-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OVyK1WqM6m8Leps3a+4AY1Moe5DsohwxgK7QpS08Ei4LpjprO/2UVrvHNhdQnjGM z/0lqW9gGH/FbwzY2WNfcA== 0000900092-95-000304.txt : 19951031 0000900092-95-000304.hdr.sgml : 19951031 ACCESSION NUMBER: 0000900092-95-000304 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950831 FILED AS OF DATE: 19951030 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERRILL LYNCH BALANCED FD FOR INV & RET CENTRAL INDEX KEY: 0000746637 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [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: 95585295 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, INC. FUND LOGO Annual Report September 30,1995 Officers and Directors Arthur Zeikel, President and Director James H. Bodurtha, 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 Chase MetroTech Center, 18th Floor Brooklyn, NY 11245 Transfer Agent Merrill Lynch Financial Data Services, Inc. 4800 Deer Lake Drive East Jacksonville, FL 32246-6484 (800) 637-3863 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 Balanced Fund for Investment and Retirement, Inc. Box 9011 Princeton, NJ 08543-9011 Merrill Lynch Balanced Fund for Investment and Retirement, Inc. PORTFOLIO SUMMARY AS OF SEPTEMBER 30, 1995 Security Diversification A pie chart illustrating the following percentages: US Stocks 50.3% International Stocks 11.2% US Bonds 24.8% International Bonds 6.1% Cash 7.6% US Stock Sector Allocation A pie chart illustrating the following percentages: Capital Spending 36.4% Energy 6.4% Basic Industry 11.5% Credit-Sensitive & Financial Services 17.5% Utilities 8.5% Consumer Cyclicals 8.0% Consumer Staples 11.7% US Domiciled Common Stock S&P Investments Fund 500* After-Tax Profit Margin 7.7% 7.5% Yield 1.9% 2.3% Price/Earnings Ratio** 18.0 17.0 Return on Equity 18.0% 17.3% Average Capitalization (in billions) $13.6 $8.5 Earnings Growth Rate (5 yr. average) 17.0% 12.0% [FN] *An unmanaged broad-based index comprised of common stocks. **Based on 1995 earnings estimates. Merrill Lynch Fixed-Income Investments Fund B0A0 Index* Duration 5.1 Years 5.5 Years Average Maturity 8.5 Years 9.4 Years Asset Breakdown: US Treasuries/Agencies 72.2% 76.0% Corporates 10.6% 24.0% International Governments 17.2% -- [FN] *An unmanaged market-weighted corporate and Government master bond index reflecting approximately 97% of total outstanding US bonds. Percent of Currency Diversification Net Assets US Dollar 83.5% Japanese Yen 4.1 Canadian Dollar 2.4 German Mark 2.2 Australian Dollar 1.8 Mexican Peso 1.3 Italian Lira 1.1 Netherlands Guilder 0.9 Norwegian Krone 0.8 Portuguese Escudo 0.6 Hong Kong Dollar 0.6 UK Sterling 0.3 Chilean Peso 0.3 Indonesian Rupiah 0.1 Percent of US Equities vs. S&P S&P 500 Index Fund vs. 500* Basic Industry 11.5% 7.1% Capital Spending 36.4 20.3 Conglomerates 0.0 1.3 Consumer Cyclicals 8.0 8.4 Consumer Staples 11.7 26.9 Credit-Sensitive & Financial Services 17.5 12.8 Energy 6.4 9.3 Transports 0.0 1.7 Utilities 8.5 12.2 [FN] *An unmanaged broad-based index comprised of common stocks. DEAR SHAREHOLDER Economic Background Third-quarter economic activity decelerated despite the July cut in the Federal Funds rate, which reversed the series of interest rate increases that ended in 1994. Inventories built as consumers slowed their spending (especially for products versus services), employment growth decelerated, and savings inched up. Industry kept up a torrid pace of spending for capital improvements, most of which were quick payback expenditures designed to reduce costs, especially for labor, and improve productivity. Other developed economies are behind the US economy, but are recognizing the need to reduce costs as well. Since the end of the cold war, price competition has intensified as workers from formerly communist countries flooded the world labor market. Adding to the problem, much of the defense industry was dislocated, government spending has decelerated and corporate restructuring and streamlining contributed to an underlying disinflationary bias by keeping labor costs low. While some observers believe US industry has completed the needed productivity-enhancing projects and little more will be done, it is more likely this is a continuous process. It will be many years before we can relent on productivity enhancements as there are two billion laborers in the global work force earning less than $10 weekly. In this context, the planned 9.4% increase in capital spending by US industry for 1996 on top of strong durable goods orders recently is appropriate, in our opinion. The result of these trends is decelerating inflation in the fifth year of an economic expansion and coincident sharp improvement in worker productivity. Real sales per employee are up 14% since March 1991, and even more remarkably, real profits per employee are up 130%, or six times the improvement of the average gain of the two prior expansions. Corporate profit gains have been so large that the average stock price/earnings ratio declined in 1995, despite a better than 25% advance in stock prices during the first three quarters. Profit gains in the second half of 1995 are decelerating rapidly from recent quarters, but few observers expect a downturn in profits before earnings gains reaccelerate. The Federal Reserve Board was sufficiently confident of growth prospects at the late September Federal Open Market Committee meeting to hold the Federal Funds rate steady. Increased US dollar volatility in the foreign exchange markets has been unsettling. Should the strength in the US dollar witnessed early in September reappear as we expect, driving bond yields still lower, the interest rate sensitive housing and auto industries would power the economy through 1996, a presidential election year. The impending Presidential election increases the pressure on elected Congressmen to produce a budget compromise that deals with the recurring annual budget deficits which have become more unpopular. Early in the new fiscal year the national debt is expected to reach the legislated ceiling, requiring new legislation to lift that ceiling above $5 trillion. Debate over resolution of both the budget and the debt ceiling situations has the ability to influence the value of the US dollar in the foreign exchange market and in turn the debt market in the United States. Investment Strategy Turmoil in the currency and debt markets is likely to provide an opportunity to assume a more aggressive fixed-income investment strategy. We had reduced the allocation to bonds at the end of the rally which began in November 1994. With inflation showing no signs of reacceleration and Congress apparently working toward a balanced budget, we believe bonds will produce positive returns from both appreciation and income in the months just ahead. Recognizing that equities have trended higher for nearly five years without a major correction, we could see a setback, perhaps caused by uncertainty over the budget/debt ceiling debate or a destabilized US dollar, or both. However, since the valuation of equities has declined while earnings accelerated and the popular expectation is that profits will grow through at least 1996, higher stock prices seem likely in the next few quarters. We have secured profits in numerous issues, many of which were selling at elevated price/earnings multiples, including computer