As filed with the Securities and Exchange Commission on June 1,
2000
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.
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¨ |
| Post-Effective
Amendment No. 19 |
|
x |
| and/or |
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REGISTRATION
STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 |
|
x |
| Amendment No.
22 |
|
x |
| (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:
BROWN & WOOD
LLP
One World Trade
Center
New York, New
York 10048-0557
Attention:
Thomas R. Smith, Jr., Esq.
|
|
Michael J.
Hennewinkel, Esq.
FUND ASSET
MANAGEMENT, L.P.
P.O. Box
9011
Princeton, New
Jersey
08543-9011
|
|
Jeffrey S.
Alexander, Esq.
MERRILL LYNCH,
PIERCE, FENNER & SMITH INCORPORATED
222 Broadway (14th
Floor)
New York, New York
10038
It is proposed that
this filing will become effective (check appropriate box)
|
x
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immediately upon
filing pursuant to paragraph (b)
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¨
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on (date) pursuant
to paragraph (b)
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¨
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60 days after
filing pursuant to paragraph (a) (1)
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¨
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on (date) pursuant
to paragraph (a) (1)
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¨
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75 days after
filing pursuant to paragraph (a) (2)
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¨
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on (date) pursuant
to paragraph (a) (2) of Rule 485
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If appropriate, check
the following box:
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¨
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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
Prospectus
[LOGO] Merrill
Lynch
June 1, 2000
|
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.
|
Table of Contents
CBA MONEY
FUND
[GRAPHIC] Key
Facts
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.
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® 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 intends
to achieve its investment objectives 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
programs (each, a “Service”) and to investors maintaining
accounts directly with the Transfer Agent.
The Fund may be
an appropriate investment for you if you:
|
Ÿ
|
Are looking
for preservation of capital.
|
|
Ÿ
|
Are investing
with short term goals in mind.
|
|
Ÿ
|
Are looking
for current income and liquidity.
|
CBA MONEY
FUND
3
[GRAPHIC] Key
Facts
Yield — the
income generated by an investment in the Fund.
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 one, five and ten years.
How the Fund performed in the past is not necessarily an indication of
how the Fund will perform in the future.
[BAR CHART]
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
7.88% 5.80% 3.46% 2.68% 3.63% 5.38% 4.93% 5.08% 5.03% 4.65%
During the ten year
period shown in the bar chart, the highest return for a quarter was
1.93% (quarter ended December 31, 1999) 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, 2000 was 1.32%.
Average Annual Total
Returns (as of the
calendar year ended
December 31, 1999) |
|
Past
One Year |
|
Past
5 Years |
|
Past
10 Years |
|
| CBA® Money Fund |
|
4.65% |
|
5.01% |
|
4.84% |
|
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
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:
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, advertising and
promotion.
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.
| Shareholder Fees (fees paid directly by the
shareholder) |
|
| Maximum Account
Fee(a) |
|
$65 |
|
Annual Fund Operating Expenses (expenses
that are deducted from Fund assets) |
|
| Management
Fee |
|
0.41% |
|
| Distribution (12b-1)
Fees(b) |
|
0.13% |
|
| Other Expenses (including transfer
agency fees)(c) |
|
0.16% |
|
| Total
Annual Fund Operating Expenses |
|
0.70% |
|
(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)
|
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 29, 2000,
$3,021,428 was paid to Merrill Lynch and Broadcort pursuant to the
distribution plan.
|
(c)
|
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 29, 2000, the Fund paid the Transfer Agent fees
totaling $3,490,738. The Manager provides accounting services to the
Fund at its cost. For the fiscal year ended February 29, 2000, the
Fund reimbursed the Manager $184,424 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 that 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:
| 1 Year |
|
3 Years |
|
5 Years |
|
10 Years |
|
| $72 |
|
$224 |
|
$390 |
|
$871 |
|
CBA MONEY
FUND
5
[GRAPHIC] 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.
| 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 |
|
†
|
Subject to
rebate or waiver in certain circumstances.
|
††
|
Fee charged by
Broadcort Capital Corp., an affiliate of Merrill Lynch.
|
CBA MONEY
FUND
6
Maturity — the time at which the full
principal amount of a fixed income security is scheduled to be returned
to investors.
