MERRILL LYNCH
READY ASSETS
TRUST
FUND LOGO
Semi-Annual Report
June 30, 1996
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Trust unless
accompanied or preceded by the Trust's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance, which will fluctuate. The
Trust seeks to maintain a consistent $1.00 net asset value per
share, although this cannot be assured. An investment in the Trust
is neither insured nor guaranteed by the US Government. Statements
and other information herein are as dated and are subject to change.
<PAGE>
Printed on Recycled Paper
Merrill Lynch
Ready Assets Trust
Box 9011
Princeton, NJ
08543-9011
DEAR SHAREHOLDER
For the six-month period ended June 30, 1996, Merrill Lynch Ready
Assets Trust paid shareholders a net annualized yield of 4.93%*. The
Trust's 7-day yield as of June 30, 1996 was 4.79%.
The average portfolio maturity for Merrill Lynch Ready Assets Trust
at June 30, 1996 was 56 days, compared to 85 days at December 31,
1995.
The Environment
For the six months ended June 30, 1996, Merrill Lynch Ready Assets
Trust held an average life which was reflective of two distinct
interest rate trends as market sentiment shifted. Our outlook was at
first optimistic. However, as the period progressed the Trust's
investment outlook reflected our more cautious view that the Federal
Reserve Board would be less accomodative as evidence of a stronger
economy unfolded.
The pace of economic activity picked up over the course of the
period. As a result, recessionary concerns have abated. Investors
are now focusing on prospects for an overheating economy, increasing
inflationary pressures, and the potential for monetary policy
tightening by the Federal Reserve Board. With more robust economic
growth, a sharp rise in prices for crude oil and agricultural
commodities, and expectations of escalating wage pressures, long-
term interest rates (as measured by the yield on the 30-year US
Treasury bond) are in excess of 7%.
<PAGE>
Inflationary concerns were heightened further shortly after the
close of the June period with the report of a stronger-than-expected
employment report for June. Unemployment fell to a six-year low, and
hourly wages rose sharply. This mounting evidence of a tighter labor
market and rising labor costs suggested to many investors that the
US central bank would be forced to raise short-term interest rates
in the coming months. In the weeks ahead, investors will continue to
monitor economic data releases to determine the potential for
monetary policy tightening by the Federal Reserve Board.
[FN]
*Based on a constant investment throughout the period, with
dividends compounded daily, and reflecting a net return to the
investor after all expenses.
Evidence of more moderate, but sustained, economic activity would
be a beneficial development for the US capital markets.
The portfolio's composition at the end of the June period and as of
our last report is detailed below:
6/30/96 12/31/95
Bank Notes 1.1% 1.5%
Certificates of Deposit--European 2.4 5.9
Certificates of Deposit--Yankee* 0.3 1.0
Commercial Paper--Discount 43.4 45.2
Corporate Notes 8.6 7.0
Funding Agreements 1.1 --
Master Notes 2.4 3.1
Repurchase Agreements 5.5 5.0
US Government, Agency &
Instrumentality Obligations--Discount 8.6 9.7
US Government, Agency &
Instrumentality Obligations--
Non-Discount 27.1 23.4
Liabilities in Excess of Other Assets (0.5) (1.8)
------- -------
Total 100.0% 100.0%
======= =======
[FN]
*US branches of foreign banks.
In Conclusion
We thank you for your support of Merrill Lynch Ready Assets Trust,
and we look forward to serving your investment needs in the months
and years ahead.
<PAGE>
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(John Ng)
John Ng
Vice President and Portfolio Manager
July 29, 1996
SCHEDULE OF INVESTMENTS (in Thousands)
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
Bank Notes--1.1%
Bank One, $ 56,000 5.30++ % 9/18/96 $ 55,990
Columbus
Bank One, 26,000 5.33++ 8/28/96 25,998
Milwaukee
Total Bank Notes
(Cost--$81,988) 81,988
Certificates of Deposit--European--2.4%
Abbey National 40,000 5.345 7/08/96 39,999
Treasury Services 50,000 5.35 7/16/96 49,997
PLC
<PAGE>
Bayerische 50,000 5.16 8/02/96 49,983
Vereinsbank AG 35,000 5.42 10/31/96 34,973
Total Certificates of Deposit--European
(Cost--$174,992) 174,952
Certificate of Deposit--Yankee--0.3%
Bayerische 20,000 5.366 1/15/97 19,989
Landesbank
Girozentrale, NY
Total Certificates of Deposit--Yankee
(Cost--$19,989) 19,989
Commercial Paper--Discount--43.4%
ABN-AMRO North 25,000 5.36 12/06/96 24,381
America Finance
Inc.
