As filed with the Securities and Exchange Commission on July 28, 1998
Securities Act File No. 2-59311
Investment Company Act File No. 811-2752
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 26 [X]
(Check appropriate box or boxes)
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 23 [X]
(Check appropriate box or boxes)
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CMA Money Fund
(Exact name of registrant as specified in charter)
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<TABLE>
<CAPTION>
<S> <C>
800 Scudders Mill Road (609) 282-2800
Plainsboro, New Jersey 08536 (Registrant's Telephone Number,
(Address of Principal Executive Offices) (Zip Code) including Area Code)
</TABLE>
---------------
Arthur Zeikel
CMA Money Fund
800 Scudders Mill Road, Plainsboro, New Jersey
Mailing Address:
P.O. Box 9011, Princeton, New Jersey 08543-9011
(Name and address of agent for service)
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Copies to:
<TABLE>
<S> <C> <C>
Counsel for the Fund: Jeffrey S. Alexander, Esq. Philip L. Kirstein, Esq.
Brown & Wood LLP Merrill Lynch, Pierce, Fenner & Smith Fund Asset Management, L.P.
One World Trade Center Incorporated P.O. Box 9011
New York, New York 10048-0557 World Financial Center, North Tower Princeton, New Jersey
Attention: Thomas R. Smith, Jr., Esq. New York, New York 10281 08543-9011
</TABLE>
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It is proposed that this filing will become effective (check appropriate
box):
[X] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new
effective date for a previously filed post-effective
amendment.
Title of Securities Being Registered: Shares of Beneficial Interest, par
value $.10 per share.
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<PAGE>
CMA MONEY FUND
Cross Reference Sheet
<TABLE>
<CAPTION>
N-1A
Item No. Location
- ----------- ----------------------------------------------------------
<S> <C> <C>
Part A
Item 1. Cover Page ................................ Cover Page
Item 2. Synopsis .................................. Fee Table
Item 3. Condensed Financial Information ........... Financial Highlights; Yield Information
Item 4. General Description of Registrant ......... Investment Objectives and Policies; Appendix - Additional
Information - Organization of the Funds
Item 5. Management of the Fund .................... Fee Table; Appendix - Management of the Funds;
Appendix - Portfolio Transactions; Inside Back Cover Page
Item 5A. Management's Discussion of Fund
Performance ............................... Not Applicable
Item 6. Capital Stock and Other Securities ........ Appendix - Additional Information - Organization of the
Funds
Item 7. Purchase of Securities Being Offered ...... Cover Page; Fee Table; Appendix - Purchase of Shares;
Appendix - Redemption of Shares; Inside Back Cover Page
Item 8. Redemption or Repurchase .................. Fee Table; Appendix - Purchase of Shares;
Appendix - Redemption of Shares
Item 9. Pending Legal Proceedings ................. Not Applicable
Part B
Item 10. Cover Page ................................ Cover Page
Item 11. Table of Contents ......................... Cover Page
Item 12. General Information and History ........... Not Applicable
Item 13. Investment Objectives and Policies ........ Investment Objectives and Policies
Item 14. Management of the Fund .................... Management of the Funds
Item 15. Control Persons and Principal Holders
of Securities ............................. Management of the Funds; General Information - Additional
Information
Item 16. Investment Advisory and Other Services..... Management of the Funds; Purchase and Redemption of
Shares; General Information
Item 17. Brokerage Allocation and Other
Practices ................................. Portfolio Transactions
Item 18. Capital Stock and Other Securities ........ General Information - Description of Shares
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered .................. Purchase and Redemption of Shares; Determination of Net
Asset Value
Item 20. Tax Status ................................ Taxes
Item 21. Underwriters .............................. Purchase and Redemption of Shares
Item 22. Calculation of Performance Data ........... Yield Information
Item 23. Financial Statements ...................... Financial Statements
Part C
</TABLE>
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
<PAGE>
CMA MONEY FUND
CMA GOVERNMENT SECURITIES FUND
CMA TAX-EXEMPT FUND
CMA TREASURY FUND
----------------
This document consists of the Prospectuses of CMA Money Fund, CMA
Government Securities Fund, CMA Tax-Exempt Fund and CMA Treasury Fund, four of
the money market mutual funds (collectively, the "CMA Funds") the shares of
which are offered to participants in the Cash Management Account(R) ("CMA" or
"CMA(R) account") financial service program of Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") to provide a medium for the investment of
free credit balances held in CMA accounts, and an Appendix to such Prospectuses
which constitutes a part of each Prospectus. A Table of Contents is contained
on page 1 of each Prospectus.
----------------
A CMA account is a conventional Merrill Lynch cash securities account or
margin securities account ("Securities Account") which is linked to the CMA
Funds, to money market deposit accounts maintained with depository institutions
and to a Visa(R) card/check account ("Visa(R) Account"). Merrill Lynch markets
its margin account under the name Investor CreditLineSM service. Subscribers to
the CMA service may automatically invest free credit balances held in their CMA
accounts in shares of one of the CMA Funds, or such balances may be
automatically deposited with a depository institution through the Insured
SavingsSM Account (the "Insured Savings Account"). The CMA Funds and the
Insured Savings Account are collectively referred to as the "Money Accounts."
Each CMA Fund is a no-load money market fund seeking current income,
preservation of capital and liquidity available from investing in short-term
securities. Of the CMA Funds offered by this Prospectus, CMA Money Fund invests
in money market securities generally; CMA Government Securities Fund invests in
direct U.S. Government obligations; CMA Tax-Exempt Fund invests in tax-exempt
securities and pays dividends exempt from Federal income taxation; and CMA
Treasury Fund invests in U.S. Treasury securities. The CMA Funds also include
various series of CMA Multi-State Municipal Series Trust (the "CMA State
Funds"), each of which invests in tax-exempt securities and pays dividends
exempt, in the opinion of counsel to the issuer, from Federal income taxes,
personal income taxes of the designated state and, in certain instances, local
personal income taxes, local personal property taxes and/or state intangible
personal property taxes. At the date hereof, CMA State Funds exist with respect
to Arizona, California, Connecticut, Massachusetts, Michigan, New Jersey, New
York, North Carolina, Ohio and Pennsylvania.
Free credit balances held in CMA accounts will be automatically invested
in or deposited through the Money Account selected by the CMA subscriber as his
or her Primary Money Account. The subscriber may make manual investments in any
of the CMA Funds as described under "Purchase of Shares" in the Appendix. The
subscriber may change the Primary Money Account designation at any time by
following the procedures set forth under "Purchase of Shares."
Merrill Lynch charges a program participation fee for the CMA service
which presently is $100 per year (an additional $25 annual program fee is
charged for participation in the CMA Visa(R) Gold Program described in the CMA
Program Description). A different fee may be charged to certain group plans and
special accounts. In addition, on or about January 2, 1997, certain group plans
and special accounts offered by Merrill Lynch (such as the Employees AccessSM
Account financial service) may not afford participants in such plans and
accounts access to all of the CMA Funds. Participants in such plans or special
accounts should refer to the relevant program descriptions or other explanatory
material for such plans or accounts to determine which of the CMA Funds are
available to them. Merrill Lynch reserves the right to change the fee for the
CMA service or the CMA Visa(R) Gold Program at any time. As described under
"Purchase of Shares," shares of the CMA Funds may also be purchased directly
through the CMA Funds' Transfer Agent by investors who are not subscribers to
the CMA program. Shareholders of the CMA Funds not subscribing to the CMA
program will not be charged the CMA program fee but will not receive any of the
additional services available to CMA program subscribers.
----------------
The information in this document should be read in conjunction with the
description of the Merrill Lynch Cash Management Account program which is
furnished to all CMA subscribers. Reference is made to such description for
information with respect to the CMA program, including the fees related
thereto. Information concerning the other CMA Funds is contained in the
prospectus relating to each of such Funds, and information concerning the
Insured Savings Account is contained in the Insured Savings Account Fact Sheet.
All CMA subscribers are furnished with the prospectuses of CMA Money Fund, CMA
Government Securities Fund, CMA Tax-Exempt Fund and CMA Treasury Fund. The
prospectuses of the CMA State Funds and the Insured Savings Account Fact Sheet
are available from Merrill Lynch. For more information about the Merrill Lynch
Cash Management Account program, call toll-free from anywhere in the U.S.,
1-800-CMA-INFO (1-800-262-4636).
<PAGE>
PROSPECTUS
July 28, 1998
CMA Money Fund
P.O. Box 9011, Princeton, New Jersey 08543-9011 - Phone No. (609) 282-2800
CMA Money Fund (the "Money Market Fund") is a no-load, diversified,
open-end investment company seeking current income, preservation of capital and
liquidity available from investing in a diversified portfolio of short-term
money market securities. These securities will consist primarily of short-term
U.S. Government securities, bank certificates of deposit, commercial paper and
repurchase agreements. Dividends are declared and reinvested daily in the form
of additional shares at net asset value. The Money Market Fund seeks to
maintain a constant $1.00 net asset value per share, although this cannot be
assured. An investment in the Money Market Fund is neither insured nor
guaranteed by the U.S. Government. The Money Market Fund has adopted a
Distribution and Shareholder Servicing Plan in compliance with Rule 12b-1 under
the Investment Company Act of 1940, as amended (the "Investment Company Act").
There can be no assurance that the investment objectives of the Money Market
Fund will be realized.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
----------------
This Prospectus is a concise statement of information about the Money
Market Fund that is relevant to making an investment in the Money Market Fund.
This Prospectus should be read carefully and retained for future reference. A
statement containing additional information about the Money Market Fund, dated
July 28, 1998 (the "Statement of Additional Information"), has been filed with
the Securities and Exchange Commission (the "Commission") and can be obtained,
without charge, by calling or writing to the Money Market Fund at the above
telephone number or address. The Commission maintains a Website
(http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference and other information about the Money Market
Fund. The Statement of Additional Information is hereby incorporated by
reference into this Prospectus.
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
Fee Table .................................... 2
Financial Highlights ......................... 3
Yield Information ............................ 4
Investment Objectives and Policies ........... 4
Appendix ..................................... A-1
Purchase of Shares ........................ A-1
Redemption of Shares ...................... A-4
</TABLE>
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Management of the Funds ................... A-7
Portfolio Transactions .................... A-8
Dividends ................................. A-9
Determination of Net Asset Value .......... A-9
Taxes ..................................... A-10
Additional Information .................... A-13
</TABLE>
<PAGE>
FEE TABLE
<TABLE>
<S> <C> <C>
Money Market Fund Annual Operating Expenses (as a percentage of average net
assets) for the fiscal year ended March 31, 1998:
Management Fees(a) ................................................................ 0.38%
Rule 12b-1 Fees(b) ................................................................ 0.13%
Other Expenses:
Dividend and Transfer Agency Fees(c) .................................. 0.04%
Other Fees ............................................................ 0.02%
----
Total Other Expenses .............................................................. 0.06%
----
Total Money Market Fund Operating Expenses ........................................ 0.57%
====
</TABLE>
- --------
(a) See "Management of the Funds -- Investment Advisory Arrangements" -- page
A-7.
(b) See "Purchase of Shares" -- page A-1.
(c) See "Management of the Funds -- Transfer Agency Services" -- page A-8.
Example:
<TABLE>
<CAPTION>
Cumulative Expenses
Paid for the Period of:
--------------------------------------------
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000 investment,
assuming an operating expense ratio of 0.57% and a 5% annual return
throughout the periods ............................................ $6 $18 $32 $71
</TABLE>
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch")
charges an annual program participation fee, presently $100 for individuals,
for the CMA service (an additional fee, presently $25, is charged for
participation in the CMA Visa(R) Gold Program). Shareholders of the Money
Market Fund whose accounts are maintained directly with the Money Market Fund's
Transfer Agent and who are not subscribers to the CMA program will not be
charged the CMA program fee but will not receive any of the additional services
available to CMA program subscribers.
The foregoing Fee Table is intended to assist investors in understanding
the costs and expenses that a shareholder in the Money Market Fund will bear
directly or indirectly. The example set forth above assumes reinvestment of all
dividends and distributions. The example should not be considered a
representation of past or future expenses and actual expenses may be more or
less than those assumed for purposes of the example.
Money Market Fund
2
<PAGE>
FINANCIAL HIGHLIGHTS
Financial statements for the fiscal year ended March 31, 1998 and the
independent auditors' report thereon are included in the Statement of Additional
Information. The following per share data and ratios have been derived from
information provided in financial statements of the Money Market Fund audited by
Deloitte & Touche LLP, independent auditors.
<TABLE>
<CAPTION>
For the Year Ended March 31,
-------------------------------------------------------------------
1998 1997 1996 1995
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Asset
Value:
Per Share Operating Performance:
Net asset value, beginning of year ....... $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- ---------
Investment income -- net ................ .0512 .0490 .0529 .0437
Realized and unrealized gain (loss)
on investments -- net .................. .0004 -- .0003 .0005
----------- ----------- ----------- -----------
Total from investment operations ......... .0516 .0490 .0532 .0442
----------- ----------- ----------- -----------
Less dividends and distributions:
Investment income -- net ................ ( .0512) ( .0490) ( .0529) ( .0437)
Realized gain on investments -- net ( .0001) ( .0002) ( .0006) ( .0003)
----------- ----------- ----------- -----------
Total dividends and distributions ........ ( .0513) ( .0492) ( .0535) ( .0440)
----------- ----------- ----------- -----------
Net asset value, end of year ............. $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== ===========
Total Investment Return .................. 5.26 % 5.04 % 5.49 % 4.50 %
=========== =========== =========== ===========
Ratios to Average Net Assets:
Expenses, excluding interest expenses..... .56 % .55 % -- --
=========== =========== =========== ===========
Expenses ................................. .57 % .56 % .56 % .56 %
=========== =========== =========== ===========
Investment income and realized gain
on investments -- net ................... 5.13 % 4.89 % 5.35 % 4.42 %
=========== =========== =========== ===========
Supplemental Data:
Net assets, end of year
(in thousands) .......................... $50,923,780 $41,984,753 $36,922,858 $29,066,762
=========== =========== =========== ===========
<CAPTION>
For the Year Ended March 31,
-------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Asset
Value:
Per Share Operating Performance:
Net asset value, beginning of year ....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
Investment income -- net ................ .0276 .0309 .0498 .0734 .0837
Realized and unrealized gain (loss)
on investments -- net .................. (.0005) .0019 .0019 .0017 (.0001)
----------- ----------- ----------- ----------- -----------
Total from investment operations ......... .0271 .0328 .0517 .0751 .0836
----------- ----------- ----------- ----------- -----------
Less dividends and distributions:
Investment income -- net ................ (.0276) (.0309) (.0498) (.0734) (.0836)
Realized gain on investments -- net (.0003) (.0015) (.0020) (.0017)* --
----------- ----------- ----------- ----------- -----------
Total dividends and distributions ........ (.0279) (.0324) (.0518) (.0751) (.0836)
----------- ----------- ----------- ----------- -----------
Net asset value, end of year ............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== =========== ===========
Total Investment Return .................. 2.82 % 3.30 % 5.32 % 7.79 % 8.72 %
=========== =========== =========== =========== ===========
Ratios to Average Net Assets:
Expenses, excluding interest expenses..... -- -- -- -- --
=========== =========== =========== =========== ===========
Expenses ................................. .55 % .55 % .54 % .54 % .55 %
=========== =========== =========== =========== ===========
Investment income and realized gain
on investments -- net ................... 2.79 % 3.25 % 5.18 % 7.51%* 8.33%*
=========== =========== =========== =========== ===========
Supplemental Data:
Net assets, end of year
(in thousands) .......................... $27,071,882 $27,093,682 $29,106,627 $31,163,167 $29,768,495
=========== =========== =========== =========== ===========
<CAPTION>
For the Year
Ended March 31,
----------------
1989
----------------
<S> <C>
Increase (Decrease) in Net Asset
Value:
Per Share Operating Performance:
Net asset value, beginning of year ....... $ 1.00
---------
Investment income -- net ................ .0754
Realized and unrealized gain (loss)
on investments -- net .................. (.0004)
-----------
Total from investment operations ......... .0750
-----------
Less dividends and distributions:
Investment income -- net ................ (.0750)
Realized gain on investments -- net --
-----------
Total dividends and distributions ........ (.0750)
-----------
Net asset value, end of year ............. $ 1.00
===========
Total Investment Return .................. 7.79 %
===========
Ratios to Average Net Assets:
Expenses, excluding interest expenses..... --
===========
Expenses ................................. .55 %
===========
Investment income and realized gain
on investments -- net ................... 7.53%*
===========
Supplemental Data:
Net assets, end of year
(in thousands) .......................... $22,954,950
=============
</TABLE>
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* Includes unrealized gain (loss).
Money Market Fund
3
<PAGE>
YIELD INFORMATION
Set forth below is yield information as to the annualized and compounded
annualized yield for the indicated seven-day periods.
<TABLE>
<CAPTION>
Seven-Day Period Ended
--------------------------------
March 31, 1998 May 31, 1998
---------------- -------------
<S> <C> <C>
Annualized Yield:
Including gains and losses ............................ 5.05% 5.07%
Excluding gains and losses ............................ 5.05% 5.07%
Compounded Annualized Yield ............................ 5.18% 5.20%
Average Maturity of Portfolio at End of Period ......... 76 days 76 days
</TABLE>
The yield of the Money Market Fund refers to the income generated by an
investment in the Money Market Fund over a stated seven-day period. This income
is then annualized: that is, the amount of income generated by the investment
during that week is assumed to be generated each week over a 52-week period and
is shown as a percentage of the investment. The compounded annualized yield
(which excludes gains and losses) is calculated similarly but, when annualized,
the income earned by an investment in the Money Market Fund is assumed to be
reinvested. The compounded annualized yield will be somewhat higher than the
yield because of the effect of the assumed reinvestment.
The yield on Money Market Fund shares normally will fluctuate on a daily
basis. Therefore, the yield for any given past period is not an indication or
representation by the Money Market Fund of future yields or rates of return on
its shares. The Money Market Fund's yield is affected by changes in interest
rates on money market securities, average portfolio maturity, the types and
quality of portfolio securities held and operating expenses. Current yield
information may not provide a basis for comparison with bank deposits or other
investments that pay a fixed yield over a stated period of time.
On occasion, the Money Market Fund may compare its yield to (i) the average
yield reported by the Bank Rate Monitor National Index(TM) for money market
deposit accounts offered by the 100 leading banks and thrift institutions in the
ten largest standard metropolitan statistical areas, (ii) yield data published
by Lipper Analytical Services, Inc., (iii) the yield on an investment in 90-day
Treasury bills on a rolling basis, assuming quarterly compounding, (iv)
performance data published by Morningstar Publications, Inc., Money Magazine,
U.S. News & World Report, Business Week, CDA Investment Technology, Inc., Forbes
Magazine and Fortune Magazine or (v) historical yield data relating to other
central asset accounts similar to the CMA program. As with yield quotations,
yield comparisons should not be considered indicative of the Money Market Fund's
yield or relative performance for any future period.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the Money Market Fund are to seek current
income, preservation of capital and liquidity available from investing in a
diversified portfolio of short-term money market securities. There can be no
assurance that the investment objectives of the Money Market Fund will be
realized.
Investment in Money Market Fund shares offers several potential benefits.
The Money Market Fund seeks to provide as high a yield potential, consistent
with its objectives, as is available from investments in short-term
Money Market Fund
4
<PAGE>
money market securities utilizing professional money market management, block
purchases of securities and yield improvement techniques. It provides high
liquidity because of its redemption features and seeks the reduced risk that
generally results from diversification of assets. The shareholder is also
relieved from administrative burdens associated with direct investment in
short-term securities, such as coordinating maturities and reinvestments,
safekeeping and making numerous buy-sell decisions. These benefits are at least
partially offset by certain expenses borne by investors, including management
fees, distribution fees, administrative costs and operational costs.
In managing the Money Market Fund's portfolio, Fund Asset Management, L.P.
(the "Investment Adviser") will employ a number of professional money
management techniques, including varying the composition of the Money Market
Fund's investments and the average maturity of the portfolio based on its
assessment of the relative values of the various money market instruments and
future interest rate patterns. The Investment Adviser's assessments will
respond to changing economic and money conditions and to shifts in fiscal and
monetary policy. The Investment Adviser will also seek to improve yield by
taking advantage of yield disparities that regularly occur in the money market.
For example, market conditions frequently result in similar securities trading
at different prices. Also, there are frequently yield disparities between the
various types of money market securities. The Money Market Fund seeks to
enhance yield by purchasing and selling securities based on these yield
disparities.
The following is a description of some of the types of short-term money
market securities in which the Money Market Fund may invest:
U.S. Government Securities: Marketable securities issued by or
guaranteed as to principal and interest by the U.S. Government and
supported by the full faith and credit of the United States.
U.S. Government Agency Securities: Debt securities issued by U.S.
Government-sponsored enterprises, agencies and instrumentalities,
including, but not limited to, the Federal National Mortgage Association,
the Federal Home Loan Mortgage Corporation, the Student Loan Marketing
Association and the Federal Agricultural Mortgage Corporation. Such
securities may also include debt securities issued by international
organizations designated or supported by multiple governmental entities,
such as the International Bank for Reconstruction and Development (the
"World Bank"). Government Agency Securities are not direct obligations of
the U.S. Government but involve various forms of U.S. Government
sponsorship or guarantees and are issued, in general, under the authority
of an act of Congress. The U.S. Government is not obligated to provide
financial support to any of these agencies, instrumentalities or
organizations.
Bank Money Instruments: U.S. dollar-denominated obligations of
depository institutions such as, but not limited to, certificates of
deposit, including variable rate certificates of deposit, time deposits,
deposit notes, bank notes and bankers' acceptances. The obligations of
commercial banks may be issued by U.S. banks, foreign branches or
subsidiaries of U.S. banks ("Eurodollar" obligations) or U.S. branches or
subsidiaries of foreign banks ("Yankeedollar" obligations). The Money
Market Fund may invest only in Eurodollar obligations which by their terms
are general obligations of the U.S. parent bank. Yankeedollar obligations
in which the Money Market Fund may invest must be issued by U.S. branches
or subsidiaries of foreign banks which are subject to state or Federal
banking regulations in the U.S. and by their terms must be general
obligations of the foreign parent.
Commercial Paper and Other Short-Term Obligations: Commercial paper
(including variable amount master demand notes and funding agreements),
which refers to short-term, unsecured promissory notes issued by
corporations, partnerships, trusts or other entities to finance short-term
credit needs, and non-convertible
Money Market Fund
5
<PAGE>
debt securities (e.g., bonds and debentures) with no more than 397 days (13
months) remaining to maturity at the date of purchase. Short-term obligations
issued by trusts, corporations, partnerships or other entities include
mortgage or asset-backed instruments, including pass-through certificates
such as participations in, or bonds and notes backed by, pools of mortgage,
automobile, manufactured housing or other types of consumer loans; credit
card or trade receivables; or pools of mortgage- or asset-backed securities.
These structured financings will be supported by sufficient collateral and
other credit enhancements, including letters of credit, insurance, reserve
funds and guarantees by third parties, to enable such instruments to obtain
the requisite quality rating by a nationally recognized statistical rating
organization, as described below.
Foreign Bank Money Instruments: U.S. dollar-denominated obligations of
foreign depository institutions and their foreign branches and
subsidiaries, such as, but not limited to, certificates of deposit,
bankers' acceptances, time deposits, bank notes and deposit notes. The
obligations of such foreign branches and subsidiaries may be the general
obligation of the parent bank or may be limited to the issuing branch or
subsidiary by the terms of the specific obligation or by government
regulation. Such investments will only be made if determined to be of
comparable quality to other investments permissible for the Money Market
Fund. The Money Market Fund will not invest more than 25% of its total
assets (taken at market value at the time of each investment) in these
obligations.
Foreign Short-Term Debt Instruments: U.S. dollar-denominated commercial
paper and other short-term obligations issued by foreign entities. Such
investments are subject to quality standards similar to those applicable to
investments in comparable obligations of domestic issuers.
The following is a description of other types of investments or investment
practices in which the Money Market Fund may invest or engage:
Repurchase Agreements: The Money Market Fund may invest in the money
market securities described above pursuant to repurchase agreements. Under
such agreements, the counterparty agrees, upon entering into the contract,
to repurchase the security at a mutually agreed upon time and price,
thereby determining the yield during the term of the agreement. This
results in a fixed rate of return insulated from market fluctuations during
such period.
Reverse Repurchase Agreements: The Money Market Fund may enter into
reverse repurchase agreements which involve the sale of money market
securities held by the Money Market Fund, with an agreement to repurchase
the securities at an agreed upon price, date and interest payment. During
the time a reverse repurchase agreement is outstanding, the Money Market
Fund will maintain a segregated custodial account containing U.S.
Government or other appropriate high-grade debt securities having a value
equal to the repurchase price.
Lending of Portfolio Securities: The Money Market Fund may lend
portfolio securities (with a value not in excess of 33 1/3% of its total
assets, taken at market value) to brokers, dealers and financial
institutions and receive collateral in cash or securities issued or
guaranteed by the U.S. Government which will be maintained at all times in
an amount equal to at least 100% of the current market value of the
loaned securities.
During the period of the loan, the Money Market Fund receives income on the
loaned securities and either receives a fee or earns interest on any
investments made with cash collateral and thereby increases its yield.
Money Market Fund
6
<PAGE>
Preservation of capital is a prime investment objective of the Money
Market Fund and, while the types of money market securities in which the Money
Market Fund invests generally are considered to have low principal risk, such
securities are not completely risk-free. There is a risk of the failure of
issuers to meet their principal and interest obligations. Repurchase agreements
may be construed to be collateralized loans by the purchaser to the seller
secured by the securities transferred to the purchaser. In the event of default
by the seller under a repurchase agreement construed to be a collateralized
loan, the underlying securities are not owned by the Money Market Fund but only
constitute collateral for the seller's obligation to pay the repurchase price.
With respect to repurchase agreements, reverse repurchase agreements and the
lending of portfolio securities by the Money Market Fund, there is also the
risk of the failure of parties involved to repurchase at the agreed upon price
or to return the securities involved in such transactions, in which event the
Money Market Fund may suffer time delays and incur costs or possible losses in
connection with such transactions.
Bank money market instruments in which the Money Market Fund invests must
be issued by depository institutions with total assets of at least $1 billion,
except that the Money Market Fund may invest in certificates of deposit of
smaller institutions if such certificates of deposit are Federally insured and
if, as a result of such purchase, no more than 10% of total assets (taken at
market value), are invested in such certificates of deposit.
The Money Market Fund's investments in U.S. Government and Government
agency securities will be in instruments with a remaining maturity of 762 days
(25 months) or less. The Money Market Fund's other investments will be in
instruments with a remaining maturity of 397 days (13 months) or less that have
received a short-term rating, or that have been issued by issuers that have
received a short-term rating with respect to a class of debt obligations that
are comparable in priority and security with the instruments, from the
requisite nationally recognized statistical rating organizations ("NRSROs") in
one of the two highest short-term rating categories or, if neither the
instrument nor its issuer is so rated, will be of comparable quality as
determined by the Trustees of the Money Market Fund. Currently, there are five
NRSROs: Duff & Phelps Inc., Fitch IBCA, Inc., Thompson Bankwatch, Inc.,
Moody's Investors Service, Inc. and Standard & Poor's Ratings Services. The
Money Market Fund will determine the remaining maturity of investments in which
it invests in accordance with Commission regulations.
A Commission regulation limits investments by the Money Market Fund in
securities issued by any one issuer (other than the U.S. Government, its
agencies or instrumentalities) ordinarily to not more than 5% of its total
assets, or in the event that such securities do not have the highest rating,
not more than 1% of its total assets. In addition, such regulations require
that not more than 5% of the Money Market Fund's total assets be invested in
securities that do not have the highest rating, or are not of comparable
quality to securities with the highest rating, as determined by the Trustees of
the Money Market Fund.
The Money Market Fund may purchase or sell money market securities on a
forward commitment basis at fixed purchase or sale terms. The purchase of money
market securities on a forward commitment basis involves the risk that the
yields available in the market when the delivery takes place may actually be
higher than those obtained in the transaction itself; if yields increase, the
value of the securities purchased on a forward commitment basis will generally
decrease. A separate account of the Money Market Fund will be established with
its custodian consisting of cash or liquid money market securities having a
market value at all times at least equal to the amount of the forward purchase
commitment. The Money Market Fund may also sell money market securities on a
forward commitment basis. By doing so, the Fund foregoes the opportunity to sell
such securities at a higher price should they increase in value between the
trade and settlement dates.
Money Market Fund
7
<PAGE>
For purposes of its investment policies, the Money Market Fund defines
short-term money market securities as having a maturity of no more than 762
days (25 months) in the case of U.S. Government and agency securities and no
more than 397 days (13 months) in the case of all other securities. The
dollar-weighted average maturity of the Money Market Fund's portfolio will not
exceed 90 days. During the Money Market Fund's fiscal year ended March 31,
1998, the average maturity of its portfolio ranged from 62 days to 85 days.
Investment Restrictions. The Money Market Fund has adopted a number of
restrictions and policies relating to the investment of its assets and its
activities, which are fundamental policies and may not be changed without the
approval of the holders of a majority of the Money Market Fund's outstanding
voting securities as defined in the Investment Company Act. Among the more
significant restrictions, the Money Market Fund may not: (1) purchase any
securities other than the types of money market securities and investments
described under "Investment Objectives and Policies"; (2) invest more than 25%
of its total assets (taken at market value at the time of each investment) in
the securities of issuers in any particular industry (other than U.S.
Government securities, U.S. Government agency securities or domestic bank money
market instruments); (3) purchase the securities of any one issuer, other than
U.S. Government or U.S. Government agency securities, if immediately after such
purchase, more than 5% of the value of its total assets (taken at market value)
would be invested in such issuer, except that in the case of bank money market
instruments or repurchase agreements with any one bank up to 25% of the value
of the Money Market Fund's total assets may be invested without regard to such
5% limitation but shall instead be subject to a 10% limitation; (4) invest in
the securities of any single issuer, if immediately after and as a result of
such investment, the Money Market Fund would own more than 10% of the
outstanding securities, or more than 10% of the outstanding voting securities,
of such issuer; and (5) enter into repurchase agreements if, as a result
thereof, more than 10% of the Money Market Fund's total assets (taken at market
value at the time of each investment, together with any other investments
deemed illiquid) would be subject to repurchase agreements maturing in more
than seven days.
Money Market Fund
8
<PAGE>
PROSPECTUS
July 28, 1998
CMA Government Securities Fund
P.O. Box 9011, Princeton, New Jersey 08543-9011 - Phone No. (609) 282-2800
CMA Government Securities Fund (the "Government Fund") is a no-load,
diversified, open-end investment company seeking preservation of capital,
liquidity and current income available from investing exclusively in a
diversified portfolio of short-term marketable securities which are direct
obligations of the U.S. Government and repurchase agreements pertaining to such
securities. Dividends are declared and reinvested daily in the form of
additional shares at net asset value. The Government Fund seeks to maintain a
constant $1.00 net asset value per share, although this cannot be assured. An
investment in the Government Fund is neither insured nor guaranteed by the U.S.
Government. The Government Fund has adopted a Distribution and Shareholder
Servicing Plan in compliance with Rule 12b-1 under the Investment Company Act
of 1940 as amended (the "Investment Company Act"). There can be no assurance
that the investment objectives of the Government Fund will be realized.
-----------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------------------------
This Prospectus is a concise statement of information about the Government
Fund that is relevant to making an investment in the Government Fund. This
Prospectus should be read carefully and retained for future reference. A
statement containing additional information about the Government Fund, dated
July 28, 1998 (the "Statement of Additional Information"), has been filed with
the Securities and Exchange Commission and can be obtained, without charge, by
calling or writing to the Government Fund at the above telephone number or
address. The Commission maintains a Website (http://www.sec.gov) that contains
the Statement of Additional Information, material incorporated by reference and
other information about the Government Fund. The Statement of Additional
Information is hereby incorporated by reference into this Prospectus
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Fee Table .................................... 2
Financial Highlights ......................... 3
Yield Information ............................ 4
Investment Objectives and Policies ........... 4
Appendix ..................................... A-1
Purchase of Shares ........................ A-1
Redemption of Shares ...................... A-4
</TABLE>
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Management of the Funds ................... A-7
Portfolio Transactions .................... A-8
Dividends ................................. A-9
Determination of Net Asset Value .......... A-9
Taxes ..................................... A-10
Additional Information .................... A-13
</TABLE>
<PAGE>
FEE TABLE
<TABLE>
<S> <C> <C>
Government Fund Annual Operating Expenses (as a percentage of average net
assets) for the fiscal year ended March 31, 1998:
Management Fees(a) .............................................................. 0.40%
Rule 12b-1 Fees(b) .............................................................. 0.13%
Other Expenses:
Dividend and Transfer Agency Fees(c) ................................ 0.02%
Other Fees .......................................................... 0.02%
----
Total Other Expenses ............................................................ 0.04%
----
Total Government Fund Operating Expenses ........................................ 0.57%
====
</TABLE>
- --------
(a) See "Management of the Funds -- Investment Advisory Arrangements" -- page
A-7.
(b) See "Purchase of Shares" -- page A-1.
(c) See "Management of the Funds -- Transfer Agency Services" -- page A-8.
Example:
<TABLE>
<CAPTION>
Cumulative Expenses
Paid for the Period of:
--------------------------------------------
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000 investment,
assuming an operating expense ratio of 0.57% and a 5% annual return
throughout the periods ............................................ $6 $18 $32 $71
</TABLE>
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch")
charges an annual program participation fee, presently $100 for individuals,
for the CMA service (an additional fee, presently $25, is charged for
participation in the CMA Visa(R) Gold Program). Shareholders of the Government
Fund whose accounts are maintained directly with the Government Fund's Transfer
Agent and who are not subscribers to the CMA program will not be charged the
CMA program fee but will not receive any of the additional services available
to CMA program subscribers.
The foregoing Fee Table is intended to assist investors in understanding
the costs and expenses that a shareholder in the Government Fund will bear
directly or indirectly. The example set forth above assumes reinvestment of all
dividends and distributions. The example should not be considered a
representation of past or future expenses and actual expenses may be more or
less than those assumed for purposes of the example.
Government Fund
2
<PAGE>
FINANCIAL HIGHLIGHTS
Financial statements for the fiscal year ended March 31, 1998 and the
independent auditors' report thereon are included in the Statement of
Additional Information. The following per share data and ratios have been
derived from information provided in financial statements of the Government
Fund audited by Deloitte & Touche LLP, independent auditors.
<TABLE>
<CAPTION>
For the Year Ended March 31,
---------------------------------------------------------------
1998 1997 1996 1995
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net
Asset Value:
Per Share Operating
Performance:
Net asset value, beginning of
year .......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- --------
Investment income -- net ...... .0501 .0477 .0521 .0419
Realized and unrealized
gain (loss) on
investments -- net ........... .0007 (.0004) .0002 .0008
---------- ---------- ---------- ----------
Total from investment
operations .................... .0508 .0473 .0523 .0427
---------- ---------- ---------- ----------
Less dividends and
distributions:
Investment income -- net ...... (.0501) (.0477) (.0521) (.0419)
Realized gain on
investments -- net ........... (.0001) --+ (.0003) (.0002)
---------- ---------- ---------- ----------
Total dividends and
distributions ................. (.0502) (.0477) (.0524) (.0421)
---------- ---------- ---------- ----------
Net asset value, end of year ... $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ==========
Total Investment Return ........ 5.15 % 4.96 % 5.37 % 4.30 %
========== ========== ========== ==========
Ratios to Average Net
Assets:
Expenses ....................... .57 % .56 % .57 % .58 %
========== ========== ========== ==========
Investment income and
realized gain on
investments -- net ............ 5.02 % 4.81 % 5.25 % 4.18 %
========== ========== ========== ==========
Supplemental Data:
Net assets, end of year (in
thousands) .................... $3,540,040 $3,423,468 $3,345,603 $3,132,803
========== ========== ========== ==========
<CAPTION>
For the Year Ended March 31,
-----------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989
--------------- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net
Asset Value:
Per Share Operating
Performance:
Net asset value, beginning of
year .......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
Investment income -- net ...... .0271 .0294 .0473 .0704 .0819 .0737
Realized and unrealized
gain (loss) on
investments -- net ........... (.0013) .0038 .0034 .0014 .0006 (.0013)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations .................... .0258 .0332 .0507 .0718 .0825 .0724
---------- ---------- ---------- ---------- ---------- ----------
Less dividends and
distributions:
Investment income -- net ...... (.0271) (.0294) (.0473) (.0704) (.0819) (.0724)
Realized gain on
investments -- net ........... (.0004) (.0026) (.0036) (.0014)* (.0006)* --
---------- ---------- ---------- ---------- ---------- ----------
Total dividends and
distributions ................. (.0275) (.0320) (.0509) (.0718) (.0825) (.0724)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of year ... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ========== ==========
Total Investment Return ........ 2.79 % 3.25 % 5.22 % 7.44 % 8.59 % 7.50 %
========== ========== ========== ========== ========== ==========
Ratios to Average Net
Assets:
Expenses ....................... .56 % .55 % .56 % .56 % .57 % .59 %
========== ========== ========== ========== ========== ==========
Investment income and
realized gain on
investments -- net ............ 2.75 % 3.20 % 5.05 % 7.11%* 8.21%* 7.25%*
========== ========== ========== ========== ========== ==========
Supplemental Data:
Net assets, end of year (in
thousands) .................... $3,563,595 $3,858,017 $4,452,247 $5,228,619 $3,515,578 $2,494,905
========== ========== ========== ========== ========== ==========
</TABLE>
- --------
* Includes unrealized gains (losses).
+ Amount is less than $.0001 per share.
Government Fund
3
<PAGE>
YIELD INFORMATION
Set forth below is yield information as to the annualized and compounded
annualized yield for the indicated seven-day periods.
<TABLE>
<CAPTION>
Seven-Day Period Ended
--------------------------------
March 31, 1998 May 31, 1998
---------------- -------------
<S> <C> <C>
Annualized Yield:
Including gains and losses ............................ 5.00% 5.04%
Excluding gains and losses ............................ 5.00% 5.04%
Compounded Annualized Yield ............................ 5.13% 5.17%
Average Maturity of Portfolio at End of Period ......... 74 days 75 days
</TABLE>
The yield of the Government Fund refers to the income generated by an
investment in the Government Fund over a stated seven-day period. This income
is then annualized: that is, the amount of income generated by the investment
during that week is assumed to be generated each week over a 52-week period and
is shown as a percentage of the investment. The compounded annualized yield
(which excludes gains and losses) is calculated similarly but, when annualized,
the income earned by an investment in the Government Fund is assumed to be
reinvested. The compounded annualized yield will be somewhat higher than the
yield because of the effect of the assumed reinvestment.
The yield on Government Fund shares normally will fluctuate on a daily
basis. Therefore, the yield for any given past period is not an indication or
representation by the Government Fund of future yields or rates of return on
its shares. The Government Fund's yield is affected by changes in interest
rates on money market securities, average portfolio maturity, the types and
quality of portfolio securities held and operating expenses. The yield on
Government Fund shares for various reasons may not be comparable to the yield
on shares of other money market funds or other investments. Current yield
information may not provide a basis for comparison with bank deposits or other
investments that pay a fixed yield over a stated period of time.
On occasion, the Government Fund may compare its yield to (i) the average
yield reported by the Bank Rate Monitor National Index(TM) for money market
deposit accounts offered by the 100 leading banks and thrift institutions in the
ten largest standard metropolitan statistical areas, (ii) yield data reported by
Lipper Analytical Services, Inc., (iii) the yield on an investment in 90-day
Treasury bills on a rolling basis, assuming quarterly compounding, (iv)
performance data published by Morningstar Publications, Inc., Money Magazine,
U.S. News and World Report, Business Week, CDA Investment Technology, Inc.,
Forbes Magazine and Fortune Magazine or (v) historical yield data relating to
other central asset accounts similar to the CMA program. As with yield
quotations, yield comparisons should not be considered indicative of the
Government Fund's yield or relative performance for any future period.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the Government Fund are to seek preservation
of capital, liquidity and current income available from investing exclusively in
a diversified portfolio of short-term marketable securities which are direct
obligations of the U.S. Government and repurchase agreements pertaining to such
securities. Direct U.S. Government obligations consist of securities issued, or
guaranteed as to principal and interest, by the U.S. Government and which are
backed by the full faith and credit of the United States. The Government Fund
may
Government Fund
4
<PAGE>
not invest in securities issued or guaranteed by U.S. Government agencies,
instrumentalities or Government-sponsored enterprises which are not backed by
the full faith and credit of the United States. There can be no assurance that
the investment objectives of the Government Fund will be realized.
Investment in Government Fund shares offers several potential benefits.
The Government Fund seeks to provide as high a yield potential, consistent with
its objectives, as is available from investments in short-term U.S. Government
securities utilizing professional money market management and block purchases
of securities. It provides high liquidity because of its redemption features
and seeks the reduced market risk that generally results from diversification
of assets. The shareholder is also relieved from administrative burdens
associated with direct investment in short-term U.S. Government securities,
such as coordinating maturities and reinvestments, safekeeping and making
numerous buy-sell decisions. These benefits are at least partially offset by
certain expenses borne by investors, including management fees, distribution
fees, administrative costs and operational costs.
The Government Fund may invest in the U.S. Government securities described
above pursuant to repurchase agreements. Under such agreements, the
counterparty agrees, upon entering into the contract, to repurchase the
security from the Government Fund at a mutually agreed upon time and price,
thereby determining the yield during the term of the agreement. This results in
a fixed rate of return insulated from market fluctuations during such period.
Preservation of capital is a prime investment objective of the Government
Fund and the direct U.S. Government obligations in which it will invest are
generally considered to have the lowest principal risk among money market
securities. Historically, direct U.S. Government obligations have generally had
lower rates of return than other money market securities with less safety.
Repurchase agreements may be construed to be collateralized loans by the
purchaser to the seller secured by the securities transferred to the purchaser.
In the event of default by the seller under a repurchase agreement construed to
be a collateralized loan, the underlying securities are not owned by the
Government Fund but only constitute collateral for the seller's obligation to
pay the repurchase price. With respect to repurchase agreements, there is also
the risk of the failure of parties involved to repurchase at the agreed upon
price, in which event the Government Fund may suffer time delays and incur
costs or possible losses in connection with such transactions.
The Government Fund may purchase or sell portfolio securities on a forward
commitment basis at fixed purchase or sale terms. The purchase of portfolio
securities on a forward commitment basis involves the risk that the yields
available in the market when the delivery takes place may actually be higher
than those obtained in the transaction itself; if yields increase, the value of
the securities purchased on a forward commitment basis will generally decrease.
A separate account of the Government Fund will be established with its
custodian consisting of cash or liquid money market securities having a market
value at all times at least equal to the amount of the forward purchase
commitment. The Government Fund may also sell money market securities on a
forward commitment basis. By doing so, the Fund foregoes the opportunity to
sell such securities at a higher price should they increase in value between
the trade and settlement dates.
For purposes of its investment policies, the Government Fund defines
short-term U.S. Government securities as securities having a maturity of not
more than 762 days (25 months). Fund Asset Management, L.P. (the "Investment
Adviser") expects that substantially all the assets of the Government Fund will
be invested in securities maturing in not more than 397 days (13 months) but at
times some portion may have maturities up to not more than 762 days (25
months). The dollar-weighted average maturity of the Government Fund's
portfolio will not exceed 90
Government Fund
5
<PAGE>
days. During the Government Fund's fiscal year ended March 31, 1998, the
average maturity of its portfolio ranged from 63 days to 85 days.
Investment Restrictions. The Government Fund has adopted a number of
restrictions and policies relating to the investment of its assets and its
activities, which are fundamental policies and may not be changed without the
approval of the holders of a majority of the Government Fund's outstanding
voting securities as defined in the Investment Company Act. Among the more
significant restrictions, the Government Fund may not: (1) purchase any
securities other than short-term marketable securities which are direct
obligations of the U.S. Government and repurchase agreements pertaining to such
securities; (2) enter into repurchase agreements with any one bank or primary
dealer or an affiliate thereof, if immediately thereafter, more than 5% of the
value of its total assets (taken at market value) would be invested in
repurchase agreements with such bank or primary dealer or an affiliate thereof;
and (3) enter into repurchase agreements if, as a result thereof, more than 10%
of the Government Fund's total assets (taken at market value at the time of
each investment) would be subject to repurchase agreements maturing in more
than seven days.
Government Fund
6
<PAGE>
PROSPECTUS
July 28, 1998
CMA Tax-Exempt Fund
P.O. Box 9011, Princeton, New Jersey 08543-9011 - Phone No. (609) 282-2800
CMA Tax-Exempt Fund (the "Tax-Exempt Fund") is a no-load, diversified,
open-end investment company seeking current income exempt from Federal income
taxes, preservation of capital and liquidity available from investing in a
diversified portfolio of short-term high quality Tax-Exempt Securities (as
defined herein). Portfolio securities will consist principally of short-term
municipal notes, variable rate demand notes and short-term municipal commercial
paper. All of the investments of the Tax-Exempt Fund will be in securities with
remaining maturities of not more than 397 days (13 months). The dollar-weighted
average maturity of the Tax-Exempt Fund's portfolio will be 90 days or less.
Dividends are declared and reinvested daily in the form of additional shares at
net asset value. The Tax-Exempt Fund seeks to maintain a constant $1.00 net
asset value per share, although this cannot be assured. An investment in the
Tax-Exempt Fund is neither insured nor guaranteed by the U.S. Government. The
Tax-Exempt Fund has adopted a Distribution and Shareholder Servicing Plan in
compliance with Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "Investment Company Act"). The Tax-Exempt Fund may invest in certain
otherwise tax-exempt securities which are classified as "private activity
bonds" which may be subject to an alternative minimum tax. See "Taxes". The
Tax-Exempt Fund also may invest in derivative or synthetic municipal
instruments. See "Investment Objectives and Policies -- Portfolio Investments
- -- Derivative Products." There can be no assurance that the investment
objectives of the Tax-Exempt Fund will be realized.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
This Prospectus is a concise statement of information about the Tax-Exempt
Fund that is relevant to making an investment in the Tax-Exempt Fund. This
Prospectus should be read carefully and retained for future reference. A
statement containing additional information about the Tax-Exempt Fund, dated
July 28, 1998 (the "Statement of Additional Information"), has been filed with
the Securities and Exchange Commission and can be obtained, without charge, by
calling or writing to the Tax-Exempt Fund at the above telephone number or
address. The Commission maintains a Website (http://www.sec.gov) that contains
the Statement of Additional Information, material incorporated by reference and
other information about the Tax-Exempt Fund. The Statement of Additional
Information is hereby incorporated by reference into this Prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Fee Table .................................... 2
Financial Highlights ......................... 3
Yield Information ............................ 4
Investment Objectives and Policies ........... 5
Appendix ..................................... A-1
Purchase of Shares ........................ A-1
Redemption of Shares ...................... A-4
</TABLE>
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Management of the Funds ................... A-7
Portfolio Transactions .................... A-8
Dividends ................................. A-9
Determination of Net Asset Value .......... A-9
Taxes ..................................... A-10
Additional Information .................... A-13
</TABLE>
<PAGE>
FEE TABLE
<TABLE>
<S> <C> <C>
Tax-Exempt Fund Annual Operating Expenses (as a percentage of average net
assets) for the fiscal year ended March 31, 1998:
Management Fees(a) .............................................................. 0.39%
Rule 12b-1 Fees(b) .............................................................. 0.13%
Other Expenses:
Dividend and Transfer Agency Fees(c) ................................ 0.02%
Other Fees .......................................................... 0.01%
----
Total Other Expenses ............................................................ 0.03%
----
Total Tax-Exempt Fund Operating Expenses ........................................ 0.55%
====
</TABLE>
- --------
(a) See "Management of the Funds -- Investment Advisory Arrangements" -- page
A-7.
(b) See "Purchase of Shares" -- page A-1.
(c) See "Management of the Funds -- Transfer Agency Services" -- page A-8.
Example:
<TABLE>
<CAPTION>
Cumulative Expenses
Paid for the Period of:
--------------------------------------------
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000 investment,
assuming an operating expense ratio of 0.55% and a 5% annual return
throughout the periods ............................................ $6 $18 $31 $69
</TABLE>
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch")
charges an annual program participation fee, presently $100 for individuals,
for the CMA service (an additional fee, presently $25, is charged for
participation in the CMA Visa(R) Gold Program). Shareholders of the Tax-Exempt
Fund whose accounts are maintained directly with the Tax-Exempt Fund's Transfer
Agent and who are not subscribers to the CMA program will not be charged the
CMA program fee but will not receive any of the additional services available
to CMA program subscribers.
The foregoing Fee Table is intended to assist investors in understanding
the costs and expenses that a shareholder in the Tax-Exempt Fund will bear
directly or indirectly. The example set forth above assumes reinvestment of all
dividends and distributions. The example should not be considered a
representation of past or future expenses and actual expenses may be more or
less than those assumed for purposes of the example.
Tax-Exempt Fund
2
<PAGE>
FINANCIAL HIGHLIGHTS
Financial statements for the fiscal year ended March 31, 1998 and the
independent auditor's report thereon are included in the Statement of
Additional Information. The following per share data and ratios have been
derived from information provided in financial statements of the Tax-Exempt
Fund audited by Deloitte & Touche LLP, independent auditors.