manufacturers and software companies, while we have reduced the sizable holdings in communications equipment manufacturers and semiconductor producers. Our continuing expectation of lower interest rates argues in favor of maintaining our overweight position in the interest rate sensitive groups including banks, insurance companies and communications utilities. We have been underweight recently in the large US-based multinationals which derive a sizable portion of their profits from non-US areas in anticipation of a firming US dollar. This is the reverse of our position earlier in 1995 when the US dollar was weak. Fiscal Year in Review Both equity and fixed-income markets have continued to be volatile by historic standards during the past year. Interest rates have been declining for most of the year, justifying the more aggressive portfolio posture we assumed from October 1994 through early July 1995, when we thought the bond market had modestly overdone the advance fully justified by fundamentals. Our slight decrease in bond holdings in July has had no net consequence to the Fund's performance, since interest rates on balance have been flat since then, but the increased allocation to bonds in the fourth quarter of 1994 at the expense of cash equivalents was both timely and beneficial. Equities were the investment of choice for the past year as the popular indexes advanced about 25%. For most of the year the equity allocation approached 62% of portfolio resources, which is 80% of the maximum permitted in the Fund. The equity selection was weighted heavily for most of the year in favor of capital spending issues, including several communications equipment manufacturers which did well late in 1994 and from the second quarter of 1995 onward. On the other hand, communications utilities did not contribute to overall performance until late in the fiscal year and in a few instances pro- duced little net gain until the third quarter of 1995. Cash equivalents were slightly above 7% of portfolio resources on average during the year, which did not enhance total return, since equities produced a substantially higher return than the approximate 6% yield achieved on liquid short-term instruments. Foreign fixed-income investments produced a modestly better return than their US counterparts, since the US dollar was weak most of the year. Non-US equities, however, represented a substantial drag on portfolio return especially in the early months of the fiscal year through February 1995. Our earlier emphasis on developing markets that were priced at lower price/earnings multiples than the United States while growing faster than the United States proved unsuccessful when the US dollar weakened and the flow of funds to developing economies dried up. Since the first quarter, our non-US equity investments have been selected with emphasis on earnings growth and their ability to sell across country borders, which has proven successful. In Conclusion We thank you for your continued investment in Merrill Lynch Balanced Fund for Investment and Retirement. Sincerely, (Arthur Zeikel) Arthur Zeikel President (Denis B. Cummings) Denis B. Cummings Vice President and Portfolio Manager October 19, 1995 PERFORMANCE DATA About Fund Performance Since October 21, 1994, investors have been able to purchase shares of the Fund through the Merrill Lynch Select Pricing SM System, which offers four pricing alternatives: * Class A Shares incur a maximum initial sales charge (front-end load) of 5.25% and bear no ongoing distribution or account maintenance fees. Class A Shares are available only to eligible investors. * Class B Shares are subject to a maximum contingent deferred sales charge of 4% if redeemed during the first year, decreasing 1% each year thereafter to 0% after the fourth year. In addition, Class B Shares are subject to a distribution fee of 0.75% and an account maintenance fee of 0.25%. These shares automatically convert to Class D Shares after approximately 8 years. * Class C Shares are subject to a distribution fee of 0.75% and an account maintenance fee of 0.25%. In addition, Class C Shares are subject to a 1% contingent deferred sales charge if redeemed within one year of purchase. * Class D Shares incur a maximum initial sales charge of 5.25% and an account maintenance fee of 0.25% (but no distribution fee). Performance data for all of the Fund's shares are presented in the "Total Return Based on a $10,000 Investment" graphs on pages 5 and 6 and the "Recent Performance Results" table below. Data for the Fund's Class A and Class B Shares are presented in the "Average Annual Total Return" tables on page 5. "Aggregate Total Return" tables for Class C and Class D Shares are presented on page 6. The "Recent Performance Results" table shows investment results before the deduction of any sales charges for Class A and Class B Shares for the 12-month and 3-month periods ended September 30, 1995 and for Class C and Class D Shares for the since inception and 3- month periods ended September 30, 1995. All data in this table assume imposition of the actual total expenses incurred by each class of shares during the relevant period. None of the past results shown should be considered a representation of future performance. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Dividends paid to each class of shares will vary because of the different levels of account maintenance, distribution and transfer agency fees applicable to each class, which are deducted from the income available to be paid to shareholders. Recent Performance Results
12 Month 3 Month 9/30/95 6/30/95 9/30/94++ % Change++ % Change ML Balanced Fund Class A Shares* $11.56 $11.16 $11.67 + 7.69%(1) +3.58% ML Balanced Fund Class B Shares* 11.75 11.29 11.75 + 8.57(1) +4.07 ML Balanced Fund Class C Shares* 11.60 11.19 11.74 + 7.35(1) +3.66 ML Balanced Fund Class D Shares* 11.54 11.13 11.66 + 7.61(1) +3.68 ML Balanced Fund Class A Shares--Total Return* +11.86(2) +5.07(3) ML Balanced Fund Class B Shares--Total Return* +10.80(4) +4.82(5) ML Balanced Fund Class C Shares--Total Return* +10.93(6) +4.80(7) ML Balanced Fund Class D Shares--Total Return* +11.62(8) +5.06(9) S&P 500/ML B0A0 Blended Index--Total Return** +21.98 +4.90 *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. ++Investment results shown for Class C and Class D Shares are since inception (10/21/94). (1)Percent change includes reinvestment of $0.885 per share capital gains distributions. (2)Percent change includes reinvestment of $0.425 per share ordinary income dividends and $0.885 per share capital gains distributions. (3)Percent change includes reinvestment of $0.160 per share ordinary income dividends. (4)Percent change includes reinvestment of $0.231 per share ordinary income dividends and $0.885 per share capital gains distributions. (5)Percent change includes reinvestment of $0.081 per share ordinary income dividends. (6)Percent change includes reinvestment of $0.369 per share ordinary income dividends and $0.885 per share capital gains distributions. (7)Percent change includes reinvestment of $0.123 per share ordinary income dividends. (8)Percent change includes reinvestment of $0.410 per share ordinary income dividends and $0.885 per share capital gains distributions. (9)Percent change includes reinvestment of $0.148 per share ordinary income dividends.
