<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 25, 1997
SECURITIES ACT FILE NO. 2-52711 INVESTMENT COMPANY ACT FILE NO. 811-2556
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [_]
POST-EFFECTIVE AMENDMENT NO. 30 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 19 [X]
(CHECK APPROPRIATE BOX OR BOXES)
----------------
MERRILL LYNCH READY ASSETS TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
800 SCUDDERS MILL ROAD PLAINSBORO, 08536
NEW JERSEY
(ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (609) 282-2800
ARTHUR ZEIKEL
MERRILL LYNCH READY ASSETS 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
MERRILL LYNCH ASSET MANAGEMENT BROWN & WOOD LLP
ONE WORLD TRADE CENTER
P.O. BOX 9011 NEW YORK, NEW YORK 10048-0557
PRINCETON, NEW JERSEY 08543-9011 ATTENTION: THOMAS R. SMITH, JR.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
[X] immediately upon filing pursuant to paragraph (b), or
[_] on (date) pursuant to paragraph (b), or
[_] 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.
----------------
THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT
OF 1940. THE NOTICE REQUIRED BY SUCH RULE FOR THE REGISTRANT'S MOST RECENT
FISCAL YEAR WAS FILED ON FEBRUARY 20, 1997.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT OF MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SECURITIES SHARES BEING OFFERING PRICE AGGREGATE REGISTRATION
BEING REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of beneficial
interest
(par value $.10 per
share)............... 5,688,665,560 $1.00 $330,000* $100
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
*
(1) The calculation of the maximum aggregate offering price is made pursuant
to Rule 24e-2 under the Investment Company Act of 1940.
(2) The total amount of securities redeemed or repurchased during Registrant's
previous fiscal year was 14,301,439,885 shares of beneficial interest.
(3) 8,613,104,325 of the shares described in (2) above have been used for
reduction pursuant to Rule 24e-2(a) or Rule 24f-2(c) under the Investment
Company Act of 1940 in previous filings during Registrant's current fiscal
year.
(4) 5,688,335,560 of the shares redeemed during Registrant's previous fiscal
year are being used for the reduction of the registration fee in this
amendment to the Registration Statement.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
MERRILL LYNCH READY ASSETS 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................. Fee Table
Item 3. Condensed Financial
Information.............. Financial Highlights; Yield Information
Item 4. General Description of
Registrant............... Investment Objectives and Policies;
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
Securities............... Cover Page; Additional Information
Item 7. Purchase 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
Proceedings.............. Not Applicable
PART B
Item 10. Cover Page............... Cover Page
Item 11. Table of Contents........ Back Cover Page
Item 12. General Information and
History.................. Not Applicable
Item 13. Investment Objectives and
Policies................. Investment Objectives and Policies
Item 14. Management of the Fund... Management of the Trust
Item 15. Control Persons and
Principal Holders of
Securities............... Management of the Trust
Item 16. Investment Advisory and
Other Services........... Management of the Trust; Purchase of
Shares; Redemption of Shares; General
Information
Item 17. Brokerage Allocation..... Portfolio Transactions
Item 18. Capital Stock and Other
Securities............... General Information--Description of Shares
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered............ Purchase of Shares; Redemption of Shares;
Determination of Net Asset Value;
Shareholder Services
Item 20. Tax Status............... Taxes
Item 21. Underwriters............. Purchase of Shares; Redemption of Shares
Item 22. Calculation of
Performance Data......... Yield Information
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
APRIL 25, 1997
MERRILL LYNCH READY ASSETS TRUST
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 . PHONE NO. (609) 282-2800
----------------
Merrill Lynch Ready Assets Trust (the "Trust") is a no-load money market
fund, organized as a Massachusetts business trust that seeks preservation of
capital, liquidity and the highest possible current income consistent with the
foregoing objectives available from investing in a diversified portfolio of
short-term money market securities. Portfolio securities principally consist
of short-term U.S. Government securities, U.S. Government agency securities,
bank money instruments, corporate debt instruments, including commercial paper
and variable amount master demand notes, and repurchase and reverse repurchase
agreements. The Trust shares common goals with those investors who seek to put
reserve assets to work in an income producing and prudent manner and to make
those assets readily available without penalty. There can be no assurance that
the investment objectives of the Trust will be realized. THE TRUST SEEKS TO
MAINTAIN A CONSTANT $1.00 NET ASSET VALUE PER SHARE, ALTHOUGH THIS CANNOT BE
ASSURED. AN INVESTMENT IN THE TRUST IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT.
Shares of the Trust may be purchased at their net asset value without any
sales charge. In general, the minimum initial purchase is $5,000 and the
minimum subsequent purchase is $1,000. For accounts advised by banks and
registered investment advisers, the minimum initial purchase is $300 and the
minimum subsequent purchase is $100. The minimum initial purchase with respect
to pension, profit sharing, individual retirement and certain other retirement
plans is $100 and the minimum subsequent purchase with respect to these plans
is $1, except that the minimum purchase requirements are waived for purchases
of Trust shares by certain Employer Sponsored Retirement or Savings Plans, as
defined herein. The minimum initial purchase under the Merrill Lynch
BlueprintSM Program is $500 (or $50 if the shareholder elects to participate
in the automatic investment of sale proceeds option on the Merrill Lynch
BlueprintSM Program application form) and the minimum subsequent purchase is
$50. Shares may be redeemed at any time at net asset value as described
herein. The Trust pays Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") a distribution fee for providing certain services in
connection with the distribution of Trust shares. See "Purchase of Shares" and
"Redemption of Shares."
Shares may be purchased directly from Merrill Lynch Funds Distributor, Inc.
(the "Distributor"), P.O. Box 9081, Princeton, New Jersey 08543-9081, Tel. No.
(609) 282-2800, or from securities dealers that have entered into selected
dealer agreements with the Distributor including Merrill Lynch. See "Purchase
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 that
is relevant to making an investment in the Trust. This Prospectus should be
retained for future reference. A statement containing additional information
about the Trust, dated April 25, 1997 (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 Trust at the above telephone number or address. 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>
ANNUAL TRUST OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996:
Management Fees(a)...................................................... 0.36%
Rule 12b-1 Fees(b)...................................................... 0.13%
Other Expenses(c)....................................................... 0.15%
----
Total Trust Operating Expenses............................................ 0.64%
====
</TABLE>
- --------
(a) See "Management of the Trust--Management and Advisory Arrangements"--page
9.
(b) See "Purchase of Shares--Distribution Plan"--page 12.
(c) See "Management of the Trust--Transfer Agency Services"--page 10.
EXAMPLE:
<TABLE>
<CAPTION>
CUMULATIVE EXPENSES PAID FOR THE PERIOD OF:
----------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
An investor would pay the
following expenses on a
$1,000 investment, assum-
ing an operating expense
ratio of 0.64% and a 5%
annual rate of return
throughout the periods... $7 $20 $36 $80
</TABLE>
The foregoing Fee Table is intended to assist investors in understanding the
costs and expenses that a shareholder in the Trust will bear directly or
indirectly. 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 and actual expenses 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 Trust by Deloitte &
Touche LLP, independent auditors. Financial statements for the fiscal year
ended December 31, 1996 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 Trust's
audited financial statements. Further information about the performance of the
Trust is contained in the Trust's most recent annual report to shareholders
which may be obtained, without charge, by calling or writing the Trust at the
telephone number or address on the front cover of this Prospectus.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (De-
crease) in Net
Asset Value:
PER SHARE OPER-
ATING PERFOR-
MANCE:
Net asset value,
beginning of
year............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ---------- ---------- ----------- -----------
Investment in-
come--net....... .0491 .0538 .0366 .0272 .0332 .0556 .0771 .0860
Realized and
unrealized gain
(loss) on
investments--
net............. (.0003) .0016 (.0012) .0003 .0009 .0029 .0010 .0005
---------- ---------- ---------- ---------- ---------- ---------- ----------- -----------
Total from in-
vestment opera-
tions........... .0488 .0554 .0354 .0275 .0341 .0585 .0781 .0865
---------- ---------- ---------- ---------- ---------- ---------- ----------- -----------
Less dividends
and distribu-
tions:
Investment in-
come--net....... (.0491) (.0538) (.0366) (.0272) (.0332) (.0556) (.0771) (.0860)
Realized gain on
investments--
net............. (.0001) (.0001) -- + (.0005) (.0007) (.0029)* (.0010)* (.0005)*
---------- ---------- ---------- ---------- ---------- ---------- ----------- -----------
Total dividends
and distribu-
tions........... (.0492) (.0539) (.0366) (.0277) (.0339) (.0585) (.0781) (.0865)
---------- ---------- ---------- ---------- ---------- ---------- ----------- -----------
Net asset value,
end of year..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ========== ========== =========== ===========
Total Investment
Return.......... 5.05% 5.53% 3.73% 2.81% 3.45% 6.02% 8.08% 9.05%
========== ========== ========== ========== ========== ========== =========== ===========
RATIOS TO AVER-
AGE NET ASSETS:
Expenses........ .64% .67% .65% .65% .64% .62% .62% .63%
========== ========== ========== ========== ========== ========== =========== ===========
Investment
income and
realized gain
(loss) on
investments--
net............. 4.88% 5.40% 3.67% 2.78% 3.48% 5.87%* 7.80%* 8.65%*
========== ========== ========== ========== ========== ========== =========== ===========
SUPPLEMENTAL DA-
TA:
Net assets, end
of year (in
thousands)...... $7,096,260 $7,079,355 $6,240,997 $6,523,187 $7,465,869 $9,077,226 $10,180,436 $10,650,487
========== ========== ========== ========== ========== ========== =========== ===========
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------
1988 1987
---------- ----------
<S> <C> <C>
Increase (De-
crease) in Net
Asset Value:
PER SHARE OPER-
ATING PERFOR-
MANCE:
Net asset value,
beginning of
year............ $ 1.00 $ 1.00
---------- ----------
Investment in-
come--net....... .0695 .0616
Realized and
unrealized gain
(loss) on
investments--
net............. (.0004) (.0005)
---------- ----------
Total from in-
vestment opera-
tions........... .0691 .0611
---------- ----------
Less dividends
and distribu-
tions:
Investment in-
come--net....... (.0691) (.0611)
Realized gain on
investments--
net............. -- --
---------- ----------
Total dividends
and distribu-
tions........... (.0691) (.0611)
---------- ----------
Net asset value,
end of year..... $ 1.00 $ 1.00
========== ==========
Total Investment
Return.......... 7.16% 6.30%
========== ==========
RATIOS TO AVER-
AGE NET ASSETS:
Expenses........ .62% .62%
========== ==========
Investment
income and
realized gain
(loss) on
investments--
net............. 6.88%* 6.10%*
========== ==========
SUPPLEMENTAL DA-
TA:
Net assets, end
of year (in
thousands)...... $9,130,343 $9,864,068
========== ==========
</TABLE>
- ----
* Includes unrealized gain (loss).
+ Amount is less than $.0001 per share.
3
<PAGE>
YIELD INFORMATION
Set forth below is the Trust's yield information for the indicated seven-day
periods, computed to include and exclude realized gains and losses for the
applicable seven-day period, and information as to the compounded annualized
yield, excluding gains and losses, for the same periods.
<TABLE>
<CAPTION>
SEVEN-DAY PERIOD ENDED
--------------------------------
DECEMBER 31, 1996 MARCH 31, 1997
----------------- --------------
<S> <C> <C>
Annualized Yield:
Including gains and losses.................. 4.95% 4.92%
Excluding gains and losses.................. 4.95% 4.92%
Compounded Annualized Yield................... 5.07% 5.04%
Average maturity of portfolio at end of
period....................................... 75 days 65 days
</TABLE>
The yield of the Trust refers to the income generated by an investment in
the Trust 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
Trust is assumed to be reinvested. The compounded annualized yield will be
somewhat higher than the yield because of the effect of the assumed
reinvestment.
The yield on Trust shares normally will fluctuate on a daily basis.
Therefore, the yield for any given past period is not an indication or
representation by the Trust of future yields or rates of return on its shares.
The Trust'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 Trust may compare its yield to (1) yield data (including
Donoghue's Domestic Prime and Eurodollar and Yankeedollar Funds Average)
reported 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 SM 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 reported 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 other performance data, yield
comparisons should not be considered indicative of the Trust's yield or
relative performance for any future period.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the Trust are to seek preservation of capital,
liquidity and the highest possible current income consistent with these
objectives available from investing in a diversified portfolio of
4
<PAGE>
short-term money market securities. The investment objectives are fundamental
policies of the Trust which may not be changed without a vote of the majority
of the outstanding shares of the Trust.
Investment in the Trust offers several potential benefits. The Trust seeks to
provide as high a yield potential as is available, consistent with the
preservation of capital, from investments in 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 seeks the reduced risk that generally results from
diversification of assets. There can be no assurance that the investment
objectives of the Trust will be realized. Certain expenses are borne by
investors, including advisory and management fees, administrative costs and
operational costs.
In managing the Trust, Merrill Lynch Asset Management, L.P. (the "Manager" or
"MLAM"), will employ a number of professional money management techniques,
including varying the composition of investments and the average maturity of
the portfolio based on its assessment of the relative values of the various
money market securities and future interest rate patterns. These assessments
will respond to changing economic and money market conditions and to shifts in
fiscal and monetary policy. The Manager also will 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 frequently are differences in the yields
between the various types of money market securities. The Trust seeks to
enhance yield by purchasing and selling securities based on these yield
disparities.
The following is a description of the types of money market securities in
which the Trust may invest:
U.S. Government Securities: Marketable securities issued by or guaranteed as
to principal and interest by the U.S. Government and supported by the full
faith and credit of the United States.
U.S. Government Agency Securities: Debt securities issued by U.S. Government-
sponsored enterprises, Federal agencies 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 is not obligated to provide financial support
to these instrumentalities.
Bank Money Instruments: The Trust may invest in U.S. dollar-denominated
obligations of U.S. and foreign depository institutions, including commercial
and savings banks, savings and loan associations, and other institutions. Such
obligations include certificates of deposit, bankers' acceptances, time
deposits, bank notes and deposit notes. For example, the obligations may be
issued by U.S. or foreign depository institutions, foreign branches or
subsidiaries of U.S. depository institutions ("Eurodollar" obligations), U.S.
branches or subsidiaries of foreign depository institutions ("Yankeedollar"
obligations) or foreign branches or subsidiaries of foreign depository
institutions. Eurodollar and Yankeedollar obligations and obligations of
branches or subsidiaries of foreign depository institutions may be general
obligations of the parent bank or may be limited to the issuing branch or
subsidiary by the terms of the specific obligations or by government
regulation. Investments in obligations of foreign depository institutions and
their foreign branches and subsidiaries will only be made if determined to be
of comparable quality to other investments permissible for the Trust. The Trust
will not invest more than 25% of its total assets (taken at market value at the
time of each investment) in obligations of foreign depository institutions and
their foreign branches and subsidiaries or in obligations of foreign branches
or subsidiaries of U.S. depository institutions that are not backed by the U.S.
parent. The
5
<PAGE>
Trust treats bank money instruments issued by U.S. branches or subsidiaries of
foreign banks as obligations issued by domestic banks (not subject to the 25%
limitation) if the branch or subsidiary is subject to the same bank regulation
as U.S. banks.
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 at the date of purchase. Short-
term obligations issued by trusts, corporations, partnerships or other entities
include mortgage or asset-backed instruments, such as pass-through certificates
representing participations in, or bonds and notes backed by, pools of
mortgages; automobile, manufactured housing or other types of consumer loans;
credit card or trade receivables; or pools of mortgage- or asset-backed
securities.
Foreign Short-term Debt Instruments: The Trust 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 Statement of Additional Information in connection with
investments in Eurodollar and Yankeedollar obligations and obligations of
foreign depository institutions and their foreign branches and subsidiaries.
The following is a description of other types of investments or investment
practices in which the Trust may invest or engage:
Repurchase Agreements; Purchase and Sale Contracts. The Trust may invest in
repurchase agreements or purchase and sale contracts involving the money market
securities described above. Repurchase agreements and purchase and sale
contracts may be entered into only with a member bank of the Federal Reserve
System or a primary dealer in U.S. Government securities, or an affiliate
thereof. Under such agreements, the bank or primary dealer (or the affiliate)
agrees, on entering into the contract, to repurchase the security at a mutually
agreed on 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. In the case of repurchase agreements, the
prices at which the trades are conducted do not reflect accrued interest on the
underlying obligations; whereas, in the case of purchase and sale contracts,
the prices take into account accrued interest. Such agreements usually cover
short periods, such as under one week. 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 case of a repurchase agreement,
the Trust 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; the Trust does not have the right
to seek additional collateral in the case of purchase and sale contracts. 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 Trust but
only constitute collateral for the seller's obligation to pay the repurchase
price. Therefore, the Trust may suffer time delays and incur costs or possible
losses in connection with the disposition of the collateral. A purchase and
sale contract differs from a repurchase agreement in that the contract
arrangements stipulate that the securities are owned by the Trust. In the event
of a default under such a repurchase agreement or under a purchase and sale
contract, instead of the contractual fixed rate of return, the rate of return
to the Trust shall be dependent on intervening fluctuations of the market value
of such security and the accrued interest on the
6
<PAGE>
security. In such event, the Trust 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.
Reverse Repurchase Agreements. The Trust may enter into reverse repurchase
agreements which involve the sale of money market securities held by the Trust,
with an agreement to repurchase the securities at an agreed on price, date and
interest payment. During the time a reverse repurchase agreement is
outstanding, the Trust will maintain a segregated custodial account containing
U.S. Government or other appropriate high-grade debt securities having a value
equal to the repurchase price.
Lending of Portfolio Securities. The Trust may lend portfolio securities
(with a value not in excess of 20% 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. During the period of the loan, the Trust 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 Trust, and
while the types of money market securities in which the Trust invests generally
are considered to have low principal risk, such securities are not completely
risk free. There is a risk of the failure of issuers to meet their principal
and interest obligations. Repurchase agreements may be construed to be
collateralized loans by the purchaser to the seller secured by the securities
transferred to the purchaser. In the event of default by the seller under a
repurchase agreement construed to be a collateralized loan, the underlying
securities are not owned by the Trust 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 the
lending of portfolio securities by the Trust, there is also the risk of the
failure of the parties involved to repurchase at the agreed-upon price or to
return the securities involved in such transactions, in which event the Trust
may suffer time delays and incur costs or possible losses in connection with
such transactions.
