MERRILL LYNCH
RETIREMENT
ASSET BUILDER
PROGRAM, INC.
FUND LOGO
Semi-Annual Report
July 31, 1995
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Program unless
accompanied or preceded by the Program's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
<PAGE>
Merrill Lynch Retirement
Asset Builder Program, Inc.
Box 9011
Princeton, NJ
08543-9011
Merrill Lynch Retirement Asset Builder Program, Inc.
Officers and
Directors
Arthur Zeikel, President and Director
Joe Grills, Director
Walter Mintz, Director
Melvin R. Seiden, Director
Stephen B. Swensrud, Director
Harry Woolf, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
N. John Hewitt, Senior Vice President
Donald C. Burke, Vice President
Jay C. Harbeck, Vice President
Joel Heymsfeld, Vice President
Gregory Mark Maunz, Vice President
Kevin M. Rendino, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
<PAGE>
Custodian
The Bank of New York
90 Washington Street, 12th Floor
New York, New York 10286
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
Transfer Agency Mutual Fund Operations
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
DEAR SHAREHOLDER
We are pleased to provide you with this first semi-annual report for
Merrill Lynch Retirement Asset Builder Program, Inc. In this and
future shareholder reports, we will highlight the Program's
performance, describe recent investment activities and examine some
of the important market developments that helped shape our
investment strategy during the period under review.
<PAGE>
Merrill Lynch Retirement Asset Builder Program, Inc. consists of
four separate diversified portfolios, each with its own investment
objectives. Merrill Lynch Fundamental Value Portfolio seeks capital
appreciation and income by investing in securities, primarily
equities, that we believe are undervalued and represent investment
value. Merrill Lynch Quality Bond Portfolio seeks income and capital
appreciation by investing primarily in long-term corporate bonds
rated A or better by at least one of the major rating agencies.
Merrill Lynch US Government Securities Portfolio seeks high current
return by investing in US Government and Government agency
securities. Merrill Lynch Global Opportunity Portfolio seeks high
total investment return through a fully managed investment policy
utilizing US and foreign equity, debt and money market securities.
Complete performance information for all four portfolios, including
aggregate total returns, can be found on pages 6-9 of this report to
shareholders.
Merrill Lynch Fundamental
Value Portfolio
Merrill Lynch Fundamental Value Portfolio's investment universe is
clearly defined by strict valuation criteria. Specifically, we
purchase issues that usually possess at least two of the following
characteristics: sell at price/book value ratios below the stock
market; have above-average dividend yields; sell at price/earnings
ratios below the stock market; or display other out-of-favor
characteristics such as operational or financial turnarounds.
The first six months since the Portfolio's inception were marked by
steadily rising US stock prices. A gradual slowdown in the economy
led to a sharp rally in the bond market as fears of a recession led
investors to believe the Federal Reserve Board would have to lower
interest rates. Stocks followed the bond market and advanced
strongly after many US companies reported better-than-expected
earnings for the first and second quarters of 1995. The market has
rallied significantly since the Portfolio's first day of operation.
In fact, the rally was so strong that we elected to proceed slowly
in investing the assets as we did not want to "chase" valuations.
Our primary investment focus has been to heavily weight the
Portfolio toward the cyclical area of the market, a sector which has
suffered as the health of the economy has been called into question.
The Portfolio is significantly overweighted in credit cyclicals
(8.98% of the Portfolio versus 0.63% of the Standard & Poor's 500
(S&P 500), with companies such as Bay Apartment Communities, Inc.,
Camden Property Trust, Evans Withycombe Residential, Inc. and Simon
Property Group, Inc. Financial issues also have been overweighted
(15.59% equity weighting versus 11.66% for the S&P 500), with stocks
such as Bay View Capital Corp., Greater New York Savings Bank,
Student Loan Marketing Association, TIG Holdings, Inc., Bankers
Trust New York Corp. and Washington Mutual Savings Bank. In
addition, the consumer cyclical sector has also been overweighted
(22.41% equity weighting versus 8.35% for the S&P 500), with stocks
such as Burlington Industries, Inc., Dillard Department Stores,
Inc., Ford Motor Co., General Motors Corp., John Q. Hammons Hotels,
Inc., Kmart Corp., The Limited, Inc., Liz Claiborne, Inc. and
National Auto Credit, Inc. These three areas of the market offer
very attractive valuations, in our opinion. We have significantly
underweighted the consumer service sector (0.16% of our Portfolio
weighting versus 5.74% for the S&P 500) and the consumer staple area
(4.66% of Portfolio weighting versus 20.9% for the S&P 500) as these
two groups did not offer stocks which fit our strict valuation measures.
<PAGE>
As of July 31, 1995, the Portfolio was 82% invested, with the
remaining assets in cash and cash equivalents. In the weeks and
months ahead, we will invest the cash as opportunities arise. As of
July 31, 1995, holdings on average in our Portfolio sold for 10.9
times 1995 expected earnings and 1.4 times book value, both
significantly below the market. These valuation measures make
Merrill Lynch Fundamental Value Portfolio a true "value" Portfolio.
Our invested assets are comprised of 58.7% large capitalization
stocks (over $1 billion), 4.9% medium capitalization stocks (between
$400 million and $1 billion), and 36.4% small capitalization stocks
(less than $400 million). We would expect the small capitalization
component to rise somewhat as this universe of stocks has
significantly underperformed the large capitalization universe for
the last ten months.
Merrill Lynch Quality Bond
Portfolio
The bond market experienced a strong rally in May and June as the
domestic economy continued to show signs of slow growth. The lower
interest rates which prevailed in the first half of 1995 are now
being seen as encouraging an economic rebound in the late summer and
fall. Both retail sales and new housing starts are showing stronger
signs of growth. This has had the effect of removing some of the
nearly unanimous bullish sentiment which has characterized the bond
market in the past few months. While it seems likely that more data
showing a stronger economy will make the bond market weaken slightly
in the short run, we believe that long-term forces are still at work
to keep inflation under control. These would include flat wage
growth, the large amount of consumer debt and international
competitiveness. It would appear that the Federal Reserve Board has
generated the "soft landing" in economic activity. This should keep
inflation restrained and maintain a favorable environment for bonds
over the longer term.
We have been reducing the Portfolio's cash position in order to have
a fully invested posture. It is a new portfolio with a relatively
small size with an investment restriction that not more than 5% of
assets be allowed to be invested in one issuer. Because of this
restriction, we started with holdings of $100,000. Now, our position
limit is $200,000, which should make it easier for us to establish
positions. As of July 31, 1995, we held a diversified portfolio with
22 different holdings.
<PAGE>
Merrill Lynch US Government
Securities Portfolio
Since the launching of Merrill Lynch US Government Securities
Portfolio on February 1, 1995, the rate of expansion of the economy
has been on a path of slower growth. When the Portfolio commenced,
fourth quarter 1994 gross domestic product (GDP) growth was reported
at 5.1%, and investors were concerned with an overheating economy.
Unemployment was down to 5.4%, and consumer confidence was at a high
level, boding well for continued consumer activity. Commodity prices
were increasing and capacity utilization was running at a 15-year
high. Inflationary pressures were everywhere even though actual
inflation remained contained at 2.4% as measured by the change in
consumer prices in 1994. The Federal Reserve Board, in a series of
preemptive strikes against inflation, had increased short-term
interest rates seven times since February 1994. In addition to
domestic considerations, there was additional pressure to increase
interest rates in order to support the dollar which had declined
significantly against many currencies, most notably the yen and
Deutschemark. Popular conjecture was that more rate increases were
inevitable for 1995.
However, recent economic releases have indicated that the economy is
slowing. The National Association of Purchasing Managers Index has
fallen from 57.5 in December 1994 to 45.5 in June 1995. A level
below 50 indicates contracting economic conditions in the
manufacturing sector. This has led to concerns that the planned
orchestration of a soft landing for the economy could turn into an
actual recession. First quarter 1995 GDP slowed to 2.7% and the
second quarter GDP grew at a paltry 0.5%. The Index of Leading
Economic Indicators fell five consecutive months, which can be a
harbinger for recession. While not always followed by recession,
this Index has accurately predicted all nine post-war recessions.
So far in calendar year 1995 interest rates have declined
significantly, reversing the trend of 1994. The 30-year Treasury
bond is 6.84%, lower by 103 basis points (1.03%). The ten-year and
five-year Treasury note yields are lower by 140 basis points and 168
basis points, respectively, and currently stand at 6.42% and 6.15%,
respectively. Interestingly, while one-year Treasury bills have
decreased 152 basis points, three-month rates fell only 11 basis
points.
The removal of the specter of restrictive monetary policy permitted
fixed-income investors to return their focus to basic fundamental
economic analysis. Intermediate-term and long-term interest rates
have retraced most of the sell-off which began in early 1994. 1994
was the worst bond market on record as interest rates climbed 3.58%
in one-year maturities and 2.04% in ten-year maturities. In
contrast, total returns for year-to-date 1995 have been excellent.
For example, the two-year, five-year, and ten-year Treasury notes
have returned +7.22%, +10.86% and +14.10% thus far this year,
respectively. This compares with 0.34%, -3.69% and -6.45% for full-
year 1994.
<PAGE>
In spite of the fact that interest rates have come a long way in
1995, we believe they are far from overvalued on a fundamental
basis. As inflation will most likely remain at a peak below 3.50%
for this cycle, real (inflation adjusted) rates of return in excess
of 3% are currently available on longer maturities and the prospect
of continued slower economic activity bodes well for the short end.
In other words, even though a significant rally is behind us, there
seems to be limited risk of a major correction and we therefore
remain constructive on the market. In addition the Federal Reserve
Board eased interest rates by 25 basis points on July 6, 1995. This
action, which is viewed as the first in a series, adds further
support to the market.
Given the Portfolio's high current return investment objective, we
anticipate investing in the mortgage-backed securities (MBS) market,
which typically offers higher yields than US Government or agency
securities. However, prepayment concerns may prevent us from
expanding MBS investments, since the environment is once again
conducive for mortgage refinancing. The Mortgage Bankers Association
Refinance Index has increased from 41.8 at the end of 1994 to its
current level of 190.1. For a myriad of reasons it is unlikely to
reach its 1993 peak levels. However, it still is beginning to affect
price levels. Prepayment concerns are leading to much shorter
average life estimates. This is dampening price appreciation, and
spreads have widened appreciably.