<TABLE>
<CAPTION>
For the Year Ended March 31,
-----------------------------------------------------------
1998 1997 1996 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net
Asset Value:
Per Share Operating
Performance:
Net asset value, beginning of
year ............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- ---------
Investment income -- net ........ .03 .03 .03 .03
--------- --------- --------- ---------
Less dividends from
investment income -- net (.03) (.03) (.03) (.03)
---------- ---------- ---------- ----------
Net asset value, end of year ..... $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ==========
Total Investment Return .......... 3.16% 3.00% 3.31% 2.76%
========== ========== ========== ==========
Ratios to Average Net Assets:
Expenses ......................... .55% .55% .55% .55%
========== ========== ========== ==========
Investment income -- net ......... 3.11% 2.94% 3.26% 2.70%
========== ========== ========== ==========
Supplemental Data:
Net assets, end of year (in
thousands) ...................... $9,356,705 $8,347,278 $8,164,160 $7,391,964
========== ========== ========== ==========
<CAPTION>
For the Year Ended March 31,
-----------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net
Asset Value:
Per Share Operating
Performance:
Net asset value, beginning of
year ............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- --------- ---------
Investment income -- net ........ .02 .02 .04 .05 .06 .05
--------- --------- --------- --------- --------- ---------
Less dividends from
investment income -- net (.02) (.02) (.04) (.05) (.06) (.05)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of year ..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ========== ==========
Total Investment Return .......... 1.96% 2.36% 3.79% 5.37% 5.96% 5.25%
========== ========== ========== ========== ========== ==========
Ratios to Average Net Assets:
Expenses ......................... .55% .54% .54% .54% .54% .54%
========== ========== ========== ========== ========== ==========
Investment income -- net ......... 1.94% 2.33% 3.70% 5.24% 5.79% 5.11%
========== ========== ========== ========== ========== ==========
Supplemental Data:
Net assets, end of year (in
thousands) ...................... $7,911,960 $7,527,054 $7,874,437 $8,695,795 $8,356,203 $7,348,164
========== ========== ========== ========== ========== ==========
</TABLE>
Tax-Exempt Fund
3
<PAGE>
YIELD INFORMATION
Set forth below is yield information as to the annualized and compounded
annualized yield and the tax-equivalent yield for the indicated periods.
<TABLE>
<CAPTION>
Seven-Day Period Ended
--------------------------------
March 31, 1998 May 31, 1998
---------------- -------------
<S> <C> <C>
Annualized Yield ....................................... 3.14% 3.21%
Compounded Annualized Yield ............................ 3.19% 3.26%
Average Maturity of Portfolio at End of Period ......... 46 days 37 days
</TABLE>
<TABLE>
<CAPTION>
30-Day Period Ended
--------------------------------
March 31, 1998 May 31, 1998
---------------- -------------
<S> <C> <C>
Tax-equivalent Yield* ......... 4.36% 4.46%
</TABLE>
- --------
* Based upon a Federal income tax rate of 28%.
The yield of the Tax-Exempt Fund refers to the income generated by an
investment in the Tax-Exempt Fund over a stated seven-day period. This income
is then annualized: that is, the amount of income generated by the investment
during that week is assumed to be generated each week over a 52-week period and
is shown as a percentage of the investment. The compounded annualized yield is
calculated similarly but, when annualized, the income earned by an investment
in the Tax-Exempt Fund is assumed to be reinvested. The compounded annualized
yield will be somewhat higher than the yield because of the effect of the
assumed reinvestment.
The yield on Tax-Exempt Fund shares normally will fluctuate on a daily
basis. Therefore, the yield for any given past period is not an indication or
representation by the Tax-Exempt Fund of future yields or rates of return on
its shares. The Tax-Exempt Fund's yield is affected by changes in interest
rates on short-term Tax-Exempt Securities, average portfolio maturity, the
types and quality of portfolio securities held and operating expenses. Current
yield information may not provide a basis for comparison with bank deposits or
other investments that pay a fixed yield over a stated period of time.
On occasion, the Tax-Exempt Fund may compare its yield to (i) yield data
published by Lipper Analytical Services, Inc., (ii) performance data published
by Morningstar Publications, Inc., Money Magazine, U.S. News & World Report,
Business Week, CDA Investment Technology, Inc., Forbes Magazine and Fortune
Magazine, (iii) historical yield data relating to other central asset accounts
similar to the CMA program or (iv) the average yield reported by the Bank Rate
Monitor National IndexTM for money market deposit accounts offered by the 100
leading banks and thrift institutions in the ten largest standard metropolitan
statistical areas. As with yield quotations, yield comparisons should not be
considered indicative of the Tax-Exempt Fund's yield or relative performance for
any future period.
Tax-Exempt Fund
4
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Investment Objectives
The investment objectives of the Tax-Exempt Fund are to seek current
income exempt from Federal income taxes, preservation of capital and liquidity
available from investing in a diversified portfolio of short-term high quality
Tax-Exempt Securities. The Tax-Exempt Fund seeks to achieve its objectives by
investing in a diversified portfolio of obligations issued by or on behalf of
states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities or
derivative or synthetic municipal instruments, the interest from which is
exempt from Federal income tax (such obligations are herein referred to as
"Tax-Exempt Securities"). The Tax-Exempt Fund may invest in certain otherwise
tax-exempt securities which are classified as "private activity bonds" which
may be subject to an alternative minimum tax. See "Taxes." The investment
objectives of the Tax-Exempt Fund described in this paragraph are a fundamental
policy of the Tax-Exempt Fund and may not be changed without a vote of the
majority of the outstanding shares of the Tax-Exempt Fund. There can be no
assurance that the investment objectives of the Tax-Exempt Fund will be
realized.
Potential Benefits
Investment in Tax-Exempt Fund shares offers several potential benefits.
The Tax-Exempt Fund seeks to provide as high a tax-exempt yield potential,
consistent with its objectives, as is available from investments in short-term
Tax-Exempt Securities utilizing professional management and block purchases of
securities. It provides high liquidity because of its redemption features and
seeks the reduced risk that generally results from diversification of assets.
The shareholder is also relieved from administrative burdens associated with
direct investment in short-term securities, such as coordinating maturities and
reinvestments, safekeeping and making numerous buy-sell decisions. These
benefits are at least partially offset by certain expenses borne by investors,
including management fees, distribution fees, administrative costs and
operational costs.
Portfolio Investments
The Tax-Exempt Securities in which the Tax-Exempt Fund invests include
municipal notes, municipal commercial paper and municipal bonds with a
remaining maturity of not more than 397 days (13 months). The Tax-Exempt Fund
will also invest in variable rate demand notes and participations therein (see
"Variable Rate Demand Notes" below) and derivative or synthetic municipal
instruments (see "Derivative Products" below). Municipal notes include tax
anticipation notes, bond anticipation notes and revenue anticipation notes.
Anticipation notes are sold as interim financing in anticipation of tax
collection, bond sales or revenue receipts. Municipal commercial paper refers
to short-term unsecured promissory notes issued generally to finance short-term
credit needs. The Tax-Exempt Fund may invest in all types of tax-exempt
instruments currently outstanding or to be issued in the future which satisfy
the short-term maturity and quality standards of the Tax-Exempt Fund.
The Tax-Exempt Fund presently contemplates that it will not invest more
than 25% of its total assets in Tax-Exempt Securities whose issuers are located
in the same state. The Tax-Exempt Fund does not intend to invest more than 25%
of its total assets in industrial development bonds or private activity bonds
where the entities supplying the revenues from which the issues are to be paid
are in the same industry.
Certain of the instruments in which the Tax-Exempt Fund invests, including
variable rate demand notes ("VRDNs") and derivative or synthetic municipal
instruments ("Derivative Products"), effectively provide the Tax-Exempt Fund
with economic interests in long-term municipal bonds, coupled with rights to
demand payment
Tax-Exempt Fund
5
<PAGE>
of the principal amounts of such instruments from designated counterparties.
Under Securities and Exchange Commission rules, the Tax-Exempt Fund treats
these instruments as having maturities shorter than the stated maturity dates
of the notes, in the case of VRDNs, or the long-term bonds underlying
Derivative Products (the "Underlying Bonds"). Such maturities are sufficiently
short-term to allow such instruments to qualify as eligible investments for
money market funds such as the Tax-Exempt Fund. A demand right is dependent on
the financial ability of the counterparty, which is typically a bank,
broker-dealer or other financial institution, to purchase the instrument at its
principal amount. In addition, the right of the Tax-Exempt Fund to demand
payment from a counterparty may be subject to certain conditions, including the
creditworthiness of the instrument or the Underlying Bond. If a counterparty is
unable to purchase the instrument or, because of conditions on the right of the
Tax-Exempt Fund to demand payment, the counterparty is not obligated to
purchase the instrument on demand, the Tax-Exempt Fund may be required to
dispose of the instrument or the Underlying Bond in the open market, which may
be at a price which adversely affects the Tax-Exempt Fund's net asset value.
Variable Rate Demand Notes. VRDNs are tax-exempt obligations which utilize
a floating or variable interest rate adjustment formula and provide an
unconditional right of demand to receive payment of the unpaid principal
balance plus accrued interest on a short notice period. The interest rates are
adjustable at periodic intervals to some prevailing market rate for similar
investments, such adjustment formula being calculated to maintain the market
value of the VRDN at approximately the par value of the VRDN upon the
adjustment date. The adjustments are frequently based on the prime rate of a
bank or some other appropriate interest rate adjustment index.
The Tax-Exempt Fund may also invest in VRDNs in the form of participation
interests ("Participating VRDNs") in variable rate tax-exempt obligations held
by a financial institution, typically commercial banks ("institutions").
Participating VRDNs provide the Tax-Exempt Fund with a specified undivided
interest (up to 100%) of the underlying obligations and the right to demand
payment of the unpaid principal balance plus accrued interest on the
Participating VRDNs from the institution upon a specified number of days'
notice, presently not to exceed 30 days. In addition, each Participating VRDN
is backed by an irrevocable letter of credit or similar commitment of the
institution. The Tax-Exempt Fund has an undivided interest in the underlying
obligation and thus participates on the same basis as the institution in such
obligation except that the institution typically retains fees out of the
interest paid on the obligation for servicing the obligation, providing the
letter of credit or issuing the repurchase commitment.
VRDNs that contain an unconditional right of demand to receive payment of
the unpaid principal balance plus accrued interest on a notice period exceeding
seven days may be deemed to be illiquid securities. A VRDN with a demand notice
period exceeding seven days will therefore be subject to the Fund's restriction
on illiquid investments unless, in the judgment of the Trustees, such VRDN is
liquid. The Trustees may adopt guidelines and delegate to Fund Asset
Management, L.P. (the "Investment Adviser") the daily function of determining
and monitoring liquidity of such VRDNs. The Trustees, however, will retain
sufficient oversight and be ultimately responsible for such determinations.
The Tax-Exempt Fund has been advised by its counsel that the Tax-Exempt
Fund should be entitled to treat the income received on Participating VRDNs as
interest from tax-exempt obligations provided that certain conditions are met.
It is presently contemplated that the Tax-Exempt Fund will not invest more than
a limited amount (not more than 20%) of its total assets in Participating
VRDNs.
Derivative Products. The Tax-Exempt Fund may invest in a variety of
Derivative Products. Derivative Products are typically structured by a bank,
broker-dealer or other financial institution. A Derivative Product generally
Tax-Exempt Fund
6
<PAGE>
consists of a trust or partnership through which the Fund holds an interest in
one or more Underlying Bonds coupled with a conditional right to sell ("put")
the Fund's interest in the Underlying Bonds at par plus accrued interest to a
financial institution (a "Liquidity Provider"). Typically, a Derivative Product
is structured as a trust or partnership which provides for pass-through
tax-exempt income. There are currently three principal types of derivative
structures: (1) "Tender Option Bonds," which are instruments which grant the
holder thereof the right to put an Underlying Bond at par plus accrued interest
at specified intervals to a Liquidity Provider; (2) "Swap Products," in which
the trust or partnership swaps the payments due on an Underlying Bond with a
swap counterparty who agrees to pay a floating municipal money market interest
rate; and (3) "Partnerships," which allocate to the partners income, expenses,
capital gains and losses in accordance with a governing partnership agreement.
The Tax-Exempt Fund may also invest in other forms of Derivative Products.
Investments in Derivative Products raise certain tax, legal, regulatory
and accounting issues which may not be presented by investments in other
municipal bonds. There is some risk that certain issues could be resolved in a
manner which could adversely impact the performance of the Tax-Exempt Fund. For
example, the tax-exempt treatment of the interest paid to holders of Derivative
Products is premised on the legal conclusion that the holders of such
Derivative Products have an ownership interest in the Underlying Bonds. While
the Fund receives an opinion of legal counsel to the effect that the income
from each Derivative Product is tax-exempt to the same extent as the Underlying
Bond, the Internal Revenue Service (the "IRS") has not issued a ruling on this
subject. Were the IRS to issue an adverse ruling, there is a risk that the
interest paid on such Derivative Products would be deemed taxable.
Municipal Lease Obligations. Also included within the general category of
the Tax-Exempt Securities are participation certificates in a lease, an
installment purchase contract or a conditional sales contract (hereinafter
collectively called "lease obligations") entered into by a state or political
subdivision to finance the acquisition or construction of equipment, land or
facilities. Although lease obligations do not constitute general obligations of
the issuer for which the lessee's unlimited taxing power is pledged, a lease
obligation is frequently backed by the lessee's covenant to budget for,
appropriate and make the payments due under the lease obligation. However,
certain lease obligations contain "non-appropriation" clauses which provide
that the lessee has no obligation to make lease or installment purchase
payments in future years unless money is appropriated for such purpose on a
yearly basis. Although "non-appropriation" lease obligations are secured by the
leased property, disposition of the property in the event of foreclosure might
prove difficult. Certain investments in lease obligations may be illiquid. The
Tax-Exempt Fund may not invest in illiquid lease obligations if such
investments, together with all other illiquid investments, would exceed 10% of
the Tax-Exempt Fund's net assets. The Tax-Exempt Fund may, however, invest
without regard to such limitation in lease obligations which the Investment
Adviser, pursuant to guidelines which have been adopted by the Board of
Trustees and subject to the supervision of the Board, determines to be liquid.
The Investment Adviser will deem lease obligations liquid if they are publicly
offered and have received an investment grade rating of Baa or better by
Moody's Investors Service, Inc. ("Moody's"), or BBB or better by Standard &
Poor's Ratings Services ("Standard & Poor's") or Fitch IBCA, Inc., ("Fitch").
Unrated lease obligations, or those rated below investment grade, will be
considered liquid if the obligations come to the market through an underwritten
public offering and at least two dealers are willing to give competitive bids.
In reference to the unrated lease obligations, the Investment Adviser must,
among other things, also review the creditworthiness of the municipality
obligated to make payment under the lease obligation and make certain specified
determinations based on such factors as the existence of a rating or credit
enhancement such as insurance, the frequency of trades or quotes for the
obligation and the willingness of dealers to make a market in the obligation.
Tax-Exempt Fund
7
<PAGE>
Short-Term Maturity Standards
All of the investments of the Tax-Exempt Fund will be in securities with
remaining maturities of not more than 397 days (13 months). The dollar-weighted
average maturity of the Tax-Exempt Fund's portfolio will be 90 days or less.
The maturity of VRDNs (including Participating VRDNs) is deemed to be the
longer of (i) the notice period required before the Tax-Exempt Fund is entitled
to receive payment of the principal amount of the VRDN upon demand or (ii) the
period remaining until the VRDN's next interest rate adjustment. If not
redeemed by the Tax-Exempt Fund through the demand feature, VRDNs mature on a
specified date which may range up to 30 years from the date of issuance.
High Quality Standards
The Tax-Exempt Fund's portfolio investments in municipal notes and
short-term tax-exempt commercial paper will be limited to those obligations
which (i) are secured by obligations backed by the full faith and credit of the
United States, or (ii) are rated, or issued by issuers who have been rated, in
one of the two highest rating categories for short-term municipal debt
obligations by a nationally recognized statistical rating organization (an
"NRSRO") or, if not rated, will be of comparable quality as determined by the
Trustees of the Tax-Exempt Fund. The Tax-Exempt Fund's investments in municipal
bonds (which must have maturities at the date of purchase of 397 days (13
months) or less) will be in issuers who have received from the requisite NRSROs
a rating, with respect to a class of short-term debt obligations that is
comparable in priority and security with the investment, in one of the two
highest rating categories for short-term obligations or, if not rated, will be
of comparable quality as determined by the Trustees of the Tax-Exempt Fund.
Currently, there are three NRSROs which rate municipal obligations: Fitch,
Moody's and Standard & Poor's. Certain tax-exempt obligations (primarily VRDNs
and Participating VRDNs) may be entitled to the benefit of letters of credit or
similar commitments issued by financial institutions and, in such instances,
the Investment Adviser will take into account the obligation of the financial
institution in assessing the quality of such instrument. The Tax-Exempt Fund
may also purchase other types of tax-exempt instruments if, in the opinion of
the Trustees, such obligations are equivalent to securities having the ratings
described above.
Preservation of capital is a prime investment objective of the Tax-Exempt
Fund, and, while the types of short-term Tax-Exempt Securities in which the
Tax-Exempt Fund invests are not completely risk free, such securities are
generally considered by the Investment Adviser to have low risk of the failure
of issuers or credit enhancers to meet their principal and interest
obligations. These securities have a lower principal risk compared to lower
rated obligations and generally to longer term obligations which entail the
risk of changing conditions over a longer period of time.
Other Factors
Management of the Tax-Exempt Fund will endeavor to be as fully invested as
reasonably practicable in order to maximize the yield on the Tax-Exempt Fund's
portfolio. Because the Tax-Exempt Fund does not intend to realize taxable
investment income, it will not invest in taxable short-term money market
securities. Tax-Exempt Securities generally do not trade on the basis of same
day settlements and, accordingly, a portfolio of such securities cannot be
managed on a daily basis with the same flexibility as a portfolio of money
market securities which can be bought and sold on a same day basis. There may
be times when the Tax-Exempt Fund has uninvested cash resulting from an influx
of cash due to large purchases of shares or maturities of portfolio securities.
The Tax-Exempt Fund may also be required to maintain cash reserves or incur
temporary bank borrowings to make
Tax-Exempt Fund
8
<PAGE>
redemption payments which are made on the same day the redemption request is
received. Such inability to be fully invested would lower the yield on the
portfolio.
The Tax-Exempt Fund's portfolio holdings represent a significant
percentage of the market in short-term tax-exempt securities and the yield on
the portfolio could be negatively impacted from time to time by the lack of
availability of short-term high quality Tax-Exempt Securities. The Tax-Exempt
Fund reserves the right to suspend or otherwise limit sales of its shares if,
as a result of difficulties in acquiring portfolio securities, it is determined
that it is not in the interests of the Tax-Exempt Fund's shareholders to issue
additional shares.
Tax-Exempt Securities may at times be purchased or sold on a delayed
delivery basis or on a when-issued basis. These transactions arise when
securities are purchased or sold by the Tax-Exempt Fund with payment and
delivery taking place in the future, often a month or more after the purchase.
The payment obligation and the interest rate are each fixed at the time the
buyer enters into the commitment. The Tax-Exempt Fund will only make
commitments to purchase such securities with the intention of actually
acquiring the securities, but the Fund may sell these securities prior to
settlement date if it is deemed advisable. No new when-issued commitments will
be made if more than 40% of the Tax-Exempt Fund's net assets would become so
committed. Purchasing Tax-Exempt Securities on a when-issued basis involves the
risk that the yields available in the market when the delivery takes place may
actually be higher than those obtained in the transaction itself; if yields so
increase, the value of the when-issued obligation will generally decrease. The
Tax-Exempt Fund will maintain a separate account at its custodian bank
consisting of cash or liquid Tax-Exempt Securities (valued on a daily basis)
equal at all times to the amount of the when-issued commitment.
Investment Restrictions. The Tax-Exempt Fund has adopted a number of
restrictions and policies relating to the investment of its assets and its
activities, which are fundamental policies and may not be changed without the
approval of the holders of a majority of the Tax-Exempt Fund's outstanding
shares as defined in the Investment Company Act. Among the more significant
restrictions, the Tax-Exempt Fund may not: (1) purchase any securities other
than Tax-Exempt Securities referred to under "Investment Objectives and
Policies" herein and "Appendix -- Information Concerning Tax-Exempt Securities"
in the Statement of Additional Information; (2) invest more than 5% of its
total assets (taken at market value at the time of each investment) in the
securities of any one issuer except that such restriction shall not apply to
securities backed (i.e., guaranteed) by the United States Government or its
agencies or instrumentalities (for purposes of this restriction, the Tax-Exempt
Fund will regard each state and each political subdivision, agency or
instrumentality of such state and each multi-state agency of which such state
is a member and each public authority which issues securities on behalf of a
private entity as a separate issuer, except that if the security is backed only
by the assets and revenues of a non-government entity then the entity with the
ultimate responsibility for the payment of interest and principal may be
regarded as the sole issuer); and (3) invest more than 5% of its total assets
(taken at market value at the time of each investment) in industrial revenue
bonds where the entity supplying the revenues from which the issue is to be
paid, including predecessors, has a record of less than three years of
continuous operation.
Tax-Exempt Fund
9
<PAGE>
[This page intentionally left blank.]
<PAGE>
PROSPECTUS
July 28, 1998
CMA Treasury Fund
P.O. Box 9011, Princeton, New Jersey 08543-9011 - Phone No. (609) 282-2800
CMA Treasury Fund (the "Treasury Fund") is a no-load, diversified,
open-end investment company seeking preservation of capital, liquidity and
current income available from investing exclusively in a diversified portfolio
of short-term marketable securities which are direct obligations of the U.S.
Treasury. Dividends are declared and reinvested daily in the form of additional
shares at net asset value. The Treasury Fund seeks to maintain a constant $1.00
net asset value per share, although this cannot be assured. An investment in
the Treasury Fund is neither insured nor guaranteed by the U.S. Government. The
Treasury Fund has adopted a Distribution and Shareholder Servicing Plan in
compliance with Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "Investment Company Act"). There can be no assurance that the investment
objectives of the Treasury Fund will be realized.
-----------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-----------------------------------
This Prospectus is a concise statement of information about the Treasury
Fund that is relevant to making an investment in the Treasury Fund. This
Prospectus should be read carefully and retained for future reference. A
statement containing additional information about the Treasury Fund, dated July
28, 1998 (the "Statement of Additional Information"), has been filed with the
Securities and Exchange Commission and can be obtained, without charge, by
calling or writing to the Treasury Fund at the above telephone number or
address. The Commission maintains a Website (http://www.sec.gov) that contains
the Statement of Additional Information, material incorporated by reference and
other information about the Treasury Fund. The Statement of Additional
Information is hereby incorporated by reference into this Prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Fee Table .................................... 2
Financial Highlights ......................... 3
Yield Information ............................ 4
Investment Objectives and Policies ........... 5
Appendix ..................................... A-1
Purchase of Shares ........................ A-1
Redemption of Shares ...................... A-4
</TABLE>
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Management of the Funds ................... A-7
Portfolio Transactions .................... A-8
Dividends ................................. A-9
Determination of Net Asset Value .......... A-9
Taxes ..................................... A-10
Additional Information .................... A-13
</TABLE>
<PAGE>
FEE TABLE
<TABLE>
<S> <C> <C>
Treasury Fund Annual Operating Expenses (as a percentage of average net assets)
for the fiscal year ended March 31, 1998:
Management Fees(a) .................................................................... 0.42%
Rule 12b-1 Fees(b) .................................................................... 0.13%
Other Expenses:
Dividend and Transfer Agency Fees(c) ...................................... 0.02%
Other Fees ................................................................ 0.03%
----
Total Other Expenses .................................................................. 0.05%
----
Total Treasury Fund Operating Expenses ................................................ 0.60%
====
</TABLE>
- --------
(a) See "Management of the Funds -- Investment Advisory Arrangements" -- page
A-7.
(b) See "Purchase of Shares" -- page A-1.
(c) See "Management of the Funds-Transfer Agency Services" -- page A-8.
Example:
<TABLE>
<CAPTION>
Cumulative Expenses
Paid for the Period of:
--------------------------------------------
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000 investment,
assuming an operating expense ratio of 0.60% and a 5% annual return
throughout the periods ............................................ $6 $19 $33 $75
</TABLE>
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch")
charges an annual program participation fee, presently $100 for individuals,
for the CMA service (an additional fee, presently $25, is charged for
participation in the CMA Visa(R) Gold Program). Shareholders of the Treasury
Fund whose accounts are maintained directly with the Fund's Transfer Agent and
who are not subscribers to the CMA program will not be charged the CMA program
fee but will not receive any of the additional services available to CMA
program subscribers.
The foregoing Fee Table is intended to assist investors in understanding
the costs and expenses that a shareholder in the Treasury Fund will bear
directly or indirectly. The example set forth above assumes reinvestment of all
dividends and distributions. The example should not be considered a
representation of past or future expenses and actual expenses may be more or
less than those assumed for purposes of the example.
Treasury Fund
2
<PAGE>
FINANCIAL HIGHLIGHTS
Financial statements for the fiscal year ended March 31, 1998 and the
independent auditor's report thereon are included in the Statement of
Additional Information. The following per share data and ratios have been
derived from information provided in financial statements of the Treasury Fund
audited by Deloitte & Touche LLP, independent auditors.
<TABLE>
<CAPTION>
For the Year Ended March 31,
-----------------------------------------------
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Increase (Decrease) in Net
Asset Value:
Per Share Operating
Performance:
Net asset value, beginning of
period ........................... $ 1.00 $ 1.00 $ 1.00
-------- -------- --------
Investment income -- net ......... .0475 .0461 .0498
Realized and unrealized gain
(loss) on
investments -- net ............. .0008 ( .0001) .0001
---------- ---------- ----------
Total from investment
operations ....................... .0483 .0460 .0499
---------- ---------- ----------
Less dividends and
distributions:
Investment income -- net ......... (.0475) (.0461) (.0498)
Realized gain on
investments -- net ............. (.0005) (.0001) (.0003)
---------- ---------- ----------
Total dividends and
distributions .................... (.0480) (.0462) (.0501)
---------- ---------- ----------
Net asset value, end of period..... $ 1.00 $ 1.00 $ 1.00
========== ========== ==========
Total Investment Return ........... 4.92 % 4.74 % 5.14 %
========== ========== ==========
Ratios to Average Net Assets:
Expenses, net of
reimbursement .................... .60 % .59 % .60 %
========== ========== ==========
Expenses .......................... .60 % .59 % .60 %
========== ========== ==========
Investment income and
realized gain on
investments -- net ............... 4.82 % 4.59 % 5.01 %
========== ========== ==========
Supplemental Data:
Net assets, end of period (in
thousands) ....................... $2,279,822 $1,968,516 $1,791,760
========== ========== ==========
<CAPTION>
For the Period
April 15, 1991+
For the Year Ended March 31, to March 31,
----------------------------------------------- ----------------
1995 1994 1993 1992
--------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net
Asset Value:
Per Share Operating
Performance:
Net asset value, beginning of
period ........................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- --------
Investment income -- net ......... .0409 .0250 .0278 .0453
Realized and unrealized gain
(loss) on
investments -- net ............. .0004 .0002 .0026 .0019
---------- ---------- ---------- ----------
Total from investment
operations ....................... .0413 .0252 .0304 .0472
---------- ---------- ---------- ----------
Less dividends and
distributions:
Investment income -- net ......... (.0409) (.0250) (.0278) (.0453)
Realized gain on
investments -- net ............. (.0002) (.0004) (.0024) (.0020)
---------- ---------- ---------- ----------
Total dividends and
distributions .................... (.0411) (.0254) (.0302) (.0473)
---------- ---------- ---------- ----------
Net asset value, end of period..... $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ==========
Total Investment Return ........... 4.18 % 2.57 % 3.07 % 5.04%*
========== ========== ========== ==========
Ratios to Average Net Assets:
Expenses, net of
reimbursement .................... .62 % .61 % .60 % .49%*
========== ========== ========== ==========
Expenses .......................... .62 % .61 % .62 % .68%*
========== ========== ========== ==========
Investment income and
realized gain on
investments -- net ............... 4.20 % 2.55 % 3.01 % 4.67%*
========== ========== ========== ==========
Supplemental Data:
Net assets, end of period (in
thousands) ....................... $1,428,724 $1,220,440 $1,287,061 $1,221,461
========== ========== ========== ==========
</TABLE>
- --------
+ Commencement of Operations.
* Annualized.
Treasury Fund
3
<PAGE>
YIELD INFORMATION
Set forth below is yield information as to the annualized and compounded
annualized yield for the indicated seven-day periods.
<TABLE>
<CAPTION>
Seven-Day Period Ended
--------------------------------
March 31, 1998 May 31, 1998
---------------- -------------
<S> <C> <C>
Annualized Yield:
Including gains and losses ............................ 4.80% 4.78%
Excluding gains and losses ............................ 4.80% 4.67%
Compounded Annualized Yield ............................ 4.92% 4.78%
Average Maturity of Portfolio at End of Period ......... 80 days 77 days
</TABLE>
The yield of the Treasury Fund refers to the income generated by an
investment in the Treasury Fund over a stated seven-day period. This income is
then annualized; that is, the amount of income generated by the investment
during that period is assumed to be generated each seven-day period over a
52-week period and is shown as a percentage of the investment. The compounded
annualized yield (which excludes gains and losses) is calculated similarly but,
when annualized, the income earned by an investment in the Treasury Fund is
assumed to be reinvested. The compounded annualized yield will be somewhat
higher than the yield because of the effect of the assumed reinvestment.
The yield on Treasury Fund shares normally will fluctuate on a daily
basis. Therefore, the yield for any given past period is not an indication or
representation by the Treasury Fund of future yields or rates of return on its
shares. The Treasury Fund's yield is affected by changes in interest rates on
Treasury securities, average portfolio maturity, the types and quality of
portfolio securities held and operating expenses. The yield on Treasury Fund
shares for various reasons may not be comparable to the yield on shares of
other money market funds or other investments. Current yield information may
not provide a basis for comparison with bank deposits or other investments that
pay a fixed yield over a stated period of time.
On occasion, the Treasury Fund may compare its yield to (i) the average
yield reported by the Bank Rate Monitor National IndexTM for money market
deposit accounts offered by the 100 leading banks and thrift institutions in the
ten largest standard metropolitan statistical areas, (ii) yield data reported by
Lipper Analytical Services, Inc., (iii) the yield on an investment in 90-day
Treasury bills on a rolling basis, assuming quarterly compounding, (iv)
performance data published by Morningstar Publications, Inc., Money Magazine,
U.S. News & World Report, Business Week, CDA Investment Technology, Inc., Forbes
Magazine and Fortune Magazine or (v) historical yield data relating to other
central asset accounts similar to the CMA program. As with yield quotations,
yield comparisons should not be considered indicative of the Treasury Fund's
yield or relative performance for any future period.
Treasury Fund
4
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the Treasury Fund are to seek preservation of
capital, liquidity and current income available from investing exclusively in a
diversified portfolio of short-term marketable securities which are direct
obligations of the U.S. Treasury. There can be no assurance that the investment
objectives of the Treasury Fund will be realized.
Preservation of capital is a prime investment objective of the Treasury
Fund and the direct U.S. Treasury obligations in which it will invest are
generally considered to have the lowest principal risk among money market
securities. Historically, direct U.S. Treasury obligations have generally had
lower rates of return than other money market securities with less safety.
For purposes of its investment objectives, the Treasury Fund defines
short-term marketable securities which are direct obligations of the U.S.
Treasury as any U.S. Treasury obligations having maturities of no more than 762
days (25 months). The dollar-weighted average maturity of the Treasury Fund's
portfolio will not exceed 90 days. For the year ended March 31, 1998, the
average maturity of the Treasury Fund's portfolio ranged from 60 days to 86
days.
Investment in Treasury Fund shares offers several potential benefits. The
Treasury Fund seeks to provide as high a yield potential, consistent with its
objectives, as is available through investment in short-term U.S. Treasury
obligations utilizing professional money market management and block purchases
of securities. It provides high liquidity because of its redemption features
and seeks the reduced market risk that generally results from diversification
of assets. The shareholder is also relieved from administrative burdens
associated with direct investment in U.S. Treasury securities, such as
coordinating maturities and reinvestments, and making numerous buy-sell
decisions. These benefits are at least partially offset by certain expenses
borne by investors, including management fees, distribution fees,
administrative costs and operational costs.
Forward Commitments. The Treasury Fund may purchase or sell portfolio
securities on a forward commitment basis at fixed purchase or sale terms. The
purchase of portfolio securities on a forward commitment basis involves the
risk that the yields available in the market when the delivery takes place may
actually be higher than those obtained in the transaction itself; if yields
increase, the value of the securities purchased on a forward commitment basis
will generally decrease. A separate account of the Treasury Fund will be
established with its custodian consisting of cash or Treasury securities having
a market value at all times at least equal to the amount of the forward
purchase commitment. The Treasury Fund may also sell securities on a forward
commitment basis. By doing so, the Fund foregoes the opportunity to sell such
securities at a higher price should they increase in value between the trade
and settlement dates.
Investment Restrictions. The Treasury Fund has adopted a number of
restrictions and policies relating to the investment of its assets and its
activities, which are fundamental policies and may not be changed without the
approval of the holders of a majority of the Treasury Fund's outstanding voting
securities as defined in the Investment Company Act. Among the more significant
restrictions, the Treasury Fund may not purchase any securities other than
direct obligations of the U.S. Treasury with remaining maturities of 762 days
(25 months) or less.
Treasury Fund
5
<PAGE>
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<PAGE>
Appendix
This Appendix constitutes a part of the Prospectuses of CMA Money Fund
(the "Money Market Fund"), CMA Government Securities Fund (the "Government
Fund"), CMA Tax-Exempt Fund (the "Tax-Exempt Fund") and CMA Treasury Fund (the
"Treasury Fund"). The Money Market Fund, the Government Fund, the Tax-Exempt
Fund and the Treasury Fund are referred to in this Appendix collectively as the
"Funds." Unless otherwise indicated, the information set forth herein is
applicable to each Fund. Management of the Funds has considered the possibility
that the use of a combined prospectus may subject one Fund to liability for an
alleged misstatement relating to another Fund. Management believes that this
possibility is remote.
As described in the description of the Merrill Lynch Cash Management
Account program, a subscriber to CMA financial services may also elect to have
free credit balances in CMA accounts deposited in individual money market
deposit accounts established for such subscriber at designated depository
institutions pursuant to the Insured SavingsSM Account (the "Insured Savings
Account"). In addition, investors may also have their free credit balances
invested in certain series of CMA Multi-State Municipal Series Trust (the "CMA
State Funds"), each of which is designed to provide income that is exempt from
Federal income taxes, personal income taxes of the designated state and, in
certain instances, local personal income taxes, local personal property taxes
and/or state intangible personal property taxes. For more information about the
CMA State Funds, investors should contact their Merrill Lynch Financial
Consultants. The Funds, the CMA State Funds and the Insured Savings Account are
collectively referred to in this Appendix as the Money Accounts. However, this
Appendix does not purport to describe the Insured Savings Account or the CMA
State Funds. Prospective participants in the Insured Savings Account are
referred to the fact sheet with respect thereto which is available from Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), and prospective
investors in the CMA State Funds are referred to the prospectuses for those
funds which are available from Merrill Lynch.
PURCHASE OF SHARES
The shares of the Funds are offered to participants in the CMA program to
provide a medium for the investment of free credit balances held in CMA
accounts and to individual investors maintaining accounts directly with the
Funds' Transfer Agent. Persons subscribing to CMA services will have free
credit balances invested in shares of the Money Market Fund, the Government
Fund, the Tax-Exempt Fund or the Treasury Fund, depending on which Fund has
been designated by the participant as the primary investment account (the
"Primary Money Account"). Alternatively, subscribers may designate the Insured
Savings Account or one of the CMA State Funds as their Primary Money Account.
Purchases of shares of a Fund designated as the Primary Money Account will
be made pursuant to the CMA automatic or manual purchase procedures described
below. Purchases of shares of the Funds may also be made by investors
maintaining accounts with the Funds' Transfer Agent pursuant to the procedures
described below.
The purchase price for shares of the Funds is the net asset value per
share next determined after receipt by a Fund of an automatic or manual
purchase order in proper form. Shares purchased will receive the next dividend
declared after such shares are issued which will be immediately prior to the 12
noon, New York time, pricing on the following business day. A purchase order
will not be effective until cash in the form of Federal funds becomes available
to the Fund (see below for information as to when free credit balances held in
CMA accounts become available to the Funds). There are no minimum investment
requirements for subscribers to the Cash Management Account program other than
for manual purchases.
A-1
<PAGE>
Purchase of Shares by Cash Management Account Subscribers
Subscribers to the CMA service have the option to change the designation
of their Primary Money Account at any time by notifying their Merrill Lynch
Financial Consultants. At that time, a subscriber may instruct his or her
Financial Consultant to redeem shares of a Fund designated as the Primary Money
Account and to transfer the proceeds to the newly-designated Primary Money
Account.
Automatic Purchases. Free credit balances arising in a CMA account are
automatically invested in shares of a Fund designated as the Primary Money
Account not later than the first business day of each week on which either the
New York Stock Exchange or New York banks are open, which normally will be
Monday. Free credit balances arising from the following transactions will be
invested automatically prior to the automatic weekly sweeps. Free credit
balances arising from the sale of securities which do not settle on the day of
the transaction (such as most common and preferred stock transactions) and from
principal repayments on debt securities become available to the Funds and will
be invested in shares on the business day following receipt of the proceeds with
respect thereto in the CMA account.Proceeds from the sale of securities settling
on a same day basis will also be invested in shares on the next business day
following receipt. Free credit balances of $1,000 or more arising from cash
deposits into a CMA account, dividend and interest payments or any other source
become available to the Funds and are invested in shares on the next business
day following receipt in the CMA account unless such balance results from a cash
deposit made after the cashiering deadline of the Merrill Lynch office in which
the deposit is made, in which case the resulting free credit balances are
invested on the second following business day. A CMA participant desiring to
make a cash deposit should contact his or her Merrill Lynch Financial Consultant
for information concerning the local office's cashiering deadline, which is
dependent on such office's arrangements with its commercial banks. Free credit
balances of less than $1,000 are invested in shares in the automatic weekly
sweep. Free credit balances of $1.00 or more are invested daily in certain
accounts including those established under the Working Capital ManagementTM
account program or the CMA for Retirement Plans program. Additional information
on these programs is available from Merrill Lynch.
Manual Purchases. Subscribers to the CMA service may make manual
investments of $1,000 or more at any time in shares of a Fund not selected as
their Primary Money Account. Manual purchases shall be effective on the day
following the day the order is placed with Merrill Lynch, except that orders
involving cash deposits made on the date of a manual purchase shall become
effective on the second business day thereafter if they are placed after the
cashiering deadline referred to in the preceding paragraph. As a result, CMA
customers who enter manual purchase orders which include cash deposits made on
that day after such cashiering deadline will not receive the daily dividend
which would have been received had their orders been entered prior to the
deadline. In addition, manual purchases of $500,000 or more can be made
effective on the same day the order is placed with Merrill Lynch provided that
requirements as to timely notification and transfer of a Federal funds wire in
the proper amount are met. CMA customers desiring further information on this
method of purchasing shares should contact their Merrill Lynch Financial
Consultants.
Merrill Lynch reserves the right to terminate a subscriber's participation
in the Cash Management Account program for any reason.
All purchases of the Funds' shares and dividend reinvestments will be
confirmed to Cash Management Account subscribers (rounded to the nearest share)
in the transaction statement which is sent to all participants in such Account
monthly.
A-2
<PAGE>
Purchase of Shares by Non-Cash Management Account Subscribers
Shares of the Funds may be purchased by investors maintaining accounts
directly with the Funds' Transfer Agent who are not subscribers to the Cash
Management Account program. Shareholders of the Funds not subscribing to such
program will not be charged the applicable program fee, but will not receive
any of the services available to program subscribers, such as the Visa
card/check account or the automatic investment of free credit balances. The
minimum initial purchase for non-program subscribers is $5,000 and the minimum
subsequent purchase is $1,000. Investors desiring to purchase shares directly
through the Transfer Agent as described below should contact Merrill Lynch
Financial Data Services, Inc., P.O. Box 45290, Jacksonville, Florida 32232-5290
or call (800) 221-7210.
Payment to the Transfer Agent. Investors who are not subscribers to the
CMA program may submit purchase orders directly by mail or otherwise to the
Transfer Agent. Purchase orders by mail should be sent to Merrill Lynch
Financial Data Services, Inc., P.O. Box 45290, Jacksonville, Florida
32232-5290. Purchase orders which are sent by hand should be delivered to
Merrill Lynch Financial Data Services, Inc., 4800 Deer Lake Drive East,
Jacksonville, Florida 32246-6484. Investors opening a new account must enclose
a completed Purchase Application which is available from Merrill Lynch
Financial Data Services, Inc. Existing shareholders should enclose the
detachable stub from a monthly account statement which they have received.
Checks should be made payable to Merrill Lynch, Pierce, Fenner & Smith
Incorporated. Certified checks are not necessary, but checks are accepted
subject to collection at full face value in U.S. funds and must be drawn in
U.S. dollars on a U.S. bank. Payments for the accounts of corporations,
foundations and other organizations may not be made by third party checks.
Since there is a three-day settlement period applicable to the sale of most
securities, delays may occur when an investor is liquidating other investments
for investment in one of the Funds.
As described under "Investment Objectives and Policies" in its Prospectus,
the Tax-Exempt Fund has reserved the right to suspend or otherwise limit sales
of its shares if, as a result of difficulties in obtaining portfolio
securities, it is determined that it is not in the interests of the Tax-Exempt
Fund's shareholders to issue additional shares. If sales of shares of the
Tax-Exempt Fund are suspended, shareholders who have designated such Fund as
their Primary Money Account will be permitted to designate the Money Market
Fund, the Government Fund, the Treasury Fund, one of the CMA State Funds (if
available) or the Insured Savings Account as their Primary Money Account.
Pending such an election, Merrill Lynch will consider various alternatives with
respect to automatic investments for such accounts, including the investment of
free credit balances in such accounts in shares of the Money Market Fund, the
Government Fund or the Treasury Fund.
Each Fund has entered into a Distribution Agreement with Merrill Lynch
pursuant to which Merrill Lynch acts as the distributor for the Fund.
Each Fund has adopted a Distribution and Shareholder Servicing Plan (each,
a "Distribution Plan") in compliance with Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "Investment Company Act") pursuant to
which Merrill Lynch receives a distribution fee under the Distribution
Agreement from each Fund at the end of each month at the annual rate of 0.125%
of average daily net assets of such Fund attributable to subscribers to the CMA
program and to investors maintaining securities accounts at Merrill Lynch or
maintaining accounts directly with the Transfer Agent who are not subscribers
to such program, except that the value of the Fund shares in accounts
maintained directly with the Transfer Agent which are not serviced by Merrill
Lynch Financial Consultants will be excluded. The fees reimburse Merrill Lynch
only for actual expenses incurred in the fiscal year in which the fees are
paid. The distribution fee is to compensate Merrill Lynch Financial Consultants
and other directly involved branch office personnel for selling shares of each
Fund and for providing direct personal services to shareholders. For the fiscal
year ended March 31, 1998, $73,072,956 was paid to Merrill
A-3
<PAGE>
Lynch pursuant to the Distribution Plans: $55,763,388 by the Money Market Fund,
$4,090,796 by the Government Fund, $10,594,071 by the Tax-Exempt Fund and
$2,624,701 by the Treasury Fund. The annual fee paid to Merrill Lynch for the
fiscal year ended March 31, 1998 aggregated 0.125% of average daily net assets
of each Fund.
REDEMPTION OF SHARES
Each Fund is required to redeem for cash all full and fractional shares of
the Fund. The redemption price is the net asset value per share next determined
after receipt by the Transfer Agent of proper notice of redemption as described
in accordance with either the automatic or manual procedures set forth below.
If such notice is received by the Transfer Agent prior to the 12 noon, New York
time, pricing on any business day, the redemption will be effective on such
day. Payment of the redemption proceeds will be made on the same day the
redemption becomes effective. If the notice is received after 12 noon, New York
time, the redemption will be effective on the next business day and payment
will be made on such next day.
Redemption of Shares by Cash Management Account Subscribers
Automatic Redemptions. Redemptions will be effected automatically by
Merrill Lynch to satisfy debit balances in the Securities Account created by
activity therein or to satisfy debit balances created by Visa card purchases,
card advances (which may be obtained through participating banks and automated
teller machines) or checks written against the Visa Account. Each CMA account
will be automatically scanned for debits each business day prior to 12 noon,
New York time. After application of any free credit balances in the account to
such debits, shares of the Funds (or the CMA State Funds, if applicable) will
be redeemed at net asset value at the 12 noon, New York time pricing, and funds
deposited pursuant to the Insured Savings Account will be withdrawn, to the
extent necessary to satisfy any remaining debits in either the Securities
Account or the Visa Account. Automatic redemptions or withdrawals will be made
first from the participant's Primary Money Account and then, to the extent
necessary, from Money Accounts not designated as the Primary Money Account.
Unless otherwise requested, in those instances where shareholders request
transactions that settle on a "same-day" basis (such as Federal Funds wire
redemptions, branch office checks, transfers to other Merrill Lynch accounts
and certain securities transactions) the Fund shares necessary to effect such
transactions will be deemed to have been transferred to Merrill Lynch prior to
the Fund's declaration of dividends on that day. In such instances,
shareholders will receive all dividends declared and reinvested through the
date immediately preceding the date of redemption. Unless otherwise requested
by the participant, redemptions or withdrawals from non-Primary Money Accounts
will be made in the order the Money Accounts were established; thus,
redemptions or withdrawals will first be made from the non-Primary Money
Account which the participant first established. Margin loans through the
Investor CreditLineSM service will be utilized to satisfy debits remaining
after the liquidation of all funds invested in or deposited through Money
Accounts, and shares of the Funds may not be purchased, nor may deposits be
made pursuant to the Insured Savings Account, until all debits and margin loans
in the account are satisfied.
Merrill Lynch, in conjunction with an affiliate, offers a modified
feature, the CMA Visa(R) Gold Program, to the CMA account for individual
shareholders. Participants in the CMA Visa(R) Gold Program may purchase goods
or services at participating merchants with the Visa(R) Gold card. Such
purchases may be paid for by automatic debit on the fourth Wednesday of each
month. See the Merrill Lynch Cash Management Account Program Description for
more information concerning the CMA Visa(R) Gold Program.
As set forth in the current description of the CMA program, a participant
whose Securities Account is a margin account through the Investor CreditLineSM
service may designate a minimum balance to be maintained in shares of the Funds
or the CMA State Funds or deposits made pursuant to the Insured Savings Account
(the
A-4
<PAGE>
"Minimum Money Accounts Balance"). If a participant designates a Minimum Money
Accounts Balance, the shares or deposits representing such balance will not be
redeemed or withdrawn until loans equal to the available margin loan value of
securities in the Securities Account have been made. Participants considering
the establishment of a Minimum Money Accounts Balance should review the
description of this service contained in the description of the CMA program
which is available from Merrill Lynch.
Shareholders of the Funds may arrange to have periodic investments made in
certain other mutual funds sponsored by Merrill Lynch through the CMA Automated
Investment Program. Under this program, the shareholder's Money Account will be
automatically debited at periodic intervals in an amount of $250 or more, as
selected by the shareholder, and investment made in the fund the shareholder
has designated. Further information on this program is available from Merrill
Lynch.
Manual Redemptions. Shareholders may redeem shares of a Fund directly by
submitting a written notice of redemption directly to Merrill Lynch, which will
submit the requests to the Funds' Transfer Agent. Cash proceeds from the manual
redemption of Fund shares will be ordinarily mailed to the shareholder at his
or her address of record, or upon request, mailed or wired (if $10,000 or more)
to his or her bank account. Redemption requests should not be sent to the Fund
or the Transfer Agent. If inadvertently sent to the Fund or the Transfer Agent,
redemption requests will be forwarded to Merrill Lynch. The notice requires the
signatures of all persons in whose name the shares are registered, signed
exactly as their names appear on their monthly statement. The signature(s) on
the redemption request must be guaranteed by an "eligible guarantor
institution" as such is defined in Rule 17Ad-15 under the Securities Exchange
Act of 1934, the existence and validity of which may be verified by the
Transfer Agent through the use of industry publications. Notarized signatures
are not sufficient. In certain instances, additional documents such as, but not
limited to, trust instruments, death certificates, appointments as executor or
administrator, or certificates of corporate authority may be required. CMA
customers desiring to effect manual redemptions should contact their Merrill
Lynch Financial Consultants.
All redemptions of Fund shares will be confirmed to Cash Management
Account subscribers (rounded to the nearest share) in the CMA Transaction
Statement which is sent to all CMA participants monthly.
Redemption of Shares by Non-Cash Management Account Subscribers
Shareholders may redeem shares of the Funds held in a Merrill Lynch
securities account directly by submitting a written notice of redemption to
Merrill Lynch, which will submit the requests to the Funds' Transfer Agent as
described above under "Redemption of Shares -- Redemption of Shares by Cash
Management Account Subscribers -- Manual Redemptions."
Shareholders maintaining an account directly with the Transfer Agent, who
are not CMA program participants, may redeem shares of the Funds by submitting
a written notice by mail directly to the Transfer Agent, Merrill Lynch
Financial Data Services, Inc., P.O. Box 45290, Jacksonville, Florida
32232-5290. Redemption requests which are sent by hand should be delivered to
Merrill Lynch Financial Data Services, Inc., 4800 Deer Lake Drive East,
Jacksonville, Florida 32246-6484. Cash proceeds from the manual redemption of
Fund shares will be mailed to the shareholder at his or her address of record.
Redemption requests should not be sent to the Funds or Merrill Lynch. If
inadvertently sent to the Funds or Merrill Lynch, such redemption requests will
be forwarded to the Transfer Agent. The notice requires the signatures of all
persons in whose names the shares are registered, signed exactly as their names
appear on their monthly statement. The signature(s) on the notice must be
guaranteed by an "eligible guarantor institution" as defined in Rule 17Ad-15
under the Securities Exchange Act of 1934, the existence and validity of which
may be verified by the Transfer Agent by the use of industry publications.
Notarized signatures are not sufficient. In certain instances, additional
documents such as, but not limited to,
A-5
<PAGE>
trust instruments, death certificates, appointments as executor or
administrator, or certificates of corporate authority may be required.