PERFORMANCE DATA (continued) Total Return Based on a $10,000 Investment--Class A and Class B Shares A line graph depicting 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** 9/95 ML Balanced Fund++--Class A Shares* $ 9,475 $17,903 S&P 500 Index++++ $10,000 $26,113 S&P 500/ML BOAO Blended Index++++++ $10,000 $22,392 A line graph depicting 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** 9/95 ML Balanced Fund++--Class B Shares* $10,000 $22,509 S&P 500 Index++++ $10,000 $39,550 S&P 500/ML BOAO Blended Index++++++ $10,000 $32,466 [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. Average Annual Total Return % Return Without % Return With Sales Charge Sales Charge** Class A Shares* Year Ended 9/30/95 +11.86% + 5.99% Five Years Ended 9/30/95 +11.92 +10.72 Inception (10/27/88) through 9/30/95 + 9.62 + 8.77 [FN] *Maximum sales charge is 5.25%. **Assuming maximum sales charge. % Return % Return Without CDSC With CDSC** Class B Shares* Year Ended 9/30/95 +10.80% + 6.80% Five Years Ended 9/30/95 +10.78 +10.78 Inception (11/29/85) through 9/30/95 + 8.59 + 8.59 [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) Total Return Based on a $10,000 Investment--Class C and Class D Shares A line graph depicting growth of an investment in the Fund's Class C and Class D 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: 10/21/94** 9/95 ML Balanced Fund++--Class C Shares* $10,000 $10,993 ML Balanced Fund++--Class D Shares* $ 9,475 $10,576 S&P 500 Index++++ $10,000 $12,891 S&P 500/ML BOAO Blended Index++++++ $10,000 $12,163 [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. Aggregate Total Return % Return % Return Without CDSC With CDSC** Class C Shares* Inception (10/21/94) through 9/30/95 +10.93% +9.93% [FN] *Maximum contingent deferred sales charge is 1% and is reduced to 0% after 1 year. **Assuming payment of applicable contingent deferred sales charge. % Return Without % Return With Sales Charge Sales Charge** Class D Shares* Inception (10/21/94) through 9/30/95 +11.62% +5.76% [FN] *Maximum sales charge is 5.25%. **Assuming maximum sales charge. 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 $ 10,643,000 1.6% Services 5,000,000 Landeskreditbank, N.V., 7.875% due 4/15/2004 4,972,067 5,418,250 0.8 Total Investments in Corporate Bonds 15,009,967 16,061,250 2.4 Country Foreign Government & Agency Obligations Italy 5,000,000 Republic of Italy, 8.75% due 2/08/2001 5,373,050 5,448,445 0.8 Total Investments in Foreign Government & Agency Obligations 5,373,050 5,448,445 0.8 US Government & Agency Obligations United States Federal Home Loan Mortgage Corp., REMIC (a): 10,000,000 Series, 6.30% due 5/15/2008 9,210,937 9,440,625 1.5 4,910,000 1243-HP, 5.625% due 11/25/2015 4,788,017 4,756,563 0.7 Federal National Mortgage Association: 9,482,095 8% due 10/01/2024 9,053,920 9,698,382 1.5 19,205,450 8% due 12/01/2024 18,866,355 19,643,527 3.0 US Treasury Notes: 55,000,000 7.875% due 8/15/2001 53,943,600 59,795,450 9.2 25,000,000 6.25% due 2/15/2003 25,710,937 25,140,500 3.9 22,000,000 US Treasury STRIPS++, 5.99% due 5/15/2000 (b) 16,533,161 16,740,460 2.6 Total Investments in US Government & Agency Obligations 138,106,927 145,215,507 22.4 Foreign Obligations Canada C$ 17,000,000 Government of Canada, 7.50% due 9/01/2000 12,513,374 12,692,853 2.0 Germany DM 20,000,000 Bundes, 6% due 2/20/1998 13,870,415 14,397,858 2.2 Italy Lit 12,000,000,000 European Investment Bank, 10.80% due 3/15/1999 7,677,863 7,410,781 1.1 Total Investments in Foreign Obligations 34,061,652 34,501,492 5.3 Total Investments in Corporate Bonds, Foreign Government & Agency Obligations, US Government & Agency Obligations & Foreign Obligations 192,551,596 201,226,694 30.9 Shares Held US Stocks Basic Industry Aluminum 125,000 Aluminum Co. of America (ALCOA) 6,893,308 6,609,375 1.0 Chemicals 61,000 Dow Chemical Company (The) 4,633,938 4,544,500 0.7 93,700 Eastman Chemical Co. 5,394,105 5,996,800 0.9 90,000 Engelhard Corporation 2,751,452 2,283,750 0.4 70,000 IMC Fertilizer Group, Inc. 4,196,080 4,436,250 0.7 55,000 PPG Industries, Inc. 2,464,430 2,557,500 0.4 Paper & Forest Producers 225,000 Scott Paper Co. 10,875,875 10,912,500 1.7 Total Basic Industry 37,209,188 37,340,675 5.8
SCHEDULE OF INVESTMENTS (continued)
Shares Value Percent of Industries Held US Stocks Cost (Note 1a) Net Assets Capital Spending Aerospace 125,000 Boeing Company (The) $ 7,925,190 $ 8,531,250 1.3% 56,000 Crane Company 2,046,063 1,932,000 0.3 110,000 United Technologies Corp. 8,698,059 9,721,250 1.5 Communication 150,000 +++ADC Telecommunications, Inc. 3,462,859 6,825,000 1.0 Equipment 144,000 +++DSC Communications Corp. 4,548,726 8,532,000 1.3 80,000 +++Tellabs, Inc. 2,952,585 3,360,000 0.5 Computer Equipment 90,000 +++Cisco Systems, Inc. 4,973,502 6,210,000 1.0 Computer Services 225,000 +++Computer Sciences Corp. 8,005,471 14,484,375 2.2 240,000 General Motors Corp. (Class E) 9,927,011 10,920,000 1.7 Electrical Equipment 165,000 General Electric Co. 9,160,779 10,518,750 1.6 173,218 Siebe PLC 1,605,130 1,984,156 0.3 Electronics 90,000 +++Solectron Corp. 2,554,952 3,555,000 0.5 Environmental Control 550,000 Wheelabrator Technologies, Inc. 7,310,684 8,181,250 1.3 Machinery & Equipment 150,000 York International Corp. 6,687,115 6,318,750 1.0 Office Equipment 380,000 Danka Business Systems PLC (ADR)(c)(1) 6,702,445 13,680,000 2.1 29,200 Harris Corp. 1,755,785 1,602,350 0.2 Semiconductors 43,500 Texas Instruments, Inc. 3,357,421 3,474,562 0.5 Total Capital Spending 91,673,777 119,830,693 18.3 Consumer Cyclicals Appliances 230,000 Singer Co. N.V. (ADR)(c)(1) 6,382,381 6,123,750 0.9 Automotive 305,000 Ford Motor Company 9,068,012 9,493,125 1.5 Automotive Equipment 55,000 Magna International, Inc. (ADR)(c)(1) 2,005,798 2,481,875 0.4 Retail 95,000 Sears, Roebuck and Co. 2,561,323 3,503,125 0.5 Retail--Specialty 170,000 +++Toys 'R' Us, Inc. 4,706,973 4,590,000 0.7 Total Consumer Cyclicals 24,724,487 26,191,875 4.0 Consumer Staples Consumer--Services 225,000 H & R Block, Inc. 8,896,652 8,550,000 1.3 Drug Stores 80,000 +++Revco D.S., Inc. 1,725,576 1,880,000 0.3 Foods 70,000 General Mills, Inc. 3,396,222 3,902,500 0.6 Healthcare 300,000 +++Humana Inc. 5,920,005 6,037,500 0.9 203,100 +++Physician Corp. of America 4,284,714 3,198,825 0.5 Pharmaceuticals 55,000 American Home Products Corp. 3,726,541 4,668,125 0.7 Photography 160,000 Eastman Kodak Co. 8,746,145 9,480,000 1.5 Restaurants 80,000 Darden Restaurants Inc. 837,277 920,000 0.1 Total Consumer Staples 37,533,132 38,636,950 5.9