We maintain two mortgage-backed positions which account for 70% of
the Portfolio. The first is Federal Home Loan Mortgage Corp. (FHLMC)
pool #555228. The pool is a compilation of 30-year FHLMC 11.50% MBS
which have a remaining average maturity of 14.4 years and have
prepaid an average of 94%. We view the remaining balance to have low
prepayment risk because lower interest rates would provide little
additional economic incentive to refinance. Low average remaining
balances would not warrant the costs entailed in a new mortgage and
borrowers have not acted to refinance previously in spite of ample
opportunity to do so. The Portfolio also has a 38% investment in
FHLMC Gold 7%, which permits the Portfolio to increase yield and
participate in market movements.
In order to balance the Portfolio's duration, the remainder of the
Portfolio's assets were invested in five-year and ten-year Treasury
notes. These securities have participated fully in the recent rally
in the market. The Portfolio's duration at July 31, 1995 stood at
3.0 years, with its liquidity position at 15%.
<PAGE>
Merrill Lynch Global Opportunity
Portfolio
As of July 31, 1995, the Portfolio's asset allocation was: US
stocks, 24%; foreign stocks, 40%; US bonds, 17%; foreign bonds, 9%;
and cash, 10%. The US bond sector consists of high-yield corporate
issues. The appeal of these commitments is based on an average
current yield which exceeds 10%. German obligations account for the
largest proportion of assets in the foreign bond sector, while
commitments are also maintained in the United Kingdom, Italy,
Germany and Canada.
In the equity sector, the Portfolio's largest overweighted positions
are in the emerging markets of Asia and Latin America. We expect
these markets to exhibit significant appreciation in coming months.
Favorable economic prospects should benefit the Asian markets.
Evidence of stabilization in the Mexican financial situation should
result in a revival of interest in Latin American equity markets. We
also maintain a significant position in Japanese equities. The
Japanese stock market should continue an advance supported by an
economic recovery through increasingly stimulative monetary and
fiscal policies.
We maintained a modest underweighting in US equities. While the US
market could advance further in coming months, it is unlikely to
exhibit the superior relative performance which took place during
the first half of 1995. During that time, the US stock market
benefited from a strong bond market rally. We believe that evidence
of an acceleration of economic activity will limit the scope for
further interest rate declines over the next six months.
Representation in European equities has been selective, with
emphasis placed on companies in the capital spending,
telecommunications and energy sectors.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Kevin M. Rendino)
Kevin M. Rendino
Vice President and Portfolio Manager
<PAGE>
(Jay C. Harbeck)
Jay C. Harbeck
Vice President and Portfolio Manager
(Gregory Mark Maunz)
Gregory Mark Maunz
Vice President and Portfolio Manager
(Joel Heymsfeld)
Joel Heymsfeld
Vice President and Portfolio Manager
September 12, 1995
PERFORMANCE DATA
About Fund
Performance
Investors are able to purchase shares of the Program through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 5.25% and bear no ongoing distribution or account
maintenance fees for Fundamental Value and Global Opportunity
Portfolios. Quality Bond and US Government Securities Portfolios
incur a maximum initial sales charge (front-end load) of 4% and bear
no ongoing distribution or account maintenance fees. Class A Shares
are available only to eligible investors.
<PAGE>
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year for Fundamental Value,
Global Opportunity, Quality Bond and US Government Securities
Portfolios. In addition, Quality Bond and US Government Securities
Portfolios are subject to a distribution fee of 0.50% and an account
maintenance fee of 0.25%. Fundamental Value and Global Opportunity
Portfolios are subject to a 0.75% distribution fee and a 0.25%
account maintenance fee. Fundamental Value and Global Opportunity
Portfolios automatically convert to Class D Shares after
approximately 8 years. Quality Bond and US Government Securities
Portfolios automatically convert to Class D Shares after
approximately 10 years.
* Class C Shares are subject to a distribution fee of 0.55% and an
account maintenance fee of 0.25% for Quality Bond and US Government
Securities Portfolios. Fundamental Value and Global Opportunity
Portfolios are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. In addition, Class C Shares are subject to
a 1% contingent deferred sales charge if redeemed within one year of
purchase.
* Class D Shares incur a maximum initial sales charge of 5.25% and
an account maintenance fee of 0.25% (but no distribution fee) for
Fundamental Value and Global Opportunity Portfolios. Quality Bond
and US Government Securities Portfolios incur a maximum initial
sales charge of 4% and an account maintenance fee of 0.25% (but no
distribution fee).
"Aggregate Total Return" tables for all of the Program's shares are
presented below and on pages 7 and 8. Performance data for all of
the Program's shares are also presented in the "Recent Performance
Results" table on pages 8 and 9.
The "Recent Performance Results" table shows investment results
before the deduction of any sales charges for Class A, Class B,
Class C and Class D Shares for the since inception and 3-month
periods ended July 31, 1995. All data in this table assume
imposition of the actual total expenses incurred by each class of
shares during the relevant period.
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. Dividends paid to each class
of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
<PAGE>
Aggregate
Total Returns
Fundamental Value Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Inception (2/01/95) to 6/30/95 +12.70% + 6.78%
[FN]
*Maximum sales charge is 5.25%
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Inception (2/01/95) to 6/30/95 +12.20% + 8.20%
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Inception (2/01/95) to 6/30/95 +12.20% +11.20%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Inception (2/01/95) to 6/30/95 +12.50% + 6.59%
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Global Opportunity Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Inception (2/01/95) to 6/30/95 + 4.70% - 0.80%
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Inception (2/01/95) to 6/30/95 + 4.20% + 0.20%
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Inception (2/01/95) to 6/30/95 + 4.20% + 3.20%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Inception (2/01/95) to 6/30/95 + 4.50% - 0.99%
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Quality Bond Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Inception (2/01/95) to 6/30/95 + 2.24% - 1.85%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Inception (2/01/95) to 6/30/95 + 1.82% - 2.17%
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Inception (2/01/95) to 6/30/95 + 1.80% + 0.80%
<PAGE>
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Inception (2/01/95) to 6/30/95 + 2.15% - 1.94%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
PERFORMANCE DATA (concluded)
Aggregate
Total Returns
(concluded)
US Government Securities Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Inception (2/01/95) to 6/30/95 + 8.48% + 4.14%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Inception (2/01/95) to 6/30/95 + 8.14% + 4.14%
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Inception (2/01/95) to 6/30/95 + 8.12% + 7.12%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Inception (2/01/95) to 6/30/95 + 8.33% + 3.99%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<PAGE>
<TABLE>
Recent
Performance
Results*
<CAPTION>
Since Standardized
Inception 3 Month 30-day Yield
7/31/95 4/30/95 Inception++ % Change++ % Change As of 7/31/95
<S> <C> <C> <C> <C> <C> <C>
Fundamental Value Portfolio Class A Shares $11.61 $10.73 $10.00 +16.10% + 8.20% --
Fundamental Value Portfolio Class B Shares 11.55 10.70 10.00 +15.50 + 7.94 --
Fundamental Value Portfolio Class C Shares 11.55 10.70 10.00 +15.50 + 7.94 --
Fundamental Value Portfolio Class D Shares 11.59 10.72 10.00 +15.90 + 8.12 --
Global Opportunity Portfolio Class A Shares 10.82 10.30 10.00 + 8.20 + 5.05 --
Global Opportunity Portfolio Class B Shares 10.76 10.27 10.00 + 7.60 + 4.77 --
Global Opportunity Portfolio Class C Shares 10.76 10.27 10.00 + 7.60 + 4.77 --
Global Opportunity Portfolio Class D Shares 10.81 10.29 10.00 + 8.10 + 5.05 --
Quality Bond Portfolio Class A Shares 9.86 10.00 10.00 - 1.40 - 1.40 6.06%
Quality Bond Portfolio Class B Shares 9.86 9.99 10.00 - 1.40 - 1.30 5.55
Quality Bond Portfolio Class C Shares 9.86 9.99 10.00 - 1.40 - 1.30 5.50
Quality Bond Portfolio Class D Shares 9.86 9.99 10.00 - 1.40 - 1.30 5.81
US Government Securities Portfolio Class A Shares 10.47 10.21 10.00 + 4.70 + 2.55 6.65
US Government Securities Portfolio Class B Shares 10.47 10.21 10.00 + 4.70 + 2.55 6.17
US Government Securities Portfolio Class C Shares 10.46 10.21 10.00 + 4.60 + 2.45 6.13
US Government Securities Portfolio Class D Shares 10.47 10.21 10.00 + 4.70 + 2.55 6.41
Fundamental Value Portfolio Class A Shares--Total Return +16.10 + 8.20
Fundamental Value Portfolio Class B Shares--Total Return +15.50 + 7.94
Fundamental Value Portfolio Class C Shares--Total Return +15.50 + 7.94
Fundamental Value Portfolio Class D Shares--Total Return +15.90 + 8.12
Global Opportunity Portfolio Class A Shares--Total Return + 8.20 + 5.05
Global Opportunity Portfolio Class B Shares--Total Return + 7.60 + 4.77
Global Opportunity Portfolio Class C Shares--Total Return + 7.60 + 4.77
Global Opportunity Portfolio Class D Shares--Total Return + 8.10 + 5.05
Quality Bond Portfolio Class A Shares--Total Return + 1.51(1) + 0.08(2)
Quality Bond Portfolio Class B Shares--Total Return + 1.13(3) + 0.07(4)
Quality Bond Portfolio Class C Shares--Total Return + 1.10(5) + 0.05(6)
Quality Bond Portfolio Class D Shares--Total Return + 1.40(7) + 0.21(8)
US Government Securities Portfolio Class A Shares--Total Return + 8.64(9) + 4.37(10)
US Government Securities Portfolio Class B Shares--Total Return + 8.24(11) + 4.16(12)
US Government Securities Portfolio Class C Shares--Total Return + 8.10(13) + 4.04(14)
US Government Securities Portfolio Class D Shares--Total Return + 8.47(15) + 4.31(16)
<PAGE>
<FN>
++The Program commenced operations on 2/01/95.
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
(1)Percent change includes reinvestment of $0.271 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.148 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.233 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.127 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.230 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.125 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.260 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.142 per share ordinary
income dividends.
(9)Percent change includes reinvestment of $0.363 per share ordinary
income dividends.
(10)Percent change includes reinvestment of $0.186 per share
ordinary income dividends.
