- -------------------------------------------------------------------------------
Dear Shareholder:
We are pleased to provide you with this Annual Report for Merrill Lynch
Funds For Institutions Series.
Investor perceptions regarding the US economy changed over the course of
the six-month period ended April 30, 1996. As 1995 drew to a close and 1996
began, it appeared that the US economy was losing momentum. Lackluster retail
sales, increases in initial unemployment claims (along with weak job and
income growth), and evidence of slowing in the manufacturing sector all
suggested that the rate of economic growth was decelerating, with some
forecasters even suggesting the possibility of an imminent recession.
However, the consensus outlook for the rate of future economic growth
changed dramatically with the report of stronger-than-expected employment
data for February and March. As a result, investors began to anticipate
renewed economic growth. Long-term interest rose, and the Federal Reserve
Board left monetary policy on hold. Adding to investor concerns was the
report that the Knight Ridder-Commodity Research Bureau Index was near an
eight-year high, largely because of an increase in agricultural prices as
well as an upward spike in the price of crude oil.
Investors are likely to continue to focus on the probable direction of
economic activity and Federal Reserve Board monetary policy in the weeks
ahead. At this time, inflationary pressures do not seem to be building and
the capital spending, housing and consumption sectors are still relatively
weak, which suggest that the economy is not on the verge of overheating.
Nevertheless, it is likely that any further indication of stronger economic
activity in the weeks ahead may add to investor concerns that accelerating
economic activity could lead to higher inflation and interest rates.
Merrill Lynch Institutional Fund
For the year ended April 30, 1996, Merrill Lynch Institutional Fund's net
yield was 5.66%. The Fund's seven-day net annualized yield as of April 30,
1996 was 5.12%.
The average portfolio maturity for Merrill Lynch Institutional Fund at
April 30, 1996 was 53 days, compared to 84 days at October 31, 1995.
During 1995 and into early 1996, we maintained the Fund's average life
toward the higher end of the allowed band as detailed in the Fund's
prospectus, to take advantage of an expected flattening in the front end of
the fixed-income yield curve as the Federal Reserve Board eased monetary
policy. By March 1996, and in response to negative investor psychology, we
sold longer-dated maturities with proceeds used to build 30-day and under
cash positions.
Merrill Lynch Government Fund
For the year ended April 30, 1996, Merrill Lynch Government Fund's net
yield was 5.53%. The Fund's seven-day net annualized yield as of April 30,
1996 was 5.06%.
The average portfolio maturity for Merrill Lynch Government Fund at April
30, 1996 was 41 days, compared to 48 days at October 31, 1995.
For the six-month period ended April 30, 1996, we maintained an investment
approach which reflected two distinct interest rate trends as investor
sentiment shifted dramatically after Federal Reserve Board Chairman Alan
Greenspan's Humphrey-Hawkins testimony in February. Our posture for the first
part of the six-month period was based on the sentiment that the Federal
Reserve Board would seek lower interest rates given a
1
<PAGE>
slowing economy and moderate inflation. Strong investor demand kept the
market well bid to the extent that the front end of the yield curve inverted
to overnight financing. We modified the Fund's stance during the months of
March and April since we believed that the Federal Reserve Board would be on
hold for the near term. We reduced the Fund's average life as the yield curve
steepened dramatically while investors sought safe haven in the front end of
the market.
Merrill Lynch Treasury Fund
For the year ended April 30, 1996, Merrill Lynch Treasury Fund's net yield
was 5.24%. The Fund's seven-day net annualized yield as of April 30, 1996
was 4.80%.
The average portfolio maturity for Merrill Lynch Treasury Fund at April
30, 1996 was 47 days, compared to 59 days at October 31, 1995.
During the first part of the six-month period, we held a constructive
viewpoint which was in line with our expectations regarding the direction of
interest rates. Specifically, it was our expectation that the Federal Reserve
Board would seek to maintain an accommodative monetary policy in response to
a lackluster economy and a well-contained inflation scenario. As preliminary
evidence of economic strength started to mount, we reduced the Fund's average
life through attrition. Short-term cash management bills allowed the Fund to
invest at interest rates which approached financing levels in the very front
end of the yield curve with limited interest rate exposure.
Merrill Lynch Institutional Tax-Exempt Fund
For the year ended April 30, 1996, Merrill Lynch Institutional Tax-Exempt
Fund's net yield was 3.62%. The Fund's seven-day net annualized yield as of
April 30, 1996 was 3.74%.
The average portfolio maturity for Merrill Lynch Institutional Tax-Exempt
Fund at April 30, 1996 was 38 days, compared to 51 days at October 31, 1995.
We began the six-month period ended April 30, 1996 with an aggressive
approach to the market, allowing the Fund's average portfolio maturity to
fluctuate in the 55-60-day range. This strategy was based on weak economic
statistics combined with the consensus view that the Federal Reserve Board
would have to ease monetary policy further to stimulate an otherwise slumping
economy. In addition, a harsh winter and delinquent economic statistics being
released by the Federal Government because of work stoppages continued to
cloud the economic picture. We used attractively priced tax-exempt commercial
paper as well as municipal notes to maintain the average life in that range.
As the period progressed, the Fund grew from approximately $455 million in
net assets on November 1, 1995 to approximately $621 million by late
December. We invested new subscriptions primarily in variable rate demand
notes (VRDNs) as yields began to rise in anticipation of year-end pressures
and broadened the Fund's purchases to include municipal notes and tax-exempt
commercial paper as availability occurred. This strategy benefited the Fund,
especially through the beginning of 1996 as yields came down in January and
February. However, as the second half of the period unfolded various economic
statistics indicated an improvement in retail sales and housing, culminating
with the release of the January/February non-farm payroll number in March
showing strong job growth. This data suggested that the Federal Reserve Board
might not reduce interest rates further, but might in fact begin raising
short-term interest rates. At that point we changed our strategy to a neutral
one, allowing the Fund's average life to decline to the 40-day range. This
strategy worked well as a combination of new subscriptions, maturing
municipal notes and tax-exempt commercial paper were replaced with VRDNs that
enhanced the performance of the Fund as yields on the VRDNs increased. We
ended the six-month period by initiating the purchase of longer-term notes,
taking advantage of the seasonal spike in yields from an overabundance of
short-term municipal supply created by tax-related redemptions in April.
2
<PAGE>
In the coming months we will continue to maintain a neutral approach to
the market while positioning the Fund for the upcoming period of supply
imbalances in the short-term municipal market. We anticipate taking advantage
of attractively priced short-term municipal notes as opportunities become
available. Diversity and credit quality are paramount to the Fund, and we
will seek to offer an attractive tax-exempt yield to our shareholders.
We thank you for your continued interest in the Merrill Lynch Funds For
Institutions Series, and we look forward to serving your investment needs in
the months and years ahead.
Sincerely,
/s/ Robert W. Crook
Robert W. Crook
President and Trustee
Merrill Lynch Funds For Institutions Series
/s/ Christopher Ayoub
Christopher Ayoub
Vice President and Portfolio Manager
Merrill Lynch Institutional Fund
/s/ John Ng
John Ng
Vice President and Portfolio Manager
Merrill Lynch Government Fund
Merrill Lynch Treasury Fund
/s/ Kevin Schiatta
Kevin Schiatta
Vice President and Portfolio Manager
Merrill Lynch Institutional Tax-Exempt Fund
May 24, 1996
3
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Schedule of Investments
April 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. $ 75,000,000 U.S. Treasury Bills 4.54% 02/06/97 $ 71,949,979
Government & 50,000,000 U.S. Treasury Bills 4.56 02/06/97 47,966,653
Agency 50,000,000 U.S. Treasury Bills 4.59 02/06/97 47,966,653
Issues -- 9.8% 25,000,000 U.S. Treasury Notes 6.50 09/30/96 25,113,283
50,000,000 U.S. Treasury Notes 6.87 10/31/96 50,351,565
79,000,000 U.S. Treasury Notes 5.25 12/31/97 78,086,562
190,000,000 U.S. Treasury Notes 5.00 01/31/98 186,793,750
20,000,000 Federal Farm Credit Banks 5.52 06/03/96 20,000,000
30,000,000 Federal Farm Credit Banks 5.10 08/01/96 29,976,600
10,900,000 Federal Home Loan Banks 6.03 10/24/97 10,879,562
12,000,000 Federal Home Loan Banks 6.04 11/03/97 11,968,128
20,480,000 Federal Home Loan Banks 5.78 12/22/97 20,364,800
25,250,000 Federal Home Loan Banks 6.19 05/08/98 25,182,936
35,000,000 Federal Home Loan Mortgage Corp. 6.00 05/13/96 34,998,699
25,000,000 Federal National Mortgage Assoc. 5.19 01/08/98 24,656,250
57,000,000 Federal National Mortgage Assoc. D/N 4.98 06/04/96 56,731,910
-------------------------------------------------------------------------------------------------------------
Total U.S. Government & Agency
Issues (Cost $748,843,865) 742,987,330
-------------------------------------------------------------------------------------------------------------
U.S. 25,000,000 Federal Farm Credit Banks 5.31 02/06/98 24,987,539
Government Agency 25,000,000 Federal Home Loan Banks 5.75 05/10/96 24,999,878
Issues -- 48,000,000 Federal Home Loan Banks 5.71 06/17/96 48,000,000
Variable 20,000,000 Federal Home Loan Banks 5.71 06/21/96 20,000,000
Rate -- 26.7% 10,000,000 Federal Home Loan Banks 5.81 12/23/96 10,003,649
35,270,000 Federal Home Loan Banks 5.83 01/31/97 35,299,174
34,105,000 Federal Home Loan Banks 5.78 02/03/97 34,100,069
35,000,000 Federal Home Loan Banks 5.78 02/10/97 35,000,000
14,000,000 Federal Home Loan Banks 5.60 01/26/98 13,921,154
10,100,000 Federal Home Loan Mortgage Corp. 5.58 05/06/96 10,100,000
50,000,000 Federal National Mortgage Assoc. 5.23 05/10/96 49,999,406
70,000,000 Federal National Mortgage Assoc. 5.58 05/13/96 70,000,000
60,000,000 Federal National Mortgage Assoc. 5.58 05/24/96 60,000,000
160,000,000 Federal National Mortgage Assoc. 5.37 06/03/96 160,010,317
100,000,000 Federal National Mortgage Assoc. 5.27 07/05/96 99,982,904
32,000,000 Federal National Mortgage Assoc. 5.25 07/18/96 31,994,703
70,000,000 Federal National Mortgage Assoc. 5.19 08/08/96 69,989,018
30,000,000 Federal National Mortgage Assoc. 5.58 08/13/96 30,000,000
15,000,000 Federal National Mortgage Assoc. 5.70 10/04/96 14,996,634
See Notes to Financial Statements.
