<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 26, 1996
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. [_]
POST-EFFECTIVE AMENDMENT NO. 15 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_]
AMENDMENT NO. 18 [X]
MERRILL LYNCH BALANCED FUND FOR
INVESTMENT AND RETIREMENT, 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. and PHILIP L. KIRSTEIN, ESQ.
SHEREFF, FRIEDMAN, HOFFMAN & GOODMAN, LLP MERRILL LYNCH ASSET MANAGEMENT
919 THIRD AVENUE P.O. BOX 9011
NEW YORK, NEW YORK 10022 PRINCETON, NEW JERSEY 08543-9011
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE:
[X] Immediately upon filing pursuant to paragraph (b), or
[_] 60 days after filing pursuant to paragraph (a), or
[_] on (date) pursuant to paragraph (b), or
[_] on (date) pursuant to paragraph (a),
[_] 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 WAS FILED ON NOVEMBER 16, 1995.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
MERRILL LYNCH BALANCED FUND FOR INVESTMENT AND RETIREMENT, INC.
POST-EFFECTIVE AMENDMENT NO. 15 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
PricingSM 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 Objective 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
JANUARY 26, 1996 MERRILL LYNCH BALANCED FUND
FOR INVESTMENT AND RETIREMENT, INC.
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 . PHONE NO. (609) 282-2800
----------------
Merrill Lynch Balanced Fund for Investment and Retirement, Inc., 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. For more information on the
Fund's investment objective and policies, please see "Investment Objective and
Policies" on page 10.
----------------
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 4.
Shares may be purchased directly from Merrill Lynch Funds Distributor, Inc.
(the "Distributor"), P.O. Box 9081, Princeton, New Jersey 08543-9081, (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 January 26, 1996 (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 CLASS D
---------- ---------- ------- -------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES:
Maximum Sales Charge
Imposed on Purchases
(as a percentage of
offering price)....... 5.25%(c) None None 5.25%(c)
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(d) 4.0% during the first 1% for one year None(d)
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)(e).........
Investment Advisory
Fees(f)............... 0.62% 0.62% 0.62% 0.62%
12b-1 Fees(g):
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....... 0.01% 0.01% 0.01% 0.01%
Shareholder Servicing
Costs(h)............ 0.25% 0.28% 0.28% 0.26%
Other................ 0.13% 0.13% 0.13% 0.13%
---- ---- ---- ----
Total Other Ex-
penses............ 0.39% 0.42% 0.42% 0.40%
---- ---- ---- ----
Total Fund Operating
Expenses.............. 1.01% 2.04% 2.04% 1.27%
==== ==== ==== ====
</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 15.
(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 17.
(c) Reduced for purchases of $25,000 and over, and waived for purchases of
Class A shares by certain retirement plans in connection with certain
investment programs. 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 15.
(d) Class A and Class D shares are not subject to a contingent deferred sales
charge ("CDSC"), except that certain purchases of $1,000,000 or more which
are not 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.
(e) Information for Class A and Class B shares is stated for the fiscal year
ended September 30, 1995. Information for Class C and Class D shares is
stated for the period October 21, 1994 (commencement of operations) to
September 30, 1995.
(f) See "The Fund and Its Management--Investment Advisory Fee"--page 12.
(g) See "Purchase of Shares--Distribution Plans"--page 21.
(h) See "The Fund and Its Management--Transfer Agency Services"--page 12.
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................. $62 $83 $105 $170
Class B................. $61 $84 $110 $218*
Class C................. $31 $64 $110 $237
Class D................. $65 $91 $119 $198
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................. $62 $83 $105 $170
Class B................. $21 $64 $110 $218*
Class C................. $21 $64 $110 $237
Class D................. $65 $91 $119 $198
</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".
IMPORTANT FUND INFORMATION
On October 13, 1995, the Board of Directors of the Fund approved an Agreement
and Plan of Reorganization between the Fund and Merrill Lynch Global Allocation
Fund, Inc. ("Global Allocation") pursuant to which the Fund would transfer
substantially all of its assets and substantially all of its liabilities to
Global Allocation in exchange for newly issued shares of Global Allocation, and
thereafter deregister as an investment company under the Investment Company Act
of 1940, as amended, and dissolve in accordance with the laws of the State of
Maryland (the "Reorganization"). Subsequently, the Reorganization was approved
by vote of the Fund's shareholders at a special meeting of shareholders held on
January 25, 1996.
The Reorganization is conditioned upon the receipt of a favorable ruling from
the Internal Revenue Service (the "IRS") concerning the tax consequences of the
Reorganization. If the requisite IRS approval is obtained, it is anticipated
that the Reorganization will take place as soon as practicable following
receipt of such approval.
3
<PAGE>
The Fund and Global Allocation are open-end management investment companies
with similar, though not identical, investment objectives. The Fund seeks to
provide shareholders with as high a level of total investment return as is
consistent with a reasonable and relatively low level of risk. Global
Allocation seeks to provide a high total investment return, consistent with
prudent risk. The Board of Directors of Global Allocation approved the
Reorganization on October 2, 1995.
MLAM, the investment adviser to both the Fund and Global Allocation,
believes that the Reorganization will benefit the Fund's shareholders in
several ways. First, Balanced Fund shareholders will remain invested in an
open-end fund that has an investment objective similar to that of Balanced
Fund, although not identical. Second, Balanced Fund shareholders are likely to
experience certain additional benefits, including lower expenses per share,
economies of scale and greater flexibility in portfolio management.
If the Reorganization takes place, Fund shareholders will receive shares of
that class of shares of Global Allocation having the same letter designation
(i.e., Class A, Class B, Class C or Class D) and the same distribution fees,
account maintenance fees, and sales charges (including CDSCs), if any, as the
shares of the Fund held by them immediately prior to the Reorganization.
MERRILL LYNCH SELECT PRICINGSM SYSTEM
The Fund offers four classes of shares under the Merrill Lynch Select
PricingSM 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 PricingSM 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, 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
4
<PAGE>
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. 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, and waived for purchases of
Class A shares by certain retirement plans in connection with certain
investment programs. 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 was 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 of the Fund in a
shareholder account are entitled to purchase additional Class A
shares of the Fund 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 Merrill
Lynch & Co., Inc. ("ML & Co.") and its subsidiaries (the term
"subsidiaries", when used herein with respect to ML & Co., includes
MLAM, FAM and certain other entities directly or indirectly wholly-
owned and controlled by ML & Co.), and their directors and employees
and to members of the Boards of MLAM-advised mutual funds. The
maximum initial sales charge is 5.25%, which is reduced for purchases
of $25,000 and over and waived for purchases by certain retirement
plans in connection with certain investment programs. Purchases of
5
<PAGE>
$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 to 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 to 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 the conversion and holding
periods for certain retirement plans, were 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 $1,000,000 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 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, except that there is no waiver for
purchases by retirement plans in connection with certain investment
programs. 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".
6
<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".
7
<PAGE>
FINANCIAL HIGHLIGHTS
The financial information in the table below has been audited in conjunction
with the audits of the financial statements of the Fund by Deloitte & Touche
LLP, independent auditors. Financial statements for the year ended September
30, 1995, and the independent auditors' report thereon are included in the
Statement of Additional Information. 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>
<S> <C>
THE FOLLOWING
PER SHARE DATA
AND RATIOS HAVE
BEEN DERIVED
FROM INFORMATION
PROVIDED IN THE
FINANCIAL
STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------
FOR THE YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------
1995(1) 1994(1) 1993 1992 1991 1990 1989+
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period..... $ 11.67 $ 13.02 $ 12.57 $ 11.94 $ 10.61 $ 11.93 $ 11.18
------- ------- ------- ------- ------- ------- -------
Investment Income--net.. .32 .32 .43 .47 .70 .64 .24
Realized and unrealized
gain (loss) on
investments
and foreign currency
transactions--net....... .88 (.07) 1.29 .61 1.63 (1.41) 1.42
------- ------- ------- ------- ------- ------- -------
Total from investment
operations.............. 1.20 .25 1.72 1.08 2.33 (.77) 1.66
------- ------- ------- ------- ------- ------- -------
Less dividends and
distributions:
Investment income--net.. (.34) (.37) (.39) (.45) (.62) (.55) (.90)
Realized gain on
investments--net....... (.97) (1.23) (.88) -- (.38) -- (.01)
------- ------- ------- ------- ------- ------- -------
Total dividends and
distributions........... (1.31) (1.60) (1.27) (.45) (1.00) (.55) (.91)
------- ------- ------- ------- ------- ------- -------
Net asset value, end of
period.................. $ 11.56 $ 11.67 $ 13.02 $ 12.57 $ 11.94 $ 10.61 $ 11.93
======= ======= ======= ======= ======= ======= =======
TOTAL INVESTMENT
RETURN:**
Based on net asset value
per share............... 11.86% 1.81% 14.62% 9.23% 23.14% (6.86%) 15.54%#
======= ======= ======= ======= ======= ======= =======
RATIOS TO AVERAGE NET
ASSETS:
Expenses, excluding
account maintenance and
distribution fees....... 1.01% .83% .83% .81% .85% .83% .78%*
======= ======= ======= ======= ======= ======= =======
Expenses................ 1.01% .83% .83% .81% .85% .83% .78%*
======= ======= ======= ======= ======= ======= =======
Investment income--net.. 2.93% 2.68% 3.09% 3.18% 3.64% 5.12% 4.23%*
======= ======= ======= ======= ======= ======= =======
SUPPLEMENTAL DATA:
Net assets, end of
period (in thousands)... $30,485 $39,963 $40,688 $20,320 $12,839 $ 4,511 $ 2,080
======= ======= ======= ======= ======= ======= =======
Portfolio turnover...... 86.33% 59.15% 79.55% 65.40% 173.76% 163.56% 175.47%
======= ======= ======= ======= ======= ======= =======
</TABLE>
- ----
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Class A shares commenced operations on October 27, 1988.
# Aggregate total investment return.
(1)
Based on average shares outstanding during the year.
8
<PAGE>
<TABLE>
<CAPTION>
CLASS B
---------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED SEPTEMBER 30,
---------------------------------------------------------------------------------------------------------------
1995(1) 1994(1) 1993 1992 1991 1990 1989 1988 1987 1986++
-------- -------- -------- -------- -------- ---------- ---------- ---------- ---------- -----------
<S> <C> <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.......... $ 11.75 $ 13.09 $ 12.62 $ 11.99 $ 10.60 $ 11.91 $ 10.94 $ 12.54 $ 11.17 $ 10.00
-------- -------- -------- -------- -------- ---------- ---------- ---------- ---------- -----------
Investment
Income--net..... .21 .20 .24 .29 .39 .50 .53 .57 .39 .25
Realized and
unrealized gain
(loss) on
investments and
foreign currency
transactions--
net............. .90 (.07) 1.37 .66 1.83 (1.39) 1.25 (1.40) 1.64 .98
-------- -------- -------- -------- -------- ---------- ---------- ---------- ---------- -----------
Total from
investment
operations...... 1.11 .13 1.61 .95 2.22 (.89) 1.78 (.83) 2.03 1.23
-------- -------- -------- -------- -------- ---------- ---------- ---------- ---------- -----------
Less dividends
and
distributions:
Investment
income--net..... (.14) (.24) (.26) (.32) (.45) (.42) (.80) (.55) (.38) (.06)
Realized gain on
investments--
net............ (.97) (1.23) (.88) -- (.38) -- (.01) (.22) (.28) --
-------- -------- -------- -------- -------- ---------- ---------- ---------- ---------- -----------
Total dividends
and
distributions... (1.11) (1.47) (1.14) (.32) (.83) (.42) (.81) (.77) (.66) (.06)
-------- -------- -------- -------- -------- ---------- ---------- ---------- ---------- -----------
Net asset value,
end of period... $ 11.75 $ 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........... 10.80% 0.76% 13.49% 8.01% 21.91% (7.79%) 16.93% (6.36%) 18.98% 12.29%
======== ======== ======== ======== ======== ========== ========== ========== ========== ===========
RATIOS TO AVERAGE
NET ASSETS:
Expenses,
excluding
account
maintenance and
distribution
fees............ 1.04% .86% .85% .85% .90% .86% .84% .82% .73% .82%
======== ======== ======== ======== ======== ========== ========== ========== ========== ===========
Expenses......... 2.04% 1.86% 1.85% 1.85% 1.90% 1.86% 1.84% 1.82% 1.73% 1.82%
======== ======== ======== ======== ======== ========== ========== ========== ========== ===========
Investment
income--net..... 1.90% 1.65% 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)...... $152,121 $709,836 $830,955 $886,920 $986,895 $1,171,567 $1,735,873 $2,264,429 $3,384,647 $ 2,065,752
======== ======== ======== ======== ======== ========== ========== ========== ========== ===========
Portfolio
turnover........ 86.33% 59.15% 79.55% 65.40% 173.76% 163.56% 175.47% 239.78% 145.17% 143.78%
======== ======== ======== ======== ======== ========== ========== ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
CLASS C CLASS D
------------ ------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
SEPTEMBER SEPTEMBER
30, 1995+(1) 30, 1995+(1)
------------ ------------
<S> <C> <C>
INCREASE
(DECREASE) IN
NET ASSET VALUE:
PER SHARE
OPERATING
PERFORMANCE:
Net asset value,
beginning of
period.......... $11.74 $ 11.66
------ --------
Investment
Income--net..... .19 .27
Realized and
unrealized gain
(loss) on
investments and
foreign currency
transactions--
net............. .92 .90
------ --------
Total from
investment
operations...... 1.11 1.17
------ --------
Less dividends
and
distributions:
Investment
income--net..... (.28) (.32)
Realized gain on
investments--
net............ (.97) (.97)
------ --------
Total dividends
and
distributions... (1.25) (1.29)
------ --------
Net asset value,
end of period... $11.60 $ 11.54
====== ========
TOTAL INVESTMENT
RETURN:**
Based on net
asset value per
share........... 10.93%# 11.62%#
====== ========
RATIOS TO AVERAGE
NET ASSETS:
Expenses,
excluding
account
maintenance and
distribution
fees............ 1.04%* 1.02%*
====== ========
Expenses......... 2.04%* 1.27%*
====== ========
Investment
income--net..... 1.94%* 2.68%*
====== ========
SUPPLEMENTAL
DATA:
Net assets, end
of period (in
thousands)...... $1,154 $467,546
====== ========
Portfolio
turnover........ 86.33% 86.33%
====== ========
</TABLE>
- ------
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Class C and Class D shares commenced operations on October 21, 1994.
++ Class B shares commenced operations on November 29, 1985.
# Aggregate total investment return.
(1) Based on average shares outstanding during the period.
9
<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 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. In seeking
to identify "high quality" companies, particular emphasis is placed by
management on common stocks of companies which are believed to have internal
strengths, such as good financial resources, a satisfactory rate of return on
capital, a good industry position and superior management skills. 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.
The Fund also may engage in options and futures transactions 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.
Inasmuch as the Fund is authorized to invest in bonds and other fixed-income
securities, it is important to note that the portion of the Fund's net asset
value attributable to such securities may fall when interest rates rise and
rise when interest rates fall. In general, fixed-income securities with longer
maturities will be subject to greater volatility resulting from interest rate
fluctuations than will fixed-income securities with shorter maturities.
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.
10
<PAGE>
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".
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 of MLAM and its affiliate, FAM; President and
Director of Princeton Services, Inc.; Executive Vice President of ML & Co.;
Director of Merrill Lynch Funds Distributor, Inc.
James H. Bodurtha--Chairman and CEO, China Enterprise Management
Corporation.
Herbert I. London--John M. Olin Professor of Humanities, Gallatin
Division of New York University.
Robert R. Martin--Director, WTC Industries, Inc.
Joseph L. May--Attorney in private practice.
Andre F. Perold--Professor, Harvard Business School.
- --------
* Interested person, as defined by 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 130 other registered investment companies,
as well as to numerous pension plans and other institutions. As of December 31,
1995, the Investment Adviser and FAM had a total of
11
<PAGE>
approximately $196.4 billion in investment company and other portfolio assets
under management, including accounts of certain affiliates of the Investment
Adviser.
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.
Investment 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, 1995, the total management fee paid by the Fund to the Investment
Adviser was $4,289,001 (based upon average net assets of approximately $696.5
million). For the fiscal year ended September 30, 1995, the ratio of total
expenses, excluding account maintenance and distribution fees, to average net
assets was 1.01% for the Class A shares and 1.04% for the Class B shares. For
the period October 21, 1994 (commencement of operations) to September 30, 1995,
the annualized ratio of total expenses, excluding account maintenance and
distribution fees, to average net assets was 1.04% for Class C shares and 1.02%
for Class D shares.
Transfer Agency Services. Merrill Lynch Financial Data Services, Inc. (the
"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, 1995, the total fee
paid by the Fund to the Transfer Agent was $1,826,759. At December 31, 1995,
the Fund had 3,725 Class A shareholder accounts, 18,152 Class B shareholder
accounts, 140 Class C shareholder accounts and 64,126 Class D shareholder
accounts. At this level of accounts, the annual fee payable to the Transfer
Agent would aggregate approximately $1,002,449 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, 1995, the Fund reimbursed the
Investment Adviser $115,994 for accounting services.
Code of Ethics. The Board of Directors of the Fund has adopted a Code of
Ethics under Rule 17j-1 of the Investment Company Act which incorporates the
Code of Ethics of the Investment Adviser (together, the "Codes"). The Codes
significantly restrict the personal investing activities of all employees of
the Investment Adviser and, as described below, impose additional, more
onerous, restrictions on fund investment personnel.
The Codes require that all employees of the Investment Adviser preclear any
personal securities investment (with limited exceptions, such as government
securities). The preclearance requirement and associated procedures are
designed to identify any substantive prohibition or limitation applicable to
the
12
<PAGE>
proposed investment. The substantive restrictions applicable to all employees
of the Investment Adviser include a ban on acquiring any securities in a "hot"
initial public offering and a prohibition from profiting on short-term trading
in securities. In addition, no employee may purchase or sell any security which
at the time is being purchased or sold (as the case may be), or to the
knowledge of the employee is being considered for purchase or sale, by any fund
advised by the Investment Adviser. Furthermore, the Codes provide for trading
"blackout periods" which prohibit trading by investment personnel of the Fund
within periods of trading by the Fund in the same (or equivalent) security (15
or 30 days depending upon the transaction).
PURCHASE OF SHARES
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, for which
the minimum initial purchase is $100 and the minimum subsequent purchase is
$1.00. Different minimums may apply to purchases through the Merrill Lynch
BlueprintSM Program. See "Purchase of Shares--Reduced Initial Sales Charges--
Merrill Lynch BlueprintSM 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
PricingSM 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 the close of business on the New York
Stock Exchange (generally 4:00 P.M. New York time), which includes orders
received after the close of business on the previous day, the applicable
offering price will be based on the net asset value determined as of 15 minutes
after the close of business on the New York Stock Exchange on that day,
provided the Distributor in turn receives orders from the securities dealer
prior to 30 minutes after the close of business on the New York Stock Exchange
on that day. If the purchase orders are not received prior to 30 minutes after
the close of business on the New York Stock Exchange, such orders shall be
deemed received on the next business day. 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
PricingSM 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
13
<PAGE>
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 PricingSM System is
set forth under "Merrill Lynch Select PricingSM System" on page 4.
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 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 Select PricingSM 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.
14
<PAGE>
(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, and waived for purchases of
Class A shares by certain retirement plans in connection with certain
investment programs. 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 was 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.
<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 and on Class A
purchases by certain retirement plan investors in connection with certain
investment programs. If the sales charge is waived in connection with a
purchase of $1,000,000 or more, 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 $1,000,000 or more of
Class A or Class D shares by certain Employer Sponsored Retirement or
Savings 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, 1995, the Fund sold 1,070,519
Class A shares for aggregate net proceeds of $11,586,869. The gross sales
charges for the sale of Class A shares of the Fund for that year were $5,097,
of which $477 and $4,620 were received by the Distributor and Merrill Lynch,
respectively.
15
<PAGE>
During such period, no CDSCs were received with respect to Class A shares for
which the initial sales charge was waived.
During the period October 21, 1994 (commencement of operations) to September
30, 1995, the Fund sold 522,879 Class D shares for aggregate net proceeds of
$5,601,295. The gross sales charges for the sale of Class D shares of the Fund
for that period were $65,058, of which $3,598 and $61,460 were received by the
Distributor and Merrill Lynch, respectively. For the same period, $10,323 in
CDSCs were received with respect to Class D shares for which the initial sales
charge was waived.
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 of the
Fund in a shareholder account, including participants in the Merrill Lynch
BlueprintSM Program, are entitled to purchase additional Class A shares of the
Fund 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 are
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 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 A and Class D shares are offered at net asset value to certain Employer
Sponsored Retirement or Savings Plans and to Employee Access Accounts SM
available through employers which provide such plans.
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
16
<PAGE>
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.
Class D shares of the Fund are offered at net asset value to shareholders of
Merrill Lynch Municipal Strategy Fund Inc. and of Merrill Lynch High Income
Municipal Bond Fund Inc. who wish to reinvest the net proceeds from a sale of
certain of their shares of common stock of such funds in shares of the Fund.
Similarly, Class A shares of the Fund 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 such fund in shares of the Fund.
Additional information concerning these reduced initial sales charges,
including information regarding investments by Employer 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 to Class D shares of the Fund and
thereafter will be subject to lower continuing fees. See "Conversion of Class B
Shares to Class D Shares" below. Both Class B and Class C shares 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 to Class D shares of the
17
<PAGE>
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 to 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>
For the fiscal year ended September 30, 1995, the Distributor received CDSCs
of $199,447 with respect to Class B shares, all of which was paid to Merrill
Lynch.
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
18
<PAGE>
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 a CDSC because of dividend
reinvestment. With respect to the remaining 40 shares, the CDSC is applied
only to the original cost of $10 per share and not to the increase in net
asset value of $2 per share. Therefore, $400 of the $600 redemption proceeds
will be charged at a rate of 2.0% (the applicable rate in the third year after
purchase).
In the event that Class B shares are exchanged by certain retirement plans
for Class A shares in connection with a transfer to the Merrill Lynch Mutual
Fund Advisor ("MFA") program, the time period that such Class A shares are
held in the MFA program will be included in determining the holding period of
Class B shares reacquired upon termination of participation in the MFA program
(see "Shareholder Services--Exchange Privilege").
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 and for any Class B shares
that were acquired and held at the time of the redemption in an Employee
Access Account SM available through employers providing eligible 401(k) plans.
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 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.
For the period October 21, 1994 (commencement of operations) to September
30, 1995, the Distributor received no CDSCs with respect to the redemption of
Class C shares.
19
<PAGE>
Conversion of Class B Shares to Class D Shares. After approximately eight
years (the "Conversion Period"), Class B shares will be converted automatically
to 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 to
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.
The Conversion Period also is modified for retirement plan investors which
participate in the MFA program. While participating in the MFA program, such
investors will hold Class A shares. If these Class A shares were acquired
through exchange of Class B shares (see "Shareholders Services--Exchange
Privilege"), then the holding period for such Class A shares will be "tacked"
to the holding period of the Class B shares originally held for purposes of
calculating the Conversion Period on Class B shares acquired upon termination
of participation in the MFA program.
20
<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.
For the fiscal year ended September 30, 1995, the Fund paid the Distributor
account maintenance fees of $727,880 and distribution fees of $2,183,639 (based
on average net assets relating to the Class B shares of approximately $292.0
million) under the Class B Distribution Plan. For the period October 21, 1994
(commencement of operations) to September 30, 1995, the Fund paid the
Distributor account maintenance fees of $1,320 and distribution fees of $3,959
(based on average net assets relating to the Class C shares of $561,798) under
the Class C Distribution Plan. For the same period, the Fund paid the
Distributor $869,529 in account maintenance fees (based on average net assets
relating to the Class D shares of approximately $370.1 million) under the Class
D Distribution Plan. At December 31, 1995, the net assets of the Fund subject
to the Class B Distribution Plan aggregated approximately $136.5 million. At
this net asset level, the annual fee payable pursuant to the Class B
Distribution Plan would aggregate approximately $1.6 million. At December 31,
1995, the net assets of the Fund subject to the Class C Distribution Plan
aggregated approximately $1.2 million. At this net asset level, the annual fee
payable pursuant to the Class C Distribution Plan would aggregate $12,219. At
December 31, 1995, the net assets of the Fund subject to the Class D
Distribution Plan aggregated approximately $471.8 million. At this net asset
level, the annual fee payable pursuant to the Class D Distribution Plan would
aggregate approximately $1.2 million.
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
21
<PAGE>
revenues from the Distribution Plans may be more or less than distribution-
related expenses. Information with respect to the distribution-related revenues
and expenses is presented to the Directors for their consideration in
connection with their deliberations as to the continuance of the Class B and
Class C Distribution Plans. This information is presented annually as of
December 31 of each year on a "fully allocated accrual" basis and quarterly on
a "direct expense and revenue/cash" basis. On the fully allocated accrual
basis, revenues consist of the account maintenance fees, distribution fees, 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. With respect to Class B shares, as of December 31, 1994, the last
date at which fully allocated accrual data is available, the fully allocated
accrual revenues received by the Distributor and Merrill Lynch exceeded fully
allocated accrual expenses for the period since the Fund commenced operations
on November 29, 1985 by $29,354,000 (9.80% of Class B net assets at that date).
As of September 30, 1995, direct cash revenues for the period since the
commencement of operations exceeded direct cash expenses by $117,590,901
(77.30% of Class B net assets at that date).
With respect to Class C shares, as of September 30, 1995, direct cash
expenses for the period since October 21, 1994 (commencement of operations)
exceeded direct cash revenues by $115 (.01% of Class C 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 to 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
22
<PAGE>
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.
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 BlueprintSM 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 Account at
any time by mailing a check directly to the Transfer Agent. Shareholders may
also maintain their accounts through Merrill Lynch. Upon the transfer of shares
out of a Merrill Lynch brokerage account, an Investment Account in the
transferring shareholder's name will be 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.
Share certificates are issued only for full shares and only upon the specific
request of the shareholder. Issuance of certificates representing all or only
part of the full shares in an Investment Account may be requested by a
shareholder directly from the Transfer Agent.
23
<PAGE>
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.
Under the Merrill Lynch Select PricingSM 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 are exchangeable for shares of the same
class of other MLAM-advised mutual funds.
Shares of the Fund which are subject to a CDSC are 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 are 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.
24
<PAGE>
The exchange privilege is modified with respect to certain retirement plans
which participate in the MFA program. Such retirement plans may exchange Class
B, Class C or Class D shares that have been held for at least one year for
Class A shares of the same Fund on the basis of relative net asset values in
connection with the commencement of participation in the MFA program, i.e., no
CDSC will apply. The one year holding period does not apply to shares
reacquired through reinvestment of dividends. Upon termination of participation
in the MFA program. Class A shares will be reexchanged for the class of shares
originally held. For purposes of computing any CDSC that may be payable upon
redemption of Class B or Class C shares so reacquired, or the Conversion Period
for Class B shares so acquired, the holding period for the Class A shares will
be "tacked" to the holding period for the Class B or Class C shares originally
held. The Fund's exchange privilege also is modified with respect to purchases
of Class A and Class D shares by non-retirement plan investors under the 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
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 whose account is maintained through the Transfer
Agent 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. A
shareholder whose account is accepted through Merrill Lynch may, at any time,
by written notice to Merrill Lynch, elect to have both dividends and capital
gains distributions paid in cash, rather than reinvested. 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 or a 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, 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
25
<PAGE>
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 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, Merrill Lynch Financial Data
Services, Inc., P.O. Box 45289, Jacksonville, Florida 32232-5289. Redemption
requests delivered other than by mail should be delivered to Merrill Lynch
Financial Data Services, Inc., 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 (generally 4:00 P.M. New York
time) on the day received and such request is received by the Fund from the
dealer not later than 30 minutes after the close of business on the New York
Stock Exchange on the same day.
26
<PAGE>
Dealers have the responsibility of submitting such repurchase requests to the
Fund not later than 30 minutes after the close of business on the New York
Stock Exchange in order to obtain that day's closing price. 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. 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
27
<PAGE>
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.
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".
28
<PAGE>
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 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
29
<PAGE>
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 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.
30
<PAGE>
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 15% (10% to the extent required by certain state laws)
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
31
<PAGE>
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.
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.
Illiquid Securities. The Fund may invest up to 15% of its total assets in
illiquid securities, although it will limit such investments to 10% of its
total assets to the extent required by state law. Pursuant to this restriction
the Fund may not invest in securities which cannot be readily resold because of
legal or contractual restrictions or which cannot otherwise be marketed,
redeemed, put to the issuer or a third party, or which do not mature within
seven days, or which the Board of Directors has not determined to be liquid,
if, regarding all such securities, more than 15% of its total assets, taken at
market value, would be invested in such securities.
The Fund may purchase, without regard to the above limitation, securities
that are not registered under the Securities Act of 1933, as amended (the
"Securities Act") but that can be offered and sold to "qualified institutional
buyers" under Rule 144A under the Securities Act, provided that the Fund's
Board of Trustees, or the Manager pursuant to guidelines adopted by the Board,
continuously determines, based on the trading markets for the specific Rule
144A security, that it is liquid. The Board of Directors retains oversight and
is ultimately responsible for the determinations. The Board of Directors
carefully monitors the Fund's investments in these securities, focusing on such
factors, among others, as valuation, liquidity and availability of information.
This investment practice could have the effect of increasing the level of
illiquidity in the Fund to the extent that qualified institutional buyers
become for a time uninterested in purchasing these securities.
32
<PAGE>
Foreign and Emerging Markets Securities. The Fund may invest up to 20% of its
total assets in securities issued by foreign companies. For purposes of this
investment policy, 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.
Investments in the securities of foreign issuers involve certain
considerations and risks not ordinarily associated with investments in
securities of domestic issuers. Foreign companies are not generally subject to
uniform accounting, auditing and financial standards and requirements
comparable to those applicable to U.S. companies. Foreign securities exchanges,
brokers and listed companies may be subject to less government supervision and
regulation than exists in the United States. Dividend and interest income may
be subject to withholding and other foreign taxes which may adversely affect
the net return on such investments. In addition, with respect to certain
countries, there are risks of expropriation, confiscatory taxation, political
or social instability or diplomatic developments which could affect assets of
the Fund held in foreign countries.
There may be less publicly available information about a foreign company than
a U.S. company. Foreign securities markets may have substantially less volume
than U.S. securities markets and some foreign company securities are less
liquid and more volatile than comparable securities of U.S. companies. A
portfolio of foreign securities may also be adversely affected by fluctuations
in the rates of exchange between the currencies of different nations and by
exchange control regulations. Foreign markets also have different clearance and
settlement procedures, and in certain markets there have been times when
settlements have failed to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. Delays in
settlement could result in temporary periods when assets of the Fund are
uninvested and no return is earned thereon. The inability of the Fund to make
intended security purchases due to settlement problems could cause the Fund to
miss attractive investment opportunities. Inability to dispose of a portfolio
security due to settlement problems could result either in losses to the Fund
due to subsequent declines in value of such portfolio security or, if the Fund
has entered into a contract to sell the security, could result in possible
liability to the purchaser. In addition, a portfolio which includes foreign
securities can expect to have a higher expense ratio because of the increased
transaction costs on non-U.S. securities markets and the increased costs of
maintaining the custody of foreign securities.
The Fund has made, and may continue to make, substantial investments in
securities of issuers in Latin America, the Far East and lesser developed
capital markets. The risks of investments in foreign securities described above
tend to be particularly significant when investing in lesser developed capital
markets.
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
33
<PAGE>
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.
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."
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.
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
34
<PAGE>
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 the Standard & Poor's
500 Composite Stock Price Index, the Value Line Composite Index or the Dow
Jones Industrial Average, or to data contained in publications such as Lipper
Analytical Services, Inc., Morningstar Publications, Inc. ("Morningstar"),
Money Magazine, U.S. News & World Report, Business Week, CDA Investment
Technology, Inc., Forbes Magazine and Fortune Magazine. From time to time, the
Fund may include the Fund's Morningstar risk-adjusted performance ratings in
advertisements or supplemental sales literature. As with other performance
data, performance comparisons should not be considered indicative 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
35
<PAGE>
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.
See "Shareholder Services--Automatic Reinvestment of Dividends and Capital
Gains Distributions" for information as to how to elect either dividend
reinvestment or cash payments.
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of all classes of the Fund is determined
once daily as of 15 minutes after the close of business on the New York Stock
Exchange (generally, 4:00 P.M. New York time), on 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 market 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 paid fees to MLSPS in the
amount of $421 for the fiscal year ended September 30, 1995. 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
36
<PAGE>
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 (although not necessarily meet) 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 which are traded on stock exchanges are valued at the
last sale price (regular way) on the exchange on which such securities are
traded, as of the close of business on the day the securities are being valued,
or, lacking any sales, at the last available bid price. In cases where
securities are traded on more than one exchange, the securities are valued on
the exchange designated by or under the authority of the Board of Directors as
the primary market. Securities traded in the over-the-counter market are valued
at the last available bid price in the over-the-counter market prior to the
time of valuation. 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.
Options written are valued at the last sale price in the case of exchange-
traded options or, in the case of options traded in the over-the-counter
market, the last asked price. Options purchased are valued at the last sale
price in the case of exchange-traded options or, in the case of options traded
in the over-the-counter market, the last bid price.
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, 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
37
<PAGE>
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 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
38
<PAGE>
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 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.
39
<PAGE>
SHAREHOLDER REPORTS
Only one copy of each shareholder report and certain shareholder
communications will be mailed to each identified shareholder regardless of the
number of accounts such shareholder has. If a shareholder wishes to receive
separate copies of each report and communication for each of the shareholder's
related accounts the shareholder should notify in writing:
Merrill Lynch Financial Data Services, Inc.
P.O. Box 45289
Jacksonville, Florida 32232-5289
The written notification should include the shareholder's name, address, tax
identification number and Merrill Lynch, 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 Merrill Lynch Financial
Data Services, Inc. at 800-637-3863.
40
<PAGE>
MERRILL LYNCH BALANCED FUND FOR INVESTMENT AND RETIREMENT, INC. 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, Inc. 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 Merrill Lynch 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, Inc. Authorization Form.
SPECIFY TYPE OF ACCOUNT (CHECK ONE) [_] CHECKING [_] SAVINGS
Name on your account ..........................................................
Bank Name .....................................................................
Bank Number ...................... Account Number ............................
Bank Address ..................................................................
I agree that this authorization will remain in effect until I provide written
notification to Merrill Lynch Financial Data Services, Inc. amending or
terminating this service.
Signature of Depositor ........................................................
Signature of Depositor ............................... Date...................
(if joint account, both must sign)
NOTE: IF DIRECT DEPOSIT TO BANK ACCOUNT IS SELECTED, YOUR BLANK, UNSIGNED
CHECK MARKED "VOID" OR A DEPOSIT SLIP FROM YOUR SAVINGS ACCOUNT SHOULD
ACCOMPANY THIS APPLICATION.
- -------------------------------------------------------------------------------
41
<PAGE>
- -------------------------------------------------------------------------------
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, Inc. 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, Inc.
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.
.....................................
Dealer Name and Address
- - -
By ..................................
Authorized Signature of Dealer
This form when completed should be
mailed to:
Merrill Lynch Balanced Fund for [ ][ ][ ] .......................
Investment and Retirement, Branch-Code F/C Last Name
Inc.
[ ][ ][ ][ ]
c/o Merrill Lynch Financial F/C No.
Data Services, Inc.
P.O. Box 45289 [ ][ ][ ] [ ][ ][ ][ ][ ]
Jacksonville, FL 32232-5289 Dealer's Customer A/C No.
42
<PAGE>
MERRILL LYNCH BALANCED FUND FOR INVESTMENT AND RETIREMENT, INC. 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, Inc. 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 MERRILL LYNCH FINANCIAL DATA SERVICES, INC.
AMENDING OR TERMINATING THIS SERVICE.
Specify type of account (check one): [_] checking [_] savings
Name on your Account...........................................................
Bank Name......................................................................
Bank Number........................ Account Number............................
Bank Address...................................................................
...............................................................................
Signature of Depositor................................. Date..................
Signature of Depositor.........................................................
(If joint account, both must sign)
NOTE: IF DIRECT DEPOSIT IS ELECTED, YOUR BLANK, UNSIGNED CHECK MARKED "VOID"
OR A DEPOSIT SLIP FROM YOUR SAVINGS ACCOUNT SHOULD ACCOMPANY THIS APPLICATION.
43
<PAGE>
- -------------------------------------------------------------------------------
3. APPLICATION FOR AUTOMATIC INVESTMENT PLAN
I hereby request that Merrill Lynch Financial Data Services, Inc. draw an
automated clearing house ("ACH") debit on my checking account 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, Inc., subject to
the terms set forth below. In the event that I am not eligible to purchase
Class A shares, I understand that Class D shares will be purchased.
MERRILL LYNCH FINANCIAL DATA AUTHORIZATION TO HONOR ACH DEBITS
SERVICES, INC. DRAWN BY MERRILL LYNCH FINANCIAL
DATA SERVICES, INC.
You are hereby authorized to draw an To...............................Bank
ACH debit each month on my bank (Investor's Bank)
account for investment in Merrill
Lynch Balanced Fund for Investment
and Retirement, Inc. as indicated
below:
Bank Address.........................
City...... State...... Zip Code......
Amount of each check or ACH debit
$................................. 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 Merrill Lynch Financial Data
the 20th of each month beginning Services, Inc., I agree that your
rights in respect of each such debit
......(month) or as soon thereafter as shall be the same as if it were a
possible. check drawn on you and signed
personally by me. This authority is
I agree that you are drawing these to remain in effect until revoked by
ACH debits voluntarily at my request me in writing. Until you receive
and that you shall not be liable for such notice, you shall be fully
any loss arising from any delay in protected in honoring any such
preparing or failure to prepare any debit. I further agree that if any
such debit. If I change banks or such debit be dishonored, whether
desire to terminate or suspend this with or without cause and whether
program, I agree to notify you intentionally or inadvertently, you
promptly in writing. I hereby shall be under no liability.
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, Merrill Lynch Financial Bank Signature of Depositor
Data Services, Inc. is authorized to Account (If joint account,
discontinue immediately the Automatic Number both must sign)
Investment Plan and to liquidate
sufficient shares held in my account
to offset the purchase made with the
dishonored debit.
............ .....................
Date Signature of
Depositor
..................... NOTE: IF AUTOMATIC INVESTMENT PLAN
Signature of Depositor IS ELECTED, YOUR BLANK, UNSIGNED
(If joint account, CHECK MARKED "VOID" SHOULD ACCOMPANY
both must sign) THIS APPLICATION.
44
<PAGE>
[This Page Intentionally Left Blank]
45
<PAGE>
[This Page Intentionally Left Blank]
46
<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 9081
Princeton, New Jersey 08543-9081
CUSTODIAN
The Chase Manhattan Bank, N.A.
4 Metro Tech Center
18th Floor
Brooklyn, New York 11245
TRANSFER AGENT
Merrill Lynch Financial Data Services, Inc.
