<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 30, 1997
SECURITIES ACT FILE NO. 2-74584
INVESTMENT COMPANY ACT FILE NO. 811-3310
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [_]
[X]
POST-EFFECTIVE AMENDMENT NO. 18
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[X]
[X]
AMENDMENT NO. 20
(CHECK APPROPRIATE BOX OR BOXES)
----------------
MERRILL LYNCH RETIREMENT RESERVES MONEY FUND
OF MERRILL LYNCH RETIREMENT SERIES TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY
(ADDRESS OF PRINCIPAL 08536
EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (609) 282-2800
ARTHUR ZEIKEL
MERRILL LYNCH RETIREMENT SERIES TRUST
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY
MAILING ADDRESS: P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011
(NAME AND ADDRESS OF AGENT FOR SERVICE)
----------------
COPIES TO:
PHILIP L. KIRSTEIN, ESQ. COUNSEL FOR THE TRUST:
MERRILL LYNCH ASSET MANAGEMENT BROWN & WOOD LLP
ONE WORLD TRADE CENTER
P.O. BOX 9011 NEW YORK, N.Y. 10048-0557
PRINCETON, NEW JERSEY 08543-9011 ATTENTION: THOMAS R. SMITH, JR.,
ESQ.
----------------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
[_] immediately upon filing pursuant to paragraph (b)
[_] on (date) pursuant to paragraph (b)
[X] 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
MERRILL LYNCH RETIREMENT RESERVES MONEY FUND
OF MERRILL LYNCH RETIREMENT SERIES TRUST
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-1A
ITEM NO. LOCATION
-------- --------
<C> <S> <C>
PART A
Item 1. Cover Page............... Cover Page
Item 2. Synopsis................. Not Applicable
Item 3. Condensed Financial Financial Highlights; Yield Information
Information..............
Item 4. General Description of Investment Objectives and Policies;
Registrant............... Additional Information
Item 5. Management of the Fund... Fee Table; Management of the Trust;
Portfolio Transactions; Inside Back Cover
Page
Item 5A. Management's Discussion
of Fund Performance...... Not Applicable
Item 6. Capital Stock and Other Cover Page; Additional Information
Securities...............
Item 7. Purchases of Securities Cover Page; Fee Table; Purchase of Shares;
Being Offered............ Redemption of Shares; Additional
Information; Inside Back Cover Page
Item 8. Redemption or Repurchase. Purchase of Shares; Redemption of Shares
Item 9. Pending Legal Not Applicable
Proceedings..............
PART B
Item 10. Cover Page............... Cover Page
Item 11. Table of Contents........ Back Cover Page
Item 12. General Information and Not Applicable
History..................
Item 13. Investment Objectives and Investment Objectives and Policies
Policies.................
Item 14. Management of the Fund... Management of the Trust
Item 15. Control Persons and
Principal Holders of
Securities............... Management of the Trust
Item 16. Investment Advisory and Management of the Trust; Purchase of
Other Services........... Shares; Redemption of Shares; General
Information
Item 17. Brokerage Allocation..... Portfolio Transactions
Item 18. Capital Stock and Other General Information--Description of Series
Securities............... and Shares
Item 19. Purchase, Redemption and
Pricing of Securities Purchase of Shares; Redemption of Shares;
Being Offered............ Determination of Net Asset Value; Exchange
Privilege
Item 20. Tax Status............... Taxes
Item 21. Underwriters............. Purchase of Shares; Redemption of Shares
Item 22. Calculation of Yield Information
Performance Data.........
Item 23. Financial Statements..... Financial Statements
</TABLE>
PART C
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>
PROSPECTUS
, 1998
MERRILL LYNCH RETIREMENT RESERVES MONEY FUND
MERRILL LYNCH RETIREMENT SERIES TRUST
P.O. Box 9011, Princeton, New Jersey 08543-9011 . Phone No. (609) 282-2800
-------------------------
The investment objectives of the Merrill Lynch Retirement Reserves Money
Fund (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. These securities primarily consist of U.S.
Government and agency securities, bank certificates of deposit and bankers'
acceptances, commercial paper and repurchase agreements. 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 Government agency securities and no more than 397
days (13 months) in the case of all other securities. 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 is the only
existing series of Merrill Lynch Retirement Series Trust (the "Trust"), which
is a Massachusetts business trust.
Shares of the Money Market Fund are offered to participants in the self-
directed retirement plans for which Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") acts as passive custodian (the "Self-Directed
Plans"). For a description of the Self-Directed Plans, see Appendix A to the
Statement of Additional Information referred to below. The participant in each
Self-Directed Plan is responsible for making investment decisions concerning
the funds contributed to his or her Self-Directed Plan. Participants in the
Self-Directed Plans may elect to have cash balances in their accounts
automatically invested in shares of the Money Market Fund. Shares of the Money
Market Fund are also offered to certain independent pension, profit-sharing,
annuity and other qualified plans.
The Money Market Fund is authorized to offer two classes of shares. Both
Class A and Class B shares are or will be sold at their net asset value
without any sales charge; however, Class B shares will be sold subject to an
ongoing distribution fee. As of the date of this Prospectus, Class B shares
are not yet offered. There is no minimum initial or subsequent purchase
requirement. Shares may be redeemed at any time at net asset value as
described herein. See "Purchase of Shares" and "Redemption of Shares."
-------------------------
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 Trust and
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 Trust and
the Money Market Fund, dated , 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 by writing
the Money Market Fund at the above telephone number or address. The Commission
maintains a web site (http://www.sec.gov) that contains the Statement of
Additional Information, material incorporated by reference and other
information regarding the Trust. The Statement of Additional Information is
hereby incorporated by reference into this Prospectus.
-------------------------
MERRILL LYNCH ASSET MANAGEMENT--MANAGER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.--DISTRIBUTOR
<PAGE>
FEE TABLE
<TABLE>
<S> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES CLASS CLASS
(AS A PERCENTAGE OF AVERAGE NET ASSETS): A(a) B(b)
---------- ----------
Management Fees(c)................................. 0.37% 0.37%
12b-1 Fees......................................... None 0.20%(d)
Other Expenses
Shareholder Servicing Fees(e).................. 0.14% 0.14%
Other.......................................... 0.03% 0.03%
---- ----
Total Other Expenses........................... 0.17% 0.17%
---- ----
Total Money Market Fund Operating Expenses(f)...... 0.54% 0.74%
==== ====
</TABLE>
- --------
(a) Information for Class A shares is stated for the fiscal year ended October
31, 1997.
(b) As of the date of this Prospectus, Class B shares are not yet offered.
Class B expenses have been estimated for the fiscal year ending October
31, 1998 assuming Class B shares were outstanding for a full year.
(c) See "Management of the Trust--Management and Advisory Arrangements"--page
9.
(d) See "Purchase of Shares--Class B Shares"-- page 11.
(e) See "Management of the Trust--Transfer Agency Services"--page 10.
(f) The Money Market Fund has no minimum initial or subsequent purchase
requirement. Therefore, there are a large number of Money Market Fund
accounts of relatively small asset size, and as a result, the total
operating expenses of the Money Market Fund may be higher than the
expenses incurred in other money market funds.
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 fol-
lowing expenses on a $1,000
investment, assuming the Total
Money Market Fund Operating
Expenses set forth above and a
5% annual return throughout
the periods
Class A....................... $6 $17 $30 $68
Class B....................... $8 $24 $41 $92
</TABLE>
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 expenses set forth under "Other Expenses" for
Class B shares are based on estimated amounts through the end of the Money
Market Fund's fiscal year ending October 31, 1998 assuming Class B shares were
outstanding for a full year. The Example set forth above assumes reinvestment
of all dividends and distributions and utilizes a 5% annual rate of return as
mandated by Commission regulations. The Example should not be considered a
representation of past or future expenses or annual rate of return and actual
expenses or annual rate of return may be more or less than those assumed for
purposes of the Example.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The financial information in the table below has been audited in conjunction
with the annual audits of the financial statements of the Money Market Fund by
Deloitte & Touche LLP, independent auditors. Financial statements for the
fiscal year ended October 31, 1997 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 the Money
Market Fund's audited financial statements. No information is provided with
respect to Class B shares of the Money Market Fund since no Class B shares were
issued as of October 31, 1997.
Further information about the performance of the Money Market Fund is
contained in the Money Market Fund's most recent annual report to shareholders
which may be obtained, without charge, by calling or writing the Money Market
Fund at the telephone number or address on the front cover of this Prospectus.
<TABLE>
<CAPTION>
CLASS A
<CAPTION>
-------------------------------------------------------------------------------
FOR THE YEAR ENDED OCTOBER 31,
-------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991
----------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (De-
crease) in Net
Asset Value:
PER SHARE OPERAT-
ING PERFORMANCE:
Net asset value,
beginning of
year............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ---------- ---------- ---------- ---------- ---------- ----------
Investment in-
come--net...... .0512 .0509 .0540 .0345 .0279 .0370 .0609
Realized and
unrealized gain
(loss) on in-
vestments--net. .0001 (.0002) .0015 (.0011) .0004 .0012 .0025
----------- ---------- ---------- ---------- ---------- ---------- ----------
Total from in-
vestment opera-
tions........... .0513 .0507 .0555 .0334 .0283 .0382 .0634
----------- ---------- ---------- ---------- ---------- ---------- ----------
Less dividends
and distribu-
tions:
Investment in-
come--net...... (.0512) (.0509) (.0540) (.0345) (.0279) (.0370) (.0609)
Realized gain on
investments--
net............ (.0001) (.0001) (.0002) -- + (.0003) (.0010) (.0025)*
----------- ---------- ---------- ---------- ---------- ---------- ----------
Total dividends
and distribu-
tions........... (.0513) (.0510) (.0542) (.0345) (.0282) (.0380) (.0634)
----------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value,
end of year..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== ========== ========== ========== ========== ========== ==========
Total Investment
Return.......... 5.35% 5.19% 5.55% 3.47% 2.85% 4.02% 6.52%
=========== ========== ========== ========== ========== ========== ==========
RATIOS TO AVERAGE
NET ASSETS:
Expenses......... .54% .56% .59% .59% .62% .63% .64%
=========== ========== ========== ========== ========== ========== ==========
Investment income
and realized
gain on
investments--
net............. 5.13% 5.07% 5.43% 3.44% 2.82% 3.88% 6.30%*
=========== ========== ========== ========== ========== ========== ==========
SUPPLEMENTAL DA-
TA:
Net assets, end
of year (in
thousands)...... $10,690,345 $9,340,229 $8,648,907 $7,403,684 $7,066,326 $6,474,640 $6,485,985
=========== ========== ========== ========== ========== ========== ==========
1990 1989 1988
------------ ------------ ------------
<S> <C> <C> <C>
Increase (De-
crease) in Net
Asset Value:
PER SHARE OPERAT-
ING PERFORMANCE:
Net asset value,
beginning of
year............ $ 1.00 $ 1.00 $ 1.00
------------ ------------ ------------
Investment in-
come--net...... .0775 .0853 .0668
Realized and
unrealized gain
(loss) on in-
vestments--net. -- .0002 (.0004)
------------ ------------ ------------
Total from in-
vestment opera-
tions........... .0775 .0855 .0664
------------ ------------ ------------
Less dividends
and distribu-
tions:
Investment in-
come--net...... (.0775) (.0853) (.0664)
Realized gain on
investments--
net............ -- (.0002)* --
------------ ------------ ------------
Total dividends
and distribu-
tions........... (.0775) (.0855) (.0664)
------------ ------------ ------------
Net asset value,
end of year..... $ 1.00 $ 1.00 $ 1.00
============ ============ ============
Total Investment
Return.......... 8.04% 8.89% 6.79%
============ ============ ============
RATIOS TO AVERAGE
NET ASSETS:
Expenses......... .69% .81% .90%
============ ============ ============
Investment income
and realized
gain on
investments--
net............. 7.75%* 8.55%* 6.62%*
============ ============ ============
SUPPLEMENTAL DA-
TA:
Net assets, end
of year (in
thousands)...... $5,597,641 $5,012,328 $3,366,310
============ ============ ============
</TABLE>
- -------
* Includes unrealized gain (loss).
+ Amount is less than $.0001 per share.
3
<PAGE>
YIELD INFORMATION
Set forth below is yield information for the Class A shares for the indicated
seven-day periods, computed to include and exclude realized and unrealized
gains and losses, and information as to the compounded annualized yield,
excluding gains and losses, for the same periods. No information is presented
for the Class B shares because no Class B shares were issued during the periods
covered.
<TABLE>
<CAPTION>
CLASS A
---------------------------
SEVEN-DAY PERIOD ENDED
---------------------------
OCTOBER 31, 1997 , 1998
---------------- ----------
<S> <C> <C>
Annualized Yield:
Including gains and losses........................ 5.26% %
Excluding gains and losses........................ 5.24% %
Compounded Annualized Yield......................... 5.40% %
Average maturity of portfolio at end of period...... 77 days 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 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.
This 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 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
which pay a fixed yield over a stated period of time.
On occasion, the Money Market Fund may compare its yield to (1) the
Donoghue's Domestic Prime Funds Average, an average compiled by Donoghue's
Money Fund Report, a widely recognized independent publication that monitors
the performance of money market mutual funds, (2) 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, (3) yield data published by Lipper
Analytical Services, Inc., Morningstar Publications, Inc., Money Magazine, U.S.
News & World Report, Business Week, CDA Investment Technology, Inc., Forbes
Magazine and Fortune Magazine, or (4) the yield on an investment in 90-day
Treasury bills on a rolling basis, assuming quarterly compounding. 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. The
4
<PAGE>
investment objectives are fundamental policies of the Money Market Fund that
may not be changed without the vote of a majority of the outstanding shares of
the Money Market Fund.
Investment in the Money Market Fund offers several potential benefits. The
Money Market Fund seeks to provide as high a yield potential as is available,
consistent with the preservation of capital, from short-term 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 reduced risk resulting from diversification of
assets. There can be no assurance that the objectives of the Money Market Fund
will be realized. Certain expenses are borne by investors, including management
fees, administrative costs and operational costs and, in the case of Class B
shares, Rule 12b-1 fees.
In managing the Money Market Fund's portfolio, Merrill Lynch Asset
Management, L.P. ("MLAM" or the "Manager") 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 Manager's assessments will respond to
changing economic and money market conditions and to shifts in fiscal and
monetary policy. The Manager 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 differences in the yield 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
differences.
The following is a description of the types of money market securities in
which the Money Market Fund may invest:
United States 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.
United States Government Agency Securities: Debt securities issued by U.S.
Government-sponsored enterprises, Federal agencies and instrumentalities and
certain international institutions that are not direct obligations of the
United States but involve U.S. Government sponsorship or guarantees by U.S.
Government agencies or enterprises. The U.S. Government may not be obligated to
provide financial support to these entities.
Bank Money Instruments: Obligations of commercial banks, savings banks,
savings and loan associations, or other depository institutions, such as
certificates of deposit, including variable rate certificates of deposit,
bankers' acceptances, bank notes and time deposits. The savings banks and
savings and loan associations must be organized and operating in the United
States. The obligations of commercial banks may be issued by U.S. depository
institutions, foreign branches or subsidiaries of U.S. depository institutions
("Eurodollar" obligations) or U.S. branches or subsidiaries of foreign
depository institutions ("Yankeedollar" obligations). The Money Market Fund may
invest in Eurodollar obligations which by their terms are general obligations
of the U.S. parent bank.
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 and other entities to finance short-term credit needs, and
non-convertible debt securities (e.g., bonds and debentures) with no more than
397 days (13 months) remaining to maturity
5
<PAGE>
at the date of purchase. Short-term obligations also include mortgage-related
or asset-backed debt or debt-like instruments, including pass-through
certificates representing participations in, or bonds and notes backed by,
pools of mortgage, credit card, automobile or other types of receivables.
Foreign Bank Money Instruments: The Money Market Fund may invest in U.S.
dollar-denominated obligations of foreign depository institutions and their
foreign branches and subsidiaries, such as 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: 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. Investments in foreign entities in general involve the same
risks as those described in the Money Market Fund Statement of Additional
Information in connection with investments in Eurodollar and Yankeedollar
obligations.
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 repurchase
agreements involving the money market securities described above and repurchase
agreements involving U.S. Government and agency securities with longer
maturities. Under such agreements, the counterparty agrees, upon entering into
the contract, to repurchase the security from the Money Market 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.
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 money market 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) 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. The Money Market Fund may pay reasonable fees to persons
unaffiliated with the Money Market Fund in connection with the arranging of
such loans. During the period of the loan, the Money Market Fund receives the
income on both the loaned securities and the collateral and thereby increases
its yield.
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 are not completely risk free, such
6
<PAGE>
securities generally are considered to have low principal risk. There is the
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,
purchase and sale contracts, reverse repurchase agreements and securities
loans, 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
transaction, in which event the Money Market Fund may suffer time delays and
incur costs or possible losses in connection with such transactions.
Bank money instruments in which the Money Market Fund invests must be issued
by depository institutions with total assets of at least $1 billion, except
that up to 10% of total assets (taken at market value) may be invested in
certificates of deposit of smaller institutions if such certificates of deposit
are Federally insured.
The Money Market Fund may invest in participations in, or bonds and notes
backed by, pools of mortgage, credit card, automobile or other types of
receivables with remaining maturities of no more than 397 days (13 months).
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.
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 Trust (or by the Manager pursuant to
delegated authority). Currently, there are five NRSROs: Duff & Phelps Inc.,
Fitch IBCA Inc., Thompson Bankwatch, Inc., Moody's Investors Service, Inc. and
Standard & Poor's, a Division of The McGraw-Hill Companies, Inc. The Money
Market Fund will determine the remaining maturity of investments in which it
invests in accordance with Commission regulations.
A Commission regulation ordinarily limits investments by the Money Market
Fund in securities issued by any one issuer (other than the U.S. Government,
its agencies or instrumentalities) to not more than 5% of its total assets, or
in the event that such securities do not have the highest rating, and are not
of comparable quality to such securities, not more than 1% of its total assets.
In addition, such regulation requires 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 Trust (or by the Manager pursuant to
delegated authority).
The Money Market Fund may purchase or sell money market securities on a
forward commitment basis at fixed purchase 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
7
<PAGE>
those obtained in the transaction itself; if yields increase, the value of
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 high grade money market securities
having a market value at all times at least equal to the amount of the forward
purchase commitment.
For purposes of its investment policies, the Money Market Fund defines short-
term money market securities as securities 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 October 31,
1997, the average maturity of its portfolio ranged from 61 days to 89 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 of 1940, as amended
(the "Investment Company Act"). Among the more significant restrictions, the
Money Market Fund may not: (1) purchase any securities other than (i) money
market and (ii) other securities 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, Government agency securities,
or domestic bank money instruments); (3) purchase the securities of any one
issuer, other than the U.S. Government, its agencies or instrumentalities, 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 instruments, repurchase agreements and purchase and sale
contracts 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 limitation of 15% of the value of its total assets; and
(4) enter into repurchase agreements or purchase and sale contracts if, as a
result, more than 10% of the Money Market Fund's total assets (taken at market
value at the time of each investment) would be subject to repurchase agreements
or purchase and sale contracts maturing in more than seven days.
The Board of Trustees of the Trust, at a meeting held on December 22, 1997,
approved certain changes to the fundamental investment restrictions of the
Money Market Fund. These changes were proposed in response to recent Federal
legislation and changes in the money markets and are designed to provide the
Money Market Fund with as much investment flexibility as possible under the
Investment Company Act, help promote operational efficiencies and facilitate
monitoring of compliance. The investment objective and policies of the Money
Market Fund will be unaffected by the adoption of the proposed investment
restriction amendments.
The full text of the proposed investment restriction amendments is set forth
under "Investment Objectives and Policies -- Proposed Investment Restriction
Amendments" in the Statement of Additional Information. Shareholders of the
Money Market Fund are currently considering whether to approve the proposed
revised investment restrictions. If such shareholder approval is obtained, the
Money Market Fund's current investment restrictions will be amended as
proposed, and the Money Market Fund's Prospectus and Statement of Additional
Information will be supplemented to reflect such change.
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MANAGEMENT OF THE TRUST
TRUSTEES
The Trustees of the Trust consist of six individuals, five of whom are not
"interested persons" of the Trust as defined in the Investment Company Act. The
Trustees of the Trust are responsible for the overall supervision of the
operations of the Money Market Fund and perform the various duties imposed on
the directors of investment companies by the Investment Company Act.
The Trustees of the Trust are:
ARTHUR ZEIKEL*--Chairman of the Manager and its affiliate, Fund Asset
Management, L.P. ("FAM"); and Executive Vice President of Merrill Lynch & Co.,
Inc. ("ML & Co.").
JOE GRILLS--Member of the Committee of Investment of Employee Benefit Assets
of the Financial Executives Institute ("CIEBA"); Member of CIEBA's Executive
Committee; Member of the Investment Advisory Committees of the State of New
York Common Retirement Fund and the Howard Hughes Medical Institute.
WALTER MINTZ--Special Limited Partner of Cumberland Associates (investment
partnership).
ROBERT S. SALOMON, JR.--Principal of STI Management (investment adviser).
MELVIN R. SEIDEN--Director of Silbanc Properties, Ltd. (real estate,
investment and consulting).
STEPHEN B. SWENSRUD--Chairman of Fernwood Advisors (investment adviser);
Principal of Fernwood Associates (financial consultant).
- --------
* Interested person, as defined in the Investment Company Act, of the Trust.
MANAGEMENT AND ADVISORY ARRANGEMENTS
The Manager acts as the manager for the Money Market Fund and provides the
Trust and the Money Market Fund with management and investment advisory
services. The Manager is owned and controlled by ML&Co., a financial services
holding company and the parent of Merrill Lynch. The Manager or FAM acts as the
investment adviser for more than 140 registered investment companies and
provides investment advice to individual and institutional accounts. As of
January 31, 1998, the Manager and FAM had a total of $ billion in investment
company and other portfolio assets under management, including accounts of
certain affiliates of the Manager.
The management agreement with the Manager (the "Management Agreement")
provides that, subject to the direction of the Trustees, the Manager is
responsible for the actual management of the Money Market Fund's portfolio and
constantly reviews the Money Market Fund's 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
Manager, subject to review by the Trustees. The Manager performs certain of the
other administrative services and provides all of the office space, facilities,
equipment and necessary personnel for management of the Money Market Fund.
Pursuant to the Management Agreement, the Manager is entitled to receive
compensation at the annual rate of 0.50% of the Fund's average net assets not
exceeding $1 billion; 0.45% of the average daily net assets exceeding $1
billion but not exceeding $2 billion; 0.40% of the average daily net assets
exceeding $2 billion
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but not exceeding $3 billion; 0.375% of average daily net assets exceeding $3
billion but not exceeding $4 billion; 0.35% of average daily net assets
exceeding $4 billion but not exceeding $7 billion; 0.325% of average daily net
assets exceeding $7 billion but not exceeding $10 billion; and 0.30% of average
daily net assets exceeding $10 billion. For the fiscal year ended October 31,
1997, the total fee paid by the Money Market Fund to the Manager aggregated
$38,870,409 (based on average daily net assets of approximately $10.5 billion)
and the effective fee rate was 0.37%.
The Management Agreement obligates the Money Market Fund to pay certain
expenses incurred in its operations, including, among other things, the
management 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 the Trust by the Manager, and the Trust reimburses the Manager for
its costs in connection with such services. For the fiscal year ended October
31, 1997, the Trust paid $524,387 to the Manager in connection with accounting
services. For the fiscal year ended October 31, 1997, the ratio of total
expenses to average net assets was 0.54%.
Christopher G. Ayoub is primarily responsible for the day-to-day management
of the Trust's portfolio. Mr. Ayoub is a Vice President of the Fund, has been
Director (Fixed Income Fund Management) of the Manager since 1997 and was a
Vice President of the Manager from 1985 to 1997.
TRANSFER AGENCY SERVICES
Merrill Lynch Financial Data Services, Inc. (the "Transfer Agent"), which is
a subsidiary of ML & Co., acts as the Trust's 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
$6.50 per shareholder account for the first one million accounts and $6.00 per
shareholder account for each account thereafter and 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 in the relevant share class on a recordkeeping system, provided the
recordkeeping system is maintained by a subsidiary of ML & Co. For the fiscal
year ended October 31, 1997, the total fee paid by the Trust to the Transfer
Agent pursuant to the Transfer Agency Agreement was $14,619,064.
PURCHASE OF SHARES
The Trust currently offers Class A shares, and will offer Class B shares, of
the Money Market Fund to participants in the Self-Directed Plans (see "Self-
Directed Plans" on page 12 herein) and certain independent pension, profit-
sharing, annuity and other qualified plans. There are no minimum initial or
subsequent purchase requirements. Fractional shares of the Money Market Fund
will not be sold, other than through dividend reinvestments.
Class A shares are, and Class B shares will be, offered without a sales
charge at a public offering price equal to the net asset value (normally $1.00
per share) next determined after a purchase order becomes
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effective. Share purchase orders are effective on the date Federal Funds become
available to the Money Market Fund. If Federal Funds are available to the Money
Market Fund prior to the determination of net asset value (generally 4:00 p.m.
New York time), on any business day, the order will be effective on that day.
Shares purchased will begin accruing dividends on the day following the date of
purchase. Any order may be rejected by the Money Market Fund or the
Distributor.
Class A Shares. As of , 1998, all issued and outstanding shares of
the Money Market Fund were redesignated "Class A shares." Class A shares are
sold without any front-end or deferred sales charges and bear no ongoing
distribution fees. As of the date of this Prospectus, all investors in the
Money Market Fund receive Class A shares. After the commencement of the
offering of Class B shares (the "Class B commencement"), Class A shares will
continue to be offered to:
. Money Market Fund shareholders who held Class A shares as of the Class B
commencement;
. Money Market Fund shareholders who did not hold shares of the Money
Market Fund as of the Class B commencement but had at that time designated
the Money Market Fund as the money market fund into which free cash
balances in their Self-Directed Plan would be "swept";
. Corporate cash or deferred ("401(k)") plans;
. Participants in various retirement plans in association with the Merrill
Lynch BlueprintSM Program ("Blueprint"); and
. Participants purchasing shares for their individual retirement accounts
("IRAs") through certain Merrill Lynch fee-based programs.
Most contributions to retirement plans are made through payroll deductions.
In addition to investing in the Money Market Fund, participants in such plans
may invest in other mutual funds associated with the Merrill Lynch organization
or various other types of securities. If participants elect to have their
contributions invested in the Money Market Fund, the contributions will be
invested automatically on the business day following the date they are received
in the account. There will be no minimum initial or subsequent purchase
requirement pursuant to these types of plans. Cash balances of less than $1.00
will not be invested. Additional information about Blueprint can be obtained
from Merrill Lynch, Pierce, Fenner & Smith Incorporated, The BlueprintSM
Program, P.O. Box 30441, New Brunswick, New Jersey 08989-0441.
Class B Shares. Like Class A shares, Class B shares will be sold without any
front-end or deferred sales charges; however, Class B shares will be subject to
an ongoing distribution fee. Upon the Class B commencement (currently
anticipated to be on or about , 1998), Class B shares will be offered to:
. All individual investors in Self-Directed Plans who did not hold Class A
shares as of the Class B commencement and did not otherwise qualify to
purchase Class A shares;
. Participants in Self-Directed Plans who had designated the [Merrill Lynch
Insured Money Account] as the account into which free cash balances in
their Self-Directed Plan would be "swept";
. Educational cash or deferred ("403(b)") plans, self-employed retirement
("Keogh") plans and simplified employee pension plans ("SEPs") established
on or after Class B commencement; and
. Investors purchasing shares through an IRA rollover.
The Money Market Fund has adopted a distribution plan pursuant to Rule 12b-1
under the Investment Company Act with respect to distribution fees paid by the
Money Market Fund to Merrill Lynch with respect to the Class B shares (the
"Class B Distribution Plan"). The Class B Distribution Plan provides that such
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distribution fee is accrued daily and paid monthly at the annual rate of 0.20%
of the Money Market Fund's average daily net assets attributable to the Class
B shares. This distribution fee will be used to help defray the expenses
associated with marketing activities and services related to the Class B
shares, such as advertising expenditures related to the Class B shares, the
costs of systems enhancements, expenditures for sales and marketing support
and the costs of preparing and distributing promotional materials relating to
the Class B shares. Since the Class B shares have not commenced operations as
of the date of this Prospectus, no distribution fees were paid during the
fiscal year ended October 31, 1997 pursuant to the Class B Distribution Plan.
Payments under the Class B Distribution Plan will be based on a percentage
of average daily net assets attributable to the Class B shares regardless of
the amount of expenses incurred, and accordingly, distribution-related
revenues from the Class B Distribution Plan may be more or less than
distribution-related expenses. Information with respect to the Class B
distribution-related revenues and expenses will be presented to the Trustees
for their consideration in connection with their deliberations as to the
continuance of the Class B Distribution Plan. This information will be
presented annually as of December 31 of each year on a "fully allocated
accrual" basis and quarterly on a "direct revenue/cash" basis. On the fully
allocated accrual basis, revenues consist of the distribution fees and
expenses consist of branch office and regional operation center selling and
transaction processing expenses, all expenses associated with advertising,
sales promotion and marketing of Class B shares, corporate overhead and
interest expense. On the direct revenue/cash basis, revenues consist of
distribution fees paid to Merrill Lynch.