Abbey National 50,000 5.30 11/29/96 48,830
N.A. Corporation 25,000 5.40 12/04/96 24,388
25,000 5.50 12/04/96 24,388
Allomon 10,049 5.35 7/15/96 10,024
Funding Corp.
Alpine 14,521 5.30 7/11/96 14,493
Securitization 19,584 5.36 7/15/96 19,534
Corp. 40,895 5.31 7/18/96 40,774
American Express 25,000 5.30 11/22/96 24,442
Credit Corp.
Apreco, Inc. 30,000 5.35 7/17/96 29,915
Asset 50,000 5.36 7/25/96 49,799
Securitization
Cooperative Corp.
Bear Stearns 50,000 5.34 7/03/96 49,963
Companies, Inc. 50,000 5.30 7/29/96 49,772
Beta Finance Inc. 10,000 5.30 10/09/96 9,844
5,000 5.37 11/07/96 4,900
6,000 5.31 12/04/96 5,853
<PAGE>
SCHEDULE OF INVESTMENTS (in Thousands)
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
Commercial Paper--Discount (continued)
CSW Credit, Inc. $ 26,000 5.30 % 7/24/96 $ 25,900
13,500 5.38 7/29/96 13,437
41,600 5.38 8/02/96 41,382
Caisse 50,000 5.51 12/27/96 48,600
d'Amortissement
de la Dette
Sociale
Caisse des 100,000 5.60 7/01/96 99,953
Depots et
Consignations
Cheltenham & 15,500 5.32 7/02/96 15,491
Gloucester PLC
Corporate Asset 15,000 5.60 7/01/96 14,993
Funding Co., Inc.
Corporate 25,000 5.30 7/24/96 24,904
Receivables Corp. 40,000 5.35 7/24/96 39,845
20,400 5.35 7/25/96 20,318
Deer Park 50,000 5.35 7/12/96 49,896
Refining L.P.
Dresdner U.S. 100,000 5.45 7/01/96 99,955
Finance Inc.
Eiger Capital 25,000 5.35 7/15/96 24,937
Corp. 69,244 5.35 7/30/96 68,915
Electricite 30,000 5.03 8/02/96 29,845
de France Service
National
Eureka 25,000 5.31 7/10/96 24,956
Securitization 30,000 5.36 7/23/96 29,888
Inc. 20,000 5.30 7/24/96 19,923
25,000 5.30 7/26/96 24,897
<PAGE>
Falcon Asset 25,100 5.35 7/09/96 25,059
Securitization
Corp.
Ford Motor 100,000 5.36 7/01/96 99,955
Credit Company 25,000 5.40 12/09/96 24,369
France Telecom 15,000 5.37 7/24/96 14,942
25,000 5.37 7/29/96 24,884
General Motors 20,800 5.31 7/09/96 20,766
Acceptance Corp. 40,000 5.33 7/10/96 39,929
40,000 5.33 7/11/96 39,923
50,000 5.41 7/22/96 49,820
50,000 5.41 7/23/96 49,812
50,000 5.41 7/26/96 49,790
50,000 5.42 7/30/96 49,759
50,000 5.39 8/09/96 49,686
Goldman Sachs 100,000 5.65 7/01/96 99,953
Group, L.P.
