Merrill Lynch
U.S. Treasury
Money Fund
Semi-Annual Report May 31, 1994
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.
Merrill Lynch
U.S.Treasury Money Fund
Box 9011
Princeton, NJ 08543-9011
<PAGE>
Dear Shareholder:
For the six-month period ended May 31, 1994, Merrill Lynch U.S.
Treasury Money Fund paid shareholders a net annualized dividend
of 2.72%.* For the three-month period ended May 31, 1994,
the Fund paid shareholders a net annualized dividend of 2.73%.*
The Fund's 7-day yield as of May 31, 1994 was 2.93% (excluding
gains and losses) and 2.92% (including gains and losses).
The Environment
The six months ended May 31, 1994 proved to be turbulent for
the financial markets. Inflationary expectations and investor
sentiment changed for the worse during the period. Following
stronger-than-expected economic results through year-end 1993,
the Federal Reserve Board broke with tradition on February 4,
1994 and publicly announced a modest 25 basis point (0.25%)
increase in short-term interest rates, the first of four
tightening moves.
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. While the remaining increases
in the Federal Funds rate were less of a surprise, investors
viewed signs of economic strength as an indication that the
rate of inflation would soon accelerate. In addition, the
impact of highly leveraged investors forced to liquidate
positions in the face of declining stock and bond prices led
to further market turbulence.
In the weeks ahead, investors are likely to continue to focus
their attention on the direction of the economy and inflationary
trends. Evidence of stable and moderate economic growth, combined
with subdued inflationary pressures, would be a positive development
for the financial markets. The absence of these trends, along with
continued monetary policy tightening by the central bank, would
likely lead to continued volatility in stock and bond prices over
the near term.
[FN]
*Based on a constant investment throughout the period, with
dividends compounded daily, and reflecting a net return to the
investor after all expenses.
<PAGE>
Portfolio Matters
For the six months ended May 31, 1994, Merrill Lynch U.S. Treasury
Money Fund's investment outlook became progressively less optimistic,
as reflected in our weighted average maturity, which peaked at a high
of 86 days early in the period and subsequently declined to a low of 23
days. Since our last shareholder report, interest rates have risen on
the heels of continued economic growth and modest inflation. During the
period, the Federal Reserve Board has taken an aggressive role in the
marketplace by raising the Federal Funds rate four times to its present
level of 4.25% and the discount rate to its current level of 3.50%.
Throughout December, we maintained a constructive stance as the average
portfolio maturity ranged from 80 days to 74 days. As the month
progressed, the yield curve continued to steepen. Consequently, we
selectively added to positions in the six-month and one-year
sectors. During December, traditionally marked by an increase in net
assets, we saw the Fund's asset base grow from $70 million to $103
million. In line with modestly improved market technicals, the
Fund's average portfolio maturity stood at 80 days at month-end.
As the new year began, the lack of substantive improvement in the
employment data coupled with modest inflation statistics gave investors
little reason to change their expectations that interest rates would
indeed trade in a narrow range. However, as January came to a close,
we became increasingly concerned that the stability of interest rates
could be in jeopardy. As a result, the Fund's average portfolio maturity,
which had been held in the mid 80-day range during January, was reduced
to 75 days by the end of the month.
During the opening days of February, we aggressively reduced the Fund's
average portfolio maturity from 75 days to 53 days. As was the case at
the end of January, stronger-than-expected improvement on the consumer
front prompted this change in investment strategy. On February 4, 1994,
the Federal Reserve Board moved to tighten monetary policy by hiking the
Federal Funds rate target from 3.00% to 3.25%. For the remainder of the
month, the Fund's average portfolio maturity was reduced through attrition
as new purchases were limited to the front end of the maturity spectrum.
By the end of the month, the Fund's average portfolio maturity stood at
45 days.