----------------
At various times the Funds may be requested to redeem shares, in manual or
automatic redemptions, with respect to which good payment has not yet been
received by Merrill Lynch. A Fund may delay, or cause to be delayed, the
payment of the redemption proceeds until such time as it has assured itself
that good payment has been collected for the purchase of such shares. Normally,
this delay will not exceed 10 days. In addition, the Funds reserve the right
not to effect automatic redemptions where the shares to be redeemed have been
purchased by check within 15 days prior to the date the redemption request is
received.
Merrill Lynch, in conjunction with another subsidiary of Merrill Lynch &
Co., Inc. ("ML & Co."), offers a modified version of the CMA account which has
been designed for corporations and other businesses. This account, the Working
Capital ManagementTM account ("WCMA(R) account"), provides participants with
the features of a regular CMA account and also optional lines of credit. A
brochure describing the WCMA program, as well as information concerning charges
for participation in the program, is available from Merrill Lynch.
Participants in the WCMA program are able to invest funds in one or more
of the Funds designated by them. Checks and other funds transmitted to a WCMA
account will generally be applied, first to the payment of pending securities
transactions or other charges in the participant's securities account, second,
to reduce outstanding balances in the lines of credit available through such
program and, third, to purchase shares of the designated Fund. To the extent
not otherwise applied, funds transmitted by Federal funds wire or an automated
clearinghouse service will be invested in shares of the designated Fund on the
business day following receipt of such funds by Merrill Lynch. Funds received
in a WCMA account from the sale of securities will be invested in the
designated Fund as described above. The amount payable on a check received in a
WCMA account prior to the cashiering deadline referred to above will be
invested on the second business day following receipt of the check by Merrill
Lynch. Redemptions of Fund shares will be effected as described above to
satisfy debit balances, such as those created by purchases of securities or by
checks written against a bank providing checking services to WCMA participants.
WCMA participants that have a line of credit will, however, be permitted to
maintain a minimum Fund balance; for participants who elect to maintain such a
balance, debits from check usage will be satisfied through the line of credit
so that such balance is maintained. However, if the full amount of available
credit is not sufficient to satisfy the debit, it will be satisfied from the
minimum balance.
From time to time, Merrill Lynch also may offer the Funds to participants
in certain other programs sponsored by Merrill Lynch. Some or all of the
features of the CMA account may not be available in such programs. For more
information on the services available under such programs, participants should
contact their financial consultants.
A-6
<PAGE>
MANAGEMENT OF THE FUNDS
Trustees
The Trustees of each Fund consist of six individuals, five of whom are not
"interested persons" of the Fund as defined in the Investment Company Act. The
Trustees of each Fund are responsible for the overall supervision of the
operations of the Fund and perform the various duties imposed on the directors
of investment companies by the Investment Company Act.
The Trustees of each Fund are:
ARTHUR ZEIKEL* -- Chairman of Fund Asset Management, L.P. (the "Investment
Adviser") and its affiliate, Merrill Lynch Asset Management, L.P.
("MLAM"); Chairman and Director of Princeton Services, Inc. ("Princeton
Services"); Executive Vice President of ML & Co.
RONALD W. FORBES -- Professor of Finance, School of Business, State
University of New York at Albany.
CYNTHIA A. MONTGOMERY -- Professor of Competition and Strategy, Harvard
Business School.
CHARLES C. REILLY -- Self-employed financial consultant; former President
and Chief Investment Officer of Verus Capital, Inc.; former Senior Vice
President of Arnhold and S. Bleichroeder, Inc.
KEVIN A. RYAN -- Professor of Education, Boston University; Founder and
current Director of the Boston University Center for the Advancement of
Ethics and Character.
RICHARD R. WEST -- Dean Emeritus, New York University, Leonard N. Stern
School of Business Administration.
- ----------
* Interested person, as defined in the Investment Company Act, of each Fund.
Investment Advisory Arrangements
The Investment Adviser is owned and controlled by ML & Co., a financial
services holding company and the parent of Merrill Lynch. The Asset Management
Group of ML & Co. (which includes the Investment Adviser) acts as the
investment adviser for more than 100 registered investment companies and
provides investment advisory services to individuals and institutional accounts.
As of April 30, 1998, the Asset Management Group had a total of approximately
$490 billion in investment company and other portfolio assets under management.
This amount includes assets managed for certain affiliates of the Investment
Adviser.
Each Fund has entered into a separate investment advisory agreement with
the Investment Adviser (the "Investment Advisory Agreements"). The Investment
Advisory Agreements with the Investment Adviser (the "Investment Advisory
Agreements") provide that, subject to the supervision of the Trustees, the
Investment Adviser is responsible for the actual management of the Funds'
portfolios and constantly reviews the Funds' holdings in light of its own
research analysis and that from other relevant sources. The responsibility for
making decisions to buy, sell or hold a particular security rests with the
Investment Adviser, subject to the review of the Board of Trustees. The
Investment Adviser also performs certain of the other administrative services
and provides all of the office space, facilities, equipment and necessary
personnel for portfolio management of the Funds.
As compensation for its services under the Investment Advisory Agreements,
the Investment Adviser receives a fee from each Fund at the end of each month
at the annual rates of 0.50% of the first $500 million of average daily net
assets of the Fund, 0.425% of average daily net assets in excess of $500
million but not exceeding $1 billion, and 0.375% of average daily net assets in
excess of $1 billion.
A-7
<PAGE>
The following table sets forth information as to the advisory fees paid by
each Fund for the fiscal year ended March 31, 1998. The information does not
include amounts paid under each Fund's Distribution Plan to Merrill Lynch.
<TABLE>
<CAPTION>
Fiscal Year Ended March 31, 1998
----------------------------------------
Average
Fee Paid Net Assets Effective
CMA Fund (millions) (billions) Fee Rate
- ---------------------- ------------ ------------ ----------
<S> <C> <C> <C>
Money Market ......... $ 170.2 $ 45.2 0.38%
Government ........... $ 13.4 $ 3.3 0.40%
Tax-Exempt ........... $ 33.0 $ 8.6 0.39%
Treasury ............. $ 8.8 $ 2.1 0.42%
</TABLE>
The Investment Advisory Agreements obligate each Fund to pay certain
expenses incurred in its operations, including, among other things, the
investment advisory fee, legal and audit fees, unaffiliated Trustees' fees and
expenses, registration fees, custodian and transfer agency fees, accounting and
pricing costs, and certain of the costs of printing proxies, shareholder
reports, prospectuses and statements of additional information. Accounting
services are provided to each of the Funds by the Investment Adviser, and each
Fund reimburses the Investment Adviser for its costs in connection with such
services. For the fiscal year ended March 31, 1998, the amounts of such
reimbursement paid by the Money Market Fund, the Government Fund, the
Tax-Exempt Fund and the Treasury Fund aggregated $1,371,794, $219,396, $441,217
and $177,256, respectively. For the fiscal year ended March 31, 1998, the ratio
of total expenses to average net assets was 0.57% for the Money Market Fund,
0.57% for the Government Fund, 0.55% for the Tax-Exempt Fund and 0.60% for the
Treasury Fund (excluding payments under the Funds' Distribution Plans).
Transfer Agency Services
Merrill Lynch Financial Data Services, Inc. (the "Transfer Agent"), which
is a subsidiary of ML & Co., acts as the Funds' Transfer Agent pursuant to a
Transfer Agency, Shareholder Servicing Agency, and Proxy Agency Agreement (the
"Transfer Agency Agreement"). Pursuant to the Transfer Agency Agreement, the
Transfer Agent is responsible for the issuance, transfer and redemption of
shares and the opening and maintenance of shareholder accounts. Pursuant to the
Transfer Agency Agreement, the Transfer Agent receives a fee at the rate of
$10.00 per account and the Transfer Agent is entitled to reimbursement from the
Fund for certain transaction charges and out-of-pocket expenses incurred by it
under the Transfer Agency Agreement. Additionally, a $.20 monthly closed
account charge will be assessed on all accounts which close during the calendar
year. Application of this fee will commence the month following the month the
account is closed. At the end of the calendar year, no further fees will be
due. For purposes of the Transfer Agency Agreement, the term "account" includes
a shareholder account maintained directly by the Transfer Agent and any other
account representing the beneficial interest of a person on a recordkeeping
system, provided the recordkeeping system is maintained by a subsidiary of ML &
Co. For the year ended March 31, 1998, the total fee paid by each Fund to the
Transfer Agent pursuant to the Transfer Agency Agreement was $17,058,436 by the
Money Market Fund, $531,773 by the Government Fund, $1,465,966 by the
Tax-Exempt Fund and $434,043 by the Treasury Fund.
PORTFOLIO TRANSACTIONS
The portfolio securities in which the Funds invest are traded primarily in
the over-the-counter market. Where possible, the Funds will deal directly with
the dealers who make a market in the securities involved, except in those
circumstances where better prices and execution are available elsewhere. Such
dealers usually are acting
A-8
<PAGE>
as principals for their own accounts. On occasion, securities may be purchased
directly from the issuer. Such portfolio securities generally are traded on a
net basis and normally do not involve either brokerage commissions or transfer
taxes. The cost of executing portfolio transactions primarily will consist of
dealer spreads and underwriting commissions. Under the Investment Company Act,
persons affiliated with the Funds are prohibited from dealing with the Funds as
a principal in the purchase and sale of securities unless an exemptive order
allowing such transactions is obtained from the Securities and Exchange
Commission (the "Commission"). An affiliated person of a Fund may serve as its
broker in over-the-counter transactions conducted for the Funds.
The Commission has issued exemptive orders permitting the Money Market
Fund, the Government Fund, the Tax-Exempt Fund and the Treasury Fund to conduct
certain principal transactions with Merrill Lynch Government Securities Inc.,
its subsidiary Merrill Lynch Money Markets Inc. and Merrill Lynch, subject to
certain terms and conditions. For the fiscal year ended March 31, 1998, the
Money Market Fund engaged in 146 transactions pursuant to such orders
aggregating approximately $10.4 billion; the Government Fund engaged in no
transactions pursuant to such orders; the Tax-Exempt Fund engaged in 20
transactions pursuant to such orders aggregating approximately $353.7 million;
the Treasury Fund engaged in 7 transactions pursuant to such orders aggregating
approximately $48.6 million.
DIVIDENDS
All of the net income of each Fund is declared as dividends daily. Each
Fund's net income for dividend purposes is determined by the Investment Adviser
at 12 noon, New York time, on each day the New York Stock Exchange or New York
banks are open for business immediately prior to the determination of the
Fund's net asset value on that day (see "Determination of Net Asset Value").
Net income of the Money Market Fund, the Government Fund and the Treasury Fund
(from the time of the immediately preceding determination thereof) consists of
(i) interest accrued and/or discount earned (including both original issue and
market discount), (ii) less the estimated expenses of the Fund (including the
fees payable to the Investment Adviser) applicable to that dividend period and
(iii) plus or minus all realized gains and losses on the portfolio securities.
Net income of the Tax-Exempt Fund (from the time of the immediately preceding
determination thereof) consists of interest accrued and/or original issue
discount earned, less amortization of premium and the estimated expenses of the
Tax-Exempt Fund (including the fees payable to the Investment Adviser)
applicable to that dividend period. The amount of discount or premium on
portfolio securities is fixed at the time of their purchase and consists of the
difference between the purchase price for such securities and the principal
amount of such securities. Unrealized gains and losses are reflected in the
Tax-Exempt Fund's net assets and are not included in net income. Dividends are
declared and reinvested daily in the form of additional full and fractional
shares of the Funds at net asset value.
DETERMINATION OF NET ASSET VALUE
The net asset value of each Fund is determined by the Investment Adviser
once daily, immediately after the daily declaration of dividends, as of 12
noon, New York time, on each business day the New York Stock Exchange or New
York banks are open for business.
The net asset value of the Money Market Fund, the Government Fund and the
Treasury Fund is determined pursuant to the "penny-rounding" method by adding
the fair value of all securities and other assets in each Fund, deducting such
Fund's liabilities and dividing by the number of shares of that Fund
outstanding. The result of this computation will be rounded to the nearest
whole cent. It is anticipated that the net asset value per share will remain
constant at $1.00 per share, but no assurance can be offered in this regard.
Securities with remaining
A-9
<PAGE>
maturities of greater than 60 days for which market quotations are readily
available will be valued at market value. Securities with remaining maturities
of 60 days or less will be valued on an amortized cost basis, i.e. by valuing
the instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. Other securities held by
the Money Market Fund, the Government Fund and the Treasury Fund will be valued
at their fair value as determined in good faith by or under direction of the
Board of Trustees.
The Tax-Exempt Fund values its portfolio securities based on their
amortized cost. This involves valuing an instrument at its cost and thereafter
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument.
TAXES
The Funds intend to continue to qualify for the special tax treatment
afforded regulated investment companies ("RICs") under the Internal Revenue
Code of 1986, as amended (the "Code"). As long as the Money Market Fund, the
Government Fund, the Treasury Fund or the Tax-Exempt Fund so qualifies, such
Fund (but not its shareholders) will not be subject to Federal income tax on
the part of its net ordinary income and net realized capital gains which it
distributes to shareholders. Each Fund intends to distribute substantially all
of such income.
Taxation of Money Market Fund, Government Fund and Treasury Fund Dividends
Dividends paid by the Money Market Fund, the Government Fund and the
Treasury Fund from their ordinary income or from an excess of net short-term
capital gains over net long-term capital losses (together referred to hereafter
as "ordinary income dividends") are taxable to shareholders as ordinary income.
Distributions made from an excess of net long-term capital gains over net
short-term capital losses ("capital gain dividends") are taxable to shareholders
as long-term capital gains, regardless of the length of time the shareholder has
owned shares of such Fund. Recent legislation creates additional categories of
capital gains taxable at different rates. Additional legislation eliminates the
highest 28% category for most sales of capital assets occurring after December
31, 1997. Generally not later than 60 days after the close of its taxable year,
each Fund will provide its shareholders with a written notice designating the
amounts of any ordinary income dividends or capital gain dividends as well as
the amount of capital gain dividends in the different categories of capital
gains referred to above. Dividends are taxable to shareholders even though they
are reinvested in additional shares of a Fund.
Taxation of Tax-Exempt Fund Dividends
To the extent that the dividends distributed to the Tax-Exempt Fund's
shareholders are derived from interest income exempt from Federal income tax
under Code Section 103(a) and are properly designated as "exempt-interest
dividends" by such Fund, they will be excludable from a shareholder's gross
income for Federal income tax purposes. Exempt-interest dividends are included,
however, in determining the portion, if any, of a person's social security and
railroad retirement benefits subject to Federal income taxes. The Tax-Exempt
Fund will inform shareholders annually as to the portion of the Tax-Exempt
Fund's distributions which constitutes exempt-interest dividends. Interest on
indebtedness incurred or continued to purchase or carry shares of the
Tax-Exempt Fund is not deductible for Federal income tax purposes to the extent
attributable to exempt-interest dividends. Persons who may be "substantial
users" (or "related persons" of substantial users) of facilities financed by
industrial development bonds or private activity bonds held by the Tax-Exempt
Fund should consult their tax advisers before purchasing Fund shares.
A-10
<PAGE>
To the extent that the Tax-Exempt Fund's distributions are derived from
interest on its taxable investments or from an excess of net short-term capital
gains over net long-term capital losses ("ordinary income dividends"),
such distributions are considered ordinary income for Federal income tax
purposes. Distributions, if any, from an excess of net long-term capital gains
over net short-term capital losses derived from the sale of securities ("capital
gain dividends") are taxable at long-term capital gains rates for Federal income
tax purposes, regardless of the length of time the shareholder has owned Tax
Exempt Fund shares. New legislation affects the taxation of capital gains, as
discussed above. All or a portion of the Tax-Exempt Fund's gain from the sale or
redemption of tax-exempt obligations purchased at a market discount will be
treated as ordinary income rather than capital gain. This rule may increase the
amount of ordinary income dividends received by shareholders. Any loss upon the
sale or exchange of shares held for six months or less will be disallowed to the
extent of any exempt-interest dividends received by the shareholder. In
addition, any such loss that is not disallowed under the rule stated above will
be treated as long-term capital loss to the extent of any capital gain dividends
received by the shareholder.
The Code subjects interest received on certain otherwise tax-exempt
securities to an alternative minimum tax. The alternative minimum tax applies
to interest received on "private activity bonds" issued after August 7, 1986.
Private activity bonds are bonds which, although tax-exempt, are used for
purposes other than those generally performed by governmental units and which
benefit non-governmental entities (e.g., bonds used for industrial development
or housing purposes). Income received on such bonds is classified as an item of
"tax preference", which could subject certain investors in such bonds,
including shareholders of the Tax-Exempt Fund, to an alternative minimum tax.
The Tax-Exempt Fund will purchase such "private activity bonds" and will report
to shareholders within 60 days after its taxable year-end the portion of its
dividends declared during the year which constitutes an item of tax preference
for alternative minimum tax purposes. The Code further provides that
corporations are subject to an alternative minimum tax based, in part, on
certain differences between taxable income as adjusted for other tax
preferences and the corporation's "adjusted current earnings", which more
closely reflect a corporation's economic income. Because an exempt-interest
dividend paid by the Tax-Exempt Fund will be included in adjusted current
earnings, a corporate shareholder may be required to pay alternative minimum
tax on exempt-interest dividends paid by the Tax-Exempt Fund.
The Code provides that every shareholder required to file a tax return
must include for information purposes on such return the amount of
exempt-interest dividends received from all sources (including the Tax-Exempt
Fund) during the taxable year.
General
If the Money Market Fund, the Government Fund, the Treasury Fund or the
Tax-Exempt Fund pays a dividend in January which was declared in the previous
October, November or December to shareholders of record on a specified date in
one of such months, then such dividend will be treated for tax purposes as
being paid by such Fund and received by its shareholders on December 31 of the
year in which such dividend was declared. Distributions by the Funds, whether
from exempt interest income, ordinary income or capital gains, will not be
eligible for the dividends received deduction allowed to corporations under the
Code. Distributions in excess of a Fund's earnings and profits will first
reduce the adjusted tax basis of a holder's shares and, after such adjusted tax
basis is reduced to zero, will constitute capital gains to such holder
(assuming the shares are held as a capital asset). Any loss upon the sale or
exchange of Fund shares held for six months or less will be treated as
long-term capital loss to the extent of any capital gain dividends received by
the shareholder.
If the value of assets held by the Money Market Fund, the Government Fund,
the Treasury Fund or the Tax-Exempt Fund declines, the Board of Trustees may
authorize a reduction in the number of outstanding shares in respective
shareholders' accounts so as to preserve a net asset value of $1.00 per share.
After such a reduction,
A-11
<PAGE>
the basis of eliminated shares would be added to the basis of shareholders'
remaining Fund shares, and any shareholders disposing of shares at that time may
recognize a capital loss. Distributions paid by the Money Market Fund, the
Government Fund and the Treasury Fund, including distributions reinvested in
additional shares of the affected Fund, will nonetheless be fully taxable, even
if the number of shares in shareholders' accounts has been reduced as described
above.
Ordinary income dividends paid to shareholders who are nonresident aliens
or foreign entities will be subject to a 30% United States withholding tax
under existing provisions of the Code applicable to foreign individuals and
entities unless a reduced rate of withholding or a withholding exemption is
provided under applicable treaty law. Nonresident shareholders are urged to
consult their own tax advisers concerning the applicability of the United
States withholding tax.
Dividends and interest received by a Fund may give rise to withholding and
other taxes imposed by foreign countries. Tax conventions between certain
countries and the United States may reduce or eliminate such taxes.
Under certain Code provisions, some taxpayers may be subject to a 31%
withholding tax on certain ordinary income dividends and on capital gain
dividends and redemption payments ("backup withholding"). Generally,
shareholders subject to backup withholding will be those for whom no certified
taxpayer identification number is on file with a Fund or who, to such Fund's
knowledge, have furnished an incorrect number. When establishing an account, an
investor must certify under penalty of perjury that such number is correct and
that such investor is not otherwise subject to backup withholding.
A loss realized on a sale or exchange of shares of any of the Funds will
be disallowed if shares of the Fund are acquired (whether through the automatic
reinvestment of dividends or otherwise) within a 61-day period beginning 30
days before and ending 30 days after the date that the shares are disposed of.
In such a case, the basis of the shares acquired will be adjusted to reflect
the disallowed loss.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections
and the Treasury regulations promulgated thereunder. The Code and the Treasury
regulations are subject to change by legislative, judicial or administrative
action either prospectively or retroactively.
Ordinary income and capital gain dividends may also be subject to state
and local taxes.
Certain states exempt from state income taxation dividends paid by RICs
which are derived from interest on U.S. Government obligations. State law
varies as to whether and what percentage of dividend income attributable to
U.S. Government obligations is exempt from state income tax.
Shareholders are urged to consult their tax advisers regarding specific
questions as to Federal, foreign, state or local taxes. Foreign investors
should consider applicable foreign taxes in their evaluation of an investment
in any of the Funds.
A-12
<PAGE>
ADDITIONAL INFORMATION
Organization of the Funds
The Money Market Fund, the Government Fund and the Tax-Exempt Fund are
unincorporated business trusts organized on June 5, 1989 under the laws of
Massachusetts. The Money Market Fund is the successor to a Massachusetts
business trust organized on September 19, 1977, the Government Fund is the
successor to a Massachusetts business trust organized on August 3, 1981 and the
Tax-Exempt Fund is the successor to a Massachusetts business trust organized on
January 15, 1981. The Treasury Fund is an unincorporated business trust
organized on October 24, 1990 under the laws of Massachusetts. Each Fund is a
no-load, diversified, open-end investment company. The Declaration of Trust of
each Fund permits the Trustees to issue an unlimited number of full and
fractional shares of a single class. Upon liquidation of any of the Funds,
shareholders of that Fund are entitled to share pro rata in the net assets of
the Fund available for distribution to shareholders. Shares are fully paid and
nonassessable by the Funds. Shareholders are entitled to one vote for each full
share held and fractional votes for fractional shares held and to vote in the
election of Trustees and on other matters submitted to the vote of
shareholders.
The Declarations of Trust do not require that the Funds hold annual
meetings of shareholders. However, each Fund will be required to call special
meetings of shareholders in accordance with the requirements of the Investment
Company Act to seek approval of new management and advisory arrangements, of a
material increase in distribution fees or of a change in the fundamental
policies, objectives or restrictions of such Fund. Each Fund also would be
required to hold a special shareholders' meeting to elect new Trustees at such
time as less than a majority of the Trustees holding office have been elected
by shareholders. Each Declaration of Trust provides that a shareholders'
meeting may be called for any reason at the request of 10% of the outstanding
shares of the related Fund or by a majority of the Trustees. Except as set
forth above, the Trustees shall continue to hold office and appoint successor
Trustees.
The Declarations of Trust establishing the Funds refer to the Trustees
under the Declarations of Trust collectively as Trustees, but not as
individuals or personally; and no Trustee, shareholder, officer, employee or
agent of any of the Funds shall be held to any personal liability, nor shall
resort be had to their private property for the satisfaction of any obligation
or claim of any Fund but the Trust Property only shall be liable. Copies of the
Declarations of Trust, together with all amendments thereto, are on file in the
office of the Secretary of the Commonwealth of Massachusetts.
Year 2000 Issues
Many computer systems were designed using only two digits to designate
years. These systems may not be able to distinguish the year 2000 from the Year
1900 (commonly known as the "Year 2000 Problem"). Like other investment
companies and financial and business organizations, the Funds could be
adversely affected if the computer systems used by the Investment Adviser or
other Fund service providers do not properly address this problem prior to
January 1, 2000. The Investment Adviser has established a dedicated group to
analyze these issues and to implement any systems modifications necessary to
prepare for the Year 2000. Currently, the Investment Adviser does not
anticipate that the transition to the 21st century will have any material
impact on its ability to continue to service the Funds at current levels. In
addition, the Investment Adviser has sought assurances from the Funds' other
service providers that they are taking all necessary steps to ensure that their
computer systems will accurately reflect the Year 2000, and the Investment
Adviser will continue to monitor the situation. At this time, however, no
assurance can be given that the Funds' other service providers have anticipated
every step necessary to avoid any adverse effect on the Funds attributable to
the Year 2000 Problem.
A-13
<PAGE>
Shareholder Inquiries
Shareholder inquiries may be addressed to each Fund at the address or
telephone number set forth on the cover page of such Fund's Prospectus.
Reports to Shareholders
The fiscal year of each Fund ends on the last day of March of each year.
Each Fund will send to its shareholders at least semi-annually reports showing
its portfolio securities and other information. An annual report containing
financial statements audited by independent auditors is sent to shareholders
each year.
Only one copy of each shareholder report and certain shareholder
communications will be mailed to each identified shareholder regardless of the
number of accounts such shareholder has. If a shareholder wishes to receive
separate copies of each report and communication for each of the shareholder's
related accounts the shareholder should notify in writing:
Merrill Lynch Financial Data Services, Inc.
P.O. Box 45290
Jacksonville, FL 32232-5290
The written notification should include the shareholder's name, address,
tax identification number and Merrill Lynch and/or mutual fund account numbers.
If you have any questions regarding this please call your Merrill Lynch
Financial Consultant or Merrill Lynch Financial Data Services, Inc. at (800)
221-7210.
A-14
<PAGE>
Investment Adviser
Fund Asset Management
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey
Mailing Address:
P.O. Box 9011
Princeton, New Jersey 08543-9011
Distributor
Merrill Lynch, Pierce, Fenner & Smith Incorporated
World Financial Center
North Tower
250 Vesey Street
New York, New York 10281
Custodian
State Street Bank and Trust Company
P.O. Box 1713
Boston, Massachusetts 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
Administrative Offices:
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
Mailing Address:
P.O. Box 45290
Jacksonville, Florida 32232-5290
Independent Auditors
Deloitte & Touche LLP
117 Campus Drive
Princeton, New Jersey 08540
Counsel
Brown & Wood LLP
One World Trade Center
New York, New York 10048-0557
<PAGE>
No person has been authorized to give any information or to make any
representations, other than those contained in these Prospectuses, in
connection with the offers contained therein, and, if given or made, such other
information or representations must not be relied upon as having been
authorized by the Funds, the Investment Adviser or Merrill Lynch, Pierce,
Fenner & Smith Incorporated. These Prospectuses do not constitute an offering
in any state in which such offering may not lawfully be made.
Code #10117-0698
- ----------------------------------------------------------------
CMA Money Fund
CMA Government
Securities Fund
CMA Tax-Exempt
Fund
CMA Treasury Fund
- ----------------------------------------------------------------
Prospectuses
================================================================
(Logo of CMA(Registration Mark) appears here)
The enclosed prospectuses describe four fully managed money market funds.
Shares of the Funds are offered to participants in the Cash Management
Account(R) ("CMA(R) account") program of Merrill Lynch, Pierce, Fenner & Smith
Incorporated and to investors maintaining accounts directly with the Transfer
Agent.
Investors should be aware that the Cash Management Account service is not a
bank account and that a shareholder's investment in the Funds is not insured by
any governmental agency. As with any investment in securities, the value of a
shareholder's investment in the Funds may fluctuate.
Principal Office of the Funds
800 Scudders Mill Road
Plainsboro, New Jersey 08536
July 28, 1998
(Merrill Lynch logo appears here)
Code #10117-0798
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
CMA MONEY FUND
CMA GOVERNMENT SECURITIES FUND
CMA TAX-EXEMPT FUND
CMA TREASURY FUND
P.O. Box 9011, Princeton, New Jersey 08543-9011 - Phone No. (609) 282-2800
CMA Money Fund (the "Money Market Fund"), CMA Government Securities Fund
(the "Government Fund"), CMA Tax-Exempt Fund (the "Tax-Exempt Fund") and CMA
Treasury Fund (the "Treasury Fund") are no-load money market funds whose shares
are offered to participants in the Cash Management Account(R) ("CMA" or "CMA(R)
account") financial service program of Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") to provide a medium for the investment of free
credit balances held in CMA accounts. A CMA account is a conventional Merrill
Lynch cash securities account or margin securities account ("Securities
Account") which is linked to the Money Market Fund, the Government Fund, the
Tax-Exempt Fund and the Treasury Fund (collectively, the "Funds"), money market
deposit accounts maintained with depository institutions and to a Visa(R)
card/check account ("Visa(R) Account"). In addition, investors may have their
free credit balances invested in certain series of CMA Multi-State Municipal
Series Trust, each of which is designed to provide income that is exempt from
taxation in a particular state (the "CMA State Funds"). Merrill Lynch markets
its margin account under the name Investor CreditLineSM service.
A customer of Merrill Lynch may subscribe to the CMA program with a
minimum of $20,000 in securities or cash. Subject to the conditions described
in the Prospectuses referred to below, free credit balances in the Securities
Account of CMA participants will be invested periodically in shares of one of
the four Funds. This permits the subscriber to earn a return on such funds
pending further investment in other aspects of the CMA program or utilization
through the Visa(R) Account.
Merrill Lynch charges an annual program participation fee, presently $100
for individuals, for the CMA service (an additional $25 annual program fee is
charged for participation in the CMA Visa(R) Gold Program described in the CMA
Program Description). Merrill Lynch reserves the right to change the fee for
the CMA service or the CMA Visa(R) Gold Program at any time. The shares of each
Fund also may be purchased without the imposition of the annual program
participation fee by investors maintaining accounts directly with the Transfer
Agent who do not subscribe to the CMA program. The minimum initial purchase for
non-CMA subscribers is $5,000 and subsequent purchases must be $1,000 or more.
Such investors will not receive any of the additional services available to CMA
program subscribers, such as a Visa card/check account or the automatic
investment of free credit balances.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Investment Objectives and Policies .......... 2
Money Market Fund ........................ 2
Government Fund .......................... 4
Tax-Exempt Fund .......................... 5
Treasury Fund ............................ 8
Management of the Funds ..................... 8
Purchase and Redemption of Shares ........... 12
Portfolio Transactions ...................... 14
Determination of Net Asset Value ............ 15
Yield Information ........................... 17
Taxes ....................................... 17
</TABLE>
<TABLE>
<CAPTION>
Page
-----
<S> <C>
General Information ......................... 20
Appendix .................................... 23
Description of Commercial Paper, Bank
Money Market Instruments and Corporate
Bond Ratings ............................. 23
Financial Statements
Money Market Fund ........................ 27
Government Fund .......................... 41
Tax-Exempt Fund .......................... 47
Treasury Fund ............................ 68
</TABLE>
This Statement of Additional Information of the Funds is not a prospectus
and should be read in conjunction with the Prospectuses of the Funds dated July
28, 1998 (the "Prospectuses"), which have been filed with the Securities and
Exchange Commission (the "Commission") and can be obtained, without charge, by
calling or writing to the Funds at the above telephone number or address. This
Statement of Additional Information has been incorporated by reference into the
Prospectuses.
----------------
The date of this Statement of Additional Information is July 28, 1998.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Money Market Fund
The Money Market Fund is a no-load money market fund. Reference is made to
"Investment Objectives and Policies" in the Prospectus of the Money Market Fund
for a discussion of the investment objectives and policies of such Fund.
As discussed in its Prospectus, the Money Market Fund may invest in money
market securities pursuant to repurchase agreements. Under such agreements, the
counterparty agrees, upon entering into the contract, to repurchase the
security at a mutually agreed upon time and price, thereby determining the
yield during the term of the agreement. This results in a fixed rate of return
insulated from market fluctuations during such period. Such agreements usually
cover short periods, such as under a week. The Money Market Fund will require
the seller to provide additional collateral if the market value of the
securities falls below the repurchase price at any time during the term of the
repurchase agreement. In the event of a default by the seller, the Money Market
Fund ordinarily will retain ownership of the securities underlying the
repurchase agreement, and instead of a contractually fixed rate of return, the
rate of return to the Money Market Fund shall be dependent upon intervening
fluctuations of the market value of such securities and the accrued interest on
the securities. In such event, the Money Market Fund would have rights against
the seller for breach of contract with respect to any losses arising from
market fluctuations following the failure of the seller to perform. In certain
circumstances, repurchase agreements may be construed to be collateralized
loans by the purchaser to the seller secured by the securities transferred to
the purchaser. In the event of default by the seller under a repurchase
agreement construed to be a collateralized loan, the underlying securities are
not owned by the Money Market Fund but only constitute collateral for the
seller's obligation to pay the repurchase price. Therefore, the Money Market
Fund may suffer time delays and incur costs or possible losses in connection
with the disposition of the collateral. From time to time, the Money Market
Fund also may invest in money market securities pursuant to purchase and sale
contracts. While purchase and sale contracts are similar to repurchase
agreements, purchase and sale contracts are structured so as to be in substance
more like a purchase and sale of the underlying security than is the case with
repurchase agreements.
Also, as discussed in the Prospectus, the Money Market Fund may invest in
obligations issued by commercial and savings banks and savings and loan
associations. The obligations of commercial banks may be issued by U.S. banks,
foreign branches or subsidiaries of U.S. banks ("Eurodollar" obligations) or
U.S. branches or subsidiaries of foreign banks ("Yankeedollar" obligations). In
addition, the Money Market Fund may also invest in other U.S.
dollar-denominated obligations of foreign depository institutions and their
subsidiaries. Eurodollar and Yankeedollar obligations must be general
obligations of the parent bank. The obligations of other foreign depository
institutions and their subsidiaries may be the general obligations of the
parent bank or may be limited to the issuing branch or subsidiary by the terms
of the specific obligation or by government regulation. The Money Market Fund
may also invest in U.S. dollar-denominated commercial paper and other
short-term obligations issued by foreign entities. Such investments are subject
to quality standards similar to those applicable to investments in comparable
obligations of domestic issuers.
Eurodollar and Yankeedollar obligations, as well as other obligations of
foreign depository institutions and short-term obligations issued by other
foreign entities, may involve additional investment risks, including adverse
political and economic developments, the possible imposition of withholding
taxes on interest income payable on such obligations, the possible seizure or
nationalization of foreign deposits and the possible establishment of exchange
controls or other foreign governmental laws or restrictions which might
adversely affect the repayment of principal and the payment of interest. The
issuers of such obligations may not be subject to U.S. regulatory requirements.
Foreign branches or subsidiaries of U.S. banks may be subject to less stringent
reserve requirements
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than U.S. banks. U.S. branches or subsidiaries of foreign banks are subject to
the reserve requirements of the state in which they are located. There may be
less publicly available information about a U.S. branch or subsidiary of a
foreign bank or other issuer than about a U.S. bank or other issuer, and such
entities may not be subject to the same accounting, auditing and financial
record keeping standards and requirements as U.S. issuers. Evidence of
ownership of Eurodollar and foreign obligations may be held outside the United
States and the Money Market Fund may be subject to the risks associated with
the holding of such property overseas. Eurodollar and foreign obligations of
the Money Market Fund held overseas will be held by foreign branches of the
Money Market Fund's custodian or by other U.S. or foreign banks under
subcustodian arrangements complying with the requirements of the Investment
Company Act of 1940, as amended (the "Investment Company Act").
The investment adviser of the Money Market Fund, Fund Asset Management,
L.P. (the "Investment Adviser"), will carefully consider the above factors in
making investments in Eurodollar obligations and Yankeedollar obligations of
foreign depository institutions and other foreign short-term obligations, and
will not knowingly purchase obligations which, at the time of purchase, are
subject to exchange controls or withholding taxes. Generally, the Money Market
Fund will limit its Yankeedollar investments to obligations of banks organized
in Canada, France, Germany, Japan, the Netherlands, Switzerland, the United
Kingdom and other industrialized nations.
The Money Market Fund may enter into reverse repurchase agreements, as
discussed in its Prospectus. The Money Market Fund will use the proceeds of
reverse repurchase agreements to purchase other money market securities either
maturing, or under an agreement to resell, at a date simultaneous with or prior
to the expiration of the reverse repurchase agreements. The Money Market Fund
will utilize reverse repurchase agreements when the interest income to be
earned from the investment of the proceeds of the transaction is greater than
the interest expense of the reverse repurchase transaction.
The Money Market Fund's investments in U.S. Government and Government
agency securities will be in instruments with a remaining maturity of 762 days
(25 months) or less. The Money Market Fund's other investments will be in
instruments with a remaining maturity of 397 days (13 months) or less that have
received a short-term rating, or that have been issued by issuers that have
received a short-term rating with respect to a class of debt obligations that
are comparable in priority and security with the instruments, from the
requisite nationally recognized statistical rating organizations ("NRSROs") in
one of the two highest short-term rating categories or, if neither the
instrument nor its issuer is so rated, will be of comparable quality as
determined by the Trustees of the Money Fund. Currently, there are five NRSROs:
Duff & Phelps Inc., Fitch IBCA, Inc., Thompson Bankwatch, Inc., Moody's
Investors Service, Inc. and Standard & Poor's Ratings Services. The Money
Market Fund will determine the remaining maturity of investments in which it
invests in accordance with Commission regulations.
As described in its Prospectus, the Money Market Fund may invest in
variable amount master demand notes. These are demand obligations that permit
the investment of fluctuating amounts at varying market rates of interest.
In addition to the investment restrictions set forth in its Prospectus,
the Money Market Fund has adopted the following restrictions and policies
relating to the investment of its assets and its activities, which are
fundamental policies and may not be changed without the approval of the holders
of a majority of the Money Market Fund's outstanding voting securities (which
for this purpose means the lesser of (i) 67% of the shares represented at a
meeting at which more than 50% of the outstanding shares are represented or
(ii) more than 50% of the outstanding shares). The Money Market Fund may not:
(1) make investments for the purpose of exercising control or management; (2)
underwrite securities issued by other persons; (3) purchase securities of other
investment companies, except in connection with a merger, consolidation,
acquisition or reorganization; (4) purchase or sell real estate (other than
money market securities secured by real estate or interests therein or money
market securities issued by companies which invest in real estate or interests
therein), commodities or commodity contracts, interests in oil,
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gas or other mineral exploration or development programs; (5) purchase any
securities on margin, except for use of short-term credit necessary for
clearance of purchases and sales of portfolio securities; (6) make short sales
of securities or maintain a short position or write, purchase or sell puts,
calls, straddles, spreads or combinations thereof; (7) make loans to other
persons, provided that the Money Market Fund may purchase money market
securities or enter into repurchase agreements and lend securities owned or
held by it pursuant to (8) below; (8) lend its portfolio securities in excess
of 33 1/3% of its total assets, taken at market value, provided that such loans
are made according to the guidelines set forth below; (9) borrow amounts in
excess of 20% of its total assets, taken at market value (including the amount
borrowed), and then only from banks as a temporary measure for extraordinary or
emergency purposes (The borrowing provisions shall not apply to reverse
repurchase agreements.) (Usually only "leveraged" investment companies may
borrow in excess of 5% of their assets; however, the Money Market Fund will not
borrow to increase income but only to meet redemption requests which might
otherwise require untimely dispositions of portfolio securities. The Money
Market Fund will not purchase securities while borrowings are outstanding.
Interest paid on such borrowings will reduce net income.); (10) mortgage,
pledge, hypothecate or in any manner transfer (except as provided in (8) above)
as security for indebtedness any securities owned or held by the Money Market
Fund except as may be necessary in connection with borrowings referred to in
investment restriction (9) above, and then such mortgaging, pledging or
hypothecating may not exceed 10% of the Money Market Fund's net assets, taken
at market value; (11) invest in securities with legal or contractual
restrictions on resale (except for repurchase agreements) or for which no
readily available market exists if, regarding all such securities, more than
10% of its net assets (taken at market value) would be invested in such
securities; (12) invest in securities of issuers (other than issuers of U.S.
Government agency securities) having a record, together with predecessors, of
less than three years of continuous operation if, regarding all such
securities, more than 5% of its total assets (taken at market value) would be
invested in such securities; (13) enter into reverse repurchase agreements if,
as a result thereof, the Money Market Fund's obligations with respect to
reverse repurchase agreements would exceed one-third of its net assets (defined
to be total assets, taken at market value, less liabilities other than reverse
repurchase arrangements); and (14) purchase or retain the securities of any
issuer, if those individual officers and Trustees of the Money Market Fund, the
Investment Adviser or any subsidiary thereof each owning beneficially more than
1% of the securities of such issuer own in the aggregate more than 5% of the
securities of the issuer.
Lending of Portfolio Securities. Subject to investment restriction (8)
above, the Money Market Fund may from time to time lend securities from its
portfolio to brokers, dealers and financial institutions and receive collateral
in cash or securities issued or guaranteed by the U.S. Government which will be
maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. Such cash collateral will be invested in
short-term securities, the income from which will increase the return to the
Money Market Fund. Such loans will be terminable at any time. The Money Market
Fund will have the right to regain record ownership of loaned securities to
exercise beneficial rights. The Money Market Fund may pay reasonable fees in
connection with the arranging of such loans.
Government Fund
The Government Fund is a no-load money market fund. Reference is made to
"Investment Objectives and Policies" in the Prospectus of the Government Fund
for a discussion of the investment objectives and policies of such Fund.
As discussed in its Prospectus, the Government Fund may invest in U.S.
Government securities pursuant to repurchase agreements. Reference is made to
"Investment Objectives and Policies -- Money Market Fund" herein for a
discussion of such repurchase agreements.
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In addition to the investment restrictions set forth in its Prospectus,
the Government Fund has adopted the following restrictions and policies
relating to the investment of its assets and its activities, which are
fundamental policies and may not be changed without the approval of the holders
of a majority of the Government Fund's outstanding voting securities (which for
this purpose means the lesser of (i) 67% of the shares represented at a meeting
at which more than 50% of the outstanding shares are represented or (ii) more
than 50% of the outstanding shares). The Government Fund may not: (1) act as an
underwriter of securities issued by other persons; (2) purchase any securities
on margin, except for use of short-term credit necessary for clearance of
purchases and sales of portfolio securities; (3) make short sales of securities
or maintain a short position or write, purchase or sell puts, calls, straddles,
spreads or combinations thereof; (4) make loans to other persons, provided that
the Government Fund may purchase short-term marketable securities which are
direct obligations of the U.S. Government or enter into repurchase agreements
pertaining thereto; (5) borrow amounts in excess of 20% of its total assets,
taken at market value (including the amount borrowed), and then only from banks
as a temporary measure for extraordinary or emergency purposes. (Usually only
"leveraged" investment companies may borrow in excess of 5% of their assets;
however, the Government Fund will not borrow to increase income but only to
meet redemption requests which might otherwise require untimely dispositions of
portfolio securities. The Government Fund will not purchase securities while
borrowings are outstanding. Interest paid on such borrowings will reduce net
income.); and (6) mortgage, pledge, hypothecate or in any manner transfer as
security for indebtedness any securities owned or held by the Government Fund
except as may be necessary in connection with borrowings mentioned in (5)
above, and then such mortgaging, pledging or hypothecating may not exceed 10%
of the Government Fund's net assets, taken at market value.
Tax-Exempt Fund
The Tax-Exempt Fund is a no-load tax-exempt money market fund. Reference
is made to "Investment Objectives and Policies" in the Prospectus of the
Tax-Exempt Fund for a discussion of the investment objectives and policies of
such Fund.
As discussed in its Prospectus, the Tax-Exempt Fund may invest in variable
rate demand notes ("VRDNs"). VRDNs are tax-exempt obligations which utilize a
floating or variable interest rate adjustment formula and provide an
unconditional right of demand to receive payment of the unpaid principal
balance plus accrued interest on a short notice period. The interest rates are
adjustable at periodic intervals to some prevailing market rate for similar
investments, such adjustment formula being calculated to maintain the market
value of the VRDN at approximately the par value of the VRDN on the adjustment
date. The adjustments are frequently based upon the prime rate of a bank or
some other appropriate interest rate adjustment index.
The Tax-Exempt Fund may also invest in VRDNs in the form of participation
interests ("Participating VRDNs") in variable rate tax-exempt obligations held
by a financial institution, typically commercial banks ("institutions").
Participating VRDNs provide the Tax-Exempt Fund with a specified undivided
interest (up to 100%) of the underlying obligation and the right to demand
payment of the unpaid principal balance plus accrued interest on the
Participating VRDNs from the institution upon a specified number of days'
notice, presently not to exceed 30 days. In addition, each Participating VRDN
is backed by an irrevocable letter of credit or similar commitment of the
institution. The Tax-Exempt Fund has an undivided interest in the underlying
obligation and thus participates on the same basis as the institution in such
obligation except that the institution typically retains fees out of the
interest paid on the obligation for servicing the obligation, providing the
letter of credit or issuing the repurchase commitment.
The Tax-Exempt Fund has been advised by its counsel that the interest
received on Participating VRDNs will be treated as interest from tax-exempt
obligations as long as the Tax-Exempt Fund does not invest more
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<PAGE>
than a limited amount (not more than 20%) of its total assets in such
investments and certain other conditions are met. It is contemplated that the
Tax-Exempt Fund will not invest more than a limited amount of its total assets
in Participating VRDNs.
The Tax-Exempt Fund can be expected to offer a lower yield than
longer-term municipal bond funds since Tax-Exempt Securities with longer
maturities tend to produce higher yields. Interest rates in the short-term
Tax-Exempt Securities market also may fluctuate more widely from time to time
than interest rates in the long-term municipal bond market. However, because of
the shorter maturities, the market value of the Tax-Exempt Securities held by
the Tax-Exempt Fund can be expected to fluctuate less in value as a result of
changes in interest rates. Because of the interest rate adjustment formula on
VRDNs (including Participating VRDNs), the VRDNs are not comparable to fixed
rate securities. The Tax-Exempt Fund's yield on VRDNs will decline and its
shareholders will forego the opportunity for capital appreciation during
periods when prevailing interest rates have declined. On the other hand, during
periods when prevailing interest rates have increased, the Tax-Exempt Fund's
yield on VRDNs will increase and its shareholders will have a reduced risk of
capital depreciation.
The Tax-Exempt Fund's portfolio of investments in municipal notes and
short-term tax-exempt commercial paper will be limited to those obligations
which (i) are secured by a pledge of the full faith and credit of the United
States or (ii) are rated, or issued by issuers who have been rated, in one of
the two highest rating categories for short-term municipal debt obligations by
an NRSRO or, if not rated, will be of comparable quality as determined by the
Trustees of the Tax-Exempt Fund. The Tax-Exempt Fund's investments in municipal
bonds (which must have maturities at the date of purchase of 397 days (13
months) or less) will be in issuers who have received from the requisite NRSROs
a rating, with respect to a class of short-term debt obligations that is
comparable in priority and security with the investment, in one of the two
highest rating categories for short-term obligations or, if not rated, will be
of comparable quality as determined by the Trustees of the Tax-Exempt Fund.
Currently, there are three NRSROs which rate municipal obligations: Fitch IBCA,
Inc., Moody's Investors Service, Inc. and Standard & Poor's Ratings Group.
Certain tax-exempt obligations (primarily VRDNs and Participating VRDNs) may be
entitled to the benefit of standby letters of credit or similar commitments
issued by financial institutions and, in such instances, the Board of Trustees
and the Investment Adviser will take into account the obligation of the
financial institution in assessing the quality of such instrument. The
Tax-Exempt Fund may also purchase other types of tax-exempt instruments if, in
the opinion of the Trustees, such obligations are equivalent to securities
having the ratings described above. For a description of Tax-Exempt Securities
and such ratings, see "Information Concerning Tax-Exempt Securities" in the
Appendix.
Purchase or Sale of Tax-Exempt Securities on a Delayed Delivery Basis or
on a When-Issued Basis. Tax-Exempt Securities may at times be purchased or sold
on a delayed delivery basis or on a when-issued basis. These transactions arise
when securities are purchased or sold by the Tax-Exempt Fund with payment and
delivery taking place in the future, often a month or more after the purchase.
The payment obligation and the interest rate are each fixed at the time the
buyer enters into the commitment. The Tax-Exempt Fund will only make
commitments to purchase such securities with the intention of actually
acquiring the securities, but the Fund may sell these securities prior to
settlement date if it is deemed advisable. No new when-issued commitments will
be made if more than 40% of the Tax-Exempt Fund's net assets would become so
committed. Purchasing Tax-Exempt Securities on a when-issued basis involves the
risk that the yields available in the market when the delivery takes place may
actually be higher than those obtained in the transaction itself; if yields so
increase, the value of the when-issued obligation will generally decrease. The
Tax-Exempt Fund will maintain a separate account at its custodian consisting of
cash or liquid Tax-Exempt Securities (valued on a daily basis) equal at all
times to the amount of the when-issued commitment.
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Purchase of Securities with Fixed Price "Puts." The Tax-Exempt Fund has
authority to purchase fixed rate Tax-Exempt Securities and, for a price,
simultaneously acquire the right to sell such securities back to the seller at
an agreed upon price at any time during a stated period or on a certain date.
Such a right is generally denoted as a fixed price put. Puts with respect to
fixed rate instruments are to be distinguished from the demand or repurchase
features of VRDNs and Participating VRDNs which enable the Tax-Exempt Fund to
dispose of the security at a time when the market value of the security
approximates its par value. The Tax-Exempt Fund does not currently intend to
enter into fixed price put transactions but reserves the right to do so in the
future. No such transactions will be entered into unless such transactions are
permissible under applicable rules under the Investment Company Act and the
Trustees of the Tax-Exempt Fund have approved the proposed terms of such
transactions.
