<PAGE>
As filed with the Securities and Exchange Commission on June 29, 1999
Securities Act File No. 2-82766
Investment Company Act File No. 811-3703
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [_]
[X]
Post-Effective Amendment No. 18
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
[X]
Amendment No. 21
(Check appropriate box or boxes)
----------------
CBA MONEY FUND
(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)
----------------
TERRY K. GLENN
CBA Money Fund
800 Scudders Mill Road, Plainsboro, New Jersey
Mailing Address:
P.O. Box 9011, Princeton, New Jersey 08543-9011
(Name and Address of Agent for Service)
----------------
Copies to:
Counsel for the Fund: Michael J. Hennewinkel, Esq.
BROWN & WOOD LLP FUND ASSET MANAGEMENT
One World Trade Center P.O. Box 9011
New York, New York 10048-0557 Princeton, New Jersey
Attention: Thomas R. Smith, Jr., 08543-9011
Esq.
Jeffrey S. Alexander, Esq.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
World Financial Center
New York, New York 10281
----------------
It is proposed that this filing will become effective (check appropriate box)
[X]immediately upon filing pursuant to paragraph (b)
[_]on (date) pursuant to paragraph (b)
[_]60 days after filing pursuant to paragraph (a) (1)
[_]on (date) pursuant to paragraph (a) (1)
[_]75 days after filing pursuant to paragraph (a) (2)
[_]on (date) pursuant to paragraph (a) (2) of Rule 485
If appropriate, check the following box:
[_]This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
----------------
Title of Securities Being Registered: Shares of Beneficial Interest, Par Value
$.10 Per Share
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
[LOGO] Merrill Lynch
CBA(R) Money Fund
June 29, 1999
This Prospectus contains information you should know
before investing, including information about risks.
Please read it before you invest and keep it for
future reference.
The Securities and Exchange Commission has not
approved or disapproved these securities or passed
upon the adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
Prospectus
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
PAGE
<S> <C>
[LOGO]
KEY FACTS
- -------------------------------------------------------------------------------
CBA(R) Money Fund at a Glance................................................ 3
Risk/Return Bar Chart........................................................ 4
Fees and Expenses............................................................ 5
[LOGO]
DETAILS ABOUT THE FUND
- -------------------------------------------------------------------------------
How the Fund Invests......................................................... 7
Investment Risks............................................................. 9
[LOGO]
YOUR ACCOUNT
- -------------------------------------------------------------------------------
How to Buy, Sell and Transfer Shares........................................ 11
How Shares are Priced....................................................... 15
Dividends and Taxes......................................................... 15
[LOGO]
MANAGEMENT OF THE FUND
- -------------------------------------------------------------------------------
Fund Asset Management....................................................... 17
Financial Highlights........................................................ 18
[LOGO]
FOR MORE INFORMATION
- -------------------------------------------------------------------------------
Shareholder Reports................................................. Back Cover
Statement of Additional Information................................. Back Cover
</TABLE>
CBA MONEY FUND
<PAGE>
Key Facts [LOGO]
In an effort to help you better understand the many concepts involved in making
an investment decision, we have defined the highlighted terms in this
prospectus in the sidebar.
Short Term Securities -- securities with maturities of not more than 762 days
(25 months) in the case of U.S. Government and agency securities and no more
than 397 days (13 months) in the case of all other securities.
Direct U.S. Government Obligations -- obligations that are issued or have their
principal and interest guaranteed and backed by the full faith and credit of
the United States.
CBA(R) MONEY FUND AT A GLANCE
- --------------------------------------------------------------------------------
What are the Fund's investment objectives?
The investment objectives of the Fund are to seek current income, preservation
of capital and liquidity available from investing in a diversified portfolio of
short term money market securities.
What are the Fund's main investment strategies?
The Fund tries to achieve its goals by investing in a diversified portfolio of
U.S. dollar-denominated short term securities. These securities consist
primarily of direct U.S. Government obligations, U.S. Government agency
securities, obligations of domestic and foreign banks, commercial paper and
other short term debt securities issued by U.S. and foreign entities and
repurchase agreements. Other than U.S. Government and certain U.S. Government
agency securities, the Fund only invests in short term securities of issuers
with one of the two highest short term ratings from a nationally recognized
credit rating organization or unrated instruments which, in the opinion of Fund
management, are of similar quality.
Fund management decides which of these securities to buy and sell based on its
assessment of the relative values of different securities and future interest
rates. Fund management seeks to improve the Fund's yield by taking advantage of
yield differentials that regularly occur between securities of a similar kind.
We cannot guarantee that the Fund will achieve its objectives.
What are the main risks of investing in the Fund?
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. The Fund could lose money
if the issuer of an instrument held by the Fund defaults or if short-term
interest rates rise sharply in a manner not anticipated by Fund management.
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
Who should invest?
Shares of the Fund are offered to participants in the Capital Builder SM
Account Service, to participants in certain other central asset account pro-
grams (each, a "Service") and to investors maintaining accounts directly with
the Transfer Agent.
The Fund may be an appropriate investment for you if you:
. Are looking for current income
and liquidity.
. Are looking for preservation of
capital.
. Are investing with short term
goals in mind, such as for cash
reserves.
CBA MONEY FUND
3
<PAGE>
[LOGO] Key Facts
Yield -- the income generated by an investment in the Fund.
RISK/RETURN BAR CHART
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the Fund. The bar chart shows changes in the Fund's performance
for the past ten calendar years. The table shows the average annual total
returns of the Fund for the periods shown. How the Fund performed in the past
is not necessarily an indication of how the Fund will perform in the future.
[GRAPHIC]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
8.96% 7.88% 5.80% 3.46% 2.68% 3.63% 5.38% 4.93% 5.08% 5.03%
During the ten year period shown in the bar chart, the highest return for a
quarter was 2.34% (quarter ended June 30, 1989) and the lowest return for a
quarter was 0.64% (quarter ended June 30, 1993). The Fund's year-to-date return
as of March 31, 1999 was 1.08%.
<TABLE>
<CAPTION>
Average Annual Total
Returns (as of the
calendar year ended Past Past Past
December 31, 1998) One Year 5 Years 10 Years
- ------------------------------------------------
<S> <C> <C> <C>
CBA Money Fund 5.03% 4.81% 5.27%
- ------------------------------------------------
</TABLE>
Yield Information
The yield on Fund shares normally will go up and down on a daily basis.
Therefore, yields for any given past periods are not an indication or
representation of future yields. The Fund's yield is affected by changes in
interest rates, average portfolio maturity and operating expenses. Current
yield information may not provide the basis for a comparison with bank deposits
or other investments, which pay a fixed yield over a stated period of time.
CBA MONEY FUND
4
<PAGE>
UNDERSTANDING EXPENSES
Fund investors pay various fees and expenses, either directly or indirectly.
Listed below are some of the main types of expenses, which all mutual funds may
charge:
Expenses paid indirectly by the shareholder (these costs are deducted from the
Fund's total assets).
Annual Fund Operating Expenses -- expenses that cover the costs of operating
the Fund.
Management Fee -- a fee paid to the Manager for managing the Fund.
Distribution Fees -- fees used to support the Fund's marketing and distribution
efforts, such as compensating Financial Consultants and others for these and
for shareholder servicing.
FEES AND EXPENSES
- --------------------------------------------------------------------------------
This table shows the different fees and expenses that you may pay if you buy
and hold shares of the Fund. Future expenses may be greater or less than those
indicated below.
<TABLE>
<S> <C>
Shareholder Fees (fees paid directly by the shareholder)
- -----------------------------------------------------------
Maxmimum Account Fee(a) $65
- -----------------------------------------------------------
Annual Fund Operating Expenses (expenses that are
deducted from Fund assets)
- -----------------------------------------------------------
Management Fee(b) 0.41%
- -----------------------------------------------------------
Distribution (12b-1) Fees(c) 0.13%
- -----------------------------------------------------------
Other Expenses (including transfer agency fees)(d) 0.19%
- -----------------------------------------------------------
Total Annual Fund Operating Expenses 0.73%
- -----------------------------------------------------------
</TABLE>
(a) Merrill Lynch charges this annual program participation fee for the Capital
Builder SM Account Service. Other programs through which Fund investments
may be made charge different annual fees, as described below.
(b) For the fiscal year ended February 28, 1999, the Manager voluntarily waived
a portion of the management fee. Total Annual Fund Operating Expenses,
after giving effect to the waiver of fees, was 0.70%. The fee waiver may be
discontinued or reduced by the Manager at any time without notice.
(c) The Fund is authorized to pay Merrill Lynch and Broadcort distribution fees
of 0.125% each year under a distribution plan that the Fund has adopted
under rule 12b-1. For the fiscal year ended February 28, 1999, $2,981,064
was paid to Merrill Lynch pursuant to the distribution plan.
(d) The Fund pays the Transfer Agent $10.00 for each shareholder account and
reimburses the Transfer Agent's out-of-pocket expenses. For the fiscal year
ended February 28, 1999, the Fund paid the Transfer Agent fees totaling
$3,783,796. The Manager provides accounting services to the Fund at its
cost. For the fiscal year ended February 28, 1999, the Fund reimbursed the
Manager $163,855 for these services.
Example:
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other money market funds.
This example assumes that you invest $10,000 in the Fund for the time periods
indicated, that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. This assumption is not meant to indicate
you will receive a 5% annual rate of return. Your annual return may be more or
less than the 5% used in this example. Although your actual costs may be higher
or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$75 $233 $406 $906
-----------------------------------------------------------------------------------------------
</TABLE>
CBA MONEY FUND
5
<PAGE>
[LOGO] Key Facts
FEES AND EXPENSES
- --------------------------------------------------------------------------------
This example does not take into account annual program participation fees
charged by Merrill Lynch or its affiliates for the Services listed below. See
each Service's program description brochure for details. Shareholders of the
Fund whose accounts are maintained directly with the Fund's Transfer Agent and
who are not subscribers to any of the Services will not be charged a program
fee but will not receive any of the additional services available to
subscribers.
<TABLE>
<S> <C>
Service Current Annual Fee
- ----------------------------------------------------------------
Capital Builder SM Account $65
- ----------------------------------------------------------------
Life Management Service SM $114+
- ----------------------------------------------------------------
Merrill Lynch Emerging Investor Account SM $24+
- ----------------------------------------------------------------
Medical Savings Account $100
- ----------------------------------------------------------------
Broadcort Capital Account++ $75
- ----------------------------------------------------------------
</TABLE>
+ Subject to rebate or waiver in certain circumstances.
++ Fee charged by Broadcort Capital Corp., an affiliate of Merrill Lynch.
CBA MONEY FUND
6
<PAGE>
Details About the Fund [LOGO]
Maturity -- the time at which the full principal amount of a fixed income
security is scheduled to be repaid.
U.S. Government agencies -- entities that are part of or sponsored by the
federal government, such as the Government National Mortgage Administration,
the Tennessee Valley Authority or the Federal Housing Administration.
HOW THE FUND INVESTS
- --------------------------------------------------------------------------------
The Fund seeks current income, preservation of capital and liquidity. The Fund
tries to achieve its goals by investing in a diversified portfolio of short
term money market securities.
In seeking to achieve the Fund's objective, Fund management varies the kinds of
money market securities in the portfolio and the average maturity. Fund
management decides which securities to buy and sell based on its assessment of
the relative values of different securities and future interest rates. Fund
management seeks to improve the Fund's yield by taking advantage of yield
differentials that regularly occur between securities of a similar kind. For
example, market conditions frequently result in similar securities trading at
different prices. Fund management seeks to improve the Fund's yield by buying
and selling securities based on these yield differences.
Among the money market obligations the Fund may buy are:
U.S. Government Securities -- Debt 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 or guaranteed as to
principal and interest by U.S. Government agencies, by U.S. Government-
sponsored enterprises, U.S. Government instrumentalities and certain
international institutions that are not direct obligations of the United States
but involve U.S. Government sponsorship or guarantees by U.S. Government
agencies or enterprises. The U.S. Government may not be obligated to provide
financial support to the entities.
Bank Money Instruments -- Obligations of commercial banks, savings banks,
savings and loan associations, or other depository institutions, such as
certificates of deposit, bankers' acceptances, bank notes and time deposits.
The savings banks and savings and loan associations must be organized and
operating in the United States. The obligations of commercial banks may be
issued by U.S. depository institutions, foreign branches or subsidiaries of
U.S. depository institutions (called Eurodollar obligations) or U.S. branches
or subsidiaries of foreign depository institutions (called Yankeedollar
obligations). The Fund may invest in Eurodollar obligations only if they, by
their terms, are general obligations of the U.S. parent bank.
CBA MONEY FUND
7
<PAGE>
[LOGO] Details About the Fund
Commercial Paper and Other Short Term Obligations -- Commercial paper
(including master notes, funding agreements, and mortgage backed or asset
backed securities) with no more than 397 days (13 months) remaining to maturity
at the date of purchase.
Foreign Bank Money Instruments -- U.S. dollar-denominated obligations of
foreign depository institutions and their foreign branches and subsidiaries,
such as certificates of deposit, bankers' acceptances, time deposits, bank
notes and deposit notes. Payment on securities of foreign branches and
subsidiaries may be a general obligation of the parent bank or may be an
obligation only of the issuing branch or subsidiary. The Fund will invest in
these securities only if Fund management determines they are of comparable
quality to other investments permissible for the Fund. The Fund will not invest
more than 25% of its total assets (taken at market value at the time of each
investment) in these obligations.
Foreign Short Term Debt Instruments -- U.S. dollar-denominated commercial paper
and other short term obligations issued by foreign entities. The Fund may
purchase these securities only if Fund management determines they are of
comparable quality to the Fund's U.S. investments.
Repurchase Agreements -- In a repurchase agreement the Fund buys a security
from another party, which agrees to buy it back at an agreed upon time and
price. The Fund may invest in repurchase agreements involving the money market
securities described above or U.S. Government and agency securities with longer
maturities.
Reverse Repurchase Agreements -- In a reverse repurchase agreement the Fund
sells a security to another party and agrees to buy it back at a specific time
and price. The Fund may invest in reverse repurchase agreements involving the
money market securities described above.
Forward Commitments -- The Fund may buy or sell money market securities on a
forward commitment basis. In these transactions, the Fund buys the securities
at an established price with payment and delivery taking place in the future.
The value of the security on the delivery date may be more or less than its
purchase price.
U.S. Government-sponsored enterprises -- private corporations sponsored by the
federal government which have the legal status of government agencies, such as
the Federal Home Loan Mortgage Corporation, the Student Loan Marketing
Association or the Federal National Mortgage Association.
U.S. Government instrumentalities -- supranational entities sponsored by the
U.S. and other governments, such as the World Bank or the Inter-American
Development Bank.
ABOUT THE
PORTFOLIO MANAGER
Robert Sabatino is the portfolio manager of the Fund. Mr. Sabatino has been a
Vice President of Merrill Lynch Asset Management since 1998 and has been
employed by MLAM since 1995.
ABOUT THE MANAGER
The Fund is managed by Fund Asset Management.
CBA MONEY FUND
8
<PAGE>
INVESTMENT RISKS
- --------------------------------------------------------------------------------
This section contains a summary discussion of the general risks of investing in
the Fund. As with any mutual fund, there can be no guarantee that the Fund will
meet its goals or that the Fund's performance will be positive for any period
of time.
Credit Risk -- Credit risk is the risk that the issuer of a security owned by
the Fund will be unable to pay the interest or principal when due. The degree
of credit risk depends on both the financial condition of the issuer and the
terms of the obligation. While the Fund invests only in money-market securities
of highly rated issuers, those issuers may still default on their obligations.
Selection Risk -- Selection risk is the risk that the securities that Fund
management selects will underperform other funds with similar investment
objectives and investment strategies.
Interest Rate Risk -- Interest rate risk is the risk that prices of money
market securities generally increase when interest rates decline and decrease
when interest rates increase. Prices of longer term securities generally change
more in response to interest rate changes than prices of shorter term
securities.
