AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 30, 1995
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [_]
POST-EFFECTIVE AMENDMENT NO. 1 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 2 [X]
(CHECK APPROPRIATE BOX OR BOXES)
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MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (609) 282-2800
ARTHUR ZEIKEL
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
800 SCUDDERS MILL ROAD, PLAINSBORO, NEW JERSEY
MAILING ADDRESS: P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPIES TO:
COUNSEL FOR THE FUND: MARK B. GOLDFUS, ESQ.
BROWN & WOOD MERRILL LYNCH ASSET
ONE WORLD TRADE CENTER MANAGEMENT
NEW YORK, NEW YORK 10048-0557 P.O. BOX 9011
ATTENTION: THOMAS R. SMITH, JR., ESQ. PRINCETON, N.J. 08543-9011
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IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
[X] immediately upon filing pursuant to paragraph (b)
[_] on (date) pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)(1)
[_] on (date) pursuant to paragraph (a)(1)
[_] 75 days after filing pursuant to paragraph (a)(2)
[_] on (date) pursuant to paragraph (a)(2) 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 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 RULE FOR THE REGISTRANT'S MOST RECENT FISCAL YEAR WAS FILED ON MARCH 30, 1995.
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
N-1A ITEM NO. LOCATION
------------- --------
PART A
Item 1. Cover Page.............. Cover Page
Item 2. Synopsis................ Fee Table
Item 3. Condensed Financial
Information............. Financial Highlights
Item 4. General Description of
Registrant.............. Investment Objectives and Policies;
Additional Information
Item 5. Management of the Fund.. Fee Table; Management of the Program;
Portfolio Transactions and Brokerage;
Inside Back Cover Page
Item 5A. Management's Discussion
of Fund Performance..... Not Applicable
Item 6. Capital Stock and Other
Securities.............. Cover Page; Additional Information
Item 7. Purchase of Securities
Being Offered........... Cover Page; Fee Table; Merrill Lynch
Select Pricing SM System; Purchase of
Shares; Shareholder Services; Additional
Information; Inside Back Cover Page
Item 8. Redemption or
Repurchase.............. Fee Table; Merrill Lynch Select Pricing
SM System; Purchase of Shares;
Shareholder Services; 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................. Not Applicable
Item 13. Investment Objectives
and Policies............ Investment Objectives and Policies
Item 14. Management of the Fund.. Management of the Program
Item 15. Control Persons and
Principal Holders of
Securities.............. Management of the Program
Item 16. Investment Advisory and
Other Services.......... Management of the Program; Purchase of
Shares; General Information
Item 17. Brokerage Allocation and
Other Practices......... Portfolio Transactions and Brokerage
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.... Independent Auditors' Reports; Statements
of Assets and Liabilities
PART C
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Information required to be included in Part C is set forth under the appropriate Item, so numbered, in Part C to this Registration Statement.
PROSPECTUS
MAY 30, 1995
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
MERRILL LYNCH FUNDAMENTAL VALUE MERRILL LYNCH U.S. GOVERNMENT
PORTFOLIO SECURITIES PORTFOLIO
MERRILL LYNCH QUALITY BOND PORTFOLIO MERRILL LYNCH GLOBAL OPPORTUNITY
PORTFOLIO
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P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 . PHONE NO. (609) 282-2800
Merrill Lynch Retirement Asset Builder Program, Inc. (the "Program") is a professionally managed, open-end investment company. The Program consists of four separate portfolios: the Merrill Lynch Fundamental Value Portfolio (the "Fundamental Value Portfolio"), the Merrill Lynch Quality Bond Portfolio (the "Quality Bond Portfolio"), the Merrill Lynch U.S. Government Securities Portfolio (the "U.S. Government Securities Portfolio") and the Merrill Lynch Global Opportunity Portfolio (the "Global Opportunity Portfolio") (each a "Portfolio"). Each Portfolio has its own separate investment objectives and may employ a variety of instruments and techniques to enhance income and to hedge against market risk and, in the case of the Fundamental Value and Global Opportunity Portfolios, currency risk. Investments on an international basis involve risks not typically associated with investments in domestic securities. See "Risk Factors and Special Considerations". There can be no assurance that the investment objectives of any Portfolio will be achieved. For more information on the Portfolios' investment objectives and policies, please see "Investment Objectives and Policies" on page 20.
(Cover continues on next page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus is a concise statement of information about the Program that is relevant to making an investment in the Program. This Prospectus should be retained for future reference. A statement containing additional information about the Program, dated May 30, 1995 (the "Statement of Additional Information"), has been filed with the Securities and Exchange Commission and can be obtained, without charge, by calling or by writing the Program 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
Each Portfolio is a separate series of the Program issuing its own shares pursuant to the Merrill Lynch Select Pricing SM System. Each Portfolio 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. See "Merrill Lynch Select Pricing SM System" on page 9.
Shares of each Portfolio are available for purchase solely by holders of individual retirement plans, individual retirement rollover accounts and simplified employee pension plans (collectively "IRAs") for which Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") acts as custodian. Merrill Lynch has advised the Program that it will not charge an annual account fee upon any IRA which participates in the Merrill Lynch Retirement Asset Builder SM Service, receives additional contributions of at least $250 annually and is invested solely in one or more of the Program's Portfolios or a money market fund advised by Merrill Lynch Asset Management, L.P. ("MLAM" or the "Investment Adviser"), or its affiliates. The minimum initial purchase in any Portfolio is $100 and the minimum subsequent purchase is $1. Merrill Lynch may charge its customers a processing fee (presently $4.85) for confirming purchases and repurchases. See "Purchase of Shares" and "Redemption of Shares". The holder of each IRA is responsible for making investment decisions concerning the funds contributed to his or her IRA.
To permit the Program to invest the net proceeds from the sale of its shares in an orderly manner, the Program may, from time to time, suspend the sale of its shares, except for dividend reinvestments.
FEE TABLE
A general comparison of the sales arrangements and other nonrecurring and recurring expenses applicable to shares of each of the Portfolios follows:
FUNDAMENTAL VALUE PORTFOLIO QUALITY BOND PORTFOLIO
------------------------------------------------- -------------------------------------------------
CLASS A(a) CLASS B(b) CLASS C CLASS D CLASS A(a) CLASS B(b) CLASS C CLASS D
---------- ------------------- -------- --------- ---------- ------------------- -------- ---------
SHAREHOLDER
TRANSACTION
EXPENSES:
Maximum Sales
Charge Imposed on
Purchases (as a
percentage of
offering price).... 5.25%(c) None None 5.25%(c) 4.00%(c) None None 4.00%(c)
Sales Charge
Imposed on
Dividend
Reinvestments...... None None None None None None None None
Deferred Sales
Charge (as a
percentage of None(d) 4.0% during 1.0% for None(d) None(d) 4.0% during 1.0% for None(d)
original purchase the first year, one year the first year, one year
price or decreasing 1.0% decreasing 1.0%
redemption annually thereafter annually thereafter
proceeds, to 0.0% after to 0.0% after
whichever is the fourth year the fourth year
lower).............
Exchange Fee....... None None None None None None None None
ANNUAL PROGRAM
OPERATING EXPENSES
(AS A PERCENTAGE OF
AVERAGE NET
ASSETS)(E):
Investment
Advisory Fees(f)... 0.65% 0.65% 0.65% 0.65% 0.50% 0.50% 0.50% 0.50%
12b-1 Fees(g):
Account
Maintenance Fees. None 0.25% 0.25% 0.25% None 0.25% 0.25% 0.25%
Distribution
Fees............. None 0.75%(i) 0.75% None None 0.50%(j) 0.55% None
Other Expenses:
Custodial Fees... 0.05% 0.05% 0.05% 0.05% 0.28% 0.28% 0.28% 0.28%
Shareholder Ser-
vicing Costs(h).. 0.10% 0.12% 0.12% 0.10% 0.18% 0.20% 0.20% 0.18%
Other............ 0.71% 0.71% 0.71% 0.71% 1.31% 1.31% 1.31% 1.31%
---- ---- ---- ---- ---- ---- ---- ----
Total Other Ex- 0.86% 0.88% 0.88% 0.86% 1.77% 1.79% 1.79% 1.77%
penses........... ---- ---- ---- ---- ---- ---- ---- ----
Total Portfolio
Operating Ex- 1.51% 2.53% 2.53% 1.76% 2.27% 3.04% 3.09% 2.52%
penses............. ==== ==== ==== ==== ==== ==== ==== ====
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(footnotes appear on next page)
U.S. GOVERNMENT SECURITIES PORTFOLIO GLOBAL OPPORTUNITY PORTFOLIO
---------------------------------------------------- --------------------------------------------------
CLASS A(a) CLASS B(b) CLASS C CLASS D CLASS A(a) CLASS B(b) CLASS C CLASS D
---------- ------------------- -------- --------- ---------- ------------------- -------- ---------
SHAREHOLDER
TRANSACTION
EXPENSES:
Maximum Sales
Charge Imposed on
Purchases (as a
percentage of
offering price).... 4.00 %(c) None None 4.00 %(c) 5.25%(c) None None 5.25%(c)
Sales Charge
Imposed on
Dividend
Reinvestments...... None None None None None None None None
Deferred Sales
Charge (as a
percentage of None(d) 4.0% during 1.0% for None(d) None(d) 4.0% during 1.0% for None(d)
original purchase the first year, one year the first year, one year
price or decreasing 1.0% decreasing 1.0%
redemption annually thereafter annually thereafter
proceeds, to 0.0% after to 0.0% after
whichever is the fourth year the fourth year
lower).............
Exchange Fee....... None None None None None None None None
ANNUAL PROGRAM
OPERATING EXPENSES
(AS A PERCENTAGE OF
AVERAGE NET
ASSETS)(E):
Investment
Advisory Fees(f)... 0.50 % 0.50 % 0.50 % 0.50 % 0.75% 0.75% 0.75% 0.75%
12b-1 Fees(g):
Account
Maintenance Fees. None 0.25 % 0.25 % 0.25 % None 0.25% 0.25% 0.25%
Distribution
Fees............. None 0.50 %(j) 0.55 % None None 0.75%(i) 0.75% None
Other Expenses:
Custodial Fees... 0.15 % 0.15 % 0.15 % 0.15 % 0.13% 0.13% 0.13% 0.13%
Shareholder Ser-
vicing Costs(h).. 0.09 % 0.11 % 0.11 % 0.09 % 0.10% 0.10% 0.10% 0.10%
Other............ 1.91 % 1.91 % 1.91 % 1.91 % 1.52% 1.52% 1.52% 1.52%
---- ---- ---- ---- ---- ---- ---- ----
Total Other Ex- 2.15 % 2.17 % 2.17 % 2.15 % 1.75% 1.75% 1.75% 1.75%
penses........... ---- ---- ---- ---- ---- ---- ---- ----
Reimbursement of (0.15)% (0.17)% (0.17)% (0.15)% -- -- -- --
Expenses(k)........ ----- ----- ----- ----- --- --- --- ---
Total Portfolio
Operating Ex- 2.50 % 3.25 % 3.30 % 2.75 % 2.50% 3.50% 3.50% 2.75%
penses............. ==== ==== ==== ==== ==== ==== ==== ====
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(a) Class A shares are sold to a limited group of investors including existing Class A shareholders. See "Purchase of Shares--Initial Sales Charge Alternatives--Class A and Class D Shares"--page 40.
(b) Class B shares convert to Class D shares automatically approximately eight years after initial purchase for the Fundamental Value and Global Opportunity Portfolios and approximately ten years after initial purchase for the Quality Bond and U.S. Government Securities Portfolios. See "Purchase of Shares--Deferred Sales Charge Alternatives--Class B and Class C Shares"--page 41.
(c) Reduced for purchases of $25,000 and over decreasing to 0.00% for
purchases of $1,000,000 or more. See "Purchase of Shares--Initial Sales
Charge Alternatives--Class A and Class D Shares"--page 40.
(d) Under certain limited conditions, purchases of Class A and Class D shares
will be subject to a contingent deferred sales charge ("CDSC") rather than
an initial sales charge.
(e) Information under "Other Expenses" is estimated for the fiscal year ending January 31, 1996.
(Footnotes continued on next page.)
(f) See "Management of the Program--Management and Advisory Arrangements"-- page 33.
(g) See "Purchase of Shares--Distribution Plans"--page 45.
(h) See "Management of the Program--Transfer Agency Services"--page 35.
(i) Class B shares convert to Class D shares automatically after approximately
eight years and cease being subject to distribution fees.
(j) Class B shares convert to Class D shares automatically after approximately
ten years and cease being subject to distribution fees.
(k) Pursuant to state expense limitations imposed on the Program, for the period February 1, 1995 (commencement of operations) to March 31, 1995, the Investment Adviser was required to reimburse a portion of its investment advisory fee, and voluntarily waived the remainder of its investment advisory fee and reimbursed a portion of other expenses (excluding 12b-1 fees). The Total Portfolio Operating Expenses in the fee table have been restated to assume the absence of any such voluntary waiver or reimbursement of expenses because the Investment Adviser may discontinue or reduce such waiver of fees and/or assumption of expenses at any time without notice. The actual Total Portfolio Operating Expenses, net of the waiver and/or reimbursement, is provided below:
INVESTMENT ADVISORY FEES WAIVED
AND TOTAL OPERATING EXPENSES AFTER
EXPENSES REIMBURSED WAIVER AND REIMBURSEMENT
------------------------------- -------------------------------
CLASS A CLASS B CLASS C CLASS D CLASS A CLASS B CLASS C CLASS D
------- ------- ------- ------- ------- ------- ------- -------
Fundamental Value
Portfolio............... 1.02% 0.78% 0.75% 0.78% 1.71% 2.27% 2.28% 1.54%
Quality Bond Portfolio.. 4.37% 3.59% 3.47% 3.85% 0.00% 0.78% 0.84% 0.24%
US Government Securities
Portfolio............... 3.35% 3.10% 3.31% 3.15% 0.00% 0.77% 0.83% 0.25%
Global Opportunity
Portfolio............... 1.27% 1.37% 1.33% 1.33% 1.79% 2.48% 2.50% 1.73%
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EXAMPLE:
CUMULATIVE EXPENSES PAID
OPERATING FOR THE PERIOD OF:
EXPENSE -------------------------------
RATIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------- ------ ------- ------- --------
An investor in the Portfolios (and
classes) listed below would pay the
following expenses on a $1,000
investment including, for Class A
and Class D shares of the
Fundamental Value and Global
Opportunity Portfolios, the maximum
$52.50 initial sales charge and, for
Class A and Class D shares of the
Quality Bond and U.S. Government
Securities Portfolios, the maximum
$40.00 initial sales charge and
assuming (1) the Total Program
Operating Expenses for each class
set forth above; (2) a 5% annual
return throughout the periods and
(3) redemption at the end of the
period:
Fundamental Value Portfolio
Class A.......................... 1.51% $67 $ 98 $131 $223
Class B.......................... 2.53% $66 $ 99 $135 $268
Class C.......................... 2.53% $36 $ 79 $135 $287
Class D.......................... 1.76% $69 $105 $143 $249
Quality Bond Portfolio
Class A.......................... 2.27% $62 $108 $157 $290
Class B.......................... 3.04% $71 $114 $160 $336
Class C.......................... 3.09% $41 $ 95 $162 $340
Class D.......................... 2.52% $64 $115 $169 $314
U.S. Government Securities Portfo-
lio
Class A.......................... 2.50% $64 $115 $168 $312
Class B.......................... 3.25% $73 $120 $170 $355
Class C.......................... 3.30% $43 $102 $172 $359
Class D.......................... 2.75% $67 $122 $180 $336
Global Opportunity Portfolio
Class A.......................... 2.50% $76 $126 $179 $321
Class B.......................... 3.50% $75 $127 $182 $361
Class C.......................... 3.50% $45 $107 $182 $377
Class D.......................... 2.75% $79 $133 $190 $344
An investor would pay the following
expenses on the same $1,000 invest-
ment assuming no redemption at the
end of the period:
Fundamental Value Portfolio
Class A.......................... 1.51% $67 $ 98 $131 $223
Class B.......................... 2.53% $26 $ 79 $135 $268
Class C.......................... 2.53% $26 $ 79 $135 $287
Class D.......................... 1.76% $69 $105 $143 $249
Quality Bond Portfolio
Class A.......................... 2.27% $62 $108 $157 $290
Class B.......................... 3.04% $31 $ 94 $160 $336
Class C.......................... 3.09% $31 $ 95 $162 $340
Class D.......................... 2.52% $64 $115 $169 $314
U.S. Government Securities Portfo-
lio
Class A.......................... 2.50% $64 $115 $168 $312
Class B.......................... 3.25% $33 $100 $170 $355
Class C.......................... 3.30% $33 $102 $172 $359
Class D.......................... 2.75% $67 $122 $180 $336
Global Opportunity Portfolio
Class A.......................... 2.50% $76 $126 $179 $321
Class B.......................... 3.50% $35 $107 $182 $361
Class C.......................... 3.50% $35 $107 $182 $377
Class D.......................... 2.75% $79 $133 $190 $344
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The foregoing Fee Table is intended to assist investors in understanding the costs and expenses that a shareholder in a Portfolio 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 ("Commission") regulations. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RATES 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 hold 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 charges 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 redemptions. Purchases and redemptions directly through the Program's transfer agent are not subject to the processing fee. See "Purchase of Shares" and "Redemption of Shares".
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more detailed information included elsewhere in this Prospectus and the Statement of Additional Information.
THE PROGRAM
Merrill Lynch Retirement Asset Builder Program, Inc. (the "Program") is a professionally managed, open-end investment company consisting of four separate portfolios: the Fundamental Value Portfolio, the Quality Bond Portfolio, the U.S. Government Securities Portfolio and the Global Opportunity Portfolio.
INVESTMENT OBJECTIVES AND POLICIES
Each Portfolio pursues its investment objectives through the separate investment policies described below:
Fundamental Value Portfolio is a diversified portfolio seeking capital appreciation and, secondarily, income by investing in securities, primarily (i.e., at least 65% of the Portfolio's assets) in equities, that the management of the Portfolio believes are undervalued and therefore represent investment value. The Portfolio seeks special opportunities in securities that are selling at a discount either from book value or historical price-earnings ratios, or seem capable of recovering from temporarily out-of-favor considerations. Particular emphasis is placed on securities which provide an above-average dividend return and sell at a below-average price-earnings ratio. The Portfolio may invest up to 30% of its total assets in securities of foreign issuers. See "Risk Factors and Special Considerations".
Quality Bond Portfolio is a diversified portfolio seeking income and, secondarily, capital appreciation by investing primarily in long-term corporate bonds that are rated A or better by a nationally recognized rating agency such as Standard & Poor's Ratings Group ("S&P"), Moody's Investors Service, Inc. ("Moody's") or Fitch Investors Services, Inc. ("Fitch"), or that possess, in the judgment of the Investment Adviser, similar credit characteristics.
U.S. Government Securities Portfolio is a diversified portfolio seeking high current return by investing in U.S. Government and Government agency securities, including Government National Mortgage Association ("GNMA") mortgage-backed securities and other mortgage-backed government securities.
Global Opportunity Portfolio is a diversified portfolio seeking high total investment return 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 types of securities and markets, in response to changing market and economic trends. Total investment return is the aggregate of capital value changes and income.
RISK FACTORS AND SPECIAL CONSIDERATIONS
All of the Portfolios may invest in fixed income securities and to the extent a Portfolio does invest in fixed income securities, the net asset value of its shares will be affected by changes in the general level of interest rates.
The Fundamental Value and Global Opportunity Portfolios are authorized to invest in foreign securities. Investments in securities of foreign entities and securities denominated in foreign currencies involve risks not typically involved in domestic investment, including fluctuations in foreign exchange rates, future foreign political and economic developments, and the possible imposition of exchange controls or other foreign or U.S. governmental laws or restrictions applicable to such investments. These risks are often heightened for investments in small capital markets.
The Global Opportunity Portfolio has established no rating criteria for the fixed income securities in which it may invest and securities in the lower rated categories are predominantly speculative with respect to the capacity to pay interest and repay principal.
The Portfolios also may invest in certain derivative securities. See "Risk Factors and Special Considerations".
THE INVESTMENT ADVISER
Merrill Lynch Asset Management, L.P. (the "Investment Adviser" or "MLAM") acts as a manager for the Program and provides the Program with management services. The Investment Adviser or its affiliate, Fund Asset Management, L.P. ("FAM"), acts as the investment adviser for over 130 other registered investment companies. The Investment Adviser and FAM also offer portfolio management and portfolio analysis services to individuals and institutions. As of March 31, 1995, the Investment Adviser and FAM had a total of approximately $170.3 billion in investment company and other portfolio assets under management, including accounts of certain affiliates of the Investment Adviser. See "Management of the Program -- Management and Advisory Arrangements".
PURCHASE AND REDEMPTION OF SHARES
Shares of the Portfolios 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. See "Merrill Lynch Select Pricing SM System" and "Purchase of Shares".
DIVIDENDS AND DISTRIBUTIONS
It is the Program's intention to distribute substantially all of the net investment income, if any, of each Portfolio. All long-term and short-term capital gains, if any, including gains from option and futures contract
transactions will be distributed by each Portfolio at least annually. See "Additional Information -- Dividends and Distributions".
DETERMINATION OF NET ASSET VALUE
The net asset value of each Portfolio is determined by the Investment Adviser once daily 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 and, under certain circumstances, on other days. See "Additional Information -- Determination of Net Asset Value".
MERRILL LYNCH SELECT PRICING SM SYSTEM
Each Portfolio offers four classes of shares under the Merrill Lynch Select Pricing SM System. The shares of each class may be purchased at a price equal to the next determined net asset value per share subject to the sales charges and ongoing fee arrangements described below. Shares of Class A and Class D are sold to investors choosing the initial sales charge alternatives, and shares of Class B and Class C are sold to investors choosing the deferred sales charge alternatives. The Merrill Lynch Select Pricing SM System is used by more than 50 mutual funds advised by MLAM or FAM, an affiliate of MLAM. Funds advised by MLAM or FAM are referred to herein as "MLAM-advised mutual funds".
Each Class A, Class B, Class C or Class D share of a Portfolio represents an identical interest in the investment portfolio of that Portfolio 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 Portfolio 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 a Portfolio 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". If pursuant to the exchange privilege, shares of any Portfolio are exchanged for shares of a fund other than a Portfolio of the Program or a money market fund advised by the Investment Adviser or its affiliates, then the imposition of the IRA annual account fee may result. For information about current IRA fees charged by Merrill Lynch, consult the Merrill Lynch IRA disclosure statement.
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 Program. The distribution- related revenues paid with respect to a class will not be used to finance the distribution expenditures of another class. Sales personnel may receive different compensation for selling different classes of shares.
The following table sets forth a summary of the distribution arrangements for each class of shares under the Merrill Lynch Select PricingSM System, followed by a more detailed description of each class and a
discussion of the factors that investors should consider in determining the method of purchasing shares under the Merrill Lynch Select PricingSM System that the investor believes is most beneficial under his particular circumstances. More detailed information as to each class of shares is set forth under "Purchase of Shares".
FUNDAMENTAL VALUE AND GLOBAL OPPORTUNITY PORTFOLIOS
ACCOUNT
MAINTENANCE DISTRIBUTION
CLASS SALES CHARGE(/1/) FEE FEE CONVERSION FEATURE
- ----------------------------------------------------------------------------------------
A Maximum 5.25% initial No No No
sales charge(/2/)(/3/)
- ----------------------------------------------------------------------------------------
B CDSC for a period of up 0.25% 0.75% B shares convert to D shares
to four years at a rate automatically after
of 4.0% during the approximately eight
first year, decreasing years(/4/)
1.0% annually to 0.0%
- ----------------------------------------------------------------------------------------
C 1.0% CDSC for one year 0.25% 0.75% No
- ----------------------------------------------------------------------------------------
D Maximum 5.25% initial 0.25% No No
sales charge(/3/)
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QUALITY BOND AND U.S. GOVERNMENT SECURITIES PORTFOLIOS
ACCOUNT
MAINTENANCE DISTRIBUTION
CLASS SALES CHARGE(/1/) FEE FEE CONVERSION FEATURE
- ----------------------------------------------------------------------------------------
A Maximum 4.00% initial No No No
sales charge(/2/)(/3/)
- ----------------------------------------------------------------------------------------
B CDSC for a period of up 0.25% 0.50% B shares convert to D shares
to four years at a rate automatically after
of 4.0% during the approximately ten
first year, decreasing years(/4/)
1.0% annually to 0.0%
- ----------------------------------------------------------------------------------------
C 1.0% CDSC for one year 0.25% 0.55% No
- ----------------------------------------------------------------------------------------
D Maximum 4.00% initial 0.25% No No
sales charge(/3/)
|
Class A: Class A shares of a Portfolio 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. 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% for the Fundamental Value and Global Opportunity Portfolios and 4.00% for the Quality Bond and U.S. Government Securities Portfolios, which is reduced for purchases of $25,000 and over. Purchases of $1,000,000 or more may not be subject to an initial sales charge, but if the initial sales charge is waived, such purchases will be subject to a CDSC of 1.0% if the shares are redeemed within one year after purchase. Sales charges also are reduced under a right of accumulation which takes into account the investor's holdings of all classes of all MLAM-advised mutual funds. See "Purchase of Shares -- Initial Sales Charge Alternatives -- Class A and Class D Shares".
Class B: Class B shares of a Portfolio do not incur a sales charge when they are purchased, but they are subject to an ongoing account maintenance fee of 0.25% of the Portfolio's average net assets attributable to Class B shares, an ongoing distribution fee of 0.75% of average net assets attributable to Class B shares for the Fundamental Value and Global Opportunity Portfolios and 0.50% of average net assets attributable to Class B shares for the Quality Bond and U.S. Government Securities Portfolios, and a CDSC if they are redeemed within four years of purchase. Class B shares of a Portfolio will convert automatically into Class D shares of the same Portfolio approximately eight years after issuance in the case of the Fundamental Value and Global Opportunity Portfolios and approximately ten years after issuance in the case of the Quality Bond and U.S. Government Securities Portfolios. Class D shares are subject to an account maintenance fee but no distribution fee. If Class B shares of a Portfolio are exchanged for Class B shares of another Portfolio or 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 on to the holding period for the shares acquired. Automatic conversion of Class B shares into Class D shares will occur at least once each 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 will also convert automatically to Class D shares. The conversion period for dividend reinvestment shares is modified as described under "Purchase of Shares -- Deferred Sales Charge Alternatives -- Class B and Class C Shares -- Conversion of Class B Shares to Class D Shares".
Class C: Class C shares of a Portfolio do not incur a sales charge when they are purchased, but they are subject to an ongoing account maintenance fee of 0.25% of the Portfolio's average net assets attributable to Class C shares and an ongoing distribution fee of 0.75% of the Portfolio's average net assets attributable to Class C shares in the case of the Fundamental Value and Global Opportunity Portfolios or 0.55% of the Portfolio's average net assets attributable to Class C shares in the case of the Quality Bond and U.S. Government Securities Portfolios. 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 Program's Board of Directors and regulatory limitations.
Class D: Class D shares of a Portfolio incur an initial sales charge when they are purchased and are subject to an ongoing account maintenance fee of 0.25% of the Portfolio'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 after purchase. The schedule of initial sales charges and reductions for Class D shares for each Portfolio is the same as the schedule for Class A shares of that Portfolio. 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".
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 under his 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 there is an 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 on Class A shares, or may exceed the initial sales charge plus the accumulated ongoing account maintenance fee on Class D shares. 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 total 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 of a Portfolio will be converted into Class D shares of the same Portfolio after a conversion period of approximately eight years for the Fundamental Value and Global Opportunity Portfolios or ten years for the Quality Bond and U.S. Government Securities Portfolios, 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".
FINANCIAL HIGHLIGHTS
(UNAUDITED)
The financial information in the tables below is unaudited. Financial statements for each of the Portfolios for the period February 1, 1995 (commencement of operations) to March 31, 1995, are included in the Statement of Additional Information.
The following per share data and ratios have been derived from information provided in the financial statements.
FUNDAMENTAL VALUE PORTFOLIO
-----------------------------------------------
FOR THE PERIOD FEBRUARY 1, 1995+ TO
MARCH 31, 1995
-----------------------------------------------
CLASS A CLASS B CLASS C CLASS D
-------- -------- -------- --------
Increase (Decrease) in
Net Asset Value:
PER SHARE OPERATING PER-
FORMANCE:
Net asset value, begin-
ning of period......... $10.00 $10.00 $10.00 $10.00
-------- -------- -------- --------
Investment income--net.. 0.04 0.01 0.01 0.02
Realized and unrealized
gain on investments--
net.................... 0.40 0.41 0.41 0.41
-------- -------- -------- --------
Total from investment
operations............. 0.44 0.42 0.42 0.43
-------- -------- -------- --------
Net asset value, end of
period................. $ 10.44 $ 10.42 $ 10.42 $ 10.43
======== ======== ======== ========
TOTAL INVESTMENT RE-
TURN:**
Based on net asset value
per share.............. 4.40%++ 4.20%++ 4.20%++ 4.30%++
======== ======== ======== ========
RATIOS TO AVERAGE NET
ASSETS:
Expenses, excluding
account maintenance and
distribution fees and
net of reimbursement... 1.71%* 1.27%* 1.28%* 1.29%*
======== ======== ======== ========
Expenses, net of reim-
bursement.............. 1.71%* 2.27%* 2.28%* 1.54%*
======== ======== ======== ========
Expenses................ 2.73%* 3.05%* 3.03%* 2.32%*
======== ======== ======== ========
Investment income--net.. 2.68%* 1.73%* 1.69%* 2.45%*
======== ======== ======== ========
SUPPLEMENTAL DATA:
Net assets, end of pe-
riod (in thousands).... $ 2,124 $ 5,459 $ 1,177 $ 681
======== ======== ======== ========
Portfolio turnover...... 0.00% 0.00% 0.00% 0.00%
======== ======== ======== ========
|
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++ Aggregate total investment return.
QUALITY BOND PORTFOLIO
-----------------------------------------------
FOR THE PERIOD FEBRUARY 1, 1995+
TO MARCH 31, 1995
-----------------------------------------------
CLASS A CLASS B CLASS C CLASS D
-------- -------- -------- --------
INCREASE (DECREASE) IN
NET ASSET VALUE:
PER SHARE OPERATING PER-
FORMANCE:
Net asset value, begin-
ning of period......... $10.00 $10.00 $10.00 $10.00
-------- -------- -------- --------
Investment income--net.. 0.09 0.08 0.08 0.09
Realized and unrealized
gain (loss) on invest-
ments--net............. 0.00 (0.01) (0.01) (0.01)
-------- -------- -------- --------
Total from investment
operations............. 0.09 0.07 0.07 0.08
-------- -------- -------- --------
Less dividends from in-
vestment income--net... (0.09) (0.08) (0.08) (0.09)
-------- -------- -------- --------
Net asset value, end of
period................. $10.00 $ 9.99 $ 9.99 $ 9.99
======== ======== ======== ========
TOTAL INVESTMENT RE-
TURN:**
Based on net asset value
per share.............. 0.99%++ 0.68%++ 0.67%++ 0.76%++
======== ======== ======== ========
RATIOS TO AVERAGE NET
ASSETS:
Expenses, excluding
account maintenance and
distribution fees and
net of reimbursement... 0.00%* 0.03%* 0.04%* 0.00%*
======== ======== ======== ========
Expenses, net of reim-
bursement.............. 0.00%* 0.78%* 0.84%* 0.24%*
======== ======== ======== ========
Expenses................ 4.37%* 4.37%* 4.31%* 4.09%*
======== ======== ======== ========
Investment income--net.. 5.67%* 4.96%* 4.89%* 5.48%*
======== ======== ======== ========
SUPPLEMENTAL DATA:
Net assets, end of pe-
riod (in thousands).... $2,023 $ 909 $ 238 $ 78
======== ======== ======== ========
Portfolio turnover...... 0.00% 0.00% 0.00% 0.00%
======== ======== ======== ========
|
* Annualized.
** Total investment returns exclude the effect of sales loads.
+ Commencement of operations.
++ Aggregate total investment return.
US GOVERNMENT SECURITIES PORTFOLIO
---------------------------------------------------------------
FOR THE PERIOD FEBRUARY 1, 1995+ TO MARCH 31, 1995
---------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS D
------------ ------------ ------------ ------------
Increase (Decrease) in
Net Asset Value:
PER SHARE OPERATING PER-
FORMANCE:
Net asset value, begin-
ning of period......... $10.00 $10.00 $ 10.00 $ 10.00
------------ ------------ ------------ ------------
Investment income--net.. 0.14 0.13 0.13 0.14
Realized and unrealized
gain on investments--
net.................... 0.17 0.17 0.17 0.18
------------ ------------ ------------ ------------
Total from investment
operations............. 0.31 0.30 0.30 0.32
------------ ------------ ------------ ------------
Less dividends from in-
vestment income--net... (0.14) (0.13) (0.13) (0.14)
------------ ------------ ------------ ------------
Net asset value, end of
period................. $ 10.17 $ 10.17 $ 10.17 $ 10.18
============ ============ ============ ============
TOTAL INVESTMENT RE-
TURN:**
Based on net asset value
per share.............. 3.10%++ 2.99%++ 2.98%++ 3.17%++
============ ============ ============ ============
RATIOS TO AVERAGE NET
ASSETS:
Expenses, excluding
account maintenance and
distribution fees
and net of
reimbursement.......... 0.00%* 0.02%* 0.03%* 0.00%*
============ ============ ============ ============
Expenses, net of reim-
bursement.............. 0.00%* 0.77%* 0.83%* 0.25%*
============ ============ ============ ============
Expenses................ 3.35%* 3.87%* 4.14%* 3.40%*
============ ============ ============ ============
Investment income--net.. 8.40%* 7.53%* 7.53%* 8.16%*
============ ============ ============ ============
SUPPLEMENTAL DATA:
Net assets, end of pe-
riod (in thousands).... $ 5,151 $ 754 $ 183 $ 44
============ ============ ============ ============
Portfolio turnover...... 0.49% 0.49% 0.49% 0.49%
============ ============ ============ ============
|
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++ Aggregate total investment return.
See Notes to Financial Statements.
GLOBAL OPPORTUNITY PORTFOLIO
---------------------------------------------------------------
FOR THE PERIOD FEBRUARY 1, 1995+ TO MARCH 31, 1995
---------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS D
------------ ------------ ------------ ------------
Increase (Decrease) in
Net Asset Value:
PER SHARE OPERATING PER-
FORMANCE:
Net asset value, begin-
ning of period......... $10.00 $10.00 $10.00 $10.00
------------ ------------ ------------ ------------
Investment income--net.. 0.06 0.02 0.02 0.03
Realized and unrealized
gain on investments--
net.................... 0.03 0.05 0.05 0.05
------------ ------------ ------------ ------------
Total from investment
operations............. 0.09 0.07 0.07 0.08
------------ ------------ ------------ ------------
Net asset value, end of
period................. $ 10.09 $ 10.07 $ 10.07 $ 10.08
============ ============ ============ ============
TOTAL INVESTMENT RE-
TURN:**
Based on net asset value
per share.............. 0.90%++ 0.70%++ 0.70%++ 0.80%++
============ ============ ============ ============
RATIOS TO AVERAGE NET
ASSETS:
Expenses, excluding
account maintenance and
distribution fees and
net of reimbursement... 1.79%* 1.48%* 1.50%* 1.48%*
============ ============ ============ ============
Expenses, net of reim-
bursement.............. 1.79%* 2.48%* 2.50%* 1.73%*
============ ============ ============ ============
Expenses................ 3.06%* 3.85%* 3.83%* 3.06%*
============ ============ ============ ============
Investment income--net.. 3.76%* 3.33%* 3.44%* 4.10%*
============ ============ ============ ============
SUPPLEMENTAL DATA:
Net assets, end of pe-
riod (in thousands).... $ 8,107 $ 4,129 $ 717 $ 335
============ ============ ============ ============
Portfolio turnover...... 4.80% 4.80% 4.80% 4.80%
============ ============ ============ ============
|
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++ Aggregate total investment return.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Investment in Fixed Income Securities. All of the Portfolios are authorized to invest in fixed income securities. To the extent a portfolio invests in fixed income securities, the net asset value of its shares will be affected by changes in the general level of interest rates. Typically, when interest rates decline, the value of a portfolio of fixed income securities can be expected to rise. Conversely, when interest rates rise typically the value of a portfolio of fixed income securities can be expected to decline. See "Other Investment Policies and Practices of the Portfolios--Investments in Debt Securities".
Investments in Foreign Securities. The Fundamental Value Portfolio may invest up to 30% of its total assets, and the Global Opportunity Portfolio may invest without limitation, in the securities of foreign issuers. Investments in securities of foreign entities and securities denominated in foreign currencies involve risks not typically involved in domestic investment, including fluctuations in foreign exchange rates, future foreign political and economic developments, and the possible imposition of exchange controls or other foreign or U.S. governmental laws or restrictions applicable to such investments. Since the Fundamental Value and Global Opportunity Portfolios may invest in securities denominated or quoted in currencies other than the U.S. dollar, changes in foreign currency exchange rates may affect the value of investments in the portfolio and the unrealized appreciation or depreciation of investments insofar as U.S. investors are concerned. Changes in foreign currency exchange rates relative to the U.S. dollar will affect the U.S. dollar value of the Fundamental Value and Global Opportunity Portfolios' assets denominated in those currencies and the corresponding Portfolio's yield on such assets. Foreign currency exchange rates are determined by forces of supply and demand on the foreign exchange markets. These forces are, in turn, affected by the international balance of payments and other economic and financial conditions, government intervention, speculation, and other factors. Moreover, individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross national product, rate of inflation, capital reinvestment, resources, self-sufficiency and balance of payments position.
With respect to certain foreign countries, there is the possibility of expropriation of assets, confiscatory taxation, political or social instability or diplomatic developments which could affect investment in those countries. There may be less publicly available information about a foreign financial instrument than about a U.S. instrument, and foreign entities may not be subject to accounting, auditing and financial reporting standards and requirements comparable to those to which U.S. entities are subject. Foreign financial markets, while growing in volume, generally have substantially less volume than U.S. markets, and securities of many foreign companies are less liquid and their prices more volatile than securities of comparable domestic companies. Foreign markets also have different clearance and settlement procedures and in certain markets there have been times when settlements have been unable 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 Fundamental Value or Global Opportunity Portfolios are uninvested and no return is earned thereon. The inability of either Portfolio to make intended security purchases due to settlement problems could cause that Portfolio to miss attractive investment opportunities. Inability to dispose of securities in a Portfolio due to settlement problems could result either in losses to that Portfolio due to subsequent declines in value of the portfolio securities or, if the Portfolio has entered into a contract to sell the security, could result in possible liability to the purchaser. Costs associated with transactions in foreign securities generally are higher than costs associated with transactions in U.S. securities. There is generally less government supervision and regulation of exchanges, financial institutions and issuers in foreign countries than there is in the United States.
The operating expense ratios of the Fundamental Value and Global Opportunity Portfolios can be expected to be higher than those of an investment company investing exclusively in U.S. securities because the expenses of each Portfolio, such as custodial costs, may be higher.
Dividends and interest received by the Global Opportunity Portfolio and, to a lesser extent, the Fundamental Value Portfolio, may give rise to withholding and other taxes imposed by foreign countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. Because their participation in such Portfolios is in an IRA, shareholders will generally not be able to credit or deduct such taxes in computing their taxable incomes. See "Taxes".
International Investing in Countries with Smaller Capital Markets. The risks associated with investments in foreign securities discussed above are often heightened for investments in small capital markets.
There may be less publicly available information about an issuer in a smaller capital market than would be available about a U.S. company, and it may not be subject to accounting, auditing and financial reporting standards and requirements comparable to those to which U.S. companies are subject. As a result, traditional investment measurements, such as price/earnings ratios, as used in the United States, may not be applicable in certain capital markets.
Smaller capital markets, while often growing in trading volume, typically have substantially less volume than U.S. markets, and securities in many smaller capital markets are less liquid and their prices may be more volatile than securities of comparable U.S. companies. Brokerage commissions, custodial services, and other costs relating to investment in smaller capital markets are generally more expensive than in the United States. Such markets have different clearance and settlement procedures, and in certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. Further, satisfactory custodial services for investment securities may not be available in some countries having smaller capital markets, which may result in the Portfolio's incurring additional costs and delays in transporting and custodying such securities outside such countries. Delays in settlement could result in temporary periods when assets of the Portfolio are uninvested and no return is earned thereon. The inability of the Portfolio to make intended security purchases due to settlement problems could cause the Portfolio to miss attractive investment opportunities. Inability to dispose of a portfolio security due to settlement problems could result either in losses to the Portfolio due to subsequent declines in value of the portfolio security or, if the Portfolio has entered into a contract to sell the security, could result in possible liability to the purchaser. There is generally less government supervision and regulation of exchanges, brokers and issuers in countries having smaller capital markets than there is in the United States.
As a result, management of the Program may determine that, notwithstanding otherwise favorable investment criteria, it may not be practicable or appropriate to invest in a particular country. The Portfolios may invest in countries in which foreign investors, including management of the Program, have had no or limited prior experience.
Investments in Lower Rated Securities. The Global Opportunity Portfolio has established no rating criteria for the fixed income securities in which it may invest. Securities rated in the medium to lower rating
categories of nationally recognized rating agencies (commonly referred to as "junk bonds") are predominately speculative with respect to the capacity to pay interest and repay principal in accordance with the terms of the security and generally involve a greater volatility of price than securities in higher rating categories. The Portfolio does not intend to purchase securities that are in default. See "Other Investment Policies and Practices of the Portfolios--Investments in Debt Securities".
Derivative Investments. In order to seek to enhance income or to hedge various portfolio positions, including to hedge against price movements in markets in which the Portfolios anticipate increasing their exposure, the Portfolios may invest in certain instruments which may be characterized as derivative investments. These investments include various types of interest rate transactions, options and futures. Such investments also may consist of indexed securities, including inverse securities. The Program has express limitations on the percentage of its assets that may be committed to certain of such investments. Other of such investments have no express quantitative limitations, although they may be made solely for hedging purposes, not for speculation, and may in some cases require limitations as to the type of permissible counter-party to the transaction. Interest rate transactions involve the risk of an imperfect correlation between the index used in the hedging transactions and that pertaining to the securities which are the subject of such transactions. Similarly, utilization of options and futures transactions involves the risk of imperfect correlation in movements in the price of options and futures and movements in the price of the securities or interest rates which are the subject of the hedge. Investments in indexed securities, including inverse securities, subject the Portfolios to the risks associated with changes in the particular indexes, which may include reduced or eliminated interest payments and losses of invested principal. An investment in derivative instruments for the purpose of enhancing income may have certain speculative characteristics and may increase a Portfolio's volatility. For a further discussion of the risks associated with these investments, see "Other Investment Policies and Practices of the Portfolios -- Indexed and Inverse Securities" "--Portfolio Strategies Involving Options and Futures" and Appendix A--"Options and Futures Transactions". Management of the Program believes the above investments are appropriate for the Portfolios.
INVESTMENT OBJECTIVES AND POLICIES
The Program consists of four separate Portfolios: the Fundamental Value Portfolio, the Quality Bond Portfolio, the U.S. Government Securities Portfolio and the Global Opportunity Portfolio, each with its own separate investment objectives. Each of the Portfolios pursues its investment objectives through separate investment policies. Set forth below are the specific investment objectives and policies of each Portfolio, followed by a description of general investment policies applicable to some or all of the Portfolios. Management of the Program believes that all of the Portfolios' investments will be appropriate for the retirement plans for which the Program is designed.
FUNDAMENTAL VALUE PORTFOLIO
The Fundamental Value Portfolio seeks capital appreciation and, secondarily, income by investing in securities, with at least 65% of the Portfolio's assets being invested in equities. These objectives are fundamental policies of the Fundamental Value Portfolio and may not be changed without the approval of a majority of the Portfolio's outstanding voting securities. The Portfolio seeks special opportunities in securities that the Investment Adviser believes are undervalued and therefore represent investment value, including
securities that are selling at a discount, either from book value or historical price-earnings ratios, or seem capable of recovering from temporarily out-of- favor considerations. Particular emphasis is placed on securities which provide an above-average dividend return and sell at a below-average price-earnings ratio. There can be no assurance that the objectives of the Fundamental Value Portfolio will be achieved.
Investment emphasis is on equities, primarily common stock and, to a lesser extent, securities convertible into common stocks. The Fundamental Value Portfolio also may invest in preferred stocks and non-convertible debt securities. The Portfolio may invest up to 30% of its total assets, taken at market value at the time of acquisition, in the securities of foreign issuers.
See "Other Investment Policies and Practices of the Portfolios" below for additional investment policies applicable to the Fundamental Value Portfolio.
QUALITY BOND PORTFOLIO
The Quality Bond Portfolio seeks 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. The Portfolio will invest primarily in securities rated in the top three rating categories (typically "A" or better) of a nationally recognized rating agency such as Moody's, S&P or Fitch, or in securities that possess, in the judgment of the Investment Adviser, similar credit characteristics. This objective is a fundamental policy of the Quality Bond Portfolio and may not be changed without the approval of a majority of the Portfolio's outstanding voting securities. The credit risk of the Portfolio should be minimized by the quality of the bonds in which it will invest, but the long maturities that typically provide the best yields will subject the Portfolio to possible substantial price changes resulting from market yield fluctuations. Portfolio management strategy will attempt to mitigate adverse price changes and optimize favorable price changes through active trading that shifts the maturity and/or quality structure of the Portfolio within the overall investment guidelines. There can be no assurance that the objectives of the Quality Bond Portfolio will be achieved.
The Quality Bond Portfolio may continue to hold securities which, after being purchased by the Portfolio, are downgraded to a rating below the top three rating categories of a nationally recognized rating agency as well as any unrated securities which, in the Investment Adviser's judgment, have suffered a similar decline in quality.
The securities in the Quality Bond Portfolio will be varied from time to time depending upon the judgment of management as to prevailing conditions in the economy and the securities markets and the prospects for interest rate changes among different categories of fixed income securities. The Portfolio anticipates that under normal circumstances more than 90% of the assets of the Portfolio will be invested in fixed income securities, including convertible and nonconvertible debt securities and preferred stock. In addition, as a matter of operating policy, at least 65% of the assets of the Portfolio will under normal circumstances be invested in corporate bonds. The remaining assets of the Portfolio may be held in cash or, as described herein, may be used in connection with hedging transactions in futures contracts, related options, and options on debt securities, or in connection with non-hedging transactions in options on debt securities. The Portfolio does not intend to invest in common stocks, rights or other equity securities. Transactions in options on debt securities for non-hedging purposes may have certain speculative characteristics.
See "Other Investment Policies and Practices of the Portfolios" below for additional investment policies applicable to the Quality Bond Portfolio.
U.S. GOVERNMENT SECURITIES PORTFOLIO
The U.S. Government Securities Portfolio seeks 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. This investment objective is a fundamental policy of the Portfolio which may not be changed without a vote of a majority of the outstanding shares of the Portfolio. There can be no assurance that the objectives of the U.S. Government Securities Portfolio will be achieved.
The securities in which the U.S. Government Securities Portfolio may invest are marketable securities issued or guaranteed by the U.S. Government, by various agencies of the U.S. Government and by various instrumentalities which have been established or sponsored by the U.S. Government ("U.S. Government securities"). Certain of these obligations, including U.S. Treasury bills, notes and bonds and securities of GNMA and the Federal Housing Administration ("FHA"), are issued or guaranteed by the U.S. Government and supported by the full faith and credit of the United States. Other U.S. Government securities are issued or guaranteed by Federal agencies or government-sponsored enterprises and are not direct obligations of the United States but involve sponsorship or guarantees by Government agencies or enterprises. The guarantee by Federal agencies or government-sponsored enterprises of their securities does not extend to the Program's shares. These obligations include securities that are supported by the right of the issuer to borrow from the Treasury, such as obligations of Federal Home Loan Banks, and securities that are supported only by the credit of the instrumentality, such as Federal National Mortgage Association ("FNMA") bonds. Because the U.S. Government is not obligated to provide support to its instrumentalities, the Portfolio will invest in obligations issued by these instrumentalities where the Portfolio is satisfied that the credit risk with respect to the issuers is minimal. In addition, the Portfolio may invest up to 5% of its assets in obligations issued or guaranteed by the International Bank for Reconstruction and Development (the "World Bank").
The Portfolio has authority to invest in all U.S. Government securities. It is anticipated that under certain circumstances as described below, a significant portion of its portfolio of U.S. Government securities may consist of GNMA mortgaged-backed certificates ("GNMA Certificates") and other U.S. Government securities representing ownership interests in mortgage pools.
The Investment Adviser will effect portfolio transactions without regard to any holding period if, in its judgment, such transactions are advisable in light of a change in general market, economic or financial conditions. While the Portfolio anticipates that its annual turnover rate should not exceed 400% under normal conditions, it is impossible to predict portfolio turnover rates. A high portfolio turnover rate involves correspondingly greater transaction costs in the form of dealer spreads and brokerage commissions, which are borne directly by the Portfolio. Such turnover also has certain tax consequences for the Portfolio.
See "Other Investment Policies and Practices of the Portfolios" below for additional investment policies applicable to the U.S. Government Securities Portfolio.
GLOBAL OPPORTUNITY PORTFOLIO
The Global Opportunity Portfolio seeks a high total investment return 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 types of securities and markets, in response to changing market and economic trends. Total investment return is the aggregate of capital value
changes and income. This objective is a fundamental policy of the Global Opportunity Portfolio and may not be changed without the approval of a majority of the Portfolio's outstanding voting securities. There can be no assurance that the objectives of the Global Opportunity Portfolio will be achieved.
The Global Opportunity Portfolio will invest in a portfolio of U.S. and foreign equity, debt and money market securities. The composition of the portfolio among these securities and markets will be varied from time to time by the Investment Adviser in response to changing market and economic trends. This fully managed investment approach provides the Portfolio with the opportunity to benefit from anticipated shifts in the relative performance of different types of securities and different capital markets. For example, at times the Portfolio may emphasize investments in equity securities in anticipation of significant advances in stock markets and at times may emphasize debt securities in anticipation of significant declines in interest rates. Similarly, the Portfolio may emphasize foreign markets in its security selection when such markets are expected to outperform, in U.S. dollar terms, the U.S. markets. The Portfolio will seek to identify longer-term structural or cyclical changes in the various economies and markets of the world which are expected to benefit certain capital markets and certain securities in those markets to a greater extent than other investment opportunities.
In determining the allocation of assets among capital markets, the Investment Adviser will consider, among other factors, the relative valuation, condition and growth potential of the various economies, including current and anticipated changes in the rates of economic growth, rates of inflation, corporate profits, capital reinvestment, resources, self-sufficiency, balance of payments, governmental deficits or surpluses and other pertinent financial, social and political factors which may affect such markets. In allocating among equity, debt and money market securities within each market, the Investment Adviser also will consider the relative opportunity for capital appreciation of equity and debt securities, dividend yields, and the level of interest rates paid on debt securities of various maturities.
While there are no prescribed limits on the geographical allocation of the Portfolio's assets, the Investment Adviser anticipates that it will invest primarily in the securities of corporate and governmental issuers domiciled or located in the U.S., Canada, Western Europe and the Far East. In addition, the Investment Adviser anticipates that a portion of the Portfolio's assets normally will be invested in the U.S. securities markets and the other major capital markets. Under normal conditions, the Portfolio's investments will be denominated in at least three currencies or multinational currency units. However, the Portfolio reserves the right to invest substantially all of its assets in U.S. markets or U.S. dollar-denominated obligations when market conditions warrant.