The Trust will have no obligation with respect to distribution-related
expenses incurred by the Distributor and Merrill Lynch in connection with
Class B shares, and there is no assurance that the Trustees of the Trust will
approve the continuance of the Class B Distribution Plan from year to year.
However, Merrill Lynch intends to seek annual continuation of the Class B
Distribution Plan. In their review of the Class B Distribution Plan, the
Trustees will be asked to take into consideration expenses incurred in
connection with the distribution of each class of shares separately. The
distribution fee received with respect to Class B shares will not be used to
subsidize the sale of Class A shares.
Purchases of Class A or Class B shares of the Money Market Fund by pension,
profit-sharing and annuity plans (other than the Self-Directed Plans) are made
by payments by the trustee or sponsor of such plan directly to Merrill Lynch.
Self-Directed Plans. As described in Appendix A to the Statement of
Additional Information, there are eight types of Self-Directed Plans: the
traditional individual retirement account ("IRA"), the Roth individual
retirement account ("Roth IRA"), the individual retirement rollover account
("IRRA"), a simplified employee pension plan ("SEP Plus (R)"), a Basic SM
(Keogh Plus) profit sharing plan, a Basic SM (Keogh Plus) money purchase
pension plan (together with the profit sharing plan, the "Basic SM Plans"), a
403(b)(7) Retirement Selector Account ("RSA") and the corporate self-directed
account of Blueprint. Although the amount which may be contributed to a Self-
Directed Plan account in any one year is subject to certain limitations,
assets already in a Self-Directed Plan account may be invested in the Money
Market Fund without regard to such limitations.
Shareholders considering transferring a tax-deferred retirement account such
as an IRA from Merrill Lynch to another brokerage firm or financial
institution should be aware that, if the firm to which the retirement account
is to be transferred will not take delivery of shares of the Trust, a
shareholder must either redeem the shares so that the cash proceeds can be
transferred to the account at the new firm, or such shareholder must continue
to maintain a retirement account at Merrill Lynch for those shares.
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Self-Directed Plan Investments. Investment in shares of the Money Market
Fund by participants in the Self-Directed Plans are made as follows:
Participants in these Self-Directed Plans have three options concerning cash
balances which may arise in their IRA, Roth IRA, IRRA, SEP Plus (R), RSA and
Basic SM Plan ("Retirement Plan") accounts. First, participants may elect to
have such balances automatically invested in shares of the Money Market Fund
or, in some cases, another money market mutual fund advised by the Manager on
a daily basis. Second, participants may elect to have such balances deposited
in an FDIC-insured money market account with a commercial bank designated by
Merrill Lynch except for RSA accounts. Third, participants may elect to
maintain the cash balances in their Retirement Plan account, in which case
such amounts will not be invested and no return will be earned until
investment instructions are received by Merrill Lynch from the participant.
Cash balances of participants who elect to have such funds automatically
invested in the Money Market Fund will be invested as follows. Cash balances
arising from the sale of securities held in the Self-Directed Plan account
which do not settle on the day of the transaction (such as most common and
preferred stock transactions) become available to the Trust and will be
invested in shares of the Money Market Fund on the business day following the
day that proceeds with respect thereto are received in the Self-Directed Plan
account. Proceeds giving rise to cash balances from the sale of securities
held in the Self-Directed Plan account settling on a same day basis and from
principal repayments on debt securities held in the account become available
to the Trust and will be invested in shares of the Money Market Fund on the
next business day following receipt. Cash balances arising from dividends or
interest payments on securities held in the Self-Directed Plan account or from
a contribution to the Self-Directed Plan are invested in shares of the Money
Market Fund on the business day following the date the payment is received in
the Self-Directed Plan account. Cash balances of less than $1.00 will not be
invested and no return will be earned.
A participant in these Self-Directed Plans (except retirement plans in
association with Blueprint) who has not elected to have cash balances
automatically invested in shares of the Money Market Fund may enter a purchase
order through his or her Merrill Lynch Financial Consultant. Orders to invest
either cash balances held in a Self-Directed Plan account or funds deposited
in the commercial bank referred to above will become effective on the business
day following the date on which the order is received.
REDEMPTION OF SHARES
Distributions from a Self-Directed Plan to a participant prior to the time
the participant reaches age 59 1/2 may subject the participant to penalty
taxes and income taxes on all or a portion of the distribution. There are,
however, no adverse tax consequences resulting from redemptions of shares of
the Money Market Fund where the redemption proceeds remain in the Self-
Directed Plan account and are otherwise invested. Shareholders other than
participants in the Self-Directed Plans should consult their tax advisers
concerning tax consequences resulting from redemption of shares of the Money
Market Fund.
The Money Market Fund is required to redeem for cash all of its full and
fractional shares. The redemption price is the net asset value per share next
determined after receipt by Merrill Lynch of proper notice of redemption as
described below. If such notice is received by Merrill Lynch prior to the
determination of net asset value on that day, the redemption will be effective
on such day and payment generally will be made on the next business day. If
the notice is received after the determination of net asset value has been
made, the redemption will be effective on the next business day and payment
will be made on the second business day after receipt of the notice.
Shareholders liquidating their holdings in the Money Market Fund will receive
upon redemption all dividends declared and reinvested until the time of
redemption.
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Any shareholder may redeem shares of the Money Market Fund by submitting a
written notice of redemption to Merrill Lynch. Participants in IRA, Roth IRA,
Basic SM, RSA and SEP Plus (R) Self-Directed Plans should contact their
Merrill Lynch Financial Consultant to effect such redemptions. Participants in
Self-Directed Plans in association with Blueprint should contact Merrill Lynch
at the toll-free number furnished to them to effect such redemptions.
Redemption requests should not be sent to the Money Market Fund or to its
Transfer Agent. If inadvertently sent to the Money Market Fund or the Transfer
Agent, redemption requests will be forwarded to Merrill Lynch. The notice must
bear the signature of the person in whose name the Self-Directed Plan is
maintained, signed exactly as his name appears on his Self-Directed Plan
adoption agreement.
The Trust has instituted an automatic redemption procedure for participants
in the Self-Directed Plans who have elected to have cash balances in their
accounts automatically invested in shares of the Money Market Fund. In the
case of such participants, unless directed otherwise, Merrill Lynch will
redeem a sufficient number of shares of the Money Market Fund to purchase
other securities which the participant has selected for investment in his
Self-Directed Plan account.
PORTFOLIO TRANSACTIONS
The money market securities in which the Money Market Fund invests are
traded primarily in the over-the-counter ("OTC") market. Where possible, the
Money Market Fund 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
principal for their own account. On occasion, securities may be purchased
directly from the issuer. Money market securities generally are 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 Money
Market Fund will consist primarily of dealer spreads and underwriting
commissions. Under the Investment Company Act, persons affiliated with the
Trust are prohibited from dealing with the Trust as a principal in the
purchase and sale of securities unless a permissive order allowing such
transactions is obtained from the Commission. Affiliated persons of the Trust
may serve as its broker in OTC transactions conducted on an agency basis. The
Commission has issued an exemptive order permitting the Trust to conduct
certain principal transactions with Merrill Lynch Government Securities Inc.
and Merrill Lynch Money Markets Inc., subject to certain terms and conditions.
For the fiscal year ended October 31, 1997, the Money Market Fund engaged in
2,505 transactions pursuant to such order aggregating approximately $2.1
billion.
ADDITIONAL INFORMATION
DIVIDENDS
Dividends are declared and reinvested daily in the form of additional shares
at net asset value. Shareholders liquidating their holdings will receive upon
redemption all dividends declared and reinvested through the date of
redemption. Since the net income (including realized gains and losses on the
portfolio assets) is declared as a dividend in shares each time the net income
of the Money Market Fund is determined, the net asset value per share of the
Money Market Fund normally remains constant at $1.00 per share. Fluctuations
in value may be reflected in the number of outstanding shares in the
shareholder's account.
Net income (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) plus or minus all realized
gains and losses on portfolio securities, (iii) less the estimated expenses of
the Money Market Fund applicable to that dividend period.
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DETERMINATION OF NET ASSET VALUE
The net asset value of the Money Market Fund is determined by the Manager
once daily, immediately after the daily declaration of dividends, on each day
during which the New York Stock Exchange ("NYSE") or New York banks are open
for business. Such determination is made as of the close of business on the
NYSE (generally, 4:00 p.m., New York time) or, on days when the NYSE is closed
but New York banks are open, at 4:00 p.m., New York time. The net asset value
per share is determined pursuant to the "penny-rounding" method by adding the
fair value of all securities and other assets in the portfolio including
interest accrued but not yet received, deducting the portfolio's liabilities
and dividing by the number of shares outstanding. The result of this
computation will be rounded to the nearest whole cent. Securities with
remaining maturities of greater than 60 days for which market quotations are
readily available will be valued at market value. Securities with a remaining
maturity of 60 days or less are valued on an amortized cost basis. 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. Other
securities held by the Money Market Fund will be valued at the fair value as
determined in good faith by or under direction of the Board of Trustees.
EXCHANGE PRIVILEGE
Class A and Class B shareholders of the Money Market Fund will have an
exchange privilege with Class D shares of certain other mutual funds advised by
the Manager or FAM ("MLAM-advised mutual funds"). Alternatively, shareholders
may exchange Class A or Class B shares of the Money Market Fund for Class A
shares of one of the MLAM-advised mutual funds if the shareholder holds any
Class A shares of that fund in his account in which the exchange is made at the
time of the exchange or is otherwise an eligible Class A investor in such fund.
Class A and Class B shareholders of the Money Market Fund also may exchange
shares of the Money Market Fund into shares of certain MLAM-advised money
market funds specifically designated as available for exchange by holders of
Money Market Fund shares. There is currently no limitation on the number of
times a shareholder may exercise the exchange privilege. The exchange privilege
may be modified or terminated at any time in accordance with the rules of the
Commission. Exercise of the exchange privilege is treated as a sale of the
exchanged shares and a purchase of the acquired shares for Federal income tax
purposes. For further information, see "Exchange Privilege" in the Statement of
Additional Information.
TAXES
Regulated Investment Companies. The following is a general summary of the
treatment of regulated investment companies ("RICs") and their shareholders
under the Internal Revenue Code of 1986, as amended (the "Code"). The Trust
intends to continue to qualify the Money Market Fund for the special tax
treatment afforded RICs under the Code. As long as it so qualifies, the Money
Market Fund will not be subject to Federal income tax on the part of its net
ordinary income and net realized capital gains that it distributes to
participants' Self-Directed Plan accounts. The Trust intends to cause the Money
Market Fund to distribute substantially all of such income.
Dividends paid by the Money Market Fund from its 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 ordinarily
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 ordinarily taxable to shareholders as long-term capital
gains, regardless of the length of time the shareholder has owned Money Market
Fund shares. Any loss upon the sale or exchange of Money Market Fund shares
held for six months
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or less, however, will be treated as long-term capital loss to the extent of
any capital gain dividends received by the shareholder. Distributions in excess
of the Money Market 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). Recent legislation creates additional categories of
capital gain taxable at different rates, which RICs generally may pass through
to shareholders. Generally, not later than 60 days after the close of its
taxable year, the Money Market 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 amounts of capital gain dividends in the
different categories of capital gain referred to above. Dividends of a RIC are
ordinarily taxable to shareholders even though they are reinvested in
additional shares of the Money Market Fund.
Under certain provisions of the Code, some taxpayers may be subject to a 31%
withholding tax on ordinary income dividends, capital gain dividends and
redemption payments ("backup withholding"). Generally, participants in the
Self-Directed Plans subject to backup withholding will be those for whom no
certified taxpayer identification number is on file with the Trust or who, to
the Trust'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.
Self-Directed Retirement Plans. Investment in the Money Market Fund is
limited to participants in the self-directed retirement plans ("retirement
plans") for which Merrill Lynch acts as passive custodian. Accordingly, the
general description of the tax treatment of RICs as set forth above is
qualified with respect to the special tax treatment afforded retirement plans
under the Code. Under the Code, neither ordinary income dividends nor capital
gain dividends represent current income to Class A or Class B shareholders if
such shares are held in a retirement plan. Rather, distributions from a
retirement plan (except a Roth IRA) will be taxable as ordinary income at the
rate applicable to the participant at the time of the distribution.
For all Self-Directed Plans except Roth IRAs, such distributions would
include (i) any pre-tax contributions to the retirement plan (including pre-tax
contributions that have been rolled over from another retirement plan or IRA)
and (ii) dividends (whether or not such dividends are classified as ordinary
income or capital gain dividends). Recent legislation, however, provides that
there is no penalty for early withdrawals from a retirement plan for the
purpose of acquiring one's first home. In addition to ordinary income tax,
participants (except Roth IRA participants) may be subject to the imposition of
excise taxes on any distributed amount, including: (i) a 10% excise tax on any
amount withdrawn from a retirement plan prior to the participant's attainment
of age 59 1/2, unless the shareholder has become disabled, is purchasing a
first new home (subject to the $10,000 lifetime limit) or has died.
For Roth IRA participants, distributions, including accumulated earnings on
contributions, will not be includible in income if such distribution is made
more than five years after the first tax year of contribution and the account
holder is either age 59 1/2 or older, has become disabled, is purchasing a
first new home (subject to the $10,000 lifetime limit) or has died. As with the
other Self-Directed Plans, a 10% excise tax applies to amounts, other than the
$10,000 allowed for a first home purchase, withdrawn from the Roth IRA prior to
reaching age 59 1/2. Such a withdrawal would also be included in income to the
extent of earnings on contributions, with distributions treated as made from
contributions and then from earnings.
Under certain limited circumstances (for example, if an individual for whose
benefit a retirement plan is established engages in any transaction prohibited
under Section 4975 of the Code with respect to such account), the retirement
plan would cease to be qualified for the special treatment afforded certain
retirement plans under the Code as of the first day of such taxable year that
the transaction causing disqualification
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occurred. If a retirement plan through which a participant holds Class A or
Class B shares of the Money Market Fund becomes ineligible for special tax
treatment, such participant will be treated as having received a distribution
on the first day of the taxable year from the retirement plan in an amount
equal to the fair market value of all assets in the account. Thus, a
shareholder (except shareholders in Roth IRAs) then would be taxed currently on
the amount of any pre-tax contributions and previously untaxed dividends held
within the account. A Roth IRA shareholder would be taxed currently on the
distribution to the extent of accumulated earnings on contributions. All
shareholders would be taxed on all ordinary income and capital gain dividends
paid by the Fund subsequent to such event, whether such dividends were received
in cash or reinvested in additional shares. These ordinary income and capital
gain dividends also might be subject to state and local taxes. In the event of
retirement plan disqualification, shareholders also could be subject to the 10%
excise tax described above. Additionally, retirement plan disqualification may
subject a nonresident alien shareholder to a 30% United States withholding tax
on ordinary income dividends paid by the Money Market Fund unless a reduced
rate of withholding or a withholding exemption is provided under applicable
treaty law.
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.
State. Ordinary income and capital gain dividends on RIC shares held in a
disqualified retirement plan or outside of a retirement plan also may be
subject to state and local taxes. Certain states exempt from state income
taxation dividends paid by RICs which are derived from interest on United
States Government obligations. State law varies as to whether dividend income
attributable to United States Government obligations is exempt from state
income tax. Generally, however, states exempt from state income taxation
dividends on shares held within a qualified retirement plan, and commence
taxation on such amounts when actually distributed from the retirement plan.
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 Fund.
ORGANIZATION OF THE TRUST
The Trust was organized on July 15, 1986 under the laws of the Commonwealth
of Massachusetts as a business trust. The Trust is the successor to a
Massachusetts business trust of the same name organized October 28, 1981. It is
a no-load, diversified, open-end investment company. The Trustees are
authorized to create an unlimited number of Series and, with respect to each
Series, to issue an unlimited number of full and fractional shares of
beneficial interest, $.10 par value per share, of different classes.
Shareholder approval is not required for the authorization of additional Series
or classes of a Series of the Trust. At the date of this Prospectus, the shares
of the Money Market Fund are divided into Class A and Class B shares. Class A
and Class B shares represent interests in the same assets of the Money Market
Fund and are identical in all respects, except that Class B shares bear certain
expenses related to the distribution of such shares and have exclusive voting
rights with respect to matters relating to Class B distribution expenditures.
See "Purchase of Shares." The Trustees of the Trust may classify and reclassify
the shares of the Trust into additional classes at a future date. All shares
have equal voting rights, except that only shares of the respective Series are
entitled to vote on matters concerning only that Series. Each issued and
outstanding share of a Series is entitled to
17
<PAGE>
one vote and to participate equally in dividends and distributions declared by
such Series and in net assets of such Series upon liquidation or dissolution
remaining after satisfaction of outstanding liabilities except that, as noted
above, Class B shares bear certain additional expenses. In the event a Series
were unable to meet its obligations, the remaining Series would assume the
unsatisfied obligations of that Series. The obligations and liabilities of a
particular Series are restricted to the assets of that Series and do not extend
to the assets of the Trust generally. The shares of each Series, when issued,
will be fully paid and non-assessable by the Trust. At the date of this
Prospectus, the Money Market Fund is the only Series of the Trust.
The Declaration does not require that the Trust hold an annual meeting of
shareholders. However, the Trust 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 the Money Market Fund or the Trust. The Trust
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. The Declaration provides that a
shareholders' meeting may be called for any reason at the request of 10% of the
outstanding shares of the Trust or by a majority of the Trustees. Except as set
forth above, the Trustees shall continue to hold office and appoint successor
Trustees.
The Declaration of Trust establishing the Trust, dated July 15, 1986, a copy
of which, together with all amendments thereto (the "Declaration"), is on file
in the office of the Secretary of the Commonwealth of Massachusetts, provides
that the name "Merrill Lynch Retirement Series Trust" refers to the Trustees
under the Declaration collectively as Trustees, but not as individuals or
personally; and no Trustee, shareholder, officer, employee or agent of the
Trust 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 said Trust
but the "Trust Property" (as defined in the Declaration) only shall be liable.
SHAREHOLDER REPORTS
Only one copy of each shareholder report and certain shareholder
communications will be mailed to each identified shareholder regardless of the
number of accounts such shareholder has. If a shareholder wishes to receive
separate copies of each report and communication for each of the shareholder's
related accounts the shareholder should notify in writing:
Merrill Lynch Financial Data Services, Inc.
P.O. Box 45290
Jacksonville, Florida 32232-5290
The written notification should include the shareholder's name, address, tax
identification number and Merrill Lynch, Pierce, Fenner & Smith Incorporated
and/or mutual fund account numbers. If you have any questions regarding this
please call your Merrill Lynch financial consultant or Merrill Lynch Financial
Data Services, Inc. at 800-221-7210.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Money Market Fund at the
address or telephone number set forth on the cover page of this Prospectus.
18
<PAGE>
APPLICATION FOR CHECK WRITING PRIVILEGES FOR
MERRILL LYNCH RETIREMENT RESERVES MONEY FUND
If you are either 59 1/2 years or older, permanently disabled or, in the
case of a [Merrill Lynch Roth IRA or] Merrill Lynch Tax-Deferred Basic (TM)
Retirement Plan, you are eligible for distributions, you may be eligible to
write checks of $500 or more against your balance in the Merrill Lynch
Retirement Reserves Money Fund.
(THE RETIREMENT RESERVES CHECK WRITING PRIVILEGE IS NOT AVAILABLE TO
PARTICIPANTS IN CERTAIN EMPLOYEE BENEFIT PLANS (IN ASSOCIATION WITH THE
MERRILL LYNCH BLUEPRINT SM PROGRAM) OR TO A PARTICIPANT IN A PENSION, PROFIT-
SHARING OR OTHER QUALIFIED PLAN, WITH THE EXCEPTION OF THE MERRILL LYNCH TAX-
DEFERRED BASIC (TM) RETIREMENT PLAN.)
To apply for the check writing privilege:
--Read the information on this page to determine if you are eligible.
--If you are eligible, read the terms governing the check writing
privilege.
--Complete the Check Request Form on the back of this page.
WHO IS ELIGIBLE FOR CHECK WRITING
You are eligible for the check writing privilege only if you meet the
following three conditions:
(1) YOU ARE EITHER (I) AGE 59 1/2 OR OLDER, (II) PERMANENTLY DISABLED OR
(III), IN THE CASE OF BASIC PLANS, ARE ELIGIBLE FOR DISTRIBUTIONS.
Distributions from a traditional IRA or SEP before you reach age 59 1/2
are generally subject to an Internal Revenue Service penalty tax equal
to 10% of the amount withdrawn unless you are permanently disabled.
Distributions from certain Basic Plans before you reach age 59 1/2 may
also be subject to penalty taxes.
(2) YOU CHOOSE NOT TO HAVE INCOME TAXES WITHHELD FROM AMOUNTS DISTRIBUTED
FROM YOUR ACCOUNT THROUGH USE OF THE CHECK WRITING PRIVILEGE. All
distributions from your account are taxable income to you and are
subject to Federal Income Tax withholding. However, you may for any
reason choose not to have these taxes withheld. You can participate in
the check writing program only if you choose not to have taxes
withheld, since Merrill Lynch cannot withhold taxes from checks you
write. NOTE: You may be responsible, under IRS regulations, for paying
estimated taxes based on the amounts distributed from your account by
check. Be aware also that when your actual taxes for a year are
determined, you could incur IRS penalties if your estimated tax
payments were not sufficient.
(3)YOU HAVE A MERRILL LYNCH RETIREMENT RESERVES MONEY FUND POSITION.
NOTE: IF YOU ARE A PARTICIPANT IN A BASIC PLAN, YOU MUST BE ELIGIBLE UNDER
THE PLAN TO BEGIN RECEIVING PAYMENTS. CHECK WITH YOUR PLAN
ADMINISTRATOR (USUALLY IT IS YOUR EMPLOYER) TO MAKE SURE YOU ARE
ELIGIBLE. IF YOU ARE, YOUR PLAN ADMINISTRATOR MUST ALSO SIGN THE CHECK
REQUEST FORM.
TERMS GOVERNING CHECK WRITING
The check writing program does not establish a checking account relationship
between you and Merrill Lynch or between you and Merrill Lynch Financial Data
Services, Inc.
Instead, these terms apply to the check writing program:
--Each check must be for at least $500.
--Any check for less than $500 will be returned unpaid.
--There are no charges for checks.
--A transaction advice will confirm any check paid against your account, and
distribution by check will be indicated on your account's monthly statement--
there is no separate "checking statement."
--No check may exceed your balance in the Merrill Lynch Retirement Reserves
Money Fund.
NOTE: DO NOT USE CHECKS TO CLOSE OUT OR TRANSFER YOUR ACCOUNT, TO CORRECT AN
OVERCONTRIBUTION (EXCESS CONTRIBUTION) OR TO WITHDRAW AMOUNTS
CLASSIFIED AS VOLUNTARY CONTRIBUTIONS TO BASIC PLANS. THIS IS BECAUSE
ALL MERRILL LYNCH RETIREMENT RESERVES MONEY FUND CHECK DISTRIBUTIONS
WILL BE REPORTED TO THE IRS AS TAXABLE DISTRIBUTIONS. AS A RESULT YOU
MAY BE SUBJECT TO ADVERSE TAX CONSEQUENCES. INSTEAD, CONTACT YOUR
MERRILL LYNCH FINANCIAL CONSULTANT TO MAKE SUCH TRANSACTIONS.
DISTRIBUTIONS OTHER THAN BY CHECK
If you decide to use the check writing privilege, you may still choose to
take distributions from your Retirement Account by contacting your Financial
Consultant rather than by writing checks.
NOTE: FOR DISTRIBUTIONS OTHER THAN BY CHECK WRITING YOU WILL NEED TO COMPLETE
THE APPROPRIATE DISTRIBUTION AND TAX WITHHOLDING FORM WHICH CAN BE
OBTAINED FROM YOUR MERRILL LYNCH FINANCIAL CONSULTANT.
19
<PAGE>
CHECK REQUEST FORM Merrill Lynch Financial Data Services,
When completed return this form to: Inc.
P.O. Box 45290
Jacksonville, Florida 32232-5290
CHECK NAME. Checks are issued only in the name of the owner of the Retirement
Account. Please enter your name exactly as it appears on your Merrill Lynch
Adoption Agreement:
- -------------------------------------------------------------------------------
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
- -------------------------------------------------------------------------------
Last Name First Name Initial
ACCOUNT NUMBER FOR YOUR MERRILL LYNCH IRA, [MERRILL LYNCH ROTH IRA,] BASIC OR
SEP RETIREMENT ACCOUNT. (If you have more than one account, you must complete
a separate form to request checks for each account on which you want to write
checks.)
- ----------------
| | | | | | | |
|
- ----------------
Account Number
BIRTHDATE:
------------
| | | | | |
------------
Month-Day-
Year
SOCIAL SECURITY NUMBER:
------------------
| | | | | | | | |
------------------
ADDRESS:
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Street Address
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
-----------------------------------------------------------------------
City State Zip Code
CHECK REDEMPTION PRIVILEGE (SEE TERMS AND CONDITIONS IN THE PROSPECTUS): By
signing this form, you request and authorize Merrill Lynch Financial Data
Services, Inc. (the "Transfer Agent") to honor checks or automatic clearing
house ("ACH") debits you draw on the Merrill Lynch Retirement Reserves Money
Fund in your Merrill Lynch Retirement Account (IRA, Basic or SEP) in the
amount of $500 or more, subject to acceptance by the Fund. Payment for the
checks will be made by redeeming sufficient Fund shares in your account
without a signature guarantee.
The Transfer Agent and the Fund reserve all their lawful rights for honoring
checks or ACH debits drawn by you and for redeeming Fund shares pursuant to
this check redemption privilege. You acknowledge that this privilege does not
create a checking account or other bank account relationship between you and
the Transfer Agent or the Fund and the relationship between you and the
Transfer Agent is that of a shareholder-transfer agent.
INTERNAL REVENUE SERVICE REPORTING
MERRILL LYNCH IS REQUIRED BY LAW TO REPORT TO THE INTERNAL REVENUE SERVICE
ALL DISTRIBUTIONS MADE DURING THE YEAR FROM YOUR RETIREMENT ACCOUNT.
PLEASE NOTE:-- THE YEAR OF DISTRIBUTION WILL BE DETERMINED BY THE DATE THE
CHECK IS PROCESSED BY MERRILL LYNCH FINANCIAL DATA SERVICES,
INC., NOT THE DATE YOU WRITE THE CHECK OR THE DATE THE CHECK IS
PRESENTED TO A LOCAL BANK FOR PAYMENT.
THEREFORE, IF YOU ARE OVER AGE 70 1/2 AND MUST TAKE A
DISTRIBUTION BY DECEMBER 31 OF A CALENDAR YEAR, YOU MUST ALLOW
SUFFICIENT TIME FOR THE CHECK TO BE PAID BY THE BANK BEFORE
YEAR-END. OTHERWISE, YOUR DISTRIBUTION WILL NOT BE REFLECTED
AND REPORTED TO THE IRS IN THE YEAR FOR WHICH IT WAS INTENDED.
SIGNATURE
By signing this check request form, you confirm that you are either 59 1/2
years of age or older, permanently disabled or, in the case of Basic Plans,
are eligible for distributions, and that you choose not to have income taxes
withheld from distributions made under the check writing program.
Your signature: _____________________________________________ Date: __________
If you are a Basic Plan participant, your Plan Administrator must also sign
to indicate you are eligible to start receiving distributions under the Plan.
Signature of Plan Administrator: ______________________________________________
20
<PAGE>
[This Page Intentionally Left Blank]
<PAGE>
[This Page Intentionally Left Blank]
<PAGE>
MANAGER
Merrill Lynch Asset Management
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Mailing Address:
P.O. Box 9011
Princeton, New Jersey 08543-9011
DISTRIBUTOR
Merrill Lynch Funds Distributor, Inc.
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Mailing Address:
P.O. Box 9081
Princeton, New Jersey 08543-9081
CUSTODIAN
The Bank of New York
90 Washington Street
12th Floor
New York, New York 10286
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 08540-6400
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 REPRESEN-
TATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE TRUST, THE MANAGER, OR THE DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFERING IN ANY STATE IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
----------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fee Table.................................................................. 2
Financial Highlights....................................................... 3
Yield Information.......................................................... 4
Investment Objectives and Policies......................................... 4
Management of the Trust.................................................... 9
Trustees.................................................................. 9
Management and Advisory Arrangements...................................... 9
Transfer Agency Services.................................................. 10
Purchase of Shares......................................................... 10
Redemption of Shares....................................................... 13
Portfolio Transactions..................................................... 14
Additional Information..................................................... 14
Dividends................................................................. 14
Determination of Net Asset Value.......................................... 15
Exchange Privilege........................................................ 15
Taxes..................................................................... 15
Organization of the Trust................................................. 17
Shareholder Reports....................................................... 18
Shareholder Inquiries..................................................... 18
Application for Check Writing Privileges................................... 19
</TABLE>
Code # 10093-0198
[LOGO] MERRILL LYNCH
Merrill Lynch Retirement
Reserves Money Fund
Merrill Lynch
Retirement Series Trust
[ART]
Merrill Lynch Retirement Reserves Money
Fund is organized as a Massachusetts
business trust. It is not a bank nor does it offer
fiduciary or trust services. Shares of the Fund
are not equivalent to a bank account. As with
any investment in securities, the value of a
shareholder's investment in the Fund will
fluctuate. The shares of the Fund are not
insured by any Government agency and are
not subject to the protection of the Securities
Investor Protection Corporation. A
shareholder's investment in the Fund is not
insured by any government agency.
