MERRILL LYNCH U.S. TREASURY MONEY FUND
Annual Report
November 30, 1993
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
Dear Shareholder:
For the year ended November 30, 1993, Merrill Lynch U.S. Treasury
Money Fund paid shareholders a net annualized dividend of 2.69%.*
The Fund's 7-day yield as of November 30 was 2.82% (excluding gains
and losses) and 2.83% (including gains and losses).
The Environment
The US economy began to show some signs of improvement during the
six months ended November 30, 1993, with little evidence of an
appreciable increase in the rate of inflation. The industrial
sector is demonstrating growing strength, yet capacity utilization
is still well below the levels associated with rising inflation.
Consumer spending has improved, but the labor market remains soft.
Despite the areas of economic weakness that persist, concerns arose
during the quarter that the rate of business activity might increase
inflationary pressures.
<PAGE>
Other developments during the period had significant long-term
implications for the US financial markets. Although Boris Yeltsin's
swift and apparently decisive victory over his hard-line opponents
in Russia created little immediate disruption in the world financial
markets, the future of political and economic reform in the former
Soviet Union is far from certain. Evidence of greater progress toward
a free-market economy and democratic government in Russia would have
more positive implications for the US financial markets over the
long term. The outline for proposed healthcare reform is also very
important for the US economy. As the various healthcare reform
proposals are debated, investors will focus on their potential
effects on the Federal budget, the US economy and the quality of
healthcare delivery in the United States. Finally, the ratification
of the North American Free Trade Agreement by the US Congress was
important not only for the prospect of expanding trade with Canada
and Mexico, but also as a positive influence on the recently
concluded round of negotiations on the General Agreement on
Tariffs and Trade. Further economic integration and growth through
trade liberalization would be positive for the capital markets in
the United States and around the world.
Portfolio Matters
For the six months ended November 30, 1993, Merrill Lynch U.S.
Treasury Money Fund for the most part maintained a positive
approach to the market. Since our last report, interest rates
have increased slightly in the front end of the yield curve,
while declining in intermediate-term and longer-term maturities.
The increase in interest rates has come on the backdrop of modest
economic growth with little inflationary pressure. During the same
period, the market received little direction from the Federal
Reserve Board as the Federal Funds and discount rates both re-
mained at 3%.
<PAGE>
During the month of June, we were less optimistic as to the
direction of interest rates as we focused on May inflation
numbers. While the numbers were tame compared to those released
in earlier months, they did prompt concerns for a potential
tightening of monetary policy by the Federal Reserve Board.
Accordingly, the Fund continued to limit purchases to the
short end of its investment spectrum.
As we began July, we maintained a relatively conservative
approach to the market based in part on the remarks of Chairman
Alan Greenspan during his July Humphrey-Hawkins testimony. His
forecast for future economic gains and potential inflation fears
forced a modest steeping in the short-term end of the yield curve.
By month-end, these fears seemed overdone and as a result, the
Fund increased its average portfolio maturity to the high 70-day
area. This was accomplished by selectively adding to positions in
the three-month--six-month sector.
During the months of August and September, the Fund continued its
relatively constructive approach to the market. Passage of the
deficit reduction package and consecutive employment reports
showing lackluster gains with little inflation implications
allowed the market to improve modestly. Throughout this period,
the Fund continued to add to its positions in the three-month--
six-month sector. By the end of September, the average portfolio
maturity was gradually increased to the mid 80-day range.
The interest rate declines of August and September were reversed
in October as the economic outlook began to improve. Short-term
yields climbed by approximately 20 basis points (0.20%) even
though a handful of banks reduced their prime lending rates by 50
basis points. Several factors contributed to this reversal of in-
terest rate declines, namely improved retail sales and signs of
strength in the housing sector. Additionally, the Treasury increased
the size of the three-month and six-month bill auctions which put
added pressure on the front end of the yield curve. In spite of the
potential of continuing increases in the size of the Treasury bill
auctions, the Fund continued to selectively focus on the three-
month--six-month area which remained attractive relative to
short-term Treasury bills. By month-end, the average portfolio
maturity stood at 74 days, reflective of a more conservative stance.
The month of November was marked by more supply in the front end
of the yield curve. This, along with year-end pressures, con-
tinued to weigh heavily on the market. As a result the Fund
focused on trades in the one-month--three-month sector. In view
of the size of the December 16 and January 20 cash management
bills, these became attractive holdings compared to other bills
in this maturity range. By the end of November, we felt that any
movement in interest rates would be modest, given our belief that
economic results would continue to be lackluster. As a result we
moved the average portfolio maturity to 80 days.
Looking ahead, we are cautiously optimistic as to the direction
of interest rates despite the increased supply of short-term debt
and building year-end pressures. We believe that economic growth
will remain slow and expect inflation to remain in check for 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
December 27, 1993
<PAGE>
[FN]
*Based on a constant investment throughout the period, with
dividends compounded daily, and reflecting a net return to the
investor after all expenses.
