-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, eEsKi4EpGUr4UzV0elei9wGxgnB6sYgWtoTyq7yfdgt45WII+cLGT+4Mlgn/F6On nEttJkSHfQpqslFYKI+Q6A== 0000900092-94-000519.txt : 19941125 0000900092-94-000519.hdr.sgml : 19941125 ACCESSION NUMBER: 0000900092-94-000519 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941123 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERRILL LYNCH BALANCED FD FOR INV & RET CENTRAL INDEX KEY: 0000746637 STANDARD INDUSTRIAL CLASSIFICATION: 0000 STATE OF INCORPORATION: MD FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-04035 FILM NUMBER: 94561589 BUSINESS ADDRESS: STREET 1: P O BOX 9011 CITY: PRINCETON STATE: NJ ZIP: 08543 BUSINESS PHONE: 6092823319 FORMER COMPANY: FORMER CONFORMED NAME: MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT PROG INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: MERRILL LYNCH BALANCED FUND FOR INVESTMENT & RETIREMENT DATE OF NAME CHANGE: 19910529 FORMER COMPANY: FORMER CONFORMED NAME: MERRILL LYNCH RETIREMENT BENEFIT INVESTMENT PROGRAM INC DATE OF NAME CHANGE: 19910501 N-30D 1 ANNUAL REPORT MERRILL LYNCH BALANCED FUND For Investment and Retirement FUND LOGO Annual Report September 30, 1994 This report is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Fund unless accompanied or preceded by the Fund's current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Merrill Lynch Retirement Benefit Investment Program, Inc. Full Investment Portfolio d/b/a Merrill Lynch Balanced Fund for Investment and Retirement Box 9011 Princeton, NJ 08543-9011 Merrill Lynch Balanced Fund for Investment and Retirement PORTFOLIO SUMMARY GRAPHIC AND IMAGE MATERIAL APPEARS HERE. SEE APPENDIX ITEM 1. As of September 30, 1994 Percent of Currency Diversification Net Assets US Dollar 82.9% German Mark 3.2 Mexican Peso 3.2 UK Sterling 2.2 Australian Dollar 1.5 Hong Kong Dollar 1.4 French Franc 1.0 Italian Lira 1.0 Chilean Peso 0.8 Argentinian Peso 0.7 Canadian Dollar 0.5 Portuguese Escudo 0.4 Swedish Krona 0.4 Danish Krone 0.3 Japanese Yen 0.3 Spanish Peseta 0.2 S&P US Common Stock Investments Fund 500* After Tax Profit Margin 8.1% 7.1% Yield 1.8% 2.5% Price/Earnings Ratio** 17.0 18.0 Return on Equity 20.5% 14.9% Average Capitalization (in billions) $7.5 $6.6 Earnings Growth Rate (5 yr. average) 22.0% 13.0% [FN] *An unmanaged broad-based index comprised of common stocks. **Based on 1994 earnings estimates. Merrill Lynch Fixed-Income Investments Fund BOAO Index* Duration 4.9 Years 5.2 Years Average Maturity 8.0 Years 9.3 Years Asset Breakdown: US Treasuries/Agencies 68.2% 76.6% Corporates 10.5% 23.4% International Governments 21.3% -- [FN] *An unmanaged market-weighted corporate and Government master bond index reflecting approximately 97% of total outstanding US bonds. DEAR SHAREHOLDER During the September quarter, the Fund's asset mix shifted slightly to favor cash equivalents at the expense of bonds and equities. At the end of September, cash equivalents represented 8.5% of the portfolio's net assets, bonds were 32.4%, and 59.1% of net assets were invested in equities. Economic Background Economic growth has slowed, but it has not slowed enough to ease investors' inflationary fears. Second quarter growth of 4.0% was aided substantially by inventory accumulation, as final sales advanced at only a 1.6% rate. Economists initially lowered their projections for third-quarter growth to reflect the assumed slowdown in production deemed necessary to work off this increased inventory. But consumer spending on clothes, furniture and automobiles was strong this summer, so that gross domestic product (GDP) growth for the third quarter will most likely register 3.0%--3.5%. However, new home sales and buyer traffic have slowed from the peak of last year and will most likely continue to weaken as mortgage rates increase. What seems to be concerning investors most is the rapid rises of commodity and producer prices, yet perhaps this should be seen as corroboration of a synchronized world recovery in the developed countries with an added bonus from growth in the developing economies. So far we have not seen signs of a pickup in the type of inflation that tends to linger even after growth slows. Consumer prices and wage rate increases are well behaved. Monetary growth in the United States and worldwide is at a record low, credit expansion is at a record low, and the growth rate of government spending in both the United States and other developed nations is very low. The price movement of basic materials and high operating rates of manufacturing capacity are causing investors to remain cautious. It seems possible, though, that after years of restructuring and increasing productivity, operating rates may run at higher levels than in the past two decades without causing inflation to accelerate substantially. Another factor that may prevent inflation from a major upturn during this cycle is the preemptive moves by the Federal Reserve Board and the aggres- sive response by fixed-income investors. In the last eight months, long-term bond yields have increased 200 basis points (2.00%) while inflation has still remained stable at 2.0%. In past economic cycles, inflation had already turned up several percentage points before bond market yields increased. Having said all this, and believing that price in- creases are reacting in a traditional end-of-cycle man- ner, we believe the Federal Reserve Board is likely to continue to raise interest rates to further slow the economy to a non-inflationary 2.5%--3.0% rate. Investment Strategy Our strategy in this negative interest rate environ- ment has been to raise cash from bond holdings and shorten the average life of the bond portfolio until clearer signs of a decelerating economy and easing prices are more evident. Because of the preemptive moves by the Federal Reserve Board, inflation should not reach the level of the late 1980s, and further interest rate increases should be better reflected in the short-term end of the market with a prospective flattening of the yield curve. In the equity markets, our short-term strategy shifted during the September quarter. After a modest rally earlier this summer in the cyclical and interest rate sensitive stocks, we have again reduced our allocation to this sector for the duration of interest rate increases. We continued to reduce our allocation to consumer cyclicals, big ticket pur- chases which will likely be negatively affected by higher cost of credit. Witnessing higher world demand and accelerating prices, we have maintained our investments in globally oriented commodity goods. We continue to emphasize stocks in the rapidly growing worldwide development of the information