CMA
CMA TREASURY FUND
Annual Report
March 31, 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
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].
<PAGE>
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 year ended March 31, 1994, CMA Treasury Fund paid
shareholders a net annualized dividend of 2.57%*. The Fund's 7-
day yield as of March 31, 1994 was 2.65% (excluding gains and
losses) and 2.65% (including gains and losses).
The Environment
Inflationary expectations changed sharply during the six months
ended March 31. Following several months of better-than-expected
economic results, Federal Reserve Board Chairman Alan Greenspan
indicated in Congressional testimony in January that continued
strong expansion of the economy would lead the central bank to
tighten monetary policy in an effort to control inflation. On
February 4, 1994, the central bank broke with tradition and
publicly announced a modest 25 basis point (0.25%) increase in
short-term interest rates. At the March 22 meeting of the Federal
Open Market Committee, the Federal Reserve Board again raised the
Federal Funds rate by 25 basis points, and also announced the
increase.
<PAGE>
Rather than view the Federal Reserve Board's first tightening
move as a preemptive strike against inflation, fixed-income
investors focused on Chairman Greenspan's implicit promise of
further tightening should the rate of inflation accelerate, and
bond prices declined sharply. The setback in the bond market was
also reflected in greater stock market volatility. While the
second increase in the Federal Funds rate was less of a surprise,
investors remained concerned that interest rates would trend
upward sharply. As a result, stock and bond prices continued to
decline through the end of March. The volatility in the US
capital markets was mirrored in international markets. Political
and economic developments, along with concerns of heightened
global inflationary pressures, led to a sell-off in most capital
markets, especially the emerging markets that had appreciated
strongly in 1993.
[FN]
*Based on a constant investment throughout the period, with
dividends compounded daily, and reflecting a net return to the
investor after all expenses.
In the weeks ahead, investors will continue to gauge the pace of
the economic expansion and watch for signs of an overheating
economy. At this time, there is little evidence that the rate of
inflation will increase rapidly. Therefore, although the secular
long-term trend toward lower interest rates may be over, it is
not yet certain whether the pace of economic activity will
accelerate to the point where extensive Federal Reserve Board
tightening will be necessary to contain inflation.
Portfolio Matters
Throughout the six months ended March 31, 1994, we maintained the
Fund's average portfolio maturity in the 28-day--90-day range.
This relatively wide range reflects our changing view of the
market as the period progressed. In the early part of the period,
the US Treasury increased the size of the weekly US Treasury bill
auctions, which put some upward pressure on yields. The Treasury
also announced December 16 and January 20 cash management bills.
During this time, CMA Treasury Fund purchased cash management
bills which were at an attractive spread compared to other
Treasury securities of similar maturity.
As we approached the middle part of the six-month period, one-
month and two-month Treasury bills became expensive as investors
anticipated the maturity of the December 16 cash management
bills. The Fund focused on March and May Treasury bills, which
looked attractive on the yield curve. As mid-January approached,
the market's tone started to change. Retail sales and capacity
utilization both showed fairly large increases, and a University
of Michigan survey continued to show that consumer confidence was
improving.
<PAGE>
As we entered February, we began to change our view of the
market. The price component of the purchasing managers' survey
showed a large increase, and leading indicators also showed a
larger increase than was expected. At this point, the Fund
shortened its average portfolio maturity to the mid 50-day range.
On February 4, 1994, the Federal Reserve Board raised the Federal
Funds rate by 25 basis points (0.25%) to 3.25%. In the weeks that
followed, investors focused on when the next tightening by the
Federal Reserve Board would occur. On March 22, 1994, the Federal
Reserve Board tightened its monetary policy by another 25 basis
points to 3.50%. The end of March proved to be volatile, with the
assassination of the leading Mexican presidential candidate,
higher gold prices and stock prices falling. The net result of
this volatility was a notable steepening of the front end of the
yield curve. During this time, the spread between Treasury bills
and Treasury notes in the one-month--two-month area widened from
8 basis points to 20 basis points. Accordingly, CMA Treasury Fund
purchased April and May Treasury notes. In late March, the
Treasury announced a cash management bill maturing on April 21.
With short-term Treasury bills continuing to be expensive, this
proved to be an attractive alternative.
Looking forward, CMA Treasury Fund expects to remain relatively
cautious. We believe the Federal Reserve Board could tighten
again as part of its desire to implement a neutral monetary
policy, and we are positioning the portfolio accordingly.
We thank you for your support of CMA Treasury Fund, and we look
forward to serving your investment needs in the months and years
ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Marie Heumiller)
Marie Heumiller
Vice President and Portfolio Manager
April 26, 1994
IMPORTANT TAX INFORMATION
None of the ordinary income distributions paid daily by the CMA
Treasury Fund during the fiscal year ended March 31, 1994 qualify
for the dividends-received deduction for corporations. Additionally,
there were no long-term capital gains distributions declared during
the year.
