALANCED FUND FOR INVESTMENT AND RETIREMENT AUTHORIZATION FORM
- --------------------------------------------------------------------------------
NOTE: THIS FORM MAY NOT BE USED FOR PURCHASES THROUGH THE MERRILL LYNCH
BLUEPRINT SM PROGRAM. YOU MAY REQUEST A MERRILL LYNCH BLUEPRINT SM PROGRAM
APPLICATION BY CALLING (800) 637-3766.
- --------------------------------------------------------------------------------
1. SHARE PURCHASE APPLICATION
I, BEING OF LEGAL AGE, WISH TO PURCHASE .......... CLASS A SHARES OR
.......... CLASS B SHARES (CHOOSE ONE) OF MERRILL LYNCH BALANCED FUND FOR
INVESTMENT AND RETIREMENT AND ESTABLISH AN INVESTMENT ACCOUNT AS DESCRIBED IN
THE PROSPECTUS.
Basis for establishing an Investment Account:
A. I enclose a check for $............ payable to Financial Data
Services, Inc., as an initial investment (minimum $1,000) (Subsequent
investments $50 or more). I understand that this purchase will be executed
at the applicable offering price next to be determined after this
Application is received by you.
B. I already own shares of the following Merrill Lynch mutual funds that
would qualify for the right of accumulation as outlined in the Statement of
Additional Information:
4. ..............................
1. ..............................
5. ..............................
2. ..............................
6. ..............................
3. ..............................
(Please list all Funds. Use a separate sheet of paper if necessary.)
Until you are notified by me in writing, the following options with
respect to dividends and distributions are elected:
Elect[_] reinvest Elect[_] reinvest
dividends capital gains
Distribution
Options
One[_] pay dividends One[_] pay capital gains
in cash in cash
If no election is made, dividends and capital gains will be reinvested
automatically at net asset value without a sales charge.
(Please Print)
Name .............................................
First Name Initial Last Name
Social Security
Name of Co-Owner (if any) ........................ No. or Taxpayer
First Name Initial Last Name Identification
No.
Address ......................................
............... , 19. .
.............................................. Date
(Zip Code)
Occupation ..............
Name and Address of Employer.............
.......................
............................
Under penalty of perjury, I certify (1) that the number set forth above is my
correct Social Security No. or Taxpayer Identification No. and (2) that I am
not subject to backup withholding (as discussed under "Additional Information--
Taxes" in the Prospectus) either because I have not been notified that I am
subject thereto as a result of a failure to report all interest or dividends,
or the Internal Revenue Service ("IRS") has notified me that I am no longer
subject thereto.
INSTRUCTION: YOU MUST STRIKE OUT THE LANGUAGE IN (2) ABOVE IF YOU HAVE BEEN
NOTIFIED THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING DUE TO UNDERREPORTING, AND
IF YOU HAVE NOT RECEIVED A NOTICE FROM THE IRS THAT BACKUP WITHHOLDING HAS BEEN
TERMINATED. THE UNDERSIGNED AUTHORIZES THE FURNISHING OF THIS CERTIFICATION TO
OTHER MERRILL LYNCH-SPONSORED MUTUAL FUNDS.
SIGNATURE OF OWNER ............ SIGNATURE OF CO-OWNER (IF ANY) ............
In the case of co-owners, a joint tenancy with right of survivorship will be
presumed unless otherwise specified.
- --------------------------------------------------------------------------------
2. LETTER OF INTENTION--CLASS A SHARES ONLY (SEE TERMS AND CONDITIONS IN THE
STATEMENT OF ADDITIONAL INFORMATION)
..............,19..
Date of initial
purchase
Gentlemen:
Although I am not obligated to do so, I intend to purchase shares of Merrill
Lynch Balanced Fund for Investment and Retirement, or any other investment
company with an initial sales charge or deferred sales charge for which the
Merrill Lynch Funds Distributor, Inc. acts as a distributor over the next 13-
month period which will equal or exceed:
<TABLE>
<S> <C> <C> <C> <C> <C>
[_] $10,000 [_] $25,000 [_] $50,000 $100,000 [_] $250,000 [_] $1,000,000
</TABLE>
Each purchase will be made at the then reduced offering price applicable to
the amount checked above, as described in the Fund prospectus.
I agree to the terms and conditions of the Letter of Intention. I hereby
irrevocably constitute and appoint Merrill Lynch Funds Distributor, Inc., my
attorney, with full power of substitution, to surrender for redemption any or
all shares of Merrill Lynch Balanced Fund for Investment and Retirement held as
security.
......................................
By.............................
Signature of Owner Signature
(If registered in joint names, both
must sign)
In making purchases under this letter, the following are the related accounts
on which reduced offering prices are to apply:
(1) Name ...................... (2) Name ........................
27
<PAGE>
MERRILL LYNCH BALANCED FUND FOR INVESTMENT AND RETIREMENT AUTHORIZATION FORM
- -------------------------------------------------------------------------------
3.SYSTEMATIC WITHDRAWAL PLAN--CLASS A SHARES ONLY (SEE TERMS AND CONDITIONS IN
THE STATEMENT OF ADDITIONAL INFORMATION)
Minimum Requirements: $10,000 for monthly disbursements, $5,000 for
quarterly, of shares in Merrill Lynch Balanced Fund for Investment and
Retirement, at cost or current offering price.
Begin systematic withdrawal on . . . . . . . . . , 19. .
Withdrawals to be made either (check
one) [_] Monthly [_] Quarterly. Quarterly
withdrawals are made on the 24th day of March, June,
September and December.
[date]
Specify withdrawal amount (check one): [_] $ . . . . . . . or [_] . . . . .%
of the current value of Class A shares in the account
Specify withdrawal method: [_] check or [_] direct deposit to bank account
(CHECK ONE AND COMPLETE PART (A) OR (B) BELOW):
(B) I HEREBY AUTHORIZE PAYMENT BY
(A) I HEREBY AUTHORIZE PAYMENT BY DIRECT DEPOSIT TO BANK ACCOUNT and
CHECK (if necessary) debit entries and
adjustments for any credit entries
made in error to my account
Draw checks payable
(check one) Specify type of account (check
one): [_] checking [_] savings
[_] as indicated in item 1.
I agree that this authorization will
[_] to the order of ........... remain in effect until I provide
written notification to Financial
Data Services, Inc. amending or
terminating this service.
Name on your Account ............
Mail to (check one) Bank ............................
[_] the address indicated in item Bank # .......
1.
Account # .....
[_] Name (Please Print) .......
Bank Address ....................
Address .........................
Signature of Depositor ... Date .....
Signature of Owner............... Signature of Depositor (if joint
account) ........................
NOTE: IF AUTOMATIC DIRECT DEPOSIT IS
Signature of Co-Owner (if any)... ELECTED, YOUR BLANK, UNSIGNED CHECK
MARKED "VOID" OR A DEPOSIT SLIP FROM
YOUR SAVINGS ACCOUNT SHOULD ACCOMPANY
THIS APPLICATION.
- -------------------------------------------------------------------------------
4. APPLICATION FOR AUTOMATIC INVESTMENT PLAN
I hereby request that Financial Data Services, Inc. draw a check or an
automated clearing house ("ACH") debit on my checking account as described
below each month to purchase . . . . . Class A shares or Class B shares
(choose one) of Merrill Lynch Balanced Fund for Investment and Retirement,
subject to the terms set forth below.
FINANCIAL DATA SERVICES, INC. AUTHORIZATION TO HONOR CHECKS DRAWN
BY FINANCIAL DATA SERVICES, INC.
You are hereby authorized to draw
checks or an automated clearing house
("ACH") debit each month on my bank
account for investment in Merrill
Lynch Balanced Fund for Investment
and Retirement, as indicated below:
To ..........................Bank
(Investor's Bank)
Bank Address ....................
Amount of each check or ACH debit $ ..
Account No. ...............
Please date and invest checks City ...... State ... Zip Code...
or draw ACH debits on the 20th
of each month beginning ... As a convenience to me, I hereby re-
quest and authorize you to pay and
(Month) charge to my account checks or ACH
debits drawn on my account by and
or as soon thereafter as payable to Financial Data Services,
possible. Inc. I agree that your rights in re-
spect to each such check or debit
I agree that you are preparing these shall be the same as if it were a
checks or drawing these debits volun- check drawn on you and signed person-
tarily at my request and that you ally by me. This authority is to re-
shall not be liable for any loss main in effect until revoked by me in
arising from any delay in preparing writing. Until you receive such no-
or failure to prepare any such check tice, you shall be fully protected in
or debit. If I change banks or desire honoring any such check or debit. I
to terminate or suspend this program, further agree that if any such check
I agree to notify you promptly in or debit be dishonored, whether with
writing. or without cause and whether inten-
tionally or inadvertently, you shall
I further agree that if a check or be under no liability.
debit is not honored upon
presentation, Financial Data
Services, Inc. is authorized to
discontinue immediately the Automatic
Investment Plan and to liquidate
sufficient shares held in my account
to offset the purchase made with the
returned check or dishonored debit.
...... ...................
Date Signature of Depositor
...... ...................
Bank Signature of Depositor
...... ................... Account
Number
Date Signature of Depositor
(If joint account, both
must sign)
...................
NOTE: IF AUTOMATIC INVESTMENT PLAN IS
Signature of Depositor ELECTED, YOUR BLANK, UNSIGNED CHECK
MARKED "VOID" SHOULD ACCOMPANY THIS
APPLICATION.
(If joint account, both
must sign)
- -------------------------------------------------------------------------------
5. FOR DEALER ONLY
Branch Office, Address, Stamp We hereby authorize Merrill Lynch Funds
Distributor, Inc. to act as our agent in
connection with transactions under this
authorization form and agree to notify
the Distributor of any purchases made
under a Letter of Intention or System-
atic Withdrawal Plan. We guarantee the
Shareholder's Signature.
This form when completed should
be mailed to:
Merrill Lynch Balanced Fund for
Investment and Retirement
c/o Financial Data Services,
Inc. .........................................
Dealer Name and Address
Transfer Agency Operations By ......................................
Department Authorized Signature of Dealer
P.O. Box 45290
Jacksonville, FL 32232-5290
........................
Branch- F/C F/C Last Name
Code No.
Dealer's
Customer A/C No.
28
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
29
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
30
<PAGE>
INVESTMENT ADVISER
Merrill Lynch Asset Management
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey
Mailing Address:
Box 9011
Princeton, New Jersey 08543-9011
DISTRIBUTOR
Merrill Lynch Funds Distributor, Inc.
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey
Mailing Address:
Box 9011
Princeton, New Jersey 08543-9011
CUSTODIAN
National Westminster Bank NJ
Exchange Place Centre
10 Exchange Place
Jersey City, New Jersey 07302
TRANSFER AGENT
Financial Data Services, Inc.
Administrative Offices:
Transfer Agency Operations Department
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
Mailing Address:
P.O. Box 45289
Jacksonville, Florida 32232-5289
INDEPENDENT AUDITORS
Deloitte & Touche
117 Campus Drive
Princeton, New Jersey 08540
COUNSEL
Shereff, Friedman, Hoffman & Goodman
919 Third Avenue
New York, New York 10022
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND THE
STATEMENT OF ADDITIONAL INFORMATION, IN CONNECTION WITH THE OFFER CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND,
THE INVESTMENT ADVISER, OR THE DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFERING IN ANY STATE IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fee Table.................................................................. 2
Alternative Sales Arrangements............................................. 3
Financial Highlights....................................................... 5
Investment Objective and Policies.......................................... 6
The Fund and Its Management................................................ 7
Purchase of Shares......................................................... 8
Alternative Sales Arrangements............................................ 9
Initial Sales Charge Alternative--
Class A Shares........................................................... 10
Deferred Sales Charge Alternative--
Class B Shares........................................................... 12
Shareholder Services....................................................... 16
Redemption of Shares....................................................... 18
Redemption................................................................ 18
Repurchase................................................................ 19
Reinstatement Privilege--
Class A Shares........................................................... 19
Investment Practices and Restrictions...................................... 20
Performance Data........................................................... 22
Additional Information..................................................... 23
Dividends and Distributions............................................... 23
Determination of Net Asset Value.......................................... 23
Taxes..................................................................... 24
Organization of the Fund.................................................. 26
Shareholder Inquiries..................................................... 26
Shareholder Reports....................................................... 26
Authorization Form......................................................... 27
</TABLE>
Code #10331
Prospectus
(ART)
- --------------------------------------------------------------------------------
MERRILL LYNCH
BALANCED FUND
FOR INVESTMENT AND RETIREMENT
January 28, 1994
This Prospectus should be
retained for future reference
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 28, 1994 MERRILL LYNCH BALANCED FUND
FOR INVESTMENT AND RETIREMENT
BOX 9011, PRINCETON, NEW JERSEY 08543-9011 . PHONE NO. (609) 282-2800
----------------
Merrill Lynch Retirement Benefit Investment Program, Inc., doing business as
Merrill Lynch Balanced Fund for Investment and Retirement, is a mutual fund,
technically known as an open-end diversified management investment company, of
the type permitted to have a number of different portfolios, or series. The
fund and its only series, the Full Investment Portfolio, are referred to as the
"Fund." The Fund seeks to provide shareholders with as high a level of total
investment return as is consistent with a relatively low level of risk. It
tries to achieve its objective through investment in high quality, larger
capitalization common stocks (generally companies with $500,000,000 or more of
market capitalization) and other types of securities, including preferred
stocks, debt securities and convertible securities. Because the Fund is
designed for investors for whom current tax liability is not a consideration,
such as certain tax qualified employee benefit plans, the Fund will invest
without regard to tax considerations.
----------------
The Fund offers two classes of shares which may be purchased at a price equal
to the next determined net asset value per share, plus a sales charge which, at
the election of the purchaser, may be imposed (i) at the time of purchase (the
"Class A shares"), or (ii) on a deferred basis (the "Class B shares"). These
alternatives permit an investor to choose the method of purchasing shares that
is most beneficial given the amount of the purchase, the length of time the
investor expects to hold the shares and other circumstances. Investors should
understand that the purpose and function of the deferred sales charges with
respect to the Class B shares are the same as those of the initial sales charge
with respect to the Class A shares. Each Class A share and Class B share
represents identical interests in the investment portfolio of the Fund and have
the same rights, except that Class B shares bear the expenses of the account
maintenance fee and the distribution fee and certain other costs resulting from
the deferred sales charge arrangement and have exclusive voting rights with
respect to the account maintenance fee and the distribution fee. The two
classes also have different exchange privileges.
----------------
This Statement of Additional Information of the Fund is not a prospectus and
should be read in conjunction with the prospectus of the Fund, dated January
28, 1994 (the "Prospectus"), which has been filed with the Securities and
Exchange Commission and can be obtained without charge from Merrill Lynch Funds
Distributor, Inc., Box 9011, Princeton, New Jersey 08543-9011, (609) 282-2800,
or from selected securities dealers. This Statement of Additional Information
contains information in addition to, and more detailed than, that set forth in
the Prospectus. It is intended to provide investors with additional information
regarding the activities and operations of the Fund.
----------------
MERRILL LYNCH ASSET MANAGEMENT--INVESTMENT ADVISER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.--DISTRIBUTOR
----------------
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
As discussed on page 6 of the Prospectus, the investment objective of the
Fund is to provide shareholders with as high a level of total investment return
as is consistent with a relatively low level of risk. This is a fundamental
investment objective. The Fund seeks to accomplish its objective through
investment in high quality, larger capitalization common stocks (generally
companies with $500,000,000 or more of market capitalization) and other types
of securities, including preferred stocks, debt securities and convertible
securities, as well as through the writing of covered call options and the
lending of its portfolio securities. It is anticipated that, except under
unusual circumstances, the Fund will maintain at least 25% of the value of its
assets in fixed income senior securities. In its common stock investments, it
is anticipated that the Fund will seek to emphasize issues with relatively low
price earnings ratios, above average dividend yields, and relatively low price
to book value ratios, as compared to prevailing market conditions. With respect
to debt securities (other than money market instruments which are discussed
below), the Fund will invest only in instruments which are rated Aa or better
by Moody's Investors Service, Inc. or AA or better by Standard & Poor's
Corporation or which are determined by the investment adviser of the Fund to be
of quality comparable to instruments so rated.
As discussed on page 6 of the Prospectus, the Fund may, under certain
circumstances, invest all or a portion of its assets in high quality money
market securities. Such securities can include the following: (1) U.S. Treasury
bills; (2) bankers' acceptances and certificates of deposit; (3) commercial
paper; and (4) repurchase agreements with respect to U.S. Government securities
and U.S. Government agency securities.
MANAGEMENT OF THE FUND
The Investment Adviser. Merrill Lynch Asset Management, L.P., doing business
as Merrill Lynch Asset Management (the "Investment Adviser" or "MLAM") is the
investment adviser of the Fund. MLAM is a Delaware limited partnership and is
owned and controlled by Merrill Lynch & Co., Inc. The Investment Adviser and
its affiliate, Fund Asset Management, L.P. ("FAM"), together serve as the
investment adviser to over 90 other registered investment companies, as well as
to numerous pension plans and other institutions.
Merrill Lynch & Co., Inc., Merrill Lynch Investment Management, Inc. and
Princeton Services, Inc. are "controlling persons" of the Investment Adviser as
defined under the Investment Company Act because of their power to exercise a
controlling influence over its management policies.
The Advisory Agreement. Under its investment advisory agreement with the Fund
(the "Agreement"), the Investment Adviser is responsible for the actual
management of the Fund's portfolio. Responsibility for making decisions to buy,
sell or hold a particular security rests with the Investment Adviser, subject
to general oversight by the Board of Directors. The Investment Adviser provides
the portfolio managers for the Fund, who make investment decisions and place
orders to effect portfolio transactions for the Fund. In this regard, the
Investment Adviser has access to the total securities research and economic
research facilities of Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch"). Pursuant to the Agreement, the Investment Adviser also
performs certain administrative and management services for the Fund. The
Agreement
2
<PAGE>
obligates the Investment Adviser to pay all compensation of and furnish office
space for officers and employees of the Fund connected with investment and
economic research, trading and investment management of the Fund, and to pay
the fees of all Directors of the Fund who are affiliated with Merrill Lynch &
Co., Inc., or any of its subsidiaries. Portfolio accounting services are
provided for the Fund by the Investment Adviser, and the Fund reimburses the
Investment Adviser for its costs in connection with such services.
The Agreement will continue in effect until April 3, 1994, and may continue
in effect thereafter from year to year if approved at least annually by vote of
a majority of the Directors of the Fund or by the holders of a majority of the
outstanding shares of each series of the Fund. Any such continuation also
requires approval by a majority of the Directors who are not parties to the
Agreement or "interested persons" of any such party as defined in the
Investment Company Act of 1940 (the "Act") by vote cast in person at a meeting
called for such purpose. The Agreement may be terminated at any time, without
penalty, on sixty days' written notice by the Fund's Board of Directors, by the
holders of a majority of the Fund's outstanding voting securities or by the
Investment Adviser. The Agreement automatically terminates in the event of its
assignment (as defined in the Act and the rules thereunder).
As discussed under "The Fund and Its Management" in the Prospectus, the
Agreement provides that the Fund will pay the Investment Adviser a monthly fee
based upon the average daily value of the portfolio's net assets at the
following annual rate: 0.65% of the average daily net assets not exceeding $500
million; 0.60% of the average daily net assets exceeding $500 million but not
exceeding $1.5 billion; 0.55% of the average daily net assets exceeding $1.5
billion but not exceeding $2.5 billion; 0.50% of the average daily net assets
exceeding $2.5 billion but not exceeding $3.5 billion; and 0.45% of the average
daily net assets exceeding $3.5 billion. Certain states in which the shares of
the Fund are qualified for sale impose limitations on the expenses of the Fund.
At the date of this Statement of Additional Information, the most restrictive
annual expense limitations to which the Fund is subject require that the
Investment Adviser reimburse each portfolio in any amount necessary to prevent
the portfolio's aggregate ordinary operating expenses (excluding interest,
taxes, account maintenance, distribution and brokerage fees and commissions,
and extraordinary charges such as litigation costs) from exceeding in any
fiscal year 2.5% of the first $30 million of the portfolio's average net
assets, 2.0% of the next $70 million of average net assets and 1.5% of the
portfolio's remaining average net assets. Any such reimbursements would be made
on a monthly basis. No payment of the investment advisory fee will be made to
the Investment Adviser which would result in expenses of any portfolio
exceeding on a cumulative annualized basis the most restrictive applicable
expense limitation in effect at the time of such payment. (Expenses not covered
by the limitation are interest, taxes, brokerage commissions and other items
such as extraordinary legal expenses.) For the Fund's fiscal years ended
September 30, 1993, 1992, and 1991, the Investment Adviser earned a fee of
approximately $5,620,993, $6,063,373, and $6,868,382, respectively, from the
Fund.
Directors and Officers. The Directors and executive officers of the Fund and
their principal occupations for at least the last five years are set forth
below. Unless otherwise noted, the address of each Director and executive
officer is Box 9011, Princeton, New Jersey 08543-9011.
Arthur Zeikel--President and Director (1)(2)--President of the Investment
Adviser since 1977 and Director and Chief Investment Officer thereof since
1976; President and Chief Investment Officer of FAM since 1977; President and
Director of Princeton Services, Inc. ("Princeton Services") since 1993;
Executive Vice President of Merrill Lynch since 1990 and a Senior Vice
President thereof from 1985 to 1990; Executive
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Vice President of Merrill Lynch & Co., Inc. since 1990; Director of Merrill
Lynch Funds Distributor, Inc. ("MLFD" or the "Distributor").
Kenneth S. Axelson--Director (2)--75 Jameson Point Road, Rockland, Maine
04841, Executive Vice President and Director, J.C. Penney Company, Inc., until
1982; Director, Grumman Corporation, Key Trust Company of Maine, Protection
Mutual Insurance Company, UNUM Corporation, Zurn Industries, Inc., and until
1992, of Central Maine Power Company and Key Trust Company of Maine; Trustee of
The Chicago Dock and Canal Trust.
Herbert I. London--Director (2)--New York University-Gallatin Division, 113-
115 University Place, New York, New York 10003. Dean, Gallatin Division of New
York University from 1978 to 1993 and Director from 1975 to 1976; Professor,
New York University since 1973; Distinguished Fellow, Herman Kahn Chair, Hudson
Institute from 1984 to 1985; Director, Damon Corporation since 1991; Overseer,
Center for Naval Analyses.
Robert R. Martin--Director (2)--513 Grand Hill, St. Paul, Minnesota 55102.
Chairman and Chief Executive Officer, Kinnard Investments, Inc. from 1990 to
1993; Executive Vice President, Dain Bosworth from 1974 to 1989; Director,
Carnegie Capital Management from 1977 to 1985 and Chairman thereof in 1979;
Director, Securities Industry Association from 1981 to 1982 and Public
Securities Association from 1979 to 1980; Trustee, Northland College since
1992.
Joseph L. May--Director (2)--424 Church Street, Suite 2000, Nashville,
Tennessee 37219. Attorney in private practice since 1984; President, May and
Athens Hosiery Mills Division, Wayne-Gossard Corporation from 1954 to 1983;
Vice President, Wayne-Gossard Corporation from 1972 to 1983; Chairman, The May
Corporation (personal holding company) from 1972 to 1983; Director, Signal
Apparel Co. from 1972 to 1989.
Andre F. Perold--Director (2)--Morgan Hall, Soldiers Field Road, Boston,
Massachusetts 02163. Professor, Harvard Business School since 1989 and
Associate Professor from 1983 to 1989; Trustee, The Common Fund, since 1989;
Director, Quantec Investment Technology (a private United Kingdom company).
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 of MLFD since 1986 and
Director thereof since 1991.
Bernard J. Durnin--Senior Vice President (1)(2)--Senior Vice President of the
Investment Adviser and FAM since 1981 and Vice President from 1977 to 1981.
Denis B. Cummings--Vice President (1)--Vice President of the Investment
Adviser since 1978.
Donald C. Burke--Vice President (1)(2)--Vice President and Director of
Taxation of MLAM since 1990; employee of Deloitte & Touche from 1981 to 1990.
Gerald M. Richard--Treasurer (1)(2)--Senior Vice President and Treasurer of
FAM and the Investment Adviser since 1984; Senior Vice President and Treasurer
of Princeton Services since 1993; Treasurer of MLFD since 1984 and Vice
President since 1981; employee of MLFD since 1978.
