Exhibit 17(d)
(BULL LOGO) Merrill Lynch Investment Managers www.mlim.ml.com
Prospectus
April 30, 2002
The Corporate Fund Investment Accumulation Program
The Corporate Fund Investment Accumulation Program is only open to holders of
units of Corporate Income Fund, International Bond Fund and Corporate
Investment Trust Fund for reinvestment of distributions on those units.
This Prospectus contains information you should know before investing,
including information about risks. Please read it before you invest and keep
it for future reference.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation
to the contrary is a criminal offense.
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Table of Contents
PAGE
KEY FACTS
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The Corporate Fund Investment Accumulation Program at a Glance........ 3
Risk/ Return Bar Chart................................................ 5
Fees and Expenses..................................................... 6
DETAILS ABOUT THE PROGRAM
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How the Program Invests............................................... 7
Investment Risks...................................................... 8
YOUR ACCOUNT
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Participation in the Program..........................................16
How to Buy, Sell, Transfer and Exchange Shares........................17
MANAGEMENT OF THE PROGRAM
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Fund Asset Management.................................................21
Financial Highlights..................................................22
FOR MORE INFORMATION
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Shareholder Reports...........................................Back Cover
Statement of Additional Information...........................Back Cover
THE CORPORATE FUND INVESTMENT ACCUMULATION PROGRAM
Key Facts
In an effort to help you better understand the many concepts involved in
making an investment decision, we have defined the highlighted terms in this
prospectus in the sidebar.
Fixed-Income Securities -- securities that pay a fixed rate of interest or a
fixed dividend.
Corporate Bonds or Notes -- fixed-income debt securities issued by
corporations, as distinct from securities issued by a government or its
agencies or instrumentalities.
Investment Grade Securities -- fixed-income securities rated in the four
highest rating categories by recognized rating agencies, including Moody's
Investors Service, Inc., Standard & Poor's or Fitch, Inc.
Foreign Securities -- securities issued by a foreign corporation or
government, as distinct from securities issued by a U.S. corporation or the
U.S. government.
THE CORPORATE FUND INVESTMENT ACCUMULATION
PROGRAM AT A GLANCE
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What is the Corporate Fund Investment Accumulation Program (the "Program")?
The Program invests distributions made to holders of units of the Corporate
Income Fund, International Bond Fund and the Corporate Investment Trust Fund.
Holders of units of these unit trust funds may elect to have their
distributions reinvested in shares of the Program rather than paid in cash.
The Program is not open to investment by persons who are not holders of units
of the participating unit trust funds and investments in the Program are
limited to reinvestment of distributions.
What is the Program's investment objective?
The investment objective of the Program is to provide shareholders with a high
level of current income by investing in a diversified portfolio of
fixed-income securities that are primarily corporate bonds or notes.
What are the Program's main investment strategies?
Under normal circumstances, the Program invests at least 80% of its net assets
in corporate bonds or notes. The Program invests primarily in corporate bonds
with remaining maturities of two years or more. The Program invests only in
investment grade securities and, measured at the time of purchase, at least
75% of the securities in which the Program invests will be rated in the three
highest rating categories. The Program may also invest up to 25% of its total
assets in foreign securities that meet the Program's investment criteria. When
choosing investments, the Program management considers various factors,
including credit quality of issuers, yield analysis, and diversification.
What are the main risks of investing in the Program?
As with any fund, the value of the Program's investments -- and therefore the
value of the Program's shares -- may fluctuate. These changes may occur in
response to interest rate changes or in response to other factors, including
financial condition, that may affect a particular issuer or obligation.
Generally, when interest rates go up, the value of fixed-income securities
goes down. Bonds with longer maturities are affected more by changes in
interest rates than bonds with shorter maturities. The Program faces
additional risks when it invests in foreign securities, including changes in
foreign currency exchange rates, liquidity risk and the possibility of
substantial volatility due
THE CORPORATE FUND INVESTMENT ACCUMULATION PROGRAM 3
Key Facts
to adverse political, economic or other developments. If the value of the
Program's investments goes down, you may lose money.
Who should invest?
The Program allows for the automatic reinvestment of distributions made to
holders of units of certain unit trust funds. The Program may be an
appropriate investment for you if you:
o Want to automatically reinvest distributions you receive from a
participating unit trust fund
o Are looking for an investment that provides income
o Want a professionally managed and diversified portfolio
o Are willing to accept the risk of loss of income and principal caused
by negative economic developments, changes in interest rates or adverse
changes in the price of bonds in general
4 THE CORPORATE FUND INVESTMENT ACCUMULATION PROGRAM
RISK/RETURN BAR CHART
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The bar chart and table shown below provide an indication of the risks of
investing in the Program. The bar chart shows changes in the Program's
performance for each of the past ten calendar years. The table compares the
average annual total returns of the Program's shares for the periods shown
with those of the Merrill Lynch US Corporate A-AAA Rated Index. The after-tax
returns are calculated using the historical highest marginal Federal
individual income tax rates in effect during the periods measured. The
after-tax returns do not reflect the impact of state and local taxes. Actual
after-tax returns depend on an investor's tax situation and may differ from
those shown. The after-tax returns shown are not relevant to investors who
hold their Program shares through tax-deferred arrangements, such as 401(k)
plans or individual retirement accounts or through tax advantaged education
savings accounts. How the Program performed in the past is not necessarily an
indication of how the Program will perform in the future.
