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Asset Classes Paper Essay

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The mutual fund chosen is Merrill Lynch Global and the Dow 30 organization chosen is McDonalds. The asset classes for both the mutual fund and Dow 30 organization will be determined. The following will explain how classifications and the current investment environment impact organizational decisions concerning the composition of these portfolios.

_Merrill Lynch Global_

Merrill Lynch (2006).

Merrill Lynch is a company that helps individual clients achieve financial success. With a professional advisor, customers can receive a customized strategy with the customer’s goals in mind.

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It makes available to its clients a wide range of investment products and services. When selecting the fund that best suits the clients need, some key factors to consider include a fund’s investment strategy, risk profile, investment performance, and relationship to the overall asset allocation strategy and investment time horizon.

_Class A Shares_. Typically, the most preferred tier of classified stock, offering more voting rights than Class B shares. Class A shares are designed to insulate management from the short-term swings of Wall Street, by allowing those in management to control a small amount of the equity of the company but still maintain voting power. These types of shares are not sold to the public and cannot be traded, which supporters say allows management to focus on long-term goals.

Class A shares’ annual operating expenses typically include an annual asset-based distribution and service fee of up to .35% (Mutual Funds. 2006). This annual fee is used to compensate the fund’s distributor and firms like Merrill Lynch for shareholder servicing and distribution-related services. Class A shares are generally more economical for investors who seek to invest larger amounts and have a longer term time horizon.

_Class B Shares_. Class B shares typically do not charge a front-end sales charge, so all of the assets are immediately invested in a fund. Class B shares usually impose a contingent deferred sales charge (CDSC) which may be charged to shareholders who redeem Class B shares within a certain number of years. This charge declines over time and is eventually limited. Class B shares are more economical for investors who have an intermediate to longer term time horizon and have less than $100,000 to invest in a fund family’s equity funds or less than $50,000 to invest in a fund family’s fixed income funds (Mutual Funds. 2006).

_Class C Shares_. Class C shares usually do not impose a front end sales charge at the time of purchase. All of the client’s assets are immediately invested in the fund. It is common for Class C shares to impose a CDSC up to 1.00% of the redemption amount during the first year or longer (Mutual Funds 2006). Unlike Class B shares which convert to Class A shares after a period of time, C shares generally do not have a conversion feature. Compared to Class A and Class B shares, Class C shares generally become less economical for investors who plan to invest over a longer term.

Merrill Lynch’s compensation differs by share class. The fund share class specific compensation is the basis upon which Merrill Lynch Financial Advisors are paid. Some funds may set higher sales charges and asset based fees for a particular class than do other funds for the same class. Merrill Lynch policy sets a limit as to the maximum sales charges or asset based fees included in the Financial Advisors’ compensation formula based on the share class and size of investment to minimize potential conflicts of interest based on differential compensations (Mutual Funds. 2006).

Merrill Lynch is a diversified financial services company. It can be expected to pursue additional business opportunities with the firms whose mutual funds Merrill Lynch makes available to its customers.

_McDonald’s (MCD)_

The Dow 30 organization chosen for this paper is McDonald’s. McDonald’s was founded in 1948 and is based in Oak Brook, Illinois. McDonald’s Corporation operates as a foodservice retailer worldwide. It operates and franchises McDonald’s restaurants, which offer various food items, and soft drinks and other beverages. As of July 14, 2006, it operated approximately 31,000 restaurants in 100 countries (Yahoo Finance).

McDonald’s change in cash and cash equivalents is a difference of $2,718,200. In 2003, the cash and cash equivalents were at $162,400 and in 2005 the cash and cash equivalents were at 2,880600. The total cash flows from financing activities was (1,736,800) in 2003 and 361,600 in 2005. The cash flows grew substantially throughout the three years (Yahoo Finance).

McDonald’s Income Statement shows a revenue of 21.23B, and quarterly revenue growth of 9.40%, a gross profit of 6.32B, a diluted EPS of 2.22 and quarterly earnings growth to be at 57.30%. The balance sheet’s total cash in 2005 is set at 3.29B. The net income for 2003 was $1,471,400 then greatly increasing in 2004 to 2,278,500 then increasing a little more to $2,602,200 in 2005 Yahoo Finance (2006).

The stock price history for McDonald’s shows Beta, a measure of security’s or portfolio’s volatility or systematic risk, in comparison to the market as a whole, to be at .92. In my reading for this past couple of weeks, I have learned that many utilities stocks have a beta of less than 1. McDonald’s 52 week low on September 21, 2005 was set at $31.31 while its 52 week high on February 8, 2006 was set at 36.75 Yahoo Finance (2006).

Overall, McDonald’s has been growing since 1948 at a great pace. McDonald’s second quarter operating results was fueled by strong sales and margin performance worldwide. McDonald’s EPS compared to competitors is much higher at 2.218 with Burger King at .235 and Wendy’s at 1.056 (Yahoo Finance. 2006). McDonald’s has done an excellent job with their employees, stocks, investments, an d all aspects of the fast food organization.


Mutual Funds Investing at Merrill Lynch (2006). Retrieved on August 12, 2006 from http://askmerrill.ml.com/publish/marketingcenters/products/MF_DisclosureDocument_0406.pdf .

Merrill Lynch (2006). Achieve Life on Your Terms. Retrieved on August 13, 2006, from http://askmerrill.ml.com/fa_front/1,2280,,00.html?pg=cnp.

Yahoo Finance (2006). Retrieved August 13, 2006, from http://finance.yahoo.com/q/ pr?s=mcd.

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