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Jerry Weiss--Secretary (1)(2)--Vice President of the Investment Adviser since
1990; Attorney in private practice from 1982 to 1990.
- --------
(1) Interested person, as defined in the Investment Company Act of 1940 (the
"Act"), of the Fund.
(2) Such Director or officer is a director or officer of certain other
investment companies for which the Investment Adviser or its affiliate,
FAM, acts as investment adviser or manager.
As of the date of this Statement of Additional Information, officers and
Directors of the Fund, as a group, own less than 1% of the outstanding shares
of the Fund. Each Director who is not an interested person of the Fund is paid
a fee by the Fund plus actual out-of-pocket expenses for each meeting of the
Board of Directors attended. The Fund also compensates members of the Audit and
Nominating Committee of the Board of Directors for their services on that
committee. The Audit and Nominating Committee consists of all of the Directors
who are not interested persons of the Fund.
PURCHASE OF SHARES
Reference is made to "Purchase of Shares" in the Prospectus for certain
information as to the purchase of Fund shares.
ALTERNATIVE SALES ARRANGEMENTS
The Fund issues two classes of shares: Class A shares are sold to investors
choosing the initial sales charge alternative and Class B shares are sold to
investors choosing the deferred sales charge alternative. The two classes of
shares each represent interests in the same portfolio of investments of the
Fund, have the same rights and are identical in all respects, except that Class
B shares bear the expenses of the deferred sales arrangements and any expenses
(including incremental transfer agency costs) resulting from such sales
arrangements, and have exclusive voting rights with respect to the Rule 12b-1
distribution plan pursuant to which the account maintenance and distribution
fees are paid. The two classes also have different exchange privileges. See
"Shareholder Services--Exchange Privilege".
The Fund has entered into separate distribution agreements with the
Distributor in connection with the continuous offering of Class A and Class B
shares of the Fund (the "Distribution Agreements"). The Distribution Agreements
obligate the Distributor to pay certain expenses in connection with the
offering of the Class A and Class B shares of the Fund. After the prospectuses,
statements of additional information and periodic reports have been prepared,
set in type and mailed to the 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 Investment Advisory Agreement described above.
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
The gross sales charges for the sale of Class A shares for the fiscal year
ended September 30, 1993 were $62,442, of which the Distributor received $3,517
and Merrill Lynch received $58,925.
The term "purchase," as used in the Prospectus and this Statement of
Additional Information in connection with an investment in Class A shares of
the Fund, 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
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account although more than one beneficiary is involved. The term "purchase"
also includes purchases by any "company," as that term is defined in the Act,
but does not include purchases by any such company which has not been in
existence for at least six months or which has no purpose other than the
purchase of shares of the Fund or shares of other registered investment
companies at a discount; provided, however, that it shall not include purchases
by any group of individuals whose sole organizational nexus is that the
participants therein are credit cardholders of a company, policyholders of an
insurance company, customers of either a bank or broker-dealer or clients of an
investment adviser.
REDUCED INITIAL SALES CHARGES--CLASS A SHARES
Right of Accumulation. Reduced sales charges are applicable through a right
of accumulation under which eligible investors are permitted to purchase Class
A shares of the Fund at the offering price applicable to the total of (a) the
dollar amount then being purchased plus (b) an amount equal to the then current
net asset value or cost, whichever is higher, of the purchaser's combined
holdings of the Class A shares and Class B shares of the Fund and of any other
investment company with an initial sales charge or a deferred 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 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.
Letter of Intention. Reduced sales charges are applicable to purchases
aggregating $10,000 or more of the Class A shares of the Fund or any other
investment company with an initial sales charge or a deferred sales charge for
which the Distributor acts as the distributor made within a thirteen-month
period starting with the first purchase pursuant to a Letter of Intention in
the form provided in the Prospectus. The Letter of Intention is available only
to investors whose accounts are maintained at Financial Data Services, Inc.,
the Fund's transfer agent (the "Transfer Agent"). The Letter of Intention is
not available to employee benefit plans for which Merrill Lynch provides plan
participant recordkeeping services. The Letter of Intention is not a binding
obligation to purchase any amount of Class A shares, but 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 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 shares of the Fund and of other
investment companies with an initial sales charge or a deferred sales charge
for which the Distributor acts as the distributor 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 the
completion of such Letter. If the total amount of shares does not equal the
amount stated in the Letter of Intention (minimum of $10,000), 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 shares purchased at the
reduced rate and the sales charge applicable to the shares actually purchased
through the Letter. Class A shares equal to five percent of the intended amount
will be held in escrow during the thirteen-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 or more of the
dollar amount of such Letter. If during the term of such Letter, a purchase
brings the total amount invested to an amount equal to or in excess of the
amount indicated in the Letter, 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 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
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<PAGE>
purchases made under such Letter. An exchange from Merrill Lynch Government
Fund, Merrill Lynch Institutional Fund, Merrill Lynch Ready Assets Trust,
Merrill Lynch Retirement Reserves Money Fund, Merrill Lynch U.S.A. Government
Reserves, Merrill Lynch Treasury Fund or Merrill Lynch Institutional Tax-Exempt
Fund into the Fund that creates a sales charge will count toward completing a
new or existing Letter of Intention from the Fund.
Merrill Lynch Blueprint SM Program. Class A shares of the Fund are offered to
participants in the Merrill Lynch Blueprint SM Program ("Blueprint"). Blueprint
is directed to small investors, group IRAs and participants in certain affinity
groups such as credit unions and trade associations. Investors placing orders
to purchase Class A shares of the Fund through Blueprint will acquire the Class
A shares at net asset value plus a sales charge calculated in accordance with
the Blueprint sales charge schedule (i.e., up to $300 at 5.5%, $300.01 up to
$5,000 at 4.5% plus $3 and $5,000.01 or more at the standard sales charge rates
disclosed in the Prospectus). In addition, Class A shares of the Fund are being
offered at net asset value plus a sales charge of 1/2 of 1% for corporate or
group IRA programs placing orders to purchase their Class A shares through
Blueprint. Services, including the exchange privilege, available to Class A
investors through Blueprint, however, may differ from those available to other
investors in Class A shares. Orders for purchases and redemptions of Class A
shares of the Fund may be grouped for execution purposes which, in some
circumstances, may involve the execution of such orders two business days
following the day such orders are placed. The minimum initial purchase price is
$100, with a $50 minimum for subsequent purchases through Blueprint. There are
no minimum initial or subsequent purchase requirements for participants who are
part of an automatic investment plan.
Class A shares are offered at net asset value, with a waiver of the front-end
sales charge, to participants in the Merrill Lynch Blueprint Program through
the Merrill Lynch Directed IRA Rollover Program ("IRA Rollover Program")
available from Merrill Lynch Business Financial Services, a business unit of
Merrill Lynch. The IRA Rollover Program is available to custodian to custodian
rollover assets from Eligible Retirement Plans (see definition below) whose
Trustee and/or Plan Sponsor offers the Merrill Lynch Directed IRA Rollover
Program. Eligible Retirement Plans include: (a) plans qualified under Section
401(k) of the Internal Revenue Code of 1986, as amended (the "Code") with a
salary reduction feature offering a menu of investments to plan participants,
provided such plan initially has 1,000 or more employees eligible to
participate in the plan (employees eligible to participate in retirement plans
of the same sponsoring employer or its affiliates may be aggregated); or (b)
tax qualified retirement plans within the meaning of Section 401(a) of the Code
or deferred compensation plans within the meaning of Section 403(b) of the
Code, provided the plan (i) initially invested $5 million or more in existing
plan assets in portfolios, mutual funds or trusts advised by MLAM or its
subsidiaries or (ii) has accumulated $5 million or more in existing plan assets
invested in mutual funds advised by MLAM or its subsidiaries, which charge a
front-end sales charge or contingent deferred sales charge (assets of
retirement plans with the same sponsor or an affiliated sponsor may be
aggregated). Additional information concerning purchases through Blueprint,
including any annual fees and transaction charges, is available from Merrill
Lynch, Pierce, Fenner & Smith Incorporated, The Blueprint SM Program, P.O. Box
30441, New Brunswick, New Jersey 08989-0441.
Retirement Plans. Class A shares are offered at net asset value to tax
qualified retirement plans within the meaning of Section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), and deferred compensation plans
within the meaning of Sections 403(b) and 457 of the Code ("Retirement Plans"),
provided the plan has $5 million or more in existing plan assets initially
invested in portfolios, mutual funds or trusts advised either directly or
through a subsidiary by MLAM or FAM. Class A shares may also be offered at net
asset value to Retirement Plans, provided the plan has accumulated $5 million
or more in existing plan assets invested in mutual funds advised by MLAM
charging a front-end sales charge or
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<PAGE>
contingent deferred sales charge. Assets of Retirement Plans with the same
sponsor or an affiliated sponsor may be aggregated. Retirement Plans that are
also qualified under Section 401(k) of the Code with a salary reduction feature
offering a menu of investments to plan participants ("Eligible 401(k) Plans")
are also offered Class A shares at net asset value, provided such plan
initially has 1,000 or more employees eligible to participate in the plan.
Employees eligible to participate in Retirement Plans of the same sponsoring
employer or its affiliates may be aggregated. Retirement Plans meeting any of
the foregoing requirements and which are provided specialized services (e.g.,
plans whose participants may direct on a daily basis their plan allocations
among a wide range of investments including individual corporate equities and
other securities in addition to mutual fund shares) by the Merrill Lynch
Blueprint SM Program, are offered Class A shares at a price equal to net asset
value per share plus a reduced sales charge of 0.50%. Any Retirement Plan which
does not meet the above described qualifications to purchase Class A shares at
net asset value has the option of purchasing Class A shares at the sales charge
schedule disclosed in the Prospectus, or if the Retirement Plan meets the
specified requirements, then it may purchase Class B shares with a waiver of
the contingent deferred sales charge upon redemption. The minimum initial and
subsequent purchase requirements are waived in connection with all the above
referenced Retirement Plans.
Purchase Privileges of Certain Persons. Directors of the Fund, directors and
trustees of certain other Merrill Lynch sponsored investment companies,
Directors of Merrill Lynch & Co., Inc., employees of Merrill Lynch & Co., Inc.
and its subsidiaries and any trust, pension, profit-sharing or other benefit
plan for such persons, may purchase Class A shares of the Fund at net asset
value. Under such programs, the Fund realizes economies of scale and reduction
of sales related expenses by virtue of familiarity with the Fund.
Employees and directors wishing to purchase shares of the Fund must satisfy
the Fund's suitability standards.
Class A shares of the Fund will be offered at net asset value, without 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 purchase Class A shares of
the Fund with proceeds from a redemption of shares of a mutual fund that was
sponsored by the financial consultant's previous firm and imposed a sales
charge either at the time of purchase or on a deferred basis. Second, such
redemption must have been made within 60 days prior to the investment in the
Fund, and the proceeds from the redemption must have been maintained in the
interim in cash or a money market fund.
Class A shares of the Fund 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 ("notice"), if the following conditions are
satisfied. First, the investor must purchase Class A shares of the Fund with
proceeds from a redemption of shares of such other mutual fund and such fund
imposed a sales charge either at the time of purchase or on a deferred basis.
Second, such purchase of Class A shares must be made within 90 days after
notice.
Closed-End Fund Option. Class A shares of the Fund and certain other mutual
funds advised by the Investment Adviser (the "Eligible Class A shares") are
offered at net asset value to shareholders of certain closed-end funds advised
by the Investment Adviser who wish to reinvest the net proceeds of a sale of
their closed-end fund shares of common stock in Eligible Class A shares, if the
conditions set forth below are
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<PAGE>
satisfied. First, the sale of closed-end fund shares must be made through
Merrill Lynch, and the net proceeds therefrom must be immediately reinvested in
Eligible Class A shares. Second, the closed-end fund shares must have either
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 Fund are offered
at net asset value to shareholders of Merrill Lynch Senior Floating Rate Fund
(formerly known as Merrill Lynch Prime 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 the Senior Floating Rate Fund in shares of the Fund.
In order to exercise this investment option, Senior Floating Rate Fund
shareholders must sell their Senior Floating Rate Fund shares to the Senior
Floating Rate Fund in connection with a tender offer conducted by the Senior
Floating Rate Fund and reinvest the proceeds immediately in the Fund. This
investment option is available only with respect to the proceeds of the 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
Fund at such day.
TMA SM Managed Trusts. Class A shares are offered to TMA SM Managed Trusts to
which Merrill Lynch Trust Company provides discretionary trustee services at
net asset value plus a reduced sales charge of 0.50% of the offering price
which is 0.50% of the net amount invested.
Acquisition of Certain Investment Companies. The public offering price of
Class A shares may be reduced to the net asset value per Class A share in
connection with the acquisition of the assets of or merger or consolidation
with a personal holding company or a public or private investment company. The
value of the assets or company acquired in a tax-free transaction may be
adjusted in appropriate cases to reduce possible adverse tax consequences to
the Fund which might result from an acquisition of assets having net unrealized
appreciation which is disproportionately higher at the time of acquisition than
the realized or unrealized appreciation of the Fund.
DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES
Distribution Plan. Reference is made to "Purchase of Shares--Deferred Sales
Charge Alternative--Class B Shares--Distribution Plan" in the Prospectus for
certain information with respect to the Distribution Plan of the Fund (the
"Distribution Plan").
The payment of the distribution fee and account maintenance fee is subject to
the provisions of Rule 12b-1 under the Act. Among other things, the
Distribution Plan provides that the Distributor shall provide and the Directors
shall review quarterly reports of the disbursement of the account maintenance
fees and distribution fees paid to the Distributor. In their consideration of
the Distribution Plan, the Directors must consider all factors they deem
relevant, including information as to the benefits of the Distribution Plan to
the Fund and its Class B shareholders. The Distribution Plan further provides
that, so long as the Distribution Plan remains in effect, the selection and
nomination of Directors who are not "interested persons" of the Fund, as
defined in the Act (the "Independent Directors"), shall be committed to the
discretion of the Independent Directors then in office. In approving the
Distribution Plan in accordance with Rule 12b-1, the Independent Directors
concluded that there is reasonable likelihood that the Distribution Plan will
benefit the Fund and its Class B shareholders. The 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 Class B voting securities of the Fund. The Distribution Plan cannot
be amended to increase
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<PAGE>
materially the amount to be spent by the Fund without Class B shareholder
approval, 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 the Distribution Plan, cast in person
at a meeting called for that purpose. Rule 12b-1 further requires that the Fund
preserve copies of the Distribution Plan and any report made pursuant to such
plan for a period of not less than six years from the date of the Distribution
Plan or such report, the first two years in an easily accessible place.
During the fiscal year ended September 30, 1993, the Fund paid $8,587,740
under the Plan, an amount equal to 1% of the average daily net assets of the
Class B shares for such fiscal year. All such amounts were paid to MLFD and in
turn were paid by MLFD to Merrill Lynch to defray a portion of its costs
incurred in rendering account maintenance and distribution services to the
Fund, including advancement of sales commissions to its account executives for
the sale of the Class B shares of the Fund.
REDEMPTION OF SHARES
Reference is made to "Redemption of Shares" in the Prospectus for certain
information as to the redemption and repurchase of Fund shares.
Payment for shares presented for redemption will be made by check sent within
seven days after receipt by the Transfer Agent of your written request in
proper form and, if issued, certificates for the shares being redeemed. The
right to redeem shares or to receive payment with respect to any such
redemption may be suspended only for any period during which trading on the New
York Stock Exchange is restricted as determined by the Securities and Exchange
Commission or such Exchange is closed (other than customary weekend and holiday
closings), for any period during which an emergency exists as defined by the
Securities and Exchange Commission, as a result of which disposal of portfolio
securities or determination of the net asset value of the Fund is not
reasonably practicable, and for such other periods as the Securities and
Exchange Commission may by order permit for the protection of shareholders of
the Fund.
The value of shares at the time of redemption may be more or less than the
shareholder costs, depending on the net asset value of such shares at such
time.
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES
As discussed in the Prospectus under "Purchase of Shares--Deferred Sales
Charge Alternative--Class B Shares", while Class B shares redeemed within four
years of purchase are subject to a contingent deferred sales charge under most
circumstances, the charge is waived on redemptions of Class B shares in
connection with certain post-retirement withdrawals from an Individual
Retirement Account ("IRA") or other retirement plan or following the death or
disability of a Class B shareholder. Redemptions for which the waiver applies
are: (a) any partial or complete redemption in connection with a distribution
following retirement under a tax-deferred retirement plan which is permitted to
be made without tax penalty under the Internal Revenue Code, or attaining age
59 1/2 in the case of an IRA or other retirement plan, 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 Internal Revenue 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. For the year ended September 30, 1993, the
Distributor received contingent deferred sales charges of $182,110, all of
which was paid to Merrill Lynch.
Merrill Lynch BlueprintSM Program. Class B shares are offered to certain
participants in Blueprint. Blueprint is directed to small investors, group IRAs
and participants in certain affinity groups such as trade
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<PAGE>
associations, credit unions and benefit plans. Class B shares of the Fund are
offered through Blueprint only to members of certain affinity groups. The
contingent deferred sales charge is waived in connection with purchase orders
placed through Blueprint. Services, including the exchange privilege, available
to Class B investors through Blueprint, however, may differ from those
available to other Class B investors. Orders for purchases and redemptions of
Class B shares of the Fund may be grouped for execution purposes which, in some
circumstances, may involve the execution of such orders two business days
following the day such orders are placed. The minimum initial purchase price is
$100, with a $50 minimum for subsequent purchases through Blueprint. There is
no minimum initial or subsequent purchase requirement for investors who are
part of a Blueprint automatic investment plan. Additional information
concerning Blueprint, including any annual fees or transaction charges, is
available from Merrill Lynch, Pierce, Fenner & Smith Incorporated, The
BlueprintSM Program, P.O. Box 30441, New Brunswick, New Jersey 08989-0441.
Retirement Plans. Any Retirement Plan which does not meet the qualifications
to purchase Class A shares at net asset value has the option of purchasing
Class A shares at the sales charge schedule disclosed in the Prospectus, or if
the Retirement Plan meets the following requirements, then it may purchase
Class B shares with a waiver of the contingent deferred sales charge upon
redemption. The contingent deferred sales charge is waived for any Eligible
401(k) Plan redeeming Class B shares. The contingent deferred sales charge is
also waived for redemptions from 401(a) plans qualified under the Code,
provided, however, such plan has the same or an affiliated sponsoring employer
as an Eligible 401(k) Plan purchasing MLAM or FAM advised mutual fund Class B
shares ("Eligible 401(a) Plan"). The contingent deferred sales charge is waived
for any Class B shares which are purchased by an Eligible 401(k) Plan or
Eligible 401(a) Plan and are rolled over into a Merrill Lynch or Merrill Lynch
Trust Company custodied Individual Retirement Account and held in such account
at the time of redemption. The minimum initial and subsequent purchase
requirements are waived in connection with all the above referenced Retirement
Plans.
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of the Fund is determined once daily Monday
through Friday as of the time of the close of trading on the New York Stock
Exchange on each day during which such 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. The Fund also will determine its net asset value on any day in
which there is sufficient trading in its portfolio securities that the net
asset value might be affected materially, but only if on any such day the Fund
is required to sell or redeem shares. The net asset value per share is computed
by dividing the sum of the value of the securities held by the Fund plus any
cash or other assets (including interest and dividends accrued but not yet
received) minus all liabilities (including accrued expenses) by the total
number of shares outstanding at such time, rounded to the nearest cent.
Expenses, including the investment advisory fees and account maintenance and
distribution fees, are accrued daily. The per share net asset value of the
Class B shares generally will be lower than the per share net asset value of
the Class A shares reflecting the daily expense accruals of the account
maintenance, distribution and transfer agency fees applicable with respect to
the Class B shares. It is expected, however, that the per share net asset value
of the two 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 and options which are traded on stock exchanges are
valued at the last sale price as of the close of business on the day the
securities are being valued, or, lacking any sales, at the last available bid
price. Securities traded in the over-the-counter market are valued at the last
quoted bid prices at the close
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of trading on the New York Stock Exchange on each day by brokers that make
markets in the securities. Portfolio securities which are traded both in the
over-the-counter market and on a stock exchange are valued according to the
broadest and most representative market. Securities and assets for which market
quotations are not readily available are valued at fair value as determined in
good faith by or under the direction of the Board of Directors of the Fund.
SHAREHOLDER SERVICES
The Fund offers a number of shareholder services described below which are
designed to facilitate investment in its shares. Certain of such services are
not available to investors who place orders for the Fund through the Merrill
Lynch BlueprintSM Program. Full details as to each of such services and copies
of the various plans described below can be obtained from the Fund, the
Distributor or Merrill Lynch.
INVESTMENT ACCOUNT
Each shareholder whose account is maintained at the Transfer Agent has an
Investment Account and will receive statements from the Transfer Agent after
each share transaction, including reinvestment of dividends and capital gains
distributions, showing the activity in the account since the beginning of the
year. Shareholders considering transferring their Class A shares from Merrill
Lynch to another brokerage firm or financial institution should be aware that,
if the firm to which the Class A shares are to be transferred will not take
delivery of shares of the Fund, a shareholder either must redeem the Class A
shares so that the cash proceeds can be transferred to the account at the new
firm or such shareholder must continue to maintain an
Investment Account at the Transfer Agent for those Class A shares. Shareholders
interested in transferring their Class B shares from Merrill Lynch and who do
not wish to have an Investment Account maintained for such shares at the
Transfer Agent may request their new brokerage firm to maintain such shares in
an account registered in the name of the brokerage firm for the benefit of the
shareholder. If the new brokerage firm is willing to accommodate the
shareholder in this manner, the shareholder must request that he be issued
certificates for his shares, and then must turn the certificates over to the
new firm for re-registration as described in the preceding sentence.
Shareholders may make additions to their Investment Account at any time by
mailing a check directly to the Transfer Agent.
Share certificates are issued only for full shares and only upon the specific
request of the shareholder who has an Investment Account. Issuance of
certificates representing all or only part of the full shares in an Investment
Account may be requested by a shareholder directly from the Transfer Agent.
AUTOMATIC INVESTMENT PLAN
A shareholder may make additions to an Investment Account at any time by
purchasing Class A or Class B shares at the applicable public offering price
either through the shareholder's securities dealer, or by mail directly to the
Transfer Agent, acting as agent for such securities dealer. Voluntary
accumulation can also be made through a service known as the Automatic
Investment Plan whereby the Transfer Agent is authorized through pre-authorized
checks of $50 or more to charge the regular bank account of the shareholder on
a regular basis to provide systematic additions to the Investment Account of
such shareholder. For investors who buy shares of the Fund through the Merrill
Lynch BlueprintSM Program or Merrill Lynch Employee Financial Services, no
minimum charge to the investor's bank account is required. Investors who
maintain CMA(R) accounts may arrange to have periodic investments made in the
Fund, in the CMA accounts or in certain related accounts in amounts of $250 or
more through the CMA Automatic Investment Program.
AUTOMATIC REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Unless specific instructions are given as to the method of payment of
dividends and capital gains distributions, dividends and distributions will be
reinvested automatically in additional shares of the Fund.
12
<PAGE>
Such reinvestment will be at the net asset value of shares of the Fund, without
sales charge, as of the close of business on the ex-dividend date of the
dividend or distribution. Shareholders may elect in writing or by telephoning
(1-(800)-MER-FUND) to receive either their dividends or capital gains
distributions, or both, in cash, in which event payment will be mailed on or
about the payment date.
Shareholders may, at any time, notify the Transfer Agent in writing that they
no longer wish to have their dividends and/or capital gains distributions
reinvested in shares of the Fund or vice versa and, commencing ten days after
the receipt by the Transfer Agent of such notice, those instructions will be
effected.
SYSTEMATIC WITHDRAWAL PLANS--CLASS A SHARES
A Class A shareholder may elect to make withdrawals from an Investment
Account in the form of payments by check or through automatic payment by direct
deposit to his bank account on either a monthly or quarterly basis as provided
below. Quarterly withdrawals are available for shareholders who have acquired
Class A shares of the Fund having a value, based on cost or the current
offering price, of $5,000 or more, and monthly withdrawals for shareholders
with Class A shares with such a value of $10,000 or more.
At the time of each withdrawal payment, sufficient Class A shares are
redeemed from those on deposit in the shareholder's account to provide the
withdrawal payment specified by the shareholder. The shareholder may specify
either a dollar amount or a percentage of the value of his Class A shares.