4
<PAGE>
- --------------------------------------------------------------------------------------------------------------
U.S. $ 30,000,000 Federal National Mortgage Assoc. 5.85% 10/07/96 $ 30,016,817
Government 110,000,000 Federal National Mortgage Assoc. 5.26 10/11/96 110,000,000
Agency 38,000,000 Federal National Mortgage Assoc. 5.35 11/04/96 38,000,000
Issues -- 75,000,000 Federal National Mortgage Assoc. 5.21 12/19/96 74,965,604
Variable 50,000,000 Federal National Mortgage Assoc. 5.85 02/14/97 50,047,700
Rate (continued) 50,000,000 Federal National Mortgage Assoc. 5.35 02/21/97 50,000,000
62,000,000 Federal National Mortgage Assoc. 5.33 04/15/97 61,936,651
75,000,000 Federal National Mortgage Assoc. 5.26 04/22/97 74,936,308
135,000,000 Federal National Mortgage Assoc. 5.31 05/22/97 134,903,023
89,900,000 Student Loan Marketing Assoc. 5.31 05/14/96 89,902,074
28,000,000 Student Loan Marketing Assoc. 5.28 07/19/96 28,002,028
75,000,000 Student Loan Marketing Assoc. 5.33 08/08/96 75,000,000
15,000,000 Student Loan Marketing Assoc. 5.61 08/16/96 14,993,746
13,000,000 Student Loan Marketing Assoc. 5.58 08/22/96 13,012,146
101,500,000 Student Loan Marketing Assoc. 5.28 09/23/96 101,496,554
65,000,000 Student Loan Marketing Assoc. 5.35 10/04/96 65,000,000
14,100,000 Student Loan Marketing Assoc. 5.50 11/27/96 14,100,000
80,550,000 Student Loan Marketing Assoc. 5.34 12/20/96 80,545,579
20,000,000 Student Loan Marketing Assoc. 5.49 01/14/97 20,000,000
25,000,000 Student Loan Marketing Assoc. 5.70 01/21/97 25,013,211
18,940,000 Student Loan Marketing Assoc. 5.55 02/14/97 18,956,105
18,000,000 Student Loan Marketing Assoc. 5.45 01/27/98 18,032,074
-------------------------------------------------------------------------------------------------------------
Total U.S. Government Agency Issues
-- Variable Rate
(Cost $2,032,244,065) 2,032,244,065
-------------------------------------------------------------------------------------------------------------
Euro Australia and New Zealand Banking
Certificates of 25,000,000 Group Ltd., London 5.02 08/20/96 24,971,724
Deposit -- 1.6% Bayerische Hypotheken-und
50,000,000 Wechsel-Bank AG, London 5.10 07/05/96 49,972,723
Bayerische Vereinsbank AG,
45,000,000 London 5.35 07/08/96 44,993,028
-------------------------------------------------------------------------------------------------------------
Total Euro Certificates of
Deposit (Cost $120,004,730) 119,937,475
-------------------------------------------------------------------------------------------------------------
Yankee Hongkong & Shanghai Banking
Certificates of 100,000,000 Corp., NY 5.35 05/06/96 100,000,000
Deposit -- 4.6% 250,000,000 Societe Generale, NY 5.37 06/07/96 250,002,550
-------------------------------------------------------------------------------------------------------------
Total Yankee Certificates of
Deposit (Cost $350,002,550) 350,002,550
-------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
5
<PAGE>
- -------------------------------------------------------------------------------------------------------------
Time
Deposits -- 3.0% $225,000,000 Society National Bank (Cayman) 5.37% 05/01/96 $225,000,000
-------------------------------------------------------------------------------------------------------------
Total Time Deposits
(Cost $225,000,000) 225,000,000
-------------------------------------------------------------------------------------------------------------
Bank Notes -- 125,000,000 Bank One, Texas N.A. 5.31 09/05/96 124,983,266
Variable 100,000,000 Key Bank of New York 5.30 08/16/96 99,985,903
Rate -- 2.9%
-------------------------------------------------------------------------------------------------------------
Total Bank Notes -- Variable Rate
(Cost $224,969,169) 224,969,169
-------------------------------------------------------------------------------------------------------------
Corporate 35,000,000 Abbey National Treasury Services
Notes -- 0.7% PLC 6.45 05/15/96 34,999,612
18,800,000 Morgan (J.P.) Securities Inc. 5.75 08/07/96 18,789,815
-------------------------------------------------------------------------------------------------------------
Total Corporate Notes
(Cost $53,793,823) 53,789,427
-------------------------------------------------------------------------------------------------------------
Corporate Notes -- 39,000,000 Bear Stearns & Co., Inc. 5.62 05/22/96 39,002,508
Variable 20,000,000 Bear Stearns & Co., Inc. 5.49 09/20/96 20,001,860
Rate -- 10.5% 25,000,000 Beta Finance Inc. 5.37 08/26/96 25,000,000
35,000,000 Beta Finance Inc. 5.38 09/16/96 35,000,000
30,000,000 Beta Finance Inc. 5.38 09/25/96 29,998,818
25,000,000 CIT Group Holdings, Inc. 5.30 09/20/96 24,990,005
50,000,000 CIT Group Holdings, Inc. 5.31 09/26/96 49,982,454
33,000,000 CIT Group Holdings, Inc. 5.49 11/14/96 33,014,582
70,000,000 CIT Group Holdings, Inc. 5.30 02/06/97 69,958,349
75,000,000 PHH Corp. 5.34 01/23/97 74,984,029
25,000,000 PHH Corp. 5.36 02/10/97 24,992,858
150,000,000 Short Term Card Account
Trust 1995-1 5.51 01/15/97 149,989,471
51,000,000 SMM Trust 1995-K 5.52 06/14/96 51,000,000
150,000,000 SMM Trust 1995-K 5.50 01/08/97 149,990,233
25,000,000 Toyota Motor Credit Corp. 5.33 09/13/96 24,993,739
-------------------------------------------------------------------------------------------------------------
Total Corporate Notes -- Variable
Rate (Cost $802,898,906) 802,898,906
-------------------------------------------------------------------------------------------------------------
Master Notes -- 231,982,000 Goldman Sachs Group, L.P. 5.33 10/08/96 231,982,000
Variable 50,000,000 Goldman Sachs Group, L.P. 5.38 11/08/96 50,000,000
Rate -- 3.7%
-------------------------------------------------------------------------------------------------------------
Total Master Notes -- Variable Rate
(Cost $281,982,000) 281,982,000
-------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
6
<PAGE>
- -------------------------------------------------------------------------------------------------------------
Commercial $ 11,753,000 Allomon Funding Corp. 5.35% 05/03/96 $ 11,749,507
Paper -- 33.5% 11,046,000 Alpine Securitization Corp. 5.35 05/15/96 11,023,018
47,864,000 Alpine Securitization Corp. 5.30 05/17/96 47,751,254
16,090,000 Alpine Securitization Corp. 5.30 06/18/96 15,976,297
25,000,000 American Express Credit Corp. 4.88 08/09/96 24,630,555
40,000,000 Ameritech Capital Funding Corp. 5.30 07/03/96 39,626,900
70,000,000 Caisse Des Depots Et Consignations 5.35 05/08/96 69,927,181
20,000,000 Corporate Asset Funding Co. Inc. 5.30 05/17/96 19,952,889
44,000,000 Corporate Receivables Corp. 5.32 05/14/96 43,915,471
50,000,000 Corporate Receivables Corp. 5.35 05/21/96 49,851,389
20,900,000 Corporate Receivables Corp. 5.33 05/29/96 20,813,358
8,100,000 CSW Credit, Inc. 5.34 05/16/96 8,081,977
37,090,000 Deer Park Refining Limited
Partnership 5.34 05/03/96 37,078,997
60,525,000 Eiger Capital Corp. 5.37 05/02/96 60,515,972
40,000,000 Eiger Capital Corp. 5.32 05/20/96 39,887,689
21,500,000 Eureka Securitization Inc. 5.30 05/23/96 21,430,364
30,000,000 Eureka Securitization Inc. 5.32 06/05/96 29,844,833
45,000,000 Eureka Securitization Inc. 5.31 07/01/96 44,593,587
49,760,000 Falcon Asset Securitization Corp. 5.35 05/13/96 49,671,261
15,925,000 Falcon Asset Securitization Corp. 5.32 05/21/96 15,877,933
25,000,000 Falcon Asset Securitization Corp. 5.30 05/23/96 24,919,028
150,000,000 Ford Motor Credit Co. 5.32 05/06/96 149,889,167
100,000,000 Ford Motor Credit Co. 5.32 05/08/96 99,896,556
100,000,000 Ford Motor Credit Co. 5.30 05/31/96 99,558,333
120,000,000 General Motors Acceptance Corp. 5.39 05/06/96 119,910,167
25,000,000 General Motors Acceptance Corp. 5.13 05/13/96 24,957,250
85,000,000 General Motors Acceptance Corp. 5.40 05/16/96 84,808,750
50,000,000 Goldman Sachs Group, L.P. 5.30 05/31/96 49,779,167
76,000,000 Greenwich Funding Corp. 5.35 05/15/96 75,841,878
20,082,000 Greenwich Funding Corp. 5.30 05/15/96 20,040,609
18,969,000 Greenwich Funding Corp. 5.33 06/14/96 18,845,427
45,000,000 International Lease Finance Corp. 5.32 05/23/96 44,853,700
75,325,000 International Securitization Corp. 5.35 05/21/96 75,101,117
See Notes to Financial Statements.
