<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 25, 1995
FILE NO. 33-14190
FILE NO. 811-5149
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 12 /x/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
AMENDMENT NO. 14 /x/
(CHECK APPROPRIATE BOX OR BOXES.)
------------------------
MERRILL LYNCH FUNDS FOR INSTITUTIONS SERIES
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
ONE FINANCIAL CENTER 02111-2646
BOSTON, MASSACHUSETTS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) (617) 357-1460
ROBERT W. CROOK
ONE FINANCIAL CENTER
BOSTON, MASSACHUSETTS 02111-2646
(NAME AND ADDRESS OF AGENT FOR SERVICE)
------------------------
Copies to:
PHILIP L. KIRSTEIN, ESQ. LEONARD B. MACKEY, JR., ESQ.
FUND ASSET MANAGEMENT, L.P. ROGERS & WELLS
P.O. BOX 9011 200 PARK AVENUE
PRINCETON, NEW JERSEY 08543-9011 NEW YORK, NEW YORK 10166
------------------------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX):
/x/ immediately upon filing pursuant to paragraph (b)
/ / on August , 1995 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on (date) pursuant to paragraph (a)(i)
/ / 75 days after filing pursuant to paragraph (a)(ii)
/ / on (date) pursuant to paragraph (a)(ii) of rule 485
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
/ / this post-effective amendment designates a new effective date
for a previously filed post-effective amendment
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
AMOUNT OF PROPOSED PROPOSED
SHARES MAXIMUM MAXIMUM
TITLE OF SECURITIES BEING OFFERING PRICE AGGREGATE AMOUNT OF
BEING REGISTERED REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Government Fund Shares of Beneficial Interest,
par value $.01 per share..................... 36,720,855 $1.00 $145,000*
Treasury Fund Shares of Beneficial Interest,
par value $.01 per share..................... 97,731,450 $1.00 $145,000** $100
</TABLE>
* The calculation of the maximum aggregate offering price is made pursuant to
Rule 24e-2 under this Investment Company Act of 1940. The total amount of
Common Stock redeemed or repurchased during the current fiscal year was
8,313,348,347 shares. Of that amount 8,276,772,492 shares have been used for
reductions pursuant to Rule 24e-2 or Rule 24f-2(c) under the Investment
Company Act of 1940 in previous filings during the Registrant's current
fiscal year. 36,575,855 shares of Common Stock redeemed during the
Registrant's previous fiscal year are being used for the reduction of the
registration fee in this post-effective amendment.
** The calculation of the maximum aggregate offering price is made pursuant to
Rule 24e-2 under the Investment Company Act of 1940. The total amount of
Common Stock redeemed or repurchased during the current fiscal year was
2,226,955,175 shares. Of that amount 2,129,368,725 shares have been used for
reductions pursuant to Rule 24e-2 or Rule 24f-2(c) under the Investment
Company Act of 1940 in previous filings during the Registrant's current
fiscal year. 97,586,450 shares of Common Stock redeemed during the
Registrant's previous fiscal year are being used for the reduction of the
registration fee in this post-effective amendment.
THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO RULE 24f-2 UNDER THE INVESTMENT COMPANY ACT
OF 1940. THE NOTICE REQUIRED BY SUCH RULE FOR THE REGISTRANT'S MOST RECENT
FISCAL YEAR WAS FILED ON JUNE 30, 1995.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
MERRILL LYNCH FUNDS FOR INSTITUTIONS SERIES
MERRILL LYNCH INSTITUTIONAL FUND
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-1A ITEM PROSPECTUS CAPTION
---------------------------------------------- ------------------------------
PART A
<S> <C> <C>
Item 1. Cover Page.................... Cover Page
Item 2. Synopsis...................... Fee Table
Item 3. Condensed Financial
Information................. Financial Highlights; Yield
Information
Item 4. General Description of
Registrant.................. The Institutional Fund and Its
Objectives; Investors For Whom
The Funds are Designed
Item 5. Management of the Fund........ Management; Investment
Adviser; Portfolio
Transactions; Additional
Information
Item 5A. Management's Discussion of
Fund Performance............ *
Item 6. Capital Stock and Other
Securities.................. Cover Page; Dividends; Taxes;
Additional Information
Item 7. Purchase of Securities Being
Offered..................... Purchase of Shares;
Distributor; Net Asset Value
Item 8. Redemption or Repurchase...... Redemptions
Item 9. Pending Legal Proceedings..... *
<CAPTION>
PART B
<S> <C> <C>
Item 10. Cover Page.................... Cover Page
Item 11. Table of Contents............. Table of Contents
Item 12. General Information and
History..................... General Information
Item 13. Investment Objectives and
Policies.................... Investment Objective and
Policies
Item 14. Management of the Fund........ Management of the Trust
Item 15. Control Persons and Principal
Holders of Securities....... Management of the Trust;
General Information
Item 16. Investment Advisory and Other
Services.................... Management of the Trust;
Investment Advisory and Other
Services
Item 17. Brokerage Allocation and Other
Practices................... Portfolio Transactions
Item 18. Capital Stock and Other
Securities.................. General Information
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered..................... Net Asset Value; Distributor
Item 20. Tax Status.................... Taxes
Item 21. Underwriters.................. Distributor
Item 22. Calculation of Performance
Data........................ Yield Information
Item 23. Financial Statements.......... Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
------------------
* Item inapplicable or answer negative.
<PAGE>
MERRILL LYNCH FUNDS FOR INSTITUTIONS SERIES
MERRILL LYNCH GOVERNMENT FUND
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-1A ITEM PROSPECTUS CAPTION
---------------------------------------------- ------------------------------
PART A
<S> <C> <C>
Item 1. Cover Page.................... Cover Page
Item 2. Synopsis...................... Fee Table
Item 3. Condensed Financial
Information................. Financial Highlights; Yield
Information
Item 4. General Description of
Registrant.................. The Government Fund and Its
Objectives; Investors For Whom
The Funds are Designed
Item 5. Management of the Fund........ Management; Investment
Adviser; Portfolio
Transactions; Additional
Information
Item 5A. Management's Discussion of
Fund Performance............ *
Item 6. Capital Stock and Other
Securities.................. Cover Page; Dividends; Taxes;
Additional Information
Item 7. Purchase of Securities Being
Offered..................... Purchase of Shares;
Distributor; Net Asset Value
Item 8. Redemption or Repurchase...... Redemptions
Item 9. Pending Legal Proceedings..... *
<CAPTION>
PART B
<S> <C> <C>
Item 10. Cover Page.................... Cover Page
Item 11. Table of Contents............. Table of Contents
Item 12. General Information and
History..................... General Information
Item 13. Investment Objectives and
Policies.................... Investment Objective and
Policies
Item 14. Management of the Fund........ Management of the Trust
Item 15. Control Persons and Principal
Holders of Securities....... Management of the Trust;
General Information
Item 16. Investment Advisory and Other
Services.................... Management of the Trust;
Investment Advisory and Other
Services
Item 17. Brokerage Allocation and Other
Practices................... Portfolio Transactions
Item 18. Capital Stock and Other
Securities.................. General Information
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered..................... Net Asset Value; Distributor
Item 20. Tax Status.................... Taxes
Item 21. Underwriters.................. Distributor
Item 22. Calculation of Performance
Data........................ Yield Information
Item 23. Financial Statements.......... Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
------------------
* Item inapplicable or answer negative.
<PAGE>
MERRILL LYNCH FUNDS FOR INSTITUTIONS SERIES
MERRILL LYNCH TREASURY FUND
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-1A ITEM PROSPECTUS CAPTION
---------------------------------------------- ------------------------------
<S> <C> <C>
PART A
Item 1. Cover Page.................... Cover Page
Item 2. Synopsis...................... Fee Table
Item 3. Condensed Financial
Information................. Financial Highlights; Yield
Information
Item 4. General Description of
Registrant.................. The Treasury Fund and Its
Objectives; Investors For Whom
The Funds are Designed
Item 5. Management of the Fund........ Management; Investment
Adviser; Portfolio
Transactions; Additional
Information
Item 5A. Management's Discussion of
Fund Performance............ *
Item 6. Capital Stock and Other
Securities.................. Cover Page; Dividends; Taxes;
Additional Information
Item 7. Purchase of Securities Being
Offered..................... Purchase of Shares;
Distributor; Net Asset Value
Item 8. Redemption or Repurchase...... Redemptions
Item 9. Pending Legal Proceedings..... *
<CAPTION>
PART B
<S> <C> <C>
Item 10. Cover Page.................... Cover Page
Item 11. Table of Contents............. Table of Contents
Item 12. General Information and
History..................... General Information
Item 13. Investment Objectives and
Policies.................... Investment Objective and
Policies
Item 14. Management of the Fund........ Management of the Trust
Item 15. Control Persons and Principal
Holders of Securities....... Management of the Trust;
General Information
Item 16. Investment Advisory and Other
Services.................... Management of the Trust;
Investment Advisory and Other
Services
Item 17. Brokerage Allocation and Other
Practices................... Portfolio Transactions
Item 18. Capital Stock and Other
Securities.................. General Information
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered..................... Net Asset Value; Distributor
Item 20. Tax Status.................... Taxes
Item 21. Underwriters.................. Distributor
Item 22. Calculation of Performance
Data........................ Yield Information
Item 23. Financial Statements.......... Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
------------------
* Item inapplicable or answer negative.
<PAGE>
MERRILL LYNCH FUNDS FOR INSTITUTIONS SERIES
MERRILL LYNCH INSTITUTIONAL TAX-EXEMPT FUND
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-1A ITEM PROSPECTUS CAPTION
---------------------------------------------- ------------------------------
<S> <C> <C>
PART A
Item 1. Cover Page.................... Cover Page
Item 2. Synopsis...................... Fee Table
Item 3. Condensed Financial
Information................. Financial Highlights; Yield
Information
Item 4. General Description of
Registrant.................. The Tax-Exempt Fund and Its
Objectives; Investors For Whom
The Fund is Designed
Item 5. Management of the Fund........ Management; Investment
Adviser; Portfolio
Transactions; Additional
Information
Item 5A. Management's Discussion of
Fund Performance............ *
Item 6. Capital Stock and Other
Securities.................. Cover Page; Dividends; Taxes;
Additional Information
Item 7. Purchase of Securities Being
Offered..................... Purchase of Shares;
Distributor; Net Asset Value
Item 8. Redemption or Repurchase...... Redemptions
Item 9. Pending Legal Proceedings..... *
<CAPTION>
PART B
<S> <C> <C>
Item 10. Cover Page.................... Cover Page
Item 11. Table of Contents............. Table of Contents
Item 12. General Information and
History..................... General Information
Item 13. Investment Objectives and
Policies.................... Investment Objective and
Policies
Item 14. Management of the Fund........ Management of the Trust
Item 15. Control Persons and Principal
Holders of Securities....... Management of the Trust;
General Information
Item 16. Investment Advisory and Other
Services.................... Management of the Trust;
Investment Advisory and Other
Services
Item 17. Brokerage Allocation and Other
Practices................... Portfolio Transactions
Item 18. Capital Stock and Other
Securities.................. General Information
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered..................... Net Asset Value; Distributor
Item 20. Tax Status.................... Taxes; Special Tax
Consideration
Item 21. Underwriters.................. Distributor
Item 22. Calculation of Performance
Data........................ Yield Information
Item 23. Financial Statements.......... Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
------------------
* Item inapplicable or answer negative.
<PAGE>
MERRILL LYNCH INSTITUTIONAL FUND
MERRILL LYNCH GOVERNMENT FUND
MERRILL LYNCH TREASURY FUND
MERRILL LYNCH INSTITUTIONAL TAX-EXEMPT FUND
------------------------
This document consists of the Prospectuses of Merrill Lynch Institutional
Fund, Merrill Lynch Government Fund, Merrill Lynch Treasury Fund and Merrill
Lynch Institutional Tax-Exempt Fund and an Appendix which constitutes part of
each Prospectus. A Table of Contents may be found on page 1 of each Prospectus.
------------------------
Merrill Lynch Institutional Fund (the 'Institutional Fund'), Merrill Lynch
Government Fund (the 'Government Fund'), Merrill Lynch Treasury Fund (the
'Treasury Fund') and Merrill Lynch Institutional Tax-Exempt Fund (the
'Tax-Exempt Fund') are separate series of Merrill Lynch Funds For Institutions
Series (the 'Trust'). The Institutional Fund is a no-load money fund whose
objectives are maximum current income consistent with liquidity and the
maintenance of a portfolio of high quality short-term 'money market'
instruments. The Government Fund and the Treasury Fund are no-load money funds
seeking current income consistent with liquidity and security of principal. The
Government Fund invests in a portfolio of securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities. The Treasury Fund invests in
a portfolio of U.S. Treasury securities. The Tax-Exempt Fund is a no-load money
fund whose objectives are to seek current income exempt from Federal income
taxes, preservation of capital and liquidity available from investing in a
diversified portfolio of short-term, high quality Tax-Exempt Securities. Each
Fund seeks to maintain a constant $1.00 net asset value per share, although this
cannot be assured. An investment in a Fund is neither insured nor guaranteed by
the U.S. Government.
The investment adviser of each Fund is Fund Asset Management, L.P. ('FAM'),
a subsidiary of Merrill Lynch & Co., Inc., a publicly held corporation. The
distributor of each Fund is Merrill Lynch Funds Distributor, Inc. ('MLFD'), an
indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc.
Each Fund is designed primarily for institutions as an economical and
convenient means for the investment of short-term funds. Such institutions
include banks and trust companies, corporations, investment bankers and brokers,
insurance companies, investment counsellors, pension funds, employee benefit
plans, law firms, trusts, estates, and educational, religious and charitable
institutions. Fund shares are sold and redeemed twice on each business day at
net asset value without any sales or redemption charge. All net income is
declared as dividends daily. Dividends are paid monthly and automatically
reinvested in additional shares or, at the option of the shareholder, paid in
cash. Purchase orders where payment is to be made by Federal Funds wire must be
submitted to MLFD in Boston by telephone and PAYMENT MUST BE REMITTED BY FEDERAL
FUNDS WIRE DIRECTLY TO STATE STREET BANK AND TRUST COMPANY. While other forms of
payment will also be accepted, purchases of shares will not be effected until
Federal Funds are available. See 'Purchase of Shares,' page A-3.
<PAGE>
PROSPECTUS
AUGUST 25, 1995
MERRILL LYNCH INSTITUTIONAL FUND
OF MERRILL LYNCH FUNDS FOR INSTITUTIONS SERIES
ONE FINANCIAL CENTER FOR GENERAL INFORMATION AND PURCHASES CALL
BOSTON, MASSACHUSETTS 02111-2646 617-357-1460 OR TOLL FREE 800-225-1576
The Institutional Fund is a no-load money fund whose objectives are maximum
current income consistent with liquidity and the maintenance of a portfolio of
high quality short-term 'money market' instruments. The Institutional Fund
is a series of Merrill Lynch Funds For Institutions Series (the 'Trust'), a
diversified, open-end management investment company. The Institutional Fund
seeks to maintain a constant $1.00 net asset value per share, although this
cannot be assured. An investment in the Institutional Fund is neither insured
nor guaranteed by the U.S. Government. For more information on the Fund's
investment objectives, please see 'The Institutional Fund and Its Objectives,'
page 4.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Prospectus sets forth in concise form the information about the
Institutional Fund that a prospective investor should know before investing in
the Institutional Fund. Investors should read and retain this Prospectus for
future reference. Additional information about the Institutional Fund has been
filed with the Securities and Exchange Commission in a Statement of Additional
Information and is available upon request and without charge. Investors and
prospective investors may obtain a copy of the Statement of Additional
Information, which is dated August 25, 1995, by writing to or calling Merrill
Lynch Institutional Fund at the above address and telephone numbers. The
Statement of Additional Information has been incorporated by reference into this
Prospectus.
The minimum initial purchase for the Institutional Fund is $25,000 per
investor.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE PAGE
---- ----
<S> <C> <C> <C>
Fee Table........................ 2 Management....................... A-2
Financial Highlights............. 3 Purchase of Shares............... A-3
Yield Information................ 4 Redemptions...................... A-5
The Institutional Fund and Its Dividends........................ A-8
Objectives..................... 4 Net Asset Value.................. A-8
Investment Adviser............... 7 Taxes............................ A-9
Distribution and Shareholder Portfolio Transactions........... A-10
Servicing Plan................. 8 Exchange Privilege............... A-10
Appendix Additional Information........... A-11
Investors for Whom the Funds Account Application.............. A-17
are Designed................ A-1 Authorization for Redemption by
Investment Adviser............. A-2 Check Form..................... A-19
Distributor.................... A-2
</TABLE>
<PAGE>
FEE TABLE
<TABLE>
<CAPTION>
INSTITUTIONAL
FUND
-------------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases................. None
Deferred Sales Charge..................................... None
Sales Charge Imposed on Dividend Reinvestments............ None
Redemption Fee............................................ None
Exchange Fee.............................................. None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE
NET ASSETS)
Investment Advisory Fees.................................. .20%*
---
Other Expenses
Dividend and Transfer Agency Fees...................... .01%
Other Fees and Expenses................................ .03%
---
Total Other Expenses................................. .04%
---
TOTAL FUND OPERATING EXPENSES............................. .24%
---
---
</TABLE>
------------------
* The Fund's Investment Adviser has agreed to waive a portion of its fee so that
the effective fee will be .20% of the Fund's average daily net assets. If the
Investment Adviser had not agreed to waive a portion of the investment
advisory fee, Total Fund Operating Expenses would be .37% of average net
assets. The Investment Adviser may discontinue the waiver of investment
advisory fees without notice at any time.
EXAMPLE:
<TABLE>
<CAPTION>
CUMULATIVE EXPENSES PAID
FOR THE PERIOD OF:
-------------------------------
3 5 10
1 YEAR YEARS YEARS YEARS
------ ------ ------ -------
<S> <C> <C> <C> <C>
An investor would pay the following
expenses on a $1,000 investment
assuming (1) an operating expense
ratio of .24%, (2) a 5% annual return
throughout the period and (3)
redemption at the end of the period... $ 2 $ 8 $ 14 $ 31
</TABLE>
The foregoing fee table is intended to assist investors in understanding
the costs and expenses that a shareholder in the Institutional Fund will bear
directly or indirectly. The example set forth above assumes reinvestment of all
dividends and distributions and uses a five percent annual rate of return as
mandated by Securities and Exchange Commission regulations. The actual rate of
return on the Institutional Fund's shares will vary, and may be more or less
than five percent. The example should not be considered a representation of past
or future expenses, and actual expenses may be more or less than those assumed
for purposes of the example. For a more detailed description of such costs and
expenses, see 'Investment Adviser,' 'Distributor,' 'Purchase of Shares' and
'Redemptions.'
Institutional Fund
2
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of the Merrill Lynch Institutional Fund
outstanding throughout each period:
<TABLE>
<CAPTION>
FIVE
MONTHS
YEAR ENDED APRIL 30, ENDED
-------------------------------------------------------------- APRIL 30,
1995 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
period......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment
Operations:
Net investment income.......... .050 .031 .033 .050 .074 .033
Net realized and unrealized
gain on investments.......... -- -- .001 -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations................. .050 .031 .034 .050 .074 .033
Less Distributions:
Dividends from net investment
income....................... (.050) (.031) (.034) (.050) (.074) (.033)
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value, end of
period..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Total Return.................... 5.11% 3.20% 3.46% 5.12% 7.67% 8.11%*
Ratios/Supplemental Data:
Net Assets, end of period
(000)........................ $6,580,086 $3,775,121 $4,712,639 $2,156,878 $2,622,402 $1,732,563
Ratio of operating expenses to
average net assets (before
waiver)...................... .37% .37% .38% .40% .42% .45%*
Ratio of operating expenses to
average net assets (after
waiver)...................... .24% .24% .26% -- -- --
Ratio of net investment income,
including realized and
unrealized gains and losses,
to average net assets (before
waiver)...................... 5.00% 2.91% 3.29% 4.99% 7.35% 7.99%*
Ratio of net investment income,
including realized and
unrealized gains and losses
to average net assets (after
waiver)...................... 5.13% 3.04% 3.41% -- -- --
<CAPTION>
YEAR ENDED NOVEMBER 30,
-------------------------------------------------------------
1989 1988 1987 1986 1985
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
period......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment
Operations:
Net investment income.......... .088 .070 .062 .064 .078
Net realized and unrealized
gain on investments.......... -- -- -- .002 .002
---------- ---------- ---------- ---------- ----------
Total from investment
operations................. .088 .070 .062 .066 .080
Less Distributions:
Dividends from net investment
income....................... (.088) (.070) (.062) (.066) (.080)
---------- ---------- ---------- ---------- ----------
Net Asset Value, end of
period..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total Return.................... 9.16% 7.25% 6.36% 6.78% 8.25%
Ratios/Supplemental Data:
Net Assets, end of period
(000)........................ $1,800,019 $1,258,741 $1,893,655 $1,371,548 $1,269,652
Ratio of operating expenses to
average net assets (before
waiver)...................... .46% .45% .45% .46% .45%
Ratio of operating expenses to
average net assets (after
waiver)...................... -- -- -- -- --
Ratio of net investment income,
including realized and
unrealized gains and losses,
to average net assets (before
waiver)...................... 8.83% 6.92% 6.19% 6.53% 7.91%
Ratio of net investment income,
including realized and
unrealized gains and losses
to average net assets (after
waiver)...................... -- -- -- -- --
</TABLE>
------------------
* On an annualized basis.
Note--The Financial Highlights shown for the fiscal years 1991-1995 have
been audited by Deloitte & Touche LLP, independent auditors.
Institutional Fund
3
<PAGE>
YIELD INFORMATION
Set forth below is yield information for the seven-day period ended April
30, 1995, computed to include and exclude realized and unrealized gains and
losses, and information as to the compounded annualized yield excluding gains
and losses, for the same period.
<TABLE>
<S> <C>
Annualized Yield:
Including gains and losses........................ 5.53%
Excluding gains and losses........................ 6.01%
Compounded Annualized Yield............................ 6.19%
Average Maturity of Portfolio at End of Period......... 68 days
</TABLE>
The yield on Institutional Fund shares normally will fluctuate on a daily
basis. Therefore, the yield for any given past period is not an indication or
representation by the Institutional Fund of future yields or rates of return on
its shares. The Institutional Fund's yield is affected by changes in interest
rates on money market securities, average portfolio maturity, the types and
quality of portfolio securities held, and operating expenses.
On occasion, the Institutional Fund may compare its yield to (i) the
Donoghue's First Tier-Institutional Funds Only Average, an average compiled by
Donoghue'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(Trademark) for money market
accounts offered by the 100 leading banks and thrift institutions in the 10
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 contained in publications such as Morningstar Publications,
Inc., Money Magazine, U.S. News & World Report, Business Week, CDA Investment
Technology, Inc., Forbes and Fortune. As with yield quotations, yield
comparisons should not be considered indicative of the Institutional Fund's
yield or relative performance for any future period.
THE INSTITUTIONAL FUND AND ITS OBJECTIVES
The Institutional Fund is a no-load money fund whose objectives are maximum
current income consistent with liquidity and the maintenance of a portfolio of
high quality short-term "money market" instruments. The Institutional Fund
enables investors to invest short-term cash reserves in a portfolio of high
quality 'money market' securities. Institutional Fund shares are sold and
redeemed twice on each business day at the net asset value next determined after
an order is received, and there is no sales or redemption charge. There can be
no assurance that the objectives of the Institutional Fund will be attained.
The Institutional Fund will attempt to accomplish its objectives of maximum
current income consistent with liquidity and the maintenance of a portfolio of
high quality, 'money market' instruments by investing in securities with
remaining maturities of up to 762 days (25 months) in the case of government
securities and 397 days (13 months) in the case of all other securities. The
dollar weighted average maturity of the Institutional Fund's portfolio will be
90 days or less. The Institutional Fund's portfolio will principally include:
(i) U.S. Treasury bills, notes and other obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities;
(ii) obligations of the 50 largest commercial banks in the United
States (measured by total assets as shown by their most recent annual
financial statements), such as certificates of deposit, bank notes, deposit
Institutional Fund
4
<PAGE>
notes, time deposits and bankers' acceptances. The Institutional Fund may
also invest up to 5% of its net assets in certificates of deposit issued by
commercial banks other than the 50 largest commercial banks in the United
States if the principal amount of such certificates of deposit is insured
by the Federal Deposit Insurance Corporation;
(iii) U.S. dollar-denominated obligations of depository institutions,
such as certificates of deposit, bankers' acceptances, time deposits, bank
notes and deposit notes. The obligations of commercial banks may be issued
by U.S. banks, foreign branches or subsidiaries of U.S. banks ('Eurodollar'
obligations) or U.S. branches or subsidiaries of foreign banks
('Yankeedollar' obligations). The Institutional Fund may invest only in
Eurodollar obligations which by their terms are general obligations of the
U.S. parent bank. Yankeedollar obligations in which the Institutional Fund
may invest must be issued by U.S. branches or subsidiaries of foreign banks
which are subject to state or Federal banking regulations in the U.S. and
by their terms must be general obligations of the foreign parent;
(iv) commercial paper which at the time of purchase is rated in the
top rating category by a nationally recognized statistical rating
organization (an 'NRSRO') or which is issued by an entity having an
outstanding debt issue which at the time of purchase is rated in one of the
top two rating categories by an NRSRO. The Institutional Fund may also
invest in U.S. dollar-denominated commercial paper and other short-term
obligations issued by foreign entities. Such investments are subject to
quality standards similar to those applicable to investments in comparable
obligations of domestic issuers. Investments in foreign entities in general
involve the same risks as those described in the Institutional Fund's
Statement of Additional Information in connection with investments in
Eurodollar and Yankeedollar obligations; and
(v) bonds and notes maturing within 397 days (13 months) from the date
of investment which at that date are rated in one of the top two rating
categories by an NRSRO.
There are currently six NRSROs: Standard & Poor's Rating Group ('Standard &
Poor's'), Moody's Investors Service, Inc. ('Moody's'), Fitch Investors Services,
Inc. ('Fitch'), Duff & Phelps Credit Ratings Co. ('Duff & Phelps'), IBCA Limited
and its affiliate IBCA Inc. ('IBCA'), and Thomson Bankwatch, Inc. ('BankWatch').
See 'Additional Information--Description of Commercial Paper, Bank Money
Instrument and Corporate Bond Ratings' for a description of the above ratings.
The following is a description of the types of short-term money market
securities in which the Institutional Fund may invest:
Government Securities: U.S. Treasury bills and notes constitute the
principal type of U.S. Government securities invested in by the
Institutional Fund. U.S. Treasury bills and notes are supported by the full
faith and credit of the United States. The Institutional Fund also invests
in instruments issued by U.S. Government agencies, such as the Federal
National Mortgage Association, which are supported by the credit of that
agency.
Repurchase Agreements: The Institutional Fund may enter into
repurchase agreements with any member bank of the Federal Reserve System or
primary dealer in U.S. Government securities. A repurchase agreement is an
instrument under which the purchaser (i.e., the Institutional Fund)
acquires the obligation (debt security) and the seller agrees, at the time
of the sale, to repurchase the obligation at a mutually agreed upon time
and price, thereby determining the yield during the purchaser's holding
period. As a matter of operating policy, the Institutional Fund will not
enter into repurchase agreements with more than seven days to maturity if
it would result in the investment of more than 10% of the value of the
Institutional Fund's net
Institutional Fund
5
<PAGE>
assets in such repurchase agreements. If a repurchase agreement is
construed to be a collateralized loan, the underlying securities will not
be considered to be owned by the Institutional Fund but only to constitute
collateral for the seller's obligation to pay the repurchase price and in
the event of a default by the seller, the Institutional Fund may suffer
time delays and incur costs or losses in connection with the disposition of
the collateral.
Variable Amount Master Notes: The Institutional Fund may also
purchase variable amount master notes issued by companies or other entities
having an outstanding debt issue at the time of purchase rated in one of
the top two rating categories by an NRSRO. Variable amount master notes are
obligations that permit the short-term investment of fluctuating amounts by
the Institutional Fund at varying market rates of interest pursuant to
direct arrangements between the Institutional Fund, as lender, and the
borrower.
Commercial Paper and Other Short-Term Obligations: The Institutional
Fund may purchase commercial paper (including variable amount master
notes), which refers to short-term, unsecured promissory notes issued by
the 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 time of purchase. Short-term obligations issued by trusts
include mortgage-related or asset-backed debt instruments, including
pass-through certificates such as participations in, or Treasury bonds or
notes backed by, pools of mortgages, credit card, automobile or other types
of receivables. See 'Investment Objectives and Policies' in the Statement
of Additional Information for a discussion of these structured financings.
Eurodollar and Yankeedollar Obligations: Investment in Eurodollar and
Yankeedollar obligations may involve different risks from the risks of
investing in obligations of U.S. banks. Such 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. See
'Investment Objectives and Policies' in the Statement of Additional
Information for a more detailed discussion of these risks.
Foreign Bank Money Instruments: The Institutional Fund may also
purchase U.S. dollar-denominated obligations of foreign depository
institutions and their foreign branches and subsidiaries, such as
certificates of deposit, bankers' acceptances, time deposits, bank notes
and deposit notes. The obligations of such foreign branches and
subsidiaries may be the general obligation of the parent bank or may be
limited to the issuing branch or subsidiary by the terms of the specific
obligation or by government regulation. The Institutional Fund will not
invest more than 25% of its total assets (taken at market value at the time
of each investment) in these obligations.
Forward Commitments: The Institutional Fund may purchase and sell
U.S. securities on a when-issued basis or forward commitment basis, and it
may purchase or sell such securities for delayed delivery. These
transactions occur when securities are purchased or sold by the
Institutional Fund with payment and delivery taking place in the future to
secure what is considered an advantageous yield and price to the
Institutional Fund at the time of entering into the transaction. The value
of the security on the delivery date may be more or less than its purchase
price. If the management of the Institutional Fund deems it appropriate to
do so, the Institutional Fund may dispose of a commitment prior to
settlement. There can, of course, be no assurance that the judgments upon
which these practices are based will be accurate, and it is possible that
in consequence of these practices the Institutional Fund would be required
to pay on a
Institutional Fund
6
<PAGE>
settlement date more than the market value of the purchased securities at
that time, or that the Institutional Fund would incur a loss by disposing
of a commitment on terms less favorable than those of its original
purchase. The Institutional Fund will maintain a segregated account with
its custodian of cash or U.S. Government securities in an aggregate amount
equal to the amount of its commitments in connection with such purchase
transactions.
Investment Restrictions: The Institutional 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 Institutional
Fund's outstanding voting securities. Among the more significant
restrictions, the Institutional Fund may not (1) invest more than 25% of
its total assets in the securities of issuers in any particular industry
(other than U.S. Government securities, Government agency securities or
domestic bank money instruments); (2) purchase the securities of any one
issuer, other than the U.S. Government, if immediately after such purchase
more than 5% of the value of its total assets would be invested in such
issuer, except that up to 25% of the value of the Institutional Fund's
total assets may be invested without regard to this limitation; or (3)
enter into repurchase agreements with more than seven days to maturity if
it would result in the investment of more than 10% of the value of the
Institutional Fund's assets in such repurchase agreements.
A regulation of the Securities and Exchange Commission limits investments
by the Institutional 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 do not have the
highest rating, not more than 1% of its total assets. In addition, this
regulation requires that not more than 5% of the Institutional Fund's total
assets be invested in securities that do not have the highest rating or are not
of comparable quality to securities with the highest rating as determined by the
Trustees of the Trust.
INVESTMENT ADVISER
The investment adviser to the Institutional Fund is Fund Asset Management,
L.P. ('FAM'), a subsidiary of Merrill Lynch & Co., Inc., a publicly held
corporation.
FAM, subject to the general supervision of the Trust's Board of Trustees,
renders investment advice to the Institutional Fund and is responsible for the
overall management of the Institutional Fund's business affairs. For the fiscal
year ended April 30, 1995, FAM was entitled to receive $16,621,425 or .33% of
the Institutional Fund's average daily net assets. FAM has agreed to waive a
portion of its fee so that the effective fee payable by the Institutional Fund
to FAM will be at the annual rate of .20% of the Fund's average daily net
assets. During the fiscal year ended April 30, 1995, such waiver amounted to
$6,623,625 or .13% of the Fund's average net assets. FAM therefore received
$9,997,800 or .20% of the Fund's average daily net assets during the fiscal year
ended April 30, 1995. FAM may discontinue waiver of the fee in whole or in part
at any time without notice.
FAM, as investment adviser, has agreed that, in the event the operating
expenses of the Institutional Fund (including the fees payable to FAM but
excluding taxes, interest, brokerage and extraordinary expenses) for any fiscal
year exceed the expense limitations applicable to the Institutional Fund imposed
by the state securities laws or any regulations thereunder, it will reduce its
fees by the extent of such excess and, if required pursuant to any such laws or
regulations, will annually reimburse the Institutional Fund in the amount of
such excess. During the fiscal year ended April 30, 1995, the Institutional
Fund's total expenses were $12,054,414 or .24% of its average net assets. If FAM
had not waived a portion of its fee, the Institutional Fund's total expenses
would have been $18,678,039 or .37% of its average net assets during the fiscal
year ended April 30, 1995.
Institutional Fund
7
<PAGE>
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN
The Institutional Fund has adopted a Distribution and Shareholder Servicing
Plan (the 'Plan') pursuant to Rule 12b-1 under the Investment Company Act of
1940. The Plan permits FAM to pay a fee to MLFD which in turn is authorized to
make payments to securities dealers with which MLFD has entered into selected
dealers agreements. MLFD may also use a portion of the fee it receives under the
Plan to compensate administrators who perform administrative services that would
otherwise be performed by FAM or its agent. The purpose of the Plan is to
promote distribution of the Institutional Fund's shares and to enhance the
provision of shareholder services. The Institutional Fund is not required or
permitted under the Plan to make payments over and above its investment advisory
fee; the Plan merely permits the reallocation of a portion of the advisory fee
FAM receives to pay for distribution-related and shareholder servicing
activities. For the fiscal year ended April 30, 1995, the fees paid to MLFD
under the Plan totalled $1,852,130 or .04% of the Institutional Fund's average
net assets, all of which was paid to MLFD for providing distribution-related
services in connection with Fund shares.
Institutional Fund
8
<PAGE>
PROSPECTUS
AUGUST 25, 1995
MERRILL LYNCH GOVERNMENT FUND
OF MERRILL LYNCH FUNDS FOR INSTITUTIONS SERIES
ONE FINANCIAL CENTER FOR GENERAL INFORMATION AND PURCHASES CALL
BOSTON, MASSACHUSETTS 02111-2646 617-357-1460 OR TOLL FREE 800-225-1576
The Government Fund is a no-load money fund whose objectives are to seek
current income consistent with liquidity and security of principal by investing
in a portfolio of securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. The Government Fund is a series of Merrill Lynch
Funds For Institutions Series (the 'Trust'), a diversified, open-end management
investment company. The Government Fund seeks to maintain a constant $1.00 net
asset value per share, although this cannot be assured. An investment in the
Government Fund is neither insured nor guaranteed by the U.S. Government. For
more information on the Fund's investment objectives, please see 'The Government
Fund and Its Objectives,' page 4.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus sets forth in concise form the information about the
Government Fund that a prospective investor should know before investing in the
Government Fund. Investors should read and retain this Prospectus for future
reference. Additional information about the Government Fund has been filed with
the Securities and Exchange Commission in a Statement of Additional Information
and is available upon request and without charge. Investors and prospective
investors may obtain a copy of the Statement of Additional Information, which is
dated August 25, 1995, by writing to or calling Merrill Lynch Government Fund at
the above address and telephone numbers. The Statement of Additional Information
has been incorporated by reference into this Prospectus.
The minimum initial purchase for the Government Fund is $25,000 per
investor.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE PAGE
---- ----
<S> <C> <C> <C>
Fee Table........................ 2 Management....................... A-2
Financial Highlights............. 3 Purchase of Shares............... A-3
Yield Information................ 4 Redemptions...................... A-5
The Government Fund and Its Dividends........................ A-8
Objectives..................... 4 Net Asset Value.................. A-8
Investment Adviser............... 6 Taxes............................ A-9
Distribution and Shareholder Portfolio Transactions........... A-10
Servicing Plan................. 6 Exchange Privilege............... A-10
Appendix Additional Information........... A-11
Investors for Whom the Funds Account Application.............. A-17
are Designed.................. A-1 Authorization for Redemption by
Investment Adviser............. A-2 Check Form ..................... A-19
Distributor.................... A-2
</TABLE>
<PAGE>
FEE TABLE
<TABLE>
<CAPTION>
GOVERNMENT
FUND
----------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases...................... None
Deferred Sales Charge.......................................... None
Sales Charge Imposed on Dividend Reinvestments................. None
Redemption Fee................................................. None
Exchange Fee................................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET
ASSETS)
Investment Advisory Fees....................................... .20%*
---
Other Expenses
Dividend and Transfer Agency Fees........................... .02%
Other Fees and Expenses..................................... .02%
---
Total Other Expenses...................................... .04%
---
TOTAL FUND OPERATING EXPENSES.................................. .24%
---
---
</TABLE>
------------------
* The Fund's Investment Adviser has agreed to waive a portion of its fee so that
the effective fee will be .20% of the Fund's average daily net assets. If the
Investment Adviser had not agreed to waive a portion of the investment
advisory fee, Total Fund Operating Expenses would be .37% of average net
assets. The Investment Adviser may discontinue the waiver of investment
advisory fees without notice at any time.
EXAMPLE:
<TABLE>
<CAPTION>
CUMULATIVE EXPENSES PAID
FOR THE PERIOD OF:
----------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following
expenses on a $1,000 investment
assuming (1) an operating expense
ratio of .24%, (2) a 5% annual return
throughout the period and (3)
redemption at the end of the period... $ 2 $ 8 $ 14 $ 31
</TABLE>
The foregoing Fee Table is intended to assist investors in understanding
the costs and expenses that a shareholder in the Government Fund will bear
directly or indirectly. The Example set forth above assumes reinvestment of all
dividends and distributions and uses a five percent annual rate of return as
mandated by Securities and Exchange Commission regulations. The actual rate of
return on the Government Fund's shares will vary, and may be more or less than
five percent. The Example should not be considered a representation of past or
future expenses, and actual expenses may be more or less than those assumed for
purposes of the Example. For a more detailed description of such costs and
expenses, see 'Investment Adviser,' 'Distributor,' 'Purchase of Shares' and
'Redemptions.'
Government Fund
2
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of the Merrill Lynch Government Fund outstanding
throughout each period:
<TABLE>
<CAPTION>
EIGHT
MONTHS
YEAR ENDED APRIL 30, ENDED
-------------------------------------------------------------- APRIL 30,
1995 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
period......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment
Operations:
Net investment income.......... .049 .030 .030 .047 .070 .052
Net realized and unrealized
gain on investments.......... -- -- .001 .002 .001 --
---------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations............... .049 .030 .031 .049 .071 .052
Less Distributions:
Dividends from net investment
income....................... (.049) (.030) (.031) (.049) (.071) (.052)
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value, end of
period..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Total Return.................... 4.99% 3.06% 3.19% 5.05% 7.38% 8.15%*
Ratios/Supplemental Data:
Net Assets, end of period
(000)........................ $1,601,085 $1,533,478 $1,355,044 $1,358,150 $1,438,197 $1,270,277
Ratio of expenses to average
net assets (before waiver)... .37% .38% .39% .41% .44% .46%*
Ratio of expenses to average
net assets (after waiver).... .24% .32% -- -- -- --
Ratio of net investment income,
including realized and
unrealized gains and losses,
to average net assets (before
waiver)...................... 4.82% 2.83% 3.19% 4.93% 7.11% 7.97%*
Ratio of net investment income,
including realized and
unrealized gains and losses
to average net assets (after
waiver)...................... 4.95% 2.89% -- -- -- --
<CAPTION>
YEAR ENDED AUGUST 31,
-------------------------------------------------------------
1989 1988 1987 1986 1985
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
period......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment
Operations:
Net investment income.......... .083 .061 .053 .065 .082
Net realized and unrealized
gain on investments.......... -- .001 .002 .003 .003
---------- ---------- ---------- ---------- ----------
Total from investment
operations............... .083 .062 .055 .068 .085
Less Distributions:
Dividends from net investment
income....................... (.083) (.062) (.055) (.068) (.085)
---------- ---------- ---------- ---------- ----------
Net Asset Value, end of
period..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total Return.................... 8.65% 6.43% 5.61% 7.01% 8.89%
Ratios/Supplemental Data:
Net Assets, end of period
(000)........................ $1,409,819 $1,469,766 $1,561,268 $1,757,524 $1,583,065
Ratio of expenses to average
net assets (before waiver)... .46% .46% .43% .45% .45%
Ratio of expenses to average
net assets (after waiver).... -- -- -- -- --
Ratio of net investment income,
including realized and
unrealized gains and losses,
to average net assets (before
waiver)...................... 8.31% 6.23% 5.41% 6.79% 8.51%
Ratio of net investment income,
including realized and
unrealized gains and losses
to average net assets (after
waiver)...................... -- -- -- -- --
</TABLE>
------------------
* On an annualized basis.
Note--The Financial Highlights shown for the fiscal years 1991-1995 have
been audited by Deloitte & Touche LLP, independent auditors.
Government Fund
3
<PAGE>
YIELD INFORMATION
Set forth below is yield information for the seven-day period ended April
30, 1995, computed to include and exclude realized and unrealized gains and
losses, and information as to the compounded annualized yield excluding gains
and losses, for the same period.
<TABLE>
<S> <C>
Annualized Yield:
Including gains and losses........................ 5.89%
Excluding gains and losses........................ 5.93%
Compounded Annualized Yield............................ 6.11%
Average Maturity of Portfolio at End of Period......... 48 days
</TABLE>
The yield on Government Fund shares normally will fluctuate on a daily
basis. Therefore, the yield for any given past period is not an indication or
representation by the Government Fund of future yields or rates of return on its
shares. The Government Fund's yield is affected by changes in interest rates on
money market securities, average portfolio maturity, the types and quality of
portfolio securities held, and operating expenses.
On occasion, the Government Fund may compare its yield to (i) the
Donoghue's Government Only Institutional Only Average, an average compiled by
Donoghue'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(Trademark) for money market
accounts offered by the 100 leading banks and thrift institutions in the 10
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 contained in publications such as Morningstar Publications,
Inc., Money Magazine, U.S. News & World Report, Business Week, CDA Investment
Technology, Inc., Forbes and Fortune. As with yield quotations, yield
comparisons should not be considered indicative of the Government Fund's yield
or relative performance for any future period.
THE GOVERNMENT FUND AND ITS OBJECTIVES
The Government Fund is a no-load money fund whose objectives are to seek
current income consistent with liquidity and security of principal by investing
in a portfolio of securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities ('U.S. Government securities'). The Government
Fund enables investors to invest short-term cash reserves in a portfolio of U.S.
Government securities. Government Fund shares are sold and redeemed twice on
each business day at net asset value, and there is no sales or redemption
charge. There can be no assurance that the objectives of the Government Fund
will be attained.
The Government Fund will attempt to accomplish its investment objectives by
investing in a portfolio of U.S. Government securities, with remaining
maturities not exceeding 762 days (25 months). The dollar weighted average
maturity of the Government Fund's portfolio will be 90 days or less.
Securities of the type included in the Government Fund's portfolio have
historically had lower rates of return than commercial obligations but have
involved little risk of loss of principal if held to maturity. However, due to
fluctuations in interest rates, the market value of such securities may vary
during the period of a shareholder's investment in the Government Fund.
The types of securities in which the Government Fund may invest include the
following:
Government Securities: Certain Government securities, including U.S.
Treasury bills, notes and bonds and securities of the Government National
Mortgage Association and the Federal Housing
Government Fund
4
<PAGE>
Administration, are issued or guaranteed by the U.S. Government and
supported by the full faith and credit of the United States. Other U.S.
Government securities are issued or guaranteed by federal agencies or
government-sponsored enterprises and are not direct obligations of the
United States but involve sponsorship or guarantees by Government agencies
or enterprises. These obligations include securities that are supported by
the right of the issuer to borrow from the Treasury, such as obligations of
Federal Home Loan Banks, and securities that are supported only by the
credit of the instrumentality, such as Federal National Mortgage
Association bonds. Because the U.S. Government is not obligated to provide
support to its instrumentalities, the Fund will invest in obligations
issued by these instrumentalities where the Investment Adviser believes
that the credit risk with respect to the issuers is minimal.
Repurchase Agreements: The Government Fund may invest in obligations
which are subject to repurchase agreements with any member bank of the
Federal Reserve System or primary dealer in U.S. Government securities. A
repurchase agreement is an instrument under which the purchaser (i.e., the
Government Fund) acquires the obligation (debt security) and the seller
agrees, at the time of the sale, to repurchase the obligation at a mutually
agreed upon time and price, thereby determining the yield during the
purchaser's holding period. This results in a fixed rate of return
insulated from market fluctuations during that period. As a matter of
operating policy, the Government Fund will not enter into repurchase
agreements with more than seven days to maturity if it would result in the
investment of more than 10% of the value of the Government Fund's net
assets in such repurchase agreements. If a repurchase agreement is
construed to be a collateralized loan, the underlying securities will not
be considered to be owned by the Government Fund but only to constitute
collateral for the seller's obligation to pay the repurchase price and, in
the event of a default by the seller, the Government Fund may suffer time
delays and incur costs or losses in connection with the disposition of the
collateral.
Forward Commitments: The Government Fund may purchase and sell U.S.
Government securities on a when-issued basis or forward commitment basis,
and it may purchase or sell such securities for delayed delivery. These
transactions occur when securities are purchased or sold by the Government
Fund with payment and delivery taking place in the future to secure what is
considered an advantageous yield and price to the Government Fund at the
time of entering into the transaction. The value of the security on the
delivery date may be more or less than its purchase price. If management of
the Government Fund deems it appropriate to do so, the Government Fund may
dispose of a commitment prior to settlement. There can, of course, be no
assurance that the judgments upon which these practices are based will be
accurate, and it is possible that in consequence of these practices the
Government Fund would be required to pay on a settlement date more than the
market value of the purchased securities at that time, or that the
Government Fund would incur a loss by disposing of a commitment on terms
less favorable than those of its original purchase. The Government Fund
will maintain a segregated account with its custodian of cash or U.S.
Government securities in an aggregate amount equal to the amount of its
commitments in connection with such purchase transactions.
'Stripped Coupon' Securities: The Government Fund may invest in
direct obligations of the U.S. Government by purchasing component parts of
U.S. Treasury bonds through the acquisition of deposit receipts which
evidence ownership of direct interest in such component parts of such
bonds.