Redemptions will be made at net asset value as determined at the close of
business on the New York Stock Exchange on the 24th day of each month or the
24th day of the last month of each quarter, whichever is applicable. If the
Exchange is not open for business on such date, the Class A shares will be
redeemed at the close of business on the following business day. The check for
the withdrawal payment will be mailed or the direct deposit for withdrawal
payment will be made on the next business day following redemption. When a
shareholder is making systematic withdrawals, dividends and distributions on
all Class A shares in the Investment Account are reinvested automatically in
Class A shares of the Fund. A shareholder's Systematic Withdrawal Plan may be
terminated at any time, without charge or penalty, by the shareholder, the
Fund, the Transfer Agent or the Distributor. Withdrawal payments should not be
considered as dividends, yield or income. Each withdrawal is a taxable event.
If periodic withdrawals continuously exceed reinvested dividends, the
shareholder's original investment may be reduced correspondingly. Purchases of
additional Class A shares concurrent with withdrawals are ordinarily
disadvantageous to the shareholder because of sales charges and tax
liabilities. The Fund will not knowingly accept purchase orders for Class A
shares of the Fund from investors who maintain a Systematic Withdrawal Plan
unless such purchase is equal to at least one year's scheduled withdrawals or
$1,200, whichever is greater. Periodic investments may not be made into an
Investment Account in which the shareholder has elected to make systematic
withdrawals.
A Class A shareholder whose shares are held within a CMA (R), CBA (R) or
Retirement Account may elect to have shares redeemed on a monthly, bi-monthly,
quarterly, semiannual or annual basis through the Systematic Redemption
Program. The minimum fixed dollar amount redeemable is $25. The proceeds of
systematic redemptions will be posted to the shareholder's account five
business days after the date the shares are redeemed. Monthly systematic
redemptions will be made at net asset value on the first Monday of each month,
bi-monthly systematic redemptions will be made at net asset value on the first
Monday of every other month, and quarterly, semiannual or annual redemptions
are made at net asset value on the first Monday of months selected at the
shareholder's option. If the first Monday of the month is a holiday, the
redemption will be processed at net asset value on the next business day. The
Systematic Redemption Program is not available if Fund shares are being
purchased within the account pursuant to the Automatic Investment
13
<PAGE>
Program. For more information on the Systematic Redemption Program, eligible
shareholders should contact their Financial Consultant.
RETIREMENT PLANS
Self-directed individual retirement accounts and other retirement plans are
available from Merrill Lynch. Under these plans, investments may be made in the
Fund and certain of the other mutual funds sponsored by Merrill Lynch as well
as in other securities. Merrill Lynch charges an initial establishment fee and
an annual custodial fee for each account. Information with respect to these
plans is available on request from Merrill Lynch. The minimum initial purchase
to establish any such plan is $250 (except that the minimum initial purchase
through the Merrill Lynch BlueprintSM Program is $100. However, there is no
minimum for purchases through the Merrill Lynch BlueprintSM Program's
systematic investment plans).
Capital gains and income received in each of the plans referred to above are
exempt from Federal taxation until distributed from the plans. Investors
considering participation in any such plan should review specific tax laws
relating thereto and should consult their attorneys or tax advisers with
respect to the establishment and maintenance of any such plan.
EXCHANGE PRIVILEGE
Class A and Class B shareholders of the Fund may exchange their Class A or
Class B shares of the Fund for shares of the same class of Merrill Lynch
Adjustable Rate Securities Fund, Inc., Merrill Lynch Americas Income Fund,
Inc., Merrill Lynch Arizona Limited Maturity Municipal Bond Fund, Merrill Lynch
Arizona Municipal Bond Fund, Merrill Lynch Basic Value Fund, Inc., Merrill
Lynch California Insured Municipal Bond Fund, Merrill Lynch California Limited
Maturity Municipal Bond Fund, Merrill Lynch California Municipal Bond Fund,
Merrill Lynch Capital Fund, Inc., Merrill Lynch Colorado Municipal Bond Fund,
Merrill Lynch Corporate Bond Fund, Inc., Merrill Lynch Developing Capital
Markets, Inc., Merrill Lynch Dragon Fund, Inc., Merrill Lynch EuroFund, Merrill
Lynch Federal Securities Trust, Merrill Lynch Florida Limited Maturity
Municipal Bond Fund, Merrill Lynch Florida Municipal Bond Fund, Merrill Lynch
Fund For Tomorrow, Inc., Merrill Lynch Fundamental Growth Fund, 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 (residents of Arizona must meet investor suitability
standards), Merrill Lynch Global Utility Fund, Inc., Merrill Lynch Growth Fund
for Investment and Retirement, Merrill Lynch Healthcare Fund, Inc. (residents
of Wisconsin must meet investor suitability standards), Merrill Lynch
International Equity Fund, Merrill Lynch Latin America Fund, Inc., Merrill
Lynch Maryland Municipal Bond Fund, Inc., Merrill Lynch Massachusetts Limited
Maturity Municipal Bond Fund, Merrill Lynch Massachusetts Municipal Bond Fund,
Merrill Lynch Michigan Limited Maturity Municipal Bond Fund, Merrill Lynch
Michigan Municipal Bond Fund, Merrill Lynch Minnesota Municipal Bond Fund,
Merrill Lynch Municipal Bond Fund, Inc., Merrill Lynch Municipal Intermediate
Term Fund, Merrill Lynch Natural Resources Trust, Merrill Lynch New Jersey
Limited Maturity Municipal Bond Fund, Merrill Lynch New Jersey Municipal Bond
Fund, Merrill Lynch New York Limited Maturity Municipal Bond Fund, Merrill
Lynch New York Municipal Bond Fund, Merrill Lynch North Carolina Municipal Bond
Fund, Merrill Lynch Ohio Municipal Bond Fund, Merrill Lynch Oregon Municipal
Bond Fund, Inc., Merrill Lynch Pacific Fund, Inc., Merrill Lynch Pennsylvania
Limited Maturity Municipal Bond Fund, Merrill Lynch Pennsylvania Municipal Bond
Fund, Merrill Lynch Phoenix Fund, Inc., Merrill Lynch Short-Term Global Income
Fund, Inc., Merrill Lynch Special Value Fund, Inc., Merrill Lynch Strategic
Dividend Fund, Merrill Lynch Technology Fund, Inc., Merrill Lynch Texas
Municipal Bond Fund, Merrill Lynch Utility Income Fund, Inc. and Merrill Lynch
World Income Fund, Inc. on the basis described below. In addition, Class A
shareholders of the Fund may exchange their Class A shares for shares of
Merrill Lynch U.S.A.
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<PAGE>
Government Reserves, Merrill Lynch U.S. Treasury Money Fund, Merrill Lynch
Ready Assets Trust (or Merrill Lynch Retirement Reserves Money Fund if the
exchange occurs within certain retirement plans) (together the "Class A money
market funds") and Class B shareholders of the Fund may exchange their Class B
shares for shares of Merrill Lynch Government Fund, Merrill Lynch
Institutional Fund, Merrill Lynch Treasury Fund, Merrill Lynch Institutional
Tax-Exempt Fund (together the "Class B money market funds") on the basis
described below. In addition, Class A shares of the Fund are exchangeable with
Class A shares of Merrill Lynch Municipal Income Fund. Shares with a net asset
value of at least $250 are required to qualify for the exchange privilege and
any shares utilized in an exchange must have been held by the shareholder for
at least 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. The exchange privilege available to participants in the Merrill
Lynch Blueprint SM Program may be different from that available to other
investors.
Under the exchange privilege, each of the funds with Class A shares
outstanding offers to exchange its Class A shares ("new Class A shares") for
Class A shares ("outstanding Class A shares") of any of the other funds, on
the basis of relative net asset value per Class A share, plus an amount equal
to the difference, if any, between the sales charge previously paid on the
outstanding Class A shares and the sales charge payable at the time of the
exchange on the new Class A shares. With respect to outstanding Class A shares
as to which previous exchanges have taken place, the "sales charge previously
paid" shall include the aggregate of the sales charges paid with respect to
such Class A shares in the initial purchase and any subsequent exchange. Class
A shares issued pursuant to dividend reinvestment are sold on a no-load basis
in each of the funds offering Class A shares. For purposes of the exchange
privilege, dividend reinvestment Class A shares shall be exchanged into the
Class A shares of the other funds or into shares of the Class A money market
funds without a sales charge.
The Fund's exchange privilege is modified with respect to purchases of Class
A shares under the Merrill Lynch Mutual Fund Adviser program. First, the
initial allocation of assets is made under the program. Then, any subsequent
exchange under the program of Class A shares of a fund for Class A shares of
the Fund will be made solely on the basis of the relative net asset values of
the shares being exchanged. Therefore, there will not be a charge for any
difference between the sales charge previously paid on the shares of the other
fund and the sales charge payable on the shares of the Fund being acquired in
the exchange under this program.
In addition, each of the funds with Class B shares outstanding offers to
exchange its Class B shares ("new Class B shares") for Class B shares
("outstanding Class B shares") of any of the other funds on the basis of
relative net asset value per Class B share, without the payment of any
contingent deferred sales charge that might otherwise be due on redemption of
the outstanding shares. Class B shareholders of the Fund exercising the
exchange privilege will continue to be subject to the Fund's contingent
deferred sales charge schedule if such schedule is higher than the deferred
sales charge schedule relating to the new Class B shares acquired through use
of the exchange privilege. In addition, Class B shares of the Fund acquired
through use of the exchange privilege will be subject to the Fund's contingent
deferred sales charge schedule if such schedule is higher than the deferred
sales charge schedule relating to the Class B shares of the fund from which
the exchange has been made. For purposes of computing the contingent deferred
sales charge that may be payable on a disposition of the new Class B shares,
the holding period for the outstanding Class B shares is "tacked" to the
holding period of the new Class B shares. For example, an investor may
exchange Class B shares of the Fund for those of Merrill Lynch Natural
Resources Trust after having held Class B shares of the Fund for two and a
half years. The 2% sales charge 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 Merrill Lynch Natural Resources Trust and receive
cash. There will be no contingent deferred sales charge due on this
redemption, since by "tacking" the two and a half year holding period of Fund
Class B shares to the three
15
<PAGE>
year holding period for the Merrill Lynch Natural Resources Trust 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 Class A shares and Class B shares from any of
the funds into shares of the Class A money market funds and Class B money
market funds, respectively, but the period of time that Class B shares are
held in a Class B money market fund will not count towards satisfaction of the
holding period requirement for purposes of reducing the contingent deferred
sales charge. However, shares of a Class B money market fund which were
acquired as a result of an exchange for Class B shares of a fund may in turn
be exchanged back into Class B shares of any fund offering such shares, in
which event the holding period for Class B shares of the fund will be
aggregated with previous holding periods for purposes of reducing the
contingent deferred sales charge. Thus, for example, an investor may exchange
Class B shares of the Fund for shares of Merrill Lynch Institutional Fund
after having held Class B shares of the Fund for two and a half years and
three years later decide to redeem the shares of Merrill Lynch Institutional
Fund for cash. At the time of this redemption, the 2% contingent deferred
sales charge that would have been due had the Class B shares of the Fund been
redeemed for cash rather than exchanged for shares of Merrill Lynch
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 continues to hold for an additional two and a half years, any
subsequent redemption will not incur a contingent deferred sales charge.
The investment objectives of the other funds into which exchanges can be
made are as follows:
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 investors with as high a
level of income exempt from Federal
and Arizona income taxes as is
consistent with prudent investment
management.
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<PAGE>
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 as
high a level of insured income exempt
from Federal and California income
taxes as is consistent with prudent
investment management through
investment in a portfolio 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 shareholders
with 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 investors with as high a
level of income exempt from Federal
and California income taxes as is
consistent with prudent investment
management.
Merrill Lynch Capital Fund, Inc. .... The highest total investment return
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 as
high a level of income exempt from
Federal and Colorado income taxes as
is consistent with prudent investment
management.
Merrill Lynch Corporate Bond Fund, Current income from three separate
Inc. ............................... 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.
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<PAGE>
Merrill Lynch Dragon Fund, Inc. .....
Capital appreciation primarily through
investment in equity and debt
securities of companies domiciled in
developing countries located in Asia
and the Pacific Basin other than
Japan, Australia and New Zealand.
Merrill Lynch EuroFund............... Capital appreciation primarily through
investment in equity securities of
corporations domiciled in Europe.
Merrill Lynch Federal Securities High current return through
Trust.......................... investments in U.S. Government and
Government agency securities,
including GNMA mortgage-backed
certificates and other mortgaged-
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 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
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 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, Long-term growth through investment in
Inc................................. a portfolio of good quality
securities, primarily common stock,
potentially positioned to benefit
from demographic and cultural changes
as they affect consumer markets.
Merrill Lynch Fundamental Growth
Fund, Inc...........................
Long-term growth through investment in
a diversified portfolio of equity
securities placing particular
emphasis on companies that have
exhibited an above-average growth
rate in earnings.
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<PAGE>
Merrill Lynch Global Allocation
Fund, Inc...........................
High total return consistent with
prudent risk, 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 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 a global portfolio of
debt instruments denominated in
various currencies and multi-national
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
(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 Utility Fund, Capital appreciation and current
Inc. ............................... income through investment of at least
65% of its total assets in equity and
debt securities issued by domestic
and foreign 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 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 and its agencies
and instrumentalities and in
repurchase agreements secured by such
obligations.
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.
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<PAGE>
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 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.........................
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 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, Capital appreciation by investing
Inc. .......................... 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 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.
Merrill Lynch Massachusetts
Municipal Bond Fund.................
A portfolio of Merrill Lynch Multi-
State Municipal Series Trust, a
series fund, whose objective is to
provide investors with as high a
level of income exempt from both
Federal and Massachusetts income
taxes as is consistent with prudent
investment management.
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<PAGE>
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 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 as
high a level of income exempt from
Federal and Minnesota income taxes as
is consistent with prudent investment
management.
Merrill Lynch Municipal Bond Fund, Tax-exempt income from three separate
Inc................................. 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.
Merrill Lynch Natural Resources Long-term growth and protection of
Trust............................... capital from investment in securities
of domestic and foreign companies
that possess substantial natural
resource assets.
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 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.
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<PAGE>
Merrill Lynch New Jersey Municipal
Bond Fund...........................
A portfolio of Merrill Lynch Multi-
State Municipal Series Trust, a
series fund, whose objective is as
high a level of income exempt from
Federal and New Jersey 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 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 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.
Merrill Lynch Ohio Municipal Bond A portfolio of Merrill Lynch Multi-
Fund................................ State Municipal Series Trust, a
series fund, whose objective is to
provide investors with as high a
level of income exempt from both
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 investors with as high a
level of income exempt from both
Federal and Oregon income taxes as is
consistent with prudent investment
management.
Merrill Lynch Pacific Fund, Inc......
Capital appreciation by investing in
equity securities of corporations
domiciled in Far Eastern and Western
Pacific countries, including Japan,
Australia, Hong Kong, and Singapore.
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<PAGE>
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
income taxes as is consistent with
prudent investment management.
Merrill Lynch Phoenix Fund, Inc...... Long-term growth of capital by
investing in 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 Ready Assets Trust..... 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 if the
exchange occurs 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 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
multi-national currency units and
having remaining maturities not
exceeding three years.
Merrill Lynch Special Value Fund,
Inc................................. Long-term growth of capital from
investments in securities, primarily
common stock, or relatively small
companies believed to have special
investment value and emerging growth
companies regardless of size.
23
<PAGE>
Merrill Lynch Strategic Dividend Long-term total return from investment
Fund................................ 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 investors with 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 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.
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 Preservation of capital, liquidity and
Fund................................ current income through investment
exclusively in a diversified
portfolio of short-term marketable
securities which are direct
obligations of the U.S. Treasury.
Merrill Lynch Utility Income Fund, High current income through investment
Inc. .......................... primarily in equity and debt
securities issued by companies
primarily engaged in the ownership or
operation of facilities used to
generate, transmit or to distribute
electricity, telecommunications, gas
or water.
Merrill Lynch World Income Fund, High current income by investing in a
Inc. ............................... global portfolio of fixed-income
securities denominated in various
currencies, including multinational
currencies.
24
<PAGE>
Before effecting an exchange, shareholders of the Fund should obtain a
currently effective prospectus of the fund into which the exchange is to be
made. Exercise of the exchange privilege is treated as a sale for Federal
income tax purposes and, depending on the circumstances, a short- or long-term
capital gain or loss may be realized. In addition, a shareholder exchanging
shares of any of the funds may be subject to a backup withholding tax unless
such shareholder certifies under penalty of perjury that the taxpayer
identification number on file with any such fund is correct and that he is not
otherwise subject to backup withholding. See "Dividends, Distributions and
Taxes" below.
To exercise the exchange privilege, shareholders should contact their Merrill
Lynch financial consultant, who will advise the Fund of the exchange, or, if
the exchange does not involve a money market fund, the shareholder may write to
the Transfer Agent requesting that the exchange be effected. Such letter must
be signed exactly as the account is registered with signatures guaranteed by an
"eligible guarantor institution" as such is defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended, the existence and validity of
which may be verified by the Transfer Agent through the use of industry
publications. Shareholders of the Fund, 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
Fund 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 Securities and Exchange Commission. The Fund 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 shares to the
general public at any time and may thereafter 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
It is the Fund's intention to distribute all of its net investment income, if
any. Dividends from such investment income are paid semi-annually. All net
realized long- or short-term capital gains, if any, are distributed to the
Fund's's shareholders at least annually. Premiums from expired call options
written by the Fund and net gains from closing purchase transactions are
treated as short-term capital gains for Federal income tax purposes. See
"Shareholder Services--Automatic Reinvestment of Dividends and Capital Gains
Distributions" for information concerning the manner in which dividends and
distributions may be reinvested automatically in shares of the Fund.
Shareholders may elect in writing to receive any such dividends or
distributions, or both, in cash. Dividends and distributions are taxable to
shareholders as described below whether they are invested in shares of the Fund
or received in cash. The per share dividends and distributions on Class B
shares will be lower than the per share dividends and distributions on Class A
shares as a result of the account maintenance, distribution and transfer agency
fees applicable with respect to the Class B shares. See "Determination of Net
Asset Value".
TAXES
The Fund has elected and intends to continue to qualify for the special tax
treatment afforded regulated investment companies ("RICs") under the Internal
Revenue Code of 1986, as amended (the "Code"). If it so qualifies, the Fund
will not be subject to Federal income tax on the part of its net ordinary
income and net realized capital gains which it distributes to Class A and Class
B shareholders ("shareholders").
Dividends paid by the Fund from its ordinary income and distributions of the
Fund's net realized short-term capital gains (together referred to hereafter as
"ordinary income dividends") are taxable to shareholders as ordinary income.
Distributions made from the Fund's net realized long-term capital gains
(including long-
25
<PAGE>
term gains from certain transactions in options) are taxable to shareholders as
long-term capital gains, regardless of the length of time the shareholder has
owned Fund shares. A capital gains distribution with respect to shares held for
six months or less, however, will cause any loss on a subsequent sale or
exchange of such shares to be treated as long-term capital loss to the extent
of such long-term capital gains distribution.
Dividends and distributions are taxable to shareholders even though they are
reinvested in additional shares of the Fund. Not later than 60 days after the
close of its taxable year, the Fund will provide its shareholders with a
written notice designating the amounts of any dividends or capital gains
distributions. A portion of the Fund's ordinary income dividends may be
eligible for the dividends received deduction allowed to corporations under the
Code, if certain requirements are met. For this purpose, the Fund will allocate
dividends eligible for the dividends received deduction between the Class A and
Class B shareholders according to a method (which it believes is consistent
with the Securities and Exchange Commission exemptive order permitting the
issuance and sale of two classes of stock) that is based on the average daily
net assets of each class (taking into account the incremental expenses of the
Class B shares) during the taxable year, or such other method as the Internal
Revenue Service may prescribe.
Pursuant to the Fund's investment objectives, the Fund may invest in foreign
securities. Foreign taxes may be paid by the Fund as a result of tax laws of
countries in which the Fund may invest. Income tax treaties between certain
countries and the United States may reduce or eliminate such taxes. It is
impossible to determine in advance the effective rate of foreign tax to which
the Fund will be subject, since the amount of Fund assets to be invested in
various countries is not known. Because the Fund limits its investment in
foreign securities, shareholders will not be entitled to claim foreign tax
credits with respect to their share of foreign taxes paid by the Fund on income
from investments of foreign securities held by the Fund.
Under certain provisions of the Code, some shareholders may be subject to a
31% withholding tax on reportable dividends, capital gains distributions and
redemption payments ("backup withholding"). Generally, shareholders subject to
backup withholding will be those for whom a certified taxpayer identification
number is not on file with the Fund, those who, to the Fund's knowledge, have
furnished an incorrect number or those who are subject to backup withholding
because of a failure to report income. When establishing an account, an
investor must certify under penalty of perjury that such number is correct and
that such shareholder is not otherwise subject to backup withholding.
Ordinary income dividends paid by the Fund to shareholders who are non-
resident aliens or foreign entities generally will be subject to a 30% United
States withholding tax under existing provisions of the Code applicable to
foreign individuals and entities unless a reduced rate of withholding or a
withholding exemption is provided under applicable treaty law. Non-resident
shareholders are urged to consult their own tax advisers concerning the
applicability of the United States withholding tax.
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. If the Fund pays a dividend in January which was
declared in the previous October, November or December to shareholders of
record on a specified date in one of such months, then such dividend or
distribution will be treated for federal tax purposes as being paid on December
31 and will be taxable to shareholders as if received on December 31. While the
Fund intends to distribute its ordinary income and capital gains in the manner
necessary to avoid imposition of the 4% excise tax, there can be no assurance
that sufficient amounts of the Fund's taxable income and capital gains will be
distributed to avoid entirely the imposition of the tax. In such event, the
Fund will be liable for the tax only on the amount by which it does not meet
the foregoing distribution requirements.
26
<PAGE>
Tax Treatment of Option Transactions. The Fund may write (i.e., sell) covered
call options with respect to the securities that it holds in its portfolio. In
general, gain or loss from transactions in such options contracts will be
capital gain or loss.
Code Section 1092, which applies to certain "straddles," may affect the
taxation of the Fund's transactions in options contracts. Under Section 1092,
the Fund may be required to postpone recognition for tax purposes of losses
incurred in certain closing transactions in options.
One of the requirements for qualification as a RIC is that less than 30% of
the Fund's gross income may be derived from gains from the sale or other
disposition of securities held for less than three months. Accordingly, the
Fund may be restricted in effecting closing transactions within three months
after entering into an option contract or from making short-term investments in
securities.
Special Rules for Certain Foreign Currency Transactions. In general, gains
from "foreign currencies" and from foreign currency options, foreign currency
futures and forward foreign exchange contracts relating to investments in
stock, securities or foreign currencies will be qualifying income for purposes
of determining whether the Fund qualifies as a RIC. It is currently unclear,
however, who will be treated as the issuer of a foreign currency instrument or
how foreign currency options, futures, or forward foreign exchange contracts
will be valued for purposes of the RIC diversification requirements applicable
to the Fund.
Under Code Section 988, special rules are provided for certain transactions
in a foreign currency other than the taxpayer's functional currency (i.e.,
unless certain special rules apply, currencies other than the U.S. dollar). In
general, foreign currency gains or losses from certain forward contracts not
traded in the interbank market, from futures contracts that are not "regulated
futures contracts," and from unlisted options will be treated as ordinary
income or loss under Code Section 988. In certain circumstances, the Fund may
elect capital gain or loss treatment for such transactions. In general,
however, Code Section 988 gains or losses will increase or decrease the amount
of the Fund's investment company taxable income available to be distributed to
shareholders as ordinary income, rather than increasing or decreasing the
amount of the Fund's net capital gain. Additionally, if Code Section 988 losses
exceed other investment company taxable income during a taxable year, the Fund
would not be able to make any ordinary dividend distributions, and any
distributions made before the losses were realized but in the same taxable year
would be recharacterized as a return of capital to shareholders, thereby
reducing each shareholder's basis in his Fund shares.
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.
Dividends and capital gains distributions also may be subject to state and
local taxes.
Shareholders are urged to consult their own tax advisers regarding specific
questions as to Federal, state or local taxes.