Share Reduction Risk -- In order to maintain a constant net asset value of
$1.00 per share, the Fund may reduce the number of shares held by its
shareholders.
Borrowing Risk -- The Fund may borrow only to meet redemptions. Borrowing may
exaggerate changes in the net asset value of Fund shares and in the yield on
the Fund's portfolio. Borrowing will cost the Fund interest expense and other
fees. The cost of borrowing money may reduce the Fund's return.
Repurchase Agreement Risk -- If the party with whom the Fund has entered into a
repurchase agreement defaults on its obligation under the agreement, the Fund
may suffer delays and incur costs or even lose money in exercising its rights
under the agreement.
CBA MONEY FUND
9
<PAGE>
[LOGO] Details About the Fund
Reverse Repurchase Agreement and Securities Lending Risk -- The Fund may lend
securities to, or enter into reverse repurchase agreements with, financial
institutions which provide cash or government securities as collateral. Reverse
repurchase agreements and securities lending involve the risk that the
counterparty may fail to return the securities in a timely manner or at all.
The Fund could lose money if it is unable to recover its security and the value
of the collateral held by the Fund is less than the value of the security.
These events could trigger adverse tax consequences to the Fund.
Foreign Market Risk -- The Fund may invest in U.S. dollar denominated money
market instruments and other short-term debt obligations issued by foreign
banks and other foreign entities. Although the Fund will invest in these
securities only if Fund management determines they are of comparable quality to
the Fund's U.S. investments, investing in securities of foreign issuers
involves some additional risks. These risks include the possibly higher costs
of foreign investing, and the possibility of adverse political, economic or
other developments.
European Economic and Monetary Union ("EMU") -- A number of European countries
have entered into EMU in an effort to reduce trade barriers between themselves
and eliminate fluctuations in their currencies. EMU has established a single
European currency (the euro), which was introduced on January 1, 1999 and is
expected to replace the existing national currencies of all initial EMU
participants by July 1, 2002. Certain securities (beginning with government and
corporate bonds) were redenominated in the euro. These securities trade and
make dividend and other payments only in euros. Like other investment companies
and business organizations, including the companies in which the Fund invests,
the Fund could be adversely affected if the transition to the euro, or EMU as a
whole, does not proceed as planned.
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
If you would like further information about the Fund, including how it invests,
please see the Statement of Additional Information.
CBA MONEY FUND
10
<PAGE>
Your Account [LOGO]
HOW TO BUY, SELL AND TRANSFER SHARES
- --------------------------------------------------------------------------------
The chart below summarizes how to buy, sell and transfer shares through Merrill
Lynch or other securities dealers. You may also buy shares through the Transfer
Agent. To learn more about buying shares through the Transfer Agent, call 1-
800-221-7210. Because the selection of a mutual fund involves many
considerations, your Merrill Lynch Financial Consultant may help you with this
decision.
CBA MONEY FUND
11
<PAGE>
[LOGO] Your Account
<TABLE>
<CAPTION>
Information Important for You to
If You Want To Your Choices Know
- -------------------------------------------------------------------------------
<C> <C> <S>
Buy Shares Determine the amount of If you are a Service subscriber,
your investment there is no minimum initial
investment for Fund shares.
If you are not a Service subscriber,
the minimum initial investment for
the Fund is $5,000.
--------------------------------------------------------------------
Have cash balances from If you are a Service subscriber and
your account you choose to have your cash
automatically invested balances automatically invested in
in shares the Fund, they will be invested as
follows:
. Except as described below, cash
balances in a Service account are
automatically invested in shares
of the Fund at the next determined
net asset value not later than the
first business day of each week on
which both the New York Stock
Exchange and New York banks are
open, which will usually be a
Monday.
. Cash balances from (i) a sale of
securities that does not settle on
the day the sale is made, (ii) a
sale of securities that settles on
a same day basis, (iii) a
repayment of principal on debt
securities held in the Service
account or (iv) a sale of shares
of Merrill Lynch Ready Assets
Trust or Merrill Lynch U.S.A.
Government Reserves will be
invested in shares of the Fund at
the next determined net asset
value on the business day
following the day on which
proceeds of the transaction are
received by the Service account.
. A cash deposit to the Service
account, other than a manual
investment placed through your
Merrill Lynch Financial
Consultant, must be delivered
prior to the cashiering deadline
in the brokerage office in which
the deposit is made at least one
business day prior to the next
weekly sweep to be invested in
shares of the Fund in the next
weekly sweep. Check with your
Merrill Lynch Financial Consultant
regarding the cashiering deadline
in his or her branch.
--------------------------------------------------------------------
Have your Merrill Lynch If you are a Service subscriber, you
Financial Consultant or may make manual investments of
securities dealer submit $1,000 or more from cash balances in
your purchase order your account which arise from cash
deposits or other activity.
Generally, manual purchases placed
through Merrill Lynch will be
effective on the day following the
day the order is placed. Manual
purchases of $500,000 or more can be
made effective on the same day the
order is placed provided certain
requirements are met.
The Fund may reject any order to buy
shares and may suspend the sale of
shares at any time.
Merrill Lynch, Broadcort and the
securities dealers reserve the right
to terminate a subscriber's
participation in the respective
Service at any time.
When purchasing shares as a Service
subscriber, you will be subject to
the applicable annual program
participation fee. To receive all
the services available as a Service
subscriber, you must complete the
account opening process, including
completing or supplying requested
documentation.
- -------------------------------------------------------------------------------
</TABLE>
CBA MONEY FUND
12
<PAGE>
<TABLE>
<CAPTION>
Information Important for You to
If You Want To Your Choices Know
- -------------------------------------------------------------------------------
<C> <C> <S>
Buy Shares Or contact the Transfer If you maintain an account directly
(continued) Agent with the Transfer Agent, and are not
a Service subscriber, you may call
the Transfer Agent at 1-800-221-7210
and request a purchase application.
Mail the completed purchase
application to the Transfer Agent at
the address on the inside back cover
of this prospectus.
- -------------------------------------------------------------------------------
Add to Your Purchase additional The minimum investment for
Investment shares additional purchases (other than
automatic purchases) is $1,000 for
all accounts.
--------------------------------------------------------------------
Acquire additional All dividends are automatically
shares through the reinvested daily in the form of
automatic dividend additional shares at net asset
reinvestment plan value.
- -------------------------------------------------------------------------------
Transfer Shares Transfer to a You may transfer your Fund shares
to Another participating securities only to another securities dealer
Securities dealer that has entered into an agreement
Dealer with Merrill Lynch. All shareholder
services will be available for the
transferred shares. You may only
purchase additional shares of funds
previously owned before the
transfer. All future trading of
these assets must be coordinated by
the receiving firm.
--------------------------------------------------------------------
Transfer to a non- You must either:
participating securities .Transfer your shares to an account
dealer with the Transfer Agent; or
.Sell your shares.
- -------------------------------------------------------------------------------
Sell Your Automatic Redemption The Fund has instituted an automatic
Shares redemption procedure for subscribers
in a Service who have elected to
have cash balances in their accounts
automatically invested in shares of
the Fund. For these subscribers,
unless directed otherwise, Merrill
Lynch or Broadcort will redeem a
sufficient number of shares of the
Fund to satisfy debit balances in
the account (i) created by activity
therein or (ii) created by Visa(R)
card purchases, cash advances or
checks written against the Visa(R)
account. Each account of a
subscriber will be automatically
scanned for debits each business day
prior to 12 noon, Eastern time.
After application of any cash
balances in the account to these
debits, shares of the Fund will be
redeemed at net asset value at the
12 noon, Eastern time, pricing to
satisfy remaining debits.
- -------------------------------------------------------------------------------
</TABLE>
CBA MONEY FUND
13
<PAGE>
[LOGO] Your Account
<TABLE>
<CAPTION>
Information Important for You to
If You Want To Your Choices Know
- -------------------------------------------------------------------------------
<C> <C> <S>
Sell Your Have your Merrill Lynch If you are a Service subscriber, you
Shares Financial Consultant or may redeem your shares directly by
(continued) securities dealer submit submitting a written notice of
your sales order redemption to Merrill Lynch or the
securities dealer, respectively,
which will submit the request to the
Transfer Agent. Cash proceeds from
the redemption generally will be
mailed to you at your address of
record, or upon request, mailed or
wired (if more than $10,000) to your
bank account. Redemption requests
should not be sent to the Fund or
its Transfer Agent. If inadvertently
sent to the Fund or the Transfer
Agent, redemption requests will be
forwarded to Merrill Lynch or
Broadcort. All shareholders on the
account must sign the letter.
Redemptions of Fund shares will be
confirmed to Service subscribers
(rounded to the nearest share) in
their monthly transaction
statements.
- -------------------------------------------------------------------------------
Sell through the You may sell shares held at the
Transfer Agent Transfer Agent by writing to the
Transfer Agent at the address on the
inside back cover of this
prospectus. All shareholders on the
account must sign the letter and
signatures must be guaranteed.
Redemption requests should not be
sent to the Fund or Merrill Lynch.
If inadvertently sent to the Fund or
Merrill Lynch, redemption requests
will be forwarded to the Transfer
Agent. The Transfer Agent will
normally mail redemption proceeds
within seven days following receipt
of a properly completed request. If
you make a redemption request before
the Fund has collected payment for
the purchase of shares, the Fund or
the Transfer Agent may delay mailing
your proceeds. This delay will
usually not exceed ten days.
Check with the Transfer Agent or
your Merrill Lynch Financial
Consultant for details.
- -------------------------------------------------------------------------------
</TABLE>
CBA MONEY FUND
14
<PAGE>
Net Asset Value -- the market value of the Fund's total assets after deducting
liabilities, divided by the number of shares outstanding.
Dividends -- ordinary income and capital gains paid to shareholders. Dividends
may be reinvested in additional Fund shares as they are paid.
HOW SHARES ARE PRICED
- --------------------------------------------------------------------------------
When you buy shares, you pay the net asset value (normally $1.00 per share)
without a sales charge. The "penny-rounding" method is used in calculating net
asset value, meaning that the calculation is rounded to the nearest whole cent.
This is the offering price. Shares are also redeemed at their net asset value.
The Fund calculates its net asset value at 12 noon Eastern time on each
business day New York banks are open, immediately after the daily declaration
of dividends. The net asset value used in determining your price is the one
calculated after your purchase or redemption order becomes effective. Share
purchase orders are effective on the date Federal Funds become available to the
Fund.
DIVIDENDS AND TAXES
- --------------------------------------------------------------------------------
Dividends are declared and reinvested daily in the form of additional shares at
net asset value. You will begin accruing dividends on the day following the
date your purchase becomes effective. Shareholders will receive statements
monthly as to such reinvestments. Shareholders redeeming their holdings will
receive all dividends declared and reinvested through the date of redemption.
The Fund intends to make distributions most of which will be taxed as ordinary
income although the Fund may distribute capital gains as well.
You will pay tax on dividends from the Fund whether you receive them in cash or
additional shares. If you redeem Fund shares or exchange them for shares of
another fund, any gain on the transaction may be subject to tax. Capital gain
dividends are generally taxed at different rates than ordinary income
dividends.
If the value of assets held by the Fund declines, the 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 your eliminated shares would be added to the basis of your remain- ing
Fund shares, and you could recognize a capital loss if you disposed of your
shares at that time. Dividends from the Fund, including dividends reinvested in
additional shares of the Fund, will nonetheless be fully taxable, even if the
number of shares in your account has been reduced as described above.
CBA MONEY FUND
15
<PAGE>
[LOGO APPEARS HERE]
Your Account
If you are neither a lawful permanent resident nor a citizen of the U.S. or if
you are a foreign entity, the Fund's ordinary income dividends (which include
distributions of net short-term capital gains) will generally be subject to a
30% U.S. withholding tax, unless a lower treaty rate applies.
Dividends and interest received by the Fund may give rise to withholding and
other taxes imposed by foreign countries. Tax conventions between certain
countries and the United States may reduce or eliminate such taxes.
By law, the Fund must withhold 31% of your dividends and proceeds if you have
not provided a taxpayer identification number or social security number.
This section summarizes some of the consequences under current Federal tax law
of an investment in the Fund. It is not a substitute for personal tax advice.
Consult your personal tax adviser about the potential tax consequences of an
investment in the Fund under all applicable tax laws.
CBA MONEY FUND
16
<PAGE>
Management of the Fund [LOGO]
FUND ASSET MANAGEMENT
- --------------------------------------------------------------------------------
Fund Asset Management, the Fund's Manager, manages the Fund's investments and
its business operations under the overall supervision of the Fund's Board of
Trustees. The Manager has the responsibility for making all investment
decisions for the Fund. The Fund pays the Manager a fee at the annual rate of
0.500% of the Fund's average daily net assets not exceeding $500 million;
0.425% of the average daily net assets exceeding $500 million but not exceeding
$1 billion; and 0.375% of the average daily net assets exceeding $1 billion.
Fund Asset Management is part of Merrill Lynch Asset Management Group, which
had approximately $507 billion in investment company and other portfolio assets
under management as of February 1999. This amount includes assets managed for
Merrill Lynch affiliates.
A Note About Year 2000
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"). The Fund could be adversely
affected if the computer systems used by the Fund's management or other Fund
service providers do not properly address this problem before January 1, 2000.
The Fund's management expects to have addressed this problem before then, and
does not anticipate that the services it provides will be adversely affected.
The Fund's other service providers have told the Fund management that they also
expect to resolve the Year 2000 Problem, and the Fund's management will
continue to monitor the situation as the Year 2000 approaches. However, if the
problem has not been fully addressed, the Fund could be negatively affected.
The Year 2000 Problem could also have a negative impact on the issuers in which
the Fund invests, and this could hurt the Fund's investment returns.
CBA MONEY FUND
17
<PAGE>
Management of the Fund [LOGO]
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The Financial Highlights table is intended to help you understand the Fund's
financial performance for the past five years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate an investor would have earned on an investment in the Fund
(assuming reinvestment of all dividends). This information has been audited by
Deloitte & Touche LLP, whose report, along with the Fund's financial
statements, are included in the Fund's annual report to shareholders, which is
available upon request.
<TABLE>
<CAPTION>
For the Year Ended February 28, For the For the
---------------------------------- Year Ended Year Ended
Increase (Decrease) to February 29, February 28,
Net Asset Value: 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
- ----------------------------------------------------------------------------------------
Net asset value,
beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------------------------------------------------------
Investment income --
net .0478 .0497 .0475 .0524 .0396
- ----------------------------------------------------------------------------------------
Realized and unrealized
gain (loss) on
investments -- net (.0002) .0001 --+ .0001 .0005
- ----------------------------------------------------------------------------------------
Total from investment
operations .0476 .0498 .0475 .0525 .0401
- ----------------------------------------------------------------------------------------
Less dividends and
distributions:
Investment income --
net (.0478) (.0497) (.0475) (.0524) (.0396)
Realized gain on
investments -- net (.0001) (.0001) --+ (.0001) --+
- ----------------------------------------------------------------------------------------
Total dividends and
distributions (.0479) (.0498) (.0475) (.0525) (.0396)
- ----------------------------------------------------------------------------------------
Net asset value, end of
year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------------------------------------------------------
Total Investment
Return: 4.91% 5.10% 4.87% 5.39% 4.04%
- ----------------------------------------------------------------------------------------
Ratios to Average Net
Assets:
Expenses net of
reimbursement .70% .70% .69% .75% .77%
Expenses .73% .74% .73% .79% .81%
- ----------------------------------------------------------------------------------------
Investment income and
realized gain on
investments -- net 4.79% 4.98% 4.71% 5.22% 3.98%
- ----------------------------------------------------------------------------------------
Supplemental Data:
- ----------------------------------------------------------------------------------------
Net assets, end of year
(in thousands) $2,557,289 $2,360,682 $2,236,660 $1,988,000 $1,406,315
- ----------------------------------------------------------------------------------------
</TABLE>
+ Amount is less than $.0001 per share.