7
<PAGE>
- -------------------------------------------------------------------------------------------------------------
Commercial $ 24,000,000 International Securitization Corp. 5.32% 05/21/96 $ 23,929,067
Paper 50,000,000 International Securitization Corp. 5.32 05/22/96 49,844,833
(continued) 41,000,000 Kingdom of Sweden 5.50 05/01/96 41,000,000
17,000,000 Kingdom of Sweden 4.98 07/08/96 16,828,848
20,000,000 Korea Development Bank 5.10 05/08/96 19,980,167
30,000,000 Korea Development Bank 5.30 07/25/96 29,622,458
20,031,000 Matterhorn Capital Corp. 5.33 05/13/96 19,995,412
40,000,000 McKenna Triangle National Corp. 5.30 07/19/96 39,532,144
10,214,000 Monte Rosa Capital Corp. 5.31 05/20/96 10,185,375
45,908,000 Monte Rosa Capital Corp. 5.31 05/22/96 45,765,800
40,000,000 National Australia Funding (DE) Inc. 5.33 05/09/96 39,952,622
10,000,000 National Australia Funding (DE) Inc. 5.44 05/29/96 9,957,689
20,000,000 National Fleet Funding Corp. 5.20 05/03/96 19,994,222
50,000,000 National Fleet Funding Corp. 5.30 05/29/96 49,793,889
100,000,000 New Center Asset Trust 5.33 05/15/96 99,792,722
25,000,000 Nomura Holding America, Inc. 5.20 05/08/96 24,974,722
25,000,000 Nomura Holding America, Inc. 5.35 05/31/96 24,888,542
36,075,000 Preferred Receivables Funding Corp. 5.30 05/28/96 35,931,602
13,400,000 Riverwoods Funding Corp. 5.32 05/17/96 13,368,316
43,300,000 Sheffield Receivables Corp. 5.33 05/03/96 43,287,178
35,950,000 Sheffield Receivables Corp. 5.35 05/15/96 35,875,204
31,325,000 Svenska Handelsbanken Inc. 5.10 05/08/96 31,293,936
31,136,000 Svenska Handelsbanken Inc. 5.35 05/10/96 31,094,356
40,000,000 Svenska Handelsbanken Inc. 5.10 05/13/96 39,932,000
9,200,000 Toshiba International Finance (U.K.)
PLC 5.32 07/15/96 9,097,842
18,850,000 Unilever Capital Corp. 5.30 05/10/96 18,825,024
50,000,000 Western Australia Treasury Corp. 4.90 08/08/96 49,268,500
15,000,000 WCP Funding Inc. 5.18 05/31/96 14,935,250
25,000,000 WCP Funding Inc. 5.33 05/31/96 24,888,958
32,460,000 Windmill Funding Corp. 5.35 05/10/96 32,416,585
51,632,000 Windmill Funding Corp. 5.35 05/20/96 51,486,211
-------------------------------------------------------------------------------------------------------------
Total Commercial Paper
(Cost $2,548,449,175) 2,548,341,055
-------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements
8
<PAGE>
- -------------------------------------------------------------------------------------------------------------
Repurchase $215,000,000 Lehman Brothers Inc., purchased
Agreements**-- 2.8% on 04/30/96 5.40% 05/01/96 $ 215,000,000
-------------------------------------------------------------------------------------------------------------
Repurchase Agreements
(Cost $215,000,000) 215,000,000
-------------------------------------------------------------------------------------------------------------
Total Investments -- 99.8%
(Cost $7,603,188,283) 7,597,151,977
-------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities
-- 0.2% 17,973,899
-------------------------------------------------------------------------------------------------------------
Net Assets -- Equivalent to $1.00
Per Share on 7,621,162,182
Shares of Beneficial Interest
Outstanding -- 100.0% $7,615,125,876
=============================================================================================================
</TABLE>
Note--Costs for Federal income tax purposes are the same as those shown
above. At April 30, 1996 gross and net unrealized depreciation amounted to
$6,036,306.
*Commercial Paper and some U.S. Government and Agency Issues are traded on a
discount basis; the interest rate shown is the discount rate paid at the
time of purchase by the Fund. Other securities bear interest at the rates
shown, payable at fixed dates or upon maturity; the rates shown are the
rates in effect at April 30, 1996. For variable rate instruments, the next
date on which the interest rate is to be adjusted is deemed the maturity
date for valuation.
**Repurchase Agreements are fully collateralized by U.S. Government and
Agency Obligations.
D/N--Discount Notes
See Notes to Financial Statements.
9
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Statement of Assets and Liabilities
April 30, 1996
- --------------------------------------------------------------------------------
Assets:
Total investments at value (identified cost $7,603,188,283)
(Note 1a) $7,597,151,977
Cash 10,207,706
Interest receivable 37,596,624
Receivable for investments sold 24,933,679
Prepaid expenses 177,355
-----------
Total assets 7,670,067,341
-----------
Liabilities:
Payable for investments purchased 50,153,142
Dividends payable 4,564,252
Accrued expenses 224,071
-----------
Total liabilities 54,941,465
-----------
Net Assets: (Equivalent to $1.00 per share, offering and
redemption price, based on 7,621,162,182 shares of
beneficial interest outstanding) $7,615,125,876
===========
- -------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Statement of Operations
For the Year Ended April 30, 1996
- -------------------------------------------------------------------------------
Investment Income:
Income:
Interest and discount earned (Note 1d) $464,532,053
-----------
Expenses:
Investment advisory fee (Note 2) $ 26,191,407
Registration fees 1,490,351
Dividend and transfer agency fees 724,627
Accounting and custodian services 579,649
Legal and audit fees 164,224
Printing and shareholder reports 96,679
Trustees' fees (Note 5) 93,069
Insurance 45,086
Miscellaneous 33,924
---------
Total expenses 29,419,016
Waived investment advisory fee (Note 2) (10,263,924) 19,155,092
--------- -----------
Net investment income 445,376,961
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain from investment transactions 2,709,598
Net unrealized depreciation of investments (6,134,973)
---------
Net realized and unrealized loss from investments (3,425,375)
-----------
Net Increase in Net Assets Resulting From Operations $441,951,586
===========
See Notes to Financial Statements.
10
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Statements of Changes in Net Assets
Year Ended April 30,
-----------------------------
1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Increase in Net Assets:
Operations:
Net investment income $ 445,376,961 $ 251,886,269
Net realized gain from investment transactions 2,709,598 1,934,054
Net unrealized appreciation (depreciation) of investments (6,134,973) 2,746,629
--------- -----------
Net increase in net assets resulting from operations 441,951,586 256,566,952
Total declared as dividends to shareholders (Note 4) (448,086,559) (253,820,323)
Capital share transactions (Note 3) 1,041,174,836 2,802,217,964
--------- -----------
Net increase in net assets 1,035,039,863 2,804,964,593
Net Assets:
Beginning of year 6,580,086,013 3,775,121,420
--------- -----------
End of year $7,615,125,876 $6,580,086,013
========= ===========
</TABLE>
- -------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Financial Highlights
<TABLE>
<CAPTION>
Year Ended April 30,
----------------------------------------------------------------
1996 1995 1994 1993 1992
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
Income from Investment Operations:
Net investment income .056 .050 .031 .033 .050
Net realized and unrealized gain on
investments -- -- -- .001 --
------- ------- ------- ------- ---------
Total from investment operations .056 .050 .031 .034 .050
Less Distributions:
Dividends from net investment income (.056) (.050) (.031) (.034) (.050)
------- ------- ------- ------- ---------
Net Asset Value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= =========
Total Return 5.81% 5.11% 3.20% 3.46% 5.12%
Ratios/Supplemental Data:
Net Assets, end of year (000) $7,615,126 $6,580,086 $3,775,121 $4,712,639 $2,156,878
Ratio of expenses to average net assets
(before waiver) .37% .37% .37% .38% .40%
Ratio of expenses to average net assets
(after waiver) .24% .24% .24% .26% --
Ratio of net investment income, including
realized and unrealized gains and losses,
to average net assets (before waiver) 5.42% 5.00% 2.91% 3.29% 4.99%
Ratio of net investment income, including
realized and unrealized gains and losses,
to average net assets (after waiver) 5.55% 5.13% 3.04% 3.41% --
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Government Fund
Schedule of Investments
April 30, 1996
<TABLE>
<CAPTION>
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. $ 16,000,000 U.S. Treasury Bills 5.54% 07/25/96 $ 15,811,489
Government
& Agency 25,000,000 U.S. Treasury Bills 4.69 09/19/96 24,504,542
Issues -- 12,500,000 U.S. Treasury Bills 4.55 02/06/97 11,991,663
46.5% 10,000,000 U.S. Treasury Bills 5.30 05/01/97 9,463,567
50,000,000 U.S. Treasury Notes 4.37 08/15/96 49,875,000
10,000,000 Federal Farm Credit Banks 5.17 10/01/96 9,987,000
1,000,000 Federal Home Loan Banks D/N 5.83 05/02/96 999,838
13,000,000 Federal Home Loan Banks D/N 5.19 05/09/96 12,985,007
6,110,000 Federal Home Loan Banks D/N 5.10 06/07/96 6,077,973
25,000,000 Federal Home Loan Banks D/N 5.02 06/25/96 24,808,264
25,000,000 Federal Home Loan Banks D/N 5.05 06/28/96 24,796,597
13,320,000 Federal Home Loan Banks D/N 5.19 07/03/96 13,199,021
6,000,000 Federal Home Loan Banks D/N 5.18 07/17/96 5,933,395
25,000,000 Federal Home Loan Banks D/N 5.00 07/19/96 24,715,271
16,855,000 Federal Home Loan Banks D/N 5.18 09/16/96 16,518,377
9,300,000 Federal Home Loan Banks D/N 5.16 10/21/96 9,065,816
34,500,000 Federal Home Loan Banks D/N 5.16 10/23/96 33,621,208
Federal Home Loan Mortgage Corp.
100,000,000 D/N 4.97 05/03/96 99,972,389
Federal Home Loan Mortgage Corp.
50,000,000 D/N 5.24 05/13/96 49,912,667
Federal Home Loan Mortgage Corp.
100,000,000 D/N 5.20 06/12/96 99,393,333
Federal Home Loan Mortgage Corp.