Bank money instruments in which the Trust invests must be issued by
depository institutions with total assets of at least $1 billion, except that
up to 10% of the Trust's 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 Trust's investments in short-term "Government Securities" (as defined in
Commission regulations) will be in instruments with a remaining maturity of 762
days (25 months) or less. The Trust'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 six NRSROs: Duff & Phelps Credit Rating Co.,
Fitch Investors Service, Inc., IBCA Limited and its affiliate IBCA Inc.,
Thompson Bankwatch, Inc., Moody's Investors Service, Inc. and Standard & Poor's
Ratings Services. The Trust will determine the remaining maturity of its
investments in accordance with Commission regulations. The dollar-weighted
average maturity of the Trust's portfolio will not exceed 90 days. During the
Trust's fiscal year ended December 31, 1996, the average maturity of its
portfolio ranged from 45 days to 89 days.
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A Commission regulation ordinarily limits investments by the Trust 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, not more than 1%
of its total assets. In addition, such regulation requires that not more than
5% of the Trust's total assets be invested in securities that do not have the
highest rating.
The Trust may purchase or sell money market securities on a forward
commitment basis at fixed purchase terms. The purchase will be recorded on the
date the Trust enters into the commitment and the value of the security
thereafter will be reflected in the calculation of the Trust's net asset value.
The value of the security on the delivery date may be more or less than its
purchase price. A separate account of the Trust will be established with its
custodian consisting of cash or liquid money market securities having a market
value at all times at least equal to the amount of the forward purchase
commitment.
Investment Restrictions. The Trust 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 Trust'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 Trust may not: (1) purchase any
securities other than (i) money market securities 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, U.S. Government agency securities or bank money
instruments); (3) (i) invest more than 5% of its total assets (taken at market
value at the time of each investment) in the securities (other than U.S.
Government or U.S. Government agency securities) of any one issuer (including
repurchase agreements and purchase and sale contracts with any one bank) except
that up to 25% of the value of the Trust's total assets may be invested without
regard to such 5% limitation but shall instead be subject to a 10% limitation,
or (ii) purchase more than 10% of the outstanding securities of an issuer
except that this restriction shall not apply to U.S. Government or U.S.
Government agency securities, bank money instruments, repurchase agreements and
purchase and sale contracts; (4) enter into repurchase agreements or purchase
and sale contracts if, as a result, more than 10% of the Trust's net 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; and (5) borrow amounts in excess of 20% of its total assets, taken
at market value, and then only from banks as a temporary measure for
extraordinary or emergency purposes (usually only "leveraged" investment
companies may borrow in excess of 5% of their assets; however, the Trust will
not borrow to increase income but only to meet redemption requests which might
otherwise require untimely dispositions of portfolio securities; interest paid
on such borrowings will reduce net income). The Trust will not purchase
securities while borrowings described in investment restriction (5) are
outstanding except to honor prior commitments.
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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 Trust 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*--President of MLAM and its affiliate, Fund Asset Management,
L.P. ("FAM"); President and Director of Princeton Services, Inc. ("Princeton
Services"); Executive Vice President of Merrill Lynch & Co., Inc. ("ML & Co.");
and Director of the Distributor.
Donald Cecil--Special Limited Partner of Cumberland Partners (an investment
partnership).
M. Colyer Crum--James R. Williston Professor of Investment Management
Emeritus, Harvard Business School.
Edward H. Meyer--Chairman of the Board of Directors, President and Chief
Executive Officer of Grey Advertising Inc.
Jack B. Sunderland--President and Director of American Independent Oil
Company, Inc. (an energy company).
J. Thomas Touchton--Managing Partner of The Witt-Touchton Company (a private
investment partnership).
- --------
* Interested person, as defined in the Investment Company Act, of the Trust.
MANAGEMENT AND ADVISORY ARRANGEMENTS
The Manager, which is owned and controlled by ML & Co., a financial services
holding company, acts as the Manager for the Trust and provides the Trust with
investment management services. The Manager or an affiliate of the Manager,
FAM, acts as the investment adviser for more than 130 registered investment
companies and provides investment advisory services to individual and
institutional accounts. As of March 31, 1997, the Manager and FAM had a total
of approximately $247.2 billion in investment company and other portfolio
assets under management, including accounts of certain affiliates of the
Manager.
The 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 Trust's portfolio and the Manager constantly reviews
the Trust'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 Board of
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 Trust.
The Manager receives compensation at the annual rate of 0.50% of the portion
of the Trust's average net assets not exceeding $500 million; this rate is
reduced at several breakpoints for net assets in excess of
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$500 million. For the fiscal year ended December 31, 1996, the total management
fee paid by the Trust to the Manager aggregated $26,214,794 (based on average
net assets of approximately $7.3 billion) and the effective fee rate was 0.36%.
John Ng is Vice President and Portfolio Manager of the Trust and is
responsible for the day to day management of the Trust. Mr. Ng has been a
Portfolio Manager and Vice President of the Manager since 1984.
The Management Agreement obligates the Trust 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 December 31, 1996, the amount of such
reimbursement was $370,559. For the fiscal year ended December 31, 1996, the
ratio of total expenses to average net assets was 0.64%.
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 of $15.00 per
shareholder account, and is entitled to reimbursement for certain transaction
charges and out-of-pocket expenses incurred by it under 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 shares in a recordkeeping system,
provided the recordkeeping system is maintained by a subsidiary of ML & Co. For
the fiscal year ended December 31, 1996, the total fee paid by the Trust to the
Transfer Agent pursuant to the Transfer Agency Agreement was $11,479,556.
PURCHASE OF SHARES
The Trust is offering its shares 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 effective. Share purchase orders are effective
on the date Federal Funds become available to the Trust. If Federal Funds are
available to the Trust 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 Trust or the
Distributor.
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The minimum initial purchase is $5,000 and the minimum subsequent purchase
is $1,000, except that lower minimums apply in the case of purchases made
under certain retirement plans. The Trust may, at its discretion, establish
reduced minimum initial and subsequent purchase requirements with respect to
various types of accounts. For pension, profit sharing, individual retirement
and certain other retirement plans, including self-directed retirement plans
for which Merrill Lynch acts as passive custodian, and the various retirement
plans available from the Distributor, the minimum initial purchase is $100 and
the minimum subsequent investment is $1. The minimum initial or subsequent
purchase requirements may be waived for certain employer sponsored retirement
or savings plans, such as tax qualified retirement plans within the meaning of
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
deferred compensation plans within the meaning of Section 403(b) and Section
457 of the Code, other deferred compensation arrangements, Voluntary Employee
Benefits Association ("VEBA") plans, and non-qualified After Tax Savings and
Investment programs, maintained on the Merrill Lynch Group Employee Services
system, referred to herein and in the Statement of Additional Information as
"Employer Sponsored Retirement or Savings Plans." The minimum initial purchase
with respect to other retirement plans and pension and profit-sharing plans is
$100 and the minimum subsequent investment is $1. For accounts advised by
banks and registered investment advisers, the minimum initial purchase is $300
and the minimum subsequent purchase is $100.
METHODS OF PAYMENT
Payment Through Securities Dealers. Investment in the Trust may be made
through securities dealers, including Merrill Lynch, who have entered into
selected dealer agreements with the Distributor. In such a case, the dealer
will transmit payment to the Trust on behalf of the investor and will supply
the Trust with the required account information. Generally, purchase orders
placed through Merrill Lynch will be made effective on the day following the
day the order is placed with Merrill Lynch, except that orders received
through the Merrill Lynch Blueprint SM Program ("Blueprint") in some
circumstances may be executed two business days following the day the order is
placed with Merrill Lynch. Investments in the Trust through Blueprint may be
made only through Merrill Lynch. Such orders should be sent to Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Attention: The Blueprint SM Program, P.O.
Box 30441, New Brunswick, New Jersey 08989-0441. Blueprint maintains a toll-
free telephone number for inquiries: (800) 637-3766. Investors who are not
placing orders through Blueprint and who desire same day effectiveness should
utilize the Payment by Wire procedure described below. Investors with free
cash credit balances (i.e., immediately available funds) in securities
accounts of Merrill Lynch will not have their funds invested in the Trust
until the day after the order is placed with Merrill Lynch and will not
receive the daily dividend that would have been received had their funds been
invested in the Trust on the day the order was placed with Merrill Lynch.
Merrill Lynch has an order procedure pursuant to which investors can have the
proceeds from the sale of listed securities invested in shares of the Trust on
the day investors receive such proceeds in their Merrill Lynch securities
accounts and can have the proceeds from the sale of most other securities
invested in shares of the Trust on the day following the day investors receive
such proceeds in their Merrill Lynch securities accounts.
Payment by Wire. An expeditious method of investing in the Trust is
available through the transmittal of Federal Funds by wire to the Transfer
Agent. The Trust will not be responsible for delays in the wiring system. To
purchase shares by wiring Federal Funds, payment should be wired to First
Union National Bank
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of Florida. Shareholders should give their financial institutions the following
wiring instructions: ABA #063000021, DDA #2112600061186, Merrill Lynch
Financial Data Services, Inc. The wire should be identified as a payment to
Merrill Lynch Ready Assets Trust and should include the shareholder's name and
account number. Failure to submit the required information may delay
investment. Investors are urged to make payment by wire in Federal Funds.
Payment to the Transfer Agent. Purchase orders for which remittance is to be
made by check may be submitted directly by mail or otherwise to the Transfer
Agent. Purchase orders by mail should be sent to Merrill Lynch Financial Data
Services, Inc., P.O. Box 45290, Jacksonville, Florida 32232-5290. Purchase
orders that are made by hand should be delivered to Merrill Lynch Financial
Data Services, Inc., 4800 Deer Lake Drive East, Jacksonville, Florida 32246-
6484. Investors opening a new account must enclose a completed Purchase
Application. Existing shareholders should enclose the detachable stub from a
monthly account statement that they have received. Checks should be made
payable to Merrill Lynch Financial Data Services, Inc. Certified checks are not
necessary, but checks are accepted subject to collection at full face value in
U.S. funds and must be drawn in U.S. dollars on a U.S. bank. Payments for the
accounts of corporations, foundations and other organizations may not be made
by third party checks.
DISTRIBUTION PLAN
The Trust has adopted a Shareholder Servicing Plan and Agreement (the "Plan")
in compliance with Rule 12b-1 under the Investment Company Act pursuant to
which the Trust is authorized to pay Merrill Lynch a fee at the annual rate of
0.125% of the average daily net asset value of Trust accounts maintained
through Merrill Lynch. The Plan reimburses Merrill Lynch only for actual
expenses incurred in the fiscal year in which the fee is paid. The fee is
principally to provide compensation to Merrill Lynch Financial Consultants and
other Merrill Lynch personnel for providing certain services to shareholders
who maintain their Trust accounts through Merrill Lynch. The fee is for direct
personal services to Trust shareholders. Under the Plan, as amended to date,
Merrill Lynch, in its sole discretion, may expend out of the fee an amount not
exceeding 0.01% of such average daily net asset value as reimbursement for
expenditures incurred in advertising activities promoting the sale, marketing
and distribution of the shares of the Trust.
For the fiscal year ended December 31, 1996, $8,008,404 was paid to Merrill
Lynch pursuant to the Plan (based on average net assets subject to the Plan of
$7.3 billion).
REDEMPTION OF SHARES
The Trust is required to redeem for cash all full and fractional shares of
the Trust. The redemption price is the net asset value per share next
determined after receipt by the Transfer Agent of proper notice of redemption
as described in accordance with one of the procedures set forth below. If such
notice is received by the Transfer Agent prior to the determination of net
asset value (generally 4:00 p.m., New York time) on any business day during
which the New York Stock Exchange (the "NYSE") or New York banks are open for
business, the redemption will be effective on such day and payment 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 thereafter. If
notice of a redemption of shares held in connection with Blueprint is received
by Merrill Lynch prior to the Trust's
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determination of net asset value, it will be effective on the business day
following receipt of the redemption request. If the notice is received after
the determination of net asset value has been made, the redemption will be
effective on the second business day thereafter.
At various times, the Trust may be requested to redeem shares for which good
payment has not yet been received (e.g., cash, Federal Funds or a certified
check drawn on a U.S. bank). The Trust may delay, or cause to be delayed, the
payment of redemption proceeds until such time as it or the Transfer Agent has
assured itself that good payment has been collected for the purchase of such
shares. Normally, this delay will not exceed 10 days. In addition, the Trust
reserves the right not to honor redemption checks or requests for Federal Funds
redemptions where the shares to be redeemed have been purchased by check within
10 days prior to the date the redemption request is received by the Transfer
Agent.
METHODS OF REDEMPTION
Set forth below is information as to the five methods pursuant to which
shareholders may redeem shares. In certain instances, the Transfer Agent may
require documents in connection with redemptions.
Redemption by Check. Shareholders may redeem shares by check in an amount not
less than $500. At the shareholder's request, the Transfer Agent will provide
the shareholder with checks drawn on the custody account of the Trust with its
Custodian. These checks can be made payable to the order of any person in any
amount not less than $500; however, these checks may not be used to purchase
securities in transactions with Merrill Lynch. The payee of the check may cash
or deposit it like any check drawn on a bank. When such a check is presented to
the Transfer Agent for payment, the Transfer Agent will present the check to
the Trust as authority to redeem a sufficient number of full and fractional
shares in the shareholder's account to cover the amount of the check. This
enables the shareholder to continue earning daily dividends until the check is
cleared. Canceled checks will be returned to the shareholder by the Transfer
Agent.
Shareholders will be subject to the Transfer Agent's rules and regulations
governing such checking accounts, including the right of the Transfer Agent not
to honor checks in amounts exceeding the value of the shareholder's account at
the time the check is presented for payment. The Trust or the Transfer Agent
may modify or terminate the redemption by check privilege at any time on 30
days' notice to participating shareholders. In order to be eligible for the
redemption by check privilege, purchasers should check the box under the
caption "Check Redemption Privilege" in the Purchase Application. The Transfer
Agent will then send checks to the shareholder.
Federal Funds Redemption. Shareholders also may arrange to have redemption
proceeds of $5,000 or more wired in Federal Funds to a pre-designated bank
account. In order to be eligible for Federal Funds redemption, the shareholder
must designate on his or her Purchase Application the domestic commercial bank
and account number to receive the proceeds of his or her redemption and must
have his or her signature on the Purchase Application guaranteed. The
redemption request for Federal Funds redemption may be made by telephone, wire
or letter (no signature guarantee required) to the Transfer Agent and, if
received before the determination of net asset value of the Trust on any
business day (generally 4:00 p.m., New York time) the redemption proceeds will
be wired to the investor's pre-designated bank account on the next business
day. Shareholders may effect Federal Funds redemptions by telephoning the
Transfer Agent toll-free at (800) 221-7210. The Trust will employ reasonable
procedures to confirm that instructions communicated by
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telephone are genuine; if it does not, the Trust may be liable for any losses
due to fraudulent or unauthorized instructions. Among other things, redemption
proceeds may only be wired into the bank account designated on the Purchase
Application. The investor must independently verify this information at the
time the redemption request is made.
Repurchase Through Securities Dealers. The Trust will repurchase shares
through securities dealers. The Trust normally will accept orders to repurchase
shares by wire or telephone from dealers for customers at the net asset value
next computed after receipt of the order from the dealer, provided that such
request for repurchase is received from the dealer prior to the determination
of net asset value of the Trust (generally 4:00 p.m., New York time) on any
business day. These repurchase arrangements are for the convenience of
shareholders and do not involve a charge by the Trust; however, dealers may
impose a charge on the shareholder for transmitting the notice of repurchase to
the Trust. Redemption of Trust shares held in connection with Blueprint may be
made only through Merrill Lynch. Such a redemption may be made by submitting a
written notice by mail directly to Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Attention: The BlueprintSM Program, P.O. Box 30441, New
Brunswick, New Jersey 08989-0441. Investors whose shares are held through
Blueprint also may effect notice of redemption by telephoning Merrill Lynch
toll-free at (800) 637-3766. The Trust reserves the right to reject any order
for repurchase through a securities dealer, but it may not reject properly
submitted requests for redemption as described below. The Trust will promptly
notify any shareholder of any rejection of a repurchase with respect to his or
her shares. For shareholders repurchasing through their securities dealer,
payment will be made by the Transfer Agent to the dealer.
Regular Redemption. Shareholders may redeem shares by submitting a written
notice by mail directly to the Transfer Agent, Merrill Lynch Financial Data
Services, Inc., P.O. Box 45290, Jacksonville, Florida 32232-5290. Redemption
requests that are made by hand should be delivered to Merrill Lynch Financial
Data Services, Inc., 4800 Deer Lake Drive East, Jacksonville, Florida 32246-
6484. Redemption requests should not be sent to the Trust. The notice requires
the signatures of all persons in whose names the shares are registered, signed
exactly as their names appear on the Transfer Agent's register. The signatures
on the redemption request must be guaranteed by an "eligible guarantor
institution" as such is defined in Rule 17Ad-15 under the Securities Exchange
Act of 1934, as amended, the existence and validity of which may be verified by
the Transfer Agent through the use of industry publications. Notarized
signatures are not sufficient.
Automatic Redemption. Merrill Lynch has instituted an automatic redemption
procedure applicable to shareholders of the Trust who maintain securities
accounts with Merrill Lynch. Merrill Lynch may utilize this procedure, which is
not applicable to margin accounts, to satisfy amounts due it by the shareholder
as a result of account fees and expenses owed to Merrill Lynch or one of its
affiliates or as a result of purchases of securities or other transactions in
the shareholder's securities account. Under this procedure, unless the
shareholder notifies Merrill Lynch to the contrary, the shareholder's Merrill
Lynch securities account will be scanned each business day prior to the
determination of net asset value of the Trust (generally 4:00 p.m., New York
time) after application of any cash balances in the account, a sufficient
number of Trust shares will be redeemed at the net asset value, as determined
on that day, to satisfy any amounts for which the shareholder is obligated to
make payment to Merrill Lynch or one of its affiliates. Redemptions will be
effected on the business day preceding the date the shareholder is obligated to
make such payment, and Merrill Lynch or its affiliate will receive the
redemption proceeds on the business day following the redemption date.