[GRAPHIC OMITTED]
During the ten-year period shown in the bar chart, the highest return for a
quarter was 5.60% (quarter ended March 31, 1993) and the lowest return for a
quarter was -4.75% (quarter ended March 31, 1994). The Program's year-to date
return as of March 31, 2002 was -1.16%.
Average Annual Total Returns Past Past Past
(as of December 31, 2001) One Year Five Years Ten Years
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The Corporate Fund IAP
Return Before Taxes* 8.32% 6.08% 6.36%
Return After Taxes on Distributions* 6.13% 3.72% 3.75%
Return After Taxes on Distributions and 5.02% 3.67% 3.81%
Sale of Program Shares*
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ML US Corporate A-AAA Rated Index** 10.86% 7.47% 7.76%
(reflects no deduction for fees, expenses or taxes)
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*Includes all applicable fees and sales charges.
**This unmanaged Index is comprised of all industrial bonds rated A-AAA, of
all maturities.
Past performance is not predictive of future performance.
THE CORPORATE FUND INVESTMENT ACCUMULATION PROGRAM 5
Key Facts
UNDERSTANDING EXPENSES
Fund investors pay various fees and expenses, either directly or indirectly.
Listed below are some of the main types of expenses, which the Program may
charge:
Expenses paid directly by the shareholder:
Shareholder Fees -- these include sales charges which you may pay when you buy
or sell shares of the Program.
Expenses paid indirectly by the shareholder:
Annual Program Operating Expenses -- expenses that cover the costs of
operating the Program.
Management Fee -- a fee paid to the Investment Adviser for managing the
Program.
FEES AND EXPENSES
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This table shows the different fees and expenses that you may pay if you buy
and hold shares of the Program. Future expenses may be greater or less than
those indicated below.
Shareholder Fees (fees paid directly from your investment):
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Maximum Sales Charge (Load) imposed on purchases (as a percentage of
offering price) None
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Maximum Deferred Sales Charge (Load) (as a percentage of original purchase
price or redemption proceeds, whichever is lower) None
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Maximum Sales Charge (Load) imposed on Dividend Reinvestments None
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Redemption Fee None
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Exchange Fee None
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Annual Program Operating Expenses (expenses that are deducted from Program
assets):
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Management Fee 0.50%
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Distribution and/or Service (12b-1) Fees None
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Other Expenses 0.72%
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Total Annual Program Operating Expenses 1.22%
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Example
This example is intended to help you compare the cost of investing in the
Program with the cost of investing in other mutual funds by illustrating the
costs to you if you redeem after one, three, five and ten years.
This example assumes that you invest $10,000 in the Program for the time
periods indicated, that dividends are reinvested, that your investment has a
5% return each year and that the Program's operating expenses remain the same.
This assumption is not meant to indicate you will receive a 5% annual rate of
return. Your annual return may be more or less than the 5% used in this
example. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
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$ 124 $ 387 $ 670 $ 1,477
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6 THE CORPORATE FUND INVESTMENT ACCUMULATION PROGRAM
Details About the Program
ABOUT THE PORTFOLIO MANAGERS
Robert Peterson is a Vice President and a co-portfolio manager of the Program.
Mr. Peterson has been a Managing Director of Merrill Lynch Investment Managers
since 1997 and was a Vice President from 1985 to 1997. Mr. Peterson has been
responsible for the management of the Program since 2002.
Melinda Raso is a Vice President and a co-portfolio manager of the Program.
Ms. Raso has been a Vice President of Merrill Lynch Investment Managers since
1994. Ms. Raso has been responsible for the management of the Program since
2002.
HOW THE PROGRAM INVESTS
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The investment objective of the Program is to seek to provide shareholders
with a high level of current income. The Program invests in a diversified
portfolio of fixed-income securities. Under normal circumstances, the Program
invests at least 80% of its net assets in corporate bonds or notes. The
Program invests primarily in corporate bonds with remaining maturities of two
years or more. The fixed-income securities will be payable in U.S. dollars and
will not have any equity conversion or other equity features. Such securities
may be secured or unsecured, or may be subordinated to other indebtedness.
The Program invests only in investment grade securities and, measured at the
time of purchase, at least 75% of the securities in which the Program invests
will be rated in the three highest rating categories ("A" or better). Under
current market conditions, the Board of Directors of the Program has
determined that the Program will not purchase fixed-income securities if one
or more of the recognized rating agencies has rated the security below
investment grade. However, the Program may continue to hold securities that,
after purchase, are downgraded to a rating below investment grade. This policy
adopted by the Board of Directors is discretionary and may be changed from
time to time.
