<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 1, 1998
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. 31 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 20 [X]
(CHECK APPROPRIATE BOX OR BOXES)
------------------------
MERRILL LYNCH READY ASSETS TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(609) 282-2800
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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:
<TABLE>
<S> <C>
BROWN & WOOD LLP PHILIP L. KIRSTEIN
ONE WORLD TRADE CENTER MERRILL LYNCH ASSET MANAGEMENT
NEW YORK, NEW YORK 10048-0557 P.O. BOX 9011
ATTENTION: THOMAS R. SMITH, JR. PRINCETON, NEW JERSEY 08543-9011
</TABLE>
------------------------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
<TABLE>
<S> <C>
[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.
</TABLE>
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
<TABLE>
<S> <C>
[ ] this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
</TABLE>
TITLE OF SECURITIES BEING REGISTERED: Shares of Common Stock, par value $0.10
per share.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
MERRILL LYNCH READY ASSETS TRUST
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
------------- --------
<S> <C> <C>
PART A
Item 1. Cover Page............................ Cover Page
Item 2. Synopsis.............................. Fee Table
Item 3. Condensed Financial Information....... Financial Highlights; Yield
Information
Item 4. General Description of Registrant..... Investment Objectives and Policies;
Organization of the Fund
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.... Organization of the Trust
Item 7. Purchase of Securities Being
Offered............................. Cover Page; Fee Table; Purchase of
Shares; Redemption of Shares; 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....... General Information
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; 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; Purchase and Redemption of
Shares through Merrill Lynch
Retirement Plans; Determination of
Net Asset Value
Item
20. Tax Status............................ Taxes
Item
21. Underwriters.......................... Purchase of Shares
Item
22. Calculation of Performance Data....... Yield Information
Item
23. Financial Statements.................. Financial Statements; Yield
Information
PART C
</TABLE>
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
<PAGE> 3
PROSPECTUS
APRIL 1, 1998
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
Blueprint(SM) Program is $500 (or $50 if the shareholder elects to participate
in the automatic investment of sale proceeds option on the Merrill Lynch
Blueprint(SM) 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 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 1, 1998 (the "Statement of Additional
Information"), has been filed with the Securities and Exchange Commission (the
"Commission") and can be obtained, without charge, by calling or by writing the
Trust at the above telephone number or address. The Commission maintains a Web
site (http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference and other information about the Trust. The
Statement of Additional Information is hereby incorporated by reference into
this Prospectus.
------------------------
MERRILL LYNCH ASSET MANAGEMENT -- MANAGER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC. -- DISTRIBUTOR
<PAGE> 4
FEE TABLE
ANNUAL TRUST OPERATING EXPENSES
<TABLE>
<S> <C>
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997:
Management Fees(a)........................................ 0.35%
Rule 12b-1 Fees(b)........................................ 0.13%
Other Expenses(c)......................................... 0.17%
-----
Total Trust Operating Expenses.............................. 0.65%
=====
</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, assuming an operating expense
ratio of 0.65% and a 5% annual rate of return
throughout the periods.............................. $7 $21 $36 $81
</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. This 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> 5
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, 1997 and the independent auditors' report thereon are included in
the Statement of Additional Information. The following per share data and ratios
have been derived from information provided in the 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,
------------
1997
----------
<S> <C>
Increase (Decrease) in Net Asset Value:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year...... $ 1.00
----------
Investment income -- net............... .0503
Realized and unrealized gain (loss) on
investments -- net................... .0001
----------
Total from investment operations........ .0504
----------
Less dividends and distributions:
Investment income -- net............... (.0503)
Realized gain on investments -- net.... --+
----------
Total dividends and distributions....... (.0503)
----------
Net asset value, end of year............ $ 1.00
==========
Total Investment Return................. 5.16%
==========
RATIOS TO AVERAGE NET ASSETS:
Expenses................................ .65%
==========
Investment income and realized gain
(loss) on investments -- net........... 5.03%
==========
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands)............................. $6,946,667
==========
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Asset Value:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ----------- ----------
Investment income -- net............... .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 NET ASSETS:
Expenses................................ .64% .67% .65% .65% .64%
========== ========== ========== =========== ==========
Investment income and realized gain
(loss) on investments -- net........... 4.88% 5.40% 3.67% 2.78% 3.48%
========== ========== ========== =========== ==========
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands)............................. $7,096,260 $7,079,355 $6,240,997 $ 6,523,187 $7,465,869
========== ========== ========== =========== ==========
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------
1991 1990 1989 1988
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Asset Value:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year...... $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ----------- ----------- ----------
Investment income -- net............... .0556 .0771 .0860 .0695
Realized and unrealized gain (loss) on
investments -- net................... .0029 .0010 .0005 (.0004)
---------- ----------- ----------- ----------
Total from investment operations........ .0585 .0781 .0865 .0691
---------- ----------- ----------- ----------
Less dividends and distributions:
Investment income -- net............... (.0556) (.0771) (.0860) (.0691)
Realized gain on investments -- net.... (.0029)* (.0010)* (.0005)* --
---------- ----------- ----------- ----------
Total dividends and distributions....... (.0585) (.0781) (.0865) (.0691)
---------- ----------- ----------- ----------
Net asset value, end of year............ $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== =========== =========== ==========
Total Investment Return................. 6.02% 8.08% 9.05% 7.16%
========== =========== =========== ==========
RATIOS TO AVERAGE NET ASSETS:
Expenses................................ .62% .62% .63% .62%
========== =========== =========== ==========
Investment income and realized gain
(loss) on investments -- net........... 5.87%* 7.80%* 8.65%* 6.88%*
========== =========== =========== ==========
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands)............................. $9,077,226 $10,180,436 $10,650,487 $9,130,343
========== =========== =========== ==========
</TABLE>
- ---------------
* Includes unrealized gain (loss).
+ Amount is less than $.0001 per share.
3
<PAGE> 6
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, 1997 FEBRUARY 28, 1998
----------------- ------------------
<S> <C> <C>
Annualized Yield:
Including gains and losses............................. 5.21% 5.08%
Excluding gains and losses............................. 5.21% 5.08%
Compounded Annualized Yield................................. 5.35% 5.21%
Average maturity of portfolio at end of period.............. 69 days 78 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 that 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 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.
4
<PAGE> 7
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 some 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 but are not limited to 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 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.
5
<PAGE> 8
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. Under such agreements, the counterparty
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. 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 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
6
<PAGE> 9
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.
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.
7
<PAGE> 10
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 seven individuals, six 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* -- Chairman of MLAM and its affiliate, Fund Asset
Management, L.P. ("FAM"); Chairman and Director of Princeton Services, Inc.
("Princeton Services"); and Executive Vice President of Merrill Lynch & Co.,
Inc. ("ML & Co.").
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).
FRED G. WEISS -- Managing Director of FGW Associates and Director of Noven
Corporation (a pharmaceutical company).
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* 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 Asset Management Group of ML &
Co. (which includes the Manager), acts as the investment adviser for more than
100 registered investment companies and provides investment advisory services to
individual and institutional accounts. As of February 1998, the Asset Management
Group had a total of approximately $476 billion in investment company and other
portfolio assets under management. This amount includes assets managed for
certain affiliates of the Manager.
The agreement with the Manager (the "Management Agreement") provides that,
subject to the supervision 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.
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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 $500 million. For
the fiscal year ended December 31, 1997, the total management fee paid by the
Trust to the Manager aggregated $25,839,319 (based on average net assets of
approximately $7.3 billion) and the effective fee rate was 0.35%.
Donaldo S. Benito is Vice President and Portfolio Manager of the Trust and
is responsible for the day-to-day management of the Trust's investment
portfolio. Mr. Benito has been a Portfolio Manager and Vice President of the
Manager since 1985.
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, 1997, the
amount of such reimbursement was $366,592. For the fiscal year ended December
31, 1997, the ratio of total expenses to average net assets was 0.65%.
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. Additionally, a $.20 monthly closed account charge will be assessed
on all accounts which close during the calendar year. Application of this fee
will commence the month following the month the account is closed. At the end of
the calendar year, no further fees will be due. For purposes of the Transfer
Agency Agreement, the term "account" includes a shareholder account maintained
directly by the Transfer Agent and any other account representing the beneficial
interest of a person in the shares in a recordkeeping system, provided the
recordkeeping system is maintained by a subsidiary of ML & Co. For the fiscal
year ended December 31, 1997, the total fee paid by the Trust to the Transfer
Agent pursuant to the Transfer Agency Agreement was $11,354,568.
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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<PAGE> 13
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 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
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<PAGE> 14
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, 1997, $8,242,767 was paid to Merrill
Lynch pursuant to the Plan (based on average daily 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 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.
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<PAGE> 15
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 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.
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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 Blueprint(SM) 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
signature(s) on the redemption request must be guaranteed by an "eligible
guarantor institution" as such is defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended, the existence and validity 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. 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,
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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-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.
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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).
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, 1997, the Trust
engaged in 40 transactions pursuant to such orders aggregating approximately
$1.2 billion.
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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 business day
during which the NYSE or New York banks are open for business. Such
determination is made as of the close of business on the NYSE (generally 4:00
p.m., New York time) or, on days when the NYSE is closed but 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.
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,
17
<PAGE> 20
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 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). Recent
legislation creates additional categories of capital gains taxable at different
rates. Generally not later than 60 days after the close of its taxable year, the
Fund will provide its shareholders with a written notice designating the amounts
of any ordinary income dividends or capital gain dividends, as well as the
amount of capital gain dividends in the different categories of capital gain
referred to above.