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Shareholders will receive all dividends declared and reinvested through the
date of redemption, except that, unless otherwise requested, in those instances
where shareholders request transactions that settle on a "same-day" basis (such
as Federal Funds wire redemptions, branch office checks, transfers to other
Merrill Lynch accounts and certain securities transactions) the Trust shares
necessary to effect such transactions will be deemed to have been transferred
to Merrill Lynch prior to the Trust's declaration of dividends on that day. In
such instances, shareholders will receive all dividends declared and reinvested
through the date immediately preceding the date of redemption.
----------------
Due to the relatively high cost of maintaining accounts of less than $1,000,
the Trust reserves the right to redeem shares in any account for their then
current value (which will be promptly paid to the shareholder), if at any time
the total investment does not have a value of at least $1,000. Shareholders
will be notified that the value of their account is less than $1,000 and
allowed two months to make an additional investment before the redemption is
processed. In such event, the $1,000 minimum on subsequent investments will not
be applicable.
SHAREHOLDER SERVICES
The Trust offers a number of shareholder services, described below, that are
designed to facilitate investment in its shares. Full details as to each of
such services, copies of the various plans described below and instructions as
to how to participate in the various services or plans, or to change options
with respect thereto can be obtained from the Trust, the Distributor or Merrill
Lynch. Included in such services are the following:
Investment Account. Each shareholder whose account is maintained at the
Transfer Agent has an Investment Account and will receive from the Transfer
Agent a monthly report showing the activity in his or her account for the
month. A shareholder may make additions to his or her Investment Account at any
time by purchasing shares at the public offering price either through his or
her securities dealer, by wire or by mail directly to the Transfer Agent,
acting as agent for his or her dealer. A shareholder may ascertain the number
of shares in his or her Investment Account by telephoning the Transfer Agent
toll-free at (800) 221-7210. The Transfer Agent will furnish this information
only after the shareholder has specified the name, address, account number and
social security number of the registered owner or owners. Shareholders also may
maintain their accounts through Merrill Lynch. Upon the transfer of shares out
of a Merrill Lynch brokerage account, an Investment Account in the transferring
shareholder's name may be opened at the Transfer Agent. Shareholders
considering transferring a tax-deferred retirement account such as an
individual retirement account 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.
Exchange Privilege. U.S. shareholders of the Trust 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 shares
of the Trust for Class A shares of certain of the MLAM-
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advised mutual funds if the shareholder holds any Class A shares of a fund in
the account in which the exchange is made at the time of the exchange or is
otherwise an eligible Class A investor. Shareholders of the Trust also may
exchange shares of the Trust into shares of certain other MLAM-advised money
market funds specifically designated as available for exchange by holders of
Trust 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 for Federal
income tax purposes. For further information, see "Shareholder Services--
Exchange Privilege" in the Statement of Additional Information.
Accrued Monthly Payout Plan. Shareholders desiring their dividends in cash
may enroll in this plan and receive monthly cash payments resulting from the
redemption of the shares received on dividend reinvestments during the month.
Systematic Withdrawal Plan. A shareholder may elect to receive systematic
withdrawal payments from his or her Investment Account in the form of payments
by check or through automatic payment by direct deposit to his or her bank
account on either a monthly or quarterly basis.
Automatic Investment Plan. Regular additions may be made to an investor's
Investment Account by prearranged charges to his or her regular bank account at
a minimum of $50 per month.
Retirement Plans. Self-directed individual retirement accounts and other
retirement plans are available from Merrill Lynch. Under these plans,
investments may be made in the Trust and in certain of the other mutual funds
whose shares are distributed by the Distributor, as well as in other
securities. Merrill Lynch charges an initial establishment fee and an annual
custodial fee for each account. In addition, eligible shareholders of the Trust
may participate in a variety of qualified employee benefit plans which are
available from the Distributor. The minimum initial purchase to establish any
such plan is $100.
FEE-BASED PROGRAMS
Trust shares may be held in certain Merrill Lynch fee-based programs,
including pricing alternatives for securities transactions (each referred to in
this paragraph as a "Program"). These Programs generally prohibit such shares
from being transferred to another account at Merrill Lynch, to another broker-
dealer or to the Transfer Agent. Except in limited circumstances (which may
also involve an exchange as described above), such shares must be redeemed and
new shares purchased in order for the investment not to be subject to Program
fees. Additional information regarding a specific Program (including charges
and limitations on transferability applicable to shares that may be held in
such Program) is available in such Program's client agreement and from Merrill
Lynch Investor Services at (800) MER-FUND (637-3863).
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PORTFOLIO TRANSACTIONS
The money market securities in which the Trust invests are traded primarily
in the over-the-counter ("OTC") market. Where possible, the Trust 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 normally do not involve
either brokerage commissions or transfer taxes. The cost of executing portfolio
transactions 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 an exemptive order allowing such transactions is
obtained from the Commission. An affiliated person 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.
or its subsidiary, Merrill Lynch Money Markets, Inc. subject to certain terms
and conditions. During the fiscal year ended December 31, 1996, the Trust
engaged in 40 transactions pursuant to such orders aggregating approximately
$1.7 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 on
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 Trust is determined, the net asset value per share of the Trust 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 Trust
applicable to that dividend period.
DETERMINATION OF NET ASSET VALUE
The net asset value of the Trust is determined by the Manager once daily,
immediately after the daily declaration of dividends, on each 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 New York banks are open, at 4:00 p.m., New
York time. The net asset value per share is computed pursuant to the "penny-
rounding" method by dividing the value of the securities held by the Trust plus
any cash or other assets (including interest accrued but not yet received)
minus all liabilities by the total number of shares outstanding at such time.
The result of this computation will be rounded to the nearest whole cent. It is
anticipated that net asset value will remain constant at $1.00 per share,
although this cannot be assured.
17
<PAGE>
The money market securities in which the Trust invests are valued at the most
recent bid price or yield equivalent as obtained from dealers that make markets
in such securities. 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 Trustees of the Trust. Securities with a remaining maturity of
60 days or less are valued on an amortized cost basis, i.e., by valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument.
TAXES
The Trust intends to continue to qualify for the special tax treatment
afforded regulated investment companies ("RICs") under the Code. As long as it
so qualifies, the Trust 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 shareholders. The Trust intends to distribute substantially all of such
income.
Dividends paid by the Trust 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 taxable to shareholders as
ordinary income. Distributions made from an excess of net long-term capital
gains over net short-term capital losses ("capital gain dividends") are taxable
to shareholders as long-term capital gains, regardless of the length of time
the shareholder has owned Trust shares. Any loss upon the sale or exchange of
Trust 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 Trust'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).
Dividends are taxable to shareholders even though they are reinvested in
additional shares of the Trust. Not later than 60 days after the close of its
taxable year, the Trust will provide its shareholders with a written notice
designating the amounts of any ordinary income dividends or capital gain
dividends. Distributions by the Trust, whether from ordinary income or capital
gains, will not be eligible for the dividends received deduction allowed to
corporations under the Code. If the Trust pays a dividend in January which was
declared in the previous October, November or December to shareholders of
record on a specified date in one of such months, then such dividend will be
treated for tax purposes as being paid by the Trust and received by its
shareholders on December 31 of the year in which such dividend was declared.
If the value of assets held by the Trust 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 Trust shares, and any shareholders disposing of shares
at that time may recognize a capital loss. Distributions, including
distributions reinvested in additional shares of the Trust, will nonetheless be
fully taxable, even if the number of shares in shareholders' accounts has been
reduced as described above.
Ordinary income dividends paid to shareholders who are nonresident aliens or
foreign entities will be subject to a 30% U.S. withholding tax under existing
provisions of the Code applicable to foreign individuals and entities unless a
reduced rate of withholding or a withholding exemption is provided under
applicable
18
<PAGE>
treaty law. Nonresident shareholders are urged to consult their own tax
advisors concerning the applicability of the U.S. withholding tax.
Dividends and interest received by the Trust may give rise to withholding and
other taxes imposed by foreign countries. Tax conventions between certain
countries and the United States may reduce or eliminate such taxes.
Under certain provisions of the Code, some shareholders may be subject to a
31% withholding tax on ordinary income dividends, capital gain dividends and
redemption payments ("backup withholding"). Generally, shareholders subject to
backup withholding will be those for whom no certified taxpayer identification
number is on file with 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.
A loss realized on a sale or exchange of shares of the Trust will be
disallowed if other Trust shares are acquired (whether through the automatic
reinvestment of dividends or otherwise) within a 61-day period beginning 30
days before and ending 30 days after the date that the shares are disposed of.
In such a case, the basis of the shares acquired will be adjusted to reflect
the disallowed loss.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections
and the Treasury regulations promulgated thereunder. The Code and the Treasury
regulations are subject to change by legislative, judicial or administrative
action either prospectively or retroactively.
Ordinary income and capital gain dividends may also be subject to state and
local taxes.
Certain states exempt from state income taxation dividends paid by RICs that
are derived from interest on U.S. Government obligations. State law varies as
to whether dividend income attributable to U.S. Government obligations is
exempt from state income tax.
Shareholders are urged to consult their own 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 Trust.
ORGANIZATION OF THE TRUST
The Trust was organized on May 14, 1987 under the laws of the Commonwealth of
Massachusetts. The Trust is a successor to a Massachusetts business trust of
the same name organized on January 21, 1975. It is a no-load, diversified,
open-end investment company. The Declaration of Trust of the Trust permits the
Trustees to issue an unlimited number of full and fractional shares of
beneficial interest of a single class. Upon liquidation of the Trust,
shareholders are entitled to share pro rata in the net assets of the Trust
available for
19
<PAGE>
distribution to shareholders. Shares are fully paid and nonassessable by the
Trust. Shareholders are entitled to one vote for each full share held and
fractional votes for fractional shares held and vote in the election of the
Trustees and on other matters submitted to a vote of shareholders.
The Declaration of Trust of the Trust 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 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.
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, FL 32232-5290
The written notification should include the shareholder's name, address, tax
identification number and Merrill Lynch and/or mutual fund account numbers. If
you have any questions regarding this please call your Merrill Lynch Financial
Consultant or Merrill Lynch Financial Data Services, Inc. at (800) 221-7210.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Trust at the address or
telephone number set forth on the cover page of this Prospectus.
----------------
The Declaration of Trust establishing the Trust, dated May 14, 1987, 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 Ready Assets 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.
20
<PAGE>
TYPE OF
ACCOUNT
Check appropriate
box:
[_] Single
[_] Joint
[_] UGMA/UTMA
[_] Estate
[_] Trust*
[_] Corporation*
[_] Partnership*
[_] Transfer On
Death*
[_] Other* ____
FOR CERTAIN ACCOUNTS
(*) ADDITIONAL
DOCUMENTATION MAY
BE REQUIRED, PLEASE
SEE ADDITIONAL
INFORMATION ON
PAGE 23
MERRILL LYNCH READY ASSETS TRUST PURCHASE APPLICATION
[ ][ ][ ] - [ ][ ][ ][ ][ ]
READY ASSETS TRUST ACCOUNT NUMBER
(IF ACCOUNT IS ALREADY ESTABLISHED)
ACCOUNT OWNER(S) AND OTHER INFORMATION
INDIVIDUAL OR JOINT ACCOUNT
________________________________________________________________________________
First Name MI Last Name
Tax ID or Social Security No.
________________________________________________________________________________
Joint Tenant's First Name
MI Last Name
Joint tenants with rights of survivorship (not tenants in common) will be
presumed unless otherwise specified. No joint tenants with right of
survivorship registrations are permitted for residents of Louisiana.
- --------------------------------------------------------------------------------
GIFT/TRANSFER TO MINOR ACCOUNTS--UGMA/UTMA
________________________________________________________________________________
Custodian's Name (one only)
Under Uniform Gift/Transfer to Minors Act of (State)
________________________________________________________________________________
Minor's Name (one only) Minor's Social Security Number
- --------------------------------------------------------------------------------
CORPORATE, PARTNERSHIP, TRUST OR OTHER ACCOUNTS
________________________________________________________________________________
Exact Name of Corporation, Partnership, Trust or other Organization
Taxpayer Identification Number
________________________________________________________________________________
Trustee Accounts Only: Name(s) of all Trustee(s) required by trust agreement to
sell/purchase shares
________________________________________________________________________________
Date of Trust Agreement Taxpayer Identification Number of Trust
________________________________________________________________________________
Name of Trust (Trust Registrations only)
For the benefit of (Name of Beneficiary)
For multiple trustees, provide additional names required in registration on a
separate sheet and attach.
- --------------------------------------------------------------------------------
MAILING ADDRESS
________________________________________________________________________________
Street Address Apt. Number
________________________________________________________________________________
City State Zip
( ) ( )
________________________________________________________________________________
Daytime Phone Home Phone
Citizenship
[_] US
[_] Resident Alien
[_] Non Resident Alien (indicate Country of residence)
__________________
21
<PAGE>
CHECK
REDEMPTION
PRIVILEGE
Check box [_]
I hereby request and authorize Merrill Lynch Financial Data Services, Inc. (the
"Transfer Agent") to honor checks drawn by me on my Merrill Lynch Ready Assets
Trust (the "Trust") account subject to acceptance by the Trust, with payment
therefor to be made by redeeming sufficient shares in my account without a
signature guarantee. The Transfer Agent and the Trust do hereby reserve all of
their lawful rights for honoring checks drawn by me and for effecting
redemptions pursuant to the Check Redemption Privilege. I understand that this
election does not create a checking or other bank account relationship between
myself and the Transfer Agent or the Trust and that the relationship between
myself and the Transfer Agent is that of shareholder-transfer agent.
For Joint Account: Check here whether any owner [_] is authorized, or all
owners [_] are required to sign checks.
If you select the Check Redemption Privilege, a supply of checks imprinted with
your name and shareholder account number will be sent to you in approximately
10 days. YOU SHOULD BE CERTAIN THAT A SUFFICIENT NUMBER OF SHARES ARE HELD BY
THE TRANSFER AGENT IN YOUR ACCOUNT TO COVER THE AMOUNT OF ANY CHECK DRAWN BY
YOU. IF INSUFFICIENT SHARES ARE IN THE ACCOUNT, THE CHECK WILL BE RETURNED
MARKED INSUFFICIENT FUNDS.
Since the aggregate dollar value of your account fluctuates daily, the total
value of your account cannot be determined in advance and the account cannot be
fully redeemed by check. If the Check Redemption Privilege is being requested
for an account in the name of a corporation, trust or other organization,
additional documents will be required. (See ADDITIONAL INFORMATION on pg. 23)
- --------------------------------------------------------------------------------
FEDERAL
FUNDS
REDEMPTION
Check box [_]
Signature Guarantee
required for this
option
The undersigned hereby authorize(s) and direct(s) Merrill Lynch Financial Data
Services, Inc. (the "Transfer Agent") to act on telephonic, telegraphic, or
other instructions (without signature guarantee) from any person representing
himself to be either the investor or any authorized representative of the
investor, directing redemption of shares in an amount of $5,000.00 or more of
Merrill Lynch Ready Assets Trust (the "Trust") held by the Transfer Agent on
behalf of the undersigned, and to transmit the proceeds by wire only to the
bank account designated below. Any change in the bank account designated to
receive redemption proceeds shall require a signature guarantee. A national
bank, trust company or a member of the Federal Reserve system may guarantee a
signature. A commercial bank or trust company located in or having a
correspondent in New York City, a member firm of a national securities exchange
or a member of the National Association of Securities Dealers, Inc. may also
guarantee a signature. PLEASE NOTE THAT A NOTARY PUBLIC'S SEAL DOES NOT
CONSTITUTE A SIGNATURE GUARANTEE. The investor understands and agrees that the
Trust and the Transfer Agent reserve the right to refuse any instructions. The
Transfer Agent requires additional documentation from corporations,
partnerships, trustees and similar institutional investors in addition to this
authorization (see ADDITIONAL INFORMATION on pg. 23 to establish this
privilege). Absent its own negligence, and so long as reasonable procedures to
confirm the validity of telephoned instructions are employed, neither the Trust
nor the Transfer Agent shall be liable for any redemption caused by
unauthorized instructions. Investors may effect notice of this type of
redemption by telephoning the Transfer Agent toll-free at (800) 221-7210.
Shares which are being repurchased through securities dealers will not qualify
for Federal Funds redemption.
PLEASE PROVIDE THE FOLLOWING INFORMATION IF THE ABOVE BOX IS CHECKED. Your bank
must be a member of the Federal Reserve or have a correspondent banking
relation with a bank that does belong to the Federal Reserve.
ENCLOSE A COPY OF YOUR PERSONAL CHECK (MARKED "VOID") FOR THE BANK ACCOUNT
LISTED BELOW:
________________________________________________________________________________
Your Bank Name Bank Routing Code
________________________________________________________________________________
Your Account Name Your Account Number
________________________________________________________________________________
Your Bank Address City State Zip Code
________________________________________________________________________________
Correspondent Bank Name Routing Code
(complete if your bank is not a member of the Federal Reserve)
22
<PAGE>
ACCRUED MONTHLY
PAYOUT PLAN
Check box [_]
The undersigned hereby authorizes and directs Merrill Lynch Financial Data
Services, Inc. to redeem on the last Friday of the month all shares purchased
during such month through the daily reinvestment of dividends and distributions
and send the proceeds to me.
- --------------------------------------------------------------------------------
SYSTEMATIC
WITHDRAWAL PLAN
Check box [_]
Signature Guarantee
required for this
option.