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.
[GRAPHIC] Details About
the Fund
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 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,
U.S. Government-sponsored enterprises or U.S. Government
instrumentalities that are not direct obligations of the United
States but involve U.S. Government sponsorship or guarantees by U.S.
Government.
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 Eurodollar obligations or
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
[GRAPHIC] Details About
the Fund
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
(“Freddie Mac”), the Student Loan Marketing Association
(“Sallie Mae”) or the Federal National Mortgage Association
(“Fannie Mae”).
U.S. Government
instrumentalities — supranational entities
sponsored by the U.S.
Eurodollar — obligations issued by
foreign branches or subsidiaries of U.S. banks.
Yankeedollar — obligations issued by U.S.
branches of subsidiaries of foreign banks.
ABOUT THE
PORTFOLIO
MANAGER
Robert Sabatino is the
portfolio manager and Vice President 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.
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.
CBA MONEY
FUND
8
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
securities owned by the Fund generally increase when interest rates go
down and decrease when interest rates go up. 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 other party to 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.
Reverse Repurchase
Agreement and Securities Lending Risk — The Fund may enter into reverse repurchase
agreements with financial institutions. 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 similar institutions. 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
[GRAPHIC] Your
Account
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-MER-FUND. 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
[GRAPHIC] Your
Account
| If You Want
To |
|
Your
Choices |
|
Information
Important for You to Know |
|
| Buy Shares |
|
Determine the amount of
your investment |
|
If you are a Service
subscriber, 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
your account automatically
invested in shares |
|
If you are a Service
subscriber and you choose to have your cash
balances automatically invested in the Fund, they will be invested
as follows: |
| |
|
|
|
Ÿ 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. |
| |
|
|
|
Ÿ 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. |
| |
|
|
|
Ÿ 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
Financial Consultant or
securities dealer submit
your purchase order |
|
If you are a Service
subscriber, you may make manual investments
of $1,000 or more from cash balances in 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. |
|
CBA MONEY
FUND
12
| If You Want
To |
|
Your
Choices |
|
Information
Important for You to Know |
|
Buy Shares
(continued) |
|
Or contact the Transfer
Agent |
|
If you maintain an
account directly with the Transfer Agent, and
are not a Service subscriber, you may call the Transfer Agent at
1-800-MER-FUND 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
Investment |
|
Purchase additional
shares |
|
The minimum investment
for additional purchases (other than
automatic purchases) is $1,000 for all accounts. |
|
| |
|
Acquire additional
shares
through the automatic
dividend reinvestment plan |
|
All dividends are
automatically reinvested daily in the form of
additional shares at net asset value. |
|
Transfer Shares to
Another Securities
Dealer |
|
Transfer to a
participating
securities dealer |
|
You may transfer your
Fund shares only to another securities
dealer that has entered into an agreement with Merrill Lynch.
Certain shareholder services may not 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-
participating securities
dealer |
|
You must either:
Ÿ Transfer your
shares to an account with the Transfer Agent; or
Ÿ Sell your
shares. |
|
| Sell Your
Shares |
|
Automatic
Redemption |
|
The Fund has
instituted an automatic 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® card purchases, cash advances or checks
written against the Visa® 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. |
|
CBA MONEY
FUND
13
[GRAPHIC] Your
Account
| If You Want
To |
|
Your
Choices |
|
Information
Important for You to Know |
|
Sell Your Shares
(continued) |
|
Have your Merrill Lynch
Financial Consultant or
securities dealer submit
your sales order |
|
If you are a Service
subscriber, you may redeem your shares
directly by submitting a written notice of 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
Transfer
Agent |
|
You may sell shares
held at the 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. A
signature guarantee will generally be required but may be waived
in certain limited circumstances. You can obtain a signature
guarantee from a bank, securities dealer, securities broker, credit
union, savings association, national securities exchange and
registered securities association. A notary public seal will not be
acceptable. Redemption requests should not be sent to the Fund
or Merrill Lynch. 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. |
|
CBA MONEY
FUND
14
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.