CBA MONEY FUND
18
<PAGE>
------------------------------
POTENTIAL
___________ INVESTORS ____________
| Open an account (two options). |
| ------------------------------ |
| |
- ------------------------ ------------------------
SERVICE SUBSCRIBERS' NON-SERVICE SUBSCRIBERS'
MERRILL LYNCH --------------------------- TRANSFER AGENT
FINANCIAL CONSULTANT DISTRIBUTORS
or SECURITIES DEALER Financial Data
Merrill Lynch, Pierce, Services, Inc.
Advises shareholders on Fenner & Smith P.O. Box 45290
their Fund investments. Incorporated Jacksonville, Florida
- ------------------------ North Tower 32232-5290
| World Financial Center 1-800-221-7210
|____________ 250 Vesey Street
New York, New York 10281 Performs recordkeeping
and reporting services.
Bradcort Capital Corp. ------------------------
- ------------------------ 100 Church Street ______________|
COUNSEL New York, New York 10007
------------------------
Brown & Wood LLP Arrange for the sale CUSTODIAN
One World Trade Center of Fund shares.
New York, New York ------------------------- State Street Bank and
10048-0557 | Trust Company
| P.O. Box 1713
Provides legal advice | Boston, Massachusetts 02101
to the Fund. -------------------------
- ------------------------ THE FUND Holds the Fund's assets
| for safekeeping.
______________ The Board of Trustees -------------------------
oversees the Fund. ____________|
--------------------------
---------------------------- | ----------------------------
INDEPENDENT AUDITORS | MANAGER
|
Deloitte & Touche LLP | Fund Asset Management, L.P.
117 Campus Drive |
Princeton, New Jersey _____|______ ADMINISTRATIVE OFFICES
08540-6400 800 Scudders Mill Road
Plainsboro, New Jersey 08536
Audits the financial
statements of the Fund MAILING ADDRESS
on behalf of the P.O. Box 9011
shareholders. Princeton, New Jersey
---------------------------- 08543-9011
TELEPHONE NUMBER
1-800-MER-FUND
Manages the Fund's
day-to-day activities.
----------------------------
CBA MONEY FUND
<PAGE>
For More Information [LOGO]
Shareholder Reports
Additional information about the Fund's investments is available in the Fund's
annual and semi-annual reports to shareholders. You may obtain these reports at
no cost by calling 1-800-221-7210.
The Fund will send you one copy of each shareholder report and certain other
mailings, regardless of the number of Fund accounts you have. To receive sepa-
rate shareholder reports for each account, call your Merrill Lynch Financial
Consultant or write to the Transfer Agent at its mailing address. Include your
name, address, tax identification number and Merrill Lynch brokerage or mutual
fund account number. If you have any questions, please call your Merrill Lynch
Financial Consultant or the Transfer Agent at 1-800-221-7210.
Statement of Additional Information
The Fund's Statement of Additional Information contains further information
about the Fund and is incorporated by reference (legally considered to be part
of this prospectus). You may request a free copy by writing the Fund at Finan-
cial Data Services, Inc., P.O. Box 45290, Jacksonville, Florida 32232-5289 or
by calling 1-800-221-7210.
Contact your Merrill Lynch Financial Consultant or the Fund at the telephone
number or address indicated above if you have any questions.
Information about the Fund (including the Statement of Additional Information)
can be reviewed and copied at the SEC's Public Reference Room in Washington,
D.C. Call 1-800-SEC-0330 for information on the operation of the public refer-
ence room. This information is also available on the SEC's Internet site at
http://www.sec.gov and copies may be obtained upon payment of a duplicating fee
by writing the Public Reference Section of the SEC, Washington, D.C. 20549-
6009.
You should rely only on the information contained in this prospectus. No one is
authorized to provide you with information that is different from the informa-
tion contained in this prospectus.
Investment Company Act file #811-3703
Code #10126-0699
(C)Fund Asset Management, L.P.
Prospectus
[LOGO] Merrill Lynch
CBA(R) Money Fund
June 29, 1999
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
CBA Money Fund
P.O. Box 9011, Princeton, New Jersey 08543-9011 . Phone No. (609) 282-2800
________________
CBA Money Fund (the "Fund") is a no-load money market fund, whose shares are
offered to subscribers to the Capital Builder(SM) Account service, the Life
Management Service(SM), the Merrill Lynch Emerging Investor Account(SM) service
and the Medical Savings Account service of Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch"), to subscribers to the Broadcort Capital
Account service of Broadcort Capital Corp. ("Broadcort") (the Capital
Builder(SM) Account service, Life Management Service(SM), Merrill Lynch Emerging
Investor Account(SM) service and the Medical Savings Account service are
collectively referred to as the "Services") and to investors maintaining
accounts directly with the Money Fund's Transfer Agent. Each Service consists
of a conventional securities cash or margin account ("Securities Account")
maintained at Merrill Lynch or Broadcort, as applicable, which is presently
linked to the Fund and to a Visa(R) card/check account ("Visa(R) Account").
The Life Management Service also may be linked to insurance, home financing
and other services.
A customer of Merrill Lynch and a customer of a securities firm that has
entered into a selected dealer agreement with Broadcort may subscribe to one
of the Services, as applicable, as set forth in the description of the
respective Services discussed below. Subject to the conditions described in
the Prospectus, free credit balances in the Securities Account of Service
participants will be periodically invested in shares of the Fund. This permits
the subscriber to earn a return on such funds pending further investment
through other aspects of the respective Service or utilization through the
Visa(R) Account. The shares of the Fund also may be purchased by investors
maintaining accounts directly with the Money Fund's Transfer Agent. Such
investors will not receive any of the additional services available to Service
subscribers, such as the Visa(R) Account or the automatic investment of free
credit balances.
Merrill Lynch charges an annual program participation fee (presently $65)
for the Capital Builder(SM) Account service and charges an annual program
participation fee (presently $114, subject to rebate in certain circumstances)
for the Life Management Service(SM). See the Life Management Service(SM) program
description booklet for details. Merrill Lynch charges an annual program
participation fee (presently $24, subject to fee waiver in certain
circumstances) for the Merrill Lynch Emerging Investor Account(SM). See the
Merrill Lynch Emerging Investor Account(SM) brochure for details. Merrill Lynch
charges an annual program participation fee (presently $100) for the Medical
Savings Account service. Broadcort charges an annual fee (presently $75) for
the Broadcort Capital Account service. Information with respect to the
respective Services is set forth in the description of such Service or
accompanying material furnished to all Service subscribers. Merrill Lynch and
Broadcort reserve the right to change the respective fees at any time.
________________
This Statement of Additional Information of the Fund is not a prospectus and
should be read in conjunction with the Prospectus of the Fund, dated June 29,
1999 (the "Prospectus"), which has been filed with the Securities and Exchange
Commission (the "Commission") and can be obtained, without charge, by calling
(800) 221-7210 or by writing the Fund at the above address. The Prospectus is
incorporated by reference into this Statement of Additional Information, and
this Statement of Additional Information is incorporated by reference into the
Prospectus. The Fund's audited financial statements are incorporated in this
Statement of Additional Information by reference to its 1999 annual report to
shareholders. You may request a copy of the annual report at no charge by
calling (800) 221-7210 ext. 789 between 8:00 a.m. and 8:00 p.m. on any
business day.
________________
Fund Asset Management--Manager
________________
The date of this Statement of Additional Information is June 29, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Objectives and Policies......................................... 2
Management of the Fund..................................................... 7
Trustees and Officers.................................................... 7
Compensation of Trustees................................................. 8
Management and Advisory Arrangements..................................... 9
Code of Ethics........................................................... 10
Purchase of Shares......................................................... 11
Purchase of Shares by Service Subscribers................................ 11
Purchase of Shares by Non-Service Subscribers............................ 12
Distribution Plan........................................................ 12
Redemption of Shares....................................................... 13
Redemption of Shares by Service Subscribers.............................. 13
Redemption of Shares by Non-Service Subscribers.......................... 14
Determination of Net Asset Value........................................... 14
Yield Information.......................................................... 15
Portfolio Transactions..................................................... 16
Dividends and Taxes........................................................ 17
Dividends................................................................ 17
Taxes.................................................................... 17
General Information........................................................ 19
Description of Shares.................................................... 19
Independent Auditors..................................................... 19
Custodian................................................................ 19
Transfer Agent........................................................... 19
Legal Counsel............................................................ 19
Reports to Shareholders.................................................. 19
Shareholder Inquiries.................................................... 20
Additional Information................................................... 20
Financial Statements....................................................... 20
Appendix................................................................... I-1
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the Fund are to seek current income,
preservation of capital and liquidity available from investing in a
diversified portfolio of short-term money market securities. The investment
objectives are fundamental policies of the Fund that may not be changed
without a vote of the majority of the outstanding shares of the Fund.
The Fund's investments in short-term "Government Securities" and Government
agency securities will be in instruments with a remaining maturity of 762 days
(25 months) or less. The Fund's other investments will be in instruments with
a remaining maturity of 397 days (13 months) or less that have received a
short-term rating or that have been issued by issuers that have received a
short-term rating with respect to a class of debt obligations that are
comparable in priority and security with the instruments, from the requisite
nationally recognized statistical rating organizations ("NRSROs") in one of
the two highest short-term rating categories or, if neither the instrument nor
its issuer is so rated, will be of comparable quality as determined by the
Trustees of the Fund (or by Fund Asset Management, L.P. (the "Manager" or
"FAM") pursuant to delegated authority). Currently, there are five NRSROs:
Duff & Phelps Credit Rating Co., Fitch IBCA, Inc., Thomson BankWatch, Inc.,
Moody's Investors Service, Inc. and Standard & Poor's. The Fund will determine
the remaining maturity of its investments in accordance with Commission
regulations. The dollar-weighted average maturity of the Fund's portfolio will
not exceed 90 days. During the Fund's fiscal year ended February 28, 1999, the
average maturity of its portfolio ranged from 67 days to 86 days.
Investment in Fund shares offers several potential benefits. The Fund seeks
to provide as high a yield potential as is available through investment 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 Fund, the Manager 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 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 yields between the various types of money market securities. The Fund seeks
to enhance yield by purchasing and selling securities based on these yield
differences.
The following is a description of some of the types of money market
securities in which the Fund may invest:
U.S. Government Securities. Marketable securities issued by or guaranteed as
to principal and interest by the U.S. Government and supported by the full
faith and credit of the United States.
U.S. Government Agency Securities. Debt securities issued by U.S.
Government-sponsored enterprises, 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. Obligations of commercial banks, savings banks,
savings and loan associations or other depository institutions such as
certificates of deposit, including variable rate certificates of deposit, time
deposits, deposit notes, bank notes and bankers' acceptances. The savings
banks and savings and loan associations must be organized and operating in the
United States. The obligations of commercial banks may be issued by U.S.
banks, foreign branches of U.S. banks ("Eurodollar" obligations) or U.S.
branches of foreign banks ("Yankeedollar" obligations). Eurodollar and
Yankeedollar obligations may be general obligations of the parent bank or may
be limited to the issuing branch by the terms of the specific obligations or
by government regulation.
2
<PAGE>
Eurodollar and Yankeedollar obligations, as well as obligations of foreign
depository institutions and short-term obligations issued by other foreign
entities, involve additional investment risks from the risks of obligations of
U.S. issuers. Such investment risks include adverse political and economic
developments, the possible imposition of withholding taxes on interest income
payable on such obligations, the possible seizure or nationalization of
foreign deposits and the possible establishment of exchange controls or other
foreign governmental laws or restrictions which might adversely affect the
payment of principal and interest. Generally the issuers of such obligations
are subject to few or none of the U.S. regulatory requirements applicable to
U.S. issuers. Foreign branches of U.S. banks may be subject to less stringent
reserve requirements than U.S. banks. U.S. branches of foreign banks are
subject to the reserve requirements of the states in which they are located.
There may be less publicly available information about a U.S. branch or
subsidiary of a foreign bank or other issuer than about a U.S. bank or other
issuer, and such entities may not be subject to the same accounting, auditing
and financial record keeping standards and requirements as U.S. issuers.
Evidence of ownership of Eurodollar and foreign obligations may be held
outside the United States, and the Fund may be subject to the risks associated
with the holding of such property overseas. Eurodollar and foreign obligations
of the Fund held overseas will be held by foreign branches of the Fund's
custodian or by other U.S. or foreign banks under subcustodian arrangements
complying with the requirements of the Investment Company Act of 1940, as
amended (the "Investment Company Act").
The Manager will carefully consider the above factors in making investments
in Eurodollar obligations, Yankeedollar obligations of foreign depository
institutions and other foreign short-term obligations and will not knowingly
purchase obligations which, at the time of purchase, are subject to exchange
controls or withholding taxes. Generally, the Fund will limit its Yankeedollar
investments to obligations of banks organized in Canada, France, Germany,
Japan, the Netherlands, Switzerland, the United Kingdom and other
industrialized nations. As discussed in the Prospectus, the Fund may also
invest in U.S. dollar-denominated commercial paper and other short-term
obligations issued by foreign entities. Such investments are subject to
quality standards similar to those applicable to investments in comparable
obligations of domestic issues. 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.
Bank money instruments in which the Fund invests must be issued by
depository institutions with total assets of at least $1 billion, except that
up to 10% of the Fund'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.
Commercial Paper and Other Short-Term Obligations. Commercial paper
(including master notes and funding agreements), which refers to short-term
unsecured promissory notes issued by corporations, partnerships, trusts or
other entities to finance short-term credit needs and non-convertible 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-
related or asset-backed debt instruments, including pass-through certificates
such as participations in, or bonds and notes backed by, pools of mortgage,
credit card, automobile or other types of receivables. These structured
financings will be supported by sufficient collateral and other credit
enhancements, including letters of credit, insurance, reserve funds and
guarantees by third parties, to enable such instruments to obtain the
requisite quality rating by an NRSRO.
Foreign Bank Money Instruments. U.S. dollar-denominated obligations of
foreign depository institutions and their foreign branches and subsidiaries,
such as certificates of deposit, bankers' acceptances, time deposits and
deposit notes. The obligations of such foreign branches and subsidiaries may
be the general obligation of the parent bank or may be limited to the issuing
branch or subsidiary by the terms of the specific obligation or by government
regulation. Such investments will only be made if determined to be of
comparable quality to other investments permissible for the Fund. The Fund
will not invest more than 25% of its total assets (taken at market value at
the time of each investment) in these obligations.
Foreign Short-term Debt Instruments. U.S. dollar-denominated commercial
paper and other short-term obligations issued by foreign entities. Such
investments are subject to quality standards similar to those applicable to
investments in comparable obligations of domestic issuers.
3
<PAGE>
The following is a description of other types of investments or investment
practices in which the Fund may invest or engage:
Repurchase Agreements; Purchase and Sale Contracts. The Fund may invest in
the money market securities described above pursuant to repurchase agreements.
Under such agreements, the counterparty agrees, upon entering into the
contract, to repurchase the security at a mutually agreed upon time and price,
thereby determining the yield during the term of the agreement. This results
in a fixed rate of return insulated from market fluctuations during such
period.
Such agreements usually cover short periods, such as under a week. The Fund
will require the seller to provide additional collateral if the market value
of the securities falls below the repurchase price at any time during the term
of the repurchase agreement. In the event of a default by the seller, the Fund
ordinarily will retain ownership of the securities underlying the repurchase
agreement, and instead of a contractually fixed rate of return, the rate of
return to the Fund shall be dependent upon intervening fluctuations of the
market value of such securities and the accrued interest on the securities. In
such event, the Fund would have rights against the seller for breach of
contract with respect to any losses arising from market fluctuations following
the failure of the seller to perform. In certain circumstances, repurchase
agreements may be construed to be collateralized loans by the purchaser to the
seller secured by the securities transferred to the purchaser. In the event of
default by the seller under a repurchase agreement construed to be a
collateralized loan, the underlying securities are not owned by the Fund but
only constitute collateral for the seller's obligation to pay the repurchase
price. Therefore, the Fund may suffer time delays and incur costs or possible
losses in connection with the disposition of the collateral. From time to time
the Fund also may invest in money market securities pursuant to purchase and
sale contracts. While purchase and sale contracts are similar to repurchase
agreements, purchase and sale contracts are structured so as to be in
substance more like a purchase and sale of the underlying security than is the
case with repurchase agreements.