30,000,000 D/N 5.21 07/01/96 29,736,175
Federal Home Loan Mortgage Corp.
10,000,000 D/N 5.18 07/11/96 9,897,642
Federal Home Loan Mortgage Corp.
14,388,000 D/N 5.18 07/12/96 14,238,653
Federal Home Loan Mortgage Corp.
25,000,000 D/N 5.18 07/22/96 24,704,458
25,000,000 Federal National Mortgage Assoc. D/N 4.97 05/07/96 24,979,292
35,000,000 Federal National Mortgage Assoc. D/N 5.04 06/07/96 34,818,700
5,000,000 Federal National Mortgage Assoc. D/N 5.19 07/24/96 4,939,450
80,000,000 Federal National Mortgage Assoc. D/N 5.16 10/25/96 77,938,933
--------------------------------------------------------------------------------------------------------
Total U.S. Government & Agency Issues
(Cost $765,077,438) 764,885,720
--------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
12
<PAGE>
- --------------------------------------------------------------------------------------------------------
U.S. $20,000,000 Federal Farm Credit Banks 5.20% 12/30/96 $ 19,984,606
Government 20,000,000 Federal Farm Credit Banks 5.24 02/07/97 19,981,113
Agency 13,000,000 Federal Home Loan Banks 5.71 06/17/96 13,000,000
Issues-- 6,000,000 Federal Home Loan Banks 5.71 06/21/96 6,000,000
Variable Rate 10,000,000 Federal Home Loan Banks 5.19 08/05/96 9,995,891
- -- 36.4% 50,000,000 Federal Home Loan Banks 5.25 09/27/96 49,980,459
50,000,000 Federal Home Loan Banks 5.60 01/26/98 49,974,270
3,000,000 Federal Home Loan Mortgage Corp. 5.75 05/13/98 3,000,000
30,000,000 Federal National Mortgage Assoc. 5.58 05/13/96 30,000,000
15,000,000 Federal National Mortgage Assoc. 5.58 05/24/96 15,000,000
9,000,000 Federal National Mortgage Assoc. 5.23 08/08/96 8,998,588
50,000,000 Federal National Mortgage Assoc. 5.25 09/03/96 49,993,410
40,000,000 Federal National Mortgage Assoc. 5.27 10/11/96 40,000,000
40,000,000 Federal National Mortgage Assoc. 5.24 10/15/96 39,989,143
7,800,000 Federal National Mortgage Assoc. 5.35 11/04/96 7,800,000
25,000,000 Federal National Mortgage Assoc. 5.35 02/21/97 25,000,000
10,000,000 Federal National Mortgage Assoc. 5.30 03/14/97 10,000,000
15,000,000 Federal National Mortgage Assoc. 5.31 03/19/97 14,990,291
14,000,000 Federal National Mortgage Assoc. 5.33 04/15/97 13,985,695
25,000,000 Federal National Mortgage Assoc. 5.29 04/28/97 24,983,152
10,000,000 Federal National Mortgage Assoc. 5.26 04/29/97 9,989,865
17,000,000 Federal National Mortgage Assoc. 5.70 05/19/97 17,000,000
25,000,000 Federal National Mortgage Assoc. 5.75 05/14/98 25,000,000
50,000,000 Student Loan Marketing Assoc. 5.26 07/01/96 49,995,022
15,400,000 Student Loan Marketing Assoc. 5.28 07/19/96 15,401,081
20,000,000 Student Loan Marketing Assoc. 5.27 09/20/96 20,000,000
8,500,000 Student Loan Marketing Assoc. 5.35 10/04/96 8,500,000
--------------------------------------------------------------------------------------------------------
Total U.S. Government Agency
Issues -- Variable Rate
(Cost $598,542,586) 598,542,586
--------------------------------------------------------------------------------------------------------
Repurchase 40,830,000 Goldman Sachs Group, L.P.,
Agreements**-- purchased on 04/30/96 5.25 05/01/96 40,830,000
17.1% 80,000,000 HSBC Securities Inc., purchased
on 04/30/96 5.37 05/01/96 80,000,000
80,000,000 Lehman Brothers Inc., purchased
on 04/30/96 5.36 05/01/96 80,000,000
See Notes to Financial Statements.
13
<PAGE>
- --------------------------------------------------------------------------------------------------------
Repurchase
Agreements** $80,000,000 Nomura Securities International Inc.,
(continued) purchased on 04/30/96 5.37% 05/01/96 $ 80,000,000
--------------------------------------------------------------------------------------------------------
Repurchase Agreements
(Cost $280,830,000) 280,830,000
--------------------------------------------------------------------------------------------------------
Total Investments--100.0%
(Cost $1,644,450,024) 1,644,258,306
--------------------------------------------------------------------------------------------------------
Liabilities in Excess of Other
Assets--(0.0%) (633,646)
--------------------------------------------------------------------------------------------------------
Net Assets--Equivalent to $1.00
Per Share on 1,643,816,378 Shares
of Beneficial Interest
Outstanding--100.0% $1,643,624,660
========================================================================================================
</TABLE>
Note--Costs for Federal income tax purposes are the same as those shown
above. At April 30, 1996 unrealized net depreciation amounted to $191,718 and
is comprised of $21,794 of appreciation and $213,512 in depreciation.
*U.S. Treasury Notes and Repurchase Agreements bear interest payable at
fixed dates or upon maturity. U.S. Treasury Bills and some U.S. Government
and Agency Issues are purchased on a discount basis; the interest rate
shown is the discount paid at the time of purchase by the Fund. Other U.S.
Government and Agency Issues bear interest at the rates shown, payable at
fixed dates or upon maturity; the rates shown are the rates in effect at
April 30, 1996. For variable rate instruments, the next date on which the
interest rate is to be adjusted is deemed the maturity date for valuation.
**Repurchase Agreements are fully collateralized by U.S. Government and
Agency Obligations.
D/N--Discount Notes
See Notes to Financial Statements.
14
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Government Fund
Statement of Assets and Liabilities
April 30, 1996
- --------------------------------------------------------------------------------
Assets:
Investments in securities subject to
repurchase agreements $ 280,830,000
Investments in other marketable securities 1,363,428,306
----------
Total investments at value (identified
cost $1,644,450,024) (Note 1a) $1,644,258,306
Cash 4,773,565
Interest receivable 4,276,668
Prepaid expenses 95,289
------------
Total assets 1,653,403,828
------------
Liabilities:
Payable for investments purchased 9,464,111
Dividends payable 246,997
Accrued expenses 68,060
Total liabilities 9,779,168
------------
Net Assets: (Equivalent to $1.00 per share, offering and
redemption price, based on 1,643,816,378 shares of beneficial
interest outstanding) $1,643,624,660
============
- --------------------------------------------------------------------------------
Merrill Lynch Government Fund
Statement of Operations
April 30, 1996
- --------------------------------------------------------------------------------
Investment Income:
Income:
Interest and discount earned (Note 1d) $96,447,559
----------
Expenses:
Investment advisory fee (Note 2) $ 5,423,149
Registration fees 390,750
Dividend and transfer agency fees 288,779
Accounting and custodian services 191,939
Legal and audit fees 40,910
Printing and shareholder reports 22,917
Trustees' fees (Note 5) 19,471
Insurance 10,935
Miscellaneous 9,823
--------
Total expenses 6,398,673
Waived investment advisory fee (Note 2) (2,066,757) 4,331,916
-------- ----------
Net investment income 92,115,643
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain from investment transactions 318,832
Net unrealized depreciation of investments (230,159)
--------
Net realized and unrealized gain from investments 88,673
----------
Net Increase in Net Assets Resulting From Operations $92,204,316
==========
See Notes to Financial Statements.
15
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Government Fund
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended April 30,
----------------------
<S> <C> <C>
1996 1995
- -----------------------------------------------------------------------------------------
Increase in Net Assets:
Operations:
Net investment income $ 92,115,643 $ 70,187,087
Net realized gain from investment transactions 318,832 245,307
Net unrealized appreciation (depreciation) of investments (230,159) 961,939
---------- -----------
Net increase in net assets resulting from operations 92,204,316 71,394,333
Total declared as dividends to shareholders (Note 4) (92,434,475) (70,432,394)
Capital share transactions (Note 3) 42,769,813 66,644,939
---------- -----------
Net increase in net assets 42,539,654 67,606,878
Net Assets:
Beginning of year 1,601,085,006 1,533,478,128
---------- -----------
End of year $1,643,624,660 $1,601,085,006
========== ===========
</TABLE>
- -------------------------------------------------------------------------------
Merrill Lynch Government Fund
Financial Highlights
<TABLE>
<CAPTION>
Year Ended April 30,
------------------------------------------------------------
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
Income from Investment Operations:
Net investment income .055 .049 .030 .030 .047
Net realized and unrealized gain on
investments -- -- -- .001 .002
------- ------- ------- ------- ---------
Total from investment operations .055 .049 .030 .031 .049
Less Distributions:
Dividends from net investment income (.055) (.049) (.030) (.031) (.049)
------- ------- ------- ------- ---------
Net Asset Value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= =========
Total Return 5.67% 4.99% 3.06% 3.19% 5.05%
Ratios/Supplemental Data:
Net Assets, end of year (000) $1,643,625 $1,601,085 $1,533,478 $1,355,044 $1,358,150
Ratio of expenses to average net assets
(before waiver) .38% .37% .38% .39% .41%
Ratio of expenses to average net assets
(after waiver) .26% .24% .32% -- --
Ratio of net investment income, including
realized and unrealized gains and losses, to
average net assets (before waiver) 5.37% 4.82% 2.83% 3.19% 4.93%
Ratio of net investment income, including
realized and unrealized gains and losses, to
average net assets (after waiver) 5.49% 4.95% 2.89% -- --
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
- -------------------------------------------------------------------------------
Merrill Lynch Treasury Fund
Schedule of Investments
April 30, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Interest Maturity Value
Amount Rate* Date (Note 1a)
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. $ 2,013,000 U.S. Treasury Bills 5.22% 05/09/96 $ 2,010,663
Government 13,777,000 U.S. Treasury Bills 4.95 06/06/96 13,708,735
Issues -- 25,000,000 U.S. Treasury Bills 4.95 06/06/96 24,876,250
99.3% 4,779,000 U.S. Treasury Bills 4.94 06/06/96 4,755,392
50,000,000 U.S. Treasury Bills 4.92 06/06/96 49,753,750
6,500,000 U.S. Treasury Bills 4.77 06/13/96 6,462,966
13,500,000 U.S. Treasury Bills 4.76 06/13/96 13,423,164
9,000,000 U.S. Treasury Bills 4.75 06/13/96 8,948,938
67,854,000 U.S. Treasury Bills 4.94 06/13/96 67,453,624
11,332,000 U.S. Treasury Bills 4.95 07/11/96 11,221,371
4,302,000 U.S. Treasury Bills 4.97 07/11/96 4,260,002
6,366,000 U.S. Treasury Bills 4.96 07/11/96 6,303,852
2,477,000 U.S. Treasury Bills 4.96 07/11/96 2,452,818
92,000,000 U.S. Treasury Bills 4.98 07/11/96 91,101,850
15,000,000 U.S. Treasury Bills 4.75 08/08/96 14,794,162
79,000,000 U.S. Treasury Notes 5.87 05/31/96 79,043,742
15,000,000 U.S. Treasury Notes 6.12 07/31/96 15,031,641
10,000,000 U.S. Treasury Notes 6.50 09/30/96 10,045,313
25,000,000 U.S. Treasury Strips 5.15 05/15/96 24,950,176
60,000,000 U.S. Treasury Strips 4.94 05/15/96 59,884,640
---------------------------------------------------------------------------------------------------
Total Investments -- 99.3%
(Cost $510,493,228) 510,483,049
---------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 0.7% 3,640,433
---------------------------------------------------------------------------------------------------
Net Assets -- Equivalent to
$1.00 Per Share on 514,133,661
Shares of Beneficial Interest
Outstanding -- 100.0% $514,123,482
===================================================================================================
</TABLE>
Note--Costs for Federal income tax purposes are the same as those shown
above. At April 30, 1996 net unrealized depreciation amounted to $10,179 and
is comprised of $9,482 in appreciation and $19,661 in depreciation.