Administrative Offices:
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
Mailing Address:
P.O. Box 45289
Jacksonville, Florida 32232-5289
INDEPENDENT AUDITORS
Deloitte & Touche LLP
117 Campus Drive
Princeton, New Jersey 08540-6400
COUNSEL
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESEN-
TATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND THE STATEMENT OF AD-
DITIONAL 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...................................... 4
Financial Highlights....................................................... 8
Investment Objective and Policies.......................................... 10
The Fund and Its Management................................................ 11
Purchase of Shares......................................................... 13
Initial Sales Charge Alternatives--
Class A and Class D Shares.............................................. 15
Deferred Sales Charge Alternatives--
Class B and Class C Shares.............................................. 17
Distribution Plans........................................................ 21
Limitations on the Payment of Deferred Sales Charges...................... 22
Shareholder Services....................................................... 23
Redemption of Shares....................................................... 26
Redemption................................................................ 26
Repurchase................................................................ 26
Reinstatement Privilege--
Class A and Class D Shares.............................................. 27
Investment Practices and Restrictions...................................... 27
Portfolio Strategies Involving Options and Futures........................ 27
Other Investment Practices................................................ 32
Performance Data........................................................... 34
Portfolio Transactions and Brokerage....................................... 35
Additional Information..................................................... 36
Dividends and Distributions............................................... 36
Determination of Net Asset Value.......................................... 36
Taxes..................................................................... 37
Organization of the Fund.................................................. 39
Shareholder Inquiries..................................................... 39
Shareholder Reports....................................................... 40
Authorization Form......................................................... 41
</TABLE>
Code #10331-0196
[LOGO] MERRILL LYNCH
MERRILL LYNCH
BALANCED FUND FOR INVESTMENT
AND RETIREMENT, INC.
[ART]
PROSPECTUS
January 26, 1996
Distributor:
Merrill Lynch
Funds Distributor, Inc.
This prospectus should be retained for future reference.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 26, 1996 MERRILL LYNCH BALANCED FUND
FOR INVESTMENT AND RETIREMENT, INC.
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 . PHONE NO. (609) 282-2800
----------------
Merrill Lynch Balanced Fund for Investment and Retirement, Inc., 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 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 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 January
26, 1996 (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 9081, Princeton, New Jersey 08543-9081,
(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 10 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 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 10 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 130 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
2
<PAGE>
subsidiaries. Portfolio accounting services are provided for the Fund by the
Investment Adviser, and the Fund reimburses the Investment Adviser for its
costs in connection with such services.
The Agreement will continue in effect until April 3, 1996, 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. For the Fund's fiscal
years ended September 30, 1995, 1994, and 1993, the Investment Adviser earned a
fee of approximately $4,289,001, $5,173,680, and $5,620,993, respectively, from
the Fund. At December 31, 1995, the net assets of the Fund aggregated
approximately $640.4 million. At this level, the annual management fee would
aggregate approximately $4.1 million.
Directors and Officers. The Directors and executive officers of the Fund,
their ages 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 (63)--President and Director (1)(2)--President of the
Investment Adviser (which term as used herein includes its corporate
predecessors) since 1977; President of Fund Asset Management, L.P. ("FAM")
(which term as used herein includes its corporate predecessors) since 1977;
President and Director of Princeton Services, Inc. ("Princeton Services") since
1993; Executive Vice President of Merrill Lynch from 1990 to 1995; Executive
Vice President of ML & Co. since 1990; Director of Merrill Lynch Funds
Distributor, Inc. ("MLFD" or the "Distributor").
3
<PAGE>
James H. Bodurtha (51)--Director (2)--124 Long Pond Road, Plymouth,
Massachusetts 02360. Chairman and Chief Executive Officer, China Enterprise
Management Corporation since 1993; Chairman, Berkshire Corporation since 1980;
Partner, Squire, Sanders & Dempsey from 1980 to 1993.
Herbert I. London (56)--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 (68)--Director (2)--513 Grand Hill, St. Paul, Minnesota
55102. Director, WTC Industries, Inc. since 1994 and Chairman thereof in 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 (66)--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 (43)--Director (2)--Morgan Hall, Soldiers Field, Boston,
Massachusetts 02163. Professor, Harvard Business School 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 (55)--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.
Denis B. Cummings (53)--Vice President (1)(2)--Vice President of the
Investment Adviser since 1978.
Donald C. Burke (35)--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 (46)--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 (37)--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, trustee or officer of other
investment companies for which the Investment Adviser or FAM acts as
Investment Adviser.
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, 1995, fees and expenses paid to
the unaffiliated Directors aggregated $46,274.
The following table sets forth for the fiscal year ended September 30, 1995,
compensation paid by the Fund to the non-interested Directors and for the
calendar year ended December 31, 1994, the aggregate compensation paid by all
investment companies advised by MLAM and its affiliate, FAM ("MLAM/FAM Advised
Funds") to the non-interested Directors.
<TABLE>
<CAPTION>
TOTAL COMPENSATION
FROM FUND AND
AGGREGATE PENSION OR RETIREMENT MLAM/FAM ADVISED
COMPENSATION BENEFITS ACCRUED AS FUNDS PAID TO
NAME OF DIRECTOR FROM FUND* PART OF FUND EXPENSES DIRECTORS(1)
---------------- ------------ --------------------- ------------------
<S> <C> <C> <C>
James H. Bodurtha......... $2,750 None 157,500**
Herbert I. London......... $9,000 None 157,500
Robert R. Martin.......... $9,000 None 157,500
Joseph L. May............. $9,000 None 157,500
Andre F. Perold........... $9,000 None 157,500
</TABLE>
- --------
(1) The Directors served on the boards of other MLAM/FAM Advised Funds as
follows: Mr. Bodurtha (46 boards); Mr. London (46 boards); Mr. Martin (46
boards); Mr. May (46 boards); and Mr. Perold (46 boards).
* Includes September 30, 1995 meeting which was rescheduled for October 13,
1995.
** $157,500 represents the amount Mr. Bodurtha would have received if he had
been a Director for the entire calendar year ended December 31, 1994. Mr.
Bodurtha was elected to the Fund's Board of Directors effective June 23,
1995.
As of January 1, 1996, the officers and Directors of the Fund as a group (11
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
PricingSM System: Class A and Class D shares are sold to investors choosing
the initial sales charge alternatives and Class B and Class C shares are sold
to investors choosing the deferred sales charge alternatives. 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, has
5
<PAGE>
the same rights and is 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 PricingSM System is used by more than 50 mutual
funds advised by the Investment Adviser or its affiliate, FAM. Funds advised by
the Investment Adviser or FAM are referred to herein as "MLAM-advised mutual
funds".
The 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 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 fiscal years
ended September 30, 1995, 1994 and 1993 were $5,097, $54,923 and $62,442,
respectively, of which the Distributor received $477, $3,336 and $3,517 and
Merrill Lynch received $4,620, $51,587 and $58,925, respectively. For the
fiscal year ended September 30, 1995 the Distributor received no CDSCs with
respect to Class A shares for which the initial sales charge was waived. For
the period October 21, 1994 (commencement of operations) to September 30, 1995,
the gross sales charges for the sale of Class D shares was $65,058, of which
the Distributor received $3,598 and Merrill Lynch received $61,460. For the
same period, $10,323 in CDSCs were received with respect to Class D 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
6
<PAGE>
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 Merrill Lynch Financial Data Services, Inc., the
Fund's transfer agent (the "Transfer Agent"). The Letter of Intention is not
available to employee benefit plans for which Merrill Lynch provides plan
participant recordkeeping services. The Letter of Intention is not a binding
obligation to purchase any amount of Class A 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.
7
<PAGE>
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
Blueprint through the Merrill Lynch Directed IRA Rollover Program ("IRA
Rollover Program") available from Merrill Lynch Business Financial Services, a
business unit of Merrill Lynch. The IRA Rollover Program is available to
custodian rollover assets from 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.
8
<PAGE>
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 Blueprint
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, (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.
Any Employer Sponsored Retirement or Savings Plan which does not meet the
above described qualifications to purchase Class A or Class D shares at net
asset value has the option of (i) purchasing Class D shares at the initial
sales charge schedule disclosed in the Prospectus for purchases of up to
$1,000,000 and at 0.75% for purchases of $1,000,000 or more, (ii) 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 (iii)
if the Employer Sponsored Retirement or Savings Plan does not qualify to
purchase Class B shares with a waiver upon redemption, purchasing Class B or
Class C shares at their respective CDSC schedule disclosed in the Prospectus.
Certain Employer Sponsored Retirement or Savings Plans, which were permitted
prior to October 21, 1994, to purchase Class A shares at the initial sales
charge schedule in the then current prospectus for purchases up to $1,000,000
and at 0.75% for purchases of $1,000,000 or more, may purchase Class A shares
at the initial sales charge schedule disclosed in the Prospectus for purchases
of up to $1,000,000 and at 0.75% for purchases of $1,000,000 or more. The
minimum initial and subsequent purchase requirements are waived in connection
with all the above-referenced Employer Sponsored Retirement or Savings Plans.
Employee Access AccountsSM. Class A or Class D shares are offered at net
asset value to Employee Access AccountsSM available through employers that
provide Employer Sponsored Retirement or Savings Plans that are eligible to
purchase such shares at net asset value. The initial minimum for such accounts
is $500, except that the initial minimum for shares purchased for such accounts
pursuant to the Automatic Investment Program is $50.
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 ML & Co., includes MLAM, FAM and certain other entities directly or
indirectly wholly-owned and controlled by ML & Co.), and any trust, pension,
profit-sharing or other benefit plan for such persons, may purchase Class A
shares of the Fund at net asset value. Under such
9
<PAGE>
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 are 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 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 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, 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
10
<PAGE>
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. Similarly, Class D shares of
the Fund are offered at net asset value to shareholders of Merrill Lynch
Municipal Strategy Fund, Inc. ("Municipal Strategy Fund") and Merrill Lynch
High Income Municipal Bond Fund, Inc. ("High Income Fund") who wish to purchase
shares of the Fund with the net proceeds from a sale of certain of their shares
of common stock of Municipal Strategy Fund and High Income Fund pursuant to a
tender offer by Municipal Strategy Fund or High Income Fund. This investment
option is available only with respect to the proceeds of Municipal Strategy
Fund shares as to which no CDSC (as defined in the Municipal Strategy Fund
prospectus) is applicable, or with respect to the proceeds of High Income Fund
shares as to which no Early Withdrawal Charge (as defined in the High Income
Fund prospectus) is applicable.
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 Rule 12b-1
11
<PAGE>
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
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.
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.
12
<PAGE>
The following table sets forth comparative information as of September 30,
1995 with respect to the Class B and Class C shares of the Fund indicating the
maximum allowable payments that can be made under the NASD maximum sales charge
rule and the Distributor's voluntary maximum for Class B shares for the period
from November 29, 1985 (commencement of operations of Class B shares) to
September 30, 1995.
<TABLE>
<CAPTION>
DATA CALCULATED AS OF SEPTEMBER 30, 1995
(IN THOUSANDS)
------------------------------------------------------------------------------------
ALLOWABLE AMOUNTS ANNUAL
ELIGIBLE AGGREGATE INTEREST MAXIMUM PREVIOUSLY AGGREGATE DISTRIBUTION
GROSS SALES ON UNPAID AMOUNT PAID TO UNPAID FEE AT CURRENT
CLASS B SHARES 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.... $3,639,964 $227,498 $162,002 $389,500 $151,032 $238,468 $1,141
Under Distribu-
tor's
Voluntary
Waiver........ $3,639,964 $227,498 $ 18,200 $245,698 $151,032 $ 94,666 $1,141
<CAPTION>
CLASS C SHARES
- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Under NASD Rule
as Adopted.... $1,335 $83 $4 $87 $4 $83 $9
</TABLE>
- --------
(1) Purchase price of all eligible Class B shares sold since November 29, 1985
(commencement of operations) and all eligible Class C shares sold since
October 21, 1994 (commencement of operations) 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.
13
<PAGE>
DEFERRED SALES CHARGE--CLASS B AND CLASS C 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
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 years ended September 30, 1995, 1994 and
1993, the Distributor received CDSCs of $199,447, $163,949 and $182,110,
respectively, with respect to Class B shares, all of which was paid to Merrill
Lynch. For the period October 21, 1994 (commencement of operations) to
September 30, 1995, the Distributor received no CDSCs with respect to Class C
shares.
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
14
<PAGE>
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. The CDSC is also
waived for any Class B shares that were acquired and held at the time of
redemption by Employee Access AccountsSM available through employers that
provide Eligible 401(k) Plans. The initial minimum for such accounts is $500,
except that the initial minimum for shares purchased for such accounts pursuant
to the Automatic Investment Program is $50.
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of the Fund is determined once daily as of
15 minutes after the close of business on the New York Stock Exchange
(generally, 4:00 P.M. New York time), on 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 (although not necessarily meet)
immediately after the payment of dividends or distributions, which will differ
by approximately the amount of the expense accrual differential between the
classes.
Portfolio securities which are traded on stock exchanges are valued at the
last sale price (regular way) on the exchange on which such securities are
traded, as of the close of business on the day the securities are being valued,
or, lacking any sales, at the last available bid price. 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
15
<PAGE>
at fair value as determined in good faith by or under the direction of the
Board of Directors of the Fund. Options written are valued at the last sale
price in the case of exchange-traded options or, in the case of options traded
in the over-the-counter market, the last asked price. Options purchased are
valued at the last sale price in the case of exchange-traded options or, in the
case of options traded in the over-the-counter market, the last bid price.
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 Blueprint.
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 long-term capital gains 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 gains 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
16
<PAGE>
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 Blueprint, 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.
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 as described
herein 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
17
<PAGE>
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 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 BlueprintSM Program's systematic investment plans.
Capital gains and income received in each of the plans referred to above are
exempt from Federal taxation until distributed from the plans. Investors
considering participation in any such plan should review specific tax laws
relating thereto and should consult their attorneys or tax advisers with
respect to the establishment and maintenance of any such plan.
EXCHANGE PRIVILEGE
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 PricingSM 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
18
<PAGE>
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 qualify for the exchange
privilege, and any shares utilized in an exchange must have been held by the
shareholder for 15 days. It is contemplated that the exchange privilege may be
applicable to other new mutual funds whose shares may be distributed by the
Distributor.
Exchanges of Class A or Class D shares outstanding ("outstanding Class A or
Class D shares") for Class A or Class D shares of another MLAM-advised mutual
fund ("new Class A or Class D shares") are transacted on the basis of relative
net asset value per Class A or Class D share, respectively, plus an amount
equal to the difference, if any, between the sales charge previously paid on
the outstanding Class A or Class D shares and the sales charge payable at the
time of the exchange on the new Class A or Class D shares. With respect to
outstanding Class A or Class D shares as to which previous exchanges have taken
place, the "sales charge previously paid" shall include the aggregate of the
sales 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
19
<PAGE>
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.
The exchange privilege is modified with respect to certain retirement plans
which participate in the Merrill Lynch Mutual Fund Advisor ("MFA") program.
Such retirement plans may exchange Class B, Class C or Class D shares that
have been held for at least one year for Class A shares of the same Fund on
the basis of relative net asset values in connection with the commencement of
participation in the MFA program, i.e., no CDSC will apply. The one year
holding period does not apply to shares acquired through reinvestment of
dividends. Upon termination of participation in the MFA program, Class A
shares will be reexchanged for the class of shares originally held. For
purposes of computing any CDSC that may be payable upon redemption of Class B
or Class C shares so reacquired, the holding period for the Class A shares
will be "tacked" to the holding period for the Class B or Class C shares
originally held.
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.
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).
20
<PAGE>
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.
Merrill Lynch Basic Value Fund,
Inc. ...............................
Capital appreciation and, secondarily,
income through investment in
securities, primarily equities, that
are undervalued and therefore
represent basic investment value.
Merrill Lynch California Insured
Municipal Bond Fund.................
A portfolio of Merrill Lynch California
Municipal Series Trust, a series fund,
whose objective is to provide as high
a level of 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.
21
<PAGE>
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.
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 capital appreciation through
investment in securities, principally
equities, of issuers in countries
having smaller capital markets.
22
<PAGE>
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 High current return through investments
Trust............................... 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, Long-term growth through investment in
Inc................................. a portfolio of good quality
securities, primarily common stock,
potentially positioned to benefit from
demographic and cultural changes as
they affect consumer markets.
Merrill Lynch Fundamental Growth
Fund, Inc...........................
Long-term growth through investment in
a diversified portfolio of equity
securities placing particular emphasis
on companies that have exhibited an
above-average growth rate in earnings.
23
<PAGE>
Merrill Lynch Fundamental Value
Portfolio (Available only for
exchanges by certain individual
retirement accounts for which
Merrill Lynch acts as custodian)....
A portfolio of Merrill Lynch Asset
Builder Program, Inc., a series fund,
whose objective is to provide capital
appreciation and income by investing
in securities, with at least 65% of
the portfolio's assets being invested
in equities.
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 Opportunity
Portfolio (Available only for
exchanges by certain individual
retirement accounts for which
Merrill Lynch acts as custodian)....
A portfolio of Merrill Lynch Asset
Builder Program, Inc., a series fund,
whose objective is to provide a high
total investment return through an
investment policy utilizing United
States and foreign equity, debt and
money market securities, the
combination of which will vary
depending upon changing market and
economic trends.
24
<PAGE>
Merrill Lynch Global Resources Long-term growth and protection of
Trust............................... 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.
Merrill Lynch Global Utility Fund, Capital appreciation and current
Inc................................. income through investment of at least
65% of its total assets in equity and
debt securities issued by domestic
and foreign companies 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, Capital appreciation by investing
Inc. ............................... primarily in Latin American equity
and debt securities.
Merrill Lynch Maryland Municipal
Bond Fund...........................
A portfolio of Merrill Lynch Multi-
State Municipal Series Trust, a
series fund, whose objective is to
provide as high a level of income
exempt from Federal and Maryland
income taxes as is consistent with
prudent investment management.
25
<PAGE>
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.
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, Tax-exempt income from three separate
Inc................................. diversified portfolios of municipal
bonds.
Merrill Lynch Municipal Intermediate
Term Fund...........................
Currently the only portfolio of
Merrill Lynch Municipal Series Trust,
a series fund, whose objective is to
provide as high a level as possible
of income
26
<PAGE>
exempt from Federal income taxes by
investing in investment grade
obligations with a dollar weighted
average maturity of five to twelve
years.
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.
27
<PAGE>
Merrill Lynch North Carolina
Municipal Bond Fund.................
A portfolio of Merrill Lynch Multi-
State Municipal Series Trust, a
series fund, whose objective is to
provide as high a level of income
exempt from Federal and North
Carolina income taxes as is
consistent with prudent investment
management.
Merrill Lynch Ohio Municipal Bond A portfolio of Merrill Lynch Multi-
Fund................................ State Municipal Series Trust, a
series fund, whose objective is to
provide investors with as high a
level of income exempt from both
Federal and Ohio income taxes as is
consistent with prudent investment
management.
Merrill Lynch Oregon Municipal Bond
Fund................................
A portfolio of Merrill Lynch Multi-
State Municipal Series Trust, a
series fund, whose objective is to
provide investors with as high a
level of income exempt from both
Federal and Oregon income taxes as is
consistent with prudent investment
management.
Merrill Lynch Pacific Fund, Inc...... Capital appreciation by investing in
equity securities of corporations
domiciled in Far Eastern and Western
Pacific countries, including Japan,
Australia, Hong Kong, and Singapore.
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
28
<PAGE>
undervalued relative to the current or
prospective condition of such issuer.
Merrill Lynch Quality Bond Portfolio
(Available only for exchanges by
certain individual retirement
accounts for which Merrill Lynch
acts as custodian).............
A portfolio of Merrill Lynch Asset
Builder Program, Inc., a series fund,
whose objective is to provide a high
level of current income through
investment in a diversified portfolio
of debt obligations, such as corporate
bonds and notes, convertible
securities, preferred stocks and
governmental obligations.
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, Long-term growth of capital from
Inc................................. 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 Long-term total return from investment
Fund................................ in dividend paying common stocks which
yield more than Standard & Poor's 500
Composite Stock Price Index.
Merrill Lynch Technology Fund, Inc... Capital appreciation through worldwide
investment in equity securities of
companies that derive or are expected
to derive a substantial portion of
their sales from products and services
in technology.
Merrill Lynch Texas Municipal Bond
Fund................................
A portfolio of Merrill Lynch Multi-
State Municipal Series Trust, a series
fund, whose objective is to provide
investors with as high a level of
income exempt from Federal income
taxes as is consistent with prudent
investment management by investing
primarily in a portfolio of long-term,
investment grade obligations issued by
the State of Texas, its political
subdivisions, agencies and
instrumentalities.
29
<PAGE>
Merrill Lynch U.S. Government
Securities Portfolio (Available
only for exchanges by certain
individual retirement accounts for
which Merrill Lynch acts as
custodian).....................
A portfolio of Merrill Lynch Asset
Builder Program, Inc., a series fund,
whose object is to provide a high
current return through investments in
U.S. Government and government agency
securities, including GNMA mortgage-
backed certificates and other
mortgage-backed government
securities.
Merrill Lynch Utility Income Fund, High current income through investment
Inc. ............................... primarily in equity and debt
securities issued by companies
primarily engaged in the ownership or
operation of facilities used to
generate, transmit or to distribute
electricity, telecommunications, gas
or water.
Merrill Lynch World Income Fund, High current income by investing in a
Inc. ............................... global portfolio of fixed-income
securities denominated in various
currencies, including multinational
currencies.
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 Preservation of capital, liquidity and
Fund................................ current income through investment
exclusively in a diversified
portfolio of short-term marketable
securities which are direct
obligations of the U.S. Treasury.
30
<PAGE>
Class B, Class C and Class D Share
Money Market Funds:
Merrill Lynch Government Fund........ A portfolio of Merrill Lynch Funds For
Institutions Series, a series fund,
whose objective is to provide current
income consistent with liquidity and
security of principal from investment
in securities issued or guaranteed by
the U.S. Government, its agencies and
instrumentalities and in repurchase
agreements secured by such
obligations.
Merrill Lynch Institutional Fund..... A portfolio of Merrill Lynch Funds For
Institutions Series, a series fund,
whose objective is to provide maximum
current income consistent with
liquidity and the maintenance of a
high-quality portfolio of money market
securities.
Merrill Lynch Institutional Tax-
Exempt Fund.........................
A portfolio of Merrill Lynch Funds For
Institutions Series, a series fund,
whose objective is to provide current
income exempt from Federal income
taxes, preservation of capital and
liquidity available from investing in
a diversified portfolio of short-term,
high quality municipal bonds.
Merrill Lynch Treasury Fund.......... A portfolio of Merrill Lynch Funds For
Institutions Series, a series fund,
whose objective is to provide current
income consistent with liquidity and
security of principal from investment
in direct obligations of the U.S.
Treasury and up to 10% of its total
assets in repurchase agreements
secured by such obligations.
Before effecting an exchange, shareholders should obtain a currently
effective prospectus of the fund into which the exchange is to be made.
To exercise the exchange privilege, shareholders should contact their Merrill
Lynch financial consultant, who will advise the 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.
31
<PAGE>
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 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.
32
<PAGE>
Pursuant to the Fund's investment objectives, the Fund may invest in foreign
securities. Foreign taxes may be paid by the Fund as a result of tax laws of
countries in which the Fund may invest. Income tax treaties between certain
countries and the United States may reduce or eliminate such taxes. It is
impossible to determine in advance the effective rate of foreign tax to which
the Fund will be subject, since the amount of Fund assets to be invested in
various countries is not known. Because the Fund limits its investment in
foreign securities, shareholders will not be entitled to claim foreign tax
credits with respect to their share of foreign taxes paid by the Fund on income
from investments of foreign securities held by the Fund.
Under certain provisions of the Code, some shareholders may be subject to a
31% withholding tax on 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 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.
33
<PAGE>
Tax Treatment of Option Transactions. The Fund may write (i.e., sell) covered
call options with respect to the securities that it holds in its portfolio. In
general, gain or loss from transactions in such options contracts will be
capital gain or loss.
Code Section 1092, which applies to certain "straddles," may affect the
taxation of the Fund's transactions in options contracts. Under Section 1092,
the Fund may be required to postpone recognition for tax purposes of losses
incurred in certain closing transactions in options.
One of the requirements for qualification as a RIC is that less than 30% of
the Fund's gross income may be derived from gains from the sale or other
disposition of securities held for less than three months. Accordingly, the
Fund may be restricted in effecting closing transactions within three months
after entering into an option contract or from making short-term investments in
securities.
Special Rules for Certain Foreign Currency Transactions. In general, gains
from "foreign currencies" and from foreign currency options, foreign currency
futures and forward foreign exchange contracts relating to investments in
stock, securities or foreign currencies will be qualifying income for purposes
of determining whether the Fund qualifies as a RIC. It is currently unclear,
however, who will be treated as the issuer of a foreign currency instrument or
how foreign currency options, futures, or forward foreign exchange contracts
will be valued for purposes of the RIC diversification requirements applicable
to the Fund.
Under Code Section 988, special rules are provided for certain transactions
in a foreign currency other than the taxpayer's functional currency (i.e.,
unless certain special rules apply, currencies other than the U.S. dollar). In
general, foreign currency gains or losses from certain forward contracts not
traded in the interbank market, from futures contracts that are not "regulated
futures contracts," and from unlisted options will be treated as ordinary
income or loss under Code Section 988. In certain circumstances, the Fund may
elect capital gain or loss treatment for such transactions. In general,
however, Code Section 988 gains or losses will increase or decrease the amount
of the Fund's investment company taxable income available to be distributed to
shareholders as ordinary income, rather than increasing or decreasing the
amount of the Fund's net capital gain. Additionally, if Code Section 988 losses
exceed other investment company taxable income during a taxable year, the Fund
would not be able to make any ordinary dividend distributions, and any
distributions made before the losses were realized but in the same taxable year
would be recharacterized as a return of capital to shareholders, thereby
reducing each shareholder's basis in his Fund shares.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury Regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections
and the Treasury Regulations promulgated thereunder. The Code and the Treasury
Regulations are subject to change by legislative or administrative action
either prospectively or retroactively.
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.
34
<PAGE>
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.
35
<PAGE>
Set forth below is total return information for Class A, Class B, Class C
and Class D shares of the Fund for the periods indicated.
<TABLE>
<CAPTION>
CLASS A SHARES* CLASS B SHARES**
----------------------------------- -----------------------------------
REDEEMABLE REDEEMABLE
VALUE OF A VALUE OF A
EXPRESSED AS A HYPOTHETICAL EXPRESSED AS A HYPOTHETICAL
PERCENTAGE BASED $1,000 INVESTMENT PERCENTAGE BASED $1,000 INVESTMENT
ON A HYPOTHETICAL AT THE END OF THE ON A HYPOTHETICAL AT THE END OF THE
PERIOD $1,000 INVESTMENT PERIOD $1,000 INVESTMENT PERIOD
------ ----------------- ----------------- ----------------- -----------------
AVERAGE ANNUAL TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGE)
<S> <C> <C> <C> <C>
One Year Ended September
30, 1995............... 5.99% $1,059.90 6.80% $1,068.00
Five Years Ended
September 30, 1995..... 10.72% $1,663.60 10.78% $1,668.50
Inception (November 29,
1985) to September 30,
1995................... 8.59% $2,250.90
Inception (October 27,
1988) to September 30,
1995................... 8.77% $1,790.30
<CAPTION>
ANNUAL TOTAL RETURN
(EXCLUDING MAXIMUM APPLICABLE SALES CHARGE)
YEAR ENDED SEPTEMBER 30,
- ------------------------
<S> <C> <C> <C> <C>
1995.................... 11.86% $1,118.60 10.80% $1,108.00
1994.................... 1.81% $1,018.10 0.76% $1,007.60
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
Inception (November 29,
1985) to September 30,
1986................... 12.29% $1,122.90
Inception (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>
Inception (November 29,
1985) to September 30,
1995................... 125.09% $2,250.90
Inception (October 27,
1988) to September 30,
1995................... 79.03% $1,790.30
</TABLE>
- --------
* Information as to Class A shares is presented only for the period October
27, 1988 to September 30, 1995. No Class A shares were sold prior to October
27, 1988.
** Commencement of Operations of Class B shares was November 29, 1985.
36
<PAGE>
<TABLE>
<CAPTION>
CLASS C SHARES* CLASS D 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>
Inception (October 21,
1994) to September 30,
1995.................. 10.56% $1,099.30 6.12% $1,057.60
<CAPTION>
ANNUAL TOTAL RETURN
(EXCLUDING MAXIMUM APPLICABLE SALES CHARGE)
<S> <C> <C> <C> <C>
Inception (October 21,
1994) to September 30,
1995.................. 10.93% $1,109.30 11.62% $1,116.20
<CAPTION>
AGGREGATE TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
<S> <C> <C> <C> <C>
Inception (October 21,
1994) to September 30,
1995.................. 9.93% $1,099.30 5.76% $1,057.60
</TABLE>
- --------
* Class C shares and Class D shares commenced operations on October 21, 1994.
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.
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" in the
Prospectus 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
37
<PAGE>
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 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
38
<PAGE>
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.
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
39
<PAGE>
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 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
40
<PAGE>
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) enter into non-hedging
transactions, provided that the Fund may 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
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.
41
<PAGE>
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 15% 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.
42
<PAGE>
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 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.
43
<PAGE>
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
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
institutional buyers" under Rule 144A under the Securities Act. However, the
Fund will not invest more than 15% 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
44
<PAGE>
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, 1995, 1994 and 1993 the rate of
portfolio turnover for the Fund was 86.33%, 59.15% and 79.55%, 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.
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, 1995, 1994 and 1993 were $1,203,065,
$1,097,166 and $1,375,992, respectively. The aggregate dollar amounts of such
portfolio transactions were $714,084,212, $658,162,025 and $843,535,870,
45
<PAGE>
respectively, for such periods. During those periods, the aggregate dollar
amounts of brokerage commissions paid by the Fund to Merrill Lynch were
$92,882, $75,348 and $80,436, respectively. These amounts represent 7.72%,
6.87% and 5.85%, 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 5.36%, 7.27% and 1.65%, 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.
Investment Restrictions. The Fund has adopted the following investment
restrictions and policies relating to the investment of its assets and its
activities. The fundamental restrictions set forth below may not be changed
without the prior approval of the holders of the majority of the Fund's
outstanding voting securities, which for this purpose and under the Investment
Company Act 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. 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.
46
<PAGE>
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 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.
The Fund has also adopted certain non-fundamental investment restrictions,
which may be changed by the Directors without approval by the shareholders.
Under the non-fundamental restrictions, the 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 50% 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
47
<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.
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 officially changed its name to
Merrill Lynch Balanced Fund for Investment and Retirement, Inc. on December 21,
1994. 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
48
<PAGE>
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, Class B, Class C and Class D shares of the
Fund, based on the value of the Fund's net assets and number of shares
outstanding as of September 30, 1995, is calculated as set forth below.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
----------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Net Assets.................... $30,485,421 $152,121,232 $1,154,235 $467,546,176
=========== ============ ========== ============
Number of Shares Outstanding.. 2,637,319 12,951,639 99,541 40,520,316
=========== ============ ========== ============
Net Asset Value Per Share (net
assets divided by number of
shares outstanding).......... $ 11.56 $ 11.75 $ 11.60 $ 11.54
Sales Charge (for Class A and
Class D shares; 5.25% of
offering price (5.54% of net
asset value per share))*..... .64 ** ** $ .64
----------- ------------ ---------- ------------
Offering Price ............... $ 12.20 $ 11.75 $ 11.60 $ 12.18
=========== ============ ========== ============
</TABLE>
* Rounded to the nearest one-hundredth percent; assumes maximum sales charge
is applicable.
** Class B and Class C shares are not subject to an initial sales charge but
may be subject to a CDSC on redemption of shares. See "Purchase of Shares--
Deferred Sales Charge Alternatives--Class B and Class C Shares" in the
Prospectus.
INDEPENDENT AUDITORS
Deloitte & Touche LLP, 117 Campus Drive, Princeton, New Jersey 08540, has
been selected as the independent auditors of the 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.
49
<PAGE>
CUSTODIAN
Chase Manhattan Bank N.A., 4 Chase MetroTech Center, 18th Floor, Brooklyn, NY
11245, 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
Merrill Lynch 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, LLP, 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 January 1, 1996.
50
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders, Merrill Lynch Balanced Fund for
Investment and Retirement, 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, Inc. as of September 30, 1995, 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, 1995 by correspondence with the custodian and brokers. 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, Inc. as of September 30, 1995, 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 26, 1995
51
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch Balanced September 30, 1995
Fund for Investment and Retirement, Inc.
SCHEDULE OF INVESTMENTS
Face Value Percent of
Industries Amount* Corporate Bonds Cost (Note 1a) Net Assets
<C> <C> <C> <S> <C> <C> <C>
Financial $ 10,000,000 Ford Capital BV, 9.375% due 1/01/1998 $ 10,037,900 $ 10,643,000 1.6%
Services 5,000,000 Landeskreditbank, N.V., 7.875% due
4/15/2004 4,972,067 5,418,250 0.8
Total Investments in Corporate Bonds 15,009,967 16,061,250 2.4
Country Foreign Government & Agency Obligations
Italy 5,000,000 Republic of Italy, 8.75% due 2/08/2001 5,373,050 5,448,445 0.8
Total Investments in Foreign
Government & Agency Obligations 5,373,050 5,448,445 0.8
US Government & Agency Obligations
United States Federal Home Loan Mortgage Corp.,
REMIC (a):
10,000,000 Series, 6.30% due 5/15/2008 9,210,937 9,440,625 1.5
4,910,000 1243-HP, 5.625% due 11/25/2015 4,788,017 4,756,563 0.7
Federal National Mortgage Association:
9,482,095 8% due 10/01/2024 9,053,920 9,698,382 1.5
19,205,450 8% due 12/01/2024 18,866,355 19,643,527 3.0
US Treasury Notes:
55,000,000 7.875% due 8/15/2001 53,943,600 59,795,450 9.2
25,000,000 6.25% due 2/15/2003 25,710,937 25,140,500 3.9
22,000,000 US Treasury STRIPS++, 5.99% due
5/15/2000 (b) 16,533,161 16,740,460 2.6
Total Investments in US Government &
Agency Obligations 138,106,927 145,215,507 22.4
Foreign Obligations
Canada C$ 17,000,000 Government of Canada, 7.50% due
9/01/2000 12,513,374 12,692,853 2.0
Germany DM 20,000,000 Bundes, 6% due 2/20/1998 13,870,415 14,397,858 2.2
Italy Lit 12,000,000,000 European Investment Bank, 10.80% due
3/15/1999 7,677,863 7,410,781 1.1
Total Investments in Foreign
Obligations 34,061,652 34,501,492 5.3
Total Investments in Corporate Bonds,
Foreign Government & Agency Obligations,
US Government & Agency Obligations
& Foreign Obligations 192,551,596 201,226,694 30.9
Shares
Held US Stocks
Basic Industry
Aluminum 125,000 Aluminum Co. of America (ALCOA) 6,893,308 6,609,375 1.0
Chemicals 61,000 Dow Chemical Company (The) 4,633,938 4,544,500 0.7
93,700 Eastman Chemical Co. 5,394,105 5,996,800 0.9
90,000 Engelhard Corporation 2,751,452 2,283,750 0.4
70,000 IMC Fertilizer Group, Inc. 4,196,080 4,436,250 0.7
55,000 PPG Industries, Inc. 2,464,430 2,557,500 0.4
Paper & Forest Producers 225,000 Scott Paper Co. 10,875,875 10,912,500 1.7
Total Basic Industry 37,209,188 37,340,675 5.8
</TABLE>
52
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Value Percent of
Industries Held US Stocks Cost (Note 1a) Net Assets
Capital Spending
<C> <C> <S> <C> <C> <C>
Aerospace 125,000 Boeing Company (The) $ 7,925,190 $ 8,531,250 1.3%
56,000 Crane Company 2,046,063 1,932,000 0.3
110,000 United Technologies Corp. 8,698,059 9,721,250 1.5
Communication 150,000 +++ADC Telecommunications, Inc. 3,462,859 6,825,000 1.0
Equipment 144,000 +++DSC Communications Corp. 4,548,726 8,532,000 1.3
80,000 +++Tellabs, Inc. 2,952,585 3,360,000 0.5
Computer Equipment 90,000 +++Cisco Systems, Inc. 4,973,502 6,210,000 1.0
Computer Services 225,000 +++Computer Sciences Corp. 8,005,471 14,484,375 2.2
240,000 General Motors Corp. (Class E) 9,927,011 10,920,000 1.7
Electrical Equipment 165,000 General Electric Co. 9,160,779 10,518,750 1.6
173,218 Siebe PLC 1,605,130 1,984,156 0.3
Electronics 90,000 +++Solectron Corp. 2,554,952 3,555,000 0.5
Environmental Control 550,000 Wheelabrator Technologies, Inc. 7,310,684 8,181,250 1.3
Machinery & Equipment 150,000 York International Corp. 6,687,115 6,318,750 1.0
Office Equipment 380,000 Danka Business Systems PLC
(ADR)(c)(1) 6,702,445 13,680,000 2.1
29,200 Harris Corp. 1,755,785 1,602,350 0.2
Semiconductors 43,500 Texas Instruments, Inc. 3,357,421 3,474,562 0.5
Total Capital Spending 91,673,777 119,830,693 18.3
Consumer Cyclicals
Appliances 230,000 Singer Co. N.V. (ADR)(c)(1) 6,382,381 6,123,750 0.9
Automotive 305,000 Ford Motor Company 9,068,012 9,493,125 1.5
Automotive Equipment 55,000 Magna International, Inc. (ADR)(c)(1) 2,005,798 2,481,875 0.4
Retail 95,000 Sears, Roebuck and Co. 2,561,323 3,503,125 0.5
Retail--Specialty 170,000 +++Toys 'R' Us, Inc. 4,706,973 4,590,000 0.7
Total Consumer Cyclicals 24,724,487 26,191,875 4.0
Consumer Staples
Consumer--Services 225,000 H & R Block, Inc. 8,896,652 8,550,000 1.3
Drug Stores 80,000 +++Revco D.S., Inc. 1,725,576 1,880,000 0.3
Foods 70,000 General Mills, Inc. 3,396,222 3,902,500 0.6
Healthcare 300,000 +++Humana Inc. 5,920,005 6,037,500 0.9
203,100 +++Physician Corp. of America 4,284,714 3,198,825 0.5
Pharmaceuticals 55,000 American Home Products Corp. 3,726,541 4,668,125 0.7
Photography 160,000 Eastman Kodak Co. 8,746,145 9,480,000 1.5
Restaurants 80,000 Darden Restaurants Inc. 837,277 920,000 0.1
Total Consumer Staples 37,533,132 38,636,950 5.9
</TABLE>
53
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Value Percent of
Industries Held US Stocks Cost (Note 1a) Net Assets
Credit-Sensitive and Financial Services
<S> <C> <S> <C> <C> <C>
Banking 250,000 The Bank of New York Co. $ 7,473,216 $ 11,625,000 1.8%
15,000 The Bank of New York Co. (Warrants)
(e) 168,750 481,875 0.1
200,000 BankAmerica Corp. 9,113,967 11,975,000 1.8
100,000 CoreStates Financial Corp. 3,613,740 3,662,500 0.6
Insurance 140,000 Aetna Life & Casualty Co. 8,227,835 10,272,500 1.6
104,900 Allstate Corp. 3,168,972 3,710,837 0.6
99,500 International Telephone & Telegraph
Corp. 8,599,833 12,338,000 1.9
70,000 National Re Corp. 2,016,028 2,476,250 0.4
Total Credit-Sensitive & Financial
Services 42,382,341 56,541,962 8.8
Energy
Oil--Integrated 175,000 Chevron Corp. 8,576,842 8,509,375 1.3
125,000 Mobil Oil Corp. 9,757,153 12,453,125 1.9
Total Energy 18,333,995 20,962,500 3.2
Utilities
Utilities-- 39,200 Frontier Corp. 876,071 1,043,700 0.2
Communications 180,000 GTE Corp. 5,790,102 7,065,000 1.1
180,000 SBC Communications Inc. 8,015,735 9,900,000 1.5
310,000 +++WorldCom, Inc. 7,317,231 9,958,750 1.5
Total Utilities 21,999,139 27,967,450 4.3
Total Investments in US Stocks 273,856,059 327,472,105 50.3
Foreign Stocks
Australia
Media/Publishing 600,000 +++News Corp. Ltd. (Preferred)
(ADR)(c) 10,451,056 11,925,000 1.8
Canada
Appliances 280,000 Semi-Tech Corp.(d) 4,108,297 2,236,588 0.3
Chile
Banking 40,000 Banco O'Higgins (ADR)(c) 649,848 905,000 0.1
Packaging 60,000 Christalerias de Chile S.A.
