MERRILL LYNCH
RETIREMENT
RESERVES
MONEY FUND
Merrill Lynch
Retirement Series Trust
FUND LOGO
Annual Report
October 31, 1996
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance, which will fluctuate. The Fund
seeks to maintain a consistent $1.00 net asset value per share,
although this cannot be assured. An investment in the Fund is
neither insured nor guaranteed by the US Government. Statements and
other information herein are as dated and are subject to change.
<PAGE>
Merrill Lynch
Retirement Reserves
Money Fund
Box 9011
Princeton, New Jersey
08543-9011
Printed on post-consumer recycled paper
DEAR SHAREHOLDER
For the year ended October 31, 1996, Merrill Lynch Retirement
Reserves Money Fund's net annualized yield was 5.21%.* For the six-
month period ended October 31, 1996, the Fund's net annualized yield
was 4.95%. The Fund's 7-day yield as of October 31, 1996 was 4.98%.
The average portfolio maturity for Merrill Lynch Retirement Reserves
Money Fund at October 31, 1996 was 72 days, compared to 52 days at
April 30, 1996.
<PAGE>
The Environment
Investor perceptions regarding the direction of the US economy
shifted over the course of the six-month period ended October 31,
1996. Throughout the summer months, concerns of an overheating
economy and spiraling inflation dominated the financial markets as
investors focused on the increasing possibility of monetary policy
tightening by the Federal Reserve Board. However, as it became
apparent that inflationary pressures were still under control--and
when the Federal Reserve Board did not tighten monetary policy at
its September 24 meeting--the investment outlook became more
positive. These developments, coupled with several economic data
releases that showed growth was at or below expectations, helped to
assuage investors' concerns about an overheating economy. This,
combined with the steepness which had developed in the front end of
the fixed-income yield curve, prompted us to extend the Fund's
average life into the mid 70-day area. This was primarily
accomplished via the purchase of six-month money market instruments
and 12-month--18-month Treasury securities. Stock and bond prices
improved, with most broad-based stock market averages reaching
historic high levels. However, one factor potentially overshadowing
investor enthusiasm is the possibility that corporate profits may
have peaked for this economic cycle.
The US economy clearly has slowed from its strong growth rate during
the first half of 1996. Gross domestic product growth is slowing,
labor-cost pressures are subsiding, consumer confidence is easing,
and commodity prices are dropping. Investors are also anticipating
that President Clinton's re-election, combined with continued
Republican majorities in the House of Representatives and the
Senate, will prove positive for the nation's budget deficit. As 1996
draws to a close, investors are likely to continue to focus on the
economy. Evidence of continued growth at a non-inflationary pace
would be positive for the US capital markets.
[FN]
*Based on a constant investment throughout the period, with
dividends compounded daily, and reflecting a net return to the
investor after all expenses.
The Fund's portfolio composition at the end of the October period
and as of our last report is detailed below:
10/31/96 4/30/96
<PAGE>
Bank Notes 3.6% 4.5%
Certificates of Deposit 1.9 0.2
Certificates of Deposit--European 2.7 --
Certificates of Deposit--Yankee 2.9 5.1
Commercial Paper 32.3 34.7
Corporate Notes 11.0 10.3
Funding Agreements 0.9 --
Master Notes 2.2 3.2
Repurchase Agreements 6.9 1.0
US Government, Agency &
Instrumentality Obligations--
Discount Notes 4.0 6.3
US Government, Agency &
Instrumentality Obligations--
Non-Discount Notes 32.7 36.8
Liabilities in Excess of Other
Assets (1.1) (2.1)
------- -------
Total 100.0% 100.0%
======= =======
In Conclusion
We appreciate your continued interest in Merrill Lynch Retirement
Reserves Money Fund, and we look forward to assisting you with your
financial needs in the months and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Christopher G. Ayoub)
Christopher G. Ayoub
Vice President and Portfolio Manager
December 2, 1996
SCHEDULE OF INVESTMENTS (in Thousands)
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
<PAGE>
Bank Notes--3.6%
Bank One, Dayton $ 60,000 5.32++ % 1/30/97 $ 59,993
Colorado National 90,000 5.345++ 2/19/97 89,997
Bank of Denver 10,000 5.345++ 5/21/97 9,999
First Bank of 75,000 5.33 12/09/96 75,001
South Dakota, N.A.
