<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 12, 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
[_]
PRE-EFFECTIVE AMENDMENT NO. [_]
[X]
POST-EFFECTIVE AMENDMENT NO. 12
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[_]
AMENDMENT NO. 15 [X]
MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT PROGRAM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
P. O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (609) 282-2800
ARTHUR ZEIKEL
P. O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011
(NAME AND ADDRESS OF AGENT FOR SERVICE)
----------------
COPIES TO:
JOEL H. GOLDBERG, ESQ. SHEREFF, and
FRIEDMAN, HOFFMAN & GOODMAN 919 PHILIP L. KIRSTEIN, ESQ. MERRILL
THIRD AVENUE NEW YORK, NEW YORK LYNCH ASSET MANAGEMENT P.O. BOX 9011
10022 PRINCETON, NEW JERSEY 08543-9011
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE:
[_] Immediately upon filing pursuant to paragraph (b),
or
[_] 60 days after filing pursuant to paragraph (a), or
[X] on October 21, 1994 pursuant to paragraph (b), or
[_] on (date) pursuant to paragraph (a), of Rule 485
[_] 75 days after filing pursuant to paragraph (a)(ii)
[_] on (date) pursuant to paragraph (a)(ii) of rule 485.
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
[_] this post-effective amendment designates a new
effective date for a previously filed post-effective
amendment.
THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES OF ITS
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 WILL BE FILED ON OR BEFORE NOVEMBER 30,
1994.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT PROGRAM, INC.
POST-EFFECTIVE AMENDMENT NO. 12 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
Data
Item 4. General Description of
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
and Restrictions
Item 5A. Management's Discussion of Fund
Performance................... Not Applicable
Item 6. Capital Stock and Other
Securities.................... Additional Information
Item 7. Purchase of Securities Being
Offered....................... Cover Page; Merrill Lynch Select
Pricing(SM) System; Purchase of
Shares; Shareholder Services;
Additional Information
Item 8. Redemption or Repurchase....... Merrill Lynch Select PricingSM
System; Purchase of Shares;
Redemption of Shares
Item 9. Pending Legal Proceedings...... Not Applicable
PART B
Item 10. Cover Page..................... Cover Page
Item 11. Table of Contents.............. Back Cover Page
Item 12. General Information and
History....................... 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 Post-Effective Amendment to
the Registration Statement.
<PAGE>
PROSPECTUS
OCTOBER 21, 1994 MERRILL LYNCH BALANCED FUND
FOR INVESTMENT AND RETIREMENT
P.O. 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.
----------------
Pursuant to the Merrill Lynch Select PricingSM System, the Fund offers four
classes of shares, each with a different combination of sales charges, ongoing
fees and other features. The Merrill Lynch Select PricingSM System permits an
investor to choose the method of purchasing shares that the investor believes
is most beneficial given the amount of the purchase, the length of time the
investor expects to hold the shares and other relevant circumstances. See
"Merrill Lynch Select PricingSM System" on page 3.
Shares may be purchased directly from Merrill Lynch Funds Distributor, Inc.
(the "Distributor"), P.O. 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
($100 for retirement plans) and the minimum subsequent purchase is $50 ($1 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 the
processing fee. See "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 SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
This Prospectus is a concise statement of information about the Fund that is
relevant to making an investment in the Fund. This Prospectus should be
retained for future reference. A statement containing additional information
about the Fund, dated October 21, 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 shares of the Fund follows:
<TABLE>
<CAPTION>
CLASS A(A) CLASS B(B) CLASS C(C) CLASS D(C)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES:
Maximum Sales Charge
Imposed on Purchases
(as a percentage of
offering price)....... 5.25%(d) None None 5.25%(d)
Sales Charge Imposed
on Dividend Reinvest-
ments................. None None None None
Deferred Sales Charge
(as a percentage of
original purchase
price or redemption
proceeds, whichever
is lower)............. None (e) 4.0% during the first 1% for one year None (e)
year, decreasing 1.0%
annually thereafter to 0.0%
after the fourth year
Exchange Fee........... None None None None
ANNUAL FUND OPERATING
EXPENSES (AS A
PERCENTAGE OF AVERAGE
NET ASSETS)(F).........
Investment Advisory
Fees(g)............... 0.62% 0.62% 0.62% 0.62%
12b-1 Fees(h):
Account Maintenance
Fees................ None 0.25% 0.25% 0.25%
Distribution Fees.... None 0.75% 0.75% None
(Class B shares convert to
Class D shares automatically
after approximately eight years
and cease being subject
to distribution fees)
Other Expenses:
Custodial Fees....... 0.02% 0.02% 0.02% 0.02%
Shareholder Servicing
Costs(i)............ 0.12% 0.14% 0.14% 0.12%
Other................ 0.07% 0.07% 0.07% 0.07%
---- ---- ---- ----
Total Other Ex-
penses............ 0.21% 0.23% 0.23% 0.21%
---- ---- ---- ----
Total Fund Operating
Expenses.............. 0.83% 1.85% 1.85% 1.08%
==== ==== ==== ====
</TABLE>
- --------
(a) Class A shares are sold to a limited group of investors including existing
Class A shareholders, certain retirement plans and investment programs.
See "Purchase of Shares--Initial Sales Charge Alternatives--Class A and
Class D Shares"--page 12.
(b) Class B shares convert to Class D shares automatically approximately eight
years after initial purchase. See "Purchase of Shares--Deferred Sales
Charge Alternatives--Class B and Class C Shares"--page 14.
(c) Prior to the date of this Prospectus, the Fund has not offered its Class C
and Class D shares to the public.
(d) Reduced for purchases of $25,000 and over. Class A or Class D purchases of
$1,000,000 or more may not be subject to an initial sales charge. See
"Purchase of Shares--Initial Sales Charge Alternatives--Class A and Class
D Shares"--page 12.
(e) Class A and Class D shares are not subject to a contingent deferred sales
charge ("CDSC"), except that purchases of $1,000,000 or more which may not
be subject to an initial sales charge will instead be subject to a CDSC of
1.0% of amounts redeemed within the first year of purchase.
(f) Information for Class A and Class B shares is stated for the fiscal year
ended September 30, 1993. Information under "Other Expenses" for Class C
and Class D shares is estimated for the fiscal year ending September 30,
1995.
(g) See "The Fund and Its Management--Advisory Fee"--page 10.
(h) See "Purchase of Shares--Distribution Plans"--page 18.
(i) See "The Fund and Its Management--Transfer Agency Services"--page 10.
2
<PAGE>
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
following expenses on a
$1,000 investment in-
cluding the maximum
$52.50 initial sales
charge (Class A and
Class D shares only) and
assuming (1) the Total
Fund Operating Expenses
for each class set forth
above; (2) a 5% annual
return throughout the
periods and (3) redemp-
tion at the end of the
period:
Class A................ $61 $78 $ 96 $150
Class B................ $59 $78 $100 $197*
Class C................ $29 $58 $100 $217
Class D................ $63 $85 $109 $177
An investor would pay the
following expenses on
the same $1,000 invest-
ment assuming no redemp-
tion at the end of the
period:
Class A................ $61 $78 $ 96 $150
Class B................ $19 $58 $100 $197*
Class C................ $19 $58 $100 $217
Class D................ $63 $85 $109 $177
</TABLE>
- --------
* Assumes conversion to Class D shares approximately eight years after
purchase.
The foregoing Fee Table is intended to assist investors in understanding the
costs and expenses that a shareholder in the Fund will bear directly or
indirectly. The 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 (the "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 RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE ASSUMED FOR PURPOSES OF THE EXAMPLE. Class B and Class C
shareholders who own their shares for an extended period of time may pay more
in Rule 12b-1 distribution fees than the economic equivalent of the maximum
front-end sales charge permitted under the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. ("NASD"). Merrill Lynch may
charge its customers a processing fee (presently $4.85) for confirming
purchases and 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".
MERRILL LYNCH SELECT PRICING(SM) SYSTEM
The Fund offers four classes of shares under the Merrill Lynch Select
Pricing(SM) System. The shares of each class may be purchased at a price equal
to the next determined net asset value per share subject to the sales charges
and ongoing fee arrangements described below. Shares of Class A and Class D
are sold to investors choosing the initial sales charge alternatives, and
shares of Class B and Class C are sold to investors choosing the deferred
sales charge alternatives. The Merrill Lynch Select Pricing(SM) System is used
by more than 50 mutual funds advised by Merrill Lynch Asset Management, L.P.,
doing business as Merrill Lynch Asset Management ("MLAM" or the "Investment
Adviser") or an affiliate of MLAM, Fund Asset Management, L.P. ("FAM"). Funds
advised by MLAM or FAM are referred to herein as "MLAM-advised mutual funds".
Each Class A, Class B, Class C and Class D share of the Fund represents an
identical interest in the investment portfolio of the Fund and has the same
rights, except that Class B, Class C and Class D shares bear the expenses of
the ongoing account maintenance fees and Class B and Class C shares bear the
expenses of the ongoing distribution fees and the additional incremental
transfer agency costs resulting from the deferred sales charge arrangements.
The deferred sales charges and account maintenance fees that are imposed on
Class B and Class C shares, as well as the account maintenance fees that are
imposed on the Class D shares, will be imposed directly against those classes
and not against all assets of the Fund and,
3
<PAGE>
accordingly, such charges will not affect the net asset value of any other
class or have any impact on investors choosing another sales charge option.
Dividends paid by the Fund for each class of shares will be calculated in the
same manner at the same time and will differ only to the extent that account
maintenance and distribution fees and any incremental transfer agency costs
relating to a particular class are borne exclusively by that class. Each class
has different exchange privileges. See "Shareholder Services--Exchange
Privilege".
Investors should understand that the purpose and function of the initial
sales charges with respect to the Class A and Class D shares are the same as
those of the deferred sales charges with respect to the Class B and Class C
shares in that the sales charges applicable to each class provide for the
financing of the distribution of the shares of the Fund. The distribution-
related revenues paid with respect to a class will not be used to finance the
distribution expenditures of another class. Sales personnel may receive
different compensation for selling different classes of shares.
The following table sets forth a summary of the distribution arrangements
for each class of shares under the Merrill Lynch Select PricingSM System,
followed by a more detailed description of each class and a discussion of the
factors that investors should consider in determining the method of purchasing
shares under the Merrill Lynch Select PricingSM System that the investor
believes is most beneficial under the investor's particular circumstances.
More detailed information as to each class of shares is set forth under
"Purchase of Shares".
<TABLE>
<CAPTION>
ACCOUNT
MAINTENANCE DISTRIBUTION
CLASS SALES CHARGE(/1/) FEE FEE CONVERSION FEATURE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A Maximum 5.25% initial No No No
sales charge(/2/)(/3/)
- -------------------------------------------------------------------------------------------------
B CDSC for a period of 4 years, 0.25% 0.75% B shares convert to D shares
at a rate of 4.0% during the automatically after
first year, decreasing 1.0% approximately
annually to 0.0% eight years(/4/)
- -------------------------------------------------------------------------------------------------
C 1.0% CDSC for one year 0.25% 0.75% No
- -------------------------------------------------------------------------------------------------
D Maximum 5.25% initial sales 0.25% No No
charge(/3/)
</TABLE>
- --------
(1) Initial sales charges are imposed at the time of purchase as a percentage
of the offering price. Contingent deferred sales charges ("CDSCs") are
imposed if the redemption occurs within the applicable CDSC time period.
The charge will be assessed on an amount equal to the lesser of the
proceeds of redemption or the cost of the shares being redeemed.
(2) Offered only to eligible investors. See "Purchase of Shares--Initial Sales
Charge Alternatives--Class A and Class D Shares--Eligible Class A
Investors".
(3) Reduced for purchases of $25,000 or more. Class A and Class D share
purchases of $1,000,000 or more may not be subject to an initial sales
charge but instead will be subject to a 1.0% CDSC for one year. See "Class
A" and "Class D" below.
(4) The conversion period for dividend reinvestment shares and certain
retirement plans is modified. Also, Class B shares of certain other MLAM-
advised mutual funds into which exchanges may be made have a ten year
conversion period. If Class B shares of the Fund are exchanged for Class B
shares of another MLAM-advised mutual fund, the conversion period
applicable to the Class B shares acquired in the exchange will apply, and
the holding period for the shares exchanged will be tacked onto the
holding period for the shares acquired.
Class A: Class A shares incur an initial sales charge when they are purchased
and bear no ongoing distribution or account maintenance fees. Class A
shares are offered to a limited group of investors and also will be
issued upon reinvestment of dividends on outstanding Class A shares.
Investors that currently own Class A shares in a shareholder account
are entitled to purchase additional Class A shares in that account.
Other eligible investors include certain retirement plans and
participants in certain investment programs. In addition, Class A
shares will be offered to directors and
4
<PAGE>
employees of Merrill Lynch & Co., Inc. and its subsidiaries (the
term "subsidiaries", when used herein with respect to Merrill Lynch &
Co., Inc., includes MLAM, FAM and certain other entities directly or
indirectly wholly-owned and controlled by Merrill Lynch & Co., Inc.),
and to members of the Boards of MLAM-advised mutual funds. The maximum
initial sales charge is 5.25%, which is reduced for purchases of
$25,000 and over. Purchases of $1,000,000 or more may not be subject to
an initial sales charge but if the initial sales charge is waived such
purchases will be subject to a CDSC of 1.0% if the shares are redeemed
within one year after purchase. Sales charges also are reduced under a
right of accumulation which takes into account the investor's holdings
of all classes of all MLAM-advised mutual funds. See "Purchase of
Shares--Initial Sales Charge Alternatives--Class A and Class D Shares".
Class B: Class B shares do not incur a sales charge when they are purchased,
but they are subject to an ongoing account maintenance fee of 0.25%,
an ongoing distribution fee of 0.75% of the Fund's average net assets
attributable to the Class B shares, and a CDSC if they are redeemed
within four years of purchase. Approximately eight years after
issuance, Class B shares will convert automatically into Class D
shares of the Fund, which are subject to an account maintenance fee
but no distribution fee; Class B shares of certain other MLAM-advised
mutual funds into which exchanges may be made convert into Class D
shares automatically after approximately ten years. If Class B shares
of the Fund are exchanged for Class B shares of another MLAM-advised
mutual fund, the conversion period applicable to the Class B shares
acquired in the exchange will apply, and the holding period for the
shares exchanged will be tacked onto the holding period for the shares
acquired. Automatic conversion of Class B shares into Class D shares
will occur at least once a month on the basis of the relative net
asset values of the shares of the two classes on the conversion date,
without the imposition of any sales load, fee or other charge.
Conversion of Class B shares to Class D shares will not be deemed a
purchase or sale of the shares for Federal income tax purposes. Shares
purchased through reinvestment of dividends on Class B shares also
will convert automatically to Class D shares. The conversion period
for dividend reinvestment shares and for certain retirement plans is
modified as described under "Purchase of Shares--Deferred Sales Charge
Alternatives--Class B and Class C Shares--Conversion of Class B Shares
to Class D Shares".
Class C: Class C shares do not incur a sales charge when they are purchased,
but they are subject to an ongoing account maintenance fee of 0.25%
and an ongoing distribution fee of 0.75% of the Fund's average net
assets attributable to Class C shares. Class C shares are also subject
to a CDSC if they are redeemed within one year of purchase. Although
Class C shares are subject to a 1.0% CDSC for only one year (as
compared to four years for Class B), Class C shares have no conversion
feature and, accordingly, an investor that purchases Class C shares
will be subject to distribution fees that will be imposed on Class C
shares for an indefinite period subject to annual approval by the
Fund's Board of Directors and regulatory limitations.
Class D: Class D shares incur an initial sales charge when they are purchased
and are subject to an ongoing account maintenance fee of 0.25% of the
Fund's average net assets attributable to Class D shares. Class D
shares are not subject to an ongoing distribution fee or any CDSC when
they are redeemed. Purchases of $1 million or more may not be subject
to an initial sales charge but if the initial sales charge is waived
such purchases will be subject to a CDSC of 1.0% if the shares are
redeemed within one year of purchase. The schedule of initial sales
charges and reductions for the Class D shares is the same as the
schedule for Class A shares. Class D shares also will be issued upon
conversion of Class B shares as described above under "Class B". See
"Purchase of Shares--Initial Sales Charge Alternatives--Class A and
Class D Shares".
5
<PAGE>
The following is a discussion of the factors that investors should consider
in determining the method of purchasing shares under the Merrill Lynch Select
PricingSM System that the investor believes is most beneficial in the
investor's particular circumstances.
Initial Sales Charge Alternatives. Investors who prefer an initial sales
charge alternative may elect to purchase Class D shares or, if an eligible
investor, Class A shares. Investors choosing the initial sales charge
alternative who are eligible to purchase Class A shares should purchase Class A
shares rather than Class D shares because of the account maintenance fee
imposed on Class D shares. Investors qualifying for significantly reduced
initial sales charges may find the initial sales charge alternative
particularly attractive because similar sales charge reductions are not
available with respect to the deferred sales charges imposed in connection with
purchases of Class B or Class C shares. Investors not qualifying for reduced
initial sales charges who expect to maintain their investment for an extended
period of time also may elect to purchase Class A or Class D shares, because
over time the accumulated ongoing account maintenance and distribution fees on
Class B or Class C shares may exceed the initial sales charge and, in the case
of Class D shares, the account maintenance fee. Although some investors that
previously purchased Class A shares may no longer be eligible to purchase Class
A shares of other MLAM-advised mutual funds, those previously purchased Class A
shares, together with Class B, Class C and Class D share holdings, will count
toward a right of accumulation which may qualify the investor for reduced
initial sales charges on new initial sales charge purchases. In addition, the
ongoing Class B and Class C account maintenance and distribution fees will
cause Class B and Class C shares to have higher expense ratios, pay lower
dividends and have lower total returns than the initial sales charge shares.
The ongoing Class D account maintenance fees will cause Class D shares to have
a higher expense ratio, pay lower dividends and have a lower return than Class
A shares.
Deferred Sales Charge Alternatives. Because no initial sales charges are
deducted at the time of purchase, Class B and Class C shares provide the
benefit of putting all of the investor's dollars to work from the time the
investment is made. The deferred sales charge alternatives may be particularly
appealing to investors who do not qualify for a reduction in initial sales
charges. Both Class B and Class C shares are subject to ongoing account
maintenance fees and distribution fees; however, the ongoing account
maintenance and distribution fees potentially may be offset to the extent any
return is realized on the additional funds initially invested in Class B or
Class C shares. In addition, Class B shares will be converted into Class D
shares of the Fund after a conversion period of approximately eight years, and
thereafter investors will be subject to lower ongoing fees.
Certain investors may elect to purchase Class B shares if they determine it
to be most advantageous to have all their funds invested initially and intend
to hold their shares for an extended period of time. Investors in Class B
shares should take into account whether they intend to redeem their shares
within the CDSC period and, if not, whether they intend to remain invested
until the end of the conversion period and thereby take advantage of the
reduction in ongoing fees resulting from the conversion into Class D shares.
Other investors, however, may elect to purchase Class C shares if they
determine that it is advantageous to have all their assets invested initially
and they are uncertain as to the length of time they intend to hold their
assets in MLAM-advised mutual funds. Although Class C shareholders are subject
to a shorter CDSC period at a lower rate, they forgo the Class B conversion
feature, making their investment subject to account maintenance and
distribution fees for an indefinite period of time. In addition, while both
Class B and Class C distribution fees are subject to the limitations on asset-
based sales charges imposed by the NASD, the Class B distribution fees are
further limited under a voluntary waiver of asset-based sales charges. See
"Purchase of Shares--Limitations on the Payment of Deferred Sales Charges".
6
<PAGE>
FINANCIAL HIGHLIGHTS
The financial information in the table below (other than for the six-month
period ended March 31, 1994, which is unaudited) has been audited in
conjunction with the audits of the financial statements of the Fund by Deloitte
& Touche LLP, 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. Unaudited financial statements for
the six months ended March 31, 1994 are also included in the Statement of
Additional Information. Financial information is not presented for Class C or
Class D shares, since no shares of those classes are publicly issued as of the
date of this Prospectus. Further information about the performance of the Fund
is contained in the Fund's most recent annual report to shareholders which may
be obtained, without charge, by calling or writing the Fund at the telephone
number or address on the front cover of this Prospectus.
<TABLE>
<CAPTION>
THE FOLLOWING CLASS A
PER SHARE DATA ---------------------------------------------------------
AND RATIOS HAVE FOR THE
BEEN DERIVED SIX-MONTHS
FROM INFORMATION ENDED FOR THE YEAR ENDED SEPTEMBER 30,
PROVIDED IN THE MARCH 31, --------------------------------------------
FINANCIAL 1994 1993 1992 1991 1990 1989+
STATEMENTS. ---------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
INCREASE
(DECREASE) IN NET
ASSET VALUE:
PER SHARE
OPERATING
PERFORMANCE:
Net asset value,
beginning of
period........... $ 13.02 $ 12.57 $ 11.94 $ 10.61 $ 11.93 $ 11.18
------- ------- ------- ------- ------- -------
Investment
Income--net...... .17 .43 .47 .70 .64 .24
Realized and
unrealized gain
(loss) on
investment and
foreign currency
transactions--
net(1)........... (.09) 1.29 .61 1.63 (1.41) 1.42
------- ------- ------- ------- ------- -------
Total from
investment
operations....... .08 1.72 1.08 2.33 (.77) 1.66
------- ------- ------- ------- ------- -------
Less dividends
and
distributions:
Investment
income--net...... (.20) (.39) (.45) (.62) (.55) (.90)
Realized gain on
investments--
net............. (1.23) (.88) -- (.38) -- (.01)
------- ------- ------- ------- ------- -------
Total dividends
and
distributions.... (1.43) (1.27) (.45) (1.00) (.55) (.91)
------- ------- ------- ------- ------- -------
Net asset value,
end of period.... $ 11.67 $ 13.02 $ 12.57 $ 11.94 $ 10.61 $ 11.93
======= ======= ======= ======= ======= =======
TOTAL INVESTMENT
RETURN:**
Based on net
asset value per
share............ 0.24%++ 14.62% 9.23% 23.14% (6.86%) 15.54%++
======= ======= ======= ======= ======= =======
RATIOS TO AVERAGE
NET ASSETS:
Expenses,
excluding
distribution
fees............. .79%* .83% .81% .85% .83% .78%*
======= ======= ======= ======= ======= =======
Expenses......... .79%* .83% .81% .85% .83% .78%*
======= ======= ======= ======= ======= =======
Investment
income--net...... 2.38%* 3.09% 3.18% 3.64% 5.12% 4.23%*
======= ======= ======= ======= ======= =======
SUPPLEMENTAL
DATA:
Net assets, end
of period (in
thousands)....... $40,175 $40,688 $20,320 $12,839 $ 4,511 $ 2,080
======= ======= ======= ======= ======= =======
Portfolio
turnover......... 30.76% 79.55% 65.40% 173.76% 163.56% 175.47%
======= ======= ======= ======= ======= =======
<CAPTION>
CLASS B
-----------------------------------------------------------------------------------------------------------
FOR THE
SIX-MONTHS
ENDED FOR THE YEAR ENDED SEPTEMBER 30,
MARCH 31, ----------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986++
------------ --------- --------- --------- ------------ ----------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE
(DECREASE) IN NET
ASSET VALUE:
PER SHARE
OPERATING
PERFORMANCE:
Net asset value,
beginning of
period........... $ 13.09 $ 12.62 $ 11.99 $ 10.60 $ 11.91 $ 10.94 $ 12.54 $ 11.17 $ 10.00
------------ --------- --------- --------- ------------ ----------- ------------ ----------- --------------
Investment
Income--net...... .09 .24 .29 .39 .50 .53 .57 .39 .25
Realized and
unrealized gain
(loss) on
investment and
foreign currency
transactions--
net(1)........... (.07) 1.37 .66 1.83 (1.39) 1.25 (1.40) 1.64 .98
------------ --------- --------- --------- ------------ ----------- ------------ ----------- --------------
Total from
investment
operations....... .02 1.61 .96 2.22 (.89) 1.78 (.83) 2.03 1.23
------------ --------- --------- --------- ------------ ----------- ------------ ----------- --------------
Less dividends
and
distributions:
Investment
income--net...... (.13) (.26) (.32) (.45) (.42) (.80) (.55) (.38) (.06)
Realized gain on
investments--
net............. (1.23) (.88) -- (.38) -- (.01) (.22) (.28) --
------------ --------- --------- --------- ------------ ----------- ------------ ----------- --------------
Total dividends
and
distributions.... (1.36) (1.14) (.32) (.83) (.42) (.81) (.77) (.66) (.06)
------------ --------- --------- --------- ------------ ----------- ------------ ----------- --------------
Net asset value,
end of period.... $ 11.75 $ 13.09 $ 12.62 $ 11.99 $ 10.60 $ 11.91 $ 10.94 $ 12.54 $ 11.17
============ ========= ========= ========= ============ =========== ============ =========== ==============
TOTAL INVESTMENT
RETURN:**
Based on net
asset value per
share............ (0.23%)* 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............. .81%* .85% .85% .90% .86% .84% .82% .73% .82%*
============ ========= ========= ========= ============ =========== ============ =========== ==============
Expenses......... 1.81%* 1.85% 1.85% 1.90% 1.86% 1.84% 1.82% 1.73% 1.82%*
============ ========= ========= ========= ============ =========== ============ =========== ==============
Investment
income--net...... 1.36%* 1.99% 2.10% 3.37% 3.90% 3.73% 4.66% 3.60% 4.23%*
============ ========= ========= ========= ============ =========== ============ =========== ==============
SUPPLEMENTAL
DATA:
Net assets, end
of period (in
thousands)....... $760,265 $830,955 $886,920 $986,895 $1,171,567 $1,735,873 $2,264,429 $3,384,647 $ 2,065,752
============ ========= ========= ========= ============ =========== ============ =========== ==============
Portfolio
turnover......... 30.76% 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.
(1) Foreign currency transaction amounts have been reclassified to conform to
the 1994 presentation.
7
<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 Ratings Group
("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 the Investment Adviser. For a discussion of the
investment restrictions of the Fund, see "Investment Practices and
Restrictions--Investment Restrictions".
8
<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 of 1986, as amended (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, as amended (the "Investment Company Act"). 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.
The Directors are:
Arthur Zeikel*--President and Chief Investment Officer of MLAM and FAM;
President and Director of Princeton Services, Inc.; Executive Vice
President of Merrill Lynch & Co., Inc. ("ML & Co.") and Executive Vice
President of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch"); Director of Merrill Lynch Funds Distributor, Inc.
Kenneth S. Axelson--Former Executive Vice President and Director, J.C.
Penney Company, Inc.
Herbert I. London--John M. Olin Professor of Humanities, Gallatin
Division of New York University.
Robert R. Martin--Chairman, WTC Industries, 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 the Fund.
MLAM, with offices at 800 Scudders Mill Road, Plainsboro, New Jersey 08536
(mailing address: P.O. Box 9011, Princeton, New Jersey 08543-9011), is the
investment adviser for the Fund. MLAM is owned and controlled by ML & Co., a
financial services holding company. 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 100 other registered investment
companies, as well as to numerous pension plans and other institutions. As of
August 31, 1994, the Investment Adviser and FAM had a total of approximately
$165.7 billion in investment company and other portfolio assets under
management, including accounts of certain affiliates of the Investment
Adviser.
9
<PAGE>
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; no Class C or Class D shares
had been issued during that year.
Transfer Agency Services. Financial Data Services, Inc. ("Transfer Agent"),
which is a wholly-owned subsidiary of ML & Co., acts as the Fund's Transfer
Agent pursuant to a Transfer Agency, Dividend Disbursing Agency and Shareholder
Servicing Agency Agreement (the "Transfer Agency Agreement"). Pursuant to the
Transfer Agency Agreement, the Transfer Agent is responsible for the issuance,
transfer and redemption of shares and the opening and maintenance of
shareholder accounts. Pursuant to the Transfer Agency Agreement, the Transfer
Agent receives a fee of $11.00 per Class A and Class D shareholder account and
$14.00 per Class B and Class C 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. At August 31, 1994, the
Fund had 3,783 Class A shareholder accounts, 92,883 Class B shareholder
accounts, no Class C shareholder accounts and no Class D shareholder accounts.
At this level of accounts, the annual fee payable to the Transfer Agent would
aggregate approximately $1,341,975 plus out-of-pocket expenses.
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"), an affiliate of
both the Investment Adviser and 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 for retirement plans, the
minimum initial purchase is $100 and the minimum subsequent purchase is $1.00.
Different minimums may apply to purchases through the Merrill
10
<PAGE>
Lynch Blueprint(SM) Program. See "Purchase of Shares--Reduced Initial Sales
Charges--Merrill Lynch Blueprint(SM) Program" in the Statement of Additional
Information.
The Fund is offering its shares in four classes at a public offering price
equal to the next determined net asset value per share plus sales charges
imposed either at the time of purchase or on a deferred basis depending upon
the class of shares selected by the investor under the Merrill Lynch Select
Pricing(SM) System described below. The applicable offering price for purchase
orders is based upon the net asset value of the Fund next determined after
receipt of the purchase orders by the Distributor. As to purchase orders
received by securities dealers prior to 4:15 P.M., New York time, which
includes orders received after the determination of net asset value on the
previous day, the applicable offering price will be based on the net asset
value determined as of 4:15 P.M. on the day the orders are placed with the
Distributor, provided the orders are received by the Distributor prior to 4:30
P.M., New York time, on that day. If the purchase orders are not received by
the Distributor prior to 4:30 P.M., New York time, such orders shall be deemed
received on the next business day. Any order may be rejected by the Distributor
or the Fund. The Fund or the Distributor may suspend the continuous offering of
the Fund's shares of any class 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 four classes of shares under the Merrill Lynch Select
Pricing(SM) System, which permits each investor to choose the method of
purchasing shares that the investor believes is most beneficial given the
amount of purchase, the length of time the investor expects to hold the shares
and other relevant circumstances. Shares of Class A and Class D are sold to
investors choosing the initial sales charge alternatives and shares of Class B
and Class C are sold to investors choosing the deferred sales charge
alternatives. Investors should determine whether under their particular
circumstances it is more advantageous to incur an initial sales charge or to
have the entire initial purchase price invested in the Fund with the investment
thereafter being subject to a CDSC and ongoing distribution fees. A discussion
of the factors that investors should consider in determining the method of
purchasing shares under the Merrill Lynch Select Pricing(SM) System is set forth
under "Merrill Lynch Select Pricing(SM) System" on page 3.
Each Class A, Class B, Class C and Class D share of the Fund represents an
identical interest in the investment portfolio of the Fund and has the same
rights, except that Class B, Class C and Class D shares bear the expenses of
the ongoing account maintenance fees, and Class B and Class C shares bear the
expenses of the ongoing distribution fees and the additional incremental
transfer agency costs resulting from the deferred sales charge arrangements.
The deferred sales charges and account maintenance fees that are imposed on
Class B and Class C shares, as well as the account maintenance fees that are
imposed on Class D shares, will be imposed directly against those classes and
not against all assets of the Fund and, accordingly, such charges will not
affect the net asset value of any other class or have any impact on investors
choosing another sales charge option. Dividends paid by the Fund for each class
of shares will be calculated in the same manner at the same time and will
differ only to the extent that account maintenance and distribution fees and
any incremental transfer agency costs relating to a particular class are borne
exclusively by that class. Class B, Class C and Class D shares each have
exclusive voting rights with respect to the Rule 12b-1
11
<PAGE>
distribution plan adopted with respect to such class pursuant to which account
maintenance and/or distribution fees are paid. See "Distribution Plans" below.
Each class has different exchange privileges. See "Shareholder Services--
Exchange Privilege".
Investors should understand that the purpose and function of the initial
sales charges with respect to Class A and Class D shares are the same as those
of the deferred sales charges with respect to Class B and Class C shares in
that the sales charges applicable to each class provide for the financing of
the distribution of the shares of the Fund. The distribution-related revenues
paid with respect to a class will not be used to finance the distribution
expenditures of another class. Sales personnel may receive different
compensation for selling different classes of shares. Investors are advised
that only Class A and Class D shares may be available for purchase through
securities dealers, other than Merrill Lynch, which are eligible to sell
shares.
The following table sets forth a summary of the distribution arrangements for
each class of shares under the Merrill Lynch SelectSM Pricing System.
<TABLE>
<CAPTION>
ACCOUNT
MAINTENANCE DISTRIBUTION
CLASS SALES CHARGE(/1/) FEE FEE CONVERSION FEATURE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A Maximum 5.25% initial No No No
sales charge(/2/)(/3/)
- -------------------------------------------------------------------------------------------------
B CDSC for a period of 4 years, 0.25% 0.75% B shares convert to D shares
at a rate of 4.0% during the automatically after
first year, decreasing 1.0% approximately
annually to 0.0% eight years(/4/)
- -------------------------------------------------------------------------------------------------
C 1.0% CDSC for one year 0.25% 0.75% No
- -------------------------------------------------------------------------------------------------
D Maximum 5.25% initial sales 0.25% No No
charge(/3/)
</TABLE>
- --------
(1) Initial sales charges are imposed at the time of purchase as a percentage
of the offering price. CDSCs may be imposed if the redemption occurs within
the applicable CDSC time period. The charge will be assessed on an amount
equal to the lesser of the proceeds of redemption or the cost of the shares
being redeemed.
(2) Offered only to eligible investors. See "Initial Sales Charge
Alternatives--Class A and Class D Shares--Eligible Class A Investors".
(3) Reduced for purchases of $25,000 or more. Class A and Class D share
purchases of $1,000,000 or more may not be subject to an initial sales
charge but instead will be subject to a 1.0% CDSC for one year.
(4) The conversion period for dividend reinvestment shares and certain
retirement plans is modified. Also, Class B shares of certain other MLAM-
advised mutual funds into which exchanges may be made have a ten year
conversion period. If Class B shares of the Fund are exchanged for Class B
shares of another MLAM-advised mutual fund, the conversion period
applicable to the Class B shares acquired in the exchange will apply, and
the holding period for the shares exchanged will be tacked onto the holding
period for the shares acquired.
INITIAL SALES CHARGE ALTERNATIVES--CLASS A AND CLASS D SHARES
Investors choosing the initial sales charge alternatives who are eligible to
purchase Class A shares should purchase Class A shares rather than Class D
shares because there is an account maintenance fee imposed on Class D shares.
The public offering price of Class A and Class D shares for purchasers
choosing the initial sales charge alternative is the next determined net asset
value plus varying sales charges (i.e., sales loads), as set forth below.
12
<PAGE>
<TABLE>
<CAPTION>
SALES LOAD SALES LOAD DISCOUNT TO
AS PERCENTAGE AS PERCENTAGE* SELECTED DEALERS
OF OFFERING OF THE NET AS PERCENTAGE OF
AMOUNT OF PURCHASE PRICE AMOUNT INVESTED THE OFFERING PRICE
------------------ ------------- --------------- ------------------
<S> <C> <C> <C>
Less than $25,000............. 5.25% 5.54% 5.00%
$25,000 but less than $50,000. 4.75 4.99 4.50
$50,000 but less than
$100,000..................... 4.00 4.17 3.75
$100,000 but less than
$250,000..................... 3.00 3.09 2.75
$250,000 but less than
$1,000,000................... 2.00 2.04 1.80
$1,000,000 and over**......... 0.00 0.00 0.00
</TABLE>
- --------
* Rounded to the nearest one-hundredth percent.
** The initial sales charge may be waived on Class A and Class D purchases of
$1,000,000 or more made on or after October 21, 1994. If the sales charge is
waived, such purchases will be subject to a CDSC of 1.0% if the shares are
redeemed within one year after purchase. Class A purchases made prior to
October 21, 1994 may be subject to a CDSC, in lieu of an initial sales
charge, if the shares are redeemed within one year of purchase at the
following rates: 1.00% on purchases of $1,000,000 to $2,500,000; 0.60% on
purchases of $2,500,001 to $3,500,000; 0.40% on purchases of $3,500,001 to
$5,000,000; and 0.25% on purchases of more than $5,000,000. The charge will
be assessed on an amount equal to the lesser of the proceeds of redemption
or the cost of the shares being redeemed. A sales charge of 0.75% will be
charged on purchases of $1 million or more of Class A or Class D shares by
certain 401(k) plans.
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 and Class D
shares of the Fund will receive a concession equal to most of the sales charge,
they may be deemed to be underwriters under the Securities Act of 1933, as
amended (the "Securities Act").
During the fiscal year ended September 30, 1993, the Fund sold 2,695,028
Class A shares for aggregate net proceeds of $33,091,210. The gross sales
charges for the sale of Class A shares of the Fund for that year were $62,442,
of which $3,517 and $58,925 were received by the Distributor and Merrill Lynch,
respectively. The gross sales charges for the sale of Class A shares for the
six-month period ended March 31, 1994 were $37,535, of which the Distributor
received $2,294 and Merrill Lynch received $35,241. No CDSCs were received with
respect to Class A shares for which the initial sales charge was waived during
the fiscal year ended September 30, 1993 or the six months ended March 31,
1994.
Eligible Class A Investors. Class A shares are offered to a limited group of
investors and also will be issued upon reinvestment of dividends from
outstanding Class A shares. Investors that currently own Class A shares in a
shareholder account, including participants in the Merrill Lynch BlueprintSM
Program, are entitled to purchase additional Class A shares in that account.
Certain employer sponsored retirement or savings plans, including eligible
401(k) plans, may purchase Class A shares at net asset value provided such
plans meet the required minimum number of eligible employees or required amount
of assets advised by MLAM or any of its affiliates. Class A shares are
available at net asset value to corporate warranty insurance reserve fund
programs provided that the program has $3 million or more initially invested in
MLAM-advised mutual funds. Also eligible to purchase Class A shares at net
asset value are participants in certain investment programs including TMASM
Managed Trusts to which Merrill Lynch Trust Company provides discretionary
trustee services and certain purchases made in connection with the Merrill
Lynch Mutual Fund Adviser program. In addition, Class A shares will be offered
at net asset value to ML & Co. and its subsidiaries and their directors and
employees and to members of the Boards of MLAM-advised investment companies,
including the Fund. Certain persons who acquired shares of certain MLAM-advised
closed-end funds who
13
<PAGE>
wish to reinvest the net proceeds from a sale of their closed-end fund shares
of common stock in shares of the Fund also may purchase Class A and Class D
shares of the Fund if certain conditions set forth in the Statement of
Additional Information are met for closed-end funds that commenced operations
prior to October 21, 1994. For example, Class A shares of the Fund and certain
other MLAM-advised mutual funds are offered at net asset value to shareholders
of Merrill Lynch Senior Floating Rate Fund, Inc. who wish to reinvest the net
proceeds from a sale of certain of their shares of common stock of Merrill
Lynch Senior Floating Rate Fund, Inc. in shares of such funds.