superhighway. Outside of the United States, we have continued to focus on Latin America and the Pacific Rim markets which are growing at above-average rates. The Mexican stock market recovered this summer in anticipation of the presidential elections and with the conviction the country will remain successful in lowering inflation and maintaining growth. The Mexican market recently was disquieted by a second political assassination this year. Fiscal Year in Review The last 12 months have been more volatile compared to the preceding two years. Interest rates hit a cyclical low in October 1993 and have since increased to a cyclical high. We had anticipated a relatively flat yield curve reflecting a still moderately recovering economy with low inflation expectations. However, preemptive moves by the Federal Reserve Board beginning in early February had a negative impact on fixed-income investments, but a more substantial impact on international fixed-income and equity markets particularly in those currencies tied to the US dollar. Although we reduced our exposure to Mexico and Hong Kong, investments in these markets remain prominent after excellent performance in the fourth quarter of last year. And as both markets are US dollar sensitive, they underperformed in the first half of the year. However, the US currency is showing signs of some stabilization, and these markets are performing better. Now that the Mexican presidential election is over and the new govern- ment seems intent on maintaining growth while still focusing on controlling inflation, this market has recovered substantially. In the Pacific Rim, an area of long-term emphasis, the Hong Kong market was negatively affected by US dollar instability in addition to the impact of the Chinese government tightening credit in an effort to curb high inflation. Some of these investment dollars shifted to the Japanese market, where despite political upheaval and negative economic growth, the equity market was one of the best-performing in the world. In the United States, equity market performance was negatively impacted by the increase in interest rates, which adversely affected long duration growth stocks including telecommunication issues which are heavily weighted in the portfolio. Since the end of June, these stocks have performed very well, which reflects their solid growth prospects, in our opinion. Overall, these investment decisions bene- fited the portfolio's total returns for the fiscal year. In Conclusion We believe that deceleration of US corporate profit growth into 1995 should lead to a shift in favor of steady growth companies which are significantly represented in the equity portfolio. We thank you for your continued investment in Merrill Lynch Balanced Fund for Investment and Retirement, and we look forward to continuing to serve your financial needs throughout the Fund's new fiscal year and beyond. Sincerely, (Arthur Zeikel) Arthur Zeikel President (Denis B. Cummings) Denis B. Cummings Vice President and Portfolio Manager November 3, 1994 OFFICERS AND DIRECTORS Arthur Zeikel, President and Director Kenneth S. Axelson, Director Herbert I. London, Director Robert R. Martin, Director Joseph L. May, Director Andre F. Perold, Director Terry K. Glenn, Executive Vice President Bernard J. Durnin, Senior Vice President Donald C. Burke, Vice President Denis B. Cummings, Vice President and Portfolio Manager Gerald M. Richard, Treasurer Jerry Weiss, Secretary Custodian The Chase Manhattan Bank, N.A. 4 Metro Tech Center, 18th Floor Brooklyn, New York 11245 Transfer Agent Financial Data Services, Inc. 4800 Deer Lake Drive East Jacksonville, Florida 32246-6484 (800) 637-3863 PERFORMANCE DATA None of the past results shown should be considered a representation of future performance. Investment return and principal value of Class A and Class B Shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Total Return Based on a $10,000 Investment GRAPHIC MATERIAL APPEARS HERE. SEE APPENDIX GRAPHIC AND IMAGE MATERIALS ITEM 2. Average Annual Total Return % Return Without % Return With Sales Charge Sales Charge** Class A Shares* Year Ended 9/30/94 +1.81% -4.81% Five Years Ended 9/30/94 +7.89 +6.45 Inception (10/27/88) through 9/30/94 +9.25 +8.01 [FN] *Maximum sales charge is 6.5%. **Assuming maximum sales charge. % Return % Return Without CDSC With CDSC** Class B Shares* Year Ended 9/30/94 +0.76% -2.81% Five Years Ended 9/30/94 +6.79 +6.79 Inception (11/29/85) through 9/30/94 +8.35 +8.35 [FN] *Maximum contingent deferred sales charge is 4% and is reduced to 0% after 4 years. **Assuming payment of applicable contingent deferred sales charge. PERFORMANCE DATA (concluded) Recent Performance Results
12 Month 3 Month 9/30/94 6/30/94 9/30/93 % Change % Change ML Balanced Fund Class A Shares* $11.67 $11.36 $13.02 -2.82%(1) +2.73% ML Balanced Fund Class B Shares* 11.75 11.41 13.09 -2.75(1) +2.98 ML Balanced Fund Class A Shares--Total Return* +1.81(2) +4.34(3) ML Balanced Fund Class B Shares--Total Return* +0.76(4) +4.00(5) S&P 500/ML BOAO Blended Index--Total Return** +2.68 -0.14 *Investment results shown do not reflect sales charges; results shown would be lower if a sales charge was included. **An unmanaged broad-based index comprised of corporate bonds, government bonds and common stocks. Total investment returns for unmanaged indexes are based on estimates. (1)Percent change includes reinvestment of $1.013 per share capital gains distributions. (2)Percent change includes reinvestment of $0.587 per share ordinary income dividends and $1.013 per share capital gains distributions. (3)Percent change includes reinvestment of $0.176 per share ordinary income dividends. (4)Percent change includes reinvestment of $0.454 per share ordinary income dividends and $1.013 per share capital gains distributions. (5)Percent change includes reinvestment of $0.112 per share ordinary income dividends.
IMPORTANT TAX INFORMATION (unaudited) The following information summarizes all per share distributions paid by Merrill Lynch Balanced Fund for Investment and Retirement during the fiscal year ended September 30, 1994:
Qualifying Interest From Other Total Long-Term Record Payable Domestic Federal Non-Qualifying Ordinary Capital Date Date Ordinary Income* Obligations Ordinary Income Income Gains Class A Shares: 12/20/93 12/29/93 $0.104233 $0.057586 $0.249177 $0.410996 $1.012622 07/05/94 07/13/94 $0.039847 $0.037407 $0.098430 $0.175684 -- Class B Shares: 12/20/93 12/29/93 $0.086545 $0.047814 $0.206890 $0.341249 $1.012622 07/05/94 07/13/94 $0.025478 $0.023918 $0.062935 $0.112331 -- *Qualifying domestic ordinary income qualifies for the dividends received deduction for corporations.