Reverse Repurchase Agreements. The Fund may enter into reverse repurchase
agreements that involve the sale of money market securities held by the Fund,
with an agreement to repurchase the securities at an agreed- upon price, date
and interest payment. During the time a reverse repurchase agreement is
outstanding, the Fund will maintain a segregated custodial account containing
U.S. Government or other appropriate high-grade debt securities having a value
equal to the repurchase price.
Lending of Portfolio Securities. The Fund may lend securities with a value
not exceeding 33 1/3% of its total assets. In return, the Fund receives
collateral in an amount equal to at least 100% of the current market value of
the loaned securities in cash or securities issued or guaranteed by the U.S.
Government. This limitation is a fundamental policy and it may not be changed
without the approval of the holders of a majority of the Fund's outstanding
voting securities, as defined in the Investment Company Act. The Fund receives
securities as collateral for the loaned securities and the Fund and the
borrower negotiate a rate for the loan premium to be received by the Fund for
the loaned securities, which increases the Fund's yield. The Fund may receive
a flat fee for its loans. The loans are terminable at any time and the
borrower, after notice, is required to return borrowed securities within five
business days. The Fund may pay reasonable finder's, administrative and
custodial fees in connection with its loans. In the event that the borrower
defaults on its obligation to return borrowed securities because of insolvency
or for any other reason, the Fund could experience delays and costs in gaining
access to the collateral and could suffer a loss to the extent the value of
the collateral falls below the market value of the borrowed securities.
Forward Commitments. The Fund may purchase or sell money market securities
on a forward commitment basis at fixed purchase or sale terms. The purchase of
money market securities on a forward commitment basis involves the risk that
the yields available in the market when the delivery takes place may actually
be higher than those obtained in the transaction itself; if yields increase,
the value of the securities purchased on a forward commitment basis will
generally decrease. A separate account of the Fund will be established with
the Fund's custodian consisting of cash or liquid money market securities
having a market value at all times at least equal to the amount of the forward
purchase commitment. The Fund may also sell money market securities on a
forward commitment basis. By doing so, the Fund forgoes the opportunity to
sell such securities at a higher price should they increase in value between
the trade and settlement dates.
4
<PAGE>
There can be no assurance that a security purchased or sold through a
forward commitment will be delivered. The value of securities in these
transactions on the delivery date may be more or less than the Fund's purchase
price. The Fund may bear the risk of a decline in the value of the security in
these transactions and may not benefit from an appreciation in the value of
the security during the commitment period.
________________
Preservation of capital is a prime investment objective of the Fund, and
while the types of money market securities in which the Fund invests generally
are considered to have low principal risk, such securities are not completely
risk free. There is a risk of the failure of issuers to meet their principal
and interest obligations. With respect to repurchase agreements, purchase and
sale contracts, reverse repurchase agreements and the lending of portfolio
securities by the Fund, 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 Fund may suffer time delays
and incur costs or possible losses in connection with such transactions.
Rule 2a-7 under the Investment Company Act presently limits investments by
the Fund in securities issued by any one issuer (other than the U.S.
Government, its agencies or instrumentalities) ordinarily to not more than 5%
of its total assets, or, in the event that such securities are not First Tier
Securities (as defined in the Rule), not more than 1%. In addition, Rule 2a-7
requires that not more than 5% of the Fund's total assets be invested in
Second Tier Securities (as defined in the Rule). The Rule requires the Fund to
be diversified (as defined in the Rule) other than with respect to government
securities and securities subject to guarantee issued by a non-controlled
person (as defined in the Rule).
Investment Restrictions. The Fund has adopted a number of restrictions and
policies relating to the investment of its assets and its activities, which
are fundamental policies and may not be changed without the approval of the
holders of a majority of the Fund's outstanding voting securities (which for
this purpose means the lesser of (i) 67% of the shares represented at a
meeting at which more than 50% of the outstanding shares are represented or
(ii) more than 50% of the outstanding shares). Among the more significant
restrictions, the Fund 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 domestic bank money instruments);
(3) purchase the securities of any one issuer, other than the U.S.
Government, its agencies or instrumentalities, if immediately after the
purchase, more than 5% of the value of its total assets (taken at market
value) would be invested in that issuer, except that, with respect to 25%
of the value of the Fund's total assets, the Fund may invest up to 10% of
its total assets in bank money instruments or repurchase agreements with
any one bank;
(4) purchase more than 10% of the outstanding securities of an issuer
except that this restriction shall not apply to U.S. Government or
Government agency securities, bank money instruments and repurchase
agreements; or
(5) enter into repurchase agreements if, as a result, more than 10% of
its total assets (taken at market value at the time of each investment)
would be subject to repurchase agreements maturing in more than seven days.
In addition, the Fund has adopted the following other fundamental
restrictions and policies relating to the investment of its assets and its
activities. The Fund may not:
(1) make investments for the purpose of exercising control or management;
(2) underwrite securities issued by other persons;
(3) purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition or reorganization;
5
<PAGE>
(4) purchase or sell real estate (other than money market securities
secured by real estate or interests therein or money market securities
issued by companies which invest in real estate or interests therein),
commodities or commodity contracts, interests in oil, gas or other mineral
exploration or development programs;
(5) purchase any securities on margin, except for the use of short-term
credit necessary for clearance of purchase and sales of portfolio
securities;
(6) make short sales of securities or maintain a short position or write,
purchase or sell puts, calls, straddles, spreads or combinations thereof;
(7) make loans to other persons, provided that the Fund may purchase
money market securities or enter into repurchase agreements or purchase and
sale contracts and lend securities owned or held by it pursuant to (8)
below;
(8) lend its portfolio securities in excess of 33 1/3% of its total
assets, taken at market value, provided that such loans are made according
to the guidelines set forth below;
(9) borrow amounts in excess of 20% of its total assets, taken at market
value (including the amount borrowed), and then only from banks as a
temporary measure for extraordinary or emergency purposes (the borrowing
provisions shall not apply to reverse repurchase agreements). (Usually only
"leveraged" investment companies may borrow in excess of 5% of their
assets; however, the Fund will not borrow to increase income but only to
meet redemption requests which might otherwise require untimely
dispositions of portfolio securities. The Fund will not purchase securities
while borrowings are outstanding. Interest paid on such borrowings will
reduce net income.);
(10) mortgage, pledge, hypothecate or in any manner transfer (except as
provided in (8) above) as security for indebtedness any securities owned or
held by the Fund except as may be necessary in connection with borrowings
referred to in investment restriction (9) above, and then such mortgaging,
pledging or hypothecating may not exceed 10% of the Fund's net assets,
taken at market value;
(11) invest in securities with legal or contractual restrictions on
resale (except for repurchase agreements) or for which no readily available
market exists if, regarding all such securities, more than 10% of its net
assets (taken at market value) would be invested in such securities;
(12) invest in securities of issuers (other than U.S. Government agency
securities) having a record, together with predecessors, of less than three
years of continuous operation if, regarding all such securities, more than
5% of its total assets (taken at market value) would be invested in such
securities;
(13) invest in securities or investments referred to in investment
restrictions (11) above and investment restriction (5) on the previous page
if, regarding all such securities and investments, more than 10% of the
Fund's total assets (taken at market value) would be invested in such
securities or investments;
(14) enter into reverse repurchase agreements if, as a result thereof,
the Fund's obligations with respect to reverse repurchase agreements would
exceed one-third of its net assets (defined to be total assets, taken at
market value, less liabilities other than reverse repurchase agreements);
(15) purchase or retain the securities of any issuer, if those individual
officers and Trustees of the Fund, Merrill Lynch Asset Management, L.P.
("MLAM") or any subsidiary thereof each owning beneficially more than 1/2
of 1% of the securities of such issuer own in the aggregate more than 5% of
the securities of the issuer; and
(16) issue senior securities to the extent such issuance would violate
applicable law.
Subject to the supervision of the Board of Trustees, the Manager performs,
or arranges for affiliates to perform, pursuant to the Management Agreement,
the management and administrative services necessary for the operation of the
Fund. The Manager and its affiliates will provide a variety of administrative
and operational services to shareholders of the Fund, including processing
services related to the purchase and redemption of shares and the general
handling of shareholder relations. The Manager is responsible for the actual
management of the Fund's portfolio and constantly reviews the Fund's holdings
in light of its own research analysis and that
6
<PAGE>
from other relevant sources. The responsibility for making decisions to buy,
sell or hold a particular security rests with the Manager, subject to review
by the Trustees. The Manager provides the Fund with office space, equipment
and facilities and such other services as the Manager, subject to supervision
and review by the Trustees, shall from time to time determine to be necessary
to perform its obligations under the Management Agreement.
MANAGEMENT OF THE FUND
Trustees and Officers
The Board of Trustees of the Fund consists of eight individuals, six of whom
are not "interested persons" of the Fund as defined in the Investment Company
Act (the "non-interested Trustees"). The Trustees are responsible for the
overall supervision of the operations of the Fund and perform the various
duties imposed on the directors of investment companies by the Investment
Company Act.
Information about the Trustees, executive officers and the portfolio manager
of the Fund, 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 Trustee, executive officer and the portfolio manager is P.O. Box 9011,
Princeton, New Jersey 08543-9011.
Terry K. Glenn (58) -- President and Trustee (1)(2) -- Executive Vice
President of the Manager and MLAM (which terms as used herein include their
corporate predecessors) since 1983; Executive Vice President and Director of
Princeton Services, Inc. ("Princeton Services") since 1993; President of
Princeton Funds Distributor, Inc. ("PFD") since 1986 and Director thereof
since 1991; President of Princeton Administrators, L.P. since 1988.
Ronald W. Forbes (58) -- Trustee (2) -- 1400 Washington Avenue, Albany, New
York 12222. Professor of Finance, School of Business, State University of New
York at Albany since 1989; Consultant, Urban Institute, Washington, D.C. since
1995.
Cynthia A. Montgomery (46) -- Trustee (2) -- Harvard Business School,
Soldiers Field Road, Boston, Massachusetts 02163. Professor, Harvard Business
School since 1989; Associate Professor, J.L. Kellogg Graduate School of
Management, Northwestern University from 1985 to 1989; Assistant Professor,
Graduate School of Business Administration, The University of Michigan from
1979 to 1985; Director, UNUM Corporation since 1990 and Director of Newell Co.
since 1995.
Charles C. Reilly (68) -- Trustee (2) -- 9 Hampton Harbor Road, Hampton
Bays, New York 11946. Self-employed financial consultant since 1990; President
and Chief Investment Officer of Verus Capital, Inc. from 1979 to 1990; Senior
Vice President of Arnold and S. Bleichroeder, Inc. from 1973 to 1990; Adjunct
Professor, Columbia University Graduate School of Business from 1990 to 1991;
Adjunct Professor, Wharton School, The University of Pennsylvania from 1989 to
1990.
Kevin A. Ryan (66) -- Trustee (2) -- 127 Commonwealth Avenue, Chestnut Hill,
Massachusetts 02167. Founder and current Director of The Boston University
Center for the Advancement of Ethics and Character; Professor of Education at
Boston University since 1982; formerly taught on the faculties of The
University of Chicago, Stanford University and Ohio State University.
Richard R. West (60) -- Trustee (2) -- Box 604, Genoa, Nevada 89411.
Professor of Finance since 1984, and Dean from 1984 to 1993, and currently
Dean Emeritus of New York University, Leonard N. Stern School of Business
Administration; Director of Bowne & Co., Inc., Vornado Realty Trust, Inc.,
Vornado Operating Company and Alexander's Inc.
Arthur Zeikel (66) -- Trustee (1)(2) -- 300 Woodland Avenue, Westfield, New
Jersey 07090. Chairman of the Manager and MLAM from 1997 to 1999 and President
thereof from 1977 to 1997; Chairman of Princeton Services from 1997 to 1999,
Director thereof from 1993 to 1999 and President thereof from 1993 to 1997;
Executive Vice President of Merrill Lynch & Co., Inc. ("ML & Co.") from 1990
to 1999.
7
<PAGE>
Joseph T. Monagle, Jr. (50) -- Senior Vice President (1)(2) -- Senior Vice
President of the Manager and MLAM since 1990; Department Head of the Global
Fixed Income Division of the Manager and MLAM since 1997; Senior Vice
President of Princeton Services since 1993.
Kevin J. McKenna (42) -- Senior Vice President (1)(2) -- Vice President of
MLAM since 1995.
Robert Sabatino (26) -- Vice President and Portfolio Manager (1)(2) -- Vice
President of MLAM since 1998; employed by MLAM since 1995.
Donald C. Burke (39) -- Senior Vice President and Treasurer (1)(2)--Senior
Vice President and Treasurer of the Manager and MLAM since 1999; Senior Vice
President and Treasurer of Princeton Services since 1999; Vice President of
PFD since 1999; First Vice President of MLAM from 1997 to 1999; Vice President
of MLAM from 1990 to 1997; Director of Taxation of MLAM since 1990.
Ira Shapiro (36) -- Secretary (1)(2) -- First Vice President of MLAM since
1997; Director (Legal Advisory) of the Manager and MLAM from 1997 to 1998;
Vice President of the Manager and MLAM from 1996 to 1997; Attorney with the
Manager and MLAM from 1993 to 1996.
- ----------
(1) Interested person, as defined in the Investment Company Act, of the Fund.
(2) Such Trustee or officer is a director, trustee or officer of certain
other investment companies for which MLAM or FAM acts as the investment
adviser or manager.
As of June 1, 1999, the Trustees and officers of the Fund as a group (12
persons) owned an aggregate of less than 1% of the outstanding shares of the
Fund. At such date, Mr. Zeikel, a Trustee of the Fund, Mr. Glenn, a Trustee
and officer of the Fund, and the other officers of the Fund owned an aggregate
of less than 1% of the outstanding shares of common stock of ML & Co.
Compensation of Trustees
The Fund pays each non-interested Trustee a fee of $4,500 per year plus $400
per meeting attended. The Fund also compensates members of its Audit and
Nominating Committee (the "Committee"), which consists of all the non-
interested Trustees, a fee of $1,400 per year. The Fund pays the Chairman of
the Committee an additional fee of $1,000 per year. The Fund reimburses each
non-interested Trustee for his out-of-pocket expenses relating to attendance
at Board and Committee meetings.
The following table shows the compensation earned by the non-interested
Trustees for the fiscal year ended February 28, 1999 and also the aggregate
compensation paid to them from all registered investment companies advised by
the Manager and its affiliate, MLAM ("FAM/MLAM-advised funds"), for the
calendar year ended December 31, 1998.
<TABLE>
<CAPTION>
Aggregate
Pension or Estimated Compensation from
Position Retirement Benefits Annual Fund and Other
with Compensation Accrued as Part of Benefits upon FAM/MLAM-
Name Fund from Fund Fund Expense Retirement Advised Funds(1)
- ---- -------- ------------ ------------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
Ronald W. Forbes(1)..... Trustee $7,500 None None $192,567
Cynthia A.
Montgomery(1).......... Trustee $7,500 None None $192,567
Charles C. Reilly(1).... Trustee $8,500 None None $362,858
Kevin A. Ryan(1)........ Trustee $7,500 None None $192,567
Richard R. West(1)...... Trustee $7,500 None None $346,125
</TABLE>
- ----------
(1) The Trustees serve on the boards of FAM/MLAM-advised funds as follows:
Mr. Forbes (38 registered investment companies consisting of 51
portfolios); Ms. Montgomery (38 registered investment companies
consisting of 51 portfolios); Mr. Reilly (57 registered investment
companies consisting of 70 portfolios); Mr. Ryan (38 registered
investment companies consisting of 51 portfolios); and Mr. West (58
registered investment companies consisting of 79 portfolios).