SCHEDULE OF INVESTMENTS (continued)
Shares Value Percent of Industries Held US Stocks Cost (Note 1a) Net Assets Credit-Sensitive and Financial Services Banking 250,000 The Bank of New York Co. $ 7,473,216 $ 11,625,000 1.8% 15,000 The Bank of New York Co. (Warrants) (e) 168,750 481,875 0.1 200,000 BankAmerica Corp. 9,113,967 11,975,000 1.8 100,000 CoreStates Financial Corp. 3,613,740 3,662,500 0.6 Insurance 140,000 Aetna Life & Casualty Co. 8,227,835 10,272,500 1.6 104,900 Allstate Corp. 3,168,972 3,710,837 0.6 99,500 International Telephone & Telegraph Corp. 8,599,833 12,338,000 1.9 70,000 National Re Corp. 2,016,028 2,476,250 0.4 Total Credit-Sensitive & Financial Services 42,382,341 56,541,962 8.8 Energy Oil--Integrated 175,000 Chevron Corp. 8,576,842 8,509,375 1.3 125,000 Mobil Oil Corp. 9,757,153 12,453,125 1.9 Total Energy 18,333,995 20,962,500 3.2 Utilities Utilities-- 39,200 Frontier Corp. 876,071 1,043,700 0.2 Communications 180,000 GTE Corp. 5,790,102 7,065,000 1.1 180,000 SBC Communications Inc. 8,015,735 9,900,000 1.5 310,000 +++WorldCom, Inc. 7,317,231 9,958,750 1.5 Total Utilities 21,999,139 27,967,450 4.3 Total Investments in US Stocks 273,856,059 327,472,105 50.3 Foreign Stocks Australia Media/Publishing 600,000 +++News Corp. Ltd. (Preferred) (ADR)(c) 10,451,056 11,925,000 1.8 Canada Appliances 280,000 Semi-Tech Corp.(d) 4,108,297 2,236,588 0.3 Chile Banking 40,000 Banco O'Higgins (ADR)(c) 649,848 905,000 0.1 Packaging 60,000 Christalerias de Chile S.A. (ADR)(c) 1,105,062 1,485,000 0.2 Hong Kong Banking 286,378 HSBC Holdings PLC 1,750,973 3,982,000 0.6
SCHEDULE OF INVESTMENTS (continued)
Shares Value Percent of Industries Held Foreign Stocks Cost (Note 1a) Net Assets Indonesia Telecommunications 9,000 P.T. Indonesian Satellite (ADR)(c) $ 311,138 $ 316,125 0.1% Tobacco 74,500 P.T. Hanjaya Mandala Sampoerna 415,075 694,018 0.1 Japan Electronics 70,000 Advantest Corp. 3,441,308 4,143,434 0.6 45,000 Kyocera Corp. 3,995,841 3,700,000 0.6 240,000 Sharp Corp. 3,564,993 3,369,697 0.5 75,000 Tokyo Electron Ltd. 2,928,405 3,265,152 0.5 Financial Services 360,000 Nomura Securities Co., Ltd. 7,080,991 7,054,545 1.1 Insurance 250,000 Tokio Marine & Fire Insurance Co. 2,976,505 2,702,020 0.4 Office Equipment 150,000 Canon, Inc. 2,752,380 2,681,818 0.4 Mexico Multi-Industry 433,800 +++Grupo Carso, S.A. de C.V. (ADR)(c)++++ 3,832,850 5,042,925 0.8 Utilities-- 95,000 Telefonos de Mexico, S.A. de C.V. Communications (ADR)(c)(1) 3,301,965 3,016,250 0.5 Netherlands Computer Services 112,800 Getronics N.V. 4,941,210 5,556,789 0.9 Norway Telecommunications 152,425 Nera AS 4,340,748 5,247,618 0.8 Portugal 325,000 Espirito Santo Financial Holdings S.A. (ADR)(c)(1) 4,538,463 3,818,750 0.6 United Kingdom Leisure/Entertainment 90,000 Thorn EMI PLC 1,726,953 2,096,336 0.3 Total Investments in Foreign Stocks 68,214,061 73,239,065 11.2 Total Investments in US & Foreign Stocks 342,070,120 400,711,170 61.5
SCHEDULE OF INVESTMENTS (concluded)
Face Value Percent of Amount Issue Cost (Note 1a) Net Assets Short-Term Securities Commercial Paper** $ 21,064,000 Ford Motor Credit Co., 6.50% due 10/02/1995 $ 21,056,394 $ 21,056,394 3.3% 17,000,000 National Fleet Funding Corp., 5.75% due 10/11/1995 16,970,132 16,970,132 2.6 Total Investments in Short-Term Securities 38,026,526 38,026,526 5.9 Total Investments $572,648,242 639,964,390 98.3 ============ Other Assets Less Liabilities 11,342,674 1.7 ------------ ------ Net Assets $651,307,064 100.0% ============ ====== (a)Real Estate Mortgage Investment Conduits (REMIC). (b)Represents the yield-to-maturity on this zero coupon issue. These securities are purchased at a deep discount and amortized to maturity. (c)American Depositary Receipts (ADR). (d)Formerly named International Semi-Tech Corp. (e)Warrants entitle the Fund to purchase a predetermined number of shares of Common Stock. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date. *Denominated in US dollars unless otherwise indicated. **Commercial Paper is traded on a discount basis; the interest rates shown are the discount rates paid at the time of purchase by the Fund. (1)Consistent with the general policy of the Securities and Exchange Commission, the nationality or domicile of an issuer for determination of foreign issuer status may be (i) the country under whose laws the issuer is organized, (ii) the country in which the issuer's securities are principally traded, or (iii) the country in which the issuer derives a significant proportion (at least 50%) of its revenue or profits from goods produced or sold, investments made, or services performed in the country, or in which at least 50% of the assets of the issuer are situated. ++Separate Trading of Registered Interest and Principal of Securities (STRIPS). ++++Restricted securities as to resale. The value of the Fund's investments in restricted securities was approximately $5,043,000, representing 0.8% of net assets. Acquisition Value Issue Dates Cost (Note la) Grupo Carso, S.A. de C.V. (ADR) 9/24/1991-1/24/1992 $3,832,850 $5,042,925 Total $3,832,850 $5,042,925 ========== ========== +++Non-income producing security. See Notes to Financial Statements.