Reduced Initial Sales Charges. No initial sales charges are imposed upon
Class A and Class D shares issued as a result of the automatic reinvestment of
dividends or capital gains distributions. Class A and Class D sales charges are
reduced under a Right of Accumulation and a Letter of Intention. Class A shares
are offered at net asset value to certain eligible Class A investors as set
forth above under "Eligible Class A investors".
Class D shares are offered at net asset value 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. Class D shares may be offered at net asset value in connection with the
acquisition of assets of other investment companies. Class D shares also are
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 (i)
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 or
(ii) invested in a mutual fund sponsored by a non-Merrill Lynch company for
which Merrill Lynch has not served as a selected dealer, if certain conditions
set forth in the Statement of Additional Information are met.
Class D shares are offered with reduced sales charges and, in certain
circumstances, at net asset value, to participants in the Merrill Lynch
BlueprintSM Program.
Additional information concerning these reduced initial sales charges,
including information regarding investments by Employee Sponsored Retirement or
Savings Plans is set forth in the Statement of Additional Information.
DEFERRED SALES CHARGE ALTERNATIVES--CLASS B AND CLASS C SHARES
Investors choosing the deferred sales charge alternatives should consider
Class B shares if they intend to hold their shares for an extended period of
time and Class C shares if they are uncertain as to the length of time they
intend to hold their assets in MLAM-advised mutual funds.
The public offering price of Class B and Class C shares for investors
choosing the deferred sales charge alternatives is the next determined net
asset value per share without the imposition of a sales charge at the time of
purchase. As discussed below, Class B shares are subject to a four year CDSC,
while Class C shares are subject only to a one year 1.0% CDSC. On the other
hand, approximately eight years after Class B shares are issued, such Class B
shares, together with shares issued upon dividend reinvestment with respect to
those shares, are automatically converted into Class D shares of the Fund and
thereafter will be subject to lower
14
<PAGE>
continuing fees. See "Conversion of Class B Shares to Class D Shares" below.
Both Class B and Class C shares are subject to an account maintenance fee of
0.25% of net assets and a distribution fee of 0.75% of net assets as discussed
below under "Distribution Plans".
Class B and Class C shares are sold without an initial sales charge so that
the Fund will receive the full amount of the investor's purchase payment.
Merrill Lynch compensates its financial consultants for selling Class B and
Class C shares at the time of purchase from its own funds. See "Distribution
Plans" below.
Proceeds from the CDSC and the ongoing distribution fees are paid to the
Distributor and are used in whole or in part by the Distributor to defray the
expenses of dealers (including Merrill Lynch) related to providing
distribution-related services to the Fund in connection with the sale of the
Class B and Class C shares, such as the payment of compensation of financial
consultants for selling Class B and Class C shares, from its own funds. The
combination of the CDSC and the ongoing distribution fee facilitates the
ability of the Fund to sell the Class B and Class C shares without a sales
charge being deducted at the time of purchase. Approximately eight years after
issuance, Class B shares will convert automatically into Class D shares of the
Fund, which are subject to an account maintenance fee but no distribution fee;
Class B shares of certain other MLAM-advised mutual funds into which exchanges
may be made convert into Class D shares automatically after approximately ten
years. If Class B shares of the Fund are exchanged for Class B shares of
another MLAM-advised mutual fund, the conversion period applicable to the Class
B shares acquired in the exchange will apply, and the holding period for the
shares exchanged will be tacked onto the holding period for the shares
acquired.
Imposition of the CDSC and the distribution fee on Class B and Class C shares
is limited by the NASD asset-based sales charge rule. See "Limitations on the
Payment of Deferred Sales Charges" below. The proceeds from the ongoing account
maintenance fee are used to compensate Merrill Lynch for providing continuing
account maintenance activities. 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 CDSC schedule if such schedule is
higher than the CDSC schedule relating to the Class B shares acquired as a
result of the exchange.
Contingent Deferred Sales Charges--Class B Shares. Class B shares which are
redeemed within four years of purchase may be subject to a CDSC at the rates
set forth below charged as a percentage of the dollar amount subject thereto.
The charge will be assessed on an amount equal to the lesser of the proceeds of
redemption or the cost of the shares being redeemed. Accordingly, no CDSC will
be imposed on increases in net asset value above the initial purchase price. In
addition, no CDSC will be assessed on shares derived from reinvestment of
dividends or capital gains distributions.
The following table sets forth the rates of the Class B CDSC:
<TABLE>
<CAPTION>
CLASS B CDSC
AS A PERCENTAGE OF
YEAR SINCE PURCHASE DOLLAR AMOUNT
PAYMENT MADE SUBJECT TO CHARGE
------------------- ------------------
<S> <C>
0-1..................................................... 4.00%
1-2..................................................... 3.00
2-3..................................................... 2.00
3-4..................................................... 1.00
4 and thereafter........................................ 0.00
</TABLE>
15
<PAGE>
For the fiscal year ended September 30, 1993, the Distributor received CDSCs
of $182,110 with respect to Class B shares.
In determining whether a CDSC is applicable to a redemption, the calculation
will be determined in the manner that results in the lowest possible rate being
charged. Therefore, it will be assumed that the redemption is first of shares
held for over four years or shares acquired pursuant to reinvestment of
dividends or distributions and then of shares held longest during the four-year
period. The charge will not be applied to dollar amounts representing an
increase in the net asset value since the time of purchase. A transfer of
shares from a shareholder's account to another 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 or her first redemption of 50 shares (proceeds of $600), 10 shares
will not be subject to charge because of dividend reinvestment. With respect to
the remaining 40 shares, the 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 Class B CDSC 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
1986, as amended) of a shareholder.
The Class B CDSC 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
1986, as amended) of a shareholder. The Class B CDSC also is waived on
redemptions 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
BlueprintSM Program. The CDSC also is waived for any Class B shares which are
purchased by eligible 401(k) or eligible 401(a) plans which are rolled over
into a Merrill Lynch or Merrill Lynch Trust Company custodied IRA and held in
such account at the time of redemption. The Class B CDSC also is waived for any
Class B shares which are purchased by a Merrill Lynch rollover IRA that was
funded by a rollover from a terminated 401(k) plan managed by the MLAM Private
Portfolio Group and held in such account at the time of redemption. Additional
information concerning the waiver of the Class B CDSC is set forth in the
Statement of Additional Information.
Contingent Deferred Sales Charges--Class C Shares. Class C shares which are
redeemed within one year of purchase may be subject to a 1.0% CDSC charged as a
percentage of the dollar amount subject thereto. The charge will be assessed on
an amount equal to the lesser of the proceeds of redemption or the cost of the
shares being redeemed. Accordingly, no Class C CDSC will be imposed on
increases in net asset value above the initial purchase price. In addition, no
Class C CDSC will be assessed on shares derived from reinvestment of dividends
or capital gains distributions.
In determining whether a Class C CDSC is applicable to a redemption, the
calculation will be determined in the manner that results in the lowest
possible rate being charged. Therefore, it will be assumed that the redemption
is first of shares held for over one year or shares acquired pursuant to
reinvestment of dividends
16
<PAGE>
or distributions and then of shares held longest during the one-year period.
The charge will not be applied to dollar amounts representing an increase in
the net asset value since the time of purchase. A transfer of shares from a
shareholder's account to another account will be assumed to be made in the same
order as a redemption.
Conversion of Class B Shares to Class D Shares. After approximately eight
years (the "Conversion Period"), Class B shares will be converted automatically
into Class D shares of the Fund. Class D shares are subject to an ongoing
account maintenance fee of 0.25% of net assets but are not subject to the
distribution fee that is borne by Class B shares. Automatic conversion of Class
B shares into Class D shares will occur at least once each month (on the
"Conversion Date") on the basis of the relative net asset values of the shares
of the two classes on the Conversion Date, without the imposition of any sales
load, fee or other charge. Conversion of Class B shares to Class D shares will
not be deemed a purchase or sale of the shares for Federal income tax purposes.
In addition, shares purchased through reinvestment of dividends on Class B
shares also will convert automatically to Class D shares. The Conversion Date
for dividend reinvestment shares will be calculated taking into account the
length of time the shares underlying such dividend reinvestment shares were
outstanding. If at a Conversion Date the conversion of Class B shares to Class
D shares of the Fund in a single account will result in less than $50 worth of
Class B shares being left in the account, all of the Class B shares of the Fund
held in the account on the Conversion Date will be converted to Class D shares
of the Fund.
Share certificates for Class B shares of the Fund to be converted must be
delivered to the Transfer Agent at least one week prior to the Conversion Date
applicable to those shares. In the event such certificates are not received by
the Transfer Agent at least one week prior to the Conversion Date, the related
Class B shares will convert to Class D shares on the next scheduled Conversion
Date after such certificates are delivered.
In general, Class B shares of equity MLAM-advised mutual funds will convert
approximately eight years after initial purchase, and Class B shares of taxable
and tax-exempt fixed income MLAM-advised mutual funds will convert
approximately ten years after initial purchase. If, during the Conversion
Period, a shareholder exchanges Class B shares with an eight-year Conversion
Period for Class B shares with a ten-year Conversion Period, or vice versa, the
Conversion Period applicable to the Class B shares acquired in the exchange
will apply, and the holding period for the shares exchanged will be tacked onto
the holding period for the shares acquired.
The Conversion Period is modified for shareholders who purchased Class B
shares through certain retirement plans which qualified for a waiver of the
CDSC normally imposed on purchases of Class B shares ("Class B Retirement
Plans"). When the first share of any MLAM-advised mutual fund purchased by a
Class B Retirement Plan has been held for ten years (i.e., ten years from the
date the relationship between MLAM-advised mutual funds and the Class B
Retirement Plan was established), all Class B shares of all MLAM-advised mutual
funds held in that Class B Retirement Plan will be converted into Class D
shares of the appropriate funds. Subsequent to such conversion, that Class B
Retirement Plan will be sold Class D shares of the appropriate funds at net
asset value per share.
17
<PAGE>
DISTRIBUTION PLANS
The Fund has adopted separate distribution plans for Class B, Class C and
Class D shares pursuant to Rule 12b-1 under the Investment Company Act (each a
"Distribution Plan") with respect to the account maintenance and/or
distribution fees paid by the Fund to the Distributor with respect to such
classes. The Class B and Class C Distribution Plans provide for the payment of
account maintenance fees and distribution fees, and the Class D Distribution
Plan provides for the payment of account maintenance fees.
The Distribution Plans for Class B, Class C and Class D shares each provide
that the Fund pays the Distributor an account maintenance fee relating to the
shares of the relevant class, accrued daily and paid monthly, at the annual
rate of 0.25% of the average daily net assets of the Fund attributable to
shares of the relevant class in order to compensate the Distributor and Merrill
Lynch (pursuant to a sub-agreement) in connection with account maintenance
activities.
The Distribution Plans for Class B and Class C shares each provide that the
Fund also pays the Distributor a distribution fee relating to the shares of the
relevant class, accrued daily and paid monthly, at the annual rate of 0.75% of
the average daily net assets of the Fund attributable to the shares of the
relevant class in order to compensate the Distributor and Merrill Lynch
(pursuant to a sub-agreement) for providing shareholder and distribution
services, and bearing certain distribution-related expenses of the Fund,
including payments to financial consultants for selling Class B and Class C
shares of the Fund. The Distribution Plans relating to Class B and Class C
shares are designed to permit an investor to purchase Class B and Class C
shares through dealers without the assessment of an initial sales charge and at
the same time permit the dealer to compensate its financial consultants in
connection with the sale of the Class B and Class C shares. In this regard, the
purpose and function of the ongoing distribution fees and the CDSC are the same
as those of the initial sales charge with respect to the Class A and Class D
shares of the Fund in that the deferred sales charges provide for the financing
of the distribution of the Fund's Class B and Class C shares.
Prior to July 6, 1993, the Fund paid the Distributor an ongoing distribution
fee, accrued daily and paid monthly, at the annual rate of 1.0% of average
daily net assets of the Class B shares of the Fund under a distribution plan
previously adopted by the Fund (the "Prior Plan") to compensate the Distributor
and Merrill Lynch for providing account maintenance and distribution-related
activities and services to Class B shareholders. The fee rate payable and the
services provided under the Prior Plan are identical to the aggregate fee rate
payable and the services provided under the Class B Distribution Plan, the
difference being that the account maintenance and distribution services have
been unbundled.
For the year ended September 30, 1993, the Fund paid the Distributor account
maintenance fees of $2,146,935 and distribution fees of $6,440,805 under the
Class B Distribution Plan. The Fund did not begin to offer shares of Class C or
Class D publicly until the date of this Prospectus. Accordingly, no payments
have been made pursuant to the Class C or Class D Distribution Plans prior to
the date of this Prospectus.
The payments under the Distribution Plans are based upon a percentage of
average daily net assets attributable to the shares regardless of the amount of
expenses incurred and, accordingly, distribution-related revenues from the
Distribution Plans may be more or less than distribution-related expenses.
Information with respect to the distribution-related revenues and expenses is
presented to the Directors for their consideration in connection with their
deliberations as to the continuance of the Class B and Class C
18
<PAGE>
Distribution Plans. This information is presented annually as of December 31 of
each year on a "fully allocated accrual" basis and quarterly on a "direct
expense and revenue/cash" basis. On the fully allocated accrual basis, revenues
consist of the account maintenance fees, distribution fees, the CDSCs and
certain other related revenues, and expenses consist of financial consultant
compensation, branch office and regional operation center selling and
transaction processing expenses, advertising, sales promotion and marketing
expenses, corporate overhead and interest expense. On the direct expense and
revenue/cash basis, revenues consist of the account maintenance fees,
distribution fees and CDSCs and the expenses consist of financial consultant
compensation. As of December 31, 1993, 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 $24,803,000 (2.99% of Class B net
assets at that date). As of December 31, 1993, direct cash revenues for the
period since the commencement of operations exceeded direct cash expenses by
$109,814,195 (13.22% of Class B net assets at that date); as of July 31, 1994,
direct cash revenues for the period since the commencement of operations
exceeded direct cash expenses by $113,763,218 (15.59% of Class B net assets at
that date).
The Fund has no obligation with respect to distribution and/or account
maintenance-related expenses incurred by the Distributor and Merrill Lynch in
connection with the Class B, Class C and Class D shares, and there is no
assurance that the Board of Directors of the Fund will approve the continuance
of the Distribution Plans from year to year. However, the Distributor intends
to seek annual continuation of the Distribution Plans. In their review of the
Distribution Plans, the Directors will be asked to take into consideration
expenses incurred in connection with the account maintenance and/or
distribution of each class of shares separately. The initial sales charges, the
account maintenance fee, the distribution fee and/or the CDSCs received with
respect to one class will not be used to subsidize the sale of shares of
another class. Payments of the distribution fee on Class B shares will
terminate upon conversion of those Class B shares into Class D shares as set
forth under "Deferred Sales Charge Alternatives--Class B and Class C Shares--
Conversion of Class B Shares to Class D Shares".
LIMITATIONS ON THE PAYMENT OF DEFERRED SALES CHARGES
The maximum sales charge rule in the Rules of Fair Practice of the NASD
imposes a limitation on certain asset-based sales charges such as the Fund's
distribution fee and the CDSC borne by the Class B and Class C shares, but not
the account maintenance fee. The maximum sales charge rule is applied
separately to each class. As applicable to the Fund, the maximum sales charge
rule limits the aggregate of distribution fee payments and CDSCs payable by the
Fund to (1) 6.25% of eligible gross sales of Class B shares and Class C shares,
computed separately (defined to exclude shares issued pursuant to dividend
reinvestments and exchanges) plus (2) interest on the unpaid balance at the
prime rate plus 1% (the unpaid balance being the maximum amount payable minus
amounts received from the payment of the distribution fee and the CDSC). The
Distributor has voluntarily agreed to waive interest charges on the unpaid
balance in excess of 0.50% of eligible gross sales. Consequently, the maximum
amount payable to the Distributor (referred to as the "voluntary maximum") in
connection with the Class B shares is 6.75% of eligible gross sales. The
Distributor retains the right to stop waiving the interest charges at any time.
To the extent payments would exceed the voluntary maximum, the Fund will not
make further payments of the distribution fee with respect to Class B shares,
and any CDSCs will be paid to the Fund rather than to the Distributor; however,
the Fund will continue to make payments of the account maintenance fee. In
certain circumstances, the amount payable
19
<PAGE>
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.
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 statements, at least
quarterly, from the Transfer Agent. These statements will serve as transaction
confirmations for automatic investment purchases and the reinvestment of
ordinary income dividends and long-term capital gain distributions. The
statements will also show any other activity in the account since the preceding
statement. Shareholders will receive separate transaction confirmations for
each purchase or sale transaction other than automatic investment purchases and
the reinvestment of ordinary income dividends, and long-term 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 or
Class D 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 or Class D shares (paying any applicable CDSC) so that
the cash proceeds can be transferred to the account at the new firm or such
shareholder must continue to maintain an Investment Account at the Transfer
Agent for those Class A or Class D shares. Shareholders interested in
transferring their Class B or Class C shares from Merrill Lynch and who do not
wish to have an Investment Account maintained for such shares at the Transfer
Agent may request their new brokerage firm to maintain such shares in an
account registered in the name of the brokerage firm for the benefit of the
shareholder at the Transfer Agent. Shareholders considering transferring a tax-
deferred retirement account such as an IRA from Merrill Lynch to another
brokerage firm or financial institution should be aware that, if the firm to
which the retirement account is to be transferred will not take delivery of
shares of the Fund, a shareholder must either redeem the shares (paying any
applicable CDSC) so that the cash proceeds may be transferred to the account at
the new firm, or such shareholder must continue to maintain a retirement
account at Merrill Lynch for those shares.
Exchange Privilege. Shareholders of each class of shares of the Fund each
have an exchange privilege with certain other MLAM-advised mutual funds. There
is currently no limitation on the number of times a shareholder may exercise
the exchange privilege. The exchange privilege may be modified or terminated at
any time in accordance with the rules of the Commission.
20
<PAGE>
Under the Merrill Lynch Select Pricing(SM) System, Class A shareholders may
exchange Class A shares of the Fund for Class A shares of a second MLAM-advised
mutual fund if the shareholder holds any Class A shares of the second fund in
his account in which the exchange is made at the time of the exchange or is
otherwise eligible to purchase Class A shares of the second fund. If the Class
A shareholder wants to exchange Class A shares for shares of a second MLAM-
advised mutual fund, and the shareholder does not hold Class A shares of the
second fund in his account at the time of the exchange and is not otherwise
eligible to acquire Class A shares of the second fund, the shareholder will
receive Class D shares of the second fund as a result of the exchange. Class D
shares also may be exchanged for Class A shares of a second MLAM-advised mutual
fund at any time as long as, at the time of the exchange, the shareholder holds
Class A shares of the second fund in the account in which the exchange is made
or is otherwise eligible to purchase Class A shares of the second fund.
Exchanges of Class A and Class D shares are made on the basis of the relative
net asset values per Class A or Class D share, respectively, plus an amount
equal to the difference, if any, between the sales charge previously paid on
the Class A or Class D shares being exchanged and the sales charge payable at
the time of the exchange on the shares being acquired.
Class B, Class C and Class D shares will be exchangeable with shares of the
same class of other MLAM-advised mutual funds.
Shares of the Fund which are subject to a CDSC will be exchangeable on the
basis of relative net asset value per share without the payment of any CDSC
that might otherwise be due upon redemption of the shares of the Fund. For
purposes of computing the CDSC that may be payable upon a disposition of the
shares acquired in the exchange, the holding period for the previously owned
shares of the Fund is "tacked" to the holding period of the newly acquired
shares of the other Fund.
Class A, Class B, Class C and Class D shares also will be exchangeable for
shares of certain MLAM-advised money market funds specifically designated as
available for exchange by holders of Class A, Class B, Class C or Class D
shares. The period of time that Class A, Class B, Class C or Class D shares are
held in a money market fund, however, will not count toward satisfaction of the
holding period requirement for reduction of any CDSC imposed on such shares, if
any, and, with respect to Class B shares, toward satisfaction of the Conversion
Period.
Class B shareholders of the Fund exercising the exchange privilege will
continue to be subject to the Fund's CDSC schedule if such schedule is higher
than the CDSC schedule relating to the new Class B shares. In addition, Class B
shares of the Fund acquired through use of the exchange privilege will be
subject to the Fund's CDSC schedule if such schedule is higher than the CDSC
schedule relating to the Class B shares of the MLAM-advised mutual fund from
which the exchange has been made.
Exercise of the exchange privilege is treated as a sale for Federal income
tax purposes. For further information, see "Shareholder Services--Exchange
Privilege" in the Statement of Additional Information.
The Fund's exchange privilege is modified with respect to purchases of Class
A and Class D shares under the Merrill Lynch Mutual Fund Adviser ("MFA")
program. First, the initial allocation of assets is made under the MFA program.
Then, any subsequent exchange under the MFA program of Class A or Class D
21
<PAGE>
shares of a MLAM-advised mutual fund for Class A or Class D 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 MLAM-
advised mutual fund and the sales charge payable on the shares of the Fund
being acquired in the exchange under the MFA program.
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. Cash payments can also be directly deposited to the shareholder's bank
account. No CDSC will be imposed on redemption of shares issued as a result of
the automatic reinvestment of dividends or capital gains distributions.
Systematic Withdrawal Plans. A Class A or Class D 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.
Automatic Investment Plans. Regular additions of Class A, Class B, Class C or
Class D shares may be made to an investor's Investment Account by prearranged
charges of $50 or more to 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 $100
or more through the CMA Automated Investment Program.
Retirement Plans. Self-directed individual retirement accounts and other
retirement plans are available from Merrill Lynch. Under these plans,
investments may be made in the 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
$100 and the minimum subsequent purchase is $1.
REDEMPTION OF SHARES
The Fund is required to redeem for cash all 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 CDSC which may be applicable, 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
22
<PAGE>
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 Mutual Funds Operations, P.O. Box 45289, Jacksonville,
Florida 32232-5289. Redemption requests delivered other than by mail should be
delivered to Financial Data Services, Inc., Transfer Agency Mutual Funds
Operations, 4800 Deer Lake Drive East, Jacksonville, Florida 32246-6484. Proper
notice of redemption in the case of shares deposited with the Transfer Agent
may be 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 applicable CDSC,
provided that the request for repurchase is received by the dealer prior to the
close of business on the New York Stock Exchange on the day received and such
request is received by the Fund from the dealer not later than 4:30 p.m., New
York Time, on the same day.
Dealers have the responsibility of submitting such repurchase requests to the
Fund not later than 4:30 P.M., New York time, in order to obtain that day's
closing price. These repurchase arrangements are for the convenience of
shareholders and do not involve a charge by the Fund (other than any applicable
CDSC). 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.
23
<PAGE>
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 AND CLASS D SHARES
Shareholders who have redeemed their Class A or Class D shares have a one-
time privilege to reinstate their accounts by purchasing Class A or Class D
shares, as the case may be, 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 or Class D shareholder only the first time
such shareholder makes a redemption.
INVESTMENT PRACTICES AND RESTRICTIONS
PORTFOLIO STRATEGIES INVOLVING OPTIONS AND FUTURES
The Fund may engage in various portfolio strategies to seek to increase its
return through the use of options on portfolio securities and to hedge its
portfolio against movements in the equity markets, interest rates and exchange
rates between currencies. The Fund has authority to write (i.e., sell) covered
call options on its portfolio securities, purchase put options on securities
and engage in transactions in stock index options, stock index futures and
financial futures, and related options on such futures. The Fund may also deal
in forward foreign exchange transactions and foreign currency options and
futures, and related options on such futures. Each of these portfolio
strategies is described below. Although certain risks are involved in options
and futures transactions (as discussed below in "Risk Factors in Options,
Futures and Currency Transactions"), the Investment Adviser believes that,
because the Fund will only engage in these transactions for hedging purposes,
the options and futures portfolio strategies of the Fund will not subject the
Fund to the risks frequently associated with the speculative use of options and
futures transactions. While the Fund's use of hedging strategies is intended to
reduce the volatility of the net asset value of Fund shares, the Fund's net
asset value will fluctuate. There can be no assurance that the Fund's hedging
transactions will be effective. Furthermore, the Fund will only engage in
hedging activities from time to time and may not necessarily be engaging in
hedging activities when movements in the equity markets, interest rates or
currency exchange rates occur.
Purchasing Put Options. The Fund is authorized to purchase put options to
hedge against a decline in the market value of its portfolio securities. By
buying a put option, the Fund has a right to sell the underlying security at
the exercise price, thus limiting the Fund's risk of loss through a decline in
the market value of the security until the put option expires. The amount of
any appreciation in the value of the underlying security will be partially
offset by the amount of the premium paid for the put option and any related
transaction costs. Prior to its expiration, a put option may be sold in a
closing sale transaction and profit or loss from the sale will depend on
whether the amount received is more or less than the premium paid for the
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put option plus the related transaction costs. A closing sale transaction
cancels out the Fund's position as the purchaser of an option by means of an
offsetting sale of an identical option prior to the expiration of the option it
has purchased. The Fund will not purchase put options on securities if, as a
result of such purchase, the aggregate cost of all outstanding options on
securities held by the Fund would exceed 5% of the market value of the Fund's
total assets.
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.
Stock Index Options and Futures and Financial Futures. The Fund is authorized
to engage in transactions in stock index options and futures and financial
futures, and related options on such futures. The Fund may purchase or write
call options and purchase or write put options on stock indexes to hedge
against the risks of market-wide stock price movements in the securities in
which the Fund invests. The effectiveness of the hedge will depend on the
degree of diversification of the Fund's portfolio and the sensitivity of the
securities comprising the portfolio to factors influencing the market as a
whole. Because the value of an index option depends upon movements in the level
of the index rather than the price of a particular stock, whether the Fund will
realize a gain or loss on the purchase or sale of an option on an index depends
upon movements in the level of prices in the stock market generally or in an
industry or market segment rather than movements in the prices of a particular
stock. Currently, stock index options traded include the S&P 100 Index, the S&P
500 Index, the NYSE Composite Index, the AMEX Market Value Index, the National
Over-the-Counter Index and other standard, broadly based stock market indices.
The Fund may also purchase and sell stock index futures contracts and
financial futures contracts ("futures contracts") as a hedge against adverse
changes in the market value of its portfolio securities and interest rates, as
described below. A futures contract is an agreement between two parties which
obligates the purchaser of the futures contract to buy and the seller of a
futures contract to sell a security for a set price on a future date. Unlike
most other futures contracts, a stock index futures contract does not require
actual delivery of securities, but results in cash settlement based upon the
difference in value of the index between the time the contract was entered into
and the time of its settlement. The Fund may effect transactions in stock index
futures contracts in securities and financial futures contracts in United
States Government and agency securities and corporate debt securities.
Transactions by the Fund in stock index futures and financial futures are
subject to limitations as described below under "Restrictions on the Use of
Futures Transactions".
The Fund may sell stock index futures contracts in anticipation of or during
a market decline to attempt to offset the decrease in market value of the
Fund's securities portfolio that might otherwise result. When the Fund is not
fully invested in the securities markets and anticipates a significant market
advance, it may purchase stock index futures in order to gain rapid market
exposure that may in part or entirely offset increases in the cost of
securities that the Fund intends to purchase. As such securities purchases are
made,
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an equivalent amount of stock index futures contracts will be terminated by
offsetting sales. The Fund does not consider purchases of futures contracts to
be a speculative practice under these circumstances. It is anticipated that, in
a substantial majority of these transactions, the Fund will purchase such
securities upon termination of the long futures position, whether the long
position is the purchase of a stock index futures contract or the purchase of a
call option on a stock index future, but under unusual circumstances (e.g., the
Fund experiences a significant amount of redemptions), a long futures position
may be terminated without the corresponding purchase of securities.
The Fund may sell financial futures contracts in anticipation of an increase
in the general level of interest rates. Generally, as interest rates rise, the
market values of debt securities which may be held by the Fund as a temporary
defensive measure will fall, thus reducing the net asset value of the Fund.
However, as interest rates rise, the value of the Fund's short position in the
futures contract will also tend to increase, thus offsetting all or a portion
of the depreciation in the market value of the Fund's investments which are
being hedged. While the Fund will incur commission expenses in selling and
closing out futures positions, these commissions are generally less than the
transaction expenses which the Fund would have incurred had the Fund sold
portfolio securities in order to reduce its exposure to increases in interest
rates. The Fund also may purchase financial futures contracts in anticipation
of a decline in interest rates when it is not fully invested in a particular
market in which it intends to make investments to gain market exposure that may
in part or entirely offset an increase in the cost of securities it intends to
purchase. It is anticipated that, in a substantial majority of these
transactions, the Fund will purchase securities upon termination of the futures
contract.
The Fund also has authority to purchase and write call and put options on
futures contracts in connection with its hedging activities. Generally, these
strategies are utilized under the same market and market sector conditions
(i.e., conditions relating to specific types of investments) in which the Fund
enters into futures transactions. The Fund may purchase put options or write
call options on futures contracts rather than selling the underlying futures
contract in anticipation of a decrease in the market value of a security or an
increase in interest rates. Similarly, the Fund may purchase call options, or
write put options on futures contracts, as a substitute for the purchase of
such futures to hedge against the increased cost resulting from an increase in
the market value or a decline in interest rates of securities which the Fund
intends to purchase.
The Fund may engage in options and futures transactions on exchanges and
options in the over-the-counter markets ("OTC options"). In general, exchange-
traded contracts are third-party contracts (i.e., performance of the parties'
obligations is guaranteed by an exchange or clearing corporation) with
standardized strike prices and expiration dates. OTC options transactions are
two-party contracts with price and terms negotiated by the buyer and seller.
See "Restrictions on OTC Options" below for information as to restrictions on
the use of OTC options.
Foreign Currency Options, Futures and Related Options. The Fund is also
authorized to purchase or sell listed or over-the-counter foreign currency
options, foreign currency futures and related options on foreign currency
futures as a short or long hedge against possible variations in foreign
exchange rates. Such transactions may be effected with respect to hedges on
non-U.S. dollar denominated securities owned by the Fund, sold by the Fund but
not yet delivered, or committed or anticipated to be purchased by the Fund. As
an illustration, the Fund may use such techniques to hedge the stated value in
United States dollars of an investment in a pound sterling denominated
security. In such circumstances, for example, the Fund may
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purchase a foreign currency put option enabling it to sell a specified amount
of pounds for dollars at a specified price by a future date. To the extent the
hedge is successful, a loss in value of the pound relative to the dollar will
tend to be offset by an increase in the value of the put option. To offset, in
whole or in part, the cost of acquiring such a put option, the Fund may also
sell a call option which, if exercised, requires it to sell a specified amount
of pounds for dollars at a specified price by a future date (a technique called
a "straddle"). By selling such call option, the Fund gives up the opportunity
to profit without limit from increases in the relative value of the pound 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.
Certain differences exist between these foreign currency hedging instruments.
Foreign currency options provide the holder thereof the right to buy or sell a
currency at a fixed price on a future date (with exchange-traded contracts and
OTC options having the characteristics described above). A futures contract on
a foreign currency is an agreement between two parties to buy and sell a
specified amount of currency for a set price on a future date. Futures
contracts and options on futures contracts are traded on boards of trade or
futures exchanges. The Fund will not speculate in foreign currency options,
futures or related options. Accordingly, the Fund will not hedge a currency
substantially in excess of the market 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. The Fund may not incur potential
net liabilities of more than 20% of its total assets from foreign currency
options, futures or related options.
Restrictions on the Use of Futures Transactions. Under regulations of the
Commodity Futures Trading Commission ("CFTC"), the futures trading activities
described herein will not result in the Fund being deemed to be a "commodity
pool," as defined under such regulations, provided that the Fund adheres to
certain restrictions. In particular, the Fund may (i) purchase and sell futures
contracts and options thereon for bona fide hedging purposes, as defined under
CFTC regulations, without regard to the percentage of the Fund's assets
committed to margin and option premiums, and (ii) the Fund may enter into non-
hedging transactions, provided that the Fund not enter into such transactions
for yield enhancement or risk management purposes if, immediately thereafter,
the sum of the amount of initial margin deposits on the Fund's existing futures
positions and option premiums would exceed 5% of the market value of its
liquidation value, after taking into account unrealized profits and unrealized
losses on any such transactions. However, the Fund intends to engage in options
and futures transactions only for hedging purposes. Margin deposits may consist
of cash or securities acceptable to the broker and the relevant contract
market.
When the Fund purchases a futures contract or writes a put option or
purchases a call option thereon, an amount of cash and cash equivalents will be
deposited in a segregated account with the Fund's custodian so that the amount
so segregated, plus the amount of initial and variation margin held in the
account of its broker, equals the market value of the futures contract, thereby
ensuring that the use of such futures is unleveraged.
An order has been obtained from the Commission which exempts the Fund from
certain provisions of the Investment Company Act in connection with
transactions involving futures contracts and options thereon.
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Restrictions on OTC Options. The Fund will engage in OTC options, including
over-the-counter foreign currency options and options on foreign currency
futures, only with member banks of the Federal Reserve System and primary
dealers in United States Government securities or with affiliates of such banks
or dealers which have capital of at least $50 million or whose obligations are
guaranteed by an entity having capital of at least $50 million. The Fund will
acquire only those OTC options for which the Investment Adviser believes the
Fund can receive on each business day at least two independent bids or offers
(one of which will be from an entity other than a party to the option).
The staff of the Commission has taken the position that purchased OTC options
and the assets used as cover for written OTC options are illiquid securities.
Therefore, the Fund has adopted an investment policy pursuant to which it will
not purchase or sell OTC options (including OTC options on futures contracts)
if, as a result of such transaction, the sum of the market value of OTC options
currently outstanding which are held by the Fund, the market value of the
underlying securities covered by OTC call options currently outstanding which
were sold by the Fund and margin deposits on the Fund's existing OTC options on
futures contracts exceed 5% of the total assets of the Fund, taken at market
value, together with all other assets of the Fund which are illiquid or are not
otherwise readily marketable. However, if the OTC option is sold by the Fund to
a primary U.S. Government securities dealer recognized by the Federal Reserve
Bank of New York and if the Fund has the unconditional contractual right to
repurchase such OTC option from the dealer at a predetermined price, then the
Fund will treat as illiquid such amount of the underlying securities as is
equal to the repurchase price less the amount by which the option is "in-the-
money" (i.e., current market value of the underlying security minus the
option's strike price). The repurchase price with the primary dealers is
typically a formula price which is generally based on a multiple of the premium
received for the option, plus the amount by which the option is "in-the-money".
This policy is not a fundamental policy of the Fund and may be amended by the
Board of Directors of the Fund without the approval of the Fund's shareholders.
However, the Fund will not change or modify this policy prior to the change or
modification by the Commission staff of its positions.
Risk Factors in Options, Futures and Currency Transactions. Utilization of
options and futures transactions to hedge the portfolio involves the risk of
imperfect correlation in movements in the price of options and futures prices
and movements in the prices of the securities, interest rates or currencies
which are the subject of the hedge. If the price of the options or futures
moves more or less than the price of the subject of the hedge, the Fund will
experience a gain or loss which will not be completely offset by movements in
the price of the subject of the hedge.
The Fund intends to enter into options and futures transactions, on an
exchange or in the over-the-counter market, only if there appears to be a
liquid secondary market for such options or futures or, in the case of OTC
options, the Investment Adviser believes the Fund can receive on each business
day at least two independent bids or offers. However, there can be no assurance
that a liquid secondary market will exist at any specific time. Thus, it may
not be possible to close an options or futures position. The inability to close
options and futures positions also could have an adverse impact on the Fund's
ability to effectively hedge its portfolio. There is also the risk of loss by
the Fund of margin deposits or collateral in the event of bankruptcy of a
broker with whom the Fund has an open position in an option, a futures contract
or a related option.
The exchanges on which currency options are traded have generally established
limitations governing the maximum number of call or put options on the same
underlying currency (whether or not covered) which
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may be written by a single investor, whether acting alone or in concert with
others (regardless of whether such options are written on the same or different
exchanges or are held or written on one or more accounts or through one or more
brokers). "Trading limits" are imposed on the maximum number of contracts which
any person may trade on a particular trading day. The Investment Adviser does
not believe that these trading and position limits will have any adverse impact
on the portfolio strategies for hedging the Fund's portfolio.
OTHER INVESTMENT PRACTICES
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.
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.
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
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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.
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.
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 under "Investment Practices and Restrictions--Current
Investment Restrictions."
The Board of Directors of the Fund, at a meeting held on August 3, 1994,
approved certain changes to the fundamental and non-fundamental investment
restrictions of the Fund. These changes were proposed in connection with the
creation of a set of standard fundamental and non-fundamental investment
restrictions that would be adopted, subject to shareholder approval, by
substantially all of the non-money market mutual funds advised by MLAM or FAM.
The proposed uniform investment restrictions are designed to provide each of
these funds, including the Fund, with as much investment flexibility as
possible under the Investment Company Act and applicable state securities
regulations, help promote operational efficiencies and facilitate monitoring of
compliance. The investment objectives and policies of the Fund will be
unaffected by the adoption of the proposed investment restrictions.
The full text of the proposed investment restrictions is set forth under
"Investment Practices and Restrictions--Proposed Uniform Investment
Restrictions" in the Statement of Additional Information. Shareholders of the
Fund are currently considering whether to approve the proposed revised
investment restrictions. If such shareholder approval is obtained, the Fund's
current investment restrictions will be replaced by the proposed restrictions,
and the Fund's Prospectus and Statement of Additional Information will be
supplemented to reflect such change.
PERFORMANCE DATA
From time to time the Fund may include its average annual total return for
various specified time periods in advertisements or information furnished to
present or prospective shareholders. Average annual total return is computed
separately for Class A, Class B, Class C and Class D shares in accordance with
a formula specified by the Commission.
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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 and Class D shares
and the CDSC that would be applicable to a complete redemption of the
investment at the end of the specified period in the case of Class B and Class
C shares. Dividends paid by the Fund with respect to all shares, to the extent
any dividends are paid, will be calculated in the same manner at the same time
on the same day and will be in the same amount, except that account maintenance
fees and distribution charges and any incremental transfer agency costs
relating to each class of shares will be borne exclusively by that class. The
Fund will include performance data for both Class A and Class B shares of the
Fund in any advertisement or information including performance data for all
classes of shares 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 and Class D shares
or waiver of the CDSC in the case of Class B and Class C shares (such as
investors in certain retirement plans), performance data may take into account
the reduced, and not the maximum, sales charge or may not take into account the
CDSC and therefore may reflect greater total return since, due to the reduced
sales charges or waiver of the CDSC, a lower amount of expenses may be
deducted. See "Purchase of Shares". The Fund's total return may be expressed
either as a percentage or as a dollar amount in order to illustrate the effect
of such total return on a hypothetical $1,000 investment in the Fund at the
beginning of each specified period.
Total return figures are based on the Fund's historical performance and are
not intended to indicate future performance. The Fund's total return will vary
depending on market conditions, the securities comprising the Fund's portfolio,
the Fund's operating expenses and the amount of realized and unrealized net
capital gains or losses during the period. The value of an investment in the
Fund will fluctuate and an investor's shares, when redeemed, may be worth more
or less than their original cost.