Similarly, there are no prescribed limits on the allocation of the Portfolio's assets among equity, debt and money market securities. Therefore, at any given time, the Portfolio's assets may be primarily invested in either equity, debt or money market securities or in any combination thereof. However, the Investment Adviser anticipates that the Portfolio's holdings generally will include both equity and debt securities.
The Global Opportunity Portfolio may invest up to 34% of the Portfolio's assets in debt securities rated below "investment grade" (i.e., Ba or lower by Moody's or BB or lower by S&P or Fitch) or which possess, in the judgment of the Investment Adviser, similar credit characteristics. Investment in debt securities rated in the medium to lower rating categories of a nationally recognized rating agency or in unrated securities of comparable quality involve special risks which are described more fully below under "Other Investment Policies and Practices of the Portfolios--Investments in Debt Securities-- Credit Quality".
See "Other Investment Policies and Practices of the Portfolios" below for additional investment policies applicable to the Global Opportunity Portfolio.
OTHER INVESTMENT POLICIES AND PRACTICES OF THE PORTFOLIOS
Set forth below are additional investment policies applicable to some or all of the Portfolios.
INVESTMENTS IN EQUITY SECURITIES
The Fundamental Value Portfolio will invest primarily (at least 65% of the Portfolio's net assets) in equity securities. A significant portion of the Global Opportunity Portfolio also may be invested in equity securities. In purchasing equity securities for these Portfolios, the Investment Adviser will seek to identify the securities of companies and industry sectors which are expected to provide high total return relative to alternative equity investments. Both Portfolios generally will seek to invest in securities the Investment Adviser believes to be undervalued. Undervalued issues include securities selling at a discount from the price-to-book value ratios and price- earnings ratios computed with respect to the relevant stock market averages. A Portfolio also may consider as undervalued securities selling at a discount from their historic price-to-book value or price-earnings ratios, even though these ratios may be above the ratios for the stock market averages. Securities offering dividend yields higher than the yields for the relevant stock market averages or higher than such securities' historic yield may also be considered to be undervalued. The Portfolios may also invest in the securities of small and emerging growth companies when such companies are expected to provide a higher total return than other equity investments. Such companies are characterized by rapid historical growth rates, above-average returns on equity or special investment value in terms of their products or services, research capabilities or other unique attributes. The Investment Adviser will seek to identify small and emerging growth companies that possess superior management, marketing ability, research and product development skills and sound balance sheets.
Investment in the securities of small and emerging growth companies involves greater risk than investment in larger, more established companies. Such risks include the fact that securities of small or emerging growth companies may be subject to more abrupt or erratic market movements than larger, more established companies or the market average in general. Also, these companies may have limited product lines, markets or financial resources, or they may be dependent on a limited management group.
There may be periods when market and economic conditions exist that favor certain types of tangible assets as compared to other types of investments.
INVESTMENTS IN DEBT SECURITIES
The Quality Bond and U.S. Government Securities Portfolios will invest primarily in debt securities. A significant portion of the Global Opportunity Portfolio also may be invested in debt securities. The average maturity of a Portfolio's holdings of debt securities will vary based on the Investment Adviser's assessment of pertinent economic and market conditions. As with all debt securities, changes in market yields will affect the value of such securities. Prices generally increase when interest rates decline and decrease when interest rates rise. Prices of longer term securities generally fluctuate more in response to interest rate changes than do shorter term securities.
The debt securities in which these Portfolios may invest include securities issued or guaranteed by the U.S. Government and its agencies or instrumentalities and debt obligations issued by U.S. corporations. Such
securities may include mortgage-backed securities issued or guaranteed by U.S. governmental entities or by private issuers. In addition, the Fundamental Value and Global Opportunity Portfolios may invest in debt securities issued by foreign corporations or issued or guaranteed by foreign governments (including foreign states, provinces and municipalities), by agencies and instrumentalities thereof or by international organizations designed or supported by multiple governmental entities (which are not obligations of the U.S. Government or foreign governments) to promote economic reconstruction or development ("supranational entities") such as the World Bank.
GNMA Certificates and Other Mortgage-Backed Government Securities. The U.S. Government Securities and Global Opportunity Portfolios may invest in GNMA Certificates and other mortgage-backed government securities. GNMA Certificates are mortgage-backed securities of the modified pass-through type, which means that both interest and principal payments (including prepayments) are passed through monthly to the holder of the Certificate. The National Housing Act provides that the full faith and credit of the United States is pledged to the timely payment of principal and interest by GNMA of amounts due on these GNMA Certificates. Each Certificate evidences an interest in a specific pool of mortgage loans insured by the FHA or the Farmers Home Administration or guaranteed by the Veterans Administration ("VA"). GNMA is a wholly-owned corporate instrumentality of the United States within the Department of Housing and Urban Development.
The average life of GNMA Certificates varies with the maturities of the underlying mortgage instruments which have maximum maturities of 30 years. The average life is likely to be substantially less than the original maturity of the mortgage pools underlying the securities as a result of prepayments or refinancing of such mortgages. Such prepayments are passed through to the registered holder with the regular monthly payments of principal and interest. In addition, GNMA offers a pass-through security backed by adjustable-rate mortgages. As prepayment rates vary widely, it is not possible to predict accurately the average life of a particular pool. The actual yield of each GNMA Certificate is influenced by the prepayment experience of the mortgage pool underlying the certificate.
In addition to GNMA Certificates, the U.S. Government Securities and Global Opportunity Portfolios may invest in mortgage-backed securities issued by FNMA and by the Federal Home Loan Mortgage Corporation ("FHLMC"). FNMA, a federally- chartered and privately-owned corporation, issues pass-through securities and certificates representing an interest in a pool of FNMA pass-through securities which are guaranteed as to payment of principal and interest by FNMA. FHLMC, a corporate instrumentality of the United States, issues participation certificates which represent an interest in mortgages from FHLMC's portfolio and securities representing an interest in a pool of FHLMC participation certificates. FHLMC guarantees the timely payment of interest and the ultimate collection of principal. As is the case with GNMA Certificates, the actual maturity of and realized yield on particular FNMA and FHLMC mortgage-backed securities will vary based on the prepayment experience of the underlying pool of mortgages. Securities guaranteed by FNMA and FHLMC are not backed by the full faith and credit of the United States.
Mortgage-backed U.S. Government securities typically provide a higher potential for current income than other types of U.S. Government securities; however, U.S. Treasury bills, notes and bonds typically provide a higher potential for capital appreciation than mortgage-backed securities.
Payments of principal of and interest on mortgage-backed securities are made more frequently than are payments on conventional debt securities. In addition, holders of mortgage-backed securities may receive unscheduled payments of principal at any time representing prepayments on the underlying mortgage loans or financial assets. Such prepayments may usually be made by the related obligor without penalty.
Prepayment rates are affected by changes in prevailing interest rates and numerous other economic, geographic, social and other factors. Changes in the rate of prepayments will generally affect the yield to maturity of the security. Moreover, when the holder of the security attempts to reinvest prepayments or even the scheduled payments of principal and interest, it may receive a rate of interest which is higher or lower than the rate on the mortgage-backed securities originally held. To the extent that mortgage-backed securities are purchased at a premium, mortgage foreclosures and principal prepayments may result in a loss to the extent of the premium paid. If such securities are bought at a discount, both scheduled payments of principal and unscheduled prepayments will increase current and total returns of the Portfolio.
Stripped Mortgage-Backed Securities. The U.S. Government Securities and Global Opportunity Portfolios may invest in stripped mortgage-backed securities ("SMBSs") issued by agencies or instrumentalities of the United States. SMBSs are derivative multiclass mortgage-backed securities. SMBS arrangements commonly involve two classes of securities that receive different proportions of the interest and principal distributions on a pool of mortgage assets. A common variety of SMBS is where one class (the principal-only or "PO" class) receives some of the interest and most of the principal from the underlying assets, while the other class (the interest-only or "IO" class) receives most of the interest and the remainder of the principal. In the most extreme case, the IO class receives all of the interest, while the PO class receives all of the principal. While a Portfolio may purchase securities of a PO class, it is more likely to purchase the securities of an IO class. The yield to maturity of an IO class is extremely sensitive to the rate of principal payments (including prepayments) on the related underlying assets, and a rapid rate of principal payments in excess of that considered in pricing the securities will have a material adverse effect on an IO security's yield to maturity. If the underlying mortgage assets experience greater than anticipated payments of principal, a Portfolio may fail to recoup fully its initial investment in IOs. In addition, there are certain types of IOs which represent the interest portion of a particular class as opposed to the interest portion of the entire pool. The sensitivity of this type of IO to interest rate fluctuations may be increased because of the characteristics of the principal portion to which they relate. As a result of the above factors, the Portfolios generally will purchase IOs only as a component of so-called "synthetic" securities. This means that purchases of IOs will be matched with certain purchases of other securities such as inverse floating rate collateralized mortgage obligations ("CMOs") or fixed rate securities; as interest rates fall, presenting a greater risk of unanticipated prepayments of principal, the negative effect on the Portfolio because of its holdings of IOs should be diminished somewhat because of the increased yield on the inverse floating rate CMOs or the increased appreciation on the fixed rate securities. IOs and POs of SMBSs are considered by the staff of the Commission to be illiquid securities and, consequently, as long as the staff maintains this position, the Portfolio will not invest in IOs or POs in an amount which, taken together with the Portfolio's other investments in illiquid securities, exceeds 15% (10% to the extent required by certain state laws) of the Portfolio's total assets.
Foreign Debt Securities. The obligations of foreign governmental entities have various kinds of government support and include obligations issued or guaranteed by foreign governmental entities with taxing power. These obligations may or may not be supported by the full faith and credit of a foreign government. The Global Opportunity Portfolio will invest in foreign government securities of issuers considered stable by the Investment Adviser. The Investment Adviser does not believe that the credit risk inherent in the obligations of stable foreign governments is significantly greater than that of U.S. Government securities.
Portfolio Maturity. Neither the U.S. Government Securities Portfolio nor the portion of the Global Opportunity Portfolio invested in debt securities is limited as to the maturities of its portfolio investments. The Investment Adviser may adjust the average maturity of a Portfolio's investments from time to time,
depending on its assessment of the relative yields available on securities of different maturities and its assessment of future interest rate patterns. Thus, at various times the average maturity of the Portfolio may be relatively short (from under one year to five years, for example) and at other times may be relatively long (over 10 years, for example).
Credit Quality. The Quality Bond Portfolio will invest primarily in securities rated in the top three (typically A or better) rating categories of a nationally recognized rating agency such as Moody's, S&P or Fitch, or in securities that possess, in the judgment of the Investment Adviser, similar credit characteristics.
The Investment Adviser considers the ratings assigned by nationally recognized rating agencies as one of several factors in its independent credit analysis of issuers. If a debt security in the Quality Bond Portfolio is downgraded below A the Investment Adviser will consider factors such as price, credit risk, market conditions and interest rates and will sell such security only if, in the Investment Adviser's judgment, it is advantageous to do so.
The Global Opportunity Portfolio is authorized to invest without limitation in fixed income securities rated below Ba by Moody's or BB by S&P or Fitch or in unrated securities which, in the Investment Adviser's judgment, possess similar credit characteristics ("high yield bonds"). The Program's Board of Directors has adopted a policy that the Global Opportunity Portfolio will not invest more than 34% of its assets in obligations rated by a nationally recognized rating agency below investment grade, or in obligations deemed by the Investment Adviser to possess similar credit characteristics. Investment in high yield bonds (which are sometimes referred to as "junk" bonds) involves substantial risk. Investments in high yield bonds will be made only when, in the judgment of the Investment Adviser, such securities provide attractive total return potential, relative to the risk of such securities, as compared to higher quality debt securities. Securities rated BB or lower by S&P or Fitch or Ba or lower by Moody's are considered by those rating agencies to have varying degrees of speculative characteristics. Consequently, although high yield bonds can be expected to provide higher yields, such securities may be subject to greater market price fluctuations and risk of loss of principal than lower yielding, higher rated fixed income securities. The Global Opportunity Portfolio will not invest in debt securities in the lowest rating categories (CC or lower for S&P or Fitch or Ca or lower for Moody's) unless the Investment Adviser believes that the financial condition of the issuer or the protection afforded the particular securities is stronger than would otherwise be indicated by such low ratings. See Appendix B-- "Ratings of Corporate Debt Securities" for additional information regarding high yield bonds.
High yield bonds may be issued by less creditworthy companies or by larger, highly leveraged companies and are frequently issued in corporate restructurings such as mergers and leveraged buyouts. Such securities are particularly vulnerable to adverse changes in the issuer's industry and in general economic conditions. High yield bonds frequently are junior obligations of their issuers, so that in the event of the issuer's bankruptcy, claims of the holders of high yield bonds will be satisfied only after satisfaction of the claims of senior security holders. While the high yield bonds in which the Portfolio may invest normally do not include securities which, at the time of investment, are in default or the issuers of which are in bankruptcy, there can be no assurance that such events will not occur after the Portfolio purchases a particular security, in which case the Portfolio may experience losses and incur costs.
High yield bonds tend to be more volatile than higher rated fixed income securities so that adverse economic events may have a greater impact on the prices of high yield bonds than on higher rated fixed income securities. Like higher rated fixed income securities, high yield bonds are generally purchased and
sold through dealers who make a market in such securities for their own accounts. However, there are fewer dealers in the high yield bond market which may be less liquid than the market for higher rated fixed income securities even under normal economic conditions. Also, there may be significant disparities in the prices quoted for high yield bonds by various dealers. Adverse economic conditions or investor perceptions (whether or not based on economic fundamentals) may impair the liquidity of this market and may cause the prices the Portfolio receives for its high yield bonds to be reduced, or the Portfolio may experience difficulty in liquidating a portion of its portfolio. Under such conditions, judgment may play a greater role in valuing certain of the Portfolio's securities than in the case of securities trading in a more liquid market.
INVESTMENTS IN SECURITIES DENOMINATED IN FOREIGN CURRENCIES
Both the Fundamental Value and Global Opportunity Portfolios may invest in securities denominated in currencies other than the U.S. dollar. In selecting securities denominated in foreign currencies, the Investment Adviser will consider, among other factors, the effect of movement in currency exchange rates on the U.S. dollar value of such securities. An increase in the value of a currency will increase the total return to the Portfolio of securities denominated in such currency. Conversely, a decline in the value of the currency will reduce the total return. The Investment Adviser may seek to hedge all or a portion of a Portfolio's foreign securities through the use of forward foreign currency contracts, currency options, futures contracts and options thereon or derivative securities. See "Indexed and Inverse Securities" and "Portfolio Strategies Involving Options and Futures" below and Appendix A -- "Options and Futures Transactions".
INVESTMENTS IN MONEY MARKET SECURITIES
The Global Opportunity Portfolio may invest a significant portion of its assets in short-term, high quality debt instruments. In addition, for temporary or defensive purposes or in anticipation of redemptions, each of the Portfolios is authorized to invest up to 100% of its assets in such money market instruments, including obligations of or guaranteed by the U.S. Government or its instrumentalities or agencies, certificates of deposit, bankers' acceptances and other bank obligations, commercial paper rated in the highest category by a nationally recognized rating agency or other fixed income securities deemed by the Investment Adviser to be consistent with the objectives of the Portfolio, or the Portfolio may hold its assets in cash. The obligations of commercial banks may be issued by U.S. banks, foreign branches of U.S. banks ("Eurodollar" obligations) or U.S. branches of foreign banks ("Yankeedollar" obligations).
WHEN-ISSUED SECURITIES, FORWARD COMMITMENTS AND DELAYED DELIVERY TRANSACTIONS
Each Portfolio may purchase securities on a when-issued or forward commitment basis and may purchase or sell securities for delayed delivery. These transactions occur when securities are purchased or sold by a Portfolio with payment and delivery taking place in the future to secure what is considered an advantageous yield and price to the Portfolio at the time of entering into the transaction. Although none of the Portfolios has established limits on the percentage of its assets that may be committed in connection with such transactions, each Portfolio will maintain with the Program's custodian a segregated account of cash, cash equivalents, U.S. Government securities or other high grade liquid debt or equity securities denominated in U.S. dollars or non-U.S. currencies in an aggregate amount equal to the amount of the Portfolio's commitment in connection with such purchase transactions.
STANDBY COMMITMENT AGREEMENTS
Each Portfolio may from time to time enter into standby commitment agreements. Such agreements commit a Portfolio, for a stated period of time, to purchase a stated amount of a fixed income security which may be issued and sold to the Portfolio at the option of the issuer. The price and coupon of the security is fixed at the time of the commitment. At the time of entering into the agreement, the Portfolio is paid a commitment fee, regardless of whether or not the security is ultimately issued, which typically is approximately 0.5% of the aggregate purchase price of the security which the Portfolio has committed to purchase. A Portfolio will enter into such agreements only for the purpose of investing in the security underlying the commitment at a yield and price which is considered advantageous to the Portfolio. None of the Portfolios will enter into a standby commitment with a remaining term in excess of 45 days, and each Portfolio will limit its investment in such commitments so that the aggregate purchase price of the securities subject to such commitments, together with the value of portfolio securities subject to legal restrictions on resale, will not exceed 15% (10% to the extent required by certain state laws) of its total assets taken at the time of acquisition of such commitment or security. The Portfolio will at all times maintain a segregated account with its custodian of cash, cash equivalents, U.S. Government securities or other high grade liquid debt or equity securities denominated in U.S. dollars or non-U.S. currencies in an aggregate amount equal to the purchase price of the securities underlying the commitment.
There can be no assurance that the securities subject to a standby commitment will be issued and, if issued, the value of the security on the delivery date may be more or less than its purchase price. Since the issuance of the security underlying the commitment is at the option of the issuer, a Portfolio may bear the risk of a decline in the value of such security and may not benefit from an appreciation in the value of the security during the commitment period.
The purchase of a security subject to a standby commitment agreement and the related commitment fee will be recorded on the date on which the security reasonably can be expected to be issued, and the value of the security will thereafter be reflected in the calculation of the related Portfolio's net asset value. The cost basis of the security will be adjusted by the amount of the commitment fee. In the event the security is not issued, the commitment fee will be recorded as income on the expiration date of the standby commitment.
REPURCHASE AGREEMENTS AND PURCHASE AND SALE CONTRACTS
Each Portfolio may invest in securities pursuant to repurchase agreements or purchase and sale contracts. Repurchase agreements and purchase and sale contracts may be entered into only with financial institutions which have capital of at least $50 million or whose obligations are guaranteed by an entity having capital of at least $50 million. Under such agreements, the other party agrees, upon entering into the contract with a Portfolio, to repurchase the security at a mutually agreed upon time and price in a specified currency, thereby determining the yield during the term of the agreement. This results in a fixed rate of return insulated from market fluctuations during such period, although such return may be affected by currency fluctuations. In the case of repurchase agreements, the prices at which the trades are conducted do not reflect accrued interest on the underlying obligation; whereas, in the case of purchase and sale contracts, the prices take into account accrued interest. Such agreements usually cover short periods, such as under one week. Repurchase agreements may be construed to be collateralized loans by the purchaser to the seller secured by the securities transferred to the purchaser. In the case of a repurchase agreement, as a purchaser, a Portfolio will require the seller to provide additional collateral if the market value of the securities falls below the repurchase price at any time during the term of the repurchase agreement; the Portfolio does not have the right to seek additional collateral
in the case of purchase and sale contracts. In the event of default by the seller under a repurchase agreement construed to be a collateralized loan, the underlying securities are not owned by the Portfolio but only constitute collateral for the seller's obligation to pay the repurchase price. Therefore, a Portfolio may suffer time delays and incur costs or possible losses in connection with disposition of the collateral.
A purchase and sale contract differs from a repurchase agreement in that the contract arrangements stipulate that the securities are owned by the Portfolio. In the event of a default under such a repurchase agreement or under a purchase and sale contract, instead of the contractual fixed rate, the rate of return to the Portfolio would be dependent upon intervening fluctuations of the market values of such securities and the accrued interest on the securities. In such event, the Portfolio would have rights against the seller for breach of contract with respect to any losses arising from market fluctuations following the failure of the seller to perform. A Portfolio may not invest in repurchase agreements or purchase and sale contracts maturing in more than seven days if such investments, together with the Portfolio's other illiquid investments, would exceed 15% (10% to the extent required by certain state laws) of the Portfolio's total assets.
INDEXED AND INVERSE SECURITIES
The Portfolios may invest in securities whose potential investment return is based on the change in particular measurements of value or rate (an "index"). As an illustration, the Portfolios may invest in a security that pays interest and returns principal based on the change in an index of interest rates or of the value of a precious or industrial metal. Interest and principal payable on a security may also be based on relative changes among particular indexes. In addition, the Portfolios may invest in securities whose potential investment return is inversely based on the change in particular indexes. For example, the Portfolios may invest in securities that pay a higher rate of interest and principal when a particular index decreases and pay a lower rate of interest and principal when the value of the index increases. To the extent that the Portfolios invest in such types of securities, they will be subject to the risks associated with changes in the particular indexes, which may include reduced or eliminated interest payments and losses of invested principal. Indexed and inverse securities are currently issued by a number of U.S. governmental agencies such as FHLMC and FNMA, as well as a number of other financial institutions. To the extent the Portfolios invest in such instruments, under current market conditions, they most likely will purchase indexed and inverse securities issued by the above-mentioned U.S. governmental agencies.
Certain indexed securities, including certain inverse securities, may have the effect of providing a degree of investment leverage, because they may increase or decrease in value at a rate that is a multiple of the changes in applicable indices. As a result, the market value of such securities will generally be more volatile than the market values of fixed-rate securities. The Portfolios believe that indexed securities, including inverse securities, represent flexible portfolio management instruments that may allow the Portfolios to seek potential investment return, hedge other portfolio positions, or vary the degree of portfolio leverage relatively efficiently under different market conditions.
LENDING OF PORTFOLIO SECURITIES
Each Portfolio may from time to time lend securities from its portfolio with a value not exceeding 33 1/3% of its total assets, to banks, brokers and other financial institutions and receive collateral in cash or securities issued or guaranteed by the U.S. Government. Such collateral will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. This limitation is a fundamental
policy of each Portfolio, and it may not be changed without the approval of the holders of a majority of the Portfolio's outstanding voting securities, as defined in the Investment Company Act of 1940, as amended (the "Investment Company Act"). During the period of such a loan, the Portfolio 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, a Portfolio 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 falls below the market value of the borrowed securities.
PORTFOLIO STRATEGIES INVOLVING OPTIONS AND FUTURES
Each Portfolio may engage in various portfolio strategies to seek to increase its return through the use of listed or over-the-counter ("OTC") options on its portfolio securities and to hedge its portfolio against adverse movements in the markets in which it invests. Each Portfolio is authorized to write (i.e., sell) covered put and call options on its portfolio securities or securities in which it anticipates investing and purchase put and call options on securities. In addition, the Fundamental Value and Global Opportunity Portfolios may engage in transactions in stock index options, stock index futures and related options on such futures and may deal in forward foreign exchange transactions and foreign currency options and futures and related options on such futures. The Quality Bond, U.S. Government Securities and Global Opportunity Portfolios may engage in transactions in interest rate futures and related options on such futures. Each of these portfolio strategies is described in more detail in "Appendix A--Options and Futures Transactions" attached to this Prospectus and in the Statement of Additional Information. Although certain risks are involved in options and futures transactions (as discussed in the Appendix), the Investment Adviser believes that, because the Portfolios will (i) write only covered options on portfolio securities or securities in which they anticipate investing and (ii) engage in other options and futures transactions only for hedging purposes, the options and portfolio strategies of the Portfolios will not subject any Portfolio to the risks frequently associated with the speculative use of options and futures transactions. While each Portfolio's use of hedging strategies is intended to reduce the volatility of the net asset value of shares of that Portfolio, each Portfolio's net asset value will fluctuate. There can be no assurance that any Portfolio's hedging transactions will be effective. Furthermore, each Portfolio will only engage in hedging activities from time to time and may not necessarily be engaging in hedging activities when movements in the equity or debt markets, interest rates or currency exchange rates occur.
ILLIQUID SECURITIES
Each Portfolio may invest up to 15% of its assets in illiquid securities, although it will limit such investments to 10% of its assets to the extent required by state law. Pursuant to that restriction, the Portfolios may not invest in securities that cannot readily be 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 of the Program has not determined to be liquid pursuant to applicable law, if at the time of acquisition more than 15% (or 10%, if state law so requires) of that Portfolio's assets, taken at market value, would be invested in such securities. Securities subject to this restriction include repurchase agreements maturing in more than seven days and securities the disposition of which is subject to other legal restrictions, such as restrictions imposed by the Securities Act of 1933, as amended (the "Securities Act"), on the resale of securities acquired in certain private placements. If registration of these securities
under the Securities Act is required, such registration may not be readily accomplished, and if such securities may be resold without registration, such resale may be permissible only in limited quantities. In either event, a Portfolio may not be able to sell these restricted securities at a time which, in the judgment of the Investment Adviser, would be most opportune.
Although not a fundamental policy, each Portfolio will include OTC options and securities underlying such options (to the extent provided under "Restrictions on OTC Options" in Appendix A hereto) in calculating the amount of its assets subject to the limitation on restricted securities. No Portfolio will change or modify this policy prior to the change or modification by the Commission staff of its positions regarding OTC options.
Notwithstanding the above limitation, each Portfolio may purchase securities that are not registered under the Securities Act but that can be offered and sold to "qualified institutional buyers" under Rule 144A under the Securities Act, provided that the Program's Board of Directors, or the Investment Adviser pursuant to guidelines adopted by the Board, continuously determines, based on trading markets for the specific Rule 144A security, that it is liquid. The Board of Directors, however, will retain oversight and is ultimately responsible for the liquidity determinations. Since it is not possible to predict with assurance exactly how this market for restricted securities offered and sold under Rule 144A will develop, the Board of Directors will monitor carefully each Portfolio'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 a Portfolio to the extent that qualified institutional buyers become for a time uninterested in purchasing these securities.
INVESTMENT RESTRICTIONS
Each Portfolio's investment activities are subject to further restrictions that are described in the Statement of Additional Information. Investment restrictions and policies which are fundamental policies may not be changed without the approval of the holders of a majority of a Portfolio's outstanding voting securities (which for this purpose and under the Investment Company Act means the lesser of (a) 67% of the shares represented at a meeting at which more than 50% of the outstanding shares are represented or (b) more than 50% of the outstanding shares). Among each Portfolio's fundamental policies, a Portfolio may not invest more than 25% of its assets, taken at market value at the time of each investment, in the securities of issuers of any particular industry (excluding the U.S. Government and its agencies or instrumentalities). Investment restrictions and policies that are non-fundamental policies may be changed by the Board of Directors without shareholder approval. As a non- fundamental policy, no Portfolio may 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 Portfolio shares. No Portfolio will purchase securities while borrowings exceed 5% of its assets. None of the Portfolios has a present intention to borrow money in amounts exceeding 5% of its assets.
MANAGEMENT OF THE PROGRAM
BOARD OF DIRECTORS
The Board of Directors of the Program consists of six individuals, five of whom are not "interested persons" of the Program as defined in the Investment Company Act. The Directors of the Program are
responsible for the overall supervision of the operations of the Program and perform the various duties imposed on the directors of investment companies by the Investment Company Act.
The Directors of the Program are:
Arthur Zeikel*--President of the Investment Adviser and FAM; President and Director of Princeton Services, Inc. ("Princeton Services"); Executive Vice President of ML&Co. and Merrill Lynch and Director of Merrill Lynch Funds Distributor, Inc. (the "Distributor").
Joe Grills--Member of the Committee of Investment of Employee Benefit Assets of Financial Executives Institute ("CIEBA"); Member of CIEBA's Executive Committee; Member of the Investment Advisory Committee of the State of New York Common Retirement Fund; Director, Duke Management Company.
Walter Mintz--Special Limited Partner of Cumberland Associates (an investment partnership).
Melvin R. Seiden--President of Silbanc Properties, Ltd. (real estate, investment and consulting).
Stephen B. Swensrud--Principal of Fernwood Associates (financial consultants).
MANAGEMENT AND ADVISORY ARRANGEMENTS
The Investment Adviser acts as the investment adviser to the Program and provides each Portfolio with management and investment advisory services. The Investment Adviser is owned and controlled by ML&Co., a financial services holding company and the parent of Merrill Lynch. The Investment Adviser or its affiliates act as investment adviser(s) to more than 130 other registered investment companies and provide investment advisory services to individuals and institutions. As of April 30, 1995, the Investment Adviser and its affiliates had a total of approximately $172.7 billion in investment company and other portfolio assets under management.
The investment advisory agreement with the Investment Adviser relating to each Portfolio (each an "Investment Advisory Agreement") provides that, subject to the direction of the Board of Directors of the Program, the Investment Adviser is responsible for the actual management of that Portfolio and for the review of that Portfolio's holdings in light of its own research analysis and analyses from other relevant sources. The responsibility for making decisions to buy, sell or hold a particular security rests with the Investment Adviser, subject to review by the Board of Directors. The Investment Adviser supplies the portfolio managers for each Portfolio, who consider analyses from various sources, make the necessary investment decisions and place transactions accordingly. The Investment Adviser also is obligated to perform certain administrative and management services for the Program and is required to provide all the office
space, facilities, equipment and personnel necessary to perform its duties under each Investment Advisory Agreement. The Investment Adviser has access to the total securities research, economic research and computer applications facilities of Merrill Lynch and makes extensive use of these facilities.
Each Portfolio pays the Investment Adviser a monthly fee based on the average daily value of that Portfolio's net assets at the following annual rates:
U.S.
FUNDAMENTAL QUALITY GOVERNMENT GLOBAL
VALUE BOND SECURITIES OPPORTUNITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- --------- ---------- -----------
0.65% 0.50% 0.50% 0.75%
|
Each Investment Advisory Agreement obligates a Portfolio to pay certain expenses incurred in its operations and a portion of the Program's general administrative expenses allocated on the basis of the asset size of the respective Portfolios. Expenses that will be borne directly by the Portfolios include redemption expenses, expenses of portfolio transactions, shareholder servicing costs, expenses of registering the shares under Federal and state securities laws, pricing costs (including the daily calculation of net asset value), interest, certain taxes, charges of the Custodian and Transfer Agent and other expenses attributable to a particular Portfolio. Expenses which will be allocated on the basis of the size of the respective Portfolios include directors' fees, legal expenses, state franchise taxes, auditing services, costs of printing proxies, stock certificates, shareholder reports and prospectuses (except to the extent paid by the Distributor), Securities and Exchange Commission fees, accounting costs and other expenses properly payable by the Program and allocable on the basis of the size of the respective Portfolios. Accounting services are provided for the Portfolios by the Investment Adviser and the Portfolios reimburse the Investment Adviser for its costs in connection with such services.
Set forth in the table below is information for each Portfolio pertaining to the Portfolio's investment advisory arrangements for the fiscal period February 1, 1995 (commencement of operations) through March 31, 1995:
RATIO OF TOTAL EXPENSE, NET OF
REIMBURSEMENT, TO AVERAGE NET ASSETS
------------------------------------------------
PAYMENT TO
BASED ON INVESTMENT
AVERAGE NET ADVISER FOR
MANAGEMENT ASSETS OF ACCOUNTING
PORTFOLIO FEE $ (1) APPROX. ($) SERVICES ($)(1) CLASS A CLASS B CLASS C CLASS D
- --------- ---------- ------------- --------------- --------- --------- --------- ---------
(IN MILLIONS)
Fundamental Value Port-
folio.................. 5,129 4.9 2,685 1.71% 2.27% 2.28% 1.54%
Quality Bond Portfolio.. 2,068 2.5 3,171 0.00 0.78 0.84 0.24
U.S. Government Securi-
ties Portfolio......... 4,544 5.4 6,130 0.00 0.77 0.83 0.25
Global Opportunity Port-
folio.................. 12,537 10.3 9,234 1.79 2.48 2.50 1.73
|
(1) The Investment Adviser waived the payment of a portion of the fee for the period pursuant to state expense limitations and voluntarily waived the remainder of the fee and reimbursed the Portfolios for a portion of other expenses (excluding 12b-1 fees). The Investment Adviser may discontinue or reduce such waiver of fees and/or assumption of expenses at any time without notice.
Set forth below is information about the Portfolio Manager for each of the Program's Portfolios. The Portfolio Manager is the individual who is primarily responsible for the day to day management of the Portfolio.
Fundamental Value Portfolio--Kevin Rendino. Mr. Rendino has served as Vice President of the Investment Adviser since December 1993. Prior to that he was a Senior Research Analyst from 1990 to 1992 and a Corporate Analyst from 1988 to 1990.
Quality Bond Portfolio--Jay C. Harbeck. Mr. Harbeck has served as Vice President of the Investment Adviser since 1986 and as Portfolio Manager of the Investment Adviser since 1992.
U.S. Government Securities Portfolio--Gregory Mark Maunz. Mr. Maunz has been Vice President of the Investment Adviser since 1985 and Portfolio Manager since 1984.
Global Opportunity Portfolio--Joel Heymsfeld. Mr. Heymsfeld has been a Vice President of the Investment Adviser since 1978.
CODE OF ETHICS
The Board of Directors of the Program 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 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 Program within periods of trading by any Portfolio of the Program in the same (or equivalent) security (15 or 30 days depending upon the transaction).
TRANSFER AGENCY SERVICES
Merrill Lynch Financial Data Services, Inc. (the "Transfer Agent"), which is a wholly-owned subsidiary of ML&Co., acts as the Program'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, each Portfolio pays the Transfer Agent a fee of $11 per Class A and Class D shareholder account and $14 per Class B and Class C shareholder account and nominal miscellaneous fees (e.g., account closing fees) and reimburses the Transfer Agent for out-of-pocket expenses incurred under the Transfer Agency Agreement.
AT MARCH 31, 1995
------------------------------------------
TRANSFER
AGENCY FEE PAID NUMBER OF SHAREHOLDER ACCOUNTS TRANSFER
FEBRUARY 1, 1995* ------------------------------- AGENCY FEE
PORTFOLIO TO MARCH 31, 1995 CLASS A CLASS B CLASS C CLASS D DUE
- --------- ----------------- ------- ------- ------- ------- ----------
Fundamental Value....... $1,057 28 1,625 483 187 $ 31,877
Quality Bond............ $1,703 8 287 97 28 $ 5,772
U.S. Government Securi-
ties................... $2,847 6 212 60 9 $ 3,973
Global Opportunity...... $1,883 17 1,489 348 105 $ 25,940
|
* Commencement of operations.
PURCHASE OF SHARES
The Program offers shares solely to holders of IRAs for which Merrill Lynch
acts as custodian, including individual retirement rollover accounts and SEP-
IRAs. The minimum initial purchase in any Portfolio is $100, and the minimum
subsequent purchase in any Portfolio is $1.
The Distributor, an affiliate of both the Investment Adviser and Merrill
Lynch, acts as the distributor of shares of the Portfolios. Shares of the
Portfolios are offered continuously for sale by the Distributor and other
eligible securities dealers (including Merrill Lynch). Shares of the Portfolios
may be purchased from securities dealers or by mailing a purchase order
directly to the Transfer Agent.
The Program is offering shares of the Portfolios 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, as described below. The applicable offering price for purchase orders is based upon the net asset value of the Portfolio 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 as of 15 minutes after the close of business on the New York Stock Exchange, on the day the orders are placed with the Distributor, provided the orders are received by the Distributor 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. The Program or the Distributor may suspend the continuous offering of any Portfolio's shares of any class at any time in response to conditions in the securities markets or otherwise and may thereafter resume such offering from time to time. Any order may be rejected by the Distributor or the Program. 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 Transfer Agent are not subject to the processing fee.
Each Portfolio 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 the purchase, the length of time the investor expects to hold the shares and other relevant circumstances. Shares of Class A and Class D are sold to investors choosing the initial sales charge alternatives and shares of Class B and Class C are sold to investors choosing the deferred sales charge alternatives. Investors should determine whether under their particular circumstances it is more advantageous to incur an initial sales charge or to have the entire initial purchase price invested in the Portfolio 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 9.
Shareholders considering transferring a tax-deferred account such as an IRA from Merrill Lynch to another brokerage firm or financial institution should be aware that shares of the Portfolios may only be held in a Merrill Lynch custodied IRA. Prior to any such transfer, a shareholder must either redeem the shares so that the cash proceeds can be transferred to the account at the new firm or exchange the shares for shares of another MLAM-advised mutual fund pursuant to the exchange privilege. It is possible, however, that the
firm to which the IRA is to be transferred will not take delivery of shares of such fund, in which case the shareholder would have to redeem these shares (paying any applicable CDSC) so that the cash proceeds can be transferred or continue to maintain an IRA account at Merrill Lynch for those shares.
Cash balances of participants who elect to have such funds automatically invested in shares of a Portfolio will be invested as follows. Cash balances arising from the sale of securities held in the IRA account which do not settle on the day of the transaction (such as most common and preferred stock transactions) become available to the Program and will be invested in shares of a Portfolio on the business day following the day that proceeds with respect thereto are received in the IRA account. Proceeds giving rise to cash balances from the sale of securities held in the IRA account settling on a same day basis and from principal repayments on debt securities held in the account become available to the Program and will be invested in shares of a Portfolio on the next business day following receipt. Cash balances arising from dividends or interest payments on securities held in the IRA account or from a contribution to the IRA account are invested in shares of the Portfolios on the business day following the date the payment is received in the IRA account.
Merrill Lynch has advised the Program that it will not charge an annual account fee upon any IRA which is then invested solely in one or more of the Program's Portfolios or in a money market fund advised by the Investment Adviser or its affiliates. Merrill Lynch has also advised the Program that it will not charge an annual account fee upon any IRA which participates in the Merrill Lynch Retirement Asset Builder SM Service, receives additional contributions of $250 annually and is invested solely in one or more of the Program's Portfolios or a money market fund advised by the Investment Adviser or its affiliates. If, however, a shareholder of any of the Portfolios exchanges any of his or her shares of a Portfolio for shares of another MLAM- advised mutual fund, Merrill Lynch will reinstate the IRA annual account fee. For information about current IRA fees charged by Merrill Lynch, consult the Merrill Lynch IRA disclosure statement and the Merrill Lynch IRA custodial agreement.
Each Class A, Class B, Class C and Class D share of a Portfolio represents an identical interest in the same investment portfolio 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 Portfolio 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 a Portfolio 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". If pursuant to the exchange privilege, shares of any Portfolio are exchanged for shares of a fund other than a Portfolio of the Program or a money market fund advised by the Investment Adviser or its affiliates then the imposition of the IRA annual account fee may result. For information about current IRA fees charged by Merrill Lynch, consult the Merrill Lynch IRA disclosure statement and the Merrill Lynch IRA custodial agreement.
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 Program. 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.
FUNDAMENTAL VALUE AND GLOBAL OPPORTUNITY PORTFOLIOS
ACCOUNT
MAINTENANCE DISTRIBUTION
CLASS SALES CHARGE(/1/) FEE FEE CONVERSION FEATURE
- ---------------------------------------------------------------------------------------
A Maximum 5.25% initial No No No
sales charge(/2/)(/3/)
- ---------------------------------------------------------------------------------------
B CDSC for a period of up 0.25% 0.75% B shares convert to D shares
to four years, at a automatically after
rate of 4.0% during approximately eight
the first year, years(/4/)
decreasing 1.0%
annually to 0.0%
- ---------------------------------------------------------------------------------------
C 1.0% CDSC for one year 0.25% 0.75% No
- ---------------------------------------------------------------------------------------
D Maximum 5.25% initial 0.25% No No
sales charge(/3/)
|
QUALITY BOND AND U.S. GOVERNMENT SECURITIES PORTFOLIOS
ACCOUNT
MAINTENANCE DISTRIBUTION
CLASS SALES CHARGE(/1/) FEE FEE CONVERSION FEATURE
- ----------------------------------------------------------------------------------------
A Maximum 4.00% initial No No No
sales charge(/2/)(/3/)
- ----------------------------------------------------------------------------------------
B CDSC for a period of up 0.25% 0.50% B shares convert to D shares
to four years at a rate automatically after
of 4.0% during the approximately ten
first year, decreasing years(/4/)
1.0% annually to 0.0%
- ----------------------------------------------------------------------------------------
C 1.0% CDSC for one year 0.25% 0.55% No
- ----------------------------------------------------------------------------------------
D Maximum 4.00% initial 0.25% No No
sales charge(/3/)
|
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 alternatives is the next determined net asset value plus varying sales charges (i.e., sales loads), as set forth below.
FUNDAMENTAL VALUE AND GLOBAL OPPORTUNITY
PORTFOLIOS
--------------------------------------------------
SALES LOAD AS A DISCOUNT TO
SALES LOAD AS A PERCENTAGE* OF SELECTED DEALERS
PERCENTAGE OF THE NET AMOUNT AS A PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE INVESTED OFFERING PRICE
- ------------------ --------------- --------------- ------------------
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
|
QUALITY BOND AND
U.S. GOVERNMENT SECURITIES PORTFOLIOS
-----------------------------------------------------
SALES LOAD AS A DISCOUNT TO
SALES LOAD PERCENTAGE* OF SELECT DEALERS
AS A PERCENTAGE NET AMOUNT AS A PERCENTAGE
AMOUNT OF PURCHASE OF OFFERING PRICE INVESTED OF OFFERING PRICE
- ------------------ ----------------- ----------------- -----------------
Less than $25,000........ 4.00% 4.16% 3.75%
$25,000 but less than
$50,000................. 3.75 3.90 3.50
$50,000 but less than
$100,000................ 3.25 3.36 3.00
$100,000 but less than
$250,000................ 2.50 2.56 2.25
$250,000 but less than
$1,000,000.............. 1.50 1.52 1.25
$1,000,000 and more**.... 0.00 0.00 0.00
|
The Distributor may reallow discounts to selected dealers and retain the balance over such discounts. At times the Distributor may reallow the entire sales charge to such dealers. Since securities dealers selling Class A and Class D shares of the Program will receive a concession equal to most of the sales charge, they may be deemed to be underwriters under the Securities Act.
On February 1, 1995, the Portfolios commenced the public offering of their Class A and Class D shares. The following tables set forth information about the number of Class A and Class D shares sold by each Portfolio for the fiscal period February 1, 1995 (commencement of operations) through March 31, 1995, the aggregate net proceeds from such sales, the gross sales charges and the amounts of such charges received by the Distributor and Merrill Lynch. No CDSCs were paid to the Distributor with respect to redemption within one year of purchase of Class A or Class D shares purchased subject to front-end sales charge waivers.
GROSS SALES CHARGES
------------------------------------
NO. OF AGGREGATE PAID TO
CLASS A SHARES NET TOTAL PAID TO MERRILL
PORTFOLIO SOLD PROCEEDS ($) AMOUNT ($) DISTRIBUTOR ($) LYNCH ($)
- --------- -------------- ------------ ---------- --------------- ---------
Fundamental Value....... 202,832 2,028,823 12,620 584 12,036
Quality Bond............ 200,189 2,001,884 1,386 98 1,288
U.S. Government Securi-
ties................... 500,029 5,000,287 1,708 121 1,587
Global Opportunity...... 803,051 8,030,386 3,506 166 3,340
GROSS SALES CHARGES
------------------------------------
NO. OF AGGREGATE PAID TO
CLASS D SHARES NET TOTAL PAID TO MERRILL
PORTFOLIO SOLD PROCEEDS ($) AMOUNT ($) DISTRIBUTOR ($) LYNCH ($)
- --------- -------------- ------------ ---------- --------------- ---------
Fundamental Value....... 65,494 664,925 12,620 584 12,036
Quality Bond............ 7,735 77,287 1,386 98 1,288
U.S. Government Securi-
ties................... 7,415 75,219 1,708 121 1,587
Global Opportunity...... 32,292 321,679 3,506 166 3,340
|
Eligible Class A Investors. 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. Class A shares may be purchased at net asset value by participants in certain investment programs to which Merrill Lynch Trust Company provides discretionary trustee services. 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 Program. 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 common shares in shares of the Program also may purchase Class A shares of a Portfolio if certain conditions set forth in the Statement of Additional Information are met. For example, Class A shares of the Program 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 also may be reduced under a Right of Accumulation and a Letter of Intention.
Class A shares are offered at net asset value to certain eligible Class A investors as set forth above under "Eligible Class A Investors".
Class D shares are offered at net asset value without sales charge to an investor who has a business relationship with a Merrill Lynch financial consultant, if certain conditions set forth in the Statement of Additional Information are met.
Additional information concerning these reduced initial sales charges 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, with respect to the Fundamental Value and Global Opportunity Portfolios, approximately eight years after Class B shares are issued, and with respect to the Quality Bond and U.S. Government Securities Portfolios, approximately ten years after Class B shares are issued, such Class B shares, together with shares issued upon dividend reinvestment with respect to those shares, are automatically converted into Class D shares of the same Portfolio 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 of each of the Portfolios are subject to ongoing account maintenance and distribution fees as discussed below under "Distribution Plans". The proceeds from the account maintenance fees are used to compensate Merrill Lynch for providing continuing account maintenance activities.
Class B and Class C shares of each Portfolio are sold without an initial sales charge so that the Portfolio 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 distribution fee 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 Program in connection with the sale of the Class B and Class C shares of the Portfolios, such as the payment of compensation to 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 Program to sell the Class B and Class C shares without a sales charge being deducted at the time of purchase. Class B shares of a Portfolio will convert automatically into Class D shares of the same Portfolio approximately eight years after issuance in the case of the Fundamental Value and Global Opportunity Portfolios and approximately ten years after issuance in the case of the Quality Bond and U.S. Government Securities Portfolios. Class D shares are subject to an account maintenance fee but no distribution fee. Class B shares of certain MLAM-advised mutual funds into which exchanges may be made convert into Class D shares automatically after approximately eight years, and 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 a Portfolio are exchanged for Class B shares of another Portfolio or MLAM-advised mutual fund, the conversion period applicable to Class B shares acquired in the exchange will apply, and the holding period for the shares exchanged will be tacked on to 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. Class B shareholders of a Portfolio exercising the exchange privilege described under "Shareholder Services -- Exchange Privilege" will continue to be subject to that Portfolio'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:
CLASS B CDSC
AS A PERCENTAGE
YEAR SINCE PURCHASE OF DOLLAR AMOUNT
PAYMENT MADE SUBJECT TO CHARGE
------------------- -----------------
0-1........................................................ 4.00%
1-2........................................................ 3.00
2-3........................................................ 2.00
3-4........................................................ 1.00
4 and thereafter........................................... 0.00
|
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 account will be assumed to be made in the same order as a redemption.
To provide an example, assume an investor purchases 100 shares at $10 per share (at a cost of $1,000) and in the third year after purchase, the net asset value per share is $12 and, during such time, the investor has acquired 10 additional shares through 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 $600 redemption proceeds will be charged at a rate of 2.0% (the applicable rate in the third year after purchase).
The Class B CDSC is waived on redemptions of shares in connection with certain post-retirement withdrawals from an IRA or following the death or disability (as defined in the Internal Revenue Code of 1986, as amended) of a shareholder. Additional information concerning the waiver of the Class B CDSC is set forth in the Statement of Additional Information.
Contingent Deferred Sales Charges -- Class C Shares. Class C shares which are redeemed within one year after purchase may be subject to a 1.0% CDSC charged as a percentage of the dollar amount subject thereto. The charge will be assessed on an amount equal to the lesser of the proceeds of redemption or the cost of the shares being redeemed. Accordingly, no Class C CDSC will be imposed on increases in net asset value above the initial purchase price. In addition, no Class C CDSC will be assessed on shares derived from reinvestment of dividends or capital gains distributions.
In determining whether a Class C CDSC is applicable to a redemption, the calculation will be determined in the manner that results in the lowest possible rate being charged. Therefore, it will be assumed that the redemption is first of shares held for over one year or shares acquired pursuant to reinvestment of dividends or distributions and then of shares held longest during the one-year period. The charge will not be applied to dollar amounts representing an increase in the net asset value since the time of purchase. A transfer of shares from a shareholder's account to another account will be assumed to be made in the same order as a redemption.
For the fiscal period February 1, 1995 (commencement of operations) through March 31, 1995, the Distributor received CDSCs from the Portfolios with respect to redemption of Class B and Class C shares, all of which were paid to Merrill Lynch, as follows:
CDSCS RECEIVED
BY DISTRIBUTOR ($)
---------------------
PORTFOLIO CLASS B CLASS C
--------- --------- ---------
Fundamental Value.................................... 148 62
Quality Bond......................................... 41 0
U.S. Government Securities........................... 167 0
Global Opportunity................................... 637 8
|
Conversion of Class B Shares to Class D Shares. After approximately eight years in the case of the Fundamental Value and Global Opportunity Portfolios and ten years in the case of the Quality Bond and U.S. Government Securities Portfolios (the "Conversion Period"), Class B shares of a Portfolio will be converted automatically into Class D shares of the same Portfolio. Class D shares are subject to an ongoing account maintenance fee of 0.25% of net assets but are not subject to the distribution fee that is borne by Class B shares. Automatic conversion of Class B shares into Class D shares will occur at least once each month (on the "Conversion Date") on the basis of the relative net asset values of the shares of the two classes on the Conversion Date, without the imposition of any sales load fee or other charge. Conversion of Class B shares to Class D shares will not be deemed a purchase or sale of the shares for Federal income tax purposes.
In addition, shares purchased through reinvestment of dividends on Class B shares also will convert automatically to Class D shares. The Conversion Date for dividend reinvestment shares will be calculated taking into account the length of time the shares underlying such dividend reinvestment shares were outstanding. If at a Conversion Date the conversion of Class B shares to Class D shares of a Portfolio 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 that Portfolio held in the account on the Conversion Date will be converted to Class D shares of that Portfolio.
Share certificates for Class B shares of a Portfolio 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 on to the holding period for the shares acquired.
DISTRIBUTION PLANS
The Program has adopted separate distribution plans on behalf of each of the Portfolios 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 Portfolio 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 Portfolio 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 Portfolio 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 respective Portfolio also pays the Distributor a distribution fee relating to the shares of the relevant class, accrued daily and paid monthly, (i) at the annual rate of 0.75% of the average daily net assets attributable to the Class B and Class C shares of the Fundamental Value and Global Opportunity Portfolios or (ii) at the annual rates of 0.50% and 0.55% of the average daily net assets attributable to the Class B and Class C shares, respectively, of the Quality Bond and U.S. Government Securities Portfolios, 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 Portfolios, including payments to financial consultants for selling Class B and Class C shares of that Portfolio. 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 Portfolios in that the deferred sales charges provide for the financing of the distribution of the Portfolio's Class B and Class C shares.
For the period February 1, 1995 (commencement of operations) through March 31, 1995, the Portfolios paid the Distributor the amounts set forth below under the Plans.
CLASS D
CLASS B DISTRIBUTION CLASS C DISTRIBUTION DISTRIBUTION
PLAN PLAN PLAN
------------------------ ------------------------ ------------
ACCOUNT ACCOUNT ACCOUNT
MAINTENANCE DISTRIBUTION MAINTENANCE DISTRIBUTION MAINTENANCE
PORTFOLIO FEES FEES FEES FEES FEES
- --------- ----------- ------------ ----------- ------------ ------------
Fundamental Value....... $847 $2,540 $166 $500 $132
Quality Bond............ $111 $ 334 $ 23 $ 68 $ 17
U.S. Government Securi-
ties................... $ 84 $ 253 $ 19 $ 56 $ 14
Global Opportunity...... $768 $2,306 $115 $346 $ 62
|
The payments under the Distribution Plans are based upon a percentage of average daily net assets attributable to the shares regardless of the amount of expenses incurred, and accordingly, distribution-related revenues from the Distribution Plans may be more or less than distribution-related expenses. Information with respect to the distribution-related revenues and expenses is presented to the Directors for their
consideration in connection with their deliberations as to the continuance of the Class B and Class C 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, 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.