Investment Restrictions. The Government 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 Government Fund's
outstanding voting securities. Among the more significant restrictions, the
Government Fund may not (1) enter into repurchase
Government Fund
5
<PAGE>
agreements with any one bank or primary dealer if immediately thereafter
more than 5% of the value of its total assets would be invested in
repurchase agreements with such bank or primary dealer and (2) borrow money
except from banks for temporary purposes and in an amount not exceeding 10%
of the value of its total net assets, or mortgage, pledge or hypothecate
its assets except in connection with any such borrowing and in amounts not
in excess of the dollar amounts borrowed. (As a matter of operating policy,
the Government Fund will not invest in securities if outstanding borrowings
exceed 5% of the net asset value.)
INVESTMENT ADVISER
The investment adviser to the Government Fund is Fund Asset Management,
L.P. ('FAM'), a subsidiary of Merrill Lynch & Co., Inc., a publicly held
corporation.
FAM, subject to the general supervision of the Trust's Board of Trustees
and in conformance with the stated policies of the Government Fund, renders
investment advice to the Government Fund and is responsible for the overall
management of the Government Fund's business affairs. For the fiscal year ended
April 30, 1995, FAM was entitled to receive investment advisory fees of
$4,718,056 or .33% of the Government Fund's average net assets. FAM has agreed
to waive a portion of its fee so that the effective fee will be .20% of the
Government Fund's average daily net assets. Such waiver amounted to $1,831,019
during the fiscal year ended April 30, 1995, or .13% of the Fund's average net
assets during the period. FAM therefore received $2,887,037 or .20% of the
Fund's average net assets during the fiscal year ended April 30, 1995. FAM may
discontinue waiver of the fee in whole or in part at any time without notice.
FAM, as investment adviser, has agreed that, in the event the operating
expenses of the Government Fund (including the fees payable to FAM but excluding
taxes, interest, brokerage and extraordinary expenses) for any fiscal year
exceed the expense limitations applicable to the Government Fund imposed by
state securities laws or any regulations thereunder, it will reduce its fees by
the extent of such excess and, if required pursuant to any such laws or
regulations, will annually reimburse the Government Fund in the amount of such
excess. During the fiscal year ended April 30, 1995, the Government Fund's total
expenses were $3,553,235 or .24% of its average net assets. If FAM had not
waived a portion of its fee, the Government Fund's total expenses would have
been $5,384,254 or .37% of its average net assets.
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN
The Government Fund has adopted a Distribution and Shareholder Servicing
Plan (the 'Plan') pursuant to Rule 12b-1 under the Investment Company Act of
1940. The Plan permits FAM to pay a fee to MLFD which in turn is authorized to
make payments to securities dealers with which MLFD has entered into selected
dealers agreements. MLFD may also use a portion of the fee it receives under the
Plan to compensate administrators who perform administrative services that would
otherwise be performed by FAM or its agent. The purpose of the Plan is to
promote distribution of the Government Fund's shares and to enhance the
provision of shareholder services. The Government Fund is not required or
permitted under the Plan to make payments over and above its investment advisory
fee; the Plan merely permits the reallocation of a portion of the advisory fee
FAM receives to pay for distribution-related and shareholder servicing
activities. For the fiscal year ended April 30, 1995, the fees paid to MLFD
under the Plan totalled $509,758 or .04% of the Government Fund's average net
assets, all of which was paid to MLFD for providing distribution-related
services in connection with Government Fund shares.
Government Fund
6
<PAGE>
PROSPECTUS
AUGUST 25, 1995
MERRILL LYNCH TREASURY FUND
OF MERRILL LYNCH FUNDS FOR INSTITUTIONS SERIES
ONE FINANCIAL CENTER FOR GENERAL INFORMATION AND PURCHASES CALL
BOSTON, MASSACHUSETTS 02111-2646 617-357-1460 OR TOLL FREE 800-225-1576
The Treasury Fund is a no-load money fund whose objectives are to seek
current income consistent with liquidity and security of principal. The Fund
will attempt to achieve its investment objectives by investing in a portfolio of
U.S. Treasury securities. The Treasury Fund is a series of Merrill Lynch Funds
For Institutions Series (the 'Trust'), a diversified, open-end management
investment company. The Treasury Fund seeks to maintain a constant $1.00 net
asset value per share, although this cannot be assured. An investment in the
Treasury Fund is neither insured nor guaranteed by the U.S. Government. For more
information on the Fund's investment objectives, please see 'The Treasury Fund
and Its Objectives,' page 4.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Prospectus sets forth in concise form the information about the
Treasury Fund that a prospective investor should know before investing in the
Treasury Fund. Investors should read and retain this Prospectus for future
reference. Additional information about the Treasury Fund has been filed with
the Securities and Exchange Commission in a Statement of Additional Information
and is available upon request and without charge. Investors and prospective
investors may obtain a copy of the Statement of Additional Information, which is
dated August 25, 1995 by writing to or calling Merrill Lynch Treasury Fund at
the above address and telephone numbers. The Statement of Additional Information
has been incorporated by reference into this Prospectus.
The minimum initial purchase for the Treasury Fund is $25,000 per investor.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE PAGE
---- ----
<S> <C> <C> <C>
Fee Table........................ 2 Management....................... A-2
Financial Highlights............. 3 Purchase of Shares............... A-3
Yield Information................ 4 Redemptions...................... A-5
The Treasury Fund and Its Dividends........................ A-8
Objectives..................... 4 Net Asset Value.................. A-8
Investment Adviser............... 5 Taxes............................ A-9
Distribution and Shareholder Portfolio Transactions........... A-10
Servicing Plan................. 6 Exchange Privilege............... A-10
Appendix Additional Information........... A-11
Investors for Whom the Funds Account Application.............. A-17
are Designed.................. A-1 Authorization for Redemption by
Investment Adviser............. A-2 Check Form...................... A-19
Distributor.................... A-2
</TABLE>
<PAGE>
FEE TABLE
<TABLE>
<CAPTION>
TREASURY
FUND
--------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases................. None
Deferred Sales Charge..................................... None
Sales Charge Imposed on Dividend Reinvestments............ None
Redemption Fee............................................ None
Exchange Fee.............................................. None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE
NET ASSETS)
Investment Advisory Fees.................................. .20%*
---
Other Expenses
Dividend and Transfer Agency Fees...................... .03%
Other Fees and Expenses................................ .06%
---
Total Other Expenses................................. .09%
---
TOTAL FUND OPERATING EXPENSES............................. .29%
---
---
</TABLE>
------------------
* The Fund's Investment Adviser has agreed to waive a portion of its fee so that
the effective fee will be .20% of the Fund's average daily net assets. If the
Investment Adviser had not agreed to waive a portion of the investment
advisory fee, Total Fund Operating Expenses would be .44% of average net
assets. The Investment Adviser may discontinue the waiver of investment
advisory fees without notice at any time.
EXAMPLE:
<TABLE>
<CAPTION>
CUMULATIVE EXPENSES PAID
FOR THE PERIOD OF:
----------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following
expenses on a $1,000 investment
assuming (1) an operating expense
ratio of .29%, (2) a 5% annual return
throughout the period and (3)
redemption at the end of the period... $ 3 $ 9 $ 16 $ 37
</TABLE>
The foregoing Fee Table is intended to assist investors in understanding
the costs and expenses that a shareholder in the Treasury Fund will bear
directly or indirectly. The Example set forth above assumes reinvestment of all
dividends and distributions and uses a five percent annual rate of return as
mandated by Securities and Exchange Commission regulations. The actual rate of
return on the Treasury Fund's shares will vary, and may be more or less than
five percent. The Example should not be considered a representation of past or
future expenses, and actual expenses may be more or less than those assumed for
purposes of the Example. For a more detailed description of such costs and
expenses, see 'Investment Adviser,' 'Distributor,' 'Purchase of Shares' and
'Redemptions.'
Treasury Fund
2
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of the Merrill Lynch Treasury Fund outstanding
throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 18,
YEAR ENDED APRIL 30, 1989+ TO
---------------------------------------------------- APRIL 30,
1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income......................... .045 .027 .028 .045 .066 .028
Net realized and unrealized gain on
investments................................. -- -- .001 .002 .003 --
-------- -------- -------- -------- -------- ------------
Total from investment operations............ .045 .027 .029 .047 .069 .028
Less Distributions:
Dividends from net investment income.......... (.045) (.027) (.029) (.047) (.069) (.028)
-------- -------- -------- -------- -------- ------------
Net Asset Value, end of period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- ------------
-------- -------- -------- -------- -------- ------------
Total Return.................................... 4.68% 2.82% 2.97% 4.79% 7.17% 7.75%*
Ratios/Supplemental Data:
Net Assets, end of period (000)............... $342,844 $266,953 $359,318 $320,686 $391,643 $ 64,392
Ratio of expenses to average net assets
(before waiver)............................. .44% .45% .45% .46% .50% .88%*
Ratio of expenses to average net assets (after
waiver)..................................... .29% .39% -- -- .47% .51%*
Ratio of net investment income, including
realized and unrealized gains and losses, to
average net assets (before waiver).......... 4.58% 2.67% 2.93% 4.69% 6.63% 7.79%*
Ratio of net investment income, including
realized and unrealized gains and losses, to
average net assets (after waiver)........... 4.73% 2.73% -- -- 6.66% 8.16%*
</TABLE>
------------------
* On an annualized basis.
+ Commencement of operations.
Note--The Financial Highlights shown for the fiscal years 1991-1995 have
been audited by Deloitte & Touche LLP, independent auditors.
Treasury Fund
3
<PAGE>
YIELD INFORMATION
Set forth below is yield information for the seven-day period ended April
30, 1995, computed to include and exclude realized and unrealized gains and
losses, and information as to the compounded annualized yield excluding gains
and losses, for the same period.
<TABLE>
<S> <C>
Annualized Yield:
Including gains and losses........................ 5.40%
Excluding gains and losses........................ 5.71%
Compounded Annualized Yield............................ 5.88%
Average Maturity of Portfolio at End of Period......... 45 days
</TABLE>
The yield on Treasury Fund shares normally will fluctuate on a daily basis.
Therefore, the yield for any given past period is not an indication or
representation by the Treasury Fund of future yields or rates of return on its
shares. The Treasury Fund's yield is affected by changes in interest rates on
money market securities, average portfolio maturity, the types and quality of
portfolio securities held, and operating expenses.
On occasion, the Treasury Fund may compare its yield to (i) the Donoghue's
100% U.S. Treasury Funds Average, an average compiled by Donoghue's Money Fund
Report, a widely recognized independent publication that monitors the
performance of money market mutual funds, (ii) the average yield reported by the
Bank Rate Monitor National Index(Trademark) for money market accounts offered by
the 100 leading banks and thrift institutions in the 10 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 contained
in publications such as Morningstar Publications, Inc., Money Magazine, U.S.
News & World Report, Business Week, CDA Investment Technology, Inc., Forbes and
Fortune. As with yield quotations, yield comparisons should not be considered
indicative of the Treasury Fund's yield or relative performance for any future
period.
THE TREASURY FUND AND ITS OBJECTIVES
The Treasury Fund is a no-load money fund whose objectives are to seek
current income consistent with liquidity and security of principal. The
Treasury Fund enables investors to invest short-term cash reserves in a
portfolio of direct obligations of the U.S. Treasury. Treasury Fund shares
are sold and redeemed twice on each business day at net asset value, and
there is no sales or redemption charge. There can be no assurance that
the objectives of the Treasury Fund will be attained.
The Treasury Fund will attempt to accomplish its investment objectives by
investing in a portfolio of U.S. Treasury securities with remaining maturities
not exceeding 762 days (25 months). The dollar weighted average maturity of the
Treasury Fund's portfolio will be 90 days or less.
Securities of the type included in the Treasury Fund's portfolio have
historically had lower rates of return than commercial obligations but have
involved little risk of loss of principal if held to maturity. However, due to
fluctuation in interest rates, the market value of such securities may vary
during the period of a shareholder's investment in the Treasury Fund.
The types of securities in which the Treasury Fund may invest include the
following:
U.S. Treasury Securities: The Treasury Fund will invest in Treasury
bills, notes and other direct obligations of the U.S. Treasury.
Treasury Fund
4
<PAGE>
Forward Commitments: The Treasury Fund may purchase and sell U.S.
Government securities on a when-issued or forward commitment basis and it
may purchase or sell such securities for delayed delivery. These
transactions occur when securities are purchased or sold by the Treasury
Fund with payment and delivery taking place in the future to secure what is
considered an advantageous yield and price to the Treasury Fund at the time
of entering into the transaction. The value of the security on the delivery
date may be more or less than its purchase price. If management of the
Treasury Fund deems it appropriate to do so, the Treasury Fund may dispose
of a commitment prior to settlement. There can, of course, be no assurance
that the judgments upon which these practices are based will be accurate,
and it is possible that in consequence of these practices the Treasury Fund
would be required to pay on a settlement date more than the market value of
the purchased securities at that time, or that the Treasury Fund would
incur a loss by disposing of a commitment on terms less favorable than
those of its original purchase. The Treasury Fund will maintain a
segregated account with its custodian of cash or U.S. Government securities
in an aggregate amount equal to the amount of its commitments in connection
with such purchase transactions.
Repurchase Agreements: The Treasury Fund may invest up to 10% of its
total assets in obligations subject to repurchase agreements with any
member bank of the Federal Reserve System or primary dealers in Treasury
securities. This limitation on the Treasury Fund's investment in
obligations subject to repurchase agreements may adversely affect the
Treasury Fund's yield under certain market conditions.
A repurchase agreement is an instrument under which the purchaser
(i.e., the Treasury Fund) acquires the obligation (debt security) and the
seller agrees, at the time of the sale, to repurchase the obligation at a
mutually agreed upon time and price, thereby determining the yield during
the purchaser's holding period. This results in a fixed rate of return
insulated from market fluctuations during such period. Repurchase
agreements usually are for short periods, such as under one week. If a
repurchase agreement is construed to be a collateralized loan, the
underlying securities will not be considered to be owned by the Treasury
Fund but only to constitute collateral for the seller's obligation to pay
the repurchase price and, in the event of a default by the seller, the
Treasury Fund may suffer time delays and incur costs or losses in
connection with the disposition of the collateral.
Investment Restrictions: The Treasury 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 Treasury Fund's
outstanding voting securities. Among the more significant restrictions, the
Treasury Fund may not (1) enter into repurchase agreements if immediately
thereafter more than 10% of the value of its total assets would be invested
in repurchase agreements and (2) borrow money except from banks for
temporary purposes and in an amount not exceeding 10% of the value of its
total net assets, or mortgage, pledge or hypothecate its assets except in
connection with any such borrowing and in amounts not in excess of the
dollar amounts borrowed. (As a matter of operating policy, the Treasury
Fund will not invest in securities if outstanding borrowings exceed 5% of
net asset value.)
INVESTMENT ADVISER
The investment adviser to the Treasury Fund is Fund Asset Management, L.P.
('FAM'), a subsidiary of Merrill Lynch & Co., Inc., a publicly held corporation.
FAM, subject to the general supervision of the Trust's Board of Trustees
and in conformance with the stated policies of the Treasury Fund, renders
investment advice to the Treasury Fund and is responsible for the overall
Treasury Fund
5
<PAGE>
management of the Treasury Fund's business affairs. For the fiscal year ended
April 30, 1995, FAM was entitled to receive investment advisory fees of
$1,104,980 or .35% of the Treasury Fund's average net assets. FAM has agreed to
waive a portion of its fee so that the effective fee will be .20% of the
Treasury Fund's average daily net assets. Such waiver amounted to $473,563
during the fiscal year ended April 30, 1995, or .15% of the Fund's average net
assets during the period. FAM therefore received $631,417 or .20% of the Fund's
average net assets during the fiscal year ended April 30, 1995. FAM may
discontinue waiver of the fee in whole or in part at anytime without notice.
FAM, as investment adviser, has agreed that, in the event the operating
expenses of the Treasury Fund (including the fees payable to FAM but excluding
taxes, interest, brokerage and extraordinary expenses) for any fiscal year
exceed the expense limitations applicable to the Treasury Fund imposed by state
securities laws and published regulations thereunder, it will reduce its fee by
the extent of such excess and, if required pursuant to any such laws or
regulations, will reimburse the Treasury Fund in the amount of such excess.
During the fiscal year ended April 30, 1995, the Treasury Fund's total expenses
were $925,789 or .29% of its average net assets. If FAM had not waived a portion
of its fee, the Treasury Fund's total expenses would have been $1,399,352 or
.44% of its average net assets.
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN
The Treasury Fund has adopted a Distribution and Shareholder Servicing Plan
(the 'Plan') pursuant to Rule 12b-1 under the Investment Company Act of 1940.
The Plan permits FAM to pay a fee to MLFD which in turn is authorized to make
payments to securities dealers with which MLFD has entered into selected dealers
agreements. MLFD may also use a portion of the fee it receives under the Plan to
compensate administrators who perform administrative services that would
otherwise be performed by FAM or its agent. The purpose of the Plan is to
promote distribution of the Treasury Fund's shares and to enhance the provision
of shareholder services. The Treasury Fund is not required or permitted under
the Plan to make payments over and above its investment advisory fee; the Plan
merely permits the reallocation of a portion of the advisory fee FAM receives to
pay for distribution-related and shareholder servicing activities. For the
fiscal year ended April 30, 1995, the fees paid to MLFD under the Plan totalled
$173,519 or .06% of the Treasury Fund's average net assets, all of which was
paid to MLFD for providing distribution-related services in connection with
Treasury Fund shares.
Treasury Fund
6
<PAGE>
PROSPECTUS
AUGUST 25, 1995
MERRILL LYNCH INSTITUTIONAL TAX-EXEMPT FUND
OF MERRILL LYNCH FUNDS FOR INSTITUTIONS SERIES
ONE FINANCIAL CENTER FOR GENERAL INFORMATION AND PURCHASES CALL
BOSTON, MASSACHUSETTS 02111-2646 617-357-1460 OR TOLL FREE 800-225-1576
The Tax-Exempt Fund is a no-load money fund whose objectives are to seek
current income exempt from Federal income taxes, preservation of capital and
liquidity available from investing in a diversified portfolio of short-term,
high quality Tax-Exempt Securities. The Tax-Exempt Fund is a series of Merrill
Lynch Funds For Institutions Series (the 'Trust'), a diversified, open-end
management investment company. The Tax-Exempt Fund seeks to maintain a constant
$1.00 net asset value per share, although this cannot be assured. An investment
in the Tax-Exempt Fund is neither insured nor guaranteed by the U.S. Government.
For more information on the Fund's investment objectives, please see 'The Tax-
Exempt Fund and Its Objectives,' page 4.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Prospectus sets forth in concise form the information about the
Tax-Exempt Fund that a prospective investor should know before investing in the
Tax-Exempt Fund. Investors should read and retain this Prospectus for future
reference. Additional information about the Tax-Exempt Fund has been filed with
the Securities and Exchange Commission in a Statement of Additional Information
and is available upon request and without charge. Investors and prospective
investors may obtain a copy of the Statement of Additional Information, which is
dated August 25, 1995, by writing to or calling Merrill Lynch Institutional
Tax-Exempt Fund at the above address and telephone numbers. The Statement of
Additional Information has been incorporated by reference into this Prospectus.
The minimum initial purchase for the Tax-Exempt Fund is $25,000 per
investor.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE PAGE
---- ----
<S> <C> <C> <C>
Fee Table........................ 2 Distributor...................... A-2
Financial Highlights............. 3 Management....................... A-2
Yield Information................ 4 Purchase of Shares............... A-3
The Tax-Exempt Fund and Its Redemptions...................... A-5
Objectives..................... 4 Dividends........................ A-8
Investment Adviser............... 8 Net Asset Value.................. A-8
Distribution and Shareholder Taxes............................ A-9
Servicing Plan................. 9 Portfolio Transactions........... A-10
Special Tax Considerations....... 9 Exchange Privilege............... A-10
Appendix Additional Information........... A-11
Investors for Whom the Funds Account Application.............. A-17
are Designed.................. A-1 Authorization for Redemption by
Investment Adviser............. A-2 Check Form...................... A-19
</TABLE>
<PAGE>
FEE TABLE
<TABLE>
<CAPTION>
TAX-EXEMPT
FUND
----------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases................. None
Deferred Sales Charge..................................... None
Sales Charge Imposed on Dividend Reinvestments............ None
Redemption Fee............................................ None
Exchange Fee.............................................. None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE
NET ASSETS)
Investment Advisory Fees.................................. .20%*
---
Other Expenses
Dividend and Transfer Agency Fees...................... .02%
Other Fees and Expenses................................ .09%
---
Total Other Expenses................................. .11%
---
TOTAL FUND OPERATING EXPENSES............................. .31%
---
---
</TABLE>
------------------
* The Fund's Investment Adviser has agreed to waive a portion of its fee so that
the effective fee will be .20% of the Fund's average daily net assets. If the
Investment Adviser had not agreed to waive a portion of the management fee,
Total Fund Operating Expenses would be .56% of average net assets. The
Investment Adviser may discontinue the waiver of investment advisory fees
without notice at any time.
EXAMPLE:
<TABLE>
<CAPTION>
CUMULATIVE EXPENSES PAID
FOR THE PERIOD OF:
----------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following
expenses on a $1,000 investment
assuming (1) an operating expense
ratio of .31%, (2) a 5% annual return
throughout the period and (3)
redemption at the end of the period... $ 3 $ 10 $ 17 $ 39
</TABLE>
The foregoing fee table is intended to assist investors in understanding
the costs and expenses that a shareholder in the Tax-Exempt Fund will bear
directly or indirectly. The example set forth above assumes reinvestment of all
dividends and distributions and uses a five percent annual rate of return as
mandated by Securities and Exchange Commission regulations. The actual rate of
return on the Tax-Exempt Fund's shares will vary, and may be more or less than
five percent. The example should not be considered a representation of past or
future expenses, and actual expenses may be more or less than those assumed for
purposes of the example. For a more detailed description of such costs and
expenses, see 'Investment Adviser,' 'Distributor,' 'Purchase of Shares' and
'Redemptions.'
Tax-Exempt Fund
2
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of the Merrill Lynch Institutional Tax-Exempt
Fund outstanding throughout each period:
<TABLE>
<CAPTION>
FIVE
YEAR MONTHS
ENDED ENDED YEAR ENDED NOVEMBER 30,
APRIL 30, APRIL 30, ----------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
--------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income......................... .03 .01 .02 .03 .04 .05 .06
Less dividends from net investment income..... (.03 ) (.01 ) (.02) (.03) (.04) (.05) (.06)
--------- --------- -------- -------- -------- -------- --------
Net Asset Value, end of period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- -------- -------- -------- -------- --------
--------- --------- -------- -------- -------- -------- --------
Total Return................................... 3.20 % 2.14 %* 2.14% 2.74% 4.33% 5.55% 6.16%
Ratios/Supplemental Data:
Net Assets, end of period (000)............... $403,903 $390,375 $278,697 $329,254 $377,154 $310,344 $281,839
Ratio of expenses to average net assets
(before waiver)............................. .56% .59%* .62% .61% .61% .63% .63%
Ratio of expenses to average net assets (after
waiver)..................................... .31% .34%* .45% .53% .54% .56% .55%
Ratio of net investment income to average net
assets (before waiver)...................... 2.90% 1.92%* 1.96% 2.67% 4.21% 5.36% 5.92%
Ratio of net investment income to average net
assets (after waiver)....................... 3.15% 2.17%* 2.13% 2.75% 4.28% 5.43% 6.00%
<CAPTION>
YEAR ENDED NOVEMBER 30,
-----------------------------------------
1988 1987 1986 1985
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value, beginning of period........... $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income......................... .04 .04 .04 .04
Less dividends from net investment income..... (.04) (.04) (.04) (.04)
-------- -------- -------- --------
Net Asset Value, end of period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- --------
-------- -------- -------- --------
Total Return................................... 4.86% 4.11% 4.57% 4.86%
Ratios/Supplemental Data:
Net Assets, end of period (000)............... $375,209 $679,892 $802,347 $214,798
Ratio of expenses to average net assets
(before waiver)............................. .59% .58% .62% .72%
Ratio of expenses to average net assets (after
waiver)..................................... .52% .47% .45% .45%
Ratio of net investment income to average net
assets (before waiver)...................... 4.62% 3.90% 4.13% 4.50%
Ratio of net investment income to average net
assets (after waiver)....................... 4.69% 4.01% 4.30% 4.77%
</TABLE>
------------------
* On an annualized basis.
Note--The Financial Highlights shown for the fiscal years 1990-1995 have
been audited by Deloitte & Touche LLP, independent auditors.
Tax-Exempt Fund
3
<PAGE>
YIELD INFORMATION
Set forth below is yield information for the seven-day period ended April
30, 1995, computed to include and exclude realized and unrealized gains and
losses, and information as to the compounded annualized yield excluding gains
and losses, for the same period.
<TABLE>
<S> <C>
Annualized Yield:
Including gains and losses........................ 4.33%
Excluding gains and losses........................ 4.33%
Compounded Annualized Yield............................ 4.42%
Average Maturity of Portfolio at End of Period......... 34 days
</TABLE>
The yield on Tax-Exempt Fund shares normally will fluctuate on a daily
basis. Therefore, the yield for any given past period is not an indication or
representation by the Tax-Exempt Fund of future yields or rates of return on its
shares. The Tax-Exempt Fund's yield is affected by changes in interest rates on
money market securities, average portfolio maturity, the types and quality of
portfolio securities held, and operating expenses.
On occasion, the Tax-Exempt Fund may compare its yield to (i) the
Donoghue's Tax-Free Fund Average, an average compiled by Donoghue'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(Trademark) for money market accounts offered by
the 100 leading banks and thrift institutions in the 10 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 contained
in publications such as Morningstar Publications, Inc., Money Magazine, U.S.
News & World Report, Business Week, CDA Investment Technology, Inc., Forbes and
Fortune. As with yield quotations, yield comparisons should not be considered
indicative of the Tax-Exempt Fund's yield or relative performance for any future
period.
THE TAX-EXEMPT FUND AND ITS OBJECTIVES
The Tax-Exempt Fund is a no-load money fund whose objectives are to seek
current income exempt from Federal income taxes, preservation of capital and
liquidity available from investing in a diversified portfolio of short-term,
high-quality Tax-Exempt Securities. The Tax-Exempt Fund enables investors to
invest short-term cash reserves in a portfolio of high-quality tax-exempt 'money
market' securities. Tax-Exempt Fund shares are sold and redeemed twice on each
business day at the net asset value next determined after an order is received,
and there is no sales or redemption charge. There can be no assurance that the
objectives of the Tax-Exempt Fund will be attained.
The Tax-Exempt Fund will attempt to accomplish its objectives of seeking
current income exempt from Federal income taxes, preservation of capital and
liquidity by investing in a diversified portfolio of obligations issued by or on
behalf of states, territories and possessions of the United States and the
District of Columbia and their political subdivisions, agencies and
instrumentalities, the interest from which is exempt from Federal income tax
(such obligations are herein referred to as 'Tax-Exempt Securities'). The two
principal classifications of Tax-Exempt Securities are 'general obligation' and
'revenue' bonds. The investment objectives of the Tax-Exempt Fund described
above in this paragraph are a fundamental policy of the Tax-Exempt Fund and may
not be changed without a vote of a majority of the outstanding shares of the
Tax-Exempt Fund. There can be no assurance that the objectives of the Tax-Exempt
Fund will be attained. The Tax-Exempt
Tax-Exempt Fund
4
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Fund may not purchase any securities other than Tax-Exempt Securities, and, as a
matter of operating policy, the Tax-Exempt Fund under normal circumstances will
invest at least 80% of its assets in Tax-Exempt Securities which are not subject
to the alternative minimum tax described under 'Special Tax Considerations'.
The Tax-Exempt Fund will seek to achieve its objectives by investing
exclusively in securities with maturities not exceeding 397 days (13 months),
principally including:
(i) obligations issued by or on behalf of states, territories and
possessions of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities, the interest from
which is exempt from Federal income tax and which are rated AAA or AA by
Standard & Poor's Rating Group ('S&P') or by Fitch Investors Services, Inc.
('Fitch'), or Aaa or Aa by Moody's Investors Service, Inc. ('Moody's') and
unrated Tax-Exempt Securities which, in the judgment of the Trustees of the
Trust, have as nearly as possible the same characteristics and quality as
bonds having the above ratings;
(ii) municipal notes (tax anticipation notes, bond anticipation notes
and revenue anticipation notes) rated MIG-1 or MIG-2 by Moody's, SP-1 or
SP-2 on the short-term debt-rating scale of S&P, or F-1 or F-2 by Fitch or,
if the notes are not rated, are obligations which, in the judgment of the
trustees of the Trust, are of a quality equivalent to obligations rated
MIG-1 or MIG-2 or SP-1 or SP-2 or F-1 or F-2;
(iii) variable rate demand notes and participations therein;
(iv) short-term tax-exempt commercial paper obligations (short-term
unsecured promissory notes issued to finance short-term credit needs) which
are rated at least A-1 by S&P, Prime-1 by Moody's or their equivalents as
determined by the Trustees of the Trust; and
(v) floating rate tax-exempt demand notes on which the Fund may demand
payment from the issuer at par value plus accrued interest on short notice.
The Appendix to this Prospectus and Appendix B to the Statement of
Additional Information sets forth a description of the above rating symbols. The
Tax-Exempt Fund presently contemplates that it will not invest more than 25% of
its total assets in Tax-Exempt Securities whose issuers are located in the same
state. The Tax-Exempt Fund does not intend to invest more than 25% of its total
assets in industrial development bonds where the entities supplying the revenues
from which the bonds are to be paid are in the same industry. Preservation of
capital is a prime investment objective of the Tax-Exempt Fund, and, while the
types of short-term Tax-Exempt Securities in which the Tax-Exempt Fund invests
are not completely risk free, the Tax-Exempt Fund believes that securities
having the rating characteristics described above have a lower principal risk
than lower rated obligations and generally have a lower principal risk than
longer term obligations which entail the risk of changing conditions over a
longer period of time.
Certain of the instruments in which the Tax-Exempt Fund invests, including
variable rate demand notes ('VRDNs') and derivative or synthetic municipal
instruments ('Derivative Products'), effectively provide the Tax-Exempt Fund
with economic interests in long-term municipal bonds, coupled with rights to
demand payment of the principal amounts of such instruments from designated
counterparties. Under Securities and Exchange Commission rules, the Tax-Exempt
Fund treats these instruments as having maturities shorter than the stated
maturity dates of the notes, in the case of VRDNs, or the long-term bonds
underlying Derivative Products (the 'Underlying Bonds'). Such maturities are
sufficiently short-term to allow such instruments to qualify as eligible
investments for money market funds such as the Tax-Exempt Fund. A demand right
is dependent on the financial ability of the counterparty, which is typically a
bank, broker-dealer or other financial institution, to purchase the instrument
at its principal amount. In addition, the right of the Tax-Exempt Fund to demand
payment from a
Tax-Exempt Fund
5
<PAGE>
counterparty may be subject to certain conditions, including the
creditworthiness of the instrument or the Underlying Bond. If a counterparty is
unable to purchase the instrument or, because of conditions on the right of the
Tax-Exempt Fund to demand payment, the counterparty is not obligated to purchase
the instrument on demand, the Tax-Exempt Fund may be required to dispose of the
instrument or the Underlying Bond in the open market, which may be at a price
which adversely affects the Tax-Exempt Fund's net asset value.
VRDNs and participation interests in VRDNs held by a financial institution
('Participating VRDNs') are tax-exempt obligations which utilize a floating or
variable interest rate adjustment formula and provide an unconditional right of
demand to receive payment of the unpaid principal balance plus accrued interest
on a short-notice period. The interest rates are adjustable at periodic
intervals to some prevailing market rate for similar investments, such
adjustment formula being calculated to maintain the market value of the VRDN at
approximately the par value of the VRDN upon the adjustment date. The
adjustments are frequently based upon the prime rate of a bank or some other
appropriate interest rate adjustment index. Because of the interest rate
adjustment formula on VRDNs (including Participating VRDNs), VRDNs are not
comparable to fixed rate securities. The Tax-Exempt Fund's yield on VRDNs will
decline and its shareholders will forego the opportunity for capital
appreciation during periods when prevailing interest rates have declined. On the
other hand, during periods when prevailing interest rates have increased, the
Tax-Exempt Fund's yield on VRDNs will increase and its shareholders will have a
reduced risk of capital depreciation. See the Statement of Additional
Information for further information regarding VRDNs.
The Tax-Exempt Fund may invest in a variety of Derivative Products.
Derivative Products are typically structured by a bank, broker-dealer or other
financial institution. A Derivative Product generally consists of a trust or
partnership through which the Fund holds an interest in one or more Underlying
Bonds coupled with a conditional right to sell ('put') the Fund's interest in
the Underlying Bonds at par plus accrued interest to a financial institution (a
'Liquidity Provider'). Typically, a Derivative Product is structured as a trust
or partnership which provides for pass-through tax-exempt income. There are
currently three principal types of derivative structures: (1) 'Tender Option
Bonds', which are instruments which grant the holder thereof the right to put an
Underlying Bond at par plus accrued interest at specified intervals to a
Liquidity Provider; (2) 'Swap Products', in which the trust or partnership swaps
the payments due on an Underlying Bond with a swap counterparty who agrees to
pay a floating municipal money market interest rate; and (3) 'Partnerships',
which allocate to the partners income, expenses, capital gains and losses in
accordance with a governing partnership agreement. The Tax-Exempt Fund may also
invest in other forms of Derivative Products.
Investments in Derivative Products raise certain tax, legal, regulatory and
accounting issues which may not be presented by investments in other Tax-Exempt
Securities. There is some risk that certain issues could be resolved in a manner
which could adversely impact the performance of the Tax-Exempt Fund. For
example, the tax-exempt treatment of the interest paid to holders of Derivative
Products is premised on the legal conclusion that the holders of such Derivative
Products have an ownership interest in the Underlying Bonds. While the Fund
receives an opinion of legal counsel to the effect that the income from each
Derivative Product is tax-exempt to the same extent as the Underlying Bond, the
Internal Revenue Service (the 'IRS') has not issued a ruling on this subject.
Were the IRS to issue an adverse ruling, there is a risk that the interest paid
on such Derivative Products would be deemed taxable.
The Tax-Exempt Fund may purchase and sell tax-exempt securities on a
when-issued basis or forward commitment basis, and it may purchase or sell such
securities for delayed delivery. These transactions occur when securities are
purchased or sold by the Tax-Exempt Fund with payment and delivery taking place
in the future to secure what is considered an advantageous yield and price to
the Tax-Exempt Fund at the time of
Tax-Exempt Fund
6
<PAGE>
entering into the transaction. The value of the security on the delivery date
may be more or less than its purchase price. If management of the Tax-Exempt
Fund deems it appropriate to do so, the Tax-Exempt Fund may dispose of a
commitment prior to settlement. There can, of course, be no assurance that the
judgments upon which these practices are based will be accurate, and it is
possible that in consequence of these practices the Tax-Exempt Fund would be
required to pay on a settlement date more than the market value of the purchased
securities at that time, or the Tax-Exempt Fund would incur a loss by disposing
of a commitment on terms less favorable than those of its original purchase. The
Tax-Exempt Fund will maintain a segregated account with its custodian of cash or
tax-exempt securities in an aggregate amount equal to the amount of its
commitments in connection with such purchase transactions.
Management of the Tax-Exempt Fund will endeavor to be as fully invested as
reasonably practicable to maximize the yield on the Tax-Exempt Fund's portfolio.
However, because the Tax-Exempt Fund does not intend to realize taxable
investment income, it will not invest in taxable short-term money market
securities (other than securities subject to the alternative minimum tax
described under 'Special Tax Considerations'). Accordingly, there may be times
when the Tax-Exempt Fund has uninvested cash resulting from an influx of cash
due to large purchases of shares or maturities of portfolio securities or
resulting from the need to maintain a reserve for redemptions. The yield on the
portfolio could also be negatively affected from time to time by the lack of
availability of short-term, high-quality Tax-Exempt Securities. The Tax-Exempt
Fund reserves the right to suspend or otherwise limit sales of its shares if, as
a result of difficulties in acquiring portfolio securities, it is determined
that it is not in the interests of the Tax-Exempt Fund's shareholders to issue
additional shares. See 'Purchase of Shares.'
As is described in the Statement of Additional Information, the Tax-Exempt
Fund has the authority, subject to certain conditions, to purchase securities
with puts.
As indicated under 'Redemptions,' payments of proceeds upon redemption of
shares generally will be made on the same day as a redemption request in proper
form is received. Tax-Exempt Securities generally do not trade on the basis of
same-day settlements. As a result, the Fund may be required to maintain cash
reserves or incur temporary bank borrowings so that it can make such redemption
payments. This will reduce the Tax-Exempt Fund's yield. The Trustees will
re-examine the Tax-Exempt Fund's policy of making redemption payments on the
date redemption orders are received if that policy has a significant impact on
the Tax-Exempt Fund's yield; however, redemption payments will in any case be
made within seven days of the date of redemption unless the Tax-Exempt Fund is
permitted to suspend payments for a period longer than seven days under the
circumstances described in the Appendix to this Prospectus under 'Redemptions.'
MATURITY AND QUALITY STANDARDS
As a money market fund, the Tax-Exempt Fund is required to meet certain
maturity and quality standards as set forth below.
Short-Term Maturity Standards. All of the investments of the Tax-Exempt
Fund will be in securities with remaining maturities of 397 days (13 months) or
less. The dollar weighted average maturity of the Tax-Exempt Fund's portfolio
will be 90 days or less. The maturities of VRDNs (including Participating VRDNs)
are deemed to be the longer of (i) the notice period required before the
Tax-Exempt Fund is entitled to receive payment of the principal amount of the
VRDN on demand or (ii) the period remaining until the VRDN's next interest rate
adjustment. If not redeemed by the Tax-Exempt Fund through the demand feature,
VRDNs mature on a specified date which may range up to thirty years from the
date of issuance.
Tax-Exempt Fund
7
<PAGE>
Quality Standards. The Tax-Exempt Fund's portfolio investments in
Tax-Exempt Securities will be limited to those obligations which are rated, or
issued by issuers who have been rated, in one of the two highest rating
categories for short-term municipal debt obligations by a nationally recognized
statistical rating organization (an 'NRSRO') or, if not rated, will be of
comparable quality as determined by the trustees of the Trust. The Tax-Exempt
Fund's investments in Tax-Exempt Securities (which must have maturities at the
date of purchase of 397 days (13 months) or less) will be in issuers who have
received from the requisite NRSROs a rating, with respect to a class of
short-term debt obligations that is comparable in priority and security with the
investment, in one of the two highest rating categories for short-term
obligations or, if not rated, will be of comparable quality as determined by the
trustees of the Trust. Currently, there are three NRSROs which rate municipal
obligations: Fitch, Moody's and S&P. Certain tax-exempt obligations (primarily
VRDNs and Participating VRDNs) may be entitled to the benefit of letters of
credit or similar credit enhancements issued by financial institutions and, in
such instances, the Board of Trustees and the Investment Adviser will take into
account the obligation of the financial institution in assessing the quality of
such instruments. The Tax-Exempt Fund also may purchase other types of
tax-exempt instruments if, in the opinion of the Trustees of the Trust, such
obligations are equivalent to securities having the ratings described above.
INVESTMENT RESTRICTIONS
The Tax-Exempt 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 Tax-Exempt Fund's outstanding shares.
Among the more significant restrictions, the Tax-Exempt Fund may not: (1)
purchase any securities other than Tax-Exempt Securities referred to under 'The
Tax-Exempt Fund and Its Objectives'; (2) invest more than 5% of its total assets
(taken at value at the time of each investment) in the securities of any one
issuer except that such restriction shall not apply to securities backed by the
U.S. Government or its agencies or instrumentalities; (3) 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 Tax-Exempt Fund will not purchase securities while
borrowings are outstanding); (4) mortgage, pledge, hypothecate or in any manner
transfer as security for indebtedness any securities owned or held by the
Tax-Exempt Fund except as may be necessary in connection with borrowings
mentioned in (3) above, and then such mortgaging, pledging or hypothecating may
not exceed 10% of its total assets, taken at value; or (5) invest in securities
with legal or contractual restrictions on resale or for which no readily
available market exists if, regarding all such securities, more than 10% of its
total assets (taken at market value) would be invested in such securities.
Because of the affiliation of Merrill Lynch & Co., Inc. with the Tax-Exempt
Fund, the Tax-Exempt Fund is prohibited from engaging in certain transactions
involving Merrill Lynch & Co., Inc., or subsidiaries thereof, unless such
transactions are conducted pursuant to the terms of an exemptive order which has
been issued by the Securities and Exchange Commission. See 'Portfolio
Transactions' in the Appendix to this Prospectus.
INVESTMENT ADVISER
The investment adviser to the Tax-Exempt Fund is Fund Asset Management,
L.P. ('FAM'), a subsidiary of Merrill Lynch & Co., Inc., a publicly held
corporation.
FAM, subject to the general supervision of the Trust's Board of Trustees,
renders investment advice to the Tax-Exempt Fund and is responsible for the
overall management of the Tax-Exempt Fund's business affairs. For
Tax-Exempt Fund
8
<PAGE>
the year ended April 30, 1995, FAM was entitled to receive $1,515,253 or .45% of
the Tax-Exempt Fund's average daily net assets. FAM has agreed to waive a
portion of its fee so that the effective fee payable by the Tax-Exempt Fund to
the investment adviser will be at the annual rate of .20% of the Tax-Exempt
Fund's average daily net assets. For the year ended April 30, 1995, FAM waived a
portion of its fee equal to $841,807 or .25% of the Fund's average daily net
assets. FAM therefore received $673,446 or .20% of the Tax-Exempt Fund's average
daily net assets. FAM may discontinue waiver of the fee in whole or in part at
any time without notice.
FAM, as investment adviser, has agreed that, in the event the operating
expenses of the Tax-Exempt Fund (including the fees payable to FAM but excluding
taxes, interest, brokerage and extraordinary expenses) for any fiscal year
exceed the expense limitations applicable to the Tax-Exempt Fund imposed by the
state securities laws or any regulations thereunder, it will reduce its fees by
the extent of such excess and, if required pursuant to any such laws or
regulations, will annually reimburse the Tax-Exempt Fund in the amount of such
excess. For the year ended April 30, 1995, the Tax-Exempt Fund's total expenses
were $1,054,976 or .31% of its average daily net assets. If FAM had not waived a
portion of its fee, the Tax-Exempt Fund's total expenses would have been
$1,896,783 or .56% of its average daily net assets.
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN
The Tax-Exempt Fund has adopted a Distribution and Shareholder Servicing
Plan (the 'Plan') pursuant to Rule 12b-1 under the Investment Company Act of
1940. The Plan permits FAM to pay a fee to MLFD which in turn is authorized to
make payments to securities dealers with which MLFD has entered into selected
dealers agreements. MLFD may also use a portion of the fee it receives under the
Plan to compensate administrators who perform administrative services that would
otherwise be performed by FAM or its agent. The purpose of the Plan is to
promote distribution of the Tax-Exempt Fund's shares and to enhance the
provision of shareholder services. The Tax-Exempt Fund is not required or
permitted under the Plan to make payments over and above its investment advisory
fee; the Plan merely permits the reallocation of a portion of the advisory fee
FAM receives to pay for distribution-related and shareholder servicing
activities. For the year ended April 30, 1995, the fees paid to MLFD under the
Plan totalled $199,580 or .06% of the Tax-Exempt Fund's average net assets, all
of which was paid to MLFD for providing distribution-related services in
connection with Fund shares.
SPECIAL TAX CONSIDERATIONS
FEDERAL
The Tax-Exempt Fund has elected to qualify to pay 'exempt interest'
dividends as defined in the Internal Revenue Code of 1986, as amended (the
'Code'). If it so qualifies, dividends or any part thereof (other than any
capital gain distributions) paid by the Tax-Exempt Fund which are attributable
to interest on tax-exempt obligations and which are designated by the Tax-Exempt
Fund as exempt interest dividends in a written notice mailed to the Tax-Exempt
Fund's shareholders within 60 days after the close of its taxable year may be
treated by shareholders for all purposes as items of interest excludable from
their gross income under Section 103(a) of the Code. The recipient of tax-exempt
income is required to report such income on his or her federal income tax return
solely for informational purposes. However, shareholders are advised to consult
their tax advisers with respect to whether exempt interest dividends are
excludable under Section 103(a) of the Code if such shareholders would be
treated as 'substantial users' under Section 147(a)(1) of the Code with respect
to some or all of the tax-exempt obligations held by the Tax-Exempt Fund. The
Code provides that interest on indebtedness
Tax-Exempt Fund
9
<PAGE>
incurred or continued to purchase or carry shares of the Tax-Exempt Fund is not
deductible to the extent attributable to exempt interest dividends. Also, any
losses realized by individuals who dispose of shares of the Tax-Exempt Fund
within six months of their purchase are disallowed to the extent of any exempt
interest dividends received with respect to such shares.
Individual shareholders of the Tax-Exempt Fund may be subject to
alternative minimum tax to the extent the Tax-Exempt Fund holds 'private
activity' bonds. The Tax-Exempt Fund expects that it will hold private activity
bonds; however, an individual shareholder filing a joint return who does not
have any tax preference items subject to the alternative minimum tax other than
income received from the Tax-Exempt Fund derived from private activity bonds
would have to receive more than $40,000 of such income from the Tax-Exempt Fund
before becoming subject to the alternative minimum tax.
Exempt interest dividends paid by the Tax-Exempt Fund, whether or not
attributable to private activity bonds, may increase a corporate shareholder's
alternative minimum taxable income. In addition, the payment of exempt interest
dividends may increase a corporate shareholder's liability for the environmental
tax imposed on a corporation's alternative minimum taxable income (computed
without regard to either the alternative tax net operating loss deduction or the
environmental tax deduction). The tax, which is imposed at a rate of $12 per
$10,000 (0.12%) of alternative minimum taxable income in excess of $2,000,000,
is imposed even if the corporation is not required to pay an alternative minimum
tax because the corporation's regular income tax liability exceeds its minimum
tax liability.
The Tax-Exempt Fund may realize capital gains, which will constitute
taxable income. Distributions of the Tax-Exempt Fund's net realized short-term
capital gains will be taxable to shareholders as ordinary income. In order to
avoid taxation on its net long-term capital gains, the Tax-Exempt Fund may elect
to distribute 'capital gain dividends' to its shareholders. Any distributions
designated as capital gain dividends, i.e., as being made from the Tax-Exempt
Fund's net long-term capital gains in a written notice furnished annually to
shareholders are taxable to shareholders as long-term capital gains, regardless
of the shareholders' holding period of shares of the Tax-Exempt Fund. As of
April 30, 1995, the Fund had net capital loss carry-overs of $260,081 of which
$78 expire in the year 2000, $102,443 expire in 2001, $17,520 expire in 2002 and
$140,040 expire in 2003.