(ADR)(c) 1,105,062 1,485,000 0.2
Hong Kong
Banking 286,378 HSBC Holdings PLC 1,750,973 3,982,000 0.6
</TABLE>
54
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Value Percent of
Industries Held Foreign Stocks Cost (Note 1a) Net Assets
Indonesia
<C> <C> <S> <C> <C> <C>
Telecommunications 9,000 P.T. Indonesian Satellite (ADR)(c) $ 311,138 $ 316,125 0.1%
Tobacco 74,500 P.T. Hanjaya Mandala Sampoerna 415,075 694,018 0.1
Japan
Electronics 70,000 Advantest Corp. 3,441,308 4,143,434 0.6
45,000 Kyocera Corp. 3,995,841 3,700,000 0.6
240,000 Sharp Corp. 3,564,993 3,369,697 0.5
75,000 Tokyo Electron Ltd. 2,928,405 3,265,152 0.5
Financial Services 360,000 Nomura Securities Co., Ltd. 7,080,991 7,054,545 1.1
Insurance 250,000 Tokio Marine & Fire Insurance Co. 2,976,505 2,702,020 0.4
Office Equipment 150,000 Canon, Inc. 2,752,380 2,681,818 0.4
Mexico
Multi-Industry 433,800 +++Grupo Carso, S.A. de C.V.
(ADR)(c)++++ 3,832,850 5,042,925 0.8
Utilities-- 95,000 Telefonos de Mexico, S.A. de C.V.
Communications (ADR)(c)(1) 3,301,965 3,016,250 0.5
Netherlands
Computer Services 112,800 Getronics N.V. 4,941,210 5,556,789 0.9
Norway
Telecommunications 152,425 Nera AS 4,340,748 5,247,618 0.8
Portugal
325,000 Espirito Santo Financial Holdings
S.A. (ADR)(c)(1) 4,538,463 3,818,750 0.6
United Kingdom
Leisure/Entertainment 90,000 Thorn EMI PLC 1,726,953 2,096,336 0.3
Total Investments in Foreign Stocks 68,214,061 73,239,065 11.2
Total Investments in US & Foreign
Stocks 342,070,120 400,711,170 61.5
</TABLE>
55
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face Value Percent of
Amount Issue Cost (Note 1a) Net Assets
Short-Term Securities
<S> <C> <S> <C> <C> <C>
Commercial Paper** $ 21,064,000 Ford Motor Credit Co., 6.50% due
10/02/1995 $ 21,056,394 $ 21,056,394 3.3%
17,000,000 National Fleet Funding Corp., 5.75%
due 10/11/1995 16,970,132 16,970,132 2.6
Total Investments in Short-Term
Securities 38,026,526 38,026,526 5.9
Total Investments $572,648,242 639,964,390 98.3
============
Other Assets Less Liabilities 11,342,674 1.7
------------ ------
Net Assets $651,307,064 100.0%
============ ======
<FN>
(a)Real Estate Mortgage Investment Conduits (REMIC).
(b)Represents the yield-to-maturity on this zero coupon issue. These
securities are purchased at a deep discount and amortized to
maturity.
(c)American Depositary Receipts (ADR).
(d)Formerly named International Semi-Tech Corp.
(e)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.
*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.
(1)Consistent with the general policy of the Securities and Exchange
Commission, the nationality or domicile of an issuer for
determination 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.
++Separate Trading of Registered Interest and Principal of
Securities (STRIPS).
++++Restricted securities as to resale. The value of the Fund's
investments in restricted securities was approximately $5,043,000,
representing 0.8% of net assets.
Acquisition Value
Issue Dates Cost (Note la)
Grupo Carso, S.A. de C.V.
(ADR) 9/24/1991-1/24/1992 $3,832,850 $5,042,925
Total $3,832,850 $5,042,925
========== ==========
+++Non-income producing security.
See Notes to Financial Statements.
</TABLE>
56
<PAGE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of September 30, 1995
<C> <S> <C> <C>
Assets: Investments, at value (identified cost--$572,648,242)
(Note 1a) $639,964,390
Cash 4,488,255
Receivables:
Securities sold $ 6,963,402
Interest 2,720,710
Dividends 729,022
Capital shares sold 352,889 10,766,023
------------
Prepaid registration fees and other assets (Note 1f) 89,979
------------
Total assets 655,308,647
------------
Liabilities: Payables:
Securities purchased 1,965,810
Capital shares redeemed 1,154,219
Investment adviser (Note 2) 331,332
Distributor (Note 2) 216,708 3,668,069
------------
Accrued expenses and other liabilities 333,514
------------
Total liabilities 4,001,583
------------
Net Assets: Net assets $651,307,064
============
Net Assets Class A Shares of Common Stock, $.01 par value, 500,000,000
Consist of: shares authorized $ 26,373
Class B Shares of Common Stock, $.01 par value, 500,000,000
shares authorized 129,516
Class C Shares of Common Stock, $.01 par value, 500,000,000
shares authorized 996
Class D Shares of Common Stock, $.01 par value, 500,000,000
shares authorized 405,203
Paid-in capital in excess of par 560,997,385
Undistributed investment income--net 5,264,881
Undistributed realized capital gains on investments and foreign
currency transactions--net 17,172,044
Unrealized appreciation on investments and foreign currency
transactions--net 67,310,666
------------
Net assets $651,307,064
============
Net Asset Value: Class A--Based on net assets of $30,485,421 and 2,637,319 shares
outstanding $ 11.56
============
Class B--Based on net assets of $152,121,232 and 12,951,639 shares
outstanding $ 11.75
============
Class C--Based on net assets of $1,154,235 and 99,541 shares
outstanding $ 11.60
============
Class D--Based on net assets of $467,546,176 and 40,520,316 shares
outstanding $ 11.54
============
See Notes to Financial Statements.
</TABLE>
57
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations for the Year Ended September 30, 1995
<C> <S> <C>
Investment Interest and discount earned (net of $14,295 foreign
Income withholding tax) $ 19,733,199
(Notes 1d & 1e): Dividends (net of $245,500 foreign withholding tax) 6,790,388
Other 41,541
------------
Total income 26,565,128
------------
Expenses: Investment advisory fees (Note 2) 4,289,001
Account maintenance and distribution fees--Class B (Note 2) 2,911,519
Transfer agent fees--Class D (Note 2) 896,673
Account maintenance fees--Class D (Note 2) 869,529
Transfer agent fees--Class B (Note 2) 843,941
Printing and shareholder reports 334,152
Professional fees 117,014
Accounting services (Note 2) 115,994
Registration fees (Note 1f) 94,249
Custodian fees 89,647
Transfer agent fees--Class A (Note 2) 84,659
Directors' fees and expenses 46,274
Pricing fees 6,456
Account maintenance and distribution fees--Class C (Note 2) 5,279
Transfer agent fees--Class C (Note 2) 1,486
Other 11,367
------------
Total expenses 10,717,240
------------
Investment income--net 15,847,888
------------
Realized & Realized gain from:
Unrealized Gain Investments--net $ 17,324,044
(Loss) on Foreign currency transactions--net 1,351,860 18,675,904
Investments & ------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions Investments--net 33,342,301
- --Net (Notes 1b, Foreign currency transactions--net (18,980) 33,323,321
1c, 1e & 3): ------------ ------------
Net realized and unrealized gain on investments and foreign
currency transactions 51,999,225
------------
Net Increase in Net Assets Resulting from Operations $ 67,847,113
============
See Notes to Financial Statements.
</TABLE>
58
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statments of Changes in Net Assets
<CAPTION>
For the Year Ended September 30,
Increase (Decrease) in Net Assets: 1995 1994
<C> <S> <C> <C>
Operations: Investment income--net $ 15,847,888 $ 13,984,464
Realized gain on investments and foreign currency
transactions--net 18,675,904 66,569,641
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net 33,323,321 (72,060,997)
------------ ------------
Net increase in net assets resulting from operations 67,847,113 8,493,108
------------ ------------
Dividends & Investment income--net:
Distributions to Class A (1,043,247) (1,253,348)
Shareholders Class B (3,008,886) (14,802,935)
(Note 1g): Class C (10,834) --
Class D (11,100,445) --
Realized gain on investments--net:
Class A (3,297,664) (4,103,194)
Class B (27,299,110) (75,192,306)
Class C (10,962) --
Class D (29,225,123) --
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (74,996,271) (95,351,783)
------------ ------------
Capital Share Net decrease in net assets derived from capital share
Transactions transactions (91,342,468) (34,985,543)
(Note 4): ------------ ------------
Net Assets: Total decrease in net assets (98,491,626) (121,844,218)
Beginning of year 749,798,690 871,642,908
------------ ------------
End of year* $651,307,064 $749,798,690
============ ============
<FN>
*Undistributed investment income--net (Note 1h) $ 5,264,881 $ 3,227,255
============ ============
See Notes to Financial Statements.
</TABLE>
59
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class A
For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1995* 1994* 1993 1992 1991
<C> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 11.67 $ 13.02 $ 12.57 $ 11.94 $ 10.61
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .32 .32 .43 .47 .70
Realized and unrealized gain (loss) on
investments and foreign currency
transactions (1)--net .88 (.07) 1.29 .61 1.63
-------- -------- -------- -------- --------
Total from investment operations 1.20 .25 1.72 1.08 2.33
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.34) (.37) (.39) (.45) (.62)
Realized gain on investments--net (.97) (1.23) (.88) -- (.38)
-------- -------- -------- -------- --------
Total dividends and distributions (1.31) (1.60) (1.27) (.45) (1.00)
-------- -------- -------- -------- --------
Net asset value, end of year $ 11.56 $ 11.67 $ 13.02 $ 12.57 $ 11.94
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 11.86% 1.81% 14.62% 9.23% 23.14%
Return:** ======== ======== ======== ======== ========
Ratios to Expenses 1.01% .83% .83% .81% .85%
Average ======== ======== ======== ======== ========
Net Assets: Investment income--net 2.93% 2.68% 3.09% 3.18% 3.64%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $ 30,485 $ 39,963 $ 40,688 $ 20,320 $ 12,839
Data: ======== ======== ======== ======== ========
Portfolio turnover 86.33% 59.15% 79.55% 65.40% 173.76%
======== ======== ======== ======== ========
<FN>
*Based on average shares outstanding during the year.
**Total investment returns exclude the effect of sales loads.
(1)Foreign currency transaction amounts have been reclassified to
conform to the 1994 presentation.
See Notes to Financial Statements.
</TABLE>
60
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class B
The following per share data and ratios have been derived
from information provided in the financial statements.
For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1995* 1994* 1993 1992 1991
<C> <S> <C> <C> <C> <C> <C>
Per-Share Net asset value, beginning of year $ 11.75 $ 13.09 $ 12.62 $ 11.99 $ 10.60
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .21 .20 .24 .29 .39
Realized and unrealized gain (loss) on
investments and foreign currency
transactions (1)--net .90 (.07) 1.37 .66 1.83
-------- -------- -------- -------- --------
Total from investment operations 1.11 .13 1.61 .95 2.22
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.14) (.24) (.26) (.32) (.45)
Realized gain on investments--net (.97) (1.23) (.88) -- (.38)
-------- -------- -------- -------- --------
Total dividends and distributions (1.11) (1.47) (1.14) (.32) (.83)
-------- -------- -------- -------- --------
Net asset value, end of year $ 11.75 $ 11.75 $ 13.09 $ 12.62 $ 11.99
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 10.80% 0.76% 13.49% 8.01% 21.91%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, excluding account maintenance
Net Assets: and distribution fees 1.04% .86% .85% .85% .90%
======== ======== ======== ======== ========
Expenses 2.04% 1.86% 1.85% 1.85% 1.90%
======== ======== ======== ======== ========
Investment income--net 1.90% 1.65% 1.99% 2.10% 3.37%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $152,121 $709,836 $830,955 $886,920 $986,895
Data: ======== ======== ======== ======== ========
Portfolio turnover 86.33% 59.15% 79.55% 65.40% 173.76%
======== ======== ======== ======== ========
<FN>
*Based on average shares outstanding during the year.
**Total investment returns exclude the effect of sales loads.
(1)Foreign currency transaction amounts have been reclassified to
conform to the 1994 presentation.
See Notes to Financial Statements.
</TABLE>
61
<PAGE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. October 21, 1994++ to
September 30, 1995*
Increase (Decrease) in Net Asset Value: Class C Class D
<C> <S> <C> <C>
Per-Share Net asset value, beginning of period $ 11.74 $ 11.66
Operating ------------ ------------
Performance: Investment income--net .19 .27
Realized and unrealized gain on investments and foreign
currency transactions--net .92 .90
------------ ------------
Total from investment operations 1.11 1.17
------------ ------------
Less dividends and distributions:
Investment income--net (.28) (.32)
Realized gain on investments--net (.97) (.97)
------------ ------------
Total dividends and distributions (1.25) (1.29)
------------ ------------
Net asset value, end of period $ 11.60 $ 11.54
============ ============
Total Investment Based on net asset value per share 10.93%+++ 11.62%+++
Return:*** ============ ============
Ratios to Expenses, excluding account maintenance and distribution fees 1.04%** 1.02%**
Average ============ ============
Net Assets: Expenses 2.04%** 1.27%**
============ ============
Investment income--net 1.94%** 2.68%**
============ ============
Supplemental Net assets, end of period (in thousands) $ 1,154 $ 467,546
Data: ============ ============
Portfolio turnover 86.33% 86.33%
============ ============
<FN>
*Based on average shares outstanding during the period.
**Annualized.
***Total investment returns exclude the effect of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
62
<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 Balanced
Fund for Investment and Retirement, Inc. (the "Fund") is registered
under the Investment Company Act of 1940 as a diversified, open-end
management investment company. The Fund offers four classes of
shares under the Merrill Lynch Select Pricing SM System. Class A and
Class D Shares are sold with a front-end sales charge. Class B and
Class C Shares may be subject to a contingent deferred sales charge.
All classes of shares have identical voting, dividend, liquidation
and other rights and the same terms and conditions, except that
Class B, Class C and Class D Shares bear certain expenses related to
the account maintenance of such shares, and Class B and Class C
Shares also bear certain expenses related to the distribution of
such shares. Each class has exclusive voting rights with respect to
matters relating to its account maintenance and distribution
expenditures. The following is a summary of significant accounting
policies followed by the Fund.
(a) Valuation of investments--Portfolio securities which are traded
on stock exchanges are valued at the last sale price on the exchange
on which such securities are traded, as of the close of business on
the day the securities are being valued or, lacking any sales, at
the last available bid price. Securities traded in the over-the-
counter market are valued at the last available bid price prior to
the time of valuation. In cases where securities are traded on more
than one exchange, the securities are valued on the exchange
designated by or under the authority of the Board of Directors as
the primary market. Securities that are traded both in the over-the-
counter market and on a stock exchange are valued according to the
broadest and most representative market. Options written are valued
at the last sale price in the case of exchange-traded options or, in
the case of options traded in the over-the-counter market, the last
asked price. Options purchased are valued at the last sale price in
the case of exchange-traded options or, in the case of options
traded in the over-the-counter market, the last bid price. Short-
term securities are valued at amortized cost, which approximates
market value. Other investments, including futures contracts and
related options, are stated at market value. Securities and assets
for which market value quotations are not available are valued at
their fair value as determined in good faith by or under the
direction of the Fund's Board of Directors.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the equity, debt and currency
markets. Losses may arise due to changes in the value of the
contract or if the counterparty does not perform under the contract.
* Forward foreign exchange contracts--The Fund is authorized to
enter into forward foreign exchange contracts 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.
* Financial futures contracts--The Fund may purchase or sell
interest-rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures contracts
are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a
contract, the Fund deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is
effected. Pursuant to the contract, the Fund agrees to receive from
or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are
known as variation margin and are recorded by the Fund as unrealized
gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
* Foreign currency options and futures--The Fund may also 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
63
<PAGE>
effected with respect to hedges on non-US-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.
* Options--The Fund is authorized to write covered call options and
purchase put options. When the Fund writes 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 purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds 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 gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Foreign currency transactions--Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing when
recognized. Assets and liabilities denominated in foreign currencies
are valued at the exchange rate at the end of the period. Foreign
currency transactions are the result of settling (realized) 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.
(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 by 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). Dividend 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) Prepaid registration fees--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--Generally accepted accounting principles
require that certain differences between undistributed net realized
capital gains for financial reporting and tax purposes, if permanent,
be reclassified to undistributed net investment income. Accordingly,
current year's permanent book/tax differences of $1,353,150 have
been reclassified from undistributed net realized capital gains
to undistributed net investment income. These reclassifications have
no effect on net assets or net asset values per share.
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"). The general partner
of MLAM is Princeton Services, Inc. ("PSI"), an indirect wholly
owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is
the limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), a wholly owned
subsidiary of Merrill Lynch Group, Inc.
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 average daily net
64
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
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 MLAM 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.
Pursuant to the distribution plans (the "Distribution Plans")
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 a distribution fee. These fees
are accrued daily and paid monthly, at the annual rates based upon
the average daily net assets of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.75%
Class C 0.25% 0.75%
Class D 0.25% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner, and Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the year ended September 30, 1995, MLFD earned underwriting
discounts and commissions and MLPF&S earned dealer concessions on the
sales of the Fund's Class A and Class D Shares as follows:
MLFD MLPF&S
Class A $ 477 $ 4,620
Class D $3,598 $61,460
For the year ended September 30, 1995, MLPF&S received contingent
deferred sales charges of $199,447 relating to transactions in Class
B Shares.
In addition, MLPF&S received $92,882 in commissions on the execution
of portfolio security transactions for the Fund for the year ended
September 30, 1995.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly
owned subsidiary of ML & Co., 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 MLAM, MLPF&S, PSI, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended September 30, 1995 were $541,068,330 and
$676,930,218, respectively.
Net realized and unrealized gains (losses) as of September 30, 1995
were as follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
Long-term investments $17,240,225 $ 67,316,148
Short-term investments (721) --
Options written
on investments 84,540 --
Foreign currency
transactions 1,351,860 (5,482)
----------- -------------
Total $18,675,904 $ 67,310,666
=========== =============
As of September 30, 1995, net unrealized appreciation for Federal
income tax purposes aggregated $67,316,148, of which $75,277,436
related to appreciated securities and $7,961,288 related to
depreciated
65
<PAGE>
securities. The aggregate cost of investments at September 30, 1995
for Federal income tax purposes was $572,648,242.
Transactions in call options written for the year ended September
30, 1995 were as follows:
Number of Premiums
Call Options Written Shares Received
Outstanding call options at
beginning of year 1,000 $ 1,783
Options written 167,800 214,530
Options exercised (67,100) (106,550)
Options closed (98,500) (105,726)
Options expired (3,200) (4,037)
----------- -------------
Outstanding call options at
end of year -- $ --
=========== =============
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions
was $91,342,468 and $34,985,543 for the years ended September 30,
1995 and September 30, 1994, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the Year Dollar
Ended September 30, 1995 Shares Amount
Shares sold 1,070,519 $ 11,586,869
Shares issued to shareholders
in reinvestment of dividends
and distributions 396,121 4,060,338
----------- -------------
Total issued 1,466,640 15,647,207
Shares redeemed (2,253,897) (24,043,484)
----------- -------------
Net decrease (787,257) $ (8,396,277)
=========== =============
Class A Shares for the Year Dollar
Ended September 30, 1994 Shares Amount
Shares sold 1,518,510 $ 18,698,722
Shares issued to shareholders
in reinvestment of dividends
and distributions 428,291 5,110,279
----------- -------------
Total issued 1,946,801 23,809,001
Shares redeemed (1,648,302) (19,908,322)
----------- -------------
Net increase 298,499 $ 3,900,679
=========== =============
Class B Shares for the Year Dollar
Ended September 30, 1995 Shares Amount
Shares sold 2,091,731$ 23,097,445
Shares issued to shareholders
in reinvestment of dividends
and distributions 2,431,572 25,214,963
----------- -------------
Total issued 4,523,303 48,312,408
Shares redeemed (7,383,654) (81,669,553)
Automatic conversion of
shares (44,590,058) (505,798,220)
----------- -------------
Net decrease (47,450,409) $(539,155,365)
=========== =============
Class B Shares for the Year Dollar
Ended September 30, 1994 Shares Amount
Shares sold 2,858,236 $ 35,039,885
Shares issued to shareholders
in reinvestment of dividends
and distributions 6,329,365 76,402,900
----------- -------------
Total issued 9,187,601 111,442,785
Shares redeemed (12,275,154) (150,329,007)
----------- -------------
Net decrease (3,087,553) $ (38,886,222)
=========== =============
Class C Shares for the Period Dollar
Oct. 21, 1994++ to Sept. 30, 1995 Shares Amount
Shares sold 132,339 $ 1,431,442
Shares issued to shareholders
in reinvestment of dividends
and distributions 1,002 10,249
----------- -------------
Total issued 133,341 1,441,691
Shares redeemed (33,800) (359,094)
----------- -------------
Net increase 99,541 $ 1,082,597
=========== =============
[FN]
++Commencement of Operations.
66
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded)
Class D Shares for the Period Dollar
Oct. 21, 1994++ to Sept. 30, 1995 Shares Amount
Shares sold 522,879 $ 5,601,295
Automatic conversion
of shares 45,012,054 505,798,220
Shares issued to shareholders
in reinvestment of dividends
and distributions 3,325,210 34,178,246
----------- -------------
Total issued 48,860,143 545,577,761
Shares redeemed (8,339,827) (90,451,184)
----------- -------------
Net increase 40,520,316 $ 455,126,577
=========== =============
[FN]
++Commencement of Operations.
5. Reorganization Plan:
On October 13, 1995, the Board of Directors approved a plan of
reorganization, subject to shareholder approval and certain
conditions, whereby Merrill Lynch Global Allocation Fund, Inc.
would acquire substantially all of the assets and liabilities
of the Fund in exchange for newly issued shares of Merrill Lynch
Global Allocation Fund, Inc., which is a registered, diversified,
open-end management investment company managed by MLAM.
67
<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............................................. 7
Distribution Plans........................................................ 11
Limitations on the Payment of Deferred Sales Charges...................... 12
Redemption of Shares....................................................... 13
Deferred Sales Charge--
Class B and Class C Shares............................................... 14
Determination of Net Asset Value........................................... 15
Shareholder Services....................................................... 16
Investment Account........................................................ 16
Automatic Investment Plans................................................ 16
Automatic Reinvestment of Dividends and Capital Gains Distributions....... 17
Systematic Withdrawal Plans--
Class A and Class D Shares............................................... 17
Retirement Plans.......................................................... 18
Exchange Privilege........................................................ 18
Dividends, Distributions and Taxes......................................... 32
Dividends and Distributions............................................... 32
Taxes..................................................................... 32
Performance Data........................................................... 35
Investment Practices and Restrictions...................................... 37
Portfolio Strategies Involving Options and Futures........................ 37
Other Investment Policies and Practices................................... 43
General Information........................................................ 48
Description of Shares..................................................... 48
Computation of Offering Price Per Share................................... 49
Independent Auditors...................................................... 49
Custodian................................................................. 50
Transfer Agent............................................................ 50
Legal Counsel............................................................. 50
Reports to Shareholders................................................... 50
Additional Information.................................................... 50
Independent Auditors' Report............................................... 51
Financial Statements....................................................... 52
</TABLE>
Code #10332-0196
[LOGO] MERRILL LYNCH
MERRILL LYNCH
BALANCED FUND FOR
INVESTMENT AND RETIREMENT, INC.
[ART]
STATEMENT OF
ADDITIONAL
INFORMATION
JANUARY 26, 1996
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 nine year period ended September 30, 1995 and
for the period November 29, 1985 (Commencement of Operations) to
September 30, 1986.
(2) Financial Statements included in Part B, the Statement of Additional
Information:
Schedule of Investments as of September 30, 1995.
Statement of Assets and Liabilities as of September 30, 1995.
Statement of Operations for the Year Ended September 30, 1995.
Statements of Changes in Net Assets for the Years Ended September
30, 1995 and 1994.
Financial Highlights for each of the periods in the nine year period
ended September 30, 1995.
(b) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
(1)(A)* --Articles of Incorporation of Registrant, as
amended.
(1)(B). --Articles Supplementary.
(1)(C)(degrees)(degrees) --Articles of Amendment.
(1)(D) --Articles of Amendment dated October 21, 1994.
(1)(E) --Articles Supplementary dated October 21, 1994.
(2)* --By-Laws of Registrant.
(3) --Not applicable.
(4)(A)+++ --Instruments Defining Rights of Shareholders.
(5)** --Investment Advisory Agreement between Registrant
and Merrill Lynch Asset Management.
(6)(A)(degrees)(degrees) --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)(degrees)(degrees) --Class C Distribution Agreement between Registrant
and Merrill Lynch Funds Distributor, Inc.
(6)(D)(degrees)(degrees) --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.)
(10) --Not applicable.
(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) --Not applicable.
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
(15)(A)(degrees)(degrees)(degrees) --Amended and Restated Class B Plan of
Distribution pursuant to Rule 12b-1 under
the Investment Company Act of 1940.
(15)(B)(degrees)(degrees) --Class C Distribution Plan and Class C
Distribution Plan Sub-Agreement.
(15)(C)(degrees)(degrees) --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).
(16)(C)(degrees)(degrees) --Schedule for computation of each
performance quotation provided in the
Registration Statement in response to
Item 22 (Class C Shares).
(16)(D)(degrees)(degrees) --Schedule for computation of each
performance quotation provided in the
Registration Statement in response to
Item 22 (Class D Shares).
(17)(A) --Financial Data Schedule for Class A
shares.
(17)(B) --Financial Data Schedule for Class B
shares.
(17)(C) --Financial Data Schedule for Class C
shares.
(17)(D) --Financial Data Schedule for Class D
shares.
(18)(A)(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
(18)(B) --Power of Attorney for James H. Bodurtha.
(18)(C) --Rule 18f-3 Plan.
</TABLE>
- --------
* Filed electronically herewith. Initially filed as an exhibit in Pre-
Effective Amendment No. 2 to this Registration Statement (File No. 2-
91329).
** Filed electronically herewith. Initially filed as the identically numbered
Exhibit in Post-Effective Amendment No. 3 to this Registration Statement
(File No. 2-91329).
*** Filed electronically herewith. Initially filed as the identically numbered
Exhibit in Post-Effective Amendment No. 1 to this Registration Statement
(File No. 2-91329).
. Filed electronically herewith. Initially filed as the identically numbered
Exhibit in Post-Effective Amendment No. 9 to this Registration Statement
(File No. 2-91329).
.. Filed electronically herewith. Initially filed as Exhibit No. 16 in Post-
Effective Amendment No. 4 to this Registration Statement (File No. 2-
91329).
... Filed electronically herewith. Initially filed as the identically numbered
Exhibit in Post-Effective Amendment No. 6 to this Registration Statement
(File No. 2-91329).
+ Filed electronically herewith. Initially filed as 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.
++ Filed electronically herewith. Initially filed as 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 Exhibit (4)(C) to Post-Effective Amendment No.
11 to this Registration Statement (File No. 2-91329).
(degrees) Filed electronically herewith. Initially filed as Exhibit 17
to Post-Effective Amendment No. 11 to this Registration Statement (File No.
2-91329).
(degrees)(degrees) Filed electronically herewith. Initially filed as the
identically numbered Exhibit to Post-Effective Amendment No. 14 to this
Registration Statement (File No. 2-91329).
(degrees)(degrees)(degrees) Incorporated by reference to the identically
numbered Exhibit in 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
HOLDERS AT
TITLE OF CLASS DECEMBER 31, 1995
-------------- -----------------
<S> <C>
Class A Common Stock, par value $.01 per share........... 3,725
Class B Common Stock, par value $.01 per share........... 18,152
Class C Common Stock, par value $.01 per share........... 140
Class D Common Stock, par value $.01 per share........... 64,126
</TABLE>
Note: The number of holders shown above includes holders of record plus
beneficial owners, whose shares are held of record by Merrill Lynch,
Pierce, Fenner & Smith Incorporated.
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.
The Registrant has purchased an insurance policy insuring its officers and
directors against liabilities, and certain costs of defending claims against
such officers and directors, to the extent such officers and directors are not
found to have committed conduct constituting willful misfeasance, bad faith,
gross negligence or reckless disregard in the performance of their duties
Article IV of the Management Agreement between Registrant and Merrill Lynch
Asset Management, Inc. (now called Merrill Lynch Asset Management, L.P.)
("MLAM") (Exhibit 5 to Registrant's Registration Statement on Form N-1A) limits
the liability of MLAM to liabilities arising from willful misfeasance, bad
faith or gross negligence in the performance of their respective duties or from
reckless disregard of their respective duties and obligations.
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)
C-3
<PAGE>
the advances must be limited to amounts used, or to be used, for the
preparation or presentation of a defense to the action, including costs
connected with the preparation of a settlement; (ii) advances may be made only
upon receipt of: (a) a written affirmation by the director of the director's
good faith belief that the standard of conduct necessary for indemnification
by the corporation as authorized in this section has been met, and (b) a
written promise by, or on behalf of, the recipient to repay that amount of the
advance which exceeds the amount to which it is ultimately determined that he
is entitled to receive from the Registrant by reason of indemnification; and
(iii) (a) such promise must be secured by a surety bond, other suitable
insurance or an equivalent form of security which assures that any repayments
may be obtained by the Registrant without delay or litigation, which bond,
insurance or other form of security must be provided by the recipient of the
advance, or (b) a majority of a quorum of the Registrant's disinterested,
nonparty directors, or an independent legal counsel in a written opinion,
shall determine, based upon a review of readily available facts, that the
recipient of the advance ultimately will be found entitled to indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant and the principal underwriter pursuant to the foregoing provisions
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer,
or controlling person of the Registrant and the principal underwriter in
connection with the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person or the principal
underwriter in connection with the shares being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Merrill Lynch Asset Management, L.P. (the "Manager" or "MLAM") also acts as
investment adviser for the following open-end investment companies: Merrill
Lynch Adjustable Rate Securities Fund, Inc., Merrill Lynch Americas Income
Fund, Inc., Merrill Lynch Asset Growth Fund, Inc., Merrill Lynch Asset Income
Fund, Inc., Merrill Lynch Balanced Fund for Investment and Retirement, Inc.,
Merrill Lynch Capital Fund, Inc., Merrill Lynch Developing Capital Markets
Fund, Inc., Merrill Lynch Dragon Fund, Inc., Merrill Lynch EuroFund, Merrill
Lynch Fundamental Growth Fund, Inc., Merrill Lynch Fund for Tomorrow, Inc.,
Merrill Lynch Global Allocation Fund, Inc., Merrill Lynch Global Bond Fund for
Investment and Retirement, Merrill Lynch Global Convertible Fund, Inc.,
Merrill Lynch Global Holdings, Merrill Lynch Global Resources Trust, Merrill
Lynch Global SmallCap Fund, Inc., Merrill Lynch Global Utility Fund, Inc.,
Merrill Lynch Growth Fund for Investment and Retirement, Merrill Lynch
Healthcare Fund, Inc., Merrill Lynch Institutional Intermediate Fund, Merrill
Lynch International Equity Fund, Merrill Lynch Latin America Fund, Inc.,
Merrill Lynch Middle East/Africa Fund, Inc., Merrill Lynch Municipal Series
Trust, Merrill Lynch Pacific Fund, Inc., Merrill Lynch Ready Assets Trust,
Merrill Lynch Retirement Asset Builder Program, Inc., Merrill Lynch Retirement
Series Trust, Merrill Lynch Series Fund, Inc., Merrill Lynch Short-Term Global
Income Fund, Inc., Merrill Lynch Strategic Dividend Fund, Merrill Lynch
Technology Fund, Inc., Merrill Lynch U.S.A. Government Reserves, Merrill Lynch
U.S. Treasury Money Fund, Merrill Lynch Utility Income Fund, Inc. and Merrill
Lynch Variable Series Funds, Inc.; and the following closed-end investment
companies: Convertible Holdings, Inc., Merrill Lynch High Income Municipal
Bond Fund, Inc. and Merrill Lynch Senior Floating Rate Fund, Inc. Fund Asset
Management, L.P. ("FAM"), an affiliate of MLAM, acts as the investment adviser
for the following open-end investment companies: CBA Money Fund, CMA
Government Securities Fund, CMA Money Fund, CMA Multi-State Municipal Series
Trust, CMA Tax-Exempt Fund, CMA Treasury Fund, The Corporate Fund Accumulation
Program, Inc., Financial Institutions Series Trust, Merrill Lynch Basic Value
Fund, Inc., Merrill Lynch California Municipal Series Trust, Merrill Lynch
Corporate Bond Fund, Inc., Merrill Lynch Federal Securities Trust, Merrill
Lynch Funds for Institutions Series, Merrill Lynch Multi-State Limited
Maturity
C-4
<PAGE>
Municipal Series Trust, Merrill Lynch Multi-State Municipal Series Trust,
Merrill Lynch Municipal Bond Fund, Inc., Merrill Lynch Phoenix Fund, Inc.,
Merrill Lynch Special Value Fund, Inc., Merrill Lynch World Income Fund, Inc.
and The Municipal Fund Accumulation Program, Inc.; and the following closed-end
investment companies: Apex Municipal Fund, Inc., Corporate High Yield Fund,
Inc., Corporate High Yield Fund II, Inc., Emerging Tigers Fund, Inc., Income
Opportunities Fund 1999, Inc., Income Opportunities Fund 2000, Inc., MuniAsset
Fund, Inc., MuniEnhanced Fund, Inc., MuniInsured Fund, Inc., MuniVest Fund,
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 California Fund, Inc., MuniYield California Insured Fund, Inc.,
MuniYield California Insured Fund II, Inc., MuniYield Florida Fund, MuniYield
Florida Insured Fund, MuniYield Fund, Inc., MuniYield Insured Fund, Inc.,
MuniYield Insured Fund II, Inc., MuniYield Michigan Fund, Inc., MuniYield
Michigan Insured Fund, Inc., MuniYield New Jersey Fund, Inc., MuniYield New
Jersey Insured Fund, Inc., MuniYield New York Insured Fund, Inc., MuniYield New
York Insured Fund II, Inc., MuniYield New York Insured Fund III, Inc.,
MuniYield Pennsylvania Fund, MuniYield Quality Fund, Inc., MuniYield Quality
Fund II, Inc., Senior High Income Portfolio, Inc., Senior High Income Portfolio
II, Inc., Senior Strategic Income Fund, Inc., Taurus MuniCalifornia Holdings,
Inc., Taurus MuniNew York Holdings, Inc., and Worldwide DollarVest Fund, Inc.
The address of each of these investment companies is P.O. Box 9011, Princeton,
New Jersey 08543-9011, except that the address of Merrill Lynch Funds for
Institutions Series and Merrill Lynch Institutional Intermediate Fund is One
Financial Center, 15th Floor, Boston, Massachusetts 02111-2646. The address of
the Manager, FAM, Princeton Services, Inc. ("Princeton Services") and Princeton
Administrators, L.P. ("Princeton Administrators") is also P.O. Box 9011,
Princeton, New Jersey 08543-9011. The address of Merrill Lynch Funds
Distributor, Inc. ("MLFD") is P.O. Box 9081, Princeton, New Jersey 08543-9081.
The address of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch") and Merrill Lynch & Co., Inc. ("ML&Co.") is World Financial Center,
North Tower, 250 Vesey Street, New York, New York 10281. The address of Merrill
Lynch Financial Data Services ("FDS") is 4800 Deer Lake Drive East,
Jacksonville, Florida 32246-6484.
Set forth below is a list of each executive officer and partner of the
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, 1993, 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 and Monagle 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, General Partner General Partner of FAM
Inc. ..................
("Princeton Services")
Arthur Zeikel........... President President of FAM; President and Director of
Princeton Services; Director of MLFD;
Executive Vice President of ML & Co.
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL BUSINESS,
NAME POSITION WITH THE INVESTMENT ADVISER PROFESSION, VOCATION OR EMPLOYMENT
---- ------------------------------------ ----------------------------------
<C> <C> <S>
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;
Director of FDS
Vincent R. Giordano..... Senior Vice President Senior Vice President of FAM; Senior Vice
President of Princeton Services
Elizabeth Griffin....... Senior Vice President Senior Vice President of FAM; Senior Vice
President of Princeton Services
Norman R. Harvey........ Senior Vice President Senior Vice President of FAM; Senior Vice
President of Princeton Services
N. John Hewitt.......... Senior Vice President Senior Vice President of FAM; Senior Vice
President of Princeton Services
Philip L. Kirstein...... Senior Vice Senior Vice President, General Counsel and
President, General Secretary of FAM; Senior Vice President,
Counsel and General Counsel Director and Secretary of
Secretary Princeton Services; Director of MLFD
Ronald M. Kloss......... Senior Vice President Senior Vice President and Controller of
and Controller FAM; Senior Vice President and Controller
of Princeton Services
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
Richard L. Reller....... Senior Vice President First Vice President of MLAM; First 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
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 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., The Municipal Fund Accumulation
Program, Inc., and also acts as principal underwriter for the following closed-
end funds: Merrill Lynch High Income Municipal Bond Fund, Inc., Merrill Lynch
Senior Floating Rate Fund, Inc. and Merrill Lynch Municipal Strategy Fund, Inc.
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,
Brady, Crook, Graczyk, Fatseas, Wasel and Ms. Schena 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
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, Merrill Lynch Financial Data Services, Inc., 4800
Deer Lake Drive East, Jacksonville, Florida 32246-6484.
ITEM 31. MANAGEMENT SERVICES.
Other than as set forth under the caption "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 25TH DAY OF JANUARY,
1996.
Merrill Lynch Balanced Fund for
Investment and Retirement, Inc.
/s/ Terry K. Glenn
By___________________________________
TERRY K. GLENN, EXECUTIVE VICE
PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS POST-
EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE
FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURES TITLE DATE
President and
* Director (Principal
- ------------------------------------- Executive Officer)
(ARTHUR ZEIKEL)
* Treasurer (Principal
- ------------------------------------- Financial and
(GERALD M. RICHARD) Accounting Officer)
* Director
- -------------------------------------
(JAMES H. BODURTHA)
* 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.