The table below sets forth information concerning direct cash revenues and expenses for the period February 1, 1995 (commencement of operations) through March 31, 1995.
AMOUNT BY WHICH
AMOUNT BY WHICH DIRECT CASH
DIRECT CASH EXPENSES EXCEEDED
REVENUES EXCEEDED DIRECT CASH
DIRECT CASH % OF CLASS B REVENUES AS OF % OF CLASS C
EXPENSES AS OF NET ASSETS AT MARCH 31, NET ASSETS AT
PORTFOLIO MARCH 31 1995 ($) MARCH 31, 1995 1995 ($) MARCH 31, 1995
- --------- ----------------- -------------- ----------------- --------------
Fundamental Value....... 3,535 .06% 4,992 .42%
Quality Bond............ 486 .05% 962 .41%
U.S. Government Securi-
ties................... 503 .07% 734 .40%
Global Opportunity...... 3,712 .09% 3,844 .54%
|
The Program has no obligation with respect to distribution and/or account maintenance-related expenses incurred by the Distributor and Merrill Lynch in connection with Class B, Class C and Class D shares, and there is no assurance that the Directors of the Program will approve the continuance of the Distribution Plans from year to year. However, the Distributor intends to seek annual continuation of the Distribution Plans. In their review of the Distribution Plans, the Directors will be asked to take into consideration expenses incurred in connection with the account maintenance and/or distribution of each class of shares separately. The initial sales charges, the account maintenance fee, the distribution fee and/or the CDSCs received with respect to one class will not be used to subsidize the sale of shares of another class. Payments of the distribution fee on Class B shares will terminate upon conversion of those Class B shares into Class D shares as set forth under "Deferred Sales Charge Alternatives -- Class B and Class C Shares -- Conversion of Class B Shares to Class D Shares".
LIMITATIONS ON THE PAYMENT OF DEFERRED SALES CHARGES
The maximum sales charge rule in the Rules of Fair Practice of the NASD imposes a limitation on certain asset-based sales charges such as the Portfolios' distribution fees and the CDSCs but not the account maintenance fees. The maximum sales charge rule is applied separately to each Portfolio and to each class. As applicable to the Portfolios, the maximum sales charge rule limits the aggregate of distribution fee payments and CDSCs payable by each Portfolio 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 interest charges at any time. To the extent payments would exceed the voluntary maximum, the Portfolio in question will not make further payments of the distribution fee with respect to Class B shares, and any CDSCs will be paid to the Portfolio rather than to the Distributor; however, the Portfolio 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.
REDEMPTION OF SHARES
Distributions from an IRA to a participant prior to the time the participant reaches age 59 1/2 may subject the participant to income and excise taxes. See "Taxes". There are no adverse tax consequences resulting from redemptions of shares of the Portfolios where the redemption proceeds remain in the IRA account and are otherwise invested. Shareholders should consult their tax advisers concerning tax consequences resulting from redemptions of shares of the Portfolios. Shareholders should be aware, however, that redemption of shares of a Portfolio and reinvestment of the proceeds in shares of another fund advised by the Investment Adviser or an affiliate may subject the investor's IRA to an annual IRA account fee. For information about the current IRA fees charged by Merrill Lynch, consult the Merrill Lynch IRA disclosure statement and the Merrill Lynch IRA custodial agreement.
The Program is required to redeem for cash shares of each Portfolio of the Program at the request of shareholders. The redemption price is the net asset value per share next determined after the initial receipt by Merrill Lynch of proper notice of redemption, as described below. If such notice is received by Merrill Lynch prior to the determination of net asset value (15 minutes after the close of business on the New York Stock Exchange), the redemption will be effective on that day and payment generally will be made on the next business day. If the notice is received after the determination of net asset value on any day, the redemption will be effective on the next business day and payment will be made on the second business day after receipt of the notice. Shareholders liquidating their holdings will receive upon redemption all dividends reinvested through the date of redemption. Accrued but unpaid dividends will be paid on the payable date next following the date of redemption.
Any shareholder may redeem shares of the Portfolios by submitting a written notice of redemption to Merrill Lynch. Participants in the Program should contact their Merrill Lynch financial consultant to effect such redemptions. Redemption requests should not be sent to the Program or to the Transfer Agent. The notice must bear the signature of the person in whose name the IRA is maintained, signed exactly as his or her name appears on the IRA adoption agreement.
SHAREHOLDER SERVICES
The Program offers a number of shareholder services and investment plans designed to facilitate investment in its shares. 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 Program by calling the telephone number on the cover page hereof or from the Distributor or Merrill Lynch.
Exchange Privilege. Shareholders of each Portfolio have an exchange privilege with each other Portfolio of the Program, with certain money market funds advised by the Investment Adviser or its affiliates and 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 in accordance with the rules of the Commission. If, however, a shareholder exchanges any of his or her shares of a Portfolio for shares of another MLAM-advised mutual fund, Merrill Lynch will reinstate the IRA annual account fee. For information about the current IRA fees charged by Merrill Lynch, consult the Merrill Lynch IRA disclosure statement and the Merrill Lynch IRA custodial agreement.
Under the Merrill Lynch Select PricingSM System, Class A shareholders may exchange Class A shares of a Portfolio for Class A shares of a second Portfolio or MLAM-advised mutual fund if the shareholder holds any Class A shares of the second Portfolio or 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 Portfolio or fund. If the Class A shareholder wants to exchange Class A shares for shares of a second Portfolio or MLAM-advised mutual fund, and the shareholder does not hold Class A shares of the second Portfolio or fund in his account at the time of the exchange and is not otherwise eligible to acquire Class A shares of the second Portfolio or fund, the shareholder will receive Class D shares of the second Portfolio or fund as a result of the exchange. Class D shares also may be exchanged for Class A shares of a second Portfolio or 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 Portfolio or fund in the account in which the exchange is made or is otherwise eligible to purchase Class A shares of the second Portfolio or fund.
Exchanges of Class A and Class D shares are made on the basis of the relative net asset values per Class A or Class D share, respectively, plus an amount equal to the difference, if any, between the sales charge previously paid on the Class A or Class D shares being exchanged and the sales charge payable at the time of the exchange on the shares being acquired.
Class B, Class C and Class D shares will be exchanged with shares of the same class of another Portfolio or MLAM-advised mutual fund.
Shares of the Portfolios which are subject to a CDSC will be exchangeable on the basis of relative net asset value per share without the payment of any CDSC that might otherwise be due upon redemption of the shares of the Portfolio. 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 Portfolio is tacked on to the holding period of the newly acquired shares of the other Portfolio or fund.
Class A, Class B, Class C and Class D shares also will be exchangeable for shares of certain MLAM- advised money market funds specifically designated as available for exchange by holders of Class A, Class B, Class C or Class D shares. The period of time that Class A, Class B, Class C or Class D shares are held in a money market fund, however, will not count toward satisfaction of the holding period requirement for reduction of any CDSC imposed on such shares, if any, and with respect to Class B shares, toward satisfaction of the Conversion Period.
Class B shareholders of a Portfolio exercising the exchange privilege will continue to be subject to the Portfolio'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 a Portfolio acquired through use of the exchange privilege will be subject
to the Portfolio'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.
MERRILL LYNCH HAS ADVISED THE PROGRAM THAT IT WILL NOT CHARGE AN ANNUAL ACCOUNT FEE UPON ANY IRA WHICH IS THEN INVESTED SOLELY IN ONE OR MORE OF THE PROGRAM'S PORTFOLIOS OR A MONEY MARKET FUND ADVISED BY THE INVESTMENT ADVISER OR ITS AFFILIATES. IN THIS REGARD, EXCHANGE OF PORTFOLIO SHARES FOR SHARES OF A FUND OTHER THAN A PORTFOLIO OF THE PROGRAM OR A MONEY MARKET FUND ADVISED BY THE INVESTMENT ADVISER OR ITS AFFILIATES MAY RESULT IN THE IMPOSITION OF AN ANNUAL IRA FEE. FOR INFORMATION ABOUT THE CURRENT IRA FEES CHARGED BY MERRILL LYNCH, CONSULT THE MERRILL LYNCH IRA DISCLOSURE STATEMENT AND THE MERRILL LYNCH IRA CUSTODIAL AGREEMENT.
For further information, see "Shareholder Services--Exchange Privilege" in the Statement of Additional Information.
Automatic Reinvestment of Dividends and Capital Gains Distributions. All dividends and capital gains distributions of a Portfolio are reinvested automatically in full and fractional shares of that Portfolio, at the net asset value per share of the respective Portfolio next determined on the ex-dividend date of such dividend or distribution in the case of the Fundamental Value and Global Opportunity Portfolios and at the close of business on the monthly payment date for such dividends and distributions in the case of the Quality Bond and U.S. Government Securities Portfolios. A shareholder may, at any time, by written notification to Merrill Lynch, elect to have subsequent dividends or both dividends and capital gains distributions held in the IRA as a cash balance rather than reinvested.
Systematic Withdrawal Plans. At age 59 1/2, a Class A or Class D shareholder may elect to receive systematic redemption payments from his or her account in the form of payments by check or through automatic payment by direct deposit to his or her bank account on either a monthly or quarterly basis. A Class A or Class D shareholder may elect to have shares redeemed on a monthly, bimonthly, quarterly, semiannual or annual basis through the Systematic Redemption Program, subject to certain conditions. See "Taxes" for consequences of withdrawals from IRA accounts prior to attaining age 59 1/2.
Automatic Investment Plans. Regular additions of Class A, Class B, Class C or Class D shares may be made to an investor's account by prearranged charges of $50 or more to his regular bank account. In addition, Merrill Lynch offers an automated funding service which permits regular current year IRA contributions of up to $2,000 per year to be made to IRAs and an automated investment program which may be used for automated subsequent purchases of shares of the Program.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Directors of the Program, the Investment Adviser is primarily responsible for the Program's portfolio decisions and the execution of the Program's portfolio transactions. With respect to such transactions, the Investment Adviser seeks to obtain the best results for each Portfolio, taking into account such factors as price (including the applicable fee, brokerage commission or dealer spread), size of order, difficulty of execution and operational facilities of the firm involved, the firm's risk in positioning a block of securities and the provision of supplemental investment research by the firm. While the Investment Adviser generally seeks reasonably competitive fees, commissions or spreads, the Portfolios will not necessarily be paying the lowest fee, commission or spread available. The Board of Directors of the Program has adopted procedures to ensure that brokerage transactions with affiliated persons, including the frequency of such transactions, the receipt of commissions payable and the selection of the broker effecting the transactions, are fair and reasonable to the Program's shareholders.
The fixed income securities and certain equity securities in which the Portfolios will invest are traded in the over-the-counter markets, and where possible the Portfolios intend to deal directly with the dealers who make markets in the securities involved, except in those circumstances where better prices and execution are available elsewhere. Under the Investment Company Act, except as permitted by exemptive order, persons affiliated with the Program are prohibited from dealing with any Portfolio 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, the Portfolios will not deal with affiliated persons, including Merrill Lynch and its affiliates, in connection with such transactions. In addition, the Portfolios may not purchase securities during the existence of any underwriting syndicate for such securities of which Merrill Lynch is a member except pursuant to procedures approved by the Board of Directors of the Program which comply with rules adopted by the Commission. Affiliated persons of the Program may serve as its broker in over-the-counter transactions conducted on an agency basis.
No Portfolio has any obligation to deal with any broker or dealer in the execution of its portfolio transactions. Subject to obtaining the best price and execution, securities firms, including Merrill Lynch, which provide supplemental investment research to the Investment Adviser may receive orders for transactions by the Portfolios. Information so received is in addition to and not in lieu of the services required to be performed by the Investment Adviser under the Investment Advisory Agreement, and the expenses of the Investment Adviser will not necessarily be reduced as a result of the receipt of such supplemental information. Supplemental investment research received by the Investment Adviser also may be used in connection with other investment advisory accounts of the Investment Adviser and its affiliates. Each Portfolio will pay brokerage fees to Merrill Lynch in connection with portfolio transactions executed on its behalf by Merrill Lynch.
The Program anticipates that its brokerage transactions involving securities of companies domiciled in countries other than the United States generally will be conducted primarily on the principal stock exchanges of such countries. Brokerage commissions and other transaction costs on foreign stock exchange transactions are generally higher than in the United States although the Portfolios will endeavor to achieve the best net results in effecting such transactions. There is generally less governmental supervision and regulation of foreign stock exchanges and brokers than in the United States.
PERFORMANCE DATA
From time to time the Program may include each Portfolio's average annual total return and, in the case of the Quality Bond and U.S. Government Securities Portfolios, yield for various specified time periods in advertisements or information furnished to present or prospective shareholders. Average annual total return and yield are computed separately for each Portfolio in accordance with formulas specified by the Commission.
Average annual total return quotations for each Portfolio 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 a Portfolio 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 and distribution fees and any incremental transfer agency costs relating to each class of shares will be borne exclusively by that class. The Portfolios will include performance data for all classes of shares of the Portfolio in any advertisement or information including performance data of the Portfolio.
The Program also may quote each Portfolio's total return and aggregate total
return performance data for various specified time periods. Such data will be
calculated substantially as described above, except that (1) the rates of
return calculated will not be average annual rates, but rather, actual annual,
annualized or aggregate rates of return and (2) the maximum applicable sales
charges will not be included with respect to annual or annualized rates of
return calculations. Aside from the impact on the performance data calculations
of including or excluding the maximum applicable sales charges, actual annual
or annualized total return data generally will be lower than average 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 shares, 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". Each Portfolio'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
Program at the beginning of each specified period.
Yield quotations will be computed based on a 30-day period by dividing (a)
the net income based on the yield of each security earned during the period by
(b) the average daily number of shares outstanding in the Portfolio during the
period that were entitled to receive dividends multiplied by (c) the maximum
offering price/net asset value per share of that Portfolio on the last day of
the period.
The following sets forth the yield for the Class A, Class B, Class C and Class D shares of the Portfolios indicated for the 30-day period ended March 31, 1995.
PORTFOLIO CLASS A CLASS B CLASS C CLASS D --------- ------- ------- ------- ------- Quality Bond.............................. 5.89% 5.39% 5.33% 5.65% U.S. Government Securities................ 7.84% 7.39% 7.35% 7.59% |
Total return figures and yield figures are based on each Portfolio's historical performance and are not intended to indicate future performance. Each Portfolio's total return will vary depending on market conditions, the securities comprising such Portfolio's holdings, the Portfolio's operating expenses and the amount of realized and unrealized net capital gains or losses during the period. The value of an investment in any Portfolio will fluctuate and an investor's shares, when redeemed, may be worth more or less than their original cost.
On occasion, a Portfolio may compare its performance to that of the Standard & Poor's 500 Composite Stock Price Index, the Dow Jones Industrial Average, or performance data published by Lipper Analytical Services, Inc., Morningstar Publications, Inc., Money Magazine, U.S. News & World Report, Business Week, CDA Investment Technology, Inc., Forbes Magazine and Fortune Magazine. As with other performance data, performance comparisons should not be considered indicative of the Portfolio's relative performance for any future period.
TAXES
FEDERAL
RICs. The following is a general summary of the treatment of regulated investment companies ("RICs") and their shareholders under the Internal Revenue Code of 1986, as amended (the "Code"). The Program intends to continue to qualify each Portfolio for the special tax treatment afforded RICs under the Code. If it so qualifies, each Portfolio (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. If in any taxable year a Portfolio does not qualify as a RIC, all of its taxable income will be taxed to the Program at corporate rates. The Program intends to cause each Portfolio to distribute substantially all of such income.
Dividends paid by a Portfolio from its ordinary income and distributions of a Portfolio's net realized short-term capital gains (together referred to hereafter as "ordinary income dividends") are ordinarily taxable to shareholders as ordinary income. Distributions made from a Portfolio's net realized long-term capital gains (including long-term gains from certain transactions in futures and options) ("capital gain dividends") are ordinarily taxable to shareholders as long-term capital gains, regardless of the length of time the shareholder has owned Portfolio shares. Distributions in excess of a Portfolio's earnings and profits will first reduce the adjusted tax basis of a holder's shares and, after such adjusted tax basis is reduced to zero, will constitute capital gains to such holder (assuming the shares are held as a capital asset). Dividends are ordinarily taxable to shareholders even though they are reinvested in additional shares of the Portfolio.
Under certain provisions of the Code, some shareholders may be subject to a 31% withholding tax on ordinary income dividends, capital gain dividends and redemption payments ("backup withholding").
Generally, shareholders subject to backup withholding will be those for whom no certified taxpayer identification number is on file with the Program or who, to the Program's knowledge, have furnished an incorrect number. When establishing an account, an investor must certify under penalty of perjury that such number is correct and that such investor is not otherwise subject to backup withholding.
IRAs. Investment in the Portfolios is limited to participants in IRAs for which Merrill Lynch acts as passive custodian. Accordingly, the general description of the tax treatment of RICs as set forth above is qualified with respect to the special tax treatment afforded IRAs under the Code. Under the Code, neither ordinary income dividends nor capital gain dividends represent current income to shareholders if such shares are held in an IRA. Rather, distributions from an IRA will be taxable as ordinary income at the rate applicable to the participant at the time of the distribution. Such distributions would include (i) any pre-tax contributions to the IRA (including pre-tax contributions that have been rolled over from another IRA or qualified retirement plan), and (ii) dividends (whether or not such dividends are classified as ordinary income or capital gain dividends). In addition to ordinary income tax, participants may be subject to the imposition of excise taxes on any distributed amount, including: (i) a 10 percent excise tax on any amount withdrawn from an IRA prior to the participant's attainment of age 59 1/2; and (ii) a 15 percent excise tax on the amount of any "excess distributions" (generally, amounts in excess of $150,000) made from the IRA and any other IRA or qualified retirement plan annually.
Under certain limited circumstances (for example, if an individual for whose
benefit an IRA is established engages in any transaction prohibited under
Section 4975 of the Code with respect to such account), the IRA could cease to
be treated as an IRA as of the first day of such taxable year that such
transaction occurred. If an IRA through which a shareholder holds Portfolio
shares becomes ineligible for the special treatment afforded IRAs under the
Code, such shareholder will be treated as having received a distribution on
such first day of the taxable year from the IRA in an amount equal to the fair
market value of all assets in the account. Thus, the shareholder would be taxed
currently on (i) the amount of any pre-tax contributions and previously untaxed
dividends held within the account, and (ii) all ordinary income and capital
gain dividends paid by a Portfolio subsequent to such event, whether such
dividends are received in cash or reinvested in additional shares. These
ordinary income and capital gain dividends also might be subject to state and
local taxes. In the event of IRA disqualification, shareholders also could be
subject to the excise taxes described above. Additionally, IRA disqualification
may subject a nonresident alien shareholder to a 30% United States withholding
tax on ordinary income dividends paid by a Portfolio unless a reduced rate of
withholding or a withholding exemption is provided under applicable treaty law.
Dividends and interest received by the Global Opportunity Portfolio and, to a lesser extent, the Fundamental Value Portfolio may give rise to withholding and other taxes imposed by foreign countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. Because of their participation in an IRA, shareholders will not be able to credit or deduct such taxes in computing their taxable incomes. However, in the event of IRA disqualification, as discussed above, shareholders of the Global Opportunity Portfolio might be entitled to a credit or deduction with respect to their proportionate shares of foreign taxes paid by the Portfolio, subject to certain conditions and limitations in the Code, if the Portfolio is eligible and makes an election with the Internal Revenue Service. It is unlikely, however, that the Fundamental Value Portfolio will be able to make this election.
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.
STATE
Ordinary income and capital gain dividends on RIC shares held in a disqualified IRA or outside of an IRA also may be subject to state and local taxes. Certain states exempt from state income taxation dividends paid by RICs which are derived from interest on United States Government obligations. State law varies as to whether dividend income attributable to United States Government obligations is exempt from state income tax. Generally, however, states exempt from state income taxation dividends on shares held within an IRA, and commence taxation on such amounts when actually distributed from an IRA. Such amounts are generally treated as ordinary income.
Shareholders are urged to consult their tax advisers regarding specific questions as to Federal, foreign, state or local taxes. Foreign investors should consider applicable foreign taxes in their evaluation of an investment in a Portfolio of the Program.
ADDITIONAL INFORMATION
DIVIDENDS AND DISTRIBUTIONS
It is the Program's intention to distribute substantially all of the net investment income, if any, of each Portfolio. The net investment income of the Quality Bond and U.S. Government Securities Portfolios is declared as dividends daily immediately prior to the determination of the net asset value of each Portfolio on that day. The net investment income of the Quality Bond and U.S. Government Securities Portfolios for dividend purposes consists of interest and dividends earned on portfolio securities, less expenses, in each case computed since the most recent determination of net asset value. Dividends from net investment income of the Fundamental Value and Global Opportunity Portfolios will be declared at least annually. All net long-term and short-term capital gains, if any, including gains from option and futures contract transactions, will be distributed by each Portfolio at least annually. Dividends and distributions on all Portfolios will be reinvested in additional full and fractional shares of the Portfolio at net asset value unless the shareholder elects to receive such dividends as cash in his or her IRA account. Expenses of each Portfolio including the investment advisory fees, distribution and account maintenance fees with respect to Class B and Class C shares, and account maintenance fees with respect to Class D shares, are accrued daily. Shares will accrue dividends as long as they are issued and outstanding. Shares are issued and outstanding as of the settlement date of a purchase order to the settlement date of a redemption order.
Premiums from expired call options written by a Portfolio and net gains from closing purchase transactions are treated as short-term capital gains for Federal income tax purposes. Dividends and distributions paid by a Portfolio may be reinvested automatically in shares of the same Portfolio, at net asset value without sales charge. Shareholders may elect in writing to receive any such dividends or distributions, or both, as cash in their IRA accounts. Dividends and distributions are, for tax purposes, treated by shareholders as described above whether they are reinvested in shares of a Portfolio or held in their IRA accounts as a cash balance.
Certain gains or losses attributable to foreign currency related gains or losses from certain of the investments of the Global Opportunity Portfolio, and to a lesser extent, the Fundamental Value Portfolio, may increase or decrease the amount of such Portfolio's income available for distribution. If such losses exceed other income during a taxable year, (a) the related Portfolio would not be able to make any ordinary
income dividend distributions, and (b) distributions made before the losses were realized would be recharacterized as returns of capital to shareholders, rather than as ordinary income dividends, reducing each shareholder's tax basis in the Portfolio shares for Federal income tax purposes. If in any fiscal year either the Fundamental Value or Global Opportunity Portfolio has net income from certain foreign currency transactions, such income will be distributed annually.
The per share dividends and distributions on Class B, Class C and Class D shares will be lower than the per share dividends and distributions on Class A shares as a result of the effect of the account maintenance, distribution and higher transfer agency fees applicable with respect to the Class B and Class C shares and the account maintenance fees with respect to the Class D shares. See "Additional Information--Determination of Net Asset Value".
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of each Portfolio is determined once daily 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 and, under certain circumstances, on other days. 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 of a Portfolio is computed by dividing the sum of the value of the securities held by such Portfolio 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, are accrued daily. The Program will employ Merrill Lynch Securities Pricing Service, an affiliate of the Investment Adviser, to provide certain securities prices for the Portfolios.
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. When a Portfolio writes a call option, the amount of the premium received is recorded on the books of the Portfolio as an asset and an equivalent liability. The amount of the liability is subsequently valued to reflect the current market value of the option written, based upon 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. 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.
The Program values corporate debt securities, mortgage-backed securities, municipal securities, asset-backed securities and other debt securities on the basis of valuations provided by dealers or by a pricing service which uses information with respect to transactions in such securities, quotations from dealers, market transactions in comparable securities, various relationships between securities and yield to maturity. Portfolio securities (other than short-term obligations but including listed issues) may be valued on the basis of prices furnished by one or more pricing services which determine prices for normal, institutional-size trading units
of such securities using market information, transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders. Obligations with remaining maturities of 60 days or less are valued at amortized cost unless this method no longer produces fair valuations.
The per share net asset value of 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 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 the higher transfer agency fees applicable with respect to Class B and Class C shares. It is expected, however, that the per share net asset value of the classes will tend to converge (although not necessarily meet) immediately after the payment of dividends or distributions which will differ by approximately the amount of the expense accrual differentials between the classes.
Option Accounting Principles. When a Portfolio sells an option, an amount equal to the premium received by the Portfolio is included in that Portfolio's Statement of Assets and Liabilities as a deferred credit. The amount of such liability subsequently will be marked-to-market to reflect the current market value of the option written. If current market value exceeds the premium received there is an unrealized loss; conversely, if the premium exceeds current market value there is an unrealized gain. The current market value of a traded option is the last sale price or, in the absence of a sale, the last offering price. If an option expires on its stipulated expiration date or if a Portfolio enters into a closing purchase transaction, the affected Portfolio will realize a gain (or loss if the cost of a closing purchase transaction exceeds the premium received when the option was sold) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option will be extinguished. If an option is exercised, the Program will realize a gain or loss from the sale of the underlying security and the proceeds of sales are increased by the premium originally received.
ORGANIZATION OF THE PROGRAM
The Program was incorporated under Maryland law on May 12, 1994. The Program is an open-end management investment company comprised of separate series ("Series"), each of which is a separate portfolio offering shares to selected groups of purchasers. Each Series is to be managed independently. At the date of this Prospectus, the Program has authorized capital of 100,000,000 shares of Common Stock, par value $0.10 per share, divided as follows:
SHARES OF SHARES OF SHARES OF SHARES OF
CLASS A CLASS B CLASS C CLASS D
COMMON COMMON COMMON COMMON
PORTFOLIO STOCK STOCK STOCK STOCK
- --------- --------- --------- --------- ---------
Fundamental Value....................... 6,250,000 6,250,000 6,250,000 6,250,000
Quality Bond............................ 6,250,000 6,250,000 6,250,000 6,250,000
U.S. Government Securities.............. 6,250,000 6,250,000 6,250,000 6,250,000
Global Opportunity...................... 6,250,000 6,250,000 6,250,000 6,250,000
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The Program has received an order (the "Order") from the SEC permitting the issuance and sale of multiple classes of shares, and the Directors of the Program may classify and reclassify the shares of the
Program into additional Series or classes of common stock at a future date without shareholder approval. Shares of Class A, Class B, Class C and Class D Common Stock of each Portfolio represent interests in the same assets of that Portfolio 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 applicable. See "Purchase of Shares".
Shareholders are entitled to one vote for each full share and to fractional votes for fractional shares held in the election of Directors (to the extent hereinafter provided) and on other matters submitted to the vote of shareholders. There normally will be no meeting of shareholders for the purpose of electing Directors unless and until such time as less than a majority of the Directors holding office have been elected by shareholders, at which time the Directors then in office will call a shareholders' meeting for the election of Directors. Shareholders may, in accordance with the Articles of Incorporation of the Program, cause a meeting of shareholders to be held for the purpose of voting on the removal of Directors. Also, the Program will be required to call a special meeting of shareholders of a Series in accordance with the requirements of the Investment Company Act to seek approval of new management and advisory arrangements, of a material increase in distribution fees or of a change in the fundamental policies, objectives or restrictions of a Series. Except as set forth above, the Directors shall continue to hold office and appoint successor Directors. Each issued and outstanding share is entitled to participate equally in dividends and distributions declared by the respective Series and in net assets of such Series upon liquidation or dissolution remaining after satisfaction of outstanding liabilities except that, as noted above, Class B, Class C and Class D shares of each Series bear certain additional expenses. The obligations and liabilities of a particular Series are restricted to the assets of that Series and do not extend to the assets of the Program generally. Shares of each Series represent an interest only in that Series and not in any other Series of the Program. The shares of each Series, when issued, will be fully-paid and non-assessable by the Program.
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. Attn: TAMFO P.O. Box 45289 Jacksonville, FL 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 1-800-637-3863.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Program at the address or telephone number set forth on the cover page of this Prospectus.
APPENDIX A: OPTIONS AND FUTURES TRANSACTIONS
As described under "Other Investment Policies and Practices of the Portfolios--Portfolio Strategies Involving Options and Futures", each Portfolio is authorized to engage in various portfolio management strategies involving options, futures and options on futures. These strategies are described in detail below:
Writing Covered Options. Each Portfolio is authorized to write (i.e., sell) covered call options on the securities in which it may invest and to enter into closing purchase transactions with respect to certain of such options. A covered call option is an option where a Portfolio in return for a premium gives another party a right to buy specified securities owned by the Portfolio at a specified future date and price set at the time of the contract. The principal reason for writing call options is to attempt to realize, through the receipt of premiums, a greater return than would be realized on the securities alone. By writing covered call options, a Portfolio gives up the opportunity, while the option is in effect, to profit from any price increase in the underlying security above the option exercise price. In addition, the Portfolio's ability to sell the underlying security will be limited while the option is in effect unless the Portfolio effects a closing purchase transaction. A closing purchase transaction cancels out the Portfolio's position as the writer of an option by means of an offsetting purchase of an identical option prior to the expiration of the option it has written. Covered call options serve as a partial hedge against the price of the underlying security declining.
Each Portfolio also may write put options which give the holder of the option the right to sell the underlying security to the Portfolio at the stated exercise price. A Portfolio will receive a premium for writing a put option, which increases the Portfolio's return. The Portfolios write only covered put options, which means that so long as the Portfolio is obligated as the writer of the option it will, through its custodian, have deposited and maintained cash, cash equivalents, U.S. Government securities or other high grade liquid debt or equity securities denominated in U.S. dollars or non-U.S. currencies with a securities depository with a value equal to or greater than the exercise price of the underlying securities. By writing a put, the Portfolio will be obligated to purchase the underlying security at a price that may be higher than the market value of that security at the time of exercise for as long as the option is outstanding. A Portfolio may engage in closing transactions in order to terminate put options that it has written.
Purchasing Options. Each Portfolio is authorized to purchase put options to hedge against a decline in the market value of its securities. By buying a put option, a Portfolio has a right to sell the underlying security at the exercise price, thus limiting the Portfolio'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 Portfolio'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. In certain circumstances, a Portfolio may purchase call options on securities held in its portfolio on which it has written call options or on securities which it intends to purchase. A Portfolio will not purchase options on securities (including stock index options discussed below) if, as a result of such purchase, the aggregate cost of all outstanding options on securities held by the Portfolio would exceed 5% of the market value of the Portfolio's total assets.
Stock Index Options. The Fundamental Value and Global Opportunity Portfolios are authorized to engage in transactions in stock index options. These Portfolios may purchase or write put and call options on stock indexes to hedge against the risks of market-wide stock price movements in the securities in which either Portfolio invests. Options on indexes are similar to options on securities, except that on exercise or assignment, the parties to the contract pay or receive an amount of cash equal to the difference between the closing value of the index and the exercise price of the option times a specified multiple. A Portfolio may invest in stock index options based on a broad market index, e.g., the S&P 500 Index, or on a narrow index representing an industry or market segment, e.g., the AMEX Oil & Gas Index.
Stock Index Futures and Interest Rate Futures Contracts. The Fundamental Value and Global Opportunity Portfolios may purchase and sell stock index futures contracts, and the Quality Bond, Global Opportunity and U.S. Government Securities Portfolios may purchase and sell interest rate futures contracts, as a hedge against adverse changes in the market value of portfolio securities, as described below. Stock index futures contracts and interest rate futures contracts are herein together referred to as "futures contracts".
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 financial instrument for a set price on a future date. The terms of a futures contract require either actual delivery of the financial instrument underlying the contract or, in the case of a stock index futures contract, a 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 Fundamental Value and Global Opportunity Portfolios may effect transactions in stock index futures contracts in connection with the equity securities in which they invest; the Quality Bond, Global Opportunity and U.S. Government Securities Portfolios may invest in interest rate futures contracts in connection with the debt securities in which they invest. Transactions by a Portfolio in futures contracts are subject to limitations as described below under "Restrictions on the Use of Futures Transactions".
The Portfolios may sell futures contracts in anticipation of or during a market decline to attempt to offset the decrease in market value of such Portfolio's securities that might otherwise result. When a Portfolio is not fully invested in the securities markets and anticipates a significant advance, it may purchase futures in order to gain rapid market exposure. This technique generally will allow the Portfolios to gain exposure to a market in a manner which is more efficient than purchasing individual securities and may in part or entirely offset increases in the cost of securities in such market that the Portfolio ultimately purchases. As such purchases are made, an equivalent amount of futures contracts will be terminated by offsetting sales. The Program does not consider purchases of futures contracts by the Portfolios to be a speculative practice under these circumstances. It is anticipated that, in a substantial majority of these transactions, each Portfolio will purchase such securities upon termination of the long futures position, whether the long position is the purchase of a futures contract or the purchase of a call option or the writing of a put option on a future, but under unusual circumstances (e.g., a Portfolio experiences a significant amount of redemptions), a long futures position may be terminated without the corresponding purchase of securities.
Each Portfolio also has authority to purchase and write call and put options on futures contracts (and, in the case of the Fundamental Value and Global Opportunity Portfolios, stock indexes) in connection with its hedging (including anticipatory 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 a Portfolio enters into futures transactions. A Portfolio may purchase put options or write call options on futures contracts or stock indexes rather than selling the underlying futures contract in anticipation of a
decrease in the market value of its securities. Similarly, a Portfolio may purchase call options, or write put options on futures contracts or stock indexes, as a substitute for the purchase of such futures contract to hedge against the increased cost resulting from an increase in the market value of securities which the Portfolio intends to purchase.
Each Portfolio may engage in options and futures transactions on U.S. (and, in the case of the Fundamental Value and Global Opportunity Portfolios, foreign) exchanges and 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 are two-party contracts with prices 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 Hedging. The Fundamental Value and Global Opportunity Portfolios are authorized to deal in forward foreign exchange among currencies of the different countries in which they will invest and multinational currency units as a hedge against possible variations in the foreign exchange rates among these currencies. Foreign currency hedging 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 Fundamental Value and Global Opportunity Portfolios' 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 Portfolio accruing in connection with the purchase and sale of its portfolio securities, the sale and redemption of shares of the Portfolio or the payment of dividends and distributions by the Portfolio. Position hedging is the sale of forward foreign currency with respect to portfolio security positions denominated or quoted in such foreign currency. No Portfolio will speculate in forward foreign exchange.
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 a Portfolio to hedge against a devaluation that is so generally anticipated that the Portfolio is not able to contract to sell the currency at a price above the devaluation level it anticipates.
The Fundamental Value and Global Opportunity Portfolios also are authorized to purchase or sell listed or OTC foreign currency options, foreign currency futures and related options on foreign currency futures as a short or long hedge against possible variations in foreign exchange rates. Such transactions may be effected with respect to hedges on non-U.S. dollar denominated securities owned by the Portfolio, sold by the Portfolio but not yet delivered, or committed or anticipated to be purchased by the Portfolio. As an illustration, a Portfolio may use such techniques to hedge the stated value in U.S. dollars of an investment in a yen denominated security. In such circumstances, for example, the Portfolio may purchase a foreign currency put option enabling it to sell a specified amount of yen for dollars at a specified price by a future date. To the extent the hedge is successful, a loss in the value of the yen relative to the dollar will tend to be offset by an increase in the value of the put option. To offset, in whole or in part, the cost of acquiring such a put option, the Portfolio may also sell a call option which, if exercised, requires it to sell a specified amount of yen for dollars at a specified price by a future date (a technique called a "straddle"). By selling such call option in
this illustration, the Portfolio gives up the opportunity to profit without limit from increases in the relative value of the yen to the dollar. The Investment Adviser believes that "straddles" of the type which may be utilized by the Fundamental Value and Global Opportunity Portfolios 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. A futures contract on a foreign currency is an agreement between two parties to buy and sell a specified amount of a 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. Neither the Fundamental Value nor the Global Opportunity Portfolio will speculate in foreign currency options, futures or related options. Accordingly, neither Portfolio will hedge a currency substantially in excess of the market value of securities which it has committed or anticipates to purchase which are denominated in such currency and, in the case of securities which have been sold by the Portfolio but not yet delivered, the proceeds thereof in its denominated currency. The Fundamental Value and Global Opportunity Portfolios each are limited regarding potential net liabilities from foreign currency options, futures or related options to no more than 20% of such Portfolio's total assets.
Restrictions on the Use of Futures Transactions. Regulations of the Commodity Futures Trading Commission (the "CFTC") applicable to the Portfolios provide that the futures trading activities described herein will not result in any Portfolio being deemed a "commodity pool" as defined under such regulations if each Portfolio adheres to certain restrictions. In particular, a Portfolio may purchase and sell futures contracts and options thereon (i) for bona fide hedging purposes and (ii) for non-hedging purposes, if the aggregate initial margin and premiums required to establish positions in such contracts and options does not exceed 5% of the liquidation value of the Portfolio's holdings, after taking into account unrealized profits and unrealized losses on any such contracts and options. Margin deposits may consist of cash or securities acceptable to the broker and the relevant contract market.
When a Portfolio 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 in the name of the Portfolio with the Program'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 contract is unleveraged.
Restrictions on OTC Options. The Portfolios may engage in OTC options, including OTC stock index options, OTC foreign currency options and options on foreign currency futures, only with 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 staff of the SEC has taken the position that purchased OTC options and the assets used as cover for written OTC options are illiquid securities. Therefore, each Portfolio 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 Portfolio, the market value of the underlying securities covered by OTC call options currently outstanding which were sold by the Portfolio and margin deposits on the Portfolio's existing OTC options on futures contracts exceed 10% of the total assets of the Portfolio, taken at market value, together with all other assets of the Portfolio which are illiquid or are not otherwise readily marketable. However, if the OTC
option is sold by the Portfolio to a primary U.S. Government securities dealer recognized by the Federal Reserve Bank of New York and if the Portfolio has the unconditional contractual right to repurchase such OTC option from the dealer at a predetermined price, then the Portfolio 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 as to OTC options is not a fundamental policy of each Portfolio and may be amended by the Directors of the Program without the approval of the Portfolio's shareholders. However, no Portfolio will change or modify this policy prior to the change or modification by the SEC staff of its position.
Options on GNMA Certificates. The following information relates to unique characteristics of options on GNMA Certificates. Since the remaining principal balance of GNMA Certificates declines each month as a result of mortgage payments, the U.S. Government Securities Portfolio, as a writer of a GNMA call holding GNMA Certificates as "cover" to satisfy its delivery obligation in the event of exercise, may find that the GNMA Certificates it holds no longer have a sufficient remaining principal balance for this purpose. Should this occur, the Portfolio will purchase additional GNMA Certificates from the same pool (if obtainable) or other GNMA Certificates in the cash market in order to maintain its "cover".
A GNMA Certificate held by the Portfolio to cover an option position in any but the nearest expiration month may cease to represent cover for the option in the event of a decline in the GNMA coupon rate at which new pools are originated under the FHA/VA loan ceiling in effect at any given time. If this should occur, the Portfolio will no longer be covered, and the Portfolio will either enter into a closing purchase transaction or replace such Certificate with a certificate which represents cover. When the Portfolio closes its position or replaces such Certificate, it may realize an unanticipated loss and incur transaction costs.
Risk Factors in Options and Futures Transactions. Utilization of options and futures transactions to hedge a Portfolio involves the risk of imperfect correlation in movements in the price of options and futures and movements in the price of the securities 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 hedged securities or currencies, the Portfolio will experience a gain or loss which will not be completely offset by movements in the price of the subject of the hedge. The successful use of options and futures also depends on the Investment Adviser's ability to correctly predict price movements in the market involved in a particular options or futures transaction. To compensate for imperfect correlations, the Portfolio may purchase or sell stock index options or futures contracts in a greater dollar amount than the hedged securities if the volatility of the hedged securities is historically greater than the volatility of the stock index options or futures contracts. Conversely, the Portfolio may purchase or sell fewer stock index options or futures contracts if the volatility of the price of the hedged securities is historically less than that of the stock index options or futures contracts. The risk of imperfect correlation generally tends to diminish as the maturity date of the stock index option or futures contract approaches.
The Portfolios intend 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 over- the-counter transactions, the Investment Adviser believes the Portfolio 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 Portfolio's ability to hedge effectively its portfolio. There is also the risk of loss by the Portfolio of margin deposits or collateral in the event of bankruptcy of a broker with whom the Portfolio has an open position in an option, a futures contract or related option.
The exchanges on which the Portfolios intend to conduct options transactions have generally established limitations governing the maximum number of call or put options on the same underlying security or 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 Portfolios' holdings.
APPENDIX B: RATINGS OF CORPORATE DEBT SECURITIES
(INCLUDING MORTGAGE-BACKED AND ASSET-BACKED SECURITIES)
DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP ("STANDARD & POOR'S") CORPORATE DEBT RATINGS
A Standard & Poor's corporate or municipal rating is a current assessment of the creditworthiness of an obligor with respect to a specific obligation. This assessment may take into consideration obligors such as guarantors, insurers, or lessees.
The debt rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment as to market price or suitability for a particular investor.
The ratings are based on current information furnished by the issuer or obtained by Standard & Poor's from other sources it considers reliable. Standard & Poor's does not perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended or withdrawn as a result of changes in, or unavailability of, such information, or for other reasons.
The ratings are based, in varying degrees, on the following considerations:
(1) likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation; (2) nature of and provisions of the obligation; and
(3) protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
AAA Debt rated AAA has the highest rating assigned by Standard & Poor's. Capacity
to pay interest and repay principal is extremely strong.
AA Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest-rated issues only in small degree.
A Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
BBB Debt rated BBB is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay principal for debt in this
category than for debt in higher-rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest.
While such debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major exposures to adverse
conditions.
BB Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
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B Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness
to pay interest and repay principal. The B rating category is also used for
debt subordinated to senior debt that is assigned an actual or implied BB or
BB- rating.
CCC Debt rated CCC has a currently identifiable vulnerability to default, and is
dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.
CC The rating CC is typically applied to debt subordinated to senior debt that is
assigned an actual or implied CCC rating.
C The rating C typically is applied to debt subordinated to senior debt which is
assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
CI The rating CI is reserved for income bonds on which no interest is being paid.
D Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless Standard & Poor's believes
that such payments will be made during such grace period. The D rating also
will be used upon the filing of a bankruptcy petition if debt service payments
are jeopardized.
Plus (+) or
minus (-): The ratings from AA to CCC may be modified by the addition of a plus or minus
sign to show relative standing within the major rating categories.
c The letter c indicates that the holder's option to tender the security for
purchase may be canceled under certain prestated conditions enumerated in the
tender option documents.
L The letter L indicates that the rating pertains to the principal amount of
those bonds to the extent that the underlying deposit collateral is federally
insured and interest is adequately collateralized. In the case of certificates
of deposit, the letter L indicates that the deposit, combined with other
deposits being held in the same right and capacity, will be honored for
principal and accrued pre-default interest up to the federal insurance limits
within 30 days after closing of the insured institution or, in the event that
the deposit is assumed by a successor insured institution, upon maturity.
p The letter p indicates that the rating is provisional. A provisional rating
assumes the successful completion of the project being financed by the debt
being rated and indicates that payment of debt service requirements is largely
or entirely dependent upon the successful and timely completion of the
project. This rating, however, while addressing credit quality subsequent to
completion of the project, makes no comment on the likelihood of, or the risk
of default upon failure of, such completion. The investor should exercise his
own judgment with respect to such likelihood and risk.
* Continuance of the rating is contingent upon Standard & Poor's receipt of an
executed copy of the escrow agreement or closing documentation confirming
investments and cash flows.
N.R. Not rated.
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Debt obligations of issuers outside the United States and its territories are rated on the same basis as domestic corporate and municipal issues. The ratings measure the creditworthiness of the obligor but do not take into account currency exchange and related uncertainties.
Bond Investment Quality Standards: Under present commercial bank regulations issued by the Comptroller of the Currency, bonds rated in the top four categories ("AAA", "AA", "A", "BBB", commonly known as "Investment Grade" ratings) are generally regarded as eligible for bank investment. In addition, the laws of various states governing legal investments impose certain rating or other standards for obligations eligible for investment by savings banks, trust companies, insurance companies and fiduciaries generally.
DESCRIPTION OF STANDARD & POOR'S COMMERCIAL PAPER RATINGS
A Standard & Poor's commercial paper rating is a current assessment of the likelihood of timely payment of debt considered short-term in the relevant market. Ratings are graded into several categories, ranging from A-1 for the highest quality obligations to D for the lowest. These categories are as follows:
A-1 This highest category indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated A-1.
A-3 Issues carrying this designation have adequate capacity for timely payment. They are, however, more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations.
B Issues rated B are regarded as having only speculative capacity for timely payment.
C This rating is assigned to short-term debt obligations with a doubtful capacity for payment.
D Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless Standard & Poor's believes that such payments will be made during such grace period.
A commercial paper rating is not a recommendation to purchase, sell, or hold a security inasmuch as it does not comment as to market price or suitability for a particular investor. The ratings are based on current information furnished to Standard & Poor's by the issuer or obtained by Standard & Poor's from other sources it considers reliable. Standard & Poor's does not perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended, or withdrawn as a result of changes in, or unavailability of, such information, or based on other circumstances.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE RATINGS
Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
Baa Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Ba Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of desirable investments. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest.
Ca Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating classification from Aa through B in its corporate bond rating system. The modifier 1 indicates that the security ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks in the lower end of its generic rating category.
DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS
The term "commercial paper" as used by Moody's means promissory obligations not having an original maturity in excess of nine months. Moody's makes no representations as to whether such commercial paper is by any other definition "commercial paper" or is exempt from registration under the Securities Act of 1933, as amended.
Moody's Commercial Paper ratings are opinions of the ability of issuers to repay punctually promissory obligations not having an original maturity in excess of nine months. Moody's makes no representation that
such obligations are exempt from registration under the Securities Act of 1933, nor does it represent that any specific note is a valid obligation of a rated issuer or issued in conformity with any applicable law. Moody's employs the following three designations, all judged to be investment grade, to indicate the relative repayment ability of rated issuers.
Issuers rated PRIME-1 (or supporting institutions) have a superior ability for repayment of short-term promissory obligations. PRIME-1 repayment ability will often be evidenced by many of the following characteristics:
--Leading market positions in well-established industries.
--High rates of return on funds employed.
--Conservative capitalization structure with moderate reliance on debt and ample asset protection.
--Broad margins in earnings coverage of fixed financial charges and high internal cash generation.
--Well-established access to a range of financial markets and assured sources of alternate liquidity.
Issuers rated PRIME-2 (or supporting institutions) have a strong ability for repayment of short-term promissory obligations. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated PRIME-3 (or supporting institutions) have an acceptable ability for repayment of short-term promissory obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained.
Issuers rated NOT PRIME do not fall within any of the Prime rating categories.
If an issuer represents to Moody's that its Commercial Paper obligations are supported by the credit of another entity or entities, in assigning ratings to such issuers, Moody's evaluates the financial strength of the affiliated corporations, commercial banks, insurance companies, foreign governments or other entities, but only as one factor in the total rating assessment. Moody's makes no representation and gives no opinion on the legal validity or enforceability of any support arrangement.
DESCRIPTION OF FITCH INVESTORS SERVICES, INC.'S ("FITCH") INVESTMENT GRADE BOND RATINGS
Fitch investment grade bond ratings provide a guide to investors in determining the credit risk associated with a particular security. The ratings represent Fitch's assessment of the issuer's ability to meet the obligations of a specific debt issue or class of debt in a timely manner.
The rating takes into consideration special features of the issue, its relationship to other obligations of the issuer, the current and prospective financial condition and operating performance of the issuer and any guarantor, as well as the economic and political environment that might affect the issuer's future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by insurance policies or financial guarantees unless otherwise indicated.
Bonds that have the same rating are of similar but not necessarily identical credit quality since the rating categories do not fully reflect small differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect of any security. Fitch ratings are based on information obtained from issuers, other obligors, underwriters, their experts, and other sources Fitch believes to be reliable. Fitch does not audit or verify the truth or accuracy of such information. Ratings may be changed, suspended, or withdrawn as a result of changes in, or the unavailability of, information or for other reasons.
AAA Bonds considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong ability to pay interest and repay principal, which is unlikely to be affected by reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated AAA. Because bonds rated in
the AAA and AA categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated
F-1+.
A Bonds considered to be investment grade and of high credit quality. The obligor's ability to pay interest and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings.
BBB Bonds considered to be investment grade and of satisfactory credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to have adverse impact on these bonds, and therefore impair timely payment. The likelihood that the ratings of these bonds will fall below investment grade is higher than for bonds with higher ratings.
Plus (+) or Minus (-): Plus and minus signs are used with a rating symbol to indicate the relative position of a credit within the rating category. Plus and minus signs, however, are not used in the AAA category.
Credit Trend Indicator: Credit trend indicators show whether credit fundamentals are improving, stable, declining, or uncertain, as follows:
Improving [UP ARROW] Stable [LEFT AND RIGHT ARROW] Declining [DOWN ARROW] Uncertain [UP AND DOWN ARROW] |
Credit trend indicators are not predictions that any rating change will occur, and have a longer-term time frame than issues placed on FitchAlert.
NR INDICATES THAT FITCH DOES NOT RATE THE SPECIFIC ISSUE
Conditional: A conditional rating is premised on the successful completion of a project or the occurrence of a specific event.
Suspended: A rating is suspended when Fitch deems the amount of information available from the issuer to be inadequate for rating purposes.
Withdrawn: A rating will be withdrawn when an issue matures or is called or refinanced and, at Fitch's discretion, when an issuer fails to furnish proper and timely information.
FitchAlert: Ratings are placed on FitchAlert to notify investors of an occurrence that is likely to result in a rating change and the likely direction of such change. These are designated as "Positive" indicating a potential upgrade. "Negative" for potential downgrade, or "Evolving" where ratings may be raised or lowered. FitchAlert is relatively short-term, and should be resolved within 12 months.
DESCRIPTION OF FITCH'S INVESTMENT GRADE SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on demand or have original maturities of generally up to three years, including commercial paper, certificates of deposit, medium-term notes, and municipal and investment notes.
The short-term rating places greater emphasis than a long-term rating on the existence of liquidity necessary to meet the issuer's obligations in a timely manner.
Fitch short-term ratings are as follows:
F-1+ Exceptionally Strong Credit Quality. Issues assigned this rating are regarded as having the strongest degree of assurance for timely payment.
F-1 Very Strong Credit Quality. Issues assigned this rating reflect an assurance of timely payment only slightly less in degree than issues rated F-1+.
F-2 Good Credit Quality. Issues assigned this rating have a satisfactory degree of assurance for timely payment, but the margin of safety is not as great as for issues assigned F-1+ and F-1 ratings.
F-3 Fair Credit Quality. Issues assigned this rating have characteristics suggesting that the degree of assurance for timely payment is adequate; however, near-term adverse changes could cause these securities to be rated below investment grade.
F-4 Weak Credit Quality. Issues assigned this rating have characteristics suggesting a minimal degree of assurance for timely payment and are vulnerable to near-term adverse changes in financial and economic conditions.
D Default. Issues assigned this rating are in actual or imminent payment default.
LOC The symbol "LOC" indicates that the rating is based on a letter of credit issued by a commercial bank.