(11)Percent change includes reinvestment of $0.324 per share
ordinary income dividends.
(12)Percent change includes reinvestment of $0.165 per share
ordinary income dividends.
(13)Percent change includes reinvestment of $0.321 per share
ordinary income dividends.
(14)Percent change includes reinvestment of $0.163 per share
ordinary income dividends.
(15)Percent change includes reinvestment of $0.346 per share
ordinary income dividends.
(16)Percent change includes reinvestment of $0.180 per share
ordinary income dividends.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS
(in US dollars)
<CAPTION>
Fundamental Value Portfolio
LATIN Value Percent of
AMERICA Industries Shares Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Argentina Oil--International 8,000 Yacimientos Petroliferos
Fiscales S.A. (Sponsored)
(ADR)* $ 142,635 $ 139,000 0.6%
Total Investments in Argentina 142,635 139,000 0.6
Total Investments in
Latin America 142,635 139,000 0.6
NORTH
AMERICA
United States Aerospace 60,000 Aviall, Inc. 449,110 495,000 2.2
Automotive 9,000 Ford Motor Co. 236,320 259,875 1.2
6,000 General Motors Corp. 246,183 292,500 1.3
------------ ------------ ------
482,503 552,375 2.5
Auto-Related 35,000 ++National Auto Credit, Inc. 376,181 511,875 2.3
Banking 15,000 Bankers Trust New York Corp. 955,408 967,500 4.4
Capital Goods 5,000 Eaton Corp. 259,915 279,375 1.3
Chemicals 10,000 Union Carbide Corp. 294,130 347,500 1.6
Environmental 92,400 ++Allwaste, Inc. 510,654 519,750 2.3
Services
Financial Services 8,000 Student Loan Marketing
Association 284,105 431,000 1.9
Foods/Food 10,000 General Mills, Inc. 512,742 522,500 2.3
Processing
Hotels 20,000 ++John Q. Hammons Hotels, Inc. 284,843 312,500 1.4
Information 30,000 ++Tandem Computers, Inc. 373,050 393,750 1.8
Processing 40,000 ++Unisys Corp. 381,425 355,000 1.6
------------ ------------ ------
754,475 748,750 3.4
<PAGE>
Insurance 10,000 TIG Holdings, Inc. 206,305 247,500 1.1
Medical Services 75,000 Applied Bioscience
International, Inc. 388,612 356,250 1.6
15,000 ++Foundation Health Corp. 464,225 513,750 2.3
------------ ------------ ------
852,837 870,000 3.9
Metals-- 11,700 ASARCO Inc. 289,412 371,475 1.7
Non-Ferrous
Oil Refiners 50,000 Total Petroleum of
North America Ltd. 588,173 581,250 2.6
Oil--Related 30,000 ++Tetra Tech., Inc. 364,150 360,000 1.6
Oil/Gas Producers 55,000 ++Swift Energy Co. 472,649 481,250 2.2
Paper & Forest 5,000 International Paper Co. 367,664 422,500 1.9
Products
Pharmaceuticals 5,000 Bristol-Myers Squibb Co. 316,560 346,250 1.6
Real Estate 20,000 Bay Apartment Communities, Inc. 356,450 397,500 1.8
Investment Trust 20,000 Camden Property Trust 450,612 417,500 1.9
20,000 Evans Withycombe Residential,
Inc. 404,875 385,000 1.7
15,000 Simon Property Group, Inc. 357,555 367,500 1.7
------------ ------------ ------
1,569,492 1,567,500 7.1
Restaurants 30,000 Darden Restaurants, Inc. 329,558 326,250 1.5
Retail 25,000 Dillard Department Stores, Inc. 682,325 775,000 3.5
25,000 Kmart Corp. 326,500 393,750 1.8
------------ ------------ ------
1,008,825 1,168,750 5.3
Retail--Specialty 25,000 The Limited, Inc. 517,323 512,500 2.3
Savings & Loans 20,000 Bay View Capital Corp. 482,500 495,000 2.2
54,000 Greater New York Savings Bank 504,892 567,000 2.6
20,000 Washington Mutual Savings Bank 417,984 472,500 2.1
------------ ------------ ------
1,405,376 1,534,500 6.9
Steel 10,000 USX-US Steel Group 308,255 331,250 1.5
30,000 ++WHX Corp. 327,870 360,000 1.6
------------ ------------ ------
636,125 691,250 3.1
<PAGE>
Technology 75,000 ++Micronics Computers, Inc. 370,369 290,625 1.3
10,000 ++Storage Technology Corp. 193,370 256,250 1.2
25,000 ++Syquest Technology, Inc. 298,575 409,375 1.8
20,000 ++Western Digital Corp. 339,928 387,500 1.7
------------ ------------ ------
1,202,242 1,343,750 6.0
Telecommunications 20,000 MCI Communications Corp. 436,950 477,500 2.1
Textiles & Apparel 25,000 ++Burlington Industries, Inc. 281,265 312,500 1.4
12,000 Liz Claiborne, Inc. 201,470 274,500 1.2
------------ ------------ ------
482,735 587,000 2.6
Utilities 5,000 Texas Utilities Co. 165,435 169,375 0.8
Total Investments in the
United States 16,375,877 17,746,725 79.9
Total Investments in
North America 16,375,877 17,746,725 79.9
WESTERN
EUROPE
United Conglomerates 25,000 ++ADT Ltd. (ADR)* 283,600 300,000 1.4
Kingdom
Total Investments in the
United Kingdom 283,600 300,000 1.4
Total Investments in
Western Europe 283,600 300,000 1.4
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Fundamental Value Portfolio
SHORT-TERM Face Value Percent of
SECURITIES Amount Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Commercial Paper** $ 917,000 General Electric Capital Corp.,
5.80% due 8/01/1995 $ 917,000 $ 917,000 4.1%
US Government & 1,200,000 Federal Home Loan Bank,
Agency 5.66% due 8/28/1995 1,194,906 1,194,906 5.4
Obligations** Federal Home Loan Mortgage
Corp.:
200,000 5.81% due 8/03/1995 199,935 199,935 0.9
200,000 5.61% due 8/09/1995 199,751 199,751 0.9
Federal National Mortgage
Association:
200,000 5.62% due 8/11/1995 199,688 199,688 0.9
1,200,000 5.62% due 8/25/1995 1,195,504 1,195,504 5.4
300,000 5.63% due 9/08/1995 298,217 298,217 1.3
------------ ------------ ------
3,288,001 3,288,001 14.8
Total Investments in
Short-Term Securities 4,205,001 4,205,001 18.9
Total Investments $ 21,007,113 22,390,726 100.8
============
Liabilities in Excess of Other Assets (188,730) (0.8)
------------ ------
Net Assets $ 22,201,996 100.0%
============ ======
<FN>
*American Depositary Receipts (ADR).
**Commercial Paper and certain US Government & Agency Obligations
are traded on a discount basis; the interest rates shown are the
rates paid at the time of purchase by the Portfolio.
++Non-income producing security.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Global Opportunity Portfolio
Value Percent of
COUNTRY Industries Shares Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Canada Cellular US$ 100,000 Rogers Communication, Inc.,
Telephones 10.875% due 4/15/2004 $ 100,250 $ 103,625 0.5%
Conglomerates 200,000 Sherritt Gordon Ltd., 9.75%
due 4/01/2003 192,500 200,000 0.9
Financial Services 100,000 Groupe L'TEE Videotron, 10.625%
due 2/15/2005 99,375 106,500 0.5
Industrial 100,000 Gulf Canada Resources, Ltd.,
9.25% due 1/15/2004 95,000 99,750 0.5
United Broadcasting & 125,000 The Katz Corp., 12.75% due
States Publishing 11/15/2002 129,625 135,625 0.6
Building & 100,000 Del E. Webb Corporation, 9.75%
Construction due 3/01/2003 86,000 97,500 0.4
Cellular Telephones 200,000 Dial Page, Inc., 12.25% due
2/15/2000 205,375 217,000 1.0
Chemicals 205,000 G-I Holdings Inc., 3.88% due
10/01/1998 (a) 143,473 145,550 0.7
Communications 300,000 Panamsat L.P., 11.10% due
8/01/2003 (a) 212,748 220,500 1.0
Consumer Products 280,000 Coleman Holdings, Inc., 22.54%
due 5/27/1998 (a) 208,659 214,200 1.0
Cosmetics 100,000 Revlon Consumer Products Corp.,
9.375% due 4/01/2001 89,975 98,000 0.4
Energy 250,000 Oleoducts Central S.A., 9.35%
due 9/01/2005 250,000 247,500 1.2
Entertainment 100,000 Marvel III Holdings, Inc.,
9.125% due 2/15/1998 93,500 92,000 0.4
Financial 100,000 Reliance Group Holdings, Inc.,
Services 9.75% due 11/15/2003 93,250 98,000 0.4
Health Care 100,000 Tenet Healthcare Corp., 10.125%
due 3/01/2005 100,000 106,000 0.5
Hotels 100,000 John Q. Hammons Hotels, Inc.,
8.875% due 2/15/2004 89,750 95,500 0.4
<PAGE>
Hotels & 200,000 Bally's Park Place Funding
Casinos Corp., 9.25% due 3/15/2004 182,000 192,000 0.9
100,000 Host Marriot Hospitality, Inc.,
9.50% due 5/15/2005 96,377 98,250 0.5
200,000 Trump Plaza Funding, Inc.,
10.875% due 6/15/2001 177,500 190,000 0.9
------------ ------------ ------
455,877 480,250 2.3
Industrial 100,000 Repap Wisconsin, Inc., 9.25%
due 2/01/2002 89,500 99,250 0.5
Industrial-- 100,000 ++TransTexas Gas Corp., 11.50%
Energy due 6/15/2002 100,000 104,000 0.5
Metal & Mining 50,000 Kaiser Aluminum & Chemical
Corp., 12.75% due 2/01/2003 52,250 55,375 0.3
Steel 100,000 WCI Steel, Inc., 10.50% due
3/01/2002 97,000 99,250 0.5
Transport Services 100,000 Eletson Holdings, Inc., 9.25%
due 11/15/2003 94,360 96,000 0.4
Transportation 100,000 Viking Star Shipping Co.,
9.625% due 7/15/2003 96,000 99,250 0.5
Utilities 100,000 Beaver Valley Funding Co.,
8.625% due 6/01/2007 82,000 87,554 0.4
100,000 CTC Mansfield Funding Corp.,
11.125% due 9/30/2016 98,750 102,319 0.5
200,000 Maxus Energy Corp., 9.875%
due 10/15/2002 182,250 193,000 0.9
------------ ------------ ------
363,000 382,873 1.8
Total Investments in
Corporate Bonds 3,537,467 3,693,498 17.2
Foreign Government &
Agency Obligations
Germany 1,200,000 Bundes Obligations, 7.375%
due 1/03/2005 883,418 898,980 4.2
<PAGE>
United 300,000 UK Treasury Gilt, 8% due
Kingdom 6/10/2003 467,880 475,559 2.2
Total Investments in
Foreign Government &
Agency Obligations 1,351,298 1,374,539 6.4
Foreign Obligations
Canada C$ 500,000 National Bank of Canada,
7.25% due 6/01/2003 354,827 341,676 1.6
Italy Lit 300,000,000 Buoni Poliennali del Tesoro,
10% due 8/01/2003 165,110 172,404 0.8
Total Investments in
Foreign Obligations 519,937 514,080 2.4