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 that the NYSE or 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 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.
Capital gains paid by the Fund, if any, may be taxable to you at
different rates, depending, in part, on how long the Fund has held the
assets sold.
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, you generally will be treated as having sold
your shares and any gain on the transaction may be subject to tax.
Capital gains 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 remaining 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
[GRAPHIC] 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 redemption 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
[GRAPHIC] Management of
the Fund
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 $240 billion in investment company and other portfolio
assets under management as of April 2000. This amount includes assets
managed for Merrill Lynch affiliates.
CBA MONEY
FUND
17
[GRAPHIC] Management of
the Fund
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.
| |
|
For the
Year Ended
February 29,
2000 |
|
For the Year Ended
February 28,
|
|
For the
Year Ended
February 29,
1996 |
| Increase (Decrease)
to Net Asset Value: |
|
|
1999 |
|
1998 |
|
1997 |
|
| Per Share Operating
Performance: |
|
| Net asset value,
beginning of year |
|
$
1.00 |
|
|
$
1.00 |
|
|
$
1.00 |
|
|
$
1.00 |
|
|
$
1.00 |
|
|
| Investment
income — net |
|
.0473 |
|
|
.0478 |
|
|
.0497 |
|
|
.0475 |
|
|
.0524 |
|
|
| Realized and
unrealized gain (loss) on investments
— net |
|
(.0003 |
) |
|
(.0002 |
) |
|
.0001 |
|
|
— |
† |
|
.0001 |
|
|
| Total from investment
operations |
|
.0470 |
|
|
.0476 |
|
|
.0498 |
|
|
.0475 |
|
|
.0525 |
|
|
| Less dividends and
distributions: |
| Investment
income — net |
|
(.0473 |
) |
|
(.0478 |
) |
|
(.0497 |
) |
|
(.0475 |
) |
|
(.0524 |
) |
|
| Total dividends and
distributions |
|
(.0473 |
) |
|
(.0479 |
) |
|
(.0498 |
) |
|
(.0475 |
) |
|
(.0525 |
) |
|
| Net asset value, end
of year |
|
$
1.00 |
|
|
$
1.00 |
|
|
$
1.00 |
|
|
$
1.00 |
|
|
$
1.00 |
|
|
| Total Investment
Return: |
|
5.09 |
% |
|
4.91 |
% |
|
5.10 |
% |
|
4.87 |
% |
|
5.39 |
% |
|
| Ratios to Average Net
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Expenses, net of
reimbursement |
|
.70 |
% |
|
.70 |
% |
|
.70 |
% |
|
.69 |
% |
|
.75 |
% |
| Expenses |
|
.70 |
% |
|
.73 |
% |
|
.74 |
% |
|
.73 |
% |
|
.79 |
% |
|
| Investment income and
realized gain on investments — net |
|
4.68 |
% |
|
4.79 |
% |
|
4.98 |
% |
|
4.71 |
% |
|
5.22 |
% |
|
| Supplemental
Data: |
|
| Net assets, end of
year (in thousands) |
|
$2,425,888 |
|
|
$2,557,289 |
|
|
$2,360,682 |
|
|
$2,236,660 |
|
|
$1,988,000 |
|
|
†
|
Amount is less
than $.0001 per share.
|
CBA MONEY
FUND
18
------------------------------
POTENTIAL
-------------- INVESTORS ----------
| Open an account (two options). |
| ------------------------------ |
\1/ \2/
----------------------- ----------------------------------------------
SERVICE SUBSCRIBERS' NON - SERVICE
MERRILL LYNCH SUBSCRIBERS'
FINANCIAL CONSULTANT TRANSFER AGENT
or SECURITIES DEALER
Financial Data Services, Inc.