Trustees of the Fund, members of the Boards of other FAM-advised investment
companies, ML & Co. and its subsidiaries (the term "subsidiaries," when used
herein with respect to ML & Co., includes FAM, MLAM and certain other entities
directly or indirectly wholly owned and controlled by ML & Co.) and their
trustees/directors and employees and any trust, pension, profit-sharing or
other benefit plan for such persons, may purchase shares of the Fund at net
asset value. The Fund realizes economies of scale and reduction of sales-
related expenses by virtue of the familiarity of these persons with the Fund.
Employees and directors or trustees wishing to purchase shares of the Fund
must satisfy the Fund's suitability standards.
8
<PAGE>
Management and Advisory Arrangements
Management Services. Subject to the supervision of the Board of Trustees,
the Manager performs, or arranges for affiliates to perform, pursuant to the
Management Agreement, the management and administrative services necessary for
the operation of the Fund. The Manager and its affiliates will provide a
variety of administrative and operational services to shareholders of the
Fund, including processing services related to the purchase and redemption of
shares and the general handling of shareholder relations. The Manager is
responsible for the actual management of the Fund's portfolio and constantly
reviews the Fund's holdings in light of its own research analysis and that
from other relevant sources. The responsibility for making decisions to buy,
sell or hold a particular security rests with the Manager, subject to review
by the Trustees. The Manager provides the Fund with office space, equipment
and facilities and such other services as the Manager, subject to supervision
and review by the Trustees, shall from time to time determine to be necessary
to perform its obligations under the Management Agreement.
Securities held by the Fund also may be held by, or be appropriate
investments for, other funds or clients (collectively referred to as
"clients") for which the Manager or MLAM acts as an investment adviser.
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 Fund or other clients
arise for consideration at or about the same time, transactions in such
securities will be made, insofar as feasible, for the respective funds and
clients in a manner deemed equitable to all by the Manager or MLAM. To the
extent that transactions on behalf of more than one client of the Manager or
MLAM during the same period may increase the demand for securities being
purchased or the supply of securities being sold, there may be an adverse
effect on price.
Management Fee. The Fund entered into a management agreement with the
Manager (the "Management Agreement"), pursuant to which the Manager receives
for its services to the Fund monthly compensation 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........... 0.425%
In excess of $1 billion.......................................... 0.375%
</TABLE>
The table below sets forth information about the total management fees
payable by the Fund to the Manager for the periods indicated.
<TABLE>
<CAPTION>
Fiscal Year Ended February 28, Management Fee
------------------------------ --------------
<S> <C>
1999....................................................... $9,962,574
1998....................................................... $9,293,428
1997....................................................... $8,657,674
</TABLE>
In the interest of minimizing the expenses of the Fund, the Manager has
agreed voluntarily to assume a portion of the expenses of the Fund. The
Manager may discontinue or reduce such assumption of expenses at any time
without notice. For the fiscal years ended February 28, 1999, February 28,
1998 and February 29, 1997, the Manager waived $768,507, $898,221 and
$830,366, respectively, to the Fund pursuant to such arrangement.
Payment of Fund Expenses. The Management Agreement obligates the Manager to
provide management services and to pay all compensation of and furnish office
space for officers and employees of the Fund connected with investment and
economic research, trading and investment management of the Fund, as well as
the fees of all Trustees of the Fund who are affiliated persons of ML & Co. or
any of its affiliates. The Fund pays all other expenses incurred in the
operation of the Fund, including among other things: taxes, expenses for legal
and auditing services, costs of printing proxies, stock certificates,
shareholder reports, prospectuses and statements of additional information,
except to the extent paid by the distributors; charges of the custodian and
the transfer agent;
9
<PAGE>
expenses of redemption of shares; Commission fees; expenses of registering the
shares under Federal and state securities laws; fees and expenses of
unaffiliated Trustees; accounting and pricing costs (including the daily
calculations of net asset value); insurance; interest; brokerage costs;
litigation and other extraordinary or non-recurring expenses; and other
expenses properly payable by the Fund. Accounting services are provided for
the Fund by the Manager and the Fund reimburses the Manager for its costs in
connection with such services. Merrill Lynch and Broadcort will also pay for
other supplementary sales literature.
For information as to the distribution fee paid by the Fund to Merrill Lynch
and Broadcort pursuant to the Distribution Agreement, see "Purchase of Shares"
below.
Organization of the Manager. The Manager is a limited partnership, the
partners of which are ML & Co., a financial services holding company and the
parent of Merrill Lynch, and Princeton Services. ML & Co. and Princeton
Services are "controlling persons" of the Manager as defined under the
Investment Company Act because of their ownership of its voting securities or
their power to exercise a controlling influence over its management or
policies.
Duration and Termination. Unless earlier terminated as described herein, the
Management Agreement will continue in effect from year to year if approved
annually (a) by the Board of Trustees of the Fund or by a majority of the
outstanding shares of the Fund and (b) by a majority of the Trustees who are
not parties to such contract or interested persons (as defined in the
Investment Company Act) of any such party. Such agreement terminates upon
assignment and may be terminated without penalty on 60 days' written notice at
the option of either party thereto or by vote of the shareholders of the Fund.
Transfer Agency Services. Financial Data Services, Inc. (the "Transfer
Agent"), a subsidiary of ML & Co., acts as the Fund'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 $10.00 per
account and is entitled to reimbursement from the Fund for certain transaction
charges and out-of-pocket expenses incurred by it under the Transfer Agency
Agreement. Additionally, a $.20 monthly closed account charge will be assessed
on all accounts which close during the calendar year. Application of this fee
will commence the month following the month the account is closed. At the end
of the calendar year, no further fees will be due. For purposes of the
Transfer Agency Agreement, the term "account" includes a shareholder account
maintained directly by the Transfer Agent and any other account representing
the beneficial interest of a person in the relevant share class on a
recordkeeping system, provided the recordkeeping system is maintained by a
subsidiary of ML & Co.
Code of Ethics
The Board of Trustees of the Fund has adopted a Code of Ethics under Rule
17j-1 under the Investment Company Act which incorporates the Code of Ethics
of the Manager (together, the "Codes"). The Codes significantly restrict the
personal investing activities of all employees of the Manager and, as
described below, impose additional, more onerous, restrictions on Fund
investment personnel.
The Codes require that all employees of the Manager pre-clear any personal
securities investment (with limited exceptions, such as government
securities). The pre-clearance requirement and associated procedures are
designed to identify any substantive prohibition or limitation applicable to
the proposed investment. The substantive restrictions applicable to all
employees of the Manager include a ban on acquiring any securities in a "hot"
initial public offering and a prohibition from profiting on short-term trading
in securities. In addition, no employee may purchase or sell any security that
at the time is being purchased or sold (as the case may be), or to the
knowledge of the employee is being considered for purchase or sale, by any
fund advised by the Manager. Furthermore, the Codes provide for trading
"blackout periods" which prohibit trading by investment personnel of the Trust
within periods of trading by the Fund in the same (or equivalent) security (15
or 30 days depending upon the transaction).
10
<PAGE>
PURCHASE OF SHARES
Reference is made to "How to Buy, Sell and Transfer Shares" in the
Prospectus.
The Fund is offering its shares without sales charge at a public offering
price equal to the net asset value (normally $1.00 per share) next determined
after receipt by the Fund of the purchase order. Shares purchased will receive
the next dividend declared after the shares are issued, which will be
immediately prior to the 12 noon, New York time, pricing on the following
business day. A purchase order will not become effective until cash in the
form of Federal funds becomes available to the Fund (see below for information
as to when the Fund receives such funds). Purchases of shares will be made
pursuant to the procedures described below.
Purchase of Shares by Service Subscribers
Automatic Purchases. Cash balances arising in the Securities Account of a
Service subscriber are automatically invested in shares of the Fund not later
than the first business day of each week on which both the New York Stock
Exchange and New York banks are open, which normally will be Monday (except
cash balances in the Securities Account of a Medical Savings Account service
subscriber are automatically invested the next business day after they are
received). Subscribers to a Service also are able to have free credit balances
deposited in money market deposit accounts maintained with depository
institutions. This Prospectus does not purport to describe such Services and
prospective participants in such Services are referred to the brochure which
is available with respect thereto. Cash balances may arise from securities
activity in the Securities Account, dividend and interest payments or cash
deposits made by the subscriber. Cash balances arising from the following
transactions will be automatically invested prior to the automatic weekly
sweeps. Cash balances arising from the sale of securities which do not settle
on the day of the transactions (such as most common and preferred stock
transactions) and from principal repayment on debt securities become available
to the Fund and will be invested in shares on the business day following
receipt of the proceeds with respect thereto in the subscriber's Service
account. Proceeds from the sale of shares of Merrill Lynch Ready Assets Trust
and Merrill Lynch U.S.A. Government Reserves, and from the sale of securities
settling on a same day basis also become available to the Fund and will be
invested in shares on the next business day following receipt. A Service
subscriber desiring to effect a purchase order for Fund shares by making a cash
deposit in his Securities Account should make such deposit on the business day
preceding the day of the weekly sweep before the cashiering deadline of the
brokerage office in which the deposit is to be made in order for such cash
deposit to be invested in Fund shares through the weekly sweep. A subscriber
desiring to make a cash deposit should contact his financial consultant or
registered representative for information concerning the cashiering deadline of
his local brokerage office.
Manual Purchases. Subscribers to a Service may make manual investments of
$1,000 or more at any time in shares of the Fund. Manual investments may be
made from cash balances in the subscriber's Securities Account that arise from
cash deposits or other activity. Manual purchases shall be effective on the
day following the day the order is placed from Merrill Lynch or the selected
dealer except that orders involving cash deposits become effective on the
second business day thereafter if they are placed after the cashiering
deadline referred to in the preceding paragraph. In addition, manual purchases
of $500,000 or more can be made effective on the same day the order is placed
with Merrill Lynch provided that requirements as to timely notification and
transfer of a Federal funds wire in the proper amount are met. Fund customers
desiring further information on this method of purchasing shares should
contact their Financial Consultants.
Merrill Lynch, Broadcort and the selected dealers reserve the right to
terminate a subscriber's participation in a respective Service for any reason.
All purchases of Fund shares and dividend reinvestments will be confirmed to
Service subscribers (rounded to the nearest share) in the transaction
statement which is sent to all participants in such Accounts monthly.
Individuals who purchase shares of the Fund through a Securities Account
will be subject to the applicable annual program participation fee. In order
to receive all the services available to Service subscribers, such individuals
must complete the account opening process, including completing or supplying
requested documentation. Individuals who subscribe to the Life Management
ServiceSM will receive a full rebate of their annual program participation fee
if they meet certain conditions, as described in more detail in the Life
11
<PAGE>
Management Service(SM) program description booklet. Individuals who subscribe to
the Merrill Lynch Emerging Investor Accounts(SM) service will have their annual
program participation fee waived if they meet certain conditions, as described
in more detail in the Merrill Lynch Emerging Investor Account(SM) program
brochure.
Merrill Lynch (or Broadcort if applicable) will transmit payment to the Fund
on behalf of the investor and will supply the Fund with the required account
information. If the investor can provide Merrill Lynch (or Broadcort if
applicable) with immediately available funds, Merrill Lynch (or Broadcort if
applicable) will be able to transmit such funds to the Fund in an expeditious
manner. Since there is a three-day settlement period applicable to the sale of
most securities, delays may occur when an investor is liquidating other
investments for investment in the Fund.
Purchase of Shares by Non-Service Subscribers
Shares of the Fund may be purchased by investors maintaining accounts
directly with the Transfer Agent. Shareholders of the Fund not subscribing to
a Service will not be charged the applicable Service fee but will not receive
any of the additional services available to Service subscribers, such as the
Visa(R) Account or the automatic investment of free credit balances. The
minimum initial purchase for non-Service subscribers is $5,000 and the minimum
subsequent purchase is $1,000. Investors desiring to purchase shares directly
through the Transfer Agent as described below should contact Financial Data
Services, Inc., P.O. Box 45290, Jacksonville, Florida 32239-5290.
Payment to the Transfer Agent. Investors who are not subscribers to a
Service may submit purchase orders directly by mail or otherwise to the
Transfer Agent. Purchase orders by mail should be sent to Financial Data
Services, Inc., P.O. Box 45290, Jacksonville, Florida 32232-5290. Purchase
orders which are sent by hand should be delivered to Financial Data Services,
Inc., 4800 Deer Lake Drive East, Jacksonville, Florida 32246-6484. Investors
opening a new account must enclose a completed Purchase Application which is
available from Financial Data Services, Inc. Existing shareholders should
enclose the detachable stub from a monthly account statement which they have
received. Checks should be made payable to Merrill Lynch, Pierce, Fenner &
Smith Incorporated. Certified checks are not necessary, but checks are
accepted subject to collection at full face value in U.S. funds and must be
drawn in U.S. dollars on a U.S. bank. Payments for the accounts of
corporations, foundations and other organizations may not be made by third
party checks.
The Fund has entered into a distribution agreement with Merrill Lynch, a
wholly-owned subsidiary of ML & Co., and Broadcort (the "Distribution
Agreement"). Broadcort, a wholly-owned subsidiary of Merrill Lynch, conducts a
securities clearing business. Pursuant to the Distribution Agreement, the
shares of the Fund are offered exclusively (i) by Merrill Lynch to subscribers
to the Capital Builder(SM) Account program and the Services, (ii) by Broadcort
to selected dealers for resale to subscribers to the Broadcort Capital Account
program and (iii) to investors maintaining accounts directly with the Transfer
Agent. The Distribution Agreement obligates Merrill Lynch and Broadcort to pay
certain expenses in connection with the offering of the shares of the Fund.
After the prospectuses, statements of additional information and periodic
reports have been prepared, set in type and mailed to shareholders, Merrill
Lynch and Broadcort will pay for the printing and distribution of copies
thereof used in connection with the offering to investors. Merrill Lynch and
Broadcort will also pay for other supplementary sales literature and
advertising costs. The Distribution Agreement is subject to the same renewal
requirements and termination provisions as the Management Agreement described
above.
Distribution Plan
The Fund has also adopted a Distribution and Shareholder Servicing Plan in
compliance with Rule 12b-1 under the Investment Company Act (the "Distribution
Plan") pursuant to which Merrill Lynch and Broadcort receive a distribution
fee under the Distribution Agreement from the Fund at the end of each month at
the annual rate of 0.125% of average daily net assets of the Fund attributable
to subscribers to the Services, to investors maintaining securities accounts
at Merrill Lynch or at firms which use the clearing facilities of Broadcort
who are not subscribers to such programs and to investors maintaining accounts
directly with the Transfer Agent, except that the value of Fund shares in
accounts maintained directly with the Transfer Agent which are not serviced by
Merrill Lynch financial consultants will be excluded. The Distribution Plan
reimburses Merrill Lynch and Broadcort only for actual expenses incurred in
the fiscal year in which the fee is paid. The Merrill Lynch
12
<PAGE>
distribution fee is to compensate Merrill Lynch financial consultants and
other directly involved Merrill Lynch personnel for selling shares of the Fund
and for providing direct personal services to shareholders. The Broadcort
distribution fee is to compensate selected dealers for activities and services
related to the sale, promotion and marketing of shares of the Fund. The
distribution fee is not compensation for the administrative and operational
services rendered to the shareholders by Merrill Lynch which are covered by
the Management Agreement (see "Management of the Fund--Management and Advisory
Arrangements") between the Fund and the Manager. For the fiscal year ended
February 28, 1999, $2,981,064 was paid to Merrill Lynch and Broadcort pursuant
to the Distribution Plan (based on average daily net assets of approximately
$2.4 billion). All of the amounts were allocated to Merrill Lynch and
Broadcort personnel and to related administrative costs.
The payment of the distribution fee under the Distribution Agreement is
subject to the provisions of the Distribution Plan and Rule 12b-1. Among other
things, the Distribution Plan provides that Merrill Lynch and Broadcort shall
each provide and the Trustees of the Fund shall review quarterly reports
regarding the payment of the respective distribution fees during such period.