Dividends are taxable to shareholders even though they are reinvested in
additional shares of the Trust. 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 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.
18
<PAGE> 21
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 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.
YEAR 2000 ISSUES
Many computer systems were designed using only two digits to designate
years. These systems may not be able to distinguish the Year 2000 from the Year
1900 (commonly known as the "Year 2000 Problem"). Like other investment
companies and financial and business organizations, the Trust could be adversely
affected if the computer systems used by the Manager or other Trust service
providers do not properly address this problem prior to January 1, 2000. The
Manager has established a dedicated group to analyze these issues and to
implement any systems modifications necessary to prepare for the Year 2000.
Currently, the Manager does not anticipate that the transition to the 21st
century will have any material impact on its ability to continue to service the
Trust at current levels. In addition, the Manager has sought assurances from the
19
<PAGE> 22
Trust's other service providers that they are taking all necessary steps to
ensure that their computer systems will accurately reflect the Year 2000, and
the Manager will continue to monitor the situation. At this time, however, no
assurance can be given that the Trust's other service providers have anticipated
every step necessary to avoid any adverse effect on the Trust attributable to
the Year 2000 Problem.
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> 23
<TABLE>
<CAPTION>
<S> <C>
MERRILL LYNCH READY ASSETS TRUST PURCHASE APPLICATION -
-------- ------------
READY ASSETS TRUST ACCOUNT NUMBER
(IF ACCOUNT IS ALREADY ESTABLISHED)
TYPE OF ACCOUNT OWNER(S) AND OTHER INFORMATION
ACCOUNT INDIVIDUAL OR JOINT ACCOUNT
Check appropriate ------------------------------------------------------------------------------------------------------
box: First Name MI Last Name Tax ID or Social Security No.
[ ] Single
[ ] Joint ------------------------------------------------------------------------------------------------------
[ ] UGMA/UTMA Joint Tenant's First name MI Last Name
[ ] Estate Joint tenants with rights of survivorship (not tenants in
[ ] Trust* common) will be presumed unless otherwise specified. No
[ ] Corporation* joint tenants with right of survivorship registrations are
[ ] Partnership* permitted for residents of Louisiana.
[ ] Transfer On ------------------------------------------------------------------------------------------------------
Death* GIFT/TRANSFER TO MINOR ACCOUNTS--UGMA/UTMA
[ ] Other* -----------
------------------------------------------------------------------------------------------------------
FOR CERTAIN ACCOUNTS (*) Custodian's Name (one only) Under Uniform Gift/Transfer to Minors Act of (State)
ADDITIONAL
DOCUMENTATION MAY ------------------------------------------------------------------------------------------------------
BE REQUIRED, PLEASE Minor's Name (one only) Minor's Social Security Number
SEE ADDITIONAL
INFORMATION ON PAGE 23 ------------------------------------------------------------------------------------------------------
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)
--------------------------------------------------------------
</TABLE>
21
<PAGE> 24
<TABLE>
<S> <C>
CHECK I hereby request and authorize Merrill Lynch Financial Data
REDEMPTION Services, Inc. (the "Transfer Agent") to honor checks drawn
PRIVILEGE by me on my Merrill Lynch Ready Assets Trust (the "Trust")
Check box [ ] 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 The undersigned hereby authorize(s) and direct(s) Merrill
FUNDS Lynch Financial Data Services, Inc. (the "Transfer Agent")
REDEMPTION to act on telephonic, telegraphic, or other instructions
Check box [ ] (without signature guarantee) from any person representing
Signature Guarantee himself to be either the investor or any authorized
required for this option 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)
</TABLE>
22
<PAGE> 25
<TABLE>
<S> <C>
ACCRUED MONTHLY The undersigned hereby authorizes and directs Merrill Lynch
PAYOUT PLAN Financial Data Services, Inc. to redeem on the last Friday
Check box [ ] 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 To establish this feature, minimum balance requirements are:
PLAN $10,000.00 for monthly disbursements and $5,000.00 for
Check box [ ] quarterly disbursements of shares in Merrill Lynch Ready
Signature Guarantee Assets Trust at cost or current offering price. IN ADDITION,
required for this option 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 State Zip Code
- ----------------------------------------------------------------------------------------------
ADDITIONAL - Corporations--"Certification of Corporate Resolution,"
INFORMATION 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.
</TABLE>
23
<PAGE> 26
<TABLE>
<S> <C>
REQUIRED By the execution of this Purchase Application, the investor
SIGNATURES 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
--------------------------------- --------------------------------- ---------
Signature of Joint Registrant, if
Print Name 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)
</TABLE>
24
<PAGE> 27
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25
<PAGE> 28
[This page intentionally left blank.]
26
<PAGE> 29
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> 30
- ------
NO DEALER, SALESMAN, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, 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 OFFERING
MAY NOT LAWFULLY BE MADE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fee Table............................ 2
Financial Highlights................. 3
Yield Information.................... 4
Investment Objectives and Policies... 4
Management of the Trust.............. 9
Trustees........................... 9
Management and Advisory
Arrangements.................... 9
Transfer Agency Services........... 10
Purchase of Shares................... 10
Methods of Payment................. 11
Distribution Plan.................. 12
Redemption of Shares................. 12
Methods of Redemption.............. 13
Shareholder Services................. 15
Fee-Based Programs................. 16
Portfolio Transactions............... 16
Additional Information............... 17
Dividends.......................... 17
Determination of Net Asset Value... 17
Taxes.............................. 17
Organization of the Trust.......... 19
Year 2000 Issues................... 19
Shareholder Reports................ 19
Shareholder Inquiries.............. 20
Purchase Application................. 21
</TABLE>
Code # 10053-0498
(Merrill Lynch Logo)
MERRILL LYNCH
READY ASSETS TRUST
[MLYNCH COMPASS GRAPHIC]
Merrill Lynch Ready
Assets Trust is organized
as a Massachusetts business
trust. It is not a bank nor
does it offer fiduciary or
trust services. Shares of the
Trust are not equivalent to
a bank account. A share-
holder's investment in the
Trust is not insured by any
Government agency.
PROSPECTUS
April 1, 1998
Distributor:
Merrill Lynch
Funds Distributor, Inc.
This prospectus should be
retained for future reference.
<PAGE> 31
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
1, 1998 (the "Prospectus"), which has been filed with the Securities and
Exchange Commission (the "Commission") and can be obtained, without charge, by
calling or by writing the 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 1, 1998.
<PAGE> 32
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 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.
Also as discussed in the Prospectus, the Trust may invest in money market
securities pursuant to repurchase agreements or purchase and sale contracts.
Under such agreements, the counterparty agrees, on entering into the contract,
to repurchase the security at a mutually agreed-upon time and price, thereby
2
<PAGE> 33
determining the yield during the term of the agreement. This results in a fixed
rate of return insulated from market fluctuations during such period. Such
agreements usually cover short periods, such as under 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.
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.
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
3
<PAGE> 34
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 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.
4
<PAGE> 35
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS
Information about the Trustees, executive officers and portfolio manager 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 and the portfolio manager is c/o P.O. Box 9011,
Princeton, New Jersey 08543-9011.
ARTHUR ZEIKEL (65) -- President and Trustee(1)(2) -- Chairman of the
Manager and Fund Asset Management, L.P. ("FAM") (which terms, as used herein,
include their corporate predecessors) since 1997; President of the Manager and
FAM from 1977 to 1997; Chairman of Princeton Services, Inc. ("Princeton
Services") since 1997 and Director thereof since 1993; President of Princeton
Services from 1993 to 1997; Executive Vice President of Merrill Lynch & Co.,
Inc. ("ML & Co.") since 1990.
DONALD CECIL (71) -- 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 (65) -- Trustee(2) -- 104 Westcliff Road, Weston,
Massachusetts 02193. 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 (71) -- 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 (69) -- 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 (59) -- 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).
FRED G. WEISS (56) -- Trustee(2) -- 5141 Via de Amalfi Drive, Boca Raton,
Florida 33496. Managing Director of FGW Associates since 1997; Vice President,
Planning, Investment, and Development of Warner Lambert Co. from 1979 to 1997;
Director of Noven Corporation (a pharmaceutical company) since 1997.
TERRY K. GLENN (57) -- Executive Vice President(1)(2) -- Executive Vice
President of the Manager and FAM since 1983; President of Merrill Lynch Funds
Distributor, Inc. (the "Distributor") since 1986 and Director thereof since
1991; Executive Vice President and Director of Princeton Services since 1993;
President of Princeton Administrators, L.P. since 1988.
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<PAGE> 36
JOSEPH T. MONAGLE, JR. (49) -- Senior Vice President(1)(2) -- Senior Vice
President and Department Head of the Global Fixed Income Division of the Manager
and FAM since 1990; Vice President of the Manager from 1978 to 1990; Senior Vice
President of Princeton Services since 1993.
KEVIN J. MCKENNA (41) -- Senior Vice President(1)(2) -- First Vice
President of the Manager since 1997; Vice President of the Manager from 1985 to
1997.
DONALDO S. BENITO (52) -- Vice President and Portfolio
Manager(1)(2) -- Vice President of the Manager since 1985.
DONALD C. BURKE (37) -- Vice President(1)(2) -- First Vice President of the
Manager since 1997; Vice President of the Manager from 1990 to 1997 and Director
of Taxation of the Manager since 1990.
GERALD M. RICHARD (48) -- 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.