Advises shareholders on
their Fund investments. ADMINISTRATIVE OFFICES
----------------------- 4800 Deer Lake Drive East
/|\ Jacksonville, Florida 32246-6484
|
| MAILING ADDRESS
| P.O. Box 45289
| Jacksonville, Florida 32232-5289
| Performs recordkeeping and reporting services.
| ----------------------------------------------
| / \
| |
| ------------------------------------ |
| DISTRIBUTORS |
| |
| Merrill Lynch, Pierce, Fenner & Smith |
| Incorporated |
| North Tower |
| World Financial Center |
| 250 Vesey Street |
_______\ New York, New York 10080 /______
/ \
Broadcort Capital Corp.
100 Church Street
New York, New York 10007
Arranges for the sale of Fund shares.
------------------------------------
|
|
---------------------------------- | ----------------------------------------
COUNSEL | CUSTODIAN
|
Brown & Wood LLP | State Street Bank and Trust Company
One World Trade Center | P.O. Box 1713
New York, New York 10048-0557 | Boston, Massachusetts 02101
|
Provides legal advice to the Fund. | Holds the Fund's assets for safekeeping.
---------------------------------- | ----------------------------------------
| | |
| | |
| | |
| \ / |
| ----------------------- |
_________\ /________
/ THE FUND \
_________\ The Board of Directors /_______
| / oversees the Fund. \ |
| ----------------------- |
| |
| |
| |
----------------------------------- ---------------------------------
INDEPENDENT AUDITORS MANAGER
Deloitte & Touche LLP Fund Asset Management, L.P.
Princeton Forrestal Village
116-300 Village Boulevard ADMINISTRATIVE OFFICES
Princeton, New Jersey 08540-6400 800 Scudders Mill Road
Plainsboro, New Jersey 08543-9011
Audits the financial
statements of the Fund on behalf of MAILING ADDRESS
the shareholders. P.O. Box 9011
----------------------------------- Princeton, New Jersey 08543-9011
TELEPHONE NUMBER
1-800-MER-FUND
Manages the Fund's
day-to-day activities.
--------------------------------
CBA MONEY
FUND
[GRAPHIC] For More
Information
|
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
separate 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 Financial Data Services, Inc., P.O. Box 45289,
Jacksonville, Florida 32232-5289 or by calling
1-800-MER-FUND.
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 1-202-942-8090 for information on the operation
of the public reference 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 electronic request at the
following E-mail address: [email protected] or by writing the Public
Reference Section of the SEC, Washington, D.C. 20549-0102.
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 information
contained in this Prospectus.
Investment Company Act
file #811-3703
Code
#10126-06-00
©
Fund Asset Management, L.P.
Prospectus
[LOGO] Merrill
Lynch
June 1, 2000
STATEMENT OF
ADDITIONAL INFORMATION
CBA®
Money Fund
P.O. Box 9011,
Princeton, New Jersey 08543-9011 Ÿ 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 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® card/check
account (“Visa® Account”). The Life Management Service
also may be linked to insurance, home financing and other services. 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.
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® Account. The shares of the
Fund also may be purchased by investors maintaining accounts directly
with the Fund’s Transfer Agent. Such investors will not receive
any of the additional services available to Service subscribers, such
as the Visa® 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 1, 2000
(the “Prospectus”), which has been filed with the Securities
and Exchange Commission (the “Commission”) and can be
obtained, without charge, by calling (800) MER-FUND 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 2000 annual report to shareholders. You may request a copy of
the annual report at no charge by calling (800) 456-4587 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 1, 2000.
TABLE OF
CONTENTS
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. There can be no
assurance that the Fund’s investment objectives will be achieved.
The investment objectives are fundamental policies of the Fund that may
not be changed without the approval of the holders of the Fund’s
outstanding securities (as defined below). Reference is made to
“How the Fund Invests” and “Investment Risks” in
the Prospectus.