In addition to the investment restrictions set forth in its Prospectus,
the Tax-Exempt Fund has adopted the following restrictions and policies
relating to the investment of its assets and its activities, which are
fundamental policies and may not be changed without the approval of the holders
of a majority of the Tax-Exempt Fund's outstanding shares (for this purpose a
majority of the shares means the lesser of (i) 67% of the shares represented at
a meeting at which more than 50% of the outstanding shares are represented or
(ii) more than 50% of the outstanding shares). The Tax-Exempt Fund may not: (1)
make investments for the purpose of exercising control or management; (2)
purchase securities of other investment companies, except in connection with a
merger, consolidation, acquisition or reorganization; (3) purchase or sell real
estate (provided that such restriction shall not apply to Tax-Exempt Securities
secured by real estate or interests therein or issued by companies which invest
in real estate or interests therein), commodities or commodity contracts,
interests in oil, gas or other mineral exploration or development programs; (4)
purchase any securities on margin, except for use of short-term credit
necessary for clearance of purchases and sales of portfolio securities; (5)
make short sales of securities or maintain a short position or invest in put,
call, straddle, or spread options or combinations thereof; provided, however,
that the Tax-Exempt Fund shall have the authority to purchase Tax-Exempt
Securities subject to put options as set forth under "Investment Objectives and
Policies" and "Appendix -- Information Concerning Tax-Exempt Securities"; (6)
make loans to other persons, provided that the Tax-Exempt Fund may purchase a
portion of an issue of Tax-Exempt Securities (the acquisition of a portion of
an issue of Tax-Exempt Securities or bonds, debentures or other debt securities
which are not publicly distributed is considered to be the making of a loan
under the Investment Company Act); (7) borrow amounts in excess of 20% of its
total assets taken at market value (including the amount borrowed), and then
only from banks as a temporary measure for extraordinary or emergency purposes.
(Usually only "leveraged" investment companies may borrow in excess of 5% of
their assets; however, the Tax-Exempt Fund will not borrow to increase income
but only to meet redemption requests which might otherwise require untimely
dispositions of portfolio securities. The Tax-Exempt Fund will not purchase
securities while borrowings are outstanding. Interest paid on such borrowings
will reduce net income.); (8) mortgage, pledge, hypothecate or in any manner
transfer as security for indebtedness any securities owned or held by the
Tax-Exempt Fund except as may be necessary in connection with borrowings
mentioned in (7) above, and then such mortgaging, pledging or hypothecating may
not exceed 10% of its total assets, taken at value; (9) invest in securities
with legal or contractual restrictions on resale or for which no readily
available market exists if, regarding all such securities, more than 10% of its
net assets (taken at value), would be invested in such securities; and (10) act
as an underwriter of securities, except to the extent that the Tax-Exempt Fund
may technically be deemed an underwriter when engaged in the activities
described in (6) above or insofar as the Tax-Exempt Fund may be deemed an
underwriter under the Securities Act of 1933 in selling portfolio securities.
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Treasury Fund
The Treasury Fund is a no-load money market fund. Reference is made to
"Investment Objectives and Policies" in the Prospectus of the Treasury Fund for
a discussion of the investment objectives and policies of the Treasury Fund.
The Treasury Fund has adopted the following restrictions and policies
relating to the investment of its assets and its activities, which are
fundamental policies and may not be changed without the approval of the holders
of a majority of the Treasury Fund's outstanding voting securities (which for
this purpose means the lesser of (i) 67% of the shares represented at a meeting
at which more than 50% of the outstanding shares are represented or (ii) more
than 50% of the outstanding shares). The Treasury Fund may not: (1) purchase
any securities other than direct obligations of the U.S. Treasury having
maturities of no more than 762 days (25 months), (2) act as an underwriter of
securities issued by other persons; (3) purchase any securities on margin,
except for use of short-term credit necessary for clearance of purchases and
sales of portfolio securities; (4) make short sales of securities or maintain a
short position or write, purchase or sell puts, calls, straddles, spreads or
combinations thereof; (5) make loans to other persons, provided that the
Treasury Fund may purchase short-term marketable securities which are direct
obligations of the U.S. Treasury; (6) borrow amounts in excess of 20% of its
total assets, taken at market value (including the amount borrowed), and then
only from banks as a temporary measure for extraordinary or emergency purposes.
(Usually only "leveraged" investment companies may borrow in excess of 5% of
their assets; however, the Treasury Fund will not borrow to increase income but
only to meet redemption requests which might otherwise require untimely
dispositions of portfolio securities. The Treasury Fund will not purchase
securities while borrowings are outstanding. Interest paid on such borrowings
will reduce net income.); and (7) mortgage, pledge, hypothecate or in any
manner transfer as security for indebtedness any securities owned or held by
the Treasury Fund except as may be necessary in connection with borrowings
mentioned in (6) above, and then such mortgaging, pledging or hypothecating may
not exceed 10% of the Treasury Fund's net assets, taken at market value.
MANAGEMENT OF THE FUNDS
Trustees and Officers
Information about the Trustees and executive officers of the Funds,
including their ages and their principal occupations for at least the last five
years, is set forth below. With the exception of six officers, the persons
named below hold the same positions with each of the Funds. Unless otherwise
noted, the address of each Trustee and executive officer is P.O. Box 9011,
Princeton, New Jersey 08543-9011.
ARTHUR ZEIKEL (66) -- President and Trustee (1)(2) -- Chairman of the
Investment Adviser and its affiliate Merrill Lynch Asset Management, L.P.
("MLAM") (which terms, as used herein, include their corporate predecessors)
since 1997; President of the Investment Adviser and MLAM from 1977 to 1997;
Chairman of Princeton Services, Inc. ("Princeton Services") since 1997 and
Director thereof since 1993; President of Princeton Services from 1993 to 1997;
Executive Vice President of Merrill Lynch & Co., Inc. ("ML & Co.") since 1990.
RONALD W. FORBES (57) -- Trustee (2) -- 1400 Washington Avenue, Albany,
New York 12222. Professor of Finance, School of Business, State University of
New York at Albany since 1989.
CYNTHIA A. MONTGOMERY (45) -- Trustee (2) -- Harvard Business School,
Soldiers Field Road, Boston, Massachusetts 02163. Professor, Harvard Business
School since 1989; Associate Professor, J.L. Kellogg Graduate School of
Management, Northwestern University from 1985 to 1989; Assistant Professor,
Graduate School of Business
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Administration, The University of Michigan from 1979 to 1985; Director, UNUM
Corporation since 1990 and Director of Newell Co. since 1995.
CHARLES C. REILLY (66) -- Trustee (2) -- 9 Hampton Harbor Road, Hampton
Bays, New York 11946. Self-employed financial consultant since 1990; President
and Chief Investment Officer of Verus Capital, Inc. from 1979 to 1990; Senior
Vice President of Arnhold and S. Bleichroeder, Inc. from 1973 to 1990; Adjunct
Professor, Columbia University Graduate School of Business from 1990 to 1991;
Adjunct Professor, Wharton School, The University of Pennsylvania, from 1989 to
1990; Partner, Small Cities Cable Television since 1986.
KEVIN A. RYAN (65) -- Trustee (2) -- 127 Commonwealth Avenue, Chestnut
Hill, Massachusetts 02167. Founder and current Director of The Boston
University Center for the Advancement of Ethics and Character; Professor of
Education at Boston University since 1982; formerly taught on the faculties of
The University of Chicago, Stanford University and Ohio State University.
RICHARD R. WEST (60) -- Trustee (2) -- Box 604, Genoa, Nevada 89411.
Professor of Finance since 1984, and Dean from 1984 to 1993, and currently Dean
Emeritus of New York University, Leonard N. Stern School of Business
Administration; Director of Bowne & Co., Inc. (financial printers), Vornado,
Inc. (real estate holding company), and Alexander's Inc. (real estate company).
TERRY K. GLENN (57) -- Executive Vice President (1)(2) -- Executive Vice
President of the Investment Adviser and MLAM since 1983; President of Merrill
Lynch Funds Distributor. ("MLFD" or the "Distributor") since 1986 and the
Director thereof since 1991; Executive Vice President and Director of Princeton
Services since 1993; President of MLFD since 1986 and Director thereof since
1991; President of Princeton Administrators, L.P. since 1988.
VINCENT R. GIORDANO (53) -- Senior Vice President of the Tax-Exempt Fund
(1)(2) -- Senior Vice President of the Investment Adviser and MLAM since 1984;
Senior Vice President of Princeton Services since 1993.
JOSEPH T. MONAGLE, JR. (49) -- Senior Vice President of the Money Market
Fund, the Government Fund and the Treasury Fund (1)(2) -- Senior Vice President
and Department Head of the Global Fixed Income Division of the Investment
Adviser and MLAM since 1997; Vice President of MLAM from 1978 to 1990; Senior
Vice President of Princeton Services since 1993.
DONALD C. BURKE (38) -- Vice President (1)(2) -- First Vice President of
MLAM since 1997, Vice President of MLAM from 1990 to 1997; and Director of
Taxation of the Investment Adviser since 1990.
CARLO J. GIANNINI (54) -- Vice President of the Government Fund (1) --
Vice President and portfolio manager of MLAM since 1981.
PETER J. HAYES (40) -- Vice President of the Tax-Exempt Fund (1)(2) --
First Vice President of MLAM since 1997; Vice President of MLAM from 1988 to
1997.
JACQUELINE ROGERS (40) -- Vice President of the Treasury Fund (1)(2) --
Vice President and Portfolio Manager of MLAM since 1985.
KENNETH A. JACOB (47) -- Vice President of the Tax-Exempt Fund (1)(2) --
First Vice President of MLAM since 1997; Vice President of MLAM from 1984 to
1997.
KEVIN J. MCKENNA (41) -- Senior Vice President of the Money Market Fund,
the Government Fund and the Treasury Fund (1)(2) -- Vice President of MLAM
since 1985.
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HELEN MARIE SHEEHAN (38) -- Vice President of the Tax-Exempt Fund (1)(2)
- -- Vice President of MLAM since 1991; Assistant Vice President of MLAM from
1989 to 1991; employee of MLAM since 1985.
GERALD M. RICHARD (49) -- Treasurer (1)(2) -- Senior Vice President and
Treasurer of the Investment Adviser and MLAM since 1984; Senior Vice President
and Treasurer of Princeton Services since 1993; Vice President of the
Distributor since 1981; Treasurer since 1984.
ROBERT HARRIS (46) -- Secretary (1)(2) -- First Vice President of MLAM
since 1997; Vice President of MLAM since 1984 and attorney associated with MLAM
since 1980; Secretary of MLFD since 1982.
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(1) Interested person, as defined in the Investment Company Act, of the Funds.
(2) Such Trustee or officer is a director or officer of certain other
investment companies for which the Investment Adviser or MLAM acts as
investment adviser.
At May 31, 1998 the Trustees and officers of the Funds as a group (18
persons) owned an aggregate of less than 1% of the outstanding shares of
beneficial interest of the Funds. At such date, Mr. Zeikel and the other
officers of the Funds owned an aggregate of less than 1% of the outstanding
shares of common stock of ML & Co.
Compensation of Trustees
Pursuant to the terms of its Investment Advisory Agreements (the
"Investment Advisory Agreements") with the Funds, the Investment Adviser pays
all compensation of officers and employees of the Funds as well as the fees of
all Trustees of the Funds who are affiliated persons of ML & Co. or its
subsidiaries. Each Fund pays each Trustee who is not affiliated with the
Investment Adviser (each a "non-affiliated Trustee") an annual fee plus a fee
for each meeting attended and pays all Trustees' actual out-of-pocket expenses
relating to attendance at meetings. Each Fund also compensates members of its
Audit and Nominating Committee (the "Committee"), which consists of all of the
non-affiliated Trustees. The Chairman of the Committee receives an additional
annual fee of $1,000 per year. For the fiscal year ended March 31, 1998, fees
and expenses paid by the Money Market Fund, the Government Fund, the Tax-Exempt
Fund and the Treasury Fund to the non-affiliated Trustees aggregated $100,634,
$34,134, $43,134 and $26,447, respectively.
The following table sets forth for the fiscal year ended March 31, 1998
compensation paid by the Funds to the non-affiliated Trustees and for the
calendar year ended December 31, 1997 the aggregate compensation paid by all
registered investment companies advised by MLAM and its affiliate, FAM
("MLAM/FAM-Advised Funds") to the non-affiliated Trustees:
<TABLE>
<CAPTION>
Pension or Aggregate
Retirement Compensation
Compensation Compensation Compensation Benefits from Fund
Compensation from from from Accrued as and MLAM/FAM-
from Money Government Tax-Exempt Treasury Part of Advised Funds
Name of Trustee Market Fund Fund Fund Fund Fund Expense Paid to Trustee(1)
- ---------------------------------- -------------- -------------- -------------- -------------- -------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Ronald W. Forbes(1) .............. $19,800 $6,400 $ 9,300 $5,000 None $153,500
Cynthia A. Montgomery(1) ......... $19,800 $6,400 $ 9,300 $5,000 None $153,500
Charles C. Reilly(1) ............. $20,800 $7,400 $10,300 $6,000 None $313,000
Kevin A. Ryan(1) ................. $19,800 $6,400 $ 9,300 $5,000 None $153,500
Richard R. West(1) ............... $19,800 $6,400 $ 9,300 $5,000 None $299,000
</TABLE>
10
<PAGE>
- --------
(1) The Trustees serve on the boards of MLAM/FAM Advised Funds as follows: Mr.
Forbes (29 registered investment companies consisting of 42 portfolios);
Ms. Montgomery (29 registered investment companies consisting of 42
portfolios); Mr. Reilly (47 registered investment companies consisting of
60 portfolios); Mr. Ryan (29 registered investment companies consisting of
42 portfolios); and Mr. West (48 registered investment companies
consisting of 70 portfolios).
Investment Advisory Arrangements
Reference is made to "Management of the Funds -- Investment Advisory
Arrangements" in the Appendix to the Prospectuses of the Funds for certain
information concerning the investment advisory arrangements of the Funds.
Each Fund has entered into a separate investment advisory agreement with
the Investment Adviser (the "Investment Advisory Agreements"). Subject to the
supervision of the Board of Trustees, the Investment Adviser is responsible for
the actual management of the Funds' portfolio and constantly reviews the Funds'
holdings in light of its own research analysis and that from other relevant
sources. The responsibility for making decisions to buy, sell or hold a
particular security rests with the Investment Adviser, subject to the review of
the Board of Trustees. The Investment Adviser also performs certain other
administrative services and provides all of the office space, facilities,
equipment and necessary personnel for portfolio management of the Funds.
Securities held by the Funds may also be held by, or be appropriate
investments for, other funds or clients (collectively referred to as "clients")
for which the Investment Adviser or MLAM acts as an investment adviser. Because
of different investment objectives or other factors, a particular security may
be bought for one or more clients when one or more clients are selling the
security. If purchases or sales of securities for the Funds or other clients
arise for consideration at or about the same time, transactions in such
securities will be made, insofar as feasible, for the respective clients in a
manner deemed equitable to all by the Investment Adviser or MLAM. To the extent
that transactions on behalf of more than one client of the Investment Adviser
or MLAM during the same period may increase the demand for securities being
purchased or the supply of securities being sold, there may be an adverse
effect on price.
The Investment Adviser presently receives a fee from each Fund at the end
of each month at the annual rates of 0.50% of the first $500 million of average
daily net assets of the Fund, 0.425% of the average daily net assets in excess
of $500 million but not exceeding $1 billion, and 0.375% of average daily net
assets in excess of $1 billion.
Money Market Fund. For the fiscal years ended March 31, 1996, 1997 and
1998 the total advisory fees paid by the Money Market Fund to the Investment
Adviser aggregated $124,239,520, $143,662,831 and $170,196,721, respectively.
Government Fund. For the fiscal years ended March 31, 1996, 1997 and 1998
the total advisory fees paid by the Government Fund to the Investment Adviser
aggregated $12,987,502, $13,466,157 and $13,436,885, respectively.
Tax-Exempt Fund. For the fiscal years ended March 31, 1996, 1997 and 1998
the total advisory fees paid by the Tax-Exempt Fund to the Investment Adviser
aggregated $29,964,050, $30,793,066 and $32,978,418, respectively.
Treasury Fund. For the fiscal years ended March 31, 1996, 1997 and 1998
the total advisory fees paid by the Treasury Fund to the Investment Adviser
aggregated $7,235,779, $8,329,150 and $8,821,989, respectively.
11
<PAGE>
The Investment Advisory Agreements obligate the Investment Adviser to
provide investment advisory services, to furnish administrative services, office
space and facilities for management of the affairs of each Fund, to pay all
compensation of and furnish office space for officers and employees of the Fund,
as well as the fees of all Trustees of the Funds who are affiliated persons of
ML & Co. or any of its subsidiaries. Except for certain expenses incurred by
Merrill Lynch (see "Purchase and Redemption of Shares"), the Funds pay all other
expenses incurred in their operations, including, among other things, taxes,
expenses for legal and auditing services, costs of printing proxies, reports,
prospectuses and statements of additional information sent to current
shareholders (except to the extent paid for by the Distributor), charges of the
custodian and transfer agent, expenses of redemption of shares, Commission fees,
expenses of registering the shares under Federal and state securities laws, fees
and expenses of non-affiliated Trustees, accounting and pricing costs (including
the daily calculation of net asset value), insurance, interest, brokerage costs,
litigation and other extraordinary or non-recurring expenses, and other expenses
properly payable by the Funds. Accounting services are provided by the
Investment Adviser and each Fund reimburses the Investment Adviser for its costs
in connection with such services provided to that Fund.
For information as to the distribution fee to be paid by each Fund to
Merrill Lynch pursuant to the Distribution Agreements, see "Purchase and
Redemption of Shares" below.
Duration and Termination. Unless earlier terminated as described below,
each Investment Advisory Agreement will continue in effect from year to year if
approved annually (a) by the Trustees of the Fund or by a majority of the
outstanding voting shares of the Fund and (b) by a majority of the Trustees who
are not parties to such contract or interested persons (as defined in the
Investment Company Act) of any such party. Such contract is not assignable and
may be terminated without penalty on 60 days' written notice at the option of
either party thereto or by the vote of the shareholders of the Fund.
PURCHASE AND REDEMPTION OF SHARES
Reference is made to "Purchase of Shares" and "Redemption of Shares" in
the Appendix to the Prospectuses of the Funds for certain information as to the
purchase and redemption of Fund shares.
Each Fund has entered into a distribution agreement (each, a "Distribution
Agreement") with Merrill Lynch as the distributor. The Distribution Agreements
obligate Merrill Lynch to pay certain expenses in connection with the offering
of the shares of the Funds. After the prospectuses, statements of additional
information and periodic reports have been prepared, set in type and mailed to
shareholders, Merrill Lynch will pay for the printing and distribution of
copies thereof used in connection with the offering to investors. Merrill Lynch
will also pay for other supplementary sales literature and advertising costs.
The Distribution Agreements are subject to the same renewal requirements and
termination provisions as the Investment Advisory Agreements described above.
Each Fund has adopted a Distribution and Shareholder Servicing Plan (each,
a "Distribution Plan") in compliance with Rule 12b-1 under the Investment
Company Act pursuant to which Merrill Lynch receives a distribution fee under
the Distribution Agreement from each Fund at the end of each month at the annual
rate of 0.125% of average daily net assets of such Fund attributable to
subscribers to the CMA program and to investors maintaining securities accounts
with Merrill Lynch or maintaining accounts directly with the Transfer Agent who
are not subscribers to such program, except that the value of Fund shares in
accounts maintained directly with the Transfer Agent which are not serviced by
Merrill Lynch Financial Consultants will be excluded. The Distribution Plans
reimburse Merrill Lynch only for actual expenses incurred in the fiscal year in
which the fees are paid. The distribution fees are principally to provide
compensation to Merrill Lynch Financial Consultants and other Merrill Lynch
personnel for selling shares of each Fund and for providing direct personal
services to shareholders of the Funds. The distribution fee is not compensation
for the administrative and operational services rendered to
12
<PAGE>
shareholders by Merrill Lynch which are covered by Investment Advisory
Agreements (see "Management of the Funds -- Investment Advisory Arrangements")
between each Fund and the Investment Adviser.
The Trustees believe that each Fund's expenditures under its Distribution
Plan benefit such Fund and its shareholders by providing better shareholder
services and by facilitating the sale and distribution of Fund shares. For the
years ended March 31, 1996, 1997 and 1998, the Money Market Fund paid
$40,955,813, $46,767,555 and $55,763,388, respectively, to Merrill Lynch
pursuant to its Distribution Plan. For the years ended March 31, 1996, 1997 and
1998, the Government Fund paid $4,027,066, $4,103,537 and $4,090,796,
respectively, to Merrill Lynch pursuant to its Distribution Plan. For the years
ended March 31, 1996, 1997 and 1998, the Tax-Exempt Fund paid $9,683,869,
$9,788,070 and $10,594,071, respectively, to Merrill Lynch pursuant to its
Distribution Plan. For the years ended March 31, 1996, 1997 and 1998, the
Treasury Fund paid $2,115,419, $2,438,072 and $2,624,701, respectively, to
Merrill Lynch pursuant to the Distribution Plan. All of the amounts expended
under the Distribution Plans for the years ended March 31, 1996, 1997 and 1998
were allocated to Merrill Lynch Financial Consultants, other Merrill Lynch
personnel and related administrative costs.
Among other things, each Distribution Plan provides that Merrill Lynch
shall provide and the Trustees of each Fund shall review quarterly reports of
the distribution expenses made by Merrill Lynch pursuant to the Distribution
Plan. In their consideration of each Distribution Plan, the Trustees must
consider all factors they deem relevant, including information as to the
benefits of the Distribution Plan to the related Fund and its shareholders.
Each Distribution Plan further provides that, so long as the Distribution Plan
remains in effect, the selection and nomination of Trustees of the Fund who are
not "interested persons" of the Fund as defined in the Investment Company Act
("Independent Trustees") shall be committed to the discretion of the
Independent Trustees then in office. Each Distribution Plan can be terminated
at any time, without penalty, by the vote of a majority of the Independent
Trustees or by the vote of the holders of a majority of the outstanding voting
securities of each Fund. Finally, the Distribution Plans cannot be amended to
increase materially the amount to be spent by the Fund thereunder without
shareholder approval, and all material amendments are required to be approved
by vote of the Trustees of the Fund, including a majority of the Independent
Trustees, cast in person at a meeting called for that purpose.
The right to receive payment with respect to any redemption of Fund shares
may be suspended by each Fund for a period of up to seven days. Suspensions of
more than seven days may not be made except (1) for any period (A) during which
the New York Stock Exchange (the "NYSE") is closed other than customary weekend
and holiday closings or (B) during which trading on the NYSE is restricted; (2)
for any period during which an emergency exists as a result of which (a)
disposal by the Fund of securities owned by it is not reasonably practicable or
(b) it is not reasonably practicable for the Fund fairly to determine the value
of its net assets; or (3) for such other periods as the Commission may by order
permit for the protection of securityholders of the Fund. The Commission shall
by rules and regulations determine the conditions under which (i) trading shall
be deemed to be restricted and (ii) an emergency shall be deemed to exist
within the meaning of clause (2) above.
The value of shares of the Funds at the time of redemption may be more or
less than the shareholders' cost, depending on the market value of the
securities held by the Funds at any such time.
Merrill Lynch has offered the CMA program since September, 1977. While no
significant problems have occurred to date, no predictions can be made as to
the rate of purchases and redemptions of shares which will result from the
automatic features of the CMA program. The portfolio securities of the Funds
are highly liquid and the Funds have the right to borrow up to 20% of their
total assets on a temporary basis to meet unexpected
13
<PAGE>
redemptions. Nevertheless, an erratic redemption pattern could force the
Investment Adviser to invest in securities or maintain an average portfolio
maturity which might lessen the yield that would otherwise be available to the
Funds.
PORTFOLIO TRANSACTIONS
The Funds have no obligations to deal with any dealer or group of dealers
in the execution of transactions in portfolio securities. Subject to policy
established by the Trustees and officers of each Fund, the Investment Adviser
is primarily responsible for the Fund's portfolio decisions and the placing of
the Fund's portfolio transactions. In placing orders, it is the policy of the
Funds to obtain the best net results taking into account such factors as price
of the securities offered, the type of transaction involved, the firm's general
execution and operational facilities, and the firm's risk in positioning the
securities involved. While the Investment Adviser generally seeks reasonably
competitive spreads or commissions, the Funds will not necessarily be paying
the lowest spread or commission available. The Fund's policy of investing in
securities with short maturities will result in high portfolio turnover.
The securities in which each Fund invests are traded primarily in the
over-the-counter ("OTC") market. Where possible, the Funds will deal directly
with the dealers who make a market in the securities involved except in those
circumstances where better prices and execution are available elsewhere. Such
dealers usually are acting as principals for their own accounts. On occasion,
securities may be purchased directly from the issuer. The money market
securities in which the Money Market Fund, the Government Fund and the Treasury
Fund invest and the tax-exempt securities in which the Tax-Exempt Fund invests
are generally traded on a net basis and do not normally involve either
brokerage commissions or transfer taxes. The cost of executing portfolio
securities transactions of the Funds primarily will consist of dealer spreads
and underwriting commissions. Under the Investment Company Act, a person
affiliated with the Funds is prohibited from dealing with the Funds as a
principal in the purchase and sale of securities unless an exemptive order
allowing such transactions is obtained from the Commission. Since OTC
transactions are usually principal transactions, an affiliated person of the
Funds may not serve as the Funds' dealer in connection with such transactions,
except pursuant to the exemptive order described below. However, an affiliated
person of the Funds may serve as the Funds' broker in OTC transactions
conducted on an agency basis. The Funds may not purchase securities from any
underwriting syndicate of which Merrill Lynch is a member, except in accordance
with applicable rules under the Investment Company Act.
The Commission has issued an exemptive order permitting the Money Market
Fund, the Government Fund and the Treasury Fund to conduct principal
transactions with Merrill Lynch Government Securities Inc. ("GSI") in U.S.
Government and U.S. Government agency securities, with Merrill Lynch Money
Markets Inc. ("MMI") in certificates of deposit and other short-term bank money
market instruments and commercial paper and with Merrill Lynch in fixed income
securities including medium-term notes. The order contains a number of
conditions, including conditions designed to insure that the price to the Money
Market Fund, the Government Fund and the Treasury Fund from GSI, MMI or Merrill
Lynch is equal to or better than that available from other sources. GSI, MMI
and Merrill Lynch have informed such Funds that they will in no way, at any
time, attempt to influence or control the activities of the Fund or the
Investment Adviser in placing such principal transactions. The exemptive order
allows GSI, MMI or Merrill Lynch to receive a dealer spread on any transaction
with the Money Market Fund, the Government Fund or the Treasury Fund no greater
than its customary dealer spread for transactions of the type involved.
Generally such spreads do not exceed 0.25% of the principal amount of the
securities involved. For the fiscal years ended March 31, 1996, 1997 and 1998
the Money Market Fund engaged in 240, 184 and 146, respectively, such
transactions aggregating approximately $20.2 billion, $11.7 billion and $10.4
billion, respectively. For the fiscal years ended March 31, 1996, 1997 and
1998, the Government Fund engaged
14
<PAGE>
in no, 4 and no, such transactions, respectively, aggregating approximately $0,
$469.0 million and $0, respectively. For the fiscal years ended March 31, 1996,
1997 and 1998 the Treasury Fund engaged in 34, 15 and 7 such transactions,
respectively aggregating approximately $616.5 million, $353.9 million and $48.6
million, respectively.
Prior to the receipt of a separate exemptive order also described below,
the Tax-Exempt Fund could not purchase securities in principal transactions
with Merrill Lynch, although it could purchase tax-exempt securities from
underwriting syndicates of which Merrill Lynch was a member under certain
conditions in accordance with the provisions of a rule adopted under the
Investment Company Act. In 1987, the Commission issued an exemptive order
permitting the Tax-Exempt Fund to conduct principal transactions with Merrill
Lynch in Tax-Exempt Securities with remaining maturities of one year or less.
This order contains a number of conditions, including conditions designed to
insure that the price to the Tax-Exempt Fund from Merrill Lynch is equal to or
better than that available from other sources. Merrill Lynch has informed the
Tax-Exempt Fund that it will in no way, at any time, attempt to influence or
control the activities of the Fund or the Investment Adviser in placing such
principal transactions. The exemptive order allows Merrill Lynch to receive a
dealer spread on any transaction with the Tax-Exempt Fund no greater than its
customary dealer spread for transactions of the type involved. For the fiscal
years ended March 31, 1996, 1997 and 1998, the Tax-Exempt Fund engaged in 19,
31 and 20 principal transactions, respectively, with Merrill Lynch, aggregating
approximately $360.7 million, $773.4 million and $353.7 million, respectively.
The Trustees of each Fund have considered the possibilities of recapturing
for the benefit of the Funds expenses of possible portfolio transactions, such
as dealers' spreads and underwriting commissions, by conducting such portfolio
transactions through affiliated entities, including Merrill Lynch. After
considering all factors deemed relevant, the Trustees made a determination not
to seek such recapture. The Trustees will reconsider this matter from time to
time. The Investment Adviser has arranged for the Funds' custodian to receive
any tender offer solicitation fees on behalf of the Funds payable with respect
to portfolio securities of the Funds.
The Funds do not expect to use one particular dealer, but, subject to
obtaining the best price and execution, dealers who provide supplemental
investment research to the Investment Adviser may receive orders for
transactions by the Funds. Information so received will be in addition to and
not in lieu of the services required to be performed by the Investment Adviser
under its Investment Advisory Agreement and the expenses of the Investment
Adviser will not necessarily be reduced as a result of the receipt of such
supplemental information.
DETERMINATION OF NET ASSET VALUE
Money Market Fund, Government Fund and Treasury Fund
The net asset value of the Money Market Fund, the Government Fund and the
Treasury Fund is determined by the Investment Adviser at 12:00 noon, New York
time, on each business day during which the NYSE or New York banks are open for
business, immediately after the daily declaration of dividends. As a result of
this procedure, the net asset value is determined each business day except for
days on which both the NYSE and New York banks are closed. Both the NYSE and New
York banks are closed for New Year's Day, Martin Luther King, Jr. Day,
Presidents Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. The net asset value per share of the Money Market Fund, the
Government Fund and the Treasury Fund is determined under the "penny rounding"
method by adding the value of all securities and other assets in each Fund's
portfolio, deducting such Fund's liabilities, dividing by the number of shares
of the Fund outstanding and rounding the result to the nearest whole cent. It is
anticipated that the net asset value per share of each Fund will remain constant
at $1.00 per share, but no assurance can be offered in this regard. Securities
with remaining maturities of greater than 60 days for which market quotations
are readily available will be valued at market value. Securities
15
<PAGE>
with remaining maturities of 60 days or less will be valued on an amortized cost
basis. Other securities held by the Money Market Fund, the Government Fund and
the Treasury Fund will be valued at their fair value as determined in good faith
by or under direction of the Board of Trustees.
Tax-Exempt Fund
The net asset value of the Tax-Exempt Fund for the purpose of pricing
orders for the purchase and redemption of shares is determined by the
Investment Adviser at 12:00 noon, New York time, on each day the NYSE or New
York banks are open for business, immediately after the daily declaration of
dividends. As a result of this procedure, the net asset value is determined
each day except for days on which both the NYSE and New York banks are closed.
Both the NYSE and New York banks are closed on New Year's Day, Martin Luther
King, Jr. Day, Presidents Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. The net asset value is determined by adding
the value of all securities and other assets in the portfolio, deducting its
liabilities and dividing by the number of shares outstanding. It is anticipated
that the net asset value per share of the Tax-Exempt Fund will remain constant
at $1.00 per share, but no assurance can be offered in this regard.
The Tax-Exempt Fund values its portfolio securities based upon their
amortized cost in accordance with the terms of a rule adopted by the
Commission. This involves valuing an instrument at its cost and thereafter
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. While this method provides certainty in valuation, it may
result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Tax-Exempt Fund would receive if it sold the
instrument.
----------------
In accordance with the Commission regulations applicable to the valuation
of portfolio securities, the Funds will maintain a dollar-weighted average
portfolio maturity of 90 days or less and will purchase instruments having
remaining maturities of not more than 397 days (13 months),with the exception
of U.S. Government and U.S. Government agency securities, which may have
remaining maturities of up to 762 days (25 months). The Funds will invest only
in securities determined by the Trustees to be of high quality with minimal
credit risks. In addition, the Trustees have established procedures designed to
stabilize, to the extent reasonably possible, each Fund's price per share as
computed for the purpose of sales and redemptions at $1.00. Deviations of more
than an insignificant amount between the net asset value calculated using
market quotations and that calculated on a "penny rounded" basis or, in the
case of the Tax-Exempt Fund, an amortized cost basis, will be reported to the
Trustees of the Fund by the Investment Adviser. In the event the Trustees
determine that a deviation exists with respect to any Fund that may result in
material dilution or other unfair results to investors or existing shareholders
of that Fund, the Fund will take such corrective action as it regards necessary
and appropriate, including the reduction of the number of outstanding shares of
the Fund by having each shareholder proportionately contribute shares to the
Fund's capital; the sale of portfolio instruments prior to maturity to realize
capital gains or losses or to shorten average portfolio maturity; withholding
dividends; or establishing a net asset value per share solely by using
available market quotations. If the number of outstanding shares is reduced in
order to maintain a constant net asset value of $1.00 per share, the
shareholders will contribute proportionately to the Fund's capital. Each
shareholder will be deemed to have agreed to such contribution by such
shareholder's investment in such Fund.
Since the net income of the Funds is determined and declared as a dividend
immediately prior to each time the net asset value of each Fund is determined,
the net asset value per share of the Funds normally remains at $1.00 per share
immediately after each such dividend declaration. Any increase in the value of
a shareholder's investment in a Fund, representing the reinvestment of dividend
income, is reflected by an increase in the number
16
<PAGE>
of shares of the Fund in the account and any decrease in the value of a
shareholder's investment may be reflected by a decrease in the number of shares
in the account. See "Taxes" below.
YIELD INFORMATION
Each Fund normally computes its annualized yield by determining the net
income for a seven-day base period for a hypothetical pre-existing account
having a balance of one share at the beginning of the base period, dividing the
net income by the net asset value of the account at the beginning of the base
period to obtain the base period return, multiplying the result by 365 and then
dividing by seven. Under this calculation, the yield on the Money Market Fund,
the Government Fund and the Treasury Fund shares reflects, and the yield on the
Tax-Exempt Fund does not reflect, realized gains and losses on portfolio
securities. In accordance with regulations adopted by the Commission, each Fund
is required to disclose its annualized yield for certain seven-day periods in a
standardized manner that does not take into consideration any realized or
unrealized gains or losses on portfolio securities. The Commission also permits
the calculation of a standardized effective or compounded yield. This is
computed by compounding the unannualized base period return which is done by
adding one to the base period return, raising the sum to a power equal to 365
divided by seven and subtracting one from the result. In the case of the Money
Market Fund, the Government Fund and the Treasury Fund, this compounded yield
calculation also reflects realized gains or losses on portfolio securities.
Realized gains and losses are not reflected in the compounded yield calculation
of the Tax-Exempt Fund.
The yield on the Funds' shares normally will fluctuate on a daily basis.
Therefore, the yield for any given past period is not an indication or
representation by the Fund of future yields or rates of return on its shares.
The yield is affected by such factors as changes in interest rates on money
market securities (or short-term Tax-Exempt Securities in the case of the
Tax-Exempt Fund), average portfolio maturity, the types and quality of
portfolio securities held and operating expenses. The yield on Government Fund
shares and Treasury Fund shares for various reasons may not be comparable to
the yield on shares of other money market funds or other investments.
TAXES
Federal
The Funds intend to continue to qualify for the special tax treatment
afforded regulated investment companies ("RICs") under the Internal Revenue
Code of 1986, as amended (the "Code"). As long as the Money Market Fund, the
Government Fund, the Treasury Fund or the Tax-Exempt Fund so qualifies, such
Fund (but not its shareholders) will not be subject to Federal income tax on
the part of its net ordinary income and net realized capital gains which it
distributes to shareholders. The Funds intend to distribute substantially all
of such income.
Taxation of Money Market Fund, Government Fund and Treasury Fund Dividends
Dividends paid by the Money Market Fund, the Government Fund and the
Treasury Fund from their ordinary income or from an excess of net short-term
capital gains over net long-term capital losses (together referred to hereafter
as "ordinary income dividends") are taxable to shareholders as ordinary income.
Distributions made from an excess of net long-term capital gains over net
short-term capital losses ("capital gain dividends") are taxable to shareholders
as long-term capital gains, regardless of the length of time the shareholder has
owned the Money Market Fund, the Government Fund or the Treasury Fund shares.
Recent legislation creates additional categories of capital gains taxable at
different rates. Additional legislation eliminates the highest 28% category for
most sales of capital assets occurring after December 31, 1997. Generally not
later than 60 days after the close of their taxable years, the Money Market
Fund, the Government Fund and the Treasury Fund will provide
17
<PAGE>
their respective shareholders with a written notice designating the amounts of
any ordinary income or capital gain dividends as well as the amount of capital
gains in the different categories of capital gain referred to above. Dividends
are taxable to shareholders even though they are reinvested in additional shares
of a Fund.
Taxation of Tax-Exempt Fund Dividends
The Tax-Exempt Fund intends to qualify to pay "exempt-interest dividends"
as defined in Section 852(b)(5) of the Code. Under such section if, at the
close of each quarter of its taxable year, at least 50% of the value of its
total assets consists of obligations exempt from Federal income tax
("tax-exempt obligations") under Section 103(a) of the Code (relating generally
to obligations of a state or local governmental unit), the Tax-Exempt Fund
shall be qualified to pay exempt-interest dividends to its shareholders.
Exempt-interest dividends are dividends or any part thereof paid by the
Tax-Exempt Fund which are attributable to interest on tax-exempt obligations
and designated by the Tax-Exempt Fund as exempt-interest dividends in a written
notice mailed to the Tax-Exempt Fund's shareholders within sixty days after the
close of its taxable year. To the extent that the dividends distributed to the
Tax-Exempt Fund's shareholders are derived from interest income exempt from
Federal income tax under Code Section 103(a) and are properly designated as
exempt-interest dividends, they will be excludable from a shareholder's gross
income for Federal income tax purposes. Exempt-interest dividends are included,
however, in determining the portion, if any, of a person's social security and
railroad retirement benefits subject to Federal income taxes. Interest on
indebtedness incurred or continued to purchase or carry shares of a RIC paying
exempt-interest dividends, such as the Tax-Exempt Fund, will not be deductible
by the investor for Federal income tax purposes to the extent attributable to
exempt-interest dividends. Shareholders are advised to consult their tax
advisers with respect to whether exempt-interest dividends retain the exclusion
under Code Section 103(a) if a shareholder would be treated as a "substantial
user" or "related person" under Code Section 147(a) with respect to property
financed with the proceeds of an issue of "industrial development bonds" or
"private activity bonds", if any, held by the Tax-Exempt Fund.
To the extent that the Tax-Exempt Fund's distributions are derived from
interest on its taxable investments or from an excess of net short-term capital
gains over net long-term capital losses ("ordinary income dividends"), such
distributions are considered ordinary income for Federal income tax purposes.
Distributions, if any, from an excess of net long-term capital gains over net
short-term capital losses derived from the sale of securities ("capital gain
dividends") are taxable as long-term capital gains for Federal income tax
purposes, regardless of the length of time the shareholder has owned Tax-Exempt
Fund shares. New legislation affects the taxation of capital gains, as discussed
above. All or a portion of the Tax-Exempt Fund's gain from the sale or
redemption of tax-exempt obligations purchased at a market discount will be
treated as ordinary income rather than capital gain. This rule may increase the
amount of ordinary income dividends received by shareholders. Any loss upon the
sale or exchange of Tax-Exempt Fund shares held for six months or less will be
disallowed to the extent of any exempt-interest dividends received by the
shareholder. In addition, any such loss that is not disallowed under the rule
stated above will be treated as long-term capital loss to the extent of any
capital gain dividends received by the shareholder.
The Code subjects interest received on certain otherwise tax-exempt
securities to an alternative minimum tax. The alternative minimum tax applies
to interest received on "private activity bonds" issued after August 7, 1986.
Private activity bonds are bonds which, although tax exempt, are used for
purposes other than those generally performed by governmental units and which
benefit non-governmental entities (e.g., bonds used for industrial development
or housing purposes). Income received on such bonds is classified as an item of
"tax preference", which could subject certain investors in such bonds,
including shareholders of the Tax-Exempt Fund, to an alternative minimum tax.
The Tax-Exempt Fund will purchase such "private activity bonds" and will report
to shareholders
18
<PAGE>
within 60 days after its taxable year-end the portion of the Tax-Exempt Fund's
dividends declared during the year which constitutes an item of tax preference
for alternative minimum tax purposes. The Code further provides that
corporations are subject to an alternative minimum tax based, in part, on
certain differences between taxable income as adjusted for other tax preferences
and the corporation's "adjusted current earnings", which more closely reflect a
corporation's economic income. Because an exempt-interest dividend paid by the
Tax-Exempt Fund will be included in adjusted current earnings, a corporate
shareholder may be required to pay alternative minimum tax on exempt-interest
dividends paid by the Tax-Exempt Fund.
The Code provides that every shareholder required to file a tax return
must include for information purposes on such return the amount of
exempt-interest dividends received from all sources (including the Tax-Exempt
Fund) during the taxable year.
General Taxation
If the Money Market Fund, the Government Fund, the Treasury Fund or the
Tax-Exempt Fund pays a dividend in January which was declared in the previous
October, November or December to shareholders of record on a specified date in
one of such months, then such dividend will be treated for tax purposes as
being paid by such Fund and received by its shareholders on December 31 of the
year in which such dividend was declared. Distributions by the Funds, whether
from exempt-interest income, ordinary income or capital gains, will not be
eligible for the dividends received deduction allowed to corporations under the
Code. Distributions in excess of a Fund's earnings and profits will first
reduce the adjusted tax basis of a holder's shares and, after such adjusted tax
basis is reduced to zero, will constitute capital gains to such holder
(assuming the shares are held as a capital asset). Any loss upon the sale or
exchange of Fund shares held for six months or less will be treated as
long-term capital loss to the extent of any capital gain dividends received by
the shareholder.
If the value of assets held by the Money Market Fund, the Government Fund,
the Treasury Fund or the Tax-Exempt Fund declines, the Board of Trustees may
authorize a reduction in the number of outstanding shares in the respective
shareholders' accounts so as to preserve a net asset value of $1.00 per share.
After such a reduction, the basis of eliminated shares would be added to the
basis of shareholders' remaining Fund shares, and any shareholders disposing of
shares at that time may recognize a capital loss. Distributions paid by the
Money Market Fund, the Government Fund and the Treasury Fund, including
distributions reinvested in additional shares of an affected Fund, will
nonetheless be fully taxable, even if the number of shares in shareholders'
accounts has been reduced as described above.
Ordinary income dividends paid to shareholders who are nonresident aliens
or foreign entities will be subject to a 30% United States withholding tax
under existing provisions of the Code applicable to foreign individuals and
entities unless a reduced rate of withholding or a withholding exemption is
provided under applicable treaty law. Nonresident shareholders are urged to
consult their own tax advisers concerning the applicability of the United
States withholding tax.
Dividends and interest received by a Fund may give rise to withholding and
other taxes imposed by foreign countries. Tax conventions between certain
countries and the United States may reduce or eliminate such taxes.
Under certain Code provisions, some shareholders may be subject to a 31%
withholding tax on certain ordinary income dividends and on capital gain
dividends and redemption payments ("backup withholding"). Generally,
shareholders subject to backup withholding will be those for whom no certified
taxpayer identification number is on file with a Fund or who, to such Fund's
knowledge, have furnished an incorrect number. When establishing an account, an
investor must certify under penalty of perjury that such number is correct and
that such investor is not otherwise subject to backup withholding.
19
<PAGE>
The Code requires a RIC to pay a nondeductible 4% excise tax to the extent
the RIC does not distribute, during each calendar year, 98% of its ordinary
income, determined on a calendar year basis, and 98% of its capital gains,
determined, in general, on an October 31 year-end, plus certain undistributed
amounts from previous years. The required distributions, however, are based only
on the taxable income of a RIC. The excise tax, therefore, will generally not
apply to the tax-exempt income of a fund, such as the Tax-Exempt Fund, that pays
exempt-interest dividends. Although the Money Market Fund, the Government Fund
and the Treasury Fund intend to distribute their income and capital gains in the
manner necessary to minimize imposition of the 4% excise tax, there can be no
assurance that sufficient amounts of each Fund's taxable ordinary income and
capital gains will be distributed to avoid entirely the imposition of the tax.
In such event, any such Fund will be liable for the tax only on the amount by
which it does not meet the foregoing distribution requirements.
A loss realized on a sale or exchange of shares of any of the Funds will
be disallowed if other shares of such Fund are acquired (whether through the
automatic reinvestment of dividends or otherwise) within a 61-day period
beginning 30 days before and ending 30 days after the date that the shares are
disposed of. In such a case, the basis of the shares acquired will be adjusted
to reflect the disallowed loss.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury Regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections
and the Treasury Regulations promulgated thereunder. The Code and the Treasury
Regulations are subject to change by legislative, judicial or administrative
action either prospectively or retroactively.
Ordinary income dividends and capital gain dividends may also be subject
to state and local taxes. Certain states exempt from state income taxation
dividends paid by RICs which are derived in whole or in part from interest on
U.S. Government obligations. State law varies as to whether and what percentage
of dividend income attributable to U.S. Government obligations is exempt from
state income tax.
Shareholders are urged to consult their tax advisers regarding specific
questions as to Federal, foreign, state or local taxes. Foreign investors
should consider applicable foreign taxes in their evaluation of an investment
in the Funds.
GENERAL INFORMATION
Description of Shares
The Declaration of Trust of each Fund permits the Trustees to issue an
unlimited number of full and fractional shares of a single class and to divide
or combine the shares into a greater or lesser number of shares without thereby
changing the proportionate beneficial interest in the Fund. Each share
represents an equal proportionate interest in the Fund with each other share.
Upon liquidation of the Fund, shareholders are entitled to share pro rata in
the net assets of the Fund available for distribution to shareholders. Shares
have no preemptive or conversion rights. The rights of redemption and exchange
are described elsewhere herein and in the Prospectuses of the Funds. Shares of
each Fund are fully paid and non-assessable by the Fund.
Shareholders are entitled to one vote for each full share held and
fractional votes for fractional shares held in the election of Trustees and on
other matters submitted to the vote of shareholders. Voting rights are not
cumulative, so that the holders of more than 50% of the shares voting in the
election of Trustees can, if they choose to do so, elect all of the Trustees of
a Fund, in which event the holders of the remaining shares are unable to elect
any person as a Trustee. No amendment may be made to any Declaration of Trust
without the affirmative vote of a majority of the outstanding shares of the
related Fund except under certain limited circumstances set forth in the
Declaration of Trust.
20
<PAGE>
Custodian
State Street Bank and Trust Company, P.O. Box 1713, Boston, Massachusetts
02101 (the "Custodian"), acts as Custodian of the Funds' assets. The Custodian
is responsible for safeguarding and controlling the Funds' cash and securities,
handling the receipt and delivery of securities and collecting interest on the
Funds' investments.
Transfer Agent
Merrill Lynch Financial Data Services, Inc., 4800 Deer Lake Drive East,
Jacksonville, Florida 32246-6484 (the "Transfer Agent"), acts as the Funds'
transfer agent. The Transfer Agent is responsible for the issuance, transfer
and redemption of shares and the opening, maintenance and servicing of
shareholder accounts.
Independent Auditors
Deloitte & Touche LLP, 117 Campus Drive, Princeton, New Jersey 08540, has
been selected as the independent auditors of each Fund. The selection of
independent auditors is subject to ratification by the shareholders of the
Funds. The independent auditors are responsible for auditing the annual
financial statements of the Funds.
Legal Counsel
Brown & Wood LLP, One World Trade Center, New York, New York 10048-0557,
is counsel for the Funds.
Report to Shareholders
The fiscal year of each Fund ends on the last day of March of each year.
Each Fund will send to its shareholders at least semi-annually reports showing
its portfolio and other information. An annual report containing financial
statements audited by independent auditors is sent to the shareholders each
year.
Only one copy of each shareholder report and certain shareholder
communications will be mailed to each identified shareholder regardless of the
number of accounts such shareholder has. If a shareholder wishes to receive
separate copies of each report and communication for each of the shareholder's
related accounts the shareholder should notify in writing:
Merrill Lynch Financial Data Services, Inc.
P.O. Box 45290
Jacksonville, FL 32232-5290
The written notification should include the shareholder's name, address,
tax identification number and Merrill Lynch and/or mutual fund account numbers.
If you have any questions regarding this please call your Merrill Lynch
Financial Consultant or Merrill Lynch Financial Data Services, Inc. at (800)
221-7210.
Additional Information
The Prospectus and this Statement of Additional Information do not contain
all of the information set forth in the Registration Statements and the
exhibits relating thereto, which each Fund has filed with the Commission,
Washington, D.C., under the Securities Act of 1933, as amended, and the
Investment Company Act, to which reference is hereby made.
21
<PAGE>
The Declarations of Trust establishing the Funds refer to the Trustees
under the Declarations of Trust collectively as Trustees, but not as
individuals or personally; and no Trustee, shareholder, officer, employee or
agent of any of the Funds shall be held to any personal liability, nor shall
resort be had to their private property for the satisfaction of any obligation
or claim of any Fund but the Trust Property only shall be liable. Copies of the
Declarations of Trust, together with all amendments thereto, are on file in the
office of the Secretary of the Commonwealth of Massachusetts.
To the knowledge of the Funds, no person owned beneficially 5% or more of
any Fund's shares on May 31, 1998.
22
<PAGE>
APPENDIX
Description of Commercial Paper, Bank Money Market
Instruments and Corporate Bond Ratings
Commercial Paper and Bank Money Market Instruments
Commercial paper with the greatest capacity for timely payment is rated A
by Standard & Poor's Ratings Services ("Standard & Poor's"). Issues within this
category are further redefined with designations 1, 2 and 3 to indicate the
relative degree of safety; A-1, the highest of the three, indicates the degree
of safety is either overwhelming or very strong; A-2 indicates that capacity
for timely repayment is strong; and A-3 indicates that the capacity for timely
repayment is adequate, but adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity of the obligor to
meet its financial commitment on the obligation.