THOMAS D. JONES, III (33) -- Secretary(1)(2) -- Vice President of the
Manager since 1998. Attorney with the Manager since 1992.
- ---------------
(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 February 28, 1998, the Trustees and the officers of the Trust as a group
(14 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 Trustee
who is not affiliated with the Manager (each a "non-affiliated 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 (the
"Committee") of the Board of Trustees of which all of the non-affiliated
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-affiliated Trustees aggregated
$137,773 for the fiscal year ended December 31, 1997.
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<PAGE> 37
The following table sets forth, for the fiscal year ended December 31,
1997, compensation paid by the Trust to the non-affiliated Trustees and, for the
calendar year ended December 31, 1997, the aggregate compensation paid by all
registered investment companies advised by MLAM and its affiliate, FAM
("MLAM/FAM Advised Funds"), to the non-affiliated Trustees.
<TABLE>
<CAPTION>
PENSION OR TOTAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS FROM TRUST AND
COMPENSATION ACCRUED AS PART MLAM/FAM ADVISED
NAME OF TRUSTEE FROM TRUST OF TRUST EXPENSES FUNDS PAID TO TRUSTEES
--------------- ------------ ------------------- ----------------------
<S> <C> <C> <C>
Donald Cecil(1).............................. $29,500 None $275,850
M. Colyer Crum(1)............................ $27,000 None $115,600
Edward H. Meyer(1)........................... $27,000 None $222,100
Jack B. Sunderland(1)........................ $27,000 None $132,600
J. Thomas Touchton(1)........................ $27,000 None $132,100
Fred G. Weiss(1)(2).......................... $ 0 None $ 0
</TABLE>
- ---------------
(1) The Trustees serve on the boards of MLAM/FAM Advised Funds as follows: Mr.
Cecil (33 registered investment companies consisting of 33 portfolios), Mr.
Crum (15 registered investment companies consisting of 15 portfolios), Mr.
Meyer (33 registered investment companies consisting of 33 portfolios), Mr.
Sunderland (18 registered investment companies consisting of 30 portfolios),
Mr. Touchton (18 registered investment companies consisting of 30
portfolios) and Mr. Weiss (15 registered investment companies consisting of
15 portfolios).
(2) Mr. Weiss was elected a Trustee of the Trust on February 3, 1998.
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 supervision 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
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<PAGE> 38
same time, transactions in such securities will be made, insofar as feasible,
for the respective funds and clients 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>
For the fiscal years ended December 31, 1995, 1996 and 1997, the total
management fees paid by the Trust to the Manager aggregated $24,584,276,
$26,214,794 and $25,839,319, respectively.
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, 1997, $366,592 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.
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<PAGE> 39
Duration and Termination. Unless earlier terminated as described below,
the Management Agreement will continue in effect from year to year if approved
annually (a) by the Trustees of the Trust or by a majority of the outstanding
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> 40
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, 1995, 1996 and 1997, $7,712,779, $8,008,404 and
$8,242,767, respectively, was paid to Merrill Lynch pursuant to the Plan. All of
the amounts expended for the years ended December 31, 1995, 1996 and 1997 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.
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
10
<PAGE> 41
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 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,
11
<PAGE> 42
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,
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. During the fiscal year
ended December 31, 1997, the Trust engaged in 40 such transactions aggregating
approximately $1.2 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, Martin Luther King, Jr. Day, Presidents' Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share is computed pursuant to the "penny-rounding" method by 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
12
<PAGE> 43
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 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.
13
<PAGE> 44
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
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.
14
<PAGE> 45
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 having 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 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
15
<PAGE> 46
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 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
16
<PAGE> 47
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 of Trust shares held for six months or less will be treated as
long-term capital loss to the extent of any capital gain dividends received by
the shareholder. 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). Recent legislation
creates additional categories of capital gains taxable at different rates.
Generally not later than 60 days after the close of its taxable year, the Fund
will provide its shareholders with a written notice designating the amounts of
any ordinary income dividends or capital gain dividends, as well as the amount
of capital gain dividends in the different categories of capital gain referred
to above.
Dividends are taxable to shareholders even though they are reinvested in
additional shares of the Trust. 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.
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<PAGE> 48
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.
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.
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<PAGE> 49
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.
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.
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<PAGE> 50
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.
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 February 28, 1998.
------------------------
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> 51
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, 1997, the related statements of operations for the year then ended, and
changes in net assets for each of the years in the two-year period then ended
and the financial highlights for each of the years in the five-year period then
ended. These financial statements and the financial highlights are the
responsibility of the 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, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Merrill Lynch Ready
Assets Trust as of December 31, 1997, the results of its operations, the changes
in its net assets, and the financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
February 6, 1998
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<PAGE> 52
<TABLE>
<CAPTION>
Merrill Lynch Ready Assets Trust December 31, 1997
SCHEDULE OF INVESTMENTS (in Thousands)
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
<S> <C> <C> <C> <C>
Bank Notes -- 9.4%
American Express $50,000 5.96+ % 12/11/98 $50,000
Centurion Bank
Bank of America N.A. 25,000 6.04 6/10/98 25,010
Bank of America 25,000 5.93 6/24/98 25,000
N.T. & S.A. 40,000 6.10+ 6/30/98 39,984
First Bank N.A., 25,000 5.597+ 5/15/98 24,995
Minneapolis
KeyBank N.A. 28,000 5.64+ 5/06/98 27,995
51,500 5.62+ 8/20/98 51,476
50,000 5.24+ 8/28/98 49,978
100,000 5.655+ 11/27/98 99,978
Morgan Guaranty 45,000 5.615+ 2/19/98 44,997
Trust Company
of NY
Northern Trust 15,000 5.96 6/17/98 15,002
Company 13,000 5.95 6/24/98 13,001
PNC Bank N.A. 131,900 5.60+ 10/01/98 131,833
Royal Bank of 26,000 5.61+ 6/30/98 25,990
Canada
Sun Trust Bank, 20,000 5.80 7/24/98 19,987
Atlanta
U.S. National Bank 10,000 5.665+ 4/14/98 9,998
of Oregon ----------
Total Bank Notes
(Cost -- $655,197) 655,224
==========
Certificates of Deposit -- 0.3%
Chase Manhattan 20,000 5.87 7/21/98 19,996
Bank, USA ----------
Total Certificates of Deposit
(Cost -- $20,000) 19,996
==========
Certificates of Deposit --
European -- 1.1%
Barclays Bank PLC 25,000 6.08 6/15/98 25,001
Lloyds Bank PLC 25,000 5.90 8/18/98 24,999
Westdeutsche 30,000 5.83 8/03/98 29,984
Landesbank
Girozentrale ----------
Total Certificates of Deposit --
European
(Cost -- $80,008) 79,984
==========
Certificates of Deposit --
Yankee -- 12.5%
ABN -- AMRO Bank, 20,000 5.77 7/28/98 19,986
N.V., NY 25,000 5.71 10/09/98 24,959
Barclays Bank PLC, 18,000 5.94 6/30/98 18,003
NY 40,000 5.86 8/18/98 39,988
Bayerische 40,000 5.835 9/29/98 39,979
Hypotheken-und
Wechsel Bank, NY
Bayerische 50,000 5.85 7/10/98 49,984
Landesbank
Girozentrale, NY
Bayerische 50,000 5.89 9/15/98 49,989
Vereinsbank 25,000 5.70 10/06/98 24,957
AG, NY
Canadian 25,000 5.79 10/06/98 24,974
Imperial Bank of
Commerce, NY
Credit Suisse 35,000 5.705+ 12/11/98 35,000
First Boston, NY
Deutsche Bank 25,000 5.80 1/28/98 24,994
AG, NY 25,000 5.63 2/26/98 24,978
15,000 5.95 6/16/98 15,002
25,000 5.935 9/15/98 25,002
Landesbank 25,000 5.78 1/27/98 24,994
Hessen -- Thuringen 25,000 6.00 6/09/98 25,008
Girozentrale, NY 22,600 6.08 6/09/98 22,615
Royal Bank of 50,000 5.77 1/27/98 49,988
Canada, NY 25,000 5.95 3/24/98 24,999
20,000 6.05 6/08/98 20,010
25,000 6.04 6/15/98 25,013
16,100 5.79 8/20/98 16,089
25,000 5.80 10/06/98 24,976
Swiss Bank 58,000 6.02 6/12/98 58,025
Corp., NY 20,000 5.95 7/02/98 20,003
38,000 5.84 7/17/98 37,987
50,000 5.85 7/17/98 49,986
26,000 5.85 8/26/98 25,992
Westdeutsche 23,000 5.94 6/29/98 23,004
Landesbank
Girozentrale, NY ----------
Total Certificates of Deposit --
Yankee
(Cost -- $866,580) 866,484
==========
Commercial Paper -- Discount --
48.0%
Aesop Funding Corp. 35,000 5.81 2/02/98 34,814
Allomon Funding 14,100 6.20 1/14/98 14,066
Corporation
Alpine 89,687 5.82 2/02/98 89,213
Securitization Corp. 25,000 5.80 2/04/98 24,857
25,852 5.70 2/13/98 25,667
21,461 5.70 2/19/98 21,286
American Express 52,039 6.45 1/02/98 52,020
Credit Corp.
American Honda 40,000 6.05 1/30/98 39,798
Finance Corp. 60,000 5.70 2/09/98 59,609
Apreco Inc. 25,000 6.15 1/20/98 24,915
50,000 5.85 2/13/98 49,643
Asset Securitization 50,000 5.80 2/19/98 49,592
Cooperative Corp.