INVESTMENT ADVISER
Merrill Lynch Asset Management
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey 08536
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 08536
Mailing Address:
P.O. Box 9011
Princeton, New Jersey 08543-9011
TRANSFER AGENT
Merrill Lynch Financial Data Services, Inc. Administrative Offices:
Transfer Agency Mutual Fund Operations
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
Mailing Address:
P.O. Box 45289
Jacksonville, Florida 32232-5289
CUSTODIAN
The Bank of New York
90 Washington Street
12th Floor
New York, New York 10286
INDEPENDENT AUDITORS
Deloitte & Touche LLP
117 Campus Drive
Princeton, New Jersey 08540
COUNSEL
Brown & Wood
One World Trade Center
New York, New York 10048-0557
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE- SENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER IN- FORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE PROGRAM, 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
PAGE
----
Fee Table................................................................. 3
Prospectus Summary........................................................ 7
Merrill Lynch Select PricingSM System..................................... 9
Financial Highlights...................................................... 14
Risk Factors and Special Considerations................................... 18
Investment Objectives and Policies........................................ 20
Fundamental Value Portfolio.............................................. 20
Quality Bond Portfolio................................................... 21
U.S. Government Securities Portfolio..................................... 22
Global Opportunity Portfolio............................................. 22
Other Investment Policies and Practices of the Portfolios................. 24
Investments in Equity Securities......................................... 24
Investments in Debt Securities........................................... 24
Investments in Securities Denominated in Foreign Currencies.............. 28
Investments in Money Market Securities................................... 28
When-Issued Securities, Forward Commitments and Delayed Delivery Transac-
tions................................................................... 28
Standby Commitment Agreements............................................ 29
Repurchase Agreements and Purchase and Sale Contracts.................... 29
Indexed and Inverse Securities........................................... 30
Lending of Portfolio Securities.......................................... 30
Portfolio Strategies Involving Options and Futures....................... 31
Illiquid Securities...................................................... 31
Investment Restrictions.................................................. 32
Management of the Program................................................. 32
Board of Directors....................................................... 32
Management and Advisory Arrangements..................................... 33
Code of Ethics........................................................... 35
Transfer Agency Services................................................. 35
Purchase of Shares........................................................ 36
Initial Sales Charge Alternatives--
Class A and Class D Shares.............................................. 40
Deferred Sales Charge Alternatives--
Class B and Class C Shares.............................................. 41
Distribution Plans....................................................... 45
Limitations on the Payment of Deferred Sales Charges..................... 46
Redemption of Shares...................................................... 47
Shareholder Services...................................................... 47
Portfolio Transactions and Brokerage...................................... 50
Performance Data.......................................................... 51
Taxes..................................................................... 52
Federal.................................................................. 52
State.................................................................... 54
Additional Information.................................................... 54
Dividends and Distributions.............................................. 54
Determination of Net Asset Value......................................... 55
Organization of the Program.............................................. 56
Shareholder Reports...................................................... 57
Shareholder Inquiries.................................................... 57
Appendix A--Options and Futures Transactions.............................. 58
Appendix B--Ratings of Corporate Debt Securities.......................... 64
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Code # 18471-0595
[LOGO] MERRILL LYNCH
Merrill Lynch
Retirement Asset
Builder Program, Inc.
[ART]
PROSPECTUS
May 30, 1995
Distributor:
Merrill Lynch
Funds Distributor, Inc.
This prospectus should be retained for future reference.
STATEMENT OF ADDITIONAL INFORMATION
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
MERRILL LYNCH FUNDAMENTAL VALUE MERRILL LYNCH U.S. GOVERNMENT
PORTFOLIO SECURITIES PORTFOLIO
MERRILL LYNCH QUALITY BOND PORTFOLIO MERRILL LYNCH GLOBAL OPPORTUNITY
PORTFOLIO
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Merrill Lynch Retirement Asset Builder Program, Inc. (the "Program") is a professionally managed, open-end investment company. The Program consists of four separate portfolios: the Merrill Lynch Fundamental Value Portfolio (the "Fundamental Value Portfolio"), the Merrill Lynch Quality Bond Portfolio (the "Quality Bond Portfolio"), the Merrill Lynch U.S. Government Securities Portfolio (the "U.S. Government Securities Portfolio") and the Merrill Lynch Global Opportunity Portfolio (the "Global Opportunity Portfolio") (each a "Portfolio"). Each Portfolio has its own separate investment objectives and may employ a variety of instruments and techniques to enhance income and to hedge against market risk and, in the case of the Fundamental Value and Global Opportunity Portfolios, currency risk.
The Fundamental Value Portfolio is a diversified portfolio seeking capital appreciation and, secondarily, income by investing in securities, primarily equities, that the management of the Portfolio believes are undervalued and therefore represent investment value.
The Quality Bond Portfolio is a diversified portfolio seeking income and, secondarily, capital appreciation by investing primarily in long-term corporate bonds that are rated A or better by a nationally recognized rating agency such as Standard & Poor's Ratings Group ("S&P"), Moody's Investors Service, Inc. ("Moody's") and Fitch Investors Services, Inc. ("Fitch"), or that possess, in the judgment of the Investment Adviser, similar credit characteristics.
The U.S. Government Securities Portfolio is a diversified portfolio seeking high current return by investing in U.S. Government and government agency securities, including Government National Mortgage Association ("GNMA") mortgage-backed securities and other mortgage-backed government securities.
The Global Opportunity Portfolio is a diversified portfolio seeking high total investment return 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 types of securities and markets, in response to changing market and economic trends.
Each portfolio is a separate series of the Program issuing its own shares. Shares of each Portfolio are available for purchase solely by holders of the individual retirement plans, individual retirement rollover accounts and simplified employee pension plans (collectively "IRAs") for which Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") acts as custodian. For a description of the IRAs, see Appendix A to this Statement of Additional Information.
Pursuant to the Merrill Lynch Select Pricing SM System, each Portfolio 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.
MERRILL LYNCH ASSET MANAGEMENT--INVESTMENT ADVISER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.--DISTRIBUTOR
The date of this Statement of Additional Information is May 30, 1995.
INVESTMENT OBJECTIVES AND POLICIES
The Program consists of four separate Portfolios: the Fundamental Value Portfolio, the Quality Bond Portfolio, the U.S. Government Securities Portfolio and the Global Opportunity Portfolio, each with its own separate investment objectives. Each of the Portfolios pursues its investment objectives through separate investment policies. Reference is made to "Investment Objectives and Policies" in the Prospectus for a discussion of the investment objectives and policies of each Portfolio.
FUNDAMENTAL VALUE PORTFOLIO
The Fundamental Value Portfolio seeks capital appreciation and, secondarily, income by investing in securities, primarily (i.e., at least 65% of the Portfolio's assets) in equities, that the Investment Adviser believes are undervalued and therefore represent investment value.
Portfolio Turnover. The rate of portfolio turnover is not a limiting factor and, given the Portfolio's investment policies, it is anticipated that there may be periods when high portfolio turnover will exist. The use of covered call options at times when the underlying securities are appreciating in value may result in higher portfolio turnover. The Portfolio 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. Although the Portfolio anticipates that its annual portfolio turnover rates should not exceed 100%, the turnover rate may vary greatly from year to year or during periods within a year. A high rate of portfolio turnover results in correspondingly greater brokerage commission expenses. The portfolio turnover rate for each of the Portfolios is calculated by dividing the lesser of the Portfolio's annual sales or purchases of portfolio securities (exclusive of purchases or sales of all securities with maturities at the time of acquisition of one year or less) by the monthly average value of the securities in the portfolio during the year.
QUALITY BOND PORTFOLIO
The Quality Bond Portfolio seeks a high level of current income through investment primarily in securities rated in the top three rating categories of a nationally recognized rating agency such as Moody's, S&P or Fitch or in securities that possess, in the judgment of the Investment Adviser, similar credit characteristics. The Quality Bond Portfolio seeks to achieve its objectives by investing in a diversified portfolio of fixed income securities, including corporate bonds and notes, convertible and nonconvertible debt securities and preferred stock and government obligations.
Portfolio Turnover. The rate of portfolio turnover is not a limiting factor when management deems it appropriate to purchase or sell securities. The Portfolio expects that its annual turnover rate should not generally exceed 100%; however, during periods when interest rates fluctuate significantly, as they have during the past few years, the portfolio turnover rate may be substantially higher. In any particular year, however, market conditions could result in portfolio activity at a greater or lesser rate than anticipated.
U.S. GOVERNMENT SECURITIES PORTFOLIO
The U.S. Government Securities Portfolio seeks a high current return through investments in U.S. Government and Government agency securities ("U.S. Government securities"), including GNMA mortgage-backed certificates, and other mortgage-backed government securities.
While the Portfolio has authority to invest in all U.S. Government securities, it is anticipated that under certain market conditions, a significant portion of its portfolio of U.S. Government securities may consist of GNMA mortgage-backed certificates ("GNMA Certificates") and other U.S. Government securities representing ownership interests in mortgage pools. The Portfolio is authorized to acquire all types of U.S. Government securities representing ownership interests in mortgage pools which are presently issued or which may be issued in the future. In this regard, GNMA recently began offering a pass-through security backed by adjustable-rate mortgages. These securities bear interest at a rate which is adjusted either quarterly or annually. The prepayment experience of the mortgages underlying these securities may vary from that for fixed-rate mortgages. These securities are eligible for purchase by the Portfolio.
Portfolio Turnover. The Investment Adviser will effect portfolio transactions without regard to any holding period if, in its judgment, such transactions are advisable in light of a change in general market, economic or financial conditions. While the Portfolio anticipates that its annual turnover rate should not exceed 400% under normal conditions, it is impossible to predict portfolio turnover rates. A high portfolio turnover rate involves correspondingly greater transaction costs in the form of dealer spreads and brokerage commissions, which are borne directly by the Portfolio. See "Portfolio Transactions and Brokerage--Portfolio Turnover".
GLOBAL OPPORTUNITY PORTFOLIO
The Portfolio's investment objective is to seek a high total investment return 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 types of securities and markets, in response to changing market and economic trends.
The U.S. Government has from time to time in the past imposed restrictions, through taxation and otherwise, on foreign investments by U.S. investors such as the Portfolio. If such restrictions should be reinstituted, it might become necessary for the Portfolio to invest all or substantially all of its assets in U.S. securities. In such event, the Portfolio would review its investment objective and investment policies to determine whether changes are appropriate. Any changes in the investment objective or fundamental policies set forth under "Investment Restrictions" below would require the approval of the holders of a majority of the Portfolio's outstanding voting securities.
The Portfolio's ability and decisions to purchase or sell portfolio securities may be affected by laws or regulations relating to the convertibility and repatriation of assets. Because the shares of the Portfolio are redeemable on a daily basis on each day the Portfolio determines its net asset value in U.S. dollars, the Portfolio intends to manage its portfolio so as to give reasonable assurance that it will be able to obtain U.S. dollars to the extent necessary to meet anticipated redemptions. See "Redemption of Shares". Under present conditions, the Portfolio does not believe that these considerations will have any significant effect on its portfolio strategy, although there can be no assurance in this regard.
Portfolio Turnover. While it is the policy of the Portfolio generally not to engage in trading for short-term gains, the Investment Adviser will effect portfolio transactions without regard to holding period if, in its judgment, such transactions are advisable in light of a change in circumstances of a particular company or within a particular industry or due to general market, economic or financial conditions. Accordingly, while the Portfolio anticipates that its annual turnover rate should not exceed 200% under normal conditions, it is impossible to predict portfolio turnover rates. A high rate of portfolio turnover results in correspondingly greater brokerage commission expenses. See "Portfolio Transactions and Brokerage--Portfolio Turnover".
All of the Portfolios are subject to the Federal income tax requirement that less than 30% of the Portfolio's gross income be derived from gains from the sale or other disposition of securities held for less than three months.
OTHER INVESTMENT POLICIES AND PRACTICES OF THE PORTFOLIOS
Writing of Covered Call Options. Each Portfolio may from time to time write (i.e., sell) covered call options on its portfolio securities and enter into closing purchase transactions with respect to certain of such options. A call option is considered covered where the writer of the option owns the underlying securities. By writing a covered call option, the Portfolio, in return for the premium income realized from the sale of the option may give up the opportunity to profit from a price increase in the underlying security above the option exercise price. In addition, the Portfolio will not be able to sell the underlying security until the option expires, is exercised or the Program effects a closing purchase transaction as described below. A closing purchase transaction cancels out the Program's position as the writer of an option by means of an offsetting purchase of an identical option prior to the expiration of the option it has written. If the option expires unexercised, the Program realizes a gain in the amount of the premium received for the option which may be offset by a decline in the market price of the underlying security during the option period. The use of covered call options is not a primary investment technique of any of the Portfolios and such options normally will be written on underlying securities as to which management does not anticipate significant short-term capital appreciation. In its use of options, the Program's investment adviser has access to personnel of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") with extensive experience in options research and strategy. No Portfolio may write covered options on underlying securities exceeding 15% of that Portfolio's total assets.
All options referred to herein and in the Program's Prospectus are options issued by The Options Clearing Corporation (the "Clearing Corporation") which are currently traded on the Chicago Board Options Exchange, American Stock Exchange, Philadelphia Stock Exchange, Pacific Stock Exchange or New York Stock Exchange. An 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. The option period normally ranges from three to nine months from the date the option is written. For writing an option, the Program receives a premium, which is the price of such option on the exchange on which it is traded. The exercise price of the option may be below, equal to, or above the current market value of the underlying security at the time the option is written.
The writer may terminate its obligation prior to the expiration date of the option by executing a closing purchase transaction which is effected 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. Such a purchase does not result in the ownership of an option. A closing purchase transaction ordinarily will be effected to realize a profit on an outstanding call option, to prevent an underlying security from being called, to permit the sale of the underlying security or to permit the writing of a new call option containing different terms on such underlying security. The cost of such a liquidation purchase plus transaction costs may be greater than the premium received upon the original option, in which event the Portfolio will have incurred a loss in the transaction. An option may be closed out only on an exchange which provides a secondary market for an option of the same series and there is no assurance that a liquid secondary market on an exchange will exist for any particular option. A covered option writer unable to effect a closing purchase transaction will not be able to sell the underlying security until the option expires or the underlying security is delivered upon
exercise, with the result that the writer will be subject to the risk of market decline in the underlying security during such period. A Portfolio will write an option on a particular security only if management believes that a liquid secondary market will exist on an exchange for options of the same series which will permit the Portfolio to make a closing purchase transaction in order to close out its position.
Due to the relatively short time that exchanges have been dealing with options, options involve risks of possible unforeseen events which can be disruptive to the option markets or could result in the institution of certain procedures, including restriction of certain types of orders.
Investment Restrictions. In addition to the investment restrictions set forth in the Prospectus, each of the Portfolios has adopted the following restrictions and policies relating to the investment of its assets and its activities, which are fundamental policies and may not be changed without the approval of the holders of a majority of the Portfolio's outstanding voting securities (which for this purpose and under the Investment Company Act of 1940, as amended (the "Investment Company Act") means the lesser of (a) 67% of the shares represented at a meeting at which more than 50% of the outstanding shares are represented or (b) more than 50% of the outstanding shares). The Portfolios may not:
1. Make any investment inconsistent with the Portfolio'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, a Portfolio 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 a Portfolio 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 Program's Prospectus and Statement of Additional Information, as they may be amended from time to time.
6. Issue senior securities to the extent such issuance would violate applicable law.
7. Borrow money, except that (i) a Portfolio 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) a Portfolio may borrow up to an additional 5% of its total assets for temporary purposes, (iii) a Portfolio may obtain such short-term credit as may be necessary for the clearance of purchases and sales of portfolio securities and (iv) a Portfolio may purchase securities on margin to the extent permitted by applicable law. A Portfolio may not pledge its assets other than to secure such borrowings or, to the extent permitted by such Portfolio's investment policies as set forth in the Program's 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 a Portfolio 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 a Portfolio may do so in accordance with applicable law and the Program'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.
Additional investment restrictions adopted by the Portfolios, which may be changed by the Program's Board of Directors, provide that the Portfolios may not:
a. Purchase securities of other investment companies, except to the extent such purchases are permitted by applicable law. Applicable law currently prohibits the Portfolios from purchasing the securities of other investment companies only if immediately thereafter not more than (i) 3% of the total outstanding voting stock of such company is owned by the Portfolio, (ii) 5% of the Portfolio's total assets, taken at market value, would be invested in any one such company, (iii) 10% of the Portfolio's total assets, taken at market value, would be invested in such securities, and (iv) the Portfolio, together with other investment companies having the same investment adviser and companies controlled by such companies, owns not more than 10% of the total outstanding stock of any one closed-end investment company. Investments by the Portfolios in wholly-owned investment entities created under the laws of certain countries will not be deemed an investment in other investment companies.
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 Program 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 a Portfolio's shares are registered or qualified for sale require a lower limitation, the Portfolio will observe such limitation. As of the date hereof, therefore, a Portfolio will not invest more than 10% of its total assets in securities which are subject to this investment restriction (c). Securities purchased in accordance with Rule 144A under the Securities Act (a "Rule 144A security") and determined to be liquid by the Program's Board of Directors are not subject to the limitations set forth in 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, no Portfolio will invest more than 50% of its total assets in securities of issuers that are restricted as to disposition, including Rule 144A securities, or in securities of issuers described in (e) below.
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 Portfolio's net assets; included within such limitation, but not to exceed 2% of the Portfolio's net assets, are warrants which are not listed on the New York Stock Exchange or American Stock Exchange or a major foreign exchange. For purposes of this restriction, warrants acquired by the Portfolio 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 Portfolio'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 Program, the officers and general partner of the Manager, 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 a Portfolio 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 Program's Prospectus and Statement of Additional Information, as they may be amended from time to time.
i. Notwithstanding fundamental investment 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 Portfolio shares. A Portfolio will not purchase securities while borrowings exceed 5% (taken at market value) of its total assets.
Portfolio securities of the Portfolios generally may not be purchased from, sold or loaned to the Investment Adviser or its affiliates or any of their directors, officers or employees, acting as principal, unless pursuant to a rule or exemptive order under the Investment Company Act.
Because of the affiliation of the Investment Adviser with the Program, the Portfolios are prohibited from engaging in certain transactions involving the Investment Adviser's affiliate, Merrill Lynch, or its affiliates except for brokerage transactions permitted under the Investment Company Act involving only usual and customary commissions or transactions pursuant to an exemptive order under the Investment Company Act. See "Portfolio Transactions and Brokerage". Without such an exemptive order, the Portfolios are prohibited from engaging in portfolio transactions with Merrill Lynch or its affiliates acting as principal and from purchasing securities in public offerings which are not registered under the Securities Act in which such firms or any of their affiliates participate as an underwriter or dealer.
Investment in Foreign Issuers. The Fundamental Value and Global Opportunity Portfolios may invest in securities of foreign issuers. Foreign companies may not be subject to uniform accounting and auditing and financial reporting standards or to practices and requirements comparable to those applicable to domestic issuers. Securities of foreign issuers may be less liquid and more volatile than securities of United States issuers. Investment in foreign securities also involves certain risks, including fluctuations in foreign exchange rates, political and economic developments and the possible imposition of exchange controls.
MANAGEMENT OF THE PROGRAM
DIRECTORS AND OFFICERS
The Directors and executive officers of the Program, their ages and their principal occupations for at least the last five years are set forth below. Unless otherwise noted, the address of each executive officer and Director is P.O. Box 9011, Princeton, New Jersey 08543-9011.
Arthur Zeikel (62)--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 & Co., Inc. ("ML & Co.") since 1990; Executive Vice President of Merrill Lynch since 1990 and Senior Vice President from 1985 to 1990; Director of Merrill Lynch Funds Distributor, Inc. (the "Distributor").
Joe Grills (60)--Director(2)--183 Soundview Lane, New Canaan, Connecticut 06840. Member of the Committee of Investment of Employee Benefit Assets of the Financial Executives Institute ("CIEBA") since 1986, member of CIEBA's Executive Committee since 1988 and its Chairman from 1991 to 1992; Assistant Treasurer of International Business Machines Corporation ("IBM") and Chief Investment Officer of IBM Retirement Funds from 1986 until 1993; Member of the Investment Advisory Committee of the State of New York Common Retirement Fund; Director, Duke Management Company.
Walter Mintz (66)--Director(2)--1114 Avenue of the Americas, New York, New York 10036. Special Limited Partner of Cumberland Associates (investment partnership) since 1982.
Melvin R. Seiden (64)--Director(2)--780 Third Avenue, New York, New York 10017. President of Silbanc Properties, Ltd. (real estate, investments and consulting) since 1987; Chairman and President of Seiden & de Cuevas, Inc. (private investment firm) from 1964 to 1987.
Stephen B. Swensrud (61)--Director(2)--24 Federal Street, Boston, Massachusetts 02110. Principal of Fernwood Associates (financial consultants).
Harry Woolf (71)--Director(2)--The Institute for Advanced Study, Olden Lane, Princeton, New Jersey 08540. Member of the editorial board of Interdisciplinary Science Reviews; Director, Alex. Brown Mutual Funds, Advanced Technology Laboratories, Family Health International, Inc. and SpaceLabs Medical (medical equipment manufacturing and marketing).
Terry K. Glenn (54)--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 the Distributor since 1986 and a Director thereof since 1991.
N. John Hewitt (60)--Senior Vice President(1)(2)--Senior Vice President of the Investment Adviser and FAM since 1976; Senior Vice President of Princeton Services since 1993.
Bernard J. Durnin (52)--Senior Vice President(1)(2)--Senior Vice President of the Investment Adviser and FAM since 1981; Senior Vice President of Princeton Services since 1993.
Norman R. Harvey (61)--Senior Vice President(1)(2)--Senior Vice President of the Investment Adviser and FAM since 1982; Senior Vice President of Princeton Services since 1993.
Joel Heymsfeld (51)--Vice President(1)(2)--Vice President of the Investment Adviser since 1978.
Jay C. Harbeck (60)--Vice President(1)(2)--Vice President of the Investment Adviser since 1986.
Kevin Rendino (28)--Vice President(1)(2)--Vice President of the Investment Adviser since December 1993; Senior Research Analyst from 1990 to 1992; Corporate Analyst from 1988 to 1990.
Gregory Mark Maunz (42)--Vice President(1)(2)--Vice President of the Investment Adviser since 1985 and Portfolio Manager since 1984.
Donald C. Burke (34)--Vice President(1)(2)--Vice President and Director of Taxation of MLAM since 1990; employee of Deloitte & Touche LLP from 1982 to 1990.
Gerald M. Richard (45)--Treasurer(1)(2)--Senior Vice President and Treasurer of the Investment Adviser and FAM since 1984; Senior Vice President and Treasurer of Princeton Services since 1993; Vice President of the Distributor since 1981 and Treasurer since 1984.
(2) Such Director or officer is a director or officer of certain other investment companies for which the Investment Adviser or its affiliates act as investment adviser(s). See "Compensation of Directors" below.
At April 30, 1995, the Directors and officers of the Program as a group (17 persons) owned an aggregate of less than 1% of the outstanding shares of the Program. At that date, Mr. Zeikel, a Director and officer of the Program, and the other officers of the Program owned less than 1% of the outstanding Common Stock of ML & Co.
COMPENSATION OF DIRECTORS
Pursuant to the terms of the Program's investment advisory agreement with the
Investment Adviser relating to each Portfolio (each an "Investment Advisory
Agreement"), the Investment Adviser pays all compensation of officers and
employees of the Program as well as the fees of all Directors of the Program
who are affiliated persons of ML & Co. or its subsidiaries. The Program pays
each unaffiliated Director an annual fee of $2,600 plus a fee of $250 for each
meeting attended and reimburses each Director for actual out-of-pocket expenses
relating to attendance at meetings. Additionally, the Program has established
an Audit Committee of the Board of Directors of which all of the unaffiliated
Directors are members. Each member of such committee receives an annual fee of
$800 plus a fee of $150 for each meeting attended and reimburses each Director
for actual out-of-pocket expenses related to attendance at meetings. Fees and
expenses paid to the unaffiliated Directors by the Portfolios for the period
February 1, 1995 (commencement of operations) through March 31, 1995, were
allocated to each Portfolio on the basis of the size of the Portfolio:
Fundamental Value Portfolio, $1,048; Quality Bond Portfolio, $1,293; U.S.
Government Securities Portfolio, $2,729 and Global Opportunity Portfolio,
$3,700.
The following table sets forth for the fiscal year ending January 31, 1996, compensation to be paid by the Program to the unaffiliated Directors assuming each member attends each of the quarterly meetings of the Board and the Audit Committee during the period, and for the calendar year ended December 31, 1994,
the aggregate compensation paid by all investment companies advised by the Investment Adviser and its affiliate, FAM ("MLAM/FAM Advised Funds"), to the unaffiliated Directors.
PENSION OR RETIREMENT TOTAL COMPENSATION
AGGREGATE BENEFITS ACCRUED AS FROM MLAM/FAM
ESTIMATED COMPENSATION PART OF PROGRAM ADVISED FUNDS
NAME OF DIRECTOR FROM PROGRAM EXPENSES PAID TO DIRECTORS
---------------- ---------------------- --------------------- ------------------
Joe Grills(/1/)......... $5,250 None $156,000
Walter Mintz(/1/)....... $5,250 None $156,000
Melvin R. Seiden(/1/)... $5,250 None $156,000
Stephen B.
Swensrud(/1/).......... $5,250 None $164,000
Harry Woolf(/1/)........ $5,250 None $156,000
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(1) In addition to the Program, the Directors serve on the boards of MLAM/FAM Advised Funds as follows: Mr. Grills (34 funds), Mr. Mintz (34 funds), Mr. Seiden (34 funds), Mr. Swensrud (44 funds) and Mr. Woolf (34 funds).
MANAGEMENT AND ADVISORY ARRANGEMENTS
Reference is made to "Management of the Program--Management and Advisory Arrangements" in the Prospectus for certain information concerning the management and advisory arrangements of the Program.
The Investment Advisory Agreements provide that, subject to the direction of the Board of Directors of the Program, the Investment Adviser is responsible for the actual management of that Portfolio and for the review of that Portfolio's holdings in light of its own research analysis and analyses from other relevant sources. The responsibility for making decisions to buy, sell or hold a particular security rests with the Investment Adviser, subject to review by the Board of Directors. The Investment Adviser supplies the portfolio managers for each Portfolio who consider analyses from various sources, make the necessary investment decisions and place transactions accordingly. The Investment Adviser also is obligated to perform certain administrative and management services for the Portfolios and is required to provide all the office space, facilities, equipment and personnel necessary to perform its duties under the Investment Advisory Agreement. The Investment Adviser has access to the total securities research, economic research and computer applications facilities of Merrill Lynch and makes extensive use of these facilities.
Securities held by the Portfolios also may be held by or be appropriate investments for other funds for which the Investment Adviser or its affiliates act as adviser or by investment advisory clients of the Investment Adviser. Because of different investment objectives or other factors, a particular security may be bought for one or more clients when one or more clients are selling the same security. If purchases or sales of securities for the Program or other funds for which the Investment Adviser or its affiliates act as investment adviser or for their advisory clients arise for consideration at or about the same time, transactions in such securities will be made, insofar as feasible, for the respective funds and clients in a manner deemed equitable to all. To the extent that transactions on behalf of more than one client of the Investment Adviser or its affiliates 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 price.
As compensation for its services to the Portfolios, the Investment Adviser will receive from each Portfolio a monthly fee based on the average daily value of that Portfolio's net assets at the following annual rates:
U.S. GOVERNMENT GLOBAL
FUNDAMENTAL VALUE QUALITY BOND SECURITIES OPPORTUNITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------- ------------ --------------- -----------
0.65% 0.50% 0.50% 0.75%
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The State of California imposes limitations on the expenses of the Program. At the date of this Statement of Additional Information, the limitations require that the Investment Adviser reimburse the Program in an amount necessary to prevent the aggregate ordinary operating expenses of the Program (excluding interest, taxes, brokerage fees and commissions and extraordinary charges such as litigation costs) from exceeding in any fiscal year 2.5% of the Program's first $30 million of average daily net assets, 2.0% of the next $70 million of average daily net assets and 1.5% of the remaining average daily net assets. No fee payment will be made to the Investment Adviser during any fiscal year which will cause such expenses to exceed the pro rata expense limitation at the time of such payment.
The table below sets forth for the fiscal period from February 1, 1995 (commencement of operations) to March 31, 1995, the total advisory fee paid by each Portfolio to the Investment Adviser:
PORTFOLIO FEE AMOUNT ($)(/1/) --------- ------------------- Fundamental Value..................................... 5,129 Quality Bond.......................................... 2,068 U.S. Government Securities............................ 4,544 Global Opportunity.................................... 12,537 |
(1) The Investment Adviser reimbursed the Portfolios for a portion of the advisory fee pursuant to certain state expense limitations and voluntarily waived the remainder of its fee. In addition, the Investment Adviser reimbursed the Portfolios for a portion of certain other expenses (excluding 12b-1 fees).
Each Investment Advisory Agreement obligates the Investment Adviser to provide investment advisory services and to pay all compensation of and furnish office space for officers and employees of the Portfolios connected with investment and economic research, trading and investment management of the Portfolios, as well as the fees of all Directors of the Program who are affiliated persons of ML & Co. or any of its subsidiaries. Each Portfolio pays all other expenses incurred in its operations and a portion of the Program's general administrative expenses allocated on the basis of the asset size of the respective Portfolios. Expenses that will be borne directly by the Portfolios include redemption expenses, expenses of portfolio transactions, shareholder servicing costs, expenses of registering the shares under Federal and state securities laws, pricing costs (including the daily calculation of net asset value), interest, certain taxes, charges of the Custodian and Transfer Agent and other expenses attributable to the particular Portfolio. Expenses which will be allocated on the basis of the size of the respective Portfolios include directors' fees, legal expenses, state franchise taxes, auditing services, costs of printing proxies, stock certificates, shareholder reports and prospectuses (except to the extent paid by the Distributor), Securities and Exchange Commission fees, accounting costs and other expenses properly payable by the Portfolios and allocable on the basis of the size of the respective Portfolios. Accounting services are provided for the Portfolios by the Investment Adviser and the Portfolios reimburse the Investment Adviser for its costs in connection with such services. As required by the Distribution Agreements, the Distributor will pay certain of the expenses of the Portfolios incurred in connection with the offering of shares of each Portfolio, including the expenses of printing the prospectuses and statements of additional information used in connection with the continuous offering of shares by the Portfolios.
Duration and Termination. Unless earlier terminated as described below, the Investment Advisory Agreement for each Portfolio will remain in effect from year to year if approved annually (a) by the Board of Directors of the Program or by a majority of the outstanding shares of the subject Portfolio and (b) by a
majority of the Directors who are not parties to such contract or interested persons (as defined in the Investment Company Act) of any such party. Such contract is not assignable and may be terminated without penalty on 60 days' written notice at the option of either party or by the vote of the shareholders of the Portfolios.
PURCHASE OF SHARES
Reference is made to "Purchase of Shares" and "Redemption of Shares" in the Prospectus for certain information as to the purchase of shares of the Portfolios.
The Program will offer shares solely to holders of IRAs for which Merrill Lynch acts as custodian. The minimum initial purchase in any Portfolio is $100 and the minimum subsequent purchase in any Portfolio is $1.
The Distributor, a subsidiary of the Investment Adviser, acts as the distributor of the shares of the Program. The applicable offering price for purchase orders is based on the net asset value of the Portfolio 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 the day the orders are placed with the Distributor, provided the orders are received by the Distributor 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 by the Distributor 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 Program. The Program or the Distributor may suspend the continuous offering of any Portfolio's shares 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.
Each Portfolio issues four classes of shares under the Merrill Lynch Select PricingSM System: 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. Each Class A, Class B, Class C and Class D share of each Portfolio represents identical interests in the investment portfolio of that Portfolio 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. 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. 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 Program has entered into separate distribution agreements with the Distributor on behalf of each Portfolio in connection with the continuous offering of each class of shares of each of the Portfolios (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 Portfolios. After the prospectuses, statements of additional information and periodic reports have been prepared, set in type and mailed to 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 Management Agreement described above.
INITIAL SALES CHARGE ALTERNATIVES--CLASS A AND CLASS D SHARES
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 Portfolios, 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 (including a pension, profit-sharing or other employee benefit trust created pursuant to a plan qualified under Section 401 of the Code) 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 Portfolio or shares of other registered investment companies at a discount; provided, however, that it shall not include purchases by any group of individuals whose sole organizational nexus is that the participants therein are credit cardholders of a company, policyholders of an insurance company, customers of either a bank or broker- dealer or clients of an investment adviser.
Closed-End Fund Investment Option. Class A shares of the Portfolios 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 from 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 Portfolios and other MLAM-advised mutual funds ("Eligible Class D shares"), if the following conditions are met. First, the sale of the 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 must either have been acquired in the initial public offering or be shares representing dividends from shares of common stock acquired in such offering. Third, the closed-end fund shares must have been continuously maintained in a Merrill Lynch securities account. Fourth, there must be a minimum purchase of $250 to be eligible for the investment option. Class A shares of the Portfolios 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 Senior Floating Rate Fund in shares of a Portfolio. 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 a Portfolio. This investment option is available only with respect to the proceeds of 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 Portfolio at such day.
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 Portfolios subject to an initial sales charge 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 all classes of shares of the Program 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 Class A or Class D shares of the Program or any other MLAM-advised mutual funds made within a 13-month period starting with the first purchase pursuant to a Letter of Intention. The Letter of Intention is available only to investors whose accounts are maintained at the Program's transfer agent. The Letter of Intention is not available to employee benefit plans for which Merrill Lynch provides plan-participant record-keeping services. The Letter of Intention is not a binding obligation to purchase any amount of Class A or Class D shares; however, 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 of Intention 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 Program 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 completion of such Letter, but the reduced sales charge applicable to the amount covered by such Letter will be applied only to new purchases. If the total amount of shares purchased 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 of the dollar amount of such Letter. If a purchase during the term of such Letter would otherwise be subject to a further reduced sales charge based on the right of accumulation, 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 Class A or Class D 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 a Portfolio that creates a sales charge will count toward completing a new or existing Letter of Intention from the Portfolio.
Purchase Privilege of Certain Persons. Directors of the Program, directors and trustees of other MLAM-advised investment companies, 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 may purchase Class A shares of the Portfolios at net asset value.
Class D shares of the Portfolios will be offered at net asset value, without a 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 Portfolio 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 also must establish that such redemption had been made within 60 days prior to the investment in the Portfolio, and the proceeds from the redemption had been maintained in the interim in cash or a money market fund.
Class D shares of the Portfolios 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, if the following conditions are satisfied: first, the investor must purchase Class D shares of a Portfolio 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; second, such purchase of Class D shares must be made within 90 days after such notice of termination.
Class D shares of the Portfolios will be offered at net asset value, without a sales charge, to an investor who has a business relationship with a Merrill Lynch financial consultant and who has invested in a mutual fund 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 a Portfolio with proceeds from the redemption of such shares of other mutual funds and that such shares have been outstanding for a period of no less than six months. Second, such purchase of Class D shares must be made within 60 days after the redemption and the proceeds from the redemption must be maintained in the interim in cash or a money market fund.
Reductions in or exemptions from the imposition of a sales load are due to the nature of the investors and/or the reduced sales efforts that will be needed in obtaining such investments.
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 under the Investment Company Act (each a "Distribution Plan").
Payments of the account maintenance fees and/or distribution 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 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 Portfolio and its related class of shareholder. 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 Program, 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 a reasonable likelihood that such Distribution Plan will benefit the Portfolio 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 Portfolio. A Distribution Plan cannot be amended to increase materially the amount to be spent by the Portfolio 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 Portfolio 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-backed 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 Portfolios, the maximum sales charge rule limits the
aggregate of distribution fee payments and CDSCs payable by the Portfolios 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
Portfolio will not make further payments of the distribution fee with respect
to Class B shares, and any CDSCs will be paid to the Portfolio rather than to
the Distributor, however, the Portfolio 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.
As described in Appendix A, there are three types of self-directed plans which are eligible to invest in the Portfolios: the individual retirement account, the individual retirement rollover account ("IRRA") and
the Simplified Employee Pension Plan ("SEP-IRA") (collectively, "IRAs"). Although the amount which may be contributed to an IRA account in any one year is subject to certain limitations, assets already in an IRA account may be invested in the Portfolios without regard to such limitations.
Shareholders considering transferring a tax-deferred account such as an IRA from Merrill Lynch to another brokerage firm or financial institution should be aware that Program shares may only be held in a Merrill Lynch custodied IRA. Prior to any such transfer, a shareholder must either redeem the shares (paying any applicable CDSC), so that the cash proceeds can be transferred to the account at the new firm or exchange the shares for shares of another mutual fund advised by the Investment Adviser or its affiliates pursuant to the exchange privilege. It is possible, however, that the firm to which the retirement account is to be transferred will not take delivery of shares of such fund, and then the shareholder would have to redeem these shares so that the cash proceeds can be transferred or continue to maintain an IRA account at Merrill Lynch for those shares.
Cash balances of participants who elect to have such funds automatically invested in shares of a Portfolio will be invested as follows. Cash balances arising from the sale of securities held in the IRA account which do not settle on the day of the transaction (such as most common and preferred stock transactions) become available to the Program and will be invested in shares of a Portfolio on the business day following the day that proceeds with respect thereto are received in the IRA account. Proceeds giving rise to cash balances from the sale of securities held in the IRA account settling on a same day basis and from principal repayments on debt securities held in the account become available to the Program and will be invested in shares of a Portfolio on the next business day following receipt. Cash balances arising from dividends or interest payments on securities held in the IRA account or from a contribution to the IRA account are invested in shares of the Portfolios on the business day following the date the payment is received in the IRA account.
Merrill Lynch has advised the Program that it will not charge an annual account fee upon any IRA which is then invested solely in one or more of the Program's Portfolios or in a money market fund advised by the Investment Adviser or its affiliates. If, however, a shareholder of any of the Portfolios exchanges any of his or her shares of a Portfolio for shares of another fund advised by the Investment Adviser or its affiliates, other than shares of a Portfolio or a money market fund advised by the Investment Adviser or its affiliates, then Merrill Lynch will reinstate the IRA annual account fee. For information about the current IRA fees charged by Merrill Lynch, consult the Merrill Lynch IRA disclosure statement and the Merrill Lynch IRA custodial agreement.
REDEMPTION OF SHARES
Reference is made to "Redemption of Shares" in the Prospectus for certain information as to the redemption and repurchase of shares of the Portfolios.
The right to redeem shares or to receive payment with respect to any such redemption may be suspended only for any period during which trading on the New York Stock Exchange is restricted as determined by the Securities and Exchange Commission (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 any Portfolio is not reasonably practicable, and for such other periods as the Commission may by order permit for the protection of shareholders of the Portfolios.
Distributions from an IRA account to a participant prior to the time the participant reaches age 59 1/2 may subject the participant to income and excise taxes. See "Dividends, Distributions and Taxes". There are, however, no adverse tax consequences resulting from redemptions of shares of the Portfolios where the redemption proceeds remain in the IRA account and are otherwise invested.
The Program is required to redeem for cash all shares of each Portfolio of the Program. The redemption price is the net asset value per share next determined after the initial receipt of proper notice of redemption as described below. If such notice is received by Merrill Lynch prior to the determination of net asset value on any day (15 minutes after the close of business on the New York Stock Exchange), the redemption will be effective on that day and payment generally will be made on the next business day. If the notice is received after the determination of net asset value on any day, the redemption will be effective on the next business day and payment will be made on the second business day after receipt of the notice. Shareholders liquidating their holdings will receive upon redemption all dividends reinvested through the date of redemption. Accrued but unpaid dividends will be paid on the payable date next following the date of redemption.
Any shareholder may redeem shares of the Portfolios by submitting a written notice of redemption to Merrill Lynch. Participants in the Program should contact their Merrill Lynch financial consultant to effect such redemptions. Redemption requests should not be sent to the Program or to its Transfer Agent. The notice must bear the signature of the person in whose name the IRA is maintained, signed exactly as his or her name appears on the IRA adoption agreement.
DEFERRED SALES CHARGES--CLASS B SHARES
As discussed in the Prospectus under "Purchase of Shares--Deferred Sales
Charge Alternatives--Class B and Class C Shares", while Class B shares redeemed
within four years of purchase are subject to a CDSC, under most circumstances,
the charge is waived (i) on redemptions of Class B shares in connection with
certain post-retirement withdrawals from an IRA or other retirement plan or
(ii) on redemptions of Class B shares 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 tax-free distribution
following retirement under a tax-deferred retirement plan 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 the 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 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.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Reference is made to "Portfolio Transactions and Brokerage" in the Prospectus. Subject to policies established by the Board of Directors of the Program, the Investment Adviser is primarily responsible for the portfolio decisions of each of the Portfolios and the placing of the portfolio transactions for each of the Portfolios. With respect to such transactions, the Investment Adviser seeks to obtain the best net results for each Portfolio, 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 Portfolios will not necessarily be paying the lowest commission or spread available. Transactions with respect to the securities of small and emerging growth companies in which the
Fundamental Value Portfolio may invest may involve specialized services on the part of the broker or dealer and thereby entail higher commissions or spreads than would be the case with transactions involving more widely traded securities of more established companies. The Portfolios have no obligation to deal with any broker in the execution of transactions for their portfolio securities. In addition, consistent with the Rules of Fair Practice of the NASD and policies established by the Directors of the Program, the Investment Adviser may consider sales of shares of the Portfolios as a factor in the selection of brokers or dealers to execute portfolio transactions for the Portfolios.
The Program has been informed by Merrill Lynch that it will in no way, at any time, attempt to influence or control the placing by the Investment Adviser or by the Program of orders for brokerage transactions. Brokers and dealers, including Merrill Lynch, who provide supplemental investment research (such as securities and economic research and market forecasts) to the Investment Adviser may receive orders for transactions by the Portfolios. If, in the judgment of the Investment Adviser, a Portfolio will be benefited by such supplemental research services, the Investment Adviser is authorized to pay commissions to brokers furnishing such services which are in excess of commissions which another broker may charge for the same transaction. 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 Program, 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 may also be used in connection with other investment advisory accounts of the Investment Adviser and its affiliates.
The Portfolios also may invest in securities traded in the over-the-counter market. Transactions in the over-the-counter market generally are principal transactions with dealers and the costs of such transactions involve dealer spreads. With respect to the over-the-counter transactions, the Portfolios, where possible, will deal directly with the dealers who make a market in the securities involved except in those circumstances where better prices and execution are available elsewhere. Such dealers usually act as principals for their own account. On occasion, securities may be purchased directly from the issuer. Bonds and money market securities are generally traded on a net basis and do not normally involve either brokerage commissions or transfer taxes. The cost of portfolio securities transactions of the Quality Bond and the U.S. Government Securities Portfolios will consist primarily of dealer or underwriter spreads.
Under the Investment Company Act, persons affiliated with the Program are prohibited from dealing with the Portfolios as a principal in the purchase and sale of securities unless a permissive order allowing such transactions is obtained from the Commission. Since transactions in the over-the-counter market usually involve transactions with dealers acting as principal for their own account, affiliated persons of the Program, including Merrill Lynch, may not serve as the Program's dealer in connection with such transactions. See "Investment Objectives and Policies--Investment Restrictions". However, affiliated persons of the Program may serve as its broker in the over-the- counter transactions conducted on an agency basis.
The ability and decisions of the Global Opportunity and Fundamental Value Portfolios to purchase or sell portfolio securities may be affected by laws or regulations relating to the convertibility and repatriation of assets. Because the shares of the Portfolios are redeemable on a daily basis in U.S. dollars, the Global Opportunity and Fundamental Value Portfolios intend to manage their portfolios so as to give reasonable assurance that they will be able to obtain U.S. dollars to the extent necessary to meet anticipated redemptions. Under present conditions, it is not believed that these considerations will have any significant effect on portfolio strategies.
The Global Opportunity and Fundamental Value Portfolios anticipate that brokerage transactions involving securities of companies domiciled in countries other than the U.S. will be conducted primarily on the principal stock exchanges of such countries. Brokerage commissions and other transaction costs on foreign stock exchange transactions are generally higher than in the U.S., although the Global Opportunity and Fundamental Value Portfolios will endeavor to achieve the best net results in effecting the transactions. There is generally less governmental supervision and regulation of foreign stock exchanges and brokers than in the U.S.
The Board of Directors of the Program has considered the possibilities of seeking to recapture for the benefit of the Program brokerage commissions, dealer spreads and other expenses of possible portfolio transactions, such as underwriting commissions and tender offer solicitation fees, by conducting such portfolio transactions through affiliated entities, including Merrill Lynch. For example, brokerage commissions received by Merrill Lynch could be offset against the advisory fee payable by the Program to the Investment Adviser. After considering all factors deemed relevant, the Board made a determination not to seek such recapture. The Board will reconsider this matter from time to time. The Investment Adviser has arranged for the Program's custodian to receive any tender offer solicitation fees on behalf of the Program payable with respect to portfolio securities of the Program.
The Global Opportunity and Fundamental Value Portfolios may invest in the securities of foreign issuers in the form of American Depositary Receipts (ADRs), European Depositary Receipts (EDRs) or other securities convertible into securities of foreign issuers. These securities may not necessarily be denominated in the same currency as the securities into which they may be converted. ADRs are receipts typically issued by an American bank or trust company which evidence ownership of underlying securities issued by a foreign corporation. EDRs are receipts issued in Europe which evidence a similar ownership arrangement. Generally, ADRs, which are issued in registered form, are designed for use in the United States securities markets and EDRs, which are issued in bearer form, are designed for use in European securities markets.
Section 11(a) of the Securities Exchange Act of 1934 generally prohibits members of the national securities exchanges from executing exchange transactions for their affiliates and institutional accounts which they manage unless the member (i) has obtained prior express authorization from the account to effect such transactions, (ii) at least annually furnishes the account with the aggregate compensation received by the member in effecting such transactions, and (iii) complies with any rules the Commission has prescribed with respect to the requirements of clauses (i) and (ii). To the extent Section 11(a) would apply to Merrill Lynch acting as a broker for the Portfolios in any of the portfolio transactions executed on any such securities exchange of which it is a member, appropriate consents have been obtained from the Program, and annual statements as to aggregate compensation will be provided to the Portfolios. The Commission has the authority to issue regulations to broaden the prohibition contained in Section 11(a) to extend to transactions executed otherwise than on a national securities exchange. While there is no indication that it will do so, the Commission could under this authority issue regulations at any time which would prohibit affiliates from executing portfolio transactions for the Portfolios on foreign securities exchanges.
PORTFOLIO TURNOVER
Each Portfolio intends to comply with the various requirements of the Internal Revenue Code so as to qualify as a "regulated investment company" thereunder. See "Dividends, Distributions and Taxes". Among such requirements is a limitation to less than 30% on the amount of gross income which the Portfolios may
derive from gain on the sale or other disposition of securities held for less than three months. Accordingly, the Portfolios' ability to effect certain portfolio transactions may be limited.
DETERMINATION OF NET ASSET VALUE
Reference is made to "Additional Information--Determination of Net Asset Value" in the Prospectus concerning the determination of net asset value. The net asset value of the shares of each Portfolio is determined once daily Monday through Friday 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. Each Portfolio also will determine its net asset value on any day in which there is sufficient trading in its portfolio securities that the net asset value might be affected materially, but only if on any such day the Portfolio is required to sell or redeem shares. The net asset value per share of a Portfolio is computed by dividing the sum of the value of the securities held by the Portfolio 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 distribution fees, are accrued daily. The per share net asset value of the Class B, Class C and Class D shares of a Portfolio generally will be lower than the per share net asset value of the Class A shares of the same Portfolio 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 Portfolio. 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. 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 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.
Option Accounting Principles. When a Portfolio writes a call option, the amount of the premium received is recorded on the books of the Portfolio as an asset and an equivalent liability. The amount of the liability is subsequently valued to reflect the current market value of the option written, based upon 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.
SHAREHOLDER SERVICES
The Program offers a number of shareholder services and investment plans designed to facilitate investment in its shares. 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 Program by calling the telephone number on the cover page hereof or from the Distributor or Merrill Lynch.
INVESTMENT ACCOUNT
A shareholder must maintain his or her account through a Merrill Lynch- custodied IRA and will receive information regarding activity in his or her Merrill Lynch IRA as part of the Merrill Lynch retirement account statement. Shareholders also will receive separate confirmations for each purchase or sale transaction other than reinvestments of ordinary income dividends and long-term capital gains distributions. 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 Program shares may only be held in a Merrill Lynch-custodied IRA. Prior to any such transfer, a shareholder must either redeem the shares (paying any applicable CDSC) so that the cash proceeds can be transferred to the account at the new firm or exchange the shares for shares of another mutual fund advised by the Investment Adviser or its affiliates pursuant to the exchange privilege. It is possible, however, that the firm to which the retirement account is to be transferred will not take delivery of shares of such fund, and then the shareholder would have to redeem these shares so that the cash proceeds can be transferred or such shareholder must continue to maintain a retirement account at Merrill Lynch for those shares. In addition, shareholders considering transferring the holdings in their Merrill Lynch custodied IRA to a Merrill Lynch brokerage account should be aware that because Program shares may only be held in a Merrill Lynch-custodied IRA, the shares will also in this instance have to be redeemed prior to such transfer or exchanged for another mutual fund advised by the Investment Adviser or its affiliates.
AUTOMATIC REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
All dividends and capital gains distributions of a Portfolio are reinvested automatically in full and fractional shares of that Portfolio, at the net asset value per share, of the respective Portfolio next determined on the ex-dividend date of such dividend or distribution. A shareholder may, at any time, by written notification to Merrill Lynch, elect to have subsequent dividends or both dividends and capital gains distributions paid in cash and held in such shareholder's IRA account rather than reinvested.
SYSTEMATIC REDEMPTION AND AUTOMATIC INVESTMENT PLANS
At age 59 1/2, a Class A or Class D shareholder may elect to receive systematic redemption payments from his or her Investment Account in the form of payments by check or through automatic payment by direct deposit to his or her bank account on either a monthly or quarterly basis. 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 his or her regular bank account. See "Dividends, Distributions and Taxes" for consequences of withdrawals from IRA accounts prior to age 59 1/2. In addition, Merrill Lynch offers an automated funding service which permits regular current year IRA contributions of up to $2,000 per year to be made to IRAs and an automated investment program which may be used for automated subsequent purchases of shares of the Program.
EXCHANGE PRIVILEGE
Shareholders of each class of shares of each of the Portfolios have an exchange privilege with certain other MLAM-advised mutual funds listed below. If, however, a shareholder of any of the Portfolios exchanges any of his or her shares of a Portfolio for shares of another MLAM-advised mutual fund, Merrill Lynch will reinstate the IRA annual account fee. Under the Merrill Lynch Select PricingSM System, Class A shareholders may exchange Class A shares of a Portfolio for Class A shares of another 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, but does not hold Class A shares of the second fund in his account at the time of the exchange and is not otherwise eligible to acquire Class A shares of the second fund, the shareholder will receive Class D shares of the second fund as a result of the exchange. Class D shares also may be exchanged for Class A shares of a second MLAM-advised mutual fund at any time as long as, at the time of the exchange, the shareholder holds Class A shares of the second fund in the account in which the exchange is made or is otherwise eligible to purchase Class A shares of the second fund. Class B, Class C and Class D shares will be exchangeable with shares of the same class of other MLAM-advised mutual funds. For purposes of computing the CDSC that may be payable upon a disposition of the shares acquired in the exchange, the holding period for the previously owned shares of the Program is tacked on 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 charge paid with respect to such Class A or Class D shares in the initial purchase and any subsequent exchange. Class A or 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 of a Portfolio generally may be exchanged into the Class A or Class D shares of the other funds or into shares of the Class A and Class D money market funds with a reduced or 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 a Portfolio exercising the exchange privilege will continue to be subject to the Portfolio'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 a Portfolio acquired through use of the exchange privilege will be subject to the Portfolio'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 on to the holding period of the new Class B or Class C shares. For example, an investor may exchange Class B shares of a Portfolio for those of Merrill Lynch Special Value Fund, Inc. ("Special Value Fund") after having held the Portfolio Class B shares for two and a half years. The 2% CDSC 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 Portfolio Class B shares to the three year holding period for the Special Value Fund Class B shares, the investor will be deemed to have held the new Class B shares for more than five years.