The Program may invest up to 25% of its assets in foreign securities that meet
the Program's investment criteria.
At times the Program may have a high portfolio turnover rate which may result
in higher trading costs and adverse tax consequences.
Program management considers a variety of factors when choosing investments,
such as:
o Credit Quality of Issuers -- based on bond ratings and other factors
including the financial condition of the issuer and general economic
conditions.
o Yield Analysis -- takes into account factors such as the different
yields available on different types of obligations and the shape of the
yield curve (yields on obligations having the same credit
characteristics but different maturities -- longer term obligations
typically have higher yields).
THE CORPORATE FUND INVESTMENT ACCUMULATION PROGRAM 7
Details About the Program
o Diversification -- The Program will not concentrate its investments in a
single industry. The Program seeks to achieve this by attempting to
diversify its investments, while taking into consideration the
availability of investments meeting the Program's other investment
criteria.
ABOUT THE INVESTMENT ADVISER
The Program is managed by Fund Asset Management.
As a temporary measure for defensive purposes, or to provide liquidity, the
Program may invest without limitation in short-term instruments. Short-term
investments may limit the potential for income on your shares. During
defensive periods the Program may not achieve its investment objective.
Although not among its principal strategies, the Program may also invest in
collateralized mortgage obligations, and may lend its portfolio securities,
invest in repurchase agreements and make forward commitments. For further
information on these investments, see the Statement of Additional Information.
INVESTMENT RISKS
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This section contains a summary discussion of the general risks of investing
in the Program. As with any mutual fund, there can be no guarantee that the
Program will meet its investment objective or that the Program's performance
will be positive for any period of time.
Bond Market and Selection Risk -- Bond market risk is the risk that the bond
market will go down in value, including the possibility that the market will
go down sharply and unpredictably. Selection risk is the risk that the
investments that Program management selects will underperform the market or
other funds with similar investment objectives and investment strategies.
Credit Risk -- Credit risk is the risk that the issuer will be unable to pay
the interest or principal when due. The degree of credit risk depends on both
the financial condition of the issuer and the terms of the obligation.
8 THE CORPORATE FUND INVESTMENT ACCUMULATION PROGRAM
Interest Rate Risk -- Interest rate risk is the risk that prices of
fixed-income securities generally increase when interest rates decline and
decrease when interest rates increase. Prices of longer term securities
generally change more in response to interest rate changes than prices of
shorter term securities.
Risks associated with certain types of obligations in which the Program may
invest include:
Foreign Market Risk -- Since the Program may invest in foreign securities, it
offers the potential for more diversification than an investment only in the
United States. This is because securities traded on foreign markets have often
(though not always) performed differently than securities in the United
States. However, such foreign investments involve special risks not present in
U.S. investments that can increase the chances that the Program will lose
money. In particular, investment in foreign securities involves the following
risks, which are generally greater for investments in emerging markets.
o The economies of certain foreign markets often do not compare favorably
with the economy of the United States with respect to such issues as
growth of gross national product, reinvestment of capital, resources
and balance of payments position. Certain such economies may rely
heavily on particular industries or foreign capital and are more
vulnerable to diplomatic developments, the imposition of economic
sanctions against a particular country or countries, changes in
international trading patterns, trade barriers and other protectionist
or retaliatory measures.
o Investments in foreign markets may also be adversely affected by
governmental actions such as the imposition of capital controls,
nationalization of companies or industries, expropriation of assets or
the imposition of punitive taxes.
o The governments of certain countries may prohibit or impose substantial
restrictions on foreign investing in their capital markets or in
certain industries. Any of these actions could severely affect security
prices, impair the Program's ability to purchase or sell foreign
securities or transfer its assets or income back into the United
States, or otherwise adversely affect the Program's operations.
THE CORPORATE FUND INVESTMENT ACCUMULATION PROGRAM 9
Details About the Program
o Other foreign market risks include foreign exchange controls,
difficulties in pricing securities, defaults on foreign government
securities, difficulties in enforcing favorable legal judgments in
foreign courts and political and social instability. Legal remedies
available to investors in certain foreign countries may be less
extensive than those available to investors in the United States or
other foreign countries.
o Because there are fewer investors in foreign markets and a smaller
number of securities traded each day, it may be difficult for the
Program to buy and sell securities on those exchanges. In addition,
prices of foreign securities may go up and down more than prices of
securities traded in the United States.
o Non-U.S. markets have different clearance and settlement procedures and
in certain markets, settlements may be unable to keep pace with the
volume of securities transactions which may cause delays. This means
that the Program's assets may be uninvested and not earning returns.
The Program may miss investment opportunities or be unable to dispose
of a security because of these delays.