</TABLE>
22
<PAGE> 53
<TABLE>
<S> <C> <C> <C> <C>
Bear Stearns 25,000 5.55 1/29/98 24,884
Companies, Inc. 25,000 5.62 2/06/98 24,849
25,000 5.57 2/13/98 24,821
25,000 5.74 3/11/98 24,725
25,000 5.56 4/13/98 24,596
CSW Credit, Inc. 23,900 5.62 2/09/98 23,744
Centric Capital Corp. 16,740 5.80 2/09/98 16,632
26,000 5.82 2/09/98 25,832
Chrysler Financial 40,000 5.80 2/09/98 39,742
Corporation 50,000 5.74 3/04/98 49,506
Clipper Receivables 50,000 5.62 2/05/98 49,707
Corp.
Countrywide Home 25,000 6.55 1/08/98 24,964
Loans, Inc. 15,000 5.78 2/12/98 14,895
35,000 5.75 3/03/98 34,660
Cregem North 11,900 5.70 2/24/98 11,793
America, Inc.
Daimler-Benz 50,000 6.70 1/02/98 49,981
North America Corp.
Eureka 30,000 6.05 1/12/98 29,940
Securitization Inc. 30,000 5.65 2/06/98 29,819
13,000 5.72 2/23/98 12,886
25,000 5.75 2/26/98 24,768
10,000 5.78 2/26/98 9,907
18,500 5.75 3/03/98 18,320
15,000 5.73 3/05/98 14,849
Finova Capital Corp. 30,000 5.63 2/06/98 29,819
20,000 5.72 2/24/98 19,821
60,000 5.56 3/19/98 59,266
20,000 5.56 3/23/98 19,743
25,000 5.59 4/17/98 24,580
France Telecom 11,200 5.75 3/20/98 11,061
General Electric 50,000 5.50 3/02/98 49,521
Capital Corp.
General Motors 50,000 5.81 2/03/98 49,726
Acceptance Corp. 25,000 5.64 2/11/98 24,829
75,000 5.72 2/13/98 74,462
75,000 5.75 2/13/98 74,462
40,000 5.73 3/13/98 39,548
30,000 5.72 3/16/98 29,647
20,000 5.54 3/18/98 19,758
25,000 5.57 3/20/98 24,690
Greenwich 24,500 5.82 2/10/98 24,336
Funding 14,785 5.82 2/12/98 14,681
Corporation 13,470 5.75 3/10/98 13,324
34,743 5.80 3/23/98 34,296
Internationale 40,000 5.70 6/09/98 39,004
Nederlanden (U.S.)
Funding Corp.
Lehman Brothers 65,000 5.90 1/27/98 64,712
Holdings, Inc. 46,400 5.75 2/17/98 46,037
38,000 5.74 2/23/98 37,665
Lexington Parker 14,413 5.82 2/02/98 14,336
Capital Corp. 49,402 5.63 2/12/98 49,056
40,000 5.71 2/24/98 39,641
40,666 5.75 3/05/98 40,258
30,519 5.73 3/06/98 30,208
Mont Blanc 80,000 5.80 2/04/98 79,544
Capital Corp. 40,000 5.85 2/05/98 39,765
50,000 5.81 2/12/98 49,649
50,000 5.85 2/26/98 49,535
Morgan Stanley 50,000 5.75 3/11/98 49,451
Group, Inc. 50,000 5.51 4/09/98 49,223
New Center 50,000 5.71 2/17/98 49,609
Asset Trust 40,000 5.75 3/18/98 39,517
Nordbanken 50,000 5.74 3/12/98 49,443
North America 50,000 5.75 3/16/98 49,411
Inc.
Old Line 50,000 5.89 1/28/98 49,771
Funding Corp. 50,000 5.82 2/03/98 49,727
25,000 5.85 2/03/98 24,862
8,490 5.82 2/06/98 8,439
12,000 5.98 2/26/98 11,888
Park Avenue 18,678 5.75 1/30/98 18,588
Receivables Corp. 29,277 5.83 2/06/98 29,102
22,204 5.70 2/12/98 22,048
Preferred 19,300 5.65 2/10/98 19,171
Receivables
Funding Corp.
Sears Roebuck 50,000 5.71 2/17/98 49,609
Acceptance 50,000 5.71 2/18/98 49,601
Corporation 50,000 5.71 2/20/98 49,584
Three Rivers 50,000 6.00 1/16/98 49,867
Funding Corp.
Twin Towers Inc. 23,917 6.00 1/21/98 23,833
40,000 5.90 2/17/98 39,685
WCP Funding Inc. 35,000 5.78 2/18/98 34,720
Windmill Funding 40,000 6.50 1/05/98 39,964
Corp. 20,464 5.82 2/02/98 20,355
48,000 5.70 2/05/98 47,718
15,062 5.75 2/06/98 14,971
35,362 5.65 2/10/98 35,126
9,854 5.80 2/13/98 9,783
19,000 5.75 3/09/98 18,797
25,000 5.77 3/20/98 24,690
----------
Total Commercial Paper
(Cost -- $3,337,026) 3,336,833
==========
Corporate Notes -- 9.2%
Abbey National 50,000 5.59+ 2/25/98 49,994
Treasury Services 50,000 5.65+ 4/15/98 49,993
PLC 50,000 5.62+ 6/09/98 49,985
Bank of Scotland 13,000 5.95 6/18/98 12,998
Treasury Services PLC
</TABLE>
23
<PAGE> 54
<TABLE>
<S> <C> <C> <C> <C>
CIT Group 15,000 6.35 7/31/98 15,041
Holdings, Inc. 14,500 5.58+ 8/17/98 14,492
36,200 5.59+ 9/30/98 36,176
Credit Suisse 33,000 6.19+ 5/22/98 33,000
First Boston Inc.
IBM Credit Corp. 10,000 5.868 8/13/98 9,999
70,000 5.635+ 11/23/98 69,973
LABS Trust -- 61,448 6.00+ 12/28/98 61,448
Series 1996-4
Senior Notes
LABS Trust -- 38,866 5.969+ 10/21/98 38,866
Series 1997-6
Senior Notes
LABS Trust -- 30,000 5.969+ 12/22/98 30,000
Series 1997-7
Senior Notes
Morgan Stanley 50,000 5.921+ 9/14/98 50,000
Group, Inc.
Premier Auto 15,028 5.649 6/08/98 15,027
Trust 1997-3
(Class A-1)
SMM Trust 1997-Q 100,000 5.98+ 1/15/98 100,000
----------
Total Corporate Notes
(Cost -- $636,984) 636,992
==========
Funding Agreements -- 1.2%
Jackson National 80,000 5.718+ 5/01/98 80,000
Life Insurance Co. ----------
Total Funding Agreements
(Cost -- $80,000) 80,000
==========
Master Notes -- 4.3%
Goldman Sachs 75,000 5.94+ 4/28/98 75,000
Group, L.P. 75,000 5.969+ 4/28/98 75,000
150,000 5.94+ 5/29/98 150,000
----------
Total Master Notes
(Cost -- $300,000) 300,000
==========
US Government, Agency &
Instrumentality
Obligations -- Discount -- 1.7%
Federal Home 25,000 5.35 6/05/98 24,406
Loan Banks 5,095 5.34 6/19/98 4,963
24,330 5.35 6/19/98 23,700
Federal National 15,000 5.35 4/09/98 14,774
Mortgage Association
US Treasury Bills 13,300 5.36 4/30/98 13,068
36,700 5.40 4/30/98 36,060
----------
Total US Government, Agency &
Instrumentality Obligations --
Discount (Cost -- $116,982) 116,971
==========
US Government, Agency &
Instrumentality Obligations --
Non-Discount -- 9.0%
Federal Farm 10,000 5.81 12/04/98 9,995
Credit Banks 15,000 6.10 4/15/99 15,000
Federal Home 26,000 5.85+ 1/26/98 26,002
Loan Banks 25,000 5.80 6/12/98 24,995
5,000 6.355 6/11/99 5,010
10,000 5.98 8/11/99 9,994
20,000 5.99 8/11/99 19,981
Federal Home 30,000 5.685 8/21/98 29,972
Loan Mortgage Corp.
Federal National 51,000 5.57+ 3/26/98 50,993
Mortgage 66,000 5.629+ 3/27/98 65,989
Association 50,000 5.669+ 4/24/98 49,994
33,000 6.00+ 5/14/98 33,000
29,000 5.56+ 5/21/98 28,992
45,000 5.56+ 5/22/98 44,988
25,000 5.68 7/31/98 24,979
10,000 5.81 11/25/98 9,995
10,000 5.81 12/01/98 9,995
14,930 5.40 12/30/98 14,869
15,000 6.375 5/21/99 15,030
11,000 6.11 6/22/99 11,048
40,000 5.504+ 7/14/99 39,897
15,000 5.95 8/05/99 14,984
8,900 5.88 8/10/99 8,884
Student Loan 7,500 5.60 8/11/98 7,490
Marketing 15,000 5.80+ 12/18/98 14,978
Association 35,000 5.909+ 11/25/98 34,991
----------
Total US Government, Agency &
Instrumentality Obligations --
Non-Discount (Cost -- $621,881) 622,045
==========
<CAPTION>
Face
Amount Issue
<S> <C>
Repurchase Agreements** -- 3.6%
$250,000 HSBC Securities, Inc., purchased on
12/31/1997 to yield 6.80% to 1/02/1998 250,000
----------
Total Repurchase Agreements (Cost -- $250,000) 250,000
==========
Total Investments (Cost -- $6,964,658) -- 100.3% 6,964,529
==========
Liabilities in Excess of Other Assets -- (0.3%) (17,862)
----------
Net Assets -- 100.0% $6,946,667
==========
</TABLE>
* 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, 1997.