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
Commercial Paper--Discount (continued)
Greenwich $ 29,890 5.35 % 7/02/96 $ 29,872
Funding 10,171 5.29 7/08/96 10,156
Corporation 41,203 5.30 7/17/96 41,087
10,000 5.42 7/22/96 9,964
33,736 5.29 7/23/96 33,612
20,120 5.36 7/24/96 20,042
International 66,590 5.32 7/01/96 66,560
Securitization 10,645 5.34 7/16/96 10,617
Corp. 14,467 5.42 7/22/96 14,415
13,298 5.40 8/01/96 13,236
45,000 5.34 8/30/96 44,575
Kingdom of Sweden 25,000 5.00 8/01/96 24,874
25,000 5.29 10/21/96 24,566
<PAGE>
Korea Development 50,000 5.31 7/22/96 49,822
Bank 50,000 5.32 8/06/96 49,712
Kredietbank North 50,000 5.30 7/03/96 49,963
America Finance
Corp.
MCI Communi- 20,000 5.35 7/18/96 19,941
cations Corp.
McKenna Triangle 25,000 5.35 7/12/96 24,948
National Corp. 40,000 5.35 7/16/96 39,893
Monte Rosa 50,041 5.32 7/09/96 49,960
Capital Corp.
National Fleet 25,000 5.44 8/01/96 24,872
Funding Corp.
New Center 50,000 5.36 7/15/96 49,873
Asset Trust 50,000 5.36 7/18/96 49,851
75,000 5.31 7/29/96 74,657
20,000 5.51 12/20/96 19,461
25,000 5.52 12/23/96 24,315
Nomura Holding 25,000 5.35 7/02/96 24,985
America, Inc. 25,000 5.30 7/05/96 24,974
25,000 5.45 8/16/96 24,817
Rexam PLC 10,000 5.35 7/08/96 9,985
5,000 5.35 7/11/96 4,990
Sheffield 26,430 5.40 7/24/96 26,327
Receivables Corp.
Vattenfall 20,000 5.00 7/29/96 19,908
Treasury Inc.
WCP Funding Inc. 15,000 5.35 7/08/96 14,978
30,000 5.35 7/19/96 29,906
Walt Disney 48,425 5.56 7/01/96 48,403
Company (The)
<PAGE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
Commercial Paper--Discount (concluded)
Westpac Capital $ 25,000 5.41 % 12/05/96 $ 24,384
Corp. 25,000 5.51 12/09/96 24,369
25,000 5.50 12/30/96 24,288
Windmill Funding 36,811 5.35 7/12/96 36,734
Corp. 32,721 5.35 7/15/96 32,638
32,676 5.35 7/15/96 32,593
10,000 5.38 7/25/96 9,960
56,932 5.37 7/31/96 56,652
Total Commercial Paper--Discount
(Cost--$3,129,916) 3,129,717
Corporate Notes--8.6%
Abbey National 100,000 5.339++ 5/16/97 99,910
Treasury
Services PLC
Bear Stearns 25,000 5.526++ 9/18/96 25,003
Companies, Inc.
CIT Group 50,000 5.80++ 9/20/96 49,988
Holdings, Inc. 50,000 5.80++ 12/23/96 49,977
(The)
First Bank 20,000 5.436++ 11/20/96 19,998
System, Inc.
PHH Corporation 50,000 5.423++ 12/13/96 49,991
50,000 5.444++ 1/23/97 49,992
SMM Trust 100,000 5.496++ 1/08/97 100,000
(1995-Q)
Short Term Card 150,000 5.506++ 1/15/97 150,000
Account Trust
(1995-1)
<PAGE>
Toyota Motor 24,000 5.373++ 9/13/96 23,997
Credit Corp.
Total Corporate Notes
(Cost--$618,841) 618,856
Funding Agreements--1.1%
Jackson National 80,000 5.47++ 4/08/97 80,000
Life Insurance Co.