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 29, 2000, the average maturity of its
portfolio ranged from 53 days to 81 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.
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.
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.
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;
|
|
(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
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.
The Board of
Trustees of the Fund consists of seven individuals, five 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
(59) — President and Trustee
(1)(2) — Executive Vice President of the Manager and
Merrill Lynch Asset Management (“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
(59) — Trustee (2)(3) — 1400
Washington Avenue, Albany, New York 12222. Professor of Finance, School
of Business, State University of New York at Albany since 1989;
International Consultant, Urban Institute, Washington, D.C. from 1995
to 1999.
CYNTHIA
A. MONTGOMERY
(47) — Trustee (2)(3) — 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)(3) — 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
(67) — Trustee (2)(3) — 127
Commonwealth Avenue, Chestnut Hill, Massachusetts 02167. Founder and
Emeritus Director of The Boston University Center for the Advancement
of Ethics and Character and director thereof until 1989; Professor from
1982 until 1999 and currently Professor Emeritus of Education at Boston
University; formerly taught on the faculties of The University of
Chicago, Stanford University and Ohio State University.
RICHARD
R. WEST
(62) — Trustee (2)(3) — 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
(67) — 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.
JOSEPH
T. MONAGLE
, JR
. (51) — 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. MC
KENNA
(43) — 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
P. SHAPIRO
(37) — Secretary (1)(2) — First Vice
President of MLAM since 1998; 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.
|
(3)
|
Member of the
Fund’s Audit and Nominating Committee, which is responsible for
the selection of the independent auditors and the selection and
nomination of non-interested Trustees.
|
As of May 1,
2000, 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.
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 29, 2000 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,
1999.
Name
|
|
Position
with
Fund
|
|
Compensation
from Fund
|
|
Pension or
Retirement Benefits
Accrued as Part of
Fund Expense
|
|
Estimated
Annual
Benefits upon
Retirement
|
|
Aggregate
Compensation from
Fund and Other
FAM/MLAM-
Advised Funds(1)
|
| Ronald W.
Forbes(1) |
|
Trustee |
|
$7,500 |
|
None |
|
None |
|
$213,900 |
| Cynthia A.
Montgomery(1) |
|
Trustee |
|
$7,500 |
|
None |
|
None |
|
$213,900 |
| Charles C.
Reilly(1) |
|
Trustee |
|
$8,500 |
|
None |
|
None |
|
$400,025 |
| Kevin A.
Ryan(1) |
|
Trustee |
|
$7,500 |
|
None |
|
None |
|
$213,900 |
| Richard R.
West(1) |
|
Trustee |
|
$7,500 |
|
None |
|
None |
|
$388,775 |
(1)
|
The Trustees
serve on the boards of FAM/MLAM-advised funds as follows: Mr. Forbes
(36 registered investment companies consisting of 49 portfolios); Ms.
Montgomery (36 registered investment companies consisting of 49
portfolios); Mr. Reilly (57 registered investment companies
consisting of 68 portfolios); Mr. Ryan (36 registered investment
companies consisting of 49 portfolios); and Mr. West (67 registered
investment companies consisting of 72 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.
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 approximately at the following annual
rates:
Portion of
average daily value of net assets:
| |
|
Rate
|
| Not exceeding
$500 million |
|
0.500% |
| In excess of
$500 million but not exceeding $1 billion |
|
0.425% |
| In excess of
$1 billion |
|
0.375% |
The table below
sets forth information about the total management fees payable by the
Fund to the Manager for the periods indicated.
Fiscal
Year
|
|
Management
Fee
|
| 2000 |
|
$10,117,569 |
| 1999 |
|
$ 9,962,574 |
| 1998 |
|
$ 9,293,428 |
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 and
February 28, 1998, the Manager waived $768,507 and $898,221,
respectively, of the management fee payable by the Fund pursuant to
such arrangement. For the fiscal year ended February 29, 2000, no
management fees were waived.