Shareholders also may exchange shares of a Portfolio 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 a Portfolio may, in turn, be exchanged back into Class B or Class C shares, respectively, 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 a Portfolio for shares of Merrill Lynch Institutional Fund ("Institutional Fund") after having held the Portfolio Class B shares 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 Portfolio 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 continued to hold for an additional two and 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).
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 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. ...................
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 Asset Income
Fund, Inc. ...................
A high level of current income through
investment primarily in United States fixed
income securities.
Merrill Lynch Balanced Fund
for Investment and As high a level of total investment return as
Retirement, Inc.......... is consistent with reasonable risk by
investing in common stocks and other types
of securities, including fixed income
securities and convertible securities.
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
income exempt from Federal and California
income taxes as is consistent with prudent
investment management through investment in
a portfolio consisting primarily of insured
California Municipal Bonds.
Merrill Lynch California
Limited Maturity Municipal
Bond Fund.....................
A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
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 as high a level of
income exempt from Federal and California
income taxes as is consistent with prudent
investment management.
Merrill Lynch Capital Fund, The highest total investment return
Inc........................... 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.
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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 appreciation through investment in
securities, principally equities, of issuers
in countries having smaller capital markets.
Merrill Lynch Dragon Fund,
Inc...........................
Capital appreciation primarily through
investment in equity and debt securities of
issuers domiciled in developing countries
located in Asia and the Pacific Basin.
Merrill Lynch EuroFund....
Capital appreciation primarily through
investment in equity securities of
corporations domiciled in Europe.
Merrill Lynch Federal
Securities Trust..............
High current return through investments in
U.S. Government and Government agency
securities, including GNMA mortgage-backed
certificates and other mortgage-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 serving
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.
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Merrill Lynch Fund For
Tomorrow, Inc.................
Long-term growth through investment in a
portfolio of good quality securities,
primarily common stock, potentially
positioned to benefit from demographic and
cultural changes as they affect consumer
markets.
Merrill Lynch Fundamental
Growth Fund, Inc..............
Long-term growth of capital through
investment in a diversified portfolio of
equity securities placing particular
emphasis on companies that have exhibited an
above-average growth rate in earnings.
Merrill Lynch Global
Allocation Fund, Inc. ........
High total return, consistent with prudent
risk, through a fully managed investment
policy utilizing U.S. 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 government and corporate bonds
denominated in various currencies and
multinational currency units.
Merrill Lynch Global
Convertible Fund, Inc.........
High total return from investment primarily
in an internationally diversified portfolio
of convertible debt securities, convertible
preferred stock and "synthetic" convertible
securities consisting of a combination of
debt securities or preferred stock and
warrants or options.
Merrill Lynch Global Holdings,
Inc. (residents of Arizona
must meet investor
suitability standards)........
The highest total investment return
consistent with prudent risk through
worldwide investment in an internationally
diversified portfolio of securities.
Merrill Lynch Global Resources
Trust.........................
Long-term growth and protection of capital
from investment in securities of domestic
and foreign 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.
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Merrill Lynch Global Utility
Fund, Inc.....................
Capital appreciation and current income
through investment of at least 65% of its
total assets in equity and debt securities
issued by domestic and foreign companies
primarily engaged in the ownership or
operation of facilities used to generate,
transmit or distribute electricity,
telecommunications, gas or water.
Merrill Lynch Growth Fund for
Investment and Retirement.....
Growth of capital and, secondarily, income
from investment in a diversified portfolio
of equity securities placing principal
emphasis on those securities which
management of the fund believes to be
undervalued.
Merrill Lynch Healthcare Fund,
Inc. (residents of Wisconsin
must meet investor
suitability standards)........
Capital appreciation through worldwide
investment in equity securities of companies
that derive or are expected to derive a
substantial portion of their sales from
products and services in healthcare.
Merrill Lynch International
Equity Fund...................
Capital appreciation and, secondarily, income
by investing in a diversified portfolio of
equity securities of issuers located in
countries other than the United States.
Merrill Lynch Latin America
Fund, Inc.....................
Capital appreciation by investing primarily
in Latin American equity and debt
securities.
Merrill Lynch Maryland
Municipal Bond Fund...........
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Maryland
income taxes as is consistent with prudent
investment management.
Merrill Lynch Massachusetts
Limited Maturity Municipal
Bond Fund.....................
A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
as high a level of income exempt from
Federal and Massachusetts income taxes as is
consistent with prudent investment
management through investment in a portfolio
primarily of intermediate-term investment
grade Massachusetts Municipal Bonds.
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Merrill Lynch Massachusetts
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 Massachusetts
income taxes as is consistent with prudent
investment management.
Merrill Lynch Michigan Limited
Maturity Municipal Bond Fund..
A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
as high a level of income exempt from
Federal and Michigan income taxes as is
consistent with prudent investment
management through investment in a portfolio
primarily of intermediate-term investment
grade Michigan Municipal Bonds.
Merrill Lynch Michigan
Municipal Bond Fund...........
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Michigan
income taxes as is consistent with prudent
investment management.
Merrill Lynch Minnesota
Municipal Bond Fund...........
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Minnesota
personal income taxes as is consistent with
prudent investment management.
Merrill Lynch Municipal Bond
Fund, Inc.....................
Tax-exempt income from three separate
diversified portfolios of municipal bonds.
Merrill Lynch Municipal
Intermediate Term Fund........
Currently the only portfolio of Merrill Lynch
Municipal Series Trust, a series fund, whose
objective is to provide as high a level as
possible of income exempt from Federal
income taxes by investing in investment
grade obligations with a dollar weighted
average maturity of five to twelve years.
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.
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Merrill Lynch New Jersey
Municipal Bond Fund...........
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and New Jersey
income taxes as is consistent with prudent
investment management.
Merrill Lynch New Mexico
Municipal Bond Fund...........
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and New Mexico
income taxes as is consistent with prudent
investment management.
Merrill Lynch New York Limited
Maturity Municipal Bond Fund..
A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
as high a level of income exempt from
Federal, New York State and New York City
income taxes as is consistent with prudent
investment management through investment in
a portfolio primarily of intermediate-term
investment grade New York Municipal Bonds.
Merrill Lynch New York
Municipal Bond Fund...........
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal, New York State
and New York City income taxes as is
consistent with prudent investment
management.
Merrill Lynch North Carolina
Municipal Bond Fund...........
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and North
Carolina income taxes as is consistent with
prudent investment management.
Merrill Lynch Ohio 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 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 as high a level of
income exempt from Federal and Oregon income
taxes as is consistent with prudent
investment management.
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Merrill Lynch Pacific Fund, Capital appreciation by investing in equity
Inc........................... 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
personal income taxes as is consistent with
prudent investment management.
Merrill Lynch Phoenix Fund, Long-term growth of capital by investing in
Inc........................... equity and fixed income securities,
including tax-exempt securities, of issuers
in weak financial condition or experiencing
poor operating results believed to be
undervalued relative to the current or
prospective condition of such issuer.
Merrill Lynch 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 multinational
currency units and having remaining
maturities not exceeding three years.
Merrill Lynch Special Value
Fund, Inc.....................
Long-term growth of capital from investments
in securities, primarily common stock, of
relatively small companies believed to have
special investment value and emerging growth
companies regardless of size.
Merrill Lynch Strategic
Dividend Fund.................
Long-term total return from investment in
dividend paying common stocks which yield
more than Standard & Poor's 500 Composite
Stock Price Index.
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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 as high a level of
income exempt from Federal income taxes as
is consistent with prudent investment
management by investing primarily in a
portfolio of long-term, investment grade
obligations issued by the State of Texas,
its political subdivisions, agencies and
instrumentalities.
Merrill Lynch Utility Income
Fund, Inc.....................
High current income through investment in
equity and debt securities issued by
companies which are primarily engaged in the
ownership or operation of facilities used to
generate, transmit or distribute
electricity, telecommunications, gas or
water.
Merrill Lynch World Income
Fund, Inc.....................
High current income by investing in a global
portfolio of fixed income securities
denominated in various currencies, including
multinational currencies.
Class A Share Money Market Funds:
Merrill Lynch Ready
AssetsTrust...................
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.
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Merrill Lynch U.S. Treasury
Money Fund....................
Preservation of capital, liquidity and
current income through investment
exclusively in a diversified portfolio of
short-term marketable securities which are
direct obligations of the U.S. Treasury.
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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.
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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 Program of the exchange. Shareholders of the Portfolios, 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 Program 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 Program 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 at any time and thereafter may resume such offering from time to time. The exchange privilege is available only to U.S. shareholders in states where the exchange legally may be made.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Reference is made to "Additional Information--Dividends and Distributions" in the Prospectus.
FEDERAL TAX
RICs. The following is a general summary of the treatment of regulated investment companies ("RICs") and their shareholders under the Internal Revenue Code of 1986, as amended (the "Code"). The Program intends to continue to qualify each Portfolio for the special tax treatment afforded RICs under the Code. If it so qualifies, each Portfolio (but not its shareholders) will be subject to Federal income tax with respect to the net ordinary income and net realized capital gains which it distributes to Class A, Class B, Class C and Class D shareholders. The Program intends to cause each Portfolio to distribute substantially all of such income.
Each Portfolio of the Program is treated as a separate corporation for Federal income tax purposes. Each Portfolio therefore is considered to be a separate entity in determining its treatment under the rules for RICs described in the Prospectus. Losses in one Portfolio do not offset gains in another Portfolio, and the requirements (other than certain organizational requirements) for qualifying for RIC status will be determined at the Portfolio level rather than the Program level.
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. While the Program intends to cause each Portfolio to distribute its 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 each Portfolio's taxable income and capital gains will be distributed to avoid entirely the imposition of the tax. In such event, the Portfolios will be liable for the tax only on the amount by which they do not meet the foregoing distribution requirements.
Dividends paid by a Portfolio from its ordinary income and distributions of a Portfolio's net realized short-term capital gains (together referred to hereafter as "ordinary income dividends") are ordinarily taxable to shareholders as ordinary income. Distributions made from a Portfolio's net realized long-term capital gains (including long-term gains from certain transactions in futures and options) ("capital gain dividends") are ordinarily taxable to shareholders as long-term capital gains, regardless of the length of time the shareholder has owned Portfolio shares. Distributions in excess of a Portfolio's earnings and profits will first reduce the adjusted tax basis of a holder's shares and, after such adjusted tax basis is reduced to zero, will ordinarily constitute capital gains to such holder (assuming the shares are held as a capital asset). Dividends are ordinarily taxable to shareholders even though they are reinvested in additional shares of the Portfolio.
Under certain provisions of the Code, some shareholders may be subject to a 31% withholding tax on ordinary income dividends, capital gain dividends and redemption payments ("backup withholding"). Generally, shareholders subject to backup withholding will be those for whom no certified taxpayer identification number is on file with the Program or who, to the Program's knowledge, have furnished an incorrect number. When establishing an account, an investor must certify under penalty of perjury that such number is correct and that such investor is not otherwise subject to backup withholding.
IRAs. Investment in the Portfolios is limited to participants in IRAs for which Merrill Lynch acts as passive custodian. Accordingly, the general description of the tax treatment of RICs as set forth above is qualified with respect to the special tax treatment afforded IRAs under the Code. Under the Code, neither ordinary income dividends nor capital gain dividends represent current income to shareholders if such shares are held in an IRA. Rather, distributions from an IRA will be taxable as ordinary income at the rate applicable to the participant at the time of the distribution. Such distributions would include (i) any pre-tax contributions to the IRA (including pre-tax contributions that have been rolled over from another IRA or qualified retirement plan), and (ii) dividends (whether or not such dividends are classified as ordinary income or capital gain dividends). In addition to ordinary income tax, participants may be subject to the imposition of excise taxes on any distributed amount, including: (i) a 10 percent excise tax on any amount withdrawn from an IRA prior to the participant's attainment of age 59 1/2; and (ii) a 15 percent excise tax on the amount of any "excess distributions" (generally, amounts in excess of $150,000) made from the IRA and any other IRA or qualified retirement plan annually.
Under certain limited circumstances (for example, if an individual for whose
benefit an IRA is established engages in any transaction prohibited under
Section 4975 of the Code with respect to such account), the IRA could cease to
be treated as an IRA as of the first day of such taxable year that such
transaction occurred. If an IRA through which a shareholder holds Portfolio
shares becomes ineligible for the special treatment afforded IRAs under the
Code, such shareholder will be treated as having received a distribution on
such first day of the taxable year from the IRA in an amount equal to the fair
market value of all assets in the account. Thus, the shareholder would be taxed
currently on (i) the amount of any pre-tax contributions and previously untaxed
dividends held within the account, and (ii) all ordinary income and capital
gain dividends paid by the Portfolios subsequent to such event, whether such
dividends are received in cash or reinvested in additional shares. These
ordinary income and capital gain dividends also might be subject to state and
local taxes. In the event of IRA disqualification, shareholders also could be
subject to the excise taxes described above. Additionally, IRA disqualification
may subject a nonresident alien shareholder to a 30% United States withholding
tax on ordinary income dividends paid by a Portfolio unless a reduced rate of
withholding or a withholding exemption is provided under applicable treaty law.
Dividends and interest received by the Global Opportunity Portfolio and, to a lesser extent, the Fundamental Value Portfolio, may give rise to withholding and other taxes imposed by foreign countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. Because of their participation in an IRA, shareholders will not be able to credit or deduct such taxes in computing their taxable incomes. However, in the event of IRA disqualification, as discussed above, shareholders of the Global Opportunity Portfolio might be entitled to a credit or deduction with respect to their proportionate shares of foreign taxes paid by the Portfolio, subject to certain conditions and limitations in the Code, if the Portfolio is eligible and makes an election with the Internal Revenue Service. It is unlikely, however, that the Fundamental Value Portfolio will be able to make this election.
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.
STATE TAX
Ordinary income and capital gain dividends on RIC shares held in a disqualified IRA or outside of an IRA may also be subject to state and local taxes. Certain states exempt from state income taxation dividends paid by RICs which are derived from interest on United States Government obligations. State law varies as to whether dividend income attributable to United States Government obligations is exempt from state income tax. Generally, however, states exempt from state income taxation dividends on shares held within an IRA, and commence taxation on amounts actually distributed from an IRA. Such amounts are generally treated as ordinary income.
Shareholders are urged to consult their own tax advisers regarding 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 Program.
PERFORMANCE DATA
From time to time the Program may include each Portfolio's average total return and other total return data, as well as yield for the Quality Bond and U.S. Government Securities Portfolios, in advertisements or information furnished to present or prospective shareholders. Total return and yield figures are based on each Portfolio's historical performance and are not intended to indicate future performance. Average annual total return and yield are determined separately for Class A, Class B, Class C and Class D shares of each Portfolio in accordance with formulae specified by the Commission.
Average annual total return quotations for each Portfolio 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 Program also may quote each Portfolio's total return and aggregate total return performance data for various specified time periods. Such data will be computed as described above, except that (1) the rates of return calculated will not be average annual rates, but rather, actual annual, annualized or aggregate rates of return and (2) the maximum applicable sales charges will not be included with respect to annual or annualized rates of return calculations. Aside from the impact on the performance data calculations of including or excluding the maximum applicable sales charges, actual annual or annualized total return data generally will be lower than average annual total return data since the average rates of return reflect compounding of return; aggregate total return data generally will be higher than average annual total return since the aggregate rates of return reflect compounding over a longer period of time. The Program'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 a Portfolio at the beginning of each specified period.
Yield quotations for a Portfolio are computed based on a 30-day period by dividing (a) the net income based on the yield of each security earned during the period by (b) the average daily number of shares
outstanding in each Portfolio during the period that were entitled to receive dividends (c) multiplied by the maximum offering price/net asset value per share of that Portfolio on the last day of the period.
Total return figures and yield figures are based on each Portfolio's historical performance and are not intended to indicate future performance. Each Portfolio's total return will vary depending on market conditions, the securities comprising such Portfolio's holdings, the Portfolio's operating expenses and the amount of realized and unrealized net capital gains or losses during the period. The value of an investment in any Portfolio will fluctuate and an investor's shares, when redeemed, may be worth more or less than their original cost.
On occasion, a Portfolio may compare its performance to that of the Standard & Poor's 500 Composite Stock Price Index, the Dow Jones Industrial Average, or performance data published by Lipper Analytical Services, Inc., Morningstar Publications, Inc., Money Magazine, U.S. News & World Report, Business Week, CDA Investment Technology, Inc., Forbes Magazine and Fortune Magazine. As with other performance data, performance comparisons should not be considered representative of the Portfolio's relative performance for any future period.
Set forth below is the total return information for the Class A, Class B, Class C and Class D shares of each of the Portfolios for the periods indicated.
CLASS A SHARES CLASS B SHARES
----------------------------------- -----------------------------------
REDEEMABLE VALUE REDEEMABLE VALUE
EXPRESSED AS A OF A HYPOTHETICAL EXPRESSED AS A OF A HYPOTHETICAL
PERCENTAGE BASED $1,000 INVESTMENT PERCENTAGE BASED $1,000 INVESTMENT
ON A HYPOTHETICAL AT THE END OF ON A HYPOTHETICAL AT THE END OF
$1,000 INVESTMENT THE PERIOD $1,000 INVESTMENT THE PERIOD
----------------- ----------------- ----------------- -----------------
FUNDAMENTAL VALUE PORT-
FOLIO
- -----------------------
AVERAGE ANNUAL TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
Inception (February 1,
1995) to March 31,
1995................. (6.61)% $ 989.20 1.27 % $1,002.00
ANNUAL TOTAL RETURN
(EXCLUDING MAXIMUM APPLICABLE SALES CHARGES)
Inception (February 1,
1995) to March 31,
1995................. 4.40 % $ 1,044.00 4.20 % $1,042.00
AGGREGATE TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
Inception (February 1,
1995) to March 31,
1995................. (1.08)% $ 989.20 0.20 % $1,002.00
QUALITY BOND PORTFOLIO
- ----------------------
AVERAGE ANNUAL TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
Inception (February 1,
1995) to March 31,
1995................. (17.69)% $ 969.50 (19.14)% $ 966.80
ANNUAL TOTAL RETURN
(EXCLUDING MAXIMUM APPLICABLE SALES CHARGES)
Inception (February 1,
1995) to March 31,
1995................. 0.99 % $ 1,009.90 0.68 % $1,006.80
AGGREGATE TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
Inception (February 1,
1995) to March 31,
1995................. (3.05)% $ 969.50 (3.32)% $ 966.80
|
CLASS A SHARES CLASS B SHARES
----------------------------------- -----------------------------------
REDEEMABLE VALUE REDEEMABLE VALUE
EXPRESSED AS A OF A HYPOTHETICAL EXPRESSED AS A OF A HYPOTHETICAL
PERCENTAGE BASED $1,000 INVESTMENT PERCENTAGE BASED $1,000 INVESTMENT
ON A HYPOTHETICAL AT THE END OF ON A HYPOTHETICAL AT THE END OF
$1,000 INVESTMENT THE PERIOD $1,000 INVESTMENT THE PERIOD
----------------- ----------------- ----------------- -----------------
U.S. GOVERNMENT SECURI-
TIES PORTFOLIO
- -----------------------
AVERAGE ANNUAL TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
Inception (February 1,
1995) to March 31,
1995................. (6.26)% $ 989.80 (6.19)% $ 989.90
ANNUAL TOTAL RETURN
(EXCLUDING MAXIMUM APPLICABLE SALES CHARGES)
Inception (February 1,
1995) to March 31,
1995................. 3.10 % $ 1,031.00 2.99 % $1,029.90
AGGREGATE TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
Inception (February 1,
1995) to March 31,
1995................. (1.02)% $ 989.80 (1.01)% $ 989.90
GLOBAL OPPORTUNITY
PORTFOLIO
- ------------------
AVERAGE ANNUAL TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
Inception (February 1,
1995) to March 31,
1995................. (24.65)% $ 956.00 (19.04)% $ 967.00
ANNUAL TOTAL RETURN
(EXCLUDING MAXIMUM APPLICABLE SALES CHARGES)
Inception (February 1,
1995) to March 31,
1995................. 0.90 % $ 1,009.00 0.70 % $1,007.00
AGGREGATE TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
Inception (February 1,
1995) to March 31,
1995................. (4.40)% $ 956.00 (3.30)% $ 967.00
CLASS C SHARES CLASS D SHARES
----------------------------------- -----------------------------------
REDEEMABLE VALUE REDEEMABLE VALUE
EXPRESSED AS A OF A HYPOTHETICAL EXPRESSED AS A OF A HYPOTHETICAL
PERCENTAGE BASED $1,000 INVESTMENT PERCENTAGE BASED $1,000 INVESTMENT
ON A HYPOTHETICAL AT THE END OF ON A HYPOTHETICAL AT THE END OF
$1,000 INVESTMENT THE PERIOD $1,000 INVESTMENT THE PERIOD
----------------- ----------------- ----------------- -----------------
FUNDAMENTAL VALUE PORT-
FOLIO
- -----------------------
AVERAGE ANNUAL TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
Inception (February 1,
1995) to March 31,
1995................. 21.92% $1,032.00 (7.17)% $1,011.80
ANNUAL TOTAL RETURN
(EXCLUDING MAXIMUM APPLICABLE SALES CHARGES)
Inception (February 1,
1995) to March 31,
1995................. 4.20% $1,042.00 4.30 % $1,043.00
AGGREGATE TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
Inception (February 1,
1995) to March 31,
1995................. 3.20% $1,032.00 (1.18)% $1,011.80
QUALITY BOND PORTFOLIO
- ----------------------
AVERAGE ANNUAL TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
Inception (February 1,
1995) to March 31,
1995................. (2.05)% $ 996.70 (18.89)% $ 967.30
ANNUAL TOTAL RETURN
(EXCLUDING MAXIMUM APPLICABLE SALES CHARGES)
Inception (February 1,
1995) to March 31,
1995................. 0.67 % $1,006.70 0.76 % $1,007.60
AGGREGATE TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
Inception (February 1,
1995) to March 31,
1995................. (0.33)% $ 996.70 (3.27)% $ 967.30
|
CLASS C SHARES CLASS D SHARES
----------------------------------- -----------------------------------
REDEEMABLE VALUE REDEEMABLE VALUE
EXPRESSED AS A OF A HYPOTHETICAL EXPRESSED AS A OF A HYPOTHETICAL
PERCENTAGE BASED $1,000 INVESTMENT PERCENTAGE BASED $1,000 INVESTMENT
ON A HYPOTHETICAL AT THE END OF ON A HYPOTHETICAL AT THE END OF
$1,000 INVESTMENT THE PERIOD $1,000 INVESTMENT THE PERIOD
----------------- ----------------- ----------------- -----------------
U.S. GOVERNMENT SECURI-
TIES PORTFOLIO
- -----------------------
AVERAGE ANNUAL TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
Inception (February 1,
1995) to March 31,
1995................. 13.15 % $1,019.80 (5.87)% $ 990.40
ANNUAL TOTAL RETURN
(EXCLUDING MAXIMUM APPLICABLE SALES CHARGES)
Inception (February 1,
1995) to March 31,
1995................. 2.98 % $1,029.80 3.17 % $1,031.70
AGGREGATE TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
Inception (February 1,
1995) to March 31,
1995................. 1.98 % $1,019.80 (0.96)% $ 990.40
GLOBAL OPPORTUNITY
PORTFOLIO
- ------------------
AVERAGE ANNUAL TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
Inception (February 1,
1995) to March 31,
1995................. (1.87)% $ 997.00 (25.12)% $ 955.10
ANNUAL TOTAL RETURN
(EXCLUDING MAXIMUM APPLICABLE SALES CHARGES)
Inception (February 1,
1995) to March 31,
1995................. 0.70 % $1,007.00 0.80 % $1,008.00
AGGREGATE TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
Inception (February 1,
1995) to March 31,
1995................. (0.30)% $ 997.00 (4.49)% $ 955.10
|
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 shares applicable to certain investors, as described under "Purchase of Shares" and "Redemption of Shares", respectively, the total return data quoted by the Program in advertisements directed to such investors may take into account the reduced, and not the maximum, sales charge or may take into account the waiver of 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 is deducted.
GENERAL INFORMATION
DESCRIPTION OF SHARES
The Program was incorporated under Maryland law on May 12, 1994. It has an authorized capital of 100,000,000 shares of Common Stock, par value $0.10 per share. The shares are divided as follows: Fundamental Value Portfolio Series Common Stock which consists of 6,250,000 Class A shares, 6,250,000 Class B shares, 6,250,000 Class C shares and 6,250,000 Class D shares; Quality Bond Portfolio Series Common Stock which consists of 6,250,000 Class A shares, 6,250,000 Class B shares, 6,250,000 Class C shares and 6,250,000 Class D shares; U.S. Government Securities Portfolio Series Common Stock which consists of 6,250,000 Class A shares, 6,250,000 Class B shares, 6,250,000 Class C shares and 6,250,000 Class D shares; and Global Opportunity Portfolio Series Common Stock which consists of 6,250,000 Class A shares, 6,250,000 Class B shares, 6,250,000 Class C shares and 6,250,000 Class D shares. The Board of Directors of the Program may classify and reclassify the shares of a Portfolio 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 Program does not intend to hold meetings of shareholders in any year in which the Investment Company Act does not require shareholders to act on 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 auditors. Generally, under Maryland law, a meeting of shareholders may be called for any purpose on the written request of the holders of at least 10% of the outstanding shares of the Program. Voting rights for Directors are not cumulative. Shares issued are fully paid and non- assessable and have no preemptive or conversion rights. Redemption rights are discussed elsewhere herein and in the Prospectus. Each share is entitled to participate equally in dividends and distributions declared by the Program and in the net assets of the Program on 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 Portfolio shares, based on the value of each Portfolio's net assets and number of shares outstanding as of March 31, 1995, is calculated as set forth below:
FUNDAMENTAL VALUE PORTFOLIO GLOBAL OPPORTUNITY PORTFOLIO
------------------------------------------ ----------------------------------------
CLASS A CLASS B CLASS C CLASS D CLASS A CLASS B CLASS C CLASS D
---------- ---------- ---------- -------- ---------- ---------- -------- --------
Net Assets.............. $2,123,496 $5,458,945 $1,177,326 $681,431 $8,106,563 $4,129,447 $716,581 $335,433
========== ========== ========== ======== ========== ========== ======== ========
Number of Shares
Outstanding............ 203,457 523,935 112,994 65,315 803,666 410,182 71,180 33,275
========== ========== ========== ======== ========== ========== ======== ========
Net Asset Value Per
Share (net assets
divided by number of
shares outstanding).... $ 10.44 $ 10.42 $ 10.42 $ 10.43 $ 10.09 $ 10.07 $ 10.07 $ 10.08
Sales Charge(1)......... .58* ** ** .58* .56* ** ** .56*
---------- ---------- ---------- -------- ---------- ---------- -------- --------
Offering Price.......... $ 11.02 $ 10.42 $ 10.42 $ 11.01 $ 10.65 $ 10.07 $ 10.07 $ 10.64
========== ========== ========== ======== ========== ========== ======== ========
QUALITY BOND PORTFOLIO U.S. GOVERNMENT SECURITIES PORTFOLIO
------------------------------------------ ----------------------------------------
CLASS A CLASS B CLASS C CLASS D CLASS A CLASS B CLASS C CLASS D
---------- ---------- ---------- -------- ---------- ---------- -------- --------
Net Assets.............. $2,022,993 $ 909,094 $ 237,533 $ 78,052 $5,151,355 $ 753,778 $182,891 $ 43,704
========== ========== ========== ======== ========== ========== ======== ========
Number of Shares
Outstanding............ 202,370 90,972 23,771 7,810 506,478 74,109 17,983 4,295
========== ========== ========== ======== ========== ========== ======== ========
Net Asset Value Per
Share (net assets
divided by number of
shares outstanding).... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.17 $ 10.17 $ 10.17 $ 10.18
Sales Charge(1)......... .42* ** ** .42* .42* ** ** .42*
---------- ---------- ---------- -------- ---------- ---------- -------- --------
Offering Price.......... $ 10.42 $ 10.00 $ 10.00 $ 10.42 $ 10.59 $ 10.17 $ 10.17 $ 10.60
========== ========== ========== ======== ========== ========== ======== ========
|
INDEPENDENT AUDITORS
Deloitte & Touche LLP, 117 Campus Drive, Princeton, New Jersey 08540, has been selected as the independent auditors of the Program. The selection of independent auditors is subject to ratification by the shareholders of the Program. The independent auditors are responsible for auditing the annual financial statements of the Program.
CUSTODIAN
The Bank of New York, 90 Washington Street, 12th Floor, New York, New York 10286, acts as Custodian of the Program's assets. The Custodian is responsible for safeguarding and controlling the Program's cash and securities, handling the receipt and delivery of securities and collecting interest and dividends on the Program's investments.
TRANSFER AGENT
Merrill Lynch Financial Data Services, Inc., 4800 Deer Lake Drive East, Jacksonville, Florida 32246-6484, acts as the Program'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 "Management of the Program--Transfer Agency Services" in the Prospectus.
LEGAL COUNSEL
Brown & Wood, One World Trade Center, New York, New York 10048-0557, is counsel for the Program.
REPORTS TO SHAREHOLDERS
The fiscal year of the Program ends on January 31 of each year. The Program will send to its shareholders at least semiannually reports showing the Program's portfolio and other information. An annual report, containing financial statements audited by independent auditors, is sent to shareholders each year. After the end of each year, shareholders will receive Federal income tax information regarding dividends and capital gains distributions.
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 Program has filed with the Commission, Washington, D.C., under the Securities Act and the Investment Company Act to which reference is hereby made.
Certain Record Holders. On April 30, 1995, the Merrill Lynch Group, Inc., P.O. Box 9000, Princeton, New Jersey 08543-9000, owned of record the following percentages of the outstanding shares of common stock of each of the Portfolios:
PORTFOLIO PERCENT
--------- -------
Fundamental Value.............................................. 13.1%
Quality Bond................................................... 49.6%
U.S. Government Securities..................................... 77.1%
Global Opportunity............................................. 46.7%
|
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder,
Fundamental Value Portfolio of
Merrill Lynch Retirement Asset Builder Program, Inc.:
We have audited the accompanying statement of assets and liabilities of the Fundamental Value Portfolio (the "Portfolio") of Merrill Lynch Retirement Asset Builder Program, Inc. as of January 31, 1995. This financial statement is the responsibility of the Portfolio's management. Our responsibility is to express an opinion on this financial statement based on our audit.
We conducted our audit 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 statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. 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 audit provides a reasonable basis for our opinion.
In our opinion, such statement of assets and liabilities presents fairly, in all material respects, the financial position of the Portfolio as of January 31, 1995, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
May 19, 1995
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
FUNDAMENTAL VALUE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1995
Assets:
Cash................................................................ $ 25,000
Prepaid Registration Fees........................................... 84,546
Deferred organization costs......................................... 15,500
--------
Total assets.......................................................... 125,046
Liabilities:
Liabilities and accrued expenses.................................... 100,046
--------
Net Assets............................................................ $ 25,000
========
Net Assets Consist Of:
Class A Shares of Common Stock, $.10 par value, 6,250,000 shares au-
thorized........................................................... $ 63
Class B Shares of Common Stock, $.10 par value, 6,250,000 shares au-
thorized........................................................... 63
Class C Shares of Common Stock, $.10 par value, 6,250,000 shares au-
thorized........................................................... 63
Class D Shares of Common Stock, $.10 par value, 6,250,000 shares au-
thorized........................................................... 63
Paid-in Capital in excess of par.................................... 24,748
--------
Net Assets............................................................ $ 25,000
========
Net Asset Value Per Share:
Class A--Based on net assets of $6,250 and 625 shares outstanding... $ 10.00
========
Class B--Based on net assets of $6,250 and 625 shares outstanding... $ 10.00
========
Class C--Based on net assets of $6,250 and 625 shares outstanding... $ 10.00
========
Class D--Based on net assets of $6,250 and 625 shares outstanding... $ 10.00
========
|
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder,
Quality Bond Portfolio of
Merrill Lynch Retirement Asset Builder Program, Inc.:
We have audited the accompanying statement of assets and liabilities of the Quality Bond Portfolio (the "Portfolio") of Merrill Lynch Retirement Asset Builder Program, Inc. as of January 31, 1995. This financial statement is the responsibility of the Portfolio's management. Our responsibility is to express an opinion on this financial statement based on our audit.
We conducted our audit 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 statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. 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 audit provides a reasonable basis for our opinion.
In our opinion, such statement of assets and liabilities presents fairly, in all material respects, the financial position of the Portfolio as of January 31, 1995, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
May 19, 1995
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
QUALITY BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1995
Assets:
Cash................................................................ $ 25,000
Prepaid Registration Fees........................................... 84,546
Deferred organization costs......................................... 15,500
--------
Total assets.......................................................... 125,046
Liabilities:
Liabilities and accrued expenses.................................... 100,046
--------
Net Assets............................................................ $ 25,000
========
Net Assets Consist Of:
Class A Shares of Common Stock, $.10 par value, 6,250,000 shares au-
thorized........................................................... $ 63
Class B Shares of Common Stock, $.10 par value, 6,250,000 shares au-
thorized........................................................... 63
Class C Shares of Common Stock, $.10 par value, 6,250,000 shares au-
thorized........................................................... 63
Class D Shares of Common Stock, $.10 par value, 6,250,000 shares au-
thorized........................................................... 63
Paid-in Capital in excess of par.................................... 24,748
--------
Net Assets............................................................ $ 25,000
========
Net Asset Value Per Share:
Class A--Based on net assets of $6,250 and 625 shares outstanding .. $ 10.00
========
Class B--Based on net assets of $6,250 and 625 shares outstanding .. $ 10.00
========
Class C--Based on net assets of $6,250 and 625 shares outstanding .. $ 10.00
========
Class D--Based on net assets of $6,250 and 625 shares outstanding .. $ 10.00
========
|
(1) Quality Bond Portfolio (the "Portfolio") is one of the four portfolios of
Merrill Lynch Retirement Asset Builder Program, Inc. (the "Program") which
was organized as a Maryland corporation on May 12, 1994. The Program is
registered under the Investment Company Act of 1940 as an open-end
investment company.
(2) The Portfolio has entered into an Investment Advisory Agreement (the
"Investment Advisory Agreement") with Merrill Lynch Asset Management (the
"Investment Adviser"), and distribution agreements (the "Distribution
Agreements") with Merrill Lynch Funds Distributor, Inc. (the
"Distributor"). (See "Management and Advisory Arrangements" in the
Statement of Additional Information.) Certain officers and/or directors of
the Program are officers and/or directors of the Investment Adviser and/or
the Distributor.
(3) Prepaid registration fees are charged to income as the related shares are
issued.
(4) Deferred organization expenses will be amortized over a period from the
date the Portfolio commences operations not exceeding five years. In the
event that the Investment Adviser (or any subsequent holder) redeems any
of its original shares prior to the end of the five-year period, the
proceeds of the redemption payable in respect of such shares shall be
reduced by the pro rata share (based on the proportionate share of the
original shares redeemed to the total number of original shares
outstanding at the time of redemption) of the unamortized deferred
organization expenses as of the date of such redemption. In the event that
the Portfolio is liquidated prior to the end of the five-year period, the
Investment Adviser (or any subsequent holder) shall bear the unamortized
deferred organization expenses.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder,
U.S. Government Securities Portfolio of
Merrill Lynch Retirement Asset Builder Program, Inc.:
We have audited the accompanying statement of assets and liabilities of the U.S. Government Securities Portfolio (the "Portfolio") of Merrill Lynch Retirement Asset Builder Program, Inc. as of January 31, 1995. This financial statement is the responsibility of the Portfolio's management. Our responsibility is to express an opinion on this financial statement based on our audit.
We conducted our audit 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 statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. 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 audit provides a reasonable basis for our opinion.
In our opinion, such statement of assets and liabilities presents fairly, in all material respects, the financial position of the Portfolio as of January 31, 1995, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
May 19, 1995
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
U.S. GOVERNMENT SECURITIES PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1995
Assets:
Cash................................................................ $ 25,000
Prepaid Registration Fees........................................... 84,546
Deferred organization costs......................................... 15,500
--------
Total assets.......................................................... 125,046
Liabilities:
Liabilities and accrued expenses.................................... 100,046
--------
Net Assets............................................................ $ 25,000
========
Net Assets Consist Of:
Class A Shares of Common Stock, $.10 par value, 6,250,000 shares
authorized.......................................................... $ 63
Class B Shares of Common Stock, $.10 par value, 6,250,000 shares
authorized.......................................................... 63
Class C Shares of Common Stock, $.10 par value, 6,250,000 shares
authorized.......................................................... 63
Class D Shares of Common Stock, $.10 par value, 6,250,000 shares
authorized.......................................................... 63
Paid-in Capital in excess of par.................................... 24,748
--------
Net Assets............................................................ $ 25,000
========
Net Asset Value Per Share:
Class A--Based on net assets of $6,250 and 625 shares outstanding... $ 10.00
========
Class B--Based on net assets of $6,250 and 625 shares outstanding... $ 10.00
========
Class C--Based on net assets of $6,250 and 625 shares outstanding... $ 10.00
========
Class D--Based on net assets of $6,250 and 625 shares outstanding... $ 10.00
========
|
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder,
Global Opportunity Portfolio of
Merrill Lynch Retirement Asset Builder Program, Inc.:
We have audited the accompanying statement of assets and liabilities of the Global Opportunity Portfolio (the "Portfolio") of Merrill Lynch Retirement Asset Builder Program, Inc. as of January 31, 1995. This financial statement is the responsibility of the Portfolio's management. Our responsibility is to express an opinion on this financial statement based on our audit.
We conducted our audit 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 statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. 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 audit provides a reasonable basis for our opinion.
In our opinion, such statement of assets and liabilities presents fairly, in all material respects, the financial position of the Portfolio as of January 31, 1995, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
May 19, 1995
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
GLOBAL OPPORTUNITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1995
Assets:
Cash................................................................ $ 25,000
Prepaid Registration Fees .......................................... 84,546
Deferred organization costs......................................... 15,500
--------
Total assets.......................................................... 125,046
Liabilities:
Liabilities and accrued expenses.................................... 100,046
--------
Net Assets ........................................................... $ 25,000
========
Net Assets Consist Of:
Class A Shares of Common Stock, $.10 par value, 6,250,000 shares au- $ 63
thorized...........................................................
Class B Shares of Common Stock, $.10 par value, 6,250,000 shares au- 63
thorized...........................................................
Class C Shares of Common Stock, $.10 par value, 6,250,000 shares au- 63
thorized...........................................................
Class D Shares of Common Stock, $.10 par value, 6,250,000 shares au- 63
thorized...........................................................
Paid-in Capital in excess of par.................................... 24,748
--------
Net Assets ........................................................... $ 25,000
========
Net Asset Value Per Share:
Class A--Based on net assets of $6,250 and 625 shares outstanding... $ 10.00
========
Class B--Based on net assets of $6,250 and 625 shares outstanding... $ 10.00
========
Class C--Based on net assets of $6,250 and 625 shares outstanding... $ 10.00
========
Class D--Based on net assets of $6,250 and 625 shares outstanding... $ 10.00
========
|
THE FOLLOWING FINANCIAL STATEMENTS FOR THE PORTFOLIOS FOR THE PERIOD FEBRUARY
1, 1995 (COMMENCEMENT OF OPERATIONS) TO MARCH 31, 1995 ARE UNAUDITED.
These unaudited interim financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim period presented. All such adjustments are of a normal recurring nature.
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
FUNDAMENTAL VALUE PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
MARCH 31, 1995
(IN US DOLLARS)
VALUE PERCENT OF
LATIN AMERICA INDUSTRIES SHARES HELD INVESTMENTS COST (NOTE 1A) NET ASSETS
- ----------------------------------------------------------------------------------------------------------
Argentina Oil & Gas Producers 6,000 Yacimientos Petroliferos
Fiscales S.A.
(Sponsored) (ADR)* $104,495 $114,000 1.2%
------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
ARGENTINA 104,495 114,000 1.2
- ----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
LATIN AMERICA 104,495 114,000 1.2
- ----------------------------------------------------------------------------------------------------------
NORTH AMERICA
- ----------------------------------------------------------------------------------------------------------
United States Aerospace & Defense 2,000 United Technologies
Corporation 133,130 138,250 1.5
------------------------------------------------------------------------------------------------------
Apparel 5,000 +Fruit of the Loom, Inc. 121,425 131,250 1.4
------------------------------------------------------------------------------------------------------
Automobiles 8,000 Ford Motor Co. 209,500 216,000 2.3
6,000 General Motors Corp. 246,183 265,500 2.8
-------- -------- ---
455,683 481,500 5.1
------------------------------------------------------------------------------------------------------
Capital Equipment 3,000 Eaton Corp. 149,775 162,750 1.7
------------------------------------------------------------------------------------------------------
Chemicals 2,000 Union Carbide Corp. 51,370 61,250 0.6
------------------------------------------------------------------------------------------------------
Commercial Services 2,300 Aviall, Inc. 14,777 15,237 0.2
------------------------------------------------------------------------------------------------------
Computers 5,000 +Digital Equipment Corp. 158,425 189,375 2.0
8,000 +Storage Technology
Corp. 155,980 153,000 1.6
15,000 +Syquest Technology Inc. 181,932 180,000 1.9
10,000 +Western Digital Corp. 152,400 137,500 1.5
-------- -------- ---
648,737 659,875 7.0
------------------------------------------------------------------------------------------------------
Environmental 20,000 +Allwaste, Inc. 111,200 120,000 1.3
5,000 +Tetra Tech, Inc. 52,137 59,375 0.6
-------- -------- ---
163,337 179,375 1.9
------------------------------------------------------------------------------------------------------
Financial Services 3,000 Citicorp 126,825 127,500 1.4
13,000 +National Auto Credit, 139,915 146,250 1.5
Inc. -------- -------- ---
266,740 273,750 2.9
------------------------------------------------------------------------------------------------------
Foods 2,000 General Mills, Inc. 119,495 119,250 1.3
------------------------------------------------------------------------------------------------------
Hotels 10,500 +John Q. Hammons Hotel
Inc. 135,247 141,750 1.5
------------------------------------------------------------------------------------------------------
Industrial 24,000 +Burlington Industries,
Inc. 269,955 273,000 2.9
------------------------------------------------------------------------------------------------------
Information Processing 15,000 +UNISYS Corp. 145,125 138,750 1.5
------------------------------------------------------------------------------------------------------
Machine--Diversified 1,000 Deere & Co. 71,685 81,250 0.9
- ----------------------------------------------------------------------------------------------------------
|
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
FUNDAMENTAL VALUE PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
MARCH 31, 1995
(IN US DOLLARS)
- -----------------------------------------------------------------------------------------------------------------
NORTH AMERICA VALUE PERCENT OF
(CONCLUDED) INDUSTRIES SHARES HELD INVESTMENTS COST (NOTE 1A) NET ASSETS
- -----------------------------------------------------------------------------------------------------------------
United States Oil & Gas Producers 10,000 KCS Energy Inc. $ 157,870 $ 161,250 1.7%
(concluded)
-------------------------------------------------------------------------------------------------------------
Oil--Integrated 11,600 Total Petroleum (North
America) Ltd. 122,581 142,100 1.5
-------------------------------------------------------------------------------------------------------------
Oil Services 5,000 Halliburton Co. 181,185 181,875 1.9
15,000 +Varco International, Inc. 92,030 114,375 1.2
---------- ---------- ----
273,215 296,250 3.1
-------------------------------------------------------------------------------------------------------------
Pharmaceuticals 4,000 Bristol-Myers
Squibb Co. 248,125 252,000 2.7
-------------------------------------------------------------------------------------------------------------
Property & Casualty 8,000 TIG Holdings, Inc. 161,185 180,000 1.9
Insurance
-------------------------------------------------------------------------------------------------------------
Real Estate Investment 3,000 Simon Property Group 71,805 73,125 0.8
Trust
-------------------------------------------------------------------------------------------------------------
Retail 12,000 Liz Clairborne, Inc. 201,470 213,000 2.3
-------------------------------------------------------------------------------------------------------------
Retail Apparel 6,000 Limited, Inc. (The) 106,745 138,750 1.5
-------------------------------------------------------------------------------------------------------------
Semiconductors 12,000 +National Semiconductor
Corp. 222,720 210,000 2.2
-------------------------------------------------------------------------------------------------------------
Steel 7,000 USX-US Steel
Group, Inc. 217,700 236,250 2.5
-------------------------------------------------------------------------------------------------------------
Utilities 4,000 Texas Utilities Co. 132,365 127,000 1.3
-------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE
UNITED STATES 4,662,262 4,886,962 51.9
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN NORTH
AMERICA 4,662,262 4,886,962 51.9
- -----------------------------------------------------------------------------------------------------------------
WESTERN EUROPE
- -----------------------------------------------------------------------------------------------------------------
United Kingdom Conglomerates 8,000 +ADT Limited (ADR)* 83,385 98,000 1.0
-------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE
UNITED KINGDOM 83,385 98,000 1.0
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
WESTERN EUROPE 83,385 98,000 1.0
- -----------------------------------------------------------------------------------------------------------------
SHORT-TERM FACE
SECURITIES AMOUNT ISSUE
- -----------------------------------------------------------------------------------------------------------------
United States Commercial Paper** US$ 277,000 General Electric Capital
Corp., 6.25% due
4/03/1995 276,904 276,904 2.9
- -----------------------------------------------------------------------------------------------------------------
|
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
FUNDAMENTAL VALUE PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)(CONCLUDED)
MARCH 31, 1995
(IN US DOLLARS)
- ---------------------------------------------------------------------------------------------------------
SHORT-TERM FACE VALUE PERCENT OF
SECURITIES AMOUNT ISSUE COST (NOTE 1A) NET ASSETS
- ---------------------------------------------------------------------------------------------------------
United States US Government & Federal Home Loan
(concluded) Agency Obligations** Mortgage Corp.:
$ 600,000 5.88% due 4/03/1995 $ 599,804 $ 599,804 6.3%
457,000 5.92% due 4/07/1995 456,549 456,549 4.8
Federal National
Mortgage Association:
100,000 5.91% due 4/05/1995 99,934 99,934 1.1
200,000 5.91% due 4/20/1995 199,376 199,376 2.1
US Treasury Bills:
700,000 5.40% due 4/06/1995 699,475 699,475 7.4
300,000 5.48% due 4/06/1995 299,772 299,772 3.2
900,000 5.58% due 4/06/1995 899,303 899,303 9.5
500,000 5.63% due 4/06/1995 499,609 499,609 5.3
1,000,000 5.72% due 4/20/1995 996,981 996,981 10.6
-----------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
SHORT-TERM SECURITIES 5,027,707 5,027,707 53.2
- ---------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS $9,877,849 10,126,669 107.3
----------
LIABILITIES IN EXCESS OF OTHER AS- (685,471) (7.3)
SETS ----------- -----
NET ASSETS $ 9,441,198 100.0%
----------- -----
- ---------------------------------------------------------------------------------------------------------
|
* American Depositary Receipt (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
Program.
+ Non-income producing security.
See Notes to Financial Statements.
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
QUALITY BOND PORTFOLIO
SHORT-TERM FACE VALUE
SECURITIES AMOUNT ISSUE COST (NOTE 1A)
- --------------------------------------------------------------------------------------------------------------
US Government US Treasury Bills:
Obligations*-- $ 35,000 5.52% due 4/20/1995 $ 34,909 $ 34,909
97.1% 20,000 5.53% due 4/20/1995 19,948 19,948
70,000 5.55% due 4/20/1995 69,817 69,817
50,000 5.57% due 4/20/1995 49,868 49,868
118,000 5.58% due 4/20/1995 117,689 117,689
45,000 5.59% due 4/20/1995 44,881 44,881
420,000 5.60% due 4/20/1995 418,889 418,889
30,000 5.61% due 4/20/1995 29,921 29,921
40,000 5.62% due 4/20/1995 39,894 39,894
65,000 5.63% due 4/20/1995 64,827 64,827
2,080,000 5.67% due 4/20/1995 2,074,430 2,073,910
55,000 5.70% due 4/20/1995 54,852 54,852
75,000 5.75% due 4/20/1995 74,796 74,796
60,000 5.87% due 4/20/1995 59,834 59,834
- --------------------------------------------------------------------------------------------------------------
Total Investments in Short-Term Securities--97.1% 3,154,555 3,154,035
- --------------------------------------------------------------------------------------------------------------
Total Investments--97.1% $3,154,555 3,154,035
----------
Other Assets Less Lia-
bilities--2.9% 93,637
----------
Net Assets--100.0% $3,247,672
----------
- --------------------------------------------------------------------------------------------------------------
|
* 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 Program.
See Notes to Financial Statements.
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
U.S. GOVERNMENT SECURITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
MARCH 31, 1995
(IN US DOLLARS)
- -------------------------------------------------------------------------------
FACE INTEREST MATURITY VALUE
ISSUE AMOUNT RATE DATE (NOTE 1A)
- -------------------------------------------------------------------------------
US Government Obligations*--53.88%
- -------------------------------------------------------------------------------
United States Treasury Notes $ 900,000 6.875% 3/21/2000 $ 893,953
2,310,000 7.875 11/15/2004 2,409,607
- -------------------------------------------------------------------------------
Total US Government Obligations
(Cost--$3,235,191) 3,303,560
- -------------------------------------------------------------------------------
US Government Agency Mortgage-Backed
Obligations**--42.98%
- -------------------------------------------------------------------------------
Federal Home Loan Mortgage Corpora-
tion 2,418,070 11.50 6/01/2019 2,635,696
- -------------------------------------------------------------------------------
Total US Government Agency Mortgage-
Backed Obligations (Cost--
$2,614,735) 2,635,696
- -------------------------------------------------------------------------------
Total Investments (Cost--
$5,849,926)--96.86% 5,939,256
Other Assets Less Liabilities--3.14% 192,472
----------
Net Assets--100.00% $6,131,728
----------
- -------------------------------------------------------------------------------
|
* Certain US Government Obligations are traded on a discount basis; the interest rate shown is the discount rate paid at the time of purchase by the Program.
** 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.
See Notes to Financial Statements.