For the month of March, the Fund continued its conservative posture,
allowing the average portfolio maturity to fall to the mid 20-day
area as we approached month-end. For the most part, new purchases
were limited to the very front end of the yield curve as the
market awaited the announcement of a short-dated cash management
bill to mature in the latter half of April. We invested heavily
in these Treasury bills because they were attractively priced to
comparable maturities while offering little price volatility over
the near term. As a result of this investment, we temporarily
extended the Fund's average portfolio maturity to 43 days at the
end of March.
<PAGE>
During the months of April and May, we maintained the Fund's
conservative posture by holding its average portfolio maturity in
the 20-day--30-day area in spite of the pronounced steepness of the
yield curve. By the end of May, the Fund's average portfolio maturity
stood at 27 days, reflective of our belief that there is still an
upward bias in the direction of interest rates as the Federal Reserve
Board continues to seek neutrality over the near term.
We appreciate your interest in Merrill Lynch U.S. Treasury Money Fund,
and we look forward to assisting you with your financial needs in the
months and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(John Ng)
John Ng
Vice President and Portfolio Manager
June 22, 1994
<PAGE>
Merrill Lynch U.S. Treasury Money Fund
Schedule of Investments as of May 31, 1994 (in Thousands)
Face Interest Maturity Value
Issue Amount Rate Date (Note 1a)
US Government Obligations--100.2%
US Treasury Bills* $ 366 3.41 % 6/02/94 $ 366
5,000 3.425 6/02/94 4,999
5,000 3.43 6/02/94 4,999
299 3.44 6/02/94 299
3,386 3.46 6/02/94 3,385
5,466 3.56 6/02/94 5,465
1,447 3.57 6/02/94 1,447
309 3.22 6/09/94 309
150 3.23 6/09/94 150
5,000 3.45 6/09/94 4,996
5,751 3.49 6/09/94 5,746
2,324 3.225 6/16/94 2,320
1,373 3.20 6/23/94 1,370
1,579 3.25 6/23/94 1,575
151 3.265 6/30/94 150
100 3.79 7/07/94 100
960 3.81 7/07/94 956
197 3.825 7/07/94 196
500 3.31 7/28/94 497
6,000 4.07 8/11/94 5,951
6,266 4.10 8/11/94 6,215
1,290 4.08 8/18/94 1,278
237 4.12 8/18/94 235
1,498 4.18 8/25/94 1,483
US Treasury Notes 9,191 5.00 6/30/94 9,199
Total US Government Obligations (Cost--$63,688) 63,686
Total Investments (Cost--$63,688)--100.2% 63,686
Liabilities in Excess of Other Assets--(0.2%) (134)
-------
Net Assets--100.0% $63,552
=======
[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.
See Notes to Financial Statements.
<PAGE>
<TABLE>
Merrill Lynch U.S. Treasury Money Fund
<CAPTION>
Statement of Assets and Liabilities as of May 31, 1994
<S> <C> <C>
Assets:
Investments, at value (identified cost--$63,687,783*)(Note 1a) $ 63,685,610
Cash 178
Receivables:
Interest $ 191,691
Beneficial interest sold 1,000 192,691
------------
Deferred organization expenses (Note 1d) 26,592
Prepaid registration fees and other assets (Note 1d) 65,823
------------
Total assets 63,970,894
------------
Liabilities:
Payables:
Beneficial interest redeemed 397,102
Distributor (Note 2) 12,926
Investment adviser (Note 2) 8,816 418,844
------------
Accrued expenses and other liabilities 28
------------
Total liabilities 418,872
------------
Net assets $ 63,552,022
============
Net Assets Consist of:
Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized $ 6,355,420
Paid-in capital in excess of par 57,198,775
Unrealized depreciation on investments--net (2,173)
------------
Net Assets:
Equivalent to $1.00 per share based on 63,554,195 shares of beneficial interest
outstanding $ 63,552,022
============
<FN>
*Cost of Federal income tax purposes. As of May 31, 1994, net unrealized
depreciation for Federal income tax purposes aggregated $2,173, of which
$125 related to appreciated securities and $2,298 related to depreciated
securities.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Merrill Lynch U.S. Treasury Money Fund
<CAPTION>
Statement of Operations for the Six Months Ended May 31, 1994
<S> <C> <C>
Investment Income (Note 1c):
Interest and amortization of premium and discount earned $ 1,177,465
Expenses:
Investment advisory fees (Note 2) $ 177,219