STATE AND LOCAL
Depending upon the extent of the Tax-Exempt Fund's activities in those
states and localities in which its offices are maintained or in which its agents
or independent contractors are located, the Tax-Exempt Fund may be subject to
the tax laws of such states or localities. In addition, the exemption of
interest income for federal income tax purposes does not necessarily result in
exemption under the income or other tax laws of any state or local taxing
authority. The laws of individual states and local taxing authorities vary with
respect to the taxation of such interest income, and each holder of shares of
the Tax-Exempt Fund is advised to consult his own tax adviser in that regard.
The Tax-Exempt Fund will report annually the percentage of interest income it
received during the preceding year on tax-exempt obligations, indicating, on a
state-by-state basis, the source of such income.
The Appendix and the Statement of Additional Information describes the
effect of other provisions of the Code on the Tax-Exempt Fund and its
shareholders.
------------------------
Shareholders are urged to consult their attorneys or tax advisers regarding
specific questions as to Federal, state or local taxes.
Tax-Exempt Fund
10
<PAGE>
APPENDIX
This Appendix constitutes part of the Prospectuses of Merrill Lynch
Institutional Fund (the 'Institutional Fund'), Merrill Lynch Government Fund
(the 'Government Fund'), Merrill Lynch Treasury Fund (the 'Treasury Fund') and
Merrill Lynch Institutional Tax-Exempt Fund (the 'Tax-Exempt Fund')
(collectively, the 'Funds'). Unless otherwise indicated, the information set
forth herein is applicable to each of the Funds.
------------------------
INVESTORS FOR WHOM THE FUNDS ARE DESIGNED
Each of the Funds is designed primarily for institutions as an economical
and convenient means for the investment of short-term funds which they hold for
their own account or hold or manage for others. Such institutions include banks
and trust companies, savings institutions, corporations, investment bankers and
brokers, insurance companies, investment counsellors, pension funds, employee
benefit plans, law firms, trusts, estates and educational, religious and
charitable institutions.
Each Fund offers the economic advantages of block purchases of securities
and diversification. Securities of the types in which the Funds invest are not
generally available in denominations of less than $10,000. A higher yield may
also be available when such securities are bought directly from the issuer in
amounts of $1,000,000 or more. Likewise, when buying U.S. Government and taxable
and tax-exempt money market obligations from a dealer rather than the issuer,
the spread between the bid and asked price or the commission tends to decrease
as the size of the transaction increases, thereby increasing the yield. The
Funds also offer the investor the opportunity to participate in a more
diversified maturity schedule than the size of its portfolio might otherwise
permit.
Investment in the Funds may relieve the investor of many of the
administrative problems usually associated with the direct purchase of U.S.
Government and taxable and tax-exempt money market obligations, such as
scheduling maturities and reinvestments, safekeeping of securities, surveying
the market for the best price at which to buy and sell, and separate principal
and income recordkeeping. Furthermore, purchasers meeting the requirements for
the expedited redemption procedure have the convenience of receiving the
proceeds from the redemption of their shares the same day or the next business
day; therefore, at times when yields on longer term U.S. Government and money
market obligations are higher than yields on shorter term obligations, ownership
of Fund shares will allow an investor with a need for a short-term call on funds
to earn a higher yield than would be possible from investing directly in such
obligations. All such benefits will be reduced to the extent of the Fund's
expenses (see 'Investment Adviser,' 'Distributor' and 'Management') and during
any periods when interest rates are higher for U.S. Government and taxable and
tax-exempt money market obligations with shorter maturities than the weighted
average maturity date of the Fund's portfolio securities.
In general, if interest rates decline, then the yield to shareholders will
also decline. An increase in interest rates will generally reduce the value of
each Fund's investments and a decline in interest rates will generally increase
the value. If there are unusually heavy redemption requests because of changes
in interest rates or for any other reason, a Fund may have to sell a portion of
its investment portfolio at a time when it may be disadvantageous to do so.
Selling portfolio securities under these circumstances may result in a lower net
asset value per share for investors. However, in these circumstances each Fund
is permitted to borrow amounts up to 10% of the value of its net assets, and the
Funds believe that such borrowings would help mitigate any adverse effects and
would make the sale of their portfolio securities unlikely.
A-1
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INVESTMENT ADVISER
The investment adviser to each Fund is Fund Asset Management, L.P. ('FAM'),
a subsidiary of Merrill Lynch & Co., Inc., a publicly held corporation. The
principal business address of FAM is 800 Scudders Mill Road, Plainsboro, New
Jersey (mailing address: P.O. Box 9011, Princeton, New Jersey 08543-9011), and
the principal business address of Merrill Lynch & Co., Inc. is World Financial
Center, North Tower, 250 Vesey Street, New York, New York 10281-1209.
FAM and its sister company, Merrill Lynch Asset Management, L.P. ('MLAM'),
together act as the manager or adviser for over 130 other investment companies.
FAM has access to the expertise of its affiliates, Merrill Lynch Government
Securities, Inc. ('GSI') and Merrill Lynch Money Markets, Inc. ('MLMM'). In
terms of dollar values of trading, GSI and MLMM are two of the largest dealers
in U.S. Government securities, U.S. Government agency securities and certain
other money market securities, acting both as primary dealers and secondary
market traders. In addition, the total securities and economic research
facilities of Merrill Lynch, Pierce, Fenner & Smith Incorporated ('Merrill
Lynch') are available to FAM. MLAM also offers portfolio management and
portfolio analysis services to individuals and institutions. As of July 31,
1995, FAM and MLAM had a total of approximately $186.2 billion in investment
company and other portfolio assets under management, including accounts of
certain affiliates of FAM.
Securities held by the Funds may also be held by other funds for which FAM
or MLAM acts as the manager or adviser or by investment advisory clients of
MLAM. If purchases or sales of securities for a Fund or other funds for which
FAM or MLAM acts as the manager or adviser or for their other advisory clients
arise for consideration at or about the same time, transactions in such
securities will be made, insofar as feasible, for the respective funds and
clients in a manner deemed equitable to all. To the extent the transactions on
behalf of more than one client of FAM 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.
DISTRIBUTOR
The principal underwriter and distributor of shares of the Funds is Merrill
Lynch Funds Distributor, Inc. ('MLFD'), an indirect subsidiary of Merrill Lynch
& Co., Inc. The principal business address of MLFD is 800 Scudders Mill Road,
Plainsboro, New Jersey (mailing address: P.O. Box 9011, Princeton, New Jersey
08543-9011). MLFD makes a continuous offering of the Funds' shares and bears the
costs and expenses of printing and distributing any copies of any prospectuses
and annual and interim reports of the Funds (after such items have been prepared
and set in type) which are used in connection with the offering of shares to
selected dealers or investors, and the cost and expenses of preparing, printing
and distributing any other literature used by MLFD or furnished by it for use by
selected dealers in connection with the offering of the shares for sale to the
public. There will be no fee payable by the Funds in these services. There is no
sales or redemption charge.
MANAGEMENT
The Trustees of the Trust consist of seven individuals, five of whom are
not 'interested persons' of the Trust as defined in the Investment Company Act
of 1940. The Trustees are responsible for the overall supervision of the
operations of the Funds and perform the various duties imposed on the trustees
of investment companies by the Investment Company Act of 1940. The Board of
Trustees elects officers annually.
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<PAGE>
The Trustees of the Trust are:
*Robert W. Crook--Senior Vice President of MLAM and MLFD.
David Almy--President of McCall & Almy, Inc.
A. Bruce Brackenridge--Retired Group Executive of J.P. Morgan & Co.,
Inc. and Morgan Guaranty Trust Company.
Charles C. Cabot, Jr.--Partner in the law firm of Sullivan &
Worcester.
*Terry K. Glenn--Executive Vice President of MLAM and FAM and
President and Director of MLFD.
Todd Goodwin--General Partner of Gibbons, Goodwin, van Amerongen.
George W. Holbrook, Jr.--Managing Partner of Bradley Resources
Company.
------------------
* Interested person as defined in the Investment Company Act of 1940.
As described under the caption 'Investment Adviser,' FAM has assumed
responsibility for the actual management of the business affairs of the Funds,
subject to the general supervision of the Trust's Board of Trustees. The
responsibility for making decisions to buy, sell or hold a particular security
rests with FAM. FAM performs certain of the other administrative services and
provides all the office space, facilities, equipment and necessary personnel for
portfolio management of the Funds. Each Trustee who is not an officer or
employee of Merrill Lynch & Co., Inc. or its subsidiaries will be paid $24,000
annually in his capacity as trustee of the Trust, and all Trustees will be
reimbursed for any expenses incurred in attending meetings of the Board of
Trustees of the Trust or of any committee thereof. No officer or employee of
Merrill Lynch & Co., Inc. or its subsidiaries will receive any compensation from
any Fund for acting as a trustee or officer of the Fund. The Trust has no
employees other than its officers, all of whom are compensated by FAM or MLFD.
PURCHASE OF SHARES
Each Fund's shares are sold without a sales charge, on a continuous basis.
Each Fund will effect orders to purchase its shares twice on each day that the
New York Stock Exchange is open for business at the net asset value per share
(see 'Net Asset Value') determined as of 12:00 Noon (Boston time) for the
Tax-Exempt Fund, 2:00 p.m. (Boston time) for the Treasury Fund, or as of 3:00
p.m. (Boston time) for the Institutional Fund and the Government Fund, and as of
the close of trading on the New York Stock Exchange (the 'Exchange'). It is
anticipated, although it cannot be assured, that the net asset value of each of
the Funds will remain constant at $1.00 per share. A purchase order does not
become effective until Federal Funds are received by State Street Bank and Trust
Company ('State Street Bank' or the 'Bank') or other forms of payment are
converted by State Street Bank (at no charge to the investor) into Federal
Funds.
The minimum initial purchase of shares for each of the Funds is $25,000.
Subsequent purchases may be made in amounts as small as $1,000. Shares purchased
as of 12:00 Noon (Boston time) for the Tax-Exempt Fund, 2:00 p.m. (Boston time)
for the Treasury Fund, or 3:00 p.m. (Boston time) for the Institutional Fund and
the Government Fund, begin earning dividends on the day of purchase, and shares
purchased as of the close of trading on the Exchange begin earning dividends on
the following day. See 'Dividends.' Investors are required to maintain a minimum
balance of $5,000 in each account maintained with an applicable Fund. If an
account balance falls below $5,000, an investor's shares in the applicable Fund
may be redeemed. See 'Redemptions.'
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The Fund strongly recommends the use of Federal Funds to purchase shares
because, while the other forms of payment described below will also be accepted,
purchase orders do not become effective until Federal Funds are available.
PURCHASE BY FEDERAL FUNDS WIRE
Federal Funds are monies credited to a bank's account with a Federal
Reserve Bank. To purchase shares of any Fund by wiring Federal Funds, the
investor must first telephone MLFD, Boston (617-357-1460 or toll-free
800-225-1576) to receive a wire order number. On the telephone the following
information will be requested by MLFD: name of investor, address, tax
identification number, dividend distribution election, amount being wired and
wiring bank. Instructions should then be given by the investor to its bank to
wire transfer Federal Funds to State Street Bank and Trust Company-Boston,
Attention: Merrill Group, Credit (Name of Fund), Wire Order Number: (Assigned by
Fund) and the investor's name and account number.
The Funds have a procedure designed to facilitate the purchase of shares by
Federal Funds Wire. Under this procedure, if an order is received by a Fund by
12:00 Noon (Boston time) for the Tax-Exempt Fund, by 2:00 p.m. (Boston time) for
the Treasury Fund, or by 3:00 p.m. (Boston time) for the Government Fund and the
Institutional Fund, and Federal Funds are received by State Street Bank prior to
4:00 p.m. (Boston time), the order is effective as of 12:00 Noon (Boston time)
for the Tax-Exempt Fund, as of 2:00 p.m. (Boston time) for the Treasury Fund, or
as of 3:00 p.m. (Boston time) for the Government Fund and the Institutional
Fund. If an order is received by a Fund after 12:00 Noon (Boston time) for the
Tax-Exempt Fund, after 2:00 p.m. (Boston time) for the Treasury Fund, or after
3:00 p.m. (Boston time) for the Government Fund or the Institutional Fund, and
Federal Funds are received by State Street Bank prior to the close of the
Federal Funds Wire, the order will become effective immediately after the close
of trading on the Exchange.
PURCHASE THROUGH FACTS
Business organizations (such as corporations, partnerships or business
trusts) may purchase shares of the Funds through the Merrill Lynch Financial
Assets Control Tracking System ('FACTS'). FACTS is a program designed to help
businesses manage their cash flow and earn money market returns through
investment in the Funds. FACTS utilizes the Automated Clearing House system
('ACH') to transfer funds electronically between the corporate investor's local
bank and the Funds.
The purchase of shares of the Funds through FACTS may be arranged by
completing a FACTS Account Application, which can be obtained by calling
617-357-1460 or toll-free 800-225-1576 and returning it to Merrill Lynch Funds
Distributor, Inc. in Boston. After the application is received, an announcement
card will be sent to the organization supplying it with an account number and
advising it that, after 15 days from the printed date on the card, the
corporation may begin using the ACH System for purchasing Fund shares.
After this waiting period, an authorized representative of the organization
may call the Funds' FACTS toll-free number (800-343-3446) by 4:00 p.m. (Boston
time), identify the corporation by name and account number, and tell the FACTS
operator how much cash the corporation wishes to invest in the applicable Fund
from its local corporate checking account. On the morning of the following
business day funds will automatically be transferred to a Fund via ACH.
Dividends will be paid by the Fund on the day funds are transferred.
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PURCHASE BY CHECK OR FEDERAL RESERVE DRAFT
Purchase orders for which remittance is to be made by check or Federal
Reserve Draft must be submitted directly by mail to State Street Bank and Trust
Company, P.O. Box 8500, Boston, Massachusetts 02266-8500, together with payment
for the purchase price of such shares and, in the case of a new account, a
completed Account Application (see page A-17). Such orders will become effective
on the day the remittance is converted into Federal Funds, and shares will be
purchased at the net asset value next determined after such conversion. Checks
and Federal Reserve Drafts should be made payable to the order of Merrill Lynch
Institutional Fund, Merrill Lynch Government Fund, Merrill Lynch Treasury Fund
or Merrill Lynch Institutional Tax-Exempt Fund, as applicable. Money transmitted
by check normally will be converted into Federal Funds within two business days
following receipt. Certified checks are not necessary, but checks are accepted
subject to collection at full face value in United States funds and must be
drawn on a United States bank. In the event that the purchase price for shares
of a Fund is paid by Federal Funds in the form of a Federal Reserve Draft,
Federal Funds will be available to the Fund on the next business day and the
investor's order will be effected on such day. During the period of time prior
to the conversion into Federal Funds, an investor's money will not be invested
and, therefore, will not be earning dividends.
GENERAL
All funds will be fully invested in full and fractional shares. To minimize
recordkeeping by banks and other institutions purchasing shares on behalf of
separate accounts, arrangements can be made through MLFD, Boston, to have State
Street Bank provide subaccounting services.
The issuance of shares of a Fund is recorded on the books of the Fund, and,
to avoid additional operating costs and for investor convenience, stock
certificates will not be issued unless expressly requested in writing by a
shareholder. Certificates will not be issued for fractional shares. State Street
Bank, the transfer agent, will send to each shareholder of record a monthly
statement and a statement of shares of the Fund(s) owned after each purchase or
redemption transaction relating to such shareholder.
Boston banks are closed on certain holidays on which the New York Stock
Exchange is open. These holidays are Martin Luther King, Jr. Day (the 3rd Monday
in January), Columbus Day (the 2nd Monday in October) and Veterans Day (November
11). Investors are not able to purchase shares by wiring Federal Funds on such
holidays because State Street Bank is not open to receive such funds on behalf
of the Funds. Investors whose checks are received one business day prior to a
holiday will have the proceeds of the check invested in shares of the applicable
Fund as of 12:00 Noon (Boston time) on the next day on which State Street Bank
is open for business. Also, investors will not be able to have redemption
proceeds wired to their banks on these days. The Funds' offices will be open,
however, and all phones will be operative. The Funds' staff will be available to
take orders for next day purchases and redemptions, or answer any questions
investors may have.
Each Fund reserves the right to reject any order for Fund shares.
REDEMPTIONS
Upon receipt by State Street Bank of a proper redemption request
(indicating the name and account number of the shareholder, the name of the Fund
and the dollar amount of shares to be redeemed), each Fund will redeem its
shares at the next determined net asset value on a day that the New York Stock
Exchange is open for business. On days that the Exchange is open for business,
net asset value per share is determined twice daily, at 12:00 Noon (Boston time)
for the Tax-Exempt Fund, at 2:00 p.m. (Boston time) for the Treasury Fund and at
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3:00 p.m. (Boston time) for the Government Fund and the Institutional Fund, and
at the close of trading on the Exchange. See 'Net Asset Value.' Shareholders may
use either the ordinary or, if they elect, the expedited redemption procedure.
If in utilizing any of the redemption procedures the shareholder redeems all
shares owned, his or her dividends accrued for the month to date will be
simultaneously remitted by check. UNLESS PAYMENT IS REQUIRED ON A SAME DAY
BASIS, THE FUNDS STRONGLY RECOMMEND THAT ALL REDEMPTION REQUESTS BE PLACED SO AS
TO BECOME EFFECTIVE BETWEEN 12:00 NOON (BOSTON TIME) FOR THE TAX-EXEMPT FUND,
2:00 P.M. (BOSTON TIME) FOR THE TREASURY FUND, OR 3:00 P.M. (BOSTON TIME) FOR
THE GOVERNMENT FUND AND THE INSTITUTIONAL FUND, AND THE CLOSE OF TRADING ON THE
EXCHANGE, SINCE THE REDEEMING SHAREHOLDER WILL THEN QUALIFY AS A SHAREHOLDER OF
RECORD FOR THE DIVIDEND DECLARED THAT DAY. SEE 'DIVIDENDS.' Shares purchased
other than by Federal Funds wire or bank wire may not be redeemed by the
expedited procedure or the checking account redemption plan until 15 calendar
days after the purchase of such shares but may be redeemed pursuant to the
ordinary redemption procedure during such period.
Due to the relatively high cost of maintaining investment accounts of less
than $5,000, each Fund reserves the right to redeem shares, at a redemption
price as determined in accordance with the preceding paragraph, if at any time
the total investment in a shareholder's account does not have a value of at
least $5,000. Shareholders will be notified that the value of their account is
less than $5,000 and will be allowed 60 days to make an additional investment
into their account before the redemption is processed.
EXPEDITED REDEMPTION PROCEDURE
Shareholders meeting the requirements stated below may initiate redemptions
by submitting their redemption requests by telephone to State Street Bank
(toll-free 800-225-5150, in Massachusetts 800-972-5555) or mail (P.O. Box 8500,
Boston, Massachusetts 02266-8500) (without signature guarantee) and have the
proceeds sent by a Federal Funds wire to a previously designated bank or trust
company account. The minimum amount to be wired is $1,000. A redemption request
received prior to 12:00 Noon (Boston time) for the Tax-Exempt Fund, prior to
2:00 p.m. (Boston time) for the Treasury Fund, or prior to 3:00 p.m. (Boston
time) for the Government Fund and the Institutional Fund, will not earn a
dividend on the day the request is received and payment will be made in Federal
Funds wired on the same business day. If an expedited redemption request for
which the redemption proceeds will be wired is received after 12:00 Noon (Boston
time) for the Tax-Exempt Fund, or after 2:00 p.m. (Boston time) for the Treasury
Fund, or after 3:00 p.m. (Boston time) for the Government Fund and Institutional
Fund, and prior to the close of trading on the Exchange on a day on which MLFD
and State Street Bank are open for business, the redemption proceeds will be
wired on the next business day following the redemption request that State
Street Bank is open for business. A redemption request received after 12:00 Noon
(Boston time) for the Tax-Exempt Fund, after 2:00 p.m. (Boston time) for the
Treasury Fund, or after 3:00 p.m. (Boston time) for the Government Fund and
Institutional Fund, will earn a dividend on the day the request is received. If
an expedited redemption request is received after the close of trading on the
Exchange or on a day on which either MFLD or State Street Bank is closed, the
redemption proceeds will be wired on the next business day following receipt of
the redemption request. Therefore, a redeeming shareholder will receive a
dividend on the day the request is received, but not on the day that shares are
redeemed out of his account.
To utilize the expedited redemption procedure, all shares must be held in
non-certificate form in the shareholder's account. In addition, an Account
Application (page A-17) with the expedited payment authorization section
properly completed must be on file with State Street Bank before an expedited
redemption request is submitted. This form requires a shareholder to designate
the bank or trust company account to which its redemption proceeds should be
sent. Any change in the bank or trust company account designated to receive the
proceeds must be submitted in proper form on a new Account Application with
signature guaranteed. In making a
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telephone redemption request, a shareholder must provide the shareholder's name
and account number, the dollar amount of the redemption requested, and the name
of the bank to which the redemption proceeds should be sent. If the information
provided by the shareholder does not correspond to the information on the
application, the transaction will not be approved. If, because of unusual
circumstances, a shareholder is unable to contact State Street Bank at the
telephone numbers listed above to make an expedited redemption request, he or
she may contact MLFD or his or her Merrill Lynch Financial Consultant to effect
such a redemption, or request redemption in writing as described under 'Ordinary
Redemption Procedure' below.
ORDINARY REDEMPTION PROCEDURE
If this method of redemption is used, the shareholder may submit his
redemption request in writing to State Street Bank and Trust Company, P.O. Box
8500, Boston, Massachusetts 02266-8500. A Fund will make payment for shares
redeemed pursuant to the ordinary redemption procedure by check sent to the
shareholder at the address on such shareholder's Account Application. Such
checks will normally be sent out within one business day, but in no event more
than seven days after receipt of the redemption request in proper form. If
certificates have been issued representing the shares to be redeemed, prior to
effecting a redemption with respect to such shares State Street Bank must have
received such certificates. A shareholder's signature must be guaranteed by an
'eligible guarantor institution' as such term is defined by Rule 17Ad-15 of the
Securities Exchange Act of 1934, the existence and validity of which may be
verified by State Street Bank through the use of industry publications. A notary
public is not an acceptable guarantor. In certain instances, State Street Bank
may request additional documentation which it believes necessary to insure
proper authorization such as, but not limited to, trust instruments, death
certificates, appointment of executor or administrator, or certificates of
corporate authority. Shareholders having questions regarding proper
documentation should contact State Street Bank (toll-free 800-225-5150, in
Massachusetts 800-972-5555).
CHECKING ACCOUNT REDEMPTION PLAN
State Street Bank will establish a checking account for any shareholder at
the shareholder's request. Checks drawn on this account can be made payable to
the order of any person in any amount not less than $500. The payee of the check
may cash or deposit it like any other check drawn on a bank. When such a check
is presented to State Street Bank for payment, the Bank will present the check
to the applicable Fund as authority to redeem a sufficient number of shares in
the shareholder's account to cover the amount of the check. This enables the
shareholder to continue earning daily income dividends until the check is
cleared. Canceled checks will be returned to the shareholder by the Bank.
Shareholders will be subject to the Bank's rules and regulations governing
such checking accounts including the right of the Bank not to honor checks in
amounts exceeding the value of the shareholder's account at the time the check
is presented for payment. Also, the Bank may not honor checks drawn against
shares purchased, other than by Federal Funds wire, until 15 days after the
purchase of such shares. The Bank and the Funds have reserved the right to
modify or terminate this checking account privilege upon 30 days' notice to
participating shareholders. Shareholders wishing to consider this method of
redemption should complete the Authorization for Redemption by Check Form and
Signature Card which appear on pages A-19 and A-20 of this Prospectus.
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REDEMPTION THROUGH FACTS
Those shareholders who participate in the FACTS program may redeem shares
of a Fund through any of the methods described above.
DIVIDENDS
All of each Fund's net income is declared as dividends daily. Dividends are
paid monthly and automatically reinvested in additional Fund shares at net asset
value and credited to the shareholder's account or, at the shareholder's option,
paid in cash.
Each Fund's net income for dividend purposes is determined daily. On days
on which the Exchange is open for business, such determination will be made
immediately prior to the determination of net asset value at the close of
trading on the Exchange. On days on which the Exchange is not open for business,
such determination will be made as of 4:00 p.m. (Boston time). Immediately after
such determination, each Fund will declare a dividend payable to shareholders of
record either: (a) at 12:00 Noon (Boston time) for the Tax-Exempt Fund, 2:00
p.m. (Boston time) for the Treasury Fund and 3:00 p.m. (Boston time) for the
Government Fund and Institutional Fund, on days which the Exchange is open for
business or (b) at the previous close of trading on the Exchange on days on
which the Exchange is not open for business.
Each Fund intends to use its best efforts to maintain its net asset value
at $1.00 per share, although this cannot be assured.
Shareholders may receive their dividends in cash monthly by completing the
appropriate section of the Account Application (page A-17). Such cash
distributions will be paid by check within seven days after the end of each
month. The election to receive cash distributions may be made at the time of
purchase of Fund shares or at any time subsequent thereto by giving written
notice to State Street Bank. To be effective with respect to a particular
monthly dividend, such written notice must be received by State Street Bank at
least seven days prior to the end of the month. Dividends and distributions made
by the Funds are taxable to shareholders whether distributed in cash or
reinvested in additional shares. See 'Taxes.'
NET ASSET VALUE
The net asset value per share of each Fund for purposes of pricing orders
for both the purchase and the redemption of Fund shares is determined twice
daily on days that the Exchange is open for business. Each Fund will also
determine its net asset value on any day on which there is sufficient trading in
portfolio securities that the net asset value might be materially affected, but
only if on any such day, the Fund is required to sell or redeem shares. Net
asset value is determined at 12:00 Noon (Boston time) for the Tax-Exempt Fund,
2:00 p.m. (Boston time) for the Treasury Fund and 3:00 p.m. (Boston time) for
the Government Fund and Institutional Fund, for the purpose of pricing orders
received subsequent to the previous close of trading on the Exchange and prior
to 12:00 Noon (Boston time) for the Tax-Exempt Fund, 2:00 p.m. (Boston time) for
the Treasury Fund and 3:00 p.m. (Boston time) for the Government Fund and
Institutional Fund, and is also determined at the close of trading on the
Exchange for the purpose of pricing orders received subsequent to 12:00 Noon
(Boston time) for the Tax-Exempt Fund, 2:00 p.m. (Boston time) for the Treasury
Fund and 3:00 p.m. (Boston time) for the Government Fund and Institutional Fund,
and before the close of trading on the Exchange on that day. The net asset value
of the Institutional Fund, Government Fund and Treasury Fund is determined
pursuant to the 'penny rounding' method by adding the fair 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
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cent. In determining fair value, securities held by the Institutional Fund,
Government Fund and Treasury Fund with a remaining maturity of 60 days or less
will be valued on an amortized cost basis, and securities with a remaining
maturity of greater than 60 days for which market quotations are readily
available are valued at market value. Other securities held by the Institutional
Fund, Government Fund and Treasury Fund are valued at their fair value as
determined in good faith by or under the direction of the Trust's Board of
Trustees. The Tax-Exempt Fund relies on a rule of the Securities and Exchange
Commission pursuant to which the valuation of its portfolio securities is based
upon their amortized cost. This method involves valuing a security at its cost
and thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the security. While this method provides certainty in valuation, it may
result in periods during which value, as determined by amortized cost, is higher
or lower than the price the Tax-Exempt Fund would receive if it sold the
securities.
TAXES
Each Fund in the past has elected the special tax treatment afforded
regulated investment companies under the Internal Revenue Code of 1986, as
amended (the 'Code'). Each Fund believes that it has qualified for such
treatment and intends to continue to qualify therefor. If a Fund so qualifies,
in any fiscal year with respect to which it distributes at least 90% of its net
investment income, the Fund (but not its shareholders) will be relieved of
Federal income tax liability on the amount distributed. Each Fund contemplates
declaring as dividends 100% of its net investment income. See 'Dividends.' If in
any taxable year a Fund does not qualify as a regulated investment company, all
of its taxable income and gains will be taxed to that Fund at corporate rates.
Taxable dividends and distributions will be taxable to shareholders as ordinary
income or long-term capital gains, whether received in cash or reinvested in
additional shares of a Fund. State Street Bank, the transfer agent, will send
each shareholder a monthly dividend statement which will include the amount of
dividends paid and will identify whether such dividends represent ordinary
income or long-term capital gains. In general, taxable dividends paid by the
Funds will be treated as ordinary income.
Investments by the Institutional Fund in certain Eurodollar and
Yankeedollar obligations may be subject to foreign withholding taxes. See 'The
Institutional Fund and Its Objectives.'
The Statement of Additional Information for each Fund describes the effect
on other provisions of the Code on the Fund and its shareholders. The Prospectus
for the Tax-Exempt Fund describes certain special tax attributes of that Fund as
a result of its investment in tax-exempt securities.
Certain states exempt from state income taxation dividends paid by
regulated investment companies which are derived in whole or in part from
interest on U.S. Government obligations. State law varies as to whether dividend
income attributable to U.S. Government obligations is exempt from state income
tax. Each Fund intends to provide shareholders annually with information
relating to that Fund's income and assets necessary to permit shareholders to
determine whether and to what extent their dividend income from the Fund is
exempt from their state's income tax.
Investors are urged to consult their attorneys or tax advisers regarding
specific questions as to Federal, state or local taxes.
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PORTFOLIO TRANSACTIONS
The Funds have no obligation to deal with any dealer or group of dealers in
the execution of transactions in portfolio securities. Subject to policy
established by the trustees of the Trust, the Investment Adviser is primarily
responsible for each Fund's portfolio decisions and the placing of the Fund's
portfolio transactions. In placing orders, it is the policy of the Funds 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, the firm's
risk in positioning the securities involved, and the provision of supplemental
investment research by the firm. While the Investment Adviser generally seeks
reasonably competitive spreads or commissions, the Funds 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 U.S. Government obligations and money market securities in which the
Funds invest are traded primarily in the over-the-counter market. Where
possible, the Funds 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 account. On occasion, securities may be purchased directly from
the issuer. U.S. Government obligations and taxable and tax-exempt money market
securities are generally traded on a net basis and do not normally involve
either brokerage commissions or transfer taxes. The cost of executing the Funds'
portfolio transactions will consist primarily of dealer spreads and underwriting
commissions.
The Institutional Fund, Government Fund and Treasury Fund may conduct
principal transactions with two affiliates, Merrill Lynch Government Securities,
Inc. and Merrill Lynch Money Markets Inc., subject to a number of conditions
imposed in an exemptive order issued by the Securities and Exchange Commission.
Similarly, the Tax-Exempt Fund may conduct principal transactions with its
affiliate, Merrill Lynch, subject to a number of conditions imposed in an
exemptive order issued by the Securities and Exchange Commission. In addition,
affiliated persons of the Funds may serve as their brokers in over-the-counter
transactions conducted on an agency basis. The Funds may also purchase
securities from underwriting syndicates of which Merrill Lynch is a member under
certain conditions in accordance with the provisions of a rule adopted under the
Investment Company Act of 1940.
The Trustees of the Trust have considered the possibilities of recapturing
for the benefit of the Funds expenses of possible portfolio transactions, such
as dealer spreads and underwriting commissions, by conducting such portfolio
transactions through affiliated entities, including Merrill Lynch. 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.
EXCHANGE PRIVILEGE
Shareholders of a Fund may exchange their shares for shares of any other
Fund, as well as shares of Merrill Lynch Institutional Intermediate Fund
(collectively referred to as the 'funds'), on the basis described below. To
qualify for the Exchange Privilege, a shareholder must exchange shares with a
current value of at least $1,000. Under the Exchange Privilege, each of the
funds offers to exchange its shares for shares of any other fund, on the basis
of relative net asset value per share. Since all of the funds other than Merrill
Lynch Institutional Intermediate Fund are no-load funds and seek to maintain a
constant $1.00 net asset value per share, it is expected that any exchange with
those funds would be on a share-for-share basis. If in utilizing the Exchange
Privilege the shareholder exchanges all his shares of a Fund, all dividends
accrued on such shares for the month
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to date will be invested in shares of the fund into which the exchange is being
made. Before effecting an exchange of Fund shares for shares of Merrill Lynch
Institutional Intermediate Fund, shareholders should obtain the current
effective prospectus of Merrill Lynch Institutional Intermediate Fund. The
investment objective of Merrill Lynch Institutional Intermediate Fund is to seek
current income. Merrill Lynch Institutional Intermediate Fund invests only in
those assets which will permit its shares to qualify both as 'liquid assets'
under the regulations of the Department of the Treasury's Office of Thrift
Supervision and as an investment permitted by the regulations of the National
Credit Union Administration. An exchange between funds pursuant to the Exchange
Privilege is treated as a sale for Federal income tax purposes and, depending
upon the circumstances, a short-or long-term capital gain or loss may be
realized.
To exercise the Exchange Privilege, shareholders should contact MLFD,
Boston, or their Merrill Lynch financial consultants, who will advise the
applicable Fund of the exchange. A shareholder may make exchanges by telephone,
provided that (i) he has elected the telephone exchange option on the Account
Application, (ii) the registration of the account for the new fund will be the
same as for the Fund, and (iii) the shares to be exchanged are not in
certificate form. To make exchanges by telephone, a shareholder should call MLFD
at 617-357-1460 or toll-free 800-225-1576. The shareholder should identify
himself by name and account number and give the name of the fund into which he
wishes to make the exchange, the name of the Fund and the number of shares he
wishes to exchange. The shareholder also may write to State Street Bank
requesting that the exchange be effected. Such letter must be signed exactly as
the account is registered with signature(s) guaranteed by a commercial bank
which is a member of the FDIC or by a trust company or a member firm of a
domestic securities exchange. The Funds reserve the right to require a properly
completed Exchange Application.
Investors in certain other Merrill Lynch funds which impose a contingent
deferred sales load on redemption of shares ('deferred load funds') may exchange
shares of such funds for shares of the Funds without paying the contingent
deferred sales load normally applicable to such redemptions. Shares of the Funds
which were acquired as a result of such an exchange may, in turn, be exchanged
back into a participating deferred load fund, in which event the holding period
for shares of the deferred load fund will be aggregated with the previous
deferred load fund holding periods for purposes of calculating the contingent
deferred sales load. The holding period for shares of the Fund so acquired will
not, however, be taken into account in calculating the contingent deferred sales
load. Furthermore, if shares of the Fund which were acquired as a result of an
exchange for shares of a deferred load fund are subsequently redeemed or
exchanged for shares of a fund other than a deferred load fund, the shareholder
will thereupon be charged the contingent deferred sales load that would
otherwise have been payable upon the exchange of shares of the deferred load
fund for shares of the applicable Fund.
These exchange privileges may be modified or terminated at any time.
ADDITIONAL INFORMATION
YIELD INFORMATION
The Funds may from time to time include information regarding their
respective yields in advertisements or information furnished to present or
prospective shareholders. Yield will be computed by annualizing net investment
income dividends for a given period and dividing by the average public offering
price. Each Fund's yield will vary from time to time depending upon market
conditions, the securities comprising the Fund's portfolio, and the Fund's
operating expenses. Yield should also be considered relative to changes in the
net asset value of the Fund's shares and the Fund's investment and dividend
payment policies.
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DESCRIPTION OF SHARES OF THE TRUST
The Declaration of Trust of the Trust provides that the Trust may be
comprised of separate series (the 'Series') each of which will consist of a
separate portfolio which will issue a separate class of shares. Each of the
Funds is a Series of the Trust. The Trustees of the Trust are authorized to
create an unlimited number of Series and, with respect to each Series, to issue
an unlimited number of full and fractional shares of beneficial interest of a
single class. All shares of the Trust have equal voting rights, except that only
shares of a particular Series are entitled to vote on matters concerning only
that Series, and each issued and outstanding share is entitled to one vote and
to participate equally in dividends and distributions declared by a particular
Series of the Trust, as the case may be, and in net assets of that Series upon
liquidation or dissolution remaining after satisfaction of outstanding
liabilities. In the event a Series is unable to meet its obligations, the
remaining Series would assume the unsatisfied obligations of that Series. The
shares of the Trust, when issued, will be fully paid and non-assessable by the
Trust, have no preference, preemptive, conversion or similar rights, and be
freely transferable. Holders of shares of the Trust are entitled to redeem their
shares as set forth under 'Redemptions.' Shares do not have cumulative voting
rights and the holders of more than 50% of the shares of the Trust voting for
the election of trustees can elect all of the trustees if they choose to do so
and in such event the holders of the remaining shares would not be able to elect
any trustees. Shareholders' meetings will only be held in connection with
matters with respect to which shareholder approval is required under the
Investment Company Act of 1940. Therefore, 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 of the Trust, at which time the trustees then in office will call a
shareholders' meeting for the election of trustees. Shareholders may, in
accordance with the applicable Declaration of Trust, cause a meeting of
shareholders to be held for the purpose of voting on the removal of trustees. No
amendment may be made to the Declaration of Trust without the affirmative vote
of a majority of the outstanding shares of the Trust.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company, P.O. Box 8500, Boston, Massachusetts
02266-8500, is the Funds' custodian, transfer agent and dividend disbursing
agent.
COUNSEL AND INDEPENDENT AUDITORS
Rogers & Wells, counsel to the Trust, passes upon legal matters for the
Trust in connection with the shares offered by this Prospectus. Deloitte &
Touche LLP are the independent auditors of the Trust.
COMMERCIAL PAPER, BANK MONEY INSTRUMENTS AND CORPORATE BOND RATINGS
Commercial Paper and Bank Money Instruments. Commercial paper with the
greatest capacity for timely payment is rated A by Standard & Poor's Ratings
Group ('S&P'). Issues within this category are further redefined with
designations 1, 2 and 3 to indicate the relative degree of safety; A1, the
highest of the three, indicates the degree of safety is either overwhelming or
very strong; A2 indicates that capacity for timely repayment is strong.
Moody's Investors Service ('Moody's') employs the designations of Prime-1,
Prime-2 and Prime-3 to indicate the relative capacity of the rated issuers to
repay punctually. Prime-1 issues have a superior capacity for repayment. Prime-2
issues have a strong capacity for repayment, but to a lesser degree than
Prime-1.
Commercial paper rated A-1 + by IBCA Limited or its affiliate IBCA Inc.
(together, 'IBCA') are obligations supported by the highest capacity for timely
repayment. Commercial paper rated A-1 has a very
A-12
<PAGE>
strong capacity for timely repayment. Commercial paper rated A-2 has a strong
capacity for timely repayment, although such capacity may be susceptible to
adverse changes in business, economic or financial conditions.
Fitch Investors Services, Inc. ('Fitch') employs the rating F-1+ to
indicate issues regarded as having the strongest degree of assurance for timely
payment. The rating F-1 reflects an assurance of timely payment only slightly
less in degree than issues rated F-1+, while the rating F-2 indicates a
satisfactory degree of assurance for timely payment, although the margin of
safety is not as great as indicated by the F-1+ and F-1 categories.
Duff & Phelps Credit Ratings Co. ('Duff & Phelps') employs the designation
of Duff 1 with respect to top grade commercial paper and bank money instruments.
Duff 1+ indicates the highest certainty of timely payment; short-term liquidity
is clearly outstanding, and safety is just below risk-free U.S. Treasury
short-term obligations, Duff 1- indicates high certainty of timely payment, Duff
2 indicates good certainty of timely payment; liquidity factors and company
fundamentals are sound.
Thomson Bankwatch, Inc. ('BankWatch') employs the rating TBW-1 with respect
to the highest category of commercial paper and bank money instruments. A rating
of TBW-1 indicates the degree of safety regarding timely repayment of principal
and interest is very strong. A rating of TBW-2 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 strong capacity to pay interest and repay
principal and differ from the highest rated issues only in a small degree.
Bonds rated Aaa by Moody's are judged to be of the best quality. Interest
payments are protected by a large or by an exceptionally stable margin and
principal is secure. Bonds rated Aa are judged to be of high quality by all
standards. They are rated lower than the best bonds because the margins of
protection may not be as large or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities. Moody's applies
numerical modifiers, 1, 2 and 3 in each generic rating classification from Aa
through B in its corporate bond rating system. The modifier 1 indicates that the
security ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks
in the lower end of its generic rating category.
Bonds rated AAA by IBCA are obligations for which there is the lowest
expectation of investment risk. Capacity for timely repayment of principal and
interest is substantial such that adverse changes in business, economic or
financial conditions are unlikely to increase investment risk significantly.
Bonds rated AA are obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial conditions may
increase investment risk, albeit not very significantly.
Bonds rated AAA by Fitch are considered to be investment grade and of the
highest 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.
Companies rated A by BankWatch possess exceptionally strong balance sheets
and earnings records, translating into excellent reputations and unquestioned
access to their natural money markets. If weakness or
A-13
<PAGE>
vulnerability exists in any aspect of such a company's business, it is entirely
mitigated by the strength of the organization. Companies rated A/B by BankWatch
are financially very solid with favorable track records and no readily apparent
weaknesses. Their overall risk profiles, while low, are not quite as favorable
as for companies in the highest rating category.
RATINGS OF TAX-EXEMPT SECURITIES AND SHORT-TERM TAX-EXEMPT OBLIGATIONS
Set forth below are descriptions of the two highest ratings of Moody's, S&P
and Fitch for Tax-Exempt Securities and short-term tax-exempt obligations.
Ratings for commercial paper have been included since certain of the obligations
which the Tax-Exempt Fund is authorized to purchase have characteristics of
commercial paper and have been rated as such by Moody's and S&P.
DESCRIPTIONS OF MOODY'S RATINGS
Aaa-Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
'gilt edge.' Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa-Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities 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.
Short-term Notes: The two highest ratings of Moody's for short-term notes
are MIG-1 and MIG-2; MIG-1 denotes 'best quality, enjoying strong protection
from established cash flows'; MIG-2 denotes 'high quality' with 'ample margins
of protection.'
Variable Rate Demand Obligations: Moody's has separate rating categories
for variable rate demand obligations ('VRDOs'). VRDOs will receive two ratings.
The first rating, depending on the maturity of the VRDO, will be assigned either
a bond or MIG rating which represents an evaluation of the risk associated with
scheduled principal and interest payments. The second rating, designated as
'VMIG,' represents an evaluation of the degree of risk associated with the
demand feature. The new VRDO demand feature ratings symbols are:
VMIG 1: strong protection by established cash flows, superior
liquidity support, demonstrated access to the market for refinancing.
VMIG 2: ample margins of protection, high quality.
VMIG 3: favorable quality, liquidity and cash flow protection may be
narrow, market access for refinancing may be less well established.
VMIG 4: adequate quality, not predominantly speculative but there is
risk.
Commercial Paper: The highest rating of Moody's for commercial paper is
Prime-1. Issuers rated Prime-1 are judged to be of the highest quality. Their
short-term debt obligations carry the smallest degree of investment risk.
Margins of support for current indebtedness are large or stable with cash flow
and asset protection well assured. Currently liquidity provides ample coverage
of near-term liabilities and unused alternative financing arrangements are
generally available. While protective elements may change over the intermediate
or long term, such changes are most unlikely to impair the fundamentally strong
position of short-term obligations.
A-14
<PAGE>
DESCRIPTION OF S&P RATINGS
AAA--This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.
AA--Bonds rated AA also qualify as high-quality debt obligations. Capacity
to pay principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in small degree.
Short-Term Notes: S&P has a separate rating category with respect to
certain municipal note issues with a maturity of less than three years. The note
ratings and symbols are:
SP-1 A very strong, or strong, capacity to pay principal and
interest. Issues that possess overwhelming safety characteristics will be
given a '+' designation.
SP-2 A satisfactory capacity to pay principal and interest.
SP-3 A speculative capacity to pay principal and interest.
S&P may continue to rate note issues with a maturity greater than three
years in accordance with the same rating scale currently employed for municipal
bond ratings.
Commercial Paper: S&P highest rating for commercial paper is A-1. This
designation indicates the degree of safety regarding timely payment as either
overwhelming or very strong. Those issues determined to have overwhelming safety
characteristics will be designated with a plus (+) sign designation.
DESCRIPTION OF FITCH'S RATINGS
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. The
ratings take into consideration special features of the issue, its relationship
to other obligations of the issuer, the current financial condition and
operative performance of the issuer and of any guarantor, as well as the
political and economic environment that might affect the issuer's future
financial strength and credit quality. Bonds that have the same rating are of
similar but not necessarily identical credit quality since the rating categories
do not fully reflect small differences in the degrees of credit risk.
Fitch employs the rating F-1+ to indicate short-term debt issues regarded
as having the strongest degree of assurance for timely payment. The rating F-1
reflects an assurance of timely payment only slightly less in degree than issues
rated F-1+. The rating F-2 indicates a satisfactory degree of assurance for
timely payment, although the margin of safety is not as great as indicated by
the F-1+ and F-1 categories.
REPORTS TO SHAREHOLDERS
The fiscal year of the Trust ends on April 30 of each year. The Trust
issues to its shareholders semi-annually reports containing unaudited financial
statements and annual reports containing audited financial statements.
ADDITIONAL INFORMATION
This Prospectus does not contain all the information included in the
Registration Statement filed with the Securities and Exchange Commission under
the Securities Act of 1933 with respect to the securities offered hereby,
certain portions of which have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The Statement of
Additional Information, dated August 25, 1995, which forms a part of the
Registration Statement, is incorporated by reference into this Prospectus. The
Statement of Additional Information may be obtained without charge as provided
on the cover page of this Prospectus. The Registration Statements including the
exhibits filed therewith may be examined at the office of the Securities and
Exchange Commission in Washington, D.C.
A-15
<PAGE>
------------------------
The Trust was organized as an unincorporated business trust under the laws
of Massachusetts on May 7, 1987, and commenced operations on December 18, 1989
with only one series, Merrill Lynch Treasury Fund. Two additional series of the
Trust, Merrill Lynch Institutional Fund and Merrill Lynch Government Fund,
commenced operations effective August 31, 1990. One additional series of the
Trust, Merrill Lynch Institutional Tax-Exempt Fund, commenced operations
effective February 18, 1994. The executive offices of the Trust are located at
One Financial Center, Boston, Massachusetts 02111-2646 (telephone 617-357-1460
or toll-free 800-225-1576).