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
GLOBAL OPPORTUNITY PORTFOLIO
PERCENT
FACE VALUE OF NET
COUNTRY AMOUNT* CORPORATE BONDS COST (NOTE 1A) ASSETS
- -----------------------------------------------------------------------------------------
Argentina
- -----------------------------------------------------------------------------------------
Industrial $170,000 Telefonica de Argentina,
8.375% due 10/01/2000 $132,600 $133,875 1.0%
- -----------------------------------------------------------------------------------------
Oil & Gas Producers 100,000 Yacimientos Petroliferos
Fiscales S.A.--
(Sponsored)(ADR), 8.00%
due 2/15/2004 ** 73,000 79,000 0.6
- -----------------------------------------------------------------------------------------
Canada
- -----------------------------------------------------------------------------------------
Cellular Telephone(s) 100,000 Rogers Communication
Inc., 10.875% due
4/15/2004 100,250 100,500 0.8
- -----------------------------------------------------------------------------------------
Conglomerates 100,000 Sherritt Gordon Ltd.,
9.75% due 4/01/2003 95,500 97,875 0.7
- -----------------------------------------------------------------------------------------
Financial Services 100,000 Groupe Videotron Ltee,
10.625% due 2/15/2005 99,375 101,500 0.8
- -----------------------------------------------------------------------------------------
Industrial 100,000 Gulf Canada Resources,
Ltd., 9.25% due
1/15/2004 95,000 95,000 0.7
- -----------------------------------------------------------------------------------------
United States
- -----------------------------------------------------------------------------------------
Broadcasting & Publishing 100,000 Katz Corp., 12.75% due
11/15/2002 102,750 104,500 0.8
- -----------------------------------------------------------------------------------------
Building & Construction 100,000 Webb (Del E.) Corp.,
9.75% due 3/01/2003 86,000 90,000 0.7
- -----------------------------------------------------------------------------------------
Cellular Telephone(s) 100,000 Dial Page, Inc., 12.25%
due 2/15/2000 101,000 101,000 0.8
- -----------------------------------------------------------------------------------------
Chemicals 160,000 G I Holdings Inc.,
13.10% due
10/01/1998(a) 102,633 103,200 0.8
- -----------------------------------------------------------------------------------------
Communications 100,000 Panamsat L.P., 9.75% due
8/01/2000 96,250 98,750 0.7
- -----------------------------------------------------------------------------------------
Consumer--Products 140,000 Coleman Holdings, 11.47%
due 5/27/1998(a) 98,672 98,000 0.7
- -----------------------------------------------------------------------------------------
Cosmetics 100,000 Revlon Consumer Products
Corp., 9.375% due
4/01/2001 89,905 93,000 0.7
- -----------------------------------------------------------------------------------------
Energy 100,000 TransTexas Gas Corp.,
10.50% due
9/01/2000 96,375 100,625 0.8
- -----------------------------------------------------------------------------------------
Financial Services 100,000 Reliance Group Holdings,
Inc., 9.75% due
11/15/2003 88,750 91,500 0.7
- -----------------------------------------------------------------------------------------
Hotel(s) 100,000 John Q. Hammons Hotels,
8.875% due 2/15/2004 89,750 93,250 0.7
- -----------------------------------------------------------------------------------------
Hotels & Casinos 100,000 Ballys Park Place
Funding Corp., 9.25%
due 3/15/2004 88,000 88,500 0.7
- -----------------------------------------------------------------------------------------
Industrial 100,000 Repap Wisconsin, Inc.,
9.25% due 2/01/2002 89,500 93,750 0.7
- -----------------------------------------------------------------------------------------
Medical 100,000 National Medical
Enterprises Inc.,
10.125% due 3/01/2005 100,000 102,625 0.8
- -----------------------------------------------------------------------------------------
Steel 100,000 WCI Steel, Inc., 10.50%
due 3/01/2002 97,000 96,500 0.7
- -----------------------------------------------------------------------------------------
Textiles 100,000 WestPoint Stevens, Inc.,
9.375% due 12/15/2005 90,625 91,500 0.7
- -----------------------------------------------------------------------------------------
Transportation 100,000 Viking Star Shipping
Co., 9.625% due
7/15/2003 93,000 94,000 0.7
- -----------------------------------------------------------------------------------------
|
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
GLOBAL OPPORTUNITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
MARCH 31, 1995
(IN US DOLLARS)
- --------------------------------------------------------------------------------------------
PERCENT
FACE VALUE OF NET
COUNTRY AMOUNT* CORPORATE BONDS COST (NOTE 1A) ASSETS
- --------------------------------------------------------------------------------------------
Beaver Valley Funding
Co., 8.625% due
Utilities $ 100,000 6/01/2007 $ 82,000 $ 83,250 0.6%
100,000 CTC Mansfield Funding
Corp., 11.125% due
9/30/2016 98,750 98,999 0.7
- --------------------------------------------------------------------------------------------
Total Investments in
Corporate Bonds 2,286,685 2,330,699 17.6
- --------------------------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY
OBLIGATIONS
- --------------------------------------------------------------------------------------------
US Treasury Note, 7.50%
United States of America 1,000,000 due 2/15/2005 1,027,031 1,020,310 7.7
- --------------------------------------------------------------------------------------------
Total Investments in
U.S. Government &
Agency Obligations 1,027,031 1,020,310 7.7
- --------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT &
AGENCY OBLIGATIONS
- --------------------------------------------------------------------------------------------
Bundes Obligations,
Germany 700,000 7.375% due 1/03/2005 506,346 508,817 3.8
- --------------------------------------------------------------------------------------------
Total Investments in
Foreign Government &
Agency Obligations 506,346 508,817 3.8
- --------------------------------------------------------------------------------------------
SHARES
INDUSTRY HELD U.S. STOCKS
- --------------------------------------------------------------------------------------------
United Technologies
Aerospace & Defense 1,500 Corporation 95,903 103,687 0.8
- --------------------------------------------------------------------------------------------
Archer-Daniels-Midland
Agriculture 4,700 Company 96,092 87,538 0.7
- --------------------------------------------------------------------------------------------
Stewart & Stevenson
Automobile Parts 2,000 Services, Inc. 70,797 70,500 0.5
- --------------------------------------------------------------------------------------------
Automobiles 4,000 Ford Motor Co. 107,194 108,000 0.8
- --------------------------------------------------------------------------------------------
Keystone International,
Capital Goods 5,500 Inc. 96,580 118,938 0.9
- --------------------------------------------------------------------------------------------
Chemicals 2,800 Nalco Chemical Company 93,296 94,150 0.7
Shanghai Petrochemical
3,800 Co., Ltd. 95,266 112,100 0.8
- --------------------------------------------------------------------------------------------
Commercial--Services 3,000 +Kelly Services, Inc. 93,870 108,000 0.8
- --------------------------------------------------------------------------------------------
Hospital Supplies 2,700 Abbott Laboratories 94,352 96,187 0.7
- --------------------------------------------------------------------------------------------
Industrial 5,000 Comsat Corporation 90,350 93,125 0.7
- --------------------------------------------------------------------------------------------
Insurance 4,000 +Humana, Inc. 97,280 102,500 0.8
- --------------------------------------------------------------------------------------------
Natural Resources 6,800 Canadian Pacific Limited 96,458 102,000 0.8
- --------------------------------------------------------------------------------------------
Office--Related 2,900 Pitney Bowes, Inc. 98,915 104,400 0.8
- --------------------------------------------------------------------------------------------
Phillips Petroleum
Oil--Integrated 3,000 Company 94,305 109,875 0.8
- --------------------------------------------------------------------------------------------
Oil Service 4,900 Dresser Industries, Inc. 96,457 104,125 0.8
1,800 Schlumberger Limited 95,976 107,325 0.8
- --------------------------------------------------------------------------------------------
Pharmaceuticals 2,400 Merck & Co., Inc. 95,868 102,300 0.8
- --------------------------------------------------------------------------------------------
Photography 1,800 Eastman Chemical Co. 95,508 100,125 0.7
2,000 Eastman Kodak Company 97,140 106,250 0.8
- --------------------------------------------------------------------------------------------
|
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
GLOBAL OPPORTUNITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
MARCH 31, 1995
(IN US DOLLARS)
- -------------------------------------------------------------------------------------------------------
SHARES VALUE PERCENT OF
INDUSTRY HELD U.S. STOCKS COST (NOTE 1A) NET ASSETS
- -------------------------------------------------------------------------------------------------------
Pollution Control 2,900 General Signal Corporation $ 103,514 $ 103,312 0.8%
6,000 +Wheelabrator Technologies Inc. 95,670 81,750 0.6
- -------------------------------------------------------------------------------------------------------
Telecommunications 2,900 GTE Corporation 98,440 96,425 0.7
2,800 Northern Telecom Limited 96,796 106,050 0.8
- -------------------------------------------------------------------------------------------------------
Utilities--Communica-
tions 1,900 AT&T Corp. 96,083 98,325 0.7
- -------------------------------------------------------------------------------------------------------
Utilities--Electric 5,600 +California Energy Company, Inc. 96,236 89,600 0.7
- -------------------------------------------------------------------------------------------------------
Total Investments in U.S. Stocks 2,388,346 2,506,587 18.8
- -------------------------------------------------------------------------------------------------------
FOREIGN STOCKS
- -------------------------------------------------------------------------------------------------------
Argentina
- -------------------------------------------------------------------------------------------------------
Banking 5,000 Banco Frances del Rio de la Plata S.A. 80,350 90,625 0.7
- -------------------------------------------------------------------------------------------------------
Oil & Gas Producers 4,700 Yacimientos Petroliferos Fiscales S.A.
(Sponsored) (ADR)** 98,394 89,300 0.7
- -------------------------------------------------------------------------------------------------------
Australia
- -------------------------------------------------------------------------------------------------------
Multi--Industry 40,000 Pacific Dunlop Limited 93,681 87,290 0.7
- -------------------------------------------------------------------------------------------------------
Chile
- -------------------------------------------------------------------------------------------------------
Banking 5,500 +Banco O'Higgins S.A. 101,392 97,625 0.7
- -------------------------------------------------------------------------------------------------------
France
- -------------------------------------------------------------------------------------------------------
Building & Construction 800 Compagnie de Saint-Gobain 94,832 99,584 0.7
- -------------------------------------------------------------------------------------------------------
Communication Equipment 1,100 Alcatel Alsthom 91,344 99,467 0.7
- -------------------------------------------------------------------------------------------------------
Oil--International 3,300 TOTAL SA, (ADR)** 94,281 99,000 0.7
- -------------------------------------------------------------------------------------------------------
Germany
- -------------------------------------------------------------------------------------------------------
Electronics 200 Siemens AG 94,252 92,832 0.7
- -------------------------------------------------------------------------------------------------------
Machinery & Equipment 350 Mannesmann AG 95,224 88,943 0.7
- -------------------------------------------------------------------------------------------------------
Multi-Industry 300 Preussag AG 91,752 83,333 0.6
- -------------------------------------------------------------------------------------------------------
Hong Kong
- -------------------------------------------------------------------------------------------------------
Real Estate 17,000 Sun Hung Kai Properties Limited 104,273 115,987 0.9
- -------------------------------------------------------------------------------------------------------
Indonesia
- -------------------------------------------------------------------------------------------------------
Telecommunications 3,000 +P.T. Indonesia Satellite (ADR)** 95,430 105,750 0.8
- -------------------------------------------------------------------------------------------------------
|
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
GLOBAL OPPORTUNITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
MARCH 31, 1995
(IN US DOLLARS)
- ----------------------------------------------------------------------------------------------------------
SHARES VALUE PERCENT OF
INDUSTRY HELD FOREIGN STOCKS COST (NOTE 1A) NET ASSETS
- ----------------------------------------------------------------------------------------------------------
Italy
- ----------------------------------------------------------------------------------------------------------
Building Materials 24,000 +Italcementi SpA $ 93,046 $ 66,321 0.5%
- ----------------------------------------------------------------------------------------------------------
Japan
- ----------------------------------------------------------------------------------------------------------
Building & Construction 8,000 Maeda Corporation 89,098 91,022 0.7
10,000 Okumura Corporation 91,981 89,552 0.7
- ----------------------------------------------------------------------------------------------------------
Building Materials 7,000 Asahi Glass Co., Ltd. 82,898 81,975 0.6
- ----------------------------------------------------------------------------------------------------------
Capital Goods 12,000 Hitachi Cable, Ltd. 92,460 88,037 0.7
14,000 Mitsubishi Heavy Industries, Ltd. 94,894 100,138 0.7
- ----------------------------------------------------------------------------------------------------------
Electronics 5,000 Matsushita Electric Industrial Co., Ltd. 71,070 80,367 0.6
- ----------------------------------------------------------------------------------------------------------
Food Processing 5,000 Yamazaki Baking Co., Ltd. 89,111 94,719 0.7
- ----------------------------------------------------------------------------------------------------------
Industrial 6,000 Toto Ltd. 91,919 92,997 0.7
- ----------------------------------------------------------------------------------------------------------
Insurance 15,000 Nippon Fire & Marine Insurance Co., Ltd. 93,756 106,602 0.8
9,000 Tokio Marine & Fire Insurance Co. Ltd. 97,273 101,780 0.8
- ----------------------------------------------------------------------------------------------------------
Machinery 200 Smc Corporation 9,680 9,874 0.1
- ----------------------------------------------------------------------------------------------------------
Photography 6,000 Canon Inc. 88,100 98,507 0.7
- ----------------------------------------------------------------------------------------------------------
Retail Stores 2,000 Ito-Yokado Co., Ltd. 92,743 98,737 0.7
- ----------------------------------------------------------------------------------------------------------
Textiles 15,000 Toray Industries, Inc. 95,214 101,435 0.8
- ----------------------------------------------------------------------------------------------------------
Trading 11,000 Kamigumi Co., Ltd. 91,627 105,453 0.8
9,000 Sumitomo Corp. 87,447 81,630 0.6
- ----------------------------------------------------------------------------------------------------------
Malaysia
- ----------------------------------------------------------------------------------------------------------
Automotive & Equipment 39,000 UMW Holdings BHD 98,720 95,630 0.7
- ----------------------------------------------------------------------------------------------------------
Mexico
- ----------------------------------------------------------------------------------------------------------
Capital Goods 44,000 Cementos Mexicanos, S.A. de C.V. (Cemex) 131,719 96,399 0.7
- ----------------------------------------------------------------------------------------------------------
Utilities--Communica-
tions 3,000 Telefonos de Mexico, S.A. de C.V. (ADR)** 86,460 85,500 0.6
- ----------------------------------------------------------------------------------------------------------
Netherlands
- ----------------------------------------------------------------------------------------------------------
Oil--International 800 Royal Dutch Petroleum N.V. (ADR)** 92,248 96,000 0.7
- ----------------------------------------------------------------------------------------------------------
Norway
- ----------------------------------------------------------------------------------------------------------
Shipping 2,000 Kvaerner A.S. (Class B) 94,557 83,683 0.6
- ----------------------------------------------------------------------------------------------------------
|
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
GLOBAL OPPORTUNITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
MARCH 31, 1995
(IN US DOLLARS)
- ---------------------------------------------------------------------------------------------------------
SHARES VALUE PERCENT OF
INDUSTRY HELD FOREIGN STOCKS COST (NOTE 1A) NET ASSETS
- ---------------------------------------------------------------------------------------------------------
Singapore
- ---------------------------------------------------------------------------------------------------------
Machinery 12,000 Jurong Shipyard Ltd. $ 96,693 $ 102,906 0.8%
- ---------------------------------------------------------------------------------------------------------
Shipping 75,000 Neptune Orient Lines Ltd. 93,990 92,488 0.7
- ---------------------------------------------------------------------------------------------------------
Spain
- ---------------------------------------------------------------------------------------------------------
Petroleum 3,300 Repsol S.A. 94,660 95,700 0.7
- ---------------------------------------------------------------------------------------------------------
Sweden
- ---------------------------------------------------------------------------------------------------------
Engineering & 5,500 SKF AB 'B' Free 98,567 91,090 0.7
Construction
- ---------------------------------------------------------------------------------------------------------
Switzerland
- ---------------------------------------------------------------------------------------------------------
Building & Construction 125 Holderbank Financiere Glarus AG (Bearer) 92,109 91,189 0.7%
- ---------------------------------------------------------------------------------------------------------
Electrical Equipment 100 BBC Brown Boveri & Cie (Bearer) 88,062 94,802 0.7
- ---------------------------------------------------------------------------------------------------------
Thailand
- ---------------------------------------------------------------------------------------------------------
Real Estate 30,000 MDX Company Ltd. 89,321 62,157 0.5
- ---------------------------------------------------------------------------------------------------------
United Kingdom
- ---------------------------------------------------------------------------------------------------------
Building Materials 4,000 Grand Metropolitan PLC (ADR)** 94,780 103,000 0.8
- ---------------------------------------------------------------------------------------------------------
Business Services 32,000 Lucas Industries PLC (0rdinary) 96,545 101,026 0.8
- ---------------------------------------------------------------------------------------------------------
Chemicals 2,200 Imperial Chemical Industries PLC 100,782 103,400 0.8
- ---------------------------------------------------------------------------------------------------------
Conglomerates 5,300 Hanson PLC (Sponsored) (ADR)** 97,758 100,037 0.7
- ---------------------------------------------------------------------------------------------------------
Utilities--Gas 1,900 British Gas PLC 92,758 88,825 0.7
- ---------------------------------------------------------------------------------------------------------
Total Investments in Foreign Stocks 4,227,251 4,222,714 31.7
- ---------------------------------------------------------------------------------------------------------
Total Investments in U.S. & Foreign Stocks 6,615,597 6,729,301 50.5
- ---------------------------------------------------------------------------------------------------------
|
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
GLOBAL OPPORTUNITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONCLUDED)
MARCH 31, 1995
(IN US DOLLARS)
- --------------------------------------------------------------------------------------------------------------------
FACE VALUE PERCENT OF
INDUSTRY AMOUNT* SHORT-TERM SECURITIES COST (NOTE 1A) NET ASSETS
- --------------------------------------------------------------------------------------------------------------------
Commercial Pa-
per*** $ 486,000 General Electric Capital Corp., 6.10% due 4/04/1995 $ 485,831 $ 485,831 3.7%
- --------------------------------------------------------------------------------------------------------------------
US Government
Agency Obliga-
tions*** 2,500,000 US Treasury Bill, 5.675% due 4/20/1995 2,492,512 2,492,479 18.8
- --------------------------------------------------------------------------------------------------------------------
Total Investments in Short-Term Securities 2,978,343 2,978,310 22.5
- --------------------------------------------------------------------------------------------------------------------
Total Invest- $13,414,002
ments ----------- 13,567,437 102.1
Unrealized Depreciation on Forward Foreign Exchange Contracts++ (94,597) (0.7)
Liabilities in Excess of Other Assets (184,816) (1.4)
----------- -----
-----
Net Assets $13,288,024 100.0%
----------- -----
- --------------------------------------------------------------------------------------------------------------------
|
** American Depositary Receipt (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 the yield to maturity on
this zero coupon issue.
+ Non-income producing security.
++ Forward foreign exchange contracts as of March 31, 1995 were as follows:
----------------------------------------------------------------------------------------
EXPIRATION UNREALIZED
FOREIGN CURRENCY SOLD DATE DEPRECIATION
----------------------------------------------------------------------------------------
Y 70,000,000 July 1995 (94,597)
----------------------------------------------------------------------------------------
TOTAL UNREALIZED DEPRECIATION ON FORWARD
FOREIGN EXCHANGE CONTRACTS ($94,597)
TOTAL (US$ COMMITMENT-$719,942) --------
----------------------------------------------------------------------------------------
|
See Notes to Financial Statements.
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
FINANCIAL INFORMATION
STATEMENTS OF ASSETS AND LIABILITIES AS OF MARCH 31, 1995 (UNAUDITED)
FUNDAMENTAL QUALITY US GOVERNMENT GLOBAL
VALUE BOND SECURITIES OPPORTUNITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ---------- ------------- -----------
ASSETS:
Investments, at value* (Note
1a)......................... $10,126,669 $3,154,035 $5,939,256 $13,567,437
Cash......................... -- 1,734 896 --
Receivables:
Securities sold............ 1,017,000 -- 834,141 613,185
Capital shares sold........ 941,869 147,192 116,034 406,364
Interest................... -- -- 118,421 70,341
Investment adviser (Note
2)........................ 1,793 15,418 25,770 8,998
Dividends.................. 3,183 -- -- 24,136
Principal paydowns......... -- -- 17,958 --
Deferred organization ex-
penses (Note 1f)............ 15,500 15,500 15,500 15,500
Prepaid registration fees
and other assets (Note 1f).. 50,000 39,173 84,546 50,000
----------- ---------- ---------- -----------
Total assets................. 12,156,014 3,373,052 7,152,522 14,755,961
----------- ---------- ---------- -----------
LIABILITIES:
Unrealized depreciation on
forward foreign exchange
contracts................... -- -- -- 94,597
Payables:
Securities purchased....... 2,599,791 59,804 893,953 1,179,141
Capital shares redeemed.... 43,726 7,469 4,086 9,380
Dividends to shareholders
(Note 1g)................. -- 4,352 13,292 --
Distributor (Note 2)....... 3,585 499 381 2,986
Accrued expenses and other
liabilities................. 67,714 53,256 109,082 181,833
----------- ---------- ---------- -----------
Total liabilities............ 2,714,816 125,380 1,020,794 1,467,937
----------- ---------- ---------- -----------
NET ASSETS:
Net assets................... $ 9,441,198 $3,247,672 $6,131,728 $13,288,024
=========== ========== ========== ===========
NET ASSETS CONSIST OF:
Class A Common Stock, $0.10
par value+.................. $ 20,346 $ 20,237 $ 50,648 $ 80,367
Class B Common Stock, $0.10
par value++................. 52,394 9,097 7,411 41,018
Class C Common Stock, $0.10
par value+++................ 11,299 2,377 1,798 7,118
Class D Common Stock, $0.10
par value++++............... 6,531 781 430 3,327
Paid-in capital in excess of
par......................... 9,084,617 3,215,700 5,982,598 13,028,933
Undistributed investment in-
come--net................... 17,154 -- -- 61,446
Undistributed realized
capital gains (losses) on
investments--net............ 37 -- (487) 7,024
Unrealized appreciation
(depreciation) on
investments--net............ 248,820 (520) 89,330 58,791
----------- ---------- ---------- -----------
Net assets................... $ 9,441,198 $3,247,672 $6,131,728 $13,288,024
=========== ========== ========== ===========
|
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
FINANCIAL INFORMATION (CONTINUED)
STATEMENTS OF ASSETS AND LIABILITIES AS OF MARCH 31, 1995 (UNAUDITED)
(CONCLUDED)
FUNDAMENTAL QUALITY US GOVERNMENT GLOBAL
VALUE BOND SECURITIES OPPORTUNITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ---------- ------------- -----------
NET ASSET VALUE:
Class A:
Net assets.................. $2,123,496 $2,022,993 $5,151,355 $ 8,106,563
========== ========== ========== ===========
Shares outstanding.......... 203,457 202,370 506,478 803,666
========== ========== ========== ===========
Net asset value and redemp-
tion price per share....... $ 10.44 $ 10.00 $ 10.17 $ 10.09
========== ========== ========== ===========
Class B:
Net assets.................. $5,458,945 $ 909,094 $ 753,778 $ 4,129,447
========== ========== ========== ===========
Shares outstanding.......... 523,935 90,972 74,109 410,182
========== ========== ========== ===========
Net asset value and redemp-
tion price per share....... $ 10.42 $ 9.99 $ 10.17 $ 10.07
========== ========== ========== ===========
Class C:
Net assets.................. $1,177,326 $ 237,533 $ 182,891 $ 716,581
========== ========== ========== ===========
Shares outstanding.......... 112,994 23,771 17,983 71,180
========== ========== ========== ===========
Net asset value and redemp-
tion price per share....... $ 10.42 $ 9.99 $ 10.17 $ 10.07
========== ========== ========== ===========
Class D:
Net assets.................. $ 681,431 $ 78,052 $ 43,704 $ 335,433
========== ========== ========== ===========
Shares outstanding.......... 65,315 7,810 4,295 33,275
========== ========== ========== ===========
Net asset value and redemp-
tion price per share....... $ 10.43 $ 9.99 $ 10.18 $ 10.08
========== ========== ========== ===========
*Identified cost.............. $9,877,849 $3,154,555 $5,849,926 $13,414,002
========== ========== ========== ===========
+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.
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
FINANCIAL INFORMATION (CONTINUED)
STATEMENTS OF OPERATIONS FOR THE PERIOD FEBRUARY 1, 1995+ TO MARCH 31, 1995
(UNAUDITED)
FUNDAMENTAL QUALITY US GOVERNMENT GLOBAL
VALUE BOND SECURITIES OPPORTUNITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- --------- ------------- -----------
INVESTMENT INCOME (NOTES 1D &
1E):
Interest and discount
earned*..................... $ 27,587 $23,481 $ 76,261 $ 61,596
Dividends**.................. 5,258 -- -- 32,209
-------- ------- -------- --------
Total income............... 32,845 23,481 76,261 93,805
-------- ------- -------- --------
EXPENSES:
Printing and shareholder re-
ports....................... 3,483 3,448 7,759 12,366
Investment advisory fees
(Note 2).................... 5,129 2,068 4,544 12,537
Accounting services (Note 2). 2,685 3,171 6,130 9,234
Directors' fees and expenses. 1,048 1,293 2,729 3,700
Distribution fees--Class B
(Note 2).................... 3,387 445 337 3,074
Registration fees (Note 1f).. 2,949 1,201 1,196 1,793
Transfer agent fees--Class A
(Note 2).................... 484 1,417 2,659 1,373
Custodian fees............... 400 1,493 1,388 2,092
Professional fees............ 1,032 1,031 2,268 3,647
Amortization of organization
expenses (Note 1f).......... 272 770 598 601
Distribution fees--Class C
(Note 2).................... 666 91 75 461
Transfer agent fees--Class B
(Note 2).................... 434 220 140 421
Pricing fees................. -- 385 116 35
Transfer agent fees--Class C
(Note 2).................... 86 42 32 65
Account maintenance fees--
Class D (Note 2)............ 132 17 14 62
Transfer agent fees--Class D
(Note 2).................... 53 24 16 24
Other........................ 373 924 739 2,409
-------- ------- -------- --------
Total expenses before reim-
bursement................... 22,613 18,040 30,740 53,894
Reimbursement of expenses
(Note 2).................... (6,922) (17,486) (30,314) (21,535)
-------- ------- -------- --------
Total expenses after reim-
bursement................... 15,691 554 426 32,359
-------- ------- -------- --------
Investment income--net....... 17,154 22,927 75,835 61,446
-------- ------- -------- --------
REALIZED & UNREALIZED GAIN
(LOSS) ON INVESTMENTS &
FOREIGN CURRENCY
TRANSACTIONS--NET
(NOTES 1B, 1C, 1E & 3)
Realized gain (loss) from:
Investments--net........... 37 -- (487) 8,215
Foreign currency transac-
tions--net................ -- -- -- (1,191)
Unrealized appreciation (de-
preciation) on:
Investments--net........... 248,820 (520) 89,330 153,435
Foreign currency transac-
tions--net................ -- -- -- (94,644)
-------- ------- -------- --------
Net realized and unrealized
gain (loss) on investments
and foreign currency trans-
actions..................... 248,857 (520) 88,843 65,815
-------- ------- -------- --------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS... $266,011 $22,407 $164,678 $127,261
======== ======= ======== ========
*Net of withholding tax on
interest.................... $ -- $ -- $ -- $ 2,393
======== ======= ======== ========
**Net of withholding tax on
dividends................... $ -- $ -- $ -- $ 2,072
======== ======= ======== ========
|
+ Commencement of Operations.
See Notes to Financial Statements.
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
FINANCIAL INFORMATION (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
FUNDAMENTAL
VALUE PORTFOLIO
FOR THE PERIOD
FEBRUARY 1, 1995+
TO MARCH 31,
1995
-----------------
Increase (Decrease) in Net Assets:
OPERATIONS:
Investment income--net....................................... $ 17,154
Realized gain on investments--net............................ 37
Unrealized appreciation on investments--net.................. 248,820
----------
Net increase in net assets resulting from operations......... 266,011
----------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net increase in net assets derived from capital share trans-
actions..................................................... 9,150,187
----------
NET ASSETS:
Total increase in net assets................................. 9,416,198
Beginning of period.......................................... 25,000
----------
End of period *.............................................. $9,441,198
==========
* Undistributed investment income--net......................... $ 17,154
==========
|
+ Commencement of Operations.
See Notes to Financial Statements.
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
FINANCIAL INFORMATION (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
QUALITY BOND PORTFOLIO
FOR THE PERIOD
FEBRUARY 1, 1995+
TO MARCH 31,
1995
----------------------
Increase (Decrease) in Net Assets:
OPERATIONS:
Investment income--net................................... $ 22,927
Unrealized depreciation on investments--net.............. (520)
----------
Net increase in net assets resulting from operations..... 22,407
----------
DIVIDENDS TO SHAREHOLDERS (NOTE 1G):
Investment income--net:
Class A................................................. (19,055)
Class B................................................. (2,947)
Class C................................................. (556)
Class D................................................. (369)
----------
Net decrease in net assets resulting from dividends to
shareholders............................................ (22,927)
----------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net increase in net assets derived from capital share
transactions............................................ 3,223,192
----------
NET ASSETS:
Total increase in net assets............................. 3,222,672
Beginning of period...................................... 25,000
----------
End of period ........................................... $3,247,672
==========
|
+ Commencement of Operations.
See Notes to Financial Statements.
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
FINANCIAL INFORMATION (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
US GOVERNMENT
SECURITIES PORTFOLIO
FOR THE PERIOD
FEBRUARY 1, 1995+
TO MARCH 31,
1995
--------------------
Increase (Decrease) in Net Assets:
OPERATIONS:
Investment income--net..................................... $ 75,835
Realized loss on investments--net.......................... (487)
Unrealized appreciation on investments--net................ 89,330
----------
Net increase in net assets resulting from operations....... 164,678
----------
DIVIDENDS TO SHAREHOLDERS (NOTE 1G):
Investment income--net:
Class A................................................... (71,295)
Class B................................................... (3,380)
Class C................................................... (709)
Class D................................................... (451)
----------
Net decrease in net assets resulting from dividends to
shareholders.............................................. (75,835)
----------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net increase in net assets derived from capital share
transactions.............................................. 6,017,885
----------
NET ASSETS:
Total increase in net assets............................... 6,106,728
Beginning of period........................................ 25,000
----------
End of period ............................................. $6,131,728
==========
|
+ Commencement of Operations.
See Notes to Financial Statements.
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
FINANCIAL INFORMATION (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONCLUDED)
GLOBAL OPPORTUNITY
PORTFOLIO
FOR THE PERIOD
FEBRUARY 1, 1995+
TO MARCH 31, 1995
------------------
Increase (Decrease) in Net Assets:
OPERATIONS:
Investment income--net.................................... $ 61,446
Realized gain on investments and foreign currency transac-
tions--net............................................... 7,024
Unrealized appreciation on investments and foreign cur-
rency transactions--net.................................. 58,791
-----------
Net increase in net assets resulting from operations...... 127,261
-----------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net increase in net assets derived from capital share
transactions............................................. 13,135,763
-----------
NET ASSETS:
Total increase in net assets.............................. 13,263,024
Beginning of period....................................... 25,000
-----------
End of period*............................................ $13,288,024
===========
*Undistributed investment income--net..................... $ 61,446
===========
|
+ Commencement of Operations.
See Notes to Financial Statements.
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
FINANCIAL INFORMATION (CONTINUED)
FINANCIAL HIGHLIGHTS (UNAUDITED)
The following per share data and ratios have been derived from information provided in the financial statements.
FUNDAMENTAL VALUE PORTFOLIO
-----------------------------------------------
FOR THE PERIOD FEBRUARY 1, 1995+
TO MARCH 31, 1995
-----------------------------------------------
CLASS A CLASS B CLASS C CLASS D
-------- -------- -------- --------
Increase (Decrease) in Net
Asset Value:
PER SHARE OPERATING PER-
FORMANCE:
Net asset value, begin-
ning of period......... $ 10.00 $ 10.00 $ 10.00 $ 10.00
-------- -------- -------- --------
Investment income--net.. 0.04 0.01 0.01 0.02
Realized and unrealized
gain on investments--
net.................... 0.40 0.41 0.41 0.41
-------- -------- -------- --------
Total from investment
operations............. 0.44 0.42 0.42 0.43
-------- -------- -------- --------
Net asset value, end of
period................. $ 10.44 $ 10.42 $ 10.42 $ 10.43
======== ======== ======== ========
TOTAL INVESTMENT RETURN:**
Based on net asset value
per share.............. 4.40%++ 4.20%++ 4.20%++ 4.30%++
======== ======== ======== ========
RATIOS TO AVERAGE NET AS-
SETS:
Expenses excluding ac-
count maintenance and
distribution fees and
net of reimbursement... 1.71%* 1.27%* 1.28%* 1.29%*
======== ======== ======== ========
Expenses, net of reim-
bursement.............. 1.71%* 2.27%* 2.28%* 1.54%*
======== ======== ======== ========
Expenses................ 2.73%* 3.05%* 3.03%* 2.32%*
======== ======== ======== ========
Investment income--net.. 2.68%* 1.73%* 1.69%* 2.45%*
======== ======== ======== ========
SUPPLEMENTAL DATA:
Net assets, end of pe-
riod (in thousands).... $ 2,124 $ 5,459 $ 1,177 $ 681
======== ======== ======== ========
Portfolio turnover...... 0.00% 0.00% 0.00% 0.00%
======== ======== ======== ========
|
+Commencement of Operations.
++Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
FINANCIAL INFORMATION (CONTINUED)
FINANCIAL HIGHLIGHTS (UNAUDITED) (CONTINUED)
The following per share data and ratios have been derived from information provided in the financial statements.
QUALITY BOND PORTFOLIO
-----------------------------------------------
FOR THE PERIOD FEBRUARY 1, 1995+
TO MARCH 31, 1995
-----------------------------------------------
CLASS A CLASS B CLASS C CLASS D
-------- -------- -------- --------
Increase (Decrease) in Net Asset Value:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of peri-
od.................................. $ 10.00 $ 10.00 $ 10.00 $ 10.00
-------- -------- -------- --------
Investment income--net............... 0.09 0.08 0.08 0.09
Realized and unrealized gain (loss)
on investments--net................. 0.00 (0.01) (0.01) (0.01)
-------- -------- -------- --------
Total from investment operations..... 0.09 0.07 0.07 0.08
-------- -------- -------- --------
Less dividends from investment in-
come--net........................... (0.09) (0.08) (0.08) (0.09)
-------- -------- -------- --------
Net asset value, end of period....... $ 10.00 $ 9.99 $ 9.99 $ 9.99
======== ======== ======== ========
TOTAL INVESTMENT RETURN:**
Based on net asset value per share... 0.99%++ 0.68%++ 0.67%++ 0.76%++
======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS:
Expenses excluding account
maintenance and distribution fees
and net of reimbursement............ 0.00%* 0.03%* 0.04%* 0.00%*
======== ======== ======== ========
Expenses, net of reimbursement....... 0.00%* 0.78%* 0.84%* 0.24%*
======== ======== ======== ========
Expenses............................. 4.37%* 4.37%* 4.31%* 4.09%*
======== ======== ======== ========
Investment income--net............... 5.67%* 4.96%* 4.89%* 5.48%*
======== ======== ======== ========
SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)........................... $ 2,023 $ 909 $ 238 $ 78
======== ======== ======== ========
Portfolio turnover................... 0.00% 0.00% 0.00% 0.00%
======== ======== ======== ========
|
+Commencement of Operations.
++Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
FINANCIAL INFORMATION (CONTINUED)
FINANCIAL HIGHLIGHTS (UNAUDITED) (CONTINUED)
The following per share data and ratios have been derived from information provided in the financial statements.
US GOVERNMENT SECURITIES PORTFOLIO
-----------------------------------------------
FOR THE PERIOD FEBRUARY 1, 1995+
TO MARCH 31, 1995
-----------------------------------------------
CLASS A CLASS B CLASS C CLASS D
-------- -------- -------- --------
Increase (Decrease) in Net Asset Value:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of peri-
od.................................. $ 10.00 $ 10.00 $ 10.00 $ 10.00
-------- -------- -------- --------
Investment income--net............... 0.14 0.13 0.13 0.14
Realized and unrealized gain on in-
vestments--net...................... 0.17 0.17 0.17 0.18
-------- -------- -------- --------
Total from investment operations..... 0.31 0.30 0.30 0.32
-------- -------- -------- --------
Less dividends from investment in-
come--net........................... (0.14) (0.13) (0.13) (0.14)
-------- -------- -------- --------
Net asset value, end of period....... $ 10.17 $ 10.17 $ 10.17 $ 10.18
======== ======== ======== ========
TOTAL INVESTMENT RETURN:**
Based on net asset value per share... 3.10%++ 2.99%++ 2.98%++ 3.17%++
======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS:
Expenses excluding distribution fees
and net of reimbursement............ 0.00%* 0.02%* 0.03%* 0.00%*
======== ======== ======== ========
Expenses, net of reimbursement....... 0.00%* 0.77%* 0.83%* 0.25%*
======== ======== ======== ========
Expenses............................. 3.35%* 3.87%* 4.14%* 3.40%*
======== ======== ======== ========
Investment income--net............... 8.40%* 7.53%* 7.53%* 8.16%*
======== ======== ======== ========
SUPPLEMENTAL DATA:
Net assets, end of period (in thou-
sands).............................. $ 5,151 $ 754 $ 183 $ 44
======== ======== ======== ========
Portfolio turnover................... 0.49% 0.49% 0.49% 0.49%
======== ======== ======== ========
|
+Commencement of Operations.
++Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
FINANCIAL INFORMATION (CONCLUDED)
FINANCIAL HIGHLIGHTS (UNAUDITED) (CONCLUDED)
The following per share data and ratios have been derived from information provided in the financial statements.
GLOBAL OPPORTUNITY PORTFOLIO
-----------------------------------------------
FOR THE PERIOD FEBRUARY 1, 1995+
TO MARCH 31, 1995
-----------------------------------------------
CLASS A CLASS B CLASS C CLASS D
-------- -------- -------- --------
Increase (Decrease) in Net
Asset Value:
PER SHARE OPERATING PER-
FORMANCE:
Net asset value, begin-
ning of period......... $ 10.00 $ 10.00 $ 10.00 $ 10.00
-------- -------- -------- --------
Investment income--net.. 0.06 0.02 0.02 0.03
Realized and unrealized
gain on investments--
net.................... 0.03 0.05 0.05 0.05
-------- -------- -------- --------
Total from investment
operations............. 0.09 0.07 0.07 0.08
-------- -------- -------- --------
Net asset value, end of
period................. $ 10.09 $ 10.07 $ 10.07 $ 10.08
======== ======== ======== ========
TOTAL INVESTMENT RETURN:**
Based on net asset value
per share............... 0.90%++ 0.70%++ 0.70%++ 0.80%++
======== ======== ======== ========
RATIOS TO AVERAGE NET AS-
SETS:
Expenses excluding
account maintenance and
distribution fees and
net of reimbursement... 1.79%* 1.48%* 1.50%* 1.48%*
======== ======== ======== ========
Expenses, net of reim-
bursement.............. 1.79%* 2.48%* 2.50%* 1.73%*
======== ======== ======== ========
Expenses................ 3.06%* 3.85%* 3.83%* 3.06%*
======== ======== ======== ========
Investment income--net.. 3.76%* 3.33%* 3.44%* 4.10%*
======== ======== ======== ========
SUPPLEMENTAL DATA:
Net assets, end of pe-
riod (in thousands).... $ 8,107 $ 4,129 $ 717 $ 335
======== ======== ======== ========
Portfolio turnover...... 4.80% 4.80% 4.80% 4.80%
======== ======== ======== ========
|
+Commencement of Operations.
++Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1995
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: the Fundamental Value Portfolio, the Global Opportunity Portfolio, the Quality Bond Portfolio and the 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 bear certain expenses related to the account maintenance of such shares, and Class B and Class C 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. 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. 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.
(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 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.
. Financial futures contracts--The Portfolios 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 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
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MARCH 31, 1995
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 write covered call options and purchase put options. When the Portfolios write an option, an amount equal to the premium received by the Portfolios are 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).
Written and purchased options are non-income producing investments.
. Forward foreign exchange contracts--The 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 Portfolio's records. However, the effect on operations is recorded from the date the Portfolio enters into such contracts. Premium or discount is amortized over the life of the contracts.
. Foreign currency options and futures--The 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 Portfolio, sold by the Portfolio but not yet delivered, or committed or anticipated to be purchased by the Portfolio.
(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
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MARCH 31, 1995
Portfolio is informed of the ex-dividend date. Interest income (including amortization of discount) is recognized on the accrual basis. Realized gains and losses on security transactions are determined on the identified cost basis.
(f) Deferred organization expenses and prepaid 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 the Quality Bond and US Government Securities Portfolios are declared daily and paid monthly. Dividends from net investment income of the 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 Plan 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 the Fundamental Value Portfolio, 0.50% for the Quality Bond and US Government Securities Portfolios and 0.75% for the 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 March 31, 1995 MLAM had voluntarily waived management fees and reimbursed each Portfolio for additional expenses as follows:
US
GOVERNMENT GLOBAL
FUNDAMENTAL QUALITY BOND SECURITIES OPPORTUNITY
VALUE PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- ------------ ---------- -----------
Management fee.............. $5,129 $ 2,068 $ 4,544 $12,537
Additional expenses......... $1,793 $15,418 $25,770 $ 8,998
|
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MARCH 31, 1995
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 DISTRIBUTION FEES
---------------------------- ------------------
CLASS B CLASS C CLASS D CLASS B CLASS C
-------- -------- -------- -------- --------
Fundamental Value Portfolio.. 0.25% 0.25% 0.25% 0.75% 0.75%
Quality Bond Portfolio....... 0.25% 0.25% 0.25% 0.50% 0.55%
US Government Securities
Portfolio................... 0.25% 0.25% 0.25% 0.50% 0.55%
Global Opportunity Portfolio. 0.25% 0.25% 0.25% 0.75% 0.75%
|
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.
For the period February 1, 1995 to March 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..................... $0 $584 $0 $12,036
Quality Bond Portfolio.......................... 0 98 0 1,288
US Government Securities Portfolio.............. 0 121 0 1,587
Global Opportunity Portfolio.................... 0 166 0 3,340
--- ---- --- -------
$0 $969 $0 $18,251
=== ==== === =======
|
For the period February 1, 1995 to March 31, 1995, 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....................... $148 $62
Quality Bond Portfolio............................ 41 --
US Government Securities Portfolio................ 167 --
Global Opportunity Portfolio...................... 637 8
|
In addition, MLPF&S received $1,270 and $2,715 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 March 31, 1995.
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MARCH 31, 1995
Merrill Lynch Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co., is the Program's transfer agent.
During the period February 1, 1995 to March 31, 1995, the Program paid Merrill Lynch Security Pricing Service, an affiliate of MLPF&S, $501 for security price quotations to compute the net asset value of the Program.
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, FDS and/or ML & Co.
3. INVESTMENTS:
Purchases and sales of investments, excluding short-term securities, for the period February 1, 1995 to March 31, 1995, were as follows:
FUNDAMENTAL QUALITY US GOVERNMENT GLOBAL
VALUE BOND SECURITIES OPPORTUNITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- --------- ------------- -----------
Purchases....................... $4,850,142 -- $5,871,193 $10,706,707
Sales........................... -- -- $ 17,958 $ 281,437
|
Net realized and unrealized gains (losses) as of March 31, 1995 were as follows:
REALIZED UNREALIZED
FUNDAMENTAL VALUE PORTFOLIO GAINS GAINS
- --------------------------- -------------- ----------
Long-term investments................................. -- $248,820
Short-term investments................................ $ 37 --
----- --------
Total............................................... $ 37 $248,820
===== ========
REALIZED UNREALIZED
QUALITY BOND PORTFOLIO GAINS (LOSSES) LOSSES
- ---------------------- -------------- ----------
Short-term investments................................ -- $ (520)
----- --------
Total............................................... -- $ (520)
===== ========
REALIZED UNREALIZED
US GOVERNMENT SECURITIES PORTFOLIO LOSSES GAINS
- ---------------------------------- -------------- ----------
Long-term investments................................. $ -- $ 89,330
Short-term investments................................ (487) --
----- --------
Total............................................... $(487) $ 89,330
===== ========
|
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MARCH 31, 1995
REALIZED UNREALIZED
GLOBAL OPPORTUNITY PORTFOLIO GAINS (LOSSES) GAINS(LOSSES)
- ---------------------------- -------------- -------------
Long-term investments................................ $ 8,029 $153,468
Short-term investments............................... 186 (33)
Foreign currency transactions........................ 20,281 (47)
Forward foreign exchange contracts................... (21,472) (94,597)
------- --------
Total.............................................. $ 7,024 $ 58,791
======= ========
|
As of March 31, 1995, net unrealized appreciation/depreciation for Federal income tax purposes was as follows:
FUNDAMENTAL QUALITY US GOVERNMENT GLOBAL
VALUE BOND SECURITIES OPPORTUNITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- --------- ------------- -----------
Gross unrealized appreciation.. $293,337 -- $89,330 $ 359,915
Gross unrealized depreciation.. (44,517) $(520) -- (206,480)
-------- ----- ------- ---------
Net unrealized appreciation
(depreciation)................ $248,820 $(520) $89,330 $ 153,435
======== ===== ======= =========
|
The aggregate cost of investments at March 31, 1995 for Federal income tax purposes was $9,877,849 for the Fundamental Value Portfolio, $13,414,002 for the Global Opportunity Portfolio, $3,154,555 for the Quality Bond Portfolio, and $5,849,926 for the 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 March 31, 1995, was $9,150,187 for the Fundamental Value Portfolio, $13,135,763 for the Global Opportunity Portfolio, $3,223,192 for the Quality Bond Portfolio, and $6,017,885 for the 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 MARCH 31, 1995 SHARES AMOUNT
--------------------------------------------------------------------------
Shares sold........................................... 202,832 $2,028,823
------- ----------
Net increase.......................................... 202,832 $2,028,823
======= ==========
|
+ Prior to February 1, 1995 (commencement of operations), the Portfolio issued 625 shares to MLAM for $6,250.
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MARCH 31, 1995
---------------------------------------------------------------------------
FUNDAMENTAL VALUE PORTFOLIO
---------------------------------------------------------------------------
CLASS B SHARES FOR THE PERIOD DOLLAR
FEBRUARY 1, 1995+ TO MARCH 31, 1995 SHARES AMOUNT
---------------------------------------------------------------------------
Shares sold.......................................... 536,040 $5,450,487
Shares redeemed...................................... (12,730) (129,766)
------- ----------
Net increase......................................... 523,310 $5,320,721
======= ==========
|
---------------------------------------------------------------------------
FUNDAMENTAL VALUE PORTFOLIO
---------------------------------------------------------------------------
CLASS C SHARES FOR THE PERIOD DOLLAR
FEBRUARY 1, 1995+ TO MARCH 31, 1995 SHARES AMOUNT
---------------------------------------------------------------------------
Shares sold.......................................... 114,247 $1,163,081
Shares redeemed...................................... (1,878) (19,133)
------- ----------
Net increase......................................... 112,369 $1,143,948
======= ==========
|
---------------------------------------------------------------------------
FUNDAMENTAL VALUE PORTFOLIO
---------------------------------------------------------------------------
CLASS D SHARES FOR THE PERIOD DOLLAR
FEBRUARY 1, 1995+ TO MARCH 31, 1995 SHARES AMOUNT
---------------------------------------------------------------------------
Shares sold............................................. 65,494 $664,925
Shares redeemed......................................... (804) (8,230)
------ --------
Net increase............................................ 64,690 $656,695
====== ========
|
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MARCH 31, 1995
--------------------------------------------------------------------------
QUALITY BOND PORTFOLIO
--------------------------------------------------------------------------
CLASS A SHARES FOR THE PERIOD DOLLAR
FEBRUARY 1, 1995+ TO MARCH 31, 1995 SHARES AMOUNT
--------------------------------------------------------------------------
Shares sold......................................... 200,189 $2,001,884
Shares issued to shareholders in reinvestment of
dividends.......................................... 1,558 15,582
------- ----------
Total issued........................................ 201,747 2,017,466
Shares redeemed..................................... (2) (22)
------- ----------
Net increase........................................ 201,745 $2,017,444
======= ==========
|
--------------------------------------------------------------------------
QUALITY BOND PORTFOLIO
--------------------------------------------------------------------------
CLASS B SHARES FOR THE PERIOD DOLLAR
FEBRUARY 1, 1995+ TO MARCH 31, 1995 SHARES AMOUNT
--------------------------------------------------------------------------
Shares sold............................................ 92,446 $923,662
Shares issued to shareholders in reinvestment of divi-
dends................................................. 178 1,784
------ --------
Total issued........................................... 92,624 925,446
Shares redeemed........................................ (2,277) (22,750)
------ --------
Net increase........................................... 90,347 $902,696
====== ========
|
--------------------------------------------------------------------------
QUALITY BOND PORTFOLIO
--------------------------------------------------------------------------
CLASS C SHARES FOR THE PERIOD DOLLAR
FEBRUARY 1, 1995+ TO MARCH 31, 1995 SHARES AMOUNT
--------------------------------------------------------------------------
Shares sold............................................ 25,060 $250,382
Shares issued to shareholders in reinvestment of divi-
dends................................................. 30 299
------ --------
Total issued........................................... 25,090 250,681
Shares redeemed........................................ (1,944) (19,426)
------ --------
Net increase........................................... 23,146 $231,255
====== ========
|
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MARCH 31, 1995
---------------------------------------------------------------------------
QUALITY BOND PORTFOLIO
---------------------------------------------------------------------------
CLASS D SHARES FOR THE PERIOD DOLLAR
FEBRUARY 1, 1995+ TO MARCH 31, 1995 SHARES AMOUNT
---------------------------------------------------------------------------
Shares sold.............................................. 7,735 $77,287
Shares issued to shareholders in reinvestment of
dividends............................................... 26 263
----- -------
Total issued............................................. 7,761 77,550
Shares redeemed.......................................... (576) (5,753)
----- -------
Net increase............................................. 7,185 $71,797
===== =======
|
----------------------------------------------------------------------------
US GOVERNMENT SECURITIES PORTFOLIO
----------------------------------------------------------------------------
CLASS A SHARES FOR THE PERIOD DOLLAR
FEBRUARY 1, 1995+ TO MARCH 31, 1995 SHARES AMOUNT
----------------------------------------------------------------------------
Shares sold.......................................... 500,029 $5,000,287
Shares issued to shareholders in reinvestment of div-
idends.............................................. 5,826 58,928
------- ----------
Total issued......................................... 505,855 5,059,215
Shares redeemed...................................... (2) (20)
------- ----------
Net increase......................................... 505,853 $5,059,195
======= ==========
|
---------------------------------------------------------------------------
US GOVERNMENT SECURITIES PORTFOLIO
---------------------------------------------------------------------------
CLASS B SHARES FOR THE PERIOD DOLLAR
FEBRUARY 1, 1995+ TO MARCH 31, 1995 SHARES AMOUNT
---------------------------------------------------------------------------
Shares sold............................................. 77,691 $788,228
Shares issued to shareholders in reinvestment of
dividends.............................................. 196 1,987
------ --------
Total issued............................................ 77,887 790,215
Shares redeemed......................................... (4,403) (44,578)
------ --------
Net increase............................................ 73,484 $745,637
====== ========
|
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MARCH 31, 1995
--------------------------------------------------------------------------
US GOVERNMENT SECURITIES PORTFOLIO
--------------------------------------------------------------------------
CLASS C SHARES FOR THE PERIOD DOLLAR
FEBRUARY 1, 1995+ TO MARCH 31, 1995 SHARES AMOUNT
--------------------------------------------------------------------------
Shares sold............................................ 18,515 $187,349
Shares issued to shareholders in reinvestment of divi-
dends................................................. 42 430
------ --------
Total issued........................................... 18,557 187,779
Shares redeemed........................................ (1,199) (12,048)
------ --------
Net increase........................................... 17,358 $175,731
====== ========
|
--------------------------------------------------------------------------
US GOVERNMENT SECURITIES PORTFOLIO
--------------------------------------------------------------------------
CLASS D SHARES FOR THE PERIOD DOLLAR
FEBRUARY 1, 1995+ TO MARCH 31, 1995 SHARES AMOUNT
--------------------------------------------------------------------------
Shares sold............................................. 7,415 $75,219
Shares issued to shareholders in reinvestment of
dividends.............................................. 28 287
------ -------
Total issued............................................ 7,443 75,506
Shares redeemed......................................... (3,773) (38,184)
------ -------
Net increase............................................ 3,670 $37,322
====== =======
|
--------------------------------------------------------------------------
GLOBAL OPPORTUNITY PORTFOLIO
--------------------------------------------------------------------------
CLASS A SHARES FOR THE PERIOD DOLLAR
FEBRUARY 1, 1995+ TO MARCH 31, 1995 SHARES AMOUNT
--------------------------------------------------------------------------
Shares sold......................................... 803,051 $8,030,386
Shares redeemed..................................... (10) (99)
------- ----------
Net increase........................................ 803,041 $8,030,287
======= ==========
|
+ Prior to February 1, 1995 (commencement of operations), the Portfolio issued 625 shares to MLAM for $6,250.