The law varies in each state as to whether and what percentage of dividend income attributable to Fed- eral obligations is exempt from state income tax. We recommend that you consult your tax adviser to determine if any portion of the dividends you received is exempt from state income tax. Listed at right are the percentages of the Fund's total assets invested in Federal obligations as of the end of each quarter of the fiscal year. For the Quarter Ended Federal Obligations* December 31, 1993 14.85% March 31, 1994 15.65% June 30, 1994 15.80% September 30, 1994 16.07% Please retain this information for your records. *For purposes of this calculation, Federal obligations include US Treasury Notes, US Treasury Bills, and US Treasury Bonds. Also included are obligations issued by the following agencies: Banks for Cooperatives, Federal Intermediate Credit Banks, Federal Land Banks, Federal Home Loan Banks, and the Student Loan Marketing Association. Repurchase agreements are not included in this calculation. SCHEDULE OF INVESTMENTS
Face Value Percent of Industries Amount* Corporate Bonds Cost (Note 1a) Net Assets Financial $ 10,000,000 Ford Capital BV, 9.375% due 1/01/1998 $ 10,037,900 $ 10,552,600 1.4% Services 5,000,000 Landeskreditbank, N.V., 7.875% due 4/15/2004 4,972,068 4,957,500 0.7 Financial 10,000,000 American General Financial Corp., 7.38% Services-- due 5/13/1997 9,993,200 10,020,400 1.3 Consumer Total Investments in Corporate Bonds 25,003,168 25,530,500 3.4 Country US Government & Agency Obligations United States 4,910,000 Federal Home Loan Mortgage Corp., REMIC, 1243-HP, 5.625% due 11/25/2015 (a) 4,788,017 4,437,413 0.6 20,000,000 Federal National Mortgage Association, 7.00% due 3/25/2024 18,443,750 18,362,500 2.4 Government National Mortgage Association: 12,720,792 7.50% due 6/15/2024 12,152,332 11,953,575 1.6 6,869,588 7.50% due 7/15/2024 6,562,603 6,455,269 0.8 US Treasury Notes: 55,000,000 7.875% due 8/15/2001 53,943,600 56,289,200 7.5 25,000,000 6.25% due 2/15/2003 25,710,938 22,972,750 3.1 35,000,000 5.75% due 8/15/2003 36,432,813 30,860,200 4.1 22,000,000 US Treasury STRIPS++, 6.81% due 5/15/2000(b) 16,050,781 14,639,240 2.0 Total Investments in US Government & Agency Obligations 174,084,834 165,970,147 22.1 Foreign Obligations Australia A$ 3,100,000 Queensland Treasury Corp., Global, 8.00% due 7/14/1999 2,328,332 2,134,085 0.3 Germany Bundes: DM 17,000,000 6.00% due 2/20/1998 10,668,744 10,668,625 1.4 22,000,000 6.375% due 5/20/1998 13,923,234 13,918,671 1.8 Italy Lit 5,000,000 Republic of Italy, 8.75% due 2/08/2001 5,373,050 5,152,670 0.7 Mexico Mxp 45,013,640 Mexican Cetes, 9.04% due 9/07/1995(b) 13,025,996 11,761,787 1.6 United UK Treasury Gilt: Kingdom Pound Sterling 1,350,000 8.75% due 9/01/1997 2,267,919 2,149,575 0.3 4,000,000 8.00% due 6/10/2003 6,698,788 5,949,233 0.8 Total Investments in Foreign Obligations 54,286,063 51,734,646 6.9 Total Investments in Corporate Bonds, US Government & Agency and Foreign Obligations 253,374,065 243,235,293 32.4
SCHEDULE OF INVESTMENTS (continued)
Shares Value Percent of Industries Held US Stocks & Warrants Cost (Note 1a) Net Assets Basic Industry Aluminum 15,000 Aluminum Co. of America (ALCOA) $ 1,285,103 $ 1,271,250 0.2% Chemicals 110,000 du Pont (E.I.) de Nemours & Co. 6,362,863 6,380,000 0.8 145,000 Eastman Chemical Co. 7,478,773 7,884,375 1.0 120,000 IMC Fertilizer Group, Inc. 4,987,939 5,340,000 0.7 90,000 Rohm & Haas Co. 4,872,761 5,141,250 0.7 Packaging 150,000 Crown Cork & Seal Co., Inc. 4,484,320 5,775,000 0.8 Paper & Forest 135,000 Scott Paper Co. 6,002,300 8,251,875 1.1 Producers 85,000 Willamette Industries, Inc. 3,173,000 4,356,250 0.6 Total Basic Industry 38,647,059 44,400,000 5.9 Capital Spending Auto & Truck 125,000 Consorcio G Groupo Dina, S.A. de C.V. (ADR) (c) (1) 2,026,119 1,500,000 0.2 Communication 255,000 +++ADC Telecommunications, Inc. 8,983,466 10,200,000 1.4 Equipment 270,000 DSC Communications Corp. 7,169,181 7,695,000 1.0 75,000 +++General Data Comm Industries, Inc. 1,790,297 2,118,750 0.3 120,000 Motorola, Inc. 6,103,380 6,330,000 0.8 120,000 Tellabs, Inc. 2,539,049 5,100,000 0.7 Computer Services 435,000 Computer Sciences Corp. 12,394,300 18,922,500 2.5 Electrical Equipment 150,000 Siebe PLC (1) 1,309,386 1,277,370 0.2 100,000 W.W. Grainger 6,446,088 5,925,000 0.8 Electronics 210,000 Solectron Corp. 5,168,718 5,538,750 0.7 Engineering & 230,000 Empresas ICA Sociedad Controladora, S.A. de C.V. Construction (ADR) (c) (1) 4,526,225 7,417,500 1.0 410,000 Huntington International Holdings PLC (ADR) (c) (1) 9,996,548 1,998,750 0.3 Environmental 1,100,000 Wheelabrator Technologies, Inc. 12,362,975 16,912,500 2.3 Control Multi-Industry 200,000 Allied-Signal Inc. 6,438,764 6,825,000 0.9 Office Equipment 610,000 Danka Business Systems PLC (ADR) (c) (1) 9,489,019 11,208,750 1.5 15,000 International Business Machines Corp. 1,063,730 1,042,500 0.1 Total Capital Spending 97,807,245 110,012,370 14.7
SCHEDULE OF INVESTMENTS (continued)