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;
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.
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).
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 Service
SM
will receive a
full rebate of their annual program participation fee if they meet
certain conditions, as described in more detail in the Life
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® 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.
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
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 29, 2000, $3,021,428 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.
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® card purchases, cash
advances or checks written against the Visa® 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® 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
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.
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.”
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.
Seven-Day
Period Ended February 29, 2000
|
|
|
| Excluding
gains and losses |
|
5.29% |
On occasion, the
Fund may compare its yield to (i) industry averages compiled by
iMoneyNet Inc.’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™ for money market deposit
accounts offered by 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.
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:
Fiscal
Year
|
|
Number
|
|
Dollar
Volume
|
| 2000 |
|
53 |
|
$859.8
million |
| 1999 |
|
46 |
|
$656.4
million |
| 1998 |
|
40 |
|
$559.5
million |
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 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.
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
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 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.
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.
Deloitte &
Touche LLP, Princeton
Forrestal Village, 116-300 Village Boulevard, 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.
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.
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.
Brown &
Wood LLP, One World
Trade Center, New York, New York 10048-0557, is counsel for the
Fund.
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.
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.
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.
The Fund’s
audited financial statements are incorporated in this Statement of
Additional Information by reference to its 2000 annual report to
shareholders. You may request a copy of the annual report at no charge
by calling (800) 456-4587, ext. 789 between 8:00 a.m. and 8:00 p.m. on
any business day.
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.
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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CODE #: 10129-05-00
PART
C. OTHER INFORMATION
Item
23. Exhibits.
Exhibit
Number
|
|
|
|
Description
|
| 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 of
Brown, Wood, Ivey, Mitchell & Petty, counsel to the
Registrant.(c) |
| 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 |
|
|
|
— |
|
None. |
(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)
|
Refiled as an
Exhibit to this filing pursuant to EDGAR requirements.
|
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
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, Master Internet Strategies Trust, Master
Focus Twenty Trust, Master Large Cap Series Trust, Master Premier
Growth 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 U.S. Government Mortgage
Fund, 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 2000, Inc.,
Merrill Lynch Municipal Strategy Fund, Inc., MuniAssets Fund, Inc.,
MuniEnhanced Fund, Inc., MuniHoldings California
Insured Fund II, Inc., MuniHoldings California Insured Fund V, Inc.,
MuniHoldings Florida Insured Fund, MuniHoldings Florida Insured Fund V,
MuniHoldings Fund, Inc., MuniHoldings Fund II, Inc., MuniHoldings
Insured Fund, Inc., MuniHoldings Insured Fund II, Inc., MuniHoldings
Insured Fund III, Inc., MuniHoldings Insured Fund IV, Inc.,
MuniHoldings Michigan Insured Fund II, Inc., MuniHoldings New Jersey
Insured Fund, Inc., MuniHoldings New Jersey Insured Fund IV, Inc.,
MuniHoldings New York Insured Fund, Inc., MuniHoldings New York Insured
Fund IV, Inc., MuniInsured Fund, Inc., MuniVest Fund, Inc., MuniVest
Fund II, Inc., 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 Pennsylvania
Insured 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: Master Global Financial Services Trust, 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 Disciplined
Equity 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 Financial Services 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 Index 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 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
Trusts.
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 4 World Financial Center,
New York, New York 10080. 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 January 1, 1998 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 and Messrs. Doll,
Giordano and Monagle are officers or directors/trustees of one or more
of such companies.
Name
|
|
Position(s)
with the
Manager
|
|
Other Substantial Business,
Profession, Vocation or Employment
|
| 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
President |
|
Executive Vice
President of MLAM; Executive 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. |
| Gregory A.
Bundy |
|
Chief
Operating Officer
and Managing Director |
|
Chief
Operating Officer and Managing Director of
FAM; Chief Operating Officer and Managing
Director of Princeton Services; Co-CEO of
Merrill
Lynch Australia from 1977 to
1999 |
| Donald C.