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONCLUDED)
MARCH 31, 1995
---------------------------------------------------------------------------
GLOBAL OPPORTUNITY PORTFOLIO
---------------------------------------------------------------------------
CLASS B SHARES FOR THE PERIOD DOLLAR
FEBRUARY 1, 1995+ TO MARCH 31, 1995 SHARES AMOUNT
---------------------------------------------------------------------------
Shares sold.......................................... 422,739 $4,208,800
Automatic conversion of shares....................... (1,227) (12,185)
Shares redeemed...................................... (11,955) (118,688)
------- ----------
Net increase......................................... 409,557 $4,077,927
======= ==========
|
---------------------------------------------------------------------------
GLOBAL OPPORTUNITY PORTFOLIO
---------------------------------------------------------------------------
CLASS C SHARES FOR THE PERIOD DOLLAR
FEBRUARY 1, 1995+ TO MARCH 31, 1995 SHARES AMOUNT
---------------------------------------------------------------------------
Shares sold............................................. 71,285 $709,631
Shares redeemed......................................... (730) (7,312)
------ --------
Net increase............................................ 70,555 $702,319
====== ========
|
---------------------------------------------------------------------------
GLOBAL OPPORTUNITY PORTFOLIO
---------------------------------------------------------------------------
CLASS D SHARES FOR THE PERIOD DOLLAR
FEBRUARY 1, 1995+ TO MARCH 31, 1995 SHARES AMOUNT
---------------------------------------------------------------------------
Shares sold............................................. 32,292 $321,679
Automatic conversion of shares.......................... 1,227 12,185
------ --------
Total issued............................................ 33,519 333,864
Shares redeemed......................................... (869) (8,634)
------ --------
Net increase............................................ 32,650 $325,230
====== ========
|
5. COMMITMENTS:
At March 31, 1995, the Global Opportunity Portfolio entered into forward foreign exchange contracts under which it had agreed to purchase and sell various foreign currencies with values of approximately $108,000 and $89,000.
APPENDIX A
DESCRIPTION OF THE SELF-DIRECTED PLANS
This Appendix describes in summary form the various types of self-directed retirement plans for which Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") acts as custodian (the "Self-Directed Plans"). This description does not purport to be complete, and it should be read in conjunction with the materials concerning the Self-Directed Plans, including copies of the Plans and the forms necessary to establish a plan, which are available from Merrill Lynch. Investors should read such materials carefully before establishing a Self-Directed Plan and should consult with their attorney or tax adviser to determine if any of the Self-Directed Plans are suited to their needs and circumstances. The laws applicable to the Self-Directed Plans, including the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and the Internal Revenue Code of 1986, as amended (the "Code") are complex and include a variety of transitional rules which may be applicable to some investors. These laws should be reviewed by investors' attorneys to determine their applicability. Investors are further advised that the discussion of taxation contained in this Appendix relates solely to federal tax laws but generally does not address the numerous transitional rules and that the tax treatment of the Self-Directed Plans under applicable state law may vary.
Shares of the Merrill Lynch Retirement Asset Builder Program, Inc. are available for purchase solely by participants in an IRA (individual retirement account), an IRRA (individual retirement rollover account) or SEP (simplified employee pension plan) and, accordingly, the description set forth below will describe only such arrangements.
ESTABLISHMENT OF A SELF-DIRECTED PLAN ACCOUNT
Self-Directed Plan accounts may be established by qualified individuals and businesses through Merrill Lynch.
Generally, Self-Directed Plans afford participants the opportunity to take a tax deduction, up to the maximum amount permitted under the Code for the particular Self-Directed Plan, for amounts contributed to the Plan. Each Self- Directed Plan is "self-directed"; that is, each participant is responsible for making investment decisions concerning the funds contributed to his Self- Directed Plan.
Merrill Lynch charges an annual custodial fee for each account established pursuant to the Self-Directed Plans. These fees, which are contained in the Self-Directed Plan documents, vary according to the type of account. Brokerage fees will be assessed separately for each transaction to which they apply.
PERMISSIBLE SELF-DIRECTED PLAN INVESTMENTS
The type of investments that may be made depends on the type of Self-Directed Plan established.
Participants and employers that maintain IRAs, IRRAs or SEPs may invest in securities through Merrill Lynch or its affiliates, including stocks traded "over-the-counter" or on a recognized exchange, government or corporate debt obligations, certain mutual funds, certain limited partnership interests in real estate, and bank money instruments. Participants and employers may also invest in annuity contracts issued by a life insurance company (including Merrill Lynch Life Insurance Company and Merrill Lynch Life Insurance Company of New York). Those participants and employers desiring a diversified portfolio but not wishing to actively manage the portfolio may elect to invest all or a portion of their account in certain mutual funds
advised by Merrill Lynch Asset Management, L.P. (the "Investment Adviser") or its affiliate. Participants and employers may vary their investment portfolio as often as they wish.
Cash balances arise in a Self-Directed Plan account from contributions to the Plan, the sale of securities held in the account and the receipt of dividends, interest and principal repayments on securities held in the account. Cash balances for which no other investment directions are given will, in accordance with the option previously selected by the participant or employer, be invested in full shares of the Portfolios or in certain money market funds advised by the Investment Adviser or its affiliate, or maintained uninvested in the Self- Directed Plan account. If such amounts are not invested, no return will be earned. All cash balances will be invested or maintained in accordance with the option selected by the participant or employer, pending instructions as to further investment.
There can be no assurance, that the yield on an investment in the Portfolios or a money market fund will be or will remain greater than that available on any interest-bearing account. In addition, a money market fund is not a bank, and shares of a money market fund are not equivalent to a bank account. As with any investment in securities, the value of an investment in the Portfolios will fluctuate. Amounts deposited in an interest-bearing bank account will be insured as to principal in an amount of up to $100,000 per account by the Federal Deposit Insurance Corporation. Cash balances maintained in a Self- Directed Plan account will be insured, up to $100,000, by the Securities Investor Protection Corporation.
CONTRIBUTIONS AND DISTRIBUTIONS
The amount which may be contributed to a Self-Directed Plan in any one year is subject to certain limitations under the Code; however, assets already in a Self-Directed Plan account may be invested without regard to such limitations on contributions. With the exception of pretax contributions made by participants in their IRAs or employer contributions to a SEP, a Self-Directed Plan participant may deduct from his annual gross income, up to the maximum permitted under the Code, amounts contributed to his Self-Directed Plan. These amounts, plus any additional income earned on such contributions, will ordinarily not be taxed until distributed to the participant.
Generally, under the Code, distributions may be made at any time but, as discussed below, distributions made prior to the date on which the participant reaches age 59 1/2 may be subject to a penalty and may be subject to mandatory federal income tax withholding at a 20 percent rate (as described below). Distributions will be taxed as ordinary income at the rate applicable to the participant in the year in which distributed.
Excess Contributions. Under Section 4973 of the Code, contributions to an IRA, IRRA or SEP in excess of those allowed by law are subject to a six percent excise tax if not withdrawn, together with additional income attributable to such excess contributions, prior to the date the participant files his income tax return for the year in which the excess contribution was made. If an excess amount is contributed in one year and is not eliminated in later years, the excess amount will be subject to a cumulative six percent excise tax each year until it is eliminated. Elimination of the excess may be accomplished either by reducing the contribution (and deduction) for a succeeding year, or by withdrawal of the excess amount plus the income attributable to it. Such income will be considered a premature distribution subject to the ten percent penalty tax on premature distributions under Section 72(f) of the Code discussed below, and will additionally be taxable as ordinary income at the applicable rate for the year in which it is distributed.
Timing of Retirement Benefits. Generally, a participant, upon reaching age 59 1/2, may make such distributions from his Self-Directed Plan account as he chooses without tax penalties. Generally, the Code
requires that amounts in all Self-Directed Plans must commence being distributed to a participant on or before April 1 of the calendar year following the calendar year in which he reaches age 70 1/2, even if the employee has not retired.
Such distributions may be made in a lump sum or in installments over the life of the participant, or the joint lives of the participant and a designated beneficiary, or over a period not to exceed the life expectancy (determined, generally, by IRS life expectancy tables) of the participant or the joint life expectancy of the participant and designated beneficiary. If the employee dies before his entire interest has been distributed, the remaining portion of his interest must be distributed at least as rapidly as the method of distribution in effect prior to his death. Special rules apply under the Code to spousal beneficiaries.
If the minimum payout required from a Self-Directed Plan for a particular year is not made, a 50% excise tax will be imposed on the amount representing the difference between the minimum payout required from the Self-Directed Plan and the amount actually distributed under Section 4974 of the Code.
Treatment of Lump Sum Distributions and Annuities. The recipient of a "lump sum distribution" (generally a distribution or payment within one taxable year to the recipient of the balance to the credit of the employee on account of the employee's death, attainment of age 59 1/2, disability or separation from service (except in the case of a self-employed individual)) from a qualified retirement plan may compute his tax liability using the five-year income averaging tax computation, subject to certain requirements. However, no lump sum income averaging methods apply to distributions from IRAs, IRRAs or SEPs.
Excise Tax on Large Distributions. To limit the total tax-deferred benefits any individual can receive annually, Section 4980A of the Code imposes a 15 percent excise tax on certain "excess distributions" from qualified retirement plans. All distributions from "qualified retirement plans" including IRAs, IRRAs or SEPs made within one year are aggregated for this purpose. Total benefits paid in a year exceeding the greater of $112,500, indexed for inflation ($148,500 for 1994), or $150,000 (unindexed) are subject to the tax to the extent of the excess. For lump sum distributions eligible to be taxed under the five-year averaging provisions, the penalty will be applied separately with respect to the lump sum distribution and other retirement distributions. The penalty will be applied on the portion of the lump sum distribution which exceeds five times the otherwise applicable limit for the year.
Unless an election is made by a spouse, distributions made to beneficiaries after the death of an individual are disregarded for purposes of applying this tax; instead, an additional estate tax may be payable. The penalty tax on excess distributions is reduced by an excise tax on early withdrawals.
Benefits accrued before August 1, 1986 may have been grandfathered and may not be subject to the excise tax.
Premature Distributions. 1. Excise Tax: Distributions from an IRA, IRRA or SEP prior to the time the participant reaches age 59 1/2 generally are subject to penalty unless the participant has died or has become disabled (within the meaning of Code Section 72(m)(7)). The penalty for early distributions is an excise tax equivalent to ten percent of the amount so distributed, in addition to the applicable ordinary income tax payable on such amount for the year in which it is distributed. The tax will be waived for any distribution that is part of a scheduled series of substantially level payments under an annuity for the life or life expectancy of the taxpayer or the joint lives of the taxpayer and his designated beneficiary. Distributions can also be made, without penalty, to cover deductible medical expenses, for certain payments in a divorce settlement, or
to an employee who is age 55 or older, has separated from service, and has satisfied the requirements of the employer's plan for early retirement (if the plan permits such payments). In certain cases, the penalty will not be waived if the distribution is from an IRA or retirement annuity. The penalty is also not waived for distributions from a qualified retirement plan, if the employee is a more than five percent owner or has been a more than five percent owner at any time during the five plan years preceding the plan year ending in the tax year in which the amount is received. A five percent owner is a person who, in the case of a corporate employer, actually or constructively owns more than five percent of the outstanding stock of the employer or stock possessing more than five percent of the total combined voting power of all stock of the employer, or who, in the case of a non-corporate employer, owns more than five percent of the capital or profits interest in the employer. A rollover will avoid imposition of the excise tax. However, for distributions prior to 1993, the Code restricts the rollover of partial distributions to distributions received on account of an employee's separation from service, death or disability.
2. Mandatory Income Tax Withholding. Generally, any portion of an "eligible
rollover distribution" made from a qualified retirement plan after December 31,
1992 qualifies for tax-free rollover into an eligible retirement plan under
Section 402(c) of the Code. Under Section 402(c), as amended, all distributions
from a qualified retirement plan (including in-service distributions) are
eligible rollover distributions, except for certain periodic payments, required
amounts distributed to a participant who is over age 70 1/2 as described above,
and amounts otherwise not includible in gross income. Rollovers may be made by
the participant in one of two ways: first, by direct transfers from the
qualified retirement plan to an IRA (including an individual retirement annuity
other than endowment contract), a qualified defined contribution plan or an
annuity under Section 403(a) of the Code (a "direct rollover") or, in the case
of the RSA plan to another 403(b) plan, a tax sheltered annuity; or second, by
rolling over an eligible rollover distribution within 60 days of receipt to any
of the arrangements described above. In the event a direct rollover is not
chosen by the participant, a mandatory 20 percent of the distribution is
withheld to satisfy any federal tax liability that may be assessed. The
mandatory 20 percent withholding tax is not assessed against any distributions
that may not be rolled over (including, but not limited to, distributions to
beneficiaries other than a surviving spouse, or a present or former spouse
under a qualified domestic relations order).
Participants should consult with their attorneys or tax advisers in order to determine the application of the new rollover and mandatory withholding requirements to their own circumstances.
The foregoing rules are of general applicability to the Self-Directed Plans. The following section discusses specific considerations applicable to the different types of Self-Directed Plans.
TYPES OF SELF-DIRECTED PLANS
Individual Retirement Accounts. As a result of changes made by the Tax Reform Act of 1986, the allowable deductions for contributions to IRAs are restricted for certain taxpayers who are (or their spouses are) active participants in employer-sponsored retirement plans and whose adjusted gross income exceeds certain levels. An individual will be considered an active participant in a defined contribution plan if any employer contribution or forfeiture is added to his account for the year. In the case of a defined benefit plan, an individual will be considered an active participant if he is not excluded under the eligibility rules for the year. The determination of whether an individual is an active participant is made without regard to whether the individual's rights under a plan are vested. If an unmarried taxpayer, or either spouse in the case of married taxpayers, is an "active participant" in an employer- sponsored retirement plan, deductible contributions are permitted subject to a pro rata phase-out rule where adjusted gross income (before the IRA
deduction) is over $40,000 on a joint return or $25,000 for an unmarried individual. The allowable deduction is completely eliminated for such taxpayers when adjusted gross income (before the IRA deduction) reaches $50,000 on a joint return or $35,000 for an unmarried person. For this purpose, an employer- sponsored retirement plan means a pension, profit-sharing or stock bonus plan qualified under Code section 401(a) (including a Keogh plan or 401(k) plan), an annuity plan qualified under Section 403(a), a SEP, a tax-sheltered Code section 403(b) annuity and retirement plans covering federal, state or local government employees. A minimum deductible contribution of $200 is provided for any taxpayer whose adjusted gross income is not above the phase-out range even if the phase-out rules would provide for a lower deduction.
Subject to the above limitations, any individual with compensation may establish an IRA. Generally, the maximum yearly tax deduction that may be taken for an IRA contribution is the lesser of $2,000 or 100% of the individual's compensation. If a husband and wife are both employed, they may take a deduction of up to $4,000 on a joint return. If only one spouse is employed, a separate IRA, called a "spousal IRA", may be established for the benefit of the non-working spouse or a spouse that elects to be treated as having no compensation for the year. The deduction for a spousal IRA may only be taken if a joint return is filed, and the maximum contribution and aggregate deduction for the two IRAs for any year is $2,250. Allocations may be made between the two accounts in any manner so long as no more than $2,000 is contributed to either of the accounts. No deduction for IRA contributions may be made for or after the tax year in which a participant reaches age 70 1/2. In addition, no deduction will be allowed for amounts paid to an "inherited IRA" (i.e., an IRA acquired on account of the death of another individual other than by the surviving spouse of the original owner).
Active participants in employer-sponsored plans who are not eligible to make deductible contributions to IRAs (or whose deductions are limited) may make nondeductible contributions to a separate account. The nondeductible contribution is subject to the same dollar limitations (the lesser of $2,000 or 100% of compensation) as deductible contributions described above. Income in the separate account will accumulate tax-free until distributed; however, only the account earnings will be included in taxable income upon distribution.
The Self-Directed IRA program allows for the establishment of IRRAs, which are "rollover IRAs". Prior to 1993, a rollover IRA could have only been established with a distribution received from a qualified employer-sponsored pension plan that was of an amount equal to at least 50% of the balance to the credit of the employee in the plan; after December 31, 1992, this 50% requirement no longer applies. This distribution would ordinarily be subject to income tax; however, tax may be deferred to the extent that all or part of the rollover amount, less any voluntary contributions made to the employer- sponsored plans, is put into an IRA within 60 days of receiving the distribution. With respect to a distribution of less than the entire balance to the credit of the employee in the plan prior to 1993 (a "partial rollover"), the distribution was eligible for rollover treatment only if the distribution was made on account of the employee's death, separation from service or disability and was not one of a series of periodic payments and the employee elected, in a manner to be prescribed by regulations, to have rollover treatment apply to such distribution. However, as described above, effective for rollovers made after December 31, 1992, the limitations described with respect to partial rollovers have been eliminated, and new mandatory federal income tax withholding requirements have been imposed for any rollover that is not a direct rollover. The amounts in a rollover IRA are taxed only upon distribution, as with other IRAs. However, tax-free rollover treatment will be denied for amounts received from an "inherited IRA".
Simplified Employee Pension Plans. A SEP is essentially a collection of IRA accounts established by employers for their employees, and any employer, whether it is a sole proprietorship, a partnership or a corporation, may set up a SEP. To qualify as a SEP, certain requirements must be met; in particular, the plan must cover all current employees age 21 years or older who have worked for the business in three of the last five calendar years and have received at least $300 in compensation from the employer. Up to $30,000 or 15% of the employee's compensation up to $150,000 (effective for plan years beginning after December 31, 1993), subject to inflation adjustments may be paid by the employer to the employee's SEP. The same percentage of compensation (determined under a written formula) must be contributed on behalf of each employee. Such contributions are deductible by the employer and excluded from the employee's income. The tax-free elective deferral of an employee's income for a taxable year cannot exceed $7,000, as adjusted for inflation (currently, $9,240 in 1994). This cap limits all tax-free elective deferrals by an employee under all cash and deferred arrangements, SEPs and tax sheltered annuities.
Because the SEP is also an IRA, the employee may, if otherwise eligible under the rules applicable to IRAs discussed above, make up to a $2,000 contribution to the SEP or make rollover contributions (see "Individual Retirement Accounts" above). Amounts contributed to a participant's SEP account vest immediately. If the participant should cease to be employed by the business maintaining the SEP, the participant retains full rights to and investment power over the account. In such case, the account should be changed to a regular IRA so that the participant may make additional permissible contributions.
Tax-deductible employer contributions may continue to be made to a SEP participant's account even after he has reached age 70 1/2.
Each of the foregoing Self-Directed Plans is designed to meet differing needs and has varying financial and tax consequences. An investor should thoroughly review all of the materials available from Merrill Lynch concerning the Self- Directed Plans and consult with his attorney or tax adviser in determining whether any of these Plans is suited to his needs and circumstances.
Top-Heavy Plan Requirements. The Code imposes special rules with respect to qualified plans that are considered to be "top-heavy" plans (individual retirement plans are not subject to the Code's rules relating to "top-heavy" plans). A defined contribution plan (for purposes of these rules, a SEP is deemed to be a defined contribution plan) is considered to be "top-heavy" where the account balances of "key employees" exceed 60% of the account balances of all employees. "Key employees" include all employees who, at any time during the plan year or the four preceding plan years (1) are officers having annual compensation of more than $45,000, as adjusted for inflation, (2) are one of the ten employees with annual compensation of more than $30,000 that actually or constructively own the largest interests in the employer, (3) are "five- percent owners", or (4) own more than a one percent interest in the employer and have annual compensation in excess of $150,000. The account balance of an individual that has not received compensation as an employee during the five preceding plan years is not taken into account.
When a plan favoring key employees is determined to be "top-heavy", its continued qualification under the Code depends on its compliance with certain requirements, which (1) limit the amount of a participant's compensation that may be taken into account, (2) provide stringent vesting schedules, (3) provide minimum contributions or benefits for non-key employees, and (4) reduce the aggregate limit on benefits and contributions for certain key employees who participate in both a defined benefit plan and a defined contribution plan.
[THIS PAGE IS INTENTIONALLY LEFT BLANK.]
TABLE OF CONTENTS
PAGE
----
Investment Objectives and Policies......................................... 2
Fundamental Value Portfolio............................................... 2
Quality Bond Portfolio.................................................... 2
U.S. Government Securities Portfolio...................................... 2
Global Opportunity Portfolio.............................................. 3
Other Investment Policies and Practices of the Portfolios................. 4
Management of the Program.................................................. 8
Directors and Officers.................................................... 8
Compensation of Directors................................................. 9
Management and Advisory Arrangements...................................... 10
Purchase of Shares......................................................... 12
Initial Sales Charge Alternatives--
Class A and Class D Shares............................................... 13
Reduced Initial Sales Charges............................................. 14
Distribution Plans ....................................................... 15
Limitations on the Payment of Deferred Sales Charges ..................... 16
Redemption of Shares....................................................... 17
Deferred Sales Charges--Class B Shares.................................... 18
Portfolio Transactions and Brokerage....................................... 18
Portfolio Turnover........................................................ 20
Determination of Net Asset Value........................................... 21
Shareholder Services....................................................... 22
Investment Account........................................................ 22
Automatic Reinvestment of Dividends and Capital Gains Distributions....... 22
Systematic Redemption and Automatic Investment Plans...................... 22
Exchange Privilege........................................................ 23
Dividends, Distributions and Taxes......................................... 35
Dividends and Distributions............................................... 35
Federal Tax............................................................... 35
State Tax................................................................. 37
Performance Data........................................................... 37
General Information........................................................ 40
Description of Shares..................................................... 40
Computation of Offering Price Per Share................................... 41
Independent Auditors...................................................... 42
Custodian................................................................. 42
Transfer Agent............................................................ 42
Legal Counsel............................................................. 42
Reports to Shareholders................................................... 42
Additional Information.................................................... 42
Independent Auditors' Report
Fundamental Value Portfolio............................................... 43
Quality Bond Portfolio.................................................... 45
U.S. Government Securities Portfolio...................................... 47
Global Opportunity Portfolio.............................................. 49
Statement of Assets and Liabilities
Fundamental Value Portfolio............................................... 44
Quality Bond Portfolio.................................................... 46
U.S. Government Securities Portfolio...................................... 48
Global Opportunity Portfolio.............................................. 50
Financial Statements (unaudited)........................................... 51
Appendix A--Description of the Self-Directed Plans......................... 85
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Code # 18472-0595
[LOGO] MERRILL LYNCH
Merrill Lynch
Retirement Asset
Builder Program, Inc.
[ART]
STATEMENT OF
ADDITIONAL
INFORMATION
May 30, 1995
Distributor:
Merrill Lynch
Funds Distributor, Inc.
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
Contained in Part A:
Financial Highlights for each of the Portfolios for the period February 1, 1995 (commencement of operations) to March 31, 1995 (unaudited).
Contained in Part B:
Financial Statements:
Statements of Assets and Liabilities as of January 31, 1995 (audited).
Fundamental Value Portfolio
Quality Bond Portfolio
U.S. Government Securities Portfolio
Global Opportunity Portfolio
Schedules of Investments as of March 31, 1995 (unaudited).
Fundamental Value Portfolio
Quality Bond Portfolio
U.S. Government Securities Portfolio
Global Opportunity Portfolio
Statements of Assets and Liabilities as of March 31, 1995 (unaudited).
Fundamental Value Portfolio
Quality Bond Portfolio
U.S. Government Securities Portfolio
Global Opportunity Portfolio
Statements of Operations for the period ended March 31, 1995 (unaudited).
Fundamental Value Portfolio
Quality Bond Portfolio
U.S. Government Securities Portfolio
Global Opportunity Portfolio
Statements of Changes in Net Assets for the period ended March 31, 1995 (unaudited).
Fundamental Value Portfolio
Quality Bond Portfolio
U.S. Government Securities Portfolio
Global Opportunity Portfolio
Financial Highlights for the period ended March 31, 1995 (unaudited).
Fundamental Value Portfolio
Quality Bond Portfolio
U.S. Government Securities Portfolio
Global Opportunity Portfolio
(b) Exhibits:
EXHIBIT
NUMBER
-------
1(a) --Articles of Incorporation of Registrant.(a)
(b) --Articles of Amendment of Articles of Incorporation of Registrant filed
on November 9, 1994.(a)
(c) --Articles of Amendment of Articles of Incorporation, filed on December
19, 1994.
2 --By-Laws of Registrant.(b)
3 --None.
4(a) --Portions of the Articles of Incorporation and By-Laws of Registrant
defining the rights of holders of shares of common stock of
Registrant.(c)
(b) --Form of specimen certificate for shares of Class A common stock of
Registrant.(a)
(c) --Form of specimen certificate for shares of Class B common stock of
Registrant.(a)
(d) --Form of specimen certificate for shares of Class C common stock of
Registrant.(a)
(e) --Form of specimen certificate for shares of Class D common stock of
Registrant.(a)
5 --Form of Management Agreement between Registrant and Merrill Lynch Asset
Management.(a)
6(a) --Form of Class A Shares Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc. (including Form of Selected Dealers
Agreement).(a)
(b) --Form of Class B Shares Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc. (including Form of Selected Dealers
Agreement).(a)
(c) --Form of Class C Shares Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc. (including Form of Selected Dealers
Agreement).(a)
(d) --Form of Class D Shares Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc. (including Form of Selected Dealers
Agreement).(a)
7 --None.
8 --Form of Custody Agreement between Registrant and The Bank of New
York.(a)
9(a) --Transfer Agency, Dividend Disbursing Agency and Shareholder Servicing
Agency Agreement between Registrant and Financial Data Services, Inc.
(b) --Agreement between Merrill Lynch & Co., Inc. and Registrant relating to
Registrant's use of Merrill Lynch name.(a)
10 --None.
11 --Consent of Deloitte & Touche LLP, independent auditors for Registrant.
12 --None.
13 --Certificate of Merrill Lynch Asset Management.(a)
14 --None.
15(a) --Form of Class B Shares Distribution Plan of Registrant and Class B
Shares Distribution Plan Sub-Agreement.(a)
(b) --Form of Class C Shares Distribution Plan of Registrant and Class C
Shares Distribution Plan Sub-Agreement.(a)
(c) --Form of Class D Shares Distribution Plan of Registrant and Class D
Shares Distribution Plan Sub-Agreement.(a)
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EXHIBIT
NUMBER
-------
16 --Schedule for computation of each performance quotation provided in the
Registration Statement in response to Item 22.
17(a) --Financial Data Schedules for Fundamental Value Portfolio.
(b) --Financial Data Schedules for Quality Bond Portfolio.
(c) --Financial Data Schedules for U.S. Government Securities Portfolio.
(d) --Financial Data Schedules for Global Opportunity Portfolio.
|
(a) Filed on December 16, 1994, as an Exhibit to Pre-Effective Amendment No. 1 to Registrant's Registration Statement on Form N-1A (File No. 33-53887) under the Securities Act of 1933.
(b) Filed on May 27, 1994, as an Exhibit to the Registrants' Registration Statement on Form N-1A (File No. 33-53887) under the Securities Act of 1933.
(c) Reference is made to Article IV, Article V (Sections 2, 3, 4, 5 and 6), Article VI, Article VII and Article IX, of the Registrant's Articles of Incorporation, as amended, filed as Exhibits 1(a), 1(b) and 1(c) to the Registration Statement, and to Article II, Article III (Sections 1, 3, 5, 6 and 17), Article VI, Article VII, Article XII, Article XIII and Article XIV of the Registrant's By-Laws, filed as Exhibit 2 to the Registration Statement.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Registrant is not controlled by or under common control with any other person.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
NUMBER OF
RECORD
HOLDERS AT
TITLE OF CLASS APRIL 30, 1995
-------------- --------------
Class A Shares of Common Stock, par value $0.10 per share:
Fundamental Value Portfolio.................................... 3
Quality Bond Portfolio......................................... 3
U.S. Government Securities Portfolio........................... 3
Global Opportunity Portfolio................................... 3
Class B Shares of Common Stock, par value $0.10 per share:
Fundamental Value Portfolio.................................... 2
Quality Bond Portfolio......................................... 2
U.S. Government Securities Portfolio........................... 2
Global Opportunity Portfolio................................... 2
Class C Shares of Common Stock, par value $0.10 per share:
Fundamental Value Portfolio.................................... 2
Quality Bond Portfolio......................................... 2
U.S. Government Securities Portfolio........................... 2
Global Opportunity Portfolio................................... 2
Class D Shares of Common Stock, par value $0.10 per share:
Fundamental Value Portfolio.................................... 2
Quality Bond Portfolio......................................... 2
U.S. Government Securities Portfolio........................... 2
Global Opportunity Portfolio................................... 2
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ITEM 27. INDEMNIFICATION.
Reference is made to Article V of Registrant's Articles of Incorporation, Article VI of Registrant's By-Laws, Section 2-418 of the Maryland General Corporation Law and Section 9 of the Class A, Class B, Class C and Class D Distribution Agreements.
Insofar as the conditional advancing of indemnification moneys for actions based on the Investment Company Act of 1940 may be concerned, Article VI of the Registrant's By-Laws provides that the person seeking indemnification shall provide to the Registrant a written affirmation of his good faith belief that the standard of conduct necessary for indemnification by the Registrant has been met and a written undertaking to repay any such advance if it should ultimately be determined that the standard of conduct has not been met, and provided further that at least one of the following additional conditions is met: (a) the person seeking indemnification shall provide a security in form and amount acceptable to the Registrant for his undertaking; (b) the Registrant is insured against losses arising by reason of the advance; and (c) a majority of a quorum of the Registrant's disinterested non-party Directors, or an independent legal counsel in a written opinion, shall determine, based upon a review of readily available facts, that there is reason to believe that the person seeking indemnification will ultimately be found to be entitled to indemnification.
In Section 9 of the Class A, Class B, Class C and Class D Distribution Agreements relating to the securities being offered hereby, the Registrant agrees to indemnify the Distributor and each person, if any, who controls the Distributor within the meaning of the Securities Act of 1933 (the "Act"), against certain types of civil liabilities arising in connection with the Registration Statement or Prospectus and Statement of Additional Information.
Insofar as indemnification for liabilities arising under the Act 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 "Investment Adviser") 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, Inc., Merrill
Lynch Global Resources Trust, Merrill Lynch Global SmallCap Fund, Inc., Merrill
Lynch Global Utility Fund, Inc., Merrill Lynch Growth Fund for Investment and
Retirement, Merrill Lynch Healthcare Fund, Inc., Merrill Lynch 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 the Investment Adviser,
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 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., MuniAssets Fund, Inc., MuniEnhanced Fund, Inc., MuniInsured Fund,
Inc., MuniVest Fund, Inc., MuniVest Fund II, Inc., MuniVest California Insured
Fund, Inc., MuniVest Florida Fund, MuniVest Michigan Insured Fund, Inc.,
MuniVest New Jersey Fund, Inc., MuniVest New York Insured Fund, Inc., MuniVest
Pennsylvania Insured Fund, MuniYield Arizona Fund, Inc., MuniYield 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 MuniNewYork
Holdings, Inc. and Worldwide DollarVest Fund, Inc.
The address of each of these investment companies is P.O. Box 9011, Princeton, New Jersey 08543-9011, except that the address of Merrill Lynch Funds for Institutions Series and Merrill Lynch Institutional Intermediate Fund is One Financial Center, 15th Floor, Boston, Massachusetts 02111-2646. The address of the Investment Adviser, FAM, Princeton Services, Inc. ("Princeton Services"), Merrill Lynch Funds Distributor, Inc. ("MLFD") and Princeton Administrators, L.P. is also P.O. Box 9011, Princeton, New Jersey 08543-9011. The address of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and Merrill Lynch & Co., Inc. ("ML & Co.") is World Financial Center, North Tower, 250 Vesey Street, New York, New York 10281. The address of Merrill Lynch Financial Data Services, Inc. ("FDS") is 4800 Deer Lake Drive East, Jacksonville, Florida 32246-6484.
Set forth below is a list of each executive officer and partner of the Investment Adviser indicating each business, profession, vocation or employment of a substantial nature in which each such person or entity has been engaged since February 1, 1993, for his or its 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 substantially all of the investment companies described in the first paragraph of Item 28, and Messrs. Geiger, Durnin, Giordano, Harvey, Kirstein, Monagle and Ms. Griffin are directors, trustees or officers of one or more of such companies.
POSITION(S) WITH THE OTHER SUBSTANTIAL BUSINESS, PROFESSION,
NAME INVESTMENT ADVISER VOCATION OR EMPLOYMENT
---- --------------------- ---------------------------------------
ML & Co................. Limited Partner Financial Services Holding Company
Princeton Services...... General Partner General Partner of FAM
Arthur Zeikel........... President President of FAM; President and
Director of Princeton Services;
Director of MLFD; Executive Vice
President of ML & Co.; Executive Vice
President of Merrill Lynch
Terry K. Glenn.......... Executive Vice Executive Vice President of FAM;
President Executive Vice President and Director
of Princeton Services; President and
Director of MLFD; Director of FDS;
President of Princeton
Administrators, L.P.
Bernard J. Durnin....... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
Vincent R. Giordano..... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
Elizabeth Griffin....... Senior Vice President Senior Vice President of FAM
Norman R. Harvey........ Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
N. John Hewitt.......... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
Philip L. Kirstein...... Senior Vice Senior Vice President, General Counsel
President, General and Secretary of FAM; Senior Vice
Counsel and President, General Counsel, Director
Secretary and Secretary of Princeton Services;
Director of MLFD
Ronald M. Kloss......... Senior Vice President Senior Vice President and Controller
and Controller of FAM; Senior Vice President and
Controller of Princeton Services
Stephen M.M. Miller..... Senior Vice President Executive Vice President of Princeton
Administrators, L.P.
Joseph T. Monagle, Jr... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
Gerald M. Richard....... Senior Vice President Senior Vice President and Treasurer of
and Treasurer FAM; 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
|
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. and Merrill Lynch Senior Floating Rate Fund, Inc.
(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. Crook, Aldrich, Breen, Graczyk, Fatseas, and Wasel is One Financial Center, Boston, Massachusetts 02111-2646.
(2) (3)
(1) POSITION(S) AND OFFICE(S) POSITION(S) AND OFFICE(S)
NAME WITH MLFD WITH REGISTRANT
------ ------------------------- -------------------------
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
William M. Breen............ Vice President None
Sharon Creveling............ Vice President and None
Assistant Treasurer
Mark A. DeSario............. Vice President None
James T. Fatseas............ Vice President None
Stanley Graczyk............. Vice President None
Michelle T. Lau............. Vice President None
Debra W. Landsman-Yaros..... Vice President None
Gerald M. Richard........... Vice President and Treasurer
Treasurer
Salvatore Venezia........... Vice President None
William Wasel............... Vice President None
Robert Harris............... Secretary None
|
(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 are maintained at the offices of the Registrant, 800 Scudders Mill Road, Plainsboro, New Jersey 08536, and its transfer agent, 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 "Management of the Fund--Management and Advisory Arrangements" in the Prospectus constituting Part A of the Registration Statement and under "Management of the Fund--Management and Advisory Arrangements" in the Statement of Additional Information constituting Part B of the Registration Statement, the Registrant is not a party to any management-related service contract.
ITEM 32. UNDERTAKINGS.
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to furnish each person to whom a prospectus is delivered with a copy of the Registrant's latest annual report to shareholders, upon request and without charge.
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 ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF PLAINSBORO, AND THE STATE OF NEW JERSEY, ON THE 26TH DAY OF MAY, 1995.
Merrill Lynch Retirement Asset Builder Program, Inc.
(Registrant)
/s/ Terry K. Glenn
By __________________________________
(Terry K. Glenn, Executive Vice
President)
|
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATE(S) INDICATED.
SIGNATURES TITLE DATE
---------- ----- ----
Arthur Zeikel*
- -------------------------------------------
(Arthur Zeikel) President (Principal
Executive Officer) and
Director
Joe Grills*
- -------------------------------------------
(Joe Grills) Director
Walter Mintz*
- -------------------------------------------
(Walter Mintz) Director
Melvin R. Seiden*
- -------------------------------------------
(Melvin R. Seiden) Director
Harry Woolf*
- -------------------------------------------
(Harry Woolf) Director
Stephen B. Swensrud*
- -------------------------------------------
(Stephen B. Swensrud) Director
/s/ Gerald M. Richard May 26, 1995
- -------------------------------------------
(Gerald M. Richard) Treasurer (Principal
Financial and
Accounting Officer)
May 26, 1995
/s/ Terry K. Glenn
*By ____________________________
(Terry K. Glenn, Attorney-in-fact)
|
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
1(c) --Articles of Amendment of Articles of Incorporation, filed on
December 19, 1994.
9(a) --Transfer Agency, Dividend Disbursing Agency and Shareholder
Servicing Agency Agreement between Registrant and Financial
Data Services, Inc. (now called Merrill Lynch Financial Data
Services, Inc.).
11 --Consent of Deloitte & Touche LLP, independent auditors for
Registrant.
16 --Schedule for computation of each performance quotation
provided in the Registration Statement in response to Item 22.
(a) --Fundamental Value Portfolio.
(b) --Quality Bond Portfolio.
(c) --U.S. Government Securities Portfolio.
(d) --Global Opportunity Portfolio.
17(a) --Financial Data Schedules for Fundamental Value Portfolio.
(b) --Financial Data Schedules for Quality Bond Portfolio.
(c) --Financial Data Schedules for U.S. Government Securities
Portfolio.
(d) --Financial Data Schedules for Global Opportunity Portfolio.
|
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 material to the location of each occurrence in the text.
