<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 28, 1995
SECURITIES ACT FILE NO. 33-37439
INVESTMENT COMPANY ACT FILE NO. 811-6196
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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. 5 /X/
(Check appropriate box or boxes)
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 7 /X/
(Check appropriate box or boxes)
------------------------
CMA TREASURY FUND
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
<TABLE>
<S> <C>
800 SCUDDERS MILL ROAD 08536
PLAINSBORO, NEW JERSEY (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (609) 282-2800
ARTHUR ZEIKEL
CMA TREASURY FUND
800 SCUDDERS MILL ROAD, PLAINSBORO, NEW JERSEY
MAILING ADDRESS: P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011
(NAME AND ADDRESS OF AGENT FOR SERVICE)
------------------------
Copies to:
<TABLE>
<S> <C>
COUNSEL FOR THE FUND: PHILIP L. KIRSTEIN, ESQ.
BROWN & WOOD FUND ASSET MANAGEMENT, L.P.
ONE WORLD TRADE CENTER NEW YORK, N.Y. 10048-0557 P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011
ATTENTION: THOMAS R. SMITH, JR., ESQ.
</TABLE>
KEVIN J. MOYNIHAN, ESQ.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
WORLD FINANCIAL CENTER, NORTH TOWER, NEW YORK, N.Y. 10281
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE
BOX):
/X/ immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485.
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
/ / this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
The Registrant has registered an indefinite number of its shares of
beneficial interest 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 May 30, 1995.
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<PAGE> 2
CMA TREASURY FUND
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-1A ITEM
NO. LOCATION
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<C> <S> <C>
PART A
Item 1. Cover Page........................... Cover Page
Item 2. Synopsis............................. Fee Table
Item 3. Condensed Financial Information...... Financial Highlights; Yield
Information
Item 4. General Description of Registrant.... Investment Objectives and Policies;
Appendix-Additional Information-
Organization of the Funds
Item 5. Management of the Fund............... Fee Table; Appendix-Management of the
Funds; Appendix-Portfolio
Transactions; Inside Back Cover
Page
Item 5A. Management's Discussion of Fund
Performance........................ Not Applicable
Item 6. Capital Stock and Other Securities... Appendix-Additional Information-
Organization of the Funds
Item 7. Purchase of Securities Being Cover Page; Fee Table; Appendix-
Offered............................ Purchase of Shares; Appendix-
Redemption of Shares; Inside Back
Cover Page
Item 8. Redemption or Repurchase............. Fee Table; Appendix-Purchase of
Shares; Appendix-Redemption of Shares
Item 9. Pending Legal Proceedings............ Not Applicable
PART B
Item 10. Cover Page........................... Cover Page
Item 11. Table of Contents.................... Cover Page
Item 12. General Information and History...... Not Applicable
Item 13. Investment Objectives and Policies... Investment Objectives and Policies
Item 14. Management of the Fund............... Management of the Funds
Item 15. Control Persons and Principal Holders
of Securities...................... Management of the Funds; General
Information -- Additional
Information
Item 16. Investment Advisory and Other Management of the Funds; Purchase and
Services........................... Redemption of Shares; General
Information
Item 17. Brokerage Allocation and Other
Practices.......................... Portfolio Transactions
Item 18. Capital Stock and Other Securities... General Information-Description of
Shares
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered........... Purchase and Redemption of Shares;
Determination of Net Asset Value
Item 20. Tax Status........................... Taxes
Item 21. Underwriters......................... Purchase and Redemption of Shares
Item 22. Calculation of Performance Data...... Yield Information
Item 23. Financial Statements................. Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
<PAGE> 3
CMA MONEY FUND
CMA GOVERNMENT SECURITIES FUND
CMA TAX-EXEMPT FUND
CMA TREASURY FUND
------------------------
This document consists of the Prospectuses of CMA Money Fund, CMA Government
Securities Fund, CMA Tax-Exempt Fund and CMA Treasury Fund, four of the money
market mutual funds (collectively, the "CMA Funds") the shares of which are
offered to participants in the Cash Management Account(R) ("CMA(R) account")
financial service program of Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") to provide a medium for the investment of free credit balances
held in CMA accounts, and an Appendix to such Prospectuses which constitutes a
part of each Prospectus. A Table of Contents is contained on page 1 of each
Prospectus.
------------------------
A CMA account is a conventional Merrill Lynch cash securities account or
margin securities account ("Securities Account") which is linked to the CMA
Funds, to money market deposit accounts maintained with depository institutions
and to a Visa(R) card/check account ("Visa(R) Account"). Merrill Lynch markets
its margin account under the name Investor CreditLineSM service. Subscribers to
the CMA service may automatically invest free credit balances held in their CMA
accounts in shares of one of the CMA Funds, or such balances may be
automatically deposited with a depository institution through the Insured
SavingsSM Account (the "Insured Savings Account"). The CMA Funds and the Insured
Savings Account are collectively referred to as the "Money Accounts".
Each CMA Fund is a no-load money market fund seeking current income,
preservation of capital and liquidity available from investing in short-term
securities. Of the CMA Funds offered by this Prospectus, CMA Money Fund invests
in money market securities generally; CMA Government Securities Fund invests in
direct U.S. Government obligations; CMA Tax-Exempt Fund invests in tax-exempt
securities and pays dividends exempt from Federal income taxation; and CMA
Treasury Fund invests in U.S. Treasury securities. The CMA Funds also include
various series of CMA Multi-State Municipal Series Trust (the "CMA State
Funds"), each of which invests in tax-exempt securities and pays dividends
exempt, in the opinion of counsel to the issuer, from Federal income taxes,
personal income taxes of the designated state and, in certain instances, local
income taxes. At the date hereof, CMA State Funds exist with respect to Arizona,
California, Connecticut, Massachusetts, Michigan, New Jersey, New York, North
Carolina, Ohio and Pennsylvania.
Free credit balances held in CMA accounts will be automatically invested in
or deposited through the Money Account selected by the CMA subscriber as his or
her Primary Money Account. The subscriber may make manual investments in any of
the CMA Funds as described under "Purchase of Shares" in the Appendix. The
subscriber may change the Primary Money Account designation at any time by
following the procedures set forth under "Purchase of Shares".
Merrill Lynch charges a program participation fee for the CMA service which
presently is $100 per year (an additional $25 annual program fee is charged for
participation in the CMA Visa(R) Gold Program described in the CMA Program
Description). A different fee may be charged to certain group plans and special
accounts. Merrill Lynch reserves the right to change the fee for the CMA service
or the CMA Visa(R) Gold Program at any time. As described under "Purchase of
Shares", shares of the CMA Funds may also be purchased directly through the CMA
Funds' Transfer Agent by investors who are not subscribers to the CMA program.
Shareholders of the CMA Funds not subscribing to the CMA program will not be
charged the CMA program fee but will not receive any of the additional services
available to CMA program subscribers.
------------------------
The information in this document should be read in conjunction with the
description of the Merrill Lynch Cash Management Account program which is
furnished to all CMA subscribers. Reference is made to such description for
information with respect to the CMA program, including the fees related thereto.
Information concerning the other CMA Funds is contained in the prospectus
relating to each of such Funds, and information concerning the Insured Savings
Account is contained in the Insured Savings Account Fact Sheet. All CMA
subscribers are furnished with the prospectuses of CMA Money Fund, CMA
Government Securities Fund, CMA Tax-Exempt Fund and CMA Treasury Fund. The
prospectuses of the CMA State Funds and the Insured Savings Account Fact Sheet
are available from Merrill Lynch. For more information about the Merrill Lynch
Cash Management Account program, call toll-free from anywhere in the U.S.,
1-800-CMA-INFO (1-800-262-4636).
<PAGE> 4
PROSPECTUS
JULY 28, 1995
CMA MONEY FUND
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 - PHONE NO. (609) 282-2800
CMA Money Fund (the "Money Market Fund") is a no-load, diversified,
open-end investment company seeking current income, preservation of capital and
liquidity available from investing in a diversified portfolio of short-term
money market securities. These securities will consist primarily of short-term
U.S. Government securities, bank certificates of deposit, commercial paper and
repurchase agreements. Dividends are declared and reinvested daily in the form
of additional shares at net asset value. THE MONEY MARKET FUND SEEKS TO MAINTAIN
A CONSTANT $1.00 NET ASSET VALUE PER SHARE, ALTHOUGH THIS CANNOT BE ASSURED. AN
INVESTMENT IN THE MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. The Money Market Fund has adopted a Distribution and
Shareholder Servicing Plan in compliance with Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "Investment Company Act"). There can be no
assurance that the investment objectives of the Money Market Fund will be
realized.
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 is a concise statement of information about the Money
Market Fund that is relevant to making an investment in the Money Market Fund.
This Prospectus should be read carefully and retained for future reference. A
statement containing additional information about the Money Market Fund, dated
July 28, 1995 (the "Statement of Additional Information"), has been filed with
the Securities and Exchange Commission and can be obtained, without charge, by
calling or writing to the Money Market Fund at the above telephone number or
address. The Statement of Additional Information is hereby incorporated by
reference into this Prospectus.
------------------------
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Fee Table......................... 2
Financial Highlights.............. 3
Yield Information................. 4
Investment Objectives and
Policies........................ 4
Appendix.......................... A-1
Purchase of Shares.............. A-1
Redemption of Shares............ A-4
<CAPTION>
PAGE
-----
<S> <C>
Management of the Funds........... A-7
Portfolio Transactions............ A-9
Dividends......................... A-10
Determination of Net Asset
Value........................... A-10
Taxes............................. A-11
Additional Information............ A-13
</TABLE>
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<PAGE> 5
FEE TABLE
<TABLE>
<S> <C> <C>
MONEY MARKET FUND ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
FOR THE FISCAL YEAR ENDED MARCH 31, 1995:
Management Fees(a)............................................................. 0.38%
Rule 12b-1 Fees(b)............................................................. 0.125%
Other Expenses:
Dividend and Transfer Agency Fees(c)................................... 0.04%
Other Fees............................................................. 0.01%
----
Total Other Expenses........................................................... 0.05%
-----
Total Money Market Fund Operating Expenses..................................... 0.56%
=====
</TABLE>
- ------------
(a) See "Management of the Funds--Investment Advisory Arrangements"--page A-8.
(b) See "Purchase of Shares"--page A-1.
(c) See "Management of the Funds--Transfer Agency Services"--page A-9.
EXAMPLE:
<TABLE>
<CAPTION>
CUMULATIVE EXPENSES
PAID FOR THE PERIOD OF:
---------------------------------------------
1 3 5 10
YEAR YEARS YEARS YEARS
----- ------ ------ ------
<S> <C> <C> <C> <C>
An investor would pay the following expenses
on a $1,000 investment, assuming an
operating expense ratio of 0.56% and a 5%
annual return throughout
the periods................................. $6.00 $18.00 $31.00 $70.00
</TABLE>
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED ("MERRILL LYNCH")
CHARGES AN ANNUAL PROGRAM PARTICIPATION FEE, PRESENTLY $100 FOR INDIVIDUALS, FOR
THE CMA SERVICE (AN ADDITIONAL FEE, PRESENTLY $25, IS CHARGED FOR PARTICIPATION
IN THE CMA VISA(R) GOLD PROGRAM). SHAREHOLDERS OF THE MONEY MARKET FUND WHOSE
ACCOUNTS ARE MAINTAINED DIRECTLY WITH THE MONEY MARKET FUND'S TRANSFER AGENT AND
WHO ARE NOT SUBSCRIBERS TO THE CMA PROGRAM WILL NOT BE CHARGED THE CMA PROGRAM
FEE BUT WILL NOT RECEIVE ANY OF THE ADDITIONAL SERVICES AVAILABLE TO CMA PROGRAM
SUBSCRIBERS.
The foregoing Fee Table is intended to assist investors in understanding
the costs and expenses that a shareholder in the Money Market Fund will bear
directly or indirectly. The example set forth above assumes reinvestment of all
dividends and distributions. 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.
Money Market Fund
2
<PAGE> 6
FINANCIAL HIGHLIGHTS
Financial statements for the fiscal year ended March 31, 1995 and the
independent auditors' report thereon are included in the Statement of Additional
Information. The following per share data and ratios have been derived from
information provided in financial statements of the Money Market Fund audited by
Deloitte & Touche LLP, independent auditors.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31,
-----------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSET
VALUE:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
year............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ----------- ----------- ----------- ----------- ----------- -----------
Investment income--net.......... .0437 .0276 .0309 .0498 .0734 .0837 .0754
Realized and unrealized gain
(loss) on investments--net.... .0005 (.0005) .0019 .0019 .0017 (.0001) (.0004)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations...................... .0442 .0271 .0328 .0517 .0751 .0836 .0750
----------- ----------- ----------- ----------- ----------- ----------- -----------
Less dividends and distributions:
Investment income--net.......... (.0437) (.0276) (.0309) (.0498) (.0734) (.0836) (.0750)
Realized gain on
investments--net.............. (.0003) (.0003) (.0015) (.0020) (.0017)* -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total dividends and
distributions................... (.0440) (.0279) (.0324) (.0518) (.0751) (.0836) (.0750)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of year..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ========== ========== ==========
TOTAL INVESTMENT RETURN.......... 4.50% 2.82% 3.30% 5.27% 7.81% 8.69% 7.79%
========== ========== ========== ========== ========== ========== ==========
RATIOS TO AVERAGE NET ASSETS:
Expenses, excluding distribution
fees............................ .44% .42% .42% .42% .41% .43% .43%
========== ========== ========== ========== ========== ========== ==========
Expenses......................... .56% .55% .55% .54% .54% .55% .55%
========== ========== ========== ========== ========== ========== ==========
Investment income and realized
gain on investments--net........ 4.42% 2.79% 3.25% 5.18% 7.51%* 8.33%* 7.53%*
========== ========== ========== ========== ========== ========== ==========
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands)...................... $29,066,762 $27,071,882 $27,093,682 $29,106,627 $31,163,167 $29,768,495 $22,954,950
========== ========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
1988 1987 1986
----------- ----------- -----------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSET
VALUE:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
year............................ $ 1.00 $ 1.00 $ 1.00
----------- ----------- -----------
Investment income--net.......... .0635 .0579 .0745
Realized and unrealized gain
(loss) on investments--net.... .0004 .0002 .0030
----------- ----------- -----------
Total from investment
operations...................... .0639 .0581 .0775
----------- ----------- -----------
Less dividends and distributions:
Investment income--net.......... (.0635) (.0579) (.0745)
Realized gain on
investments--net.............. (.0004)* (.0002)* (.0030)*
----------- ----------- -----------
Total dividends and
distributions................... (.0639) (.0581) (.0775)
----------- ----------- -----------
Net asset value, end of year..... $ 1.00 $ 1.00 $ 1.00
========== ========== ==========
TOTAL INVESTMENT RETURN.......... 6.58% 5.97% 8.01%
========== ========== ==========
RATIOS TO AVERAGE NET ASSETS:
Expenses, excluding distribution
fees............................ .43% .43% .43%
========== ========== ==========
Expenses......................... .55% .56% .56%
========== ========== ==========
Investment income and realized
gain on investments--net........ 6.39%* 5.80%* 7.70%*
========== ========== ==========
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands)...................... $20,557,461 $19,029,720 $17,957,576
========== ========== ==========
</TABLE>
- ------------------------
* Includes unrealized gain (loss).
Money Market Fund
3
<PAGE> 7
YIELD INFORMATION
Set forth below is yield information as to the annualized and compounded
annualized yield for the indicated seven-day periods.
<TABLE>
<CAPTION>
SEVEN-DAY PERIOD ENDED
-----------------------------
MARCH 31, JUNE 30,
1995 1995
------------ ------------
<S> <C> <C>
Annualized Yield:
Including gains and losses................................ 5.62% 5.52%
Excluding gains and losses................................ 5.59% 5.51%
Compounded Annualized Yield.................................... 5.75% 5.66%
Average Maturity of Portfolio at End of Period................. 60 days 77 days
</TABLE>
The yield of the Money Market Fund refers to the income generated by an
investment in the Money Market Fund over a stated seven-day period. This income
is then annualized: that is, the amount of income generated by the investment
during that week is assumed to be generated each week over a 52-week period and
is shown as a percentage of the investment. The compounded annualized yield
(which excludes gains and losses) is calculated similarly but, when annualized,
the income earned by an investment in the Money Market Fund is assumed to be
reinvested. The compounded annualized yield will be somewhat higher than the
yield because of the effect of the assumed reinvestment.
The yield on Money Market 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 Money Market Fund of future yields or rates of return on
its shares. The Money Market 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. Current yield
information may not provide a basis for comparison with bank deposits or other
investments which pay a fixed yield over a stated period of time.
On occasion, the Money Market Fund may compare its yield to (i) industry
averages 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 IndexTM
for money market deposit accounts offered by the 100 leading banks and thrift
institutions in the ten largest standard metropolitan statistical areas, (iii)
yield data published by Lipper Analytical Services, Inc., (iv) the yield on an
investment in 90-day Treasury bills on a rolling basis, assuming quarterly
compounding, (v) performance data published by Morningstar Publications, Inc.,
Money Magazine, U.S. News & World Report, Business Week, CDA Investment
Technology, Inc., Forbes Magazine and Fortune Magazine or (vi) historical yield
data relating to other central asset accounts similar to the CMA program. As
with yield quotations, yield comparisons should not be considered indicative of
the Money Market Fund's yield or relative performance for any future period.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the Money Market Fund are to seek current
income, preservation of capital and liquidity available from investing in a
diversified portfolio of short-term money market securities. There can be no
assurance that the investment objectives of the Money Market Fund will be
realized.
Money Market Fund
4
<PAGE> 8
Investment in Money Market Fund shares offers several benefits. The Money
Market Fund seeks to provide as high a yield potential, consistent with its
objectives, as is available from short-term money market securities utilizing
professional money market management, block purchases of securities and yield
improvement techniques. It provides high liquidity because of its redemption
features and seeks reduced risk resulting from diversification of assets. The
shareholder is also relieved from administrative burdens associated with direct
investment in short-term securities, such as coordinating maturities and
reinvestments, safekeeping and making numerous buy-sell decisions. These
benefits are at least partially offset by certain expenses borne by investors,
including management fees, distribution fees, administrative costs and
operational costs.
In managing the Money Market Fund's portfolio, Fund Asset Management, L.P.
(the "Investment Adviser") will employ a number of professional money management
techniques, including varying the composition of the Money Market Fund's
investments and the average maturity of the portfolio based on its assessment of
the relative values of the various money market instruments and future interest
rate patterns. The Investment Adviser's assessments will respond to changing
economic and money conditions and to shifts in fiscal and monetary policy. The
Investment Adviser will also seek to improve yield by taking advantage of yield
disparities that regularly occur in the money market. For example, market
conditions frequently result in similar securities trading at different prices.
Also, there are frequently yield disparities between the various types of money
market securities. The Money Market Fund seeks to enhance yield by purchasing
and selling securities based on these yield disparities.
The following is a description of the types of short-term money market
securities in which the Money Market Fund may invest:
U.S. Government Securities: Marketable securities issued by or
guaranteed as to principal and interest by the U.S. Government and
supported by the full faith and credit of the United States.
U.S. Government Agency Securities: Debt securities issued by U.S.
Government-sponsored enterprises, agencies and instrumentalities,
including, but not limited to, the Federal National Mortgage Association,
the Federal Home Loan Mortgage Corporation, the Student Loan Marketing
Association and the Federal Agricultural Mortgage Corporation. Such
securities may also include debt securities issued by international
organizations designated or supported by multiple governmental entities,
such as the International Bank for Reconstruction and Development (the
"World Bank"). Government Agency Securities are not direct obligations of
the U.S. Government but involve various forms of U.S. Government
sponsorship or guarantees and are issued, in general, under the authority
of an act of Congress. The U.S. Government is not obligated to provide
financial support to any of these agencies, instrumentalities or
organizations.
Bank Money Instruments: U.S. dollar-denominated obligations of
depository institutions such as certificates of deposit, including variable
rate certificates of deposit, time deposits, deposit notes, bank notes and
bankers' acceptances. 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 Money Market 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 Money Market Fund
may invest must be issued by U.S. branches or subsidiaries of foreign
Money Market Fund
5
<PAGE> 9
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.
Commercial Paper and Other Short-Term Obligations: Commercial paper
(including variable amount master demand notes), which refers to
short-term, unsecured promissory notes issued by corporations,
partnerships, trusts or other entities to finance short-term credit needs,
and non-convertible debt securities (e.g., bonds and debentures) with no
more than 397 days (13 months) remaining to maturity at the date of
purchase. Short-term obligations issued by trusts include mortgage-related
or asset-backed debt instruments, including pass-through certificates such
as participations in, or bonds and notes backed by, pools of mortgage,
credit card, automobile or other types of receivables. These structured
financings will be supported by sufficient collateral and other credit
enhancements, including letters of credit, insurance, reserve funds and
guarantees by third parties, to enable such instruments to obtain the
requisite quality rating by a nationally recognized statistical rating
organization, as described below.
Foreign Bank Money Instruments: U.S. dollar-denominated obligations
of foreign depository institutions and their foreign branches and
subsidiaries, such as certificates of deposit, bankers' acceptances, time
deposits, bank notes and deposit notes. The obligations of such foreign
branches and subsidiaries may be the general obligation of the parent bank
or may be limited to the issuing branch or subsidiary by the terms of the
specific obligation or by government regulation. Such investments will only
be made if determined to be of comparable quality to other investments
permissible for the Money Market Fund. The Money Market Fund will not
invest more than 25% of its total assets (taken at market value at the time
of each investment) in these obligations.
Foreign Short-Term Debt Instruments: U.S. dollar-denominated
commercial paper and other short-term obligations issued by foreign
entities. Such investments are subject to quality standards similar to
those applicable to investments in comparable obligations of domestic
issuers.
The following is a description of other types of investments or investment
practices in which the Money Market Fund may invest or engage:
Repurchase Agreements: The Money Market Fund may invest in the money
market securities described above pursuant to repurchase agreements.
Repurchase agreements may be entered into only with a member bank of the
Federal Reserve System or a primary dealer in U.S. Government securities or
an affiliate thereof. Under such agreements, the bank or primary dealer or
an affiliate thereof agrees, upon entering into the contract, to repurchase
the security at a mutually agreed upon time and price, thereby determining
the yield during the term of the agreement. This results in a fixed rate of
return insulated from market fluctuations during such period.
Reverse Repurchase Agreements: The Money Market Fund may enter into
reverse repurchase agreements which involve the sale of money market
securities held by the Money Market Fund, with an agreement to repurchase
the securities at an agreed upon price, date and interest payment. During
the time a reverse repurchase agreement is outstanding, the Money Market
Fund will maintain a segregated custodial account containing U.S.
Government or other appropriate high-grade debt securities having a value
equal to the repurchase price.
Money Market Fund
6
<PAGE> 10
Lending of Portfolio Securities: The Money Market Fund may lend
portfolio securities (with a value not in excess of 33 1/3% of its total
assets, taken at market value) to brokers, dealers and financial
institutions and receive collateral in cash or securities issued or
guaranteed by the U.S. Government which will be maintained at all times
in an amount equal to at least 100% of the current market value of the
loaned securities. During the period of the loan, the Money Market Fund
receives income on the loaned securities and either receives a fee or
earns interest on any investments made with cash collateral and thereby
increases its yield.
Preservation of capital is a prime investment objective of the Money
Market Fund and, while the types of money market securities in which the
Money Market Fund invests generally are considered to have low principal
risk, such securities are not completely risk-free. There is a risk of the
failure of issuers to meet their principal and interest obligations.
Repurchase agreements may be construed to be collateralized loans by the
purchaser to the seller secured by the securities transferred to the
purchaser. In the event of default by the seller under a repurchase
agreement construed to be a collateralized loan, the underlying securities
are not owned by the Money Market Fund but only constitute collateral for
the seller's obligation to pay the repurchase price. With respect to
repurchase agreements, reverse repurchase agreements and the lending of
portfolio securities by the Money Market Fund, there is also the risk of
the failure of parties involved to repurchase at the agreed upon price or
to return the securities involved in such transactions, in which event the
Money Market Fund may suffer time delays and incur costs or possible losses
in connection with such transactions.
Bank money market instruments in which the Money Market Fund invests
must be issued by depository institutions with total assets of at least $1
billion, except that the Money Market Fund may invest in certificates of
deposit of smaller institutions if such certificates of deposit are
Federally insured and if, as a result of such purchase, no more than 10% of
total assets (taken at market value), are invested in such certificates of
deposit.
The Money Market Fund's investments in short-term corporate,
partnership and trust debt and bank money market instruments will be rated,
or will be issued by issuers who have been rated, in one of the two highest
rating categories for short-term 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 Money
Market Fund. The Money Market Fund's investments in corporate, partnership
and trust bonds and debentures (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 Money Market Fund. Currently, there are
six NRSROs: Duff & Phelps Credit Ratings Co., Fitch Investors Service,
Inc., IBCA Limited and its affiliate IBCA, Inc., Moody's Investors Service,
Inc., Standard & Poor's Ratings Group and Thomson BankWatch, Inc.
Securities and Exchange Commission regulations limit investments by
the Money Market 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, such regulations require that not more than 5% of the Money
Market Fund's total assets be invested in securities that do not have the
highest
Money Market Fund
7
<PAGE> 11
rating, or are not of comparable quality to securities with the highest
rating, as determined by the Trustees of the Money Market Fund.
The Money Market Fund may purchase money market securities on a
forward commitment basis at fixed purchase terms. The purchase of money
market securities on a forward commitment basis involves the risk that the
yields available in the market when the delivery takes place may actually
be higher than those obtained in the transaction itself; if yields
increase, the value of the securities purchased on a forward commitment
basis will generally decrease. A separate account of the Money Market Fund
will be established with its custodian consisting of cash or liquid money
market securities having a market value at all times at least equal to the
amount of the forward commitment.
For purposes of its investment policies, the Money Market Fund defines
short-term money market securities as having a maturity of no more than 762
days (25 months) in the case of U.S. Government and agency securities and
no more than 397 days (13 months) in the case of all other securities. The
dollar-weighted average maturity of the Money Market Fund's portfolio will
not exceed 90 days. During the Money Market Fund's fiscal year ended March
31, 1995, the average maturity of its portfolio ranged from 40 days to 69
days.
Investment Restrictions. The Money Market 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 Money Market
Fund's outstanding voting securities as defined in the Investment Company
Act. Among the more significant restrictions, the Money Market Fund may
not: (1) purchase any securities other than the types of money market
securities and investments described under "Investment Objectives and
Policies"; (2) invest more than 25% of its total assets (taken at market
value at the time of each investment) in the securities of issuers in any
particular industry (other than U.S. Government securities, U.S. Government
agency securities or domestic bank money market instruments); (3) purchase
the securities of any one issuer, other than U.S. Government or U.S.
Government agency securities, if immediately after such purchase, more than
5% of the value of its total assets (taken at market value) would be
invested in such issuer, except that in the case of bank money market
instruments or repurchase agreements with any one bank up to 25% of the
value of the Money Market Fund's total assets may be invested without
regard to such 5% limitation but shall instead be subject to a 10%
limitation; (4) invest in the securities of any single issuer, if
immediately after and as a result of such investment, the Money Market Fund
would own more than 10% of the outstanding securities, or more than 10% of
the outstanding voting securities, of such issuer; and (5) enter into
repurchase agreements if, as a result thereof, more than 10% of the Money
Market Fund's total assets (taken at market value at the time of each
investment, together with any other investments deemed illiquid) would be
subject to repurchase agreements maturing in more than seven days.
Money Market Fund
8
<PAGE> 12
PROSPECTUS
JULY 28, 1995
CMA GOVERNMENT SECURITIES FUND
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 - PHONE NO. (609) 282-2800
CMA Government Securities Fund (the "Government Fund") is a no-load,
diversified, open-end investment company seeking preservation of capital,
liquidity and current income available from investing exclusively in a
diversified portfolio of short-term marketable securities which are direct
obligations of the U.S. Government and repurchase agreements pertaining to such
securities. Dividends are declared and reinvested daily in the form of
additional shares at net asset value. 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. The Government Fund has adopted a Distribution and Shareholder
Servicing Plan in compliance with Rule 12b-1 under the Investment Company Act of
1940 as amended (the "Investment Company Act"). There can be no assurance that
the investment objectives of the Government Fund will be realized.
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 is a concise statement of information about the Government
Fund that is relevant to making an investment in the Government Fund. This
Prospectus should be read carefully and retained for future reference. A
statement containing additional information about the Government Fund, dated
July 28, 1995 (the "Statement of Additional Information"), has been filed with
the Securities and Exchange Commission and can be obtained, without charge, by
calling or writing to the Government Fund at the above telephone number or
address. The Statement of Additional Information is hereby incorporated by
reference into this Prospectus.
------------------------
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Fee Table......................... 2
Financial Highlights.............. 3
Yield Information................. 4
Investment Objectives and
Policies........................ 5
Appendix.......................... A-1
Purchase of Shares.............. A-1
Redemption of Shares............ A-4
<CAPTION>
PAGE
-----
<S> <C>
Management of the Funds........... A-7
Portfolio Transactions............ A-9
Dividends......................... A-10
Determination of Net Asset
Value........................... A-10
Taxes............................. A-11
Additional Information............ A-13
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 13
FEE TABLE
<TABLE>
<S> <C> <C>
GOVERNMENT FUND ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS) FOR
THE FISCAL YEAR ENDED MARCH 31, 1995:
Management Fees(a).............................................................. 0.40%
Rule 12b-1 Fees(b).............................................................. 0.13%
Other Expenses:
Dividend and Transfer Agency Fees(c).................................... 0.02%
Other Fees.............................................................. 0.03%
----
Total Other Expenses............................................................ 0.05%
----
Total Government Fund Operating Expenses........................................ 0.58%
====
</TABLE>
- ------------
(a) See "Management of the Funds--Investment Advisory Arrangements"--page A-8.
(b) See "Purchase of Shares"--page A-1.
(c) See "Management of the Funds--Transfer Agency Services"--page A-9.
EXAMPLE:
<TABLE>
<CAPTION>
CUMULATIVE EXPENSES
PAID FOR THE PERIOD OF:
---------------------------------------------
1 3 5 10
YEAR YEARS YEARS YEARS
----- ------ ------ ------
<S> <C> <C> <C> <C>
An investor would pay the following expenses
on a $1,000 investment, assuming an
operating expense ratio of 0.58% and a 5%
annual return throughout the periods........ $6.00 $19.00 $32.00 $73.00
</TABLE>
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED ("MERRILL LYNCH")
CHARGES AN ANNUAL PROGRAM PARTICIPATION FEE, PRESENTLY $100 FOR INDIVIDUALS, FOR
THE CMA SERVICE (AN ADDITIONAL FEE, PRESENTLY $25, IS CHARGED FOR PARTICIPATION
IN THE CMA VISA(R) GOLD PROGRAM). SHAREHOLDERS OF THE GOVERNMENT FUND WHOSE
ACCOUNTS ARE MAINTAINED DIRECTLY WITH THE GOVERNMENT FUND'S TRANSFER AGENT AND
WHO ARE NOT SUBSCRIBERS TO THE CMA PROGRAM WILL NOT BE CHARGED THE CMA PROGRAM
FEE BUT WILL NOT RECEIVE ANY OF THE ADDITIONAL SERVICES AVAILABLE TO CMA PROGRAM
SUBSCRIBERS.
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. 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.
Government Fund
2
<PAGE> 14
FINANCIAL HIGHLIGHTS
Financial statements for the fiscal year ended March 31, 1995 and the
independent auditors' report thereon are included in the Statement of Additional
Information. The following per share data and ratios have been derived from
information provided in financial statements of the Government Fund audited by
Deloitte & Touche LLP, independent auditors.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31,
----------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSET VALUE:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ---------- ---------- ----------
Investment income--net.................... .0419 .0271 .0294 .0473 .0704 .0819 .0737
Realized and unrealized gain (loss) on
investments--net........................ .0008 (.0013) .0038 .0034 .0014 .0006 (.0013)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations........... .0427 .0258 .0332 .0507 .0718 .0825 .0724
---------- ---------- ---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net.................... (.0419) (.0271) (.0294) (.0473) (.0704) (.0819) (.0724)
Realized gain on investments--net......... (.0002) (.0004) (.0026) (.0036) (.0014)* (.0006)* --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total dividends and distributions.......... (.0421) (.0275) (.0320) (.0509) (.0718) (.0825) (.0724)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of year............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= ========= ========= =========
TOTAL INVESTMENT RETURN.................... 4.30% 2.79% 3.25% 5.17% 7.46% 8.57% 7.50%
========= ========= ========= ========= ========= ========= =========
RATIOS TO AVERAGE NET ASSETS:
Expenses, excluding distribution fees...... .45% .43% .43% .43% .43% .45% .46%
========= ========= ========= ========= ========= ========= =========
Expenses................................... .58% .56% .55% .56% .56% .57% .59%
========= ========= ========= ========= ========= ========= =========
Investment income and realized gain (loss)
on investments--net....................... 4.18% 2.75% 3.20% 5.05% 7.11%* 8.21%* 7.25%*
========= ========= ========= ========= ========= ========= =========
SUPPLEMENTAL DATA:
Net assets, end of year (in thousands)..... $3,132,803 $3,563,595 $3,858,017 $4,452,247 $5,228,619 $3,515,578 $2,494,905
========= ========= ========= ========= ========= ========= =========
<CAPTION>
1988 1987 1986
---------- ---------- ----------
<S> <<C> <C> <C>
INCREASE (DECREASE) IN NET ASSET VALUE:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year......... $ 1.00 $ 1.00 $ 1.00
---------- ---------- ----------
Investment income--net.................... .0586 .0546 .0702
Realized and unrealized gain (loss) on
investments--net........................ .0011 .0018 .0042
---------- ---------- ----------
Total from investment operations........... .0597 .0564 .0744
---------- ---------- ----------
Less dividends and distributions:
Investment income--net.................... (.0586) (.0546) (.0702)
Realized gain on investments--net......... (.0011)* (.0018)* (.0042)*
---------- ---------- ----------
Total dividends and distributions.......... (.0597) (.0564) (.0744)
---------- ---------- ----------
Net asset value, end of year............... $ 1.00 $ 1.00 $ 1.00
========= ========= =========
TOTAL INVESTMENT RETURN.................... 6.13% 5.80% 7.68%
========= ========= =========
RATIOS TO AVERAGE NET ASSETS:
Expenses, excluding distribution fees...... .47% .46% .48%
========= ========= =========
Expenses................................... .59% .59% .61%
========= ========= =========
Investment income and realized gain (loss)
on investments--net....................... 5.97%* 5.63%* 7.43%*
========= ========= =========
SUPPLEMENTAL DATA:
Net assets, end of year (in thousands)..... $2,362,766 $2,076,907 $1,903,593
========= ========= =========
</TABLE>
- ------------
* Includes unrealized gains (losses).
Government Fund
3
<PAGE> 15
YIELD INFORMATION
Set forth below is yield information as to the annualized and compounded
annualized yield for the indicated seven-day periods.
<TABLE>
<CAPTION>
SEVEN-DAY PERIOD ENDED
-----------------------------
MARCH 31, JUNE 30,
1995 1995
------------ ------------
<S> <C> <C>
Annualized Yield:
Including gains and losses................................ 5.46% 5.46%
Excluding gains and losses................................ 5.46% 5.44%
Compounded Annualized Yield.................................... 5.61% 5.59%
Average Maturity of Portfolio at End of Period................. 54 days 75 days
</TABLE>
The yield of the Government Fund refers to the income generated by an
investment in the Government Fund over a stated seven-day period. This income is
then annualized: that is, the amount of income generated by the investment
during that week is assumed to be generated each week over a 52-week period and
is shown as a percentage of the investment. The compounded annualized yield
(which excludes gains and losses) is calculated similarly but, when annualized,
the income earned by an investment in the Government Fund is assumed to be
reinvested. The compounded annualized yield will be somewhat higher than the
yield because of the effect of the assumed reinvestment.
The yield on 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. The yield on Government Fund
shares for various reasons may not be comparable to the yield on shares of other
money market funds or other investments. Current yield information may not
provide a basis for comparison with bank deposits or other investments which pay
a fixed yield over a stated period of time.
On occasion, the Government Fund may compare its yield to (i) averages
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 IndexTM for money
market deposit accounts offered by the 100 leading banks and thrift institutions
in the ten largest standard metropolitan statistical areas, (iii) yield data
reported by Lipper Analytical Services, Inc., (iv) the yield on an investment in
90-day Treasury bills on a rolling basis, assuming quarterly compounding, (v)
performance data published by Morningstar Publications, Inc., Money Magazine,
U.S. News and World Report, Business Week, CDA Investment Technology, Inc.,
Forbes Magazine and Fortune Magazine or (vi) historical yield data relating to
other central asset accounts similar to the CMA program. As with yield
quotations, yield comparisons should not be considered indicative of the
Government Fund's yield or relative performance for any future period.
Government Fund
4
<PAGE> 16
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the Government Fund are to seek preservation
of capital, liquidity and current income available from investing exclusively in
a diversified portfolio of short-term marketable securities which are direct
obligations of the U.S. Government and repurchase agreements pertaining to such
securities. Direct U.S. Government obligations consist of securities issued, or
guaranteed as to principal and interest, by the U.S. Government and which are
backed by the full faith and credit of the United States. The Government Fund
may not invest in securities issued or guaranteed by U.S. Government agencies,
instrumentalities or Government-sponsored enterprises which are not backed by
the full faith and credit of the United States. There can be no assurance that
the investment objectives of the Government Fund will be realized.
Investment in Government Fund shares offers several benefits. The
Government Fund seeks to provide as high a yield potential, consistent with its
objectives, as is available from short-term U.S. Government securities utilizing
professional money market management and block purchases of securities. It
provides high liquidity because of its redemption features and seeks reduced
market risk resulting from diversification of assets. The shareholder is also
relieved from administrative burdens associated with direct investment in short-
term U.S. Government securities, such as coordinating maturities and
reinvestments, safekeeping and making numerous buy-sell decisions. These
benefits are at least partially offset by certain expenses borne by investors,
including management fees, distribution fees, administrative costs and
operational costs.
The Government Fund may invest in the U.S. Government securities described
above pursuant to repurchase agreements. Repurchase agreements may be entered
into only with a member bank of the Federal Reserve System or a primary dealer
in U.S. Government securities or an affiliate thereof. Under such agreements,
the bank or primary dealer or an affiliate thereof agrees, upon entering into
the contract, to repurchase the security from the Government Fund at a mutually
agreed upon time and price, thereby determining the yield during the term of the
agreement. This results in a fixed rate of return insulated from market
fluctuations during such period.
Preservation of capital is a prime investment objective of the Government
Fund and the direct U.S. Government obligations in which it will invest are
generally considered to have the lowest principal risk among money market
securities. Historically, direct U.S. Government obligations have generally had
lower rates of return than other money market securities with less safety.
Repurchase agreements may be construed to be collateralized loans by the
purchaser to the seller secured by the securities transferred to the purchaser.
In the event of default by the seller under a repurchase agreement construed to
be a collateralized loan, the underlying securities are not owned by the
Government Fund but only constitute collateral for the seller's obligation to
pay the repurchase price. With respect to repurchase agreements, there is also
the risk of the failure of parties involved to repurchase at the agreed upon
price, in which event the Government Fund may suffer time delays and incur costs
or possible losses in connection with such transactions.
The Government Fund may purchase portfolio securities on a forward
commitment basis at fixed purchase terms. The purchase of portfolio securities
on a forward commitment basis involves the risk that the yields available in the
market when the delivery takes place may actually be higher than those obtained
in the transaction itself; if yields increase, the value of the securities
purchased on a forward commitment basis will
Government Fund
5
<PAGE> 17
generally decrease. A separate account of the Government Fund will be
established with its custodian consisting of cash or liquid money market
securities having a market value at all times at least equal to the amount of
the forward commitment.
For purposes of its investment policies, the Government Fund defines
short-term U.S. Government securities as securities having a maturity of not
more than 762 days (25 months). Fund Asset Management, L.P. (the "Investment
Adviser") expects that substantially all the assets of the Government Fund will
be invested in securities maturing in not more than 397 days (13 months) but at
times some portion may have maturities up to not more than 762 days (25 months).
The dollar-weighted average maturity of the Government Fund's portfolio will not
exceed 90 days. During the Government Fund's fiscal year ended March 31, 1995,
the average maturity of its portfolio ranged from 34 days to 64 days.
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 as defined in the Investment Company Act. Among the more
significant restrictions, the Government Fund may not: (1) purchase any
securities other than short-term marketable securities which are direct
obligations of the U.S. Government and repurchase agreements pertaining to such
securities; (2) enter into repurchase agreements with any one bank or primary
dealer or an affiliate thereof, if immediately thereafter, more than 5% of the
value of its total assets (taken at market value) would be invested in
repurchase agreements with such bank or primary dealer or an affiliate thereof;
and (3) enter into repurchase agreements if, as a result thereof, more than 10%
of the Government Fund's total assets (taken at market value at the time of each
investment) would be subject to repurchase agreements maturing in more than
seven days.
Government Fund
6
<PAGE> 18
PROSPECTUS
JULY 28, 1995
CMA TAX-EXEMPT FUND
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 - PHONE NO. (609) 282-2800
CMA Tax-Exempt Fund (the "Tax-Exempt Fund") is a no-load, diversified,
open-end investment company 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 (as
defined herein). Portfolio securities will consist principally of short-term
municipal notes, variable rate demand notes and short-term municipal commercial
paper. All of the investments of the Tax-Exempt Fund will be in securities with
remaining maturities of not more than 397 days (13 months). The dollar-weighted
average maturity of the Tax-Exempt Fund's portfolio will be 90 days or less.
Dividends are declared and reinvested daily in the form of additional shares at
net asset value. 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. The
Tax-Exempt Fund has adopted a Distribution and Shareholder Servicing Plan in
compliance with Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "Investment Company Act"). The Tax-Exempt Fund may invest in certain
otherwise tax-exempt securities which are classified as "private activity bonds"
which may be subject to an alternative minimum tax. See "Taxes". The Tax-Exempt
Fund also may invest in derivative or synthetic municipal instruments. See
"Investment Objectives and Policies--Portfolio Investments--Derivative
Products". There can be no assurance that the investment objectives of the
Tax-Exempt Fund will be realized.
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 is a concise statement of information about the Tax-Exempt
Fund that is relevant to making an investment in the Tax-Exempt Fund. This
Prospectus should be read carefully and retained for future reference. A
statement containing additional information about the Tax-Exempt Fund, dated
July 28, 1995 (the "Statement of Additional Information"), has been filed with
the Securities and Exchange Commission and can be obtained, without charge, by
calling or writing to the Tax-Exempt Fund at the above telephone number or
address. The Statement of Additional Information is hereby incorporated by
reference into this Prospectus.
------------------------
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Fee Table......................... 2
Financial Highlights.............. 3
Yield Information................. 4
Investment Objectives and
Policies........................ 4
Appendix.......................... A-1
Purchase of Shares.............. A-1
Redemption of Shares............ A-4
<CAPTION>
PAGE
------
<S> <C>
Management of the Funds........... A-7
Portfolio Transactions............ A-9
Dividends......................... A-10
Determination of Net Asset
Value........................... A-10
Taxes............................. A-11
Additional Information............ A-13
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 19
FEE TABLE
<TABLE>
<S> <C> <C>
TAX-EXEMPT FUND ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS) FOR
THE FISCAL YEAR ENDED MARCH 31, 1995:
Management Fees(a).............................................................. 0.39%
Rule 12b-1 Fees(b).............................................................. 0.13%
Other Expenses:
Dividend and Transfer Agency Fees(c).................................... 0.01%
Other Fees.............................................................. 0.02%
----
Total Other Expenses............................................................ 0.03%
----
Total Tax-Exempt Fund Operating Expenses........................................ 0.55%
====
</TABLE>
- ------------
(a) See "Management of the Funds--Investment Advisory Arrangements"--page A-8.
(b) See "Purchase of Shares"--page A-1.
(c) See "Management of the Funds--Transfer Agency Services"--page A-9.
EXAMPLE:
<TABLE>
<CAPTION>
CUMULATIVE EXPENSES
PAID FOR THE PERIOD OF:
---------------------------------------------
1 3 5 10
YEAR YEARS YEARS YEARS
----- ------ ------ ------
<S> <C> <C> <C> <C>
An investor would pay the following expenses
on a $1,000 investment, assuming an
operating expense ratio of 0.55% and a 5%
annual return throughout the periods........ $6.00 $18.00 $31.00 $69.00
</TABLE>
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED ("MERRILL LYNCH")
CHARGES AN ANNUAL PROGRAM PARTICIPATION FEE, PRESENTLY $100 FOR INDIVIDUALS, FOR
THE CMA SERVICE (AN ADDITIONAL FEE, PRESENTLY $25, IS CHARGED FOR PARTICIPATION
IN THE CMA VISA(R) GOLD PROGRAM). SHAREHOLDERS OF THE TAX-EXEMPT FUND WHOSE
ACCOUNTS ARE MAINTAINED DIRECTLY WITH THE TAX-EXEMPT FUND'S TRANSFER AGENT AND
WHO ARE NOT SUBSCRIBERS TO THE CMA PROGRAM WILL NOT BE CHARGED THE CMA PROGRAM
FEE BUT WILL NOT RECEIVE ANY OF THE ADDITIONAL SERVICES AVAILABLE TO CMA PROGRAM
SUBSCRIBERS.
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. 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.
Tax-Exempt Fund
2
<PAGE> 20
FINANCIAL HIGHLIGHTS
Financial statements for the fiscal year ended March 31, 1995 and the
independent auditor's report thereon are included in the Statement of Additional
Information. The following per share data and ratios have been derived from
information provided in financial statements of the Tax-Exempt Fund audited by
Deloitte & Touche LLP, independent auditors.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31,
----------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSET VALUE:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ---------- ---------- ----------
Investment income--net................. .03 .02 .02 .04 .05 .06 .05
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations........ .03 .02 .02 .04 .05 .06 .05
---------- ---------- ---------- ---------- ---------- ---------- ----------
Less dividends:
Investment income--net................. (.03) (.02) (.02) (.04) (.05) (.06) (.05)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of year............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= ========= ========= =========
TOTAL INVESTMENT RETURN................. 2.76% 1.96% 2.36% 3.76% 5.39% 5.94% 5.25%
========= ========= ========= ========= ========= ========= =========
RATIOS TO AVERAGE NET ASSETS:
Expenses, excluding distribution fees... .43% .42% .42% .42% .41% .42% .42%
========= ========= ========= ========= ========= ========= =========
Expenses................................ .55% .55% .54% .54% .54% .54% .54%
========= ========= ========= ========= ========= ========= =========
Investment income--net.................. 2.70% 1.94% 2.33% 3.70% 5.24% 5.79% 5.11%
========= ========= ========= ========= ========= ========= =========
SUPPLEMENTAL DATA:
Net assets, end of year (in thousands).. $7,391,964 $7,911,960 $7,527,054 $7,874,437 $8,695,795 $8,356,203 $7,348,164
========= ========= ========= ========= ========= ========= =========
<CAPTION>
1988 1987 1986
---------- ---------- ----------
<S> <<C> <C> <C>
INCREASE (DECREASE) IN NET ASSET VALUE:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year...... $ 1.00 $ 1.00 $ 1.00
---------- ---------- ----------
Investment income--net................. .04 .04 .05
---------- ---------- ----------
Total from investment operations........ .04 .04 .05
---------- ---------- ----------
Less dividends:
Investment income--net................. (.04) (.04) (.05)
---------- ---------- ----------
Net asset value, end of year............ $ 1.00 $ 1.00 $ 1.00
========= ========= =========
TOTAL INVESTMENT RETURN................. 4.38% 3.97% 4.89%
========= ========= =========
RATIOS TO AVERAGE NET ASSETS:
Expenses, excluding distribution fees... .42% .42% .43%
========= ========= =========
Expenses................................ .54% .55% .56%
========= ========= =========
Investment income--net.................. 4.32% 3.89% 4.80%
========= ========= =========
SUPPLEMENTAL DATA:
Net assets, end of year (in thousands).. $8,277,540 $8,534,034 $7,171,113
========= ========= =========
</TABLE>
Tax-Exempt Fund
3
<PAGE> 21
YIELD INFORMATION
Set forth below is yield information as to the annualized and compounded
annualized yield and the tax-equivalent yield for the indicated periods.
<TABLE>
<CAPTION>
SEVEN-DAY PERIOD
ENDED
-------------------
MARCH JUNE
31, 30,
1995 1995
------- -------
<S> <C> <C>
Annualized Yield................................................. 3.51% 3.70%
Compounded Annualized Yield...................................... 3.57% 3.77%
Average Maturity of Portfolio at End of Period................... 57 days 43 days
</TABLE>
<TABLE>
<CAPTION>
30-DAY PERIOD ENDED
-------------------
MARCH JUNE
31, 30,
1995 1995
------- -------
<S> <C> <C>
Tax-equivalent Yield*............................................ 4.61% 4.64%
</TABLE>
- ---------------
* Based upon a Federal income tax rate of 28%.
The yield of the Tax-Exempt Fund refers to the income generated by an
investment in the Tax-Exempt Fund over a stated seven-day period. This income is
then annualized: that is, the amount of income generated by the investment
during that week is assumed to be generated each week over a 52-week period and
is shown as a percentage of the investment. The compounded annualized yield is
calculated similarly but, when annualized, the income earned by an investment in
the Tax-Exempt Fund is assumed to be reinvested. The compounded annualized yield
will be somewhat higher than the yield because of the effect of the assumed
reinvestment.
The yield on 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
short-term Tax-Exempt Securities, average portfolio maturity, the types and
quality of portfolio securities held and operating expenses. Current yield
information may not provide a basis for comparison with bank deposits or other
investments which pay a fixed yield over a stated period of time.
On occasion, the Tax-Exempt Fund may compare its yield to (i) the
Donoghue's Tax-Free 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) yield data published by Lipper
Analytical Services, Inc., (iii) performance data published by Morningstar
Publications, Inc., Money Magazine, U.S. News & World Report, Business Week, CDA
Investment Technology, Inc., Forbes Magazine and Fortune Magazine, (iv)
historical yield data relating to other central asset accounts similar to the
CMA program or (v) the average yield reported by the Bank Rate Monitor National
IndexTM for money market deposit accounts offered by the 100 leading banks and
thrift institutions in the ten largest standard metropolitan statistical areas.
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.
INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT OBJECTIVES
The investment objectives of the Tax-Exempt Fund are to seek current income
exempt from Federal income taxes, preservation of capital and liquidity
available from investing in a diversified portfolio of short-
Tax-Exempt Fund
4
<PAGE> 22
term high quality Tax-Exempt Securities. The Tax-Exempt Fund seeks to achieve
its objectives 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 or derivative or synthetic municipal instruments, the interest
from which is exempt from Federal income tax (such obligations are herein
referred to as "Tax-Exempt Securities"). The Tax-Exempt Fund may invest in
certain otherwise tax-exempt securities which are classified as "private
activity bonds" which may be subject to an alternative minimum tax. See "Taxes".
The investment objectives of the Tax-Exempt Fund described in this paragraph are
a fundamental policy of the Tax-Exempt Fund and may not be changed without a
vote of the majority of the outstanding shares of the Tax-Exempt Fund. There can
be no assurance that the investment objectives of the Tax-Exempt Fund will be
realized.
POTENTIAL BENEFITS
Investment in Tax-Exempt Fund shares offers several benefits. The
Tax-Exempt Fund seeks to provide as high a tax-exempt yield potential,
consistent with its objectives, as is available from the short-term Tax-Exempt
Securities in which it invests utilizing professional management and block
purchases of securities. It provides high liquidity because of its redemption
features and seeks reduced risk resulting from diversification of assets. The
shareholder is also relieved from administrative burdens associated with direct
investment in short-term securities, such as coordinating maturities and
reinvestments, safekeeping and making numerous buy-sell decisions. These
benefits are at least partially offset by certain expenses borne by investors,
including management fees, distribution fees, administrative costs and
operational costs.
PORTFOLIO INVESTMENTS
The Tax-Exempt Securities in which the Tax-Exempt Fund invests include
municipal notes, municipal commercial paper and municipal bonds with a remaining
maturity of not more than 397 days (13 months). The Tax-Exempt Fund will also
invest in variable rate demand notes and participations therein (see "Variable
Rate Demand Notes" below) and derivative or synthetic municipal instruments (see
"Derivative Products" below). Municipal notes include tax anticipation notes,
bond anticipation notes and revenue anticipation notes. Anticipation notes are
sold as interim financing in anticipation of tax collection, bond sales or
revenue receipts. Municipal commercial paper refers to short-term unsecured
promissory notes issued generally to finance short-term credit needs. The
Tax-Exempt Fund may invest in all types of tax-exempt instruments currently
outstanding or to be issued in the future which satisfy the short-term maturity
and quality standards of the Tax-Exempt Fund.
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 or private activity bonds
where the entities supplying the revenues from which the issues are to be paid
are in the same industry.
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
Tax-Exempt Fund
5
<PAGE> 23
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 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.
Variable Rate Demand Notes. 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 on the prime rate of a bank or some
other appropriate interest rate adjustment index.
The Tax-Exempt 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 commercial banks ("institutions").
Participating VRDNs provide the Tax-Exempt 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 30 days. In addition, each Participating VRDN is
backed by an irrevocable letter of credit or similar commitment of the
institution. The Tax-Exempt 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 or issuing the repurchase commitment.
VRDNs that contain an unconditional right of demand to receive payment of
the unpaid principal balance plus accrued interest on a notice period exceeding
seven days may be deemed to be illiquid securities. A VRDN with a demand notice
period exceeding seven days will therefore be subject to the Fund's restriction
on illiquid investments unless, in the judgment of the Trustees, such VRDN is
liquid. The Trustees may adopt guidelines and delegate to Fund Asset Management,
L.P. (the "Investment Adviser") the daily function of determining and monitoring
liquidity of such VRDNs. The Trustees, however, will retain sufficient oversight
and be ultimately responsible for such determinations.
The Tax-Exempt Fund has been advised by its counsel that the Tax-Exempt
Fund should be entitled to treat the income received on Participating VRDNs as
interest from tax-exempt obligations provided that certain conditions are met.
It is presently contemplated that the Tax-Exempt Fund will not invest more than
a limited amount (not more than 20%) of its total assets in Participating VRDNs.
Derivative Products. 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
Tax-Exempt Fund
6
<PAGE> 24
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 municipal
bonds. 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.
Municipal Lease Obligations. Also included within the general category of
the Tax-Exempt Securities are participation certificates in a lease, an
installment purchase contract or a conditional sales contract (hereinafter
collectively called "lease obligations") entered into by a state or political
subdivision to finance the acquisition or construction of equipment, land or
facilities. Although lease obligations do not constitute general obligations of
the issuer for which the lessee's unlimited taxing power is pledged, a lease
obligation is frequently backed by the lessee's covenant to budget for,
appropriate and make the payments due under the lease obligation. However,
certain lease obligations contain "non-appropriation" clauses which provide that
the lessee has no obligation to make lease or installment purchase payments in
future years unless money is appropriated for such purpose on a yearly basis.
Although "non-appropriation" lease obligations are secured by the leased
property, disposition of the property in the event of foreclosure might prove
difficult. These securities represent a relatively new type of financing that
has not yet developed the depth of marketability associated with more
conventional securities. Certain investments in lease obligations may be
illiquid. The Tax-Exempt Fund may not invest in illiquid lease obligations if
such investments, together with all other illiquid investments, would exceed 10%
of the Tax-Exempt Fund's net assets. The Tax-Exempt Fund may, however, invest
without regard to such limitation in lease obligations which the Investment
Adviser, pursuant to guidelines which have been adopted by the Board of Trustees
and subject to the supervision of the Board, determines to be liquid. The
Investment Adviser will deem lease obligations liquid if they are publicly
offered and have received an investment grade rating of Baa or better by Moody's
Investors Service, Inc. ("Moody's"), or BBB or better by Standard & Poor's
Ratings Group ("Standard & Poor's") or Fitch Investors Service, Inc. ("Fitch").
Unrated lease obligations, or those rated below investment grade, will be
considered liquid if the obligations come to the market through an underwritten
public offering and at least two dealers are willing to give competitive bids.
In reference to the unrated lease obligations, the Investment
Tax-Exempt Fund
7
<PAGE> 25
Adviser must, among other things, also review the creditworthiness of the
municipality obligated to make payment under the lease obligation and make
certain specified determinations based on such factors as the existence of a
rating or credit enhancement such as insurance, the frequency of trades or
quotes for the obligation and the willingness of dealers to make a market in the
obligation.
SHORT-TERM MATURITY STANDARDS
All of the investments of the Tax-Exempt Fund will be in securities with
remaining maturities of not more than 397 days (13 months). The dollar-weighted
average maturity of the Tax-Exempt Fund's portfolio will be 90 days or less. The
maturity of VRDNs (including Participating VRDNs) 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
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 30 years from the date of issuance.
HIGH QUALITY STANDARDS
The Tax-Exempt Fund's portfolio investments in municipal notes and
short-term tax-exempt commercial paper will be limited to those obligations
which (i) are secured by a pledge of the full faith and credit of the United
States, or (ii) 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 Tax-
Exempt Fund. The Tax-Exempt Fund's investments in municipal bonds (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 Tax-Exempt Fund. Currently, there are three
NRSROs which rate municipal obligations: Fitch, Moody's and Standard & Poor's.
Certain tax-exempt obligations (primarily VRDNs and Participating VRDNs) may be
entitled to the benefit of letters of credit or similar commitments issued by
financial institutions and, in such instances, the Investment Adviser will take
into account the obligation of the financial institution 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, such obligations are
equivalent to securities having the ratings described above.
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, such securities are
generally considered by the Investment Adviser to have low risk of the failure
of issuers or credit enhancers to meet their principal and interest obligations.
These securities have a lower principal risk compared to lower rated obligations
and generally to longer term obligations which entail the risk of changing
conditions over a longer period of time.
OTHER FACTORS
Management of the Tax-Exempt Fund will endeavor to be as fully invested as
reasonably practicable in order to maximize the yield on the Tax-Exempt Fund's
portfolio. Because the Tax-Exempt Fund does not intend to realize taxable
investment income, it will not invest in taxable short-term money market
securities.
Tax-Exempt Fund
8
<PAGE> 26
Tax-Exempt Securities generally do not trade on the basis of same day
settlements and, accordingly, a portfolio of such securities cannot be managed
on a daily basis with the same flexibility as a portfolio of money market
securities which can be bought and sold on a same day basis. 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. The
Tax-Exempt Fund may also be required to maintain cash reserves or incur
temporary bank borrowings to make redemption payments which are made on the same
day the redemption request is received. Such inability to be fully invested
would lower the yield on the portfolio.
The Tax-Exempt Fund's portfolio holdings represent a significant percentage
of the market in short-term tax-exempt securities and the yield on the portfolio
could be negatively impacted 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.
Tax-Exempt Securities may at times be purchased or sold on a delayed
delivery basis or on 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. The Tax-Exempt Fund will only make commitments
to purchase such securities with the intention of actually acquiring the
securities, but the Fund may sell these securities prior to settlement date if
it is deemed advisable. No new when-issued commitments will be made if more than
40% of the Tax-Exempt Fund's net assets would become so committed. Purchasing
Tax-Exempt Securities on a when-issued basis involves the risk that the yields
available in the market when the delivery takes place may actually be higher
than those obtained in the transaction itself; if yields 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.
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 as defined in the Investment Company Act. Among the more significant
restrictions, the Tax-Exempt Fund may not: (1) purchase any securities other
than Tax-Exempt Securities referred to under "Investment Objectives and
Policies" herein and "Appendix-Information Concerning Tax-Exempt Securities" in
the Statement of Additional Information; (2) invest more than 5% of its total
assets (taken at market value at the time of each investment) in the securities
of any one issuer except that such restriction shall not apply to securities
backed (i.e., guaranteed) by the United States Government or its agencies or
instrumentalities (for purposes of this restriction, the Tax-Exempt Fund will
regard each state and each political subdivision, agency or instrumentality of
such state and each multi-state 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 a non-government entity then the entity with the ultimate
responsibility for the payment of interest and principal may be regarded as the
sole issuer); and (3) 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.
Tax-Exempt Fund
9
<PAGE> 27
[This page is intentionally left blank.]
<PAGE> 28
PROSPECTUS
JULY 28, 1995
CMA TREASURY FUND
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 - PHONE NO. (609) 282-2800
CMA Treasury Fund (the "Treasury Fund") is a no-load, diversified, open-end
investment company seeking preservation of capital, liquidity and current income
available from investing exclusively in a diversified portfolio of short-term
marketable securities which are direct obligations of the U.S. Treasury.
Dividends are declared and reinvested daily in the form of additional shares at
net asset value. 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. The Treasury Fund
has adopted a Distribution and Shareholder Servicing Plan in compliance with
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "Investment
Company Act"). There can be no assurance that the investment objectives of the
Treasury Fund will be realized.
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 is a concise statement of information about the Treasury
Fund that is relevant to making an investment in the Treasury Fund. This
Prospectus should be read carefully and retained for future reference. A
statement containing additional information about the Treasury Fund, dated July
28, 1995 (the "Statement of Additional Information"), has been filed with the
Securities and Exchange Commission and can be obtained, without charge, by
calling or writing to the Treasury Fund at the above telephone number or
address. The Statement of Additional Information is hereby incorporated by
reference into this Prospectus.
------------------------
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Fee Table......................... 2
Financial Highlights.............. 3
Yield Information................. 4
Investment Objectives and
Policies........................ 5
Appendix.......................... A-1
Purchase of Shares.............. A-1
Redemption of Shares............ A-4
<CAPTION>
PAGE
-----
<S> <C>
Management of the Funds........... A-7
Portfolio Transactions............ A-9
Dividends......................... A-10
Determination of Net Asset
Value........................... A-10
Taxes............................. A-11
Additional Information............ A-13
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 29
FEE TABLE
<TABLE>
<S> <C> <C>
TREASURY FUND ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS) FOR
THE FISCAL YEAR ENDED MARCH 31, 1995:
Management Fees(a).............................................................. 0.44%
Rule 12b-1 Fees(b).............................................................. 0.13%
Other Expenses:
Dividend and Transfer Agency Fees(c).................................... 0.02%
Other Fees.............................................................. 0.03%
----
Total Other Expenses............................................................ 0.05%
----
Total Treasury Fund Operating Expenses.......................................... 0.62%
====
</TABLE>
- ------------
(a) See "Management of the Funds--Investment Advisory Arrangements"--page A-8.
(b) See "Purchase of Shares"--page A-1.
(c) See "Management of the Funds--Transfer Agency Services"--page A-9.
EXAMPLE:
<TABLE>
<CAPTION>
CUMULATIVE EXPENSES
PAID FOR THE PERIOD OF:
--------------------------------------------
1 3 5 10
YEAR YEARS YEARS YEARS
----- ------ ------ ------
<S> <C> <C> <C> <C>
An investor would pay the following expenses
on a $1,000 investment, assuming an
operating expense ratio of 0.62% and a 5%
annual return throughout the periods........ $6.00 $20.00 $35.00 $77.00
</TABLE>
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED ("MERRILL LYNCH")
CHARGES AN ANNUAL PROGRAM PARTICIPATION FEE, PRESENTLY $100 FOR INDIVIDUALS, FOR
THE CMA SERVICE (AN ADDITIONAL FEE, PRESENTLY $25, IS CHARGED FOR PARTICIPATION
IN THE CMA VISA(R) GOLD PROGRAM). SHAREHOLDERS OF THE TREASURY FUND WHOSE
ACCOUNTS ARE MAINTAINED DIRECTLY WITH THE FUND'S TRANSFER AGENT AND WHO ARE NOT
SUBSCRIBERS TO THE CMA PROGRAM WILL NOT BE CHARGED THE CMA PROGRAM FEE BUT WILL
NOT RECEIVE ANY OF THE ADDITIONAL SERVICES AVAILABLE TO CMA PROGRAM SUBSCRIBERS.
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. 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.
Treasury Fund
2
<PAGE> 30
FINANCIAL HIGHLIGHTS
Financial statements for the fiscal year ended March 31, 1995 and the
independent auditor's report thereon are included in the Statement of Additional
Information. The following per share data and ratios have been derived from
information provided in financial statements of the Treasury Fund audited by
Deloitte & Touche LLP, independent auditors.