FINANCIAL INFORMATION Statement of Assets and Liabilities as of September 30, 1995 Assets: Investments, at value (identified cost--$572,648,242) (Note 1a) $639,964,390 Cash 4,488,255 Receivables: Securities sold $ 6,963,402 Interest 2,720,710 Dividends 729,022 Capital shares sold 352,889 10,766,023 ------------ Prepaid registration fees and other assets (Note 1f) 89,979 ------------ Total assets 655,308,647 ------------ Liabilities: Payables: Securities purchased 1,965,810 Capital shares redeemed 1,154,219 Investment adviser (Note 2) 331,332 Distributor (Note 2) 216,708 3,668,069 ------------ Accrued expenses and other liabilities 333,514 ------------ Total liabilities 4,001,583 ------------ Net Assets: Net assets $651,307,064 ============ Net Assets Class A Shares of Common Stock, $.01 par value, 500,000,000 Consist of: shares authorized $ 26,373 Class B Shares of Common Stock, $.01 par value, 500,000,000 shares authorized 129,516 Class C Shares of Common Stock, $.01 par value, 500,000,000 shares authorized 996 Class D Shares of Common Stock, $.01 par value, 500,000,000 shares authorized 405,203 Paid-in capital in excess of par 560,997,385 Undistributed investment income--net 5,264,881 Undistributed realized capital gains on investments and foreign currency transactions--net 17,172,044 Unrealized appreciation on investments and foreign currency transactions--net 67,310,666 ------------ Net assets $651,307,064 ============ Net Asset Value: Class A--Based on net assets of $30,485,421 and 2,637,319 shares outstanding $ 11.56 ============ Class B--Based on net assets of $152,121,232 and 12,951,639 shares outstanding $ 11.75 ============ Class C--Based on net assets of $1,154,235 and 99,541 shares outstanding $ 11.60 ============ Class D--Based on net assets of $467,546,176 and 40,520,316 shares outstanding $ 11.54 ============ See Notes to Financial Statements.
FINANCIAL INFORMATION (continued) Statement of Operations for the Year Ended September 30, 1995 Investment Interest and discount earned (net of $14,295 foreign Income withholding tax) $ 19,733,199 (Notes 1d & 1e): Dividends (net of $245,500 foreign withholding tax) 6,790,388 Other 41,541 ------------ Total income 26,565,128 ------------ Expenses: Investment advisory fees (Note 2) 4,289,001 Account maintenance and distribution fees--Class B (Note 2) 2,911,519 Transfer agent fees--Class D (Note 2) 896,673 Account maintenance fees--Class D (Note 2) 869,529 Transfer agent fees--Class B (Note 2) 843,941 Printing and shareholder reports 334,152 Professional fees 117,014 Accounting services (Note 2) 115,994 Registration fees (Note 1f) 94,249 Custodian fees 89,647 Transfer agent fees--Class A (Note 2) 84,659 Directors' fees and expenses 46,274 Pricing fees 6,456 Account maintenance and distribution fees--Class C (Note 2) 5,279 Transfer agent fees--Class C (Note 2) 1,486 Other 11,367 ------------ Total expenses 10,717,240 ------------ Investment income--net 15,847,888 ------------ Realized & Realized gain from: Unrealized Gain Investments--net $ 17,324,044 (Loss) on Foreign currency transactions--net 1,351,860 18,675,904 Investments & ------------ Foreign Currency Change in unrealized appreciation/depreciation on: Transactions Investments--net 33,342,301 - --Net (Notes 1b, Foreign currency transactions--net (18,980) 33,323,321 1c, 1e & 3): ------------ ------------ Net realized and unrealized gain on investments and foreign currency transactions 51,999,225 ------------ Net Increase in Net Assets Resulting from Operations $ 67,847,113 ============ See Notes to Financial Statements.
FINANCIAL INFORMATION (continued) Statments of Changes in Net Assets
For the Year Ended September 30, Increase (Decrease) in Net Assets: 1995 1994 Operations: Investment income--net $ 15,847,888 $ 13,984,464 Realized gain on investments and foreign currency transactions--net 18,675,904 66,569,641 Change in unrealized appreciation/depreciation on investments and foreign currency transactions--net 33,323,321 (72,060,997) ------------ ------------ Net increase in net assets resulting from operations 67,847,113 8,493,108 ------------ ------------ Dividends & Investment income--net: Distributions to Class A (1,043,247) (1,253,348) Shareholders Class B (3,008,886) (14,802,935) (Note 1g): Class C (10,834) -- Class D (11,100,445) -- Realized gain on investments--net: Class A (3,297,664) (4,103,194) Class B (27,299,110) (75,192,306) Class C (10,962) -- Class D (29,225,123) -- ------------ ------------ Net decrease in net assets resulting from dividends and distributions to shareholders (74,996,271) (95,351,783) ------------ ------------ Capital Share Net decrease in net assets derived from capital share Transactions transactions (91,342,468) (34,985,543) (Note 4): ------------ ------------ Net Assets: Total decrease in net assets (98,491,626) (121,844,218) Beginning of year 749,798,690 871,642,908 ------------ ------------ End of year* $651,307,064 $749,798,690 ============ ============ *Undistributed investment income--net (Note 1h) $ 5,264,881 $ 3,227,255 ============ ============ See Notes to Financial Statements.