Shares Value Percent of Industries Held US Stocks & Warrants Cost (Note 1a) Net Assets Consumer Goods & Services Appliances 675,000 Singer Co. N.V. (ADR) (c) (1) $ 17,730,688 $ 22,781,250 3.0% 474,500 Sunbeam-Oster Inc. 9,420,127 11,565,938 1.5 Automotive 104,700 Magna International Inc. (ADR) (c) (1) 5,172,274 3,860,813 0.5 Equipment Beverages 20,000 PanAmerican Beverage Inc. (ADR) (c) (1) 635,958 717,500 0.1 Consumer-- 90,000 Duracell International Inc. 3,713,033 4,106,250 0.5 Miscellaneous Consumer--Services 180,000 Block (H & R), Inc. 7,774,923 8,257,500 1.1 Drugs & Hospital 60,000 Merck & Co., Inc. 2,143,314 2,130,000 0.3 Supply Health Care 450,000 Humana Inc. 8,419,745 10,631,250 1.4 265,000 Physician Corp. of America 5,482,809 5,962,500 0.8 40,000 Vivra Inc. 727,950 1,090,000 0.1 Household Products 240,000 Procter & Gamble Co. 13,503,704 14,310,000 1.9 Photography 60,000 Eastman Kodak Co. 3,004,778 3,105,000 0.4 Retail 75,000 Phillips-Van Heusen Corp. 1,721,463 1,546,875 0.2 Tires & Rubber 196,100 Cooper Tire & Rubber Co. 4,764,741 4,583,837 0.6 Total Consumer Goods & Services 84,215,507 94,648,713 12.4 Credit-Sensitive & Financial Services Banking 90,000 Banco Frances del Rio de la Plata S.A.(ADR)(c)(1) 2,964,448 2,700,000 0.4 165,000 BankAmerica Corp. 7,440,617 7,280,625 1.0 200,000 Bank of New York Co. 5,581,161 5,925,000 0.8 245,000 Espirito Santo Financial Holding S.A. (ADR) (c) (1) 3,447,435 3,430,000 0.5 130,000 Grupo Financiero Serfin S.A. (ADR) (c) (1) 3,204,369 2,957,500 0.4 Insurance 110,000 International Telephone & Telegraph Corp. 9,403,546 9,171,250 1.2 Total Credit-Sensitive & Financial Services 32,041,576 31,464,375 4.3 Energy Energy--Related 350,000 California Energy Co., Inc. 6,244,403 5,993,750 0.8 Oil--Integrated 110,000 Mobil Oil Corp. 8,561,728 8,703,750 1.2 180,000 Phillips Petroleum Co. 5,854,415 6,165,000 0.8 70,000 Royal Dutch Petroleum Co. N.V. (ADR) (c) (1) 6,155,380 7,516,250 1.0 Total Energy 26,815,926 28,378,750 3.8
SCHEDULE OF INVESTMENTS (continued)
Shares Value Percent of Industries Held US Stocks & Warrants Cost (Note 1a) Net Assets Transports Railroads 310,000 +++Southern Pacific Rail Co. $ 6,386,644 $ 5,812,500 0.8% Total Transports 6,386,644 5,812,500 0.8 Utilities Utilities-- 49,100 ALC Communications Corp. 1,456,673 1,608,025 0.2 Communications 180,000 GTE Corp. 5,790,102 5,467,500 0.7 515,750 LDDS Communications Inc. (Class A) 11,447,075 11,346,500 1.5 415,000 MCI Communications Corp. 11,820,141 10,530,625 1.4 170,000 Southwestern Bell Corp. 7,282,605 7,225,000 1.0 90,000 Sprint Corp. 3,364,449 3,431,250 0.5 200,000 Telefonos de Mexico, S.A. de C.V. (ADR) (c) (1) 9,342,788 12,500,000 1.7 Total Utilities 50,503,833 52,108,900 7.0 Total Investments in US Stocks & Warrants 336,417,790 366,825,608 48.9 Foreign Stocks & Warrants Argentina Banking 40,000 Banco de Galicia y Buenos Aires S.A. (ADR) (c) 1,261,974 1,250,000 0.2 Utilities-- 560,000 Telecom Argentina S.A. (Class B) 3,305,379 3,741,174 0.5 Communications Australia Banking 425,250 Coles Myer Ltd. 1,802,859 1,312,236 0.2 347,492 National Australia Bank Ltd. 2,199,488 2,653,727 0.4 Media/Publishing 80,000 News Corp. (ADR) (c) 4,079,037 4,050,000 0.5 Multi-Industry 308,963 Pacific Dunlop, Ltd. 1,154,171 937,394 0.1 Canada Appliances 280,000 International Semi-Tech Corp. 2,947,648 1,775,457 0.2 Chemicals 90,000 NOVA Corp. (Class A) 949,140 990,000 0.1 Retail Stores 75,000 Hudson's Bay Company (Ordinary) 2,011,843 1,629,523 0.2 Chile Banking 57,000 +++Banco O'Higgins (ADR) (c) 837,114 1,168,500 0.2 Utilities--Electric 96,600 Distribuidora Chilectra Metropolitana S.A. (ADR) (c)++++ 2,696,793 4,745,475 0.6 Denmark Utilities-- 80,000 Tele Danmark A/S 1,882,080 2,180,000 0.3 Communications
SCHEDULE OF INVESTMENTS (continued)
Shares Value Percent of Industries Held Foreign Stocks & Warrants Cost (Note 1a) Net Assets France Industrial 3,123 +++Eramet $ 183,452 $ 201,457 0.0% Insurance 42,900 Compagnie UAP 1,165,352 1,086,662 0.1 Oil--Integrated 153,826 Societe Nationale Elf Aquitaine (ADR) (c) 5,483,913 5,537,736 0.7 Utilities--Water 15,413 Compagnie Generale des Eaux 1,445,264 1,361,634 0.2 Hong Kong Banking 283,415 HSBC Holdings PLC 1,715,599 3,163,646 0.4 Electrical 1,300,000 Johnson Electric Co. 2,603,189 3,659,389 0.5 Equipment Multi--Industry 660,000 Hutchison Whampoa, Ltd. 1,685,630 3,117,761 0.4 Real Estate 225,000 Wharf Holdings Ltd. 948,314 905,626 0.1 Italy Banking 90,000 Instituto Mobilare (ADR) (c) 1,976,579 1,890,000 0.3 Japan Chemicals 65,000 Sekisui Chemical Co. 663,408 684,211 0.1 Electronics 90,000 Mitsubishi Electric Corp. 556,016 643,117 0.1 Tools 30,000 +++Makita Electric Work 609,699 582,996 0.1 Mexico Multi-Industry 465,000 +++Grupo Carso, S.A. de C.V. (ADR) (c)++++ 4,106,100 10,520,625 1.4 Retail Stores 430,000 CIFRA, S.A. de C.V. 'C' 1,129,713 1,203,949 0.2 Portugal Banking 100,000 Banco Commercial Portugal (New) (ADR) (c) 1,342,303 1,350,000 0.2 97,000 Banco Commercial Portugal (Registered) 1,233,051 1,332,215 0.2 Spain Oil--Integrated 60,000 Repsol S.A. 1,616,190 1,832,489 0.2 Sweden Appliances 12,000 Electrolux AB 'B' Free 610,647 568,302 0.1 Telecommunications 40,000 Ericsson (LM) Telephone Co. 2,085,490 2,140,000 0.3
SCHEDULE OF INVESTMENTS (concluded)
