CMA
CMA Treasury Fund
Semi-Annual Report
September 30, 1994
Merrill Lynch Bull Logo
Officers and Trustees
Arthur Zeikel--President and Trustee
Ronald W. Forbes--Trustee
Cynthia A. Montgomery--Trustee
Charles C. Reilly--Trustee
Kevin A. Ryan--Trustee
Richard R. West--Trustee
Terry K. Glenn--Executive Vice President
Joseph T. Monagle, Jr.--Senior Vice President
Donald C. Burke--Vice President
Linda B. Costanzo--Vice President
Marie Heumiller--Vice President
Kevin J. McKenna--Vice President
Patrick Maldari--Vice President
Gerald M. Richard--Treasurer
Robert Harris--Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 1713
Boston, Massachusetts 02101
<PAGE>
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 221-7210*
[FN]
*For inquiries regarding your CMA account,
call (800) CMA-INFO [(800) 262-4636].
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance, which will fluctuate. The Fund
seeks to maintain a consistent $1.00 net asset value per share,
although this cannot be assured. An investment in the Fund is
neither insured nor guaranteed by the US Government.
CMA Treasury Fund
Box 9011
Princeton, NJ 08543-9011
Dear Shareholder:
For the six-month period ended September 30, 1994, CMA Treasury Fund
paid shareholders a net annualized dividend of 3.44%*. As of
September 30, 1994, the Fund's 7-day yield was 4.05% (excluding
gains and losses) and 4.05% (including gains and losses).
<PAGE>
The Environment
Concerns of increasing inflationary pressures continued to prompt
volatility in the US stock and bond markets during the July--
September period. In addition, the weakness of the US dollar in
foreign exchange markets caused intermittent stock and bond market
declines during the period. While the immediate concerns regarding
the US dollar had diminished by late July, the possibility of
continued tightening by the Federal Reserve Board persisted for most
of the period. However, a lower-than-expected rate of growth
reported for the US economy during the second calendar quarter
allayed inflationary concerns to some degree, despite the fifth
increase this year in short-term interest rates made by the central
bank in mid-August. Inflationary expectations surfaced again with
the announcement of significant upward revision in industrial
production and capacity utilization for the May--July period. When
the central bank did not raise short-term interest rates at the late
September Federal Open Market Committee meeting, financial markets
rallied on the expectation that the US economy was not overheating
and therefore significant further monetary policy tightening would
not be necessary.
Despite the stronger-than-expected industrial production results,
other economic data suggest that while the economic recovery is
continuing, it is losing some momentum. Consumer spending is
increasing, but at a relatively slow pace, and existing home sales
may have peaked. Inflation remains subdued at the retail level. In
the industrial sector, the sharp increase in manufacturing
production in August was largely the result of a strong increase in
motor vehicle assemblies, which may level off in the weeks ahead. On
balance, it appears that the growth in US industry is progressing at
a steady, modest rate.
Despite evidence of a moderating trend in the US economy, Chairman
Greenspan indicated in his July Humphrey-Hawkins testimony that the
central bank would prefer to err on the side of too much monetary
tightening rather than too little. In the weeks ahead, investors
will continue to assess economic data and inflationary trends in
order to gauge whether further increases in short-term interest
rates are imminent. Continued indications of moderate and
sustainable levels of economic growth would be positive for the US
capital markets.
<PAGE>
Portfolio Matters
During the six-month period ended September 30, 1994, we maintained
the Fund's average portfolio maturity in the 29-day--59-day range.
This range reflected changes we made during the September period to
account for the strategy of the Federal Reserve Board and our
general belief that interest rates would be moving higher. As the
September period began, we expected the Federal Reserve Board to
raise interest rates. One-month and two-month Treasury bills were
very expensive as investors flocked to the front end of the yield
curve. We purchased May Treasury notes at a spread of 38 basis
points to May Treasury bills. The employment report for April showed
a fairly large gain, but the Consumer Price Index and Producer Price
Index reports continued to show inflation was under control. On
April 18, 1994, the Federal Reserve Board raised the Federal Funds
target rate by 25 basis points to 3.75%. In early May, the
employment report again showed a large increase. Since investors
expected the Federal Reserve Board to tighten monetary policy again,
the short-term end of the Treasury curve remained overvalued. On May
17, the Federal Reserve Board acted again by raising the Federal
Funds and discount rates 50 basis points to 4.25% and 3.50%,
respectively.
[FN]
*Based on a constant investment throughout the period, with
dividends compounded daily, and reflecting a net return to the
investor after all expenses.