Total Investments in
Corporate Bonds,
Foreign Government & Agency
& Foreign Obligations 5,408,702 5,582,117 26.0
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Global Opportunity Portfolio
Shares Value Percent of
COUNTRY Industries Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
United Aerospace & 2,500 United Technologies Corporation $ 174,847 $ 210,000 1.0%
States Defense
Agriculture 11,200 Archer-Daniels-Midland Co. 210,109 184,800 0.9
Automobile Parts 4,500 Stewart & Stevenson Services,
Inc. 160,797 171,000 0.8
Automobiles 5,400 Ford Motor Co. 144,378 155,925 0.7
Capital Goods 7,500 Keystone International, Inc. 136,220 157,500 0.7
<PAGE>
Chemicals 5,100 Nalco Chemical Company 175,132 181,688 0.8
3,800 Shanghai Petrochemical Co., Ltd. 95,266 120,650 0.6
----------- ----------- ------
270,398 302,338 1.4
Commercial-- 6,500 Kelly Services, Inc. 199,275 177,125 0.8
Services
Conglomerates 265 US Industries Inc. 3,642 3,809 0.0
Consumer-- 3,000 Whirlpool Corporation 173,678 173,250 0.8
Durables
Hardware Products 4,500 Stanley Works (The) 180,743 178,313 0.8
Hospital Supplies 5,000 Abbott Laboratories 185,467 200,000 0.9
Industrial 6,500 Comsat Corporation 119,518 150,313 0.7
Insurance 10,000 Humana Inc. 212,450 193,750 0.9
Machinery 5,000 Ingersoll-Rand Company 189,675 208,750 1.0
Manufacturing 5,000 Fisher Scientific
International Inc. 156,974 164,375 0.8
Natural Resources 10,800 Canadian Pacific Limited 165,958 193,050 0.9
Office--Related 3,900 Pitney Bowes, Inc. 136,850 156,487 0.7
Oil Service 6,500 Dresser Industries, Inc. 132,353 149,500 0.7
1,800 Schlumberger Ltd., Inc. 95,976 120,600 0.6
----------- ----------- ------
228,329 270,100 1.3
Oil--Integrated 5,500 Phillips Petroleum Company 180,292 194,562 0.9
Pharmaceuticals 3,100 Merck & Co., Inc. 128,460 160,037 0.7
Photography 2,900 Eastman Chemical Co. 159,485 185,600 0.9
3,000 Eastman Kodak Company 160,085 172,875 0.8
----------- ----------- ------
319,570 358,475 1.7
Pollution 3,900 General Slgnal Corporation 141,699 143,812 0.7
Control 9,000 Wheelabrator Technologies Inc. 140,505 149,625 0.7
----------- ----------- ------
282,204 293,437 1.4
Publishing 2,700 Gannett Co., Inc. 143,295 147,825 0.7
<PAGE>
Telecommunications 2,600 Bell Atlantic Corporation 140,051 148,850 0.7
4,100 GTE Corporation 139,325 145,550 0.7
4,800 Northern Telecom Limited 171,686 180,600 0.8
----------- ----------- ------
451,062 475,000 2.2
Utilities-- 3,700 AT&T Corp. 191,509 195,175 0.9
Communications
Utilities-- 8,600 California Energy Company, Inc. 144,821 164,475 0.8
Electric
Total Investments in
United States Stocks 4,890,521 5,239,871 24.4
Foreign Stocks
Argentina Banking 5,000 Banco Frances del Rio de
la Plata S.A. 80,350 105,000 0.5
Oil & Gas 4,700 Yacimientos Petroliferos
Producers Fiscales S.A.(Sponsored) (ADR)** 98,394 81,662 0.4
Australia Banking 12,000 National Australia Bank Limited 102,479 98,080 0.5
Multi-Industry 40,000 Pacific Dunlop Ltd. 93,681 93,410 0.4
Chile Banking 5,500 Banco O'Higgins S.A. 101,392 116,875 0.5
France Building & 800 Compagnie de Saint-Gobain 94,832 106,551 0.5
Construction
Communication 1,700 Alcatel Alsthom 148,786 180,495 0.8
Equipment
Oil-- 2,600 Schneider S.A. -- 108,351 0.5
International 1,300 Schneider S.A. 102,933 -- 0.0
3,300 TOTAL S.A. (ADR)** 94,281 102,712 0.5
----------- ----------- ------
197,214 211,063 1.0
<PAGE>
Germany Electronics 300 Siemens AG 143,480 158,609 0.7
Machinery & 450 Mannesmann AG 127,844 150,402 0.7
Equipment 500 Thyssen AG 92,087 104,219 0.5
----------- ----------- ------
219,931 254,621 1.2
Multi-Industry 300 Preussag AG 91,752 95,969 0.4
Hong Kong Multi-Industry 14,000 Swire Pacific Ltd. (Class A) 96,152 109,467 0.5
Real Estate 17,000 Sun Hung Kai Properties, Ltd. 104,273 127,981 0.6
Utilities-Electric 19,000 China Light & Power Co., Ltd. 93,942 99,205 0.5
Indonesia Telecommunications 3,000 P.T. Indonesian Satellite
(ADR)** 95,430 112,500 0.5
Italy Building 24,000 Italcementi S.p.A. 93,046 77,514 0.4
Materials
Telecommunications 50,000 Societa Finanziara Telefonica
S.p.A. (STET) 146,511 157,235 0.7
Japan Banking & 6,000 Sanwa Bank, Ltd. 121,129 128,805 0.6
Financial
Building & 12,000 Maeda Corp. 133,874 139,028 0.6
Construction 15,000 Okumura Corp. 134,507 141,924 0.7
----------- ----------- ------
268,381 280,952 1.3
Building 11,000 Asahi Glass Co., Ltd. 131,493 129,941 0.6
Materials
Capital Goods 17,000 Hitachi Cable Ltd. 129,552 117,015 0.5
14,000 Mitsubishi Heavy
Industries, Ltd. 94,894 101,295 0.5
----------- ----------- ------
224,446 218,310 1.0
Chemicals 8,000 Sekisui Chemical Co., Ltd. 99,347 96,320 0.5
Construction & 9,000 Kandenko Co., Ltd. 121,387 117,560 0.5
Housing
Consumer-- 3,000 Rohm Company Ltd. 141,942 170,718 0.8
Electronics
Diversified 8,000 Tokyo Style Co., Ltd. 120,819 122,672 0.6
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Global Opportunity Portfolio
Shares Value Percent of
COUNTRY Industries Held Foreign Stocks Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Japan Electronics 1,000 Kyocera Corporation $ 75,152 $ 86,552 0.4%
(concluded)
6,000 Makita Electric Work Ltd. 91,149 94,730 0.4
8,000 Matsushita Electric Industrial
Co., Ltd. 116,780 133,576 0.6
19,000 Mitsubishi Electric Corp. 137,527 140,925 0.7
9,000 Sharp Corp. 140,675 131,872 0.6
----------- ----------- ------
561,283 587,655 2.7
Financial Services 6,000 Mitsubishi Trust and Banking
Corp. 102,035 108,360 0.5
Food Processing 5,000 Yamazaki Baking Co., Ltd. 89,111 97,115 0.5
Industrial 6,000 Toto Ltd. 91,919 92,685 0.4
Insurance 15,000 Nippon Fire & Marine Insurance
Co., Ltd. 93,756 91,663 0.4
20,000 Nippon Oil Co., Ltd. 121,398 124,943 0.6
9,000 Tokio Marine & Fire Insurance
Co., Ltd. 97,273 107,338 0.5
----------- ----------- ------
312,427 323,944 1.5
Machinery 13,000 Komatsu Ltd. 103,087 106,168 0.5
2,000 SMC Corporation 98,090 121,763 0.6
----------- ----------- ------
201,177 227,931 1.1
Photography 6,000 Canon Inc. 88,100 109,041 0.5
Printing & 7,000 Dai Nippon Printing Co., Ltd. 112,301 112,903 0.5
Publishing
Retail Stores 2,000 Ito-Yokado Co., Ltd. 92,743 110,632 0.5
<PAGE>
Textiles 15,000 Toray Industries Inc. 95,214 95,411 0.4
Trading 11,000 Kamigumi Co., Ltd. 91,627 104,328 0.5
13,000 Sumitomo Corp. 124,539 130,679 0.6
----------- ----------- ------
216,166 235,007 1.1
Malaysia Automotive & 39,000 UMW Holdings BHD 98,720 125,422 0.6
Equipment
Building 18,000 Hong Leong Industries BHD 93,277 112,843 0.5
Materials
Mexico Capital Goods 44,000 Cementos Mexicanos, S.A. de
C.V. (Cemex) 131,719 180,753 0.8
Telecommunications 8,000 Empresas ICA Sociedad Controladora,
S.A. de C.V. (ADR)** 92,223 75,000 0.4
Utilities-- 3,000 Telefonos de Mexico, S.A. de
Communications C.V. (ADR)** 86,460 99,000 0.5
Netherlands Oil-- 1,300 Royal Dutch Petroleum N.V. (ADR)** 153,715 165,100 0.8
International
Norway Shipplng 3,500 Kvaerner A.S. (CIass B) 156,837 162,977 0.8
Philippines Telecommunications 2,000 Philippine Long Distance
Telephone Co. (ADR)** 141,453 138,750 0.6
Portugal Banking 10,000 Banco Comercial Portugues
(B.C.P.) (ADR)** 137,375 132,500 0.6
Singapore Machinery 12,000 Jurong Shipyard Ltd. 96,693 90,452 0.4
Shipping 75,000 Neptune Orient Lines Ltd. 93,990 89,375 0.4
Spain Petroleum 4,800 Repsol S.A. 143,703 160,200 0.7
<PAGE>
Sweden Engineering & 5,500 SKF AB 'B' Free 98,567 123,262 0.6
Construction
Switzerland Building & 125 Holderbank Financiere
Construction Glarus AG (Bearer) 92,109 102,641 0.5
Building Materials 625 Holderbank Financiere Glarus AG -- 844 0.0
Electrical Equipment 150 BBC Brown Boveri & Cie (Bearer) 140,031 158,342 0.7
Machinery 200 Sulzer Gebrueder AG 115,432 124,651 0.6
Thailand Real Estate 30,000 MDX Company Ltd. 89,321 75,167 0.4
United Building 4,000 Grand Metropolitan PLC (ADR)** 94,780 97,500 0.5
Kingdom Materials
Business Services 9,000 GKN PLC 92,846 104,125 0.5
52,000 Lucas Industries PLC (Ordinary) 158,646 156,436 0.7
----------- ----------- ------
251,492 260,561 1.2
Chemicals 2,200 Imperial Chemical Industries PLC 100,782 110,825 0.5
Conglomerates 9,300 Hanson PLC (Sponsored) (ADR)** 164,668 160,425 0.7
Electrical 20,000 General Electric Co. PLC
Equipment (Ordinary) 97,276 97,132 0.5
Telecommunications 2,000 British Telecommunications
PLC (ADR)** 127,640 127,250 0.6
Utilities--Gas 1,900 British Gas PLC (ADR)** 92,758 88,825 0.4
Total Investments in
Foreign Stocks 8,084,086 8,611,996 40.0
SHORT-TERM Face
SECURITIES Amount Short-Term Securities
Commercial US$ 479,000 General Electric Capital Corp.,
Paper*** 5.80% due 8/01/1995 479,000 479,000 2.2
<PAGE>
US Government & 1,500,000 Federal National Mortgage
Agency Association, 5.63% due 8/10/1995 1,497,889 1,497,889 7.0
Obligations***
Total Investments in
Short-Term Securities 1,976,889 1,976,889 9.2
Total Investments $20,360,198 21,410,873 99.6
===========
Unrealized Appreciation on
Forward Foreign Exchange Contracts++++ 7,997 0.1
Other Assets Less Liabilities 71,099 0.3
----------- ------
Net Assets $21,489,969 100.0%
=========== ======
<FN>
*Denominated in US dollars unless otherwise indicated.
