CMA
CMA TREASURY FUND
Annual Report
March 31, 1995
MERRILL LYNCH BULL LOGO
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 con-
sidered 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
<PAGE>
DEAR SHAREHOLDER:
For the year ended March 31, 1995, CMA Treasury Fund paid
shareholders a net annualized dividend of 4.18%*. As of March 31,
1995, the Fund's 7-day yield was 5.30% (excluding gains and losses)
and 5.32% (including gains and losses).
The Environment
During the six months ended March 31, 1995, the perception that the
US economy was overheating and inflationary pressures were
increasing gave way to a more benign economic outlook. With more
signs of slowing growth, investors now appear to be forecasting a
"soft landing" for the US economy. Although gross domestic product
was reported to have increased at a revised 5.1% rate during the
final quarter of 1994, declines in other indicators such as new home
sales and durable goods orders registered thus far in 1995 have led
investors to anticipate that the economy is losing enough momentum
to keep inflation under control and preclude further significant
monetary policy tightening by the Federal Reserve Board.
However, as US stock and bond markets have risen on more positive
economic news, the value of the US dollar reached new lows relative
to the yen and Deutschemark. Persistent trade deficits and exports
of capital from the United States have kept the US currency in a
decade-long decline relative to the Japanese and German currencies.
Over the longer term, since the United States has the highest
productivity among industrialized nations and among the lowest labor
costs, demand for US dollar-denominated assets may improve. However,
a reduction of the still-widening US trade deficit may be necessary
before the US dollar appreciates substantially relative to the yen
and the Deutschemark.
[FN]
*Based on a constant investment throughout the period, with
dividends compounded daily, and reflecting a net return to the
investor after all expenses.
The first months of 1995 have been very positive for the stock and
bond markets. Continued signs of a moderating expansion and well-
contained inflationary pressures would provide further assurance
that the peak in interest rates is behind us. On the other hand,
indications of reaccelerating growth and further significant
monetary policy tightening by the Federal Reserve Board would be a
decided negative for the US financial markets.
Portfolio Matters
During the six-month period ended March 31, 1995, we maintained the
Fund's average portfolio maturity in the 42-day--61-day range. This
range was consistent with our view that high levels of resource
utilization would prompt the Federal Reserve Board to raise interest
rates.
<PAGE>
At the beginning of the six-month period ended March 31, 1995, the
short-term fixed income market was dominated by technical supply
considerations. In October 1994, the Treasury announced a $15
billion cash management bill. We purchased this security at a yield
spread of 15 basis points to nearby Treasury bills. A stronger-than-
expected Philadelphia Federal Reserve Board survey led the market to
expect either a 75 or 100 basis point increase in the Federal Funds
rate by year-end. As the market weakened, the yield spread between
three-month and six-month Treasury bills widened, bringing more
relative value to the six-month sector. Accordingly, we purchased
six-month Treasury bills which extended the Fund's average portfolio
maturity slightly. As November 15, 1994 approached, the market
weakened in anticipation of further monetary tightening at the
Federal Open Market Committee (FOMC) meeting. As expected, the
Federal Reserve Board raised both the Federal Funds rate and the
discount rate by 75 basis points.
CMA Treasury Fund began the middle of the six-month period with an
average portfolio maturity in the mid 50-day range. The employment
report that was released in early December 1994 showed a large gain
of 350,000. This led investors to ex-pect another monetary
tightening move at the December FOMC meeting. The maturity of the
December 22, 1994 cash management bill caused short-term Treasury
bills to become increasingly expensive. Therefore, we purchased mid-
February Treasury notes at a spread of 39 basis points to the
comparable Treasury bill. However, the central bank did not tighten
monetary policy and the market rallied in late December while the
front-end of the Treasury bill curve remained steep. The Fund sold
February and March Treasury bills and purchased mid-May Treasury
notes, picking up 75 basis points--112 basis points. Reported
inflation was well-behaved, causing the market to remain strong. As
we neared the end of January 1995, the Fund's average portfolio
maturity was shortened to the mid 40-day range in anticipation of
more monetary tightening by the Federal Reserve Board at its January
31, 1995 and February 1, 1995 deliberations.
On February 1, 1995, the Federal Reserve Board raised the Federal
Funds rate to 6.00% from 5.50%, and the discount rate to 5.25% from
4.75%. As we approached the release of the producer price report,
the market weakened. We took advantage of this backup and purchased
six-month Treasury bills. As the market continued to sell off, we
also purchased one-year Treasury bills. This brought the Fund's
average portfolio maturity to the 60-day range. As the market
subsequently rallied, we sold the Fund's one-year Treasury bills,
feeling that the rally was overdone. This sale combined with
attrition brought the average portfolio maturity into the low 50-day
area. As more economic data became available in March, economists
pushed back their estimates of the next Federal Reserve Board
monetary tightening. Throughout March, statistical releases
continued to paint a picture of a moderating economy. As the end of
March approached, we purchased February 1996 Treasury coupons, which
represented the steepest part of the short-term yield curve.