On occasion, the Fund may compare its performance to 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
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with other performance data, performance comparisons should not be considered
representative of the Fund's relative performance for any future period.
PORTFOLIO TRANSACTIONS AND 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 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
and operational facilities of the firm involved and the firm's risk in
positioning a block of securities. While the Investment Adviser generally seeks
reasonably competitive commission rates, the 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 pays brokerage fees to Merrill Lynch in
connection with portfolio transactions executed by Merrill Lynch.
Brokers and dealers, including Merrill Lynch, who provide supplemental
investment research 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, and the expenses of the Investment Adviser
will not necessarily be reduced as a result of the receipt of such supplemental
information. Supplemental investment research received by the Investment
Adviser also may be used in connection with other investment advisory accounts
of the Investment Adviser and its affiliates. Whether or not a particular
broker-dealer sells shares of the Fund neither qualifies nor disqualifies such
broker-dealer to execute transactions for the Fund.
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 each class of shares will be reduced as a
result of any account maintenance, distribution and transfer agency fees
applicable to that class. 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.
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DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of all classes of the Fund is determined
once daily as of 4:15 p.m., New York time, on each day during which the New
York Stock Exchange is open for trading. Any assets or liabilities initially
expressed in terms of non-U.S. dollar currencies are translated into U.S.
dollars at the prevailing market rates as quoted by one or more banks or
dealers on the day of valuation. The net asset value per share is computed by
dividing the 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
any account maintenance and/or distribution fee payable to the Distributor, are
accrued daily. The Fund employs Merrill Lynch Securities Pricing Service
("MLSPS"), an affiliate of the Investment Adviser, to provide certain
securities prices for the Fund. The Fund's arrangement with MLSPS was not
effective until after the close of the Fund's most recently completed fiscal
year end. Consequently, no fees were paid by the Fund to MLSPS for pricing
services during the Fund's most recently completed fiscal year. The per share
net asset value of the Class A shares generally will be higher than the per
share net asset value of shares of the other classes, reflecting the daily
expense accruals of the account maintenance, distribution and higher transfer
agency fees applicable with respect to Class B and Class C shares and the daily
expense accruals of the account maintenance fees applicable with respect to the
Class D shares; moreover, the per share net asset value of Class D shares
generally will be higher than the per share net asset value of Class B and
Class C shares, reflecting the daily expense accruals of the distribution and
higher transfer agency fees applicable with respect to Class B and Class C
shares. It is expected, however, that the per share net asset value of the
classes will tend to converge immediately after the payment of dividends or
distributions, which will differ by approximately the amount of the expense
accrual differentials among 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
(but not its shareholders) will not be subject to Federal income tax on the
part of its net ordinary income and net realized capital gains which it
distributes to Class A, Class B, Class C and Class D shareholders (together,
the "shareholders").
The 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,
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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 ordinary income dividends or
capital gains dividends. 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.
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.
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 ordinary income dividends, capital gains dividends 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
34
<PAGE>
long-term capital loss to the extent of any distributions of net capital gains
received by the shareholder with respect to such shares.
No gain or loss will be recognized by Class B shareholders on the conversion
of their Class B shares into Class D shares. A shareholder's basis in the Class
D shares acquired will be the same as such shareholder's basis in the Class B
shares converted, and the holding period of the acquired Class D shares will
include the holding period for the converted Class B shares.
If a shareholder exercises an 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 shares in the absence of the exchange privilege. Instead, such sales
charge will be treated as an amount paid for the new shares. See "Shareholder
Services--Exchange Privilege".
A loss realized on a sale or exchange of shares of the Fund will be
disallowed if other Fund shares are acquired (whether through the automatic
reinvestment of dividends or otherwise) within a 61-day period beginning 30
days before and ending 30 days after the date that the shares are disposed of.
In such a case, the basis of the shares acquired will be adjusted to reflect
the disallowed loss.
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.
ORGANIZATION OF THE FUND
The Fund was incorporated under Maryland law on May 21, 1984. It has an
authorized capital of 2,000,000,000 shares of Common Stock, par value $0.01 per
share, divided into four classes, designated Class A, Class B, Class C and
Class D Common Stock, each of which consists of 500,000,000 shares. Class A,
Class B, Class C and Class D Common Stock represent interests in the same
assets of the Fund and are identical in all respects except that Class B, Class
C and Class D shares bear certain expenses related to the account maintenance
associated with such shares, and Class B and Class C shares bear certain
expenses related to the distribution of such shares. Each class has exclusive
voting rights with respect to matters relating to account maintenance and
distribution expenditures, as the case may be. See "Purchase of Shares". The
Fund has received an order from the Commission permitting the issuance and sale
of multiple classes of
35
<PAGE>
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.
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
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 rights. Shares
have the conversion rights described in this Prospectus. Each share of 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, Class C and Class D shares bear certain additional
expenses.
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: TAMFO
P.O. Box 45289
Jacksonville, Florida 32232-5289
The written notification should include the shareholder's name, address, tax
identification number and Merrill Lynch, Pierce, Fenner & Smith Incorporated
and/or mutual fund account numbers. If you have any questions regarding this
please call your Merrill Lynch financial consultant or Financial Data Services,
Inc. at 800-637-3863.
36
<PAGE>
MERRILL LYNCH BALANCED FUND FOR INVESTMENT AND RETIREMENT AUTHORIZATION FORM
(PART 1)
- -------------------------------------------------------------------------------
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: (choose one)
[_] Class A shares [_] Class B shares [_] Class C shares [_] Class D shares
of Merrill Lynch Balanced Fund for Investment and Retirement and establish an
Investment Account as described in the Prospectus. In the event that I am not
eligible to purchase Class A shares, I understand that Class D shares will be
purchased.
Basis for establishing an Investment Account:
A. I enclose a check for $............ payable to Financial Data Services,
Inc. as an initial investment (minimum $1,000). I understand that this
purchase will be executed at the applicable offering price next to be
determined after this Application is received by you.
B. I already own shares of the following Merrill Lynch mutual funds that
would qualify for the Right of Accumulation as outlined in the Statement of
Additional Information: Please list all funds. (Use a separate sheet of
paper if necessary.)
1. ............................. 4. .............................
2. ............................. 5. .............................
3. ............................. 6. .............................
(Please Print)
Name......................................................................
First Name Initial Last Name
Name of Co-Owner (if any).................................................
First Name Initial Last Name
Address...................................................................
............................................ Date.....................
(Zip Code)
Occupation...................... Name and Address of Employer ...
................................ ................................
Signature of Owner Signature of Co-Owner (if any)
(In the case of co-owner, a joint tenancy with rights of survivorship will be
presumed unless otherwise specified.)
- -------------------------------------------------------------------------------
2. DIVIDEND AND CAPITAL GAIN DISTRIBUTION OPTIONS
Ordinary Income Dividends Long-Term Capital Gains
Select [_] Reinvest Select [_] Reinvest
One: [_] Cash One: [_] Cash
If no election is made, dividends and capital gains will be automatically
reinvested at net asset value without a sales charge.
IF CASH, SPECIFY HOW YOU WOULD LIKE YOUR DISTRIBUTIONS PAID TO YOU: [_] CHECK
OR [_] DIRECT DEPOSIT TO BANK ACCOUNT
IF DIRECT DEPOSIT TO BANK ACCOUNT IS SELECTED, PLEASE COMPLETE BELOW:
I hereby authorize payment of dividend and capital gain distributions by
direct deposit to my bank account and, if necessary, debit entries and
adjustments for any credit entries made to my account in accordance with the
terms I have selected on the Merrill Lynch Balanced Fund for Investment and
Retirement Authorization Form.
SPECIFY TYPE OF ACCOUNT (CHECK ONE) [_] CHECKING [_] SAVINGS
Name on your account .....................................................
Bank Name ................................................................
Bank Number ................. Account Number .........................
Bank Address .............................................................
I agree that this authorization will remain in effect until I provide written
notification to Financial Data Services, Inc. amending or terminating this
service.
Signature of Depositor ...................................................
Signature of Depositor .......................... Date..............
(if joint account, both must sign)
NOTE: IF DIRECT DEPOSIT TO BANK ACCOUNT IS SELECTED, YOUR BLANK, UNSIGNED
CHECK MARKED "VOID" OR A DEPOSIT SLIP FROM YOUR SAVINGS ACCOUNT SHOULD
ACCOMPANY THIS APPLICATION.
- -------------------------------------------------------------------------------
37
<PAGE>
MERRILL LYNCH BALANCED FUND FOR INVESTMENT AND RETIREMENT AUTHORIZATION FORM
(PART 1) -- (CONTINUED)
3. SOCIAL SECURITY OR TAXPAYER IDENTIFICATION NUMBER
[ ]
Social Security Number or Taxpayer Identification Number
Under penalty of perjury, I certify (1) that the number set forth above is
my correct Social Security Number or Taxpayer Identification Number and (2)
that I am not subject to backup withholding (as discussed in the Prospectus
under "Taxes") either because I have not been notified that I am subject
thereto as a result of a failure to report all interest or dividends, or the
Internal Revenue Service ("IRS") has notified me that I am no longer subject
thereto.
INSTRUCTION: YOU MUST STRIKE OUT THE LANGUAGE IN (2) ABOVE IF YOU HAVE BEEN
NOTIFIED THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING DUE TO UNDER-REPORTING AND
IF YOU HAVE NOT RECEIVED A NOTICE FROM THE IRS THAT BACKUP WITHHOLDING HAS
BEEN TERMINATED. THE UNDERSIGNED AUTHORIZES THE FURNISHING OF THIS
CERTIFICATION TO OTHER MERRILL LYNCH SPONSORED MUTUAL FUNDS.
................................ ................................
Signature of Owner Signature of Co-Owner (if any)
- -------------------------------------------------------------------------------
4. LETTER OF INTENTION--CLASS A AND CLASS D SHARES ONLY (SEE TERMS AND
CONDITIONS IN THE STATEMENT OF ADDITIONAL INFORMATION)
.............., 19......
Date of Initial Purchase
Dear Sir/Madam:
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
Merrill Lynch Funds Distributor, Inc. acts as distributor over the next 13
month period which will equal or exceed:
[_] $25,000 [_] $50,000 [_] $100,000 [_] $250,000 [_] $1,000,000
Each purchase will be made at the then reduced offering price applicable to
the amount checked above, as described in the Fund's prospectus.
I agree to the terms and conditions of this Letter of Intention. I hereby
irrevocably constitute and appoint Merrill Lynch Funds Distributor, Inc. my
attorney, with full power of substitution, to surrender for redemption any or
all shares of Merrill Lynch Balanced Fund for Investment and Retirement held
as security.
By ............................. ................................
Signature of Owner Signature of Co-Owner
(If registered in joint names,
both must sign)
In making purchases under this letter, the following are the related
accounts on which reduced offering prices are to apply:
(1) Name........................ (2) Name........................
Account Number..................
Account Number..................
- -------------------------------------------------------------------------------
5. FOR DEALER ONLY
Branch Office, Address, Stamp. We hereby authorize Merrill Lynch
- - - Funds Distributor, Inc. to act as
our agent in connection with
transactions under this
authorization form and agree to
notify the Distributor of any
purchases made under a Letter of
Intention or Systematic Withdrawal
Plan. We guarantee the shareholder's
- - - signature.
This form when completed should be ................................
mailed to: Dealer Name and Address
Merrill Lynch Balanced Fund for By .............................
Investment and Retirement Authorized Signature of Dealer
c/o Financial Data Services,
Inc.
Transfer Agency Mutual Fund
Operations
P.O. Box 45289 [_][_][_] [_][_][_][_].............
Jacksonville, FL 32232-5289 Branch-Code F/C No. F/C Last Name
[_][_][_] [_][_][_][_][_]
Dealer's Customer A/C No.
38
<PAGE>
MERRILL LYNCH BALANCED FUND FOR INVESTMENT AND RETIREMENT AUTHORIZATION FORM
(PART 2)
- -------------------------------------------------------------------------------
NOTE: THIS FORM IS REQUIRED TO APPLY FOR THE SYSTEMATIC WITHDRAWAL OR
AUTOMATIC INVESTMENT PLANS ONLY.
- -------------------------------------------------------------------------------
1. ACCOUNT REGISTRATION
Name of Owner................. [_][_][_] [_][_] [_][_][_][_]
Name of Co-Owner (if any)..... Social Security No. or
Taxpayer Identification
Number
Address....................... Account Number ...............
(if existing account)
..............................
- -------------------------------------------------------------------------------
2. SYSTEMATIC WITHDRAWAL PLAN--CLASS A AND CLASS D SHARES ONLY (SEE TERMS AND
CONDITIONS IN THE STATEMENT OF ADDITIONAL INFORMATION)
MINIMUM REQUIREMENTS: $10,000 for monthly disbursements, $5,000 for
quarterly, of [_] Class A or [_] Class D shares in Merrill Lynch Balanced Fund
for Investment and Retirement at cost or current offering price. Withdrawals
to be made either (check one) [_] Monthly on the 24th day of each month, or
[_] Quarterly on the 24th day of March, June, September and December. If the
24th falls on a weekend or holiday, the next succeeding business day will be
utilized. Begin systematic withdrawal on . . . . . . . . . .(month) or as soon
as possible thereafter.
SPECIFY HOW YOU WOULD LIKE YOUR WITHDRAWAL PAID TO YOU (CHECK ONE): [_] $
or [_] % of the current value of [_] Class A or [_] Class D shares in the
account.
SPECIFY WITHDRAWAL METHOD: [_] check or [_] direct deposit to bank account
(check one and complete part (a) or (b) below):
DRAW CHECKS PAYABLE (CHECK ONE)
(a)I hereby authorize payment by check
[_] as indicated in Item 1.
[_] to the order of.....................................................
Mail to (check one)
[_] the address indicated in Item 1.
[_] Name (Please Print).................................................
Address ..................................................................
.....................................................................
Signature of Owner................................ Date..................
Signature of Co-Owner (if any).......................................
(B) I HEREBY AUTHORIZE PAYMENT BY DIRECT DEPOSIT TO BANK ACCOUNT AND (IF
NECESSARY) DEBIT ENTRIES AND ADJUSTMENTS FOR ANY CREDIT ENTRIES MADE IN ERROR
TO MY ACCOUNT. I AGREE THAT THIS AUTHORIZATION WILL REMAIN IN EFFECT UNTIL I
PROVIDE WRITTEN NOTIFICATION TO FINANCIAL DATA SERVICES, INC. AMENDING OR
TERMINATING THIS SERVICE.
Specify type of account (check one): [_] checking [_] savings
Name on your Account......................................................
Bank Name.................................................................
Bank Number................... Account Number.......................
Bank Address..............................................................
..........................................................................
Signature of Depositor............................ Date.............
Signature of Depositor....................................................
(If joint account, both must sign)
NOTE: IF DIRECT DEPOSIT IS ELECTED, YOUR BLANK, UNSIGNED CHECK MARKED "VOID"
OR A DEPOSIT SLIP FROM YOUR SAVINGS ACCOUNT SHOULD ACCOMPANY THIS APPLICATION.
39
<PAGE>
- -------------------------------------------------------------------------------
3. APPLICATION FOR AUTOMATIC INVESTMENT PLAN
I hereby request that Financial Data Services, Inc. draw an automated
clearing house ("ACH") debit on my checking account described below each month
to purchase: (choose one)
[_] Class A shares [_] Class B shares [_] Class C shares [_] Class D shares
of Merrill Lynch Balanced Fund for Investment and Retirement, subject to the
terms set forth below. In the event that I am not eligible to purchase Class A
shares, I understand that Class D shares will be purchased.
AUTHORIZATION TO HONOR ACH DEBITS
FINANCIAL DATA SERVICES, INC. DRAWN BY FINANCIAL DATA SERVICES,
INC.
You are hereby authorized to draw an To..........................Bank
ACH debit each month on my bank
account for investment in Merrill (Investor's Bank)
Lynch Balanced Fund for Investment
and Retirement as indicated below: Bank Address....................
Amount of each check or ACH debit City.... State.... Zip Code....
$............................
As a convenience to me, I hereby
request and authorize you to pay and
Account Number .............. charge to my account ACH debits
drawn on my account by and payable
Please date and invest ACH debits on to Financial Data Services, Inc., I
the 20th of each month beginning agree that your rights in respect of
each such debit shall be the same as
if it were a check drawn on you and
......(month) or as soon thereafter as signed personally by me. This
possible. authority is to remain in effect
until revoked by me in writing.
I agree that you are drawing these Until you receive such notice, you
ACH debits voluntarily at my request shall be fully protected in honoring
and that you shall not be liable for any such debit. I further agree that
any loss arising from any delay in if any such debit be dishonored,
preparing or failure to prepare any whether with or without cause and
such debit. If I change banks or whether intentionally or
desire to terminate or suspend this inadvertently, you shall be under no
program, I agree to notify you liability.
promptly in writing. I hereby
authorize you to take any action to
correct erroneous ACH debits of my
bank account or purchases of fund ....... ................
shares including liquidating shares Date Signature of
of the Fund and credit my bank Depositor
account. I further agree that if a
debit is not honored upon
presentation, Financial Data ....... ................
Services, Inc. is authorized to
discontinue immediately the Automatic Bank Signature of Depositor
Investment Plan and to liquidate Account
sufficient shares held in my account Number
to offset the purchase made with the (If joint account,
dishonored debit. both must sign)
....... ................ NOTE: IF AUTOMATIC INVESTMENT PLAN
IS ELECTED, YOUR BLANK, UNSIGNED
Date Signature of CHECK MARKED "VOID" SHOULD ACCOMPANY
Depositor THIS APPLICATION.
.................
Signature of Depositor
(If joint account,
both must sign)
40
<PAGE>
[This Page Intentionally Left Blank]
41
<PAGE>
[This Page Intentionally Left Blank]
42
<PAGE>
INVESTMENT ADVISER
Merrill Lynch Asset Management
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey
Mailing Address:
P.O. Box 9011
Princeton, New Jersey 08543-9011
DISTRIBUTOR
Merrill Lynch Funds Distributor, Inc.
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey
Mailing Address:
P.O. Box 9011
Princeton, New Jersey 08543-9011
CUSTODIAN
National Westminster Bank NJ
2 Montgomery Street
2nd Floor
Jersey City, New Jersey 07302
TRANSFER AGENT
Financial Data Services, Inc.
Administrative Offices:
Transfer Agency Mutual Funds Operations
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
Mailing Address:
P.O. Box 45289
Jacksonville, Florida 32232-5289
INDEPENDENT AUDITORS
Deloitte & Touche LLP
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
Merrill Lynch Select PricingSM System...................................... 3
Financial Highlights....................................................... 7
Investment Objective and Policies.......................................... 8
The Fund and Its Management................................................ 9
Purchase of Shares......................................................... 10
Initial Sales Charge Alternatives--
Class A and Class D Shares............................................... 12
Deferred Sales Charge Alternatives--
Class B and Class C Shares............................................... 14
Distribution Plans....................................................... 18
Limitations on the Payment of Deferred Sales Charges..................... 19
Shareholder Services....................................................... 20
Redemption of Shares....................................................... 22
Redemption................................................................ 23
Repurchase................................................................ 23
Reinstatement Privilege--
Class A and Class D Shares............................................... 24
Investment Practices and Restrictions...................................... 24
Portfolio Strategies Involving Options and Futures........................ 24
Other Investment Practices................................................ 29
Performance Data........................................................... 30
Portfolio Transactions and Brokerage....................................... 32
Additional Information..................................................... 32
Dividends and Distributions............................................... 32
Determination of Net Asset Value.......................................... 33
Taxes..................................................................... 33
Organization of the Fund.................................................. 35
Shareholder Inquiries..................................................... 36
Shareholder Reports....................................................... 36
Authorization Form......................................................... 37
</TABLE>
Code #10331-1094
Merrill Lynch
(ART)
- --------------------------------------------------------------------------------
MERRILL LYNCH
BALANCED FUND
FOR INVESTMENT AND RETIREMENT
(ART)
October 21, 1994
Distributor:
Merrill Lynch Funds Distributor, Inc.
This Prospectus should be
retained for future reference
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
- -----------------------------------
OCTOBER 21, 1994
MERRILL LYNCH BALANCED FUND
FOR INVESTMENT AND RETIREMENT
P.O. 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.
----------------
Pursuant to the Merrill Lynch Select Pricing(SM) System, the Fund offers four
classes of shares, each with a different combination of sales charges, ongoing
fees and other features. The Merrill Lynch Select Pricing SM System permits an
investor to choose the method of purchasing shares that the investor believes
is most beneficial given the amount of the purchase, the length of time the
investor expects to hold the shares and other relevant circumstances.
----------------
This Statement of Additional Information of the Fund is not a prospectus and
should be read in conjunction with the prospectus of the Fund, dated October
21, 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., P.O. 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 and has been incorporated by reference
into 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 8 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 Ratings
Group or which are determined by the investment adviser of the Fund to be of
quality comparable to instruments so rated.
As discussed on page 8 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 owned and controlled by Merrill Lynch &
Co., Inc., a financial services holding company ("ML & Co."). The Investment
Adviser and its affiliate, Fund Asset Management, L.P. ("FAM"), together serve
as the investment adviser to over 100 other registered investment companies, as
well as to numerous pension plans and other institutions.
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 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
ML & Co. 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.
2
<PAGE>
The Agreement will continue in effect until April 3, 1995, 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 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 P.O. Box 9011, Princeton, New Jersey 08543-9011.
Arthur Zeikel--President and Director (1)(2)--President of the Investment
Adviser (which term as used herein includes its corporate predecessors) since
1977 and Chief Investment Officer thereof since 1976; President and Chief
Investment Officer of FAM (which term as used herein includes its corporate
predecessors) since 1977; President and Director of Princeton Services, Inc.
("Princeton Services") since 1993; Executive Vice President of Merrill Lynch
since 1990 and a Senior Vice President thereof from 1985 to 1990; Executive
Vice President of ML & Co. 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, Protection Mutual Insurance
3
<PAGE>
Company, UNUM Corporation, and, until 1994, of Grumman Corporation and 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. John M. Olin Professor of
Humanities, New York University since 1993 and Professor thereof since 1973;
Dean, Gallatin Division of New York University from 1978 to 1993 and Director
from 1975 to 1976; 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 of the Board, WTC Industries, Inc. since 1994; 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 Limited since 1991 and Teknekron Software Systems since
1994.
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 llp 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.
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 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.
4
<PAGE>
Pursuant to the terms of the management agreement with the Fund, the
Investment Adviser pays all compensation of officers of the Fund as well as the
fees of all Directors who are affiliated persons of the Investment Adviser. The
Fund pays each Director not affiliated with the Investment Adviser a fee of
$5,000 per year plus $500 per meeting attended, together with such Director's
out-of-pocket expenses relating to attendance at meetings. The Fund also
compensates members of its Audit and Nominating Committee, which consists of
all of the Directors of the Fund who are not interested persons of the Fund,
with a fee of $1,000 per year and a per meeting fee of $250 per year. For the
fiscal year ended September 30, 1993, fees and expenses paid to the
unaffiliated Directors aggregated $36,447.
As of September 30, 1994, the officers and Directors of the Fund as a group
(12 persons) owned, in the aggregate, less than 1% of the outstanding shares 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.
The Fund issues four classes of shares under the Merrill Lynch Select
Pricing(SM) System: Class A and Class D shares are sold to investors choosing
the initial sales charge alternatives and Class B shares are sold to investors
choosing the deferred sales charge alternative. Each Class A, Class B, Class C
and Class D shares of the Fund represents identical interests in the investment
portfolio of the Fund, have the same rights and are identical in all respects,
except that Class B, Class C and Class D shares bear the expenses of the ongoing
account maintenance fees and Class B and Class C shares bear the expenses of the
ongoing distribution fees and the additional incremental transfer agency costs
resulting from the deferred sales charge arrangements. Class B, Class C and
Class D shares each have exclusive voting rights with respect to the Rule 12b-1
distribution plan adopted with respect to such class pursuant to which the
account maintenance and distribution fees are paid. Each class has different
exchange privileges. See "Shareholder Services--Exchange Privilege".
The Merrill Lynch Select Pricing(SM) System is used by more than 50 mutual
funds advised by the Investment Adviser or its affiliate, FAM. Funds advised by
the Investment Adviser or FAM are referred to herein as "MLAM-advised mutual
funds".
The Fund has entered into separate distribution agreements with the
Distributor in connection with the continuous offering of each class of shares
of the Fund (the "Distribution Agreements"). The Distribution Agreements
obligate the Distributor to pay certain expenses in connection with the
offering of each class of shares of the Fund. After the prospectuses,
statements of additional information and periodic reports have been prepared,
set in type and mailed to 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
5
<PAGE>
subject to the same renewal requirements and termination provisions as the
Investment Advisory Agreement described above.
INITIAL SALES CHARGE ALTERNATIVES--CLASS A AND CLASS D SHARES
The gross sales charges for the sale of Class A shares for the six-month
period ended March 31, 1994 were $37,535, of which the Distributor received
$2,294 and Merrill Lynch received $35,241. 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. For
the fiscal year ended September 30, 1993 and the six months ended March 31,
1994, the Distributor received no CDSCs with respect to Class A shares for
which the initial sales charge was waived.
The term "purchase," as used in the Prospectus and this Statement of
Additional Information in connection with an investment in Class A and Class D
shares of the 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 account although more than one beneficiary is
involved. The term "purchase" also includes purchases by any "company," as that
term is defined in the Investment Company Act, but does not include purchases
by any such company which has not been in existence for at least six months or
which has no purpose other than the purchase of shares of the Fund or shares of
other registered investment companies at a discount; provided, however, that it
shall not include purchases by any group of individuals whose sole
organizational nexus is that the participants therein are credit cardholders of
a company, policyholders of an insurance company, customers of either a bank or
broker-dealer or clients of an investment adviser.
REDUCED INITIAL SALES CHARGES
Right of Accumulation. Reduced sales charges are applicable through a right
of accumulation under which eligible investors are permitted to purchase shares
of the Fund subject to an initial sales charge at the offering price applicable
to the total of (a) the public offering price then being purchased plus (b) an
amount equal to the then current net asset value or cost, whichever is higher,
of the purchaser's combined holdings of all classes of shares of the Fund and
of other MLAM-advised mutual funds. For any such right of accumulation to be
made available, the Distributor must be provided at the time of purchase, by
the purchaser or the purchaser's securities dealer, with sufficient information
to permit confirmation of qualification. Acceptance of the purchase order is
subject to such confirmation. The right of accumulation may be amended or
terminated at any time. Shares held in the name of a nominee or custodian under
pension, profit-sharing or other employee benefit plans may not be combined
with other shares to qualify for the right of accumulation.
Letter of Intention. Reduced sales charges are applicable to purchases
aggregating $25,000 or more of the Class A or Class D shares of the Fund or any
other MLAM-advised mutual funds 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
6
<PAGE>
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 or Class D 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 and Class D shares of the Fund
and of other MLAM-advised mutual funds presently held, at cost or maximum
offering price (whichever is higher), on the date of the first purchase under
the Letter of Intention, may be included as a credit toward the completion of
such Letter. If the total amount of shares does not equal the amount stated in
the Letter of Intention (minimum of $25,000), the investor will be notified
and must pay, within 20 days of the expiration of such Letter, the difference
between the sales charge on the Class A or Class D shares purchased at the
reduced rate and the sales charge applicable to the shares actually purchased
through the Letter. Class A or Class D shares equal to five percent of the
intended amount will be held in escrow during the 13-month period (while
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 purchases made under such Letter. An exchange from a MLAM-advised money
market 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 D shares of the Fund are offered
to participants in the Merrill Lynch Blueprint SM Program ("Blueprint"). In
addition, participants in Blueprint who own Class A shares of the Fund may
purchase additional Class A shares of the Fund through Blueprint. Blueprint is
directed to small investors, group Investment Retirement Accounts ("IRAs") and
participants in certain affinity groups such as credit unions, trade
associations and benefit plans. Investors placing orders to purchase Class A
or Class D shares of the Fund through Blueprint will acquire the Class A or
Class D shares at net asset value plus a sales charge calculated in accordance
with the Blueprint sales charge schedule (i.e., up to $300 at 4.25%, $300.01
up to $5,000 at 3.25% plus $3 and $5,000.01 or more at the standard sales
charge rates disclosed in the Prospectus). In addition, Class A or Class D
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 or Class D shares through Blueprint. Services, including the exchange
privilege, available to Class A and Class D investors through Blueprint,
however, may differ from those available to other investors in Class A and
Class D shares. Orders for purchases and redemptions of Class A or Class D
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 and Class D shares are offered at net asset value to participants in
the Merrill Lynch Blueprint Program through the Merrill Lynch Directed IRA
Rollover Program ("IRA Rollover Program") available
7
<PAGE>
from Merrill Lynch Business Financial Services, a business unit of Merrill
Lynch. The IRA Rollover Program is available to custodian rollover assets from
Employer Sponsored Retirement and Savings Plans (see definition below) whose
Trustee and/or Plan Sponsor offers the Merrill Lynch Directed IRA Rollover
Program. 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.
Employer Sponsored Retirement and Savings Plans. Class A and Class D shares
are offered at net asset value to employer sponsored retirement or savings
plans, such as tax qualified retirement plans within the meaning of Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), deferred
compensation plans within the meaning of Section 403(b) and 457 of the Code,
other deferred compensation arrangements, Voluntary Employee Benefits
Association ("VEBA") plans, and non-qualified After Tax Savings and Investment
programs, maintained on the Merrill Lynch Group Employee Services system,
herein referred to as "Employer Sponsored Retirement or Savings Plans",
provided the plan has accumulated at least $20 million in MLAM-advised mutual
funds (in the case of Class A shares) or $5 million in MLAM-advised mutual
funds (in the case of Class D shares). Class D shares may be offered at net
asset value to new Employer Sponsored Retirement or Savings Plans, provided
the plan has $3 million or more initially invested in MLAM-advised mutual
funds. Assets of Employer Sponsored Retirement or Savings Plans sponsored by
the same sponsor or an affiliated sponsor may be aggregated. Class A shares
and Class D shares also are offered at net asset value to Employer Sponsored
Retirement or Savings Plans that have at least 1,000 employees eligible to
participate in the plan (in the case of Class A shares) or between 500 and 999
employees eligible to participate in the plan (in the case of Class D shares).
Employees eligible to participate in Employer Sponsored Retirement or Savings
Plans of the same sponsoring employer or its affiliates may be aggregated. Tax
qualified retirement plans within the meaning of Section 401(a) of the Code
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
Employer Sponsored Retirement or Savings Plan which does not meet the above
described qualifications to purchase Class A shares or Class D shares at net
asset value has the option of (i) purchasing Class A shares at the initial
sales charge and possible CDSC schedule disclosed in the Prospectus if it is
otherwise eligible to purchase Class A shares, or (ii) purchasing Class D
shares at the initial sales charge and possible CDSC schedule disclosed in the
Prospectus, (iii) if the Employer Sponsored Retirement or Savings Plan meets
the specified requirements, purchasing Class B shares with a waiver of the
CDSC upon redemption, or (iv) if the Employer Sponsored Retirement or Savings
Plan does not qualify to purchase Class B shares with a waiver of the CDSC
upon redemption, purchasing Class C shares at the CDSC schedule disclosed in
the Prospectus. The minimum initial and subsequent purchase requirements are
waived in connection with all the above referenced Employer Sponsored
Retirement or Savings Plans.
Purchase Privileges of Certain Persons. Directors of the Fund, members of
the Boards of other MLAM-advised investment companies, directors and employees
of ML & Co. and its subsidiaries (the term "subsidiaries", when used herein
with respect to Merrill Lynch & Co., Inc., includes MLAM, FAM and certain
other entities directly or indirectly wholly-owned and controlled by Merrill
Lynch & Co., Inc.), and
8
<PAGE>
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 D 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 advise Merrill Lynch that it
will purchase Class D shares of the Fund with proceeds from a redemption of a
mutual fund that was sponsored by the financial consultant's previous firm and
was subject to a sales charge either at the time of purchase or on a deferred
basis. Second, the investor must also establish that such redemption was made
within 60 days prior to the investment in the Fund, and the proceeds from the
redemption had been maintained in the interim in cash or a money market fund.
Class D shares of the Fund will be 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 for which Merrill
Lynch has not served as a selected dealer if the following conditions are
satisfied: First, the investor must advise Merrill Lynch that it will purchase
Class D shares of the Fund with proceeds from a redemption of such shares of
other mutual funds and that such shares have been outstanding for a period of
no less than 6 months. Second, such purchase of Class D shares must be made
within 60 days after the redemption and the proceeds from the redemption must
have been maintained in the interim in cash or a money market fund.
Class D 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 D shares of the Fund with
proceeds from a redemption of shares of such other mutual fund and such fund
was subject to a sales charge either at the time of purchase or on a deferred
basis; and second, such purchase of Class D shares must be made within 90 days
after such notice.
Closed-End Fund Investment Option. Class A shares of the Fund and other MLAM-
advised mutual funds ("Eligible Class A shares") are offered at net asset value
to shareholders of certain closed-end funds advised by the Investment Adviser
or FAM who purchased such closed-end fund shares prior to October 21, 1994 and
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
satisfied. Alternatively, closed-end fund shareholders who purchased such
shares on or after October 21, 1994 and wish to reinvest the net proceeds from
a sale of their closed-end fund shares are offered Class A shares (if eligible
to buy Class A shares) or Class D shares of the Fund and other MLAM-advised
mutual funds ("Eligible Class D shares"), if the following conditions are met.
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 or Class D shares. Second,
9
<PAGE>
the closed-end fund shares either must have been acquired in the initial
public offering or be shares representing dividends from shares of common
stock acquired in such offering. Third, the closed-end fund shares must have
been continuously maintained in a Merrill Lynch securities account. Fourth,
there must be a minimum purchase of $250 to be eligible for the investment
option. Class A shares of the Fund are offered at net asset value to
shareholders of Merrill Lynch Senior Floating Rate Fund, Inc. ("Senior
Floating Rate Fund") who wish to reinvest the net proceeds from a sale of
certain of their shares of common stock of 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.
Acquisition of Certain Investment Companies. The public offering price of
Class D shares may be reduced to the net asset value per Class D share in
connection with the acquisition of the assets of or merger or consolidation
with a 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. The
issuance of Class D shares for consideration other than cash is limited to
bona fide reorganizations, statutory mergers or other acquisitions of
portfolio securities which (i) meet the investment objectives and policies of
the Fund; (ii) are acquired for investment and not for resale (subject to the
understanding that the disposition of the Fund's portfolio securities shall at
all times remain within its control); and (iii) are liquid securities, the
value of which is readily ascertainable, which are not restricted as to
transfer either by law or liquidity of market (except that the Fund may
acquire through such transactions restricted or illiquid securities to the
extent the Fund does not exceed the applicable limits on acquisition of such
securities set forth under "Investment Objective and Policies" herein).
DISTRIBUTION PLANS
Reference is made to "Purchase of Shares--Distribution Plans" in the
Prospectus for certain information with respect to the separate distribution
plans for Class B, Class C and Class D shares pursuant to Rule12b-1 under the
Investment Company Act (each a "Distribution Plan") with respect to the
account maintenance and/or distribution fees paid by the Fund to the
Distributor with respect to such classes.
Payments of the distribution fees and/or account maintenance fees are
subject to the provisions of Rule 12b-1 under the Investment Company Act.
Among other things, each Distribution Plan provides that the Distributor shall
provide and the Directors shall review quarterly reports of the disbursement
of the account
10
<PAGE>
maintenance fees and/or distribution fees paid to the Distributor. In their
consideration of each Distribution Plan, the Directors must consider all
factors they deem relevant, including information as to the benefits of the
Distribution Plan to the Fund and its related class of shareholders. Each
Distribution Plan further provides that, so long as the Distribution Plan
remains in effect, the selection and nomination of Directors who are not
"interested persons" of the Fund, as defined in the Investment Company Act (the
"Independent Directors"), shall be committed to the discretion of the
Independent Directors then in office. In approving each Distribution Plan in
accordance with Rule 12b-1, the Independent Directors concluded that there is
reasonable likelihood that such Distribution Plan will benefit the Fund and its
related class of shareholders. Each Distribution Plan can be terminated at any
time, without penalty, by the vote of a majority of the Independent Directors
or by the vote of the holders of a majority of the outstanding related class of
voting securities of the Fund. A Distribution Plan cannot be amended to
increase materially the amount to be spent by the Fund without the approval of
the related class of shareholders, and all material amendments are required to
be approved by the vote of the Directors, including a majority of the
Independent Directors who have no direct or indirect financial interest in such
Distribution Plan, cast in person at a meeting called for that purpose. Rule
12b-1 further requires that the Fund preserve copies of each Distribution Plan
and any report made pursuant to such plan for a period of not less than six
years from the date of such Distribution Plan or such report, the first two
years in an easily accessible place.
During the fiscal year ended September 30, 1993, the Fund paid the
Distributor account maintenance fees of $2,146,935 and distribution fees of
$6,440,805 under the Class B Distribution Plan. The Fund did not begin to offer
shares of Class C or Class D publicly until the date of this Statement of
Additional Information. Accordingly, no payments have been made pursuant to the
Class C or Class D Distribution Plans prior to the date of this Statement of
Additional Information.
LIMITATIONS ON THE PAYMENT OF DEFERRED SALES CHARGES
The maximum sales charge rule in the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. ("NASD") imposes a limitation on
certain asset-based sales charges such as the distribution fee and the CDSC
borne by the Class B and Class C shares, but not the account maintenance fee.
The maximum sales charge rule is applied separately to each class. As
applicable to the Fund, the maximum sales charge rule limits the aggregate of
distribution fee payments and CDSCs payable by the Fund to (1) 6.25% of
eligible gross sales of Class B shares and Class C shares, computed separately
(defined to exclude shares issued pursuant to dividend reinvestments and
exchanges), plus (2) interest on the unpaid balance for the respective class,
computed separately, at the prime rate plus 1% (the unpaid balance being the
maximum amount payable minus amounts received from the payment of the
distribution fee and the CDSC). In connection with the Class B shares, the
Distributor has voluntarily agreed to waive interest charges on the unpaid
balance in excess of 0.50% of eligible gross sales. Consequently, the maximum
amount payable to the Distributor (referred to as the "voluntary maximum") in
connection with the Class B shares is 6.75% of eligible gross sales. The
Distributor retains the right to stop waiving the interest charges at any time.
To the extent payments would exceed the voluntary maximum, the Fund will not
make further payments of the distribution fee with respect to Class B shares,
and any CDSCs will be paid to the Fund rather than to the Distributor; however,
the Fund will continue to make payments of the account maintenance fee. In
certain circumstances the amount payable pursuant to the voluntary maximum may
exceed the amount payable under the NASD formula. In such circumstances payment
in excess of the amount payable under the NASD formula will not be made.