/s/ Terry K. Glenn
*By _________________________________ January 25, 1996
(TERRY K. GLENN, ATTORNEY-IN-FACT)
C-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER NUMBER
------- ------
<C> <S> <C>
(1)(D) --Articles of Amendment dated October 21, 1994
(1)(E) --Articles Supplementary dated October 21, 1994
(11)(A) --Consent of Deloitte & Touche LLP, independent auditors for
Registrant
(17)(A) --Financial Data Schedule for Class A shares
(17)(B) --Financial Data Schedule for Class B shares
(17)(C) --Financial Data Schedule for Class C shares
(17)(D) --Financial Data Schedule for Class D shares
(18)(B) --Power of Attorney for James H. Bodurtha
(18)(C) --Rule 18f-3 Plan
</TABLE>
<PAGE>
APPENDIX FOR GRAPHIC AND IMAGE MATERIAL
Pursuant to Rule 304 of Regulation S-T, the following table presents
fair and accurate narrative descriptions of graphic and image material omitted
from this EDGAR Submission file due to ASCII-incompatibility and cross-
references this material to the location of each occurrence in the text.
DESCRIPTION OF OMITTED LOCATION OF GRAPHIC
GRAPHIC OR IMAGE OR IMAGE IN TEXT
- ---------------------- -------------------
Compass plate, circular Back cover of Prospectus and
graph paper and Merrill Lynch back cover of Statement of
logo including stylized market Additional Information
bull
<PAGE>
EXHIBIT 99.1(a)
ARTICLES OF INCORPORATION
OF
MERRILL LYNCH RETIREMENT BENEFIT FUND, INC.
ARTICLE I
THE UNDERSIGNED# LISA SCHOENFELD, whose post-office
address is 101 Park Avenue, New Yorke New York 10178, being
at least eighteen years of age, does hereby act as an incor-
porator, under and by virtue of the General Laws of the State
of Maryland authorizing the formation of corporations and
with the intention of forming a corporation.
ARTICLE II
NAME
----
The name of the Corporation is MERRILL LYNCH
RETIREMENT BENEFIT FUND, INC.
ARTICLE III
PURPOSES AND POWERS
-------------------
The purpose or purposes for which the Corporation
is formed and the business or objects to be transacted,
carried on and promoted by it are as follows:
<PAGE>
(1) To conduct and carry on the business of an
investment company of the open-end,, management type as
defined in the Investment Company Act of 1940, as amended,
and to engage in all activities incident-thereto.
(2) To hold, invest and reinvest its assets in
securities, and in connection therewith to hold part or all
of its assets in cash.
(3) To issue and sell shares of its own capital
stock in such amounts and on such terms and conditions for
such purposes and for such amount or kind of consideration
now or hereafter permitted by the General Laws of the State
of Maryland' and by these Articles of Incorporation, as its
Board of Directors may determine, consistent with all applic-
able laws and regulations, including the Investment Company
Act of 1940, as amended.
(4) To redeem, purchase or otherwise acquire,
hold, dispose of, resell, transfer, reissue or cancel (all
without the vote or consent of the stockholders of the Corpo-
ration) shares of its capital stock, in any manner and to the
extent now or hereafter permitted by the General Laws of the
State of Maryland and by these Articles of Incorporation.
(5) To do any and all such further acts or things
and to exercise any and all such further powers or rights as
-2-
<PAGE>
may be necessary, incidental, relative, conducive, appro-
priate or desirable for the accomplishment, carrying out
or attainment of all or any of the foregoing purposes or
objects.
The Corporation shall be authorized to exercise
and enjoy all of the powers, rights and privileges granted
to, or conferred upon, corporations by the General Laws of
the State of Maryland now or hereafter in force, and the
enumeration of the foregoing shall not be deemed to exclude
any powers, rights or privileges so granted or conferred.
ARTICLE IV
PRINCIPAL OFFICE AND RESIDENT AGENT
-----------------------------------
The post-office address of the principal office of
the Corporation in the State of Maryland is c/o The Corpora-
tion Trust Incorporated, 32 South Street,.Baltimore, Maryland
21202. The name of the resident agent of the Corporation in
this State is The Corporation Trust incorporated, a corpo-
ration of this State, whose post-office address is 32 South
Street, Baltimore, Maryland 21202.
ARTICLE V
CAPITAL STOCK
-------------
(1)The total number of shares of capital stock
-3-
<PAGE>
which the Corporation shall have authority to issue is five
hundred million (500,000,000) shares, all of one class called
Common Stock, of the par value of ten cents ($0.10) per share
and of the aggregate par value of fifty million dollars
($50,000,000).
(2)The Corporation may issue, sell, redeem,
repurchase and otherwise deal in and with said shares of
Common Stock in fractional shares, and any such fractional
shares shall carry proportionately all the rights of a whole
share, excepting any right to receive a certificate evidenc-
ing such fractional shares, but including, without limita-
tion, the right to vote, the right to receive dividends and
distributions, and the right to participate upon liquida-
tion of the Corporation.
(3) All persons who shall acquire stock in the
Corporation shall acquire the same subject to the provisions
of these Articles of Incorporation and the By-Laws of the
Corporation.
ARTICLE VI
PROVISIONS FOR DEFINING, LIMITING AND
REGULATING CERTAIN POWERS OF THE CORPORA-
TION AND OF THE DIRECTORS AND STOCKHOLDERS
------------------------------------------
(1) The number of directors of the Corporation
shall be three (3), which number may be increased pursuant
-4-
<PAGE>
to the By-Laws of the Corporation but shall never be less
than three3). The names of the directors who shall act
until the first annual meeting or until their successors
are duly elected and qualify are:
Arthur Zeikel
Robert Harris
Philip L. Kirstein
(2) The Board of Directors of the Corporation
is hereby empowered to authorize the issuance from time to
time of shares of capital stock, whether now or hereafter
authorized, for such consideration as the Board of Directors,
may deem advisable, subject to such limitations as may be
set forth in these Articles of Incorporation or in the
By-Laws of the Corporation or in the General Laws of the
State of Maryland.
(3) No holder of stock of the Corporation shall,
as such holder, have any right to purchase or subscribe for
any shares of the capital stock of the Corporation or any
other security of the Corporation which it may issue or sell
(whether out of the number of shares authorized by these
Articles of Incorporation, or out of any shares of the
capital stock of the Corporation acquired by it after the
issue thereof, or otherwise) other than such right, if any,
as the Board of Directors, in its discretion, may determine.
-5-
<PAGE>
(4) Each director and each officer of the Corpo-
ration shall be indemnified by the Corporation to the full
extent permitted by the General Laws of the State of Mary-
land, subject to any limitations arising under the Invest-
ment Company Act of 1940, as amended.
(5) The Board of Directors of the Corporation may
make, alter or repeal from time to time any of the By-Laws
of the Corporation except any particular By-Law which is
specified as not subject to alteration or repeal by the Board
of Directors, subject to the requirements of the Investment
Company Act of 1940, as amended.
ARTICLE VII
REDEMPTION
----------
Each holder of shares of capital stock of the
Corporation shall be entitled to require the Corporation to
redeem all or any part of the shares of capital stock of the
Corporation standing in the name of such holder on the books
of the Corporation, and all shares of capital stock issued
by the Corporation shall be subject to redemption by the
Corporation, at the redemption price of such shares as in
effect from time to time as may be determined by the Board
of Directors of the Corporation in accordance with the
provisions hereof, subject to the right of the Board of
-6-
<PAGE>
Directors of the Corporation to suspend the right of re-
demption of shares of capital stock of the Corporation or
postpone the date of payment of such redemption price in
accordance with provisions of applicable law. The redemp-
tion price of shares of capital stock of the Corporation
shall be the net asset value thereof as determined by the
Board of Directors of the Corporation from. time to time in
accordance with the provisions of applicable law, less such
redemption fee or other charge, if any, as may be fixed by
resolution of the Board of Directors of the Corporation.
Payment of the redemption price shall be made in cash by
the Corporation at such time and in such manner as may be
determined from time to time by the Board of Directors of
the Corporation.
The Corporation may in its discretion redeem,
at such current net asset value, outstanding shares of its
capital stock not offered for redemption which are. held by
any stockholder whose shares in the aggregate have a then
total net asset value of less than such amount as set forth
in the By-Laws, provided that prior to any such proposed
redemption the Corporation shall have given such stockholder
written notice that such then current net asset value is less
than the amount set forth in the By-Laws as aforesaid and
allowed such stockholder to make additional investments
in order to increase such then current net asset value to
-7-
<PAGE>
the amount so set forth. The Corporation may also in its
discretion redeem the shares of its capital stock held by a
stockholder or stockholders to the extent deemed necessary by
the Board of Directors to avoid taxation of the Fund as a
"personal holding company."
ARTICLE VIII
VOTING
------
Notwithstanding any provision of the
General Corporation Law of the State of Maryland requiring
a greater proportion than a majority of the votes of all
classes or of any class of capital stock entitled to be cast
to take or authorize any action, the Corporation may take or
authorize any such action upon the concurrence of a majority
of the aggregate number of the votes entitled to be cast
thereon, all as permitted by Section 2-104(b) of the General
Corporation Law of the State of Maryland or any comparable
successor provision.
ARTICLE IX
DETERMINATION BINDING
---------------------
Any determination made in good faith, so far as
accounting matters are involved, in accordance with accepted
accounting practice by or pursuant to the direction of the
-8-
<PAGE>
Board of Directors, as to the amount of assets, obligations
or liabilities of the Corporation, as to the amount of net
income of the Corporation from dividends and interest for
any period or amounts at any time legally available for the
payment of dividends, as to the amount of any reserves or
charges set up and the propriety thereof, as to the time of
or purpose for creating reserves or as to the use, alteration
or cancellation of any reserves or charges (whether or not
any obligation or liability for which such reserves or
charges shall have been created shall have been paid or
discharged), as to the price of any security owned by the
Corporation or as to any other matters relating to the is-
suance, sale, redemption or other acquisition or disposition
of securities or shares of capital stock of the Corporation,
and any reasonable determination made in good faith by the
Board of Directors as to whether any transaction constitutes
a purchase of securities on "margin", a sale of securities
"short", or an underwriting of the sale of, or a participa-
tion in any underwriting or selling group in connection with
the public distribution of, any securities, shall be final
and conclusive, and shall be binding upon the Corporation and
all holders of its capital stock, past, present and future,
and shares of the capital stock of the Corporation are issued
and sold on the condition and understanding, evidenced by the
purchase of shares of capital stock or acceptance of share
-9-
<PAGE>
certificates, that any and all such determinations shall be
binding as aforesaid.
ARTICLE X
PERPETUAL EXISTENCE
-------------------
The duration of the Corporation shall be perpetual.
ARTICLE XI
AMENDMENT
---------
The Corporation reserves the right from time to
time to make any amendment of its Articles of Incorporation,
now or hereafter authorized by law, including any amendment
which alters the contract rights, as expressly set forth in
its Articles of Incorporation, of any outstanding stock.
IN WITNESS WHEREOF, the undersigned incorporator of
MERRILL LYNCH RETIREMENT BENEFIT FUND, INC. hereby executes
the foregoing Articles of Incorporation and acknowledges the
same to be her act and further acknowledges that, to the best
of her knowledge, the matters and facts set forth therein are
true in all material respects under the penalties of perjury.
Dated this 18th day of May, 1984.
/s/ Lisa Schoenfeld
-----------------------------
Lisa Schoenfeld, Incorporator
-10-
<PAGE>
this certificate is made a part, hereby acknowledges, in the
name and on behalf of said corporation, the foregoing Arti-
cles of Amendment to be the corporate act of said corporation
and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth
therein with respect to the approval thereof are true in all
material respects, under the penalties of perjury.
/s/ Arthur Zeikel
-------------
Arthur Zeikel
-11-
<PAGE>
MERRILL LYNCH RETIREMENT BENEFIT FUND, INC.
ARTICLES OF AMENDMENT
Merrill Lynch Retirement Benefit Fund, Inc., a
Maryland Corporation having its principal office in Baltimore
City, Maryland (hereinafter called the Corporation), hereby
certifies to the State Department of Assessments and Taxation
of Maryland, that:
FIRST: The charter of the Corporation is hereby
amended by striking out Article II, Article V, Article VII
and Article VIII of the Articles of Incorporation and insert-
ing in lieu thereof the following:
ARTICLE II
NAME
----
The- name of the Corporation is MERRILL
LYNCH RETIREMENT BENEFIT INVESTMENT PROGRAM,
INC.
ARTICLE V
CAPITAL STOCK
-------------
1. Amount Authorized. The total number of
-----------------
shares of capital stock of all classes which the
Corporation shall have authority to issue is one
billion (1,0OO,OOO,OOO) shares, of the par value
of one cent ($.01 ) (the "Shares" or "capital
STATE OF MARYLAND
-----------------
I hereby certify that his is a true and complete copy of
the 12 page document on file in this office. DATED: 8-9-85
-- ------
985/7496/A01 STATE DEPARTMENT OF ASSESSMENTS AND TAXATION
By: /s/
------------------------------------------
This stamp replaces our previous certification system.
Effective: 10/84
<PAGE>
stock"), and of the aggregate par value of ten
million dollars ($10,000,000). Five Hundred
Million of such Shares may be issued in the
following class, comprising the number of Shares
and having the designations indicated; subjectr
however, to the authority herein granted to the
Board of Directors to increase or decrease any
such number of Shares:
MERRILL LYNCH -FULL INVESTMENT PORTFOLIO
500,000,000 Shares
The balance of Five Hundred Million Shares
may be issued by the Board of Directors in such
initial class, or in any new class or classes,
each comprising such number of Shares and having
such preferences, rights, voting powers, restric-
tions, limitations as to dividends, qualifica-
tions, and terms and conditions of redemption as
shall be fixed and determined from time to time
by resolution or resolutions providing for the
issuance of such Shares adopted by the Board of
Directors, to whom authority so to fix and
determine the same is hereby expressly granted.
In addition, the Board of Directors is hereby
expressly granted authority to increase or
decrease the number of Shares of any class, but
the number Of Shares of any class shall hot be
decreased by the Board of Directors below the
number of Shares thereof then outstanding.
Without limiting the foregoing, the Board of
Directors may classify or reclassify any unissued
Shares from time to time by setting or changing
the preferences, conversion or other rights,
voting powers, restrictions, limitations as to
dividends, qualifications, or terms or conditions
of redemption of the Shares. The Corporation may
hold as treasury Shares, reissue for such con-
sideration and on such terms as the Board of
Directors may determine, or cancel, at their
discretion from time to time, any Shares of any
class reacquired by the Corporation.
2. Procedure for Designation.
The establishment and designation of any,
class of Shares in addition to that which has
been established and designated in Section (1)
-2-
<PAGE>
above, shall be effective upon (i) the authori-
zation of such class by vote of a majority of the
Board of Directors, including the establishment
and designation of the preferences, rights,
voting powers, restrictions, limitations as to
dividends, qualifications, and terms and condi-
tions of redemption of such class, and (ii) the
filing for record of the articles supplementary
required by Section 2-208 of the Maryland General
Corporation Law with the State Department of
Assessments and Taxation of Maryland. At any
time when there are no Shares outstanding or
subscribed for a particular class previously
established and designated by the Board of
Directors, the class may be liquidated by similar
means.
3. Establishment and Designation of
Classes.
--------------------------------
Without limiting the authority of the Board
of Directors set forth herein to establish and
designate any further classes, there is hereby
established and designated one class of stock to
be known as the MERRILL LYNCH FULL INVESTMENT
PORTFOLIO. The Shares of said class and any
Shares of any further class that may fro time to
time be established and designated by the Board
of Directors (unless provided otherwise by the
Board of Directors with respect- to such further
class at the time of establishing and designating
such further class) shall have the following
relative preferences, rights, voting powers,
restrictions, limitations as to dividends,
qualifications, and terms and conditions of
redemption:
(a) Assets Belonging to Classes. All con-
---------------------------
sideration received by the Corporation for the
issue or sale of Shares of a particular class,
together with all assets in which such considera-
tion is invested or reinvested, all income,
earnings, profits, and proceeds thereof, includ-
ing any proceeds derived from the sales, exchange
or liquidation of such assets, and any funds or
payments derived from any reinvestment of such
proceeds in whatever form the same may be, shall
irrevocably belong to that class for all pur-
poses, subject only to the rights of creditors,
-3-
<PAGE>
and shall be so recorded upon the books and
accounts of the Corporation. Such consideration,
assets, income, earnings profits, and proceeds
derived from the sale, exchange or liquidation of
such shares, and any funds or liquidation of such
assets, and any funds or payments derived from
any reinvestment of -such proceeds, in whatever
form the same may be, together with any General
items allocated to that class as provided in the
following sentence, are herein referred to as
"assets belonging to" that class. In the event
that there are any assets, income, earnings,
profits, and proceeds thereof, funds, or payments
which are not readily identifiable as belonging
to any particular class (collectively "General
items"), such General Items shall be allocated by
or under the supervision of the Board of Direc-
tors to and among any one or more of the classes
established and designated from time to time in
such manner and on such basis as the Board of
Directors, in its sole discretion, deems fair and
equitable, and any General Items so allocated to
a particular class shall belong to that class.
Each such allocation by the Board of Directors
shall be conclusive and binding for all purposes.
(b) Liabilities Belonging to Class. The
------------------------------
assets belonging to each particular class shall
be charged with the liabilities of the Corpora-
tion in respect of that class and all expenses,
costs, charges and reserves of the Corporation
which are not readily indentifiable as belonging
to any particular class shall be allocated and
charged by or under the supervision of the Board
of Directors to and among any one or more of the
classes established and designated from time to
time in such manner and on such basis as the
Board of Directors, in its sole discretion, deems
fair and equitable. The liabilities expenses,
costs, charges and reserves allocated and so
charged to a class are herein referred to as
"liabilities belonging to" that class. Each
allocation of liabilities, expenses, costs,
charges and reserves by the Board of Directors
shall be conclusive and binding for all purposes.
(c) Dividends. Dividends and distributions
---------
on Shares of a particular class may be declared
and paid with such frequency, in such form and in
-4-
<PAGE>
such amount as the Board of Directors may from
time to time determine. Dividends may be de-
clared daily or otherwise pursuant to a standing
resolution or resolutions adopted only once or
with such frequency as the Board of Directors may
determine, after providingfor actual and accrued
liabilities belonging to that class.
All dividends and capital gains distribu-
tions on Shares of a particular class shall be
paid only out of the earnings, surplus or other
lawfully available assets belonging to that class
(including for this purpose any General Assets
allocated to such class). All dividends and
distributions on Shares of a particular class
shall be distributed pro rata to the holders of
that class in proportion to the number of Shares
of that class held by such holders at the date
and time of record established for the payment of
such dividends or distributions, except that in
connection with any dividend or distribution
program or procedure the Board of Directors may
determine that no dividend or distribution
shall be payable on Shares as to which the
Shareholder's purchase order and/or payment have
not been received by the time or times estab-
lished by the Board of Directors under such
program or procedure.
The Board of Directors shall have the power,
in its sole discretion, to distribute in any
fiscal year as dividends, including dividends
designated in whole or in part as capital gains
distributions, amounts sufficient, in the opinion
of the Board of Directors, to enable the Corpora-
tion to qualify as a regulated investment company
under the Internal Revenue Code of 1954, as
amended, or any successor or comparable statute,
thereto, and regulations promulgated thereunder,
and to avoid liability of the Corporation for
Federal income tax in respect of that year.
However, nothing in the foregoing shall limit the
authority of the Board of Directors to make
distributions greater than or less than the
amount necessary to qualify as a regulated
investment company and to avoid liability of the
Corporation for-such tax.
Dividends and distributions may be paid in
cash, property or Shares, or a combination
-5-
<PAGE>
thereof as determined by the Board of Directors
or pursuant to any program that the Board of
Directors may have in effect at the time. Any
such dividend or distribution paid in Shares will
be paid at the current net asset value thereof as
determined by the Board of Directors of the
Corporation from time to time in accordance with
the provisions of applicable law.
(d) Liquidation. in the event of the liq-
-----------
uidation of the Corporation or of a particular
class, the Shareholders of each class that has
been established and designated and is being
liquidated shall be entitled to receive, as a
class, when and as declared by the Board of
Directors, the excess of the assets belonging to
that class over the liabilities belonging to that
class. The holders of Shares of any class shall
not be entitled thereby to any distribution upon
liquidation of any other class. The assets so
distributable to the Shareholder of any partic-
ular class shall be distributed among such
Shareholders in proportion to the number of
Shares of that class held by them and recorded on
the books of the Corporation. The liquidation of.
any particular class in which there are Shares
then outstanding may be authorized by vote of a
majority of the Board of Directors then in
office, subject to the approval of a majority of
the outstanding securities of that class, as
defined in the 1940 Act.
(e) Equality. All Shares of each partic-
--------
ular class shall represent an equal proportionate
interest in the assets belonging to that class
(subject to the liabilities belonging to that
class), and each Share of any particular class
shall be equal to each other Share of that class.
The Board of Directors may from time to time
divide or combine the Shares of any particular
class into a greater or lesser number of Shares
of that class without thereby changing the
proportionate beneficial interest in the assets.
belonging to that Class or in any way affecting
the rights of Shares of any other class.
(f) Conversion or Exchange Rights. Subject
-----------------------------
to compliance with the requirements of the 1940
Act, the Board of Directors shall have the
-6-
<PAGE>
authority, to provide that holders of Shares of
any class shall have the right to convert or
exchange said Shares into Shares of one or more
other classes of Shares in accordance with such
requirements and procedures as may be established
by the Board of Directors.
4. Fractional Shares. The Corporation
-----------------
may issue, sell, redeem, repurchase and other-
wise deal in and with its Shares in fractional
Shares, and any such fractional Shares shall
carry proportionately all the rights of a
whole Share, excepting any right to receive a
certificate evidencing such fractional Shares,
but including, without limitation, the right to
vote, the right to receive dividends and dis-
tributions, and the right to participate upon
liqudation of the Corporation.
All persons who shall acquire Shares in
the Corporation shall acquire the same subject to
the provisions of these Articles of Incorporation
and the By-laws of the Corporation.
ARTICLE VII
REDEMPTION
----------
Each holder of Shares of the Corporation
shall be entitled to require the Corporation to
redeem all or any part of the Shares of the
Corporation standing in the name of such holder
on the books of the Corporation, and all-Shares
issued by the Corporation shall be subject
to redemption by the Corporation, at the redemp-
tion price of such Shares as in effect from time
to time as may be determined by the Board of
Directors of the Corporation in accordance with
the provisions hereof, subject to the right of
the Board of Directors of the Corporation to
suspend the right of redemption of Shares
of the Corporation or postpone the date of
payment of such redemption-price in accordance
with provisions of applicable law. The redemp-
tion price of Shares of the Corporation of a
particular class shall be the net asset value per
Share of that class as determined by the Board of
-7-
<PAGE>
Directors of the Corporation from time to time in
accordance with the provisions of applicable law,
less such redemption fee or other charge, if any,
as may be fixed by resolution of the Board of
Directors of the Corporation. Payment of the
redemption price shall be made in cash by the
Corporation at such time and in such manner as
may be determined from time to time by the Board
of Directors of the Corporation.
The Corporation may in its discretion re-
deem, at such current net asset value, outstand-
ing Shares not offered for redemption which are
held by any stockholder whose Shares of a par-
ticular class in the aggregate have a then total
net asset value of less than such amount as set
forth in the By-Laws, provided that prior to any
such proposed redemption the Corporation shall
have given such stockholder written notice that
such then current net asset value is less than
the amount set forth in the By-Laws as aforesaid
and allowed such stockholder to make additional
investments in order to increase such then
current net asset value to the amount so set
forth. The Corporation may also in its discre-
tion redeem the Shares held, by a stockholder or
stockholders to the extent deemed necessary by
the Board of Directors' to avoid taxation of the
Fund as a "personal holding company."
ARTICLE VIII
VOTING
------
The registered owner of each Share shall be
entitledto one vote for each full Share, and a
fractional vote for each. fractional Share,
irrespective of the class, then standing in his,
name in the books of the Corporation. on any
matter submitted to a vote of shareholders, all-
Shares then issued and outstanding and entitled
to vote, irrespective of class, shall be voted
in the aggregate and not by class except:(i)
when otherwise required by the Maryland General
Corporation Law; (ii) when otherwise required by
the Investment Company Act of 1940 or the rules
adopted thereunder in which case Shares shall be
-8-
<PAGE>
voted by individual class; and (iii) when the
matter does not affect the interest of a particu-
lar class, in which case only shareholders of the
class affected shall be entitled to vote thereon
and shall vote by individual class.
Notwithstanding any provision of Article 23
of the General Corporation Law of the State of
Maryland requiring a greater proportion than a
majority of the 'votes of all classes or of any
class of Shares entitled to vote thereon as a
separate class to take or authorize any action,
the Corporation may take or authorize any such
action upon the concurrence of a majority of the
aggregate number of the votes entitled to be cast
thereon (or of a majority of the aggregate number
of votes of a class entitled to vote thereon as
a separate class), all as permitted by Section
2-104(b) of the General Corporation Law of the
State of Maryland or any comparable successor
provision.
SECOND: The board of directors of the Corporation
by unanimous written consent pursuant to Section 2-408 of
Corporations and Associations Article of the Annotated Code
of Maryland on July __ 1985, duly adopted a resolution in
which was set forth the foregoing amendment to the charter.
THIRD: The amendment of the charter of the Corpo-
ration as hereinabove set forth has been duly advised,
approved and adopted by the board of directors of the Corpo-
ration there being no stock outstanding or subscribed for at
the time of approval.
FOURTH: (a) The total number of shares of stock
which the Corporation was heretofore authorized to issue was
Five Hundred Million (500,000,000) shares, all of one class,
-9-
<PAGE>
of the par value of ten cents ($.10) each and of the aggre-
gate par value of Fifty Million Dollars ($50,000,000).
(b) The total number of shares of all
classes of stock is increased by this amendment to one
billion (1,000,000,000) shares of capital stock of the par
value of one cent ($.01) each and of the aggregate par value
of Ten Million Dollars, ($10,000,000).
IN WITNESS WHEREOF, Merrill Lynch Retirement Bene-
fit Fund, Inc. has caused these. presents to be signed in its
name and on its behalf by its President and witnessed by its
Secretary on July 22,1985.
Merrill Lynch Retirement Benefit Fund, Inc.
By: /s/ Arthur Zeikel
-----------------------------
Arthur Zeikel, President
Witness: (Attest)
/s/ Robert Harris
----------------------------
Robert Harris, Secretary
THE UNDERSIGNED, President of Merrill Lynch Retire-
ment Benefit Fund, Inc., who executed on behalf of said
corporation the foregoing Articles of Amendment, of which
-10-
<PAGE>
EXHIBIT 99.1 (b)
MERRILL LYNCH RETIREMENT
BENEFIT INVESTMENT PROGRAM,INC.
ARTICLES SUPPLEMENTARY
Pursuant to Section 2-208.1 of the Maryland General
Corporation Law, Merrill Lynch Retirement Benefit Investment Program,
Inc. (formerly Merrill Lynch Retirement Benefit Fund, Inc.), a
Maryland corporation, having its principal office in the State of
Maryland in Baltimore City, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: The total number of shares of capital stock of all
classes that the Corporation has authority to issue is one billion
(1,000,000,000) shares, of the par value of one cent ($.01) (the
"Shares"), and of the aggregate par value of ten million dollars
($10,000,000).
SECOND: Five hundred million (500,000,000) of such Shares (the
"Initial Shares") have been allocated to the following class: Merrill
Lynch Full Investment Portfolio (the "Full Investment Portfolio").
THIRD: Pursuant to authority expressly vested in the Board of
Directors of the Corporation by Article V of the Charter of the
Corporation, as amended, the Board of Directors has duly designated
those five hundred million (500,000,000) Initial Shares of the capital
stock of the Corporation as Class B shares of the Full Investment
Portfolio, and has duly designated the remaining five hundred million
(500,000,000) Shares of the capital stock of the Corporation as Class
A shares of the Full Investment Portfolio.
FOURTH: The Corporation is registered as an open-end company
under the Investment Company Act of 1940.
<PAGE>
FIFTH: The total number of Shares of capital stock that the
Corporation has authority to issue has not been changed by the Board
of Directors.
The undersigned, President of Merrill Lynch Retirement Benefit
Investment Program, Inc., has signed these Articles Supplementary in
the Corporation's name and on its behalf and acknowledges that these
Articles Supplementary are the act of the Corporation, that to the
best of his knowledge, information and belief all matters and facts
set forth therein relating to the authorization and approval of the
Articles Supplementary are true in all material respects and that this
statement is made under the penalties of perjur y.
IN WITNESS WHEREOF, these Articles Supplementary have been
executed on behalf of Merrill Lynch Retirement Benefit Investment
Program, Inc. this 3rd day of October, 1988.
Attest: MERRILL LYNCH RETIREMENT
BENEFIT INVESTMENT PROGRAM, INC.
[SEAL]
/s/ Robert Harris /s/ Terry K. Glenn
---------------------------- ---------------------------------
Robert Harris Terry K. Glenn
Secretary Executive Vice President,
-2-
<PAGE>
EXHIBIT 99.1(c)
MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT PROGRAM, INC.
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT PROGRAM, INC., a
Maryland corporation having its principal Maryland office c/o the
Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland
21202 hereinafter called the "Corporation". hereby certifies to the
State Department of Assessments and Taxation of Maryland that:
FIRST: The charter of the Corporation is hereby amended by
deleting Article II thereof in its entirety and inserting the following
in lieu thereof:
Article II
NAME
----
The name of the Corporation is MERRILL LYNCH
BALANCED FUND FOR INVESTMENT AND RETIREMENT,
INC. (The "Corporation")
SECOND: The foregoing amendment has been effected in the manner
and by the vote required by the Corporation's charter and the laws of
the State of Maryland. The amendment is limited to a change expressly
permitted by Section 2-605(a)(4) of the Maryland Corporations and
Assiociations Code to be made without action by the stockholders and was
approved by a majority of the entire Board of Directors of the
Corporation. The Corporation is registered as an open-end company under
the Investment Company Act of 1940, as amended.
THIRD: Except as amended hereby, the Corporat ion's charter
shall remain in full force and effect.
FOURTH: The authorized capital stock of the Corporation has not
been increased by these Articles of Amendment.
The President acknowledges these Articles of Amendment to be the
corporate act of the Corporation and states that to the best of his
knowledge, information and belief, the matters set forth in these
Articles of Amendment with respect to the authorization and approval of
the amendment of the Corporation's charter are true in all material
respects, and that this statement is made under the penalties of
perjury.
<PAGE>
IN WITNESS WHEREOF, MERRILL LYNCH RETIREMENT BENEFITS INVESTMENT
PROGRAM, INC. Has caused these Articles of Amendment to be signed in
its name and on its behalf by its President, a duly authorized officer
of the Corporation, and attested by its Secretary as of the 20th day of
December, 1994.
MERRILL LYNCH RETIREMENT BENEFIT
INVESTMENT PROGRAM, INC.
/S/Arthur Zeikel
-------------------------------
Arthur Zeikel
President
Attest:
/s/ Jerry Weiss
- ----------------------------
Jerry Weiss
Secretary
-2-
<PAGE>
EXHIBIT 99.2
BY-LAWS
OF
MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT PROGRAM, INC.,
ARTICLE I
---------
Offices
-------
Section 1. Principal Office. The principal of-
---------
fice of the Corporation shall be in the City of Baltimore,
State of Maryland.
Section 2. Principal Executive Office. The
---------
principal executive office of the Corporation shall be at
800 Scudders Mill Road, Plainsboro, New Jersey 08536.
Section 3. Other Offices. The Corporation may
---------
have such other offices in such places as the Board of
Directors may from time to time designate or as the business
of the Corporation may require.
ARTICLE II
----------
Meetings of Stockholders
------------------------
Section 1. Annual Meeting. The annual meeting of the
---------
stockholders of the Corporation for the election of directors
and for the transaction of such other business as may pro-
perly be brought before the meeting shall be held
<PAGE>
annually on the date designated by the Board of Directors.
Section 2. Special Meetings. Special meetings of the stockholders,
unless otherwise provided by law or by the Articles of Incorporation, may be
called for any purpose or purposes by a majority of the Board of Directors, the
President, or on the written request of the holders of at least 25% of the
outstanding capital stock of the Corporation entitled to vote at such meeting.
Section 3. Place of Meetings. The annual meeting and any special meeting
of the stockholders shall be held at such place within the United States as the
Board of Directors may from time to time determine.
Section 4. Notice of Meetings; Waiver of Notice. Written notice of the
place, date and time of the holding of each annual and special meeting of the
stockholders and the purpose or purposes of each special meeting shall be given
by the Secretary to each stockholder entitled to vote at such meeting and to
each stockholder entitled to notice of the meeting, not less than ten (10) nor
more than ninety (90) days before the date of such meeting. Notice by mail shall
be deemed to be duly given when deposited in the United States mail addressed to
the stockholder at his address as it
-2-
<PAGE>
appears on the records of the Corporation, with postage thereon prepaid.
Notice of any meeting of stockholders shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, or who shall,
either before or after the meeting., submit a signed waiver of notice which is
filed with the records of the meeting. When a meeting is adjourned to another
time and placer unless the Board of Directors, after the adjournment, shall fix
a new record date for an adjourned meeting, or the adjournment is for more than
thirty days, notice of such adjourned meeting need not be given if the time and
place to which the meeting shall be adjourned were announced at the meeting at
which the adjourn- ment is taken.
Section 5. Quorum. At all meetings of the stock, holders, the holders
of a majority of the shares of stock of the Corporation entitled to vote at the
meeting, present in person or by proxy, shall constitute a quorum for the trans-
action of any business, except as otherwise required by statute or by the
Articles of incorporation. In the absence of a quorum no business may be
transacted except that the holders of a majority of the shares of stock present
in per- son or by proxy and entitled to vote may adjourn the meeting from time
to time, without notice other than announcement
-3-
<PAGE>
thereat except as otherwise required by these By-Laws, until the holders of the
requisite amount of shares of stock shall be so present. At any such adjourned
meeting at which a quorum may be present, any business may be transacted at the
meeting as originally called. The absence from any meeting, in person or by
proxy, of holders of the number of shares of stock of the Corporation in excess
of a majority thereof which may be required by the laws of the State of Maryland
the Investment Company Act of 1940, as amended, or other applicable statute,
the Articles of Incorporation, or these By-Laws, for action upon any given
matter shall not prevent action at such meeting upon any other matter or matters
which may proper y come before the meeting, if there shall be present thereat,
in person or by proxy, holders of the number of shares of stock of the
Corporation required for action in respect of such other matter or matters.
Section 6. Organization. At each meeting of the stockholders, the
Chairman of the Board (if one has been designated by the Board), or in his
absence or inability to act, the President, or in the absence or inability to
act of the Chairman of the Board and the.President, a Vice-President, shall act
as chairman of the meeting. The Secre tary, or in his absence or inability to
act, any person appointed by the chairman of the meetings, shall act as
secretary of the meeting and keep the minutes thereof.
-4-
<PAGE>
Section 7. Order of Business. The order of business at all meetings of
the stockholders shall be as determined by the chairman of the meeting.
Section 8. Voting. Except as otherwise provided by statute or the
Articles of incorporation, each holder of record of shares of stock of the
Corporation having voting power shall be entitled at each meeting of the
stockholders to one vote for every share of such stock standing in his name on
the record of stockholders of the Corporation as of the record date determined
pursuant to Section 9 of this Article or if such record date shall not have been
so fixed, then at the later of (i) the close of business on the day on which
notice of the meeting is mailed or (ii) the thirtieth day before the meeting.
Each stockholder entitled to vote at any meeting of stockholders may
authorize another person or persons to act for him by a proxy signed by such
stockholder or his attorney-in-fact. No proxy shall be valid after the
expiration of eleven months from the date thereof, unless otherwise provided in
the proxy. Every proxy shall be revocable at the pleasure of the stockholder
executing it, except in those cases where such proxy states that it is
irrevocable and where an irrevocable proxy is permitted by law. Except as
otherwise required by statute, the Articles
-5-
<PAGE>
of Incorporation or these By-Laws, any corporate action to be taken by vote of
the stockholders shall be authorized by a majority of the total votes cast at a
meeting of stock- holders at which a quorum is present by the holders of shares
present in person or represented by proxy and entitled to vote on such action.
If a vote shall be taken on any question other than the election of
directors, which shall be by written ballot, then unless required by statute or
these By-Laws, or determined by the chairman of the meeting to be advisable any
such vote need not be by ballot, On a vote by ballot, each ballot shall be
signed by the stockholder voting, or by his proxy, if there be such proxy, and
shall state the number of shares voted.
Section 9. Fixing of Record Date. The Board of Directors may fix in
advance a record date not more than ninety (90) nor less than ten (10) days
before the date then fixed for the holding of any meeting of the stockholders.
All persons who were holders of record of shares at such time, and no others,
shall be entitled to vote at such meeting and any adjournment thereof.
Section 10. Inspectors. The Board may, in advance of any meeting of
stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. if
-6-
<PAGE>
the inspectors shall not be so appointed or if any of them shall fail to appear
or act, the chairman of the meeting may, and on the request of any stockholder
entitled to vote there at shall, appoint inspectors. Each inspector before
entering upon the discharge of his duties, shall take and sign an oath to
execute faithfully the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. The inspectors shall
determine the number of shares outstanding and the voting power of each, the
number of shares represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes, ballots or consents
hear and determine all challenges and questions arising in connection with the
right to vote, count and tabulate all votes, ballots or consents determine the
result, and do such acts as are proper to conduct the election or vote with
fairness to all stockholders. On request of the-chairman of the meeting or any
stockholder entitled to vote thereat, the inspectors shall make a report in
writing of any challenge request or matter determined by them and shall execute
a certificate of any fact found by them. No director or candidate for the office
of director shall act as inspector of an election of directors. In- spectors
need not be stockholders. At every meeting of the stockholders where the voting
is not conducted by inspectors, all questions with respect to the qualifications
of voters
-7-
<PAGE>
and the validity of proxies and the acceptance or rejection of votes shall
be decided by the chairman of the meeting.
Section 11. Consent of Stockholders in Lieu of Meeting. Except as
otherwise provided by statute or the Articles of incorporation, any action
required to be taken at any annual or special meeting of stockholders or any
action which may be taken at any annual or special meeting of such stockholders,
may be taken without a meeting, without prior notice and without a vote, if the
following are filed with the records of stockholders meetings: (i) a unanimous
written consent which sets forth the action and is signed by each stockholder
entitled to vote on the matter and (ii) a written waiver of any right to dissent
signed by each stockholder entitled to notice of the meeting but not entitled
to vote thereat.
ARTICLE III
Board of Directors
Section 1. General Powers. Except as otherwise provided in the Articles
of Incorporation, the business and affairs of the Corporation shall be managed
under the direction of the Board of Directors. All powers of the Corporation may
be exercised by or under authority of the Board of
-8-
<PAGE>
Directors except as conferred on or reserved to the
stockholders by law or by the Articles of Incorporation or these By-Laws.
Section 2. Number of Directors. The number of directors shall be fixed
from time to time by resolution of the Board of Directors adopted by a majority
of the Directors then in office; provided, however, that the number of directors
shall in no event be less than three (3) nor more than fifteen (15). Any vacancy
created by an increase in Directors may be filled in accordance with Section 6
of this Article III. No reduction in the number of directors shall have the
effect of removing any director from office prior to the expiration of his term
unless such director is specifically removed pursuant to Section 5 of this
Article III at the time of such decrease. Directors need not be stockholders.
Section 3. Election and Term of Directors. Directors shall be elected
annually by written ballot at the annual meeting of stockholders or a special
meeting held for that purpose. The term of office of each director shall be from
the time of his election and qualification until the annual election of
directors next succeeding his election and until his successor shall have been
elected and shall have qualified, or until his death, or until he shall have
resigned, or have been removed as hereinafter provided in these By-Laws, or
-9-
<PAGE>
as otherwise provided by statute or the Articles of incorporation.