To establish this feature, minimum balance requirements are: $10,000.00 for
monthly disbursements and $5,000.00 for quarterly disbursements of shares in
Merrill Lynch Ready Assets Trust at cost or current offering price. IN
ADDITION, YOUR SIGNATURE(S) MUST BE GUARANTEED TO ESTABLISH THIS PLAN. A
national bank, trust company or a member of the Federal Reserve system may
guarantee a signature. A commercial bank or trust company located in or having
a correspondent in New York City, a member firm of a national securities
exchange or a member of the National Association of Securities Dealers, Inc.
may also guarantee a signature. PLEASE NOTE THAT A NOTARY PUBLIC'S SEAL DOES
NOT CONSTITUTE A SIGNATURE GUARANTEE. This option is only available if you do
not select the Accrued Monthly Payout Plan. The undersigned hereby authorizes
and directs Merrill Lynch Financial Data Services, Inc. on (check only one in
each category):
A: [_]the 24th of each month OR
[_]March 24th, June 24th, September 24th and December 24th
B: [_]to redeem a sufficient number of shares in my account to generate
redemption
proceeds of $ OR
[_]to redeem % of the shares in my account on such date.
C: [_]Pay the redemption proceeds by check payable to the order of
the registered owner(s) OR
[_]other
________________________________________________________________________________
Name
________________________________________________________________________________
Address
________________________________________________________________________________
City Zip Code
State
- --------------------------------------------------------------------------------
ADDITIONAL
INFORMATION
. Corporations--"Certification of Corporate Resolution," indicating the names
and titles of officers authorized to write checks, must be signed by an
officer other than one empowered to execute transactions, with his/her
signature guaranteed and the corporate seal affixed.
. Partnerships--"Certificate of Partnership," naming the partners and the
required number that may act in accordance with the terms of the Partnership
Agreements is to be executed by a general partner with his/her signature
guaranteed.
. Trusts--"Certification of Trustees," naming the trustees and the required
number that may act in accordance with the terms of the Trust Agreement, must
be executed by a certifying trustee with his/her signature guaranteed.
. Transfer On Death--"Transfer on Death Beneficiary Form," must be completed by
the account holder(s) with the signature(s) guaranteed.
. If you are adding or reinstating the Federal Funds Redemption and/or the
Systematic Withdrawal Plan options, the signature(s) must be guaranteed in
the space provided below. A national bank, trust company or a member of the
Federal Reserve system may guarantee a signature. A commercial bank or trust
company located in or having a correspondent in New York City, a member firm
of a national securities exchange or a member of the National Association of
Securities Dealers, Inc. may also guarantee a signature. PLEASE NOTE THAT A
NOTARY PUBLIC'S SEAL DOES NOT CONSTITUTE A SIGNATURE GUARANTEE.
23
<PAGE>
REQUIRED
SIGNATURES
By the execution of this Purchase Application, the investor represents and
warrants that the investor has full right, power and authority to make the
investment applied for pursuant to this Application, and the person or persons
signing on behalf of the investor represent and warrant that they are duly
authorized to sign this Application and to purchase or redeem shares of Merrill
Lynch Ready Assets Trust (the "Trust") on behalf of the investor. The investor
hereby affirms that he or she has received a current Trust Prospectus and
appoints Merrill Lynch Financial Data Services, Inc. as his or her agent to
receive dividends and distributions for their automatic reinvestment in
additional Trust shares.
X ______________________ ________________________ ______
Print Name Signature of Investor Date
X ______________________ ________________________ ______
Print Name Signature of Joint Registrant, if any Date
Signature(s) Guaranteed: (for those electing the Federal Funds Redemption or
Systematic Withdrawal Plan)
AFFIX SIGNATURE GUARANTEE HERE:
By: ________________________________
(Authorized Signatory)
- --------------------------------------------------------------------------------
TAX CERTIFICATION
Under penalties of perjury, I certify that:
1. The number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me), and 2. I am not subject to
backup withholding (as discussed in the Prospectus under "Additional
Information--Taxes") either because: (a) I am exempt from backup withholding,
or (b) I have not been notified by the Internal Revenue Service (the "IRS")
that I am subject to backup withholding as a result of failure to report all
interest or dividends, or (c) the IRS has notified me that I am no longer
subject to backup withholding.
[_] Please check box and write in the word exempt if you are exempt from backup
withholding. _________
CERTIFICATION INSTRUCTIONS: You must cross out item 2 above if you have been
notified by the IRS that you are currently subject to backup withholding
because of underreporting interest or dividends on your tax return. By your
signature below, you authorize the furnishing of this certification to other
mutual funds sponsored by Merrill Lynch Asset Management or its affiliates.
X ______________________ ______ ________________________
Signature Date Title (For Special Accounts, e.g. Trustee)
24
<PAGE>
[This page is intentionally left blank.]
25
<PAGE>
[This Page Intentionally Left Blank]
26
<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 DEALER, SALESMAN, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMA-
TION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PRO-
SPECTUS, IN CONNECTION WITH THE OFFER 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 OF-
FERING 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
Methods of Payment........................................................ 11
Distribution Plan......................................................... 12
Redemption of Shares....................................................... 12
Methods of Redemption..................................................... 13
Shareholder Services....................................................... 15
Fee-Based Programs........................................................ 16
Portfolio Transactions..................................................... 17
Additional Information..................................................... 17
Dividends................................................................. 17
Determination of Net Asset Value.......................................... 17
Taxes..................................................................... 18
Organization of the Trust................................................. 19
Shareholder Reports....................................................... 20
Shareholder Inquiries..................................................... 20
Purchase Application....................................................... 21
</TABLE>
Code # 10053-0497
[LOGO] MERRILL LYNCH
Merrill Lynch
Ready Assets Trust
[ART]
PROSPECTUS
April 25, 1997
Distributor:
Merrill Lynch
Funds Distributor, Inc.
This prospectus should be retained for future reference.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MERRILL LYNCH READY ASSETS TRUST
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 . PHONE NO. (609) 282-2800
-------------------------
The Trust is a no-load money market fund, organized as a Massachusetts
business trust, that seeks preservation of capital, liquidity and the highest
possible current income consistent with the foregoing objectives available from
investing in a diversified portfolio of short-term money market securities.
Portfolio securities principally consist of short-term U.S. Government
securities, U.S. Government agency securities, bank money instruments,
corporate debt instruments, including commercial paper and variable amount
master demand notes, and repurchase and reverse repurchase agreements. The
Trust shares common goals with those investors who seek to put reserve assets
to work in an income producing and prudent manner and to make those assets
readily available without penalty. There can be no assurance that the
investment objectives of the Trust will be realized. The Trust pays Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") a distribution fee
for providing certain services in connection with the distribution of Trust
shares. See "Purchase of Shares."
-------------------------
This Statement of Additional Information of the Trust is not a prospectus and
should be read in conjunction with the prospectus of the Trust, dated April 25,
1997 (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 Trust at the above telephone number or address. This
Statement of Additional Information has been incorporated by reference into the
Prospectus.
-------------------------
MERRILL LYNCH ASSET MANAGEMENT -- MANAGER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC. -- DISTRIBUTOR
-------------------------
The date of this Statement of Additional Information is April 25, 1997.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the Trust are to seek preservation of capital,
liquidity and the highest possible current income consistent with these
objectives 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 Trust.
As discussed in the Prospectus, the Trust may invest in U.S. dollar-
denominated obligations of U.S. and foreign depository institutions, including
commercial and savings banks and savings and loan associations. The obligations
may be issued by U.S. or foreign depository institutions, foreign branches or
subsidiaries of U.S. depository institutions ("Eurodollar" obligations), U.S.
branches or subsidiaries of foreign depository institutions ("Yankeedollar"
obligations) or foreign branches or subsidiaries of foreign depository
institutions. Obligations of foreign depository institutions, their branches
and subsidiaries, and Eurodollar and Yankeedollar obligations may involve
investment risks additional to the risks of obligations of U.S. institutions.
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 that might adversely affect the payment of principal and
the payment of interest. Generally, the issuers of such obligations are subject
to fewer regulatory requirements than are applicable to U.S. banks. Foreign
depository institutions, their branches or subsidiaries, and foreign branches
or subsidiaries of U.S. banks may be subject to less stringent reserve
requirements than U.S. banks. U.S. branches or subsidiaries of foreign banks
are subject to the reserve requirements of the state in which they are located.
There may be less publicly available information about a foreign bank or a
branch or subsidiary of a foreign bank than about a U.S. institution, and such
branches or subsidiaries may not be subject to the same accounting, auditing
and financial record keeping standards and requirements as U.S. banks. Evidence
of ownership of foreign depository and Eurodollar obligations may be held
outside of the United States and the Trust may be subject to the risks
associated with the holding of such property overseas. Foreign depository and
Eurodollar obligations of the Trust held overseas will be held by foreign
branches of the Custodian for the Trust's portfolio securities or by other U.S.
or foreign banks under subcustodian arrangements complying with the
requirements of the Investment Company Act of 1940, as amended (the "Investment
Company Act"). The Trust's manager, Merrill Lynch Asset Management, L.P. (the
"Manager" or "MLAM"), will consider the above factors in making investments in
foreign depository, 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 Trust will limit its
foreign depository and Yankeedollar investments to obligations of banks
organized in Canada, France, Germany, Japan, the Netherlands, Switzerland, the
United Kingdom and other western industrialized nations. As discussed in the
Prospectus, the Trust 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 generally involve the same risks as those described above in
connection with investments in Eurodollar and Yankeedollar obligations and
obligations of foreign depository institutions and their foreign branches and
subsidiaries.
2
<PAGE>
Also as discussed in the Prospectus, the Trust may invest in money market
securities pursuant to repurchase agreements or purchase and sale contracts.
Repurchase agreements and purchase and sale contracts may be entered into only
with a member bank of the Federal Reserve System or a primary dealer in U.S.
Government securities or an affiliate thereof. Under such agreements, the bank
or primary dealer (or the affiliate) agrees, on 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. In the
case of repurchase agreements, the prices at which the trades are conducted do
not reflect accrued interest on the underlying obligation; whereas, in the case
of purchase and sale contracts, the prices take into account accrued interest.
Such agreements usually cover short periods, such as under one week. 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 case of a
repurchase agreement, the Trust 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; the Trust does
not have the right to seek additional collateral in the case of purchase and
sale contracts. 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 Trust but only constitute collateral for the seller's
obligation to pay the repurchase price. Therefore, the Trust may suffer time
delays and incur costs or possible losses in connection with the disposition of
the collateral. A purchase and sale contract differs from a conventional
repurchase agreement in that the contract arrangements stipulate that the
securities are owned by the Trust and, if the seller should fail to repurchase
the security, the Trust retains ownership of the security. The Trust would also
retain ownership of the securities in the event of a default under a repurchase
agreement that is construed not to be a collateralized loan. In the event of a
default under such a repurchase agreement or under a purchase and sale
contract, instead of the contractual fixed rate of return, the rate of return
to the Trust shall be dependent on intervening fluctuations of the market value
of such security and accrued interest on the security. In such event, the Trust
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. While the substance of purchase and sale contracts is similar to
repurchase agreements, because of the different treatment with respect to
accrued interest and additional collateral, management believes that purchase
and sale contracts are not repurchase agreements as such term is understood in
the banking and brokerage community, although they are considered repurchase
agreements for purposes of the Investment Company Act.
The Trust's investments in short-term "Government Securities" (as defined in
Commission regulations) will be in instruments with a remaining maturity of 762
days (25 months) or less. The Trust'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 six NRSROs: Duff & Phelps Credit Rating Co.,
Fitch Investors Service, Inc., IBCA Limited and its affiliate, IBCA Inc.,
Thompson Bankwatch, Inc., Moody's Investors Service, Inc. and Standard & Poor's
Ratings Services. The Trust will determine the remaining maturity of its
investments in accordance with Commission regulations.
3
<PAGE>
In addition to the investment restrictions set forth in the Prospectus, the
Trust 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
Trust'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 Trust may not (1) make investments for the purpose of exercising
control or management; (2) purchase securities of other investment companies,
except in connection with a merger, consolidation, acquisition or
reorganization; (3) purchase or sell real estate (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; (4) purchase any securities on
margin, except for use of short-term credit necessary for clearance of
purchases and sales of portfolio securities; (5) make short sales of securities
or maintain a short position or write, purchase or sell puts, calls, straddles,
spreads or combinations thereof; (6) make loans to other persons, provided that
the Trust 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 (7) below; (7) lend its portfolio securities in excess of 20% of
its total assets, taken at market value, provided that such loans are made
according to the guidelines of the Securities and Exchange Commission and the
Trust's Board of Trustees, including maintaining collateral from the borrower
equal at all times to the current market value of the securities loaned; (8)
borrow amounts in excess of 20% of its total assets, taken at market value, and
then only from banks as a temporary measure for extraordinary or emergency
purposes (the borrowing provisions shall not apply to reverse repurchase
agreements with respect to which see (12) below) (usually only "leveraged"
investment companies may borrow in excess of 5% of their assets; however, the
Trust will not borrow to increase income but only to meet redemption requests
which might otherwise require untimely dispositions of portfolio securities;
interest paid on such borrowings will reduce net income); (9) mortgage, pledge,
hypothecate or in any manner transfer (except as provided in (7) above), as
security for indebtedness any securities owned or held by the Trust except as
may be necessary in connection with borrowings mentioned in (8) above, and then
such mortgaging, pledging or hypothecating may not exceed 25% of the Trust's
total assets, taken at market value (although the Trust has the authority to
mortgage, pledge or hypothecate up to 25% of total assets under this investment
restriction (9), as a matter of operating policy, it will not mortgage, pledge
or hypothecate in excess of 10% of net assets in order to comply with the
requirements of certain state securities commissions); (10) invest in
securities (except for repurchase agreements, purchase and sale contracts or
variable amount master demand notes) with legal or contractual restrictions on
resale or for which no readily available market exists or in securities of
issuers (other than issuers of U.S. Government agency securities) having a
record, together with predecessors, of less than three years of continuous
operation if, regarding all such securities, more than 5% of its total assets,
taken at market value, would be invested in such securities; (11) act as an
underwriter of securities; (12) enter into reverse repurchase agreements if, as
a result thereof, the Trust's obligations with respect to reverse repurchase
agreements would exceed one-third of the Trust's net assets (defined to be
total assets, taken at market value, less liabilities other than reverse
repurchase agreements). The Trust will not purchase securities while borrowings
described in investment restriction (8) are outstanding except to honor prior
commitments.
Lending of Portfolio Securities. Subject to investment restriction (7) above,
the Trust may from time to time loan securities from its portfolio to brokers,
dealers and financial institutions and receive collateral in cash or cash
equivalents which will be maintained at all times in an amount equal to at
least 100% of the
4
<PAGE>
current market value of the loaned securities. Such collateral will be invested
in short-term securities, the income from which will increase the return to the
Trust. The Trust will retain all rights of beneficial ownership as to the
loaned portfolio securities, including voting rights and rights to interest or
other distributions, and will have the right to regain record ownership of
loaned securities to exercise such beneficial rights. Such loans will be
terminable at any time. The Trust may pay reasonable fees to persons
unaffiliated with the Trust in connection with the arranging of such loans.
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS
Information about the Trustees and executive officers of the Trust, including
their ages and their principal occupations for at least the last five years, is
set forth below. Unless otherwise noted, the address of each executive officer
and Trustee is c/o P.O. Box 9011, Princeton, New Jersey 08543-9011.
Arthur Zeikel (64)--President and Trustee(1)(2)--President of the Manager
(which term as used herein includes its corporate predecessors) since 1977;
President of Fund Asset Management, L.P. ("FAM", which term as used herein
includes its corporate predecessors) since 1977; President and Director of
Princeton Services, Inc. ("Princeton Services") since 1993; Executive Vice
President of Merrill Lynch & Co., Inc. ("ML & Co.") since 1990; Director of
Merrill Lynch Funds Distributor, Inc. (the "Distributor") since 1977.
Donald Cecil (70)--Trustee(2)--1114 Avenue of the Americas, New York, New
York 10036. Special Limited Partner of Cumberland Partners (an investment
partnership) since 1982; Member of Institute of Chartered Financial Analysts;
Member and Chairman of Westchester County (N.Y.) Board of Transportation.
M. Colyer Crum (64)--Trustee(2)--Soldiers Field Road, Boston, Massachusetts
02163. Currently James R. Williston Professor of Investment Management
Emeritus, Harvard Business School; James R. Williston Professor of Investment
Management, Harvard Business School, from 1971 to 1996; Director of Cambridge
Bancorp, Copley Properties, Inc. and Sun Life Assurance Company of Canada.
Edward H. Meyer (70)--Trustee(2)--777 Third Avenue, New York, New York 10017.
President of Grey Advertising Inc. since 1968, Chief Executive Officer since
1970 and Chairman of the Board of Directors since 1972; Director of The May
Department Stores Company, Bowne & Co., Inc. (financial printers), Ethan Allen
Interiors, Inc. and Harman International Industries, Inc.
Jack B. Sunderland (68)--Trustee(2)--P.O. Box 7, West Cornwall, Connecticut
06796. President and Director of American Independent Oil Company, Inc. (an
energy company) since 1987; Member of Council on Foreign Relations since 1971.
J. Thomas Touchton (58)--Trustee(2)--Suite 3405, One Tampa City Center,
Tampa, Florida 33602. Managing Partner of The Witt-Touchton Company and its
predecessor The Witt Co. (a private investment partnership) since 1972; Trustee
Emeritus of Washington and Lee University; Director of TECO Energy, Inc. (an
electric utility holding company).
5
<PAGE>
Terry K. Glenn (56)--Executive Vice President(1)(2)--Executive Vice President
of the Manager and FAM since 1983; Executive Vice President and Director of
Princeton Services since 1993; President of the Distributor since 1986 and
Director thereof since 1991; President of Princeton Administrators, L.P. since
1988.
Joseph T. Monagle, Jr. (48)--Senior Vice President(1)(2)--Senior Vice
President of the Manager and FAM since 1990; Vice President of the Manager from
1978 to 1990; Senior Vice President of Princeton Services since 1993.
Donald C. Burke (36)--Vice President(1)(2)--Vice President and Director of
Taxation of the Manager since 1990.