The following table sets forth comparative information as of March 31, 1994
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
11
<PAGE>
rule and the Distributor's voluntary maximum for the period November 29, 1985
(commencement of the public offering of Class B shares) to March 31, 1994.
Since Class C shares of the Fund had not been publicly issued prior to the
date of this Statement of Additional Information, information concerning Class
C shares is not yet provided below.
<TABLE>
<CAPTION>
DATA CALCULATED AS OF MARCH 31, 1994
(IN THOUSANDS)
------------------------------------------------------------------------------------
ALLOWABLE AMOUNTS ANNUAL
ELIGIBLE AGGREGATE INTEREST MAXIMUM PREVIOUSLY AGGREGATE DISTRIBUTION
GROSS SALES ON UNPAID AMOUNT PAID TO UNPAID FEE AT CURRENT
SALES(1) CHARGES BALANCE(2) PAYABLE DISTRIBUTOR(3) BALANCE NET ASSET LEVEL(4)
---------- --------- ---------- -------- -------------- --------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Under NASD Rule
as Adopted.... $3,615,428 $225,964 $132,021 $357,985 $145,799 $212,186 $5,702
Under Distribu-
tor's
Voluntary
Waiver........ $3,615,428 $225,964 $ 18,077 $244,041 $145,799 $ 98,243 $5,702
</TABLE>
- --------
(1) Purchase price of all eligible Class B shares sold since November 29, 1985
(commencement of the public offering 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 1.0% as permitted under the NASD
Rule.
(3) Consists of CDSC payments, distribution fee payments and accruals. Of the
distribution fee payments made prior to July 6, 1993 under a prior plan at
the 1.0% rate, 0.75% of average daily net assets has been treated as a
distribution fee and 0.25% of average daily net assets has been deemed to
have been a service fee and not subject to the NASD maximum sales charge
rule. See "Purchase of Shares--Distribution Plans" in the Prospectus.
(4) Provided to illustrate the extent to which the current level of
distribution fee payments (not including any CDSC 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.
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 Commission or such
Exchange is closed (other than customary weekend and holiday closings), for
any period during which an emergency exists as defined by the Commission, as a
result of which disposal of portfolio securities or determination of the net
asset value of the Fund is not reasonably practicable, and for such other
periods as the 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.
DEFERRED SALES CHARGES--CLASS B SHARES
As discussed in the Prospectus under "Purchase of Shares--Deferred Sales
Charge Alternatives--Class B and Class C Shares", while Class B shares
redeemed within four years of purchase are subject to a CDSC under most
circumstances, the charge is waived on redemptions of Class B shares in
connection with
12
<PAGE>
certain post-retirement withdrawals from an 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 part of a series of equal periodic payments (not less
frequently than annually) made for life (or life expectancy) or any redemption
resulting from the tax-free return of an excess contribution to an IRA; or (b)
any partial or complete redemption following the death or disability (as
defined in the 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 CDSCs 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 associations, credit
unions and benefit plans. Class B shares of the Fund are offered through
Blueprint only to members of certain affinity groups. The CDSC 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 or Class D shares at net asset value has the option of
purchasing Class A or Class D shares at the sales charge schedule disclosed in
the Prospectus, or if the Retirement Plan meets the following requirements,
then it may purchase Class B shares with a waiver of the CDSC upon redemption.
The CDSC is waived for any Eligible 401(k) Plan redeeming Class B shares.
"Eligible 401(k) Plan" is defined as a retirement plan qualified under Section
401(k) of the Code with a salary reduction feature offering a menu of
investments to plan participants. The CDSC is also waived for redemptions from
a 401(a) plan qualified under the Code, provided, however, that each such plan
has the same or an affiliated sponsoring employer as an Eligible 401(k) Plan
purchasing Class B shares of MLAM-advised mutual funds ("Eligible 401(a)
Plan"). Other tax qualified retirement plans within the meaning of Section
401(a) and 403(b) of the Code which are provided specialized services (e.g.,
plans whose participants may direct on a daily basis their plan allocations
among a menu of investments) by independent administration firms contracted
through Merrill Lynch also may purchase Class B shares with a waiver of the
CDSC. The CDSC also is waived for any Class B or Class C shares which are
purchased by an Eligible 401(k) Plan or Eligible 401(a) Plan and are rolled
over into a Merrill Lynch or Merrill Lynch Trust Company custodied IRA and held
in such account at the time of redemption. The Class B CDSC also is waived for
any Class B shares which are purchased by a Merrill Lynch rollover IRA, that
was funded by a rollover from a terminated 401(k) plan managed by the MLAM
Private Portfolio Group and held in such account at the time of redemption. The
minimum initial and subsequent purchase requirements are waived in connection
with all the above-referenced Retirement Plans.
13
<PAGE>
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of the Fund is determined once daily Monday
through Friday as of 4:15 p.m., New York time on each day during which the New
York Stock Exchange is open for trading. The New York Stock Exchange is not
open on New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Any assets or
liabilities initially expressed in terms of non-U.S. dollar currencies are
translated into U.S. dollars at the prevailing market rates as quoted by one or
more banks or dealers on the day of valuation. The 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/or
distribution fees, are accrued daily. The per share net asset value of the
Class B, Class C and Class D shares generally will be lower than the per share
net asset value of the Class A shares reflecting the daily expense accruals of
the account maintenance, distribution and higher transfer agency fees
applicable with respect to the Class B and Class C shares and the daily expense
accruals of the account maintenance fees applicable with respect to the Class D
shares; moreover the per share net asset value of the Class B and Class C
shares generally will be lower than the per share net asset value of its Class
D shares reflecting the daily expense accruals of the distribution fees and
higher transfer agency fees applicable with respect to the Class B and Class C
shares of the Fund. It is expected, however, that the per share net asset value
of the four classes will tend to converge immediately after the payment of
dividends or distributions, which will differ by approximately the amount of
the expense accrual 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 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, at least quarterly, statements from the
Transfer Agent. These statements will serve as transaction confirmations for
automatic investment purchases and the reinvestment of ordinary income
dividends and
14
<PAGE>
long-term capital gain distributions. The statements will also show any other
activity in the account since the preceding statement. Shareholders will
receive separate transaction confirmations for each purchase or sale
transaction other than automatic investment purchases and the reinvestment of
income dividends, and long-term capital gain distributions. Shareholders
considering transferring their Class A or Class D shares from Merrill Lynch to
another brokerage firm or financial institution should be aware that, if the
firm to which the Class A or Class D shares are to be transferred will not take
delivery of shares of the Fund, a shareholder either must redeem the Class A or
Class D shares so that the cash proceeds can be transferred to the account at
the new firm or such shareholder must continue to maintain an Investment
Account at the Transfer Agent for those Class A or Class D shares. Shareholders
interested in transferring their Class B or Class C shares from Merrill Lynch
and who do not wish to have an Investment Account maintained for such shares at
the Transfer Agent may request their new brokerage firm to maintain such shares
in an account registered in the name of the brokerage firm for the benefit of
the shareholder. If the new brokerage firm is willing to accommodate the
shareholder in this manner, the shareholder must request that he 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 PLANS
A shareholder may make additions to an Investment Account at any time by
purchasing Class A shares (if an eligible Class A investor as described in the
Prospectus) or Class B, Class C or Class D shares at the applicable public
offering price either through the shareholder's securities dealer, or by mail
directly to the Transfer Agent, acting as agent for such securities dealer.
Voluntary accumulation can also be made through a service known as the
Automatic Investment Plan whereby the Transfer Agent is authorized through pre-
authorized checks or automatic clearing house debits of $50 or more to charge
the regular bank account of the shareholder on a regular basis to provide
systematic additions to the Investment Account of such shareholder. For
investors who buy shares of the Fund through the Merrill Lynch Blueprint(SM)
Program, 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 $100 or more ($1 for retirement accounts) through the CMA Automated
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. 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 or direct deposited on or
about the payment date.
15
<PAGE>
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 AND CLASS D SHARES
A Class A or Class D 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 or Class D shares of the Fund having a value, based
on cost or the current offering price, of $5,000 or more, and monthly
withdrawals are available for shareholders with Class A or Class D shares with
such a value of $10,000 or more.
At the time of each withdrawal payment, sufficient Class A or Class D 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 or Class D
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 or Class D 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 or Class D shares, respectively, 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 Fund's 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 or Class D
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 or Class D 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 or Class D 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
16
<PAGE>
Automatic Investment 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 $100. However, there is no minimum for purchases
through the Merrill Lynch Blueprint(SM) 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
Shareholders of each class of shares of the Fund have an exchange privilege
with certain other MLAM-advised mutual funds listed below. Under the Merrill
Lynch Select Pricing(SM) System, Class A shareholders may exchange Class A
shares of the Fund for Class A shares of a second MLAM-advised mutual fund if
the shareholder holds any Class A shares of the second fund in his account in
which the exchange is made at the time of the exchange or is otherwise eligible
to purchase Class A shares of the second fund. If the Class A shareholder wants
to exchange Class A shares for shares of a second MLAM-advised mutual fund, and
the shareholder does not hold Class A shares of the second fund in his account
at the time of the exchange and is not otherwise eligible to acquire Class A
shares of the second fund, the shareholder will receive Class D shares of the
second fund as a result of the exchange. Class D shares also may be exchanged
for Class A shares of a second MLAM-advised mutual fund at any time as long as,
at the time of the exchange, the shareholder holds Class A shares of the second
fund in the account in which the exchange is made or is otherwise eligible to
purchase Class A shares of the second fund. Class B, Class C and Class D shares
will be exchangeable with shares of the same class of other MLAM-advised mutual
funds. For purposes of computing the CDSC that may be payable upon a disposition
of the shares acquired in the exchange, the holding period for the previously
owned shares of the Fund is "tacked" to the holding period of the newly acquired
shares of the other Fund as more fully described below. Class A, Class B, Class
C and Class D shares also will be exchangeable for shares of certain MLAM-
advised money market funds specifically designated below as available for
exchange by holders of Class A, Class B, Class C or Class D shares. Shares with
a net asset value of at least $100 are required to quality for the exchange
privilege, and any shares utilized in an exchange must have been held by the
shareholder for 15 days. It is contemplated that the exchange privilege may be
applicable to other new mutual funds whose shares may be distributed by the
Distributor.
Exchanges of Class A or Class D shares outstanding ("outstanding Class A or
Class D shares") for Class A or Class D shares of another MLAM-advised mutual
fund ("new Class A or Class D shares") are transacted on the basis of relative
net asset value per Class A or Class D share, respectively, plus an amount
equal to the difference, if any, between the sales charge previously paid on
the outstanding Class A or Class D shares and the sales charge payable at the
time of the exchange on the new Class A or Class D shares. With respect to
outstanding Class A or Class D shares as to which previous exchanges have taken
place, the
17
<PAGE>
"sales charge previously paid" shall include the aggregate of the sales charges
paid with respect to such Class A or Class D shares in the initial purchase and
any subsequent exchange. Class A and Class D shares issued pursuant to dividend
reinvestment are sold on a no-load basis in each of the funds offering Class A
or Class D shares. For purposes of the exchange privilege, Class A and Class D
shares acquired through dividend reinvestment shall be deemed to have been sold
with a sales charge equal to the sales charge previously paid on the Class A or
Class D shares on which the dividend was paid. Based on this formula, Class A
and Class D shares generally may be exchanged into the Class A or Class D
shares of the other funds or into shares of the Class A money market funds
without a sales charge.
In addition, each of the funds with Class B and Class C shares outstanding
("outstanding Class B or Class C shares") offers to exchange its Class B or
Class C shares for Class B or Class C shares, respectively, of another MLAM-
advised mutual fund ("new Class B or Class C shares") on the basis of relative
net asset value per Class B or Class C share, without the payment of any CDSC
that might otherwise be due on redemption of the outstanding shares. Class B
shareholders of the Fund exercising the exchange privilege will continue to be
subject to the Fund's CDSC schedule if such schedule is higher than the CDSC
schedule relating to the new Class B shares acquired through use of the
exchange privilege. In addition, Class B shares of the Fund acquired through
use of the exchange privilege will be subject to the Fund's CDSC schedule if
such schedule is higher than the CDSC schedule relating to the Class B shares
of the fund from which the exchange has been made. For purposes of computing
the sales charge that may be payable on a disposition of the new Class B or
Class C shares, the holding period for the outstanding Class B or Class C
shares is "tacked" to the holding period of the new Class B or Class C shares.
For example, an investor may exchange Class B shares of the Fund for those of
Merrill Lynch Special Value Fund, Inc. ("Special Value Fund") 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 Special
Value Fund and receive cash. There will be no CDSC due on this redemption,
since by "tacking" the two and a half year holding period of Fund Class B
shares to the three year holding period for the Special Value Fund Class B
shares, the investor will be deemed to have held the new Class B shares for
more than five years.
Shareholders also may exchange shares of the Fund into shares of a money
market fund advised by the Investment Adviser or its affiliates, but the period
of time that Class B or Class C shares are held in a money market fund will not
count towards satisfaction of the holding period requirement for purposes of
reducing the CDSC or, with respect to Class B shares, towards satisfaction of
the conversion period. However, shares of a money market fund which were
acquired as a result of an exchange for Class B or Class C shares of the fund
may in turn be exchanged back into Class B or Class C shares of any fund
offering such shares, in which event the holding period for Class B or Class C
shares of the fund will be aggregated with previous holding periods for
purposes of reducing the CDSC. Thus, for example, an investor may exchange
Class B shares of the Fund for shares of Merrill Lynch Institutional Fund
("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 Institutional
Fund for cash. At the time of this redemption, the 2% CDSC that would have been
due had the Class B shares of the Fund been redeemed for cash rather than
exchanged for shares of Institutional Fund will be payable. If, instead of such
redemption, the shareholder exchanged such shares for Class B shares of a fund
which the shareholder continues to hold for an additional two and a half years,
any subsequent redemption will not incur a CDSC.
18
<PAGE>
Set forth below is a description of the investment objectives of the other
funds into which exchanges can be made:
Funds issuing Class A, Class B, Class C and Class D Shares:
Merrill Lynch Adjustable Rate
Securities Fund, Inc. .............. High current income consistent with a
policy of limiting the degree of
fluctuation in net asset value by
investing primarily in a portfolio of
adjustable rate securities,
consisting principally of mortgage-
backed and asset-backed securities.
Merrill Lynch Americas Income Fund,
Inc. ............................... A high level of current income,
consistent with prudent investment
risk, by investing primarily in debt
securities denominated in a currency
of a country located in the Western
Hemisphere (i.e., North and South
America and the surrounding waters).
Merrill Lynch Arizona Limited
Maturity Municipal Bond Fund........ A portfolio of Merrill Lynch Multi-
State Limited Maturity Municipal
Series Trust, a series fund, whose
objective is to provide as high a
level of income exempt from Federal
and Arizona income taxes as is
consistent with prudent investment
management through investment in a
portfolio primarily of intermediate-
term investment grade Arizona
Municipal Bonds.
Merrill Lynch Arizona Municipal Bond
Fund................................ A portfolio of Merrill Lynch Multi-
State Municipal Series Trust, a
series fund, whose objective is to
provide investors with as high a
level of income exempt from Federal
and Arizona income taxes as is
consistent with prudent investment
management.
Merrill Lynch Arkansas Municipal
Bond Fund........................... A portfolio of Merrill Lynch Multi-
State Municipal Series Trust, a
Series Fund, whose objective is to
provide as high a level of income
exempt from Federal and Arkansas
income taxes as is consistent with
prudent investment management.
Merrill Lynch Asset Growth Fund,
Inc................................. A high level of current income through
investment primarily in United States
fixed income securities.
Merrill Lynch Asset Income Fund,
Inc................................. High total investment return,
consistent with prudent risk, from
investment in United States and
foreign equity, debt and money market
securities, the combination of which
will be varied both with respect to
types of securities and markets in
response to changing market and
economic trends.
19
<PAGE>
Merrill Lynch Basic Value Fund, Capital appreciation and, secondarily,
Inc. ............................... income through investment in
securities, primarily equities, that
are undervalued and therefore
represent basic investment value.
Merrill Lynch California Insured
Municipal Bond Fund.................
A portfolio of Merrill Lynch California
Municipal Series Trust, a series fund,
whose objective is to provide as high
a level of 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 to provide as
high a level of income exempt from
Federal and Colorado income taxes as
is consistent with prudent investment
management.
Merrill Lynch Connecticut Municipal
Bond Fund......................
A portfolio of Merrill Lynch Multi-
State Municipal Series Trust, a series
fund, whose objective is to provide as
high a level of income exempt from
Federal and Connecticut income taxes
as is consistent with prudent
investment management.
20
<PAGE>
Merrill Lynch Corporate Bond Fund,
Inc. ............................... Current income from three separate
diversified portfolios of fixed-
income securities.
Merrill Lynch Developing Capital
Markets Fund, Inc. ................. Long-term appreciation through
investment in securities, principally
equities, of issuers in countries
having smaller capital markets.
Merrill Lynch Dragon Fund, Inc. ..... Capital appreciation primarily through
investment in equity and debt
securities of issuers domiciled in
developing countries located in Asia
and the Pacific Basin.
Merrill Lynch EuroFund............... Capital appreciation primarily through
investment in equity securities of
corporations domiciled in Europe.
Merrill Lynch Federal Securities
Trust............................... High current return through
investments in U.S. Government and
Government agency securities,
including GNMA mortgage-backed
certificates and other 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 to provide as high a
level of income exempt from Federal
income taxes as is consistent with
prudent investment management while
seeking to offer shareholders the
opportunity to own securities exempt
from Florida intangible personal
property taxes through investment in
a portfolio primarily of
intermediate-term investment grade
Florida Municipal Bonds.
Merrill Lynch Florida Municipal Bond
Fund................................ A portfolio of Merrill Lynch Multi-
State Municipal Series Trust, a
series fund, whose objective is to
provide as high a level of income
exempt from Federal income taxes as
is consistent with prudent investment
management while seeking to offer
shareholders the opportunity to own
securities exempt from Florida
intangible personal property taxes.
Merrill Lynch Fund For Tomorrow,
Inc................................. Long-term growth through investment in
a portfolio of good quality
securities, primarily common stock,
potentially positioned to benefit
from demographic and cultural changes
as they affect consumer markets.
21
<PAGE>
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.
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, Inc.
(residents of Arizona must meet
investor suitability standards)..... The highest total investment return
consistent with prudent risk through
worldwide investment in an
internationally diversified portfolio
of securities.
Merrill Lynch Global Resources
Trust............................... Long-term growth and protection of
capital from investment in securities
of foreign and domestic companies
that possess substantial natural
resource assets.
Merrill Lynch Global SmallCap Fund,
Inc................................. Long-term growth of capital by
investing primarily in equity
securities of companies with
relatively small market
capitalizations located in various
foreign countries and in the United
States.
22
<PAGE>
Merrill Lynch Global Utility Fund,
Inc................................. Capital appreciation and current
income through investment of at least
65% of its total assets in equity and
debt securities issued by domestic
and foreign companies primarily
engaged in the ownership or operation
of facilities used to generate,
transmit or distribute electricity,
telecommunications, gas or water.
Merrill Lynch Growth Fund for
Investment and Retirement........... Growth of capital and, secondarily,
income from investment in a
diversified portfolio of equity
securities placing principal emphasis
on those securities which management
of the fund believes to be
undervalued.
Merrill Lynch Healthcare Fund, Inc.
(residents of Wisconsin must meet
investor suitability standards)..... Capital appreciation through worldwide
investment in equity securities of
companies that derive or are expected
to derive a substantial portion of
their sales from products and
services in healthcare.
Merrill Lynch International Equity
Fund................................ Capital appreciation and, secondarily,
income by investing in a diversified
portfolio of equity securities of
issuers located in countries other
than the United States.
Merrill Lynch Latin America Fund,
Inc. ............................... Capital appreciation by investing
primarily in Latin American equity
and debt securities.
Merrill Lynch Maryland Municipal
Bond Fund........................... A portfolio of Merrill Lynch Multi-
State Municipal Series Trust, a
series fund, whose objective is to
provide as high a level of income
exempt from Federal and Maryland
income taxes as is consistent with
prudent investment management.
Merrill Lynch Massachusetts Limited
Maturity Municipal Bond Fund........ A portfolio of Merrill Lynch Multi-
State Limited Maturity Municipal
Series Trust, a series fund, whose
objective is to provide as high a
level of income exempt from Federal
and Massachusetts income taxes as is
consistent with prudent investment
management through investment in a
portfolio primarily of intermediate-
term investment grade Massachusetts
Municipal Bonds.
23
<PAGE>
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.
Merrill Lynch Michigan Limited
Maturity Municipal Bond Fund........ A portfolio of Merrill Lynch Multi-
State Limited Maturity Municipal
Series Trust, a series fund, whose
objective is to provide as high a
level of income exempt from Federal
and Michigan income taxes as is
consistent with prudent investment
management through investment in a
portfolio primarily of intermediate-
term investment grade Michigan
Municipal Bonds.
Merrill Lynch Michigan Municipal
Bond Fund........................... A portfolio of Merrill Lynch Multi-
State Municipal Series Trust, a
series fund, whose objective is to
provide as high a level of income
exempt from Federal and Michigan
income taxes as is consistent with
prudent investment management.
Merrill Lynch Minnesota Municipal
Bond Fund........................... A portfolio of Merrill Lynch Multi-
State Municipal Series Trust, a
series fund, whose objective is to
provide as high a level of income
exempt from Federal and Minnesota
personal income taxes as is
consistent with prudent investment
management.
Merrill Lynch Municipal Bond Fund,
Inc................................. Tax-exempt income from three separate
diversified portfolios of municipal
bonds.
Merrill Lynch Municipal Intermediate
Term Fund........................... Currently the only portfolio of
Merrill Lynch Municipal Series Trust,
a series fund, whose objective is to
provide as high a level as possible
of income exempt from Federal income
taxes by investing in investment
grade obligations with a dollar
weighted average maturity of five to
twelve years.
24
<PAGE>
Merrill Lynch New Jersey Limited
Maturity Municipal Bond Fund........ A portfolio of Merrill Lynch Multi-
State Limited Maturity Municipal
Series Trust, a series fund, whose
objective is to provide as high a
level of income exempt from Federal
and New Jersey income taxes as is
consistent with prudent investment
management through a portfolio
primarily of intermediate-term
investment grade New Jersey Municipal
Bonds.
Merrill Lynch New Jersey Municipal
Bond Fund........................... A portfolio of Merrill Lynch Multi-
State Municipal Series Trust, a
series fund, whose objective is to
provide as high a level of income
exempt from Federal and New Jersey
income taxes as is consistent with
prudent investment management.
Merrill Lynch New Mexico Municipal
Bond Fund........................... A portfolio of Merrill Lynch Multi-
State Municipal Series Trust, a
series fund, whose objective is to
provide as high a level of income
exempt from Federal and New Mexico
income taxes as is consistent with
prudent investment management.
Merrill Lynch New York Limited
Maturity Municipal Bond Fund........ A portfolio of Merrill Lynch Multi-
State Limited Maturity Municipal
Series Trust, a series fund, whose
objective is to provide as high a
level of income exempt from Federal,
New York State and New York City
income taxes as is consistent with
prudent investment management through
investment in a portfolio primarily
of intermediate-term investment grade
New York Municipal Bonds.
Merrill Lynch New York Municipal
Bond Fund........................... A portfolio of Merrill Lynch Multi-
State Municipal Series Trust, a
series fund, whose objective is to
provide as high a level of income
exempt from Federal, New York State
and New York City income taxes as is
consistent with prudent investment
management.
Merrill Lynch North Carolina
Municipal Bond Fund................. A portfolio of Merrill Lynch Multi-
State Municipal Series Trust, a
series fund, whose objective is to
provide as high a level of income
exempt from Federal and North
Carolina income taxes as is
consistent with prudent investment
management.
25
<PAGE>
Merrill Lynch Ohio 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 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.
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.
26
<PAGE>
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.
Merrill Lynch Strategic Dividend
Fund................................ Long-term total return from investment
in dividend paying common stocks
which yield more than Standard &
Poor's 500 Composite Stock Price
Index.
Merrill Lynch Technology Fund, Inc... Capital appreciation through worldwide
investment in equity securities of
companies that derive or are expected
to derive a substantial portion of
their sales from products and
services in technology.
Merrill Lynch Texas Municipal Bond
Fund................................ A portfolio of Merrill Lynch Multi-
State Municipal Series Trust, a
series fund whose objective is to
provide 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 Utility Income Fund,
Inc. ............................... High current income through investment
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,
Inc. ............................... High current income by investing in a
global portfolio of fixed-income
securities denominated in various
currencies, including multinational
currencies.
27
<PAGE>
Class A Share Money Market Funds:
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 for
exchanges within certain retirement
plans).............................. Currently the only portfolio of
Merrill Lynch Retirement Series
Trust, a series fund, whose
objectives are current income,
preservation of capital and liquidity
available from investing in a
diversified portfolio of short-term
money market securities.
Merrill Lynch U.S.A. Government
Reserves............................ Preservation of capital, current
income and liquidity available from
investing in direct obligations of
the U.S. Government and repurchase
agreements relating to such
securities.
Merrill Lynch U.S. Treasury Money
Fund................................ Preservation of capital, liquidity and
current income through investment
exclusively in a diversified
portfolio of short-term marketable
securities which are direct
obligations of the U.S. Treasury.
Class B; Class C and Class D Share
Money Market Funds:
Merrill Lynch Government Fund........ A portfolio of Merrill Lynch Funds For
Institutions Series, a series fund,
whose objective is to provide current
income consistent with liquidity and
security of principal from investment
in securities issued or guaranteed by
the U.S. Government, its agencies and
instrumentalities and in repurchase
agreements secured by such
obligations.
Merrill Lynch Institutional Fund..... A portfolio of Merrill Lynch Funds For
Institutions Series, a series fund,
whose objective is to provide maximum
current income consistent with
liquidity and the maintenance of a
high-quality portfolio of money
market securities.
Merrill Lynch Institutional Tax-
Exempt Fund......................... A portfolio of Merrill Lynch Funds For
Institutions Series, a series fund,
whose objective is to provide current
income exempt from Federal income
taxes, preservation of capital and
liquidity available from investing in
a diversified portfolio of short-
term, high quality municipal bonds.
28
<PAGE>
Merrill Lynch Treasury Fund.......... A portfolio of Merrill Lynch Funds For
Institutions Series, a series fund,
whose objective is to provide current
income consistent with liquidity and
security of principal from investment
in direct obligations of the U.S.
Treasury and up to 10% of its total
assets in repurchase agreements
secured by such obligations.
Before effecting an exchange, shareholders should obtain a currently
effective prospectus of the fund into which the exchange is to be made.
To exercise the exchange privilege, shareholders should contact their Merrill
Lynch financial consultant, who will advise the Fund of the exchange.
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
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 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 and
Class C shares will be lower than the per share dividends and distributions on
Class A and Class D shares as a result of the account maintenance, distribution
and higher transfer agency fees applicable with respect to the Class B and
Class C shares; similarly, the per share dividends and distributions on Class D
shares will be lower than the per share dividends and distributions on Class A
shares as a result of the account maintenance fees applicable with respect to
the Class D 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
29
<PAGE>
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, Class B, Class C and Class D shareholders (together, the
"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-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. Any loss on a sale or exchange of shares
held for six months or less, however, will be treated as long-term capital loss
to the extent of any long-term capital gains distribution with respect to such
shares.
Dividends are taxable to shareholders even though they are reinvested in
additional shares of the Fund. Not later than 60 days after the close of its
taxable year, the Fund will provide its shareholders with a written notice
designating the amounts of any 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 among the Class A, Class B, Class
C and Class D shareholders according to a method (which it believes is
consistent with the Securities and Exchange Commission exemptive order
permitting the issuance and sale of multiple classes of stock) that is based on
the gross income allocable to Class A, Class B, Class C and Class D
shareholders during the taxable year, or such other method as the Internal
Revenue Service may prescribe.
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 ordinary income 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.
No gain or loss will be recognized by Class B shareholders on the conversion
of their Class B shares for Class D shares. A shareholder's basis in the Class
D shares acquired will be the same as such shareholder's basis in the Class B
shares converted, and the holding period of the acquired Class D shares will
include the holding period of the converted Class B shares.
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
30
<PAGE>
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.
A loss realized on a sale or exchange of shares of the Fund will be
disallowed if other Fund shares are acquired (whether through the automatic
reinvestment of dividends or otherwise) within a 61-day period beginning 30
days before and ending 30 days after the date that the shares are disposed of.
In such a case, the basis of the shares acquired will be adjusted to reflect
the disallowed loss.
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.
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
31
<PAGE>
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.
Ordinary income 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, Class B,
Class C and Class D shares in accordance with a formula specified by the
Commission.
Average annual total return quotations for the specified periods are computed
by finding the average annual compounded rates of return (based on net
investment income and any realized and unrealized capital gains or losses on
portfolio investments over such periods) that would equate the initial amount
invested to the redeemable value of such investment at the end of each period.
Average annual total return is computed assuming all dividends and
distributions are reinvested and taking into account all applicable recurring
and nonrecurring expenses, including the maximum sales charge in the case of
Class A and Class D shares and the CDSC that would be applicable to a complete
redemption of the investment at the end of the specified period in the case of
Class B and Class C shares.
The Fund also may quote annual, average annual and annualized total return
and aggregate total return performance data, both as a percentage and as a
dollar amount based on a hypothetical $1,000 investment, for various periods
other than those noted below. Such data will be computed as described above,
except that, (1) as required by the periods of the quotations, actual annual,
annualized or aggregate data, rather than average annual data, may be quoted
and (2) the maximum applicable sales charges will not be included with respect
to annual or annualized rates of return calculations. Aside from the impact on
the performance data calculations of including or excluding the maximum
applicable sales charges, actual annual or annualized total return data
generally will be lower than average annual total return data since the average
rates of return reflect compounding of return; aggregate total return data
generally will be higher than average annual total return data since the
aggregate rates of return reflect compounding over a longer period of time.
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<PAGE>
Set forth below is total return information for both Class A and Class B
shares of the Fund for the periods indicated. Since Class C and Class D shares
have not been issued prior to the date of this Statement of Additional
Information, performance information concerning Class C and Class D shares is
not yet provided.
<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 March 31,
1994................... (0.64%) $ 993.60 0.19% $1,001.90
Five Years Ended March
31, 1994............... 8.91% $1,532.60 8.96% $1,536.10
November 29, 1985 to
March 31, 1994......... 8.74% $2,011.60
October 27, 1988 to
March 31, 1994......... 8.74% $1,575.80
<CAPTION>
ANNUAL TOTAL RETURN
(EXCLUDING MAXIMUM APPLICABLE SALES CHARGE)
<S> <C> <C> <C> <C>
For the six months ended
March 31, 1994......... 0.24% $1,002.40 (0.23%) $ 997.70
YEAR ENDED SEPTEMBER 30,
- ------------------------
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
March 31, 1994......... 101.16% $2,011.60
October 27, 1988 to
March 31, 1994......... 57.58% $1,575.80
</TABLE>
- --------
* Information as to Class A shares is presented only for the period October
27, 1988 to March 31, 1994. No Class A shares were sold prior to October 27,
1988.
** Commencement of Operations of Class B shares was November 29, 1985.
In order to reflect the reduced sales charges in the case of Class A or Class
D shares or the waiver of the CDSC in the case of Class B or Class C shares
applicable to certain investors, as described under "Purchase of Shares" and
"Redemption of Shares", respectively, the total return data quoted by the Fund,
in advertisements directed to such investors, may take into account the
reduced, and not the maximum, sales charge or may not take into account the
CDSC and therefore may reflect greater total return since, due to the reduced
sales charges or 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.
33
<PAGE>
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.
PORTFOLIO STRATEGIES INVOLVING OPTIONS AND FUTURES
Reference is made to the discussion under "Investment Practices and
Restrictions--Portfolio Strategies Involving Options and Futures" for
information regarding various portfolio strategies involving options and
futures. The Fund may engage in various portfolio strategies to seek to
increase its return through the use of options on portfolio securities and to
hedge its portfolio against movements in the equity markets, interest rates and
exchange rates between currencies. The Fund has authority to write (i.e., sell)
covered call options on its portfolio securities, purchase put options on
securities and engage in transactions in stock index options, stock index
futures and financial futures, and related options on such futures. The Fund
may also deal in forward foreign exchange transactions and foreign currency
options and futures, and related options on such futures. Each of these
portfolio strategies is described below. Although certain risks are involved in
options and futures transactions (as discussed below in "Risk Factors in
Options, Futures and Currency Transactions"), the Investment Adviser believes
that, because the Fund will only engage in these transactions for hedging
purposes, the options and futures portfolio strategies of the Fund will not
subject the Fund to the risks frequently associated with the speculative use of
options and futures transactions. While the Fund's use of hedging strategies is
intended to reduce the volatility of the net asset value of Fund shares, the
Fund's net asset value will fluctuate. There can be no assurance that the
Fund's hedging transactions will be effective. Furthermore, the Fund will only
engage in hedging activities from time to time and may not necessarily be
engaging in hedging activities when movements in the equity markets, interest
rates or currency exchange rates occur.
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
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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.
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.
Purchasing Put Options. The Fund is authorized to purchase put options to
hedge against a decline in the market value of its portfolio securities. By
buying a put option, the Fund has a right to sell the underlying security at
the exercise price, thus limiting the Fund's risk of loss through a decline in
the market value of the security until the put option expires. The amount of
any appreciation in the value of the underlying security will be partially
offset by the amount of the premium paid for the put option and any related
transaction costs. Prior to its expiration, a put option may be sold in a
closing sale transaction and profit or loss from the sale will depend on
whether the amount received is more or less than the premium paid for the put
option plus the related transaction costs. A closing sale transaction cancels
out the Fund's position as the purchaser of an option by means of an offsetting
sale of an identical option prior to the expiration of the option it has
purchased. The Fund will not purchase put options on securities if, as a result
of such purchase, the aggregate cost of all outstanding options on securities
held by the Fund would exceed 5% of the market value of the Fund's total
assets.
Stock Index Options and Futures and Financial Futures. The Fund is authorized
to engage in transactions in stock index options and futures and financial
futures, and related options on such futures. The Fund may purchase or write
call options and purchase or write put options on stock indexes to hedge
against the risks of market-wide stock price movements in the securities in
which the Fund invests. The effectiveness of the hedge will depend on the
degree of diversification of the Fund's portfolio and the sensitivity of the
securities comprising the portfolio to factors influencing the market as a
whole. Because the value of an index option depends upon movements in the level
of the index rather than the price of a particular stock, whether the Fund will
realize a gain or loss on the purchase or sale of an option on an index depends
upon movements in the level of prices in the stock market generally or in an
industry or market segment rather than movements in the prices of a particular
stock. Currently, stock index options traded include the S&P 100 Index, the S&P
500 Index, the NYSE Composite Index, the AMEX Market Value Index, the National
Over-the-Counter Index and other standard, broadly based stock market indices.
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The Fund may also purchase and sell stock index futures contracts and
financial futures contracts ("futures contracts") as a hedge against adverse
changes in the market value of its portfolio securities and interest rates, as
described below. A futures contract is an agreement between two parties which
obligates the purchaser of the futures contract to buy and the seller of a
futures contract to sell a security for a set price on a future date. Unlike
most other futures contracts, a stock index futures contract does not require
actual delivery of securities, but results in cash settlement based upon the
difference in value of the index between the time the contract was entered into
and the time of its settlement. The Fund may effect transactions in stock index
futures contracts in securities and financial futures contracts in United
States Government and agency securities and corporate debt securities.
Transactions by the Fund in stock index futures and financial futures are
subject to limitations as described below under "Restrictions on the Use of
Futures Transactions".
The Fund may sell stock index futures contracts in anticipation of or during
a market decline to attempt to offset the decrease in market value of the
Fund's securities portfolio that might otherwise result. When the Fund is not
fully invested in the securities markets and anticipates a significant market
advance, it may purchase stock index futures in order to gain rapid market
exposure that may in part or entirely offset increases in the cost of
securities that the Fund intends to purchase. As such securities purchases are
made, an equivalent amount of stock index futures contracts will be terminated
by offsetting sales. The Fund does not consider purchases of futures contracts
to be a speculative practice under these circumstances. It is anticipated that,
in a substantial majority of these transactions, the Fund will purchase such
securities upon termination of the long futures position, whether the long
position is the purchase of a stock index futures contract or the purchase of a
call option on a stock index future, but under unusual circumstances (e.g., the
Fund experiences a significant amount of redemptions), a long futures position
may be terminated without the corresponding purchase of securities.
The Fund may sell financial futures contracts in anticipation of an increase
in the general level of interest rates. Generally, as interest rates rise, the
market values of debt securities which may be held by the Fund as a temporary
defensive measure will fall, thus reducing the net asset value of the Fund.
However, as interest rates rise, the value of the Fund's short position in the
futures contract will also tend to increase, thus offsetting all or a portion
of the depreciation in the market value of the Fund's investments which are
being hedged. While the Fund will incur commission expenses in selling and
closing out futures positions, these commissions are generally less than the
transaction expenses which the Fund would have incurred had the Fund sold
portfolio securities in order to reduce its exposure to increases in interest
rates. The Fund also may purchase financial futures contracts in anticipation
of a decline in interest rates when it is not fully invested in a particular
market in which it intends to make investments to gain market exposure that may
in part or entirely offset an increase in the cost of securities it intends to
purchase. It is anticipated that, in a substantial majority of these
transactions, the Fund will purchase securities upon termination of the futures
contract.
The Fund also has authority to purchase and write call and put options on
futures contracts in connection with its hedging activities. Generally, these
strategies are utilized under the same market and market sector conditions
(i.e., conditions relating to specific types of investments) in which the Fund
enters into futures transactions. The Fund may purchase put options or write
call options on futures contracts rather than selling the underlying futures
contract in anticipation of a decrease in the market value of a security or an
increase in interest rates. Similarly, the Fund may purchase call options, or
write put options on futures
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contracts, as a substitute for the purchase of such futures to hedge against
the increased cost resulting from an increase in the market value or a decline
in interest rates of securities which the Fund intends to purchase.
The Fund may engage in options and futures transactions on exchanges and
options in the over-the-counter markets ("OTC options"). In general, exchange-
traded contracts are third-party contracts (i.e., performance of the parties'
obligations is guaranteed by an exchange or clearing corporation) with
standardized strike prices and expiration dates. OTC options transactions are
two-party contracts with price and terms negotiated by the buyer and seller.
See "Restrictions on OTC Options" below for information as to restrictions on
the use of OTC options.