Section 4. Resignation. A director of the Corporation may resign at any
time by giving written notice of his resignation to the Board or the Chairman of
the Board or the President or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified there in, immediately upon its receipt; and,
unless otherwise specified therein, the acceptance of such resignation sha11 not
be necessary to make it effective.
Section 5. Removal of Directors. Any director of the Corporation may be
removed by the stockholders by a vote of a majority of the votes entitled to be
cast for the election of directors.
Section 6. Vacancies. Any vacancies in the Board,, whether arising from
death, resignation, removal, an increase in the number of directors or -any
other cause, shall be filled by a vote of the majority of the Board of Directors
then in office even though such majority is less than a quorum, provided that no
vacancies shall be filled by action of the remaining directors, if after the
filling of said vacancy or vacancies, less than two-thirds of the directors
-10-
<PAGE>
then holding office shall have been elected by the stockholders of the
Corporation. In the event that at any time there is a vacancy in any office of
a director which vacancy may not be filled by the remaining directors, a special
meeting of the stockholders shall be held as promptly as possible and in any
event within sixty days, for the purpose of filling said vacancy or vacancies.
Any directors elected or appointed to fill a vacancy shall hold office until
the next annual meeting of stockholders of the Corporation and until a successor
shall have been chosen and qualifies or until his earlier resignation or
removal.
Section 7. Place of Meetings. Meetings of the Board may be held at such
place as the Board may from time to time determine or as shall be specified in
the notice of such meeting.
Section 8. Regular meetings. Regular meetings of the Board may be held
without notice at such time and place as may be determined by the Board of
Directors.
Section 9. Special Meetings. Special meetings of the Board may be called
by two or more directors of the Corporation or by-the Chairman of the Board or
the President.
Section 10. Annual Meeting. The annual meeting of each newly elected
Board of Directors shall be held as soon
-11-
<PAGE>
as practicable after the meeting of stockholders at which the directors were
elected. No notice of such annual meeting shall be necessary if held immediately
after the adjournment, and at the site, of the meeting of stockholders. If not
so held, notice shall be given as hereinafter provided for special meetings of
the Board of Directors.
Section 11. Notice of Special Meetings. Notice of each special meeting
of the Board shall be given by the Secretary as hereinafter provided, in which
notice shall be stated the time and place of the-meeting* Notice of each such
meeting shall be delivered to each director, either personally or by telephone
or any standard form of tele-communication, at least twenty-four hours before
the time at which such meeting is to be held, or by first-class mail postage
prepaid, addressed to him at his residence or usual, place of business, at least
three days before the day on which such meeting is to be held.
Section 12. Telephone Meetings. Any member or members of the Board of
Directors or of any committee desig- nated by the Board, may participate in a
meeting of the Board, or any such committee, as the case may be, by means of a
conference telephone or similar communications equipment if all persons
participating in the meeting can hear each other at the same time. Participation
in a meeting by these means
-12-
<PAGE>
constitutes presence in person at the meeting. This Section 12 shall not be
applicable to meetings held for the-purpose of voting in respect of approval of
contracts or agreements whereby a person undertakes to serve or act as
investment adviser of, or principal underwriter fort the Corporation.
Section 13. Waiver of Notice of Meetings. Notice of any special meeting
need not be given to any director who shall, either before or after the meeting,
sign a written waiver of notice which is filed with the records of the meeting
or who shall attend such meeting. Except as otherwise specifically required by
these By-Laws, a notice or waiver of notice of any meeting need not state the
purposes of such meeting.
Section 14. Quorum and Voting. One-third, but not less than two, of the
members of the entire Board shall be present in person at any meeting of the
Board in order to constitute a quorum for the transaction of business at such
meeting, and except as otherwise expressly required by statute, the Articles of
Incorporation these By-Laws; the Investment Company Act of 1940, as amendeds, or
other appli- cable statute, the act of a majority of the directors present at
any meeting at which a quorum is present shall be the act of the Board;
provided, howeverr that the approval of any contract with an investment adviser
or principal underwriter,
-13-
<PAGE>
as such terms are defined in the Investment Company Act of 1940, as amended,
which the Corporation enters into or any renewal or amendment thereof, the
approval of the fidelity bond required by the investment Company Act of 1940, as
amended, and the selection of the Corporation's independent public accountants
shall each require the affirmative vote of a majority of the directors who are
not interested persons as defined in the Investment Company Act of 1940, as
amended, of the Corporation. In the absence of a quorum at any meeting of the
Board, a majority of the directors present thereat may adjourn such meeting to
another time and place until a quorum shall be present thereat. Notice of the
time and place of any such adjourned meeting shall be given to the directors who
were not present at the time of the adjournment and, unless such time and place
were announced at the meeting at which the adjournment was taken, to the other
directors. At any adjourned meeting at which a quorum is present, any business
may be transacted which might have been transacted at the meeting as originally,
called.
Section 15. Organization. The Board may, by resolution adopted by a
majority of the entire Board, desig- nate a Chairman of the Board, who shall
preside at each meeting of the Board. In the absence or inability of the
Chairman of the Board to preside at a meeting, the President,
-14-
<PAGE>
or, in his absence or inability to act, another director chosen by a majority of
the directors present, shall act as chairman of the meeting and preside thereat.
The Secretary (or, in his absence or inability to act, any person appointed by
the chairman) shall act as secretary of the meeting and keep the minutes
thereof.
Section 16. Written Consent of Directors in Lieu of a Meeting. Any
action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting, to the
extent permis-sible under applicable law, if all members of the Board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of the proceedings of the Board or
committee.
Section 17. Compensation. Directors may receive compensation for
services to the Corporation in their capa- cities as directors or otherwise in
such manner and in such amounts as may be fixed from time to time by the Board.
Section 18. Investment Policies. It shall be the. duty of the Board of
Directors to ensure that the purchase, sale, retention and disposal of portfolio
securities and the other investment practices of the Corporation are at all
times consistent with the investment policies and,
-15-
<PAGE>
restrictions with respect to securities investments and otherwise of the
Corporation, as recited in the current Prospectus of the Corporation filed from
time to time with the Securities and Exchange Commission and as required by the
Investment Company Act of 1940, as amended. The Board, however, may delegate the
duty of management of the assets and the administration of its day to day
operations to an individual or corporate management company and/or investment
adviser pursuant to a written contract or contracts which have obtained the
requisite approvals, including the requi- site approvals of renewals thereof, of
the Board of Directors and/or the stockholders of the Corporation in accordance
with applicable provisions of the Investment Company Act of 1940, as amended,
and the rules thereunder.
Section 19. Contracts. Except as otherwise provided by law or by the
Articles of Incorporation, no contract or transaction between the Corporation
and any partnership or corporation, and no act of the Corporations ,shall in any
way be affected or invalidated by the fact that any officer or director of the
Corporation is pecuniarily or otherwise interested therein or is a member,
officer or director of such interest shall be known to the Board of Directors of
the Corporation. Specifically, but without
-16-
<PAGE>
limitation of the foregoing, the Corporation may enter into one or more
contracts appointing Merrill Lynch Asset Management Inc. investment manager of
the Corporation, and may otherwise do business with Merrill Lynch Asset
Management Inc. notwithstanding the fact that one or more of the directors of
the Corporation and some or all of its officers, aret have been or may become
directors, officers, members, employees or stockholders of Merrill Lynch Asset
Management Inc. may deal freely with each other, and neither such contract
appointing Merrill Lynch Asset Management Inc. investment manager to the
Corporation nor any other contract or transaction between the Corporation and
Merrill Lynch Asset Management Inc. shall be invalidated or in any wise affected
thereby, nor shall any director or officer of the Corporation by reason thereof
be liable to the Corporation or to any stockholder or creditor of the
Corporation or to any other person for any loss incurred under or by reason of
any such contract or transaction. For purposes of this paragraph, any reference
to Merrill Lynch Asset Management Inc." shall be deemed to include said company
and any parent, subsidiary or affiliate of said company and any successor (by
merger, consolidation or otherwise) to said company or any such parent,
subsidiary or affiliate.
-17-
<PAGE>
ARTICLE IV
Committees
Section 1. Executive Committee. Unless otherwise required by statute the
Articles of Incorporation these By-Laws or the Investment Company Act of 1940,
as amended, and all rules thereunder, the Board may, by resolution adopted by a
majority of the entire board, designate an Executive Committee consisting of two
or more of the direc- tors of the Corporation, which committee shall have and
may exercise all the powers and authority of the Board with respect to all
matters other than:
(a) the submission to stockholders of any action requiring
authorization of stockholders pursuant to statute or the Articles of
Incorporation;
(b) the filling of vacancies on the Board of, Directors;
(c) the fixing of compensation of the directors for serving on the
Board or on any committee of the Boarde including the Executive Committee;,
(d) the approval or termination of any contract with an investment adviser or
principal underwriter, as such terms are defined in the Investment Company Act
of 1940, as amended;
-18-
<PAGE>
(e) the amendment or repeal of these By-Laws or the adoption of new By-
Laws;
(f) the amendment or repeal of any resolution of the Board which by its
terms may be amended or repealed only by the Board;
(g) the declaration of dividends and the issuance of capital stock of
the Corporation; and,
(h) the approval of any merger or share exchange which does not require
stockholder approval.
The Executive Committee shall keep written minutes of its proceedings
and shall report such minutes to the Board. All such proceedings shall be
subject to revision or alteration by the Board; provided, however, that third
parties shall not be prejudiced by such revision or alteration.
Section 2. Other Committees of the Board. The Board of Directors may
from time to times by resolution adop- ted by a majority of the whole Board,
designate one or more other committees of the Board, each such committee to
consist of two or more directors and to have such powers and duties as the Board
of Directors may, by resolution, prescribe.
-19-
<PAGE>
Section 3. General. One-third, but not less than two, of the members of
any committee shall be present in person at any meeting of such committee in
order to constitute a quorum for the transaction of business at such meeting,
and the act of a majority present shall be the act of such committee. The Board
may designate a chairman of any committee and such chairman or any two members
of any committee may fix the time and place of its meetings unless the Board
shall otherwise provide. In the absence or disqualification of any member of any
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. The Board shall
have the power at any time to change the membership of any committee, to fill
all vacancies, to designate alternate members to replace any absent or
disqualified member, or to dissolve any such committee. Nothing herein shall be
deemed to prevent the Board from appointing one or more committees consisting in
whole or in part of persons who are not directors of the Corporation; provided,
however, that no such committee shall have or may exercise any authority or
power of the Board in the management of the business or affairs of the
Corporation.
-20-
<PAGE>
ARTICLE V
Officers, Agents and Employees
Section 1. Number and Qualifications. The officers of the Corporation
shall be a President, who shall be a director of the Corporation, a-Secretary
and a Treasurer, each of whom shall be elected by the Board of Directors. The
Board of Directors may elect or appoint one or more Vice Presidents and may also
appoint such other officers, agents and employees as it may deem necessary or
proper. Any two or more offices may be held by the same person, except the
offices of President and Vice President, but no officer shall execute,
acknowledge or verify any instrument in more than one capacity. Such officers
shall be elected by the Board of Directors each year at its first meeting held
after the annual meeting of stockholders, each to hold office until the meeting
of the Board following the next annual meeting of the stockholders and until his
successor shall have been duly elected and shall have qualified, or until his
death, or until he shall have resigned or have been removed, as hereinafter
provided in these BY-Laws. The Board may from time to time elect, or delegate to
the President the power to appoint, such officers (including one or more
Assistant Vice Presidents, one or more Assistant Treasurers and one or more
Assistant Secretaries) and such agents, as may be
-21-
<PAGE>
necessary or desirable for the business of the Corporation. Such other officers
and agents shall have such-duties and shall hold their offices for such terms as
may be prescribed by the Board or by the appointing authority.
Section 2. Resignations. Any officer of the Corporation may resign at
any time by giving written notice of his resignation to the Board, the Chairman
of the Board, the-President or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified there- in, immediately upon its receipt; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 3. Removal of Officer Agent or Employee. Any officer, agent or
employee of the Corporation may be re- moved by the Board of Directors with or
without cause at any time, and the Board may delegate such power of removal as
to agents and employees not elected or appointed by the Board of Directors. Such
removal shall be without prejudice to such person's contract rights, if any, but
the appointment of any person as an officer, agent or employee of the
Corporation shall not of itself create contract rights.
Section 4. Vacancies. A vacancy in any pffice, whether arising from
death, resignation, removal or any
-22-
<PAGE>
other cause, may be filled for the unexpired portion of the term of the office
which shall be vacant in the manner prescribed in these By-Laws for the regular
election or appointment to such office.
Section 5. Compensation. The compensation of the officers of the
Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any officer in respect of other officers under his control.
Section 6. Bonds or Other Security. If required by the Board, any
officer, agent or employee of the Corpora- tion shall give a bond or other
security for the faithful performance of his duties, in such amount and with
such surety or sureties as the Board may require.
Section 7. President. The president shall be the chief executive officer
of the Corporation. In the absence of the Chairman' of the Board (or if there be
none), he shall preside at all meetings of the stockholders and of the Board of
Directors. He shall have, subject to the control of the Board of Directors
general charge of the business and af- fairs of the Corporation. He may employ
and discharge em- ployees and agents of the Corporation, except such as shall be
appointed. by the Board, and he may delegate these powers.
-23-
<PAGE>
Section 8. Vice President. Each Vice President shall have such powers
and perform such duties as the Board of Directors or the President may from time
to time prescribe.
Section 9. Treasurer. The Treasurer shall:,
(a) have charge and custody of, and be responsible for, all the funds
and securities of the Corporation,, except those which the Corporation has
placed in the custody of a bank or trust company or member of a national
securities exchange (as that term is defined in the Securities Exchange Act of
1934) pursuant to a written agreement designating such bank or trust company or
member of a national securities exchange as custodian of the property of the
Corporation;
(b) keep full and accurate accounts of receipts and disbursements in
books belonging to the Corporation;
(c) cause all moneys and other valuable to be deposited to the credit of
the Corporation;
(d) receive, and give receipts form, moneys due and payable to the
Corporation from any source whatsoever;,
(e) disburse the funds of the Corporation and supervise the investment
of its funds as ordered or author- ized by the Board, taking proper vouchers
therefor; and
-24-
<PAGE>
(f) in general, perform all the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him by
the Board or the President.
Section 11. Secretary. The Secretary shall:
(a) keep or cause to be kept in one or more booksprovided for the
purpose, the minutes of all meetings of theBoard, the committees of the Board
and the stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the Corporation and
affix and attest the seal to all stock certificates of the Corporation (unless
the seal of the Corporation on such certificates shall be a facsimile, as
hereinafter provided) and affix and attest the seal to all other documents to be
executed on behalf of the Corporation under its seal;
(d) see that the books, report statements, certificates and other
documents and records required by law to be kept and filed are properly kept and
filed; and,
(e) in general, perform all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the Board or the President.
-25-
<PAGE>
Section 12. Delegation of Duties. In case of the absence of any
officer of the Corporation, or for any other reason that the Board may deem
sufficient, the Board may confer for the time being the powers or duties, or any
of them, of such officer upon any other officer or upon any director.
ARTICLE VI
Indemnification
Each officer and director of the Corporation shall be indemnified by the
Corporation to the full extent permitted under the General Laws of the State of
Maryland, and the Investment Company Act of 1940 except that such indemnity
shall not protect any such person against any liability to the Corporation or
any stockholder thereof to which such person would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office. Absent a court
determination that an officer or director seeking indemnification was not liable
on the merits or guilty of willful misfeasance, bad faith gross negligence or
reckless disregard of the duties involved in the conduct of his office, the
decision by the Corporation to indemnify such person must be based upon the
reasonable determination of
-26-
<PAGE>
independent counsel in a written opinion or of the non-party independent
directors, by vote as set forth in section 2-418(E)(2)(1) of the Maryland
General Corporate Law or any comparable successor provision, after review of the
facts that such officer or director is not guilty of willful mis- feasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office.
The Corporation may purchase insurance on behalf of an officer or
director protecting such person to the full extent permitted under the General
Laws of the State of Maryland, from liability arising from his activities as
officer or director of the Corporation. The Corporation, however, may not pay
that portion of the premium for insurance on behalf of any officer or director
of the Corporation attributable to coverage that protects or purports to
protect such person from liability to the Corporation or to its stockholders
to which such officer or director would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of his office. For purposes of this Article VI
the terms officer and director shall be deemed to include former officers and
directors of the Corporation.
The Corporation may indemnify or purchase insurance to the extent
provided in this Article VI on behalf of an
-27-
<PAGE>
employee or agent who is not an officer or director of the Corporation.
ARTICLE VII
Capital Stock
Section 1. Stock Certificates. Each holder of stock of the Corporation
shall be entitled upon request to have a certificate or certificates, in such
form as shall be approved by the Board, representing the number of shares of
stock of the Corporation owned by him, provided, howevers, that certificates for
fractional shares will not be delivered in any case. The certificates
representing shares-of stock shall be signed by or in the name of the
Corporation by the President or a Vice President and by the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer and sealed with
the seal of the Corporation. Any or all of the signatures or the seal on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officers, transfer agent or registrar before such
certificate shall be issued, it may be issued by the Corporation with the same
effect as if such officer, transfer agent or registrar were still in office at
the date of issue.
-28-
<PAGE>
Section 2. Books of Account and Record of Stockholders. There shall
be kept at the principal executive office of the Corporation correct and
complete books and records of account of all the business and transactions of
the Corporation. There shall be made available upon request of any stockholder,
in accordance with Maryland law, a record containing the number of shares of
stock issued during a specified period not to exceed twelve months and the
consideration received by the Corporation for each such share.
Section 3. Transfers of Shares. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation only by the
registered holder. thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer agent or
transfer clerk, and on surrender of the certificate or certificates, if issued,
for such shares properly endorsed or accompanied by a duly executed stock
transfer power and the payment of all taxes thereon. Except as otherwise
provided by law, the Corporation shall be entitled to recognize the exclusive
right of a person in whose name any share or shares stand on the record of
stockholders as the owner of such share or shares for all purposes, including,
without limitation, the rights to receive dividends or other distributions, and
to vote as such owner, and the Corporation
-29-
<PAGE>
shall not be bound to recognize any equitable or legal claim to or interest in
any such share or shares on the part of any other person.
Section 4. Regulations. The Board may make such additional rules and
regulations, not inconsistent with these By-Laws, as it may deem expedient
concerning the issues, transfer and registration of certificates for shares of
stock of the Corporation. It may appoint, or authorize any officer or officers
to appoint, one or more transfer agents or one or more transfer clerks and one
or more registrars and may require all certificates for shares of stock to
bear the signature or signatures of any of them.
Section 5. Lost, Destroyed or Mutilated Certificates. The holder of
any certificates representing shares of stock of the Corporation shall
immediately notify the Corporation of any loss, destruction or mutilation of
such certificate, and the Corporation may issue a new certificate of stock in
the place of any certificate theretofore issued by it which the owner thereof
shall allege to have been lost or destroyed or which shall have been mutilated,
and the Board may, in its discretion, require such owner or his legal
representatives to give to the Corporation a bond in such sum, limited or
unlimited, and in such form and with such surety or sureties, as the Board in
its absolute discretion,
-30-
<PAGE>
shall determine, to indemnify the Corporation against any claim that may be made
against it on account of the alleged loss or destruction of any such
certificate, or issuance of a new certificate. Anything herein to the contrary
notwith- standing, the Board, in its absolute discretion, may refuse to issue
any such new certificate, except pursuant to legal proceedings under the laws of
the State of Maryland.
Section 6. Fixing of a Record Date for Dividends and Distributions. The
Board may fix, in advance, a date not more than ninety (90) days preceding the
date fixed for the payment of any dividend or the making of any distribution or
the allotment of rights to subscribe for securities of the Corporation, or for
the delivery of evidences of rights or evidences of interests arising out of any
changer conversion or exchange of common stock or other securities, as the
record date for the determination of the stockholders entitled to receive any
such dividend, distribution, allotment, rights on interests, and in such case
only the stockholders of record at the time so fixed shall be entitled to
receive such dividend,, distribution allotment, rights or interests.
Section 7. information to Stockholders and Others. Any stockholder of
the Corporation or his agent may inspect and copy during usual business hours
the Corporation's By-Laws, minutes of the proceedings of its stockholders,
annual,
-31-
<PAGE>
statements of its affairs, and voting trust agreements on file at its principal
office.
ARTICLE VIII
Determination of Net Asset Value; Valuation of
Portfolio Securities and Other Assets,
Section 1. Net Asset Value. The net asset value of a share of Common
Stock of the Corporation shall be determined in accordance with applicable laws
and regulations or under the supervision of such persons and at such time or
times as shall from time to time be prescribed by the Board of Directors. Each
such determination shall be made by sub-tracting from the value of the assets of
the Corporation (as determined pursuant to Article VIII Section 2 of these By-
Laws) the amount of its liabilities, dividing the remain- der by the number of
shares of Common Stock issued and outstanding, and adjusting the results to the
nearest full cent per share.
Section 2. Valuation of Portfolio Securities and Other Assets. Except as
otherwise required by any aoplicable law or regulation of any regulatory agency
having jurisdic- tion over the activities of the Corporation, the Corporation
shall determine the value of its portfolio securities and other assets as
follows:
-32-
<PAGE>
(a) securities for which market quotations are readily available shall
be valued at current market value determined in such manner as the Board of
Directors may from time to time prescribe;
(b) all other securities and assets shall be valued at amounts deemed
best to reflect their fair value as determined in good faith by, the Board of
Directors or by other persons designated and supervised by the Board acting
pursuant to procedures adopted by the Board in good faith, and at such time or
times as shall from time to time be prescribed by the Board.
All quotations, sale prices, bid and asked prices and other information
shall be obtained from such sources as the persons making such determination
believe to be reliable, persons making such determination believe to be
reliableand any determination of net asset value based thereon, shall, be
conclusive.
ARTICLE IX
Seal,
The seal of the Corporation shall be circular in form and shall bearp in
addition to any other emblem or device approved by the Board of Directorsp the
name of the Corporation, the year of its incorporation and the words
-33-
<PAGE>
"Corporate Seal" and "Maryland". Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any other manner reproduced.
ARTICLE X
Fiscal Year
Unless otherwise determined by the Board, the fiscal year of the
Corporation shall end on the 30th day of September in each year.
ARTICLE XI
Depositories and Custodians
Section 1. Depositories. The funds of the Corpora- tion shall be
deposited with such banks or other depositories as the Board of Directors of the
Corporation may from time totime determine.
Section 2. Custodians. All securities and other investments shall be
deposited in the safe keeping of such banks or other companies as the Board of
Directors of the Corporation may from time to time determine. Every arrange-
ment entered into with any bank or other company for the safe keeping of the
securities and investments of the Corporation shall contain provisions
complying with the Investment,
-34-
<PAGE>
Company Act of 1940, as amended, and the general rules and regulations
thereunder.
ARTICLE XII
Execution of Instruments
Section 1. Checks, Notes, Drafts, etc. Checks, notes, drafts,
acceptances, bills of exchange and other orders of obligations for the payment
of money shall be signed by such officer or officers or person orpersons as the
Board of Directors by resolution shall from time to time designate.
Section 2. Sale or Transfer of Securities. Stock certificates, bonds or
other securities at any time owned by the Corporation may be held on behalf of
the Corporation or sold, transferred or otherwise disposed of subject to any
limits imposed by these By-Laws and pursuant to authorization by the Board
and, when so authorized to be held on behalf of the Corporation or sold,
transferred or otherwise disposed of, may be transferred from the name of the
Corporation by the signature of the President or a Vice President or the
Treasurer or pursuant to any procedure approved by the Board of Directors,
subject to applicable law.
-35-
<PAGE>
ARTICLE XIII
Independent Public Accountants
The firm of independent public accountants which shall sign or certify
the financial statements of the Corporation which are filed with the
Securities and Exchange Commission shall be selected annually by the Board of
Directors and ratified by the stockholders to the extent required by
applicable provisions of the Investment Company Act of 1940, as amended, and the
rules thereunder.
ARTICLE XIV
Annual Statement
The books of account of the Corporation shall be examined by an
independent firm of public accountants at the close of each annual period of the
Corporation and at such other times as may be directed by the Board. A report to
the stockholders based upon each such examination shall be mailed to each
stockholder of the Corporation of record on such date with respect to each
report as may be determined by the Board, at his address as the same appears on
the books of the Corporation. Such annual statement shall also.be available at
the annual meeting of stockholders and within twenty (20) days thereafter, be
placed on file at the Corporation's principal office in the State of Maryland.
Each
-36-
<PAGE>
such report shall show the assets and liabilities of the Corporation as of
the close of the annual or quarterly period covered by the report and the
securities in which the funds of the Corporation were then invested. Such
report shall also show the Corporation's income and expenses for the period from
the end of the Corporation's preceding fiscal year to the close of the annual or
quarterly period covered by the report and any other information required by the
Investment Company Act of 1940, as amended, and shall set forth such other
matters as the Board or such firm of inde- pendent public accountants shall
determine.
ARTICLE XV
Amendments
These By-Laws or any of them may be amended, altered or repealed at any
regular meeting of the stockholders or at any special meeting of the
stockholders at which a quorum is present or represented provided that notice of
the proposed amendment, alteration or repeal be contained in the notice of such
special meeting. These By-Laws may also be amended altered or repealed by the
affirmative vote of a majority of the Board of Directors at any regular or
special meeting of the Board of Directors, except any particular By-Law which
is specified as not subject to alteration or repeal,
-37-
<PAGE>
by the Board of Directors, subject to the requirements of the Investment Company
Act of 1940, as amended.
-38-
<PAGE>
EXHIBIT 99.5
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of this 20th day of March,, 1987, by and
between MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT PROGRAM, INC., a
Maryland corporation (hereinafter referred to as the ("Fund"), and
MERRILL LYNCH ASSET MANAGEMENT, INC., a Delaware corporation
(hereinafter referred to as the "Investment Advise r").
W I T N E S S E T H:
WHEREAS, the Fund intends to engage in business as a
diversified, open-end, management investment company registered under
the Investment Company Act of 1940, as amended (hereinafter, referred
to-as the "Investment Company Act"); and
WHEREAS, the Investment Adviser is engaged principally in
rendering management and investment advisory services and is
registered as an investment adviser under the Investment Advisers Act
of 1940; and
WHEREAS, the Fund desires to retain the Investment Adviser to
render management and investment advisory services to the Fund in the
manner and an the terms hereinafter set forth; and
WHEREAS, the Investment Adviser is willing to provide management
and investment advisory services to the Fund on the terms and
conditions hereinafter set forth.
<PAGE>
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, the Fund and the Investment Adviser
hereby agree as follows:
ARTICLE I
---------
Duties of the Investment Adviser
--------------------------------
The Fund hereby employs the Investment Adviser to act as the
manager and investment adviser of the Fund and to furnish, or arrange
for affiliates to furnish, the management and investment advisory
services described below, subject to the supervision of the Board of
Directors of the Fund, for the period and on the terms and conditions
set forth in this Agreement. The Investment Adviser hereby accepts
such employment and agrees during such period, at its own expense, to
render, or arrange for the rendering of, such services and to assume
the obligations herein, set forth for the compensation provided for
herein. The Investment Adviser and its affiliates shall, for all
purposes herein, be deemed to be independent contractors and shall,
unless otherwise expressly provided or authorized, have no authority
to act for or represent the Fund in any way or otherwise be deemed an
agent of the Fund.
(a) Management Services. The Investment Adviser shall perform
(or arrange for the performance by affiliates of) the management and
administrative services necessary for the operation of the Fu nd,
including processing shareholder orders,
-2-
<PAGE>
administering shareholder accounts and handling shareholder relations,
except to the extent that the Investment Adviser is required to render
such services pursuant to its separate Administrative and Sub-
Accounting Services Agreement with the Fund. The Investment Adviser
shall provide the Fund with office space, equipment and facilities and
such other services as the investment Adviser, subject to review by
the Board of Directors of the Fund, shall from time to time determine
to be necessary or useful to perform its obligations under this
Agreement. The Investment Adviser shall also, on behalf of the Fund,
conduct relations with custodians, depositories, transfer agents,
dividend disbursing agents, other shareholder service agents,
accountants, attorneys, underwriters, brokers and dealers, corporate
fiduciaries, insurers, banks and such oth2r persons in any such other
capacity deemed to be necessary or desirable. The investment Adviser
shall make reports to the Board of Directors of the Fund of its
performance of obligations hereunder and furnish advice and
recommendations with respect to such other aspects of the business and
affairs of the Fund as it shall determine to be desirable.
(b) Investment Advisory Services. The Investment Adviser shall
----------------------------
provide the Fund with such investment research, advice and supervision
as the latter may from time to time consider necessary for the proper
supervision of the assets of the Fund, shall furnish continuously an
investment program for
-3-
<PAGE>
the Fund and shall determine from time to time which securities shall
be purchased, sold or exchanged and what portion of the Fund shall be
held in the various securities in which the Fund invests or cash,
subject always to the restrictions of the Articles of Incorporation
and By-Laws of the Fund, as amended from time to time, the provisions
of the Investment Company Act and the statements relating to the
Fund's investment objectives, investment policies and investment
restrictions as the same are set forth in the currently effective
prospectus and statement of additional information relating to the
shares of the Fund under the Securities Act of 1933, as amended (the
"Prospectus and SAI"). The Investment Adviser shall also make
decisions for the Fund-as to the manner in which voting rights, rights
to consent to corporate action and any other rights pertaining to the
Fund's portfolio securities shall be exercised. Should the Board of,
Directors of the Fund at any time, however, make any definite
determination as to investment policy and notify the Investment
Adviser thereof in writing, the Investment Adviser shall be bound by
such determination for the period, if any, specified in such notice or
until similarly notified that such determination has been revoked. The
Investment Adviser shall take, on behalf of the Fund, all actions
which it deems necessary to implement the investment policies
determined as provided above, and in particular, to place all orders
for the purchase or sale of portfolio securities for the Fund's
account with brokers or
-4-
<PAGE>
dealers selected by it, and to that end, the Investment Adviser is
authorized as the agent of the Fund to give instructions to the
Custodian of the Fund as to deliveries of securities and payments of
cash for the account of the Fund. in connection with the selection of
such brokers or dealers and the placing of such orders with respect to
assets of the Fund, the Investment Adviser is directed at all times to
seek to obtain execution and prices within the policy guidelines
determined by the Board of Directors of the Fund and set forth in the
Prospectus and SAI. Subject to this requirement and the provisions of
the Investment Company Act, the Securities Exchange Act of 1934, as
amended, and other applicable provisions of law, the Investment
Adviser may select brokers or dealers with which it, or the Fund, is
affiliated.
ARTICLE II
----------
Allocation of Charges and Expenses
----------------------------------
(a) The Investment Adviser. The Investment Adviser assumes the
----------------------
expense of, and shall pay for, maintaining the staff and personnel
necessary to perform its obligations under this Agreement, and shall
at its own expense, provide the office space, equipment and facilities
which it is obligated to provide under Article I hereof, and shall pay
all compensation of officers of the Fund and all directors of the Fund
who are affiliated persons of the Investment Adviser.
-5-
<PAGE>
(b) The Fund. The Fund assumes and shall pay, or cause to be
--------
paid, all other expenses of the Fund (except for the expenses incurred
by the Distributor), including, without limitation: taxes, expenses
for legal and auditing services, costs of printing proxies, stock
certificates, shareholder reports and Prospectuses and SAIs (except to
the extent paid by the Distributor), charges of the Custodian and
Transfer Agent, expenses of redemption of shares, Securities and
Exchange Commission fees, expenses of registering the shares under
Federal and state securities laws, fees and actual out-of-pocket
expenses of directors who are not affiliated persons of the Investment
Adviser, accounting and pricing costs (including the daily calculation
of the net asset value), insurance, interest, brokerage costs,
litigation and other extraordinary or non- recurring expenses, and
other expenses properly payable by the Fund. it is also understood
that the Fund will reimburse the Investment Adviser for its costs in
providing portfolio accounting services to the Fund. The Distributor
will pay certain of the expenses of the Fund incurred in connection -
with the continuous offering of Fund shares.
ARTICLE III
-----------
Compensation of the Investment Adviser
--------------------------------------
(a) Investment Advisory Fee. For the services, rendered the
-----------------------
facilities furnished and expenses assumed by the investment Adviser,
the Fund shall pay to the Investment Adviser
-6-
<PAGE>
at the end of each calendar month a fee based upon the average daily
value of the net assets of the Fund, as determined and computed in
accordance with the description of the determination of the net asset
value contained in the Prospectus and SAI, 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. During any period when the determination of net asset value
is suspended by the Board of Directors of the Fund, the net asset
value of a share as of the last business day prior to such suspension
shall, for this purpose, be deemed to be the net asset value at the
close of each succeeding business day until it is again determined.
(b) Expense Limitations. In the event the operating expenses of
-------------------
the Fund, including amounts payable to the investment Adviser pursuant
to subsection (a) hereof, for any fiscal year ending on a date on
which this Agreement is in effect, exceed the expense limitations
applicable to the Fund imposed by applicable state securities laws or
regulations thereunder, as such limitations may be raised or lowered
from time to time, the investment Adviser shall reduce its management
fee by the extent
-7-
<PAGE>
of such excess and, if required pursuant to any such laws or
regulations, will reimburse the Fund in the amount of such excess,
provided, however, to the extent permitted by law, there shall be
excluded from such expenses the amount of any interest, taxes,
brokerage commissions, distribution fees and extraordinary expenses
(including but not limited to legal claims and, liabilities and
litigation costs and any indemnification related thereto) paid or
payable by the Fund. Whenever the expenses of the Fund exceed a pro
rata portion of the applicable annual expense limitations the
estimated amount of reimbursement under such limitations shall be
applicable as an offset against the monthly payment of the fee due to
the Investment Adviser. Should two or more such expense limitations be
applicable as at the end of the last business day of the month, that
expense limitation which results in the largest reduction in the
Investment Adviser's fee shall be applicable.
ARTICLE IV
----------
Limitation of Liability of the Investment Adviser
-------------------------------------------------
The Investment Adviser shall not be liable for any error of
judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in the management of the Fund,
except for willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of reckless disregard of its
obligations and duties hereunder. As
-8-
<PAGE>
used in this Article IV, the term "Investment Adviser" shall include
any affiliates of the Investment Adviser performing services for the
Fund contemplated hereby and directors, officers and employees of the
Investment Adviser and such affiliates.
ARTICLE V
---------
Activities of the Investment Adviser
------------------------------------
The services of the Investment Adviser to the Fund are not to be
deemed to be exclusive, the Investment Adviser being free to render
services to others. It is understood a directors, officers, employees
and shareholders of the Fund are or may become interested in the
Investment Adviser as directors, officers, employees and shareholders
or otherwise and that directors, officers, employees and shareholders
of the Investment Adviser are or may become similarly interested in
the Fund, and, that the Investment Adviser may become interested in
the Fund as, a shareholder or otherwise.
ARTICLE VI
----------
Duration and Termination of this Agreement
------------------------------------------
This Agreement shall become effective as of the date first above
written and shall remain in full force until March 20, 1989 and
thereafter, but only so long as such continuance is specifically
approved at least annually by (i) the Board of Directors of the Fund,
or by the vote of a Majority of the
-9-
<PAGE>
outstanding voting securities of the Fund, and (ii) a majority of
those directors who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval. This Agreement may be terminated
at any time, without' the payment of any penalty, by the Board of
Directors of the Fund or by vote of a majority of the outstanding
voting securities of the Fund, or by the Investment Adviser, on sixty
days written notice to the other party. This Agreement shall
automatically terminate in the event of its assignment.
ARTICLE VII
-----------
Amendments of this Agreement
----------------------------
This Agreement may be amended by the parties only if such
amendment is specifically approved by (i) the Board of,, Directors of
the Fund, or by the vote of a Majority of outstanding voting
securities of the Fund, and (ii) a majority of those directors who are
not parties to this Agreement or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on such
approval.
ARTICLE VIII
------------
Definitions of Certain Terms
----------------------------
The terms 'vote of a majority of the outstanding voting securi
ties", "assignment", "affiliated person" and "interested
-10-
<PAGE>
person", when used in this Agreement, shall have the respective
meanings specified in the Investment Company Act.
ARTICLE IX
----------
Governing Law
-------------
This Agreement shall be construed in accordance with laws of the
State of New York, and the applicable provisions of the Investment
Company Act. To the extent that the applicable laws of the State of
New York, or any of the provisions herein, conflict with the
applicable provisions of the Investment Company Act, the latter shall
control.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written.
MERRILL LYNCH RETIREMENT BENEFIT
INVESTMENT PROGRAM, INC.
By /S/ Terry K. Glenn
---------------------------
Terry K. Glenn
MERRILL LYNCH ASSET
MANAGEMENT, INC.
By /S/ Robert Harris
----------------------------
Robert Harris
-11-
<PAGE>
EXHIBIT 99.6(a)
CLASS A SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 21st 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 prin cipal underwriter and
distributor, except that:
(a) The Fund may, upon written notice to the Distributor, from time to time
designate other principal underwriters and dis tributors 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 pur chase 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 sub
stantially 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 deter mined 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
Distri butor 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 repur chase within seven business days
after the date of the confirma tion 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 Dis tributor may reasonably
request for use in connection with the distribution of Class A shares of the
Fund, and this shall in clude, 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 addi tional 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 Securi ties 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 in vestment 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 Distri butor 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 mem bers 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 regis tration 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 con sultants. 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 qualifi cation of the Class A
shares for sale pursuant to this Agreement and, if necessary or advisable in
connection therewith, of quali 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.
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 com mon 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 per formance 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 21, 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 Dis tributor, 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 specifi cally 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 /s/ Jerry Weiss
------------------------------------
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By /s/ Gerald M. Richard
------------------------------------
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 indi vidual, 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 confirma
tion.
The reduced sales charges are applicable to purchases aggre gating $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
compen sation 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 con cerning 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 State ment 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 tele graphed 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 /s/ Gerald M. Richard
-----------------------------------
(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: /s/ David Conine
---------------------------------------------------
Address: 800 Scudders Mill Road
----------------------------------------------
Plainsboro, New Jersey 08536
------------------------------------------------------
Date: October 21, 1994
-------------------------------------------------
6
<PAGE>
EXHIBIT 99.6(b)
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 18th day of October, 1985 between MERRILL LYNCH
RETIREMENT BENEFIT INVESTMENT PROGRAM, INC., 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 Invest- ment Company Act of
1940, as amended to date (the "Invest- ment Company Act"), as a diversified,
open-end, management 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 shares in
order to promote the growth of the Fund and facilitate the distribution of its
shares.
NOW, THEREFORE, the parties agree as follows:
<PAGE>
Section 1. Appointment of the Distributor
The Fund hereby appoints the Distributor as the principal underwriter
and distributor of the Fund to sell shares of Common Stock of the Fund
(sometimes herein referred to as "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, except that:
(a) The Fund may, upon written notice to the Dis- tributor, from time to
time designate other principal under- writers and distributors of its 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 shares in the areas so designated shall terminate, but this
Agreement shall re- main otherwise in full effect until terminated in accordance
with the other provisions hereof.
(b) The exclusive rights granted to the Distributor to purchase shares
from the Fund shall not apply to,
-2-
<PAGE>
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 of all (or substantially all) the assets or
the outstanding shares of any such company by the Fund.