Moody's Investors Service, Inc. ("Moody's") employs the designations of
Prime-1, Prime-2 and Prime-3 to indicate the relative repayment ability of
rated issuers. Prime-1 issuers have a superior capacity for repayment. Prime-2
issuers have a strong capacity for repayment, but to a lesser degree than
Prime-1. Prime-3 issuers have an acceptable capacity for repayment.
Fitch IBCA, Inc. ("Fitch") employs the rating F-1+ to indicate issues
regarded as having the strongest degree of assurance for timely payment. The
rating F-1 reflects an assurance of timely payment only slightly less in degree
than issues rated F-1+. While the rating F-2 indicates a satisfactory degree of
assurance for timely payment, although the margin of safety is not as great as
indicated by F-1+ and F-1 ratings.
Duff & Phelps Credit Ratings Co. ("Duff & Phelps") employs the designation
of Duff 1 with respect to top grade commercial paper and bank money
instruments. Duff 1+ indicates the highest certainty of timely payment:
short-term liquidity is outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations. Duff 1- indicates high certainty of timely
payment. Duff 2 indicates good certainty of timely payment: liquidity factors
and company fundamentals are sound.
Thomson BankWatch, Inc. ("Thomson") employs the designation TBW-1, TBW-2,
TBW-3 and TBW-4 as ratings for commercial paper, other senior short-term
obligations and deposit obligations of the entities to which the rating has
been assigned. TBW-1 is the highest category and indicates a very high degree
of likelihood that principal and interest will be paid on a timely basis. TBW-2
is the second highest category and indicates that while the degree of safety
regarding timely repayment of principal and payment of interest is strong, the
relative degree of safety is not as high as for issues rated TBW-1.
Corporate Bonds
Bonds rated AAA have the highest rating assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong. Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest-rated issues only in small degree. The
ratings from AA to B may be modified by the addition of a plus or minus sign to
show relative standing within the major rating categories.
Bonds which are rated Aaa by Moody's are judged to be of the best quality.
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. Bonds rated Aa are judged to be of high quality by all
standards. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond
23
<PAGE>
rating system. The modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the lower end of
its generic rating category.
Bonds rated AAA by Fitch are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events. Bonds rated AA are considered to be investment grade and of
very high credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds rated AAA.
Bonds rated AAA by Duff & Phelps are deemed to be of the highest credit
quality: the risk factors are negligible, being only slightly more than for
risk-free U.S. Treasury debt. AA indicates high credit quality: protection
factors are strong, and risk is modest but may vary slightly from time to time
because of economic conditions.
Bonds rated AAA by Thomson are accorded the highest rating category which
indicates that the ability to repay principal and pay interest on a timely
basis is extremely high. AA is the second highest rating category and indicates
a very strong ability to repay principal and pay interest on a timely basis
with limited incremental risk compared to issues rated in the highest rating
category.
Information Concerning Tax-Exempt Securities
Description of Tax-Exempt Securities
Tax-Exempt Securities include debt obligations issued to obtain funds for
various public purposes, including construction of a wide range of public
facilities, refunding of outstanding obligations and obtaining of funds for
general operating expenses and loans to other public institutions and
facilities. In addition, certain types of industrial development bonds are
issued by or on behalf of public authorities to finance various facilities
operated for private profit, including pollution control facilities. Such
obligations are included within the term Tax-Exempt Securities if the interest
paid thereon is exempt from Federal income tax.
The two principal classifications of Tax-Exempt Securities are "general
obligation" bonds and "revenue" or "special obligation" bonds. General
obligation bonds are secured by the issuer's pledge of its faith, credit, and
taxing power for the repayment of principal and the payment of interest. Revenue
or special obligation bonds are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or other specific revenue source such as from the user
of the facility being financed. Industrial development bonds are in most cases
revenue bonds and do not generally constitute the pledge of the credit or taxing
power of the issuer of such bonds. The repayment of the principal and the
payment of interest on such industrial revenue bonds depends solely on the
ability of the user of the facilities financed by the bonds to meet its
financial obligations and the pledge, if any, of real and personal property so
financed as security for such payment. The portfolio may generally include
"moral obligation" bonds which are normally issued by special purpose public
authorities. If an issuer of moral obligations bonds is unable to meet its debt
service obligations from current revenues, it may draw on a reserve fund, the
restoration of which is a moral commitment but not a legal obligation of the
state or municipality which created the issuer.
Yields on Tax-Exempt Securities are dependent on a variety of factors,
including the general condition of the money market and of the municipal bond
market, the size of a particular offering, the maturity of the obligation, and
the rating of the issue. The ability of the Tax-Exempt Fund to achieve its
investment objective is also dependent on the continuing ability of the issuers
of the Tax-Exempt Securities in which the Tax-Exempt Fund invests to meet their
obligations for the payment of interest and repayment of principal when due.
There are variations in
24
<PAGE>
the risks involved in holding Tax-Exempt Securities, both within a particular
classification and between classifications, depending on numerous factors.
Furthermore, the rights of holders of Tax-Exempt Securities and the obligations
of the issuers of such Tax-Exempt Securities may be subject to applicable
bankruptcy, insolvency and similar laws and court decisions affecting the rights
of creditors generally, and such laws, if any, which may be enacted by Congress
or state legislatures affecting specifically the rights of holders of Tax-Exempt
Securities.
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the Federal income tax exemption for
interest on Tax-Exempt Securities. Similar proposals may be introduced in the
future. If such a proposal were enacted, the ability of the Tax-Exempt Fund to
pay "exempt-interest dividends" would be adversely affected and the Tax-Exempt
Fund would re-evaluate its investment objective and policies and consider
changes in its structure. See "Taxes".
Ratings of Municipal Notes and Short-Term Tax-Exempt Commercial Paper
Commercial paper with the greatest capacity for timely payment is rated A
by Standard & Poor's. Issues within this category are further redefined with
designations 1, 2 and 3 to indicate the relative degree of safety; A-1
indicates the degree of safety is strong; issues that possess extremely strong
safety characteristics will be given an A-1+ designation; A-2 indicates that
capacity for timely repayment is satisfactory. A Standard & Poor's rating with
respect to certain municipal note issues with a maturity of less than three
years reflects the liquidity concerns and market access risks unique to notes.
SP-1, the highest note rating, indicates a very strong, or strong, capacity to
repay principal and pay interest. Issues that possess overwhelming safety
characteristics will be given an "SP-1+" designation. SP-2, the second highest
note rating, indicates a satisfactory capacity to repay principal and pay
interest.
Moody's employs the designations of Prime-1, Prime-2 and Prime-3 with
respect to commercial paper to indicate the relative capacity of the rated
issuers (or related supporting institutions) to repay punctually. Prime-1
issues have a superior capacity for repayment. Prime-2 issues have a strong
capacity for repayment, but to a lesser degree than Prime-1. Moody's highest
rating for short-term notes and VRDOs is MIG-1/VMIG-1; MIG-1/VMIG-1 denotes
"best quality", enjoying "strong protection by established cash flows";
MIG-2/VMIG-2 denotes "high quality" with margins of protection that are ample
although not so large as MIG-1/VMIG-1.
Fitch employs the rating F-1+ to indicate short-term debt issues regarded
as having the strongest degree of assurance for timely payment. The rating F-1
reflects an assurance of timely payment only slightly less in degree than
issues rated F-1+. The rating F-2 indicates a satisfactory degree of assurance
for timely payment, although the margin of safety is not as great as indicated
by the F-1+ and F-1 categories.
Ratings of Municipal Bonds
Bonds rated AAA have the highest rating assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong. Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in a small degree. A
Standard & Poor's municipal debt rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors and insurers
of lessees.
Bonds rated Aaa by Moody's are judged to be of the best quality. Interest
payments are protected by a large or by an exceptionally stable margin and
principal is secure. Bonds rated Aa are judged to be of high quality by all
standards. They are rated lower than the best bonds because the margins of
protection may not be as large or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities. Moody's applies
the numerical modifier
25
<PAGE>
1 to the classifications Aa through B to indicate that Moody's believes the
issue possesses the strongest investment attributes in its rating category.
Bonds for which the security depends upon the completion of some act or the
fulfillment of some condition are rated conditionally. These are bonds secured
by (a) earnings of projects under construction, (b) earnings of projects
unseasoned in operating experience, (c) rentals which begin when facilities are
completed, or (d) payments to which some other limiting condition attaches.
Parenthetical rating denotes probable credit stature upon completion of
construction or elimination of basis of condition.
Bonds rated AAA by Fitch are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events. Bonds rated AA are considered to be investment grade and of
very high credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds rated AAA. The
ratings take into consideration special features of the issue, its relationship
to other obligations of the issuer, the current and prospective financial
condition and operative performance of the issuer and of any guarantor, as well
as the economic and political environment that might affect the issuer's future
financial strength and credit quality. Bonds that have the same rating are of
similar but not necessarily identical credit quality since the rating
categories do not fully reflect small differences in the degrees of credit
risk.
26
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
CMA Money Fund:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of CMA Money Fund as of March 31, 1998, 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 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 March
31, 1998 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 CMA Money Fund as
of March 31, 1998, 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
May 8, 1998
27
<PAGE>
- --------------------------------------------------------------------------------
CMA MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 (IN THOUSANDS)
- --------------------------------------------------------------------------------
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
- -------------------------------------------------------------
Bank Notes--4.7%
- -------------------------------------------------------------
American Express $ 50,000 5.644+% 12/04/98 $ 50,000
Centurion Bank 25,000 5.646+ 1/04/99 25,000
25,000 5.648+ 1/05/99 25,000
50,000 5.638+ 3/16/99 50,000
- -------------------------------------------------------------
The Bank of New York 20,500 6.10 5/22/98 20,506
99,000 6.00 6/11/98 99,021
64,000 5.94 6/30/98 64,011
95,000 5.85 8/20/98 94,998
- -------------------------------------------------------------
BankBoston N.A. 50,000 5.56 4/08/98 49,999
100,000 5.62+ 1/11/99 99,970
- -------------------------------------------------------------
Comerica Bank, Detroit 100,000 5.582+ 2/02/99 99,967
- -------------------------------------------------------------
FCC National Bank 50,000 5.70 1/07/99 49,942
50,000 5.55+ 2/23/99 49,969
- -------------------------------------------------------------
First National Bank of 80,000 5.52 2/16/99 79,768
Chicago 120,000 5.55+ 2/23/99 119,926
54,000 5.63 3/16/99 53,889
- -------------------------------------------------------------
First Tennessee Bank 20,000 6.08 6/05/98 20,006
N.A., Memphis 50,000 5.505+ 2/09/99 49,961
- -------------------------------------------------------------
Harris Trust & Savings 50,000 5.54 4/22/98 50,000
- -------------------------------------------------------------
Huntington National 100,000 5.574+ 1/20/99 99,960
Bank (Columbus)
- -------------------------------------------------------------
KeyBank N.A. 75,000 5.62+ 5/06/98 74,997
25,000 5.60+ 8/20/98 24,993
- -------------------------------------------------------------
KeyBank of New York 100,000 5.60+ 6/26/98 99,984
- -------------------------------------------------------------
LaSalle National Bank, 25,000 5.79 7/31/98 24,995
Chicago 25,000 5.81 7/31/98 24,996
- -------------------------------------------------------------
Morgan Guaranty 89,000 5.955 6/22/98 89,014
Trust Co. of NY
- -------------------------------------------------------------
NationsBank N.A. 50,000 5.51 4/14/98 49,998
50,000 5.68+ 1/08/99 50,000
- -------------------------------------------------------------
Northern Trust Company 70,000 5.96 6/17/98 70,011
- -------------------------------------------------------------
PNC Bank N.A. 150,000 5.60+ 10/01/98 149,949
- -------------------------------------------------------------
SouthTrust Bank N.A. 50,000 5.58+ 3/25/99 49,981
- -------------------------------------------------------------
Sun Trust Co. Bank, 100,000 5.80 7/24/98 99,982
Atlanta
- -------------------------------------------------------------
US Bank N.A. 94,000 5.583+ 8/28/98 93,979
100,000 5.578+ 9/16/98 99,973
100,000 5.558+ 11/16/98 99,954
- -------------------------------------------------------------
US National Bank of 55,000 5.665+ 4/14/98 54,999
Oregon
- -------------------------------------------------------------
Total Bank Notes (Cost--$2,409,821) 2,409,698
- -------------------------------------------------------------
Certificates of Deposit--2.0%
- -------------------------------------------------------------
Bank of America 50,000 5.93 6/24/98 50,006
N.T. & S.A. 50,000 5.82 7/17/98 49,994
- -------------------------------------------------------------
Chase Manhattan Bank, 24,500 5.59 6/10/98 24,499
USA, N.A. 50,000 5.87 7/21/98 50,004
- -------------------------------------------------------------
CoreStates Bank N.A. 50,000 5.638 6/26/98 49,998
50,000 5.625 10/16/98 49,994
50,000 5.638 12/10/98 49,997
25,000 5.638 12/18/98 24,998
- -------------------------------------------------------------
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
- -------------------------------------------------------------
Certificates of Deposit (concluded)
- -------------------------------------------------------------
Harris Trust & $ 50,000 5.54 % 4/13/98 $ 50,000
Savings
- -------------------------------------------------------------
Morgan Guaranty 325,000 5.80 7/28/98 324,966
Trust Co. of NY
- -------------------------------------------------------------
National City Bank, 50,000 5.578+ 2/05/99 49,979
Ohio 50,000 5.578+ 3/08/99 49,977
- -------------------------------------------------------------
National City Bank, 25,000 5.578+ 2/05/99 24,990
Indiana
- -------------------------------------------------------------
National City Bank, 25,000 5.574 1/20/99 24,990
Kentucky
- -------------------------------------------------------------
NationsBank N.A. 129,000 5.55 2/09/99 128,683
21,000 5.55 2/10/99 20,948
- -------------------------------------------------------------
Total Certificates of Deposit (Cost--$1,024,309) 1,024,023
- -------------------------------------------------------------
Certificates of Deposit--European--1.1%
- -------------------------------------------------------------
ABN AMRO Bank 100,000 5.55 4/09/98 100,000
N.V., London
- -------------------------------------------------------------
Abbey National 100,000 5.753 3/30/99 99,916
Treasury Services
PLC, London
- -------------------------------------------------------------
Banco de Santander, 25,000 5.56 4/15/98 25,000
S.A., London 50,000 5.57 4/17/98 50,000
- -------------------------------------------------------------
Bank Brussels Lambert, 25,000 5.53 4/02/98 25,000
London
- -------------------------------------------------------------
Bank of Scotland, 50,000 5.905 8/18/98 50,015
London
- -------------------------------------------------------------
Barclays Bank PLC, 45,000 6.08 6/15/98 45,018
London
- -------------------------------------------------------------
Lloyds Bank PLC, London 15,000 5.91 9/04/98 15,004
- -------------------------------------------------------------
NationsBank N.A., 50,000 5.54 11/09/98 49,950
London
- -------------------------------------------------------------
Rabobank Nederland, 20,000 5.88 7/13/98 20,002
N.V., London
- -------------------------------------------------------------
Societe Generale, London33,000 5.53 6/25/98 32,992
- -------------------------------------------------------------
Sudwestdeutsche 25,000 5.56 4/14/98 24,999
Landesbank Girozentrale,20,000 5.56 6/23/98 19,997
London
- -------------------------------------------------------------
Total Certificates of Deposit--European
(Cost--$558,018) 557,893
- -------------------------------------------------------------
Certificates of Deposit--Yankee--7.5%
- -------------------------------------------------------------
ABN AMRO Bank 209,000 5.77 7/28/98 208,958
N.V., Chicago
- -------------------------------------------------------------
ABN AMRO Bank 25,000 6.03 6/11/98 25,007
N.V., NY 30,000 5.93 6/19/98 30,004
90,000 5.69 3/05/99 89,876
- -------------------------------------------------------------
Australia & New 40,000 5.52 4/20/98 39,999
Zealand Banking
Group Ltd., NY
- -------------------------------------------------------------
Banque Nationale 125,000 5.58 4/06/98 125,000
de Paris, San Francisco 50,000 5.57 4/09/98 50,000
25,000 5.57 4/16/98 25,000
- -------------------------------------------------------------
28
<PAGE>
- --------------------------------------------------------------------------------
CMA MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 (CONTINUED) (IN THOUSANDS)
- --------------------------------------------------------------------------------
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
- -------------------------------------------------------------
Certificates of Deposit--Yankee (concluded)
- -------------------------------------------------------------
Barclays Bank PLC, NY $ 55,000 5.94 % 6/30/98 $ 55,010
50,000 5.56 2/25/99 49,882
250,000 5.645 3/02/99 249,554
50,000 5.635 3/12/99 49,908
- -------------------------------------------------------------
Bayerische Hypotheken- 100,000 5.73 10/09/98 99,950
und Wechsel-Bank, NY 86,000 5.72 10/13/98 85,952
64,000 5.65 2/26/99 63,899
- -------------------------------------------------------------
Bayerische 100,000 6.20 4/21/98 100,020
Landesbank 76,000 5.86 7/17/98 76,003
Girozentrale, NY 124,000 5.528+ 3/23/99 123,875
- -------------------------------------------------------------
Bayerische Vereinsbank 80,000 5.70 10/06/98 79,948
AG, NY 45,000 5.71 10/06/98 44,973
161,000 5.70 1/07/99 160,873
14,000 5.60 2/02/99 13,971
- -------------------------------------------------------------
Canadian Imperial 100,000 5.79 10/06/98 99,979
Bank of Commerce, NY 50,000 5.55 2/10/99 49,877
50,000 5.635 3/02/99 49,906
- -------------------------------------------------------------
Credit Suisse First 100,000 6.265 4/08/98 100,009
Boston, NY 30,000 5.71 3/11/99 29,965
- -------------------------------------------------------------
Deutsche Bank AG, NY 11,000 6.20 4/08/98 11,001
50,000 5.50 4/13/98 49,998
115,000 5.95 6/16/98 115,018
85,000 5.71 10/07/98 84,949
80,000 5.62 2/26/99 79,853
20,000 5.65 3/01/99 19,965
- -------------------------------------------------------------
Generale Bank, NY 50,000 5.58 4/09/98 50,000
- -------------------------------------------------------------
Landesbank 30,000 6.00 6/09/98 30,007
Hessen Thuringen 50,000 6.03 6/10/98 50,014
Girozentrale, NY
- -------------------------------------------------------------
Norddeutsche 70,000 5.572 2/02/99 69,971
Landesbank 30,000 5.68 3/05/99 29,956
Girozentrale AG, NY
- -------------------------------------------------------------
Rabobank Nederland 25,000 6.00 6/10/98 25,006
N.V., NY 25,000 5.87 8/17/98 25,003
86,200 5.62 3/16/99 86,031
- -------------------------------------------------------------
Royal Bank of Canada, 50,000 6.14 5/12/98 50,013
NY 37,000 5.78 7/31/98 36,994
50,000 5.80 10/06/98 49,992
25,000 5.555 2/11/99 24,940
88,000 5.54 2/12/99 87,777
- -------------------------------------------------------------
Swiss Bank Corp., NY 275,000 6.00 6/12/98 275,065
38,000 5.95 7/02/98 38,009
50,000 5.86 7/17/98 50,002
25,000 5.80 9/22/98 24,997
- -------------------------------------------------------------
Westdeutsche 150,000 5.56 4/20/98 150,000
Landesbank 133,000 5.94 6/29/98 133,024
Girozentrale, NY
- -------------------------------------------------------------
Total Certificates of Deposit--Yankee
(Cost--$3,826,398) 3,824,983
- -------------------------------------------------------------
Commercial Paper--46.1%
- -------------------------------------------------------------
AESOP Funding Corp. 24,700 5.49 4/03/98 24,689
59,800 5.53 5/21/98 59,332
- -------------------------------------------------------------
- -------------------------------------------------------------
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
- -------------------------------------------------------------
Commercial Paper (continued)
- -------------------------------------------------------------
ANZ (Delaware), Inc. $100,000 5.53 % 4/06/98 $ 99,908
- -------------------------------------------------------------
Allomon Funding 29,809 5.47 5/08/98 29,633
Corporation 20,191 5.47 5/14/98 20,053
- -------------------------------------------------------------
Alpine Securitization 29,559 5.48 4/07/98 29,527
Corporation 11,098 5.49 4/07/98 11,086
42,402 5.56 4/14/98 42,310
45,000 5.50 4/15/98 44,897
30,769 5.55 4/20/98 30,674
18,000 5.49 4/21/98 17,942
18,746 5.57 4/23/98 18,679
28,000 5.55 4/24/98 27,896
43,129 5.56 4/28/98 42,942
14,410 5.53 5/07/98 14,327
18,887 5.55 5/07/98 18,779
- -------------------------------------------------------------
American Express 200,000 5.52 4/17/98 199,479
Credit Corp. 100,000 5.53 4/23/98 99,647
200,000 5.51 4/27/98 199,170
- -------------------------------------------------------------
American Honda 25,000 5.45 4/16/98 24,938
Finance Corp. 10,000 5.56 5/27/98 9,912
15,000 5.56 5/28/98 14,866
- -------------------------------------------------------------
Apreco, Inc. 25,000 5.50 4/15/98 24,942
25,000 5.48 4/16/98 24,938
25,000 5.47 4/23/98 24,912
- -------------------------------------------------------------
Asset Securitization 145,000 5.53 4/09/98 144,800
Cooperative Corp. 68,000 5.53 4/14/98 67,854
18,002 5.54 4/16/98 17,958
56,998 5.54 4/17/98 56,849
53,000 5.47 4/29/98 52,763
45,000 5.48 4/30/98 44,792
100,000 5.47 5/01/98 99,523
50,000 5.48 5/01/98 49,761
200,000 5.48 5/06/98 198,884
100,000 5.48 5/08/98 99,411
64,000 5.54 5/08/98 63,623
- -------------------------------------------------------------
Associates Corporation 257,187 6.07 4/01/98 257,144
of North America 100,000 5.54 4/14/98 99,784
100,000 5.53 4/16/98 99,754
100,000 5.53 4/17/98 99,739
100,000 5.54 4/21/98 99,677
- -------------------------------------------------------------
Associates First 25,000 5.53 4/16/98 24,938
Capital Corp. 28,000 5.51 5/14/98 27,809
47,000 5.50 6/03/98 46,537
- -------------------------------------------------------------
Atlantic Asset 17,322 5.56 4/13/98 17,287
Securitization Corp. 32,678 5.55 4/15/98 32,602
- -------------------------------------------------------------
Avco Financial 18,000 5.55 4/13/98 17,964
Services, Inc. 25,000 5.54 4/28/98 24,892
19,000 5.55 4/29/98 18,915
- -------------------------------------------------------------
B.B.V. Finance 50,000 5.43 4/08/98 49,938
(Delaware), Inc.
- -------------------------------------------------------------
BBL North America, Inc. 89,500 5.54 4/06/98 89,417
10,500 5.52 5/19/98 10,421
- -------------------------------------------------------------
BIL North America, Inc. 25,000 5.53 4/14/98 24,946
25,000 5.53 4/15/98 24,942
- -------------------------------------------------------------
29
<PAGE>
- --------------------------------------------------------------------------------
CMA MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 (CONTINUED) (IN THOUSANDS)
- --------------------------------------------------------------------------------
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
- -------------------------------------------------------------
Commercial Paper (continued)
- -------------------------------------------------------------
BTR Dunlop Finance, $ 40,000 5.56 % 4/06/98 $ 39,963
Inc. 25,000 5.54 4/20/98 24,923
- -------------------------------------------------------------
Bank Austria Finance, Inc.50,000 5.52 4/13/98 49,900
- -------------------------------------------------------------
Bear Stearns 25,000 5.50 4/09/98 24,965
Companies, Inc. 15,000 5.54 4/23/98 14,947
110,000 5.70 4/29/98 109,508
75,000 5.51 5/08/98 74,558
50,000 5.65 6/17/98 49,400
50,000 5.51 7/07/98 49,249
- -------------------------------------------------------------
Block Financial Corp. 37,000 5.50 4/02/98 36,989
29,000 5.55 4/27/98 28,879
9,000 5.51 6/25/98 8,881
- -------------------------------------------------------------
CIT Group Holdings, 100,000 5.55 4/23/98 99,647
Inc. (The) 137,500 5.58 8/17/98 137,455
220,300 5.59 9/30/98 220,204
190,000 5.64 1/12/99 189,927
129,000 5.57 3/22/99 128,939
- -------------------------------------------------------------
CSW Credit, Inc. 11,700 5.42 4/09/98 11,684
31,000 5.55 4/09/98 30,957
10,000 5.54 4/23/98 9,965
9,954 5.55 4/28/98 9,911
- -------------------------------------------------------------
CXC Incorporated 25,000 5.48 4/01/98 24,996
43,400 5.48 4/02/98 43,387
40,000 5.49 4/02/98 39,988
75,000 5.49 4/03/98 74,966
10,000 5.49 4/09/98 9,986
25,000 5.52 4/14/98 24,946
25,000 5.49 4/16/98 24,938
25,000 5.48 4/21/98 24,919
26,400 5.48 4/22/98 26,311
45,500 5.49 4/28/98 45,304
28,000 5.53 5/08/98 27,837
30,100 5.53 5/12/98 29,904
25,000 5.53 5/14/98 24,831
30,000 5.52 5/19/98 29,773
50,000 5.52 5/20/98 49,615
21,600 5.53 5/21/98 21,430
100,000 5.52 5/28/98 99,106
50,000 5.50 6/18/98 49,392
75,000 5.50 6/22/98 74,042
- -------------------------------------------------------------
Caisse d'Amortissement 100,000 5.53 4/09/98 99,862
de la dette Sociale
- -------------------------------------------------------------
Caisse des Depots et 100,000 5.53 4/06/98 99,908
Consignations 20,000 5.53 4/08/98 19,975
- -------------------------------------------------------------
Cargill, Inc. 50,000 5.54 4/09/98 49,931
- -------------------------------------------------------------
Carnival Corp. 50,000 5.52 4/02/98 49,985
- -------------------------------------------------------------
Carnival (UK) PLC 25,000 5.51 4/07/98 24,973
- -------------------------------------------------------------
Centric Capital Corp. 12,800 5.54 4/06/98 12,788
25,000 5.55 4/09/98 24,965
19,000 5.50 4/14/98 18,959
23,000 5.55 4/14/98 22,950
40,200 5.55 4/20/98 40,076
25,000 5.55 4/22/98 24,915
15,000 5.47 5/04/98 14,921
- -------------------------------------------------------------
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
- -------------------------------------------------------------
Commercial Paper (continued)
- -------------------------------------------------------------
Centric Capital Corp. $ 18,125 5.53 % 5/19/98 $ 17,989
(concluded) 20,000 5.54 5/27/98 19,824
- -------------------------------------------------------------
Chrysler Financial 50,000 5.58 4/13/98 49,899
Corp. 100,000 5.56 4/20/98 99,691
100,000 5.57 4/21/98 99,675
- -------------------------------------------------------------
Ciesco L.P. 50,000 5.53 4/06/98 49,954
30,000 5.53 4/09/98 29,958
35,000 5.54 4/20/98 34,892
50,000 5.52 4/23/98 49,824
37,500 5.54 4/24/98 37,361
50,000 5.55 4/29/98 49,776
47,719 5.51 5/28/98 47,292
- -------------------------------------------------------------
Clipper Receivables 28,719 5.54 4/13/98 28,661
Corp. 24,782 5.54 4/16/98 24,721
22,499 5.55 4/23/98 22,419
49,000 5.50 6/16/98 48,419
- -------------------------------------------------------------
Commercial Credit 25,000 5.50 4/01/98 24,996
Corp. 50,000 5.49 4/02/98 49,985
50,000 5.49 4/03/98 49,977
50,000 5.47 4/06/98 49,954
25,000 5.54 4/16/98 24,938
36,000 5.54 5/05/98 35,806
50,000 5.53 5/21/98 49,607
50,000 5.51 6/04/98 49,500
- -------------------------------------------------------------
Corporate Asset 15,000 5.50 4/03/98 14,993
Funding Co., Inc. 75,000 5.50 4/08/98 74,908
50,000 5.54 4/09/98 49,931
50,000 5.53 4/15/98 49,885
100,000 5.53 4/16/98 99,754
40,000 5.52 4/20/98 39,877
40,000 5.52 4/24/98 39,853
20,000 5.53 4/28/98 19,914
25,000 5.47 4/29/98 24,888
60,000 5.48 4/29/98 59,732
75,000 5.51 5/20/98 74,426
50,000 5.50 6/11/98 49,446
- -------------------------------------------------------------
Corporate Receivables 25,000 5.48 4/08/98 24,969
Corp. 10,000 5.48 4/09/98 9,986
40,000 5.50 4/09/98 39,945
10,000 5.53 4/09/98 9,986
12,000 5.54 4/16/98 11,970
50,000 5.47 4/27/98 49,793
25,000 5.54 4/28/98 24,892
75,000 5.47 5/11/98 74,523
25,000 5.53 5/12/98 24,839
35,000 5.55 5/13/98 34,768
20,000 5.51 5/14/98 19,864
28,000 5.52 5/15/98 27,805
60,000 5.52 5/19/98 59,547
30,000 5.53 5/22/98 29,759
30,000 5.51 5/28/98 29,732
25,000 5.52 5/28/98 24,776
- -------------------------------------------------------------
Countrywide Home 20,000 5.56 4/30/98 19,907
Loans, Inc. 50,000 5.55 5/04/98 49,738
30,000 5.53 5/27/98 29,736
- -------------------------------------------------------------
30
<PAGE>
- --------------------------------------------------------------------------------
CMA MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 (CONTINUED) (IN THOUSANDS)
- --------------------------------------------------------------------------------
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
- -------------------------------------------------------------
Commercial Paper (continued)
- -------------------------------------------------------------
Creditanstalt Finance, $150,000 5.53 % 4/09/98 $ 149,793
Inc.
- -------------------------------------------------------------
Cregem North America, 90,000 5.50 6/09/98 89,030
Inc. 60,000 5.50 6/11/98 59,335
100,000 5.50 6/19/98 98,769
- -------------------------------------------------------------
Daimler-Benz North 12,000 5.47 5/28/98 11,893
America Corp. 50,000 5.51 5/28/98 49,553
- -------------------------------------------------------------
Delaware Funding 20,094 5.54 4/03/98 20,085
Corp. 10,076 5.47 4/09/98 10,062
50,000 5.54 4/13/98 49,900
300,000 5.55 4/13/98 299,399
73,288 5.53 4/14/98 73,130
68,517 5.55 4/15/98 68,358
25,121 5.54 4/23/98 25,032
86,444 5.53 5/21/98 85,764
- -------------------------------------------------------------
Den Danske 100,000 5.53 4/09/98 99,862
Corporation
- -------------------------------------------------------------
Den Norske Bank ASA 50,000 5.47 5/13/98 49,667
- -------------------------------------------------------------
Deutsche Bank 39,000 5.43 4/08/98 38,952
Financial, Inc.
- -------------------------------------------------------------
EDS Finance PLC 10,000 5.52 4/30/98 9,954
10,900 5.53 5/22/98 10,813
45,000 5.54 5/22/98 44,639
- -------------------------------------------------------------
Eastman Kodak Company 46,700 5.52 5/21/98 46,333
- -------------------------------------------------------------
Eiger Capital 17,076 5.54 4/27/98 17,005
Corporation 25,490 5.55 4/27/98 25,384
102,000 5.52 5/20/98 101,218
- -------------------------------------------------------------
Eureka Securitization, 10,000 5.47 5/08/98 9,941
Inc. 40,000 5.53 5/13/98 39,733
42,190 5.53 5/18/98 41,878
50,000 5.51 6/03/98 49,508
25,000 5.50 6/09/98 24,731
15,000 5.51 6/09/98 14,838
17,810 5.51 6/11/98 17,613
- -------------------------------------------------------------
Falcon Asset 41,414 5.50 4/03/98 41,395
Securitization Corp. 35,625 5.49 4/13/98 35,554
37,855 5.53 4/14/98 37,774
30,645 5.48 4/16/98 30,570
22,045 5.55 4/17/98 21,987
17,300 5.55 4/23/98 17,239
55,045 5.54 4/28/98 54,807
27,371 5.53 5/20/98 27,161
6,245 5.53 5/26/98 6,191
11,150 5.50 6/23/98 11,006
- -------------------------------------------------------------
Finova Capital Corp. 10,400 5.50 4/16/98 10,374
30,000 5.54 5/05/98 29,838
15,000 5.54 5/21/98 14,882
40,000 5.54 5/28/98 39,642
20,000 5.53 6/17/98 19,760
19,600 5.53 6/22/98 19,350
40,000 5.53 6/25/98 39,471
- -------------------------------------------------------------
Fleet Funding Corp. 24,741 5.54 4/14/98 24,688
18,448 5.56 4/14/98 18,408
69,708 5.53 4/17/98 69,526
- -------------------------------------------------------------
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
- -------------------------------------------------------------
Commercial Paper (continued)
- -------------------------------------------------------------
Fleet Funding Corp. $ 76,556 5.54 % 4/23/98 $ 76,285
(concluded) 10,547 5.55 4/24/98 10,508
- -------------------------------------------------------------
Ford Credit Europe PLC 25,000 5.49 4/03/98 24,989
13,000 5.54 4/16/98 12,968
25,000 5.48 4/24/98 24,908
25,000 5.52 5/07/98 24,858
- -------------------------------------------------------------
Ford Motor Credit Co. 100,000 5.40 4/03/98 99,954
100,000 5.47 4/23/98 99,647
- -------------------------------------------------------------
General Electric 50,000 5.54 4/02/98 49,985
Capital Corp. 200,000 5.55 4/08/98 199,753
100,000 5.47 4/15/98 99,770
90,000 5.53 4/15/98 89,793
150,000 5.71 4/28/98 149,355
150,000 5.47 4/30/98 149,306
200,000 5.53 5/14/98 198,648
125,000 5.54 5/14/98 124,154
50,000 5.47 5/22/98 49,599
150,000 5.51 5/26/98 148,705
200,000 5.51 5/27/98 198,243
150,000 5.50 6/05/98 148,477
100,000 5.549+ 11/09/98 99,977
100,000 5.545+ 11/16/98 99,973
- -------------------------------------------------------------
General Electric Capital 75,000 5.53 4/15/98 74,827
Services, Inc.
- -------------------------------------------------------------
General Electric 150,000 5.47 5/22/98 148,798
Company
- -------------------------------------------------------------
General Motors 107,000 5.53 5/01/98 106,490
Acceptance Corp. 300,000 5.53 5/04/98 298,433
500,000 5.53 5/06/98 497,235
129,000 5.53 5/18/98 128,049
94,000 5.51 5/26/98 93,188
175,000 5.50 6/04/98 173,250
- -------------------------------------------------------------
Glaxo Wellcome, Inc. 20,000 5.54 4/03/98 19,991
70,325 5.54 4/06/98 70,260
- -------------------------------------------------------------
Goldman Sachs 50,000 5.70 5/14/98 49,659
Group, L.P. 100,000 5.65 5/19/98 99,245
3,000 5.56 6/24/98 2,961
- -------------------------------------------------------------
Greenwich Funding 25,000 5.49 4/07/98 24,973
Corp. 75,000 5.50 4/07/98 74,920
40,770 5.53 4/08/98 40,720
87,555 5.49 4/15/98 87,355
13,650 5.55 4/22/98 13,604
35,355 5.48 4/30/98 35,191
15,670 5.52 5/21/98 15,547
57,000 5.53 5/21/98 56,552
- -------------------------------------------------------------
Halifax PLC 175,600 5.50 4/06/98 175,438
74,400 5.52 4/07/98 74,320
- -------------------------------------------------------------
Henkel Corporation 20,000 5.47 4/15/98 19,954
19,000 5.43 4/21/98 18,939
- -------------------------------------------------------------
Household Finance Corp. 50,000 5.52 4/09/98 49,931
100,000 5.55 4/16/98 99,753
100,000 5.54 4/21/98 99,677
50,000 5.53 4/22/98 49,831
- -------------------------------------------------------------
31
<PAGE>
- --------------------------------------------------------------------------------
CMA MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 (CONTINUED) (IN THOUSANDS)
- --------------------------------------------------------------------------------
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
- -------------------------------------------------------------
Commercial Paper (continued)
- -------------------------------------------------------------
International $ 36,450 5.55 % 4/13/98 $ 36,377
Securitization 30,755 5.58 4/14/98 30,688
Corporation 20,000 5.48 4/16/98 19,951
50,000 5.49 4/16/98 49,877
35,000 5.57 4/16/98 34,913
72,795 5.55 4/17/98 72,604
30,000 5.48 4/23/98 29,894
8,745 5.53 5/26/98 8,670
- -------------------------------------------------------------
Internationale 50,000 5.53 4/14/98 49,892
Nederlanden (US)
Funding Corp.
- -------------------------------------------------------------
John Deere Capital 100,000 5.54 4/16/98 99,754
Corp.
- -------------------------------------------------------------
KfW International 17,000 5.56 4/08/98 16,979
Finance Inc. 30,000 5.52 4/09/98 29,959
42,000 5.52 4/22/98 41,858
- -------------------------------------------------------------
Lehman Brothers 96,000 5.48 5/04/98 95,494
Holdings, Inc. 54,000 5.50 5/12/98 53,648
- -------------------------------------------------------------
Lexington Parker 32,000 5.49 4/09/98 31,956
Capital Company, LLC 40,000 5.47 4/24/98 39,853
26,100 5.54 5/21/98 25,895
46,207 5.47 5/29/98 45,787
75,232 5.54 5/29/98 74,548
30,461 5.52 6/01/98 30,170
- -------------------------------------------------------------
Matterhorn Capital 14,876 5.55 4/27/98 14,814
Corp. 14,000 5.52 5/26/98 13,879
- -------------------------------------------------------------
MetLife Funding Corp. 30,260 5.53 4/08/98 30,223
- -------------------------------------------------------------
Mont Blanc Capital 90,676 5.49 4/15/98 90,467
Corp. 20,116 5.57 4/20/98 20,054
75,000 5.55 4/22/98 74,746
197,322 5.55 4/24/98 196,592
81,000 5.55 4/28/98 80,650
27,000 5.52 5/26/98 26,767
101,827 5.53 5/26/98 100,948
69,059 5.53 5/28/98 68,442
38,000 5.51 6/10/98 37,585
- -------------------------------------------------------------
Monte Rosa Capital 25,121 5.57 4/13/98 25,070
Corp. 25,121 5.54 4/20/98 25,044
25,000 5.48 4/23/98 24,912
44,000 5.49 4/23/98 43,845
111,000 5.48 4/24/98 110,591
75,000 5.48 4/27/98 74,689
20,000 5.55 4/30/98 19,908
20,000 5.54 5/08/98 19,883
11,543 5.48 5/12/98 11,468
60,000 5.53 5/28/98 59,464
33,511 5.50 6/18/98 33,104
- -------------------------------------------------------------
Morgan Stanley, 18,500 5.51 4/06/98 18,483
Dean Witter & Co. 100,000 5.49 4/08/98 99,877
150,000 5.51 4/09/98 149,793
100,000 5.55 4/14/98 99,784
175,000 5.52 4/27/98 174,274
10,000 5.648 10/26/98 10,000
- -------------------------------------------------------------
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
- -------------------------------------------------------------
Commercial Paper (continued)
- -------------------------------------------------------------
Morgan Stanley, $ 50,000 5.648% 11/20/98 $ 50,000
Dean Witter & Co. 190,000 5.648 12/24/98 190,000
(concluded)
- -------------------------------------------------------------
National Australia 105,000 5.53 4/08/98 104,871
Funding (Delaware), 14,900 5.42 4/09/98 14,879
Inc. 100,000 5.66 6/04/98 99,000
- -------------------------------------------------------------
NationsBank Corp. 100,000 5.40 8/06/98 98,041
- -------------------------------------------------------------
New Center Asset 25,000 5.53 4/03/98 24,988
Trust 200,000 5.73 4/14/98 199,570
150,000 5.56 5/04/98 149,210
225,000 5.54 5/06/98 223,754
50,000 5.51 6/18/98 49,392
- -------------------------------------------------------------
Nordbanken 30,000 5.53 5/28/98 29,732
North America Inc. 50,000 5.51 6/04/98 49,500
20,000 5.50 6/10/98 19,781
- -------------------------------------------------------------
Old Line Funding Corp. 20,420 5.55 4/15/98 20,373
12,380 5.58 4/17/98 12,347
17,882 5.57 4/20/98 17,827
10,951 5.56 5/06/98 10,890
86,106 5.56 5/07/98 85,614
- -------------------------------------------------------------
Ontario Hydro 24,000 5.71 4/06/98 23,978
- -------------------------------------------------------------
Park Ave Receivables 9,717 5.51 4/02/98 9,714
Corp. 23,312 5.54 4/17/98 23,251
11,603 5.55 4/22/98 11,564
42,167 5.55 4/23/98 42,017
14,000 5.53 5/07/98 13,920
22,445 5.53 5/08/98 22,313
11,756 5.53 5/14/98 11,676
- -------------------------------------------------------------
Preferred Receivables 49,750 5.56 4/01/98 49,742
Funding Corp. 17,065 5.50 4/02/98 17,060
36,425 5.55 4/03/98 36,408
54,540 5.49 4/07/98 54,482
53,200 5.48 4/13/98 53,095
25,400 5.49 4/14/98 25,346
10,025 5.49 4/15/98 10,002
11,825 5.55 4/21/98 11,787
60,650 5.54 4/28/98 60,389
30,725 5.46 5/04/98 30,563
39,200 5.55 5/07/98 38,976
11,195 5.53 5/11/98 11,124
- -------------------------------------------------------------
Republic Industries 42,300 5.56 4/14/98 42,209
Funding Corp. 40,000 5.52 4/24/98 39,853
92,700 5.54 5/01/98 92,258
- -------------------------------------------------------------
Rexam PLC 10,000 5.44 4/16/98 9,975
24,500 5.54 4/23/98 24,413
- -------------------------------------------------------------
Rio Tinto America, Inc. 15,500 5.53 4/02/98 15,495
11,000 5.42 4/14/98 10,976
15,600 5.54 4/17/98 15,559
15,200 5.50 5/20/98 15,083
54,000 5.51 5/29/98 53,509
16,800 5.51 6/19/98 16,593
47,486 5.51 6/25/98 46,858
- -------------------------------------------------------------
32
<PAGE>
- --------------------------------------------------------------------------------
CMA MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 (CONTINUED) (IN THOUSANDS)
- --------------------------------------------------------------------------------
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
- -------------------------------------------------------------
Commercial Paper (continued)
- -------------------------------------------------------------
Riverwoods Funding $ 10,000 5.54 % 4/09/98 $ 9,986
Corp. 15,000 5.54 4/14/98 14,968
50,000 5.54 4/16/98 49,877
50,000 5.52 5/28/98 49,553
50,000 5.50 6/24/98 49,346
25,000 5.51 6/25/98 24,669
- -------------------------------------------------------------
Salomon, Smith Barney 150,000 5.49 4/09/98 149,793
Holdings, Inc. 50,000 5.48 4/22/98 49,831
10,000 5.47 5/14/98 9,932
90,000 5.48 5/19/98 89,320
- -------------------------------------------------------------
Sears Roebuck 50,000 5.47 5/05/98 49,729
Acceptance Corp. 50,000 5.40 5/07/98 49,713
50,000 5.47 5/11/98 49,682
50,000 5.47 5/12/98 49,675
50,000 5.54 5/13/98 49,667
50,000 5.47 5/19/98 49,622
50,000 5.49 5/22/98 49,599
- -------------------------------------------------------------
Societe Generale 75,000 5.53 4/07/98 74,919
N.A., Inc. 150,000 5.53 4/14/98 149,677
65,000 5.55 4/15/98 64,850
- -------------------------------------------------------------
Southern California 35,200 5.53 4/07/98 35,162
Edison Co.
- -------------------------------------------------------------
Svenska 50,000 5.54 4/06/98 49,954
Handelsbanken AB 35,162 5.52 5/04/98 34,979
- -------------------------------------------------------------
Swedish Export 50,000 5.71 4/07/98 49,946
Credit Corp.
- -------------------------------------------------------------
Three Rivers Funding 33,838 5.55 4/13/98 33,770
Corp. 18,527 5.54 4/14/98 18,487
22,635 5.55 4/17/98 22,576
- -------------------------------------------------------------
Toronto-Dominion 200,000 5.54 4/07/98 199,785
Holdings (USA), Inc.
- -------------------------------------------------------------
Toyota Motor Credit 55,000 5.53 4/13/98 54,890
Corp.
- -------------------------------------------------------------
Transamerica Finance 41,000 5.53 4/13/98 40,918
Corp. 25,000 5.53 4/23/98 24,912
- -------------------------------------------------------------
Twin Towers, Inc. 28,436 5.57 4/03/98 28,423
16,196 5.56 4/13/98 16,163
50,279 5.55 4/14/98 50,170
103,453 5.57 4/15/98 103,213
32,314 5.45 4/16/98 32,235
50,447 5.56 4/20/98 50,291
18,875 5.50 4/21/98 18,814
- -------------------------------------------------------------
Unifunding, Inc. 69,635 5.48 4/08/98 69,549
30,365 5.53 5/05/98 30,202
- -------------------------------------------------------------
Vattenfall Treasury, Inc.50,000 5.45 5/22/98 49,600
- -------------------------------------------------------------
WCP Funding, Inc. 9,800 5.50 4/09/98 9,787
25,000 5.52 4/09/98 24,965
25,000 5.47 4/28/98 24,892
28,000 5.52 4/29/98 27,875
21,700 5.47 5/11/98 21,562
25,000 5.47 5/14/98 24,830
- -------------------------------------------------------------
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
- -------------------------------------------------------------
Commercial Paper (concluded)
- -------------------------------------------------------------
WCP Funding, Inc. $ 31,900 5.53 % 5/14/98 $ 31,682
(concluded) 8,600 5.54 5/14/98 8,541
25,000 5.51 6/17/98 24,700
- -------------------------------------------------------------
Windmill Funding 5,683 5.59 4/08/98 5,676
Corp. 32,000 5.50 4/16/98 31,922
55,970 5.55 4/16/98 55,832
62,460 5.55 4/23/98 62,239
50,000 5.55 4/29/98 49,776
100,000 5.55 5/07/98 99,430
17,401 5.47 5/13/98 17,285
85,581 5.47 5/14/98 84,997
16,729 5.47 5/18/98 16,605
34,000 5.47 5/22/98 33,727
66,938 5.54 5/28/98 66,339
36,847 5.50 6/16/98 36,410
77,668 5.51 6/18/98 76,724
38,560 5.50 6/19/98 38,085
20,163 5.51 6/19/98 19,915
- -------------------------------------------------------------
Xerox Capital 50,000 5.47 4/22/98 49,831
(Europe) PLC 50,000 5.47 4/23/98 49,823
- -------------------------------------------------------------
Xerox Overseas 50,000 5.54 4/20/98 49,846
Holdings PLC 50,000 5.47 4/22/98 49,831
- -------------------------------------------------------------
Total Commercial Paper (Cost--$23,445,274) 23,444,787
- -------------------------------------------------------------
Corporate Notes--6.0%
- -------------------------------------------------------------
Abbey National 96,000 5.568 2/17/99 95,950
Treasury Services PLC
- -------------------------------------------------------------
Asset-Backed 715,150 5.648+ 9/15/98 715,150
Securities Investment
Trust 1997-F
- -------------------------------------------------------------
Bear Stearns 25,000 9.125 4/15/98 25,038
Companies, Inc.
- -------------------------------------------------------------
Chase Manhattan Auto 63,427 5.549 3/12/99 63,415
Owner Trust 1998--
As Class A-1
- -------------------------------------------------------------
Ford Credit Auto Owner 175,039 5.545 2/16/99 174,986
Trust 1998-A, Class A-1
- -------------------------------------------------------------
KfW International 14,000 9.375 7/15/98 14,139
Finance, Inc.
- -------------------------------------------------------------
LABS Trust Series 288,953 5.688 12/28/98 288,953
1996-4, Senior Notes
- -------------------------------------------------------------
LABS Trust, Series 273,703 5.684 10/21/98 273,703
1997-6, Senior Notes
- -------------------------------------------------------------
LABS Trust Series 192,755 5.684 12/22/98 192,755
1997-7, Senior Notes
- -------------------------------------------------------------
LINCS, Series 1997-4 285,000 5.678+ 9/18/98 285,000
- -------------------------------------------------------------
LINCS, Series 1997-5 285,000 5.678+ 11/18/98 285,000
- -------------------------------------------------------------
LINCS, Series 1998-2 340,000 5.678 2/12/99 340,000
- -------------------------------------------------------------
Newcourt Receivables 19,755 5.815 12/21/98 19,755
Asset Trust 1997-1
- -------------------------------------------------------------
33
<PAGE>
- --------------------------------------------------------------------------------
CMA MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 (CONTINUED) (IN THOUSANDS)
- --------------------------------------------------------------------------------
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
- -------------------------------------------------------------
Corporate Notes (concluded)
- -------------------------------------------------------------
Premier Auto Trust $ 56,673 5.68 % 8/06/98 $ 56,674
1997-2, Class A-1
- -------------------------------------------------------------
Premier Auto Trust 19,054 5.649 6/08/98 19,054
1997-3, Class A-1
- -------------------------------------------------------------
Premier Auto Trust 109,444 5.545 11/06/98 109,444
1998-1, Class A-1
- -------------------------------------------------------------
Premier Auto Trust 105,000 5.608 12/06/98 105,000
1998-2, Class A-1
- -------------------------------------------------------------
Total Corporate Notes (Cost--$3,064,076) 3,064,016
- -------------------------------------------------------------
Funding Agreements--1.0%
- -------------------------------------------------------------
Transamerica Life 150,000 5.672+ 4/15/98 150,000
Insurance & Annuity 25,000 5.672+ 8/03/98 25,000
Company 50,000 5.672+ 9/14/98 50,000
50,000 5.692+ 3/02/99 50,000
- -------------------------------------------------------------
Transamerica 60,000 5.672+ 5/15/98 60,000
Occidental Life 75,000 5.672+ 11/20/98 75,000
Insurance Co.