PERFORMANCE DATA
From time to time the Fund may include its average annual total return and
other total return data in advertisements or information furnished to present
or prospective shareholders. Total return figures are based on the Fund's
historical performance and are not intended to indicate future performance.
Average annual total return is determined separately for Class A and Class B
shares in accordance with a formula specified by the Securities and Exchange
Commission.
Average annual total return quotations for the specified periods are computed
by finding the average annual compounded rates of return (based on net
investment income and any realized and unrealized capital
27
<PAGE>
gains or losses on portfolio investments over such periods) that would equate
the initial amount invested to the redeemable value of such investment at the
end of each period. Average annual total return is computed assuming all
dividends and distributions are reinvested and taking into account all
applicable recurring and nonrecurring expenses, including the maximum sales
charge in the case of Class A shares and the contingent deferred sales charge
that would be applicable to a complete redemption of the investment at the end
of the specified period in the case of Class B shares.
The Fund also may quote annual, average annual and annualized total return
and aggregate total return performance data, both as a percentage and as a
dollar amount based on a hypothetical $1,000 investment, for various periods
other than those noted below. Such data will be computed as described above,
except that, (1) as required by the periods of the quotations, actual annual,
annualized or aggregate data, rather than average annual data, may be quoted
and (2) the maximum applicable sales charges will not be included with respect
to annual or annualized rates of return calculations. Aside from the impact on
the performance data calculations of including or excluding the maximum
applicable sales charges, actual annual or annualized total return data
generally will be lower than average annual total return data since the
average rates of return reflect compounding of return; aggregate total return
data generally will be higher than average annual total return data since the
aggregate rates of return reflect compounding over a longer period of time.
Set forth below is total return information for both Class A and Class B
shares of the Fund for the periods indicated.
<TABLE>
<CAPTION>
CLASS A SHARES* CLASS B SHARES**
----------------------------------- -----------------------------------
REDEEMABLE REDEEMABLE
VALUE OF A VALUE OF A
EXPRESSED AS A HYPOTHETICAL EXPRESSED AS A HYPOTHETICAL
PERCENTAGE BASED $1,000 INVESTMENT PERCENTAGE BASED $1,000 INVESTMENT
ON A HYPOTHETICAL AT THE END OF THE ON A HYPOTHETICAL AT THE END OF THE
PERIOD $1,000 INVESTMENT PERIOD $1,000 INVESTMENT PERIOD
------ ----------------- ----------------- ----------------- -----------------
AVERAGE ANNUAL TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGE)
<S> <C> <C> <C> <C>
One Year Ended September
30, 1993............... 7.17% $1,071.70 9.49% $1,094.90
Five Years Ended
September 30, 1993..... 10.01% $1,611.40
November 29, 1985 to
September 30, 1993..... 9.35% $2,016.10
October 27, 1988 to
September 30, 1993..... 9.32% $1,551.30
<CAPTION>
ANNUAL TOTAL RETURN
(EXCLUDING MAXIMUM APPLICABLE SALES CHARGE)
YEAR ENDED SEPTEMBER 30,
- ------------------------
<S> <C> <C> <C> <C>
1993.................... 14.62% $1,146.20 13.49% $1,134.90
1992.................... 9.23% $1,092.30 8.01% $1,080.10
1991.................... 23.14% $1,231.40 21.91% $1,219.10
1990.................... (6.86%) $ 931.40 (7.79%) $ 922.10
1989.................... 16.93% $1,169.30
1988.................... (6.36%) $ 936.40
1987.................... 18.98% $1,189.80
November 29, 1985 to
September 30, 1986..... 12.29% $1,122.90
October 27, 1988 to
September 30, 1989..... 15.54% $1,155.40
<CAPTION>
AGGREGATE TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
<S> <C> <C> <C> <C>
November 29, 1985 to
September 30, 1993..... 101.61% $2,016.10
October 27, 1988 to
September 30, 1993..... 55.13% $1,551.30
</TABLE>
- --------
* Information as to Class A shares is presented only for the period October
27, 1988 to September 30, 1993. No Class A shares were sold prior to October
27, 1988.
** Commencement of Operations of Class B shares was November 29, 1985.
28
<PAGE>
In order to reflect the reduced sales charges in the case of Class A shares
or the waiver of the contingent deferred sales charge in the case of Class B
shares applicable to certain investors, as described under "Purchase of Shares"
and "Redemption of Shares", respectively, the total return data quoted by the
Fund, in advertisements directed to such investors, may take into account the
reduced, and not the maximum, sales charge or may not take into account the
contingent deferred sales charge and therefore may reflect greater total return
since, due to the reduced sales charges or the waiver of sales charges, a lower
amount of expenses may be deducted.
From time to time, the Fund may include the Fund's Morningstar risk-adjusted
performance rating in advertisements or supplemental sales literature.
INVESTMENT PRACTICES AND RESTRICTIONS
Reference is made to "Investment Objective and Policies" in the Prospectus
for a discussion of the investment objective and policies of the Fund.
Lending of Portfolio Securities. As discussed in the Prospectus, the Fund may
from time to time lend its portfolio securities in order to increase the total
yield on its portfolio. Such loans will be effected in accordance with
applicable regulatory guidelines and will at all times be secured by cash
collateral or securities issued or guaranteed by the United States government
in an amount that is at least equal to the market value, determined daily, of
the loaned securities. Cash collateral received by the Fund is invested in
short-term money market securities, and a portion of the yield earned on such
securities is retained by the Fund. Where securities, instead of cash, are
delivered to the Fund as collateral, the Fund earns its return in the form of a
loan premium paid by the borrower. The Fund retains the right to regain record
ownership of loaned securities and to exercise beneficial rights such as voting
rights, subscription rights and rights to dividends, interest or other
distributions. Securities loans can be terminated by the Fund at any time. The
Fund may pay reasonable finders', administrative and custodial fees in
connection with such loans.
Writing of Covered Call Options. As discussed in the Prospectus, the Fund may
from time to time sell ("write") covered call options. The term option, as used
herein, means an option issued by the Options Clearing Corporation and traded
on a national securities exchange. A call 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. When the
Fund writes an option it receives a premium. This premium is the price of such
option on the exchange on which it is traded. At the time the option is
written, the exercise price of the option may be lower, equal to or higher than
the market price of the security on which the option is written.
A call option is "covered" if the Fund already owns securities subject to the
option ("underlying securities") or has an absolute and immediate right to
acquire that security without additional cash consideration upon conversion or
exchange of other securities held in its portfolio. By writing a covered call
option, the Fund, in return for the premium income realized from the sale of
the option, gives up the opportunity to profit from any increase in the price
of the underlying security above the option exercise price during the period
until the option expires, is exercised or the Fund effects a "closing purchase
transaction" as described below. In addition the Fund will not be able to sell
the security during the period of the option without taking special steps
described below which will involve expense. If the call option expires
unexercised, the Fund realizes a gain (short-term capital gain for Federal
income tax purposes) in the amount of the premium received for the option. This
gain may be offset by a decline in the market price of the underlying security
during the option period.
29
<PAGE>
The Fund can terminate its obligation under an option prior to the expiration
date of the option by effecting a "closing purchase transaction." This is done
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. This can be done, however, only on an exchange which
provides a secondary market for an option of the same series and there is no
assurance that a secondary market will exist for any particular option. With
respect to a covered call option, in the event the Fund is unable to effect a
closing purchase transaction, it will not be able to dispose of the underlying
securities until the option expires or until the underlying securities are
delivered upon exercise of the option, with the result that the Fund will be
subject to the risk of decline in the price of the underlying securities during
such period. The Fund writes options on securities only if management believes
that secondary markets will exist on an exchange for options of the same series
which will permit the Fund to effect closing purchase transactions. Depending
on the premium paid by the Fund in effecting a closing purchase transaction and
transaction costs, the cost of a closing purchase transaction may exceed the
premium received by the Fund from writing the original option, in which case
the transaction will result in a loss to the Fund.
Foreign Securities. As discussed in the Prospectus, the Fund may invest up to
20% of its total assets in securities issued by foreign companies. Foreign
investments may be affected favorably or unfavorably by changes in currency
rates and exchange control regulations. There may be less publicly available
information about a foreign company than about a U.S. company, and foreign
companies may not be subject to uniform accounting, auditing and financial
reporting standards requirements comparable to those applicable to U.S.
companies. Securities of some foreign companies may be less liquid or more
volatile than securities of U.S. companies, and foreign brokerage commissions
and custodian fees are generally higher than in the U.S. There is generally
less government regulation of stock exchanges, brokers and listed companies
abroad than in the U.S. Investment in foreign securities may also be subject to
other risks different from those affecting U.S. investments, including local
political or economic developments, expropriation or nationalization of assets
and imposition of withholding taxes on dividends or interest payments.
Generally, the foreign exchange transactions of the Fund will be conducted on
a spot, i.e., cash, basis at the spot rate for purchasing or selling currency
prevailing in the foreign exchange market. This rate under normal market
conditions differs from the prevailing exchange rate in an amount generally
less than 0.1 of one percent due to the costs of converting from one currency
to another. However, the Fund has authority to deal in forward foreign exchange
between currencies of the different countries in which it will invest as a
hedge against possible variations in the foreign exchange rate between these
currencies. This is accomplished through contractual agreements to purchase or
sell a specified currency at a specified future date and price set at the time
of the contract. The Fund's dealings in forward foreign exchange will be
limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is the purchase or sale of forward foreign
currency with respect to specific receivables or payables of the Fund accruing
in connection with the purchase and sale of its portfolio securities, the sale
and redemption of shares of the Fund or the payment of dividends and
distributions by the Fund. Position hedging is the sale of forward foreign
currency with respect to portfolio security positions denominated or quoted in
such foreign currency. The Fund will not speculate in forward foreign exchange.
The Fund may not position hedge with respect to the currency of a particular
country to an extent greater than the aggregate market value (at the time of
making such sale) of the securities held in its portfolio denominated or quoted
in that particular foreign currency. If the Fund enters into a position hedging
transaction, its custodian bank will place cash or liquid equity or debt
securities in a separate account of the Fund in an amount equal to the value of
the Fund's total assets committed to the consummation of such forward contract.
If the value of the securities placed in the separate account declines,
30
<PAGE>
additional cash or securities will be placed in the account so that the value
of the account will equal the amount of the Fund's commitment with respect to
such contracts. The Fund will not attempt to hedge all of its foreign portfolio
positions and will enter into such transactions only to the extent, if any,
deemed appropriate by the Investment Adviser. The Fund will not enter into a
position hedging commitment if, as a result thereof, the Fund would have more
than 15% of the value of its assets committed to such contracts. The Fund will
not enter into a forward contract with a term of more than one year.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for the Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the
currency at a price above the devaluation level it anticipates. It is possible
that, under certain circumstances, the Fund may have to limit its currency
transactions to qualify as a regulated investment company under the Internal
Revenue Code; in this regard, the Fund presently intends to limit its gross
income from currency hedging transactions to less than 10% of its gross income
in any taxable year until such time as the Fund determines that income from the
transactions is not subject to this restriction. The cost to the Fund of
engaging in foreign currency transactions varies with such factors as the
currency involved, the length of the contract period and the market conditions
then prevailing. Since transactions in foreign currency exchange are usually
conducted on a principal basis, no fees or commissions are involved.
Portfolio Turnover. The Fund has not placed any limit on its rate of
portfolio turnover and securities may be sold without regard to the time they
have been held when, in the opinion of the Investment Adviser, investment
considerations warrant such action. As a result, portfolio turnover rate may
vary greatly from year to year or during periods within a year. Also, the use
of covered call options at times when the underlying securities are
appreciating in value may result in higher portfolio turnover than would
otherwise be the case. The Fund 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. A high rate of
portfolio turnover would result in correspondingly greater brokerage commission
expenses. Portfolio turnover rate is calculated by dividing the lesser of the
Fund's annual sales or purchases of portfolio securities (exclusive of
purchases and sales of Government securities and of all other securities,
including options, whose maturity or expiration dates at the time of
acquisition were one year or less) by the monthly average value of the
securities in the Fund during the fiscal year. For the years ended September
30, 1993 and 1992 the rate of portfolio turnover for the Fund was 79.55% and
65.40%, respectively.
Portfolio Brokerage. Subject to policies established by the Board of
Directors of the Fund, the Investment Adviser is responsible for the Fund's
portfolio decisions and the placing of orders to effect the Fund's portfolio
transactions. With respect to such transactions, the Investment Adviser seeks
to obtain the best net results for the Fund taking into account such factors as
price (including the applicable brokerage commission or dealer spread), size of
order, difficulty of execution, 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 Fund will
not necessarily be paying the lowest commission or spread available. The Fund
has no obligation to deal with any broker or dealer in the execution of its
portfolio transactions. The Fund contemplates that, consistent with the above
policy of obtaining the best net results, a substantial amount of its brokerage
transactions will be conducted through Merrill Lynch. The Fund has been
informed by Merrill Lynch that it will not attempt to influence or control the
placing by the Investment Adviser or by the Fund of orders for brokerage
transactions.
31
<PAGE>
Brokers and dealers, including Merrill Lynch, who provide supplemental
investment research (such as economic data and market forecasts) to the
Investment Adviser may receive orders for transactions by the Fund. 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 Fund. The expenses of the Investment Adviser are not necessarily
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 Fund may invest in securities traded in the over-the-counter market.
Transactions in the over-the-counter market are generally principal
transactions with dealers and the costs of such transactions involve dealer
spreads rather than brokerage commissions. With respect to over-the-counter
transactions, the Fund deals directly with dealers who make markets in the
securities involved where possible, except in circumstances where better prices
and execution are available elsewhere. Under the Investment Company Act of 1940
(the "Act"), Merrill Lynch and its affiliates are generally prohibited from
dealing with the Fund or its portfolios 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,
neither Merrill Lynch nor any affiliate of Merrill Lynch may serve as the
Fund's dealer in connection with such transactions. However, such companies may
serve as broker for the Fund in over-the-counter transactions conducted on an
agency basis.
The aggregate dollar amounts of brokerage commissions paid by the Fund for
the fiscal years ended September 30, 1993, 1992 and 1991 were $1,375, 992,
$1,433,924 and $2,548,636, respectively. The aggregate dollar amounts of such
portfolio transactions were $843,535,870, $1,042,727,092 and $4,045,684,979,
respectively, for such periods. During those periods, the aggregate dollar
amounts of brokerage commissions paid by the Fund to Merrill Lynch were
$80,436, $99,711 and $184,039, respectively. These amounts represent 5.85%,
6.95% and 7.22%, respectively, of the Fund's aggregate brokerage commissions
paid to all brokers during those periods. The Fund's aggregate dollar amounts
of transactions involving the payment of commissions effected through Merrill
Lynch during those periods were 1.65%, 5.83% and 1.99%, respectively, of the
aggregate dollar amount of all Fund transactions involving the payment of
commissions.
The Fund and one or more of the other investment companies or accounts which
the Investment Adviser or its wholly owned subsidiary, Fund Asset Management,
L.P., manages, may own the same investments from time to time. Similarly, a
particular security may be bought for one or more companies or accounts at the
same time that one or more companies or accounts are selling the same security.
If purchases or sales of securities for the Fund and other companies or
accounts arise for consideration at or about the same time, transactions in
such securities will be made, insofar as feasible, for the respective companies
and accounts in a manner deemed equitable to all. To the extent that
transactions on behalf of more than one company or account 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 the price of the
security being purchased or sold for the Fund.
The Board of Directors of the Fund has approved a written contract among the
Fund, Merrill Lynch and the Investment Adviser to permit Merrill Lynch to
effect portfolio transactions on national securities exchanges for the Fund and
to retain compensation in connection with such transactions. This arrangement
is in accord with a rule adopted by the Securities and Exchange Commission
under the Securities Exchange Act of 1934.
32
<PAGE>
Investment Restrictions. The Fund has adopted certain fundamental investment
restrictions which may not be changed without the prior approval of the holders
of the majority of the Fund's outstanding shares, including a majority of the
shares of each portfolio affected. A majority for this purpose means: (a) more
than 50% of the outstanding shares, or (b) 67% of the shares represented at a
meeting where more than 50% of the outstanding shares are represented,
whichever is less. For purposes of the following restrictions, all percentage
limitations apply immediately after a purchase or initial investment and any
subsequent change in any application percentage resulting from market
fluctuations does not require elimination of any security from a portfolio.
Under its fundamental investment restrictions, the Fund may not:
1. Invest more than 5% of the total assets of any portfolio in the
securities of any one issuer (except for government securities); or
purchase more than 10% of the outstanding voting securities of any one
company.
2. Pledge any of its assets, except that each portfolio may pledge
securities having a market value of not more than 10% of its total assets
in order to secure permitted borrowings from banks. Such borrowings may not
exceed 10% of any such portfolio's assets. No such portfolio may make
additional investments while outstanding borrowings are in excess of 5% of
its assets.
3. Purchase a restricted security or a security for which there is no
readily available market if as a result of such purchase more than 5% of
the total assets of the portfolio making the purchase would be invested in
such securities.
4. Invest more than 25% of the value of the total assets of any portfolio
in the securities of issuers in any single industry.
5. Invest in companies for the purpose of exercising control of
management.
6. Purchase or sell real estate.
7. Purchase or sell commodities or commodity contracts.
8. Purchase any securities on margin, except that any portfolio may
obtain such short-term credit as may be necessary for the clearance of
purchases and sales of portfolio securities.
9. Make short sales of securities or maintain a short position in any
security.
10. Lend money to other persons, except through the purchase of debt
obligations and repurchase agreements consistent with the investment
policies of the portfolio taking such action.
11. Lend securities of any portfolio in an amount exceeding 33 1/3% of
the value of total assets of such portfolio, both taken at market value at
the time any such loan is made.
12. Enter into a repurchase agreement maturing in more than seven days
if, as a result, such repurchase agreement, together with restricted
securities and securities for which there are no readily available markets,
would constitute more than 10% of the value of the total assets of the
portfolio entering into such agreement.
13. Underwrite securities of other issuers except insofar as the Fund or
any portfolio thereof may technically be deemed an underwriter under the
Securities Act of 1933 in selling portfolio securities.
14. Purchase securities of other open-end investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets.
15. Issue senior securities as defined in the Act, except that this
restriction shall not be deemed to prohibit any portfolio from making
permitted borrowings, lending its portfolio securities or entering into
repurchase agreements.
33
<PAGE>
The following additional investment restrictions have been adopted by the
Fund and may be changed by the Board of Directors. Under these restrictions,
the Fund may not:
1. Invest more than 5% of the assets of any portfolio, taken at market
value at the time of the investment, in companies having a record, together
with predecessors, of less than three years of continuous operation.
2. Purchase or sell interests in oil, gas or other mineral exploration or
development programs, except that any portfolio may invest in the
securities of companies which invest in such interests or sponsor such
programs.
3. Invest in warrants if at the time of acquisition more than 2% of the
value of the total assets of the portfolio making such acquisition, taken
at market value, would be invested in warrants. (For purposes of this
restriction, warrants acquired by a portfolio in units or attached to
securities are deemed to have no value.)
4. Invest in the securities of any issuer if, to the knowledge of the
Fund, any officer or director of the Fund or its investment adviser owns
more than 1/2 of 1% of the outstanding securities of such issuer and such
officers and directors who own more than 1/2 of 1% own in the aggregate
more than 5% of the outstanding securities of such issuer.
5. Borrow money, except for temporary or emergency purposes, and in any
case the Fund may not make borrowings in an aggregate amount in excess of
33 1/3% of its net assets.
GENERAL INFORMATION
DESCRIPTION OF SHARES
The Fund was incorporated under Maryland law on May 21, 1984, under the name
Merrill Lynch Retirement Fund, Inc. The name of the Fund was changed to Merrill
Lynch Retirement Benefit Investment Program, Inc. on August 8, 1985. On April
30, 1991, the Fund began doing business under the name Merrill Lynch Balanced
Fund for Investment and Retirement. The Fund has an authorized capital of
1,000,000,000 shares of Common Stock, par value $0.01 per share, divided into
two classes, designated Class A and Class B Common Stock, each of which
consists of 500,000,000 shares. Both Class A and Class B Common Stock represent
an interest in the same assets of the Fund and are identical in all respects
except that the Class B shares bear certain expenses related to the account
maintenance and distribution of such shares and have exclusive voting rights
with respect to matters relating to such account maintenance and distribution
expenditures.
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 Fund does not intend to
hold meetings of shareholders in any year in which the Act does not require
shareholders to act upon 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
accountants. Generally, under Maryland law, a meeting of shareholders may be
called for any purpose on the written request of the holders of at least 25% of
the outstanding shares of the Fund. 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 Fund and in the net assets of the
34
<PAGE>
Fund upon 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.
INDEPENDENT AUDITORS
Deloitte & Touche, 117 Campus Drive, Princeton, New Jersey 08540, has been
selected as the independent auditors of the Fund. The selection of independent
auditors is subject to ratification by the shareholders of the Fund, and the
employment of such auditors may be terminated without any penalty by vote of a
majority of the outstanding shares of the Fund at a meeting called for the
purpose of terminating such employment. The independent auditors are
responsible for auditing the annual financial statements of the Fund.
CUSTODIAN
National Westminster Bank NJ, Exchange Place Centre, 10 Exchange Place,
Jersey City, New Jersey 07302, acts as Custodian of the Fund's assets. The
Custodian is responsible for safeguarding and controlling the Fund's cash and
securities, handling the delivery of securities and collecting interest and
dividends on the Fund's investments.
TRANSFER AGENT
Financial Data Services, Inc., 4800 Deer Lake Drive East, Jacksonville,
Florida 33246-6484, acts as the Fund'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 "The Fund and
Its Management-- Transfer Agency Services" in the Prospectus.
LEGAL COUNSEL
Shereff, Friedman, Hoffman & Goodman, 919 Third Avenue, New York, New York
10022, is counsel for the Fund.
REPORTS TO SHAREHOLDERS
The fiscal year of the Fund ends on September 30 of each year. The Fund will
send to its shareholders at least semi-annually reports showing the Fund's
portfolio and other information. An annual report, containing financial
statements audited by independent auditors, is sent to shareholders each year.
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 Fund has filed with the Securities and Exchange
Commission, Washington, D.C., under the Securities Act of 1933 and the
Investment Company Act of 1940, to which reference is hereby made.
To the knowledge of the Fund, no person or entity owned beneficially 5% or
more of the Fund's shares on December 31, 1993.
35
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Balanced Fund for Investment and
Retirement (formerly Merrill Lynch
Retirement Benefit Investment
Program, Inc.);
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Merrill Lynch Balanced Fund for Investment and
Retirement as of September 30, 1993, the related statements of operations for
the year then ended and changes in net assets for each of the years in the two-
year period then ended, and the financial highlights for each of the years in
the five-year period then ended. These financial statements and the financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at
September 30, 1993 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Merrill Lynch
Balanced Fund for Investment and Retirement as of September 30, 1993, the
results of its operations, the changes in its net assets, and the financial
highlights for the respective stated periods in conformity with generally
accepted accounting principles.