PROSPECTUS
, 1998
Distributor:
Merrill Lynch
Funds Distributor, Inc.
This prospectus should be retained for future references.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MERRILL LYNCH RETIREMENT RESERVES MONEY FUND
MERRILL LYNCH RETIREMENT SERIES TRUST
P.O. Box 9011, Princeton, New Jersey 08543-9011 . Phone No. (609) 282-2800
-------------------------
The investment objectives of the Merrill Lynch Retirement Reserves Money Fund
(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. These securities primarily consist of U.S. Government
and agency securities, bank certificates of deposit and bankers' acceptances,
commercial paper and repurchase agreements. For purposes of its investment
policies, the Money Market Fund defines short-term money market securities as
securities 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. Management of the Money Market Fund
expects that substantially all the assets of the Money Market Fund will be
invested in securities maturing in less than one year, but at times some
portion may have longer maturities not exceeding 762 days. The dollar weighted-
average maturity of the Money Market Fund's portfolio will not exceed 90 days.
The Trust is authorized to offer Class A and Class B shares of the Money
Market Fund to participants in the self-directed retirement plans for which
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") acts as
passive custodian (the "Self-Directed Plans"). For a description of the Self-
Directed Plans, see Appendix A to this Statement of Additional Information.
Shares of the Money Market Fund are also offered to certain independent
pension, profit-sharing, annuity and other qualified plans. As of the date of
this Statement of Additional Information, no Class B shares have been issued.
The Money Market Fund is the only existing series of Merrill Lynch Retirement
Series Trust (the "Trust"), a business trust organized under the laws of
Massachusetts. The Trust is a no-load, diversified, open-end investment company
which may be comprised of separate series ("Series"), each of which would be a
separate portfolio offering a separate class or classes of shares to
participants in the retirement plans described herein.
-------------------------
This Statement of Additional Information of the Money Market Fund is not a
prospectus and should be read in conjunction with the prospectus of the Money
Market Fund, dated , 1998 (the "Prospectus"), which has been filed
with the Securities and Exchange Commission (the "Commission") and can be
obtained, without charge, by calling or by writing the Money Market Fund at the
above telephone number or address. This Statement of Additional Information has
been incorporated by reference into the Prospectus. Capitalized terms used but
not defined herein have the same meanings as in the Prospectus.
-------------------------
MERRILL LYNCH ASSET MANAGEMENT--MANAGER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.--DISTRIBUTOR
-------------------------
The date of this Statement of Additional Information is , 1998.
<PAGE>
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. Reference is made
to "Investment Objectives and Policies" in the Prospectus for a discussion of
the investment objectives and policies of the Money Market Fund.
As discussed in the Prospectus, the Money Market Fund may invest in money
market securities pursuant to repurchase agreements involving money market
securities and involving U.S. Government and agency securities with longer
maturities. 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.
Repurchase agreements may be construed to be collateralized loans by the
purchaser to the seller secured by the securities transferred to the purchaser.
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 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 savings banks and savings and loan associations must be
organized and operating in the United States. The obligations of commercial
banks may be issued by U.S. banks, foreign branches or subsidiaries of U.S.
banks ("Eurodollar" obligations) U.S. branches or subsidiaries of foreign banks
("Yankeedollar" obligations), or foreign branches and subsidiaries of foreign
depository institutions. Eurodollar and Yankeedollar obligations may be general
obligations of the parent bank or may be limited to the issuing branch by the
terms of the specific obligation or by government regulation.
Eurodollar and Yankeedollar obligations may involve additional investment
risks from the risks of obligations of U.S. banks. Such investment risks
include 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 payment of principal and interest. Generally the
issuers of such obligations are subject to fewer U.S. regulatory requirements
than are applicable to U.S. banks. Foreign branches or subsidiaries of U.S.
banks may be subject to less stringent reserve
2
<PAGE>
requirements than U.S. banks. U.S. branches or subsidiaries of foreign banks
are subject to the reserve requirements of the states in which they are
located. There may be less publicly available information about a U.S. branch
or subsidiary of a foreign bank than about a U.S. bank, and such branches or
subsidiaries may not be subject to the same accounting, auditing and financial
recordkeeping standards and requirements as U.S. banks. Evidence of ownership
of Eurodollar obligations may be held outside of the United States, and the
Money Market Fund may be subject to risks associated with the holding of such
property overseas. Eurodollar obligations of the Money Market Fund held
overseas will be held by foreign branches of the Money Market Fund's Custodian
or by foreign branches of other U.S. banks or foreign banks under subcustodian
arrangements complying with the requirements of the Investment Company Act of
1940, as amended (the "Investment Company Act").
Merrill Lynch Asset Management, L.P. ("MLAM" or the "Manager") will carefully
consider the above factors in making investments in Eurodollar and Yankeedollar
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'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 Trust. Currently, there are five NRSROs: Duff
& Phelps Inc., Fitch IBCA Inc., Thompson Bankwatch, Inc., Moody's Investors
Service, Inc. and Standard & Poor's, a Division of The McGraw-Hill Companies,
Inc. The Money Market Fund will determine the remaining maturity of investments
in which it invests in accordance with Commission regulations.
Current Investment Restrictions. In addition to the investment restrictions
set forth in the 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, 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
3
<PAGE>
thereof; (7) make loans to other persons, provided that the Money Market Fund
may purchase money market securities or enter into repurchase agreements or
purchase and sale contracts and lend securities owned or held by it pursuant to
(8) below; (8) lend its portfolio securities other than as provided in the
guidelines set forth below, or in excess of 33 1/3% of its total assets, taken
at market value; (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 for which
no readily available market exists if more than 10% of its total assets (taken
at market value) would be invested in such securities; (12) invest in
securities with legal or contractual restrictions on resale (except for
repurchase agreements or purchase and sale contracts), or in securities of
issuers (other than 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 and borrowings
permitted in (9) above would exceed 33 1/3% of its net assets (defined to be
total assets, taken at market value, less liabilities other than reverse
repurchase agreements).
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 United States 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 and may do so when deemed appropriate. The Money
Market Fund may pay reasonable fees to persons unaffiliated with the Money
Market Fund in connection with the arranging of such loans.
Proposed Investment Restriction Amendments. As discussed in the Prospectus
under "Investment Objectives and Policies--Investment Restrictions," the Board
of Trustees of the Trust has approved the replacement of certain of the Money
Market Fund's existing investment restrictions as set forth below. The
investment objectives and policies of the Money Market Fund will be unaffected
by the adoption of the proposed investment restriction amendments.
Shareholders of the Money Market Fund are currently considering whether to
approve the proposed amendments to the investment restrictions. If such
shareholder approval is obtained, the Money Market
4
<PAGE>
Fund's current investment restrictions will be replaced by the proposed
restrictions as noted, and the Money Market Fund's Prospectus and Statement of
Additional Information will be supplemented to reflect such change.
. With respect to investment in other investment companies, current
fundamental investment restriction (3) would be replaced with a non-fundamental
restriction providing that the Money Market Fund may not:
Purchase securities of other investment companies, except to the extent
such purchases are permitted by applicable law. As a matter of policy,
however, the Money Market Fund will not purchase shares of any registered
open-end investment company or registered unit investment trust, in
reliance on Section 12(d)(1)(F) or (G) (the "fund of funds" provisions) of
the Investment Company Act at any time the Money Market Fund's shares are
owned by another investment company that is part of the same group of
investment companies as the Money Market Fund.
. With respect to investment in real estate, current fundamental investment
restriction (4) would be replaced with two fundamental restrictions providing
that the Money Market Fund may not:
Purchase or sell real estate, except that, to the extent permitted by
applicable law, the Money Market Fund may invest in money market securities
secured by real estate or interests therein or money market securities
issued by companies that invest in real estate or interests therein and may
hold and sell real estate acquired by the Money Market Fund as a result of
the ownership of money market securities.
and
Purchase or sell commodities or contracts on commodities, except to the
extent that the Money Market Fund may do so in accordance with applicable
law and the Money Market Fund's Prospectus and Statement of Additional
Information, as they may be amended from time to time, and without
registering as a commodity pool operator under the Commodity Exchange Act.
. With respect to short sales, current fundamental investment restriction (6)
would be replaced with a non-fundamental restriction providing that the Money
Market Fund may not:
Make short sales of securities or maintain a short position except to the
extent permitted by applicable law. The Money Market Fund currently does
not intend to engage in short sales.
. With respect to investments in restricted securities and "unseasoned"
issuers, current fundamental investment restrictions (11) and (12) would be
replaced with a non-fundamental restriction providing that the Money Market
Fund may not:
Invest in securities which cannot be readily resold because of legal or
contractual restrictions, or which cannot otherwise be marketed, redeemed,
put to the issuer or to a third party, if at the time of acquisition more
than 10% of its total assets would be invested in such securities. This
restriction shall not apply to money market securities that mature within
seven days or securities that the Board of Trustees has otherwise
determined to be liquid pursuant to applicable law. Securities purchased in
accordance with Rule 144A under the Securities Act of 1933, as amended, and
determined to be liquid by the Board of Trustees are not subject to the
limitations set forth in this investment restriction.
5
<PAGE>
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS
Information about the Trustees and executive officers of the Trust, their
ages and their principal occupations for at least the last five years are set
forth below. Unless otherwise noted, the address of each Trustee and executive
officer is Merrill Lynch Asset Management, L.P., P.O. Box 9011, Princeton, New
Jersey 08543-9011.
ARTHUR ZEIKEL (65)--President and Trustee (1)(2)--Chairman of MLAM (which
term as used herein includes its corporate predecessors) since 1997; Chairman
of Fund Asset Management, L.P. ("FAM") (which term as used herein includes its
corporate predecessors) since 1997; President of MLAM and FAM from 1977 to
1997; President and Director of Princeton Services, Inc. ("Princeton Services")
from 1993 to 1997; Executive Vice President of Merrill Lynch & Co., Inc.
("ML&Co.") since 1990.
JOE GRILLS (62)--Trustee (2)--P.O. Box 98, Rapidan, Virginia 22733. Member of
the Committee of Investment of Employee Benefit Assets of the Financial
Executives Institute ("CIEBA") since 1986; member of CIEBA's Executive
Committee since 1988 and its Chairman from 1991 to 1992; Assistant Treasurer of
International Business Machines Incorporated ("IBM") and Chief Investment
Officer of the IBM Retirement Funds from 1986 until 1993; Member of the
Investment Advisory Committee of the State of New York Common Retirement Fund;
Member of the Investment Advisory Committee of the Howard Hughes Medical
Institute; Director, Duke Management Company since 1993; Director, LaSalle
Street Fund since 1995; Director, Kimco Realty Corporation since January 1997.
WALTER MINTZ (68)--Trustee (2)--1114 Avenue of the Americas, New York, New
York 10036. Special Limited Partner of Cumberland Associates (investment
partnership) since 1982.
ROBERT S. SALOMON, JR. (61)--Trustee (2)--106 Dolphin Cove Quay, Stamford,
Connecticut 06902. Principal of STI Management (investment adviser); Chairman
and CEO of Salomon Brothers Asset Management from 1992 to 1995; Chairman of
Salomon Brothers equity mutual funds from 1992 to 1995; Director of Stock
Research and U.S. Equity Strategist at Salomon Brothers from 1975 to 1991;
Director, Common Fund.
MELVIN R. SEIDEN (67)--Trustee (2)--780 Third Avenue, Suite 2502, New York,
New York 10017. Director of Silbanc Properties, Ltd. (real estate, investments
and consulting) since 1987; Chairman and President of Seiden & de Cuevas, Inc.
(private investment firm) from 1964 to 1987.
Stephen B. Swensrud (64)--Trustee (2)--24 Federal Street, Suite 400, Boston,
Massachusetts 02110. Chairman of Fernwood Advisors (investment adviser) since
1996; Principal of Fernwood Associates (financial consultant) since 1975.
TERRY K. GLENN (57)--Executive Vice President (1)(2)--Executive Vice
President of MLAM and FAM since 1983; President of Merrill Lynch Funds
Distributor, Inc. (the "Distributor") since 1986 and Director thereof since
1991; Executive Vice President and Director of Princeton Services since 1993;
President of Princeton Administrators, L.P. since 1988.
JOSEPH T. MONAGLE, JR. (49)--Senior Vice President (1)(2)--Senior Vice
President and Department Head of the Global Fixed Income Division of MLAM and
FAM since 1990; Vice President of MLAM from 1978 to 1990; Senior Vice President
of Princeton Services since 1993.
CHRISTOPHER G. AYOUB (42)--Vice President (1)(2)--Director (Fixed Income Fund
Management) since 1997; Vice President of MLAM from 1985 to 1997; Assistant
Vice President of MLAM from 1984 to 1985 and employee since 1982.
6
<PAGE>
DONALD C. BURKE (37)--Vice President (1)(2)--First Vice President of MLAM
since 1997; Vice President of MLAM from 1990 to 1997; Director of Taxation of
MLAM since 1990.
GERALD M. RICHARD (48)--Treasurer (1)(2)--Senior Vice President and
Treasurer of MLAM and FAM since 1984; Vice President of the Distributor since
1981 and Treasurer thereof since 1984; Senior Vice President and Treasurer of
Princeton Services since 1993.
BARBARA G. FRASER (53)--Secretary (1)(2)--First Vice President of MLAM since
1996; Vice President of MLAM from 1994 to 1996, attorney on sabbatical from
1991 to 1994.
- ---------------------
(1) Interested person, as defined in the Investment Company Act of 1940, of
the Trust.
(2) Such Trustee or officer is a director, trustee, officer or member of an
advisory board of certain other investment companies for which the Manager
or FAM acts as investment adviser.
At , 1998, the Trustees and Officers of the Trust as a group (12
persons) owned an aggregate of less than 1% of the outstanding shares of
beneficial interest of the Trust. At such date, Mr. Zeikel, a Trustee and
Officer of the Trust, and the other Officers of the Trust owned less than 1%
of the outstanding Common Stock of ML & Co.
COMPENSATION OF TRUSTEES
Pursuant to the terms of its management agreement with the Trust (the
"Management Agreement"), the Manager pays all compensation of officers and
employees of the Trust as well as the fees of all Trustees of the Trust who
are affiliated persons of ML & Co. or its subsidiaries. The Trust pays each
unaffiliated Trustee a fee of $4,000 per year plus $1,000 per meeting attended
and all Trustees' actual out-of-pocket expenses relating to attendance at
meetings. The Trust also pays each member of the Audit Committee, which
consists of all of the unaffiliated Trustees, an annual fee of $4,000 plus a
fee of $750 for each meeting of the Audit Committee which is held on a day on
which the Board of Trustees does not meet, together with all out-of-pocket
expenses relating to attendance at such meetings. These fees and expenses
aggregated $75,354 for the fiscal year ended October 31, 1997.
The following table sets forth for the fiscal year ended October 31, 1997,
compensation paid by the Trust to the unaffiliated Trustees and, for the
calendar year ending December 31, 1996, the aggregate compensation paid by all
investment companies (including the Trust) advised by MLAM and its affiliate,
FAM ("MLAM/FAM Advised Funds"), to the unaffiliated Trustees.
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION
PENSION OR FROM TRUST AND
COMPENSATION RETIREMENT BENEFITS MLAM/FAM ADVISED
NAME OF FROM THE ACCRUED AS PART FUNDS PAID TO
TRUSTEE TRUST OF TRUST EXPENSE TRUSTEES
- ------- ------------ ------------------- ----------------------
<S> <C> <C> <C>
Joe Grills(1) $15,000 None $164,000
Walter Mintz(1) $15,000 None $164,000
Robert S. Salomon,
Jr.(1) $15,000 None $187,167
Melvin R. Seiden(1) $15,000 None $164,000
Stephen B. Swensrud(1) $15,000 None $154,250
</TABLE>
- --------
(1) The Trustees serve on the boards of MLAM/FAM Advised Funds as follows: Joe
Grills (19 registered investment companies consisting of 47 portfolios);
Walter Mintz (18 registered investment companies consisting of 37
portfolios); Robert S. Salomon, Jr. (18 registered investment companies
consisting of 37 portfolios); Melvin R. Seiden (18 registered investment
companies consisting of 37 portfolios); and Stephen B. Swensrud (21
registered investment companies consisting of 52 portfolios).
7
<PAGE>
MANAGEMENT AND ADVISORY ARRANGEMENTS
Reference is made to "Management of the Trust--Management and Advisory
Arrangements" in the Prospectus for certain information concerning the
management and advisory arrangements of the Money Market Fund.
Subject to the direction of the Trustees, the Manager performs, or arranges
for affiliates to perform, pursuant to the Management Agreement, the management
and administrative services necessary for the operation of the Trust and the
Money Market Fund. The Manager and its affiliates will provide a variety of
administrative and operational services to shareholders of the Money Market
Fund, including processing services related to the purchase and redemption of
shares and the general handling of shareholder relations. The Manager is
responsible for the actual management of the Money Market Fund's portfolio and
constantly reviews the Money Market Fund's 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
Manager, subject to review by the Trustees. The Manager provides the Trust and
the Money Market Fund with office space, equipment and facilities and such
other services as the Manager, subject to supervision and review by the
Trustees, shall from time to time determine to be necessary to perform its
obligations under the Management Agreement.
Securities held by the Money Market Fund may also be held by, or be
appropriate investments for, other funds or clients (collectively referred to
as "clients") for which the Manager or its affiliate, FAM, 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 other clients are selling the security. If purchases or sales of
securities for the Money Market Fund 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 Manager or FAM. To the extent that transactions on behalf of more
than one client of the Manager or FAM during the same period may increase the
demand for securities being purchased or the supply of securities being sold,
there may be an adverse effect on price.
As compensation for its services under the Management Agreement with the
Trust, the Manager is entitled to receive a fee from the Money Market Fund at
the end of each month at the annual rates of 0.50% of average daily net assets
not exceeding $1 billion; 0.45% of average daily net assets exceeding $1
billion but not exceeding $2 billion; 0.40% of average daily net assets
exceeding $2 billion but not exceeding $3 billion; 0.375% of average daily net
assets exceeding $3 billion but not exceeding $4 billion; 0.35% of average
daily net assets exceeding $4 billion but not exceeding $7 billion; 0.325% of
average daily net assets exceeding $7 billion but not exceeding $10 billion;
and 0.30% of average daily net assets exceeding $10 billion. For the fiscal
years ended October 31, 1995, 1996 and 1997 the fees paid by the Money Market
Fund to the Manager were $30,946,227, $34,280,472 and $38,870,409,
respectively.
The Management Agreement obligates the Manager to provide advisory,
administrative and management services, to furnish office space and facilities
for management of the affairs of the Trust and the Money Market Fund, to pay
all compensation of and furnish office space for officers and employees of the
Trust, as well as the fees of all Trustees of the Trust who are affiliated
persons of ML & Co. or any of its subsidiaries. The Money Market Fund pays all
other expenses incurred in its operation, and, if other Series should be added,
a portion of the Trust's general administrative expenses will be allocated on
the basis of the
8
<PAGE>
asset size of the respective Series. Expenses that will be borne directly by
the Series include redemption expenses, expenses of portfolio transactions,
expenses of registering the shares under Federal and state securities laws,
pricing costs (including the daily calculation of net asset value), fees for
legal and auditing services, expenses of printing proxies, shareholder reports,
prospectuses and statements of additional information (except to the extent
paid by the Distributor as described below), charges of the Custodian and
Transfer Agent, Commission fees, interest, certain taxes, and other expenses
attributable to a particular Series. Expenses which will be allocated on the
basis of asset size of the respective Series include fees and expenses of
unaffiliated Trustees, state franchise taxes, expenses related to shareholder
meetings, and other expenses properly payable by the Trust. If additional
Series are added to the Trust, the organizational expenses will be allocated
among the Series in a manner deemed equitable by the Trustees. Depending upon
the nature of a lawsuit, litigation costs may be assessed to the specific
Series to which the lawsuit relates or allocated on the basis of the asset size
of the respective Series. The Trustees have determined that this is an
appropriate method of allocation of expenses. As required by the Distribution
Agreement, the Distributor will pay certain of the expenses of each Series
incurred in connection with the offering of shares of each Series; after the
prospectuses, statements of additional information and periodic reports have
been prepared and set in type, the Distributor will pay for the printing and
distribution of copies thereof used in connection with the offering to
investors. The Distributor will also pay for other supplementary sales
literature.
The Manager is a limited partnership, the partners of which are ML & Co. and
Princeton Services, Inc. ML & Co. and Princeton Services are "controlling
persons" of the Manager (as defined in the Investment Company Act) because of
their ownership of its voting securities or their power to exercise a
controlling influence over its management or policies.
Duration and Termination. Unless earlier terminated as described below, the
Management Agreement will continue in effect from year to year if approved
annually (a) by the Trustees of the Trust or by a majority of the outstanding
shares of the Money Market 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 agreement terminates upon
assignment 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
Money Market Fund.
PURCHASE AND REDEMPTION OF SHARES
Reference is made to "Purchase of Shares" and "Redemption of Shares" in the
Prospectus for certain information as to the purchase and redemption of Money
Market Fund shares.
The Money Market Fund is authorized to issue two classes of shares; however,
as of the date of this Statement of Additional Information, no Class B shares
have been issued. Each Class A and Class B share of the Money Market Fund
represents identical interests in the investment portfolio of the Money Market
Fund and has the same rights, except that Class B shares bear the expenses of
the ongoing Class B distribution fees. Class B shares have exclusive voting
rights with respect to the Rule 12b-1 distribution plan adopted with respect to
such class pursuant to which distribution fees are paid. Each class has
identical exchange privileges. See "Shareholder Services--Exchange Privilege."
The Fund has entered into a separate distribution agreement with the
Distributor in connection with the continuous offering of each class of shares
of the Money Market Fund (the "Distribution Agreements"). The
9
<PAGE>
Distribution Agreements obligate the Distributor to pay certain expenses in
connection with the offering of each class of shares of the Fund. After the
prospectuses, statements of additional information and periodic reports have
been prepared, set in type and mailed to shareholders, the Distributor pays
for the printing and distribution of copies thereof used in connection with
the offering to dealers and investors. The Distributor also pays for other
supplementary sales literature and advertising costs. The Distribution
Agreements are subject to the same renewal requirements and termination
provisions as the Management Agreement described above.
The right to receive payment with respect to any redemption of Money Market
Fund shares may be suspended by the Trust 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 ("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 Money Market Fund of securities owned by it is
not reasonably practicable or (b) it is not reasonably practicable for the
Money Market 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
security holders of the Money Market 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.
All purchases and redemptions of Money Market Fund shares and dividend
reinvestments are confirmed to participants in the IRA, Roth IRA, Basic SM and
SEP Plus(R) Self-Directed Plans (rounded to the nearest share) in the
statement that is sent monthly to all participants in these Self-Directed
Plans. The Money Market Fund and the Distributor have received an exemptive
order from the Commission which permits the Money Market Fund to omit sending
out more frequent confirmations with respect to certain transactions. These
transactions are purchases resulting from automatic investments in shares of
the Money Market Fund and redemptions which are effected automatically to
purchase other securities which the participant has selected for investment in
his account.
Participants in Self-Directed Plans in association with the Merrill Lynch
Blueprint SM Program receive quarterly statements reflecting all purchases,
redemptions and dividend reinvestments of Money Market Fund shares. In
addition, these participants receive an individual confirmation with respect
to each redemption of Money Market Fund shares and each purchase of such
shares other than purchases which are made automatically through payroll
deductions. Shareholders who are not participants in the Self-Directed Plans
receive quarterly statements reflecting all purchases, redemptions and
dividend reinvestments of Money Market Fund shares.
In the interest of economy and convenience and because of the operating
procedures of the Money Market Fund, certificates representing the Money
Market Fund's shares will not be physically issued. Shares are maintained by
the Money Market Fund on the register maintained by the Transfer Agent, and
the holders thereof will have the same rights of ownership with respect to
such shares as if certificates had been issued.
Class B Distribution Plan. Reference is made to "Purchase of Shares--Class B
Shares" in the Prospectus for certain information with respect to the
distribution plan for Class B shares (the "Class B Distribution Plan") with
respect to the distribution fees paid by the Money Market Fund to Merrill
Lynch with respect to such class.
10
<PAGE>
Payments of the distribution fees are subject to the provisions of Rule 12b-1
under the Investment Company Act. Among other things, the Class B Distribution
Plan provides that Merrill Lynch shall provide and the Trustees shall review
quarterly reports of the disbursement of the distribution fees paid to Merrill
Lynch. In their consideration of the Class B Distribution Plan, the Trustees
must consider all factors they deem relevant, including information as to the
benefits of the Class B Distribution Plan to the Money Market Fund and to the
Class B shareholders. The Class B Distribution Plan further provides that, so
long as the Plan remains in effect, the selection and nomination of Trustees
who are not "interested persons" of the Trust, as defined in the Investment
Company Act (the "Independent Trustees"), shall be committed to the discretion
of the Independent Trustees then in office. In approving the Class B
Distribution Plan in accordance with Rule 12b-1, the Independent Trustees
concluded that there is reasonable likelihood that such Plan will benefit the
Money Market Fund and its Class B shareholders. The Class B 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 Class B voting securities of the Money Market Fund. The Class B
Distribution Plan cannot be amended to increase materially the amount to be
spent by the Money Market Fund without the approval of the Class B
shareholders, and all material amendments are required to be approved by the
vote of the Trustees, including a majority of the Independent Trustees who have
no direct or indirect financial interest in such Distribution Plan, cast in
person at a meeting called for that purpose. Rule 12b-1 further requires that
the Trust preserve copies of the Class B Distribution Plan and any report made
pursuant to such plan for a period of not less than six years from the date of
such Distribution Plan or such report, the first two years in an easily
accessible place.
Limitations on the Payment of Deferred Sales Charges. The maximum sales
charge rule in the Conduct Rules of the National Association of Securities
Dealers, Inc. ("NASD") imposes a limitation on certain asset-based sales
charges such as the distribution fee borne by the Class B shares. As applicable
to the Class B shares, the maximum sales charge rule limits the aggregate of
distribution fee payments payable by the Money Market Fund to (1) 7.25% of
eligible gross sales of Class B shares (defined to exclude shares issued
pursuant to dividend reinvestments and exchanges), plus (2) interest on the
unpaid balance for Class B, at the prime rate plus 1% (the unpaid balance being
the maximum amount payable minus amounts received from the payment of the
distribution fee).
PORTFOLIO TRANSACTIONS
The Trust has no obligation 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 the Trust, the Manager is primarily
responsible for the Money Market Fund's portfolio decisions and the placing of
the Money Market Fund's portfolio transactions. In placing orders, it is the
policy of the Money Market Fund to obtain the best net results taking into
account such factors as price (including the applicable dealer spread), size,
type and difficulty of the transaction involved, the firm's general execution
and operational facilities, and the firm's risk in positioning the securities
involved. While the Manager generally seeks reasonably competitive spreads or
commissions, the Money Market Fund will not necessarily be paying the lowest
spread or commission available. The Money Market Fund's policy of investing in
securities with short maturities will result in high portfolio turnover.
11
<PAGE>
The money market securities in which the Money Market Fund invests are traded
primarily in the over-the-counter ("OTC") market. Bonds and debentures are
usually traded OTC but may be traded on an exchange. Where possible, the Money
Market Fund will deal directly with the dealers who make a market in the
securities involved, except in those circumstances where better prices and
execution are available elsewhere. Such dealers usually act as principal for
their own accounts. On occasion, securities may be purchased directly from the
issuer. The money market securities in which the Money Market 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 Money Market Fund will primarily consist of dealer spreads
and underwriting commissions. Under the Investment Company Act, persons
affiliated with the Trust are prohibited from dealing with the Trust as a
principal in the purchase and sale of securities, unless a permissive order
allowing such transactions is obtained from the Commission. Since OTC
transactions are usually principal transactions, affiliated persons of the
Trust, including Merrill Lynch Government Securities Inc. ("GSI") and Merrill
Lynch, may not serve as the Money Market Fund's dealer in connection with such
transactions, except pursuant to the permissive order described below. However,
affiliated persons of the Trust may serve as its broker in OTC transactions
conducted on an agency basis. The Trust may not generally purchase securities
from any underwriting syndicate of which Merrill Lynch is a member. Of the
money market securities in which the Money Market Fund invests, generally only
United States Government agency securities are sold in underwritings.
The Commission has issued an order permitting all Merrill Lynch-sponsored
money market funds, including the Money Market Fund, to conduct principal
transactions with GSI in U.S. Government securities and U.S. Government agency
securities and with Merrill Lynch Money Markets Inc., a subsidiary of GSI
("MMI"), in certificates of deposit and other short-term bank money instruments
and commercial paper. This order contains a number of conditions, including
conditions designed to ensure that the price to the Money Market Fund from GSI
or MMI is equal to or better than that available from other sources. GSI and
MMI have informed the Trust that they will in no way, at any time, attempt to
influence or control the activities of the Money Market Fund or the Manager in
placing such principal transactions. The permissive order allows GSI or MMI to
receive a dealer spread on any transaction with the Money Market Fund no
greater than its customary dealer spread from transactions of the type
involved. Generally such spreads do not exceed 0.25% of the principal amount of
the securities involved.