** Repurchase Agreements are fully collateralized by US Government Obligations.
+ Variable Rate Notes.
See Notes to Financial Statements.
24
<PAGE> 55
<TABLE>
<CAPTION>
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of December 31, 1997
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $6,964,657,805*) (Note 1a) $6,964,528,823
Cash 4,514,581
Receivables:
Interest $45,384,797
Securities sold 4,996,866
Beneficial interest sold 2,133,140 52,514,803
--------------
Prepaid registration fees and other assets (Note 1e) 175,493
--------------
Total assets 7,021,733,700
--------------
Liabilities: Payables:
Beneficial interest redeemed 68,193,342
Distributor (Note 2) 2,439,306
Investment adviser (Note 2) 2,306,532 72,939,180
--------------
Accrued expenses and other liabilities 2,127,864
--------------
Total liabilities 75,067,044
--------------
Net Assets: Net assets $6,946,666,656
==============
Net Assets Shares of beneficial interest, $.10 par value, unlimited number of
Consist of: shares authorized $694,679,564
Paid-in capital in excess of par 6,252,116,074
Unrealized depreciation on investments -- net (128,982)
--------------
Net Assets -- Equivalent to $1.00 per share based on 6,946,795,638
shares of beneficial interest outstanding $6,946,666,656
==============
* As of December 31, 1997, net unrealized depreciation for Federal
income tax purposes amounted to $128,982 of which $509,654 related
to appreciated securities and $638,636 related to depreciated
securities. The aggregate cost of investments at December 31, 1997
for Federal income tax purposes was $6,964,657,805.
See Notes to Financial Statements.
</TABLE>
25
<PAGE> 56
<TABLE>
<CAPTION>
Statement of Operations
For the Year Ended
December 31, 1997
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned $412,382,281
(Note 1d):
Expenses: Investment advisory fees (Note 2) $25,839,319
Transfer agent fees (Note 2) 11,354,568
Distribution fees (Note 2) 8,242,767
Accounting services (Note 2) 366,592
Registration fees (Note 1e) 308,041
Interest expense 306,707
Printing and shareholder reports 286,393
Custodian fees 219,143
Trustees' fees and expenses 137,773
Professional fees 88,613
Other 74,017
--------------
Total expenses 47,223,933
--------------
Investment income -- net 365,158,348
--------------
Realized & Realized gain on investments -- net 175,283
Unrealized Gain on Change in unrealized depreciation on investments -- net 329,079
Investments -- Net --------------
(Note 1d): Net Increase in Net Assets Resulting from Operations $365,662,710
==============
See Notes to Financial Statements.
</TABLE>
26
<PAGE> 57
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the Year
Ended December 31,
Increase (Decrease) in Net Assets: 1997 1996
<S> <C> <C> <C>
Operations: Investment income -- net $365,158,348 $360,356,362
Realized gain on investments -- net 175,283 559,269
Change in unrealized appreciation/depreciation on investments
-- net 329,079 (2,689,938)
--------------- ---------------
Net increase in net assets resulting from operations 365,662,710 358,225,693
--------------- ---------------
Dividends & Investment income -- net (365,158,348) (360,356,362)
Distributions to Realized gain on investments -- net (175,283) (559,269)
Shareholders --------------- ---------------
(Note 1f): Net decrease in net assets resulting from dividends and
distributions to shareholders (365,333,631) (360,915,631)
--------------- ---------------
Beneficial Interest Net proceeds from sale of shares 13,708,317,153 13,961,575,969
Transactions Net asset value of shares issued to shareholders in reinvestment
(Note 3): of dividends and distributions (Note 1f) 363,840,858 359,459,266
--------------- ---------------
14,072,158,011 14,321,035,235
Cost of shares redeemed (14,222,080,551) (14,301,439,885)
--------------- ---------------
Net increase (decrease) in net assets derived from beneficial
interest transactions (149,922,540) 19,595,350
--------------- ---------------
Net Assets: Total increase (decrease) in net assets (149,593,461) 16,905,412
Beginning of year 7,096,260,117 7,079,354,705
--------------- ---------------
End of year $6,946,666,656 $7,096,260,117
=============== ===============
See Notes to Financial Statements.
</TABLE>
27
<PAGE> 58
<TABLE>
<CAPTION>
Financial Highlights
The following per share data and ratios have been derived
from information provided in the financial statements. For the Year Ended December 31,
1997 1996 1995 1994 1993
Increase (Decrease) in Net Asset Value:
<S> <C> <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 .0503 .0491 .0538 .0366 .0272
Realized and unrealized gain (loss) on
investments -- net .0001 (.0003) .0016 (.0012) .0003
---------- ---------- ---------- ---------- ----------
Total from investment operations .0504 .0488 .0554 .0354 .0275
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income -- net (.0503) (.0491) (.0538) (.0366) (.0272)
Realized gain on investments -- net --+ (.0001) (.0001) --+ (.0005)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.0503) (.0492) (.0539) (.0366) (.0277)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
========== ========== ========== ========== ==========
Total investment return 5.16% 5.05% 5.53% 3.73% 2.81%
========== ========== ========== ========== ==========
Ratios to Average Expenses .65% .64% .67% .65% .65%
Net Assets: ========== ========== ========== ========== ==========
Investment income and realized gain
(loss) on investments -- net 5.03% 4.88% 5.40% 3.67% 2.78%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year
Data: (in thousands) $6,946,667 $7,096,260 $7,079,355 $6,240,997 $6,523,187
========== ========== ========== ========== ==========
</TABLE>
+ Amount is less than $.0001 per share.
See Notes to Financial Statements.
28
<PAGE> 59
Merrill Lynch Ready Assets Trust December 31, 1997
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) Repurchase agreements -- The Trust invests in US Government
securities pursuant to repurchase agreements with a member bank of the
Federal Reserve System or a primary dealer in US Government
securities. Under such agreements, the bank or primary dealer agrees
to repurchase the security at a mutually agreed upon time and price.
The Trust takes possession of the underlying securities, marks to
market such securities and, if necessary, receives additional
securities daily to ensure that the contract is fully collateralized.
(c) Income taxes -- It is the 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.
(d) Security transactions and investment income -- Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income (including amortization of
discount) is recognized on the accrual basis. Realized gains and
losses on security transactions are determined on the identified cost
basis.
(e) Prepaid registration fees -- Prepaid registration fees are charged
to expense as the related shares are issued.
(f) Dividends and distributions to shareholders -- The 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
29
<PAGE> 60
the Investment Company Act of 1940, pursuant to which Merrill Lynch,
Pierce, Fenner and 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 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, and/or ML & Co.
3. Shares of Beneficial Interest:
The number of shares purchased and redeemed during the year ended
December 31, 1997 and the year ended December 31, 1996 corresponds to
the amounts included in the Statements of Changes in Net Assets for
net proceeds from sale of shares and cost of shares redeemed,
respectively, since shares are recorded at $1.00 per share.
4. Capital Loss Carryforward:
At December 31, 1997, the Trust had a net capital loss carryforward of
approximately $71,000, all of which expires in 2005. This amount will
be available to offset like amounts of any future taxable gains.
30
<PAGE> 61
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.
31
<PAGE> 62
Bonds rated Aaa by Moody's are judged to be of the best quality. Interest
payments are protected by a large or by an exceptionally stable margin and
principal is secure. Bonds rated Aa are judged to be of high quality by all
standards. They are rated lower than the best bonds because margins of
protection may not be as large or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities. Moody's applies
numerical modifiers, 1, 2 and 3 in each generic rating classification from Aa
through B in its corporate bond rating system. The modifier 1 indicates that the
security ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks
in the lower end of its generic rating category.
Bonds rated AAA by 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.
32
<PAGE> 63
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33
<PAGE> 64
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34
<PAGE> 65
- ------
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............... 10
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...... 14
Systematic Withdrawal Plans...... 15
Retirement Plans................. 15
Exchange Privilege............... 15
Taxes.............................. 17
Federal.......................... 17
General Information................ 19
Description of Shares............ 19
Custodian........................ 19
Transfer Agent................... 19
Independent Auditors............. 19
Legal Counsel.................... 19
Reports to Shareholders.......... 20
Additional Information........... 20
Independent Auditors' Report....... 21
Financial Statements............... 22
Appendix........................... 31
</TABLE>
Code # 10240-0498
[Merrill Lynch Logo]
MERRILL LYNCH
READY ASSETS TRUST
[MLYNCH COMPASS GRAPH]
Merrill Lynch Ready
Assets Trust is organized
as a Massachusetts business
trust. It is not a bank nor
does it offer fiduciary or
trust services. Shares of the
Trust are not equivalent to
a bank account. A share-
holder's investment in the
Trust is not insured by any
Government agency.
STATEMENT OF
ADDITIONAL
INFORMATION
April 1, 1998
Distributor:
Merrill Lynch
Funds Distributor, Inc.
<PAGE> 66
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, 1997.
Contained in Part B:
Schedule of Investments as of December 31, 1997.
Statement of Assets and Liabilities as of December 31, 1997.
Statement of Operations for the year ended December 31, 1997.
Statements of Changes in Net Assets for each of the years in the
two-year period ended December 31, 1997.
Financial Highlights for each of the years in the five-year period
ended December 31, 1997.