Shares Value Percent of Industries Held Foreign Stocks & Warrants Cost (Note 1a) Net Assets United Kingdom Financial Services 100,000 Reuters Holding PLC (ADR) (c) $ 2,571,186 $ 4,475,000 0.6% Multi-Industry 50,000 Hanson PLC Sponsored (ADR) (c) 1,106,687 906,250 0.1 Oil--Integrated 35,000 British Petroleum Co. PLC (ADR) (c) 2,578,350 2,651,250 0.4 Total Investments in Foreign Stocks & Warrants 62,543,658 76,247,801 10.2 Total Investments in US & Foreign Stocks & Warrants 398,961,448 443,073,409 59.1 Face Amount* Short-Term Securities Commercial $ 20,000,000 B.A.T. Capital Corp., 4.92% due 10/26/1994 19,931,667 19,931,667 2.7 Paper** 24,881,000 General Electric Capital Corp., 4.95% due 10/03/1994 24,874,157 24,874,157 3.3 Total Investments in Short-Term Securities 44,805,824 44,805,824 6.0 Total Investments 697,141,337 731,114,526 97.5 Number of Premiums Shares Issue Received Options Written Call Options 1,000 General DataComm Industries, Inc., Written expiring October 1994 at US$30 (1,783) (1,125) 0.0 Total Options Written (1,783) (1,125) 0.0 Total Investments, Net of Options Written $697,139,554 731,113,401 97.5 ============ Other Assets Less Liabilities 18,685,289 2.5 ------------ ------ Net Assets $749,798,690 100.0% ============ ====== (a)Real Estate Mortgage Investment Conduits (REMIC). (b)Represents the yield-to-maturity on this zero coupon issue. These securities are purchased at a deep discount and amortized to maturity. (c)American Depositary Receipt (ADR). *Denominated in US dollars unless otherwise indicated. **Commercial Paper is traded on a discount basis; the interest rates shown are the discount rates paid at the time of purchase by the Fund. (1)Consistent with the general policy of the Securities and Exchange Commission, the nationality or domicile of an issuer for determination of foreign issuer status may be (i) the country under whose laws the issuer is organized, (ii) the country in which the issuer's securities are principally traded, or (iii) the country in which the issuer derives a significant proportion (at least 50%) of its revenue or profits from goods produced or sold, investments made, or services performed in the country, or in which at least 50% of the assets of the issuer are situated. See Notes to Financial Statements. ++Separate Trading of Registered Interest and Principal of Securities (STRIPS). ++++Restricted securities as to resale. The value of the Fund's investment in restricted securities was approximately $15,266,000, representing 2.0% of net assets. Value Issue Acquisition Date Cost (Note 1a) Distribuidora Chilectra Metropolitana S.A. (ADR) 2/12/1992-2/26/1992 $ 2,696,793 $ 4,745,475 Grupo Carso, S.A. de C.V. (ADR) 9/24/1991-1/24/1992 4,106,100 10,520,625 ------------ ------------ Total $ 6,802,893 $ 15,266,100 ============ ============ +++Non-income producing security.
FINANCIAL INFORMATION Statement of Assets and Liabilities as of September 30, 1994 Assets: Investments, at value (identified cost--$697,141,337) (Note 1a) $731,114,526 Cash 1,193,921 Receivables: Securities sold $ 39,659,730 Interest 3,297,249 Dividends 676,737 Capital shares sold 251,850 43,885,566 ------------ Prepaid registration fees and other assets (Note 1d) 126,383 ------------ Total assets 776,320,396 ------------ Liabilities: Options written, at value (premiums received--$1,783) (Notes 1a & 1c) 1,125 Payables: Securities purchased 23,288,459 Capital shares redeemed 1,805,947 Distributor (Note 2) 592,475 Investment adviser (Note 2) 396,063 26,082,944 ------------ Accrued expenses and other liabilities 437,637 ------------ Total liabilities 26,521,706 ------------ Net Assets: Net assets $749,798,690 ============ Net Assets Class A Shares of Common Stock, $0.01 par value, 500,000,000 shares authorized $ 34,246 Consist of: Class B Shares of Common Stock, $0.01 par value, 500,000,000 shares authorized 604,020 Paid-in capital in excess of par 652,263,675 Undistributed investment income--net 3,227,255 Undistributed realized capital gains on investments and foreign currency transactions--net 59,682,149 Unrealized appreciation on investments and foreign currency transactions--net 33,987,345 ------------ Net assets $749,798,690 ============ Net Asset Class A--Based on net assets of $39,962,564 and 3,424,576 shares outstanding $ 11.67 Value: ============ Class B--Based on net assets of $709,836,126 and 60,402,048 shares outstanding $ 11.75 ============ See Notes to Financial Statements.
FINANCIAL INFORMATION (continued) Statement of Operations for the Year Ended September 30, 1994 Investment Interest and discount earned (net of $91,991 foreign withholding tax) $ 21,932,818 Income Dividends (net of $259,965 foreign withholding tax) 6,678,142 (Notes 1d Other 204,094 & 1e): ------------ Total income 28,815,054 ------------ Expenses: Distribution fees--Class B (Note 2) 7,779,195 Investment advisory fees (Note 2) 5,173,680 Transfer agent fees--Class B (Note 2) 1,174,407 Custodian fees 190,179 Printing and shareholder reports 182,011 Accounting services (Note 2) 98,036 Transfer agent fees--Class A (Note 2) 53,139 Professional fees 51,144 Registration fees (Note 1f) 49,492 Directors' fees and expenses 48,967 Pricing fees 4,640 Amortization of organization expenses (Note 1f) 2,683 Other 23,017 ------------ Total expenses 14,830,590 ------------ Investment income--net 13,984,464 ------------ Realized & Realized gain from: Unrealized Investments--net $ 66,568,356 Gain (Loss) Foreign currency transactions--net 1,285 66,569,641 on Investment ------------ & Foreign Change in unrealized appreciation/depreciation on: Currency Investments--net (72,110,568) Transactions-- Foreign currency transactions--net 49,571 (72,060,997) Net (Notes 1b, ------------ ------------ 1e & 3): Net realized and unrealized loss on investments and foreign currency transactions (5,491,356) ------------ Net Increase in Net Assets Resulting from Operations $ 8,493,108 ============ See Notes to Financial Statements.