The Declaration of Trust establishing the Trust, dated May 7, 1987, a copy
of which, together with all amendments thereto (the 'Declaration'), is on file
in the office of the Secretary of the Commonwealth of Massachusetts, provides
that the name 'Merrill Lynch Funds For Institutions Series' refers to the
trustees under the Declaration collectively as trustees, but not as individuals
or personally; and no trustee, shareholder, officer, employee or agent of the
Trust may be held to any personal liability, nor may resort by law to their
private property for the satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Trust but only the Trust Property shall be
liable. The Trust issues shares in one or more series. All persons dealing with
the Trust must look solely to the property of the applicable series of the Trust
for the enforcement of any claims against it.
A-16
<PAGE>
ACCOUNT APPLICATION (CHECK ONE)
/ / MERRILL LYNCH INSTITUTIONAL FUND / / MERRILL LYNCH TREASURY FUND
/ / MERRILL LYNCH GOVERNMENT FUND / / MERRILL LYNCH INSTITUTIONAL
TAX-EXEMPT FUND
MAIL TO: STATE STREET BANK AND TRUST COMPANY,
P.O. BOX 8500, BOSTON, MASSACHUSETTS 02266-8500
REGISTRATION: The account should be registered as follows:
/ / / / / / / / / / / / / / / / / / / / / /
------------------------------------------
Name of Account
/ / / / / / / / / / / / / / / / / / / / / /
------------------------------------------
/ / / / / / / / / / / / / / / / / / / / / /
------------------------------------------
/ / / / / / / / / / / / / / / / / / / / / /
------------------------------------------
Street
/ / / / / / / / / / / / / / / / / / / / / /
------------------------------------------
City State Zip
/ / / / / / / / / / / / / / / / / / / / / /
------------------------------------------
Occupation
/ / / / / / / / / / / / / / / / / / / / / /
------------------------------------------
Name of Employer
/ / / / / / / / / / / / / / / / / / / / / /
------------------------------------------
Street
/ / / / / / / / / / / / / / / / / / / / / /
------------------------------------------
City State Zip
INITIAL INVESTMENT:--Minimum $25,000
/ / The account has been opened by wire on ___________________________________
(Date) and the account no. assigned is ___________________________________
/ / Please establish an account with the enclosed check for $ ________________
payable to Merrill Lynch Institutional Fund, Merrill Lynch Government Fund,
Merrill Lynch Treasury Fund or Merrill Lynch Institutional Tax-Exempt Fund,
as applicable.
/ / / /-/ / /-/ / / / /
----------------------
Soc. Sec. No. (Individual)
/ / / / / / / / / / / /*
----------------------
Tax ID No. (Corporate)
___(_________)__________________________________________________________________
Area code Telephone
Citizen of
/ / U.S.
/ / Other (please specify) ____________________________________________________
---------
* Under the Federal income tax law, you are subject to certain penalties as
well as withholding of tax at a 31% rate if you do not provide a correct
number.
MONTHLY CASH DIVIDENDS
/ / Check this box if dividends are to be paid monthly in cash. Otherwise
dividends will be reinvested automatically in additional shares of the Fund.
CHECK REDEMPTION PRIVILEGE (SEE PAGE A-7)
/ / Check this box and complete Authorization for Redemption by Check Form and
Signature Card on pages A-19 and A-20.
TELEPHONE EXCHANGE PRIVILEGE (SEE PAGE A-10)
YES NO
/ / / / I (We) hereby authorize telephone instructions to withdraw
amounts from my (our) Fund account and exchange for shares
of Merrill Lynch Institutional Fund, Merrill Lynch Government
Fund, Merrill Lynch Treasury Fund, Merrill Lynch Institutional
Tax-Exempt Fund and/or Merrill Lynch Institutional Intermediate
Fund.
EXPEDITED REDEMPTION PAYMENTS Redemption proceeds will be sent to the bank or
(SEE PAGE A-6) trust company listed below, for credit to the
If desired check box investor's account. If the investor wishes to
/ / send redemption proceeds to more than one such
and complete the rest institution, an additional application must be
of this section submitted for each institution. The investor
hereby authorizes State Street Bank to honor
telephone or written instructions, without a
signature guarantee, for redemption of Fund
shares. State Street Bank's records of such
instructions will be binding on all parties and
State Street Bank and the Fund will not be
liable for any loss, expense or cost arising
out of such transactions, unless the Fund or
State Street Bank fail to employ reasonable
procedures to confirm that instructions
communicated by telephone are genuine.
Enclose a specimen of your check or deposit slip (marked 'VOID') for the bank
account listed below. TO FACILITATE THE WIRING OF YOUR REDEMPTION PROCEEDS THE
INDICATED BANK SHOULD BE A COMMERCIAL BANK.
Name of Bank: __________________________ Bank Account No. _____________________
Address of Bank: ______________________________________________________________
Street City State Zip
Name on Account: ______________________________________________________________
CERTIFICATION: By the execution of this Application, the investor represents
and warrants that the investor has full right, power and authority to invest
in the Fund, and the person or persons signing on behalf of the investor
represent and warrant that they are duly authorized to sign this Application
and to purchase or redeem shares of the Fund on behalf of the investor. The
investor hereby affirms that he has received a current Fund Prospectus.
The undersigned hereby certifies under penalty of perjury that (1) the above
Social Security Number or Taxpayer Identification Number is correct and that
(2) he is not subject to backup withholding because (a) he is exempt from
backup withholding, OR (b) he has not been notified by the Internal Revenue
Service that he is subject to backup withholding as a result of a failure to
report all interest or dividends, OR (c) the IRS has notified him that he is
no longer subject to backup withholding.
Certification Instructions--You must cross out item 2 above if you have been
notified by the IRS that you are currently subject to backup withholding due
to underreporting of interest or dividends. The undersigned authorizes the
furnishing of this certification to other Merrill Lynch sponsored mutual
funds.
...................................... .......................................
Signature Title (Corporate Account only)
...................................... .......................................
Signature Title (Corporate Account only)
A-17
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
A-18
<PAGE>
AUTHORIZATION FOR REDEMPTION BY CHECK
MERRILL LYNCH INSTITUTIONAL FUND, MERRILL LYNCH GOVERNMENT FUND,
MERRILL LYNCH TREASURY FUND AND/OR MERRILL LYNCH INSTITUTIONAL TAX-EXEMPT FUND
INSTRUCTIONS:
INDIVIDUAL ACCOUNT: Complete Steps 1, 3, 4 and 5.
INSTITUTIONAL ACCOUNT: Complete All Steps.
STEP 1--Fill in account title and address. (This information must be identical
to the registration of the shareholder account in the Fund). Also fill in your
shareholder account number, if known.
STEP 2--Institutions should enter type of organization, (i.e., Corporation,
Trust, Partnership, etc.)
STEP 3--Print name(s) in section (a) and sign in section (b). Officers of
organizations should give their titles.
STEP 4--Have your signature(s) guaranteed by an eligible guarantor institution.
STEP 5--Fill in account title and affix authorized signature(s). (Only
registered shareholder's signatures allowed for single name or joint accounts.
Corporate accounts may have multiple signatures.)
MAIL COMPLETED FORM ALONG WITH THE SIGNATURE CARD TO:
STATE STREET BANK AND TRUST CO., P.O. BOX 8500, BOSTON, MA 02266-8500.
--------------------------------------------------------------------------------
STEP 1 At the undersigned's request, State Street Bank and Trust
INSERT ACCOUNT Company (the 'Bank') has established a checking account for
NUMBER IF KNOWN the undersigned. When a check is presented on the
undersigned's checking account for payment, the Bank will
present the check to the Fund as authority to redeem a
sufficient number of shares in the undersigned's shareholder
account with the Fund to cover the amount of the check. Checks
may not be for less than $500. The Fund is hereby authorized
and directed to accept and act upon checks presented to it by
the Bank and to redeem a sufficient number of shares for which
certificates have not been issued in the undersigned's
shareholder account with the Fund and forward the proceeds of
such redemption to the Bank. THE UNDERSIGNED UNDERSTANDS AND
AGREES THAT SHARES PURCHASED BY CHECK (INCLUDING CERTIFIED OR
CASHIER'S CHECK) WITHIN 15 CALENDAR DAYS PRIOR TO PRESENTATION
OF SUCH CHECK WILL NOT BE REDEEMED AND ANY CHECK DRAWN TO
REDEEM SUCH SHARES WILL BE RETURNED MARKED 'UNCOLLECTED
FUNDS.' The undersigned further understands and agrees that
the Fund and/or its agents will not be liable for any loss,
expense or cost arising out of check redemptions other than
for its negligence or willful misconduct. The undersigned will
be subject to the Bank's rules and regulations governing such
checking accounts, including the right of the Bank not to
honor checks in amounts exceeding the value of the
undersigned's shareholder account at the time the check is
presented for payment. The Fund and the Bank have reserved the
right to change, modify or terminate this checking account
privilege at any time.
STEPS 2, 3 & 4 Account Name(s):______________________________________
ON REVERSE SIDE
Address:______________________________________________
Account No. (if assigned):____________________________
--------------------------------------------------------------------------------
STEP 5 Merrill Lynch Institutional Fund Account No.
Merrill Lynch Government Fund ____________________________
Merrill Lynch Treasury Fund
Merrill Lynch Institutional Tax-Exempt Fund
State Street Bank and Trust Company
SIGNATURE CARD
-------------------------------------------------------------
Account Name(s) as Registered
-------------------------------------------------------------
Authorized Signature(s) (a) Print or type (b) Sign below
full name
1. 1.
-------------------------------------------------------------
2. 2.
-------------------------------------------------------------
3. 3.
-------------------------------------------------------------
4. 4.
-------------------------------------------------------------
/ / Check if all signatures are required
/ / Check if only one signature is required
/ / Check if combination of signatures is required
and specify number ______
DATE
SUBJECT TO CONDITIONS ON REVERSE SIDE
A-19
<PAGE>
--------------------------------------------------------------------------------
STEP 2 We hereby certify that each of the persons listed in Step 3
IF OTHER THAN has been duly elected and is now legally holding the office
AN INDIVIDUAL, set opposite his name.
INSERT TYPE OF We further certify that the said ______________________ is
ORGANIZATION duly organized and existing and has the power to take the
(CORPORATION, action called for by this Continuing Redemption
TRUST, ETC.) Authorization.
We further certify that the signatures on the signature card
which is submitted with this Application and is incorporated
into this Agreement as if set forth herein, are authentic
and represent individuals with legal capacity to sign on
behalf of the above.
--------------------------------------------------------------------------------
STEP 3 We further certify and agree that the above certifications,
NAMES AND authorizations and appointments in this document will continue
SIGNATURES until State Street Bank and Trust Company receives actual
written notice of any change thereof.
(a) Please print or type full (b) Sign below:
names and titles:
______________________________ ______________________________
(Individual, President, (Signature)
Trustee, General Partner
or Representative)
______________________________ ______________________________
(If joint account insert the (Signature)
name of joint account)
______________________________ ______________________________
(Secretary of Corporation) (Signature)
(The President or Vice President and Secretary or Assistant
Secretary of a corporation must sign.)
--------------------------------------------------------------------------------
STEP 4 Signature(s) Guaranteed: _______________________________
BANKER OR (Name of Guarantor
BROKER SIGNS Institution)
By: _______________________________
(Authorized Signature)
-----------------------------------------------------------------------------
This completed authorization must be received by State Street Bank and Trust
Company before redemption requests by check will be honored. Any amendment
or modification of the above information will require that a new
Authorization Form be completed and submitted and may require the execution
of new signature cards.
--------------------------------------------------------------------------------
MERRILL LYNCH INSTITUTIONAL FUND
MERRILL LYNCH GOVERNMENT FUND
MERRILL LYNCH TREASURY FUND
MERRILL LYNCH INSTITUTIONAL TAX-EXEMPT FUND
THE PAYMENT OF FUNDS IS AUTHORIZED BY THE SIGNATURE(S) APPEARING ON THE REVERSE
SIDE.
If this card is signed by more than one person, all checks will require all
signatures appearing on the reverse side unless a lesser number is indicated. If
no indication is given, all checks will require all signatures. Each signatory
guarantees the genuineness of the other signatures.
The bank is hereby appointed agent by the person(s) (the 'Depositor(s)') signing
this card and, as agent, is authorized and directed to present checks drawn on
this checking account to the Fund or its transfer agent as requests to redeem
shares of the Fund registered in the name of the Depositor(s) in the amounts of
such checks and to deposit the proceeds of such redemptions in this checking
account. The Bank will be liable only for its own negligence.
The Depositor(s) agrees to be subject to the rules and regulations of the Bank
pertaining to this checking account as amended from time to time. The Bank
reserves the right to change, modify or terminate this checking account and
authorization at any time.
A-20
<PAGE>
MERRILL LYNCH INSTITUTIONAL FUND
MERRILL LYNCH GOVERNMENT FUND
MERRILL LYNCH TREASURY FUND
MERRILL LYNCH INSTITUTIONAL TAX-EXEMPT FUND
This document consists of the Statements of Additional Information of
Merrill Lynch Institutional Fund (the 'Institutional Fund'), Merrill Lynch
Government Fund (the 'Government Fund'), Merrill Lynch Treasury Fund (the
'Treasury Fund') and Merrill Lynch Institutional Tax-Exempt Fund (the
'Tax-Exempt Fund') (collectively, the 'Funds') and an Appendix A which
constitutes part of each Fund's Statement of Additional Information. A table of
contents may be found on page 1 of each Statement of Additional Information.
------------------------
The Institutional Fund is a no-load money fund whose objectives are maximum
current income consistent with liquidity and the maintenance of a portfolio of
high quality short-term 'money market' instruments. The Government Fund and the
Treasury Fund are no-load money funds seeking current income consistent with
liquidity and security of principal. The Government Fund invests in a portfolio
of securities issued or guaranteed by the U.S. Government, its agencies or its
instrumentalities. The Treasury Fund invests in a portfolio of U.S. Treasury
securities. The Tax-Exempt Fund is a no-load money fund seeking current income
exempt from Federal income taxes, preservation of capital and liquidity
available from investing in a diversified portfolio of short-term, high quality
Tax-Exempt Securities.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MERRILL LYNCH INSTITUTIONAL FUND
OF MERRILL LYNCH FUNDS FOR INSTITUTIONS SERIES
ONE FINANCIAL CENTER, BOSTON, MASSACHUSETTS 02111-2646
FOR GENERAL INFORMATION AND PURCHASES CALL 617-357-1460 OR TOLL FREE
800-225-1576
Merrill Lynch Institutional Fund is a no-load money fund whose objectives
are maximum current income consistent with liquidity and the maintenance of a
portfolio of high quality short-term 'money market' instruments. The
Institutional Fund is designed primarily for institutions as an economical and
convenient means for the investment of short-term funds. The Institutional Fund
is a separate series of Merrill Lynch Funds For Institutions Series (the
'Trust'), a diversified, open-end management investment company.
The Statement of Additional Information of the Institutional Fund is not a
prospectus and should be read in conjunction with the Prospectus of the
Institutional Fund (the 'Prospectus') which has been filed with the Securities
and Exchange Commission and is available upon oral or written request without
charge. Copies of the Prospectus can be obtained by calling or by writing the
Institutional Fund at the above telephone number or address. This Statement of
Additional Information has been incorporated by reference into the Prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objectives and Policies.......................... 2
Independent Auditors' Report................................ 5
Audited Financial Statements for the Fiscal Year Ended
April 30, 1995............................................ 6
Appendix A:
Management of the Trust................................ A-1
Investment Advisory and Other Services................. A-4
Portfolio Transactions................................. A-7
Net Asset Value........................................ A-8
Dividends.............................................. A-9
Taxes.................................................. A-10
Federal........................................... A-10
Massachusetts Income Tax.......................... A-12
Other Taxes....................................... A-12
Distributor............................................ A-13
Yield Information...................................... A-14
General Information.................................... A-14
</TABLE>
The date of this Statement of Additional Information and the Prospectus is
August 25, 1995.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Reference is made to 'The Institutional Fund and Its Objectives' in the
Prospectus for a discussion of the investment objectives and policies of the
Institutional Fund.
All investments of the Institutional Fund will be in securities with
remaining maturities of up to 762 days (25 months) in the case of government
securities and 397 days (13 months) in the case of all other securities. The
dollar weighted average maturity of the Institutional Fund's portfolio will be
90 days or less.
As discussed in the Prospectus, the Institutional Fund may invest in
obligations issued by commercial banks. Except as provided below, the U.S. banks
must be among the 50 largest commercial banks in the United States (measured by
total assets as shown by their most recent annual financial statements) and must
be members of the Federal Deposit Insurance Corporation (the 'FDIC'). The
Institutional Fund may invest up to 5% of the value of its total assets (taken
at market value at the time of each investment) in certificates of deposit
issued by U.S. commercial banks other than the 50 largest commercial banks in
the United States if the principal amount thereof is fully insured by the FDIC.
The Institutional Fund may also invest in U.S. dollar-denominated
obligations of depository institutions, such as certificates of deposit,
bankers' acceptances, time deposits, bank notes and deposit notes. The
obligations of commercial banks may be issued by U.S. banks, foreign branches or
subsidiaries of U.S. banks ('Eurodollar' obligations) or U.S. branches or
subsidiaries of foreign banks ('Yankeedollar' obligations). The Institutional
Fund may invest only in Eurodollar obligations which by their terms are general
obligations of the U.S. parent bank. Yankeedollar obligations in which the
Institutional Fund may invest must be issued by U.S. branches or subsidiaries of
foreign banks which are subject to state or Federal banking regulations in the
U.S. and by their terms must be general obligations of the foreign parent.
Investment in Eurodollar and Yankeedollar obligations may involve different
risks from the risks of investing in obligations of U.S. banks. Such risks
include adverse political and economic developments, the possible imposition of
withholding taxes on interest income payable on such obligations, the possible
seizure or nationalization of foreign deposits and the possible establishment of
exchange controls or other foreign governmental laws or restrictions which might
adversely affect the payment of principal and interest. Generally, the issuers
of such obligations are subject to fewer U.S. regulatory requirements than are
applicable to U.S. banks. Foreign branches or subsidiaries of U.S. banks may be
subject to less stringent reserve requirements than U.S. banks. U.S. branches or
subsidiaries of foreign banks are subject to the reserve requirements of the
state in which they are located. There may be less publicly available
information about a U.S. branch or subsidiary of a foreign bank than about a
U.S. bank, and such branches or subsidiaries may not be subject to the same
accounting, auditing and financial record keeping standards and requirements as
U.S. banks. Evidence of ownership of Eurodollar obligations may be held outside
of the United States and the Institutional Fund may be subject to the risks
associated with the holding of such property overseas. Eurodollar obligations of
the Institutional Fund held overseas will be held by foreign branches of the
Custodian for the Institutional Fund's portfolio securities or by other U.S. or
foreign banks under subcustodian arrangements complying with the requirements of
the Investment Company Act of 1940.
Fund Asset Management, L.P. ('FAM') will consider the above factors in
making investments in Eurodollar and Yankeedollar obligations and will not
knowingly purchase obligations which, at the time of purchase, are subject to
exchange controls or withholding taxes. Generally, the Institutional Fund will
limit its Yankeedollar investments to obligations of banks organized in Canada,
France, Germany, Japan, the Netherlands, Switzerland, the United Kingdom and
other western industrialized nations.
Institutional Fund
2
<PAGE>
The Institutional Fund's investments in commercial paper (including
short-term, unsecured promissory notes issued by corporations, partnerships,
trusts and other entities) will be rated in the highest rating category for
short-term debt obligations by a nationally recognized statistical rating
organization (an 'NRSRO') or will be issued by a company having an outstanding
debt issue which at the time of purchase is rated in one of the top two rating
categories by an NRSRO or, if not rated, will be of comparable quality as
determined by the Trustees of the Trust. The Institutional Fund's investments in
bonds (which must have remaining maturities at the date of purchase of 397 days
(13 months) or less) will be in issuers which have received from an NRSRO a
rating, with respect to a class of short-term debt obligations that is
comparable in priority and security with the investment to be purchased by the
Fund, in one of the two highest rating categories for short-term obligations or,
if not rated, will be of comparable quality as determined by the Trustees.
Currently there are six NRSROs: Duff & Phelps Credit Ratings Co., Fitch
Investors Services, Inc., IBCA Limited and its affiliate IBCA Inc., Moody's
Investors Service, Inc., Standard & Poor's Ratings Group and Thomson Bankwatch,
Inc. See the section of the Prospectus captioned 'Additional
Information-Commercial Paper, Bank Money Instrument and Bond Ratings.'
The Institutional Fund may also invest in U.S. dollar-denominated
commercial paper and other short-term obligations issued by foreign entities.
Such investments are subject to quality standards similar to those applicable to
investments in comparable obligations of domestic issuers. Investments in
foreign entities in general involve the same risks as those described in
connection with investments in Eurodollar and Yankeedollar obligations.
As described in the Prospectus, the Institutional Fund may invest in
participations in, or bonds and notes backed by, pools of mortgage, credit card,
automobile or other types of receivables, with remaining maturities of no more
than 397 days (13 months). These structured financings will be supported by
sufficient collateral and other credit enhancements, including letters of
credit, insurance, reserve funds and guarantees by third parties, to enable such
instruments to obtain the requisite quality rating by a nationally recognized
statistical rating organization, as described above.
Variable amount master notes, described in the Prospectus, permit a series
of short-term borrowings under a single note. The lender has the right to
increase the amount under the note at any time up to the full amount provided by
the note agreement. In addition the lender has the right to reduce the amount of
outstanding indebtedness at any time.
Forward or firm commitments for the purchase or sale of U.S. Government
securities may be entered into by the Institutional Fund as described in the
Prospectus. The purchase of the underlying securities will be recorded on the
date the Institutional Fund enters into the commitment and the value of the
security will thereafter be reflected in the calculation of the Institutional
Fund's net asset value. A separate account of the Institutional Fund will be
established with State Street Bank and Trust Company, the Institutional Fund's
custodian, consisting of cash or liquid money market securities having a market
value at all times until the delivery at least equal to the amount of the
forward commitment. As stated in the Prospectus, the Institutional Fund may
dispose of a commitment prior to settlement, although the Institutional Fund
will generally enter into forward commitments with the intention of acquiring
securities for its portfolio. Risks relating to these trading practices are
briefly described in the Prospectus.
In addition to the investment restrictions set forth in the Prospectus, the
Institutional Fund has adopted the following investment restrictions, none of
which may be changed without the approval of a majority of the Institutional
Fund's outstanding shares, which for this purpose means the vote of (i) 67% or
more of the Institutional Fund's shares present at a meeting, if the holders of
more than 50% of the outstanding shares of the
Institutional Fund
3
<PAGE>
Institutional Fund are present or represented by proxy, or (ii) more than 50% of
the Institutional Fund's outstanding shares, whichever is less. The
Institutional Fund may not:
(1) Purchase common stocks or other voting securities, preferred
stocks, warrants, other equity securities, securities with legal or
contractual restrictions on resale, state bonds or municipal bonds.
(2) Make loans, except through the purchase of debt obligations in
accordance with the Institutional Fund's investment objective and policies.
(3) Borrow money, except from banks for extraordinary or emergency
purposes and then only in amounts up to 10% of the value of the
Institutional Fund's net assets, taken at cost, at the time the borrowing
is made. This borrowing provision is included solely to facilitate the
orderly sale of portfolio securities to accommodate abnormally heavy
redemption requests if they should occur and is not for investment
purposes. (As a matter of operating policy, the Institutional Fund will not
purchase securities when outstanding borrowings exceed 5% of the
Institutional Fund's asset value.)
(4) Mortgage, pledge or hypothecate any assets except in an amount of
up to 15% of the value of the Institutional Fund's net assets, taken at
cost, but only to secure borrowings for extraordinary or emergency
purposes.
(5) Purchase or sell real estate, real estate investment trust
securities, commodities, commodity contracts or oil and gas interests.
(6) Acquire securities of other investment companies.
(7) Act as an underwriter of securities.
(8) Purchase securities on margin, make short sales of securities or
maintain a short position.
As a matter of operating policy, in order to comply with certain applicable
state restrictions, the Institutional Fund will not (1) pledge, mortgage or
hypothecate in excess of 10% of its net assets at market value, (2) invest more
than 5% of its total assets in securities of unseasoned issuers (including their
predecessors) which have been in operation for less than three years, or (3)
invest in real estate limited partnerships or oil, gas or mineral leases. Also,
as a matter of policy, the Trustees of the Trust have determined that the
Institutional Fund will not write put or call options.
For purposes of the 25% limitation on investment or securities of issuers
in a particular industry, neither all utility companies (including telephone
companies) as a group nor all finance companies as a group will be considered a
single industry.
Institutional Fund
4
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders of
Merrill Lynch Funds For Institutions Series:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of Merrill Lynch Funds For Institutions
Series (the 'Trust'), consisting of the Merrill Lynch Institutional Fund,
Merrill Lynch Government Fund, Merrill Lynch Treasury Fund, and Merrill Lynch
Institutional Tax-Exempt Fund (the 'Funds') as of April 30, 1995, the related
statements of operations for the year then ended, and the statements of changes
in net assets and financial highlights for each of the respective fiscal periods
then ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at
April 30, 1995, by correspondence with the custodian and brokers; where replies
were not received from brokers, we performed other auditing procedures. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of each of the
respective Funds of the Merrill Lynch Funds For Institutions Series at April 30,
1995, the results of their operations, the changes in their net assets, and
their financial highlights for each of the respective fiscal periods then ended
in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Boston, Massachussetts
May 26, 1995
Institutional Fund
5
-------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Schedule of Investments
April 30, 1995
<TABLE>
<CAPTION>
=============================================================================================================================
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
==============================================================================================================================
<S> <C> <C> <C> <C> <C>
U.S. $ 50,000,000 U.S. Treasury Bills 6.38 % 07/13/95 $ 49,425,125
Government & 50,000,000 U.S. Treasury Bills 6.42 07/27/95 49,310,042
Agency 20,000,000 U.S. Treasury Bills 5.26 08/24/95 19,632,639
Issues--15.5% 40,000,000 U.S. Treasury Bills 6.589 02/08/96 38,138,489
25,000,000 U.S. Treasury Bills 6.61 02/08/96 23,836,556
10,000,000 U.S. Treasury Bills 6.605 02/08/96 9,534,622
25,000,000 U.S. Treasury Bills 6.02 04/04/96 23,603,979
75,000,000 U.S. Treasury Bills 5.875 05/02/96 70,492,750
25,000,000 U.S. Treasury Bills 5.91 05/02/96 23,497,583
50,000,000 U.S. Treasury Bills 5.895 05/02/96 46,995,167
44,000,000 U.S. Treasury Notes 3.875 08/31/95 43,690,627
34,000,000 U.S. Treasury Notes 5.875 05/31/96 33,808,750
17,400,000 U.S. Treasury Notes 6.25 08/31/96 17,340,188
20,000,000 U.S. Treasury Notes 6.875 02/28/97 20,093,750
10,025,000 Federal Home Loan Banks 10.30 07/25/95 10,115,225
40,000,000 Federal Home Loan Banks 6.42 04/24/96 39,964,000
15,000,000 Federal Home Loan Banks 7.10 04/03/97 15,000,000
28,000,000 Federal Home Loan Mortgage Corp 4.635 08/09/95 27,885,200
59,000,000 Federal Home Loan Mortgage Corp 6.84 02/28/96 59,159,300
20,000,000 Federal Home Loan Mortgage Corp 6.45 04/08/96 19,988,000
81,450,000 Federal National Mortgage Assoc. 6.86 02/28/96 81,661,770
25,000,000 Federal National Mortgage Assoc. 6.72 02/28/96 25,037,500
10,000,000 Federal National Mortgage Assoc. 7.68 01/27/97 10,151,000
20,000,000 Student Loan Marketing Assoc. 5.48 06/30/95 20,002,360
33,000,000 Federal Home Loan Banks D/N 6.04 10/04/95 32,144,860
6,000,000 Federal Home Loan Banks D/N 6.30 11/08/95 5,809,318
50,000,000 Federal Home Loan Banks D/N 6.02 11/27/95 48,252,917
50,000,000 Federal Home Loan Banks D/N 6.02 01/11/96 47,867,917
51,500,000 Federal Home Loan Banks D/N 6.02 01/12/96 49,295,342
10,500,000 Federal Home Loan Banks D/N 6.15 03/29/96 9,911,422
11,600,000 Federal Home Loan Banks D/N 6.16 03/29/96 10,949,762
25,000,000 Federal Home Loan Banks D/N 5.98 04/19/96 23,529,917
15,000,000 Federal National Mortgage 6.00 09/26/95 14,633,083
Assoc. D/N
------------------------------------------------------------------------------------------------------------------------------
Total U.S. Government & Agency 1,020,759,160
Issues (Cost $1,020,938,413)
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements Institutional Fund
6
-------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Schedule of Investments--Continued
April 30, 1995
<TABLE>
<CAPTION>
==============================================================================================================================
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
==============================================================================================================================
<S> <C> <C> <C> <C> <C>
U.S. $17,000,000 Federal Farm Credit Banks 6.20 % 02/09/96 $ 16,993,142
Government 28,000,000 Federal Home Loan Banks 6.43 06/21/95 28,000,000
Agency 25,300,000 Federal Home Loan Banks 6.40 09/20/95 25,298,155
Issues--Variable 58,000,000 Federal Home Loan Banks 6.03 10/03/95 57,983,202
Rate--28.4% 40,000,000 Federal Home Loan Banks 6.43 12/28/95 40,000,000
25,000,000 Federal Home Loan Banks 6.50 05/10/96 24,994,929
48,000,000 Federal Home Loan Banks 6.46 06/17/96 48,000,000
20,000,000 Federal Home Loan Banks 6.46 06/21/96 20,000,000
10,000,000 Federal Home Loan Banks 6.50 12/23/96 10,009,307
10,000,000 Federal Home Loan Banks 6.58 01/31/97 10,009,753
25,270,000 Federal Home Loan Banks 6.58 01/31/97 25,328,250
34,105,000 Federal Home Loan Banks 6.53 02/03/97 34,093,577
35,000,000 Federal Home Loan Banks 6.53 02/10/97 35,000,000
14,000,000 Federal Home Loan Banks 6.35 01/26/98 13,875,709
10,100,000 Federal Home Loan Mortgage Corp. 6.33 05/06/96 10,100,000
11,000,000 Federal Home Loan Mortgage Corp. 6.50 05/13/98 11,000,000
36,000,000 Federal National Mortgage Assoc. 5.82 06/01/95 35,999,696
44,000,000 Federal National Mortgage Assoc. 5.82 06/01/95 43,999,629
75,000,000 Federal National Mortgage Assoc. 6.09 08/23/95 75,000,000
55,000,000 Federal National Mortgage Assoc. 6.09 08/25/95 54,998,252
50,000,000 Federal National Mortgage Assoc. 6.06 09/22/95 49,994,082
20,000,000 Federal National Mortgage Assoc. 6.40 12/20/95 19,987,385
50,000,000 Federal National Mortgage Assoc. 5.99 05/10/96 49,975,860
70,000,000 Federal National Mortgage Assoc. 6.33 05/13/96 70,000,000
60,000,000 Federal National Mortgage Assoc. 6.33 05/24/96 60,000,000
32,000,000 Federal National Mortgage Assoc. 6.005 07/18/96 31,969,847
30,000,000 Federal National Mortgage Assoc. 6.33 08/13/96 30,000,000
15,000,000 Federal National Mortgage Assoc. 6.45 10/04/96 14,988,737
10,000,000 Federal National Mortgage Assoc. 6.60 10/07/96 10,010,028
20,000,000 Federal National Mortgage Assoc. 6.60 10/07/96 20,045,500
110,000,000 Federal National Mortgage Assoc. 6.03 10/11/96 110,000,000
50,000,000 Federal National Mortgage Assoc. 6.60 02/14/97 50,108,109
50,000,000 Federal National Mortgage Assoc. 6.06 02/21/97 50,000,000
47,000,000 Federal National Mortgage Assoc. 6.45 05/19/97 47,000,000
44,000,000 Federal National Mortgage Assoc. 6.50 05/14/98 44,000,000
17,500,000 Student Loan Marketing Assoc. 6.06 06/02/95 17,503,812
20,000,000 Student Loan Marketing Assoc. 6.19 08/07/95 20,002,547
</TABLE>
See Notes to Financial Statements Institutional Fund
7
-------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Schedule of Investments--Continued
April 30, 1995
<TABLE>
<CAPTION>
==============================================================================================================================
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
==============================================================================================================================
<S> <C> <C> <C> <C> <C>
U.S. $71,000,000 Student Loan Marketing Assoc. 6.19 % 03/20/96 $71,139,263
Government 69,000,000 Student Loan Marketing Assoc. 6.06 04/16/96 69,063,200
Agency 89,900,000 Student Loan Marketing Assoc. 6.02 05/14/96 89,960,454
Issues--Variable 28,000,000 Student Loan Marketing Assoc. 5.99 07/19/96 28,011,422
Rate 15,000,000 Student Loan Marketing Assoc. 6.36 08/16/96 14,972,354
(continued) 13,000,000 Student Loan Marketing Assoc. 6.29 08/22/96 13,051,487
101,500,000 Student Loan Marketing Assoc. 5.99 09/23/96 101,487,855
14,100,000 Student Loan Marketing Assoc. 6.215 11/27/96 14,100,000
69,750,000 Student Loan Marketing Assoc. 6.05 12/20/96 69,745,945
20,000,000 Student Loan Marketing Assoc. 6.20 01/14/97 20,000,000
25,000,000 Student Loan Marketing Assoc. 6.45 01/21/97 25,031,456
35,000,000 Student Loan Marketing Assoc. 6.16 03/03/97 35,000,000
------------------------------------------------------------------------------------------------------------------------------
Total U.S. Government Agency
Issues--Variable Rate
(Cost $1,867,833,019) 1,867,832,944
------------------------------------------------------------------------------------------------------------------------------
European 10,000,000 Abbey National Treasury Services
Certificates of PLC, London 7.22 02/05/96 10,052,766
Deposit--3.2% 25,000,000 Abbey National Treasury Services
PLC, London 6.54 04/09/96 25,003,685
25,000,000 Bank of America N.T. & S.A.,
London 6.26 10/19/95 24,999,650
25,000,000 Bank of Scotland, London 6.76 04/04/96 25,050,637
25,000,000 NationsBank N.A. (Carolinas)
London 5.47 05/19/95 25,001,029
100,000,000 Sumitomo Bank Ltd., London 6.11 05/03/95 99,999,945
------------------------------------------------------------------------------------------------------------------------------
Total European Certificates of
Deposit
(Cost $210,072,170) 210,107,712
------------------------------------------------------------------------------------------------------------------------------
Yankee 14,000,000 Bank of Nova Scotia, NY 6.00 05/25/95 14,000,093
Certificates of 30,000,000 Dai-Ichi Kangyo Bank Ltd., NY 6.06 05/22/95 30,000,174
Deposit--5.7% 12,000,000 Dai-Ichi Kangyo Bank Ltd., NY 6.19 05/31/95 12,000,165
60,000,000 Sanwa Bank Ltd., NY 6.06 05/24/95 60,001,144
25,000,000 Sanwa Bank Ltd., NY 6.05 05/25/95 25,000,332
42,000,000 Societe Generale, NY 6.75 06/02/95 42,001,453
90,000,000 Societe Generale, NY 6.08 06/12/95 90,003,739
80,000,000 Sumitomo Bank Ltd., NY 6.11 05/03/95 80,000,124
20,000,000 Sumitomo Bank Ltd., NY 6.06 05/17/95 20,000,000
------------------------------------------------------------------------------------------------------------------------------
Total Yankee Certificates of
Deposit
(Cost $373,007,225) 373,007,224
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements Institutional Fund
8
-------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Schedule of Investments--Continued
April 30, 1995
<TABLE>
<CAPTION>
==============================================================================================================================
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
==============================================================================================================================
<S> <C> <C> <C> <C> <C>
Bank Notes-- $20,000,000 Fifth Third Bank 6.24 % 10/18/95 $19,980,000
1.6% 52,000,000 NationsBank N.A. (Carolinas) 5.40 05/19/95 51,998,666
25,000,000 NationsBank N.A. (Carolinas) 5.625 07/18/95 24,950,000
10,000,000 NationsBank N.A. (Carolinas) 5.65 07/21/95 9,980,000
------------------------------------------------------------------------------------------------------------------------------
Total Bank Notes
(Cost $106,987,926) 106,908,666
------------------------------------------------------------------------------------------------------------------------------
Bank Notes--
Variable 15,000,000 Bank One, Columbus 5.962 05/02/95 14,999,959
Rate--0.2%
------------------------------------------------------------------------------------------------------------------------------
Total Bank Notes--Variable Rate
(Cost $14,999,959) 14,999,959
------------------------------------------------------------------------------------------------------------------------------
Corporate 50,000,000 Abbey National Treasury Services
Notes--1.7% PLC 7.05 03/01/96 50,150,000
11,300,000 A T & T Corp. 6.312 05/04/95 11,300,000
25,000,000 General Electric Capital Corp. 6.95 03/01/96 25,057,500
25,000,000 General Electric Capital Corp. 6.55 03/28/96 24,962,500
------------------------------------------------------------------------------------------------------------------------------
Total Corporate Notes
(Cost $111,261,654) 111,470,000
------------------------------------------------------------------------------------------------------------------------------
Master Notes-- 50,000,000 Goldman Sachs Group, L.P. 6.07 05/26/95 50,000,000
Variable 107,947,000 Goldman Sachs Group, L.P. 6.05 01/12/96 107,947,000
Rate--2.9% 35,000,000 Smith Barney Inc. 6.05 06/09/95 35,000,000
------------------------------------------------------------------------------------------------------------------------------
Total Master Notes--Variable Rate
(Cost $192,947,000) 192,947,000
------------------------------------------------------------------------------------------------------------------------------
Bankers' 9,000,000 Bank of America N.T. & S.A. 6.30 07/28/95 8,867,560
Acceptances--0.1%
------------------------------------------------------------------------------------------------------------------------------
Total Bankers' Acceptances
(Cost $8,861,400) 8,867,560
------------------------------------------------------------------------------------------------------------------------------
Commercial 25,000,000 AIG Funding Inc. 5.97 05/01/95 25,000,000
Paper--37.0% 27,000,000 Allomon Funding Corp. 6.08 06/13/95 26,803,920
50,000,000 American Express Credit Corp. 6.07 10/16/95 48,581,333
50,000,000 Associates Corp. of North America 6.00 05/09/95 49,933,333
50,000,000 Bayerische Vereinsbank AG 5.96 05/04/95 49,975,167
50,000,000 Bayerische Vereinsbank AG 5.97 05/05/95 49,966,833
</TABLE>
See Notes to Financial Statements Institutional Fund
9
-------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Schedule of Investments--Continued
April 30, 1995
<TABLE>
<CAPTION>
==============================================================================================================================
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
==============================================================================================================================
<S> <C> <C> <C> <C> <C>
Commercial $50,000,000 B.B.V. Finance (Delaware) Inc. 5.97% 05/08/95 $49,941,958
Paper 24,700,000 Beta Finance Inc. 5.95 05/12/95 24,655,094
(continued) 35,000,000 Beta Finance Inc. 5.95 05/22/95 34,878,521
20,000,000 Bowater PLC 6.08 06/09/95 19,868,267
21,800,000 British Columbia, Province of 6.07 01/12/96 20,859,015
50,000,000 Cadbury Schweppes Money Mgmt. 6.00 05/09/95 49,933,333
73,000,000 Caisse Des Depots Et Consignations 5.96 05/30/95 72,649,519
11,300,000 Central & Southwest Corp. 6.00 05/17/95 11,269,867
10,100,000 Corporate Asset Securitization
Australia Ltd. Inc. 6.02 05/03/95 10,096,622
50,000,000 Creditanstalt Finance Inc. 6.00 05/11/95 49,916,667
10,000,000 CS First Boston Inc. 6.06 06/05/95 9,941,083
22,700,000 CSW Credit Inc. 5.98 05/01/95 22,700,000
12,600,000 CSW Credit Inc. 6.00 05/02/95 12,597,900
25,000,000 CXC Inc 6.00 05/10/95 24,962,500
16,800,000 CXC Inc 6.00 05/16/95 16,758,000
25,000,000 CXC Inc 5.97 06/01/95 24,871,479
43,005,000 Dean Witter Discover & Co. 5.96 05/24/95 42,841,247
11,000,000 Deer Park Refining L.P. 6.02 05/05/95 10,992,642
28,500,000 Deer Park Refining L.P. 6.05 06/05/95 28,332,365
46,121,000 Delaware Funding Corp. 6.00 06/20/95 45,736,658
50,000,000 Dupont (E.I.) De Nemours & Co. 5.95 05/19/95 49,851,250
50,000,000 Dupont (E.I.) De Nemours & Co. 5.95 06/02/95 49,735,556
42,000,000 Eiger Capital Corp. 6.00 05/02/95 41,993,000
58,000,000 Eiger Capital Corp. 5.96 05/18/95 57,836,762
38,611,000 Falcon Asset Securitization Corp 6.00 05/16/95 38,514,473
50,000,000 Ford Motor Credit Co. 6.10 05/01/95 50,000,000
20,000,000 Ford Motor Credit Co. 6.00 05/16/95 19,950,000
10,000,000 Ford Motor Credit Co. 5.97 05/22/95 9,965,175
9,000,000 Ford Motor Credit Co. 5.97 05/23/95 8,967,165
25,000,000 General Electric Capital Corp. 6.36 05/08/95 24,969,084
9,000,000 General Electric Capital Corp. 6.35 05/10/95 8,985,713
46,500,000 General Electric Capital Corp. 5.97 06/05/95 46,230,106
47,000,000 General Electric Capital Corp. 6.38 08/03/95 46,257,531
19,000,000 Hertz Corp., The 5.95 05/22/95 18,934,054
50,000,000 International Lease Finance Corp. 5.97 05/17/95 49,867,333
</TABLE>
See Notes to Financial Statements Institutional Fund
10
-------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Schedule of Investments--Continued
April 30, 1995
<TABLE>
<CAPTION>
==============================================================================================================================
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
==============================================================================================================================
<S> <C> <C> <C> <C> <C>
Commercial $37,234,000 International Lease Finance Corp. 6.03% 10/16/95 $36,177,547
Paper 60,000,000 International Nederlanden US
(continued) Funding Corp. 6.00 05/11/95 59,900,000
11,000,000 Kingdom of Sweden 6.18 07/12/95 10,867,340
50,000,000 Kredietbank N.A. Finance Corp. 6.00 05/10/95 49,925,000
15,000,000 McKenna Triangle National Corp. 6.00 05/11/95 14,975,000
50,000,000 Melville Corp. 5.96 05/01/95 50,000,000
15,500,000 National Australia Funding (DE)
Inc. 6.00 05/05/95 15,489,667
60,000,000 New Center Asset Trust Series 6.03 06/12/95 59,577,900
30,000,000 New Center Asset Trust Series 6.15 07/31/95 29,542,725
30,000,000 New Center Asset Trust Series 6.15 08/15/95 29,465,583
35,000,000 New South Wales Treasury Corp. 6.00 05/09/95 34,953,333
25,000,000 Nomura Holding America Inc. 6.04 05/09/95 24,966,444
11,765,000 Nomura Holding America Inc. 6.05 06/08/95 11,689,867
20,000,000 Nomura Holding America Inc. 6.08 06/12/95 19,858,133
15,000,000 Nomura Holding America Inc. 6.03 07/10/95 14,824,125
100,000,000 Paribas Finance Inc. 5.95 05/22/95 99,652,917
23,090,000 Pfizer Inc. 5.95 05/16/95 23,032,756
35,900,000 Pfizer Inc. 5.95 05/17/95 35,805,064
50,000,000 PHH Corp. 5.95 05/22/95 49,826,458
17,411,000 PHH Corp. 5.97 05/31/95 17,324,380
12,390,000 Pitney Bowes Credit Corp. 6.05 09/08/95 12,118,418
25,125,000 Preferred Receivables Funding
Corp. 6.00 05/09/95 25,091,500
11,114,000 Premium Funding Inc., Series A-Q 6.07 05/12/95 11,093,387
20,611,000 Premium Funding Inc., Series A-Q 6.07 06/02/95 20,499,792
35,000,000 Raytheon Co. 5.97 05/04/95 34,982,588
15,000,000 Riverwoods Funding Corp. 6.00 05/15/95 14,965,000
9,000,000 Riverwoods Funding Corp. 5.97 05/22/95 8,968,658
8,000,000 Riverwoods Funding Corp. 5.97 05/23/95 7,970,813
50,000,000 Santander Finance (DEL) Inc. 6.25 07/31/95 49,237,875
13,150,000 Sara Lee Corp. 5.98 05/01/95 13,150,000
30,100,000 Sheffield Receivables Corp. 6.00 05/03/95 30,089,967
20,000,000 Sheffield Receivables Corp. 6.25 07/21/95 19,728,650
25,000,000 Siemens Corp. 6.32 08/14/95 24,558,854
10,997,000 Windmill Funding Corp. 6.02 05/02/95 10,995,161
50,000,000 Windmill Funding Corp. 6.04 05/03/95 49,983,222
22,434,000 Windmill Funding Corp. 6.00 05/31/95 22,321,830
</TABLE>
See Notes to Financial Statements Institutional Fund
11
-------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Schedule of Investments--Continued
April 30, 1995
<TABLE>
<CAPTION>
==============================================================================================================================
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
==============================================================================================================================
<S> <C> <C> <C> <C> <C>
Commerical $15,119,000 Windmill Funding Corp. 5.99% 05/31/95 $15,043,531
Paper 19,000,000 Windmill Funding Corp. 5.97 06/09/95 18,877,118
(continued)
------------------------------------------------------------------------------------------------------------------------------
Total Commercial Paper
(Cost $2,433,543,920) 2,433,651,128
------------------------------------------------------------------------------------------------------------------------------
Repurchase 150,000,000 Bear Stearns & Co., Inc. purchased
Agreements--** on 04/28/95 5.94 05/01/95 150,000,000
6.1% 150,000,000 Fuji Securities Inc. purchased on
04/28/95 5.95 05/01/95 150,000,000
100,000,000 Smith Barney Inc. purchased on
04/28/95 5.98 05/01/95 100,000,000
------------------------------------------------------------------------------------------------------------------------------
Total Repurchase Agreements (Cost
$400,000,000) 400,000,000
------------------------------------------------------------------------------------------------------------------------------
Total Investments--102.4%
(Cost $6,740,452,686) 6,740,551,353
------------------------------------------------------------------------------------------------------------------------------
Liabilities in Excess of Other
Assets (2.4%) (160,465,340)
------------------------------------------------------------------------------------------------------------------------------
Net Assets--Equivalent to $1.00
Per Share on 6,579,987,346
Shares of Beneficial Interest
Outstanding--100.0% $6,580,086,013
==============================================================================================================================
</TABLE>
Note--Costs for Federal income tax purposes are the same as those shown
above. At April 30, 1995 net unrealized appreciation amounted to $98,667 and
is comprised of $1,171,398 in appreciation and $1,072,731 in depreciation.