**American Depositary Receipts (ADR).
***Commercial Paper and certain US Government & Agency Obligations
are traded on a discount basis; the interest rates shown are the
discount rates paid at the time of purchase by the Portfolio.
(a)Represents a zero coupon or step bond; the interest rate shown is
the effective yield at the time of purchase.
++Non-income producing security.
++++Forward foreign exchange contracts sold as of July 31, 1995
were as follows:
Foreign Expiration Unrealized
Currency Sold Date Appreciation (Note 1a)
YEN 100,660,000 January 1996 $7,997
Total Unrealized Appreciation on Forward
Foreign Exchange Contracts Sold
(US$ Commitment--$1,171,244) $7,997
======
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Quality Bond Portfolio
S&P Moody's Face Value
INDUSTRIES Ratings Ratings Amount Bonds & Notes Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Banking--3.3% A- A3 $ 150,000 First Bank System, Inc., 7.625%
due 5/01/2005 $ 158,753 $ 155,555
Financial A A2 150,000 Dean Witter, Discover & Co., 6.50% due
Services--9.3% 11/01/2005 146,831 141,845
BBB+ A3 150,000 General Motors Acceptance Corp., 7.85%
due 3/05/1997 153,815 153,437
A- A3 150,000 Smith Barney Holdings, 6.875% due
6/15/2005 148,485 144,354
---------- ----------
449,131 439,636
Foreign A A2 115,000 Kingdom of Thailand, 8.25% due
Government 3/15/2002 124,737 122,115
Obligations--4.7% A+ A2 100,000 Pohang Iron & Steel Company, Ltd.,
7.375% due 5/15/2005 101,816 100,436
---------- ----------
226,553 222,551
Industrial-- A- A2 150,000 American Home Products Corporation,
Consumer 7.90% due 2/15/2005 162,417 159,170
Goods--10.2% AA- A1 100,000 Anheuser-Busch Co., Inc., 8.75% due
12/01/1999 107,905 108,460
A+ A1 100,000 Bass America, Inc., 8.125% due
3/31/2002 105,928 106,371
BBB A2 100,000 Sears, Roebuck & Co., 9.25% due
4/15/1998 106,444 106,620
---------- ----------
482,694 480,621
Industrial-- AA- A1 175,000 BP America Inc., 9.375% due
Energy--8.4% 11/01/2000 200,263 196,420
A+ A1 175,000 Texaco Capital Inc., 8.625% due
11/15/2031 205,665 197,675
---------- ----------
405,928 394,095
<PAGE>
Industrial-- AA- Aa3 150,000 Capital Cities/ABC, Inc., 8.75%
Other--6.9% due 8/15/2021 176,105 169,562
A- A3 150,000 Carnival Cruise Lines, Inc.,
7.70% due 7/15/2004 156,745 154,209
---------- ----------
332,850 323,771
Supranational-- AAA Aaa 166,000 International Bank for Reconstruction
4.6% & Development, 12.375% due
10/15/2002 222,483 218,497
US Government US Treasury Notes:
Obligations--20.4% AAA Aaa 250,000 6.125% due 7/31/2000 249,522 249,647
AAA Aaa 250,000 6.375% due 8/15/2002 256,250 250,155
AAA Aaa 350,000 6.50% due 5/15/2005 359,297 351,585
AAA Aaa 100,000 7.50% due 11/15/2024 110,562 107,703
---------- ----------
975,631 959,090
Utilities-- A A2 150,000 Virginia Electric & Power Co.,
Electric-- 8.625% due 10/01/2024 166,200 162,176
3.4%
Total Investments in
Bonds & Notes--71.2% 3,420,223 3,355,992
SHORT-TERM
SECURITIES Issue
Commercial 133,000 General Electric Capital Corp.,
Paper*--2.8% 5.80% due 8/01/1995 133,000 133,000
US Government 1,100,000 US Treasury Bills, 5.35% due
Obligations*-- 8/24/1995 1,096,240 1,096,240
23.2%
Total Investments in
Short-Term Securities--26.0% 1,229,240 1,229,240
Total Investments--97.2% $4,649,463 4,585,232
==========
Other Assets Less Liabilities--2.8% 130,300
----------
Net Assets--100.0% $4,715,532
==========
<PAGE>
<FN>
*Commercial Paper and certain US Government Obligations are traded
on a discount basis; the interest rates shown are the discount rates
paid at the time of purchase by the Portfolio.
See Notes to Financial Statements.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
US Government Securities Portfolio
Face Interest Maturity Value
Issue Amount Rate Date (Note 1a)
<S> <S> <C> <C> <C> <C>
US Government & US Treasury Notes $ 900 6.875% 3/21/2000 $ 924
Agency Obliga- US Treasury Notes 230 7.875 11/15/2004 252
tions-- 15.1%
Total US Government & Agency Obligations (Cost--$1,127) 1,176
US Government & Federal Home Loan Mortgage Corporation 2,235 11.50 6/01/2019 2,454
Agency Federal Home Loan Mortgage Corporation 2,173 7.00 4/01/2024 2,121
Mortgage-Backed Federal Home Loan Mortgage Corporation 812 7.00 6/01/2024 792
Obligations*--
69.0%
Total US Government & Agency Mortgage-Backed Obligations (Cost--$5,371) 5,367
Face
Amount Issue
Repurchase $ 875 Nikko Securities Company, purchased on 7/31/1995 to yield 5.85% to 8/01/1995 875
Agreement**--
11.2%
Total Repurchase Agreement (Cost--$875) 875
<PAGE>
Total Investments (Cost--$7,373)--95.3% 7,418
Other Assets Less Liabilities--4.7% 365
--------
Net Assets--100.0% $ 7,783
========
<FN>
*Mortgage-Backed Obligations are subject to principal paydowns as a
result of prepayments or refinancing of the underlying mortgage
instruments. As a result, the average life may be substantially less
than the original maturity.
**Repurchase Agreement is fully collateralized by US Government &
Agency Obligations.