The Trustees of the Trust have considered the possibilities of recapturing
for the benefit of the Money Market Fund expenses of possible portfolio
transactions, such as dealer spreads and underwriting commissions, by
conducting such portfolio transactions through affiliated entities, including
GSI and Merrill Lynch. For example, dealer spreads received by GSI or its
subsidiary on transactions conducted pursuant to the permissive order described
above could be offset against the management fee payable by the Money Market
Fund to the Manager. 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 Money Market Fund does not expect to use one particular dealer, but,
subject to obtaining the best price and execution, dealers who provide
supplemental investment research (such as information concerning money market
securities, economic data and market forecasts) to the Manager may receive
orders for
12
<PAGE>
transactions by the Money Market Fund. Information so received will be in
addition to and not in lieu of the services required to be performed by the
Manager under its Management Agreement and the expenses of the Manager will not
necessarily be reduced as a result of the receipt of such supplemental
information.
DETERMINATION OF NET ASSET VALUE
The net asset value of the Money Market Fund is determined by the Manager
once daily, immediately after the daily declaration of dividends, on each
business day during which the NYSE or New York banks are open for business.
Such determination is made as of the close of business on the NYSE (generally
4:00 p.m., New York time) or, on days when the NYSE is closed but the New York
banks are open, at 4:00 p.m., New York time. 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 per share is determined under the "penny-rounding" method by adding the
value of all securities and other assets in the portfolio, deducting the
portfolio's liabilities, dividing by the number of shares outstanding and
rounding the result to the nearest whole cent.
The Money Market Fund values its portfolio securities with remaining
maturities of 60 days or less on an amortized cost basis and values its
securities with remaining maturities of greater than 60 days for which market
quotations are readily available at market value. Other securities held by the
Money Market Fund are valued at their fair value as determined in good faith by
or under the direction of the Board of Trustees.
In accordance with the Commission rule applicable to the valuation of its
portfolio securities, the Money Market Fund 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 Securities and U.S. Government agency securities,
which may have remaining maturities of up to 762 days (twenty-five months). The
Money Market Fund 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, the Money Market Fund's price per share as computed for the purposes
of sales and redemptions at $1.00. Deviations of more than an insignificant
amount between the net asset value per share calculated using market quotations
and that calculated on a "penny-rounded" basis will be reported to the Trustees
by the Manager. In the event the Trustees determine that a deviation exists
which may result in the material dilution or other unfair results to investors
or existing shareholders, the Money Market Fund will take such corrective
action as it regards as necessary and appropriate, including the reduction of
the number of outstanding shares of the Money Market Fund by having each
shareholder proportionately contribute shares to the Money Market 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 "penny rounded" net asset value of $1.00 per
share, the shareholders will contribute proportionately to the Money Market
Fund's capital. Each shareholder will be deemed to have agreed to such
contribution by an investment in the Money Market Fund.
13
<PAGE>
Since the net income of the Money Market Fund (including realized gains and
losses on the portfolio securities) is determined and declared as a dividend
immediately prior to each time the net asset value of the Money Market Fund is
determined, the net asset value per share of the Money Market Fund normally
remains at $1.00 per share immediately after each such dividend declaration.
Any increase in the value of a shareholder's investment in the Money Market
Fund, representing the reinvestment of dividend income, is reflected by an
increase in the number of shares of the Money Market 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."
YIELD INFORMATION
The Money Market 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 reflects
realized and unrealized gains and losses on portfolio securities. In accordance
with regulations adopted by the Commission, the Money Market Fund is required
to disclose its annualized yield for certain seven-day base 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. This compounded yield
calculation also excludes realized and unrealized gains or losses on portfolio
securities.
The yield on the Money Market Fund's 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 yield is affected by such factors as changes in
interest rates on Treasury securities, average portfolio maturity, the types
and quality of portfolio securities held and operating expenses. The yield on
Money Market Fund shares for various reasons may not be comparable to the yield
on shares of other money market funds or other investments.
TAXES
FEDERAL
Regulated Investment Companies. The following is a general summary of the
treatment of regulated investment companies ("RICs") and their shareholders
under the Code. The Trust intends to continue to qualify the Money Market Fund
for the special tax treatment afforded RICs under the Code. As long as it so
qualifies, the Money Market Fund will not be subject to Federal income tax on
the part of its net ordinary income and net realized capital gains that it
distributes to participants' Self-Directed Plan accounts. The Trust intends to
cause the Money Market Fund to distribute substantially all of its income.
As discussed in the Prospectus, the Trust may establish other series in
addition to the Money Market Fund (together with the Money Market Fund, the
"Series"). Each Series of the Trust will be treated as a
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separate corporation for Federal income tax purposes. Each Series, therefore,
will be considered to be a separate entity in determining its treatment under
the rules for RICs described in the Prospectus. Losses in one Series do not
offset gains in another Series, and the requirements (other than certain
organizational requirements) for qualifying for RIC status are determined at
the Series level rather than at the Money Market Fund level.
Dividends paid by the Money Market Fund from its 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 ordinarily
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 ordinarily taxable to shareholders as long-term capital
gains, regardless of the length of time the shareholder has owned Money Market
Fund shares. Any loss upon the sale or exchange of Money Market Fund shares
held for six months or less, however, will be treated as long-term capital loss
to the extent of any capital gain dividends received by the shareholder.
Distributions in excess of the Money Market 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). Recent legislation
creates additional categories of capital gain taxable at different rate, which
RICs generally may pass through to shareholders. Generally, not later than 60
days after the close of its taxable year, the Money Market 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 amounts of capital
gain dividends in the different categories of capital gain referred to above.
Dividends of a RIC are ordinarily taxable to shareholders even though they are
reinvested in additional shares of the Fund.
If the value of assets held by the Money Market Fund declines, the Board of
Trustees may authorize a reduction in the number of outstanding shares in
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 Money Market Fund shares. In the event of
retirement plan disqualification or for shares held outside of a retirement
plan, distributions, including distributions reinvested in additional shares of
the Money Market Fund, would be fully taxable, even if the number of shares in
shareholders' accounts had been reduced as described above.
Under certain provisions of the Code, some taxpayers may be subject to a 31%
withholding tax on ordinary income dividends, capital gain dividends and
redemption payments ("backup withholding"). Generally, participants in the
Self-Directed Plans subject to backup withholding will be those for whom no
certified taxpayer identification number is on file with the Trust or who, to
the Trust'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.
The Code requires a RIC to pay a nondeductible 4% excise tax to the extent
the RIC does not distribute, during each calendar year, 98% of its ordinary
income, determined on a calendar year basis, and 98% of its capital gains,
determined, in general, on an October 31 year end, plus certain undistributed
amounts from previous years. While the Money Market Fund intends to distribute
its 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 the
Fund's taxable income and capital gains will be distributed to avoid entirely
the imposition of the tax. In such event, the Fund will be liable for the tax
only on the amount by which it does not meet the foregoing distribution
requirements.
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Self-Directed Retirement Plans. Investment in the Money Market Fund is
limited to participants in the self-directed retirement plans ("retirement
plans") for which Merrill Lynch acts as passive custodian. Accordingly, the
general description of the tax treatment of RICs as set forth above is
qualified with respect to the special tax treatment afforded retirement plans
under the Code. Under the Code, neither ordinary income dividends nor capital
gain dividends represent current income to Class A or B shareholders if such
shares are held in a retirement plan.
For all Self-Directed Plans except Roth IRAs, such distributions will be
taxable as ordinary income at the rate applicable to the participant at the
time of the distribution. Such distributions would include (i) any pre-tax
contributions to their self-directed retirement plan (including pre-tax
contributions that have been rolled over from another retirement plan or IRA)
and (ii) dividends (whether or not such dividends are classified as ordinary
income or capital gain dividends). Recent legislation, however, provides that
there is no penalty for early withdrawals from a retirement plan for the
purpose of acquiring one's first home. In addition to ordinary income tax,
participants (except Roth IRA participants) may be subject to the imposition of
a 10% excise tax on any amount withdrawn from a retirement plan prior to the
participant's attainment of age 59 1/2, unless the shareholder has become
disabled, is purchasing a first new home (subject to the $10,000 lifetime
limit) or has died.
For Roth IRA participants, distributions, including accumulated earnings on
contributions, will not be includible in income if such distribution is made
more than five years after the first tax year of contribution and the account
holder is either 59 1/2 or older, has become disabled, is purchasing a first
new home (subject to a $10,000 lifetime limit) or has died. As with the other
Self-Directed Plans, a 10% excise tax applies to amounts, other than the
$10,000 allowed for a first home purchase, withdrawn from the Roth IRA prior to
reaching age 59 1/2. Such a withdrawal would also be included in income to the
extent of earnings on contributions, with distributions treated as made from
contributions and then from earnings.
Under certain limited circumstances (for example, if an individual for whose
benefit a retirement plan is established engages in any transaction prohibited
under Section 4975 of the Code with respect to such account), the retirement
plan would cease to be qualified for the special treatment afforded certain
retirement plans under the Code as of the first day of such taxable year that
the transaction causing disqualification occurred. If a retirement plan through
which a participant holds Class A or Class B shares of the Money Market Fund
becomes ineligible for special tax treatment, such participant will be treated
as having received a distribution on the first day of the taxable year from the
retirement plan in an amount equal to the fair market value of all assets in
the account. A shareholder (except shareholders in Roth IRAs) then would be
taxed currently on the amount of any pre-tax contributions and previously
untaxed dividends held within the account. A Roth IRA shareholder would be
taxed currently on the distribution to the extent of accumulated earnings on
contributions. All shareholders would be taxed on all ordinary income and
capital gain dividends paid by the Money Market Fund subsequent to such event,
whether such dividends were received in cash or reinvested in additional
shares. These ordinary income and capital gain dividends also might be subject
to state and local taxes. In the event of retirement plan disqualification,
shareholders also could be subject to the 10% excise taxes described above.
Additionally, retirement plan disqualification may subject a nonresident alien
shareholder to a 30% United States withholding tax on ordinary income dividends
paid by the Fund unless a reduced rate of withholding or withholding exemption
is provided under applicable treaty law.
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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.
STATE
Ordinary income and capital gain dividends on RIC shares held in a
disqualified retirement plan or outside of a retirement plan also may be
subject to state and local taxes. Certain states exempt from state income
taxation dividends paid by RICs which are derived from interest on United
States Government obligations. State law varies as to whether dividend income
attributable to United States Government obligations is exempt from state
income taxation. Generally, however, states exempt from state income tax
dividends on shares held within a qualified retirement plan, and commence
taxation on such amounts when actually distributed from the retirement plan.
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 Fund.
EXCHANGE PRIVILEGE
Participants in the Self-Directed Plans (except retirement plans in
association with the Merrill Lynch Blueprint SM Program) who are Class A or
Class B shareholders of the Money Market Fund and who have held all or part of
their shares for at least 15 days may exchange their Class A or Class B shares
of the Money Market Fund for Class D shares of certain other mutual funds
advised by the Manager or FAM (collectively referred to as the "MLAM-advised
mutual funds") on the basis described below. Shares with a net asset value of
at least $250 are required to qualify for the exchange privilege.
Alternatively, shareholders may exchange shares of the Money Market Fund for
Class A shares of one of the MLAM-advised non-money market mutual funds if the
shareholder holds any Class A shares of that fund in the account in which the
exchange is made at the time of the exchange or is otherwise eligible to
invest in Class A shares of such fund, otherwise Class D shares will be
automatically purchased. An eligible Class A investor includes the following:
certain employer sponsored retirement or savings plans, including eligible
401(k) plans, provided such plans meet the required minimum number of eligible
employees or required amount of assets advised by MLAM or any of its
affiliates; corporate warranty insurance reserve fund programs provided that
the program has $3 million or more initially invested in MLAM-advised mutual
funds; participants in certain investment programs including TMASM Managed
Trusts to which Merrill Lynch Trust Company provides discretionary trustee
services and certain purchases made in connection with the Merrill Lynch
Mutual Fund Adviser program; and ML & Co. and its subsidiaries and their
directors and employees and members of the Board of MLAM-advised investment
companies, including the Money Market Fund.
Class A and Class B shareholders of the Money Market Fund also may exchange
shares of the Money Market Fund into shares of Merrill Lynch Ready Assets
Trust, Merrill Lynch U.S.A. Government Reserves and Merrill Lynch U.S.
Treasury Money Fund.
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Under the exchange privilege, each of the funds offers to exchange its
shares ("new shares") for shares ("outstanding shares") of any of the other
funds, on the basis of relative net asset value per share, plus an amount
equal to the difference, if any, between the sales charge previously paid on
the outstanding shares and the sales charge payable at the time of the
exchange on the new shares. At the present time, the shares of each of the
funds other than Merrill Lynch U.S.A. Government Reserves are sold with
varying sales charges. With respect to outstanding shares as to which previous
exchanges have taken place, the "sales charge previously paid" shall include
the aggregate of the sales charges paid with respect to such shares in the
initial purchase and any subsequent exchange. Shares issued pursuant to
dividend reinvestment are sold on a no-load basis in each of the funds. For
purposes of the exchange privilege, dividend reinvestment shares shall be
deemed to have been sold with a sales charge equal to the sales charge
previously paid on the shares on which the dividend was paid. Based on this
formula, an exchange of shares of the Money Market Fund, which are sold on a
no-load basis, for shares of the other funds, which are sold with a sales
charge, will generally require the payment of a sales charge.
The exchange privilege available to participants in the Merrill Lynch
Blueprint SM Program may be different from that available to other investors.
Shareholders of the Money Market Fund other than participants in the Self-
Directed Plans should consult with Merrill Lynch as to availability of the
exchange privilege.
Before effecting an exchange, shareholders of the Money Market Fund should
obtain a currently effective prospectus of the fund into which the exchange is
to be made. Exercise of the exchange privilege is treated as a sale of the
exchanged shares and a purchase of the new shares for Federal income tax
purposes and depending on the circumstances, a short or long-term capital gain
or loss may be realized with different long-term capital gains rates
potentially applicable, if gain on the sale is long-term. In addition, an
exchanging shareholder of any of the funds may be subject to backup
withholding unless such shareholder certifies under penalty of perjury that
the taxpayer identification number on file with any such fund is correct, and
that he or she is not otherwise subject to backup withholding. See "Taxes."
To exercise the exchange privilege, shareholders may either contact their
listed securities dealer, who will advise the Money Market Fund of the
exchange. This exchange privilege may be modified or terminated in accordance
with the rules of the Commission. The Money Market Fund reserves the right to
limit the number of times an investor may exercise the exchange privilege.
Certain funds may suspend the continuous offering of their shares to the
general public at any time and may thereafter resume such offering from time
to time. The exchange privilege is available only to U.S. shareholders in
states where the exchange legally may be made.
GENERAL INFORMATION
DESCRIPTION OF SERIES AND SHARES
The Declaration of Trust provides that the Trust shall comprise separate
Series each of which will consist of a separate portfolio that will issue
separate shares. The Trustees are authorized to create an unlimited number of
Series and, with respect to each Series, to issue an unlimited number of full
and fractional shares of beneficial interest, par value $.10 per share, of
different classes and to divide or combine the shares into a greater or lesser
number of shares without thereby changing the proportionate beneficial
interests in the Series. Shareholder approval is not necessary for the
authorization of additional Series or classes of a Series
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of the Trust. At the date of this Statement of Additional Information, the
Money Market Fund is the only existing Series of the Trust, and shares of the
Money Market Fund are divided into Class A and Class B shares (although no
Class B shares have been issued). Class A and Class B shares represent an
interest in the same assets of the Money Market Fund and are identical in all
respects, except that Class B shares bear certain expenses related to the
distribution of such shares and have exclusive voting rights with respect to
matters relating to such distribution expenditures. The Board of Trustees of
the Trust may classify and reclassify shares of any Series into additional
classes at a future date.
All shares have equal voting rights, except that only shares of the
respective Series are entitled to vote on matters concerning only that Series
and, as noted above, Class B shares will have exclusive voting rights with
respect to matters relating to the distribution expenses borne solely by such
class. Each issued and outstanding share is entitled to one vote for each full
share held and fractional votes on fractional shares in the election of
Trustees (to the extent hereinafter provided) and on other matters submitted to
the vote of shareholders, and to participate equally in dividends and
distributions with respect to that Series and upon liquidation or dissolution
of the Series in the net assets of such Series remaining after satisfaction of
outstanding liabilities.
The obligations and liabilities of a particular Series are restricted to the
assets of that Series and do not extend to the assets of the Trust generally.
The shares of each Series, when issued, will be fully paid and non-assessable,
have no preference, pre-emptive, conversion, exchange or similar rights, and
will be freely transferable. Shareholders of the Trust are entitled to redeem
their shares as set forth under "Redemption of Shares" in the Prospectus and
"Purchase and Redemption of Shares" herein. Shares do not have cumulative
voting rights and the holders of more than 50% of the shares of the Trust
voting for the election of Trustees can elect all of the Trustees of the Trust
if they choose to do so, and in such event the holders of the remaining shares
would not be able to elect any Trustees. No amendment may be made to the
Declaration of Trust without the affirmative vote of a majority of the
outstanding shares of the Trust. At the date of this Statement of Additional
Information, the Money Market Fund is the only Series of the Trust.
CUSTODIAN
The Bank of New York, (the "Custodian"), 90 Washington Street, 12th Floor,
New York, New York 10286, acts as Custodian of the Money Market Fund's assets.
The Custodian is responsible for safeguarding and controlling the Money Market
Fund's cash and securities, handling the receipt and delivery of securities and
collecting interest and dividends on the Money Market Fund's investments.
TRANSFER AGENT
Merrill Lynch Financial Data Services (the "Transfer Agent"), Inc., 4800 Deer
Lake Drive East, Jacksonville, Florida 32246-6484, a subsidiary of ML & Co.,
acts as the Money Market Fund's Transfer Agent. The Transfer Agent is
responsible for the issuance, transfer and redemption of shares and the
opening, maintenance and servicing of shareholder accounts.
INDEPENDENT AUDITORS
Deloitte & Touche llp, 117 Campus Drive, Princeton, New Jersey 08540, has
been selected as the independent auditors of the Trust. The selection of
independent auditors is subject to ratification by the shareholders of the
Trust. The independent auditors are responsible for auditing the annual
financial statements of the Money Market Fund.
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LEGAL COUNSEL
Brown & Wood LLP, One World Trade Center, New York, New York 10048-0557, is
counsel for the Trust.
REPORTS TO SHAREHOLDERS
The fiscal year of the Money Market Fund ends on October 31 of each year. The
Money Market Fund sends to its shareholders at least semi-annually reports
showing the Money Market Fund's portfolio and other information. An annual
report, containing financial statements audited by independent auditors, is
sent to shareholders each year.
ADDITIONAL INFORMATION
The Prospectus and this Statement of Additional Information do not contain
all of the information set forth in the Registration Statement and the exhibits
relating thereto, which the Money Market Fund has filed with the Commission,
Washington, D.C. 20549, under the Securities Act and the Investment Company
Act, to which reference is hereby made.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
To the knowledge of the Trust, no person or entity owned beneficially 5% or
more of the Money Market Fund's shares on January , 1998.
----------------
The Declaration of Trust establishing the Trust, dated July 15, 1986, a copy
of which, together with all amendments thereto (the "Declaration"), is on file
in the office of the Secretary of the Commonwealth of Massachusetts, provides
that the name "Merrill Lynch Retirement Series Trust" refers to the Trustees
under the Declaration collectively as Trustees, but not as individuals or
personally; and no Trustee, shareholder, officer, employee or agent of the
Trust 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 said Trust
but the "Trust Property" (as defined in the Declaration) only shall be liable.
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APPENDIX A
DESCRIPTION OF THE SELF-DIRECTED PLANS
This Appendix describes in summary form the various types of self-directed
retirement plans for which Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") acts as passive custodian (the "Self-Directed Plans"). This
description does not purport to be complete, and it should be read in
conjunction with the materials concerning the Self-Directed Plans, including
copies of the Plans and the forms necessary to establish a plan, which are
available from Merrill Lynch. Investors should read such materials carefully
before establishing a Self-Directed Plan and should consult with their
attorney or tax adviser to determine if any of the Self-Directed Plans are
suited to their needs and circumstances. The laws applicable to the Self-
Directed Plans, including the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") and the Internal Revenue Code of 1986, as amended (the
"Code") are complex and include a variety of transitional rules which may be
applicable to some investors. These laws should be reviewed by investors'
attorneys to determine their applicability. Investors are further advised that
the discussion of taxation contained in this Appendix relates solely to
federal tax laws but generally does not address the numerous transitional
rules and that the tax treatment of the Self-Directed Plans under applicable
state law may vary.
There are eight types of Self-Directed Plans available: the individual
retirement account ("IRA"); the Roth IRA; the individual retirement rollover
account ("IRRA"), the simplified employee pension plan ("SEP Plus (R)"); the
Basic SM (Keogh Plus) profit sharing plan; the Basic SM (Keogh Plus) money
purchase pension plan (together with the profit sharing plan, the "Basic SM
Plans"); the 403(b)(7) Retirement Selector Account ("RSA") and the corporate
self-directed account of the Merrill Lynch Blueprint SM Program. Specific
information with respect to certain requirements and limitations for each
Self-Directed Plan is described in greater detail below. See "Types of Self-
Directed Plans."
ESTABLISHMENT OF A SELF-DIRECTED PLAN ACCOUNT
Self-Directed Plan accounts may be established by qualified individuals and
businesses through Merrill Lynch.
With the exception of Roth IRAs, Self-Directed Plans generally afford
participants whose income is below certain prescribed limits the opportunity
to take a tax deduction, up to the maximum amount permitted under the Code for
the particular Self-Directed Plan, for amounts contributed to the Plan.
Contributions to Roth IRAs are not currently deductible; however, amounts
contributed to Roth IRA accounts can accumulate tax-free and qualified
distributions from the Roth IRA including accumulated earnings will not be
included in income. Each Self-Directed Plan is "self-directed;" that is, each
participant is responsible for making investment decisions concerning the
funds contributed to his Self-Directed Plan.
Merrill Lynch charges an annual custodial fee for each account established
pursuant to the Self-Directed Plans. These fees, which are contained in the
Self-Directed Plan documents, vary according to the type of account. Brokerage
fees will be assessed separately for each transaction to which they apply.
Shares of the Money Market Fund also are offered to participants in various
retirement plans in association with the Merrill Lynch Blueprint SM Program.
Most contributions to such plans are made through payroll deductions. In
addition to investing in the Money Market Fund, participants in such plans may
invest in other mutual funds associated with the Merrill Lynch organization or
various other types of securities. If participants elect to have their
contributions invested in the Money Market Fund, the contributions will be
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invested automatically on the business day following the date they are
received in the account. There will be no minimum initial or subsequent
purchase requirement pursuant to these types of plans. Cash balances of less
than $1.00 will not be invested.
PERMISSIBLE SELF-DIRECTED PLAN INVESTMENTS
The type of investments that may be made depends on the type of Self-
Directed Plan established.
Participants and employers that maintain IRAs, Roth IRAs, IRRAs, Basic SM
Plans, SEP Plus(R) or retirement plans in association with the Merrill Lynch
Blueprint SM Program may invest in securities through Merrill Lynch or its
affiliates, including stocks traded "over-the-counter" or on a recognized
exchange, government or corporate debt obligations, certain mutual funds,
certain limited partnership interests in real estate, and bank money
instruments. Participants and employers may also invest in annuity contracts
issued by a life insurance company (including Merrill Lynch Life Insurance
Company and Merrill Lynch Life Insurance Company of New York), and, in the
case of Basic SM Plan participants only, life insurance contracts.
Participants and employers that maintain RSAs are restricted to investing in
mutual funds. Those participants and employers desiring a diversified
portfolio but not wishing to actively manage the portfolio may elect to invest
all or a portion of their account in certain mutual funds advised by Merrill
Lynch Asset Management, L.P. (the "Manager") or its affiliate. Participants
and employers may vary their investment portfolio as often as they wish.
Cash balances arise in a Self-Directed Plan account from contributions to
the Plan, the sale of securities held in the account and the receipt of
dividends, interest and principal repayments on securities held in the
account. Cash balances for which no other investment directions are given
will, in accordance with the option previously selected by the participant or
employer, be invested in full shares of the Money Market Fund or another money
market fund advised by the Manager, deposited in an Insured Investment
Account, an FDIC insured interest-bearing account with a Merrill Lynch Bank
and Trust Company, or maintained uninvested in the Self-Directed Plan account.
If such amounts are not invested, no return will be earned. All cash balances
will be invested or maintained in accordance with the option selected by the
participant or employer, pending instructions as to further investment.
Based upon performance of money market funds generally over the last several
years, the yield on amounts invested in the Money Market Fund may be greater
at times than the yield on amounts deposited in the interest-bearing account.
There can be no assurance, however, that the yield on an investment in the
Money Market Fund will be or will remain greater than that available on such
interest-bearing account. In addition, the Money Market Fund is not a bank,
and shares of the Money Market Fund are not equivalent to a bank account. As
with any investment in securities, the value of an investment in the Money
Market Fund will fluctuate. Amounts deposited in the interest-bearing account
will be insured as to principal in an amount of up to $100,000 per account by
the Federal Deposit Insurance Corporation. Cash balances maintained in a Self-
Directed Plan account will be insured, up to $100,000, by the Securities
Investor Protection Corporation.
CONTRIBUTIONS AND DISTRIBUTIONS
The amount that may be contributed to a Self-Directed Plan in any one year
is subject to certain limitations under the Code; however, assets already in a
Self-Directed Plan account may be invested without regard to such limitations
on contributions. With the exception of contributions made on behalf of
employees by employers under the Basic SM Plans, employer contributions to a
SEP Plus (R), RSA or 401(k) plan in
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association with the Merrill Lynch Blueprint SM Program (as discussed herein),
and contributions to a Roth IRA, a Self-Directed Plan participant may deduct
from his annual gross income, up to the maximum permitted under the Code,
amounts contributed to his or her Self-Directed Plan. These amounts, plus any
additional income earned on such contributions, will ordinarily not be taxed
until distributed to the participant.
Generally, under the Code, distributions from any Self-Directed Plan may be
made at any time but, as discussed below, distributions made prior to the date
on which the participant reaches age 59 1/2 and, for Roth IRAs, within five
years from the first tax year of contribution, may be subject to a penalty
and, for Self-Directed Plans other than a Roth IRA, the entire distribution
and for Roth IRAs the portion attributable to accumulated earnings may be
subject to mandatory federal income tax withholding at a 20% rate (as
described below). Recent legislation provides that there is no penalty for
early withdrawals from any Self-Directed Plan for the purpose of acquiring
one's first home. Except in the case of Roth IRAs, distributions will be taxed
as ordinary income at the rate applicable to the participant in the year in
which distributed. For Roth IRAs, only the portion of the distribution
attributable to accumulated earnings will be taxable as ordinary income on
distribution.
Excess Contributions. Contributions to an IRA, Roth IRA, IRRA or SEP
Plus (R) in excess of those allowed by law are subject to a 6% excise tax if
not withdrawn, together with additional income attributable to such excess
contributions, prior to the date the participant files his or her income tax
return for the year in which the excess contribution was made. If an excess
amount is contributed in one year and is not eliminated in later years, the
excess amount will be subject to a cumulative six percent excise tax each year
until it is eliminated. Elimination of the excess may be accomplished either
by reducing the contribution (and deduction) for a succeeding year, or by
withdrawal of the excess amount plus the income attributable to it. Such
income will be considered a premature distribution subject to the ten percent
penalty tax on premature distributions discussed below, and, except for Roth
IRAs, for which the distribution would only be taxed to the extent of any
accumulated earnings, will additionally be taxable as ordinary income at the
applicable rate for the year in which it is distributed. Contributions to a
Basic Plan SM, RSA or a 401(k) plan in association with the Merrill Lynch
Blueprint SM Program are not subject to the 6% excise tax, but premature
distributions from these plans under the Code are generally subject to the 10%
penalty.
Timing of Retirement Benefits. Except with respect to Roth IRAs, a
participant, upon reaching age 59 1/2, generally may make such distributions
from his Self-Directed Plan account as he chooses without tax penalties.
Generally, the Code requires that amounts in Self-Directed Plans must commence
to be distributed to a participant on or before April 1 of the calendar year
following the calendar year in which he reaches age 70 1/2, even if the
employee has not retired; with respect to Roth IRAs, however, no mandatory
withdrawals are required during the account holder's life.
Distributions from Self-Directed Plans may be made in a lump sum or
installments over the life of the participant, or the joint lives of the
participant and a designated beneficiary, or over a period not to exceed the
life expectancy (determined, generally, by IRS life expectancy tables) of the
participant or the joint life expectancy of the participant and designated
beneficiary. If the employee dies before his entire interest has been
distributed, the remaining portion of his interest must be distributed at
least as rapidly as the method of distribution in effect prior to his death.
Special rules apply under the Code to spousal beneficiaries.
If the minimum payout required from a Self-Directed Plan for a particular
year is not made, a 50% excise tax will be imposed on the amount representing
the difference between the minimum payout required
23
<PAGE>
from the Self-Directed Plan, and the amount actually distributed, under
Section 4974 of the Code. Since there are no minimum payouts required for Roth
IRAs during the grantor's lifetime, there are no such penalties until the
minimum payout obligation becomes operative for the grantor's beneficiaries.