Distribution fees (Note 2) 42,873
Trustees' fees and expenses 26,770
Professional fees 24,439
Registration fees (Note 1d) 23,039
Accounting services (Note 2) 17,342
Transfer agent fees (Note 2) 12,508
Printing and shareholder reports 10,559
Custodian fees 4,330
Amortization of organization expenses (Note 1d) 648
Other 7,129
------------
Total expenses before reimbursement 346,856
Reimbursement of expenses (Note 2) (124,053)
------------
Total expenses after reimbursement 222,803
------------
Investment income--net 954,662
Realized Gain on Investments--Net (Note 1c) 4,373
Change in Unrealized Appreciation/Depreciation on Investments--Net (2,333)
------------
Net Increase in Net Assets Resulting from Operations $ 956,702
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Merrill Lynch U.S. Treasury Money Fund
<CAPTION>
For the Six For the Year
Months Ended Ended
Statements of Changes in Net Assets May 31, 1994 Nov. 30, 1993
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Investment income--net $ 954,662 $ 1,988,296
Realized gain on investments--net 4,373 33,592
Change in unrealized appreciation/depreciation on investments--net (2,333) 41,965
------------ ------------
Net increase in net assets resulting from operations 956,702 2,063,853
------------ ------------
Dividends & Distributions to Shareholders (Note 1e):
Investment income--net (954,662) (1,988,296)
Realized gain on investments--net (4,373) (33,592)
------------ ------------
Net decrease in net assets resulting from dividends and distributions to shareholders (959,035) (2,021,888)
------------ ------------
Beneficial Interest Transactions (Note 3):
Net proceeds from sale of shares 96,662,016 169,140,970
Net asset value of shares issued to shareholders in reinvestment of dividends (Note 1e) 955,166 2,019,817
------------ ------------
97,617,182 171,160,787
Cost of shares redeemed (104,606,759) (181,636,527)
------------ ------------
Net decrease in net assets derived from beneficial interest transactions (6,989,577) (10,475,740)
------------ ------------
Net Assets:
Total decrease in net assets (6,991,910) (10,433,775)
Beginning of period 70,543,932 80,977,707
------------ ------------
End of period $ 63,552,022 $ 70,543,932
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Merrill Lynch U.S. Treasury Money Fund
<CAPTION>
For the Six For the Year Ended For the Period
Months Ended November 30, April 15, 1991++
Financial Highlights May 31, 1994 1993 1992 to Nov. 30, 1991
The following per share data and ratios have been derived from
information provided in the financial statements.
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Asset Value:
Per Share Operating Performance:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ----------- ----------- -----------
Investment income--net .0134 .0262 .0312 .0328
Realized and unrealized gain on investments--net .0001 .0010 .0014 .0029
----------- ----------- ----------- -----------
Total from investment operations .0135 .0272 .0326 .0357
----------- ----------- ----------- -----------
Less dividends and distributions:
Investment income--net (.0134) (.0262) (.0312) (.0328)
Realized gain on investments--net (.0001) (.0004) (.0020) (.0029)++++
----------- ----------- ----------- -----------
Total dividends and distributions (.0135) (.0266) (.0332) (.0357)
----------- ----------- ----------- -----------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== ===========
Total Investment Return 2.72%* 2.69% 3.37% 5.58%*
=========== =========== =========== ===========
Ratios to Average Net Assets:
Expenses, net of reimbursement and excluding
distribution fees .51%* .41% .53% .27%*
=========== =========== =========== ===========
Expenses, net of reimbursement .63%* .53% .65% .39%*
=========== =========== =========== ===========
Expenses .98%* .96% 1.16% 1.55%*
=========== =========== =========== ===========
Investment income and realized gain on
investments--net 2.71%* 2.66% 3.41% 5.45%*
=========== =========== =========== ===========
Supplemental Data:
Net assets, end of period (in thousands) $ 63,552 $ 70,544 $ 80,978 $ 94,301
=========== =========== =========== ===========
<FN>
*Annualized.