Total Funding Agreements
(Cost--$80,000) 80,000
Master Notes--2.4%
Goldman Sachs 26,000 5.48++ 8/09/96 26,000
Group, L.P. 150,000 5.46++ 11/08/96 150,000
Total Master Notes
(Cost--$176,000) 176,000
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
US Government, Agency & Instrumentality
Obligations--Discount--8.6%
Federal Home $ 59,000 5.20 % 7/05/96 $ 58,940
Loan Mortgage 35,000 5.275 7/22/96 34,877
Corporation
Federal National 50,000 5.25 7/10/96 49,913
Mortgage 50,000 5.25 7/11/96 49,905
Association 10,000 5.13 9/05/96 9,898
14,265 5.11 9/18/96 14,091
40,000 5.14 9/18/96 39,513
15,000 5.18 10/11/96 14,766
13,340 5.12 10/24/96 13,107
25,000 5.11 10/30/96 24,540
75,000 5.225 11/21/96 73,370
<PAGE>
US Treasury 50,000 4.80 9/19/96 49,413
Bills 25,000 5.095 11/21/96 24,473
50,000 5.115 12/05/96 48,838
50,000 4.55 2/06/97 48,365
25,000 4.565 2/06/97 24,182
40,000 5.33 5/29/97 37,990
Total US Government, Agency & Instrumentality
Obligations--Discount (Cost--$616,721) 616,181
US Government, Agency & Instrumentality
Obligations--Non-Discount--27.1%
Federal Farm 50,000 5.22++ 12/06/96 49,964
Credit Bank 20,000 6.24 5/07/98 19,960
Federal Home 26,000 5.60++ 1/26/98 26,043
Loan Bank
Federal National 40,000 5.31++ 7/08/96 39,999
Mortgage 50,000 5.25++ 8/08/96 49,997
Association 110,000 5.343++ 10/11/96 110,000
60,000 5.24++ 10/15/96 59,989
36,000 5.37++ 11/04/96 36,000
100,000 5.44++ 2/21/97 100,000
50,000 5.30++ 3/14/97 50,000
35,000 5.32++ 3/19/97 34,981
52,000 5.326++ 4/15/97 51,956
50,000 5.352++ 4/28/97 49,972
40,000 5.260++ 4/29/97 39,966
100,000 5.42++ 5/01/97 99,942
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
US Government, Agency & Instrumentality
Obligations--Non-Discount (concluded)
Federal $ 35,000 5.33++ % 5/14/97 $ 34,973
National 70,000 5.70++ 5/19/97 70,000
Mortgage 50,000 5.334++ 5/22/97 49,969
Assocation 33,000 5.75++ 5/14/98 33,000
(concluded)
<PAGE>
Student Loan 25,650 5.37++ 7/19/96 25,650
Marketing 125,000 5.343++ 9/20/96 125,000
Association 69,000 5.37++ 10/04/96 68,998
23,000 5.595++ 11/27/96 23,017
60,000 5.58++ 1/14/97 60,000
50,000 5.41++ 8/04/97 49,989
US Treasury 25,000 6.125 7/31/96 25,021
Notes 50,000 4.375 8/15/96 49,946
135,000 6.875 2/28/97 136,055
20,000 6.625 3/31/97 20,125
50,000 6.875 3/31/97 50,414
126,000 6.50 4/30/97 126,699
25,000 5.75 9/30/97 24,930
15,000 5.375 11/30/97 14,869
101,500 5.25 12/31/97 100,295
47,000 5.00 1/31/98 46,222
Total US Government, Agency & Instrumentality
Obligations--Non-Discount (Cost--$1,956,737) 1,953,941
Face
Amount Issue
Repurchase Agreements**--5.5%
$100,000 Fuji Securities, Inc., purchased on
6/28/1996 to yield 5.57% to
7/01/1996 100,000
292,115 Lehman Brothers, Inc., purchased on
6/28/1996 to yield 5.53% to
7/01/1996 292,115
Total Repurchase Agreements
(Cost--$392,115) 392,115
Total Investments (Cost--$7,247,299)--100.5% 7,243,739
Liabilities in Excess of Other Assets--(0.5%) (37,330)
----------
Net Assets--100.0% $7,206,409
==========
<PAGE>
[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 Trust. 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; interest rates shown are the rates in effect at
June 30, 1996.
**Repurchase Agreements are fully collateralized by US Government
Obligations.
++Variable Rate Notes.
See Notes to Financial Statements.