Deloitte & Touche
Princeton, New Jersey
October 29, 1993
36
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Face Value Percent of
Industries Amount* Corporate Bonds Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Financial $10,000,000 American General Financial Corp., 7.38%
Services due 5/13/1997 $ 9,993,200 $ 10,737,500 1.2%
10,000,000 Ford Capital BV, 9.375% due 1/01/1998 10,037,900 11,475,000 1.3
5,000,000 Landeskreditbank, 7.875% due 4/15/2004 4,972,067 5,625,000 0.6
Tobacco 10,000,000 Philip Morris Companies, Inc., 7.75% due 5/01/1999 9,975,000 10,900,000 1.3
Total Investments in Corporate Bonds 34,978,167 38,737,500 4.4
<CAPTION>
Country US Government & Agency Obligations
<S> <C> <S> <C> <C> <C>
United States Federal Home Loan Mortgage Corp.:
4,659,000 REMIC 1243-HP, 7.50% due 11/15/2004(a) 4,547,621 4,891,950 0.6
25,000,000 REMIC FHG 16PH, 6.75% due 4/15/2021(a) 25,390,625 25,753,906 3.0
20,000,000 Federal National Mortgage Association, REMIC
1993 103PG, 6.75% due 5/25/2022(a) 20,262,500 20,384,375 2.3
5,000,000 Republic of Italy, 8.75% due 2/08/2001 5,373,050 5,817,445 0.7
US Treasury Notes:
55,000,000 7.875% due 8/15/2001 53,943,600 64,255,455 7.4
25,000,000 6.25% due 2/15/2003 25,710,938 26,441,400 3.0
35,000,000 5.75% due 8/15/2003 36,432,813 35,907,830 4.1
22,000,000 US Treasury STRIPS++, 4.79% due 5/15/2000(b) 15,175,873 15,659,600 1.8
Total Investments in US Government &
Agency Obligations 186,837,020 199,111,961 22.9
<CAPTION>
Foreign Obligations
<S> <S> <C> <S> <C> <C> <C>
Australia A$ 4,000,000 Queensland Treasury Corp. Global, 8.00%
due 7/14/1999 2,977,727 2,742,114 0.3
Canada C$ 14,500,000 Government of Canada, 7.25% due 6/01/2003 10,739,024 11,025,826 1.3
France Ffr 32,500,000 Obligations Assimables de Tresor, 8.50% due
4/25/2003 6,538,792 6,687,965 0.8
Italy Lit 10,500,000,000 BTPS, 12.00% due 1/01/1998 6,889,745 7,254,215 0.8
Japan Yen 350,000,000 Kingdom of Belgium, 6.875% due 7/09/2001 2,850,635 3,847,026 0.5
World Bank:
550,000,000 4.50% due 12/22/1997 4,631,436 5,442,871 0.6
200,000,000 5.25% due 3/20/2002 1,455,944 2,050,992 0.2
Mexico Mxp 45,013,640 Mexican Cetes, 12.60% due 9/07/1995(b) 11,613,458 11,352,583 1.3
Sweden Skr 34,000,000 Government of Sweden, 10.75% due 1/23/1997 4,797,378 4,652,887 0.5
United Pound
Kingdom Sterling 1,350,000 UK Treasury Gilt, 8.75% due 9/01/1997 2,267,919 2,195,660 0.3
Total Investments in Foreign Obligations 54,762,058 57,252,139 6.6
Total Investments in Corporate Bonds,
US Government & Agency & Foreign
Obligations 276,577,245 295,101,600 33.9
</TABLE>
37
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Value Percent of
Industries Held US Stocks & Warrants Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Basic Industry
Auto & Truck 155,000 Consorcio G Groupo Dina (ADR) (d) $ 2,506,119 $ 3,138,750 0.4%
Chemical 140,000 PPG Industries, Inc. 10,063,769 9,135,000 1.0
Forest Products 195,000 Willamette Industries, Inc. 7,348,738 7,410,000 0.9
Packaging 615,000 Crown Cork & Seal Co., Inc. 16,800,048 21,986,250 2.5
Plastics 125,000 Rohm & Haas Co. 6,791,460 6,296,875 0.7
Total Basic Industry 43,510,134 47,966,875 5.5
Capital Spending
Aerospace 257,000 Allied-Signal Inc. 13,823,545 18,728,875 2.1
Communication 150,000 Motorola, Inc. 8,615,563 15,150,000 1.7
Equipment
Computer Services 130,000 ++++Computer Sciences Corp. 9,841,829 11,927,500 1.4
140,000 General Motors Corp. 4,261,130 4,077,500 0.5
Electrical 132,000 Emerson Electric Co. 6,798,426 7,755,000 0.9
Equipment 675,000 Singer Co. N.V. 17,730,688 25,312,500 2.9
Electronics 30,000 ++++Solectron Corp. 1,122,882 1,642,500 0.2
280,000 ++++Teradyne Inc. 4,418,915 7,770,000 0.9
Engineering & 50,000 Thermo Electron Corp. 2,987,818 3,175,000 0.4
Construction
Miscellaneous 400,000 Corning Glass Works 14,012,126 13,400,000 1.5
135,000 Tellabs, Inc. 5,554,861 8,437,500 1.0
35,000 Whirlpool Corp. 1,854,188 2,060,625 0.2
Office Equipment 240,000 Danka Business Systems (ADR) (d) 6,123,041 7,080,000 0.8
Pollution Control 1,140,000 Wheelabrator Technologies, Inc. 12,797,181 20,092,500 2.3
Total Capital Spending 109,942,193 146,609,500 16.8
Consumer Goods & Services
Apparel 245,000 Phillips-Van Heusen Corp. 5,697,027 7,870,625 0.9
Automobile
& Equipment 450,000 Cooper Tire & Rubber Co. 8,426,497 11,306,250 1.3
Automotive 210,000 Ford Motor Co. 11,292,000 11,602,500 1.3
Beverages 26,000 Coca-Cola Femsa S.A. (ADR) (d) 566,372 617,500 0.1
19,100 Pan American Beverage 487,050 544,350 0.1
70,000 PepsiCo., Inc. 2,782,941 2,738,750 0.3
Healthcare--Products 510,000 Huntingdon International Holdings PLC (ADR) (d) 12,702,548 5,610,000 0.6
& Services 80,000 Johnson & Johnson, Inc. 3,200,505 3,140,000 0.4
</TABLE>
38
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Value Percent of
Industries Held US Stocks & Warrants Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Consumer Goods & Services (concluded)
Household Products 25,000 Procter & Gamble Co. $ 1,212,120 $ 1,187,500 0.1
Media/Publishing 40,000 News Corp. (ADR) (d) 1,815,791 2,250,000 0.3
Medical 200,000 ++++Physician Corp. 3,715,593 3,800,000 0.4
Printing & Publishing 355,000 Gannett Co. 15,790,424 16,995,625 2.0
Retail Stores 150,000 Heilig-Meyers Co. 1,973,810 4,781,250 0.5
Services 90,000 Block (H & R), Inc. 2,675,014 3,420,000 0.4
Soap 140,000 Colgate-Palmolive Co. 6,283,473 7,350,000 0.8
Telecommunications 76,200 ALC Communications Corp. 1,943,100 2,095,500 0.3
11,300 ++++Antec Corp. 203,400 265,550 0.0
155,000 ++++DSC Communications Corp. 7,060,659 9,455,000 1.1
550,000 MCI Communications Corp. 15,538,597 15,056,250 1.7
Total Consumer Goods & Services 103,366,921 110,086,650 12.6
Credit-Sensitive & Financial Services
Banking 315,000 Bank of New York Co. 13,183,294 17,836,875 2.0
80,000 Bank of New York Co. (Warrants) (c) 595,620 810,000 0.1
122,500 Espirito Santo (ADR) (d) 3,447,435 4,011,875 0.5
315,000 Society Corp. 10,387,520 10,080,000 1.2
Communications 324,875 ++++LDDS Communications (Class A) 13,898,703 16,162,531 1.9
Equipment 50,000 ++++Picture Tel Corp. 910,880 862,500 0.1
Insurance 70,000 Capital Holding Corp. 2,697,825 3,027,500 0.3
Total Credit-Sensitive & Financial Services 45,121,277 52,791,281 6.1
Energy
Oil 140,000 British Petroleum PLC (ADR)(d)(1) 7,683,915 8,312,500 1.0
413,018 British Petroleum PLC 1,943,586 2,005,929 0.2
90,000 Chevron Corp. 7,904,107 8,797,500 1.0
115,000 Royal Dutch British Petroleum Co. N.V. (ADR)(d) 9,786,535 11,686,875 1.3
Petroleum 300,000 Phillips Petroleum Co. 8,639,686 10,087,500 1.2
Utilities 314,000 California Energy Co., Inc. 5,576,243 5,769,750 0.7
Total Energy 41,534,072 46,660,054 5.4
</TABLE>
39
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Value Percent of
Industries Held US Stocks & Warrants Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Smaller Capital
Smaller Growth 260,000 ++++ADC Telecommunications, Inc. $ 6,959,902 $ 10,140,000 1.2%
140,000 Bandag, Inc. (Class A) 6,400,395 7,332,500 0.8
62,775 Kelly Services, Inc. (Class A) 1,792,414 1,490,906 0.2
110,000 ++++Vivra Inc. 3,078,837 3,795,000 0.4
Total Smaller Capital 18,231,548 22,758,406 2.6
Total Investments in US Stocks & Warrants 361,706,145 426,872,766 49.0
<CAPTION>
Foreign Stocks & Warrants
<S> <C> <S> <C> <C> <C>
Argentina
Banking 50,000 Banco de Galicia y Buenos Aires S.A. (ADR) (d) 1,087,500 1,587,500 0.2
Miscellaneous 275,000 ++++Telefonica de Argentina S.A. 1,120,159 1,295,090 0.1
Australia
Banking 328,144 National Australia Bank Ltd. 2,046,966 2,557,163 0.3
Multi-Industry 294,274 Pacific Dunlop, Ltd. 1,105,242 943,486 0.1
Retail 270,000 Coles Myer Ltd. (Warrants)(c) 808,121 362,288 0.1
Canada
Miscellaneous 280,000 International Semi-Tech Microelectronics (Receipts) (f) 1,806,344 1,784,108 0.2
Chile
Utilities 121,600 Distribuidora Chilectra Metropolitana S.A.
(ADR)(d)(1) 3,323,793 3,449,792 0.4
France
Electronics 3,500 Compagnie Generale des Eaux 1,306,017 1,589,116 0.2
Germany
Machinery 2,000 Mannesmann A.G. 343,289 376,304 0.0
Hong Kong
Banking 518,766 HSBC Holdings PLC 2,806,717 5,466,696 0.6
Electronics 1,300,000 Johnson Electric Co. 2,603,189 3,143,264 0.4
Multi-Industry 3,004,000 Hutchison Whampoa, Ltd. 5,907,278 9,205,431 1.1
800,000 Swire Pacific, Ltd. (Class A) 3,049,508 4,189,294 0.5
Real Estate 40,000 Cheung Kong (Holdings) Ltd. 144,109 142,229 0.0
1,000,000 Hong Kong Land Holdings, Ltd. 1,944,997 2,262,736 0.3
</TABLE>
40
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Value Percent of
Industries Held Foreign Stocks & Warrants Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Italy
Utilities 1,000,000 ++++Societa Finanziaria Telefonica S.p.A. (STET) $ 1,589,749 $ 2,031,196 0.2%
Japan
Capital Goods 150,000 Hitachi Cable, Ltd. 1,217,317 1,127,479 0.1
250,000 Hitachi, Ltd. 1,835,126 1,933,428 0.2
Construction & 75,000 Daiwa House Industries 1,227,714 1,175,637 0.1
Housing
Electrical 175,000 Sharp Corp. 1,778,863 2,412,653 0.3
Equipment
Electronics 75,000 Makita Electric Work 1,247,512 1,253,541 0.1
Insurance 300,000 Nippon Fire & Marine Insurance Co., Ltd. 2,048,480 2,181,303 0.3
Machinery 150,000 Komatsu, Ltd. 940,949 1,046,742 0.1
150,000 Mitsubishi Heavy Industries, Ltd. 784,198 912,181 0.1
Utilities-Electric 25,000 Tokyo Electric Power Company, Inc. 924,882 774,315 0.1
Mexico
Banking 125,000 Grupo Financiero Bancomer, S.A. de C.V. (ADR)(d) (1) 3,681,243 3,750,000 0.4
Construction 300,000 Empresas ICA Sociedad Controladora,
S.A. de C.V. (ADR)(d) 5,870,455 5,175,000 0.6
Multi-Industry 700,000 ++++Grupo Carso, S.A. de C.V. (ADR)(d) (1) 5,957,220 9,275,000 1.1
Retail Stores 2,000,000 ++++Cifra, S.A. de C.V. 'C' 1,755,970 4,358,276 0.5
Telecommunications 350,000 Telefonos de Mexico, S.A. de C.V. (ADR)(d) 13,274,795 17,675,000 2.0
Netherlands
Insurance 127,658 Aegon N.V. 5,441,143 6,119,155 0.7
Portugal
Banking 96,000 Banco Commercial Portugal (New) (ADR)(d) 1,280,967 1,284,000 0.1
97,000 Banco Commercial Portugal (Registered) 1,233,051 1,272,890 0.1
Spain
Electrical Utilities 75,000 Empresa Nacional de Electricidad S.A. (ADR)(d) 1,049,706 3,046,875 0.4
Oil & Related 60,000 Repsol S.A. 1,616,190 1,735,160 0.2
United Kingdom
Business Services 75,000 Reuters Holding PLC (ADR)(d) 3,856,856 5,175,000 0.6
</TABLE>
41
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Shares Value Percent of
Industries Held Foreign Stocks & Warrants Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Venezuela
Automobile & 657,500 Siderurgica Venezolana SIVENSA
Equipment S.A.I.C.A.-S.A.C.A. (ADR) (Warrants)(c)(d)(1) $ 1,544,625 $ 19,725 0.0%
Steel 95,000 ++++Venezolana de Prerreducidos Caroni
'Venprecar' (GDS)(e)(1) 693,500 558,125 0.1
Total Investments in Foreign Stocks & Warrants 90,253,740 112,647,178 12.9
</TABLE>
<TABLE>
<CAPTION>
Total Investments in US & Foreign Stocks
& Warrants 451,959,885 539,519,944 61.9
Face
Amount Short-Term Securities
<S> <C> <S> <C> <C> <C>
Commercial $21,296,000 General Electric Capital Corp., 3.45% due
Paper** 10/01/1993 21,296,000 21,296,000 2.4
Total Investments in Short-Term Securities 21,296,000 21,296,000 2.4
Total Investments $749,833,130 855,917,544 98.2
============
Other Assets Less Liabilities 15,725,364 1.8
------------ ------
Net Assets $871,642,908 100.0%
============ ======
<FN>
(a)Real Estate Mortgage Investment Conduits (REMICs).
(b)Represents the yield-to-maturity on this zero coupon issue.
(c)Warrants entitle the Fund to purchase a predetermined
number of shares of Common Stock. The purchase price and
number of shares are subject to adjustment under certain
conditions until the expiration date.
(d)American Depositary Receipt (ADR).
(e)Global Depositary Shares (GDS).
(f)Receipts evidence payment by the Fund of 40% of the pur-
chase price of Class A Shares of International Semi-Tech
Microelectronics, Inc. The Fund is obligated to pay the
remaining 60%, approximately $2,700,000 over the next two years.
*Denominated in US dollars unless otherwise indicated.
**Commercial Paper is traded on a discount basis; the interest
rates shown are the discount rates paid at the time of
purchase by the Fund.
++Separate Trading of Registrated Interest and Principal
of Securities (STRIPS).
++++Non-income producing security.
See Notes to Financial Statements.
(1)Restricted securities as to resale. The value of the Fund's
investment in restricted securities was approximately $25,365,000,
representing 2.9% of net assets.
Value
Issue Acquisition Date Cost (Note 1a)
British Petroleum PLC
(ADR) 5/27/92-8/09/93 $7,683,915 $8,312,500
Distribuidora Chilectra
Metropolitana S.A. (ADR) 2/12/92-2/26/92 3,323,793 3,449,792
Grupo Carso,
S.A. de C.V. (ADR) 9/24/91-1/24/92 5,957,220 9,275,000
Grupo Financiero
Bancomer, S.A. de C.V.
(ADR) 4/03/92-10/06/92 3,681,243 3,750,000
Siderurgica Venezolana
SIVENSA S.A.I.C.A.-
S.A.C.A. (ADR) (Warrants) 2/13/92-3/16/92 1,544,625 19,725
Venezolana de
Prerreducidos Caroni
'Venprecar' (GDS) 2/13/92 693,500 558,125
Total $22,884,296 $25,365,142
=========== ===========
</TABLE>
42
<PAGE>
<TABLE>
FINANCIAL INFORMATION
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES AS OF SEPTEMBER 30, 1993
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$749,833,130) (Note 1a) $855,917,544
Cash 104,957
Receivables:
Securities sold $ 14,049,878
Interest 3,794,532
Dividends 839,969
Capital shares sold 614,161 19,298,540
------------
Deferred organization expenses (Note 1f) 2,683
Prepaid registration fees and other assets (Note 1) 145,110
------------
Total assets 875,468,834
------------
Liabilities: Payables:
Capital shares redeemed 2,182,862
Distributor (Note 2) 684,001
Investment adviser (Note 2) 451,029 3,317,892
------------
Accrued expenses and other liabilities 508,034
------------
Total liabilities 3,825,926
------------
Net Assets: Net assets $871,642,908
============
Net Assets Class A Common Stock, $0.01 par value, 500,000,000 shares authorized $ 31,261
Consist of: Class B Common Stock, $0.01 par value, 500,000,000 shares authorized 634,896
Paid-in capital in excess of par 687,221,327
Undistributed investment income--net 4,746,266
Undistributed realized capital gains--net 72,960,816
Unrealized appreciation on investments--net 106,048,342
------------
Net assets $871,642,908
============
Net Asset Class A--Based on net assets of $40,688,322 and 3,126,077 shares
Value: outstanding $ 13.02
============
Class B--Based on net assets of $830,954,586 and 63,489,601 shares
outstanding $ 13.09
============
See Notes to Financial Statements.
</TABLE>
43
<PAGE>
<TABLE>
FINANCIAL INFORMATION (continued)
<CAPTION>
Statement of Operations for the Year Ended September 30, 1993
<S> <C> <C>
Investment Interest and discount earned $ 21,852,613
Income Dividends (net of $356,183 foreign withholding tax) 10,955,111
(Notes 1d & 1e): ------------
Total income 32,807,724
------------
Expenses: Distribution fees--Class B (Note 2) 8,587,740
Investment advisory fees (Note 2) 5,620,993
Transfer agent fees--Class B (Note 2) 1,281,016
Printing and shareholder reports 203,151
Accounting services (Note 2) 143,231
Custodian fees 142,314
Professional fees 66,179
Registration fees (Note 1f) 55,261
Transfer agent fees--Class A (Note 2) 43,692
Directors' fees and expenses 36,447
Amortization of organization expenses (Note 1f) 32,191
Pricing fees 4,616
Other 20,035
------------
Total expenses 16,236,866
------------
Realized transaction gain--net (Note 1b) 1,780,462
------------
Investment income--net 18,351,320
------------
Realized & Realized gain on investments--net 81,149,148
Unrealized Gain on Change in unrealized appreciation on investments--net 14,121,027
Investments--Net ------------
(Notes 1e & 3): Net Increase in Net Assets Resulting from Operations $113,621,495
============
<CAPTION>
Statements of Changes in Net Assets
For the Year Ended Sept. 30,
Increase (Decrease) in Net Assets: 1993 1992
<S> <S> <C> <C>
Operations: Investment income--net $ 18,351,320 $ 20,626,192
Realized gain on investments--net 81,149,148 62,706,063
Change in unrealized appreciation on investments--net 14,121,027 (5,892,297)
------------ -----------
Net increase in net assets resulting from operations 113,621,495 77,439,958
------------ -----------
Dividends & Investment Income--net:
Distributions to Class A (994,119) (594,211)
Shareholders Class B (17,314,603) (24,114,241)
(Note 1g): Realized gain on investments--net:
Class A (1,508,643) --
Class B (59,542,543) --
------------ ------------
Net decrease in net assets resulting from dividends
and distributions to shareholders (79,359,908) (24,708,452)
------------ ------------
Capital Share Trans- Net decrease in net assets derived from capital
actions (Note 4): share transactions (69,858,642) (145,224,775)
------------- ------------
Net Assets: Total decrease in net assets (35,597,055) (92,493,269)
Beginning of year 907,239,963 999,733,232
------------ ------------
End of year* $871,642,908 $907,239,963
<FN> ============ ============
*Undistributed investment income-net $ 4,746,266 $ 4,703,668
============ ============
See Notes to Financial Statements.
</TABLE>
44
<PAGE>
<TABLE>
FINANCIAL INFORMATION (continued)
<CAPTION>
Financial Highlights
Class A
----------------------------------------------------
For the
Period
Oct. 27,
1988++ to
The following per share data and ratios have been For the Year Ended September 30, Sept. 30,
derived from information provided in the financial statements. 1993 1992 1991 1990 1989
Increase (Decrease) in Net Asset Value:
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 12.57 $ 11.94 $ 10.61 $ 11.93 $ 11.18
Operating ------- ------- ------- ------- -------
Performance: Investment income-net .47 .46 .64 .64 .24
Realized and unrealized gain (loss) on
investments--net 1.25 .62 1.69 (1.41) 1.42
------- ------- ------- ------- -------
Total from investment operations 1.72 1.08 2.33 (.77) 1.66
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net (.39) (.45) (.62) (.55) (.90)
Realized gain on investments--net (.88) -- (.38) -- (.01)
------- ------- ------- ------- -------
Total dividends and distributions (1.27) (.45) (1.00) (.55) (.91)
------- ------- ------- ------- -------
Net asset value, end of period $ 13.02 $ 12.57 $ 11.94 $ 10.61 $ 11.93
======= ======= ======= ======= =======
Total Investment Based on net asset value per share 14.62% 9.23% 23.14% (6.86%) 15.54%+++
Return:** ======= ======= ======== ======== =======
Ratios to Average Expenses .83% .81% .85% .83% .78%*
Net Assets: ======= ======= ======== ======== ========
Investment income--net 3.09% 3.18% 3.64% 5.12% 4.23%*
======= ======= ======== ======== ========
Supplemental Data: Net assets, end of period (in thousands) $40,688 $20,320 $12,839 $ 4,511 $ 2,080
======= ======= ======= ======== ========
Portfolio turnover 79.55% 65.40% 173.76% 163.56% 175.47%
======= ======= ======= ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment returns.
See Notes to Financial Statements.
</TABLE>
45
<PAGE>
<TABLE>
FINANCIAL INFORMATION (concluded)
<CAPTION>
Financial Highlights (concluded)
The following per share data and ratios have been derived
from information provided in the financial statements. Class B
For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1993 1992 1991 1990 1989
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 12.62 $ 11.99 $ 10.60 $ 11.91 $ 10.94
Operating -------- -------- -------- ---------- ----------
Performance: Investment income--net .27 .28 .41 .50 .53
Realized and unrealized gain (loss) on
investments--net 1.34 .67 1.81 (1.39) 1.25
-------- --------- --------- ---------- ----------
Total from investment operations 1.61 .95 2.22 (.89) 1.78
Less dividends and distributions: -------- --------- --------- ---------- ----------
Investment income--net (.26) (.32) (.45) (.42) (.80)
Realized gain on investments--net (.88) -- (.38) -- (.01)
-------- --------- --------- ---------- ----------
Total dividends and distributions (1.14) (.32) (.83) (.42) (.81)
-------- --------- --------- ---------- ----------
Net asset value, end of year $ 13.09 $ 12.62 $ 11.99 $ 10.60 $ 11.91
======== ========= ========= ========== ==========
Total Investment Based on net asset value per share 13.49% 8.01% 21.91% (7.79%) 16.93%
Return:* ======== ========= ========= ========== ==========
Ratios to Average Expenses, excluding distribution fees .85% .85% .90% .86% .84%
Net Assets: ======== ========= ======== ========== ==========
Expenses 1.85% 1.85% 1.90% 1.86% 1.84%
======== ========= ======== ========== ==========
Investment income--net 1.99% 2.10% 3.37% 3.90% 3.73%
======== ========= ======== ========== ==========
Supplemental Data: Net assets, end of year (in thousands) $830,955 $886,920 $986,895 $1,171,567 $1,735,873
======== ======== ======== ========== ==========
Portfolio turnover 79.55% 65.40% 173.76% 163.56% 175.47%
======== ======== ======== ========== ==========
<FN>
*Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
</TABLE>
46
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Retirement Benefit Investment Pro-
gram, Inc., Full Investment Portfolio does business
under the name Merrill Lynch Balanced Fund for
Investment and Retirement. Merrill Lynch Balanced
Fund for Investment and Retirement (the "Fund")
is registered under the Investment Company Act
of 1940 as a diversified, open-end investment
management company. The Fund offers both Class A
and Class B Shares. Class A Shares are sold with a
front-end sales charge. Class B Shares may be subject
to a contingent deferred sales charge. Both classes
of shares have identical voting, dividend, liquidation
and other rights and the same terms and conditions,
except that Class B Shares bear certain expenses
related to the distribution of such shares and have
exclusive voting rights with respect to matters
relating to such distribution expenditures. The
following is a summary of significant accounting
policies followed by the Fund.
(a) Valuation of investments--Portfolio securities
and options which are traded on stock exchanges are
valued at the last sale price as of the close of busi-
ness on the day the securities are being valued or,
lacking any sales, at the mean between closing bid
and asked prices. Securities traded in the over-
the-counter market are valued at the last quoted
bid prices at the close of trading on the New York
Stock Exchange on each day by brokers that make
markets in the securities. Portfolio securities which
are traded both in the over-the-counter market and
on a stock exchange are valued according to the
broadest and most representative market. Short-
term securities are valued at amortized cost which
approximates market. Securities and assets for
which market quotations are not readily available
are valued at fair value as determined in good
faith by or under the direction of the Board of
Directors of the Fund.