*U.S. Treasury Bills are purchased on a discount basis; the interest rate
shown is the discount paid at the time of purchase by the Fund. U.S.
Treasury Strips are purchased on a discount basis; the interest rate shown
represents the yield at the time of purchase by the Fund.
U.S. Treasury Notes bear interest payable at fixed dates or upon maturity.
See Notes to Financial Statements.
17
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Treasury Fund
Statement of Assets and Liabilities
April 30, 1996
- --------------------------------------------------------------------------------
Assets:
Total investments at value (identified cost $510,493,228)
(Note 1a) $510,483,049
Cash 1,488,821
Interest receivable 2,224,936
Prepaid expenses 1,030
-----------
Total assets 514,197,836
-----------
Liabilities:
Dividends payable 43,010
Accrued expenses 31,344
-----------
Total liabilities 74,354
-----------
Net Assets: (Equivalent to $1.00 per share, offering and
redemption price, based on 514,133,661 shares of beneficial
interest outstanding) $514,123,482
===========
- --------------------------------------------------------------------------------
Merrill Lynch Treasury Fund
Statement of Operations
For the Year Ended April 30, 1996
- --------------------------------------------------------------------------------
Investment Income:
Income:
Interest and discount earned (Note 1d) $28,001,355
----------
Expenses:
Investment advisory fee (Note 2) $1,792,930
Registration fees 121,429
Dividend and transfer agency fees 97,362
Accounting and custodian services 75,803
Legal and audit fees 13,259
Printing and shareholder reports 7,741
Trustees' fees (Note 5) 6,207
Insurance 2,447
Miscellaneous 3,462
--------
Total expenses 2,120,640
Waived investment advisory fee (Note 2) (765,429) 1,355,211
-------- ----------
Net investment income 26,646,144
Realized and Unrealized Gain on Investments:
Net realized gain from investment transactions 221,477
Net unrealized appreciation of investments 10,300
--------
Net realized and unrealized gain from investments 231,777
----------
Net Increase in Net Assets Resulting From Operations $26,877,921
==========
See Notes to Financial Statements.
18
<PAGE>
- -------------------------------------------------------------------------------
Merrill Lynch Treasury Fund
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended April 30,
----------------------------
1996 1995
---------------------------------------------------------------------------------------
<S> <C> <C>
Increase in Net Assets:
Operations:
Net investment income $ 26,646,144 $ 14,839,828
Net realized gain from investment transactions 221,477 92,135
Net unrealized appreciation (depreciation) of investments 10,300 (2,366)
--------- -----------
Net increase in net assets resulting from operations 26,877,921 14,929,597
Total declared as dividends to shareholders (Note 4) (26,867,621) (14,931,963)
Capital share transactions (Note 3) 171,268,720 75,893,383
--------- -----------
Net increase in net assets 171,279,020 75,891,017
Net Assets:
Beginning of year 342,844,462 266,953,445
--------- -----------
End of year $514,123,482 $342,844,462
========= ===========
</TABLE>
- -------------------------------------------------------------------------------
Merrill Lynch Treasury Fund
Financial Highlights
<TABLE>
<CAPTION>
Year Ended April 30,
---------------------------------------------------
1996 1995 1994 1993 1992
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
Income from Investment Operations:
Net investment income .052 .045 .027 .028 .045
Net realized and unrealized gain
on investments -- -- -- .001 .002
----- ----- ----- ----- -------
Total from investment operations .052 .045 .027 .029 .047
Less Distributions:
Dividends from net investment income (.052) (.045) (.027) (.029) (.047)
----- ----- ----- ----- -------
Net Asset Value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =======
Total Return 5.37% 4.68% 2.82% 2.97% 4.79%
Ratios/Supplemental Data:
Net Assets, end of year (000) $514,123 $342,844 $266,953 $359,318 $320,686
Ratio of expenses to average net assets
(before waiver) .41% .44% .45% .45% .46%
Ratio of expenses to average net assets
(after waiver) .26% .29% .39% -- --
Ratio of net investment income, including
realized and unrealized gains and losses,
to average net assets (before waiver) 5.09% 4.58% 2.67% 2.93% 4.69%
Ratio of net investment income, including
realized and unrealized gains and losses,
to average net assets (after waiver) 5.24% 4.73% 2.73% -- --
</TABLE>
See Notes to Financial Statements.
19
<PAGE>
- -------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Schedule of Investments
April 30, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
Face Value
Amount Issue (Note 1a)
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Alabama -- $13,000,000 Birmingham, Alabama Medical Clinic Board Revenue
2.5% (University of Alabama Health Services Project)
DDN 4.20% due 12/01/2026 (a) $13,000,000
4,000,000 Jefferson County, Alabama Sewer Revenue VRDN
4.15% due 09/01/2025 (a) 4,000,000
----------------------------------------------------------------------------------------------------
Arizona -- 800,000 Maricopa County, Arizona PCR (Arizona Public
2.1% Service Co.) DDN 4.10% due 05/01/2029 (a) 800,000
13,000,000 Maricopa County, Arizona PCR (El Paso Electric
Co. Project) VRDN 4.50% due 07/01/2014 (a) 13,000,000
----------------------------------------------------------------------------------------------------
Colorado -- 8,000,000 Denver, Colorado City & County Airport Revenue
1.2% VRDN 4.20% due 11/15/2025 (a) 8,000,000
----------------------------------------------------------------------------------------------------
Connecticut -- 5,400,000 Connecticut Special Assessment Unemployment
1.3% Compensation Revenue VRDN 4.35% due
11/01/2001 (a) 5,400,000
3,500,000 Eagles Tax Exempt Trust VRDN 4.21% due
07/01/2015 (a) 3,500,000
----------------------------------------------------------------------------------------------------
District of 14,300,000 District of Columbia General Fund Recovery DDN
Columbia -- 4.30% due 06/01/2003 (a) 14,300,000
4.4% District of Columbia Revenue (Georgetown
University) VRDN:
6,825,000 4.60% due 04/01/2004 (a) 6,825,000
5,000,000 4.60% due 04/01/2017 (a) 5,000,000
3,100,000 District of Columbia Revenue (American
Association for the Advancement of Sciences) DDN
4.15% due 10/01/2022 (a) 3,100,000
----------------------------------------------------------------------------------------------------
Florida -- 5,000,000 Jacksonville, Florida CP 3.50% due 07/12/1996 5,000,000
1.2% 3,000,000 Sunshine State Governmental Financing Commission
CP 4.15% due 05/01/1996 3,000,000
----------------------------------------------------------------------------------------------------
Georgia -- 6,410,000 Georgia State Residential Finance Authority FXRDN
3.1% 3.70% due 06/01/1996 6,410,000
Municipal Electric Authority CP:
8,000,000 3.40% due 05/01/1996 8,000,000
6,000,000 3.45% due 07/12/1996 6,000,000
----------------------------------------------------------------------------------------------------
Illinois -- 4,300,000 Chicago, Illinois IDR (Enterprise Center Project)
15.5% VRDN 4.30% due 06/01/2022 (a) 4,300,000
21,900,000 Chicago, Illinois O'Hare International Airport
Revenue (American Airlines) DDN 4.10% due
12/01/2017 (a) 21,900,000
7,000,000 Chicago, Illinois Solid Waste Disposal Facilities
Revenue (Groot Industries Inc. Project) VRDN
4.10% due 12/01/2015 (a) 7,000,000
See Notes to Financial Statements.