FINANCIAL INFORMATION (continued) Statements of Changes in Net Assets
For the Year Ended Sept. 30, Increase (Decrease) in Net Assets: 1994 1993 Operations: Investment income--net $ 13,984,464 $ 16,570,858 Realized gain on investments and foreign currency transactions--net 66,569,641 82,929,610 Change in unrealized appreciation/depreciation on investments and foreign currency transactions--net (72,060,997) 14,121,027 ------------ ------------ Net increase in net assets resulting from operations 8,493,108 113,621,495 ------------ ------------ Dividends & Investment income--net: Distributions Class A (1,253,348) (994,119) to Share- Class B (14,802,935) (17,314,603) holders Realized gain on investments--net: (Note 1g): Class A (4,103,194) (1,508,643) Class B (75,192,306) (59,542,543) ------------ ------------ Net decrease in net assets resulting from dividends and distributions to shareholders (95,351,783) (79,359,908) ------------ ------------ Capital Share Net decrease in net assets derived from capital Transactions share transactions (34,985,543) (69,858,642) (Note 4): ------------ ------------ Net Assets: Total decrease in net assets (121,844,218) (35,597,055) Beginning of year 871,642,908 907,239,963 ------------ ------------ End of year* $749,798,690 $871,642,908 ============ ============ *Undistributed investment income--net $ 3,227,255 $ 4,746,266 ============ ============ See Notes to Financial Statements.
FINANCIAL INFORMATION (concluded) FINANCIAL HIGHLIGHTS
The following per share data and ratios have been derived from information provided in the financial statements. Class A For the Year Ended September 30, Increase (Decrease) in Net Asset Value: 1994* 1993 1992 1991 1990 Per Share Net asset value, beginning of year $ 13.02 $ 12.57 $ 11.94 $ 10.61 $ 11.93 Operating -------- -------- -------- -------- -------- Performance: Investment income--net .32 .43 .47 .70 .64 Realized and unrealized gain (loss) on investments and foreign currency transactions (1)--net (.07) 1.29 .61 1.63 (1.41) -------- -------- -------- -------- -------- Total from investment operations .25 1.72 1.08 2.33 (.77) -------- -------- -------- -------- -------- Less dividends and distributions: Investment income--net (.37) (.39) (.45) (.62) (.55) Realized gain on investments--net (1.23) (.88) -- (.38) -- -------- -------- -------- -------- -------- Total dividends and distributions (1.60) (1.27) (.45) (1.00) (.55) -------- -------- -------- -------- -------- Net asset value, end of year $ 11.67 $ 13.02 $ 12.57 $ 11.94 $ 10.61 ======== ======== ======== ======== ======== Total Based on net asset value per share 1.81% 14.62% 9.23% 23.14% (6.86%) Investment ======== ======== ======== ======== ======== Return:** Ratios to Expenses .83% .83% .81% .85% .83% Average ======== ======== ======== ======== ======== Net Assets: Investment income--net 2.68% 3.09% 3.18% 3.64% 5.12% ======== ======== ======== ======== ======== Supplemental Net assets, end of year (in thousands) $ 39,963 $ 40,688 $ 20,320 $ 12,839 $ 44,511 Data: ======== ======== ======== ======== ======== Portfolio turnover 59.15% 79.55% 65.40% 173.76% 163.56% ======== ======== ======== ======== ======== The following per share data and ratios have been derived from information provided in the financial statements. Class B For the Year Ended September 30, Increase (Decrease) in Net Asset Value: 1994* 1993 1992 1991 1990 Per Share Net asset value, beginning of year $ 13.09 $ 12.62 $ 11.99 $ 10.60 $ 11.91 Operating --------- --------- --------- --------- ---------- Performance: Investment income--net .20 .24 .29 .39 .50 Realized and unrealized gain (loss) on investments and foreign currency transactions (1)--net (.07) 1.37 .66 1.83 (1.39) --------- --------- --------- --------- ---------- Total from investment operations .13 1.61 .95 2.22 (.89) --------- --------- --------- --------- ---------- Less dividends and distributions: Investment income--net (.24) (.26) (.32) (.45) (.42) Realized gain on investments--net (1.23) (.88) -- (.38) -- --------- --------- --------- --------- ---------- Total dividends and distributions (1.47) (1.14) (.32) (.83) (.42) --------- --------- --------- --------- ---------- Net asset value, end of year $ 11.75 $ 13.09 $ 12.62 $ 11.99 $ 10.60 ========= ========= ========= ========= ========== Total Based on net asset value per share 0.76% 13.49% 8.01% 21.91% (7.79%) Investment ========= ========= ========= ========= ========== Return:** Ratios to Expenses, excluding distribution fees .86% .85% .85% .90% .86% Average ========= ========= ========= ========= ========== Net Assets: Expenses 1.86% 1.85% 1.85% 1.90% 1.86% ========= ========= ========= ========= ========== Investment income--net 1.65% 1.99% 2.10% 3.37% 3.90% ========= ========= ========= ========= ========== Supplemental Net assets, end of year (in thousands) $ 709,836 $ 830,955 $ 886,920 $ 986,895 $1,171,567 Data: ========= ========= ========= ========= ========== Portfolio turnover 59.15% 79.55% 65.40% 173.76% 163.56% ========= ========= ========= ========= ========== *Based on average shares outstanding during the year. **Total investment returns exclude the effect of sales loads. (1)Foreign currency transaction amounts have been reclassified to conform to 1994 presentation. See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS 1. Significant Accounting Policies: Merrill Lynch Retirement Benefit Investment Pro- gram, Inc., Full Investment Portfolio does business under the name Merrill Lynch Balanced Fund for Investment and Retirement. Merrill Lynch Balanced Fund for Investment and Retirement (the "Fund") is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The Fund offers both Class A and Class B Shares. Class A Shares are sold with a front-end sales charge. Class B Shares may be subject to a contingent deferred sales charge. Both classes of shares have identical voting, dividend, liquidation and other rights and the same terms and conditions, except that Class B Shares bear certain expenses related to the distribution of such shares and have exclusive voting rights with respect to matters relating to such distribution expenditures. On September 27, 1994, shareholders approved the implementation of the Merrill Lynch Select Pricing sm System, which will offer two new classes of shares, Class C and Class D. The following is a summary of significant accounting policies followed by the Fund. (a) Valuation of investments--Portfolio securities and options which are traded on stock exchanges are valued at the last sale price as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price. Securities traded in the over-the-counter market are valued at the last quoted bid prices at the close of trading on the New York Stock Exchange on each day by brokers that make markets in the securities. Portfolio securities which are traded both in the over-the-counter market and on a stock ex- change are valued according to the broadest and most representative market. 