*Commercial Paper and some U.S. Government and Agency Issues are purchased
on a discount basis; the interest rate shown is the discount rate paid at
the time of purchase by the Fund. Other securities bear interest at the
rates shown, payable at fixed dates or upon maturity; the rates shown are
the rates in effect at April 30, 1995. For variable rate instruments, the
next date on which the interest rate is to be adjusted is deemed the
maturity date for valuation.
**Repurchase Agreements are fully collateralized by U.S. Government and
Agency Obligations.
D/N-Discount Notes
See Notes to Financial Statements Institutional Fund
12
-------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Statement of Assets and Liabilities
April 30, 1995
<TABLE>
=====================================================================================================
<S> <C>
Assets:
Investments at value (identified cost $6,740,452,686) (Note 1a) $6,740,551,353
Cash 5,264,355
Receivable for securities sold 161,134,636
Interest receivable 31,820,934
Prepaid expenses 141,471
--------------
Total assets 6,938,912,749
--------------
Liabilities:
Payable for investments purchased 352,149,971
Dividends payable 5,498,323
Investment advisory fee payable 979,632
Accrued expenses 198,810
--------------
Total liabilities 358,826,736
--------------
Net Assets: (Equivalent to $1.00 per share, offering and redemption price, based
on 6,579,987,346 shares of beneficial interest outstanding) $6,580,086,013
==============
</TABLE>
<TABLE>
-----------------------------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Statement of Operations
For the Year Ended April 30, 1995
=====================================================================================================
<S> <C> <C>
Investment Income:
Income:
Interest and discount earned (Note 1d) $263,940,683
--------------
Expenses:
Investment advisory fee (Note 2) $16,621,425
Registration fees 786,675
Accounting and custodian services 497,309
Dividend and transfer agency fees 403,397
Legal and audit fees 128,533
Trustees' fees (Note 5) 85,795
Printing and shareholder reports 85,295
Insurance 42,032
Miscellaneous 27,578
-----------
Total expenses 18,678,039
Waived investment advisory fee (Note 2) (6,623,625) 12,054,414
----------- --------------
Net investment income 251,886,269
Realized and Unrealized Gain on Investments:
Net realized gain from investment transactions 1,934,054
Net unrealized appreciation of investments 2,746,629
-----------
Net realized and unrealized gain from investments 4,680,683
--------------
Net Increase in Net Assets Resulting From Operations $256,566,952
==============
</TABLE>
See Notes to Financial Statements Institutional Fund
13
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Statements of Changes in Net Assets Year Ended April 30,
----------------------------------
1995 1994
================================================================================================
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income $ 251,886,269 $ 142,849,591
Net realized gain from investment transactions 1,934,054 1,591,015
Net unrealized appreciation (depreciation) of investments 2,746,629 (4,755,155)
------------ --------------
Net increase in net assets resulting from operations 256,566,952 139,685,451
Total declared as dividends to shareholders (Note 4) (253,820,323) (144,440,606)
Capital share transactions (Note 3) 2,802,217,964 (932,762,113)
------------ --------------
Net increase (decrease) in net assets 2,804,964,593 (937,517,268)
Net Assets:
Beginning of year 3,775,121,420 4,712,638,688
------------ --------------
End of year $6,580,086,013 $3,775,121,420
============ ==============
</TABLE>
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Merrill Lynch Institutional Fund
Financial Highlights Year Ended April 30,
------------------------------------------------------------------------------
1995 1994 1993 1992 1991
=================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
Income from Investment Operations:
Net investment income .050 .031 .033 .050 .074
Net realized and unrealized gain on
investments -- -- .001 -- --
---------- ---------- ---------- ---------- ------------
Total from investment operations .050 .031 .034 .050 .074
Less Distributions:
Dividends from net investment income (.050) (.031) (.034) (.050) (.074)
---------- ---------- ---------- ---------- ------------
Net Asset Value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
========== ========== ========== ========== ============
Total Return 5.11 % 3.20 % 3.46 % 5.12 % 7.67 %
Ratios/Supplemental Data:
Net Assets, end of year (000) $6,580,086 $3,775,121 $4,712,639 $2,156,878 $2,622,402
Ratio of expenses to average net assets
(before waiver) .37 % .37 % .38 % .40 % .42 %
Ratio of expenses to average net assets
(after waiver) .24 % .24 % .26 % -- --
Ratio of net investment income, including
realized and unrealized gains and losses, to
average net assets (before waiver) 5.00 % 2.91 % 3.29 % 4.99 % 7.35 %
Ratio of net investment income, including
realized and unrealized gains and losses, to --
average net assets (after waiver) 5.13 % 3.04 % 3.41 % --
</TABLE>
See Notes to Financial Statements Institutional Fund
14
-------------------------------------------------------------------------------
Merrill Lynch Funds For Institutions Series
Notes to Financial Statements
===============================================================================
1. Significant Accounting Policies
Merrill Lynch Funds For Institutions Series (the 'Trust') was organized as a
Massachusetts business trust on May 7, 1987 and is registered under the
Investment Company Act of 1940 as a diversified, open-end management company.
On February 18, 1994 Merrill Lynch Institutional Tax-Exempt Fund was
reorganized as a separate series of the Trust. The Trust has a fiscal year
end of April 30. The following is a summary of significant accounting
policies consistently followed by the Trust. These policies are in conformity
with generally accepted accounting principles.
(a) The value of the Institutional, Government and Treasury Fund portfolio
securities is determined on the basis of fair value as determined in good
faith by the Trustees of the Trust. In determining fair value, securities for
which market quotations are readily available are valued at market value.
Merrill Lynch Security Pricing Service, an affiliate of Merrill Lynch & Co.,
Inc., provides security price quotations in connection with such valuation to
compute the net asset value of the Institutional, Government and Treasury
Funds. Other securities, if any, are valued at their fair value in the best
judgment of Fund Asset Management, L.P., ('FAM') under procedures established
by, and under the supervision of, the Trustees. Securities with remaining
maturities of 60 days or less are valued by use of the amortized cost method.
Institutional Tax-Exempt Fund investments are carried at amortized cost which
approximates market.
For the purpose of valuation, the maturity of a variable rate demand
instrument is deemed to be the next coupon date on which the interest rate is
to be adjusted. In the case of a floating rate instrument, the remaining
maturity is deemed to be the demand notice payment period.
(b) It is the Trust's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to its shareholders. Therefore, no
Federal Income tax provision is required.
(c) Realized gains and losses on investments are computed on the basis of
identified cost of the security sold.
(d) Security transactions are accounted for on the date the securities are
purchased or sold (the trade date). Interest Income (after adjustment for
amortization of premium or discount) is recorded as earned.
(e) Deferred organization expenses are amortized over a period not
exceeding five years. Prepaid registration fees are charged to income as the
related shares are sold.
(f) Repurchase agreements--The Institutional Fund and the Government Fund
invest in U.S. Government & Agency securities pursuant to repurchase
agreements with member banks of the Federal Reserve System or primary dealers
in U.S. Government securities. Under such agreements, the bank or primary
dealer agrees to repurchase the security at a mutually agreed upon time and
price. The Trust takes possession of the underlying securities, marks to
market such securities daily and, if necessary, receives additional
securities to ensure that the contract is adequately collateralized.
(g) Effective December 1, 1993, Merrill Lynch Institutional Tax-Exempt Fund
adopted Statement of Position ('SOP') 93-2 'Determination, Disclosure, and
Financial Statement Presentation of Income, Capital Gain, and Return of
Capital Distributions by Investment Companies.' Accordingly, the Fund changed
the classification of its net asset components as a result of permanent
differences arising from differing treatments of market discount for book and
tax purposes. During the year ended April 30, 1995, amounts have been
reclassified to reflect a decrease of $13,457 in both accumulated capital
losses and undistributed net investment income. This SOP had no effect on the
other series of the Trust.
2. Investment Advisory Fees and Other
Transactions with Affiliates
Fund Asset Management, L.P., a subsidiary of Merrill Lynch & Co., Inc.,
provides investment
Institutional Fund
15
-------------------------------------------------------------------------------
Merrill Lynch Funds For Institutions Series
Notes to Financial Statements--Continued
===============================================================================
advisory and corporate administrative services to the Trust for a fee,
subject to certain limitations, at the following annual rates:
<TABLE>
<CAPTION>
Percentage of Average Daily Net Assets
-------------------------------------------
<S> <C>
Institutional Fund .40% up to and including $250,000,000
plus .375% over $250,000,000 up to and
including $500,000,000
plus .35% over $500,000,000 up to and
including $750,000,000
plus .325% over $750,000,000
Government Fund
and Treasury Fund .35% up to and including $500,000,000
plus .335% over $500,000,000 up to and
including $750,000,000
plus .32% over $750,000,000 up to and
including $1,000,000,000
plus .30% over $1,000,000,000
Institutional
Tax-Exempt Fund .45% up to and including $1,500,000,000
plus .425% over $1,500,000,000 up to and
including $2,000,000,000
plus .40% over $2,000,000,000
</TABLE>
FAM has agreed to waive a portion of its advisory fees. As of December 1,
1993 the effective fee payable to FAM will be at the annual rate of 0.20% of
each Fund's average daily net assets. FAM may discontinue waiver of the fee
in whole or in part at any time without notice.
For the year ended April 30, 1995 FAM waived a portion of its fees
amounting to $6,623,625 for the Institutional Fund, $1,831,019 for the
Government Fund, $473,563 for the Treasury Fund and $841,807 for the
Institutional Tax-Exempt Fund.
All officers and certain trustees of the Trust are affiliated with Merrill
Lynch & Co., Inc.
3. Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited number
of shares of beneficial interest in the Institutional Fund, Government Fund
and Treasury Fund ($.01 par value) and Institutional Tax-Exempt Fund ($.10
par value) of a single class. At April 30, 1995, capital paid-in aggregated
$6,579,987,346 for Institutional Fund, $1,601,046,564 for Government Fund,
$342,864,941 for Treasury Fund and $404,028,815 for Institutional Tax-Exempt
Fund. Transactions in shares at a constant net asset value of $1.00 per share
were as follows:
<TABLE>
<CAPTION>
Year Ended April 30,
----------------------------------
Institutional Fund 1995 1994
-------------- ----------------
<S> <C> <C>
Shares sold 63,113,089,823 57,789,577,790
Shares issued to shareholders
in reinvestment of dividends 198,199,152 112,959,517
------------ --------------
Total 63,311,288,975 57,902,537,307
Shares redeemed 60,509,071,011 58,835,299,420
------------ --------------
Net increase (decrease) 2,802,217,964 (932,762,113)
============ ==============
<CAPTION>
Year Ended April 30,
------------------------------------
Government Fund 1995 1994
--------------- -----------------
<S> <C> <C>
Shares sold 8,314,763,207 7,510,129,404
Shares issued to shareholders
in reinvestment of dividends 65,230,079 37,905,314
------------- ---------------
Total 8,379,993,286 7,548,034,718
Shares redeemed 8,313,348,347 7,367,634,473
------------- ---------------
Net increase (decrease) 66,644,939 180,400,245
============= ===============
<CAPTION>
Year Ended April 30,
------------------------------------
Treasury Fund 1995 1994
--------------- -----------------
<S> <C> <C>
Shares sold 2,288,760,430 1,476,065,082
Shares issued to shareholders
in reinvestment of dividends 14,088,128 8,566,715
------------- ---------------
Total 2,302,848,558 1,484,631,797
Shares redeemed 2,226,955,175 1,576,895,366
------------- ---------------
Net increase (decrease) 75,893,383 (92,263,569)
============= ===============
<CAPTION>
Year Five Months Year
Institutional Ended Ended Ended
Tax-Exempt Fund April 30, April 30, November 30,
--------------- --------------- -----------------
1995 1994 1993
--------------- --------------- -----------------
<S> <C> <C> <C>
Shares sold 2,737,285,871 1,450,485,801 3,279,737,452
Shares issued to
shareholders in
reinvestment
of dividends 9,666,260 2,708,949 5,105,388
------------- ------------- ---------------
Total 2,746,952,131 1,453,194,750 3,284,842,840
Shares redeemed 2,733,284,809 1,341,521,024 3,335,299,466
------------- ------------- ---------------
Net increase
(decrease) 13,667,322 111,673,726 (50,456,626)
============= ============= ===============
</TABLE>
Institutional Fund
16
-------------------------------------------------------------------------------
Merrill Lynch Funds For Institutions Series
Notes to Financial Statements--Continued
===============================================================================
4. Distributions
The Funds declare dividends daily, pay dividends monthly and automatically
reinvest such dividends in additional Fund shares at net asset value, unless
shareholders request payment in cash. Dividends for the Institutional,
Government and Treasury Funds are declared from the total of net investment
income, plus or minus realized gains or losses, if any, on investments.
Dividends for the Institutional Tax-Exempt Fund are declared from net
investment incomeexcluding discounts earned other than original issue
discounts. Net realized capital gains, if any, are normally distributed
annually, after deducting prior years' loss carryovers. The Fund may
distribute capital gains more frequently than annually in order to maintain
the Fund's net asset value at $1.00 per share.
At April 30, 1995, the Institutional Tax-Exempt Fund had net capital loss
carryovers of $260,081 of which $78 expire in the year 2000, $102,443 expire
in 2001, $17,520 expire in 2002 and $140,040 expire in 2003.
5. Trustees' Fees
Each Trustee who is not affiliated with the Trust or its adviser is paid an
annual fee of $24,000 by the Trust. Trustees' fees are allocated among the
four series of the Trust based on the net assets under management.
-------------------------------------------------------------------------------
Trustees
===============================================================================
Robert W. Crook*
President & Trustee
David Almy
Trustee
President,
McCall & Almy, Inc.
A. Bruce Brackenridge
Trustee
Retired Group Executive,
J.P. Morgan & Co., Inc.
Charles C. Cabot, Jr.
Trustee
Partner, Sullivan & Worcester
Terry K. Glenn*
Trustee
Executive Vice President,
Merrill Lynch Asset Management
Todd Goodwin
Trustee
Partner, Gibbons, Goodwin, van
Amerongen
George W. Holbrook, Jr.
Trustee
Managing Partner,
Bradley Resources Company
* May be deemed to be an 'interested
person' of the Fund as such term is
defined in the Investment Company Act
of 1940.
Institutional Fund
17
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MERRILL LYNCH GOVERNMENT FUND
OF MERRILL LYNCH FUNDS FOR INSTITUTIONS SERIES
ONE FINANCIAL CENTER, BOSTON, MASSACHUSETTS 02111-2646
FOR GENERAL INFORMATION AND PURCHASES CALL 617-357-1460 OR TOLL-FREE
800-225-1576
Merrill Lynch Government Fund is a no-load money fund whose objectives are
to seek current income consistent with liquidity and security of principal by
investing in a portfolio of securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. The Government Fund is a series
of Merrill Lynch Funds For Institutions Series (the 'Trust'), a diversified,
open-end management investment company.
The Statement of Additional Information of the Government Fund is not a
prospectus and should be read in conjunction with the Prospectus of the
Government Fund (the 'Prospectus') which has been filed with the Securities and
Exchange Commission and is available upon oral or written request without
charge. Copies of the Prospectus can be obtained by calling or by writing the
Government Fund at the above telephone number or address. This Statement of
Additional Information has been incorporated by reference into the Prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objectives and Policies.......................... 2
Independent Auditors' Report................................ 3
Audited Financial Statements for the Fiscal Year ended
April 30, 1995............................................ 4
Appendix A:
Management of the Trust................................ A-1
Investment Advisory and Other Services................. A-4
Portfolio Transactions................................. A-7
Net Asset Value........................................ A-8
Dividends.............................................. A-9
Taxes.................................................. A-10
Federal........................................... A-10
Massachusetts Income Tax.......................... A-12
Other Taxes....................................... A-12
Distributor............................................ A-13
Yield Information...................................... A-14
General Information.................................... A-14
</TABLE>
The date of this Statement of Additional Information and the Prospectus is
August 25, 1995.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Reference is made to 'The Government Fund and Its Objectives' in the
Prospectus for a discussion of the investment objectives and policies of the
Government Fund. Subject to the investment restrictions described below, the
Government Fund's investment objectives can be changed without shareholder
approval.
All investments of the Government Fund will be in securities with remaining
maturities not exceeding 762 days (25 months). The dollar weighted average
maturity of the Government Fund's portfolio will be 90 days or less.
Forward or firm commitments for the purchase of U.S. Government securities
may be entered into by the Government Fund, as described in 'The Government Fund
and Its Objectives' in the Prospectus. The purchase of the underlying securities
will be recorded on the date the Government Fund enters into the commitment, and
the value of the security will thereafter be reflected in the calculation of the
Government Fund's net asset value. A separate account of the Government Fund
will be established with State Street Bank and Trust Company, the Government
Fund's custodian, consisting of cash or U.S. Government securities having a
market value at all times until the delivery date at least equal to the amount
of the forward commitment. As stated in the Prospectus, the Government Fund may
dispose of a commitment prior to settlement. Risks relating to these trading
practices are briefly described in the Prospectus.
In addition to the investment restrictions set forth in the Prospectus, the
Government Fund has adopted the following investment restrictions, none of which
may be changed without the approval of a majority of the Government Fund's
outstanding shares, which for this purpose means the vote of (i) 67% or more of
the Fund's shares present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy, or (ii) more
than 50% of the Fund's outstanding shares, whichever is less. The Government
Fund may not:
(1) Purchase securities other than U.S. Treasury bills, notes and
other obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities, some of which may be subject to repurchase
agreements. There is no limit on the amount of its assets which may be
invested in the securities of any one issuer of such obligations;
(2) Act as an underwriter of securities;
(3) Make loans, except that the Government Fund may purchase or hold
debt obligations in accordance with its investment objectives and policies,
may enter into repurchase agreements for such securities, and may lend its
portfolio securities against collateral consisting of cash, or securities
issued or guaranteed by the U.S. Government or its agencies, which is equal
at all times to at least 100% of the value of the securities loaned. There
is no investment restriction on the amount of portfolio securities that may
be loaned, except that payments received on such loans, including amounts
received during the loan on account of interest on the securities loaned,
will not (together with all non-qualifying income) exceed 10% of the
Government Fund's annual gross income (without offset for realized capital
gains) unless, in the opinion of counsel to the Government Fund, such
amounts are qualifying income under federal income tax provisions
applicable to regulated investment companies; and
(4) Purchase securities on margin or make short sales of securities.
As a matter of operating policy, the Trustees of the Trust have determined
that the Government Fund will not write put or call options.
Collateral received by the Fund to secure loans of its portfolio securities
will be marked to market on a daily basis.
Government Fund
2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders of
Merrill Lynch Funds For Institutions Series:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of Merrill Lynch Funds For Institutions
Series (the 'Trust'), consisting of the Merrill Lynch Institutional Fund,
Merrill Lynch Government Fund, Merrill Lynch Treasury Fund, and Merrill Lynch
Institutional Tax-Exempt Fund (the 'Funds') as of April 30, 1995, the related
statements of operations for the year then ended, and the statements of changes
in net assets and financial highlights for each of the respective fiscal periods
then ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at
April 30, 1995, by correspondence with the custodian and brokers; where replies
were not received from brokers, we performed other auditing procedures. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of each of the
respective Funds of the Merrill Lynch Funds For Institutions Series at April 30,
1995, the results of their operations, the changes in their net assets, and
their financial highlights for each of the respective fiscal periods then ended
in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Boston, Massachussetts
May 26, 1995
Government Fund
3
-------------------------------------------------------------------------------
Merrill Lynch Government Fund
Schedule of Investments
April 30, 1995
<TABLE>
<CAPTION>
==========================================================================================================================
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
==========================================================================================================================
<S> <C> <C> <C> <C> <C>
U.S. $15,000,000 U.S. Treasury Bills 6.72 % 12/14/95 $ 14,445,742
Government 25,000,000 Federal Farm Credit Banks 5.85 05/01/95 25,000,000
& Agency 14,000,000 Federal Home Loan Banks 4.625 08/09/95 13,939,800
Issues--49.4% 14,000,000 Federal Home Loan Mortgage Corp. 4.635 08/09/95 13,942,600
10,000,000 Federal Farm Credit Banks D/N 6.52 07/10/95 9,884,889
19,000,000 Federal Home Loan Banks D/N 6.25 05/03/95 18,993,403
50,000,000 Federal Home Loan Banks D/N 6.27 05/04/95 49,973,875
39,000,000 Federal Home Loan Banks D/N 5.99 08/30/95 38,222,676
75,000,000 Federal Home Loan Banks D/N 6.03 09/18/95 73,264,583
10,000,000 Federal Home Loan Banks D/N 5.89 10/17/95 9,720,933
12,025,000 Federal Home Loan Banks D/N 5.98 10/31/95 11,659,460
13,625,000 Federal Home Loan Banks D/N 6.10 11/03/95 13,203,329
10,000,000 Federal Home Loan Banks D/N 6.06 11/29/95 9,647,256
14,700,000 Federal Home Loan Banks D/N 6.05 12/22/95 14,124,250
5,000,000 Federal Home Loan Banks D/N 6.02 01/11/96 4,786,792
10,000,000 Federal Home Loan Banks D/N 6.02 01/12/96 9,571,911
5,000,000 Federal Home Loan Banks D/N 6.02 01/12/96 4,785,955
7,295,000 Federal Home Loan Banks D/N 5.99 04/12/96 6,868,184
15,900,000 Federal Home Loan Mortgage Corp. D/N 5.97 05/02/95 15,897,363
29,365,000 Federal Home Loan Mortgage Corp. D/N 5.85 05/22/95 29,264,792
21,680,000 Federal Home Loan Mortgage Corp. D/N 5.98 06/01/95 21,568,360
65,000,000 Federal Home Loan Mortgage Corp. D/N 6.01 06/09/95 64,576,796
47,500,000 Federal Home Loan Mortgage Corp. D/N 5.98 06/19/95 47,113,376
20,385,000 Federal Home Loan Mortgage Corp. D/N 5.98 06/21/95 20,212,305
55,000,000 Federal National Mortgage Assoc. D/N 5.92 08/04/95 54,139,326
75,000,000 Federal National Mortgage Assoc. D/N 6.05 08/21/95 73,616,333
10,000,000 Federal National Mortgage Assoc. D/N 6.03 09/11/95 9,780,181
7,495,000 Federal National Mortgage Assoc. D/N 5.95 09/21/95 7,317,858
</TABLE>
See Notes to Financial Statements Government Fund
4
-------------------------------------------------------------------------------
Merrill Lynch Government Fund
Schedule of Investments--Continued
April 30, 1995
<TABLE>
<CAPTION>
==========================================================================================================================
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
==========================================================================================================================
<S> <C> <C> <C> <C> <C>
U.S. $28,820,000 Federal National Mortgage Assoc. D/N 5.95 % 09/26/95 $ 28,115,031
Government 13,200,000 Federal National Mortgage Assoc. D/N 5.92 10/18/95 12,827,247
& Agency 10,000,000 Federal National Mortgage Assoc. D/N 5.89 10/19/95 9,717,611
Issues 6,025,000 Federal National Mortgage Assoc. D/N 6.00 11/03/95 5,838,536
(continued) 48,800,000 Student Loan Marketing Assoc. D/N 5.91 05/24/95 48,615,739
--------------------------------------------------------------------------------------------------------------------------
Total U.S. Government & Agency Issues 790,636,492
(Cost $790,597,949)
--------------------------------------------------------------------------------------------------------------------------
U.S. 7,000,000 Federal Home Loan Banks 6.43 06/21/95 7,000,000
Government 13,000,000 Federal Home Loan Banks 6.46 06/17/96 13,000,000
Agency 6,000,000 Federal Home Loan Banks 6.43 06/21/96 6,000,000
Issues 10,000,000 Federal Home Loan Banks 5.947 08/05/96 9,980,224
Variable 20,000,000 Federal Home Loan Banks 6.35 01/26/98 19,873,174
Rate-- 29.4% 3,000,000 Federal Home Loan Mortgage Corp. 6.50 05/13/98 3,000,000
16,000,000 Federal National Mortgage Assoc. 5.82 06/01/95 15,999,865
20,000,000 Federal National Mortgage Assoc. 6.06 09/22/95 19,997,633
25,000,000 Federal National Mortgage Assoc. 5.975 10/30/95 24,993,189
5,000,000 Federal National Mortgage Assoc. 6.40 12/20/95 5,000,000
50,000,000 Federal National Mortgage Assoc. 5.94 02/16/96 50,000,000
30,000,000 Federal National Mortgage Assoc. 6.33 05/13/96 30,000,000
15,000,000 Federal National Mortgage Assoc. 6.33 05/24/96 15,000,000
40,000,000 Federal National Mortgage Assoc. 6.03 10/11/96 40,000,000
25,000,000 Federal National Mortgage Assoc. 6.06 02/21/97 25,000,000
17,000,000 Federal National Mortgage Assoc. 6.45 05/19/97 17,000,000
25,000,000 Federal National Mortgage Assoc. 6.50 05/14/98 25,000,000
24,250,000 Student Loan Marketing Assoc. 5.80 05/11/95 24,246,392
30,000,000 Student Loan Marketing Assoc. 6.14 06/02/95 30,005,831
30,000,000 Student Loan Marketing Assoc. 5.89 09/14/95 30,000,000
5,000,000 Student Loan Marketing Assoc. 6.19 03/20/96 4,998,787
10,000,000 Student Loan Marketing Assoc. 6.08 03/20/96 10,015,234
10,000,000 Student Loan Marketing Assoc. 6.06 04/16/96 10,008,817
15,400,000 Student Loan Marketing Assoc. 5.99 07/19/96 15,406,091
20,000,000 Student Loan Marketing Assoc. 5.967 09/20/96 20,000,000
--------------------------------------------------------------------------------------------------------------------------
Total U.S. Government Agency 471,525,237
Issues--Variable Rate
(Cost $471,525,338)
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements Government Fund
5
-------------------------------------------------------------------------------
Merrill Lynch Government Fund
Schedule of Investments--Continued
April 30, 1995
<TABLE>
<CAPTION>
==========================================================================================================================
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
==========================================================================================================================
<S> <C> <C> <C> <C> <C>
Repurchase $65,000,000 Chemical Securities Inc., purchased 6.00% 05/01/95 $ 65,000,000
Agreements**-- on 04/28/95
21.6% 65,000,000 Dean Witter Discover & Co., 5.95 05/01/95 65,000,000
purchased on 04/28/95
30,719,000 Goldman Sachs Group, L.P. 5.80 05/01/95 30,719,000
purchased on 04/28/95
65,000,000 Fuji Securities Inc., purchased on 5.95 05/01/95 65,000,000
04/28/95
70,000,000 HSBC Securities, Inc., purchased on 6.05 05/01/95 70,000,000
04/28/95
50,000,000 UBS Securities, Inc., purchased on 6.00 05/01/95 50,000,000
04/28/95.
--------------------------------------------------------------------------------------------------------------------------
Total Repurchase Agreements
(Cost $345,719,000) 345,719,000
--------------------------------------------------------------------------------------------------------------------------
Total Investments--100.4% 1,607,880,729
(Cost $1,607,842,287)
--------------------------------------------------------------------------------------------------------------------------
Liabilities in Excess of Other (6,795,723)
Assets--(0.4%)
--------------------------------------------------------------------------------------------------------------------------
Net Assets--Equivalent to $1.00 $1,601,085,006
Per Share on 1,601,046,564 Shares of
Beneficial Interest
Outstanding--100.0%
==========================================================================================================================
</TABLE>
Note--Costs for Federal income tax purposes are the same as those shown
above. At April 30, 1995 net unrealized appreciation amounted to $38,442 and
is comprised of $172,133 in appreciation and $133,691 in depreciation.
*U.S. Treasury Notes and Repurchase Agreements bear interest payable at fixed
dates or upon maturity. U.S. Treasury Bills and some U.S. Government and
Agency Issues are purchased on a discount basis; the interest rate shown is
the discount paid at the time of purchase by the Fund. Other U.S. Government
and Agency Issues bear interest at the rates shown, payable at fixed dates
or upon maturity; the rates shown are the rates in effect at April 30, 1995.
For variable rates instruments, the next date on which the interest rate is
to be adjusted is deemed the maturity date for valuation.
**Repurchase Agreements are fully collateralized by US Government and Agency
Obligations.
D/N-Discount Notes
See Notes to Financial Statements Government Fund
6
-------------------------------------------------------------------------------
Merrill Lynch Government Fund
Statement of Assets and Liabilities
April 30, 1995
<TABLE>
=================================================================================================================
<S> <C> <C>
Assets:
Investments in securities subject to repurchase agreements $ 345,719,000
Investments in other marketable securities 1,262,161,729
-------------
Total investments at value (identified cost $1,607,842,287) (Note 1a) $1,607,880,729
Cash 2,105,748
Receivable for securities sold 25,096,875
Interest receivable 5,831,980
Prepaid expenses 233,727
---------------
Total assets 1,641,149,059
---------------
Liabilities:
Payable for investments purchased 39,443,722
Dividends payable 307,837
Investment advisory fee payable 237,135
Accrued expenses 75,359
---------------
Total liabilities 40,064,053
---------------
Net Assets: (Equivalent to $1.00 per share, offering and redemption
price, based on 1,601,046,564 shares of beneficial interest outstanding) $1,601,085,006
===============
</TABLE>
-------------------------------------------------------------------------------
Merrill Lynch Government Fund
Statement of Operations
April 30, 1995
===============================================================================
<TABLE>
<S> <C> <C>
Investment Income:
Income:
Interest and discount earned (Note 1d) $73,740,322
-------------
Expenses:
Investment advisory fee (Note 2) $ 4,718,056
Dividend and transfer agency fees 258,736
Accounting and custodian services 181,691
Registration fees 102,448
Legal and audit fees 49,698
Trustees' fees (Note 5) 24,689
Printing and shareholder reports 23,644
Insurance 15,286
Miscellaneous 10,006
-----------
Total expenses 5,384,254
Waived investment advisory fee (Note 2) (1,831,019) 3,553,235
----------- -------------
Net investment income 70,187,087
Realized and Unrealized Gain on Investments:
Net realized gain from investment transactions 245,307
Net unrealized appreciation of investments 961,939
-----------
Net realized and unrealized gain from investments 1,207,246
-------------
Net Increase in Net Assets Resulting From Operations $71,394,333
=============
</TABLE>
See Notes to Financial Statements Government Fund
7
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
Merrill Lynch Government Fund
Statements of Changes in Net Assets Year Ended April 30,
----------------------------------
1995 1994
================================================================================================
<S> <C> <C>
Increase in Net Assets:
Operations:
Net investment income $ 70,187,087 $ 41,958,999
Net realized gain from investment transactions 245,307 219,402
Net unrealized appreciation (depreciation) of investments 961,939 (1,965,782)
------------ --------------
Net increase in net assets resulting from operations 71,394,333 40,212,619
Total declared as dividends to shareholders (Note 4) (70,432,394) (42,178,401)
Capital share transactions (Note 3) 66,644,939 180,400,245
------------ --------------
Net increase in net assets 67,606,878 178,434,463
Net Assets:
Beginning of year 1,533,478,128 1,355,043,665
------------ --------------
End of year $1,601,085,006 $1,533,478,128
============ ==============
-----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Merrill Lynch Government Fund
Financial Highlights
Year Ended April 30,
-----------------------------------------------------------------------------
1995 1994 1993 1992 1991
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
Income from Investment Operations:
Net investment income .049 .030 .030 .047 .070
Net realized and unrealized gain on investments -- -- .001 .002 .001
---------- ---------- ---------- ---------- ------------
Total from investment operations .049 .030 .031 .049 .071
Less Distributions:
Dividends from net investment income (.049) (.030) (.031) (.049) (.071)
---------- ---------- ---------- ---------- ------------
Net Asset Value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
========== ========== ========== ========== ============
Total Return 4.99 % 3.06 % 3.19 % 5.05 % 7.38 %
Ratios/Supplemental Data:
Net Assets, end of year (000) $1,601,085 $1,533,478 $1,355,044 $1,358,150 $1,438,197
Ratio of expenses to average net assets
(before waiver) .37 % .38 % .39 % .41 % .44 %
Ratio of expenses to average net assets
(after waiver) .24 % .32 % -- -- --
Ratio of net investment income, including
realized and unrealized gains and losses, to
average net assets (before waiver) 4.82 % 2.83 % 3.19 % 4.93 % 7.11 %
Ratio of net investment income, including
realized and unrealized gains and losses, to --
average net assets (after waiver) 4.95 % 2.89 % -- --
</TABLE>
See Notes to Financial Statements Government Fund
8
-------------------------------------------------------------------------------
Merrill Lynch Funds For Institutions Series
Notes to Financial Statements
===============================================================================
1. Significant Accounting Policies
Merrill Lynch Funds For Institutions Series (the 'Trust') was organized as a
Massachusetts business trust on May 7, 1987 and is registered under the
Investment Company Act of 1940 as a diversified, open-end management company.
On February 18, 1994 Merrill Lynch Institutional Tax-Exempt Fund was
reorganized as a separate series of the Trust. The Trust has a fiscal year
end of April 30. The following is a summary of significant accounting
policies consistently followed by the Trust. These policies are in conformity
with generally accepted accounting principles.
(a) The value of the Institutional, Government and Treasury Fund portfolio
securities is determined on the basis of fair value as determined in good
faith by the Trustees of the Trust. In determining fair value, securities for
which market quotations are readily available are valued at market value.
Merrill Lynch Security Pricing Service, an affiliate of Merrill Lynch & Co.,
Inc., provides security price quotations in connection with such valuation to
compute the net asset value of the Institutional, Government and Treasury
Funds. Other securities, if any, are valued at their fair value in the best
judgment of Fund Asset Management, L.P., ('FAM') under procedures established
by, and under the supervision of, the Trustees. Securities with remaining
maturities of 60 days or less are valued by use of the amortized cost method.
Institutional Tax- Exempt Fund investments are carried at amortized cost which
approximates market.
For the purpose of valuation, the maturity of a variable rate demand
instrument is deemed to be the next coupon date on which the interest rate is
to be adjusted. In the case of a floating rate instrument, the remaining
maturity is deemed to be the demand notice payment period.
(b) It is the Trust's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to its shareholders. Therefore, no
Federal Income tax provision is required.
(c) Realized gains and losses on investments are computed on the basis of
identified cost of the security sold.
(d) Security transactions are accounted for on the date the securities are
purchased or sold (the trade date). Interest Income (after adjustment for
amortization of premium or discount) is recorded as earned.
(e) Deferred organization expenses are amortized over a period not
exceeding five years. Prepaid registration fees are charged to income as the
related shares are sold.
(f) Repurchase agreements--The Institutional Fund and the Government Fund
invest in U.S. Government & Agency securities pursuant to repurchase
agreements with member banks of the Federal Reserve System or primary dealers
in U.S. Government securities. Under such agreements, the bank or primary
dealer agrees to repurchase the security at a mutually agreed upon time and
price. The Trust takes possession of the underlying securities, marks to
market such securities daily and, if necessary, receives additional
securities to ensure that the contract is adequately collateralized.
(g) Effective December 1, 1993, Merrill Lynch Institutional Tax-Exempt Fund
adopted Statement of Position ('SOP') 93-2 'Determination, Disclosure, and
Financial Statement Presentation of Income, Capital Gain, and Return of
Capital Distributions by Investment Companies.' Accordingly, the Fund changed
the classification of its net asset components as a result of permanent
differences arising from differing treatments of market discount for book and
tax purposes. During the year ended April 30, 1995, amounts have been
reclassified to reflect a decrease of $13,457 in both accumulated capital
losses and undistributed net investment income. This SOP had no effect on the
other series of the Trust.
2. Investment Advisory Fees and Other
Transactions with Affiliates
Fund Asset Management, L.P., a subsidiary of Merrill Lynch & Co., Inc.,
provides investment
Government Fund
9
-------------------------------------------------------------------------------
Merrill Lynch Funds For Institutions Series
Notes to Financial Statements--Continued
===============================================================================
advisory and corporate administrative services to the Trust for a fee,
subject to certain limitations, at the following annual rates:
Percentage of Average Daily Net Assets
-------------------------------------------
Institutional Fund .40% up to and including $250,000,000
plus .375% over $250,000,000 up to and
including $500,000,000
plus .35% over $500,000,000 up to and
including $750,000,000
plus .325% over $750,000,000
Government Fund
and Treasury Fund .35% up to and including $500,000,000
plus .335% over $500,000,000 up to and
including $750,000,000
plus .32% over $750,000,000 up to and
including $1,000,000,000
plus .30% over $1,000,000,000
Institutional
Tax-Exempt Fund .45% up to and including $1,500,000,000
plus .425% over $1,500,000,000 up to and
including $2,000,000,000
plus .40% over $2,000,000,000
FAM has agreed to waive a portion of its advisory fees. As of December 1,
1993 the effective fee payable to FAM will be at the annual rate of 0.20% of
each Fund's average daily net assets. FAM may discontinue waiver of the fee
in whole or in part at any time without notice.
For the year ended April 30, 1995 FAM waived a portion of its fees
amounting to $6,623,625 for the Institutional Fund, $1,831,019 for the
Government Fund, $473,563 for the Treasury Fund and $841,807 for the
Institutional Tax-Exempt Fund.
All officers and certain trustees of the Trust are affiliated with Merrill
Lynch & Co., Inc.
3. Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited number
of shares of beneficial interest in the Institutional Fund, Government Fund
and Treasury Fund ($.01 par value) and Institutional Tax-Exempt Fund ($.10
par value) of a single class. At April 30, 1995, capital paid-in aggregated
$6,579,987,346 for Institutional Fund, $1,601,046,564 for Government Fund,
$342,864,941 for Treasury Fund and $404,028,815 for Institutional Tax-Exempt
Fund. Transactions in shares at a constant net asset value of $1.00 per share
were as follows:
<TABLE>
<CAPTION>
Year Ended April 30,
----------------------------------
Institutional Fund 1995 1994
-------------- ----------------
<S> <C> <C>
Shares sold 63,113,089,823 57,789,577,790
Shares issued to shareholders
in reinvestment of dividends 198,199,152 112,959,517
------------ --------------
Total 63,311,288,975 57,902,537,307
Shares redeemed 60,509,071,011 58,835,299,420
------------ --------------
Net increase (decrease) 2,802,217,964 (932,762,113)
============ ==============
<CAPTION>
Year Ended April 30,
------------------------------------
Government Fund 1995 1994
--------------- -----------------
<S> <C> <C>
Shares sold 8,314,763,207 7,510,129,404
Shares issued to shareholders
in reinvestment of dividends 65,230,079 37,905,314
------------- ---------------
Total 8,379,993,286 7,548,034,718
Shares redeemed 8,313,348,347 7,367,634,473
------------- ---------------
Net increase (decrease) 66,644,939 180,400,245
============= ===============
<CAPTION>
Year Ended April 30,
------------------------------------
Treasury Fund 1995 1994
--------------- -----------------
<S> <C> <C>
Shares sold 2,288,760,430 1,476,065,082
Shares issued to shareholders
in reinvestment of dividends 14,088,128 8,566,715
------------- ---------------
Total 2,302,848,558 1,484,631,797
Shares redeemed 2,226,955,175 1,576,895,366
------------- ---------------
Net increase (decrease) 75,893,383 (92,263,569)
============= ===============
<CAPTION>
Year Five Months Year
Institutional Ended Ended Ended
Tax-Exempt Fund April 30, April 30, November 30,
--------------- --------------- -----------------
1995 1994 1993
--------------- --------------- -----------------
<S> <C> <C> <C>
Shares sold 2,737,285,871 1,450,485,801 3,279,737,452
Shares issued to
shareholders in
reinvestment
of dividends 9,666,260 2,708,949 5,105,388
------------- ------------- ---------------
Total 2,746,952,131 1,453,194,750 3,284,842,840
Shares redeemed 2,733,284,809 1,341,521,024 3,335,299,466
------------- ------------- ---------------
Net increase
(decrease) 13,667,322 111,673,726 (50,456,626)
============= ============= ===============
</TABLE>
Government Fund
10
-------------------------------------------------------------------------------
Merrill Lynch Funds For Institutions Series
Notes to Financial Statements--Continued
===============================================================================
4. Distributions
The Funds declare dividends daily, pay dividends monthly and automatically
reinvest such dividends in additional Fund shares at net asset value, unless
shareholders request payment in cash. Dividends for the Institutional,
Government and Treasury Funds are declared from the total of net investment
income, plus or minus realized gains or losses, if any, on investments.
Dividends for the Institutional Tax-Exempt Fund are declared from net
investment incomeexcluding discounts earned other than original issue
discounts. Net realized capital gains, if any, are normally distributed
annually, after deducting prior years' loss carryovers. The Fund may
distribute capital gains more frequently than annually in order to maintain
the Fund's net asset value at $1.00 per share.
At April 30, 1995, the Institutional Tax-Exempt Fund had net capital loss
carryovers of $260,081 of which $78 expire in the year 2000, $102,443 expire
in 2001, $17,520 expire in 2002 and $140,040 expire in 2003.
5. Trustees' Fees
Each Trustee who is not affiliated with the Trust or its adviser is paid an
annual fee of $24,000 by the Trust. Trustees' fees are allocated among the
four series of the Trust based on the net assets under management.
-------------------------------------------------------------------------------
Trustees
===============================================================================
Robert W. Crook*
President & Trustee
David Almy
Trustee
President,
McCall & Almy, Inc.
A. Bruce Brackenridge
Trustee
Retired Group Executive,
J.P. Morgan & Co., Inc.
Charles C. Cabot, Jr.
Trustee
Partner, Sullivan & Worcester
Terry K. Glenn*
Trustee
Executive Vice President,
Merrill Lynch Asset Management
Todd Goodwin
Trustee
Partner, Gibbons, Goodwin, van
Amerongen
George W. Holbrook, Jr.
Trustee
Managing Partner,
Bradley Resources Company
* May be deemed to be an 'interested
person' of the Fund as such term is
defined in the Investment Company Act
of 1940.
Government Fund
11
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MERRILL LYNCH TREASURY FUND
OF MERRILL LYNCH FUNDS FOR INSTITUTIONS SERIES
ONE FINANCIAL CENTER, BOSTON, MASSACHUSETTS 02111-2646
FOR GENERAL INFORMATION AND PURCHASES CALL 617-357-1460 OR TOLL-FREE
800-225-1576
Merrill Lynch Treasury Fund is a no-load money fund whose objectives are to
seek current income consistent with liquidity and security of principal. The
Treasury Fund will attempt to achieve its investment objectives by investing in
a portfolio of U.S. Treasury securities. The Treasury Fund is a series of
Merrill Lynch Funds For Institutions Series (the 'Trust'), a diversified,
open-end management investment company.
The Statement of Additional Information of the Treasury Fund is not a
prospectus and should be read in conjunction with the Prospectus of the Treasury
Fund (the 'Prospectus') which has been filed with the Securities and Exchange
Commission and is available upon oral or written request without charge. Copies
of the Prospectus can be obtained by calling or by writing the Treasury Fund at
the above telephone number or address. This Statement of Additional Information
has been incorporated by reference into the Prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objectives and Policies.......................... 2
Independent Auditors' Report................................ 4
Audited Financial Statements for the Fiscal Year ended April
30, 1995.................................................. 5
Appendix A:
Management of the Trust................................ A-1
Investment Advisory and Other Services................. A-4
Portfolio Transactions................................. A-7
Net Asset Value........................................ A-8
Dividends.............................................. A-9
Taxes.................................................. A-10
Federal........................................... A-10
Massachusetts Income Tax.......................... A-12
Other Taxes....................................... A-12
Distributor............................................ A-13
Yield Information...................................... A-14
General Information.................................... A-14
</TABLE>
The date of this Statement of Additional Information and the Prospectus is
August 25, 1995.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Reference is made to 'The Treasury Fund and Its Objectives' in the
Prospectus for a discussion of the investment objectives and policies of the
Treasury Fund. Subject to the investment restrictions described below, the
Treasury Fund's investment objectives can be changed without shareholder
approval.
All investments of the Treasury Fund will be in securities with remaining
maturities not exceeding 762 days (25 months). The dollar weighted average
maturity of the Treasury Fund's portfolio will be 90 days or less.
Forward or firm commitments for the purchase of U.S. Government securities
may be entered into by the Treasury Fund, as described in 'The Treasury Fund and
Its Objectives' in the Prospectus. The purchase of the underlying securities
will be recorded on the date the Treasury Fund enters into the commitment, and
the value of the security will thereafter be reflected in the calculation of the
Treasury Fund's net asset value. A separate account of the Treasury Fund will be
established with State Street Bank and Trust Company, the Treasury Fund's
custodian, consisting of cash or U.S. Government securities having a market
value at all times until the delivery date at least equal to the amount of the
forward commitment. As stated in the Prospectus, the Treasury Fund may dispose
of a commitment prior to settlement. Risks relating to these trading practices
are briefly described in the Prospectus.
The Treasury Fund may invest up to 10% of its total assets in obligations
subject to repurchase agreements with any member bank of the Federal Reserve
System or primary dealer in U.S. Government securities. The Treasury Fund will
not acquire repurchase agreements if, as a result thereof, more than 10% of the
value of its total assets would be invested in repurchase agreements.
The limitation on the Treasury Fund's investment in obligations subject to
repurchase agreements may adversely affect the Treasury Fund's yield, since the
Treasury Fund earns a fee for entering into a repurchase agreement which
increases the effective yield of the obligations underlying the repurchase
agreement. The adverse effect of this limitation on the Treasury Fund's yield
will be greater during periods in which yields on shorter term securities are
higher than yields on longer term securities.