First Bank, N.A., 50,000 5.325++ 11/20/96 50,000
Minneapolis 50,000 5.325++ 12/18/96 49,998
Total Bank Notes (Cost--$334,988) 334,988
Certificates of Deposit--1.9%
Chase Manhattan 29,000 5.85 1/08/97 29,018
Bank 50,000 5.75 2/03/97 50,030
50,000 5.60 4/01/97 50,014
Morgan Guaranty 50,000 5.90 9/30/97 50,146
Trust Company
Total Certificates of Deposit (Cost--$179,089) 179,208
Certificates of Deposit--European--2.7%
ABN-AMRO 20,000 5.51 4/15/97 19,999
Bank NV
Abbey National 50,000 5.51 4/15/97 49,997
Treasury Services PLC
Australia and New 60,000 5.62 4/02/97 60,021
Zealand Banking
Group Ltd.
Bank of Scotland 45,000 5.63 3/27/97 45,022
25,000 5.65 4/03/97 25,012
Bankers Trust 50,000 5.40 1/21/97 49,997
Company
Total Certificates of Deposit--European
(Cost--$250,011) 250,048
Certificates of Deposit--Yankee--2.9%
<PAGE>
Bank of Nova Scotia 25,000 5.51 4/15/97 25,002
(The), NY
Bayerische 25,000 5.46 11/27/96 24,998
Hypotheken-und- 25,000 5.80 3/06/97 25,023
Wechsel Bank, NY
Bayerische 25,000 5.45 11/29/96 24,998
Landesbank
Girozentrale, NY
Bayerische 75,000 5.49 11/13/96 74,997
Vereinsbank AG, NY
Hongkongbank, NY 100,000 5.40 11/05/96 99,998
Total Certificates of Deposit--Yankee
(Cost--$275,004) 275,016
SCHEDULE OF INVESTMENTS (in Thousands)
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
Commercial Paper--32.3%
ABN-AMRO North $ 42,000 5.30 % 11/07/96 $ 41,955
America Finance Inc.
Abbey National 200,000 5.45 3/26/97 195,669
N.A. Corp.
Allomon Funding 10,132 5.30 11/04/96 10,126
Corporation 16,071 5.27 11/15/96 16,036
18,000 5.27 11/21/96 17,945
Alpine 44,167 5.27 11/14/96 44,076
Securitization 70,000 5.27 11/15/96 69,846
Corporation
Bear Stearns 25,000 5.32 11/08/96 24,970
Companies, Inc.
Beta Finance Inc. 12,000 5.64 1/10/97 11,874
6,250 5.64 1/13/97 6,182
12,500 5.50 3/18/97 12,244
50,000 5.45 3/24/97 48,932
<PAGE>
CSW Credit, Inc. 13,338 5.27 11/19/96 13,301
29,600 5.27 11/26/96 29,487
Caisse 47,000 5.515 12/11/96 46,713
d'Amortissement 54,400 5.50 12/24/96 53,968
de la Dette 13,000 5.40 2/20/97 12,784
Sociale 60,000 5.46 3/03/97 58,905
50,000 5.66 3/10/97 49,036
Chase Manhattan 29,000 5.68 1/09/97 28,700
Corporation
Clipper Receivables 25,000 5.27 11/20/96 24,927
Corp. 9,114 5.27 11/22/96 9,085
Eiger Capital Corp. 24,014 5.26 11/22/96 23,937
Eksportfinans A/S 32,000 5.30 11/29/96 31,862
Eureka 25,000 5.31 11/12/96 24,956
Securitization Inc.
Falcon Asset 24,825 5.47 11/04/96 24,810
Securitization Corp.
Ford Credit 50,000 5.51 3/24/97 48,932
Europe PLC
Ford Motor 50,000 5.46 11/01/96 49,993
Credit Company 100,000 5.35 2/03/97 98,594
50,000 5.48 3/24/97 48,932
General Electric 50,000 5.50 3/03/97 49,088
Capital Corp.