Currency Risk and Exchange Risk -- Securities in which the Program invests may
be denominated or quoted in currencies other than the U.S. dollar. Changes in
foreign currency exchange rates will affect the value of such securities of
the Program. Generally, when the U.S. dollar rises in value against a foreign
currency, a security denominated in that currency loses value because the
currency is worth fewer U.S. dollars. Conversely, when the U.S. dollar
decreases in value against a foreign currency, a security denominated in that
currency gains value because the currency is worth more U.S. dollars. This
risk, generally known as "currency risk," means that a strong U.S. dollar will
reduce returns for U.S. investors while a weak U.S. dollar will increase those
returns.
Governmental Supervision and Regulation/ Accounting Standards -- Many foreign
governments supervise and regulate brokers and the sale of securities less
than the United States does. Some countries may not have laws to protect
investors the way that the U.S. securities laws do. For example, some foreign
countries may have no laws or rules against insider trading. Insider trading
occurs when a person buys or sells a company's securities based on non-public
information about that company. Accounting standards in other
10 THE CORPORATE FUND INVESTMENT ACCUMULATION PROGRAM
counties are not necessarily the same as in the United States. If the
accounting standards in another country do not require as much detail as U.S.
accounting standards, it may be harder for Program management to completely
and accurately determine a company's financial condition. Also, brokerage
commissions and other costs of buying or selling securities often are higher
in foreign countries than they are in the United States. This reduces the
amount the Program can earn on its investments.
Certain Risks of Holding Program Assets Outside the United States -- The
Program generally holds its foreign securities and cash in foreign banks and
securities depositories. Some foreign banks and securities depositories may be
recently organized or new to the foreign custody business. In addition, there
may be limited or no regulatory oversight over their operations. Also, the
laws of certain countries may put limits on the Program's ability to recover
its assets if a foreign bank, depository or issuer of a security, or any of
their agents, goes bankrupt. In addition, it is often more expensive for the
Program to buy, sell and hold securities in certain foreign markets than in
the United States The increased expense of investing in foreign markets
reduces the amount the Program can earn on its investments and typically
results in a higher operating expense ratio for the Program than investment
companies invested only in the United States.
Emerging Markets Risk -- The risks of foreign investments are usually much
greater for emerging markets. Investments in emerging markets may be
considered speculative. Emerging markets include those in countries defined as
emerging or developing by the World Bank, the International Finance
Corporation, or the United Nations. Emerging markets are riskier because they
develop unevenly and may never fully develop. They are more likely to
experience hyperinflation and currency devaluations, which adversely affects
returns to U.S. investors. In addition. the securities markets in many of
these countries have far lower trading volumes and less liquidity than
developed markets. Since these markets are so small, they may be more likely
to suffer sharp and frequent price changes or long-term price depression
because of adverse publicity, investor perceptions, or the actions of a few
large investors. In addition, traditional measures of investment value used in
the United States, such as price to earnings ratios, may not apply to certain
small markets.
Many emerging markets have histories of political instability and abrupt
changes in policies. As a result, their governments are more likely to take
actions that are hostile or detrimental to private enterprise or foreign
THE CORPORATE FUND INVESTMENT ACCUMULATION PROGRAM 11
Details About the Program
investment than those of more developed countries. Certain emerging markets
may also face other significant internal or external risks, including the risk
of war, and ethnic, religious, and racial conflicts. In addition, governments
in many emerging market countries participate to a significant degree in their
economies and securities markets, which may impair investment and economic
growth.
Sovereign Debt -- The Program may invest in sovereign debt securities issued
or guaranteed by foreign government entities. Investments in sovereign debt
subjects the Program to the risk that a government entity may delay or refuse
to pay interest or repayment of principal on its sovereign debt. Some of these
reasons may include: cash flow problems, insufficient foreign currency
reserves, political considerations, the relative size of its debt position to
its economy or its failure to put in place economic reforms required by the
International Monetary Fund or other multilateral agencies. If a government
entity defaults it may ask for more time in which to pay, or for further
loans. There is no legal process for collecting sovereign debts that a
government does not pay.
Collateralized Mortgage Obligations -- The Program may invest in
collateralized mortgage obligations ("CMOs"), which are pass-through
securities collateralized by mortgage pools. CMOs are created by dividing the
principal and interest payments collected on a pool of mortgages into several
revenue streams (tranches) with different priority rights to portions of the
underlying mortgage payments. In general, mortgage-backed securities represent
the right to receive a portion of principal and/or interest payments made on a
pool of residential or commercial mortgage loans. When interest rates fall,
borrowers may refinance or otherwise repay principal on their mortgages
earlier than scheduled. When this happens, certain types of mortgage-backed
securities will be paid off more quickly than originally anticipated and the
Program has to invest the proceeds in securities with lower yields. This risk
is known as "prepayment risk." When interest rates rise, certain types of
mortgage-backed securities will be paid off more slowly than originally
anticipated and the value of these securities will fall. This risk is known as
extension risk.
Because of prepayment risk and extension risk, mortgage-backed securities
react differently to changes in interest rates than other fixed-income
securities. Small movements in interest rates (both increases and decreases)
may quickly and significantly reduce the value of certain mortgage-backed
securities.