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
<CAPTION>
US
Fundamental Global Quality Government
Value Opportunity Bond Securities
As of July 31, 1995 Portfolio Portfolio Portfolio Portfolio
<S> <S> <C> <C> <C> <C>
Assets: Investments, at value* (Note la) $22,390,726 $21,410,873 $ 4,585,232 $ 7,418,428
Foreign cash (Note 1c) -- 6,479 -- --
Cash -- -- 249,891 35,847
Unrealized appreciation on forward
foreign exchange contracts (Note 1b) -- 7,997 -- --
Receivables:
Capital shares sold. 157,616 90,866 33,903 151,635
Interest -- 148,835 66,491 85,363
Securities sold 258,444 -- -- --
Investment adviser (Note 2) -- -- 25,192 66,949
Principal paydowns -- -- -- 35,909
Dividends 17,090 17,011 -- --
Deferred organization expenses (Note 1f) 34,848 80,070 20,614 44,032
Prepaid registration fees and other
assets (Note 1f) 50,000 50,000 39,173 84,546
----------- ----------- ----------- -----------
Total assets 22,908,724 21,812,131 5,020,496 7,922,709
----------- ----------- ----------- -----------
<PAGE>
Liabilities: Payables:
Capital shares redeemed. 449,667 109,607 401 138
Securities purchased 1,590 41,792 249,523 --
Investment adviser (Note 2) 14,767 16,166 -- --
Distributor (Note 2) 15,263 9,917 1,496 2,704
Dividends to shareholders (Note 1g) -- -- 8,583 14,946
Accrued expenses and other liabilities 225,441 144,680 44,961 121,692
----------- ----------- ----------- -----------
Total liabilities 706,728 322,162 304,964 139,480
----------- ----------- ----------- -----------
Net Assets: Net assets $22,201,996 $21,489,969 $ 4,715,532 $ 7,783,229
=========== =========== =========== ===========
Net Assets Class A Common Stock, $0.10 par
Consist of: value++ $ 17,313 $ 79,585 $ 20,660 $ 51,863
=========== =========== =========== ===========
Class B Common Stock, $0.10 par
value++++. 119,212 87,538 19,841 15,821
=========== =========== =========== ===========
Class C Common Stock, $0.10 par
value++++++. 42,201 24,154 5,759 5,791
=========== =========== =========== ===========
Class D Common Stock, $0.10 par
value++++++++. 13,400 7,887 1,562 892
=========== =========== =========== ===========
Paid-in capital in excess of par. 20,028,610 19,932,896 4,731,271 7,431,973
=========== =========== =========== ===========
Undistributed investment income--net 76,538 231,283 -- --
=========== =========== =========== ===========
Undistributed realized capital
gains on investments and foreign
currency transactions--net 521,109 67,402 670 231,391
=========== =========== =========== ===========
Unrealized appreciation
(depreciation) on investments
and foreign currency
transactions--net 1,383,613 1,059,224 (64,231) 45,498
=========== =========== =========== ===========
Net assets $22,201,996 $21,489,969 $ 4,715,532 $ 7,783,229
=========== =========== =========== ===========
<PAGE>
Net Asset Value: Class A:
Net assets $ 2,009,904 $ 8,614,747 $ 2,037,774 $ 5,428,082
=========== =========== =========== ===========
Shares outstanding 173,132 795,846 206,600 518,635
=========== =========== =========== ===========
Net asset value and
redemption price per share $ 11.61 $ 10.82 $ 9.86 $ 10.47
=========== =========== =========== ===========
Class B:
Net assets $13,765,635 $ 9,422,995 $ 1,956,007 $ 1,655,798
=========== =========== =========== ===========
Shares outstanding 1,192,116 875,385 198,404 158,205
=========== =========== =========== ===========
Net asset value and
redemption price per share $ 11.55 $ 10.76 $ 9.86 $ 10.47
=========== =========== =========== ===========
Class C:
Net assets $ 4,872,813 $ 2,599,739 $ 567,710 $ 605,957
=========== =========== =========== ===========
Shares outstanding. 422,009 241,544 57,591 57,909
=========== =========== =========== ===========
Net asset value and
redemption price per share $ 11.55 $ 10.76 $ 9.86 $ 10.46
=========== =========== =========== ===========
Class D:
Net assets $ l,553,644 $ 852,488 $ 154,041 $ 93,392
=========== =========== =========== ===========
Shares outstanding 133,998 78,869 15,624 8,919
=========== =========== =========== ===========
Net asset value and redemption
price per share $ 11.59 $ 10.81 $ 9.86 $ 10.47
=========== =========== =========== ===========
<FN>
*Identified cost $21,007,113 $20,360,198 $ 4,649,463 $ 7,372,930
=========== =========== =========== ===========
++Authorized shares--Class A 6,250,000 6,250,000 6,250,000 6,250,000
=========== =========== =========== ===========
++++Authorized shares--Class B 6,250,000 6,250,000 6,250,000 6,250,000
=========== =========== =========== ===========
++++++Authorized shares--Class C 6,250,000 6,250,000 6,250,000 6,250,000
=========== =========== =========== ===========
++++++++Authorized shares--Class D 6,250,000 6,250,000 6,250,000 6,250,000
=========== =========== =========== ===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF OPERATIONS
<CAPTION>
US
Fundamental Global Quality Government
For the Period Value Opportunity Bond Securities
February 1, 1995++ to July 31, 1995 Portfolio Portfolio Portfolio Portfolio
<S> <S> <C> <C> <C> <C>
Investment Income Interest and discount earned* $ 128,329 $ 285,231 $ 104,522 $ 238,927
(Notes 1d & 1e): Dividends** 96,300 129,620 -- --
----------- ----------- ----------- -----------
Total income 224,629 414,851 104,522 238,927
----------- ----------- ----------- -----------
Expenses: Investment advisory fees (Note 2) 42,856 58,285 8,854 16,001
Account maintenance and distribution
fees--Class B (Note 2) 38,727 27,737 4,204 3,357
Printing and shareholder reports 12,075 23,416 6,926 21,485
Accounting services (Note 2) 11,004 20,537 6,152 17,111
Transfer agent fees--Class B (Note 2) 15,080 6,870 1,959 901
Transfer agent fees--Class A (Note 2) 4,378 8,912 4,054 4,035
Professional fees 4,183 8,058 2,044 6,297
Account maintenance and distribution
fees--Class C (Note 2) 11,704 6,579 1,262 994
Custodian fees. 4,953 6,581 4,141 3,418
Amortization of organization expenses
(Note 1f) 1,896 8,289 2,256 4,701
Registration fees (Note 1f) 10,368 751 1,183 3,433
Directors' fees and expenses 1,637 5,880 1,898 3,388
Transfer agent fees--Class C (Note 2) 4,806 1,780 577 280
Pricing fees (Note 2) 273 5,881 842 --
Transfer agent fees--Class D (Note 2) 1,465 381 131 38
Account maintenance fees--Class D (Note 2) 1,153 580 113 67
Other 1,966 3,200 646 1,975
----------- ----------- ----------- -----------
Total expenses before reimbursement 168,524 193,717 47,242 87,481
Reimbursement of expenses (Note 2) (20,433) (10,149) (41,663) (83,064)
----------- ----------- ----------- -----------
Total expenses after reimbursement. 148,091 183,568 5,579 4,417
----------- ----------- ----------- -----------
Investment income--net. 76,538 231,283 98,943 234,510
----------- ----------- ----------- -----------
<PAGE>
Realized & Realized gain (loss) from:
Unrealized Investments--net 521,109 133,429 670 231,391
Gain (Loss) on Foreign currency transactions--net -- (66,027) -- --
Investments & Unrealized appreciation (depreciation) on:
Foreign Currency Investments--net 1,383,613 1,050,675 (64,231) 45,498
Transactions-- Foreign currency transactions--net -- 8,549 -- --
Net (Notes 1b, ----------- ----------- ----------- -----------
1c, 1e & 3): Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 1,904,722 1,126,626 (63,561) 276,889
----------- ----------- ----------- -----------
Net Increase in Net Assets Resulting
from Operations $ 1,981,260 $ 1,357,909 $ 35,382 $ 511,399
=========== =========== =========== ===========
<FN>
*Net of foreign withholding tax
on interest $ 693 $ 479 $ -- $ --
=========== =========== =========== ===========
**Net of foreign withholding tax
on dividends $ -- $ 10,542 $ -- $ --
=========== =========== =========== ===========
<FN>
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Period
February 1, 1995++ to July 31, 1995
US
Fundamental Global Quality Government
Value Opportunity Bond Securities
Increase (Decrease) in Net Assets: Portfolio Portfolio Portfolio Portfolio
<S> <S> <C> <C> <C> <C>
Operations: Investment income--net $ 76,538 $ 231,283 $ 98,943 $ 234,510
Realized gain on investments and foreign
currency transactions--net 521,109 67,402 670 231,391
Unrealized appreciation (depreciation) on
investments and foreign currency
transactions--net 1,383,613 1,059,224 (64,231) 45,498
----------- ----------- ----------- -----------
Net increase in net assets resulting
from operations 1,981,260 1,357,909 35,382 511,399
----------- ----------- ----------- -----------
Dividends to Investment income--net:
Shareholders Class A -- -- (59,217) (196,002)
(Note 1g): Class B -- -- (29,049) (28,734)
Class C -- -- (8,067) (7,862)
Class D -- -- (2,610) (1,912)
----------- ----------- ----------- -----------
Net decrease in net assets resulting
from dividends to shareholders -- -- (98,943) (234,510)
=========== =========== =========== ===========
<PAGE>
Capital Share Net increase in net assets derived from
Transactions capital share transactions 20,195,736 20,107,060 4,754,093 7,481,340
(Note 4): =========== =========== =========== ===========
Net Assets: Total increase in net assets 22,176,996 21,464,969 4,690,532 7,758,229
Beginning of period 25,000 25,000 25,000 25,000
----------- ----------- ----------- -----------
End of period* $22,201,996 $21,489,969 $ 4,715,532 $ 7,783,229
=========== =========== =========== ===========
<FN>
*Undistributed investment income--net $ 76,538 $ 231,283 $ -- $ --
=========== =========== =========== ===========
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
The following per share data ratios For the Period
have been derived from information provided February 1, 1995++ to July 31, 1995
in the financial statements. Fundamental Value Portfolio
Increase (Decrease) in Net Asset Value: Class A Class B Class C Class D
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00 $ 10.00
Operating ------- ------- ------- -------
Performance: Investment income--net .14 .03 .02 .06
Realized and unrealized gain on investments
and foreign currency transactions--net 1.47 1.52 1.53 1.53
------- ------- ------- -------
Total from investment operations 1.61 1.55 1.55 1.59
------- ------- ------- -------
Net asset value, end of period $ 11.61 $ 11.55 $ 11.55 $ 11.59
======= ======= ======= =======
Total Investment Based on net asset value per share. 16.10%+++ 15.50%+++ 15.50%+++ 15.90%+++
Return:** ======= ======= ======= =======
<PAGE>
Ratios to Expenses excluding account maintenance
Average Net and distribution fees and net of
Assets: reimbursement 1.43%* 1.46%* 1.54%* 1.38%*
======= ======= ======= =======
Expenses, net of reimbursement 1.43%* 2.46%* 2.54%* 1.63%*
======= ======= ======= =======
Expenses 1.95%* 2.74%* 2.76%* 1.93%*
======= ======= ======= =======
Investment income--net 2.25%* .90%* .78%* 1.75%*
======= ======= ======= =======
Supplemental Net assets end of period (in thousands) $ 2,010 $13,765 $ 4,873 $ 1,554
Data: ======= ======= ======= =======
Portfolio turnover 31.42% 31.42% 31.42% 31.42%
======= ======= ======= =======
<CAPTION>
The following per share data ratios For the Period
have been derived from information provided February 1, 1995++ to July 31, 1995
in the financial statements. Global Opportunity Portfolio
Increase (Decrease) in Net Asset Value: Class A Class B Class C Class D
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00 $ 10.00
Operating ------- ------- ------- -------
Performance: Investment income--net .18 .07 .06 .09
Realized and unrealized gain on investments
and foreign currency transactions--net .64 .69 .70 .72
------- ------- ------- -------
Total from investment operations .82 .76 .76 .81