Looking ahead, we will continue to monitor the economy for signs of
a slowdown as we evaluate the likely course of monetary policy.
<PAGE>
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
May 2, 1995
CMA TREASURY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (IN THOUSANDS)
Face Interest Maturity Value
Issue Amount Rate Date (Note 1a)
US Government Obligations*--99.7%
US Treasury $ 3,150 5.53 % 4/06/95 $ 3,147
Bills 25,000 5.535 4/06/95 24,976
20,000 5.555 4/06/95 19,981
3,638 5.61 4/06/95 3,635
3,859 5.78 4/06/95 3,855
20,000 5.34 4/20/95 19,937
8,123 5.68 4/20/95 8,097
50,000 5.725 4/20/95 49,842
110,000 5.73 4/20/95 109,652
70,000 5.735 4/20/95 69,778
15,000 5.425 4/27/95 14,937
15,000 5.49 4/27/95 14,937
10,000 5.045 5/04/95 9,946
10,000 5.06 5/04/95 9,946
1,500 5.105 5/04/95 1,492
5,103 5.51 5/04/95 5,075
94,320 5.66 5/04/95 93,810
<PAGE> 2,019 5.665 5/04/95 2,008
1,908 5.67 5/04/95 1,898
1,931 5.68 5/04/95 1,921
3,892 5.69 5/04/95 3,871
1,263 5.70 5/04/95 1,256
12,000 5.74 5/04/95 11,935
5,682 5.75 5/04/95 5,651
3,330 5.845 5/04/95 3,312
50,000 5.99 5/04/95 49,730
34,675 6.00 5/04/95 34,488
25,000 6.015 5/04/95 24,865
15,000 5.58 5/11/95 14,902
Face Interest Maturity Value
Issue Amount Rate Date (Note 1a)
US Government Obligations* (concluded)
US Treasury $ 1,276 5.65 % 5/11/95 $ 1,268
Bills 7,156 5.675 5/11/95 7,109
(concluded) 750 5.70 5/11/95 745
2,948 5.72 5/11/95 2,929
25,000 5.82 5/11/95 24,837
14,378 5.67 5/18/95 14,269
24,000 5.685 5/18/95 23,817
15,019 5.69 5/18/95 14,904
4,962 5.70 5/18/95 4,924
37,081 5.715 5/18/95 36,798
10,000 5.85 5/25/95 9,914
10,000 5.855 5/25/95 9,913
25,000 5.10 6/01/95 24,753
25,000 6.10 8/10/95 24,464
15,000 6.23 11/16/95 14,429
5,000 6.125 4/04/96 4,691
US Treasury 130,000 3.875 4/30/95 129,760
Notes 148,000 5.875 5/15/95 147,966
77,000 8.50 5/15/95 77,213
90,000 4.25 7/31/95 89,480
107,650 4.625 8/15/95 107,078
25,000 3.875 10/31/95 24,660
10,000 7.875 2/15/96 10,112
Total US Government Obligations
(Cost--$1,424,824) 1,424,913
Total Investments (Cost--$1,424,824++)--99.7% 1,424,913
Other Assets Less Liabilities--0.3% 3,811
----------
Net Assets--100.0% $1,428,724
==========
[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.
<PAGE>
See Notes to Financial Statements.