- -------------------------------------------------------------
Travelers Insurance Co. 25,000 5.655+ 1/21/99 25,000
25,000 5.625+ 1/27/99 25,000
20,000 5.655+ 2/01/99 20,000
- -------------------------------------------------------------
Total Funding Agreements (Cost--$480,000) 480,000
- -------------------------------------------------------------
Master Notes--1.6%
- -------------------------------------------------------------
Goldman Sachs 700,000 5.672+ 4/28/98 700,000
Group, L.P. 130,000 5.672+ 5/29/98 130,000
- -------------------------------------------------------------
Total Master Notes (Cost--$830,000) 830,000
- -------------------------------------------------------------
Medium-Term Notes--4.5%
- -------------------------------------------------------------
Abbey National 130,000 5.60 6/09/98 129,983
Treasury Services PLC 69,000 5.50 2/05/99 68,814
- -------------------------------------------------------------
Bank of Scotland 40,000 5.95 6/18/98 40,004
Treasury Services PLC
- -------------------------------------------------------------
Barnett Banks, Inc. 50,000 6.25 7/28/98 50,074
- -------------------------------------------------------------
CIT Group Holdings, 35,550 6.25 3/22/99 35,682
Inc. (The)
- -------------------------------------------------------------
Chase Manhattan 300,000 5.598+ 3/25/99 299,867
Corp.
- -------------------------------------------------------------
Credit Suisse First 67,000 5.69 4/14/98 67,001
Boston, Inc. 103,000 5.67 5/22/98 103,000
25,000 6.148 6/02/98 25,013
500,000 5.622 10/01/98 500,000
- -------------------------------------------------------------
Ford Motor Credit Co. 90,000 5.70+ 12/23/98 90,004
250,000 5.71+ 1/08/99 250,000
- -------------------------------------------------------------
General Motors 145,000 5.702+ 2/27/01 144,710
Acceptance Corp.
- -------------------------------------------------------------
Goldman Sachs 17,000 6.10 4/15/98 17,004
Group, L.P. 100,000 5.68 + 3/26/99 100,000
100,000 5.688+ 3/26/99 100,022
- -------------------------------------------------------------
IBM Credit Corp. 75,000 5.73 7/30/98 75,007
75,000 5.665+ 7/31/98 75,000
- -------------------------------------------------------------
- -------------------------------------------------------------
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
- -------------------------------------------------------------
Medium-Term Notes (concluded)
- -------------------------------------------------------------
Morgan Stanley, $ 10,000 5.954% 5/18/98 $ 10,006
Dean Witter & Co. 86,500 5.544+ 1/15/99 86,488
- -------------------------------------------------------------
Norwest Corporation 25,000 6.00 10/13/98 25,032
- -------------------------------------------------------------
Total Medium-Term Notes (Cost--$2,293,201) 2,292,711
- -------------------------------------------------------------
US Government & Agency Obligations--
Discount Notes--4.6%
- -------------------------------------------------------------
Federal Farm Credit 74,000 5.23 7/29/98 72,658
Bank
- -------------------------------------------------------------
Federal Home Loan 27,172 5.11 2/04/99 25,918
Banks 75,000 5.20 3/04/99 71,226
- -------------------------------------------------------------
Federal Home Loan 100,000 5.27 8/07/98 98,058
Mortgage Corp.
- -------------------------------------------------------------
Federal National 48,000 5.27 5/22/98 47,623
Mortgage Association 26,000 5.28 5/28/98 25,772
50,000 5.28 6/08/98 49,476
50,000 5.54 6/15/98 49,423
50,000 5.51 6/18/98 49,400
150,000 5.50 6/23/98 148,086
150,000 5.49 6/30/98 147,926
204,000 5.46 7/06/98 201,010
51,049 5.295 7/30/98 50,116
130,000 5.35 9/30/98 126,425
100,000 5.05 1/07/99 95,801
30,195 5.16 1/07/99 28,927
50,000 5.25 1/27/99 47,752
- -------------------------------------------------------------
International Bank for 25,875 5.38 4/09/98 25,840
Reconstruction and 21,395 5.54 6/15/98 21,148
Development
- -------------------------------------------------------------
US Treasury Bills 100,000 4.82 7/16/98 98,506
400,000 4.909 7/16/98 394,026
150,000 4.97 1/07/99 143,984
170,000 4.975 1/07/99 163,182
100,000 4.98 1/07/99 95,989
75,000 4.993 2/04/99 71,677
- -------------------------------------------------------------
Total US Government & Agency Obligations--
Discount Notes (Cost--$2,351,393) 2,349,949
- -------------------------------------------------------------
US Government & Agency Obligations--
Non-Discount Notes--20.7%
- -------------------------------------------------------------
Federal Farm Credit 30,000 5.81 12/04/98 30,021
Bank
- -------------------------------------------------------------
Federal Home Loan 32,500 5.96 6/09/98 32,516
Banks 7,250 5.82 6/16/98 7,251
26,000 5.78 7/07/98 26,006
18,600 5.58 8/06/98 18,591
455,000 5.51+ 9/16/98 454,856
365,000 5.80 9/18/98 365,161
10,900 7.64 9/21/98 10,997
438,000 5.634+ 10/20/98 437,929
750,000 5.639+ 11/03/98 749,804
84,000 5.595 3/10/99 83,924
215,000 5.599+ 3/26/99 214,894
34
<PAGE>
- --------------------------------------------------------------------------------
CMA MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 (CONCLUDED) (IN THOUSANDS)
- --------------------------------------------------------------------------------
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
- -------------------------------------------------------------
US Government & Agency Obligations--
Non-Discount Notes (continued)
- -------------------------------------------------------------
Federal Home Loan $200,000 5.649+% 4/01/99 $ 199,900
Banks 18,000 6.355 6/11/99 18,032
(concluded) 60,000 5.99 8/11/99 60,050
75,000 5.67 1/20/00 74,738
100,000 5.855 1/20/00 99,800
100,000 5.77 1/27/00 99,730
137,000 5.75 1/28/00 136,589
29,405 5.445 2/04/00 29,228
28,590 5.66 2/11/00 28,476
44,860 5.69 3/10/00 44,672
50,000 5.75 3/16/00 49,825
46,000 5.705 3/23/00 45,862
24,965 5.81 4/06/00 24,893
- -------------------------------------------------------------
Federal Home Loan 150,000 5.58+ 4/16/98 149,997
Mortgage Corp. 277,000 5.57+ 4/20/98 276,991
208,000 5.685 8/21/98 208,008
- -------------------------------------------------------------
Federal National 162,000 5.56+ 5/21/98 161,985
Mortgage Association 250,000 5.56+ 5/22/98 249,976
200,000 5.68 7/31/98 200,023
200,000 5.50+ 9/15/98 199,928
406,000 5.629+ 10/20/98 405,902
375,000 5.644+ 11/03/98 374,844
200,000 5.554+ 1/21/99 199,919
271,000 5.40 2/02/99 270,187
200,000 5.38 2/12/99 199,380
20,000 5.41 2/23/99 19,940
75,000 5.37 2/26/99 74,760
825,000 5.554+ 3/03/99 824,678
100,000 5.57 3/05/99 99,888
12,000 6.32 5/11/99 12,008
200,000 5.191+ 6/02/99 199,611
40,000 5.191+ 7/26/99 39,911
100,000 5.86 7/30/99 100,117
35,000 5.95 8/05/99 35,020
117,000 5.83 9/27/99 117,113
- -------------------------------------------------------------
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
- -------------------------------------------------------------
US Government & Agency Obligations--
Non-Discount Notes (concluded)
- -------------------------------------------------------------
Federal National $324,000 5.664+% 10/27/99 $ 323,760
Mortgage Association 200,000 5.60 1/12/00 199,412
(concluded) 10,105 5.34 1/24/00 10,030
100,000 5.51 2/04/00 99,510
30,000 5.71 3/22/00 29,904
- -------------------------------------------------------------
Student Loan 200,000 5.394+ 4/24/98 199,994
Marketing Association 73,000 5.86 6/10/98 73,015
260,000 5.74 6/30/98 260,070
81,000 5.60 8/11/98 80,974
20,000 5.84 9/10/98 19,992
247,000 5.599+ 10/06/98 246,919
184,000 5.634+ 11/25/98 183,953
65,000 5.80 12/18/98 65,051
75,000 5.364+ 2/22/99 74,840
18,000 5.81 1/27/00 17,963
278,000 5.609+ 2/04/00 277,877
- -------------------------------------------------------------
US Treasury Notes 400,000 6.25 3/31/99 402,656
50,000 5.625 12/31/99 49,992
150,000 5.375 1/31/00 149,309
- -------------------------------------------------------------
Total US Government & Agency Obligations--
Non-Discount Notes (Cost--$10,533,588) 10,529,152
- -------------------------------------------------------------
Face
Amount Issue
- -------------------------------------------------------------
Repurchase Agreements**--0.2%
- -------------------------------------------------------------
$100,000 Fuji Securities, Inc., purchased 100,000
on 3/31/98 to yield 6.08% to 4/01/98
- -------------------------------------------------------------
Total Repurchase Agreements (Cost--$100,000) 100,000
- -------------------------------------------------------------
Total Investments (Cost--$50,916,078)--100.0% 50,907,212
Other Assets Less Liabilities--0.0% 16,568
------------
Net Assets--100.0% $50,923,780
============
- --------------------------------------------------------------------------------
* Commercial Paper and certain US Government & Agency Obligations are traded
on a discount basis; the interest rates shown are the discount rates paid at
the time of purchase by the Fund. Other securities bear interest at the
rates shown, payable at fixed dates through maturity. Interest rates on
variable rate securities are adjusted periodically based on appropriate
indexes; the interest rates shown are the rates in effect at March 31, 1998.
** Repurchase Agreements are fully collateralized by US Government Obligations.
+ Variable Rate Notes.
See Notes to Financial Statements.
35
<PAGE>
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
CMA MONEY FUND
STATEMENT OF ASSETS AND LIABILITIES AS OF MARCH 31, 1998
- --------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost--$50,916,078,103+) (Note 1a) $ 50,907,212,346
Cash 543,797
Interest receivable 274,913,861
Prepaid registration fees and other assets (Note 1e) 1,202,545
------------------
Total assets 51,183,872,549
------------------
Liabilities:
Payables:
Securities purchased $ 224,849,397
Investment adviser (Note 2) 16,762,341
Distributor (Note 2) 14,552,103
Dividends to shareholders (Note 1f) 13,930 256,177,771
Accrued expenses and other liabilities --------------- 3,915,176
------------------
Total liabilities 260,092,947
------------------
Net Assets $ 50,923,779,602
==================
Net Assets Consist of:
Shares of beneficial interest, $.10 par value, unlimited number of shares
authorized $ 5,093,264,536
Paid-in capital in excess of par 45,839,380,823
Unrealized depreciation on investments--net (8,865,757)
------------------
Net Assets--Equivalent to $1.00 per share based on 50,932,645,357 shares of
beneficial interest outstanding $ 50,923,779,602
==================
</TABLE>
+ Cost for Federal income tax purposes. As of March 31, 1998, net unrealized
depreciation for Federal income tax purposes amounted to $8,865,757, of
which $2,077,762 related to appreciated securities and $10,943,519 related
to depreciated securities.
See Notes to Financial Statements.
36
<PAGE>
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------
CMA MONEY FUND
STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1998
- -----------------------------------------------------------------------------------------------------------------
Investment Income (Note 1d):
Interest and amortization of premium and discount earned $ 2,568,298,224
Expenses:
Investment advisory fees (Note 2) $ 170,196,721
Distribution fees (Note 2) 55,763,388
Transfer agent fees (Note 2) 17,058,436
Registration fees (Note 1e) 6,658,679
Interest expense (Note 4) 3,122,526
Accounting services (Note 2) 1,371,794
Custodian fees 1,029,083
Printing and shareholder reports 628,881
Professional fees 112,357
Trustees' fees and expenses 100,634
Other 314,350
---------------
Total expenses 256,356,849
------------------
Investment income--net 2,311,941,375
Realized Gain on Investments--Net (Note 1d) 5,277,494
Change in Unrealized Depreciation on Investments--Net 15,324,920
------------------
Net Increase in Net Assets Resulting from Operations $ 2,332,543,789
==================
See Notes to Financial Statements.
- -----------------------------------------------------------------------------------------------------------------
CMA MONEY FUND
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------------------
For the Year Ended March 31,
---------------------------------
Increase (Decrease) in Net Assets: 1998 1997
- -----------------------------------------------------------------------------------------------------------------
Operations:
Investment income--net $ 2,311,941,375 $ 1,860,190,714
Realized gain on investments--net 5,277,494 7,267,457
Change in unrealized depreciation on investments--net 15,324,920 (7,046,015)
--------------- ---------------
Net increase in net assets resulting from operations 2,332,543,789 1,860,412,156
--------------- ---------------
Dividends & Distributions to Shareholders (Note 1f):
Investment income--net (2,311,941,375) (1,860,190,714)
Realized gain on investments--net (5,277,494) (7,267,457)
--------------- ---------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (2,317,218,869) (1,867,458,171)
--------------- ---------------
Beneficial Interest Transactions (Note 3):
Net proceeds from sale of shares 202,384,030,927 157,862,710,322
Net asset value of shares issued to shareholders in reinvestment of
dividends (Note 1f) 2,312,393,811 1,863,526,563
--------------- ---------------
204,696,424,738 159,726,236,885
Cost of shares redeemed (195,772,722,923) (154,657,296,361)
--------------- ---------------
Net increase in net assets derived from beneficial interest transactions 8,923,701,815 5,068,940,524
Net Assets:
Total increase in net assets 8,939,026,735 5,061,894,509
Beginning of year 41,984,752,867 36,922,858,358
--------------- ----------------
End of year $50,923,779,602 $ 41,984,752,867
=============== ================
</TABLE>
See Notes to Financial Statements.
37
<PAGE>
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------
CMA MONEY FUND
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------------------------------------------
The following per share data and ratios have
been derived from information provided in the
financial statements. For the Year Ended March 31,
-----------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
Per Share Operating Performance:
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ----------- ----------- ----------- -----------
Investment income-- net .0512 .0490 .0529 .0437 .0276
Realized and unrealized gain (loss) on
investments-- net .0004 -- .0003 .0005 (.0005)
----------- ----------- ----------- ----------- -----------
Total from investment operations .0516 .0490 .0532 .0442 .0271
----------- ----------- ----------- ----------- -----------
Less dividends and distributions:
Investment income-- net (.0512) (.0490) (.0529) (.0437) (.0276)
Realized gain on investments-- net (.0001) (.0002) (.0006) (.0003) (.0003)
----------- ----------- ----------- ----------- -----------
Total dividends and distributions (.0513) (.0492) (.0535) (.0440) (.0279)
----------- ----------- ----------- ----------- -----------
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== =========== ===========
Total Investment Return 5.26% 5.04% 5.49% 4.50% 2.82%
=========== =========== =========== =========== ===========
Ratios to Average Net Assets:
Expenses, excluding interest expenses .56% .55% -- -- --
=========== =========== =========== =========== ===========
Expenses .57% .56% .56% .56% .55%
=========== =========== =========== =========== ===========
Investment income and realized gain on
investments-- net 5.13% 4.89% 5.35% 4.42% 2.79%
=========== =========== =========== =========== ===========
Supplemental Data:
Net assets, end of year (in thousands) $50,923,780 $41,984,753 $36,922,858 $29,066,762 $27,071,882
=========== =========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
38
<PAGE>
- --------------------------------------------------------------------------------
CMA MONEY FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. Significant Accounting Policies:
CMA Money Fund (the "Fund") is registered under the Investment Company Act of
1940 as a no load, diversified, open-end management investment company. The
following is a summary of significant accounting policies followed by the Fund.
(a) Valuation of investments--Investments maturing more than sixty days after
the valuation date are valued at the most recent bid price or yield equivalent
as obtained from dealers that make markets in such securities. When securities
are valued with sixty days or less to maturity, the difference between the
valuation existing on the sixty-first day before maturity and maturity value is
amortized on a straight-line basis to maturity. Investments maturing within
sixty days from their date of acquisition are valued at amortized cost, which
approximates market value.
For the purpose of valuation, the maturity of variable rate certificates of
deposit, variable rate commercial paper, short-term corporate bond notes and
variable rate corporate notes is deemed to be the next coupon date on which the
interest rate is to be adjusted. Other securities 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 Trustees of the Fund.
(b) Repurchase agreements--The Fund invests in US Government securities pursuant
to repurchase agreements. Under such agreements, the bank or dealer agrees to
repurchase the security at a mutually agreed upon time and price. The Fund takes
possession of the underlying securities, marks to market such securities and, if
necessary, receives additional securities daily to ensure that the contract is
fully collateralized.
(c) 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 all of its taxable income to its shareholders. Therefore, no Federal
income tax provision is required.
(d) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Interest income, including amortization of premium and discount, is recognized
on the accrual basis. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Prepaid registration fees--Prepaid registration fees are charged to expense
as the related shares are issued.
(f) Dividends and distributions to shareholders--The Fund declares dividends
daily and reinvests daily such dividends (net of non-resident alien tax and
back-up withholding tax withheld) in additional fund shares at net asset value.
Dividends and distributions are declared from the total of net investment income
and net realized gain or loss on investments.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML &
Co."), which is the limited partner.
FAM 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: 0.50% of the Fund's average daily net assets not exceeding $500
million; 0.425% of the average daily net assets in excess of $500 million, but
not exceeding $1 billion; and 0.375% of the average daily net assets in excess
of $1 billion.
The Fund has adopted a Distribution and Shareholder Servicing Plan in compliance
with Rule 12b-1 under the Investment Company Act of 1940, pursuant to which
Merrill Lynch, Pierce,
39
<PAGE>
- --------------------------------------------------------------------------------
CMA MONEY FUND
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
- --------------------------------------------------------------------------------
Fenner & Smith Inc. ("MLPF&S") receives a distribution fee under the
Distribution Agreement from the Fund at the end of each month at the annual rate
of 0.125% of average daily net assets of the Fund for shareholders who maintain
their accounts through MLPF&S. The distribution fee is to compensate MLPF&S
financial consultants and other directly involved branch office personnel for
selling shares of the Fund and for providing direct personal services to
shareholders. The distribution fee is not compensation for the administrative
and operational services rendered to the Fund by MLPF&S in processing share
orders and administering shareholder accounts.
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 FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or directors of
FAM, PSI, MLFDS, and/or ML & Co.
3. Shares of Beneficial Interest:
The number of shares purchased and redeemed during the periods corresponds to
the amounts included in the Statements of Changes in Net Assets for net proceeds
from sale of shares and cost of shares redeemed, respectively, since shares are
recorded at $1.00 per share.
4. Reverse Repurchase Agreements:
Under a reverse repurchase agreement, the Fund sells securities and agrees to
repurchase them at a mutually agreed upon date and price. At the time the Fund
enters into a reverse repurchase agreement, it may establish a segregated
account with the custodian containing cash, cash equivalents or liquid high
grade debt securities having a value at least equal to the repurchase price.
For the year ended March 31, 1998, the average amount outstanding was
approximately $61,663,000, and the daily weighted average interest rate was
5.06%.
40
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
CMA Government Securities Fund:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of CMA Government Securities Fund as of March 31,
1998, 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 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 March
31, 1998 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 CMA Government
Securities Fund as of March 31, 1998, 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
May 5, 1998
41
<PAGE>
<TABLE>
<S> <C>
CMA Government Securities Fund
Schedule of Investments as of March 31, 1998 (in Thousands)
- ----------------------------------------------------------------------------------------------------------------
Face Interest Maturity Value
Issue Amount Rate Date (Note 1a)
US Government Obligations--37.7%
- -----------------------------------------------------------------------------------------------------------------
US Treasury $ 17,000 5.355% 4/16/98 $16,960
Bills* 25,000 5.24 4/23/98 24,916
5,000 5.27 4/23/98 4,983
8,000 5.275 4/23/98 7,973
35,000 5.29 4/23/98 34,883
15,000 5.295 4/23/98 14,950
17,100 5.32 5/07/98 17,011
5,800 5.225 5/28/98 5,753
13,800 5.52 5/28/98 13,687
12,750 5.525 5/28/98 12,646
12,900 5.255 8/20/98 12,640
18,920 5.29 9/17/98 18,463
- -----------------------------------------------------------------------------------------------------------------
US Treasury 74,275 7.875 4/15/98 74,361
Notes* 21,235 5.125 4/30/98 21,228
32,500 5.875 4/30/98 32,508
100,290 6.125 5/15/98 100,368
80,270 8.25 7/15/98 80,903
8,500 5.25 7/31/98 8,495
16,500 6.25 7/31/98 16,544
14,125 5.875 8/15/98 14,143
24,900 9.25 8/15/98 25,238
52,200 6.125 8/31/98 52,331
83,550 6.00 9/30/98 83,761
12,600 7.125 10/15/98 12,706
90,100 5.875 10/31/98 90,241
107,400 5.50 11/15/98 107,350
30,500 8.875 11/15/98 31,105
29,200 5.625 11/30/98 29,216
48,900 6.375 1/15/99 49,202
29,900 5.00 1/31/99 29,755
54,800 5.875 1/31/99 54,924
40,000 5.00 2/15/99 39,800
60,000 6.25 3/31/99 60,398
25,100 6.375 4/30/99 25,304
25,000 9.125 5/15/99 25,930
10,000 6.00 6/30/99 10,047
10,000 6.75 6/30/99 10,134
25,000 5.75 9/30/99 25,043
15,000 5.375 1/31/00 14,931
- -----------------------------------------------------------------------------------------------------------------
US Treasury 25,000 5.282 2/15/99 23,816
STRIPS**
- -----------------------------------------------------------------------------------------------------------------
Total US Government Obligations
(Cost--$1,334,395).............................. 1,334,647
<CAPTION>
Face Value
Amount Issue (Notes 1a & 1e)
Repurchase Agreements***--61.8%
- ----------------------------------------------------------------------
$150,000 Aubrey G. Lanston Co., Inc., purchased
on 3/31/98 to yield 5.95% to 4/01/98... $ 150,000
- ----------------------------------------------------------------------
$160,000 BZW Securities, Inc., purchased on
3/31/98 to yield 5.95% to 4/01/98...... 160,000
- ----------------------------------------------------------------------
$100,000 CIBC Oppenheimer Corp., purchased on
3/31/98 to yield 5.90% to 4/01/98...... 100,000
- ----------------------------------------------------------------------
$150,000 Daiwa Securities America, Inc.,
purchased on 3/31/98 to yield 5.95%
to 4/01/98............................. 150,000
- ----------------------------------------------------------------------
$160,000 Dean Witter Reynolds, Inc., purchased
on 3/31/98 to yield 5.95% to 4/01/98 160,000
- ----------------------------------------------------------------------
$100,000 Fuji Securities Inc., purchased on
3/31/98 to yield 5.97% to 4/01/98...... 100,000
- ----------------------------------------------------------------------
$150,000 Greenwich Capital Markets, Inc., purchased
on 3/31/98 to yield 5.95% to 4/01/98 150,000
- ----------------------------------------------------------------------
$150,000 HSBC Securities, Inc., purchased on
3/31/98 to yield 5.90% to 4/01/98...... 150,000
- ----------------------------------------------------------------------
$150,000 Nesbitt Burns Securities, Inc., purchased
on 3/31/98 to yield 5.95% to 4/01/98 150,000
- ----------------------------------------------------------------------
$150,000 Nikko Securities Co. International, Inc.,
purchased on 3/31/98 to yield 6.03%
to 4/01/98............................. 150,000
- ----------------------------------------------------------------------
$150,000 Nomura Securities International, Inc.,
purchased on 3/31/98 to yield 5.95%
to 4/01/98............................. 150,000
- ----------------------------------------------------------------------
$159,180 PaineWebber Inc., purchased on 3/31/98
to yield 5.95% to 4/01/98.............. 159,180
- ----------------------------------------------------------------------
$160,000 Salomon Brothers, Inc., purchased on
3/31/98 to yield 5.95% to 4/01/98...... 160,000
- ----------------------------------------------------------------------
$150,000 Sanwa Securities USA Co., L.P., purchased
on 3/31/98 to yield 5.95% to 4/01/98... 150,000
- ----------------------------------------------------------------------
$150,000 UBS Securities LLC, purchased on
3/31/98 to yield 5.96% to 4/01/98...... 150,000
- ----------------------------------------------------------------------
Total Repurchase Agreements
(Cost--$2,189,180)................................ 2,189,180
- ----------------------------------------------------------------------
Total Investments
(Cost--$3,523,575)--99.5%......................... 3,523,827
Other Assets Less Liabilities--0.5%............... 16,213
----------
Net Assets--100.0%................................ $3,540,040
==========
- ----------------------------------------------------------------------
</TABLE>
* US Treasury Bills are traded on a discount basis; the interest rates shown
are the discount rates paid at the time of purchase by the Fund. US Treasury
Notes bear interest at the rates shown, payable at fixed dates through
maturity.
**STRIPS--Separate Trading of Registered Interest and Principal of Securities.
***Repurchase Agreements are fully collateralized by US Government Obligations.
See Notes to Financial Statements.
42
<PAGE>
<TABLE>
<S> <C>
CMA Government Securities Fund
Statement of Assets and Liabilities as of March 31, 1998
- ----------------------------------------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost--$3,523,574,603+) (Notes 1a & 1e)........ $3,523,826,684
Cash........................................................................... 513
Interest receivable............................................................ 18,533,913
Prepaid registration fees and other assets (Note 1d)........................... 247,490
-------------
Total assets................................................................... 3,542,608,600
-------------
Liabilities:
Payables:
Investment adviser (Note 2).................................................. $ 1,239,639
Distributor (Note 2)......................................................... 1,063,158
Dividends to shareholders (Note 1f).......................................... 593 2,303,390
---------
Accrued expenses and other liabilities......................................... 265,578
---------
Total liabilities.............................................................. 2,568,968
-------------
Net Assets..................................................................... $3,540,039,632
==============
Net Assets Consist of:
Shares of beneficial interest, $0.10 par value, unlimited number of shares
authorized..................................................................... $ 353,978,755
Paid-in capital in excess of par............................................... 3,185,808,796
Unrealized appreciation on investments--net.................................... 252,081
-------------
Net Assets--Equivalent to $1.00 per share based on 3,539,787,550 shares of
beneficial interest outstanding................................................ $3,540,039,632
==============
+Cost for Federal income tax purposes. As of March 31, 1998, net unrealized
appreciation for Federal income tax purposes amounted to $252,081, of which
$528,401 related to appreciated securities and $276,320 related to depreciated
securities.
See Notes to Financial Statements.
- ----------------------------------------------------------------------------------------------------------------
CMA Government Securities Fund
Statement of Operations for the Year Ended March 31, 1998
- -------------------------------------------------------------------------------------------------------------------
Investment Income (Note 1c):
Interest and amortization of premium and discount earned....................... $ 186,996,605
Expenses:
Investment advisory fees (Note 2).............................................. $ 13,436,885
Distribution fees (Note 2)..................................................... 4,090,796
Transfer agent fees (Note 2)................................................... 531,773
Registration fees (Note 1d).................................................... 369,374
Accounting services (Note 2)................................................... 219,396
Custodian fees................................................................. 214,659
Professional fees.............................................................. 72,502
Printing and shareholder reports............................................... 44,156
Trustees' fees and expenses.................................................... 34,134
Other.......................................................................... 38,505
------------
Total expenses................................................................. 19,052,180
----------
Investment income--net.......................................................... 167,944,425
Realized Gain on Investments--Net (Note 1c)..................................... 197,541
Change in Unrealized Appreciation/Depreciation on Investments--Net.............. 1,941,084
--------------
Net Increase in Net Assets Resulting from Operations........................... $ 170,083,050
==============
</TABLE>
See Notes to Financial Statements.
43
<PAGE>
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------
CMA Government Securities Fund
Statements of Changes in Net Assets
- -------------------------------------------------------------------------------------------------------------------
For the Year Ended March 31,
- -------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets: 1998 1997
- -------------------------------------------------------------------------------------------------------------------
Operations:
Investment income--net........................................................ $ 167,944,425 $ 161,841,782
Realized gain on investments--net............................................. 197,541 116,775
Change in unrealized appreciation/depreciation on investments--net............ 1,941,084 (1,388,661)
--------- ----------
Net increase in net assets resulting from operations.......................... 170,083,050 160,569,896
-------------- --------------
Dividends & Distributions to Shareholders (Note 1f):
Investment income--net........................................................ (167,944,425) (161,841,782)
Realized gain on investments--net............................................. (197,541) (116,775)
-------- --------
Net decrease in net assets resulting from dividends and distributions
to shareholders.............................................................. (168,141,966) (161,958,557)
------------ ------------
Beneficial Interest Transactions (Note 3):
Net proceeds from sale of shares............................................. 14,532,261,909 13,617,455,013
Net asset value of shares issued to shareholders in reinvestment of
dividends and distributions (Note 1f)........................................ 167,986,012 161,803,882
-------------- --------------
14,700,247,921 13,779,258,895
Cost of shares redeemed...................................................... (14,585,617,671) (13,700,005,200)
--------------- ---------------
Net increase in net assets derived from beneficial interest transactions..... 114,630,250 79,253,695
--------------- ---------------
Net Assets:
Total increase in net assets................................................. 116,571,334 77,865,034
Beginning of year............................................................ 3,423,468,298 3,345,603,264
------------- -------------
End of year.................................................................. $ 3,540,039,632 $ 3,423,468,298
=============== ===============
- --------------------------------------------------------------------------------------------------------------------
CMA Government Securities Fund
Financial Highlights
- --------------------------------------------------------------------------------------------------------------------
The following per share data and ratios have been derived
from information provided in the financial statements. For the Year Ended March 31,
- -------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
Per Share Operating Performance:
Net asset value, beginning of year................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- --------- --------- --------- ---------
Investment income--net............................ .0501 .0477 .0521 .0419 .0271
Realized and unrealized gain (loss) on
investments--net................................... .0007 (.0004) .0002 .0008 (.0013)
-------- --------- --------- --------- ---------
Total from investment operations.................. .0508 .0473 .0523 .0427 .0258
-------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net........................... (.0501) (.0477) (.0521) (.0419) (.0271)
Realized gain on investments--net................ (.0001) --+ (.0003) (.0002) (.0004)
-------- --------- --------- --------- ---------
Total dividends and distributions................. (.0502) (.0477) (.0524) (.0421) (.0275)
-------- --------- --------- --------- ---------
Net asset value, end of year...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ========= ========= ========= =========
Total Investment Return........................... 5.15% 4.96% 5.37% 4.30% 2.79%
======== ========= ========= ========= =========
Ratios to Average Net Assets:
Expenses.......................................... .57% .56% .57% .58% .56%
======== ========= ========= ========= =========
Investment income and realized gain on
investments--net................................... 5.02% 4.81% 5.25% 4.18% 2.75%
======== ========= ========= ========= =========
Supplemental Data:
Net assets, end of year (in thousands)............ $3,540,040 $3,423,468 $3,345,603 $3,132,803 $3,563,595
========== ========== ========== ========== ==========
</TABLE>
+Amount is less than $.0001 per share.
See Notes to Financial Statements.
44
<PAGE>
- --------------------------------------------------------------------------------
CMA Government Securities Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Significant Accounting Policies:
CMA Government Securities Fund (the "Fund") is registered under the
Investment Company Act of 1940 as a no load, diversified, open-end management
investment company. The following is a summary of significant accounting
policies followed by the Fund.
(a) Valuation of investments--Investments maturing more than sixty days after
the valuation date are valued at the most recent bid price or yield
equivalent as obtained from dealers that make markets in such securities.
When securities are valued with sixty days or less to maturity, the
difference between the valuation existing on the sixty-first day before
maturity and maturity value is amortized on a straight-line basis to
maturity. Investments maturing within sixty days from their date of
acquisition are valued at amortized cost, which approximates market value.
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 Trustees of the Fund.
(b) 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.
(c) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Interest income (including amortization of premium and discount) is
recognized on the accrual basis. Realized gains and losses on security
transactions are determined on the identified cost basis.
(d) Prepaid registration fees--Prepaid registration fees are charged to
expense as the related shares are issued.
(e) Repurchase agreements--The Fund invests in US Government securities
pursuant to repurchase agreements. Under such agreements, the bank or dealer
agrees to repurchase the security at a mutually agreed upon time and price.
The Fund takes possession of the underlying securities, marks to market such
securities daily and, if necessary, receives additional securities to ensure
that the contract is fully collateralized.
(f) Dividends and distributions to shareholders--The Fund declares dividends
daily and reinvests daily such dividends (net of non-resident alien tax and
back-up withholding tax withheld) in additional fund shares at net asset
value. Dividends and distributions are declared from the total of net
investment income and net realized gain or loss on investments.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services,
Inc. ("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co.,
Inc. ("ML & Co."), which is the limited partner. FAM 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:
0.50% of the Fund's average daily net assets not exceeding $500 million;
0.425% of the average daily net assets in excess of $500 million but not
exceeding $1 billion; and 0.375% of the average daily net assets in excess of
$1 billion.
The Fund has adopted a Distribution and Shareholder Servicing Plan in
compliance with Rule 12b-1 under the Investment Company Act of 1940, pursuant
to which Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S") receives a
distribution fee from the Fund at the end of each month at the annual rate of
45
<PAGE>
- --------------------------------------------------------------------------------
CMA Government Securities Fund
Notes to Financial Statements (concluded)
- --------------------------------------------------------------------------------
0.125% of average daily net assets of the Fund for shareholders
who maintain their accounts through MLPF&S. The distribution fee is to
compensate MLPF&S financial consultants and other directly involved branch
office personnel for selling shares of the Fund and for providing direct
personal services to shareholders. The distribution fee is not compensation
for the administrative and operational services rendered to the Fund by
MLPF&S in processing share orders and administering shareholder accounts.
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 FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or directors of
FAM, PSI, MLFDS, and/or ML & Co.
3. Transactions in Shares of Beneficial Interest:
The number of shares purchased and redeemed during the periods corresponds to
the amounts included in the Statements of Changes in Net Assets for net
proceeds from sale of shares and cost of shares redeemed, respectively, since
shares are recorded at $1.00 per share.
46
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
CMA Tax-Exempt Fund:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of CMA Tax-Exempt Fund as of March 31, 1998, 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 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 March
31, 1998 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 CMA Tax-Exempt Fund
as of March 31, 1998, the results of its operations, the changes in its net
assets, and the financial highlights for the respective stated years in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
May 8, 1998
47
<PAGE>
<TABLE><S> <C>
- -----------------------------------------------------------------------------------------------------------------
CMA TAX-EXEMPT FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 (IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------
Face Value
State Amount Issue (Note 1a)
- -----------------------------------------------------------------------------------------------------------------
Alabama--2.1% $ 67,500 Birmingham, Alabama, Medical Clinic Board Revenue Bonds (U.A.H.S.F.),
VRDN, 3.65% due 12/01/2026 (a) ........................................ $67,500
Columbia, Alabama, IDB, PCR, Refunding (Alabama Power Co. Project), VRDN (a):
25,000 Series A, 3.70% due 5/01/2022 ....................................... 25,000
21,500 Series E, 3.60% due 10/01/2022 ...................................... 21,500
McIntosh, Alabama, IDB, PCR (Ciba-Geigy Corporation Project), VRDN (a):
23,600 3.60% due 7/01/2004 ................................................. 23,600
7,600 Series A, 3.70% due 12/01/2003 ...................................... 7,600
5,900 Mobile, Alabama, IDB, PCR, Refunding (Alabama Power Co. Project),
VRDN, 3.70% due 6/01/2015 (a) ......................................... 5,900
9,680 Montgomery, Alabama, Special Care Facilities Financing Authority,
Health Care Facilities Revenue Bonds (Saint Margaret's Hospital--
Daughters of Charity), VRDN, 3.75% due 11/01/2013 (a) ................. 9,680
20,000 Parrish, Alabama, IDB, PCR, Refunding (Alabama Power Co. Project),
VRDN, 3.70% due 6/01/2015 (a) ......................................... 20,000
15,000 Stevenson, Alabama, IDB, Environmental Improvement Revenue Bonds
(Mead Corporation Project), VRDN, 3.75% due 1/01/2031 (a) ............. 15,000
- -----------------------------------------------------------------------------------------------------------------
Alaska--0.7% 10,400 Alaska Industrial Development and Export Authority Revolving Fund,
VRDN, AMT, Series B, 3.75% due 4/01/2023 (a) .......................... 10,400
Valdez, Alaska, Marine Terminal Revenue Bonds (Exxon Pipeline Co.
Project) (a):
27,300 DATES, 3.65% due 10/01/2025 ......................................... 27,300
12,000 Refunding, VRDN, Series A, 3.65% due 12/01/2033 ..................... 12,000
18,700 Refunding, VRDN, Series B, 3.65% due 12/01/2033 ..................... 18,700
- -----------------------------------------------------------------------------------------------------------------
Arizona--3.1% 26,300 Apache County, Arizona, IDA, IDR (Tucson Electric Power--Springerville
Project), VRDN, Series B, 3.85% due 12/15/2018 (a) .................... 26,300
10,200 Arizona Educational Loan Marketing Corporation Revenue Bonds, VRDN,
AMT, Series A, 3.75% due 3/01/2015 (a)(c) ............................. 10,200
6,350 Coconino County, Arizona, Pollution Control Corp. Revenue Bonds
(Arizona Public Service Co.--Navajo Project), VRDN, AMT, Series A, 3.80%
due 10/01/2029(a) ..................................................... 6,350
7,200 Maricopa County, Arizona, IDA, Hospital Facilities Revenue Bonds
(Samaritan Health Service Hospital), VRDN, Series B-2, 3.65% due
12/01/2008 (a)(c) ..................................................... 7,200
41,500 Maricopa County, Arizona, PCR (El Paso Electic Co. Project), VRDN,
Series A, 3.70% due 7/01/2014 (a) ..................................... 41,500
Maricopa County, Arizona, PCR, Refunding (Arizona Public Service
Co.), VRDN (a):
16,100 Series A, 3.60% due 5/01/2029 ....................................... 16,100
34,300 Series C, 3.70% due 5/01/2029 ....................................... 34,300
19,700 Series D, 3.65% due 5/01/2029 ....................................... 19,700
15,500 Series F, 3.70% due 5/01/2029 ....................................... 15,500
25,000 Maricopa County, Arizona, PCR, Refunding (El Paso Electric),
VRDN, Series A, 3.70% due 8/01/2015 (a) ............................... 25,000
5,000 Maricopa County, Arizona, School District No. 11, TAN, Series C,
4.60% due 6/30/1998 ................................................... 5,010
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Portfolio Abbreviations for CMA Tax-Exempt Fund
ACES(SM) Adjustable Convertible Extendable Securities
AMT Alternative Minimum Tax (subject to)
BAN Bond Anticipation Notes
COP Certificates of Participation
CP Commercial Paper
DATES Daily Adjustable Tax-Exempt Securities
EDA Economic Development Authority
GO General Obligation Bonds
HDA Housing Development Authority
IDA Industrial Development Authority
IDB Industrial Development Board
IDR Industrial Development Revenue Bonds
M/F Multi-Family
MSTR Municipal Securities Trust Receipts
PRC Pollution Control Revenue Bonds
RAN Revenue Anticipation Notes
S/F Single-Family
TAN Tax Anticipation Notes
TAW Tax Anticipation Warrants
TRAN Tax Revenue Anticipation Notes
UPDATES Unit Priced Adjustable Tax-Exempt Securities
UT Unlimited Tax
VRDN Variable Rate Demand Notes
48
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CMA TAX-EXEMPT FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 (CONTINUED) (IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------
Face Value
State Amount Issue (Note 1a)
- -----------------------------------------------------------------------------------------------------------------
Arizona $ 20,785 Phoenix, Arizona, Civic Improvement Corporation Revenue Bonds, VRDN,
(concluded) 3.80% due 7/01/2003 (a) .............................................. $ 20,785
6,200 Phoenix, Arizona, VRDN, Series 95-2, 3.70% due 6/01/2020(a) .......... 6,200
2,300 Pinal County, Arizona, IDA, PCR (Magma Copper/Newmont Mining Corp.),
VRDN, 3.65% due 12/01/2009 (a) ....................................... 2,300
Salt River Project, Arizona, Agricultural Improvement and Power
District, Electric System Revenue Bonds, CP:
9,850 3.65% due 5/06/1998 ................................................ 9,850
15,000 3.35% due 5/07/1998 ................................................ 15,000
11,460 3.55% due 7/09/1998 ................................................ 11,460
19,500 3.60% due 7/14/1998 ................................................ 19,500
- -----------------------------------------------------------------------------------------------------------------
California--5.4% California Higher Education Loan Authority, Inc., Student Loan
Revenue Bonds (i):
41,425 AMT, Series C, 3.95% due 6/01/1998 ................................. 41,425
3,250 Refunding, Series B, 4% due 7/01/1998 .............................. 3,250
33,000 Refunding, VRDN, AMT, Series E-1, 3.80% due 12/01/2022 (a) ......... 33,000
50,000 California Public Capital Improvements Financing Authority Revenue
Bonds (Pooled Loan Project), Series D, 3.60% due 6/15/1998 ........... 50,000
290,270 California State, CP, 4.50% due 6/30/1998 ............................ 290,803
20,000 Los Angeles County, California, Local Education Agency, COP, Pooled
TRAN, Series A, 4.50% due 6/30/1998 (g) .............................. 20,034
40,000 Los Angeles County, California, Metropolitan Transportation Authority
Revenue Bonds, Municipal Securities Trust Receipts, VRDN, Series 1,
3.70% due 7/01/2025 (a)(g) ........................................... 40,000
22,600 Tulane County, California, TRAN, 4.25% due 6/30/1998 ................. 22,624
- -----------------------------------------------------------------------------------------------------------------
Colorado--1.3% 72,000 Colorado Health Facilities Authority Revenue Bonds (Catholic Health),
VRDN, Series B, 3.70% due 12/01/2025 (a) ............................. 72,000
10,500 Denver, Colorado, City and County Airport Revenue Bonds, VRDN, AMT,
Series F, 3.80% due 11/15/2025 (a) ................................... 10,500
7,900 Moffat County, Colorado, PCR, Refunding (Pacificorp Projects), VRDN,
3.70% due 5/01/2013 (a)(e) ........................................... 7,900
14,755 Palomino Park, Colorado, Assessment Lien Revenue Bonds (Public
Improvements Corporation), VRDN, 4% due 12/01/2035 (a) ............... 14,755
Pitkin County, Colorado, IDR, Refunding (Aspen Skiing Co. Project),
VRDN (a):
6,500 AMT, Series B, 3.80% due 4/01/2014 ................................. 6,500
1,500 Series A, 3.70% due 4/01/2016 ...................................... 1,500
8,000 Westminster, Colorado, IDR, Refunding (Ball Corp. Project), VRDN,
3.70% due 6/01/2005 (a) .............................................. 8,000
- -----------------------------------------------------------------------------------------------------------------
Connecticut--0.6% 22,000 Connecticut State Special Assessment, Unemployment Compensation,
Advanced Fund Revenue Bonds (Connecticut Unemployment), Series C,
3.90% due 7/01/1998 (f) .............................................. 22,000
Eagle Tax-Exempt Trust, Connecticut, VRDN (a):
23,700 3.82% due 11/15/2004 ............................................... 23,700
13,200 Series 94, Class 1803, 3.70% due 8/15/2004 (b) ..................... 13,200
- -----------------------------------------------------------------------------------------------------------------
Delaware--0.4% 24,000 Delaware State, EDA, IDR, Refunding, VRDN, AMT, Series B (Delaware
Clean Power Project), 3.75% due 8/01/2029 (a) ........................ 24,000
Delaware State, EDA, Revenue Bonds (Delmarva Power & Light Co. Project),
VRDN, AMT (a):
4,400 3.85% due 10/01/2017 ............................................... 4,400
2,100 Series A, 3.85% due 10/01/2017 ..................................... 2,100
7,745 Delaware State, GO, Series A, 4.50% due 2/01/1999 .................... 7,799
- -----------------------------------------------------------------------------------------------------------------
District of District of Columbia, General Fund Recovery Bonds, VRDN, UT (a):
Columbia--1.4% 5,600 Series B-1, 3.65% due 6/01/2003 5,600
17,300 Series B-3, 3.65% due 6/01/2003 17,300
17,100 District of Columbia, Hospital Revenue Bonds (Providence Hospital--
Daughters of Charity), VRDN, Series 89-A, 3.75% due 12/01/2019 (a) ... 17,100
</TABLE>
49
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<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------
CMA TAX-EXEMPT FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 (CONTINUED) (IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------
Face Value
State Amount Issue (Note 1a)
- -----------------------------------------------------------------------------------------------------------------
District of District of Columbia, TRAN:
Columbia $ 28,400 Series A, 3.75% due 9/30/1998 ...................................... $ 28,400
(concluded) 37,000 Series B, 4.50% due 9/30/1998 ...................................... 37,112
26,700 Eagle Tax-Exempt Trust, District of Columbia, VRDN, Series 1994-A,
3.82% due 6/01/2005 (a) .............................................. 26,700
- -----------------------------------------------------------------------------------------------------------------
Florida--3.8% 33,245 Dade County, Florida, Aviation Revenue Refunding Bonds, VRDN, Series V,
3.65% due 10/01/2007 (a) ............................................. 33,245
66,200 Dade County, Florida, School District, TAN, 4.50% due 6/30/1998 ...... 66,313
72,300 Dade County, Florida, Water and Sewer System Revenue Bonds, VRDN, 3.65%
due 10/05/2022 (a)(f) ................................................ 72,300
23,700 Eagle Tax-Exempt Trust, Florida, VRDN, 3.70% due 7/01/2025 (a) ....... 23,700
14,100 Florida Local Government Finance Authority Revenue Bonds, CP, Series A,
3.70% due 5/08/1998 .................................................. 14,100
24,195 Florida State Municipal Power Agency Revenue Refunding Bonds (Stanton
Project), VRDN, 3.65% due 10/01/2019 (a)(c) .......................... 24,195
6,300 Hillsborough County, Florida, IDA, PCR, Refunding (Tampa Electric
Company Project), VRDN, 3.60% due 9/01/2025 (a) ...................... 6,300
5,000 Jacksonville, Florida, Revenue Bonds (YMCA Florida First Coast Project),
VRDN, 3.70% due 3/01/2018 (a) ........................................ 5,000
25,000 Palm Beach County, Florida, School District, TAN, 4.50% due 10/13/1998 25,100
11,100 Saint Lucie County, Florida, PCR, Refunding (Florida Power & Light Co.