20
<PAGE>
- -----------------------------------------------------------------------------------------------------
Illinois $ 2,500,000 Illinois Educational Facilities Authority Revenue
(continued) (Art Institute of Chicago) VRDN 4.15% due
03/01/2027 (a) $ 2,500,000
Illinois Health Facilities Authority Revenue
(Evanston Hospital Corp. Project) CP:
5,000,000 3.75% due 10/31/1996 5,000,000
5,000,000 3.35% due 12/27/1996 5,000,000
24,400,000 Illinois Health Facilities Authority Revenue
(Northwest Community Hospital) VRDN 4.40% due
07/01/2025 (a) 24,400,000
24,100,000 Illinois Health Facilities Authority Revenue
(Central Du Page County Healthcorp Project) DDN
4.40% due 11/01/2020 (a) 24,100,000
6,500,000 Kane Cook & Du Page Counties School District TAN
3.94% due 09/30/1996 6,510,273
2,870,000 Peoria, Illinois IDR (CDC Realty L.P. Project)
VRDN 4.35% due 12/01/2014 (a) 2,870,000
----------------------------------------------------------------------------------------------------
Indiana -- 6,660,000 Anderson, Indiana Economic Development Revenue
4.8% (Applecreek Commons L.P.) VRDN 4.25% due
12/01/2027 (a) 6,660,000
3,645,000 Bloomington, Indiana Economic Development Revenue
(Bloomington Square Project) VRDN 4.25% due
12/01/2008 (a) 3,645,000
3,000,000 Greencastle, Indiana IDR (Crown Equipment Corp.
Project) VRDN 4.15% due 02/01/2011 (a) 3,000,000
900,000 Greendale, Indiana Economic Development Revenue
(Pripak Inc. Project) VRDN 4.35% due 12/01/2003
(a) 900,000
2,700,000 Indiana State Development Finance Authority
Economic Development Revenue (Hart Housing Group
Inc. Project) VRDN 4.30% due 06/01/2011 (a) 2,700,000
2,815,000 Indiana State Development Finance Authority IDR
(Centurion Industries Inc. Project) VRDN 4.35%
due 10/01/2005 (a) 2,815,000
5,000,000 Indiana State Educational Facilities Authority
Revenue (Wesleyan University Project) VRDN 4.25%
due 12/01/2015 (a) 5,000,000
2,105,000 New Castle, Indiana Economic Development Revenue
(Barden Homes Indiana Inc.) VRDN 4.35% due
08/01/2010 (a) 2,105,000
2,485,000 St. Joseph County, Indiana Hospital Authority
(Madison Center Inc. Project) VRDN 4.15% due
03/04/2015 (a) 2,485,000
3,000,000 Westfield, Indiana IDR (Standard Locknut Inc.
Project) VRDN 4.35% due 02/01/2002 (a) 3,000,000
----------------------------------------------------------------------------------------------------
21
See Notes to Financial Statements.
<PAGE>
- -----------------------------------------------------------------------------------------------------
Kentucky -- $25,100,000 Kentucky Economic Development Finance Authority
5.2% Revenue (Sisters of Charity) DDN 4.40% due
11/01/2020 (a) $25,100,000
9,300,000 Perry County, Kentucky Health Care Systems
Revenue (Appalachian Regional Health Care) VRDN
4.00% due 08/01/2014 (a) 9,300,000
----------------------------------------------------------------------------------------------------
Louisiana -- 6,050,000 Louisiana Public Facilities Authority GO 4.50%
0.9% due 08/29/1996 6,058,608
----------------------------------------------------------------------------------------------------
Maryland -- 2,000,000 Anne Arundel County, Maryland Economic
1.2% Development Revenue (Atlas Container Corp.
Project) VRDN 4.25% due 04/01/2006 (a) 2,000,000
3,500,000 Maryland State Economic Development Corp. Revenue
(Grafco Industries L.P. Project) VRDN 4.35% due
03/01/2008 (a) 3,500,000
2,700,000 Maryland State Health & Higher Educational
Facilities Authority Revenue (Helix Health Inc.)
VRDN 4.20% due 07/01/2026 (a) 2,700,000
----------------------------------------------------------------------------------------------------
Massachusetts-- 6,000,000 Bridgewater, Massachusetts BAN 3.90% due
5.9% 11/19/1996 6,011,356
1,850,000 Fall River, Massachusetts RAN 4.25% due
06/28/1996 1,852,053
5,400,000 Gardner, Massachusetts BAN 4.00% due 04/01/1997 5,409,516
6,000,000 Lynn, Massachusetts Water & Sewer Commission BAN
4.50% due 10/11/1996 6,008,204
10,000,000 Massachusetts State Industrial Finance Agency
(Goddard House) VRDN 4.15% due 11/01/2025 (a) 10,000,000
3,935,000 Massachusetts State Industrial Finance Agency
Revenue (WBC Extrusion Products) FXRDN 3.80% due
04/01/2006 3,935,000
2,200,000 Massachusetts State Industrial Finance Agency PCR
(New England Power Co. Project) CP 3.50% due
08/26/1996 2,200,000
1,650,000 Massachusetts State Industrial Finance Agency
Solid Waste Disposal Revenue (E.L. Harvey &
Sons) VRDN 3.80% due 01/01/2011 (a) 1,650,000
2,000,000 New Bedford, Massachusetts RAN 4.10% due
06/28/1996 2,001,867
----------------------------------------------------------------------------------------------------
Michigan -- 14,000,000 Michigan State Building Authority Revenue CP
2.1% 3.50% due 05/07/1996 14,000,000
----------------------------------------------------------------------------------------------------
Minnesota -- 7,900,000 Becker, Minnesota PCR (Northern State Power Co.)
1.2% CP 3.50% due 05/10/1996 7,900,000
- -----------------------------------------------------------------------------------------------------
Missouri -- 2,240,000 Jefferson County, Missouri IDA Revenue (Sinclair
0.3% & Rush Inc. Project) VRDN 4.35% due 11/01/2001
(a) 2,240,000
----------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
22
<PAGE>
- -----------------------------------------------------------------------------------------------------
Nevada -- Nevada Housing Single Family Program Bond
1.4% Mortgage Revenue FXRDN:
$ 5,100,000 Series A-1 3.45% due 10/01/1996 $ 5,100,000
4,200,000 Series A-2 3.55% due 10/01/1996 4,200,000
----------------------------------------------------------------------------------------------------
New 9,830,000 New Hampshire Higher Educational & Health
Hampshire -- Facilities Authority Revenue (Dartmouth
1.8% Educational Loan Corp.) FXRDN 4.20% due
06/01/1996 9,830,000
1,876,000 Salem, New Hampshire TAN 3.60% due 12/17/1996 1,877,135
----------------------------------------------------------------------------------------------------
New York -- 4,300,000 New York Power Authority Revenue FXRDN 3.25% due
0.6% 09/01/1996 4,300,000
----------------------------------------------------------------------------------------------------
North Dakota -- 9,000,000 Grand Forks, North Dakota Health Care Facilities
1.4% Revenue (The United Hospital Obligation Group)
DDN 4.20% due 12/01/2025 (a) 9,000,000
----------------------------------------------------------------------------------------------------
Ohio -- 10,800,000 Beavercreek, Ohio School District BAN 4.03% due
11.4% 07/18/1996 10,812,034
1,900,000 Cadiz, Ohio BAN 4.44% due 09/12/1996 1,901,930
Cincinnati, Ohio School District TAN:
7,000,000 4.31% due 06/28/1996 7,006,624
6,550,000 6.00% due 07/11/1996 6,580,983
5,000,000 Cuyahoga County, Ohio Hospital Revenue (University
Hospital of Cleveland) DDN 4.15% due 01/01/2016
(a) 5,000,000
7,400,000 Dayton, Ohio BAN 4.10% due 07/25/1996 7,406,742
6,000,000 Dayton, Ohio Special Facilities Revenue (Emery
Air Freight Project) DDN 4.10% due 10/01/2009
(a) 6,000,000
8,240,000 Greater Cleveland Regional Transit Authority BAN
3.90% due 10/17/1996 8,256,769
4,560,000 Lucas-Beacon Place Housing Development Corp. M/F
Revenue (Beacon Place Apartments Project) FXRDN
3.35% due 09/15/1996 4,560,000
7,400,000 Mahoning County, Ohio Health Care Facilities
Revenue (Shepherd of the Valley Lutheran Home
and Retirement Center) VRDN 4.25% due 09/01/2020
(a) 7,400,000
2,731,199 Nelsonville York, Ohio School District BAN 4.65%
due 05/15/1996 2,731,757
1,000,000 Ohio State Higher Educational Facilities
Commission Revenue (Ashland University Project)
VRDN 4.25% due 09/01/2001 (a) 1,000,000
2,860,000 Stark County, Ohio IDR (Superior Dairy Inc.
Project) VRDN 4.35% due 05/01/2003 (a) 2,860,000
400,000 State Water Development Authority Revenue (Honda
of America Project) VRDN 3.85% due 01/01/1997
(a) 400,000
4,100,000 Toledo, Ohio City Services Revenue GO 4.32% due
07/31/1996 4,106,191
----------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
23
<PAGE>
- -----------------------------------------------------------------------------------------------------
Oregon -- $ 2,410,000 State Veterans Hospital Welfare Board VRDN 4.10%
0.4% due 12/01/2017 (a) $ 2,410,000
----------------------------------------------------------------------------------------------------
Pennsylvania -- 13,000,000 Allegheny County, Pennsylvania Hospital
8.3% Development Authority Revenue (Presbyterian
University Hospital) VRDN 3.25% due 03/01/2020
(a) 13,000,000
1,200,000 Allegheny County, Pennsylvania IDA Revenue
(Parkway Center Project) VRDN 4.30% due
05/01/2009 (a) 1,200,000
3,500,000 Delaware County, Pennsylvania IDA PCR (BP Oil
Inc. Project) DDN 4.10% due 12/01/2009 (a) 3,500,000
Emmaus, Pennsylvania, General Authority Revenue
Local Government (Pool Program) VRDN:
10,000,000 Series B-8 4.30% due 03/01/2024 (a) 10,000,000
5,500,000 Series B-10 4.30% due 03/01/2024 (a) 5,500,000
5,000,000 Series D-11 4.30% due 03/01/2024 (a) 5,000,000
1,500,000 Series F-6 4.25% due 03/01/2024 (a) 1,500,000
10,000,000 Harrisburg, Pennsylvania Authority Revenue
(Pooled Loan) VRDN 4.45% due 07/01/2021 (a) 10,000,000
3,000,000 Montgomery County, Pennsylvania Higher Education
& Health Authority Revenue (Philadelphia
Presbytery) VRDN 4.15% due 07/01/2025 (a) 3,000,000
2,850,000 Washington County, Pennsylvania Authority Lease
Revenue Higher Education Bonds (Pooled Equipment
Lease) VRDN 4.30% due 11/01/2005 (a) 2,850,000
----------------------------------------------------------------------------------------------------
Rhode Island -- 2,000,000 East Providence, Rhode Island TAN 3.64% due
1.1% 07/08/1996 2,000,501
3,000,000 Rhode Island Housing & Mortgage Finance Corp.