Burke |
|
Senior Vice
President,
Treasurer and Director
of Taxation |
|
Senior Vice
President and Treasurer of MLAM;
Senior Vice 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
President |
|
Senior Vice
President of MLAM; Senior Vice
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 |
| Robert C.
Doll, Jr. |
|
Senior Vice
President |
|
Senior Vice
President of FAM; Senior Vice President
of Princeton Services; Chief Investment
Officer of
Oppenheimer Funds, Inc. in 1999 and
Executive
Vice President thereof from 1991 to
1999 |
| Linda L.
Federici |
|
Senior Vice
President |
|
Senior Vice
President of MLAM; Senior Vice
President of Princeton
Services |
| Vincent R.
Giordano |
|
Senior Vice
President |
|
Senior Vice
President of MLAM; Senior Vice
President of Princeton
Services |
| Michael J.
Hennewinkel |
|
Senior Vice
President,
General Counsel and
Secretary |
|
Senior Vice
President, General Counsel and Secretary
of MLAM; Senior Vice President of
Princeton
Services |
| Philip L.
Kirstein |
|
Senior Vice
President |
|
Senior Vice
President of MLAM; Senior Vice
President, Director and Secretary of
Princeton
Services |
| Debra W.
Landsman-Yaros |
|
Senior Vice
President |
|
Senior Vice
President of MLAM; Senior Vice
President of Princeton Services; Senior
Vice
President of PFD |
| Stephen M. M.
Miller |
|
Senior Vice
President |
|
Executive Vice
President of Princeton Administrators;
Senior Vice President of Princeton
Services |
| Joseph T.
Monagle, Jr. |
|
Senior Vice
President |
|
Senior Vice
President of MLAM; Senior Vice
President of Princeton
Services |
| Gregory D.
Upah |
|
Senior Vice
President |
|
Senior Vice
President of MLAM; Senior Vice
President of Princeton
Services |
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 4 World Financial Center, New York, New York
10080.
Name
|
|
Position(s)
and Office(s)
with Merrill Lynch
|
|
Position(s)
and Office(s)
with Registrant
|
| 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 4 World
Financial Center, New York, New York 10080. |
|
Name
|
|
Position(s) and Office(s)
with Broadcort
|
|
Position(s) and Office(s)
with Registrant
|
| 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 |
(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.
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.
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 1st day of
June, 2000.
|
(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.
Signature
|
|
Title
|
|
Date
|
| |
|
/S
/ TERRY
K. GLENN
(Terry K.
Glenn) |
|
President
(Principal Executive
Officer) and Trustee |
|
June 1,
2000 |
| |
|
DONALD
C. BURKE
*
(Donald C.
Burke) |
|
Treasurer
(Principal Financial
and Accounting Officer) |
|
|
| |
|
RONALD
W. FORBES
*
(Ronald W. Forbes) |
|
Trustee |
|
|
| |
|
CYNTHIA
A. MONTGOMERY
*
(Cynthia
A. Montgomery) |
|
Trustee |
|
|
| |
|
CHARLES
C. REILLY
*
(Charles
C. Reilly) |
|
Trustee |
|
|
| |
|
KEVIN
A. RYAN
*
(Kevin A.
Ryan) |
|
Trustee |
|
|
| |
|
RICHARD
R. WEST
*
(Richard
R. West) |
|
Trustee |
|
|
| |
|
ARTHUR
ZEIKEL
*
(Arthur
Zeikel) |
|
Trustee |
|
|
| |
|
/S
/ TERRY
K. GLENN
*By:
(Terry K.
Glenn, Attorney-in-Fact) |
|
|
|
June 1,
2000 |
EXHIBIT
INDEX
Exhibit
Number
|
|
Description
|
| 9 |
|
— Opinion of Brown, Wood, Ivey, Mitchell
& Petty, counsel to the Registrant. |
| 10 |
|
— Consent of Deloitte & Touche
LLP, independent
auditors for the Registrant. |