<TABLE>
<CAPTION>
FOR THE
PERIOD
APRIL 15,
1991+
FOR THE YEAR ENDED MARCH 31, TO
-------------------------------------- MARCH 31,
1995 1994 1993 1992
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSET VALUE:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ----------
Investment income--net..................... .0409 .0250 .0278 .0453
Realized and unrealized gain on
investments--net........................ .0004 .0002 .0026 .0019
---------- ---------- ---------- ----------
Total from investment operations............. .0413 .0252 .0304 .0472
---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net..................... (.0409) (.0250) (.0278) (.0453)
Realized gain on investments--net.......... (.0002) (.0004) (.0024) (.0020)
---------- ---------- ---------- ----------
Total dividends and distributions............ (.0411) (.0254) (.0302) (.0473)
---------- ---------- ---------- ----------
Net asset value, end of period............... $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= =========
TOTAL INVESTMENT RETURN...................... 4.18% 2.57% 3.07% 5.02%*
========= ========= ========= =========
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement and excluding
distribution fees.......................... .49% .49% .48% .36%*
========= ========= ========= =========
Expenses, net of reimbursement............... .62% .61% .60% .49%*
========= ========= ========= =========
Expenses..................................... .62% .61% .62% .68%*
========= ========= ========= =========
Investment income and realized gain on
investments--net........................... 4.20% 2.55% 3.01% 4.67%*
========= ========= ========= =========
SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands)..... $1,428,724 $1,220,440 $1,287,061 $1,221,461
========= ========= ========= =========
</TABLE>
- ------------
+ Commencement of Operations.
* Annualized.
Treasury Fund
3
<PAGE> 31
YIELD INFORMATION
Set forth below is yield information as to the annualized and compounded
annualized yield for the indicated seven-day periods.
<TABLE>
<CAPTION>
SEVEN-DAY PERIOD
ENDED
---------------------
MARCH JUNE
31, 30,
1995 1995
------- -------
<S> <C> <C>
Annualized Yield:
Including gains and losses................................ 5.32% 5.24%
Excluding gains and losses................................ 5.30% 5.22%
Compounded Annualized Yield.................................... 5.44% 5.36%
Average Maturity of Portfolio at End of Period................. 52 days 80 days
</TABLE>
The yield of the Treasury Fund refers to the income generated by an
investment in the Treasury Fund over a stated seven-day period. This income is
then annualized; that is, the amount of income generated by the investment
during that period is assumed to be generated each seven-day period over a
52-week period and is shown as a percentage of the investment. The compounded
annualized yield (which excludes gains and losses) is calculated similarly but,
when annualized, the income earned by an investment in the Treasury Fund is
assumed to be reinvested. The compounded annualized yield will be somewhat
higher than the yield because of the effect of the assumed reinvestment.
The yield on 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
Treasury securities, average portfolio maturity, the types and quality of
portfolio securities held and operating expenses. The yield on Treasury Fund
shares for various reasons may not be comparable to the yield on shares of other
money market funds or other investments. Current yield information may not
provide a basis for comparison with bank deposits or other investments which pay
a fixed yield over a stated period of time.
On occasion, the Treasury Fund may compare its yield to (i) yield data
reported by Donoghue's Money Fund Report (including Donoghue's U.S. Funds
Average), 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 IndexTM for money market deposit accounts offered by
the 100 leading banks and thrift institutions in the ten largest standard
metropolitan statistical areas, (iii) yield data reported by Lipper Analytical
Services, Inc., (iv) the yield on an investment in 90-day Treasury bills on a
rolling basis, assuming quarterly compounding, (v) performance data published by
Morningstar Publications, Inc., Money Magazine, U.S. News & World Report,
Business Week, CDA Investment Technology, Inc., Forbes Magazine and Fortune
Magazine or (vi) historical yield data relating to other central asset accounts
similar to the CMA program. As with yield quotations, yield comparisons should
not be considered indicative of the Treasury Fund's yield or relative
performance for any future period.
Treasury Fund
4
<PAGE> 32
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the Treasury Fund are to seek preservation of
capital, liquidity and current income available from investing exclusively in a
diversified portfolio of short-term marketable securities which are direct
obligations of the U.S. Treasury. There can be no assurance that the investment
objectives of the Treasury Fund will be realized.
Preservation of capital is a prime investment objective of the Treasury
Fund and the direct U.S. Treasury obligations in which it will invest are
generally considered to have the lowest principal risk among money market
securities. Historically, direct U.S. Treasury obligations have generally had
lower rates of return than other money market securities with less safety.
For purposes of its investment objectives, the Treasury Fund defines
short-term marketable securities which are direct obligations of the U.S.
Treasury as any U.S. Treasury obligations having maturities of no more than 762
days (25 months). The dollar-weighted average maturity of the Treasury Fund's
portfolio will not exceed 90 days. During the year ended March 31, 1995, the
average maturity of the Treasury Fund's portfolio ranged from 29 days to 61
days.
Investment in Treasury Fund shares offers several benefits. The Treasury
Fund seeks to provide as high a yield potential, consistent with its objectives,
as is available through investment in short-term U.S. Treasury obligations
utilizing professional money market management and block purchases of
securities. It provides high liquidity because of its redemption features and
seeks reduced market risk resulting from diversification of assets. The
shareholder is also relieved from administrative burdens associated with direct
investment in U.S. Treasury securities, such as coordinating maturities and
reinvestments, and making numerous buy-sell decisions. These benefits are at
least partially offset by certain expenses borne by investors, including
management fees, distribution fees, administrative costs and operational costs.
Forward Commitments. The Treasury Fund may purchase portfolio securities
on a forward commitment basis at fixed purchase terms. The purchase of portfolio
securities on a forward commitment basis involves the risk that the yields
available in the market when the delivery takes place may actually be higher
than those obtained in the transaction itself; if yields increase, the value of
the securities purchased on a forward commitment basis will generally decrease.
A separate account of the Treasury Fund will be established with its custodian
consisting of cash or Treasury securities having a market value at all times at
least equal to the amount of the forward commitment.
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 as defined in the Investment Company Act. Among the more significant
restrictions, the Treasury Fund may not purchase any securities other than
direct obligations of the U.S. Treasury with remaining maturities of 762 days
(25 months) or less.
Treasury Fund
5
<PAGE> 33
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<PAGE> 34
Appendix
This Appendix constitutes a part of the Prospectuses of CMA Money Fund (the
"Money Market Fund"), CMA Government Securities Fund (the "Government Fund"),
CMA Tax-Exempt Fund (the "Tax-Exempt Fund") and CMA Treasury Fund (the "Treasury
Fund"). The Money Market Fund, the Government Fund, the Tax-Exempt Fund and the
Treasury Fund are referred to in this Appendix collectively as the "Funds".
Unless otherwise indicated, the information set forth herein is applicable to
each Fund. Management of the Funds has considered the possibility that the use
of a combined prospectus may subject one Fund to liability for an alleged
misstatement relating to another Fund. Management believes that this possibility
is remote.
As described in the description of the Merrill Lynch Cash Management
Account program, a subscriber to CMA financial services may also elect to have
free credit balances in CMA accounts deposited in individual money market
deposit accounts established for such subscriber at designated depository
institutions pursuant to the Insured SavingsSM Account (the "Insured Savings
Account"). In addition, investors may also have their free credit balances
invested in certain series of CMA Multi-State Municipal Series Trust (the "CMA
State Funds"), each of which is designed to provide income that is exempt from
Federal income taxes, personal income taxes of the designated state and, in
certain instances, local income taxes. For more information about the CMA State
Funds, investors should contact their Merrill Lynch Financial Consultants. The
Funds, the CMA State Funds and the Insured Savings Account are collectively
referred to in this Appendix as the Money Accounts. However, this Appendix does
not purport to describe the Insured Savings Account or the CMA State Funds.
Prospective participants in the Insured Savings Account are referred to the fact
sheet with respect thereto which is available from Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("Merrill Lynch"), and prospective investors in the CMA
State Funds are referred to the prospectuses for those funds which are available
from Merrill Lynch.
PURCHASE OF SHARES
The shares of the Funds are offered to participants in the CMA program to
provide a medium for the investment of free credit balances held in CMA accounts
and to individual investors maintaining accounts directly with the Funds'
Transfer Agent. Persons subscribing to CMA services will have free credit
balances invested in shares of the Money Market Fund, the Government Fund, the
Tax-Exempt Fund or the Treasury Fund, depending on which Fund has been
designated by the participant as the primary investment account (the "Primary
Money Account"). Alternatively, subscribers may designate the Insured Savings
Account or one of the CMA State Funds as their Primary Money Account.
Purchases of shares of a Fund designated as the Primary Money Account will
be made pursuant to the CMA automatic or manual purchase procedures described
below. Purchases of shares of the Funds may also be made by investors
maintaining accounts with the Funds' Transfer Agent pursuant to the procedures
described below.
The purchase price for shares of the Funds is the net asset value per share
next determined after receipt by a Fund of an automatic or manual purchase order
in proper form. Shares purchased will receive the next dividend declared after
such shares are issued which will be immediately prior to the 12 noon, New York
time, pricing on the following business day. A purchase order will not be
effective until cash in the form of Federal funds becomes available to the Fund
(see below for information as to when free credit balances held in CMA
A-1
<PAGE> 35
accounts become available to the Funds). There are no minimum investment
requirements for subscribers to the Cash Management Account program other than
for manual purchases.
PURCHASE OF SHARES BY CASH MANAGEMENT ACCOUNT SUBSCRIBERS
Subscribers to the CMA service have the option to change the designation of
their Primary Money Account at any time by notifying their Merrill Lynch
Financial Consultants. At that time, a subscriber may instruct his or her
Financial Consultant to redeem shares of a Fund designated as the Primary Money
Account and to transfer the proceeds to the newly-designated Primary Money
Account.
Automatic Purchases. Free credit balances arising in a CMA account are
automatically invested in shares of a Fund designated as the Primary Money
Account not later than the first business day of each week on which either the
New York Stock Exchange or New York banks are open, which normally will be
Monday. Free credit balances arising from the following transactions will be
invested automatically prior to the automatic weekly sweeps. Free credit
balances arising from the sale of securities which do not settle on the day of
the transaction (such as most common and preferred stock transactions) and from
principal repayments on debt securities become available to the Funds and will
be invested in shares on the business day following receipt of the proceeds with
respect thereto in the CMA account. Proceeds from the sale of shares of Merrill
Lynch Ready Assets Trust and Merrill Lynch U.S.A. Government Reserves and from
the sale of securities settling on a same day basis also become available to the
Funds and will be invested in shares on the next business day following receipt.
Free credit balances of $1,000 or more arising from cash deposits into a CMA
account, dividend and interest payments or any other source become available to
the Funds and are invested in shares on the next business day following receipt
in the CMA account unless such balance results from a cash deposit made after
the cashiering deadline of the Merrill Lynch office in which the deposit is
made, in which case the resulting free credit balances are invested on the
second following business day. A CMA participant desiring to make a cash deposit
should contact his or her Merrill Lynch Financial Consultant for information
concerning the local office's cashiering deadline, which is dependent on such
office's arrangements with its commercial banks. Free credit balances of less
than $1,000 are invested in shares in the automatic weekly sweep. Free credit
balances of $1.00 or more are invested daily in certain accounts including those
established under the Working Capital ManagementTM account program or the CMA
for Retirement Plans program. Additional information on these programs is
available from Merrill Lynch.
Manual Purchases. Subscribers to the CMA service may make manual
investments of $1,000 or more at any time in shares of a Fund not selected as
their Primary Money Account. Manual purchases shall be effective on the day
following the day the order is placed with Merrill Lynch, except that orders
involving cash deposits made on the date of a manual purchase shall become
effective on the second business day thereafter if they are placed after the
cashiering deadline referred to in the preceding paragraph. As a result, CMA
customers who enter manual purchase orders which include cash deposits made on
that day after such cashiering deadline will not receive the daily dividend
which would have been received had their orders been entered prior to the
deadline. In addition, manual purchases of $500,000 or more can be made
effective on the same day the order is placed with Merrill Lynch provided that
requirements as to timely notification and transfer of a Federal funds wire in
the proper amount are met. CMA customers desiring further information on this
method of purchasing shares should contact their Merrill Lynch Financial
Consultants.
Merrill Lynch reserves the right to terminate a subscriber's participation
in the Cash Management Account program for any reason.
A-2
<PAGE> 36
All purchases of the Funds' shares and dividend reinvestments will be
confirmed to Cash Management Account subscribers (rounded to the nearest share)
in the transaction statement which is sent to all participants in such Account
monthly.
PURCHASE OF SHARES BY NON-CASH MANAGEMENT ACCOUNT SUBSCRIBERS
Shares of the Funds may be purchased by investors maintaining accounts
directly with the Funds' Transfer Agent who are not subscribers to the Cash
Management Account program. Shareholders of the Funds not subscribing to such
program will not be charged the applicable program fee, but will not receive any
of the services available to program subscribers, such as the Visa card/check
account or the automatic investment of free credit balances. The minimum initial
purchase for non-program subscribers is $5,000 and the minimum subsequent
purchase is $1,000. Investors desiring to purchase shares directly through the
Transfer Agent as described below should contact Merrill Lynch Financial Data
Services, Inc., P.O. Box 45290, Jacksonville, Florida 32232-5290 or call (800)
221-7210.
Payment to the Transfer Agent. Investors who are not subscribers to the
CMA program may submit purchase orders directly by mail or otherwise to the
Transfer Agent. Purchase orders by mail should be sent to Merrill Lynch
Financial Data Services, Inc., P.O. Box 45290, Jacksonville, Florida 32232-5290.
Purchase orders which are sent by hand should be delivered to Merrill Lynch
Financial Data Services, Inc., 4800 Deer Lake Drive East, Jacksonville, Florida
32246-6484. Investors opening a new account must enclose a completed Purchase
Application which is available from Merrill Lynch Financial Data Services, Inc.
Existing shareholders should enclose the detachable stub from a monthly account
statement which they have received. Checks should be made payable to Merrill
Lynch, Pierce, Fenner & Smith Incorporated. Certified checks are not necessary,
but checks are accepted subject to collection at full face value in U.S. funds
and must be drawn in U.S. dollars on a U.S. bank. Payments for the accounts of
corporations, foundations and other organizations may not be made by third party
checks. Since there is a three-day settlement period applicable to the sale of
most securities, delays may occur when an investor is liquidating other
investments for investment in one of the Funds.
As described under "Investment Objectives and Policies" in its Prospectus,
the Tax-Exempt Fund has reserved the right to suspend or otherwise limit sales
of its shares if, as a result of difficulties in obtaining portfolio securities,
it is determined that it is not in the interests of the Tax-Exempt Fund's
shareholders to issue additional shares. If sales of shares of the Tax-Exempt
Fund are suspended, shareholders who have designated such Fund as their Primary
Money Account will be permitted to designate the Money Market Fund, the
Government Fund, the Treasury Fund, one of the CMA State Funds (if available) or
the Insured Savings Account as their Primary Money Account. Pending such an
election, Merrill Lynch will consider various alternatives with respect to
automatic investments for such accounts, including the investment of free credit
balances in such accounts in shares of the Money Market Fund, the Government
Fund or the Treasury Fund.
Each Fund has entered into a Distribution Agreement with Merrill Lynch
pursuant to which Merrill Lynch acts as the distributor for the Fund.
Each Fund has adopted a Distribution and Shareholder Servicing Plan (each,
a "Distribution Plan") in compliance with Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "Investment Company Act") pursuant to which
Merrill Lynch receives a distribution fee under the Distribution
A-3
<PAGE> 37
Agreement from each Fund at the end of each month at the annual rate of 0.125%
of average daily net assets of such Fund attributable to subscribers to the CMA
program and to investors maintaining securities accounts at Merrill Lynch or
maintaining accounts directly with the Transfer Agent who are not subscribers to
such program, except that the value of the Fund shares in accounts maintained
directly with the Transfer Agent which are not serviced by Merrill Lynch
Financial Consultants will be excluded. The fees reimburse Merrill Lynch only
for actual expenses incurred in the fiscal year in which the fees are paid. The
distribution fee is to compensate Merrill Lynch Financial Consultants and other
directly involved branch office personnel for selling shares of each Fund and
for providing direct personal services to shareholders. For the fiscal year
ended March 31, 1995, $49,152,733 was paid to Merrill Lynch pursuant to the
Distribution Plans: $34,206,694 by the Money Market Fund, $4,013,060 by the
Government Fund, $9,357,280 by the Tax-Exempt Fund and $1,575,699 by the
Treasury Fund. The annual fee paid to Merrill Lynch for the fiscal year ended
March 31, 1995 aggregated 0.125% of average daily net assets of each Fund. At
June 30, 1995, the net assets of the Funds aggregated approximately $42.6
billion. At this asset level, the annual fees payable to Merrill Lynch pursuant
to the Distribution Plans would aggregate approximately $38.3 million by the
Money Market Fund, $3.8 million by the Government Fund, $9.1 million by the
Tax-Exempt Fund and $1.9 million by the Treasury Fund.
REDEMPTION OF SHARES
Each Fund is required to redeem for cash all full and fractional shares of
the Fund. The redemption price is the net asset value per share next determined
after receipt by the Transfer Agent of proper notice of redemption as described
in accordance with either the automatic or manual procedures set forth below. If
such notice is received by the Transfer Agent prior to the 12 noon, New York
time, pricing on any business day, the redemption will be effective on such day.
Payment of the redemption proceeds will be made on the same day the redemption
becomes effective. If the notice is received after 12 noon, New York time, the
redemption will be effective on the next business day and payment will be made
on such next day.
REDEMPTION OF SHARES BY CASH MANAGEMENT ACCOUNT SUBSCRIBERS
Automatic Redemptions. Redemptions will be effected automatically by
Merrill Lynch to satisfy debit balances in the Securities Account created by
activity therein or to satisfy debit balances created by Visa card purchases,
card advances (which may be obtained through participating banks and automated
teller machines) or checks written against the Visa Account. Each CMA account
will be automatically scanned for debits each business day prior to 12 noon, New
York time. After application of any free credit balances in the account to such
debits, shares of the Funds (or the CMA State Funds, if applicable) will be
redeemed at net asset value at the 12 noon, New York time pricing, and funds
deposited pursuant to the Insured Savings Account will be withdrawn, to the
extent necessary to satisfy any remaining debits in either the Securities
Account or the Visa Account. Automatic redemptions or withdrawals will be made
first from the participant's Primary Money Account and then, to the extent
necessary, from Money Accounts not designated as the Primary Money Account.
Unless otherwise requested, in those instances where shareholders request
transactions that settle on a "same-day" basis (such as Federal Funds wire
redemptions, branch office checks, transfers to other Merrill Lynch accounts and
certain securities transactions) the Fund shares necessary to effect such
transactions will be deemed to have been transferred to Merrill Lynch prior to
the Fund's declaration of dividends on that day. In such instances, shareholders
will receive all dividends declared and
A-4
<PAGE> 38
reinvested through the date immediately preceding the date of redemption. Unless
otherwise requested by the participant, redemptions or withdrawals from
non-Primary Money Accounts will be made in the order the Money Accounts were
established; thus, redemptions or withdrawals will first be made from the
non-Primary Money Account which the participant first established. Margin loans
through the Investor CreditLineSM service will be utilized to satisfy debits
remaining after the liquidation of all funds invested in or deposited through
Money Accounts, and shares of the Funds may not be purchased, nor may deposits
be made pursuant to the Insured Savings Account, until all debits and margin
loans in the account are satisfied.
Merrill Lynch, in conjunction with an affiliate, has introduced a modified
feature, the CMA Visa(R) Gold Program, to the CMA account for individual
shareholders. Participants in the CMA Visa(R) Gold Program may purchase goods or
services at participating merchants with the Visa(R) Gold card. Such purchases
may be paid for by automatic debit on the fourth Wednesday of each month. See
the Merrill Lynch Cash Management Account Program Description for more
information concerning the CMA Visa(R) Gold Program.
As set forth in the current description of the CMA program, a participant
whose Securities Account is a margin account through the Investor CreditLineSM
service may designate a minimum balance to be maintained in shares of the Funds
or the CMA State Funds or deposits made pursuant to the Insured Savings Account
(the "Minimum Money Accounts Balance"). If a participant designates a Minimum
Money Accounts Balance, the shares or deposits representing such balance will
not be redeemed or withdrawn until loans equal to the available margin loan
value of securities in the Securities Account have been made. Participants
considering the establishment of a Minimum Money Accounts Balance should review
the description of this service contained in the description of the CMA program
which is available from Merrill Lynch.
Shareholders of the Funds may arrange to have periodic investments made in
certain other mutual funds sponsored by Merrill Lynch through the CMA Automated
Investment Program. Under this program, the shareholder's Money Account will be
automatically debited at periodic intervals in an amount of $250 or more, as
selected by the shareholder, and investment made in the fund the shareholder has
designated. Further information on this program is available from Merrill Lynch.
Manual Redemptions. Shareholders may redeem shares of a Fund directly by
submitting a written notice of redemption directly to Merrill Lynch, which will
submit the requests to the Funds' Transfer Agent. Cash proceeds from the manual
redemption of Fund shares will be ordinarily mailed to the shareholder at his or
her address of record, or upon request, mailed or wired (if $10,000 or more) to
his or her bank account. Redemption requests should not be sent to the Fund or
the Transfer Agent. If inadvertently sent to the Fund or the Transfer Agent,
redemption requests will be forwarded to Merrill Lynch. The notice requires the
signatures of all persons in whose name the shares are registered, signed
exactly as their names appear on their monthly statement. The signature(s) on
the redemption request must be guaranteed by an "eligible guarantor institution"
as such is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934,
the existence and validity of which may be verified by the Transfer Agent
through the use of industry publications. Notarized signatures are not
sufficient. In certain instances, additional documents such as, but not limited
to, trust instruments, death certificates, appointments as executor or
administrator, or certificates of corporate authority may be required. CMA
customers desiring to effect manual redemptions should contact their Merrill
Lynch Financial Consultants.
A-5
<PAGE> 39
All redemptions of Fund shares will be confirmed to Cash Management Account
subscribers (rounded to the nearest share) in the CMA Transaction Statement
which is sent to all CMA participants monthly.
REDEMPTION OF SHARES BY NON-CASH MANAGEMENT ACCOUNT SUBSCRIBERS
Shareholders may redeem shares of the Funds held in a Merrill Lynch
securities account directly by submitting a written notice of redemption to
Merrill Lynch, which will submit the requests to the Funds' Transfer Agent as
described above under "Redemption of Shares--Redemption of Shares by Cash
Management Account Subscribers-Manual Redemptions".
Shareholders maintaining an account directly with the Transfer Agent, who
are not CMA program participants, may redeem shares of the Funds by submitting a
written notice by mail directly to the Transfer Agent, Merrill Lynch Financial
Data Services, Inc., P.O. Box 45290, Jacksonville, Florida 32232-5290.
Redemption requests which are sent by hand should be delivered to Merrill Lynch
Financial Data Services, Inc., 4800 Deer Lake Drive East, Jacksonville, Florida
32246-6484. Cash proceeds from the manual redemption of Fund shares will be
mailed to the shareholder at his or her address of record. Redemption requests
should not be sent to the Funds or Merrill Lynch. If inadvertently sent to the
Funds or Merrill Lynch, such redemption requests will be forwarded to the
Transfer Agent. The notice requires the signatures of all persons in whose names
the shares are registered, signed exactly as their names appear on their monthly
statement. The signature(s) on the notice must be guaranteed by an "eligible
guarantor institution" as defined in Rule 17Ad-15 under the Securities Exchange
Act of 1934, the existence and validity of which may be verified by the Transfer
Agent by the use of industry publications. Notarized signatures are not
sufficient. In certain instances, additional documents such as, but not limited
to, trust instruments, death certificates, appointments as executor or
administrator, or certificates of corporate authority may be required.
At various times the Funds may be requested to redeem shares, in manual or
automatic redemptions, with respect to which good payment has not yet been
received by Merrill Lynch. A Fund may delay, or cause to be delayed, the payment
of the redemption proceeds until such time as it has assured itself that good
payment has been collected for the purchase of such shares. Normally, this delay
will not exceed 10 days. In addition, the Funds reserve the right not to effect
automatic redemptions where the shares to be redeemed have been purchased by
check within 15 days prior to the date the redemption request is received.
Merrill Lynch, in conjunction with another subsidiary of Merrill Lynch &
Co., Inc. ("ML & Co."), has introduced a modified version of the CMA account
which has been designed for corporations and other businesses. This account, the
Working Capital ManagementTM account ("WCMA(R) account"), provides participants
with the features of a regular CMA account and also optional lines of credit. A
brochure describing the WCMA program, as well as information concerning charges
for participation in the program, is available from Merrill Lynch.
Participants in the WCMA program are able to invest funds in one or more of
the Funds designated by them. Checks and other funds transmitted to a WCMA
account will generally be applied, first to the payment of pending securities
transactions or other charges in the participant's securities account, second,
to reduce outstanding balances in the lines of credit available through such
program and, third, to purchase shares of the designated Fund. To the extent not
otherwise applied, funds transmitted by Federal funds wire or an automated
clearinghouse service will be invested in shares of the designated Fund on the
business day following receipt of such funds by Merrill Lynch. Funds received in
a WCMA account from the sale of securities will be invested in the designated
Fund as described above. The amount payable on a check received in a WCMA
account prior to the cashiering deadline referred to above will be invested on
the second business
A-6
<PAGE> 40
day following receipt of the check by Merrill Lynch. Redemptions of Fund shares
will be effected as described above to satisfy debit balances, such as those
created by purchases of securities or by checks written against a bank providing
checking services to WCMA participants. WCMA participants that have a line of
credit will, however, be permitted to maintain a minimum Fund balance; for
participants who elect to maintain such a balance, debits from check usage will
be satisfied through the line of credit so that such balance is maintained.
However, if the full amount of available credit is not sufficient to satisfy the
debit, it will be satisfied from the minimum balance.
From time to time, Merrill Lynch also may offer the Funds to participants
in certain other programs sponsored by Merrill Lynch. Some or all of the
features of the CMA account may not be available in such programs. For more
information on the services available under such programs, participants should
contact their financial consultants.
MANAGEMENT OF THE FUNDS
TRUSTEES
The Trustees of each Fund consist of six individuals, five of whom are not
"interested persons" of the Fund as defined in the Investment Company Act. The
Trustees of each Fund are responsible for the overall supervision of the
operations of the Fund and perform the various duties imposed on the directors
of investment companies by the Investment Company Act.
The Trustees of each Fund are:
ARTHUR ZEIKEL*--President of Fund Asset Management, L.P. (the "Investment
Adviser"); Executive Vice President of ML & Co.; Executive Vice President
of Merrill Lynch; President and Director of Princeton Services, Inc.
("Princeton Services"); and Director of Merrill Lynch Funds Distributor,
Inc. (the "Distributor").
RONALD W. FORBES--Professor of Finance, School of Business, State
University of New York at Albany.
CYNTHIA A. MONTGOMERY--Professor of Finance, Harvard Business School.
CHARLES C. REILLY--Self-employed financial consultant; former President and
Chief Investment Officer of Verus Capital Inc.; former Senior Vice
President of Arnhold and S. Bleichroeder, Inc.
KEVIN A. RYAN--Professor of Education, Boston University, founder and
current Director of the Boston University Center for the Advancement of
Ethics and Character.
RICHARD R. WEST--Professor of Finance and former Dean, New York University
Leonard N. Stern School of Business Administration.
- ---------------
* Interested person, as defined in the Investment Company Act, of each Fund.
A-7
<PAGE> 41
INVESTMENT ADVISORY ARRANGEMENTS
The Investment Adviser is owned and controlled by ML & Co., a financial
services holding company and the parent of Merrill Lynch. The Investment Adviser
or an affiliate of the Investment Adviser, Merrill Lynch Asset Management, L.P.
("MLAM"), acts as the investment adviser for more than 130 registered investment
companies and provides investment advisory services to individuals and
institutional accounts. As of June 30, 1995, MLAM and the Investment Adviser had
a total of approximately $182.4 billion in investment company and other
portfolio assets under management, including accounts of certain affiliates of
MLAM.
The investment advisory agreements with the Investment Adviser (the
"Investment Advisory Agreements") provide that, subject to the direction of the
Trustees, the Investment Adviser is responsible for the actual management of the
Funds' portfolios and constantly reviews the Funds' holdings in light of its own
research analysis and that from other relevant sources. The responsibility for
making decisions to buy, sell or hold a particular security rests with the
Investment Adviser, subject to the review of the Board of Trustees. The
Investment Adviser performs certain of the other administrative services and
provides all of the office space, facilities, equipment and necessary personnel
for portfolio management of the Funds.
As compensation for its services under the Investment Advisory Agreements,
the Investment Adviser receives a fee from each Fund at the end of each month at
the annual rates of 0.50% of the first $500 million of average daily net assets
of the Fund, 0.425% of average daily net assets in excess of $500 million but
not exceeding $1 billion, and 0.375% of average daily net assets in excess of $1
billion.
The following table sets forth information as to the advisory fees paid by
each Fund for the fiscal year ended March 31, 1995 and the annual fees payable
at the net asset level of each Fund as of June 30, 1995. The information does
not include amounts paid under each Fund's Distribution Plan to Merrill Lynch.
<TABLE>
<CAPTION>
PRO FORMA INFORMATION
BASED UPON
NET ASSET LEVEL AS OF JUNE
YEAR ENDED MARCH 31, 1995 30, 1995
-------------------------- --------------------------
AVERAGE ANNUAL
FEE NET EFFECTIVE NET EFFECTIVE FEE
PAID ASSETS FEE ASSETS FEE PAYABLE
CMA FUND (MILLIONS) (BILLIONS) RATE (BILLIONS) RATE (MILLIONS)
- ------------------------------------- ------ ----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Money Market......................... $104.1 $27.5 0.38% $30.7 0.38% $115.9
Government........................... $ 13.0 $ 3.2 0.40% $ 3.1 0.40% $ 12.4
Tax-Exempt........................... $ 29.1 $ 7.5 0.39% $ 7.3 0.39% $ 28.3
Treasury............................. $ 5.6 $ 1.3 0.44% $ 1.5 0.43% $ 6.6
</TABLE>
- ---------------
The Investment Advisory Agreements obligate each Fund to pay certain
expenses incurred in its operations, including, among other things, the
investment advisory fee, legal and audit fees, unaffiliated Trustees' fees and
expenses, registration fees, custodian and transfer agency fees, accounting and
pricing costs, and certain of the costs of printing proxies, shareholder
reports, prospectuses and statements of additional information. Accounting
services are provided to each of the Funds by the Investment Adviser, and each
Fund reimburses the Investment Adviser for its costs in connection with such
services. For the fiscal year ended March 31, 1995, the amounts of such
reimbursement paid by the Money Market Fund, the Government Fund, the Tax-Exempt
Fund and the Treasury Fund aggregated $1,110,858, $193,217, $411,464 and
$109,977, respectively. For the fiscal year ended March 31, 1995, the ratio of
total expenses to average net assets was
A-8
<PAGE> 42
0.56% for the Money Market Fund, 0.58% for the Government Fund, 0.55% for the
Tax-Exempt Fund and 0.62% for the Treasury Fund (excluding payments under the
Funds' Distribution Plans).
TRANSFER AGENCY SERVICES
Each of the Funds has entered into a Transfer Agency, Shareholder Servicing
Agency and Proxy Agency Agreement (each, a "Transfer Agency Agreement") with
Merrill Lynch Financial Data Services, Inc. (the "Transfer Agent"), a
wholly-owned subsidiary of ML & Co. Pursuant to the Transfer Agency Agreements,
the Transfer Agent is responsible for the issuance, transfer and redemption of
shares and the opening and maintenance of shareholder accounts. Pursuant to the
Transfer Agency Agreements, the Funds pay the Transfer Agent a fee of $10.00 per
shareholder account and the Transfer Agent is entitled to reimbursement from the
Funds for out-of-pocket expenses incurred by the Transfer Agent under the
Transfer Agency Agreements. For the fiscal year ended March 31, 1995 (during a
portion of which a lower fee schedule was in effect), $11,240,401 was paid to
the Transfer Agent by the Money Market Fund, $660,663 was paid to the Transfer
Agent by the Government Fund, $1,623,665 was paid to the Transfer Agent by the
Tax-Exempt Fund and $232,782 was paid to the Transfer Agent by the Treasury Fund
pursuant to their Transfer Agency Agreements, including reimbursement of
out-of-pocket expenses. At June 30, 1995, the Money Market Fund, the Government
Fund, the Tax-Exempt Fund and the Treasury Fund had 1,118,562, 51,235, 130,785
and 21,360 shareholder accounts, respectively. At these levels of accounts, the
annual fees payable to the Transfer Agent would aggregate approximately
$11,185,260, $512,350, $1,307,850 and $213,600, respectively.
PORTFOLIO TRANSACTIONS
The portfolio 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 accounts. On occasion,
securities may be purchased directly from the issuer. Such portfolio securities
generally are traded on a net basis and normally do not involve either brokerage
commissions or transfer taxes. The cost of executing portfolio transactions
primarily will consist of dealer spreads and underwriting commissions. Under the
Investment Company Act, 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 (the "Commission"). Affiliated persons of a
Fund may serve as its broker in over-the-counter transactions conducted on an
agency basis.
The Commission has issued exemptive orders permitting the Money Market
Fund, the Government Fund, the Tax-Exempt Fund and the Treasury Fund to conduct
certain principal transactions with Merrill Lynch Government Securities Inc.,
its subsidiary Merrill Lynch Money Markets Inc. and Merrill Lynch, subject to
certain terms and conditions. During the fiscal year ended March 31, 1995, the
Money Market Fund engaged in 383 transactions pursuant to such orders
aggregating approximately $23.9 billion; the Tax-Exempt Fund engaged in 13
transactions aggregating approximately $130.1 million; the Government Fund
engaged in 5 transactions aggregating approximately $174.9 million; and the
Treasury Fund engaged in 5 transactions pursuant to such order aggregating
approximately $112.0 million.
A-9
<PAGE> 43
DIVIDENDS
All of the net income of each Fund is declared as dividends daily. Each
Fund's net income for dividend purposes is determined by the Investment Adviser
at 12 noon, New York time, on each day the New York Stock Exchange or New York
banks are open for business immediately prior to the determination of the Fund's
net asset value on that day (see "Determination of Net Asset Value"). Net income
of the Money Market Fund, the Government Fund and the Treasury Fund (from the
time of the immediately preceding determination thereof) consists of (i)
interest accrued and/or discount earned (including both original issue and
market discount), (ii) less the estimated expenses of the Fund (including the
fees payable to the Investment Adviser) applicable to that dividend period and
(iii) plus or minus all realized gains and losses on the portfolio securities.
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 premium and the estimated expenses of the
Tax-Exempt Fund (including the fees payable to the Investment Adviser)
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. Unrealized gains and losses are reflected in the
Tax-Exempt Fund's net assets and are not included in net income. Dividends are
declared and reinvested daily in the form of additional full and fractional
shares of the Funds at net asset value.
DETERMINATION OF NET ASSET VALUE
The net asset value of each Fund is determined by the Investment Adviser
once daily, immediately after the daily declaration of dividends, as of 12 noon,
New York time, on each day the New York Stock Exchange or New York banks are
open for business.
The net asset value of the Money Market Fund, the Government Fund and the
Treasury Fund is determined pursuant to the "penny-rounding" method by adding
the fair value of all securities and other assets in each portfolio, deducting
such portfolio's liabilities and dividing by the number of shares of that Fund
outstanding. The result of this computation will be rounded to the nearest whole
cent. It is anticipated that the net asset value per share will remain constant
at $1.00 per share, but no assurance can be offered in this regard. Securities
with remaining maturities of greater than 60 days for which market quotations
are readily available will be valued at market value. Securities with remaining
maturities of 60 days or less will be valued on an amortized cost basis, i.e. by
valuing the instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument. Other
securities held by the Money Market Fund, the Government Fund and the Treasury
Fund will be valued at their fair value as determined in good faith by or under
direction of the Board of Trustees.
The Tax-Exempt Fund values its portfolio securities based on their
amortized cost. This involves valuing an instrument at its cost and thereafter
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument.
A-10
<PAGE> 44
TAXES
The Funds intend to continue to qualify for the special tax treatment
afforded regulated investment companies ("RICs") under the Internal Revenue Code
of 1986, as amended (the "Code"). If the Money Market Fund, the Government Fund,
the Treasury Fund or the Tax-Exempt Fund so qualifies, such Fund (but not its
shareholders) will not be subject to Federal income tax on the part of its net
ordinary income and net realized capital gains (see below) which it distributes
to shareholders, in any taxable year in which it distributes at least 90% of its
taxable net income and 90% of its tax-exempt net income. Each Fund intends to
distribute substantially all of such income.
TAXATION OF MONEY MARKET FUND, GOVERNMENT FUND AND TREASURY FUND DIVIDENDS
Dividends paid by the Money Market Fund, the Government Fund and the
Treasury Fund from their ordinary income and distributions of such Funds' net
realized short-term capital gains (together referred to hereafter as "ordinary
income dividends") are taxable to shareholders as ordinary income. Distributions
made from such Funds' net realized long-term capital gains from the sale of
securities ("capital gain dividends") are taxable to shareholders as long-term
capital gains, regardless of the length of time the shareholder has owned Fund
shares. Dividends are taxable to shareholders even though they are reinvested in
additional shares of a Fund. Not later than 60 days after the close of its
taxable year, each such Fund will provide its shareholders with a written notice
designating the amounts of any ordinary income dividends or capital gain
dividends.
If the value of assets held by the Money Market Fund, the Government Fund,
the Treasury Fund or the Tax-Exempt Fund declines, the Board of Trustees may
authorize a reduction in the number of outstanding shares in respective
shareholders' accounts so as to preserve a net asset value of $1.00 per share.
After such a reduction, the basis of eliminated shares would be added to the
basis of shareholders' remaining Fund shares, and any shareholders disposing of
shares at that time may recognize a capital loss. Distributions paid by the
Money Market Fund, the Government Fund and the Treasury Fund, including
distributions reinvested in additional shares of the affected Fund, will
nonetheless be fully taxable, even if the number of shares in shareholders'
accounts has been reduced as described above.
TAXATION OF TAX-EXEMPT FUND DIVIDENDS
The Tax-Exempt Fund intends to qualify to pay "exempt-interest dividends"
under the Code, and if it so qualifies, dividends derived from the interest
earned on tax-exempt securities which are designated by such Fund as
exempt-interest dividends will not be subject to Federal income taxes. To the
extent that the dividends distributed to the Tax-Exempt Fund's shareholders are
derived from interest income exempt from Federal tax and are properly designated
as "exempt-interest dividends" by the Fund, they will be excludable from a
shareholder's gross income for Federal income tax purposes. Exempt-interest
dividends are included, however, in determining the portion, if any, of a
person's social security and railroad retirement benefits subject to Federal
income taxes. Persons who may be "substantial users" (or "related persons" of
substantial users) of facilities financed by industrial development bonds or
private activity bonds held by the Tax-Exempt Fund should consult their tax
advisers before purchasing Fund shares. The Fund will inform shareholders
annually as to the portion of the Tax-Exempt Fund's distributions which
constitutes exempt-interest dividends. Interest on indebtedness incurred or
continued to purchase or carry shares of the Tax-Exempt Fund is not deductible
for Federal income tax purposes to the extent attributable to exempt-interest
dividends.
A-11
<PAGE> 45
To the extent that the Tax-Exempt Fund's distributions are derived from
interest on its taxable investments or from an excess of net short-term capital
gains over net long-term capital losses ("ordinary income dividends"), such
distributions are considered ordinary income for Federal income tax purposes.
Distributions, if any, of net long-term capital gains from the sale of
securities ("capital gain dividends") are taxable at long-term capital gains
rates for Federal income tax purposes, regardless of the length of time the
shareholder has owned Fund shares. Under the Revenue Reconciliation Act of 1993,
all or a portion of the Tax-Exempt Fund's gain from the sale or redemption of
tax-exempt obligations purchased at a market discount will be treated as
ordinary income rather than capital gain. This rule may increase the amount of
ordinary income dividends received by shareholders. Any loss upon the sale or
exchange of shares held for six months or less will be disallowed to the extent
of any exempt-interest dividends received by the shareholder.
The Code subjects interest received on certain otherwise tax-exempt
securities to an alternative minimum tax. The alternative minimum tax applies to
interest received on "private activity bonds" issued after August 7, 1986.
Private activity bonds are bonds which, although tax-exempt, are used for
purposes other than those generally performed by governmental units and which
benefit non-governmental entities (e.g., bonds used for industrial development
or housing purposes). Income received on such bonds is classified as an item of
"tax preference", which could subject investors in such bonds, including
shareholders of the Tax-Exempt Fund, to an alternative minimum tax. The
Tax-Exempt Fund will purchase such "private activity bonds" and will report to
shareholders within 60 days after its taxable year-end the portion of its
dividends declared during the year which constitutes an item of tax preference
for alternative minimum tax purposes. The Code further provides that
corporations are subject to an alternative minimum tax based, in part, on
certain differences between taxable income as adjusted for other tax preferences
and the corporation's "adjusted current earnings", which more closely reflect a
corporation's economic income. Because an exempt-interest dividend paid by the
Tax-Exempt Fund will be included in adjusted current earnings, a corporate
shareholder may be required to pay alternative minimum tax on exempt-interest
dividends paid by the Tax-Exempt Fund.
The Revenue Reconciliation Act of 1993 added new marginal tax brackets of
36% and 39.6% for individuals and created a graduated structure of 26% and 28%
for the alternative minimum tax applicable to individual taxpayers. These rate
increases may affect an individual investor's after-tax return from an
investment in the Tax-Exempt Fund as compared with such investor's return from
taxable investments.
The Code provides that every shareholder required to file a tax return must
include for information purposes on such return the amount of exempt-interest
dividends received from all sources (including the Tax-Exempt Fund) during the
taxable year.
GENERAL
If the Money Market Fund, the Government Fund, the Treasury Fund or the
Tax-Exempt Fund pays a dividend in January which was declared in the previous
October, November or December to shareholders of record on a specified date in
one of such months, then such dividend will be treated for tax purposes as being
paid by such Fund and received by its shareholders on December 31 of the year in
which such dividend was declared. Distributions by the Funds will not be
eligible for the dividends received deduction allowed to corporations under the
Code. Distributions in excess of a Fund's earnings and profits will first reduce
the adjusted tax basis of a holder's shares and, after such adjusted tax basis
is reduced to zero, will constitute capital gains to such holder (assuming the
shares are held as a capital asset).
A-12
<PAGE> 46
Ordinary income dividends paid by a Fund to shareholders who are
nonresident aliens or foreign entities will be subject to a 30% United States
withholding tax under existing provisions of the Code applicable to foreign
individuals and entities unless a reduced rate of withholding or a withholding
exemption is provided under applicable treaty law. Nonresident shareholders are
urged to consult their own tax advisers concerning the applicability of the
United States withholding tax.
Dividends and interest received by a Fund may give rise to withholding and
other taxes imposed by foreign countries. Tax conventions between certain
countries and the United States may reduce or eliminate such taxes.
Under certain provisions of the Code, some taxpayers may be subject to a
31% withholding tax on certain ordinary income dividends and on capital gain
dividends and redemption payments ("backup withholding"). Generally,
shareholders subject to backup withholding will be those for whom no certified
taxpayer identification number is on file with a Fund or who, to such Fund's
knowledge, have furnished an incorrect number. When establishing an account, an
investor must certify under penalty of perjury that such number is correct and
that such investor is not otherwise subject to backup withholding.
A loss realized on a sale or exchange of shares of any of the Funds will be
disallowed if shares of the Fund are acquired (whether through the automatic
reinvestment of dividends or otherwise) within a 61-day period beginning 30 days
before and ending 30 days after the date that the shares are disposed of. In
such a case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
the Treasury regulations promulgated thereunder. The Code and the Treasury
regulations are subject to change by legislative or administrative action either
prospectively or retroactively.
Ordinary income and capital gain dividends may also be subject to state and
local taxes. Certain states exempt from state income taxation dividends paid by
RICs which are derived from interest on U.S. Government obligations. State law
varies as to whether and what percentage of dividend income attributable to U.S.
Government obligations is exempt from state income tax.
Shareholders are urged to consult their tax advisers regarding specific
questions as to Federal, foreign, state or local taxes. Foreign investors should
consider applicable foreign taxes in their evaluation of an investment in any of
the Funds.
ADDITIONAL INFORMATION
ORGANIZATION OF THE FUNDS
The Money Market Fund, the Government Fund and the Tax-Exempt Fund are
unincorporated business trusts organized on June 5, 1989 under the laws of
Massachusetts. The Money Market Fund is the successor to a Massachusetts
business trust organized on September 19, 1977, the Government Fund is the
successor to a Massachusetts business trust organized on August 3, 1981 and the
Tax-Exempt Fund is the successor to a Massachusetts business trust organized on
January 15, 1981. The Treasury Fund is an unincorporated business trust
organized on October 24, 1990 under the laws of Massachusetts. Each Fund is a
no-load, diversified, open-end investment company. The Declaration of Trust of
each Fund permits the Trustees to issue an unlimited number of full and
fractional shares of a single class. Upon liquidation of any of the Funds,
shareholders of that Fund are entitled to share pro rata in the net assets of
the Fund available for distribution
A-13
<PAGE> 47
to shareholders. Shares are fully paid and nonassessable by the Funds.
Shareholders are entitled to one vote for each full share held and fractional
votes for fractional shares held and to vote in the election of Trustees and on
other matters submitted to the vote of shareholders.
The Declarations of Trust do not require that the Funds hold annual
meetings of shareholders. However, each Fund will be required to call special
meetings of shareholders in accordance with the requirements of the Investment
Company Act to seek approval of new management and advisory arrangements, of a
material increase in distribution fees or of a change in the fundamental
policies, objectives or restrictions of such Fund. Each Fund also would be
required to hold a special shareholders' meeting to elect new Trustees at such
time as less than a majority of the Trustees holding office have been elected by
shareholders. Each Declaration of Trust provides that a shareholders' meeting
may be called for any reason at the request of 10% of the outstanding shares of
the related Fund or by a majority of the Trustees. Except as set forth above,
the Trustees shall continue to hold office and appoint successor Trustees.
The Declarations of Trust establishing the Funds refer to the Trustees
under the Declarations of Trust collectively as Trustees, but not as individuals
or personally; and no Trustee, shareholder, officer, employee or agent of any of
the Funds shall be held to any personal liability, nor shall resort be had to
their private property for the satisfaction of any obligation or claim of any
Fund but the Trust Property only shall be liable. Copies of the Declarations of
Trust, together with all amendments thereto, are on file in the office of the
Secretary of the Commonwealth of Massachusetts.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to each Fund at the address or
telephone number set forth on the cover page of such Fund's Prospectus.
REPORTS TO SHAREHOLDERS
The fiscal year of each Fund ends on the last day of March of each year.
Each Fund will send to its shareholders at least semi-annually reports showing
its portfolio securities and other information. An annual report containing
financial statements audited by independent auditors is sent to shareholders
each year.
Only one copy of each shareholder report and certain shareholder
communications will be mailed to each identified shareholder regardless of the
number of accounts such shareholder has. If a shareholder wishes to receive
separate copies of each report and communication for each of the shareholder's
related accounts the shareholder should notify in writing:
Merrill Lynch Financial Data Services, Inc.
P.O. Box 45290
Jacksonville, FL 32232-5290
The written notification should include the shareholder's name, address,
tax identification number and Merrill Lynch and/or mutual fund account numbers.
If you have any questions regarding this please call your Merrill Lynch
Financial Consultant or Merrill Lynch Financial Data Services, Inc. at (800)
221-7210.
A-14
<PAGE> 48
Investment Adviser
Fund Asset Management
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey
Mailing Address:
P.O. Box 9011
Princeton, New Jersey 08543-9011
Distributor
Merrill Lynch, Pierce, Fenner & Smith Incorporated
World Financial Center
North Tower
250 Vesey Street
New York, New York 10281
Custodian
State Street Bank and Trust Company
P.O. Box 1713
Boston, Massachusetts 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
Administrative Offices:
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
Mailing Address:
P.O. Box 45290
Jacksonville, Florida 32232-5290
Independent Auditors
Deloitte & Touche LLP
117 Campus Drive
Princeton, New Jersey 08540
Counsel
Brown & Wood
One World Trade Center
New York, New York 10048-0557
<PAGE> 49
No person has been authorized to give any information or to make any
representations, other than those contained in these Prospectuses, in connection
with the offers contained therein, and, if given or made, such other information
or representations must not be relied upon as having been authorized by the
Funds, the Investment Adviser or Merrill Lynch, Pierce, Fenner & Smith
Incorporated. These Prospectuses do not constitute an offering in any state in
which such offering may not lawfully be made.
Code #10117-0795
- ---------------------------------------------------------
CMA MONEY FUND
CMA GOVERNMENT
SECURITIES FUND
CMA TAX-EXEMPT
FUND
CMA TREASURY FUND
- ---------------------------------------------------------
PROSPECTUSES
- ---------------------------------------------------------
The enclosed prospectuses describe four fully managed money market funds. Shares
of the Funds are offered to participants in the Cash Management Account(R)
("CMA(R) account") program of Merrill Lynch, Pierce, Fenner & Smith Incorporated
and to investors maintaining accounts directly with the Transfer Agent.
Investors should be aware that the Cash Management Account service is not a bank
account and that a shareholder's investment in the Funds is not insured by any
governmental agency. As with any investment in securities, the value of a
shareholder's investment in the Funds may fluctuate.
Principal Office of the Funds
800 Scudders Mill Road
Plainsboro, New Jersey 08536
July 28,1995
- ---------------------------------------------------------
(LOGO)Za
<PAGE> 50
STATEMENT OF ADDITIONAL INFORMATION
CMA MONEY FUND
CMA GOVERNMENT SECURITIES FUND
CMA TAX-EXEMPT FUND
CMA TREASURY FUND
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 - PHONE NO. (609) 282-2800
CMA Money Fund (the "Money Market Fund"), CMA Government Securities Fund
(the "Government Fund"), CMA Tax-Exempt Fund (the "Tax-Exempt Fund") and CMA
Treasury Fund (the "Treasury Fund") are no-load money market funds whose shares
are offered to participants in the Cash Management Account(R) ("CMA(R) account")
financial service program of Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") to provide a medium for the investment of free credit balances
held in CMA accounts. A CMA account is a conventional Merrill Lynch cash
securities account or margin securities account ("Securities Account") which is
linked to the Money Market Fund, the Government Fund, the Tax-Exempt Fund and
the Treasury Fund (collectively, the "Funds"), money market deposit accounts
maintained with depository institutions and to a Visa(R) card/check account
("Visa(R) Account"). In addition, investors may have their free credit balances
invested in certain series of CMA Multi-State Municipal Series Trust, each of
which is designed to provide income that is exempt from taxation in a particular
state (the "CMA State Funds"). Merrill Lynch markets its margin account under
the name Investor CreditLineSM service.
A customer of Merrill Lynch may subscribe to the CMA program with a minimum
of $20,000 in securities or cash. Subject to the conditions described in the
Prospectuses referred to below, free credit balances in the Securities Account
of CMA participants will be invested periodically in shares of one of the four
Funds. This permits the subscriber to earn a return on such funds pending
further investment in other aspects of the CMA program or utilization through
the Visa(R) Account.
Merrill Lynch charges an annual program participation fee, presently $100
for individuals, for the CMA service (an additional $25 annual program fee is
charged for participation in the CMA Visa(R) Gold Program described in the CMA
Program Description). Merrill Lynch reserves the right to change the fee for the
CMA service or the CMA Visa(R) Gold Program at any time. The shares of each Fund
also may be purchased without the imposition of the annual program participation
fee by investors maintaining accounts directly with the Transfer Agent who do
not subscribe to the CMA program. The minimum initial purchase for non-CMA
subscribers is $5,000 and subsequent purchases must be $1,000 or more. Such
investors will not receive any of the additional services available to CMA
program subscribers, such as a Visa card/check account or the automatic
investment of free credit balances.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---
<S> <C>
Investment Objectives and Policies......... 2
Money Market Fund...................... 2
Government Fund........................ 5
Tax-Exempt Fund........................ 5
Treasury Fund.......................... 8
Management of the Funds.................... 9
Purchase and Redemption of Shares.......... 13
Portfolio Transactions..................... 15
Determination of Net Asset Value........... 17
Yield Information.......................... 18
Taxes...................................... 19
<CAPTION>
PAGE
---
<S> <C>
General Information........................ 22
Appendix................................... 25
Description of Commercial Paper, Bank Money
Market Instruments and Corporate Bond
Ratings.................................. 25
Financial Statements
Money Market Fund...................... 29
Government Fund........................ 41
Tax-Exempt Fund........................ 49
Treasury Fund.......................... 67
</TABLE>
This Statement of Additional Information of the Funds is not a prospectus
and should be read in conjunction with the Prospectuses of the Funds dated July
28, 1995 (the "Prospectuses"), which have been filed with the Securities and
Exchange Commission and can be obtained, without charge, by calling or writing
to the Funds at the above telephone number or address. This Statement of
Additional Information has been incorporated by reference into the Prospectuses.
---------------------
The date of this Statement of Additional Information is July 28, 1995.
<PAGE> 51
INVESTMENT OBJECTIVES AND POLICIES
MONEY MARKET FUND
The Money Market Fund is a no-load money market fund. Reference is made to
"Investment Objectives and Policies" in the Prospectus of the Money Market Fund
for a discussion of the investment objectives and policies of such Fund.
As discussed in its Prospectus, the Money Market Fund may invest in money
market securities pursuant to repurchase agreements. Repurchase agreements may
be entered into only with a member bank of the Federal Reserve System or a
primary dealer in U.S. Government securities or an affiliate thereof. Under such
agreements, the bank or primary dealer or an affiliate thereof agrees, upon
entering into the contract, to repurchase the security at a mutually agreed upon
time and price, thereby determining the yield during the term of the agreement.
This results in a fixed rate of return insulated from market fluctuations during
such period. Such agreements usually cover short periods, such as under a week.
The Money Market Fund will require the seller to provide additional collateral
if the market value of the securities falls below the repurchase price at any
time during the term of the repurchase agreement. In the event of a default by
the seller, the Money Market Fund ordinarily will retain ownership of the
securities underlying the repurchase agreement, and instead of a contractually
fixed rate of return, the rate of return to the Money Market Fund shall be
dependent upon intervening fluctuations of the market value of such securities
and the accrued interest on the securities. In such event, the Money Market Fund
would have rights against the seller for breach of contract with respect to any
losses arising from market fluctuations following the failure of the seller to
perform. In certain circumstances, repurchase agreements may be construed to be
collateralized loans by the purchaser to the seller secured by the securities
transferred to the purchaser. In the event of default by the seller under a
repurchase agreement construed to be a collateralized loan, the underlying
securities are not owned by the Money Market Fund but only constitute collateral
for the seller's obligation to pay the repurchase price. Therefore, the Money
Market Fund may suffer time delays and incur costs or possible losses in
connection with the disposition of the collateral. From time to time, the Money
Market Fund also may invest in money market securities pursuant to purchase and
sale contracts. While purchase and sale contracts are similar to repurchase
agreements, purchase and sale contracts are structured so as to be in substance
more like a purchase and sale of the underlying security than is the case with
repurchase agreements.
Also, as discussed in the Prospectus, the Money Market Fund may invest in
obligations issued by commercial and savings banks and savings and loan
associations. 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). In
addition, the Money Market Fund may also invest in other U.S. dollar-denominated
obligations of foreign depository institutions and their subsidiaries.
Eurodollar and Yankeedollar obligations must be general obligations of the
parent bank. The obligations of other foreign depository institutions and their
subsidiaries may be the general obligations 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 Money Market 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.
Eurodollar and Yankeedollar obligations, as well as other obligations of
foreign depository institutions and short-term obligations issued by other
foreign entities, may involve additional investment risks, including adverse
political and economic developments, the possible imposition of withholding
taxes on interest income
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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 repayment of
principal and the payment of interest. The issuers of such obligations may not
be subject to U.S. regulatory requirements. 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 or
other issuer than about a U.S. bank or other issuer, and such entities may not
be subject to the same accounting, auditing and financial record keeping
standards and requirements as U.S. issuers. Evidence of ownership of Eurodollar
and foreign obligations may be held outside of the United States and the Money
Market Fund may be subject to the risks associated with the holding of such
property overseas. Eurodollar and foreign obligations of the Money Market Fund
held overseas will be held by foreign branches of the Money Market Fund's
custodian or by other U.S. or foreign banks under subcustodian arrangements
complying with the requirements of the Investment Company Act of 1940, as
amended (the "Investment Company Act").
The investment adviser of the Money Market Fund, Fund Asset Management (the
"Investment Adviser"), will carefully consider the above factors in making
investments in Eurodollar obligations and Yankeedollar obligations of foreign
depository institutions and other foreign short-term obligations, and will not
knowingly purchase obligations which, at the time of purchase, are subject to
exchange controls or withholding taxes. Generally, the Money Market 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.
The Money Market Fund may enter into reverse repurchase agreements, as
discussed in its Prospectus. The Money Market Fund will use the proceeds of
reverse repurchase agreements to purchase other money market securities either
maturing, or under an agreement to resell, at a date simultaneous with or prior
to the expiration of the reverse repurchase agreements. The Money Market Fund
will utilize reverse repurchase agreements when the interest income to be earned
from the investment of the proceeds of the transaction is greater than the
interest expense of the reverse repurchase transaction.
The Money Market Fund's investments in short-term corporate, partnership
and trust debt and bank money instruments will be rated, or will be issued by
issuers who have been rated, in one of the two highest rating categories for
short-term 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 Money Market Fund. The Money Market Fund's
investments in corporate, partnership and trust bonds and debentures (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 Money Market Fund. Currently, there are six
NRSROs: Duff and Phelps Credit Ratings Co., Fitch Investors Service, Inc., IBCA
Limited and its affiliate IBCA, Inc., Moody's Investors Service, Inc., Standard
& Poor's Ratings Group and Thomson Bankwatch, Inc. See "Appendix -- Description
of Commercial Paper, Bank Money Market Instruments and Corporate Bond Ratings".
As described in its Prospectus, the Money Market Fund may invest in
variable amount master demand notes. These are demand obligations that permit
the investment of fluctuating amounts at varying market
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rates of interest pursuant to arrangements between the issuer and a commercial
bank acting as agent for the payees of such notes whereby both parties have the
right to vary the amount of the outstanding indebtedness at any time.
In addition to the investment restrictions set forth in its Prospectus, the
Money Market Fund has adopted the following restrictions and policies relating
to the investment of its assets and its activities, which are fundamental
policies and may not be changed without the approval of the holders of a
majority of the Money Market Fund's outstanding voting securities (which for
this purpose means the lesser of (i) 67% of the shares represented at a meeting
at which more than 50% of the outstanding shares are represented or (ii) more
than 50% of the outstanding shares). The Money Market Fund may not: (1) make
investments for the purpose of exercising control or management; (2) underwrite
securities issued by other persons; (3) purchase securities of other investment
companies, except in connection with a merger, consolidation, acquisition or
reorganization; (4) purchase or sell real estate (other than money market
securities secured by real estate or interests therein or money market
securities issued by companies which invest in real estate or interests
therein), commodities or commodity contracts, interests in oil, gas or other
mineral exploration or development programs; (5) purchase any securities on
margin, except for use of short-term credit necessary for clearance of purchases
and sales of portfolio securities; (6) make short sales of securities or
maintain a short position or write, purchase or sell puts, calls, straddles,
spreads or combinations thereof; (7) make loans to other persons, provided that
the Money Market Fund may purchase money market securities or enter into
repurchase agreements and lend securities owned or held by it pursuant to (8)
below; (8) lend its portfolio securities in excess of 33 1/3% of its total
assets, taken at market value, provided that such loans are made according to
the guidelines set forth below; (9) borrow amounts in excess of 20% of its total
assets, taken at market value (including the amount borrowed), and then only
from banks as a temporary measure for extraordinary or emergency purposes (The
borrowing provisions shall not apply to reverse repurchase agreements.) [Usually
only "leveraged" investment companies may borrow in excess of 5% of their
assets; however, the Money Market Fund will not borrow to increase income but
only to meet redemption requests which might otherwise require untimely
dispositions of portfolio securities. The Money Market Fund will not purchase
securities while borrowings are outstanding. Interest paid on such borrowings
will reduce net income.]; (10) mortgage, pledge, hypothecate or in any manner
transfer (except as provided in (8) above) as security for indebtedness any
securities owned or held by the Money Market Fund except as may be necessary in
connection with borrowings referred to in investment restriction (9) above, and
then such mortgaging, pledging or hypothecating may not exceed 10% of the Money
Market Fund's net assets, taken at market value; (11) invest in securities with
legal or contractual restrictions on resale (except for repurchase agreements)
or for which no readily available market exists if, regarding all such
securities, more than 10% of its net assets (taken at market value) would be
invested in such securities; (12) invest in securities of issuers (other than
issuers of U.S. Government agency securities) having a record, together with
predecessors, of less than three years of continuous operation if, regarding all
such securities, more than 5% of its total assets (taken at market value) would
be invested in such securities; (13) enter into reverse repurchase agreements
if, as a result thereof, the Money Market Fund's obligations with respect to
reverse repurchase agreements would exceed one-third of its net assets (defined
to be total assets, taken at market value, less liabilities other than reverse
repurchase arrangements); and (14) purchase or retain the securities of any
issuer, if those individual officers and Trustees of the Money Market Fund, the
Investment Adviser or any subsidiary thereof each owning beneficially more than
1/2 of 1% of the securities of such issuer own in the aggregate more than 5% of
the securities of the issuer.
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Lending of Portfolio Securities. Subject to investment restriction (8)
above, the Money Market Fund may from time to time lend securities from its
portfolio to brokers, dealers and financial institutions and receive collateral
in cash or securities issued or guaranteed by the U.S. Government which will be
maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. Such cash collateral will be invested in
short-term securities, the income from which will increase the return to the
Money Market Fund. Such loans will be terminable at any time. The Money Market
Fund will have the right to regain record ownership of loaned securities to
exercise beneficial rights. The Money Market Fund may pay reasonable fees in
connection with the arranging of such loans.
GOVERNMENT FUND
The Government Fund is a no-load money market fund. Reference is made to
"Investment Objectives and Policies" in the Prospectus of the Government Fund
for a discussion of the investment objectives and policies of such Fund.
As discussed in its Prospectus, the Government Fund may invest in U.S.
Government securities pursuant to repurchase agreements. Reference is made to
"Investment Objectives and Policies--Money Market Fund" herein for a discussion
of such repurchase agreements.
In addition to the investment restrictions set forth in its Prospectus, the
Government Fund has adopted the following restrictions and policies relating to
the investment of its assets and its activities, which are fundamental policies
and may not be changed without the approval of the holders of a majority of the
Government Fund's outstanding voting securities (which for this purpose means
the lesser of (i) 67% of the shares represented at a meeting at which more than
50% of the outstanding shares are represented or (ii) more than 50% of the
outstanding shares). The Government Fund may not: (1) act as an underwriter of
securities issued by other persons; (2) purchase any securities on margin,
except for use of short-term credit necessary for clearance of purchases and
sales of portfolio securities; (3) make short sales of securities or maintain a
short position or write, purchase or sell puts, calls, straddles, spreads or
combinations thereof; (4) make loans to other persons, provided that the
Government Fund may purchase short-term marketable securities which are direct
obligations of the U.S. Government or enter into repurchase agreements
pertaining thereto; (5) 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. [Usually only
"leveraged" investment companies may borrow in excess of 5% of their assets;
however, the Government Fund will not borrow to increase income but only to meet
redemption requests which might otherwise require untimely dispositions of
portfolio securities. The Government Fund will not purchase securities while
borrowings are outstanding. Interest paid on such borrowings will reduce net
income.]; and (6) mortgage, pledge, hypothecate or in any manner transfer as
security for indebtedness any securities owned or held by the Government Fund
except as may be necessary in connection with borrowings mentioned in (5) above,
and then such mortgaging, pledging or hypothecating may not exceed 10% of the
Government Fund's net assets, taken at market value.
TAX-EXEMPT FUND
The Tax-Exempt Fund is a no-load tax-exempt money market fund. Reference is
made to "Investment Objectives and Policies" in the Prospectus of the Tax-Exempt
Fund for a discussion of the investment objectives and policies of such Fund.
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As discussed in its Prospectus, the Tax-Exempt Fund may invest in variable
rate demand notes ("VRDNs"). 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 on the adjustment
date. The adjustments are frequently based upon the prime rate of a bank or some
other appropriate interest rate adjustment index.
The Tax-Exempt 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 commercial banks ("institutions").
Participating VRDNs provide the Tax-Exempt Fund with a specified undivided
interest (up to 100%) of the underlying obligation 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 30 days. In addition, each Participating VRDN is
backed by an irrevocable letter of credit or similar commitment of the
institution. The Tax-Exempt 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 or issuing the repurchase commitment.