Project), VRDN, 3.65% due 1/01/2026 (a) .............................. 11,100
4,900 Saint Lucie County, Florida, Solid Waste Disposal Revenue Bonds
(Florida Power & Light Co. Project), VRDN, AMT, 3.80% due 1/01/2027 (a) 4,900
23,500 Sarasota County, Florida, Public Hospital District Revenue Bonds, CP
(Sarasota Memorial Hospital Project), Series A, 3.60% due 4/01/1998 .. 23,500
Sunshine State Governmental Finance Commission, Florida, Revenue Bonds,
CP (e):
7,000 3.55% due 7/10/1998 ................................................ 7,000
17,700 3.60% due 7/10/1998 ................................................ 17,700
15,030 3.55% due 7/13/1998 ................................................ 15,030
6,560 Volusia County, Florida, Health Facilities Authority Revenue Bonds
(Pooled Hospital Loan Program), ACES, 3.70% due 11/01/2015 (a)(f) .... 6,560
- -----------------------------------------------------------------------------------------------------------------
Georgia--5.9% 6,095 Atlanta, Georgia, Airport Facilities Revenue Refunding Bonds, 5.25% due
1/01/1999 (e) 6,169
20,000 Burke County, Georgia, Development Authority, CP, PCR (Oglethorpe Power
Corporation--Plant Vogtle Project), Series A, 3.50% due 7/16/1998 (e) 20,000
Burke County, Georgia, Development Authority, PCR (Georgia Power
Company--Plant Vogtle Project), VRDN (a):
55,300 2nd Series, 3.70% due 4/01/2025 .................................... 55,300
17,700 3rd Series, 3.70% due 7/01/2024 .................................... 17,700
15,300 4th Series, 3.60% due 7/01/2024 .................................... 15,300
14,200 4th Series, 3.65% due 9/01/2025 .................................... 14,200
35,400 AMT, 3.75% due 9/01/2034 ........................................... 35,400
29,800 Refunding, 3.70% due 9/01/2026 ..................................... 29,800
32,300 Refunding, 1st Series, 3.65% due 4/01/2032 ......................... 32,300
21,200 Refunding, 3rd Series, 3.70% due 9/01/2025 ......................... 21,200
41,000 Cobb County, Georgia, TAN, 4% due 12/31/1998 ......................... 41,148
5,000 Doughterty County, Georgia, School District, TAN, 4% due 12/31/1998 .. 5,015
Eagle Tax-Exempt Trust, Georgia, VRDN (a):
9,500 3.50% due 11/01/2005 ............................................... 9,500
9,500 3.70% due 7/01/2020 ................................................ 9,500
3,290 Resource Finance Authority, 3.85% due 12/01/2016 ................... 3,290
8,604 Georgia Municipal Association, Pooled Bonds, COP, VRDN, 3.70% due
12/15/2020 (a)(c) .................................................... 8,604
Georgia Municipal Gas Authority Revenue Bonds, VRDN (a):
15,000 (Agency Project), Series A, 3.65% due 11/01/2006 ................... 15,000
59,750 (Gas Portfolio II Project), Series C, 3.65% due 1/01/2008 .......... 59,750
</TABLE>
50
<PAGE>
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------
CMA TAX-EXEMPT FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 (CONTINUED) (IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------
Face Value
State Amount Issue (Note 1a)
- -----------------------------------------------------------------------------------------------------------------
Georgia $ 15,800 Heard County, Georgia, Development Authority, PCR (Georgia Power Company
(concluded) Project), VRDN, 3.65% due 9/01/2029 (a) .............................. $ 15,800
Metropolitan Atlanta Rapid Transit Authority, Georgia, Sales Tax Revenue
Bonds, VRDN (a):
7,005 3.80% due 7/01/2002 ................................................ 7,005
7,340 3.80% due 7/01/2004 ................................................ 7,340
Monroe County, Georgia, Development Authority, PCR (Georgia Power Co.),
VRDN (a):
38,000 1st Series, 3.70% due 7/01/2025 .................................... 38,000
24,900 2nd Series, 3.60% due 7/01/2025 .................................... 24,900
5,355 Municipal Electric Authority, Georgia, Refunding (General Resolution
Projects), Sub-Series A, 5% due 1/01/1999 (c) ........................ 5,408
Putnam County, Georgia, Development Authority, PCR (Georgia Power
Company Plant Project), VRDN (a):
18,800 1st Series, 3.65% due 6/01/2023 .................................... 18,800
31,600 2nd Series, 3.70% due 9/01/2029 .................................... 31,600
- ----------------------------------------------------------------------------------------------------------------
Idaho--0.2% 22,600 Idaho Health Facilities Authority Revenue Bonds (Pooled Financing
Program), ACES, 3.60% due 10/01/2010 (a) ............................. 22,600
- ----------------------------------------------------------------------------------------------------------------
Illinois--8.1% 7,000 Chicago, Illinois, IDR (Enterprise Center VIII Project), VRDN, AMT,
3.95% due 6/01/2022 (a) .............................................. 7,000
Chicago, Illinois, O'Hare International Airport Revenue Bonds (American
Airlines), DATES (a):
20,200 Series A, 3.70% due 12/01/2017 ..................................... 20,200
25,600 Series B, 3.70% due 12/01/2017 ..................................... 25,600
23,500 Series C, 3.70% due 12/01/2017 ..................................... 23,500
18,200 Series D, 3.70% due 12/01/2017 ..................................... 18,200
6,430 Chicago, Illinois, O'Hare International Airport Revenue Bonds (General
Airport), VRDN, Second Lien, Series B, 3.65% due 1/01/2015 (a) ....... 6,430
14,800 Chicago, Illinois, O'Hare International Airport, Special Facilities
Revenue Bonds (Compagnie Nationale--Air France), VRDN, AMT, 3.80%
due 5/01/2018 (a) .................................................... 14,800
24,000 Chicago, Illinois, Park District, TAW, 4.75% due 9/21/1998 ........... 24,098
16,895 Chicago, Illinois, VRDN, Series B, 3.70% due 1/01/2012 (a) ........... 16,895
Eagle Tax-Exempt Trust, Chicago, Illinois, VRDN (a):
13,800 Series 95, Class 7090, 3.75% due 10/31/2002 ........................ 13,800
19,000 Series 96C, 3.70% due 1/01/2023 .................................... 19,000
42,200 Illinois Development Finance Authority, PCR, Refunding (Commonwealth
Edison Company Project), VRDN, Series B, 3.65% due 10/15/2014 (a) .... 42,200
Illinois Development Finance Authority, Revenue Bonds, VRDN (a):
8,300 (Lyric Opera Chicago Project), 3.70% due 12/01/2028 ................ 8,300
6,000 (Olin Corporation Project), Series A, 3.70% due 6/01/2004 .......... 6,000
Illinois Educational Facilities Authority Revenue Bonds, VRDN (a):
16,800 (Art Institute of Chicago), 3.75% due 3/01/2027 .................... 16,800
5,100 (Chicago Historical Society), 3.70% due 12/01/2025 ................. 5,100
26,500 (Illinois Institute of Technology), Series A, 3.70% due 9/01/2025 .. 26,500
20,000 (The Adler Planetarium), 3.70% due 4/01/2031 ....................... 20,000
Illinois Health Facilities Authority Revenue Bonds, VRDN (a):
6,900 (Central Dupage Healthcorp. Project), 3.70% due 11/01/2020 ......... 6,900
29,550 (Franciscan Sisters Health Service), 3.75% due 1/01/2018 ........... 29,550
8,400 (Hospital Sisters Services, Inc.), Series E, 3.70% due 12/01/2014(c) 8,400
41,800 (Northwest Community Hospital), 3.70% due 7/01/2025 ................ 41,800
11,400 (Northwestern Memorial Hospital), 3.70% due 8/15/2025 .............. 11,400
7,000 (Pooled Financing Program), Series F, 3.65% due 8/01/2015 .......... 7,000
84,800 Refunding (Advocate Health Care), Series B, 3.75% due 8/15/2022 .... 84,800
20,000 Refunding (Little Company of Mary Hospital), Series B, 3.80% due
8/15/2021 (c) ...................................................... 20,000
47,400 (Resurrection Health Care System), 3.70% due 5/01/2011 ............. 47,400
</TABLE>
51
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<TABLE>
<S> <C>
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CMA TAX-EXEMPT FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 (CONTINUED) (IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------
Face Value
State Amount Issue (Note 1a)
- -----------------------------------------------------------------------------------------------------------------
Illinois Illinois Health Facilities Authority Revenue Bonds (Evanston Hospital
(concluded) Corporation Project):
$ 22,000 CP, 3.85% due 11/30/1998 ........................................... $ 22,000
12,000 CP, Series A, 3.90% due 7/31/1998 .................................. 12,000
12,000 CP, Series A, 3.90% due 10/15/1998 ................................. 12,000
10,000 Series B, 3.95% due 4/30/1998 ...................................... 10,000
10,000 Series C, 3.95% due 4/30/1998 ...................................... 10,000
10,000 Series D, 3.95% due 4/30/1998 ...................................... 10,000
41,140 Illinois Housing Development Authority Revenue Bonds (Homeowner
Mortgage), AMT, Sub-Series B-2, 4.15% due 7/07/1998 .................. 41,140
18,815 Illinois State, GO, VRDN, UT, Series 60, 3.80% due 8/01/2019 (a)(c) .. 18,815
4,900 Illinois Student Assistance Commission, Student Loan Revenue Bonds, VRDN,
AMT, Series A, 3.75% due 3/01/2006 (a) ............................... 4,900
21,350 Regional Transportation Authority, Illinois, VRDN, Series 82, 3.80% due
6/01/2025 (a)(c) ..................................................... 21,350
Southwestern Illinois Development Authority, Solid Waste Disposal
Revenue Bonds (Shell Oil Co.--Wood River Project), VRDN, AMT (a):
11,100 3.75% due 8/01/2021 ................................................ 11,100
10,600 3.75% due 4/01/2022 ................................................ 10,600
- -----------------------------------------------------------------------------------------------------------------
Indiana--2.8% 3,200 Elkhardt County, Indiana, Mortgage Revenue Bonds (Hubbard Hill Estates),
VRDN, Series A, 3.65% due 7/01/2027 (a) .............................. 3,200
Fort Wayne, Indiana, Hospital Authority Revenue Bonds (Parkview Memorial
Hospital), VRDN (a):
1,645 Series B, 3.70% due 1/01/2016 ...................................... 1,645
2,700 Series B, 3.70% due 1/01/2020 ...................................... 2,700
3,505 Series C, 3.70% due 1/01/2016 ...................................... 3,505
5,670 Series D, 3.70% due 1/01/2016 ...................................... 5,670
5,800 Hammond, Indiana, PCR, Refunding (Amoco Oil Co. Project), VRDN, 3.65%
due 2/01/2022 (a) .................................................... 5,800
Indiana Bond Bank, Advance Funding Notes:
10,190 Series A-1, 4% due 7/28/1998 ....................................... 10,205
48,500 Series A-2, 4% due 1/20/1999 ....................................... 48,661
Indiana Health Facilities Financing Authority, Hospital Revenue Bonds,
VRDN (a):
10,650 (Capital Access Designated Pool), 3.70% due 1/01/2012 .............. 10,650
20,700 (Clarian Health Partners, Inc), Series B, 3.75% due 2/15/2026 ...... 20,700
15,000 (Community Hospitals Project), Series A, 3.75% due 7/01/2027 ....... 15,000
15,000 Refunding (Charity Obligation Group), Series E, 3.65% due 11/01/2026 15,000
18,200 Refunding (Clarian Health Partners, Inc.), Series A, 3.75% due
2/15/2026 (c) ...................................................... 18,200
Indiana Secondary Market Educational Loans Incorporated, Student Loan
Revenue Bonds, VRDN, AMT, Series B (a)(e):
26,900 3.80% due 12/01/2013 ............................................... 26,900
22,500 3.80% due 12/01/2014 ............................................... 22,500
Jasper County, Indiana, PCR, Refunding (Northern Indiana Public Service
Co.), VRDN (a):
8,000 Series B, 3.70% due 6/01/2013 ...................................... 8,000
11,600 Series C, 3.70% due 4/01/2019 ...................................... 11,600
9,400 Princeton, Indiana, PCR, Refunding (PSI Energy Inc. Project), VRDN, 3.65%
due 4/01/2022 (a) .................................................... 9,400
9,000 Purdue University, Indiana, University Revenue Bonds (Student Fees),
VRDN, Series O, 3.60% due 7/01/2019 (a) .............................. 9,000
Rockport, Indiana, PCR, Refunding (AEP Generating Co. Project), VRDN
(a)(e):
14,200 Series A, 3.70% due 7/01/2025 ...................................... 14,200
800 Series B, 3.70% due 7/01/2025 ...................................... 800
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
52
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<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------
CMA TAX-EXEMPT FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 (CONTINUED) (IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------
Face Value
State Amount Issue (Note 1a)
- -----------------------------------------------------------------------------------------------------------------
Iowa--1.8% $ 5,000 Chillicothe, Iowa, PCR, Refunding (Iowa-Illinois Gas & Electric
Project), VRDN, 3.75% due 1/01/2023 (a) .............................. $ 5,000
Iowa Finance Authority, Solid Waste Disposal Revenue Bonds (Cedar
River Paper Company Project), VRDN, Series A (a):
66,400 3.80% due 7/01/2023 66,400
42,000 AMT, 3.80% due 6/01/2024 ........................................... 42,000
20,500 AMT, 3.80% due 5/01/2025 ........................................... 20,500
14,500 Iowa Student Loan Liquidity Corporation, Student Loan Revenue Bonds,
VRDN, AMT, Series B, 3.75% due 12/01/2013 (a)(e) ..................... 14,500
19,200 Polk County, Iowa, Revenue Bonds (Catholic Health), VRDN, Series B,
3.70% due 12/01/2015 (a) ............................................. 19,200
- -----------------------------------------------------------------------------------------------------------------
Kansas--0.5% 9,100 Butler County, Kansas, Solid Waste Disposal Facilities Revenue Bonds
(Texaco Refining and Marketing Project), VRDN, AMT, Series A, 3.80%
due 8/01/2024 (a) .................................................... 9,100
38,000 Kansas State, Department of Transportation, Highway Revenue Bonds,
VRDN, Series B, 3.65% due 6/03/1998 (a)(b) ........................... 38,000
- -----------------------------------------------------------------------------------------------------------------
Kentucky--2.7% 5,100 Ashland, Kentucky, PCR (Calgon Carbon Corporation Project), VRDN,
Series A, 3.90% due 10/01/2006 (a) ................................... 5,100
22,700 Carroll County, Kentucky, Solid Waste Disposal Facilities Revenue Bonds
(Kentucky Utilities Co. Project), VRDN, AMT, Series A, 3.80% due
11/01/2024 (a) ....................................................... 22,700
Daviess County, Kentucky, Solid Waste Disposal Facilities Revenue Bonds
(Scott Paper Co. Project), VRDN, AMT (a):
29,100 Series A, 3.75% due 12/01/2023 ..................................... 29,100
9,300 Series A, 3.75% due 5/01/2024 ...................................... 9,300
19,800 Series B, 3.75% due 12/01/2023 ..................................... 19,800
21,700 Series B, 3.75% due 5/01/2024 ...................................... 21,700
13,000 Kentucky Asset/Liability Commission, General Fund Revenue Bonds, TRAN,
4.50% due 6/25/1998 .................................................. 13,020
36,400 Kentucky Economic Development Finance Authority Revenue Bonds (Sisters of
Charity), VRDN, 3.70% due 11/01/2020 (a) ............................. 36,400
27,421 Kentucky Interlocal School Transportation Association, COP, TRAN, 4.09%
due 6/30/1998 ........................................................ 27,425
30,805 Kentucky School Boards Finance Corporation, COP, TRAN, Series A, 4.25%
due 6/30/1998 ........................................................ 30,828
38,300 Kentucky State Pollution Abatement and Water Resource Finance Authority,
PCR (Toyota Motors), VRDN, AMT, 4.30% due 8/13/2006 (a) .............. 38,300
- -----------------------------------------------------------------------------------------------------------------
Louisiana--1.7% 31,500 Calcasieu Parish, Louisiana, IDB, Environmental Revenue Refunding Bonds
(Citgo Petroleum Corporation), VRDN, AMT, 3.80% due 3/01/2025 (a) .... 31,500
8,800 Eagle Tax-Exempt Trust, Louisiana State, VRDN, Series 94, Class 3803,
3.82% due 5/01/2008 (a) .............................................. 8,800
East Baton Rouge Parish, Louisiana, PCR, Refunding (Exxon Project),
VRDN (a):
10,750 3.70% due 11/01/2019 ............................................... 10,750
22,150 3.70% due 3/01/2022 ................................................ 22,150
Louisiana State Offshore Terminal Authority, Deepwater Port Revenue
Refunding Bonds (Loop Inc.--First Stage) (a):
5,100 ACES, 3.65% due 9/01/2006 .......................................... 5,100
14,250 VRDN, Series A, 3.65% due 9/01/2008 ................................ 14,250
14,100 Plaquemines Parish, Louisiana, Environmental Revenue Bonds (BP Exploration
& Oil), VRDN, AMT, 3.80% due 10/01/2024 (a) .......................... 14,100
Saint Charles Parish, Louisiana, PCR, VRDN (a):
19,200 (Shell Oil Company--Norco Project), AMT, 3.75% due 11/01/2021 ...... 19,200
4,400 (Shell Oil Company Project), 3.60% due 6/01/2005 ................... 4,400
21,000 (Shell Oil Company Project), AMT, Series A, 3.75% due 10/01/2022 ... 21,000
4,400 South Louisiana Port Commission, Louisiana, Port Revenue Refunding Bonds
(Occidental Petroleum Corporation Project), VRDN, 3.75% due 7/01/2018
(a) .................................................................. 4,400
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE>
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------
CMA TAX-EXEMPT FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 (CONTINUED) (IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------
Face Value
State Amount Issue (Note 1a)
- -----------------------------------------------------------------------------------------------------------------
Maine--0.0% Maine Health and Higher Educational Facilities Authority Revenue Bonds
(VHA New England Inc.), VRDN (a)(e):
$ 1,250 Series B, 3.70% due 12/01/2025 ..................................... $ 1,250
1,450 Series F, 3.70% due 12/01/2025 ..................................... 1,450
- -----------------------------------------------------------------------------------------------------------------
Maryland--0.7% 35,700 Baltimore, Maryland, Port Facilities Revenue Bonds (Occidental Petroleum
Corporation), VRDN, 3.25% due 10/14/2011 (a) ......................... 35,700
19,700 Maryland State Health and Higher Educational Facilities Authority Revenue
Bonds (Helix Health Hospital), VRDN, Issue A, 3.65% due 7/01/2026 (a) 19,700
8,200 Washington Suburban Sanitation District, Maryland, BAN, UT, 3.75% due
1/01/1999 ............................................................ 8,200
- -----------------------------------------------------------------------------------------------------------------
Massachusetts-- 20,900 Eagle Tax-Exempt Trust, Massachusetts, GO, VRDN, Series J, 3.70% due
1.7% 8/01/2005 (a) ........................................................ 20,900
139,250 Massachusetts Bay Transportation Authority, Series B, 4.50% due 9/04/1998 139,609
- -----------------------------------------------------------------------------------------------------------------
Michigan--4.7% 17,100 Grand Rapids, Michigan, Water Supply System, Revenue Refunding Bonds, VRDN,
3.60% due 1/01/2020 (a)(f) ........................................... 17,100
8,460 Holly, Michigan, Area School District, VRDN, UT, Series 50, 3.80% due
5/01/2020 (a)(f) ..................................................... 8,460
58,500 Michigan Municipal Bond Authority Revenue Notes, Series B, 4.50% due
7/02/1998 ............................................................ 58,598
237,000 Michigan State Notes, GO, UT, 4.50% due 9/30/1998 .................... 237,874
6,150 Michigan State Strategic Fund, Limited Obligation Revenue Refunding Bonds
(Detroit Edison Company), VRDN, Series CC, 3.70% due 9/01/2030 (a) ... 6,150
17,300 Monroe County, Michigan, Economic Development Corporation, Limited
Obligation Revenue Refunding Bonds (Detroit Edison Co.), VRDN, Series
CC, 3.70% due 10/01/2024 (a) ......................................... 17,300
Royal Oak, Michigan, Hospital Finance Authority Revenue Bonds (William
Beaumont Hospital), VRDN (a):
10,700 Series J, 3.70% due 1/01/2003 ...................................... 10,700
11,400 Series L, 3.70% due 1/01/2027 ...................................... 11,400
University of Michigan, University Hospital Revenue Bonds, VRDN,
Series A (a):
43,900 3.70% due 12/01/2027 ............................................... 43,900
15,900 (Medical Service Plan), 3.70% due 12/01/2027 ....................... 15,900
9,800 Refunding, 3.70% due 12/01/2019 .................................... 9,800
- -----------------------------------------------------------------------------------------------------------------
Minnesota--0.5% 45,000 Eagle Tax-Exempt Trust, Minnesota, GO, VRDN, Series A, 3.70% due
11/12/1998 (a) ....................................................... 45,000
- -----------------------------------------------------------------------------------------------------------------
Mississippi--0.8% 7,000 Jackson County, Mississippi, Individual Sewer Facilities Revenue
Bonds (Chevron USA, Inc. Project), VRDN, 3.80% due 12/15/2024 (a) .... 7,000
8,755 Jackson County, Mississippi, PCR, Refunding (Chevron USA, Inc. Project),
VRDN, 3.65% due 12/01/2016 (a) ....................................... 8,755
26,060 Jackson County, Mississippi, Port Facility Revenue Refunding Bonds
(Chevron USA, Inc. Project), VRDN, 3.70% due 6/01/2023 (a) ........... 26,060
3,000 Mississippi Hospital Equipment and Facilities Authority Revenue Bonds
(Mississippi Baptist Medical Center), VRDN, Series B, 3.65% due
7/01/2012 (a) ........................................................ 3,000
28,400 Perry County, Mississippi, PCR, Refunding (Leaf River Forest Project),
VRDN, 3.65% due 3/01/2002 (a) ........................................ 28,400
- -----------------------------------------------------------------------------------------------------------------
Missouri--0.6% 30,000 Eagle Tax-Exempt Trust, Missouri, VRDN, Series 1993-E, 3.82% due
8/01/2006 (a) ........................................................ 30,000
Missouri Higher Education Loan Authority, Student Loan Revenue Bonds,
VRDN, AMT (a):
7,800 Series A, 3.80% due 6/01/2017 ...................................... 7,800
11,700 Series B, 3.80% due 6/01/2020 ...................................... 11,700
5,000 Missouri State Health and Educational Facilities Authority, Health
Facilities Revenue Bonds (Sisters of Mercy Health System), VRDN,
Series A, 3.65% due 6/01/2019 (a) .................................... 5,000
- -----------------------------------------------------------------------------------------------------------------
Montana--0.5% 50,000 Montana State, TRAN, 4.50% due 6/30/1998 ............................. 50,082
- -----------------------------------------------------------------------------------------------------------------
Nebraska--0.1% 3,100 Nebraska Higher Education Loan Program, Multiple Mode Student Loan
Revenue Bonds, VRDN, Series C, 3.70% due 12/01/2015 (a)(c) ........... 3,100
3,550 Nebraska Higher Education Loan Program, Student Loan Revenue Bonds, VRDN,
AMT, Series A, 3.80% due 12/01/2016 (a) .............................. 3,550
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
54
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<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------
CMA TAX-EXEMPT FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 (CONTINUED) (IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------
Face Value
State Amount Issue (Note 1a)
- -----------------------------------------------------------------------------------------------------------------
Nevada--1.2% Clark County, Nevada, Airport Improvement Revenue Bonds:
$ 12,090 (Knudson Project), CP, Series 87-A, 3.70% due 5/07/1998 ............ $ 12,090
95,425 Refunding, VRDN, Series A, 3.65% due 7/01/2012 (a)(c) .............. 95,425
7,075 Nevada Housing Division (Mesquite Bluffs Apartments), VRDN, AMT, Series B,
4.15% due 5/01/2028 (a) .............................................. 7,075
- -----------------------------------------------------------------------------------------------------------------
New Hampshire-- 1,400 New Hampshire Higher Educational and Health Facilities Authority Revenue
0.3% Bonds (VHA New England Inc.), VRDN, Series D, 3.70% due 12/01/2025
(a)(e) ............................................................... 1,400
22,000 New Hampshire State, Business Finance Authority, PCR, Refunding (United
Illuminating Company), VRDN, AMT, Series A, 3.80% due 7/01/2027 (a) .. 22,000
5,700 New Hampshire State, HFA, M/F Housing Revenue Bonds (P.R.A. Properties--
Pheasant Run Project), VRDN, AMT, 3.75% due 5/01/2025 (a) ............ 5,700
- -----------------------------------------------------------------------------------------------------------------
New Jersey-- 15,000 Atlantic City, New Jersey, BAN, UT, 4.25% due 8/27/1998 .............. 15,027
0.4% 27,300 Eagle Tax-Exempt, New Jersey, VRDN, 3.70% due 2/15/2007 (a) .......... 27,300
- -----------------------------------------------------------------------------------------------------------------
New Mexico-- Farmington, New Mexico, PCR (Arizona Public Service Co.), VRDN (a):
1.0% 22,000 AMT, Series C, 3.80% due 9/01/2024 ................................. 22,000
25,300 Refunding, Series A, 3.70% due 5/01/2024 ........................... 25,300
9,200 Refunding, Series B, 3.65% due 9/01/2024 ........................... 9,200
8,600 Hurley, New Mexico, PCR (Kennecott Santa Fe), VRDN, 3.70% due 12/01/2015
(a) .................................................................. 8,600
32,900 New Mexico State Hospital, Equipment Loan Council Revenue Bonds
(Catholic Health), VRDN, Series B, 3.70% due 12/01/2022 (a) .......... 32,900
- -----------------------------------------------------------------------------------------------------------------
New York-- 20,000 Copake Taconic Hills, New York, Century School District, BAN, 4.25% due
5.5% 4/08/1999 ............................................................ 20,106
12,000 Floating Rate Trust Certificates, New York City, New York, VRDN,
Series 1992-H, 3.90% due 10/02/1998 (a) .............................. 12,000
20,000 Municipal Assistance Corporation, New York City, New York, VRDN, Sub-
Series K-1, 3.50% due 7/01/2008 (a) .................................. 20,000
New York City, New York, GO, VRDN, UT (a):
8,400 Series B, Sub-Series B-3, 3.70% due 8/15/2004 (c) .................. 8,400
3,000 Sub-Series A-7, 3.70% due 8/01/2019 3,000
15,000 New York City, New York, Housing Development Corporation, M/F Housing
Rental Revenue Bonds, VRDN, Series A, 3.50% due 11/15/2019 (a)(d) .... 15,000
New York City, New York, Municipal Water Finance Authority, Water and
Sewer System Revenue Bonds, VRDN (a):
21,500 MSTR, Series 27, 3.80% due 6/15/2024 (g) ........................... 21,500
17,770 Series 93-C, 3.70% due 6/15/2022 (f) ............................... 17,770
38,450 Series A, 3.70% due 6/15/2025 (f) .................................. 38,450
25,500 Series C, 3.70% due 6/15/2023 (f) .................................. 25,500
32,600 Series G, 3.65% due 6/15/2024 (f) .................................. 32,600
92,500 New York City, New York, RAN, UT, Series A, 4.50% due 6/30/1998 ...... 92,670
16,100 New York City, New York, VRDN, Series B, Sub-Series B-5, 3.65% due
8/15/2022 (a)(c) ..................................................... 16,100
New York State, Local Government Assistance Corporation, VRDN (a):
19,000 Series 59, 3.70% due 4/01/2019 (e) ................................. 19,000
16,300 Series B, 3.45% due 4/01/2025 ...................................... 16,300
55,065 New York State Power Authority, Revenue and General Purpose Bonds
(Junior Lien), 3.60% due 9/01/1998 ................................... 55,065
13,200 Port Authority of New York and New Jersey, Special Obligation Revenue
Bonds (Versatile Structure Obligation), VRDN, AMT, Series 6, 3.70%
due 12/01/2017 (a) ................................................... 13,200
40,000 Rochester, New York, BAN, UT, Series IV, 4.25% due 10/29/1998 ........ 40,085
49,500 Westchester County, New York, TAN, UT, 3.59% due 12/29/1998 .......... 49,506
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
55
<PAGE>
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------
CMA TAX-EXEMPT FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 (CONTINUED) (IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------
Face Value
State Amount Issue (Note 1a)
- -----------------------------------------------------------------------------------------------------------------
North Carolina-- Craven County, North Carolina, Industrial Facilities and Pollution
0.5% Control Financing Authority (Cravenwood Energy Project), VRDN, AMT (a):
$ 2,800 Series B, 3.75% due 5/01/2011 ...................................... $ 2,800
3,000 Series C, 3.75% due 5/01/2011 ...................................... 3,000
16,875 North Carolina Medical Care Commission, Health Care Facilities Revenue
Bonds (Cabarrus Memorial Hospital Project), VRDN, 3.60% due
3/01/2012 (a) ........................................................ 16,875
North Carolina Medical Care Commission, Hospital Revenue Bonds, VRDN (a):
9,000 (Carol Woods Project), 3.75% due 4/01/2021 ......................... 9,000
1,700 (Duke University Hospital), Series B, 3.60% due 6/01/2015 .......... 1,700
2,000 (Duke University Hospital), Series C, 3.60% due 6/01/2015 .......... 2,000
Raleigh-Durham, North Carolina, Airport Authority, Special Facility
Revenue Refunding Bonds (American Airlines), VRDN (a):
8,300 Series A, 3.70% due 11/01/2015 ..................................... 8,300
2,000 Series B, 3.70% due 11/01/2015 ..................................... 2,000
- -----------------------------------------------------------------------------------------------------------------
Ohio--1.4% 12,150 Cuyahoga County, Ohio, Hospital Revenue Refunding Bonds, VRDN, Series
A, 3.70% due 1/01/2016 (a)(e) ........................................ 12,150
10,500 Eagle Tax-Exempt Trust, Ohio, VRDN, 3.77% due 7/01/2015 (a) .......... 10,500
18,600 Franklin County, Ohio, Hospital Revenue Refunding and Improvement Bonds
(US Health Corp.--Columbus), VRDN, Series A, 3.70% due 12/01/2021 (a) 18,600
25,000 Mahoning County, Ohio, Hospital Facilities Revenue Refunding Bonds, VRDN,
Series A, 3.70% due 12/01/2028 (a)(c) ................................ 25,000
32,500 Montgomery County, Ohio, Revenue Refunding Bonds (Miami Valley Hospital),
VRDN, Series A, 3.70% due 11/15/2022 (a) ............................. 32,500
1,865 Ohio HFA, M/F Housing Revenue Bonds (Kenwood Congregate Retirement
Program), VRDN, 3.40% due 12/01/2015 (a) ............................. 1,865
Ohio State Air Quality Development Authority Revenue Bonds, VRDN,
Series B (a):
13,900 3.70% due 12/01/2015 ............................................... 13,900
8,100 Refunding (Cincinnati Gas & Electric), 3.65% due 9/01/2030 ......... 8,100
4,200 Paudling County, Ohio, Solid Waste Disposal Revenue Bonds (Lafarge
Corporation Project), VRDN, AMT, 3.50% due 8/01/2026 (a) ............. 4,200
- -----------------------------------------------------------------------------------------------------------------
Oklahoma-- 10,250 Grand River, Oklahoma, Dam Authority Revenue Bonds, VRDN, Series 42,
0.3% 3.80% due 6/01/2009 (a) .............................................. 10,250
14,200 Muskogee, Oklahoma, Industrial Trust, PCR, Refunding (Oklahoma Gas and
Electric Co.), VRDN, Series A, 3.75% due 1/01/2025 (a) ............... 14,200
- -----------------------------------------------------------------------------------------------------------------
Oregon--0.9% 64,000 Multnomah County, Oregon, Portland School District No.1 Bonds, TRAN,
4.25% due 6/26/1998 .................................................. 64,066
18,000 Oregon State, GO, Veterans' Welfare Bonds, VRDN, Series 73-E, 3.60% due
12/01/2016 (a) ....................................................... 18,000
- -----------------------------------------------------------------------------------------------------------------
Pennsylvania-- Allegheny County, Pennsylvania, Hospital Development Authority Revenue
3.5% Bonds (Presbyterian Health Center), VRDN (a):
5,000 Series A, 3.70% due 3/01/2020 (c) 5,000
6,300 Series C, 3.70% due 3/01/2020 6,300
33,500 Allegheny County, Pennsylvania, IDA, PCR (Duquesne), CP, Series A, 3.60%
due 1/27/1999 ........................................................ 33,500
2,500 Butler County, Pennsylvania, IDA, IDR, Refunding (Wetterau Finance Co.
Project), VRDN, 3.80% due 12/01/2014 (a) ............................. 2,500
Delaware County, Pennsylvania, IDA, PCR (a):
5,600 (BP Oil Inc. Project), UPDATES, 3.70% due 12/01/2009 ............... 5,600
15,700 Refunding, VRDN, Series A, 3.70% due 8/01/2016 ..................... 15,700
Eagle Tax-Exempt Trust, Pennsylvania, VRDN (a):
12,300 3.82% due 5/01/2015 ................................................ 12,300
17,000 Series 94, Class 3803, 3.82% due 5/01/2008 ......................... 17,000
35,000 Emmaus, Pennsylvania, General Authority Revenue Bonds, VRDN, 3.75% due
12/01/2028 (a)(g) .................................................... 35,000
</TABLE>
56
<PAGE>
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------
CMA TAX-EXEMPT FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 (CONTINUED) (IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------
Face Value
State Amount Issue (Note 1a)
- -----------------------------------------------------------------------------------------------------------------
Pennsylvania $ 2,600 Geisinger, Pennsylvania, Health Systems Authority Revenue Bonds, VRDN,
(concluded) Series B, 3.70% due 7/01/2022 (a) .................................... $ 2,600
12,000 Lackawanna County, Pennsylvania, MSTR, VRDN, Series 38, 3.80% due
9/15/2020 (a) ........................................................ 12,000
1,000 Montgomery County, Pennsylvania, Higher Education and Health Authority,
Hospital Revenue Bonds (Holy Redeemer Hospital), VRDN, 3.65% due
9/01/2018 (a)(e) ..................................................... 1,000
Pennsylvania State Higher Education Assistance Agency, Student Loan
Revenue Bonds, VRDN, AMT (a):
11,200 Series A, 3.80% due 1/01/2018 ...................................... 11,200
5,000 Series B, 3.80% due 7/01/2018 ...................................... 5,000
18,725 Pennsylvania State Higher Educational Facilities Authority, College
and University Revenue Bonds (Temple University), VRDN, 3.65% due
10/01/2009 (a) ....................................................... 18,725
Pennsylvania State Higher Educational Facilities Authority, Revenue
Refunding Bonds (Carnegie Mellon University), VRDN (a):
30,700 Series A, 3.70% due 11/01/2025 ..................................... 30,700
18,600 Series B, 3.70% due 11/01/2027 ..................................... 18,600
15,000 Series C, 3.70% due 11/01/2029 ..................................... 15,000
13,200 Series D, 3.70% due 11/01/2030 ..................................... 13,200
Philadelphia, Pennsylvania, Hospital and Higher Education Facilities
Authority, Hospital Revenue Bonds (Children's Hospital of Philadelphia),
VRDN (a):
7,100 3.70% due 3/01/2027 ................................................ 7,100
42,000 Series A, 3.70% due 3/01/2027 ...................................... 42,000
6,700 Philadelphia, Pennsylvania, IDA, Revenue Bonds (Institute for Cancer
Research Project), VRDN, Series A, 3.70% due 7/01/2013 (a) ........... 6,700
10,400 Philadelphia, Pennsylvania, TRAN, Series A, 4.50% due 6/30/1998 ...... 10,412
5,200 Schuylkill County, Pennsylvania, IDA, Resource Recovery Revenue Refunding
Bonds (Northeastern Power Company), VRDN, Series A, 3.60% due 12/01/2022
(a) .................................................................. 5,200
- -----------------------------------------------------------------------------------------------------------------
South Carolina-- 15,300 Berkeley County, South Carolina, Industrial Revenue Bonds (Amoco Chemical
1.9% Co. Project), VRDN, AMT, 3.75% due 4/01/2027 (a) ..................... 15,300
2,000 Berkeley County, South Carolina, PCR, Refunding (Amoco Chemical Co. Project),
VRDN, 3.65% due 7/01/2012 (a) ........................................ 2,000
Florence County, South Carolina, Solid Waste Disposal and Wastewater
Treatment Facilities Revenue Bonds (Roche Carolina Inc. Project),
VRDN, AMT (a):
35,000 3.80% due 4/01/2026 ................................................ 35,000
2,900 3.80% due 4/01/2027 ................................................ 2,900
15,000 Greenville County, South Carolina, School District (Enhance Program), UT,
4% due 3/01/1999 ..................................................... 15,061
South Carolina Jobs, EDA, Revenue Bonds, VRDN (a):
4,490 (Saint Francis Hospital Project), 3.75% due 7/01/2022 .............. 4,490
5,400 (Wellman, Inc. Project), AMT, 3.80% due 12/01/2010 ................. 5,400
12,095 (Wellman, Inc. Project), AMT, 3.80% due 12/01/2012 ................. 12,095
13,000 South Carolina Jobs, EDA, Solid Waste Recycling Facilities (Santee
River Rubber Project), 3.80% due 4/02/1998 ........................... 13,000
South Carolina State, Public Service Authority, Electric System Revenue
Bonds, CP:
18,000 3.45% due 5/12/1998 ................................................ 18,000
25,000 3.50% due 7/21/1998 ................................................ 25,000
25,000 3.50% due 7/22/1998 ................................................ 25,000
4,500 South Carolina State, Public Service Authority, Revenue Refunding Bonds,
Series B, 5% due 1/01/1999 (e) ....................................... 4,547
- -----------------------------------------------------------------------------------------------------------------
South Dakota-- 20,000 Lawrence County, South Dakota, Solid Waste Disposal Revenue Bonds
0.2% (Homestake Mining), VRDN, AMT, Series A, 3.75% due 7/01/2032 (a) ..... 20,000
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
57
<PAGE>
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------
CMA TAX-EXEMPT FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 (CONTINUED) (IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------
Face Value
State Amount Issue (Note 1a)
- -----------------------------------------------------------------------------------------------------------------
Tennessee-- $ 14,500 Chattanooga--Hamilton County, Tennessee, Hospital Revenue Refunding Bonds
1.5% (Erlanger Medical Center), VRDN, 3.70% due 10/01/2017 (a) ............ $ 14,500
Clarksville, Tennessee, Public Building Authority Revenue Bonds (Pooled
Financing--Tennessee Municipal Bond Fund), VRDN (a):
16,000 3.70% due 10/01/2025 ............................................... 16,000
25,000 3.70% due 11/01/2027 ............................................... 25,000
9,400 Cleveland, Tennessee, IDB, Revenue Bonds (Newly Wed Foods Incorporated
Project), VRDN, AMT, 3.75% due 1/01/2012 (a) ......................... 9,400
8,100 Loudon, Tennessee, IDB, PCR, Refunding (A.E. Staley Manufacturing Co.
Project), VRDN, 3.65% due 9/01/2001 (a) .............................. 8,100
13,000 Montgomery County, Tennessee, Public Building Authority Revenue Bonds
(Montgomery County Loan), VRDN, 3.70% due 7/01/2019 (a) .............. 13,000
14,955 Morristown, Tennessee, IDB, PCR, Refunding (Akzo Chemicals, Inc. Project),
VRDN, 3.65% due 8/01/2001 (a) ........................................ 14,955
26,500 Tennessee State, CP, 3.55% due 7/24/1998 ............................. 26,500
16,400 Tennessee State, VRDN, Series E, 3.65% due 7/02/2001 (a) ............. 16,400
- -----------------------------------------------------------------------------------------------------------------
Texas--20.9% Brazos River Authority, Texas, PCR (Texas Utilities Electric Co.),
VRDN, AMT (a):
15,600 Series A, 3.80% due 4/01/2030 ...................................... 15,600
53,055 Series B, 3.80% due 6/01/2030 ...................................... 53,055
24,005 Series B, 3.75% due 2/01/2032 (c) .................................. 24,005
15,800 Series C, 3.80% due 6/01/2030 (e) .................................. 15,800
90,555 Series C, 3.80% due 6/01/2030 ...................................... 90,555
24,500 Brazos River Authority, Texas, Revenue Refunding Bonds (Houston Light
and Power Co.), VRDN, AMT, Series 1997, 3.75% due 11/01/2018 (a)(e) .. 24,500
4,000 Corpus Christi, Texas, IDR (Dedietrich USA Incorporated Project),
VRDN, AMT, 3.85% due 11/01/2008 (a) .................................. 4,000
Dallas-Fort Worth, Texas, Regional Airport Revenue Bonds, MSTR, VRDN (a):
15,785 AMT, Series 46, 3.80% due 11/01/2020 (c) ........................... 15,785
9,495 AMT, Series 52, 3.80% due 11/01/2017 (c) ........................... 9,495
6,600 Series 5, 3.80% due 11/01/2015 ..................................... 6,600
5,300 Grapevine, Texas, Industrial Development Corporation, Airport Revenue
Refunding Bonds (Southern Air Transportation Project), VRDN, 3.75%
due 3/01/2010 (a) .................................................... 5,300
9,000 Greater East Texas Higher Educational Authority Incorporated, Student Loan
Revenue Refunding Bonds, VRDN, AMT, Series A, 4.10% due 5/01/1998
(a)(i) ............................................................... 9,000
7,300 Gulf Coast, Texas, IDA, Marine Terminal Revenue Bonds (Amoco Oil Co.
Project), VRDN, AMT, 3.75% due 4/01/2028 (a) ......................... 7,300
Gulf Coast, Texas, IDA, Solid Waste Disposal Revenue Bonds (Citgo
Petroleum Corp. Project), VRDN, AMT (a):
13,700 3.80% due 5/01/2025 ................................................ 13,700
7,400 3.80% due 4/01/2026 ................................................ 7,400
13,800 Gulf Coast Waste Disposal Authority, Texas, Environmental Improvement
Revenue Bonds (Amoco Oil Co. Project), VRDN, AMT, 3.75% due 1/01/2026
(a) .................................................................. 13,800
Gulf Coast Waste Disposal Authority, Texas, PCR, VRDN (a):
42,200 AMT (Amoco Oil Co. Project), 3.75% due 5/01/2023 ................... 42,200
30,700 AMT (Amoco Oil Co. Project), 3.75% due 6/01/2024 ................... 30,700
31,275 Refunding (Amoco Oil Co. Project), 3.65% due 10/01/2017 ............ 31,275
14,400 Refunding (Exxon Project), 3.65% due 6/01/2020 ..................... 14,400
8,000 Gulf Coast, Waste Disposal Authority, Texas, Pollution Control and
Solid Waste Disposal Revenue Refunding Bonds (Amoco Oil Co. Project)
VRDN, AMT, 3.75% due 5/01/2024 (a) ................................... 8,000
Gulf Coast Waste Disposal Authority, Texas, Solid Waste Disposal Revenue
Bonds (Amoco Oil Co. Project), VRDN, AMT (a):
37,600 3.75% due 8/01/2023 ................................................ 37,600
32,800 3.75% due 7/01/2027 ................................................ 32,800
</TABLE>
58
<PAGE>
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------
CMA TAX-EXEMPT FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 (CONTINUED) (IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------
Face Value
State Amount Issue (Note 1a)
- -----------------------------------------------------------------------------------------------------------------
Texas $ 17,710 Harris County, Texas, GO, VRDN, Series 45, 3.80% due 8/15/2016 (a)(f) $ 17,710
(continued) Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds, VRDN (a):
11,900 (Memorial Hospital System Project), Series B, 3.65% due
6/01/2024 (c) ...................................................... 11,900
225,050 (Methodist Hospital), 3.70% due 12/01/2025 ......................... 225,050
88,600 (Methodist Hospital), 3.70% due 12/01/2026 ......................... 88,600
38,700 (Saint Lukes Episcopal Hospital), Series A, 3.75% due 2/15/2027 .... 38,700
Harris County, Texas, Industrial Development Corporation, PCR (Exxon
Project) (a):
14,600 DATES, Series 1984-A, 3.70% due 3/01/2024 .......................... 14,600
10,200 DATES, Series 1984-B, 3.70% due 3/01/2024 .......................... 10,200
8,100 VRDN, AMT, 3.70% due 8/15/2027 ..................................... 8,100
51,250 Harris County, Texas, Industrial Development Corporation, PCR, Refunding
(Shell Oil Company Project), VRDN, 3.65% due 4/01/2027 (a) ........... 51,250
46,100 Harris County, Texas, Industrial Development Corporation, Solid Waste
Disposal Revenue Bonds (Deer Park Limited Partnership), VRDN, AMT,
Series A, 3.80% due 2/01/2023 (a) .................................... 46,100
Harris County, Texas, Toll Road Revenue Bonds, Sub-Lien, VRDN (a):
31,900 Series B, 3.65% due 8/01/2015 ...................................... 31,900
25,700 Series C, 3.65% due 8/01/2015 ...................................... 25,700
15,000 Series D, 3.65% due 8/01/2015 ...................................... 15,000
25,000 Series H, 3.65% due 8/01/2020 ...................................... 25,000
Hockley County, Texas, Industrial Development Corporation, PCR:
12,000 (Amoco Project), 3.75% due 5/01/1998 ............................... 12,000
24,200 (Amoco Project--Standard Oil Co.), 3.60% due 9/01/1998 ............. 24,200
12,430 Lower Colorado River Authority, Texas, Revenue Refunding Bonds, VRDN,
3rd Junior Lien, 3.65% due 1/01/2013 (a)(c) .......................... 12,430
12,000 Lubbock, Texas, Health Facilities Development Corporation Revenue Bonds
(Saint Joseph Health System), VRDN, Series A, 3.65% due 7/01/2013 (a) 12,000
39,600 Matagorda County, Texas, Navigational District No. 1, Revenue Refunding
Bonds (Houston Light & Power Co. Project), VRDN, AMT, Series 1997,
3.75% due 11/01/2028 (a)(e) .......................................... 39,600
17,600 North Central Texas, Health Facilities Development Corporation Revenue
Bonds (Methodist Hospital, Dallas), VRDN, Series B, 3.70% due
10/01/2015 (a)(h) .................................................... 17,600
North Texas Higher Education Authority Incorporated, Student Loan Revenue
Bonds, VRDN, AMT (a)(i):
3,000 3.80% due 3/01/1999 ................................................ 3,000
27,900 3.80% due 3/01/2005 ................................................ 27,900
29,000 Series A, 3.80% due 4/01/2005 ...................................... 29,000
5,000 Series A, 3.80% due 4/01/2020 ...................................... 5,000
12,800 Series C, 3.80% due 4/01/2020 (e) .................................. 12,800
13,700 Series F, 3.80% due 4/01/2020 (e) .................................. 13,700
Panhandle Plains, Texas, Higher Education Authority Incorporated, Student
Loan Revenue Bonds, VRDN, AMT, Series A (a)(i):
9,000 3.75% due 6/01/2021 ................................................ 9,000
13,700 3.75% due 6/01/2025 ................................................ 13,700
4,700 Refunding, 3.75% due 6/01/2008 ..................................... 4,700
18,800 Port Corpus Christi, Texas, Industrial Development Corporation, Sewage
and Solid Waste Disposal Revenue Bonds (Citgo Petroleum Corp. Project),
VRDN, AMT, 3.80% due 4/01/2026 (a) ................................... 18,800
14,400 Port of Port Arthur, Texas, Navigational District, PCR, Refunding
(Texaco Inc. Project), VRDN, 3.70% due 10/01/2024 (a) ................ 14,400
</TABLE>
59
<PAGE>
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------
CMA TAX-EXEMPT FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 (CONTINUED) (IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------
Face Value
State Amount Issue (Note 1a)
- -----------------------------------------------------------------------------------------------------------------
Texas Sabine River Authority, Texas, PCR, VRDN (a)(e):
(concluded) $ 5,000 Refunding (Texas Utilities Project), Series A, 3.70% due 3/01/2026 $ 5,000
8,100 (Texas Utilities Electric Co. Project), AMT, 3.75% due 3/01/2026 ... 8,100
15,000 San Antonio, Texas, Higher Education Authority, Revenue Refunding Bonds
(Trinity University Project), VRDN, 3.70% due 4/01/2004 (a) .......... 15,000
10,000 San Antonio, Texas, Hotel Occupancy Revenue Bonds, VRDN, Series 51,
3.80% due 8/15/2019 (a)(f) ........................................... 10,000
52,200 South Texas Higher Education Authority Incorporated, Student Loan Revenue
Refunding Bonds, VRDN, AMT, 3.75% due 12/01/2027 (a)(c)(i) ........... 52,200
16,850 Southwest Texas, Higher Education Authority Incorporated, Revenue Refunding
Bonds (Southern Methodist University), VRDN, 3.70% due 7/01/2015
(a) .................................................................. 16,850
10,000 Texas State, CP, Series 1993-A, 3.55% due 7/27/1998 .................. 10,000
36,500 Texas State, GO, Refunding (Veterans' Housing Assistance Fund), VRDN,
AMT, 3.65% due 12/01/2016 (a) ........................................ 36,500
28,400 Texas State, Multi-Modal Water Development Board, VRDN, Series A, 3.70%
due 3/01/2015 (a) .................................................... 28,400
7,150 Texas State, Public Financial Authority, Revenue Refunding Bonds,
4% due 10/01/1998 .................................................... 7,158
306,400 Texas State, TRAN, Series A, 4.75% due 8/31/1998 ..................... 307,724
22,770 Texas State Tender Options, VRDN, 3.80% due 10/01/2008 (a) ........... 22,770
21,200 Trinity River Authority, Texas, PCR (Texas Utilities Electric), VRDN, AMT,
Series 96A, 3.80% due 3/01/2026 (a)(e) ............................... 21,200
20,300 West Side Calhoun County, Texas, Development Corporation, PCR (Sohio
Chemical Company Project--Standard Oil Co.), UPDATES, 3.70% due
12/01/2015 (a) ....................................................... 20,300
4,200 West Side Calhoun County, Texas, Navigation District, Sewer and Solid Waste
Disposal Revenue Bonds (BP Chemicals Inc. Project), VRDN, AMT,
3.80% due 4/01/2031 (a) .............................................. 4,200
- -----------------------------------------------------------------------------------------------------------------
Utah--2.6% 11,500 Davis County, Utah, School District, TAN, 4.50% due 6/30/1998 ........ 11,517
39,900 Emery County, Utah, PCR, Refunding (Pacificorp Projects), VRDN, 3.70%
due 11/01/2024 (a)(e) ................................................ 39,900
Intermountain Power Agency, Utah, Power Supply Revenue Bonds:
25,000 CP, 3.50% due 7/08/1998 ............................................ 25,000
12,000 Series E, 3.45% due 9/15/1998 (e) .................................. 12,000
12,725 VRDN, 3.80% due 7/01/2006 (a) ...................................... 12,725
6,180 Jordan, Utah, School District, Tender Option, VRDN, UT, 3.85% due
6/15/2007 (a) ........................................................ 6,180
Salt Lake County, Utah, PCR, Refunding (Service Station Holdings Project),
VRDN (a):
30,600 3.70% due 2/01/2008 ................................................ 30,600
31,205 Series B, 3.70% due 8/01/2007 ...................................... 31,205
15,375 Utah County, Utah, Environmental Improvement Revenue Refunding Bonds
(USX Corp. Project), 3.60% due 6/15/1998 ............................. 15,375
Utah State Board of Regents, Student Loan Revenue Bonds, VRDN, AMT
(a)(e):
6,000 Series C, 3.80% due 11/01/2013 ..................................... 6,000
33,500 Series L, 3.80% due 11/01/2025 ..................................... 33,500
Utah State, HFA, S/F Mortgage, VRDN (a):
6,600 Series 1, 3.75% due 7/01/2016 ...................................... 6,600
12,450 Series 4, 3.80% due 7/01/2028 ...................................... 12,450
- -----------------------------------------------------------------------------------------------------------------
Vermont-- 1,100 Vermont Educational and Health Buildings Financing Agency Revenue Bonds
0.3% (VHA--New England), VRDN, Series G, 3.70% due 12/01/2025 (a)(e) ...... 1,100
27,575 Vermont State Student Assistance Corporation, Student Loan Revenue Bonds,
VRDN, 3.40% due 1/01/2004 (a) ........................................ 27,575
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
60
<PAGE>
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------
CMA TAX-EXEMPT FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 (CONTINUED) (IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------
Face Value
State Amount Issue (Note 1a)
- -----------------------------------------------------------------------------------------------------------------
Virginia-- $ 8,500 Eagle Tax-Exempt Trust, Virginia, VRDN, Series 95, Class 7091, 3.77% due
1.6% 1/15/2013 (a) ........................................................ $ 8,500
Norfolk, Virginia, IDA, CP, Revenue Bonds (Sentara Hospital--Norfolk
Project), Series A:
25,000 3.55% due 7/20/1998 ................................................ 25,000
12,900 3.55% due 7/23/1998 ................................................ 12,900
24,500 Roanoke, Virginia, IDA, Hospital Revenue Bonds (Carilion Health Systems),
VRDN, Series A, 3.70% due 7/01/2027 (a) .............................. 24,500
Rockingham County, Virginia, IDA, Revenue Bonds, VRDN (a):
1,000 4.15% due 10/01/2022 ............................................... 1,000
16,000 (Merck & Co.), Series A, 3.90% due 10/01/2020 ...................... 16,000
Virginia State, HDA, Commonwealth Mortgage:
24,800 AMT, Series G, Sub-Series G, 3.92% due 4/16/1998 ................... 24,800
33,700 Series H, Sub-Series H, 3.84% due 4/16/1998 ........................ 33,700
- -----------------------------------------------------------------------------------------------------------------
Washington-- 16,300 Eagle Tax-Exempt Trust, Washington State, GO, VRDN, 3.70% due
4/01/2011 (a) ........................................................ 16,300
1.6% 30,200 Snohomish County, Washington, Public Utility District No. 001, Electric
Revenue Bonds (Generation System), VRDN, 3.65% due 1/01/2025 (a)(c) .. 30,200
Washington State Housing Finance Commission, M/F Mortgage Revenue Bonds,
VRDN (a):
6,400 (Arbors on the Park Project), 3.95% due 10/01/2024 ................. 6,400
10,600 (Courtside Apartments Project), AMT, 3.80% due 1/01/2026 ........... 10,600
Washington State Public Power Supply System Revenue Bonds (Nuclear Project
No. 1), VRDN (a):
18,990 3.85% due 7/01/2004 ................................................ 18,990
5,870 Refunding, Series 1A-1, 3.65% due 7/01/2017 ........................ 5,870
24,170 Refunding, Series 1A-2, 3.625% due 7/01/2017 ....................... 24,170
20,000 Washington State Public Power Supply System, Revenue Refunding Bonds
(Nuclear Project No. 3), VRDN, Series 3A-1, 3.625% due 7/01/2018 (a) . 20,000
10,680 Washington Student Loan Finance Association Revenue Bonds (Guaranteed
Student Loan Program), VRDN, AMT, Series B, 3.60% due 1/01/2004
(a) .................................................................. 10,680
9,200 Yakima County, Washington, Revenue Bonds (Macro Plastics Inc. Project),
VRDN, AMT, 3.85% due 12/01/2026 (a) .................................. 9,200
- -----------------------------------------------------------------------------------------------------------------
West Virginia-- 11,220 Hancock County, West Virginia, County Commission, IDR, Refunding (The
0.2% Boc Group, Inc. Project), VRDN, 3.65% due 8/01/2005 (a) .............. 11,220
7,600 Marshall County, West Virginia, PCR (Mountaineer Carbon Co.--BP Oil),
UPDATES, 3.70% due 12/01/2020 (a) .................................... 7,600
- -----------------------------------------------------------------------------------------------------------------
Wisconsin-- 4,800 Eagle Tax-Exempt Trust, Wisconsin, Housing and Economy Development Bonds,
1.4% VRDN, Series 94, Class 4901, 3.82% due 9/01/2015 (a) ................. 4,800
6,500 Hartland, Wisconsin, IDR (Commercial Communications Inc.--Hegwood LLC
Project), VRDN, AMT, 3.85% due 8/01/2009 (a) ......................... 6,500
4,650 Langlade County, Wisconsin, BAN, 3.95% due 3/01/1999 ................. 4,657
35,000 Milwaukee, Wisconsin, Revenue Bonds (School Order Notes), Series B,
4.25% due 8/27/1998 .................................................. 35,062
19,000 Pleasant Prairie, Wisconsin, PCR, Refunding (Wisconsin Electric & Power
Co.), VRDN, Series C, 3.75% due 9/01/2030 (a) ........................ 19,000
16,000 Sheboygan, Wisconsin, PCR, Refunding (Wisconsin Power and Light Company
Project), VRDN, Series A, 3.70% due 9/01/2015 (a) .................... 16,000
9,125 Waupun, Wisconsin, School District, BAN, 4.35% due 12/01/1998 ........ 9,146
7,400 Wisconsin State, GO, 4.50% due 6/15/1998 ............................. 7,411
14,500 Wisconsin State Health and Educational Facilities Authority Revenue Bonds
(Wheaton Franciscan Services), VRDN, 3.70% due 8/15/2016 (a) ......... 14,500
10,077 Wisconsin State Student Loan Revenue Bonds, CP, Series A, 3.45% due
5/04/1998 ............................................................ 10,077
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
61
<PAGE>
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------
CMA TAX-EXEMPT FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 (CONCLUDED) (IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------
Face Value
State Amount Issue (Note 1a)
- -----------------------------------------------------------------------------------------------------------------
Wyoming-- Lincoln County, Wyoming, PCR, VRDN (a):
1.5% $ 7,700 (Exxon Project), AMT, Series A, 3.80% due 7/01/2017 ................ $ 7,700
9,000 (Exxon Project), AMT, Series B, 3.80% due 7/01/2017 ................ 9,000
10,960 (Pacificorp Projects), 3.80% due 11/01/2024 (e) .................... 10,960
Sublette County, Wyoming, PCR (Exxon Project) (a):
10,200 VRDN, AMT, Series B, 3.75% due 7/01/2017 ........................... 10,200
17,150 DATES, 3.65% due 11/01/2014 ........................................ 17,150
Sweetwater County, Wyoming, PCR, Refunding (Pacificorp Project), VRDN
(a):
18,000 3.75% due 7/01/2015 ................................................ 18,000
12,000 3.80% due 11/01/2024 (e) ........................................... 12,000
13,900 Sweetwater County, Wyoming, PCR, VRDN (Idaho Power Co. Project), Series
C, 3.70% due 7/15/2026 (a) ........................................... 13,900
Uinta County, Wyoming, PCR:
15,000 (Amoco--Standard Oil Company Industry), Series A, 3.85% due
12/01/1998 ........................................................... 15,000
15,100 Refunding (Chevron USA Inc. Project), VRDN, 3.65% due 8/15/2020 (a) 15,100
8,100 Refunding (Chevron USA Inc. Project), VRDN, 3.65% due 12/01/2022
(a) ................................................................ 8,100
- -----------------------------------------------------------------------------------------------------------------
Total Investments (Cost--$9,435,976*)--100.8% ........................ 9,435,976
Liabilities in Excess of Other Assets--(0.8%) ........................ (79,271)
----------
Net Assets--100.0% $9,356,705
==========
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(a)The interest rate is subject to change periodically based on
certain indexes. The interest rate shown is the rate in effect at
March 31, 1998.