Homeownership Opportunity FXRDN 3.55% due
01/30/1997 3,000,000
2,600,000 Rhode Island Industrial Facilities Corp. IDR
(Capital Development Corp. Project) FXRDN 3.70%
due 11/01/2005 2,600,000
----------------------------------------------------------------------------------------------------
Tennessee -- 6,000,000 Clarksville, Tennessee Public Building Authority
2.6% Revenue (Pooled Loan) VRDN 4.20% due 10/01/2025
(a) 6,000,000
7,000,000 Montgomery County, Tennessee Public Building
Authority VRDN 4.20% due 07/01/2015 (a) 7,000,000
4,300,000 Nashville & Davidson County, IDA Revenue (Gibson
Guitar Corp. Project) VRDN 4.00% due 03/01/2011
(a) 4,300,000
----------------------------------------------------------------------------------------------------
Texas -- 3,500,000 El Paso, Texas IDA Revenue (Camden Wire Co. Inc.
4.1% Project) VRDN 4.40% due 03/01/2016 (a) 3,500,000
4,250,000 Greater Texas Student Loan Corp. Revenue FXRDN
3.40% due 06/01/1996 4,250,000
See Notes to Financial Statements.
24
<PAGE>
- -----------------------------------------------------------------------------------------------------
Texas $ 1,895,000 Montgomery County, Texas IDA Revenue (Sawyer
(continued) Research Products Inc.) VRDN 4.30% due
02/04/2015 (a) $ 1,895,000
7,000,000 Port Arthur, Texas Naval District PCR (Texaco
Inc. Project) DDN 4.15% due 10/01/2024 (a) 7,000,000
5,000,000 Texas State (Veterans Housing Program) FXRDN
3.90% due 11/06/1996 5,000,000
5,500,000 Texas State Water Development Board DDN 4.20% due
03/01/2015 (a) 5,500,000
----------------------------------------------------------------------------------------------------
Vermont -- 900,000 Vermont IDA Revenue (Burlington Project) VRDN
2.1% 4.15% due 12/01/2011 (a) 900,000
13,000,000 Vermont State CP 3.35% due 06/13/1996 13,000,000
----------------------------------------------------------------------------------------------------
Virginia -- 13,000,000 Louisa, Virginia IDA PCR (Virginia Electric &
1.9% Power) CP 3.40% due 09/09/1996 13,000,000
----------------------------------------------------------------------------------------------------
Washington -- 3,000,000 Pierce County, Washington Housing Authority
1.0% Revenue (Eagles Watch Project) VRDN 4.05% due
09/01/2020 (a) 3,000,000
3,500,000 Pierce County, Washington Economic Development
Corp. Solid Waste Facilities Revenue (Simpson
Tacoma Kraft Co. Project) VRDN 4.20% due
11/01/2025 (a) 3,500,000
----------------------------------------------------------------------------------------------------
West Virginia-- 2,700,000 Raleigh County, West Virginia Health Care Systems
0.5% Revenue (Appalachian Regional Health Care) VRDN
4.00% due 09/01/2006 (a) 2,700,000
920,000 West Virginia State Hospital Finance Authority
Revenue (St. Mary's Hospital Project) VRDN 4.25%
due 10/01/2012 (a) 920,000
----------------------------------------------------------------------------------------------------
Wisconsin -- 1,450,000 Appleton, Wisconsin IDR (Valley Packaging
4.9% Industries) VRDN 4.25% due 02/01/2011 (a) 1,450,000
Deerfield, Wisconsin IDR (Interpane Coatings
Inc. Project) VRDN:
2,100,000 Series A 4.15% due 05/01/2003 (a) 2,100,000
2,545,000 Series B 4.30% due 05/01/2003 (a) 2,545,000
7,000,000 Kenosha, Wisconsin School District TRAN 4.50% due
09/06/1996 7,010,649
2,650,000 Milwaukee, Wisconsin Redevelopment Authority
Revenue (Jensar Corp. Project) VRDN 4.35% due
03/01/2007 (a) 2,650,000
500,000 Oshkosh, Wisconsin IDR (Automatic Handling Inc.)
VRDN 4.35% due 06/01/2006 (a) 500,000
12,000,000 Oshkosh, Wisconsin School District TRAN 4.75% due
09/12/1996 12,023,593
See Notes to Financial Statements.
25
<PAGE>
- -----------------------------------------------------------------------------------------------------
Wisconsin $ 500,000 Plymouth, Wisconsin IDR (Great Lakes Cheese Inc.
(continued) Project) VRDN 4.35% due 08/01/2024 (a) $ 500,000
3,725,000 Verona, Wisconsin School District TRAN 4.50% due
08/28/1996 (a) 3,730,849
----------------------------------------------------------------------------------------------------
Wyoming -- 5,300,000 Converse County, Wyoming Environmental
3.4% Improvement Revenue (Pacificorp Projects) DDN
4.45% due 11/01/2025 (a) 5,300,000
4,000,000 Lincoln County, Wyoming Environmental Improvement
Revenue (Pacificorp Projects) DDN 4.45% due
11/01/2025 (a) 4,000,000
13,300,000 Sweetwater County, Wyoming Environmental
Improvement Revenue (Pacificorp Projects) DDN
4.45% due 11/01/2025 (a) 13,300,000
----------------------------------------------------------------------------------------------------
Total Investments (Cost $665,557,634*) -- 99.8% 665,557,634
----------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 0.2% 1,647,061
----------------------------------------------------------------------------------------------------
Net Assets -- Equivalent to $1.00 Per Share on
667,324,370 Shares of Beneficial Interest
Outstanding -- 100.0% $667,204,695
====================================================================================================
</TABLE>
(a) The interest rate is subject to change periodically based on a certain
index. The rates shown are those in effect at April 30, 1996. For variable
rate demand instruments, the next coupon date on which the interest is to be
adjusted is deemed the maturity date for valuation.
*Cost for Federal income tax purposes.
Portfolio Abbreviations for Merrill Lynch Institutional Tax-Exempt
BAN Bond Anticipation Notes M/F Multi-Family
CP Commercial Paper PCR Pollution Control Revenue
DDN Daily Demand Notes RAN Revenue Anticipation Notes
FXRDN Fixed Rate Demand Notes TAN Tax Anticipation Notes
GO General Obligation TRAN Tax Revenue Anticipation Notes
IDA Industrial Development Authority VRDN Variable Rate Demand Notes
IDR Industrial Development Revenue
See Notes to Financial Statements.
26
<PAGE>
- -------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Statement of Assets and Liabilities
April 30, 1996
- -------------------------------------------------------------------------------
Assets:
Investments, at amortized cost and value (Note 1a) $665,557,634
Cash 1,854,450
Interest receivable 3,873,408
Deferred organization and prepaid expenses 78,036
-----------
Total assets 671,363,528
-----------
Liabilities:
Payable for investments purchased 4,106,191
Accrued expenses 31,800
Dividends payable 20,842
-----------
Total liabilities 4,158,833
-----------
Net Assets: (Equivalent to $1.00 per share, offering and
redemption price, based on 667,324,370 shares of beneficial
interest outstanding) $667,204,695
===========
- -------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Statement of Operations
April 30, 1996
- -------------------------------------------------------------------------------
Investment Income:
Income:
Interest and discount earned (Note 1d) $18,247,752
----------
Expenses:
Investment advisory fee (Note 2) $ 2,109,495
Registration fees 161,588
Dividend and transfer agency fees 113,861
Accounting and custodian services 94,841
Amortization of organization expenses 29,853
Legal and audit fees 14,830
Printing and shareholder reports 7,091
Trustees' fees (Note 5) 5,427
Insurance 2,434
Miscellaneous 4,980
--------
Total expenses 2,544,400
Waived investment advisory fee (Note 2) (1,171,941) 1,372,459
-------- ----------
Net investment income 16,875,293
Net realized gain from investment transactions 796
----------
Net Increase in Net Assets Resulting From Operations $16,876,089
==========
See Notes to Financial Statements.
27
<PAGE>
- -------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
<TABLE>
<CAPTION>
Statements of Changes in Net Assets Year Ended April 30,
----------------------------
1996 1995
<S> <C>
--------------------------------------------------------------------------------------------
Increase in Net Assets:
Operations:
Net investment income $ 16,875,293 $ 10,615,967
Net realized gain (loss) from investment transactions 796 (143,818)
--------- -----------
Net increase in net assets resulting from operations 16,876,089 10,472,149
Total declared as dividends to shareholders (Note 4) (16,870,256) (10,611,603)
Capital share transactions (Note 3) 263,295,555 13,667,322
--------- -----------
Net increase in net assets 263,301,388 13,527,868
Net Assets:
Beginning of period 403,903,307 390,375,439
--------- -----------
End of period, including undistributed net investment income
of $134,573 and accumulated capital losses of $254,248 and
$260,081 respectively (Note 1g and Note 4) $667,204,695 $403,903,307
========= ===========
</TABLE>
- -------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Financial Highlights
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Five Months
Ended
Year Ended April 30, April 30, Year Ended November 30,
-------------------- ------------- ---------------------------------
1996 1995 1994 1993 1992 1991
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Net investment income .04 .03 .01 .02 .03 .04
Dividends from net investment income (.04) (.03) (.01 ) (.02) (.03) (.04)
------- ------- ----------- ------ ------ --------
Net Asset Value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= =========== ====== ====== ========
Total Return 3.68% 3.20% 2.14%(1) 2.14% 2.74% 4.33%
Ratios/Supplemental Data:
Net Assets, end of period (000) $667,205 $403,903 $390,375 $278,697 $329,254 $377,154
Ratio of expenses to average net
assets (before waiver) .54% .56% .59%(1) .62% .61% .61%
Ratio of expenses to average net
assets (after waiver) .29% .31% .34%(1) .45% .53% .54%
Ratio of net investment income, to
average net assets (before waiver) 3.35% 2.90% 1.92%(1) 1.96% 2.67% 4.21%
Ratio of net investment income, to
average net assets (after waiver) 3.60% 3.15% 2.17%(1) 2.13% 2.75% 4.28%
</TABLE>
(1) On an annualized basis
See Notes to Financial Statements.