------- ------- ------- -------
Net asset value, end of period $ 10.82 $ 10.76 $ 10.76 $ 10.81
======= ======= ======= =======
Total Investment Based on net asset value per share. 8.20%+++ 7.60%+++ 7.60%+++ 8.10%+++
Return:** ======= ======= ======= =======
Ratios to Expenses excluding account maintenance
Average Net and distribution fees and net of
Assets: reimbursement 1.86%* 1.97%* 2.04%* 1.88%*
======= ======= ======= =======
Expenses, net of reimbursement 1.86%* 2.97%* 3.04%* 2.13%*
======= ======= ======= =======
Expenses 2.17%* 2.97%* 3.04%* 2.13%*
======= ======= ======= =======
Investment income--net 3.49%* 2.36%* 2.27%* 3.18%*
======= ======= ======= =======
<PAGE>
Supplemental Net assets end of period (in thousands) $ 8,615 $ 9,423 $ 2,600 $ 852
Data: ======= ======= ======= =======
Portfolio turnover 24.10% 24.10% 24.10% 24.10%
======= ======= ======= =======
<CAPTION>
The following per share data ratios For the Period
have been derived from information provided February 1, 1995++ to July 31, 1995
in the financial statements. Quality Bond Portfolio
Increase (Decrease) in Net Asset Value: Class A Class B Class C Class D
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00 $ 10.00
Operating ------- ------- ------- -------
Performance: Investment income--net .29 .25 .25 .28
Realized and unrealized gain (loss)
on investments--net (.14) (.14) (.14) (.14)
------- ------- ------- -------
Total from investment operations .15 .11 .11 .14
------- ------- ------- -------
Less dividends from investment income--net (.29) (.25) (.25) (.28)
------- ------- ------- -------
Net asset value, end of period $ 9.86 $ 9.86 $ 9.86 $ 9.86
======= ======= ======= =======
Total Investment Based on net asset value per share. 1.51%+++ 1.13%+++ 1.10%+++ 1.40%+++
Return:** ======= ======= ======= =======
Ratios to Average Expenses excluding account maintenance
Net Assets: and distribution fees and net of
reimbursement .00%* .04%* .07%* .00%*
======= ======= ======= =======
Expenses, net of reimbursement .00%* .79%* .87%* .25%*
======= ======= ======= =======
Expenses 2.66%* 2.75%* 2.75%* 2.28%*
======= ======= ======= =======
Investment income--net 5.88%* 5.18%* 5.11%* 5.76%*
======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $ 2,038 $ 1,956 $ 568 $ 154
Data: ======= ======= ======= =======
Portfolio turnover 63.13% 63.13% 63.13% 63.13%
======= ======= ======= =======
<PAGE>
<CAPTION>
The following per share data ratios For the Period
have been derived from information provided February 1, 1995++ to July 31, 1995
in the financial statements. US Government Securities Portfolio
Increase (Decrease) in Net Asset Value: Class A Class B Class C Class D
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00 $ 10.00
Operating ------- ------- ------- -------
Performance: Investment income--net .39 .34 .34 .37
Realized and unrealized gain (loss)
on investments--net .47 .47 .46 .47
------- ------- ------- -------
Total from investment operations .86 .81 .80 .84
------- ------- ------- -------
Less dividends from investment income--net (.39) (.34) (.34) (.37)
------- ------- ------- -------
Net asset value, end of period $ 10.47 $ 10.47 $ 10.46 $ 10.47
======= ======= ======= =======
Total Investment Based on net asset value per share. 8.64%+++ 8.24%+++ 8.10%+++ 8.47%+++
Return:** ======= ======= ======= =======
Ratios to Average Expenses excluding account maintenance
Net Assets: and distribution fees and net of
reimbursement .00%* .05%* .07%* .00%*
======= ======= ======= =======
Expenses, net of reimbursement .00%* .80%* .87%* .25%*
======= ======= ======= =======
Expenses 2.64%* 3.17%* 3.22%* 2.68%*
======= ======= ======= =======
Investment income--net 7.53%* 6.42%* 6.33%* 7.12%*
======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $ 5,428 $ 1,656 $ 606 $ 93
Data: ======= ======= ======= =======
Portfolio turnover 49.30% 49.30% 49.30% 49.30%
======= ======= ======= =======
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Retirement Asset Builder Program, Inc. (the "Program")
is registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company consisting of
four separate portfolios: Fundamental Value Portfolio, Global
Opportunity Portfolio, Quality Bond Portfolio and US Government
Securities Portfolio (the "Portfolios"). These unaudited financial
statements reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results for the
interim period presented. All such adjustments are of a normal
recurring nature. The Program's Portfolios offer four classes of
shares under the Merrill Lynch Select Pricing SM System. Shares of
Class A and Class D are sold with a front-end sales charge. Shares
of Class B and Class C 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 Program.
(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. In cases where securities are traded
on more than one exchange, the securities are valued on the exchange
designated by or under the authority of the Board of Directors as
the primary market. Securities traded in the over-the-counter market
are valued at the last available bid price in the over-the-counter
market prior to the time of valuation. Securities 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.
Options written by a Portfolio 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 by a Portfolio are valued at their last sale price in the
case of exchange-traded options or, in the case of options traded in
the over-the-counter market, the last bid price. 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 quotations are not readily available are valued at fair
market value as determined in good faith by or under the direction
of the Board of Directors of the Program.
<PAGE>
(b) Derivative financial instruments--Each Portfolio may engage in
various portfolio strategies to seek to increase its return by
hedging its portfolio against adverse movements in the equity, debt
or currency markets. Losses may arise due to changes in the value of
the contract or if the counterparty does not perform under the
contract.
NOTES TO FINANCIAL STATEMENTS (continued)
* Financial futures contracts--The Portfolios may purchase or sell
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
Portfolios deposit and maintain as collateral such initial margin as
required by the exchange on which the transaction is effected.
Pursuant to the contract, the Portfolios agree 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 Portfolios as unrealized
gains or losses. When the contract is closed, the Portfolios record
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.
* Options--The Portfolios are authorized to purchase and write call
and put options. When the Portfolios write an option, an amount
equal to the premium received by the Portfolios 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 Portfolios enter into a closing
transaction), the Portfolios realize 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).
<PAGE>
Written and purchased options are non-income producing
investments.
* Forward foreign exchange contracts--Fundamental Value and Global
Opportunity Portfolios are 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
Portfolios' records. However, the effect on operations is recorded
from the date the Portfolios enter into such contracts. Premium or
discount is amortized over the life of the contracts.
* Foreign currency options and futures--Fundamental Value and Global
Opportunity Portfolios 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 effected with respect to hedges on non-US dollar
denominated securities owned by the Portfolios, sold by the
Portfolios but not yet delivered, or committed or anticipated to be
purchased by the Portfolios.
(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) or
valuing (unrealized) assets or liabilities expressed in foreign
currencies into US dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on
investments.
(d) Income taxes--It is each Portfolio's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required. Under the applicable foreign tax law, a
withholding tax may be imposed on interest, dividends and capital
gains at various rates.
(e) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Dividend income is recorded on the ex-
dividend dates except that if the ex-dividend date has passed,
certain dividends from foreign securities are recorded as soon as
the Portfolios are informed of the exdividend 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.
<PAGE>
(f) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a five-year period. Prepaid registration fees are
charged to expense as the related shares are issued.
(g) Dividends and distributions--Dividends from net investment
income of Quality Bond and US Government Securities Portfolios are
declared daily and paid monthly. Dividends from net investment
income of Fundamental Value and Global Opportunity Portfolios are
recorded on the ex-dividend dates. Distributions of capital gains
for all Portfolios are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and Transactions
with Affiliates:
The Program 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 Program 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 Program's portfolios
and provides the necessary personnel, facilities, equipment and
certain other services necessary to the operations of the Program.
For such services, each Portfolio pays a monthly fee based on the
average daily value of that Portfolio's net assets at the following
annual rates; 0.65% for Fundamental Value Portfolio, 0.50% for
Quality Bond and US Government Securities Portfolios and 0.75% for
Global Opportunity Portfolio.
The Investment Advisory Agreement obligates MLAM to reimburse the
Program to the extent the Program's expenses (excluding interest,
taxes, distribution fees, brokerage fees and commissions, and
extraordinary items) exceed 2.5% of the Program's first $30 million
of average daily net assets, 2.0% of the Program's next $70 million
of average daily net assets and 1.5% of the average daily net assets
in excess thereof. No fee payment will be made to the Investment
Adviser during any fiscal year which will cause such expenses to
exceed the pro rata expense limitation at the time of such payment.
For the period February 1, 1995 to July 31, 1995, MLAM had
voluntarily waived management fees and reimbursed each Portfolio for
additional expenses as follows:
<PAGE>
US
Fundamental Global Quality Government
Value Opportunity Bond Securities
Portfolio Portfolio Portfolio Portfolio
Management fee $20,433 -- $ 8,854 $16,001
Additional
expenses -- $10,149 $32,809 $67,063
Pursuant to the distribution plans ("the Distribution Plans")
adopted by the Program in accordance with Rule 12b-1 under the
Investment Company Act of 1940, each Portfolio pays the Distributor
ongoing account maintenance and distribution fees. The fees are
accrued daily and paid monthly at annual rates based upon the
average daily net assets of the shares as follows:
Account Maintenance Fees
Class B Class C Class D
Fundamental Value Portfolio 0.25% 0.25% 0.25%
Global Opportunity Portfolio 0.25% 0.25% 0.25%
Quality Bond Portfolio 0.25% 0.25% 0.25%
US Government Securities Portfolio 0.25% 0.25% 0.25%
Distribution Fees
Class B Class C
Fundamental Value Portfolio 0.75% 0.75%
Global Opportunity Portfolio 0.75% 0.75%
Quality Bond Portfolio 0.50% 0.55%
US Government Securities Portfolio 0.50% 0.55%
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Program. 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.