DESCRIPTION OF OMITTED LOCATION OF GRAPHIC GRAPHIC OR IMAGE OR IMAGE IN TEXT - ---------------------- ------------------- Interlocking gears and Back cover of Prospectus and Merrill Lynch logo including back cover of Statement of stylized market bull Additional Information |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 1 |
| NAME: MERRILL LYNCH FUNDAMENTAL VALUE PORTFOLIO CLASS A |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1996 |
| PERIOD START | FEB 01 1995 |
| PERIOD END | MAR 31 1995 |
| INVESTMENTS AT COST | 9877849 |
| INVESTMENTS AT VALUE | 10126669 |
| RECEIVABLES | 1963845 |
| ASSETS OTHER | 65500 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 12156014 |
| PAYABLE FOR SECURITIES | 2599791 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 115025 |
| TOTAL LIABILITIES | 2714816 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 9175187 |
| SHARES COMMON STOCK | 203457 |
| SHARES COMMON PRIOR | 625 |
| ACCUMULATED NII CURRENT | 17154 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 37 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 248820 |
| NET ASSETS | 2123496 |
| DIVIDEND INCOME | 5258 |
| INTEREST INCOME | 27587 |
| OTHER INCOME | 0 |
| EXPENSES NET | 15691 |
| NET INVESTMENT INCOME | 17154 |
| REALIZED GAINS CURRENT | 37 |
| APPREC INCREASE CURRENT | 248820 |
| NET CHANGE FROM OPS | 266011 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 0 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 202832 |
| NUMBER OF SHARES REDEEMED | 0 |
| SHARES REINVESTED | 0 |
| NET CHANGE IN ASSETS | 9416198 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 5129 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 22613 |
| AVERAGE NET ASSETS | 2047308 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | .04 |
| PER SHARE GAIN APPREC | .40 |
| PER SHARE DIVIDEND | 0 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 10.44 |
| EXPENSE RATIO | 2.73 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 2 |
| NAME: MERRILL LYNCH FUNDAMENTAL VALUE PORTFOLIO CLASS B |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1996 |
| PERIOD START | FEB 01 1995 |
| PERIOD END | MAR 31 1995 |
| INVESTMENTS AT COST | 9877849 |
| INVESTMENTS AT VALUE | 10126669 |
| RECEIVABLES | 1963845 |
| ASSETS OTHER | 65500 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 12156014 |
| PAYABLE FOR SECURITIES | 2599791 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 115025 |
| TOTAL LIABILITIES | 2714816 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 9175187 |
| SHARES COMMON STOCK | 523935 |
| SHARES COMMON PRIOR | 625 |
| ACCUMULATED NII CURRENT | 17154 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 37 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 248820 |
| NET ASSETS | 5458945 |
| DIVIDEND INCOME | 5258 |
| INTEREST INCOME | 27587 |
| OTHER INCOME | 0 |
| EXPENSES NET | 15691 |
| NET INVESTMENT INCOME | 17154 |
| REALIZED GAINS CURRENT | 37 |
| APPREC INCREASE CURRENT | 248820 |
| NET CHANGE FROM OPS | 266011 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 0 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 536040 |
| NUMBER OF SHARES REDEEMED | 12730 |
| SHARES REINVESTED | 0 |
| NET CHANGE IN ASSETS | 9416198 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 5129 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 22613 |
| AVERAGE NET ASSETS | 2095440 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | .01 |
| PER SHARE GAIN APPREC | .41 |
| PER SHARE DIVIDEND | 0 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 10.42 |
| EXPENSE RATIO | 3.05 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 3 |
| NAME: MERRILL LYNCH FUNDAMENTAL VALUE PORTFOLIO CLASS C |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1996 |
| PERIOD START | FEB 01 1995 |
| PERIOD END | MAR 31 1995 |
| INVESTMENTS AT COST | 9877849 |
| INVESTMENTS AT VALUE | 10126669 |
| RECEIVABLES | 1963845 |
| ASSETS OTHER | 65500 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 12156014 |
| PAYABLE FOR SECURITIES | 2599791 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 115025 |
| TOTAL LIABILITIES | 2714816 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 9175187 |
| SHARES COMMON STOCK | 112994 |
| SHARES COMMON PRIOR | 625 |
| ACCUMULATED NII CURRENT | 17154 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 37 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 248820 |
| NET ASSETS | 1177326 |
| DIVIDEND INCOME | 5258 |
| INTEREST INCOME | 27587 |
| OTHER INCOME | 0 |
| EXPENSES NET | 15691 |
| NET INVESTMENT INCOME | 17154 |
| REALIZED GAINS CURRENT | 37 |
| APPREC INCREASE CURRENT | 248820 |
| NET CHANGE FROM OPS | 266011 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 0 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 114247 |
| NUMBER OF SHARES REDEEMED | 1878 |
| SHARES REINVESTED | 0 |
| NET CHANGE IN ASSETS | 9416198 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 5129 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 22613 |
| AVERAGE NET ASSETS | 411800 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | .01 |
| PER SHARE GAIN APPREC | .41 |
| PER SHARE DIVIDEND | 0 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 10.42 |
| EXPENSE RATIO | 3.03 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 4 |
| NAME: MERRILL LYNCH FUNDAMENTAL VALUE PORTFOLIO CLASS D |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1996 |
| PERIOD START | FEB 01 1995 |
| PERIOD END | MAR 31 1995 |
| INVESTMENTS AT COST | 9877849 |
| INVESTMENTS AT VALUE | 10126669 |
| RECEIVABLES | 1963845 |
| ASSETS OTHER | 65500 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 12156014 |
| PAYABLE FOR SECURITIES | 2599791 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 115025 |
| TOTAL LIABILITIES | 2714816 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 9175187 |
| SHARES COMMON STOCK | 65315 |
| SHARES COMMON PRIOR | 625 |
| ACCUMULATED NII CURRENT | 17154 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 37 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 248820 |
| NET ASSETS | 681431 |
| DIVIDEND INCOME | 5258 |
| INTEREST INCOME | 27587 |
| OTHER INCOME | 0 |
| EXPENSES NET | 15691 |
| NET INVESTMENT INCOME | 17154 |
| REALIZED GAINS CURRENT | 37 |
| APPREC INCREASE CURRENT | 248820 |
| NET CHANGE FROM OPS | 266011 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 0 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 65494 |
| NUMBER OF SHARES REDEEMED | 804 |
| SHARES REINVESTED | 0 |
| NET CHANGE IN ASSETS | 9416198 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 5129 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 22613 |
| AVERAGE NET ASSETS | 327188 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | .02 |
| PER SHARE GAIN APPREC | .41 |
| PER SHARE DIVIDEND | 0 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 10.43 |
| EXPENSE RATIO | 2.32 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 5 |
| NAME: MERRILL LYNCH QUALITY BOND PORTFOLIO CLASS A |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1996 |
| PERIOD START | FEB 01 1995 |
| PERIOD END | MAR 31 1995 |
| INVESTMENTS AT COST | 3154555 |
| INVESTMENTS AT VALUE | 3154035 |
| RECEIVABLES | 162610 |
| ASSETS OTHER | 56407 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 3373052 |
| PAYABLE FOR SECURITIES | 59804 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 65576 |
| TOTAL LIABILITIES | 125380 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 3248192 |
| SHARES COMMON STOCK | 202370 |
| SHARES COMMON PRIOR | 625 |
| ACCUMULATED NII CURRENT | 0 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 0 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | (520) |
| NET ASSETS | 2022993 |
| DIVIDEND INCOME | 0 |
| INTEREST INCOME | 23481 |
| OTHER INCOME | 0 |
| EXPENSES NET | 554 |
| NET INVESTMENT INCOME | 22927 |
| REALIZED GAINS CURRENT | 0 |
| APPREC INCREASE CURRENT | (520) |
| NET CHANGE FROM OPS | 22407 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 19055 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 200189 |
| NUMBER OF SHARES REDEEMED | 2 |
| SHARES REINVESTED | 1558 |
| NET CHANGE IN ASSETS | 3222672 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 2068 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 18040 |
| AVERAGE NET ASSETS | 2011417 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | .09 |
| PER SHARE GAIN APPREC | 0 |
| PER SHARE DIVIDEND | .09 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 10.00 |
| EXPENSE RATIO | 4.37 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 6 |
| NAME: MERRILL LYNCH QUALITY BOND PORTFOLIO CLASS B |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1996 |
| PERIOD START | FEB 01 1995 |
| PERIOD END | MAR 31 1995 |
| INVESTMENTS AT COST | 3154555 |
| INVESTMENTS AT VALUE | 3154035 |
| RECEIVABLES | 162610 |
| ASSETS OTHER | 56407 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 3373052 |
| PAYABLE FOR SECURITIES | 59804 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 65576 |
| TOTAL LIABILITIES | 125380 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 3248192 |
| SHARES COMMON STOCK | 90972 |
| SHARES COMMON PRIOR | 625 |
| ACCUMULATED NII CURRENT | 0 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 0 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | (520) |
| NET ASSETS | 909094 |
| DIVIDEND INCOME | 0 |
| INTEREST INCOME | 23481 |
| OTHER INCOME | 0 |
| EXPENSES NET | 554 |
| NET INVESTMENT INCOME | 22927 |
| REALIZED GAINS CURRENT | 0 |
| APPREC INCREASE CURRENT | (520) |
| NET CHANGE FROM OPS | 22407 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 2947 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 92446 |
| NUMBER OF SHARES REDEEMED | 2277 |
| SHARES REINVESTED | 178 |
| NET CHANGE IN ASSETS | 3222672 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 2068 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 18040 |
| AVERAGE NET ASSETS | 355276 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | .08 |
| PER SHARE GAIN APPREC | (.01) |
| PER SHARE DIVIDEND | .08 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 9.99 |
| EXPENSE RATIO | 4.37 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 7 |
| NAME: MERRILL LYNCH QUALITY BOND PORTFOLIO CLASS C |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1996 |
| PERIOD START | FEB 01 1995 |
| PERIOD END | MAR 31 1995 |
| INVESTMENTS AT COST | 3154555 |
| INVESTMENTS AT VALUE | 3154035 |
| RECEIVABLES | 162610 |
| ASSETS OTHER | 56407 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 3373052 |
| PAYABLE FOR SECURITIES | 59804 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 65576 |
| TOTAL LIABILITIES | 125380 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 3248192 |
| SHARES COMMON STOCK | 23771 |
| SHARES COMMON PRIOR | 625 |
| ACCUMULATED NII CURRENT | 0 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 0 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | (520) |
| NET ASSETS | 237533 |
| DIVIDEND INCOME | 0 |
| INTEREST INCOME | 23481 |
| OTHER INCOME | 0 |
| EXPENSES NET | 554 |
| NET INVESTMENT INCOME | 22927 |
| REALIZED GAINS CURRENT | 0 |
| APPREC INCREASE CURRENT | (520) |
| NET CHANGE FROM OPS | 22407 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 556 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 25060 |
| NUMBER OF SHARES REDEEMED | 1944 |
| SHARES REINVESTED | 30 |
| NET CHANGE IN ASSETS | 3222672 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 2068 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 18040 |
| AVERAGE NET ASSETS | 67968 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | .08 |
| PER SHARE GAIN APPREC | (.01) |
| PER SHARE DIVIDEND | .08 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 9.99 |
| EXPENSE RATIO | 4.31 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 8 |
| NAME: MERRILL LYNCH QUALITY BOND PORTFOLIO CLASS D |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1996 |
| PERIOD START | FEB 01 1995 |
| PERIOD END | MAR 31 1995 |
| INVESTMENTS AT COST | 3154555 |
| INVESTMENTS AT VALUE | 3154035 |
| RECEIVABLES | 162610 |
| ASSETS OTHER | 56407 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 3373052 |
| PAYABLE FOR SECURITIES | 59804 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 65576 |
| TOTAL LIABILITIES | 125380 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 3248192 |
| SHARES COMMON STOCK | 7810 |
| SHARES COMMON PRIOR | 625 |
| ACCUMULATED NII CURRENT | 0 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 0 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | (520) |
| NET ASSETS | 78052 |
| DIVIDEND INCOME | 0 |
| INTEREST INCOME | 23481 |
| OTHER INCOME | 0 |
| EXPENSES NET | 554 |
| NET INVESTMENT INCOME | 22927 |
| REALIZED GAINS CURRENT | 0 |
| APPREC INCREASE CURRENT | (520) |
| NET CHANGE FROM OPS | 22407 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 369 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 7735 |
| NUMBER OF SHARES REDEEMED | 576 |
| SHARES REINVESTED | 26 |
| NET CHANGE IN ASSETS | 3222672 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 2068 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 18040 |
| AVERAGE NET ASSETS | 40307 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | .09 |
| PER SHARE GAIN APPREC | (.01) |
| PER SHARE DIVIDEND | .09 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 9.99 |
| EXPENSE RATIO | 4.09 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 9 |
| NAME: MERRILL LYNCH U.S. GOVERNMENT SECURITIES PORTFOLIO CLASS A |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1996 |
| PERIOD START | FEB 01 1995 |
| PERIOD END | MAR 31 1995 |
| INVESTMENTS AT COST | 5849926 |
| INVESTMENTS AT VALUE | 5939256 |
| RECEIVABLES | 1112324 |
| ASSETS OTHER | 100942 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 7152522 |
| PAYABLE FOR SECURITIES | 893953 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 126841 |
| TOTAL LIABILITIES | 1020794 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 6042885 |
| SHARES COMMON STOCK | 506478 |
| SHARES COMMON PRIOR | 625 |
| ACCUMULATED NII CURRENT | 0 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | (487) |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 89330 |
| NET ASSETS | 5151355 |
| DIVIDEND INCOME | 0 |
| INTEREST INCOME | 76261 |
| OTHER INCOME | 0 |
| EXPENSES NET | 426 |
| NET INVESTMENT INCOME | 75835 |
| REALIZED GAINS CURRENT | (487) |
| APPREC INCREASE CURRENT | 89330 |
| NET CHANGE FROM OPS | 164678 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 71295 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 500029 |
| NUMBER OF SHARES REDEEMED | 2 |
| SHARES REINVESTED | 5826 |
| NET CHANGE IN ASSETS | 6106728 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 4544 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 30740 |
| AVERAGE NET ASSETS | 5079575 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | .14 |
| PER SHARE GAIN APPREC | .17 |
| PER SHARE DIVIDEND | .14 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 10.17 |
| EXPENSE RATIO | 3.35 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 10 |
| NAME: MERRILL LYNCH U.S. GOVERNMENT SECURITIES PORTFOLIO CLASS B |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1996 |
| PERIOD START | FEB 01 1995 |
| PERIOD END | MAR 31 1995 |
| INVESTMENTS AT COST | 5849926 |
| INVESTMENTS AT VALUE | 5939256 |
| RECEIVABLES | 1112324 |
| ASSETS OTHER | 100942 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 7152522 |
| PAYABLE FOR SECURITIES | 893953 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 126841 |
| TOTAL LIABILITIES | 1020794 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 6042885 |
| SHARES COMMON STOCK | 74109 |
| SHARES COMMON PRIOR | 625 |
| ACCUMULATED NII CURRENT | 0 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | (487) |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 89330 |
| NET ASSETS | 753778 |
| DIVIDEND INCOME | 0 |
| INTEREST INCOME | 76261 |
| OTHER INCOME | 0 |
| EXPENSES NET | 426 |
| NET INVESTMENT INCOME | 75835 |
| REALIZED GAINS CURRENT | (487) |
| APPREC INCREASE CURRENT | 89330 |
| NET CHANGE FROM OPS | 164678 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 3380 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 77691 |
| NUMBER OF SHARES REDEEMED | 4403 |
| SHARES REINVESTED | 196 |
| NET CHANGE IN ASSETS | 6106728 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 4544 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 30740 |
| AVERAGE NET ASSETS | 268558 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | .13 |
| PER SHARE GAIN APPREC | .17 |
| PER SHARE DIVIDEND | .13 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 10.17 |
| EXPENSE RATIO | 3.87 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 11 |
| NAME: MERRILL LYNCH U.S. GOVERNMENT SECURITIES PORTFOLIO CLASS C |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1996 |
| PERIOD START | FEB 01 1995 |
| PERIOD END | MAR 31 1995 |
| INVESTMENTS AT COST | 5849926 |
| INVESTMENTS AT VALUE | 5939256 |
| RECEIVABLES | 1112324 |
| ASSETS OTHER | 100942 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 7152522 |
| PAYABLE FOR SECURITIES | 893953 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 126841 |
| TOTAL LIABILITIES | 1020794 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 6042885 |
| SHARES COMMON STOCK | 17983 |
| SHARES COMMON PRIOR | 625 |
| ACCUMULATED NII CURRENT | 0 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | (487) |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 89330 |
| NET ASSETS | 182891 |
| DIVIDEND INCOME | 0 |
| INTEREST INCOME | 76261 |
| OTHER INCOME | 0 |
| EXPENSES NET | 426 |
| NET INVESTMENT INCOME | 75835 |
| REALIZED GAINS CURRENT | (487) |
| APPREC INCREASE CURRENT | 89330 |
| NET CHANGE FROM OPS | 164678 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 709 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 18515 |
| NUMBER OF SHARES REDEEMED | 1199 |
| SHARES REINVESTED | 42 |
| NET CHANGE IN ASSETS | 6106728 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 4544 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 30740 |
| AVERAGE NET ASSETS | 56339 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | .13 |
| PER SHARE GAIN APPREC | .17 |
| PER SHARE DIVIDEND | .13 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 10.17 |
| EXPENSE RATIO | 4.14 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 12 |
| NAME: MERRILL LYNCH U.S. GOVERNMENT SECURITIES PORTFOLIO CLASS D |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1996 |
| PERIOD START | FEB 01 1995 |
| PERIOD END | MAR 31 1995 |
| INVESTMENTS AT COST | 5849926 |
| INVESTMENTS AT VALUE | 5939256 |
| RECEIVABLES | 1112324 |
| ASSETS OTHER | 100942 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 7152522 |
| PAYABLE FOR SECURITIES | 893953 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 126841 |
| TOTAL LIABILITIES | 1020794 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 6042885 |
| SHARES COMMON STOCK | 4295 |
| SHARES COMMON PRIOR | 625 |
| ACCUMULATED NII CURRENT | 0 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | (487) |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 89330 |
| NET ASSETS | 43704 |
| DIVIDEND INCOME | 0 |
| INTEREST INCOME | 76261 |
| OTHER INCOME | 0 |
| EXPENSES NET | 426 |
| NET INVESTMENT INCOME | 75835 |
| REALIZED GAINS CURRENT | (487) |
| APPREC INCREASE CURRENT | 89330 |
| NET CHANGE FROM OPS | 164678 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 451 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 7415 |
| NUMBER OF SHARES REDEEMED | 3773 |
| SHARES REINVESTED | 28 |
| NET CHANGE IN ASSETS | 6106728 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 4544 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 30740 |
| AVERAGE NET ASSETS | 33103 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | .14 |
| PER SHARE GAIN APPREC | .18 |
| PER SHARE DIVIDEND | .14 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 10.18 |
| EXPENSE RATIO | 3.40 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 13 |
| NAME: MERRILL LYNCH GLOBAL OPPORTUNITY PORTFOLIO CLASS A |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1996 |
| PERIOD START | FEB 01 1995 |
| PERIOD END | MAR 31 1995 |
| INVESTMENTS AT COST | 13414002 |
| INVESTMENTS AT VALUE | 13567437 |
| RECEIVABLES | 1123024 |
| ASSETS OTHER | 65500 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 14755961 |
| PAYABLE FOR SECURITIES | 1179141 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 288796 |
| TOTAL LIABILITIES | 1467937 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 13160763 |
| SHARES COMMON STOCK | 803666 |
| SHARES COMMON PRIOR | 625 |
| ACCUMULATED NII CURRENT | 61446 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 7024 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 58791 |
| NET ASSETS | 8106563 |
| DIVIDEND INCOME | 32209 |
| INTEREST INCOME | 61596 |
| OTHER INCOME | 0 |
| EXPENSES NET | 32359 |
| NET INVESTMENT INCOME | 61446 |
| REALIZED GAINS CURRENT | 7024 |
| APPREC INCREASE CURRENT | 58791 |
| NET CHANGE FROM OPS | 127261 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 0 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 803051 |
| NUMBER OF SHARES REDEEMED | 10 |
| SHARES REINVESTED | 0 |
| NET CHANGE IN ASSETS | 13263024 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 12537 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 53894 |
| AVERAGE NET ASSETS | 8001345 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | .06 |
| PER SHARE GAIN APPREC | .03 |
| PER SHARE DIVIDEND | 0 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 10.09 |
| EXPENSE RATIO | 3.06 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 14 |
| NAME: MERRILL LYNCH GLOBAL OPPORTUNITY PORTFOLIO CLASS B |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1996 |
| PERIOD START | FEB 01 1995 |
| PERIOD END | MAR 31 1995 |
| INVESTMENTS AT COST | 13414002 |
| INVESTMENTS AT VALUE | 13567437 |
| RECEIVABLES | 1123024 |
| ASSETS OTHER | 65500 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 14755961 |
| PAYABLE FOR SECURITIES | 1179141 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 288796 |
| TOTAL LIABILITIES | 1467937 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 13160763 |
| SHARES COMMON STOCK | 410182 |
| SHARES COMMON PRIOR | 625 |
| ACCUMULATED NII CURRENT | 61446 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 7024 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 58791 |
| NET ASSETS | 4129447 |
| DIVIDEND INCOME | 32209 |
| INTEREST INCOME | 61596 |
| OTHER INCOME | 0 |
| EXPENSES NET | 32359 |
| NET INVESTMENT INCOME | 61446 |
| REALIZED GAINS CURRENT | 7024 |
| APPREC INCREASE CURRENT | 58791 |
| NET CHANGE FROM OPS | 127261 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 0 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 422739 |
| NUMBER OF SHARES REDEEMED | 13182 |
| SHARES REINVESTED | 0 |
| NET CHANGE IN ASSETS | 13263024 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 12537 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 53894 |
| AVERAGE NET ASSETS | 1901998 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | .02 |
| PER SHARE GAIN APPREC | .05 |
| PER SHARE DIVIDEND | 0 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 10.07 |
| EXPENSE RATIO | 3.85 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 15 |
| NAME: MERRILL LYNCH GLOBAL OPPORTUNITY PORTFOLIO CLASS C |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1996 |
| PERIOD START | FEB 01 1995 |
| PERIOD END | MAR 31 1995 |
| INVESTMENTS AT COST | 13414002 |
| INVESTMENTS AT VALUE | 13567437 |
| RECEIVABLES | 1123024 |
| ASSETS OTHER | 65500 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 14755961 |
| PAYABLE FOR SECURITIES | 1179141 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 288796 |
| TOTAL LIABILITIES | 1467937 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 13160763 |
| SHARES COMMON STOCK | 71180 |
| SHARES COMMON PRIOR | 625 |
| ACCUMULATED NII CURRENT | 61446 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 7024 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 58791 |
| NET ASSETS | 716581 |
| DIVIDEND INCOME | 32209 |
| INTEREST INCOME | 61596 |
| OTHER INCOME | 0 |
| EXPENSES NET | 32359 |
| NET INVESTMENT INCOME | 61446 |
| REALIZED GAINS CURRENT | 7024 |
| APPREC INCREASE CURRENT | 58791 |
| NET CHANGE FROM OPS | 127261 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 0 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 71285 |
| NUMBER OF SHARES REDEEMED | 730 |
| SHARES REINVESTED | 0 |
| NET CHANGE IN ASSETS | 13263024 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 12537 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 53894 |
| AVERAGE NET ASSETS | 285240 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | .02 |
| PER SHARE GAIN APPREC | .05 |
| PER SHARE DIVIDEND | 0 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 10.07 |
| EXPENSE RATIO | 3.83 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| SERIES: |
| NUMBER: 16 |
| NAME: MERRILL LYNCH GLOBAL OPPORTUNITY PORTFOLIO CLASS D |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | JAN 31 1996 |
| PERIOD START | FEB 01 1995 |
| PERIOD END | MAR 31 1995 |
| INVESTMENTS AT COST | 13414002 |
| INVESTMENTS AT VALUE | 13567437 |
| RECEIVABLES | 1123024 |
| ASSETS OTHER | 65500 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 14755961 |
| PAYABLE FOR SECURITIES | 1179141 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 288796 |
| TOTAL LIABILITIES | 1467937 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 13160763 |
| SHARES COMMON STOCK | 33275 |
| SHARES COMMON PRIOR | 625 |
| ACCUMULATED NII CURRENT | 61446 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 7024 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 58791 |
| NET ASSETS | 335433 |
| DIVIDEND INCOME | 32209 |
| INTEREST INCOME | 61596 |
| OTHER INCOME | 0 |
| EXPENSES NET | 32359 |
| NET INVESTMENT INCOME | 61446 |
| REALIZED GAINS CURRENT | 7024 |
| APPREC INCREASE CURRENT | 58791 |
| NET CHANGE FROM OPS | 127261 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 0 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 33519 |
| NUMBER OF SHARES REDEEMED | 869 |
| SHARES REINVESTED | 0 |
| NET CHANGE IN ASSETS | 13263024 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 12537 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 53894 |
| AVERAGE NET ASSETS | 152816 |
| PER SHARE NAV BEGIN | 10.00 |
| PER SHARE NII | .03 |
| PER SHARE GAIN APPREC | .05 |
| PER SHARE DIVIDEND | 0 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 10.08 |
| EXPENSE RATIO | 3.06 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
EXHIBIT 99.1(c)
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
Articles of Amendment
to the Articles of Incorporation
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC., a Maryland corporation having its principal Maryland office in the City of Baltimore (the "Corporation"), certifies to the Maryland State Department of Assessments and Taxation that:
FIRST: The charter of the Corporation is hereby amended by adding the
following provision at the end of Article IV:
"(12)(a) Each series of capital stock of the Corporation shall relate to a
separate portfolio of investments. All shares of stock in each series shall be
identical except that there may be variations between the different series as to
the purchase price, determination of net asset value, designations, preferences,
conversion or other rights, voting powers, restrictions, special and relative
rights and limitations as to dividends and on liquidation, qualifications or
terms or conditions of redemption of such shares of stock.
(b) Each series of stock of the Corporation shall have the following
powers, preferences and voting or other special rights, and the qualifications,
restrictions and limitations thereof shall be as follows:
(i) All consideration received by the Corporation for the issue
or sale of stock of each series, together with all assets in which such
consideration is invested or
reinvested, all income, earnings, profits and proceeds received thereon, including any proceeds derived from the sale, exchange or liquidation thereof, and any assets, funds or payments derived from any reinvestment of such proceeds in whatever form the same may be, shall irrevocably belong to the series of stock with respect to which such assets, payments or funds were received by the Corporation for all purposes, subject only to the rights of creditors, and shall be so handled in the books of account of the Corporation. Such assets, payments and funds, including any proceeds derived from the sale, exchange or liquidation thereof, and any assets, funds or payments derived from any reinvestment of such proceeds in whatever form the same may be, are herein referred to as "assets belonging to" such series. In the event that there are any assets, income, earnings, profits and proceeds thereof, funds or payments that are not readily identifiable as belonging to any particular series, the Board of Directors of the Corporation shall allocate them among any one or more of the series established and designated from time to time in such manner and on such basis as the Board of Directors, in their sole discretion, deem fair and equitable. Each allocation by the Board of Directors shall be conclusive and binding on the shareholders of the Corporation of all series for all purposes.
(ii) The assets belonging to each series of stock shall be charged with the liabilities in respect to such series, and also shall be charged with their shares of the general liabilities of the Corporation, in proportion to the asset value of the respective series determined in accordance with the charter of the Corporation. The determination of the Board of Directors shall be conclusive as to the amount of liabilities, including accrued expenses and reserves, as to the allocation of the same to a given series, and as to whether the same or general assets of the Corporation are allocable to one or more series."
SECOND: The foregoing Articles of Amendment have 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 was duly approved by a majority of the entire Board of Directors of the Corporation and by the sole stockholder of the Corporation.
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.
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 and facts 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.
IN WITNESS WHEREOF, MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC. has cause 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 December 16, 1994.
MERRILL LYNCH RETIREMENT ASSET
BUILDER PROGRAM, INC.
By: /s/ Arthur Zeikel
--------------------------
Arthur Zeikel
President
Attest:
/s/ Mark B. Goldfus
- -------------------------
Mark B. Goldfus
Secretary
|
EXHIBIT 99.9(a)
TRANSFER AGENCY, DIVIDEND DISBURSING AGENCY
AND SHAREHOLDER SERVICING AGENCY AGREEMENT
THIS AGREEMENT made as of the 21st day of December, 1994, by and between Merrill Lynch Retirement Asset Builder Program, Inc., on behalf of itself and its constituent Portfolios (the "Program") and Financial Data Services, Inc. ("FDS"), a New Jersey corporation.
WITNESSETH:
WHEREAS, the Program wishes to appoint FDS to be the Transfer Agent, Dividend Disbursing Agent and Shareholder Servicing Agent upon, and subject to, the terms and provisions of this Agreement, and FDS 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 Program and FDS agree as follows:
A. The Program hereby appoints FDS to act as Transfer Agent, Dividend Disbursing Agent and Shareholder Servicing Agent for the Program upon, and subject to, the terms and provisions of this Agreement.
B. FDS hereby accepts the appointment as Transfer Agent, Dividend Disbursing Agent and Shareholder Servicing Agent for the Program, and agrees to act as such upon, and subject to, the terms and provisions of this Agreement.
In this Agreement:
A. The term "Act" means the Investment Company Act of 1940, as amended from time to time, and any rule or regulation thereunder;
B. The term "Account" means any account of a Shareholder which shall be a retirement account for which MLPF&S acts as custodian for benefit of an identified customer;
C. The term "application" means an application made by a Shareholder or prospective Shareholder respecting the opening of an Account;
D. The term "MLFD" means Merrill Lynch Funds Distributor, Inc., a Delaware corporation;
E. The term "MLPF&S" means Merrill Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation;
F. The term "Officer's Instruction" means an instruction in writing given on behalf of the Program to FDS, and signed on behalf of the Program by the President, any Vice President, the Secretary or the Treasurer of the Program;
G. The term "Prospectus" means the Prospectus and the Statement of Additional Information of the Program as from time to time in effect;
H. The term "Shares" means shares of stock of the Program, irrespective of class or series;
I. The term "Shareholder" means the holder of record of Shares;
J. 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.
A. Subject to the succeeding provisions of the Agreement, FDS hereby agrees to perform the following functions as Transfer Agent, Dividend Disbursing Agent and Shareholder Servicing Agent for the Program;
1. Issuing, transferring and redeeming Shares;
2. Opening, maintaining, servicing and closing Accounts;
3. Acting as agent for the Program Shareholders and/or customers of MLPF&S in connection with Plan Accounts, upon the terms and subject to the conditions contained in the Prospectus and application relating to the specific Plan Account;
4. Acting as agent of the Program 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 Program with respect to such Shares as may be subject to a contingent deferred sales charge;
5. 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. FDS 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 imposed upon any other Shares shall be paid by FDS to MLFD.
6. Exchanging the investment of an investor into, or from the shares of other open-end investment companies or other series portfolios of the Program, if any, if and to the extent permitted by the Prospectus at the direction of such investor.
7. Processing redemptions;
8. Examining and approving legal transfers;
9. Replacing lost, stolen or destroyed certificates representing Shares, in accordance with, and subject to, procedures and conditions adopted by the Program;
10. Furnishing such confirmations of transactions relating to their Shares as required by applicable law;
11. Acting as agent for the Program 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;
12. Acting as agent for the Program and/or MLPF&S, mailing annual, semi-annual and quarterly reports prepared by or on behalf of the Program, and mailing new Prospectuses upon their issue to Shareholders as required by applicable law;
13. Furnishing such periodic statements of transactions effected by FDS, reconciliations, balances and summaries as the Program may reasonably request;
14. Maintaining such books and records relating to transactions effected by FDS as are required by the Act, or by any other applicable provision of law, rule or regulation, to be maintained by the Program 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 FDS and the Program. In addition, FDS agrees to maintain and preserve master files and historical computer tapes on a daily basis in multiple separate locations a sufficient distance apart to insure preservation of at least one copy of such information;
15. 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
16. Reinvesting dividends for full and fractional shares and disbursing cash dividends, as applicable.
B. FDS 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 Program the results of such tabulation accompanied by appropriate certifications, and preparing and furnishing to the Program certified lists of Shareholders as of such date, in such form and containing such information as may be required by the Program.
C. FDS agrees to deal with, and answer in a timely manner, all correspondence and inquiries relating to the functions of FDS under this Agreement with respect to Accounts.
D. FDS agrees to furnish to the Program such information and at such intervals as is necessary for the Program 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.
E. FDS agrees to provide to the Program such information as may reasonably be required to enable the Program to reconcile the number of outstanding Shares between FDS's records and the account books of the Program.
F. Notwithstanding anything in the foregoing provisions of this paragraph, FDS 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.
The charges for services described in this Agreement, including "out-of- pocket" expenses, will be set forth in the Schedule of Fees attached hereto.
FDS agrees that it will in a timely manner make available to, and permit, any officer, accountant, attorney or authorized agent of the Program to examine and make transcripts and copies (including photocopies and computer or other electronic information storage media and print-outs) of any and all of its books and records which relate to any transaction or function performed by FDS under or pursuant to this Agreement.
FDS 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 Program, 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 authorized by the Program by way of an Officer's Instruction.
The Program shall indemnify and hold FDS harmless from any loss, costs, damage and reasonable expenses, including reasonable attorney's fees (provided that such attorney is appointed with the Program'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, provided that this indemnification shall not apply to actions or omissions of FDS in cases of willful misconduct, failure to act in good faith or negligence by FDS, its officers, employees or agents, and further provided, that prior to confessing any claim against it which may be subject to this indemnification, FDS shall give the Program reasonable opportunity to defend against said claim in its own name or in the name of FDS. An action taken by FDS 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.
A. FDS hereby agrees to hire, purchase, develop and maintain such dedicated personnel, facilities, equipment, software, resources and capabilities as may be reasonably determined by the Program to be necessary for the satisfactory performance of the duties and responsibilities of FDS. FDS warrants 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 Program possess the special skill and technical knowledge appropriate for that purpose. FDS 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 Program. FDS 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. FDS warrants and represents that it 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 Program of any revocation of such authority or permission or of the commencement of any proceeding or other action which may lead to such revocation.
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 Program or FDS (without penalty to the Program or FDS) provided that the terminating party gives the other party written notice of such termination at least sixty (60) days in advance, except that the Program may terminate this Agreement immediately upon written notice to FDS if the authority or permission of FDS to act as Transfer Agent, Dividend Disbursing Agent and Shareholder Servicing Agent has been revoked or if any proceeding or other action which the Program reasonably believes will lead to such revocation has been commenced.
B. Upon termination of this Agreement, FDS 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, Dividend Disbursing Agent and Shareholder Servicing Agent for the Program 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 Program 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.
Except to the extent that the performance by FDS of 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.
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 ASSET
BUILDER PROGRAM, INC.
By: /s/ Arthur Zeikel
---------------------------
Title: President
------------------------
|
FINANCIAL DATA SERVICES, INC.
By:___________________________
Title:________________________
The Fund will pay to FDS an annual fee of $11.00 per Class A and Class D Shareholder Account and $14.00 per Class B and Class C Shareholder Account in addition to reimbursement for the out-of-pocket expenses incurred by FDS pursuant to this Agreement.
EXHIBIT 99.11
INDEPENDENT AUDITORS' CONSENT
Merrill Lynch Retirement Asset
Builder Program, Inc.:
We consent to the use in Post-Effective Amendment No. 1 to Registration Statement No. 33-53887 of our reports dated May 19, 1995 appearing in the Statement of Additional Information, which is a part of such Registration Statement.
DELOITTE & TOUCHE LLP
Princeton, New Jersey
May 26, 1995
EXHIBIT 99.16(a)
RABP: Fundamental Value - Class A
02/01/95 - 03/31/95
Since Since
Inception Inception
Average Annual Total
Total Return Return*
-------------- ---------
Initial Investment $1,000.00 $1,000.00
Divided by Initial Maximum Offering Price 10.55
---------
Divided by Net Asset Value 10.00
---------
Equals Shares Purchased 94.750 100.000
Plus Shares Acquired through
Dividend Reinvestment 0.000 0.000
--------- ---------
Equals Shares Held at 03/31/95 94.750 100.000
Multiplied by Net Asset Value at 03/31/95 10.44 10.44
--------- ---------
Equals Ending Redeemable Value at
$1000 Investment (ERV) at 03/31/95 989.19 1,044.00
Divided by $1,000 (P) 0.9892 1.0440
Subtract 1 -0.0108 0.0440
Expressed as a percentage equals the
Aggregate Total Return for the Period (T) -1.08%
=========
Expressed as a percentage equals the
Aggregate Total Return for the Period 4.40%
=========
ERV divided by P 0.9892
Raise to the power of 6.2931
Equals 0.9339
Subtract 1 -0.0661
Expressed as a percentage equals the
Average Annualized Total Return -6.61%
=========
|
* Does not include sales charge for the period.
RABP: Fundamental Value - Class B
02/01/95 - 03/31/95
Since Since
Inception Inception
Average Annual Total
Total Return Return*
-------------- ---------
Initial Investment $1,000.00 $1,000,00
Divided by Net Asset Value 10.00 10.00
--------- ---------
Equals Shares Purchased 100.000 100.000
Plus Shares Acquired through
Dividend Reinvestment 0.000 0.000
--------- ---------
Equals Shares Held at 03/31/95 100.000 100.000
Multiplied by Net Asset Value at 03/31/95 10.42 10.42
--------- ---------
Equals Ending Value before deduction for
contingent deferred sales charge 1,042.00 1,042.00
Less deferred sales charge (40.00) 0.00
Equals Ending Redeemable Value at
$1000 Investment (ERV) at 03/31/95 1,002.00 1,042.00
--------- ---------
Divided by $1,000 (P) 1.0020 1.0420
Subtract 1 0.0020 0.0420
Expressed as a percentage equals the
Aggregate Total Return for the Period (T) 0.20%
=========
Expressed as a percentage equals the
Aggregate Total Return for the Period 4.20%
=========
ERV divided by P 1.0020
Raise to the power of 6.2931
Equals 1.0127
Subtract 1 0.0127
Expressed as a percentage equals the
Average Annualized Total Return 1.27%
=========
|
* Does not include sales charge for the period.
RABP: Fundamental Value - Class C
02/01/95 - 03/31/95
Since Since
Inception Inception
Average Annual Total
Total Return Return*
-------------- ---------
Initial Investment $1,000.00 $1,000,00
Divided by Net Asset Value 10.00 10.00
--------- ---------
Equals Shares Purchased 100.000 100.000
Plus Shares Acquired through
Dividend Reinvestment 0.000 0.000
--------- ---------
Equals Shares Held at 03/31/95 100.000 100.000
Multiplied by Net Asset Value at 03/31/95 10.42 10.42
--------- ---------
Equals Ending Value before deduction for
contingent deferred sales charge 1,042.00 1,042.00
Less deferred sales charge (10.00) 0.00
--------- ---------
Equals Ending Redeemable Value at
$1000 Investment (ERV) at 03/31/95 1,032.00 1,042.00
--------- ---------
Divided by $1,000 (P) 1.0320 1.0420
Subtract 1 0.0320 0.0420
Expressed as a percentage equals the
Aggregate Total Return for the Period (T) 3.20%
=========
Expressed as a percentage equals the
Aggregate Total Return for the Period 4.20%
=========
ERV divided by P 1.0320
Raise to the power of 6.2931
Equals 1.2192
Subtract 1 0.2192
Expressed as a percentage equals the
Average Annualized Total Return 21.92%
=========
|
* Does not include sales charge for the period.
RABP: Fundamental Value - Class D
02/01/95 - 03/31/95
Since Since
Inception Inception
Average Annual Total
Total Return Return*
-------------- ---------
Initial Investment $1,000.00 $1,000.00
Divided by Initial Maximum Offering Price 10.55
---------
Divided by Net Asset Value 10.00
---------
Equals Shares Purchased 94.750 100.000
Plus Shares Acquired through
Dividend Reinvestment 0.000 0.000
--------- ---------
Equals Shares Held at 03/31/95 94.750 100.000
Multiplied by Net Asset Value at 03/31/95 10.43 10.43
--------- ---------
Equals Ending Redeemable Value at
$1000 Investment (ERV) at 03/31/95 988.24 1,043.00
Divided by $1,000 (P) 0.9892 1.0430
Subtract 1 -0.0118 0.0430
Expressed as a percentage equals the
Aggregate Total Return for the Period (T) -1.18%
=========
Expressed as a percentage equals the
Aggregate Total Return for the Period 4.30%
=========
ERV divided by P 0.9882
Raise to the power of 6.2931
Equals 0.9283
Subtract 1 -0.0717
Expressed as a percentage equals the
Average Annualized Total Return -7.17%
=========
|
* Does not include sales charge for the period.
EXHIBIT 99.16(b)
RABP: Quality Bond - Class A
02/01/95 - 03/31/95
Since Since
Inception Inception
Average Annual Total
Total Return Return*
-------------- ---------
Initial Investment $1,000.00 $1,000.00
Divided by Initial Maximum Offering Price 10.42
---------
Divided by Net Asset Value 10.00
---------
Equals Shares Purchased 96.000 100.000
Plus Shares Acquired through
Dividend Reinvestment 0.760 0.791
--------- ---------
Equals Shares Held at 03/31/95 96.760 100.791
Multiplied by Net Asset Value at 03/31/95 10.02 10.02
--------- ---------
Equals Ending Redeemable Value at
$1000 Investment (ERV) at 03/31/95 969.53 1,009.93
Divided by $1,000 (P) 0.9695 1.0099
Subtract 1 -0.0305 0.0099
Expressed as a percentage equals the
Aggregate Total Return for the Period (T) -3.05%
=========
Expressed as a percentage equals the
Aggregate Total Return for the Period 0.99%
=========
ERV divided by P 0.9695
Raise to the power of 6.2931
Equals 0.8231
Subtract 1 -0.1769
Expressed as a percentage equals the
Average Annualized Total Return -17.69%
=========
|
* Does not include sales charge for the period.
RABP: Quality Bond - Class B
02/01/95 - 03/31/95
Since Since
Inception Inception
Average Annual Total
Total Return Return*
-------------- ---------
Initial Investment $1,000.00 $1,000.00
Divided by Net Asset Value 10.00 10.00
--------- ---------
Equals Shares Purchased 100.000 100.000
Plus Shares Acquired through
Dividend Reinvestment 0.681 0.681
--------- ---------
Equals Shares Held at 03/31/95 100.681 100.681
Multiplied by Net Asset Value at 03/31/95 10.00 10.00
--------- ---------
Equals Ending Value before deduction for
contingent deferred sales charge 1,006.81 1,006.81
Less deferred sales charge (40.00) 0.00
--------- ---------
Equals Ending Redeemable Value at
$1000 Investment (ERV) at 03/31/95 966.81 1,006.81
Divided by $1,000 (P) 0.9668 1.0068
Subtract 1 -0.0332 0.0068
Expressed as a percentage equals the
Aggregate Total Return for the Period (T) -3.32%
=========
Expressed as a percentage equals the
Aggregate Total Return for the Period 0.68%
=========
ERV divided by P 0.9668
Raise to the power of 6.2931
Equals 0.8086
Subtract 1 -0.1914
Expressed as a percentage equals the
Average Annualized Total Return -19.14%
=========
|
* Does not include sales charge for the period.
RABP: Quality Bond - Class C
02/01/95 - 03/31/95
Since Since
Inception Inception
Average Annual Total
Total Return Return*
-------------- ---------
Initial Investment $1,000.00 $1,000.00
Divided by Net Asset Value 10.00 10.00
--------- ---------
Equals Shares Purchased 100.000 100.000
Plus Shares Acquired through
Dividend Reinvestment 0.672 0.672
--------- ---------
Equals Shares Held at 03/31/95 100.672 100.672
Multiplied by Net Asset Value at 03/31/95 10.00 10.00
--------- ---------
Equals Ending Value before deduction for
contingent deferred sales charge 1,006.72 1,006.72
Less deferred sales charge (10.00) 0.00
--------- ---------
Equals Ending Redeemable Value at
$1000 Investment (ERV) at 03/31/95 996.72 1,006.72
Divided by $1,000 (P) 0.9967 1.0067
Subtract 1 -0.0033 0.0067
Expressed as a percentage equals the
Aggregate Total Return for the Period (T) -0.33%
=========
Expressed as a percentage equals the
Aggregate Total Return for the Period 0.67%
=========
ERV divided by P 0.9967
Raise to the power of 6.3066
Equals 0.9795
Subtract 1 -0.0205
Expressed as a percentage equals the
Average Annualized Total Return -2.05%
=========
|
* Does not include sales charge for the period.
RABP: Quality Bond - Class D
02/01/95 - 03/31/95
Since Since
Inception Inception
Average Annual Total
Total Return Return*
-------------- ---------
Initial Investment $1,000.00 $1,000.00
Divided by Initial Maximum Offering Price 10.42
---------
Divided by Net Asset Value 10.00
---------
Equals Shares Purchased 96.000 100.000
Plus Shares Acquired through
Dividend Reinvestment 0.727 0.757
--------- ---------
Equals Shares Held at 03/31/95 96.727 100.757
Multiplied by Net Asset Value at 03/31/95 10.00 10.00
--------- ---------
Equals Ending Redeemable Value at
$1000 Investment (ERV) at 03/31/95 967.27 1,007.57
Divided by $1,000 (P) 0.9673 1.0076
Subtract 1 -0.0327 0.0076
Expressed as a percentage equals the
Aggregate Total Return for the Period (T) -3.27%
=========
Expressed as a percentage equals the
Aggregate Total Return for the Period 0.76%
=========
ERV divided by P 0.9673
Raise to the power of 6.2913
Equals 0.8111
Subtract 1 -0.1889
Expressed as a percentage equals the
Average Annualized Total Return -18.89%
=========
|
* Does not include sales charge for the period.
30 DAYS STANDARDIZED YIELD
FOR THE PERIOD ENDING 03-31-95
RAPB: Quality Bond - Class A
Long term income generally based on yield to
maturity times market value of each security $ 0
Plus short term income accrued for the past
thirty days 9,194
-----------
Equals Total Income 9,194
Less expenses for the past thirty days 0
-----------
Equals net monthly income for yield calculation 9,194
-----------
Average shares outstanding for 30 days 202,670
Times the Maximum Offering Price 10.42
-----------
Equals total dollars $2,111,823
===========
Net monthly income divided by total dollars equals 0.004353357
Add 1 1.004353357
Raise to the power of 6 1.026406074
Subtract 1 0.026406074
Times 2 0.052812148
Expressed as a percentage equals the
standardized yield for 30 day period 5.28%
===========
Tax Rate 28.00%
X = 1 minus Tax Rate 72.00%
Standardized Yield divided by X equals
Tax Equivalent Yield for 30 day period 7.33%
===========
|
30 DAYS STANDARDIZED YIELD
FOR THE PERIOD ENDING 03-31-95
RAPB: Quality Bond - Class B
Long term income generally based on yield to
maturity times market value of each security $ 0
Plus short term income accrued for the past
thirty days 4,760
-----------
Equals Total Income 4,760
Less expenses for the past thirty days -647
-----------
Equals net monthly income for yield calculation 4,113
-----------
Average shares outstanding for 30 days 105,030
Times the Net Asset Value 9.99
-----------
Equals total dollars $1,049,246
===========
Net monthly income divided by total dollars equals 0.003919911
Add 1 1.003919911
Raise to the power of 6 1.023751159
Subtract 1 0.023751159
Times 2 0.047502317
Expressed as a percentage equals the
standardized yield for 30 day period 4.75%
===========
Tax Rate 28.00%
X = 1 minus Tax Rate 72.00%
Standardized Yield divided by X equals
Tax Equivalent Yield for 30 day period 6.60%
===========
|
30 DAYS STANDARDIZED YIELD
FOR THE PERIOD ENDING 03-31-95
RAPB: Quality Bond - Class C
Long term income generally based on yield to
maturity times market value of each security $ 0
Plus short term income accrued for the past
thirty days 1,324
-----------
Equals Total Income 1,324
Less expenses for the past thirty days -192
-----------
Equals net monthly income for yield calculation 1,132
-----------
Average shares outstanding for 30 days 29,215
Times the Maximum Offering Price 9.99
-----------
Equals total dollars $291,861
===========
Net monthly income divided by total dollars equals 0.003878384
Add 1 1.003878384
Raise to the power of 6 1.023497102
Subtract 1 0.023497102
Times 2 0.046994205
Expressed as a percentage equals the
standardized yield for 30 day period 4.70%
==========
Tax Rate 28.00%
X = 1 minus Tax Rate 72.00%
Standardized Yield divided by X equals
Tax Equivalent Yield for 30 day period 6.53%
==========
|
30 DAYS STANDARDIZED YIELD
FOR THE PERIOD ENDING 03-31-95
RAPB: Quality Bond - Class D
Long term income generally based on yield to
maturity times market value of each security $ 0
Plus short term income accrued for the past
thirty days 384
-----------
Equals Total Income 384
Less expenses for the past thirty days -17
-----------
Equals net monthly income for yield calculation 366
-----------
Average shares outstanding for 30 days 8,462
Times the Net Asset Value 10.41
-----------
Equals total dollars $88,088
===========
Net monthly income divided by total dollars equals 0.004157667
Add 1 1.004157667
Raise to the power of 6 1.025206738
Subtract 1 0.025206738
Times 2 0.050413476
Expressed as a percentage equals the
standardized yield for the 30 day period 5.04%
==========
Tax Rate 28.00%
X = 1 minus Tax Rate 72.00%
Standardized Yield divided by X equals
Tax Equivalent Yield for 30 day period 7.00%
==========
|
EXHIBIT 99.16(c)
RABP: U.S. Government Security - Class A
02/01/95 - 03/31/95
Since Since
Inception Inception
Average Annual Total
Total Return Return*
-------------- ---------
Initial Investment $1,000.00 $1,000.00
Divided by Initial Maximum Offering Price 10.42
---------
Divided by Net Asset Value 10.00
---------
Equals Shares Purchased 96.000 100.000
Plus Shares Acquired through
Dividend Reinvestment 1.133 1.180
--------- ---------
Equals Shares Held at 03/31/95 97.133 101.180
Multiplied by Net Asset Value at 03/31/95 10.19 10.19
--------- ---------
Equals Ending Redeemable Value at
$1000 Investment (ERV) at 03/31/95 989.78 1,031.03
Divided by $1,000 (P) 0.9898 1.0310
Subtract 1 -0.0102 0.0310
Expressed as a percentage equals the
Aggregate Total Return for the Period (T) -1.02%
=========
Expressed as a percentage equals the
Aggregate Total Return for the Period 3.10%
=========
ERV divided by P 0.9898
Raise to the power of 6.2931
Equals 0.9374
Subtract 1 -0.0626
Expressed as a percentage equals the
Average Annualized Total Return -6.26%
=========
|
* Does not include sales charge for the period.
RABP: U.S. Government Security - Class B
02/01/95 - 03/31/95
Since Since
Inception Inception
Average Annual Total
Total Return Return*
-------------- ---------
Initial Investment $1,000.00 $1,000.00
Divided by Net Asset Value 10.00 10.00
--------- ---------
Equals Shares Purchased 100.000 100.000
Plus Shares Acquired through
Dividend Reinvestment 1.070 1.070
--------- ---------
Equals Shares Held at 03/31/95 101.070 101.070
Multiplied by Net Asset Value at 03/31/95 10.19 10.19
--------- ---------
Equals Ending Value before deduction for
contingent deferred sales charge 1,029.90 1,029.90
Less deferred sales charge (40.00) 0.00
--------- ---------
Equals Ending Redeemable Value at
$1000 Investment (ERV) at 03/31/95 989.90 1,029.90
--------- ---------
Divided by $1,000 (P) 0.9899 1.0299
Subtract 1 -0.0101 0.0299
Expressed as a percentage equals the
Aggregate Total Return for the Period (T) -1.01%
=========
Expressed as a percentage equals the
Aggregate Total Return for the Period 2.99%
=========
ERV divided by P 0.9899
Raise to the power of 6.2931
Equals 0.9381
Subtract 1 -0.0619
Expressed as a percentage equals the
Average Annualized Total Return -6.19%
=========
|
* Does not include sales charge for the period.
RABP: U.S. Government Security - Class C
02/01/95 - 03/31/95
Since Since
Inception Inception
Average Annual Total
Total Return Return*
-------------- ---------
Initial Investment $1,000.00 $1,000.00
Divided by Net Asset Value 10.00 10.00
--------- ---------
Equals Shares Purchased 100.00 100.000
Plus Shares Acquired through
Dividend Reinvestment 1.063 1.063
--------- ---------
Equals Shares Held at 03/31/95 101.063 101.063
Multiplied by Net Asset Value at 03/31/95 10.19 10.19
--------- ---------
Equals Ending Value before deduction for
contingent deferred sales charge 1,029.83 1,029.83
Less deferred sales charge (10.00) 0.00
--------- ---------
Equals Ending Redeemable Value at
$1000 Investment (ERV) at 03/31/95 1,019.83 1,029.83
--------- ---------
Divided by $1,000 (P) 1.0198 1.0298
Subtract 1 0.0198 0.0298
Expressed as a percentage equals the
Aggregate Total Return for the Period (T) 1.98%
=========
Expressed as a percentage equals the
Aggregate Total Return for the Period 2.98%
=========
ERV divided by P 1.0198
Raise to the power of 6.2931
Equals 1.1315
Subtract 1 0.1315
Expressed as a percentage equals the
Average Annualized Total Return 13.15%
=========
|
* Does not include sales charge for the period.
RABP: U.S. Government Security - Class D
02/01/95 - 03/31/95
Since Since
Inception Inception
Average Annual Total
Total Return Return*
-------------- ---------
Initial Investment $1,000.00 $1,000.00
Divided by Initial Maximum Offering Price 10.42
---------
Divided by Net Asset Value 10.00
---------
Equals Shares Purchased 96.000 100.000
Plus Shares Acquired through
Dividend Reinvestment 1.101 1.147
--------- ---------
Equals Shares Held at 03/31/95 97.101 101.147
Multiplied by Net Asset Value at 03/31/95 10.20 10.20
--------- ---------
Equals Ending Redeemable Value at
$1000 Investment (ERV) at 03/31/95 990.43 1,031.69
Divided by $1,000 (P) 0.9904 1.0317
Subtract 1 -0.0096 0.0317
Expressed as a percentage equals the
Aggregate Total Return for the Period (T) -0.96%
=========
Expressed as a percentage equals the
Aggregate Total Return for the Period 3.17%
=========
ERV divided by P 0.9904
Raise to the power of 6.2931
Equals 0.9413
Subtract 1 -0.0587
Expressed as a percentage equals the
Average Annualized Total Return -5.87%
=========
|
* Does not include sales charge for the period.
30 DAYS STANDARDIZED YIELD
FOR THE PERIOD ENDING 03-31-95
RAPB: U.S. Government Securities - Class A
Long term income generally based on yield to
maturity times market value of each security $ 16,631
Plus short term income accrued for the past
thirty days 13,511
-----------
Equals Total Income 30,141
Less expenses for the past thirty days 0
-----------
Equals net monthly income for yield calculation 30,141
-----------
Average shares outstanding for 30 days 507,463
Times the Maximum Offering Price 10.64
-----------
Equals total dollars $5,399,402
===========
Net monthly income divided by total dollars equals 0.005582343
Add 1 1.005582343
Raise to the power of 6 1.033964988
Subtract 1 0.033964988
Times 2 0.067929976
Expressed as a percentage equals the
standardized yield for 30 day period 6.79%
===========
Tax Rate 28.00%
X = 1 minus Tax Rate 72.00%
Standardized Yield divided by X equals
Tax Equivalent Yield for 30 day period 9.43%
===========
|
30 DAYS STANDARDIZED YIELD
FOR THE PERIOD ENDING 03-31-95
RAPB: U.S. Government Securities - Class B
Long term income generally based on yield to
maturity times market value of each security $ 2,739
Plus short term income accrued for the past
thirty days 2,225
-----------
Equals Total Income 4,964
Less expenses for the past thirty days -528
-----------
Equals net monthly income for yield calculation 4,437
-----------
Average shares outstanding for 30 days 83,763
Times the Net Asset Value 10.21
-----------
Equals total dollars $ 855,224
===========
Net monthly income divided by total dollars equals 0.005187749
Add 1 1.005187749
Raise to the power of 6 1.031532991
Subtract 1 0.031532991
Times 2 0.063065982
Expressed as a percentage equals the
standardized yield for the 30 day period 6.31%
===========
Tax Rate 28.00%
X = 1 minus Tax Rate 72.00%
Standardized Yield divided by X equals
Tax Equivalent Yield for 30 day period 8.76%
===========
|
30 DAYS STANDARDIZED YIELD
FOR THE PERIOD ENDING 03-31-95
RAPB: U.S. Government Securities - Class C
Long term income generally based on yield to
maturity times market value of each security $692
Plus short term income accrued for the past
thirty days 562
-----------
Equals Total Income 1,255
Less expenses for the past thirty days -143
-----------
Equals net monthly income for yield calculation 1,112
-----------
Average shares outstanding for 30 days 21,238
Times the Maximum Offering Price 10.21
-----------
Equals total dollars $216,840
===========
Net monthly income divided by total dollars equals 0.005128623
Add 1 1.005128623
Raise to the power of 6 1.031168988
Subtract 1 0.031168988
Times 2 0.062337977
Expressed as a percentage equals the
standardized yield for 30 day period 6.23%
===========
Tax Rate 28.00%
X = 1 minus Tax Rate 72.00%
Standardized Yield divided by X equals
Tax Equivalent Yield for 30 day period 8.65%
===========
|
30 DAYS STANDARDIZED YIELD
FOR THE PERIOD ENDING 03-31-95
RAPB: U.S. Government Securities - Class D
Long term income generally based on yield to
maturity times market value of each security $ 153
Plus short term income accrued for the past
thirty days 124
-----------
Equals Total Income 277
Less expenses for the past thirty days -10
-----------
Equals net monthly income for yield calculation 267
-----------
Average shares outstanding for 30 days 4,664
Times the Net Asset Value 10.64
-----------
Equals total dollars $ 49,626
===========
Net monthly income divided by total dollars equals 0.005376994
Add 1 1.005376994
Raise to the power of 6 1.032698770
Subtract 1 0.032698770
Times 2 0.065397539
Expressed as a percentage equals the
standardized yield for 30 day period 6.54%
===========
Tax Rate 28.00%
X = 1 minus Tax Rate 72.00%
Standardized Yield divided by X equals
Tax Equivalent Yield for 30 day period 9.08%
===========
|
EXHIBIT 99.16(d)
RABP: Global Opportunity - Class A
02/01/95 - 03/31/95
Since Since
Inception Inception
Average Annual Total
Total Return Return*
-------------- ---------
Initial Investment $1,000.00 $1,000.00
Divided by Initial Maximum Offering Price 10.55
---------
Divided by Net Asset Value 10.00
---------
Equals Shares Purchased 94.750 100.000
Plus Shares Acquired through
Dividend Reinvestment 0.000 0.000
--------- ---------
Equals Shares Held at 03/31/95 94.750 100.000
Multiplied by Net Asset Value at 03/31/95 10.09 10.09
--------- ---------
Equals Ending Redeemable Value at
$1000 Investment (ERV) at 03/31/95 956.03 1,009.00
Divided by $1,000 (P) 0.9560 1.0090
Subtract 1 -0.0440 0.0090
Expressed as a percentage equals the
Aggregate Total Return for the Period (T) -4.40%
=========
Expressed as a percentage equals the
Aggregate Total Return for the Period 0.90%
=========
ERV divided by P 0.9560
Raise to the power of 6.2931
Equals 0.7535
Subtract 1 -0.2465
Expressed as a percentage equals the
Average Annualized Total Return -24.65%
=========
|
* Does not include sales charge for the period.
RABP: Global Opportunity - Class B
02/01/95 - 03/31/95
Since Since
Inception Inception
Average Annual Total
Total Return Return*
-------------- ---------
Initial Investment $1,000.00 $1,000.00
Divided by Net Asset Value 10.00 10.00
--------- ---------
Equals Shares Purchased 100.000 100.000
Plus Shares Acquired through
Dividend Reinvestment 0.000 0.000
--------- ---------
Equals Shares Held at 03/31/95 100.000 100.000
Multiplied by Net Asset Value at 03/31/95 10.07 10.07
--------- ---------
Equals Ending Value before deduction for
contingent deferred sales charge 1,007.00 1,007.00
Less deferred sales charge (40.00) 0.00
--------- ---------
Equals Ending Redeemable Value at
$1000 Investment (ERV) at 03/31/95 967.00 1,007.00
--------- ---------
Divided by $1,000 (P) 0.9670 1.0070
Subtract 1 -0.0330 0.0070
Expressed as a percentage equals the
Aggregate Total Return for the Period (T) -3.30%
=========
Expressed as a percentage equals the
Aggregate Total Return for the Period 0.70%
=========
ERV divided by P 0.9670
Raise to the power of 6.2931
Equals 0.8096
Subtract 1 -0.1904
Expressed as a percentage equals the
Average Annualized Total Return -19.04%
=========
|
* Does not include sales charge for the period.
RABP: Global Opportunity - Class C
02/01/95 - 03/31/95
Since Since
Inception Inception
Average Annual Total
Total Return Return*
-------------- ---------
Initial Investment $1,000.00 $1,000.00
Divided by Net Asset Value 10.00 10.00
--------- ---------
Equals Shares Purchased 100.00 100.000
Plus Shares Acquired through
Dividend Reinvestment 0.000 0.000
--------- ---------
Equals Shares Held at 03/31/95 100.000 100.000
Multiplied by Net Asset Value at 03/31/95 10.07 10.07
--------- ---------
Equals Ending Value before deduction for
contingent deferred sales charge 1,007.00 1,007.00
Less deferred sales charge (10.00) 0.00
--------- ---------
Equals Ending Redeemable Value at
$1000 Investment (ERV) at 03/31/95 997.00 1,007.00
--------- ---------
Divided by $1,000 (P) 0.9970 1.0070
Subtract 1 -0.0030 0.0070
Expressed as a percentage equals the
Aggregate Total Return for the Period (T) -0.30%
=========
Expressed as a percentage equals the
Aggregate Total Return for the Period 0.70%
=========
ERV divided by P 0.9970
Raise to the power of 6.2931
Equals 0.9813
Subtract 1 -0.0187
Expressed as a percentage equals the
Average Annualized Total Return -1.87%
=========
|
* Does not include sales charge for the period.
RABP: Global Opportunity - Class D
02/01/95 - 03/31/95
Since Since
Inception Inception
Average Annual Total
Total Return Return*
-------------- ---------
Initial Investment $1,000.00 $1,000.00
Divided by Initial Maximum Offering Price 10.55
---------
Divided by Net Asset Value 10.00
---------
Equals Shares Purchased 94.750 100.000
Plus Shares Acquired through
Dividend Reinvestment 0.000 0.000
--------- ---------
Equals Shares Held at 03/31/95 94.750 100.000
Multiplied by Net Asset Value at 03/31/95 10.08 10.08
--------- ---------
Equals Ending Redeemable Value at
$1000 Investment (ERV) at 03/31/95 955.08 1,008.00
Divided by $1,000 (P) 0.9551 1.0080
Subtract 1 -0.0449 0.0080
Expressed as a percentage equals the
Aggregate Total Return for the Period (T) -4.49%
=========
Expressed as a percentage equals the
Aggregate Total Return for the Period 0.80%
=========
ERV divided by P 0.9551
Raise to the power of 6.2931
Equals 0.7488
Subtract 1 -0.2512
Expressed as a percentage equals the
Average Annualized Total Return -25.12%
=========
|
* Does not include sales charge for the period.