The Tax-Exempt Fund has been advised by its counsel that the interest
received on Participating VRDNs will be treated as interest from tax-exempt
obligations as long as the Tax-Exempt 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. It is contemplated that the Tax-Exempt Fund will not
invest more than a limited amount of its total assets in Participating VRDNs.
The Tax-Exempt Fund can be expected to offer a lower yield than longer-term
municipal bond funds since 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.
Because of the interest rate adjustment formula on VRDNs (including
Participating VRDNs), the 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.
The Tax-Exempt Fund's portfolio of investments in municipal notes and
short-term tax-exempt commercial paper will be limited to those obligations
which (i) are secured by a pledge of the full faith and credit of the United
States or (ii) 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
an NRSRO or, if not rated, will be of comparable quality as determined by the
Trustees of the Tax-Exempt Fund. The Tax-Exempt Fund's investments in municipal
bonds (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
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highest rating categories for short-term obligations or, if not rated, will be
of comparable quality as determined by the Trustees of the Tax-Exempt Fund.
Currently, there are three NRSROs which rate municipal obligations: Fitch
Investors Service, Inc., Moody's Investors Service, Inc. and Standard & Poor's
Ratings Group. Certain tax-exempt obligations (primarily VRDNs and Participating
VRDNs) may be entitled to the benefit of standby letters of credit or similar
commitments 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 instrument. The
Tax-Exempt Fund may also purchase other types of tax-exempt instruments if, in
the opinion of the Trustees, such obligations are equivalent to securities
having the ratings described above. For a description of Tax-Exempt Securities
and such ratings, see "Information Concerning Tax-Exempt Securities" in the
Appendix.
Purchase or Sale of Tax-Exempt Securities on a Delayed Delivery Basis or on
a When-Issued Basis. Tax-Exempt Securities may at times be purchased or sold on
a delayed delivery basis or on 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. The Tax-Exempt Fund will only make commitments
to purchase such securities with the intention of actually acquiring the
securities, but the Fund may sell these securities prior to settlement date if
it is deemed advisable. No new when-issued commitments will be made if more than
40% of the Tax-Exempt Fund's net assets would become so committed. Purchasing
Tax-Exempt Securities on a when-issued basis involves the risk that the yields
available in the market when the delivery takes place may actually be higher
than those obtained in the transaction itself; if yields so increase, the value
of the when-issued obligation will generally decrease. The Tax-Exempt Fund will
maintain a separate account at its custodian 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 Fixed Price "Puts". The Tax-Exempt Fund has
authority to purchase fixed rate Tax-Exempt Securities and, for a price,
simultaneously acquire the right to sell such 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 fixed price put. Puts with respect to
fixed rate instruments are to be distinguished from the demand or repurchase
features of VRDNs and Participating VRDNs which enable the Tax-Exempt Fund to
dispose of the security at a time when the market value of the security
approximates its par value. The Tax-Exempt Fund does not currently intend to
enter into fixed price put transactions but reserves the right to do so in the
future. No such transactions will be entered into unless such transactions are
permissible under applicable rules under the Investment Company Act and the
Trustees of the Tax-Exempt Fund have approved the proposed terms of such
transactions.
In addition to the investment restrictions set forth in its Prospectus, the
Tax-Exempt Fund has adopted the following restrictions and policies relating to
the investment of its assets and its activities, which are fundamental policies
and may not be changed without the approval of the holders of a majority of the
Tax-Exempt Fund's outstanding shares (for this purpose a majority of the shares
means the lesser of (i) 67% of the shares represented at a meeting at which more
than 50% of the outstanding shares are represented or (ii) more than 50% of the
outstanding shares). The 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
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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) purchase any securities on
margin, except for use of short-term credit necessary for clearance of purchases
and sales of portfolio securities; (5) make short sales of securities or
maintain a short position or invest in put, call, straddle, or spread options or
combinations thereof; 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" and "Appendix-Information Concerning
Tax-Exempt Securities"; (6) 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); (7)
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. [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. The
Tax-Exempt Fund will not purchase securities while borrowings are outstanding.
Interest paid on such borrowings will reduce net income.]; (8) 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 (7) above, and then such mortgaging,
pledging or hypothecating may not exceed 10% of its total assets, taken at
value; (9) 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 net assets (taken at value), would be invested
in such securities; and (10) 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 (6) above or insofar as the Tax-Exempt
Fund may be deemed an underwriter under the Securities Act of 1933 in selling
portfolio securities.
TREASURY FUND
The Treasury Fund is a no-load money market fund. Reference is made to
"Investment Objectives and Policies" in the Prospectus of the Treasury Fund for
a discussion of the investment objectives and policies of the Treasury Fund.
The Treasury Fund has adopted the following restrictions and policies
relating to the investment of its assets and its activities, which are
fundamental policies and may not be changed without the approval of the holders
of a majority of the Treasury Fund's outstanding voting securities (which for
this purpose means the lesser of (i) 67% of the shares represented at a meeting
at which more than 50% of the outstanding shares are represented or (ii) more
than 50% of the outstanding shares). The Treasury Fund may not: (1) purchase any
securities other than direct obligations of the U.S. Treasury having maturities
of no more than 762 days (25 months), (2) act as an underwriter of securities
issued by other persons; (3) purchase any securities on margin, except for use
of short-term credit necessary for clearance of purchases and sales of portfolio
securities; (4) make short sales of securities or maintain a short position or
write, purchase or sell puts, calls, straddles, spreads or combinations thereof;
(5) make loans to other persons, provided that the Treasury Fund may purchase
short-term marketable securities which are direct obligations of the U.S.
Treasury; (6) 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. [Usually only
"leveraged"
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investment companies may borrow in excess of 5% of their assets; however, the
Treasury Fund will not borrow to increase income but only to meet redemption
requests which might otherwise require untimely dispositions of portfolio
securities. The Treasury Fund will not purchase securities while borrowings are
outstanding. Interest paid on such borrowings will reduce net income.]; and (7)
mortgage, pledge, hypothecate or in any manner transfer as security for
indebtedness any securities owned or held by the Treasury Fund except as may be
necessary in connection with borrowings mentioned in (6) above, and then such
mortgaging, pledging or hypothecating may not exceed 10% of the Treasury Fund's
net assets, taken at market value.
MANAGEMENT OF THE FUNDS
TRUSTEES AND OFFICERS
The Trustees and executive officers of the Funds, their ages and their
principal occupations for at least the last five years are set forth below. With
the exception of six officers, the persons named below hold the same positions
with each of the Funds. Unless otherwise noted, the address of each Trustee and
executive officer is P.O. Box 9011, Princeton, New Jersey 08543-9011.
ARTHUR ZEIKEL (63)--President and Trustee (1)(2)--President of the
Investment Adviser (which term as used herein includes its corporate
predecessors) since 1977; President of Merrill Lynch Asset Management ("MLAM",
which term as used herein includes its corporate predecessors) since 1977;
President and Director of Princeton Services, Inc. ("Princeton Services") since
1993; Executive Vice President of Merrill Lynch & Co., Inc. ("ML & Co.") since
1990; Executive Vice President of Merrill Lynch since 1990 and a Senior Vice
President thereof from 1985 to 1990; Director of Merrill Lynch Funds
Distributor, Inc. ("MLFD").
RONALD W. FORBES (54)--Trustee (2)--1400 Washington Avenue, Albany, New
York 12222. Professor of Finance, School of Business, State University of New
York at Albany since 1989 and Associate Professor prior thereto; Member, Task
Force on Municipal Securities Markets, Twentieth Century Fund.
CYNTHIA A. MONTGOMERY (42)--Trustee (2)--Harvard Business School, Soldiers
Field Road, Boston, Massachusetts 02163. Professor, Harvard Business School
since 1989; Associate Professor, J.L. Kellogg Graduate School of Management,
Northwestern University from 1985 to 1989; Assistant Professor, Graduate School
of Business Administration, The University of Michigan from 1979 to 1985;
Director, UNUM Corporation.
CHARLES C. REILLY (64)--Trustee (2)--9 Hampton Harbor Road, Hampton Bays,
New York 11946. Self-employed financial consultant since 1990; President and
Chief Investment Officer of Verus Capital, Inc. from 1979 to 1990; Senior Vice
President of Arnhold and S. Bleichroeder, Inc. from 1973 to 1990; Partner, Small
Cities CableVision since 1986; Adjunct Professor, Columbia University Graduate
School of Business, 1990; Adjunct Professor, Wharton School, The University of
Pennsylvania, 1990.
KEVIN A. RYAN (62)--Trustee (2)--127 Commonwealth Avenue, Chestnut Hill,
Massachusetts 02167. Founder, current Director and Professor of The Boston
University Center for the Advancement of Ethics and Character; Professor of
Education at Boston University from 1982 until 1994; formerly taught on the
faculties of The University of Chicago, Stanford University and Ohio State
University.
RICHARD R. WEST (57)--Trustee (2)--482 Tepi Drive, Southbury, Connecticut
06488. Professor of Finance since 1984, and Dean from 1984 to 1993, New York
University Leonard N. Stern School of Business Administration; Professor of
Finance at the Amos Tuck School of Business Administration from 1976 to 1984
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and Dean from 1976 to 1983; Director, Vornado, Inc. (real estate investment
trust), Smith Corona Corporation (manufacturer of typewriters and word
processors), Alexander's Inc. (real estate company) and Bowne & Co., Inc.
(financial printer).
TERRY K. GLENN (54)--Executive Vice President (1)(2)--Executive Vice
President of the Investment Adviser and MLAM since 1983; Executive Vice
President and Director of Princeton Services since 1993; President of MLFD since
1986 and Director thereof since 1991; President of Princeton Administrators,
L.P. (and its corporate predecessor) since 1988.
VINCENT R. GIORDANO (50)--Senior Vice President of the Tax-Exempt Fund
(1)(2)--Senior Vice President of the Investment Adviser and MLAM since 1984 and
Vice President from 1980 to 1984.
JOSEPH T. MONAGLE, JR. (47)--Senior Vice President of the Money Market
Fund, the Government Fund and the Treasury Fund (1)(2)--Senior Vice President of
the Investment Adviser and MLAM since 1990; Vice President of MLAM from 1978 to
1990; Senior Vice President of Princeton Services since 1993.
DONALD C. BURKE (35)--Vice President (1)(2)--Vice President and Director of
Taxation of the Investment Adviser since 1990; employee of Deloitte & Touche LLP
from 1982 to 1990.
DONALDO S. BENITO (49)--Vice President of the Government Fund (1)--Vice
President of MLAM since 1986; Assistant Vice President of MLAM from 1984 to
1986.
PETER J. HAYES (36)--Vice President of the Tax-Exempt Fund (1)(2)--Vice
President of MLAM since 1988.
MARIE HEUMILLER (31)--Vice President of the Treasury Fund (1)(2)--Vice
President and Portfolio Manager of MLAM since 1991; employed by MLAM since 1985.
KENNETH A. JACOB (44)--Vice President of the Tax-Exempt Fund (1)(2)--Vice
President of MLAM since 1984.
KEVIN J. MCKENNA (38)--Vice President of the Money Market Fund, the
Government Fund and the Treasury Fund (1)(2)--Vice President of MLAM since 1985.
HELEN MARIE SHEEHAN (35)--Vice President of the Tax-Exempt Fund
(1)(2)--Vice President of MLAM since 1991; Assistant Vice President of MLAM from
1989 to 1991; employee of MLAM since 1985.
GERALD M. RICHARD (46)--Treasurer (1)(2)--Senior Vice President and
Treasurer of the Investment Adviser and MLAM since 1984; Senior Vice President
and Treasurer of Princeton Services since 1993; Vice President of MLFD since
1981 and Treasurer since 1984.
ROBERT HARRIS (43)--Secretary (1)(2)--Vice President of MLAM since 1984;
Secretary of MLFD since 1982.
- ---------------
(1) Interested person, as defined in the Investment Company Act, of the Funds.
(2) Such Trustee or officer is a director or officer of certain other investment
companies for which the Investment Adviser or MLAM acts as investment
adviser.
At June 30, 1995 the Trustees and officers of the Funds as a group (18
persons) owned an aggregate of less than 1% of the outstanding shares of
beneficial interest of the Funds. At such date, Mr. Zeikel and the other
officers of the Funds owned an aggregate of less than 1% of the outstanding
shares of common stock of ML & Co.
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<PAGE> 60
COMPENSATION OF TRUSTEES
Pursuant to the terms of its Investment Advisory Agreements (the
"Investment Advisory Agreements") with the Funds, the Investment Adviser pays
all compensation of officers and employees of the Funds as well as the fees of
all Trustees of the Funds who are affiliated persons of ML & Co. or its
subsidiaries. Each Fund pays each unaffiliated Trustee an annual fee plus a fee
for each meeting attended and pays all Trustees' actual out-of-pocket expenses
relating to attendance at meetings. Each Fund also compensates members of its
audit and nominating committee, which consists of all of the non-affiliated
Trustees. The fees and expenses paid by the Money Market Fund, the Government
Fund, the Tax-Exempt Fund and the Treasury Fund for the fiscal year ended March
31, 1995 aggregated $64,068, $25,068, $57,568, and $37,664, respectively.
The following table sets forth for the fiscal year ended March 31, 1995
compensation paid by the Funds to the non-interested Trustees and for the
calendar year ended December 31, 1994 the aggregate compensation paid by all
investment companies advised by MLAM and its affiliate, FAM ("MLAM/FAM-Advised
Funds") to the non-interested Trustees:
<TABLE>
<CAPTION>
PENSION
OR AGGREGATE
RETIREMENT COMPENSATION
BENEFITS FROM
ACCRUED FUND AND
COMPENSATION AS MLAM/FAM-
FROM COMPENSATION COMPENSATION COMPENSATION PART ADVISED
MONEY FROM FROM FROM OF FUNDS
MARKET GOVERNMENT TAX-EXEMPT TREASURY FUND PAID TO
NAME OF TRUSTEE FUND FUND FUND FUND EXPENSE TRUSTEES(1)
- --------------------------------- ------- ------- ------- ------ ----- --------
<S> <C> <C> <C> <C> <C> <C>
Ronald W. Forbes(1).............. $16,000 $ 8,500 $10,000 $7,000 None $154,400
Cynthia A. Montgomery(1)......... $27,000(2) $13,000(2) $16,000(2) $7,000 None $133,817
Charles C. Reilly(1)............. $16,000 $ 8,500 $10,000 $7,000 None $276,900
Kevin A. Ryan(1)................. $16,000 $ 8,500 $10,000 $7,000 None $154,400
Richard R. West(1)............... $17,000 $ 9,500 $11,000 $8,000 None $300,900
</TABLE>
- ---------------
(1) In addition to the Fund, the Trustees served on the boards of other
MLAM/FAM-Advised Funds as follows: Mr. Forbes (36 funds); Ms. Montgomery (36
funds); Mr. Reilly (53 funds); Mr. Ryan (36 funds); and Mr. West (53 funds).
(2)Reflects a pro-rata annual retainer for a portion of the fiscal year 1995 and
the full annual retainer for the fiscal year 1996.
INVESTMENT ADVISORY ARRANGEMENTS
Reference is made to "Management of the Funds--Investment Advisory
Arrangements" in the Appendix to the Prospectuses of the Funds for certain
information concerning the investment advisory arrangements of the Funds.
Subject to the direction of the Board of Trustees, the Investment Adviser
is responsible for the actual management of the Funds' portfolio and constantly
reviews the Funds' holdings in light of its own research analysis and that from
other relevant sources. The responsibility for making decisions to buy, sell or
hold a particular security rests with the Investment Adviser, subject to the
review of the Board of Trustees. The Investment Adviser performs certain of the
other administrative services and provides all of the office space, facilities,
equipment and necessary personnel for portfolio management of the Funds.
Securities held by the Funds may also be held by, or be appropriate
investments for, other funds or clients (collectively referred to as "clients")
for which the Investment Adviser or MLAM acts as an investment
11
<PAGE> 61
adviser. Because of different investment objectives or other factors, a
particular security may be bought for one or more clients when one or more
clients are selling the security. If purchases or sales of securities for the
Funds or other clients arise for consideration at or about the same time,
transactions in such securities will be made, insofar as feasible, for the
respective clients in a manner deemed equitable to all by the Investment Adviser
or MLAM. To the extent that transactions on behalf of more than one client of
the Investment Adviser 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.
The Investment Adviser presently receives a fee from each Fund at the end
of each month at the annual rates of 0.50% of the first $500 million of average
daily net assets of the Fund, 0.425% of the average daily net assets in excess
of $500 million but not exceeding $1 billion, and 0.375% of average daily net
assets in excess of $1 billion. The State of California imposes limitations on
the expenses of the Fund. This annual expense limitation applicable to each Fund
requires that the Investment Adviser reimburse the Fund in any amount necessary
to prevent such operating expenses (excluding interest, taxes, distribution
fees, brokerage fees and commissions and extraordinary charges such as
litigation costs) of the Fund from exceeding in any fiscal year 2.5% of the
Fund's first $30 million of average daily net assets, 2.0% of the next $70
million of average daily net assets and 1.5% of the remaining average daily net
assets. No fee payment will be made to the Investment Adviser during the year
which will cause such expenses to exceed the pro rata expense limitation at the
time of such payment.
Money Market Fund. For the fiscal years ended March 31, 1993, 1994 and
1995 the total advisory fees paid by the Money Market Fund to the Investment
Adviser aggregated $103,584,527, $101,568,034 and $104,060,839, respectively.
Government Fund. For the fiscal years ended March 31, 1993, 1994 and 1995
the total advisory fees paid by the Government Fund to the Investment Adviser
aggregated $16,323,136, $14,779,998 and $12,979,282, respectively.
Tax-Exempt Fund. For the fiscal years ended March 31, 1993, 1994 and 1995
the total advisory fees paid by the Tax-Exempt Fund to the Investment Adviser
aggregated $29,159,137, $29,468,384 and $29,119,924, respectively.
Treasury Fund. For the fiscal years ended March 31, 1993, 1994 and 1995
the total advisory fees paid by the Treasury Fund to the Investment Adviser
aggregated $5,629,043, $5,591,419 and $5,626,244, respectively.
The Investment Advisory Agreements obligate the Investment Adviser to
provide investment advisory services, to furnish administrative services, office
space and facilities for management of the affairs of each 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 Funds who are affiliated persons of
ML & Co. or any of its subsidiaries. Except for certain expenses incurred by
Merrill Lynch (see "Purchase and Redemption of Shares"), the Funds pay all other
expenses incurred in their operations, including, among other things, taxes,
expenses for legal and auditing services, costs of printing proxies, reports,
prospectuses and statements of additional information sent to current
shareholders (except to the extent paid for by the Distributor), charges of the
custodian and transfer agent, expenses of redemption of shares, Securities and
Exchange Commission fees, expenses of registering the shares under Federal and
state securities laws, fees and expenses of unaffiliated Trustees, accounting
and pricing costs (including the daily calculation of net asset value),
insurance, interest, brokerage
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<PAGE> 62
costs, litigation and other extraordinary or non-recurring expenses, and other
expenses properly payable by the Funds. Accounting services are provided by the
Investment Adviser and each Fund reimburses the Investment Adviser for its costs
in connection with such services provided to that Fund.
For information as to the distribution fee to be paid by each Fund to
Merrill Lynch pursuant to the Distribution Agreements, see "Purchase and
Redemption of Shares" below.
Duration and Termination. Unless earlier terminated as described below,
each Investment Advisory Agreement will continue in effect from year to year if
approved annually (a) by the Trustees of the Fund or by a majority of the
outstanding voting shares of the Fund and (b) by a majority of the Trustees who
are not parties to such contract or interested persons (as defined in the
Investment Company Act) of any such party. Such contract is not assignable and
may be terminated without penalty on 60 days' written notice at the option of
either party thereto or by the vote of the shareholders of the Fund.
PURCHASE AND REDEMPTION OF SHARES
Reference is made to "Purchase of Shares" and "Redemption of Shares" in the
Appendix to the Prospectuses of the Funds for certain information as to the
purchase and redemption of Fund shares.
Each Fund has entered into a distribution agreement (each, a "Distribution
Agreement") with Merrill Lynch as the distributor. The Distribution Agreements
obligate Merrill Lynch to pay certain expenses in connection with the offering
of the shares of the Funds. After the prospectuses, statements of additional
information and periodic reports have been prepared, set in type and mailed to
shareholders, Merrill Lynch will pay for the printing and distribution of copies
thereof used in connection with the offering to investors. Merrill Lynch will
also pay for other supplementary sales literature and advertising costs. The
Distribution Agreements are subject to the same renewal requirements and
termination provisions as the Investment Advisory Agreements described above.
Each Fund has adopted a Distribution and Shareholder Servicing Plan (each,
a "Distribution Plan") in compliance with Rule 12b-1 under the Investment
Company Act pursuant to which Merrill Lynch receives a distribution fee under
the Distribution Agreement from each Fund at the end of each month at the annual
rate of 0.125% of average daily net assets of such Fund attributable to
subscribers to the CMA program and to investors maintaining securities accounts
with Merrill Lynch or maintaining accounts directly with the Transfer Agent who
are not subscribers to such program, except that the value of Fund shares in
accounts maintained directly with the Transfer Agent which are not serviced by
Merrill Lynch Financial Consultants will be excluded. The Distribution Plans
reimburse Merrill Lynch only for actual expenses incurred in the fiscal year in
which the fees are paid. The distribution fees are principally to provide
compensation to Merrill Lynch Financial Consultants and other Merrill Lynch
personnel for selling shares of each Fund and for providing direct personal
services to shareholders of the Funds. The distribution fee is not compensation
for the administrative and operational services rendered to shareholders by
Merrill Lynch which are covered by Investment Advisory Agreements (see
"Management of the Funds--Investment Advisory Arrangements") between each Fund
and the Investment Adviser.
The Trustees believe that each Fund's expenditures under its Distribution
Plan benefit such Fund and its shareholders by providing better shareholder
services and by facilitating the sale and distribution of Fund shares. For the
years ended March 31, 1993, 1994 and 1995, the Money Market Fund paid
$33,934,955,
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<PAGE> 63
$33,387,092 and $34,206,694, respectively, to Merrill Lynch pursuant to its
Distribution Plan. For the years ended March 31, 1993, 1994 and 1995, the
Government Fund paid $5,101,796, $4,610,312 and $4,013,060, respectively, to
Merrill Lynch pursuant to its Distribution Plan. For the years ended March 31,
1993, 1994 and 1995, the Tax-Exempt Fund paid $9,361,603, $9,483,835 and
$9,357,280, respectively, to Merrill Lynch pursuant to its Distribution Plan.
For the years ended March 31, 1993, 1994 and 1995, the Treasury Fund paid
$1,576,608, $1,561,956 and $1,575,699, respectively, to Merrill Lynch pursuant
to the Distribution Plan. All of the amounts expended under the Distribution
Plans for the years ended March 31, 1993, 1994 and 1995 were allocated to
Merrill Lynch Financial Consultants, other Merrill Lynch personnel and related
administrative costs.
Among other things, each Distribution Plan provides that Merrill Lynch
shall provide and the Trustees of each Fund shall review quarterly reports of
the distribution expenses made by Merrill Lynch pursuant to the Distribution
Plan. In their consideration of each Distribution Plan, the Trustees must
consider all factors they deem relevant, including information as to the
benefits of the Distribution Plan to the related Fund and its shareholders. Each
Distribution Plan further provides that, so long as the Distribution Plan
remains in effect, the selection and nomination of Trustees of the Fund who are
not "interested persons" of the Fund as defined in the Investment Company Act
("Independent Trustees") shall be committed to the discretion of the Independent
Trustees then in office. Each Distribution Plan can be terminated at any time,
without penalty, by the vote of a majority of the Independent Trustees or by the
vote of the holders of a majority of the outstanding voting securities of each
Fund. Finally, the Distribution Plans cannot be amended to increase materially
the amount to be spent by the Fund thereunder without shareholder approval, and
all material amendments are required to be approved by vote of the Trustees of
the Fund, including a majority of the Independent Trustees, cast in person at a
meeting called for that purpose.
The right to receive payment with respect to any redemption of Fund shares
may be suspended by each Fund for a period of up to seven days. Suspensions of
more than seven days may not be made except (1) for any period (A) during which
the New York Stock Exchange is closed other than customary weekend and holiday
closings or (B) during which trading on the New York Stock Exchange is
restricted; (2) for any period during which an emergency exists as a result of
which (a) disposal by the Fund of securities owned by it is not reasonably
practicable or (b) it is not reasonably practicable for the Fund fairly to
determine the value of its net assets; or (3) for such other periods as the
Securities and Exchange Commission may by order permit for the protection of
securityholders of the Fund. The Commission shall by rules and regulations
determine the conditions under which (i) trading shall be deemed to be
restricted and (ii) an emergency shall be deemed to exist within the meaning of
clause (2) above.
Merrill Lynch has offered the CMA program since September, 1977. While no
significant problems have occurred to date, no predictions can be made as to the
rate of purchases and redemptions of shares which will result from the automatic
features of the CMA program. The portfolio securities of the Funds are highly
liquid and the Funds have the right to borrow up to 20% of their total assets on
a temporary basis to meet unexpected redemptions. Nevertheless, an erratic
redemption pattern could force the Investment Adviser to invest in securities or
maintain an average portfolio maturity which might lessen the yield that would
otherwise be available to the Funds.
14
<PAGE> 64
PORTFOLIO TRANSACTIONS
The Funds have no obligations 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 each Fund, the Investment Adviser is
primarily responsible for the 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 of the
securities offered, the type of transaction involved, the firm's general
execution and operational facilities, and the firm's risk in positioning the
securities involved. 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 securities in which each Fund invests 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 accounts. On occasion,
securities may be purchased directly from the issuer. The money market
securities in which the Money Market Fund, the Government Fund and the Treasury
Fund invest and the tax-exempt securities in which the Tax-Exempt Fund invests
are generally traded on a net basis and do not normally involve either brokerage
commissions or transfer taxes. The cost of executing portfolio securities
transactions of the Funds primarily will consist of dealer spreads and
underwriting commissions. Under the Investment Company Act, a person affiliated
with the Funds is 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, an affiliated
person of the Funds may not serve as the Funds' dealer in connection with such
transactions, except pursuant to the exemptive order described below. However,
affiliated persons of the Funds may serve as the Funds' broker in
over-the-counter transactions conducted on an agency basis. The Funds may not
purchase securities from any underwriting syndicate of which Merrill Lynch is a
member, except in accordance with applicable rules under the Investment Company
Act.
The Securities and Exchange Commission has issued an exemptive order
permitting the Money Market Fund, the Government Fund and the Treasury Fund to
conduct principal transactions with Merrill Lynch Government Securities Inc.
("GSI") in U.S. Government and U.S. Government agency securities, with Merrill
Lynch Money Markets Inc. ("MMI") in certificates of deposit and other short-term
bank money market instruments and commercial paper and with Merrill Lynch in
fixed income securities including medium-term notes. The order contains a number
of conditions, including conditions designed to insure that the price to the
Money Market Fund, the Government Fund and the Treasury Fund from GSI, MMI or
Merrill Lynch is equal to or better than that available from other sources. GSI,
MMI and Merrill Lynch have informed such Funds that they will in no way, at any
time, attempt to influence or control the activities of the Fund or the
Investment Adviser in placing such principal transactions. The exemptive order
allows GSI, MMI or Merrill Lynch to receive a dealer spread on any transaction
with the Money Market Fund, the Government Fund or the Treasury Fund no greater
than its customary dealer spread for transactions of the type involved.
Generally such spreads do not exceed 0.25% of the principal amount of the
securities involved. During the fiscal year ended March 31, 1993, the Money
Market Fund engaged in 609 such transactions aggregating approximately $23.5
billion, the Government Fund engaged in three such transactions aggregating
approximately $35.2 million and the Treasury Fund engaged in 19 such
transactions aggregating approximately $380.9 million. During the fiscal year
ended March 31, 1994, the Money Market Fund engaged
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<PAGE> 65
in 402 such transactions aggregating approximately $19.9 billion, the Government
Fund engaged in 131 such transactions aggregating approximately $5.0 billion and
the Treasury Fund engaged in 29 such transactions aggregating approximately
$478.8 million. During the fiscal year ended March 31, 1995, the Money Market
Fund engaged in 383 such transactions aggregating approximately $23.9 billion,
the Government Fund engaged in 5 such transactions aggregating approximately
$174.9 million and the Treasury Fund engaged in 5 such transactions aggregating
approximately $112.0 million.
Prior to the receipt of a separate exemptive order also described below,
the Tax-Exempt Fund could not purchase securities in principal transactions with
Merrill Lynch, although it could purchase tax-exempt securities from
underwriting syndicates of which Merrill Lynch was a member under certain
conditions in accordance with the provisions of a rule adopted under the
Investment Company Act. In 1987, the Securities and Exchange Commission issued
an exemptive order permitting the Tax-Exempt Fund to conduct principal
transactions with Merrill Lynch in Tax-Exempt Securities with remaining
maturities of one year or less. This order contains a number of conditions,
including conditions designed to insure that the price to the Tax-Exempt Fund
from Merrill Lynch is equal to or better than that available from other sources.
Merrill 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 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 its customary dealer spread for transactions of
the type involved. During the fiscal year ended March 31, 1993, the Tax-Exempt
Fund engaged in 50 principal transactions with Merrill Lynch, aggregating
approximately $1.2 billion. During the fiscal year ended March 31, 1994, the
Tax-Exempt Fund engaged in 35 principal transactions with Merrill Lynch,
aggregating approximately $603.6 million. During the fiscal year ended March 31,
1995, the Tax-Exempt Fund engaged in 13 principal transactions with Merrill
Lynch, aggregating approximately $130.1 million.
The Trustees of each Fund have considered the possibilities of recapturing
for the benefit of the Funds expenses of possible portfolio transactions, such
as dealers' 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. The Investment Adviser has arranged for the Funds' custodian to receive
any tender offer solicitation fees on behalf of the Funds payable with respect
to portfolio securities of the Funds.
The Funds do not expect to use one particular dealer, but, subject to
obtaining the best price and execution, dealers who provide supplemental
investment research to the Investment Adviser may receive orders for
transactions by the Funds. 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 Agreement and the expenses of the Investment
Adviser will not necessarily be reduced as a result of the receipt of such
supplemental information.
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<PAGE> 66
DETERMINATION OF NET ASSET VALUE
MONEY MARKET FUND, GOVERNMENT FUND AND TREASURY FUND
The net asset value of the Money Market Fund, the Government Fund and the
Treasury Fund is determined by the Investment Adviser at 12:00 noon, New York
time, on each day during which the New York Stock Exchange or New York banks are
open for business, immediately after the daily declaration of dividends. As a
result of this procedure, the net asset value is determined each day except for
days on which both the New York Stock Exchange and New York banks are closed.
Both the New York Stock Exchange and New York banks are closed for New Year's
Day, President's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day. The net asset value per share of the Money Market Fund,
the Government Fund and the Treasury Fund is determined under the "penny
rounding" method by adding the value of all securities and other assets in each
Fund's portfolio, deducting such Fund's liabilities, dividing by the number of
shares of the Fund outstanding and rounding the result to the nearest whole
cent. It is anticipated that the net asset value per share of each Fund will
remain constant at $1.00 per share, but no assurance can be offered in this
regard. Securities with remaining maturities of greater than 60 days for which
market quotations are readily available will be valued at market value.
Securities with remaining maturities of 60 days or less will be valued on an
amortized cost basis. Other securities held by the Money Market Fund, the
Government Fund and the Treasury Fund will be valued at their fair value as
determined in good faith by or under direction of the Board of Trustees.
TAX-EXEMPT FUND
The net asset value of the Tax-Exempt Fund for the purpose of pricing
orders for the purchase and redemption of shares is determined by the Investment
Adviser at 12:00 noon, New York time, on each day the New York Stock Exchange or
New York banks are open for business, immediately after the daily declaration of
dividends. As a result of this procedure, the net asset value is determined each
day except for days on which both the New York Stock Exchange and New York banks
are closed. Both the New York Stock Exchange and New York banks are closed on
New Year's Day, President's Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. The net asset value is determined by adding
the value of all securities and other assets in the portfolio, deducting its
liabilities and dividing by the number of shares outstanding. It is anticipated
that the net asset value per share of the Tax-Exempt Fund will remain constant
at $1.00 per share, but no assurance can be offered in this regard.
The Tax-Exempt Fund values its portfolio securities based upon their
amortized cost in accordance with the terms of a rule adopted by the Securities
and Exchange Commission. This involves valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. 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
instrument.
------------------------
In accordance with the Securities and Exchange Commission rule applicable
to the valuation of portfolio securities, the Funds will maintain a
dollar-weighted average portfolio maturity of 90 days or less and will purchase
instruments having remaining maturities of not more than 397 days (13
months),with the exception of U.S. Government and U.S. Government agency
securities, which may have remaining maturities of up to
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<PAGE> 67
762 days (25 months). The Funds will invest only in securities determined by the
Trustees to be of high quality with minimal credit risks. In addition, the
Trustees have established procedures designated 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 on a "penny rounded" basis or, in the case of the Tax-Exempt Fund, an
amortized cost basis, will be reported to the Trustees of the Fund by the
Investment Adviser. In the event the Trustees determine that a deviation exists
with respect to any Fund which may result in material dilution or other unfair
results to investors or existing shareholders of that Fund, the Fund will take
such corrective action as it regards necessary and appropriate, including the
reduction of the number of outstanding shares of the Fund by having each
shareholder proportionately contribute shares to the Fund's capital; the sale of
portfolio instruments prior to maturity to realize capital gains or losses or to
shorten average portfolio maturity; withholding dividends; or establishing a net
asset value per share solely by using available market quotations. If the number
of outstanding shares is reduced in order to maintain a constant net asset value
of $1.00 per share, the shareholders will contribute proportionately to the
Fund's capital. Each shareholder will be deemed to have agreed to such
contribution by such shareholder's investment in such Fund.
Since the net income of the Funds is determined and declared as a dividend
immediately prior to each time the net asset value of each Fund is determined,
the net asset value per share of the Funds normally remains at $1.00 per share
immediately after each such dividend declaration. Any increase in the value of a
shareholder's investment in a Fund, representing the reinvestment of dividend
income, is reflected by an increase in the number of shares of the Fund in the
account and any decrease in the value of a shareholder's investment may be
reflected by a decrease in the number of shares in the account. See "Taxes"
below.
YIELD INFORMATION
Each Fund normally computes its annualized yield by determining the net
income for a seven-day base period for a hypothetical pre-existing account
having a balance of one share at the beginning of the base period, dividing the
net income by the net asset value of the account at the beginning of the base
period to obtain the base period return, multiplying the result by 365 and then
dividing by seven. Under this calculation, the yield on the Money Market Fund,
the Government Fund and the Treasury Fund shares reflects, and the yield on the
Tax-Exempt Fund does not reflect, realized gains and losses on portfolio
securities. In accordance with regulations adopted by the Securities and
Exchange Commission, each Fund is required to disclose its annualized yield for
certain seven-day periods in a standardized manner which does not take into
consideration any realized or unrealized gains or 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. In the case of the Money Market Fund, the
Government Fund and the Treasury Fund, this compounded yield calculation also
reflects realized gains or losses on portfolio securities. Realized gains and
losses are not reflected in the compounded yield calculation of the Tax-Exempt
Fund.
The yield on the Funds' shares normally will fluctuate on a daily basis.
Therefore, the yield for any given past period is not an indication or
representation by the Fund of future yields or rates of return on its shares.
The yield is affected by such factors as changes in interest rates on money
market securities (or short-term Tax-Exempt Securities in the case of the
Tax-Exempt Fund), average portfolio maturity, the types and quality
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<PAGE> 68
of portfolio securities held and operating expenses. The yield on Government
Fund shares and Treasury Fund shares for various reasons may not be comparable
to the yield on shares of other money market funds or other investments.
TAXES
FEDERAL
The Funds intend to continue to qualify for the special tax treatment
afforded regulated investment companies ("RICs") under the Internal Revenue Code
of 1986, as amended (the "Code"). If the Money Market Fund, the Government Fund,
the Treasury Fund or the Tax-Exempt Fund so qualifies, such Fund (but not its
shareholders) will not be subject to Federal income tax on the part of its net
ordinary income and net realized capital gains (see below) which it distributes
to shareholders in any taxable year in which it distributes at least 90% of its
taxable net income and 90% of its tax-exempt net income. The Funds intend to
distribute substantially all of such income.
Taxation of Money Market Fund, Government Fund and Treasury Fund Dividends
Dividends paid by the Money Market Fund, the Government Fund and the
Treasury Fund from their ordinary income and distributions of such Funds' net
realized short-term capital gains (together referred to hereafter as "ordinary
income dividends") are taxable to shareholders as ordinary income. Distributions
made from such Funds' net realized long-term capital gains from the sale of
securities ("capital gain dividends") are taxable to shareholders as long-term
capital gains, regardless of the length of time the shareholder has owned the
Money Market Fund, the Government Fund or the Treasury Fund shares.
Dividends are taxable to shareholders even though they are reinvested in
additional shares of a Fund. Not later than 60 days after the close of their
taxable years, the Money Market Fund, the Government Fund and the Treasury Fund
will provide their respective shareholders with a written notice designating the
amounts of any ordinary income or capital gain dividends.
If the value of assets held by the Money Market Fund, the Government Fund,
the Treasury Fund or the Tax-Exempt Fund declines, the Board of Trustees may
authorize a reduction in the number of outstanding shares in the respective
shareholders' accounts so as to preserve a net asset value of $1.00 per share.
After such a reduction, the basis of eliminated shares would be added to the
basis of shareholders' remaining Fund shares, and any shareholders disposing of
shares at that time may recognize a capital loss. Distributions paid by the
Money Market Fund, the Government Fund and the Treasury Fund, including
distributions reinvested in additional shares of an affected Fund, will
nonetheless be fully taxable, even if the number of shares in shareholders'
accounts has been reduced as described above.
Taxation of Tax-Exempt Fund Dividends
The Tax-Exempt Fund intends to qualify to pay "exempt-interest dividends"
as defined in Section 852(b)(5) of the Code. Under such 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") under Section 103(a) of the Code (relating generally to
obligations of a state or local governmental unit), the Tax-Exempt Fund shall be
qualified to pay exempt-interest dividends to its shareholders. Exempt-interest
dividends are dividends or any part thereof paid by the Tax-Exempt Fund which
are attributable to interest on
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<PAGE> 69
tax-exempt obligations and designated by the Tax-Exempt Fund as exempt-interest
dividends in a written notice mailed to the Tax-Exempt Fund's shareholders
within sixty days after the close of its taxable year. To the extent that the
dividends distributed to the Fund's shareholders are derived from interest
income exempt from Federal income tax under Code Section 103(a) and are properly
designated as exempt-interest dividends, they will be excludable from a
shareholder's gross income for Federal income tax purposes. Exempt-interest
dividends are included, however, in determining the portion, if any, of a
person's social security and railroad retirement benefits subject to Federal
income taxes. Interest on indebtedness incurred or continued to purchase or
carry shares of a RIC paying exempt-interest dividends, such as the Tax-Exempt
Fund, will not be deductible by the investor for Federal income tax purposes.
Shareholders are advised to consult their tax advisers with respect to whether
exempt-interest dividends retain the exclusion under Code Section 103(a) if a
shareholder would be treated as a "substantial user" or "related person" under
Code Section 147(a) with respect to property financed with the proceeds of an
issue of "industrial development bonds" or "private activity bonds", if any,
held by the Tax-Exempt Fund. The Tax-Exempt Fund will inform shareholders
annually regarding the portion of its distributions which constitutes
exempt-interest dividends.
To the extent that the Tax-Exempt Fund's distributions are derived from
interest on its taxable investments or from an excess of net short-term capital
gains over net long-term capital losses ("ordinary income dividends"), such
distributions are considered ordinary income for Federal income tax purposes.
Distributions, if any, of net long-term capital gains from the sale of
securities ("capital gain dividends") are taxable as long-term capital gains for
Federal income tax purposes, regardless of the length of time the shareholder
has owned Fund shares. Under the Revenue Reconciliation Act of 1993, all or a
portion of the Tax-Exempt Fund's gain from the sale or redemption of tax-exempt
obligations purchased at a market discount will be treated as ordinary income
rather than capital gain. This rule may increase the amount of ordinary income
dividends received by shareholders. Any loss upon the sale or exchange of
Tax-Exempt Fund shares held for six months or less will be disallowed to the
extent of any exempt-interest dividends received by the shareholder.
The Code subjects interest received on certain otherwise tax-exempt
securities to an alternative minimum tax. The alternative minimum tax applies to
interest received on "private activity bonds" issued after August 7, 1986.
Private activity bonds are bonds which, although tax exempt, are used for
purposes other than those generally performed by governmental units and which
benefit non-governmental entities (e.g., bonds used for industrial development
or housing purposes). Income received on such bonds is classified as an item of
"tax preference", which could subject investors in such bonds, including
shareholders of the Tax-Exempt Fund, to an alternative minimum tax. The
Tax-Exempt Fund will purchase such "private activity bonds" and will report to
shareholders within 60 days after its taxable year-end the portion of the
Tax-Exempt Fund's dividends declared during the year which constitutes an item
of tax preference for alternative minimum tax purposes. The Code further
provides that corporations are subject to an alternative minimum tax based, in
part, on certain differences between taxable income as adjusted for other tax
preferences and the corporation's "adjusted current earnings", which more
closely reflect a corporation's economic income. Because an exempt-interest
dividend paid by the Tax-Exempt Fund will be included in adjusted current
earnings, a corporate shareholder may be required to pay alternative minimum tax
on exempt-interest dividends paid by the Tax-Exempt Fund.
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<PAGE> 70
The Revenue Reconciliation Act of 1993 added new marginal tax brackets of
36% and 39.6% for individuals and created a graduated structure of 26% and 28%
for the alternative minimum tax applicable to individual taxpayers. These rate
increases may affect an individual investor's after-tax return from an
investment in the Tax-Exempt Fund as compared with such investor's return from
taxable investments.
The Code provides that every shareholder required to file a tax return must
include for information purposes on such return the amount of exempt-interest
dividends received from all sources (including the Tax-Exempt Fund) during the
taxable year.
Environmental Tax. The Code imposes a deductible tax (the "Environmental
Tax") on a corporation's modified alternative minimum taxable income (computed
without regard to the alternative tax net operating loss deduction and the
deduction for the Environmental Tax) at a rate of $12 per $10,000 (0.12%) of
alternative minimum taxable income in excess of $2,000,000. The Environmental
Tax is imposed for taxable years beginning after December 31, 1986 and before
January 1, 1996. The Environmental Tax 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 Code provides,
however, that a RIC, such as the Tax-Exempt Fund, is not subject to the
Environmental Tax. However, exempt-interest dividends paid by the Tax-Exempt
Fund that create alternative minimum tax preferences for corporate shareholders
(as described above) may subject corporate shareholders of the Tax-Exempt Fund
to the Environmental Tax.
General Taxation
If the Money Market Fund, the Government Fund, the Treasury Fund or the
Tax-Exempt Fund pays a dividend in January which was declared in the previous
October, November or December to shareholders of record on a specified date in
one of such months, then such dividend will be treated for tax purposes as being
paid by such Fund and received by its shareholders on December 31 of the year in
which such dividend was declared. Dividends by the Funds will not be eligible
for the dividends received deduction allowed to corporations under the Code.
Distributions in excess of a Fund's earnings and profits will first reduce the
adjusted tax basis of a holder's shares and, after such adjusted tax basis is
reduced to zero, will constitute capital gains to such holder (assuming the
shares are held as a capital asset). Any loss upon the sale or exchange of Fund
shares held for six months or less will be treated as long-term capital loss to
the extent of any capital gain dividends received by the shareholder.
Ordinary income dividends paid by a Fund to shareholders who are
nonresident aliens or foreign entities will be subject to a 30% United States
withholding tax under existing provisions of the Code applicable to foreign
individuals and entities unless a reduced rate of withholding or a withholding
exemption is provided under applicable treaty law. Nonresident shareholders are
urged to consult their own tax advisers concerning the applicability of the
United States withholding tax.
Dividends and interest received by a Fund may give rise to withholding and
other taxes imposed by foreign countries. Tax conventions between certain
countries and the United States may reduce or eliminate such taxes.
Under certain provisions of the Code, some shareholders may be subject to a
31% withholding tax on certain ordinary income dividends and on capital gain
dividends and redemption payments ("backup withholding"). Generally,
shareholders subject to backup withholding will be those for whom no certified
21
<PAGE> 71
taxpayer identification number is on file with a Fund or who, to such Fund's
knowledge, have furnished an incorrect number. When establishing an account, an
investor must certify under penalty of perjury that such number is correct and
that such investor is not otherwise subject to backup withholding.
The Code requires a RIC to pay a nondeductible 4% excise tax to the extent
the RIC does not distribute, during each calendar year, 98% of its ordinary
income, determined on a calendar year basis, and 98% of its capital gains,
determined, in general, on an October 31 year-end, plus certain undistributed
amounts from previous years. The required distributions, however, are based only
on the taxable income of a RIC. The excise tax, therefore, will generally not
apply to the Tax-Exempt Fund to the extent that it pays exempt-interest
dividends. Although the Funds intend to distribute their income and capital
gains in the manner necessary to avoid imposition of the 4% excise tax, there
can be no assurance that sufficient amounts of the Funds' taxable ordinary
income and capital gains will be distributed to avoid entirely the imposition of
the tax. In such event, any such Fund will be liable for the tax only on the
amount by which it does not meet the foregoing distribution requirements.
A loss realized on a sale or exchange of shares of any of the Funds will be
disallowed if shares of the Fund are acquired (whether through the automatic
reinvestment of dividends or otherwise) within a 61-day period beginning 30 days
before and ending 30 days after the date that the shares are disposed of. In
such a case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury Regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
the Treasury Regulations promulgated thereunder. The Code and the Treasury
Regulations are subject to change by legislative or administrative action either
prospectively or retroactively.
Ordinary income dividends and capital gain dividends may also be subject to
state and local taxes. Certain states exempt from state income taxation
dividends paid by RICs which are derived in whole or in part from interest on
U.S. Government obligations. State law varies as to whether and what percentage
of dividend income attributable to U.S. Government obligations is exempt from
state income tax.
Shareholders are urged to consult their tax advisers regarding specific
questions as to Federal, foreign, state or local taxes. Foreign investors should
consider applicable foreign taxes in their evaluation of an investment in the
Funds.
GENERAL INFORMATION
DESCRIPTION OF SHARES
The Declaration of Trust of each Fund permits the Trustees to issue an
unlimited number of full and fractional shares of a single class and to divide
or combine the shares into a greater or lesser number of shares without thereby
changing the proportionate beneficial interest in the Fund. Each share
represents an equal proportionate interest in the Fund with each other share.
Upon liquidation of the Fund, shareholders are entitled to share pro rata in the
net assets of the Fund available for distribution to shareholders. Shares have
no preemptive or conversion rights. The rights of redemption and exchange are
described elsewhere herein and in the Prospectuses of the Funds. Shares of each
Fund are fully paid and non-assessable by the Fund.
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<PAGE> 72
Shareholders are entitled to one vote for each full share held and
fractional votes for fractional shares held in the election of Trustees and on
other matters submitted to the vote of shareholders. Voting rights are not
cumulative, so that the holders of more than 50% of the shares voting in the
election of Trustees can, if they choose to do so, elect all of the Trustees of
a Fund, in which event the holders of the remaining shares are unable to elect
any person as a Trustee. No amendment may be made to any Declaration of Trust
without the affirmative vote of a majority of the outstanding shares of the
related Fund except under certain limited circumstances set forth in the
Declaration of Trust.
The Investment Adviser provided the initial capital for each Fund by
purchasing 100,000 shares of such Fund for $100,000. Such shares were acquired
for investment and can only be disposed of by redemption. The organizational
expenses of the Money Market Fund, the Government Fund and the Tax-Exempt Fund
were paid by each respective Fund and were amortized over a period not exceeding
five years from such Fund's commencement of operations. The organizational
expenses of the Treasury Fund ($64,239) were paid by the Treasury Fund and are
being amortized over a period not exceeding five years. The proceeds realized by
the Investment Adviser on the redemption of any of the shares initially
purchased by it will be or have been reduced by the proportionate amount of
unamortized organizational expenses which the number of shares redeemed bears or
bore to the number of shares initially purchased.
CUSTODIAN
State Street Bank and Trust Company, P.O. Box 1713, Boston, Massachusetts
02101 (the "Custodian"), acts as Custodian of the Funds' assets. The Custodian
is responsible for safeguarding and controlling the Funds' cash and securities,
handling the receipt and delivery of securities and collecting interest on the
Funds' investments.
TRANSFER AGENT
Merrill Lynch Financial Data Services, Inc., 4800 Deer Lake Drive East,
Jacksonville, Florida 32246-6484 (the "Transfer Agent"), acts as the Funds'
transfer agent. The Transfer Agent is responsible for the issuance, transfer and
redemption of shares and the opening, maintenance and servicing of shareholder
accounts.
INDEPENDENT AUDITORS
Deloitte & Touche LLP, 117 Campus Drive, Princeton, New Jersey 08540, has
been selected as the independent auditors of each Fund. The selection of
independent auditors is subject to ratification by the shareholders of the
Funds. The independent auditors are responsible for auditing the annual
financial statements of the Funds.
LEGAL COUNSEL
Brown & Wood, One World Trade Center, New York, New York 10048-0557, is
counsel for the Funds.
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<PAGE> 73
REPORT TO SHAREHOLDERS
The fiscal year of each Fund ends on the last day of March of each year.
Each Fund will send to its shareholders at least semi-annually reports showing
its portfolio and other information. An annual report containing financial
statements audited by independent auditors is sent to the shareholders each
year.
Only one copy of each shareholder report and certain shareholder
communications will be mailed to each identified shareholder regardless of the
number of accounts such shareholder has. If a shareholder wishes to receive
separate copies of each report and communication for each of the shareholder's
related accounts the shareholder should notify in writing:
Merrill Lynch Financial Data Services, Inc.
P.O. Box 45290
Jacksonville, FL 32232-5290
The written notification should include the shareholder's name, address,
tax identification number and Merrill Lynch and/or mutual fund account numbers.
If you have any questions regarding this please call your Merrill Lynch
Financial Consultant or Merrill Lynch Financial Data Services, Inc. at (800)
221-7210.
ADDITIONAL INFORMATION
The Prospectus and this Statement of Additional Information do not contain
all of the information set forth in the Registration Statements and the exhibits
relating thereto, which each Fund has filed with the Securities and Exchange
Commission, Washington, D.C., under the Securities Act of 1933 and the
Investment Company Act, to which reference is hereby made.
The Declarations of Trust establishing the Funds refer to the Trustees
under the Declarations of Trust collectively as Trustees, but not as individuals
or personally; and no Trustee, shareholder, officer, employee or agent of any of
the Funds shall be held to any personal liability, nor shall resort be had to
their private property for the satisfaction of any obligation or claim of any
Fund but the Trust Property only shall be liable. Copies of the Declarations of
Trust, together with all amendments thereto, are on file in the office of the
Secretary of the Commonwealth of Massachusetts.
To the knowledge of the Funds, no person owned beneficially 5% or more of
any Fund's shares on July 1, 1995.
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APPENDIX
DESCRIPTION OF COMMERCIAL PAPER, BANK
MONEY MARKET INSTRUMENTS AND CORPORATE BOND RATINGS
COMMERCIAL PAPER AND BANK MONEY MARKET INSTRUMENTS
Commercial paper with the greatest capacity for timely payment is rated A
by Standard & Poor's Ratings Group ("Standard & Poor's"). Issues within this
category are further redefined with designations 1, 2 and 3 to indicate the
relative degree of safety; A-1+, the highest, indicates that an issue has been
determined to possess extremely strong safety characteristics; A-1 indicates the
degree of safety is strong; A-2 indicates that capacity for timely repayment is
satisfactory.
Moody's Investors Service, Inc. ("Moody's") employs the designations of
Prime-1, Prime-2 and Prime-3 to indicate the relative capacity of the rated
issuers to repay punctually. Prime-1 issues have a superior capacity for
repayment. Prime-2 issues have a strong capacity for repayment, but to a lesser
degree than Prime-1.
Commercial paper rated A.1+ by IBCA Limited or its affiliate IBCA, Inc.
(together, "IBCA") are obligations supported by the highest capacity for timely
repayment. Commercial paper rated A.1 has a very strong capacity for timely
repayment. Commercial paper rated A.2 has a strong capacity for timely
repayment, although such capacity may be susceptible to adverse changes in
business, economic or financial conditions.
Fitch Investors Service, Inc. ("Fitch") employs the rating F-1+ to indicate
issues regarded as having the strongest degree of assurance for timely payment.
The rating F-1 reflects an assurance of timely payment only slightly less in
degree than issues rated F-1+, while the rating F-2 indicates a satisfactory
degree of assurance for timely payment, although the margin of safety is not as
great as indicated by the F-1+ and F-1 categories.
Duff & Phelps Credit 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 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. ("TBW") employs the designations TBW-1, TBW-2,
TBW-3 and TBW-4 as ratings for commercial paper, other senior short-term
obligations and deposit obligations of the entities to which the rating has been
assigned. TBW-1 is the highest category and indicates a very high degree of
likelihood that principal and interest will be paid on a timely basis. TBW-2 is
the second highest category and indicates that while the degree of safety
regarding timely repayment of principal and payment of 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 Standard & Poor's to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong. Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in a small degree.
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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 credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events. Bonds rated AA are considered to be investment grade and of
very high credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds rated AAA.
Bonds rated AAA by Duff & Phelps are deemed to be of the highest credit
quality: the risk factors are negligible, being only slightly more than for
risk-free U.S. Treasury debt. AA indicates high credit quality: protection
factors are strong, and risk is modest but may vary slightly from time to time
because of economic conditions.
Bonds rated AAA by TBW are accorded the highest rating category which
indicates that the ability to repay principal and pay interest on a timely basis
is very high. AA is the second highest rating category and indicates a superior
ability to repay principal and pay interest on a timely basis with limited
incremental risk versus issues rated in the highest rating category.
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 of 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.
The two principal classifications of Tax-Exempt Securities are "general
obligation" bonds and "revenue" or "special obligation" bonds. General
obligation bonds are secured by the issuer's pledge of its faith, credit,
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and taxing power for the repayment of principal and the payment of 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 repayment of the
principal and the payment of interest on such industrial revenue bonds depends
solely on the ability of the user of the facilities 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 generally
include "moral obligation" bonds which are normally issued by special purpose
public authorities. If an issuer of moral obligations 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 Tax-Exempt Fund to achieve its
investment objective is also dependent on the continuing ability of the issuers
of the Tax-Exempt Securities in which the Tax-Exempt Fund invests to meet their
obligations for the payment of interest and repayment of principal when due.
There are variations in the risks involved in 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 such 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 proposal were enacted, the ability of the Tax-Exempt Fund to
pay "exempt-interest dividends" would be adversely affected and the Tax-Exempt
Fund would re-evaluate its investment objective and policies and consider
changes in its structure. See "Taxes".
RATINGS OF MUNICIPAL NOTES AND SHORT-TERM TAX-EXEMPT COMMERCIAL PAPER
Commercial paper with the greatest capacity for timely payment is rated A
by Standard & Poor's. Issues within this category are further redefined with
designations 1, 2 and 3 to indicate the relative degree of safety; A-1 indicates
the degree of safety is strong; issues that possess extremely strong safety
characteristics will be given an A-1+ designation; A-2 indicates that capacity
for timely repayment is satisfactory. A Standard & Poor's rating with respect to
certain municipal note issues with a maturity of less than three years reflects
the liquidity concerns and market access risks unique to notes. SP-1, the
highest note rating, indicates a very strong, or strong, capacity to repay
principal and pay interest. Issues that possess overwhelming safety
characteristics will be given an "SP-1+" designation. SP-2, the second highest
note rating, indicates a satisfactory capacity to repay principal and pay
interest.
Moody's employs the designations of Prime-1, Prime-2 and Prime-3 with
respect to commercial paper to indicate the relative capacity of the rated
issuers (or related supporting institutions) 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. Moody's highest rating for
short-term notes and VRDOs is
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MIG-1/VMIG-1; MIG-1/VMIG-1 denotes "best quality", enjoying "strong protection
by established cash flows"; MIG-2/VMIG-2 denotes "high quality" with margins of
protection that are ample although not so large as MIG-1/VMIG-1.
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.
RATINGS OF MUNICIPAL BONDS
Bonds rated AAA have the highest rating assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong. Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in a small degree. A
Standard & Poor's municipal debt rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors and insurers
of lessees.
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
the numerical modifier 1 to the classifications Aa through B to indicate that
Moody's believes the issue possesses the strongest investment attributes in its
rating category. Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally. These are
bonds secured by (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
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 and prospective financial
condition and operative performance of the issuer and of any guarantor, as well
as the economic and political 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.
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INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
CMA MONEY FUND:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of CMA Money Fund as of March 31, 1995, the related
statements of operations for the year then ended and changes in net assets for
each of the years in the two-year period then ended, and the financial
highlights for each of the years in the five-year period then ended. These
financial statements and the financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at March
31, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of CMA Money Fund as of
March 31, 1995, the results of its operations, the changes in its net assets,
and the financial highlights for the respective stated periods in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Princeton, New Jersey
May 2, 1995
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<TABLE>
CMA MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (IN THOUSANDS)
<CAPTION>
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
<S> <C> <C> <C> <C>
Bank Notes--1.0%
Banc One, Columbus $ 90,000 6.025% 5/02/95 $ 89,953
Bank of New York 94,000 6.25 4/11/95 94,000
Trust Company Bank, 100,000 6.50 3/21/96 99,740
Atlanta
Total Bank Notes
(Cost--$283,898) 283,693
Certificates of Deposit--0.1%
American Express 25,000 6.01 4/24/95 25,000
Centurion Bank
Total Certificates of Deposit
(Cost--$25,000) 25,000
Certificates of Deposit--European--3.2%
ABN-AMRO Bank N.V. 45,000 6.32 8/31/95 45,001
Abbey National PLC, 100,000 6.22 4/20/95 99,994
London
Bankers Trust NY 300,000 5.75 4/19/95 299,895
Corp.
Bayerische 40,000 6.25 4/12/95 39,999
Landesbank
Commerzbank AG, 41,000 6.22 4/26/95 41,000
London
Deutsche Bank 50,000 6.63 3/22/96 49,986
J.P. Morgan & Co., 50,000 6.28 4/11/95 49,999
London 200,000 6.29 4/11/95 199,997
National Westminster 20,000 6.32 8/31/95 20,000
Bank PLC
NationsBank North 45,000 5.47 5/19/95 44,939
Carolina
Westpac Banking Corp., 30,000 6.06 4/27/95 30,000
London
Total Certificates of Deposit--European
(Cost--$921,005) 920,810
Certificates of Deposit--Yankee--3.7%
ABN-AMRO Bank 35,000 6.13 4/18/95 34,997
N.V., NY
Bank of Montreal, 95,000 6.37 4/04/95 95,000
Chicago
Bank of Nova Scotia, 36,000 6.36 4/05/95 36,000
Portland 50,000 6.33 4/06/95 50,000
Bank of Tokyo, 15,000 6.14 5/15/95 14,999
Portland
Banque Nationale 30,000 6.02 4/03/95 30,000
de Paris, NY 50,000 5.70 4/17/95 49,983
Commerzbank AG, NY 10,000 5.71 4/12/95 9,998
50,000 5.687 4/18/95 49,982
</TABLE>
<TABLE>
CMA MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (IN THOUSANDS)
<CAPTION>
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
<S> <C> <C> <C> <C>
Certificates of Deposit--Yankee (concluded)
Creditanstalt $ 125,000 6.23 % 4/20/95 $ 124,993
Bankverein, NY
Dai-Ichi Kangyo 10,000 6.08 4/28/95 10,000
Bank, NY
Mitsubishi Bank, NY 75,000 6.05 4/03/95 75,000
Sanwa Bank, NY 10,000 6.06 4/03/95 10,000
115,000 6.07 4/03/95 115,000
25,000 6.08 4/27/95 25,000
Societe General, NY 72,000 6.06 4/03/95 72,000
65,000 6.60 5/04/95 65,021
Sumitomo Bank, NY 50,000 6.43 4/05/95 50,000
20,000 6.10 4/10/95 20,000
75,000 6.37 4/10/95 75,000
55,000 6.06 4/27/95 55,000
Total Certificates of Deposit--Yankee
(Cost--$1,068,003) 1,067,973
Commercial Paper--40.8%
ABN-AMRO 13,000 5.99 4/25/95 12,946
North America
Finance, Inc.
ANZ (Delaware), 50,000 6.25 4/05/95 49,957
Inc.
APRECO, Inc. 9,100 6.25 4/03/95 9,095
30,000 6.25 4/05/95 29,974
50,000 6.00 4/25/95 49,792
ARCO Coal Australia 6,000 6.25 4/05/95 5,995
Inc.
Allomon Funding Corp. 10,034 6.00 4/03/95 10,029
10,036 6.00 4/04/95 10,029
25,102 6.00 4/17/95 25,031
American Express 16,500 6.05 5/01/95 16,414
Company 24,000 6.05 5/04/95 23,863
American Express 350,000 6.04 5/30/95 346,459
Credit Corp. 100,000 6.08 6/12/95 98,763
100,000 6.10 7/14/95 98,215
American General 15,000 6.00 4/20/95 14,950
Corp. 13,986 6.00 4/21/95 13,937
Asset Securitization 100,000 6.20 4/06/95 99,898
Cooperative Corp. 10,000 6.15 4/24/95 9,959
100,000 6.12 5/02/95 99,460
Avco Financial 35,000 6.23 4/06/95 34,964
Services, Inc. 50,000 5.99 4/26/95 49,784
BOC Group, Inc. 10,000 6.05 4/10/95 9,983
BTR Dunlop Finance 20,000 5.97 4/03/95 19,990
Inc. 12,000 6.25 4/04/95 11,992
40,216 5.99 4/24/95 40,055
Bank of Nova Scotia 25,000 6.21 4/05/95 24,979
</TABLE>
30
<PAGE> 80
<TABLE>
CMA MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (CONTINUED) (IN THOUSANDS)
<CAPTION>
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
<S> <C> <C> <C> <C>
Commercial Paper (continued)
Bank of Scotland $ 50,000 6.25% 4/05/95 $ 49,957
Bankers Trust NY 50,000 5.58 4/12/95 49,898
Corp. 150,000 6.14 4/27/95 149,314
Bass Finance (C.I.) Ltd. 18,892 6.18 4/05/95 18,876
Bayerische Landesbank 50,000 6.22 4/10/95 49,915
Girozentrale
Bayerische 30,000 5.99 4/21/95 29,895
Vereinsbank AG
Bear Stearns Cos., 31,000 5.98 4/03/95 30,985
Inc. 25,000 6.02 4/03/95 24,987
100,000 6.26 4/03/95 99,949
47,000 6.26 4/04/95 46,968
75,000 6.22 4/05/95 74,936
22,000 6.15 4/24/95 21,911
50,000 6.15 4/25/95 49,788
Beneficial Corp. 50,000 6.25 4/04/95 49,966
50,000 6.25 4/05/95 49,957
Beta Finance Inc. 12,500 5.57 4/03/95 12,494
19,000 6.27 4/05/95 18,984
41,000 5.99 4/13/95 40,911
14,000 5.99 4/20/95 13,953
8,800 6.00 4/20/95 8,771
5,000 6.05 4/21/95 4,982
20,000 5.57 4/24/95 19,919
25,000 6.00 4/24/95 24,900
20,000 6.02 5/01/95 19,896
20,000 6.05 5/01/95 19,896
Bowater PLC 33,600 5.97 4/03/95 33,583
10,000 6.25 4/03/95 9,995
14,178 6.22 4/06/95 14,163
10,000 5.99 4/24/95 9,960
Budget Funding Corp. 25,000 6.01 4/03/95 24,987
32,000 6.02 5/08/95 31,797
CIT Group Holdings, 100,000 5.99 4/24/95 99,601
Inc. (The) 100,000 5.99 4/25/95 99,584
125,000 6.04 5/25/95 123,850
125,000 6.04 5/26/95 123,829
100,000 6.12 7/12/95 98,249
100,000 6.12 7/13/95 98,232
CS First Boston Inc. 20,000 6.00 4/18/95 19,940
60,000 6.13 4/24/95 59,756
30,000 6.14 4/25/95 29,873
CSW Credit, Inc. 40,000 6.18 4/11/95 39,925
25,000 6.12 4/17/95 24,927
16,300 6.02 4/20/95 16,245
</TABLE>
<TABLE>
CMA MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (CONTINUED) (IN THOUSANDS)
<CAPTION>
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
<S> <C> <C> <C> <C>
Commercial Paper (continued)
CXC Inc. $ 50,000 6.00% 4/12/95 $ 49,900
35,000 6.00 4/13/95 34,924
40,000 5.99 4/20/95 39,867
50,000 6.00 4/21/95 49,825
25,000 5.99 4/25/95 24,896
Caisse des Depots et 48,000 5.98 4/03/95 47,976
Consignations
Cargill Inc. 19,945 6.00 4/25/95 19,862
Central and South 43,775 6.20 4/10/95 43,700
West Corp. 30,000 6.12 4/17/95 29,913
Cheltenham & 15,000 6.04 5/30/95 14,848
Glouster Building
Society
Ciesco L.P. 20,000 6.20 4/10/95 19,966
Commercial Credit 50,000 5.99 4/27/95 49,775
Corp.