++Commencement of Operations.
++++Includes unrealized gain (loss).
See Notes to Financial Statements.
</TABLE>
<PAGE>
Notes to Financial Statements
1. Significant Accounting Policies:
Merrill Lynch U.S. Treasury Money Fund (the "Fund")
is registered under the Investment Company Act of 1940
as a diversified, open-end management investment company.
The following is a summary of significant accounting
policies followed by the Fund.
(a) Valuation of investments--The Treasury securities
in which the Fund invests are traded primarily in the
over-the-counter markets. Except as set forth below,
these securities are valued at the most recent bid price
or yield equivalent as obtained from dealers that make
markets in Treasury 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 value. 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 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 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 Merrill Lynch Asset Management, L.P. ("MLAM"). Effective
January 1, 1994, the investment advisory business of MLAM was
reorganized from a corporation to a limited partnership. Both
prior to and after the reorganization, ultimate control of
MLAM was vested with Merrill Lynch & Co., Inc. ("ML & Co.").
The general partner of MLAM is Princeton Service, 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. The Fund has entered into a Distribution
Agreement and a Distribution Plan with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of MLIM.
MLAM 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 at the annual
rate of 0.50% of the average daily net assets of the Fund. The
Investment Advisory Agreement obligates MLAM to reimburse the
Fund to the extent the Fund's expenses (excluding interest, taxes,
distribution fees, brokerage fees and commissions, and extraordinary
charges such as litigation costs) 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 remaining
average daily net assets.
No fee payment will be made to MLAM during the period which will
cause such expenses to exceed the pro rata expense limitation
at the time of such payment. For the six months ended May 31,
1994, MLAM earned fees of $177,219, of which $124,053 was
voluntarily waived.
The Fund has adopted a Distribution Plan (the "Plan") in accordance
with Rule 12b-1 under the Investment Company Act of 1940 pursuant
to which Merrill Lynch Funds Distributor, Inc. ("MLFD") receives a
fee from the Fund at the end of each month at the annual rate of
0.125% of the average daily net assets of the Fund. This fee is to
compensate MLFD for the services it provides and the expenses borne
by MLFD under the Distribution Agreement. As authorized by the Plan,
MLFD has entered into an agreement with Merrill Lynch, Pierce
Fenner & Smith Inc. ("MLPF&S") which provides for the compensation
of MLPF&S for providing distribution-related services to the Fund.
Such services relate to the sale, promotion and marketing of the
shares of the Fund. For the six months ended May 31, 1994, MLFD
earned $42,873 under the Plan, all of which was paid to MLPF&S
pursuant to the agreement.
<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 MLAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of MLIM, FDS, MLFD, MLPF&S 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.
Officers and Trustees
Arthur Zeikel--President and Trustee
Donald Cecil--Trustee
M. Colyer Crum--Trustee
Edward H. Meyer--Trustee
Jack B. Sunderland--Trustee
J. Thomas Touchton--Trustee
Terry K. Glenn--Executive Vice President
Joseph T. Monagle, Jr.--Executive Vice President
Alex V. Bouzakis--Vice President
Donald C. Burke--Vice President
Linda B. Costanzo--Vice President
John Ng--Vice President
Gerald M. Richard--Treasurer
Mark B. Goldfus--Secretary
Custodian
The Bank of New York
110 Washington Street
New York, New York 10286
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 221-7210