In their consideration of the Distribution Plan, the Trustees must consider
all factors they deem relevant, including information as to the benefits of
the Distribution Plan to the Fund and its shareholders. The Distribution Plan
further provides that, so long as the Distribution Plan remains in effect, the
selection and nomination of Trustees of the Fund who are not "interested
persons" of the Fund as defined in the Investment Company Act ("Independent
Trustees") shall be committed to the discretion of the Independent Trustees
then in office. The Distribution Plan can be terminated at any time, without
penalty, by the vote of a majority of the Independent Trustees or by the vote
of the holders of a majority of the outstanding voting securities of the Fund.
Finally, the Distribution Plan cannot be amended to increase materially the
amount to be spent by the Fund thereunder without shareholder approval, and
all material amendments are required to be approved by vote of the Trustees of
the Fund, including a majority of the Independent Trustees, cast in person at
a meeting called for that purpose.
REDEMPTION OF SHARES
Reference is made to "How to Buy, Sell and Transfer Shares" in the
Prospectus.
The Fund is required to redeem for cash all full and fractional shares of
the Fund. The redemption price is the net asset value per share next
determined after receipt by the Transfer Agent of proper notice of redemption
as described in accordance with either the automatic or manual procedures set
forth below. If notice is received by the Transfer Agent prior to the 12 noon,
New York time, pricing on any business day, the redemption will be effective
on that day. If the notice is received after 12 noon, New York time, the
redemption will be effective on the next business day. Payment of the
redemption proceeds will be made on the same day the redemption becomes
effective.
Redemption of Shares by Service Subscribers
Automatic Redemptions. Redemptions will be automatically effected by Merrill
Lynch or Broadcort to satisfy debit balances in the Securities Account created
by activity therein or to satisfy debit balances created by Visa(R) card
purchases, cash advances or checks written against the Visa(R) Account. Each
Securities Account of a Service subscriber will be automatically scanned for
debits each business day prior to 12 noon, New York time. After application of
any cash balances in the account to these debits, shares of the Fund will be
redeemed at net asset value at the 12 noon, New York time, pricing to the
extent necessary to satisfy any remaining debits in either the Securities
Account or the Visa(R) Account. If the Securities Account is a margin account,
margin loans will be utilized to satisfy debits remaining after the
liquidation of all funds invested in the Fund, and shares of the Fund may not
be purchased until all debits and margin loans in a subscriber's Service
account are satisfied.
Manual Redemptions. Shareholders may redeem shares of the Fund directly by
submitting a written notice of redemption directly to Merrill Lynch or the
selected dealer, respectively, which will submit the requests to the Fund's
Transfer Agent. Cash proceeds from the manual redemption of the Fund shares
ordinarily will be mailed to the shareholder at his address of record, or upon
request, mailed or wired (if $10,000 or more) to his bank account. Redemption
requests should not be sent to the Fund or the Transfer Agent. If
inadvertently sent to the Fund or the Transfer Agent, they will be forwarded
to Merrill Lynch or Broadcort. The notice requires the
13
<PAGE>
signatures of all persons in whose name the shares are registered, signed
exactly as their names appear on their statements. Shareholders desiring to
effect manual redemptions should contact their financial consultant or
registered representative.
All redemptions of Fund shares will be confirmed to Service subscribers
(rounded to the nearest share) in the transaction statement which is sent to
all participants in such Services monthly.
Redemption of Shares by Non-Service Subscribers
Shareholders may redeem shares of the Fund held in a Merrill Lynch
securities account directly by submitting a written notice of redemption
directly to Merrill Lynch, which will submit the requests to the Fund's
Transfer Agent as described above under "Redemption of Shares--Redemption of
Shares by Service Subscribers--Manual Redemptions."
Shareholders maintaining an account directly with the Transfer Agent may
redeem shares of the Fund directly by submitting a written notice by mail
directly to the Transfer Agent, Financial Data Services, Inc., P.O. Box 45290,
Jacksonville, Florida 32232-5290. Redemption requests which are sent by hand
should be delivered to Financial Data Services, Inc., 4800 Deer Lake Drive
East, Jacksonville, Florida 32246-6484. Cash proceeds from the manual
redemption of Fund shares will be mailed to the shareholder at his address of
record. Redemption requests should not be sent to the Fund or Merrill Lynch.
If inadvertently sent to the Fund or Merrill Lynch, such redemption requests
will be forwarded to the Transfer Agent. The notice requires the signatures of
all persons in whose name the shares are registered, signed exactly as their
names appear on their monthly statement. The signature(s) on the redemption
request must be guaranteed by an "eligible guarantor institution" as such is
defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, the
existence and validity of which may be verified by the Transfer Agent through
the use of industry publications. Notarized signatures are not sufficient. In
certain instances, additional documents such as, but not limited to, trust
instruments, death certificates, appointments as executor or administrator, or
certificates of corporate authority may be required.
The right to receive payment with respect to any redemption of Fund shares
may be suspended by the Fund for a period of up to seven days. Suspensions of
more than seven days may not be made except (1) for any period (A) during
which the New York Stock Exchange ("NYSE") is closed other than customary
weekend and holiday closings or (B) during which trading on the NYSE is
restricted; (2) for any period during which an emergency exists as a result of
which (A) disposal by the Fund of securities owned by it is not reasonably
practicable or (B) it is not reasonably practicable for the Fund fairly to
determine the value of its net assets; or (3) for such other periods as the
Commission may by order permit for the protection of security holders of the
Fund. The Commission shall by rules and regulations determine the conditions
under which (i) trading shall be deemed to be restricted and (ii) an emergency
shall be deemed to exist within the meaning of clause (2) above.
The value of Fund shares at the time of redemption may be more or less than
the shareholder's cost, depending on the market value of the securities held
by the Fund at any such time.
At various times the Fund may be requested to redeem shares in manual or
automatic redemptions with respect to which good payment for shares purchased
has not yet been received by Merrill Lynch or the selected dealer. The Fund
may delay, or cause to be delayed, the payment of the redemption proceeds
until such time as good payment has been collected for the purchase of such
shares. Normally, this delay will not exceed 10 days.
DETERMINATION OF NET ASSET VALUE
The net asset value of the Fund is determined by the Manager at 12 noon, New
York time, on each business day the NYSE or New York banks are open for
business. As a result of this procedure, the net asset value is determined
each day except for days on which both the NYSE and New York banks are closed.
Both the NYSE and New York banks are closed on New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. The net asset value is determined under
the "penny-rounding" method by adding the value of all securities and other
assets in the portfolio, deducting the portfolio's liabilities, dividing by
the number of shares outstanding and rounding the result to the nearest whole
cent.
14
<PAGE>
The Fund values its portfolio securities with remaining maturities of 60
days or less on an amortized cost basis and values its securities with
remaining maturities of greater than 60 days for which market quotations are
readily available at market value. Other securities held by the Fund are
valued at their fair value as determined in good faith by or under the
direction of the Board of Trustees.
In accordance with the Commission rule applicable to the valuation of its
portfolio securities, the Fund will maintain a dollar-weighted average
portfolio maturity of 90 days or less and will purchase instruments having
remaining maturities of not more than 397 days (13 months), with the exception
of Government Securities, which may have remaining maturities of up to 762
days (25 months). The Fund will invest only in securities determined by the
Trustees to be of high quality with minimal credit risks. In addition, the
Trustees have established procedures designed to stabilize, to the extent
reasonably possible, the Trust's price per share as computed for the purpose
of sales and redemptions at $1.00. Deviations of more than an insignificant
amount between the net asset value calculated using market quotations and that
calculated on a "penny-rounded" basis will be reported to the Trustees by the
Manager. In the event the Trustees determine that a deviation exists which may
result in material dilution or other unfair results to investors or existing
shareholders, the Fund will take such corrective action as it regards as
necessary and appropriate, including the reduction of the number of
outstanding shares of the Fund by having each shareholder proportionately
contribute shares to the Fund's capital; the sale of portfolio instruments
prior to maturity to realize capital gains or losses or to shorten average
portfolio maturity; withholding dividends; or establishing a net asset value
per share solely by using available market quotations. If the number of
outstanding shares is reduced in order to maintain a constant penny-rounded
net asset value of $1.00 per share, the shareholders will contribute
proportionately to the Fund's capital. Each shareholder will be deemed to have
agreed to such contribution by his or her investment in the Fund.
Since the net income of the Fund is determined and declared as a dividend
immediately prior to each time the net asset value of the Fund is determined,
the net asset value per share of the Fund normally remains at $1.00 per share
immediately after each such dividend declaration. Any increase in the value of
a shareholder's investment in the Fund, representing the reinvestment of
dividend income, is reflected by an increase in the number of shares of the
Fund in his or her account and any decrease in the value of a shareholder's
investment may be reflected by a decrease in the number of shares in his or
her account. See "Dividends and Taxes."
YIELD INFORMATION
The Fund normally computes its annualized yield by determining the net
income for a seven-day base period for a hypothetical pre-existing account
having a balance of one share at the beginning of the base period, dividing
the net income by the net asset value of the account at the beginning of the
base period to obtain the base period return, multiplying the result by 365
and then dividing by seven. Under this calculation, the yield on Fund shares
does not reflect realized gains and losses on portfolio securities. In
accordance with regulations adopted by the Commission, the Fund is required to
disclose its annualized yield for certain seven-day base periods in a
standardized manner that does not take into consideration any realized or
unrealized gains or losses on portfolio securities. The Commission also
permits the calculation of a standardized effective or compounded yield. This
is computed by compounding the unannualized base period return, which is done
by adding one to the base period return, raising the sum to a power equal to
365 divided by seven, and subtracting one from the result. This compound yield
calculation also reflects realized gains or losses on portfolio securities.
The yield on the Fund's shares normally will fluctuate on a daily basis.
Therefore, the yield for any given past period is not an indication or
representation by the Fund of future yields or rates of return on its shares.
The yield is affected by such factors as changes in interest rates on the
Fund's portfolio securities, average portfolio maturity, the types and quality
of portfolio securities held and operating expenses.
<TABLE>
<CAPTION>
Seven-Day Period Ended February 28, 1999
----------------------------------------
<S> <C>
Excluding gains and losses.......................................... 4.33%
</TABLE>
On occasion, the Fund may compare its yield to (i) industry averages
compiled by IBC's Money Fund Report, a widely recognized independent
publication that monitors the performance of money market mutual funds,
(ii) the average yield reported by the Bank Rate Monitor National Index(TM)
for money market deposit accounts offered by
15
<PAGE>
the 100 leading banks and thrift institutions in the ten largest standard
metropolitan statistical areas, (iii) yield data published by Lipper
Analytical Services, Inc., (iv) the yield on an investment in 90-day Treasury
bills on a rolling basis, assuming quarterly compounding or (v) performance
data published by Morningstar Publications, Inc., Money Magazine, U.S. News &
World Report, Business Week, CDA Investment Technology, Inc., Forbes Magazine
and Fortune Magazine. As with yield quotations, yield comparisons should not
be considered indicative of the Fund's yield or relative performance for any
future period.
PORTFOLIO TRANSACTIONS
The Fund 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 and officers of the Fund, the Manager is
primarily responsible for the Fund's portfolio decisions and the placing of
portfolio transactions. In placing orders, it is the policy of the Fund 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 Fund will
not necessarily be paying the lowest spread or commission available. The
Fund's policy of investing in securities with short maturities will result in
high portfolio turnover.
The money market securities in which the Fund 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 Fund will
deal directly with the dealers who make a market in the securities involved
except in those circumstances where better prices and execution are available
elsewhere. Such dealers usually are acting as principals for their own
accounts. On occasion, securities may be purchased directly from the issuer.
The money market securities in which the Fund invests are generally traded on
a net basis and do not normally involve either brokerage commissions or
transfer taxes. The cost of executing portfolio securities transactions of the
Fund primarily will consist of dealer spreads. Under the Investment Company
Act, persons affiliated with the Fund are prohibited from dealing with the
Fund as principals in the purchase and sale of securities unless an exemptive
order allowing such transactions is obtained from the Commission. Since OTC
transactions are usually principal transactions, affiliated persons of the
Fund, including Merrill Lynch Government Securities, Inc. ("GSI") and Merrill
Lynch, may not serve as the Fund's dealer in connection with such transactions
except pursuant to the exemptive order described below. However, an affiliated
person of the Fund may serve as its broker in OTC transactions conducted on an
agency basis. The Fund may not purchase securities from any underwriting
syndicate of which Merrill Lynch is a member, except in accordance with
applicable rules under the Investment Company Act.
The Commission has issued an exemptive order permitting all Merrill Lynch-
sponsored money market funds, including the Fund, to conduct principal
transactions with GSI in U.S. Government and U.S. Government agency
securities, with Merrill Lynch Money Markets Inc. ("MMI"), a subsidiary of
GSI, in certificates of deposit and other short-term money market instruments
and commercial paper and with Merrill Lynch in fixed income securities
including medium-term notes. This order contains a number of conditions,
including conditions designed to insure that the price to the Fund from GSI,
MMI or Merrill Lynch is at least as favorable as that available from other
sources. GSI, MMI and Merrill Lynch have informed the Fund that they will in
no way, at any time, attempt to influence or control the activities of the
Fund or the Manager in placing such principal transactions. The permissive
order allows GSI, MMI or Merrill Lynch to receive a dealer spread on any
transaction with the Fund no greater than its customary dealer spread for
transactions of the type involved. Generally such spreads do not exceed 0.25%
of the principal amount of the securities involved.
The number and dollar volume of transactions engaged in by the Fund are set
forth in the following table:
<TABLE>
<CAPTION>
Fiscal Year Ended February 28, Number Dollar Volume
------------------------------ ------ --------------
<S> <C> <C>
1999............................................... 46 $656.4 million
1998............................................... 40 $559.5 million
1997............................................... 40 $600.6 million
</TABLE>
16
<PAGE>
The Trustees of the Fund have considered the possibilities of recapturing
for the benefit of the Fund expenses of possible portfolio transactions, such
as dealer spreads and underwriting commissions, by conducting such portfolio
transactions through affiliated entities, including GSI, MMI and Merrill
Lynch. For example, dealer spreads received by GSI, MMI or Merrill Lynch on
transactions conducted pursuant to the permissive order described above could
be offset against the management fee payable by the Fund to the Manager. After
considering all factors deemed relevant, the Trustees made a determination not
to seek such recapture. The Trustees will reconsider this matter from time to
time. The Manager has arranged for the Custodian to receive any tender offer
solicitation fees on behalf of the Fund payable with respect to portfolio
securities of the Fund.
The Fund does not expect to use one particular dealer, but, subject to
obtaining the best price and execution, dealers who provide supplemental
investment research (such as information concerning money market securities,
economic data and market forecasts) to the Manager may receive orders for
transactions of the Fund. Information so received will be in addition to and
not in lieu of the services required to be performed by the Manager under the
Management Agreement and the expenses of the Manager will not necessarily be
reduced as a result of the receipt of such supplemental information.
DIVIDENDS AND TAXES
Dividends
Dividends are declared and reinvested daily in the form of additional shares
at net asset value. Shareholders will receive statements monthly as to such
reinvestments. Shareholders liquidating their holdings will receive on
redemption all dividends declared and reinvested through the date of
redemption, except that in those instances where shareholders request
transactions that settle on a "same-day" basis (such as Federal Funds wire
redemptions, branch office checks, transfers to other Merrill Lynch accounts
and certain securities transactions) the Fund shares necessary to effect such
transactions will be deemed to have been transferred to Merrill Lynch prior to
the Fund's declaration of dividends on that day. In such instances,
shareholders will receive all dividends declared and reinvested through the
date immediately preceding the date of redemption. 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 Fund is determined, the net
asset value per share of the Fund normally remains constant at $1.00 per
share.
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 amortization of premiums
and the estimated expenses of the Fund applicable to that dividend period.
Taxes
The Fund intends to continue to qualify for the special tax treatment
afforded regulated investment companies ("RICs") under the Internal Revenue
Code of 1986, as amended (the "Code"). As long as the Fund so qualifies, the
Fund (but not its shareholders) will not be subject to Federal income tax on
the part of its net ordinary income and net realized capital gains which it
distributes to shareholders. The Fund intends to distribute substantially all
of such income.
