MERRILL LYNCH U S TREASURY MONEY FUND, 485B24E, 1996-03-28

MERRILL LYNCH U S TREASURY MONEY FUND
485B24E, 1996-03-28

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 28, 1996

SECURITIES ACT FILE NO. 33-37537
INVESTMENT COMPANY ACT FILE NO. 811-6211
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. / /

POST-EFFECTIVE AMENDMENT NO. 6 /X/

AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/

AMENDMENT NO. 8 /X/

(CHECK APPROPRIATE BOX OR BOXES)
------------------------

MERRILL LYNCH U.S. TREASURY MONEY FUND
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

<TABLE>
<S> <C>
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (609) 282-2800

ARTHUR ZEIKEL
MERRILL LYNCH U.S. TREASURY MONEY FUND
800 SCUDDERS MILL ROAD, PLAINSBORO, NEW JERSEY
MAILING ADDRESS: P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011
(NAME AND ADDRESS OF AGENT FOR SERVICE)
------------------------

COPIES TO:

<TABLE>
<S> <C>
COUNSEL FOR THE FUND: PHILIP L. KIRSTEIN, ESQ.

BROWN & WOOD MERRILL LYNCH ASSET MANAGEMENT
ONE WORLD TRADE CENTER P.O. BOX 9011
NEW YORK, N.Y. 10048-0557 PRINCETON, N.J. 08543-9011
ATTENTION: THOMAS R. SMITH, JR., ESQ.

</TABLE>

------------------------

IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
/X/ IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (b), OR
/ / ON (DATE) PURSUANT TO PARAGRAPH (b), OR
/ / 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(1)
/ / ON (DATE) PURSUANT TO PARAGRAPH (a)(1)
/ / 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(2)
/ / ON (DATE) PURSUANT TO PARAGRAPH (a)(2) OF RULE 485.

IF APPROPRIATE, CHECK THE FOLLOWING BOX:
/ / THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW
EFFECTIVE DATE FOR A PREVIOUSLY FILED POST-EFFECTIVE
AMENDMENT.
------------------------

THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT
OF 1940. THE NOTICE REQUIRED BY SUCH RULE FOR THE REGISTRANT'S MOST RECENT
FISCAL YEAR WAS FILED ON OR ABOUT JANUARY 23, 1996.

CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF SECURITIES AMOUNT OF SHARES OFFERING PRICE AGGREGATE AMOUNT OF
BEING REGISTERED BEING REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Shares of beneficial interest (par
value $.10 per share)............ 48,740,448 $1.00 $290,000* $100
</TABLE>

*(1) The calculation of the maximum aggregate offering price is made pursuant to
Rule 24e-2 under the Investment Company Act of 1940.

(2) The total amount of securities redeemed or repurchased during Registrant's
previous fiscal year was 166,444,550 shares of beneficial interest.

(3) 117,994,102 of the shares described in (2) above have been used for

reduction pursuant to Rule 24e-2(a) or Rule 24f-2(c) under the Investment
Company Act of 1940 in previous filings during Registrant's current fiscal
year.

(4) 48,450,448 of the shares redeemed during Registrant's previous fiscal year
are being used for the reduction of the registration fee in this amendment
to the Registration Statement.

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<PAGE>
MERRILL LYNCH U.S. TREASURY MONEY FUND
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET

N-1A ITEM NO. LOCATION
- -------------------------------------------- --------------------------------
PART A
Item 1. Cover Page...................... Cover Page
Item 2. Synopsis........................ Fee Table
Item 3. Condensed Financial
Information................... Financial Highlights; Yield
Information
Item 4. General Description of
Registrant.................... Investment Objectives and
Policies; Organization of the
Fund
Item 5. Management of the Fund.......... Fee Table; Management of the
Fund; Portfolio Transactions;
Inside Back Cover Page
Item 5A. Management's Discussion of Fund
Performance................... Not Applicable
Item 6. Capital Stock and Other
Securities.................... Organization of the Fund
Item 7. Purchase of Securities Being
Offered....................... Cover Page; Fee Table; Purchase
of Shares; Redemption of Shares;
Inside Back Cover Page
Item 8. Redemption or Repurchase........ Purchase of Shares; Redemption
of Shares
Item 9. Pending Legal Proceedings....... Not Applicable