FINANCIAL INFORMATION (continued) 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: 1995* 1994* 1993 1992 1991 Per Share Net asset value, beginning of year $ 11.67 $ 13.02 $ 12.57 $ 11.94 $ 10.61 Operating -------- -------- -------- -------- -------- Performance: Investment income--net .32 .32 .43 .47 .70 Realized and unrealized gain (loss) on investments and foreign currency transactions (1)--net .88 (.07) 1.29 .61 1.63 -------- -------- -------- -------- -------- Total from investment operations 1.20 .25 1.72 1.08 2.33 -------- -------- -------- -------- -------- Less dividends and distributions: Investment income--net (.34) (.37) (.39) (.45) (.62) Realized gain on investments--net (.97) (1.23) (.88) -- (.38) -------- -------- -------- -------- -------- Total dividends and distributions (1.31) (1.60) (1.27) (.45) (1.00) -------- -------- -------- -------- -------- Net asset value, end of year $ 11.56 $ 11.67 $ 13.02 $ 12.57 $ 11.94 ======== ======== ======== ======== ======== Total Investment Based on net asset value per share 11.86% 1.81% 14.62% 9.23% 23.14% Return:** ======== ======== ======== ======== ======== Ratios to Expenses 1.01% .83% .83% .81% .85% Average ======== ======== ======== ======== ======== Net Assets: Investment income--net 2.93% 2.68% 3.09% 3.18% 3.64% ======== ======== ======== ======== ======== Supplemental Net assets, end of year (in thousands) $ 30,485 $ 39,963 $ 40,688 $ 20,320 $ 12,839 Data: ======== ======== ======== ======== ======== Portfolio turnover 86.33% 59.15% 79.55% 65.40% 173.76% ======== ======== ======== ======== ======== *Based on average shares outstanding during the year. **Total investment returns exclude the effect of sales loads. (1)Foreign currency transaction amounts have been reclassified to conform to the 1994 presentation. See Notes to Financial Statements.
FINANCIAL INFORMATION (continued) Financial Highlgihts (continued)
Class B The following per share data and ratios have been derived from information provided in the financial statements. For the Year Ended September 30, Increase (Decrease) in Net Asset Value: 1995* 1994* 1993 1992 1991 Per-Share Net asset value, beginning of year $ 11.75 $ 13.09 $ 12.62 $ 11.99 $ 10.60 Operating -------- -------- -------- -------- -------- Performance: Investment income--net .21 .20 .24 .29 .39 Realized and unrealized gain (loss) on investments and foreign currency transactions (1)--net .90 (.07) 1.37 .66 1.83 -------- -------- -------- -------- -------- Total from investment operations 1.11 .13 1.61 .95 2.22 -------- -------- -------- -------- -------- Less dividends and distributions: Investment income--net (.14) (.24) (.26) (.32) (.45) Realized gain on investments--net (.97) (1.23) (.88) -- (.38) -------- -------- -------- -------- -------- Total dividends and distributions (1.11) (1.47) (1.14) (.32) (.83) -------- -------- -------- -------- -------- Net asset value, end of year $ 11.75 $ 11.75 $ 13.09 $ 12.62 $ 11.99 ======== ======== ======== ======== ======== Total Investment Based on net asset value per share 10.80% 0.76% 13.49% 8.01% 21.91% Return:** ======== ======== ======== ======== ======== Ratios to Average Expenses, excluding account maintenance Net Assets: and distribution fees 1.04% .86% .85% .85% .90% ======== ======== ======== ======== ======== Expenses 2.04% 1.86% 1.85% 1.85% 1.90% ======== ======== ======== ======== ======== Investment income--net 1.90% 1.65% 1.99% 2.10% 3.37% ======== ======== ======== ======== ======== Supplemental Net assets, end of year (in thousands) $152,121 $709,836 $830,955 $886,920 $986,895 Data: ======== ======== ======== ======== ======== Portfolio turnover 86.33% 59.15% 79.55% 65.40% 173.76% ======== ======== ======== ======== ======== *Based on average shares outstanding during the year. **Total investment returns exclude the effect of sales loads. (1)Foreign currency transaction amounts have been reclassified to conform to the 1994 presentation. See Notes to Financial Statements.
FINANCIAL INFORMATION (concluded) Financial Highlgihts (concluded)
The following per share data and ratios have been derived For the Period from information provided in the financial statements. October 21, 1994++ to September 30, 1995* Increase (Decrease) in Net Asset Value: Class C Class D Per-Share Net asset value, beginning of period $ 11.74 $ 11.66 Operating ------------ ------------ Performance: Investment income--net .19 .27 Realized and unrealized gain on investments and foreign currency transactions--net .92 .90 ------------ ------------ Total from investment operations 1.11 1.17 ------------ ------------ Less dividends and distributions: Investment income--net (.28) (.32) Realized gain on investments--net (.97) (.97) ------------ ------------ Total dividends and distributions (1.25) (1.29) ------------ ------------ Net asset value, end of period $ 11.60 $ 11.54 ============ ============ Total Investment Based on net asset value per share 10.93%+++ 11.62%+++ Return:*** ============ ============ Ratios to Expenses, excluding account maintenance and distribution fees 1.04%** 1.02%** Average ============ ============ Net Assets: Expenses 2.04%** 1.27%** ============ ============ Investment income--net 1.94%** 2.68%** ============ ============ Supplemental Net assets, end of period (in thousands) $ 1,154 $ 467,546 Data: ============ ============ Portfolio turnover 86.33% 86.33% ============ ============ *Based on average shares outstanding during the period. **Annualized. ***Total investment returns exclude the effect of sales loads. ++Commencement of Operations. +++Aggregate total investment return. See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS 1. Significant Accounting Policies: Merrill Lynch Retirement Benefit Investment Program, Inc., Full Investment Portfolio does business under the name Merrill Lynch Balanced Fund for Investment and Retirement. Merrill Lynch Balanced Fund for Investment and Retirement, Inc. (the "Fund") is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The Fund offers four classes of shares under the Merrill Lynch Select Pricing SM System. Class A and Class D Shares are sold with a front-end sales charge. Class B and Class C Shares may be subject to a contingent deferred sales charge. All classes of shares have identical voting, dividend, liquidation and other rights and the same terms and conditions, except that Class B, Class C and Class D Shares bear certain expenses related to the account maintenance of such shares, and Class B and Class C Shares also bear certain expenses related to the distribution of such shares. Each class has exclusive voting rights with respect to matters relating to its account maintenance and distribution expenditures. The following is a summary of significant accounting policies followed by the Fund. (a) Valuation of investments--Portfolio securities which are traded on stock exchanges are valued at the last sale price on the exchange on which such securities are traded, as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price. Securities traded in the over-the- counter market are valued at the last available bid price prior to the time of valuation. In cases where securities are traded on more than one exchange, the securities are valued on the exchange designated by or under the authority of the Board of Directors as the primary market. Securities that are traded both in the over-the- counter market and on a stock exchange are valued according to the broadest and most representative market. Options written are valued at the last sale price in the case of exchange-traded options or, in the case of options traded in the over-the-counter market, the last asked price. Options purchased are valued at the last sale price in the case of exchange-traded options or, in the case