Treatment of Lump Sum Distributions and Annuities. The recipient of a "lump
sum distribution" (generally a distribution or payment within one taxable year
to the recipient of the balance to the credit of the employee on account of
the employee's death, attainment of age 59 1/2, disability or separation from
service (except in the case of a self-employed individual)) from a qualified
retirement plan (including Basic SM Plans, RSA and 401(k) plans but not IRAs,
Roth IRAs or SEP Plus (R) accounts) may compute his tax liability using the
five-year averaging tax computation, subject to certain requirements. The
total taxable amount of a lump sum distribution is the part that is the
employer's contribution and income earned on the account. Generally, the part
of the distribution that consists of the employee's contributions (other than
deductible voluntary employee contributions), the actuarial value of any
annuity contract distributed and the net unrealized appreciation in employer's
securities distributed (until such securities are sold or otherwise disposed
of in a taxable transaction), together with the death benefit exclusion, if
applicable, is not taxed. Employee contributions should be reduced by any
amounts previously distributed that were included in gross income because they
were a return of employer contributions. If annuity payments are made from
qualified retirement plans after January 1, 1986, under Section 72(b) of the
Code a portion of the annuity payments received annually by recipients may be
excluded from income as a return of the recipient's investment. This
"exclusion ratio" is the employee's investment in the contract over the
expected return. For annuity starting dates commencing after 1986, this
exclusion ratio is applied to only a limited number of annuity payments, and
the excludable amount is limited to the employee's total investment. If an
annuitant dies before the entire investment has been recovered, the
unrecovered investment is deductible on the individual's final income tax
return. No income averaging methods apply to distributions from IRAs, Roth
IRAs, IRRAs, SEP Plus (R) accounts or RSAs.
Premature Distributions. 1. Excise Tax: Distributions from an IRA, Roth IRA,
IRRA, RSA, SEP Plus (R) or qualified retirement plan (including Basic SM Plans
and 401(k) plans) prior to the time the participant reaches age 59 1/2
generally are subject to penalty unless the participant has died or has become
disabled (within the meaning of Code Section 72(m)(7)) or is purchasing a
first home. The penalty for early distributions is an excise tax equivalent to
10% of the amount so distributed, in addition to the applicable ordinary
income tax payable on such amount for all Self-Directed Plans or on the amount
of the distribution representing accumulated earnings for Roth IRAs for the
year in which it is distributed. The tax will be waived for any distribution
that is part of a scheduled series of substantially level payments under an
annuity for the life or life expectancy of the taxpayer or the joint lives of
the taxpayer and his designated beneficiary. Distributions can also be made,
without penalty, to cover deductible medical expenses, for certain payments in
a divorce settlement, or to an employee who is age 55 or older, has separated
from service, and has satisfied the requirements of the employer's plan for
early retirement (if the plan permits such payments). In certain cases, the
penalty will not be waived if the distribution is from an IRA, Roth IRA or
retirement annuity. A premature distribution of an employee's contribution
from a 401(k) plan or RSA may be permitted without penalty in the event of
hardship, termination of the plan or a sale of the employer's business. The
penalty is also not waived for distributions from a qualified retirement plan,
if the employee is a more than five percent owner or has been a more than
five-percent owner at any time during the five plan years preceding the plan
year ending in the tax year in which the amount is received. A five percent
owner is a person who, in the case
24
<PAGE>
of a corporate employer, actually or constructively owns more than five percent
of the outstanding stock of the employer or stock possessing more than five
percent of the total combined voting power of all stock of the employer, or
who, in the case of a non-corporate employer, owns more than five percent of
the capital or profits interest in the employer. A rollover will avoid
imposition of the excise tax. However, for distributions prior to 1993, the
Code restricts the rollover of partial distributions to distributions received
on account of an employee's separation from service, death or disability.
2. Mandatory Income Tax Withholding: Generally, any portion of an "eligible
rollover distribution" made from a qualified retirement plan after December 31,
1992 qualifies for tax-free rollover into an eligible retirement plan under
Section 402(c) of the Code. Under Section 402(c), as amended, all distributions
from a qualified retirement plan (including in-service distributions) are
eligible rollover distributions, except for certain periodic payments, required
amounts distributed to a participant who is over age 70 1/2 as described above,
and amounts otherwise not includible in gross income. Rollovers may be made by
the participant in one of two ways: first, by direct transfers from the
qualified retirement plan to an IRA or Roth IRA (including an individual
retirement annuity other than an endowment contract), a qualified defined
contribution plan or an annuity under Section 403(a) of the Code (a "direct
rollover") or, in the case of the RSA plan to another 403(b) plan, a tax
sheltered annuity; or second, by rolling over an eligible rollover distribution
within 60 days of receipt to any of the arrangements described above. In the
event a direct rollover is not chosen by the participant, a mandatory 20% of
the distribution, or the amount of the distribution representing accumulated
earnings in the case of a Roth IRA, is withheld to satisfy any federal tax
liability that may be assessed. The mandatory 20% withholding tax is not
assessed against any distributions that may not be rolled over (including, but
not limited to, distributions to beneficiaries other than a surviving spouse,
or a present or former spouse under a qualified domestic relations order).
Participants should consult with their attorneys or tax advisers in order to
determine the application of the rollover and mandatory withholding
requirements to their own circumstances. Participants also should consult their
attorneys or advisers when considering converting or rolling over to a Roth
IRA.
The foregoing rules are of general applicability to the Self-Directed Plans.
The following section discusses specific considerations applicable to the
different types of Self-Directed Plans.
TYPES OF SELF-DIRECTED PLANS
Traditional Individual Retirement Accounts. As a result of changes made by
the Tax Reform Act of 1986, the allowable deductions for contributions to IRAs
are restricted for certain taxpayers who are (or their spouses are) active
participants in employer-sponsored retirement plans and whose adjusted gross
income exceeds certain levels. An individual will be considered an active
participant in a defined contribution plan if any employer contribution or
forfeiture is added to his account for the year. In the case of a defined
benefit plan, an individual will be considered an active participant if he is
not excluded under the eligibility rules for the year. The determination of
whether an individual is an active participant is made without regard to
whether the individual's rights under a plan are vested. For 1998, for a single
or married individual who is an "active participant" in an employer-sponsored
retirement plan, deductible contributions are permitted subject to a pro rata
phase-out rule where adjusted gross income (before the IRA deduction) is over
$50,000 on a joint return or $30,000 for an unmarried individual. For 1998, the
allowable deduction is completely eliminated for such taxpayers when adjusted
gross income (before the IRA deduction) reaches $60,000 on a joint return or
$40,000 for an unmarried person. For this purpose, an employer-sponsored
retirement plan means a pension, profit-sharing or stock bonus plan qualified
under Code section 401(a) (including a Keogh plan or
25
<PAGE>
401(k) plan), an annuity plan qualified under Section 403(a), a SEP, a tax-
sheltered Code section 403(b) annuity and retirement plans covering federal,
state or local government employees. A minimum deductible contribution of $200
is provided for any taxpayer whose adjusted gross income is not above the
phase-out range even if the phase-out rules would provide for a lower
deduction.
The Taxpayer Relief Act of 1997 eliminates the limits which previously
applied to spouses of active participants in an employer-sponsored retirement
plan. Instead, the maximum deductible IRA contribution for an individual who is
not an active participant but whose spouse is an active participant, is phased
out for the nonactive participant if the couples' combined adjusted gross
income is between $150,000 and $160,000.
Subject to the above limitations, any individual with compensation may
establish an IRA. Generally, the maximum yearly tax deduction that may be taken
for an IRA contribution is the lesser of $2,000 or 100% of the individual's
compensation. If a husband and wife are both employed, they may take a
deduction of up to $4,000 on a joint return. If only one spouse is employed, a
separate IRA, called a "spousal IRA," may be established for the benefit of the
non-working spouse or a spouse that elects to be treated as having no
compensation for the year. The aggregate deduction for the two IRAs for any
year may not exceed the lesser of 100% of the couples' combined income or
$4,000 annually. Allocations may be made between the two accounts in any manner
so long as no more than $4,000 is contributed to either of the accounts. No
deduction for IRA contributions may be made for or after the tax year in which
a participant reaches age 70 1/2. In addition, no deduction will be allowed for
amounts paid to an "inherited IRA" (i.e., an IRA acquired on account of the
death of another individual other than by the surviving spouse of the original
owner).
Active participants in employer-sponsored plans who are not eligible to make
deductible contributions to IRAs (or whose deductions are limited) may make
nondeductible contributions to a separate account or a Roth IRA. The
nondeductible contribution is subject to the same dollar limitations ($2,000
single, $4,000 joint or 100% of compensation) as deductible contributions
described above. Income in the separate account will accumulate tax-free, for
retirement accounts other than a Roth IRA, only the account earnings will be
included in taxable income upon distribution and a qualified distribution will
be entirely tax-free if from a Roth IRA.
The Self-Directed IRA program allows for the establishment of IRAs, which are
"rollover IRAs". Prior to 1993, a rollover IRA could have only been established
with a distribution received from a qualified employer-sponsored pension plan
that was of an amount equal to at least 50% of the balance to the credit of the
employee in the plan; after December 31, 1992, this 50% requirement no longer
applies. This distribution would ordinarily be subject to income tax; however,
tax may be deferred to the extent that all or part of the rollover amount, less
any voluntary contributions made to the employer-sponsored plan, is put into an
IRA within 60 days of receiving the distribution. With respect to a
distribution of less than the entire balance to the credit of the employee in
the plan prior to 1993 (a "partial rollover"), the distribution was eligible
for rollover treatment only if the distribution was made on account of the
employee's death, separation from service or disability and was not one of a
series of periodic payments and the employee elected, in a manner to be
prescribed by regulations, to have rollover treatment apply to such
distribution. However, as described above, effective for rollovers made after
December 31, 1992, the limitations described with respect to partial rollovers
have been eliminated, and new mandatory federal income tax withholding
requirements have been imposed for any rollover that is not a direct rollover.
The amounts in a rollover IRA are taxed only upon
26
<PAGE>
distribution, as with other IRAs, except for Roth IRAs. However, tax-free
rollover treatment will be denied for amounts received from an "inherited IRA."
Roth Individual Retirement Accounts. As of January 1, 1998, qualifying
participants in Self-Directed Plans generally can contribute up to $2,000
annually (with limits based on adjusted gross income, compensation and
contributions to other IRAs) toward retirement. While such contributions are
not tax-deductible, amounts contributed to the account can accumulate tax-free
and qualified distributions from the Roth IRA will not be included in income.
Although the amount which may be contributed to a Roth IRA in any one year is
subject to certain limitations, assets already in a Roth IRA may be invested in
the Money Market Fund without regard to such limitations.
Generally taxpayers whose adjusted gross income ("AGI") falls at or below
$150,000 (for married couples filing jointly) or at or below $95,000 (for
single tax filers) will be able to contribute up to $2,000 of compensation
annually to a Roth IRA. Contributions are phased out for taxpayers whose AGI
falls between $150,000 and $160,000 for joint filing couples and $95,000 and
$110,000 for singles. A taxpayer whose AGI does not exceed $100,000 for the
taxable year is eligible to roll over or convert an IRA into a Roth IRA in such
year (except for any married taxpayer who elects to file a separate federal
income tax return for such year).
While contributions are non-deductible, distributions from a Roth IRA
generally will be tax-free if (a) the account holder has had a Roth IRA for
more than five tax years and (b) is age 59 1/2 or older, has become permanently
disabled, is purchasing a first home (subject to a $10,000 lifetime limit) or
dies. (If a distribution is attributable to a conversion from a traditional
IRA, the five-year period is measured from the year in which the conversion
occurs.) If these factors are not met, participants withdrawing funds from the
Roth IRA will be subject to a 10% early withdrawal penalty and will be subject
to income tax to the extent amounts withdrawn represent earnings on
contributions to the Roth IRA.
Unlike other IRAs, individuals can make contributions to a Roth IRA after age
70 1/2.
Simplified Employee Pension Plans. A SEP is essentially a collection of IRA
accounts established by employers for their employees, and any employer,
whether it is a sole proprietorship, a partnership or a corporation, may set up
a SEP. To qualify as a SEP, certain requirements must be met; in particular,
the plan must cover all current employees age 21 years or older who have worked
for the business in three of the last five calendar years and have received at
least $400 in compensation from the employer. Up to $30,000 or 25% of the
employee's compensation up to $160,000 (effective for plan years beginning
after December 31, 1994), subject to inflation adjustments may be paid by the
employer to the employee's SEP. The same percentage of compensation (determined
under a written formula) must be contributed on behalf of each employee. Such
contributions are deductible by the employer and excluded from the employee's
income. In addition, elective salary deferrals may be made by a participant in
the SEP Plus (R) Plan. The tax-free elective deferral of an employee's income
for a taxable year cannot exceed $7,000, as adjusted for inflation (currently,
$10,000 for 1998). This cap limits all tax-free elective deferrals by an
employee under all cash and deferred arrangements, SEPs and tax sheltered
annuities.
Because the SEP is also an IRA, the employee may, if otherwise eligible under
the rules applicable to IRAs discussed above, make up to a $2,000 contribution
to the SEP or make rollover contributions (see
27
<PAGE>
"Individual Retirement Accounts" above). Amounts contributed to a
participant's SEP account vest immediately. If the participant should cease to
be employed by the business maintaining the SEP, the participant retains full
rights to and investment power over the account. In such case, the account
should be changed to a regular IRA so that the participant may make additional
permissible contributions.
Tax-deductible employer contributions may continue to be made to a SEP
participant's account even after he has reached age 70 1/2.
Basic SM Plans. The Basic SM Plan provides a format under which a profit-
sharing plan or a money purchase pension plan may be established either by a
corporation for its employees or by a self-employed individual or partnership
as a "Keogh" plan. A Keogh plan is a self-employed retirement plan established
by a self-employed individual or other non-corporate employer for the
exclusive benefit of employees and their beneficiaries. For Keogh plan
purposes, "employer" takes on a special meaning. A sole proprietor (i.e., a
self-employed individual who owns the entire interest in an unincorporated
trade or business), an independent contractor, or an individual in business
for himself is self-employed and is his own employer. A partnership is treated
as the employer of each partner who earns income from the performance of
services for the partnership. Silent partners who put up capital but do not
work in the business may not be included in a Keogh plan. Under the money
purchase pension plan, regular, set contributions must be made for each
employee each year. Under the profit-sharing plan, contributions are keyed to
the existence of profits and should be made on a regular basis to ensure that
the Basic SM Plan maintains its qualified status.
Generally, all employees who are at least 21 years of age and have worked
for the employer (whether corporate or non-corporate) for at least two years
must be covered under the terms of the Basic SM Plan. Contributions under a
Basic SM Plan are usually required to be allocated among those who are
participants on the last day of a plan year. For this purpose, the Basic SM
Plan provides several options to define the compensation that will be included
in determining contributions under the Basic SM Plan. Contributions under the
Basic SM Plan are fully vested when made.
Top-Heavy Plan Requirements. The Code imposes special rules with respect to
qualified plans that are considered to be "top-heavy" plans (individual
retirement plans are not subject to the Code's rules relating to "top-heavy"
plans). A defined contribution plan, such as the Basic Plan, is considered to
be "top-heavy" where the account balances of "key employees" exceed 60% of the
account balances of all employees. "Key employees" include all employees who,
at any time during the plan year or the four preceding plan years (1) are
officers having annual compensation of more than $65,000, as adjusted for
inflation, (2) are one of the ten employees with annual compensation of more
than $30,000 that actually or constructively own the largest interests in the
employer, (3) are "5% owners," or (4) own more than a 1% interest in the
employer and have annual compensation in excess of $150,000. The account
balance of an individual that has not received compensation as an employee
during the five preceding plan years is not taken into account.
When a plan favoring key employees is determined to be "top-heavy," its
continued qualification under the Code depends on its compliance with certain
requirements, which (1) limit the amount of a participant's compensation that
may be taken into account, (2) provide stringent vesting schedules, (3)
provide minimum contributions or benefits for non-key employees, and (4)
reduce the aggregate limit on benefits and contributions for certain key
employees who participate in both a defined benefit plan and a defined
contribution plan. Even if a Basic SM Plan were determined to be "top-heavy,"
it would continue to maintain
28
<PAGE>
its qualification under the Code because the provisions of the Plan relating
to the above limitations have been designed to comply with such limitations,
whether or not the Basic SM Plan is found to be "top-heavy."
For a SEP Plus (R) Plan which is top-heavy (either because it was deemed to
be top-heavy as of the adoption of the plan or as determined through annual
testing prescribed by the Code) the employer may preserve the plan's
qualification by making a contribution on behalf of each non-key employee of
the lesser of: (1) 3% of each such non-key employee's compensation, or (2) the
highest contribution percentage rate for any key employee under the plan.
Retirement Plans in Association with the Merrill Lynch Blueprint SM
Program. The Merrill Lynch Blueprint SM Program is available to participants
in a cash or deferred plan (commonly known as a "401(k) plan") and to
participants in IRAs and Roth IRAs in which contributions are made through
payroll deductions.
A 401(k) plan is a cash or deferred arrangement that allows an employee to
choose whether the employer will pay a certain amount directly to the employee
in cash or to a qualified profit-sharing plan or a stock bonus plan on behalf
of such employee. The tax-free elective deferral of an employee's income for a
taxable year cannot exceed $7,000, as adjusted for inflation (currently,
$10,000 for 1998). This cap limits all tax-free elective deferrals by an
employee under all cash and deferred arrangements, SEPs and tax sheltered
annuities. The employer may make "non-elective" contributions directly into
the plan on the employee's behalf. These contributions must meet special non-
discrimination tests. Generally, participants in a 401(k) plan in association
with the Merrill Lynch Blueprint SM Program are treated in the same manner as
participants in other qualified retirement plans.
Participants in IRA plans which are maintained in association with the
Merrill Lynch Blueprint SM Program are generally treated for contribution and
distribution purposes in the same manner as other IRA participants, as
discussed above.
Each of the foregoing Self-Directed Plans is designed to meet differing
needs and has varying financial and tax consequences. An investor should
thoroughly review all of the materials available from Merrill Lynch concerning
the Self-Directed Plans and consult with his attorney or tax adviser in
determining whether any of these Plans is suited to his needs and
circumstances.
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<PAGE>
APPENDIX B
DESCRIPTION OF COMMERCIAL PAPER, BANK MONEY INSTRUMENTS AND CORPORATE BOND
RATINGS
COMMERCIAL PAPER AND BANK MONEY INSTRUMENTS
Commercial paper with the greatest capacity for timely payment is rated A by
Standard & Poor's, a Division of The McGraw-Hill Companies, Inc. ("S&P").
Issues within this category are further refined 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 regarding timely payment is strong; A-2
indicates that capacity for timely repayment is satisfactory; A-3 indicates
that capacity for timely payment is satisfactory, however, they are more
vulnerable to the adverse changes of circumstances than obligations rated A-1
or A-2.
Moody's Investors Service, Inc. ("Moody's") employs the designations of
Prime-1, Prime-2 and Prime-3 to indicate the relative capacity of the rated
issuers 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. Prime-3 issues 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 the F-1+ and F-1 categories.
Duff & Phelps Inc. ("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
clearly 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.
CORPORATE BONDS
Bonds rated AAA have the highest rating assigned by S&P 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.
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 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
numerical modifiers, 1, 2 and 3 in each generic rating classification from Aa
through B in its corporate bond rating system. The modifier 1 indicates that
the security ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the
issue ranks in the lower end of its generic rating category.
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.
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INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders, Merrill Lynch Retirement Reserves Money
Fund of Merrill Lynch Retirement Series Trust:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Merrill Lynch Retirement Reserves Money Fund of
Merrill Lynch Retirement Series Trust as of October 31, 1997, 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 October
31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Merrill Lynch
Retirement Reserves Money Fund of Merrill Lynch Retirement Series Trust as of
October 31, 1997, 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
December 3, 1997
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<PAGE>
Merrill Lynch Retirement Reserves Money Fund October 31, 1997
SCHEDULE OF INVESTMENTS (in Thousands)
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
================================================================================
Bank Notes--9.3%
================================================================================
Bank of America, $ 40,000 5.93 % 6/24/98 $ 40,009
N.T. & S.A. 60,000 5.46+ 6/30/98 59,968
- --------------------------------------------------------------------------------
BankBoston, N.A. 69,500 5.69 3/16/98 69,474
- --------------------------------------------------------------------------------
Barclays Bank PLC 70,000 5.65+ 4/16/98 69,984
- --------------------------------------------------------------------------------
First Bank N.A., 20,000 5.665+ 3/18/98 20,007
Minneapolis
- --------------------------------------------------------------------------------
First National Bank 45,000 6.02 6/11/98 45,030
of Chicago
- --------------------------------------------------------------------------------
First Tennessee 20,000 6.10 5/15/98 20,018
Bank N.A., Memphis
- --------------------------------------------------------------------------------
KeyBank N.A. 44,000 5.56+ 5/06/98 43,990
40,000 5.56+ 5/19/98 39,990
77,400 5.54+ 8/20/98 77,355
100,000 5.54+ 8/28/98 99,944
85,000 5.90 9/17/98 85,020
- --------------------------------------------------------------------------------
Morgan Guaranty 65,000 5.615+ 2/19/98 64,989
Trust Company of NY
- --------------------------------------------------------------------------------
Northern Trust Co., 25,000 5.96 6/17/98 25,009
Chicago 14,000 5.95 6/24/98 14,005
- --------------------------------------------------------------------------------
PNC Bank N.A. 150,000 5.60+ 10/01/98 149,907
- --------------------------------------------------------------------------------
Royal Bank of 29,000 5.47+ 6/30/98 28,985
Canada
- --------------------------------------------------------------------------------
SunTrust Bank, 25,000 5.80 7/24/98 24,987
Atlanta
- --------------------------------------------------------------------------------
U.S. National Bank 15,000 5.665+ 4/14/98 14,996
of Oregon
- --------------------------------------------------------------------------------
Total Bank Notes
(Cost--$993,526) ........................................ 993,667
================================================================================
Certificates of Deposit--3.6%
================================================================================
Chase Manhattan 55,000 5.87 7/21/98 54,996
Bank
- --------------------------------------------------------------------------------
Morgan Guaranty 30,000 5.94 3/20/98 29,997
Trust Company 150,000 5.80 7/28/98 149,926
of NY 100,000 5.77 10/07/98 99,926
- --------------------------------------------------------------------------------
World Savings Bank, 50,000 5.53 11/17/97 49,999
FSB
- --------------------------------------------------------------------------------
Total Certificates of Deposit
(Cost--$384,935) ........................................ 384,844
================================================================================
Certificates of Deposit--European--1.3%
================================================================================
Abbey National 60,000 5.93 9/17/98 60,029
Treasury Services
PLC, London
- --------------------------------------------------------------------------------
Bank of Scotland 20,000 5.93 9/17/98 20,010
Treasury Services
PLC, London
- --------------------------------------------------------------------------------
Westdeutsche 60,000 5.83 8/03/98 59,976
Landesbank
Girozentrale, London
- --------------------------------------------------------------------------------
Total Certificates of Deposit--European
(Cost--$140,007) ........................................ 140,015
================================================================================
Certificates of Deposit--Yankee--5.2%
================================================================================
ABN-AMRO Bank $ 25,000 5.77 % 7/27/98 $ 24,982
N.V., Chicago 30,000 5.77 7/28/98 29,979
- --------------------------------------------------------------------------------
Barclays Bank 50,000 5.94 6/30/98 50,014
PLC, NY 50,000 5.715 10/09/98 49,930
- --------------------------------------------------------------------------------
Bayerische 100,000 5.87 10/27/98 100,015
Hypotheken-und-
Wechsel Bank, NY
- --------------------------------------------------------------------------------
Canadian Imperial 55,000 5.79 10/06/98 54,959
Bank of
Commerce, NY
- --------------------------------------------------------------------------------
Deutsche Bank, NY 25,000 5.63 2/26/98 24,977
22,000 5.94 10/22/98 22,017
- --------------------------------------------------------------------------------
Landesbank 25,000 5.78 1/27/98 24,990
Hessen-Thuringen 25,000 5.78 1/30/98 24,989
Girozentrale, NY 40,000 6.00 6/09/98 40,019
- --------------------------------------------------------------------------------
Rabobank 15,000 5.50 12/05/97 14,995
Nederland, NY
- --------------------------------------------------------------------------------
Swiss Bank Corp., NY 25,000 5.95 7/02/98 25,009
- --------------------------------------------------------------------------------
Westdeutsche 25,000 5.94 6/29/98 25,006
Landesbank 50,000 5.78 7/31/98 49,969
Girozentrale, NY
- --------------------------------------------------------------------------------
Total Certificates of Deposit--Yankee
(Cost--$561,809) ........................................ 561,850
================================================================================
Commercial Paper--38.2%
================================================================================
Aesop Funding Corp. 5,000 5.60 11/14/97 4,989
20,000 5.60 11/17/97 19,947
28,000 5.53 11/19/97 27,918
40,000 5.55 11/19/97 39,883
- --------------------------------------------------------------------------------
Alpine 32,000 5.53 11/07/97 31,966
Securitization 78,407 5.53 11/10/97 78,287
Corporation 76,069 5.56 11/12/97 75,928
- --------------------------------------------------------------------------------
American Express 25,000 5.51 12/31/97 24,763
Credit Corporation
- --------------------------------------------------------------------------------
American Honda 40,000 5.55 11/04/97 39,975
Finance Corp.
- --------------------------------------------------------------------------------
Apreco, Inc. 20,000 5.53 11/19/97 19,942
- --------------------------------------------------------------------------------
Atlantic Asset 24,000 5.53 11/07/97 23,974
Securitization Corp. 13,881 5.55 11/12/97 13,855
12,119 5.54 11/18/97 12,085
- --------------------------------------------------------------------------------
Bear Stearns 70,000 5.53 12/19/97 69,471
Companies, Inc.
- --------------------------------------------------------------------------------
Countrywide Home 45,000 5.53 11/12/97 44,917
Loans, Inc. 29,500 5.55 11/12/97 29,445
- --------------------------------------------------------------------------------
Dresdner U.S. 125,000 5.52 11/04/97 124,923
Finance Inc.
- --------------------------------------------------------------------------------
Eiger Capital Corp. 14,983 5.52 11/14/97 14,951
- --------------------------------------------------------------------------------
Eureka 75,000 5.53 11/17/97 74,804
Securitization, Inc. 40,000 5.54 11/19/97 39,883
25,000 5.52 11/20/97 24,923
- --------------------------------------------------------------------------------
Finova Capital Corp. 36,500 5.53 11/17/97 36,405
37,000 5.55 11/18/97 36,897
16,400 5.56 3/19/98 16,047
32
<PAGE>
Merrill Lynch Retirement Reserves Money Fund October 31, 1997
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
================================================================================
Commercial Paper (continued)
================================================================================
Finova Capital $ 25,000 5.56 % 3/23/98 $ 24,446
Corp. (concluded) 10,000 5.58 4/06/98 9,757
50,000 5.62 4/27/98 48,623
- --------------------------------------------------------------------------------
Ford Motor Credit 50,000 5.53 12/29/97 49,544
Company 120,000 5.53 12/30/97 118,886
75,000 5.58 12/30/97 74,304
88,000 5.60 3/30/98 85,954
- --------------------------------------------------------------------------------
General Electric 50,000 5.68 11/25/97 49,807
Capital Corp. 100,000 5.68 12/03/97 99,493
68,000 5.545 3/17/98 66,556
75,000 5.55 3/23/98 73,338
27,000 5.55 4/06/98 26,344
- --------------------------------------------------------------------------------
General Electric 200,000 5.52 12/31/97 198,102
Company
- --------------------------------------------------------------------------------
General Motors 19,000 5.82 11/03/97 18,991
Acceptance Corp. 50,000 5.72 11/10/97 49,923
50,000 5.74 11/20/97 49,846
90,000 5.71 12/01/97 89,569
50,000 5.65 12/31/97 49,526
100,000 5.59 3/02/98 98,109
50,000 5.54 3/16/98 48,946
100,000 5.55 3/30/98 97,675
- --------------------------------------------------------------------------------
Goldman Sachs 125,000 5.53 11/20/97 124,616
Group, L.P. 50,000 5.69 2/06/98 49,238
- --------------------------------------------------------------------------------
Greenwich Funding 50,000 5.53 11/12/97 49,908
Corp. 50,000 5.57 11/25/97 49,807
- --------------------------------------------------------------------------------
International Lease 20,000 5.53 12/12/97 19,871
Finance Corp.
- --------------------------------------------------------------------------------
Lehman Brothers 100,000 5.75 11/03/97 99,952
Holdings Inc.
- --------------------------------------------------------------------------------
Lexington Parker 50,000 5.55 11/05/97 49,961
Capital Company, 27,674 5.53 11/20/97 27,589
LLC 55,000 5.55 12/01/97 54,737
41,137 5.53 12/04/97 40,922
- --------------------------------------------------------------------------------
Lloyds Bank PLC 55,000 5.51 12/29/97 54,498
- --------------------------------------------------------------------------------
Mont Blanc Capital 50,000 5.52 11/06/97 49,954
Corp. 67,093 5.52 11/12/97 66,970
50,000 5.53 11/14/97 49,892
- --------------------------------------------------------------------------------
National Australia 50,000 5.51 12/29/97 49,544
Funding (Delaware) 36,455 5.53 3/11/98 35,715
Inc.