12 THE CORPORATE FUND INVESTMENT ACCUMULATION PROGRAM
Most mortgage-backed securities are issued by federal government agencies,
such as the Government National Mortgage Association (Ginnie Mae), the Federal
Home Loan Mortgage Corporation (Freddie Mac) or the Federal National Mortgage
Association (Fannie Mae). Principal and interest payments on mortgage-backed
securities issued by federal government agencies are guaranteed by either the
federal government or a government agency. This means that such securities
have very little credit risk. Other mortgage-backed securities are issued by
private corporations rather than federal agencies. Private mortgage backed
securities have credit risk as well as prepayment risk and extension risk.
Certain CMO tranches may represent a right to receive interest only (IOs),
principal only (POs) or an amount that remains after other floating-rate
tranches are paid (an inverse floater). These securities are frequently
referred to as "mortgage derivatives" and may be extremely sensitive to
changes in interest rates. Interest rates on inverse floaters, for example,
vary inversely with a short-term floating rate (which may be reset
periodically by a dutch auction, a remarketing agent or by reference to a
short-term interest rate index). Interest rates on inverse floaters will
decrease when short-term rates increase, and will increase when short-term
rates decrease. These securities have the effect of providing a degree of
investment leverage. In response to changes in market interest rates or other
market conditions, the value of an inverse floater may increase or decrease at
a multiple of the increase or decrease in the value of the underlying
securities. The values of inverse floaters are therefore more volatile than
their underlying securities. If the Program invests in CMO tranches (including
CMO tranches issued by government agencies) and interest rates move in a
manner not anticipated by Program management, it is possible that the Program
could lose all or substantially all of its investment.
Restricted Securities -- The Program may invest up to 10% of its total assets
in restricted securities. Restricted securities have contractual or legal
restrictions on their resale. They may include "private placement" securities
that the Program buys directly from the issuer. Private placement and other
restricted securities may not be listed on an exchange and may have no active
trading market.
Restricted securities may be illiquid. The Program may be unable to sell them
on short notice or may be able to sell them only at a price below current
value. The Program may get only limited information about the issuer, so it
may be less able to predict a loss. In addition, if Program management
THE CORPORATE FUND INVESTMENT ACCUMULATION PROGRAM 13
Details About the Program
receives material adverse nonpublic information about the issuer, the Program
will not be able to sell the securities.
When-Issued Securities, Delayed-Delivery Securities and Forward Commitments --
When-issued and delayed-delivery securities and forward commitments involve
the risk that the security the Program buys will lose value prior to its
delivery. There also is the risk that the security will not be issued or that
the other party will not meet its obligation. If this occurs, the Program
loses the investment opportunity for the assets it has set aside to pay for
the security and any gain in the security's price.
Repurchase Agreements -- The Program may invest in obligations which are
subject to repurchase agreements with any member bank of the Federal Reserve
System or primary dealer in U.S. Treasury Securities. The bank or dealer
agrees to repurchase the security from the Program at a set time and price,
which sets the yield. If the bank or dealer defaults, the Program may suffer
time delays and incur costs and possible losses.
Securities Lending -- The Program may lend securities to financial
institutions that provide government securities as collateral. Securities
lending involves the risk that the borrower may fail to return the securities
in a timely manner or at all. As a result, the Program may lose money and
there may be a delay in recovering the loaned securities. The Program could
also lose money if it does not recover the securities and/or the value of the
collateral falls, including the value of investments made with cash
collateral. These events could trigger tax consequences to the Program.
Illiquid Investments -- The Program may invest up to 15% of its net assets in
illiquid securities that it cannot easily sell within seven days at current
value or that have contractual or legal restrictions on resale. If the Program
buys illiquid securities it may be unable to quickly sell them or may be able
to sell them only at a price below current value.
Borrowing and Leverage -- The Program may borrow for temporary emergency
purposes, including to meet redemptions. Borrowing may exaggerate changes in
the net asset value of Program shares and in the return on the Program's
portfolio. Borrowing will cost the Program interest expense and other fees.
The cost of borrowing may reduce the Program's return. Certain securities that
the Program buys may create leverage including, for example, when-issued
securities and forward commitments.
14 THE CORPORATE FUND INVESTMENT ACCUMULATION PROGRAM
STATEMENT OF ADDITIONAL INFORMATION
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If you would like further information about the Program, including how it
invests, please see the Statement of Additional Information.
THE CORPORATE FUND INVESTMENT ACCUMULATION PROGRAM 15
Your Account
PARTICIPATION IN THE PROGRAM
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The purpose of the Program is to permit you to reinvest distributions you
receive on units you hold of certain unit trust funds. The unit trust funds
include all series of the Corporate Income Fund, International Bond Fund and
the Corporate Investment Trust Fund. Distributions on units held by you will
be paid to you in cash unless you elect to reinvest the distributions in
shares of the Program by sending written notice to the program agent. The
program agent is The Bank of New York, 5 Penn Plaza, New York, New York 10286.