Commerzbank US 55,000 6.25 4/03/95 54,972
Finance Inc. 7,340 6.22 4/18/95 7,317
22,000 6.03 4/28/95 21,897
114,500 6.05 5/01/95 113,903
Corporate Asset 25,000 6.20 4/06/95 24,974
Funding Co. Inc.
Corporate Asset 25,000 6.12 4/19/95 24,919
Securitization Australia 19,200 6.03 5/08/95 19,078
Ltd., Inc.
Corporate Receivables 5,100 6.22 4/10/95 5,091
Corp. 15,000 6.15 4/19/95 14,951
40,000 5.99 4/20/95 39,867
30,000 6.02 4/28/95 29,860
39,200 6.02 5/02/95 38,990
Daimler-Benz North 60,000 5.57 4/10/95 59,898
American Corp. 25,000 6.12 4/17/95 24,927
Dean Witter, Discover 100,000 6.02 4/26/95 99,565
& Co.
Deer Park Refining L.P. 10,000 6.00 4/17/95 9,972
15,000 6.00 4/21/95 14,948
25,000 6.02 4/24/95 24,900
Delaware Funding Corp. 16,326 6.20 4/06/95 16,309
74,096 6.135 4/17/95 73,881
9,578 6.05 5/22/95 9,494
Dun & Bradstreet Corp. 16,000 6.17 9/11/95 15,548
ESC Securitization Inc. 10,000 5.98 4/04/95 9,993
40,000 6.22 4/06/95 39,959
40,000 5.99 4/25/95 39,834
</TABLE>
31
<PAGE> 81
<TABLE>
CMA MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (CONTINUED) (IN THOUSANDS)
<CAPTION>
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
<S> <C> <C> <C> <C>
Commercial Paper (continued)
Eiger Capital Corp. $ 22,000 6.00 % 4/03/95 $ 21,989
9,040 5.99 4/17/95 9,014
17,000 6.00 4/17/95 16,952
19,962 5.99 4/18/95 19,902
31,998 5.99 4/20/95 31,892
Eli Lilly and Company 60,000 6.18 9/06/95 58,357
50,000 6.18 9/11/95 48,588
Falcon Asset 15,300 6.02 4/04/95 15,290
Securitization Corp. 25,650 6.02 4/05/95 25,629
40,000 6.00 4/17/95 39,887
52,050 5.99 4/20/95 51,877
9,375 6.00 4/20/95 9,344
9,900 6.00 4/21/95 9,865
12,500 6.17 5/03/95 12,430
Ford Motor Credit 150,000 6.00 4/03/95 149,925
Co. 250,000 5.97 4/10/95 249,585
70,000 6.12 4/11/95 69,868
25,500 6.22 4/19/95 25,417
150,000 6.35 4/19/95 149,513
150,000 6.35 4/20/95 149,488
7,900 6.22 4/21/95 7,872
100,000 6.35 4/21/95 99,641
150,000 6.10 5/01/95 149,216
35,000 6.15 8/18/95 34,162
General Electric 110,000 6.20 4/06/95 109,887
Capital Corp. 50,000 5.57 4/10/95 49,915
18,150 6.22 4/13/95 18,110
100,000 6.15 4/19/95 99,675
100,000 6.14 5/02/95 99,460
100,000 6.47 5/04/95 99,427
100,000 6.25 5/11/95 99,309
100,000 6.25 5/12/95 99,292
75,000 6.38 8/02/95 73,409
100,000 6.30 8/16/95 97,639
Generale Bank, Inc. 50,000 5.98 4/03/95 49,975
35,000 6.00 4/26/95 34,848
Glaxo Holdings PLC 50,000 6.00 4/21/95 49,825
50,000 6.00 4/27/95 49,775
Goldman Sachs Group, 100,000 5.99 4/24/95 99,601
L.P. 100,000 5.99 4/27/95 99,551
200,000 6.05 6/19/95 197,289
Halifax Building Society 150,000 6.22 4/03/95 149,923
Hanson Finance (UK) 18,000 6.25 4/03/95 17,991
PLC 17,000 6.28 4/03/95 16,991
25,000 6.25 4/04/95 24,983
76,000 6.27 4/04/95 75,948
47,500 6.20 4/06/95 47,451
62,000 6.12 4/17/95 61,820
51,500 6.125 4/26/95 51,273
</TABLE>
<TABLE>
CMA MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (CONTINUED) (IN THOUSANDS)
<CAPTION>
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
<S> <C> <C> <C> <C>
Commercial Paper (continued)
Hertz Corp. $ 58,600 6.00 % 4/03/95 $ 58,571
20,000 6.12 4/18/95 19,939
20,000 6.12 4/19/95 19,935
International 123,000 6.00 4/17/95 122,652
Nederlanden (US) 27,000 6.01 4/18/95 26,919
Funding Corp.
Kingdom of Sweden 70,000 6.135 4/17/95 69,797
130,000 6.12 4/18/95 129,600
Knight-Ridder, Inc. 20,000 6.05 5/01/95 19,896
Kredietbank 36,000 6.04 5/31/95 35,629
North American
Finance Corp.
Leeds Permanent 50,000 6.25 4/05/95 49,957
Building Society 50,000 6.28 4/05/95 49,957
MCA Funding Corp. 30,000 5.58 4/12/95 29,939
40,000 6.14 4/27/95 39,817
Matterhorn Capital 41,158 5.99 4/12/95 41,076
Corp. 45,600 5.99 4/17/95 45,471
30,011 5.99 4/18/95 29,921
McKenna Triangle 25,000 5.96 4/03/95 24,988
National Corp. 10,000 5.98 4/03/95 9,995
15,110 6.00 4/03/95 15,102
11,400 6.00 4/04/95 11,392
10,000 5.60 4/11/95 9,981
25,000 5.58 4/12/95 24,949
35,000 5.99 4/20/95 34,884
12,156 6.00 4/20/95 12,115
10,000 5.99 4/24/95 9,960
25,000 5.99 4/26/95 24,892
25,000 6.15 8/15/95 24,414
10,000 6.15 8/21/95 9,755
Miles Inc. 25,000 6.02 4/18/95 24,925
National Australia 41,000 6.22 4/04/95 40,972
Funding (Delaware) 50,000 6.21 4/06/95 49,949
Inc. 74,299 6.12 4/18/95 74,071
New Center Asset 154,000 6.18 4/10/95 153,737
Trust 50,000 6.21 4/10/95 49,915
60,000 6.02 4/19/95 59,809
17,000 6.14 4/27/95 16,922
67,000 6.13 7/18/95 65,758
40,000 6.20 7/19/95 39,252
50,000 6.20 7/21/95 49,048
62,000 6.15 7/27/95 60,756
50,000 6.35 8/11/95 48,862
100,000 6.15 8/15/95 97,656
New South Wales 70,000 6.25 4/03/95 69,964
Treasury Corp. 50,000 6.25 4/04/95 49,966
45,100 6.12 8/21/95 43,996
</TABLE>
32
<PAGE> 82
<TABLE>
CMA MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (CONTINUED) (IN THOUSANDS)
<CAPTION>
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
<S> <C> <C> <C> <C>
Commercial Paper (continued)
Nomura Holding $ 25,000 6.22 % 4/05/95 $ 24,979
America, Inc. 25,000 6.22 4/06/95 24,974
25,000 6.20 4/10/95 24,957
25,000 6.20 4/11/95 24,953
11,000 6.12 4/17/95 10,968
10,000 6.14 4/24/95 9,959
25,000 6.11 6/05/95 24,720
Ontario Hydro 100,000 6.22 4/06/95 99,898
PHH Corp. 35,000 6.07 4/21/95 34,876
Paribas Finance, Inc. 58,000 5.97 4/03/95 57,971
42,000 6.02 4/03/95 41,979
Preferred Receivable 25,000 6.00 4/03/95 24,988
Funding Corp. 11,050 6.00 4/10/95 11,032
19,275 6.20 4/10/95 19,242
104,350 5.99 4/25/95 103,916
45,500 5.99 4/26/95 45,303
13,350 6.15 5/01/95 13,280
Premium Funding, 14,314 6.00 4/03/95 14,307
Inc. (Series A--Q) 6,686 6.00 4/13/95 6,672
39,000 6.17 4/28/95 38,815
RTZ America Inc. 12,600 6.20 4/06/95 12,587
30,300 6.15 4/20/95 30,196
Reed Elsevier PLC 20,000 6.25 4/03/95 19,990
11,500 6.20 4/04/95 11,492
20,000 6.25 4/05/95 19,983
35,000 6.15 4/17/95 34,898
Riverwoods Funding 9,000 6.00 4/19/95 8,972
Corp. 16,000 6.15 4/26/95 15,930
Santander Finance Ltd. 40,000 6.185 4/10/95 39,932
Schering-Plough Corp. 28,290 6.14 8/09/95 27,656
Sheffield Receivables 9,550 6.00 4/05/95 9,542
Corp. 38,000 6.18 4/10/95 37,935
48,000 6.12 4/19/95 47,844
129,000 5.99 4/21/95 128,549
Siemens Capital Corp. 20,000 6.25 4/03/95 19,990
Societe General North 100,000 6.22 4/04/95 99,932
America, Inc.
Southwestern Bell 27,000 6.14 4/27/95 26,876
Capital Corp.
Svenska Handels- 50,000 6.00 4/28/95 49,767
banken, Inc. 50,000 6.12 6/05/95 49,441
Swedish Export 25,000 6.25 4/05/95 24,979
Credit Corp.
</TABLE>
<TABLE>
CMA MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (CONTINUED) (IN THOUSANDS)
<CAPTION>
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
<S> <C> <C> <C> <C>
Commercial Paper (concluded)
Toshiba America Corp. $ 25,000 6.25 % 4/06/95 $ 24,974
Transamerica Finance 50,000 6.25 4/04/95 49,966
Corp. 70,000 5.56 4/17/95 69,797
US Borax Inc. 6,700 6.22 4/06/95 6,693
18,600 6.12 4/19/95 18,540
17,000 6.15 4/19/95 16,945
8,500 6.12 4/20/95 8,471
15,000 6.12 8/21/95 14,633
15,000 6.12 8/22/95 14,630
USAA Capital Corp. 28,000 6.25 4/03/95 27,986
USL Capital Corp. 16,000 6.02 5/02/95 15,914
Vattenfall Treasury Inc. 41,000 5.99 4/24/95 40,836
WCP Funding Inc. 14,200 6.00 4/18/95 14,157
Westdeutsche 50,000 6.22 4/07/95 49,940
Landesbank Girozentrale
Windmill Funding Corp. 50,000 6.15 4/21/95 49,821
73,000 6.02 4/25/95 72,695
27,000 6.02 4/26/95 26,883
Wool International 10,000 6.12 8/18/95 9,760
Xerox Corp. 176,000 5.97 4/03/95 175,912
24,000 5.99 4/24/95 23,904
Total Commercial Paper
(Cost--$11,850,177) 11,850,384
Master Notes--1.7%
Goldman Sachs 300,000 6.07 5/26/95 300,000
Group, L.P. 130,000 6.07 11/24/95 130,000
Smith Barney Inc. 75,000 6.05 6/09/95 75,000
Total Master Notes
(Cost--$505,000) 505,000
Medium-Term Notes--1.1%
Abbey National 150,000 7.05 3/01/96 150,375
Treasury Services
Beta Finance Inc. 38,000 6.66 3/29/96 37,947
General Electric 86,850 6.55 3/25/96 86,685
Capital Corp. 50,000 6.55 3/28/96 49,885
Total Medium-Term Notes
(Cost--$324,687) 324,892
Time Deposits--0.9%
Swiss Bank Corp. 270,672 6.375 4/03/95 270,672
Total Time Deposits
(Cost--$ 270,672) 270,672
</TABLE>
33
<PAGE> 83
<TABLE>
CMA MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (CONTINUED) (IN THOUSANDS)
<CAPTION>
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
<S> <C> <C> <C> <C>
US Government & Agency Obligations--
Discount Notes--20.3%
Federal Farm Credit $ 23,000 6.03 % 9/14/95 $ 22,352
Bank 25,000 6.10 11/16/95 24,024
25,000 6.06 3/21/96 23,450
Federal Home Loan 32,000 6.02 4/19/95 31,900
Banks 143,100 6.03 4/24/95 142,532
790 5.00 5/15/95 784
7,345 6.145 8/07/95 7,186
101,330 6.00 9/27/95 98,255
9,615 6.13 11/08/95 9,253
265,000 6.13 11/27/95 254,161
155,000 6.09 1/16/96 147,270
99,800 6.08 1/17/96 94,805
22,000 6.08 1/23/96 20,876
50,000 6.10 2/14/96 47,244
38,950 6.13 3/22/96 36,528
Federal Home Loan 22,206 5.91 4/04/95 22,191
Mortgage Corp. 70,905 5.91 4/14/95 70,742
38,578 6.10 5/02/95 38,374
93,000 6.10 5/03/95 92,492
93,230 5.975 6/19/95 91,991
45,000 5.99 6/19/95 44,402
96,010 5.975 6/20/95 94,718
50,000 5.98 6/20/95 49,327
36,780 6.02 7/03/95 36,202
Federal National 197,490 5.92 4/10/95 197,161
Mortgage Association 50,000 5.47 4/18/95 49,851
100,000 5.99 4/20/95 99,669
30,000 6.00 4/24/95 29,881
50,000 6.03 4/24/95 49,802
126,500 6.05 4/27/95 125,940
387,000 6.10 5/03/95 384,886
50,000 5.99 6/13/95 49,385
400,000 5.98 6/16/95 394,884
50,000 5.99 7/24/95 49,038
400,000 6.08 9/14/95 388,737
300,000 6.04 9/21/95 291,199
50,000 6.00 9/29/95 48,466
100,000 6.02 10/24/95 96,504
35,000 6.07 12/07/95 33,502
International Bank for 22,000 6.00 4/03/95 21,989
Reconstruction and
Development
Student Loan 80,000 6.10 5/03/95 79,563
Marketing Association
US Treasury Bills 472,000 5.971 4/20/95 470,669
300,000 5.375 4/27/95 298,733
100,000 5.43 4/27/95 99,578
100,000 5.04 5/04/95 99,460
285,000 5.10 6/01/95 282,188
</TABLE>
<TABLE>
CMA MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (CONTINUED) (IN THOUSANDS)
<CAPTION>
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
<S> <C> <C> <C> <C>
US Government & Agency Obligations--
Discount Notes (concluded)
US Treasury Bills $ 100,000 5.26% 8/24/95 $ 97,628
(concluded) 100,000 5.265 8/24/95 97,628
200,000 5.27 8/24/95 195,255
50,000 5.28 8/24/95 48,814
100,000 5.97 4/04/96 93,817
250,000 6.02 4/04/96 234,543
Total US Government & Agency Obligations--
Discount Notes (Cost--$5,912,075) 5,909,829
US Government & Agency Obligations--
Non-Discount Notes--29.4%
Federal Farm 10,000 7.11 2/01/96 10,040
Credit Bank++
Federal Home 86,600 6.06 4/27/95 86,588
Loan Banks++ 116,000 5.79 4/28/95 115,985
44,120 5.78 6/05/95 44,104
168,000 6.43 6/21/95 168,000
277,000 4.625 8/09/95 275,227
280,000 6.43 12/28/95 280,000
20,000 7.16 2/01/96 20,088
179,500 7.13 2/09/96 180,272
20,000 6.85 2/28/96 20,042
16,000 9.80 3/25/96 16,469
274,000 6.46 6/17/96 274,000
109,000 6.46 6/21/96 109,000
60,000 5.885 8/05/96 59,873
38,500 6.42 12/23/96 38,530
88,000 7.10 4/03/97 87,639
25,000 6.35 1/26/98 24,771
50,000 6.35 1/29/98 49,541
Federal Home Loan 277,000 4.635 8/09/95 275,227
Mortgage Corp.++ 250,000 6.36 9/01/95 249,980
149,000 6.37 9/01/95 148,994
165,000 6.45 4/08/96 164,522
58,400 6.33 5/06/96 58,400
55,000 6.50 5/13/98 55,000
Federal National 531,000 5.80 6/01/95 530,967
Mortgage 120,000 6.40 12/20/95 120,000
Association++ 95,000 6.37 1/26/96 94,952
185,000 5.92 2/07/96 184,984
52,500 6.72 2/28/96 52,553
125,240 6.86 2/28/96 125,516
50,000 6.67 3/15/96 49,998
135,000 6.46 3/27/96 134,744
374,000 6.33 5/13/96 374,000
270,000 6.33 5/24/96 270,000
173,000 5.943 7/18/96 172,826
624,000 6.03 10/11/96 624,000
445,000 6.04 2/21/97 445,000
267,700 6.45 5/19/97 267,700
267,000 6.50 5/14/98 267,000
</TABLE>
34
<PAGE> 84
<TABLE>
CMA MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (CONCLUDED) (IN THOUSANDS)
<CAPTION>
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
<S> <C> <C> <C> <C>
US Government & Agency Obligations--
Non-Discount Notes (concluded)
Student Loan $ 50,000 6.42 % 4/17/95 $ 50,010
Marketing 6,000 6.12 6/02/95 6,002
Association++ 70,000 6.17 8/07/95 70,027
25,000 6.29 8/07/95 25,021
129,000 5.85 8/10/95 128,983
25,000 5.87 9/14/95 24,997
120,500 6.17 3/20/96 120,549
39,100 6.04 4/16/96 39,132
50,000 6.00 5/14/96 50,043
15,000 6.27 8/22/96 15,060
710,000 6.03 9/20/96 710,000
150,000 6.18 1/14/97 150,000
7,095 6.22 1/23/97 7,101
US Treasury Notes 205,000 3.875 4/30/95 204,559
100,000 5.875 5/15/95 99,977
65,000 3.875 8/31/95 64,391
175,000 4.625 2/15/96 172,262
40,000 5.875 5/31/96 39,662
50,000 6.875 2/28/97 50,031
Total US Government & Agency Obligations--
Non-Discount Notes (Cost--$8,559,875) 8,554,339
</TABLE>
<TABLE>
CMA MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (CONCLUDED) (IN THOUSANDS)
<CAPTION>
Face Value
Amount Issue (Note 1a)
<S> <C> <C> <C> <C>
Repurchase Agreements**--1.2%
$150,000 Fuji Securities, Inc., purchased
on 3/31/95 to yield 6.35% to
4/03/95 $ 150,000
200,000 Nomura Securities International Inc.,
purchased on 3/31/95 to yield
6.30% to 4/03/95 200,000
Total Repurchase Agreements
(Cost--$350,000) 350,000
Total Investments
(Cost--$30,070,392)--103.4% 30,062,592
Liabilities in Excess of Other Assets--(3.4%) (995,830)
-----------
Net Assets--100.0% $29,066,762
===========
<FN>
*Commercial Paper and certain US Government & Agency Obligations are
traded on a discount basis; the interest rates shown are the
discount rates paid at the time of purchase by the Fund. Other
securities bear interest at the rates shown, payable at fixed dates
through maturity. Interest rates on variable rate securities are
adjusted periodically based on appropriate indexes; the interest
rates shown are the rates in effect at March 31, 1995.
**Repurchase Agreements are fully collateralized by US Government
Obligations.
++Variable Rate Notes.
See Notes to Financial Statements.
</TABLE>
35
<PAGE> 85
<TABLE>
CMA MONEY FUND
STATEMENT OF ASSETS AND LIABILITIES AS OF MARCH 31, 1995
<S> <C> <C>
Assets:
Investments, at value (identified cost--$30,070,392,434++) (Note 1a) $ 30,062,592,047
Cash 200,055
Interest receivable 102,635,363
Prepaid registration fees and other assets (Note 1d) 461,587
----------------
Total assets 30,165,889,052
----------------
Liabilities:
Payables:
Securities purchased $ 1,077,329,406
Investment adviser (Note 2) 9,312,034
Distributor (Note 2) 8,989,741
Beneficial interest redeemed 74,236
Dividends to shareholders (Note 1e) 12,752 1,095,718,169
----------------
Accrued expenses and other liabilities 3,409,198
----------------
Total liabilities 1,099,127,367
----------------
Net Assets $ 29,066,761,685
================
Net Assets Consist of:
Shares of beneficial interest, $.10 par value, unlimited number of shares
authorized $ 2,907,456,207
Paid-in capital in excess of par 26,167,105,865
Unrealized depreciation on investments--net (7,800,387)
----------------
Net Assets--Equivalent to $1.00 per share based on 29,074,562,072 shares of
beneficial interest outstanding $ 29,066,761,685
================
<FN>
++Cost for Federal income tax purposes. As of March 31, 1995, net
unrealized depreciation for Federal income tax purposes amounted to
$7,800,387, of which $1,503,212 related to appreciated securities
and $9,303,599 related to depreciated securities.
See Notes to Financial Statements.
</TABLE>
36
<PAGE> 86
<TABLE>
CMA MONEY FUND
STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1995
<S> <C> <C>
Investment Income (Note 1c):
Interest and amortization of premium and discount earned $ 1,363,472,207
Expenses:
Investment advisory fees (Note 2) $ 104,060,839
Distribution fees (Note 2) 34,206,694
Transfer agent fees (Note 2) 11,240,401
Registration fees (Note 1d) 2,015,308
Accounting services (Note 2) 1,110,858
Custodian fees 726,354
Printing and shareholder reports 519,284
Professional fees 101,621
Trustees' fees and expenses 64,068
Other 146,594
----------------
Total expenses 154,192,021
----------------
Investment income--net 1,209,280,186
Realized Gain on Investments--Net (Note 1c) 7,984,282
Change in Unrealized Depreciation on Investments--Net 5,456,273
----------------
Net Increase in Net Assets Resulting from Operations $ 1,222,720,741
================
</TABLE>
<TABLE>
CMA MONEY FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended March 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <C> <C>
Operations:
Investment income--net $ 1,209,280,186 $ 740,582,482
Realized gain on investments--net 7,984,282 7,543,550
Change in unrealized appreciation/depreciation on investments--net 5,456,273 (21,286,112)
---------------- ----------------
Net increase in net assets resulting from operations 1,222,720,741 726,839,920
---------------- ----------------
Dividends & Distributions to Shareholders (Note 1e):
Investment income--net (1,209,280,186) (740,582,482)
Realized gain on investments--net (7,984,282) (7,543,550)
---------------- ----------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (1,217,264,468) (748,126,032)
---------------- ----------------
Beneficial Interest Transactions (Note 3):
Net proceeds from sale of shares 114,576,757,341 106,435,848,948
Net asset value of shares issued to shareholders in reinvestment of
dividends (Note 1e) 1,214,458,420 746,378,060
---------------- ----------------
115,791,215,761 107,182,227,008
Cost of shares redeemed (113,801,792,385) (107,182,740,698)
---------------- ----------------
Net increase (decrease) in net assets derived from beneficial interest
transactions 1,989,423,376 (513,690)
---------------- ----------------
Net Assets:
Total increase (decrease) in net assets 1,994,879,649 (21,799,802)
Beginning of year 27,071,882,036 27,093,681,838
---------------- ----------------
End of year $ 29,066,761,685 $ 27,071,882,036
================ ================
See Notes to Financial Statements.
</TABLE>
37
<PAGE> 87
<TABLE>
CMA MONEY FUND
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios have been
derived from information provided in the financial
statements.
For the Year Ended March 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ----------- ----------- ----------- -----------
Investment income--net .0437 .0276 .0309 .0498 .0734
Realized and unrealized gain (loss) on
investments--net .0005 (.0005) .0019 .0019 .0017
----------- ----------- ----------- ----------- -----------
Total from investment operations .0442 .0271 .0328 .0517 .0751
----------- ----------- ----------- ----------- -----------
Less dividends and distributions:
Investment income--net (.0437) (.0276) (.0309) (.0498) (.0734)
Realized gain on investments--net (.0003) (.0003) (.0015) (.0020) (.0017)*
----------- ----------- ----------- ----------- -----------
Total dividends and distributions (.0440) (.0279) (.0324) (.0518) (.0751)
----------- ----------- ----------- ----------- -----------
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== =========== ===========
Total Investment Return 4.50% 2.82% 3.30% 5.27% 7.81%
=========== =========== =========== =========== ===========
Ratios to Average Net Assets:
Expenses, excluding distribution fees .44% .42% .42% .42% .41%
=========== =========== =========== =========== ===========
Expenses .56% .55% .55% .54% .54%
=========== =========== =========== =========== ===========
Investment income and realized gain on
investments--net 4.42% 2.79% 3.25% 5.18% 7.51%
=========== =========== =========== =========== ===========
Supplemental Data:
Net assets, end of year (in thousands) $29,066,762 $27,071,882 $27,093,682 $29,106,627 $31,163,167
=========== =========== =========== =========== ===========
<FN>
*Includes unrealized gain (loss).
See Notes to Financial Statements.
</TABLE>
38
<PAGE> 88
CMA MONEY FUND
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
CMA Money Fund (the "Fund") is registered under the Investment
Company Act of 1940 as a no load, diversified, open-end management
investment company. The following is a summary of significant
accounting policies followed by the Fund.
(a) Valuation of investments--Investments maturing more than sixty
days after the valuation date are valued at the most recent bid
price or yield equivalent as obtained from dealers that make markets
in such securities. When securities are valued with sixty days or
less to maturity, the difference between the valuation existing on
the sixty-first day before maturity and maturity value is amortized
on a straight-line basis to maturity. Investments maturing within
sixty days from their date of acquisition are valued at amortized
cost, which approximates market value.
For the purpose of valuation, the maturity of variable rate
certificates of deposit, variable rate commercial paper, short-term
corporate bond notes and variable rate corporate notes is deemed to
be the next coupon date on which the interest rate is to be
adjusted. Assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or
under the direction of the Board of Trustees of the Fund.
(b) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to
its shareholders. Therefore, no Federal income tax provision is
required.
(c) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income, including amortization of
premium and discount, is recognized on the accrual basis. Realized
gains and losses on security transactions are determined on the
identified cost basis.
(d) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(e) Dividends to shareholders--The Fund declares dividends daily and
reinvests daily such dividends (net of non-resident alien tax and
back-up withholding tax withheld) in additional fund shares at net
asset value. Dividends are declared from the total of net investment
income and net realized gain or loss on investments.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM" or "Adviser"). The general partner of
FAM is Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee based upon the average daily
value of the Fund's net assets at the following annual rates: 0.50%
of the Fund's average daily net assets not exceeding $500 million;
0.425% of the average daily net assets in excess of $500 million,
but not exceeding $1 billion; and 0.375% of the average daily net
assets in excess of $1 billion. The most restrictive annual expense
limitation requires that the Adviser reimburse the Fund to the
extent the Fund's expenses (excluding interest, taxes, distribution
fees, brokerage fees and commissions, and extraordinary items)
exceed 2.5% of the Fund's first $30 million of average daily net
assets, 2.0% of the next $70 million of average daily net assets and
1.5% of the average daily net assets in excess thereof.
39
<PAGE> 89
CMA MONEY FUND
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
No fee payment will be made to the Adviser during the year which
will cause such expenses to exceed the pro rata expense limitation
at the time of such payment.
The Fund has adopted a Distribution and Shareholder Servicing Plan
in compliance with Rule 12b-1 under the Investment Company Act of
1940, pursuant to which Merrill Lynch, Pierce, Fenner & Smith Inc.
("MLPF&S") receives a distribution fee under the Distribution
Agreement from the Fund at the end of each month at the annual rate
of 0.125% of average daily net assets of the Fund for shareholders
who maintain their accounts through MLPF&S. The distribution fee is
to compensate MLPF&S financial consultants and other directly
involved branch office personnel for selling shares of the Fund and
for providing direct personal services to shareholders. The
distribution fee is not compensation for the administrative and
operational services rendered to the Fund by MLPF&S in processing
share orders and administering shareholder accounts.
At March 31, 1995, the Fund owed affiliated brokers $113,056,674 for
securities purchased.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, MLPF&S, FDS, and/or ML & Co.
3. Shares of Beneficial Interest:
The number of shares purchased and redeemed during the periods
corresponds to the amounts included in the Statements of Changes in
Net Assets for net proceeds from sale of shares and cost of shares
redeemed, respectively, since shares are recorded at $1.00 per
share.
40
<PAGE> 90
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
CMA GOVERNMENT SECURITIES FUND:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of CMA Government Securities Fund as of March 31,
1995, the related statements of operations for the year then ended and changes
in net assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the five-year period then ended.
These financial statements and the financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at March
31, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of CMA Government
Securities Fund as of March 31, 1995, the results of its operations, the changes
in its net assets, and the financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Princeton, New Jersey
April 28, 1995
41
<PAGE> 91
<TABLE>
CMA GOVERNMENT SECURITIES FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (IN THOUSANDS)
<CAPTION>
Face Interest Maturity Value
Issue Amount Rate Date (Note 1a)
<S> <C> <C> <C> <C>
US Government Obligations*--51.4%
US Treasury $ 35,000 5.90 % 4/20/95 $ 34,902
Bills 50,000 5.395 4/27/95 49,789
20,000 5.47 4/27/95 19,916
50,000 5.49 5/04/95 49,730
65,000 5.54 5/04/95 64,649
125,000 5.66 5/04/95 124,325
50,000 5.83 5/04/95 49,730
95,000 5.68 5/11/95 94,385
25,000 6.16 7/27/95 24,526
35,000 6.17 7/27/95 34,337
90,000 6.09 8/10/95 88,069
50,000 6.10 8/10/95 48,927
15,000 6.12 8/17/95 14,661
30,000 5.21 8/24/95 29,288
15,000 5.29 8/24/95 14,644
50,000 5.855 8/31/95 48,750
15,000 5.86 8/31/95 14,625
20,000 5.38 9/21/95 19,430
50,000 5.83 10/05/95 48,501
15,000 5.723 10/19/95 14,499
15,000 5.82 10/19/95 14,499
15,000 6.11 4/04/96 14,073
US Treasury 135,000 3.875 4/30/95 134,736
Notes 235,000 5.875 5/15/95 234,946
5,000 8.50 5/15/95 5,014
40,000 4.125 5/31/95 39,875
65,000 4.25 7/31/95 64,624
105,000 3.875 l0/31/95 103,573
25,000 4.25 11/30/95 24,668
55,000 7.875 2/15/96 55,619
32,000 5.50 4/30/96 31,640
Total US Government Obligations
(Cost--$1,611,017) 1,610,950
<CAPTION>
Face Value
Amount Issue (Notes 1a & 1e)
<C> <S> <C>
Repurchase Agreements**--50.3%
$135,000 Bear Stearns & Co., Inc., purchased
on 3/31/95 to yield 6.23% to 4/03/95 135,000
130,000 CS First Boston Corp., purchased on
3/31/95 to yield 6.30% to 4/03/95 130,000
</TABLE>
<TABLE>
CMA GOVERNMENT SECURITIES FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (IN THOUSANDS)
<CAPTION>
Face Value
Amount Issue (Notes 1a & 1e)
<C> <S> <C>
Repurchase Agreements**(concluded)
$120,000 Chase Securities Inc., purchased
on 3/31/95 to yield 6.15% to 4/03/95 $ 120,000
130,000 Chemical Securities, Inc., purchased
on 3/31/95 to yield 6.23% to 4/03/95 130,000
100,000 Citicorp Securities Inc., purchased on
3/31/95 to yield 6.20% to 4/03/95 100,000
130,000 Daiwa Securities America, Inc.,
purchased on 3/31/95 to yield
6.25% to 4/03/95 130,000
135,000 Fuji Securities Inc., purchased on
3/31/95 to yield 6.25% to 4/03/95 135,000
35,000 HSBC Securities Inc., purchased on
3/31/95 to yield 6.30% to 4/03/95 35,000
141,417 Lehman Government Securities, Inc.,
purchased on 3/31/95 to yield 6.23%
to 4/03/95 141,417
125,000 Nikko Securities International, Inc.,
purchased on 3/31/95 to yield 6.15%
to 4/03/95 125,000
135,000 Nomura Securities International, Inc.,
purchased on 3/31/95 to yield 6.25%
to 4/03/95 135,000
128,000 SBC Capital Market Inc., purchased
on 3/31/95 to yield 6.23% to 4/03/95 128,000
130,000 Smith Barney Inc., purchased on
3/31/95 to yield 6.25% to 4/03/95 130,000
Total Repurchase Agreements
(Cost--$1,574,417) 1,574,417
Total Investments
(Cost--$3,185,434)--101.7% 3,185,367
Liabilities in Excess of Other Assets--(1.7%) (52,564)
----------
Net Assets--100.0% $3,132,803
==========
<FN>
*US Treasury Bills are traded on a discount basis; the interest
rates shown are the discount rates paid at the time of purchase by
the Fund. US Treasury Notes bear interest at the rates shown,
payable at fixed dates or upon maturity.
**Repurchase Agreements are fully collateralized by US Government
Obligations.
See Notes to Financial Statements.
</TABLE>
42
<PAGE> 92
<TABLE>
CMA GOVERNMENT SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES AS OF MARCH 31, 1995
<S> <C> <C>
Assets:
Investments, at value (identified cost--$3,185,433,937++) (Note 1a & 1e) $ 3,185,367,418
Cash 114
Receivables:
Securities sold $ 35,519,546
Interest 11,820,993 47,340,539
---------------
Prepaid registration fees and other assets (Note 1d) 155,107
---------------
Total assets 3,232,863,178
---------------
Liabilities:
Payables:
Securities purchased 97,502,108
Investment adviser (Note 2) 1,068,696
Distributor (Note 2) 1,034,223 99,605,027
---------------
Accrued expenses and other liabilities 455,099
---------------
Total liabilities 100,060,126
---------------
Net Assets $ 3,132,803,052
===============
Net Assets Consist of:
Shares of beneficial interest, $.10 par value, unlimited number of shares
authorized $ 313,286,957
Paid-in capital in excess of par 2,819,582,614
Unrealized depreciation on investments--net (66,519)
---------------
Net Assets--Equivalent to $1.00 per share based on 3,132,869,571 shares of
beneficial interest outstanding $ 3,132,803,052
===============
<FN>
++Cost for Federal income tax purposes. As of March 31, 1995, net unrealized
depreciation for Federal income tax purposes amounted to $66,519, of which
$459,058 related to appreciated securities and $525,577 related to depreciated
securities.
See Notes to Financial Statements.
</TABLE>
43
<PAGE> 93
<TABLE>
CMA GOVERNMENT SECURITIES FUND
STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1995
<S> <C> <C>
Investment Income (Note 1c):
Interest and amortization of premium and discount earned $ 153,123,533
Expenses:
Investment advisory fees (Note 2) $ 12,979,282
Distribution fees (Note 2) 4,013,060
Transfer agent fees (Note 2) 660,663
Custodian fees 310,401
Registration fees (Note 1d) 278,964
Accounting services (Note 2) 193,217
Professional fees 90,230
Printing and shareholder reports 75,355
Trustees' fees and expenses 25,068
Other 51,480
---------------
Total expenses 18,677,720
---------------
Investment income--net 134,445,813
Realized Gain on Investments--Net (Note 1c) 607,823
Change in Unrealized Depreciation on Investments--Net 1,913,030
---------------
Net Increase in Net Assets Resulting from Operations $ 136,966,666
===============
See Notes to Financial Statements.
</TABLE>
44
<PAGE> 94
<TABLE>
CMA GOVERNMENT SECURITIES FUND
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year Ended March 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <C> <C>
Operations:
Investment income--net $ 134,445,813 $ 100,362,237
Realized gain on investments--net 607,823 1,638,506
Change in unrealized appreciation/depreciation on investments--net 1,913,030 (6,268,035)
--------------- ---------------
Net increase in net assets resulting from operations 136,966,666 95,732,708
--------------- ---------------
Dividends & Distributions to Shareholders (Note 1f):
Investment income--net (134,445,813) (100,362,237)
Realized gain on investments--net (607,823) (1,638,506)
--------------- ---------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (135,053,636) (102,000,743)
--------------- ---------------
Beneficial Interest Transactions (Note 3):
Net proceeds from sale of shares 12,035,321,698 13,417,186,906
Net asset value of shares issued to shareholders in reinvestment of
dividends and distributions (Note 1f) 134,913,910 101,906,587
--------------- ---------------
12,170,235,608 13,519,093,493
Cost of shares redeemed (12,602,941,002) (13,807,246,615)
--------------- ---------------
Net decrease in net assets derived from beneficial interest transactions (432,705,394) (288,153,122)
--------------- ---------------
Net Assets:
Total decrease in net assets (430,792,364) (294,421,157)
Beginning of year 3,563,595,416 3,858,016,573
--------------- ---------------
End of year $ 3,132,803,052 $ 3,563,595,416
=============== ===============
See Notes to Financial Statements.
</TABLE>
45
<PAGE> 95
<TABLE>
CMA GOVERNMENT SECURITIES FUND
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements.
For the Year Ended March 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ----------
Investment income--net .0419 .0271 .0294 .0473 .0704
Realized and unrealized gain (loss) on
investments--net .0008 (.0013) .0038 .0034 .0014
---------- ---------- ---------- ---------- ----------
Total from investment operations .0427 .0258 .0332 .0507 .0718
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.0419) (.0271) (.0294) (.0473) (.0704)
Realized gain on investments--net (.0002) (.0004) (.0026) (.0036) (.0014)*
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.0421) (.0275) (.0320) (.0509) (.0718)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ==========
Total Investment Return 4.30% 2.79% 3.25% 5.17% 7.46%
========== ========== ========== ========== ==========
Ratios to Average Net Assets:
Expenses, excluding distribution fees .45% .43% .43% .43% .43%
========== ========== ========== ========== ==========
Expenses .58% .56% .55% .56% .56%
========== ========== ========== ========== ==========
Investment income and realized gain on
investments--net 4.18% 2.75% 3.20% 5.05% 7.11%*
========== ========== ========== ========== ==========
Supplemental Data:
Net assets, end of year (in thousands) $3,132,803 $3,563,595 $3,858,017 $4,452,247 $5,228,619
========== ========== ========== ========== ==========
<FN>
*Includes unrealized gain (losses).
See Notes to Financial Statements.
</TABLE>
46
<PAGE> 96
CMA GOVERNMENT SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
CMA Government Securities Fund (the "Fund") is registered under the
Investment Company Act of 1940 as a no load, diversified, open-end
investment company. The following is a summary of significant
accounting policies followed by the Fund.
(a) Valuation of investments--Investments maturing more than sixty
days after the valuation date are valued at the most recent bid
price or yield equivalent as obtained from dealers that make markets
in such securities. When securities are valued with sixty days or
less to maturity, the difference between the valuation existing on
the sixty-first day before maturity and maturity value is amortized
on a straight-line basis to maturity. Investments maturing within
sixty days from their date of acquisition are valued at amortized
cost, which approximates market value. Assets for which market
quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of
Trustees of the Fund.
(b) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(c) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income (including amortization of
premium and discount) is recognized on the accrual basis. Realized
gains and losses on security transactions are determined on the
identified cost basis.
(d) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(e) Repurchase agreements--The Fund invests in US Government
securities pursuant to repurchase agreements with a member bank of
the Federal Reserve System or a primary dealer in US Government
securities. Under such agreements, the bank or primary dealer agrees
to repurchase the security at a mutually agreed upon time and price.
The Fund 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.
(f) Dividends and distributions to shareholders--The Fund declares
dividends daily and reinvests daily such dividends (net of non-
resident alien tax withheld) in additional fund shares at net asset
value. Dividends and distributions are declared from the total of
net investment income and net realized gain or loss on investments.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset
47
<PAGE> 97
CMA GOVERNMENT SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
Management, L.P. ("FAM" or "Adviser"). The general partner of
FAM is Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee based upon the average daily
value of the Fund's net assets, at the following annual rates: 0.50%
of the Fund's average daily net assets not exceeding $500 million;
0.425% of the average daily net assets in excess of $500 million but
not exceeding $1 billion; and 0.375% of the average daily net assets
in excess of $1 billion. The most restrictive annual expense
limitation requires that the Adviser reimburse the Fund to the
extent the Fund's expenses (excluding interest, taxes, distribution
fees, brokerage fees and commissions, and extraordinary items)
exceed 2.5% of the Fund's first $30 million of average daily net
assets, 2.0% of the Fund's next $70 million of average daily net
assets, and 1.5% of the average daily net assets in excess thereof.
No fee payment will be made to the Adviser during any year which
will cause such expenses to exceed the pro rata expense limitation
at the time of such payment.
The Fund has adopted a Distribution and Shareholder Servicing Plan
in compliance with Rule 12b-1 under the Investment Company Act of
1940, pursuant to which Merrill Lynch, Pierce, Fenner & Smith Inc.
("MLPF&S") receives a distribution fee from the Fund at the end of
each month at the annual rate of 0.125% of average daily net assets
of the Fund for shareholders who maintain their accounts through
MLPF&S. The distribution fee is to compensate MLPF&S financial
consultants and other directly involved branch office personnel for
selling shares of the Fund and for providing direct personal
services to shareholders. The distribution fee is not compensation
for the administrative and operational services rendered to the Fund
by MLPF&S in processing share orders and administering shareholder
accounts.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, MLPF&S, FDS, and/or ML & Co.
3. Transactions in Shares of Beneficial Interest:
The number of shares purchased and redeemed during the periods
corresponds to the amounts included in the Statements of Changes in
Net Assets for net proceeds from sale of shares and cost of shares
redeemed, respectively, since shares are recorded at $1.00 per
share.
48
<PAGE> 98
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
CMA TAX-EXEMPT FUND:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of CMA Tax-Exempt Fund as of March 31, 1995, the
related statements of operations for the year then ended and changes in net
assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the five-year period then ended.
These financial statements and the financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at March
31, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of CMA Tax-Exempt Fund
as of March 31, 1995, the results of its operations, the changes in its net
assets, and the financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Princeton, New Jersey
April 28, 1995
49
<PAGE> 99
<TABLE>
CMA TAX-EXEMPT FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
Alabama-- $ 25,000 Birmingham, Alabama, Medical Clinic Board Revenue Bonds, VRDN,
0.9% 4.30% due 12/01/2026 (a) $ 25,000
37,900 McIntosh, Alabama, IDB (Ciba-Geigy Corporation Project), VRDN,
4.25% due 7/01/2004 (a) 37,900
7,600 McIntosh, Alabama, IDB, PCR (Ciba-Geigy Corporation Project), VRDN,
Series A, 4.10% due 12/01/2003 (a) 7,600
2,200 Mobile, Alabama, IDB, Solid Waste Disposal Revenue Bonds (Scott
Paper Company), VRDN, Series E, 4.15% due 12/01/2019 (a) 2,200
Alaska-- Alaska Housing Finance Corporation Revenue Bonds, VRDN (a):
3.3% 80,000 Series A, 4.25% due 12/01/2024 80,000
35,000 Series C, 4.15% due 6/01/2026 35,000
10,650 Alaska Industrial Development and Export Authority Revenue Bonds
(Pacific Corp. Project), VRDN, 4.25% due 12/01/1995 (a) 10,650
Valdez, Alaska, Marine Terminal Revenue Refunding Bonds (Exxon
Pipeline Co. Project):
60,000 CP, Series B, 4.50% due 5/15/1995 60,028
8,275 Series C, 4.15% due 4/06/1995 8,275
19,000 VRDN, Series A, 3.90% due 5/15/1995 (a) 19,000
30,000 VRDN, Series A, 4.10% due 5/15/1995 (a) 30,000
Arizona-- 26,300 Apache County, Arizona, IDA (Tucson Electric Power Co.), VRDN,
2.8% Series B, 4.25% due 12/15/2018 (a) 26,300
10,200 Arizona Educational Loan Marketing Revenue Bonds, VRDN, AMT,
Series A, 4.15% due 3/01/2015 (a) 10,200
8,000 Coconino County, Arizona, Revenue Bonds (Arizona Public Service
Co.--Navajo Project), VRDN, Series A, 4.55% due 10/01/2029 (a) 8,000
5,300 Maricopa County, Arizona, IDA, Hospital Facilities Revenue Bonds
(Samaritan Health Service Hospital), VRDN, Series B2, 4.20%
due 12/01/2008 (a) 5,300
1,100 Maricopa County, Arizona, IDA, PCR (Motorola Inc. Project), VRDN,
4.15% due 10/01/1995 (a) 1,100
Maricopa County, Arizona, PCR, Refunding (Arizona Public
Service Co.), VRDN (a):
35,600 Series A, 4.25% due 5/01/2029 35,600
18,000 Series C, 4.25% due 5/01/2029 18,000
13,200 Series F, 4.25% due 5/01/2029 13,200
54,950 Maricopa County, Arizona, TAN, GO, 5% due 7/28/1995 55,070
Phoenix, Arizona, GO, VRDN (a):
6,700 Series 1, 4.25% due 6/01/2018 6,700
7,800 Series 2, 4.25% due 6/01/2018 7,800
20,750 Salt River Project, Arizona, Agricultural Improvement and Power
District, CP, 3.85% due 5/11/1995 20,750
Arkansas-- 3,800 Arkansas State Student Loan Authority Revenue Bonds, VRDN, AMT,
0.4% Series B-4, 4.05% due 6/01/2013 (a) 3,800
19,000 Little River County, Arkansas, Solid Waste Disposal Revenue Bonds
(Nekoosa Paper Project), VRDN, AMT, 4.275% due 2/01/2025 (a) 19,000
</TABLE>
Portfolio Abbreviations for CMA Tax-Exempt Fund
ACES SM Adjustable Convertible Extendable Securities
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
CP Commercial Paper
DATES Daily Adjustable Tax-Exempt Securities
EDA Economic Development Authority
GO General Obligation Bonds
HFA Housing Finance Agency
IDA Industrial Development Authority
IDB Industrial Development Board
IDR Industrial Development Revenue Bonds
LIBOR London Interbank Offered Rate
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RAN Revenue Anticipation Notes
S/F Single-Family
TAN Tax Anticipation Notes
TRAN Tax Revenue Anticipation Notes
UPDATES Unit Priced Adjustable Tax-Exempt Securities
UT Unlimited Tax
VRDN Variable Rate Demand Notes
50
<PAGE> 100
<TABLE>
CMA TAX-EXEMPT FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (CONTINUED) (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
California-- $ 3,620 California HFA, Home Mortgage Revenue Bonds, AMT, Series II,
10.2% 4.30% due 5/01/1995 $ 3,620
California Higher Education Loan Authority, Inc., Student Loan
Revenue Bonds, AMT, Series C:
65,375 3.85% due 6/01/1995 65,375
21,000 4% due 7/01/1995 21,000
California Higher Education Loan Authority, Inc., Student Loan
Revenue Refunding Bonds:
25,000 Senior Lien, Series A-1, 3.90% due 7/01/1995 25,000
5,000 Senior Lien, Series A-2, 3.60% due 5/01/1995 5,000
33,650 Series A, 3.60% due 5/01/1995 33,650
33,000 VRDN, AMT, Series E-1, 4.20% due 12/01/2022 (a) 33,000
California Pollution Control Financing Authority, PCR, Refunding
(Pacific Gas & Electric Co.), AMT:
21,800 Series A, 4.15% due 4/07/1995 21,800
23,100 Series B, 3.75% due 4/04/1995 23,100
4,600 California Pollution Control Financing Authority, Solid Waste
Disposal Revenue Bonds (Shell Oil Co. Project), VRDN, AMT, Series A,
4.45% due 10/01/2024 (a) 4,600
50,000 California Public Capital Improvements Financing Authority Revenue
Bonds, Series D, 4.30% due 6/15/1995 50,000
California State RAN:
70,000 Series A, 5% due 6/28/1995 70,134
120,000 Series C, 5.75% due 4/25/1996 121,035
10,000 Chula Vista, California, IDR (San Diego Gas & Electric Co.), CP, AMT,
Series D, 3.95% due 5/08/1995 10,000
17,800 Eastern Municipal Water District, California, Water and Sewer Revenue
Refunding Bonds, VRDN, COP, Series B, 4% due 7/01/2020 (a) 17,800
114,714 FB California Floating Rate Trust Certificates, VRDN, Series 9,
4.35% due 4/25/1996 (a) 114,714
23,000 Kern County, California, TRAN, 4.25% due 7/14/1995 (c) 23,033
30,975 Los Angeles County, California, TRAN, 4.50% due 6/30/1995 30,994
12,600 Riverside County, California, TRAN, 4.25% due 6/30/1995 (c) 12,620
54,750 San Diego County, California, TAN, Series A, 4.25% due 6/30/1995 (c) 54,833
10,000 Santa Clara County, California, TRAN, 4.25% due 7/07/1995 (c) 10,012
Colorado-- Arapahoe County, Colorado, Capital Improvement Trust Fund, Highway
4.1% Revenue Bonds (E-470 Project):
62,155 Series H, 4.45% due 8/31/1995 62,155
60,645 Series I, 4.45% due 8/31/1995 60,645
27,340 Series J, 4.45% due 8/31/1995 27,340
56,700 Series K, 4.45% due 8/31/1995 56,700
6,660 Series L, 4.45% due 8/31/1995 6,660
9,345 Series M, 4.45% due 8/31/1995 9,345
6,900 Colorado Health Facilities Authority Revenue Bonds (North Colorado
Medical Center), 4% due 5/15/2020 6,900
Denver, Colorado, City and County Airport Revenue Bonds, AMT:
7,520 CP, Sub-Series B, 4.45% due 4/05/1995 7,520
11,000 CP, Sub-Series C, 4.45% due 4/05/1995 11,000
15,000 CP, Sub-Series C, 4.45% due 4/07/1995 15,000
10,500 VRDN, Series F, 4.45% due 11/15/2025 (a) 10,500
11,500 VRDN, Series G, 4.45% due 11/15/2025 (a) 11,500
4,755 Moffat County, Colorado, PCR, Refunding (Pacific Corporation
Project), VRDN, 4.20% due 5/01/2013 (a) 4,755
3,800 Pitkin County, Colorado, IDR, Refunding (Aspen Skiing Co. Project),
VRDN, Series A, 4.35% due 4/01/2016 (a) 3,800
8,000 Westminster, Colorado, IDR, Refunding (Ball Corp. Project), VRDN,
4.15% due 6/01/2005 (a) 8,000
</TABLE>
51
<PAGE> 101
<TABLE>
CMA TAX-EXEMPT FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (CONTINUED) (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
Connecticut-- $ 15,000 Connecticut State Economic Recovery Notes, Series A,
2.3% 5.40% due 12/15/1995 $ 15,087
Connecticut State HFA (Mortgage Finance Project):
35,155 Series D, Sub-Series D-1, 3.55% due 5/15/1995 35,155
1,365 Series G, Sub-Series G-1, 3.55% due 5/15/1995 1,365
104,000 Connecticut State Special Assessment Unemployment Compensation,
Advanced Fund Revenue Bonds, Series C, 3.85% due 7/01/1995 104,000
1,800 Connecticut State Special Tax Obligation Revenue Bonds (Transportation
Infrastructure), Second Lien, VRDN, Series 1, 4.35% due 12/01/2010 (a) 1,800
16,200 Eagle Tax Exempt Trust, Connecticut, VRDN, 4.35% due 8/15/2012 (a) 16,200
Delaware-- Delaware State, EDA, Revenue Bonds (Delmarva Power & Light Co.
0.1% Project), VRDN, AMT (a):
4,400 4.50% due 10/01/2017 4,400
2,100 Series A, 4.50% due 10/01/2017 2,100
District of District of Columbia, General Fund Recovery Bonds, VRDN (a):
Columbia-- 7,000 Series B-2, 4.80% due 6/01/2003 7,000
1.0% 2,300 Series B-3, 4.80% due 6/01/2003 2,300
17,800 District of Columbia, Hospital Revenue Bonds (Providence Hospital--
Daughters of Charity), VRDN, Series 89A, 4.25% due 12/01/2019 (a) 17,800
2,900 District of Columbia, Refunding Bonds, VRDN, Series A-2,
4.55% due 10/01/2007 (a) 2,900
District of Columbia, Revenue Bonds:
12,500 (George Washington University), VRDN, Series A, 4.20%
due 3/01/2006 (a) 12,500
6,500 (Student Loan), 4.05% due 7/01/1995 6,500
26,700 Eagle Tax Exempt Trust, District of Columbia, VRDN, Series 1994-A,
4.35% due 6/01/2005 (a) 26,700
Florida-- 3,400 Broward County, Florida, HFA, M/F Housing Revenue Bonds (Margate
2.5% Investments Projects), VRDN, 4% due 11/01/2005 (a) 3,400
37,425 Dade County, Florida, Aviation Revenue Refunding Bonds, VRDN,
Series V, 4.25% due 10/01/2007 (a) 37,425
11,700 Dade County, Florida, IDA, Exempt Facilities Revenue Refunding Bonds
(Florida Power & Lighting Co.), VRDN, 4.40% due 6/01/2021 (a) 11,700
Dade County, Florida, Solid Waste Authority, IDR (Montenay-Dade
Limited Project), VRDN (a):
15,590 AMT, 4.40% due 12/01/2010 15,590
900 Series A, 4.40% due 12/01/2013 900
8,500 Dade County, Florida, Special Obligation Capital Asset Acquisition
Revenue Bonds, 4.30% due 10/01/2010 8,500
First Municipal Loan Council, Florida, Revenue Bonds (Florida League--
Project 2), ACES, CP:
9,000 3.85% due 5/11/1995 9,000
10,000 3.85% due 5/12/1995 10,000
8,000 Floating Rate Trust Certificate, Florida, VRDN, Series
1992-D, 4.35% due 7/01/1995 (a) 8,000
Hillsborough County, Florida, IDA, PCR, Refunding (Tampa Electric
Company Project), VRDN (a):
5,000 4.25% due 5/15/2018 5,000
400 4.20% due 9/01/2025 400
3,100 Manatee County, Florida, PCR, Refunding (Florida Power & Lighting Co.
Project), VRDN, 4.25% due 9/01/2024 (a) 3,100
7,000 Martin County, Florida, PCR, Refunding (Florida Power & Lighting Co.
Project), VRDN, 4.25% due 9/01/2024 (a) 7,000
900 Pinellas County, Florida, Health Facilities Authority, Revenue Refunding
Bonds(Pooled Hospital Loan Program), DATES, 4.25% due 12/01/2015 (a) 900
Saint Lucie County, Florida, PCR, Refunding (Florida Power & Lighting Co.
Project):
10,000 CP, 4% due 4/26/1995 10,000
21,500 CP, Series A, 4.20% due 4/04/1995 21,500
31,000 VRDN, 4.25% due 1/01/2026 (a) 31,000
6,860 Volusia County, Florida, Health Facilities Authority Revenue Bonds
(Pooled Hospital Loan Program), VRDN, 4.25% due 11/01/2015 (a) 6,860
</TABLE>
52
<PAGE> 102
<TABLE>
CMA TAX-EXEMPT FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (CONTINUED) (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
Georgia-- Burke County, Georgia, Development Authority, PCR (Georgia Power
1.6% Company--Plant Vogtle Project), VRDN (a):
$ 4,300 3rd Series, 4.40% due 7/01/2024 $ 4,300
4,500 4th Series, 4.30% due 7/01/2024 4,500
9,648 Georgia Municipal Association, Pooled Bonds, COP, VRDN, 4.125%
due 12/15/2020 (a) 9,648
10,800 Georgia Municipal Gas Authority, Gas Revenue Bonds (Southern Portfolio
I Project), CP, Series D, 4.25% due 5/19/1995 10,800
12,505 Georgia State Residential Finance Authority, Home Ownership Mortgage
Revenue Bonds, Series A, 4.40% due 6/01/1995 12,505
5,855 Georgia State Residential Finance Authority, S/F Industrial Mortgage
Revenue Bonds, Series A, 4.40% due 6/01/1995 5,855
14,320 Municipal Electric Authority, Georgia, General Resolution Revenue Bonds,
Series B, 3.85% due 6/01/1995 14,320
4,000 Municipal Electric Authority, Georgia, Money Market Municipal Bonds
(Project 1), CP, Series B, 3.90% due 5/08/1995 4,000
Municipal Electric Authority, Georgia (Project One), CP:
10,700 Sub-Series D, 4.15% due 4/10/1995 10,700
7,800 Sub-Series D, 4.25% due 4/25/1995 7,800
25,000 Sub-Series E, 4.15% due 4/10/1995 25,000
Idaho--0.1% 7,500 Custer County, Idaho, PCR (Amoco Project), 4.20% due 10/01/1995 7,500
Illinois-- Chicago, Illinois, O'Hare International Airport Revenue Bonds (a):
9.6% 7,100 (American Airlines), DATES, Series C, 4.35% due 12/01/2017 7,100
5,700 (American Airlines), DATES, Series D, 4.35% due 12/01/2017 5,700
35,300 (General Airport Second Lien), VRDN, AMT, Series A,
4.35% due 1/01/2018 35,300
20,700 (General Airport Second Lien), VRDN, Series C, 4.10%
due 1/01/2018 20,700
14,800 Chicago, Illinois, O'Hare International Airport, Special Facilities
Revenue Bonds(Compagnie Nationale, Air France), VRDN, 4.40%
due 5/01/2018 (a) 14,800
5,720 Chicago, Illinois, School Financing Authority, Refunding
(School Assistance), 8.70% due 6/01/1995 (b) 5,878
Chicago, Illinois, Tender Notes:
21,250 Series A-2, 4.15% due 7/19/1995 21,250
28,000 Series C, 4.15% due 5/04/1995 28,000
35,000 Series C-1, 4.15% due 5/04/1995 35,000
15,640 VRDN, 4.10% due 1/01/2010 (a) 15,640
63,400 VRDN, Series B, 4.05% due 10/31/1995 (a) 63,400
23,600 VRDN, Series B, 4.10% due 1/01/2012 (a) 23,600
Illinois Development Finance Authority, VRDN (a):
12,700 PCR (Diamond Star Motors Project), 4.30% due 12/01/2008 12,700
3,800 PCR (Illinois Power Co.), AMT, Series C, 4.25% due 3/01/2017 3,800
36,200 PCR, Refunding (Commonwealth Edison Company Project), Series B,
4.10% due 10/15/2014 36,200
22,100 Revenue Bonds (Lyric Opera Chicago Project), 4.15% due 12/01/2028 22,100
8,860 Revenue Bonds (Residential Rental-River Oaks Project), AMT,
4.30% due 12/15/2019 8,860
Illinois Educational Facilities Authority Revenue Bonds, VRDN (a):
16,300 (Art Institute of Chicago), 4.25% due 3/01/2027 16,300
5,200 (Chicago Historical Society), 4.15% due 12/01/2025 5,200
7,500 (Cultural Pooled Financing Program), 4.20% due 12/01/2025 7,500
15,200 (Illinois Institute of Technology), Series A, 4.15% due 9/01/2025 15,200
</TABLE>
53
<PAGE> 103
<TABLE>
CMA TAX-EXEMPT FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (CONTINUED) (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
Illinois Illinois Health Facilities Authority Revenue Bonds:
(concluded) $ 31,100 (Evangelical Hospital Corporation), VRDN, Series A, 4.05% due
1/01/2010 (a) $ 31,100
15,000 (Highland Park Hospital), VRDN, Series B, 3.75% due 6/01/1995 (a) 15,000
8,700 (Hospital Sisters Services, Inc.), UPDATES, Series E, 4% due
12/01/2014 (a) 8,700
20,000 (Lutheran Institute), VRDN, Series C, 3.85% due 4/01/2015 (a) 20,000
6,200 (Resurrection Health Care System), VRDN, 4.35% due 5/01/2011 (a) 6,200
7,000 (Revolving Fund, Pooled Financing Program), VRDN, Series F, 4.10%
due 8/01/2015 (a) 7,000
Illinois Health Facilities Authority Revenue Bonds (Evanston
Hospital Corporation Project):
35,000 CP, 4.10% due 4/27/1995 35,000
25,000 CP, 4.20% due 8/15/1995 25,000
30,000 Series A, 4.25% due 5/31/1995 30,000
10,000 Series A, 4.80% due 11/30/1995 10,000
10,000 Series B, 4.80% due 11/30/1995 10,000
10,000 Series C, 4.80% due 11/30/1995 10,000
10,000 Series D, 4.80% due 11/30/1995 10,000
2,600 Series E, 4.80% due 11/30/1995 2,600
33,000 UPDATES, Series B, 4.65% due 2/15/1996 (a) 33,000
Illinois State Toll Highway Authority Revenue Bonds (Toll
Highway Priority):
12,750 7.375% due 1/01/1996 (b) 13,265
31,200 Refunding, VRDN, Series B, 4.25% due 1/01/2010 (a) 31,200
Indiana-- Fort Wayne, Indiana, Hospital Authority Revenue Bonds (Parkview
2.9% Memorial Hospital), VRDN (a):
1,645 Series B, 4.25% due 1/01/2016 1,645
2,700 Series B, 4.25% due 1/01/2020 2,700
3,505 Series C, 4.25% due 1/01/2016 3,505
5,670 Series D, 4.25% due 1/01/2016 5,670
30,000 Indiana Bond Bank, Floating Notes (Advance Funding Program),
Series A-3, 4.165% due 1/10/1996 30,000
Indiana Health Facilities Financing Authority, Hospital Revenue
Bonds, VRDN (a):
5,400 (Daughters of Charity National Health System), Series A, 4.25%
due 11/01/2022 5,400
1,700 (Daughters of Charity National Health System), Series B, 4.25%
due 11/01/2022 1,700
7,900 (Methodist Hospital of Indiana, Inc.), Series B, 4.25%
due 9/01/2022 7,900
34,200 (Methodist Hospital of Indiana, Inc.), Series C, 4.25%
due 9/01/2022 34,200
Indiana Secondary Market Educational Loans Incorporated, Student
Loan Revenue Bonds, VRDN, AMT, Series B (a):
26,900 4.20% due 12/01/2013 26,900
22,500 4.20% due 12/01/2014 22,500
14,900 Jasper County, Indiana, PCR, Refunding (Northern Indiana Public
Service Co.), VRDN, Series C, 4.20% due 4/01/2019 (a) 14,900
47,065 Marion County, Indiana, Hospital Authority, Hospital Facility Revenue
Bonds (Saint Vincent's Hospital and Healthcare Center--Daughters
of Charity), 4.25% due 11/01/2013 47,065
5,000 Purdue University, Indiana, University Revenue Bonds, VRDN, Series K,
4.05% due 7/01/2020 (a) 5,000
</TABLE>
54
<PAGE> 104
<TABLE>
CMA TAX-EXEMPT FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (CONTINUED) (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
Iowa-- $ 5,000 Chillicothe, Iowa, PCR, Refunding (Iowa-Illinois Gas & Electric
0.7% Project), VRDN, 4.15% due 1/01/2023 (a) $ 5,000
Iowa Finance Authority, Solid Waste Disposal Revenue Bonds
(Cedar River Paper Company Project), VRDN, Series A (a):
11,600 4.50% due 7/01/2023 11,600
6,800 AMT, 4.50% due 6/01/2024 6,800
4,100 Iowa Higher Education Loan Authority Revenue Bonds (Private College
Facilities), VRDN, 4.30% due 12/01/2015 (a) 4,100
14,500 Iowa Student Loan Liquidity Corporation, Student Loan Revenue Bonds,
VRDN, AMT, Series B, 4.20% due 12/01/2013 (a) 14,500
Kansas-- 3,000 Kansas State, Department of Transportation, Highway Revenue Bonds,
1.2% VRDN, Series B, 4.10% due 9/01/2014 (a) 3,000
Wichita, Kansas, Hospital Revenue Bonds (CSJ Health Systems), VRDN (a):
1,600 4.25% due l0/01/2002 1,600
15,300 4.25% due 10/01/2008 15,300
70,000 Wichita, Kansas, Temporary Notes (Renewal and Improvement Project),
GO, UT, Series 185, 5.25% due 8/31/1995 70,165
Kentucky-- 5,100 Ashland, Kentucky, PCR (Merck & Co./Calgon Carbon Project), VRDN,
0.6% 4.375% due 10/01/2006 (a) 5,100
8,000 Carroll County, Kentucky, Solid Waste Disposal Facilities Revenue Bonds
(Kentucky Utilities Co. Project), VRDN, AMT, Series A, 4.50%
due 11/01/2024 (a) 8,000
Davies County, Kentucky, Solid Waste Disposal Facilities Revenue
Bonds (Scott Paper Co. Project), VRDN, AMT (a):
7,200 Series A, 4.50% due 12/01/2023 7,200
14,500 Series B, 4.55% due 12/01/2023 14,500
4,500 Series B, 4.55% due 5/01/2024 4,500
Louisiana-- 8,800 Eagle Tax Exempt Trust, Louisiana, VRDN, Series 94, Class 3803, 4.35%
2.8% due 5/01/2008 (a) 8,800
5,200 Louisiana Public Facilities Authority, Hospital Revenue Bonds
(Hospital Equipment Financing and Refunding Program), VRDN, Series A,
4.45% due 12/01/2005 (a) 5,200
Louisiana State Offshore Terminal Authority, Deepwater Port Revenue
Refunding Bonds (Loop Inc.), VRDN (a):
6,500 4.30% due 9/01/2006 6,500
12,485 Series A, 4.20% due 9/01/2008 12,485
9,300 New Orleans, Louisiana, Exhibition Hall Authority Revenue Bonds
(Hotel Occupancy Tax), VRDN, Series B, 4.25% due 7/01/2018 (a) 9,300
4,320 New Orleans, Louisiana, Levee District, Levee Improvement Revenue
Bonds, VRDN, 4.20% due 11/01/2014 (a) 4,320
Saint Charles Parish, Louisiana, PCR, VRDN (a):
17,100 (Shell Oil Company--Norco Project), AMT, 4.50% due 11/01/2021 17,100
4,400 (Shell Oil Company Project), 3.85% due 6/01/2005 4,400
13,600 (Shell Oil Company Project), AMT, Series A, 4.50% due 10/01/2022 13,600
Saint James Parish, Louisiana, PCR, Refunding (Texaco Project), CP:
75,000 Series A, 3.80% due 5/09/1995 75,000
46,030 Series B, 3.80% due 5/09/1995 46,030
Maine-- 15,635 Jay, Maine, Solid Waste Disposal Revenue Bonds (International
0.4% Paper), AMT, Series A, 3.95% due 6/01/1995 15,635
Maine Health and Higher Educational Facilities Authority Revenue
Bonds (VHA New England Inc.), VRDN (a):
1,250 Series B, 4.10% due 12/01/2025 1,250
1,450 Series F, 4.10% due 12/01/2025 1,450
18,000 Maine State, TAN, 4.50% due 6/30/1995 18,035
Maryland-- Maryland State Health and Higher Educational Facilities Authority
0.5% Revenue Bonds, VRDN (a):
12,300 (Pooled Loan Program), Series A, 4.15% due 4/01/2035 12,300
25,000 (Saint Agnes Hospital--Daughters of Charity), 4.25% due 7/01/2013 25,000
</TABLE>
55
<PAGE> 105
<TABLE>
CMA TAX-EXEMPT FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (CONTINUED) (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
Massachusetts-- $ 32,131 Clipper Tax Exempt Trust, Massachusetts, VRDN, Class A,
2.6% 4.17% due 10/17/2002 (a) $ 32,131
Eagle Tax Exempt Trust, Massachusetts, VRDN (a):
25,000 4.35% due 10/01/2007 25,000
20,900 Series J, 4.35% due 8/01/2005 20,900
64,100 Massachusetts Bay Transportation Authority Notes, Series B,
5% due 9/08/1995 64,313
14,600 Massachusetts State, Health and Educational Facilities Authority
Revenue Bonds(Boston University), CP, Series H, Sub-Series 2,
3.90% due 4/07/1995 14,600
33,210 Massachusetts State HFA, S/F Housing, Convertible Option Revenue
Bonds, Series 35, 3.75% due 6/01/1995 33,210
2,000 Massachusetts State, Municipal Wholesale Electric Company, Power
Supply System Revenue Bonds, VRDN, Series C, 4% due 7/01/2019 (a) 2,000
1,400 Massachusetts State, UPDATES, Series E, 4.35% due 12/01/1997 (a) 1,400
Michigan-- 6,500 Delta County, Michigan, Economic Development Corporation, Environmental
1.8% Improvement Revenue Bonds (Mead Escambia Paper), VRDN, Series D, 4.30%
due 12/01/2023 (a) 6,500
17,700 Eagle Tax Exempt Trust, Michigan, VRDN, Series 1994, Class 2201, 4.15%
due 6/01/2021 (a) 17,700
1,000 Grand Rapids, Michigan, Water Supply System, Revenue Refunding Bonds,
VRDN, 4.30% due 1/01/2020 (a) 1,000
100 Kent Hospital Finance Authority, Michigan, Hospital Facilities
Revenue Bonds(Butterworth Hospital), VRDN, Series A, 4.25% due
1/15/2020 (a) 100
Michigan Municipal Bond Authority Revenue Notes:
21,000 Series A, 4.25% due 5/05/1995 21,015
24,250 Series B, 4.75% due 7/20/1995 24,303
30,000 Michigan State Building Authority Revenue Bonds, CP, Series 1,
4.10% due 4/27/1995 30,001
Michigan State Hospital Finance Authority Revenue Bonds, VRDN (a):
4,300 (Providence Hospital--Daughters of Charity Systems, Incorporated),
4.25% due 11/01/2014 4,300
14,000 (Saint Mary's Hospital--Daughters of Charity Systems, Incorporated),
4.25% due 11/01/2013 14,000
5,000 Michigan State Strategic Fund, Limited Obligation Revenue Refunding
Bonds(Consumers Power Company Project), VRDN, Series A, 4.25%
due 6/15/2010 (a) 5,000
1,000 Michigan State Strategic Fund, Solid Waste Disposal Revenue Bonds
(Grayling Generating Project), VRDN, AMT, 4.25% due 1/01/2014 (a) 1,000
9,800 University of Michigan, University Revenue Refunding Bonds, VRDN,
Series A, 4.20% due 12/01/2019 (a) 9,800
Minnesota-- Eagle Tax Exempt Trust, Minnesota, VRDN (a):
1.0% 14,500 Series 1994-C-5, 4.35% due 2/01/2015 14,500
45,000 Series A, 4.35% due 8/01/2006 45,000
13,700 Minneapolis, Minnesota, Community Development Agency Revenue Bonds
(Riverplace Project--Pinnacle Apartments), VRDN, 4.25% due
2/01/2012 (a) 13,700
Mississippi-- 10,000 Harrison County, Mississippi, PCR, Refunding (E.I. du Pont de
0.6% Nemours & Co.), VRDN, 4.20% due 9/01/2010 (a) 10,000
12,100 Jackson County, Mississippi, PCR, Refunding (Chevron USA, Inc.