The law varies in each state as to whether and what percentage of
dividend income attributable to Federal Obligations is exempt
from state income tax. We recommend that you consult your tax
adviser to determine if any portion of the dividends you received
is exempt from state income tax.
<PAGE>
Listed below are the percentages of total assets of the Fund
invested in Federal Obligations* as of the end of each quarter of
the fiscal year:
For the Quarter Ended
June 30, 1993 100%
September 30, 1993 100%
December 31, 1993 100%
March 31, 1994 100%
Of the Fund's dividends declared daily to shareholders from
ordinary income during the fiscal year ended March 31, 1994,
98.70% was attributable to interest income on Federal
Obligations. In calculating the foregoing percentages, Fund
expenses have been allocated on a pro rata basis.
Please retain this information for your records.
[FN]
*For purposes of this calculation, Federal Obligations
include US Treasury Notes, US Treasury Bills and US Treasury
Bonds. Also included are obligations issued by the following
agencies: Banks for Cooperatives, Federal Intermediate Credit
Banks, Federal Land Banks, Federal Home Loan Banks, and the
Student Loan Marketing Association. Repurchase Agreements are
not included in this calculation.
<PAGE>
CMA TREASURY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31 (IN THOUSANDS)
Face Interest Maturity Value
Issue Amount Rate Date (Note 1a)
US Government Obligations*--99.3%
US Treasury Bills $172,664 3.05% 4/07/94 $172,561
2,965 3.38 4/21/94 2,959
20,000 3.435 4/21/94 19,960
200,000 3.47 4/21/94 199,595
11,217 2.96 5/05/94 11,181
30,000 2.97 5/05/94 29,902
3,568 3.025 5/05/94 3,556
5,701 3.035 5/05/94 5,682
10,000 3.095 5/05/94 9,967
35,000 3.13 5/05/94 34,886
40,487 3.15 5/05/94 40,355
15,000 3.155 5/05/94 14,951
50,000 3.16 5/05/94 49,837
30,848 3.165 5/05/94 30,748
20,000 3.17 5/05/94 19,935
2,460 3.26 5/05/94 2,452
1,540 3.265 5/05/94 1,535
2,541 3.275 5/05/94 2,533
4,444 3.31 5/05/94 4,430
50,000 3.215 5/12/94 49,801
7,252 3.09 5/19/94 7,218
25,000 3.10 5/26/94 24,866
<PAGE>
Face Interest Maturity Value
Issue Amount Rate Date (Note 1a)
US Government Obligations* (concluded)
US Treasury Bills $ 30,000 3.16% 5/26/94 $ 29,839
(concluded) 574 3.07 6/02/94 571
11,000 3.09 6/02/94 10,933
499 3.10 6/02/94 496
30,000 3.43 6/02/94 29,818
3,516 3.425 6/09/94 3,492
15,000 3.50 6/09/94 14,898
30,000 3.51 6/16/94 29,774
20,000 3.53 7/07/94 19,806
329 3.10 7/21/94 325
16,031 3.125 7/21/94 15,852
US Treasury Notes 90,000 7.00 4/15/94 90,133
89,526 5.375 4/30/94 89,659
95,000 7.00 5/15/94 95,429
42,100 9.50 5/15/94 42,411
Total US Government Obligations
(Cost -- $1,212,488) 1,212,346
Total Investments (Cost--$l,212,488++)--99.3% 1,212,346
Other Assets Less Liabilities--0.7% 8,094
----------
Net Assets--100.0% $1,220,440
==========
<PAGE>
[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>
CMA TREASURY FUND
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES AS OF MARCH 31, 1994
<S> <C> <C>
Assets:
Investments, at value (identified cost--$1,212,488,331++)(Note 1a) $ 1,212,346,154
Cash 24,208
Interest receivable 8,898,527
Deferred organization expenses (Note 1d) 20,126
Prepaid registration fees and other assets (Note 1d) 56,125
---------------
Total assets 1,221,345,140
---------------
Liabilities:
Payables:
Investment adviser (Note 2) $ 471,768
Distributor (Note 2) 222,621
Beneficial interest redeemed 427 694,816
--------------
Accrued expenses and other liabilities 210,298
---------------
Total liabilities 905,114
---------------
Net Assets $ 1,220,440,026
===============
Net Assets Consist of:
Shares of beneficial interest, $.10 par value, unlimited number of shares
authorized $ 122,058,220
Paid-in capital in excess of par 1,098,523,983
Unrealized depreciation on investments--net (142,177)
---------------
Net Assets--Equivalent to $1.00 per share based on 1,220,582,203 shares of
beneficial interest outstanding $ 1,220,440,026
===============
<FN>
++Cost for Federal income tax purposes. As of March 31, 1994, net unrealized depreciation
for Federal income tax purposes amounted to $142,177, of which $10,626 related to
appreciated securities and $152,803 related to depreciated securities.