John Ng (43)--Vice President(1)--Vice President of the Manager since 1984.
Gerald M. Richard (47)--Treasurer(1)(2)--Senior Vice President and Treasurer
of the Manager and FAM since 1984; Senior Vice President and Treasurer of
Princeton Services since 1993; Vice President of the Distributor since 1981 and
Treasurer since 1984.
- --------
(1) Interested person, as defined in the Investment Company Act, of the Trust.
(2) Such Trustee or officer is a director or officer of certain other
investment companies for which the Manager or FAM acts as investment
adviser.
At March 31, 1997, the Trustees and the officers of the Trust as a group (11
persons) owned an aggregate of less than 1% of the outstanding shares of
beneficial interest of the Trust. At such date, Mr. Zeikel, an officer and
Trustee of the Trust, and the other officers of the Trust, owned less than 1%
of the outstanding shares of 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 all 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 non-
interested Trustee an annual fee of $14,000 plus a fee of $2,000 for each
meeting attended and pays all Trustees' actual out-of-pocket expenses relating
to attendance at meetings. Additionally, the Trust has established an Audit and
Nominating Committee of the Board of Trustees of which all of the unaffiliated
Trustees are members. Each member of such committee receives an annual fee of
$5,000 and the chairman of such committee receives an additional annual fee of
$2,500. The total fees and expenses of the non-interested Trustees aggregated
$137,722 for the fiscal year ended December 31, 1996.
6
<PAGE>
The following table sets forth, for the fiscal year ended December 31, 1996,
compensation paid by the Trust to the non-interested Trustees and, for the
calendar year ended December 31, 1996, the aggregate compensation paid by all
investment companies advised by MLAM and its affiliate, FAM ("MLAM/FAM Advised
Funds"), to the non-interested Trustees.
<TABLE>
<CAPTION>
AGGREGATE PENSION OR RETIREMENT TOTAL COMPENSATION FROM
NAME OF COMPENSATION BENEFITS ACCRUED AS PART TRUST AND MLAM/FAM
TRUSTEE FROM TRUST OF TRUST EXPENSES ADVISED FUNDS PAID TO TRUSTEES
- -------------- ------------ ------------------------ ------------------------------
<S> <C> <C> <C>
Donald Cec-
il(1) $29,500 None $268,933
M. Colyer
Crum(1) $27,000 None $117,600
Edward H. Mey-
er(1) $27,000 None $227,933
Jack B.
Sunderland(1) $27,000 None $128,100
J. Thomas
Touchton(1) $27,000 None $128,100
</TABLE>
- --------
(1) The Trustees serve on the boards of MLAM/FAM Advised Funds as follows: Mr.
Cecil (32 registered investment companies consisting of 32 portfolios),
Mr. Crum (14 registered investment companies consisting of 14 portfolios),
Mr. Meyer (32 registered investment companies consisting of 32
portfolios), Mr. Sunderland (16 registered investment companies consisting
of 25 portfolios) and Mr. Touchton (16 registered investment companies
consisting of 25 portfolios).
MANAGEMENT AND ADVISORY ARRANGEMENTS
Reference is made to "Management of the Trust--Management and Advisory
Arrangements" in the Prospectus for certain information concerning management
and advisory arrangements of the Trust.
Subject to the direction of the Board of Trustees, the Manager is
responsible for the actual management of the Trust's portfolio and constantly
reviews the Trust'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. The Manager
performs certain of the other administrative services and provides all of the
office space, facilities, equipment and necessary personnel for portfolio
management of the Trust.
The Manager has access to the expertise of its affiliate, Merrill Lynch
Government Securities, Inc. ("GSI"), which is a wholly-owned subsidiary of ML
& Co. In terms of dollar volume of trading, GSI is one of the largest dealers
in U.S. Government securities and U.S. Government agency securities, acting
both as a primary dealer and a secondary market trader. GSI is one of the
reporting dealers in U.S. Government securities who report their daily
position and activity to the Federal Reserve Bank of New York. A subsidiary of
GSI acts as a dealer in other money market securities including bankers'
acceptances, certificates of deposit and commercial paper. In addition, the
total securities and economic research facilities of Merrill Lynch are
available to the Manager.
Securities held by the Trust also may 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 adviser or
by investment advisory clients of the Manager. Because of different objectives
or other factors, a particular security may be bought for one or more clients
when one or more clients are selling the same security. If purchases or sales
of securities for the Trust or other advisory clients arise for consideration
at or about the same time, transactions in such securities will be made,
insofar as feasible, for the respective funds and clients
7
<PAGE>
in a manner deemed equitable to all. To the extent that transactions on behalf
of more than one client of the Manager or its subsidiary 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 to the Trust, the Manager receives a fee
from the Trust at the end of each month at the following annual rates:
Portion of average daily value of net assets:
<TABLE>
<CAPTION>
RATE
------
<S> <C>
Not exceeding $500 million............................................ 0.500%
In excess of $500 million but not exceeding $1 billion................ 0.400%
In excess of $1 billion but not exceeding $5 billion.................. 0.350%
In excess of $5 billion but not exceeding $10 billion................. 0.325%
In excess of $10 billion but not exceeding $15 billion................ 0.300%
In excess of $15 billion but not exceeding $20 billion................ 0.275%
In excess of $20 billion.............................................. 0.250%
</TABLE>
The Manager is obligated to provide investment advisory services, to furnish
administrative services, office space and facilities for management of the
Trust's affairs, to pay all compensation of officers of the Trust as well as
all Trustees of the Trust who are affiliated persons of ML & Co. and its
subsidiaries, and to bear the costs and expenses of the advertising of the
Trust. The Trust pays all other expenses incurred in the operation of the Trust
(except for certain expenses incurred by the Distributor--see "Purchase of
Shares"), including, among other things, taxes, expenses for legal, auditing
and accounting services, allocated portions of clerical salaries related to
Trust activities, costs of printing of prospectuses and statements of
additional information (to the extent not paid by the Distributor), shareholder
reports and proxy statements, charges of the custodian and transfer agent,
expenses of redemption of shares, expenses of registering and qualifying shares
for sale under Federal, state and other laws, costs of conducting shareholder
relations, fees and actual out-of-pocket expenses of unaffiliated Trustees,
interest, brokerage costs and other expenses properly payable by the Trust.
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 December 31, 1996, $370,559 was required to be reimbursed.
For information as to the fee to be paid by the Trust to Merrill Lynch
pursuant to the Shareholder Servicing Plan and Agreement, see the Prospectus
under "Purchase of Shares--Distribution Plan" and below under "Purchase of
Shares--Distribution Plan".
The Manager is a limited partnership, the partners of which are ML & Co. and
Princeton Services. 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
8
<PAGE>
of the outstanding voting shares of the Trust and (b) by a majority of Trustees
who are not parties to such contract or "interested persons" (as defined in the
Investment Company Act) of any such party. Such contract is not assignable and
may be terminated without penalty on 60 days' written notice at the option of
either party thereto or by the vote of the shareholders of the Trust.
PURCHASE OF SHARES
Reference is made to "Purchase of Shares" in the Prospectus for certain
information as to the purchase of Trust shares.
The Trust is offering its shares without a sales charge at a public offering
price equal to the net asset value next determined after a purchase order
becomes effective. Share purchase orders are effective on the day Federal Funds
become available to the Trust. The Trustees anticipate that the net asset value
will remain constant at $1.00 per share and that fluctuations in value will be
reflected in the number of outstanding shares in the shareholder's account
rather than in the per share dollar value. See "Determination of Net Asset
Value." Generally, the minimum initial purchase is $5,000 and the minimum
subsequent purchase is $1,000. The minimum initial purchase with respect to
pension, profit sharing, individual retirement and certain other retirement
plans is $100 and the minimum subsequent purchase in connection with such plans
is $1. The minimum initial or subsequent purchase requirements may be waived
for certain employer sponsored retirement or savings plans, such as tax
qualified retirement plans within the meaning of Section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), deferred compensation plans
within the meaning of Section 403(b) and Section 457 of the Code, other
deferred compensation arrangements, Voluntary Employee Benefits Association
("VEBA") plans, and non-qualified After Tax Savings and Investment programs,
maintained on the Merrill Lynch Group Employee Services system, referred to
herein and in the Prospectus as "Employer Sponsored Retirement or Savings
Plans." For accounts advised by banks and registered investment advisers,
including the Manager, the minimum initial purchase is $300 and the minimum
subsequent purchase is $100. Any order may be rejected by the Distributor or
the Trust.
The Distributor acts as the distributor in the continuous offering of the
Trust's shares. Shares may be purchased directly from the Distributor or from
other securities dealers, including Merrill Lynch, with whom the Distributor
has entered into a selected dealer agreement. Securities dealers may charge
investors a fee in connection with such transactions. Merrill Lynch has
informed the Trust that it does not charge such a fee.
The Trust's distribution agreement with the Distributor is renewable
annually, and may be terminated upon 60 days' written notice by either party.
Under such agreement, 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 dealers and investors. The Distributor also
will pay for other supplementary sales literature.
It is the Trust's policy to be invested as fully as reasonably practicable at
all times to maximize the yield on the Trust's portfolio. The money markets in
which the Trust will purchase and sell portfolio securities normally require
immediate settlement of transactions in Federal Funds. Federal Funds are a
commercial bank's deposits in a Federal Reserve Bank and can be transferred
from one member bank's account to that of another member bank on the same day
and thus are considered to be immediately available funds. Orders for
9
<PAGE>
the purchase of Trust shares shall become effective on the day Federal Funds
become available to the Trust and the shares being purchased will be issued at
the net asset value per share next determined. If Federal Funds are available
to the Trust 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.
DISTRIBUTION PLAN
The Trust has adopted a Shareholder Servicing Plan and Agreement (the "Plan")
in compliance with Rule 12b-1 under the Investment Company Act pursuant to
which the Trust is authorized to pay Merrill Lynch a fee at the annual rate of
0.125% of the average daily net asset value of Trust accounts maintained
through Merrill Lynch. The Plan reimburses Merrill Lynch only for actual
expenses incurred in the fiscal year in which the fee is paid. The fee is
principally to provide compensation to Merrill Lynch Financial Consultants and
other Merrill Lynch personnel for providing direct personal services to
shareholders of the Trust. Under the Plan, as amended to date, Merrill Lynch,
in its sole discretion, may expend out of the fee an amount not exceeding 0.01%
of the average daily net asset value as reimbursement for expenditures incurred
in advertising activities promoting the sale, marketing and distribution of the
shares of the Trust.
The Trustees believe that the Trust's expenditures under the Plan benefit the
Trust and its shareholders by providing better shareholder services and by
affecting positively the sale and distribution of Trust shares. For the fiscal
years ended December 31, 1994, 1995 and 1996, $7,661,910, $7,712,779 and
$8,008,404, respectively, was paid to Merrill Lynch pursuant to the Plan. All
of the amounts expended for the years ended December 31, 1994, 1995 and 1996
were allocated to Merrill Lynch Financial Consultants, other Merrill Lynch
personnel and related administrative costs.
Among other things, the Plan provides that Merrill Lynch shall provide and
the Trustees of the Trust shall review quarterly reports of the distribution
expenditures made by Merrill Lynch pursuant to the Plan. In their consideration
of the Plan, the Trustees must consider all factors they deem relevant,
including information as to the benefits of the Plan to the Trust and its
shareholders. The Plan further provides that, so long as the Plan remains in
effect, the selection and nomination of Trustees of the Trust 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. The Plan can be terminated at any time, without
penalty, by the vote of a majority of the Independent Trustees or by the vote
of the holders of a majority of the outstanding voting securities of the Trust.
Finally, the Plan cannot be amended to increase materially the amount to be
spent by the Trust thereunder without shareholder approval, and all material
amendments are required to be approved by vote of the Trustees of the Trust,
including a majority of the Independent Trustees, cast in person at a meeting
called for that purpose.
10
<PAGE>
REDEMPTION OF SHARES
Reference is made to "Redemption of Shares" in the Prospectus for certain
information as to the repurchase and redemption of Trust shares.
The right to redeem shares or to receive payment with respect to any such
redemption may be suspended 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 Trust of securities owned by it is not reasonably practicable or (B) it
is not reasonably practicable for the Trust 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 Trust. The Commission
shall by rules and regulations determine the conditions under which (i) trading
shall be deemed to be restricted and (ii) an emergency shall be deemed to exist
within the meaning of clause (2) above.
The total value of the shareholder's investment at the time of redemption may
be more or less than his or her cost, depending on the market value of the
securities held by the Trust at such time and income earned.
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 Board of Trustees of the Trust, the Manager is primarily
responsible for the Trust's portfolio decisions and the placing of the Trust's
portfolio transactions. In placing orders, it is the policy of the Trust to
obtain the best net results taking into account such factors as price
(including the applicable dealer spread), the 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 Trust will
not necessarily be paying the lowest spread or commission available. The
Trust's policy of investing in securities with short maturities will result in
high portfolio turnover.
The money market securities in which the Trust invests are traded primarily
in the over-the-counter ("OTC") market. Bonds and debentures usually are traded
OTC, but may be traded on an exchange. Where possible, the Trust 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 normally do not involve
either brokerage commissions or transfer taxes. The cost of executing portfolio
securities transactions of the Trust 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 an exemptive order
allowing such transactions is obtained from the Commission. Since OTC
transactions usually are principal transactions, affiliated persons of the
Trust, including GSI and Merrill Lynch, may not serve as the Trust's dealer in
connection with such transactions except pursuant to the
11
<PAGE>
exemptive orders described below. However, 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
principal transactions with GSI in U.S. Government and U.S. Government agency
securities and with a subsidiary of GSI in certificates of deposit and other
short-term money market instruments and commercial paper. This order contains a
number of conditions, including conditions designed to ensure that the price to
the Trust from GSI or its subsidiary is equal to or better than that available
from other sources. GSI and its subsidiary have informed the Trust that they
will in no way, at any time, attempt to influence or control the activities of
the Trust or the Manager in placing such principal transactions. The exemptive
order allows GSI or its subsidiary, Merrill Lynch Money Markets Inc., to
receive a dealer spread on any transaction with the Trust no greater than their
customary dealer spread for transactions of the type involved. Generally, such
spreads do not exceed 0.25% of the principal amount of the securities involved.
During the fiscal year ended December 31, 1994, the Trust engaged in 47 such
transactions aggregating approximately $2.0 billion. During the fiscal year
ended December 31, 1995, the Trust engaged in 48 such transactions aggregating
approximately $1.8 billion. During the fiscal year ended December 31, 1996, the
Trust engaged in 40 such transactions aggregating approximately $1.7 billion.
The Trustees of the Trust have considered the possibilities of recapturing
for the benefit of the Trust 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 orders described above could be offset
against the management fee payable by the Trust 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 Trust 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 economic data and market forecasts) to the Manager
may receive orders for transactions by the Trust. 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 shares of the Trust is determined by the Manager
once daily, immediately after the daily declaration of dividends, on each
business day 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 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 business day except for days on which both the NYSE
and New York banks are closed. Both the NYSE and New York banks are closed on
New Year's Day, Presidents' Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. The net asset value per share is computed
pursuant to the "penny-rounding" method by
12
<PAGE>
adding the value of all securities held by the Trust plus any cash or other
assets (including interest accrued but not yet received), deducting all
liabilities (including accrued expenses), dividing by the total number of
shares outstanding at such time and rounding the result to the nearest whole
cent. Expenses, including the fees payable to the Manager, are accrued daily.
The Trust 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 Trust are
valued at their fair value as determined in good faith by or under the
direction of the Board of Trustees.
In accordance with Commission regulations applicable to the valuation of its
portfolio securities, the Trust 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 Government Securities, as defined in those regulations, which may have
remaining maturities of up to 762 days (25 months). The Trust 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 Trust'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 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 that may result in the material dilution or other
unfair results to investors or existing shareholders, the Trust will take such
corrective action as it regards as necessary and appropriate, including the
reduction of the number of outstanding shares of the Trust by having each
shareholder proportionately contribute shares to the Trust'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 Trust's capital the number of shares
which represents their proportionate shares of the difference between the
portfolio's fair market value and net asset value based on $1.00 per share.
Each shareholder will be deemed to have agreed to such contribution by an
investment in the Trust.
Since the net income of the Trust (including realized gains and losses on the
portfolio securities) is determined and declared as a dividend immediately
prior to each time the net income of the Trust is determined, the net asset
value per share of the Trust normally remains at $1.00 per share immediately
after each such determination and dividend declaration. Any increase in the
value of a shareholder's investment in the Trust, representing the reinvestment
of dividend income, is reflected by an increase in the number of shares of the
Trust 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 Trust 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
13
<PAGE>
obtain the base period return, multiplying the result by 365 and then dividing
by seven. Under this calculation, the yield reflects realized gains and losses
on portfolio securities. In accordance with regulations adopted by the
Commission, the Trust 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 Trust'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 Trust 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 Trust shares for various
reasons may not be comparable to the yield on shares of other money market
funds or other investments.
SHAREHOLDER SERVICES
The Trust offers a number of shareholder services described below designed to
facilitate investment in its shares. Full details as to each such service and
copies of the various plans described below and instructions as to how to
participate in the various services or plans, or to change options with respect
thereto, can be obtained from the Trust, the Distributor or Merrill Lynch.
INVESTMENT ACCOUNT
Each shareholder whose account is maintained at Merrill Lynch Financial Data
Services, Inc. (the "Transfer Agent") has an Investment Account and will
receive monthly statements from the Transfer Agent showing any activity in his
or her account since the preceding statement. A shareholder may make additions
to his or her Investment Account at any time by purchasing shares at the
applicable public offering price either through his or her securities dealer,
by wire or by mail directly to the Transfer Agent, acting as agent for his or
her dealer. A shareholder may ascertain the number of shares in his or her
Investment Account by telephoning the Transfer Agent toll-free at (800) 221-
7210. The Transfer Agent will furnish this information only after the
shareholder has specified the name, address, account number and social security
number of the registered owner or owners.