Foreign Currency Options, Futures and Related Options. The Fund is also
authorized to purchase or sell listed or over-the-counter foreign currency
options, foreign currency futures and related options on foreign currency
futures as a short or long hedge against possible variations in foreign
exchange rates. Such transactions may be effected with respect to hedges on
non-U.S. dollar denominated securities owned by the Fund, sold by the Fund but
not yet delivered, or committed or anticipated to be purchased by the Fund. As
an illustration, the Fund may use such techniques to hedge the stated value in
United States dollars of an investment in a pound sterling denominated
security. In such circumstances, for example, the Fund may purchase a foreign
currency put option enabling it to sell a specified amount of pounds for
dollars at a specified price by a future date. To the extent the hedge is
successful, a loss in value of the pound relative to the dollar will tend to be
offset by an increase in the value of the put option. To offset, in whole or in
part, the cost of acquiring such a put option, the Fund may also sell a call
option which, if exercised, requires it to sell a specified amount of pounds
for dollars at a specified price by a future date (a technique called a
"straddle"). By selling such call option, the Fund gives up the opportunity to
profit without limit from increases in the relative value of the pound 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.
Certain differences exist between these foreign currency hedging instruments.
Foreign currency options provide the holder thereof the right to buy or sell a
currency at a fixed price on a future date (with exchange-traded contracts and
OTC options having the characteristics described above). A futures contract on
a foreign currency is an agreement between two parties to buy and sell a
specified amount of currency for a set price on a future date. Futures
contracts and options on futures contracts are traded on boards of trade or
futures exchanges. The Fund will not speculate in foreign currency options,
futures or related options. Accordingly, the Fund will not hedge a currency
substantially in excess of the market 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. The Fund may not incur potential
net liabilities of more than 20% of its total assets from foreign currency
options, futures or related options.
Restrictions on the Use of Futures Transactions. Under regulations of the
Commodity Futures Trading Commission ("CFTC"), the futures trading activities
described herein will not result in the Fund being deemed to be a "commodity
pool," as defined under such regulations, provided that the Fund adheres to
certain restrictions. In particular, the Fund may (i) purchase and sell futures
contracts and options thereon for bona fide hedging purposes, as defined under
CFTC regulations, without regard to the percentage of the Fund's assets
committed to margin and option premiums, and (ii) the Fund may enter into non-
hedging
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transactions, provided that the Fund not entered into such transactions for
yield enhancement or risk management purposes if, immediately thereafter, the
sum of the amount of initial margin deposits on the Fund's existing futures
positions and option premiums would exceed 5% of the market value of its
liquidating value, after taking into account unrealized profits and unrealized
losses on any such transactions. However, the Fund intends to engage in options
and futures transactions only for hedging purposes. Margin deposits may consist
of cash or securities acceptable to the broker and the relevant contract
market.
When the Fund purchases a futures contract or writes a put option or
purchases a call option thereon, an amount of cash and cash equivalents will be
deposited in a segregated account with the Fund's custodian so that the amount
so segregated, plus the amount of initial and variation margin held in the
account of its broker, equals the market value of the futures contract, thereby
ensuring that the use of such futures is unleveraged.
An order has been obtained from the Commission which exempts the Fund from
certain provisions of the Investment Company Act in connection with
transactions involving futures contracts and options thereon.
Restrictions on OTC Options. The Fund will engage in OTC options, including
over-the-counter foreign currency options and options on foreign currency
futures, only with member banks of the Federal Reserve System and primary
dealers in United States Government securities or with affiliates of such banks
or dealers which have capital of at least $50 million or whose obligations are
guaranteed by an entity having capital of at least $50 million. The Fund will
acquire only those OTC options for which the Investment Adviser believes the
Fund can receive on each business day at least two independent bids or offers
(one of which will be from an entity other than a party to the option).
The staff of the Commission has taken the position that purchased OTC options
and the assets used as cover for written OTC options are illiquid securities.
Therefore, the Fund has adopted an investment policy pursuant to which it will
not purchase or sell OTC options (including OTC options on futures contracts)
if, as a result of such transaction, the sum of the market value of OTC options
currently outstanding which are held by the Fund, the market value of the
underlying securities covered by OTC call options currently outstanding which
were sold by the Fund and margin deposits on the Fund's existing OTC options on
futures contracts exceed 5% of the total assets of the Fund, taken at market
value, together with all other assets of the Fund which are illiquid or are not
otherwise readily marketable. However, if the OTC option is sold by the Fund to
a primary U.S. Government securities dealer recognized by the Federal Reserve
Bank of New York and if the Fund has the unconditional contractual right to
repurchase such OTC option from the dealer at a predetermined price, then the
Fund will treat as illiquid such amount of the underlying securities as is
equal to the repurchase price less the amount by which the option is "in-the-
money" (i.e., current market value of the underlying security minus the
option's strike price). The repurchase price with the primary dealers is
typically a formula price which is generally based on a multiple of the premium
received for the option, plus the amount by which the option is "in-the-money".
This policy is not a fundamental policy of the Fund and may be amended by the
Board of Directors of the Fund without the approval of the Fund's shareholders.
However, the Fund will not change or modify this policy prior to the change or
modification by the Commission staff of its positions.
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Risk Factors in Options, Futures and Currency Transactions. Utilization of
options and futures transactions to hedge the portfolio involves the risk of
imperfect correlation in movements in the price of options and futures prices
and movements in the prices of the securities, interest rates or currencies
which are the subject of the hedge. If the price of the options or futures
moves more or less than the price of the subject of the hedge, the Fund will
experience a gain or loss which will not be completely offset by movements in
the price of the subject of the hedge.
The Fund intends to enter into options and futures transactions, on an
exchange or in the over-the-counter market, only if there appears to be a
liquid secondary market for such options or futures or, in the case of OTC
options, the Investment Adviser believes the Fund can receive on each business
day at least two independent bids or offers. However, there can be no assurance
that a liquid secondary market will exist at any specific time. Thus, it may
not be possible to close an options or futures position. The inability to close
options and futures positions also could have an adverse impact on the Fund's
ability to effectively hedge its portfolio. There is also the risk of loss by
the Fund of margin deposits or collateral in the event of bankruptcy of a
broker with whom the Fund has an open position in an option, a futures contract
or a related option.
The exchanges on which currency options are traded have generally established
limitations governing the maximum number of call or put options on the same
underlying currency (whether or not covered) which may be written by a single
investor, whether acting alone or in concert with others (regardless of whether
such options are written on the same or different exchanges or are held or
written on one or more accounts or through one or more brokers). "Trading
limits" are imposed on the maximum number of contracts which any person may
trade on a particular trading day. The Investment Adviser does not believe that
these trading and position limits will have any adverse impact on the portfolio
strategies for hedging the Fund's portfolio.
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 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.
OTHER INVESTMENT POLICIES AND PRACTICES
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
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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.
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.
Forward Foreign Exchange Transactions. Generally, the foreign exchange
transactions of the Fund will be conducted on a spot, i.e., cash, basis at the
spot rate for purchasing or selling currency prevailing in the foreign exchange
market. This rate under normal market conditions differs from the prevailing
exchange rate in an amount generally less than 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,
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.
Restricted Securities. The Fund may purchase securities that are not
registered ("restricted securities") under the Securities Act of 1933, as
amended (the "Securities Act"), but can be offered and sold to "qualified
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institutional buyers" under Rule 144A under the Securities Act. However, the
Fund will not invest more than 5% of its net assets in illiquid investments,
which includes securities for which there is no readily available market,
securities subject to contractual restrictions on resale, certain investments
in asset-backed and receivable-backed securities and restricted securities,
unless the Fund's Board of Directors continuously determines, based on the
trading markets for the specific restricted security, that it is liquid. The
Board of Directors may adopt guidelines and delegate to the Investment Adviser
the daily function of determining and monitoring liquidity of restricted
securities. The Board of Directors, however, will retain sufficient oversight
and be ultimately responsible for the determinations.
The Board of Directors monitors the Fund's investments in these securities
purchased pursuant to Rule 144A, focusing on such factors, among others, as
valuation, liquidity and availability of information. These investments in
securities purchased pursuant to Rule 144A could have the effect of increasing
the level of illiquidity in the Fund to the extent that qualified institutional
buyers become for a time uninterested in purchasing these restricted
securities.
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.
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.
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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,
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 affiliate, FAM, 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.
Current 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 voting securities,
including a majority of the voting securities of each portfolio affected. A
majority for this purpose means: (a) more than 50% of the outstanding voting
securities, or (b) 67% of the outstanding voting securities represented at a
meeting where more than 50% of the outstanding voting securities 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.
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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.
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.)
43
<PAGE>
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.
Proposed Uniform Investment Restrictions. As discussed in the Prospectus
under "Investment Objective and Policies--Investment Restrictions", the Board
of Directors of the Fund has approved the replacement of the Fund's existing
investment restrictions with the fundamental and non-fundamental investment
restrictions set forth below. These uniform investment restrictions have been
proposed for adoption by all of the non-money market mutual funds advised by
the Investment Adviser or its affiliate, FAM. The investment objective and
policies of the Fund will be unaffected by the adoption of the proposed
investment restrictions.
Shareholders of the Fund are currently considering whether to approve the
proposed revised investment restrictions. If such shareholder approval is
obtained, the Fund's current investment restrictions will be replaced by the
proposed restrictions, and the Fund's Prospectus and Statement of Additional
Information will be supplemented to reflect such change.
Under the proposed fundamental investment restrictions, the Fund may not:
1. Make any investment inconsistent with the Fund's classification as a
diversified company under the Investment Company Act.
2. Invest more than 25% of its assets, taken at market value, in the
securities of issuers in any particular industry (excluding the U.S.
Government and its agencies and instrumentalities).
3. Make investments for the purpose of exercising control or management.
4. Purchase or sell real estate, except that, to the extent permitted by
applicable law, the Fund may invest in securities directly or indirectly
secured by real estate or interests therein or issued by companies which
invest in real estate or interests therein.
5. Make loans to other persons, except that the acquisition of bonds,
debentures or other corporate debt securities and investment in government
obligations, commercial paper, pass-through instruments, certificates of
deposit, bankers acceptances, repurchase agreements or any similar
instruments shall not be deemed to be the making of a loan, and except
further that the Fund may lend its portfolio securities, provided that the
lending of portfolio securities may be made only in accordance with
applicable law and the guidelines set forth in the Fund's Prospectus and
Statement of Additional Information, as they may be amended from time to
time.
6. Issue senior securities to the extent such issuance would violate
applicable law. The Fund currently does not intend to engage in short
sales, except short sales "against the box".
7. Borrow money, except that (i) the Fund may borrow from banks (as
defined in the Investment Company Act) in amounts up to 33 1/3% of its
total assets (including the amount borrowed), (ii) the Fund may borrow up
to an additional 5% of its total assets for temporary purposes, (iii) the
Fund may obtain such short-term credit as may be necessary for the
clearance of purchases and sales of portfolio
44
<PAGE>
securities and (iv) the Fund may purchase securities on margin to the
extent permitted by applicable law. The Fund may not pledge its assets
other than to secure such borrowings or, to the extent permitted by the
Fund's investment policies as set forth in its Prospectus and Statement of
Additional Information, as they may be amended from time to time, in
connection with hedging transactions, short sales, when-issued and forward
commitment transactions and similar investment strategies.
8. Underwrite securities of other issuers except insofar as the Fund
technically may be deemed an underwriter under the Securities Act of 1933,
as amended (the "Securities Act") in selling portfolio securities.
9. Purchase or sell commodities or contracts on commodities, except to
the extent that the Fund may do so in accordance with applicable law and
the Fund's Prospectus and Statement of Additional Information, as they may
be amended from time to time, and without registering as a commodity pool
operator under the Commodity Exchange Act.
Under the proposed non-fundamental investment restrictions, each Fund may
not:
a. Purchase securities of other investment companies, except to the
extent such purchases are permitted by applicable law.
b. Make short sales of securities or maintain a short position, except to
the extent permitted by applicable law.
c. Invest in securities which cannot be readily resold because of legal
or contractual restrictions or which cannot otherwise be marketed, redeemed
or put to the issuer or a third party, if at the time of acquisition more
than 15% of its total assets would be invested in such securities. This
restriction shall not apply to securities which mature within seven days or
securities which the Board of Directors of the Fund has otherwise
determined to be liquid pursuant to applicable law. Notwithstanding the 15%
limitation herein, to the extent the laws of any state in which the Fund's
shares are registered or qualified for sale require a lower limitation, the
Fund will observe such limitation. As of the date hereof, therefore, the
Fund will not invest more than 10% of its total assets in securities which
are subject to this investment restriction (c). Notwithstanding the fact
that the Board may determine that a Rule 144A security is liquid and not
subject to limitations set forth in this investment restriction (c), the
State of Ohio does not recognize Rule 144A securities as securities that
are free of restrictions as to resale. To the extent required by Ohio law,
the Fund will not invest more than 5% of its total assets in securities of
issuers that are restricted as to disposition, including Rule 144A
securities.
d. Invest in warrants if, at the time of acquisition, its investments in
warrants, valued at the lower of cost or market value, would exceed 5% of
the Fund's total assets; included within such limitation, but not to exceed
2% of the Fund's total assets, are warrants which are not listed on the New
York
45
<PAGE>
Stock Exchange or American Stock Exchange or a major foreign exchange. For
purposes of this restriction, warrants acquired by the Fund in units or
attached to securities may be deemed to be without value.
e. Invest in securities of companies having a record, together with
predecessors, of less than three years of continuous operation, if more
than 5% of the Fund's total assets would be invested in such securities.
This restriction shall not apply to mortgage-backed securities, asset-
backed securities or obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
f. Purchase or retain the securities of any issuer, if those individual
officers and directors of the Fund, the officers and general partner of the
Investment Adviser, the directors of such general partner or the officers
and directors of any subsidiary thereof each owning beneficially more than
one-half of one percent of the securities of such issuer own in the
aggregate more than 5% of the securities of such issuer.
g. Invest in real estate limited partnership interests or interests in
oil, gas or other mineral leases, or exploration or development programs,
except that the Fund may invest in securities issued by companies that
engage in oil, gas or other mineral exploration or development activities.
h. Write, purchase or sell puts, calls, straddles, spreads or
combinations thereof, except to the extent permitted in the Fund's
Prospectus and Statement of Additional Information, as they may be amended
from time to time.
i. Notwithstanding fundamental restriction (7) above, borrow amounts in
excess of 10% of its total assets, taken at market value, and then only
from banks as a temporary measure for extraordinary or emergency purposes
such as the redemption of Fund shares. In addition, the Fund will not
purchase securities while borrowings exceed 5% of its assets.
Because of the affiliation of Merrill Lynch with the Fund, the Fund is
prohibited from engaging in certain transactions involving Merrill Lynch except
pursuant to a permissive order or otherwise in compliance with the provisions
of the Investment Company Act and the rules and regulations thereunder.
Included among such restricted transactions are purchases from or sales to
Merrill Lynch of securities in transactions in which it acts as principal and
purchases of securities from underwriting syndicates of which Merrill Lynch is
a member.
46
<PAGE>
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
2,000,000,000 shares of Common Stock, par value $0.01 per share, divided into
four classes, designated Class A, Class B, Class C and Class D Common Stock,
each of which consists of 500,000,000 shares. Shares of Class A, Class B, Class
C and Class D Common Stock represent an interest in the same assets of the Fund
and are identical in all respects except that the Class B, Class C and Class D
shares bear certain expenses related to the account maintenance and/or
distribution of such shares and have exclusive voting rights with respect to
matters relating to such account maintenance and/or distribution expenditures.
The Fund has received an order from the Commission permitting the issuance and
sale of multiple classes of Common Stock. The Board of Directors of the Fund
may classify and reclassify the shares of the Fund into additional classes of
Common Stock at a future date.
Shareholders are entitled to one vote for each share held and fractional
votes for fractional shares held and will vote on the election of Directors and
any other matter submitted to a shareholder vote. The 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 rights. Redemption and conversion 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
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.
COMPUTATION OF OFFERING PRICE PER SHARE
The offering price for Class A and Class B shares of the Fund, based on the
value of the Fund's net assets and number of shares outstanding as of March 31,
1994, is calculated as set forth below. Information is not provided for Class C
or Class D shares since no Class C or Class D shares were publicly offered
prior to the date of this Statement of Additional Information.
<TABLE>
<CAPTION>
CLASS A CLASS B
----------- ------------
<S> <C> <C>
Net Assets............................................ $40,175,446 $760,264,660
=========== ============
Number of Shares Outstanding.......................... 3,441,241 64,695,953
=========== ============
Net Asset Value Per Share (net assets divided by
number of shares outstanding)........................ $ 11.67 $ 11.75
Sales Charge*......................................... $ .65 $ --
----------- ------------
Offering Price (for Class A shares; 5.25% of offering
price (5.54% of net asset value per share)).......... $ 12.32 $ 11.75
=========== ============
</TABLE>
* Rounded to the nearest one-hundredth percent; assumes maximum sales charge is
applicable.
47
<PAGE>
INDEPENDENT AUDITORS
Deloitte & Touche LLP, 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, 2 Montgomery Street, 2nd Floor, 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 September 30, 1994.
48
<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 llp
Princeton, New Jersey
October 29, 1993
49
<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>
50
<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>
51
<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>
52
<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>
53
<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>
54
<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
Total Investments in US & Foreign Stocks
& Warrants 451,959,885 539,519,944 61.9
<CAPTION>
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>
55
<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>
56
<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>
57
<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>
58
<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>
59
<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.
60
<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.
61
<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)
============= ==============
62
<PAGE>
THE FOLLOWING SEMI-ANNUAL FINANCIAL STATEMENTS FOR THE FUND FOR THE PERIOD
ENDED MARCH 31, 1994 ARE UNAUDITED.
These unaudited interim financial statements reflect all adjustments which
are, in the opinion of management, necessary to a fair statement of the results
for the interim period presented. All such adjustments are of a normal
recurring nature.
63
<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 Ford Capital BV, 9.375% due 1/01/1998 $ 10,037,900 $ 10,890,640 1.4%
Services 5,000,000 Landeskreditbank, N.V., 7.875% due 4/15/2004 4,972,067 5,256,255 0.6
Financial 10,000,000 American General Financial Corp., 7.38%
Services- due 5/13/1997 9,993,200 10,275,000 1.3
Consumer
Tobacco 10,000,000 Philip Morris Companies, Inc., 7.75% due 5/01/1999 9,975,000 10,275,000 1.3
Total Investments in Corporate Bonds 34,978,167 36,696,895 4.6
<CAPTION>
Country US Government & Agency Obligations
<S> <C> <S> <C> <C> <C>
United States Federal Home Loan Mortgage Corp.:
4,910,000 REMIC 1243-HP, 5.625% due 4/25/2024(a) 4,788,017 4,713,600 0.6
25,000,000 REMIC FHG 16PH, 6.75% due 4/15/2021(a) 25,390,625 23,468,750 2.9
20,000,000 Federal National Mortgage Association,
REMIC 1993 103PG, 6.75% due 5/25/2022(a) 20,262,500 18,400,313 2.3
5,000,000 Republic of Italy, 8.75% due 2/08/2001 5,373,050 5,388,690 0.7
US Treasury Notes:
55,000,000 7.875% due 8/15/2001 53,943,600 58,884,375 7.4
25,000,000 6.25% due 2/15/2003 25,710,937 24,125,000 3.0
35,000,000 5.75% due 8/15/2003 36,432,812 32,467,960 4.1
22,000,000 US Treasury STRIPS++, 6.81% due 5/15/2000(b) 15,607,802 14,826,988 1.8
Total Investments in US Government &
Agency Obligations 187,509,343 182,275,676 22.8
<CAPTION>
Foreign Obligations
<S> <C> <S> <C> <C> <C>
Australia A$ 13,100,000 Queensland Treasury Corp. Global, 8.00%
due 7/14/1999 9,812,507 9,230,822 1.2
Canada C$ 14,500,000 Government of Canada, 7.25% due 6/01/2003 10,739,024 10,005,964 1.2
Italy Buoni Poliennali del Tesoro:
Lit 5,050,000,000 9.00% due 10/01/1998 3,073,203 3,134,632 0.4
12,500,000,000 10.00% due 8/01/2003 7,957,684 8,079,078 1.0
Mexico Mxp 45,013,640 Mexican Cetes, 9.04% due 9/07/1995(b) 12,341,483 11,361,416 1.4
Spain Pta 600,000,000 Spanish Government Bonds, 10.50% due 10/30/2003 5,158,819 4,815,005 0.6
Sweden Skr 40,000,000 Government of Sweden, 6.50% due 6/05/2001 4,894,532 4,635,597 0.6
United UK Treasury Gilt:
Kingdom Pound 1,350,000 8.75% due 9/01/1997 2,267,919 2,106,366 0.3
Sterling 4,500,000 8.00% due 6/10/2003 7,536,136 6,826,707 0.8
Total Investments in Foreign Obligations 63,781,307 60,195,587 7.5
Total Investments in Corporate Bonds,
US Government & Agency & Foreign Obligations 286,268,817 279,168,158 34.9
</TABLE>
64
<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
Chemicals 70,000 du Pont (E.I.) de Nemours & Co. $ 4,084,332 $ 3,710,000 0.5%
55,000 IMC Fertilizer Group, Inc. 2,523,134 2,172,500 0.3
125,000 Rohm & Haas Co. 6,791,460 6,828,125 0.9
Consumer-- 30,000 Duracell International Inc. 1,245,024 1,192,500 0.1
Miscellaneous
Containers 170,000 Crown Cork & Seal Co., Inc. 5,064,404 6,651,250 0.8
Forest Products 132,500 Willamette Industries, Inc. 4,954,250 6,260,625 0.8
Paper 153,000 Scott Paper Co. 6,566,724 6,406,875 0.8
Railroads 130,000 CSX Corp. 11,448,373 10,660,000 1.3
270,000 Southern Pacific Rail Co. 5,596,644 5,670,000 0.7
Total Basic Industry 48,274,345 49,551,875 6.2
Capital Spending
Aerospace 250,000 Allied-Signal Inc. 7,805,352 9,156,250 1.1
Auto & Truck 155,000 Consorcio G Groupo Dina, S.A. de C.V. (ADR)
(d)(1) 2,506,119 2,499,375 0.3
Capital Goods 1,140,000 Wheelabrator Technologies, Inc. 12,797,181 21,802,500 2.7
Communications 50,000 Motorola, Inc. 4,263,282 5,062,500 0.6
75,000 Tellabs, Inc. 3,080,391 4,068,750 0.5
Computer Services 500,000 Computer Sciences Corp. 14,036,687 18,250,000 2.3
325,000 General Motors Corp. (Class E) 9,470,962 11,131,250 1.4
Computer Technology 22,800 Novell Inc. 509,503 410,400 0.1
Electrical Equipment 162,000 Emerson Electric Co. 9,124,573 9,618,750 1.2
35,000 W.W. Grainger 2,267,080 2,222,500 0.3
Electronics 50,000 Perkin Elmer Corp. 1,959,750 1,668,750 0.2
210,000 Solectron Corp. 5,168,718 6,326,250 0.8
Engineering & 210,000 Thermo Electron Corp. 8,634,781 8,163,750 1.0
Construction
Office Equipment 325,000 Danka Business Systems PLC (ADR)(d)(1) 9,952,519 12,634,375 1.6
Telecommunications 385,000++++ADC Telecommunications, Inc. 11,768,964 14,533,750 1.8
& Equipment 90,000 DSC Communications Corp. 5,136,258 4,522,500 0.6
Total Capital Spending 108,482,120 132,071,650 16.5
</TABLE>
65
<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
Apparel 140,000 Phillips-Van Heusen Corp. $ 3,151,463 $ 4,882,500 0.6%
Appliances 675,000 Singer Co. N.V. (1) 17,730,688 23,203,125 2.9
639,500 Sunbeam-Oster Inc. 12,710,739 11,830,750 1.5
Automotive 100,000 Ford Motor Co. 5,841,808 5,875,000 0.7
150,000 Magna International Inc. 7,474,189 7,050,000 0.9
Beverages 19,100 Panamerican Beverage Inc. (1) 487,050 661,337 0.1
Conglomerates 690,000++++Grupo Carso, S.A. de C.V. (ADR)(d)(1)++++++ 5,878,820 12,506,250 1.5
Healthcare-- 420,000 Humana Inc. 7,781,015 7,822,500 1.0
Products & Services 75,000 Vivra Inc. 1,398,603 1,837,500 0.2
Household Products 140,000 Procter & Gamble Co. 7,773,736 7,507,500 0.9
Medical 245,000++++Physician Corp. 4,985,524 6,431,250 0.8
Printing & Publishing 100,000 Gannett Co. 5,007,669 5,262,500 0.7
Retail 27,400 Heilig-Meyers Co. 341,708 849,400 0.1
Services 200,000 Block (H & R), Inc. 7,764,675 8,600,000 1.1
60,275 Kelly Services, Inc. (Class A) 1,715,024 1,401,394 0.2
Telecommunications 61,200 ALC Communications Corp. 1,560,600 2,034,900 0.3
100,000 GTE Corp. 3,204,870 3,100,000 0.4
515,750 LDDS Communications Inc. (Class A) 11,447,075 12,249,062 1.5
550,000 MCI Communications Corp. 15,538,597 12,856,250 1.6
70,000 Sprint Corp. 2,594,900 2,397,500 0.3
315,000 Telefonos de Mexico, S.A. de C.V. (ADR)
(d)(1) 12,692,065 18,978,750 2.4
Tires & Rubber 140,000 Bandag, Inc. (Class A) 6,400,395 6,755,000 0.9
350,000 Cooper Tire & Rubber Co. 7,181,026 8,925,000 1.1
Total Consumer Goods & Services 150,662,239 173,017,468 21.7
Credit-Sensitive & Financial Services
Banking 80,000 Banco de Galicia y Buenos Aires S.A. (ADR)
(d)(1) 2,018,496 2,540,000 0.3
40,000 Banco Frances del Rio de la Plata S.A. (ADR)
(d)(1) 1,476,693 1,255,000 0.2
80,000 BankAmerica Corp. 3,457,141 3,150,000 0.4
50,000 Bank of New York Co. 2,404,161 2,550,000 0.3
122,500 Espirito Santo Financial Holding S.A. (ADR)
(d)(1) 3,447,435 3,613,750 0.4
130,000 Grupo Financiero Serfin S.A. 3,204,369 3,266,250 0.4
90,000 Istituto Mobiliare (ADR)(d)(1) 1,976,579 2,115,000 0.3
Telecommunications 35,000 International Telephone & Telegraph Corp. 2,966,908 3,001,250 0.4
Total Credit-Sensitive & Financial Services 20,951,782 21,491,250 2.7
</TABLE>
66
<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>
Energy
Oil--Integrated 20,000 Mobil Oil Corp. $ 1,571,620 $ 1,487,500 0.2%
Oil International 70,000 Royal Dutch Petroleum Co. N.V. (ADR)(d)(1) 6,155,380 6,956,250 0.9
Petroleum 170,000 Phillips Petroleum Co. 4,864,574 4,526,250 0.5
Utilities--Electric 350,000 California Energy Co., Inc. 6,244,403 6,300,000 0.8
Total Energy 18,835,977 19,270,000 2.4
Total Investments in US Stocks & Warrants 347,206,463 395,402,243 49.5
<CAPTION>
Foreign Stocks & Warrants
<S> <C> <S> <C> <C> <C>
Argentina
Utilities-- 560,000 Telecom Argentina S.A. (Class B) 3,305,379 3,108,311 0.4
Communications
Australia
Banking 335,942 National Australia Bank Ltd. 2,106,640 2,680,702 0.3
Multi-Industry 300,948 Pacific Dunlop, Ltd. 1,129,136 1,055,124 0.1
Retail 270,000 Coles Myer Ltd. (Warrants)(c) 808,121 357,822 0.0
Canada
Consumer--Durables 280,000 International Semi-Tech Microelectronics, Inc.
(Receipts)(e) 1,806,344 1,619,433 0.2
Media/Publishing 80,000 News Corp. (ADR)(d) 4,079,037 4,030,000 0.5
Retail Stores 50,000 Hudson's Bay Company (Ord.) 1,529,050 1,066,368 0.1
Chile
Utilities 11,000 Compania de Telefonos de Chile S.A. 1,274,185 981,750 0.1
Utilities--Electric 121,600 Distribuidora Chilectra Metropolitana S.A.
(ADR)(d)++++++ 3,323,793 4,354,496 0.6
France
Multi-Industry 3,750 Compagnie Generale des Eaux 1,401,331 1,709,177 0.2
Oil-Integrated 149,100 Societe Nationale Elf Aquitaine (ADR)(d) 5,303,144 4,864,387 0.6
</TABLE>
67
<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>
Germany
Automotive 50,000 Daimler-Benz AG (ADR)(d) $ 2,337,500 $ 2,543,750 0.3%
Machinery 2,000 Mannesmann AG 343,289 499,251 0.1
Hong Kong
Banking 274,108 HSBC Holdings PLC 1,613,351 3,086,123 0.4
Electronics 1,300,000 Johnson Electric Co. 2,603,189 3,179,636 0.4
Foods/Food 500,000 Dairy Farm International Holdings Ltd. 866,896 757,056 0.1
Processing
Multi-Industry 504,000 Hutchison Whampoa, Ltd. 1,010,407 2,054,534 0.3
Mexico
Engineering & 291,600 Empresas ICA Sociedad Controladora,
Construction S.A. de C.V. (ADR)(d) 5,751,141 6,998,400 0.9
Portugal
Banking 100,000 Banco Commercial Portugal (New)(ADR)(d) 1,342,303 1,562,500 0.2
97,000 Banco Commercial Portugal (Registered) 1,233,051 1,583,824 0.2
Singapore
Beverages 65,000 Fraser & Neave Ltd. (Ordinary) 730,745 696,873 0.1
Spain
Petroleum 60,000 Repsol S.A. 1,616,190 1,882,310 0.2
Utilities--Electric 50,000 Empresa Nacional de Electricidad S.A. (ADR)(d) 701,000 2,537,500 0.3
United Kingdom
Business Services 50,000 Reuters Holding PLC (ADR)(d) 2,571,186 4,306,250 0.5
Consumer-- 50,000 Hanson PLC Sponsored (ADR)(d) 1,106,687 993,750 0.1
Miscellaneous
Electronics 100,000 Siebe PLC 886,652 877,507 0.1
Engineering & 510,000 Huntingdon International Holdings PLC (ADR)(d) 12,702,548 3,123,750 0.4
Construction
</TABLE>
68
<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
Automotive & 657,500 Siderurgica Venezolana SIVENSA
Equipment S.A.I.C.A.-S.A.C.A. (ADR)(Warrants)(c)(d)++++++ $ 1,544,625 $ 19,725 0.0%
Total Investments in Foreign Stocks & Warrants 65,026,920 62,530,309 7.7
Total Investments in US & Foreign Stocks
& Warrants 412,233,383 457,932,552 57.2
<CAPTION>
Face
Amount* Short-Term Securities
<S> <C> <S> <C> <C> <C>
Commercial $30,000,000 du Pont (E.I.) de Nemours & Co., 3.49% due
Paper** 4/25/1994 29,930,200 29,930,200 3.7
General Electric Capital Corp.:
635,000 3.50% due 4/01/1994 635,000 635,000 0.1
20,609,000 3.53% due 4/04/1994 20,602,938 20,602,938 2.6
Total Investments in Short-Term Securities 51,168,138 51,168,138 6.4
Total Investments $749,670,338 788,268,848 98.5
============
Other Assets Less Liabilities 12,171,258 1.5
------------ ------
Net Assets $800,440,106 100.0%
============ ======
<FN>
(a)Real Estate Mortgage Investment Conduits (REMIC).
(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)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.
++++++Restricted security pursuant to Rule 144A.
(1)Consistent with the general policy of the Securities and Exchange
Commission, the nationality or domicile of an issuer for determina-
tion of foreign issuer status may be (i) the country under whose laws
the issuer is organized, (ii) the country in which the issuer's securities
are principally traded, or (iii) the country in which the issuer derives
a significant proportion (at least 50%) of its revenue or profits from
goods produced or sold, investments made, or services performed in
the country, or in which at least 50% of the assets of the issuer are
situated.
See Notes to Financial Statements.
</TABLE>
69
<PAGE>
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Statement of Assets and Liabilities as of March 31, 1994
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$749,670,338) (Note 1a) $788,268,848
Receivables:
Securities sold $ 17,442,878
Interest 3,296,857
Capital shares sold 711,423
Dividends 406,028 21,857,186
------------
Deferred organization expenses (Note 1f) 2,683
Prepaid registration fees and other assets (Note 1f) 144,208
------------
Total assets 810,272,925
------------
Liabilities: Payables:
Securities purchased 5,024,240
Capital shares redeemed 2,758,319
Distributor (Note 2) 674,136
Investment adviser (Note 2) 448,623 8,905,318
------------
Accrued expenses and other liabilities 927,501
------------
Total liabilities 9,832,819
------------
Net Assets: Net assets $800,440,106
============
Net Assets Class A Common Stock, $0.01 par value, 500,000,000 shares authorized $ 34,412
Consist of: Class B Common Stock, $0.01 par value, 500,000,000 shares authorized 646,960
Paid-in capital in excess of par 702,898,369
Undistributed investment income--net 2,421,693
Undistributed realized capital gains on
investments and foreign currency transactions--net 55,845,048
Unrealized appreciation on investments and foreign currency
transactions--net 38,593,624
------------
Net assets $800,440,106
============
Net Asset Class A--Based on net assets of $40,175,446 and 3,441,241 shares
Value: outstanding $ 11.67
============
Class B--Based on net assets of $760,264,660 and 64,695,953 shares
outstanding $ 11.75
============
See Notes to Financial Statements.
</TABLE>
70
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
<CAPTION>
Statement of Operations for the Six Months Ended March 31, 1994
<S> <S> <C> <C>
Investment Interest and discount earned $ 10,813,618
Income Dividends (net of $130,379 foreign withholding tax) 2,886,327
(Notes ------------
1d & 1e): Total income 13,699,945
------------
Expenses: Distribution fees--Class B (Note 2) 4,093,753
Investment advisory fees (Note 2) 2,716,119
Transfer agent fees--Class B (Note 2) 486,429
Custodian fees 91,000
Printing and shareholder reports 73,439
Accounting services (Note 2) 35,921
Professional fees 31,131
Registration fees (Note 1f) 28,737
Transfer agent fees--Class A (Note 2) 21,255
Directors' fees and expenses 19,956
Amortization of organization expenses (Note 1f) 798
Pricing fees 798
Other 8,781
------------
Total expenses 7,608,117
------------
Investment income--net 6,091,828
------------
Realized & Realized gain from:
Unrealized Investments--net $ 61,211,346
Gain Foreign currency transactions--net 968,386 62,179,732
(Loss) on ------------
Investments Change in unrealized appreciation/depreciation on:
& Foreign Investments--net (67,485,904)
Currency Foreign currency transactions--net 31,186 (67,454,718)
Transac- ------------ ------------
tions--Net Net realized and unrealized loss on investments and foreign currency
Notes 1b, transactions (5,274,986)
1e & 3): ------------
Net Increase in Net Assets Resulting from Operations $ 816,842
============
See Notes to Financial Statements.
</TABLE>
71
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the
Six Months For the
Ended Year Ended
March 31, September 30,
Increase (Decrease) in Net Assets: 1994 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 6,091,828 $ 16,570,858
Realized gain on investments and
foreign currency transactions--net 62,179,732 82,929,610
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net (67,454,718) 14,121,027
------------ ------------
Net increase in net assets resulting from operations 816,842 113,621,495
------------ ------------
Dividends & Investment income--net:
Distri- Class A (656,642) (994,119)
butions to Class B (7,759,759) (17,314,603)
Shareholders Realized gain on investments--net:
(Note 1g): Class A (4,103,194) (1,508,643)
Class B (75,192,306) (59,542,543)
------------ ------------
Net decrease in net assets resulting from dividends
and distributions to shareholders (87,711,901) (79,359,908)
------------ ------------
Capital Share Net increase (decrease) in net assets derived from capital
Transactions share transactions 15,692,257 (69,858,642)
(Note 4): ------------ ------------
Net Assets: Total decrease in net assets (71,202,802) (35,597,055)
Beginning of period 871,642,908 907,239,963
------------ ------------
End of period* $800,440,106 $871,642,908
============ ============
<FN>
*Undistributed investment income--net $ 2,421,693 $ 4,746,266
============ ============
See Notes to Financial Statements.
</TABLE>
72
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
Class A
For the
The following per share data and ratios have been Six Months
derived from information provided in the financial statements. Ended
March 31, For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1994 1993 1992 1991 1990
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 13.02 $ 12.57 $ 11.94 $ 10.61 $ 11.93
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .17 .43 .47 .70 .64
Realized and unrealized gain (loss) on investments
and foreign currency transactions (1)--net (.09) 1.29 .61 1.63 (1.41)
-------- -------- -------- -------- --------
Total from investment operations .08 1.72 1.08 2.33 (.77)
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.20) (.39) (.45) (.62) (.55)
Realized gain on investments--net (1.23) (.88) -- (.38) --
-------- -------- -------- -------- --------
Total dividends and distributions (1.43) (1.27) (.45) (1.00) (.55)
-------- -------- -------- -------- --------
Net asset value, end of period $ 11.67 $ 13.02 $ 12.57 $ 11.94 $ 10.61
======== ======== ======== ======== ========
Total Based on net asset value per share 0.24%++ 14.62% 9.23% 23.14% (6.86%)
Investment ======== ======== ======== ======== ========
Return:**
Ratios to Expenses .79%* .83% .81% .85% .83%
Average ======== ======== ======== ======== ========
Net Assets: Investment income--net 2.38%* 3.09% 3.18% 3.64% 5.12%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 40,175 $ 40,688 $ 20,320 $ 12,839 $ 4,511
Data: ======== ======== ======== ======== ========
Portfolio turnover 30.76% 79.55% 65.40% 173.76% 163.56%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Aggregate total investment return.
(1)Foreign currency transaction amounts have been reclassified
to conform to the 1994 presentation.
See Notes to Financial Statements.
</TABLE>
73
<PAGE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class B
For the
The following per share data and ratios have been Six Months
derived from information provided in the financial statements. Ended
March 31, For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1994 1993 1992 1991 1990
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 13.09 $ 12.62 $ 11.99 $ 10.60 $ 11.91
Operating -------- -------- -------- -------- ----------
Performance: Investment income--net .09 .24 .29 .39 .50
Realized and unrealized gain (loss) on
investments and foreign currency
transactions (1)--net (.07) 1.37 .66 1.83 (1.39)
-------- -------- -------- -------- ----------
Total from investment operations .02 1.61 .95 2.22 (.89)
-------- -------- -------- -------- ----------
Less dividends and distributions:
Investment income--net (.13) (.26) (.32) (.45) (.42)
Realized gain on investments--net (1.23) (.88) -- (.38) --
-------- -------- -------- -------- ----------
Total dividends and distributions (1.36) (1.14) (.32) (.83) (.42)
-------- -------- -------- -------- ----------
Net asset value, end of period $ 11.75 $ 13.09 $ 12.62 $ 11.99 $ 10.60
======== ======== ======== ======== ==========
Total Based on net asset value per share (0.23%)++ 13.49% 8.01% 21.91% (7.79%)
Investment ======== ======== ======== ======== ==========
Return:**
Ratios to Expenses, excluding distribution fees .81%* .85% .85% .90% .86%
Average ======== ======== ======== ======== ==========
Net Assets: Expenses 1.81%* 1.85% 1.85% 1.90% 1.86%
======== ======== ======== ======== ==========
Investment income--net 1.36%* 1.99% 2.10% 3.37% 3.90%
======== ======== ======== ======== ==========
Supplemental Net assets, end of period (in thousands) $760,265 $830,955 $886,920 $986,895 $1,171,567
Data: ======== ======== ======== ======== ==========
Portfolio turnover 30.76% 79.55% 65.40% 173.76% 163.56%
======== ======== ======== ======== ==========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Aggregate total investment return.