</TABLE>
<PAGE>
<TABLE>
CMA TREASURY FUND
<CAPTION>
STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1994
<S> <C> <C>
Investment Income (Note 1c):
Interest and amortization of premium and discount earned $ 39,235,318
Expenses:
Investment advisory fees (Note 2) $ 5,591,419
Distribution fees (Note 2) 1,561,956
Transfer agent fees (Note 2) 156,000
Custodian fees 107,058
Accounting services (Note 2) 65,637
Professional fees 53,047
Printing and shareholder reports 51,003
Trustees' fees and expenses 40,094
Registration fees (Note 1d) 36,746
Amortization of organization expenses (Note 1d) 9,565
Other 13,656
--------------
Total expenses 7,686,181
---------------
Investment income--net 31,549,137
Realized Gain on Investments--Net (Note 1c) 484,458
Change in Unrealized Appreciation/Depreciation on Investments--Net (282,540)
---------------
Net Increase in Net Assets Resulting from Operations $ 31,751,055
===============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CMA TREASURY FUND
<CAPTION>
For the Year Ended March 31,
STATEMENTS OF CHANGES IN NET ASSETS 1994 1993
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Investment income--net $ 31,549,137 $ 35,205,315
Realized gain on investments--net 484,458 3,052,056
Change in unrealized appreciation/depreciation on investments--net (282,540) 307,128
-------------- --------------
Net increase in net assets resulting from operations 31,751,055 38,564,499
-------------- --------------
Dividends & Distributions to Shareholders (Note 1e):
Investment income--net (31,549,137) (35,205,315)
Realized gain on investments--net (484,458) (3,052,056)
-------------- --------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (32,033,595) (38,257,371)
-------------- --------------
Beneficial Interest Transactions (Note 3):
Net proceeds from sale of shares 6,005,046,894 6,134,074,483
Net asset value of shares issued to shareholders in reinvestment of
dividends (Note 1e) 32,008,483 38,226,039
-------------- --------------
6,037,055,377 6,172,300,522
Cost of shares redeemed (6,103,394,111) (6,107,007,061)
-------------- --------------
Net increase (decrease) in net assets derived from beneficial
interest transactions (66,338,734) 65,293,461
-------------- --------------
Net Assets:
Total increase (decrease) in net assets (66,621,274) 65,600,589
Beginning of year 1,287,061,300 1,221,460,711
-------------- --------------
End of year $1,220,440,026 $1,287,061,300
============== ==============
</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. April 15, 1991++
For the Year Ended March 31, to March 31,
Increase (Decrease) in Net Asset Value: 1994 1993 1992
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00
----------- ----------- -----------
Investment income--net .0250 .0278 .0453
Realized and unrealized gain on investments--net .0002 .0026 .0019
----------- ----------- -----------
Total from investment operations .0252 .0304 .0472
----------- ----------- -----------
Less Dividends and distributions:
Investment income--net (.0250) (.0278) (.0453)
Realized gain on investments--net (.0004) (.0024) (.0020)
----------- ----------- -----------
Total dividends and distributions (.0254) (.0302) (.0473)
----------- ----------- -----------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
=========== =========== ===========
Total Investment Return 2.57% 3.07% 5.02%*
=========== =========== ===========
Ratios to Average Net Assets:
Expenses, net of reimbursement and excluding distribution fees .49% .48% .36%*
=========== =========== ===========
Expenses, net of reimbursement .61% .60% .49%*
=========== =========== ===========
Expenses .61% .62% .68%*
=========== =========== ===========
Investment income and realized gain on investments--net 2.55% 3.01% 4.67%*
=========== =========== ===========
Supplemental Data:
Net assets, end of period (in thousands) $ 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.
(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.
<PAGE>
2. Investment Advisory Agreement and Transactions with
Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Fund Asset Management, L.P. ("FAM"). Effective January 1, 1994,
the investment advisory business of FAM was reorganized from a
corporation to a limited partnership. Both prior to and after the
reorganization, ultimate control of FAM was vested with Merrill
Lynch & Co., Inc. ("ML & Co."). The general partner of FAM is
Princeton Services, Inc., an indirect wholly-owned subsidiary of
ML & Co. The limited partners are ML & Co. and Merrill Lynch
Investment Management, Inc. ("MLIM"), 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
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
$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.
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.
<PAGE>
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, MLIM, 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.
<AUDIT-REPORT>
CMA TREASURY FUND
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
CMA Treasury Fund:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of CMA
Treasury Fund as of March 31, 1994, the related statements
of operations for the year then ended and changes in net assets
for each of the years in the two-year period then ended, and
the financial highlights for the two-year period then ended and
for the period April 15, 1991 (commencement of operations) to
March 31, 1992. These financial statements and the financial
highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and the financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
securities owned at March 31, 1994 by correspondence with the
custodian. 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.
<PAGE>
In our opinion, such financial statements and financial
highlights present fairly, in all material respects, the
financial position of CMA Treasury Fund as of March 31, 1994, the
results of its operations, the changes in its net assets, and the
financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
Deloitte & Touche
Princeton, New Jersey
April 29, 1994
</AUDIT-REPORT>