(b) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S> <C>
1(a) -- Declaration of Trust, dated May 14, 1987.(a)
1(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)
5(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)
6(b) -- Form of Selected Dealer Agreement.(a)
7 -- None.
8(a) -- Custody Agreement between the Registrant and The Bank of New
York.(a)
8(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)
9(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 -- None.
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)
14(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.
16 -- Schedule for computation of each performance quotation
provided in the Registration
Statement in response to Item 22.(a)
17 -- Financial Data Schedule for the fiscal year ended December
31, 1997.
18 -- None.
</TABLE>
C-1
<PAGE> 67
- ---------------
(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 FEBRUARY 28, 1998
-------------- -----------------
<S> <C>
Shares of beneficial interest, par value $.10 per share..... 524,014
</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 ("Merrill Lynch").
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.
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
C-2
<PAGE> 68
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 Convertible Fund, Inc., Merrill Lynch
Developing Capital Markets Fund, Inc., Merrill Lynch Dragon Fund, Inc., Merrill
Lynch EuroFund, Merrill Lynch Fundamental Growth Fund, Inc., Merrill Lynch Fund
For Tomorrow, Inc., Merrill Lynch Global Allocation Fund, Inc., Merrill Lynch
Global Bond Fund for Investment and Retirement, Merrill Lynch Global Convertible
Fund, Inc., Merrill Lynch Global Growth Fund, Inc., Merrill Lynch Global
Holdings Inc., Merrill Lynch Global Resources Trust, Merrill Lynch Global
SmallCap Fund, Inc., Merrill Lynch Global Utility Fund, Inc., Merrill Lynch
Global Value Fund, Inc., Merrill Lynch Growth Fund, Merrill Lynch Healthcare
Fund, Inc., Merrill Lynch Intermediate Government Bond Fund, Merrill Lynch
International Equity Fund, Merrill Lynch Latin America Fund, Inc., Merrill Lynch
Middle East/Africa Fund, Inc., Merrill Lynch Municipal Series Trust, Merrill
Lynch Pacific Fund, Inc., Merrill Lynch Real Estate Fund, Inc., Merrill Lynch
Retirement Series Trust, Merrill Lynch Series Fund, Inc., Merrill Lynch
Short-Term Global Income Fund, Inc., Merrill Lynch Strategic Dividend Fund,
Merrill Lynch Technology Fund, Inc., Merrill Lynch U.S.A. Government Reserves,
Merrill Lynch U.S. Treasury Money Fund, Merrill Lynch Utility Income Fund, Inc.,
Merrill Lynch Variable Series Funds, Inc. and Hotchkis and Wiley Funds (advised
by Hotchkis and Wiley, a division of MLAM); and the following closed-end
registered investment companies: Merrill Lynch High Income Municipal Bond Fund,
Inc., and Merrill Lynch Senior Floating Rate Fund, Inc. MLAM also acts as
sub-adviser to Merrill Lynch World Strategy Portfolio and Merrill Lynch Basic
Value Equity Portfolio, two investment portfolios of EQ Advisors Trust.
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.
Corporate High Yield Fund III, Inc., Debt Strategies Fund, Inc., Debt Strategies
Fund II, Inc., Income Opportunities Fund 1999, Inc., Income Opportunities Fund
2000, Inc., Merrill Lynch Municipal Strategy Fund, Inc., MuniAssets Fund, Inc.,
MuniEnhanced Fund, Inc. MuniHoldings California Insured Fund, Inc., MuniHoldings
California Insured Fund II, Inc., MuniHoldings Florida Insured Fund,
MuniHoldings Florida Insured Fund II, MuniHoldings Fund, Inc., MuniHoldings Fund
II, Inc., MuniHoldings New Jersey Insured Fund, Inc., MuniHoldings New York
Fund, Inc., MuniHoldings New York Insured Fund, Inc., MuniInsured Fund, Inc.,
MuniVest Fund, Inc., MuniVest Fund
C-3
<PAGE> 69
II, Inc., MuniVest Florida Fund, MuniVest Michigan Insured Fund, Inc., MuniVest
New Jersey Fund, Inc., MuniVest Pennsylvania Insured Fund, MuniYield Arizona
Fund, Inc., MuniYield California Fund, Inc., MuniYield California Insured Fund,
Inc., MuniYield California Insured Fund II, Inc., MuniYield Florida Fund,
MuniYield Florida Insured Fund, MuniYield Fund, Inc., MuniYield Insured Fund,
Inc., MuniYield Michigan Fund, Inc., MuniYield Michigan Insured Fund, Inc.,
MuniYield New Jersey Fund, Inc., MuniYield New Jersey Insured Fund, Inc.,
MuniYield New York Insured Fund, Inc., MuniYield New York Insured Fund II, Inc.,
MuniYield Pennsylvania Fund, MuniYield Quality Fund, Inc., MuniYield Quality
Fund II, Inc., Senior High Income Portfolio, Inc. and Worldwide DollarVest Fund,
Inc.
The address of each of these investment companies is P.O. Box 9011,
Princeton, New Jersey 08543-9011 except that the address of Merrill Lynch Funds
for Institutions Series and Merrill Lynch Institutional Intermediate Government
Bond Fund is One Financial Center, 23rd Floor, Boston, Massachusetts 02111-2646.
The address of the Manager FAM, Princeton Services, Inc. ("Princeton Services"),
and Princeton Administrators, L.P. is also P.O. Box 9011, Princeton, New Jersey
08543-9011. The address of Merrill Lynch Funds Distributor, Inc. ("MLFD") 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, employee, 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 first two
paragraphs of this Item 28, and Messrs. Giordano, Harvey, Kirstein and Monagle
are officers or directors/trustees 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; Limited
Partner of FAM
Princeton Services General Partner General Partner of FAM
Arthur Zeikel Chairman Chairman of FAM; President of MLAM and FAM
from 1977 to 1997; Chairman and Director
of Princeton Services; President of
Princeton Services from 1993 to 1997;
Executive Vice President of ML & Co.
Jeffrey M. Peek President President of FAM; President and Director of
Princeton Services; Executive Vice
President of ML & Co.
Terry K. Glenn Executive Vice President Executive Vice President of FAM; Executive
Vice President and Director of Princeton
Services; President and Director of MLFD;
Director of MLFDS; President of Princeton
Administrators, L.P.
Linda L. Federici Senior Vice President Senior Vice President of FAM; Senior Vice
President of Princeton Services
Vincent R. Giordano Senior Vice President Senior Vice President of FAM; Senior Vice
President of Princeton Services
</TABLE>
C-4
<PAGE> 70
<TABLE>
<CAPTION>
POSITION OTHER SUBSTANTIAL BUSINESS,
NAME WITH MANAGER PROFESSION, VOCATION OR EMPLOYMENT
---- ------------ ----------------------------------
<S> <C> <C>
Elizabeth A. Griffin Senior Vice President Senior Vice President of FAM; Senior Vice
President of Princeton Services
Norman R. Harvey Senior Vice President Senior Vice President of FAM; Senior Vice
President of Princeton Services
Michael J. Hennewinkel Senior Vice President Senior Vice President of FAM; Senior Vice
President of Princeton Services
Philip L. Kirstein Senior Vice President, Senior Vice President; General Counsel and
General Counsel and Secretary of FAM; Senior Vice President,
Secretary General Counsel, Director and Secretary
of Princeton Services
Ronald M. Kloss Senior Vice President Senior Vice President of FAM; Senior Vice
President of Princeton Services
Debra W. Landsman-Yaros Senior Vice President Senior Vice President of FAM; Vice
President of MLFD; Senior Vice President
of Princeton Services
Stephen M. M. Miller Senior Vice President Executive Vice President of Princeton
Administrators, L.P.; Senior Vice
President of Princeton Services
Joseph T. Monagle, Jr Senior Vice President Senior Vice President of FAM; Senior Vice
President of Princeton Services
Michael L. Quinn Senior Vice President Senior Vice President of FAM; Senior Vice
President of Princeton Services; Managing
Director and First Vice President of
Merrill Lynch from 1989 to 1995
Richard L. Reller Senior Vice President Senior Vice President of FAM; Senior Vice
President of Princeton Services; Director
of MLFD
Gerald M. Richard Senior Vice President Senior Vice President and Treasurer of FAM;
and Treasurer Senior Vice President and Treasurer of
Princeton Services; Vice President and
Treasurer of MLFD
Gregory D. Upah Senior Vice President Senior Vice President of FAM; Senior Vice
President of Princeton Services
Ronald L. Welburn Senior Vice President Senior Vice President of FAM; Senior Vice
President of Princeton Services
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) MLFD acts as the principal underwriter for the Registrant and for each
of the open-end investment companies referred to in the first two paragraphs of
Item 28 except CBA Money Fund, CMA Government Securities Fund, CMA Money Fund,
the ten series of CMA Multi-State Municipal Series Trust, CMA Tax-Exempt Fund,
CMA Treasury Fund, The Corporate Fund Accumulation Program, Inc., and also acts
as principal underwriter for the following closed-end investment companies:
Merrill Lynch High Income Municipal Bond Fund, Inc. and Merrill Lynch Senior
Floating Rate Fund, Inc.
(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
C-5
<PAGE> 71
Messrs. Aldrich, Brady, Breen, Crook, Fatseas, and Wasel is One Financial
Center, 23rd Floor, Boston, Massachusetts 02111-2633.