In the interest of economy and convenience and because of the operating
procedures of the Trust, certificates representing the Trust's shares will not
be issued physically. Shares are maintained by the Trust on its register
maintained by the Transfer Agent and the holders thereof will have the same
rights and ownership with respect to such shares as if certificates had been
issued.
AUTOMATIC INVESTMENT PLAN
The Trust offers an Automatic Investment Plan in connection with accounts
maintained at the Transfer Agent whereby the Transfer Agent is authorized
through preauthorized checks of $50 or more to charge the
14
<PAGE>
regular bank account of the shareholder on a regular basis to provide
systematic additions to the Investment Account of such shareholder. See the
Purchase Application in the Prospectus. A shareholder's Automatic Investment
Plan may be terminated at any time without charge or penalty by the
shareholder, the Trust, the Transfer Agent or the Distributor.
ACCRUED MONTHLY PAYOUT PLAN
The dividends of the Trust are reinvested automatically in additional shares.
Shareholders with accounts maintained at the Transfer Agent desiring cash
payments may enroll in the Accrued Monthly Payout Plan, under which shares
equal in number to shares credited through the automatic reinvestment of
dividends and distributions during each month are redeemed at net asset value
on the last Friday of such month in order to meet the monthly distribution.
Investors may open an Accrued Monthly Payout Plan by completing the appropriate
portion of the Purchase Application in the Prospectus. A shareholder's Accrued
Monthly Payout Plan may be terminated at any time without charge or penalty by
the shareholder, the Trust, the Transfer Agent or the Distributor.
SYSTEMATIC WITHDRAWAL PLANS
A shareholder may elect to make systematic withdrawals from an Investment
Account on either a monthly or quarterly basis as provided below. Quarterly
withdrawals are available for shareholders who have acquired shares of the
Trust having a value, based on cost or the current offering price, of $5,000 or
more, and monthly withdrawals for shareholders with shares with such a value of
$10,000 or more. The quarterly periods end on the 24th day of March, June,
September and December. See the Purchase Application in the Prospectus.
At the time of each withdrawal payment, sufficient shares are redeemed from
those on deposit in the shareholder's account to provide the withdrawal payment
specified by the shareholder. The shareholder may specify either a dollar
amount or a percentage of the value of his or her shares. Redemptions will be
made at net asset value as determined at the close of business on the NYSE on
the 24th day of each month or the 24th day of the last month of each quarter,
whichever is applicable. A shareholder's Systematic Withdrawal Plan may be
terminated at any time, without charge or penalty, by the shareholder, the
Trust, the Transfer Agent or the Distributor. A shareholder may not elect to
make systematic withdrawals while he or she is enrolled in the Accrued Monthly
Payout Plan.
Withdrawal payments should not be considered as dividends, yield or income.
Withdrawals are sales of shares and may result in taxable gain or loss. If
periodic withdrawals continuously exceed reinvested dividends, the
shareholder's original investment will be reduced correspondingly. Shareholders
are cautioned not to designate withdrawal programs that result in an undue
reduction of principal. There are no minimums on amounts that may be
systematically withdrawn. Periodic investments may not be made into an
Investment Account in which the shareholder has elected to make systematic
withdrawals.
RETIREMENT PLANS
Self-directed individual retirement accounts and other retirement plans are
available from Merrill Lynch. Under these plans, investments may be made in the
Trust and in certain of the other mutual funds sponsored
15
<PAGE>
by Merrill Lynch as well as in other securities. Merrill Lynch charges an
initial establishment fee and an annual custodial fee for each account.
Information with respect to these plans is available upon request from Merrill
Lynch. In addition, eligible shareholders of the Trust may participate in a
variety of qualified employee benefit plans which are available from the
Distributor. Participants in these plans may invest in the Trust and in
certain other mutual funds sponsored by Merrill Lynch. Information with
respect to these plans is available upon request from the Distributor. See
"Purchase of Shares" in the Prospectus.
Capital gains and income received in each of the plans referred to above are
exempt from Federal taxation until distributed from the plans. Investors
considering participation in any such plan should review specific tax laws
relating thereto and should consult their attorneys or tax advisers with
respect to the establishment and maintenance of any such plan.
EXCHANGE PRIVILEGE
Shareholders of the Trust who have held all or part of their shares for at
least 15 days may exchange their shares of the Trust for Class D shares of
certain 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. It is contemplated that the exchange privilege may be applicable to
other new mutual funds whose shares are distributed by the Distributor. The
exchange privilege available to participants in the Merrill Lynch Blueprint SM
Program may be different from that available to other investors.
Alternatively, shareholders may exchange shares of the Trust for Class A
shares of one of the MLAM-advised 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 an eligible Class A investor. 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 TMA SM 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 Boards of MLAM-advised investment companies, including the Trust.
Shareholders of the Trust also may exchange shares of the Trust into shares
of the following money market funds: Merrill Lynch Retirement Reserves Money
Fund (available only if the exchange occurs within certain retirement plans),
Merrill Lynch U.S. Treasury Money Fund and Merrill Lynch U.S.A Government
Reserves.
Under the exchange privilege, each of the MLAM-advised mutual 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 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
16
<PAGE>
aggregate of the 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 Trust, which are sold on a no-load basis, for shares of the other
funds, which are sold with a sales charge, generally will require the payment
of a sales charge.
Before effecting an exchange, shareholders of the Trust 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 for Federal
income tax purposes and, depending on the circumstances, a short- or long-term
capital gain or loss may be realized. 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 such shareholder 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 Trust of the exchange, or write
to the Transfer Agent requesting that the exchange be effected. Such letter
must be signed exactly as the account is registered with the signatures
guaranteed by a national bank or member firm of any national or regional stock
exchange. Shareholders of the Trust, and shareholders of the other funds
described above with shares for which certificates have not been issued, may
exercise the exchange privilege by wire through their securities dealer. The
Trust reserves the right to require a properly completed Exchange Application.
This exchange privilege may be modified or terminated at any time in accordance
with the rules of the Commission. The Trust 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 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.
TAXES
FEDERAL
The Trust intends to continue to qualify for the special tax treatment
afforded regulated investment companies ("RICs") under the Code . As long as it
so qualifies, the Trust 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 shareholders. The Trust intends to distribute substantially all of such
income.
Dividends paid by the Trust 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 taxable to shareholders as
ordinary income. Distributions made from an excess of net long-term capital
gains over net short-term capital losses ("capital gain dividends") are taxable
to shareholders as long-term capital gains regardless of the length of time the
shareholder has owned Trust shares. Any loss upon the sale or exchange
17
<PAGE>
of Trust 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 Trust'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).
Dividends are taxable to shareholders even though they are reinvested in
additional shares of the Trust. Not later than 60 days after the close of its
taxable year, the Trust will provide its shareholders with a written notice
designating the amounts of any ordinary income or capital gain dividends.
Distributions by the Trust, whether from ordinary income or capital gains, will
not be eligible for the dividends received deduction allowed to corporations
under the Code. If the Trust pays a dividend in January which was declared in
the previous October, November or December to shareholders of record on a
specified date in one of such months, then such dividend will be treated for
tax purposes as being paid by the Trust and received by its shareholders on
December 31 of the year in which such dividend was declared.
If the value of assets held by the Trust 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 Trust shares, and any shareholders disposing of shares
at that time may recognize a capital loss. Distributions, including
distributions reinvested in additional shares of the Trust, will nonetheless be
fully taxable, even if the number of shares in shareholders' accounts has been
reduced as described above.
Ordinary income dividends paid to shareholders who are nonresident aliens or
foreign entities will be subject to a 30% U.S. withholding tax under existing
provisions of the Code applicable to foreign individuals and entities unless a
reduced rate of withholding or a withholding exemption is provided under
applicable treaty law. Nonresident shareholders are urged to consult their own
tax advisers concerning the applicability of the U.S. withholding tax.
Dividends and interest received by the Trust may give rise to withholding and
other taxes imposed by foreign countries. Tax conventions between certain
countries and the United States may reduce or eliminate such taxes.
Under certain provisions of the Code, some shareholders may be subject to a
31% withholding tax on ordinary income dividends, capital gain dividends and
redemption payments ("backup withholding"). Generally, shareholders subject to
backup withholding will be those for whom no certified taxpayer identification
number is on file with 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.
A loss realized on a sale or exchange of shares of the Trust will be
disallowed if other Trust shares are acquired (whether through the automatic
reinvestment of dividends or otherwise) within a 61-day period beginning 30
days before and ending 30 days after the date that the shares are disposed of.
In such a case, the basis of the shares acquired will be adjusted to reflect
the disallowed loss.
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<PAGE>
The Code requires a RIC to pay a nondeductible 4% excise tax to the extent
the RIC does not distribute, during any 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 Trust intends to distribute its income
and capital gains in a manner necessary to minimize imposition of the 4% excise
tax, there can be no assurance that sufficient amounts of the Trust's taxable
income and capital gains will be distributed to avoid entirely the imposition
of the tax. In such event, the Trust will be liable for the tax only on the
amount by which it does not meet the foregoing distribution requirements.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections
and the Treasury regulations promulgated thereunder. The Code and the Treasury
regulations are subject to change by legislative, judicial or administrative
action either prospectively or retroactively.
Ordinary income and capital gain dividends also may be subject to state and
local taxes.
Certain states exempt from state income taxation dividends paid by RICs which
are derived in whole or in part from interest on U.S. Government obligations.
State law varies as to whether dividend income attributable to U.S. Government
obligations is exempt from state income tax.
Shareholders are urged to consult their tax advisers regarding specific
questions as to Federal, foreign, state or local taxes. Foreign investors
should consider applicable foreign taxes in their evaluation of an investment
in the Trust.
GENERAL INFORMATION
DESCRIPTION OF SHARES
The Declaration of Trust of the Trust permits the Trustees to issue an
unlimited number of full and fractional shares of beneficial interest, par
value $.10 per share, of a single class and to divide or combine the shares
into a greater or lesser number of shares without thereby changing the
proportionate beneficial interests in the Trust. Each share represents an equal
proportionate interest in the Trust with each other share. Upon liquidation of
the Trust, shareholders are entitled to share pro rata in the net assets of the
Trust available for distribution to shareholders. Shares have no preemptive or
conversion rights. The rights of redemption are described elsewhere herein and
in the Prospectus. Shares are fully paid and nonassessable by the Trust.
Shareholders are entitled to one vote for each full share held and fractional
votes for fractional shares held and vote in the election of Trustees and on
other matters submitted to the vote of shareholders. Voting rights are not
cumulative, so that the holders of more than 50% of the shares voting in the
election of Trustees can, if they choose to do so, elect all Trustees of the
Trust. No amendment may be made to the Declaration of Trust without the
affirmative vote of a majority of the outstanding shares of the Trust except
under certain limited circumstances set forth in the Declaration of Trust.
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<PAGE>
CUSTODIAN
The Bank of New York, 90 Washington Street, 12th Floor, New York, New York
10286, acts as custodian of the Trust's assets (the "Custodian"). The Custodian
is responsible for safeguarding and controlling the Trust's cash and
securities, handling the delivery of securities and collecting interest on the
Trust's investments.
TRANSFER AGENT
Merrill Lynch Financial Data Services, Inc. (the "Transfer Agent"), 4800 Deer
Lake Drive East, Jacksonville, Florida 32246-6484, which is a subsidiary of ML
& Co., acts as the Trust'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, have
been selected as the independent auditors of the Trust. The selection of the
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 Trust.
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 Trust ends on December 31 of each year. The Trust will
send to its shareholders at least semi-annually reports showing its portfolio
securities and other information. An annual report, containing financial
statements audited by independent auditors, is sent to shareholders each year.
Only one copy of each shareholder report and certain shareholder
communications will be mailed to each identified shareholder regardless of the
number of accounts such shareholder has. If a shareholder wishes to receive
separate copies of each report and communication for each of the shareholder's
related accounts the shareholder should notify in writing:
Merrill Lynch Financial Data Services, Inc.
P.O. Box 45290
Jacksonville, FL 32232-5290
The written notification should include the shareholder's name, address, tax
identification number and Merrill Lynch and/or mutual fund account numbers. If
you have any questions regarding this please call your Merrill Lynch Financial
Consultant or Merrill Lynch Financial Data Services, Inc. at (800) 221-7210.
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<PAGE>
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 Trust has filed with the Commission under the
Securities Act of 1933, as amended, and the Investment Company Act, to which
reference is hereby made.
To the knowledge of the Trust, no person or entity owned beneficially 5% or
more of the Trust's shares on March 31, 1997.
----------------
The Declaration of Trust establishing the Trust, dated May 14, 1987, 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 Ready Assets 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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<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
Merrill Lynch Ready Assets Trust:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Merrill Lynch Ready Assets Trust as of December
31, 1996, 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 Trust'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
December 31, 1996 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 Ready
Assets Trust as of December 31, 1996, 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
February 4, 1997
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<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
<S> <C> <C> <C> <C>
Bank Notes--1.6%
Colorado National $ 90,000 5.587++% 5/21/97 $ 89,997
Bank of Denver
KeyBank National
Association 25,000 5.60 11/04/97 24,980
Total Bank Notes (Cost--$114,997) 114,977
Certificates of Deposit--1.4%
Chase Manhattan 24,000 5.85 1/08/97 24,002
Bank
Morgan Guaranty
Trust Company 73,000 5.86 10/03/97 73,107
Total Certificates of Deposit
(Cost--$97,088) 97,109
Certificates of Deposit--European--3.1%
Australia and New 20,000 5.57 4/07/97 20,003
Zealand Banking 50,000 5.505 4/11/97 49,998
Group
Bank of Scotland 50,000 5.65 4/03/97 50,016
Bankers Trust 50,000 5.40 1/21/97 49,999
Company
Bayerische 50,000 5.79 3/06/97 50,022
Hypotheken-und
Wechsel Bank
Total Certificates of Deposit--European
(Cost--$220,001) 220,038
Certificates of Deposit--Yankee--1.8%
ABN AMRO Bank, 5,000 5.68 4/17/97 5,000
NY 100,000 5.68 12/22/97 100,017
Bayerische 20,000 5.475++ 1/15/97 19,999
Landesbank
Girozentrale, NY
Total Certificates of Deposit--Yankee
(Cost--$125,029) 125,016
Commercial Paper--Discount--51.3%
ABN-AMRO 37,000 5.65 2/28/97 36,672
North America
Finance Inc.
ANZ (Delaware), 25,000 5.39 2/10/97 24,847
Inc.
Abbey National 10,000 5.35 4/08/97 9,853
N.A. Corporation
Allomon Funding 40,460 5.34 1/07/97 40,418
Corporation
Ameritech Capital 25,000 5.55 2/18/97 24,811
Funding Corp.
Apreco, Inc. 20,000 5.32 1/21/97 19,938
25,000 5.52 2/12/97 24,835
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
<S> <C> <C> <C> <C>
Commercial Paper--Discount (continued)
Asset Securitization $ 15,000 5.35 % 1/29/97 $ 14,935
Cooperative Corp. 50,000 5.36 3/13/97 49,458
Atlantic Asset 25,121 5.65 1/13/97 25,070
Securitization Corp. 24,879 5.65 1/15/97 24,820
BTR Dunlop 70,000 5.33 3/05/97 69,326
Finance Inc.
Bank of Scotland 50,000 5.40 2/20/97 49,617
Treasury Services PLC
Bear Stearns 25,000 5.34 1/23/97 24,915
Companies, Inc. 14,400 5.35 2/18/97 14,294
25,000 5.31 2/28/97 24,778
Beta Finance Inc. 18,000 5.57 1/27/97 17,928
14,000 5.31 2/07/97 13,921
8,000 5.33 3/11/97 7,916
10,000 5.50 3/18/97 9,884
13,000 5.35 4/07/97 12,810
CIT Group Holdings, 10,000 5.32 1/29/97 9,957
Inc. (The)
CSW Credit, Inc. 29,800 5.32 2/14/97 29,600
Caisse 50,000 5.40 2/24/97 49,587
d'Amortissement 25,000 5.50 3/10/97 24,740
de la Dette Sociale 25,000 5.66 3/10/97 24,740
(CADES) 45,000 5.45 4/01/97 44,383
Chase Manhattan 24,000 5.68 1/09/97 23,968
Corporation
Cheltenham & 75,000 5.36 3/11/97 74,210
Gloucester PLC
Ciesco L.P. 28,400 5.30 1/17/97 28,329
Commerzbank 25,000 5.34 4/22/97 24,578
U.S. Finance Inc.
Commonwealth 30,000 5.39 2/03/97 29,848
Bank of Australia
Corporate 35,000 5.32 1/17/97 34,912
Receivables Corp.
Dean Witter 100,000 5.30 2/28/97 99,113
Discover & Co.
Eureka 25,000 5.32 1/16/97 24,941
Securitization Inc. 31,000 5.325 2/13/97 30,796
50,000 5.33 2/14/97 49,664
10,000 5.35 3/06/97 9,902
Falcon Asset 60,000 5.32 1/07/97 59,938
Securitization Corp.