(1)Foreign currency transaction amounts have been reclassified to
conform to the 1994 presentation.
See Notes to Financial Statements.
</TABLE>
74
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Retirement Benefit Investment Program, Inc., Full
Investment Portfolio does business under the name Merrill Lynch
Balanced Fund for Investment and Retirement. Merrill Lynch Balan-
ced 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 de-
ferred sales charge. Both classes of shares have identical vot-
ing, 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 dis-
tribution expenditures. The following is a summary of signifi-
cant 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 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 valu-
ed 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 ac-
cording 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 at the exchange rate prevailing
when recognized. Assets and liabilities denominated in foreign cur-
rencies are valued at the exchange rate at the end of the period.
Foreign currency transactions are the result of settling (real-
ized) and valuing (unrealized) assets and liabilities expressed
in foreign currencies into US dollars. Realized and unrealized
gains or losses from investments include the effects of foreign
exchange sales on investments.
The Fund is authorized to enter into forward foreign exchange con-
tracts as a hedge against either specific transactions or portfolio
positions. Such contracts are not entered on the Fund's records.
However, the effect on operations is recorded from the date the Fund
enters into such contracts. Premium or discount is amortized over
the life of the contracts.
The Fund may also purchase or sell listed or over-the-counter for-
eign currency options, foreign currency futures and related options
on foreign currency futures as a short or long hedge against possi-
ble variations in foreign exchange rates. Such transactions may be
effected with respect to hedges on non-US dollar denominated secur-
ities owned by the Fund, sold by the Fund but not yet delivered, or
committed or anticipated to be purchased by the Fund.
(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 equiv-
alent 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 re-
lated 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 re-
quirements 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 trans-
actions are recorded on the dates the transactions are entered in-
to (the trade dates). Dividend income is recorded on the ex-div-
idend date, except that if the ex-dividend date has passed, certain
dividends from foreign securities are recorded
75
<PAGE>
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.
NOTES TO FINANCIAL STATEMENTS (concluded)
(f) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a five-year period. Costs related to the organ-
ization of the second class of shares are charged to expense over
a period not exceeding five years. Prepaid registration fees are
charged to expense as the related shares are issued.
(g) Dividends and distributions--Dividends and distributions paid
by the Fund are recorded on the ex-dividend dates.
(h) Reclassifications--Certain 1993 amounts have been reclassified
to conform to the 1994 presentation.
2. Investment Advisory Agreement and
Transaction with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Merrill Lynch Asset Management, L.P. ("MLAM"). Effective January 1,
1994, the investment advisory business of MLAM was reorganized
from a corporation to a limited partnership. Both prior to and
after the reorganization, ultimate control of MLAM was vested with
Merrill Lynch & Co., Inc. ("ML & Co."). The general partner of
MLAM is Princeton Services, Inc., an indirect wholly-owned sub-
sidiary of ML & Co. The limited partners are ML & Co. and Merrill
Lynch Investment Management, Inc. ("MLIM"), which is also an in-
direct wholly-owned subsidiary of ML & Co. The Fund has also
entered into a Distribution Agreement and a Distribution Plan
with Merrill Lynch Funds Distributor, Inc. ("MLFD" or "Distri-
butor"), a wholly-owned subsidiary of MLIM.
MLAM is responsible for the management of the Fund's portfolio
and provides the necessary personnel, 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 million but not exceeding $1.5 billion; 0.55% of the av-
erage 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 an-
nual 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 extraor-
dinary items) exceed 2.5% of the Fund's first $30 million of av-
erage 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 fis-
cal year which will cause such expenses to exceed the most restric-
tive expense limitation applicable at the time of such payment.
Pursuant to a Distribution Plan (the "Distribution Plan") adopted
by the Fund in accordance with Rule 12b-1 under the Investment
Company Act of 1940, the Fund pays the Distributor an ongoing
account maintenance fee and distribution fee, which are accrued
daily and paid monthly at the annual rates 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 Dis-
tributor, Merrill Lynch provides account maintenance and distri-
bution services to the Fund with respect to Class B Shares. As
authorized by the Plan, the Distributor has entered into an agree-
ment with Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S"),
which provides for the compensation of MLPF&S for providing dis-
tribution-related services to the Fund.
For the six months ended March 31, 1994, MLFD earned under-
writing discounts of $2,294, and MLPF&S received dealer con-
cessions of $35,241 on sales of the Fund's Class A Shares.
MLPF&S received contingent deferred sales charges of $78,329
relating to transactions in Class B Shares and $53,670 in com-
missions on the execution of portfolio security transactions
for the Fund during the period.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary
of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
76
<PAGE>
Certain officers and/or directors of the Fund are officers and/
or directors of MLIM, MLPF&S, FDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securi-
ties, for the six months ended March 31, 1994 were $250,984,195
and $344,304,826, respectively.
Net realized and unrealized gains (losses) as of March 31, 1994
were as follows:
Unrealized
Realized Gains
Gains (Losses)
Long-term investments $ 61,211,346 $ 38,598,510
Options written 21,243 --
Foreign currency
transactions 947,143 (4,886)
------------ ------------
Total $ 62,179,732 $ 38,593,624
============ ============
As of March 31, 1994, net unrealized appreciation for Federal in-
come tax purposes aggregated $38,598,510, of which $75,149,692 re-
lated to appreciated securities and $36,551,182 related to de-
preciated securities. The aggregate cost of investments less premiums
received for options written, at March 31, 1994 for Federal income
tax purposes was $749,670,338.
Transactions in call options written for the six months ended
March 31, 1994 were as follows:
Par Value/Shares
Covered by Premiums
Written Options Received
Outstanding options at
beginning of period -- --
Options written 25,800 $ 38,999
Options closed (10,400) (10,154)
Options exercised (1,800) (15,010)
Options expired (13,600) (13,835)
------------ ------------
Outstanding options at
end of period -- $ --
============ ============
4. Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share
transactions was $15,692,257 for the six months ended March 31,
1994 and ($69,858,642) for the year ended September 30, 1993, re-
spectively.
Transactions in capital shares for Class A and Class B
Shares were as follows:
Class A Shares for the Six Months Dollar
Ended March 31, 1994 Shares Amount
Shares sold 1,016,163 $ 12,847,884
Shares issued to sharehold-
ers in reinvestment of
dividends and distributions 376,995 4,535,252
------------ -------------
Total issued 1,393,158 17,383,136
Shares redeemed (1,077,993) (13,288,826)
------------ -------------
Net increase 315,165 $ 4,094,310
============ =============
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 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 B Shares for the Six Months Dollar
Ended March 31, 1994 Shares Amount
Shares sold 1,673,591 $ 21,175,801
Shares issued to sharehold-
ers in reinvestment of
dividends and distributions 5,798,154 70,389,583
------------ -------------
Total issued 7,471,745 91,565,384
Shares redeemed (6,265,393) (79,967,437)
------------ -------------
Net increase 1,206,352 $ 11,597,947
============ =============
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 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)
============ =============
5. Loan Securities:
At March 31, 1994, the Fund held US Treasury Bonds having an aggregate
value of approximately $5,300,000 as collateral for portfolio securities
loaned having a market value of approximately $4,030,000.
6. Commitments:
At March 31, 1994, the Fund had entered into forward exchange contracts
under which it had agreed to sell various foreign currencies with approx-
imate values of $765,000.
77
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objective and Policies.......................................... 2
Management of the Fund..................................................... 2
Purchase of Shares......................................................... 5
Initial Sales Charge Alternatives--
Class A and Class D Shares............................................... 6
Reduced Initial Sales Charges............................................. 6
Distribution Plans........................................................ 10
Limitations on the Payment of Deferred Sales Charges...................... 11
Redemption of Shares....................................................... 12
Deferred Sales Charges--
Class B Shares........................................................... 12
Determination of Net Asset Value........................................... 14
Shareholder Services....................................................... 14
Investment Account........................................................ 14
Automatic Investment Plans................................................ 15
Automatic Reinvestment of Dividends and Capital Gains Distributions....... 15
Systematic Withdrawal Plans--
Class A and Class D Shares............................................... 16
Retirement Plans.......................................................... 17
Exchange Privilege........................................................ 17
Dividends, Distributions and Taxes......................................... 29
Dividends and Distributions............................................... 29
Taxes..................................................................... 29
Performance Data........................................................... 32
Investment Practices and Restrictions...................................... 34
Portfolio Strategies Involving Options and Funds.......................... 34
Other Investment Policies and Practices................................... 39
General Information........................................................ 47
Description of Shares..................................................... 47
Computation of Offering Price Per Share................................... 47
Independent Auditors...................................................... 48
Custodian................................................................. 48
Transfer Agent............................................................ 48
Legal Counsel............................................................. 48
Reports to Shareholders................................................... 48
Additional Information.................................................... 48
Independent Auditors' Report............................................... 49
Financial Statements....................................................... 50
Financial Statements (unaudited)........................................... 63
</TABLE>
Code #10332-1094
Merrill Lynch
(ART)
- --------------------------------------------------------------------------------
MERRILL LYNCH
BALANCED FUND
FOR INVESTMENT AND RETIREMENT
Statement of Additional Information
October 21, 1994
Distributor; Merrill Lynch Funds Distributor, Inc.
<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 (audited) and for the six months ended March
31, 1994 (unaudited).
(2) Financial Statements included in Part B, the Statement of Additional
Information:
Schedule of Investments as of 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.
Schedule of Investments as of March 31, 1994 (unaudited).
Statement of Assets and Liabilities as of March 31, 1994
(unaudited).
Statement of Operations for the Six Months Ended March 31, 1994
(unaudited).
Statements of Changes in Net Assets for the Six Months Ended March
31, 1994 (unaudited) and the Year Ended September 30, 1993.
Financial Highlights for each of the periods in the Four Years Ended
September 30, 1993 and the Six Months Ended March 31, 1994
(unaudited).
(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.
(6)(C) --Form of Class A Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc.
(6)(D) --Form of Class C Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc.
(6)(E) --Form of Class D 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.)
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
(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 llp, 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.
(15)(A)*** --Amended and Restated Class B Plan of Distribution pursuant to
Rule 12b-1 under the Investment Company Act of 1940.
(15)(B) --Form of Class C Distribution Plan and Class C Distribution
Plan Sub-Agreement.
(15)(C) --Form of Class D Distribution Plan and Class D Distribution
Plan Sub-Agreement.
(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)(A) --Financial Data Schedule for Class A shares.
(17)(B) --Financial Data Schedule for Class B shares.
(18)(degrees) --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.
+++ Incorporated by reference to the identically numbered Exhibit to Post-
Effective Amendment No. 11 to the Registration Statement (File No. 2-
91329).
(degrees)
Incorporated by reference to Exhibit 17 to Post-Effective Amendment No. 11
to the Registration Statement (File No. 2-91329).
C-2
<PAGE>
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 SEPTEMBER 30, 1994
-------------- ------------------
<S> <C>
Class A Common Stock, par value $.01 per share.......... 17
Class B Common Stock, par value $.01 per share.......... 1,985
Class C Common Stock, par value $.01 per share.......... 0
Class D Common Stock, par value $.01 per share.......... 0
</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 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.
C-3
<PAGE>
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,
Inc., Merrill Lynch Asset Growth Fund, Inc., Merrill Lynch Asset Income Fund,
Inc., Merrill Lynch Balanced Fund for Investment and Retirement, Merrill Lynch
Capital Fund, Inc., Merrill Lynch Developing Capital Markets Fund, Inc.,
Merrill Lynch Dragon Fund, Inc., Merrill Lynch EuroFund, Merrill Lynch
Fundamental Growth Fund, Inc., Merrill Lynch Fund For Tomorrow, Inc., Merrill
Lynch Global 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 Resources Trust, Merrill
Lynch Global SmallCap Fund, Inc., Merrill Lynch Global Utility Fund, Inc.,
Merrill Lynch Growth Fund for Investment and Retirement, Merrill Lynch
Healthcare Fund, Inc., Merrill Lynch High Income Municipal Bond Fund, Inc.,
Merrill Lynch Institutional Intermediate Fund, Merrill Lynch International
Equity Fund, Merrill Lynch Latin America Fund, Inc., Merrill Lynch Municipal
Series Trust, Merrill Lynch Pacific Fund, Inc., Merrill Lynch Ready Assets
Trust, Merrill Lynch Retirement Series Trust, Merrill Lynch Senior Floating
Rate Fund, Inc., Merrill Lynch Series Fund, Inc., Merrill Lynch Short-Term
Global Income Fund, Inc., Merrill Lynch Strategic Dividend Fund, Merrill Lynch
Technology Fund, Inc., Merrill Lynch U.S. Treasury Money Fund, Merrill Lynch
U.S.A. Government Reserves, Merrill Lynch Utility Income Fund, Inc. and
Merrill Lynch Variable Series Funds, Inc. Fund Asset Management, L.P. ("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 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
C-4
<PAGE>
Fund, MuniYield Quality Fund, Inc., MuniYield Quality Fund II, Inc., Emerging
Tigers Fund, Inc., Senior High Income Portfolio, Inc., Senior High Income
Portfolio II, Inc., Senior Strategic Income Fund, Inc., Taurus MuniCalifornia
Holdings, Inc., Taurus MuniNewYork Holdings, Inc. and Worldwide DollarVest
Fund, Inc. The address of each of these investment companies is P.O. Box 9011,
Princeton, New Jersey 08543-9011, except that the address of Merrill Lynch
Funds for Institutions Series and Merrill Lynch Institutional Intermediate Fund
is One Financial Center, 15th Floor, Boston, Massachusetts 02111-2646. The
address of MLAM, FAM, Princeton Services, Inc. ("Princeton Services"), Merrill
Lynch Funds Distributor, Inc. and Princeton Administrators, L.P. is also P.O.
Box 9011, Princeton, New Jersey 08543-9011. The address of Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and Merrill Lynch & Co.,
Inc. ("ML & Co.") is World Financial Center, North Tower, 250 Vesey Street, New
York, New York 10281. The address of Financial Data Services, Inc. ("FDS") is
4800 Deer Lake Drive East, Jacksonville, Florida 32246-6484.
Set forth below is a list of each executive officer and partner of the
Investment Adviser indicating each business, profession, vocation or employment
of a substantial nature in which each such person or entity has been engaged
since July 1, 1992, 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, Kirstein, Monagle and Ms. Griffin are
directors or officers of one or more of such companies.
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,
Inc. .................. General Partner General Partner of FAM
("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
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL BUSINESS,
NAME POSITION WITH THE INVESTMENT ADVISER PROFESSION, VOCATION OR EMPLOYMENT
---- ------------------------------------ ----------------------------------
<C> <C> <S>
Ronald M. Kloss......... Senior Vice President Senior Vice President and Controller of
and Controller FAM; Senior Vice President and Controller
of Princeton Services
Stephen M.M. Miller..... Senior Vice President Executive Vice President of Princeton
Administrators, L.P.
Joseph T. Monagle, Jr. . Senior Vice President Senior Vice President of FAM; Senior Vice
President of Princeton Services
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>
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., Taurus MuniNewYork Holdings,
Inc. and Worldwide DollarVest Fund, Inc.
C-6
<PAGE>
(b) Set forth below is information concerning each director and officer of
MLFD. The principal business address of each such person is P.O. Box 9011,
Princeton, New Jersey 08543-9011, except that the address of Messrs. 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
Kevin P. Boman............. 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
Lisa Gobora................ Assistant Vice President None
Susan Kibler............... Assistant Vice President None
Mark A. Maguire............ Assistant Vice President None
Richard Romm............... Assistant Vice President None
Patricia A. Schena......... Assistant 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, as amended, and the Rules
thereunder will be maintained at the offices of the Registrant and its
Custodian and Transfer Agent, FDS, 4800 Deer Lake Drive East, Jacksonville,
Florida 32246-6484.
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.
(a) Not applicable.
(b) Not applicable.
(c) 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 POST-EFFECTIVE AMENDMENT TO THE
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 11TH DAY OF OCTOBER,
1994.
Merrill Lynch Retirement Benefit
Investment Program, Inc.
By /s/ Arthur Zeikel
-----------------------------------
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
---------- ----- ----
/s/ Arthur Zeikel President and October 11, 1994
- ------------------------------------- Director (Principal
(ARTHUR ZEIKEL) Executive Officer)
/s/ Gerald M. Richard Treasurer (Principal October 11, 1994
- ------------------------------------- Financial and
(GERALD M. RICHARD) Accounting Officer)
* Director
- -------------------------------------
(KENNETH S. AXELSON)
* Director
- -------------------------------------
(HERBERT I. LONDON)
* Director
- -------------------------------------
(ROBERT R. MARTIN)
* Director
- -------------------------------------
(JOSEPH L. MAY)
* Director
- -------------------------------------
(ANDRE F. PEROLD)
- --------
* This Amendment has been signed by
each of the persons so indicated
by the undersigned as Attorney-in-
Fact.
*By /s/ Arthur Zeikel October 11, 1994
----------------------------------
(ARTHUR ZEIKEL, ATTORNEY-IN-FACT)
C-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER NUMBER
------- ------
<C> <S> <C>
(6)(C) --Form of Class A Distribution Agreement between Registrant
and Merrill Lynch Funds Distributor, Inc.
(6)(D) --Form of Class C Distribution Agreement between Registrant
and Merrill Lynch Funds Distributor, Inc.
(6)(E) --Form of Class D Distribution Agreement between Registrant
and Merrill Lynch Funds Distributor, Inc.
(11) --Consent of Deloitte & Touche LLP, independent auditors for
Registrant
(15)(B) --Form of Class C Distribution Plan and Class C Distribution
Plan Sub-Agreement
(15)(C) --Form of Class D Distribution Plan and Class D Distribution
Plan Sub-Agreement
(27)(A) --Financial Data Schedule for Class A shares
(27)(B) --Financial Data Schedule for Class B shares
</TABLE>
<PAGE>
GRAPHICS APPENDIX LIST
PAGE WHERE
GRAPHIC
APPEARS DESCRIPTION OF GRAPHIC OR CROSS REFERENCE
- --------------------------------------------------------------------------------
Back cover of Prospectus and Compass plate, circular
back cover of Statement of graph paper and Merrill Lynch
Additional information logo including stylized market bull
- --------------------------------------------------------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NAME> CLASS A
<NUMBER> 1
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> SEP-30-1993 SEP-30-1994
<PERIOD-START> OCT-01-1992 OCT-01-1993
<PERIOD-END> SEP-30-1993 MAR-31-1994
<INVESTMENTS-AT-COST> 749,833,130 749,670,338
<INVESTMENTS-AT-VALUE> 855,917,544 788,268,848
<RECEIVABLES> 19,298,540 21,857,186
<ASSETS-OTHER> 252,750 146,891
<OTHER-ITEMS-ASSETS> 0 0
<TOTAL-ASSETS> 875,468,834 810,272,925
<PAYABLE-FOR-SECURITIES> 0 5,024,240
<SENIOR-LONG-TERM-DEBT> 0 0
<OTHER-ITEMS-LIABILITIES> 3,825,926 4,808,579
<TOTAL-LIABILITIES> 3,825,926 9,832,819
<SENIOR-EQUITY> 0 0
<PAID-IN-CAPITAL-COMMON> 687,887,484 703,579,741
<SHARES-COMMON-STOCK> 3,126,077 3,441,241
<SHARES-COMMON-PRIOR> 1,616,923 3,126,077
<ACCUMULATED-NII-CURRENT> 4,746,266 2,421,693
<OVERDISTRIBUTION-NII> 0 0
<ACCUMULATED-NET-GAINS> 72,960,816 55,845,048
<OVERDISTRIBUTION-GAINS> 0 0
<ACCUM-APPREC-OR-DEPREC> 106,048,342 38,593,624
<NET-ASSETS> 40,688,322 40,175,446
<DIVIDEND-INCOME> 10,955,111 2,886,327
<INTEREST-INCOME> 21,852,613 10,813,618
<OTHER-INCOME> 0 0
<EXPENSES-NET> 16,236,866 7,608,117
<NET-INVESTMENT-INCOME> 16,570,858 6,091,828
<REALIZED-GAINS-CURRENT> 82,929,610 62,179,732
<APPREC-INCREASE-CURRENT> 14,121,027 (67,454,718)
<NET-CHANGE-FROM-OPS> 113,621,495 816,842
<EQUALIZATION> 0 0
<DISTRIBUTIONS-OF-INCOME> 994,119 656,642
<DISTRIBUTIONS-OF-GAINS> 1,508,643 4,103,194
<DISTRIBUTIONS-OTHER> 0 0
<NUMBER-OF-SHARES-SOLD> 2,695,028 1,016,163
<NUMBER-OF-SHARES-REDEEMED> 1,346,924 1,077,993
<SHARES-REINVESTED> 161,050 376,995
<NET-CHANGE-IN-ASSETS> (35,597,055) (71,202,802)
<ACCUMULATED-NII-PRIOR> 4,703,668 4,746,266
<ACCUMULATED-GAINS-PRIOR> 52,862,854 72,960,816
<OVERDISTRIB-NII-PRIOR> 0 0
<OVERDIST-NET-GAINS-PRIOR> 0 0
<GROSS-ADVISORY-FEES> 5,620,993 2,716,119
<INTEREST-EXPENSE> 0 0
<GROSS-EXPENSE> 16,236,866 7,608,117
<AVERAGE-NET-ASSETS> 36,391,513 45,193,917
<PER-SHARE-NAV-BEGIN> 12.57 13.02
<PER-SHARE-NII> .47 .17
<PER-SHARE-GAIN-APPREC> 1.25 (.09)
<PER-SHARE-DIVIDEND> .39 .20
<PER-SHARE-DISTRIBUTIONS> .88 1.23
<RETURNS-OF-CAPITAL> 0 0
<PER-SHARE-NAV-END> 13.02 11.67
<EXPENSE-RATIO> .83 .79
<AVG-DEBT-OUTSTANDING> 0 0
<AVG-DEBT-PER-SHARE> 0 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NAME> CLASS B
<NUMBER> 2
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> SEP-30-1993 SEP-30-1994
<PERIOD-START> OCT-01-1992 OCT-01-1993
<PERIOD-END> SEP-30-1993 MAR-31-1994
<INVESTMENTS-AT-COST> 749,833,130 749,670,338
<INVESTMENTS-AT-VALUE> 855,917,544 788,268,848
<RECEIVABLES> 19,298,540 21,857,186
<ASSETS-OTHER> 252,750 146,891
<OTHER-ITEMS-ASSETS> 0 0
<TOTAL-ASSETS> 875,468,834 810,272,925
<PAYABLE-FOR-SECURITIES> 0 5,024,240
<SENIOR-LONG-TERM-DEBT> 0 0
<OTHER-ITEMS-LIABILITIES> 3,825,926 4,808,579
<TOTAL-LIABILITIES> 3,825,926 9,832,819
<SENIOR-EQUITY> 0 0
<PAID-IN-CAPITAL-COMMON> 687,887,484 703,579,741
<SHARES-COMMON-STOCK> 3,126,077 64,695,953
<SHARES-COMMON-PRIOR> 1,616,923 63,489,601
<ACCUMULATED-NII-CURRENT> 4,746,266 2,421,693
<OVERDISTRIBUTION-NII> 0 0
<ACCUMULATED-NET-GAINS> 72,960,816 55,845,048
<OVERDISTRIBUTION-GAINS> 0 0
<ACCUM-APPREC-OR-DEPREC> 106,048,342 38,593,624
<NET-ASSETS> 40,688,322 760,264,660
<DIVIDEND-INCOME> 10,955,111 2,886,327
<INTEREST-INCOME> 21,852,613 10,813,618
<OTHER-INCOME> 0 0
<EXPENSES-NET> 16,236,866 7,608,117
<NET-INVESTMENT-INCOME> 16,570,858 6,091,828
<REALIZED-GAINS-CURRENT> 82,929,610 62,179,732
<APPREC-INCREASE-CURRENT> 14,121,027 (67,454,718)
<NET-CHANGE-FROM-OPS> 113,621,495 816,842
<EQUALIZATION> 0 0
<DISTRIBUTIONS-OF-INCOME> 994,119 7,759,759
<DISTRIBUTIONS-OF-GAINS> 1,508,643 75,192,306
<DISTRIBUTIONS-OTHER> 0 0
<NUMBER-OF-SHARES-SOLD> 3,695,028 1,673,591
<NUMBER-OF-SHARES-REDEEMED> 1,346,924 6,265,393
<SHARES-REINVESTED> 161,050 5,798,154
<NET-CHANGE-IN-ASSETS> (35,597,055) (71,202,802)
<ACCUMULATED-NII-PRIOR> 4,703,668 4,746,266
<ACCUMULATED-GAINS-PRIOR> 52,862,854 72,960,816
<OVERDISTRIB-NII-PRIOR> 0 0
<OVERDIST-NET-GAINS-PRIOR> 0 0
<GROSS-ADVISORY-FEES> 5,620,993 2,716,119
<INTEREST-EXPENSE> 0 0
<GROSS-EXPENSE> 16,236,866 7,608,117
<AVERAGE-NET-ASSETS> 36,391,513 820,999,833
<PER-SHARE-NAV-BEGIN> 12.57 13.09
<PER-SHARE-NII> .47 .09
<PER-SHARE-GAIN-APPREC> 1.25 (.07)
<PER-SHARE-DIVIDEND> .39 .13
<PER-SHARE-DISTRIBUTIONS> .88 1.23
<RETURNS-OF-CAPITAL> 0 0
<PER-SHARE-NAV-END> 13.02 11.75
<EXPENSE-RATIO> .83 1.81
<AVG-DEBT-OUTSTANDING> 0 0
<AVG-DEBT-PER-SHARE> 0 0
</TABLE>
<PAGE>
EXHIBIT 99.6(C)
CLASS A SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the ____ day of October 1994 between MERRILL LYNCH
RETIREMENT BENEFIT INVESTMENT PROGRAM, INC., doing business as MERRILL LYNCH
BALANCED FUND FOR INVESTMENT AND RETIREMENT, a Maryland corporation (the
"Fund"), and MERRILL LYNCH FUNDS DISTRIBUTOR, INC., a Delaware corporation (the
"Distributor").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), as an open-end investment company,
and it is affirmatively in the interest of the Fund to offer its shares for sale
continuously; and
WHEREAS, the Distributor is a securities firm engaged in the business of
selling shares of investment companies either directly to purchasers or through
other securities dealers; and
WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the Class A shares of
common stock in the Fund.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Fund hereby appoints the
------------------------------
Distributor as the principal underwriter and distri-
<PAGE>
butor of the Fund to sell Class A shares of common stock in the Fund (sometimes
herein referred to as "Class A shares") to eligible investors (as defined below)
and hereby agrees during the term of this Agreement to sell Class A shares of
the Fund to the Distributor upon the terms and conditions herein set forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the
--------------------------
exclusive representative of the Fund to act as principal underwriter and
distributor, except that:
(a) The Fund may, upon written notice to the Distributor, from time to
time designate other principal underwriters and distributors of Class A shares
with respect to areas other than the United States as to which the Distributor
may have expressly waived in writing its right to act as such. If such
designation is deemed exclusive, the right of the Distributor under this
Agreement to sell Class A shares in the areas so designated shall terminate, but
this Agreement shall remain otherwise in full effect until terminated in
accordance with the other provisions hereof.
(b) The exclusive right granted to the Distributor to purchase Class A
shares from the Fund shall not apply to Class A shares issued in connection with
the merger or consolidation of any other investment company or personal holding
company with the Fund or the acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding Class A shares of any such
company by the Fund.
2
<PAGE>
(c) Such exclusive right also shall not apply to Class A shares issued by
the Fund pursuant to reinvestment of dividends or capital gains distributions.
(d) Such exclusive right also shall not apply to Class A shares issued by
the Fund pursuant to any conversion, exchange or reinstatement privilege
afforded redeeming shareholders or to any other Class A shares as shall be
agreed between the Fund and the Distributor from time to time.
Section 3. Purchase of Class A shares from the Fund.
----------------------------------------
(a) The Distributor shall have the right to buy from the Fund the Class A
shares needed, but not more than the Class A shares needed (except for clerical
errors in transmission) to fill unconditional orders for Class A shares of the
Fund placed with the Distributor by eligible investors or securities dealers.
Investors eligible to purchase Class A shares shall be those persons so
identified in the currently effective prospectus and statement of additional
information of the Fund (the "prospectus" and "statement of additional
information", respectively) under the Securities Act of 1933, as amended (the
"Securities Act"), relating to such Class A shares ("eligible investors"). The
price which the Distributor shall pay for the Class A shares so purchased from
the Fund shall be the net asset value, determined as set forth in Section 3(d)
hereof, used in determining the public offering price on which such orders were
based.
(b) The Class A shares are to be resold by the Distributor to eligible
investors at the public offering price, as set forth
3
<PAGE>
in Section 3(c) hereof, or to securities dealers having agreements with the
Distributor upon the terms and conditions set forth in Section 7 hereof.
(c) The public offering price(s) of the Class A shares, i.e., the price
- -
per share at which the Distributor or selected dealers may sell Class A shares
to eligible investors, shall be the public offering price as set forth in the
prospectus and statement of additional information relating to such Class A
shares, but not to exceed the net asset value at which the Distributor is to
purchase the Class A shares, plus a sales charge not to exceed 5.25% of the
public offering price (5.54% of the net amount invested), subject to reductions
for volume purchases. Class A shares may be sold to certain Directors, officers
and employees of the Fund, directors and employees of Merrill Lynch & Co., Inc.
and its subsidiaries, and to certain other persons described in the prospectus
and statement of additional information, without a sales charge or at a reduced
sales charge, upon terms and conditions set forth in the prospectus and
statement of additional information. If the public offering price does not
equal an even cent, the public offering price may be adjusted to the nearest
cent. All payments to the Fund hereunder shall be made in the manner set forth
in Section 3(f).
(d) The net asset value of Class A shares shall be determined by the Fund
or any agent of the Fund in accordance with the method set forth in the
prospectus and statement of additional
4
<PAGE>
information of the Fund and guidelines established by the Directors.
(e) The Fund shall have the right to suspend the sale of its Class A
shares at times when redemption is suspended pursuant to the conditions set
forth in Section 4(b) hereof. The Fund shall also have the right to suspend the
sale of its Class A shares if trading on the New York Stock Exchange shall have
been suspended, if a banking moratorium shall have been declared by Federal or
New York authorities, or if there shall have been some other event, which, in
the judgment of the Fund, makes it impracticable or inadvisable to sell the
Class A shares.
(f) The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Class A shares received by
the Distributor. Any order may be rejected by the Fund; provided, however, that
the Fund will not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Class A shares from eligible investors. The
Fund (or its agent) will confirm orders upon their receipt, will make
appropriate book entries and, upon receipt by the Fund (or its agent) of payment
therefor, will deliver deposit receipts or certificates for such Class A shares
pursuant to the instructions of the Distributor. Payment shall be made to the
Fund in New York Clearing House funds. The Distributor agrees to cause such
payment and such instructions to be delivered promptly to the Fund (or its
agent).
5
<PAGE>
Section 4. Repurchase or Redemption of Class A shares by the Fund.
------------------------------------------------------
(a) Any of the outstanding Class A shares may be tendered for redemption
at any time, and the Fund agrees to repurchase or redeem the Class A shares so
tendered in accordance with its obligations as set forth in Article VII of its
Articles of Incorporation, as amended from time to time, and in accordance with
the applicable provisions set forth in the prospectus and statement of
additional information. The price to be paid to redeem or repurchase the Class
A shares shall be equal to the net asset value calculated in accordance with the
provisions of Section 3(d) hereof, less any contingent deferred sales charge
("CDSC"), redemption fee or other charge(s), if any, set forth in the prospectus
and statement of additional information of the Fund. All payments by the Fund
hereunder shall be made in the manner set forth below. The redemption or
repurchase by the Fund of any of the Class A shares purchased by or through the
Distributor will not affect the sales charge secured by the Distributor or any
selected dealer in the course of the original sale, except that if any Class A
shares are tendered for redemption or repurchase within seven business days
after the date of the confirmation of the original purchase, the right to the
sales charge shall be forfeited by the Distributor and the selected dealer which
sold such Class A shares.
The Fund shall pay the total amount of the redemption price as defined in
the above paragraph pursuant to the instructions of
6
<PAGE>
the Distributor in New York Clearing House funds on or before the seventh
business day subsequent to its having received the notice of redemption in
proper form. The proceeds of any redemption of shares shall be paid by the Fund
as follows: (i) any applicable CDSC shall be paid to the Distributor, and (ii)
the balance shall be paid to or for the account of the shareholder, in each case
in accordance with the applicable provisions of the prospectus and statement of
additional information.
(b) Redemption of Class A shares or payment may be suspended at times when
the New York Stock Exchange is closed, when trading on said Exchange is
suspended, when trading on said Exchange is restricted, when an emergency exists
as a result of which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Fund fairly
to determine the value of its net assets, or during any other period when the
Securities and Exchange Commission, by order, so permits.
Section 5. Duties of the Fund.
------------------
(a) The Fund shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Class A shares of the
Fund, and this shall include, upon request by the Distributor, one certified
copy of all financial statements prepared for the Fund by independent public
accountants. The Fund shall make available to the Distributor
7
<PAGE>
such number of copies of the prospectus and statement of additional information
as the Distributor shall reasonably request.
(b) The Fund shall take, from time to time, but subject to any necessary
approval of the Class A shareholders, all necessary action to fix the number of
authorized Class A shares and such steps as may be necessary to register the
same under the Securities Act, to the end that there will be available for sale
such number of Class A shares as the Distributor may reasonably be expected to
sell.
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Class A shares for sale under the
securities laws of such states as the Distributor and the Fund may approve. Any
such qualification may be withheld, terminated or withdrawn by the Fund at any
time in its discretion. As provided in Section 8(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Fund. The
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Fund in connection with such
qualification.
(d) The Fund will furnish, in reasonable quantities upon request by the
Distributor, copies of annual and interim reports of the Fund.
Section 6. Duties of the Distributor.
-------------------------
(a) The Distributor shall devote reasonable time and effort to effect
sales of Class A shares of the Fund but shall not be obligated to sell any
specific number of Class A shares. The
8
<PAGE>
services of the Distributor to the Fund hereunder are not to be deemed exclusive
and nothing herein contained shall prevent the Distributor from entering into
like arrangements with other investment companies so long as the performance of
its obligations hereunder is not impaired thereby.
(b) In selling the Class A shares of the Fund, the Distributor shall use
its best efforts in all respects duly to conform with the requirements of all
Federal and state laws relating to the sale of such securities. Neither the
Distributor nor any selected dealer, as defined in Section 7 hereof, nor any
other person is authorized by the Fund to give any information or to make any
representations, other than those contained in the registration statement or
related prospectus and statement of additional information and any sales
literature specifically approved by the Fund.
(c) The Distributor shall adopt and follow procedures, as approved by the
officers of the Fund, for the confirmation of sales to eligible investors and
selected dealers, the collection of amounts payable by eligible investors and
selected dealers on such sales, and the cancellation of unsettled transactions,
as may be necessary to comply with the requirements of the National Association
of Securities Dealers, Inc. (the "NASD"), as such requirements may from time to
time exist.
Section 7. Selected Dealers Agreements.
---------------------------
(a) The Distributor shall have the right to enter into selected dealers
agreements with securities dealers of its choice
9
<PAGE>
("selected dealers") for the sale of Class A shares and fix therein the portion
of the sales charge which may be allocated to the selected dealers; provided
that the Fund shall approve the forms of agreements with dealers and the dealer
compensation set forth therein. Class A shares sold to selected dealers shall
be for resale by such dealers only at the public offering price(s) set forth in
the prospectus and statement of additional information. The form of agreement
with selected dealers to be used during the continuous offering of the Class A
shares is attached hereto as Exhibit A.
(b) Within the United States, the Distributor shall offer and sell Class A
shares only to such selected dealers as are members in good standing of the
NASD.
Section 8. Payment of Expenses.
-------------------
(a) The Fund shall bear all costs and expenses of the Fund, including fees
and disbursements of its counsel and auditors, in connection with the
preparation and filing of any required registration statements and/or
prospectuses and statements of additional information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy materials to Class A
shareholders (including but not limited to the expense of setting in type any
such registration statements, prospectuses, statements of additional
information, annual or interim reports or proxy materials).
10
<PAGE>
(b) The Distributor shall be responsible for any payments made to selected
dealers as reimbursement for their expenses associated with payments of sales
commissions to financial consultants. In addition, after the prospectuses,
statements of additional information and annual and interim reports have been
prepared and set in type, the Distributor shall bear the costs and expenses of
printing and distributing any copies thereof which are to be used in connection
with the offering of Class A shares to selected dealers or eligible investors
pursuant to this Agreement. The Distributor shall bear the costs and expenses
of preparing, printing and distributing any other literature used by the
Distributor or furnished by it for use by selected dealers in connection with
the offering of the Class A shares for sale to eligible investors and any
expenses of advertising incurred by the Distributor in connection with such
offering.
(c) The Fund shall bear the cost and expenses of qualification of the
Class A shares for sale pursuant to this Agreement and, if necessary or
advisable in connection therewith, of qualifying the Fund as a broker or dealer
in such states of the United States or other jurisdictions as shall be selected
by the Fund and the Distributor pursuant to Section 5(c) hereof and the cost and
expenses payable to each such state for continuing qualification therein until
the Fund decides to discontinue such qualification pursuant to Section 5(c)
hereof.
11
<PAGE>
Section 9. Indemnification.