The Code requires a RIC to pay a nondeductible 4% excise tax to the extent
the RIC does not distribute, during each calendar year, 98% of its ordinary
income, determined on a calendar year basis, and 98% of its capital gains,
determined, in general on an October 31 year end, plus certain undistributed
amounts from previous years. While the Fund intends to distribute its income
and capital gains in the manner necessary to minimize imposition of the 4%
excise tax, there can be no assurance that sufficient amounts of the Fund's
taxable income and capital gains will be distributed to avoid entirely the
imposition of the tax. In such event, the Fund will be liable for the tax only
on the amount by which it does not meet the foregoing distribution
requirements.
Dividends paid by the Fund from its ordinary income or from an excess of net
short-term capital gains over net long-term capital losses (together referred
to hereafter as "ordinary income dividends") are taxable to shareholders as
ordinary income. Distributions made from an excess of net long-term capital
gains over net short-
17
<PAGE>
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 Fund shares. Certain categories of capital gains are taxable at
different rates. Any loss upon the sale or exchange of Fund shares held for
six months or less will be treated as long-term capital loss to the extent of
any capital gain dividends received by the shareholder. Distributions in
excess of the Fund's earnings and profits will first reduce the adjusted tax
basis of a holder's shares and, after such adjusted tax basis is reduced to
zero, will constitute capital gains to such holder (assuming the shares are
held as a capital asset). 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 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 Fund. Distributions by the Fund, whether from
ordinary income or capital gains, will not be eligible for the dividends
received deduction allowed to corporations under the Code. If the Fund pays a
dividend in January that 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 Fund
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 Fund declines, the Board of Trustees may
authorize a reduction in the number of outstanding shares in shareholders'
accounts so as to preserve a net asset value of $1.00 per share. After such a
reduction, the basis of eliminated shares would be added to the basis of
shareholders' remaining Fund shares, and any shareholders disposing of shares
at that time may recognize a capital loss. Dividends, including dividends
reinvested in additional shares of the Fund, will nonetheless be fully
taxable, even if the number of shares in shareholders' accounts has been
reduced as described above.
Ordinary income dividends paid to shareholders who are nonresident aliens or
foreign entities will be subject to a 30% United States withholding tax under
existing provisions of the Code applicable to foreign individuals and entities
unless a reduced rate of withholding or a withholding exemption is provided
under applicable treaty law. Nonresident shareholders are urged to consult
their own tax advisers concerning applicability of the United States
withholding tax.
Dividends and interest received by the Fund may give rise to withholding and
other taxes imposed by foreign countries. Tax conventions between certain
countries and the United States may reduce or eliminate such taxes.
Under certain 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 Fund or who, to the Fund's knowledge, have
furnished an incorrect number. When establishing an account, an investor must
certify under penalty of perjury that such number is correct and that such
investor is not otherwise subject to backup withholding.
A loss realized on a sale or exchange of shares of the Fund will be
disallowed if other Fund shares are acquired (whether through the automatic
reinvestment of dividends or otherwise) within a 61-day period beginning 30
days before and ending 30 days after the date that the shares are disposed of.
In such a case, the basis of the shares acquired will be adjusted to reflect
the disallowed loss.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections
and the Treasury regulations promulgated thereunder. The Code and the Treasury
regulations are subject to change by legislative, judicial or administrative
action either prospectively or retroactively.
Ordinary income and capital gain dividends may also be subject to state and
local taxes.
Certain states exempt from state income taxation dividends paid by RICs
which are derived from interest on United States Government obligations. State
law varies as to whether dividend income attributable to United States
Government obligations is exempt from state income tax.
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 investment in
the Fund.
18
<PAGE>
GENERAL INFORMATION
Description of Shares
The Fund is an unincorporated business trust organized on March 29, 1983
under the laws of Massachusetts. It is a no-load, diversified, open-end
investment company. The Declaration of 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 Fund. Each share represents an equal
proportionate interest in the Fund with each other share. Upon liquidation of
the Fund, shareholders are entitled to share pro rata in the net assets of the
Fund available for distribution to shareholders. Shares have no preemptive or
conversion rights. The rights of redemption are described elsewhere herein.
Shares are fully paid and non-assessable by the Fund.
Shareholders are entitled to one vote for each full share held and
fractional votes for fractional shares held in the election of Trustees (to
the extent hereafter provided) and on other matters submitted to the vote of
shareholders. There will normally be no meetings of shareholders for the
purpose of electing Trustees unless and until such time as less than a
majority of the Trustees holding office have been elected by shareholders, at
which time the Trustees then in office will call a shareholders' meeting for
the election of Trustees. Shareholders may, in accordance with the terms of
the Declaration of Trust, cause a meeting of shareholders to be held for the
purpose of voting on the removal of Trustees. 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 the Trustees of
the Fund, in which event the holders of the remaining shares are unable to
elect any person as a Trustee. No amendment may be made to the Declaration of
Trust without the affirmative vote of a majority of the outstanding shares of
the Fund except under certain limited circumstances set forth in the
Declaration of Trust.
Independent Auditors
Deloitte & Touche LLP, 117 Campus Drive, Princeton, New Jersey 08540-6400,
has been selected as the independent auditors of the Fund. The selection of
independent auditors is subject to approval by the non-interested Trustees of
the Fund. The independent auditors are responsible for auditing the annual
financial statements of the Fund.
Custodian
State Street Bank and Trust Company, P.O. Box 1713, Boston, Massachusetts
02101 (the "Custodian"), acts as custodian of the Fund's assets. The Custodian
is responsible for safeguarding and controlling the Fund's cash and
securities, handling the receipt and delivery of securities and collecting
interest and dividends on the Fund's investments.
Transfer Agent
Financial Data Services, Inc., 4800 Deer Lake Drive East, Jacksonville,
Florida 32246-6484, acts as the Fund's Transfer Agent. The Transfer Agent is
responsible for the issuance, transfer and redemption of shares and the
opening, maintenance and servicing of shareholder accounts. See "How to Buy,
Sell and Transfer Shares --Through the Transfer Agent" in the Prospectus.
Legal Counsel
Brown & Wood LLP, One World Trade Center, New York, New York 10048-0557, is
counsel for the Fund.
Reports to Shareholders
The fiscal year of the Fund ends on the last day of February of each year.
The Fund sends to its shareholders, at least semi-annually, reports showing
the Fund's portfolio and other information. An annual report, containing
financial statements audited by independent auditors, is sent to shareholders
each year.
19
<PAGE>
Shareholder Inquiries
Shareholder inquiries may be addressed to the Fund at the address or
telephone number set forth on the cover page of this Statement of Additional
Information.
Additional Information
The Prospectus and this Statement of Additional Information with respect to
the shares of the Fund do not contain all the information set forth in the
Registration Statement and the exhibits relating thereto, which the Fund has
filed with the Securities and Exchange Commission, Washington, D.C., under the
Securities Act of 1933, as amended and the Investment Company Act, to which
reference is hereby made.
The Capital Builder(SM) Account is also marketed by Merrill Lynch under the
registered service mark "CBA." The Life Management Service(SM) is also marketed
by Merrill Lynch under the registered service mark "LMS."
The Declaration of Trust establishing the Fund, as amended (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth
of Massachusetts. The Declaration provides that the name "CBA Money Fund"
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 Fund shall be held to any personal liability, nor shall resort
be had to their private property for the satisfaction of any obligation or
claim or otherwise in connection with the affairs of said Fund but the Trust
Property only shall be liable.
FINANCIAL STATEMENTS
The Fund's audited financial statements are incorporated in this Statement
of Additional Information by reference to its 1999 annual report to
shareholders. You may request a copy of the annual report at no charge by
calling (800) 221-7210 between 8:00 a.m. and 8:00 p.m. on any business day.
20
<PAGE>
APPENDIX
Description of Commercial Paper, Bank Money Instruments
and Corporate Bond Ratings
Commercial Paper and Bank Money Instruments
Commercial paper with the greatest capacity for timely payment is rated A by
Standard & Poor's, a Division of The McGraw-Hill Companies, Inc. ("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; and 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 repayment ability of
rated issuers. Prime-1 issuers have a superior capacity for repayment. Prime-2
issuers have a strong capacity for repayment, but to a lesser degree than
Prime-1.
Fitch IBCA, Inc. ("Fitch") employs the rating F1+ to indicate issues
regarded as having the strongest degree of assurance for timely payment. The
rating F1 reflects an assurance of timely payment only slightly less in degree
than issues rated F1+, while the rating F2 indicates a satisfactory degree of
assurance for timely payment, although the margin of safety is not as great as
indicated by the F1+ and F1 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 outstanding, and safety is just below risk-free U.S. Treasury
short-term obligations. Duff 1- indicates high certainty of timely payment.
Duff 2 indicates good certainty of timely payment: liquidity factors and
company fundamentals are sound.
Thomson BankWatch, Inc. ("Thomson") employs the designation TBW-1, TBW-2,
TBW-3 and TBW-4 as ratings for commercial paper, other senior short-term
obligations and deposit obligations of the entities to which the rating has
been assigned. TBW-1 is the highest category and indicates a very high degree
of likelihood that principal and interest will be paid on a timely basis. TBW-
2 is the second highest category and indicates that while the degree of safety
regarding timely repayment of principal and 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 small degree.
Bonds rated Aaa by Moody's are judged to be of the best quality. Interest
payments are protected by a large or by an exceptionally stable margin and
principal is secure. Bonds rated Aa are judged to be of high quality by all
standards. They are rated lower than the best bonds because margins of
protection may not be as large or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the long-
term risks appear somewhat larger than in Aaa securities. Moody's applies
numerical modifiers 1, 2 and 3 in each generic rating classification from Aa
through B in its corporate bond rating system. The modifier 1 indicates that
the security ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that
the issue ranks in the lower end of its generic rating category.
Bonds rated AAA by Fitch are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events. Bonds rated AA are considered to be investment grade and
of very high credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds rated AAA.
I-1
<PAGE>
Bonds rated AAA by Duff & Phelps are deemed to be of the highest credit
quality: the risk factors are negligible, being only slightly more than for
risk-free U.S. Treasury debt. AA indicates high credit quality: protection
factors are strong, and risk is modest but may vary slightly from time to time
because of economic conditions.
Bonds rated AAA by Thomson are accorded the highest rating category which
indicates that the ability to repay principal and interest on a timely basis
is extremely high. AA is the second highest rating category and indicates a
very strong ability to repay principal and interest on a timely basis with
limited incremental risk compared to issues rated in the highest rating
category.
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<PAGE>
CODE #: 10129-06-99
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
1 --Second Amended and Restated Declaration of Trust, dated June 13,
1984.(a)
2 --By-Laws of the Registrant.(a)
3 --None.
4(a) --Management Agreement between Registrant and Fund Asset Management,
L.P.(a)
(b) --Supplement to Management Agreement with Fund Asset Management,
L.P.(b)
5 --Form of Distribution Agreement among Registrant, Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Broadcort Capital Corp. and
form of Selected Dealers Agreement.(a)
6 --None.
7 --Form of Custodian Contract between Registrant and State Street Bank
and Trust Company.(a)
8(a) --Transfer Agency, Shareholder Servicing Agency, and Proxy Agency
Agreement between Registrant and Financial Data Services, Inc.(a)
(b) --Form of Capital Builder SM Account Agreement.(a)
(c) --Form of Broadcort Capital Account Agreement.(a)
9 --Opinion and Consent of Brown & Wood llp, counsel to the Registrant.
10 --Consent of Deloitte & Touche LLP, independent auditors for the
Registrant.
11 --None.
12 --Certificate of Fund Asset Management, L.P.(a)
13 --Form of Distribution and Shareholder Servicing Plan pursuant to Rule
12b-1 among Registrant, Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Broadcort Capital Corp. and form of Distribution
Plan Sub-Agreement.(a)
14 --Financial Data Schedule for the fiscal year ended February 28,
1999.(c)
15 --None.
</TABLE>
- ----------
(a) Filed as an Exhibit to Post-Effective Amendment No. 13 to Registrant's
Registration Statement on Form N-1A on June 27, 1995.
(b) Filed as an Exhibit to Post-Effective Amendment No. 12 to Registrant's
Registration Statement on Form N-1A on June 29, 1994.
(c) Filed as an Exhibit to Post-Effective Amendment No. 17 to Registrant's
Registration Statement on Form N-1A on April 30, 1999.
Item 24. Persons Controlled by or under Common Control with Registrant.
The Registrant is not controlled by, or under common control with, any
person.
Item 25. Indemnification.
Section 5.3 of the Registrant's Declaration of Trust provides as follows:
"The Trust shall indemnify each of its Trustees, officers, employees, and
agents (including persons who serve at its request as directors, officers or
trustees of another organization in which it has any interest as a
shareholder, creditor or otherwise) against all liabilities and expenses
(including amounts paid in satisfaction of judgments, in compromise, as fines
and penalties, and as counsel fees) reasonably incurred by him in connection
with the defense or disposition of any action, suit or other proceeding,
whether civil or criminal, in which he may be involved or with which he may be
threatened, while in office or thereafter, by reason of his being or having
been such a trustee, officer, employee or agent, except with respect to any
matter as to which he shall have been adjudicated to have acted in bad faith,
willful misfeasance, gross negligence or reckless disregard of his duties;
provided, however, that as to any matter disposed of by a compromise payment
by such person, pursuant to a consent decree or otherwise, no indemnification
either for said payment or for any other expenses shall be provided unless the
Trust shall have received a written opinion from independent legal counsel
approved by the Trustees to the effect that if either the matter of willful
misfeasance, gross negligence or reckless disregard of duty, or the matter of
good faith and reasonable belief as to the best interests of the Trust, had
been adjudicated, it would have been adjudicated in
C-1
<PAGE>
favor of such person. The rights accruing to any Person under these provisions
shall not exclude any other right to which he may be lawfully entitled;
provided that no Person may satisfy any right of indemnity or reimbursement
granted herein or in Section 5.1 or to which he may be otherwise entitled
except out of the property of the Trust, and no Shareholder shall be
personally liable to any Person with respect to any claim for indemnity or
reimbursement or otherwise. The Trustees may make advance payments in
connection with indemnification under this Section 5.3, provided that the
indemnified person shall have given a written undertaking to reimburse the
Trust in the event it is subsequently determined that he is not entitled to
such indemnification."
Insofar as the conditional advancing of indemnification monies for actions
based upon 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 to which it is ultimately determined he is entitled to receive from the
Registrant by reason of indemnification; and (iii) (a) such promise must be
secured by a surety bond, other suitable insurance or an equivalent form of
security which assures that any repayments may be obtained by the Registrant
without delay or litigation, which bond, insurance or other form of security
must be provided by the recipient of the advance, or (b) a majority of a
quorum of the Registrant's disinterested, non-party Trustees, or an
independent legal counsel in a written opinion, shall determine, based upon a
review of readily available facts, that the recipient of the advance
ultimately will be found entitled to indemnification.
In Section 10 of the Distribution Agreement relating to the securities being
offered hereby, the Registrant agrees to indemnify the distributors and each
person, if any, who controls the Distributors within the meaning of the
Securities Act of 1933 (the "1933 Act"), against certain types of civil
liabilities arising in connection with the Registration Statement or
Prospectus.
Insofar as indemnification for liabilities arising under the 1933 Act may be
permitted to Trustees, officers and controlling persons of the Registrant and
the principal underwriter pursuant to the foregoing provisions or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the 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 principal underwriter in connection with the
successful defense of any action or proceeding) is asserted by such Trustee,
officer or controlling person or the principal underwriter in connection with
shares being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the 1933 Act and will be governed
by the final adjudication of such issue.
Item 26. Business and Other Connections of the Investment Adviser.