You may also change an election you have made to participate in the Program by
notifying the program agent. Your initial notice and notice of any change must
be received by the program agent at least 10 days prior to the record date of
the first distribution to which you want such change to apply.
Distributions on units of the unit trust funds may consist of interest income
or capital gains or principal on the units. You may elect to have some or all
of these distributions reinvested in shares of the Program. Any distribution
that you elect to have reinvested in shares of the Program will be
automatically reinvested by the program agent on your behalf on the date the
distribution is made. On that date, the distribution will be applied to the
purchase of shares of the Program at net asset value, without a sales charge.
If you have elected to have distributions of principal on your units invested
in shares of the Program, the proceeds of redemption or payment at maturity of
securities held in the unit trust fund represented by your units will be
invested in shares of the Program, rather than being distributed to you in
cash.
The program agent will mail to you a report of each distribution that is
reinvested in shares of the Program. Even though distributions are being
reinvested in shares of the Program, for Federal income tax purposes, you will
be considered to have received those distributions.
The Board of Directors of the Program may decide to change the terms of
investment in shares of the Program or terminate the Program entirely without
notice to you. In addition, the Board of Directors of the Program may appoint
a substitute program agent or an additional program agent.
The administrators of the Program are Merrill Lynch, Pierce Fenner & Smith
Incorporated, Prudential Securities Incorporated, Morgan Stanley Dean Witter
Inc. and Salomon Smith Barney Inc. The Administrators are the sponsors of the
unit trust funds.
For further details of the terms and conditions of the Program see the
Statement of Additional Information.
16 THE CORPORATE FUND INVESTMENT ACCUMULATION PROGRAM
HOW TO BUY, SELL, TRANSFER AND EXCHANGE SHARES
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The chart on the following pages summarizes how to buy, sell, transfer and
exchange shares of the Program.
If You Want to Your Choices Information Important for You to Know
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Buy Shares First, decide whether you want to Refer to the description of the Program on page 16. Be sure
participate in the Program to read this prospectus carefully.
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Next, determine what distributions from Distributions from the unit trust funds may
the unit trust funds you want to reinvest consist of interest income, capital gains or principal.
You may reinvest the distributions of interest income or of
capital gains or of principal, or you may reinvest all
distributions.
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Notify the program agent of your election The notice must be in writing and received by the program
to reinvest some or all distributions you agent at least ten days before the record date for the
receive from the unit trust funds first distribution you want to reinvested.
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Decide whether your shares will be held Consult your securities dealer. Under certain circumstances,
in an account with your securities dealer your securities dealer may not be able to hold your shares
or with the program agent in your account with the securities dealer.
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Add to Your Purchase additional shares Once you have elected to participate in the Program,
Investment distributions from the unit trust funds that you have elected
to have reinvested in the Program will be automatically
reinvested. If you have not already elected to have all of
your distributions from unit trust funds reinvested, you may
notify the program agent that you wish to reinvest more of
your distributions.
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Acquire additional shares through the All dividends on shares of the Program are automatically
Program's automatic dividend reinvestment plan reinvested in additional shares of the Program without a
sales charge.
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Stop Reinvesting Notify the program agent in writing Your election to stop reinvesting some or all distributions
Distributions in from the unit trust funds in shares of the Program will be
Shares of the effective for any distribution that has a record date that is
Program more than ten days after the program agent receives your
written notice.
- ------------------------------------------------------------------------------------------------------------------------------------
Transfer Shares Transfer to a participating securities You may transfer your shares of the Program only to another
to Another dealer securities dealer that has entered into an agreement with
Securities Merrill Lynch. All future trading of these assets must be
Dealer coordinated by the receiving firm.
- ------------------------------------------------------------------------------------------------------------------------------------
THE CORPORATE FUND INVESTMENT ACCUMULATION PROGRAM 17
Your Account
If You Want to Your Choices Information Important for You to Know
- ------------------------------------------------------------------------------------------------------------------------------------
Transfer Shares Transfer to a non-participating You must either:
to Another securities dealer o Transfer your shares to an account with the Program
Securities Agent; or
Dealer (continued) o Sell your shares.
- ------------------------------------------------------------------------------------------------------------------------------------
Sell Your Shares Have your securities dealer submit your The price of your shares is based on the next calculation of
sales order to one of the Administrators net asset value after your order is placed. For your
redemption request to be priced at the net asset value on the
day of your request, you must submit your request to your
dealer prior to that day's close of business on the New York
Stock Exchange (generally 4:00 p.m. Eastern time). Any
redemption request placed after that time will be priced at
the net asset value at the close of business on the next
business day.
Securities dealers may charge a fee to process a redemption of
shares. No processing fee is charged if you redeem shares held
by the Program Agent.
The Program may reject an order to sell shares under certain
circumstances.