28
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Funds For Institutions Series
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Merrill Lynch Funds For Institutions Series (the "Trust") was organized as
a Massachusetts business trust on May 7, 1987 and is registered under the
Investment Company Act of 1940 as a diversified, open-end management company.
On February 18, 1994 Merrill Lynch Institutional Tax-Exempt Fund was
reorganized as a separate series of the Trust. The Trust has a fiscal year
end of April 30. The following is a summary of significant accounting
policies consistently followed by the Trust in conformity with generally
accepted accounting principles.
(a) The value of the Institutional, Government and Treasury Fund
portfolio securities is determined on the basis of fair value as determined
in good faith by the Trustees of the Trust. In determining fair value,
securities for which market quotations are readily available are valued at
market value. Other securities, if any, are valued at their fair value in the
best judgment of Fund Asset Management, L.P., ("FAM") under procedures
established by, and under the supervision of, the Trustees. Securities with
remaining maturities of 60 days or less are valued by use of the amortized
cost method. Institutional Tax-Exempt Fund investments are carried at
amortized cost which approximates market.
For the purpose of valuation, the maturity of a variable rate demand
instrument is deemed to be the next coupon date on which the interest rate is
to be adjusted. In the case of a floating rate instrument, the remaining
maturity is deemed to be the demand notice payment period.
(b) It is the Trust's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to its shareholders. Therefore, no
Federal Income tax provision is required.
(c) Realized gains and losses on investments are computed on the basis of
identified cost of the security sold.
(d) Security transactions are accounted for on the date the securities
are purchased or sold (the trade date). Interest income (after adjustment for
amortization of premium or discount) is recorded as earned.
(e) Deferred organization expenses are amortized over a period not
exceeding five years. Prepaid registration fees are charged to income as the
related shares are sold.
(f) Repurchase agreements--The Institutional Fund and the Government Fund
invest in U.S. Government & Agency securities pursuant to repurchase
agreements with member banks of the Federal Reserve System or primary dealers
in U.S. Government securities. Under such agreements, the bank or primary
dealer agrees to repurchase the security at a mutually agreed upon time and
price. The Trust takes possession of the underlying securities, marks to
market such securities daily and, if necessary, receives additional
securities to ensure that the contract is adequately collateralized.
(g) During the year ended April 30, 1996, Merrill Lynch Institutional
Tax-Exempt Fund reclassified amounts to reflect a decrease of $5,037 in both
accumulated capital losses and undistributed net investment income as a
result of permanent differences arising from different treatments of market
discount for book and tax purposes.
2. Investment Advisory Fees and Other
Transactions with Affiliates
Fund Asset Management, L.P., a subsidiary of Merrill Lynch & Co., Inc.,
provides investment advisory and corporate administrative services to the
Trust for a fee, subject to certain limitations, at the following annual
rates:
29
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Funds For Institutions Series
Notes to Financial Statements -- Continued
- --------------------------------------------------------------------------------
Percentage of Average Daily Net Assets
----------------------------------------
Institutional Fund .40% up to and including $250,000,000
- ------------------ plus .375% over $250,000,000 up to and
including $500,000,000
plus .35% over $500,000,000 up to and
including $750,000,000
plus .325% over $750,000,000
Government Fund
and Treasury Fund .35% up to and including $500,000,000
- ------------------- plus .335% over $500,000,000 up to and
including $750,000,000
plus .32% over $750,000,000 up to and
including $1,000,000,000
plus .30% over $1,000,000,000
Institutional
Tax-Exempt Fund .45% up to and including $1,500,000,000
- ----------------- plus .425% over $1,500,000,000 up to and
including $2,000,000,000
plus .40% over $2,000,000,000
FAM has agreed to waive a portion of its advisory fees. The effective fee
payable to FAM will be at the annual rate of 0.20% of each Fund's average
daily net assets. FAM may discontinue waiver of the fee in whole or in part
at any time without notice.
For the year ended April 30, 1996 FAM waived a portion of its fees
amounting to $10,263,924 for the Institutional Fund, $2,066,757 for the
Government Fund, $765,429 for the Treasury Fund and $1,171,941 for the
Institutional Tax-Exempt Fund.
All officers and certain trustees of the Trust are affiliated with
Merrill Lynch & Co., Inc.
3. Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited number
of shares of beneficial interest in the Institutional Fund, Government Fund
and Treasury Fund ($.01 par value) and Institutional Tax-Exempt Fund ($.10
par value) of a single class. At April 30, 1996, capital paid-in aggregated
$7,621,162,182 for Institutional Fund, $1,643,816,378 for Government Fund,
$514,133,661 for Treasury Fund and $667,324,370 for Institutional Tax-Exempt
Fund. Transactions in shares at a constant net asset value of $1.00 per share
were as follows:
Year Ended April 30,
-------------------------------
Institutional Fund 1996 1995
- ------------------ -------------- --------------
Shares sold 81,859,341,129 63,113,089,823
Shares issued to shareholders
in reinvestment of dividends 360,863,781 198,199,152
-------------- --------------
Total 82,220,204,910 63,311,288,975
Shares redeemed 81,179,030,074 60,509,071,011
-------------- --------------
Net increase 1,041,174,836 2,802,217,964
============== ==============
Year Ended April 30,
-------------------------------
Government Fund 1996 1995
- --------------- -------------- --------------
Shares sold 11,319,796,312 8,314,763,207
Shares issued to shareholders in
reinvestment of dividends 86,908,080 65,230,079
-------------- --------------
Total 11,406,704,392 8,379,993,286
Shares redeemed 11,363,934,579 8,313,348,347
-------------- --------------
Net increase 42,769,813 66,644,939
============== ==============
Year Ended April 30,
------------------------------
Treasury Fund 1996 1995
- ------------- ------------- -------------
Shares sold 2,984,431,147 2,288,760,430
Shares issued to shareholders
in reinvestment of dividends 25,665,244 14,088,128
------------- -------------
Total 3,010,096,391 2,302,848,558
Shares redeemed 2,838,827,671 2,226,955,175
------------- -------------
Net increase 171,268,720 75,893,383
============= =============
Year Ended April 30,
------------------------------
Institutional
Tax-Exempt Fund 1996 1995
- --------------- ------------- -------------
Shares sold 3,532,959,162 2,737,285,871
Shares issued to shareholders
in reinvestment of dividends 15,674,384 9,666,260
------------- -------------
Total 3,548,633,546 2,746,952,131
Shares redeemed 3,285,337,991 2,733,284,809
------------- -------------
Net increase 263,295,555 13,667,322
============= =============
30
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Funds For Institutions Series
Notes to Financial Statements -- Continued
- --------------------------------------------------------------------------------
4. Distributions
The Funds declare dividends daily, pay dividends monthly and automatically
reinvest such dividends in additional Fund shares at net asset value, unless
shareholders request payment in cash. Dividends for the Institutional,
Government and Treasury Funds are declared from the total of net investment
income, plus or minus realized gains or losses, if any, on investments.
Dividends for the Institutional Tax-Exempt Fund are declared from net
investment incomeexcluding discounts earned other than original issue
discounts. Net realized capital gains, if any, are normally distributed
annually, after deducting prior years' loss carryovers. The Fund may
distribute capital gains more frequently than annually in order to maintain
the Fund's net asset value at $1.00 per share.
At April 30, 1996, the Institutional Tax-Exempt Fund had net capital loss
carryovers of $254,248 of which $96,688 expire in the year 2001, $17,520
expire in 2002 and $140,040 expire in 2003.
5. Trustees' Fees
Each Trustee who is not affiliated with the Trust or its adviser is paid an
annual fee of $24,000 by the Trust. Trustees' fees are allocated among the
four series of the Trust based on the net assets under management.
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders of
Merrill Lynch Funds For Institutions Series:
- --------------------------------------------------------------------------------
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of Merrill Lynch Funds For
Institutions Series (the "Trust"), consisting of Merrill Lynch Institutional
Fund, Merrill Lynch Government Fund, Merrill Lynch Treasury Fund, and Merrill
Lynch Institutional Tax-Exempt Fund (the "Funds"), as of April 30, 1996, the
related statements of operations for the year then ended, the statements of
changes in net assets for the years ended April 30, 1996 and 1995, and the
financial highlights for each of the respective fiscal periods then ended.
These financial statements and financial highlights are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of the
securities owned at April 30, 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 each of the
respective Funds of Merrill Lynch Funds For Institutions Series at April 30,
1996, the results of their operations, the changes in their net assets, and
their financial highlights for each of the respective fiscal periods then
ended in conformity with generally accepted accounting principles.
Deloitte & Touche llp
Boston, Massachusetts
May 24, 1996
31
<PAGE>
ADMINISTRATOR & DISTRIBUTOR
Merrill Lynch Funds Distributor, Inc.
One Financial Center
Boston, Massachusetts 02111-2646
INVESTMENT ADVISER
Fund Asset Management, L.P.
P.O. Box 9011
Princeton, N.J. 08543-9011
CUSTODIAN & TRANSFER AGENT
State Street Bank & Trust Company
P.O. Box 8500
Boston, Massachusetts 02266-8500
LEGAL COUNSEL
Rogers & Wells
200 Park Avenue
New York, New York 10166
AUDITORS
Deloitte & Touche LLP
125 Summer Street
Boston, Massachusetts 02110-1617
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. Each Fund seeks to maintain a consistent $1.00 net asset value per
share, although this cannot be assured. An investment in the Funds is neither
insured nor guaranteed by the U.S. Government.
Merrill Lynch Institutional Fund
Merrill Lynch Government Fund
Merrill Lynch Treasury Fund
Merrill Lynch Institutional Tax-Exempt Fund
Merrill Lynch
Funds For Institutions Series
Merrill Lynch Institutional Fund
Merrill Lynch Government Fund
Merrill Lynch Treasury Fund
Merrill Lynch Institutional Tax-Exempt Fund
Annual Report
April 30, 1996