(c) Such exclusive rights shall also not apply to shares issued by the
Fund pursuant to reinvestment of dividends or capital gains distributions.
Section 3. Purchase of Shares from the Fund
(a) Prior to the continuous offering of the shares, commencing on a date
agreed to by the Fund and the Distributor, it is contemplated that the
Distributor will solicit subscriptions for shares during a subscription period
which shall last for such period as may be agreed upon by the parties hereto.
The subscriptions will be payable on the fifth business day after the
termination of the subscription period, at which time the Fund will commence
operations.
(b) Immediately after the completion of the subscription offering the
Fund will commence an offering of its shares and thereafter the Distributor
shall have the right to buy from the Fund the shares needed, but not more than
the shares needed (except for clerical errors in transmission) to fill
unconditional orders for shares of the Fund,
-3-
<PAGE>
placed with the Distributor by investors or securities dealers. The price which
the Distributor shall pay for the shares so purchased from the Fund shall be the
net asset value, determined as set forth in the currently effective prospectus
of the Fund under the Securities Act of 1933 (the "Prospectus") relating to such
shares.
(c) The shares are to be resold by the - Distributor or selected
dealers, as described in Section 6(d) hereof, to investors at net asset value,
as set forth in the Prospectus.
(d) The Fund shall have the right to suspend the sale of its 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 shares if trading on the New York Stock Exchange shall, have been suspended,
if a banking moratorium shall have been declared by Federal, New York or New
Jersey 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 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 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,
-4-
<PAGE>
refuse to accept or confirm orders for the purchase of 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 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 Shares by the Fund
(a) Any of the outstanding shares may be tendered for redemption at any
time, and the Fund agrees to repurchase or redeem the 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. The price to be paid to
redeem or repurchase the shares shall be equal to the net asset value determined
as set forth in the Prospectus. All payments by the Fund hereunder shall be made
in the manner set forth below.
The Fund shall pay the total amount of the redemp- tion price as defined
in the above paragraph pursuant to the,
-5-
<PAGE>
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 contingent deferred sales charge
shall be paid to the Distributor and (ii) the balance shall be paid to or for
the account of the redeeming shareholder, in each case in accordance with
applicable provisions of the Prospectus in New York Clearing House funds.,
(b) Redemption of shares or payment may be sus- pended at times when the
New York Stock Exchange is closed, when trading on said Exchange is closed, 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 shares of the Fund,
-6-
<PAGE>
and this shall include one certified copy, upon request by the Distributor, 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 ("SAI") as the
Distributor shall reasonably request.
(b) The Fund shall take, from time to time, but subject to the 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 of 1933, as amended (the "Securities Act"), to the end that
there will be available for sale such number of shares as the Distributor
reasonably may be expected to sell.
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of any appropriate number of its shares for sales 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 7(c) hereof, the expense of
qualifica- tion 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
-7-
<PAGE>
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 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 shares of the Fund, the Dis- tributor 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 Dis-
tributor nor any selected dealer 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 or SAI and any
sales literature specifically approved by the Fund.
-8-
<PAGE>
(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 of
Securities Dealers, Inc. (the "NASD"), as such requirements may from time to
time exist.
(d) The Distributor shall have the right to enter into selected dealers
agreements with securities dealers of its choice ("selected dealers") for the
sale of shares, provided that the Fund shall approve the forms of agreements
with dealers. Within the United States, the Distributor shall offer and sell
shares only to such selected dealers as are members in good standing of the
NASD. Shares sold to selected dealers shall be for resale by such dealers only
at net asset value determined as set forth in the Prospectus or SAI, as the case
may be. The Distributor may allocate the proceeds of any applicable contingent
deferred sales charge to the dealer(s) which sold the shares being redeemed. The
form of the agreement with selected dealers to be used during the subscription
period is attached hereto as Exhibit A. The initial form of the agreement with
selected dealers to be used in the continuous offering of the shares is attached
hereto as Exhibit B.
-9-
<PAGE>
Section 7. Payment of Expenses
(a) The Distributor shall bear all expenses incurred by it in connection
with its duties and activities under this Agreement, including: 1) the expense
of reimburs- ing Merrill Lynch, Pierce, Fenner & Smith Incorporated and other
selected dealers for their expenses associated with their payment of sales
commissions to account executives for sales of the Fund's shares and 2) the
costs and expenses of preparing, printing and distributing any other literature
used by the Distributor or furnished by it for use by selected dealers in
connection with the offering of the shares for sale to the public and any
expenses of advertis- ing in connection with such offering, except such expenses
offically undertaken herein by the Fund. In addition, after the prospectuses and
annual and interim reports have been prepared and set in type, the Distributor
shall bear the costs and expenses of printing and distribut- ion any copies
thereof which are to be used in connection with the offering of shares to
selected dealers or inves- tors. It is understood and agreed that, so long as
the Fund's Plan of Distribution pursuant to Rule 12b-1 under the investment
Company Act continues in effect, any expenses incurred by the Distributor
hereunder may be paid from amounts received by it from the Fund under such
Plan.
-10-
<PAGE>
(b) 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/or SAIs under the Investment Company Act, the Securities Act,
and all amendments and supplements thereto, and preparing and mailing annual and
interim reports and proxy materials to shareholders (including but not limited
to the expense of setting in type any such registration statements,
Prospectuses, SAIS, annual or interim reports or proxy materials).
(c) The Fund shall bear the cost of expenses of qualification of the
shares for sale, 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 expense payable to each such
state for continuing qualification therein until the Fund decides to
discontinue such qualification pursuant to Section 5(c) hereof.
Section 8. Indemnification
(a) The Fund shall indemnify and hold harmless the Distributor
and each person, if any, who controls the,
-11-
<PAGE>
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), arising by reason of any person acquiring any shares, which may be
based upon the Securities Act, or on any other statute or at common law, on the
ground that the registration statement or related Prospectus or SAI, 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 control- ling 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
-12-
<PAGE>
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 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
-13-
<PAGE>
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 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 forego-
ing indemnity contained in subsection (a) of this Section 8, 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 or SAI, as from time to time amended, or the 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
-14-
<PAGE>
to the Distributor by the provisions of subsection (a) of this Section 8.
Section 9. Duration and Termination of this Agreement
This Agreement shall become effective as of the date first above written
and shall remain in force until September 30, 1987 and thereafter, but only so
long as such continuance is specifically approved at least annually by (i) the
Board of Directors of the Fund, 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 Board of Directors of the Fund 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
-15-
<PAGE>
the respective meanings specified in the Investment Company Act.
Section 10. Amendments of this Agreement
This Agreement may be amended by the parties only if such amendment is
specifically approved by (i) the Board of Directors of the Fund, 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 11. 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
-16-
<PAGE>
any of the provisions herein, conflict with the applicable
provisions of the Investment Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
MERRILL LYNCH RETIREMENT BENEFIT
INVESTMENT PROGRAM, INC.
By /s/ Bernard Durnin
---------------------------------
MERRILL LYNCH FUNDS
DISTRIBUTOR, INC.
By /s/
---------------------------------
-17-
<PAGE>
EXHIBIT A
MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT
PROGRAM, INC. SHARES OF COMMON STOCK
SELECTED DEALERS AGREEMENT
FOR SUBSCRIPTION PERIOD
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distribu- tor") has an
agreement with Merrill Lynch Retirement Benefit Investment Program, Inc., a
Maryland corporation (the 'Fund"), pursuant to which it acts as the distributor
for the sale of shares of common stock, par value $0.01 per share, of the Fund,
and as such has the right to distribute shares of the Fund for resale. The Fund
is a diversified open-end investment company registered under the Investment
Company Act of 1940, as amended, and its shares being offered to the public are
registered under the Securities Act of 1933, as amended. Such shares and certain
of the terms on which they are being offered are more fully described in the
enclosed Prospectus. You have received a copy of 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 registration statement filed pursuant to the
Securities Act of 1933, as amended. This Agreement relates solely to the
subscription period described in Section 3(a) of such Distribution Agreement. As
principal, we offer to sell to you, as a member of a group of selected dealers
(the "Selected Dealers Group"), shares of the Fund upon the following terms and
conditions:
1. The subscription period referred to in Section 3(a) of the
Distribution Agreement will continue through November 21, 1985. The subscription
period may be extended upon agreement between the Fund and the Distributor.
Subject to the provisions of such Section and the conditions contained herein,
we will sell to you on the fifth business day following the termination of the
subscription period, or such later date as we may advise (the "Closing Date"),
such number of shares as to which you have placed orders with us not later than
5:00 P.M. on the second full business day preceding the Closing Date.
2. In all sales of these shares to the public you shall act as dealer
for your own account, and in no
<PAGE>
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.
3. The public offering price shall be the net asset value per share of
the Fund on the Closing Date.
4. You shall not place orders for any of the shares unless you have
already received purchase orders for such shares at the applicable public
offering price and subject to the terms hereof and of the Distribution
Agreement. The minimum initial purchase is $5000 ($250 for purchases by an IRA
or a Merrill Lynch Basic (Keogh Plus) Retirement Account) and the minimum
subsequent purchas is $500 ($50 in the case of an IRA or a Merrill Lynch Basic
(Keogh Plus) Retirement Account). You agree that you will not offer or sell any
of the shares except under circumstances that will result in compliance with the
applicable Federal and state securities laws and that in connection with sales
and offers to sell shares you will furnish to each person to whom any such sale
or offer is made a copy of the Prospectus (as then amended or supplemented) and
will not furnish to any person any information relating to the shares of the
Fund which is inconsistent in any respect with the information contained in the
Prospectus or 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. Payment for shares purchased by you is to be made by wire transfer or
certified or official bank check on the Closing Date at the time and place
specified to you by us no later than two business days prior to the Closing
Date, at the settlement price as provided above on such date in New York
Clearing House funds payable to the order of Merrill Lynch Funds Distributor,
Inc. against delivery to us of non-negotiable share deposit receipts.
("Receipts") issued by First Jersey National Bank as shareholder servicing
agent, acknowledging the deposit with it of the shares so purchased by you. You
agree that as promptly as practicable after the delivery of such shares you will
issue appropriate written transfer instructions to the Fund or to the
shareholder servicing agent as to the purchasers to whom you sold the shares.
6. No person is authorized to make any representations concerning shares
of the issuer except those contained in the current Prospectus and Statement of
Additional Information of the Fund and in such printed information
-2-
<PAGE>
subsequently issued by us or the Fund as information supplemental to such
Prospectus and Statement of Additional Information. In purchasing shares through
us you shall rely solely on the representations contained in the Prospectus and
Statement of Additional Information and supplemental information above
mentioned. Any printed information which. we furnish you other than the Fund's
Prospectus, Statement of Additional Information, periodic reports and proxy
solicitation material are 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.
7. You agree to deliver to each of the purchasers mak- ing purchases
from you a copy of the then current Prospectus at or prior to the time of
offering or sale and you agree thereafter to deliver to such purchasers copies
of the annual and the interim reports and proxy solicitation materials of the
Fund and to deliver copies of the Statement of Additional Information upon such
purchaser's request. You further agree to endeavor to obtain proxies from each
of such purchasers. Additional copies of the Prospectus, 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 shares entirely. 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 offering during the
subscription period. We shall be under no liability to you except for lack of
good faith and for obligations expressly assumed by us herein. Nothing contained
in this paragraph is intended to 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.
-3-
<PAGE>
11. Upon application to us, we will inform you as to the states in which
we believe the shares have been qualified for sale under, or are exempt from
the requirements of the respective securities laws of such states, but we assume
no responsibility or obligation as to your right to sell shares in any
jurisdiction. We will file with the Department of State in New York a Further
State Notice with respect to the shares, if necessary.
12. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
13. You agree that you will not sell any shares of the Fund to any
account over which you exercise discretionary authority.
14. This Agreement shall terminate at the close of business on the
Closing Date, unless earlier terminated, provided, however, this Agreement shall
continue after
-4-
<PAGE>
termination for the purpose of Section 7 hereof and for the purpose of
settlement of accounts hereunder.
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
N.J. 08540-9011
Accepted:
Firm Name:
-----------------------------
By:
-----------------------------
Address:
-----------------------------
Date: -----------------------------
-5-
<PAGE>
EXHIBIT B
MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT
PROGRAM, INC. SHARES OF COMMON STOCK
SELECTED DEALERS AGREEMENT
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distribu- tor") has an
agreement with Merrill Lynch Retirement Benefit Investment Program, Inc., a
Maryland corporation (the "Fund"), pursuant to which it acts as the distributor
for the sale of shares of common stock, par value $0.01 per share, of the Fund,
and as such has the right to distribute shares of the Fund for resale. The Fund
is a diversified open-end investment company registered under the investment
Company Act of 1940, as amended, and its shares being offered to the public are
registered under the Securities Act of 1933, as amended. Such shares and certain
of the terms on which they are being offered are more fully described in the
enclosed Prospectus. You have received a copy of 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
Comission which is part of the registration statement filed pursuant to the
Securities Act of 1933, as amended. This Agreement relates solely to the
continuous offering period described in Section 3(b) of such Distribution
Agreement. As principal, we offer to sell to you, as a member of a group of
selected dealers (the "Selected Dealers Group"), shares of the Fund upon the
following terms and conditions:
1. In all sales of these shares to the public you shall act as dealer
for your own account, and in no transac- tion shall you have any authority to
act as agent for the Fund, for us or for any other member of the Selected
Dealers Group.
2. Orders received from you will be accepted us only at the public
offering price applicable to each order, determined in the manner 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.
<PAGE>
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 shares unless you have
already received purchase orders for such shares at the applicable public
offering price and subject to the terms hereof and of the Distribution
Agreement. The minimum initial purchase is $5OOO ($250 for purchases by an IRA
or a Merrill Lynch Basic (Keogh Plus) Retirement Account) and the minimum
subsequent purchase is $500 ($50 in the case of an IRA or a Merrill Lynch Basic
(Keogh Plus) Retirement Account). You agree that you will not offer or sell any
of the shares except under circumstances that will result in compliance with the
applicable Federal and state securities laws and that in connection with sales
and offers to sell shares you will furnish to each person to whom any such sale
or offer is made a copy of the Prospectus (as then amended or supplemented) and
will not furnish to any person any information relating to the shares of the
Fund which is inconsistent in any respect with the information contained in the
Prospectus or 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 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 shares directly
to the Fund or its agent for redemption subject to the applicable terms and
conditons set forth in Section 4 of the Distribution Agreement.
5. You shall not withhold placing orders received from your customers so
as to profit yourself as a result of such withholding: e.g., by a change in the
'net asset value" from that used in determining the offering price to your
customers.
6. No person is authorized to make any representations concerning shares
of the issuer 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 shares through us you shall
rely
-2-
<PAGE>
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 are 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.
7. You agree to deliver to each of the purchasers mak- ing purchases
from you a copy of the then current Prospectus at or prior to the time of
offering or sale and you agree thereafter to deliver to such purchasers copies
of the annual and the interim reports and proxy solicitation materials of the
Fund and to deliver copies of the Statement of Additional Information upon such
purchaser's request. You further agree to endeavor to obtain proxies from each
of such purchasers. Additional copies of the Prospectus, 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 shares entirely. 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
period. We shall be under no liability to you except for lack of good faith and
for obligations expressly assumed by us herein. Nothing contained in this
paragraph is intended to operate as, and the provisions of this paragraph shall
not in any way whatsoever constitute, a waiver by you of compliance with any
provision of the Securities Act of 1933, as amended, or of the rules and
regulations of the Securities and Exchange Commission issued thereunder.
10. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
11. Upon application to us, we will inform you as to the states in which
we believe the shares have been quali- fied for sale under, or are exempt from
the requirements of
-3-
<PAGE>
the respective securities laws of such states, but we assume no responsibility
or obligation as to your right to sell shares in any jurisdiction. we will file
with the Department of State in New York a Further State Notice with respect to
the shares, if necessary.
12. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
13. You agree that you will not sell any shares of the Fund to any
account over which you exercise discretionary authority.
14. Your first order placed pursuant to this Agreement the purchase of
shares of the Fund will represent your acceptance of this Agreement.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
----------------------------------
(Authorized Signature)
-4-
<PAGE>
Please return one signed copy
of this agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9011
Princeton, N.J. 08540-9011
Accepted:
Firm Name:
-----------------------------
By:
-----------------------------
Address:
-----------------------------
Date:
-----------------------------
-5-
<PAGE>
EXHIBIT 99.6(c)
CLASS C SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 21st 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
<PAGE>
1. Appointment of the Distributor. The Fund hereby appoints the
------------------------------
Distributor as the principal underwriter and 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 condi
tions herein set forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the
--------------------------
exclusive representative of the Fund to act as prin cipal 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
2
<PAGE>
company with the Fund or the acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding Class C shares of any such
company by the 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 Dis tributor 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 imprac ticable 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 sus pended 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 in clude, 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 addi tional 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 exclu sive and nothing herein contained shall prevent the
Distributor from entering into like arrangements with other investment com
panies so long as the performance of its obligations hereunder is not impaired
thereby.
(b) In selling the Class C shares of the Fund, the Distri butor 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 se lected 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 neces sary
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 con sultants. 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 Dis tributor 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 here under may be paid from amounts recovered by it
from the Fund under such Plan.
(c) The Fund shall bear the cost and expenses of qualifi cation of the Class C
shares for sale pursuant to this Agreement and, if necessary or advisable in
connection therewith, of qualiy-
10
<PAGE>
ing 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 Distri butor 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, in formation
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 commence ment 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 indem nity 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 Distri butor, 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 21, 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 specifi cally 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 Agree ment 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 /s/ Jerry Weiss
---------------------------------
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By /s/ Gerald M. Richard
---------------------------------
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
1
<PAGE>
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 ini tial 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 Addi
tional 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 Sec tion 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 with holding: 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 Informa tion and supplemental information
above mentioned. Any printed information which we furnish you other than the
Fund's Prospec tus, 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 re quest.
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 tele graphed 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 /s/ Gerald M. Richard
----------------------------------------
(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: /s/ David Conine
-------------------------------------------------
Address: 800 Scudders Mill Road
--------------------------------------------
Plainsboro, New Jersey 08536
-----------------------------------------------------
Date: October 21 , 1994
-----------------------------------------------
4
<PAGE>
EXHIBIT 99.6(d)
CLASS D SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 21st 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 prin cipal underwriter and
distributor, except that:
A. The Fund may, upon written notice to the Distributor, from time to time
designate other principal underwriters and dis tributors 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 pur chase 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 sub
stantially 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 Sec tion 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 deter mined 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
Distri butor 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 repur chase within seven business days
after the date of the confirma tion 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 Dis tributor may reasonably
request for use in connection with the distribution of Class D shares of the
Fund, and this shall in clude, 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 addi tional 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 Securi ties 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 in
vestment 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 Distri butor 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 mem bers 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 regis tration 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 con sultants. 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 qualifi cation of the
Class D shares for sale pursuant to this Agreement and, if necessary or
advisable in connection therewith, of quali 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 Distri butor 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 com mon 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 per formance 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 reim burse the Distributor or such controlling person or persons,
de fendant 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 21, 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 Dis tributor, 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 specifi cally 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 /s/ Jerry Weiss
------------------------------------
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By /s/ Gerald M. Richard
------------------------------------
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 /s/ Gerald M. Richard
----------------------------------
(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: /s/ David Conine
-------------------------------------------
Address: 800 Scudders Mill Road
--------------------------------------
Plainsboro, New Jersey 08536
--------------------------------------
Date: October 21, 1994
----------------------------------------
6
<PAGE>
EXHIBIT 99.8(a)
CUSTODIAL AGREEMENT
THIS AGREEMENT made as of between, MERRILL LYNCH RETIREMENT BENEFIT
INVESTMENT PROGRAM, INC. a corporation organized and existing under the
laws of of Maryland (hereinafter called the "Corporation"), and THE FIRST
JERSEY NATIONAL BANK, a national banking association organized and existing
under the laws of the United States (hereinafter called the "Custodian").
national banking association organized and existing under the laws of the
United States (hereinafter called the "Custodian").
WITNESSETH:
WHEREAS, the Corporation desires that its securities and funds shall be
hereafter-held and administered by the Custodian pursuant to the terms of
this Agreement:
NOW, THEREFORE, in consideration of the mutual agreement herein made,
the Corporation and the Custodian agree as follows:
Section 1. Definitions
The word "securities" as used herein includes stocks, shares, bonds,
debentures, notes, mortgages or other obligations and any certificates,
receipts, options, warrants or other instruments representing any other
rights or interests therein, or in any property or assets.
<PAGE>
The words "Written Instructions" shall mean a direction or
certification in writing signed in the name of the Corporation by any two
of the Chairman of the Board, the Chairman of the Executive Committee, the
President, a Vice President, the Secretary, the Treasurer of the
Corporation or any other person duly authorized to sign by the Board of
Directors or the Executive Committee of the Corporation.
Section 2. Names, Titles and Signatures of the Corporation's officers
The Secretary of the Corporation will certify to the Custodian the names
and signatures of those persons authorized to sign the Written Instructions
described in Section 1 hereof, and the names of the members of the Board of
Directors and the Executive Committee thereof, together with any changes
which may occur from time to time and the Custodian shall be fully
protected in acting in reliance thereon.
Section 3. Receipt and Disbursement of Funds
A. The Custodian shall open and maintain a separate account or accounts
in the name of the Corporation, subject to draft or order by the Custodian
acting pursuant to the terms of this Agreement. The Custodian shall hold in
such account or accounts, subject to the provisions hereof, all funds
received by it from or for the account of the Corporation. The Custodian
shall make payments of funds to, or for the account of, the Corporation
from such funds only (a) for the purchase of securities for the
-2-
<PAGE>
portfolio of the Corporation upon the delivery of such securities to the
Custodian, or as provided in 4B registered (if registrable) in the name of
the Corporation or of the nominee of the Custodian referred to in Section 7
or in proper form for transfer; (b) any amounts as may be authorized and
outstanding shares upon delivery thereof to the Custodian; (c) for the
payment of interest, dividends, taxes, management or supervisory fees or.
operating expenses (including, without limitation thereto, fees for legal,
account and auditing services); (d) for payments in connection with the
conversion, exchange or surrender of securities owned or subscribed to by
the Corporation held by or to be delivered to the Custodian; (e) for the
payment to any bank of interest on or any portion of the principal of any
loan made by such bank to Corporation; (f) for the payment to any person,
firm or corporation who has borrowed the Corporation's portfolio securities
the amount deposited with the Custodian as collateral for such borrowing
upon the delivery of such securities to the Custodian, registered (if
registrable) in the name of the Corporation or of the nominee of the
Custodian referred to in Section 7 or in proper form for transfer; or (g)
for other proper corporate purposes. Before making any payment permitted
under item (a) of this subsection A, the Custodian shall receive and may
rely upon instructions in writing signed by any authorized signatory of the
Corporation and stating that it
-3-
<PAGE>
is for the purpose permitted under the terms of items (b), (c), (d), (e) or
(f) of this subsection A. In respect of item (g), the Custodian will take
such action only upon receipt of Written Instructions and a certified copy
of a resolution of the Board of Directors or of-the Executive Committee of
the Corporation signed by an officer of the Corporation and certified by
its Secretary or an Assistant Secrectary, specifying the amount of such
payment, setting forth the purpose for which such payment is to be made,
declaring such purpose to be a proper corporate purpose, and naming the
person or persons to whom-such payment is to be made. In respect of item
(f), the Custodian shall' make payment to the borrower of securities loaned
by the Corporation of part of the collateral deposited with the Custodian
upon receipt of Written Instructions stating that the market value of the
securities loaned has declined and specifying the amount to be paid by the
Custodian without receipt or return of any of the securities loaned by the
Corporation.
B. The Custodian is hereby authorized to endorse and collect all checks,
drafts or other orders for the payment of money received by the Custodian
for the account bf the Corporation.
Section 4A. Receipt of Securities
Except as provided in 4B, the Custodian shall hold in a separate
account, and physically segregated at all times from those of any-persons,
firms or corporations, pursuant
-4-
<PAGE>
to the provisions hereof, all securities received by it from or for the
account of the Corporation. All such securities are to be held or disposed
of by the Custodian 'for, and subject at all times to the instructions of,
the Corporation pursuant to the terms of this Agreement. The Custodian
shall have no power or authority to assign, hypothecate, pledge or
otherwise dispose of any such securities and investments except pursuant to
the directive of the Corporation and only for the account of the
Corporation as set forth in Section 5 of this Agreement.
Section 4B. Use of Central Securities System
The Custodian may use the facilities of The Depository Trust Company,
Federal Reserve Book-Entry System or any other book-entry system for the
central handling of securities (hereinafter called a "central securities.
system" or "such System"), with which securities are authorized to be
deposited under the provisions of Section 17(f) of the Investment Company
Act of 1940, subject to such rules, regulations and orders as may be
adopted by the Securities and Exchange Commission thereunder. Without
limiting the generality of such use, the following provisions shall,
subject to such rules, regulations and orders, apply thereto:
(i) Such system may be used to hold, receive, exchange, release, deliver
and otherwise deal with the securities owned by the Corporation, including
-5-
<PAGE>
distributions rights and other items of like-nature, and to receive and
remit to the Custodian all income and other payments thereon and to take
all steps necessary and proper .in connection with the collection thereof.
(ii) Registration of the Corporation's securities may be made in the
name of any nominee or nominees used by such system.
(iii) Payment for securities purchased and sold may-be made through the
clearing medium employed by such system for transactions of participants
acting through it.
(iv) Securities and any cash of the Corporation deposited in such system
will at all times be segregated from any assets and cash controlled by the
Custodian in other than a fiduciary or custodian capacity but may be
commingled with other assets held in such capacities. The Custodian will
pay out money only upon the receipt of securities or notification thereof
and will deliver securities only upon the receipt of money or notification
thereof.
(v) All books and records maintained by the Custodian which relate to
the Corporation's participation in such system will at all times during the
Custodian' regular business hours be open to inspection by the
Corporation's duly authorized officers, employees, agents and auditors, and
the Corporation will be furnished with all the information in respect of
the services rendered to it as it may require.
-6-
<PAGE>
(vi) The Custodian will make available to the Corporation copies
of any internal control reports concerning such system made to it by either
internal or external auditors within ten days after receipt of such a
report by the Custodian.
Section 5. Transfer, Exchange, Redelivery, etc. of Securities
The Custodian shall have sole power to release or deliver any securities
of the Corporation held by it pursuant to this Agreement. The Custodian
agrees to transfer, exchange or deliver securities held by it hereunder
only (a) for sales of such securities for the account of the Corporation
upon receipt by the Custodian of payment therefore, or as provided in 4B,
(b) when such securities are called, redeemed or retired or otherwise
become payable, (c) for examination by any broker selling any such
securities in accordance with "street delivery" custom, (d) in exchange for
or upon-conversion into other securities alone or other securities and cash
whether pursuant to any plan of merger, consolidation, reorganization,
recapitalization or readjustment, or otherwise, (e) upon conversion of such
securities pursuant to their terms into other securities, (f) upon exercise
or subscription, purchase or other similar rights represented by such
securities, (g) for the purpose of exchanging interim receipts or temporary
securities for definitive securities, (h) for the purpose of effecting a
loan of the Corporation's portfolio securities to any person, firm or
-7-
<PAGE>
Corporation upon the receipt by the Custodian of cash collateral or as
provided in 4B at least equal to the market value of the securities loaned,
(i) to any bank for the purpose of collateralizing the obligation of the
Corporation to repay any moneys borrowed by the Corporation from such bank;
provided, however, that the Custodian may at the option of such lending
bank keep such collateral in its possession, subject to the rights of such
bank given to it, by virtue of any promissory note or agreement executed
and delivered by the Corporation to such bank, or (j) for other proper
corporate purposes. As to any deliveries made by the Custodian pursuant to
items (a), (b), (c) (d), (e), (f), (g) and (h), securities or funds
receivable in exchange therefore shall be deliverable to the Custodian or
as provided in 4B. Before making any such transfer exchange or delivery,
the Custodian shall receive and may rely upon instructions in writing
signed by any authorized signatory of the Corporation requesting such
transfer, exchange or delivery and stating that it is for a purpose
permitted under the terms of items (a), (b), (c), (d), (e), (f), (g), (h)
or (i) of this Section 5 and, in respect of item (j), upon receipt of
Written Instructions and a certified copy of a resolution of the Board of
Directors or of the Executive Committee signed by an officer of the
Corporation and certified by its Secretary or an assistant secretary,
specifying the securities to be delivered, setting forth the purpose for
which such delivery is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or
-8-
<PAGE>
persons to whom delivery of such securities shall be made. In respect of
item (h), the instructions in writing shall state the market value of the
securities to be loaned and the corresponding amount of collateral to be
deposited with the Custodian: thereafter, upon receipt of instructions in
writing stating that the market value of the securities loaned has
increased and specifying the amount of increase, the Custodian shall
collect from the borrower additional cash collateral in such amount.
Section 6. Custodians Acts Without Instructions
Unless and until the Custodian receives Written Instructions to the
contrary, the Custodian shall:
(a) Present for payment all coupons and other income items held by it
for the account of the Corporation which call for payment upon presentation
and hold the funds received by it upon such payment for the account of the
Corporation; (b) collect interest and cash dividends received, with notice
to the Corporation, for the account of the Corporation; (c) hold for the
account of the Corporation hereunder all stock dividends, rights and
similar securities issued with respect to any securities held by it
hereunder; (d) execute as agent on behalf of the Corporation all necessary
ownership certificates required by the Internal Revenue Code or the Income
Tax Regulations of the United States Treasury Department or under the laws
of any State now or hereafter in effect, inserting the Corporation's name
on such certificates as the owner of the securities covered thereby, to the
extent it may lawfully do so; and
-9-
<PAGE>
(e) transmit promptly to the
Corporation a reports notices and other written information received by the
custodian from or concerning issuers of the Corporation's portfolio
securities; and (f) collect from the borrower of securities loaned and
delivered by the Custodian pursuant to item (h) of Section 5 hereof, (i)
any interest or cash dividends paid on such securities, and (ii) all stock
dividends, rights and similar securities issued with respect to any such
loaned securities.
Section 7. Registration of Securities
Except as otherwise directed by Written instructions, the Custodian
shall register all securities, except such as are in bearer form, in the
name of a registered nominee of the Custodian or as provided in 4B as
defined in the Internal Revenue Code and any Regulations of the Treasury
Department issued thereunder or in any provision of any subsequent Federal-
tax law exempting such transaction from liability for stock transfer taxes,
and shall execute and deliver all such certificates in connection therewith
as may be required by such laws or regulations or under the laws of any
State. The Custodian shall use its best efforts to the end that the
specific securities held by it hereunder shall be at all times identifiable
in its records.
The Corporation shall from time to time furnish to the Custodian
appropriate instruments to enable the Custodian to hold on, deliver in
proper form for transfer, or to register in the name of its registered
nominee, any securities which it may hold for the account of the
Corporation and which may from time to time be registered in the name of
the. Corporation.
-10-
<PAGE>
Section 8. Voting and other Action
Neither the Custodian nor any nominee of the Custodian, shall vote any
of the securities held hereunder by or for the account of the Corporation,
except in accordance with the instructions contained in Written
Instructions. The Custodian shall execute and deliver, or cause to be
executed and delivered, to the Corporation all notices, proxies and proxy
soliciting materials with relation to such securities (including any
securities loaned and delivered by the Custodian pursuant to item (h) of
Section 5 hereof), such proxies to be executed by the registered holder of
such securities (if registered otherwise than in the name of the
Corporation), but without indicating the manner in which such proxies are
to be voted.
Section 9. Transfer Tax and Other Disbursements
The Corporation shall pay or reimburse the Custodian from time to time
for any transfer taxes payable upon transfers of securities made hereunder,
and for all other necessary and proper disbursements and expenses made or
incurred by the Custodian in the performance of this Agreement.
The Custodian shall execute and deliver such certificates in connection
with securities delivered to it or by it under this Agreement as may be
required under the provisions of the Internal Revenue Code and any
Regulations of the Treasury Department issued thereunder, or under the laws
of any State, to exempt from taxation any exemptable transfers and/or
deliveries of any such securities.
-11-
<PAGE>
Section 10. Concerning the Custodian
A. The Custodian shall be paid as compensation for its services pursuant
to this Agreement such compensation as may from time to time be agreed upon
in writing between the two parties.
B. The Custodian shall not be liable for any action taken in good faith
upon any instructions given in writing pursuant to the terms hereof, any
Written Instructions as herein defined or certified copy of any resolution
of the Board of Directors or the Executive Committee,-and may rely on the
genuineness of any such document which it may in good faith believe to have
been validly executed.
C. The Custodian shall not be liable for any loss or damage resulting
from its action or omission to act or otherwise except for any such logs or
damage arising out ofits own negligence or willful misconduct. The
Custodian may apply for and obtain the advice and opinion of counsel to the
Corporation or of its own counsel with respect to questions of law, and
shall be fully protected with respect to anything done or omitted by it in
good faith and in conformity with such advice or opinion.
D. Without limiting the generality of the foregoing the Custodian shall
be under no duty or obligation to inquire into, and shall not be liable
for:
(a) The validity of the issue of any securities purchased by or for the
Corporation, the legality of the purchase thereof, or the propriety of the
amount paid therefore;
-12-
<PAGE>
(b) The legality of the issue or sale of any securities by or for the
Corporation, or the propriety of the amount for which the same are sold;
(c) The legality of the issue or sale of any shares of the capital
stock of the Corporation, or the sufficiency of the amount to be received
therefore;
(d) The legality of the redemtion, of any shares. of capital stock of
the Corporation or the propriety of the amount to be paid therefore;
(e) The legality of the declaration of any dividend or distribution by
the Corporattion, or the legality of the issuance of any shares of the
Corporation's capital stock in payment of any stock dividend or
distribution;
(f) The legality of the delivery of any securities held for the
Corporation for the purpose of collateralizing the obligation for the
Corporation to repay any moneys borrowed by the Corporation or
(g) The legality of the delivery of any securities held for the
Corporation for the purpose of loaning said securities to any person, firm
or corporation.
E. The Custodian shall not be under any duty or obligation to talke
action to effective collection of any amount, if the securities upon which
such consent is payable are in default, or if payment is refused after due
on presentation, unless and until (i) it shall be derected to take such
action by Written Instruction, and (ii) it shall, be assured to its
satisfaction of rereimbursement of its costs and expenses in connection
with any such action.
-13-
<PAGE>
F. The Custodian shall not be under any duty or obligation to
ascertain whether any securities at any time delivered to or held by it for
the account of the Corporation, are such as may properly be held by the
Corporation under the provisions of its Articles of Incorporation.
G. The Corporation agrees to indemnify and hold harmless the Custodian
and its nominee from all taxes, charges,assessments, claims and liabilities
incurred or assessed against it or its nominee in connection with the
performance of this Agreement, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful
misconduct. The Custodian is authorized to charge any account of the
Corporation for such items. In the event of any advance of funds for any
purpose made by the Custodian resulting front orders or instructions of the
Corporation, or in the event that the Custodian or its -nominee shall incur
or be assessed any taxes, charges, assessments, claims or liabilities in
connection with the performance of this Agreement, except such as may arise
from its or its nominees own negligent action, negligent failure to act or
willful misconduct, any property at any time held for the account of the
Corporation shall be security therefore.
H. In the event that, pursuant to this Agreement, the Corporation
instructs the Custodian to pay for securities on behalf of the Corporation,
The Corporation hereby grants its to
-14-
<PAGE>
the Custodian a security interest in such securities, until the Custodian
has been reimbursed by the Corporation in immediately available funds. The
Corporation's written instructions designating the securities to be paid
for shall be considered the requisite description and designation of the
securities pledged to the Custodian for purposes of the requirements of the
Uniforn Commercial Code.
Section 11. Reports by the Custodian
The Custodian shall furnish the Corporation daily with a Statement
summarizing all transactions and entries for the account of the
Corporation. The Custodian shall furnish the Corporation at the end of
@Very month with a list of the portfolio securities held by it as Custodian
for the Corporation, adjusted for all commitments confirmed by the
Corporation as of such time, certified by a duly authorized officer of the
Custodian. The books and records of the Custodian pertaining to its actions
under this Agreement shall be open to inspection and audit at reasonable
times by officers of the Corporation, its auditors and officers of its
investment advisors.
Section 12. Termination or Assignment
This Agreement may be terminated by the Corporation, or by the
Custodian, on sixty (60) day' notice, given in writing and sent by
registered or certified mail to the Custodian, or to the corporation, as
the case may be, at the address hereafter set forth. Upon the effective
date of any termination of this Agreement, pending-appointment of a
successor to the-Custodian or a vote of the shareholders of the Corporation
to dissolve or to function without a Custodian of its funds, securities and
other property, the Custodian shall not deliver funds, securities or other
-15-
<PAGE>
property of the Corporation to the Corporation, but may deliver them to a
bank or trust company of its own selection, having an aggregate capital
surplus and undivided profits, as shown by its last published report of not
less than ten million dollars ($10,000,000), as a Custodian for the
Corporation to be held under terms similar to those of this Agreement;
provided, however, that the Custodian shall not be required to make any
such delivery or payment until full payment shall have been made by the
Corporation of all liabilities constituting a charge on or against the
properties then held by the Custodian or-on or against the Custodian, and
until full payment shall have been made to the Custodian of all its fees,
compensation, costs and expenses, subject to the provisions of Section 10
of this Agreement.
Section 13. Miscellaneous
A. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the- Custodian, shall be sufficiently given
if addressed to the Custodian and mailed or delivered to it at its office
at one Exchange Place, Jersey City, New Jersey 07303, or at such other
place as the Custodian may from time to time designate in writing.
B. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Corporation, shall be sufficiently given
if addressed to the Corporation And mailed or delivered to it at its office
at P.O. Box 9011, Princeton, New Jersey 08540-9011.
-16-
<PAGE>
or at such other place as the Corporation may from time to time designate
in writing.
C. This Agreement may not be amended or modified in any manner except by
a written agreement executed by both parties with the same formality as
this Agreement, and authorized or approved by a resolution of the Board of
Directors of the Corporation.
D. This Agreement shall extend to and shall be binding upon the parties
hereto and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Corporation without the
written consent of the Custodian, or by the Custodian without the written
consent of the Corporation authorized or approved by a resolution of its
Board of Directors.
E. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall,
together constitute but one instrument.
F. This Agreement and the rights and obligations of the Corporation and
the Custodian hereunder shall be construed and interpreted in accordance
with the laws of the State of New Jersey.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and their respective corporate seals to be affixed hereto as of
the date first above written by their respective officers thereunto duly
authorized.
-17-
<PAGE>
Executed in several counterparts, each of which is an original.
THE FIRST JERSEY NATIONAL BANK
Attest:
/s/ By: /s/
------------------------------ -----------------------------
MERRILL LYNCH RETIREMENT
BENEFIT INVESTMENT PROGRAM
Attest:
/s/ Robert Harris By: /s/ Gerald M. Richard
------------------------------ -----------------------------
-18-
<PAGE>
EXHIBIT 99.8(b)
AGREEMENT date Dec. 16, 1985 between THE CHASE MANHATTAN BANK, N.A.
("Bank") and FIRST JERSEY NATIONAL BANK ("Company").