PART B
Item 10. Cover Page...................... Cover Page
Item 11. Table of Contents............... Back Cover Page
Item 12. General Information and
History....................... Not Applicable
Item 13. Investment Objectives and
Policies...................... Investment Objectives and
Policies
Item 14. Management of the Fund.......... Management of the Fund
Item 15. Control Persons and Principal
Holders of Securities......... Management of the Fund
Item 16. Investment Advisory and Other
Services...................... Management of the Fund; Purchase
of Shares; General Information
Item 17. Brokerage Allocation............ Portfolio Transactions
Item 18. Capital Stock and Other
Securities.................... General Information--Description
of Shares
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered... Purchase of Shares; Redemption
of Shares; Purchase and
Redemption of Shares through

Merrill Lynch Retirement
Plans; Determination of Net
Asset Value
Item 20. Tax Status...................... Taxes
Item 21. Underwriters.................... Purchase of Shares
Item 22. Calculation of Performance
Data.......................... Not Applicable
Item 23. Financial Statements............ Financial Statements; Yield
Information

PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.

<PAGE>

PROSPECTUS
MARCH 28, 1996

MERRILL LYNCH U.S. TREASURY MONEY FUND
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 PHONE NO. (609) 282-2800
------------------------

Merrill Lynch U.S. Treasury Money Fund (the 'Fund') is a no-load,
diversified, open-end investment company seeking preservation of capital,
liquidity and current income through investment exclusively in a diversified
portfolio of short-term marketable securities which are direct obligations of
the U.S. Treasury. For purposes of its investment policies, the Fund defines
short-term marketable securities which are direct obligations of the U.S.
Treasury as any U.S. Treasury obligations having a maturity of no more than 762
days (25 months). There can be no assurance that the investment objectives of
the Fund will be realized.

The net income of the Fund is declared as dividends daily and reinvested at
net asset value in additional shares. The Fund seeks to maintain a constant
$1.00 net asset value per share, although this cannot be assured. In order to
maintain a constant net asset value of $1.00 per share, the Fund may reduce the
number of shares held by its shareholders. The shares of the Fund are neither
insured nor guaranteed by the U.S. Government.

Shares of the Fund may be purchased at their net asset value without any
sales charge. The minimum initial purchase is $5,000 and subsequent purchases
generally must be $1,000 or more. For accounts advised by banks and registered
investment advisers, the minimum initial purchase is $300 and the minimum
subsequent purchase is $100. The minimum initial purchase with respect to
pension, profit sharing, individual retirement and other retirement plans is
$100 and the minimum subsequent purchase with respect to these plans is $1. The
minimum initial purchase under the Merrill Lynch Blueprint(Service Mark) Program
is $500 (or $50 if the shareholder elects to participate in the automatic
investment of sale proceeds option on the Merrill Lynch Blueprint(Service Mark)
Program application form) and the minimum subsequent purchase is $50. Shares may
be redeemed at any time at net asset value as described herein. The Fund has
adopted a Shareholder Servicing Plan and Agreement in compliance with Rule 12b-1
under the Investment Company Act of 1940, as amended (the 'Investment Company
Act'). See 'Purchase of Shares' and 'Redemption of Shares'.

Shares may be purchased directly from Merrill Lynch Funds Distributor, Inc.
(the 'Distributor'), P.O. Box 9081, Princeton, New Jersey 08543-9081, Tel. No.
(609) 282-2800, or from securities dealers which have entered into selected
dealer agreements with the Distributor, including Merrill Lynch, Pierce, Fenner
& Smith Incorporated ('Merrill Lynch'). See 'Purchase of Shares'.

------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION

PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------

This Prospectus is a concise statement of information about the Fund that
is relevant to making an investment in the Fund. This Prospectus should be
retained for future reference. A statement containing additional information
about the Fund, dated March 28, 1996 (the 'Statement of Additional
Information'), has been filed with the Securities and Exchange Commission and
can be obtained without charge by calling or writing to the Fund at the above
telephone number or address. The Statement of Additional Information is hereby
incorporated by reference into this Prospectus.

------------------------

MERRILL LYNCH ASSET MANAGEMENT--MANAGER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.--DISTRIBUTOR

<PAGE>
FEE TABLE

ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1995:

<S> <C>
Management Fees(a)................. 0.50%
Rule 12b-1 Fees(b)................. 0.12%
Other Expenses(c).................. 0.56%
----
Total Fund Operating Expenses(d)... 1.18%
----
----
</TABLE>

- ---------------
(a) See 'Management of the Fund--Management and Advisory Arrangements'--page 6.
(b) See 'Purchase of Shares--Distribution Plan'--page 9.
(c) See 'Management of the Fund--Transfer Agency Services'--page 7.

(d) The Manager voluntarily elected to waive $214,109 of its management fee for
the year ended November 30, 1995. The Total Fund Operating Expenses have
been restated to assume the absence of any such waiver or reimbursement
because the Manager may discontinue or reduce such waiver of fees at any
time without notice. The actual Total Fund Operating Expenses, net of the
waiver, for the fiscal year ended November 30, 1995 was 0.83%.