of options traded in the over-the-counter market, the last bid price. Short- term securities are valued at amortized cost, which approximates market value. Other investments, including futures contracts and related options, are stated at market value. Securities and assets for which market value quotations are not available are valued at their fair value as determined in good faith by or under the direction of the Fund's Board of Directors. (b) Derivative financial instruments--The Fund may engage in various portfolio strategies to seek to increase its return by hedging its portfolio against adverse movements in the equity, debt and currency markets. Losses may arise due to changes in the value of the contract or if the counterparty does not perform under the contract. * Forward foreign exchange contracts--The Fund is authorized to enter into forward foreign exchange contracts as a hedge against either specific transactions or portfolio positions. Such contracts are not entered on the Fund's records. However, the effect on operations is recorded from the date the Fund enters into such contracts. Premium or discount is amortized over the life of the contracts. * Financial futures contracts--The Fund may purchase or sell interest-rate futures contracts and options on such futures contracts for the purpose of hedging the market risk on existing securities or the intended purchase of securities. Futures contracts are contracts for delayed delivery of securities at a specific future date and at a specific price or yield. Upon entering into a contract, the Fund deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. * Foreign currency options and futures--The Fund may also purchase or sell listed or over-the-counter foreign currency options, foreign currency futures and related options on foreign currency futures as a short or long hedge against possible variations in foreign exchange rates. Such transactions may be effected with respect to hedges on non-US-dollar-denominated securities owned by the Fund, sold by the Fund but not yet delivered, or committed or anticipated to be purchased by the Fund. * Options--The Fund is authorized to write covered call options and purchase put options. When the Fund writes an option, an amount equal to the premium received by the Fund is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked to market to reflect the current market value of the option written. When a security is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the security acquired or deducted from (or added to) the proceeds of the security sold. When an option expires (or the Fund enters into a closing transaction), the Fund realizes a gain or loss on the option to the extent of the premiums received or paid (or gain or loss to the extent the cost of the closing transaction exceeds the premium paid or received). Written and purchased options are non-income producing investments. (c) Foreign currency transactions--Transactions denominated in foreign currencies are recorded at the exchange rate prevailing when recognized. Assets and liabilities denominated in foreign currencies are valued at the exchange rate at the end of the period. Foreign currency transactions are the result of settling (realized) and valuing (unrealized) assets and liabilities expressed in foreign currencies into US dollars. Realized and unrealized gains or losses from investments include the effects of foreign exchange sales on investments. (d) Income taxes--It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no Federal income tax provision is required. Under the applicable foreign tax law, a withholding tax may by imposed on interest, dividends and capital gains at various rates. (e) Security transactions and investment income--Security transactions are recorded on the dates the transactions are entered into (the trade dates). Dividend income is recorded on the ex- dividend date, except that if the ex-dividend date has passed, certain dividends from foreign securities are recorded as soon as the Fund is informed of the ex-dividend date. Interest income (including amortization of discount) is recognized on the accrual basis. Realized gains and losses on security transactions are determined on the identified cost basis. (f) Prepaid registration fees--Prepaid registration fees are charged to expense as the related shares areEissued. (g) Dividends and distributions--Dividends and distributions paid by the Fund are recorded on the ex-dividend dates. (h) Reclassifications--Generally accepted accounting principles require that certain differences between undistributed net realized capital gains for financial reporting and tax purposes, if permanent, be reclassified to undistributed net investment income. Accordingly, current year's permanent book/tax differences of $1,353,150 have been reclassified from undistributed net realized capital gains to undistributed net investment income. These reclassifications have no effect on net assets or net asset values per share. 2. Investment Advisory Agreement and Transaction with Affiliates: The Fund has entered into an Investment Advisory Agreement with Merrill Lynch Asset Management, L.P. ("MLAM"). The general partner of MLAM is Princeton Services, Inc. ("PSI"), an indirect wholly owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the limited partner. The Fund has also entered into a Distribution Agreement and Distribution Plans with Merrill Lynch Funds Distributor, Inc. ("MLFD" or "Distributor"), a wholly owned subsidiary of Merrill Lynch Group, Inc. MLAM is responsible for the management of the Fund's portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Fund. For such services, the Fund pays a monthly fee based upon the average daily value of the Fund's net assets at the following annual rates: 0.65% of the average daily net assets not exceeding $500 million; 0.60% of the average daily net assets exceeding $500 million but not exceeding $1.5 billion; 0.55% of the average daily net assets exceeding $1.5 billion but not exceeding $2.5 billion; 0.50% of the average daily net assets exceeding $2.5 billion but not exceeding $3.5 billion; and 0.45% of the average daily net assets exceeding $3.5 billion. The most restrictive annual expense limitation requires that MLAM reimburse the Fund to the extent the Fund's expenses (excluding interest, taxes, distribution fees, brokerage fees and commissions, and extraordinary items) exceed 2.5% of the Fund's first $30 million of average daily net assets, 2.0% of the next $70 million of average daily net assets, and 1.5% of the average daily net assets in excess thereof. No payment will be made to MLAM during any fiscal year which will cause such expenses to exceed the most restrictive expense limitation applicable at the time of such payment. NOTES TO FINANCIAL STATEMENTS (concluded) Pursuant to the distribution plans (the "Distribution Plans") adopted by the Fund in accordance with Rule 12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor an ongoing account maintenance fee and a distribution fee. These fees are accrued daily and paid monthly, at the annual rates based upon the average daily net assets of the shares as follows: Account Distribution Maintenance Fee Fee Class B 0.25% 0.75% Class C 0.25% 0.75% Class D 0.25% -- Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner, and Smith Inc. ("MLPF&S"), a subsidiary of ML & Co., also provides account maintenance and distribution services to the Fund. The ongoing account maintenance fee compensates the Distributor and MLPF&S for providing account maintenance services to Class B, Class C and Class D shareholders. The ongoing distribution fee compensates the Distributor and MLPF&S for providing shareholder and distribution-related services to Class B and Class C shareholders. For the year ended September 30, 1995, MLFD earned underwriting discounts and commissions and MLPF&S earned dealer concessions on the sales of the Fund's Class A and Class D Shares as follows: MLFD MLPF&S Class A $ 477 $ 4,620 Class D $3,598 $61,460 For the year ended September 30, 1995, MLPF&S received contingent deferred sales charges of $199,447 relating to transactions in Class B Shares. In addition, MLPF&S received $92,882 in commissions on the execution of portfolio security transactions for the Fund for the year ended September 30, 1995. Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly owned subsidiary of ML & Co., is the Fund's transfer agent. Accounting services are provided to the Fund by MLAM at cost. Certain officers and/or directors of the Fund are officers and/or directors of MLAM, MLPF&S, PSI, MLFDS, MLFD, and/or ML & Co. 3. Investments: Purchases and sales of investments, excluding short-term securities, for the year ended September 30, 1995 were $541,068,330 and $676,930,218, respectively. Net realized and unrealized gains (losses) as of September 30, 1995 were as follows: Realized Unrealized Gains (Losses) Gains (Losses) Long-term investments $17,240,225 $ 67,316,148 Short-term investments (721) -- Options written on investments 84,540 -- Foreign currency transactions 1,351,860 (5,482) ----------- ------------- Total $18,675,904 $ 67,310,666 =========== ============= As of September 30, 1995, net unrealized appreciation for Federal income tax purposes aggregated $67,316,148, of which $75,277,436 related to appreciated securities and $7,961,288 related to depreciated securities. The aggregate cost of investments at September 30, 1995 for Federal income tax purposes was $572,648,242. Transactions in call options written for the year ended September 30, 1995 were as follows: Number of Premiums Call Options Written Shares Received Outstanding call options at beginning of year 1,000 $ 1,783 Options written 167,800 214,530 Options exercised (67,100) (106,550) Options closed (98,500) (105,726) Options expired (3,200) (4,037) ----------- ------------- Outstanding call options at end of year -- $ -- =========== ============= 4. Capital Share Transactions: Net decrease in net assets derived from capital share transactions was $91,342,468 and $34,985,543 for the years ended September 30, 1995 and September 30, 1994, respectively. Transactions in capital shares for each class were as follows: Class A Shares for the Year Dollar Ended September 30, 1995 Shares Amount Shares sold 1,070,519 $ 11,586,869 Shares issued to shareholders in reinvestment of dividends and distributions 396,121 4,060,338 ----------- ------------- Total issued 1,466,640 15,647,207 Shares redeemed (2,253,897) (24,043,484) ----------- ------------- Net decrease (787,257) $ (8,396,277) =========== ============= Class A Shares for the Year Dollar Ended September 30, 1994 Shares Amount Shares sold 1,518,510 $ 18,698,722 Shares issued to shareholders in reinvestment of dividends and distributions 428,291 5,110,279 ----------- ------------- Total issued 1,946,801 23,809,001 Shares redeemed (1,648,302) (19,908,322) ----------- ------------- Net increase 298,499 $ 3,900,679 =========== ============= Class B Shares for the Year Dollar Ended September 30, 1995 Shares Amount Shares sold 2,091,731$ 23,097,445 Shares issued to shareholders in reinvestment of dividends and distributions 2,431,572 25,214,963 ----------- ------------- Total issued 4,523,303 48,312,408 Shares redeemed (7,383,654) (81,669,553) Automatic conversion of shares (44,590,058) (505,798,220) ----------- ------------- Net decrease (47,450,409) $(539,155,365) =========== ============= Class B Shares for the Year Dollar Ended September 30, 1994 Shares Amount Shares sold 2,858,236 $ 35,039,885 Shares issued to shareholders in reinvestment of dividends and distributions 6,329,365 76,402,900 ----------- ------------- Total issued 9,187,601 111,442,785 Shares redeemed (12,275,154) (150,329,007) ----------- ------------- Net decrease (3,087,553) $ (38,886,222) =========== ============= Class C Shares for the Period Dollar Oct. 21, 1994++ to Sept. 30, 1995 Shares Amount Shares sold 132,339 $ 1,431,442 Shares issued to shareholders in reinvestment of dividends and distributions 1,002 10,249 ----------- ------------- Total issued 133,341 1,441,691 Shares redeemed (33,800) (359,094) ----------- ------------- Net increase 99,541 $ 1,082,597 =========== ============= [FN] ++Commencement of Operations. Class D Shares for the Period Dollar Oct. 21, 1994++ to Sept. 30, 1995 Shares Amount Shares sold 522,879 $ 5,601,295 Automatic conversion of shares 45,012,054 505,798,220 Shares issued to shareholders in reinvestment of dividends and distributions 3,325,210 34,178,246 ----------- ------------- Total issued 48,860,143 545,577,761 Shares redeemed (8,339,827) (90,451,184) ----------- ------------- Net increase 40,520,316 $ 455,126,577 =========== ============= [FN] ++Commencement of Operations. 5. Reorganization Plan: On October 13, 1995, the Board of Directors approved a plan of reorganization, subject to shareholder approval and certain conditions, whereby Merrill Lynch Global Allocation Fund, Inc. would acquire substantially all of the assets and liabilities of the Fund in exchange for newly issued shares of Merrill Lynch Global Allocation Fund, Inc., which is a registered, diversified, open-end management investment company managed by MLAM. INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders, Merrill Lynch Balanced Fund for Investment and Retirement, Inc.: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Merrill Lynch Balanced Fund for Investment and Retirement, Inc. as of September 30, 1995, the related statements of operations for the year then ended and changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended. These financial statements and the financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned at September 30, 1995 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements and financial highlights present fairly, in all material respects, the financial position of Merrill Lynch Balanced Fund for Investment and Retirement, Inc. as of September 30, 1995, the results of its operations, the changes in its net assets, and the financial highlights for the respective stated periods in conformity with generally accepted accounting principles. Deloitte & Touche LLP Princeton, New Jersey October 26, 1995 IMPORTANT TAX INFORMATION (unaudited) The following information summarizes all per share distributions paid by Merrill Lynch Balanced Fund for Investment and Retirement during its fiscal year ended September 30, 1995:
Domestic Interest From Domestic Total Long-Term Record Payable Qualifying Federal Non-Qualifying Ordinary Capital Date Date Ordinary Income* Obligations Ordinary Income Income Gains Class A Shares: 12/16/94 12/27/94 $0.057127 $0.059193 $0.149065 $0.265385 $0.884787 7/05/95 7/13/95 $0.030917 $0.038746 $0.090261 $0.159924 -- Class B Shares: 12/16/94 12/27/94 $0.032174 $0.033337 $0.083951 $0.149462 $0.884787 7/05/95 7/13/95 $0.015691 $0.019664 $0.045809 $0.081164 -- Class C Shares: 12/16/94 12/27/94 $0.052860 $0.054772 $0.137931 $0.245563 $0.884787 7/05/95 7/13/95 $0.023774 $0.029794 $0.069407 $0.122975 -- Class D Shares: 12/16/94 12/27/94 $0.056408 $0.058447 $0.147187 $0.262042 $0.884787 7/05/95 7/13/95 $0.028563 $0.035795 $0.083388 $0.147746 -- *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 toEFederal 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, 1994 18.37% March 31, 1995 19.20% June 30, 1995 14.85% September 30, 1995 15.52% Please retain this information for your records. [FN] *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. -----END PRIVACY-ENHANCED MESSAGE-----