Project), VRDN, 4.10% due 12/01/2016 (a) 12,100
600 Jackson County, Mississippi, Port Facility Revenue Refunding Bonds
(Chevron USA, Inc. Project), VRDN, 4.35% due 6/01/2023 (a) 600
3,000 Mississippi Hospital Equipment and Facilities Authority Revenue Bonds
(Mississippi Baptist Medical Center), VRDN, Series B, 4.10% due
7/01/2012 (a) 3,000
19,800 Perry County, Mississippi, PCR, Refunding (Leaf River Forest
Project), VRDN, 4.15% due 3/01/2002 (a) 19,800
Missouri-- 30,000 Eagle Tax Exempt Trust, Missouri, VRDN, Series 1993-E,
2.0% 4.35% due 8/01/2006 (a) 30,000
Missouri Higher Education Loan Authority, Student Loan Revenue
Bonds, VRDN, AMT (a):
7,800 Series A, 4.15% due 6/01/2017 7,800
11,700 Series B, 4.15% due 6/01/2020 11,700
</TABLE>
56
<PAGE> 106
<TABLE>
CMA TAX-EXEMPT FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (CONTINUED) (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
Missouri Missouri State Health and Educational Facilities Authority, Health
(concluded) Facilities Revenue Bonds (Sisters of Mercy Health System), VRDN (a):
$ 5,000 Series A, 4% due 6/01/2019 $ 5,000
15,500 Series C, 4% due 6/01/2019 15,500
6,200 Series D, 4% due 6/01/2019 6,200
Missouri State Health and Educational Facilities Authority Revenue
Bonds (Washington University Project), VRDN (a):
1,300 Series A, 4.15% due 9/01/2010 1,300
16,830 Series A, 4.30% due 3/01/2017 16,830
19,200 Series B, 4.30% due 3/01/2017 19,200
28,700 Saint Louis County, Missouri, IDA, Hospital Revenue Bonds (DePaul
Hospital--Daughters of Charity), VRDN, 4.25% due 11/01/2014 (a) 28,700
Nebraska-- Nebraska Higher Education Loan Program, Multiple Mode Student Loan
1.5% Revenue Bonds, VRDN (a):
12,800 Series A, 4.10% due 12/01/2015 12,800
13,600 Series B, 4.10% due 12/01/2015 13,600
3,100 Series C, 4.10% due 12/01/2015 3,100
17,600 Series D, 4.10% due 12/01/2015 17,600
27,800 Series N, 4.10% due 12/01/2015 27,800
Nebraska Higher Education Loan Program, Student Loan Revenue Bonds,
VRDN, AMT (a):
3,550 Series A, 4.20% due 12/01/2016 3,550
30,150 Series C, 4.20% due 8/01/2018 30,150
New Hampshire-- 1,400 New Hampshire Higher Educational and Health Facilities Authority Revenue
0.8% Bonds (VHA New England Inc.), VRDN, Series D, 4.10% due 12/01/2025 (a) 1,400
New Hampshire State, Business Finance Authority, PCR:
20,750 (New England Power Co. Project), CP, Series B, 4.15% due 4/20/1995 20,750
38,400 Refunding (Public Service Co.), VRDN, Series E, 4.20%
due 5/01/2021 (a) 38,400
New Jersey-- 9,400 New Jersey Sports and Exposition Authority, State Contract Revenue
1.1% Bonds, VRDN, Series C, 4% due 9/01/2024 (a) 9,400
New Jersey State, CP:
21,300 3.75% due 5/09/1995 21,300
24,500 Series 94, 3.70% due 5/04/1995 24,500
10,600 Series D, 3.80% due 5/12/1995 10,600
23,000 New Jersey State, Transportation Trust Fund Authority, CP, 3.75%
due 5/05/1995 23,000
1,200 Port Authority of New York and New Jersey, Special Obligation Revenue
Bonds(Versatile Structure Obligation), VRDN, Series 1, 4.40% due
8/01/2028 (a) 1,200
New Mexico-- Farmington, New Mexico, PCR (Arizona Public Service Co.), VRDN (a):
1.3% 5,800 AMT, Series C, 4.50% due 9/01/2024 5,800
44,900 Refunding, Series A, 4.20% due 5/01/2024 44,900
18,750 Refunding, Series B, 4.30% due 9/01/2024 18,750
16,000 Hurley, New Mexico, PCR (Kennecott Santa Fe), VRDN, 4.35% due
12/01/2015 (a) 16,000
4,900 New Mexico Educational Assistance Foundation, Student Loan Revenue
Bonds, VRDN, AMT, Series B, 4.30% due 4/01/2005 (a) 4,900
2,480 New Mexico State Hospital Equipment Loan Council, Hospital Equipment
and Improvement Revenue Bonds (Health Facilities), VRDN, 4.25%
due 5/01/2009 (a) 2,480
New York-- 15,000 Nassau County, New York, RAN, 4% due 4/14/1995 15,002
3.7% New York City, New York, CP:
34,100 4.15% due 5/08/1995 34,100
25,000 4.15% due 5/09/1995 25,000
19,300 4.15% due 5/10/1995 19,300
62,000 New York City, New York, Floating Rate LIBOR Notes, VRDN,
4.063% due 6/30/1995 (a) 62,000
</TABLE>
57
<PAGE> 107
<TABLE>
CMA TAX-EXEMPT FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (CONTINUED) (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
New York New York City, New York, GO, VRDN (a):
(concluded) $ 7,400 Refunding, Series D, 4.35% due 8/01/1995 $ 7,400
20,000 Series B, Sub-Series B-7, 4.25% due 8/15/2018 20,000
8,400 Series D, 4.30% due 2/01/2021 8,400
1,300 Sub-Series A-5, 4.35% due 8/01/2016 1,300
3,000 Sub-Series A-7, 4.30% due 8/01/2019 3,000
10,300 Sub-Series A-10, 4.35% due 8/01/2016 10,300
200 New York City, New York, IDA, IDR (Japan Airlines Company Ltd.
Project), VRDN, AMT, 4.20% due 11/01/2015 (a) 200
10,000 New York City, New York, Municipal Water Finance Authority, Water
and Sewer System Revenue Bonds, CP, 4% due 5/17/1995 10,000
14,525 New York City, New York, RAN, Series B, 4.75% due 6/30/1995 14,534
5,900 New York State Dormitory Authority Revenue Bonds (Cornell
University), VRDN, Series B, 4.20% due 7/01/2025 (a) 5,900
New York State Energy Research and Development Authority, PCR, VRDN (a):
160 (Niagara Mohawk Corporation Project), Series A, 4.25% due 3/01/2027 160
22,500 (Niagara Power Corporation Project), AMT, Series B, 4.40% due 7/01/2027 22,500
9,300 New York State Local Government Assistance Corporation Revenue Bonds,
VRDN, Series B, 3.85% due 4/01/2023 (a) 9,300
15,800 Triborough Bridge and Tunnel Authority, New York, Special Obligation
Revenue Bonds, VRDN, 3.80% due 1/01/2024 (a) 15,800
North Carolina-- Craven County, North Carolina, Industrial Facilities and Pollution
2.4% Control Financing Authority Revenue Bonds (Cravenwood Energy
Project), VRDN, AMT (a):
6,300 Series B, 4.30% due 5/01/2011 6,300
16,000 Series C, 4.30% due 5/01/2011 16,000
2,600 Halifax County, North Carolina, Industrial Facilities and Pollution
Control Financing Authority Revenue Bonds (Westmoreland Project),
VRDN, 4.35% due 12/01/2019 (a) 2,600
9,995 North Carolina Eastern Municipal Power Agency, Power System Revenue
Bonds (Putters), VRDN, Series 5, 4.50% due 1/01/2018 (a) 9,995
North Carolina Educational Facilities Finance Agency Revenue
Bonds, VRDN (a):
23,950 (Bowman Grey School of Medicine Project), 4.10% due 9/01/2020 23,950
20,240 (Duke University Project), Series A, 4.075% due 6/01/2027 20,240
15,000 (Duke University Project), Series B, 4.075% due 12/01/2021 15,000
North Carolina Medical Care Commission, Hospital Revenue
Bonds, VRDN (a):
5,700 (Carol Woods Project), 4.30% due 4/01/2021 5,700
1,700 (Duke University Hospital), Series B, 4.075% due 6/01/2015 1,700
2,000 (Duke University Hospital Project), Series C, 4.075%
due 6/01/2015 2,000
18,500 (North Carolina Baptist Hospital Project), Series B,
4.10% due 6/01/2022 18,500
17,600 (Pooled Equipment Financing Project), 4.20% due 12/01/2025 17,600
9,000 (Pooled Financing Project), 4.20% due 4/01/2012 9,000
5,500 (Pooled Financing Project), Series B, 4.30% due 10/01/2013 5,500
9,000 Refunding (Moses H. Cone Memorial Hospital Project),
4.10% due 10/01/2023 9,000
9,300 Person County, North Carolina, Industrial Facilities and Pollution
Control Financing Authority, Solid Waste Disposal Revenue Bonds
(Carolina Power and Light Company), DATES, 4.40% due 11/01/2016 (a) 9,300
17,000 Wake County, North Carolina, Industrial Facilities and Pollution
Control Financing Authority Revenue Bonds (Carolina Power and Light
Company Project), DATES, 4.45% due 3/01/2017 (a) 17,000
Ohio-- 2,200 Cuyahoga County, Ohio, Hospital Revenue Improvement Bonds (Cleveland
0.1% University Hospital), VRDN, 4.25% due 1/01/2016 (a) 2,200
1,100 Franklin County, Ohio, Health System Revenue Bonds (Franciscan Sister--
Saint Anthony Medical Center), VRDN, Series B, 4.25% due 7/01/2015 (a) 1,100
1,865 Ohio HFA, M/F Housing Revenue Bonds (Kenwood Congregate Retirement
Program), VRDN, 4% due 12/01/2015 (a) 1,865
3,000 Scioto County, Ohio, Hospital Facilities Revenue Bonds (VHA Central Inc.
Capital Asset), VRDN, Series C, 4% due 12/01/2025 (a) 3,000
6,100 Scioto County, Ohio, Marine Terminal Facility, Revenue Refunding Bonds
(Norfolk Southern Corporation Project), VRDN, 4.15% due 8/15/2013 (a) 6,100
</TABLE>
58
<PAGE> 108
<TABLE>
CMA TAX-EXEMPT FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (CONTINUED) (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
Oklahoma-- $ 12,400 Muskogee, Oklahoma, Industrial Trust, PCR, Refunding (Oklahoma Gas and
0.5% Electric Co.), VRDN, Series A, 4.20% due 1/01/2025 (a) $ 12,400
10,200 Oklahoma City, Oklahoma, Industrial and Cultural Facilities Revenue
Bonds, VRDN, Series A, 4.30% due 6/01/2006 (a) 10,200
16,875 Oklahoma State, Industrial Authority Revenue Bonds (Baptist Center
Health System), Series A, CP, 4.10% due 5/18/1995 16,875
Oregon-- 9,300 Medford, Oregon, Hospital Facilities Authority Revenue Bonds (Gross--
1.1% Rogue Valley Health Services), VRDN, 4.30% due 10/01/2016 (a) 9,300
Oregon State GO, Veterans' Welfare Bonds, VRDN (a):
53,000 Series 73-E, 4.15% due 12/01/2016 53,000
15,000 Series 73-G, 4.25% due 12/01/2018 15,000
7,300 Port of Portland, Oregon, Public Grain Elevator Revenue Bonds (Columbia
Grain Incorporated Project), VRDN, Series A, 4.375% due 12/01/2014 (a) 7,300
Pennsylvania-- Allegheny County, Pennsylvania, Hospital Development Authority
8.2% Revenue Bonds(Presbyterian Health Center), VRDN (a):
8,000 Series A, 4.20% due 3/01/2020 8,000
1,400 Series C, 4.20% due 3/01/2020 1,400
Allegheny County, Pennsylvania, IDA, PCR (Duquesne Light Project),
CP, Series A:
15,000 4.40% due 12/07/1995 15,000
12,000 4.75% due 12/07/1995 12,000
800 Authority Improvement Municipalities of Allegheny County, Pennsylvania,
Hospital Revenue Bonds (Pooled Hospital Equipment Leasing), VRDN,
4.20% due 9/01/1995 (a) 800
2,500 Butler County, Pennsylvania, IDA, IDR, Refunding (Wetterau Finance Co.
Project), VRDN, 4.20% due 12/01/2014 (a) 2,500
3,000 Delaware County, Pennsylvania, IDA, Solid Waste Revenue Bonds (Scott
Paper Company), VRDN, Series B, 4.30% due 12/01/2018 (a) 3,000
17,000 Eagle Tax Exempt Trust, Pennsylvania, VRDN, Series 94, Class 3803,
4.35% due 5/01/2008 (a) 17,000
Emmaus, Pennsylvania, General Authority Revenue Bonds (Local
Government Pool), VRDN (a):
6,400 Series A, 4.25% due 3/01/2024 6,400
9,000 Series C, 4.25% due 3/01/2024 9,000
10,100 Series D, 4.25% due 3/01/2024 10,100
25,000 Series E, 4.25% due 3/01/2024 25,000
22,300 Geisinger Authority, Pennsylvania, Health Systems Revenue Bonds,
Series B, VRDN, 4.20% due 7/01/2022 (a) 22,300
5,700 Montgomery County, Pennsylvania, Higher Education and Health Authority,
Hospital Revenue Bonds (Holy Redeemer Hospital), VRDN, 4.10% due
9/01/2018 (a) 5,700
17,150 Pennsylvania Energy Development Authority Revenue Bonds (B&W
Edensburg Project), VRDN, AMT, 4.25% due 12/01/2011 (a) 17,150
77,520 Pennsylvania Floating Rate Trust Certificates, GO, VRDN, Series I,
4.35% due 10/02/1999 (a) 77,520
Pennsylvania State Higher Education Assistance Agency, Student
Loan Revenue Bonds, VRDN (a):
11,000 AMT, Series A, 4.20% due 1/01/2018 11,000
66,000 AMT, Series A, 4.20% due 12/01/2024 66,000
27,300 AMT, Series B, 4.20% due 7/01/2018 27,300
54,300 Series A, 3.85% due 12/01/2000 54,300
34,900 Series C, 4.20% due 7/01/2018 34,900
30,800 Series E, 4.20% due 7/01/2018 30,800
Pennsylvania State Higher Educational Facilities Authority,
College and University Revenue Bonds, VRDN (a):
8,000 (Carnegie-Mellon University), Series A, 4.10% due 11/01/2015 8,000
11,400 (Temple University), 4.20% due 10/01/2009 11,400
</TABLE>
59
<PAGE> 109
<TABLE>
CMA TAX-EXEMPT FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (CONTINUED) (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
Pennsylvania Pennsylvania State Higher Educational Facilities Authority,
(concluded) Health Services Revenue Bonds:
$ 5,225 (Putters), VRDN, Series 4B, 4.50% due 1/01/2009 (a) $ 5,225
15,000 (University of Pennsylvania), VRDN, Series B, 4.20% due
1/01/2024 (a) 15,000
Pennsylvania State Higher Educational Facilities Authority, Revenue
Refunding Bonds(Thomas Jefferson University), ACES:
7,650 Series B, 3.20% due 6/01/1995 7,650
34,500 Series C, 3.70% due 6/01/1995 34,500
15,000 Pennsylvania State, TAN, 4.75% due 6/30/1995 15,013
20,750 Philadelphia, Pennsylvania, Hospital and Higher Education Facilities
Authority, Hospital Revenue Bonds (Children's Hospital of Philadelphia
Project), VRDN, 4.20% due 3/01/2027 (a) 20,750
Philadelphia, Pennsylvania, IDA, Revenue Bonds:
10,200 (30th Street Station Project), VRDN, AMT, 3.50% due 1/01/2011 (a) 10,200
8,500 (Institute for Cancer Research Project), CP, Series A,
4.20% due 7/01/2013 8,500
9,000 (Philadelphia Airport Hotel), UPDATES, AMT, 4.15% due 12/01/2017 (a) 9,000
20,880 Sayre, Pennsylvania, Health Care Facilities Authority Revenue Bonds
(VHA of Pennsylvania, Inc., Capital Assets Financing Project),
VRDN, Series L, 4% due 12/01/2020 (a) 20,880
South Carolina-- 2,000 Berkeley County, South Carolina, PCR, Facilities Refunding Bonds
1.1% (Amoco Chemical Co. Project), VRDN, 4.35% due 7/01/2012 (a) 2,000
5,900 Charleston County, South Carolina, IDR, Refunding (Massey Coal
Terminal SC Corporation), VRDN, 4.30% due 1/01/2007 (a) 5,900
19,800 Charleston County, South Carolina, School District, TAN,
4.50% due 4/13/1995 19,806
12,100 Orangeburg County, South Carolina, Solid Waste Disposal Facilities
Revenue Bonds(South Carolina Electric & Gas), VRDN, AMT, 4.30%
due 11/01/2024 (a) 12,100
South Carolina Jobs EDA, Revenue Bonds, VRDN (a):
4,600 (Saint Francis Hospital Project), 4.25% due 7/01/2022 4,600
5,400 (Wellman, Inc. Project), 4.40% due 12/01/2010 5,400
14,100 (Wellman, Inc. Project), AMT, 4.40% due 12/01/2012 14,100
7,200 (WelIman, Inc Project), AMT, 4.25% due 3/01/2015 7,200
Tennessee-- 9,400 Cleveland, Tennessee, IDB, Revenue Bonds (Newly Wed Foods
0.6% Incorporated Project), VRDN, AMT, 4.35% due 1/01/2012 (a) 9,400
8,100 Loudon, Tennessee, IDB, PCR, Refunding (A.E. Staley Manufacturing
Co. Project), VRDN, 4.25% due 9/01/2001 (a) 8,100
Memphis, Tennessee (Putters), VRDN (a):
6,695 Series 3A, 4.50% due 10/01/2013 6,695
3,680 Series 3B, 4.50% due 10/01/2014 3,680
14,955 Morristown, Tennessee, IDB, PCR, Refunding (Akzo Chemicals, Inc.
Project), VRDN, 4.25% due 8/01/2001 (a) 14,955
12,000 Volunteer State Student Funding Corporation, Tennessee, Student
Loan Revenue Bonds, VRDN, AMT, Series A-1, 4.25% due 12/01/2017 (a) 12,000
Texas-- 23,500 Brazos, Texas, Higher Education Authority Incorporated, Student
14.4% Loan Revenue Bonds, AMT, Series B-1, 3.80% due 6/01/1995 23,500
4,000 Corpus Christi, Texas, IDR (Dedietrich USA Incorporated Project),
VRDN, AMT, 4.20% due 11/01/2008 (a) 4,000
8,910 Galveston County, Texas, Health Facilities Development Corporation
Revenue Bonds (Devereux Foundation Project), VRDN, 4.25%
due 1/01/2016 (a) 8,910
13,800 Grapevine, Texas, IDR, Airport Revenue Refunding Bonds (Southern Air
Transportation Project), VRDN, 4.10% due 3/01/2010 (a) 13,800
Gulf Coast Waste Disposal Authority, Texas, PCR (Amoco Oil Co.
Project), VRDN, AMT (a):
22,500 4.50% due 5/01/2023 22,500
2,800 4.50% due 6/01/2024 2,800
Gulf Coast Waste Disposal Authority, Texas, Solid Waste Disposal
Revenue Bonds(Amoco Oil Co. Project), AMT:
2,100 4.30% due 10/01/1995 2,100
14,300 Refunding, VRDN, 4.50% due 8/01/2023 (a) 14,300
</TABLE>
60
<PAGE> 110
<TABLE>
CMA TAX-EXEMPT FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (CONTINUED) (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
Texas Harris County, Texas, Health Facilities Development Corporation,
(concluded) Hospital Revenue Bonds, VRDN (a):
$ 242,800 (Methodist Hospital), 4.25% due 12/01/2025 $ 242,800
18,300 (Saint Luke's Episcopal Hospital), Series B, 4.25% due 2/15/2016 18,300
23,800 (Saint Luke's Episcopal Hospital), Series C, 4.25% due 2/15/2016 23,800
3,800 (Saint Luke's Episcopal Hospital), Series D, 4.25% due 2/15/2016 3,800
6,900 Harris County, Texas, Health Facilities Development Corporation,
Special Facilities Revenue Bonds (Texas Medical Center Project),
VRDN, 4.25% due 2/15/2022 (a) 6,900
7,100 Harris County, Texas, Industrial Development Corporation, PCR
(Exxon Project), DATES, Series A, 4.25% due 3/01/2024 (a) 7,100
Harris County, Texas, Toll Road Revenue Bonds, VRDN (a):
15,000 Sublien D, 4.10% due 8/01/2015 15,000
25,000 Sublien H, 4.10% due 8/01/2020 25,000
11,440 Hockley County, Texas, Industrial Development Corporation, PCR (Amoco
Project), 3.90% due 5/01/1995 11,439
7,000 Houston, Texas, Public Improvement Bonds, VRDN, Series A,
4.15% due 4/01/2013 (a) 7,000
54,150 Houston, Texas, TRAN, 4.50% due 6/29/1995 54,266
22,800 Lubbock, Texas, Health Facilities Development Corporation Revenue
Bonds (Saint Joseph Health System), VRDN, Series A, 4.20%
due 7/01/2013 (a) 22,800
North Texas Higher Education Authority Incorporated, Student Loan
Revenue Bonds, VRDN (a):
5,000 AMT, 4.35% due 12/01/2005 5,000
13,700 AMT, Series F, 4.20% due 4/01/2020 13,700
3,000 Refunding, 4.20% due 3/01/1999 3,000
23,700 Refunding, 4.20% due 3/01/2005 23,700
29,000 Refunding, Series A, 4.20% due 4/01/2005 29,000
5,000 Refunding, Series A, 4.20% due 4/01/2020 5,000
18,500 Panhandle Plains, Texas, Higher Education Authority Incorporated,
Student Loan Revenue Bonds, AMT, Series A, 3.80% due 6/01/1995 18,500
18,700 San Antonio, Texas, Higher Education Authority Revenue Refunding
Bonds (Trinity University Project), VRDN, 4.20% due 4/01/2004 (a) 18,700
6,900 Southwest Texas, Higher Education Authority Incorporated, Revenue
Refunding Bonds (Southern Methodist University), VRDN,
4.35% due 7/01/2015 (a) 6,900
8,800 Texas A&M University, University System Revenue Bonds (Financing
System), CP, Series B, 3.90% due 5/16/1995 8,800
11,800 Texas State, Agricultural Financing Authority Revenue Bonds, CP,
Series A, 4.10% due 4/18/1995 11,800
28,400 Texas State, Multi-Modal Water Development Board, VRDN, Series A,
4.30% due 3/01/2015 (a) 28,400
261,700 Texas State, TRAN, UT, 5% due 8/31/1995 262,392
27,920 Travis County, Texas, Health Facility Development Corporation
Revenue Bonds(Daughters of Charity--Seton Medical Center), VRDN,
4.25% due 11/01/2013 (a) 27,920
Waco, Texas, Health Facilities Development Corporation, Health
Facilities Revenue Bonds (Daughters of Charity--Providence
Hospital), VRDN (a):
18,485 4.25% due 11/01/2013 18,485
12,300 Series 88A, 4.25% due 11/01/2018 12,300
5,000 West Side Calhoun County, Texas, Development Corporation, PCR
(Sohio Chemical Company Project), UPDATES, 4.25% due 12/01/2015 (a) 5,000
5,265 Yoakum County, Texas, Industrial Development Corporation, PCR
(Amoco Project), 3.90% due 5/01/1995 5,264
Utah-- 53,000 Emery County, Utah, PCR, Refunding (Pacific Corporation Projects),
1.2% VRDN, 4.40% due 11/01/2024 (a) 53,000
12,000 Intermountain Power Agency, Utah, Power Supply Revenue Bonds, CP,
Series F, 4.05% due 5/16/1995 12,000
15,100 Salt Lake County, Utah, PCR, Refunding (Service Station Holdings
Project), VRDN, Series B, 4.25% due 8/01/2007 (a) 15,100
6,000 Utah State Board of Regents, Student Loan Revenue Bonds, VRDN,
AMT, Series C, 4.20% due 11/01/2013 (a) 6,000
</TABLE>
61
<PAGE> 111
<TABLE>
CMA TAX-EXEMPT FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (CONCLUDED) (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
Vermont-- $ 1,100 Vermont Higher Educational and Health Buildings, Financing Agency
0.0% Revenue Bonds(VHA-New England), VRDN, Series G, 4.10% due 12/01/2025 (a) $ 1,100
Virginia-- 5,700 Loudoun County, Virginia, IDA, Residential Care Facility Revenue Bonds
0.7% (Falcons Landing Project), VRDN, Series B, 4.30% due 11/01/2024 (a) 5,700
3,200 Peninsula Ports Authority, Virginia, Revenue Refunding Bonds
(Port Facility--Shell Oil Company Project), UPDATES, Series A,
4.15% due 12/01/2005 (a) 3,200
2,400 Roanoke, Virginia, IDA, Hospital Revenue Bonds (Roanoke Memorial
Hospital Project), VRDN, Series A, 4.25% due 7/01/2017 (a) 2,400
Rockingham County, Virginia, IDA, Revenue Bonds, VRDN (a):
1,000 4.625% due 10/01/2022 1,000
16,000 (Merck & Co. Project), Series A, 4.375% due 10/01/2020 16,000
27,300 Virginia State Housing Development Authority, Commonwealth Mortgage
Revenue Bonds, AMT, Series I, Sub-Series I, 4.20% due 5/11/1995 27,300
Washington-- 9,200 Port Anacortes, Washington, Industrial Development Corporation
1.1% Revenue Bonds (Texaco Project), CP, 3.85% due 5/09/1995 9,200
Washington State Public Power Supply System, Revenue Refunding
Bonds (Nuclear Project No. 3), VRDN (a):
24,500 Series 3A-1, 4.20% due 7/01/2018 24,500
9,300 Series 3A-2, 4.25% due 7/01/2018 9,300
Washington Student Loan Finance Association Revenue Bonds (Guaranteed
Student Loan Program), VRDN (a):
11,400 AMT, Series A, 4.25% due 12/01/2002 11,400
6,000 AMT, Series B, 4.25% due 12/01/2002 6,000
10,680 AMT, Series B, 4.15% due 1/01/2004 10,680
10,400 Second Series, 4% due 1/01/2001 10,400
West Virginia-- 11,220 Hancock County, West Virginia, County Commission, IDR, Refunding
0.2% (The Boc Group Inc. Project), VRDN, 4.25% due 8/01/2005 (a) 11,220
Wisconsin-- Eagle Tax Exempt Trust, Wisconsin, VRDN (a):
1.3% 30,300 Series 1993-H, 4% due 11/01/2008 30,300
6,900 Series 94, Class 4901, 4.35% due 9/01/2015 6,900
24,300 Series 94, Class 4905, 4.35% due 10/01/2005 24,300
18,450 Milwaukee, Wisconsin, RAN, Series A, 5.50% due 2/22/1996 18,568
16,000 Sheboygan, Wisconsin, PCR, Refunding (Wisconsin Power and Light
Company Project), VRDN, Series A, 4.35% due 9/01/2015 (a) 16,000
2,250 Wisconsin State Health Facilities Authority Revenue Bonds (Saint
Mary's Hospital of Milwaukee--Daughters of Charity), VRDN,
4.25% due 11/06/2016 (a) 2,250
Wyoming-- 4,800 Carbon County, Wyoming, PCR (Amoco Project), 3.90% due 5/01/1995 4,799
1.2% 17,500 Sweetwater County, Wyoming, PCR, Refunding (Pacific Corporation
Project), VRDN, 4.25% due 7/01/2015 (a) 17,500
Uinta County, Wyoming, PCR:
41,855 (Amoco Oil Company Project), Series A, 4.27% due 12/01/1995 41,743
23,500 Refunding (Chevron USA Inc. Project), VRDN, 4.10% due 8/15/2020 (a) 23,500
1,500 Refunding (Chevron USA Inc. Project), VRDN, 4.10% due 12/01/2022 (a) 1,500
Puerto Rico-- 60,000 Puerto Rico Commonwealth, Government Development Bank Revenue
0.8% Bonds,CP, 3.75% due 5/10/1995 60,000
Total Investments (Cost--$7,340,935*)--99.3% 7,340,935
Other Assets Less Liabilities--0.7% 51,029
----------
Net Assets--100.0% $7,391,964
==========
<FN>
(a)The interest rate is subject to change periodically based on
certain indexes. The interest rate shown is the rate in effect at
March 31, 1995.
(b)Prerefunded; to be called.
(c)MBIA Insured.
*Cost for Federal income tax purposes was $7,340,877 (in thousands).
See Notes to Financial Statements.
</TABLE>
62
<PAGE> 112
<TABLE>
CMA TAX-EXEMPT FUND
STATEMENT OF ASSETS AND LIABILITIES AS OF MARCH 31, 1995
<S> <C> <C>
Assets:
Investments, at value (identified cost--$7,340,935,254) (Note 1a) $ 7,340,935,254
Cash 124,472
Receivables:
Interest $ 64,146,460
Securities sold 10,987,795
Beneficial interest sold 3,975,650 79,109,905
---------------
Prepaid registration fees and other assets (Note 1d) 254,786
---------------
Total assets 7,420,424,417
---------------
Liabilities:
Payables:
Securities purchased 22,755,438
Investment adviser (Note 2) 2,456,160
Distributor (Note 2) 2,416,500 27,628,098
---------------
Accrued expenses and other liabilities 832,660
---------------
Total liabilities 28,460,758
---------------
Net Assets $ 7,391,963,659
---------------
Net Assets Consist of:
Shares of beneficial interest, $.10 par value, unlimited number
of shares authorized $ 739,756,643
Paid-in capital in excess of par 6,657,809,787
Undistributed investment income--net 57,789
Accumulated realized capital losses--net (Note 4) (5,660,560)
---------------
Net Assets--Equivalent to $1.00 per share based on 7,397,566,430
shares of beneficial interest outstanding $ 7,391,963,659
===============
</TABLE>
<TABLE>
CMA TAX-EXEMPT FUND
STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1995
<S> <C> <C>
Investment Income (Note 1c):
Interest and amortization of premium and discount earned $ 246,217,013
Expenses:
Investment advisory fees (Note 2) $ 29,119,924
Distribution fees (Note 2) 9,357,280
Transfer agent fees (Note 2) 1,623,665
Registration fees (Note 1d) 526,090
Accounting services (Note 2) 411,464
Custodian fees 189,859
Printing and shareholder reports 167,469
Professional fees 81,707
Trustees' fees and expenses 57,568
Pricing fees 49,670
Other 172,131
---------------
Total expenses 41,756,827
---------------
Investment income--net 204,460,186
Realized Loss on Investments--Net (Note 1c) (1,362,814)
---------------
Net Increase in Net Assets Resulting from Operations $ 203,097,372
===============
See Notes to Financial Statements.
</TABLE>
63
<PAGE> 113
<TABLE>
CMA TAX-EXEMPT FUND
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year Ended March 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <C> <C>
Operations:
Investment income--net $ 204,460,186 $ 148,192,450
Realized gain (loss) on investments--net (1,362,814) 51,826
--------------- ---------------
Net increase in net assets resulting from operations 203,097,372 148,244,276
--------------- ---------------
Dividends to Shareholders (Note 1e):
Investment income--net (204,366,652) (147,847,067)
--------------- ---------------
Net decrease in net assets resulting from dividends to shareholders (204,366,652) (147,847,067)
--------------- ---------------
Beneficial Interest Transactions (Note 3):
Net proceeds from sale of shares 23,571,897,187 25,164,582,052
Net asset value of shares issued to shareholders in reinvestment of
dividends (Note 1e) 204,370,799 147,842,729
--------------- ---------------
23,776,267,986 25,312,424,781
Cost of shares redeemed (24,294,994,658) (24,927,916,358)
--------------- ---------------
Net increase (decrease) in net assets derived from beneficial interest
transactions (518,726,672) 384,508,423
--------------- ---------------
Net Assets:
Total increase (decrease) in net assets (519,995,952) 384,905,632
Beginning of year 7,911,959,611 7,527,053,979
--------------- ---------------
End of year* $ 7,391,963,659 $ 7,911,959,611
=============== ===============
<FN>
*Undistributed investment income-- net (Note 1f) $ 57,789 $ 239,945
=============== ===============
</TABLE>
<TABLE>
CMA TAX-EXEMPT FUND
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. For the Year Ended March 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ----------
Investment income--net .03 .02 .02 .04 .05
---------- ---------- ---------- ---------- ----------
Less dividends from investment income--net (.03) (.02) (.02) (.04) (.05)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ==========
Total Investment Return 2.76% 1.96% 2.36% 3.76% 5.39%
========== ========== ========== ========== ==========
Ratios to Average Net Assets:
Expenses, excluding distribution fees .43% .42% .42% .42% .41%
========== ========== ========== ========== ==========
Expenses .55% .55% .54% .54% .54%
========== ========== ========== ========== ==========
Investment income--net 2.70% 1.94% 2.33% 3.70% 5.24%
========== ========== ========== ========== ==========
Supplemental Data:
Net assets, end of year (in thousands) $7,391,964 $7,911,960 $7,527,054 $7,874,437 $8,695,795
========== ========== ========== ========== ==========
See Notes to Financial Statements.
</TABLE>
64
<PAGE> 114
CMA TAX-EXEMPT FUND
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
CMA Tax Exempt Fund (the "Fund") is registered under the Investment
Company Act of 1940 as a no-load, diversified, open-end management
investment company. The following is a summary of significant
accounting policies followed by the Fund.
(a) Valuation of investments--Investments are valued at amortized
cost, which approximates market value. For the purpose of valuation,
the maturity of the 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
the demand notice payment period.
(b) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(c) Security transactions and investment
income--Security transactions are recorded on the dates the
transactions are entered into (the trade dates). Interest income
(including amortization of premium and discount) is recognized on
the accrual basis. Realized gains and losses on security
transactions are determined on the identified cost basis.
(d) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(e) Dividends to shareholders--The Fund declares dividends daily and
reinvests daily such dividends (net of non-resident alien tax
withheld) in additional fund shares at net asset value. Dividends
are declared from the total of net investment income, excluding
discounts earned other than original price discounts.Net realized
capital gains, if any, are normally distributed annually after
deducting prior years' loss carryforward. 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.
(f) Reclassification--Generally accepted accounting principles
require that certain differences between undistributed net
investment income for financial reporting and tax purposes, if
permanent, be reclassified to accumulated net realized capital
losses. Accordingly, current year's permanent book/tax differences
of $275,690 have been reclassified from undistributed net investment
income to accumulated net realized capital losses. These
reclassifications have no effect on net assets or net asset value
per share.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee based upon the average daily
value of the Fund's net assets, at the following annual rates: 0.50%
of the Fund's average daily net assets not exceeding $500 million;
0.425% of the average daily net assets in excess of $500 million but
not exceeding $1 billion; and 0.375% of the average daily net assets
in excess of $1 billion. The Investment Advisory Agreement obligates
FAM to reimburse the Fund to the extent the Fund's expenses
(excluding interest, taxes, distribution fees, brokerage fees and
commissions, and extraordinary items) exceed 2.5% of the Fund's
first $30 million of average daily net assets, 2.0% of the Fund's
next $70 million of average daily net assets, and 1.5% of the
average daily net assets in excess thereof. No fee payment will be
made to the Adviser during any year which will cause such expenses
to exceed the pro rata expense limitation at the time of such
payment.
Pursuant to the Distribution and Shareholder Servicing Plan in
compliance with Rule 12b-1 under the Investment Company Act of 1940,
Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S") receives a
distribution fee from the Fund at the end of each month at the
annual rate of 0.125% of average daily net assets of the
65
<PAGE> 115
CMA TAX-EXEMPT FUND
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
Fund. The distribution fee is to compensate MLPF&S financial consultants and
other directly involved branch office personnel for selling shares
of the Fund and for providing direct personal services to
shareholders. The distribution fee is not compensation for the
administrative and operational services rendered to the Fund by
MLPF&S in processing share orders and administering shareholder
accounts.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, MLPF&S, FDS, and/or ML & Co.
3. Transactions in Shares of
Beneficial Interest:
The number of shares purchased and redeemed during the periods
corresponds to the amounts included in the Statements of Changes in
Net Assets for net proceeds from sale of shares and cost of shares
redeemed, respectively, since shares are recorded at $1.00 per
share.
4. Capital Loss Carryforward:
At March 31, 1995, the Fund had a net capital loss carryforward of
approximately $5,227,000, of which $2,969,000 expires in 1997,
$1,358,000 expires in 1998, $210,000 expires in 1999, and $690,000
expires in 2003. These amounts will be available to offset like
amounts of any future taxable gains.
66
<PAGE> 116
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
CMA TREASURY FUND:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of CMA Treasury Fund as of March 31, 1995, the
related statements of operations for the year then ended and changes in net
assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the three-year period then ended
and for the period April 15, 1991 (commencement of operations) to March 31,
1992. These financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at March
31, 1995 by correspondence with the custodian. 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 CMA Treasury Fund as
of March 31, 1995, the results of its operations, the changes in its net assets,
and the financial highlights for the respective stated periods in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Princeton, New Jersey
April 28, 1995
67
<PAGE> 117
CMA TREASURY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (IN THOUSANDS)
Face Interest Maturity Value
Issue Amount Rate Date (Note 1a)
US Government Obligations*--99.7%
US Treasury $ 3,150 5.53 % 4/06/95 $ 3,147
Bills 25,000 5.535 4/06/95 24,976
20,000 5.555 4/06/95 19,981
3,638 5.61 4/06/95 3,635
3,859 5.78 4/06/95 3,855
20,000 5.34 4/20/95 19,937
8,123 5.68 4/20/95 8,097
50,000 5.725 4/20/95 49,842
110,000 5.73 4/20/95 109,652
70,000 5.735 4/20/95 69,778
15,000 5.425 4/27/95 14,937
15,000 5.49 4/27/95 14,937
10,000 5.045 5/04/95 9,946
10,000 5.06 5/04/95 9,946
1,500 5.105 5/04/95 1,492
5,103 5.51 5/04/95 5,075
94,320 5.66 5/04/95 93,810
2,019 5.665 5/04/95 2,008
1,908 5.67 5/04/95 1,898
1,931 5.68 5/04/95 1,921
3,892 5.69 5/04/95 3,871
1,263 5.70 5/04/95 1,256
12,000 5.74 5/04/95 11,935
5,682 5.75 5/04/95 5,651
3,330 5.845 5/04/95 3,312
50,000 5.99 5/04/95 49,730
34,675 6.00 5/04/95 34,488
25,000 6.015 5/04/95 24,865
15,000 5.58 5/11/95 14,902
Face Interest Maturity Value
Issue Amount Rate Date (Note 1a)
US Government Obligations* (concluded)
US Treasury $ 1,276 5.65 % 5/11/95 $ 1,268
Bills 7,156 5.675 5/11/95 7,109
(concluded) 750 5.70 5/11/95 745
2,948 5.72 5/11/95 2,929
25,000 5.82 5/11/95 24,837
14,378 5.67 5/18/95 14,269
24,000 5.685 5/18/95 23,817
15,019 5.69 5/18/95 14,904
4,962 5.70 5/18/95 4,924
37,081 5.715 5/18/95 36,798
10,000 5.85 5/25/95 9,914
10,000 5.855 5/25/95 9,913
25,000 5.10 6/01/95 24,753
25,000 6.10 8/10/95 24,464
15,000 6.23 11/16/95 14,429
5,000 6.125 4/04/96 4,691
US Treasury 130,000 3.875 4/30/95 129,760
Notes 148,000 5.875 5/15/95 147,966
77,000 8.50 5/15/95 77,213
90,000 4.25 7/31/95 89,480
107,650 4.625 8/15/95 107,078
25,000 3.875 10/31/95 24,660
10,000 7.875 2/15/96 10,112
Total US Government Obligations
(Cost--$1,424,824) 1,424,913
Total Investments (Cost--$1,424,824++)--99.7% 1,424,913
Other Assets Less Liabilities--0.3% 3,811
----------
Net Assets--100.0% $1,428,724
==========
[FN]
*US Treasury Bills are traded on a discount basis; the interest
rates shown are the discount rates paid at the time of purchase by
the Fund. US Treasury Notes bear interest at the rates shown,
payable at fixed dates through maturity.
++Cost for Federal income tax purposes.
See Notes to Financial Statements.
68
<PAGE> 118
<TABLE>
CMA TREASURY FUND
STATEMENT OF ASSETS AND LIABILITIES AS OF MARCH 31, 1995
<S> <C> <C>
Assets:
Investments, at value (identified cost--$1,424,823,880++) (Note 1a) $ 1,424,913,220
Cash 25,969
Interest receivable 9,555,184
Deferred organization expenses (Note 1d) 10,561
Prepaid registration fees and other assets (Note 1d) 78,620
---------------
Total assets 1,434,583,554
---------------
Liabilities:
Payables:
Securities purchased $ 4,690,347
Investment adviser (Note 2) 526,621
Distributor (Note 2) 429,420 5,646,388
---------------
Accrued expenses and other liabilities 213,277
---------------
Total liabilities 5,859,665
---------------
Net Assets $ 1,428,723,889
===============
Net Assets Consist of:
Shares of beneficial interest, $.10 par value, unlimited number of shares
authorized $ 142,863,455
Paid-in capital in excess of par 1,285,771,094
Unrealized appreciation on investments-- net 89,340
---------------
Net Assets--Equivalent to $1.00 per share based on 1,428,634,550 shares of
beneficial interest outstanding $ 1,428,723,889
===============
<FN>
++Cost for Federal income tax purposes. As of March 31, 1995, net
unrealized appreciation for Federal income tax purposes amounted to
$89,340, of which $181,244 related to appreciated securities and
$91,904 related to depreciated securities.
See Notes to Financial Statements.
</TABLE>
69
<PAGE> 119
<TABLE>
CMA TREASURY FUND
STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1995
<S> <C> <C>
Investment Income (Note 1c):
Interest and amortization of premium and discount earned $ 60,768,157
Expenses:
Investment advisory fees (Note 2) $ 5,626,244
Distribution fees (Note 2) 1,575,699
Transfer agent fees (Note 2) 232,782
Accounting services (Note 2) 109,977
Registration fees (Note 1d) 106,896
Professional fees 50,692
Trustees' fees and expenses 37,664
Custodian fees 35,321
Printing and shareholder reports 31,498
Amortization of organization expenses (Note 1d) 9,565
Other 13,848
---------------
Total expenses 7,830,186
---------------
Investment income--net 52,937,971
Realized Gain on Investments--Net (Note 1c) 239,944
Change in Unrealized Depreciation on Investments--Net 231,517
---------------
Net Increase in Net Assets Resulting from Operations $ 53,409,432
===============
See Notes to Financial Statements.
</TABLE>
70
<PAGE> 120
<TABLE>
CMA TREASURY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year Ended March 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <C> <C>
Operations:
Investment income--net $ 52,937,971 $ 31,549,137
Realized gain on investments--net 239,944 484,458
Change in unrealized depreciation on investments--net 231,517 (282,540)
--------------- ---------------
Net increase in net assets resulting from operations 53,409,432 31,751,055
--------------- ---------------
Dividends & Distributions to Shareholders (Note 1e):
Investment income--net (52,937,971) (31,549,137)
Realized gain on investments--net (239,944) (484,458)
--------------- ---------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (53,177,915) (32,033,595)
--------------- ---------------
Beneficial Interest Transactions (Note 3):
Net proceeds from sale of shares 6,534,376,700 6,005,046,894
Net asset value of shares issued to shareholders in reinvestment of
dividends (Note le) 53,133,860 32,008,483
--------------- ---------------
6,587,510,560 6,037,055,377
Cost of shares redeemed (6,379,458,214) (6,103,394,111)
--------------- ---------------
Net increase (decrease) in net assets derived from beneficial interest
transactions 208,052,346 (66,338,734)
--------------- ---------------
Net Assets:
Total increase (decrease) in net assets 208,283,863 (66,621,274)
Beginning of year 1,220,440,026 1,287,061,300
--------------- ---------------
End of year $ 1,428,723,889 $ 1,220,440,026
=============== ===============
See Notes to Financial Statements.
</TABLE>
71
<PAGE> 121
<TABLE>
CMA TREASURY FUND
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. April 15, 1991++
For the Year Ended March 31, to March 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ----------
Investment income--net .0409 .0250 .0278 .0453
---------- ---------- ---------- ----------
Realized and unrealized gain on investments--net .0004 .0002 .0026 .0019
---------- ---------- ---------- ----------
Total from investment operations .0413 .0252 .0304 .0472
---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.0409) (.0250) (.0278) (.0453)
Realized gain on investments--net (.0002) (.0004) (.0024) (.0020)
---------- ---------- ---------- ----------
Total dividends and distributions (.0411) (.0254) (.0302) (.0473)
---------- ---------- ---------- ----------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ==========
Total Investment Return 4.18% 2.57% 3.07% 5.02%*
========== ========== ========== ==========
Ratios to Average Net Assets:
Expenses, net of reimbursement and excluding distribution fees .49% .49% .48% .36%*
========== ========== ========== ==========
Expenses, net of reimbursement .62% .61% .60% .49%*
========== ========== ========== ==========
Expenses .62% .61% .62% .68%*
========== ========== ========== ==========
Investment income and realized gain on investments--net 4.20% 2.55% 3.01% 4.67%*
========== ========== ========== ==========
Supplemental Data:
Net assets, end of period (in thousands) $1,428,724 $1,220,440 $1,287,061 $1,221,461
========== ========== ========== ==========
<FN>
*Annualized.
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
72
<PAGE> 122
CMA TREASURY FUND
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
CMA Treasury Fund (the "Fund") is registered under the Investment
Company Act of 1940 as a no-load, diversified, open-end management
investment company. The following is a summary of significant
accounting policies followed by the Fund.
(a) Valuation of investments--Investments maturing more than sixty
days after the valuation date are valued at the most recent bid
price or yield equivalent as obtained from dealers that make markets
in such securities. When securities are valued with sixty days or
less to maturity, the difference between the valuation existing on
the sixty-first day before maturity and maturity value is amortized
on a straight-line basis to maturity. Investments maturing within
sixty days from their date of acquisition are valued at amortized
cost, which approximates market. Assets for which market quotations
are not readily available are valued at fair value as determined in
good faith by or under the direction of the Board of Trustees of the
Fund.
(b) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to
its shareholders. Therefore, no Federal income tax provision is
required.
(c) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income (including amortization of
premium and discount) is recognized on the accrual basis. Realized
gains and losses on security transactions are determined on the
identified cost basis.
(d) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a five-year period. Prepaid registration fees are
charged to expense as the related shares are issued.
(e) Dividends to shareholders--The Fund declares dividends daily and
reinvests daily such dividends (net of non-resident alien tax and
back-up withholding tax withheld) in additional fund shares at net
asset value. Dividends are declared from the total of net investment
income and net realized gain or loss on investments.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM" or "Adviser"). The general partner of
FAM is Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee based upon the average daily
value of the Fund's net assets at the following annual rates: 0.50%
of the Fund's average daily net assets not exceeding $500 million;
0.425% of the average daily net assets in excess of $500 million,
but not exceeding $1 billion; and 0.375% of the average daily net
assets in excess of $1 billion. The most restrictive annual expense
limitation requires that the Adviser reimburse the Fund to the
extent the Fund's expenses (excluding interest, taxes, distribution
fees, brokerage fees and commissions, and extraordinary items)
exceed 2.5% of the Fund's first $30 million of average daily net
assets, 2.0% of the next $70 million of average daily net assets,
and 1.5% of the average daily net assets in excess
73
<PAGE> 123
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
thereof. No fee payment will be made to the Adviser during the year
which will cause such expenses to exceed the pro rata expense
limitation at the time of such payment.
The Fund has adopted a Distribution and Shareholder Servicing Plan
in compliance with Rule 12b-1 under the Investment Company Act of
1940, pursuant to which Merrill Lynch, Pierce, Fenner & Smith Inc.
("MLPF&S") receives a distribution fee under the Distribution
Agreement from the Fund at the end of each month at the annual rate
of 0.125% of average daily net assets of the Fund for shareholders
who maintain their accounts through MLPF&S. The distribution fee is
to compensate MLPF&S financial consultants and other directly
involved branch office personnel for selling shares of the Fund and
for providing direct personal services to shareholders. The
distribution fee is not compensation for the administrative and
operational services rendered to the Fund by MLPF&S in processing
share orders and administering shareholder accounts.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, MLPF&S, FDS, and/or ML & Co.
3. Shares of Beneficial Interest:
The number of shares purchased and redeemed during the period
corresponds to the amounts included in the Statements of Changes in
Net Assets for net proceeds from sale of shares and cost of shares
redeemed, respectively, since shares are recorded at $1.00 per
share.
74
<PAGE> 124
Code #10116-0795
- ---------------------------------------------------------
CMA MONEY FUND
CMA GOVERNMENT
SECURITIES FUND
CMA TAX-EXEMPT
FUND
CMA TREASURY FUND
- ---------------------------------------------------------
STATEMENT OF
ADDITIONAL INFORMATION
- ---------------------------------------------------------
July 28, 1995
- ---------------------------------------------------------
(LOGO)Za
<PAGE> 125
APPENDIX FOR GRAPHIC AND IMAGE MATERIAL
Pursuant to Rule 304 of Regulation S-T, the following table presents
fair and accurate narrative descriptions of graphic and image material omitted
from this EDGAR Submission File due to ASCII-incompatibility and
cross-references this material to the location of each occurrence in the text.
DESCRIPTION OF OMITTED LOCATION OF GRAPHIC
GRAPHIC OR IMAGE OR IMAGE IN TEXT
- ---------------------- -------------------
Compass plate, circular Back cover of Prospectus and
graph paper and Merrill Lynch back cover of Statement of
logo including stylized market Additional Information
bull.
<PAGE> 126
PART C: OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS:
Contained in Part A:
Financial Highlights for the period April 15, 1991 (commencement of
operations) to March 31, 1992 and for each of the years in the
three-year period ended March 31, 1995.
Contained in Part B:
Schedule of Investments as of March 31, 1995.
Statement of Assets and Liabilities as of March 31, 1995.
Statement of Operations for the year ended March 31, 1995.
Statements of Changes in Net Assets for the years ended March 31, 1994
and 1995.
Financial Highlights for the Period April 15, 1991 (commencement of
operations) to March 31, 1992 and for each of the years in the three-year
period ended March 31, 1995.
(B) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- ----------------------------------------------------------------------------
<C> <S> <C> <C>
1 -- Declaration of Trust of the Registrant dated October 24, 1990.(a)
2 -- By-Laws of the Registrant.(a)
3 -- None.
4 -- Portions of the Declaration of Trust and By-Laws of the Registrant defining
the rights of holders of shares of the Registrant.(b)
5 (a) -- Form of Investment Advisory Agreement between the Registrant and Fund Asset
Management, L.P.(a)
(b) -- Supplement to Investment Advisory Agreement with Fund Asset Management,
L.P.(c)
6 -- Form of Distribution Agreement between the Registrant and Merrill Lynch,
Pierce, Fenner & Smith Incorporated.(a)
7 -- None.
8 -- Form of Custody Agreement between the Registrant and State Street Bank and
Trust Company.(a)
9 (a) -- Form of Amended Transfer Agency Agreement between the Registrant and
Financial Data Services, Inc.(a)
(b) -- Form of Cash Management Account Agreement.(a)
10 -- None.
11 -- Consent of Deloitte & Touche LLP, independent auditors for the Registrant.
12 -- None.
13 -- None.
14 -- None.
15 -- Form of Distribution and Shareholder Servicing Plan of the Registrant.(a)
16 -- Schedule for computation of each performance quotation provided in the
Registration Statement in response to Item 22.(a)
17 -- Financial Data Schedule.
</TABLE>
- ---------------
(a) Refiled pursuant to the Electronic Data Gathering, Analysis and Retrieval
(EDGAR) phase-in requirements.
(b) Reference is made to Article II, Section 2.3 and Articles III, V, VI, VIII,
IX, X and XI of the Registrant's Declaration of Trust, filed as Exhibit 1 to
Post-Effective Amendment No. 5 to the Registrant's Registration Statement
under the Securities Act of 1933, as amended (the "Registration Statement");
and to Articles I, V and VI of the Registrant's By-Laws, filed as Exhibit 2
to Post-Effective Amendment No. 5 to the Registration Statement.
(c) Filed on July 28, 1994 as an exhibit to Post-Effective Amendment No. 4 to
the Registration Statement.
C-1
<PAGE> 127
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>
NUMBER OF
HOLDERS
AT JUNE 30,
TITLE OF CLASS 1995
---------------------------------------------------------------------- --------------
<S> <C>
Shares of beneficial interest, par value $0.10 per share.............. 21,360
</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.
Section 5.3 of the Registrant's Declaration of Trust provides as follows:
"The Trust shall indemnify each of its Trustees, officers, employees, and
agents (including persons who serve at its request as directors, officers or
trustees of another organization in which it has any interest as a shareholder,
creditor or otherwise) against all liabilities and expenses (including amounts
paid in satisfaction of judgments, in compromise, as fines and penalties, and as
counsel fees) reasonably incurred by him in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
in which he may be involved or with which he may be threatened, while in office
or thereafter, by reason of his being or having been such a trustee, officer,
employee or agent, except with respect to any matter as to which he shall have
been adjudicated to have acted in bad faith, willful misfeasance, gross
negligence or reckless disregard of his duties; provided, however, that as to
any matter disposed of by a compromise payment by such person, pursuant to a
consent decree or otherwise, no indemnification either for said payment or for
any other expenses shall be provided unless the Trust shall have received a
written opinion from independent legal counsel approved by the Trustees to the
effect that if either the matter of willful misfeasance, gross negligence or
reckless disregard of duty, or the matter of good faith and reasonable belief as
to the best interests of the Trust, had been adjudicated, it would have been
adjudicated in favor of such person. The rights accruing to any person under
these provisions shall not exclude any other right to which he may be lawfully
entitled; provided that no person may satisfy any right of indemnity or
reimbursement granted herein or in Section 5.1 or to which he may be otherwise
entitled except out of the property of the Trust, and no Shareholder shall be
personally liable to any person with respect to any claim for indemnity or
reimbursement or otherwise. The Trustees may make advance payments in connection
with indemnification under this Section 5.3, provided that the indemnified
person shall have given a written undertaking to reimburse the Trust in the
event it is subsequently determined that he is not entitled to such
indemnification."
The Registrant's By-Laws provide that insofar as the conditional advancing
of indemnification moneys pursuant to Section 5.3 of the Declaration of Trust
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
the amount to which it is ultimately determined he is entitled to receive from
the Registrant by reason of indemnification; and (iii) (a) such promise must be
secured by a surety bond, other suitable insurance or an equivalent form of
security which assures that any repayments may be obtained by the Registrant
without delay or litigation, which bond, insurance or other form of security
must be provided by the recipient of the advance, or (b) a majority of a quorum
of the Registrant's disinterested, non-party Trustees, or an independent legal
counsel in a written opinion, shall determine, based upon a review of readily
available facts, that the recipient of the advance ultimately will be found
entitled to indemnification.
In Section 8 of the Distribution Agreement relating to the securities being
offered hereby, the Registrant agrees to indemnify the Distributor and each
person, if any, who controls the Distributor within the meaning of
C-2
<PAGE> 128
the Securities Act of 1933 (the "1933 Act"), against certain types of civil
liabilities arising in connection with the Registration Statement or Prospectus.
Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to Trustees, officers and controlling persons of the Registrant and
the principal underwriter pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Trustee, officer or controlling
person of the Registrant and the principal underwriter in connection with the
successful defense of any action, suit or proceeding) is asserted by such
Trustee, officer or controlling person or the principal underwriter in
connection with the shares being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Fund Asset Management (the "Manager" or "FAM") acts as investment adviser
for the following open-end investment companies: CBA Money Fund, CMA Government
Securities Fund, CMA Money Fund, CMA Multi-State Municipal Series Trust, CMA
Tax-Exempt 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 MuniNewYork 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
C-3
<PAGE> 129
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 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 Institutional Intermediate Fund and Merrill Lynch Funds for
Institutions Series is One Financial Center, 15th Floor, Boston, Massachusetts
02111-2646. The address of the Investment Adviser 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. The address of Merrill Lynch Financial Data Services, Inc. ("MLFDS")
is 4800 Deer Lake Drive East, Jacksonville, Florida 32246-6484.
Set forth below is a list of each executive officer and partner of the
Investment Adviser indicating each business, profession, vocation or employment
of a substantial nature in which each such person or entity has been engaged
since April 1, 1993 for his or her or its own account or in the capacity of
director, officer, partner or trustee. In addition, Mr. Zeikel is President, Mr.
Glenn is Executive Vice President and Mr. Richard is Treasurer of all or
substantially all of the investment companies described in the preceding
paragraph. Messrs. Zeikel, Glenn and Richard also hold the same position with
substantially all of the investment companies advised by MLAM as they do with
those advised by the Manager and Messrs. Giordano, Harvey, Hewitt, Kirstein and
Monagle are directors or officers of one or more of such companies.
<TABLE>
<CAPTION>
POSITION(S) WITH OTHER SUBSTANTIAL BUSINESS,
NAME MANAGER PROFESSION, VOCATION OR EMPLOYMENT
- ------------------------ ------------------------- ------------------------------------------
<S> <C> <C>
ML & Co. ............... Limited Partner Financial Services Holding Company;
Limited Partner of MLAM
Princeton Services, Inc.
("Princeton
Services")............ General Partner General Partner of FAM
Arthur Zeikel........... President President of MLAM; President and Director
of Princeton Services; Director of Merrill
Lynch Funds Distributor, Inc. ("MLFD");
Executive Vice President of ML & Co.;
Executive Vice President of Merrill
Lynch
Terry K. Glenn.......... Executive Vice President Executive Vice President of MLAM;
and Director Executive Vice President and Director of
Princeton Services; President and
Director of MLFD; Director of FDS;
President of Princeton Administrators,
L.P.