Finova Capital Corp. 25,000 5.37 2/24/97 24,793
50,000 5.47 3/20/97 49,405
20,000 5.42 6/25/97 19,472
Ford Motor Credit 25,000 5.40 1/08/97 24,970
Company 25,000 5.41 2/03/97 24,873
50,000 5.48 3/24/97 49,375
</TABLE>
23
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
<S> <C> <C> <C> <C>
Commercial Paper--Discount (continued)
General Electric $ 50,000 5.39 % 2/07/97 $ 49,716
Capital Corp. 100,000 5.39 2/10/97 99,388
30,000 5.64 3/10/97 29,688
40,000 5.45 3/25/97 39,494
100,000 5.46 3/25/97 98,735
25,000 5.69 5/12/97 24,505
General Motors 50,000 5.34 1/22/97 49,838
Acceptance Corp. 50,000 5.35 1/22/97 49,838
50,000 5.35 1/27/97 49,801
70,000 5.33 2/05/97 69,624
25,000 5.34 5/13/97 24,501
80,000 5.31 5/20/97 78,320
20,000 5.31 5/23/97 19,571
Glaxo Wellcome 25,500 5.34 1/02/97 25,492
PLC
Goldman Sachs 50,000 5.68 1/06/97 49,956
Group, L.P. 50,000 5.35 4/25/97 49,134
Greenwich Funding 18,367 5.325 1/27/97 18,294
Corporation 10,000 5.31 2/03/97 9,949
113,437 5.45 3/21/97 112,071
Industrial 25,000 5.37 3/06/97 24,755
Bank of Korea 15,000 5.40 3/10/97 14,844
10,000 5.40 3/12/97 9,893
International 60,000 5.335 1/23/97 59,797
Securitization Corp. 40,000 5.35 1/29/97 39,827
Kingdom of Sweden 25,000 5.55 1/21/97 24,923
25,000 5.50 3/12/97 24,733
100,000 5.44 3/24/97 98,750
Korea 73,000 5.35 1/10/97 72,892
Development Bank 27,000 5.35 1/15/97 26,940
50,000 5.33 2/10/97 49,694
Lehman Brothers 50,000 5.40 3/03/97 49,533
Holdings, Inc. 50,000 5.40 3/05/97 49,518
Mont Blanc 50,000 5.39 3/14/97 49,450
Capital Corp.
NYNEX 18,000 5.33 3/03/97 17,832
Corporation
National Australia 50,000 5.35 1/06/97 49,956
Funding (Delaware)
Inc.
New Center 50,000 5.44 1/06/97 49,956
Asset Trust 70,000 5.40 2/07/97 69,603
117,000 5.43 2/14/97 116,214
25,000 5.41 2/18/97 24,816
40,000 5.47 3/24/97 39,500
Nomura Holding 25,000 5.35 1/02/97 24,993
America, Inc. 25,000 5.35 1/10/97 24,963
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
<S> <C> <C> <C> <C>
Commercial Paper--Discount (concluded)
Old Line $ 40,813 5.47 % 1/24/97 $ 40,664
Funding Corp. 10,300 5.33 2/05/97 10,245
18,000 5.36 3/11/97 17,810
Rexam PLC 15,590 5.32 3/07/97 15,435
Transamerica 12,782 5.60 3/11/97 12,647
Finance Corp. 12,394 5.29 4/30/97 12,170
WCP Funding Inc. 40,000 5.32 1/17/97 39,900
15,300 5.33 3/13/97 15,134
Western Australia 28,000 5.65 2/28/97 27,752
Treasury Corp. 10,395 5.61 3/10/97 10,287
Windmill 25,000 5.33 3/10/97 24,740
Funding Corp. 17,739 5.45 3/21/97 17,525
Xerox Corp. 29,909 5.30 1/14/97 29,847
Total Commercial Paper--Discount
(Cost--$3,642,584) 3,642,593
Corporate Notes--8.6%
Abbey National 100,000 5.48++ 5/16/97 99,962
Treasury Services PLC
Asset-Backed 68,000 5.605++ 10/15/97 68,000
Securities Investment
Trust 1996-M
Bear Stearns 50,000 5.655++ 1/16/97 50,002
Companies, Inc. 15,000 5.50 3/05/97 15,000
Chase Manhattan 19,000 5.489 1/15/98 19,000
Auto Owner Trust
1996-C
KeyBank National 23,000 5.576++ 8/21/97 22,991
Association
LABS Trust 85,000 5.625++ 12/29/97 85,000
Senior Notes,
Series 1996-4
SMM Trust (1995-Q) 100,000 5.605++ 1/08/97 100,000
Short Term Card 150,000 5.615++ 1/15/97 150,000
Account Trust 1995-1
Total Corporate Notes (Cost--$609,954) 609,955
Funding Agreements--1.1%
Jackson National 80,000 5.41++ 4/08/97 80,000
Life Insurance Co.
Total Funding Agreements (Cost--$80,000) 80,000
Master Notes--2.5%
Goldman Sachs 26,000 5.73++ 5/01/97 26,000
Group, L.P. 150,000 5.73++ 8/01/97 150,000
Total Master Notes (Cost--$176,000) 176,000
</TABLE>
24
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
<S> <C> <C> <C> <C>
US Government, Agency & Instrumentality
Obligations--Discount--0.2%
Federal National $ 13,000 5.48 % 3/07/97 $ 12,872
Mortgage
Association
US Treasury STRIPS++++ 5,000 5.252 2/15/98 4,697
Total US Government, Agency & Instrumentality
Obligations--Discount (Cost--$17,569) 17,569
US Government, Agency & Instrumentality--
Obligations Non-Discount--26.5%
Federal Farm 45,000 5.85 10/01/97 45,077
Credit Banks 20,000 6.24 5/07/98 20,012
10,000 5.81 12/04/98 9,963
Federal Home 80,000 5.24++ 12/10/97 79,964
Loan Banks 26,000 5.60++ 1/26/98 26,029
15,000 6.17 11/06/98 14,991
10,000 6.12 11/19/98 9,988
Federal National 100,000 5.27++ 2/21/97 100,000
Mortgage 50,000 5.30++ 3/14/97 50,000
Association 35,000 5.48++ 3/19/97 34,995
52,000 5.435++ 4/15/97 51,984
50,000 5.524++ 4/28/97 49,989
40,000 5.494++ 4/29/97 39,987
100,000 5.25++ 5/01/97 99,977
35,000 5.455++ 5/14/97 34,989
70,000 5.70++ 5/19/97 70,000
50,000 5.521++ 5/22/97 49,987
114,000 5.23++ 7/16/97 113,958
54,000 5.25++ 8/01/97 53,986
44,000 5.235++ 9/03/97 43,978
34,000 5.24++ 9/09/97 33,984
32,000 5.24++ 9/29/97 31,986
20,000 5.53 10/14/97 19,988
58,000 5.225++ 10/20/97 57,959
50,000 5.47 12/30/97 49,924
50,000 5.29++ 4/24/98 49,975
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
<S> <C> <C> <C> <C>
US Government, Agency & Instrumentality
Obligations--Non-Discount (concluded)
Federal National $ 33,000 5.75++% 5/14/98 $ 33,000
Mortgage 25,000 6.54 9/11/98 25,125
Association 10,000 5.81 11/25/98 9,963
(concluded) 10,000 5.81 12/01/98 9,963
Student Loan 60,000 5.41++ 1/14/97 60,000
Marketing 50,000 5.30++ 8/04/97 49,994
Association 60,000 5.24++ 10/01/97 59,974
12,000 6.02 11/20/98 11,992
15,000 5.80 12/18/98 14,940
US Treasury Notes 126,000 6.50 4/30/97 126,473
34,000 5.875 7/31/97 34,080
40,000 5.75 9/30/97 40,072
25,000 5.625 10/31/97 25,016
73,500 5.25 12/31/97 73,265
27,000 5.00 1/31/98 26,810
20,000 5.625 11/30/98 19,916
15,000 5.75 12/31/98 14,975
Total US Government, Agency &
Instrumentality Obligations--Non-Discount
(Cost--$1,879,721) 1,879,228
<CAPTION>
Face
Amount Issue
<S> <S> <C>
Repurchase Agreements**--4.8%
$100,000 HSBC Securities, Inc., purchased on
12/31/1996 to yield 6.80% to 1/02/1997 100,000
241,638 Lehman Brothers Inc., purchased on
12/31/1996 to yield 7.10% to 1/02/1997 241,638
Total Repurchase Agreements
(Cost--$341,638) 341,638
Total Investments (Cost--$7,304,581)--102.9% 7,304,123
Liabilities in Excess of Other Assets--(2.9%) (207,863)
----------
Net Assets--100.0% $7,096,260
==========
<FN>
*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 Trust. 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; interest rates shown are the rates in effect at
December 31, 1996.
**Repurchase Agreements are fully collateralized by US Government
Obligations.
++Variable Rate Notes.
++++Separately Traded Registered Interest and Principal of
Securities (STRIPS).
See Notes to Financial Statements.
</TABLE>
25
<PAGE>
<TABLE>
FINANCIAL INFORMATION
<CAPTION>
Statement of Assets and Liabilities as of December 31, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$7,304,581,349*)
(Note 1a) $ 7,304,123,288
Cash 41,634
Receivables:
Interest $ 22,121,964
Beneficial interest sold 3,133,003 25,254,967
---------------
Prepaid registration fees and other assets (Note 1d) 314,957
---------------
Total assets 7,329,734,846
---------------
Liabilities: Payables:
Securities purchased 165,167,591
Beneficial interest redeemed 62,228,194
Investment adviser (Note 2) 2,266,545
Distributor (Note 2) 2,092,750 231,755,080
---------------
Accrued expenses and other liabilities 1,719,649
---------------
Total liabilities 233,474,729
---------------
Net Assets: Net assets $ 7,096,260,117
===============
Net Assets Shares of beneficial interest, $.10 par value, unlimited
Consist of: number of shares authorized $ 709,671,818
Paid-in capital in excess of par 6,387,046,360
Unrealized depreciation on investments--net (458,061)
---------------
Net Assets--Equivalent to $1.00 per share based on
7,096,718,178 shares of beneficial interest outstanding $ 7,096,260,117
===============
<FN>
*As of December 31, 1996, net unrealized depreciation for
Federal income tax purposes amounted to $704,340, of which
$511,022 related to appreciated securities and $1,215,362
related to depreciated securities. The aggregate cost of
investments at December 31, 1996 for Federal income tax
purposes was $7,304,827,628.
See Notes to Financial Statements.
</TABLE>
26
<PAGE>
<TABLE>
FINANCIAL INFORMATION (continued)
<CAPTION>
Statement of Operations
For the Year Ended
December 31, 1996
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 407,557,799
(Note 1c):
Expenses: Investment advisory fees (Note 2) $ 26,214,794
Transfer agent fees (Note 2) 11,479,556
Distribution fees (Note 2) 8,008,404
Accounting services (Note 2) 370,559
Registration fees (Note 1d) 317,938
Custodian fees 204,323
Interest expense 201,878
Trustees' fees and expenses 137,722
Professional fees 87,469
Printing and shareholder reports 81,944
Other 96,850
---------------
Total expenses 47,201,437
---------------
Investment income--net 360,356,362
---------------
Realized & Realized gain on investments--net 559,269
Unrealized Gain Change in unrealized appreciation on investments--net (2,689,938)
(Loss) on ---------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 358,225,693
(Note 1c): ===============
See Notes to Financial Statements.
</TABLE>
27
<PAGE>
<TABLE>
FINANCIAL INFORMATION (continued)
<CAPTION>
Statements of Changes in Net Assets
For the Year
Ended December 31,
Increase (Decrease) in Net Assets: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 360,356,362 $ 370,112,443
Realized gain on investments--net 559,269 995,794
Change in unrealized appreciation/depreciation on investments
--net (2,689,938) 9,723,823
--------------- ---------------
Net increase in net assets resulting from operations 358,225,693 380,832,060
--------------- ---------------
Dividends & Investment income--net (360,356,362) (370,112,443)
Distributions to Realized gain on investments--net (559,269) (995,794)
Shareholders --------------- ---------------
(Note 1e): Net decrease in net assets resulting from dividends and
distributions to shareholders (360,915,631) (371,108,237)
--------------- ---------------
Beneficial Interest Net proceeds from sale of shares 13,961,575,969 14,615,042,905
Transactions Net asset value of shares issued to shareholders in
(Note 3): reinvestment of dividends and distributions (Note 1e) 359,459,266 369,564,239
--------------- ---------------
14,321,035,235 14,984,607,144
Cost of shares redeemed (14,301,439,885) (14,155,972,930)
--------------- ---------------
Net increase in net assets derived from beneficial interest
transactions 19,595,350 828,634,214
--------------- ---------------
Net Assets: Total increase in net assets 16,905,412 838,358,037
Beginning of year 7,079,354,705 6,240,996,668
--------------- ---------------
End of year $ 7,096,260,117 $ 7,079,354,705
=============== ===============
See Notes to Financial Statements.
</TABLE>
28
<PAGE>
<TABLE>
FINANCIAL INFORMATION (concluded)
<CAPTION>
Financial Highlights
The following per share data and ratios have been derived
from information provided in the financial statements.
For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993 1992
<S> <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 .0491 .0538 .0366 .0272 .0332
Realized and unrealized gain (loss)
on investments--net (.0003) .0016 (.0012) .0003 .0009
---------- ---------- ---------- ---------- ----------
Total from investment operations .0488 .0554 .0354 .0275 .0341
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.0491) (.0538) (.0366) (.0272) (.0332)
Realized gain on investments--net (.0001) (.0001) --++ (.0005) (.0007)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.0492) (.0539) (.0366) (.0277) (.0339)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ==========
Total investment return 5.05% 5.53% 3.73% 2.81% 3.45%
========== ========== ========== ========== ==========
Ratios to Average Expenses .64% .67% .65% .65% .64%
Net Assets: ========== ========== ========== ========== ==========
Investment income and realized
gain (loss) on investments--net 4.88% 5.40% 3.67% 2.78% 3.48%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year
Data: (in thousands) $7,096,260 $7,079,355 $6,240,997 $6,523,187 $7,465,869
========== ========== ========== ========== ==========
<FN>
++Amount is less than $.0001 per share.
See Notes to Financial Statements.
</TABLE>
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Ready Assets Trust (the "Trust") is registered under
the Investment Company Act of 1940 as a diversified, open-end
management investment company. The following is a summary of
significant accounting policies followed by the Trust.
(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 such 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 purposes of
valuation, the maturity of a variable rate security 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) Income taxes--It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to
its shareholders. Therefore, no Federal income tax provision is
required.
(c) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income (including amortization of
discount) is recognized on the accrual basis. Realized gains and
losses on security transactions are determined on the identified
cost basis.
(d) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(e) Dividends and distributions to shareholders--The Trust declares
dividends daily and reinvests daily such dividends (net of non-
resident alien tax and back-up withholding tax) in additional shares
of beneficial interest at net asset value. Dividends are declared
from net investment income and distributions from net realized gain
or loss on investments.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Trust 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 Trust has also entered into a Distribution
Agreement and a Distribution Plan with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
MLAM provides the Trust with investment management, research,
statistical, and advisory services, and pays certain other expenses
of the Trust. For such services, the Trust pays a monthly fee based
upon the average daily value of the Trust's net assets at the
following annual rates:
Portion of average daily value of net assets: Rate
Not exceeding $500 million 0.500%
In excess of $500 million but not exceeding $1 billion 0.400
In excess of $1 billion but not exceeding $5 billion 0.350
In excess of $5 billion but not exceeding $10 billion 0.325
In excess of $10 billion but not exceeding $15 billion 0.300
In excess of $15 billion but not exceeding $20 billion 0.275
In excess of $20 billion 0.250
The Trust has adopted a Shareholder Servicing Plan and Agreement in
accordance with Rule 12b-1 under the Investment Company Act of 1940,
pursuant to which Merrill Lynch, Pierce, Fenner & Smith Inc.
("MLPF&S"), a wholly-owned subsidiary of ML & Co., receives a fee
each month from the Trust at the annual rate of 0.125% of average
daily net assets of
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded)
the accounts of Trust shareholders who maintain their Trust accounts through
MLPF&S. This fee is to compensate MLPF&S financial consultants and other
directly involved branch office personnel for providing direct personal services
to shareholders. The fee is not compensation for administrative services.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Trust's transfer agent.
Accounting services are provided to the Trust by MLAM at cost.
Certain officers and/or trustees of the Trust are officers and/or
directors of MLAM, MLFDS, PSI, MLFD, MLPF&S, and/or ML & Co.
3. Shares of Beneficial Interest:
The number of shares purchased and redeemed during the years ended
December 31, 1996 and December 31, 1995 corresponds to the amounts
included in the Statements of Changes in Net Assets for net proceeds
from sale of shares and cost of shares redeemed, respectively, since
shares are recorded at $1.00 per share.
31
<PAGE>
APPENDIX
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 Ratings Services ("S&P"). Issues within this category are
further redefined with designations 1, 2 and 3 to indicate the relative degree
of safety; A-1, the highest of the three, indicates the degree of safety is
either overwhelming or very strong; A-2 indicates that capacity for timely
repayment is strong.
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.
Commercial paper rated A.1+ by IBCA Limited or its affiliate IBCA Inc.
(together, "IBCA") are obligations supported by the highest capacity for timely
repayment. Commercial paper rated A.1 has a very strong capacity for timely
repayment. Commercial paper rated A.2 has a strong capacity for timely
repayment, although such capacity may be susceptible to adverse changes in
business, economic or financial conditions.
Fitch Investors Service, 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 Credit Rating Co. ("Duff & Phelps") employs the designation of
Duff 1 with respect to top grade commercial paper and bank money instruments.
Duff 1+ indicates the highest certainty of timely payment: short-term liquidity
is 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.
Thompson BankWatch, Inc. ("TBW") employs the designations TBW-1, TBW-2, TBW-3
and TBW-4 as ratings for commercial paper, other senior short-term obligations
and deposit obligations of the entities to which the rating has been assigned.
TBW-1 is the highest category and indicates a very high degree of likelihood
that principal and interest will be paid on a timely basis. TBW-2 is the second
highest category and indicates that while the degree of safety regarding timely
repayment of principal and interest is strong, the relative degree of safety is
not as high as for issues rated TBW-1.
CORPORATE BONDS
Bonds rated AAA have the highest rating assigned by 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.
32
<PAGE>
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 then 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 IBCA are obligations for which there is the lowest
expectation of investment risk. Capacity for timely repayment of principal and
interest is substantial such that adverse changes in business, economic or
financial conditions are unlikely to increase investment risk significantly.
Bonds rated AA are obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial conditions may
increase investment risk, albeit not very significantly.
Bonds rated AAA by Fitch are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events. Bonds rated AA are considered to be investment grade and of
very high credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds rated AAA.
Bonds rated AAA by Duff & Phelps are deemed to be of the highest credit
quality: the risk factors are negligible, being only slightly more than for
risk-free U.S. Treasury debt. AA indicates high credit quality: protection
factors are strong, and risk is modest but may vary slightly from time to time
because of economic conditions.