General Motors 40,000 5.54 11/04/96 39,976
Acceptance Corp. 25,000 5.34 11/07/96 24,973
50,000 5.35 1/28/97 49,342
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
Commercial Paper (concluded)
<PAGE>
Goldman Sachs $ 60,000 5.30 % 11/06/96 $ 59,947
Group, L.P. 75,000 5.68 1/06/97 74,257
25,000 5.36 4/24/97 24,351
Greenwich 150,000 5.27 11/15/96 149,671
Funding Corp.
Internationale 50,000 5.35 4/14/97 48,776
Nederlanden (US)
Funding Corp.
International 27,176 5.27 11/20/96 27,096
Securitization Corp.
Korea Development 50,000 5.37 11/06/96 49,954
Bank 30,000 5.34 11/08/96 29,964
19,000 5.35 1/15/97 18,787
Mont Blanc 23,255 5.26 11/18/96 23,194
Capital Corp. 51,745 5.27 11/20/96 51,594
Monte Rosa 19,109 5.27 11/07/96 19,089
Capital Corp. 50,000 5.26 11/15/96 49,890
23,022 5.26 11/18/96 22,961
Morgan Stanley 170,000 5.60 11/01/96 169,974
Group, Inc.
New Center 25,000 5.52 12/06/96 24,866
Asset Trust 53,000 5.43 1/29/97 52,295
35,000 5.40 2/07/97 34,487
25,000 5.43 2/14/97 24,608
50,000 5.50 2/25/97 49,134
75,000 5.62 3/10/97 73,554
50,000 5.49 3/21/97 48,954
125,000 5.46 3/24/97 122,330
Old Line Funding 25,115 5.29 12/06/96 24,982
Corp. 17,000 5.29 12/12/96 16,895
9,000 5.29 12/16/96 8,939
Smith Barney Inc. 50,000 5.27 12/02/96 49,766
Sweden, Kingdom of 50,000 5.295 11/22/96 49,834
40,000 5.58 11/27/96 39,839
Western Australia 23,000 5.53 1/24/97 22,711
Treasury Corp.
<PAGE>
Westpac Capital Corp. 25,000 5.51 12/16/96 24,829
24,200 5.50 12/30/96 23,986
Windmill Funding 15,413 5.27 11/04/96 15,404
Corp. 43,175 5.30 11/05/96 43,143
6,515 5.35 11/05/96 6,510
50,186 5.27 11/22/96 50,024
27,381 5.27 11/25/96 27,281
25,000 5.28 11/25/96 24,908
Total Commercial Paper (Cost--$3,020,279) 3,020,940
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
Corporate Notes--11.0%
Abbey National $ 150,000 5.262 % 5/16/97 $ 149,917
Treasury Services
PLC
Asset Backed 91,000 5.375++ 10/15/97 91,000
Securities Investment
Trust (1996-M)
CIT Group 40,000 5.42 11/14/96 40,001
Holdings, Inc. (The) 30,000 5.30 2/06/97 29,994
85,000 5.36++ 10/27/97 85,000
Ford Motor Credit
Co. 57,000 5.68 5/27/97 57,068
KeyBank National 30,000 5.299++ 8/21/97 29,983
Association
PHH Corp. 100,000 5.336 1/23/97 99,993
25,000 5.326 2/10/97 24,997
25,000 5.315 3/25/97 24,996
25,000 5.42 6/12/97 24,990
65,000 5.406 9/03/97 64,979
SMM Trust 150,000 5.383++ 1/08/97 150,000
Certificate (1995-Q)
Short Term Card 150,000 5.393++ 1/15/97 150,000
Account Trust (1995-1)
<PAGE>
Total Corporate Notes
(Cost--$1,022,852) 1,022,918
Funding Agreements--0.9%
Jackson National 80,000 5.45++ 4/08/97 80,000
Life Insurance Co.