(b) Foreign currency transactions--Transactions
denominated in foreign currencies are recorded in the
Fund's records at the rate prevailing when earned or in-
curred. Asset and liability accounts that are denomi-
nated in a foreign currency are adjusted to reflect the
current exchange rate at the end of the period. Trans-
action gains or losses resulting from settlement of
the foreign currency transactions are reported in net
investment income for the current period.
The Fund is authorized to enter into forward foreign
exchange contracts as a hedge against either spe-
cific transactions or portfolio positions. Such con-
tracts are not entered on the Fund's records. However,
the effect on net investment income is recorded
from the date the Fund enters into such contracts.
Premium or discount is amortized over the life of
the contracts.
(c) Options--When the Fund sells an option, an
amount equal to the premium received by the Fund
is reflected as an asset and an equivalent liability.
The amount of the liability is subsequently marked
to market to reflect the current market value of the
option written.
When a security is sold through an exercise of an
option, the related premium received is deducted from
the basis of the security sold. When an option expires
(or the Fund enters into a closing transaction), the
Fund realizes a gain or loss on the option to the extent
of the premiums received or paid (or loss or gain to
the extent the cost of the closing transaction is less
than or greater than the premium paid or received).
Written and purchased options are non-income
producing investments.
(d) Income taxes--It is the Fund's policy to comply
with the requirements of the Internal Revenue Code
applicable to regulated investment companies and
to distribute substantially all of its taxable income
to its shareholders. Therefore, no Federal income tax
provision is required. Under the applicable foreign
tax law, a withholding tax may be imposed on interest,
dividends and capital gains at various rates.
(e) Security transactions and investment income--
Security transactions are recorded on the dates the
transactions are entered into (the trade dates). Divi-
dend income is recorded on the ex-dividend date,
except that if the ex-dividend date has passed, certain
dividends from foreign securities are recorded as
soon as the Fund is informed of the ex-dividend date.
Interest income (including amortization of discount)
is recognized on the accrual basis. Realized gains
and losses on security transactions are determined
on the identified cost basis.
(f) Deferred organization expenses and prepaid reg-
istration fees--Deferred organization expenses are
charged to expense on a straight-line basis over a
five-year period. Costs related to the organization of
the second class of shares are charged to expense
over a period not exceeding five years. Prepaid regis-
tration fees are charged to expense as the related
shares are issued.
47
<PAGE>
(g) Dividends and distributions--Dividends and
distributions paid by the Fund are recorded on the
ex-dividend dates.
2. Investment Advisory Agreement and
Transaction with Affiliates:
The Fund has entered into an Investment Advisory
Agreement with Merrill Lynch Asset Management
("MLAM" or "Adviser"). MLAM is the name under
which Merrill Lynch Investment Management, Inc.
("MLIM") does business. MLIM is an indirect
wholly-owned subsidiary of Merrill Lynch & Co., Inc.
The Fund has also entered into a Distribution
Agreement and a Distribution Plan with Merrill
Lynch Funds Distributor, Inc. ("MLFD" or "Distrib-
utor"), a wholly-owned subsidiary of MLIM.
MLAM is responsible for the management of the
Fund's portfolio and provides the necessary person-
nel, facilities, equipment and certain other services
necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee based upon
the average daily value of the Fund's net assets
at the following annual rates: 0.65% of the average
daily net assets not exceeding $500 million; 0.60%
of the average daily net assets exceeding $500 mil-
lion but not exceeding $1.5 billion; 0.55% of the
average daily net assets exceeding $1.5 billion but
not exceeding $2.5 billion; 0.50% of the average
daily net assets exceeding $2.5 billion but not
exceeding $3.5 billion; and 0.45% of the average
daily net assets exceeding $3.5 billion. The most
restrictive annual expense limitation requires
that the Adviser reimburse the Fund to the extent
the Fund's expenses (excluding interest, taxes,
distribution fees, brokerage fees and commissions,
and extraordinary items) exceed 2.5% of the
Fund's first $30 million of average daily net assets,
2.0% of the next $70 million of average daily net
assets, and 1.5% of the average daily net assets
in excess thereof. No payment will be made to
MLAM during any fiscal year which will cause
such expenses to exceed the most restrictive
expense limitation applicable at the time of such
payment.
The Fund has adopted a Plan of Distribution (the
"Plan") pursuant to Rule 12b-1 under the Investment
Company Act of 1940 pursuant to which MLFD
receives a fee from the Fund at the end of each
month at the annual rate of 1.0% of the average daily
net assets of the Fund's Class B Shares. This fee is
to compensate MLFD for services provided and the
expense borne by it under the Distribution Agree-
ment. As authorized by the Plan, MLFD has entered
into an agreement with Merrill Lynch, Pierce, Fenner
& Smith Inc. ("MLPF&S") which provides for the
compensation of MLPF&S for providing distribution-
related services to the Fund.
For the year ended September 30, 1993, MLFD
earned underwriting discounts of $3,517, and
MLPF&S received dealer concessions of $58,925 on
sales of the Fund's Class A Shares.
MLPF&S received contingent deferred sales charges
of $182,110 relating to transactions in Class B Shares
and $80,436 in commissions on the execution of
portfolio security transactions for the Fund during
the period.
Financial Data Services, Inc. ("FDS"), a wholly-
owned subsidiary of Merrill Lynch & Co., Inc., is
the Fund's transfer agent.
Accounting services are provided to the Fund by
MLAM at cost.
Certain officers and/or directors of the Fund are
officers and/or directors of MLIM, MLPF&S, FDS,
MLFD, and/or Merrill Lynch & Co., Inc.
3. Investments:
Purchases and sales of investments, excluding short-
term securities, for the year ended September 30,
1993 were $675,275,908 and $801,290,251,
respectively.
Net realized and unrealized gains (losses) as of
September 30, 1993 were as follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Long-term investments $ 81,114,248 $106,084,414
Short-term investments (43) --
Options written 34,943 --
Foreign currency
transactions 1,780,462 (36,072)
------------ ------------
Total $ 82,929,610 $106,048,342
============ ============
As of September 30, 1993, net unrealized apprecia-
tion for Federal income tax purposes aggregated
$106,084,414, of which $121,183,280 related to
appreciated securities and $15,098,866 related to
depreciated securities. The aggregate cost of invest-
ments at September 30, 1993 for Federal income tax
purposes was $749,833,130.
48
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded)
Transactions in call options written for the year
ended September 30, 1993 were as follows:
Par Value/Shares
Covered by Premiums
Written Options Received
Outstanding options at
beginning of year 16,500 $ 69,628
Options written 15,000 34,943
Options closed
Options exercised (16,500) (69,628)
Options expired (15,000) (34,943)
-------- --------
Outstanding options at
end of year -- $ --
======== ========
4. Capital Share Transactions:
Net decrease in net assets derived from capital
share transactions was $69,858,642 and $145,224,775
for the years ended September 30, 1993 and
September 30, 1992, respectively.
Transactions in capital shares for Class A and Class B
Shares were as follows:
Class A Shares for the Year Dollar
Ended September 30, 1993 Shares Amount
Shares sold 2,695,028 $ 33,091,210
Shares issued to share-
holders in reinvestment
of dividends and distri-
butions 161,050 1,956,633
---------- ------------
Total issued 2,856,078 35,047,843
Shares redeemed (1,346,924) (17,015,867)
---------- ------------
Net increase 1,509,154 $ 18,031,976
========= ============
Class A Shares for the Year Dollar
Ended September 30, 1992 Shares Amount
Shares sold 697,474 $ 8,796,367
Shares issued to share-
holders in reinvestment
of dividends 35,938 437,001
--------- -----------
Total issued 733,412 9,233,368
Shares redeemed (191,640) (2,379,244)
--------- -----------
Net increase 541,772 $ 6,854,124
========= ===========
Class B Shares for the Year Dollar
Ended September 30, 1993 Shares Amount
Shares sold 2,722,243 $ 34,400,436
Shares issued to share-
holders in reinvestment
of dividends and distri-
butions 5,336,253 65,136,704
----------- -------------
Total issued 8,058,496 99,537,140
Shares redeemed (14,832,136) (187,427,758)
----------- -------------
Net decrease (6,773,640) $ (87,890,618)
============ =============
Class B Shares for the Year Dollar
Ended September 30, 1992 Shares Amount
Shares sold 3,734,041 $ 46,964,102
Shares issued to share-
holders in reinvestment
of dividends 1,676,910 20,414,677
------------ --------------
Total issued 5,410,951 67,378,779
Shares redeemed (17,491,842) (219,457,678)
------------ --------------
Net decrease (12,080,891) $ (152,078,899)
============= ==============
49
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
50
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
51
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objective and Policies.......................................... 2
Management of the Fund..................................................... 2
Purchase of Shares......................................................... 5
Alternative Sales Arrangements............................................ 5
Initial Sales Charge Alternative--
Class A Shares........................................................... 5
Reduced Initial Sales Charges--
Class A Shares........................................................... 6
Deferred Sales Charge Alternative--
Class B Shares........................................................... 9
Redemption of Shares....................................................... 10
Contingent Deferred Sales Charge--
Class B Shares........................................................... 10
Determination of Net Asset Value........................................... 11
Shareholder Services....................................................... 12
Investment Account........................................................ 12
Automatic Investment Plan................................................. 12
Automatic Reinvestment of Dividends and Capital Gains Distributions....... 12
Systematic Withdrawal Plans--
Class A Shares........................................................... 13
Retirement Plans.......................................................... 14
Exchange Privilege........................................................ 14
Dividends, Distributions and Taxes......................................... 25
Dividends and Distributions............................................... 25
Taxes..................................................................... 25
Performance Data........................................................... 27
Investment Practices and Restrictions...................................... 29
General Information........................................................ 34
Description of Shares..................................................... 34
Independent Auditors...................................................... 35
Custodian................................................................. 35
Transfer Agent............................................................ 35
Legal Counsel............................................................. 35
Reports to Shareholders................................................... 35
Additional Information.................................................... 35
Independent Auditors' Report............................................... 36
Financial Statements....................................................... 37
</TABLE>
Code #10332
Statement of Additional Information
(ART)
- --------------------------------------------------------------------------------
MERRILL LYNCH
BALANCED FUND
FOR INVESTMENT AND RETIREMENT
January 28, 1994
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements:
(1) Financial Statements included in Part A, the Prospectus:
Financial Highlights (selected per share data and ratios) for each
of the periods in the seven year period ended September 30, 1993
and for the period November 29, 1985 (Commencement of Operations)
to September 30, 1986.
(2) Financial Statements included in Part B, the Statement of Additional
Information:
Schedule of Investments, September 30, 1993.
Statement of Assets and Liabilities as of September 30, 1993.
Statement of Operations for the Year Ended September 30, 1993.
Statements of Changes in Net Assets for the Years Ended September
30, 1993 and 1992.
Financial Highlights for each of the periods in the five year period
ended September 30, 1993.
(b) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
(1)(A)* --Articles of Incorporation of Registrant, as amended.
(1)(B). --Articles Supplementary.
(2)* --By-Laws of Registrant.
(3) --Not applicable.
(4)(A)* --Specimen certificate for Class A shares of common stock of
Registrant.
(4)(B) --Specimen certificate for Class B shares of common stock of
Registrant.
(4)(C) --Instruments Defining Rights of Shareholders.
(5)** --Investment Advisory Agreement between Registrant and Merrill
Lynch Asset Management.
(6)(A)* --Class A Distribution Agreement between Registrant and Merrill
Lynch Funds Distributor, Inc.
(6)(B)*** --Class B Distribution Agreement between Registrant and Merrill
Lynch Funds Distributor, Inc.
(7) --Not applicable.
(8)(A)*** --Custody Agreement between Registrant and First Jersey National
Bank (now known as National Westminster Bank NJ).
(8)(B)*** --Sub-Custody Agreement between First Jersey National Bank (now
known as National Westminster Bank NJ) and Chase Manhattan Bank,
N.A.
(9)(A)*** --Administrative and Sub-Accounting Services Agreement between
Registrant and Merrill Lynch Asset Management.
(9)(B)** --Transfer Agency, Dividend Disbursing Agency and Shareholder
Servicing Agency Agreement between Registrant and Merrill Lynch
Financial Data Service, Inc. (now known as Financial Data
Services, Inc.)
(9)(C)*** --Agreement Pursuant to Rule 11a2-2(T) under the Securities
Exchange Act of 1934.
(10) --Opinion and consent of Shereff, Friedman, Hoffman & Goodman,
counsel for the Registrant.
(11)(A) --Consent of Deloitte & Touche, independent auditors for the
Registrant.
(11)(B). --Consent of Morningstar, Inc.
(12) --Not applicable.
(13)* --Representation of Merrill Lynch Asset Management.
(14)(A)+ --Prototype Individual Retirement Account Plan available from
Merrill Lynch, Pierce, Fenner & Smith Incorporated.
(14)(B)++ --Basic Retirement Plan available from Merrill Lynch, Pierce,
Fenner & Smith Incorporated.
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
(15)*** --Amended and Restated Plan of Distribution pursuant to Rule 12b-1
under the Investment Company Act of 1940.
(16)(A).. --Schedule for computation of each performance quotation provided
in the Registration Statement in response to Item 22 (Class B
Shares)
(16)(B)... --Schedule for computation of each performance quotation provided
in the Registration Statement in response to Item 22 (Class A
Shares).
(17) --Other Exhibits
Powers of Attorney for Officers and Directors
Arthur Zeikel
Herbert I. London
Robert R. Martin
Joseph L. May
Andre F. Perold
Gerald M. Richard
</TABLE>
- --------
* Incorporated by reference to Exhibit No. 1 in Pre-Effective Amendment No. 2
to this Registration Statement (File No. 2-91329).
** Incorporated by reference to the identically numbered Exhibit in Post-
Effective Amendment No. 3 to this Registration Statement (File No. 2-
91329).
*** Incorporated by reference to the identically numbered Exhibit in Post-
Effective Amendment No. 1 to this Registration Statement (File No. 2-
91329).
. Incorporated by reference to identically numbered Exhibit in Post-Effective
Amendment No. 9 to this Registration Statement (File No. 2-91329).
.. Incorporated by reference to Exhibit No. 16 in Post-Effective Amendment No.
4 to this Registration Statement (File No. 2-91329).
... Incorporated by reference to the identically numbered Exhibit in Post-
Effective Amendment No. 6 to this Registration Statement (File No. 2-
91329).
+ Incorporated by reference to Exhibit 14 to Pre-Effective Amendment No. 1 to
the Registration Statement under the Securities Act of 1933 on Form N-1
(File No. 2-74584) of Merrill Lynch Retirement Series Trust, filed on
January 26, 1982.
++ Incorporated by reference to Exhibit 14 to Post-Effective Amendment No. 3
to the Registration Statement under the Securities Act of 1933 on Form N-1A
(File No. 2-74584) of Merrill Lynch Retirement Series Trust, filed December
29, 1983.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
NUMBER OF
RECORD HOLDERS AT
TITLE OF CLASS NOVEMBER 30, 1993
-------------- ------------------
<S> <C>
Class A Common Stock, par value $.01 per share.......... 15
Class B Common Stock, par value $.01 per share.......... 2,141
</TABLE>
ITEM 27. INDEMNIFICATION
Reference is made to Article VI of Registrant's Articles of Incorporation,
Article VI of Registrant's By-Laws and Section 2-418 of the Maryland General
Corporation Law. Article VI of the By-Laws provides that each officer and
director of the Registrant shall be indemnified by the Registrant to the full
extent permitted
C-2
<PAGE>
under the General Laws of the State of Maryland, except that such indemnity
shall not protect any such person against any liability to the Registrant or
any stockholder thereof to which such person would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office. Absent a court
determination that an officer or director seeking indemnification was not
liable on the merits or guilty of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office, the decision by the Registrant to indemnify such person must be based
upon the reasonable determination of independent counsel or non-party
independent directors, after review of the facts, that such officer or
director is not guilty of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
The Registrant may purchase insurance on behalf of an officer or director
protecting such person to the full extent permitted under the General Laws of
the State of Maryland from liability arising from his activities as officer or
director of the Registrant. The Registrant, however, may not purchase
insurance on behalf of any officer or director of the Registrant that protects
or purports to protect such person from liability to the Registrant or to its
stockholders to which such officer or director would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
The Registrant may indemnify or purchase insurance to the extent provided in
Article VI on behalf of an employee or agent who is not an officer or director
of the Registrant.
Insofar as the conditional advancing of indemnification moneys for actions
based upon the Investment Company Act of 1940 may be concerned, such payments
will be made only on the following conditions: (i) the advances must be
limited to amounts used, or to be used, for the preparation or presentation of
a defense to the action, including costs connected with the preparation of a
settlement; (ii) advances may be made only upon receipt of: (a) a written
affirmation by the director of the director's good faith belief that the
standard of conduct necessary for indemnification by the corporation as
authorized in this section has been met, and (b) a written promise by, or on
behalf of, the recipient to repay that amount of the advance which exceeds the
amount to which it is ultimately determined that he is entitled to receive
from the Registrant by reason of indemnification; and (iii) (a) such promise
must be secured by a surety bond, other suitable insurance or an equivalent
form of security which assures that any repayments may be obtained by the
Registrant without delay or litigation, which bond, insurance or other form of
security must be provided by the recipient of the advance, or (b) a majority
of a quorum of the Registrant's disinterested, nonparty directors, or an
independent legal counsel in a written opinion, shall determine, based upon a
review of readily available facts, that the recipient of the advance
ultimately will be found entitled to indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 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., doing business as Merrill Lynch Asset
Management (the "Investment Adviser" or "MLAM"), acts as the investment
adviser for the following companies: Convertible Holdings, Inc., Merrill Lynch
Adjustable Rate Securities Fund, Inc., Merrill Lynch Americas Income Fund,
C-3
<PAGE>
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 Bond Fund for Investment and Retirement, Merrill Lynch Global
Allocation Fund, Inc., Merrill Lynch Global Convertible Fund, Inc., Merrill
Lynch Global Holdings, Inc., Merrill Lynch Global Utility Fund, Inc., Merrill
Lynch Growth Fund for Investment and Retirement, Merrill Lynch Healthcare Fund,
Inc., Merrill Lynch High Income Municipal Bond Fund, Inc., Merrill Lynch
Institutional Intermediate Fund, Merrill Lynch International Equity Fund,
Merrill Lynch Latin America Fund, Inc., Merrill Lynch Municipal Series Trust,
Merrill Lynch Natural Resources Trust, Merrill Lynch Pacific Fund, Inc.,
Merrill Lynch Ready Assets Trust, Merrill Lynch Retirement Series Trust,
Merrill Lynch Senior Floating Rate Fund, 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 registered 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., 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
Institutional Tax-Exempt Fund, Merrill Lynch Multi-State Municipal Series
Trust, Merrill Lynch Multi-State Limited Maturity 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., Taurus MuniCalifornia Holdings, Inc., and Taurus MuniNewYork
Holdings, Inc. The address of each of these investment companies is Box 9011,
Princeton, New Jersey 08543-9011, except that the address of Merrill Lynch
Funds for Institutions Series, Merrill Lynch Institutional Tax-Exempt Fund and
Merrill Lynch Institutional Intermediate Fund is One Financial Center, 15th
Floor, Boston, Massachusetts 02111-2646. The address of MLAM and FAM is also
Box 9011, Princeton, New Jersey 08543-9011. The address of Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and Merrill Lynch & Co.,
Inc. ("ML & Co.") is World Financial Center, North Tower, 250 Vesey Street, New
York, New York 10281.
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 December 31, 1991, for such person's or entity's 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 all or substantially all of the investment companies described in the
preceding paragraph. Mr. Zeikel is a director of substantially all of such
companies, and Mr. Glenn is a director of certain of such companies. Messrs.
Durnin, Giordano, Harvey, Hewitt and Monagle are directors or officers of one
or more of such companies.
C-4
<PAGE>
Officers and partners of MLAM are set forth as follows;
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL BUSINESS,
NAME POSITION WITH THE INVESTMENT ADVISER PROFESSION, VOCATION OR EMPLOYMENT
---- ------------------------------------ ----------------------------------
<C> <C> <S>
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
Inc. ..................
("Princeton Services")
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; Executive
President Vice President and Director of Princeton
Services; President and Director of MLFD;
President of Princeton Administrators
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 and
President, General Secretary of FAM; Senior Vice President,
Counsel and General Counsel Director and Secretary of
Secretary Princeton Services; Director of MLFD
Ronald M. Kloss......... Senior Vice President Senior Vice President and Controller of
and Controller FAM; Senior Vice President and Controller
of Princeton Services
Joseph T. Monagle, Jr. . Senior Vice President Senior Vice President of FAM; Senior Vice
President of Princeton Services
Gerald M. Richard....... Senior Vice President Senior Vice President and Treasurer of FAM;
and Treasurer 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 FAM
Ronald L. Welburn....... Senior Vice President Senior Vice President of FAM; Senior Vice
President of Princeton Services
Anthony Wiseman......... Senior Vice President Senior Vice President of FAM; Senior Vice
President of Princeton Services
</TABLE>
C-5
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) MLFD acts as the principal underwriter for the Registrant and for each of
the open-end 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., 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, 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., Taurus MuniCalifornia Holdings, Inc. and Taurus MuniNew York
Holdings, Inc.
(b) Set forth below is information concerning each director and officer of
MLFD. The principal business address of each such person is Box 9011,
Princeton, New Jersey 08543-9011, except that the address of Messrs. Aldrich,
Crook, Graczyk, Fatseas and Wasel is One Financial Center, 15th Floor, Boston,
Massachusetts 02111-2665.
<TABLE>
<CAPTION>
(2) (3)
(1) POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH MLFD WITH REGISTRANT
----- ---------------------- ----------------------
<S> <C> <C>
Terry K. Glenn............. President and Director Executive Vice President
Arthur Zeikel.............. Director President and Director
Philip L. Kirstein......... Director None
William E. Aldrich......... Senior Vice President None
Robert W. Crook............ Senior Vice President None
Michael J. Brady........... Vice President None
Sharon Creveling........... Vice President and None
Assistant Treasurer
Mark A. DeSario............ Vice President None
James J. Fatseas........... Vice President None
Stanley Graczyk............ Vice President None
Debra W. Landsman-Yaros.... Vice President None
Michelle T. Lau............ Vice President None
Gerald M. Richard.......... Vice President and Treasurer
Treasurer
Richard L. Rufener......... Vice President None
Salvatore Venezia.......... Vice President None
William Wasel.............. Vice President None
Robert Harris.............. Secretary Secretary
</TABLE>
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the Rules thereunder will be
maintained at the offices of the Registrant and its Custodian and Transfer
Agent.
C-6
<PAGE>
ITEM 31. MANAGEMENT SERVICES.
Other than as set forth under the caption "The Fund and Its Management" in
the Prospectus constituting Part A of the Registration Statement and under
"Management of the Fund" in the Statement of Additional Information
constituting Part B of the Registration Statement, Registrant is not a party to
any management related service contract.
ITEM 32. UNDERTAKINGS.
The Registrant will furnish each person to whom a Prospectus is delivered
with a copy of Registrant's latest annual report to shareholders, upon request
and without charge.
C-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT OF 1940, THE REGISTRANT CERTIFIES THAT IT MEETS ALL OF THE
REQUIREMENTS FOR EFFECTIVENESS OF THIS REGISTRATION STATEMENT PURSUANT TO RULE
485(B) UNDER THE SECURITIES ACT OF 1933 AND HAS DULY CAUSED THIS POST-EFFECTIVE
AMENDMENT TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE TOWNSHIP OF PLAINSBORO AND STATE
OF NEW JERSEY, ON THE 25TH DAY OF JANUARY, 1994.
Merrill Lynch Retirement Benefit
Investment Program, Inc.