Vincent R. Giordano..... Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
Elizabeth Griffin....... Senior Vice President Senior Vice President of MLAM
Norman R. Harvey........ Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
N. John Hewitt.......... Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
</TABLE>
C-4
<PAGE> 130
<TABLE>
<CAPTION>
POSITION(S) WITH OTHER SUBSTANTIAL BUSINESS,
NAME MANAGER PROFESSION, VOCATION OR EMPLOYMENT
- ------------------------ ------------------------- ------------------------------------------
<S> <C> <C>
Philip L. Kirstein...... Senior Vice President, Senior Vice President, General Counsel and
General Counsel and Secretary of MLAM; Senior Vice
Secretary President, General Counsel, Director and
Secretary of Princeton Services;
Director of MLFD
Ronald M. Kloss......... Senior Vice President and Senior Vice President and Controller of
Controller MLAM; Senior Vice President and
Controller of Princeton Services
Stephen M.M. Miller..... Senior Vice President Executive Vice President of Princeton
Administrators, L.P.
Joseph T. Monagle, Jr... Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
Richard L. Reller....... Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
Gerald M. Richard....... Senior Vice President and Senior Vice President and Treasurer of
Treasurer MLAM; Senior Vice President and Treasurer
of Princeton Services; Vice President
and Treasurer of MLFD
Ronald L. Welburn....... Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
Anthony Wiseman......... Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) Merrill Lynch acts as the principal underwriter for the Registrant.
Merrill Lynch also acts as the principal underwriter for each if the following
open-end investment companies referred to in the first paragraph of Item 28: CBA
Money Fund, CMA Multi-State Municipal Series Trust, CMA Tax-Exempt Fund, CMA
Money Fund and CMA Government Securities Fund, The Corporate Fund Accumulation
Program, Inc. and The Municipal Fund Accumulative Program, Inc., and also acts
as the principal underwriter for each of the closed-end investment companies
referred to in the first paragraph of Item 28, and as the depositor of the
following unit investment trusts: The Corporate Income Fund, Municipal
Investment Trust Fund, The ML Trust for Government Guaranteed Securities and The
Government Securities Income Fund.
(b) With the exception of Arthur Zeikel, the President and a Trustee of the
Registrant who is an Executive Vice President of Merrill Lynch and ML & Co.,
none of the Trustees or officers of the Registrant is a director, officer or
employee of Merrill Lynch.
(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, as amended, and the rules
thereunder will be maintained at the offices of the Registrant, 800 Scudders
Mill Road, Plainsboro, New Jersey 08536, and MLFDS, 4800 Deer Lake Drive East,
Jacksonville, Florida 32246-6484.
ITEM 31. MANAGEMENT SERVICES.
Other than as set forth under the caption "Management of the
Funds--Investment Advisory Arrangements" in the Appendix to the Prospectus
constituting Part A of the Registration Statement and under the caption
"Management of the Funds--Investment Advisory Arrangements" in the Statement of
C-5
<PAGE> 131
Additional Information constituting Part B of the Registration Statement,
Registrant is not a party to any management-related services contract.
ITEM 32. UNDERTAKINGS.
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to
shareholders upon request and without charge.
C-6
<PAGE> 132
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 THE
REGISTRATION STATEMENT PURSUANT TO RULE 485(B) UNDER THE SECURITIES ACT OF 1933
AND HAS DULY CAUSED THIS POST-EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THERETO DULY AUTHORIZED, IN THE
TOWNSHIP OF PLAINSBORO AND STATE OF NEW JERSEY ON THE 26TH DAY OF JULY, 1995.
CMA TREASURY FUND
(Registrant)
By /s/ TERRY K. GLENN
------------------------------------
(TERRY K. GLENN, EXECUTIVE VICE
PRESIDENT)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
POST-EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY
THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------- -------------
<S> <C> <C>
ARTHUR ZEIKEL* President (Principal Executive
- ------------------------------------------ Officer) and Trustee
(ARTHUR ZEIKEL)
GERALD M. RICHARD* Treasurer (Principal Financial
- ------------------------------------------ and Accounting Officer)
(GERALD M. RICHARD)
RONALD W. FORBES* Trustee
- ------------------------------------------
(RONALD W. FORBES)
CYNTHIA A. MONTGOMERY* Trustee
- ------------------------------------------
(CYNTHIA A. MONTGOMERY)
CHARLES C. REILLY* Trustee
- ------------------------------------------
(CHARLES C. REILLY)
KEVIN A. RYAN* Trustee
- ------------------------------------------
(KEVIN A. RYAN)
RICHARD R. WEST* Trustee
- ------------------------------------------
(RICHARD R. WEST)
*By /s/ TERRY K. July 26, 1995
GLENN
- ------------------------------------------
(TERRY K. GLENN, ATTORNEY-IN-FACT)
</TABLE>
C-7
<PAGE> 133
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- ---------------------------------------------------------------------------------
<C> <S> <C> <C>
1 -- Declaration of Trust of the Registrant dated October 24, 1990.(a)
2 -- By-Laws of the Registrant.(a)
5 (a) -- Form of Investment Advisory Agreement between the Registrant and Fund Asset
Management, Inc.(a)
6 -- Form of Distribution Agreement between the Registrant and Merrill Lynch, Pierce,
Fenner & Smith Incorporated.(a)
8 -- Form of Custody Agreement between the Registrant and State Street Bank and Trust
Company.(a)
9 (a) -- Form of Amended Transfer Agency Agreement between the Registrant and Financial
Data Services, Inc.(a)
(b) -- Form of Cash Management Account Agreement.(a)
11 -- Consent of Deloitte & Touche LLP, independent auditors for the Registrant.
15 -- Form of Distribution and Shareholder Servicing Plan of the Registrant.(a)
16 -- Schedule for computation of each performance quotation provided in the
Registration Statement in response to Item 22.(a)
17 -- Financial Data Schedule.
</TABLE>
- ---------------
(a) Refiled pursuant to the Electronic Data Gathering, Analysis and Retrieval
(EDGAR) phase-in requirements.
<PAGE> 1
Ex-99.1
DECLARATION OF TRUST
OF
CMA TREASURY FUND
THE DECLARATION OF TRUST of CMA Treasury Fund is made the 24th
day of October, 1990 by the parties signatory hereto, as trustees
such persons, so long as they shall continue in office in
accordance with the terms of this Declaration of Trust, and all
other persons who at the time in question have been duly elected or
apppointed as trustees in accordance with the provisions of this
Declaration of Trust and are then in office, being hereinafter
called the "Trustees")
W I T N E S S E T H
WHEREAS, the Trustees desire to form a trust fund under the
of Massachusetts for the investment and reinvestment of funds
contributed thereto; and
WHEREAS, it is proposed that the beneficial interest in the
trust assets be divided into transferable shares of beneficial.
interest as hereinafter provided;
NOW, THEREFORE, the Trustees hereby declare that they will
hold in trust, all money and property contributed to the trust fund
to manage and dispose of the same for the benefit of the holders
from tine to time of the shares of beneficial interest issued
hereunder and subject to the provisions hereof, to wit:
<PAGE> 2
ARTICLE I
The Trust
1.1. Name. The name of the trust created hereby (the
"Trust") shall be "CMA Treasury Fund", and so far as ray be
practicable the Trustees shall conduct the activities of the Trust,
execute all documents and sue or be sued under that name, which
name (and the word "Trust" wherever hereinafter used) shall refer
to the Trustees as Trustees, and not individually, and shall not
refer to the officers, agents, employees or Shareholders of the
Trust. However, should the Trustees deter-mine that the use of the
name of the Trust is not advisable, they may select such other name
for the Trust as they deem proper and the Trust may conduct its
activities under such other name. Any name change shall be
effective upon the execution by a majority of the then Trustees of
an instrument setting forth the new name. Any such instrument
shall have the status of an amendment to this Declaration.
1.2. Definitions. As used in this Declaration, the following
terms shall have the following meanings:
The terns "Affiliated Person", "Assignment", "Commission",
"Interested Person", "Majority Shareholder Vote" (the 67% or more
than 50% requirement of the third sentence of Section 2(a)(42) of
the 1940 Act, whichever may be applicable) and "Principal
Underwriter" shall have the meanings given them in the 1940 Act.
"Declaration" shall mean this Declaration of Trust as amended
from time to time. References in this Declaration to
"Declaration", "hereof", "herein" and "hereunder" shall be deemed
to refer to the Declaration rather than the article or section in
which such words appear.
"Fundamental Policies" shall mean the investment restrictions
set forth in the Prospectus and designated as fundamental policies
therein.
"Person" shall mean and include individuals, corporations,
partnerships, trusts, associations, joint ventures and other
entities, whether or not legal entities, and governments and
agencies and political subdivisions thereof.
"Prospectus" shall mean the currently effective Prospectus of
the Trust under the Securities Act of 1933, as amended, including
the Statement of Additional Information incorporated by reference
therein.
2.
<PAGE> 3
"Sharehclders" shall mean as of any particular time all
holders of record of outstanding Shares at such time.
"Shares" shall mean the equal proportionate transferable units
of interest into which the beneficial interest in the Trust shall
be divided from time to time and includes fractions of Shares as
well as whole Shares.
"Trustees" shall mean the signatories to this Declaration of
Trust, so long as they shall continue in office in accordance with
the terms hereof, and all other persons who at the time in question
have been duly elected or appointed and have qualified as trustees
accordance with the provisions hereof and are then in office,
are herein referred to as the "Trustees", and reference in this
Declaration of Trust to a Trustee or Trustees shall refer to such
person or persons in their capacity as Trustees hereunder.
"Trust Prcperty" shall mean as of any particular time any and
all property, real or personal, tangible or intangible, which at
such time is owned or held by or for the account of the Trust or
the Trustees.
The "1940 Act" refers to the Investment Company Act of 1940
and the regulations promulgated thereunder, as amended from time to
time.
3.
<PAGE> 4
ARTICLE II
Trustees
2.1. Number and Qualification. The number of Trustees shall
fixed from tine to time by written instrument signed by a
majority of the Trustees then in office, provided, however, that
the number of Trustees shall in no event be less than three or more
than fifteen (except prior to the first public offering of Shares).
Any vacancy created by an increase in Trustees may, to the extent
permitted by the 1940 Act, be filled by the appointment of an
individual having the qualifications described in this Article made
by a written instrument signed by a majority of the Trustees then
in office. Any such appointment shall not become effective,
however, until the individual named in the written instrument of
appointment shall have accepted in writing such appointment and
agreed in writing to be bound by the terns of this Declaration. No
reduction in the number of Trustees shall have the effect of
removing any Trustee from office prior to the expiration of his
term. Whenever a vacancy in the number of Trustees shall occur,
until such vacancy is filled as provided in Section 2.4 hereof, the
Trustees in office, regardless of their number, shall have all the
powers granted to the Trustees and shall discharge all the duties
imposed upon the Trustees by this Declaration. A Trustee shall be
an individual at least 21 years of age who is not under legal
disability. Trustees need not own Shares.
2.2. Term of Office. Each Trustee shall (except in the event
of resignations or removals or vacancies pursuant to Section 2.3 or
2.4 hereof) hold office until his successor has been elected and is
qualified to serve as Trustee.
2.3. Resignation and Removal. Any Trustee may resign his
trust (without need for prior or subsequent accounting) by an
instrument in writing signed by him and delivered or mailed to the
Chairman, if any, the President or the Secretary and such
resignation shall be effective upon such delivery, or at a later
date according to the terns of the instrument. Any of the Trustees
may be removed (provided the aggregate number of Trustees after
such removal shall not be less than the number required by Section
2.1 hereof) with cause, by the action of two-thirds of the
remaining Trustees. Any Trustee may be removed at any special
meeting of the Shareholders by a vote of two-thirds of the
outstanding Shares. Upon the resignation or removal of a Trustee,
or his otherwise ceasing to be a Trustee, he shall execute and
deliver such documents as the remaining Trustees shall require for
the purpose of conveying to the successor Trustee or the remaining
Trustees any Trust Property held in the name of the resigning or
removed Trustee. Upon the incapacity or death of any Trustee, his
legal representative shall execute and deliver on his behalf such
4.
<PAGE> 5
documents as the remaining Trustees shall require as provided in
preceding sentence.
2.4. Vacancies. The term of office of a Trustee shall
terminate and a vacancy shall occur in the event of the death,
resignation, bankruptcy, adjudicated incompetence or other
incapacity to perform the duties of the office, or removal, of a
Trustee. No such vacancy shall operate to annul this Declaration
or to revoke any existing agency created pursuant to the terms of
this Declaration. In the case of a vacancy, the Shareholders,
acting at any meeting of Shareholders held in accordance with
Section 10.2 hereof, or, to the extent permitted by the 1940 Act, a
majority of the Trustees continuing in office acting by written
instrument or instruments, may fill such vacancy, and any Trustee
so elected by the Trustees shall hold office as provided in this
Declaration.
2.5. Meetings. Meetings of the Trustees shall be held from
time to time upon the call of the Chairman, if any, the President,
the Secretary or any two Trustees. Regular meetings of the
Trustees may be held without call or notice at a time and place
fixed by the By-Laws or by resolution of the Trustees. Notice of
any other meeting shall be mailed or otherwise given not less than
48 hours before the meeting but may be waived in writing by any
Trustee either before or after such meeting. The attendance of a
Trustee at a meeting shall constitute a waiver of notice of such
meeting except where a Trustee attends a meeting for the express
purpose of objecting to the transaction of any business on the
ground that the meeting has not been lawfully called or convened.
The Trustees may act with or without a meeting. A quorum for all
meetings of the Trustees shall be a majority of the Trustees.
Unless provided otherwise in this Declaration of Trust, any action
of the Trustees may be taken at a meeting by vote of a majority of
the Trustees present (a quorum being present) or without a meeting
by written consents of a majority of the Trustees.
Any committee of the Trustees, including an executive
committee, if any, may act with or without a meeting. A quorum for
all meetings of any such committee shall be a majority of the
members thereof. Unless provided otherwise in this Declaration,
any action of any such committee nay be taken at a meeting by vote
of a majority of the members present (a quorum being present) or
without a meeting by written consent of a majority of the members.
With respect to actions of the Trustees and any committee of
the Trustees, Trustees who are Interested Persons of the Trust
Within the meaning of Section 1.2 hereof or otherwise interested in
any action to be taken ray be counted for quorum purposes under
this Section and shall be entitled to vote to the extent permitted
by the 1940 Act.
5.
<PAGE> 6
To the extent permitted by the 1940 Act, all or any one or
more Trustees may participate in a meeting of the Trustees or any
committee thereof by means of a conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other and participation
in a meeting pursuant to such communications systems shall
constitute presence in person at such meeting.
2.6. Officers. The Trustees shall annually elect a
president, a Secretary and a Treasurer and may elect a Chairman.
The Trustees may elect or appoint or authorize the Chairman, if
any, or President to appoint such other officers or agents with
such powers as the Trustees may deem to be advisable. The Chairman
and President shall be and the Secretary and Treasurer may, but
need not, be a Trustee.
2.7. By-Laws. The Trustees may adopt and from tire to tire
amend or repeal the By-Laws for the conduct of the business of the
Trust.
6.
<PAGE> 7
ARTICLE III
Powers of Trustees
3.1. General. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust
to the same extent as if the Trustees were the sole owners of the
Trust Property and business in their own right, but with such
powers of delegation as may be permitted by this Declaration. The
Trustees may perform such acts as in their sole discretion are
proper for conducting the business of the Trust. The enumeration
of any specific power herein shall not be construed as limiting the
aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
3.2. Investments. The Trustees shall have power, subject to
the Fundamental Policies, to:
(a) conduct, operate and carry on the business of an
investment company;
(b) subscribe for, invest in, reinvest in, purchase or
otherwise acquire, hold, pledge, sell, assign, transfer,
exchange, distribute or otherwise deal in or dispose of
negotiable or non-negotiable instruments, obligations,
evidences of indebtedness, certificates of deposit or
indebtedness, commercial paper, repurchase agreements,
reverse repurchase agreements and other securities,
including, without limitation, those issued, guaranteed or
sponsored by any state, territory or possession of the United
States and the District of Columbia and their political sub-
divisions, agencies and instrumentalities, or by the United
States Government or its agencies or instrumentalities, or
international instrumentalities, or by any bank, savings
institution, corporation or other business entity organized
under the laws of the United States and, to the extent
provided in the Prospectus and not prohibited by the
Fundamental Policies, organized under foreign laws; and to
exercise any and all rights, powers and privileges of
ownership or interest in respect of any and all such
investments of every kind and description, including, without
limitation, the right to consent and otherwise act with
respect thereto, with power to designate one or more persons,
firms, associations or corporations to exercise any of said
rights, powers and privileges in respect of any of said
instruments; and the Trustees shall be deemed to have the
foregoing powers with respect to any additional securities in
which the Trust nay invest should the investment policies set
forth in the Prospectus or the Fundamental Policies be
amended.
7.
<PAGE> 8
The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Trust, nor shall
the Trustees be limited by any law limiting the investments which
may be made by fiduciaries.
3.3. Legal Title. Legal title to all the Trust Property
shall be vested in the Trustees as joint tenants except that the
Trustees shall have power to cause legal title to any Trust
property to be held by or in the name of one or more of the
Trustees, or in the name of the Trust, or in the name of any other
person as nominee, on such terms as the Trustees may determine,
provided that the interest of the Trust therein is appropriately
protected.
The right, title and interest of the Trustees in the Trust
Property shall vest automatically in each person who may hereafter
become a Trustee upon his due election and qualification. Upon the
resignation, removal or death of a Trustee he shall automatically
cease to have any right, title or interest in any of the Trust
Property, and the right, title and interest of such Trustee in the
Trust Property shall vest automatically in the remaining Trustees.
Such vesting and cessation of title shall be effective whether or
not conveyancing documents have been executed and delivered.
3.4. Issuance and Repurchase of Securities. The Trustees
shall have the power to issue, sell, repurchase, redeem, retire,
cancel, acquire, hold, resell, reissue, dispose of, transfer, and
other-wise deal in, Shares, including shares in fractional
denominations, and, subject to the more detailed provisions set
forth in Articles VIII and IX, to apply to any such repurchase,
redemption, retirement, cancellation or acquisition of Shares any
funds or property of the Trust whether capital or surplus or
otherwise, to the full extent now or hereafter permitted by the
laws of the Commonwealth of Massachusetts governing business
corporations.
3.5. Borrow Money. Subject to the Fundamental Policies, the
Trustees shall have power to borrow money or otherwise obtain
credit and to secure the same by mortgaging, pledging or otherwise
subjecting as security the assets of the Trust, including the
lending of portfolio securities, and to endorse, guarantee, or
undertake the performance of any obligation, contract or engagement
of any other person, firm, association or corporation.
3.6. Delegation; Committees. The Trustees shall have power,
consistent with their continuing exclusive authority over the
management of the Trust and the Trust Property, to delegate from
time to time to such of their number or to officers, employees or
agents of the Trust the doing of such things and the execution of
such instruments either in the name of the Trust or the names of
the Trustees or otherwise as the Trustees may deem expedient, to
8.
<PAGE> 9
the same extent as such delegation is permitted to directors of a
Massachusetts business corporation and is permitted by the 1940
Act.
3.7. Collection and Payment. The Trustees shall have power
to collect all property due to the Trust; to pay all claims, in-
luding taxes, against the Trust Property; to prosecute, defend,
Compromise or abandon any claims relating to the Trust Property; to
foreclose any security interest securing any obligation, by virtue
of which any property is owed to the Trust; and to enter into
releases, agreements and other instruments.
3.8. Expenses. The Trustees shall have power to incur and
pay any expenses which in the opinion of the Trustees are necessary
orincidental to carry out any of the purposes of this Declaration
of Trust, and to pay reasonable compensation from the funds of the
Trust to themselves as Trustees. The Trustees shall fix the
compensation of all officers, employees and Trustees. The Trustees
may pay themselves such compensation for special services,
including legal, underwriting, syndicating and brokerage services,
as they in good faith may deem reasonable and reimbursement for
expenses reasonably incurred by themselves on behalf of the Trust.
3.9. Miscellaneous Powers. The Trustees shall have the power
to: (a) employ or contract with such Persons as the Trustees nay
deem desirable for the transaction of the business of the Trust;
(b) enter into joint ventures, partnerships and any other
combinations or associations; (c) purchase, and pay for out of
Trust Property, insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisors,
distributors, selected dealers or independent contractors of the
Trust against all claims arising by reason of holding any such
position or by reason of any action taken or omitted by any such
Person in such capacity, whether or not constituting negligence, or
whether or not the Trust would have the power to indemnify such
Person against such liability; (d) establish pension, profit-
sharing, share purchase, and other retirement, incentive and
benefit plans for any Trustees, officers, employees and agents of
the Trust; (e) make donations, irrespective of benefit to the
Trust, for charitable, religious, educational, scientific, civic or
similar purposes; (f) to the extent permitted by law, indemnify any
Person with whom the Trust has dealings, including any advisor,
administrator, manager, distributor and selected dealers, to such
extent as the Trustees shall determine; (g) guarantee indebtedness
Or contractual obligations of others; (h) determine and change the
fiscal year of the Trust and the method in which its accounts shall
be kept; and (i) adopt a seal for the Trust but the absence of such
seal shall not impair the validity of any instrument executed on
behalf of the Trust.
9.
<PAGE> 10
3.10. Further Powers. The Trustees shall have power to
conduct the business of the Trust and carry on its operations in
any and all of its branches and maintain offices both within and
without the Commonwealth of Massachusetts, in any and all states of
the United States of America, in the District of Columbia, and in
any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States of
America and of foreign governments, and to do all such other things
and execute all such instruments as they deem necessary, proper or
desirable in order to promote the interests of the Trust although
such things are not herein specifically mentioned. Any
determination as to what is in the interests of the Trust made by
the Trustees in good faith shall be conclusive. In construing the
provisions of this Declaration, the presumption shall be in favor
of a grant of power to the Trustees. The Trustees will not be
required to obtain any court order to deal with the Trust Property.
10.
<PAGE> 11
ARTICLE IV
Advisory, Management and Distribution Arrangements
4.1. Advisory and Manaqement Arrangements. Subject to a
Majority Shareholder Vote, as required by the 1940 Act, the
Trustees may in their discretion from time to time enter into
advisory or management contracts whereby the other party to such
contract shall undertake to furnish the Trustees such advisory and
management services as the Trustees shall from time to time
consider desirable and all upon such terms and conditions as the
Trustees may in their discretion determine. Notwithstanding any
provisions of this Declaration of Trust, the Trustees may authorize
any adviser or manager (subject to such general or specific in-
structions as the Trustees may from time to time adopt) to effect
purchases, sales, loans or exchanges of portfolio securities of the
Trust on behalf of the Trustees or nay authorize any officer,
employee or Trustee to effect such purchases, sales, loans or
exchanges pursuant to recommendations of any such advisor,
administrator or manager (and all without further action by the
Trustees). Any such purchases, sales, loans and exchanges shall be
deemed to have been authorized by all of the Trustees.
4.2. Distribution Arrangements. The Trustees may in their
discretion from time to tine enter into a contract, providing for
the sale of the Shares of the Trust to net the Trust not less than
the par value per share, whereby the Trust may either agree to sell
the Shares to the other party to the contract or appoint such other
party its sales agent for such Shares. In either case, the
contract shall be on such terms and conditions as the Trustees may
in their discretion determine not inconsistent with the provisions
of this Article IV or the By-Laws; and such contract may also
provide for the repurchase or sale of Shares by such other party as
principal or as agent of the Trust and nay provide that such other
party may enter into selected dealer agreements with registered
securities dealers to further the purpose of the distribution or
repurchase of the Shares.
4.3. Parties to Contract. Any contract of the character
described in Section 4.1 and 4.2 of this Article IV or in Article
VII hereof may be entered into with any corporation, firm, trust or
association, although one or more of the Trustees or officers of
the Trust may be an officer, director, Trustee, shareholder, or
member of such other party to the contract, and no such contract
shall be invalidated or rendered voidable by reason of the
existence of any such relationship, nor shall any person holding
such relationship be liable merely by reason of such relationship
for any loss or expense to the Trust under or by reason of said
contract or accountable for any profit realized directly or indi-
rectly therefrom, provided that the contract when entered into was
11.
<PAGE> 12
reasonable and fair and not inconsistent with the provisions of
this Article IV or the By-Laws. The same person (including a firm,
corporation, trust, or association) may be the other party to
contracts entered into pursuant to Sections 4.1 and 4.2 above or
Article VII, and any individual may be financially interested or
otherwise affiliated with persons who are parties to any or all of
the contracts mentioned in this Section 4.3.
4.4. Provisions and Amendments. Any contract entered into
pursuant to Section 4.1 and 4.2 of this Article IV shall be
consistent with and subject to the requirements of Section 15 of
the 1940 Act with respect to its continuance in effect, its
termination, and the method of authorization and approval of such
contract or renewal thereof, and no amendment to any contract
entered into pursuant to Section 4.1 shall be effective unless
assented to by a majority Shareholder Vote.
12.
<PAGE> 13
ARTICLE V
Limitations of Liability of Shareholders,
Trustees and Others
5.1. No Personal Liability of Shareholders, Trustees, etc.
No Shareholder shall be subject to any personal liability
whatsoever to any Person in connection with Trust Property or the
acts, obligations or affairs of the Trust. No Trustee, officer,
employee or agent of the Trust shall be subject to any personal
liability whatsoever to any Person, other than the Trust or its
Shareholders, in connection with Trust Property or the affairs of
the Trust, save only that arising from his bad faith, willful
misfeasance, gross negligence or reckless disregard of his duty to
such Person; and all such Persons shall look solely to the Trust
property for satisfaction of claims of any nature arising in
connection with the affairs of the Trust. If any Shareholder,
Trustee, officer, employee, or agent, as such, of the Trust, is
made a party to any suit or proceeding to enforce any such
liability, he shall not on account thereof, be held to any personal
liability. The Trust shall indemnify and hold each Shareholder
harmless from and against all claims and liabilities, to which such
Shareholder may become subject by reason of his being or having
been a Shareholder, and shall reimburse such Shareholder for all
legal and other expenses reasonably incurred by him in connection
with any such claim or liability. The rights accruing to a
Shareholder under this Section 5.1 shall not exclude any other
right to which such Shareholder nay be lawfully entitled, nor shall
anything herein contained restrict the right of the Trust to
indemnify or reimburse a Shareholder in any appropriate situation
even though not specifically provided herein.
5.2. Non-Liability of Trustees, etc. No Trustee, officer,
employee or agent of the Trust shall be liable to the Trust, its
Shareholders, or to any Shareholder, Trustee, officer, employee, or
agent thereof for any action or failure to act (including without
limitation the failure to compel in any way any former or acting
Trustee to redress any breach of trust) except for his own bad
faith, willful misfeasance, gross negligence or reckless disregard
of his duties.
5.3. Mandatory Indemnification. The Trust shall indemnify
each of its Trustees, officers, employees, and agents (including
persons who serve at its request as directors, officers or trustees
Of another organization in which it has any interest, as a
shareholder, creditor or otherwise) against all liabilities and
expenses (including amounts paid in satisfaction of judgments, in
compromise, as fines and penalties, and as counsel fees) reasonably
incurred by him in connection with the defense or disposition of
any action, suit or other proceeding, whether civil or criminal, in
13.
<PAGE> 14
which he may be involved or with which he may be threatened, while
in office or thereafter, by reason of his being or having been such
a trustee, officer, employee or agent, except with respect to any
matter as to which he shall have been adjudicated to have acted in
bad faith, willful misfeasance, gross negligence or reckless
disregard of his duties; provided, however, that as to any matter
disposed of by a compromise payment by such person, pursuant to a
consent decree or otherwise, no indemnification either for said
payment or for any other expenses shall be provided unless the
Trust shall have received a written opinion from independent legal
counsel approved by the Trustees to the effect that if either the
matter of willful misfeasance, gross negligence or reckless
disregard of duty, or the matter of good faith and reasonable
belief as to the best interests of the Trust, had been adjudicated,
it would have been adjudicated in favor of such person. The rights
accruing to any Person under these provisions shall not exclude any
other right to which he may be lawfully entitled; provided that no
Person may satisfy any right of indemnity or reimbursement granted
herein or in Section 5.1 or to which he may be otherwise entitled
expect out of the property of the Trust, and no Shareholder shall
be personally liable to any Person with respect to any claim for
indemnity or reimbursement or otherwise. The Trustees may make
advance payments in connection with indemnification under this
Secstion 5.3 provided that the indemnified person shall have given
a written undertaking to reimburse the Trust in the event it is
subsequently determined that he is not entitled to such
indemnification.
5.4. No Bond Required of Trustees. No Trustee shall, as
such, be obligated to give any bond or security or other security
for the performance of any of his duties hereunder.
5.5. No Duty of Investigation; Notice in Trust Instruments,
etc. No purchaser, lender, transfer agent or other person dealing
with the Trustees or any officer, employee or agent of the Trust
shall be bound to make any inquiry concerning the validity of any
transaction purporting to be made by the Trustees or by said
officer, employee or agent or be liable for the application of
money or property paid, loaned, or delivered to or on the order of
the Trustees or of said officer, employee or agent. Every
obligation, contract, undertaking, instrument, certificate, Share,
other security of the Trust, and every other act or thing
Whatsoever executed in connection with the Trust shall be
conclusively taken to have been executed or done by the executors
thereof only in their capacity as Trustees under this Declaration
Of Trust or in their capacity as officers, employees or agents of
the Trust. Every written obligation, contract, undertaking,
instrument, certificate, Share, other security of the Trust made or
issued by the Trustees or by any officers, employees or agents of
the Trust, in their capacity as such, shall contain an appropriate
recital to the effect that the Shareholders, Trustees, officers,
14.
<PAGE> 15
employees and agents of the Trust shall not personally be bound by
or liable thereunder, nor shall resort be had to their private
property for the satisfaction of any obligation or claim
thereunder, and appropriate references shall be made therein to the
Declaration of Trust, and may contain any further recital which
they may deem appropriate, but the omission of such recital shall
not Operate to impose personal liability on any of the Trustees,
Shareholders, officers, employees or agents of the Trust. The
Trustees may maintain insurance for the protection of the Trust
property, its Shareholders, Trustees, officers, employees and
agents in such amount as the Trustees shall deem adequate to cover
possible tort liability, and such other insurance as the Trustees
in their sole judgment shall deem advisable.
5.6. Reliance on Experts, etc. Each Trustee and officer or
employee of the Trust shall, in the performance of his duties, be
fully and completely justified and protected with regard to any act
or any failure to act resulting from reliance in good faith upon
the books of account or other records of the Trust, upon an opinion
of counsel, or upon reports made to the Trust by any of its
officers or employees or by any investment adviser, administrator,
manager, distributor, selected dealer, accountant, appraiser or
other expert or consultant selected with reasonable care by the
Trustees, officers or employees of the Trust, regardless of whether
such counsel or expert may also be a Trustee.
15.
<PAGE> 16
ARTICLE VI
Shares of Beneficial Interest
6.1. Beneficial Interest. The interest of the beneficiaries
hereunder shall be divided into transferable shares of beneficial
interest, all of one class, with par value $0.10 per share. The
number of such shares of beneficial interest authorized hereunder
us unlimited. All Shares issued hereunder including, without limi-
tation, Shares issued in connection with a dividend in Shares or a
split of Shares, shall be fully paid and nonassessable.
6.2. Rights of Shareholders. The ownership of the Trust
property of every description and the right to conduct any business
hereinbefore described are vested exclusively in the Trustees, and
the Shareholders shall have no interest therein other than the
beneficial interest conferred by their Shares, and they shall have
no right to call for any partition or division of any property,
profits, rights or interests of the Trust nor can they be called
upon to share or assume any losses of the Trust or suffer an
assessment of any kind by virtue of their ownership of Shares. The
Shares shall be personal property giving only the rights in this
Declaration specifically set forth. The Shares shall not entitle
the holder to preference, preemptive, appraisal, conversion or
exchange rights (except for rights of appraisal specified in
Section 11.4).
6.3. Trust Only. It is the intention of the Trustees to
create only the relationship of Trustee and beneficiary between the
Trustees and each Shareholder from time to time. It is not the
intention of the Trustees to create a general partnership, limited
partnership, joint stock association, corporation, bailment or any
form of legal relationship other than a trust. Nothing in this
Declaration of Trust shall be construed to make the Shareholders,
either by themselves or with the Trustees, partners or members of a
joint stock association.
6.4. Issuance of Shares. The Trustees, in their discretion,
may from tine to time without vote of the Shareholders issue
Shares, in addition to the then issued and outstanding Shares and
Shares held in the treasury, to such party or parties and for such
amount not less than par value and type of consideration, including
cash or property, at such tine or tines (including, without
limitation, each business day in accordance with the maintenance of
a constant net asset value per share as set forth in Section 9.3
hereof), and on such terms as the Trustees may deem best, and may
in such manner acquire other assets (including the acquisition of
assets subject to, and in connection with the assumption of,
liabilities) and businesses. In connection with any issuance of
Shares, the Trustees may issue fractional Shares. The Trustees may
16.
<PAGE> 17
from tire to time divide or combine the Shares into a greater or
lesser number without thereby changing the proportionate beneficial
interests of the Trust. Reductions in the number of outstanding
shares may be made pursuant to the constant net asset value per
share formula set forth in Section 9.3. Contributions to the Trust
may be accepted for, and Shares shall be redeemed as, whole Shares
and/or 1/1,000ths of a Share or multiples thereof.
6.5. Register of Shares. A register shall be kept at the
Trust or any transfer agent duly appointed by the Trustees under
the direction of the Trustees which shall contain the names and
addresses of the Shareholders and the number of Shares held by them
respectively and a record of all transfers thereof. Such register
shall be conclusive as to who are the holders of the Shares and who
shall be entitled to receive dividends or distributions or
otherwise to exercise or enjoy the rights of Shareholders. No
Shareholder shall be entitled to receive payment of any dividend or
distribution, nor to have notice given to him as herein provided,
until he has given his address to a transfer agent or such other
officer or agent of the Trustees as shall keep the register for
entry thereon. It is not contemplated that certificates will be
issued for the Shares; however, the Trustees, in their discretion,
may authorize the issuance of share certificates and promulgate
appropriate rules and regulations as to their use.
6.6. Transfer Agent and Registar. The Trustee shall have
power to employ a transfer agent or transfer agents, and a
registrar or registrars, with respect to the Shares. The transfer
agent or transfer agents may keep the applicable register and
record therein the original issues and transfers, if any, of the
said Shares. Any such transfer agent and registrars shall perform
the duties usually performed by transfer agents and registrars of
certificates of stock in a corporation, except as modified by the
Trustees.
6.7. Transfer of Shares. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by his
agent thereto duly authorized in writing, upon delivery to the
Trustees or a transfer agent of the Trust of a duly executed
instrument of transfer, together with such evidence of the
genuineness of each such execution and authorization and of other
matters as may reasonably be required. Upon such delivery the
transfer shall be recorded on the applicable register of the Trust.
Until such record is made, the Shareholder of record shall be
deemed to be the holder of such Shares for all purposes hereof and
neither the Trustees nor any transfer agent or registrar nor any
officer, employee or agent of the Trust shall be affected by any
notice of the proposed transfer.
Any person becoming entitled to any Shares in consequence of
the death, bankruptcy, or incompetence of any Shareholder, or
17.
<PAGE> 18
otherwise by operation of law, shall be recorded on the register of
hares as the holder of such Shares upon production of the proper
evidence thereof to the Trustees or a transfer agent of the Trust,
but until such record is made, the Shareholder of record shall be
deemed to be the holder of such Shares for all purposes hereof and
neither the Trustees nor any transfer agent or registrar nor any
officer or agent of the Trust shall be affected by any notice of
such death, bankruptcy or incompetence, or other operation of law.
6.8. Notices. Any and all notices to which any Shareholder
hereunder may be entitled and any and all communications shall be
deemed duly served or given if mailed, postage prepaid, addressed
to any Shareholder of record at his last known address as recorded
on the register of the Trust.
18.
<PAGE> 19
ARTICLE VII
Custodian
7.1. Appointment and Duties. The Trustees shall at all tines
employ a cutodian or custodians, meeting the qualifications for
custodians for portfolio securities of investment companies
contained in the 1940 Act, as custodian with respect to the Trust.
Any custodian shall have authority as agent of the Trust, but
subject to such restrictions, limitations and other requirements,
if anym as may be contained in the By-Laws of the Trust and the
1940 Act:
(1) to hold the securities owned by the Trust and
deliver the sane upon written order;
(2) to receive and receipt for any moneys due to the
Trust and deposit the same in its own banking department (if
a bank) or elsewhere as the Trustees may direct;
(3) to disburse such funds upon orders or vouchers;
(4) if authorized by the Trustees, to keep the books
and accounts of the Trust and furnish clerical and accounting
services; and
(5) if authorized to do so by the Trustees, to compute
the net income of the Trust;
all upon such basis of compensation as may be agreed upon between
the Trustees and the custodian. If so directed by a Majority
Shareholder Vote, the custodian shall deliver and pay over all
property of the Trust held by it as specified in such vote.
The Trustees may also authorize each custodian to employ one
or more sub-custodians fron time to time to perform such of the
acts and services of the custodian and upon such terms and
conditions, as may be agreed upon between the custodian and such
sub-custodian and approved by the Trustees, provided that in every
case such sub-custodian shall meet the qualifications for
custodians contained in the 1940 Act.
7.2. Central Certificate System. Subject to such rules,
regulations and order as the Commission may adopt, the Trustees may
direct the custodian to deposit all or any part of the securities
owned by the Trust in a system for the central handling of
securities established by a national securities exchange or a
national securities association registered with the Commission
under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with
19.
<PAGE> 20
the 1940 Act, pursuant to which system all securities of any
particular class or series of any issuer deposited within the
system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of such securities,
provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust.
2 0.
<PAGE> 21
ARTICLE VIII
Redemption
8.1. Redemptions. All outstanding Shares may be redeemed at
the option of the holders thereof, upon and subject to the terms
and conditions provided in this Article VIII. The Trust shall,
upon application of any Shareholder or pursuant to authorization
from any Shareholder, redeem or repurchase from such Shareholder
outstanding Shares for an amount per share determined by the
application of a formula adopted for such purpose by the Trustees
(which formula shall be consistent with the 1940 Act); provided
that (a) such amount per shasre shall not exceed the cash equivalent
of the proportionate interest of each share in the assets of the
Trust at the time of the purchase or redemption and (b) if so
authorized by the Trustees, the Trust may, at any time and from
tine to tine, charge fees for effecting such redemption, at such
rates as the Trustees may establish, as and to the extent permitted
under the 1940 Act, and may, at any time and from time to time,
pursuant to such Act, suspend such right of redemption. The
procedures for effecting redemption shall be as set forth in the
Prospectus with respect to the applicable Series from time to time.
8.2.Redemption of Shares; Disclosure of Holding. If the
Trustees shall, at any tine and in good faith, be of the opinion
that direct or indirect ownership of Shares or other securities of
the Trust has or may become concentrated in any person to an extent
which would disqualify the Trust as a regulated investment company
under the Internal Revenue Code, then the Trustees shall have the
power by lot or other means deemed equitable by then (i) to call
for redemption a number, or principal amount, of Shares or other
securities of the Trust sufficient, in the opinion of the Trustees,
to maintain or bring the direct or indirect ownership of Shares or
other securities of the Trust into conformity with the requirements
for such qualification and (ii) to refuse to transfer or issue
Shares or other securities of the Trust to any Person whose
acquisition of the Shares or other securities of the Trust in
question would in the opinion of the Trustees result in such
disqualification. The redemption shall be effected at a redemption
price determined in accordance with Section 8.1.
The holders of Shares or other securities of the Trust shall
upon demand disclose to the Trustees in writing such information
with respect to direct and indirect ownership of Shares or other
securities of the Trust as the Trustees deem necessary to comply
with the provisions of the Internal Revenue Code, or to comply with
the requirements of any other taxing authority.
8.3. Redemptions of Accounts of Less than $1,000. Due to the
relatively high cost of maintaining investment accounts of less
21.
<PAGE> 22
than $1,ooo, the Trustees shall have the power to redeem shares at
a redemption price determined in accordance with Section 8.1 if at
any tine the total investment in such account does not have a value
of at least $1,000; provided, however, that the Trustees may not
exercise such power with respect to Shares if the Prospectus does
not describe such power. In the event the Trustees determine to
exercise their power to redeem Shares provided in this Section 8.3,
shareholders shall be notified that the value of their account is
less than $1,000 and allowed 60 days to make an additional
investment before redemption is processed.
8.4. Redemptions Pursuant to Constant Net Asset Value
Formula. The Trust may also reduce the number of outstanding
Shares pursuant to the provisions of Section 9.3.
2 2 .
<PAGE> 23
ARTICLE IX
Determination of Net Asset Value,
Net Income and Distributions
9.1. Net Asset Value. The net asset value of each
outstanding Share of the Trust shall be determined at such time or
times on such days as the Trustees may determine, in accordance
,With the 1940 Act. The method of determination of net asset value
shall be determined by the Trustees and shall be as set forth in
the Prospectus. The power and duty to make the daily calculations
may be delegated by the Trustees to the adviser, administrator,
manager, custodian, transfer agent or such other person as the
Trustees may determine. The Trustees may suspend the dialy
determination of net asset value to the extent permitted by the
1940 Act.
9.2. Distributions to Shareholders. The Trustees shall from
tine to time distribute ratably among the Shareholders such
proportion of the net profits, surplus (including paid-in surplus)
capital, or assets held by the Trustees as they may deem proper.
such distribution may be made in cash or property (including
without limitation any type of obligations of the Trust or any
assets thereof), and the Trustees may distribute ratably among the
Shareholders additional Shares in such manner, at such times, and
on such terms as the Trustees may deem proper. Such distributions
may be among the Shareholders of record at the tine of declaring a
distribution or among the Shareholders of record at such later date
as the Trustees shall determine. The Trustees may always retain
from the net profits such amount as they may deem necessary to pay
the debts or expenses of the Trust or to meet obligations of the
Trust, or as they may deem desirable to use in the conduct of its
affairs or to retain for future requirements or extensions of the
business. The Trustees may adopt and offer to Shareholders such
dividend reinvestment plans, cash dividend payout plans or related
plans as the Trustees shall deem appropriate.
Inasmuch as the computation of net income and gains for
Federal income tax purposes may vary from the computation thereof
on the books, the above provisions shall be interpreted to give the
Trustees the power in their discretion to distribute for any fiscal
year as ordinary dividends and as capital gains distributions,
respectively, additional amounts sufficient to enable the Trust to
avoid or reduce liability for taxes.
9.3. Constant Net Asset Value; Reduction of outstanding
Shares. The Trustees shall have the power to determine the net
Income of the Trust on each day the net asset value is determined
as provided in Section 9.1 and at each such determination declare
Such net income as dividends with the result that the net asset
23 .
<PAGE> 24
value per share of the Trust shall remain at a constant dollar
value. The determination of net income and the resultant
declaration of dividends shall be as set forth in the Prospectus.
In such event fluctuations in value may be reflected in the number
of outstanding Shares in each shareholder's account. It is
expected that the Trust will have a positive net income at the tine
of each determination. If for any reason such net income is a
negative amount, the Trust may offset such amount against dividends
accrued in the account of the Shareholder. If and to the extent
such negative amount exceeds such accrued dividends, the Trust
shall have authority to reduce the number of the outstanding
Shares. Such reduction will be effected by having each Shareholder
proportionately contributing to capital the necessary Shares that
represent the amount of the excess upon such determination. Each
Shareholder will be deemed to have agreed to such contribution in
these circumstances by his investment in the Trust. This procedure
will permit the net asset value per share of the Trust to be
maintained at a constant dollar value per share.
The Trustees, by resolution, may discontinue or amend the
practice of maintaining the net asset value per share at a constant
dollar amount at any time and such modification shall be evidenced
by appropriate changes in the Prospectus.
9.4. Power to Modify Foreqoing Procedures. Notwithstanding
any of the foregoing provisions of this Article IX, the Trustees
may prescribe, in their absolute discretion, such other bases and
times for determining the per share net asset value of the Trust's
Shares or net income, or the declaration and payment of dividends
and distributions as they nay deem necessary or desirable to enable
the Trust to comply with any provision of the 1940 Act, or any se-
curities association registered under the Securities Exchange Act
of 1934, or any order of exemption issued by said Commission, all
as in effect now or hereafter amended or modified.
2 4 .
<PAGE> 25
ARTICLE X
Shareholders
10.1. Voting Powers. The Shareholders shall have power to
vote (i) for the removal of Trustees as provided in Section 2.3,
(ii)with respect to any advisory or management contract as
provided in Section 4.1, (iii) with respect to the amendment of
this Declaration as provided in Section 11.3, (iv) with respect to
such additional matters relating to the "rust as may be required or
authorized by the 1940 Act, the laws of the Commonwealth of
Massachusetts or other applicable law or by this Declaration or by
the By-Laws of the Trust, and (v) with respect to such additional
matters relating to the Trust as may be properly submitted for
Shareholder approval.
10.2. Meetings of Shareholders. Special meetings of the
Shareholders nay be called at any time by a majority of the
Trustees and shall be called by any Trustee upon written request of
Shareholders holding in the aggregate not less than 10% of the
outstanding Shares having voting rights, such request specifying
the purpose or purposes for which such meeting is to be called.
Any such meeting shall be held within or without the Commonwealth
of Massachusetts on such day and at such tine as the Trustees shall
designate. The holders of a majority of outstanding Shares present
in person or by proxy shall constitute a quorum for the transaction
of any business, except as may otherwise be required by the 1940
Act, the laws of the Commonwealth of Massachusetts or other
applicable law or by this Declaration or the By-Laws of the Trust.
If a quorum is present at a meeting, the affirmative vote of a
majority of the Shares represented at the meeting constitutes the
action of the Shareholders, unless the 1940 Act, the laws of the
Commonwealth of Massachusetts or other applicable law, this
Declaration or the By-Laws of the Trust requires a greater number
of affirmative votes.
10.3. Notice of Meetings. Notice of all meetings of the
Shareholders, stating the time, place and purposes of the meeting,
shall be given by the Trustees by mail to each Shareholder at his
registered address, mailed at least 10 days and not more than 60
days before the meeting. only the business stated in the notice of
the meeting shall be considered at such meeting. Any adjourned
meeting may be held as adjourned without further notice.
10.4.Record Date for Meetings. For the purpose of
determining the Shareholders who are entitled to notice of and to
vote at any meeting, or to participate in any distribution, or for
the purpose of any other action, the Trustees may from time to time
close the transfer books for such period, not exceeding 30 days, as
the Trustees may determine; or without closing the transfer books
the Trustees nay fix a date not more than 60 days prior to the date
25.
<PAGE> 26
of any meeting of Shareholders or daily dividends or other action
as a record date for the determination of the Persons to be treated
as Shareholders of record for such purposes, except for dividend
payments which shall be governed by Section 9.2 hereof.
10.5. Proxies, etc. At any meeting of Shareholders, any
bolder of Shares entitled to vote thereat may vote by proxy,
provided that no proxy shall be voted at any meeting unless It
shall have been placed on file with the Secretary, or with such
other officer or agent of the Trust as the Secretary may direct,
for verification prior to the time at which such vote shall be
taken. Pursuant to a resolution of a majority of the Trustees,
proxies may be solicited in the name of one or more Trustees or one
or more of the officers of the Trust. Only Shareholders of record
shall be entitled to vote. Each full Share shall be entitled to
one vote and fractional Shares shall be entitled to a vote of such
fraction. When any Share is held jointly by several persons, any
one of them ray vote at any meeting in person or by proxy in
respect of such Share, but if more than one of them shall be
present at such meeting in person or by proxy, and such joint
owners or their proxies so present disagree as to any vote to be
cast, such vote shall not be received in respect of such Share. A
proxy purporting to be executed by or on behalf of a Shareholder
shall be deemed valid unless challenged at or prior to its
exercise, and the burden of proving invalidity shall rest on the
challenger. If the holder of any such Share is a minor or a person
of unsound mind, and subject to guardianship or to the legal
control of any other person as regards the charge or management of
such Share, he may vote by his guardian or such other person
appointed or having such control, and such vote may be given in
person or by proxy.
10.6. Reports. The Trustees shall cause to be prepared at
least annually a report of operations containing a balance sheet
and statement of income and undistributed income of the Trust
prepared in conformity with generally accepted accounting
principles and an opinion of an independent public accountant on
such financial statements. Copies of such reports shall be mailed
to all Shareholders of record within the time required by the 1940
Act, and in any event within a reasonable period preceding the
annual meeting of Shareholders. The Trustees shall, in addition,
furnish to the Shareholders at least annually, interim reports
containing an unaudited balance sheet as of the end of such period
and an unaudited statement of income and surplus for the period
from the beginning of the current fiscal year to the end of such
Period.
10.7. Inspection of Records. The records of the Trust shall
be open to inspection by Shareholders to the same extent as is
permitted shareholders of a Massachusetts business corporation.
26.
<PAGE> 27
10.8. Shareholder Action by Written Consent. Any action
which may be taken by Shareholders may be taken without a meeting
if a majority of Shareholders entitled to vote on the matter (or
such larger proportion thereof as shall be required by any express
provision of this Declaration) consent to the action in writing and
the written consents are filed with the records of the meetings of
Shareholders. Such consent shall be treated for all purposes as a
vote taken at a meeting of Shareholders.
27.
<PAGE> 28
ARTICLE XI
Duration; Termination of Trust;
Amendment, Mergers Etc.
11.1. Duration. Subject to possible termination in
accordance with the provisions of Section 11.2 hereof, the Trust
created hereby shall continue until the expiration of 20 years
after the death of the last survivor of the initial Trustees named
herein and the following named persons:
Name Address Date of Birth
Avery Moores Bruno 44 Sturgis Road September 19, 1983
Bronxville, NY 10708
Emily Elizabeth Bruno 44 Sturgis Road January 16, 1990
Bronxville, NY 10708
Daryl Lian Kleiman 300 Rector Place May 9, 1986
New York, NY 10280
Lindsay Rider MacKinnon Mountain Farm, Road January 27, 1982
Tuxedo Park, NY lO987
Angus Washburn Smith 26 Prescott Avenue October 15, 1982
Bronxville, NY 10708
Elisabeth Lyon Smith 26 Prescott Avenue October 15, 1982
Bronxville, NY 10708
11.2. Termination.
(a) The Trust may be terminated by the affirmative vote
of the holders of not less than two-thirds of the Shares at any
meeting of Shareholders or by an instrument in writing, without a
meeting, signed by a majority of the Trustees and consented to by
the holders of not less than two-thirds of such Shares. Upon the
termination of the Trust,
(i) The Trust shall carry on no business except for
the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs
of the Trust and all of the powers of the Trustees under
this Declaration shall continue until the affairs of the
Trust shall have been wound up, including the power to
fulfill or discharge the contracts of the Trust, collect its
28.
<PAGE> 29
assets, Sell, convey, assign, exchange, transfer or
otherwise dispose of all or any part of the remaining Trust
Property to one or more persons at public or private sale
for consideration which may consist in whole or in part of
cash, securities or other property of any kind, discharge or
pay its liabilities, and do all other acts appropriate to
liquidate its business; provided that any sale, conveyance,
assignment, exchange, transfer or other disposition of all
or substantially all the Trust Property shall require
approval of the principal terms of the transaction and the
nature and amount of the consideration by vote or consent of
the holders of a majority of the Shares entitled to vote.
(iii) After paying or adequately providing for the
payment of all liabilities, and upon receipt of such
releases, indemnities and refunding agreements, as they deem
necessary for their protection, the Trustees may distribute
the remaining Trust Property, in cash or in kind or partly
each, among the Shareholders according to their respective
rights.
(b) After termination of the Trust and distribution to
the Shareholders as herein provided, a majority of the Trustees
shall execute and lodge among the records of the Trust an
instrument in writing setting forth the fact of such termination.
Upon termination of the Trust, the Trustees shall thereupon be
discharged from all further liabilities and duties hereunder, and
the rights and interests of all Shareholders shall thereupon
cease.
11.3. Amendment Procedure.
(a) This Declaration may be amended by the affirmative
vote of the holders of not less than a majority of the Shares at
any meeting of Shareholders or by an instrument. in writing,
without a meeting, signed by a majority of the Trustees and
consented to by the holders of not less than a Majority of such
Shares. The Trustees may also amend this Declaration without the
vote or consent of Shareholders if they deem it necessary to
conform this Declaration to the requirements of applicable federal
laws or regulations or the requirements of the regulated
investment company provisions of the Internal Revenue Code, but
the Trustees shall not be liable for failing so to do. The
Trustees may also amend this Declaration without the vote or
consent of Shareholders if they deem it necessary or desirable to
change the name of the Trust or to make other changes to this
Declaration which do not materially adversely affect the rights of
Shareholders.
(b) No amendment ray be made, under Section 11.3 (a)
above, which would change any rights with respect to any Shares of
2 9 .
<PAGE> 30
the Trust by reducing the amount payable thereon upon liquidation
of the Trust or by diminishing or eliminating any voting rights
pertaining thereto, except with the vote or consent of the holders
Of two-thirds of the Shares. Nothing contained in this
Declaration shall permit the amendment of this Declaration to
impair the exemption from personal liability of the Shareholders,
Trustees, officers, employees and agents of the Trust or to permit
assessments upon Shareholders.
(c) A certification in recordable form signed by a
majority of the Trustees setting forth an amendment and reciting
that it was duly adopted by the Shareholders or by the Trustees as
aforesaid or a copy of the Declaration, as amended, in recordable
form, and executed by a majority of the Trustees, shall be
conclusive evidence of such amendment when lodged among the
records of the Trust.
Notwithstanding any other provision hereof, until such time
as a Registration Statement under the Securities Act of 1933, as
amended, covering the first public offering of Shares of the Trust
shall have become effective, this Declaration of Trust may be
terminated or amended in any respect by the affirmative vote of a
majority of the Trustees or by an instrument signed by a majority
of the Trustees.
11.4. Merger, Consolidation and Sale of Assets. The Trust
may merge or consolidate with any other corporation, association,
trust or other organization or may sell, lease or exchange all or
substantially all of the Trust Property, including its good will,
upon such terms and conditions and for such consideration when and
as authorized at any meeting of Shareholders called for the pur-
pose by the affirmative vote of the holders of not less than two-
thirds of the Shares, or by an instrument or instruments in
writing without a meeting, consented to by the holders of not less
than two-thirds of such Shares, and any such merger,
consolidation, sale, lease or exchange shall be deemed for all
purposes to have been accomplished under and pursuant to the
statutes of the Commonwealth of Massachusetts. In respect of any
such merger, consolidation, sale or exchange of assets, any
Shareholder shall be entitled to rights of appraisal of his Shares
to the same extent as a shareholder of a Massachusetts business
corporation in respect of a merger, consolidation, sale or
exchange of assets of a Massachusetts business corporation, and
such rights shall be his exclusive remedy in respect of his
dissent from any such action.
11.5. Incorpation. With the approval of the holders of a
Majority of the Shares, the Trustees may cause to be organized or
assist in organizing a corporation or corporations under the laws
of any jurisdiction or any other trust, partnership, association
or other organization to take over all of the Trust Property or to
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<PAGE> 31
carry on any business in which the Trust shall directly or
indirectly have any interest, and to sell, convey and transfer the
Trust Property to any such corporation, trust, association or
organization in exchange for the Shares or securities thereof or
otherwise, and to lend money to, subscribe for the Shares or
securities of, and enter into any contracts with any such
corporation, trust, partnership, association or organization, or
any corporation, partnership, trust, association or organization
in which the Trust holds or is about to acquire shares or any
other interest. The Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any
such corporation, trust, partnership, association or other
organization if and to the extent permitted by law, as provided
under the law then in effect. Nothing contained herein shall be
construed as requiring approval of Shareholders for the Trustees
to organize or assist in organizing one or more corporations,
trusts, partnerships, associations or other organizations and
selling, conveying or transferring a portion of the Trust Property
to such organizations or entities.
31.
<PAGE> 32
ARTICLE XII
Miscellaneous
12.1. Filing. This Declaration and any amendment hereto
shall be filed in the office of the Secretary of the Commonwealth
of Massachusetts and in such other places as may be required under
the laws of Massachusetts and may also be filed or recorded in
much other places as the Trustees deem appropriate. Each
amendment so filed shall be accompanied by a certificate signed
and acknowleged by a Trustee stating that such action was duly
taken in a manner provided herein, and unless such amendment or
such certificate sets forth some later time for the effectiveness
Of such amendment, such amendment shall be effective upon its
filing. A restated Declaration, containing the original
Declaration and all amendments theretofore made, may be executed
from time to time by a majority of the Trustees and shall, upon
filing with the Secretary of the Commonwealth of Massachusetts, be
conclusive evidence of all amendments contained therein and may
thereafter be referred to in lieu of the original Declaration and
the various amendments thereto.
12.2. Principal Place of Business. The principal place of
business of he Trut is 800 Scudders Mill Road, Plainsboro, New
Jersey 08536.
12.3. Resident Agent. The Trust shall maintain a resident
agent in the Commonwealth of Massachusetts, which agent shall
initially be CT Corporation System, 10 Post Office Square, Boston,
Massachusetts 02109. The Trustees nay designate a successor
resident agent, provided, however, that such appointment shall not
become effective until written notice thereof is delivered to the
office of the Secretary of the Commonwealth.
12.4. Governing Law. This Declaration is executed by the
Trustees and elivered in the Commonwealth of Massachusetts and
with reference to the laws thereof, and the rights of all parties
and the validity and construction of every provision hereof shall
be subject to and construed according to the laws of said State
and reference shall be specifically made to the business cor-
poration law of the Commonwealth of Massachusetts as to the
construction of matters not specifically covered herein or as to
Which an ambiguity exists.
12.5. Counterparts. This Declaration may be simultaneously,
executed in several counterparts, each of which shall be deemed to
be an original, and such counterparts, together, shall constitute
one and the same instrument, which shall be sufficiently evidence
by any such original counterpart.
32
<PAGE> 33
12.6. Reliance by Third Parties. Any certificate executed
by an individual who, according to the records of the Trust, or of
any recording office in which this Declaration may be recorded,
appears to be a Trustee hereunder, certifying to: (a) the number
or identity of Trustees or Shareholders, (b) the name of the Trust
(c) the due authorization of the execution of any instrument or
writing, (d) the form of any vote passed at a meeting of Trustees
or Shareholders, (e) the fact that the number of Trustees or
Shareholders present at any meeting or executing any written
instrument satisfies the requirements of this Declaration, (f) the
form of any By-Laws adopted by or the identity of any officers
elected by the Trustees, or (g) the existence of any fact or facts
which in any manner relate to the affairs of the Trust, shall he
conclusive evidence as to the matters so certified in favor of any
person dealing with the Trustees and their successors.
12.7. Provisions in Conflict With Law or Regulations.
(a) The provisions of this Declaration are severable,
and if the Trustees shall determine, with the advice of counsel,
that any of such provisions is in conflict with 1940 Act, the
regulated investment company provisions of the Internal Revenue
Code or with other applicable laws and regulations, the
conflicting provision shall be deemed never to have constituted a
part of this Declaration; provided, however, that such
determination shall not affect any of the remaining provisions of
this Declaration or render invalid or improper any action taken or
omitted prior to such determination.
(b) If any provision of this Declaration shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such
jurisdiction and shall not n any manner affect such provision in
any other jurisdiction or any other provision of this Declaration
in any jurisdiction.
33.
<PAGE> 34
IN WITNESS WHEREOF, the undersigned have caused these
presents to be executed as of the day and year first above
Written.
/s/Philip L. Kirstein
79 West Shore Drive
Pennington, NJ 08534
/s/ Robert Harris
22 Zeloof Drive
Lawrenceville, NJ 08648
/s/ Susan B. Baker
1015 Buckinghar Way
Morrisville, PA 19067
/s/ William E. Aldrich
1ll Windsor Road
Needham, MA 02192
3 4
<PAGE> 1
Ex-99.2
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BY-LAWS
OF
CMA TREASURY FUND
-----------------------------------------------------------------
<PAGE> 2
CMA TREASURY FUND
BY-LAWS
These By-Laws are made and adopted pursuant to Section 2.7 of
the Declaration of Trust establishing CMA TREASURY FUND, dated
October 24, 1990, as from time to time amended (the
"Declaration"). All words and terms capitalized in these
By-Laws shall have the meaning or meanings set forth for such
words or terms in the Declaration.
ARTICLE I
Shareholder Meetings
Section 1.1. Chairman. The Chairman, if any, shall act as
chairman at all meetings of the Shareholders; in his or her
absence, the President shall act as chairman; and in the absence
of the Chairman and the President, the Trustee or Trustees
present at each meeting may elect a temporary chairman for the
meeting, who may be one of themselves.
Section 1.2. Proxies; Voting. Shareholders may vote either in
person or by duly executed proxy and each full share represented
at the meeting shall have one vote, all as provided in Article X
of the Declaration. No proxy shall be valid after eleven (11)
months from the date of its execution, unless a longer period is
expressly stated in such proxy.
Section 1.3. Closing of Transfer Books and Fixing of Record
Dates. For the purpose of determining the Shareholders who are
entitled to notice of or to vote or act at any meeting,
including any adjournment thereof, or who are entitled to
participate in
<PAGE> 3
any dividends, or for any other proper purpose,
the Trustees from time to time may close the transfer books or
fix a record date in the manner provided in Section 10.4 of the
Declaration. If the Trustees do not, prior to any meeting of
Shareholders, so fix a record date or close the transfer books,
then the date of mailing notice of the meeting or the date upon
which the dividend resolution is adopted, as the case may be,
shall be the record date.
Section 1.4. Inspectors of Election. In advance of any meeting
of Shareholders, the Trustees may appoint Inspectors of Election to act
at the meeting or any adjournment thereof. If Inspectors of Election
are not so appointed, the Chairman, if any, of any meeting of
Shareholders may, and on the request of any Shareholder or his or her
proxy shall, appoint Inspectors of Election of the meeting. The number
of Inspectors shall be either one or three. If appointed at the meeting
on the request of one or more Shareholders or proxies, a majority of
Shares present shall determine whether one or three Inspectors are to be
appointed, but failure to allow such determination by the Shareholders
shall not affect the validity of the appointment of Inspectors of
Election. In case any person appointed as Inspector fails to appear or
fails or refuses to act, the vacancy may be filled by appointment made
by the Trustees in advance of the convening of the meeting or at the
meeting by the cting as chairman. The Inspectors of Election shall
determine the number of Shares outstanding, the Shares represented at
the
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<PAGE> 4
meeting, the existence of a quorum, the authenticity, validity and
effect of proxies, shall receive votes, ballots or consents, shall hear
and determine all challenges and questions in any way arising in
connection with the right to vote, shall count and tabulate all votes or
consents, determine the results, and do such other acts as may be proper
to conduct the election or vote with fairness to all Shareholders. If
there are three Inspectors of Election, the decision, act or certificate
of a majority is effective in all respects as the decision, act or
certificate of all. On request of the Chairman, if any, of the meeting,
or of any Shareholder or his or her proxy, the Inspectors of Election
shall make a report in writing of any challenge or question or matter
determined by them and shall execute a certificate of any facts found by
them.
Section 1.5. Records at Shareholder Meetings. At each meeting
of the Shareholders there shall be open for inspection the
minutes of the last previous Shareholder Meeting of the Trust
and a list of the Shareholders of the Trust, certified to be
true and correct by the Secretary or other proper agent of the
Trust, as of the record date of the meeting or the date of
closing of transfer books, as the case may be. Such list of
Shareholders shall contain the name of each Shareholder in
alphabetical order and the address of and number of Shares owned
by such Shareholder. Shareholders shall have such other rights
and procedures of inspection of the books and records of the
Trust as
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<PAGE> 5
are granted to shareholders of a Massachusetts business
corporation.
ARTICLE II
Trustees
Section 2.1. Annual and Regular Meetings. The Trustees shall
hold an annual meeting for the election of officers and the
transaction of other business which may come before such
meeting, on such date as shall be fixed by the Trustees from
time to time. Regular meetings of the Trustees may be held
without call or notice at such place or places and times as the
Trustees by resolution may provide from time to time.
Section 2.2. Special Meetings. Special Meetings of the
Trustees shall be held upon the call of the Chairman, if any,
the President, the Secretary or any two Trustees, at such time,
on such day, and at such place, as shall be designated in the
notice of the meeting.