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 value as determined in good faith by or under the direction of the Board of Directors of the Fund. (b) Foreign currency transactions--Transactions denominated in foreign currencies are recorded at the exchange rate prevailing when recognized. Assets and liabilities denominated in foreign currencies are valued at the exchange rate at the end of the period. Foreign currency transactions are the result of settling (realized) and valuing (unrealized) assets and liabilities expressed in foreign currencies into US dollars. Realized and unrealized gains or losses from investments include the effects of foreign exchange sales on investments. The Fund is authorized to enter into forward foreign exchange contracts as a hedge against either spe- cific transactions or portfolio positions. Such con- tracts are not entered on the Fund's records. However, the effect on operations is recorded from the date the Fund enters into such contracts. Premium or discount is amortized over the life of the contracts. The Fund may also purchase or sell listed or over- the-counter 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 Fund, sold by the Fund but not yet delivered, or committed or anticipated to be purchased by the Fund. (c) Options--When the Fund sells an option, an amount equal to the premium received by the Fund is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked to market to reflect the current market value of the option written. When a security is sold through an exercise of an option, the related premium received is deducted from the basis of the security sold. When an option expires (or the Fund enters into a closing transaction), the Fund realizes a gain or loss on the option to the extent of the premiums received or paid (or loss or gain to the extent the cost of the closing transaction is less than or greater than the premium paid or received). Written and purchased options are non-income producing investments. (d) Income taxes--It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no Federal income tax provision is required. Under the applicable foreign tax law, a withholding tax may be imposed on interest, dividends and capital gains at various rates. (e) Security transactions and investment income-- Security transactions are recorded on the dates the transactions are entered into (the trade dates). Divi- dend income is recorded on the ex-dividend date, except that if the ex-dividend date has passed, certain dividends from foreign securities are recorded as soon as the Fund is informed of the ex-dividend date. Interest income (including amortization of discount) is recognized on the accrual basis. Realized gains and losses on security transactions are determined on the identified cost basis. (f) Prepaid registration fees--Prepaid registration fees are charged to expense as the related shares are issued. (g) Dividends and distributions--Dividends and distributions paid by the Fund are recorded on the ex-dividend dates. (h) Reclassifications--Certain 1993 amounts have been reclassified to conform to the 1994 presentation. Undistributed realized capital gains-net in the amount of $552,808 has been reclassified to undis- tributed investment income-net. 2. Investment Advisory Agreement and Transaction with Affiliates: The Fund has entered into an Investment Advisory Agreement with Merrill Lynch Asset Management, L.P. ("MLAM"). Effective January 1, 1994, the invest- ment advisory business of MLAM was reorganized from a corporation to a limited partnership. Both prior to and after the reorganization, ultimate con- trol of MLAM was vested with Merrill Lynch & Co., Inc. ("ML & Co."). The general partner of MLAM is Princeton Services, Inc. ("PSI"), an indirect wholly- owned subsidiary of ML & Co. The limited partners are ML & Co. and Merrill Lynch Investment Manage- ment, Inc. ("MLIM"), which is also an indirect wholly-owned subsidiary of ML & Co. The Fund has also entered into a Distribution Agreement and a Distribution Plan with Merrill Lynch Funds Dis- tributor, Inc. ("MLFD" or "Distributor"), a wholly- owned subsidiary of MLIM. MLAM is responsible for the management of the Fund's portfolio and provides the necessary person- nel, facilities, equipment and certain other services necessary to the operations of the Fund. For such services, the Fund pays a monthly fee based upon the average daily value of the Fund's net assets at the following annual rates: 0.65% of the average daily net assets not exceeding $500 million; 0.60% of the average daily net assets exceeding $500 mil- lion but not exceeding $1.5 billion; 0.55% of the average daily net assets exceeding $1.5 billion but not exceeding $2.5 billion; 0.50% of the average daily net assets exceeding $2.5 billion but not exceeding $3.5 billion; and 0.45% of the average daily net assets exceeding $3.5 billion. The most restrictive annual expense limitation requires that the Adviser reimburse the Fund to the extent the Fund's expenses (excluding interest, taxes, distribution fees, brokerage fees and commissions, and extraordinary items) exceed 2.5% of the Fund's first $30 million of average daily net assets, 2.0% of the next $70 million of average daily net assets, and 1.5% of the average daily net assets in excess thereof. No payment will be made to MLAM during any fiscal year which will cause such expenses to exceed the most restrictive expense limitation applicable at the time of such payment. Pursuant to a distribution plan (the "Distribution Plan") adopted by the Fund in accordance with Rule 12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor an ongoing account maintenance fee and a distribution fee, which are accrued daily and paid monthly at the annual rates of 0.25% and 0.75%, respectively, of the average daily net assets of the Class B Shares of the Fund. Pursu- ant 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 Fund. The ongoing account maintenance fee compensates the Distributor and MLPF&S for providing account maintenance services to Class B shareholders. The ongoing distribution fee compensates the Distributor and MLPF&S for providing shareholder and distribution services and bearing certain distribution-related expenses of the Fund. For the year ended September 30, 1994, MLFD earned underwriting discounts of $3,336, and MLPF&S received dealer concessions of $51,587 on sales of the Fund's Class A Shares. MLPF&S received contingent deferred sales charges of $163,949 relating to transactions in Class B Shares and $75,348 in commissions on the execution of portfolio security transactions for the Fund during the period. Financial Data Services, Inc. ("FDS"), a wholly- owned subsidiary of ML & Co., is the Fund's transfer agent. Accounting services are provided to the Fund by MLAM at cost. Certain officers and/or directors of the Fund are officers and/or directors of MLAM, MLIM, PSI, MLPF&S, FDS, MLFD, and/or ML & Co. NOTES TO FINANCIAL STATEMENTS (concluded) 3. Investments: Purchases and sales of investments, excluding short-term securities, for the year ended Septem- ber 30, 1994 were $455,609,366 and $600,829,358, respectively. Net realized and unrealized gains (losses) as of September 30, 1994 were as follows: Realized Unrealized Gains Gains (Losses) (Losses) Long-term investments $66,532,102 $33,973,189 Options written 36,254 658 Foreign currency transactions (241,606) 13,498 Forward foreign exchange contracts 242,891 -- ----------- ----------- Total $66,569,641 $33,987,345 =========== =========== As of September 30, 1994, net unrealized apprecia- tion for Federal income