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of June 30, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$7,247,299,199*)
(Note 1a) $ 7,243,738,714
Cash 15,020
Receivables:
Interest $ 30,122,758
Beneficial interest sold 3,461,957 33,584,715
---------------
Prepaid registration fees and other assets (Note 1d) 170,703
---------------
Total assets 7,277,509,152
---------------
Liabilities: Payables:
Beneficial interest redeemed 52,754,007
Securities purchased 13,236,164
Investment adviser (Note 2) 1,987,492
Distributor (Note 2) 1,872,598
Dividends to shareholders (Note 1e) 2,124 69,852,385
---------------
Accrued expenses and other liabilities 1,247,331
---------------
Total liabilities 71,099,716
---------------
<PAGE>
Net Assets: Net assets $ 7,206,409,436
===============
Net Assets Shares of beneficial interest, $.10 par value, unlimited
Consist of: number of shares authorized $ 720,996,992
Paid-in capital in excess of par 6,488,972,929
Unrealized depreciation on investments--net (3,560,485)
---------------
Net Assets--Equivalent to $1.00 per share based on
7,209,969,921 shares of beneficial interest outstanding $ 7,206,409,436
===============
<FN>
*Cost for Federal income tax purposes. As of June 30, 1996, net
unrealized depreciation for Federal income tax purposes amounted to
$3,560,485, of which $15,764 related to appreciated securities and
$3,576,249 related to depreciated securities.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months
Ended June 30, 1996
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 202,898,324
(Note 1c):
Expenses: Investment advisory fees (Note 2) $ 13,046,894
Transfer agent fees (Note 2) 5,709,378
Distribution fees (Note 2) 4,345,557
Registration fees (Note 1d) 167,014
Accounting services (Note 2) 156,141
Custodian fees 120,473
Printing and shareholder reports 85,236
Trustees' fees and expenses 69,168
Interest expense 51,564
Professional fees 46,491
Other 42,975
---------------
Total expenses 23,840,891
---------------
Investment income--net 179,057,433
---------------
<PAGE>
Realized & Realized gain on investments--net 311,951
Unrealized Change in unrealized appreciation/depreciation
Gain (Loss) on on investments--net (5,792,362)
Investments--Net ---------------
(Note 1c): Net Increase in Net Assets Resulting from Operations $ 173,577,022
===============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
June 30, December 31,
Increase (Decrease) in Net Assets: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 179,057,433 $ 370,112,443
Realized gain on investments--net 311,951 995,794
Change in unrealized appreciation/depreciation
on investments--net (5,792,362) 9,723,823
--------------- ---------------
Net increase in net assets resulting from operations 173,577,022 380,832,060
--------------- ---------------
Dividends & Investment income--net (179,057,433) (370,112,443)
Distributions to Realized gain on investments--net (311,951) (995,794)
Shareholders --------------- ---------------
(Note 1e): Net decrease in net assets resulting from dividends and
distributions to shareholders (179,369,384) (371,108,237)
--------------- ---------------
Beneficial Net proceeds from sale of shares 7,413,925,622 14,615,042,905
Interest Net asset value of shares issued to shareholders
Transactions in reinvestment of dividends and distributions (Note 1e) 178,633,597 369,564,239
(Note 3): --------------- ---------------
7,592,559,219 14,984,607,144
Cost of shares redeemed (7,459,712,126) (14,155,972,930)
--------------- ---------------
Net increase in net assets derived from beneficial interest
transactions 132,847,093 828,634,214
--------------- ---------------
<PAGE>
Net Assets: Total increase in net assets 127,054,731 838,358,037
Beginning of period 7,079,354,705 6,240,996,668
--------------- ---------------
End of period $ 7,206,409,436 $ 7,079,354,705
=============== ===============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived For the
from information provided in the financial statements. Six Months
Ended June 30, For the Year Ended December 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
Operating period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Performance: ---------- ---------- ---------- ---------- ----------
Investment income--net .0243 .0538 .0366 .0272 .0332
Realized and unrealized gain
(loss) on investments--net (.0008) .0016 (.0012) .0003 .0009
---------- ---------- ---------- ---------- ----------
Total from investment operations .0235 .0554 .0354 .0275 .0341
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.0243) (.0538) (.0366) (.0272) (.0332)
Realized gain on investments--net (.0000)++ (.0001) (.0000)++ (.0005) (.0007)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.0243) (.0539) (.0366) (.0277) (.0339)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ==========
Total investment return 4.93%* 5.54% 3.74% 2.81% 3.44%
========== ========== ========== ========== ==========
Ratios to Expenses .65%* .67% .65% .65% .64%
Average ========== ========== ========== ========== ==========
Net Assets: Investment income and realized
gain (loss) on investments--net 4.87%* 5.40% 3.67% 2.78% 3.48%
========== ========== ========== ========== ==========
Supplemental Net assets, end of period
Data: (in thousands) $7,206,409 $7,079,355 $6,240,997 $6,523,187 $7,465,869
========== ========== ========== ========== ==========
<PAGE>
<FN>
*Annualized.