- --------------------------------------------------------------------------------
New Center 170,000 5.55 12/31/97 168,387
Asset Trust
- --------------------------------------------------------------------------------
Old Line Funding 14,159 5.55 11/17/97 14,122
Corp. 79,341 5.54 11/18/97 79,121
56,500 5.55 11/18/97 56,343
- --------------------------------------------------------------------------------
Park Avenue 32,036 5.53 11/20/97 31,938
Receivables Corp.
- --------------------------------------------------------------------------------
Three Rivers 75,000 5.53 11/18/97 74,793
Funding Corp.
- --------------------------------------------------------------------------------
Twin Towers Inc. 100,480 5.54 11/20/97 100,171
- --------------------------------------------------------------------------------
WCP Funding Inc. 25,000 5.52 11/17/97 24,935
- --------------------------------------------------------------------------------
Windmill Funding 50,000 5.55 11/10/97 49,923
Corp. 38,083 5.57 11/12/97 38,012
171,019 5.53% 11/13/97 170,677
50,000 5.54 11/14/97 49,892
- --------------------------------------------------------------------------------
Total Commercial Paper
(Cost--$4,085,447) ...................................... 4,085,405
================================================================================
Corporate Notes--10.4%
================================================================================
Abbey National 75,000 5.61+ 2/10/98 74,986
Treasury Services 65,000 5.59+ 2/25/98 64,984
PLC 5,000 5.93+ 3/25/98 5,004
100,000 5.65+ 4/15/98 99,978
175,000 5.54+ 6/09/98 174,929
- --------------------------------------------------------------------------------
Bank of Scotland 20,000 5.95 6/18/98 20,030
Treasury Services PLC
- --------------------------------------------------------------------------------
CIT Group Holdings, 21,500 5.58+ 8/17/98 21,485
Inc. (The) 54,800 5.59 9/30/98 54,756
- --------------------------------------------------------------------------------
Credit Suisse 25,000 5.57+ 4/14/98 25,002
First Boston Inc. 44,000 5.55+ 5/22/98 44,000
- --------------------------------------------------------------------------------
First Bank 29,000 5.605+ 11/19/97 29,000
System, Inc.
- --------------------------------------------------------------------------------
General Motors 20,000 5.69+ 4/17/98 20,006
Acceptance Corp.
- --------------------------------------------------------------------------------
IBM Credit Corp. 25,000 5.665+ 7/31/98 25,000
- --------------------------------------------------------------------------------
International 30,000 5.67 1/28/98 29,994
Business Machines
Corporation
- --------------------------------------------------------------------------------
LABS Trust 92,361 5.656+ 12/29/97 92,361
Series 1996-4,
Senior Notes
- --------------------------------------------------------------------------------
LABS Trust 61,738 5.625+ 10/21/98 61,738
Series 1997-6,
Senior Notes
- --------------------------------------------------------------------------------
LINCS 50,000 5.625+ 1/12/98 50,000
Series 1996-3
- --------------------------------------------------------------------------------
Morgan Stanley 15,000 5.68+ 2/23/98 15,005
Group, Inc.
- --------------------------------------------------------------------------------
Republic Mase 23,000 5.945 6/30/98 23,032
Australia Ltd.
- --------------------------------------------------------------------------------
SMM Trust (1997-Q) 182,000 5.625+ 1/15/98 182,000
- --------------------------------------------------------------------------------
Total Corporate Notes
(Cost--$1,113,213) ...................................... 1,113,290
================================================================================
Funding Agreements--0.5%
================================================================================
Jackson National 50,000 5.686+ 5/01/98 50,000
Life Insurance Co.
- --------------------------------------------------------------------------------
Total Funding Agreements
(Cost--$50,000) ......................................... 50,000
================================================================================
Master Notes--1.5%
================================================================================
Goldman Sachs 125,000 5.656+ 4/28/98 125,000
Group, L.P. 34,000 5.656+ 5/29/98 34,000
- --------------------------------------------------------------------------------
Total Master Notes
(Cost--$159,000) ........................................ 159,000
- --------------------------------------------------------------------------------
33
<PAGE>
Merrill Lynch Retirement Reserves Money Fund October 31, 1997
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
================================================================================
US Government, Agency & Instrumentality Obligations--
Discount Notes--1.6%
================================================================================
Federal Farm $ 15,000 5.38 % 8/21/98 $ 14,334
Credit Banks 10,000 5.38 9/01/98 9,540
- --------------------------------------------------------------------------------
Federal Home 25,000 5.32 4/28/98 24,324
Loan Bank 17,500 5.34 7/09/98 16,836
- --------------------------------------------------------------------------------
Federal National 40,000 5.58 11/12/97 39,927
Mortgage 5,000 5.41 10/09/98 4,741
Association 60,000 5.41 10/16/98 56,833
- --------------------------------------------------------------------------------
Total US Government, Agency & Instrumentality
Obligations--Discount Notes (Cost--$166,584) ............ 166,535
================================================================================
US Government, Agency & Instrumentality Obligations--
Non-Discount Notes--20.3%
================================================================================
Federal Farm 40,000 5.63+ 11/25/97 39,999
Credit Banks 50,000 5.65 2/03/98 49,968
- --------------------------------------------------------------------------------
Federal Home 120,000 5.29+ 12/10/97 119,994
Loan Bank 75,000 5.30+ 1/15/98 74,991
25,000 5.99 2/09/98 25,006
40,000 5.90 6/19/98 40,026
108,600 5.57+ 10/20/98 108,569
15,000 6.12 11/19/98 15,002
15,000 6.00 12/17/98 14,999
8,000 6.355 6/11/99 8,030
20,000 6.08 6/30/99 20,064
30,000 5.99 8/11/99 30,011
- --------------------------------------------------------------------------------
Federal Home Loan 35,000 5.58+ 4/15/98 34,992
Mortgage Corp. 6,900 6.02 3/03/99 6,900
5,000 6.205 6/30/99 5,002
10,325 6.10 9/10/99 10,342
- --------------------------------------------------------------------------------
Federal National 75,000 5.47 12/30/97 74,956
Mortgage 25,000 5.19 1/08/98 24,970
Association 150,000 5.51+ 1/15/98 149,985
70,000 5.57+ 3/26/98 69,984
83,000 5.30+ 3/27/98 82,977
65,000 5.59+ 4/21/98 64,988
60,000 5.34+ 4/24/98 59,989
38,000 6.00+ 5/14/98 38,000
20,000 7.85 9/10/98 20,340
101,000 5.57+ 10/20/98 100,957
75,000 5.57+ 11/03/98 74,948
15,000 5.81 12/01/98 14,983
22,150 5.36+ 12/14/98 22,129
21,850 6.375 5/21/99 21,929
26,150 6.16 7/13/99 26,209
60,000 5.29+ 7/14/99 59,829
25,000 5.95 8/05/99 25,000
13,500 5.88 8/10/99 13,486
17,740 5.98 9/23/99 17,749
78,000 5.60+ 10/27/99 77,927
- --------------------------------------------------------------------------------
Student Loan 67,075 5.45+ 1/21/98 67,095
Marketing 85,000 5.305+ 2/05/98 84,990
Association 29,200 5.40+ 2/17/98 29,196
75,000 5.345+ 4/21/98 74,992
25,000 5.60 8/11/98 24,968
100,000 5.35+ 11/06/98 99,971
15,000 6.02+ 11/20/98 15,007
51,425 5.80+ 12/18/98 51,399
- --------------------------------------------------------------------------------
US Treasury Notes 48,000 5.25 12/31/97 47,985
13,000 5.00 1/31/98 12,982
15,000 5.75 9/30/99 15,023
- --------------------------------------------------------------------------------
Total US Government, Agency & Instrumentality
Obligations--Non-Discount Notes
(Cost--$2,168,455) ...................................... 2,168,838
- --------------------------------------------------------------------------------
Face
Amount Issue
================================================================================
Repurchase Agreements**--10.1%
================================================================================
$100,000 Fuji Securities, Inc., purchased
on 10/31/1997 to yield 5.80% to
11/03/1997 100,000
- --------------------------------------------------------------------------------
250,000 HSBC Securities, Inc., purchased
on 10/31/1997 to yield 5.80% to
11/03/1997 250,000
- --------------------------------------------------------------------------------
200,000 J.P. Morgan Securities Inc.,
purchased on 10/31/1997 to yield
5.68% to 11/03/1997 200,000
- --------------------------------------------------------------------------------
250,000 Nomura Securities International,
Inc., purchased on 10/31/1997 to
yield 5.78% to 11/03/1997 250,000
- --------------------------------------------------------------------------------
250,000 PaineWebber Inc., purchased on
10/31/1997 to yield 5.70% to
11/03/1997 250,000
- --------------------------------------------------------------------------------
31,837 UBS Securities, LLC, purchased
on 10/31/1997 to yield 5.72% to
11/03/1997 31,837
- --------------------------------------------------------------------------------
Total Repurchase Agreements
(Cost--$1,081,837) ..................................... 1,081,837
- --------------------------------------------------------------------------------
Total Investments (Cost--$10,904,813)--102.0% .......... 10,905,281
Liabilities in Excess of Other Assets--(2.0%) .......... (214,936)
-----------
Net Assets--100.0% ..................................... $10,690,345
===========
- --------------------------------------------------------------------------------
* Commercial Paper and certain US Government, Agency & Instrumentality
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 or
upon maturity. Interest rates on variable rate securities are adjusted
periodically based upon appropriate indexes; the interest rates shown are
the rates in effect at October 31, 1997.
** Repurchase Agreements are fully collateralized by US Government
Obligations.
+ Floating Rate Notes.
See Notes to Financial Statements.
34
<PAGE>
Merrill Lynch Retirement Reserves Money Fund October 31, 1997
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
==================================================================================================================
Statement of Assets and Liabilities as of October 31, 1997
==================================================================================================================
<C> <S> <C> <C>
Assets: Investments, at value (identified cost--$10,904,813,468*)
(Note 1a) .................................................. $10,905,281,465
Cash ......................................................... 730,491
Receivables:
Interest ................................................... $ 51,158,346
Beneficial interest sold ................................... 199,696 51,358,042
------------
Prepaid registration fees and other assets (Note 1e) ......... 440,147
---------------
Total assets ................................................. 10,957,810,145
---------------
- ------------------------------------------------------------------------------------------------------------------
Liabilities: Payables:
Beneficial interest redeemed ............................... 186,208,583
Securities purchased ....................................... 74,947,500
Investment adviser (Note 2) ................................ 3,467,704
Dividends to shareholders (Note 1f) ........................ 3,937 264,627,724
------------
Accrued expenses and other liabilities ....................... 2,837,279
---------------
Total liabilities ............................................ 267,465,003
---------------
- ------------------------------------------------------------------------------------------------------------------
Net Assets: Net assets ................................................... $10,690,345,142
===============
- ------------------------------------------------------------------------------------------------------------------
Net Assets Shares of beneficial interest, $0.10 par value,
Consist of: unlimited number of shares authorized ........................ $ 1,068,987,715
Paid-in capital in excess of par ............................. 9,620,889,430
Unrealized appreciation on investments--net .................. 467,997
---------------
Net assets--Equivalent to $1.00 per share based on
10,689,877,146 shares of beneficial interest outstanding ..... $10,690,345,142
===============
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
* As of October 31, 1997, net unrealized appreciation for
Federal income tax purposes amounted to $145,063, of which
$1,085,682 related to appreciated securities and $940,619
related to depreciated securities. The aggregate cost of
investments at October 31, 1997 for Federal income tax
purposes was $10,905,136,402.
See Notes to Financial Statements.
35
<PAGE>
Merrill Lynch Retirement Reserves Money Fund October 31, 1997
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
======================================================================================================================
Statement of Operations
======================================================================================================================
For the Year Ended
October 31, 1997
- ----------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned .... $ 593,141,521
(Note 1d):
- ----------------------------------------------------------------------------------------------------------------------
Expenses: Investment advisory fees (Note 2) ........................... $ 38,870,409
Transfer agent fees (Note 2) ................................ 14,619,064
Registration fees (Note 1e) ................................. 1,236,692
Printing and shareholder reports ............................ 669,209
Accounting services (Note 2) ................................ 524,387
Interest expense ............................................ 319,012
Custodian fees .............................................. 299,372
Professional fees ........................................... 83,881
Trustees' fees and expenses ................................. 75,354
Other ....................................................... 91,755
-------------
Total expenses .............................................. 56,789,135
-------------
Investment income--net ...................................... 536,352,386
-------------
- ----------------------------------------------------------------------------------------------------------------------
Realized & Realized gain on investments--net ........................... 581,438
Unrealized Gain Change in unrealized appreciation on investments--net ....... (368,533)
(Loss) on -------------
Investments--Net Net Increase in Net Assets Resulting from Operations ........ $ 536,565,291
(Note 1d): =============
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
36
<PAGE>
Merrill Lynch Retirement Reserves Money Fund October 31, 1997
FINANCIAL INFORMATION (continued)
<TABLE>
<CAPTION>
======================================================================================================================
Statements of Changes in Net Assets
======================================================================================================================
For the
Year Ended
October 31,
-----------------------------------
Increase (Decrease) in Net Assets: 1997 1996
- ----------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Operations: Investment income--net .................................... $ 536,352,386 $ 457,309,800
Realized gain on investments--net ......................... 581,438 471,407
Change in unrealized appreciation on investments--net ..... (368,533) (2,850,451)
---------------- ----------------
Net increase in net assets resulting from operations ...... 536,565,291 454,930,756
---------------- ----------------
- ----------------------------------------------------------------------------------------------------------------------
Dividends & Investment income--net .................................... (536,352,386) (457,309,800)
Distributions to Realized gain on investments--net ......................... (581,438) (471,407)
Shareholders ---------------- ----------------
(Note 1f): Net decrease in net assets resulting from dividends and
distributions to shareholders ............................. (536,933,824) (457,781,207)
---------------- ----------------
- ----------------------------------------------------------------------------------------------------------------------
Beneficial Interest Net proceeds from sale of shares .......................... 35,790,703,282 27,785,847,538
Transactions Net asset value of shares issued to shareholders in
(Notes 1f & 3): reinvestment of dividends and distributions ............... 536,932,268 457,779,630
---------------- ----------------
36,327,635,550 28,243,627,168
Cost of shares redeemed ................................... (34,977,150,947) (27,549,454,162)
---------------- ----------------
Net increase in net assets derived from beneficial interest
transactions .............................................. 1,350,484,603 694,173,006
---------------- ----------------
- ----------------------------------------------------------------------------------------------------------------------
Net Assets: Total increase in net assets .............................. 1,350,116,070 691,322,555
Beginning of year ......................................... 9,340,229,072 8,648,906,517
---------------- ----------------
End of year ............................................... $ 10,690,345,142 $ 9,340,229,072
================ ================
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
37
<PAGE>
Merrill Lynch Retirement Reserves Money Fund October 31, 1997
FINANCIAL INFORMATION (concluded)
<TABLE>
<CAPTION>
===================================================================================================================================
Financial Highlights
===================================================================================================================================
The following per share data and ratios have been derived
from information provided in the financial statements. For the Year Ended October 31,
----------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Operating ----------- ---------- ---------- ---------- ----------
Performance: Investment income--net .................. .0512 .0509 .0540 .0345 .0279
Realized and unrealized gain (loss) on
investments--net ........................ .0001 (.0002) .0015 (.0011) .0004
----------- ---------- ---------- ---------- ----------
Total from investment operations ........ .0513 .0507 .0555 .0334 .0283
----------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net ................ (.0512) (.0509) (.0540) (.0345) (.0279)
Realized gain on investments--net ..... (.0001) (.0001) (.0002) --+ (.0003)
----------- ---------- ---------- ---------- ----------
Total dividends and distributions ....... (.0513) (.0510) (.0542) (.0345) (.0282)
----------- ---------- ---------- ---------- ----------
Net asset value, end of year ............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== ========== ========== ========== ==========
Total investment return ................. 5.35% 5.19% 5.55% 3.47% 2.85%
=========== ========== ========== ========== ==========
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Expenses ................................ .54% .56% .59% .59% .62%
Net Assets: =========== ========== ========== ========== ==========
Investment income and realized gain
on investments--net ..................... 5.13% 5.07% 5.43% 3.44% 2.82%
=========== ========== ========== ========== ==========
- -----------------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of year (in thousands) .. $10,690,345 $9,340,229 $8,648,907 $7,403,684 $7,066,326
Data: =========== ========== ========== ========== ==========
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Amount is less than $.0001 per share.
See Notes to Financial Statements.
38
<PAGE>
Merrill Lynch Retirement Reserves Money Fund October 31, 1997
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Retirement Reserves Money Fund (the "Fund") is a separate Fund
offering a separate class of shares of Merrill Lynch Retirement Series Trust
(the "Trust"). The Trust is registered under the Investment Company Act of 1940
as a diversified, open-end management investment company which will comprise a
series of separate portfolios offering a separate class of shares to
participants in the retirement plans for which Merrill Lynch, Pierce, Fenner &
Smith Inc. ("MLPF&S") acts as passive custodian. At the present time, the Fund
is the only series offered. The following is a summary of significant accounting
policies consistently 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 purposes of valuations, the maturity of variable rate certificates of
deposit, variable rate commercial paper, short-term corporate bond notes,
variable rate Government agency notes and variable rate corporate notes is
deemed to be the next coupon date on which the interest rate is to be adjusted.
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.
(b) Repurchase agreements--The Fund invests in US Government securities pursuant
to repurchase agreements with a member bank of the Federal Reserve System or a
primary dealer in US Government securities. Under such agreements, the bank or
primary 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 in additional fund shares at net asset
value. Dividends and distributions are declared from the total of net investment
income and net realized gains or losses on investments.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Merrill Lynch
Asset Management, L.P. ("MLAM"). The general partner of MLAM is Princeton
Services, Inc. ("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch &
Co., Inc. ("ML & Co."), which is the limited partner. The Fund has also entered
into a Distribution Agreement and Distribution Plans with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned subsidiary of
Merrill Lynch Group, Inc.
MLAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel,
39
<PAGE>
Merrill Lynch Retirement Reserves Money Fund October 31, 1997
NOTES TO FINANCIAL STATEMENTS (concluded)
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 $1 billion; 0.45% of average daily
net assets in excess of $1 billion but not exceeding $2 billion; 0.40% of
average daily net assets in excess of $2 billion but not exceeding $3 billion;
0.375% of average daily net assets in excess of $3 billion but not exceeding $4
billion; 0.35% of average daily net assets in excess of $4 billion but not
exceeding $7 billion; 0.325% of average daily net assets in excess of $7 billion
but not exceeding $10 billion; and 0.30% of average daily net assets in excess
of $10 billion.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-owned subsidiary
of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or trustees of the Trust are officers and/or directors of
MLAM, MLFD, MLFDS, PSI, and/or ML & Co.
3. Shares of Beneficial Interest:
The number of shares purchased and redeemed during the period corresponds to the
amounts included in the Statements of Changes in Net Assets with respect to net
proceeds from sale of shares and cost of shares redeemed, since shares are
recorded at $1.00 per share.
40
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objectives and Policies......................................... 2
Management of the Trust.................................................... 6
Trustees and Officers..................................................... 6
Compensation of Trustees.................................................. 7
Management and Advisory Arrangements...................................... 8
Purchase and Redemption of Shares.......................................... 9
Portfolio Transactions..................................................... 11
Determination of Net Asset Value........................................... 13
Yield Information.......................................................... 14
Taxes...................................................................... 14
Federal................................................................... 14
State..................................................................... 17
Exchange Privilege......................................................... 17
General Information........................................................ 18
Description of Series and Shares.......................................... 18
Custodian................................................................. 19
Transfer Agent............................................................ 19
Independent Auditors...................................................... 19
Legal Counsel............................................................. 20
Reports to Shareholders................................................... 20
Additional Information.................................................... 20
Security Ownership of Certain Beneficial Owners............................ 20
Appendix A................................................................. 21
Appendix B................................................................. 30
Independent Auditors' Report............................................... 31
Schedule of Investments.................................................... 32
Financial Statements....................................................... 35
</TABLE>
Code #10237-0198
[LOGO] MERRILL LYNCH
Merrill Lynch Retirement
Reserves Money Fund
Merrill Lynch
Retirement Series Trust
[ART]
Merrill Lynch Retirement Reserves Money
Fund is organized as a Massachusetts
business trust. It is not a bank nor does it offer
fiduciary or trust services. Shares of the Fund
are not equivalent to a bank account. As with
any investment in securities, the value of a
shareholder's investment in the Fund will
fluctuate. The shares of the Fund are not
insured by any Government agency and are
not subject to the protection of the Securities
Investor Protection Corporation. A
shareholder's investment in the Fund is not
insured by any government agency.
STATEMENT OF
ADDITIONAL
INFORMATION
, 1998
Distributor:
Merrill Lynch
Funds Distributor, Inc.
<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 October 31, 1997
Contained in Part B:
Schedule of Investments as of October 31, 1997
Statement of Assets and Liabilities as of October 31, 1997
Statement of Operations for the year ended October 31, 1997
Statements of Changes in Net Assets for each of the years in the
two-year period ended October 31, 1997
Financial Highlights for each of the years in the five-year period
ended October 31, 1997
(B) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1(a) --Declaration of Trust dated July 15, 1986.(a)
(b) --Instrument establishing Merrill Lynch Retirement Reserves Money Fund
(the "Fund") as a series of Registrant.(a)
(c) --Form of Amendments to Declaration of Trust.
(d) --Form of Establishment and Designation of Class A and Class B shares
of the Fund.
2 --By-Laws of Registrant.(a)
3 --None.
4 --None.
5 --Management Agreement between Registrant and Merrill Lynch Asset
Management, L.P.(c)
6(a) --Distribution Agreement between Registrant and Merrill Lynch Funds
Distributor, Inc. (the "Distributor").(a)
(b) --Class B Distribution Agreement between Registrant and the
Distributor.
7 --None.
8 --Custody Agreement between Registrant and The Bank of New York.(a)
9 --Transfer Agency, Shareholder Servicing Agency and Proxy Agency
Agreement between Registrant and Merrill Lynch Financial Data
Service, Inc.(a)
10 --None.
11 --Consent of Deloitte & Touche LLP, independent auditors for
Registrant.
12 --None.
13 --Certificate of Merrill Lynch Asset Management, L.P.(a)
14 --None.
15 --Class B Distribution Plan pursuant to Rule 12b-1 between Registrant
and Merrill Lynch, Pierce, Fenner & Smith Incorporated.
16 --Schedule for computation of each performance quotation provided in
the Registration Statement in response to Item 22.(a)
17 --Financial Data Schedule.
18 --Plan pursuant to Rule 18f-3.
</TABLE>
- --------
(a) Refiled pursuant to the Electronic Data Gathering, Analysis and Retrieval
(EDGAR) phase-in requirements.
(b) Filed on February 21, 1997 as an exhibit to Post-Effective Amendment No. 17
to Registrant's Registration Statement on Form N-1A.
C-1
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
The Registrant is not controlled by or under common control with any person.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>
NUMBER OF
HOLDERS AT
NOVEMBER 30,
TITLE OF CLASS 1997
-------------- ------------
<S> <C>
Shares of beneficial interest, par value $.10 per share............ 2,146,446
</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, at 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
(relating to no personal liability of shareholders, Trustees, etc.) 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."
Insofar as the conditional advancing of indemnification monies 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
C-2
<PAGE>
exceeds the amount to which it is ultimately determined that 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 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 9 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, as amended (the "1933 Act") against certain types of
civil liabilities arising in connection with the Registration Statement or
Prospectus and Statement of Additional Information.
Insofar as indemnification for liabilities arising under the 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 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 MANAGER.
Fund Asset Management, L.P. ("FAM"), an affiliate of the Manager ("MLAM"),
acts as the investment adviser for the following open-end registered investment
companies: CBA Money Fund, CMA Government Securities Fund, CMA Money Fund, CMA
Multi-State Municipal Series Trust, CMA Tax-Exempt Fund, CMA Treasury Fund, The
Corporate Fund Accumulation Program, Inc., Financial Institutions Series Trust,
Merrill Lynch Basic Value Fund, Inc., Merrill Lynch California Municipal Series
Trust, Merrill Lynch Corporate Bond Fund, Inc., Merrill Lynch 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
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., Debt Strategies Fund,
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 Florida Insured Fund, Inc., MuniHoldings 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
C-3
<PAGE>
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., Taurus MuniCalifornia Holdings, Inc., Taurus
MuniNewYork Holdings, Inc. and Worldwide Dollar Vest Fund, Inc.
Merrill Lynch Asset Management, L.P. ("MLAM" or the "Manager") acts as the
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 Holdings, Inc., Merrill Lynch
Global Resources Trust, Merrill Lynch Global SmallCap Fund, Inc., Merrill Lynch
Global Utility Fund, Inc., Merrill Lynch Global Value, Inc., 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
Ready Assets Trust, Merrill Lynch Real Estate Fund, Inc., Merrill Lynch
Retirement Series Trust, Merrill Lynch Series Fund, Inc., Merrill Lynch Short-
Term Global Income Fund, Inc., Merrill Lynch Strategic Dividend Fund, Merrill
Lynch Technology Fund, Inc., Merrill Lynch U.S. Treasury Money Fund, Merrill
Lynch U.S.A. Government Reserves, Merrill Lynch Utility Income Fund, Inc. and
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: Merrill Lynch High Income Municipal
Bond Fund, Inc., and Merrill Lynch Senior Floating Rate Fund, Inc. 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.
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 Intermediate Government Bond
Fund is One Financial Center, 23rd Floor, Boston, Massachusetts 02111-2646. The
address of the Manager, FAM and 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, Inc. ("MLFD" or the "Distributor") is P.O. Box 9081, Princeton,
New Jersey 08543-9081. The address of Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") and Merrill Lynch & Co., Inc. ("ML & Co.") is
North Tower, World Financial Center, 250 Vesey Street, New York, New York
10281-1201. The address of the Fund's Transfer Agent, Merrill Lynch Financial
Data Services, Inc. ("FDS"), is 4800 Deer Lake Drive East, Jacksonville,
Florida 32246-6484.
Set forth below is a list of each executive officer and partner of the
Manager indicating each business, profession, vocation or employment of a
substantial nature in which each such person or entity has been engaged since
November 1, 1995, for his or her own account or in the capacity of director,
officer, partner or trustee. In addition, Mr. Zeikel is President, Mr. Glenn is
Executive Vice President and Mr. Richard is Treasurer of substantially all of
the investment companies described in the first two paragraphs of this Item 28
and Messrs. Giordano, Harvey, Kirstein and Monagle are directors or officers of
one or more of such companies.
C-4
<PAGE>
<TABLE>
<CAPTION>
POSITION OTHER SUBSTANTIAL BUSINESS,
NAME WITH MANAGER PROFESSION, VOCATION OR EMPLOYMENT
---- ------------ ----------------------------------
<S> <C> <C>
ML & Co. ............... Limited Partner Financial Services Holding Company;
Limited Partner of FAM
Princeton Services...... General Partner General Partner of FAM
Arthur Zeikel........... Chairman Chairman of FAM (1997 to present);
President of MLAM and FAM (1977 to
1997); President and Director of
Princeton Services (1993 to 1997);
Executive Vice President of ML & Co.
Jeffrey M. Peek......... President President of FAM; Executive Vice
President of ML&Co.; President and
Director of Princeton Services
Terry K. Glenn.......... Executive Vice Executive Vice President of FAM;
President Executive Vice President and Director
of Princeton Services; the Distributor;
Director of FDS; President of Princeton
Administrators, L.P.
Linda L. Federici....... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
Philip L. Kirstein...... Senior Vice Senior Vice President, General Counsel
President, General and Secretary of FAM; Senior Vice
Counsel and President, General Counsel, Director
Secretary and Secretary of Princeton Services
Vincent R. Giordano..... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
Elizabeth A. Griffin.... Senior Vice President Senior Vice President of FAM and
Princeton Services
Norman R. Harvey........ Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
Michael J. Hennewinkel.. Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
Ronald M. Kloss......... Senior Vice President Senior Vice President and Controller of
and Controller FAM; Senior Vice President and
Controller of Princeton Services
Debra W. Landsman-Yaros.
Senior Vice President Senior Vice President of FAM; Vice
President of the Distributor; Senior
Vice President of Princeton Services
Stephen M.M. Miller..... Senior Vice President Executive Vice President of Princeton
Administrators, L.P.; Senior Vice
President of Princeton Services
Joseph T. Monagle, Jr. . Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
Michael L. Quinn........ Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services;
Managing Director and First Vice
President of Merrill Lynch from 1989 to
1995
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
POSITION OTHER SUBSTANTIAL BUSINESS,
NAME WITH MANAGER PROFESSION, VOCATION OR EMPLOYMENT
---- ------------ ----------------------------------
<S> <C> <C>
Richard L. Reller....... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services;
Director of the Distributor
Gerald M. Richard....... Senior Vice President Senior Vice President and Treasurer of
and Treasurer FAM; Senior Vice President and
Treasurer of Princeton Services; Vice
President and Treasurer of the
Distributor
Gregory D. Upah......... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
Ronald L. Welburn....... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) MLFD acts as the principal underwriter for the Registrant and for each of
the open-end investment companies referred to in the first two paragraphs of
Item 28 except CBA Money Fund, CMA Government Securities Fund, CMA Money Fund,
CMA Multi-State Municipal Series Trust, CMA Tax-Exempt Fund, CMA Treasury Fund,
The Corporate Fund Accumulation Program, Inc., and The Municipal Fund
Accumulation Program, Inc., and MLFD also acts as the principal underwriter for
the following closed-end investment companies: Merrill Lynch High Income
Municipal Bond Fund, Inc., Merrill Lynch Municipal Strategy Fund, Inc. and
Merrill Lynch Senior Floating Rate Fund, Inc.