/s/ Arthur Zeikel
By___________________________________
ARTHUR ZEIKEL, PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS POST-
EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE
FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURES TITLE DATE
President and
/s/ Arthur Zeikel Director (Principal January 25,
- ------------------------------------- Executive Officer) 1994
(ARTHUR ZEIKEL)
Treasurer (Principal
/s/ Gerald M. Richard Financial and January 25,
- ------------------------------------- Accounting Officer) 1994
(GERALD M. RICHARD)
* Director
- ------------------------------------- January 25,
(KENNETH S. AXELSON) 1994
* Director
- ------------------------------------- January 25,
(HERBERT I. LONDON) 1994
* Director January 25,
- ------------------------------------- 1994
(ROBERT R. MARTIN)
* Director
- ------------------------------------- January 25,
(JOSEPH L. MAY) 1994
* Director
- ------------------------------------- January 25,
- -------- (ANDRE F. PEROLD) 1994
* This Amendment has been signed by
each of the persons so indicated
by the undersigned as Attorney-in-
Fact.
/s/ Arthur Zeikel
*By _________________________________
(ARTHUR ZEIKEL, ATTORNEY-IN-FACT)
C-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER NUMBER
------- ------
<C> <S> <C>
4(c) --Instruments Defining Rights of Shareholders.
10 --Opinion of Shereff, Friedman, Hoffman & Goodman, counsel
for Registrant.
11 --Consent of Deloitte & Touche, independent auditors for
Registrant.
15 --Amended and Restated Distribution Plan of Registrant
17 --Other Exhibits
</TABLE>
Powers of Attorney for Officers and Directors
Arthur Zeikel
Kenneth Axelson
Herbert I. London
Robert R. Martin
Joseph L. May
Andre F. Perold
Gerald M. Richard
<PAGE>
PAGE WHERE
GRAPHIC
APPEARS DESCRIPTION OF GRAPHIC OR CROSS-REFERENCE
- ------------ -------------------------------------------
PROSPECTUS
BACK COVER DEPICTIONS OF FOREIGN CURRENCIES
STATEMENT OF
ADDITIONAL DEPICTIONS OF FOREIGN CURRENCIES
INFORMATION
BACK COVER
<PAGE>
EXHIBIT 4
INSTRUMENTS DEFINING RIGHTS OF SHAREHOLDERS
Copies of instruments defining the rights of shareholders, including
the relevant portions of the Articles of Incorporation, as amended, and By-Laws
of Registrant:
Excerpts from:
ARTICLES OF INCORPORATION
OF
MERRILL LYNCH RETIREMENT BENEFIT
INVESTMENT PROGRAM, INC. (FORMERLY,
"MERRILL LYNCH RETIREMENT BENEFIT FUND, INC.")
(DOING BUSINESS AS MERRILL LYNCH BALANCED FUND
FOR INVESTMENT AND RETIREMENT)
ARTICLE III
PURPOSES AND POWERS
-------------------
The purpose or purposes for which the Corporation is formed and the
business or objects to be transacted, carried on and promoted by it are as
follows:
(1) ...
(2) ...
(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, consistent with all
<PAGE>
applicable laws and regulations, including the Investment Company Act of 1940,
as amended.
(4) To redeem, purchase or otherwise acquire, hold, dispose of,
resell, transfer, reissue or call (all without the vote or consent of the
stockholders of the Corporation) shares of its capital stock, in any manner and
to the extent now or hereafter permitted by the General Laws of the State of
Maryland and these Articles of Incorporation.
(5) ...
ARTICLE V
CAPITAL STOCK
-------------
1. Amount Authorized. The total number of shares of capital stock of
-----------------
all classes which the Corporation shall have authority to issue is one billion
(1,000,000,000) shares, of the par value of one cent ($.01) (the "Shares" or
"capital stock"), and of the aggregate par value of ten million dollars
($10,000,000). Five Hundred Million of such Shares may be issued in the
following class, comprising the number of Shares and having the designations
indicated; subject, however, to the authority herein granted to the Board of
Directors to increase or decrease any such number of Shares:
MERRILL LYNCH FULL INVESTMENT PORTFOLIO - 500,000,000 Shares
-2-
<PAGE>
The balance of Five Hundred Million Shares may be issued by the Board
of Directors in such initial class, or in any new class or classes, each
comprising such number of Shares and having such preferences, rights, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption as shall be fixed and determined from time to time by
resolution or resolutions providing for the issuance of such Shares adopted by
the Board of Directors, to whom authority so to fix and determine the same is
hereby expressly granted. In addition, the Board of Directors is hereby
expressly granted authority to increase or decrease the number of Shares of any
class, but the number of Shares of any class shall not be decreased by the Board
of Directors below the number of Shares thereof then outstanding.
Without limiting the foregoing, the Board of Directors may classify or
reclassify any unissued Shares from time to time by setting or changing the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, or terms or conditions of
redemption of the Shares. The Corporation may hold as treasury Shares, reissue
for such consideration and on such terms as the Board of Directors may
determine, or cancel, at their discretion from time to time, and Shares of any
class reacquired by the Corporation.
2. Procedure for Designation.
-------------------------
The establishment and designation of any class of Shares in addition
to that which has been established and designated in Section (1) above, shall be
effective upon (i)
-3-
<PAGE>
the authorization of such class by vote of a majority of the Board of Directors,
including the establishment and designation of the preferences, rights, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption of such class, and (ii) the filing for record of the
articles supplementary required by Section 2-208 of the Maryland General
Corporation Law with the State Department of Assessments and Taxation of
Maryland. At any time when there are no Shares outstanding or subscribed for a
particular class previously established and designated by the Board of
Directors, the class may be liquidated by similar means.
3. Establishment and Designation of
Classes.
--------------------------------
Without limiting the authority of the Board of Directors set forth
herein to establish and designate any further classes, there is hereby
established and designated one class of stock to be known as the MERRILL LYNCH
FULL INVESTMENT PORTFOLIO. The Shares of said class and any Shares of any
further class that may from time to time be established and designated by the
Board of Directors (unless provided otherwise by the Board of Directors with
respect to such further class at the time of establishing and designating such
further class) shall have the following relative preferences, rights, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption:
(a) Assets Belonging to Classes. All consideration received by the
---------------------------
Corporation for the issue or sale of Shares of a particular class, together with
all assets in
-4-
<PAGE>
which such consideration is invested or reinvested, all income, earnings,
profits, and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payments derived from
any reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that class for all purposes, subject only to the rights of
creditors, and shall be so recorded upon the books and accounts of the
Corporation. Such consideration, assets, income, earnings, profits, and
proceeds derived from the sale, exchange or liquidation of such shares, and any
funds or liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds, in whatever form the same may be, together with
any General Items allocated to that class as provided in the following sentence,
are herein referred to as "assets belonging to" that class. In the event that
there are any assets, income, earnings, profits, and proceeds thereof, funds, or
payments which are not readily identifiable as belonging to any particular class
(collectively "General Items"), such General Items shall be allocated by or
under the supervision of the Board of Directors to and among any one or more of
the classes established and designated from time to time in such manner and on
such basis as the Board of Directors, in its sole discretion, deems fair and
equitable, and any General Items so allocated to a particular class shall belong
to that class. Each such allocation by the Board of Directors shall be
conclusive and binding for all purposes.
(b) Liabilities Belonging to Class. The assets belonging to
------------------------------
each particular class shall be charged with the liabilities of the Corporation
in respect of that class and all expenses, costs, charges and reserves of the
Corporation which are not readily identifiable as belonging to any particular
class shall be allocated and charged by or under
-5-
<PAGE>
the supervision of the Board of Directors to and among any one or more of the
classes established and designated from time to time in such manner and on such
basis as the Board of Directors, in its sole discretion, deems fair and
equitable. The liabilities expenses, costs, charges and reserves allocated and
so charged to a class are herein referred to as "liabilities belonging to" that
class. Each allocation of liabilities, expenses, costs, charges and reserves by
the Board of Directors shall be conclusive and binding for all purposes.
(c) Dividends. Dividends and distributions on Shares of a
---------
particular class may be declared and paid with such frequency, in such form and
in such amount as the Board of Directors may from time to time determine.
Dividends may be declared daily or otherwise pursuant to a standing resolution
or resolutions adopted only once or with such frequency as the Board of
Directors may determine, after providing for actual and accrued liabilities
belonging to that class.
All dividends and capital gains distributions on Shares of a
particular class shall be paid only out of the earnings, surplus or other
lawfully available assets belonging to that class (including for this purpose
any General Assets allocated to such class). All dividends and distributions on
Shares of a particular class shall be distributed pro rata to the holders of
that class in proportion to the number of Shares of that class held by such
holders at the date and time of record established for the payment of such
dividends or distributions, except that in connection with any dividend or
distribution program or procedure the Board of Directors may determine that no
dividend or distribution shall be payable on Shares as to which the
Shareholder's purchase order and/or payment have not
-6-
<PAGE>
been received by the time or times established by the Board of
Directors under such program or procedure.
The Board of Directors shall have the power, in its sole discretion,
to distribute in any fiscal year as dividends, including dividends designated in
whole or in part as capital gains distributions, amounts sufficient, in the
opinion of the Board of Directors, to enable the Corporation to qualify as a
regulated investment company under the Internal Revenue Code of 1954, as
amended, or any successor or comparable statute, thereto, and regulations
promulgated thereunder, and to avoid liability of the Corporation for Federal
income tax in respect of that year. However, nothing in the foregoing shall
limit the authority of the Board of Directors to make distributions greater than
or less than the amount necessary to qualify as a regulated investment company
and to avoid liability of the Corporation for such tax.
Dividends and distributions may be paid in cash, property or Shares,
or a combination thereof, as determined by the Board of Directors or pursuant to
any program that the Board of Directors may have in effect at the time. Any
such dividend or distribution paid in Shares will be paid at the current 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.
-7-
<PAGE>
(d) Liquidation. In the event of the liquidation of the Corporation
-----------
or of a particular class, the Shareholders of each class that has been
established and designated and is being liquidated shall be entitled to receive,
as a class, when and as declared by the Board of Directors, the excess of the
assets belonging to that class over the liabilities belonging to that class.
The holders of Shares of any class shall not be entitled thereby to any
distribution upon liquidation of any other class. The assets so distributable
to the Shareholder of any particular class shall be distributed among such
Shareholders in proportion to the number of Shares of that class held by them
and recorded on the books of the Corporation. The liquidation of any particular
class in which there are Shares then outstanding may be authorized by vote of a
majority of the Board of Directors then in office, subject to the approval of a
majority of the outstanding securities of that class, as defined in the 1940
Act.
(e) Equality. All Shares of each particular class shall
--------
represent an equal proportionate interest in the assets belonging to that class
(subject to the liabilities belonging to that class), and each Share of any
particular class shall be equal to each other Share of that class. The Board of
Directors may from time to time divide or combine the Shares of any particular
class into a greater or lesser number of Shares of that class without thereby
changing the proportionate beneficial interest in the assets belonging to that
Class or in any way affecting the rights of Shares of any other class.
-8-
<PAGE>
(f) Conversion or Exchange Rights. Subject to compliance with the
-----------------------------
requirements of the 1940 Act, the Board of Directors shall have the authority to
provide that holders of Shares of any class shall have the right to convert or
exchange said Shares into Shares of one or more other classes of Shares in
accordance with such requirements and procedures as may be established by the
Board of Directors.
4. Fractional Shares. The Corporation may issue, sell, redeem,
-----------------
repurchase and otherwise deal in and with its Shares in fractional Shares, and
any such fractional Shares shall carry proportionately all the rights of a whole
Share, excepting any right to receive a certificate evidencing such fractional
Shares, but including, without limitation, the right to vote, the right to
receive dividends and distributions, and the right to participate upon
liquidation of the Corporation.
All persons who shall acquire Shares in the Corporation shall acquire the
same subject to the provisions of these Articles of Incorporation and the By-
laws of the Corporation.
ARTICLE VI
PROVISIONS FOR DEFINING, LIMITING AND
REGULATING CERTAIN POWERS OF THE CORPORA-
TION AND OF THE DIRECTORS AND STOCKHOLDERS
------------------------------------------
(1) ...
-9-
<PAGE>
(2) The Board of Directors of the Corporation is hereby empowered to
authorize the issuance from time to time of shares of capital stock, whether now
or hereafter authorized, for such consideration as the Board of Directors may
deem advisable, subject to such limitation as may be set forth in these Articles
of Incorporation or in the By-Laws of the Corporation or in the General laws of
the State of Maryland.
(3) No holder of stock of the Corporation shall, as such holder, have
any right to purchase or subscribe for any shares of the capital stock of the
Corporation or any other security of the Corporation which it may issue or sell
(whether out of the number of shares authorized by these Articles of
Incorporation, or out of any shares of the capital stock of the Corporation
acquired by it after the issue thereof, or otherwise) other than such right, if
any, at 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 any limitations arising under the
Investment Company Act of 1940, as amended.
(5) The Board of Directors of the Corporation may 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.
-10-
<PAGE>
ARTICLE VII
REDEMPTION
----------
Each holder of Shares of the Corporation shall be entitled to require
the Corporation to redeem all or any part of the Shares of the Corporation
standing in the name of such holder on the books of the Corporation, and all
Shares 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 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
the Corporation of a particular class shall be the net asset value per Share of
that class 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.
The Corporation may in its discretion redeem, at such current net
asset value, outstanding Shares not offered for redemption which are held by any
stockholder whose Shares of a particular class in the aggregate have a then
total net asset value of less than such
-11-
<PAGE>
amount as set forth in the By-Laws, provided that prior to any such proposed
redemption the Corporation shall have given such stockholder written notice that
such then current net asset value is less than the amount set forth in the By-
Laws as aforesaid and allowed such stockholder to make additional investments in
order to increase such then current net asset value to the amount so set forth.
The Corporation may also in its discretion redeem the Shares held by a
stockholder or stockholders to the extent deemed necessary by the Board of
Directors to avoid taxation of the Fund as a "personal holding company."
ARTICLE VIII
VOTING
------
The registered owner of each Share shall be entitled to one vote for
each full Share, and a fractional vote for each fractional Share, irrespective
of the class, then standing in his name in the books of the Corporation. On any
matter submitted to a vote of shareholders, all Shares then issued and
outstanding and entitled to vote, irrespective of class, shall be voted in the
aggregate and not by class except: (i) when otherwise required by the Maryland
General Corporation Law; (ii) when otherwise required by the Investment Company
Act of 1940 or the rules adopted thereunder, in which case Shares shall be voted
by individual class; and (iii) when the matter does not affect the interest of a
particular class, in which case only shareholders of the class affected shall be
entitled to vote thereon and shall vote by individual class.
-12-
<PAGE>
Notwithstanding any provision of Article 23 of the General Corporation
Law of the State of Maryland requiring a greater proportion than a majority of
the votes of all classes or of any class of Shares entitled to vote thereon as a
separate class to take or authorize any action, the Corporation may take or
authorize any such action upon the concurrence of a majority of the aggregate
number of the votes entitled to be cast thereon (or of a majority of the
aggregate number of votes of a class entitled to vote thereon as a separate
class), all as permitted by Section 2-104(b) of the General Corporation Law of
the State of Maryland or any comparable successor provision.
-13-
<PAGE>
Excerpts from:
BY-LAWS
OF
MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT PROGRAM, INC.
(FORMERLY MERRILL LYNCH RETIREMENT BENEFIT FUND, INC.)
(DOING BUSINESS AS MERRILL LYNCH BALANCED FUND
FOR INVESTMENT AND RETIREMENT)
ARTICLE II
----------
Meetings of Stockholders
------------------------
Section 1. Annual Meeting. The annual meeting of the stockholders of
---------- --------------
the Corporation for the election of directors and for the transaction of such
other business as may properly be brought before the meeting shall be held
annually on the date designated by the Board of Directors.
Section 2. Special Meetings. Special meetings of the stockholders,
---------- ----------------
unless otherwise provided by law or by the Articles of Incorporation, may be
called for any purpose or purposes by a majority of the Board of Directors, the
President, or on the written request of the holders of at least 25% of the
outstanding capital stock of the Corporation entitled to vote at such meeting.
Section 3. Place of Meetings. The annual meeting and any special
---------- -----------------
meeting of the stockholders shall be held at such place within the United States
as the Board of Directors may from time to time determine.
-14-
<PAGE>
Section 4. Notice of Meetings; Waiver of Notice. Written notice of
---------- ------------------------------------
the place, date and time of the holding of each annual and special meeting of
the stockholders and the purpose or purposes of each special meeting shall be
given by the Secretary to each stockholder entitled to vote at such meeting and
to each stockholder entitled to notice of the meeting, not less than ten (10)
nor more than ninety (90) days before the date of such meeting. Notice by mail
shall be deemed to be duly given when deposited in the United States mail
addressed to the stockholder at his address as it appears on the records of the
Corporation, with postage thereon prepaid.
Notice of any meeting of stockholders shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, or who shall,
either before or after the meeting, submit a signed waiver of notice which is
filed with the records of the meeting. When a meeting is adjourned to another
time and place, unless the Board of Directors, after the adjournment, shall fix
a new record date for an adjourned meeting, or the adjournment is for more than
thirty days, notice of such adjourned meeting need not be given if the time and
place to which the meeting shall be adjourned were announced at the meeting at
which the adjournment is taken.
Section 5. Quorum. At all meetings of the stockholders, the holders
---------- ------
of a majority of the shares of stock of the Corporation entitled to vote at the
meeting, present in person or by proxy, shall constitute a quorum for the
transaction of any business, except as otherwise required by statute or by the
Articles of Incorporation. In the absence of a quorum
-15-
<PAGE>
no business may be transacted, except that the holders of a majority of the
shares of stock present in person or by proxy and entitled to vote may adjourn
the meeting from time to time, without notice other than announcement thereat
except as otherwise required by these By-Laws, until the holders of the
requisite amount of shares of stock shall be so present. At any such adjourned
meeting at which a quorum may be present, any business may be transacted at the
meeting as originally called. The absence from any meeting, in person or by
proxy, of holders of the number of shares of stock of the Corporation in excess
of a majority thereof which may be required by the laws of the State of
Maryland, the Investment Company Act of 1940, as amended, or other applicable
statute, the Articles of Incorporation, or these By-Laws, for action upon any
given matter shall not prevent action at such meeting upon any other matter or
matters which may properly come before the meeting, if there shall be present
thereat, in person or by proxy, holders of the number of shares of stock of the
Corporation required for action in respect of such other matter or matters.
Section 6. Organization. At each meeting of the stockholders, the
---------- ------------
Chairman of the Board (if one has been designated by the Board), or in his
absence or inability to act, the President, or in the absence or inability to
act of the Chairman of the Board and the President, a Vice President, shall act
as chairman of the meeting. The Secretary, or in his absence or inability to
act, any person appointed by the Chairman of the meeting, shall act as secretary
of the meeting and keep the minutes thereof.
-16-
<PAGE>
Section 7. Order of Business. The order of business at all meetings
---------- -----------------
of the stockholders shall be as determined by the chairman of the meeting.
Section 8. Voting. Except as otherwise provided by statute or the
---------- ------
Articles of Incorporation, each holder of record of shares of stock of the
Corporation having voting power shall be entitled at each meeting of the
stockholders to one vote for every share of such stock standing in his name on
the record of stockholders of the Corporation as of the record date determined
pursuant to Section 9 of this Article or if such record date shall not have been
so fixed, then at the later of (i) the close of business on the day on which
notice of the meeting is mailed or (ii) the thirtieth day before the meeting.
Each stockholder entitled to vote at any meeting of stockholders may
authorize another person or persons to act for him by a proxy signed by such
stockholder or his attorney-in-fact. No proxy shall be valid after the
expiration of eleven months from the date thereof, unless otherwise provided in
the proxy. Every proxy shall be revocable at the pleasure of the stockholder
executing it, except in those cases where such proxy states that it is
irrevocable and where an irrevocable proxy is permitted by law. Except as
otherwise required by statute, the Articles of Incorporation or these By-Laws,
any corporate action to be taken by vote of the stockholders shall be authorized
by a majority of the total votes cast at a meeting of stockholders at which a
quorum is present by the holders of shares present in person or represented by
proxy and entitled to vote on such action.
-17-
<PAGE>
If a vote shall be taken on any question other than the election of
directors, which shall be by written ballot, then unless required by statute or
these By-Laws, or determined by the chairman of the meeting to be advisable, any
such vote need not be by ballot. On a vote by ballot, each ballot shall be
signed by the stockholder voting, or by his proxy, if there be such proxy, and
shall state the number of shares voted.
Section 9. Fixing of Record Date. The Board of Directors may fix in
---------- ---------------------
advance a record date not more than ninety (90) nor less than ten (10) days
before the date then fixed for the holding of any meeting of the stockholders.
All persons who were holders of record of shares at such time, and no others,
shall be entitled to vote at such meeting and any adjournment thereof.
Section 10. Inspectors. The Board may, in advance of any meeting of
----------- ----------
stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If the inspectors shall not be so appointed or if any of
them shall fail to appear or act, the chairman of the meeting may, and on the
request of any stockholder entitled to vote thereat shall, appoint inspectors.
Each inspector, before entering upon the discharge of his duties, shall take and
sign an oath to execute faithfully the duties of inspector at such meeting with
strict impartiality and according to the best of his ability. The inspectors
shall determine the number of shares outstanding and the voting power of each,
the number of shares represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes, ballots or consents,
hear and determine all challenges and
-18-
<PAGE>
questions arising in connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the result, and do such acts as are proper
to conduct the election or vote with fairness to all stockholders. On request
of the chairman of the meeting or any stockholder entitled to vote thereat, the
inspectors shall make a report in writing of any challenge, request or matter
determined by them and shall execute a certificate of any fact found by them.
No director or candidate for the office of director shall act as inspector of an
election of directors. Inspectors need not be stockholders. At every meeting
of the stockholders where the voting is not conducted by inspectors, all
questions with respect to the qualifications of voters and the validity of
proxies and the acceptance or rejection of votes shall be decided by the
chairman of the meeting.
Section 11. Consent of Stockholders in Lieu of Meeting. Except as
----------- ------------------------------------------
otherwise provided by statute or the Articles of Incorporation, any action
required to be taken at any annual or special meeting of stockholders, or any
action which may be taken at any annual or special meeting of such stockholders,
may be taken without a meeting, without prior notice and without a vote, if the
following are filed with the records of stockholders meetings: (i) a unanimous
written consent which sets forth the action and is signed by each stockholder
entitled to vote on the matter and (ii) a written waiver of any right to dissent
signed by each stockholder entitled to notice of the meeting but not entitled to
vote thereat.
-19-
<PAGE>
ARTICLE III
Board of Directors
------------------
(1) - (4) ...
Section 5. Removal of Directors. Any director of the Corporation
----------- --------------------
may be removed by the stockholders by a vote of a majority of the votes entitled
to be cast for the election of directors.
(6) - (18) ...
Section 19. Contracts. Except as otherwise provided by law or by the
----------- ---------
Articles of Incorporation, no contract or transaction between the Corporation
and any partnership or corporation, and no act of the Corporation, shall in any
way be affected or invalidated by the fact that any officer or director of the
Corporation is pecuniarily or otherwise interested therein or is a member,
officer or director of such interest shall be known to the Board of Directors of
the Corporation. Specifically, but without limitation of the foregoing, the
Corporation may enter into one or more contracts appointing Merrill Lynch Asset
Management Inc. investment manager of the Corporation, and may otherwise do
business with Merrill Lynch Asset Management Inc., notwithstanding the fact that
one or more of the directors of the Corporation and some or all of its officers
are, have been or may become directors, officers, members, employees, or
stockholders of Merrill Lynch Asset Management Inc. may deal freely with each
other, and neither such contract appointing Merrill Lynch Asset Management Inc.
investment manager to the Corporation nor any other contract or transaction
between the Corporation and Merrill Lynch Asset Management Inc. shall be
invalidated or in any wise affected thereby, nor shall any director
-20-
<PAGE>
or officer of the Corporation by reason thereof be liable to the Corporation or
to any stockholder or creditor of the Corporation or to any other person for any
loss incurred under or by reason of any such contract or transaction. For
purposes of this paragraph, any reference to "Merrill Lynch Asset Management
Inc." shall be deemed to include said company and any parent, subsidiary or
affiliate of said company and any successor (by merger, consolidation or
otherwise) to said company or any such parent, subsidiary or affiliate.