++Amount is less than $.0001 per share.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Ready Assets Trust (the "Trust") is registered under
the Investment Company Act of 1940 as a diversified, open-end
management investment company. These unaudited financial statements
reflect all adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the interim period
presented. All such adjustments are of a normal recurring nature.
The following is a summary of significant accounting policies
followed by the Trust.
(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 such 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 purposes of
valuation, the maturity of a variable rate security 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 Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to
its shareholders. Therefore, no Federal income tax provision is
required.
(c) 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
discount) is recognized on the accrual basis. Realized gains and
losses on security transactions are determined on the identified
cost basis.
<PAGE>
(d) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(e) Dividends and distributions to shareholders--The Trust declares
dividends daily and reinvests daily such dividends (net of non-
resident alien tax and back-up withholding tax) in additional shares
of beneficial interest at net asset value. Dividends are declared
from net investment income and distributions from net realized gain
or loss on investments.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Trust 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 Trust has also entered into a Distribution
Agreement and a Distribution Plan with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
MLAM provides the Trust with investment management, research,
statistical, and advisory services, and pays certain other expenses
of the Trust. For such services, the Trust pays a monthly fee based
upon the average daily value of the Trust's net assets at the
following annual rates:
Portion of average daily value of net assets: Rate
Not exceeding $500 million 0.500%
In excess of $500 million but not exceeding $1 billion 0.400
In excess of $1 billion but not exceeding $5 billion 0.350
In excess of $5 billion but not exceeding $10 billion 0.325
In excess of $10 billion but not exceeding $15 billion 0.300
In excess of $15 billion but not exceeding $20 billion 0.275
In excess of $20 billion 0.250
NOTES TO FINANCIAL STATEMENTS (concluded)
The most restrictive annual expense limitation requires that MLAM
reimburse the Trust to the extent the Trust's expenses (excluding
interest, taxes, distribution fees, brokerage fees and commissions,
and extraordinary items) exceed 2.5% of the Trust'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. The obligation of MLAM to reimburse the Trust
under this limitation is not limited to the amount of the management
fee.
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The Trust has adopted a Shareholder Servicing Plan and Agreement in
accordance with Rule 12b-1 under the Investment Company Act of 1940,
pursuant to which Merrill Lynch, Pierce, Fenner & Smith Inc.
("MLPF&S"), a wholly-owned subsidiary of ML & Co., receives a fee
each month from the Trust at the annual rate of 0.125% of average
daily net assets of the accounts of Trust shareholders who maintain
their Trust accounts through MLPF&S. This fee is to compensate
MLPF&S financial consultants and other directly involved branch
office personnel for providing direct personal services to
shareholders. The fee is not compensation for administrative
services.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Trust's transfer agent.
Accounting services are provided to the Trust by MLAM at cost.
Certain officers and/or trustees of the Trust are officers and/or
directors of MLAM, MLFDS, PSI, MLFD, MLPF&S, and/or ML & Co.
3. Shares of Beneficial Interest:
The number of shares purchased and redeemed during the six months
ended June 30, 1996 and the year ended December 31, 1995 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.
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
Donald Cecil, Trustee
M. Colyer Crum, Trustee
Edward H. Meyer, Trustee
Jack B. Sunderland, Trustee
J. Thomas Touchton, Trustee
Terry K. Glenn, Executive Vice President
Joseph T. Monagle Jr., Senior Vice President
Donald C. Burke, Vice President
John Ng, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
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Custodian
The Bank of New York
90 Washington Street, 12th floor
New York, New York 10286
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 221-7210