As we approached the middle of the six-month period, the market
seemed to stabilize. Accordingly, we increased the Fund's average
life modestly in early June. We purchased six-month Treasury bills
which offered attractive value. The remainder of June was fairly
stable, but the stability did not last as a strong employment report
caused investors to anticipate a tightening by the Federal Reserve
Board. July began with market volatility, and we felt there was
greater risk in having an average portfolio maturity that was too
long rather than too short. Accordingly, we shortened our average
portfolio maturity slightly. The Treasury announced a cash
management bill with a maturity of September 22, 1994. We purchased
these bills at a yield spread of 12 basis points to comparable
Treasury bills in that sector. The yield spread between one-month
Treasury bills and notes widened, enabling us to purchase Treasury
notes at a yield spread of 18 basis points to the comparable
Treasury bills. At the end of July, Federal Reserve Board Chairman
Alan Greenspan suggested that the central bank had not tightened
enough.
<PAGE>
With investors expecting the Federal Reserve Board to tighten in
August, the front end of the Treasury curve steepened. We took
advantage of this steepness and purchased three-month Treasury bills
which looked attractive even in the face of a tightening. On August
16, the central bank raised the Federal Funds rate and the discount
rate by 50 basis points to 4.75% and 4.00%, respectively. The market
traded very well after the tightening. A stronger-than-expected
wholesale inflation report had investors expecting a tightening at
the September 27 Federal Open Market Committee meeting. This did not
happen, but investors continued to feel that a 50 basis-point
tightening would occur in either October or November.
Looking forward, we expect to remain cautious. We believe that the
Federal Reserve Board could tighten again, and we are positioning
the portfolio accordingly.
In Conclusion
We thank you for your interest in CMA Treasury Fund, and we look
forward to assisting you with your financial needs in the months and
years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Marie Heumiller)
Marie Heumiller
Vice President and Portfolio Manager
October 24, 1994
<PAGE>
<TABLE>
CMA TREASURY FUND
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1994 (IN THOUSANDS)
<CAPTION>
Face Interest Maturity
Amount Issue Rate* Date Value
<S> <C> <S> <C> <C> <C>
US Government $ 49,696 US Treasury Bills 4.35 % 10/06/94 $ 49,660
Obligations*--99.0% 75,000 US Treasury Bills 4.20 10/20/94 74,825
50,263 US Treasury Bills 4.42 10/20/94 50,140
1,448 US Treasury Bills 4.425 10/20/94 1,444
16,376 US Treasury Bills 4.43 10/20/94 16,336
176,000 US Treasury Bills 4.435 10/20/94 175,566
20,000 US Treasury Bills 4.445 10/20/94 19,951
1,879 US Treasury Bills 4.45 10/20/94 1,874
10,000 US Treasury Bills 4.45 10/27/94 9,967
15,000 US Treasury Bills 4.50 10/27/94 14,950
10,000 US Treasury Bills 4.505 10/27/94 9,967
1,635 US Treasury Bills 4.51 11/10/94 1,627
10,185 US Treasury Bills 4.52 11/10/94 10,132
3,768 US Treasury Bills 4.53 11/10/94 3,749
1,476 US Treasury Bills 4.46 11/17/94 1,467
59 US Treasury Bills 4.47 11/17/94 59
873 US Treasury Bills 4.48 11/17/94 868
100,000 US Treasury Bills 4.485 11/17/94 99,402
25,000 US Treasury Bills 4.50 11/25/94 24,817
105,000 US Treasury Bills 4.61 12/15/94 103,965
10,000 US Treasury Bills 5.045 5/04/95 9,678
10,000 US Treasury Bills 5.06 5/04/95 9,678
4,000 US Treasury Bills 5.105 5/04/95 3,871
25,000 US Treasury Bills 5.10 6/01/95 24,083
107,435 US Treasury Notes 9.50 10/15/94 107,623
31,402 US Treasury Notes 4.25 10/31/94 31,390
120,596 US Treasury Notes 8.25 11/15/94 121,084
50,000 US Treasury Notes 11.625 11/15/94 50,401
100,000 US Treasury Notes 4.625 12/31/94 99,812
12,000 US Treasury Notes 5.50 2/15/95 12,004
Total Investments (Cost--$1,140,643++)--99.0% 1,140,390
Other Assets Less Liabilities--1.0% 11,612
----------
Net Assets--100.0% $l,152,002
==========
<FN>
*US Treasury Bills are traded on a discount basis; the interest
rates shown are the discount rates paid at the time of purchase by
the Fund. US Treasury Notes bear interest at the rates shown,
payable at fixed dates through maturity.