Total Funding Agreements
(Cost--$80,000) 80,000
Master Notes--2.2%
Goldman Sachs 175,000 5.36++ 11/08/96 175,000
Group, L.P. 34,000 5.36++ 5/01/97 34,000
Total Master Notes (Cost--$209,000) 209,000
US Government, Agency & Instrumentality
Obligations--Discount Notes--4.0%
Federal Home 75,000 5.425 3/07/97 73,616
Loan Banks 26,000 5.40 3/12/97 25,501
33,000 5.44 3/13/97 32,362
10,300 5.44 3/17/97 10,095
14,000 5.40 3/24/97 13,707
Federal National 25,000 5.46 2/03/97 24,656
Mortgage Association 168,000 5.26 4/16/97 163,924
US Treasury Bills 31,000 4.59 2/06/97 30,576
Total US Government, Agency & Instrumentality
Obligations--Discount Notes
(Cost--$374,326) 374,437
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
<PAGE>
US Government, Agency & Instrumentality
Obligations--Non-Discount Notes--32.7%
Federal Farm $ 85,000 5.20++ % 12/30/96 $ 84,975
Credit Banks 60,000 5.85 10/01/97 60,126
40,000 5.38++ 11/25/97 39,991
10,000 6.24 5/07/98 10,002
Federal Home 20,095 6.875 11/18/96 20,113
Loan Banks 25,000 5.83++ 2/18/97 25,009
25,000 5.99 2/09/98 25,075
26,000 6.19 5/08/98 26,000
26,500 6.45 10/21/98 26,567
15,000 6.12 11/19/98 14,981
Federal Home 50,000 5.36 3/28/97 49,995
Loan Mortgage Corp. 25,000 5.37++ 10/07/97 24,986
Federal National 40,000 5.32++ 11/04/96 40,000
Mortgage Association 50,000 5.31 12/11/96 49,993
75,000 5.22++ 12/19/96 74,993
75,000 5.43++ 1/13/97 75,002
30,000 5.85++ 2/14/97 30,014
123,000 5.40++ 2/21/97 123,000
67,000 5.213++ 4/15/97 66,967
75,000 5.23++ 4/22/97 74,969
50,000 5.205++ 4/29/97 49,975
42,000 5.233++ 5/14/97 41,980
68,500 5.70 5/19/97 68,500
140,000 5.24++ 5/22/97 139,947
140,000 5.36++ 7/16/97 139,933
66,000 5.38++ 8/01/97 65,978
55,000 5.38++ 8/22/97 54,974
55,000 5.365++ 9/03/97 54,966
42,000 5.37++ 9/09/97 41,975
41,000 5.37++ 9/29/97 40,978
35,000 5.53 10/14/97 34,976
73,000 5.355++ 10/20/97 72,938
25,000 5.19 1/08/98 24,850
60,000 5.42++ 4/24/98 59,966
38,000 5.75 5/14/98 38,000
22,150 5.53++ 12/14/98 22,111
Student Loan 11,830 5.58++ 11/01/96 11,830
Marketing 59,415 5.39++ 12/20/96 59,415
Association 5,000 5.54++ 1/14/97 5,002
37,125 5.58++ 1/23/97 37,141
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<PAGE>
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
US Government, Agency & Instrumentality
Obligations--Non-Discount Notes (concluded)
Student Loan $ 45,125 5.605++% 2/14/97 $ 45,145
Marketing 60,000 5.50++ 3/03/97 60,015
Association 115,000 5.375 8/21/97 114,960
(concluded) 75,000 5.37++ 10/01/97 74,960
67,075 5.53++ 1/21/98 67,189
29,200 5.48++ 2/17/98 29,182
75,000 5.425++ 4/21/98 74,974
US Treasury Notes 15,000 7.50 12/31/96 15,054
50,000 6.50 4/30/97 50,285
25,000 6.50 5/15/97 25,148
95,000 6.125 5/31/97 95,356
25,000 8.50 7/15/97 25,520
50,000 8.75 10/15/97 51,477
160,000 5.625 10/31/97 160,125
48,000 5.25 12/31/97 47,805
60,000 5.00 1/31/98 59,531
25,000 6.00 9/30/98 25,109
25,000 5.875 10/31/98 25,047
Total US Government, Agency & Instrumentality
Obligations--Non-Discount Notes
(Cost--$3,055,244) 3,055,075
Face
Amount Issue
Repurchase Agreements**--6.9%
$100,000 Fuji Securities, Inc., purchased
on 10/31/1996 to yield 5.62% to
11/01/1996 100,000
250,000 HSBC Securities, Inc., purchased
on 10/31/1996 to yield 5.60% to
11/01/1996 250,000
294,632 Lehman Brothers Inc., purchased
on 10/31/1996 to yield 5.60% to
11/01/1996 294,632
<PAGE>
Total Repurchase Agreements
(Cost--$644,632) 644,632
Total Investments (Cost--$9,445,425)--101.1% 9,446,262
Liabilities in Excess of Other Assets--(1.1%) (106,033)
----------
Net Assets--100.0% $9,340,229
==========
[FN]
*Commercial Paper and certain US Government, Agency &
Instrumentality 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 or upon maturity. Interest rates on
variable rate securities are adjusted periodically based upon
appropriate indexes; the interest rates shown are the rates in
effect at October 31, 1996.