NOTES TO FINANCIAL STATEMENTS (continued)
<PAGE>
For the period February 1, 1995 to July 31, 1995, MLFD earned
underwriting discounts and MLPF&S earned dealer concessions on sales
of each Portfolio's Class A and Class D Shares as follows:
MLFD MLPF&S
Class A Class D Class A Class D
Fundamental Value Portfolio -- $ 1,409 -- --
Global Opportunity Portfolio $8 $ 475 $149 $ 9,186
Quality Bond Portfolio -- $ 161 -- $ 2,158
US Government Securities Portfolio -- $ 149 -- $ 2,020
For the period February 1, 1995 to July 31, l995, MLPF&S received
contingent deferred sales charges relating to transactions in Class
B and Class C Shares as follows:
Class B Shares Class C Shares
Fundamental Value Portfolio $3,325 $ 261
Global Opportunity Portfolio $3,672 $ 84
Quality Bond Portfolio $ 254 $ 7
US Government Securities Portfolio $1,133 $ 174
In addition, MLPF&S received $1,570 and $4,643 in commissions on the
execution of portfolio security transactions for the Fundamental
Value and Global Opportunity Portfolios, respectively, for the
period February 1, 1995 to July 31, 1995.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Program's transfer agent.
During the period February 1, 1995 to July 31, 1995, US Government
Securities Portfolio paid Merrill Lynch Security Pricing Service, an
affiliate of MLPF&S, $23 for security price quotations to compute
the net asset value of the Portfolio.
Accounting services are provided to each Portfolio by MLAM at cost.
Certain officers and/or directors of the Program are officers and/or
directors of MLAM, PSI, MLPF&S, MLFD, MLFDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the period February 1, 1995 to July 31, 1995 were as follows:
<PAGE>
US
Fundamental Global Quality Government
Value Opportunity Bond Securities
Portfolio Portfolio Portfolio Portfolio
Purchases $19,065,229 $21,163,720 $3,974,319 $8,828,209
Sales $ 2,784,183 $ 2,938,499 $ 554,775 $2,540,700
Net realized and unrealized gains (losses) for the period February
1, 1995 to July 31, 1995 were as follows:
Realized Unrealized
Fundamental Value Portfolio Gains Gains
Long-term investments $ 521,066 $ 1,383,613
Short-term investments 43 --
----------- -----------
Total $ 521,109 $ 1,383,613
=========== ===========
Realized
Gains Unrealized
Global Opportunity Portfolio (Losses) Gains
Long-term investments $ 133,257 $1,050,675
Short-term investments 172 --
Foreign currency transactions (3,817) 552
Forward foreign exchange contracts (62,210) 7,997
----------- ----------
Total $ 67,402 $1,059,224
=========== ==========
Realized
Gains Unrealized
Quality Bond Portfolio (Losses) Losses
Long-term investments $ 678 $ (64,231)
Short-term investments (8) --
----------- -----------
Total $ 670 $ (64,231)
=========== ===========
Realized
Gains Unrealized
US Government Securities Portfolio (Losses) Gains
Long-term investments $ 231,878 $ 45,498
Short-term investments (487) --
----------- -----------
Total $ 231,391 $ 45,498
=========== ===========
<PAGE>
As of July 31, 1995, net unrealized appreciation (depreciation) for
Federal income tax purposes was as follows:
US
Fundamental Global Quality Government
Value Opportunity Bond Securities
Portfolio Portfolio Portfolio Portfolio
Gross unrealized
appreciation $1,597,970 $1,369,278 $ 1,299 $ 89,363
Gross unrealized
depreciation (214,357) (318,603) (65,530) (43,865)
---------- ---------- -------- --------
Net unrealized
appreciation
(depreciation) $1,383,613 $1,050,675 $(64,231) $ 45,498
========== ========== ======== ========
The aggregate cost of investments at July 31, 1995 for Federal
income tax purposes was $21,007,113 for Fundamental Value Portfolio,
$20,360,198 for Global Opportunity Portfolio, $4,649,463 for Quality
Bond Portfolio, and $7,372,930 for US Government Securities
Portfolio.
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions
for the period February 1, 1995 to July 31, 1995 was $20,195,736 for
Fundamental Value Portfolio, $20,107,060 for Global Opportunity
Portfolio, $4,754,093 for Quality Bond Portfolio, and $7,481,340 for
US Government Securities Portfolio.
Transactions in capital shares for each class were as follows:
Fundamental Value Portfolio
Class A Shares for the Period Dollar
February 1, 1995++ to July 31, 1995 Shares Amount
Shares sold. 207,468 $2,079,917
Shares redeemed (34,961) (405,162)
----------- ----------
Net increase 172,507 $1,674,755
=========== ==========
<PAGE>
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
Fundamental Value Portfolio
Class B Shares for the Period Dollar
February 1,1995++ to July 31, 1995 Shares Amount
Shares sold 1,252,879 $13,252,061
Shares redeemed (61,388) (660,139)
----------- -----------
Net increase 1,191,491 $12,591,922
=========== ===========
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
Fundamental Value Portfolio
Class C Shares for the Period Dollar
February 1, 1995++ to July 31, 1995 Shares Amount
Shares sold 434,562 $4,667,227
Shares redeemed (13,178) (143,373)
----------- ----------
Net increase 421,384 $4,523,854
=========== ==========
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
Fundamental Value Portfolio
Class D Shares for the Period Dollar
February 1, 1995++ to July 31, 1995 Shares Amount
Shares sold 137,052 $1,448,060
Shares redeemed (3,679) (42,855)
----------- ----------
Net increase 133,373 $1,405,205
=========== ==========
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
<PAGE>
Global Opportunity Portfolio
Class A Shares for the Period Dollar
February 1, 1995++ to July 31, 1995 Shares Amount
Shares sold 804,974 $8,050,372
Shares redeemed (9,753) (105,403)
----------- ----------
Net increase 795,221 $7,944,969
=========== ==========
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
Global Opportunity Portfolio
Class B Shares for the Period Dollar
February 1, 1995++ to July 31, 1995 Shares Amount
Shares sold 925,253 $9,411,344
Automatic conversion of shares (7,898) (81,786)
Shares redeemed. (42,595) (437,029)
----------- ----------
Net increase 874,760 $8,892,529
=========== ==========
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
NOTES TO FINANCIAL STATEMENTS (concluded)
Global Opportunity Portfolio
Class C Shares for the Period Dollar
February 1, 1995++ to July 31, 1995 Shares Amount
Shares sold 245,725 $2,518,305
Shares redeemed (4,806) (50,151)
----------- ----------
Net increase 240,919 $2,468,154
=========== ==========
<PAGE>
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
Global Opportunity Portfolio
Class D Shares for the Period Dollar
February 1, 1995++ to July 31, 1995 Shares Amount
Shares sold. 72,964 $ 746,299
Automatic conversion of shares. 7,879 81,786
----------- ----------
Total issued 80,843 828,085
Shares redeemed (2,599) (26,677)
----------- ----------
Net increase 78,244 $ 801,408
========== ==========
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
Quality Bond Portfolio
Class A Shares for the Period Dollar
February 1, 1995++ to July 31, 1995 Shares Amount
Shares sold 200,499 $2,004,986
Shares issued to shareholders in
reinvestment of dividends 5,488 54,774
----------- ----------
Total issued 205,987 2,059,760
Shares redeemed. (12) (123)
----------- ----------
Net increase 205,975 $2,059,637
=========== ==========
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
<PAGE>
Quality Bond Portfolio
Class B Shares for the Period Dollar
February 1, 1995++ to July 31, 1995 Shares Amount
Shares sold 204,222 $2,039,887
Shares issued to shareholders in
reinvestment of dividends 2,363 23,540
----------- ----------
Total issued. 206,585 2,063,427
Shares redeemed (8,806) (87,856)
----------- ----------
Net increase 197,779 $1,975,571
=========== ==========
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
Quality Bond Portfolio
Class C Shares for the Period Dollar
February 1, 1995++ to July 31, 1995 Shares Amount
Shares sold 60,136 $ 600,565
Shares issued to shareholders in
reinvestment of dividends 675 6,729
----------- ----------
Total issued 60,811 607,294
Shares redeemed (3,845) (38,338)
----------- ----------
Net increase 56,966 $ 568,956
=========== ==========
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
Quality Bond Portfolio
Class D Shares for the Period Dollar
February 1, 1995++ to July 31, 1995 Shares Amount
Shares sold. 15,576 $ 155,697
Shares issued to shareholders in
reinvestment of dividends 224 2,235
----------- ----------
Total issued 15,800 157,932
Shares redeemed (801) (8,003)
----------- ----------
Net increase 14,999 $ 149,929
=========== ==========
<PAGE>
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
US Government Securities Portfolio
Class A Shares for the Period Dollar
February 1, 1995++ to July 31, 1995 Shares Amount
Shares sold 500,248 $5,002,552
Shares issued to shareholders in
reinvestment of dividends 17,778 183,493
----------- ----------
Total issued 518,026 5,186,045
Shares redeemed (16) (174)
----------- ----------
Net increase 518,010 $5,185,871
=========== ==========
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
US Government Securities Portfolio
Class B Shares for the Period Dollar
February 1, 1995++ to July 31, 1995 Shares Amount
Shares sold 164,577 $1,702,420
Shares issued to shareholders in
reinvestment of dividends 3,345 22,436
----------- ----------
Total issued 167,922 1,724,856
Shares redeemed (10,342) (105,832)
----------- ----------
Net increase 157,580 $1,619,024
=========== ==========
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
<PAGE>
US Government Securities Portfolio
Class C Shares for the Period Dollar
February 1, 1995++ to July 31, 1995 Shares Amount
Shares sold 60,290 $ 625,465
Shares issued to shareholders in
reinvestment of dividends. 1,018 6,367
----------- ----------
Total issued 61,308 631,832
Shares redeemed (4,024) (41,201)
----------- ----------
Net increase 57,284 $ 590,631
=========== ==========
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
US Government Securities Portfolio
Class D Shares for the Period Dollar
February 1, 1995++ to July 31, 1995 Shares Amount
Shares sold. 12,628 $ 130,367
Shares issued to shareholders in
reinvestment of dividends 172 1,356
----------- ----------
Total issued. 12,800 131,723
Shares redeemed (4,506) (45,909)
----------- ----------
Net increase 8,294 $ 85,814
=========== ==========
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
5. Commitments:
At July 31, 1995, Global Opportunity Portfolio entered into a
foreign exchange contract under which it had agreed to purchase
various foreign currencies with values of approximately $41,700.