In addition to the investment restrictions set forth in the Prospectus, the
Treasury Fund has adopted the following investment restrictions, none of which
may be changed without the approval of a majority of the Treasury Fund's
outstanding shares, which for this purpose means the vote of (i) 67% or more of
the Treasury Fund's shares present at a meeting, if the holders of more than 50%
of the outstanding shares of the Treasury Fund are present or represented by
proxy, or (ii) more than 50% of the Treasury Fund's outstanding shares,
whichever is less. The Treasury Fund may not:
(1) Purchase securities other than U.S. Treasury bills, notes, and
other obligations issued or guaranteed by the U.S. Government, some of
which may be subject to repurchase agreements. There is no limit on the
amount of its assets which may be invested in the securities of any one
issuer of such obligations;
(2) Act as an underwriter of securities;
(3) Make loans, except that the Treasury Fund may purchase or hold
debt obligations in accordance with its investment objectives and policies,
may enter into repurchase agreements for such securities, and may lend its
portfolio securities against collateral consisting of cash, or securities
issued or guaranteed by the U.S. Government or its agencies, which is equal
at all times to at least 100% of the value of the securities loaned. There
is no investment restriction on the amount of portfolio securities that may
be loaned, except that payments received on such loans, including amounts
received during the loan on account of
Treasury Fund
2
<PAGE>
interest on the securities loaned, will not (together with all
non-qualifying income) exceed 10% of the Treasury Fund's annual gross
income (without offset for realized capital gains) unless, in the opinion
of counsel to the Fund, such amounts are qualifying income under Federal
income tax provisions applicable to regulated investment companies; and
(4) Purchase securities on margin or make short sales of securities.
Even though the above restrictions would permit investment in securities
issued or guaranteed by U.S. Government agencies, the trustees, as a matter of
investment policy, have determined that the Treasury Fund will not purchase any
securities other than direct obligations of the U.S. Treasury. As a matter of
operating policy, the Trustees of the Trust have determined that the Treasury
Fund will not write put or call options.
Treasury Fund
3
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders of
Merrill Lynch Funds For Institutions Series:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of Merrill Lynch Funds For Institutions
Series (the 'Trust'), consisting of the Merrill Lynch Institutional Fund,
Merrill Lynch Government Fund, Merrill Lynch Treasury Fund, and Merrill Lynch
Institutional Tax-Exempt Fund (the 'Funds') as of April 30, 1995, the related
statements of operations for the year then ended, and the statements of changes
in net assets and financial highlights for each of the respective fiscal periods
then ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at
April 30, 1995, by correspondence with the custodian and brokers; where replies
were not received from brokers, we performed other auditing procedures. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of each of the
respective Funds of the Merrill Lynch Funds For Institutions Series at April 30,
1995, the results of their operations, the changes in their net assets, and
their financial highlights for each of the respective fiscal periods then ended
in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Boston, Massachussetts
May 26, 1995
Treasury Fund
4
-------------------------------------------------------------------------------
Merrill Lynch Treasury Fund
Schedule of Investments
April 30, 1995
<TABLE>
<CAPTION>
======================================================================================================================
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
======================================================================================================================
<S> <C> <C> <C> <C> <C>
U.S. $17,000,000 U.S. Treasury Bills 5.90 % 05/04/95 $ 16,991,642
Government 9,614,000 U.S. Treasury Bills 5.85 05/04/95 9,609,313
Issues--99.5% 24,477,000 U.S. Treasury Bills 5.79 05/11/95 24,437,633
2,286,000 U.S. Treasury Bills 5.69 05/18/95 2,279,858
1,496,000 U.S. Treasury Bills 5.68 05/18/95 1,491,987
19,000,000 U.S. Treasury Bills 5.72 05/18/95 18,948,679
25,275,000 U.S. Treasury Bills 5.70 05/18/95 25,206,968
22,717,000 U.S. Treasury Bills 5.715 05/25/95 22,630,448
6,975,000 U.S. Treasury Bills 5.735 06/01/95 6,940,554
15,000,000 U.S. Treasury Bills 5.72 06/01/95 14,926,117
546,000 U.S. Treasury Bills 5.73 06/01/95 543,306
12,171,000 U.S. Treasury Bills 5.715 06/01/95 12,111,104
17,000,000 U.S. Treasury Bills 5.735 06/08/95 16,897,089
253,000 U.S. Treasury Bills 5.69 06/08/95 251,480
40,000,000 U.S. Treasury Bills 5.66 06/08/95 39,761,022
508,000 U.S. Treasury Bills 5.66 07/06/95 502,738
6,626,000 U.S. Treasury Bills 5.64 08/17/95 6,511,900
3,373,000 U.S. Treasury Bills 5.635 08/17/95 3,314,917
4,945,000 U.S. Treasury Bills 5.64 08/17/95 4,859,847
3,124,000 U.S. Treasury Bills 5.73 08/17/95 3,070,205
9,000,000 U.S. Treasury Bills 5.80 09/21/95 8,793,901
1,000,000 U.S. Treasury Bills 5.825 10/19/95 972,355
5,500,000 U.S. Treasury Bills 5.76 10/26/95 5,341,592
40,000,000 U.S. Treasury Notes 4.125 05/31/95 39,940,340
15,000,000 U.S. Treasury Notes 4.25 07/31/95 14,934,376
40,000,000 U.S. Treasury Notes 4.625 08/15/95 39,837,500
----------------------------------------------------------------------------------------------------------------------
Total U.S. Government
Issues--99.5%
(Cost $341,127,350) 341,106,871
----------------------------------------------------------------------------------------------------------------------
Other Assets Less
Liabilities--0.5% 1,737,591
----------------------------------------------------------------------------------------------------------------------
Net Assets--Equivalent to $1.00
Per Share on 342,864,941 Shares
of Beneficial Interest
Outstanding--100.0% $342,844,462
======================================================================================================================
</TABLE>
Note--Costs for Federal income tax purposes are the same as those shown
above. At April 30, 1995 net unrealized depreciation amounted to $20,479 and
is comprised of $1,284 in appreciation and $21,763 in depreciation.
*U.S. Treasury Bills are purchased on a discount basis; the interest rate
shown is the discount paid at the time of purchase by the Fund. U.S. Treasury
Notes bear interest payable at fixed dates or upon maturity.
See Notes to Financial Statements Treasury Fund
5
------------------------------------------------------------------------------
Merrill Lynch Treasury Fund
Statement of Assets and Liabilities
April 30, 1995
==============================================================================
<TABLE>
<S> <C>
Assets:
Investments at value (identified cost $341,127,350) (Note 1a) $341,106,871
Cash 534,423
Receivable for securities sold 19,968,722
Interest receivable 1,230,792
Prepaid expenses 11,397
--------------
Total assets 362,852,205
--------------
Liabilities:
Payable for investments purchased 19,880,511
Investment advisory fee payable 60,075
Dividends payable 38,208
Accrued expenses 28,949
--------------
Total liabilities 20,007,743
--------------
Net Assets: (Equivalent to $1.00 per share, offering and redemption price, based on
342,864,941 shares of beneficial interest outstanding) $342,844,462
==============
</TABLE>
-------------------------------------------------------------------------------
Merrill Lynch Treasury Fund
Statement of Operations
For the Year Ended April 30, 1995
===============================================================================
<TABLE>
<S> <C> <C>
Investment Income:
Income:
Interest and discount earned (Note 1d) $15,765,617
-------------
Expenses:
Investment advisory fee (Note 2) $1,104,980
Registration fees 91,165
Dividend and transfer agency fees 83,579
Accounting and custodian services 69,062
Amortization of organization expenses 23,256
Legal and audit fees 10,316
Trustees' fees (Note 5) 6,019
Insurance 5,188
Printing and shareholder reports 3,610
Miscellaneous 2,177
----------
Total expenses 1,399,352
Waived investment advisory fee (Note 2) (473,563) 925,789
---------- -------------
Net investment income 14,839,828
Realized and Unrealized Gain on Investments:
Net realized gain from investment transactions 92,135
Net unrealized depreciation of investments (2,366)
----------
Net realized and unrealized gain from investments 89,769
-------------
Net Increase in Net Assets Resulting From Operations $14,929,597
=============
</TABLE>
See Notes to Financial Statements Treasury Fund
6
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Merrill Lynch Treasury Fund
Statements of Changes in Net Assets Year Ended April 30,
----------------------------------
1995 1994
============================================================================================
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income $ 14,839,828 $ 8,902,274
Net realized gain from investment transactions 92,135 124,333
Net unrealized depreciation of investments (2,366) (101,448)
------------ --------------
Net increase in net assets resulting from operations 14,929,597 8,925,159
Total declared as dividends to shareholders (Note 4) (14,931,963) (9,026,607)
Capital share transactions (Note 3) 75,893,383 (92,263,569)
------------ --------------
Net increase (decrease) in net assets 75,891,017 (92,365,017)
Net Assets:
Beginning of year 266,953,445 359,318,462
------------ --------------
End of year $342,844,462 $266,953,445
============ ==============
-----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Merrill Lynch Treasury Fund
Financial Highlights
Year Ended April 30,
--------------------------------------------------------------------
1995 1994 1993 1992 1991
=======================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
Income from Investment Operations:
Net investment income .045 .027 .028 .045 .066
Net realized and unrealized gain
on investments -- -- .001 .002 .003
-------- -------- -------- -------- ----------
Total from investment operations .045 .027 .029 .047 .069
Less Distributions:
Dividends from net investment income (.045) (.027) (.029) (.047) (.069)
-------- -------- -------- -------- ----------
Net Asset Value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ======== ======== ==========
Total Return 4.68 % 2.82 % 2.97 % 4.79 % 7.17 %
Ratios/Supplemental Data:
Net Assets, end of year (000) $342,844 $266,953 $359,318 $320,686 $391,643
Ratio of expenses to average net assets
(before waiver) .44 % .45 % .45 % .46 % .50 %
Ratio of expenses to average net assets
(after waiver) .29 % .39 % -- -- .47 %
Ratio of net investment income, including
realized and unrealized gains and losses, to
average net assets (before waiver) 4.58 % 2.67 % 2.93 % 4.69 % 6.63 %
Ratio of net investment income, including
realized and unrealized gains and losses, to
average net assets (after waiver) 4.73 % 2.73 % -- -- 6.66 %
</TABLE>
See Notes to Financial Statements Treasury Fund
7
-------------------------------------------------------------------------------
Merrill Lynch Funds For Institutions Series
Notes to Financial Statements
===============================================================================
1. Significant Accounting Policies
Merrill Lynch Funds For Institutions Series (the 'Trust') was organized as a
Massachusetts business trust on May 7, 1987 and is registered under the
Investment Company Act of 1940 as a diversified, open-end management company.
On February 18, 1994 Merrill Lynch Institutional Tax-Exempt Fund was
reorganized as a separate series of the Trust. The Trust has a fiscal year
end of April 30. The following is a summary of significant accounting
policies consistently followed by the Trust. These policies are in conformity
with generally accepted accounting principles.
(a) The value of the Institutional, Government and Treasury Fund portfolio
securities is determined on the basis of fair value as determined in good
faith by the Trustees of the Trust. In determining fair value, securities for
which market quotations are readily available are valued at market value.
Merrill Lynch Security Pricing Service, an affiliate of Merrill Lynch & Co.,
Inc., provides security price quotations in connection with such valuation to
compute the net asset value of the Institutional, Government and Treasury
Funds. Other securities, if any, are valued at their fair value in the best
judgment of Fund Asset Management, L.P., ('FAM') under procedures established
by, and under the supervision of, the Trustees. Securities with remaining
maturities of 60 days or less are valued by use of the amortized cost method.
Institutional Tax- Exempt Fund investments are carried at amortized cost which
approximates market.
For the purpose of valuation, the maturity of a variable rate demand
instrument is deemed to be the next coupon date on which the interest rate is
to be adjusted. In the case of a floating rate instrument, the remaining
maturity is deemed to be the demand notice payment period.
(b) It is the Trust's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to its shareholders. Therefore, no
Federal Income tax provision is required.
(c) Realized gains and losses on investments are computed on the basis of
identified cost of the security sold.
(d) Security transactions are accounted for on the date the securities are
purchased or sold (the trade date). Interest Income (after adjustment for
amortization of premium or discount) is recorded as earned.
(e) Deferred organization expenses are amortized over a period not
exceeding five years. Prepaid registration fees are charged to income as the
related shares are sold.
(f) Repurchase agreements--The Institutional Fund and the Government Fund
invest in U.S. Government & Agency securities pursuant to repurchase
agreements with member banks of the Federal Reserve System or primary dealers
in U.S. Government securities. Under such agreements, the bank or primary
dealer agrees to repurchase the security at a mutually agreed upon time and
price. The Trust takes possession of the underlying securities, marks to
market such securities daily and, if necessary, receives additional
securities to ensure that the contract is adequately collateralized.
(g) Effective December 1, 1993, Merrill Lynch Institutional Tax-Exempt Fund
adopted Statement of Position ('SOP') 93-2 'Determination, Disclosure, and
Financial Statement Presentation of Income, Capital Gain, and Return of
Capital Distributions by Investment Companies.' Accordingly, the Fund changed
the classification of its net asset components as a result of permanent
differences arising from differing treatments of market discount for book and
tax purposes. During the year ended April 30, 1995, amounts have been
reclassified to reflect a decrease of $13,457 in both accumulated capital
losses and undistributed net investment income. This SOP had no effect on the
other series of the Trust.
2. Investment Advisory Fees and Other
Transactions with Affiliates
Fund Asset Management, L.P., a subsidiary of Merrill Lynch & Co., Inc.,
provides investment
Treasury Fund
8
-------------------------------------------------------------------------------
Merrill Lynch Funds For Institutions Series
Notes to Financial Statements--Continued
===============================================================================
advisory and corporate administrative services to the Trust for a fee,
subject to certain limitations, at the following annual rates:
Percentage of Average Daily Net Assets
-------------------------------------------
Institutional Fund .40% up to and including $250,000,000
plus .375% over $250,000,000 up to and
including $500,000,000
plus .35% over $500,000,000 up to and
including $750,000,000
plus .325% over $750,000,000
Government Fund
and Treasury Fund .35% up to and including $500,000,000
plus .335% over $500,000,000 up to and
including $750,000,000
plus .32% over $750,000,000 up to and
including $1,000,000,000
plus .30% over $1,000,000,000
Institutional
Tax-Exempt Fund .45% up to and including $1,500,000,000
plus .425% over $1,500,000,000 up to and
including $2,000,000,000
plus .40% over $2,000,000,000
FAM has agreed to waive a portion of its advisory fees. As of December 1,
1993 the effective fee payable to FAM will be at the annual rate of 0.20% of
each Fund's average daily net assets. FAM may discontinue waiver of the fee
in whole or in part at any time without notice.
For the year ended April 30, 1995 FAM waived a portion of its fees
amounting to $6,623,625 for the Institutional Fund, $1,831,019 for the
Government Fund, $473,563 for the Treasury Fund and $841,807 for the
Institutional Tax-Exempt Fund.
All officers and certain trustees of the Trust are affiliated with Merrill
Lynch & Co., Inc.
3. Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited number
of shares of beneficial interest in the Institutional Fund, Government Fund
and Treasury Fund ($.01 par value) and Institutional Tax-Exempt Fund ($.10
par value) of a single class. At April 30, 1995, capital paid-in aggregated
$6,579,987,346 for Institutional Fund, $1,601,046,564 for Government Fund,
$342,864,941 for Treasury Fund and $404,028,815 for Institutional Tax-Exempt
Fund. Transactions in shares at a constant net asset value of $1.00 per share
were as follows:
<TABLE>
<CAPTION>
Year Ended April 30,
----------------------------------
Institutional Fund 1995 1994
-------------- ----------------
<S> <C> <C>
Shares sold 63,113,089,823 57,789,577,790
Shares issued to shareholders
in reinvestment of dividends 198,199,152 112,959,517
------------ --------------
Total 63,311,288,975 57,902,537,307
Shares redeemed 60,509,071,011 58,835,299,420
------------ --------------
Net increase (decrease) 2,802,217,964 (932,762,113)
============ ==============
<CAPTION>
Year Ended April 30,
------------------------------------
Government Fund 1995 1994
--------------- -----------------
<S> <C> <C>
Shares sold 8,314,763,207 7,510,129,404
Shares issued to shareholders
in reinvestment of dividends 65,230,079 37,905,314
------------- ---------------
Total 8,379,993,286 7,548,034,718
Shares redeemed 8,313,348,347 7,367,634,473
------------- ---------------
Net increase (decrease) 66,644,939 180,400,245
============= ===============
<CAPTION>
Year Ended April 30,
------------------------------------
Treasury Fund 1995 1994
--------------- -----------------
<S> <C> <C>
Shares sold 2,288,760,430 1,476,065,082
Shares issued to shareholders
in reinvestment of dividends 14,088,128 8,566,715
------------- ---------------
Total 2,302,848,558 1,484,631,797
Shares redeemed 2,226,955,175 1,576,895,366
------------- ---------------
Net increase (decrease) 75,893,383 (92,263,569)
============= ===============
<CAPTION>
Year Five Months Year
Institutional Ended Ended Ended
Tax-Exempt Fund April 30, April 30, November 30,
--------------- --------------- -----------------
1995 1994 1993
--------------- --------------- -----------------
<S> <C> <C> <C>
Shares sold 2,737,285,871 1,450,485,801 3,279,737,452
Shares issued to
shareholders in
reinvestment
of dividends 9,666,260 2,708,949 5,105,388
------------- ------------- ---------------
Total 2,746,952,131 1,453,194,750 3,284,842,840
Shares redeemed 2,733,284,809 1,341,521,024 3,335,299,466
------------- ------------- ---------------
Net increase
(decrease) 13,667,322 111,673,726 (50,456,626)
============= ============= ===============
</TABLE>
Treasury Fund
9
-------------------------------------------------------------------------------
Merrill Lynch Funds For Institutions Series
Notes to Financial Statements--Continued
===============================================================================
4. Distributions
The Funds declare dividends daily, pay dividends monthly and automatically
reinvest such dividends in additional Fund shares at net asset value, unless
shareholders request payment in cash. Dividends for the Institutional,
Government and Treasury Funds are declared from the total of net investment
income, plus or minus realized gains or losses, if any, on investments.
Dividends for the Institutional Tax-Exempt Fund are declared from net
investment incomeexcluding discounts earned other than original issue
discounts. Net realized capital gains, if any, are normally distributed
annually, after deducting prior years' loss carryovers. The Fund may
distribute capital gains more frequently than annually in order to maintain
the Fund's net asset value at $1.00 per share.
At April 30, 1995, the Institutional Tax-Exempt Fund had net capital loss
carryovers of $260,081 of which $78 expire in the year 2000, $102,443 expire
in 2001, $17,520 expire in 2002 and $140,040 expire in 2003.
5. Trustees' Fees
Each Trustee who is not affiliated with the Trust or its adviser is paid an
annual fee of $24,000 by the Trust. Trustees' fees are allocated among the
four series of the Trust based on the net assets under management.
-------------------------------------------------------------------------------
Trustees
===============================================================================
Robert W. Crook*
President & Trustee
David Almy
Trustee
President,
McCall & Almy, Inc.
A. Bruce Brackenridge
Trustee
Retired Group Executive,
J.P. Morgan & Co., Inc.
Charles C. Cabot, Jr.
Trustee
Partner, Sullivan & Worcester
Terry K. Glenn*
Trustee
Executive Vice President,
Merrill Lynch Asset Management
Todd Goodwin
Trustee
Partner, Gibbons, Goodwin, van
Amerongen
George W. Holbrook, Jr.
Trustee
Managing Partner,
Bradley Resources Company
* May be deemed to be an 'interested
person' of the Fund as such term is
defined in the Investment Company Act
of 1940.
Treasury Fund
10
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MERRILL LYNCH INSTITUTIONAL TAX-EXEMPT FUND
OF MERRILL LYNCH FUNDS FOR INSTITUTIONS SERIES
ONE FINANCIAL CENTER, BOSTON, MASSACHUSETTS 02111-2646
FOR GENERAL INFORMATION AND PURCHASES CALL 617-357-1460 OR TOLL-FREE
800-225-1576
Merrill Lynch Institutional Tax-Exempt Fund is a no-load money fund whose
objectives are to seek current income exempt from Federal income taxes,
preservation of capital and liquidity available from investing in a diversified
portfolio of short-term, high quality Tax-Exempt Securities. The Tax-Exempt Fund
is designed primarily for institutions as an economical and convenient means for
the investment of short-term funds. The Tax-Exempt Fund is a separate series of
Merrill Lynch Funds For Institutions Series (the 'Trust'), a diversified,
open-end management investment company.
The Statement of Additional Information of the Tax-Exempt Fund is not a
prospectus and should be read in conjunction with the Prospectus of the
Tax-Exempt Fund (the 'Prospectus') which has been filed with the Securities and
Exchange Commission and is available upon oral or written request without
charge. Copies of the Prospectus can be obtained by calling or by writing the
Tax-Exempt Fund at the above telephone number or address. This Statement of
Additional Information has been incorporated by reference into the Prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objectives and Policies.......................... 2
Investment Restrictions..................................... 3
Independent Auditors' Report................................ 5
Audited Financial Statements for the Five Month Period Ended
April 30, 1995............................................ 6
Appendix A:
Management of the Trust................................ A-1
Investment Advisory and Other Services................. A-4
Portfolio Transactions................................. A-7
Net Asset Value........................................ A-8
Dividends.............................................. A-9
Taxes.................................................. A-10
Federal........................................... A-10
Massachusetts Income Tax.......................... A-12
Other Taxes....................................... A-12
Distributor............................................ A-13
Yield Information...................................... A-14
General Information.................................... A-14
Appendix B: Information Concerning Tax-Exempt Securities.... B-1
</TABLE>
The date of this Statement of Additional Information and the Prospectus is
August 25, 1995.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Reference is made to 'The Tax-Exempt Fund and Its Objectives' in the
Prospectus for a discussion of the investment objectives and policies of the
Tax-Exempt Fund.
All of the investments of the Tax-Exempt Fund will be in securities with
remaining maturities of up to 397 days (13 months). The dollar weighted average
maturity of the Tax-Exempt Fund's portfolio will be 90 days or less. The
Tax-Exempt Fund can be expected to offer a lower yield than longer-term
municipal bond funds since Tax-Exempt Securities (see Appendix B for a
description of Tax-Exempt Securities) with longer maturities tend to produce
higher yields. Interest rates in the short-term Tax-Exempt Securities market
also may fluctuate more widely from time to time than interest rates in the
long-term municipal bond market. However, because of the shorter maturities, the
market value of the Tax-Exempt Securities held by the Tax-Exempt Fund can be
expected to fluctuate less in value as a result of changes in interest rates.
The Tax-Exempt Fund may also invest in short-term municipal notes, variable
rate demand notes ('VRDNs'), participation interests in VRDNs held by a
financial institution ('Participating VRDNs'), short-term tax-exempt commercial
paper obligations and floating rate tax-exempt demand notes. See Appendix B for
a discussion of the above investment instruments.
VRDNs are tax-exempt obligations which contain a floating or variable
interest rate adjustment formula and an unconditional right of demand to receive
payment of the unpaid balance plus accrued interest upon a short notice period.
The interest rates are adjustable at periodic intervals to some prevailing
market rate for similar investments, such adjustment formula being calculated to
maintain the market value of the VRDN at approximately the par value of the VRDN
upon the adjustment date. The adjustments are frequently based upon the prime
rate of a bank or some other appropriate interest rate adjustment index.
The maturity of VRDNs (including Participating VRDNs) are deemed to be the
longer of (i) the notice period required before the Tax-Exempt Fund is entitled
to receive payment of the principal amount of the VRDN upon demand or (ii) the
period remaining until the VRDN's next interest rate adjustment. If not redeemed
by the Tax-Exempt Fund through the demand feature, VRDNs mature on a specified
date which may range up to thirty years from the date of issuance. The
Tax-Exempt Fund will not invest more than 20% of its total assets in
Participating VRDNs.
Certain tax-exempt instruments (primarily VRDNs and Participating VRDNs)
may be entitled to the benefit of standby letters of credit or similar
commitments issued by banks and, in such instances, the Trustees of the Trust
will take into account the obligation of the bank in assessing the quality of
such instrument. The Tax-Exempt Fund may also purchase other types of tax-exempt
instruments if, in the opinion of the Trustees of the Trust, such obligations
are equivalent to securities having the ratings described in the Appendix to the
Prospectus.
The performance of the Tax-Exempt Fund will be affected by general changes
in interest rates on short-term Tax-Exempt Securities. Such changes will affect
the yield on the Tax-Exempt Fund's subsequent investments, will result in
increases or decreases in the value of the obligations then held by the
Tax-Exempt Fund and will thereby affect the rate of return on the shares of the
Tax-Exempt Fund. If interest rates have increased since the time a security was
purchased, the value of that security will generally decrease. The impact on
value is lessened by the short-term maturities of the investment of the
Tax-Exempt Fund. Short-term securities tend to fluctuate less in value due to
changes in interest rates than do longer term securities. Preservation of
capital is a prime investment objective of the Tax-Exempt Fund, and, while the
types of short-term Tax-Exempt Securities in which
Tax-Exempt Fund
2
<PAGE>
the Tax-Exempt Fund invests are not completely risk free, the Tax-Exempt Fund
believes that securities having the rating characteristics described above have
a lower principal risk than lower rated obligations and generally have a lower
principal risk than longer term obligations which entail the risk of changing
conditions over a longer period of time.
As indicated under 'Redemptions' in the Prospectus, payments of proceeds
upon redemption of shares generally will be made on the same day the redemption
request is received. Tax-Exempt Securities generally do not trade on the basis
of same-day settlements. As a result, the Tax-Exempt Fund may be required to
maintain cash reserves or incur temporary bank borrowings so that it can make
such redemption payments. This will reduce the Tax-Exempt Fund's yield. The
Trustees of the Trust will re-examine the Tax-Exempt Fund's policy of making
redemption payments on the date redemption orders are received if that policy
has a significant impact on the Tax Exempt Fund's yield.
Purchase of Tax-Exempt Securities on a when-issued basis. Tax-Exempt
Securities may at times be purchased or sold on a delayed delivery basis or a
when-issued basis. These transactions arise when securities are purchased or
sold by the Tax-Exempt Fund with payment and delivery taking place in the
future, often a month or more after the purchase. The payment obligation and the
interest rate are each fixed at the time the buyer enters into the commitment.
During the period between the making of the commitment and delivery of the
securities, the Tax-Exempt Fund will not earn any income on the securities
subject to the commitment, but will be exposed to changes in the market value of
such securities. The Tax-Exempt Fund will only make commitments to purchase such
securities with the intention of actually acquiring the securities, but the Tax-
Exempt Fund may sell these securities prior to settlement date if it is deemed
advisable. Purchasing Tax-Exempt Securities on a when-issued basis involves the
risk that the yield available in the market when delivery takes place may
actually be higher than those obtained in the transaction itself; if yields so
increase, the value of the when-issued obligation will generally decrease. The
Tax-Exempt Fund will maintain a separate account at its custodian bank
consisting of cash or liquid Tax-Exempt Securities (valued on a daily basis)
equal at all times to the amount of the when-issued commitment.
Purchase of securities with puts. The Tax-Exempt Fund has authority to
purchase securities at a price which would result in a yield to maturity lower
than that generally offered by the seller at the time of purchase when it can
simultaneously acquire the right to sell the securities back to the seller at an
agreed upon price at any time during a stated period or on a certain date. Such
a right is generally denoted as a 'put.' The Tax-Exempt Fund does not currently
intend to enter into such transactions but reserves the right to do so in the
future. No transactions will be entered into for the Tax-Exempt Fund unless the
trustees of the Trust have approved the proposed terms of such transactions and
such terms are set forth in a subsequent prospectus which has been declared
effective by the Securities and Exchange Commission. In addition, the Tax-Exempt
Fund may be required to obtain an exemptive order from the Securities and
Exchange Commission permitting it to acquire puts. The right to engage in such
transactions is a fundamental policy of the Tax-Exempt Fund, which may only be
changed by shareholder vote.
INVESTMENT RESTRICTIONS
In addition to those restrictions and policies set forth in 'Investment
Restrictions' in the Prospectus, the Tax-Exempt Fund has adopted the following
restrictions and policies relating to the investment of its assets and its
activities. These are fundamental policies and may not be changed without the
approval of the holders of a majority of the Tax-Exempt Fund's outstanding
shares (for this purpose a majority of the shares means the lesser
Tax-Exempt Fund
3
<PAGE>
of (i) 67% of the shares represented at a meeting at which more than 50% of the
outstanding shares are represented or (ii) more than 50% of the outstanding
shares).
The Tax-Exempt Fund may not: (1) make investments for the purpose of
exercising control or management; (2) purchase securities of other investment
companies, except in connection with a merger, consolidation, acquisition or
reorganization; (3) purchase or sell real estate (provided that such restriction
shall not apply to tax-exempt securities secured by real estate or interests
therein or issued by companies which invest in real estate or interests
therein), commodities or commodity contracts, interests in oil, gas or other
mineral exploration or development programs; (4) make loans to other persons,
provided that the Tax-Exempt Fund may purchase a portion of an issue of
tax-exempt securities (the acquisition of a portion of an issue of tax-exempt
securities or bonds, debentures or other debt securities which are not publicly
distributed is considered to be the making of a loan under the Investment
Company Act of 1940); (5) act as an underwriter of securities, except to the
extent that the Tax-Exempt Fund may technically be deemed an underwriter when
engaged in the activities described in (4) above or insofar as the Tax-Exempt
Fund may be deemed an underwriter under the Securities Act of 1933 in selling
portfolio securities; (6) invest more than 5% of its total assets (taken at
market value at the time of each investment) in industrial revenue bonds where
the entity supplying the revenues from which the issue is to be paid, including
predecessors, has a record of less than three years of continuous operation; (7)
purchase any securities on margin, except for use of short-term credit necessary
for clearance of purchases and sales of portfolio securities; or (8) make short
sales of securities or maintain a short position or invest in put call, straddle
or spread options; provided, however, that the Tax-Exempt Fund shall have the
authority to purchase tax-exempt securities subject to put options as set forth
under 'Investment Objectives and Policies' above.
For purposes of the restriction on the Tax-Exempt Fund's investing more
than 5% of its total assets in the securities of any one issuer except
securities backed by the U.S. Government or its agencies or instrumentalities
(as more fully set forth in 'Investment Restrictions' in the Prospectus), the
Tax-Exempt Fund will regard each state and each political subdivision, agency or
instrumentality of such state and each multistate agency of which such state is
a member and each public authority which issues securities on behalf of a
private entity as a separate issuer, except that if the security is backed only
by the assets and revenues of an entity other than the issuer then the entity
with the ultimate responsibility for the payment of interest and principal may
be regarded as the sole issuer.
With respect to the restriction on the Tax-Exempt Fund's borrowing amounts
in excess of 20% of its total assets, as more fully set forth in 'Investment
Restrictions' in the Prospectus, it should be noted that usually only
'leveraged' investment companies may borrow in excess of 5% of their assets;
however, the Tax-Exempt Fund will not borrow to increase income but only to meet
redemption requests which might otherwise require untimely dispositions of
portfolio securities. Interest paid on such borrowings will reduce net income.
Tax-Exempt Fund
4
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders of
Merrill Lynch Funds For Institutions Series:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of Merrill Lynch Funds For Institutions
Series (the 'Trust'), consisting of the Merrill Lynch Institutional Fund,
Merrill Lynch Government Fund, Merrill Lynch Treasury Fund, and Merrill Lynch
Institutional Tax-Exempt Fund (the 'Funds') as of April 30, 1995, the related
statements of operations for the year then ended, and the statements of changes
in net assets and financial highlights for each of the respective fiscal periods
then ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at
April 30, 1995, by correspondence with the custodian and brokers; where replies
were not received from brokers, we performed other auditing procedures. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of each of the
respective Funds of the Merrill Lynch Funds For Institutions Series at April 30,
1995, the results of their operations, the changes in their net assets, and
their financial highlights for each of the respective fiscal periods then ended
in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Boston, Massachussetts
May 26, 1995
Tax-Exempt Fund
5
-------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Schedule of Investments
April 30, 1995
<TABLE>
<CAPTION>
==================================================================================================================
Value
Face Amount Issue (Note 1a)
==================================================================================================================
<S> <C> <C> <C>
Alabama-- $10,300,000 Birmingham, Alabama Medical Clinic Board Revenue
2.6% (University of Alabama Health Services Project) DDN
5.10% due 12/01/2026 (a) $ 10,300,000
--------------- ----------- --------------------------------------------------- -------------
Alaska-- 13,200,000 Valdez, Alaska Marine Terminal Revenue (Arco
3.3% Transportation Project) VRDN 4.75% due 05/01/2031
(a) 13,200,000
--------------- ------------ --------------------------------------------------- -------------
Arizona-- 3,300,000 Cochise County, Arizona PCR Solid Waste Disposal
12.1% Revenue (Arizona Electric Power Coop Inc. Project)
FXRDN 4.45% due 09/01/1995 3,300,000
Coconino County, Arizona PCR (Arizona Public
Service Co.--Navajo Project) DDN:
11,250,000 5.10% due 10/01/2029 (a) 11,250,000
2,000,000 5.10% due 10/01/2024(a) 2,000,000
1,800,000 Maricopa County, Arizona TAN 5.00% due 07/28/1995 1,802,768
5,000,000 Maricopa County, Arizona PCR (Arizona Public
Service Co.) DDN 5.00% due 05/01/2029 (a) 5,000,000
9,000,000 Maricopa County, Arizona PCR (El Paso Electric Co.
Project) VRDN 4.95% due 07/01/2014 (a) 9,000,000
Phoenix, Arizona DDN:
2,000,000 4.10% due 06/01/2018 (a) 2,000,000
3,700,000 5.00% due 06/01/2019 (a) 3,700,000
10,900,000 Pinal, Arizona IDA PCR (Magma-Copper/Newmont
Mining Corp. Project) DDN 5.15% due 12/01/2009 (a) 10,900,000
--------------- ----------- --------------------------------------------------- -------------
California-- 10,000,000 California Higher Education Loan Authority Inc.
2.7% Student Loan Revenue FXRDN 3.90% due 07/01/1995 10,000,000
690,000 California Housing Finance Agency Revenue FXRDN
4.30% due 05/01/1995 690,000
--------------- ----------- --------------------------------------------------- -------------
Colorado-- 6,000,000 Arapahoe County, Colorado Capital Improvement
4.4% Highway Trust Fund (E-470 Project) FXRDN 4.45% due
08/31/1995 6,000,000
Denver, Colorado City & County Airport Revenue CP:
7,000,000 4.20% due 05/11/1995 7,000,000
4,000,000 4.10% due 05/15/1995 4,000,000
800,000 4.10% due 05/24/1995 800,000
--------------- ----------- --------------------------------------------------- -------------
Connecticut-- 5,000,000 Eagles Tax-Exempt Trust VRDN 4.54% due
1.2% 08/15/2012 (a) 5,000,000
--------------- ----------- --------------------------------------------------- -------------
District of 13,400,000 District of Columbia General Fund Recovery DDN
Columbia-- 5.30% due 06/01/2003 (a) 13,400,000
3.3%
</TABLE>
See Notes to Financial Statements. Tax-Exempt Fund
6
-------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Schedule of Investments--Continued
April 30, 1995
<TABLE>
<CAPTION>
=================================================================================================================
Value
Face Amount Issue (Note 1a)
=================================================================================================================
<S> <C> <C> <C>
Florida-- $8,400,000 St. Lucie County, Florida PCR (Florida Power &
4.0% Light Co. Project) CP 4.20% due 05/19/1995 $ 8,400,000
7,800,000 St. Lucie County, Florida PCR (Florida Power &
Light Co. Project) DDN 5.15% due 01/01/2026 (a) 7,800,000
-----------------------------------------------------------------------------------------------------------------
Georgia-- 3,500,000 Burke County, Georgia Development Authority PCR
4.0% (Georgia Power Co. Plant-Vogtle Project) DDN 5.00%
due 07/01/2024 (a) 3,500,000
4,555,000 Georgia State Residential Finance Authority FXRDN
4.40% due 06/01/1995 4,555,000
8,000,000 Municipal Electric Authority CP 4.10% due
05/22/1995 8,000,000
-----------------------------------------------------------------------------------------------------------------
Illinois-- 3,270,000 Illinois Educational Facilities Authority Revenue
4.0% (Art Institute of Chicago) VRDN 4.55% due 03/01/2027 (a) 3,270,000
5,000,000 Illinois Health Facilities Authority Revenue
(Evanston Hospital Corp. Project) CP 4.30% due
02/29/1996 5,000,000
5,000,000 Illinois Health Facilities Authority Revenue
(Evanston Hospital Corp. Project) DDN 4.80% due
08/15/2020 (a) 5,000,000
2,960,000 Peoria, Illinois IDR (CDC Realty L.P. Project) VRDN
4.95% due 12/01/2014 (a) 2,960,000
-----------------------------------------------------------------------------------------------------------------
Indiana-- 3,645,000 Bloomington, Indiana Economic Development Revenue
4.8% (Bloomington Square Project) VRDN 4.80% due
12/01/2008 (a) 3,645,000
3,500,000 Indiana Bond Bank Advance Funding Program VRDN
4.12% due 01/10/1996 (a) 3,500,000
6,300,000 Jasper County, Indiana PCR (Northern Industrial
Public Service) DDN 5.10% due 06/01/2013 (a) 6,300,000
2,500,000 St. Joseph County, Indiana Hospital Authority
(Madison Center Inc. Project) VRDN 4.65% due
03/04/2015 (a) 2,500,000
3,500,000 Westfield, Indiana IDR (Standard Locknut Inc.
Project) VRDN 4.95% due 01/01/2002 (a) 3,500,000
-----------------------------------------------------------------------------------------------------------------
Kentucky-- 3,000,000 Carroll County, Kentucky Solid Waste Disposal
1.3% Revenue (Kentucky Utilities Co. Project) DDN 5.05%
due 11/01/2024 (a) 3,000,000
2,200,000 Daviess County, Kentucky Solid Waste Disposal
Revenue (Scott Paper Co. Project) DDN 5.10% due
12/01/2023 (a) 2,200,000
-----------------------------------------------------------------------------------------------------------------
Louisiana-- 2,200,000 Saint Charles Parish, Louisiana PCR (Shell Oil Co.
0.5% Project) DDN 5.05% due 10/01/2022 (a) 2,200,000
-----------------------------------------------------------------------------------------------------------------
Massachusetts-- 2,200,000 Massachusetts VRDN 5.15% due 12/01/1997 (a) 2,200,000
3.9% 1,500,000 Massachusetts Bay Transportation Authority GO 5.00%
due 06/15/1995 1,501,613
</TABLE>
See Notes to Financial Statements. Tax-Exempt Fund
7
-------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Schedule of Investments--Continued
April 30, 1995
<TABLE>
<CAPTION>
=================================================================================================================
Value
Face Amount Issue (Note 1a)
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Massachusetts-- $12,000,000 Massachusetts Health & Educational Facility
(continued) Authority Revenue (Boston University) CP 4.10% due
06/06/1995 $ 12,000,000
-----------------------------------------------------------------------------------------------------------------
Michigan-- 5,535,000 Michigan State Building Authority Revenue CP 4.30%
3.6% due 07/26/1995 5,535,000
8,800,000 Michigan State Strategic Fund PCR (Consumers Power
Project) DDN 5.00% due 04/15/2018 (a) 8,800,000
-----------------------------------------------------------------------------------------------------------------
Missouri-- 6,375,000 Clayton, Missouri IDA VRDN 4.90% due 02/01/2007 (a) 6,375,000
2.2% 2,500,000 Jefferson County, Missouri IDA (Sinclair & Rush
Inc. Project) VRDN 4.95% due 11/01/2001 (a) 2,500,000
New Hampshire-- 9,830,000 New Hampshire Higher Educational & Health
2.4% Facilities Authority Revenue (Dartmouth Educational
Loan Corp.) FXRDN 3.75% due 06/01/1995 9,830,000
-----------------------------------------------------------------------------------------------------------------
New York-- New York City DDN:
4.6% 4,000,000 5.15% due 05/15/1996 (a) 4,000,000
4,600,000 5.15% due 08/01/1996 (a) 4,600,000
5,000,000 New York City GO/VRDN 4.02% due 06/30/1995 (a) 5,000,000
3,000,000 New York City GO/DDN 5.15% due 08/01/1997 (a) 3,000,000
2,100,000 New York City Industrial Development Agency IDR DDN
5.25% due 11/01/2015 (a) 2,100,000
-----------------------------------------------------------------------------------------------------------------
North Carolina-- 6,200,000 North Carolina Medical Care Commission Hospital
1.5% Revenue (Carol Woods Project) DDN 5.40% due
04/01/2021 (a) 6,200,000
-----------------------------------------------------------------------------------------------------------------
Ohio-- 3,500,000 Cincinnati & Hamilton County, Ohio Port Authority
14.8% IDR VRDN 4.70% due 11/01/2000 (a) 3,500,000
13,700,000 Cuyahoga County, Ohio Hospital Revenue (University
Hospital of Cleveland) DDN 5.15% due 01/01/2016 (a) 13,700,000
1,400,000 Cuyahoga County, Ohio IDR VRDN 4.95% due
03/01/2019 (a) 1,400,000
5,000,000 Dayton, Ohio Special Facilities Revenue (Emery Air
Freight Project) DDN 5.15% due 10/01/2009 (a) 5,000,000
2,300,000 Franklin County, Ohio Health Systems Revenue (St.
Anthony Medical) DDN 5.15% due 07/01/2015 (a) 2,300,000
1,000,000 Franklin County, Ohio IDR VRDN 4.95% due 05/01/1997
(a) 1,000,000
2,355,000 Geauga County, Ohio IDR VRDN 4.95% due
06/01/2005 (a) 2,355,000
15,100,000 Hamilton County, Ohio Health Systems Revenue
(Franciscan Sisters of Poor Health) DDN 5.15% due
03/01/2017 (a) 15,100,000
</TABLE>
See Notes to Financial Statements. Tax-Exempt Fund
8
-------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Schedule of Investments--Continued
April 30, 1995
<TABLE>
<CAPTION>
=================================================================================================================
Value
Face Amount Issue (Note 1a)
=================================================================================================================
<S> <C> <C> <C>
Ohio-- $3,480,000 Lucas-Beacon Place Housing Development Corp. M/F
(continued) Revenue (Beacon Place Apartments Project) FXRDN
4.55% 09/15/1995 $ 3,480,000
2,400,000 Ohio State Water Development Authority Revenue VRDN
4.35% due 01/01/1997 (a) 2,400,000
5,000,000 Richland County, Ohio BAN 4.85% due 09/14/1995 5,010,723
4,500,000 University of Cincinnati Ohio General Receipts BAN
5.00% due 03/21/1996 4,513,339
-----------------------------------------------------------------------------------------------------------------
Oregon-- 5,900,000 Port St. Helens, Oregon PCR (Portland General
1.5% Electric Project) DDN 5.00% due 06/01/2010 (a) 5,900,000
-----------------------------------------------------------------------------------------------------------------
Pennsylvania-- 10,500,000 Emmaus, Pennsylvania, General Authority Revenue
6.1% local Government (Pool Program) VRDN 4.80% due
03/01/2024 (a) 10,500,000
1,500,000 Erie County, Pennsylvania IDA Revenue (McInnes
Steel Co. Project) DDN 5.35% due 11/01/2001 (a) 1,500,000
10,000,000 Philadelphia, Pennsylvania School District TRAN
4.75% due 06/30/1995 10,004,500
2,600,000 Washington County, Pennsylvania Higher Education
Authority Revenue VRDN 4.75% due 11/01/2005 (a) 2,600,000
-----------------------------------------------------------------------------------------------------------------
Rhode Island-- 3,400,000 Rhode Island Housing & Mortgage Finance Corp.
0.8% Homeownership Opportunity FXRDN 4.40% due
02/01/1996 3,400,000
-----------------------------------------------------------------------------------------------------------------
Texas-- 3,400,000 Gulf Coast IDA Solid Waste Disposal Revenue (Citgo
8.4% Petroleum Corp. Project) DDN 5.10% due
04/01/2026 (a) 3,400,000
13,000,000 Harris County, Texas Health Facilities Development
Corp. (Methodist Hospital) DDN 5.00% due
12/01/2025 (a) 13,000,000
6,000,000 San Antonio, Texas Electric & Gas Revenue CP 4.15%
due 07/25/1995 6,000,000
10,000,000 Texas State TRAN 5.00% due 08/31/1995 10,021,696
1,400,000 Texas State Water Development Board DDN 5.10% due
03/01/2015 (a) 1,400,000
-----------------------------------------------------------------------------------------------------------------
Utah-- 1,775,000 Salt Lake City, Utah PCR (Amoco Project) FXRDN
0.4% 4.40% due 10/01/1995 1,776,441
-----------------------------------------------------------------------------------------------------------------
Wisconsin-- 2,650,000 Milwaukee, Wisconsin Redevelopment Authority
0.7% Revenue (Jensar Corp. Project) VRDN 4.95% due
03/01/2007 (a) 2,650,000
</TABLE>
See Notes to Financial Statements. Tax-Exempt Fund
9
-------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Schedule of Investments--Continued
April 30, 1995
<TABLE>
<CAPTION>
=================================================================================================================
Value
Face Amount Issue (Note 1a)
=================================================================================================================
<S> <C> <C> <C>
Wyoming-- $4,800,000 Carbon County, Wyoming PCR (Amoco Project) FXRDN
2.1% 4.15% due 11/01/1995 $ 4,800,000
3,625,000 Lincoln County, Wyoming PCR (Amoco Project) FXRDN
4.40% due 10/01/1995 3,627,942
-----------------------------------------------------------------------------------------------------------------
Total Investments (Cost $408,654,022*)--101.2% 408,654,022
-----------------------------------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets--(1.2%) (4,750,715)
-----------------------------------------------------------------------------------------------------------------
Net Assets--Equivalent to $1.00 Per Share on
404,028,815 Shares of Beneficial Interest
Outstanding--100.0% $403,903,307
=================================================================================================================
</TABLE>
(a) The interest rate is subject to change periodically based on a certain
index. The rates shown are those in effect at April 30, 1995. For variable
rate demand instruments, the next coupon date on which the interest is to be
adjusted is deemed the maturity date for valuation.
*Cost for Federal income tax purposes.