**Repurchase Agreements are fully collateralized by US Government
Obligations.
++Floating Rate Notes.
See Notes to Financial Statements.
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of October 31, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$9,445,425,408*)(Note 1a) $9,446,261,938
Cash . 500,338
Receivables:
Securities sold $ 185,768,167
Interest 38,232,762
Beneficial interest sold 41,617 224,042,546
--------------
Prepaid registration fees and other assets (Note 1d) 383,253
--------------
Total assets 9,671,188,075
--------------
Liabilities: Payables:
Beneficial interest redeemed 309,826,850
Securities purchased 14,990,625
Investment adviser (Note 2) 3,012,367
Dividends to shareholders 2,382 327,832,224
--------------
Accrued expenses and other liabilities 3,126,779
--------------
Total liabilities 330,959,003
--------------
<PAGE>
Net Assets: Net assets $9,340,229,072
==============
Net Assets Shares of beneficial interest, $0.10 par value, unlimited
Consist of: number of shares authorized $ 933,939,254
Paid-in capital in excess of par 8,405,453,288
Unrealized appreciation on investments--net 836,530
--------------
Net assets--Equivalent to $1.00 per share based on 9,339,392,542
shares of beneficial interest outstanding $9,340,229,072
==============
<FN>
*As of October 31, 1996, net unrealized appreciation for Federal
income tax purposes amounted to $446,137, of which $1,805,087
related to appreciated securities and $1,358,950 related to
depreciated securities. The aggregate cost of investments at October
31, 1996 for Federal income tax purposes was $9,445,815,801.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
October 31, 1996
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 508,277,097
(Note 1c):
Expenses: Investment advisory fees (Note 2) $ 34,280,472
Transfer agent fees (Note 2) 14,246,085
Registration fees (Note 1d) 869,052
Printing and shareholder reports 595,719
Accounting services (Note 2) 386,264
Custodian fees 257,809
Professional fees 89,476
Interest expense 77,650
Trustees' fees and expenses 71,319
Other. 93,451
--------------
Total expenses 50,967,297
--------------
Investment income--net 457,309,800
--------------
<PAGE>
Realized & Realized gain on investments--net 471,407
Unrealized Gain Change in unrealized appreciationon investments--net (2,850,451)
(Loss) on --------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 454,930,756
(Note 1c): ==============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the
Year Ended
October 31,
Increase (Decrease) in Net Assets: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 457,309,800 $ 432,019,283
Realized gain on investments--net 471,407 1,637,926
Change in unrealized appreciation/depreciation on investments
--net (2,850,451) 10,376,159
-------------- --------------
Net increase in net assets resulting from operations 454,930,756 444,033,368
-------------- --------------
Dividends & Investment income--net (457,309,800) (432,019,283)
Distributions to Realized gain on investments--net (471,407) (1,637,926)
Shareholders -------------- --------------
(Note 1e): Net decrease in net assets resulting from dividends and
distributions to shareholders (457,781,207) (433,657,209)
-------------- --------------
Beneficial Interest Net proceeds from sale of shares 27,785,847,538 24,132,766,015
Transactions Net asset value of shares issued to shareholders in
(Notes 1e & 3): reinvestment of dividends and distributions 457,779,630 433,654,456
-------------- --------------
28,243,627,168 24,566,420,471
Cost of shares redeemed (27,549,454,162) (23,331,574,095)
-------------- --------------
Net increase in net assets derived from beneficial
interest transactions 694,173,006 1,234,846,376
-------------- --------------
<PAGE>
Net Assets: Total increase in net assets 691,322,555 1,245,222,535
Beginning of year 8,648,906,517 7,403,683,982
-------------- --------------
End of year $9,340,229,072 $8,648,906,517
============== ==============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements.