<TABLE>
<CAPTION>
CUMULATIVE EXPENSES PAID FOR THE
PERIOD OF:
--------------------------------------
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
An investor would pay the
following expenses on a $1,000
investment, assuming an operating
expense ratio of 1.18% and a 5%
annual return throughout the
periods............................ $12 $37 $65 $143
</TABLE>

The foregoing Fee Table is intended to assist investors in understanding
the costs and expenses that a shareholder in the Fund will bear directly or

indirectly. The example set forth above assumes reinvestment of all dividends
and distributions and utilizes a 5% annual rate of return as mandated by
Securities and Exchange Commission regulations. THE EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RATE OF RETURN
AND ACTUAL EXPENSES OR ANNUAL RATE OF RETURN MAY BE MORE OR LESS THAN THOSE
ASSUMED FOR PURPOSES OF THE EXAMPLE.

<PAGE>
FINANCIAL HIGHLIGHTS

The financial information in the table below has been audited in
conjunction with the annual audits of the financial statements of the Fund by
Deloitte & Touche LLP, independent auditors. Financial Statements for the year
ended November 30, 1995 and the independent auditors' report thereon are
included in the Statement of Additional Information. The following per share
data and ratios have been derived from information provided in the Fund's
audited financial statements.

Further information about the performance of the Fund is contained in the
Fund's most recent annual report to shareholders which may be obtained, without
charge, by calling or writing the Fund at the telephone number or address on the
front cover of this Prospectus.

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED NOVEMBER 30, APRIL 15,
INCREASE (DECREASE) IN NET ASSET ------------------------------------- 1991+ TO
VALUE: 1995 1994 1993 1992 NOV. 30, 1991
------- ------- ------- ------- --------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period........................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- --------------
Investment income--net........... .0484 .0317 .0262 .0312 .0328
Realized and unrealized gain
(loss) on investments--net... .0009 (.0002) .0010 .0014 .0029
------- ------- ------- ------- --------------
Total from investment operations... .0493 .0315 .0272 .0326 .0357
------- ------- ------- ------- --------------
Less dividends and distributions:
Investment income--net........... (.0484) (.0317) (.0262) (.0312) (.0328)
Realized gain on
investments--net.............. (.0004) (.0002) (.0004) (.0020) (.0029)++
------- ------- ------- ------- --------------
Total dividends and
distributions.................... (.0488) (.0319) (.0266) (.0332) (.0357)
------- ------- ------- ------- --------------
Net asset value, end of period..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- --------------
------- ------- ------- ------- --------------
Total Investment Return............ 4.99% 3.22% 2.69% 3.37% 5.58%*
------- ------- ------- ------- --------------
------- ------- ------- ------- --------------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement and
excluding distribution fees...... .71% .59% .41% .53% .27%*

------- ------- ------- ------- --------------
------- ------- ------- ------- --------------
Expenses, net of reimbursement..... .83% .71% .53% .65% .39%*
------- ------- ------- ------- --------------
------- ------- ------- ------- --------------
Expenses........................... 1.18% 1.06% .96% 1.16% 1.55%*
------- ------- ------- ------- --------------
------- ------- ------- ------- --------------
Investment income and realized gain
on investments--net.............. 4.89% 3.16% 2.66% 3.41% 5.45%*
------- ------- ------- ------- --------------
------- ------- ------- ------- --------------
SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)....................... $56,318 $57,184 $70,544 $80,978 $ 94,301
------- ------- ------- ------- --------------
------- ------- ------- ------- --------------
</TABLE>

- ---------------
* Annualized.
+ Commencement of Operations.
++ Includes unrealized gain (loss).

<PAGE>
YIELD INFORMATION

Set forth below is yield information for the indicated seven-day periods,
computed to include and exclude realized and unrealized gains and losses, and
information as to the compounded annualized yield, excluding gains and losses,
for the same periods.

<TABLE>
<CAPTION>
SEVEN-DAY PERIOD ENDED
--------------------------------------
FEBRUARY 29, 1996 NOVEMBER 30, 1995
------------------ ------------------
<S> <C> <C>
Annualized Yield:
Including gains and losses......... 4.43% 4.71%
Excluding gains and losses......... 4.41% 4.72%
Compounded Annualized Yield............. 4.51% 4.83%
Average maturity of portfolio at end of
period................................ 76 days 62 days
</TABLE>

The yield of the Fund refers to the income generated by an investment in
the Fund over a stated seven-day period. This income is then annualized; that
is, the amount of income generated by the investment during that period is
assumed to be generated each seven-day period over a 52-week period and is shown
as a percentage of the investment. The compounded annualized yield is calculated
similarly but, when annualized, the income earned by an investment in the Fund
is assumed to be reinvested. The compounded annualized yield will be somewhat
higher than the yield because of the effect of the assumed reinvestment.