<TABLE>
Merrill Lynch U.S. Treasury Money Fund
Schedule of Investments as of November 30, 1993 (in Thousands)
<CAPTION>
Face Interest Maturity Value
Issue Amount Rate Date (Note 1a)
<S> <C> <C> <C> <C>
US Government Obligations--100.2%
US Treasury Bills* $2,940 3.015% 12/02/93 $ 2,940
4,853 2.93 12/23/93 4,844
5,000 2.915 12/30/93 4,988
545 2.96 1/06/94 543
1,710 2.98 1/06/94 1,705
1,021 3.005 1/13/94 1,017
776 3.03 1/13/94 773
732 3.08 1/20/94 729
6,135 3.11 1/20/94 6,108
4,006 3.12 1/20/94 3,988
250 3.05 1/27/94 249
1,263 3.075 1/27/94 1,257
1,538 3.08 1/27/94 1,530
1,030 3.10 2/03/94 1,024
1,799 3.08 2/10/94 1,788
894 3.095 2/10/94 888
15,739 3.11 2/10/94 15,641
800 3.18 2/10/94 795
765 3.20 2/10/94 760
3,624 3.08 3/10/94 3,592
555 3.245 3/10/94 550
855 3.085 4/07/94 845
500 3.24 4/07/94 494
1,189 3.14 4/14/94 1,175
112 3.19 4/28/94 110
119 3.23 5/12/94 117
400 3.28 5/12/94 394
232 3.24 5/19/94 228
704 3.265 5/19/94 693
1,252 3.28 5/19/94 1,233
151 3.265 6/30/94 148
500 3.31 7/28/94 489
2,000 3.245 9/22/94 1,944
US Treasury Notes 1,700 7.625 12/31/93 1,706
1,000 4.875 1/31/94 1,003
364 6.875 2/15/94 367
1,500 5.75 3/31/94 1,512
1,500 5.125 5/31/94 1,513
500 4.25 10/31/94 503
500 4.125 6/30/95 501
<PAGE>
Total US Government Obligations (Cost--$70,684) 70,684
Total Investments (Cost--$70,684)--100.2% 70,684
Liabilities in Excess of Other Assets--(0.2%) (140)
-------
Net Assets--100.0% $70,544
=======
<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.
</TABLE>
<TABLE>
Merrill Lynch U.S. Treasury Money Fund
<CAPTION>
Statement of Assets and Liabilities as of November 30, 1993
<S> <C> <C>
Assets:
Investments, at value (identified cost--$70,683,969*) (Note 1a) $70,684,129
Cash 1,752
Interest receivable 102,419
Deferred organization expenses (Note 1d) 26,592
Prepaid registration fees and other assets (Note 1d) 51,072
------------
Total assets 70,865,964
------------
Liabilities:
Payables:
Beneficial interest redeemed $ 225,773
Distributor (Note 2) 19,890
Investment adviser (Note 2) 11,011 256,674
---------
Accrued expenses and other liabilities 65,358
-----------
Total liabilities 322,032
-----------
Net Assets $70,543,932
===========
Net Assets Consist of:
Shares of beneficial interest, $.10 par value, unlimited number of shares authorized $ 7,054,377
Paid-in capital in excess of par 63,489,395
Unrealized appreciation on investments--net 160
-----------
Net Assets--Equivalent to $1.00 per share based on 70,543,772 shares of beneficial
interest outstanding $70,543,932
===========
<FN>
* Cost for Federal income tax purposes. As of November 30, 1993, net unrealized appreciation for
Federal income tax purposes aggregated $160, of which $5,748 related to appreciated securities and
$5,588 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 Year Ended November 30, 1993
<S> <C> <C>
Investment Income (Note 1c):
Interest and amortization of premium and discount earned $ 2,390,892
Expenses:
Investment advisory fees (Note 2) $ 379,689
Distribution fees (Note 2) 92,033
Trustees' fees and expenses 58,094
Professional fees 55,035
Registration fees (Note 1d) 47,550
Printing and shareholder reports 31,784
Accounting services (Note 2) 26,584
Transfer agent fees (Note 2) 24,640
Amortization of organization expenses (Note 1d) 11,208
Custodian fees 1,977
Other 1,312
---------
Total expenses before reimbursement 729,906
Reimbursement of expenses (Note 2) (327,310)
---------
Total expenses after reimbursement 402,596
-----------
Investment income--net 1,988,296
Realized Gain on Investments--Net (Note 1c) 33,592
Change in Unrealized Appreciation on Investments--Net 41,965
-----------
Net Increase in Net Assets Resulting from Operations $ 2,063,853
===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Merrill Lynch U.S. Treasury Money Fund
Statements of Changes in Net Assets
<CAPTION> For the Year Ended November 30,
1993 1992
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Investment income--net $ 1,988,296 $ 2,309,112
Realized gain on investments--net 33,592 183,550
Change in unrealized appreciation/depreciation on investments--net 41,965 (79,268)
------------ -----------
Net increase in net assets resulting from operations 2,063,853 2,413,394
------------ -----------
Dividends & Distributions to Shareholders (Note 1e):
Investment income--net (1,988,296) (2,309,112)
Realized gain on investments--net (33,592) (146,087)
------------ -----------
Net decrease in net assets resulting from dividends and distributions to shareholders (2,021,888) (2,455,199)
------------ -----------
Beneficial Interest Transactions (Note 3):
Net proceeds from sale of shares 169,140,970 200,067,719
Net asset value of shares issued to shareholders in reinvestment of dividends (Note 1e) 2,019,817 2,443,968
------------ -----------
171,160,787 202,511,687
Cost of shares redeemed (181,636,527) (215,792,824)