For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .0509 .0540 .0345 .0279 .0370
Realized and unrealized gain (loss)
on investments--net (.0002) .0015 (.0011) .0004 .0012
---------- ---------- ---------- ---------- ----------
Total from investment operations .0507 .0555 .0334 .0283 .0382
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.0509) (.0540) (.0345) (.0279) (.0370)
Realized gain on investments--net (.0001) (.0002) --++ (.0003) (.0010)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.0510) (.0542) (.0345) (.0282) (.0380)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ==========
Total investment return 5.21% 5.57% 3.48% 2.86% 3.95%
========== ========== ========== ========== ==========
Ratios to Average Expenses .56% .59% .59% .62% .63%
Net Assets: ========== ========== ========== ========== ==========
Investment income and realized
gain on investments--net 5.07% 5.43% 3.44% 2.82% 3.88%
========== ========== ========== ========== ==========
<PAGE>
Supplemental Net assets, end of year
Data: (in thousands) $9,340,229 $8,648,907 $7,403,684 $7,066,326 $6,474,640
========== ========== ========== ========== ==========
<FN>
++Amount is less than $.0001 per share.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Retirement Reserves Money Fund (the "Fund") is a
separate Fund offering a separate class of shares of Merrill Lynch
Retirement Series Trust (the "Trust"). The Trust is registered under
the Investment Company Act of 1940 as a diversified, open-end
management investment company which will comprise a series of
separate portfolios offering a separate class of shares to
participants in the retirement plans for which Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S") acts as passive custodian. At
the present time, the Fund is the only series offered. The following
is a summary of significant accounting policies consistently
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 purposes of valuations, the maturity of variable rate
certificates of deposit, variable rate commercial paper, short-term
corporate bond notes, variable rate Government agency 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.
(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.
<PAGE>
(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 and distributions to shareholders--The Fund declares
dividends daily and reinvests daily such dividends in additional
fund shares at net asset value. Dividends and distributions are
declared from the total of net investment income and net realized
gains or losses on investments.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Merrill Lynch Asset Management, L.P. ("MLAM"). The general partner
of MLAM is Princeton Services, Inc. ("PSI"), an indirect wholly-
owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is
the limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
MLAM 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 $1 billion;
0.45% of average daily net assets in excess of $1 billion but not
exceeding $2 billion; 0.40% of average daily net assets in excess of
$2 billion but not exceeding $3 billion; 0.375% of average daily net
assets in excess of $3 billion but not exceeding $4 billion; 0.35%
of average daily net assets in excess of $4 billion but not
exceeding $7 billion; and 0.325% of average daily net assets in
excess of $7 billion.
NOTES TO FINANCIAL STATEMENTS (concluded)
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or trustees of the Trust are officers and/or
directors of MLAM, MLFD, MLFDS, PSI, MLPF&S, and/or ML & Co.
<PAGE>
3. Shares of Beneficial Interest:
The number of shares purchased and redeemed during the years
corresponds to the amounts included in the Statements of Changes in
Net Assets, since shares are recorded at $1.00 per share.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
Merrill Lynch Retirement Reserves Money Fund
of Merrill Lynch Retirement Series Trust:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Merrill Lynch
Retirement Reserves Money Fund of Merrill Lynch Retirement Series
Trust as of October 31, 1996, 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 October
31, 1996 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
Merrill Lynch Retirement Reserves Money Fund of Merrill Lynch
Retirement Series Trust as of October 31, 1996, 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.
<PAGE>
Deloitte & Touche LLP
Princeton, New Jersey
December 3, 1996
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (unaudited)
Merrill Lynch Retirement Reserves Money Fund
distributed long-term capital gains of $.0000089
per share to shareholders of record on December
29, 1995.
Please retain this information for your records.
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
Joe Grills, Trustee
Walter Mintz, Trustee
Robert S. Salomon Jr., Trustee
Melvin R. Seiden, Trustee
Stephen B. Swensrud, Trustee
Harry Woolf, Trustee
Terry K. Glenn, Executive Vice President
Joseph T. Monagle Jr., Senior Vice President
Christopher G. Ayoub, Vice President
Donald C. Burke, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
The Bank of New York
90 Washington Street
New York, New York 10286
<PAGE>
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 221-7210