Fund Asset Management, L.P. (the "Manager" or "FAM") acts as the investment
adviser for the following open-end registered investment companies: 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 Corporate High Yield Fund, Inc.,
Merrill Lynch Emerging Tigers Fund, Inc., Merrill Lynch Federal Securities
Trust, Merrill Lynch Funds for Institutions Series, Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, Merrill Lynch Multi-State Municipal
Series Trust, Merrill Lynch Municipal Bond Fund, Inc., Merrill Lynch Phoenix
Fund, Inc., Merrill Lynch Puerto Rico Tax Exempt Fund, Inc., Merrill Lynch
Special Value Fund, Inc., Merrill Lynch World Income Fund, Inc. and The
Municipal Fund Accumulation Program, Inc.; and for the following closed-end
registered investment companies: Apex Municipal Fund, Inc., Corporate High
Yield Fund, Inc., Corporate High Yield Fund II, Inc., Corporate High Yield
Fund III, Inc., Debt Strategies Fund, Inc., Debt Strategies Fund II, Inc.,
Debt Strategies Fund III, 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 California Insured Fund III, Inc., MuniHoldings California
Insured Fund IV, Inc., MuniHoldings Florida Insured Fund, MuniHoldings Florida
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<PAGE>
Insured Fund II, MuniHoldings Florida Insured Fund III, MuniHoldings Florida
Insured Fund IV, MuniHoldings Fund, Inc., MuniHoldings Fund II, Inc.,
MuniHoldings Insured Fund, Inc., MuniHoldings Insured Fund II, Inc.,
MuniHoldings Insured Fund III, Inc., MuniHoldings Michigan Insured Fund, Inc.,
MuniHoldings New Jersey Insured Fund, Inc., MuniHoldings New Jersey Insured
Fund II, Inc., MuniHoldings New Jersey Insured Fund III, Inc., MuniHoldings
New York Fund, Inc., MuniHoldings New York Insured Fund, Inc., MuniHoldings
New York Insured Fund II, Inc., MuniHoldings New York Insured Fund III, Inc.,
MuniHoldings Pennsylvania Insured Fund, MuniInsured Fund, Inc., MuniVest Fund,
Inc., MuniVest Fund II, Inc., MuniVest Florida Fund, MuniVest Michigan Insured
Fund, Inc., MuniVest New Jersey Fund, Inc., MuniVest Pennsylvania Insured
Fund, MuniYield Arizona Fund, Inc., MuniYield California Fund, Inc., MuniYield
California Insured Fund, Inc., MuniYield California Insured Fund II, Inc.,
MuniYield Florida Fund, MuniYield Florida Insured Fund, MuniYield Fund, Inc.,
MuniYield Insured Fund, Inc., MuniYield Michigan Fund, Inc., MuniYield
Michigan Insured Fund, Inc., MuniYield New Jersey Fund, Inc., MuniYield New
Jersey Insured Fund, Inc., MuniYield New York Insured Fund, Inc., MuniYield
New York Insured Fund II, Inc., MuniYield Pennsylvania Fund, MuniYield Quality
Fund, Inc., MuniYield Quality Fund II, Inc., Senior High Income Portfolio,
Inc. and Worldwide DollarVest Fund, Inc.
Merrill Lynch Asset Management, L.P. ("MLAM"), an affiliate of FAM, acts as
investment adviser for the following open-end registered investment companies:
Merrill Lynch Adjustable Rate Securities Fund, Inc., Merrill Lynch Americas
Income Fund, Inc., Merrill Lynch Asset Builder Program, Inc., Merrill Lynch
Asset Growth Fund, Inc., Merrill Lynch Asset Income Fund, Inc., Merrill Lynch
Capital Fund, Inc., Merrill Lynch Convertible Fund, Inc., Merrill Lynch
Developing Capital Markets Fund, Inc., Merrill Lynch Dragon Fund, Inc.,
Merrill Lynch EuroFund, Merrill Lynch Fundamental Growth Fund, Inc., Merrill
Lynch 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 Technology 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 Ready Assets Trust,
Merrill Lynch Retirement Series Trust, Merrill Lynch Series Fund, Inc.,
Merrill Lynch Short-Term Global Income Fund, Inc., Merrill Lynch Strategic
Dividend Fund, Merrill Lynch Technology Fund, Inc., Merrill Lynch U.S.A.
Government Reserves, Merrill Lynch U.S. Treasury Money Fund, Merrill Lynch
Utility Income Fund, Inc., Merrill Lynch Variable Series Fund, Inc., and
Hotchkis and Wiley Funds (advised by Hotchkis and Wiley, a division of MLAM);
and for the following closed-end registered investment companies: Merrill
Lynch High Income Muncipal Bond Fund, Inc., Merrill Lynch Senior Floating Rate
Fund, Inc. and Merrill Lynch Senior Floating Rate Fund II, Inc. MLAM also acts
as sub-adviser to Merrill Lynch World Strategy Portfolio and Merrill Lynch
Basic Value Equity Portfolio, two investment portfolios of EQ Advisors Trust.
The address of each of these investment companies is P.O. Box 9011,
Princeton, New Jersey 08543-9011. The address of Merrill Lynch Funds for
Institutions Series and Merrill Lynch Intermediate Bond Fund is One Financial
Center, 23rd Floor, Boston, Massachusetts 02111-2665. The address of the
Manager, MLAM, Princeton Services, Inc. ("Princeton Services") and Princeton
Administrators, L.P. is also P.O. Box 9011, Princeton, New Jersey 08543-9011.
The address of Merrill Lynch Funds Distributor ("MLFD") is P.O. Box 9081,
Princeton, New Jersey 08543-9081. The address of Merrill Lynch, and Merrill
Lynch & Co., Inc. ("ML & Co.") is North Tower, World Financial Center, 250
Vesey Street, New York, New York 10281-1201. The address of Financial Data
Services, Inc. ("FDS") is 4800 Deer Lake Drive East, Jacksonville, Florida
32246-6484.
Set forth below is a list of each executive officer and partner of the
Manager indicating each business, profession, vocation or employment of a
substantial nature in which each such person or entity has been engaged since
March 1, 1997 for his, her or its own account or in the capacity of director,
officer, employee, partner or trustee. In addition, Mr. Glenn is President and
Mr. Burke is Vice President and Treasurer of all or substantially all of the
investment companies listed in the first two paragraphs of this Item 26.
Messrs. Glenn and Burke also hold the same position with substantially all of
the investment companies advised by MLAM as they do with those advised by the
Manager and Messrs. Giordano and Monagle are officers or directors/trustees of
one or more of such companies.
C-3
<PAGE>
<TABLE>
<CAPTION>
Position(s) with the Other Substantial Business,
Name Manager Profession, Vocation or Employment
- ---- -------------------- ----------------------------------
<S> <C> <C>
ML & Co. ............... Limited Partner Financial Services Holding Company; Limited
Partner of MLAM
Princeton Services...... General Partner General Partner of MLAM
Jeffrey M. Peek......... President President of MLAM; President and Director of
Princeton Services; Executive Vice
President of ML & Co.; Managing Director
and Co-Head of the Investment Banking
Division of Merrill Lynch in 1997; Senior
Vice President and Director of the Global
Securities and Economics Division of
Merrill Lynch from 1995 to 1997
Terry K. Glenn.......... Executive Vice Executive Vice President of MLAM; Executive
President Vice President and Director of Princeton
Services; President of Princeton Funds
Distributor, Inc. since 1986 and Director
thereof since 1991; Director of FDS;
President of Princeton Administrators, L.P.
Donald C. Burke......... Senior Vice Senior Vice President, Treasurer and
President and Director of Taxation of MLAM; Senior Vice
Treasurer President and Treasurer of Princeton
Services; Vice President of PFD; First Vice
President of MLAM from 1997 to 1999; Vice
President of MLAM from 1990 to 1997
Michael G. Clark........ Senior Vice Senior Vice President of MLAM; Senior Vice
President President of Princeton Services; Treasurer
and Director of PFD; First Vice President
of MLAM from 1997 to 1999; Vice President
of MLAM from 1996 to 1997
Mark A. Desario......... Senior Vice Senior Vice President of MLAM; Senior Vice
President President of Princeton Services
Linda L. Federici....... Senior Vice Senior Vice President of MLAM; Senior Vice
President President of Princeton Services
Vincent R. Giordano..... Senior Vice Senior Vice President of MLAM; Senior Vice
President President of Princeton Services
Michael J. Hennewinkel.. Senior Vice Senior Vice President, General Counsel and
President, General Secretary of MLAM; Senior Vice President of
Counsel and Princeton Services
Secretary
Philip L. Kirstein...... Senior Vice Senior Vice President of MLAM; Senior Vice
President President, Director and Secretary of
Princeton Services
Ronald M. Kloss......... Senior Vice Senior Vice President of MLAM; Senior Vice
President President of Princeton Services
Debra W. Landsman-
Yaros.................. Senior Vice Senior Vice President of MLAM; Senior Vice
President President of Princeton Services; Senior
Vice President of PFD
Joseph T. Monagle, Jr... Senior Vice Senior Vice President of MLAM; Senior Vice
President President of Princeton Services
Brian A. Murdock........ Senior Vice Senior Vice President of MLAM; Senior Vice
President President of Princeton Services; Director
of PFD
Gregory D. Upah......... Senior Vice Senior Vice President of MLAM; Senior Vice
President President of Princeton Services
</TABLE>
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<PAGE>
Item 27. Principal Underwriters.
(a) Merrill Lynch and Broadcort Capital Corp. ("Broadcort") act as the
principal underwriters for the Registrant. Merrill Lynch also acts as the
principal underwriter for each of the following open-end investment companies
referred to in the first paragraph of Item 26: CMA Money Fund; CMA Treasury
Fund; CMA Tax-Exempt Fund; CMA Multi-State Municipal Series Trust; CMA
Government Securities Fund; The Corporate Fund Accumulation Program, Inc. and
The Municipal Fund Accumulation Program, Inc. and also acts as the principal
underwriter for each of the closed-end investment companies referred to in the
first paragraph of Item 26, and as the depositor of the following unit
investment trusts: The Corporate Income Fund, Municipal Investment Trust Fund,
The ML Trust for Government Guaranteed Securities and The Government
Securities Income Fund.
(b)(1) Set forth below is information concerning each director and executive
officer of Merrill Lynch. The principal business address of each such person
is North Tower, World Financial Center, 250 Vesey Street, New York, New York
10281.
<TABLE>
<CAPTION>
Position(s) and Office(s) Position(s) and Office(s)
Name with Merrill Lynch with Registrant
---- --------------------------------------------------- -------------------------
<S> <C> <C>
Herbert M. Allison,
Jr..................... Director, President and Chief Executive Officer None
John L. Steffens........ Vice Chairman and Director None
Thomas W. Davis......... Executive Vice President None
Barry S. Friedberg...... Executive Vice President None
Edward L. Goldberg...... Executive Vice President None
Jerome P. Kenney........ Executive Vice President None
E. Stanley O'Neal....... Executive Vice President None
Thomas H. Patrick....... Executive Vice President None
Winthrop H. Smith, Jr.
....................... Executive Vice President None
Roger M. Vasey.......... Executive Vice President None
George A. Schieren...... General Counsel, Senior Vice President and Director None
John C. Stomber......... Treasurer None
Andrea L. Dulberg....... Secretary None
(2) Set forth below is information concerning each director and executive
officer of Broadcort. The principal business address of each such person is
100 Church Street, New York, New York 10007, except that the address of
Messrs. Hughes, Joyce and Lynch is North Tower, World Financial Center, 250
Vesey Street, New York, New York 10281.
<CAPTION>
Position(s) and Office(s) Position(s) and Office(s)
Name with Broadcort with Registrant
---- --------------------------------------------------- -------------------------
<S> <C> <C>
James P. Smyth.......... President and Director None
Thomas M. Joyce......... Chairman and Director None
Thomas Conigliaro....... Executive Vice President and Director None
Robert F. McGee......... Senior Vice President and Director None
Michael J. Lynch........ Director None
Arthur L. Thomas........ Director None
James M. McCue.......... Treasurer and Chief Financial Officer None
George Y. Bramwell...... Secretary None
Daisy M. Rosado......... Assistant Secretary None
</TABLE>
(c) Not applicable.
Item 28. Location of Accounts and Records.
All accounts, books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the Rules thereunder will be
maintained at the offices of the Registrant, 800 Scudders Mill Road,
Plainsboro, New Jersey 08536, and its transfer agent, FDS, 4800 Deer Lake
Drive East, Jacksonville, Florida 32246-6484.
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<PAGE>
Item 29. Management Services.
Other than as set forth under the caption "Management of the Fund--Fund
Asset Management" in the Prospectus constituting Part A of the Registration
Statement and under the caption "Management of the Fund-- 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 30. Undertakings.
Not applicable.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1983 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 State of New Jersey, on the 28th day of June, 1999.
CBA MONEY FUND
(Registrant)
By: /s/ Terry K. Glenn
_________________________________
(Terry K. Glenn, President)
Pursuant to the requirements of the Securities Act of 1933, this Amendment
has been signed below by the following persons in the capacities and on the
date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Terry K. Glenn President (Principal June 28, 1999
- ------------------------------------
(Terry K. Glenn) Executive Officer) and
Trustee
Donald C. Burke* Treasurer (Principal
- ------------------------------------
(Donald C. Burke) Financial and Accounting
Officer)
Ronald W. Forbes* Trustee
- ------------------------------------
(Ronald W. Forbes)
Cynthia A. Montgomery* Trustee
- ------------------------------------
(Cynthia A. Montgomery)
Charles C. Reilly* Trustee
- ------------------------------------
(Charles C. Reilly)
Kevin A. Ryan* Trustee
- ------------------------------------
(Kevin A. Ryan)
Richard R. West* Trustee
- ------------------------------------
(Richard R. West)
Arthur Zeikel* Trustee
- ------------------------------------
(Arthur Zeikel)
/s/ Terry K. Glenn June 28, 1999
*By:________________________________
(Terry K. Glenn, Attorney-in-Fact)
</TABLE>
C-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
9 -- Opinion and Consent of Brown & Wood llp, counsel to the Registrant.
-- Consent of Deloitte & Touche LLP, independent auditors for the
10 Registrant.
</TABLE>
<PAGE>
EXHIBIT 9
BROWN & WOOD LLP
ONE WORLD TRADE CENTER
NEW YORK, NEW YORK 10048-0557
TELEPHONE: 212-839-5300
FACSIMILE: 212-839-5599
June 29, 1999
CBA Money Fund
800 Scudders Mill Road
Plainsboro, NJ 08536
Ladies and Gentlemen:
We have acted as counsel for CBA Money Fund, a business Trust organized
under the laws of the Commonwealth of Massachusetts (the "Fund"), in connection
with the registration of an indefinite number of shares of beneficial interest,
par value $0.10 per share, of the Fund (the "Shares") under the Securities Act
of 1933, as amended, pursuant to the Fund's registration statement on Form N-1A
(File No. 2-82766), as amended (the "Registration Statement").
As counsel for the Fund, we are familiar with the proceedings taken by it
in connection with the authorization, issuance and sale of the Shares. In
addition, we have examined and are familiar with the Declaration of Trust of the
Fund, the By-Laws of the Fund and such other documents as we have deemed
relevant to the matters referred to in this opinion.
In rendering this opinion, we have relied as to matters of Massachusetts
law upon an opinion of Bingham Dana LLP rendered to the Fund.
Based upon the foregoing, we are of the opinion that the Shares, upon
issuance and sale in the manner referred to in the Registration Statement for
consideration not less than the par value thereof, will be legally issued, fully
paid and non-assessable shares of beneficial interest, except that Shareholders
of the Fund may under certain circumstances be held personally liable for the
Trust's obligations.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the prospectus and
statement of additional information constituting parts thereof.
Very truly yours,
/s/ Brown & Wood LLP
<PAGE>
EXHIBIT 10
INDEPENDENT AUDITORS' CONSENT
CBA Money Fund:
We consent to the incorporation by reference in this Post-Effective Amendment
No. 18 to Registration Statement No. 2-82766 of our report dated April 8, 1999
appearing in the annual report to shareholders of CBA Money Fund for the year
ended February 28, 1999, and to the reference to us under the caption "Financial
Highlights" in the Prospectus, which is a part of such Registration Statement.
/s/ DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Princeton, New Jersey
June 28, 1999