++Cost for Federal income tax purposes.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CMA TREASURY FUND
STATEMENT OF ASSETS AND LIABILITIES AS OF 30, 1994
<CAPTION>
<S> <C> <C>
Assets:
Investments, at value (identified cost--$1,140,643,142++) (Note 1a) $ 1,140,389,683
Cash 23,436
Interest receivable 12,389,115
Deferred organization expenses (Note 1d) 20,126
Prepaid registration fees and other assets (Note 1d) 56,125
---------------
Total assets 1,152,878,485
---------------
Liabilities:
Payables:
Investment adviser (Note 2) $ 436,296
Distributor (Note 2) 290,061
Beneficial interest redeemed 229 726,586
---------------
Accrued expenses and other liabilities 150,128
---------------
Total liabilities 876,714
---------------
Net Assets $ 1,152,001,771
===============
Net Assets Consist of:
Shares of beneficial interest, $.10 par value, unlimited number of shares
authorized $ 115,225,523
Paid-in capital in excess of par 1,037,029,707
Unrealized depreciation on investments--net (253,459)
---------------
Net Assets--Equivalent to $1.00 per share based on 1,152,255,230 shares of
beneficial interest outstanding $ 1,152,001,771
===============
<FN>
++Cost for Federal income tax purposes. As of September 30, 1994,
net unrealized depreciation for Federal income tax purposes amounted
to $253,459, of which $1,010 related to appreciated securities and
$254,469 related to depreciated securities.
</TABLE>
<PAGE>
<TABLE>
CMA TREASURY FUND
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1994
<CAPTION>
<S> <C> <C>
Investment Income (Note 1c):
Interest and amortization of premium and discount earned $ 23,134,440
Expenses:
Investment advisory fees (Note 2) $ 2,591,167
Distribution fees (Note 2) 711,590
Transfer agent fees (Note 2) 88,419
Registration fees (Note 1d) 52,840
Accounting services (Note 2) 29,646
Professional fees 24,405
Printing and shareholder reports 18,412
Trustees' fees and expenses 16,658
Custodian fees 15,999
Amortization of organization expenses (Note 1d) 4,265
Other 5,697
---------------
Total expenses 3,559,098
---------------
Investment income--net 19,575,342
Realized Gain on Investments--Net (Note 1c) 92,918
Change in Unrealized Depreciation on Investments--Net (111,282)
---------------
Net Increase in Net Assets Resulting from Operations $ 19,556,978
===============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CMA TREASURY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Six For the Year
Months Ended Ended
Sept. 30, 1994 March 31, 1994
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Investment income--net $ 19,575,342 $ 31,549,137
Realized gain on investments--net 92,918 484,458
Change in unrealized depreciation on investments--net (111,282) (282,540)
--------------- ---------------
Net increase in net assets resulting from operations 19,556,978 31,751,055
--------------- ---------------
Dividends & Distributions to Shareholders (Note 1e):
Investment income--net (19,575,342) (31,549,137)
Realized gain on investments--net (92,918) (484,458)
--------------- ---------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (19,668,260) (32,033,595)
--------------- ---------------
Beneficial Interest Transactions (Note 3):
Net proceeds from sale of shares 2,136,819,878 6,005,046,894
Net asset value of shares issued to shareholders in reinvestment of
dividends (Note 1e) 19,653,676 32,008,483
--------------- ---------------
2,156,473,554 6,037,055,377
Cost of shares redeemed (2,224,800,527) (6,103,394,111)
--------------- ---------------
Net decrease in net assets derived from beneficial interest transactions (68,326,973) (66,338,734)
--------------- ---------------
Net Assets:
Total decrease in net assets (68,438,255) (66,621,274)
Beginning of period 1,220,440,026 1,287,061,300
--------------- ---------------
End of period $ 1,152,001,771 $ 1,220,440,026
=============== ===============
</TABLE>
<PAGE>
<TABLE>
CMA TREASURY FUND
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. For the Six For the Year April 15, 1991++
Months Ended Ended March 31, to March 31,
Increase (Decrease) in Net Asset Value: Sept. 30, 1994 1994 1993 1992
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ----------
Investment income--net .0171 .0250 .0278 .0453
Realized and unrealized gain on investments--net .0000 .0002 .0026 .0019
---------- ---------- ---------- ----------
Total from investment operations .0171 .0252 .0304 .0472
---------- ---------- ---------- ----------
Less dividends:
Investment income--net (.0171) (.0250) (.0278) (.0453)
Realized gain on investments--net (.0001) (.0004) (.0024) (.0020)
---------- ---------- ---------- ----------
Total dividends and distributions (.0172) (.0254) (.0302) (.0473)
---------- ---------- ---------- ----------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ==========
Total Investment Return 3.44%* 2.57% 3.07% 5.02%*
========== ========== ========== ==========
Ratios to Average Net Assets:
Expenses, net of reimbursement and excluding distribution fees .50%* .49% .48% .36%*
========== ========== ========== ==========
Expenses, net of reimbursement .62%* .61% .60% .49%*
========== ========== ========== ==========
Expenses .62%* .61% .62% .68%*
========== ========== ========== ==========
Investment income and realized gain on investments--net 3.43%* 2.55% 3.01% 4.67%*
========== ========== ========== ==========
Supplemental Data:
Net assets, end of period (in thousands) $1,152,002 $1,220,440 $1,287,061 $1,221,461
========== ========== ========== ==========
<FN>
*Annualized.