The yield on Fund shares normally will fluctuate on a daily basis.
Therefore, the yield for any given past period is not an indication or
representation by the Fund of future yields or rates of return on its shares.
The Fund's yield is affected by changes in interest rates on Treasury
securities, average portfolio maturity, the types and quality of portfolio
securities held and operating expenses. Current yield information may not
provide a basis for comparison with bank deposits or other investments which pay
a fixed yield over a stated period of time.

On occasion, the Fund may compare its yield to (i) the Donoghue's Domestic
Prime Funds Average, an average compiled by Donoghue's Money Fund Report, a
widely recognized independent publication that monitors the performance of money
market mutual funds, (ii) the average yield reported by the Bank Rate Monitor
National Index(Trademark) for money market deposit accounts offered by the 100
leading banks and thrift institutions in the ten largest standard metropolitan
statistical areas, (iii) yield data reported by Lipper Analytical Services,
Inc., Morningstar Publications, Inc., Money Magazine, U.S. News & World Report,
Business Week, CDA Investment Technology, Inc., Forbes Magazine and Fortune
Magazine, or (iv) the yield on an investment in 91-day Treasury bills on a

rolling basis, assuming quarterly compounding. As with other performance data,
yield comparisons should not be considered indicative of the Fund's yield or
relative performance for any future period.

INVESTMENT OBJECTIVES AND POLICIES

The investment objectives of the Fund are to seek preservation of capital,
liquidity and current income through investment exclusively in a diversified
portfolio of short-term marketable securities which are direct obligations of
the U.S. Treasury. The investment objectives are fundamental policies of the
Fund and may not be changed without a vote of the majority of the outstanding
shares of the Fund.

Preservation of capital is a prime investment objective of the Fund, and
the direct U.S. Treasury obligations in which it will invest are generally
considered to have the lowest principal risk among money market securities.

4
<PAGE>
Historically, direct U.S. Treasury obligations have generally had lower rates of
return than other money market securities with less safety.

For purposes of its investment objectives, the Fund defines short-term
marketable securities which are direct obligations of the U.S. Treasury as any
U.S. Treasury obligations having maturities of no more than 762 days (25
months). The dollar weighted average maturity of the Fund's portfolio will not
exceed 90 days. During the fiscal year ended November 30, 1995, the average
maturity of its portfolio ranged from 39 days to 84 days.

Investment in Fund shares offers several benefits. The Fund seeks to
provide as high a yield potential, consistent with preservation of capital, as
is available through investment in short-term U.S. Treasury obligations, by
utilizing professional money market management and block purchases of securities
and yield improvement techniques. The Fund provides high liquidity because of
its redemption features and seeks reduced risk resulting from diversification of
assets. The shareholder is also relieved from administrative burdens associated
with direct investment in U.S. Treasury securities, such as coordinating
maturities and reinvestments, and making numerous buy-sell decisions. There can
be no assurance that the investment objectives of the Fund will be realized.
Certain expenses are borne by investors, including advisory and management fees,
administrative costs and operational costs.

In managing the Fund, Merrill Lynch Asset Management, L.P. ('MLAM' or the
'Manager') will employ a number of professional money management techniques,
including varying the composition of investments and the average maturity of the
portfolio based on its assessment of the relative values of the various
securities and future interest rate patterns. These assessments will respond to
changing economic and money market conditions and to shifts in fiscal and
monetary policy. The Manager also will seek to improve yield by taking advantage
of yield disparities that regularly occur between securities of a similar kind.
For example, market conditions frequently result in similar securities trading

at different prices. The Fund seeks to enhance yield by purchasing and selling
securities based on these yield disparities.

Forward Commitments. The Fund may purchase portfolio securities on a
forward commitment basis at fixed purchase terms. The purchase will be recorded
on the date the Fund enters into the commitment, and the value of the security
will thereafter be reflected in the calculation of the Fund's net asset value.
The value of the security on the delivery date may be more or less than its
purchase price. A separate account of the Fund will be established with its
custodian consisting of cash or Treasury securities having a market value at all
times at least equal to the amount of the forward commitment. Although the Fund
generally will enter into forward commitments with the intention of acquiring
securities for its portfolio, the Fund may dispose of a commitment prior to
settlement if the Manager deems it appropriate to do so.