Bonds rated AAA by TBW are accorded the highest rating category which
indicates that the ability to repay principal and interest on a timely basis is
very high. AA is the second highest rating category and indicates a superior
ability to repay principal and interest on a timely basis with limited
incremental risk versus issues rated in the highest rating category.
33
<PAGE>
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34
<PAGE>
[This page is intentionally left blank.]
35
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objectives and Policies......................................... 2
Management of the Trust.................................................... 5
Trustees and Officers..................................................... 5
Compensation of Trustees.................................................. 6
Management and Advisory Arrangements...................................... 7
Purchase of Shares......................................................... 9
Distribution Plan......................................................... 10
Redemption of Shares....................................................... 11
Portfolio Transactions..................................................... 11
Determination of Net Asset Value........................................... 12
Yield Information.......................................................... 13
Shareholder Services....................................................... 14
Investment Account........................................................ 14
Automatic Investment Plan................................................. 14
Accrued Monthly Payout Plan............................................... 15
Systematic Withdrawal Plans............................................... 15
Retirement Plans.......................................................... 15
Exchange Privilege........................................................ 16
Taxes...................................................................... 17
Federal................................................................... 17
General Information........................................................ 19
Description of Shares..................................................... 19
Custodian................................................................. 20
Transfer Agent............................................................ 20
Independent Auditors...................................................... 20
Legal Counsel............................................................. 20
Reports to Shareholders................................................... 20
Additional Information.................................................... 21
Independent Auditors' Report............................................... 22
Financial Statements....................................................... 23
Appendix................................................................... 32
</TABLE>
Code #10240-0497
[LOGO] MERRILL LYNCH
Merrill Lynch
Ready Assets Trust
[ART]
STATEMENT OF
ADDITIONAL
INFORMATION
April 25, 1997
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 December 31, 1996
Contained in Part B:
Schedule of Investments as of December 31, 1996
Statement of Assets and Liabilities as of December 31, 1996
Statement of Operations for the year ended December 31, 1996
Statements of Changes in Net Assets for each of the years in the
two-year period ended December 31, 1996
Financial Highlights for each of the years in the five-year period
ended December 31, 1996
(b)Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1(a) --Declaration of Trust, dated May 14, 1987.(a)
(b) --Amendment to Declaration of Trust, dated April 29, 1988.(a)
2 --By-Laws of Registrant.(a)
3 --None.
4 --Copies of instruments defining the rights of shareholders, including
the relevant portions of the Declaration of Trust and By-Laws of the
Registrant.(b)
5(a) --Management Agreement between the Registrant and Merrill Lynch Asset
Management, L.P.(a)
(b) --Supplement to Investment Advisory Agreement with Merrill Lynch Asset
Management, L.P.(c)
6(a) --Distribution Agreement between the Registrant and Merrill Lynch
Funds Distributor, Inc.(a)
(b) --Form of Selected Dealer Agreement.(a)
7 --None.
8(a) --Custody Agreement between the Registrant and The Bank of New York.(a)
(b) --Amendment to the Custody Agreement between the Registrant and The
Bank of New York.(a)
9(a) --Transfer Agency Agreement between the Registrant and Merrill Lynch
Financial Data Services, Inc.(a)
(b) --Form of Agreement and Plan of Reorganization between Merrill Lynch
Ready Assets Trust, Merrill Lynch New Assets Trust and Merrill Lynch
New Corporation, Inc.(a)
10 --Opinion of Brown & Wood LLP, counsel for the Registrant.
11 --Consent of Deloitte & Touche LLP, independent auditors for the
Registrant.
12 --None.
13 --None.
14(a) --Prototype Individual Retirement Account Plan, Simplified Employee
Pension Plan and Corporate Individual Retirement Account Plan
available from Merrill Lynch, Pierce, Fenner & Smith Incorporated.(d)
(b) --Prototype Merrill Lynch Tax-Deferred Basic Retirement Plan available
from Merrill Lynch, Pierce, Fenner & Smith Incorporated.(e)
15 --Amended and Restated Merrill Lynch Shareholder Servicing Plan and
Agreement pursuant to Rule 12b-1 between Registrant and Merrill
Lynch, Pierce, Fenner & Smith Incorporated.(a)
16 --Schedule for computation of each performance quotation provided in
the Registration Statement in response to Item 22.(a)
17 --Financial Data Schedule.
18 --None.
</TABLE>
C-1
<PAGE>
- --------
(a) Filed as an Exhibit to Post-Effective Amendment No. 28 to the Registrant's
Registration Statement under the Securities Act of 1933 on Form N-1A (the
"Registration Statement").
(b) Reference is made to Article II, Section 2.3 and Articles V, VI, VIII, IX,
X and XI of the Registrant's Declaration of Trust, filed as Exhibit 1 to
the Registration Statement and to Articles I, V and VII of the Registrant's
By-Laws, filed as Exhibit 2 to the Registration Statement.
(c) Previously filed as Exhibit 5(b) to Post-Effective Amendment No. 27 to the
Registration Statement.
(d) Incorporated by reference to Exhibit 14 to Post-Effective Amendment No. 1
to the Registration Statement under the Securities Act of 1933, as amended,
on Form N-1 of Merrill Lynch Retirement Series Trust (File No. 2-74584).
(e) Incorporated by reference to Exhibit 14 to Post-Effective Amendment No. 3
to the Registration Statement under the Securities Act of 1933, as amended,
on Form N-1A of Merrill Lynch Retirement Series Trust (File No. 2-74584).
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
TITLE OF CLASS MARCH 31, 1997
-------------- --------------
<S> <C>
Shares of beneficial interest, par value $.10 per share.......... 529,396
-------
</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.
Reference is made to Article V of the Registrant's Declaration of Trust, as
amended, Article VI of Registrant's By-Laws, and Section 9 of the Distribution
Agreement, which have been filed as exhibits to the Registration Statement.
Insofar as the conditional advancing of indemnification monies for actions
based upon the Investment Company Act of 1940, as amended (the "Investment
Company Act") may be concerned, such payments will be made only on the
following conditions: (i) the advances must be limited to amounts used, or to
be used, for the preparation or presentation of a defense to the action,
including costs connected with the preparation of a settlement; (ii) advances
may be made only upon receipt of a written promise by, or on behalf of, the
recipient to repay that amount of the advance which exceeds the amount which it
is ultimately determined he is entitled to receive from the Registrant by
reason of indemnification; and (iii)(a) such promise must be secured by a
surety bond, other suitable insurance or an equivalent form of security which
assures that any repayments may be obtained by the Registrant without delay or
litigation, which bond, insurance or other form of security must be provided by
the recipient of the advance, or (b) a majority of a quorum of the Registrant's
disinterested, non-party Trustees, or an independent legal counsel in a written
opinion, shall determine, based upon a review of readily available facts, that
the recipient of the advance ultimately will be found entitled to
indemnification.
In Section 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 "Securities Act"), against certain
types of civil liabilities arising in connection with the Registration
Statement or Prospectus and Statement of Additional Information.
C-2
<PAGE>
Insofar as indemnification for liabilities arising under the Securities 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 Securities 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 Securities Act and will be governed by the final adjudication
of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF MANAGER.
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 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 Fund, 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 Retirement Series Trust,
Merrill Lynch Series Fund, Inc., Merrill Lynch Short-Term Global Income Fund,
Inc., Merrill Lynch Strategic Dividend Fund, Merrill Lynch Technology Fund,
Inc., Merrill Lynch U.S.A. Government Reserves, Merrill Lynch U.S. Treasury
Money Fund, Merrill Lynch Utility Income Fund, Inc. and Merrill Lynch Variable
Series Funds, Inc.; and the following closed-end registered investment
companies: Convertible Holdings, Inc., Merrill Lynch High Income Municipal Bond
Fund, Inc., and Merrill Lynch Senior Floating Rate Fund, Inc.
Fund Asset Management, L.P. ("FAM"), an affiliate of 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
Puerto Rico Tax-Exempt Fund, Inc., Merrill Lynch Special Value Fund, Inc.,
Merrill Lynch World Income Fund, Inc., and the Municipal Fund Accumulation
Program, Inc.; and the following closed-end registered investment companies:
Apex Municipal Fund, Inc., Corporate High Yield Fund, Inc., Corporate High
Yield Fund II, Inc., Income Opportunities Fund 1999, Inc., Income Opportunities
Fund 2000, Inc., Merrill Lynch Municipal Strategy Fund, Inc., MuniAssets Fund,
Inc., MuniEnhanced Fund, Inc., MuniInsured Fund, Inc., MuniVest Fund, Inc.,
MuniVest Fund II, Inc., MuniVest Florida Fund, MuniVest Michigan Insured Fund,
Inc., MuniVest New Jersey Fund, Inc., MuniVest Pennsylvania Insured Fund,
MuniYield Arizona Fund, Inc., MuniYield California Fund, Inc., MuniYield
California Insured Fund, Inc., MuniYield California Insured Fund II, Inc.,
MuniYield Florida Fund, MuniYield Florida Insured Fund, MuniYield Fund, Inc.,
MuniYield Insured Fund, Inc., MuniYield
C-3
<PAGE>
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 MuniNew York Holdings, Inc. and Worldwide DollarVest Fund, Inc.
The address of each of these investment companies is P.O. Box 9011,
Princeton, New Jersey 08543-9011 except that the address of Merrill Lynch Funds
for Institutions Series is One Financial Center, 15th Floor, Boston,
Massachusetts 02111-2646. The address of the Manager and FAM is also P.O. Box
9011, Princeton, New Jersey 08543-9011. The address of Merrill Lynch Funds
Distributor, Inc. ("MLFD") 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 World Financial Center,
North Tower, 250 Vesey Street, New York, New York 10281. The address of Merrill
Lynch Financial Data Services, Inc. ("MLFDS") is 4800 Deer Lake Drive East,
Jacksonville, Florida 32246-6484.
Set forth below is a list of each executive officer and partner of the
Manager indicating each business, profession, vocation or employment of a
substantial nature in which each such person or entity has been engaged since
January 1, 1993 for his or her or its 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 all or
substantially all of the investment companies described in the preceding
paragraph and Messrs. Giordano, Harvey, Kirstein and Monagle are directors or
officers of one or more of such companies.
<TABLE>
<CAPTION>
POSITION OTHER SUBSTANTIAL BUSINESS,
NAME WITH MANAGER PROFESSION, VOCATION OR EMPLOYMENT
---- ------------ ----------------------------------
<S> <C> <C>
ML & Co. ............... Limited Partner Financial Services Holding Company
Princeton Services, Inc.
("Princeton Servic-
es") .................. General Partner General Partner of FAM
Arthur Zeikel .......... President President of FAM; President and Director
of Princeton Services; Director of
MLFD; Executive Vice President of ML &
Co.
Terry K. Glenn.......... Executive Vice Executive Vice President of FAM;
President Executive Vice President and Director
of Princeton Services; President and
Director of MLFD; Director of MLFDS;
President of Princeton Administrators,
L.P.
Vincent R. Giordano..... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
Elizabeth Griffin....... Senior Vice President Senior Vice President of FAM
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
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;
Director of MLFD
Ronald M. Kloss......... Senior Vice President Senior Vice President and Controller of
and Controller FAM; Senior Vice President and
Controller of Princeton Services
Stephen M. M. Miller.... Senior Vice President Executive Vice President of Princeton
Administrators, L.P.; Senior Vice
President of Princeton Services
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
POSITION OTHER SUBSTANTIAL BUSINESS,
NAME WITH MANAGER PROFESSION, VOCATION OR EMPLOYMENT
---- ------------ ----------------------------------
<S> <C> <C>
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
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 MLFD
Ronald L. Welburn....... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
Anthony Wiseman ........ 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 also acts as principal underwriter for the
following closed-end funds: Merrill Lynch High Income Municipal Bond Fund, Inc.
and Merrill Lynch Senior Floating Rate Fund, Inc.
C-5
<PAGE>
(b) Set forth below is information concerning each director and officer of
MLFD. The principal business address of each such person is P.O. Box 9081,
Princeton, New Jersey 08543-9081, except that the address of Messrs. Aldrich,
Brady, Breen, Crook, Fatseas, and Wasel is One Financial Center, 15th Floor,
Boston, Massachusetts 02111-2633.
<TABLE>
<CAPTION>
(2) (3)
(1) POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH MLFD WITH REGISTRANT
---- --------------------- ---------------------
<S> <C> <C>
Executive Vice
Terry K. Glenn................. President and Director President
Arthur Zeikel.................. Director President and Trustee
Philip L. Kirstein............. Director None
William E. Aldrich............. Senior Vice President None
Robert W. Crook................ Senior Vice President None
Kevin P. Boman................. Vice President None
Michael Brady.................. Vice President None
William M. Breen............... Vice President None
Michael G. Clark............... Vice President None
Mark A. DeSario................ Vice President None
James T. Fatseas............... Vice President None
Michelle T. Lau................ Vice President None
Debra W. Landsman-Yaros........ Vice President None
Vice President and
Gerald M. Richard.............. Treasurer Treasurer
Salvatore Venezia.............. Vice President None
William Wasel.................. Vice President None
Robert Harris.................. Secretary None
</TABLE>
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by Section
31(a) of the Investment Company Act and the rules thereunder will be maintained
at the offices of the Registrant, 800 Scudders Mill Road, Plainsboro, New
Jersey 08536, and the 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.
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders
upon request and without charge.
C-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT OF 1940, THE REGISTRANT CERTIFIES THAT IT MEETS ALL OF THE
REQUIREMENTS FOR EFFECTIVENESS OF THIS AMENDMENT TO THE REGISTRATION STATEMENT
PURSUANT TO RULE 485(B) UNDER THE SECURITIES ACT OF 1933 AND HAS DULY CAUSED
THIS AMENDMENT TO THE 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 24TH DAY OF APRIL, 1997.
Merrill Lynch Ready Assets Trust
(Registrant)
/s/ Terry K. Glenn
By: _________________________________
(TERRY K. GLENN, EXECUTIVE VICE
PRESIDENT)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT TO
THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
Arthur Zeikel* President and
- ------------------------------------- Trustee (Principal
(ARTHUR ZEIKEL) Executive Officer)
Gerald M. Richard* Treasurer (Principal
- ------------------------------------- Financial and
(GERALD M. RICHARD) Accounting Officer)
Donald Cecil* Trustee
- -------------------------------------
(DONALD CECIL)
M. Colyer Crum* Trustee
- -------------------------------------
(M. COLYER CRUM)
Edward H. Meyer* Trustee
- -------------------------------------
(EDWARD H. MEYER)
Jack B. Sunderland* Trustee
- -------------------------------------
(JACK B. SUNDERLAND)
J. Thomas Touchton* Trustee
- -------------------------------------
(J. THOMAS TOUCHTON)
/s/ Terry K. Glenn April 24, 1997
*By: ________________________________
(TERRY K. GLENN, ATTORNEY-IN-FACT)
C-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<C> <S>
10 --Opinion of Brown & Wood LLP, counsel for the Registrant.
11 --Consent of Deloitte & Touche LLP, independent auditors for the
Registrant.
17 --Financial Data Schedule.
</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 market Additional Information
bull
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 7304581349
<INVESTMENTS-AT-VALUE> 7304123288
<RECEIVABLES> 25254967
<ASSETS-OTHER> 356591
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7329734846
<PAYABLE-FOR-SECURITIES> 165167591
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 68307138
<TOTAL-LIABILITIES> 233474729
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7096718178
<SHARES-COMMON-STOCK> 7096718178
<SHARES-COMMON-PRIOR> 7077122828
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (458061)
<NET-ASSETS> 7096260117
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 407557799
<OTHER-INCOME> 0
<EXPENSES-NET> (47201437)
<NET-INVESTMENT-INCOME> 360356362
<REALIZED-GAINS-CURRENT> 559269
<APPREC-INCREASE-CURRENT> (2689938)
<NET-CHANGE-FROM-OPS> 358225693
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (360356362)
<DISTRIBUTIONS-OF-GAINS> (559269)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13961575969
<NUMBER-OF-SHARES-REDEEMED> (14301439885)
<SHARES-REINVESTED> 359459266
<NET-CHANGE-IN-ASSETS> 16905412
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 26214794
<INTEREST-EXPENSE> 201878
<GROSS-EXPENSE> 47201437
<AVERAGE-NET-ASSETS> 7329945353
<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> .64
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EXHIBIT 99.10
Brown & Wood LLP
One World Trade Center
New York, N.Y. 10048-0557
Telephone: 212-839-5300
Facsimile: 212-839-5599
April 25, 1997
Merrill Lynch Ready Assets Trust
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Dear Sirs and Mesdames:
This opinion is furnished in connection with the registration by Merrill
Lynch Ready Assets Trust, a Massachusetts business trust (the "Trust") of
5,688,665,560 shares of beneficial interest, par value $0.10 per share (the
"Shares"), under the Securities Act of 1933 pursuant to a registration statement
on Form N-1A (File No. 2-52711), as amended (the "Registration Statement").
As counsel for the Trust, we are familiar with the proceedings taken by it
in connection with the authorization, issuance and sale of the Shares. In
addition, we have examined and are familiar with the Declaration of Trust of the
Trust, the By-Laws of the Trust and such other documents as we have deemed
relevant to the matters referred to in this opinion.
Based upon the foregoing, we are of the opinion that the Shares, upon
issuance and sale in the manner referred to in the Registration Statement for
consideration not less than the par value thereof, will be legally issued, fully
paid and non-assessable, except that shareholders of the Trust may under certain
circumstances be held personally liable for the Trust's obligations.
In rendering this opinion, we have relied as to matters of Massachusetts
law upon an opinion of Bingham, Dana & Gould, dated April 23, 1997, rendered to
the Trust.
<PAGE>
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the prospectus and
statement of additional information constituting parts thereof.
Very truly yours,
/s/ Brown & Wood LLP
2
<PAGE>
EXHIBIT 99.11
INDEPENDENT AUDITORS' CONSENT
Merrill Lynch Ready Assets Trust:
We consent to the use in Post-Effective Amendment No. 30 to Registration
Statement No. 2-52711 of our report dated February 4, 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
April 25, 1997