Portfolio Abbreviations for Merrill Lynch Institutional Tax-Exempt
BAN Bond Anticipation Notes
CP Commerical Paper
DD NDaily Demand Notes
FXRDN Fixed Rate Demand Notes
GO General Obligation
IDA Industrial Development Authority
IDR Industrial Development Revenue
M/F Multi-Family
PCR Pollution Control Revenue
TAN Tax Anticipation Notes
TRAN Tax Revenue Anticipation Notes
VRDN Variable Rate Demand Notes
See Notes to Financial Statements. Tax-Exempt Fund
10
-------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Statement of Assets and Liabilities
April 30, 1995
<TABLE>
=========================================================================================================
<S> <C>
Assets:
Investments, at amortized cost and value (Note 1a) $408,654,022
Cash 2,995,354
Interest receivable 2,627,747
Deferred organization and prepaid expenses 135,565
--------------
Total assets 414,412,688
--------------
Liabilities:
Payable for investments purchased 10,406,374
Investment advisory fee payable 51,296
Accrued expenses 31,374
Dividends payable 20,337
--------------
Total liabilities 10,509,381
--------------
Net Assets: (Equivalent to $1.00 per share, offering and redemption price, based on
404,028,815 shares of beneficial interest outstanding) $403,903,307
==============
</TABLE>
-------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Statement of Operations
April 30, 1995
===============================================================================
<TABLE>
<S> <C> <C>
Investment Income:
Income:
Interest and discount earned (Note 1d) $11,670,943
-------------
Expenses:
Investment advisory fee (Note 2) $1,515,253
Registration fees 132,184
Accounting and custodian services 90,518
Dividend and transfer agency fees 90,478
Amortization of organization expenses 29,814
Legal and audit fees 18,073
Printing and shareholder reports 6,361
Trustees' fees (Note 5) 5,996
Insurance 5,292
Miscellaneous 2,814
----------
Total expenses 1,896,783
Waived investment advisory fee (Note 2) (841,807) 1,054,976
---------- -------------
Net investment income 10,615,967
Net realized loss from investment transactions (143,818)
-------------
Net Increase in Net Assets Resulting From Operations $10,472,149
=============
</TABLE>
See Notes to Financial Statements. Tax-Exempt Fund
11
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Statements of Changes in Net Assets Year Five Months Year
Ended Ended Ended
April 30, 1995 April 30, 1994 November 30, 1993
===========================================================================================================================
<S> <C> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income $ 10,615,967 $ 3,119,279 $ 5,904,015
Net realized loss from investment transactions (143,818) (24,510) (106,427)
------------ ------------ -----------------
Net increase in net assets resulting from operations 10,472,149 3,094,769 5,797,588
Total declared as dividends to shareholders (Note 4) (10,611,603) (3,089,577) (5,898,152)
Capital share transactions (Note 3) 13,667,322 111,673,726 (50,456,626)
------------ ------------ -----------------
Net increase (decrease) in net assets 13,527,868 111,678,918 (50,557,190)
Net Assets:
Beginning of period 390,375,439 278,696,521 329,253,711
------------ ------------ -----------------
End of period, including undistributed net investment income of
$134,573, $143,666 and $221,830 and accumulated capital losses
of $260,081, $129,720 and $213,076 respectively (Note 1g and
Note 4) $403,903,307 $390,375,439 $278,696,521
============ ============ =================
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Financial Highlights
Year Five Months
Ended Ended
April 30, April 30, Year Ended November 30,
--------------------------------------------------
1995 1994 1993 1992 1991 1990
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period $1.00 $ 1.00 $1.00 $1.00 $1.00 $1.00
Net investment income .03 .01 .02 .03 .04 .05
Dividends from net investment income (.03) (.01) (.02) (.03) (.04) (.05)
--------- ---------- -------- -------- -------- ---------
Net Asset Value, end of period $1.00 $ 1.00 $1.00 $1.00 $1.00 $1.00
========= ========== ======== ======== ======== =========
Total Return 3.20% 2.14%(1) 2.14% 2.74% 4.33% 5.55%
Ratios/Supplemental Data:
Net Assets, end of period (000) $403,903 $390,375 $278,697 $329,254 $377,154 $310,344
Ratio of expenses to average net assets
(before waiver) .56% .59%(1) .62% .61% .61% .63%
Ratio of expenses to average net assets
(after waiver) .31% .34%(1) .45% .53% .54% .56%
Ratio of net investment income, to average
net assets (before waiver) 2.90% 1.92%(1) 1.96% 2.67% 4.21% 5.36%
Ratio of net investment income, to average
net assets (after waiver) 3.15% 2.17%(1) 2.13% 2.75% 4.28% 5.43%
(1) On an annualized basis
</TABLE>
See Notes to Financial Statements. Tax-Exempt Fund
12
-------------------------------------------------------------------------------
Merrill Lynch Funds For Institutions Series
Notes to Financial Statements
===============================================================================
1. Significant Accounting Policies
Merrill Lynch Funds For Institutions Series (the 'Trust') was organized as a
Massachusetts business trust on May 7, 1987 and is registered under the
Investment Company Act of 1940 as a diversified, open-end management company.
On February 18, 1994 Merrill Lynch Institutional Tax-Exempt Fund was
reorganized as a separate series of the Trust. The Trust has a fiscal year
end of April 30. The following is a summary of significant accounting
policies consistently followed by the Trust. These policies are in conformity
with generally accepted accounting principles.
(a) The value of the Institutional, Government and Treasury Fund portfolio
securities is determined on the basis of fair value as determined in good
faith by the Trustees of the Trust. In determining fair value, securities for
which market quotations are readily available are valued at market value.
Merrill Lynch Security Pricing Service, an affiliate of Merrill Lynch & Co.,
Inc., provides security price quotations in connection with such valuation to
compute the net asset value of the Institutional, Government and Treasury
Funds. Other securities, if any, are valued at their fair value in the best
judgment of Fund Asset Management, L.P., ('FAM') under procedures established
by, and under the supervision of, the Trustees. Securities with remaining
maturities of 60 days or less are valued by use of the amortized cost method.
Institutional Tax- Exempt Fund investments are carried at amortized cost which
approximates market.
For the purpose of valuation, the maturity of a variable rate demand
instrument is deemed to be the next coupon date on which the interest rate is
to be adjusted. In the case of a floating rate instrument, the remaining
maturity is deemed to be the demand notice payment period.
(b) It is the Trust's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to its shareholders. Therefore, no
Federal Income tax provision is required.
(c) Realized gains and losses on investments are computed on the basis of
identified cost of the security sold.
(d) Security transactions are accounted for on the date the securities are
purchased or sold (the trade date). Interest Income (after adjustment for
amortization of premium or discount) is recorded as earned.
(e) Deferred organization expenses are amortized over a period not
exceeding five years. Prepaid registration fees are charged to income as the
related shares are sold.
(f) Repurchase agreements--The Institutional Fund and the Government Fund
invest in U.S. Government & Agency securities pursuant to repurchase
agreements with member banks of the Federal Reserve System or primary dealers
in U.S. Government securities. Under such agreements, the bank or primary
dealer agrees to repurchase the security at a mutually agreed upon time and
price. The Trust takes possession of the underlying securities, marks to
market such securities daily and, if necessary, receives additional
securities to ensure that the contract is adequately collateralized.
(g) Effective December 1, 1993, Merrill Lynch Institutional Tax-Exempt Fund
adopted Statement of Position ('SOP') 93-2 'Determination, Disclosure, and
Financial Statement Presentation of Income, Capital Gain, and Return of
Capital Distributions by Investment Companies.' Accordingly, the Fund changed
the classification of its net asset components as a result of permanent
differences arising from differing treatments of market discount for book and
tax purposes. During the year ended April 30, 1995, amounts have been
reclassified to reflect a decrease of $13,457 in both accumulated capital
losses and undistributed net investment income. This SOP had no effect on the
other series of the Trust.
2. Investment Advisory Fees and Other
Transactions with Affiliates
Fund Asset Management, L.P., a subsidiary of Merrill Lynch & Co., Inc.,
provides investment
Tax-Exempt Fund
13
-------------------------------------------------------------------------------
Merrill Lynch Funds For Institutions Series
Notes to Financial Statements--Continued
===============================================================================
advisory and corporate administrative services to the Trust for a fee,
subject to certain limitations, at the following annual rates:
Percentage of Average Daily Net Assets
-------------------------------------------
Institutional Fund .40% up to and including $250,000,000
plus .375% over $250,000,000 up to and
including $500,000,000
plus .35% over $500,000,000 up to and
including $750,000,000
plus .325% over $750,000,000
Government Fund
and Treasury Fund .35% up to and including $500,000,000
plus .335% over $500,000,000 up to and
including $750,000,000
plus .32% over $750,000,000 up to and
including $1,000,000,000
plus .30% over $1,000,000,000
Institutional
Tax-Exempt Fund .45% up to and including $1,500,000,000
plus .425% over $1,500,000,000 up to and
including $2,000,000,000
plus .40% over $2,000,000,000
FAM has agreed to waive a portion of its advisory fees. As of December 1,
1993 the effective fee payable to FAM will be at the annual rate of 0.20% of
each Fund's average daily net assets. FAM may discontinue waiver of the fee
in whole or in part at any time without notice.
For the year ended April 30, 1995 FAM waived a portion of its fees
amounting to $6,623,625 for the Institutional Fund, $1,831,019 for the
Government Fund, $473,563 for the Treasury Fund and $841,807 for the
Institutional Tax-Exempt Fund.
All officers and certain trustees of the Trust are affiliated with Merrill
Lynch & Co., Inc.
3. Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited number
of shares of beneficial interest in the Institutional Fund, Government Fund
and Treasury Fund ($.01 par value) and Institutional Tax-Exempt Fund ($.10
par value) of a single class. At April 30, 1995, capital paid-in aggregated
$6,579,987,346 for Institutional Fund, $1,601,046,564 for Government Fund,
$342,864,941 for Treasury Fund and $404,028,815 for Institutional Tax-Exempt
Fund. Transactions in shares at a constant net asset value of $1.00 per share
were as follows:
<TABLE>
<CAPTION>
Year Ended April 30,
----------------------------------
<S> <C> <C>
Institutional Fund 1995 1994
-------------- ----------------
Shares sold 63,113,089,823 57,789,577,790
Shares issued to shareholders
in reinvestment of dividends 198,199,152 112,959,517
-------------- --------------
Total 63,311,288,975 57,902,537,307
Shares redeemed 60,509,071,011 58,835,299,420
-------------- --------------
Net increase (decrease) 2,802,217,964 (932,762,113)
============== ==============
<CAPTION>
Year Ended April 30,
------------------------------------
Government Fund 1995 1994
--------------- -----------------
<S> <C> <C>
Shares sold 8,314,763,207 7,510,129,404
Shares issued to shareholders
in reinvestment of dividends 65,230,079 37,905,314
-------------- ---------------
Total 8,379,993,286 7,548,034,718
Shares redeemed 8,313,348,347 7,367,634,473
-------------- ---------------
Net increase (decrease) 66,644,939 180,400,245
============== ===============
<CAPTION>
Year Ended April 30,
------------------------------------
Treasury Fund 1995 1994
---------------- -----------------
<S> <C> <C>
Shares sold 2,288,760,430 1,476,065,082
Shares issued to shareholders
in reinvestment of dividends 14,088,128 8,566,715
-------------- ---------------
Total 2,302,848,558 1,484,631,797
Shares redeemed 2,226,955,175 1,576,895,366
-------------- ---------------
Net increase (decrease) 75,893,383 (92,263,569)
============== ===============
<CAPTION>
Year Five Months Year
Institutional Ended Ended Ended
Tax-Exempt Fund April 30, April 30, November 30,
--------------- --------------- -----------------
1995 1994 1993
--------------- --------------- -----------------
<S> <C> <C> <C>
Shares sold 2,737,285,871 1,450,485,801 3,279,737,452
Shares issued to
shareholders in
reinvestment
of dividends 9,666,260 2,708,949 5,105,388
-------------- -------------- ---------------
Total 2,746,952,131 1,453,194,750 3,284,842,840
Shares redeemed 2,733,284,809 1,341,521,024 3,335,299,466
-------------- -------------- ---------------
Net increase
(decrease) 13,667,322 111,673,726 (50,456,626)
============== ============= ===============
</TABLE>
Tax-Exempt Fund
14
-------------------------------------------------------------------------------
Merrill Lynch Funds For Institutions Series
Notes to Financial Statements--Continued
===============================================================================
4. Distributions
The Funds declare dividends daily, pay dividends monthly and automatically
reinvest such dividends in additional Fund shares at net asset value, unless
shareholders request payment in cash. Dividends for the Institutional,
Government and Treasury Funds are declared from the total of net investment
income, plus or minus realized gains or losses, if any, on investments.
Dividends for the Institutional Tax-Exempt Fund are declared from net
investment income excluding discounts earned other than original issue
discounts. Net realized capital gains, if any, are normally distributed
annually, after deducting prior years' loss carryovers. The Fund may
distribute capital gains more frequently than annually in order to maintain
the Fund's net asset value at $1.00 per share.
At April 30, 1995, the Institutional Tax-Exempt Fund had net capital loss
carryovers of $260,081 of which $78 expire in the year 2000, $102,443 expire
in 2001, $17,520 expire in 2002 and $140,040 expire in 2003.
5. Trustees' Fees
Each Trustee who is not affiliated with the Trust or its adviser is paid an
annual fee of $24,000 by the Trust. Trustees' fees are allocated among the
four series of the Trust based on the net assets under management.
-------------------------------------------------------------------------------
Trustees
===============================================================================
Robert W. Crook*
President & Trustee
David Almy
Trustee
President,
McCall & Almy, Inc.
A. Bruce Brackenridge
Trustee
Retired Group Executive,
J.P. Morgan & Co., Inc.
Charles C. Cabot, Jr.
Trustee
Partner, Sullivan & Worcester
Terry K. Glenn*
Trustee
Executive Vice President,
Merrill Lynch Asset Management
Todd Goodwin
Trustee
Partner, Gibbons, Goodwin, van
Amerongen
George W. Holbrook, Jr.
Trustee
Managing Partner,
Bradley Resources Company
* May be deemed to be an 'interested
person' of the Fund as such term is
defined in the Investment Company Act
of 1940.
Tax-Exempt Fund
15
<PAGE>
APPENDIX A
This Appendix constitutes part of the Statements of Additional Information
of Merrill Lynch Institutional Fund (the 'Institutional Fund'), Merrill Lynch
Government Fund (the 'Government Fund'), Merrill Lynch Treasury Fund (the
'Treasury Fund') and Merrill Lynch Institutional Tax-Exempt Fund (the
'Tax-Exempt Fund') (collectively, the 'Funds'). Each of the Funds is a separate
series of Merrill Lynch Funds For Institutions Series (the 'Trust'). Unless
otherwise indicated, the information set forth herein is applicable to each of
the Funds.
------------------------
MANAGEMENT OF THE TRUST
The Trustees and executive officers of the Trust and their ages and
principal occupations for at least the last five years are set forth below.
Robert W. Crook (59)--President and Trustee(1)(2)(3)--Senior Vice President
of Merrill Lynch Asset Management, L.P. ('MLAM') and of Merrill Lynch Funds
Distributor, Inc. ('MLFD') since 1990 and Vice President of MLAM and MLFD prior
thereto.
David Almy (54)--Trustee(2)--One Post Office Square, Boston, Massachusetts
02109. President of McCall & Almy, Inc. (real estate advisor) since 1990 and
President of Leggatt McCall/Grubb & Ellis, Inc. prior thereto.
A. Bruce Brackenridge (65)--Trustee(2)--9 Elm Lane, Bronxville, New York
10708. Group Executive of J.P. Morgan & Co., Inc., (banking) and Morgan Guaranty
Trust Company from 1979 to 1991 and an employee of J.P. Morgan in various
capacities from 1952 to 1991; Director of Parsons School of Design since 1988.
Charles C. Cabot, Jr. (65)--Trustee(2)--One Post Office Square, Boston,
Massachusetts 02109. Partner of the law firm Sullivan & Worcester and associated
with that firm since 1966.
Terry K. Glenn (54)--Trustee(1)(2)(4)--Executive Vice President of MLAM and
Fund Asset Management, L.P. ('FAM') since 1983; President and Director of MLFD
since 1986; President of Princeton Administrators, Inc. since 1988 and Director
of Financial Data Services, Inc. since 1985.
Todd Goodwin (64)--Trustee(1)(2)--600 Madison Avenue, New York, New York
10022. General Partner of Gibbons, Goodwin, van Amerongen (investment banking
firm) since 1984; Director of Ladish Co., Inc. (large metal forgings), Wells
Aluminum Co. (aluminum products manufacturer), Rival Manufacturing Co.
(electrical appliance manufacturer), Robert Half International (temporary and
permanent accounting personnel), Horace Mann Educators Corp. (insurance company)
and Schult Homes Inc. (producer and seller of manufactured homes).
George W. Holbrook, Jr. (64)--Trustee(2)--450 Post Road East, Westport,
Connecticut 06880. Managing Partner of Bradley Resources Company (private
investment company) and associated with that firm and its predecessors since
1953; Director of Canyon Resources Corporation (mineral exploration company).
William E. Aldrich (62)--Executive Vice President(2)--Vice President of
MLAM since 1993 and Senior Vice President of MLFD since 1990; Vice President of
MLFD prior thereto and a Vice President of FAM since 1981.
William M. Breen (40)--Senior Vice President, Chief Financial
Officer(2)(3)--Vice President of MLAM since 1993 and Vice President of MLFD
since 1990 and Assistant Vice President of MLFD prior thereto.
A-1
<PAGE>
Michael J. Brady (36)--Senior Vice President(2)(3)--Vice President of MLAM
since 1993 and Vice President of MLFD since 1990 and an employee of MLFD prior
thereto.
James J. Fatseas (39)--Senior Vice President(2)(3)--Vice President of MLAM
since 1993 and Vice President of MLFD since 1990 and Assistant Vice President of
MLFD prior thereto.
Stanley Graczyk (49)--Senior Vice President(2)(3)--Vice President of MLAM
since 1993 and Vice President of MLFD since 1990 and Assistant Vice President of
MLFD prior thereto.
Joseph T. Monagle, Jr. (47)--Senior Vice President(2)(4)--Senior Vice
President of MLAM and FAM since 1990 and Vice President of MLAM and FAM prior
thereto.
William Wasel (36)--Senior Vice President(2)(3)--Vice President of MLAM
since 1993 and Vice President of MLFD since 1990 and Assistant Vice President of
MLFD prior thereto.
Christopher G. Ayoub (40)--Vice President(2)(4)--Vice President of MLAM
since 1985; Assistant Vice President from 1984 to 1985 and an employee since
1982.
Karen D. Barbato (31)--Vice President(2)(3)--Employee of MLFD since 1982.
Donald C. Burke (35)--Vice President(2)(4)--P.O. Box 9011, Princeton, New
Jersey 08543-9011. Vice President of MLAM since 1990; employee of Deloitte &
Touche LLP from 1982 to 1990.
Ann Catlin (34)--Vice President(2)(3)--Employee of MLFD since 1986.
Charles O. Daly (60)--Vice President(2)(3)--Employee of MLFD since 1981.
Mara G. DiBiase (30)--Vice President and Treasurer(2)(3)--Employee of MLFD
since 1982.
Diana Frankland (60)--Vice President(2)(3)--Employee of MLFD since 1979.
Vincent R. Giordano (50)--Senior Vice President(2)(4)--Senior Vice
President of FAM and MLAM since 1984 and Vice President since 1980; Portfolio
Manager of FAM since 1977.
Peter Hayes (36)--Vice President(2)(4)--Vice President of MLAM since 1988;
Portfolio Manager of FAM since 1987; Vice President of Shawmut Bank, N.A. from
1984 to 1987.
Kevin Schiatta (40)--Vice President(2)(4)--Vice President of MLAM since
1985; Portfolio Manager of the Tax-Exempt Fund since 1994.
Gerald M. Richard (46)--Vice President(2)(4)--Senior Vice President and
Treasurer of MLAM and FAM since 1984; Vice President of MLFD since 1981;
Treasurer of MLFD since 1989 and Senior Vice President and Treasurer of
Princeton Administrators, Inc. since 1988.
Mark E. Maguire (35)--Vice President(2)(3)--Assistant Vice President of
MLFD since 1990 and an employee of MLFD since 1986.
John Ng (41)--Vice President(2)(4)--Vice President of MLAM since 1984;
Assistant Vice President of MLAM from 1981 to 1984.
Barry F.X. Smith (30)--Vice President(2)(3)--Employee of MLFD since 1987.
Dianne McDonough (34)--Vice President(2)(3)--Employee of MLFD since 1983.
Jerry Weiss (37)--Secretary(2)(4)--Vice President of MLAM since 1990 and an
attorney in private practice prior thereto.
(footnotes on next page)
A-2
<PAGE>
------------------
(1) Interested person, as defined in the Investment Company Act of 1940.
(2) The Officers of the Funds are officers of certain other investment companies
for which the Investment Adviser or MLAM acts as investment adviser.
(3) One Financial Center, 15th Floor, Boston, MA 02211-2646
(4) P.O. Box 9011, Princeton, NJ 08543-9011
The following table sets forth for the fiscal year ended April 30, 1995,
compensation paid by the Trust to non-interested Trustees and for the calendar
year ended December 31, 1994, the aggregate compensation paid by all investment
companies advised by the Investment Adviser and its affiliate, MLAM ('MLAM/FAM
Advised Funds'), to the non-interested Trustees.
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION FROM
TRUST AND
PENSION OR RETIREMENT FAM/MLAM ADVISED
COMPENSATION BENEFITS ACCRUED AS PART FUNDS PAID TO
NAME OF TRUSTEE FROM THE TRUST OF TRUST EXPENSE TRUSTEES(1)
------------------------------------------- -------------- ------------------------ ---------------------------
<S> <C> <C> <C>
David Almy................................. $ 24,000 None $30,000
A. Bruce Brackenridge...................... $ 24,000 None $30,000
Charles C. Cabot, Jr....................... $ 24,000 None $30,000
Todd Goodwin............................... $ 24,000 None $30,000
George W. Holbrook, Jr..................... $ 24,000 None $30,000
</TABLE>
------------------
(1) In addition to the Fund, the Trustees serve on the boards of other FAM/MLAM
advised funds as follows: Mr. Almy (1 Fund); Mr. Brackenridge (1 Fund); Mr.
Cabot (1 Fund); Mr. Goodwin (1 Fund); Mr. Holbrook (1 Fund).
The Trustees have an Audit and Nominating Committee, the members of which
are Messrs. Almy, Brackenridge, Cabot, Goodwin and Holbrook.
Each Trustee who is not an officer or employee of Merrill Lynch & Co., Inc.
or its subsidiaries will be paid $24,000 annually in his capacity as a trustee
of the Trust, and all Trustees will be reimbursed for any expenses incurred in
attending meetings of the Board of Trustees of the Trust or of any committee
thereof. No officer or employee of Merrill Lynch & Co., Inc. or its subsidiaries
will receive any compensation from any Fund for acting as a trustee or officer
of the Trust.
As a result of the responsibilities assumed by MLFD and FAM under the
Distribution Agreement and the Advisory Agreement, respectively (described below
and under 'Distributor' and 'Investment Advisory and Other Services'), the Funds
themselves have no employees other than their officers, all of whom will be
compensated by FAM or MLFD.
The officers and interested Trustees of the Trust owned on July 1, 1995 an
aggregate of less than 1% of the outstanding shares of any Fund. On that date
the officers and interested Trustees of the Trust owned an aggregate of less
than 1/4 of 1% of the outstanding Common Stock of Merrill Lynch & Co., Inc.
As of August 14, 1995, the following were the only shareholders of record
of 5% or more of the outstanding shares of any Fund.
A-3
<PAGE>
Treasury Fund
The Oxford Finance Companies, Inc.
Attention: Kirt Christensen EVP/CFO
7300 Old York Road
Melrose Park, PA 19027-3001
owns 30,300,000 shares or 6.3% of the Fund
Keravision, Inc.
48630 Milmont Drive
Fremont, CA 94538-7353
owns 45,198,000 shares or 9.4% of the Fund
Tax-Exempt Fund
Winn Dixie Stores, Inc.
Attention: Debbie Allen
Box: B
Jacksonville, FL 32203-0297
owns 20,000,000 shares or 5.2% of the Fund
INVESTMENT ADVISORY AND OTHER SERVICES
The investment adviser to each of the Funds is Fund Asset Management, L.P.,
a subsidiary of Merrill Lynch & Co., Inc., a publicly held corporation. The
principal business address of FAM is 800 Scudders Mill Road, Plainsboro, New
Jersey (mailing address: P.O. Box 9011, Princeton, New Jersey 08543-9011), and
the principal business address of Merrill Lynch & Co., Inc. is World Financial
Center, North Tower, 250 Vesey Street, New York, New York 10281.
Pursuant to the terms of a separate Investment Advisory Agreement for each
Fund, FAM, subject to the general supervision of the Board of Trustees of the
Trust and in conformance with the stated policies of the applicable Fund,
renders investment supervisory and corporate administrative services to the
Fund. In this regard, it is the responsibility of FAM to make investment
decisions for each Fund and to place the purchase and sale orders for the Funds'
portfolio transactions. In addition, FAM performs, or supervises the performance
of, administrative services in connection with each Fund, including (i)
supervising all aspects of the Fund's administration and operations, including
processing services related to the purchase and redemption of Fund shares, the
general handling of shareholder relations, and portfolio management; (ii)
providing the Fund, at FAM's expense, with the services of persons competent to
perform such administrative and clerical functions as are necessary in order to
provide effective administration of the Fund; and (iii) providing the Fund, at
FAM's expense, with adequate office space and related services. FAM may arrange
for the provision of these administrative services and functions by Merrill
Lynch Funds Distributor, Inc. or another affiliate of Merrill Lynch & Co., Inc.
Each Fund's accounting records are maintained, at the Fund's expense, by its
custodian, State Street Bank and Trust Company.
A-4
<PAGE>
As compensation for the services rendered by FAM under the Investment
Advisory Agreements, each Fund pays FAM a fee, computed daily and payable
monthly, at the following annual rates:
<TABLE>
<CAPTION>
PERCENTAGE OF AVERAGE DAILY NET ASSETS
--------------------------------------
<S> <C>
Institutional Fund.................... .40% up to and including $250,000,000
plus .375% over $250,000,000 up to and
including $500,000,000
plus .35% over $500,000,000 up to and
including $750,000,000
plus .325% over $750,000,000
Government Fund and Treasury Fund..... .35% up to and including $500,000,000
plus .335% over $500,000,000 up to and
including $750,000,000
plus .32% over $750,000,000 up to and
including $1,000,000,000
plus .30% over $1,000,000,000
Tax-Exempt Fund....................... .45% up to and including
$1,500,000,000
plus .425% over $1,500,000,000 up to
and including $2,000,000,000
plus .40% over $2,000,000,000
</TABLE>
Institutional Fund. FAM has agreed to waive a portion of its advisory fee
so that the effective fee payable to FAM will be at the annual rate of .20% of
the Fund's average daily net assets. FAM may discontinue waiver of the fee in
whole or in part at any time without notice. For the fiscal years ended April
30, 1995, 1994 and 1993, the total advisory fees payable by the Institutional
Fund to the Investment Adviser aggregated $16,621,425, $15,305,750 and
$12,027,700, respectively. The Investment Adviser voluntarily waived $6,623,625,
$6,118,228 and $4,331,199 of the advisory fee payable for the fiscal years ended
April 30, 1995, 1994 and 1993, respectively.
Government Fund. Effective December 1, 1993, FAM has agreed to waive a
portion of its advisory fee so that the effective fee payable to FAM will be at
an annual rate of .20% of the Fund's average net assets. FAM may discontinue
waiver of the fee in whole or in part at any time without notice. For the fiscal
years ended April 30, 1995, 1994 and 1993, the total advisory fees payable by
the Government Fund to the Investment Adviser aggregated $4,718,056, $4,567,099
and $4,459,589, respectively. The Investment Adviser voluntarily waived
$1,831,019 and $759,434 of the advisory fee payable for the fiscal years ended
April 30, 1995 and 1994, respectively.
Treasury Fund. Effective December 1, 1993, FAM has agreed to waive a
portion of its advisory fee so that the effective fee payable to FAM will be at
an annual rate of .20% of the Fund's average net assets. FAM may discontinue
waiver of the fee in whole or in part at any time without notice. For the fiscal
years ended April 30, 1995, 1994, and 1993, the total advisory fees payable by
the Treasury Fund to the Investment Adviser aggregated $1,104,980, $1,144,957
and $1,208,805, respectively. The Investment Adviser voluntarily waived $473,563
and $181,007 of the advisory fee payable for the fiscal years ended April 30,
1995 and 1994, respectively.
Tax-Exempt Fund. Effective December 1, 1993, FAM has agreed to waive a
portion of its advisory fee so that the effective fee payable to FAM will be at
an annual rate of .20% of the Fund's average net assets. FAM may discontinue
waiver of the fee in whole or in part at any time without notice. Previously
effective February 8,
A-5
<PAGE>
1993, FAM had voluntarily agreed to waive a portion of its advisory fee so that
the effective fee payable to FAM would be at an annual rate of .26% of the
Fund's average daily net assets. For the fiscal year ended April 30, 1995, the
five months ended April 30, 1994 and the fiscal year ended November 30, 1993,
the total advisory fees payable by the Tax-Exempt Fund to the Investment Adviser
aggregated $1,515,253, $645,595 and $1,247,564, respectively. The Investment
Adviser voluntarily waived $841,807, $358,664 and $460,377, respectively, of the
advisory fee payable for the fiscal year ended April 30, 1995, the five months
ended April 30, 1994 and the fiscal year ended November 30, 1993.
Each Investment Advisory Agreement obligates the Investment Adviser to
provide advisory, administrative and management services, to furnish office
space and facilities for management of the affairs of the applicable Fund, to
pay all compensation of, and furnish office space for, officers and employees of
the Fund, as well as the fees of all Trustees of the Fund who are affiliated
persons of Merrill Lynch & Co., Inc., or any of its subsidiaries. Each Fund pays
all other expenses incurred in its operation and a portion of the Trust's
general administrative expenses allocated on the basis of the asset size of the
respective Funds. Expenses that will be borne directly by each Fund include
trustees' fees, redemption expenses, expenses of portfolio transactions,
shareholder servicing costs, expenses of registering its shares under federal
and state securities laws, pricing costs (including the daily calculation of net
asset value), interest, certain taxes, charges of the custodian and transfer
agent and other expenses attributable to a particular Fund. Expenses which will
be allocated on the basis of size of the respective Funds include trustees'
fees, legal expenses, auditing services, costs of printing proxies, stock
certificates, shareholder reports and prospectuses and statements of additional
information (except to the extent paid by MLFD), Securities and Exchange
Commission fees, accounting costs and other expenses properly payable by the
Trust and allocable on the basis of size of the respective Funds. Depending upon
the nature of the lawsuit, litigation costs may be directly applicable to a Fund
or allocated on the basis of the size of the respective Funds. The Board of
Trustees of the Trust has determined that this is an appropriate method of
allocation of expenses.
As required by the Distribution Agreement, the Distributor will pay certain
of the expenses incurred in connection with the offering of shares of the Fund.
After the prospectuses and periodic reports have been prepared and set in type,
the Distributor will pay for the printing and distribution of copies thereof
used in connection with the offering to investors. The Distributor will also pay
for other supplementary sales literature.
Each Investment Advisory Agreement will terminate automatically upon its
assignment and is terminable at any time without penalty by the Board of
Trustees of the Trust or by a vote of a majority of the applicable Fund's
outstanding voting shares on 60 days' written notice to FAM, or by FAM on 90
days' written notice to the applicable Fund.
FAM, as Investment Adviser, has agreed that, in the event the operating
expenses of any Fund (including the fees payable to FAM but excluding taxes,
interest, brokerage and extraordinary expenses), for any fiscal year ending on a
date on which that Fund's Investment Advisory Agreement is in effect, exceed the
expense limitations applicable to the Fund imposed by state securities laws or
any published regulations thereunder, it will reduce its fees by the extent of
such excess and, if required pursuant to any such laws or regulations currently
in effect, will reimburse the Fund in the amount of such excess. Under the most
restrictive state regulations currently in effect, FAM would be required to
reimburse a Fund (up to the amount of the advisory fee received by it from that
Fund) to the extent that Fund's aggregate ordinary operating expenses (excluding
interest, taxes, brokerage fees and commissions and extraordinary charges such
as litigation costs) exceed in any fiscal year 2.5% of the Fund's first $30
million of average daily net assets, and 2.0% of the Fund's average daily net
assets in excess of $30 million but less than $100 million, and 1.5% of the
Fund's daily net assets in excess of $100 million for such year.
A-6
<PAGE>
The investment advisory services of FAM to the Funds are not exclusive
under the terms of the Investment Advisory Agreements and FAM is also free to,
and does, render such services to others. FAM and MLAM together act as the
manager or adviser for over 90 investment companies.
State Street Bank and Trust Company, P.O. Box 8500, Boston, Massachusetts
02266-8500, is each Fund's custodian, transfer agent and dividend disbursing
agent. It also maintains each Fund's accounting records.
Rogers & Wells, counsel to the Trust, passes upon legal matters for the
Funds in connection with the shares offered by the Prospectuses.
Deloitte & Touche LLP are the independent auditors of the Trust.
PORTFOLIO TRANSACTIONS
The securities in which the Funds invest are traded primarily in the
over-the-counter market. Where possible, the Funds will deal directly with the
dealers who make a market in the securities involved except in those
circumstances where better prices and execution are available elsewhere. Such
dealers usually are acting as principal for their own account. On occasion,
securities may be purchased directly from the issuer. The securities in which
the Funds invest are generally traded on a net basis and do not normally involve
either brokerage commissions or transfer taxes. The cost of executing the Funds'
portfolio transactions will consist primarily of dealer spreads and underwriting
commissions. Under the Investment Company Act of 1940, persons affiliated with
the Funds are prohibited from dealing with the Funds as a principal in the
purchase and sale of securities unless an exemptive order allowing such
transactions is obtained from the Securities and Exchange Commission. Since
over-the-counter transactions are usually principal transactions, affiliated
persons of the Funds, including Merrill Lynch Government Securities, Inc.
('GSI'), Merrill Lynch Money Markets Inc. ('MLMM') and Merrill Lynch, Pierce,
Fenner & Smith Incorporated ('Merrill Lynch'), may not serve as the Funds'
dealer in connection with such transactions except pursuant to an exemptive
order such as that described below. However, affiliated persons of the Funds may
serve as their broker in over-the-counter transactions conducted on an agency
basis. The Funds may purchase securities from an underwriting syndicate of which
Merrill Lynch is a member under certain conditions in accordance with the
provisions of a rule adopted under the Investment Company Act of 1940.
The Securities and Exchange Commission has issued an exemptive order which
permits the Institutional Fund, Government Fund and Treasury Fund to conduct
principal transactions with GSI and MLMM in United States Government and
Government agency securities, and certain other money market securities, subject
to a number of conditions, including conditions designed to insure that the
prices to these Funds available from GSI and MLMM are at least as favorable as
those available from other sources. GSI and MLMM have informed the Institutional
Fund, Government Fund and Treasury Fund that they will in no way, at any time,
attempt to influence or control the activities of these Funds or the Investment
Adviser in placing such principal transactions. The exemptive order allows GSI
and MLMM to receive a dealer spread on any transaction with the Institutional
Fund, Government Fund and Treasury Fund no greater than their customary dealer
spread for transactions of the type involved.
The Securities and Exchange Commission has issued an exemptive order
permitting the Tax-Exempt Fund to conduct principal transactions with Merrill
Lynch in municipal securities with remaining maturities of one year or less
which have received one of the two highest ratings from at least one of the
nationally recognized rating agencies, subject to a number of conditions,
including conditions designed to insure that the prices to the Tax-Exempt Fund
available from Merrill Lynch are equal to or better than that available from
other sources. Merrill
A-7
<PAGE>
Lynch has informed the Tax-Exempt Fund that it will in no way at any time
attempt to influence or control the activities of the Tax-Exempt Fund or the
Investment Adviser in placing such principal transactions. The exemptive order
allows Merrill Lynch to receive a dealer spread on any transaction with the
Tax-Exempt Fund no greater than their customary dealer spreads for transactions
of the type involved.
Institutional Fund. During the fiscal year ended April 30, 1995, the
Institutional Fund engaged in 216 such transactions involving approximately
$9.83 billion. During the fiscal year ended April 30, 1994, the Institutional
Fund engaged in 180 transactions involving approximately $7.54 billion.
Government Fund. During the fiscal year ended April 30, 1995, the
Government Fund engaged in 15 such transactions involving approximately $478.6
million. During the fiscal year ended April 30, 1994, the Government Fund
engaged in 47 such transactions involving approximately $121.55 million.
Treasury Fund. During the fiscal year ended April 30, 1995, the Treasury
Fund engaged in three such transactions involving approximately $50 million.
During the fiscal year ended April 30, 1994, the Treasury Fund engaged in 12
such transactions with GSI involving approximately $121.6 million.
Tax-Exempt Fund. During the fiscal year ended April 30, 1995, the
Tax-Exempt Fund engaged in seven principal transactions with Merrill Lynch,
involving approximately $38.3 million. During the period from December 1, 1993
to April 30, 1994, the Institutional Tax-Exempt Fund engaged in four principal
transactions with Merrill Lynch amounting to approximately $29.3 million.
The Funds have no obligation to deal with any dealer or group of dealers in
the execution of transactions in portfolio securities. Subject to policy
established by the Trustees and officers of the Trust, the Investment Adviser is
primarily responsible for each Fund's portfolio decisions and for placing each
Fund's portfolio transactions. In placing orders, it is the policy of the Funds
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,
the firm's risk in positioning the securities involved and the firm's provision
of supplemental investment research (such as economic data and market
forecasts). Information so received will be in addition to and not in lieu of
the services required to be performed by the Investment Adviser under its
Investment Advisory Agreements with the Funds, and the expenses of the
Investment Adviser will not necessarily be reduced as a result of the receipt of
such supplemental information. In some cases, the Investment Adviser may use
such supplemental research in providing investment advice to its other
investment advisory accounts. While the Investment Adviser generally seeks
reasonable competitive spreads or commissions, the Funds will not necessarily be
paying the lowest spread or commission available. The Funds' policy of investing
in securities with short maturities will result in high portfolio turnover.
NET ASSET VALUE
Each Fund's net asset value is determined by adding the value of all
securities and other assets in its portfolio, deducting the portfolio's
liabilities, dividing by the number of shares outstanding and rounding the
result to the nearest whole cent. Securities held by the Funds with a remaining
maturity of 60 days or less are valued on an amortized cost basis, and
securities with a remaining maturity of greater than 60 days are valued on a
current market basis.
In accordance with the Securities and Exchange Commission rule applicable
to the valuation of its portfolio securities and consistent with certain of the
Funds' operating policies, each Fund will maintain a dollar-weighted average
portfolio maturity of 90 days or less, purchase instruments having remaining
maturities of up to 762 days (25 months) in the case of U.S. government
securities and 397 days (13 months) in the case of all other securities
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(including Tax-Exempt Securities invested in by the Tax-Exempt Fund) and invest
only in securities determined
by the trustees to be of high quality with minimal credit risks. For purposes of
calculating the Tax-Exempt Fund's dollar-weighted average portfolio maturity,
the remaining maturity of a VRDN (including a Participating VRDN, is deemed to
be the longer of (i) the notice period required before the Tax-Exempt Fund is
entitled to receive payment of the principal amount of the VRDN upon demand, or
(ii) the period required until the VRDN's next interest rate adjustment. In
addition, the Trustees have established procedures designed to stabilize, to the
extent reasonably possible, each Fund'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 pursuant to the penny rounding method, in the
case of the Institutional Fund, Government Fund and Treasury Fund, or pursuant
to the amortized cost method, in the case of the Tax-Exempt Fund, will be
reported to the Trustees by FAM. 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 affected Fund will take such
corrective action as it regards as necessary and appropriate, including 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 by using available market quotations. In addition,
each of the Treasury Fund and the Tax-Exempt Fund may reduce the number of its
outstanding shares by having each shareholder proportionately contribute shares
to the Fund's capital. If the number of outstanding shares of the Treasury Fund
or the Tax-Exempt Fund is reduced in order to maintain a constant net asset
value of $1.00 per share, the shareholders will contribute proportionately to
the Fund's capital the number of shares which represent the difference between
valuation pursuant to the penny rounding method, in the case of the Treasury
Fund, or the amortized cost method, in the case of the Tax-Exempt Fund, and the
market valuation of the portfolio. Each shareholder will be deemed to have
agreed to such contribution by his investment in the Treasury Fund or the
Tax-Exempt Fund.
Since the net income of each 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 each 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 any Fund, representing the reinvestment of dividend
income, is reflected by an increase in the number of shares in his account and
any decrease in the value of a shareholder's investment is reflected by a
decrease in the number of shares in his account.
DIVIDENDS
All of each Fund's net income is declared as dividends daily. Dividends are
paid monthly and automatically reinvested in additional Fund shares at net asset
value and credited to the shareholder's account or, at the shareholder's option,
paid in cash.
Each Fund's net income for dividend purposes is determined daily. On days
on which the New York Stock Exchange is open for business, such determination
will be made immediately prior to the determination of net asset value as of the
close of business on the New York Stock Exchange. On days on which the New York
Stock Exchange is not open for business, such determination will be made as of
4:00 p.m. (Boston time). Immediately after such determination, each Fund will
declare a dividend payable to shareholders of record either: (a) at 12:00 Noon
(Boston time) for the Tax-Exempt Fund, 2:00 p.m. (Boston time) for the Treasury
Fund or 3:00 p.m. (Boston time) for the Government Fund and Institutional Fund,
on days on which the New York Stock Exchange is open for business or (b) at the
previous close of business on the New York Stock Exchange on days on which the
New York Stock Exchange is not open for business. Net income of the
Institutional Fund, Government Fund and Treasury Fund (from the time of the
immediately preceding determination thereof) will consist of (i) interest
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accrued or discount earned (including both original issue and market discount),
(ii) plus or minus all realized gains and losses, if any, on the portfolio
securities of the Fund, (iii) less the estimated expenses of the Fund (including
the fee payable to FAM applicable to that dividend period).
Net income of the Tax-Exempt Fund (from the time of the immediately
preceding determination thereof) consists of interest accrued and/or original
issue discount earned, less amortization of premiums and the estimated expenses
of the Tax-Exempt Fund (including the fees payable to FAM applicable to that
dividend period). The amount of discount or premium on portfolio securities is
fixed at the time of their purchase and consists of the difference between the
purchase price for such securities and the principal amount of such securities.
Realized gains and losses are reflected in the Tax-Exempt Fund's net asset value
and are not included in income.
Each Fund intends to use its best efforts to maintain its net asset value
at $1.00 per share. As a result of a significant expense or realized or
unrealized loss, it is possible that a Fund's net asset value may fall below
$1.00 per share.
Should any Fund incur or anticipate any unusual or unexpected significant
expense or loss which would affect disportionately that Fund's income for a
particular period, the Trustees would at that time consider whether to adhere to
the present dividend policy described or to revise it in the light of the then
prevailing circumstances in order to ameliorate to the extent possible the
disproportionate effect of such expense or loss on then existing shareholders.
Such expenses or losses may nevertheless result in a shareholder's receiving no
dividends for the period during which he held his shares and in his receiving
upon redemption a price per share lower than that which he paid.
Shareholders may receive their dividends in cash monthly by completing the
appropriate section of the Account Application contained in the Prospectus for
the applicable Fund. Such distributions will be paid by check within seven days
after the end of each month. The election to receive cash distributions may be
made at the time of purchase of Fund shares or at any time subsequent thereto by
giving written notice to State Street Bank. To be effective with respect to a
particular monthly dividend, such written notice must be received by State
Street Bank at least seven days prior to the end of the month. Dividends and
distributions are taxable to shareholders whether distributed in cash or
reinvested in additional shares. See 'Taxes.'
State Street Bank, the transfer agent, will send each shareholder a monthly
statement showing the total number of shares owned as of the last business day
of the month, as well as the current month's and year to date dividends paid in
terms of total cash distributed and, for those shareholders who have dividends
reinvested, the number of shares acquired through the reinvestment dividends.
TAXES
FEDERAL
General. In order to qualify for tax treatment as a regulated investment
company under the Internal Revenue Code of 1986, as amended (the 'Code'), each
Fund is required, among other things, to derive less than 30% of its gross
income from the sale or other disposition of stock, securities and certain
options, futures and forward contracts held for less than three months. If in
any taxable year a Fund does not qualify as a regulated investment company, all
of its taxable income will be taxed to that Fund at corporate rates.
Some shareholders may be subject to a 31% withholding on reportable
dividends, capital gains distributions and redemption payments ('backup
withholding'). Generally, non-corporate shareholders for whom a taxpayer
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identification number is not on file with the applicable Fund or who, to the
Fund's knowledge, have furnished an incorrect number will be subject to backup
withholding. When establishing an account, an investor must certify under
penalties of perjury that such number is correct and that he is not subject to
backup withholding.
The Code imposes a 4% nondeductible excise tax on a regulated investment
company, such as a Fund, if it does not distribute to its shareholders during
the calendar year an amount equal to at least 98% of the Fund's net investment
income, with certain adjustments, for such calendar year, plus at least 98% of
the Fund's capital gain net income for the one-year period ending, as a general
rule, by October 31 of such calendar year. For this purpose, any income or gain
retained by a Fund that is subject to corporate income tax will be treated as
having been distributed at year-end. In addition, an amount equal to any
undistributed net investment income or capital gain net income from the previous
calendar year must also be distributed to avoid the excise tax. The excise tax
is imposed on the amount by which a Fund does not meet the foregoing
distribution requirements. While each Fund intends to make distributions in the
manner necessary to avoid imposition of the 4% excise tax, there can be no
assurance that sufficient amounts of taxable income and gain will be distributed
to avoid imposition of the tax. The excise tax will not generally apply to the
tax-exempt income of a regulated investment company such as the Tax-Exempt Fund
that pays exempt interest dividends.
Any dividend declared by any Fund in October, November or December of any
year and made payable to shareholders of record on a specified date in that
month will be deemed to be received by such shareholders on December 31 of such
year and to be paid by a Fund not later than December 31 of that year if
actually paid during the following January. Accordingly, these dividends will be
taxable to shareholders in the year declared and not in the year in which
shareholders actually receive the dividend.
Institutional Fund, Government Fund and Treasury Fund. Dividends will be
taxable to shareholders of the Institutional Fund, Government Fund and Treasury
Fund as ordinary income, except for (a) such portion as may exceed a
shareholder's ratable share of the applicable Fund's earnings and profits as
determined for tax purposes (which may differ from net income for book
purposes), which excess will be applied against and reduce the shareholder's
cost or other tax basis for his shares and (b) amounts representing
distributions of realized net long-term capital gains, if any. If the amount
described in (a) above were to exceed the shareholder's cost or other tax basis
for his shares, the excess over such basis would be treated as gain from the
sale or exchange of such shares. Dividends and distributions are taxable as
described herein, whether received in cash or reinvested in additional shares of
the applicable Fund.