1. Custody Account. The Bank agrees to establish and maintain (a) a
custody account in the name of the Company, acting as custodian for Merrill
Lynch Retirement Benefit Investment Program, Inc., a Maryland corporation
("Fund") ("Custody Account") for any and all stocks, shares, bonds, debentures,
notes, mortgages or other obligations for the payment of money and any
certificates, receipts, warrants or other instruments representing rights to
receive, purchase or subscribe for the same or evidencing or representing any
other rights or interests therein and other similar property (hereinafter
called "Securities") from time to time received by the Bank or its subcustodian
(as defined in the last sentence of Section 3) for the account of the Company,
and (b) a deposit account in the name of the Company acting as custodian for
the Fund ("Deposit Account") for any and all cash and cash equivalents ("Cash")
in any currency received by the Bank or its subcustodian for the
<PAGE>
account of the Company, which Cash shall not be subj ect to withdrawal by draft
or check.
2. Maintenance of Securities and Cash Abroad. Securities in the Custody
Account shall be held in such country or other jurisdiction as shall be
approved by the Board of Directors of the Fund and specified from time to time
in Instructions, provided that such country or other jurisdiction shall be one
in which (i) the principal trading market for such Securities is located, (ii)
such Securities are to be presented for payment, or (iii) such Securities are
acquired for the Custody Account. Cash in the Deposit Account shall be credited
to an account in such amounts and in the country or other jurisdiction as shall
be approved by the Board of Directors of the Fund and specified from time to
time in Instructions, provided that such country or other jurisdiction shall be
one in which such Cash is the legal currency for the payment of public or
private debts.
3. Eligible Foreign Custodians and Securities Depositories. The Company
authorizes the Bank to hold the Securities in the Custody Account and the Cash
in the Deposit Account in custody and deposit accounts, respectively, which
have been established by the Bank with one of its branches, a branch of a
qualified U.S. bank, an
<PAGE>
eligible foreign custodian or an eligible foreign securities depository;
provided, however, that the Board of Directors of the Fund has approved the use
of, and the Bank's contract with, such eligible foreign custodian or eligible
foreign securities depository by resolution, and Instructions to such effect
have been provided to the Bank. Furthermore, if one of-its branches, a branch
of a qualified U.S. bank or an eligible foreign custodian is selected to act as
the Bank's subcustodian to hold any of the Securities or Cash, such entity is
authorized to hold such Securities or Cash in its account with any eligible
foreign securities depository in which it participates. For purposes of this
Agreement (a) "gualified U.S. bank" shall mean a qualified U.S. bank as defined
in Rule 17f-S under the Investment Company Act of 1940; (b) "eligible foreign
custodian" shal1 mean (i) a banking institution or trust company incorporated
or organized under, the laws of a country other than the United States that is
regulated as such by that country's government or an agency thereof and that
has shareholders' equity in excess of $200 million in U.S. currency (or a
foreign currency equivalent thereof), (ii) a majority owned direct or indirect
subsidiary of a qualified U.S. bank or bank holding company that is
incorporated or organized under
<PAGE>
the laws of a country other than the United States and that has shareholders
equity in excess of $100 million in U.S. currency (or a foreign currency
equivalent thereof) or (iii) a banking institution or trust company
incorporated or organized under the laws of a country other than the United
States or a majority owned direct or indirect subsidiary of a qualified U.S.
bank or bank holding company that is incorporated or organized under the laws
of a country other than the United States which has such other qualifications
as shall be specified in Instructions and approved by the Bank; and (c)
"eligible foreign securities depository" shall mean a securities depository or
clearing agency, incorporated or organized under the laws of a country other
than the United States, which operates (i) the central system for handling of
securities or equivalent book-entries in that country or (ii) a transnational
system for the central handling of securities or equivalent book-entries.
Hereinafter the term "subcustodian" will refer to any branch of a
qualified U.S. bank, any eligible foreign custodian or any eligible foreign
securities depository with which the Bank has entered an agreement of the type
contemplated hereunder regarding Securities and/or Cash held
<PAGE>
in or to be acquired for the Custody Account or the Deposit Account.
4. Use of Subcustodian. With respect to Securities and other assets in
the Custody Account and Cash in the Deposit Account which are maintained by the
Bank in the physical custody of a subcustodian pursuant to Section 3 (as used
in this Section 4, the term "Securities" means such Securities and other
assets)
(a) The Bank will identify on its books as belonging to the Fund any
Securities or Cash, as the case may be, held by such subcustodian.
(b) In the event that a subcustodian permits any of the Securities or
Cash, as the case may-be, placed in its care to be held in an eligible foreign
securities depository, such subcustodian will be required by its agreement with
the Bank to identify on its-books such Securities or Cash, as the case may be,
as being held for the account of the Bank as a custodian for its customers.
(c) Any Securities in the Custody Account or Cash in the Deposit Account
held by a subcustodian of the Bank will be subject only to the instructions of
the Bank or its agents; and any Securities or Cash, as the
<PAGE>
case may be, held in an eligible foreign securities depository for the account
of a subcustodian will be subject only to the instructions of such
subcustodian.
(d) The Bank will only deposit Securities or Cash, as the case may be,
in an account with a subcustodian which includes exclusively the assets held by
the Bank for its customers, and the Bank will cause such account to be
designated by such subcustodian as a special custody account for the exclusive
benefit of customers of the Bank.
(e) Any agreement the Bank shall enter into with a subcustodian with
respect to the holding of Securities or Cash shall require that (i) the
Securities or Cash, as the case may be, are not subject to any right, charge,
security interest, lien or claim of any kind in favor of such subcustodian
except a claim of payment for their safe custody or administration and (ii)
beneficial ownership of such Securities or Cash, as the case may be, is freely
transferable without the payment of money or value other than for safe custody
or administration; provided, however, that the foregoing shall not apply to the
extent that any of the above-mentioned rights,
<PAGE>
charges, etc. result from any arrangements made by the Company with any such
subcustodian.
(f) The Bank shall allow officers of, independent public accountants
engaged by, or other representatives of the Fund or the Company such access at
reasonable. times to the records of the Bank relating to the Securities held in
the Custody Account and Cash held in the Deposit Account as is required by such
officers, accountants or representatives in connection with their examination
of the books and records pertaining to the affairs of the Fund or the Company.
Subject to restrictions under applicable law, any agreement the Bank shall
enter into with any subcustodian shall require any subcustodian With which the
Bank maintains the physical possession of any Securities in the Custody Account
or Cash in the Deposit Account to permit officers of., independent public
accountants engaged by, or other representatives of, of the Fund or the Company
such access at reasonable times to the records of such subcustodian as may be
required in connection with their examination of the books and records
pertaining to the affairs of the Fund or the Company. Upon a request from the
Company, the Bank shall furnish to the Fund and the
<PAGE>
Company such reports (or portions thereof) of the Bank's external auditors as
relate directly to the Bank's system of internal accounting controls applicable
to the Bank's duties under this Agreement. The Bank shall use its best efforts
to obtain and furnish the Fund and the Company with such similar reports as the
Fund or the Company may request with respect to each eligible foreign custodian
and eligible foreign securities depository holding Securities and Cash.
(g) The Bank will supply to the Fund and the Company no less frequently
than monthly a statement in respect to any Securities in the Custody Account
and Cash in the Deposit Account held by a subcustodian, including an
identification of the entity having possession of the Securities or Cash, as
the case may be, and the Bank will send to the Fund and the Company an advice
or notification of any transfers of Securities to or from the Custody Account,
indicating, as to Securities acquired for the account of the Company for the
Fund, the identity of the entity having physical possession of such Securities
and with respect to transfers of Securities to or from the Custody-Account, the
Bank will send to the Fund and the Company
<PAGE>
appropriate statements, reports and/or advices, reflecting transactions in the
Deposit Account. In the absence of the filing in writing with the Bank by the
Company of exceptions or objections to any such statement within one hundred
and eighty (180) days, the Company shall be deemed to have approved such
statement; and in such case or upon written approval of the Company of any such
statement the Bank shall, to the extent permitted by law, be released, relieved
and discharged with respect to all matters and things set forth in such
statement as though such statement had been settled by the decree of a court of
competent jurisdiction in an action in which the Company and all persons having
any equity interest in the Company were parties.
(h) The Bank hereby represents and warrants to the Fund and the Company
that in its opinion, after due inquiry, the established procedures to be
followed by each of its branches, each branch of a Qualified U.S. bank, each
eligible foreign custodian and each eligible foreign securities depository
holding Securities of the Fund in the account of the Company pursuant to this
Agreement afford protection for such Securities at least equal to that afforded
by the Bank's established
<PAGE>
procedures with respect to similar securities held by the Bank (and its
securities depositories) in New York and shall be subject to the provisions of
Section 4A below.
4A. Selection of Foreign Banks and Depositories. The use of, and the
Bank's contract with, each foreign bank and each foreign securities depository
selected pursuant to Section 4 herein shall be subject to the prior approval of
the Board of Directors of the Fund, which approval shall be reflected in
Schedule 4A. attached hereto. The Fund shall provide to the Bank certified
copies of resolutions of the Board of Directors approving the use of the
entities listed in such Schedule 4A. The receipt by the Bank of Instructions
shall-be sufficient to effect the amendment of Schedule 4A. %to designate the
approval of such additional entities, or to instruct the Bank to cease the use
of any one or more of such entities, to hold the Securities and cash of the
Fund; provided, in the case of the approval of an entity, that the Bank is
provided with a certified resolution of the Board of Directors to that effect.
5. Deposit Account Payments. Subject to the provisions of Section 7, the
Bank shall make, or cause its
<PAGE>
subcustodians to make, payments of Cash credited to the Deposit Account only
(a) in connection with the purchase of Securities for the Fund and the
delivery of such securities to, or the crediting of such Securities to the
account of, the Bank or its subcustodian, each such payment to be made at
prices as confirmed by Instructions (as defined in Section 9 hereof) from
Authorized Persons (as defined in Section 10 hereof);
(b) for the payment for the account of the Fund of operating expenses;
(c) for the payments to be made in connection with the conversion,
exchange or surrender of Securities held in the Custody Account;
(d) for other proper corporate purposes of the Fund; or
(e) upon the termination of this Custody Agreement as hereinafter set
forth.
All payments of Cash for a purpose. permitted by subsection (a), (b) or (c) of
this Section 5 will be made only upon receipt by the Bank of Instructions from
Authorized Persons which shall specify the purpose for which the payment is to
be made and the applicable subsection of this Section 5. In
<PAGE>
the case of any payment to be made for the purpose permitted by subsection (d)
of this Section 5, the Bank must first receive a certified copy of a resolution
of the Board of Directors of the Fund adequately describing such payment,
declaring such purpose to. be a proper corporate purpose, and naming the person
or persons to whom such payment is to be made. Any payment pursuant to
subsection (e) of this Section 5 will be made in accordance with Section 17.
In the event that any payment made under this Section 5 exceeds the
funds available in the Deposit Account, the Bank may, in its discretion,
advance the Company an amount equal to such excess and such advance, payable,
shall be deemed a loan from the Bank to the Company,. payable -on demand,
bearing interest at the rate of interest customarily charged by the Bank on
similar loans.
If the Bank causes the Deposit Account to be credited on the payable
date for interest, dividends or redemptions, the Company, upon written
instructions from the Fund, will promptly return to the Bank any such amount or
property so credited upon oral or written notification that neither the Bank
nor its subcustodian can collect such amount or property in the ordinary course
of business. Except for such actions as the Bank may lawfully perform
<PAGE>
pursuant to Instructions of Authorized Persons, the Bank or its subcustodian,
as the case may be, shall have no duty or obligation to institute legal
proceedings, file a claim or proof of claim in any insolvency proceeding or
take any other action with respect to the collection of such amount or property
beyond its ordinary collection procedures.
6. Custody Account Transactions. Subject to the provisions of Section 7,
Securities in the Custody Account will be transferred, exchanged or delivered
by the Bank or its subcustodians only
(a) upon sale of such Securities held for the Fund and receipt by the
Bank or its subcustodian only of payment therefor, each such payment to be in
the amount confirmed by Instructions from Authorized Persons;
(b) when such Securities are called, redeemed or retired, or otherwise
become payable;
(c) in exchange for or upon conversion into other Securities alone or
other Securities and Cash or Cash alone pursuant to any plan or merger,
consolidation, reorganization, recapitalization or readjustment;
(d) upon conversion of such Securities pursuant to their terms into
other Securities;
<PAGE>
(e) upon exercise of subscription, purchase or other similar rights
represented by such Securities;
(f) for the purpose of exchanging interim receipts or temporary
Securities for definitive Securities;
(g) for other proper corporate purposes of the, Fund;
(h) upon the termination of this Custody Agreement as hereinafter set
forth.
All transfers, exchanges or deliveries of Securities in the Custody Account for
a purpose permitted by either subsection (a), (b), (c), (d), (e) or (f) of this
Section 6 will be made, except as provided in Section 8, only upon receipt by
the Bank of Instructions from Authorized Persons which shall specify the
purpose of the transfer, exchange or delivery to be made and the applicable
subsection of this Section 6. In the case of any transfer, exchange or delivery
to be made for the purpose permitted by subsection (g) of this Section 6, the
Bank must first receive a certified copy of a resolution of the Board of the
Fund adequately describing such transfer, exchange or delivery, declaring such
purpose to be a proper corporate purpose, and naming the person or persons to
whom delivery of such Securities shall be made.
<PAGE>
Any transfer or delivery pursuant to subsection (h) of this Section 6 will be
made in accordance with Section 17.
7. Custody Account Procedures. With respect to any transaction involving
Securities held in or to be acquired for the Custody Account, the Bank in its
discretion may cause the Deposit Account to be credited on the contractual
settlement date with the proceeds of any sale or exchange of Securities from
the Custody Account and to be debited on the contractual settlement date for
the cost of Securities purchased or acquired for the Custody Account. The Bank
may reverse any such credit or debit if the transaction with respect to which
such credit or debit were made fails to settle within a reasonable period,
determined by the Bank in its discretion, after the contractual settlement
date, except that if any Securities delivered pursuant to this Section 7 are
returned by the recipient thereof, the Bank may cause any such credits and
debits to be reversed at any time. With respect to any transactions as to which
the Bank does not determine so to credit or debit the Deposit Account, the
proceeds from the sale or, exchange of Securities will be credited and the cost
of such Securities purchased or acquired will be debited to the
<PAGE>
Deposit Account on the date such proceeds or Securities are received by the
Bank.
Notwithstanding the preceding paragraph, settlement and payment for
Securities received for, and delivery of Securities out of, the Custody Account
may be effected in accordance with the customary or established securities
trading or securities processing practices and procedures in the jurisdiction
or market in which the transaction occurs, including, without limitation,
delivering Securities to the purchaser thereof or to a dealer therefor (or an
agent for such purchaser or dealer) against a receipt with the expectation of
receiving later payment for such Securities from such purchaser or dealer.
8. Actions of the Bank. Until the Bank receives Instructions from
Authorized Persons to the contrary, the Bank will, or will instruct its
subcustodian, to
(a) present for payment any Securities in the Custody Account which are
called, redeemed or retired or otherwise become payable and all coupons and
other income items which call for payment upon presentation to the extent that
the Bank or subcustodian is aware of such opportunities for payment, and hold
cash received
<PAGE>
upon presentation of such Securities in accordance with the provisions of
Sections 2, 3 and 4 of this Agreement;
(b) in respect of Securities in the Custody Account, execute in the name
of the Company such ownership and other certificates as may be required to
obtain payments in respect thereof;
(c) exchange interim receipts or temporary Securities in the Custody
Account for definitive Securities;
(d) convert moneys received with respect to Securities of foreign issue
into United States dollars or any other currency necessary to effect any
transaction involving the Securities whenever it is practicable to do so
through customary banking channels, using any method or agency available,
including, but not limited to, the facilities of the Bank, its subsidiaries,
affiliates or subcustodians; and
(e) appoint brokers and agents for any transaction involving the
Securities in the Custody Account, including, without limitation, affiliates of
the Bank or any subcustodian, but except as otherwise specifically provided
herein the Bank or its subcustodian, as the case may be, will not be
responsible for any act,
<PAGE>
omission or default of, or for the solvency of, any such broker or agent.
9. Instructions. As used in this Agreement, the term "Instructions"
means instructions of the Company received by the Bank, via telephone, telex,
TWX, facsimile transmission, bank wire or other teleprocess or electronic-
instruction system acceptable to the Bank which the Bank reasonably believes in
good faith to have been given by Authorized Persons or which are transmitted
with proper testing or authentication pursuant to terms and conditions which
the Bank may specify.
Any Instructions delivered to the Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which confirmation
may bear the facsimile signature of such Person), but the Company will hold the
Bank harmless for its failure to send such confirmation in writing or the
failure of such confirmation to conform to the telephone instructions received.
Unless otherwise expressly provided, all Instructions shall continue in full
force and effect until cancelled or superceded. If the Bank requires test
arrangements, authentication methods or other security devices to be used with
respect to Instructions, any Instructions given by the Company thereafter shall
be
<PAGE>
given and processed in accordance with such terms and conditions for the use of
such arrangements, methods or devices as the Bank may put into effect and
modify from time to time. The Company shall safeguard any test keys,
identification codes or other security devices which the Bank shall make
available to it. The Bank may electronically record any Instructions given by
telephone, and any other telephone discussions, with respect to the Custody
Account.
10. Authorized Persons. As used in this Agreement, the term "Authorized
Persons" means such officers or such agents of the Fund or the Company as have
been designated by a resolution of the Board of Directors of the Fund or the
Company, as the case may be, a certified copy of which has been provided to the
Bank, to act on behalf of the Fund or the Company in the performance of any
acts which Authorized Persons may do under this Agreement. Such persons shall
continue to be Authorized Persons until such time as the Bank receives
Instructions from Authorized Persons that any such officer or agent is no
longer an Authorized Person.
11. Nominees. Securities in the Custody Account which are ordinarly held
in registered form may be
<PAGE>
registered in the name of the Bank's nominee or, as to any Securities in the
possession of an entity other than the Bank, in the name of such entity's
nominee. The Company agrees to hold any such nominee harmless from any
liability as a holder of record of such Securities, except for the negligence,
fraud or wilful misconduct of such nominee. The- Bank may with prior notice to
the Company cause any such Securities to cease to be registered in the name of
any such nominee and to be registered in the name of the Company. In the event
that any Securities registered in the name of the Bank's nominee or held by one
of its subcustodians and registered in the name of such subcustodian's nominee
are called for partial redemption by the issuer of such Security, the Bank may
allot, or cause to be alloted, the called portion to the respective beneficial
holders of such class of security in any manner the Bank deems to be fair and
equitable.
12. Standard of Care. The Bank shall be responsible for the performance
of only such duties as are set forth herein or contained in Instructions given
to the Bank by Authorized Persons which are not contrary to the provisions of
this Agreement. The Bank will use reasonable care with respect to the
performance of its duties
<PAGE>
hereunder, including, without limitation, the safekeeping of Securities in the
Custody Account and of Cash in the Deposit Account. The Bank shall be liable to
and shall indemnify and hold harmless the Fund and the Company for any loss
which shall occur as the result of the failure of a subcustodian or an eligible
foreign securities depository engaged by such subcustodian to exercise
reasonable care with respect to the safekeeping of such Securities and Cash to
the same extent that the Bank would be liable to the Fund or the Company if the
Bank were holding such Securities and Cash in New York. In the event of any
loss to the Fund or the Company by reason of the failure of the Bank or its
subcustodian or an eligible foreign securities depository engaged by such
subcustodian to utilize reasonable care, the Bank shall be liable to the Fund
or the Company to the extent of the Fund's or the Company's damages, to-be
determined based on the market value of the property which is the subject of
the loss at the date of discovery of such loss and without reference to any
special conditions or circumstances. The Bank shall be held to the exercise of
reasonable care in carrying out this Agreement but shall be indemnified by, and
shall be without liability to, the Fund or the Company for any action taken or
omitted by the Bank
<PAGE>
in good faith without negligence, fraud or wilful misconduct. The Bank shall be
entitled to rely, and may act, on advice of counsel (who may be counsel for the
Fund or the Company) on all matters and shall be without liability for any
action reasonably taken or omitted pursuant to such advice.
All collections of funds or other property paid or distributed in
respect of Securities in the Custody Account shall be made at the risk of the
Company. The Bank shall have no liability for any loss occasioned by delay in
the actual receipt of notice by-the Bank or by its subcustodian of any payment,
redemption or other transaction regarding Securities in the Custody Account in
respect of which the Bank has agreed to take action as provided in Section 8
hereof, unless such loss results from the negligence, fraud or wilful
misconduct of the Bank or its subcustodians. The Bank shall not be liable for
any action taken in good faith upon Instructions or upon any certified copy of
any resolution and may rely on the genuineness of any such documents which it
may in good faith believe to be validly executed. The Bank shall not be liable
for any loss resulting from, or caused by, the direction of the Fund or the
Company to maintain custody of any Securities or cash in
<PAGE>
a foreign country including, but not limited to, losses resulting from
nationalization, expropriation, currency restrictions, acts of war or
terrorism, insurrection, revolution, nuclear fusion, fission or radiation, or
acts of God.
13. Insurance. The Bank represents and warrants that it currently
maintains a bankers' blanket bond which provides standard fidelity and non-
negligent loss-coverage with respect to the Securities and Cash which may be
held by subcustodians pursuant to this Agreement. The Bank agrees that if at
any time it for any reason discontinues such, coverage, it shall immediately-
give 60 days prior written notice to the Company and the Fund. The Bank need
not maintain any insurance for the benefit of the Fund or the Company.
14. Corporate Action. The Bank or its subcustodian is to forward to the
Company only such communications relative to the Securities in the Custody
Account as call for voting or the exercise of rights or other specific action
(including material relative to legal proceedings intended to be transmitted to
security holders) by means as shall permit, to the extent reasonably
practicable under the circumstances, the Fund to take timely
<PAGE>
action. The Bank or its subcustodian will cause its nominee to execute and
deliver to the Company proxies relating to Securities in the Custody Account
registered in the name of such nominee but without indicating the manner in
which such proxies are to be voted. Proxies relating to bearer Securities will
be delivered in accordance with written instructions from Authorized Persons.
15. Fees and Expenses. The Company agrees to pay to the Bank from time
to time such compensation for its services pursuant to this Agreement as may be
mutually agreed upon in writing from time to time and the Banks-out- of-pocket
or incidental expenses, including (but without limitation) reasonable legal
fees. The Company hereby agrees to hold the Bank harmless from any liability or
loss resulting from any taxes or other governmental charges, and any expenses
related thereto, which may be imposed, or assessed with respect to the Custody
Account and also agrees to hold the Bank, its subcustodians, and their
respective nominees harmless from any liability as a record holder of
Securities in the Custody Account, except for its or their negligence; provided
that the Company shall not be liable for any assessments of taxes or other
governmental charges or any expenses related-thereto as result from the
<PAGE>
negligence, fraud or wilful misconduct of the Bank or its subcustodians or
their respective nominees. The Bank is authorized to charge any account of the
Company for such items and the Bank shall have a lien on Securities in the
Custody Account and on cash in the Deposit Account for any amount owing to the
Bank from time to time under this Agreement, as long as such lien would not
contravene the provisions of the Order of-the Securities and Exchange
Commission contained in Release No. 12053, dated November 20, 1981, as the same
may be amended from time to time.
16. Effectiveness. This Agreement shall be effective on the date first
noted above.
17. Termination. This Agreement may be terminated by the Company or the
Bank by 60 days written notice to the other, sent by registered mail, provided
that any termination by the Company shall be authorized by a resolution of its
Board, a certified copy of which shall accompany such notice of termination,
and provided further, that such resolution shall specify the names of the
persons to whom the Bank shall deliver the Securities in the Custody Account
and to whom the cash in the Deposit Account shall be paid. If notice of
termination is given by the Bank, the
<PAGE>
Company shall, within 60 days following the giving of such notice, deliver to
the Bank a certified copy of a resolution of its Board specifying the names of
the persons to whom the Bank shall deliver the Securities in the Custody
Account and to whom the cash in the Deposit Account shall be paid. In either
case the Bank will deliver such Securities and cash to the persons so
specified, after deducting therefrom any amounts which the Bank determines to
be owed to it under Section 15. If within 60 days following the giving of a
notice of termination by the Bank, the Bank does not receive from the Company a
certified copy of a resolution of the Board specifying the names of the persons
to whom the Bank shall deliver the Securities in the Custody Account and to
whom the cash in the Cash Account shall be paid, the Bank, at its election, may
deliver such Securities and pay such cash to the Company or to Authorized
Persons, or may continue to hold such Securities and cash until a certified
copy of one or more resolutions as aforesaid is delivered to' the Bank. The
obligations of the parties hereto regarding the use of reasonable care,
indemnities and payment of fees and expenses shall survive the termination of
this Agreement.
<PAGE>
18. Notices. Any notice or other communication from the Company to the
-------
Bank is to be sent to the office of the Bank at 1211 Avenue of the Americas
(33rd floor), New York, New York, 10036, Attention Global Custody Division, or
such other address as may hereafter be given to the Company in accordance with
the notice provisions hereunder, and any notice from the Bank to the Fund or the
Company is to be mailed postage prepaid, addressed to the Fund at Box 9011,
Princeton, New Jersey 08540-9011 Attn: Senior Vice President--Operations and
to the Company at the address appearing below, or as it may hereafter be
changed on the Bank's records in accordance with notice hereunder from the
Fund or the Company.
19. Governing Law and Successors and Assigns. This Agreement shall
----------------------------------------
be governed by the law of the State of New York and shall not be assignable by
either party, but shall bind the successors and assigns of the Company and the
Bank.
<PAGE>
20. Headings. The headings of the paragraphs hereof are included for
--------
convenience of reference only and do not form a part of this Agreement.
FIRST JERSEY NATIONAL BANK
By /s/ Vice President
-------------------------------
Title(s)
Address for record Trust Custody Division
One Exchange Place
Jersey City, NJ 07303
THE CHASE MANHATTAN BANK, N.A.
By /s/ Catherine A. Lee
-------------------------
Title Vice President
Approved by the Board
of Directors of Merrill
Lynch Retirement Benefit
Investment Program, Inc.
By: /s/ Arthur Zeikel
-----------------------------
Title President & Director
<PAGE>
EXHIBIT 99.9(a)
ADMINISTRATIVE AND SUB-ACCOUNTING
SERVICES AGREEMENT
AGREEMENT made as of the 18th day of October, 1985 by and between
Merrill Lynch Retirement Benefit Investment Program, Inc. (the ("Fund"), a
Maryland corporation, and Merrill Lynch Asset Management, Inc. ("MLAM"), a
Delaware corporation.
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Fund intends to engage in business as a diversified, open-
end, management investment company registered under the Investment Company Act
of 1940, as amended (the "Act"), and
WHEREAS, the Fund desires to retain MLAM to perform certain
administrative services for the Fund and MLAM is willing and able to perform
such services.
<PAGE>
NOW THEREFORE, in consideration of the mutual covenants contained herein
the parties hereby agree as follows:
1. MLAM shall arrange for sub-accounting services to be provided to
shareholders of the Fund whose shares are held in a brokerage account with
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and shall
be responsible for monitoring the performance of such services.
2. Sub-accounting services provided to shareholders described in
paragraph 1 above shall include at a minimum (a) the maintenance of separate
records for each shareholder reflecting shares purchased and redeemed and share
balances; (b) the disbursement or credit to shareholders of all proceeds of
redemptions of shares of the Fund and of all dividends or other distributions
not reinvested in shares of the Fund; (c) the transmittal to shareholders of
periodic account statements; (d) the calculation of the amount of the contingent
deferred sales load applicable to a redemption of shares; and (e) the
transmittal to the Fund's transfer agent of purchase and redemption orders on
behalf of Merrill Lynch customers.
3. As compensation for its services performed under this Agreement, the
Fund shall pay a monthly fee to MLAM equal to an annual rate of $4.50 for each
shareholder
-2-
<PAGE>
account with respect to which the sub-accounting services arranged by MLAM
pursuant to this Agreement were performed during that month.
4. This Agreement shall become effective as of the date first above
written and shall remain in full force until September 30, 1987 and thereafter,
but only so long as such continuance is specifically approved at least annually
by (i) the Board of Directors of the Fund, or by the vote of a majority (as
defined in the Act) of the outstanding voting securities of the Fund, and (ii) a
majority of those directors who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval.
5. This Agreement may be terminated at any time, without the payment of
any penalty, by the Board of Directors of the Fund or by vote of a majority of
the outstanding voting securities of the Fund, or by the Investment Adviser, on
sixty days' written notice to the other party. This Agreement shall
automatically terminate in the event of its assignment.
6. This Agreement may be amended by the parties only if such amendment
is specifically approved by (i) the Board of Directors of the Fund, or by the
vote of a majority of outstanding voting securities of the Fund, and (ii) a
-3-
<PAGE>
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.
7. The terms "vote of a majority of the outstanding voting securities",
"interested person" and "assignment" when used in the Agreement shall have their
respective meanings specified in the Act.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
MERRILL LYNCH RETIREMENT
INVESTMENT PROGRAM, INC.
By: /s/ Bernard Durnin
-------------------------
MERRILL LYNCH ASSET MANAGEMENT, INC.
By: /s/ Robert Harris
-------------------------
-4-
<PAGE>
SUB-ACCOUNTING AGREEMENT
AGREEMENT made as of the 18th day of October, 1985 by and between
Merrill Lynch Asset Management, Inc. ("MLAM"), a Delaware corporation, and
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), a Delaware
corporation.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Merrill Lynch Retirement Benefit Investment Program, Inc. (the
"Fund") intends to engage in business as a diversified open-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "Act") and,
WHEREAS, the Fund has entered into an Administrative and Sub-Accounting
Services Agreement with MLAM pursuant to which MLAM is required to arrange for
the performance of sub-accounting services for shareholders of the Fund who
maintain their shares in a brokerage account with Merrill Lynch, and
WHEREAS, MLAM desires to retain Merrill Lynch to perform such services
and Merrill Lynch is willing and able
<PAGE>
to furnish such services on the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, MLAM and Merrill Lynch hereby agree as follows:
1. Merrill Lynch agrees to perform the administrative services and
functions specified in Exhibit "A" hereto (the "Services") for the benefit of
shareholders of the Fund who maintain their shares in a brokerage account with
Merrill Lynch.
2. Merrill Lynch will maintain and preserve all records as required by
law to be maintained and preserved in connection with providing the Services.
Upon the request of MLAM or the Fund, Merrill Lynch shall provide copies of all
records relating to transactions between the Fund and Merrill Lynch's customers,
written communications regarding the Fund to or from such customers and other
materials, in each case as may reasonably be requested to enable MLAM to monitor
and review the Services and Merrill Lynch's continued ability to provide the
Services, or to comply with any request of a governmental body or self-
regulatory organization. Merrill Lynch agrees that it will permit
representatives of MLAM to have reasonable access to its personnel and records
in order to facilitate the monitoring of the quality of the Services.
-2-
<PAGE>
3. Merrill Lynch hereby agrees to promptly notify MLAM if for any reason
it is unable to perform fully and promptly any of its obligations under this
agreement.
4. In performing the services under this agreement Merrill Lynch
acknowledges that it is not acting as agent for the Fund.
5. In no way shall the provisions of this agreement limit the authority
of MLAM or the Fund to take such action as they may deem appropriate or
advisable in connection with all matters relating to the operations of the Fund
and the sale of its shares.
6. In consideration of the performance of the Services by Merrill Lynch,
MLAM agrees to pay Merrill Lynch a monthly fee equal to an annual rate of $4.50
for each shareholder account with respect to which Merrill Lynch performs the
Services during such month.
7. This agreement may be terminated at any time by either party upon 30
days' written notice to the other party. This agreement may also be terminated
at any time without penalty upon 30 days' written notice to Merrill Lynch that
a majority of the Directors of the Fund who are not interested persons of the
Fund (within the meaning of the Act) and have no direct or indirect financial
interest in the operation of this agreement, have determined to terminate this
agreement.
-3-
<PAGE>
8. This agreement will automatically terminate upon any event whereby
MLAM ceases to serve as the investment adviser of the Fund or if the Fund
terminates its Administrative Services and Sub-Accounting Agreement with
MLAM.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
MERRILL LYNCH ASSET MANAGEMENT, INC.
By: /s/ Robert Harris
---------------------------------
MERRILL LYNCH PIERCE FENNER & SMITH
INCORPORATED
By: /s/
---------------------------------
-4-
<PAGE>
Exhibit "A"
-----------
Pursuant to its Sub-Accounting Agreement with MLAM, Merrill Lynch shall
perform the following services:
1. Maintain separate records for each shareholder of Merrill Lynch
Retirement Benefit Investment Program, Inc. (the "Fund") who holds shares of
the Fund in a brokerage account with Merrill Lynch ("Merrill Lynch customers"),
which records shall reflect shares purchased and redeemed and share balances.
Merrill Lynch shall maintain a single master account with the transfer agent of
the Fund on behalf of Merrill Lynch customers and such account shall be in the
name of Merrill Lynch or its nominee as the record owner of the shares owned by
such customers.
2. Disburse or credit to Merrill Lynch customers all proceeds of
redemptions of shares of the Fund and all dividends and other distributions not
reinvested in shares of the Fund.
3. Prepare and transmit to Merrill Lynch customers, periodic account
statements showing the total number of shares owned by the customer as of the
statement closing date, purchases and redemption of Fund shares by the customer
during the period covered by the statement and the dividends and other
distributions paid to the customer
<PAGE>
during the statement period (whether paid in cash or reinvested in Fund shares).
4. Calculate the amount of the contingent deferred sales load
applicable to a redemption of Fund shares by Merrill Lynch customers.
5. Transmit to Merrill Lynch customers proxy materials and reports and
other information required to be sent to shareholders under the federal
securities laws.
6. Transmit to the Fund's transfer agent purchase and redemption orders
on behalf of Merrill Lynch customers.
-2-
<PAGE>
EXHIBIT 99.9(b)
TRANSFER AGENCY, DIVIDEND DISBURSING AGENCY
AND SHAREHOLDER SERVICING AGENCY AGREEMENT
THIS AGREEMENT made as of the 5th day of October, 1987 by and between
Merrill Lynch Retirement Benefit Investment Program, Inc. (the "Fund") and
Merrill Lynch Financial Data Service, Inc. ("MLFDS"), a New Jersey corporation.
WITNESSETH:
WHEREAS, the Fund wishes to appoint MLFDS to be the Transfer Agent,
Dividend Disbursing Agent and Shareholder Servicing Agent upon, and subject to,
the terms and provisions of this Agreement, and MLFDS is desirous of accepting
such appointment upon, and subject to, such terms and provisions:
NOW THEREFORE, in consideration of mutual covenants contained in this
Agreement, the Fund and MLPDS agree as follows:
1. Appointment of MLFDS as Transfer Agent, Dividend Disbursing Agent and
Sharebolder Servicing Agent.
(a) The Fund hereby appoints MLFDS to act as Transfer Agent, Dividend
Disbursing Agent and Shareholder Servicing Agent for the Fund upon, and subject
to, the terms and provisions of this Agreement.
(b) MLFDS hereby accepts the appointment as Transfer Agent, Dividend
Disbursing Agent and Shareholder Servicing Agent for the Fund, and agrees to
act as such upon, and subject to, tbe terms and provisions of the Agreement.
2. Definitions.
(a) In this Agreement:
(I) The term "Act" means the Investment Company Act of 1940 as amended
from time to time and any rule or regulation thereunder;
(II) The term "Account" means any account of a Shareholder, or, if the
shares are held in an account in the name of MLPF&S for benefit of an
identified customer, such account, including a Plan Account, any account under a
plan (by whatever name referred to in the Prospectus) pursuant to the
Self-Employed Individuals Retirement Act of 1962 ("Keogh Act Plan") and any
plan (by whatever name referred to in the Prospectus) in conjunction with
Section 401 of the Internal Revenue Code ("Corporation Master Plan");
<PAGE>
(III) The term "application" means an application made by a Shareholder
or prospective Shareholder respecting the opening of an Account;
(IV) The term "MLFD" means Merrill Lynch Funds Distributor, Inc., a
Delaware corporation;
(V) The term "MLPF&S" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated, a Delaware corporation;
(VI) The term "Officer's Instruction" means an instruction in writing
given on behalf of the Fund to MLFDS, and signed on behalf of the Fund by the
President, any Vice President, the Secretary or the Treasurer of the Fund;
(VII) The term "Prospectus" means the Prospectus and the Statement of
Additional Information of the Fund as from time to time in effect:
(VIII) The term "Shares" means shares of stock or beneficial interest,
as the case may be, of tbe Fund, irrespective of class or series;
(IX) The term "Sharebolder" means the holder of record of Shares:
(X) The term "Plan Account" means an account opened by a Shareholder or
prospective Shareholder in respect to an open account, monthly payment or
withdrawal plan (in each case by whatever name referred to in the Prospectus),
and may also include an account relating to any other Plan if and when provision
is made for such plan in the Prospectus.
3. Duties of MLFDS as Transfer Agent, Dividend Disbursing Agent and
Shareholder Serivicing Agent.
(a) Subject to the succeeding provisions of the Agreement, MLFDS hereby
agrees to perform the following functions as Transfer Agent, Dividend Disbursing
Agent and Sharebolder Servicing Agent for the Fund;
(I) Issuing, transferring and redeeming Shares;
(II) Opening, maintaining, servicing and closing Accounts:
-2-
<PAGE>
(III) Acting as agent for the Fund Shareholders and/or customers of
MLPF&S in connection with Plan Accounts, upon the terms and subject to the
conditions contained in tbe Prospectus and application relating to the specific
Plan Account;
(IV) Acting as agent of the Fund and/or MLPF&S, maintaining such records
as may permit the imposition of such contingent deferred sales charges as may be
described in the Prospectus, including such reports as may be reasonably
requested by the Fund with respect to such Shares as may be subject to a
contingent deferred sales charge;
(V) Upon the redemption of Shares subject to such a contingent deferred
sales charge, calculating and deducting from the redemption proceeds thereof
the amount of such charge in the manner set forth in the Prospectus. MLFDS
shall pay, on behalf of MLFD, to MLPF&S such deducted contingent deferred sales
charges imposed upon all Shares maintained in the name of MLPF&S, or maintained
in the name of an account identified as a customer account of MLPF&S. Sales
charges impoved upon any other Shares shall be paid by MLFDS to MLFD.
(VI) Exchanging the investment of an investor into, or from the shares
of other open-end investment companies or other series portfolios of the Fund,
if any, if and to the extent permitted by the Prospectus at the direction of
such investor.
(VII) Processing redemptions;
(VIII) Examining and approving legal transfers;
(IX) Replacinq lost, stolen or destroyed certificates representing
Shares, in accordance with, and subject to, procedures and conditions adopted
by the Fund;
(X) Furnishing such confirmations of transactions relating to their
Shares as required by applicable law;
(XI) Acting as agent for the Fund and/or MLPF&S, furnishing such
appropriate periodic statements relating to Accounts, together with additional
enclosures, including appropriate income tax information and income tax forms
duly completed, as required by applicable law;
(XII) Acting as agent for the Fund and/or MLPF&S, mailing annual,
semi-annual and quarterly reports prepared by or on behalf of the Fund, and
mailing new Prospectuses upon their issue to Shareholders as required by
applicable law;
(XIII) Furnishing such periodic statements of transactions effected by
MLFDS, reconciliations, balances and summaries as the Fund may reasonably
request;
-3-
<PAGE>
(XIV) Maintaining such books and records relating to tranactions
effected by MLFDS as are required by the Act, or by any other applicable
provision of law, rule or regulation, to be maintained by the Fund or its
transfer agent with respect to such transactions, and preserving, or causing to
be preserved any such books and records for such periods as may be required by
any such law, rule or regulation and as may be agreed upon from time to time
between MLFDS and the Fund. In addition, MLFDS agrees to maintain and preserve
master files and historical computer tapes on a daily basis in multiple separate
locations a sufficient distance apart to ensure preservstion of at least one
copy of such information;
(XV) Withholding taxes on non-resident alien Accounts, preparing and
filing U.S. Treasury Department Form 1099 and other appropriate forms as
required by applicable law with respect to dividends and distributions; and
(XVI) Reinvesting dividends for full and fractional shares and
disbursing cash dividends, as applicable.