<TABLE>
<CAPTION>
(2) (3)
(1) POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH MLFD WITH REGISTRANT
---- --------------------- ---------------------
<S> <C> <C>
Terry K. Glenn........................... President and Director Executive Vice President
Richard L. Reller........................ Director None
Thomas J. Verage......................... Director None
William E. Aldrich....................... Senior Vice President None
Robert W. Crook.......................... Senior Vice President None
Michael Brady............................ Vice President None
William M. Breen......................... Vice President None
Michael G. Clark......................... Vice President None
James T. Fatseas......................... Vice President None
Michelle T. Lau.......................... Vice President None
Debra W. Landsman-Yaros.................. Vice President None
Gerald M. Richard........................ Vice President and Treasurer Treasurer
Salvatore Venezia........................ Vice President None
William Wasel............................ Vice President None
Robert Harris............................ Secretary None
</TABLE>
(c) Not applicable.
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 are
maintained at the offices of the Registrant, 800 Scudders Mill Road, Plainsboro,
New Jersey 08536, and its Transfer Agent, MLFDS, 4800 Deer Lake Drive East,
Jacksonville, Florida 32246-6484.
ITEM 31. MANAGEMENT SERVICES.
Other than as set forth under the caption "Management of the
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> 72
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 1ST DAY OF APRIL, 1998.
MERRILL LYNCH READY ASSETS TRUST
(Registrant)
By:
/s/ GERALD M. RICHARD
------------------------------------
(GERALD M. RICHARD, TREASURER)
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
ARTHUR ZEIKEL* President and Trustee
- -------------------------------------------------------- (Principal Executive
(ARTHUR ZEIKEL) Officer)
GERALD M. RICHARD* Treasurer (Principal
- -------------------------------------------------------- Financial and Accounting
(GERALD M. RICHARD) 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)
FRED G. WEISS* Trustee
- --------------------------------------------------------
(FRED G. WEISS)
*By: /s/ GERALD M. RICHARD April 1, 1998
---------------------------------------------------
(GERALD M. RICHARD, ATTORNEY-IN-FACT)
</TABLE>
C-7
<PAGE> 73
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<C> <C> <S> <C>
11 -- Consent of Deloitte & Touche LLP, independent auditors for
the Registrant.
15 -- Amended and Restated Shareholder Servicing Plan and
Agreement
17 -- Financial Data Schedule for the fiscal year ended December
31, 1997
</TABLE>
<PAGE> 1
AMENDED AND RESTATED
SHAREHOLDER SERVICING PLAN AND AGREEMENT
AMENDED AND RESTATED SHAREHOLDER SERVICING PLAN AND AGREEMENT made as
of the 5th day of November, 1996 by and between Merrill Lynch Ready Assets
Trust, a Massachusetts business trust (the "Trust"), and Merrill Lynch, Pierce,
Fenner & Smith Incorporated, a Delaware corporation ("MLPF&S").
WHEREAS, the Trust is a no-load open-end investment company registered
under the Investment Company Act of 1940, as amended (the "Investment Company
Act"), which operates as a money market fund;
WHEREAS, MLPF&S acts as a dealer selling shares of the Trust to its
customers and substantially all of the shareholders of the Trust are MLPF&S
customers who maintain their Trust accounts through MLPF&S (such accounts being
referred to herein as the "MLPF&S Trust Accounts");
WHEREAS, MLPF&S provides a variety of administrative and operational
services to MLPF&S Trust Accounts including processing shareholder orders and
administering MLPF&S Trust Accounts (such services being referred to herein as
"MLPF&S Administrative Services") which are being provided pursuant to the
management arrangements between the Trust and Merrill Lynch Asset Management,
L.P. ("MLAM");
WHEREAS, MLPF&S Financial Consultants and other personnel spend
substantial amounts of time providing shareholder services to existing and
prospective MLPF&S Trust Accounts, including furnishing information as to the
status of such MLPF&S Trust Accounts and handling purchase and redemption orders
for Trust shares (such services being referred to herein as "MLPF&S Shareholder
Services and Activities");
<PAGE> 2
WHEREAS, pursuant to a Shareholder Servicing Plan and Agreement made as
of August 26, 1983 with MLPF&S, as amended and restated as of April 29, 1988 (as
so amended, the "Plan") and continued annually thereafter, pursuant to the
provisions of Rule 12b-1 under the Investment Company Act, the Trustees of the
Trust have determined that the Trust should make direct payments to MLPF&S for
distribution to its financial consultants and other directly involved MLPF&S
personnel as compensation for the MLPF&S Shareholder Services and Activities and
that such payments should be in addition to the management compensation being
paid to MLAM;
WHEREAS, the Trustees of the Trust have determined that in addition to
providing the services and activities provided in the Plan, MLPF&S in its
discretion may promote the sale, marketing and distribution of the shares of the
Trust by engaging in advertising activities in newspapers, magazines, radio,
television and other media and through direct mail solicitations and that a
portion of the aforesaid direct payments made to MLPF&S may be utilized to
reimburse MLPF&S for the costs (or a portion thereof) of preparing, running and
otherwise engaging in such advertising activities (the "Advertising
Expenditures");
WHEREAS, the Trust desires to adopt this Amended and Restated
Shareholder Servicing Plan and Agreement (referred to herein as the "Amended
Plan", which term shall be deemed to include the Plan when the context requires)
in the manner and on the terms and conditions hereinafter set forth, which
Amended Plan must be adopted pursuant to the provisions of Paragraph 10 of the
Plan as they relate to material amendments which do not increase the fee paid
pursuant to the Plan and in accordance with Rule 12b-1 under the Investment
Company Act;
WHEREAS, MLPF&S desires to enter into the Amended Plan on said terms
and conditions; and
2
<PAGE> 3
WHEREAS, the Trustees of the Trust have determined that there is a
reasonable likelihood that adoption of the Amended Plan will benefit the Trust
and its shareholders:
NOW, THEREFORE, the Trust hereby adopts the Amended Plan in accordance
with the requirements of Paragraph 10 of the Plan and Rule 12b-1 under the
Investment Company Act and the parties hereto enter into this agreement on the
following terms and conditions:
1. The Trust is hereby authorized to utilize its assets to
make payments to MLPF&S pursuant to the Amended Plan (i) to compensate
MLPF&S financial consultants and other directly involved MLPF&S
personnel for providing the MLPF&S Shareholder Services and Activities
with respect to MLPF&S Trust Accounts and (ii) subject to the
limitations specified in Paragraph 2, to reimburse MLPF&S for part or
all of any Advertising Expenditures incurred by MLPF&S with respect to
shares of the Trust.
2. The Trust shall pay MLPF&S a fee at the end of each month
at the annual rate of 0.125% of the average daily net asset value of
the MLPF&S Trust Accounts. Out of such fee, MLPF&S, in its sole
discretion, may expend an amount not exceeding 0.01% of the average
daily net asset value of the MLPF&S Trust Accounts as reimbursement for
Advertising Expenditures; MLPF&S is obligated to expend the remaining
amount of the fee for compensation, including sales incentives and
bonuses, to MLPF&S financial consultants and other directly involved
MLPF&S personnel (such expenditures of the fee, including Advertising
Expenditures, being referred to as the "Plan Expenditures"). The fee is
not to be considered compensation for the MLPF&S Administrative
Services.
3
<PAGE> 4
3. In the event that the aggregate payments received by MLPF&S
under the Amended Plan in any year shall exceed the Plan Expenditures
in such fiscal year, MLPF&S shall be required to reimburse the Trust
the amount of such excess.
4. MLPF&S shall provide the Trust for review by the Trustees,
and the Trustees shall review, at least quarterly, a written report
complying with the requirements of Rule 12b-1 regarding the
disbursement of the fee for Plan Expenditures during such period. The
report shall include an itemization of the Plan Expenditures made by
MLPF&S and the purpose of such Plan Expenditures.
5. MLPF&S will use its best efforts in rendering and causing
its employees to render services to the Trust, but in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard
of its obligations hereunder, MLPF&S shall not be liable to the Trust
or any of its shareholders for any error of judgment or mistake of law
or for any act of omission or for any losses sustained by the Trust or
its shareholders.
6. Nothing contained in the Amended Plan shall prevent MLPF&S
or any affiliated person of MLPF&S from performing services similar to
those to be performed hereunder for any other person, firm or
corporation or for its or their own accounts or for the accounts of
others.
7. The Amended Plan shall not take effect until it has been
approved by votes of a majority of both (a) the Trustees of the Trust
and (b) those Trustees of the Trust who are not "interested persons" of
the Trust, as defined in the Investment Company Act, and have no direct
or indirect financial interest in the operation of the Amended Plan or
any agreements related to it (the "Rule 12b-1 Trustees"), cast in
person at a meeting or meetings called for the purpose of voting on the
Amended Plan.
4
<PAGE> 5
8. The Amended Plan shall continue in effect for so long as
such continuance is specifically approved at least annually in the
manner provided for approval of the Amended Plan in Paragraph 7.
9. The Amended Plan may be terminated at any time by vote of a
majority of the Rule 12b-1 Trustees, or by vote of a majority of the
outstanding voting securities of the Trust.
10. The Amended Plan may not be amended to increase materially
the fee provided for in Paragraph 2 unless and until such amendment is
approved in the manner provided for in Paragraph 7 and approved by a
vote of at least a majority, as defined in the Investment Company Act,
of the outstanding voting securities of the Trust, and no other
material amendment to the Amended Plan shall be made unless approved in
the manner provided for approval in Paragraph 7.
11. While the Amended Plan is in effect, the selection and
nomination of Trustees who are not interested persons, as defined in
the Investment Company Act, of the Trust shall be committed to the
discretion of the Trustees who are not interested persons.