Section 2.3. Notice. Notice of a meeting shall be given by
mail or by telegram (which term shall include a cablegram) or delivered
personally. If notice is given by mail, it shall be mailed not later
than 48 hours preceding the meeting and if given by telegram or
personally, such telegram shall be sent or delivery made not later than
48 hours preceding the meeting. Notice by telephone shall constitute
personal delivery for these purposes. Notice of a meeting of Trustees
may be waived before
-4-
<PAGE> 6
or after any meeting by signed written waiver. Neither the business to
be transacted at, nor the purpose of, any meeting of the Board of
Trustees need be stated in the notice or waiver of notice of such
meeting, and no notice need be given of action proposed to be taken by
unanimous written consent. The attendance of a Trustee at a meeting
shall constitute a waiver of notice of such meeting except where a
Trustee attends a meeting for the express purpose of objecting to the
transa f any business on the ground that the meeting has not been
lawfully called or convened.
Section 2.4. Chairman; Records. The Chairman, if any, shall
act as chairman at all meetings of the Trustees; in his or her
absence, the President shall act as chairman; and, in the
absence of the Chairman and the President, the Trustees present
shall elect one of their number to act as temporary chairman.
The results of all actions taken at a meeting of the Trustees,
or by unanimous written consent of the Trustees, shall be
recorded by the Secretary.
ARTICLE III
Officers
Section 3.1. Officers of the Trust. The officers of the Trust
shall consist of a Chairman, if any, a President, a Secretary,
a Treasurer and such other officers or assistant officers,
including Vice Presidents, as may be elected by the
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<PAGE> 7
Trustees. Any two or more of the offices may be held by the same person,
except that the same person may not be both President and
Secretary. The Trustees may designate a Vice President as an
Executive Vice President and may designate the order in which
the other Vice Presidents may act. The Chairman and the
President shall be Trustees, but no other officer of the Trust
need be a Trustee.
Section 3.2. Election and Tenure. At the initial
organizational meeting and thereafter at each annual meeting of
the Trustees, the Trustees shall elect the Chairman, if any, a
President, a Secretary, a Treasurer and such other officers as
the Trustees shall deem necessary or appropriate in order to
carry out the business of the Trust. Such officers shall hold
office until the next annual meeting of the Trustees and until
their successors have been duly elected and qualified. The
Trustees may fill any vacancy in office or add any additional
officers at any time.
Section 3.3. Removal of Officers. Any officer may be removed
at any time, with or without cause, by action of a majority of
the Trustees. This provision shall not prevent the making of a
contract of employment for a definite term with any officer and
shall have no effect upon any cause of action which any officer
may have as a result of removal in breach of a contract of
employment. Any officer may resign at any time by notice in
writing signed by such officer and delivered or mailed
-6-
<PAGE> 8
to the Chairman, if any, the President, or the Secretary, and such
resignation shall take effect immediately upon receipt by the
Chairman, if any, President, or Secretary, or at a later date
according to the terms of such notice in writing.
Section 3.4. Bonds and Surety. Any officer may be required by
the Trustees to be bonded for the faithful performance of his or
her duties in such amount and with such sureties as the Trustees
may determine.
Section 3.5. Chairman, President and Vice Presidents. The
Chairman, if any, if present, shall preside at all meetings of the
Shareholders and of the Trustees and shall exercise and perform such
other powers and duties as from time to time may be assigned to him or
her by the Trustees. Subject to such supervisory powers, if any, as may
be given by the Trustees to the Chairman, if any, the President shall be
the chief executive officer of the Trust and, subject to the control of
the Trustees, shall have general supervision, direction and control of
the business of the Trust and of its employees and shall exercise such
general powers of management as usually are vested in the office of
President of a corporation. In the absence of the Chairman, if any, the
President shall preside at all meetings of the Shareholders and of the
Trustees. The President shall be, ex-officio, a member of all standing
committees, except as otherwise provided in the resolutions or
instruments creati such committees. Subject to direction of the
Trustees, the Chairman, if any, and the
-7-
<PAGE> 9
President each shall have power in the name and on behalf of the
Trust to execute any and all loan documents, contracts, agreements,
deeds, mortgages and other instruments in writing, and to employ and
discharge employees and agents of the Trust. Unless otherwise directed
by the Trustees, the Chairman, if any, and the President each shall have
full authority and power, on behalf of all of the Trustees, to attend
and to act and to vote, on behalf of the Trust at any meetings of
business organizations in which the Trust holds an interest, or to
confer such powers upon any other persons, by executing any proxies duly
authorizing such persons. The Chairman, if any, and the President shall
have such further authorities and duties as the Trustees from time to
time shall determine. In the absence or disability of the President,
the Vice Presidents in order of their rank as fixed by the Trustees or,
if mor e than one and not ranked, the Vice President designated by the
Trustees, shall perform all of the duties of the President, and when so
acting shall have all the powers of, and be subject to all of the
restrictions upon, the President. Subject to the direction of the
Trustees and of the President, each Vice President shall have the power
in the name and on behalf of the Trust to execute any and all loan
documents, contracts, agreements, deeds, mortgages and other instruments
in writing, and, in addition, shall have such other duties and powers as
shall be designated from time to time by the Trustees or by the
President.
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<PAGE> 10
Section 3.6. Secretary. The Secretary shall keep the minutes
of all meetings of, and record all votes of, Shareholders,
Trustees and the Executive Committee, if any. He or she shall
be custodian of the seal of the Trust, if any, and he or she
(and any other person so authorized by the Trustees) shall affix
the seal or, if permitted, a facsimile thereof, to any
instrument executed by the Trust which would be sealed by a
Massachusetts business corporation executing the same or a
similar instrument and shall attest the seal and the signature
or signatures of the officer or officers executing such
instrument on behalf of the Trust. The Secretary also shall
perform any other duties commonly incident to such office in a
Massachusetts business corporation, and shall have such other
authorities and duties as the Trustees from time to time shall
determine.
Section 3.7. Treasurer. Except as otherwise directed by the
Trustees, the Treasurer shall have the general supervision of the
monies, funds, securities, notes receivable and other valuable papers
and documents of the Trust, and shall have and exercise under the
supervision of the Trustees and of the President all powers and duties
normally incident to his or her office. He or she may endorse for
deposit or collection all notes, checks and other instruments payable to
the Trust or to its order. He or she shall deposit all funds of the
Trust in such depositories as the Trustees shall designate. He or she
shall be responsible for such disbursement of the funds of the Trust as
may be ordered by the
-9-
<PAGE> 11
Trustees or the President. He or she shall keep accurate account of the
books of the Trust's transactions which shall be the property of the
Trust, and which together with all other property of the Trust in his or
her possession, shall be subject at all times to the inspection and l of
the Trustees. Unless the Trustees otherwise shall determine, the
Treasurer shall be the principal accounting officer of the Trust and
also shall be the principal financial officer of the Trust. He or she
shall have such other duties and authorities as the Trustees from time
to time shall determine. Notwithstanding anything to the contrary
herein contained, the Trustees may authorize any adviser, administrator,
manager or transfer agent to maintain bank accounts and deposit and
disburse funds of the Trust.
Section 3.8. Other Officers and Duties. The Trustees may elect
such other officers and assistant officers as they from time to
time shall determine to be necessary or desirable in order to
conduct the business of the Trust. Assistant officers shall act
generally in the absence of the officer whom they assist and
shall assist that officer in the duties of his or her office.
Each officer, employee and agent of the Trust shall have such
other duties and authority as may be conferred upon him or her
by the Trustees or delegated to him or her by the President.
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<PAGE> 12
ARTICLE IV
Miscellaneous
Section 4.1. Custodians. In accordance with Section 7.1 of the
Declaration, the funds of the Trust shall be deposited with such
custodian or custodians as the Trustees shall designate and
shall be drawn out on checks, drafts or other orders signed by
such officer, officers, agent or agents (including any adviser,
administrator or manager), as the Trustees from time to time may
authorize.
Section 4.2. Signatures. All contracts and other instruments
shall be executed on behalf of the Trust by such officer,
officers, agent or agents, as provided in these By-Laws or as
the Trustees from time to time by resolution may provide.
Section 4.3. Seal. The seal of the Trust, if any, may be
affixed to any document, and the seal and its attestation may be
lithographed, engraved or otherwise printed on any document with
the same force and effect as if it had been imprinted and
attested manually in the same manner and with the same effect as
if done by a Massachusetts business corporation.
ARTICLE V
Share Certificates and Share Transfers
Section 5.1. Share Certificates. Certificates representing
Shares of the Trust shall not be issued.
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<PAGE> 13
Section 5.2. Transfer Agents, Registrars and the Like. As
provided in Section 6.6 of the Declaration, the Trustees shall
have authority to employ and compensate such transfer agents and
registrars with respect to the Shares of the Trust as the
Trustees shall deem necessary or desirable. In addition, the
Trustees shall have power to employ and compensate such dividend
disbursing agents, warrant agents and agents for the
reinvestment of dividends as they shall deem necessary or
desirable. Any of such agents shall have such power and
authority as is delegated to any of them by the Trustees.
Section 5.3. Transfer of Shares. The Shares of the Trust shall
be transferable on the books of the Trust only upon delivery to
the Trustees or a transfer agent of the Trust of proper
documentation as provided in Section 6.7 of the Declaration, and
on surrender of the certificate or certificates, if issued, for
such Shares properly endorsed or accompanied by a duly executed
stock transfer power and the payment of all taxes thereon. The
Trust, or its transfer agents, shall be authorized to refuse any
transfer unless and until presentation of such evidence as
reasonably may be required to show that the requested transfer
is proper.
Section 5.4. Registered Shareholders. The Trust may deem and
treat the holder of record of any Share as the absolute owner
thereof for all purposes and shall not be required to take any
notice of any right or claim of right of any other person.
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<PAGE> 14
Section 5.5. Regulations. The Trustees may make such
additional rules and regulations, not inconsistent with these
By-Laws, as they may deem expedient concerning the issue,
transfer and registration of Shares of the Trust.
ARTICLE VI
Advancement of Indemnification Moneys
Section 6.1. Insofar as the conditional advancing of
indemnification moneys to Trustees, officers, employees or agents of the
Trust pursuant to Section 5.3 of the Declaration 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 or, the recipient to repay
that amount of the advance which exceeds the amount to which it
ultimately is determined that he or she is entitled to receive from the
Trust by reason of indemnification; and (iii) (a) such promise must be
secured by a surety bond, other suitable insurance or an equivalent form
of security which assures that any repayments may be obtained by the
Trust without delay or li 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
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<PAGE> 15
Trust's disinterested, non-party Trustees, or an independent legal
counsel in a written opinion, shall determine, based upon a review of
readily available facts, that the recipient of the advance ultimately
will be found entitled to indemnification.
ARTICLE VII
Amendment of By-Laws
Section 7.1. Amendment and Repeal of By-Laws. In accordance
with Section 2.7 of the Declaration, the Trustees shall have the power
to alter, amend or repeal the By-Laws or adopt new By-Laws at any time.
Action by the Trustees with respect to the By-Laws shall be taken by an
affirmative vote of a majority of the Trustees. The Trustees in no
event shall adopt By-Laws which are in conflict with the Declaration,
and any apparent inconsistency shall be construed in favor of the
related provisions in the Declaration.
The Declaration establishing CMA Treasury Fund, a copy of which,
together with all amendments thereto, is on file in the office of the
Secretary of the Commonwealth of Massachusetts, provides that the name
"CMA Treasury Fund" refers to the Trustees under the Declaration
collectively as Trustees, but not as individuals or personally; and no
Trustee, shareholder, officer, employee or agent of CMA Treasury Fund
shall be held to any personal liability, nor shall resort to their
private property for the satisfaction of any obligation or claim or
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<PAGE> 16
otherwise in connection with the affairs of said CMA Treasury Fund but
the "Trust Property" only (as defined in the Declaration) shall be
liable.
-15-
<PAGE> 1
Ex-99.5(a)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this lst day of April, 1991, by and between
CMA TREASURY FUND, a trust organized under the laws of
Massachusetts (the "Fund"), and FUND ASSET MANAGEMENT, INC., a
Delaware corporation (the "Investment Adviser");
W I T N E S S E T H:
WHEREAS, the Fund is engaged in business as a diversified,
open-end, management investment company and is registered as such
under the Investment Company Act of 1940, as amended (the
"Investment Company Act"); and
WHEREAS, the Investment Adviser is engaged principally in
rendering management and advisory services and is registered as
an investment adviser under the Investment Advisers Act of 1940,
as amended (the "Investment Advisers Act"); and
WHEREAS, the Fund desires to retain the Investment Adviser
to render investment supervisory and corporate administrative
services to the Fund in the manner and on the terms hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, the Fund and the Investment
Adviser hereby agree as follows:
<PAGE> 2
ARTICLE 1. Duties of the Investment Adviser. The Fund
hereby employs the Investment Adviser to act as the investment
adviser of the Fund to manage the investment and reinvestment of
the assets of the Fund and administer the affairs of the Fund,
subject to the supervision of the Trustees of the Fund, for the
period and on the terms and conditions set forth in this
Agreement. The Investment Adviser hereby accepts such employment
and agrees during such period, at its own expense, to render the
services and to assume the obligations herein set forth for the
compensation provided for herein. The Investment Adviser shall
for all purposes herein be deemed to be an independent contractor
and shall, unless otherwise expressly provided or authorized,
have no authority to act for or represent the Fund in any way or
otherwise be deemed an agent of the Fund.
(a) Management Services. In acting as investment adviser
for the Fund, the Investment Adviser shall regularly provide the
Fund with such investment research, advice and supervision as the
latter may from time to tine consider necessary for the proper
supervision of the assets of the Fund, shall furnish continuously
an investment program for the Fund and shall determine from time
to time what securities shall be purchased, sold or exchanged and
what portion of the assets of the Fund shall be held in the
various securities in which the Fund nay invest, subject always
to the restrictions of the Declaration of Trust and By-Laws of
the Fund, as amended from time to time, the provisions of the
2.
<PAGE> 3
Investment Company Act and the statements relating to the Fund's
investment objectives, investment policies and investment
restrictions as the same are set forth in the currently effective
prospectus and statement of additional information relating to
the shares of the Fund under the Securities Act of 1933, as
amended (the "Prospectus" and "Statement of Additional
Information" respectively). The Investment Adviser shall also
make recommendations as to the manner in which voting rights,
rights to consent to corporate action and any other rights
pertaining to the Fund's portfolio securities shall be exercised.
Should the Trustees of the Fund at any time, however, make any
definite determination as to investment policy and notify the
Investment Adviser thereof, the Investment Adviser shall be bound
by such determination for the period, if any, specified in such
notice or until similarly notified that such determination has
been revoked. The Investment Adviser shall take, on behalf of
the Fund, all actions which it deems necessary to implement the
investment policies of the Fund determined as provided above, and
in particular to place all orders for the purchase or sale of
portfolio securities for the Fund's account with brokers or
dealers selected by the Fund. In connection with the selection
of such brokers or dealers and the placing of such orders, the
Investment Adviser is directed at all times to seek to obtain for
the Fund the most favorable execution and price within the
meaning of such terms as determined by the Trustees and set forth
3.
<PAGE> 4
in the Prospectus. Subject to this requirement and the
provisions of the Investment Company Act, the Securities Exchange
Act of 1934, as amended (the "Securities Exchange Act"), and
other applicable provisions of law, nothing shall prohibit the
Investment Adviser from selecting brokers or dealers with which
it or the Fund is affiliated.
(b) Administrative Services. In addition to the
performance of management services, the Investment Adviser shall
perform, or supervise the performance of, administrative services
in connection with the management of the Fund. In this
connection, the Investment Adviser, on behalf of the Fund, shall
investigate, select and conduct relations with custodians,
transfer agents, dividend disbursing agents, other shareholder
service agents, accountants, attorneys, brokers and dealers,
insurers, banks and other persons necessary to the operations of
the Fund.
ARTICLE 2. Allocation of Charges and Expenses.
(a) The Investment Adviser. The Investment Adviser shall
pay all compensation of and furnish office space and facilities
for officers and employees of the Fund in connection with
economic research, investment research, trading and investment
management of the Fund which it is obligated to perform under the
Agreement. The Investment Adviser shall also pay the fees of all
Trustees of the Fund who are affiliated persons of Merrill Lynch
& Co., Inc. or its subsidiaries.
4.
<PAGE> 5
(b) The Fund. The Fund assumes and shall pay or cause to
be paid all other expenses of Fund (except for the expenses paid
by the Distributor). The expenses to be paid by the Fund
include, without limitation: taxes, expenses for legal and
auditing services, costs of printing stock certificates,
shareholder reports, prospectuses and statements of additional
information, costs of printing proxies and other expenses related
to shareholder meetings, charges of the custodian, any sub-
custodian and transfer agent, expenses of portfolio transactions,
expenses of redemption of shares, Securities and Exchange
Commission fees, expenses of registering the shares under
Federal, state and foreign laws, fees and actual out-of-pocket
expenses of trustees who are not affiliated persons of the
Investment Adviser, accounting and pricing costs (including the
daily calculation of the net asset value), insurance, interest,
brokerage costs, litigation and other extraordinary or non-
recurring expenses, and other expenses properly payable by the
Fund. It is also understood that the Fund will reimburse the
Investment Adviser for its costs in providing accounting services
to the Fund. The Distributor will pay certain of the expenses of
the Fund incurred in connection with the continuous offering of
shares of beneficial interest in the Fund.
ARTICLE 3. Compensation of the Investment Adviser.
(a) Investment Advisor Fee. For the services rendered,
the facilities furnished and expenses assumed by the Investment
5 .
<PAGE> 6
Adviser, the Fund shall pay to the Investment Adviser at the end
of each calendar month a fee based upon the average daily value
of the net assets of the Fund, as computed in accordance with the
description of the determination of net asset value set forth in
the Prospectus and Statement of Additional Information. The fee
to be paid by the Fund to the Investment Adviser shall be at the
annual rate of .50% of the average daily net assets of the Fund
not exceeding $500 million, .425% of the average daily net assets
of the Fund in excess of $500 million but not exceeding $1
billion and .375% of the average daily net assets of the Fund in
excess of $1 billion, commencing on the day following
effectiveness hereof.
During any period when the determination of net asset value
is suspended by the Trustees of the Fund, the value on a per
share basis of the net assets of the Fund as of the last business
day prior to such suspension shall for this purpose be deemed to
be the value on a per share basis of the net assets of the Fund
at the close of each succeeding business day until it is again
determined.
(b) Expense Limitations. In the event the operating
expenses of the Fund, including the management fee payable to the
investment Adviser pursuant to subsection (a) hereof, for any
fiscal year ending on a date on which this Agreement is in effect
exceed the expense limitations applicable to the Fund imposed by
state securities laws or regulations thereunder, as such
6 .
<PAGE> 7
limitations may be raised or lowered from time to tire, the
Investment Adviser shall reduce its management fee by the extent
of such excess and, if required pursuant to any such laws or
regulations, will reimburse the Fund in the amount of such
excess; provided, however, to the extent permitted by law, there
shall be excluded from such expenses the amount of any interest,
taxes, distribution fees, brokerage fees and commissions and
extraordinary expenses (including but not limited to legal claims
and liabilities and litigation costs and any indemnification
related thereto) paid or payable by the Fund. Whenever the
expenses of the Fund exceed a pro rata portion of the applicable
annual expense limitations, the estimated amount of reimbursement
under such limitations shall be applicable as an offset against
the monthly payment of the management fee due to the Investment
Adviser. 'Should two or more such expense limitations be
applicable as at the end of the last business day of the month,
that expense limitation which results in the largest reduction in
the Investment Adviser's fee shall be applicable.
ARTICLE 4. Limitation of Liability of the Investment
Adviser. The Investment Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by
the Fund in connection with any investment policy or the
purchase, sale or redemption of any securities on the
recommendation of the Investment Adviser. Nothing herein
contained shall be construed to protect the Investment Adviser
7.
<PAGE> 8
against any liability to the Fund or its security holders to
which the Investment Adviser shall otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence in the
performance of its duties on behalf of the Fund, reckless
disregard of the Investment Adviser's obligations and duties
under this Agreement or the violation of any applicable law.
ARTICLE 5. Activities of the Investment Adviser. The
services of the Investment Adviser under this Agreement are not
to be deemed exclusive, and the Investment Adviser shall be free
to render similar services to others so long as its services
hereunder are not impaired thereby. It is understood that
Trustees, officers, employees and shareholders, of the Fund are or
may become interested in the Investment Adviser, and directors,
officers, employees or shareholders of the Investment Adviser are
or may become similarly interested in the Fund, and that the
Investment Adviser is or may become interested in the Fund as
shareholder or otherwise.
ARTICLE 6. Duration and Termination of this Agreement.
This Agreement shall become effective as of the date first above
written and shall remain in force until February 28, 1993 and
shall continue thereafter only so long as such continuance is
specifically approved at least annually by (i) the Trustees of
the Fund, or by the vote of a majority of the outstanding voting
securities of the Fund, and (ii) a majority of those Trustees who
are not parties to this Agreement or interested persons of any
8.
<PAGE> 9
such party cast in person at a meeting called for the purpose of
voting on such approval.
This Agreement may be terminated at any time, without the
payment of any penalty, by the Trustees of the Fund or by vote of
a majority of the outstanding voting securities of the Fund, or
by the Investment Adviser, on sixty days' written notice to the
other party. This Agreement shall automatically terminate in the
event of its assignment.
The terms "vote of a majority of the outstanding voting
securities," "assignment," "affiliated person" and "interested
person," when used in this Agreement, shall have the respective
meanings specified in the Investment Company Act.
ARTICLE 7. Amendments of this Agreement. This Agreement
may be amended by the parties only if such amendment is
specifically approved by (i) the vote of a majority of
outstanding voting securities of the Fund, and (ii) the Trustees
of the Fund and a majority of those Trustees of the Fund who are
not parties to this Agreement or interested persons of any such
party cast in person at a meeting called for the purpose of
voting on such approval.
ARTICLE 8. Governing Law. The provisions of this Agreement
shall be construed and interpreted in accordance with the laws of
the State of New York as at the time in effect and the applicable
provisions of the Investment Company Act. To the extent that the
applicable law of the State of New York or any of the provisions
9.
<PAGE> 10
herein conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
ARTICLE 9. Personal Liability. The Declaration of Trust
establishing CMA Treasury Fund, dated October 24, 1990, 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 of the Fund, "CMA Treasury
Fund," refers to the Trustees under the Declaration collectively
as Trustees, but not as individuals or personally; and no
Trustee, shareholder, officer, employee or agent of CMA Treasury
Fund shall be held to any personal liability, nor shall resort be
had to their private property for the satisfaction of any
10.
<PAGE> 11
obligation or claim or otherwise in connection with the affairs
of said CMA Treasury Fund, but the "Trust Property" only shall be
liable.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
CMA TREASURY FUND
By
FUND ASSET MANAGEMENT, INC.
By
<PAGE> 1
Ex-99.6
DISTRIBUTION AGREEMENT
AGREEMENT made this llth day of September, 1991 between CMA
TREASURY FUND, a trust organized under the laws of Massachusetts
(the "Fund"), and MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED, a Delaware corporation (the "Distributor" or
"MLPF&S");
W I T N E S S E T H
WHEREAS, the Fund is registered under the Investment Company
Act of 1940, as amended (the "Investment Company Act"), as a
diversified, open-end investment company and it is affirmatively
in the interest of the Fund to offer its shares to participants
in the Cash Management Account program, (the "CMA program")
described in the currently effective prospectus under the
Securities Act of 1933 (the "Securities Act") of the Fund
(defined below) and to other prospective shareholders; and
WHEREAS, the Distributor is a securities firm engaged in the
business of selling shares of investment companies; and
WHEREAS, the Fund and MLPF&S have entered into a
Distribution and Shareholder Servicing Plan (the "Plan") made as
of September 11, 1991, and continued thereafter, pursuant to the
provisions of Rule 12b-1 under the Investment Company Act which
provides that the Fund should make direct payments to the
Distributor for distribution to its financial consultants and
other directly involved MLPF&S personnel as compensation for
<PAGE> 2
selling shares and providing shareholder services to shareholders
of the Fund who are participants in the CMA program or whose
accounts are serviced by MLPF&S financial consultants whether
maintained through MLPF&S or directly with the Fund's Transfer
Agent (collectively such accounts being referred to herein as the
"MLPF&S Fund Accounts"; the term "MLPF&S Fund Accounts" does not
include those accounts maintained directly with the Fund's
Transfer Agent which are not serviced by MLPF&S financial
consultants); and
WHEREAS, the Fund and the Distributor wish to enter into an
agreement with each other with respect to the continuous offering
of the shares of the Fund and the Plan.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Fund hereby
appoints the Distributor as the exclusive distributor and
representative of the Fund to sell the shares of the Fund to
participants in the CMA program and other prospective
shareholders ("investors") and the Distributor hereby accepts
such appointment. The Fund during the term of this Agreement
shall sell the shares of the Fund to the Distributor upon the
terms and conditions set forth below.
Section 2. Purchase of Shares from the Fund.
(a) The Distributor shall have the right to buy from the
Fund the shares of the Fund needed, but not more than the shares
needed (except for clerical errors in transmission), to fill
2
<PAGE> 3
unconditional orders for shares of the Fund placed through the
Distributor by investors. The price which the Distributor shall
pay for the shares so purchased from the Fund shall be the
current public offering price described below on which such
orders were based.
(b) The public offering price of the shares of the Fund,
i.e., the price per share at which the Distributor may sell
shares of the Fund to investors, shall be the net asset value
determined as set forth in the currently effective prospectus and
statement of additional information of the Fund under the
Securities Act (the "Prospectus" and "Statement of Additional
Information," respectively).
(c) The Fund, or any agent of the Fund designated in writing
by it, shall be promptly advised of all purchase orders for
shares of the Fund received by the Distributor. All issuances of
shares of the Fund to investors shall be deemed to be issued
pursuant to Section 2 hereof. Any order may be rejected by the
Fund or the Distributor, provided, however, that neither will
arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of shares of the Fund. The Fund
(or its agent) will confirm orders upon their receipt, or in
accordance with any exemptive order of the Securities and
Exchange Commission, and will make appropriate book entries
pursuant to the instructions of the Distributor. Purchase orders
are effective when Federal Funds become available to the Fund.
3
<PAGE> 4
The Distributor agrees to cause such payment and such
instructions to be delivered promptly to the Fund (or its agent).
Section 3. Redemption of Shares by the Fund. Any of the
outstanding shares of the Fund may be tendered for redemption at
any time, and the Fund shall redeem the shares so tendered in
accordance with its obligations and rights as set forth in its
Declaration of Trust, and in accordance with the applicable
provisions set forth in the Prospectus of the Fund. The price to
be paid to redeem the shares shall be equal to the net asset
value calculated in accordance with the provisions of Section
2(b) hereof. Shares redeemed due to an unauthorized use of a
Visa card of a shareholder shall be reinstated by the Fund at the
cost of the Distributor as set forth in Section 5(d) hereof.
Section 4. Duties of the Fund.
(a) The Fund shall furnish to the Distributor copies of all
information, financial statements and other papers which the
Distributor may reasonably request for use in connection with the
distribution of shares of the Fund, and this shall include one
certified copy, upon request by the Distributor, of all financial
statements prepared for the Fund by independent public
accountants. The Fund shall make available to the Distributor
such number of copies of the Prospectus and Statement of
Additional Information of the Fund as the Distributor shall
reasonably request.
4
<PAGE> 5
(b) The Fund shall take, from time to time, all necessary
action to register shares of the Fund under the Securities Act to
the end that there will be available for sale such number of
shares as investors may reasonably be expected to purchase.
(c) The Fund shall use its best efforts to qualify and
maintain the qualification of an appropriate number of shares of
the Fund for sale under the securities laws of such states as the
Distributor and the Fund may approve. Any such qualification may
be withheld, terminated or withdrawn by the Fund at any time in
its discretion. As provided in Section 7(c) hereof, the expense
of qualification and maintenance of qualification shall be borne
by the Fund. The Distributor shall furnish such information and
other material relating to its affairs and activities as may be
required by the Fund in connection with such qualifications.
(d) The Fund will furnish, in reasonable quantities upon
request by the Distributor, copies of annual and interim reports
of the Fund.
Section 5. Duties of the Distributor.
(a) The Distributor shall devote reasonable time and effort
to effect sales of shares of the Fund, but shall not be obligated
to sell any specific number of shares. The services of the
Distributor hereunder are not to be deemed exclusive and nothing
herein contained shall prevent the Distributor from entering into
distribution arrangements with other investment companies so long
5
<PAGE> 6
as the performance of its obligations hereunder is not impaired
thereby.
(b) In selling the shares of the Fund, the Distributor shall
use its best efforts in all respects duly to conform with the
requirements of all Federal and state laws and regulations and
the regulations of the National Association of Securities
Dealers, Inc. (the "NASD") relating to the sale of such
securities. Neither the Distributor nor any other person is
authorized by the Fund to give any information or to make any
representations, other than those contained in the registration
statement or related Prospectus of the Fund and any sales
literature specifically approved by the Fund for use with respect
to the Fund.
(c) The Distributor shall adopt and follow procedures, as
approved by the Fund, for the confirmation of sales of shares of
the Fund to investors, the collection of amounts payable by
investors on such sales, and the cancellation of unsettled
transactions, as may be necessary to comply with the requirements
of the NASD, as such requirements may from time to time exist.
(d) Through the CMA program, the Fund is linked to a Merrill
Lynch securities account and a Visa account and automatic
purchases and redemptions of shares of the Fund by participants
in the CMA program will be effected pursuant to the CMA program.
CMA customers may be liable for the unauthorized use of their
Visa card in an amount up to $50. The owner of a Visa card will
6
<PAGE> 7
not be liable for any unauthorized use which occurs after the
Visa processing agent has been notified orally or in writing of
loss, theft or possible unauthorized use. If shares of the Fund
are redeemed due to the unauthorized use of the Visa card, the
Fund agrees to reinstate such shares in the account of the
shareholder as if never sold and the Distributor agrees to
indemnify the Fund against any losses caused thereby and all
costs associated therewith.
Section 6. Distribution Fee. The Fund shall pay the
Distributor a distribution fee at the end of each month at the
annual rate of 0.125% of average daily net asset value of the
MLPF&S Fund Accounts. The fee is not payable with respect to the
asset value of shareholders who maintain their accounts directly
with the Fund's Transfer Agent and whose accounts are not
serviced by MLPF&S financial consultants. The Distributor is
obligated to use the entire amount of the distribution fee to
compensate the Distributor's financial consultants and other
directly involved branch office personnel for selling shares of
the Fund to the MLPF&S Fund Accounts and for providing services
to shareholders with MLPF&S Fund Accounts, including furnishing
information as to the status of accounts of the Fund and handling
purchase and redemption orders for shares of the Fund. The
distribution fee may not be used to pay for other expenditures of
the Distributor, such as sales contests, special seminars and
media advertising related to the Fund. In the event that the
7
<PAGE> 8
aggregate payments received by the Distributor under this
Agreement in any fiscal year of the Fund shall exceed the amount
of the distribution expenditures of the Distributor in such
fiscal year, the Distributor shall be required to reimburse the
Fund the amount of such excess. The payment of the distribution
fee is being made pursuant to a Distribution and Shareholder
Servicing Plan (the "Plan") of the Fund adopted by the Fund
pursuant to Rule 12b-1 of the Investment Company Act and payment
of such fee shall be subject to the terms and provisions of the
Plan. The Distributor shall provide the Fund for review by the
Trustees, and the Trustees shall review at least quarterly, a
written report complying with the requirements of Rule 12b-1
regarding the disbursement of the distribution fee during such
period. The report shall include an itemization of the
distribution expenses incurred by the Distributor on behalf of
the Fund, the purpose of such expenditures and a description of
the benefits derived by the Fund therefrom.
Section 7. Payment of Expenses.
(a) The Fund shall bear all costs and expenses of the Fund,
including fees and disbursements of its counsel and auditors, in
connection with the preparation and filing of any required
registration statements and Prospectuses and Statements of
Additional Information under the Investment Company Act, the
Securities Act, and all amendments and supplements thereto, and
the expense of preparing, printing, mailing and otherwise
8
<PAGE> 9
distributing Prospectuses, annual or interim reports and proxy
materials to the Fund's shareholders.
(b) After the Prospectuses and annual and interim reports
have been prepared, set in type and mailed to shareholders, the
Distributor shall bear the costs and expenses of printing and
distributing any copies thereof which are used in connection with
the offering of the shares of the Fund. The Distributor shall
bear the costs and expenses of preparing, printing and
distributing any supplementary sales literature used by the
Distributor in connection with the offering of the shares for
sale. Any expenses of advertising incurred in connection with
such offering will also be the obligation of the Distributor.
(c) The Fund shall bear the cost and expenses of
qualification of the shares of the Fund for sale, and, if
necessary or advisable in connection therewith, of qualifying the
Fund as a broker or dealer, in such states of the United States
or other jurisdictions as shall be selected by the Fund and the
Distributor, and the cost and expenses payable to each such state
for continuing qualification therein until the Fund decides to
discontinue such qualification.
Section 8. Indemnification.
(a) The Fund shall indemnify and hold harmless the
Distributor and each person, if any, who controls the Distributor
against any loss, liability, claim, damage or expense (including
the reasonable cost of investigating or defending any alleged
9
<PAGE> 10
loss liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith), arising by reason of any
person acquiring any shares of the Fund, which may be based upon
the Securities Act, or on any other statute or at common law, on
the ground that the registration statement or related Prospectus
and Statement of Additional Information of the Fund, as from time
to time amended and supplemented, or an annual or interim report
to shareholders of the Fund includes an untrue statement of a
material fact or omits to state a material fact required to be
stated therein or necessary in order to make the statements
therein not misleading, unless such statement or omission was
made in reliance upon and in conformity with information
furnished to the Fund in connection therewith by or on behalf of
the Distributor; provided, however, that in no case (i) is the
indemnity of the Fund in favor of the Distributor and any such
controlling persons to be deemed to protect such Distributor or
any such controlling persons thereof against any liability to the
Fund or its security holders to which the Distributor or any such
controlling persons would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of reckless disregard of
its obligations and duties under this Agreement, or (ii) is the
Fund to be liable under its indemnity agreement contained in this
paragraph with respect to any claim made against the Distributor
or any such controlling persons, unless the Distributor or such
10
<PAGE> 11
controlling persons, as the case may be, shall have notified the
Fund in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the
claim shall have been served upon the Distributor or such
controlling persons (or after the Distributor or such controlling
persons shall have received notice of such service on any
designated agent), but failure to notify the Fund of any such
claim shall not relieve it from any liability which it may have
to the person against whom such action is brought otherwise than
on account of its indemnity agreement contained in this
paragraph. The Fund will be entitled to participate at its own
expense in the defense, or, if it so elects, to assume the
defense of any suit brought to enforce any such liability, but if
the Fund elects to assume the defense, such defense shall be
conducted by counsel chosen by it and satisfactory to the
Distributor or such controlling-person or persons, defendant or
defendants in the suit. In the event the Fund elects to assume
the defense of any such suit and retain such counsel, the
Distributor or such controlling person or persons, defendant or
defendants in the suit, shall bear the fees and expenses of any
additional counsel retained by them, but, in case the Fund does
not elect to assume the defense of any such suit, it will
reimburse the Distributor or such controlling person or persons,
defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Fund shall
11
<PAGE> 12
promptly notify the Distributor of the commencement of any
litigation or proceedings against it or any of its officers or
Trustees in connection with the issuance or sale of any of the
shares of the Fund.
(b) The Distributor shall indemnify and hold harmless the
Fund and each of its Trustees and officers and each person, if
any, who controls the Fund against any loss, liability, claim,
damage or expense described in the foregoing indemnity contained
in subsection (a) of this Section, but only with respect to
statements or omissions made in reliance upon, and in conformity
with, information furnished to the Fund in writing by or on
behalf of the Distributor for use in connection wit'-. the
registration statement or related Prospectus of the Fund, as from
time to time amended, or the annual or interim reports to
shareholders of the Fund. In case any action shall be brought
against the Fund or any person so indemnified, in respect of
which indemnity may be sought against the Distributor, the
Distributor shall have the rights and duties given to the Fund,
and the Fund and each person so indemnified shall have the rights
and duties given to the Distributor by the provisions of
subsection (a) of this Section 8.
Section 9. Duration and Termination of this Agreement. This
Agreement shall become effective as of the date first above
written and shall remain in force until February 28, 1993 and
shall continue thereafter only so long as such continuance is
12
<PAGE> 13
specifically approved at least annually by (i) the Trustees of
the Fund and (ii) those Trustees who are not interested persons
of the Fund and have no direct or indirect financial interest in
the operation of the Distribution and Shareholder Servicing Plan
or in any agreements related thereto (the "Rule 12b-1 Trustees")
cast in person at a meeting called for the purpose of voting on
such approval.
This Agreement may be terminated at any time, without the
payment of any penalty, by the Rule 12b-1 Trustees or by vote of
a majority of the outstanding voting securities of the Fund, or
by the Distributor, on sixty days' written notice to the other
party. This Agreement shall automatically terminate in the event
of its assignment.
The terms "vote of a majority of the outstanding voting
securities," "assignment," "affiliated person" and "interested
person," when used in this Agreement, shall have the respective
meanings specified in the Investment Company Act.
Section 10. Governing Law. This Agreement shall be
construed in accordance with the laws of the State of New York
and the applicable provisions of the Investment Company Act. To
the extent the applicable law of the State of New York, or any of
the provisions herein, conflict with the applicable provisions of
the Investment Company Act, the latter shall control.
Section 11. Personal Liability. The Declaration of Trust
establishing CMA Treasury Fund, dated October 24, 1990, a copy of
13
<PAGE> 14
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 of the Fund, "CMA Treasury
Fund," refers to the Trustees under the Declaration collectively
as Trustees, but not as individuals or personally; and no
Trustee, shareholder, officer, employee or agent of CMA Treasury
Fund shall be held to any personal liability, nor shall resort be
had to their private property for the satisfaction of any
obligation or claim of said CMA Treasury Fund, but the Fund
Property only shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the day and year first above
written in New York, New York.
CMA TREASURY FUND
By
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By
14
<PAGE> 1
Ex-99.8
CUSTODIAN CONTRACT
Between
CMA TREASURY FUND
and
STATE STREET BANK AND TRUST COMPANY
<PAGE> 2
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held By
it 1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian 2
2.1 Holding Securities 2
2.2 Delivery of Securities 2
2.3 Registration of Securities 7
2.4 Bank Accounts 8
2.5 Payments for Shares 9
2.6 Availability of Federal Funds 9
2.7 Collection of Income 9
2.8 Payment of Fund Monies 10
2.9 Liability for Payment in Advance of
Receipt of Securities Purchased.... 13
2.10 Payments for Repurchases or Redemptions
of Shares of the Fund 13
2.11 Appointment of Agents 14
2.12 Deposit of Fund Assets in Securities System 15
2.12A Fund Assets Held in the Custodian's
Direct Paper System 18
2.13 Segregated Account 19
2.14 ownership Certificates for Tax Purposes 20
2.15 Proxies 20
2.16 Communications Relating to Fund
Portfolio Securities 21
2.17 Proper Instructions 22
2.18 Actions Permitted Without Express Authority 23
2.19 Evidence of Authority 23
3. Duties of Custodian With Respect to the Books of Account
and Calculation of Net Asset Value and Net
Income 24
4. Records 24
5. Opinion of Fund's Independent Accountant 25
6. Reports to Fund by Independent Public Accountants 25
7. Compensation of Custodian 26
8. Responsibility of Custodian 26
9. Effective Period, Termination and Amendment 27
10. Successor Custodian 29
11. Interpretive and Additional Provisions 30
12. Massachusetts Law to Apply 31
13. Prior Contracts 31
<PAGE> 3
CUSTODIAN
This Contract between CMA Treasury Fund, a business trust
organized and existing under the laws of Massachusetts, having
its principal place of business at 800 Scudders Mill Road,
Plainsboro, New Jersey, 08536 hereinafter called the "Fund", and
State Street Bank and Trust Company, a Massachusetts trust
company, having its principal place of business at 225 Franklin
Street, Boston, Massachusetts, 02110, hereinafter called the
Custodian",
WITNESSETH, that in consideration of the mutual covenants
and agreements hereinafter contained, the parties hereto agree as
follows:
1. Employment of Custodian and Property to be Held by It.
The Fund hereby employs the Custodian as the custodian of
its assets pursuant to the provisions of the Declaration of
Trust. The Fund agrees to deliver to the Custodian all
securities and cash owned by it, and all payments of income,
payments of principal or capital distributions received by it
with respect to all securities owned by the Fund from -time to
time, and the cash consideration received by it for such new or
treasury shares of beneficial interest ("Shares") of the Fund as
may be issued or sold from time to time. The Custodian shall not
be responsible for any property of the Fund held or received by
the Fund and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning
of Section 2.17), the Custodian shall from time to time employ
one or more sub-custodians, but only in accordance with an
<PAGE> 4
applicable vote by the Board of Trustees of the Fund, and
provided that the Custodian shall have no more or less
responsibility or liability to the Fund on account of any actions
or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian.
2. Duties of the Custodian with Respect to Property of the
Fund Held By the Custodian.
2.1 Holding Securities. The Custodian shall hold and
physically segregate for the account of the Fund all
non-cash property, including all securities owned by the
Fund, other than (a) securities which are maintained
pursuant to Section 2.12 in a clearing agency which acts
as a securities depository or in a book-entry system
authorized by the U.S. Department of the Treasury,
collectively referred to herein as a 'Securities System"
and (b) commercial paper of an issuer for which State
Street Bank and Trust Company acts as issuing and paying
agent ('Direct Paper') which is deposited and/or
maintained in the Direct Paper System of the Custodian
pursuant to Section 2.12A.
2.2 Delivery of Securities. The Custodian shall release and
deliver securities owned by the Fund held by the
Custodian or in a Securities System account of the
Custodian or in the Custodian's Direct Paper book entry
system account ("Direct Paper Account") only upon receipt
of Proper Instructions, which may be continuing
instructions when deemed appropriate by the parties, and
only in the following cases:
-2-
<PAGE> 5
1) Upon sale of such securities for the account
of the Fund and receipt of payment therefor;
2) Upon the receipt of payment in connection
with any repurchase agreement related to such
securities entered into by the Fund;
3) In the case of a sale effected through a
Securities System, in accordance with the
provisions of Section 2.12 hereof;
4) To the depository agent in connection with
tender or other similar offers for portfolio
securities of the Fund;
5) To the issuer thereof or its agent when such
securities are called, redeemed, retired or
otherwise become payable; provided that, in
any such case, the cash or other
consideration is to be delivered to the
Custodian;
6) To the issuer thereof,-or its agent, for
transfer into the name of the Fund or into
the name of any nominee or nominees of the
Custodian or into the name or nominee name of
any agent appointed pursuant to Section 2.11
or into the name or nominee name of any
sub-custodian appointed pursuant to Article
1; or for exchange for a different number of
bonds, certificates or other evidence
representing the same aggregate face amount
-3-
<PAGE> 6
or number of units; provided that, in any
such case, the new securities are to be
delivered to the Custodian;
Upon the sale of such securities for the
account of the Fund, to the broker or its
clearing agent, against a receipt, for
examination in accordance with "street
delivery" custom; provided that in any such
case, the Custodian shall have no
responsibility or liability for any loss
arising from the delivery of such securities
prior to receiving payment for such
securities except as may arise from the
Custodian's own negligence or willful
misconduct;
8) For exchange or conversion pursuant to any
plan of merger, consolidation,
recapitalization, reorganization or
readjustment of the securities of the issuer
of such securities, or pursuant to provisions
for conversion contained in such securities,
or pursuant to any deposit agreement;
provided that, in any such case, the new
securities and cash, if any, are to be
delivered to the Custodian;
9) In the case of warrants, rights or similar
securities, the surrender thereof in the
-4-
<PAGE> 7
exercise of such warrants, rights or similar
securities or the surrender of interim
receipts or temporary securities for
definitive securities; provided that, in any
such case, the new securities and cash, if
any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of
securities made by the Fund, but only against
receipt of adequate collateral as agreed upon
from time to time by the Custodian and the
Fund, which may be in the form of cash or
obligations issued by the United States
government, its agencies or instrumental-
ities, except that in connection with any
loans for which collateral is to be credited
to the Custodian's account in the book-entry
system authorized by the U.S. Department of
the Treasury, the Custodian will not be held
liable or responsible for the delivery of
securities owned by the Fund prior to the
receipt of such collateral;
11) For delivery as security in connection with
any borrowings by the Fund requiring a pledge
of assets by the Fund, but only against
receipt of amounts borrowed;
12) For delivery in accordance with the
provisions of any agreement among the Fund,
-5-
<PAGE> 8
the Custodian and a broker-dealer registered
under the Securities Exchange Act of 1934
(the "Exchange Act") and a member of The
National Association of Securities Dealers,
Inc. ("NASD"), relating to compliance with
the rules of The Options Clearing Corporation
and of any registered national securities
exchange, or of any similar organization or
organizations, regarding escrow or other
arrangements in connection with transactions
by the Fund;
13) For delivery in accordance with the
provisions of any agreement among the Fund,
the Custodian, and a Futures Commission
Merchant registered under the Commodity
Exchange Act, relating to compliance with '-he
rules of ,--he Commodity Futures Trading
Commission and/or any Contract Market, or any
similar organization or organizations,
regarding account deposits in connection with
transactions by the Fund;
14) Upon receipt of instructions from the
transfer agent ('Transfer Agent') for the
Fund, for delivery to such Transfer Agent or
to the holders of shares in connection with
distributions in kind, as may be described
from time to time in the Fund's currently
-6-
<PAGE> 9
effective prospectus and statement of
additional information ('prospectus"), in
satisfaction of requests by holders of Shares
for repurchase or redemption; and
15) For any other proper corporate purpose, but
only upon receipt of, in addition to Proper
Instructions, a certified copy of a
resolution of the Board of Trustees or of the
Executive Committee signed by an officer of
the Fund and certified by the Secretary or an
Assistant Secretary, specifying the
securities to be delivered, setting forth the
purpose for which such delivery is to be
made, declaring such purpose to be a proper
corporate purpose, and naming the person or
persons to whom delivery of such securities
shall be made.
2.3 Registration of Securities. Securities held by the
Custodian (other than bearer securities) shall be
registered in the name of the Fund or in the name of any
nominee of the Fund or of any nominee of the Custodian
which nominee shall be assigned exclusively to the Fund,
unless the Fund has authorized in writing the appointment
of a nominee to be used in common with other registered
investment companies having the same investment adviser
as the Fund, or in the name or nominee name of any agent
appointed pursuant to Section 2.11 or in the name or
-7-
<PAGE> 10
nominee name of any sub-custodian appointed pursuant to
Article 1. All securities accepted by the Custodian on
behalf of the Fund under the terms of this Contract shall
be in "street name" or other good delivery form. if,
however, the Fund directs the Custodian to maintain
securities in "street name", the Custodian shall utilize
its best efforts only to timely collect income due the
Fund on such securities and to notify the Fund on a best
efforts basis only of relevant corporate actions
including, without limitation, pendency of calls,
maturities, tender or exchange offers.
2.4 Bank Accounts,. The Custodian shall open and maintain a
separate bank account or accounts in the name of ',-he
Fund, subject only to draft or order by the Custodian
acting pursuant to the terms of this Contract, and shall
hold in such account or accounts, subject to the
provisions hereof, all cash received by it from or for
the account of the Fund, other than cash maintained by
the Fund in a bank account established and used in
accordance with Rule 17f-3 under the Investment Company
Act of 1940. Funds held by the Custodian for the Fund
may be deposited by it to its credit as Custodian in the
Banking Department of the Custodian or in such other
banks or trust companies as it may in its discretion deem
necessary or desirable; Provided, however, that every
such bank or trust company shall be qualified to act as a
custodian under the Investment Company Act of 1940 and
-8-
<PAGE> 11
that each such bank or trust company and the funds to be
deposited with each such bank or trust company shall be
approved by vote of a majority of the Board of Trustees
of the Fund. Such funds shall be deposited by the
Custodian in its capacity as Custodian and shall be
withdrawable by the Custodian only in that capacity.
2.5 Payments for Shares. The Custodian shall receive from
the distributor for the Fund's Shares or from the
Transfer Agent of the Fund and deposit into the Fund's
account such payments as are received for Shares of the
Fund issued or sold from time to time by the Fund. The
Custodian will provide timely notification to the Fund
and the Transfer Agent of any receipt. by it of payments
for Shares of the Fund.
2.6 Availability of Federal Funds. Upon mutual agreement
between the Fund and the Custodian, the Custodian shall,
upon the receipt of Proper Instructions, make federal
funds available to the Fund as of specified times agreed
upon from time to time by the Fund and the Custodian in
the amount of checks received in payment for Shares of
the Fund which are deposited into the Fund's account.
2.7 Collection of Income. Subject to the provisions of
Section 2.3, the Custodian shall collect on a timely
basis all income and other payments with respect to
registered securities held hereunder to which the Fund
shall be entitled either by law or pursuant to custom in
the securities business, and shall collect on a timely
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<PAGE> 12
basis all income and other payments with respect to
bearer securities if, on the date of payment by
issuer, such securities are held by the Custodian or its
agent thereof and shall credit such income, as collected,
to the Fund's custodian account. Without limiting the
generality of the foregoing, the Custodian shall detach
and present for payment all coupons and other income
items requiring presentation as and when they become due
and shall collect interest when due on securities held
hereunder. Income due the Fund on securities loaned
pursuant to the provisions of Section 2.2 (10) shall be
the responsibility of the Fund. The Custodian will have
no duty or responsibility in connection therewith, other
than to provide the Fund with such information or data as
may be necessary to assist the Fund in arranging for the
timely delivery to the Custodian of the income to which
the Fund is properly entitled.
2.8 Payment of Fund Monies. Upon receipt of Proper
Instructions, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall
pay out monies of the Fund in the following cases only:
Upon the purchase of securities, options,
futures contracts or options on futures
contracts for the account of the Fund but
only (a) against the delivery of such
securities or evidence of title to such
options, futures contracts or options on
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<PAGE> 13
futures contracts, to the Custodian (or any
bank, banking firm or trust company doing
business in the United States or abroad which
is qualified under the Investment Company Act
of 1940, as amended, to act as a custodian
and has been designated by the Custodian as
its agent for this purpose) registered in the
name of the Fund or in the name of a nominee
of the Custodian referred to in Section 2.3
hereof or in proper form for transfer; (b) in
the case of a purchase effected through a
Securities System, in accordance with the
conditions set forth in Section 2.12 hereof;
(c) in the case of a purchase involving the
Direct Paper System, in accordance with the
conditions set forth in Section 2.12A; (d) in
the case of repurchase agreements entered
into between the Fund and the Custodian or
another bank, or a broker-dealer which is a
member of NASD, (i) against delivery of the
securities either in certificate form or
through an entry crediting the Custodian's
account at the Federal Reserve Bank with such
securities or (ii) against delivery of the
receipt evidencing purchase by the Fund of
securities owned by the Custodian along with
written evidence of the agreement by the
-11-
<PAGE> 14
Custodian to repurchase such securities from
the Fund or (e) for transfer to a time
deposit account of the Fund in any bank,
whether domestic or foreign; such transfer
may be effected prior to receipt of a
confirmation from a broker and/or the
applicable bank pursuant to Proper
Instructions from the Fund as defined in
Section 2.17;
2) In connection with conversion, exchange or
surrender of securities owned by the Fund as
set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares
issued by the Fund as set forth in Section
2.10 hereof;
4) For the payment of any expense or liability
incurred by the Fund, including but not
limited to the following payments for the
account of the Fund: interest, taxes,
management, accounting, transfer agent and
legal fees, and operating expenses of the
Fund whether or not such expenses are to be
in whole or part capitalized or treated as
deterred expenses;
5) For the payment of any dividends declared
pursuant to the governing documents of the
Fund;
-12-
<PAGE> 15
6) For payment of the amount of dividends
received in respect of securities sold short;
7 For any other proper purpose, bu only upon
receipt of, in addition to Proper
Instructions, a certified copy of a
resolution of the Board of Trustees or of the
Executive Committee of the Fund signed by an
officer of the Fund and certified by its
Secretary or an Assistant Secretary,
specifying the amount of such payment,
setting forth the purpose for which such
payment is to be made, declaring such purpose
to be a proper purpose, and naming the person
or persons to whom such payment is to be made.
2 . 9 Liability for Payment in Advance Receipt of Securities
Purchased. Except as specifically stated otherwise in
this Contract, in any and every case where payment for
purchase of securities for the account of the Fund is
made by the Custodian in advance of receipt of the
securities purchased in the absence of specific written
instructions from the Fund to so pay in advance, the
Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had
been received by the Custodian.
2.10 Payments for Repurchases or Redemptions of Shares of the
Fund. From such funds as may be available for the
purpose but subject to the limitations of the Declaration
-13-
<PAGE> 16
of Trust and any applicable votes of the Board of
Trustees of the Fund pursuant thereto, the Custodian
shall, upon receipt of instructions from the Transfer
Agent, make funds available for payment to holders of
Shares who have delivered to the Transfer Agent a request
for redemption or repurchase of their Shares. In
connection with the redemption or repurchase of Shares of
the Fund, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or
through a commercial bank designated by the redeeming
shareholders. In connection with the redemption or
repurchase of Shares of the Fund, the Custodian shall
honor checks drawn on the Custodian by a holder of
Shares, which checks have been furnished by the Fund to
the holder of Shares, when presented to the Custodian in
accordance with such procedures and controls as are
mutually agreed upon from time to time between the Fund
and the Custodian.
2.11 Appointment of Agents. The Custodian may at any time or
times in its discretion appoint (and may at any time
remove) any other bank or trust company which is itself
qualified under the Investment Company Act of 1940, as
amended, to act as a custodian, as its agent to carry out
such of the provisions of this Article 2 as the Custodian
may from time to time direct; provided, however, that the
appointment of any agent shall not relieve the Custodian
of its responsibilities or liabilities hereunder.
-14-
<PAGE> 17
2.12 Deposit of Fund Assets in Securities systems. The
Custodian may deposit and/or maintain securities owned by
the Fund in a clearing agency registered with the
Securities and Exchange Commission under Section 17A of
the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system
authorized by the U.S. Department of the Treasury and
certain federal agencies, collectively referred to herein
as "Securities System' in accordance with applicable
Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to
the following provisions:
1) The Custodian may keep securities of the Fund
in a Securities System provided that such
securities are represented in an account
("Account") of the Custodian in the
Securities System which shall not include any
assets of the Custodian other than assets
held as a fiduciary, custodian or otherwise
for customers;
2) The records of the Custodian with respect to
securities of the Fund which are maintained
in a Securities System shall identify by
book-entry those securities belonging to the
Fund;
3) The Custodian shall pay for securities
purchased for the account of the Fund upon
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<PAGE> 18
(i) receipt of advice from the Securities
System that such securities have been
transferred to the Account, and (ii) the
making of an entry on the records of the
Custodian to reflect such payment and
transfer for the account of the Fund. The
Custodian shall transfer securities sold for
the account of the Fund upon (i) receipt of
advice from the Securities System that
payment for such securities has been
transferred to the Account, and (ii) the
making of an entry on the records of the
Custodian to reflect such transfer and
payment for the account of the Fund. Copies
of all advices from the Securities System of
transfers of securities for the account of
the Fund shall identify the Fund, be
maintained for the Fund by the Custodian and
be provided to the Fund at its request. Upon
request, the Custodian shall furnish the Fund
confirmation of each transfer to or from the
account of the Fund in the form of a written
advice or notice and shall furnish to the
Fund copies of daily transaction sheets
reflecting each day's transactions in the
Securities System for the account of the Fund.
-16-
<PAGE> 19
4 The Custodian shall provide the Fund with any
report obtained by the Custodian on the
Securities System's accounting system,
internal accounting control and procedures
for safeguarding securities deposited in the
Securities System;
5) The Custodian shall have received the initial
or annual certificate, as the case may be,
required by Article 9 hereof;
6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be
liable to the Fund for any loss or damage to
the Fund resulting from use of the Securities
System by reason of any negligence,
misfeasance or misconduct of the Custodian or
any of its agents or of any of its or their
employees or from failure of the Custodian or
any such agent to enforce effectively such
rights as it may have against the Securities
System; at the election of the Fund, it shall
be entitled to be subrogated to the rights of
the Custodian with respect to any claim
against the Securities System or any other
person which the Custodian may have as a
consequence of any such loss or damage if and
to the extent that the Fund has not been made
whole for any such loss or damage.
-17-
<PAGE> 20
2.12A Fund Assets Held in the Custodian's Direct Paper System
The Custodian may deposit and/or maintain securities
owned by the Fund in the Direct Paper System of the Custodian
subject to the following provisions:
1) No transaction relating to securities in the Direct
Paper System will be effected in the absence of
Proper Instructions;
2) The Custodian may keep securities of the Fund in
the Direct Paper System only if such securities are
represented in an account ("Account") of the
Custodian in the Direct Paper System which shall
not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise
for customers;
3) The records of the Custodian with respect to
securities of the Fund which are maintained in the
Direct Paper System shall identify by book-entry
those securities belonging to the Fund;
4) The Custodian shall pay for securities purchased
for the account of the Fund upon the making of an
entry on the records of the Custodian to reflect
such payment and transfer of securities to the
account of the Fund. The Custodian shall transfer
securities sold for the account of the Fund upon
the making of an entry on the records of the
Custodian to reflect such transfer and receipt of
payment for the account of the Fund;
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<PAGE> 21
5) The Custodian shall furnish the Fund confirmation
of each transfer to or from the account of the
Fund, in the form of a written advice or notice, of
Direct Paper on the next business day following
such transfer and shall furnish to the Fund copies
of daily transaction sheets reflecting each day's
transaction in the Securities System for the
account of the Fund;
6) The Custodian shall provide the Fund with any
report on its system of internal accounting control
as the Fund may reasonably request from time to
time;
2.13 Segregated Account. The Custodian shall upon receipt of
Proper Instructions establish and maintain a segregated
account or accounts for and on behalf of the Fund, into
which account or accounts may be transferred cash and/or
securities, including securities maintained in an account
by the Custodian pursuant to Section 2.12 hereof, (i) in
accordance with the provisions of any agreement among the
Fund, the Custodian and a broker-dealer registered under
the Exchange Act and a member of the NASD (or any futures
commission merchant registered under the Commodity
Exchange Act), relating to compliance with the rules of
The Options Clearing Corporation and of any registered
national securities exchange (or the Commodity Futures
Trading Commission or any registered contract market), or
of any similar organization or organizations, regarding
-19-
<PAGE> 22
escrow or other arrangements in connection with
transactions by the Fund, (ii) for purposes of
segregating cash or government securities in connection
with options purchased, sold or written by the Fund or
commodity futures contracts or options thereon purchased
or sold by the Fund, (iii) for the purpose of compliance
by the Fund with the procedures required by Investment
Company Act Release No. 10666, or any subsequent-release
or releases of the Securities and Exchange Commission
relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper
corporate purposes, but only, in the case of clause (iv),
upon receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board of Trustees
or of the Executive Committee signed by an officer of the
Fund and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such
segregated account and declaring such purposes to be
proper corporate purposes.
2.14 Ownership Certificates for Tax Purposes. The Custodian
shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in
connection with receipt of income or other payments with
respect to securities of the Fund held by it and in
connection with transfers of securities.
2.15 Proxies. The Custodian shall, with respect to the
securities held hereunder, cause to be promptly executed
-20-
<PAGE> 23
by the registered holder of such securities, if the
securities are registered otherwise than in the name of
the Fund or a nominee of the Fund, all proxies, without
indication of the manner in which such proxies are to be
voted, and shall promptly deliver to the Fund such
proxies, all proxy soliciting materials and all notices
relating to such securities.
2.16 Communications Relating to Fund Portfolio Securities
Subject to the provisions of Section 2.3, the Custodian
shall transmit promptly to the Fund all written
information (including, without limitation, pendency of
calls and maturities of securities and expirations of
rights in connection therewith and notices of exercise of
call and put options written by the Fund and the maturity
of futures contracts purchased or sold by the Fund)
received by the Custodian from issuers of the securities
being held for the Fund. With respect to tender or
exchange offers, the Custodian shall transmit promptly to
the Fund all written information received by the
Custodian from issuers of the securities whose tender or
exchange is sought and from the party (or his agents)
making the tender or exchange offer. If the Fund desires
to take action with respect to any tender offer, exchange
offer or any other similar transaction, the Fund shall
notify the Custodian at least three business days prior
to the date on which the Custodian is to take such action.
-21-
<PAGE> 24
2.17 Proper Instructions. Proper Instructions as used
throughout this Article 2 means a writing signed or
initialled by one or more person or persons as the Board
of Trustees shall have from time to time authorized.
Each such writing shall set forth the specific
transaction or type of transaction involved, including a
specific statement of the purpose for which such action
is requested. Oral instructions will be considered
Proper Instructions if the Custodian reasonably believes
them to have been given by a person authorized to give
such instructions with respect to the transaction
involved. The Fund shall cause all oral instructions to
be confirmed in writing. Upon receipt of a certificate
of the Secretary or an Assistant Secretary as to the
authorization by the Board of Trustees of the Fund
accompanied by a detailed description of procedures
approved by the Board of Trustees, Proper Instructions
may include communications effected directly between
electromechanical or electronic devices provided that
the Board of Trustees and the Custodian are satisfied
that such procedures afford adequate safeguards for the
Fund's assets. For purposes of this Section, Proper
Instructions shall include instructions received by the
Custodian pursuant to any three-party agreement which
requires a segregated asset account in accordance with
Section 2.13.
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<PAGE> 25
2.18 Actions Permitted without Express Authority. The
Custodian may in its discretion, without express
authority from the Fund:
1) make payments to itself or others for minor
expenses of handling securities or other
similar items relating to its duties under
this Contract, provided that all such
payments shall be accounted for to the Fund;
2) surrender securities in temporary form for
securities in definitive form;
3) endorse for collection, in the name of the
Fund, checks, drafts and other negotiable
instruments; and
4) in general, attend to all non-discretionary
details in connection with the sale,
exchange, substitution, purchase, transfer
and other dealings with the securities and
property of the Fund except as otherwise
directed by the Board of Trustees of the Fund.
2.19 Evidence of Authority. The Custodian shall be protected
in acting upon any instructions, notice, request,
consent, certificate or other instrument or paper
believed by it to be genuine and to have been properly
executed by or on behalf of the Fund. The Custodian may
receive and accept a certified copy of a vote of the
Board of Trustees of the Fund as conclusive evidence (a)
of the authority of any person to act in accordance with
-23-
<PAGE> 26
such vote or (b) of any determination or of any action by
the Board of Trustees pursuant to the Declaration of
Trust as described in such vote, and such vote may be
considered as in full force and effect until receipt by
the Custodian of written notice to the contrary.
3. Duties of Custodian with Respect to the Books of Account
and Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary
information to the entity or entities appointed by the Board of
Trustees of the Fund to keep the books of account of the Fund
and/or compute the net asset value per share of the outstanding
shares of Fund or, if directed in writing to do so by the
Fund, shall itself keep such books of account and/or compute such
net asset value per share. If so directed, the Custodian shall
also calculate daily the net income of the Fund as described in
the Fund's currently effective prospectus and shall advise the
Fund and the Transfer Agent daily of the total amounts of such
net income and, if instructed in writing by an officer of the
Fund to do so, shall advise the Transfer Agent periodically of
the division of such net income among its various components.
The calculations of the net asset value per share and the daily
income of the Fund shall be made at the time or times described
from time to time in the Fund's currently effective prospectus.
4. Records.
The Custodian shall create and maintain all records
relating to its activities and obligations under this Contract in
such manner as will meet the obligations of the Fund under the
-24-
<PAGE> 27
Investment Company Act of 1940, with particular attention to
Section 31 thereof and Rules 3la-1 and 3la-2 thereunder. All
such records shall be the property of the Fund and shall at all
times during the regular business hours of the Custodian be open
for inspection by duly authorized officers, employees or agents
of the Fund and employees and agents of the Securities and
Exchange Commission. The Custodian shall, at the Fund's request,
supply the Fund with a tabulation of securities owned by the Fund
and held by the Custodian and shall, when requested to do so by
the Fund and for such compensation as shall be agreed upon
between the Fund and the Custodian, include certificate numbers
in such tabulations.
5. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the
Fund may from time to time request, to obtain from year to year
favorable opinions from the Fund's independent accountants with
respect to its activities hereunder in connection with the
preparation of the Fund's Form N-lA, and-Form N-SAR or other
annual reports to the Securities and Exchange Commission and with
respect to any other requirements of such Commission.
6. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, at such times as
the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, futures
contracts and options on futures contracts, including securities
deposited and/or maintained in a Securities System, relating to
-25-
<PAGE> 28
the services provided by the Custodian under this Contract; such
reports, shall be of sufficient scope and in sufficient detail,
as may reasonably be required by the Fund to provide reasonable
assurance that any material inadequacies would be disclosed by
such examination, and, if there are no such inadequacies, the
reports shall so state.
7. Compesation of Custodain
The Custodian shall be entitled to reasonable
compensation for its services and expenses as Custodain, as
agreed upon from time to time between the Fund and the Custodian.
8. Reasonsibility of Custodian
So long as and to the extent that it is in the exercise
of reasonable care, the Custodian shall not be responsible for
the title, validity or genuineness of any property or evidence of
title thereto received by it or delivered by it pursuant to this
Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party
or parties" including any futures commission merchant acting
pursuant to the terms of a three-party futures or options
agreement. The custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Contract,
but shall be kept indemnified by and shall be without liability
to the Fund for any action taken or omitted by it in good faith
without negligence. It shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for the Fund) on all
matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice.
-26-
<PAGE> 29
If the Fund requires the Custodian to take any action
with respect to securities, which action involves the payment of
money or which action may, in the opinion of the Custodian,
result in the Custodian or its nominee assigned to the Fund being
liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the
Custodian to take such action, shall provide indemnity to the
Custodian in an amount and form satisfactory to it.
If the Fund requires the Custodian to advance cash or
securities for any purpose or in the event that the Custodian or
its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to
act or willful misconduct, any property at any time held for the
account of the Fund shall be security therefor and should the
Fund fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of Fund assets
to the extent necessary to obtain reimbursement.
9. Effective Period, Terminaticn and Amendment
This Contract shall become effective as of its execution,
shall continue in full force and effect until terminated as
hereinafter provided, may be amended at any time by mutual
agreement of the parties hereto and may be terminated by either
party by an instrument in writing delivered or mailed, postage
prepaid to the other party, such termination to take effect not
sooner than thirty (30) days after the date of such delivery or
-27-
<PAGE> 30
mailing; provided, however that the Custodian shall not act under
Section 2.12 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the
Board of Trustees of the Fund has approved the initial use of a
particular Securities System and the receipt of an annual
certificate of the Secretary or an Assistant Secretary that the
Board of Trustees has reviewed the use by the Fund of such
Securities System, as required in each case by Rule 17f-4 under
the Investment Company Act of 1940, as amended and that the
Custodian shall not act under Section 2.12A hereof in the absence
of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Trustees has approved the
initial use of the Direct Paper System and the receipt of an
annual certificate of the Secretary or an Assistant Secretary
that the Board of Trustees has reviewed the use by the Fund of
the Direct Paper System; provided further, however, that the Fund
shall not amend or terminate this Contract in contravention of
any applicable federal or state regulations, or any provision of'
the Declaration of Trust, and further provided, that the Fund may
at any time by action of its Board of Trustees (i) substitute
another bank or trust company for the Custodian by giving notice
as described above to the Custodian, or (ii) immediately
terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of
the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of
competent jurisdiction.
-28-
<PAGE> 31
Upon termination of the Contract, the Fund Shall pay to
the Custodian such compensation as may be due as of the date of
such termination and shall likewise reimburse the Custodian for
its costs, expenses and disbursements.
10. Successor Custodian
If a successor custodian shall be appointed by the Board
of Trustees of the Fund, the Custodian shall, upon termination,
deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all
securities then held by it hereunder and shall transfer to an
account of the successor custodian all of the Fund's securities
held in a Securities System.
If no such successor custodian shall be appointed, the
Custodian shall, in like manner, upon receipt of a certified copy
of a vote of the Board of Trustees of the Fund, deliver at the
office of the Custodian and transfer such securities, funds and
other properties in accordance with such vote.
In the event that no written order designating a
successor custodian or certified copy of a vote of the Board of
Trustees shall have been delivered to the Custodian on or before
the date when such termination shall become effective, then the
Custodian shall have the right to deliver to a bank or trust
company, which is a bank' as defined in the Investment Company
Act of 1940, doing business in Boston, Massachusetts, of its own
selection, having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than
$25,000,000, all securities, funds and other properties held by
-29-
<PAGE> 32
the Custodian and all instruments held by the Custodian relative
thereto and all other property held by it under this Contract and
to transfer to an account of such successor custodian all of the
Fund's securities held in any Securities System. Thereafter,
such bank or trust company shall be the successor of the
Custodian under this Contract.
In the event that securities, funds and other properties
remain in the possession of the Custodian after the date of
termination hereof owing to failure of the Fund to procure the
certified copy of the vote referred to or of the Board of
Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period
as the Custodian retains possession of such securities, funds and
other properties and the provisions of this Contract relating to
the duties and obligations of the Custodian shall remain in full
force and effect.
11. Interpretive and Additional Provisions
In connection with the operation of this Contract, the
Custodian and the Fund may from time to time agree on such
provisions interpretive of or in addition to the provisions of
this Contract as may in their joint opinion be consistent with
the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both
parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any
applicable federal or state regulations or any provision of the
Declaration of Trust of the Fund. No interpretive or additional
-30-
<PAGE> 33
provisions made as provided in the preceding sentence shall be
deemed to be an amendment of this Contract.
12. Massachusetts Law to Apply
This Contract shall be construed and the provisions
thereof interpreted under and in accordance with laws of The
Commonwealth of Massachusetts.
13. Prior Contracts
This Contract supersedes and terminates, as of the date
hereof, all prior contracts between the Fund and the Custodian
relating to the custody of the Fund's assets.
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed as
of the day of 1991.
ATTEST CMA TREASURY FUND
By
ATTEST STATE STREET BANK AND TRUST COMPANY
By /s/
By /s/
Assistant Secretary Senior Vice President
-31-
<PAGE> 1
Ex-99.9(a)
TRANSFER AGENCY, SHAREHOLDER SERVICING
AGENCY, AND PROXY AGENCY AGREEMENT
THIS AGREEMENT made as of the lst day of April, 1991 by and
between CMA Treasury Fund (the "Fund"), a trust organized under
the laws of the Commonwealth of Massachusetts, and Financial Data
Services, Inc., a corporation organized and existing under the
laws of New Jersey (the "Transfer Agent").
W I T N E S S E T H:
WHEREAS, the Fund is engaged in business as a diversified,
open-end, management investment company and is registered as such
under the Investment Company Act of 1940, as amended; and
WHEREAS, the Transfer Agent is engaged principally in
rendering transfer agency, shareholder servicing agency and proxy
agency services; and
WHEREAS, the Fund wishes to appoint the Transfer Agent to be
the transfer agent, shareholder servicing agent and proxy agent
for the Fund upon, and subject to, the terms and provisions of
this Agreement, and the Transfer Agent is desirous of accepting
such appointment upon, and subject to, such terms and provisions;
<PAGE> 2
NOW THEREFORE, in consideration of the mutual covenants
contained in this Agreement, the Fund and the Transfer Agent
agree as follows:
1. Appointment as Transfer Agent, Shareholder Servicing
Agent and Proxy Agent for the Fund.
1.1. The Fund hereby appoints the Transfer Agent to
act as the transfer agent, shareholder servicing agent and proxy
agent for the Fund upon, and subject to, the terms and provisions
of this Agreement.
1.2. The Transfer Agent hereby accepts the appointment
as transfer agent, shareholder servicing agent, and proxy agent
for the Fund, and agrees to act as such upon, and subject to, the
terms and provisions of this Agreement. The Transfer Agent
hereby agrees to hire, purchase, develop and maintain such dedi-
cated personnel, facilities, equipment, software, resources and
capabilities as may be reasonably determined by the Fund to be
necessary for the satisfactory performance of the duties and
responsibilities of the Transfer Agent under this Agreement.
2. Definitions.
In this Agreement:
2.1. The term "Act" means the Investment Company Act
of 1940, as amended from tine to time, and any applicable rule,
regulation or order thereunder.
2
<PAGE> 3
2.2. The term "Account" means any account of Share-
holder established in connection with the Cash Management Account
of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
2.3. The term "Custodian" means the bank duly
appointed to act as Custodian for the assets of the Fund and the
term "Custodian Agreement" means any agreement in effect between
the Fund and the Custodian.
2.4. The term "Officer's Instruction" means an
instruction given in writing on behalf of the Fund to the
Transfer Agent by the President, any Vice President, the
Secretary, the Treasurer or the Controller of the Fund.
2.5. The term "Prospectus" means the prospectus of the
Fund from time to time in effect.
2.6. The term "Shares" means the shares of the Fund.
2.7. The term "Shareholder" means the holder of record
of Shares, irrespective of the category of Account maintained in
respect of such Shares.
2.8. The term "Statement of Additional Information"
means the statement of additional information of the Fund from
time to time in effect.
3
<PAGE> 4
3. Functions of Transfer Agent, Shareholder Servicing Agent
and Proxy Agent.
3.1. Subject to the succeeding provisions of this
Agreement, the Transfer Agent hereby agrees to perform the
following functions for the Funds on behalf of the Fund:
3.1.1. Issuing, transferring and redeeming Shares.
3.1.2. Opening, maintaining, servicing and closing
Accounts.
3.1.3. Acting as agent of the Fund and/or Shareholders
in connection with Accounts, upon the terms and subject to the
conditions contained in the Prospectus and the Statement of
Additional Information.
3.1.4. Causing the reinvestment in Accounts of
dividends declared upon Shares.
3.1.5. Processing liquidations.
3.1.6. Furnishing to Shareholders appropriate income
tax information and income tax forms duly completed.
3.1.7. Mailing to Shareholders annual, semi-annual,
and quarterly reports of the Fund prepared by or on behalf of the
Fund, and mailing new Prospectuses upon their issue to
Shareholders whose Shares are held in Accounts.
3.1.8. Furnishing to the Fund such periodic statements
of transactions effected by the Transfer Agent, reconciliations,
balances and summaries as set forth in Exhibit A and as shall be
necessary in connection with the CMA program.
4
<PAGE> 5
3.1.9. Maintaining such books and records relating to
transactions effected by the Transfer Agent as are required by
the Act or by any other applicable provisions of law to be main-
tained by the Fund or the Transfer Agent with respect to such
transactions, and preserving, or causing to be preserved, any
such books and records for such periods as nay be required by any
law, rule or regulation.
3.2. The Transfer Agent agrees to act as proxy agent
in connection with the holding of meetings of Shareholders, such
services to include, but not be limited to, mailing to
Shareholders notices, proxies and proxy statements in connection
with the holding of such meetings, receiving and tabulating votes
cast by proxy, communicating to the Fund the results of such
tabulation accompanied by appropriate certificates, and preparing
and furnishing to the Fund certified lists of Shareholders, all
of the foregoing in such form and containing such information as
may be required by the Fund to comply with any provisions of law
applicable to such meetings.
3.3. The Transfer Agent agrees to deal with, and
answer, all correspondence from or on behalf of Shareholders
relating to the functions of the Transfer Agent under this
Agreement.
5
<PAGE> 6
3.4. The Transfer Agent agrees to furnish to the Fund
such information and at such intervals as is necessary for the
Fund to comply with the registration and/or the reporting
requirements of the Securities and Exchange Commission, state
securities authorities or other regulatory agencies.
3.5. The Transfer Agent agrees to provide to the Fund
upon request such information as may reasonably be required to
enable the Fund to reconcile the number of outstanding Shares
between the Transfer Agent's records and the account books of the
Fund.
3.6. The parties hereto agree that, without prejudice
to any other provisions of this section 3, the functions of the
Transfer Agent under this section 3 will be performed in accor-
dance with the Activities List set out in Exhibit A to this
Agreement.
3.7. Notwithstanding anything in the foregoing provi-
sions of this section 3, the Transfer Agent agrees to perform its
functions hereunder subject to such modification (whether in
respect of particular cases or in any particular class of cases)
as may from time to time be contained in an Officer's Instruc-
tion.
<PAGE> 7
4. Compensation of Transfer Agent.
The charges for services described in this Agreement,
including "out-of-pocket" expenses will be established by a Fee
Agreement between the Fund and the Transfer Agent under separate
cover.
5. Right to Inspect Records, etc., of Transfer Agent.
The Transfer Agent agrees that, upon request by any
officer of the Fund or by any officer of the Fund's accountant or
investment adviser, the Transfer Agent will make available to any
such officer any books and records (whether or not books and
records to be preserved as required by law) which relate to any
transaction or function to be performed by the Transfer Agent
under or pursuant to this Agreement and shall permit any such
officer to transcribe or to duplicate on equipment provided by
the Transfer Agent any such book or record, in whole or in part.
6. Confidential Relationships of the Transfer Agent, etc.
The Transfer Agent agrees, on behalf of itself and its
officers, employees, vendors and agents, that each of the forego-
ing shall treat the identity and all transactions of Share-
holders, and all other transactions contemplated by this Agree-
ment, and all information germane thereto, as confidential and
not to be disclosed to any person (other than the Shareholder
concerned, or the Fund, or as may be disclosed in the examination
of any books or records by any person lawfully entitled to
examine the same) except as may be authorized by an Officer's
- 7 -
<PAGE> 8
Instruction. The Transfer Agent agrees to adopt procedures for
and written instructions to its officers, employees, vendors and
agents reasonably designed to implement the agreement established
in this section 6.
7. Standard of Care; Loss Caused by Imposters.
The Transfer Agent shall use its best efforts to insure
the accuracy of all services performed under this Agreement, but
assumes no responsibility for, and shall not be liable for, any
loss or damage to any party unless the negligence, bad faith or
willful misconduct of the Transfer Agent is a proximate cause of
such loss or damage; provided, however, that losses due to the
failure of the Transfer Agent to detect payments made by it under
this Agreement to imposters shall be borne by the Transfer Agent.
8. Termination of Appointment.
The appointment of the Transfer Agent provided by this
Agreement shall be in effect for one year from the date hereof
and thereafter on a year-to-year basis, each such term to expire
on the anniversary of the date hereof. Any party may terminate
such appointment by delivering a written notice to that effect at
the principal place of business of the other party at least 60
days prior to the expiration of the then-current term of the
Agreement. In the event such appointment shall be terminated,
for whatever reason, the Transfer Agent will provide the Fund
without further charge with:
<PAGE> 9
8.1. A complete and current computer-reproducible
record, within 7 days of the date of termination, of that file
data which may reasonably be required to establish transfer
agency, shareholder servicing agency and proxy agency services
elsewhere.
8.2. All hard copy records in file containers or other
acceptable container for shipping to a new location.
8.3. A referral service, for a reasonable period of
time, indicating to Shareholders or potential Shareholders the
next appropriate address for inquiries or Shareholder informa-
tion.
8.4. Any other services, including correction of
errors or the costs of such correction, as may be normal and
necessary to effect the transfer of Shareholder information in an
orderly and timely manner, should the occasion arise.
Notwithstanding anything in the foregoing provisions of
this section 8, if it appears impracticable in the circumstances
to effect an orderly delivery of the necessary and appropriate
records of the Transfer Agent to a successor transfer agent,
shareholder servicing agent, and/or proxy agent for the Fund
within the time specified in the notice of termination as afore-
said, the Transfer Agent agrees that its appointment shall remain
in force and effect for such reasonable period as may be required
to complete necessary arrangements with a successor transfer
agent, shareholder servicing agent, and/or proxy agent.
- 9 -
<PAGE> 10
9. Amendment, etc. of Agreement.
Except to the extent that the performance by the Trans-
fer Agent of its functions under this Agreement may from time to
time be modified by an Officer's Instruction, this Agreement may
be amended or modified only by a further written agreement
between the parties.
10. No Personal Liability of Trustees, etc.
The Transfer Agent acknowledges that the Declaration of
Trust establishing the Fund, 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 of the Fund, "CMA Treasury Fund," refers to the
trustees under the Declaration collectively as trustees, but not
as individuals or personally; and no trustee, Shareholder,
officer, employee or agent of the Fund shall. be held to any
personal liability, nor shall resort be had to their private
property for the satisfaction of any obligation or claim or
otherwise in connection with the affairs of said Fund but the
"Trust Property" only shall be liable.
10 -
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written by
their respective officers hereunto duly authorized.
CMA TREASURY FUND
By
FINANCIAL DATA SERVICES, INC.
By
<PAGE> 12
Exhibit A
Activities List
Services Further Described.
A. Shareholder and Accounting Services.
1. General Scope.
The Transfer Agent will provide a comprehensive accounting
and shareholder service generally consistent with that pro-
vided to other investment companies. The Transfer Agent
acknowledges that the services necessitated for the Fund may
be significantly more demanding from a time and precision
viewpoint than other types of investment companies with
respect to such features as:
(a) Daily dividend accounting.
(b) Wire receipt and payout of Shareholders' funds.
(c) Immediate determination of Federal Funds availability on
subscriptions received.
(d) Rapid and efficient transfers of investment monies between the
Fund's various accounts (e.g., subscription/custody/redemption),
(e) Effective and controlled processing of redemptions.
2. Computer Accounting and Record Keeping.
(a) The Transfer Agent will perform daily maintenance and
routine file update prior to investment of the daily dividend or
establishing new Accounts.
A-1
<PAGE> 13
(b) The Transfer Agent will perform a dividend reinvestment run
daily in order to credit all existing Accounts with dividends
earned that day.
(c) The Transfer Agent will take reasonable precautions for
safeguarding all Accounts during computer runs.
(d) The Transfer Agent will provide continuous proof of the
outstanding Shares on a daily basis and on-line availability of
all file data.
3. Establishing and Servicing Accounts.
The Transfer Agent will accept instructions from the Fund opening
a new Account and will:
(a) Audit and verify payment items for proper registration and
other particulars as prescribed by the Prospectus or Statement of
Additional Information of the Fund.
(b) Verify that there is no other existing Account with the same
registration.
(c) Assign Account numbers.
(d) Produce microfilm record of all incoming checks and source
documentation of filmstrips so as to be retrievable and repro-
ducible on command.
(e) Process address changes and acknowledge such changes to
previous address of record.
(f) Answer inquiries from Shareholders.
(g) Process on a daily basis routine transactions such as:
i. Change of address.
A-2
<PAGE> 14
ii. Miscellaneous changes.
(h) Incorporate in the Shareholder accounting software and
procedures the necessary flags, audits and tests to assure that
the various provisions and requirements specified elsewhere in
this contract are satisfied.
B. Transfer Agent Services.
The Transfer Agent will perform all functions with respect to the
Fund normally required of a transfer agent for an investment
company. Such functions shall include but not necessarily be
limited to:
1. Keeping such records in the form and manner as it may deem
advisable consistent with the rules and regulations of appro-
priate governmental authorities.
2. Processing transfers as requested, including obtaining and
reviewing papers and all other documents necessary to satisfy
transfer requirements.
3. Processing initial and subsequent investments from Share-
holders.
4. Processing and recording liquidation of Account balances to
satisfy full or partial Account redemptions.
5. Accepting the daily dividend income calculated by the Fund
and reinvesting such income to the benefit of the Shareholders
additional full and fractional non-certificated Shares. The
procedure used must prove that the amount reinvested daily
balances to the total net income accrued to this portfolio, and
A-3
<PAGE> 15
that each Account is credited daily with the corresponding Shares
reinvested. To ensure that these objectives are achieved,
appropriate reports and proofs are to be generated.
C. Dividend Disbursement and Redemption Agent Services.
I. Dividends.
(a) Determination of daily dividend amounts shall be as
generally described in Section I.B.5. and more specifically as
set forth in:
i. The Prospectus and Statement of Additional Information
of the Fund.
ii. The Transfer Agent's dividend accrual and update
routine.
(b) Dividends shall be reinvested daily in additional non-
certificated Shares of the Fund.
(c) Additional dividend information shall be provided to
Shareholders upon written request.
2. Redemption Processing.
The Transfer Agent will take all necessary steps to insure that
redemptions and repurchase requirements have been met, including
the receipt and examination of signature guarantees, and will
obtain any needed papers or documents.
(a) All redemption requests will be automatically reviewed:
i. To ensure there are sufficient Shares available in the
redeeming Shareholder's Account.
A-4
<PAGE> 16
ii. To ensure collection of the applicable subscription
check before using funds for redemption (other than
payment received by the Transfer Agent from Bank Wire
and Federal Reserve Drafts).
iii. To notify the Fund of all redemption requests in excess
Of $1,000,000.
(b) All redemption requests will be signed by an individual
other than the preparer of the checks, to ensure that the checks
issued in redemption correspond to the amounts requested to be
redeemed.
(c) The Transfer Agent will develop and employ a method for
validating receipt of good subscription funds to comply with
section I.D.2.a.ii.
(d) No signature guarantees shall be acceptable unless provided
by a domestic bank or by a brokerage firm which is a member of
the New York, American, Midwest, Pacific or Boston Stock
Exchange.
3. Redemption Account.
The Transfer Agent shall maintain a redemption account for the
Fund. This account shall be established and operated so as to
satisfy the following criteria:
(a) The account shall be established at the Bank for the benefit
of the Fund.
A-5
<PAGE> 17
(b) All withdrawals from the redemption account shall be for the
exclusive purpose of making payments in accordance with the
Prospectus and Statement of Additional Information of the Fund.
Monies paid out will be paid out in accordance with the
description set forth therein and elsewhere in this contract.
(c) All deposits into this account shall be from the custody
account of the Fund. No deposits of subscription receipts shall
be made directly into the redemption account.
(d) The Transfer Agent will advise the Fund at various mutually
established times during each business day as to the total demand
for valid dividends and full or partial Account liquidations.
The notification of demand for payment shall only include valid
demands for payment which are actually in hand, such that the
Fund need not fund the redemption account with an amount in
excess of what is actually required to satisfy current demands
for payment. The specific objective of this procedure is
mutually recognized to be the maximum employment of each of the
Fund's assets through minimization of any float in the redemption
account. The Transfer Agent agrees to develop with the Fund
methods and procedures to accomplish this objective.
(e) Wire redemptions shall be made in Federal Funds.
(f) Federal Reserve Draft redemption payments shall only be made
upon specific request.
A-6
<PAGE> 18
(g) The Transfer Agent will adopt such reasonable safeguards as
may be prescribed by the Fund's auditors to safeguard redemption
assets.
(h) The Transfer Agent will employ all due diligence in
servicing redemption requests as rapidly as possible. Rapid
servicing of redemptions is specifically recognized as a key
feature of the Fund.
D. Proxy Agent Services.
The Transfer Agent agrees to act as proxy agent in connection
with the holding of meetings of Shareholders by nailing to
Shareholders notices, proxies and proxy statements in connection
with the holding of such meetings, receiving and tabulating votes
cast by proxy and communicating to the Fund the results of such
tabulations accompanied by appropriate certificates, and
preparing and furnishing to the Fund certified lists of
Shareholders as of such date and in such form and containing such
information as may be required by the Fund to comply with any
provisions of law applicable to such meetings.
II. Reports.
The Transfer Agent will establish, maintain and provide to the
Fund the following records with respect to the Fund:
A. Daily Journal of Subscription Receipts, Availability and Funds
Transfers to Custody.
B. Daily Journal of Redemption Payment Demand.
A-7
<PAGE> 19
C. Daily Sales and Transaction Journals containing the day's
detail of all transactions.
D. Daily Closed Account Journal.
E. Daily Dividend Proof (Daily & Monthly).
F. Daily Redemption Blotter.
G. Daily Shares Proof (Daily & Monthly).
H. Daily Master Control Proof.
I. Daily Prospectus Mailing Report.
J. Daily Blue Sky Report (frequency as agreed upon).
K. Daily Quality Control Reports.
L. Large Item Report.
M. Weekly Status Report.
N. Research and Correspondence Status Report.
0. Monthly Sales by State and Dividends Reinvested.
P. Monthly Shareholders Master File List.
Q. Monthly Record of Out-of-Pocket Costs Incurred.
III. Other Services.
The Transfer Agent will provide the following additional
services within the basic fee structure:
A. Referral of Inquiries.
Refer all Shareholder or governmental inquiries of a policy or
non-routine nature to the Fund.
A-8
<PAGE> 20
B. Account Officer at the Transfer Agent.
Assign an account officer who will serve as the primary point
of contact between the Fund, the Fund's manager, and the
Transfer Agent in its various capacities. The Transfer Agent
will exercise due care in assigning an individual to this
-function who is both conversant with standard investment
company practice and of sufficient stature to deal quickly and
efficiently with problems peculiar to placing a new investment
company on line and which may be peculiar to the cash manage-
ment variety of investment company.
C. Security.
1. Provide reasonable security against possible theft and/or
use by others of the names, addresses and properties of the
Shareholders and the properties of the Fund.
2. Perform periodic duplication of all records
(computer/nicrofilm/hardcopy/copy) at a frequency and in
detail sufficient to assure full protection of Shareholder
record information in the event of a disaster to the Transfer
Agent's facilities.
D. Other Mailings.
Provide nailing services to all Accounts, including addres-
sing, enclosing and mailing quarterly reports, semi-annual
reports, annual reports, Prospectuses, Statements of
Additional Information, proxy cards, proxy statements, and
notices. Postage will be paid by the Fund.
A-9
<PAGE> 1
Ex-99.9(b)
CASH MANAGEMENT ACCOUNT(R) AGREEMENT
INTRODUCTION
This Agreement contains the terms governing the Cash Management Account(R)
financial service ("CMA(R) Service"). I will read this Agreement and keep it for
my records because I know that by signing the CMA Application and Agreement
form or the CMA SubAccount(SM) Application and Agreement form (the "Application
and Agreement form(s)") I am agreeing to its terms.
DEFINITIONS
In this Agreement, "I," "me," "my" or "accountholder" means each person who
signs the CMA Application and Agreement form or the CMA SubAccount
Application and Agreement form. "You," "your" or "MLPF&S" means Merrill Lynch,
Pierce, Fenner & Smith Incorporated. "MLB&T" means Merrill Lynch Bank & Trust
Co. "BANK ONE" means BANK ONE, COLUMBUS, N.A. "MLNF" means Merrill Lynch
National Financial. "CHASE" means the Chase Manhattan Bank, N.A. MLB&T, MLNF,
CHASE and BANK ONE are referred to collectively as "Banks." The "Issuer" means
MLB&T or MLNF, whichever issues the Visa Cards from time to time.
"Card/Check Account" means the account(s) established for me by the Banks.
"Checks" means checks issued to me by BANK ONE for use with my Card/Check
Account. "Card" or "Cards" means one or more Classic Visa(R) cards
issued to me for use with my Card/Check Account. Unless the context requires
otherwise, "Card" or "Cards" also means one or more CMA Visa Gold Program cards
issued to me for use with my Card/Check Account if I subscribe to and am
approved for the CMA Visa Gold Program. The name of the issuer will appear on
the Card. The Card(s) issued to me if I subscribe to the CMA Visa Gold Program
will also be referred to as the "Visa Gold Program Card(s)." "Money Funds"
means the CMA money market funds. "Money Accounts" means the Money Funds and
any FDIC-insured money market deposit accounts opened for me through the
Insured Savings(SM) Account program.
For purposes of this Agreement, "securities and other property" means, but is
not limited to, money, securities, financial instruments and commodities of
every kind and nature and related contracts and options. This definition
includes securities or other property currently or hereafter held, carried or
maintained by you or by any of your affiliates, in your possession and control,
or in the possession and control of any such affiliate, for any purpose, in and
for any of my accounts now or hereafter opened, including any account in which
I may have an interest.
DESCRIPTION OF THE CMA(R) SERVICE
1. The CMA Service consists of: (1) an MLPF&S securities account (referred to as
the "Securities Account"), which is either a cash account, or with the Investor
CreditLine(SM) service, a margin account, (2) a choice of Money Accounts, (3) if
applicable, a Card/Check Account provided by the Banks and (4) if applicable,
optional CMA services as described in the Cash Management Account Program
Description.
DESCRIPTION OF THE
CMA MASTER FINANCIAL(SM) SERVICE
2. The CMA Master Financial(SM) Service consists of: (1) a master account
("Master CMA Account") established with the full CMA Service as
described above and (2) one or more related CMA SubAccounts established by or
with the consent of a Master CMA Accountholder. Each CMA SubAccount is entitled
to partial CMA service consisting of: (1) a Securities Account, which is either
a cash account or, with the Investor CreditLine Service, a margin account, (2)
a choice of Money Accounts and (3) optional CMA services to the extent
eligible. A CMA SubAccount is not eligible for a Card/Check Account.
CMA SUBACCOUNT(SM) AUTHORIZATIONS
3. By signing the CMA SubAccount Application and Agreement form, each CMA
SubAccountholder designates the Master CMA Accountholder as his or her agent
for the purpose of receiving monthly CMA account statements and any notices or
other communications and authorizes MLPF&S to mail them to the address
designated by the Master CMA Accountholder from time to time. If applicable,
each CMA SubAccountholder also authorizes MLPF&S (subject to account
eligibility requirements) to accept telephonic instructions from the Master CMA
Accountholder for the transfer of funds through the CMA Funds Transfer Service
to such CMA SubAccount from the Master CMA Account and/or from such CMA
SubAccount to the Master CMA Account, as selected in the CMA SubAccount
Application and Agreement form. In the event any erroneous transfers are made,
the Master CMA Accountholder and the CMA SubAccountholder authorize MLPF&S to
initiate appropriate corrections. The foregoing authorizations shall remain in
full force and effect until written notice of revocation is delivered to
MLPF&S, after which the CMA SubAccount shall remain subject to the terms of
this Agreement to the extent it receives the CMA Service in accordance with the
policies of MLPF&S.
AGREEMENT REGARDING CASH,
MONEY ACCOUNT BALANCES AND
OTHER ASSETS AND FEES
4. Available free credit balances in my Securities Account will automatically
be invested or deposited at least once a week into the Money Account that I
have designated as my Primary Money Account. I understand that you may
reasonably withhold access to my Money Account balances until you are
satisfied that checks credited to my Securities Account have been collected.
You may satisfy amounts that I owe in connection with my CMA Service account
(such as debit balances in the Securities Account, amounts owing in my
Card/Check Account, or investments or deposits made for me that are later
reversed), from the assets in my Money Accounts (including funds obtained by
redeeming Money Funds shares) or from my Securities Account (including, if
applicable, by making loans to me). Certain fees, including an annual fee,
which are subject to change, will be charged to my account for the financial
services provided to me.
REPRESENTATIONS, ADDITIONAL
TERMS AND AMENDMENTS
5. I have received a copy of the Money Funds' prospectuses, the Insured Savings
Account Fact Sheet and the Cash Management Account Program Description. These
documents shall be referred to in this Agreement as the "Documents." The
Documents contain additional terms governing the CMA Service. I agree
that these Documents are incorporated into this Agreement as though they were
fully set out in this Agreement. Subject to applicable law, you and the Banks
also have the right to amend the Documents by so notifying me in writing.
Unless the context otherwise requires, the term "Agreement" shall include the
Documents, as amended from time to time.
I agree that you and the Banks shall have the right to amend this Agreement, by
modifying or rescinding any of its existing provisions or by adding any new
provision, at any time by sending notice of the amendment to me. Any such
amendment shall be effective as of a date to be established by you and the
Banks, subject to applicable law.
I understand there may be additional documentation required by applicable law or
the policies and procedures of MLPF&S or the Banks. I agree to promptly comply
with any such requests for additional documents.
HEADINGS ARE DESCRIPTIVE
6. The heading of each provision of this Agreement is for descriptive purposes
only and shall not be deemed to modify or qualify any of the rights or
obligations set forth in each such provision.
JOINT ACCOUNTS AND JOINT
AND SEVERAL LIABILITY
7. If more than one person signs this Agreement, each person shall be an
accountholder and their obligations under this Agreement shall be joint and
several. The legal ownership of the account shall be in such form as the
accountholders shall designate in the Application and Agreement form and as
reflected in the account title. In the event no designation is made, MLPF&S is
authorized to deal with the accountholders as tenants in common (without right
of survivorship).
Notwithstanding the choice of law provisions of Paragraph 11, which shall
govern the contractual obligations of the parties under this Agreement, the
legal ownership of the account shall be governed by and interpreted under the
internal laws of the state of permanent residence of accountholders who are
U.S. citizens. Non-resident aliens agree that the form of joint ownership
designated for the account shall be governed (notwithstanding the laws of any
other jurisdiction to the contrary) by the internal laws of the State of New
York and, for purposes of determining all matters with regard to the account,
agree to submit to the jurisdiction of the courts of New York and the Federal
Courts in the Southern District of New York and consent to service of process
by certified mail to the account's address of record.
All accountholders agree that each accountholder has authority to transact any
business on behalf of the account as fully and completely as if each
accountholder were the sole owner of the account. Subject to MLPF&S policies,
MLPF&S may accept orders and instructions, written or oral, with respect to the
account from each accountholder, without notice to any other accountholder, for
the receipt, transfer and withdrawal of funds by check, wire transfer or
otherwise and for the purchase, sale, exchange, transfer or other disposition
of securities and other property (including margin transactions and short sales
if the accountholders have selected the Investor CreditLine service). All
accountholders further agree that all securities and other property that MLPF&S
may be holding for any of them, either in this account or otherwise, shall be
subject to a lien for the discharge of the obligations of this account to
MLPF&S, such lien to be in addition to any rights and remedies MLPF&S may
otherwise have.
In the event of the death of an accountholder, divorce of married
accountholders, assignment of an accountholder's interest or other event that
causes a change in ownership of the account, all accountholders or the
surviving accountholder(s) as the case may be shall immediately give MLPF&S
written notice thereof, and MLPF&S may, in such event, take such action,
including requiring such documents or imposing such restrictions on the
account, as MLPF&S may deem necessary in the circumstances. The estate of a
deceased accountholder and a departing accountholder by assignment or divorce
shall remain liable, jointly and severally, with the remaining or surviving
accountholder(s), for any obligations of the account arising before MLPF&S
receives such notice, or incurred in liquidation of the account or the
adjustment of the interests of the accountholders.
In the event of any such change in ownership of the account, MLPF&S is
authorized to divide or retitle the account in accordance with the form of
legal ownership of the account as reflected on the records of MLPF&S, or
by written instructions of the remaining or surviving accountholder(s), or by
obtaining a court order, as MLPF&S may reasonably determine is appropriate in
the circumstances. Unless agreed otherwise among the accountholders in a
writing provided to MLPF&S, joint accounts designated "with right of
survivorship" (e.g., JTWROS) shall vest the interest of a deceased
accountholder in the surviving accountholder(s) and accounts designated
"without right of survivorship" (e.g., TIC) shall entitle the estate of a
deceased accountholder and the surviving accountholder(s) to equal shares of
the account. All accountholders agree to indemnify MLPF&S against any
liability, loss or expense incurred from acting in accordance with this
Agreement in the event of a change in ownership of the account.
All statements, notices or other communications sent or given to one
accountholder by MLPF&S shall be considered notice to all accountholders. In
the event MLPF&S receives inconsistent instructions from two or more
accountholders, reasonably believes instructions received from one
accountholder are not mutually agreeable to all accountholders, or receives a
court order with respect to the account, MLPF&S may, but is not obligated to,
restrict activity in the account, require that all instructions be in writing
signed by all accountholders, suspend or terminate the CMA Service and/or file
an interpleader action in an appropriate court at the expense of the
accountholders.
TERMINATION OF THE CMA SERVICE
8. The Banks, you or I may terminate my subscription to the CMA Service,
including the use of my Checks or Cards, if applicable, at any time. I shall
remain responsible for authorized charges which arise before or after
termination.
If my subscription is terminated, you may redeem all my Money Fund shares and,
unless I advise you otherwise, withdraw all my Money Account deposit balances.
Also, I shall promptly return all unused Checks and any Cards to you or the
Banks. My failure to do so may result in a delay in your complying with my
instructions regarding the disposition of my assets with you.
CREDIT INFORMATION
9. I authorize you, each of your affiliates, and the Banks, to request a
consumer report about me from one or more consumer reporting agencies for the
purposes of considering my subscription to the CMA Service, reviewing or
collecting any account opened for me, or for any other legitimate business
purpose. Upon my request, you will inform me of the name and address of each
consumer reporting agency from which you obtained a consumer report, if any, in
connection with my subscription or accounts. I also authorize you, each of your
affiliates, and the Banks to share any information you may have or obtain about
me for any legitimate business purpose.
AGREEMENT TO ARBITRATE
CONTROVERSIES WITH MLPF&S
10. - ARBITRATION IS FINAL AND BINDING ON THE PARTIES.
- THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT, INCLUDING
THE RIGHT TO JURY TRIAL.
- PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND DIFFERENT
FROM COURT PROCEEDINGS.
- THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR
LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO SEEK MODIFICATION
OF RULINGS BY THE ARBITRATORS IS STRICTLY LIMITED.
- THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS
WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY.
I AGREE THAT ALL CONTROVERSIES WHICH MAY ARISE BETWEEN US, INCLUDING BUT NOT
LIMITED TO THOSE INVOLVING ANY TRANSACTION OR THE CONSTRUCTION, PERFORMANCE, OR
BREACH OF THIS OR ANY OTHER AGREEMENT BETWEEN US, WHETHER ENTERED INTO PRIOR,
ON OR SUBSEQUENT TO THE DATE HEREOF, SHALL BE DETERMINED BY ARBITRATION. ANY
ARBITRATION UNDER THIS AGREEMENT SHALL BE CONDUCTED ONLY BEFORE THE NEW YORK
STOCK EXCHANGE, INC., THE AMERICAN STOCK EXCHANGE, INC., OR AN ARBITRATION
FACILITY PROVIDED BY ANY OTHER EXCHANGE, THE NATIONAL ASSOCIATION OF SECURITIES
DEALERS, INC., OR THE MUNICIPAL SECURITIES RULEMAKING BOARD, AND IN ACCORDANCE
WITH ITS ARBITRATION RULES THEN IN FORCE. I MAY ELECT IN THE FIRST INSTANCE
WHETHER ARBITRATION SHALL BE CONDUCTED BEFORE THE NEW YORK STOCK EXCHANGE,
INC., THE AMERICAN STOCK EXCHANGE, INC., OTHER EXCHANGES, THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC., OR THE MUNICIPAL SECURITIES RULEMAKING
BOARD, BUT IF I FAIL TO MAKE SUCH ELECTION, BY REGISTERED LETTER OR TELEGRAM
ADDRESSED TO YOU AT THE OFFICE WHERE I MAINTAIN MY ACCOUNT, BEFORE THE
EXPIRATION OF FIVE DAYS AFTER RECEIPT OF A WRITTEN REQUEST FROM YOU TO MAKE
SUCH ELECTION, THEN YOU MAY MAKE SUCH ELECTION. JUDGMENT UPON THE AWARD OF THE
ARBITRATORS MAY BE ENTERED IN ANY COURT, STATE OR FEDERAL, HAVING JURISDICTION.
NO PERSON SHALL BRING A PUTATIVE OR CERTIFIED CLASS ACTION TO ARBITRATION, NOR
SEEK TO ENFORCE ANY PREDISPUTE ARBITRATION AGREEMENT AGAINST ANY PERSON WHO
HAS INITIATED IN COURT A PUTATIVE CLASS ACTION; OR WHO IS A MEMBER OF A
PUTATIVE CLASS WHO HAS NOT OPTED OUT OF THE CLASS WITH RESPECT TO ANY CLAIMS
ENCOMPASSED BY THE PUTATIVE CLASS ACTION UNTIL: (I) THE CLASS CERTIFICATION IS
DENIED; (II) THE CLASS IS DECERTIFIED; OR (III) THE CUSTOMER IS EXCLUDED FROM
THE CLASS BY THE COURT. SUCH FORBEARANCE TO ENFORCE AN AGREEMENT TO ARBITRATE
SHALL NOT CONSTITUTE A WAIVER OF ANY RIGHTS UNDER THIS AGREEMENT TO THE EXTENT
STATED HEREIN.
CLIENT COPY
Code #16453-0195 RETAIN FOR YOUR RECORDS
DO NOT RETURN TO MERRILL LYNCH
<PAGE> 2
CASH MANAGEMENT ACCOUNT(R) AGREEMENT
APPLICABLE LAWS
11. THIS AGREEMENT, WITH RESPECT TO ALL PORTIONS OF THE CMA SERVICE, INCLUDING
INTEREST CHARGES ON LOANS YOU MAY MAKE TO ME, WILL BE GOVERNED BY AND
INTERPRETED UNDER THE LAWS OF THE STATE OF NEW YORK. THE TERMS OF MY AGREEMENT
WITH MLB&T ARE GOVERNED BY FEDERAL AND NEW JERSEY LAW. THE TERMS OF MY
AGREEMENT WITH MLNF ARE GOVERNED BY FEDERAL AND UTAH LAW. THE TERMS OF MY
AGREEMENT WITH CHASE, INCLUDING THOSE RELATING TO FINANCE CHARGES ON
OVERDRAFTS, ARE GOVERNED BY FEDERAL AND NEW YORK LAW. THE TERMS OF MY AGREEMENT
WITH BANK ONE ARE GOVERNED BY OHIO LAW.
PRESUMPTION OF RECEIPT OF COMMUNICATIONS
12. Communications may be sent to me at my address or at such other address as I
give you in writing. All communications so sent, whether by mail, telegraph,
messenger or otherwise, will be considered to have been given to me personally
upon such sending, whether or not I actually receive them.
EXTRAORDINARY EVENTS
13. I agree that you and the Banks shall not be liable for loss caused directly
or indirectly by government restrictions, exchange or market rulings,
suspension of trading, war, strikes or other conditions beyond your and the
Banks' control.
SEPARABILITY
14. If any provision of this Agreement is held to be invalid, illegal, void or
unenforceable, by reason of any law, rule, administrative order or judicial
decision, such determination will not affect the validity of the remaining
provisions of this Agreement.
LIABILITY FOR COSTS OF COLLECTION
15. To the extent permitted by the laws of the State of New York, I agree to pay
you the reasonable costs and expenses of collection including attorneys' fees,
for any debit balance and any unpaid deficiency, that I owe.
APPLICABLE RULES AND REGULATIONS
16. All transactions in my Securities Account shall be subject to the
constitution, rules, regulations, customs and usages of the exchange or market
and its clearing house, if any, on which such transactions are executed by you
or your agents, including your subsidiaries and affiliates.
PARAGRAPHS 17 THROUGH 25 BELOW APPLY ONLY IF I REQUEST THAT MY SECURITIES
ACCOUNT BE ESTABLISHED WITH THE INVESTOR CREDITLINE(SM) SERVICE.
COLLATERAL REQUIREMENTS
AND CREDIT CHARGES
17. I will maintain such securities and other property in my accounts as you
shall require from time to time. In accordance with your usual custom, the
monthly debit balance of such accounts shall be charged interest at a rate
permitted by the laws of the State of New York. Unless I pay the interest
charged to my Securities Account at the close of a charge period, it will be
added to the opening balance for the next charge period. Interest will then be
charged upon the entire opening balance of that next charge period which will,
therefore, include any such unpaid interest from the previous charge period.
CALLS FOR ADDITIONAL COLLATERAL-LIQUIDATION RIGHTS
18. a. YOU SHALL HAVE THE RIGHT TO REQUIRE ADDITIONAL COLLATERAL:
(1) IN ACCORDANCE WITH YOUR GENERAL POLICIES REGARDING YOUR MAINTENANCE
REQUIREMENTS FOR THE INVESTOR CREDITLINE SERVICE, AS SUCH MAY BE MODIFIED,
AMENDED OR SUPPLEMENTED FROM TIME TO TIME; OR
(2) IF IN YOUR DISCRETION YOU CONSIDER IT NECESSARY FOR YOUR PROTECTION AT AN
EARLIER OR LATER POINT IN TIME THAN CALLED FOR BY SAID GENERAL POLICIES; OR
(3) IN THE EVENT THAT A PETITION IN BANKRUPTCY OR FOR APPOINTMENT OF A
RECEIVER IS FILED BY OR AGAINST ME; OR
(4) IF AN ATTACHMENT IS LEVIED AGAINST MY ACCOUNTS; OR
(5) IN THE EVENT OF MY DEATH.
b. IF I DO NOT PROVIDE YOU WITH ADDITIONAL COLLATERAL AS YOU MAY REQUIRE IN
ACCORDANCE WITH (a)(1) OR (2), OR SHOULD AN EVENT DESCRIBED IN (a)(3), (4) OR
(5) OCCUR (WHETHER OR NOT YOU ELECT TO REQUIRE ADDITIONAL COLLATERAL), YOU
SHALL HAVE THE RIGHT:
(1) TO SELL ANY OR ALL SECURITIES AND OTHER PROPERTY IN MY ACCOUNTS WITH YOU
OR WITH ANY OF YOUR AFFILIATES, WHETHER CARRIED INDIVIDUALLY OR JOINTLY WITH
OTHERS;
(2) TO BUY ANY OR ALL SECURITIES AND OTHER PROPERTY WHICH MAY BE SHORT IN
SUCH ACCOUNTS; AND
(3) TO CANCEL ANY OPEN ORDERS AND TO CLOSE ANY OR ALL OUTSTANDING CONTRACTS.
YOU MAY EXERCISE ANY OR ALL OF YOUR RIGHTS UNDER (b)(1), (2) AND (3) WITHOUT
FURTHER DEMAND FOR ADDITIONAL COLLATERAL, OR NOTICE OF SALE OR PURCHASE, OR
OTHER NOTICE OR ADVERTISEMENT. ANY SUCH SALES OR PURCHASES MAY BE MADE AT
YOUR DISCRETION ON ANY EXCHANGE OR OTHER MARKET WHERE SUCH BUSINESS IS USUALLY
TRANSACTED, OR AT PUBLIC AUCTION OR PRIVATE SALE, AND YOU MAY BE THE PURCHASER
FOR YOUR OWN ACCOUNT. I UNDERSTAND THAT YOUR GIVING OF ANY PRIOR DEMAND OR CALL
OR PRIOR NOTICE OF THE TIME AND PLACE OF SUCH SALE OR PURCHASE SHALL NOT BE
CONSIDERED A WAIVER OF YOUR RIGHT TO SELL OR BUY WITHOUT ANY SUCH DEMAND, CALL
OR NOTICE AS PROVIDED IN THIS AGREEMENT.
PURPOSE OF CREDIT
19. I understand and agree that any credit extended by you to me in connection
with my Securities Account is primarily for investment or business purposes.
REPRESENTATIONS AS TO BENEFICIAL
OWNERSHIP AND CONTROL
20. I represent that, with respect to securities against which credit is or may
be extended by you: (a) I am not the beneficial owner of more than three
percent (3%) of the number of outstanding shares of any class of equity
securities, and (b) I do not control, am not controlled by and am not under
common control with the issuer of any such securities. In the event that any of
the foregoing representations is inaccurate or becomes inaccurate, I will
promptly so advise you in writing.
SECURITY INTEREST IN FAVOR OF MLPF&S
21. All securities and other property shall be subject to a lien for the
discharge of all my indebtedness and any other obligations that I may owe
to you, and are to be held by you as security for the payment of any such
obligations or indebtedness to you in any account you maintain for me,
including any accounts in which I may have an interest. You shall have the
right to transfer securities and other property so held by you from or to any
other of such accounts whenever in your judgment you consider such a transfer
necessary for your protection. In enforcing your lien, you shall have the
discretion to determine which securities and property are to be sold and which
contracts are to be closed.
PAYMENT OF INDEBTEDNESS UPON DEMAND
22. I shall at all times be liable for the payment upon demand of any debit
balance or other obligations owing in any of my accounts with you. I shall be
liable to you for any deficiency remaining in any such accounts in the event of
the liquidation thereof, in whole or in part, by you or by me. I will pay such
obligations and indebtedness upon demand.
PLEDGE OF SECURITIES AND OTHER PROPERTY
23. Within the limitations imposed by applicable laws, rules and regulations,
all securities and other property may be pledged and repledged by you from
time to time, without notice to me, either separately or in common with other
such securities and other property, for any amount due in my accounts, or for
any greater amount. You may do so without retaining in your possession or under
your control for delivery a like amount of similar securities or other
property.
LENDING AGREEMENT
24. In return for your extension or maintenance of any credit in my account, I
acknowledge and agree that the securities in my account, together with all
attendant rights of ownership, may be lent to you or lent out to others to the
extent not prohibited by applicable laws, rules and regulations. In connection
with such securities loans, you may receive and retain certain benefits to
which I will not be entitled. I understand that, in certain circumstances, such
loans could limit my ability to exercise voting rights, in whole or part, with
respect to the securities lent.
REPRESENTATION AS TO CAPACITY
TO ENTER INTO AGREEMENT
25. I represent that no one except the person(s) signing this Agreement has an
interest in my account or accounts with you. If a natural person, I represent
that I am of full age, am not an employee of any exchange, nor of any
corporation of which any exchange owns a majority of the capital stock, nor of
a member of any exchange, nor of a member firm or member corporation registered
on any exchange, nor of a bank, trust company, insurance company or any
corporation, firm or individual engaged in the business of dealing either as
broker or as principal in securities, bills of exchange, acceptances or other
forms of commercial paper. If any of the foregoing representations is
inaccurate or becomes inaccurate, I will promptly so advise you in writing.
PARAGRAPHS 26 THROUGH 34 BELOW DO NOT APPLY TO CMA SUBACCOUNTS.
PARAGRAPHS 26 THROUGH 31 BELOW APPLY ONLY WHEN THE CARD/CHECK ACCOUNT IS USED,
INCLUDING WHEN CHECKS AND/OR CARDS ARE OBTAINED.
CARD OWNERSHIP
26. I certify that all information I have provided in the CMA Application and
Agreement, including in the CMA Check and Visa Information Form, is true and
correct and that you and the Banks may rely on and verify such information.
The Card remains the property of the Issuer and may be canceled by the Issuer at
any time without prior notice.
LIABILITY
27. I will be liable for all authorized transactions arising through the use of
the Card(s) and checks in connection with my Card/Check Account. I will be
responsible, on a continuing basis, for the safekeeping of my Card(s) and
Checks and shall not permit unauthorized persons to have access to my Card(s)
or Checks. I will also be responsible for reviewing my CMA Monthly Statement in
order to discover and report to MLPF&S the possible unauthorized use of my
Card(s) and Checks. I agree to notify MLPF&S immediately if I believe or have
reason to believe that my Card(s) or Checks have been or may be used by an
unauthorized person. Unless limited by law, l will be responsible for any and
all losses and damages that arise from any breach of my undertakings to
safeguard my Card(s) and Checks, to review my CMA Monthly Statement for
possible unauthorized activity and to promptly report any unauthorized activity
to MLPF&S.
I also agree to pay the reasonable costs and expenses of collection of any
unpaid balance due, including any accrued finance charges, as a result of any
overdraft(s), including but not limited to attorneys' fees, to the extent
allowed by law, involved in such collection. I understand that the Banks have
not taken a security interest in any of the assets in my Securities Account or
Money Accounts pursuant to this Agreement.
PURCHASING POWER
28. I agree that I will not incur charges to my Card/Check Account in excess of
my Purchasing Power. The Purchasing Power for my Card/Check Account will
be the total of any available free credit balance in my Securities Account, the
available balances in my Money Accounts, and, if applicable, the available loan
value of my securities in my Securities Account. I understand that my
Purchasing Power may fluctuate from day to day.
TRANSACTIONS EXCEEDING
PURCHASING POWER
29. I understand that I will be in default if I incur charges in my Card/Check
Account that exceed my Purchasing Power. If I am in default, you may, among
other things, terminate my subscription to the CMA Service. If I exceed my
Purchasing Power, CHASE may accept the transaction amount exceeding my
Purchasing Power as an overdraft, and advance funds to you or the Banks in the
amount exceeding my Purchasing Power. If CHASE does so, I will be notified and I
agree that I will immediately pay CHASE the amount of the overdraft and any
applicable finance charge which is computed as described in this section.
In each overdraft statement cycle, finance charges are figured by
applying a Daily Periodic Rate to the Average Daily Balance of overdrafts and
by multiplying the resulting figure by the number of days in that statement
cycle. The Average Daily Balance of overdrafts is calculated each day by
starting with the beginning balance of amounts I owe, adding any new overdrafts
and subtracting any payments or credits received that day and unpaid finance
charges. This gives CHASE the daily balance of overdrafts. The Average Daily
Balance is calculated by adding all of the daily balances of overdrafts in that
statement cycle and dividing the total by the number of days in the overdraft
statement cycle. The Daily Periodic Rate that is applied is disclosed in the
Cash Management Account Program Description and is subject to change upon
notice. Finance charges accrue from the date CHASE accepts an overdraft until
the date payment is made.
Any payments that I make will be applied, as of the date of receipt by
CHASE, first to any accrued and unpaid finance charges and then to the balance
of overdrafts in the order in which they were incurred.
OVERDRAFT NOTICES
30. If CHASE extends an overdraft to me, I will be notified in writing. The
initial overdraft notice will inform me of the overdraft(s), which is due and
payable by me immediately, together with any accrued finance charges. Subsequent
overdraft notices from CHASE will detail, among other disclosures, any
overdraft(s) plus finance charges imposed on such overdraft(s), payments and
credits and the balance due.
ACCOUNT INQUIRIES
31. I understand that inquiries and error allegations concerning my Card/Check
Account, any overdraft notices and my monthly statement should be directed
through MLPF&S.
PARAGRAPHS 32 THROUGH 34 BELOW APPLY ONLY IF I SUBSCRIBE TO THE CMA VISA(R) GOLD
PROGRAM.
AGREEMENT TO THE
CMA VISA GOLD PROGRAM
32. In addition to the following paragraphs, I understand that paragraphs 1
through 16, 26 through 31 and, if my account is established with the Investor
CreditLine service, 17 through 25 also apply to the CMA Visa Gold Program.
In the event I am applying for the CMA Visa Gold Program but I am not approved
for participation in that program, I apply for and authorize the issuance
of one or more Classic Visa cards and checks for use with my CMA account. In
addition, if upon expiration of the Visa Gold Program Card(s) issued to me, I
do not qualify for reissue of such Card(s), I apply for and authorize the
issuance of Classic Visa Card(s) and Checks. If a Classic Visa Card(s) and
Checks are issued to me, I understand that this Agreement, with the exception
of paragraphs 32 through 34 remain in full force and effect.
LIMITATIONS AND DIRECT
DEBITING OF MY ACCOUNT
33. I agree to pay MLNF for the Card purchases posted to my Card/Check Account.
I authorize MLPF&S to pay MLNF from the assets in my Money Accounts
(including by redeeming Money Fund shares or withdrawing ISA account balances,
if any), and/or from my Securities Account (including, if applicable, by making
loans to me). On my behalf, MLPF&S will pay MLNF, pursuant to the terms of this
Agreement and the Documents, on the fourth Wednesday of each month for all Card
purchases posted to my Card/Check Account for that monthly period. However, if
MLNF has not received and accepted my signed Statement of Purpose form (Federal
Reserve Form FR U-1), I understand that the entire amount of the charges posted
to my Card/Check account will be debited from my account once the sum of my
Visa card purchases exceeds $100,000 in any monthly cycle. In addition, any
subsequent charges not exceeding $100,000 posted to my Card/Check account
during the same monthly cycle will be paid by direct debit to my account on the
fourth Wednesday of the month. I acknowledge that I have the right under
applicable federal law to receive advance notice of the varying amounts of the
debit described above but waive my right to do so, as long as the amount does
not exceed five hundred thousand dollars. If I choose, I may elect to have this
payment made by another means which is not otherwise incompatible with MLPF&S'
operations. If I choose to have this payment made by such other means, I will
notify MLPF&S in writing of my desire to do so.
AGREEMENT NOT TO
DISPOSE OF ASSETS
34. By subscribing to the CMA Visa Gold Program, I agree that I will not
dispose of my assets in my CMA Service account or any other account I may have
with either MLPF&S or MLNF, if such disposal will negatively affect my ability
to pay MLNF for Card transactions. However, I may continue to trade securities
in my Securities Account.
<PAGE> 1
EX-99.15
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN
OF
CMA TREASURY FUND
PURSUANT TO RULE 12b-1
WHEREAS, CMA Treasury Fund (the "Fund") is a no-load,
open-end investment company registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act")
and
WHEREAS, Merrill Lynch, Pierce, Fenner & Smith Incorporated
("MLPF&S") is a securities firm engaged in the business of
selling shares of investment companies to investors; and
WHEREAS, MLPF&S acts as the exclusive distributor and
representative of the Fund in the offer and sale of shares of the
Fund pursuant to a Distribution Agreement dated September 11,
1991 (the "Distribution Agreement"); and
WHEREAS, substantially all of the shareholders of the Fund
are participants in the Cash Management Account program (the "CMA
program") of MLPF&S and other investors whose Fund accounts are
serviced by MLPF&S financial consultants (collectively such
accounts being referred to herein as the "MLPF&S Fund Accounts";
the term "MLPF&S Fund Accounts" does not include those accounts
maintained directly with the Fund's Transfer Agent which are not
serviced by MLPF&S financial consultants); and
WHEREAS, MLPF&S financial consultants and other personnel
offer and sell shares to existing and prospective shareholders
<PAGE> 2
with MLPF&S Fund Accounts and provide shareholder services to
existing and prospective MLPF&S Fund Accounts; and
WHEREAS, the Fund desires to adopt a Distribution and
Shareholder Servicing Plan for the Fund pursuant to Rule 12b-1
under the Investment Company Act; and
WHEREAS, the Trustees of the Fund have determined that there
is a reasonable likelihood that adoption of this Distribution and
Shareholder Servicing Plan will benefit the Fund and the Fund's
shareholders:
NOW, THEREFORE, the Fund hereby adopts this Distribution and
Shareholder Servicing Plan (the "Plan") in accordance with Rule
12b-1 under the Investment Company Act on the following terms and
conditions:
1. The Fund is hereby authorized to pay MLPF&S a
distribution fee under the Distribution Agreement at the end of
each month at the annual rate of 0.125% of the average daily net
asset value of the MLPF&S Fund Accounts. The fee is not payable
with respect to the asset value of shareholders who maintain
their accounts directly with the Fund's Transfer Agent and whose
accounts are not serviced by MLPF&S financial consultants.
MLPF&S is obligated to expend the entire amount of the
distribution fee for compensation to MLPF&S financial consultants
and other directly involved branch office personnel for selling
shares of the Fund to shareholders with MLPF&S Fund Accounts and
for providing direct personal services to such shareholders,
2
<PAGE> 3
including furnishing information as to the status of Fund
accounts and handling purchase and redemption orders for Fund
shares. The distribution fee may not be used to pay for other
expenditures of MLPF&S such as sales contests, special seminars
and media advertising relating to the Fund. The distribution fee
is not compensation for the administrative and operational
services rendered to the Fund by MLPF&S in processing share
orders and administering shareholder accounts.
2. MLPF&S shall provide the Fund for review by the Trustees,
and the Trustees shall review at least quarterly, a written
report complying with the requirements of Rule 12b-1 regarding
the disbursement of the distribution fee of the Fund during such
period. The report shall include an itemization of the
distribution expenses incurred by MLPF&S in respect of the Fund,
the purpose of such expenditures and a description of the
benefits derived by the Fund therefrom.
3. In the event that the aggregate payments received by
MLPF&S under the Distribution Agreement in any fiscal year of the
Fund shall exceed the amount of the distribution expenditures of
MLPF&S in respect of the Fund in such fiscal year, MLPF&S shall
be required to reimburse the Fund the amount of such excess.
4. This Plan shall not take effect until it has been
approved by a vote of at least a majority, as defined in the
Investment Company Act, of the outstanding voting securities of
the Fund.
3
<PAGE> 4
5. This Plan shall not take effect until it has been
approved, together with any related agreements, by votes of a
majority of both (a) the Trustees of the Fund and (b) those
Trustees of the Fund who are not "interested persons" of the
Fund, as defined in the Investment Company Act, and have no
direct or indirect financial interest in the operation of this
Plan or any agreements related to it (the "Rule 12b-1 Trustees"),
cast in person at a meeting or meetings called for the purpose of
voting on this Plan and such related agreements.
6. This Plan, if approved pursuant to Paragraphs 4 and 5
hereof, shall take effect on the first day of the month following
approval of the Plan pursuant to Paragraph 4 hereof.
7. This Plan shall continue in effect for so long as such
continuance is specifically approved at least annually in the
manner provided for approval of this Plan in Paragraph 5.
8. This Plan may be terminated at any time by vote of a
majority of the Rule 12b-1 Trustees, or by vote of a majority of
the outstanding voting securities of the Fund.
9. This Plan may not be amended to increase materially the
rate of distribution payments provided for in Paragraph 1 hereof
unless such amendment is approved in the manner provided for
initial approval in Paragraphs 4 and 5 hereof, and no material
amendment to the Plan shall be made unless approved in the manner
provided for approval and annual renewal in Paragraph 5 hereof.
4
<PAGE> 5
10. While this Plan is in effect, the selection and
nomination of Trustees who are not interested persons, as defined
in the Investment Company Act, of the Fund shall be committed to
the discretion of the Trustees who are not interested persons.
11. The Fund shall preserve copies of this Plan and any
related agreements and all reports made pursuant to Paragraph 2
hereof, for a period of not less than six years from the date of
this Plan or the date of the agreements or such report, as the
case may be, the first two years in an easily accessible place.
12. The Declaration of Trust establishing CMA Treasury Fund,
dated October 24, 1990, 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 of the Fund, "CMA Treasury Fund," refers to the
Trustees under the Declaration collectively as Trustees, but not
as individuals or personally; and no Trustee, shareholder,
officer, employee or agent of CMA Treasury Fund shall be held to
any personal liability, nor shall resort be had to their private
property for the satisfaction of any obligation or claim of said
CMA Treasury Fund, but the Fund Property only shall be liable.
5
<PAGE> 6
IN WITNESS WHEREOF, the Fund has executed this Distribution
and Shareholder Servicing Plan as of this llth day of September,
1991.
CMA TREASURY FUND
By
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By
6
<PAGE> 1
Ex-99.16
CMA TREASURY
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATION
AS OF JULY 31, 1991
Base Period Return
<TABLE>
<CAPTION>
Including Excluding
gains and losses gains and losses
<S> <C> <C>
Net Income of one share for a
seven-day base period .001040 .001029
Divided by
Net asset value of one share at
beginning of base period $1.00 $1.00
Equals
Base period return (unannualized) .001040 .001029
Annualized Return
Base period return (unannualized) .001040 .001029
Divided by 7
Multiplied by 365
Equals .00014857 .000147
Annualized return 5.42% 5.37%
Effective or Compounded Yield
Base period return (unannualized)* .001040 .001029
Divided by 7 .00014857 .000147
Add
1
Equals 1.00014857 1.000147
Sum raised to 365 th power 1.05572 1.05512
Subtract
1
Equals .05572 .05512
Effective or Compounded Yield 5.57% 5.51%
</TABLE>
Calculated using base period return (unannualized) excluding gains
and losses.
<PAGE> 1
Exhibit 11
INDEPENDENT AUDITORS' CONSENT
CMA Treasury Fund
We consent to the use in Post-Effective Amendment No. 5 to Registration
Statement No. 33-37439 of our report dated April 28, 1995 appearing in the
Statement of Additional Information, which is a part of such Registration
Statement, and to the reference to us under the caption "Financial Highlights"
appearing in the Prospectus, which also is a part of such Registration
Statement.
/s/ DELOITTE & TOUCHE LLP
- -----------------------------
Deloitte & Touche LLP
Princeton, New Jersey
July 27, 1995
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-START> APR-01-1994
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 1424823880
<INVESTMENTS-AT-VALUE> 1424913220
<RECEIVABLES> 9555184
<ASSETS-OTHER> 115150
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1434583554
<PAYABLE-FOR-SECURITIES> 4690347
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1169318
<TOTAL-LIABILITIES> 5859665
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1428634549
<SHARES-COMMON-STOCK> 1428634550
<SHARES-COMMON-PRIOR> 1220582203
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 89340
<NET-ASSETS> 1428723889
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 60768157
<OTHER-INCOME> 0
<EXPENSES-NET> 7830186
<NET-INVESTMENT-INCOME> 52937971
<REALIZED-GAINS-CURRENT> 239944
<APPREC-INCREASE-CURRENT> 231517
<NET-CHANGE-FROM-OPS> 53409432
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 52937971
<DISTRIBUTIONS-OF-GAINS> 239944
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6534376700
<NUMBER-OF-SHARES-REDEEMED> 6379458214
<SHARES-REINVESTED> 53133860
<NET-CHANGE-IN-ASSETS> 208283863
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5626244
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7830186
<AVERAGE-NET-ASSETS> 1266998433
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .04
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .04
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .62
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