---------------
(a) The Fund shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith), as incurred, arising by reason of any
person acquiring any Class A shares, which may be based upon the Securities Act,
or on any other statute or at common law, on the ground that the registration
statement or related prospectus and statement of additional information, as from
time to time amended and supplemented, or an annual or interim report to
shareholders of the Fund, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Fund in connection therewith by or on behalf of the
Distributor; provided, however, that in no case (i) is the indemnity of the Fund
in favor of the Distributor and any such controlling persons to be deemed to
protect such Distributor or any such controlling persons thereof against any
liability to the Fund or its security holders to which the Distributor or any
such controlling persons would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of their duties or
by reason of the reckless disregard
12
<PAGE>
of their obligations and duties under this Agreement; or (ii) is the Fund to be
liable under its indemnity agreement contained in this paragraph with respect to
any claim made against the Distributor or any such controlling persons, unless
the Distributor or such controlling persons, as the case may be, shall have
notified the Fund in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall have
been served upon the Distributor or such controlling persons (or after the
Distributor or such controlling persons shall have received notice of such
service on any designated agent), but failure to notify the Fund of any such
claim shall not relieve it from any liability which it may have to the person
against whom such action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. The Fund will be entitled to participate
at its own expense in the defense or, if it so elects, to assume the defense of
any suit brought to enforce any such liability, but if the Fund elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Distributor or such controlling person or persons, defendant
or defendants in the suit. In the event the Fund elects to assume the defense
of any such suit and retain such counsel, the Distributor or such controlling
person or persons, defendant or defendants in the suit shall bear the fees and
expenses of any additional counsel retained by them, but in case the Fund does
not elect to assume the defense of any such suit, it will reim-
13
<PAGE>
burse the Distributor or such controlling person or persons, defendant or
defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Fund shall promptly notify the Distributor of the
commencement of any litigation or proceedings against it or any of its officers
or Directors in connection with the issuance or sale of any of the Class A
shares.
(b) The Distributor shall indemnify and hold harmless the Fund and each of
its Directors and officers and each person, if any, who controls the Fund
against any loss, liability, claim, damage or expense described in the foregoing
indemnity contained in subsection (a) of this Section, but only with respect to
statements or omissions made in reliance upon, and in conformity with,
information furnished to the Fund in writing by or on behalf of the Distributor
for use in connection with the registration statement or related prospectus and
statement of additional information, as from time to time amended, or the annual
or interim reports to Class A shareholders. In case any action shall be brought
against the Fund or any person so indemnified, in respect of which indemnity may
be sought against the Distributor, the Distributor shall have the rights and
duties given to the Fund, and the Fund and each person so indemnified shall have
the rights and duties given to the Distributor by the provisions of subsection
(a) of this Section 9.
Section 10. Merrill Lynch Mutual Fund Advisor Program. In connection with
------------------------------------------
the Merrill Lynch Mutual Fund Adviser Program,
14
<PAGE>
the Distributor and its affiliate, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, are authorized to offer and sell shares of the Fund, as agent for
the Fund, to participants in such program. The terms of this Agreement shall
apply to such sales, including terms as to the offering price of shares, the
proceeds to be paid to the Fund, the duties of the Distributor, the payment of
expenses and indemnification obligations of the Fund and the Distributor.
Section 11. Duration and Termination of this Agreement. This Agreement
------------------------------------------
shall become effective as of the date first above written and shall remain in
force until October __, 1995 and thereafter, but only for so long as such
continuance is specifically approved at least annually by (i) the Directors or
by the vote of a majority of the outstanding voting securities of the Fund and
(ii) by the vote of a majority of those Directors who are not parties to this
Agreement or interested persons of any such party cast in person at a meeting
called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Directors or by vote of a majority of the outstanding voting
securities of the Fund, or by the Distributor, on sixty days' written notice to
the other party. This Agreement shall automatically terminate in the event of
its assignment.
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested
15
<PAGE>
person", when used in this Agreement, shall have the respective meanings
specified in the Investment Company Act.
Section 12. Amendments of this Agreement. This Agreement may be amended
----------------------------
by the parties only if such amendment is specifically approved by (i) the
Directors or by the vote of a majority of outstanding voting securities of the
Fund and (ii) by the vote of a majority of those Directors of the Fund who are
not parties to this Agreement or interested persons of any such party cast in
person at a meeting called for the purpose of voting on such approval.
Section 13. Governing Law. The provisions of this Agreement shall be
-------------
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment Company
Act. To the extent that the applicable law of the State of New York, or any of
the provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
Section 14. This Agreement supersedes the prior Distribution Agreement
entered into by the parties hereto with respect to the Class A shares of the
Fund.
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT
PROGRAM, INC., doing business as MERRILL
LYNCH BALANCED FUND FOR INVESTMENT AND
RETIREMENT
By_____________________________________
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By_____________________________________
Title:
17
<PAGE>
EXHIBIT A
MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT PROGRAM, INC.,
doing business as
MERRILL LYNCH BALANCED FUND FOR INVESTMENT AND RETIREMENT
CLASS A SHARES OF COMMON STOCK
SELECTED DEALERS AGREEMENT
--------------------------
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement
with Merrill Lynch Retirement Benefit Investment Program, Inc., doing business
as Merrill Lynch Balanced Fund for Investment and Retirement, a Maryland
corporation (the "Fund"), pursuant to which it acts as the distributor for the
sale of Class A shares of common stock, par value $0.01 per share (herein
referred to as "Class A shares"), of the Fund and as such has the right to
distribute Class A shares of the Fund for resale. The Fund is an open-end
investment company registered under the Investment Company Act of 1940, as
amended, and its Class A shares are registered under the Securities Act of 1933,
as amended. You have received a copy of the Class A shares Distribution
Agreement (the "Distribution Agreement") between ourself and the Fund and
reference is made herein to certain provisions of such Distribution Agreement.
The terms "Prospectus" and "Statement of Additional Information" used herein
refer to the prospectus and statement of additional information, respectively,
on file with the Securities and Exchange Commission which is part of the most
recent effective registration statement pursuant to the Securities Act of 1933,
as amended. We offer to sell to you, as a member of the Selected Dealers Group,
Class A shares of the Fund for resale to investors identified in the Prospectus
and Statement of Additional Information as eligible to purchase Class A shares
("eligible investors") upon the following terms and conditions:
1. In all sales of these Class A shares to eligible investors, you shall
act as dealer for your own account and in no transaction shall you have any
authority to act as agent for the Fund, for us or for any other member of the
Selected Dealers Group, except in connection with the Merrill Lynch Mutual Fund
Adviser program and such other special programs as we from time to time agree,
in which case you shall have authority to offer and sell shares, as agent for
the Fund, to participants in such program.
1
<PAGE>
2. Orders received from you will be accepted through us only at the public
offering price applicable to each order, as set forth in the current Prospectus
and Statement of Additional Information of the Fund. The procedure relating to
the handling of orders shall be subject to Section 5 hereof and instructions
which we or the Fund shall forward from time to time to you. All orders are
subject to acceptance or rejection by the Distributor or the Fund in the sole
discretion of either. The minimum initial and subsequent purchase requirements
are as set forth in the current Prospectus and Statement of Additional
Information of the Fund.
3. The sales charges for sales to eligible investors, computed as
percentages of the public offering price and the amount invested, and the
related discount to Selected Dealers are as follows:
<TABLE>
<CAPTION>
Discount to
Selected
Sales Charge Dealers as
Sales Charge as Percentage* Percentage
as Percentage of the Net of the
of the Amount Offering
Amount of Purchase Offering Price Invested Price
- --------------------------- --------------- --------------- -----------
<S> <C> <C> <C>
Less than $25,000.......... 5.25% 5.54% 5.00%
$25,000 but less
than $50,000.............. 4.75 4.99 4.50
$50,000 but less
than $100,000............. 4.00 4.17 3.75
$100,000 but less
than $250,000............. 3.00 3.09 2.75
$250,000 but less
than $1,000,000........... 2.00 2.04 1.80
$1,000,000 and over**...... 0.00 0.00 0.00
</TABLE>
- ------------------------------
* Rounded to the nearest one-hundredth percent.
** Initial sales charges will be waived for certain classes of offerees as set
forth in the current Prospectus and Statement of Additional Information of the
Fund. Such purchases may be subject to a contingent deferred sales charge as
set forth in the current Prospectus and Statement of Additional Information.
2
<PAGE>
The term "purchase" refers to a single purchase by an individual, or to
concurrent purchases, which in the aggregate are at least equal to the
prescribed amounts, by an individual, his spouse and their children under the
age of 21 years purchasing Class A shares for his or their own account and to
single purchases by a trustee or other fiduciary purchasing Class A shares for a
single trust estate or single fiduciary account although more than one
beneficiary is involved. The term "purchase" also includes purchases by any
"company" as that term is defined in the Investment Company Act of 1940, as
amended, but does not include purchases by any such company which has not been
in existence for at least six months or which has no purpose other than the
purchase of Class A shares of the Fund or Class A shares of other registered
investment companies at a discount; provided, however, that it shall not include
purchases by any group of individuals whose sole organizational nexus is that
the participants therein are credit cardholders of a company, policyholders of
an insurance company, customers of either a bank or broker-dealer or clients of
an investment adviser.
The reduced sales charges are applicable through a right of accumulation under
which certain eligible investors are permitted to purchase Class A shares of the
Fund at the offering price applicable to the total of (a) the public offering
price of the shares then being purchased plus (b) an amount equal to the then
current net asset value or cost, whichever is higher, of the purchaser's
combined holdings of Class A, Class B, Class C and Class D shares of the Fund
and of any other investment company with an initial sales charge for which the
Distributor acts as the distributor. For any such right of accumulation to be
made available, the Distributor must be provided at the time of purchase, by the
purchaser or you, with sufficient information to permit confirmation of
qualification, and acceptance of the purchase order is subject to such
confirmation.
The reduced sales charges are applicable to purchases aggregating $25,000 or
more of Class A shares or of Class D shares of any other investment company with
an initial sales charge for which the Distributor acts as the distributor made
through you within a thirteen-month period starting with the first purchase
pursuant to a Letter of Intention in the form provided in the Prospectus. A
purchase not originally made pursuant to a Letter of Intention may be included
under a subsequent letter executed within 90 days of such purchase if the
Distributor is informed in writing of this intent within such 90-day period. If
the intended amount of shares is not purchased within the thirteen-month period,
an appropriate price adjustment will be made pursuant to the terms of the Letter
of Intention.
3
<PAGE>
You agree to advise us promptly at our request as to amounts of any sales made
by you to eligible investors qualifying for reduced sales charges. Further
information as to the reduced sales charges pursuant to the right of
accumulation or a Letter of Intention is set forth in the Prospectus and
Statement of Additional Information.
4. You shall not place orders for any of the Class A shares unless you have
already received purchase orders for such Class A shares at the applicable
public offering prices and subject to the terms hereof and of the Distribution
Agreement. You agree that you will not offer or sell any of the Class A shares
except under circumstances that will result in compliance with the applicable
Federal and state securities laws and that in connection with sales and offers
to sell Class A shares you will furnish to each person to whom any such sale or
offer is made a copy of the Prospectus and, if requested, the Statement of
Additional Information (as then amended or supplemented) and will not furnish to
any person any information relating to the Class A shares of the Fund which is
inconsistent in any respect with the information contained in the Prospectus and
Statement of Additional Information (as then amended or supplemented) or cause
any advertisement to be published in any newspaper or posted in any public place
without our consent and the consent of the Fund.
5. As a selected dealer, you are hereby authorized (i) to place orders
directly with the Fund for Class A shares of the Fund to be resold by us to you
subject to the applicable terms and conditions governing the placement of orders
by us set forth in Section 3 of the Distribution Agreement and subject to the
compensation provisions of Section 3 hereof and (ii) to tender Class A shares
directly to the Fund or its agent for redemption subject to the applicable terms
and conditions set forth in Section 4 of the Distribution Agreement.
6. You shall not withhold placing orders received from your customers so as
to profit yourself as a result of such withholding: e.g., by a change in the
- -
"net asset value" from that used in determining the offering price to your
customers.
7. If any Class A shares sold to you under the terms of this Agreement are
repurchased by the Fund or by us for the account of the Fund or are tendered for
redemption within seven business days after the date of the confirmation of the
original purchase by you, it is agreed that you shall forfeit your right to, and
refund to us, any discount received by you on such Class A shares.
8. No person is authorized to make any representations concerning Class A
shares of the Fund except those contained in the current Prospectus and
Statement of Additional Information of the
4
<PAGE>
Fund and in such printed information subsequently issued by us or the Fund as
information supplemental to such Prospectus and Statement of Additional
Information. In purchasing Class A shares through us you shall rely solely on
the representations contained in the Prospectus and Statement of Additional
Information and supplemental information above mentioned. Any printed
information which we furnish you other than the Fund's Prospectus, Statement of
Additional Information, periodic reports and proxy solicitation material is our
sole responsibility and not the responsibility of the Fund, and you agree that
the Fund shall have no liability or responsibility to you in these respects
unless expressly assumed in connection therewith.
9. You agree to deliver to each of the purchasers making purchases from you
a copy of the then current Prospectus and, if requested, the Statement of
Additional Information at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain proxies from such purchasers. Additional copies of the
Prospectus and Statement of Additional Information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.
10. We reserve the right in our discretion, without notice, to suspend sales
or withdraw the offering of Class A shares entirely or to certain persons or
entities in a class or classes specified by us. Each party hereto has the right
to cancel this agreement upon notice to the other party.
11. We shall have full authority to take such action as we may deem advisable
in respect of all matters pertaining to the continuous offering. We shall be
under no liability to you except for lack of good faith and for obligations
expressly assumed by us herein. Nothing contained in this paragraph is intended
to operate as, and the provisions of this paragraph shall not in any way
whatsoever constitute, a waiver by you of compliance with any provision of the
Securities Act of 1933, as amended, or of the rules and regulations of the
Securities and Exchange Commission issued thereunder.
12. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
13. Upon application to us, we will inform you as to the states in which we
believe the Class A shares have been qualified for sale under, or are exempt
from the requirements of, the
5
<PAGE>
respective securities laws of such states, but we assume no responsibility or
obligation as to your right to sell Class A shares in any jurisdiction. We will
file with the Department of State in New York a Further State Notice with
respect to the Class A shares, if necessary.
14. All communications to us should be sent to the address below. Any notice
to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
15. Your first order placed pursuant to this Agreement for the purchase of
Class A shares of the Fund will represent your acceptance of this Agreement.
16. This Agreement supersedes any prior Selected Dealers Agreement entered
into by the parties hereto with respect to the Class A shares of the Fund.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
----------------------------------
(Authorized Signature)
Please return one signed copy
of this agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9011
Princeton, New Jersey 08543-9011
Accepted:
Firm Name: Merrill Lynch, Pierce, Fenner & Smith Inc.
--------------------------------------------
By:
---------------------------------------------
Address: 800 Scudders Mill Road
----------------------------------------
Plainsboro, New Jersey 08536
------------------------------------------------
Date: October , 1994
-------------------------------------------
6
<PAGE>
EXHIBIT 99.6(D)
CLASS C SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the ______ day of October 1994, between MERRILL LYNCH
RETIREMENT BENEFIT INVESTMENT PROGRAM, INC., doing business as MERRILL LYNCH
BALANCED FUND FOR INVESTMENT AND RETIREMENT, a Maryland corporation (the
"Fund"), and MERRILL LYNCH FUNDS DISTRIBUTOR, INC., a Delaware corporation (the
"Distributor").
W I T N E S S E T H:
-------------------
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), as an open-end investment company,
and it is affirmatively in the interest of the Fund to offer its shares for sale
continuously; and
WHEREAS, the Distributor is a securities firm engaged in the business of
selling shares of investment companies either directly to purchasers or through
other securities dealers; and
WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the Fund's Class C shares
in order to promote the growth of the Fund and facilitate the distribution of
its Class C shares.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Fund hereby appoints the
------------------------------
Distributor as the principal underwriter and
<PAGE>
distributor of the Fund to sell Class C shares of common stock in the Fund
(sometimes herein referred to as "Class C shares") to the public and hereby
agrees during the term of this Agreement to sell shares of the Fund to the
Distributor upon the terms and conditions herein set forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the
--------------------------
exclusive representative of the Fund to act as principal underwriter and
distributor of the Class C shares, except that:
(a) The Fund may, upon written notice to the Distributor, from time to
time designate other principal underwriters and distributors of Class C shares
with respect to areas other than the United States as to which the Distributor
may have expressly waived in writing its right to act as such. If such
designation is deemed exclusive, the right of the Distributor under this
Agreement to sell Class C shares in the areas so designated shall terminate, but
this Agreement shall remain otherwise in full effect until terminated in
accordance with the other provisions hereof.
(b) The exclusive right granted to the Distributor to purchase Class C
shares from the Fund shall not apply to Class C shares of the Fund issued in
connection with the merger or consolidation of any other investment company or
personal holding company with the Fund or the acquisition by purchase or
otherwise
2
<PAGE>
of all (or substantially all) the assets or the outstanding Class C shares of
any such company by the Fund.
(c) Such exclusive right also shall not apply to Class C shares issued by
the Fund pursuant to reinvestment of dividends or capital gains distributions.
(d) Such exclusive right also shall not apply to Class C shares issued by
the Fund pursuant to any conversion, exchange or reinstatement privilege
afforded redeeming shareholders or to any other Class C shares as shall be
agreed between the Fund and the Distributor from time to time.
Section 3. Purchase of Class C Shares from the Fund.
----------------------------------------
(a) It is contemplated that the Fund will commence an offering of its
Class C shares, and thereafter the Distributor shall have the right to buy from
the Fund the Class C shares needed, but not more than the Class C shares needed
(except for clerical errors in transmission) to fill unconditional orders for
Class C shares of the Fund placed with the Distributor by eligible investors or
securities dealers. Investors eligible to purchase Class C shares shall be
those persons so identified in the currently effective prospectus and statement
of additional information of the Fund (the "prospectus" and "statement of
additional information", respectively) under the Securities Act of 1933, as
amended (the "Securities Act"), relating to such Class C shares. The price which
the Distributor shall pay for the
3
<PAGE>
Class C shares so purchased from the Fund shall be the net asset value,
determined as set forth in Section 3(c) hereof.
(b) The Class C shares are to be resold by the Distributor to investors at
net asset value, as set forth in Section 3(c) hereof, or to securities dealers
having agreements with the Distributor upon the terms and conditions set forth
in Section 7 hereof.
(c) The net asset value of Class C shares of the Fund shall be determined
by the Fund or any agent of the Fund in accordance with the method set forth in
the prospectus and statement of additional information and guidelines
established by the Board of Directors.
(d) The Fund shall have the right to suspend the sale of its Class C
shares at times when redemption is suspended pursuant to the conditions set
forth in Section 4(b) hereof. The Fund shall also have the right to suspend the
sale of its Class C shares if trading on the New York Stock Exchange shall have
been suspended, if a banking moratorium shall have been declared by Federal or
New York authorities, or if there shall have been some other event, which, in
the judgment of the Fund, makes it impracticable or inadvisable to sell the
Class C shares.
(e) The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Class C shares received by
the Distributor. Any order may be rejected by the Fund; provided, however, that
the Fund
4
<PAGE>
will not arbitrarily or without reasonable cause refuse to accept or confirm
orders for the purchase of Class C shares. The Fund (or its agent) will confirm
orders upon their receipt, will make appropriate book entries and, upon receipt
by the Fund (or its agent) of payment therefor, will deliver deposit receipts or
certificates for such Class C shares pursuant to the instructions of the
Distributor. Payment shall be made to the Fund in New York Clearing House
funds. The Distributor agrees to cause such payment and such instructions to be
delivered promptly to the Fund (or its agent).
Section 4. Repurchase or Redemption of Class C Shares by the Fund.
------------------------------------------------------
(a) Any of the outstanding Class C shares may be tendered for redemption
at any time, and the Fund agrees to repurchase or redeem the Class C shares so
tendered in accordance with its obligations as set forth in Article VII of its
Articles of Incorporation, as amended from time to time, and in accordance with
the applicable provisions set forth in the prospectus and statement of
additional information of the Fund. The price to be paid to redeem or
repurchase the Class C shares shall be equal to the net asset value calculated
in accordance with the provisions of Section 3(c) hereof, less any contingent
deferred sales charge ("CDSC"), redemption fee or other charge(s), if any, set
forth in the prospectus and statement of additional information of the
5
<PAGE>
Fund. All payments by the Fund hereunder shall be made in the manner set forth
below.
The Fund shall pay the total amount of the redemption price as defined in
the above paragraph pursuant to the instructions of the Distributor on or before
the seventh business day subsequent to its having received the notice of
redemption in proper form. The proceeds of any redemption of shares shall be
paid by the Fund as follows: (i) any applicable CDSC shall be paid to the
Distributor, and (ii) the balance shall be paid to or for the account of the
shareholder, in each case in accordance with the applicable provisions of the
prospectus and statement of additional information.
(b) Redemption of Class C shares or payment may be suspended at times when
the New York Stock Exchange is closed, when trading on said Exchange is
suspended, when trading on said Exchange is restricted, when an emergency exists
as a result of which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Fund fairly
to determine the value of its net assets, or during any other period when the
Securities and Exchange Commission, by order, so permits.
Section 5. Duties of the Fund.
------------------
(a) The Fund shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the
6
<PAGE>
distribution of Class C shares of the Fund, and this shall include, upon request
by the Distributor, one certified copy of all financial statements prepared for
the Fund by independent public accountants. The Fund shall make available to
the Distributor such number of copies of its prospectus and statement of
additional information as the Distributor shall reasonably request.
(b) The Fund shall take, from time to time, but subject to any necessary
approval of the shareholders, all necessary action to fix the number of
authorized shares and such steps as may be necessary to register the same under
the Securities Act to the end that there will be available for sale such number
of Class C shares as the Distributor reasonably may be expected to sell.
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Class C shares for sale under the
securities laws of such states as the Distributor and the Fund may approve. Any
such qualification may be withheld, terminated or withdrawn by the Fund at any
time in its discretion. As provided in Section 8(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Fund. The
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Fund in connection with such
qualification.
(d) The Fund will furnish, in reasonable quantities upon request by the
Distributor, copies of annual and interim reports of the Fund.
7
<PAGE>
Section 6. Duties of the Distributor.
-------------------------
(a) The Distributor shall devote reasonable time and effort to effect
sales of Class C shares of the Fund but shall not be obligated to sell any
specific number of shares. The services of the Distributor to the Fund
hereunder are not to be deemed exclusive and nothing herein contained shall
prevent the Distributor from entering into like arrangements with other
investment companies so long as the performance of its obligations hereunder is
not impaired thereby.
(b) In selling the Class C shares of the Fund, the Distributor shall use
its best efforts in all respects duly to conform with the requirements of all
Federal and state laws relating to the sale of such securities. Neither the
Distributor nor any selected dealer, as defined in Section 7 hereof, nor any
other person is authorized by the Fund to give any information or to make any
representations, other than those contained in the registration statement or
related prospectus and statement of additional information and any sales
literature specifically approved by the Fund.
(c) The Distributor shall adopt and follow procedures, as approved by the
officers of the Fund, for the confirmation of sales to investors and selected
dealers, the collection of amounts payable by investors and selected dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the National Association
8
<PAGE>
of Securities Dealers, Inc. (the "NASD"), as such requirements may from time to
time exist.
Section 7. Selected Dealer Agreements.
--------------------------
(a) The Distributor shall have the right to enter into selected dealer
agreements with securities dealers of its choice ("selected dealers") for the
sale of Class C shares; provided, that the Fund shall approve the forms of
agreements with dealers. Class C shares sold to selected dealers shall be for
resale by such dealers only at net asset value determined as set forth in
Section 3(c) hereof. The form of agreement with selected dealers to be used
during the continuous offering of the shares is attached hereto as Exhibit A.
(b) Within the United States, the Distributor shall offer and sell Class C
shares only to such selected dealers that are members in good standing of the
NASD.
Section 8. Payment of Expenses.
-------------------
(a) The Fund shall bear all costs and expenses of the Fund, including fees
and disbursements of its counsel and auditors, in connection with the
preparation and filing of any required registration statements and/or
prospectuses and statements of additional information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy materials to Class C
shareholders (including but not limited to the expense of setting in type any
such registration statements,
9
<PAGE>
prospectuses, statements of additional information, annual or interim reports or
proxy materials).
(b) The Distributor shall be responsible for any payments made to selected
dealers as reimbursement for their expenses associated with payments of sales
commissions to financial consultants. In addition, after the prospectuses,
statements of additional information and annual and interim reports have been
prepared and set in type, the Distributor shall bear the costs and expenses of
printing and distributing any copies thereof which are to be used in connection
with the offering of Class C shares to selected dealers or investors pursuant to
this Agreement. The Distributor shall bear the costs and expenses of preparing,
printing and distributing any other literature used by the Distributor or
furnished by it for use by selected dealers in connection with the offering of
the Class C shares for sale to the public and any expenses of advertising
incurred by the Distributor in connection with such offering. It is understood
and agreed that so long as the Fund's Class C Shares Distribution Plan pursuant
to Rule 12b-1 under the Investment Company Act remains in effect, any expenses
incurred by the Distributor hereunder may be paid from amounts recovered by it
from the Fund under such Plan.
(c) The Fund shall bear the cost and expenses of qualification of the
Class C shares for sale pursuant to this Agreement and, if necessary or
advisable in connection therewith, of quali-
10
<PAGE>
fying the Fund as a broker or dealer in such states of the United States or
other jurisdictions as shall be selected by the Fund and the Distributor
pursuant to Section 5(c) hereof and the cost and expenses payable to each such
state for continuing qualification therein until the Fund decides to discontinue
such qualification pursuant to Section 5(c) hereof.
Section 9. Indemnification.
---------------
(a) The Fund shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith), as incurred, arising by reason of any
person acquiring any Class C shares, which may be based upon the Securities Act,
or on any other statute or at common law, on the ground that the registration
statement or related prospectus and statement of additional information, as from
time to time amended and supplemented, or an annual or interim report to Class C
shareholders of the Fund, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Fund in connection therewith by or on behalf of the
Distributor; provided, however, that in no case (i)
11
<PAGE>
is the indemnity of the Fund in favor of the Distributor and any such
controlling persons to be deemed to protect such Distributor or any such
controlling persons thereof against any liability to the Fund or its security
holders to which the Distributor or any such controlling persons would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of their duties or by reason of the reckless disregard of their
obligations and duties under this Agreement; or (ii) is the Fund to be liable
under its indemnity agreement contained in this paragraph with respect to any
claim made against the Distributor or any such controlling persons, unless the
Distributor or such controlling persons, as the case may be, shall have notified
the Fund in writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have been
served upon the Distributor or such controlling persons (or after the
Distributor or such controlling persons shall have received notice of such
service on any designated agent), but failure to notify the Fund of any such
claim shall not relieve it from any liability which it may have to the person
against whom such action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. The Fund will be entitled to participate
at its own expense in the defense or, if it so elects, to assume the defense of
any suit brought to enforce any such liability, but if the Fund elects to assume
the defense, such defense shall be
12
<PAGE>
conducted by counsel chosen by it and satisfactory to the Distributor or such
controlling person or persons, defendant or defendants in the suit. In the
event the Fund elects to assume the defense of any such suit and retain such
counsel, the Distributor or such controlling person or persons, defendant or
defendants in the suit shall bear the fees and expenses, as incurred, of any
additional counsel retained by them, but in case the Fund does not elect to
assume the defense of any such suit, it will reimburse the Distributor or such
controlling person or persons, defendant or defendants in the suit, for the
reasonable fees and expenses, as incurred, of any counsel retained by them. The
Fund shall promptly notify the Distributor of the commencement of any litigation
or proceedings against it or any of its officers or Directors in connection with
the issuance or sale of any of the Class C shares.
(b) The Distributor shall indemnify and hold harmless the Fund and each of
its Directors and officers and each person, if any, who controls the Fund
against any loss, liability, claim, damage or expense, as incurred, described in
the foregoing indemnity contained in subsection (a) of this Section, but only
with respect to statements or omissions made in reliance upon, and in conformity
with, information furnished to the Fund in writing by or on behalf of the
Distributor for use in connection with the registration statement or related
prospectus and statement of additional information, as from time to time
amended, or the
13
<PAGE>
annual or interim reports to shareholders. In case any action shall be brought
against the Fund or any person so indemnified, in respect of which indemnity may
be sought against the Distributor, the Distributor shall have the rights and
duties given to the Fund, and the Fund and each person so indemnified shall have
the rights and duties given to the Distributor by the provisions of subsection
(a) of this Section 9.
Section 10. Merrill Lynch Mutual Fund Advisor Program. In connection with
------------------------------------------
the Merrill Lynch Mutual Fund Adviser Program, the Distributor and its
affiliate, Merrill Lynch, Pierce, Fenner & Smith Incorporated, are authorized to
offer and sell shares of the Fund, as agent for the Fund, to participants in
such program. The terms of this Agreement shall apply to such sales, including
terms as to the offering price of shares, the proceeds to be paid to the Fund,
the duties of the Distributor, the payment of expenses and indemnification
obligations of the Fund and the Distributor.
Section 11. Duration and Termination of this Agreement. This Agreement
------------------------------------------
shall become effective as of the date first above written and shall remain in
force until October __, 1995 and thereafter, but only for so long as such
continuance is specifically approved at least annually by (i) the Directors or
by the vote of a majority of the outstanding voting securities of the Fund and
(ii) by the vote of a majority of those Directors who are not parties to this
Agreement or interested persons of
14
<PAGE>
any such party cast in person at a meeting called for the purpose of voting on
such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Directors or by vote of a majority of the outstanding voting
securities of the Fund, or by the Distributor, on sixty days' written notice to
the other party. This Agreement shall automatically terminate in the event of
its assignment.
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 12. Amendments of this Agreement. This Agreement may be amended
----------------------------
by the parties only if such amendment is specifically approved by (i) the
Directors or by the vote of a majority of outstanding voting securities of the
Fund and (ii) by the vote of a majority of those Directors of the Fund who are
not parties to this Agreement or interested persons of any such party cast in
person at a meeting called for the purpose of voting on such approval.
Section 13. Governing Law. The provisions of this Agreement shall be
-------------
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment Company
Act. To the extent that the applicable law of the State of New York, or any
15
<PAGE>
of the provisions herein, conflict with the applicable provisions of the
Investment Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT
PROGRAM, INC., doing business as MERRILL
LYNCH BALANCED FUND FOR INVESTMENT AND
RETIREMENT
By ____________________________________
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By ____________________________________
Title:
16
<PAGE>
EXHIBIT A
MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT PROGRAM, INC.
doing business as
MERRILL LYNCH BALANCED FUND FOR INVESTMENT AND RETIREMENT
CLASS C SHARES OF COMMON STOCK
SELECTED DEALER AGREEMENT
-------------------------
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement
with Merrill Lynch Retirement Benefit Investment Program, doing business as
Merrill Lynch Balanced Fund for Investment and Retirement, a Maryland
corporation (the "Fund"), pursuant to which it acts as the distributor for the
sale of Class C shares of common stock, par value $0.01 per share (herein
referred to as the "Class C shares"), of the Fund and as such has the right to
distribute Class C shares of the Fund for resale. The Fund is an open-end
investment company registered under the Investment Company Act of 1940, as
amended, and its Class C shares being offered to the public are registered under
the Securities Act of 1933, as amended. You have received a copy of the Class C
Shares Distribution Agreement (the "Distribution Agreement") between ourself and
the Fund and reference is made herein to certain provisions of such Distribution
Agreement. The terms "Prospectus" and "Statement of Additional Information" as
used herein refer to the prospectus and statement of additional information,
respectively, on file with the Securities and Exchange Commission which is part
of the most recent effective registration statement pursuant to the Securities
Act of 1933, as amended. We offer to sell to you, as a member of the Selected
Dealers Group, Class C shares of the Fund upon the following terms and
conditions:
1. In all sales of these Class C shares to the public, you shall act as
dealer for your own account and in no transaction shall you have any authority
to act as agent for the Fund, for us or for any other member of the Selected
Dealers Group, except in connection with the Merrill Lynch Mutual Fund Adviser
program and such other special programs as we from time to time agree, in which
case you shall have authority to offer and sell shares, as agent for the Fund,
to participants in such program.
2. Orders received from you will be accepted through us only at the public
offering price applicable to each order, as set forth in the current Prospectus
and Statement of Additional Information of the Fund. The procedure relating to
the handling of orders shall be subject to Section 4 hereof and instructions
which we or the Fund shall forward from time to time to you. All
1
<PAGE>
orders are subject to acceptance or rejection by the Distributor or the Fund in
the sole discretion of either. The minimum initial and subsequent purchase
requirements are as set forth in the current Prospectus and Statement of
Additional Information of the Fund.
3. You shall not place orders for any of the Class C shares unless you
have already received purchase orders for such Class C shares at the applicable
public offering prices and subject to the terms hereof and of the Distribution
Agreement. You agree that you will not offer or sell any of the Class C shares
except under circumstances that will result in compliance with the applicable
Federal and state securities laws and that in connection with sales and offers
to sell Class C shares you will furnish to each person to whom any such sale or
offer is made a copy of the Prospectus and, if requested, the Statement of
Additional Information (as then amended or supplemented) and will not furnish to
any person any information relating to the Class C shares of the Fund which is
inconsistent in any respect with the information contained in the Prospectus and
Statement of Additional Information (as then amended or supplemented) or cause
any advertisement to be published in any newspaper or posted in any public place
without our consent and the consent of the Fund.
4. As a selected dealer, you are hereby authorized (i) to place orders
directly with the Fund for Class C shares of the Fund to be resold by us to you
subject to the applicable terms and conditions governing the placement of orders
by us set forth in Section 3 of the Distribution Agreement and (ii) to tender
Class C shares directly to the Fund or its agent for redemption subject to the
applicable terms and conditions set forth in Section 4 of the Distribution
Agreement.
5. You shall not withhold placing orders received from your customers so
as to profit yourself as a result of such withholding: e.g., by a change in the
- -
"net asset value" from that used in determining the offering price to your
customers.
6. No person is authorized to make any representations concerning Class C
shares of the Fund except those contained in the current Prospectus and
Statement of Additional Information of the Fund and in such printed information
subsequently issued by us or the Fund as information supplemental to such
Prospectus and Statement of Additional Information. In purchasing Class C
shares through us you shall rely solely on the representations contained in the
Prospectus and Statement of Additional Information and supplemental information
above mentioned. Any printed information which we furnish you other than the
Fund's Prospectus, Statement of Additional Information, periodic reports and
proxy solicitation material is our sole responsibility and not the
responsibility of the Fund, and you agree that the Fund shall
2
<PAGE>
have no liability or responsibility to you in these respects unless expressly
assumed in connection therewith.
7. You agree to deliver to each of the purchasers making purchases from you
a copy of the then current Prospectus and, if requested, the Statement of
Additional Information at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain proxies from such purchasers. Additional copies of the
Prospectus and Statement of Additional Information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.
8. We reserve the right in our discretion, without notice, to suspend sales
or withdraw the offering of Class C shares entirely or to certain persons or
entities in a class or classes specified by us. Each party hereto has the right
to cancel this Agreement upon notice to the other party.
9. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the continuous offering. We
shall be under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this paragraph
is intended to operate as, and the provisions of this paragraph shall not in any
way whatsoever constitute, a waiver by you of compliance with any provision of
the Securities Act of 1933, as amended, or of the rules and regulations of the
Securities and Exchange Commission issued thereunder.
10. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
11. Upon application to us, we will inform you as to the states in which we
believe the Class C shares have been qualified for sale under, or are exempt
from the requirements of, the respective securities laws of such states, but we
assume no responsibility or obligation as to your right to sell Class C shares
in any jurisdiction. We will file with the Department of State in New York a
Further State Notice with respect to the Class C shares, if necessary.
12. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
3
<PAGE>
13. Your first order placed pursuant to this Agreement for the purchase of
Class C shares of the Fund will represent your acceptance of this Agreement.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
----------------------------------
(Authorized Signature)
Please return one signed copy
of this Agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9011
Princeton, New Jersey 08543-9011
Accepted:
Firm Name: Merrill Lynch, Pierce, Fenner & Smith Inc.
------------------------------------------
By:
-------------------------------------------------
Address: 800 Scudders Mill Road
--------------------------------------------
Plainsboro, New Jersey 08536
--------------------------------------------
Date: October , 1994
-----------------------------------------------
4
<PAGE>
EXHIBIT 99.6(E)
CLASS D SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the ____ day of October 1994 between MERRILL LYNCH
RETIREMENT BENEFIT INVESTMENT PROGRAM, INC., doing business as MERRILL LYNCH
BALANCED FUND FOR INVESTMENT AND RETIREMENT, a Maryland corporation (the
"Fund"), and MERRILL LYNCH FUNDS DISTRIBUTOR, INC., a Delaware corporation (the
"Distributor").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), as an open-end investment company,
and it is affirmatively in the interest of the Fund to offer its shares for sale
continuously; and
WHEREAS, the Distributor is a securities firm engaged in the business of
selling shares of investment companies either directly to purchasers or through
other securities dealers; and
WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the Class D shares of
common stock in the Fund.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Fund hereby appoints the
------------------------------
Distributor as the principal underwriter and distri-
<PAGE>
butor of the Fund to sell Class D shares of common stock in the Fund (sometimes
herein referred to as "Class D shares") to the public and hereby agrees during
the term of this Agreement to sell Class D shares of the Fund to the Distributor
upon the terms and conditions herein set forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the
--------------------------
exclusive representative of the Fund to act as principal underwriter and
distributor, except that:
A. The Fund may, upon written notice to the Distributor, from time to time
designate other principal underwriters and distributors of Class D shares with
respect to areas other than the United States as to which the Distributor may
have expressly waived in writing its right to act as such. If such designation
is deemed exclusive, the right of the Distributor under this Agreement to sell
Class D shares in the areas so designated shall terminate, but this Agreement
shall remain otherwise in full effect until terminated in accordance with the
other provisions hereof.
B. The exclusive right granted to the Distributor to purchase Class D
shares from the Fund shall not apply to Class D shares issued in connection with
the merger or consolidation of any other investment company or personal holding
company with the Fund or the acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding Class D shares of any such
company by the Fund.
2
<PAGE>
C. Such exclusive right also shall not apply to Class D shares issued by
the Fund pursuant to reinvestment of dividends or capital gains distributions.
D. Such exclusive right also shall not apply to Class D shares issued by
the Fund pursuant to any conversion, exchange or reinstatement privilege
afforded redeeming shareholders or to any other Class D shares as shall be
agreed between the Fund and the Distributor from time to time.
Section 3. Purchase of Class D Shares from the Fund.
----------------------------------------
(a) It is contemplated that the Fund will commence an offering of its
Class D shares, and thereafter the Distributor shall have the right to buy from
the Fund the Class D shares needed, but not more than the Class D shares needed
(except for clerical errors in transmission) to fill unconditional orders for
Class D shares of the Fund placed with the Distributor by eligible investors or
securities dealers. Investors eligible to purchase Class D shares shall be
those persons so identified in the currently effective prospectus and statement
of additional information of the Fund (the "prospectus" and "statement of
additional information", respectively) under the Securities Act of 1933, as
amended (the "Securities Act"), relating to such Class D shares. The price which
the Distributor shall pay for the Class D shares so purchased from the Fund
shall be the net asset value, determined as set forth in Section 3(d) hereof,
used in determining the public offering price on which such orders were based.