- ------------------------------------------------------------------------------------------------------------------------------------
Sell through the Program Agent You may sell shares held at the Program Agent by writing to
the Program Agent at the address on the inside back cover of
this prospectus. All shareholders on the account must sign the
letter. A signature guarantee will generally be required but
may be waived in certain limited circumstances. You can obtain
a signature guarantee from a bank, securities dealer,
securities broker, credit union, savings association, national
securities exchange or registered securities association. A
notary public seal will not be acceptable. If you hold stock
certificates, return the certificates with the letter. The
Program Agent will normally mail redemption proceeds within
seven days following receipt of a properly completed request.
If you hold share certificates, they must be delivered to the
Program Agent before they can be converted. Check with the
Program Agent or your securities dealer for details.
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18 THE CORPORATE FUND INVESTMENT ACCUMULATION PROGRAM
If You Want to Your Choices Information Important for You to Know
- ------------------------------------------------------------------------------------------------------------------------------------
Exchange Your You may exchange your shares for You can exchange your shares of the Program for shares of
Shares shares of another program. Be The Municipal Fund Accumulation Program, Inc. You must
sure to read that program's have held the shares used in the exchange for at least 60
prospectus calendar days before you can exchange to the other program.
To exercise the exchange privilege, contact one of the
Administrators or the Program Agent.
Although there is currently no limit on the number of
exchanges that you can make, the exchange privilege may be
modified or terminated at any time in the future.
- ------------------------------------------------------------------------------------------------------------------------------------
Because of the high cost of maintaining smaller shareholder accounts, the
Program may redeem the shares in your account if the net asset value of your
account falls below $500 due to redemptions you have made. You will be
notified that the value of your account is less than $500 before the Program
makes an involuntary redemption. You will then have 60 days to make an
additional investment to bring the value of your account to at least $500
before the Program takes any action. This involuntary redemption does not
apply to retirement plans or Uniform Gifts or Transfers to Minors Act
accounts.
THE CORPORATE FUND INVESTMENT ACCUMULATION PROGRAM
19
Your Account
Net Asset Value -- the market value of the Program's total assets after
deducting liabilities, divided by the number of shares outstanding.
Dividends -- ordinary income and capital gains paid to shareholders. Dividends
may be reinvested in additional Program shares as they are paid.
HOW SHARES ARE PRICED
- -------------------------------------------------------------------------------
Each distribution on your units will automatically be applied to purchase
shares at net asset value. This is the offering price. Shares are also
redeemed at their net asset value. The Program calculates its net asset value
(generally by using market quotations) each day the New York Stock Exchange is
open, as of the close of business on the Exchange, based on prices at the time
of closing. The Exchange generally closes at 4:00 p.m. Eastern time. The net
asset value used in determining your price is the next one calculated after
your purchase or redemption order is placed.
DIVIDENDS AND TAXES
- -------------------------------------------------------------------------------
The Program will distribute net investment income monthly and net realized
long-term capital gains annually. If you would like to receive dividends in
cash, contact the Program Agent. You will pay tax on dividends from the
Program whether you receive them in cash or additional shares.
By law, your dividends will be subject to a withholding tax if you have not
provided a taxpayer identification number or social security number or if the
number you have provided is incorrect.
If you redeem Program shares or exchange them for shares of The Municipal Fund
Accumulation Program, you generally will be treated as having sold your shares
and any gain on the transaction may be subject to tax. The Program intends to
make distributions that will either be taxed as ordinary income or capital
gains. Capital gains are generally taxed at different rates than ordinary
income dividends.
This section summarizes some of the consequences of an investment in the
Program under current Federal tax laws. It is not a substitute for personal
tax advice. You should consult your personal tax adviser about the potential
tax consequences to you of an investment in the Program under all applicable
tax laws.
20 THE CORPORATE FUND INVESTMENT ACCUMULATION PROGRAM
Management of the Program
FUND ASSET MANAGEMENT
- -------------------------------------------------------------------------------
Fund Asset Management, L.P., the Program's Investment Adviser, manages the
Program's investments and its business operations under the overall
supervision of the Program's Board of Directors. The Investment Adviser has
the responsibility for making all investment decisions for the Program. The
Investment Adviser has a sub-advisory agreement with Merrill Lynch Asset
Management U.K. Limited, an affiliate, under which the Investment Adviser may
pay a fee for services it receives. For the fiscal year ended December 31,
2001, the Program paid the Investment Adviser a fee at the annual rate of
0.50% of the average daily net assets of the Program.
Fund Asset Management was organized as an investment adviser in 1977 and
offers investment advisory services to more than 50 registered investment
companies. Fund Asset Management and its affiliates, including Merrill Lynch
Investment Managers, had approximately $517 billion in investment company and
other portfolio assets under management as of March 2002. This amount includes
assets managed for Merrill Lynch affiliates.
The Investment Adviser, together with the Administrators of the Program,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Prudential Securities
Incorporated, Morgan Stanley Dean Witter Inc., and Salomon Smith Barney Inc.
are responsible for the overall management of the Program's business
operations. The Administrators perform certain management services necessary
for the operation of the Program and provide all the office space, facilities
and necessary personnel for such services. For these services, the Investment
Adviser pays the Administrators an aggregate monthly fee at the annual rate of
0.20% of the Program's average daily net assets.