(b) MLFDS agrees to act as proxy agent in connection with the holding of
annual, if any, and special meetings of Shareholders, mailing such notices,
proxies and proxy statements in connection with the holding of such meetings as
may be required by applicable law, receiving and tabulating votes cast by proxy
and communicating to the Fund the results of such tabulation accompanied by
appropriate certifications, and preparing and furnishing to the Fund certified
lists of Shareholders as of such date, in such form and containing such
information as say be required by the Fund.
(c) MLPDS agrees to deal with, and answer in a timely manner, all
correspondence and inquiries relating to the functions of MLFDS under this
Agreement with respect to Accounts.
(d) MLPDS agrees to furnish to the Fund such information and at such
intervals as is necessary for the Fund to comply with the registration and/or
the reporting requirements (including applicable escheat laws) of the Securities
and Exchange Commission, Blue Sky authorities or other governmental authorities.
-4-
<PAGE>
(e) MLFDS agrees to provide to the Fund such information as may
reasonably be required to enable the Fund to reconcile the number of
outstanding Shares between MLFDS's records and the account books of the Fund.
(f) Notwithstanding anything in the foregoing provisions of this
paragraph, MLFDS agrees to perform its functions thereunder subject to such
modification (whether in respect of particular cases or in any particular class
of cases) as may from time to time be contained in an Officer's Instruction.
4. Compensation.
The charges for services described in this Agreement, including
"out-of-pocket" expenses, will be set forth in the Schedule of Fees attached
hereto.
5. Right of Inspection.
MLFDS agrees that it will in a timely manner make available to, and
permit, any officer, accountant, attorney or authorized agent of the Fund to
examine and make transcripts and copies (including photocopies and computer or
other electronical information storage media and print-outs) of any and all of
its books and records which relate to any transaction or function performed by
MLFDS under or pursuant to this Agreement.
6. Confidential Relationship.
MLFDS agrees that it will, on behalf of itself and its officers and
employees, treat all transactions contemplated by this Agreement, and all
information germane thereto, as confidential and not to be disclosed to any
person (other than the Shareholder concerned, or the Fund, or as may be
disclosed in the examination of any books or records by any person lawfully
entitled to examine the same) except as may be autborized by the Fund by way of
an Officer's Instruction.
7. Indemnification.
The Fund shall indemnify and hold MLFDS harmless from any loss, costs,
damage and reasonable expenses, including reasonable attorney's fees (provided
that such attorney is appointed with the Fund's consent, which consent shall
not be unreasonably withheld), incurred by it resulting from any claim, demand,
action, or suit in connection with the performance of its duties hereunder,
-5-
<PAGE>
provided that this indemnification shall not apply to actions or omissions
of MLFDS in cases of willful misconduct, failure to act in good faith or
negligence by MLFDS, it's officers, employees or agents, and further provided,
that prior to confessing any claim against it which may be subject to this
indemnification, MLFDS shall give the Fund reasonable opportunity to defend
against said claim in its own name or in the name of MLFDS. An action taken by
MLFDS upon any Officer's Instruction reasonably believed by it to have been
properly executed shall not constitute willful misconduct, failure to act in
good faith or negligence under this Agreement.
8. Regarding MLFDS.
(a) MLFDS hereby agrees to hire, purchase, develop and maintain such
dedicated personnel, facilities, equipment, software, resources and
capabilities as may be reasonably determined by the Fund to be necessary for
the satisfactory performance of the duties and responsibilities of MLFDS.
MLFDS wsrrants and represents that its officers and supervisory personnel
charged with carrying out its functions as Transfer Agent, Dividend Disbursing
Agent and Shareholder Servicing Agent for the Fund possess the special skill
and technical knowledge appropriate for that purpose. MLFDS shall at all times
exercise due care and diligence in the performance of its functions as Transfer
Agent, Dividend Disbursing Agent and Shareholder Servicing Agent for the Fund.
MLFDS agrees that, in determining whether it has exercised due care and
diligence, its conduct shall be measured by the standard applicable to persons
possessing such special skill and technical knowledge.
(b) MLFDS warrants and represents that is duly authorized and permitted
to act as Transfer Agent, Dividend Disbursing Agent, and Shareholder Servicing
Agent under all applicable laws and that it will immediately notify the Fund of
any revocation of such authority or permission or of the commencement of any
proceeding or other action which may lead to such revocation.
9. Termination.
(a) This Agreement shall become effective as of the date first above
written and shall thereafter continue from year to year. This Agreement may be
terminated by the Fund or MLFDS (without penalty to the Fund or MLFDS) provided
that the terminating party gives the other party written notice of such
termination at least sixty (60) days in advance, except that the Fund may
terminate this Agreement immediately upon written notice to MLFDS if the
authority or permission of MLFDS to act as Transfer Agent, Dividend Disbursing
Agent and Shareholder Servicing Agent has been revoked or if any proceeding or
other action which the Fund reasonably believes will lead to such revocation has
been commenced.
-6-
<PAGE>
(b) Upon termination of this Agreement, MLFDS shall deliver all unissued
and canceled stock certificates representing Shares remaining in its
possession, and all Shareholder records, books, stock ledgers, instruments and
other documents (including computerized or other electronically stored
information) made or accumulated in the performance of its duties as Transfer
Agent, Disbursing Agent and Shareholder Servicing Agent for the Fund along with
a certified locator document clearly indicating the complete contents therein,
to such successor as may be specified in a notice of termination or Officer's
Instruction; and the Fund assumes all responsibility for failure thereafter to
produce any paper, record or documents so delivered and identified in the
locator document, if and when required to be produced.
10. Amendment.
Except to the extent that the performance by MLFDS or its functions
under this Agreement may from time to time be modified by an Officer's
Instruction, this Agreement may be amended or modified only by further written
Agreement between the parties.
11. Governing Law.
This Agreement shall be governed by the laws of the State of New Jersey.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective duly authorized officers and their respective
corporate seals hereunto duly affixed and attested, as of the day and year
above written.
MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT PROGRAM, INC.
By: /s/ Terry K. Glenn
-----------------------------
Title: EXECUTIVE VICE PRESIDENT
--------------------------
MERRILL LYNCH FINANCIAL DATA SERVICE, INC.
By: /s/
----------------------------------
Title: PRESIDENT
-------------------------------
-7-
<PAGE>
EXHIBIT 99.11 (b)
CONSENT OF MORNINGSTAR, INC.
We consent to the reference to our firm under the caption "Performance
Data" appearing in the Prospectus of Merrill Lynch, Retirement Benefit
Investment Program, Inc., doing business as Merrill Lynch Balanced Fund for
Investment and Retirement.
The use of our,ratings and information in advertisements and sales
literature is permissible upon approval by Morningstar.
Morningstar, Inc.
Date: 11/20/92 By: /s/ Mariann Lindsey
-------------------
Mariann Lindsey
Morningstar, Inc.
53 West Jackson Blvd.
Suite 460
Chicago, IL 60604
<PAGE>
EXHIBIT 99.13
REPRESENTATION OF
MERRILL LYNCH ASSET MANAGEMENT, INC.
The undersigned, being the holder of 10,000 shares of common stock of
Merrill Lynch Retirement Benefit Investment Program, Inc., Full Investment
Portfolio (the "Fund"), hereby confim its representation to the Fund that it
acquired such shares for investment purposes without - any present intention of
reselling any such shares.
Merrill Lynch Asset Management, Inc.
By /s/ Robert Harris
---------------------------------
Robert Harris
Vice President
Dated: October 16, 1985
<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 21st 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:
<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 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 require ments 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
2
<PAGE>
regarding the disbursement of the account maintenance fee and the distribution
fee during such period.
5. This Plan shall not take effect until it has been approved by a vote of
at least a majority, as defined in the Investment Company Act, of the
outstanding Class C voting securities of the 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 nomina tion 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
3
<PAGE>
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 /s/ Jerry Weiss
-----------------------------------
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By /s/ Gerald M. Richard
-----------------------------------
Title:
4
<PAGE>
CLASS C SHARES DISTRIBUTION PLAN SUB-AGREEMENT
AGREEMENT made as of the 21st day of October 1994, by and between Merrill
Lynch Funds Distributor, Inc., a Delaware corpo ration ("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.
<PAGE>
3. As compensation for its activities and services performed under this
Agreement, MLFD shall pay the Securities Firm an account maintenance fee and a
distribution fee at the end of each calendar month in an amount agreed upon by
the parties hereto.
4. The Securities Firm shall provide MLFD, at least quarterly, such
information as reasonably requested by MLFD to enable MLFD to comply with the
reporting requirements of Rule 12b-1 regarding the disbursement of the account
maintenance fee and the distribution fee during such period referred to in
Paragraph 4 of the Plan.
5. This Agreement shall not take effect until it has been approved by votes
of a majority of both (a) the Directors of the 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 /s/ Gerald M. Richard
----------------------------------
Title:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By /s/ David Conine
----------------------------------
Title:
2
<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 21st 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 hanefit the Fund and its
shareholders.
NOW, THEREFORE, the Fund hereb'y 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 0.25t of average daily net assets of the
Fund relating to Class D shares to compensate NLFD and securities firms with
which MLFD enters into related agreements ("Sub-Agreements") pursuant to
Paragraph Z 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
niqtrShllt-ion 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 /s/ Jerry Weiss
------------------------------------------
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By /s/ Gerald M. Richard
-----------------------------------------
Title:
3
<PAGE>
CLASS D SHARES DISTRIBUTION PLAN SUB-AGREEMENT
AGREEMENT made as of the 21st 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 0.25k 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 willinq to perform such services;
NOW, THEREFORE, in consideration of the mutual covenants rants
ined 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 sSrvices 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
<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 hereco have executed and
delivered this Aqreement as of the date first above written.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By /s/ Gerald M. Richard
------------------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By /s/ David Conine
------------------------------------
<PAGE>
Retirement Benefit EXHIBIT 99.16(a)
Total Return
Total Annual
Since Return
Inception (10/01/97-
1 Year (11/29/85) 06/30/88)
Initial Investment $1,000.00 $1,000.00 $1,000.00
Divided by
Net Asset Value 12.17 10.00 12.54
----- ----- -----
Equals Shares Purchased 82.169 100.00 79.745
Plus SHares Acquired Through
Dividend Reinvestment 4.121 11.888 3.996
----- ------ -----
Equals Sharees Held
at 6/30/88 86.290 111.888 83.741
Multiplied by Net Asset
Value at 6/30/88 11.12 11.12 11.12
----- ----- -----
Equals Ending Value before
deduction for contingent
deferred sales charge 939.55 1,244.20 931.20
Deduction for deferred sales
charges 36.65 20.00 -0-
----- ----- ---
Equals Ending Remeemable
Value of a $1,000
Investment (ERV) 922.90 1,224.20 931.20
Divided by $1,000 (F) .9229 1.224.20 931.20
Subtract 1 (.0771) .224 (.688)
Expressed as a percentage
equals the Aggregate Total
Return for the Period (T) (7.71%) 22.40%
------- ------
Expressed as a percentage
equals the Annual
Total Return (6.88%)
-------
IRV divided by F .9229
Raise to the power of 1 1/2.586 1/.7507
Equals .9229 1.0814 .9084
Subtract 1 (7.71%) 8.14% (9.16%)
Expressed as a percentage
equals the Average
Annualized Total Return (7.71%) 8.14%
------- -----
Annualized (9.16%)
-------
*Does not include sales charge for the period.
<PAGE>
Merrill Lynch Retirement Benefit
Investment Program, Inc.
Class A
Total Return
EXHIBIT 99.16(b)
Period from
10/27/88 Annual
(inception) Total*
to 09/30/89 Return
----------- ------
Initial Investment $1,000.00 $1,000.00
Divided by
Maximum Offering Price 11.96
-----
Divided by Net Asset Value 11.18
-----
Equals Shares Purchased 83.61 89.45
Plus SHares Acquired through
Dividend Reinvestment 6.94 7.40
---- ----
Equals Shares Held
at 09/30/89 90.55 96.85
Multiplied by Net Asset
Value at 09/30/89 11.93 11.93
----- -----
Equals Ending Redeemable
Value at $1,000
Investment (ERV) at 09/30/89 $1,080.30 $1,155.40
Divided by $,000 (p) 1.080.30 1.1554
Subtract 1 0.0803 0.1554
Expressed as a percentage
equals the Aggregate Total
Return for the period (T) 8.03%
=====
Expressed as a percentage
equals the aggregate total
return for the period 15.54%
======
ERV divided by P 1.0803
Raise to the power of 1 / .9260
Equals 1.0870
Subtract 1 0.0870
Expressed as a percentage
equals the Average
Annualized Total Return 8.70%
=====
*Does not include sales charge for the period.
<PAGE>
EXHIBIT 99.16(c)
Balanced Fund for Investment and Retirement - Class C
10/21/94 - 12/31/94
Since Since
Inception Inception
Avg Annual Total
Return Return*
----------- ----------
Initial Investment $1,000.00 $1,000.00
Dividend by Net Asset Value 11.74 11.74
----- -----
Equals Shares Purchased 85.18 85.18
Plus Shares Acquired through
Dividend Reinvestment 9.41 9.41
---- ----
Equals Shares Held at 12/31/94 94.59 94.59
Multiplied by Net Asset Value at 12/31/94 10.27 10.27
----- -----
Equals Ending Value before duduction for
contingent deferred sales charge 971.45 971.45
Less deferred sales charge (8.76) 0.00
------ ----
Equals Ending Redeemable Value at
$1000 Investment (RRV) at 12/31/94 $962.69 $971.45
------- -------
Divided by $1,000 (P) 0.9627 0.9714
Subtract 1 -0.0373 -0.0286
Expressed as a percentage equals the
Aggregate Total Return for the Period (T) -3.373%
=======
Expressed as a percentage equals the
Aggregate Total Return for the Period -2.86%
======
ERV divided by P 0.9627
Raise to the power of 5.1407
Equals 0.8225
Subtract 1 -0.1775
Expressed as a percentage equals the
Average Annualized Total Retrun -17.75%
=======
*Does not include sales charge for the period.
<PAGE>
EXHIBIT 99.16(d)
Balanced Fund for Investment and Retirement - Class D
10/21/94 - 12/31/94
Since Since
Inception Inception
Avg Annual Total
Return Return*
----------- ----------
Initial Investment $1,000.00 $1,000.00
Dividend by Initial Maximum OFfering Price 12.31
-----
Dividend by Net Asset Value 11.66
-----
Equals Shares Purchased 81.26 85.76
Plus Shares Acquired through
Dividend Reinvestment 9.19 9.70
---- ----
Equals Shares Held at 12/31/94 90.45 95.46
Multiplied by NEtr Asset Value at 12/31/94 10.18 10.18
----- -----
Equals Ending Redeemable Value at
$1000 Investment (ERV) at 12/31/94 $920.79 $971.81
Divided by 1,000 (p) 0.9208 0.9718
Subtract 1 -0.0792 -0.0282
Expressed as a percentage equals the
aggregate Total Return for the Period (T) -7.92%
======
Expressed as a percentage equals the
aggregate Total Return for the period -2.82%
======
ERV divided by P 0.9208
Raise to the power of 5.1408
Equals 0.6543
Subtract 1 -0.3457
Expressed as a percentage equals the
average annualized total return -34.57%
=======
* Does not include sales charge for the period
<PAGE>
EXHIBIT 99.18(a)
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the person whose name appears below
hereby nominates, constitutes and appoints Arthur Zeikel and Gerald M. Richard
(with full power to each of them to act alone) his true and lawful attorney-in-
fact and agent, for him and on his behalf and in his place and stead in any and
all capacities, to make, execute and sign all amendments and supplements to the
Registration Statement on Form N-1A under the Securities Act of 1933 and the
Investment Company Act of 1940 of MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT
PROGRAM, INC. (doing business as MERRILL LYNCH BALANCED FUND FOR INVESTMENT AND
RETIREMENT) (the "Fund"), and to file the same with the Securities and Exchange
Commission, and any other regulatory authority having jurisdiction over the
offer and sale of shares of common stock, par value $0.01 per share, of the
Fund, and any and all exhibits and other documents requisite in connection
therewith, granting unto said attorneys and each of them, full power and
authority to perform each and every act and thing requisite and necessary to be
done in and about the premises as fully to all intents and purposes as the
undersigned Director himself might or could do.
IN WITNESS WHEREOF, the undersigned Director has hereunto set his hands
this 25 day of January, 1994.
/s/ Robert R. Martin
--------------------
Robert R. Martin
Director
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on behalf by the undersigned, thereunto
duly authorized, in the City of New York and State of New York, on the 15th
day of October 1985.
MERRILL LYNCH RETIREMENT BENEFIT
INVESTMENT PROGRAM, INC.
By: /s/ Arthur Zeikel
---------------------------
Arthur Zeikel,
President
Each person whose signature appears below hereby authorizes Arthur
Zeikel, Gerald M. Richard and Robert Harris, or any of them, as attorney-in-
fact, to sign on his behalf, individually and in each capacity stated below,
any amendments to this Registration Statement (including any pre-effective
amendments and any post-effective amendments) and to file the same, with all
exhibits thereto, with the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated below.
Signature Title Date
--------- ----- ----
/s/ Arthur Zeikel President and October 15, 1995
- ------------------------ Director (Principal
Arthur Zeikel Executive Officer)
/s/ Gerald M. Richard Treasurer October 15, 1995
- ------------------------ (Principal
Gerald M. Richard Financial and
Accounting Officer)
/s/ Andre Perold Director October 15, 1995
- ------------------------ (signatures continued)
Andre Perold
/s/ Robert Vandell Director October 15, 1995
- ------------------------
Robert Vandell
/s/ Kenneth Axelson Director October 15, 1995
- ------------------------
Kenneth Axelson
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this Post-Effective Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Township of Plainsboro and State of New Jersey, on the 25
day of January, 1988.
MERRILL LYNCH RETIREMENT BENEFIT
INVESTMENT PROGRAM, INC.
By: /s/ Robert Harris
------------------------
Robert Harris, Secretary
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Arthur Zeikel, Robert Harris and Gerald M.
Richard and each of them, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and his name,
place and stead, in any and all capacities, to sign any and all Post-
Effective Amendments in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent, and each
of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agents or any of
them, or their or his substitute or substitutes, may lawfully do or cause to
be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President and Director January 25, 1995
- ----------------------- (Principal Executive Officer)
(Arthur Zeikel)
* Treasurer (Principal January 25, 1995
- ----------------------- Financial
(Gerald M. Richard) and Accounting Officer)
* Director January 25, 1995
- -----------------------
(Kenneth S. Axelson)
/s/ Herbert L. London Director January 25, 1995
- -----------------------
(Herbert L. London)
/s/ Joseph L. May Director January 25, 1995
- -----------------------
(Joseph L. May)
* Director January 25, 1995
- -----------------------
(Andre F. Perold)
*This Amendment has been signed by
each of the persons so indicated by the
undersigned as Attorney-in-fact.
*By /s/ Robert Harris
----------------------------------
Robert Harris, Attorney-in-fact
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> MERRILL LYNCH BALANCED FUND FOR INVESTMENT AND RETIREMENT - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 572648242
<INVESTMENTS-AT-VALUE> 639964390
<RECEIVABLES> 10766023
<ASSETS-OTHER> 4578234
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 655308647
<PAYABLE-FOR-SECURITIES> 1965810
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2035773
<TOTAL-LIABILITIES> 4001583
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 561559473
<SHARES-COMMON-STOCK> 2637319
<SHARES-COMMON-PRIOR> 3424576
<ACCUMULATED-NII-CURRENT> 5264881
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 17172044
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 67310666
<NET-ASSETS> 30485421
<DIVIDEND-INCOME> 6790388
<INTEREST-INCOME> 19733199
<OTHER-INCOME> 41541
<EXPENSES-NET> 10717240
<NET-INVESTMENT-INCOME> 15847888
<REALIZED-GAINS-CURRENT> 18675904
<APPREC-INCREASE-CURRENT> 33323321
<NET-CHANGE-FROM-OPS> 67847113
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1043247
<DISTRIBUTIONS-OF-GAINS> 3297664
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1070519
<NUMBER-OF-SHARES-REDEEMED> 2253897
<SHARES-REINVESTED> 396121
<NET-CHANGE-IN-ASSETS> (98491626)
<ACCUMULATED-NII-PRIOR> 3227255
<ACCUMULATED-GAINS-PRIOR> 59682149
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4289001
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10717240
<AVERAGE-NET-ASSETS> 33882379
<PER-SHARE-NAV-BEGIN> 11.67
<PER-SHARE-NII> .32
<PER-SHARE-GAIN-APPREC> .88
<PER-SHARE-DIVIDEND> .34
<PER-SHARE-DISTRIBUTIONS> .97
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.56
<EXPENSE-RATIO> 1.01
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> MERRILL LYNCH BALANCED FUND FOR INVESTMENT AND RETIREMENT - CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 572648242
<INVESTMENTS-AT-VALUE> 639964390
<RECEIVABLES> 10766023
<ASSETS-OTHER> 4578234
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 655308647
<PAYABLE-FOR-SECURITIES> 1965810
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2035773
<TOTAL-LIABILITIES> 4001583
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 561559473
<SHARES-COMMON-STOCK> 12951639
<SHARES-COMMON-PRIOR> 60402048
<ACCUMULATED-NII-CURRENT> 5264881
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 17172044
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 67310666
<NET-ASSETS> 152121232
<DIVIDEND-INCOME> 6790388
<INTEREST-INCOME> 19733199
<OTHER-INCOME> 41541
<EXPENSES-NET> 10717240
<NET-INVESTMENT-INCOME> 15847888
<REALIZED-GAINS-CURRENT> 18675904
<APPREC-INCREASE-CURRENT> 33323321
<NET-CHANGE-FROM-OPS> 67847113
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3008886
<DISTRIBUTIONS-OF-GAINS> 27299110
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2091731
<NUMBER-OF-SHARES-REDEEMED> 51973712
<SHARES-REINVESTED> 2431572
<NET-CHANGE-IN-ASSETS> (98491626)
<ACCUMULATED-NII-PRIOR> 3227255
<ACCUMULATED-GAINS-PRIOR> 59682149
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4289001
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10717240
<AVERAGE-NET-ASSETS> 291951722
<PER-SHARE-NAV-BEGIN> 11.75
<PER-SHARE-NII> .21
<PER-SHARE-GAIN-APPREC> .90
<PER-SHARE-DIVIDEND> .14
<PER-SHARE-DISTRIBUTIONS> .97
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.75
<EXPENSE-RATIO> 2.04
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> MERRILL LYNCH BALANCED FUND FOR INVESTMENT AND RETIREMENT - CLASS C
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-21-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 572648242
<INVESTMENTS-AT-VALUE> 639964390
<RECEIVABLES> 10766023
<ASSETS-OTHER> 4578234
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 655308647
<PAYABLE-FOR-SECURITIES> 1965810
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2035773
<TOTAL-LIABILITIES> 4001583
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 561559473
<SHARES-COMMON-STOCK> 99541
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 5264881
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 17172044
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 67310666
<NET-ASSETS> 1154235
<DIVIDEND-INCOME> 6790388
<INTEREST-INCOME> 19733199
<OTHER-INCOME> 41541
<EXPENSES-NET> 10717240
<NET-INVESTMENT-INCOME> 15847888
<REALIZED-GAINS-CURRENT> 18675904
<APPREC-INCREASE-CURRENT> 33323321
<NET-CHANGE-FROM-OPS> 67847113
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 10834
<DISTRIBUTIONS-OF-GAINS> 10962
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 132339
<NUMBER-OF-SHARES-REDEEMED> 33800
<SHARES-REINVESTED> 1002
<NET-CHANGE-IN-ASSETS> (98491626)
<ACCUMULATED-NII-PRIOR> 3227255
<ACCUMULATED-GAINS-PRIOR> 59682149
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4289001
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10717240
<AVERAGE-NET-ASSETS> 561798
<PER-SHARE-NAV-BEGIN> 11.74
<PER-SHARE-NII> .19
<PER-SHARE-GAIN-APPREC> .92
<PER-SHARE-DIVIDEND> .28
<PER-SHARE-DISTRIBUTIONS> .97
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.60
<EXPENSE-RATIO> 2.04
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> MERRILL LYNCH BALANCED FUND FOR INVESTMENT AND RETIREMENT - CLASS D
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-21-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 572648242
<INVESTMENTS-AT-VALUE> 639964390
<RECEIVABLES> 10766023
<ASSETS-OTHER> 4578234
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 655308647
<PAYABLE-FOR-SECURITIES> 1965810
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2035773
<TOTAL-LIABILITIES> 4001583
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 561559473
<SHARES-COMMON-STOCK> 40520316
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 5264881
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 17172044
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 67310666
<NET-ASSETS> 467546176
<DIVIDEND-INCOME> 6790388
<INTEREST-INCOME> 19733199
<OTHER-INCOME> 41541
<EXPENSES-NET> 10717240
<NET-INVESTMENT-INCOME> 15847888
<REALIZED-GAINS-CURRENT> 18675904
<APPREC-INCREASE-CURRENT> 33323321
<NET-CHANGE-FROM-OPS> 67847113
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 11100445
<DISTRIBUTIONS-OF-GAINS> 29225123
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 45534933
<NUMBER-OF-SHARES-REDEEMED> 8339827
<SHARES-REINVESTED> 3325210
<NET-CHANGE-IN-ASSETS> (98491626)
<ACCUMULATED-NII-PRIOR> 3227255
<ACCUMULATED-GAINS-PRIOR> 59682149
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4289001
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10717240
<AVERAGE-NET-ASSETS> 370120319
<PER-SHARE-NAV-BEGIN> 11.66
<PER-SHARE-NII> .27
<PER-SHARE-GAIN-APPREC> .90
<PER-SHARE-DIVIDEND> .32
<PER-SHARE-DISTRIBUTIONS> .97
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.54
<EXPENSE-RATIO> 1.27
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EXHIBIT (1)(D)
MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT PROGRAM, INC.
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT PROGRAM, INC., a Maryland
corporation having its principal Maryland office c/o The Corporation Trust
Incorporated, 32 South Street, Baltimore, Maryland 21202 (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The charter of the Corporation is hereby amended by adding the
following provision at the end of Article V, Section 1:
The Board of Directors may classify and reclassify any issued shares of
capital stock into one or more additional or other classes or series as may be
established from time to time by setting or changing in any one or more respects
the designations, preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications or terms or conditions
of redemption of such shares of stock and pursuant to such classification or
reclassification to increase or decrease the number of authorized shares of any
existing class or series; provided, however, that any such classification or
reclassification shall not substantially adversely affect the rights of holders
of such issued shares. The Board's authority pursuant to this paragraph shall
include, but not be limited to, the power to vary among all the holders of a
particular class or series (a) the length of time shares must be held prior to
reclassification to shares of another class or series (the "Holding Period(s)"),
(b) the manner in which the time for such Holding Period(s) is determined and
(c) the class or series into which the particular class or series is being
reclassified; provided, however, that, subject to the first sentence of this
section, with respect to holders of the Corporation's shares issued on or after
the date of the Corporation's first effective prospectus which sets forth
Holding Period(s) (the "First Holding Period Prospectus"), the Holding
Period(s), the manner in which the time for such Holding Period(s) is determined
and the class or series into which the particular class or series is being
reclassified shall be disclosed in the Corporation's prospectus or statement of
additional information in effect at the time such shares, which are the subject
of the reclassification, were issued; and provided, further, that, subject to
the first sentence of this section, with respect to holders of the Corporation's
Class B shares issued prior to the date of the Corporation's First Holding
Period Prospectus, the Holding Period shall be ten (10) years for retirement
plan (as recognized by the Internal Revenue Code of 1986, as amended from time
to time) holders of issued Class B shares purchased without a contingent
deferred sales charge (a "CDSC-Waived Retirement Plan") and shall be the Holding
Period set forth in the Corporation's First Holding Period Prospectus, for all
other holders of issued Class B shares; Class B shares held by a CDSC- Waived
Retirement Plan shall be reclassified to Class D shares in the month following
the month in which the first Class B share of any mutual fund advised by Merrill
Lynch Asset Management, L.P., Fund Asset Management, L.P., or their affiliates
or successors, held by such CDSC-Waived Retirement Plan has been held for the
ten (10) year Holding Period established by the Corporation's Board of
<PAGE>
Directors for such CDSC-Waived Retirement Plan Class B shareholder; and the
Class B shares of every shareholder other than CDSC-Waived Retirement Plan Class
B shareholder; and the Class B shares of every shareholder other than CDSC-
Waived Retirement Plans shall be reclassified to Class D shares in the month
following the month in which such shares have been held for the Holding Period
established by the Corporation's Board of Directors for shareholders other than
CDSC-Waived Retirement Plans in the Corporation's First Holding Period
Prospectus.
SECOND: The foregoing amendment has been effected in the manner and by
the vote required by the Corporation's charter and the laws of the State of
Maryland. Pursuant to Section 2-604 of the Maryland Corporations and
Associations Code, the amendment was advised by the Board of Directors of the
Corporation and approved by the stockholders.
THIRD: Except as amended hereby, the Corporation's charter shall remain
in full force and effect.
FOURTH: The authorized capital stock of the Corporation has not been
increased by these Articles of Amendment.
FIFTH: These Articles of Amendment shall be effective at the very
beginning of the day on October 21, 1994.
The President acknowledges these Articles of Amendment to be the corporate
act of the Corporation and states that to the best of his knowledge, information
and belief, the matters set forth in these Articles of Amendment with respect to
the authorization and approval of the amendment of the Corporation's charter are
true in all material respects, and that this statement is made under the
penalties for perjury.
2
<PAGE>
IN WITNESS WHEREOF, MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT PROGRAM,
INC. has caused these Articles of Amendment to be signed in its name and on its
behalf by its President, a duly authorized officer of the Corporation, and
attested by its Secretary as of the 18th day of October, 1994.
MERRILL LYNCH RETIREMENT BENEFIT
INVESTMENT PROGRAM, INC
/s/ Arthur Zeikel
--------------------------------
Arthur Zeikel
President
Attest:
/s/ Jerry Weiss
- -----------------------
Jerry Weiss
Secretary
3
<PAGE>
EXHIBIT (1)(E)
MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT PROGRAM, INC.
ARTICLES SUPPLEMENTARY TO ARTICLES OF INCORPORATION INCREASING
THE AUTHORIZED CAPITAL STOCK OF THE CORPORATION AND
CREATING TWO ADDITIONAL CLASSES OF COMMON STOCK
MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT PROGRAM, INC., a Maryland
corporation having its principal Maryland office c/o The Corporation Trust
Incorporated, 32 South Street, Baltimore, Maryland 21202 (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation, that:
FIRST: The Corporation is registered as an open-end investment company
under the Investment Company Act of 1940, as amended, with authority to issue
One Billion (1,000,000,000) shares of capital stock. The Corporation has two
classes of capital stock consisting of Five Hundred Million (500,000,000) shares
of Class A Common Stock and Five Hundred Million (500,000,000) shares of Class B
Common Stock. All shares of all classes and series of the Corporation's capital
stock have a par value of One Cent ($.01) per share and an aggregate par value
of Ten Million Dollars ($10,000,000.00).
SECOND: The Board of Directors of the Corporation, acting in accordance
with Section 2-105(c) of the Maryland Corporations and Associations Code, hereby
increases the total number of authorized shares of Class B Common Stock of the
Corporation by One Billion (1,000,000,000) shares.
THIRD: After this increase in the number of authorized shares of capital
stock of the Corporation, the Corporation will have authority to issue Two
Billion (2,000,000,000) shares of capital stock and the capital stock will
consist of Five Hundred Million (500,000,000) shares of Class A Common Stock and
One Billion Five Hundred Million (1,500,000,000) shares of Class B Common Stock.
FOURTH: After this increase in the number of authorized shares of capital
stock of the Corporation, all shares of all classes and series of the
Corporation's capital stock will have a par value of One Cent ($.01) per share
and an aggregate par value of Twenty Million Dollars ($20,000,000.00).
FIFTH: Pursuant to authority expressly vested in the Board of Directors of
the Corporation by its charter, the Board of Directors has reclassified Five
Hundred Million (500,000,000) authorized and unissued shares of the Class B
Common Stock of the Corporation as Class C Common Stock of the par value of One
Cent ($.01) per share and of the aggregate par value of Five Million Dollars
($5,000,000.00)
SIXTH: The preferences, designations, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications or terms or
conditions of redemption of Class C Common Stock are as follows:
<PAGE>
The Class C Common Stock of the Corporation shall represent the same
interest in the Corporation and have identical preferences, designations,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, or terms or conditions of redemption as the Class B
Common Stock as of the date of these Articles Supplementary, except as otherwise
set forth in the Corporation's charter and further except that:
(i) Expenses related to the distribution of the Class C Common Stock shall
be borne solely by such class and such class shall have exclusive voting rights
with respect to matters relating to the expenses being borne solely by such
class;
(ii) Such distribution expenses borne solely by Class C Common Stock shall
be appropriately reflected (in the manner determined by the Board of Directors)
in the net asset value, dividends, distribution and liquidation rights of the
shares of such class; and
(iii) Class C Common Stock shall not be reclassified into Class D
shares.
SEVENTH: Pursuant to authority expressly vested in the Board of Directors
of the Corporation by its charter, the Board of Directors has reclassified Five
Hundred Million (500,000,000) authorized and unissued shares of the Class B
Common Stock of the Corporation as Class D Common Stock of the par value of One
Cent ($.01) per share and of the aggregate par value of Five Million Dollars
($5,000,000.00).
EIGHTH: The preferences, designations, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications or terms or
conditions of redemption of Class D Common Stock are as follows:
The Class D Common Stock of the Corporation shall represent the same
interest in the Corporation and have identical preferences, designations,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, or terms or conditions of redemption as the Class B
Common Stock as of the date of these Articles Supplementary, except as otherwise
set forth in the Corporation's charter and further except that:
(i) Expenses related to the distribution of the Class D Common Stock shall
be borne solely by such class and such class shall have exclusive voting rights
with respect to matters relating to the expenses being borne solely by such
class; and
(ii) Such distribution expenses borne solely by Class D Common Stock shall
be appropriate reflected (in the manner determined by the Board of Directors) in
the net asset value, dividends, distribution and liquidation rights of the
shares of such class.
2
<PAGE>
IN WITNESS WHEREOF, MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT PROGRAM,
INC. has caused these Articles Supplementary to be signed in its name and on its
behalf by its President and attested by its Secretary on October 18, 1994.
MERRILL LYNCH RETIREMENT BENEFIT
INVESTMENT PROGRAM, INC.
By: /s/ Arthur Zeikel
------------------------------
Arthur Zeikel, President
Attest:
/s/ Jerry Weiss
- ----------------------
Jerry Weiss, Secretary
THE UNDERSIGNED, President of MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT
PROGRAM, INC., who executed on behalf of said Corporation the foregoing Articles
Supplementary, of which this certificate is made a part, hereby acknowledges, in
the name and on behalf of said Corporation, the foregoing Articles Supplementary
to be the corporate act of said Corporation and further certifies that, to the
best of his knowledge, information and belief, the matters and facts set forth
therein with respect to the authorization and approval thereof are true in all
material respects, and that this statement is made under the penalties for
perjury.
/s/ Arthur Zeikel
------------------------
Arthur Zeikel, President
3
<PAGE>
EXHIBIT (11)(A)
INDEPENDENT AUDITORS' CONSENT
Merrill Lynch Balanced Fund for Investment and Retirement, Inc.
We consent to the use in Post-Effective Amendment No. 15 to Registration
Statement No. 2-91329 of our report dated October 26, 1995, appearing in the
Statement of Additional Information, which is a part of such Registration
Statement, and to the reference to us under the caption "Financial Highlights"
appearing in the Prospectus, which also is a part of such Registration
Statement.
/s/ Deloitte & Touche, LLP
- --------------------------
Princeton, New Jersey
January 25, 1996
<PAGE>
EXHIBIT (18)(B)
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the person whose name appears below
hereby nominates, constitutes and appoints Arthur Zeikel and Gerald M. Richard
(with full power to each of them to act alone) his true and lawful attorney-in-
fact and agent, for him and on his behalf and in his place and stead in any and
all capacities, to make, execute and sign all amendments and supplements to the
Registration Statement on Form N-1A under the Securities Act of 1933 and the
Investment Company Act of 1940 of MERRILL LYNCH BALANCED FUND FOR INVESTMENT AND
RETIREMENT, INC. (the "Fund"), and to file the same with the Securities and
Exchange Commission, and any other regulatory authority having jurisdiction over
the offer and sale of shares of common stock, par value $0.01 per share, of the
Fund, and any and all exhibits and other documents requisite in connection
therewith, granting unto said attorneys and each of them, full power and
authority to perform each and every act and thing requisite and necessary to be
done in and about the premises as fully to all intents and purposes as the
undersigned Director himself might or could do.
IN WITNESS WHEREOF, the undersigned Director has hereunto set his hand this
19th day of January, 1996.
/s/ James Bodurtha
-----------------------------------
James Bodurtha
Trustee
1
<PAGE>
EXHIBIT (18)(C)
MERRILL LYNCH SELECT PRICING/SM/ SYSTEM
PLAN PURSUANT TO RULE 18f-3 UNDER THE INVESTMENT COMPANY ACT
The mutual funds participating in the Merrill Lynch Select Pricing/SM/
System (individually a "Fund" and, collectively, the "Funds") offer Class A
Shares, Class B Shares, Class C Shares and Class D Shares as follows:
Account Maintenance and Distribution Fees
- -----------------------------------------
Class B Shares, Class C Shares and Class D Shares bear the expenses of the
ongoing account maintenance fees applicable to the particular Class. Class B
Shares and Class C Shares bear the expenses of the ongoing distribution fees
applicable to the particular Class. Specific shareholders within a Class may be
subject to initial or contingent deferred sales charges as set forth in each
Fund's current prospectus and statement of additional information (together, the
"prospectus").
Transfer Agency Expenses
- ------------------------
Each Class shall bear any incremental transfer agency cost applicable to
the particular Class.
Voting Rights
- -------------
Each Class has exclusive voting rights on any matter submitted to
shareholders that relates solely to its account maintenance fees or ongoing
distribution fees, as may be applicable. Each Class shall have separate voting
rights on any matter submitted to shareholders in which the interests of one
Class differ from the interests of any other Class.
Dividends
- ---------
Dividends paid on each Class will be calculated in the same manner at the
same time and will differ only to the extent that any account maintenance fee,
any distribution fee and any incremental transfer agency cost relates to a
particular Class.
Conversion Features
- -------------------
Holders of Class B Shares will have such conversion features to Class D
Shares as set forth in each Fund's current prospectus. Conversion features may
vary among holders of Class B Shares.
1
<PAGE>
Exchange Privileges
- -------------------
Holders of Class A Shares, Class B Shares, Class C Shares and Class D
Shares shall have such exchange privileges as set forth in each Fund's current
prospectus. Exchange privileges may vary amount Classes and among holders of a
Class.
Other Rights and Obligations
- ----------------------------
Except as otherwise described above, in all respects, each Class shall have
the same rights and obligations as each other Class.
2