3
<PAGE>
(b) The Class D shares are to be resold by the Distributor to investors at
the public offering price, as set forth in Section 3(c) hereof, or to securities
dealers having agreements with the Distributor upon the terms and conditions
set forth in Section 7 hereof.
(c) The public offering price(s) of the Class D shares, i.e., the price
- -
per share at which the Distributor or selected dealers may sell Class D shares
to the public, shall be the public offering price as set forth in the prospectus
and statement of additional information relating to such Class D shares, but not
to exceed the net asset value at which the Distributor is to purchase the Class
D shares, plus a sales charge not to exceed 5.25% of the public offering price
(5.54% of the net amount invested), subject to reductions for volume purchases.
Class D shares may be sold to certain Directors, officers and employees of the
Fund, directors and employees of Merrill Lynch & Co., Inc. and its subsidiaries,
and to certain other persons described in the prospectus and statement of
additional information, without a sales charge or at a reduced sales charge,
upon terms and conditions set forth in the prospectus and statement of
additional information. If the public offering price does not equal an even
cent, the public offering price may be adjusted to the nearest cent. All
payments to the Fund hereunder shall be made in the manner set forth in Section
3(f).
4
<PAGE>
(d) The net asset value of Class D shares shall be determined by the Fund
or any agent of the Fund in accordance with the method set forth in the
prospectus and statement of additional information of the Fund and guidelines
established by the Directors.
(e) The Fund shall have the right to suspend the sale of its Class D
shares at times when redemption is suspended pursuant to the conditions set
forth in Section 4(b) hereof. The Fund shall also have the right to suspend the
sale of its Class D shares if trading on the New York Stock Exchange shall have
been suspended, if a banking moratorium shall have been declared by Federal or
New York authorities, or if there shall have been some other event, which, in
the judgment of the Fund, makes it impracticable or inadvisable to sell the
Class D shares.
(f) The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Class D shares received by
the Distributor. Any order may be rejected by the Fund; provided, however, that
the Fund will not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Class D shares. The Fund (or its agent) will
confirm orders upon their receipt, will make appropriate book entries and, upon
receipt by the Fund (or its agent) of payment therefor, will deliver deposit
receipts or certificates for such Class D shares pursuant to the instructions of
the Distributor. Payment shall be made to the Fund in New York Clearing House
funds. The Distributor agrees to cause such
5
<PAGE>
payment and such instructions to be delivered promptly to the Fund (or its
agent).
Section 4. Repurchase or Redemption of Class D Shares by the Fund.
------------------------------------------------------
(a) Any of the outstanding Class D shares may be tendered for redemption
at any time, and the Fund agrees to repurchase or redeem the Class D shares so
tendered in accordance with its obligations as set forth in Article VII of its
Articles of Incorporation, as amended from time to time, and in accordance with
the applicable provisions set forth in the prospectus and statement of
additional information. The price to be paid to redeem or repurchase the Class
D shares shall be equal to the net asset value calculated in accordance with the
provisions of Section 3(d) hereof, less any contingent deferred sales charge
("CDSC"), redemption fee or other charge(s), if any, set forth in the prospectus
and statement of additional information of the Fund. All payments by the Fund
hereunder shall be made in the manner set forth below. The redemption or
repurchase by the Fund of any of the Class D shares purchased by or through the
Distributor will not affect the sales charge secured by the Distributor or any
selected dealer in the course of the original sale, except that if any Class D
shares are tendered for redemption or repurchase within seven business days
after the date of the confirmation of the original purchase, the right to the
sales charge shall be forfeited by the Distributor and the selected dealer which
sold such Class D shares.
6
<PAGE>
The Fund shall pay the total amount of the redemption price as defined in
the above paragraph pursuant to the instructions of the Distributor in New York
Clearing House funds on or before the seventh business day subsequent to its
having received the notice of redemption in proper form. The proceeds of any
redemption of shares shall be paid by the Fund as follows: (i) any applicable
CDSC shall be paid to the Distributor, and (ii) the balance shall be paid to or
for the account of the shareholder, in each case in accordance with the
applicable provisions of the prospectus and statement of additional information.
(b) Redemption of Class D shares or payment may be suspended at times when
the New York Stock Exchange is closed, when trading on said Exchange is
suspended, when trading on said Exchange is restricted, when an emergency exists
as a result of which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Fund fairly
to determine the value of its net assets, or during any other period when the
Securities and Exchange Commission, by order, so permits.
Section 5. Duties of the Fund.
------------------
(a) The Fund shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Class D shares of the
Fund, and this shall include, upon request by the Distributor, one certified
copy of all financial statements prepared for the Fund by independent public
7
<PAGE>
accountants. The Fund shall make available to the Distributor such number of
copies of the prospectus and statement of additional information as the
Distributor shall reasonably request.
(b) The Fund shall take, from time to time, but subject to any necessary
approval of the Class D shareholders, all necessary action to fix the number of
authorized Class D shares and such steps as may be necessary to register the
same under the Securities Act, to the end that there will be available for sale
such number of Class D shares as the Distributor may reasonably be expected to
sell.
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Class D shares for sale under the
securities laws of such states as the Distributor and the Fund may approve. Any
such qualification may be withheld, terminated or withdrawn by the Fund at any
time in its discretion. As provided in Section 8(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Fund. The
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Fund in connection with such
qualification.
(d) The Fund will furnish, in reasonable quantities upon request by the
Distributor, copies of annual and interim reports of the Fund.
8
<PAGE>
Section 6. Duties of the Distributor.
-------------------------
(a) The Distributor shall devote reasonable time and effort to effect
sales of Class D shares of the Fund but shall not be obligated to sell any
specific number of Class D shares. The services of the Distributor to the Fund
hereunder are not to be deemed exclusive and nothing herein contained shall
prevent the Distributor from entering into like arrangements with other
investment companies so long as the performance of its obligations hereunder is
not impaired thereby.
(b) In selling the Class D shares of the Fund, the Distributor shall use
its best efforts in all respects duly to conform with the requirements of all
Federal and state laws relating to the sale of such securities. Neither the
Distributor nor any selected dealer, as defined in Section 7 hereof, nor any
other person is authorized by the Fund to give any information or to make any
representations, other than those contained in the registration statement or
related prospectus and statement of additional information and any sales
literature specifically approved by the Fund.
(c) The Distributor shall adopt and follow procedures, as approved by the
officers of the Fund, for the confirmation of sales to investors and selected
dealers, the collection of amounts payable by investors and selected dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the National
9
<PAGE>
Association of Securities Dealers, Inc. (the "NASD"), as such requirements may
from time to time exist.
Section 7. Selected Dealers Agreements.
---------------------------
(a) The Distributor shall have the right to enter into selected dealers
agreements with securities dealers of its choice ("selected dealers") for the
sale of Class D shares and fix therein the portion of the sales charge which may
be allocated to the selected dealers; provided that the Fund shall approve the
forms of agreements with dealers and the dealer compensation set forth therein.
Class D shares sold to selected dealers shall be for resale by such dealers only
at the public offering price(s) set forth in the prospectus and statement of
additional information. The form of agreement with selected dealers to be used
during the continuous offering of the Class D shares is attached hereto as
Exhibit A.
(b) Within the United States, the Distributor shall offer and sell Class D
shares only to such selected dealers as are members in good standing of the
NASD.
Section 8. Payment of Expenses.
-------------------
(a) The Fund shall bear all costs and expenses of the Fund, including fees
and disbursements of its counsel and auditors, in connection with the
preparation and filing of any required registration statements and/or
prospectuses and statements of additional information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy
10
<PAGE>
materials to Class D shareholders (including but not limited to the expense of
setting in type any such registration statements, prospectuses, statements of
additional information, annual or interim reports or proxy materials).
(b) The Distributor shall be responsible for any payments made to selected
dealers as reimbursement for their expenses associated with payments of sales
commissions to financial consultants. In addition, after the prospectuses,
statements of additional information and annual and interim reports have been
prepared and set in type, the Distributor shall bear the costs and expenses of
printing and distributing any copies thereof which are to be used in connection
with the offering of Class D shares to selected dealers or investors pursuant to
this Agreement. The Distributor shall bear the costs and expenses of preparing,
printing and distributing any other literature used by the Distributor or
furnished by it for use by selected dealers in connection with the offering of
the Class D shares for sale to the public and any expenses of advertising
incurred by the Distributor in connection with such offering. It is understood
and agreed that so long as the Fund's Class D Shares Distribution Plan pursuant
to Rule 12b-1 under the Investment Company Act remains in effect, any expenses
incurred by the Distributor hereunder in connection with account maintenance
activities may be paid from amounts recovered by it from the Fund under such
plan.
11
<PAGE>
(c) The Fund shall bear the cost and expenses of qualification of the
Class D shares for sale pursuant to this Agreement and, if necessary or
advisable in connection therewith, of qualifying the Fund as a broker or dealer
in such states of the United States or other jurisdictions as shall be selected
by the Fund and the Distributor pursuant to Section 5(c) hereof and the cost and
expenses payable to each such state for continuing qualification therein until
the Fund decides to discontinue such qualification pursuant to Section 5(c)
hereof.
Section 9. Indemnification.
---------------
(a) The Fund shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith), as incurred, arising by reason of any
person acquiring any Class D shares, which may be based upon the Securities Act,
or on any other statute or at common law, on the ground that the registration
statement or related prospectus and statement of additional information, as from
time to time amended and supplemented, or an annual or interim report to
shareholders of the Fund, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
12
<PAGE>
furnished to the Fund in connection therewith by or on behalf of the
Distributor; provided, however, that in no case (i) is the indemnity of the Fund
in favor of the Distributor and any such controlling persons to be deemed to
protect such Distributor or any such controlling persons thereof against any
liability to the Fund or its security holders to which the Distributor or any
such controlling persons would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of their duties or
by reason of the reckless disregard of their obligations and duties under this
Agreement; or (ii) is the Fund to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the
Distributor or any such controlling persons, unless the Distributor or such
controlling persons, as the case may be, shall have notified the Fund in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the
Distributor or such controlling persons (or after the Distributor or such
controlling persons shall have received notice of such service on any designated
agent), but failure to notify the Fund of any such claim shall not relieve it
from any liability which it may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
paragraph. The Fund will be entitled to participate at its own expense in the
defense or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if
13
<PAGE>
the Fund elects to assume the defense, such defense shall be conducted by
counsel chosen by it and satisfactory to the Distributor or such controlling
person or persons, defendant or defendants in the suit. In the event the Fund
elects to assume the defense of any such suit and retain such counsel, the
Distributor or such controlling person or persons, defendant or defendants in
the suit shall bear the fees and expenses of any additional counsel retained by
them, but in case the Fund does not elect to assume the defense of any such
suit, it will reimburse the Distributor or such controlling person or persons,
defendant or defendants in the suit, for the reasonable fees and expenses of any
counsel retained by them. The Fund shall promptly notify the Distributor of the
commencement of any litigation or proceedings against it or any of its officers
or Directors in connection with the issuance or sale of any of the Class D
shares.
(b) The Distributor shall indemnify and hold harmless the Fund and each of
its Directors and officers and each person, if any, who controls the Fund
against any loss, liability, claim, damage or expense described in the foregoing
indemnity contained in subsection (a) of this Section, but only with respect to
statements or omissions made in reliance upon, and in conformity with,
information furnished to the Fund in writing by or on behalf of the Distributor
for use in connection with the registration statement or related prospectus and
statement of additional information, as from time to time amended, or the
14
<PAGE>
annual or interim reports to Class D shareholders. In case any action shall be
brought against the Fund or any person so indemnified, in respect of which
indemnity may be sought against the Distributor, the Distributor shall have the
rights and duties given to the Fund, and the Fund and each person so indemnified
shall have the rights and duties given to the Distributor by the provisions of
subsection (a) of this Section 9.
Section 10. Merrill Lynch Mutual Fund Advisor Program. In connection with
------------------------------------------
the Merrill Lynch Mutual Fund Adviser Program, the Distributor and its
affiliate, Merrill Lynch, Pierce, Fenner & Smith Incorporated, are authorized to
offer and sell shares of the Fund, as agent for the Fund, to participants in
such program. The terms of this Agreement shall apply to such sales, including
terms as to the offering price of shares, the proceeds to be paid to the Fund,
the duties of the Distributor, the payment of expenses and indemnification
obligations of the Fund and the Distributor.
Section 11. Duration and Termination of this Agreement. This Agreement
------------------------------------------
shall become effective as of the date first above written and shall remain in
force until October __, 1995 and thereafter, but only for so long as such
continuance is specifically approved at least annually by (i) the Directors or
by the vote of a majority of the outstanding voting securities of the Fund and
(ii) by the vote of a majority of those Directors who are not parties to this
Agreement or interested persons of
15
<PAGE>
any such party cast in person at a meeting called for the purpose of voting on
such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Directors or by vote of a majority of the outstanding voting
securities of the Fund, or by the Distributor, on sixty days' written notice to
the other party. This Agreement shall automatically terminate in the event of
its assignment.
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 12. Amendments of this Agreement. This Agreement may be amended
----------------------------
by the parties only if such amendment is specifically approved by (i) the
Directors or by the vote of a majority of outstanding voting securities of the
Fund and (ii) by the vote of a majority of those Directors of the Fund who are
not parties to this Agreement or interested persons of any such party cast in
person at a meeting called for the purpose of voting on such approval.
Section 13. Governing Law. The provisions of this Agreement shall be
-------------
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment Company
Act. To the extent that the applicable law of the State of New York, or any
16
<PAGE>
of the provisions herein, conflict with the applicable provisions of the
Investment Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT
PROGRAM, INC., doing business as
MERRILL LYNCH BALANCED FUND FOR INVESTMENT AND
RETIREMENT
By_____________________________________
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By_____________________________________
Title:
17
<PAGE>
EXHIBIT A
MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT PROGRAM, INC.,
doing business as
MERRILL LYNCH BALANCED FUND FOR INVESTMENT AND RETIREMENT
CLASS D SHARES OF COMMON STOCK
SELECTED DEALERS AGREEMENT
--------------------------
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement
with Merrill Lynch Retirement Benefit Investment Program, Inc., doing business
as Merrill Lynch Balanced Fund for Investment and Retirement, a Maryland
corporation (the "Fund"), pursuant to which it acts as the distributor for the
sale of Class D shares of common stock, par value $0.01 per share (herein
referred to as "Class D shares"), of the Fund and as such has the right to
distribute Class D shares of the Fund for resale. The Fund is an open-end
investment company registered under the Investment Company Act of 1940, as
amended, and its Class D shares being offered to the public are registered under
the Securities Act of 1933, as amended. You have received a copy of the Class D
Shares Distribution Agreement (the "Distribution Agreement") between ourself and
the Fund and reference is made herein to certain provisions of such Distribution
Agreement. The terms "Prospectus" and "Statement of Additional Information"
used herein refer to the prospectus and statement of additional information,
respectively, on file with the Securities and Exchange Commission which is part
of the most recent effective registration statement pursuant to the Securities
Act of 1933, as amended. We offer to sell to you, as a member of the Selected
Dealers Group, Class D shares of the Fund upon the following terms and
conditions:
1. In all sales of these Class D shares to the public, you shall act as
dealer for your own account and in no transaction shall you have any authority
to act as agent for the Fund, for us or for any other member of the Selected
Dealers Group, except in connection with the Merrill Lynch Mutual Fund Adviser
program and such other special programs as we from time to time agree, in which
case you shall have authority to offer and sell shares, as agent for the Fund,
to participants in such program.
2. Orders received from you will be accepted through us only at the
public offering price applicable to each order, as
1
<PAGE>
set forth in the current Prospectus and Statement of Additional Information of
the Fund. The procedure relating to the handling of orders shall be subject to
Section 5 hereof and instructions which we or the Fund shall forward from time
to time to you. All orders are subject to acceptance or rejection by the
Distributor or the Fund in the sole discretion of either. The minimum initial
and subsequent purchase requirements are as set forth in the current Prospectus
and Statement of Additional Information of the Fund.
3. The sales charges for sales to the public, computed as percentages of
the public offering price and the amount invested, and the related discount to
Selected Dealers are as follows:
<TABLE>
<CAPTION>
Discount to
Selected
Sales Charge Dealers as
Sales Charge as Percentage* Percentage
as Percentage of the Net of the
of the Amount Offering
Amount of Purchase Offering Price Invested Price
- ------------------ --------------- -------------- ------------
<S> <C> <C> <C>
Less than $25,000...... 5.25% 5.54% 5.00%
$25,000 but less
than $50,000.......... 4.75 4.99 4.50
$50,000 but less
than $100,000......... 4.00 4.17 3.75
$100,000 but less
than $250,000......... 3.00 3.09 2.75
$250,000 but less
than $1,000,000....... 2.00 2.04 1.80
$1,000,000 and over**.. 0.00 0.00 0.00
</TABLE>
___________________
* Rounded to the nearest one-hundredth percent.
** Initial sales charges will be waived for certain classes of offerees as set
forth in the current Prospectus and Statement of Additional Information of the
Fund. Such purchases may be subject to a contingent deferred sales charge as
set forth in the current Prospectus and Statement of Additional Information.
2
<PAGE>
The term "purchase" refers to a single purchase by an individual, or to
concurrent purchases, which in the aggregate are at least equal to the
prescribed amounts, by an individual, his spouse and their children under the
age of 21 years purchasing Class D shares for his or their own account and to
single purchases by a trustee or other fiduciary purchasing Class D shares for a
single trust estate or single fiduciary account although more than one
beneficiary is involved. The term "purchase" also includes purchases by any
"company" as that term is defined in the Investment Company Act of 1940, as
amended, but does not include purchases by any such company which has not been
in existence for at least six months or which has no purpose other than the
purchase of Class D shares of the Fund or Class D shares of other registered
investment companies at a discount; provided, however, that it shall not include
purchases by any group of individuals whose sole organizational nexus is that
the participants therein are credit cardholders of a company, policyholders of
an insurance company, customers of either a bank or broker-dealer or clients of
an investment adviser.
The reduced sales charges are applicable through a right of accumulation under
which eligible investors are permitted to purchase Class D shares of the Fund at
the offering price applicable to the total of (a) the public offering price of
the shares then being purchased plus (b) an amount equal to the then current net
asset value or cost, whichever is higher, of the purchaser's combined holdings
of Class A, Class B, Class C and Class D shares of the Fund and of any other
investment company with an initial sales charge for which the Distributor acts
as the distributor. For any such right of accumulation to be made available,
the Distributor must be provided at the time of purchase, by the purchaser or
you, with sufficient information to permit confirmation of qualification, and
acceptance of the purchase order is subject to such confirmation.
The reduced sales charges are applicable to purchases aggregating $25,000 or
more of Class A shares or of Class D shares of any other investment company with
an initial sales charge for which the Distributor acts as the distributor made
through you within a thirteen-month period starting with the first purchase
pursuant to a Letter of Intention in the form provided in the Prospectus. A
purchase not originally made pursuant to a Letter of Intention may be included
under a subsequent letter executed within 90 days of such purchase if the
Distributor is informed in writing of this intent within such 90-day period. If
the intended amount of shares is not purchased within the thirteen-month period,
an appropriate price adjustment will be made pursuant to the terms of the Letter
of Intention.
You agree to advise us promptly at our request as to amounts of any sales made
by you to the public qualifying for reduced sales charges. Further information
as to the reduced sales charges pursuant to the right of accumulation or a
Letter of Intention is set forth in the Prospectus and Statement of Additional
Information.
3
<PAGE>
4. You shall not place orders for any of the Class D shares unless you have
already received purchase orders for such Class D shares at the applicable
public offering prices and subject to the terms hereof and of the Distribution
Agreement. You agree that you will not offer or sell any of the Class D shares
except under circumstances that will result in compliance with the applicable
Federal and state securities laws and that in connection with sales and offers
to sell Class D shares you will furnish to each person to whom any such sale or
offer is made a copy of the Prospectus and, if requested, the Statement of
Additional Information (as then amended or supplemented) and will not furnish to
any person any information relating to the Class D shares of the Fund which is
inconsistent in any respect with the information contained in the Prospectus and
Statement of Additional Information (as then amended or supplemented) or cause
any advertisement to be published in any newspaper or posted in any public place
without our consent and the consent of the Fund.
5. As a selected dealer, you are hereby authorized (i) to place orders
directly with the Fund for Class D shares of the Fund to be resold by us to you
subject to the applicable terms and conditions governing the placement of orders
by us set forth in Section 3 of the Distribution Agreement and subject to the
compensation provisions of Section 3 hereof and (ii) to tender Class D shares
directly to the Fund or its agent for redemption subject to the applicable terms
and conditions set forth in Section 4 of the Distribution Agreement.
6. You shall not withhold placing orders received from your customers so as
to profit yourself as a result of such withholding: e.g., by a change in the
- -
"net asset value" from that used in determining the offering price to your
customers.
7. If any Class D shares sold to you under the terms of this Agreement are
repurchased by the Fund or by us for the account of the Fund or are tendered for
redemption within seven business days after the date of the confirmation of the
original purchase by you, it is agreed that you shall forfeit your right to, and
refund to us, any discount received by you on such Class D shares.
8. No person is authorized to make any representations concerning Class D
shares of the Fund except those contained in the current Prospectus and
Statement of Additional Information of the Fund and in such printed information
subsequently issued by us or the Fund as information supplemental to such
Prospectus and Statement of Additional Information. In purchasing Class D
shares through us you shall rely solely on the representations contained in the
Prospectus and Statement of Additional Information and supplemental information
above mentioned. Any printed information which we furnish you other than the
Fund's Prospectus, Statement of Additional Information, periodic reports and
proxy solicitation material is our sole responsibility and not the
responsibility
4
<PAGE>
of the Fund, and you agree that the Fund shall have no liability or
responsibility to you in these respects unless expressly assumed in connection
therewith.
9. You agree to deliver to each of the purchasers making purchases from you
a copy of the then current Prospectus and, if requested, the Statement of
Additional Information at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain proxies from such purchasers. Additional copies of the
Prospectus and Statement of Additional Information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.
10. We reserve the right in our discretion, without notice, to suspend sales
or withdraw the offering of Class D shares entirely or to certain persons or
entities in a class or classes specified by us. Each party hereto has the right
to cancel this agreement upon notice to the other party.
11. We shall have full authority to take such action as we may deem advisable
in respect of all matters pertaining to the continuous offering. We shall be
under no liability to you except for lack of good faith and for obligations
expressly assumed by us herein. Nothing contained in this paragraph is intended
to operate as, and the provisions of this paragraph shall not in any way
whatsoever constitute, a waiver by you of compliance with any provision of the
Securities Act of 1933, as amended, or of the rules and regulations of the
Securities and Exchange Commission issued thereunder.
12. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
13. Upon application to us, we will inform you as to the states in which we
believe the Class D shares have been qualified for sale under, or are exempt
from the requirements of, the respective securities laws of such states, but we
assume no responsibility or obligation as to your right to sell Class D shares
in any jurisdiction. We will file with the Department of State in New York a
Further State Notice with respect to the Class D shares, if necessary.
14. All communications to us should be sent to the address below. Any notice
to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
5
<PAGE>
15. Your first order placed pursuant to this Agreement for the purchase of
Class D shares of the Fund will represent your acceptance of this Agreement.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
----------------------------------
(Authorized Signature)
Please return one signed copy
of this agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9011
Princeton, New Jersey 08543-9011
Accepted:
Firm Name: Merrill Lynch, Pierce, Fenner & Smith Inc.
--------------------------------------------
By:
--------------------------------------------------
Address: 800 Scudders Mill Road
---------------------------------------------
Plainsboro, New Jersey 08536
-----------------------------------------------------
Date: October , 1994
----------------------------------------------
6
<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. 12 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 caption "Financial Highlights"
appearing in the Prospectus, which also is a part of such Registration
Statement.
Deloitte & Touche LLP
Princeton, New Jersey
October 10, 1994
<PAGE>
EXHIBIT 99.15(B)
CLASS C DISTRIBUTION PLAN
OF
MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT PROGRAM, INC.,
doing business as
MERRILL LYNCH BALANCED FUND FOR INVESTMENT AND RETIREMENT
PURSUANT TO RULE 12b-1
DISTRIBUTION PLAN made as of the day of October 1994, by and between
Merrill Lynch Retirement Benefit Investment Program, Inc., doing business as
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 proposes to enter into a Class C Shares Distribution
Agreement with MLFD, pursuant to which MLFD will act as the exclusive
distributor and representative of the Fund in the offer and sale of Class C
shares of common stock, par value $0.10 per share (the "Class C shares"), of the
Fund to the public; and
WHEREAS, the Fund desires to adopt this Class C Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act, pursuant to
which the Fund will pay an account maintenance fee and a distribution fee to
MLFD with respect to the Fund's Class C shares; and
WHEREAS, the Directors of the Fund have determined that there is a
reasonable likelihood that adoption of the Plan will benefit the Fund and its
shareholders.
NOW, THEREFORE, the Fund hereby adopts, and MLFD hereby agrees to the terms
of, the Plan in accordance with Rule 12b-1 under the Investment Company Act on
the following terms and conditions:
1. The Fund shall pay MLFD an account maintenance fee under the Plan at
the end of each month at the annual rate of 0.25% of
<PAGE>
average daily net assets of the Fund relating to Class C shares to compensate
MLFD and securities firms with which MLFD enters into related agreements
pursuant to Paragraph 3 hereof ("Sub-Agreements") for providing account
maintenance activities with respect to Class C shareholders of the Fund.
Expenditures under the Plan may consist of payments to financial consultants for
maintaining accounts in connection with Class C shares of the Fund and payment
of expenses incurred in connection with such account maintenance activities
including the costs of making services available to shareholders including
assistance in connection with inquiries related to shareholder accounts.
2. The Fund shall pay MLFD a distribution fee under the Plan at the end of
each month at the annual rate of .75% of average daily net assets of the Fund
relating to Class C shares to compensate MLFD and securities firms with which
MLFD enters into related Sub-Agreements for providing sales and promotional
activities and services. Such activities and services will relate to the sale,
promotion and marketing of the Class C shares of the Fund. Such expenditures
may consist of sales commissions to financial consultants for selling Class C
shares of the Fund, compensation, sales incentives and payments to sales and
marketing personnel, and the payment of expenses incurred in its sales and
promotional activities, including advertising expenditures related to the Fund
and the costs of preparing and distributing promotional materials. The
distribution fee may also be used to pay the financing costs of carrying the
unreimbursed expenditures described in this Paragraph 2. Payment of the
distribution fee described in this Paragraph 2 shall be subject to any
limitations set forth in any applicable regulation of the National Association
of Securities Dealers, Inc.
3. The Fund hereby authorizes MLFD to enter into Sub-Agreements with
certain securities firms ("Securities Firms"), including Merrill Lynch, Pierce,
Fenner & Smith Incorporated, to provide compensation to such Securities Firms
for activities and services of the type referred to in Paragraphs 1 and 2
hereof. MLFD may reallocate all or a portion of its account maintenance fee or
distribution fee to such Securities Firms as compensation for the above-
mentioned activities and services. Such Sub-Agreement shall provide that the
Securities Firms shall provide MLFD with such information as is reasonably
necessary to permit MLFD to comply with the reporting requirements set forth in
Paragraph 4 hereof.
4. MLFD shall provide the Fund for review by the Board of Directors, and
the Directors shall review, at least quarterly, a written report complying with
the requirements of Rule 12b-1 regarding the disbursement of the account
maintenance fee and the distribution fee during such period.
2
<PAGE>
5. This Plan shall not take effect until it has been approved by a vote of
at least a majority, as defined in the Investment Company Act, of the
outstanding Class C voting securities of the Fund.
6. This Plan shall not take effect until it has been approved, together
with any related agreements, by votes of a majority of both (a) the Directors of
the Fund and (b) those Directors of the Fund who are not "interested persons" of
the Fund, as defined in the Investment Company Act, and have no direct or
indirect financial interest in the operation of this Plan or any agreements
related to it (the "Rule 12b-1 Directors"), cast in person at a meeting or
meetings called for the purpose of voting on the Plan and such related
agreements.
7. The Plan shall continue in effect for so long as such continuance is
specifically approved at least annually in the manner provided for approval of
the Plan in Paragraph 6.
8. The Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Directors, or by vote of a majority of the outstanding Class C voting
securities of the Fund.
9. The Plan may not be amended to increase materially the rate of payments
provided for herein unless such amendment is approved by at least a majority, as
defined in the Investment Company Act, of the outstanding Class C voting
securities of the Fund, and by the Directors of the Fund in the manner provided
for in Paragraph 6 hereof, and no material amendment to the Plan shall be made
unless approved in the manner provided for approval and annual renewal in
Paragraph 6 hereof.
10. While the Plan is in effect, the selection and nomination of Directors
who are not interested persons, as defined in the Investment Company Act, of the
Fund shall be committed to the discretion of the Directors who are not
interested persons.
11. The Fund shall preserve copies of the Plan and any related agreements
and all reports made pursuant to Paragraph 4 hereof, for a period of not less
than six years from the date of
3
<PAGE>
the Plan, or the agreements or such report, as the case may be, the first two
years in an easily accessible place.
IN WITNESS WHEREOF, the parties hereto have executed this Distribution Plan
as of the date first above written.
MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT
PROGRAM, INC., doing business as MERRILL
LYNCH BALANCED FUND FOR INVESTMENT AND
RETIREMENT
By_____________________________________
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By_____________________________________
Title:
4
<PAGE>
CLASS C SHARES DISTRIBUTION PLAN SUB-AGREEMENT
AGREEMENT made as of the day of October 1994, by and between Merrill
Lynch Funds Distributor, Inc., a Delaware corporation ("MLFD"), and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation ("Securities
Firm").
W I T N E S S E T H :
--------------------
WHEREAS, MLFD has entered into an agreement with Merrill Lynch Retirement
Benefit Investment Program, Inc., doing business as 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 C shares of
common stock, par value $0.01 per share (the "Class C shares"), of the Fund; and
WHEREAS, MLFD and the Fund have entered into a Class C Shares Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended (the "Act"), pursuant to which MLFD receives an account
maintenance fee from the Fund at the annual rate of 0.25% of average daily net
assets of the Fund relating to Class C shares for account maintenance activities
related to Class C shares of the Fund and a distribution fee from the Fund at
the annual rate of .75% of average daily net assets of the Fund relating to
Class C shares for providing sales and promotional activities and services
related to the distribution of Class C shares; and
WHEREAS, MLFD desires the Securities Firm to perform certain account
maintenance activities and sales and promotional activities and services for the
Fund's Class C shareholders and the Securities Firm is willing to perform such
activities and services;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereby agree as follows:
1. The Securities Firm shall provide account maintenance activities and
services with respect to the Class C shares of the Fund and incur expenditures
in connection with such activities and services of the types referred to in
Paragraph 1 of the Plan.
2. The Securities Firm shall provide sales and promotional activities and
services with respect to the sale of the Class C shares of the Fund, and incur
distribution expenditures, of the types referred to in Paragraph 2 of the Plan.
3. As compensation for its activities and services performed under this
Agreement, MLFD shall pay the Securities
<PAGE>
Firm an account maintenance fee and a distribution fee at the end of each
calendar month in an amount agreed upon by the parties hereto.
4. The Securities Firm shall provide MLFD, at least quarterly, such
information as reasonably requested by MLFD to enable MLFD to comply with the
reporting requirements of Rule 12b-1 regarding the disbursement of the account
maintenance fee and the distribution fee during such period referred to in
Paragraph 4 of the Plan.
5. This Agreement shall not take effect until it has been approved by
votes of a majority of both (a) the Directors of the Fund and (b) those
Directors of the Fund who are not "interested persons" of the Fund, as defined
in the Act, and have no direct or indirect financial interest in the operation
of the Plan, this Agreement or any agreements related to the Plan or this
Agreement (the "Rule 12b-1 Directors"), cast in person at a meeting or meetings
called for the purpose of voting on this Agreement.
6. This Agreement shall continue in effect for as long as such continuance
is specifically approved at least annually in the manner provided for approval
of the Plan in Paragraph 6.
7. This Agreement shall automatically terminate in the event of its
assignment or in the event of the termination of the Plan or any amendment to
the Plan that requires such termination.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By_____________________________________
Title:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By_____________________________________
Title:
6
<PAGE>
EXHIBIT 99.15(C)
CLASS D DISTRIBUTION PLAN
OF
MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT PROGRAM, INC.,
doing business as
MERRILL LYNCH BALANCED FUND FOR INVESTMENT AND RETIREMENT
PURSUANT TO RULE 12b-1
DISTRIBUTION PLAN made as of the day of October 1994, by and between
Merrill Lynch Retirement Benefit Investment Program, Inc., doing business as
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 proposes to enter into a Class D Shares Distribution
Agreement with MLFD, pursuant to which MLFD will act as the exclusive
distributor and representative of the Fund in the offer and sale of Class D
shares of common stock, par value $0.10 per share (the "Class D shares"), of the
Fund to the public; and
WHEREAS, the Fund desires to adopt this Class D Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act, pursuant to
which the Fund will pay an account maintenance fee to MLFD with respect to the
Fund's Class D shares; and
WHEREAS, the Directors of the Fund have determined that there is a
reasonable likelihood that adoption of the Plan will benefit the Fund and its
shareholders.
NOW, THEREFORE, the Fund hereby adopts, and MLFD hereby agrees to the terms
of, the Plan in accordance with Rule 12b-1 under the Investment Company Act on
the following terms and conditions:
<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 D shares to compensate MLFD and securities firms with
which MLFD enters into related agreements ("Sub-Agreements") pursuant to
Paragraph 2 hereof for providing account maintenance activities with respect to
Class D shareholders of the Fund. Expenditures under the Plan may consist of
payments to financial consultants for maintaining accounts in connection with
Class D shares of the Fund and payment of expenses incurred in connection with
such account maintenance activities including the costs of making services
available to shareholders including assistance in connection with inquiries
related to shareholder accounts.
2. The Fund hereby authorizes MLFD to enter into Sub-Agreements with
certain securities firms ("Securities Firms"), including Merrill Lynch, Pierce,
Fenner & Smith Incorporated, to provide compensation to such Securities Firms
for activities of the type referred to in Paragraph 1. MLFD may reallocate all
or a portion of its account maintenance fee to such Securities Firms as
compensation for the above-mentioned activities. Such Sub-Agreement shall
provide that the Securities Firms shall provide MLFD with such information as is
reasonably necessary to permit MLFD to comply with the reporting requirements
set forth in Paragraph 3 hereof.
3. MLFD shall provide the Fund for review by the Board of Directors, and
the Directors shall review, at least quarterly, a written report complying with
the requirements of Rule 12b-1 regarding the disbursement of the account
maintenance fee during such period.
4. This Plan shall not take effect until it has been approved by a vote of
at least a majority, as defined in the Investment Company Act, of the
outstanding Class D voting securities of the Fund.
5. This Plan shall not take effect until it has been approved, together
with any related agreements, by votes of a majority of both (a) the Directors of
the Fund and (b) those Directors of the Fund who are not "interested persons" of
the Fund, as defined in the Investment Company Act, and have no direct or
indirect financial interest in the operation of this Plan or any agreements
related to it (the "Rule 12b-1 Directors"), cast in person at a meeting or
meetings called for the purpose of voting on the Plan and such related
agreements.
6. The Plan shall continue in effect for so long as such continuance is
specifically approved at least annually in the manner provided for approval of
the Plan in Paragraph 5.
2
<PAGE>
7. The Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Directors, or by vote of a majority of the outstanding Class D voting
securities of the Fund.
8. The Plan may not be amended to increase materially the rate of payments
provided for in Paragraph 1 hereof unless such amendment is approved by at least
a majority, as defined in the Investment Company Act, of the outstanding Class D
voting securities of the Fund, and by the Directors of the Fund in the manner
provided for in Paragraph 5 hereof, and no material amendment to the Plan shall
be made unless approved in the manner provided for approval and annual renewal
in Paragraph 5 hereof.
9. While the Plan is in effect, the selection and nomination of Directors
who are not interested persons, as defined in the Investment Company Act, of the
Fund shall be committed to the discretion of the Directors who are not
interested persons.
10. The Fund shall preserve copies of the Plan and any related agreements
and all reports made pursuant to Paragraph 3 hereof, for a period of not less
than six years from the date of the Plan, or the agreements or such report, as
the case may be, the first two years in an easily accessible place.
IN WITNESS WHEREOF, the parties hereto have executed this Distribution Plan
as of the date first above written.
MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT
PROGRAM, INC., doing business as MERRILL
LYNCH BALANCED FUND FOR INVESTMENT AND
RETIREMENT
By_____________________________________
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By_____________________________________
Title:
3
<PAGE>
CLASS D SHARES DISTRIBUTION PLAN SUB-AGREEMENT
AGREEMENT made as of the day of October 1994, by and between Merrill
Lynch Funds Distributor, Inc. a Delaware corporation ("MLFD"), and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation ("Securities
Firm").
W I T N E S S E T H :
--------------------
WHEREAS, MLFD has entered into an agreement with Merrill Lynch Retirement
Benefit Investment Program, Inc., doing business as 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 D shares of
common stock, par value $0.01 per share (the "Class D shares"), of the Fund; and
WHEREAS, MLFD and the Fund have entered into a Class D Shares Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended (the "Act"), pursuant to which MLFD receives an account
maintenance fee from the Fund at the annual rate of 0.25% of average daily net
assets of the Fund relating to Class D shares for providing account maintenance
activities and services with respect to Class D shares; and
WHEREAS, MLFD desires the Securities Firm to perform certain account
maintenance activities and services, including assistance in connection with
inquiries related to shareholder accounts, for the Fund's Class D shareholders
and the Securities Firm is willing to perform such services;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereby agree as follows:
1. The Securities Firm shall provide account maintenance activities and
services with respect to the Class D shares of the Fund and incur expenditures
in connection with such activities and services, of the types referred to in
Paragraph 1 of the Plan.
2. As compensation for its services performed under this Agreement, MLFD
shall pay the Securities Firm a fee at the end of each calendar month in an
amount agreed upon by the parties hereto.
3. The Securities Firm shall provide MLFD, at least quarterly, such
information as reasonably requested by MLFD to enable MLFD to comply with the
reporting requirements of Rule
4
<PAGE>
12b-1 regarding the disbursement of the fee during such period referred to in
Paragraph 3 of the Plan.
4. This Agreement shall not take effect until it has been approved by
votes of a majority of both (a) the Directors of the Fund and (b) those
Directors of the Fund who are not "interested persons" of the Fund, as defined
in the Act, and have no direct or indirect financial interest in the operation
of the Plan, this Agreement or any agreements related to the Plan or this
Agreement (the "Rule 12b-1 Directors"), cast in person at a meeting or meetings
called for the purpose of voting on this Agreement.
5. This Agreement shall continue in effect for as long as such continuance
is specifically approved at least annually in the manner provided for approval
of the Plan in Paragraph 5.
6. This Agreement shall automatically terminate in the event of its
assignment or in the event of the termination of the Plan or any amendment to
the Plan that requires such termination.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By_____________________________________
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By_____________________________________
5