------------ -----------
Net decrease in net assets derived from beneficial interest transactions (10,475,740) (13,281,137)
------------ -----------
Net Assets:
Total decrease in net assets (10,433,775) (13,322,942)
Beginning of year 80,977,707 94,300,649
------------ -----------
End of year $ 70,543,932 $80,977,707
============ ===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Merrill Lynch U.S. Treasury Money Fund
Financial Highlights
<CAPTION> For the Period
For the Year Ended November 30, April 15, 1991++
1993 1992 to Nov. 30, 1991
<S> <C> <C> <C>
The following per share data and ratios have been derived from
information provided in the financial statements.
Increase (Decrease) in Net Asset Value:
Per Share Operating Performance:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00
--------- -------- ---------
Investment income--net .0262 .0312 .0328
Realized and unrealized gain on investments--net .0010 .0014 .0029
--------- -------- ---------
Total from investment operations .0272 .0326 .0357
--------- -------- ---------
Less dividends and distributions:
Investment income--net (.0262) (.0312) (.0328)
Realized gain on investments--net (.0004) (.0020) (.0029)++++
--------- -------- ---------
Total dividends and distributions (.0266) (.0332) (.0357)
--------- -------- --------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
========= ======== =========
Total Investment Return 2.69% 3.36% 5.58%*
========= ======== =========
Ratios to Average Net Assets:
Expenses, net of reimbursement and excluding distribution fees .41% .53% .27%*
========= ======== =========
Expenses, net of reimbursement .53% .65% .39%*
========= ======== =========
Expenses .96% 1.16% 1.55%*
========= ======== =========
Investment income and realized gain on investments--net 2.66% 3.41% 5.45%*
========= ======== =========
Supplemental Data:
Net assets, end of period (in thousands) $ 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 investment management 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. However, un-
realized appreciation or depreciation will not be included in the
daily dividend to shareholders.
<PAGE>
2. Investment Advisory Agreement and Transactions with
Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Merrill Lynch Asset Management ("MLAM"). MLAM is the name under
which Merrill Lynch Investment Management, Inc. ("MLIM") does
business. MLIM is an indirect wholly-owned subsidiary of Merrill
Lynch & Co., Inc.
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 year ended November 30, 1993, MLAM earned fees of
$379,689, of which $327,310 was voluntarily waived.
The Fund has adopted a Distribution Plan (the "Plan") pursuant to
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 year ended
November 30, 1993, MLFD earned $92,033 under the Plan, all
of which was paid to MLPF&S pursuant to the agreement.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary
of Merrill Lynch & Co., Inc., 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 Merrill Lynch & Co., Inc.
<PAGE>
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>
Independent Auditors' Report
The Board of Trustees and Shareholders, Merrill Lynch U.S.
Treasury Money Fund:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Merrill Lynch
U.S. Treasury Money Fund as of November 30, 1993, 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 ended
November 30, 1993 and the financial highlights for each of the
years in the two-year period then ended and the period April 15,
1991 (commencement of operations) to November 30, 1991. These
financial statements and the financial highlights are the re-
sponsibility 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 November 30, 1993 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.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch U.S. Treasury Money Fund as of November 30, 1993,
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
December 31, 1993
</AUDIT-REPORT>
<PAGE>
Important Tax Information (unaudited)
None of the ordinary income distributions paid daily by Merrill
Lynch U.S. Treasury Money Fund during the year ended November 30,
1993 qualify for the dividends received deduction for corporations.
Additionally, there were no long-term capital gain distributions
paid 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:
Percentage
of Federal
Quarter Ended Obligations*
February 28, 1993 99.6%
May 31, 1993 99.5%
August 31, 1993 97.5%
November 30, 1993 99.7%
Of the Fund's ordinary income dividends paid during the year
ended November 30, 1993, 98.54% was attributable to Federal
obligations. In calculating the foregoing percentage, expenses
of the Fund have been allocated on a pro rata basis.
[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.
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
<PAGE>
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