(b) Set forth below is information concerning each director and officer of
the Distributor. The principal business address of each such person is P.O. Box
9011, Princeton, New Jersey 08543-9011, except that the address of Messrs.
Crook, Aldrich, Brady, Breen, Fatseas and Wasel is One Financial Center, 23rd
Floor Boston, Massachusetts 02111-2646.
<TABLE>
<CAPTION>
POSITION(S) AND OFFICES POSITIONS AND OFFICES
NAME WITH DISTRIBUTOR WITH REGISTRANT
---- ---------------------------- ------------------------
<S> <C> <C>
Terry K. Glenn............ President and Director Executive Vice President
Richard L. Reller......... Director None
Thomas J. Verage.......... Director None
William E. Aldrich........ Senior Vice President None
Robert W. Crook........... Senior Vice President None
Michael J. Brady.......... Vice President None
William M. Breen.......... Vice President None
Michael G. Clark.......... Vice President None
James T. Fatseas.......... Vice President None
Debra W. Landsman-Yaros... Vice President None
Michelle T. Lau........... Vice President None
Gerald M. Richard......... Vice President and Treasurer Treasurer
Salvatore Venezia......... Vice President None
William Wasel............. Vice President None
Robert Harris............. Secretary None
</TABLE>
(c) Not applicable.
C-6
<PAGE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the rules thereunder are
maintained at the offices of the Registrant, 800 Scudders Mill Road,
Plainsboro, New Jersey 08536 and its Transfer Agent, Merrill Lynch Financial
Data Services, Inc., 4800 Deer Lake Drive East, Jacksonville, Florida 32246-
6484.
ITEM 31. MANAGEMENT SERVICES.
Other than as set forth under the caption "Management of the Trust--
Management and Advisory Arrangements" in the Prospectus constituting Part A of
the Registration Statement, and under the caption "Management of the Trust--
Management and Advisory Arrangements" in the Statement of Additional
Information constituting Part B of the Registration Statement, the Registrant
is not a party to any management-related service contract.
ITEM 32. UNDERTAKINGS.
Not applicable.
C-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT OF 1940, THE REGISTRANT HAS DULY CAUSED THIS POST-EFFECTIVE
AMENDMENT TO ITS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE TOWNSHIP OF PLAINSBORO, AND THE
STATE OF NEW JERSEY, ON THE 29TH DAY OF DECEMBER, 1997.
Merrill Lynch Retirement Series Trust
(Registrant)
/s/ Arthur Zeikel
By___________________________________
(ARTHUR ZEIKEL, PRESIDENT)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS POST-
EFFECTIVE AMENDMENT TO ITS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE
FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Arthur Zeikel President and
- ------------------------------------- Trustee (Principal December 29,
(ARTHUR ZEIKEL) Executive Officer) 1997
Gerald M. Richard* Treasurer (Principal
- ------------------------------------- Financial and
(GERALD M. RICHARD) Accounting Officer)
Joe Grills* Trustee
- -------------------------------------
(JOE GRILLS)
Walter Mintz* Trustee
- -------------------------------------
(WALTER MINTZ)
Trustee
Robert S. Salomon, Jr.*
- -------------------------------------
(ROBERT S. SALOMON, JR.)
Melvin R. Seiden* Trustee
- -------------------------------------
(MELVIN R. SEIDEN)
Stephen B. Swensrud* Trustee
- -------------------------------------
(STEPHEN B. SWENSRUD)
/s/ Arthur Zeikel
*By _________________________________ December 29,
(ARTHUR ZEIKEL, ATTORNEY-IN-FACT) 1997
C-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1(c) --Form of Amendments to Declaration of Trust
(d) --Form of Establishment and Designation of Class A and Class B shares
of the Fund.
6(b) --Class B Distribution Agreement between Registrant and the
Distributor.
11 --Consent of Deloitte & Touche LLP, independent auditors for
Registrant.
15 --Class B Distribution Plan pursuant to Rule 12b-1 between Registrant
and Merrill Lynch, Pierce, Fenner & Smith Incorporated.
17 --Financial Data Schedule.
18 --Plan pursuant to Rule 18f-3.
</TABLE>
<PAGE>
APPENDIX FOR GRAPHIC AND IMAGE MATERIAL
Pursuant to Rule 304 of Regulation S-T, the following table presents
fair and accurate narrative descriptions of graphic and image material omitted
from this EDGAR Submission file due to ASCII-incompatibility and
cross-references this material to the location of each occurrence in the text.
DESCRIPTION OF OMITTED LOCATION OF GRAPHIC
GRAPHIC OR IMAGE OR IMAGE IN TEXT
- ---------------------- -------------------
Compass plate, circular Back cover of Prospectus and
graph paper and Merrill Lynch back cover of Statement of
logo including stylized Additional Information
market bull
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 010
<NAME> MERRILL LYNCH RETIREMENT RESERVES MONEY FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 10904813468
<INVESTMENTS-AT-VALUE> 10905281465
<RECEIVABLES> 51358042
<ASSETS-OTHER> 1170638
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10957810145
<PAYABLE-FOR-SECURITIES> 74947500
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 192517503
<TOTAL-LIABILITIES> 267465003
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10689877145
<SHARES-COMMON-STOCK> 10689877146
<SHARES-COMMON-PRIOR> 9339392542
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 467997
<NET-ASSETS> 10690345142
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 593141521
<OTHER-INCOME> 0
<EXPENSES-NET> (56789135)
<NET-INVESTMENT-INCOME> 536352386
<REALIZED-GAINS-CURRENT> 581438
<APPREC-INCREASE-CURRENT> (368533)
<NET-CHANGE-FROM-OPS> 536565291
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (536352386)
<DISTRIBUTIONS-OF-GAINS> (581438)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 35790703283
<NUMBER-OF-SHARES-REDEEMED> 34977150947
<SHARES-REINVESTED> 536932268
<NET-CHANGE-IN-ASSETS> 1350116070
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 38870409
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 56789135
<AVERAGE-NET-ASSETS> 10466854923
<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> .54
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EXHIBIT 99.1(c)
MERRILL LYNCH RETIREMENT SERIES TRUST
Certification of Amendment
To Declaration of Trust
and
Establishment and Designation of Classes
The undersigned, constituting a majority of the Trustees of Merrill Lynch
Retirement Series Trust (the "Trust"), a Massachusetts business trust, hereby
certify that the Trustees of the Trust have duly adopted the following
amendments, as approved by a majority of the shareholders of the Trust, to the
Trust's Declaration of Trust.
Voted: That Section 1.2 of Article I of the Declaration be, and it hereby is,
amended in its entirety to read as follows:
1.2 Definitions. As used in this Declaration, the following terms
-----------
shall have the following meanings:
The terms "Affiliated Person", "Assignment", "Commission", "Interested
----------------- ---------- ---------- ----------
Person", "Majority Shareholder Vote" (the 67% or more than 50% requirement
------ -------------------------
of the third sentence of Section 2(a)(42) of the 1940 Act, whichever may be
applicable) and "Principal Underwriter" shall have the meanings given them
---------------------
in the 1940 Act.
"Declaration" shall mean this Declaration as amended from time to
-----------
time. References in this Declaration to "Declaration", "hereof", "herein"
----------- ------ ------
and "hereunder" shall be deemed to refer to the Declaration rather than the
---------
article or section in which such words appear.
"Fundamental Policies" shall mean the investment restrictions set
--------------------
forth in the Prospectus of any Series and designated as fundamental
policies therein.
"Person" shall mean and include individuals, corporations,
------
partnerships, trusts, associations, joint ventures and other entities,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
<PAGE>
"Prospectus" shall mean the currently effective Prospectus of any
----------
Series of the Trust under the Securities Act of 1933, as amended, including
the Statement of Additional Information incorporated by reference therein.
"Series" shall mean the separate series that may be established and
------
designated pursuant to Section 6.2.
"Shareholders" shall mean as of any particular time all holders of
------------
record of outstanding Shares at such time.
"Shares" shall mean the equal proportionate transferable units of
------
interest into which the beneficial interest in any Series of the Trust
shall be divided from time to time and includes fractions of Shares as well
as whole Shares. As provided in Article VI hereof, a Series of the Trust
may issue separate classes of Shares; all references to Shares shall be
deemed to be Shares of any or all Series or a single class of a Series or
all classes of a Series as the context may require.
"Trustees" shall mean the signatories to this Declaration, so long as
--------
they shall continue in office in accordance with the terms hereof, and all
other persons who at the time in question have been duly elected or
appointed and have qualified as trustees in accordance with the provisions
hereof and are then in office, are herein referred to as the "Trustees",
and reference in this Declaration to a Trustee or Trustees shall refer to
such person or persons in their capacity as Trustees hereunder.
"Trust Property" shall mean as of any particular time any and all
--------------
property, real or personal, tangible or intangible, which at such time is
owned or held by or for the account of the Trust, any Series thereof or the
Trustees.
The "1940 Act" refers to the Investment Company Act of 1940, as
--------
amended from time to time, and shall include the rules and regulations and
any relevant order of exemption promulgated thereunder by the Securities
and Exchange Commission.
VOTED: That Section 6.2 of Article VI of the Declaration of Trust be, and it
hereby is, amended in its entirety to read as follows:
6.2. Series Designation. The Trustees, in their discretion from time to
------------------
time, may authorize the division of Shares into two or more Series, each Series
relating to a separate portfolio of investments. The different Series shall be
established and designated, and the variations in the relative rights and
preferences as between the different series shall be fixed and determined, by
the Trustees; provided that all Shares shall be identical except that there may
be variations between different Series as to purchase price, determination of
net asset value, the price, terms and manner of redemption, special and relative
rights as to dividends and on liquidation, conversion rights, and conditions
under which the several Series shall
2
<PAGE>
have separate voting rights. All references to Shares in this Declaration shall
be deemed to be shares of any or all Series as the context may require.
The Trustees, in their discretion from time to time without a vote of the
Shareholders, may divide the shares of beneficial interest of any Series into
classes. In such event, each class of a Series shall represent interests in the
Trust Property of a Series and have identical voting, dividend, liquidation and
other rights and the same terms and conditions except that expenses related
directly or indirectly to the distribution of the Shares of a class of a Series
may be borne solely by such class (as shall be determined by the Trustees) and,
as provided in Section 10.1, a class of a Series may have exclusive voting
rights with respect to matters relating to the expenses being borne solely by
such class. The bearing of such expenses solely by a class of Shares of a
Series shall be appropriately reflected (in the manner determined by the
Trustees) in the net asset value, dividend and liquidation rights of the Shares
of such class of a Series. The division of the Shares of a Series into classes
and the terms and conditions pursuant to which the Shares of the classes of a
Series will be issued must be made in compliance with the 1940 Act. No division
of Shares of a Series into classes shall result in the creation of a class of
Shares having a preference as to dividends or distributions or a preference in
the event of any liquidation, termination or winding up of the Trust. The
Trustees may provide that Shares of a class will be exchanged for Shares of
another class without any act or deed on the part of the holder of Shares of the
class being exchanged, whether or not Shares of such class are issued and
outstanding, all on terms and conditions as the Trustees may specify. The
Trustees may redesignate a class or Series of Shares of beneficial interest or a
portion of a class or Series of Shares of beneficial interest whether or not
shares of such class or Series are issued and outstanding, provided that such
redesignation does not substantially adversely affect the preference, conversion
or other rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms or conditions of redemption of such issued and
outstanding Shares of beneficial interest.
If the Trustees shall divide the Shares into two or more Series, the
following provisions shall be applicable:
(a) The number of Shares of each Series and of each class of a Series that
may be issued shall be unlimited. The Trustees may classify or reclassify any
unissued Shares or any Shares previously issued and reacquired of any Series
into one or more Series that may be established and designated from time to
time. The Trustees may hold as treasury Shares (of the same or some other
Series), reissue for such consideration and on such terms as they may determine,
or cancel any Shares of any Series reacquired by the Trust at their discretion
from time to time.
(b) The power of the Trustees to invest and reinvest the Trust Property of
each Series that may be established shall be governed by Section 3.2 of this
Declaration.
(c) All consideration received by the Trust for the issue or sale of Shares
of a particular Series, together with all assets in which such consideration is
invested or
3
<PAGE>
reinvested, all income, earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of such assets, and any
funds or payments derived from any reinvestment of such proceeds in whatever
form the same may be, shall irrevocably belong to that Series for all purposes,
subject only to the rights of creditors, and shall be so recorded upon the books
of account of the Trust. In the event that there are any assets, income,
earnings, profits, and proceeds thereof, funds, or payments which are not
readily identifiable as belonging to any particular Series, the Trustees shall
allocate them among any one or more of the Series established and designated
from time to time in such manner and on such basis as they, in their sole
discretion, deem fair and equitable. Each such allocation by the Trustees shall
be conclusive and binding upon the Shareholders of all Series for all purposes.
(d) The assets belonging to each particular Series shall be charged with
the liabilities of the Trust in respect of that Series only and all expenses,
costs, charges and reserves attributable to that Series and shall not be charged
with the liabilities, expenses, costs, charges and reserves attributable to
other Series, and any general liabilities, expenses, costs, charges or reserves
of the Trust which are not readily identifiable as belonging to any particular
Series shall be allocated and charged by the Trustees to and among any one or
more of the Series established and designated from time to time in such manner
and on such basis as the Trustees in their sole discretion deem fair and
equitable. Each allocation of liabilities, expenses, costs, charges and
reserves by the Trustees shall be conclusive and binding upon the Shareholders
of all Series for all purposes. The Trustees shall have full discretion, to the
extent not inconsistent with the 1940 Act, to determine which items shall be
treated as income and which items as capital; and each such determination and
allocation shall be conclusive and binding upon the Shareholders.
(e) The power of the Trustees to pay dividends and make distributions with
respect to any one or more Series shall be governed by Section 9.2 of this
Declaration. Dividends and distributions on Shares of a particular Series may be
paid with such frequency as the Trustees may determine, to the holders of Shares
of that Series, from such of the income and capital gains, accrued or realized,
from the assets belonging to that Series, as the Trustees may determine, after
providing for actual and accrued liabilities belonging to that Series. All
dividends and distributions on Shares of a particular Series shall be
distributed pro rata to the holders of that Series in proportion to the number
of Shares of that Series held by such holders at the date and time of record
established for the payment of such dividends or distributions, except that such
dividends and distributions shall appropriately reflect expenses related
directly or indirectly to the distribution of Shares of a class of such Series.
The establishment and designation of any Series of Shares shall be
effective upon the execution by a majority of the then Trustees of an instrument
setting forth the establishment and designation of such Series. Such instrument
shall also set forth any rights and preferences of such Series which are in
addition to the rights and preferences of Shares set forth in this Declaration.
At any time that there are no Shares outstanding of any particular Series
previously established and designated, the Trustees may by an instrument
executed by
4
<PAGE>
a majority of their number abolish that Series and the establishment and
designation thereof. Each instrument referred to in this paragraph shall have
the status of an amendment to this Declaration.
VOTED: That Section 6.3 of Article VI of the Declaration of Trust be, and it
hereby is, amended in its entirety to read as follows:
6.3. Rights of Shareholders. The ownership of the Trust Property of every
----------------------
description and the right to conduct any business hereinbefore described are
vested exclusively in the Trustees, and the Shareholders shall have no interest
therein other than the beneficial interest conferred by their Shares with
respect to a particular Series, and they shall have no right to call for any
partition or division of any property, profits, rights or interests of the Trust
nor can they be called upon to share or assume any losses of the Trust or suffer
an assessment of any kind by virtue of their ownership of Shares. The Shares
shall be personal property giving only the rights in this Declaration
specifically set forth. The Shares shall not entitle the holder to preference,
preemptive, appraisal, conversion or exchange rights (except for rights of
appraisal specified in Section 11.4 and except as may be specified by the
Trustees in connection with the division of shares into classes or the
redesignation of classes or portions of classes in accordance with Section 6.2).
VOTED: That Sections 9.1, 9.2 and 9.4 of Article IX of the Declaration of
Trust be, and they hereby are, amended in their entirety to read as
follows:
9.1. Net Asset Value. The net asset value of each outstanding Share of
---------------
each Series of the Trust shall be determined at such time or times on such days
as the Trustees may determine, in accordance with the 1940 Act, with respect to
each Series. The method of determination of net asset value of Shares of each
class of a Series shall be determined by the Trustees and shall be as set forth
in the Prospectus with respect to the applicable Series with any expenses being
borne solely by a class of Shares being reflected in the net asset value of such
Shares. The power and duty to make the daily calculations for any Series may be
delegated by the Trustees to the adviser, administrator, manager, custodian,
transfer agent or such other person as the Trustees may determine. The Trustees
may suspend the daily determination of net asset value to the extent permitted
by the 1940 Act.
9.2. Distributions to Shareholders. The Trustees shall from time to time
-----------------------------
distribute ratably among the Shareholders of any Series such proportion of the
net profits, surplus (including paid-in-surplus), capital, or assets with
respect to such Series held by the Trustees as they deem proper with any
expenses being borne solely by a class of Shares of any Series being reflected
in the net profits or other assets being distributed to such class. Such
distribution may be made in cash or property (including without limitation any
type of obligations of the Trust or any assets thereof), and the Trustees may
distribute ratably among the Shareholders of any Series additional Shares of
such Series issuable hereunder in such manner, at such times, and on such terms
as the Trustees may deem proper. Such distributions may be among the
Shareholders of record at the time of declaring a distribution
5
<PAGE>
or among the Shareholders of record at such later date as the Trustees shall
determine. The Trustees may always retain from the net profits such amount as
they may deem necessary to pay the debts or expenses of the Trust or to meet
obligations of the Trust, or as they deem desirable to use in the conduct of its
affairs or to retain for future requirements or extensions of the business. The
Trustees may adopt and offer to Shareholders of any Series such dividend
reinvestment plans, cash dividend payout plans or related plans as the Trustees
shall deem appropriate for such Series.
Inasmuch as the computation of net income and gains for Federal income tax
purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust to avoid or reduce liability for taxes.
9.4. Power to Modify Foregoing Procedures. Notwithstanding any of the
------------------------------------
foregoing provisions of this Article IX, the Trustees may prescribe, in their
absolute discretion, such other bases and times for determining the per share
net asset value of the Trust's shares or net income, or the declaration and
payment of dividends and distributions as they deem necessary or desirable or to
enable the Trust to comply with any provision of the 1940 Act, including any
rule or regulation adopted pursuant to Section 22 of the 1940 Act by the
Commission or any securities association registered under the Securities
Exchange Act of 1934, all as in effect now or hereafter amended or modified.
VOTED: That Sections 10.1 and 10.2 of Article X of the Declaration of Trust
be, and they hereby are, amended in their entirety to read as follows:
10.1. Voting Powers. The Shareholders shall have power to vote (i) for
-------------
the removal of Trustees as provided in Section 2.3; (ii) with respect to any
advisory or management contract of a Series as provided in Section 4.1; (iii)
with respect to the amendment of this Declaration as provided in Section 11.3;
(iv) with respect to such additional matters relating to the Trust as may be
required or authorized by the 1940 Act, the laws of the Commonwealth of
Massachusetts or other applicable law or by this Declaration or the By-Laws of
the Trust; and (v) with respect to such additional matters relating to the Trust
as may be properly submitted for Shareholder approval. If the Shares of a
Series shall be divided into classes as provided in Article VI hereof, the
Shares of each class shall have identical voting rights except that the
Trustees, in their discretion, may provide a class of a Series with exclusive
voting rights with respect to matters related to expenses being borne solely by
such class whether or not Shares of such class are issued and outstanding.
10.2. Meetings of Shareholders. Special meetings of the Shareholders may
------------------------
be called at any time by a majority of the Trustees and shall be called by any
Trustee upon written request of Shareholders of any Series holding in the
aggregate not less than 10% of the outstanding Shares of such Series having
voting rights, such request specifying the purpose or purposes for which such
meeting is to be called. Any such meeting shall be held within
6
<PAGE>
or without the Commonwealth of Massachusetts on such day and at such time as the
Trustees shall designate. The holders of one-third of the outstanding Shares of
each Series present in person or by proxy shall constitute a quorum for the
transaction of any business, except as may otherwise be required by the 1940
Act, the laws of the Commonwealth of Massachusetts or other applicable law or by
this Declaration or the By-Laws of the Trust. If a quorum is present at a
meeting of a particular Series, the affirmative vote of a majority of the Shares
of each Series represented at the meeting constitutes the action of the
Shareholders, unless the 1940 Act, the laws of the Commonwealth of Massachusetts
or other applicable law, the Declaration or by the By-Laws of the Trust requires
a greater number of affirmative votes. If the Shares of any Series shall be
divided into classes with a class having exclusive voting rights with respect to
certain matters, the aforesaid quorum and voting requirements with respect to
action to be taken by the Shareholders of the class of such Series on such
matters shall be applicable only to the Shares of such class.
VOTED: That Section 11.2 of Article XI of the Declaration be, and it hereby
is, amended in its entirety to read as follows:
11.2. Termination.
-----------
(a) The Trust may be terminated by the affirmative vote of the holders of
not less than two-thirds of the Shares of each Series of the Trust at any
meeting of Shareholders or by an instrument in writing, without a meeting,
signed by a majority of the Trustees and consented to by the holders of not less
than two-thirds of such Shares. Any Series may be so terminated by vote or
written consent of not less than two-thirds of the Shares of such Series. Upon
the termination of the Trust or any Series,
(i) The Trust or such Series shall carry on no business except for
the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the Trust
or such Series and all of the powers of the Trustees under this
Declaration shall continue until the affairs of the Trust or such
Series shall have been wound up, including the power to fulfill or
discharge the contracts of the Trust or such Series, collect its
assets, sell, convey, assign, exchange, transfer or otherwise dispose
of all or part of the remaining Trust Property to one or more persons
at public or private sale for consideration which may consist in whole
or in part of cash, securities or other property of any kind,
discharge or pay its liabilities, and do all other acts appropriate to
liquidate its business; provided that any sale, conveyance,
assignment, exchange, transfer or other disposition of all or
substantially all the Trust Property shall require approval of the
principal terms of the transaction and the nature and amount of the
consideration by vote or consent of the holders of a majority of the
Shares entitled to vote.
7
<PAGE>
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and
refunding agreements, as they deem necessary for their protection, the
Trustees may distribute the remaining Trust Property of any Series, in
cash or in kind or partly each, among the Shareholders of such Series
and each class of such Series, according to their respective rights
taking into account the proper allocation of expenses being borne
solely by any Series or any class of Shares of a Series.
(b) After termination of the Trust or a Series and distribution to the
Shareholders as herein provided, a majority of the Trustees shall execute and
lodge among the records of the Trust an instrument in writing setting forth the
fact of such termination. Upon termination of the Trust, the Trustees shall
thereupon be discharged from all further liabilities and duties hereunder, and
the rights and interests of all Shareholders shall thereupon cease. Upon
termination of any Series, the Trustees shall thereupon be discharged from all
further liabilities and duties with respect to such Series, and the rights and
interests of all Shareholders of such Series shall thereupon cease.
8
<PAGE>
IN WITNESS WHEREOF, the undersigned, constituting a majority of the
Trustees of the Trust, have signed this certificate in duplicate original
counterparts and have caused a duplicate original to be lodged among the records
of the Trust as required by Article XI, Section 11.3(c) of the Declaration of
Trust, as of the ___ day of____________, _______.
- ----------------------------- ---------------------------------------
Joe Grills Melvin R. Seiden
P.O. Box 98 780 Third Avenue
Rapidan, Virginia 22733 New York, New York 10017
- ----------------------------- ---------------------------------------
Walter Mintz Stephen B. Swensrud
1114 Avenue of the Americas 24 Federal Street
New York, New York 10036 Boston, Massachusetts 02110
- ----------------------------- ---------------------------------------
Robert S. Salomon, Jr. Arthur Zeikel
106 Dolphin Cove Quay 800 Scudders Mill Road
Stamford, Connecticut 06902 Plainsboro, New Jersey 08536
The Declaration of Trust establishing Merrill Lynch Retirement Series
Trust, dated July 15, 1986, a copy of which, together with all amendments
thereto (the "Declaration"), is on file in the office of the Secretary of the
Commonwealth of Massachusetts, provides that the name "Merrill Lynch Retirement
Series Trust" refers to the Trustees under the Declaration collectively as
Trustees, but not as individuals or personally; and no Trustee, shareholder,
officer, employee or agent of Merrill Lynch Retirement Series Trust shall be
held to any personal liability, nor shall resort be had to their private
property for the satisfaction of any obligation or claim or otherwise in
connection with the affairs of said Trust but the Trust Property only shall be
liable.
9
<PAGE>
EXHIBIT 99.1(d)
MERRILL LYNCH RETIREMENT SERIES TRUST
Establishment and Designation
of
Class A Shares and Class B Shares of
Beneficial Interest of the Series
Designated Merrill Lynch Retirement Reserves Money Fund of the Trust
The undersigned, being a majority of the Trustees of Merrill Lynch
Retirement Series Trust, a Massachusetts business trust (the "Trust"), acting
pursuant to Section 6.2 of the Declaration of Trust, as amended, dated July 15,
1986 (the "Declaration") of the Trust, do hereby divide the shares of beneficial
interest of the Series designated "Merrill Lynch Retirement Reserves Money Fund"
(the "Fund") of the Trust, par value $.10 per share ("Shares"), to create two
classes of Shares, within the meaning of said Section 6.2 as follows:
1. The two classes of Shares are designated "Class A Shares" and "Class B
Shares".
2. Class A Shares and Class B Shares shall be entitled to all of the
rights and preferences accorded to Shares under the Declaration.
3. The purchase price of Class A Shares and Class B Shares, the method of
determination of net asset value of Class A Shares and Class B Shares,
the price, terms and manner of redemption of Class A Shares and Class
B Shares, and the relative dividend rights of holders of Class A
Shares and Class B Shares shall be established by the Trustees of the
Trust in accordance with the provisions of the Declaration and shall
be set forth in the currently effective prospectus and statement of
additional information of the Trust relating to the Fund, as amended
from time to time, under the Securities Act of 1933, as amended.
4. All Shares issued prior to the filing of this instrument with the
Commonwealth of Massachusetts shall be deemed Class A Shares.
<PAGE>
IN WITNESS WHEREOF, the undersigned, have signed this instrument in
duplicate original counterparts and have caused a duplicate original to be
lodged among the records of the Trust this ___ day of , .
- ---------------------------- ---------------------------------------
Joe Grills Melvin R. Seiden
P.O. Box 98 780 Third Avenue
Rapidan, Virginia 22733 New York, New York 10017
- ---------------------------- ---------------------------------------
Walter Mintz Stephen B. Swensrud
1114 Avenue of the Americas 24 Federal Street
New York, New York 10036 Boston, Massachusetts 02110
- ---------------------------- ---------------------------------------
Robert S. Salomon, Jr. Arthur Zeikel
106 Dolphin Cove Quay 800 Scudders Mill Road
Stamford, Connecticut 06902 Plainsboro, New Jersey 08536
The Declaration of Trust establishing Merrill Lynch Retirement Series
Trust, dated July 15, 1986, a copy of which, together with all amendments
thereto (the "Declaration"), is on file in the office of the Secretary of the
Commonwealth of Massachusetts, provides that the name "Merrill Lynch Retirement
Series Trust" refers to the Trustees under the Declaration collectively as
Trustees, but not as individuals or personally; and no Trustee, shareholder,
officer, employee or agent of Merrill Lynch Retirement Series Trust shall be
held to any personal liability, nor shall resort be had to their private
property for the satisfaction of any obligation or claim or otherwise in
connection with the affairs of said Trust but the Trust Property only shall be
liable.
2
<PAGE>
EXHIBIT 99.6(b)
CLASS B SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the day of , between Merrill
Lynch Retirement Series Trust, a business trust organized under the laws of
Massachusetts (the "Trust"), and MERRILL LYNCH FUNDS DISTRIBUTOR, INC., a
Delaware corporation (the "Distributor").