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<PAGE>
CMA TREASURY FUND
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
CMA Treasury Fund (the "Fund") is registered under the Investment
Company Act of 1940 as a no-load, diversified, open-end investment
management company. The following is a summary of significant
accounting policies followed by the Fund.
(a) Valuation of investments--Investments maturing more than sixty
days after the valuation date are valued at the most recent bid
price or yield equivalent as obtained from dealers that make markets
in such securities. When securities are valued with sixty days or
less to maturity, the difference between the valuation existing on
the sixty-first day before maturity and maturity value is amortized
on a straight-line basis to maturity. Investments maturing within
sixty days from their date of acquisition are valued at amortized
cost, which approximates market. Assets for which market quotations
are not readily available are valued at fair value as determined in
good faith by or under the direction of the Board of Trustees of the
Fund.
(b) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to
its shareholders. Therefore, no Federal income tax provision is
required.
(c) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income (including amortization of
premium and discount) is recognized on the accrual basis. Realized
gains and losses on security transactions are determined on the
identified cost basis.
<PAGE>
(d) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a five-year period. Prepaid registration fees are
charged to expense as the related shares are issued.
(e) Dividends to shareholders--The Fund declares dividends daily and
reinvests daily such dividends (net of non-resident alien tax and
back-up withholding tax withheld) in additional fund shares at net
asset value. Dividends are declared from the total of net investment
income and net realized gain or loss on investments.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co. ("ML & Co."). The limited partners
are ML & Co. and Fund Asset Management, Inc. ("FAMI"), which is also
an indirect wholly-owned subsidiary of ML & Co.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee based upon the average daily
value of the Fund's net assets at the following annual rates: 0.50%
of the Fund's average daily net assets not exceeding $500 million;
0.425% of the average daily net assets in excess of $500 million,
but not exceeding $1 billion; and 0.375% of the average daily net
assets in excess of $1 billion. The most restrictive annual expense
limitation requires that the Adviser reimburse the Fund to the
extent the Fund's expenses (excluding interest, taxes, distribution
fees, brokerage fees and commissions, and extraordinary items)
exceed 2.5% of the Fund's first $30 million of average daily net
assets, 2.0% of the next $70 million of average daily net assets,
and 1.5% of the average daily net assets in excess thereof. No fee
payment will be made to the Adviser during the year which will cause
such expenses to exceed the pro rata expense limitation at the time
of such payment.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
<PAGE>
The Fund has adopted a Distribution and Shareholder Servicing Plan
in compliance with Rule 12b-1 under the Investment Company Act of
1940, pursuant to which Merrill Lynch, Pierce, Fenner & Smith Inc.
("MLPF&S") receives a distribution fee under the Distribution
Agreement from the Fund at the end of each month at the annual rate
of 0.125% of average daily net assets of the Fund for shareholders
who maintain their accounts through MLPF&S. The distribution fee is
to compensate MLPF&S financial consultants and other directly
involved branch office personnel for selling shares of the Fund and
for providing direct personal services to shareholders. The
distribution fee is not compensation for the administrative and
operational services rendered to the Fund by MLPF&S in processing
share orders and administering shareholder accounts.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, FAMI, PSI, MLPF&S, FDS, and/or ML & Co.
3. Shares of Beneficial Interest:
The number of shares purchased and redeemed during the periods
corresponds to the amounts included in the Statements of Changes in
Net Assets for net proceeds from sale of shares and cost of shares
redeemed, respectively, since shares are recorded at $1.00 per
share.