tax purposes aggregated $33,973,847, of which $64,172,617 related to appre- ciated securities and $30,198,770 related to de- preciated securities. The aggregate cost of invest- ments less premiums received for options written at September 30, 1994 for Federal income tax purposes was $697,139,554. Transactions in call options written for the year ended September 30, 1994 were as follows: Number of Premiums Shares Received Outstanding options at beginning of year -- -- Options written 32,500 $ 48,779 Options closed (10,400) (10,154) Options exercised (7,500) (23,007) Options expired (13,600) (13,835) ----------- ----------- Outstanding options at end of year 1,000 $1,783 =========== =========== 4. Capital Share Transactions: Net decrease in net assets derived from capital share transactions was $34,985,543 and $69,858,642 for the years ended September 30, 1994 and September 30, 1993, respectively. Transactions in capital shares for Class A and Class B Shares were as follows: Class A Shares for the Year Dollar Ended September 30, 1994 Shares Amount Shares sold 1,518,510 $ 18,698,722 Shares issued to share- holders in reinvestment of dividends and distributions 428,291 5,110,279 ------------ ------------- Total issued 1,946,801 23,809,001 Shares redeemed (1,648,302) (19,908,322) ------------ ------------- Net increase 298,499 $ 3,900,679 ============ ============= Class A Shares for the Year Dollar Ended September 30, 1994 Shares Amount Shares sold 2,695,028 $ 33,091,210 Shares issued to share- holders in reinvestment of distributions 161,050 1,956,633 ------------ ------------- Total issued 2,856,078 35,047,843 Shares redeemed (1,346,924) (17,015,867) ------------ ------------- Net increase 1,509,154 $ 18,031,976 ============ ============= Class B Shares for the Year Dollar Ended September 30, 1994 Shares Amount Shares sold 2,858,236 $ 35,039,885 Shares issued to share- holders in reinvestment of dividends and distributions 6,329,365 76,402,900 ------------ ------------- Total issued 9,187,601 111,442,785 Shares redeemed (12,275,154) (150,329,007) ------------ ------------- Net decrease (3,087,553) $ (38,886,222) ============ ============= Class B Shares for the Year Dollar Ended September 30, 1994 Shares Amount Shares sold 2,722,243 $ 34,400,436 Shares issued to share- holders in reinvestment of distributions 5,336,253 65,136,704 ------------ ------------- Total issued 8,058,496 99,537,140 Shares redeemed (14,832,136) (187,427,758) ------------ ------------- Net decrease (6,773,640) $ (87,890,618) ============ ============= 5. Loan Securities: At September 30, 1994, the Fund held a US Treasury Bond having an value of approximately $4,169,000 as collateral for portfolio securities loaned having a market value of approximately $4,050,000. 6. Commitments: At September 30, 1994, the Fund had entered into forward foreign exchange contracts under which it had agreed to purchase and sell various foreign currencies with values of approximately $183,000 and $772,000. INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders, Merrill Lynch Balanced Fund for Investment and Retirement (formerly Merrill Lynch Retirement Benefit Investment Program, Inc.): We have audited the accompanying statement of assets and liabilities, including the schedule of invest- ments, of Merrill Lynch Balanced Fund for Invest- ment and Retirement as of September 30, 1994, the related statements of operations for the year then ended and changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended. These financial statements and the financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with gener- ally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned at September 30, 1994 by correspondence with the custodian and brokers. An audit also in- cludes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements and financial highlights present fairly, in all material respects, the financial position of Merrill Lynch Balanced Fund for Investment and Retirement as of September 30, 1994, the results of its operations, the changes in its net assets, and the financial high- lights for the respective stated periods in conformity with generally accepted accounting principles. Deloitte & Touche LLP Princeton, New Jersey October 31, 1994 PORTFOLIO INFORMATION Ten Largest Equity Holdings Percent of As of September 30, 1994 Net Assets Singer Co. N.V. (ADR) 3.0% Computer Sciences Corp. 2.5 Wheelabrator Technologies, Inc. 2.3 Procter & Gamble Co. 1.9 Telefonos de Mexico, S.A. de C.V. (ADR) 1.7 Sunbeam-Oster Inc. 1.5 LDDS Communications Inc. (Class A) 1.5 Danka Business Systems PLC (ADR) 1.5 Humana Inc. 1.4 MCI Communications Corp. 1.4 APPENDIX GRAPHIC AND IMAGE MATERIALS. ITEM 1: PORTFOLIO SUMMARY Sector Representation As a Percentage of US Equities as of September 30, 1994 A bar graph depicting the Fund's sector representation as a percentage of US equities as of September 30, 1994 is a follows: Basic Industry 12.l% Credit-Sensitive & Financial Services 8.6% Transports 1.6% Consumer Goods & Services 25.8% Capital Spending 30.0% Energy 7.7% Utilities 14.2% Security Diversification As of September 30, 1994 A bar graph depicting the Fund's security diversification as of September 30, 1994 is as follows: Stocks 59.1% US 48.9% Non US 10.2% Bonds 32.4% US 25.5% Non US 6.9% Cash & Cash Equivalents 8.5% ITEM 2: Total Return Based on a $10,000 Investment A line graph depicting the growth of an investment in the Fund's Class A Shares compared to growth of an investment in the S&P 500 Index and the S&P 500/ML BOAO Blended Index. Beginning and ending values are: 10/27/88** 9/30/94 ML Balanced Fund, Inc.++-- Class A Shares $9,350 $15,794 S&P 500 Index++++ $10,000 $20,127 S&P 500/ML BOAO Blended Index++++++ $10,000 $18,358 [FN] *Assuming maximum sales charge, transaction costs and other operating expenses, including advisory fees. **Commencement of Operations. ++ML Balanced Fund invests primarily in high quality, larger capitalization common stocks and other types of securities, including fixed-income securities and convertible securities. ++++This unmanaged broad-based Index is comprised of common stocks. ++++++This unmanaged Index, which is an equally weighted blend of the S&P 500 Index and the ML BOAO Index, is comprised of common stocks as well as investment-grade bonds. A line graph depicting the growth of an investment in the Fund's Class B Shares compared to growth of an investment in the S&P 500 Index and the S&P 500/ML BOAO Blended Index. Beginning and ending values are: 11/29/85** 9/30/94 ML Balanced Fund, Inc.++-- Class B Shares* $10,000 $20,315 S&P 500 Index++++ $10,000 $30,484 S&P 500/ML BOAO Blended Index++++++ $10,000 $26,618 [FN] *Assuming maximum sales charge, transaction costs and other operating expenses, including advisory fees. **Commencement of Operations. ++ML Balanced Fund invests primarily in high quality, larger capitalization common stocks and other types of securities, including fixed-income securities and convertible securities. ++++This unmanaged broad-based Index is comprised of common stocks. ++++++This unmanaged Index, which is an equally weighted blend of the S&P 500 Index and the ML BOAO Index, is comprised of common stocks as well as investment-grade bonds. -----END PRIVACY-ENHANCED MESSAGE-----