W I T N E S S E T H :
-------------------
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), as an open-end investment company,
and it is affirmatively in the interest of the Trust to offer its shares for
sale continuously; and
WHEREAS, the Trust is authorized to establish separate series ("Series"),
each of which will offer separate classes of shares of beneficial interest, par
value $.10 per share (collectively referred to as "shares"), to selected groups
of purchasers; and
WHEREAS, the Trustees of the Trust (the "Trustees") have established and
designated the Merrill Lynch Retirement Reserves Money Fund (the "Fund") as a
series of the Trust; and
<PAGE>
WHEREAS, the Distributor is a securities firm engaged in the business of
selling shares of investment companies either directly to purchasers or through
other securities dealers; and
WHEREAS, the Trust and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the Class B shares of the
Fund in order to promote the growth of the Fund and facilitate the distribution
of its Class B shares.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Trust hereby appoints the
------------------------------
Distributor as the principal underwriter and distributor of the Trust to sell
Class B shares of beneficial interest in the Fund (sometimes herein referred to
as "Class B shares") to the selected groups of investors specified as eligible
investors in the currently effective prospectus and statement of additional
information of the Fund (the "prospectus" and "statement of additional
information", respectively) under the Securities Act of 1933, as amended (the
"Securities Act") relating to such Class B shares and the Distributor hereby
accepts such appointment. The Trust during the term of this Agreement shall
sell Class B shares of the Fund to the Distributor upon the terms and conditions
herein set forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the
--------------------------
exclusive representative of the Trust to act as
2
<PAGE>
principal underwriter and distributor of the Class B shares, except that:
(a) The exclusive right granted to the Distributor to purchase Class B
shares from the Fund shall not apply to Class B shares of the Fund issued in
connection with the merger or consolidation of any other investment company or
personal holding company with the Trust or the acquisition by purchase or
otherwise of all (or substantially all) the assets or the outstanding Class B
shares of any such company by the Trust.
(b) Such exclusive right also shall not apply to Class B shares issued
pursuant to reinvestment of dividends or capital gains distributions.
(c) Such exclusive right also shall not apply to Class B shares issued
pursuant to any conversion, exchange or reinstatement privilege afforded
redeeming shareholders or to any other Class B shares as shall be agreed between
the Trust and the Distributor from time to time.
Section 3. Purchase of Class B Shares from the Trust.
-----------------------------------------
(a) The Distributor shall have the right to buy from the Trust the Class B
shares needed, but not more than the Class B shares needed (except for clerical
errors in transmission) to fill unconditional orders for Class B shares of the
Fund placed with the Distributor by eligible investors or securities dealers.
The price which the Distributor shall pay for the Class B shares
3
<PAGE>
so purchased from the Trust shall be the net asset value, determined as set
forth in Section 3(c) hereof.
(b) The Class B shares are to be resold by the Distributor to investors at
net asset value, as set forth in Section 3(c) hereof, or to securities dealers
having agreements with the Distributor upon the terms and conditions set forth
in Section 7 hereof.
(c) The net asset value of Class B shares of the Fund shall be determined
by the Trust or any agent of the Trust in accordance with the method set forth
in the prospectus and statement of additional information (the "Prospectus" and
"Statement of Additional Information", respectively) and guidelines established
by the Trustees.
(d) The Trust shall have the right to suspend the sale of Class B shares
of the Fund at times when redemption is suspended pursuant to the conditions set
forth in Section 4(b) hereof. The Trust also shall have the right to suspend
the sale of Class B shares of the Fund if trading on the New York Stock Exchange
shall have been suspended, if a banking moratorium shall have been declared by
Federal or New York authorities, or if there shall have been some other event,
which, in the judgment of the Trust, makes it impracticable or inadvisable to
sell the Class B shares.
(e) The Trust, or any agent of the Trust designated in writing by the
Trust, shall be promptly advised of all purchase
4
<PAGE>
orders for Class B shares received by the Distributor. Any order may be
rejected by the Trust; provided, however, that the Trust will not arbitrarily or
without reasonable cause refuse to accept or confirm orders for the purchase of
Class B shares. The Trust (or its agent) will confirm orders upon their
receipt, will make appropriate book entries and, upon receipt by the Trust (or
its agent) of payment therefor, will deliver deposit receipts or certificates
for such Class B shares pursuant to the instructions of the Distributor.
Purchase orders are effective when Federal Funds become available to the Trust.
The Distributor agrees to cause such payment and such instructions to be
delivered promptly to the Trust (or its agent).
Section 4. Repurchase or Redemption of Class B Shares by the Trust.
-------------------------------------------------------
(a) Any of the outstanding Class B shares may be tendered for redemption
at any time, and the Trust agrees to repurchase or redeem the Class B shares so
tendered in accordance with its obligations set forth in its Declaration of
Trust, as amended from time to time, and in accordance with the applicable
provisions set forth in the Prospectus and Statement of Additional Information
of the Fund. The price to be paid to redeem or repurchase the Class B shares
shall be equal to the net asset value calculated in accordance with the
provisions of Section 3(c) hereof, less any contingent deferred sales charge,
redemption fee or other charge(s), if any, set forth in the
5
<PAGE>
Prospectus and Statement of Additional Information of the Fund. All payments by
the Trust hereunder shall be made in the manner set forth below.
The Trust shall pay the total amount of the redemption price as defined in
the above paragraph pursuant to the instructions of the Distributor to or for
the account of the shareholder, in each case in accordance with the applicable
provisions of the prospectus and statement of additional information.
(b) The Fund reserves the right to reject any order for repurchase through
a securities dealer. Redemption of Class B shares or payment may be suspended
at times when the New York Stock Exchange is closed, when trading on said
Exchange is suspended, when trading on said Exchange is restricted, when an
emergency exists as a result of which disposal by the Fund of securities owned
by it is not reasonably practicable or it is not reasonably practicable for the
Trust fairly to determine the value of its net assets, or during any other
period when the Securities and Exchange Commission, by order, so permits.
Section 5. Duties of the Trust.
-------------------
(a) The Trust shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Class B shares of the
Fund, and this shall include, upon request by the Distributor, one certified
copy of all financial statements prepared for the Fund by independent
6
<PAGE>
public accountants. The Trust shall make available to the Distributor such
number of copies of the prospectus and statement of additional information as
the Distributor shall reasonably request.
(b) The Trust shall take, from time to time, but subject to any necessary
approval of the shareholders, all necessary action to fix the number of
authorized shares and such steps as may be necessary to register the same under
the Securities Act to the end that there will be available for sale such number
of Class B shares as the Distributor reasonably may be expected to sell.
(c) The Trust shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Class B shares for sale under the
securities laws of such states as the Distributor and the Trust may approve.
Any such qualification may be withheld, terminated or withdrawn by the Trust at
any time in its discretion. As provided in Section 8(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Trust. The
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Trust in connection with such
qualification.
(d) The Trust will furnish, in reasonable quantities upon request by the
Distributor, copies of annual and interim reports of the Fund.
Section 6. Duties of the Distributor.
-------------------------
7
<PAGE>
(a) The Distributor shall devote reasonable time and effort to effect
sales of Class B shares of the Fund but shall not be obligated to sell any
specific number of shares. The services of the Distributor to the Trust
hereunder are not to be deemed exclusive and nothing herein contained shall
prevent the Distributor from entering into like arrangements with other
investment companies so long as the performance of its obligations hereunder is
not impaired thereby.
(b) In selling the Class B shares of the Fund, the Distributor shall use
its best efforts in all respects duly to conform with the requirements of all
Federal and state laws relating to the sale of such securities. Neither the
Distributor nor any selected dealer, as defined in Section 7 hereof, nor any
other person is authorized by the Fund to give any information or to make any
representations, other than those contained in the registration statement or
related prospectus and statement of additional information and any sales
literature specifically approved by the Trust.
(c) The Distributor shall adopt and follow procedures, as approved by the
officers of the Trust, for the confirmation of sales to investors and selected
dealers, the collection of amounts payable by investors and selected dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the NASD Regulation,
8
<PAGE>
Inc. (the "NASD"), as such requirements may from time to time exist.
Section 7. Selected Dealer Agreements.
--------------------------
(a) The Distributor shall have the right to enter into selected dealer
agreements with securities dealers of its choice ("selected dealers") for the
sale of Class B shares; provided, however, that the Trust shall approve the form
of agreements with dealers. Class B shares sold to selected dealers shall be
for resale by such dealers only in accordance with the provisions of the
Prospectus and Statement of Additional Information. The form of agreement with
selected dealers to be used during the continuous offering of the shares is
attached hereto as Exhibit A.
(b) Within the United States, the Distributor shall offer and sell Class B
shares only to such selected dealers that are members in good standing of the
NASD.
Section 8. Payment of Expenses.
-------------------
(a) The Fund shall bear all costs and expenses of the Fund, including fees
and disbursements of its counsel and auditors, in connection with the
preparation and filing of any required registration statements and/or
prospectuses and statements of additional information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto, and
the expense of preparing, printing, mailing and otherwise distributing
prospectuses, statements of additional information,
9
<PAGE>
annual or interim reports or proxy materials to Class B shareholders).
(b) After the prospectuses, statements of additional information and
annual and interim reports have been prepared, set in type and mailed to Class B
shareholders, the Distributor shall bear the costs and expenses of printing and
distributing any copies thereof which are to be used in connection with the
offering of Class B shares. The Distributor (or its affiliate, Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), pursuant to the Fund's
Class B Distribution Plan and Agreement with Merrill Lynch) shall bear the costs
and expenses of preparing, printing and distributing any supplementary sales
literature used by the Distributor in connection with the offering of the Class
B shares for sale to the public. Any expenses of advertising incurred in
connection with such offering will also be the obligation of the Distributor (or
Merrill Lynch).
(c) The Trust shall bear the cost and expenses of qualification of the
Class B shares for sale pursuant to this Agreement and, if necessary or
advisable in connection therewith, of qualifying the Fund as a broker or dealer
in such states of the United States or other jurisdictions as shall be selected
by the Trust and the Distributor pursuant to Section 5(c) hereof and the cost
and expenses payable to each such state for continuing
10
<PAGE>
qualification therein until the Trust decides to discontinue such qualification
pursuant to Section 5(c) hereof.
Section 9. Indemnification.
---------------
(a) The Trust shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith), as incurred, arising by reason of any
person acquiring any Class B shares, which may be based upon the Securities Act,
or on any other statute or at common law, on the ground that the registration
statement or related prospectus and statement of additional information, as from
time to time amended and supplemented, or an annual or interim report to Class B
shareholders of the Trust, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Trust in connection therewith by or on behalf of the
Distributor; provided, however, that in no case (i) is the indemnity of the
Trust in favor of the Distributor and any such controlling persons to be deemed
to protect such Distributor or any such controlling persons thereof against any
liability to the Trust or its security holders to which the
11
<PAGE>
Distributor or any such controlling persons would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of
their duties or by reason of the reckless disregard of their obligations and
duties under this Agreement; or (ii) is the Trust to be liable under its
indemnity agreement contained in this paragraph with respect to any claim made
against the Distributor or any such controlling persons, unless the Distributor
or such controlling persons, as the case may be, shall have notified the Trust
in writing within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been served
upon the Distributor or such controlling persons (or after the Distributor or
such controlling persons shall have received notice of such service on any
designated agent), but failure to notify the Trust of any such claim shall not
relieve it from any liability which it may have to the person against whom such
action is brought otherwise than on account of its indemnity agreement contained
in this paragraph. The Trust will be entitled to participate at its own expense
in the defense or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Fund elects to assume the defense, such
defense shall be conducted by counsel chosen by it and satisfactory to the
Distributor or such controlling person or persons, defendant or defendants in
the suit. In the event the Trust elects to assume the defense of any such suit
and retain
12
<PAGE>
such counsel, the Distributor or such controlling person or persons, defendant
or defendants in the suit shall bear the fees and expenses, as incurred, of any
additional counsel retained by them, but in case the Trust does not elect to
assume the defense of any such suit, it will reimburse the Distributor or such
controlling person or persons, defendant or defendants in the suit, for the
reasonable fees and expenses, as incurred, of any counsel retained by them. The
Trust shall promptly notify the Distributor of the commencement of any
litigation or proceedings against it or any of its officers or Trustees in
connection with the issuance or sale of any of the Class B shares.
(b) The Distributor shall indemnify and hold harmless the Trust and each
of its Trustees and officers and each person, if any, who controls the Trust
against any loss, liability, claim, damage or expense, as incurred, described in
the foregoing indemnity contained in subsection (a) of this Section, but only
with respect to statements or omissions made in reliance upon, and in conformity
with, information furnished to the Trust in writing by or on behalf of the
Distributor for use in connection with the registration statement or related
prospectus and statement of additional information, as from time to time
amended, or the annual or interim reports to shareholders. In case any action
shall be brought against the Trust or any person so indemnified, in respect of
which indemnity may be sought against the Distributor, the Distributor shall
have the rights
13
<PAGE>
and duties given to the Trust, and the Trust and each person so indemnified
shall have the rights and duties given to the Distributor by the provisions of
subsection (a) of this Section 9.
Section 10. Merrill Lynch Mutual Fund Adviser Program. In connection with
-----------------------------------------
the Merrill Lynch Mutual Fund Adviser Program, the Distributor and its
affiliate, Merrill Lynch are authorized, to the extent permissible, to offer and
sell shares of the Fund, as agent for the Trust, to participants in such
program. The terms of this Agreement shall apply to such sales, including terms
as to the offering price of shares, the proceeds to be paid to the Fund, the
duties of the Distributor, the payment of expenses and indemnification
obligations of the Trust and the Distributor.
Section 11. Duration and Termination of this Agreement. This Agreement
------------------------------------------
shall become effective as of the date first above written and shall remain in
force until November 30, 1999 and thereafter, but only for so long as such
continuance is specifically approved at least annually by (i) the Trustees or by
the vote of a majority of the outstanding voting securities of the Fund and (ii)
by the vote of a majority of those Trustees who are not parties to this
Agreement or interested persons of any such party cast in person at a meeting
called for the purpose of voting on such approval.
14
<PAGE>
This Agreement may be terminated at any time, without the payment of any
penalty, by the Trustees or by vote of a majority of the outstanding voting
securities of the Fund, or by the Distributor, on sixty days' written notice to
the other party. This Agreement shall automatically terminate in the event of
its assignment.
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 12. Amendments of this Agreement. This Agreement may be amended
----------------------------
by the parties only if such amendment is specifically approved by (i) the
Trustees or by the vote of a majority of outstanding voting securities of the
Fund and (ii) by the vote of a majority of those Trustees of the Trust who are
not parties to this Agreement or interested persons of any such party cast in
person at a meeting called for the purpose of voting on such approval.
Section 13. Governing Law. The provisions of this Agreement shall be
-------------
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment Company
Act. To the extent that the applicable law of the State of New York, or any of
the provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
15
<PAGE>
Section 14. Personal Liability. The Declaration of Trust establishing
------------------
Merrill Lynch Retirement Series Trust, dated July 15, 1986, a copy of which,
together with all amendments thereto (the "Declaration"), is on file in the
office of the Secretary of the Commonwealth of Massachusetts, provides that the
name "Merrill Lynch Retirement Series Trust" refers to the Trustees under the
Declaration collectively as Trustees, but not as individuals or personally; and
no Trustee, shareholder, officer, employee or agent of Merrill Lynch Retirement
Series Trust, shall be held to any personal liability, nor shall resort be had
to their private property for the satisfaction of any obligation or claim or
otherwise in connection with the affairs of said Merrill Lynch Retirement Series
Trust, but the Trust Estate only shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MERRILL LYNCH RETIREMENT SERIES TRUST
By ____________________________________
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By ____________________________________
Title:
16
<PAGE>
EXHIBIT A
MERRILL LYNCH RETIREMENT SERIES TRUST
CLASS B SHARES OF BENEFICIAL INTEREST
SELECTED DEALER AGREEMENT
-------------------------
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement
with Merrill Lynch Retirement Series Trust, a business trust organized under the
laws of Massachusetts (the "Trust"), pursuant to which it acts as the
distributor for the sale of Class B shares of beneficial interest, par value
$0.10 per share (herein referred to as the "Class B shares"), of the Merrill
Lynch Retirement Reserves Money Fund (the "Fund") and as such has the right to
distribute Class B shares of the Fund for resale. The Trust is an open-end
investment company registered under the Investment Company Act of 1940, as
amended, and the Class B shares of the Fund being offered to the public are
registered under the Securities Act of 1933, as amended. You have received a
copy of the Class B Shares Distribution Agreement (the "Distribution Agreement")
between ourselves and the Trust and reference is made herein to certain
provisions of such Distribution Agreement. The terms "Prospectus" and
"Statement of Additional Information" as used herein refer to the prospectus and
statement of additional information, respectively, on file with the Securities
and Exchange Commission which is part of the most recent effective registration
statement pursuant to the Securities Act of 1933, as amended. As principal, we
offer to sell to you, as a selected dealer, Class B shares of the Fund upon the
following terms and conditions:
1. In all sales of these Class B shares to the public, you shall act as
dealer for your own account and in no transaction shall you have any authority
to act as agent for the Trust, or for us, except in connection with the Merrill
Lynch Mutual Fund Adviser program and such other special programs as we from
time to time agree, in which case you shall have authority to offer and sell
shares, as agent for the Fund, to participants in such program.
2. Shares may be offered by you only as described in the Prospectus.
Orders received from you will be accepted through us only at the public offering
price applicable to each order, as set forth in the current Prospectus and
Statement of Additional Information. The procedure relating to the handling of
orders shall be subject to Section 4 hereof and instructions which we or
<PAGE>
the Trust shall forward from time to time to you. All orders are subject to
acceptance or rejection by the Distributor or the Fund in the sole discretion of
either. The minimum initial and subsequent purchase requirements are as set
forth in the current Prospectus and Statement of Additional Information.
3. You shall not place orders for any Class B shares unless you have
already received purchase orders for such Class B shares at the applicable
public offering prices and subject to the terms hereof and of the Distribution
Agreement. You agree that you will not offer or sell any of the Class B shares
except under circumstances that will result in compliance with the applicable
Federal and state securities laws and that in connection with sales and offers
to sell Class B shares you will furnish to each person to whom any such sale or
offer is made a copy of the Prospectus and, if requested, the Statement of
Additional Information (as then amended or supplemented) and will not furnish to
any person any information relating to the Class B shares of the Fund which is
inconsistent in any respect with the information contained in the Prospectus and
Statement of Additional Information (as then amended or supplemented) or cause
any advertisement to be published in any newspaper or posted in any public place
without our consent and the consent of the Trust.
4. As a selected dealer, you are hereby authorized (i) to place orders
directly with the Fund for Class B shares of the Fund to be resold by us to you
subject to the applicable terms and conditions governing the placement of orders
by us set forth in Section 3 of the Class B shares Distribution Agreement and
(ii) to tender Class B shares directly to the Fund or its agent for redemption
subject to the applicable terms and conditions set forth in Section 4 of the
Distribution Agreement.
5. You shall not withhold placing orders received from your customers so
as to profit yourself as a result of such withholding: e.g., by a change in the
- -
"net asset value" from that used in determining the offering price to your
customers.
6. No person is authorized to make any representations concerning Class B
shares of the Fund except those contained in the current Prospectus and
Statement of Additional Information of the Fund and in such printed information
subsequently issued by us or the Fund as information supplemental to such
Prospectus and Statement of Additional Information. In purchasing Class B
shares through us you shall rely solely on the representations contained in the
Prospectus and Statement of Additional Information and supplemental information
above mentioned. Any printed information which we furnish you other than the
Fund's Prospectus, Statement of Additional Information, periodic reports
A-2
<PAGE>
and proxy solicitation material is our sole responsibility and not the
responsibility of the Trust, and you agree that the Trust shall have no
liability or responsibility to you in these respects unless expressly assumed in
connection therewith.
7. You agree to deliver to each of the purchasers making purchases from
you a copy of the then current Prospectus and, if requested, the Statement of
Additional Information at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain proxies from such purchasers. Additional copies of the
Prospectus and Statement of Additional Information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.
8. We reserve the right in our discretion, without notice, to suspend
sales or withdraw the offering of Class B shares entirely or to certain persons
or entities in a class or classes specified by us. Each party hereto has the
right to cancel this Agreement upon notice to the other party.
9. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the continuous offering. We
shall be under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this paragraph
is intended to operate as, and the provisions of this paragraph shall not in any
way whatsoever constitute, a waiver by you of compliance with any provision of
the Securities Act of 1933, as amended, or of the rules and regulations of the
Securities and Exchange Commission issued thereunder.
10. You represent that you are a member of the NASD Regulation, Inc. and,
with respect to any sales in the United States, we both hereby agree to abide by
the Conduct Rules of such Association.
11. Upon application to us, we will inform you as to the states in which
we believe the Class B shares have been qualified for sale under, or are exempt
from the requirements of, the respective securities laws of such states, but we
assume no responsibility or obligation as to your right to sell Class B shares
in any jurisdiction. We will file with the Department of State in New York a
Further State Notice with respect to the Class B shares, if necessary.
A-3
<PAGE>
12. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
13. Your first order placed pursuant to this Agreement for the purchase of
Class B shares of the Fund will represent your acceptance of this Agreement.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By _________________________________
(Authorized Signature)
Please return one signed copy
of this Agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9081
Princeton, New Jersey 08543-9081
Accepted:
Firm Name: _________________________________________________
By: ________________________________________________________
Address: ___________________________________________________
____________________________________________________________
Date: ______________________________________________________
A-4
<PAGE>
EXHIBIT 99.11
INDEPENDENT AUDITORS' CONSENT
Merrill Lynch Retirement Reserves Money Fund of
Merrill Lynch Retirement Series Trust:
We consent to the use in Post-Effective Amendment No. 18 to Registration
Statement No. 2-74584 of our report dated December 3, 1997 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
December 30, 1997
<PAGE>
EXHIBIT 99.15
CLASS B SHARES DISTRIBUTION PLAN AND AGREEMENT
OF
MERRILL LYNCH RETIREMENT RESERVES MONEY FUND
OF
MERRILL LYNCH RETIREMENT SERIES TRUST
PURSUANT TO RULE 12b-1
CLASS B SHARES DISTRIBUTION PLAN AND AGREEMENT made as of the day of
, , by and between MERRILL LYNCH RETIREMENT SERIES TRUST, a
Massachusetts business trust (the "Trust"), and MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED, a Delaware corporation ("MLPF&S").
W I T N E S S E T H :
-------------------
WHEREAS, the Trust is engaged in business as an open-end investment company
registered under the Investment Company Act of 1940, as amended (the "Investment
Company Act"); and
WHEREAS, the Trust is authorized to establish separate series ("Series"),
each of which will offer separate classes of shares of beneficial interest, par
value $0.10 per share (the "Shares") to selected groups of purchasers; and
WHEREAS, MLPF&S is a securities firm engaged in the business of selling
shares of investment companies either directly to Purchasers or through other
securities dealers; and
WHEREAS, the Trust proposes to enter into a Class B Shares Distribution
Agreement with MLPF&S, pursuant to which MLPF&S will act as the exclusive
distributor and representative of the Trust in the offer and sale of Class B
shares of beneficial interest, par value $0.10 per share (the "Class B shares"),
of the MERRILL LYNCH RETIREMENT RESERVES MONEY FUND (the "Fund") series of the
Trust to the Public; and
WHEREAS, the Trust desires to adopt this Class B Distribution Plan and
Agreement (referred to herein as the "Class B Distribution Plan") in the manner
and on the terms and conditions hereinafter set forth, which Class B
Distribution Plan must be adopted in accordance with Rule 12b-1 under the
Investment Company Act;
<PAGE>
WHEREAS, MLPF&S desires to enter into the Class B Distribution Plan on said
terms and conditions;
WHEREAS, MLPF&S acts as a dealer selling Class B shares of the Fund to its
customers and substantially all of the Class B shareholders of the Fund are
MLPF&S customers who maintain their Fund accounts through MLPF&S (such accounts
being referred to herein as the "MLPF&S Fund Accounts");
WHEREAS, MLPF&S provides a variety of marketing activities and services
including advertising, sales and marketing support and systems, and preparing
and distributing promotional materials ("MLPF&S Marketing Services");
WHEREAS, pursuant to the provisions of Rule 12b-1 under the Investment
Company Act, the Trustees of the Trust have determined that the Fund should make
direct payments to MLPF&S for distribution to defray the expenses associated
with the MLPF&S Marketing Services and that such payments should be in addition
to the management compensation being paid to Merrill Lynch Asset Management,
L.P.; and
WHEREAS, the Trustees of the Trust have determined that there is a
reasonable likelihood that adoption of the Class B Distribution Plan will
benefit the Fund and its Class B shareholders;
NOW, THEREFORE, the Trust hereby adopts, and MLPF&S hereby agrees to the
terms of, the Class B Distribution Plan in accordance with Rule 12b-1 under the
Investment Company Act on the following terms and conditions:
1. The Fund is hereby authorized to utilize its assets to make
payments to MLPF&S pursuant to the Class B Distribution Plan to defray the
expenses associated with the MLPF&S Marketing Services with respect to
MLPF&S Fund Accounts.
2. The Fund shall pay MLPF&S a fee at the end of each month at the
annual rate of 0.20% of average daily net asset value of the MLPF&S Fund
Accounts.
3. In the event that the aggregate payments received by MLPF&S under
the Class B Distribution Plan in any year shall exceed the Plan
Expenditures in such fiscal year, MLPF&S shall not reimburse the Fund the
amount of such excess.
4. MLPF&S shall provide the Trust for review by the Trustees, and the
Trustees shall review, at least quarterly,
2
<PAGE>
a written report complying with the requirements of Rule 12b-1 regarding
the disbursement of the fee for expenses during such period.
5. MLPF&S will use its best efforts in rendering and causing its
employees to render services to the Fund, but in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations hereunder, MLPF&S shall not be liable to the Fund or any of its
Class B shareholders for any error of judgment or mistake of law for any
act of omission or for any losses sustained by the Fund or its Class B
shareholders.
6. Nothing contained in the Class B Distribution Plan shall prevent
MLPF&S or any affiliated person of MLPF&S from performing services similar
to those to be performed hereunder for any other person, firm or
corporation or for its or their own accounts or for the accounts of others.
7. The Class B Distribution Plan shall not take effect until it has
been approved by a vote of at least a majority, as defined in the
Investment Company Act, of the outstanding Class B voting securities of the
Fund.
8. The Class B Distribution Plan shall not take effect until it has
been approved by votes of a majority of both (a) the Trustees of the Trust
and (b) those Trustees of the Trust who are not "interested persons" of the
Trust, as defined in the Investment Company Act, and have no direct or
indirect financial interest in the operation of the Class B Distribution
Plan or any agreements related to it (the "Rule 12b-1 Trustees"), cast in
person at a meeting or meetings called for the purpose of voting on the
Class B Distribution Plan.
9. The Class B Distribution Plan shall continue in effect for so long
as such continuance is specifically approved at least annually in the
manner provided for approval of the Class B Distribution Plan in Paragraph
8.
10. The Class B Distribution Plan may be terminated at any time by
vote of a majority of the Rule 12b-1 Trustees, or by vote of a majority of
the outstanding Class B voting securities of the Fund.
11. The Class B Distribution Plan may not be amended to increase
materially the fee provided for in Paragraph 2 unless and until such
amendment is approved in the manner provided for in Paragraphs 7 and 8, and
no other material amendment to the Class B Distribution Plan shall be made
3
<PAGE>
unless approved in the manner provided for approval in Paragraph 8.
12. While the Class B Distribution Plan is in effect, the selection
and nomination of Trustees who are not interested persons, as defined in
the Investment Company Act, of the Trust shall be committed to the
discretion of the Trustees who are not interested persons.
13. The Trust shall preserve copies of the Class B Distribution Plan
and any related agreements and all reports made pursuant to Paragraph 4,
for a period of not less than six years, the first two years in an easily
accessible place.
14. The Declaration of Trust establishing the Trust, dated July 15,
1986, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the
Commonwealth of Massachusetts, provides that the name "Merrill Lynch
Retirement Series Trust" refers to the Trustees under the Declaration
collectively as Trustees, but not as individuals or personally; and no
Trustee, shareholder, officer, employee or agent of the Trust 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 the Trust but
the "Trust Property" only shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed this Class B
Distribution Plan as of the date first above written.
MERRILL LYNCH RETIREMENT SERIES TRUST
By ___________________________________________
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By __________________________________________
4
<PAGE>
EXHIBIT 99.18
MERRILL LYNCH RETIREMENT RESERVES MONEY FUND
of
MERRILL LYNCH RETIREMENT SERIES TRUST
PLAN PURSUANT TO RULE 18f-3 UNDER THE INVESTMENT COMPANY ACT
Merrill Lynch Retirement Reserves Money Fund (the "Fund") of Merrill Lynch
Retirement Series Trust offers Class A Shares and Class B Shares as follows:
Distribution Fees
- -----------------
Class B Shares bear the expenses of the ongoing distribution fees
applicable to such Class.
Transfer Agency Expenses
- ------------------------
Each class shall bear any incremental transfer agency cost applicable to
the particular Class.
Voting Rights
- -------------
Class B Shares have exclusive voting rights on any matter submitted to
shareholders that relates solely to its account maintenance fees or ongoing
distribution fees, as may be applicable. Each Class shall have separate voting
rights on any matter submitted to shareholders in which the interests of one
Class differ from the interests of the other Class.
Dividends
- ---------
Dividends paid on each Class will be calculated in the same manner at the
same time and will differ only to the extent that any account maintenance fee,
any distribution fee and any incremental transfer agency cost relates to a
particular Class.
Exchange Privileges
- -------------------
Holders of Class A Shares and Class B Shares shall have such exchange
privileges as set forth in the Fund's current prospectus and statement of
additional information. Exchange privileges may vary among Classes and among
holders of a Class.
Other Rights and Obligations
- ----------------------------
Except as otherwise described above, in all respects, each Class shall have
the same rights and obligations as each other Class.