THE CORPORATE FUND INVESTMENT ACCUMULATION PROGRAM 21
Management of the Program
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
The Financial Highlights table is intended to help you understand the
Program's financial performance for the past five years. Certain information
reflects financial results for a single Program share. The total returns in
the table represent the rate that an investor would have earned or lost on an
investment in the Program (assuming reinvestment of all dividends). The
information has been audited by Deloitte & Touche LLP, whose report, along
with the Program's financial statements, are included in the Program's Annual
Report, which is available upon request.
For the Year Ended December 31,
Increase (Decrease) in -----------------------------------------
Net Asset Value: 2001 2000 1999 1998 1997
- --------------------------------------------------------------------------------------------------
Per Share Operating Performance:
- --------------------------------------------------------------------------------------------------
Net asset value, beginning of year $20.34 $ 19.77 $ 21.62 $ 21.13 $ 20.69
- --------------------------------------------------------------------------------------------------
Investment income -- net 1.08+ 1.21+ 1.17+ 1.19+ 1.22
- --------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investments -- net .57 .58 (1.84) .50 .44
- --------------------------------------------------------------------------------------------------
Total from investment operations 1.65 1.79 (.67) 1.69 1.66
- --------------------------------------------------------------------------------------------------
Less dividends:
Investment income -- net (1.08) (1.22) (1.18) (1.20) (1.22)
In excess of investment income -- net -- -- --++ -- --
- --------------------------------------------------------------------------------------------------
Total dividends (1.08) (1.22) (1.18) (1.20) (1.22)
- --------------------------------------------------------------------------------------------------
Net asset value, end of year $ 20.91 $ 20.34 $ 19.77 $ 21.62 $ 21.13
- --------------------------------------------------------------------------------------------------
Total Investment Return:
- --------------------------------------------------------------------------------------------------
Based on net asset value per share 8.32% 9.21% (3.14%) 8.24% 8.30%
- --------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- --------------------------------------------------------------------------------------------------
Expenses 1.22% 1.10% 1.11% 1.00% .99%
- --------------------------------------------------------------------------------------------------
Investment income -- net 5.17% 6.16% 5.69% 5.60% 5.84%
- --------------------------------------------------------------------------------------------------
Supplemental Data:
- --------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) $59,179 $58,967 $63,150 $71,131 $72,381
- --------------------------------------------------------------------------------------------------
Portfolio turnover 227% 127% 61% 66% 90%
- --------------------------------------------------------------------------------------------------
+Based on average shares outstanding.
++Amount is less than $.01 per share.
22 THE CORPORATE FUND INVESTMENT ACCUMULATION PROGRAM
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THE CORPORATE FUND INVESTMENT ACCUMULATION PROGRAM
For More Information
Shareholder Reports
Additional information about the Program's investments is available in the
Program's annual and semi-annual reports to shareholders. In the Program's
annual report you will find a discussion of the market conditions and
investment strategies that significantly affected the Program's performance
during its last fiscal year. You may obtain these reports at no cost by
calling 1-800-MER-FUND.
The Program will send you one copy of each shareholder report and certain
other mailings, regardless of the number of Program accounts you have. To
receive separate shareholder reports for each account, write to the Program
Agent at its mailing address. Include your name, address, tax identification
number and brokerage or Program account number. If you have any questions,
please call your securities dealer or the Program Agent at 1-800-221-7771.
Statement of Additional Information
The Program's Statement of Additional Information contains further information
about the Program and is incorporated by reference (legally considered to be
part of this prospectus). You may request a free copy by writing the Program
at The Bank of New York, 5 Penn Plaza, New York, New York 10286 or by calling
1-800-221-7771.
Contact your securities dealer or the Program at the following address and
telephone number if you have any shareholder inquiries or would like to
request other information about the Program. The address of the Program is
P.O. Box 9011, Princeton, New Jersey 08543-9011, and its telephone number is
(609) 282-2000.
Information about the Program (including the Statement of Additional
Information) can be reviewed and copied at the SEC's Public Reference Room in
Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the
public reference room. This information is also available on the SEC's
Internet site at http://www.sec.gov and copies may be obtained upon payment of
a duplicating fee by electronic request at the following e-mail address:
publicinfo@sec.gov, or by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-0102.
You should rely only on the information contained in this Prospectus. No one
is authorized to provide you with information that is different from the
information contained in this Prospectus.
Investment Company Act file #811-2642
(c) Fund Asset Management, L.P.
(BULL LOGO) Merrill Lynch
Investment Managers
Prospectus
April 30, 2002
The Corporate Fund
Investment Accumulation
Program
This Prospectus contains information you should know before investing,
including information about risks. Please read it before you invest and keep
it for future reference.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation
to the contrary is a criminal offense.
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