Tax-Exempt Fund. The Tax-Exempt Fund has elected to qualify to pay 'exempt
interest' dividends as defined in Section 852(b)(5) of the Code. Under that
section if, at the close of each quarter of its taxable year, at least 50% of
the value of its total assets consists of obligations exempt from Federal income
tax ('tax-exempt obligations'), pursuant to Section 103(a) of the Code (relating
to obligations of a state, territory, or a possession of the United States, or
any political subdivision of any of the foregoing, or of the District of
Columbia), the Tax-Exempt Fund will be qualified to pay exempt interest
dividends to its shareholders. Exempt interest dividends are dividends or any
part thereof (other than any short- or long-term capital gain distributions)
paid by the Tax-Exempt Fund which are attributable to interest on tax-exempt
obligations and designated by the Fund as exempt interest dividends in a written
notice mailed to the Fund's shareholders within 60 days after the close of its
taxable year. The percentage of the total dividends paid by the Tax-Exempt Fund
during any taxable year which qualifies as exempt interest dividends will be the
same for all shareholders receiving dividends during that year. Exempt interest
dividends may be treated by shareholders for all purposes as items of interest
excludable from their gross income under Section 103(a) of the Code. However, a
shareholder is advised to consult his tax adviser with respect to whether exempt
interest dividends retain the exclusion under Section 103(a) if such shareholder
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would be treated as a 'substantial user' under Section 147(a)(1) with respect to
some or all of the tax-exempt obligations held by the Tax-Exempt Fund.
Distributions by the Tax-Exempt Fund of both net realized short-term
capital gains (whether from tax-exempt or taxable obligations) and net realized
long-term capital gains are taxable to shareholders as ordinary income. To the
extent the Tax-Exempt Fund has taxable income, expenses of the Fund will be
allocated between the taxable income and the tax-exempt income on a proportional
basis. Since the Tax-Exempt Fund will not invest in the stock of domestic
corporations, shareholders of the Tax-Exempt Fund will not be entitled to the
dividends-received deduction for corporations. The Code provides that interest
on indebtedness incurred or continued to purchase or carry shares of the
Tax-Exempt Fund is not deductible to the extent attributable to exempt interest
dividends.
Not later than 60 days after the end of each fiscal year of the Tax-Exempt
Fund, the Fund will send to its shareholders the written notice required by the
Code designating the amount of its dividends that constitutes exempt interest
dividends, the amount of the dividends and distributions which is ordinary
taxable income and the amount of distributions which is taxable to shareholders
as long-term capital gain.
The Revenue Act of 1987 (the 'Act') requires that every person required to
file a tax return must disclose on that return the amount of exempt-interest
dividends received from the Tax-Exempt Fund during the taxable year. The
disclosure of this amount is for informational purposes only. In addition, with
respect to a shareholder who receives exempt-interest dividends on shares held
for less than six months, any loss on the sale or exchange of such shares will,
to the extent of the amount of such exempt-interest dividends, be disallowed.
The Act also provides that interest income with respect to certain
tax-exempt bonds, known as private activity bonds, is a preference item for
purposes of the corporate and individual alternative minimum tax. To the extent
that the Tax-Exempt Fund invests in private activity bonds, shareholders of the
Fund will have preference items attributable to their proportionate shares of
the interest income received by the Fund from such bonds. Interest income from
tax-exempt bonds held by the Fund would increase the alternative minimum taxable
income of corporate shareholders for purposes of this computation.
MASSACHUSETTS INCOME TAX
Under present Massachusetts law, a Fund will not be subject to any
Massachusetts income taxation during any fiscal year in which such Fund
qualifies as a Massachusetts business trust. A Fund might be subject to
Massachusetts income taxes for any taxable year in which it did not so qualify.
OTHER TAXES
In those states and localities which have income tax laws, the treatment of
shareholders of the Funds under such laws may differ from their treatment under
the Federal income tax laws. Under state or local law, distributions of net
investment income may be taxable to shareholders as dividend income even though
a portion of such distributions may be derived from interest on U.S. Government
obligations which, if realized directly, would be exempt from such income taxes.
Shareholders are advised to consult their tax advisers concerning the
application of state and local taxes.
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DISTRIBUTOR
The Trust has entered into a Distribution Agreement with respect to each
Fund (the 'Distribution Agreements') with Merrill Lynch Funds Distributor, Inc.,
an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. Pursuant to the
terms of each Distribution Agreement, MLFD serves as the principal underwriter
and distributor of the applicable Fund's shares, and in that capacity makes a
continuous offering of that Fund's shares and bears the costs and expenses of
printing and distributing any copies of any prospectuses and annual and interim
reports of the Fund (after such items have been prepared and set in type) which
are used in connection with the offering of shares to selected dealers or
investors, and the costs and expenses of preparing, printing and distributing
any other literature used by MLFD or furnished by it for use by selected dealers
in connection with the offering of the shares for sale to the public. There will
be no fee payable by any Fund pursuant to the Distribution Agreements. There is
no sales or redemption charge. The continuance of the Distribution Agreements
must be approved in the same manner as the Investment Advisory Agreements, and
each Distribution Agreement will terminate automatically if assigned by either
party thereto and is terminable at any time without penalty by the Board of
Trustees of the Trust or by vote of a majority of the applicable Fund's
outstanding shares on 60 days' written notice to MLFD and by MLFD on 90 days'
written notice to the Trust.
The Trust has adopted a Distribution and Shareholder Servicing Plan (the
'Plans') with respect to each Fund pursuant to Rule 12b-1 under the Investment
Company Act of 1940, pursuant to which FAM is permitted to use a portion of the
advisory fee compensation it receives from a Fund to promote the distribution of
that Fund's shares and to enhance the provision of shareholder services. Each
Plan was approved by a majority of (i) the Trustees of the Trust, and (ii) the
Trustees of the Trust who are not interested persons of the Trust, and who have
no direct or indirect financial interest in the operation of the Plan or in any
agreement related to the Plan (the 'Rule 12b-1 Trustees'), a majority of whom
cast their votes in person at a meeting called for the purpose of voting on the
Plan. Each Plan permits FAM to pay a fee to MLFD. The amount of the fees paid to
MLFD is determined by FAM in its sole discretion. Payments under a Fund's Plan
are not made directly by the Fund. From amounts received by it under each Plan,
MLFD is authorized to make payments to securities dealers with which MLFD has
entered into selected dealer agreements. No Fund is required or permitted under
its Plan to make payments over and above the amount of the investment advisory
fee to promote the sale of its shares; its Plan merely permits the reallocation
of a portion of the advisory fee FAM receives from that Fund to pay for
distribution-related activities. Since payments to securities dealers under the
Plans must come from FAM's investment advisory fee or its past profits, no Fund
will experience any adverse impact on its yield because of its Plan.
MLFD may also use a portion of the fee it receives under a Plan to
compensate administrators who perform administrative services that otherwise
would be performed by FAM or its agent. These services may include providing
office space, equipment, telephone facilities and various support personnel as
may be required on an ongoing basis, maintaining shareholders' accounts and
records, processing purchase and redemption transactions and furnishing other
services to the applicable Fund as the Fund may reasonably request. FAM also
intends to reimburse MLFD for payments it makes to institutions which enter into
servicing arrangements with MLFD in accordance with the terms of the Plans.
Rule 12b-1 requires each Fund to preserve copies of any plan, agreement or
report made under the Rule for a period of not less than six years from the date
of the plan, agreement or report, the first two of which must be maintained in
an easily accessible place. The Rule also provides that the minutes of the
meeting of the Trust's board at which a decision is made to use a Fund's assets
for distribution must describe the factors considered and the basis for the
decision and that such minutes must be preserved for a period of at least six
years from the date of such report.
Each Plan will continue from year to year, provided that each such
continuance is approved at least annually by a vote of the Trustees, including a
majority vote of the Rule 12b-1 Trustees, cast in person at a meeting called
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for the purpose of voting on such continuance. The Trustees of the Trust,
including Rule 12b-1 Trustees, last approved each Plan at a meeting held on June
12, 1995. Each Fund's Plan may be terminated at any time, without penalty, by
the vote of a majority of the Rule 12b-1 Trustees or by the vote of the holders
of a majority of the outstanding shares of that Fund. No Plan may be amended
materially without the approval of the Trustees, including a majority of the
Rule 12b-1 Trustees, cast in person at a meeting called for that purpose. Any
modification to a Plan which would materially increase the amount of money to be
spent must be submitted to the applicable Fund's shareholders for approval. A
Shareholder Servicing Agreement between MLFD and an administrator will terminate
automatically in the event of its assignment.
Each Plan requires MLFD to provide and the trustees to review, at least
quarterly, a written report complying with the requirements of Rule 12b-1
regarding the disbursement of the payments made under the Plan. The report must
include an itemization of the expenditures made by MLFD on behalf of the
applicable Fund, the purpose of such expenditures and a description of the
benefits derived by that Fund. Each Plan further provides that, so long as the
Plan remains in effect, the selection and nomination of trustees who are not
'interested persons' of the applicable Fund, as defined in the Investment
Company Act of 1940, must be committed to the discretion of the disinterested
trustees.
YIELD INFORMATION
Each Fund normally computes its annualized yield by determining the net
change for a seven-day base period, exclusive of capital changes, in the value
of a hypothetical pre-existing account having a balance of one share at the
beginning of the period, dividing the net change in account value by the value
of the account at the beginning of the base period to obtain the base period
return, and multiplying the base period return by 365 and then dividing by seven
with the resulting yield figure carried to at least the nearest hundredth of one
percent. Under this calculation, the yield does not reflect realized and
unrealized gains and losses on portfolio securities. The Securities and Exchange
Commission also permits the calculation of a standardized effective or
compounded yield. This is computed by compounding the unannualized base period
return which is done by adding one to the base period return, raising the sum to
a power equal to 365 divided by seven and subtracting one from the result. This
compounded yield calculation also excludes realized or unrealized gains or
losses on portfolio securities.
The yield on shares of each Fund normally will fluctuate on a daily basis.
Therefore, the yield for any given past period is not an indication or
representation by the applicable Fund of future yields or rates of return on its
shares. The yield is affected by changes in interest rates on short-term
securities, average portfolio maturity, the types and quality of portfolio
securities held, and operating expenses.
GENERAL INFORMATION
The Prospectuses and the Statements of Additional Information do not
contain all the information set forth in the Registration Statements and the
exhibits relating thereto, which the Trust has filed with the Securities and
Exchange Commission, Washington, D.C., under the Securities Act of 1933 and the
Investment Company Act of 1940, to which reference is hereby made.
The Declaration of Trust establishing the Trust, copies of which, together
with all amendments thereto (the 'Declarations'), are on file in the office of
the Secretary of the Commonwealth of Massachusetts, provides that the name
'Merrill Lynch Funds For Institutions Series' refers to the Trustees under the
Declaration collectively as Trustees, but not as individuals or personally; and
no Trustee, shareholder, officer, employee or agent of the Trust may be held to
any personal liability, nor may resort be had to their private property for the
satisfaction of any obligation or claim or otherwise in connection with the
affairs of the Trust but only property of the Trust shall be liable.
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APPENDIX B
INFORMATION CONCERNING TAX-EXEMPT SECURITIES
DESCRIPTION OF TAX-EXEMPT SECURITIES
Tax-Exempt Securities include debt obligations issued to obtain funds for
various public purposes, including construction of a wide range of public
facilities, refunding of outstanding obligations and obtaining funds for general
operating expenses and loans to other public institutions and facilities. In
addition, certain types of industrial development bonds are issued by or on
behalf of public authorities to finance various facilities operated for private
profit, including pollution control facilities. Such obligations are included
within the term Tax-Exempt Securities if the interest paid thereon is exempt
from Federal income tax. Tax-Exempt Securities also include short-term
tax-exempt municipal obligations such as tax anticipation notes, bond
anticipation notes and revenue anticipation notes, which are sold as interim
financing in anticipation of tax collections, bond sales and revenue receipts,
respectively. The Fund may also invest in short-term tax-exempt commercial paper
obligations, which are short-term unsecured promissory notes issued to finance
short-term credit needs, and floating rate tax-exempt demand notes on which the
Fund may demand payment from the issuer at par value plus accrued interest on
short notice (typically three to seven days). In addition, the Fund may invest
in variable rate demand notes and participations therein (see 'Variable Rate
Demand Notes' below).
The two principal classifications of Tax-Exempt Securities are 'general
obligation' and 'revenue' or 'special obligation' bonds. General obligation
bonds are secured by the issuer's pledge of its faith, credit and taxing power
for the payment of principal and interest. Revenue or special obligation bonds
are payable only from the revenues derived from a particular facility or class
of facilities or, in some cases, from the proceeds of a special excise tax or
other specific revenue source such as from the user of the facility being
financed. Industrial development bonds are in most cases revenue bonds and do
not generally constitute the pledge of the credit or taxing power of the issuer
of such bonds. The payment of the principal and interest on such industrial
revenue bonds depends solely on the ability of the user of the property financed
by the bonds to meet its financial obligations and the pledge, if any, of real
and personal property so financed as security for such payment. The portfolio
may also include 'moral obligation' bonds which are normally issued by special
purpose public authorities. If an issuer of moral obligation bonds is unable to
meet its debt service obligations from current revenues, it may draw on a
reserve fund, the restoration of which is a moral commitment but not a legal
obligation of the state or municipality which created the issuer.
Yields on Tax-Exempt Securities are dependent on a variety of factors,
including the general condition of the money market and of the municipal bond
market, the size of a particular offering, the maturity of the obligation, and
the rating of the issue. The ability of the Fund to achieve its investment
objective is also dependent on the continuing ability of the issuers of the
Tax-Exempt Securities in which the Fund invests to meet their obligations for
the payment of interest and principal when due. There are variations in the
risks involved in the holding Tax-Exempt Securities, both within a particular
classification and between classifications, depending on numerous factors.
Furthermore, the rights of holders of Tax-Exempt Securities and the obligations
of the issuers of Tax-Exempt Securities may be subject to applicable bankruptcy,
insolvency and similar laws and court decisions affecting the rights of
creditors generally, and such laws, if any, which may be enacted by Congress or
state legislatures affecting specifically the rights of holders of Tax-Exempt
Securities.
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the Federal income tax exemption for
interest on Tax-Exempt Securities. Similar proposals may be introduced in the
future. If such a proposals were enacted, the ability of the Fund to pay
'exempt-interest'
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dividends would be adversely affected and the Fund would reevaluate its
investment objective and policies and consider changes in its structure. See
'Taxes' in the Prospectus and Statement of Additional Information.
VARIABLE RATE DEMAND NOTES
Variable rate demand notes ('VRDNs') are tax-exempt obligations upon which
interest is payable at a floating or variable rate and upon which payment of the
unpaid principal balance plus accrued interest may be demanded at any time upon
a short notice period. The interest rate on a VRDN is adjusted at periodic
intervals pursuant to an adjustment formula which is based on some prevailing
market rate for similar investments and which is designed to maintain the market
value of the VRDN on each adjustment date at approximately the par value of the
VRDN. The adjustments are frequently based upon the prime rate of a bank or some
other appropriate interest rate adjustment index. The right of demand may be
either against the issuer or a third party (typically a bank pursuant to an
irrevocable letter of credit or guaranty arrangement).
The Fund may also invest in VRDNs in the form of participation interests
('Participating VRDNs') in variable rate tax-exempt obligations held by a
financial institution, typically a commercial bank ('institutions').
Participating VRDNs provide the Fund with a specified undivided interest (up to
100%) of the underlying obligations and the right to demand payment of the
unpaid principal balance plus accrued interest on the Participating VRDNs from
the institution upon a specified number of days' notice, presently not to exceed
seven days. In addition, the Participating VRDN is backed by an irrevocable
letter of credit or similar commitment of the institution. The Fund has an
undivided interest in the underlying obligation and thus participates on the
same basis as the institution in such obligation except that the institution
typically retains fees out of the interest paid on the obligation for servicing
the obligation, providing the letter of credit and issuing the repurchase
commitment.
The Fund has been advised by its counsel to the effect that the interest
received on Participating VRDNs will be treated as interest from tax-exempt
obligations as long as the Fund does not invest more than a limited amount (not
more than 20%) of its total assets in such investments and certain other
conditions are met. The Fund will not make any such investments until its
trustees have authorized such investments. It is contemplated that if the
trustees authorize such investments, the Fund will not invest more than a
limited amount of its total assets in Participating VRDNs.
PURCHASE OF SECURITIES WITH RIGHTS TO PUT THE SECURITIES TO THE SELLER
As described under 'Investment Objectives and Policies' in the Statement of
Additional Information, the Fund reserves the right to engage in put
transactions, but it will not be permitted to engage in such transactions until,
among other things, it receives an exemptive order from the Securities and
Exchange Commission permitting the acquisition of puts. Set forth below is a
description of certain characteristics of the put transactions the Fund might
enter into if it were permitted to engage in such transactions.
The right to put the securities to the seller depends on the seller's
ability to pay for the securities at the time the put is exercised. The Fund
would limit its put transactions to institutions which the Investment Adviser
believes present minimum credit risk, and the Fund would use its best efforts to
determine initially and to continue to monitor the financial strength of the
sellers because adequate current financial information may not be available. In
the event that any seller is unable to honor a put for financial reasons, the
Fund would be a general creditor (i.e., on a parity with all other unsecured
creditors) of the seller. Furthermore, particular provisions of the contract
between the Fund and the seller may excuse the seller from repurchasing the
securities; for example, a change in the published rating of the underlying
municipal securities or any similar event that has
B-2
<PAGE>
an adverse effect on the issuer's credit or a provision in the contract that the
put will not be exercised except in certain special cases, for example, to
maintain portfolio liquidity. The Fund could, however, at any time sell the
underlying portfolio security in the open market or wait until the portfolio
security matures, at which time it should realize the full par value of the
security. If the Fund were to engage in such transactions at this time, it would
engage in such transactions with banks and, to the extent permitted by
applicable law, with broker-dealers.
It should be noted that the market for put options in tax-exempt securities
is a new and developing one, so that there can be no representation about the
future state of the market, i.e., the number of banks or dealers that might be
willing to sell securities to the Fund with a right for the Fund to put the
securities back to the seller, the spread between the price of the security if
sold without the right to put and with the right to put, the valuation of
securities subject to such puts and the value to be ascribed to the put itself,
if any, and whether and on what terms the Fund can renew any put options. The
municipal securities purchased which are subject to such a put may be sold to
third persons at any time, even though the put is outstanding, but the put
itself will generally not be marketable or otherwise assignable. Therefore, the
put would have value only to the Fund. Sale of the securities to third parties
or lapse of time with the put unexercised will terminate the right to put the
securities to the seller. Prior to the expiration of any put option, the Fund
could seek to negotiate terms for the extension of such an option. If such a
renewal cannot be negotiated on terms satisfactory to the Fund, the Fund could
sell the portfolio security. The maturity of the underlying security will
generally be different from that of the put. There will be no limit on the
percentage of portfolio securities that the Fund may purchase subject to a put
for its portfolio. The Fund has not determined the circumstances under which it
will enter into put transactions or what will be deemed to be the maturity of
securities subject to puts for purposes of calculating the weighted average
maturity of its portfolio.
B-3
<PAGE>
===========================================================================
ADMINISTRATOR & DISTRIBUTOR
Merrill Lynch Funds Distributor, Inc.
One Financial Center
Boston, Massachusetts 02111-2646
INVESTMENT ADVISER
Fund Asset Management, L.P.
P.O. Box 9011
Princeton, New Jersey 08543-9011
CUSTODIAN & TRANSFER AGENT
State Street Bank and Trust Company
P.O. Box 8500
Boston, Massachusetts 02266-8500
LEGAL COUNSEL
Rogers & Wells
200 Park Avenue
New York, New York 10166
AUDITORS
Deloitte & Touche LLP
125 Summer Street
Boston, Massachusetts 02110-1617
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THESE PROSPECTUSES AND IN THE
STATEMENTS OF ADDITIONAL INFORMATION, IN CONNECTION WITH THE OFFER MADE BY THESE
PROSPECTUSES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY ANY FUND OR ITS
DISTRIBUTOR. THESE PROSPECTUSES DO NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY BY ANY FUND OR BY THE DISTRIBUTOR IN ANY STATE
IN WHICH SUCH OFFER TO SELL OR SOLICITATION OF ANY OFFER TO BUY MAY NOT LAWFULLY
BE MADE.
MERRILL LYNCH INSTITUTIONAL FUND
MERRILL LYNCH GOVERNMENT FUND
MERRILL LYNCH TREASURY FUND
MERRILL LYNCH INSTITUTIONAL TAX-EXEMPT FUND
===========================================================================
PROSPECTUSES
MERRILL LYNCH
FUNDS FOR INSTITUTIONS SERIES
------------------------------------------------------
MERRILL LYNCH INSTITUTIONAL FUND
MERRILL LYNCH GOVERNMENT FUND
MERRILL LYNCH TREASURY FUND
MERRILL LYNCH INSTITUTIONAL
TAX-EXEMPT FUND
Merrill Lynch Institutional Fund, Merrill Lynch Government Fund, Merrill Lynch
Treasury Fund and Merrill Lynch Institutional Tax-Exempt Fund are separate
series of Merrill Lynch Funds For Institutions Series, which is organized as a
Massachusetts business trust. None of the Funds is a bank, nor does it offer
fiduciary or trust services. Shares of the Funds are not equivalent to a bank
account. While the Funds attempt to maintain a stable net asset value of $1.00
per share, there can be no assurance that they will be able to do so. The
shares of the Funds are neither insured nor guaranteed by any government
agency and are not subject to the protection of the Securities Investor
Protection Corporation.
August 25, 1995
Distributor
Merrill Lynch
Funds Distributor, Inc.
These Prospectuses should be retained
for future reference.
===========================================================================
<PAGE>
MERRILL LYNCH FUNDS FOR INSTITUTIONS SERIES
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
Contained in Part A: Financial Highlights:
-- Institutional Fund-for the ten years ended April 30, 1995
-- Government Fund-for the ten years ended April 30, 1995
-- Treasury Fund-for the period December 18, 1989 (commencement of
operations) through April 30, 1995
-- Tax-Exempt Fund-for the ten years ended April 30, 1995
Contained in Part B:
-- Schedules of Investments for Institutional Fund, Government Fund,
Treasury Fund and Tax-Exempt Fund as of April 30, 1995
-- Statements of Assets and Liabilities for Institutional Fund,
Government Fund, Treasury Fund and Tax-Exempt Fund as of April 30, 1995
-- Statements of Operations for Institutional Fund, Government Fund,
Treasury Fund and Tax-Exempt Fund, for the year ended April 30, 1995
-- Statements of Changes in Net Assets for Institutional Fund,
Government Fund and Treasury Fund, for the two years ended April 30, 1995
-- Statement of Changes in Net Assets for Tax-Exempt Fund, for the
year ended November 30, 1993, the five months ended April 30, 1994 and the
year ended April 30, 1995
-- Financial Highlights for Institutional Fund, Government Fund,
Treasury Fund and Tax-Exempt Fund, for each of the periods in the five year
periods ended April 30, 1995
-- Notes to Financial Statements
(b) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------------------------
<S> <C>
1 (a) -- Declaration of Trust, as amended, with Form of Amendment
dated December 11, 1989 (incorporated by reference to
Exhibit 1 to Registrant's Registration Statement on Form
N-1A (File No. 33-14190))
1 (b) -- Establishment and Designation of Merrill Lynch Institutional
Fund and Merrill Lynch Government Fund as separate series of
Merrill Lynch Funds For Institutions Series, dated June 18,
1990 (incorporated by reference to Exhibit 1(b) to
Post-Effective Amendment No. 6 to Registrant's Registration
Statement to Form N-1A (File No. 33-14190))
1 (c) -- Establishment and Designation of Merrill Lynch Institutional
Tax-Exempt Fund as a separate series of Merrill Lynch Funds
for Institutions Series, dated February 16, 1994
(incorporated by reference to Exhibit 1(c) to Post-Effective
Amendment No. 10 of Registrant's Registration Statement on
Form N-14 (File No. 33-14190))
2 -- By-Laws of Registrant (incorporated by reference to Exhibit
2 to Registrant's Registration Statement on Form N-1A (File
No. 33-14190))
3 -- None
4 -- Form of Share Certificate (incorporated by reference to
Exhibit 4 to Post-Effective Amendment No. 3 to Registrant's
Registration Statement to Form N-1A (File No. 33-14190))
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------------------------
<S> <C>
5(a) -- Form of Investment Advisory Agreement for Merrill Lynch
Treasury Fund (incorporated by reference to Exhibit 5 to
Registrant's Registration Statement on Form N-1A (File No.
33-14190))
5(b) -- Investment Advisory Agreement for Merrill Lynch
Institutional Fund (incorporated by reference to Exhibit
5(b) to Post-Effective Amendment No. 5 to Registrant's
Registration Statement on Form N-1A (File No. 33-14190))
5(c) -- Investment Advisory Agreement for Merrill Lynch Government
Fund (incorporated by reference to Exhibit 5(c) to
Post-Effective Amendment No. 5 to Registrant's Registration
Statement on Form N-1A (File No. 33-14190))
5(d) -- Investment Advisory Agreement for Merrill Lynch
Institutional Tax-Exempt Fund (incorporated by reference to
Exhibit 5(d) to Post-Effective Amendment No. 10 to
Registrant's Registration Statement on Form N-1A (File No.
33-14190))
6(a) -- Distribution Agreement for Merrill Lynch Treasury Fund
(incorporated by reference to Exhibit 6(a) to Registrant's
Registration Statement on Form N-1A (File No. 33-14190))
6(b) -- Form of Selected Dealer Agreement for Merrill Lynch Treasury
Fund (incorporated by reference to Exhibit 6(b) to
Registrant's Registration Statement on Form N-1A (File No.
33-14190))
6(c) -- Form of Distribution Agreement for Merrill Lynch
Institutional Fund (incorporated by reference to Exhibit
6(c) to Post-Effective Amendment No. 5 to Registrant's
Registration Statement on Form N-1A (File No. 33-14190))
6(d) -- Form of Distribution Agreement for Merrill Lynch Government
Fund (incorporated by reference to Exhibit 6(d) to
Post-Effective Amendment No. 5 to Registrant's Registration
Statement on Form N-1A (File No. 33-14190))
6(e) -- Form of Distribution Agreement for Merrill Lynch
Institutional Tax-Exempt Fund (incorporated by reference to
Exhibit 6(e) to Post-Effective Amendment No. 10 to
Registrant's Registration Statement on Form N-1A (File No.
33-14190))
7 -- None
8 -- Form of Custodian Agreement (incorporated by reference to
Exhibit 8 to Pre-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-1A (File No. 33-14190))
9(a) -- Form of Transfer Agency, and Dividend Disbursing Agreement
(incorporated by reference to Exhibit 9(a) to Pre-Effective
Amendment No. 1 to Registrant's Registration Statement on
Form N-1A (File No. 33-14190))
9(b) -- Form of Agreement relating to the use of the 'Merrill Lynch'
name (incorporated by reference to Exhibit 9(b) to
Registrant's Registration Statement on Form N-1A (File No.
33-14190))
9(c) -- Agreement and Plan of Reorganization of Merrill Lynch
Institutional Fund Inc. and Merrill Lynch Government Fund
Inc., respectively (incorporated by reference to Exhibit
9(c) to Post-Effective Amendment No. 5 to Registrant's
Registration Statement on Form N-1A (File No. 33-14190))
9(d) -- Agreement and Plan of Reorganization of Merrill Lynch
Institutional Tax-Exempt Fund (incorporated by reference to
Exhibit 10(a) to Post-Effective Amendment No. 10 to
Registrant's Registration Statement on Form N-1A (File No.
33-14190))
10(a) -- Opinion of Counsel (filed with 24f-2 Notice on June 30,
1995).
10(b) -- Opinion and Consent of Special Massachusetts Counsel
(incorporated by reference to Exhibit 11(b) to Registrant's
Registration Statement on Form N-1A (File No. 33-14190))
11 -- Consent of Independent Auditors
12 -- None
13 -- None
</TABLE>
C-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------------------------
<S> <C>
14 -- None
15(a) -- Form of Distribution and Shareholder Servicing Plan pursuant
to Rule 12b-1 and related Shareholder Servicing Agreement
for Merrill Lynch Treasury Fund (incorporated by reference
to Exhibit 15 to Registrant's Registration Statement on Form
N-1A (File No. 33-14190))
15(b) -- Distribution and Shareholder Servicing Plan pursuant to Rule
12b-1 and related Shareholder Servicing Agreement for
Merrill Lynch Institutional Fund (incorporated by reference
to Exhibit 15(b) to Post-Effective Amendment No. 5 to
Registrant's Registration Statement on Form N-1A (File No.
33-14190))
15(c) -- Distribution and Shareholder Servicing Plan pursuant to Rule
12b-1 and related Shareholder Servicing Agreement for
Merrill Lynch Government Fund (incorporated by reference to
Exhibit 15(c) to Post-Effective Amendment No. 5 to
Registrant's Registration Statement on Form N-1A (File No.
33-14190))
15(d) -- Distribution and Shareholder Servicing Plan pursuant to Rule
12b-1 and related Shareholder Servicing Agreement for
Merrill Lynch Institutional Tax-Exempt Fund (incorporated by
reference to Exhibit 15(d) to Post-Effective Amendment No.
10 to Registrant's Registration on Form N-1A (File No.
33-14190))
16 -- None
17 -- None
</TABLE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Registrant does not control any other person, nor is the Registrant under
common control with any other person.
ITEM 26. NUMBERS OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>
NUMBER OF
HOLDERS AT
TITLE OF CLASS AUGUST 14, 1995
------------------------------------------------------------ ---------------
<S> <C>
Shares of beneficial interest of Merrill Lynch Institutional
Fund, par value $0.01 per share........................... 35,961
Shares of beneficial interest of Merrill Lynch Government
Fund, par value $0.01 per share........................... 19,148
Shares of beneficial interest of Merrill Lynch Treasury
Fund, par value $0.01 per share........................... 1,013
Shares of beneficial interest of Merrill Lynch Institutional
Tax-Exempt Fund, par value $0.10 per share................ 10,943
</TABLE>
Note: The number of holders shown above includes holders of record plus
beneficial owners, whose shares are held of record by Merrill Lynch, Pierce,
Fenner & Smith, Incorporated.
ITEM 27. INDEMNIFICATION.
Reference is made to Section 5.3 of Registrant's Declaration of Trust.
Insofar as the conditional advancing of indemnification monies for actions
based upon the Investment Company Act of 1940 may be concerned, such payments
will be made only on the following conditions: (i) the advances must be limited
to amounts used, or to be used, for the preparation or presentation of a defense
to the action, including costs connected with the preparation of a settlement;
(ii) advances may be made only upon receipt of a written promise by, or on
behalf of, the recipient to repay that amount of the advance which exceeds that
amount to which it is ultimately determined that he is entitled to receive from
the Registrant by reason of indemnification; and (iii)(a) such promise must be
secured by a surety bond, other suitable insurance of 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
C-3
<PAGE>
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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to trustees, officers and controlling persons of the
Registrant 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 in
connection with the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person 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 Act and will be governed by the final
adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Fund Asset Management, L.P. (the 'Investment Adviser') acts as the
investment adviser for the following other open-end investment companies: CBA
Money Fund, CMA Government Securities Fund, CMA Money Fund, CMA Multi-State
Municipal Series Trust, CMA Treasury Fund, The Corporate Fund Accumulation
Program, Inc., Financial Institutions Series Trust, Merrill Lynch Basic Value
Fund, Inc., Merrill Lynch California Municipal Series Trust, Merrill Lynch
Corporate Bond Fund, Inc, Merrill Lynch Federal Securities Trust, Merrill Lynch
Funds for Institutions Series, Merrill Lynch Multi-State Limited Maturity
Municipal Series Trust, Merrill Lynch Multi-State Municipal Series Trust,
Merrill Lynch Municipal Bond Fund, Inc., Merrill Lynch Phoenix Fund, Inc.,
Merrill Lynch Special Value Fund, Inc., Merrill Lynch World Income Fund, Inc.
and The Municipal Fund Accumulation Program, Inc., and the following closed-end
investment companies: Apex Municipal Fund, Inc., Corporate High Yield Fund,
Inc., Corporate High Yield Fund II, Inc., Emerging Tigers Fund, Inc., Income
Opportunities Fund 1999, Inc., Income Opportunities Fund 2000, Inc., MuniAssets
Fund, Inc., MuniEnhanced Fund, Inc., MuniInsured Fund, Inc., MuniVest Fund,
Inc., MuniVest Fund II, Inc., Munivest California Insured Fund, Inc., MuniVest
Florida Fund, MuniVest Michigan Fund, Inc., MuniVest New Jersey Fund, Inc.,
MuniVest New York Insured Fund, Inc., MuniVest Pennsylvania Insured Fund,
MuniYield Arizona Fund, Inc., MuniYield California Fund, Inc., MuniYield
California Insured Fund, Inc., MuniYield California Insured Fund II, Inc.,
MuniYield Florida Fund, MuniYield Florida Insured Fund, MuniYield Fund, Inc.,
MuniYield Insured Fund, Inc., MuniYield Insured Fund II, Inc., MuniYield
Michigan Insured Fund., Inc., MuniYield New Jersey Fund, Inc., MuniYield New
Jersey Insured Fund, Inc., MuniYield New York Insured Fund, Inc., MuniYield New
York Insured Fund II, Inc., MuniYield New York Insured Fund III, Inc., MuniYield
Pennsylvania Fund, MuniYield Quality Fund, Inc., MuniYield Quality Fund II,
Inc., Senior High Income Portfolio, Inc., Senior High Income Portfolio II, Inc.,
Senior Strategic Income Fund, Inc., Taurus MuniCalifornia Holdings, Inc., Taurus
MuniNew York Holdings, 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 investment companies: Merrill
Lynch Adjustable Rate Securities Fund, Inc., Merrill Lynch Americas Income Fund,
Inc., Merrill Lynch Asset Builder Program, Inc., Merrill Lynch Asset Growth
Fund, Inc., Merrill Lynch Asset Income Fund, Inc., Merrill Lynch Balanced Fund
for Investment and Retirement, Inc., Merrill Lynch Capital Fund, Inc., Merrill
Lynch Developing Capital Markets Fund, Inc., Merrill Lynch Dragon Fund, Inc.,
Merrill Lynch EuroFund, Merrill Lynch Fundamental Growth Fund, Inc., Merrill
Lynch Fund for Tomorrow, Inc., Merrill Lynch Global Allocation Fund, Inc.,
Merrill Lynch Global Bond Fund for Investment and Retirement, Merrill Lynch
Global Convertible Fund, Inc., Merrill Lynch Global Holdings, Inc., Merrill
Lynch Global Resources Trust, Merrill Lynch Global SmallCap Fund, Inc., Merrill
Lynch Global Utility Fund, Inc., Merrill Lynch Growth Fund for Investment and
Retirement, Merrill Lynch Healthcare Fund, Inc. Merrill Lynch Institutional
Intermediate Fund, Merrill Lynch International Equity Fund, Merrill Lynch Latin
America Fund, Inc., Merrill Lynch Middle East/Africa Fund, Inc., Merrill Lynch
Municipal Series Trust, Merrill Lynch Pacific Fund, Inc., Merrill Lynch Ready
Assets Trust, Merrill Lynch Retirement Series Trust, Merrill Lynch Series Fund,
Inc., Merrill Lynch Short-Term Global Income Fund, Inc., Merrill Lynch Strategic
Dividend Fund, Merrill Lynch Technology Fund, Inc., Merrill Lynch U.S.A.
Government Reserves, Merrill Lynch U.S. Treasury Money Fund, Merrill Lynch
Utility Income Fund, Inc. and Merrill Lynch Variable Series Fund, Inc., and the
C-4
<PAGE>
following closed-end investment companies: Convertible Holdings, Inc., Merrill
Lynch High Income Municipal Bond Fund, Inc., and Merrill Lynch Senior Floating
Rate Fund, Inc. The address of each of these investment companies is P.O. Box
9011, Princeton, New Jersey 08543-9011, except that the address of Merrill Lynch
Funds For Institutions Series and Merrill Lynch Institutional Intermediate Fund
is One Financial Center, 15th Floor, Boston, Massachusetts, 02111-2646. The
address of the Investment Adviser and of Merrill Lynch Funds Distributor, Inc.
('MLFD'), and MLAM is also P.O. Box 9011, Princeton, New Jersey 08543-9011. The
address of Merrill Lynch, Pierce, Fenner & Smith Incorporated ('Merrill Lynch')
and Merrill Lynch & Co., Inc. ('ML & Co.') is World Financial Center, North
Tower, 250 Vesey Street, New York, New York 10281-1209.
Set forth below is a list of each officer and director of FAM indicating
each business, profession, vocation or employment of a substantial nature in
which each such person has been engaged since November 30, 1987 for his or her
or its own account or in the capacity of director, officer, partner or trustee.
In addition, Messrs. Zeikel, Glenn and Richard hold the same positions with
substantially all of the investment companies described in the preceding
paragraph and Messrs. Giordano, Harvey and Monagle are directors or officers of
one or more of such companies. Messrs. Zeikel and Richard also hold the same
positions with all or substantially all of the investment companies advised by
MLAM as they do with the Investment Adviser. Messrs. Harvey and Monagle are
directors or officers of one or more of such companies.
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL BUSINESS,
POSITIONS WITH PROFESSION, VOCATION OR
NAME INVESTMENT ADVISER EMPLOYMENT
------------------------- -------------------- ------------------------------
<S> <C> <C>
ML & Co.................. Limited Partner Financial Services Holding
Company; Limited Partner of
MLAM
Fund Asset
Management, Inc........ Limited Partner Investment Advisory Services
Princeton Services, Inc.
('Princeton Services'). General Partner General Partner of MLAM
Arthur Zeikel............ President and President of MLAM; President
Director and Director of Princeton
Services; Executive Vice
President of ML & Co. and
Merrill Lynch; Director of
MLFD.
Terry K. Glenn........... Executive Vice Executive Vice President of
President and MLAM; Executive Vice
Director President and Director
of Princeton Services;
President and Director of
MLFD; Director of Merrill
Lynch Financial Data
Services, Inc. ('FDS');
President of Princeton
Administrators, L.P.
Vincent R. Giordano...... Senior Vice Senior Vice President of MLAM;
President Senior Vice President of
Princeton Services
Elizabeth Griffin........ Senior Vice Senior Vice President of MLAM;
President Senior Vice President of
Princeton Services.
Norman R. Harvey......... Senior Vice Senior Vice President of MLAM;
President Senior Vice President of
Princeton Services.
N. John Hewitt........... Senior Vice Senior Vice President of MLAM;
President Senior Vice President of
Princeton Services.
Philip L. Kirstein....... Senior Vice Senior Vice President, General
President, General Counsel, and Secretary of
Counsel, and MLAM; Senior Vice President,
Secretary General Counsel, Director
and Secretary of Princeton
Services; Director of MLFD.
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL BUSINESS,
POSITIONS WITH PROFESSION, VOCATION OR
NAME INVESTMENT ADVISER EMPLOYMENT
------------------------- -------------------- ------------------------------
<S> <C> <C>
Ronald M. Kloss.......... Senior Vice Senior Vice President and
President and Controller of MLAM; Senior
Controller Vice President and
Controller of Princeton
Services.
Stephen M. M. Miller..... Senior Vice Executive Vice President of
President Princeton Administrators,
L.P.; Senior Vice President
of Princeton Services.
Joseph T. Monagle, Jr.... Senior Vice Senior Vice President of MLAM;
President Senior Vice President of
Princeton Services.
Richard L. Reller Senior Vice Senior Vice President of MLAM;
President Senior Vice President of
Princeton Services.
Gerald M. Richard........ Senior Vice Senior Vice President and
President and Treasurer of MLAM; Senior
Treasurer Vice President and Treasurer
of Princeton Services; Vice
President and Treasurer of
MLFD.
Ronald L. Welburn........ Senior Vice Senior Vice President of MLAM;
President Senior Vice President of
Princeton Services.
Anthony Wiseman.......... Senior Vice Senior Vice President of MLAM;
President Senior Vice President of
Princeton Services.
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) Merrill Lynch Funds Distributor, Inc. ('MLFD') acts as the principal
underwriter for the Registrant. MLFD acts as the principal underwriter for each
of the investment companies referred to in Item 28 except Apex Municipal Fund,
Inc., CBA Money Fund, CMA Government Securities Fund, CMA Treasury Fund, CMA
Money Fund, CMA Multi-State Municipal Series Trust, CMA Tax-Exempt Fund, Merrill
Lynch Corporate High Yield Fund, Inc., Merrill Lynch Corporate High Yield Fund
II, Inc., MuniAssets Fund, Inc., MuniBond Income Fund, Inc., MuniEnhanced Fund,
Inc., MuniInsured Fund, Inc., MuniVest Fund, Inc., MuniVest California Insured
Fund, Inc., MuniVest Florida Fund, MuniVest Fund II, Inc., MuniVest Michigan
Insured Fund, Inc., MuniVest New Jersey Fund, Inc., MuniVest New York Insured
Fund, Inc., MuniVest Pennsylvania Insured Fund, MuniYield Arizona Fund, Inc.,
MuniYield Arizona Fund II, Inc., MuniYield California Fund, Inc., MuniYield
California Insured Fund, Inc., MuniYield California Insured Fund II, Inc.,
MuniYield Florida Fund, MuniYield Florida Insured Fund, MuniYield Insured Fund,
Inc., MuniYield Insured Fund II, Inc., MuniYield Michigan Fund, Inc., MuniYield
Michigan Insured Fund, Inc., MuniYield New Jersey Fund, Inc., MuniYield New
Jersey Insured Fund, Inc., MuniYield New York Insured Fund, Inc., MuniYield New
York Insured Fund II, Inc., MuniYield New York Insured Fund III, Inc., MuniYield
Pennsylvania Fund, Inc., MuniYield Fund, Inc., MuniYield Quality Fund, Inc.,
MuniYield Quality Fund II, Inc., Senior High Income Portfolio, Inc., Senior High
Income Portfolio II, Inc., Taurus MuniCalifornia Holdings, Inc., Taurus MuniNew
York Holdings, The Corporate Fund Accumulation Program, Inc., The Municipal Fund
Accumulation Program, Inc., World Wide Dollar Vest, Inc.
C-6
<PAGE>
(b) Set forth below is information concerning each director and officer of
MLFD. The principal business address of each such person is P.O. Box 9011,
Princeton, New Jersey 08543-9011, except that the address of Messrs. Crook,
Aldrich, Brady, Graczyk, Breen, Fatseas, Maguire and Wasel and Ms. Schena is One
Financial Center, Boston, Massachusetts 02111-2646.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES POSITION AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
------------------------- ------------------------- -------------------------
<S> <C> <C>
Terry K. Glenn........... President Trustee
Arthur Zeikel............ Director None
Philip Kirstein.......... Director None
William E. Aldrich....... Senior Vice President Executive Vice President
Robert W. Crook.......... Senior Vice President President and Trustee
Gerald M. Richard........ Vice President and Vice President
Treasurer
Sharon Creveling......... Vice President and None
Assistant Treasurer
Mark A. DeSario.......... Vice President None
Michelle T. Lau.......... Vice President None
Sal Venezia.............. Vice President None
Kevin P. Boman Vice President None
Michael J. Brady......... Vice President Senior Vice President
William M. Breen......... Vice President Senior Vice President and
Chief Financial Officer
James T. Fatseas......... Vice President Senior Vice President
Stanley Graczyk.......... Vice President Senior Vice President
William Wasel............ Vice President Senior Vice President
Debra W. Landsman-Yaros.. Vice President None
Mark E. Maguire.......... Assistant Vice President Vice President
Patricia A. Schena....... Assistant Vice President Assistant Secretary
Robert Harris............ Secretary None
</TABLE>
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder
will be maintained at the offices of the Registrant and its Custodian and
Transfer Agent.
ITEM 31. MANAGEMENT SERVICES.
Other than as set forth under the caption 'Management' in the Prospectus
constituting Part A of the Registration Statement and under the caption
'Investment Advisory and Other Services' in the Statement of Additional
Information constituting Part B of the Registration Statement, Registrant is not
a party to any management-related service contract.
ITEM 32. UNDERTAKINGS.
None.
C-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE
INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT CERTIFIES THAT IT MEETS ALL OF
THE REQUIREMENTS FOR EFFECTIVENESS OF THIS POST-EFFECTIVE AMENDMENT TO ITS
REGISTRATION STATEMENT PURSUANT TO RULE 485(B) UNDER THE SECURITIES ACT OF 1933
AND HAS DULY CAUSED THIS AMENDMENT TO ITS REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE COUNTY OF
SUFFOLK AND COMMONWEALTH OF MASSACHUSETTS, ON THE 24TH DAY OF AUGUST, 1995.
MERRILL LYNCH FUNDS FOR INSTITUTIONS
SERIES
BY: /s/ ROBERT W. CROOK
---------------------------------
Robert W. Crook, President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO THE REGISTRANT'S REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE
FOLLOWING PERSONS IN THE CAPACITIES INDICATED AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
------------------------------ ------------------------------ ---------------
<S> <C> <C>
/s/ ROBERT W. CROOK President and Trustee August 24, 1995
------------------------------ (Principal
Robert W. Crook Executive Officer)
/s/ WILLIAM M. BREEN Chief Financial Officer August 24, 1995
------------------------------ (Principal Financial and
William M. Breen Accounting Officer)
* Trustee
------------------------------
David Almy
* Trustee
------------------------------
A. Bruce Brackenridge
* Trustee
------------------------------
Charles C. Cabot, Jr.
* Trustee
------------------------------
Terry K. Glenn
* Trustee
------------------------------
Todd Goodwin
* Trustee
------------------------------
George W. Holbrook, Jr.
*By: /s/ ROBERT W. CROOK August 24, 1995
------------------------------
Robert W. Crook
Attorney-in-Fact
</TABLE>
C-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
11 -- Consent of Independent Auditors
</TABLE>
<PAGE>
EXHIBIT 11
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 12 to
Registration Statement No. 33-14190 of Merrill Lynch Funds for Institutions
Series of our report dated May 26, 1995 appearing in the Statements of
Additional Information of Merrill Lynch Institutional Fund, Merrill Lynch
Government Fund, Merrill Lynch Treasury Fund and Merrill Lynch Institutional
Tax-Exempt Fund of Merrill Lynch Funds for Institutions Series, which are a part
of such Registration Statement, and to the reference to us under the heading
'Financial Highlights' appearing in the Prospectuses of Merrill Lynch
Institutional Fund, Merrill Lynch Government Fund, Merrill Lynch Treasury Fund
and Merrill Lynch Institutional Tax-Exempt Fund of Merrill Lynch Funds for
Institutions Series, which are a part of such Registration Statement.
Deloitte & Touche LLP
Boston, Massachusetts
August 24, 1995