12. The Trust shall preserve copies of the Plan and the
Amended Plan and any related agreements and all reports made pursuant
to Paragraph 4, for a period of not less than six years, the first two
years in an easily accessible place.
13. The Declaration of Trust establishing Merrill Lynch Ready
Assets 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
5
<PAGE> 6
Trustees under the Declaration collectively as Trustees, but not as
individuals or personally; and no Trustee, shareholder, officer,
employee or agent of Merrill Lynch Ready Assets 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
Merrill Lynch Ready Assets Trust, but the Trust Property (as defined in
the Declaration) only shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amended and Restated Shareholder Servicing Plan and Agreement as of the date
first above written.
MERRILL LYNCH READY ASSETS TRUST
By /s/ Gerald M. Richard
----------------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By /s/ Arthur Zeikel
----------------------------------
6
<PAGE> 1
AMENDED AND RESTATED
SHAREHOLDER SERVICING PLAN AND AGREEMENT
AMENDED AND RESTATED SHAREHOLDER SERVICING PLAN AND AGREEMENT made as
of the 5th day of November, 1996 by and between Merrill Lynch Ready Assets
Trust, a Massachusetts business trust (the "Trust"), and Merrill Lynch, Pierce,
Fenner & Smith Incorporated, a Delaware corporation ("MLPF&S").
WHEREAS, the Trust is a no-load open-end investment company registered
under the Investment Company Act of 1940, as amended (the "Investment Company
Act"), which operates as a money market fund;
WHEREAS, MLPF&S acts as a dealer selling shares of the Trust to its
customers and substantially all of the shareholders of the Trust are MLPF&S
customers who maintain their Trust accounts through MLPF&S (such accounts being
referred to herein as the "MLPF&S Trust Accounts");
WHEREAS, MLPF&S provides a variety of administrative and operational
services to MLPF&S Trust Accounts including processing shareholder orders and
administering MLPF&S Trust Accounts (such services being referred to herein as
"MLPF&S Administrative Services") which are being provided pursuant to the
management arrangements between the Trust and Merrill Lynch Asset Management,
L.P. ("MLAM");
WHEREAS, MLPF&S Financial Consultants and other personnel spend
substantial amounts of time providing shareholder services to existing and
prospective MLPF&S Trust Accounts, including furnishing information as to the
status of such MLPF&S Trust Accounts and handling purchase and redemption orders
for Trust shares (such services being referred to herein as "MLPF&S Shareholder
Services and Activities");
<PAGE> 2
WHEREAS, pursuant to a Shareholder Servicing Plan and Agreement made as
of August 26, 1983 with MLPF&S, as amended and restated as of April 29, 1988 (as
so amended, the "Plan") and continued annually thereafter, pursuant to the
provisions of Rule 12b-1 under the Investment Company Act, the Trustees of the
Trust have determined that the Trust should make direct payments to MLPF&S for
distribution to its financial consultants and other directly involved MLPF&S
personnel as compensation for the MLPF&S Shareholder Services and Activities and
that such payments should be in addition to the management compensation being
paid to MLAM;
WHEREAS, the Trustees of the Trust have determined that in addition to
providing the services and activities provided in the Plan, MLPF&S in its
discretion may promote the sale, marketing and distribution of the shares of the
Trust by engaging in advertising activities in newspapers, magazines, radio,
television and other media and through direct mail solicitations and that a
portion of the aforesaid direct payments made to MLPF&S may be utilized to
reimburse MLPF&S for the costs (or a portion thereof) of preparing, running and
otherwise engaging in such advertising activities (the "Advertising
Expenditures");
WHEREAS, the Trust desires to adopt this Amended and Restated
Shareholder Servicing Plan and Agreement (referred to herein as the "Amended
Plan", which term shall be deemed to include the Plan when the context requires)
in the manner and on the terms and conditions hereinafter set forth, which
Amended Plan must be adopted pursuant to the provisions of Paragraph 10 of the
Plan as they relate to material amendments which do not increase the fee paid
pursuant to the Plan and in accordance with Rule 12b-1 under the Investment
Company Act;
WHEREAS, MLPF&S desires to enter into the Amended Plan on said terms
and conditions; and
2
<PAGE> 3
WHEREAS, the Trustees of the Trust have determined that there is a
reasonable likelihood that adoption of the Amended Plan will benefit the Trust
and its shareholders:
NOW, THEREFORE, the Trust hereby adopts the Amended Plan in accordance
with the requirements of Paragraph 10 of the Plan and Rule 12b-1 under the
Investment Company Act and the parties hereto enter into this agreement on the
following terms and conditions:
1. The Trust is hereby authorized to utilize its assets to
make payments to MLPF&S pursuant to the Amended Plan (i) to compensate
MLPF&S financial consultants and other directly involved MLPF&S
personnel for providing the MLPF&S Shareholder Services and Activities
with respect to MLPF&S Trust Accounts and (ii) subject to the
limitations specified in Paragraph 2, to reimburse MLPF&S for part or
all of any Advertising Expenditures incurred by MLPF&S with respect to
shares of the Trust.
2. The Trust shall pay MLPF&S a fee at the end of each month
at the annual rate of 0.125% of the average daily net asset value of
the MLPF&S Trust Accounts. Out of such fee, MLPF&S, in its sole
discretion, may expend an amount not exceeding 0.01% of the average
daily net asset value of the MLPF&S Trust Accounts as reimbursement for
Advertising Expenditures; MLPF&S is obligated to expend the remaining
amount of the fee for compensation, including sales incentives and
bonuses, to MLPF&S financial consultants and other directly involved
MLPF&S personnel (such expenditures of the fee, including Advertising
Expenditures, being referred to as the "Plan Expenditures"). The fee is
not to be considered compensation for the MLPF&S Administrative
Services.
3
<PAGE> 4
3. In the event that the aggregate payments received by MLPF&S
under the Amended Plan in any year shall exceed the Plan Expenditures
in such fiscal year, MLPF&S shall be required to reimburse the Trust
the amount of such excess.
4. MLPF&S shall provide the Trust for review by the Trustees,
and the Trustees shall review, at least quarterly, a written report
complying with the requirements of Rule 12b-1 regarding the
disbursement of the fee for Plan Expenditures during such period. The
report shall include an itemization of the Plan Expenditures made by
MLPF&S and the purpose of such Plan Expenditures.
5. MLPF&S will use its best efforts in rendering and causing
its employees to render services to the Trust, but in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard
of its obligations hereunder, MLPF&S shall not be liable to the Trust
or any of its shareholders for any error of judgment or mistake of law
or for any act of omission or for any losses sustained by the Trust or
its shareholders.
6. Nothing contained in the Amended Plan shall prevent MLPF&S
or any affiliated person of MLPF&S from performing services similar to
those to be performed hereunder for any other person, firm or
corporation or for its or their own accounts or for the accounts of
others.
7. The Amended Plan shall not take effect until it has been
approved by votes of a majority of both (a) the Trustees of the Trust
and (b) those Trustees of the Trust who are not "interested persons" of
the Trust, as defined in the Investment Company Act, and have no direct
or indirect financial interest in the operation of the Amended Plan or
any agreements related to it (the "Rule 12b-1 Trustees"), cast in
person at a meeting or meetings called for the purpose of voting on the
Amended Plan.
4
<PAGE> 5
8. The Amended Plan shall continue in effect for so long as
such continuance is specifically approved at least annually in the
manner provided for approval of the Amended Plan in Paragraph 7.
9. The Amended Plan may be terminated at any time by vote of a
majority of the Rule 12b-1 Trustees, or by vote of a majority of the
outstanding voting securities of the Trust.
10. The Amended Plan may not be amended to increase materially
the fee provided for in Paragraph 2 unless and until such amendment is
approved in the manner provided for in Paragraph 7 and approved by a
vote of at least a majority, as defined in the Investment Company Act,
of the outstanding voting securities of the Trust, and no other
material amendment to the Amended Plan shall be made unless approved in
the manner provided for approval in Paragraph 7.
11. While the Amended Plan is in effect, the selection and
nomination of Trustees who are not interested persons, as defined in
the Investment Company Act, of the Trust shall be committed to the
discretion of the Trustees who are not interested persons.
12. The Trust shall preserve copies of the Plan and the
Amended Plan and any related agreements and all reports made pursuant
to Paragraph 4, for a period of not less than six years, the first two
years in an easily accessible place.
13. The Declaration of Trust establishing Merrill Lynch Ready
Assets 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
5
<PAGE> 6
Trustees under the Declaration collectively as Trustees, but not as
individuals or personally; and no Trustee, shareholder, officer,
employee or agent of Merrill Lynch Ready Assets 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
Merrill Lynch Ready Assets Trust, but the Trust Property (as defined in
the Declaration) only shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amended and Restated Shareholder Servicing Plan and Agreement as of the date
first above written.
MERRILL LYNCH READY ASSETS TRUST
By /s/ Gerald M. Richard
----------------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By /s/ Arthur Zeikel
----------------------------------
6
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<NAME> MERRILL LYNCH READY ASSETS TRUST
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
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<REALIZED-GAINS-CURRENT> 175283
<APPREC-INCREASE-CURRENT> 329079
<NET-CHANGE-FROM-OPS> 365662710
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<DISTRIBUTIONS-OF-INCOME> (365158348)
<DISTRIBUTIONS-OF-GAINS> (175283)
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<NUMBER-OF-SHARES-SOLD> 13708317153
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