ARTICLE VI
Indemnification
---------------
Each officer and director of the Corporation shall be indemnified by
the Corporation to the full extent permitted under the General Laws of the State
of Maryland, and the Investment Company Act of 1940 except that such indemnity
shall not protect any such person against any liability to the Corporation or
any stockholder thereof to which such person would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office. Absent a court
determination that an officer or director seeking indemnification was not liable
on the merits or guilty of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office, the
decision by the Corporation to indemnify such person must be based upon the
reasonable determination of independent counsel in a written opinion or of the
non-party independent directors, by vote as set forth in section
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<PAGE>
2-418(E)(2)(I) of the Maryland General Corporate Law or any comparable successor
provision, after review of the facts, that such officer or director is not
guilty of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office.
The Corporation may purchase insurance on behalf of an officer or
director protecting such person to the full extent permitted under the General
Laws of the State of Maryland, from liability arising from his activities as
officer or director of the Corporation. The Corporation, however, may not pay
the portion of the premium for insurance on behalf of any officer or director of
the Corporation attributable to coverage that protects or purports to protect
such person from liability to the Corporation or to its stockholders to which
such officer or director would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office. For purposes of this Article VI the
terms officer and director shall be deemed to include former officers and
directors of the Corporation.
The Corporation may indemnify or purchase insurance to the extent
provided in this Article VI on behalf of an employee or agent who is not an
officer or director of the Corporation.
-22-
<PAGE>
ARTICLE VII
Capital Stock
-------------
Section 1. Stock Certificates. Each holder of stock of the
---------- ------------------
Corporation shall be entitled upon request to have a certificate or
certificates, in such form as shall be approved by the Board, representing the
number of shares of stock of the Corporation owned by him, provided, however,
that certificates for fractional shares will not be delivered in any case. The
certificates representing shares of stock shall be signed by or in the name of
the Corporation by the President or a Vice President and by the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer and sealed with
the seal of the Corporation. Any or all of the signatures or the seal on the
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate shall be issued, it may be issued by the Corporation
with the same effect as if such officer, transfer agent or registrar were still
in office at the date of issue.
Section 2. Books of Account and Record of Stockholders. There shall
---------- -------------------------------------------
be kept at the principal executive office of the Corporation correct and
complete books and records of account of all the business and transactions of
the Corporation. There shall be made available upon request of any stockholder,
in accordance with Maryland law, a record
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<PAGE>
containing the number of shares of stock issued during a specified period not to
exceed twelve months and the consideration received by the Corporation for each
such share.
Section 3. Transfers of Shares. Transfers of shares of stock of the
---------- -------------------
Corporation shall be made on the stock records of the Corporation only by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer agent or
transfer clerk, and on surrender of the certificate or certificates, if issued,
for such shares properly endorsed or accompanied by a duly executed stock
transfer power and the payment of all taxes thereon. Except as otherwise
provided by law, the Corporation shall be entitled to recognize the exclusive
right of a person in whose name any share or shares stand on the record of
stockholders as the owner of such share or shares for all purposes, including,
without limitation, the rights to receive dividends or other distributions, and
to vote as such owner, and the Corporation shall not be bound to recognize any
equitable or legal claim to or interest in any such share or shares on the part
of any other person.
Section 4. Regulations. The Board may make such additional rules and
---------- -----------
regulations, not inconsistent with these By-Laws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation. It may appoint, or authorize any officer or officers
to appoint, one or more transfer agents or one or more transfer clerks and one
or more registrars and may require all certificates for shares of stock to bear
the signature or signatures of any of them.
-24-
<PAGE>
Section 5. Lost, Destroyed or Mutilated Certificates. The holder of
---------- -----------------------------------------
any certificates representing shares of stock of the Corporation shall
immediately notify the Corporation of any loss, destruction or mutilation of
such certificate, and the Corporation may issue a new certificate of stock in
the place of any certificate theretofore issued by it which the owner thereof
shall allege to have been lost or destroyed or which shall have been mutilated,
and the Board may, in its discretion, require such owner or his legal
representatives to give to the Corporation a bond in such sum, limited or
unlimited, and in such form and with such surety or sureties, as the Board in
its absolute discretion shall determine, to indemnify the Corporation against
any claim that may be made against it on account of the alleged loss or
destruction of any such certificate, or issuance of a new certificate. Anything
herein to the contrary notwithstanding, the Board, in its absolute discretion,
may refuse to issue any such new certificate, except pursuant to legal
proceedings under the laws of the State of Maryland.
Section 6. Fixing of a Record Date for Dividends and Distributions.
---------- -------------------------------------------------------
The Board may fix, in advance, a date not more than ninety (90) days preceding
the date fixed for the payment of any dividend or the making of any distribution
or the allotment of rights to subscribe for securities of the Corporation, or
for the delivery of evidences of rights or evidences of interests arising out of
any change, conversion or exchange of common stock or other securities, as the
record date for the determination of the stockholders entitled to receive any
such dividend, distribution, allotment, rights on interests, and in such case
only
-25-
<PAGE>
the stockholders of record at the time so fixed shall be entitled to receive
such dividend, distribution, allotment, rights or interests.
Section 7. Information to Stockholders and Others. Any stockholder
---------- --------------------------------------
of the Corporation or his agent may inspect and copy during usual business hours
the Corporation's By-Laws, minutes of the proceedings of its stockholders,
annual statements of its affairs, and voting trust agreements on file at its
principal office.
ARTICLE VIII
Determination of Net Asset Value; Valuation of
Portfolio Securities and Other Assets
----------------------------------------------
Section 1. Net Asset Value. The net asset value of a share of Common
---------- ---------------
Stock of the Corporation shall be determined in accordance with applicable laws
and regulations or under the supervision of such persons and at such time or
times as shall from time to time be prescribed by the Board of Directors. Each
such determination shall be made by subtracting from the value of the assets of
the Corporation (as determined pursuant to Article III, Section 2 of these By-
Laws) the amount of its liabilities, dividing the remainder by the number of
shares of Common Stock issued and outstanding, and adjusting the results to the
nearest full cent per share.
Section 2. Valuation or Portfolio Securities and Other Assets.
---------- --------------------------------------------------
Except as otherwise required by any applicable law or regulation of any
regulatory agency having
-26-
<PAGE>
jurisdiction over the activities of the Corporation, the Corporation shall
determine the value of its portfolio securities and other assets as follows:
(a) securities for which market quotations are readily available
shall be valued at current market value determined in such manner as the Board
of Directors may from time to time prescribe;
(b) all other securities and assets shall be valued at amounts
deemed best to reflect their fair value as determined in good faith by, the
Board of Directors, or by other persons designated and supervised by the Board
acting pursuant to procedures adopted by the Board in good faith, and at such
time or times as shall from time to time be prescribed by the Board.
All quotations, sale prices, bid and asked prices and other
information shall be obtained from such sources as the persons making such
determination believe to be reliable and any determination of net asset value
based thereon shall be conclusive.
-27-
<PAGE>
ARTICLE XIV
Annual Statement
----------------
The books of account of the Corporation shall be examined by an
independent firm of public accountants at the close of each annual period of the
Corporation and at such other times as may be directed by the Board. A report
to the stockholders based upon each such examination shall be mailed to each
stockholder of the Corporation of record on such date with respect to each
report as may be determined by the Board, at his address as the same appears on
the books of the Corporation. Such annual statement shall also be available at
the annual meeting of stockholders and within twenty (20) days thereafter, be
placed on file at the Corporation's principal office in the State of Maryland.
Each such report shall show the assets and liabilities of the Corporation as of
the close of the annual or quarterly period covered by the report and the
securities in which the funds of the Corporation were then invested. Such
report shall also show the Corporation's income and expenses for the period from
the end of the Corporation's preceding fiscal year to the close of the annual or
quarterly period covered by the report and any other information required by the
Investment Company Act of 1940, as amended, and shall set forth such other
matters as the Board or such firm of independent public accountants shall
determine.
-28-
<PAGE>
SHEREFF, FRIEDMAN, HOFFMAN & GOODMAN
919 Third Avenue
New York, New York 10022
January 25, 1994
Merrill Lynch Retirement Benefit
Investment Program, Inc.
P.O. Box 9011
Princeton, New Jersey 08540-9011
Dear Sirs:
Merrill Lynch Retirement Benefit Investment Program, Inc., doing business
as Merrill Lynch Balanced Fund for Investment and Retirement (the "Fund"), is
filing with the Securities and Exchange Commission Post-Effective Amendment No.
11 to its Registration Statement under the Securities Act of 1933 (the "1933
Act") on Form N-1A (File No. 33-91329), relating to the registration under the
1933 Act of 16,200,701 additional shares of its Common Stock, par value $.01
per share (the "Additional Shares"), which are to be offered and sold by the
Fund in the manner and on the terms set forth in the prospectus of the Fund
current and effective under the 1933 Act at the time of sale. Of the Additional
Shares, 16,179,060 are previously outstanding shares of the Fund's Common Stock,
par value $.01 per share, which were redeemed by the Fund during its fiscal year
ended September 30, 1993. According to Post-Effective Amendment No. 11 to the
Fund's Registration Statement, none of the Additional Shares have previously
been used by the Fund for reduction pursuant to paragraph (a) of Rule 24e-2
under the Investment Company Act of 1940 (the "1940 Act") in previous filings of
post-effective amendments to the Fund's Registration Statement during the
current year, or for reduction, pursuant to paragraph (c) of Rule 24f-2 under
the 1940 Act during the Fund's current fiscal year, of the registration fee
payable by the Fund for the registration of shares for sale under the 1933 Act.
We have, as counsel, participated in various proceedings relating to the
Fund and to the proposed issuance of the Additional Shares. We have examined
copies, either certified or otherwise proven to our satisfaction to be genuine,
of the Fund's Articles of Incorporation and By-laws, as currently in effect, and
a certificate issued by the State Department of Assessments and Taxation of the
State of Maryland, certifying the existence
<PAGE>
Merrill Lynch Retirement Benefit
Investment Program, Inc.
January 25, 1994
Page 2
and good standing of the Fund. We are generally familiar with the corporate
affairs of the Fund.
Based upon the foregoing, it is our opinion that:
1. The Fund has been duly organized and is validly existing under the laws
of the State of Maryland.
2. The Fund is authorized to issue one billion (1,000,000,000) shares of
Common Stock, par value $.01 per share. Under Maryland law, (a) the number of
authorized shares may be increased or decreased by action of the Board of
Directors and (b) shares which are issued and subsequently redeemed by the Fund
are, by virtue of such redemption, restored to the status of authorized and
unissued shares.
3. Subject to the effectiveness of the above-mentioned Post-Effective
Amendment No. 11 to the Fund's Registration Statement and compliance with
applicable state securities laws, upon the issuance of the Additional Shares for
a consideration not less than the par value thereof as required by the laws of
Maryland, and not less than the net asset value thereof as required by the 1940
Act and in accordance with the terms of the Registration Statement, such shares
will be legally issued and outstanding and fully paid and non-assessable.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as a part of the above-mentioned Post-Effective Amendment
No. 11 to the Registration Statement and with any state securities commission
where such filing is required. In giving this consent we do not admit that we
come within the category of persons whose consent is required under Section 7 of
the 1933 Act.
We are members of the Bar of the State of New York and do not hold
ourselves out as being conversant with the laws of any jurisdiction other than
those of the United States of America and the State of New York. We note that
we are not licensed to practice law in the State of Maryland, and to the extent
that any opinion herein involves the laws of the State of Maryland, such opinion
should be understood to be based solely upon our review
<PAGE>
Merrill Lynch Retirement Benefit
Investment Program, Inc.
January 25, 1994
Page 3
of the documents referred to above, the published statutes of the State of
Maryland and, where applicable, published cases, rules or regulations of
regulatory bodies of that State.
Very truly yours,
/s/ Shereff, Friedman, Hoffman & Goodman
Shereff, Friedman, Hoffman & Goodman
SFH&G:JHG:MKN:LEB:yg
<PAGE>
EXHIBIT 11
INDEPENDENT AUDITORS' CONSENT
Merrill Lynch Balanced Fund for Investment and Retirement (formerly Merrill
Lynch Retirement Benefit Investment Program, Inc.):
We consent to the use in Post-Effective Amendment No. 11 to Registration
Statement No. 2-91329 of our report dated October 29, 1993 appearing in the
Statement of Additional Information, which is a part of such Registration
Statement, and to the references to us under the captions "General
Information--Independent Auditors", appearing in the Statement of Additional
Information, and "Financial Highlights" appearing in the Prospectus, which also
is a part of such Registration Statement.
Deloitte & Touche
Princeton, New Jersey
January 24, 1994
<PAGE>
AMENDED AND RESTATED
CLASS B DISTRIBUTION PLAN
OF
MERRILL LYNCH BALANCED FUND FOR INVESTMENT AND RETIREMENT
PURSUANT TO RULE 12b-1
DISTRIBUTION PLAN made as of the 18th day of October, 1985, and amended and
restated as of September 18, 1992, by and between Merrill Lynch Balanced Fund
for Investment and Retirement, a Maryland corporation (the "Fund"), and Merrill
Lynch Funds Distributor, Inc., a Delaware corporation ("MLFD").
W I T N E S S E T H :
-------------------
WHEREAS, the Fund is engaged in business as an open-end investment company
registered under the Investment Company Act of 1940, as amended (the "Investment
Company Act"); and
WHEREAS, MLFD is a securities firm engaged in the business of selling
shares of investment companies either directly to purchasers or through other
securities dealers; and
WHEREAS, the Fund has entered into a Class B Shares Distribution Agreement
with MLFD, pursuant to which MLFD acts as the exclusive distributor and
representative of the Fund in the offer and sale of Class B shares of beneficial
interest, par value $0.10 per share (the "Class B shares"), of the Fund to the
public; and
WHEREAS, the Fund has entered into a Class B Distribution Plan (the "Prior
Plan") pursuant to Rule 12b-1 under the Investment Company Act; and
WHEREAS, the Fund desires to adopt this Amended and Restated Class B
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 Fund and its
Class B shareholders;
NOW, THEREFORE, the Fund hereby adopts, and MLFD hereby agrees to the terms
of, the Plan in accordance with Rule 12b-1 under the Investment Company Act on
the following terms and conditions:
<PAGE>
1. The Fund shall pay MLFD an account maintenance fee under the Plan at
the end of each month at the annual rate of 0.25% of average daily net assets of
the Fund relating to Class B shares to compensate MLFD and securities firms with
which MLFD enters into related agreements pursuant to Paragraph 3 hereof ("Sub-
Agreements") for account maintenance activities with respect to Class B
shareholders of the Fund.
2. The Fund shall pay MLFD a distribution fee under the Plan at the end of
each month at the annual rate of 0.75% of average daily net assets of the Fund
relating to Class B shares to compensate MLFD and securities firms with which
MLFD enters into related Sub-Agreements for providing sales and promotional
activities and services. Such activities and services will relate to the sale,
promotion and marketing of the Class B shares of the Fund. Such expenditures
may consist of sales commissions to financial consultants for selling Class B
shares of the Fund, compensation, sales incentives and payments to sales and
marketing personnel, and the payment of expenses incurred in its sales and
promotional activities, including advertising expenditures related to the Fund
and the costs of preparing and distributing promotional materials. The
distribution fee may also be used to pay the financing costs of carrying the
unreimbursed expenditures described in this Paragraph 2. Payment of the
distribution fee described in this Paragraph 2 shall be subject to any
limitations set forth in any applicable regulation of the National Association
of Securities Dealers, Inc.
3. The Fund hereby authorized MLFD to enter into Sub-Agreements with
certain securities firms ("Securities Firms"), including Merrill Lynch, Pierce,
Fenner & Smith Incorporated, to provide compensation to such Securities Firms
for activities and services of the type referred to in Paragraphs 1 and 2
hereof. MLFD may reallocate all or a portion of its account maintenance fee or
distribution fee to such Securities Firms as compensation for the above-
mentioned activities and services. Such Sub-Agreement shall provide that the
Securities Firms shall provide MLFD with such information as is reasonably
necessary to permit MLFD to comply with the reporting requirements set forth in
Paragraph 4 hereof.
4. MLFD shall provide the Fund for review by the Board of Directors, and
the Directors shall review, at least quarterly, a written report complying with
the requirements of Rule 12b-1 regarding the disbursement of the account
maintenance fee and the distribution fee during such period.
5. The Prior Plan has been approved by a vote of at least a majority, as
defined in the Investment Company Act, of the outstanding Class B voting
securities of the Fund. The Plan has not been submitted to the Class B
shareholders because the amendments do not materially increase the rate of
payments by the Fund provided for in the Prior Plan.
6. The Plan shall not take effect until it has been approved, together
with any related agreements, by (a) the Directors of the Fund and (b) those
Directors of the Fund who are not "interested persons" of the Fund, as defined
in the Investment Company Act, and have no direct or indirect financial interest
in the operation of this Plan or any agreements related to it (the "Rule 12b-1
Directors"), cast in person at a meeting or meetings called for the purpose of
voting on the Plan and such related agreements.
2
<PAGE>
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 B voting
securities of the Fund.
9. The Plan may not be amended to increase materially the rate of payments
by the Fund provided for herein unless such amendment is approved by at least a
majority, as defined in the Investment Company Act, of the outstanding Class B
voting securities of the Fund, and by the Directors of the Fund in the manner
provided for in Paragraph 6 hereof, and no material amendment to the Plan shall
be made unless approved in the manner provided for approval and annual renewal
in Paragraph 6 hereof.
10. While the Plan is in effect, the selection and nomination of Directors
who are not interested persons, as defined in the Investment Company Act, of the
Fund shall be committed to the discretion of the Directors who are not
interested persons.
11. The Fund shall preserve copies of the Plan and any related agreements
and all reports made pursuant to Paragraph 4 hereof, for a period of not less
than six years from the date of the Plan, or the agreements or such report, as
the case may be, the first two years in an easily accessible place.
12. The Articles of Incorporation establishing the Fund, dated May 21,
1984, a copy of which, together with all amendments thereto (the "Articles"),
are on file with the Secretary of State of the State of Maryland, provides that
the name "Merrill Lynch Balanced Fund for Investment and Retirement" refers to
the Directors under the Articles collectively as Directors, but not as
individuals or personally; and no Director, shareholder, officer, employee or
agent of the Fund shall be held to any personal liability, nor shall resort be
had to their private property for the satisfaction of any obligation or claim of
the Fund but the "Fund Property" only shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed this Plan as of the
date first above written.
MERRILL LYNCH BALANCED FUND FOR
INVESTMENT AND RETIREMENT
By
----------------------------
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
----------------------------
3
<PAGE>
AMENDED AND RESTATED
CLASS B SHARES DISTRIBUTION PLAN SUB-AGREEMENT
AGREEMENT made as of the 18th day of October, 1985, and amended and restated as
of September 18, 1992, by and between Merrill Lynch Funds Distributor, Inc.
("MLFD"), and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the
"Securities Firm").
W I T N E S S E T H :
-------------------
WHEREAS, MLFD had entered into an agreement with Merrill Lynch Balanced
Fund for Investment and Retirement, a Maryland corporation (the "Fund"),
pursuant to which it acts as the exclusive distributor for the sale of Class B
shares of beneficial interest, par value $0.10 per share (the "Class B shares"),
of the Fund; and
WHEREAS, MLFD and the Fund entered into an Amended and Restated
Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the "Act") pursuant to which MLFD receives an account
maintenance fee from the Fund at the annual rate of 0.25% of average daily net
assets of the Fund relating to Class B shares for account maintenance activities
related to Class B shares of the Fund and a distribution fee from the Fund at
the annual rate of 0.75% of average daily net assets of the Fund relating to
Class B shares for providing sales and promotional activities and services
related to the distribution of Class B shares of the Fund; and
WHEREAS, MLFD desires the Securities Firm to perform certain account
maintenance activities and sales and promotional activities and services for the
Fund's Class B shareholders and the Securities Firm is willing to perform such
activities and services;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereby agree as follows:
13. The Securities Firm shall provide account maintenance activities with
respect to the Class B shares of the Fund of the types referred to in Paragraph
1 of the Plan.
14. The Securities Firm shall provide sales and promotional activities and
services with respect to the sale of the Class B shares of the Fund, and incur
distribution expenditures, of the types referred to in Paragraph 2 of the Plan.
15. As compensation for its activities and services performed under this
Sub-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.
16. 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
1
<PAGE>
Rule 12b-1 regarding the disbursement to the account maintenance fee and the
distribution fee during such period referred to in Paragraph 4 of the Plan.
17. This Sub-Agreement shall not take effect until it has been approved by
votes of a majority of both (a) the Directors of the Fund and (b) those
Directors of the Fund who are not "interested persons" of the Fund, as defined
in the Act, and have no direct or indirect financial interest in the operation
of the Plan, this Agreement or any agreements related to the Plan or this
Agreement (the "Rule 12b-1 Directors"), cast in person at a meeting or meetings
called for the purpose of voting on this Agreement.
18. 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.
19. This Agreement shall automatically terminate in the event of its
assignment or in the event of the termination of the Plan or any amendment to
the Plan that requires such termination.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
-------------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By
-------------------------------
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
Township of Plainsboro and State of New Jersey, on the 25th day of January,
1988.
Merrill Lynch Retirement Benefit
Investment Program, Inc.
By: /s/ Robert Harris
------------------------------
Robert Harris, Secretary
Power of Attorney
Know All Men By These Presents, that each person whose signature appears
below constitutes and appoints Arthur Zeikel, Robert Harris and Gerald M.
Richard and each of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all Post-Effective
Amendments to this Registration Statement, and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS POST-
EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE
FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------- --------------------------------- ----------------
<S> <C> <C>
* President and Director January 25, 1988
- --------------------------- (Principal Executive Officer)
(Arthur Zeikel)
* Treasurer (Principal Financial January 25, 1988
- --------------------------- and Accounting Officer)
(Gerald M. Richard)
* Director January 25, 1988
- ---------------------------
(Kenneth S. Axelson)
/s/ Herbert I. London Director January 25, 1988
- ---------------------------
(Herbert I. London)
/s/ Joseph L. May Director January 25, 1988
- ---------------------------
(Joseph L. May)
* Director January 25, 1988
- ---------------------------
(Andre F. Perold)
</TABLE>
* This Amendment has been signed
by each of the persons so
indicated by the undersigned as
Attorney-in-fact.
* By: /s/ Robert Harris
----------------------------------------
Robert Harris, Attorney-in-fact
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on behalf by the undersigned, thereunto duly authorized, in the
City of New York and State of New York, on the 15th day of October 1985.
MERRILL LYNCH RETIREMENT
BENEFIT INVESTMENT PROGRAM, INC.
By: /s/ Arthur Zeikel
-----------------------------------
Arthur Zeikel,
President
Each person whose signature appears below hereby authorizes Arthur Zeikel,
Gerald M. Richard and Robert Harris, 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 any pre-effective
amendments and any 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 by the following persons in the capacities and on the
dates indicated below.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Arthur Zeikel President and Director October 15, 1985
- ----------------------------- (Principal Executive
Arthur Zeikel
Officer)
/s/ Gerald M. Richard Treasurer (Principal October 15, 1985
- ----------------------------- Financial and Accounting
Gerald M. Richard
Officer)
/s/ Andre Perold Director October 15, 1985
- -----------------------------
Andre Perold
/s/ Robert Vandell Director October 15, 1985
- -----------------------------
Robert Vandell
/s/ Kenneth Axelson Director October 15, 1985
- -----------------------------
Kenneth Axelson
</TABLE>
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the person whose name appears below
hereby nominates, constitutes and appoints Arthur Zeikel and Gerald M. Richard
(with full power to each of them to act alone) his true and lawful
attorney-in-fact and agent, for him and on his behalf and in his place and
stead in any and all capacities, to make, execute and sign all amendments and
supplements to the Registration Statement on Form N-1A under the Securities Act
of 1933 and the Investment Company Act of 1940 of MERRILL LYNCH RETIREMENT
BENEFIT INVESTMENT PROGRAM, INC. (doing business as MERRILL LYNCH BALANCED FUND
FOR INVESTMENT AND RETIREMENT) (the "Fund"), and to file the same with the
Securities and Exchange Commission, and any other regulatory authority having
jurisdiction over the offer and sale of shares of common stock, par value $0.01
per share, of the Fund, and any and all exhibits and other documents requisite
in connection therewith, granting unto said attorneys and each of them, full
power and authority to perform each and every act and thing requisite and
necessary to be done in and about the premises as fully to all intents and
purposes as the undersigned Director himself might or could do.
IN WITNESS WHEREOF, the undersigned Director has hereunto set his hand
this 25th day of January, 1994.
/s/ Robert R. Martin
--------------------
Robert R. Martin
Director