(b)Prerefunded.
(c)MBIA Insured.
(d)FNMA Collateralized.
(e)AMBAC Insured.
(f)FGIC Insured.
(g)FSA Insured.
(h)BIG Insured.
(i)SLMA Collateralized.
*Cost for Federal income tax purposes.
See Notes to Financial Statements.
62
<PAGE>
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------
CMA TAX-EXEMPT FUND
STATEMENT OF ASSETS AND LIABILITIES AS OF MARCH 31, 1998
- ------------------------------------------------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost--$9,435,976,145) (Note 1a) $ 9,435,976,145
Cash 98,207
Interest receivable 73,925,342
Prepaid registration fees and other assets (Note 1d) 708,318
---------------
Total assets 9,510,708,012
---------------
Liabilities:
Payables:
Securities purchased $ 147,244,022
Investment adviser (Note 2) 3,181,361
Distributor (Note 2) 2,745,270
Beneficial interest redeemed 847 153,171,500
---------------
Accrued expenses and other liabilities 831,283
---------------
Total liabilities 154,002,783
---------------
Net Assets $ 9,356,705,229
===============
Net Assets Consist of:
Shares of beneficial interest, $0.10 par value, unlimited number of shares
authorized $ 935,857,007
Paid-in capital in excess of par 8,421,748,286
Accumulated realized capital losses--net (Note 4) (900,064)
---------------
Net Assets--Equivalent to $1.00 per share based on 9,358,570,066 shares of
beneficial interest outstanding $ 9,356,705,229
===============
See Notes to Financial Statements.
</TABLE>
63
<PAGE>
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
CMA TAX-EXEMPT FUND
STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1998
- -------------------------------------------------------------------------------------------------------------------------
Investment Income (Note 1c):
Interest and amortization of premium and discount earned $ 312,934,176
Expenses:
Investment advisory fees (Note 2) $ 32,978,418
Distribution fees (Note 2) 10,594,071
Transfer agent fees (Note 2) 1,465,966
Registration fees (Note 1d) 759,338
Accounting services (Note 2) 441,217
Custodian fees 240,597
Printing and shareholder reports 117,084
Professional fees 69,623
Pricing fees 54,430
Trustees' fees and expenses 43,134
Other 73,056
---------------
Total expenses 46,836,934
---------------
Investment income--net 266,097,242
Realized Gain on Investments--Net (Note 1c) 544,094
---------------
Net Increase in Net Assets Resulting from Operations $ 266,641,336
===============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------
CMA TAX-EXEMPT FUND
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------
For the Year Ended March 31,
Increase (Decrease) in Net Assets: 1998 1997
- ------------------------------------------------------------------------------------------------------------------------
Operations:
Investment income--net $ 266,097,242 $ 235,338,847
Realized gain on investments--net 544,094 2,077,078
--------------- ---------------
Net increase in net assets resulting from operations 266,641,336 237,415,925
--------------- ---------------
Dividends to Shareholders (Note 1e):
Investment income--net (266,025,682) (235,183,162)
--------------- ---------------
Net decrease in net assets resulting from dividends to shareholders (266,025,682) (235,183,162)
--------------- ---------------
Beneficial Interest Transactions (Note 3):
Net proceeds from sale of shares 31,377,164,577 27,075,188,082
Net asset value of shares issued to shareholders in reinvestment of
dividends (Note 1e) 266,028,068 235,179,553
--------------- ---------------
31,643,192,645 27,310,367,635
Cost of shares redeemed (30,634,380,592) (27,129,482,654)
--------------- ---------------
Net increase in net assets derived from beneficial interest
transactions 1,008,812,053 180,884,981
--------------- ---------------
Net Assets:
Total increase in net assets 1,009,427,707 183,117,744
Beginning of year 8,347,277,522 8,164,159,778
--------------- ---------------
End of year* $ 9,356,705,229 $ 8,347,277,522
=============== ===============
- ------------------------------------------------------------------------------------------------------------------------
*Undistributed investment income--net (Note 1f) -- $ 19,471
=============== ===============
- ------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
</TABLE>
64
<PAGE>
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
CMA TAX-EXEMPT FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------------------
The following per share data and ratios have been derived
from information provided in the financial statements.
For the Year Ended March 31,
-------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
- --------------------------------------- -------------------------------------------------------------
Per Share Operating Performance:
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ----------
Investment income--net .03 .03 .03 .03 .02
---------- ---------- ---------- ---------- ----------
Less dividends from investment income--net (.03) (.03) (.03) (.03) (.02)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ==========
Total Investment Return 3.16% 3.00% 3.31% 2.76% 1.96%
========== ========== ========== ========== ==========
Ratios to Average Net Assets:
Expenses .55% .55% .55% .55% .55%
========== ========== ========== ========== ==========
Investment income--net 3.11% 2.94% 3.26% 2.70% 1.94%
========== ========== ========== ========== ==========
Supplemental Data:
Net assets, end of year (in thousands) $9,356,705 $8,347,278 $8,164,160 $7,391,964 $7,911,960
========== ========== ========== ========== ==========
See Notes to Financial Statements.
</TABLE>
65
<PAGE>
- --------------------------------------------------------------------------------
CMA TAX-EXEMPT FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. Significant Accounting Policies:
CMA Tax-Exempt Fund (the "Fund") is registered under the Investment
Company Act of 1940 as a no-load, diversified, open-end management
investment company. The following is a summary of significant
accounting policies followed by the Fund.
(a) Valuation of investments--Investments are valued at amortized
cost, which approximates market value. For the purpose of valuation,
the maturity of a variable rate demand instrument is deemed to be
the next coupon date on which the interest rate is to be adjusted.
In the case of a floating rate instrument, the remaining maturity is
the demand notice payment period.
(b) 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 all of its taxable income to
its shareholders. Therefore, no Federal income tax provision is
required.
(c) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income (including amortization of
premium and discount) is recognized on the accrual basis. Realized
gains and losses on security transactions are determined on the
identified cost basis.
(d) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(e) Dividends and distributions to shareholders--The Fund declares
dividends daily and reinvests daily such dividends (net of non-
resident alien tax and back-up withholding tax withheld) in
additional fund shares at net asset value. Dividends are declared
from the total of net investment income, excluding discounts earned
other than original issue discounts. Net realized capital gains, if
any, are normally distributed annually after deducting prior years'
loss carryforward. The Fund may distribute capital gains more
frequently than annually in order to maintain the Fund's net asset
value at $1.00 per share.
(f) Reclassification--Generally accepted accounting principles
require that certain components of net assets be adjusted to reflect
permanent differences between financial and tax reporting.
Accordingly, current year's permanent book/tax differences of
$91,031 have been reclassified between accumulated net realized
capital losses and undistributed net investment income. These
reclassifications have no effect on net assets or net asset value
per share.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner.
FAM 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: 0.50%
of the Fund's average daily net assets not exceeding $500 million;
0.425% of the average daily net assets in excess of $500 million but
not exceeding $1 billion; and 0.375% of the average daily net assets
in excess of $1 billion.
Pursuant to the Distribution and Shareholder Servicing Plan in
compliance with Rule 12b-1 under the Investment Company Act of 1940,
Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S") receives a
distribution fee from the Fund at the end of each
66
<PAGE>
- --------------------------------------------------------------------------------
CMA TAX-EXEMPT FUND
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
- --------------------------------------------------------------------------------
month at the annual rate of 0.125% of the average daily net assets of the Fund.
The distribution fee is to compensate MLPF&S financial consultants and other
directly involved branch office personnel for selling shares of the Fund and for
providing direct personal services to shareholders. The distribution fee is not
compensation for the administrative and operational services rendered to the
Fund by MLPF&S in processing share orders and administering shareholder
accounts.
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 FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, MLFDS, and/or ML & Co.
3. Shares of Beneficial Interest:
The number of shares purchased and redeemed during the periods
corresponds to the amounts included in the Statements of Changes in
Net Assets for net proceeds from sale of shares and cost of shares
redeemed, respectively, since shares are recorded at $1.00 per
share.
4. Capital Loss Carryforward:
At March 31, 1998, the Fund had a net capital loss carryforward of
approximately $900,000, of which $210,000 expires in 1999, and
$690,000 expires in 2003. This amount will be available to offset
like amounts of any future taxable gains. Expired capital loss
carryforward in the amount of $722,913 has been reclassified to paid-
in capital in excess of par.
67
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
CMA Treasury Fund:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of CMA Treasury Fund as of March 31, 1998, 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 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 March
31, 1998 by correspondence with the custodian. 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 CMA Treasury Fund
as of March 31, 1998, 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
May 5, 1998
68
<PAGE>
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
CMA TREASURY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 (IN THOUSANDS)
- --------------------------------------------------------------------------------
Face Interest Maturity Value
Issue Amount Rate Date (Note 1a)
- --------------------------------------------------------------------------------
US Government Obligations*--97.6%
US Treasury $ 10,944 4.99% 4/02/98 $ 10,941
Bills 10,000 5.655 4/02/98 9,997
1,176 5.06 4/09/98 1,175
9,373 5.295 4/16/98 9,351
4,297 5.41 4/16/98 4,287
107,598 5.235 4/23/98 107,238
50,000 5.26 4/23/98 49,832
107 5.265 4/23/98 107
8,121 5.28 4/23/98 8,094
25,000 5.345 4/23/98 24,915
25,000 5.15 4/30/98 24,893
4,420 5.30 4/30/98 4,401
12,279 5.33 4/30/98 12,225
13,908 5.37 4/30/98 13,847
74,740 5.35 5/14/98 74,282
18,794 5.25 5/21/98 18,659
9,800 5.055 5/28/98 9,720
25,000 5.07 5/28/98 24,796
20,568 5.205 5/28/98 20,400
25,000 5.235 5/28/98 24,795
30,000 5.28 5/28/98 29,754
12,230 5.275 6/04/98 12,118
60,000 5.29 6/04/98 59,450
7,451 5.005 6/25/98 7,361
50,000 5.06 6/25/98 49,394
50,000 5.075 6/25/98 49,394
<CAPTION>
- --------------------------------------------------------------------------------
Face Interest Maturity Value
Issue Amount Rate Date (Note 1a)
- --------------------------------------------------------------------------------
US Government Obligations* (concluded)
- --------------------------------------------------------------------------------
US Treasury $ 40,000 5.32% 6/25/98 $ 39,516
Bills 10,253 5.08 8/20/98 10,046
(concluded) 1,379 5.07 9/17/98 1,346
- --------------------------------------------------------------------------------
US Treasury 260,900 7.875 4/15/98 261,191
Notes 50,000 5.125 4/30/98 49,983
89,769 5.875 4/30/98 89,791
281,000 6.125 5/15/98 281,219
25,000 9.00 5/15/98 25,103
200,000 6.00 5/31/98 200,148
40,000 8.25 7/15/98 40,316
100,000 6.25 7/31/98 100,266
165,000 6.125 8/31/98 165,413
78,000 6.00 9/30/98 78,197
173,000 5.875 10/31/98 173,270
10,000 5.50 11/15/98 9,995
20,000 5.875 1/31/99 20,045
10,000 6.75 6/30/99 10,134
7,000 5.375 1/31/00 6,968
Total US Government Obligations
(Cost--$2,224,377 ) .......................................... 2,224,373
- -------------------------------------------------------------- ---------
Total Investments
(Cost--$2,224,377)--97.6% .................................... 2,224,373
Other Assets Less Liabilities--2.4% .......................... 55,449
----------
Net Assets--100.0% ........................................... $2,279,822
==========
- --------------------------------------------------------------------------------
</TABLE>
*US Treasury Bills are traded on a discount basis; the interest
rates shown are the discount rates paid at the time of purchase by
the Fund.
US Treasury Notes bear interest at the rates shown, payable at fixed dates
through maturity.
See Notes to Financial Statements.
69
<PAGE>
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------
CMA TREASURY FUND
STATEMENT OF ASSETS AND LIABILITIES AS OF MARCH 31, 1998
- ------------------------------------------------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost--$2,224,376,739++) (Note 1a) ............... $ 2,224,372,955
Cash 39,164
Receivables:
Interest ......................................................................... $ 31,407,182
Securities sold .................................................................. 25,657,728 57,064,910
---------------
Prepaid registration fees and other assets (Note 1d) .............................. 63,394
---------------
Total assets ...................................................................... $ 2,281,540,423
---------------
Liabilities:
Payables:
Investment adviser (Note 2) ...................................................... 828,861
Distributor (Note 2) 686,287
Dividends to shareholders (Note 1e) .............................................. 819
Beneficial interest redeemed ..................................................... 139 1,516,106
---------------
Accrued expenses and other liabilities ............................................ 201,891
---------------
Total liabilities ................................................................. 1,717,997
---------------
Net Assets ........................................................................ $ 2,279,822,426
===============
Net Assets Consist of:
Shares of beneficial interest, $0.10 par value, unlimited number of
shares authorized ................................................................. $ 227,982,621
Paid-in capital in excess of par .................................................. 2,051,843,589
Unrealized depreciation on investments--net ....................................... (3,784)
---------------
Net Assets--Equivalent to $1.00 per share based on 2,279,826,210 shares of
beneficial interest outstanding ................................................... $ 2,279,822,426
===============
+ Cost for Federal income tax purposes was $2,224,376,785. As of
March 31, 1998, net unrealized depreciation for Federal income tax
purposes amounted to $3,830, of which $181,345 related to
appreciated securities and $185,175 related to depreciated
securities.
</TABLE>
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------------
CMA TREASURY FUND
STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1998
- ---------------------------------------------------------------------------------------------------------------------------
Investment Income (Note 1c):
Interest and amortization of premium and discount earned.......................... $ 113,700,084
Expenses:
Investment advisory fees (Note 2)................................................. $ 8,821,989
Distribution fees (Note 2)........................................................ 2,624,701
Transfer agent fees (Note 2)...................................................... 434,043
Registration fees (Note 1d)....................................................... 316,760
Accounting services (Note 2)...................................................... 177,256
Custodian fees.................................................................... 111,014
Professional fees................................................................. 69,162
Printing and shareholder reports.................................................. 30,680
Trustees' fees and expenses....................................................... 26,447
Other............................................................................. 25,620
--------------
Total expenses.................................................................... 12,637,672
---------------
Investment income--net............................................................ 101,062,412
Realized Gain on Investments--Net (Note 1c)....................................... 1,099,659
Change in Unrealized Depreciation on Investments--Net............................. 666,768
--------------
Net Increase in Net Assets Resulting from Operations.............................. $ 102,828,839
==============
See Notes to Financial Statements.
</TABLE>
70
<PAGE>
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------------------------------------------
CMA TREASURY FUND
STATEMENTS OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
For the Year Ended March 31,
----------------------------
Increase (Decrease) in Net Asset Value: 1998 1997
- -------------------------------------------------------------------------------- ----------------------------
Operations:
Investment income--net......................................................... $ 101,062,412 $ 91,813,660
Realized gain on investments--net.............................................. 1,099,659 274,352
Change in unrealized appreciation/depreciation on investments--net............. 666,768 (444,830)
---------------- ----------------
Net increase in net assets resulting from operations........................... 102,828,839 91,643,182
---------------- ----------------
Dividends and Distributions to Shareholders (Note 1e):
Investment income--net......................................................... (101,062,412) (91,813,660)
Realized gain on investments--net.............................................. (1,099,659) (274,352)
---------------- ----------------
Net decrease in net assets resulting from dividends and distributions
to shareholders................................................................ (102,162,071) (92,088,012)
---------------- ----------------
Beneficial Interest Transactions (Note 3):
Net proceeds from sale of shares............................................... 11,334,080,995 11,230,658,782
Net asset value of shares issued to shareholders in reinvestment of dividends
(Note 1e)...................................................................... 102,038,528 91,987,088
---------------- ----------------
11,436,119,523 11,322,645,870
Cost of shares redeemed........................................................ (11,125,480,169) (11,145,444,645)
---------------- ----------------
Net increase in net assets derived from beneficial interest transactions....... 310,639,354 177,201,225
---------------- ----------------
Net Assets:
Total increase in net assets................................................... 311,306,122 176,756,395
Beginning of year.............................................................. 1,968,516,304 1,791,759,909
---------------- ----------------
End of year.................................................................... $ 2,279,822,426 $ 1,968,516,304
================ ================
</TABLE>
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------------
CMA TREASURY FUND
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------------------------
The following per share data and ratios have been derived
from information provided in the financial statements.
For the Year Ended March 31,
----------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
- ------------------------------------------------- ----------------------------------------------------------------
Per Share Operating Performance:
Net asset value, beginning of year............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ----------
Investment income--net........................... .0475 .0461 .0498 .0409 .0250
Realized and unrealized gain (loss) on
investments--net................................. .0008 (.0001) .0001 .0004 .0002
---------- ---------- ---------- ---------- ----------
Total from investment operations................. .0483 .0460 .0499 .0413 .0252
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net........................ (.0475) (.0461) (.0498) (.0409) (.0250)
Realized gain on investments--net............. (.0005) (.0001) (.0003) (.0002) (.0004)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions................ (.0480) (.0462) (.0501) (.0411) (.0254)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ==========
Total Investment Return.......................... 4.92% 4.74% 5.14% 4.18% 2.57%
========== ========== ========== ========== ==========
Ratios to Average Net Assets:
Expenses......................................... .60% .59% .60% .62% .61%
========== ========== ========== ========== ==========
Investment income and realized gain on
investments--net................................. 4.82% 4.59% 5.01% 4.20% 2.55%
========== ========== ========== ========== ==========
Supplemental Data:
Net assets, end of year (in thousands)........... $2,279,822 $1,968,516 $1,791,760 $1,428,724 $1,220,440
========== ========== ========== ========== ==========
See Notes to Financial Statements.
</TABLE>
71
<PAGE>
- --------------------------------------------------------------------------------
CMA TREASURY FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. Significant Accounting Policies:
CMA Treasury Fund (the "Fund") is registered under the Investment
Company Act of 1940 as a no-load, diversified, open-end management
investment company. The following is a summary of significant
accounting policies followed by the Fund.
(a) Valuation of investments-- Investments maturing more than sixty days
after the valuation date are valued at the most recent bid price or yield
equivalent as obtained from dealers that make markets in such securities. When
securities are valued with sixty days or less to maturity, the difference
between the valuation existing on the sixty-first day before maturity and
maturity value is amortized on a straight-line basis to maturity. Investments
maturing within sixty days from their date of acquisition are valued at
amortized cost, which approximates market. Other securities 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 Trustees of the Fund.
(b) 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 all of its taxable income to
its shareholders. Therefore, no Federal income tax provision is
required.
(c) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income (including amortization of
premium and discount) is recognized on the accrual basis. Realized
gains and losses on security transactions are determined on the
identified cost basis.
(d) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(e) Dividends and distributions to shareholders--The Fund declares
dividends daily and reinvests daily such dividends (net of non-resident alien
tax and back-up withholding tax withheld) in additional fund shares at net asset
value. Dividends and distributions are declared from the total of net investment
income and net realized gain or loss on investments.
2.Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML &
Co."), which is the limited partner.
FAM 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: 0.50% of the Fund's average daily net assets not exceeding $500
million; 0.425% of the average daily net assets in excess of $500 million, but
not exceeding $1 billion; and 0.375% of the average daily net assets in excess
of $1 billion.
The Fund has adopted a Distribution and Shareholder Servicing Plan in compliance
with Rule 12b-1 under the Investment Company Act of 1940, pursuant to which
Merrill Lynch, Pierce, Fenner and Smith Inc. ("MLPF&S") receives a distribution
fee under the Distribution Agreement from the Fund at the end of each month at
the annual rate of 0.125% of average daily net assets of the Fund for
shareholders who maintain their accounts through MLPF&S. The distribution fee is
to compensate MLPF&S financial consultants and other directly involved branch
office personnel for selling shares of the Fund and for providing
72
<PAGE>
- --------------------------------------------------------------------------------
CMA TREASURY FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
direct personal services to shareholders. The distribution fee is not
compensation for the administrative and operational services rendered to the
Fund by MLPF&S in processing share orders and administering shareholder
accounts.
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 FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or directors of
FAM, PSI, MLFDS, and/or ML & Co.
3. Shares of Beneficial Interest:
The number of shares purchased and redeemed during the periods corresponds to
the amounts included in the Statements of Changes in Net Assets for net proceeds
from sale of shares and cost of shares redeemed, respectively, since shares are
recorded at $1.00 per share.
73
<PAGE>
[This page intentionally left blank.]
<PAGE>
[This page intentionally left blank.]
<PAGE>
- ----------------------------------------------------------------
CMA Money Fund
CMA Government
Securities Fund
CMA Tax-Exempt
Fund
CMA Treasury Fund
- ----------------------------------------------------------------
Statement of
Additional Information
================================================================
CMA(Registration Mark)
July 28, 1998
Code #10116-0798 (Logo of Merrill Lynch appears here)
<PAGE>
PART C: OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
Contained in Part A:
Financial Highlights for each of the years in the ten-year period ended
March 31, 1998.
Contained in Part B:
Schedule of Investments as of March 31, 1998.
Statement of Assets and Liabilities as of March 31, 1998.
Statement of Operations for the year ended March 31, 1998.
Statements of Changes in Net Assets for each of the years in the
two-year period ended March 31, 1998.
Financial Highlights for each of the years in the five-year period ended
March 31, 1998.
(b) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------------ -------------------------------------------------------------------------------------------------
<S> <C> <C>
1(a) - Declaration of Trust of the Registrant dated June 5, 1989.(a)
(b) - Amendment to Declaration of Trust dated July 31, 1990.(a)
2 - By-Laws of the Registrant.(a)
3 - None.
4 - Portions of the Declaration of Trust and By-Laws of the Registrant defining the rights of
holders of shares of the Registrant.(b)
5(a) - Management Agreement between the Registrant and Fund Asset Management, Inc.(c)
(b) - Supplement to Management Agreement with Fund Asset Management, L.P.(c)
6 - Form of Distribution Agreement between the Registrant and Merrill Lynch, Pierce,
Fenner & Smith Incorporated.(a)
7 - None.
8(a) - Custody Agreement between the Registrant and State Street Bank and Trust Company.(a)
(b) - Amendment to Custody Agreement dated December 12, 1988.(a)
9(a) - Amended Transfer Agency Agreement between the Registrant and Financial Data
Services, Inc.(a)
(b) - Form of Cash Management Account Agreement.(a)
10 - None.
11 - Consent of Deloitte & Touche LLP, independent auditors for the Registrant.
12 - None.
13 - None.
14 - None.
15 - Form of Distribution and Shareholder Servicing Plan of the Registrant.(a)
16 - Schedule for computation of each performance quotation provided in the Registration
Statement in response to Item 22.(a)
17 - Financial Data Schedule for the fiscal year ended March 31, 1998.
</TABLE>
- ---------
(a) Previously filed pursuant to the Electronic Data Gathering, Analysis and
Retrieval ("EDGAR") phase-in requirements on July 28, 1995 as an exhibit to
Post-Effective Amendment No. 23 to the Registration Statement.
(b) Reference is made to Article II, Section 2.3 and Articles III, V, VI, VIII,
IX, X and XI of the Registrant's Declaration of Trust, filed as Exhibit 1
to Post-Effective Amendment No. 23 to the Registrant's Registration
Statement under the Securities Act of 1933, as amended (the "Registration
Statement"); and to Articles I, V and VI of the Registrant's By-Laws, filed
as Exhibit 2 to Post-Effective Amendment No. 23 to the Registration
Statement.
(c) Previously filed on July 28, 1994 as an exhibit to Post-Effective Amendment
No. 22 to the Registration Statement.
Item 25. Persons Controlled by or under Common Control with Registrant.
None.
C-1
<PAGE>
Item 26. Number of Holders of Securities.
<TABLE>
<CAPTION>
Number of
Holders at
Title of Class April 30, 1998
- --------------------------------------------------------------- ---------------
<S> <C>
Shares of beneficial interest, par value $0.10 per share.. 333,527
-------
</TABLE>
Note: The number of holders shown above includes holders of record plus
beneficial owners whose shares are held of record by Merrill Lynch,
Pierce, Fenner & Smith Incorporated.
Item 27. Indemnification.
Section 5.3 of the Registrant's Declaration of Trust provides as follows:
"The Trust shall indemnify each of its Trustees, officers, employees, and
agents (including persons who serve at its request as directors, officers
or trustees of another organization in which it has any interest as a
shareholder, creditor or otherwise) against all liabilities and expenses
(including amounts paid in satisfaction of judgments, in compromise, as
fines and penalties, and as counsel fees) reasonably incurred by him in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, in which he may be involved or with
which he may be threatened, while in office or thereafter, by reason of his
being or having been such a trustee, officer, employee or agent, except
with respect to any matter as to which he shall have been adjudicated to
have acted in bad faith, willful misfeasance, gross negligence or reckless
disregard of his duties; provided, however, that as to any matter disposed
of by a compromise payment by such person, pursuant to a consent decree or
otherwise, no indemnification either for said payment or for any other
expenses shall be provided unless the Trust shall have received a written
opinion from independent legal counsel approved by the Trustees to the
effect that if either the matter of willful misfeasance, gross negligence
or reckless disregard of duty, or the matter of good faith and reasonable
belief as to the best interests of the Trust, had been adjudicated, it
would have been adjudicated in favor of such person. The rights accruing to
any person under these provisions shall not exclude any other right to
which he may be lawfully entitled; provided that no person may satisfy any
right of indemnity or reimbursement granted herein or in Section 5.1 or to
which he may be otherwise entitled except out of the property of the Trust,
and no Shareholder shall be personally liable to any person with respect to
any claim for indemnity or reimbursement or otherwise. The Trustees may
make advance payments in connection with indemnification under this Section
5.3, provided that the indemnified person shall have given a written
undertaking to reimburse the Trust in the event it is subsequently
determined that he is not entitled to such indemnification."
The Registrant's By-Laws provide that insofar as the conditional advancing
of indemnification moneys pursuant to Section 5.3 of the Declaration of Trust
for actions based upon the Investment Company Act of 1940 may be concerned,
such payments will be made only on the following conditions: (i) the advances
must be limited to amounts used, or to be used, for the preparation or
presentation of a defense to the action, including costs connected with the
preparation of a settlement; (ii) advances may be made only upon receipt of a
written promise by, or on behalf of, the recipient to repay that amount of the
advance which exceeds the amount to which it is ultimately determined he is
entitled to receive from the Registrant by reason of indemnification; and (iii)
(a) such promise must be secured by a surety bond, other suitable insurance or
an equivalent form of security which assures that any repayments may be
obtained by the Registrant without delay or litigation, which bond, insurance
or other form of security must be provided by the recipient of the advance, or
(b) a majority of a quorum of the Registrant's disinterested, non-party
Trustees, or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts, that the recipient
of the advance ultimately will be found entitled to indemnification.
In Section 8 of the Distribution Agreement relating to the securities
being offered hereby, the Registrant agrees to indemnify the Distributor and
each person, if any, who controls the Distributor within the meaning of the
Securities Act of 1933 (the "1933 Act"), against certain types of civil
liabilities arising in connection with the Registration Statement or
Prospectus.
Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to Trustees, officers and controlling persons of the Registrant
and the principal underwriter pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the 1933 Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a Trustee, officer or
controlling person of the Registrant and the principal underwriter in
connection with the successful defense of any action, suit or proceeding) is
asserted by such Trustee, officer or controlling person or the principal
underwriter in connection with the shares
C-2
<PAGE>
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 1933 Act and will be governed by the
final adjudication of such issue.
Item 28. Business and Other Connections of the Investment Adviser.
Fund Asset Management (the "Manager" or "FAM") acts as investment adviser
for the following open-end registered investment companies: CBA Money Fund, CMA
Government Securities Fund, CMA Multi-State Municipal Series Trust, CMA
Tax-Exempt Fund, CMA Treasury Fund, The Corporate Fund Accumulation Program,
Inc., Financial Institutions Series Trust, Merrill Lynch Basic Value Fund,
Inc., Merrill Lynch California Municipal Series Trust, Merrill Lynch Corporate
Bond Fund, Inc., Merrill Lynch Corporate High Yield Fund, Inc., Merrill Lynch
Emerging Tigers Fund, Inc., Merrill Lynch Federal Securities Trust, Merrill
Lynch Funds for Institutions Series, Merrill Lynch Multi-State Limited Maturity
Municipal Series Trust, Merrill Lynch Multi-State Municipal Series Trust,
Merrill Lynch Municipal Bond Fund, Inc., Merrill Lynch Phoenix Fund, Inc.,
Merrill Lynch Puerto Rico Tax Exempt Fund, Inc., Merrill Lynch Special Value
Fund, Inc., Merrill Lynch World Income Fund, Inc. and The Municipal Fund
Accumulation Program, Inc., and for the following closed-end registered
investment companies: Apex Municipal Fund, Inc., Corporate High Yield Fund,
Inc., Corporate High Yield Fund II, Inc., Corporate High Yield Fund III, Inc.,
Debt Strategies Fund, Inc., Debt Strategies Fund II, Inc., Income Opportunities
Fund 1999, Inc., Income Opportunities Fund 2000, Inc., Merrill Lynch Municipal
Strategy Fund, Inc., MuniAssets Fund, Inc., MuniEnhanced Fund, Inc.,
MuniHoldings California Insured Fund, Inc., MuniHoldings California Insured
Fund II, Inc., MuniHoldings Florida Insured Fund, MuniHoldings Florida Insured
Fund II, MuniHoldings Fund, Inc., MuniHoldings Fund II, Inc., MuniHoldings
Insured Fund, Inc., MuniHoldings New Jersey Insured Fund, Inc., MuniHoldings
New York Fund, Inc., MuniHoldings New York Insured Fund, Inc., MuniInsured
Fund, Inc., MuniVest Fund, Inc., MuniVest Fund II, Inc., MuniVest Florida Fund,
MuniVest Michigan Insured Fund, Inc., MuniVest New Jersey Fund, Inc., MuniVest
Pennsylvania Insured Fund, MuniYield Arizona Fund, Inc., MuniYield California
Fund, Inc., MuniYield California Insured Fund, Inc., MuniYield California
Insured Fund II, Inc., MuniYield Florida Fund, MuniYield Florida Insured Fund,
MuniYield Fund, Inc., MuniYield Insured Fund, Inc., MuniYield Michigan Fund,
Inc., MuniYield Michigan Insured Fund, Inc., MuniYield New Jersey Fund, Inc.,
MuniYield New Jersey Insured Fund, Inc., MuniYield New York Insured Fund, Inc.,
MuniYield New York Insured Fund II, Inc., MuniYield Pennsylvania Fund,
MuniYield Quality Fund, Inc., MuniYield Quality Fund II, Inc., Senior High
Income Portfolio, Inc. and Worldwide DollarVest Fund, Inc.
Merrill Lynch Asset Management, L.P. ("MLAM"), an affiliate of FAM, acts
as investment adviser for the following open-end registered investment
companies: Merrill Lynch Adjustable Rate Securities Fund, Inc., Merrill Lynch
Americas Income Fund, Inc., Merrill Lynch Asset Builder Program, Inc., Merrill
Lynch Asset Growth Fund, Inc., Merrill Lynch Asset Income Fund, Inc., Merrill
Lynch Capital Fund, Inc., Merrill Lynch Convertible Fund, Inc., Merrill Lynch
Developing Capital Markets Fund, Inc., Merrill Lynch Dragon Fund, Inc., Merrill
Lynch EuroFund, Merrill Lynch Fundamental Growth Fund, Inc., Merrill Lynch Fund
for Tomorrow, Inc., Merrill Lynch Global Allocation Fund, Inc., Merrill Lynch
Global Bond Fund for Investment and Retirement, Merrill Lynch Global
Convertible Fund, Inc., Merrill Lynch Global Growth Fund, Inc., Merrill Lynch
Global Holdings, Inc., Merrill Lynch Global Resources Trust, Merrill Lynch
Global SmallCap Fund, Inc., Merrill Lynch Global Utility Fund, Inc., Merrill
Lynch Global Value Fund, Inc., Merrill Lynch Intermediate Government Bond Fund,
Merrill Lynch Growth Fund, Merrill Lynch Healthcare Fund, Inc., Merrill Lynch
Intermediate Government Bond Fund, Merrill Lynch International Equity Fund,
Merrill Lynch Latin America Fund, Inc., Merrill Lynch Middle East/Africa Fund,
Inc., Merrill Lynch Municipal Series Trust, Merrill Lynch Pacific Fund, Inc.,
Merrill Lynch Real Estate Fund, Inc., Merrill Lynch Ready Assets Trust, Merrill
Lynch Retirement Series Trust, Merrill Lynch Series Fund, Inc., Merrill Lynch
Short-Term Global Income Fund, Inc., Merrill Lynch Strategic Dividend Fund,
Merrill Lynch Technology Fund, Inc., Merrill Lynch U.S.A. Government Reserves,
Merrill Lynch U.S. Treasury Money Fund, Merrill Lynch Utility Income Fund,
Inc., Merrill Lynch Variable Series Funds, Inc. and Hotchkis and Wiley Funds
(advised by Hotchkis and Wiley, a division of MLAM); and for the following
closed-end registered investment companies: MLAM also acts as sub-adviser to
Merrill Lynch World Strategy Portfolio and Merrill Lynch Basic Value Equity
Portfolio, two investment portfolios of EQ Advisors Trust, Merrill Lynch High
Income Municipal Bond Fund, Inc., and Merrill Lynch Senior Floating Rate Fund,
Inc.
The address of each of these investment companies is P.O. Box 9011,
Princeton, New Jersey 08543-9011, except that the address of Merrill Lynch Funds
for Institutions Series and Merrill Lynch Institutional Intermediate Bond Fund
is One Financial Center, 15th Floor, Boston, Massachusetts 02111-2665. The
address of the Investment Adviser, MLAM, Princeton Services, Inc. ("Princeton
Services") and Princeton Administrators, L.P. is also P.O. Box 9011, Princeton,
New Jersey 08543-9011. The address of Merrill Lynch Funds Distributor ("MLFD" or
the "Distributor") is P.O. Box 9081, Princeton, New Jersey 08543-9081. The
address of Merrill Lynch and Merrill Lynch & Co., Inc. ("ML & Co.") is North
Tower, World
C-3
<PAGE>
Financial Center, 250 Vesey Street, New York, New York 10281-1201. The address
of Merrill Lynch Financial Data Services, Inc. ("MLFDS") is 4800 Deer Lake
Drive East, Jacksonville, Florida 32246-6484.
Set forth below is a list of each executive officer and partner of the
Investment Adviser indicating each business, profession, vocation or employment
of a substantial nature in which each such person or entity has been engaged
since April 1, 1996 for his, her or its own account or in the capacity of
director, officer, employee, partner or trustee. In addition, Mr. Zeikel is
President, director and trustee, Mr. Glenn is Executive Vice President and Mr.
Richard is Treasurer of all or substantially all of the investment companies
listed in the first two paragraphs of this Item 28. Messrs. Zeikel, Glenn and
Richard also hold the same position with substantially all of the investment
companies advised by MLAM as they do with those advised by the Manager and
Messrs. Giordano, Harvey, Kirstein and Monagle are officers or
directors/trustees of one or more of such companies.
<TABLE>
<CAPTION>
Other Substantial
Position(s) with Business, Profession,
Name Manager Vocation or Employment
- ----------------------------- -------------------------- ----------------------------------------------------
<S> <C> <C>
ML & Co. .................... Limited Partner Financial Services Holding Company;
Limited Partner of MLAM
Princeton Services .......... General Partner General Partner of MLAM
Arthur Zeikel ............... Chairman Chairman of MLAM; President of the Manager and
MLAM from 1977 to 1997; Chairman and Director
of Princeton Services; President of Princeton
Services from 1993 to 1997; Executive Vice
President of ML & Co.
Jeffrey M. Peek ............. President President of MLAM; President and Director of
Princeton Services; Executive Vice President of ML
& Co.
Terry K. Glenn .............. Executive Vice President Executive Vice President of MLAM; Executive Vice
President and Director of Princeton Services;
President and Director of MLFD; Director of
MLFDS; President of Princeton Administrators, L.P.
Linda L. Federici ........... Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
Vincent R. Giordano ......... Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
Elizabeth A. Griffin ........ Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
Norman R. Harvey ............ Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
Michael J. Hennewinkel ...... Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
Philip L. Kirstein .......... Senior Vice President, Senior Vice President, General Counsel and
General Counsel and Secretary of MLAM; Senior Vice President, General
Secretary Counsel, Director and Secretary of Princeton
Services
Ronald M. Kloss ............. Senior Vice President Senior Vice President of MLAM; Senior Vice
and Controller President of Princeton Services
Debra W. Landsman-Yaros ..... Senior Vice President Senior Vice President of MLAM; Vice President of
MLFD; Senior Vice President of Princeton Services
Stephen M.M. Miller ......... Senior Vice President Executive Vice President of Princeton Adminis-
trators, L.P.; Senior Vice President of Princeton
Services
Joseph T. Monagle, Jr. ...... Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
Michael L. Quinn ............ Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services; Managing Director
and First Vice President of Merrill Lynch from 1989
to 1995
Richard L. Reller ........... Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services; Director of MLFD
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
Other Substantial
Position(s) with Business, Profession,
Name Manager Vocation or Employment
- ----------------------- --------------------------- -------------------------------------------------
<S> <C> <C>
Gerald M. Richard ..... Senior Vice President and Senior Vice President and Treasurer of MLAM;
Treasurer Senior Vice President and Treasurer of Princeton
Services; Vice President and Treasurer of MLFD
Gregory D. Upah ....... Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
Ronald L. Welburn ..... Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
</TABLE>
Item 29. Principal Underwriters.
(a) Merrill Lynch acts as the principal underwriter for the Registrant.
Merrill Lynch also acts as the principal underwriter for each of the following
open-end investment companies referred to in the first paragraph of Item 28:
CBA Money Fund, CMA Multi-State Municipal Series Trust, CMA Tax-Exempt Fund,
CMA Treasury Fund and CMA Government Securities Fund, The Corporate Fund
Accumulation Program, Inc. and The Municipal Fund Accumulation Program, Inc.,
and also acts as the principal underwriter for each of the closed-end
investment companies referred to in the first paragraph of Item 28, and as the
depositor of the following unit investment trusts: The Corporate Income Fund,
Municipal Investment Trust Fund, The ML Trust for Government Guaranteed
Securities and The Government Securities Income Fund.
(b) Set forth below is information concerning each director and executive
officer of Merrill Lynch. The principal business address of each such person is
North Tower, World Financial Center, 250 Vesey Street, New York, New York
10281.
<TABLE>
<CAPTION>
Position(s) and Office(s) Position(s) and Office(s)
Name with Merrill Lynch with Registrant
- ---------------------------------- --------------------------------------- --------------------------
<S> <C> <C>
Stephen L. Hammerman ........ Vice Chairman and General Counsel None
Herbert M. Allison, Jr. ..... President and Chief Operating Officer None
John L. Steffens ............ Executive Vice President and Director None
David H. Komansky ........... Chairman and Chief Executive Officer None
Barry S. Friedberg .......... Executive Vice President None
Edward L. Goldberg .......... Executive Vice President None
Jerome P. Kenney ............ Executive Vice President None
Thomas H. Patrick ........... Executive Vice President None
Winthrop H. Smith, Jr. ...... Executive Vice President None
Roger M. Vasey .............. Executive Vice President None
George A. Schierren ......... General Counsel None
Theresa Lang ................ Treasurer None
Andrea L. Dulberg............ Secretary None
</TABLE>
(c) Not applicable.
Item 30. Location of Accounts and Records.
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the rules thereunder will be maintained at
the offices of the Registrant, 800 Scudders Mill Road, Plainsboro, New Jersey
08536, and its transfer agent, MLFDS, 4800 Deer Lake Drive East, Jacksonville,
Florida 32246-6484.
Item 31. Management Services.
Other than as set forth under the caption "Management of the Funds -
Investment Advisory Arrangements" in the Appendix to the Prospectus
constituting Part A of the Registration Statement and under the caption
"Management of the Funds - Investment Advisory Arrangements" in the Statement
of Additional Information constituting Part B of the Registration Statement,
Registrant is not a party to any management-related services contract.
Item 32. Undertakings.
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders
upon request and without charge.
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment to the Registration Statement
to be signed on its behalf by the undersigned, thereto duly authorized, in the
Township of Plainsboro and State of New Jersey on the 27th day of July, 1998.
CMA MONEY FUND
(Registrant)
By /s/ TERRY K. GLENN
---------------------------------------
(Terry K. Glenn, Executive Vice
President)
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following person in the capacity and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------------------------------------------- ----------------------------------------- --------------
<S> <C> <C>
ARTHUR ZEIKEL* President (Principal Executive Officer)
- ---------------------------------- and Trustee
(Arthur Zeikel)
GERALD M. RICHARD* Treasurer (Principal Financial and
- ----------------------------------
(Gerald M. Richard) Accounting Officer)
RONALD W. FORBES* Trustee
- ----------------------------------
(Ronald W. Forbes)
CYNTHIA A. MONTGOMERY* Trustee
- ----------------------------------
(Cynthia A. Montgomery)
CHARLES C. REILLY* Trustee
- ----------------------------------
(Charles C. Reilly)
KEVIN A. RYAN* Trustee
- ----------------------------------
(Kevin A. Ryan)
RICHARD R. WEST* Trustee
- ----------------------------------
(Richard R. West)
*By /s/ TERRY K. GLENN July 27, 1998
-------------------------------
(Terry K. Glenn, Attorney-in-Fact)
</TABLE>
C-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- -------- --------------------------------------------------------------------------
<S> <C> <C>
11 - Consent of Deloitte & Touche LLP, independent auditors for the Registrant
17 - Financial Data Schedule for the fiscal year ended March 31, 1998
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 50916078103
<INVESTMENTS-AT-VALUE> 50907212346
<RECEIVABLES> 274913861
<ASSETS-OTHER> 1746342
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 51183872549
<PAYABLE-FOR-SECURITIES> 224849397
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 35243550
<TOTAL-LIABILITIES> 260092947
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 50932645359
<SHARES-COMMON-STOCK> 50932645357
<SHARES-COMMON-PRIOR> 42008943543
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (8865757)
<NET-ASSETS> 50923779602
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2568298224
<OTHER-INCOME> 0
<EXPENSES-NET> (256356849)
<NET-INVESTMENT-INCOME> 2311941375
<REALIZED-GAINS-CURRENT> 5277494
<APPREC-INCREASE-CURRENT> 15324920
<NET-CHANGE-FROM-OPS> 2332543789
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2311941375)
<DISTRIBUTIONS-OF-GAINS> (5277494)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 202384030926
<NUMBER-OF-SHARES-REDEEMED> (195772722923)
<SHARES-REINVESTED> 2312393811
<NET-CHANGE-IN-ASSETS> 8939026735
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 170196721
<INTEREST-EXPENSE> 3122526
<GROSS-EXPENSE> 256356849
<AVERAGE-NET-ASSETS> 45152459084
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .57
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
INDEPENDENT AUDITORS' CONSENT
CMA Money Fund:
We consent to the use in Post-Effective Amendment No. 26 to Registration
Statement No. 2-59311 of our report dated May 6, 1998 appearing in the
Statement of Additional Information, which is a part of such Registration
Statement, and to the reference to us under the caption "Financial Highlights"
appearing in the Prospectus, which also is a part of such Registration
Statement.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Princeton, New Jersey
July 22, 1998