<TABLE>
CMA TREASURY FUND
STATEMENT OF ASSETS AND LIABILITIES AS OF MARCH 31, 1995
<S> <C> <C>
Assets:
Investments, at value (identified cost--$1,424,823,880++) (Note 1a) $ 1,424,913,220
Cash 25,969
Interest receivable 9,555,184
Deferred organization expenses (Note 1d) 10,561
Prepaid registration fees and other assets (Note 1d) 78,620
---------------
Total assets 1,434,583,554
---------------
Liabilities:
Payables:
Securities purchased $ 4,690,347
Investment adviser (Note 2) 526,621
Distributor (Note 2) 429,420 5,646,388
---------------
Accrued expenses and other liabilities 213,277
---------------
Total liabilities 5,859,665
---------------
Net Assets $ 1,428,723,889
===============
Net Assets Consist of:
Shares of beneficial interest, $.10 par value, unlimited number of shares
authorized $ 142,863,455
Paid-in capital in excess of par 1,285,771,094
Unrealized appreciation on investments-- net 89,340
---------------
Net Assets--Equivalent to $1.00 per share based on 1,428,634,550 shares of
beneficial interest outstanding $ 1,428,723,889
===============
<FN>
++Cost for Federal income tax purposes. As of March 31, 1995, net
unrealized appreciation for Federal income tax purposes amounted to
$89,340, of which $181,244 related to appreciated securities and
$91,904 related to depreciated securities.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CMA TREASURY FUND
STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1995
<S> <C> <C>
Investment Income (Note 1c):
Interest and amortization of premium and discount earned $ 60,768,157
Expenses:
Investment advisory fees (Note 2) $ 5,626,244
Distribution fees (Note 2) 1,575,699
Transfer agent fees (Note 2) 232,782
Accounting services (Note 2) 109,977
Registration fees (Note 1d) 106,896
Professional fees 50,692
Trustees' fees and expenses 37,664
Custodian fees 35,321
Printing and shareholder reports 31,498
Amortization of organization expenses (Note 1d) 9,565
Other 13,848
---------------
Total expenses 7,830,186
---------------
Investment income--net 52,937,971
Realized Gain on Investments--Net (Note 1c) 239,944
Change in Unrealized Depreciation on Investments--Net 231,517
---------------
Net Increase in Net Assets Resulting from Operations $ 53,409,432
===============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CMA TREASURY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year Ended March 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <C> <C>
Operations:
Investment income--net $ 52,937,971 $ 31,549,137
Realized gain on investments--net 239,944 484,458
Change in unrealized depreciation on investments--net 231,517 (282,540)
--------------- ---------------
Net increase in net assets resulting from operations 53,409,432 31,751,055
--------------- ---------------
Dividends & Distributions to Shareholders (Note 1e):
Investment income--net (52,937,971) (31,549,137)
Realized gain on investments--net (239,944) (484,458)
--------------- ---------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (53,177,915) (32,033,595)
--------------- ---------------
Beneficial Interest Transactions (Note 3):
Net proceeds from sale of shares 6,534,376,700 6,005,046,894
Net asset value of shares issued to shareholders in reinvestment of
dividends (Note le) 53,133,860 32,008,483
--------------- ---------------
6,587,510,560 6,037,055,377
Cost of shares redeemed (6,379,458,214) (6,103,394,111)
--------------- ---------------
Net increase (decrease) in net assets derived from beneficial interest
transactions 208,052,346 (66,338,734)
--------------- ---------------
Net Assets:
Total increase (decrease) in net assets 208,283,863 (66,621,274)
Beginning of year 1,220,440,026 1,287,061,300
--------------- ---------------
End of year $ 1,428,723,889 $ 1,220,440,026
=============== ===============
See Notes to Financial Statements.
</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: 1995 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 .0409 .0250 .0278 .0453
---------- ---------- ---------- ----------
Realized and unrealized gain on investments--net .0004 .0002 .0026 .0019
---------- ---------- ---------- ----------
Total from investment operations .0413 .0252 .0304 .0472
---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.0409) (.0250) (.0278) (.0453)
Realized gain on investments--net (.0002) (.0004) (.0024) (.0020)
---------- ---------- ---------- ----------
Total dividends and distributions (.0411) (.0254) (.0302) (.0473)
---------- ---------- ---------- ----------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ==========
Total Investment Return 4.18% 2.57% 3.07% 5.02%*
========== ========== ========== ==========
Ratios to Average Net Assets:
Expenses, net of reimbursement and excluding distribution fees .49% .49% .48% .36%*
========== ========== ========== ==========
Expenses, net of reimbursement .62% .61% .60% .49%*
========== ========== ========== ==========
Expenses .62% .61% .62% .68%*
========== ========== ========== ==========
Investment income and realized gain on investments--net 4.20% 2.55% 3.01% 4.67%*
========== ========== ========== ==========
Supplemental Data:
Net assets, end of period (in thousands) $1,428,724 $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 management
investment 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" or "Adviser"). The general partner of
FAM is Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner.
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)
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.
<PAGE>
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, MLPF&S, FDS, and/or ML & Co.
3. Shares of Beneficial Interest:
The number of shares purchased and redeemed during the period
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, 1995, the related statements of operations for
the year then ended and changes in net assets for each of the years
in the two-year period then ended, and the financial highlights for
each of the years in the three-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, 1995 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
CMA Treasury Fund as of March 31, 1995, 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 LLP
Princeton, New Jersey
April 28, 1995
</AUDIT-REPORT>
<PAGE>
IMPORTANT TAX INFORMATION (UNAUDITED)
None of the ordinary income distributions paid daily by the CMA
Treasury Fund during the fiscal year ended March 31, 1995 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.
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:
Federal
For the Quarter Ended Obligations*
June 30, 1994 97.00%
September 30, 1994 98.92%
December 31, 1994 91.97%
March 31, 1995 99.32%
Of the Fund's dividends declared daily to shareholders from ordinary
income during the fiscal year ended March 31, 1995, 99.43% 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
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--Senior Vice President
Donald C. Burke--Vice President
Marie Heumiller--Vice President
Kevin J. McKenna--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].