When-Issued Securities and Delayed Delivery Transactions. The Fund also
may purchase portfolio securities on a when-issued basis, and it may purchase or
sell portfolio securities for delayed delivery. These transactions occur when
securities are purchased or sold by the Fund with payment and delivery taking
place in the future to secure what is considered an advantageous yield and price
to the Fund at the time of entering into the transaction. The Fund will maintain
a segregated account with its custodian of cash or Treasury securities having a
market value at all times at least equal to the amount of its commitments in
connection with such purchase transactions.

Investment Restrictions. The Fund has adopted a number of restrictions and
policies relating to the investment of its assets and its activities, which are
fundamental policies and may not be changed without the approval of the holders
of a majority of the Fund's outstanding voting securities as defined in the
Investment

5
<PAGE>
Company Act. Among the more significant restrictions, the Fund may not purchase
any securities other than direct obligations of the U.S. Treasury having
maturities of 762 days (25 months) or less.

MANAGEMENT OF THE FUND

TRUSTEES

The Trustees of the Fund consist of six individuals, five of whom are not
'interested persons' of the Fund, as defined in the Investment Company Act. The
Trustees of the Fund are responsible for the overall supervision of the
operations of the Fund and perform the various duties imposed on the directors
of investment companies by the Investment Company Act.

The Trustees of the Fund are:

ARTHUR ZEIKEL*--President of MLAM and its affiliate, Fund Asset Management,
L.P. ('FAM'); President and Director of Princeton Services, Inc.
('Princeton Services'); Executive Vice President of Merrill Lynch & Co.,
Inc. ('ML & Co.'); and Director of the Distributor.

DONALD CECIL--Special Limited Partner of Cumberland Partners (an investment
partnership).

M. COLYER CRUM--James R. Williston Professor of Investment Management,
Harvard Business School.

EDWARD H. MEYER--Chairman of the Board of Directors, President and Chief
Executive Officer of Grey Advertising Inc.

JACK B. SUNDERLAND--President and Director of American Independent Oil
Company, Inc. (an energy company).

J. THOMAS TOUCHTON--Managing Partner of The Witt-Touchton Company (a
private investment partnership).

- ---------------
* Interested person, as defined in the Investment Company Act, of the Fund.

MANAGEMENT AND ADVISORY ARRANGEMENTS

MLAM, which is owned and controlled by ML & Co., a financial services
holding company, acts as the Manager for the Fund and provides the Fund with
management services. The Manager or an affiliate of the Manager, FAM, acts as
the investment adviser for more than 130 registered investment companies and
provides investment advisory services to individual and institutional accounts.
As of February 29, 1996, the Manager and FAM had a total of approximately $208.7
billion in investment company and other portfolio assets under management,
including accounts of certain affiliates of the Manager.

The investment advisory agreement with the Manager (the 'Management
Agreement') provides that, subject to the direction of the Trustees, the Manager
is responsible for the actual management of the Fund's portfolio and constantly
reviews the Fund's holdings in light of its own research analysis and that from
other relevant sources. The responsibility for making decisions to buy, sell or
hold a particular security rests with the Manager subject to review by the Board
of Trustees. The Manager performs certain of the other administrative services
and provides all of the office space, facilities, equipment and necessary
personnel for portfolio management of the Fund.

6
<PAGE>

As compensation for its services under the Management Agreement, the
Manager receives a fee from the Fund at the end of each month at the annual rate
of 0.50% of the Fund's average daily net assets. For the fiscal year ended
November 30, 1995, the total management fee payable by the Fund to the Manager
aggregated $305,869 (based on average net assets of approximately $61.2
million). At February 29, 1996, the net assets of the Fund aggregated
approximately $59.5 million. At this asset level, the annual management fee
would aggregate $297,400.

The Management Agreement obligates the Fund to pay certain expenses
incurred in its operations, including, among other things, the management fee,
legal and audit fees, unaffiliated Trustees' fees and expenses, registration
fees, Custodian and Transfer Agent fees, accounting and pricing costs, and
certain of the costs of printing proxies, shareholder reports, prospectuses and
statements of additional information. Accounting services are provided to the
Fund by the Manager, and the Fund reimburses the Manager for its costs in
connection with such services. For the fiscal year ended November 30, 1995, the
Fund paid $38,315 to the Manager in connection with accounting services, and the
ratio of total expenses, net of reimbursement, to average net assets was 0.83%.

John Ng, Vice President and Portfolio Manager of the Fund, is primarily
responsible for the day to day management of the Fund. Mr. Ng has been a
Portfolio Manager and Vice President of the Manager since 1993.

TRANSFER AGENCY SERVICES

The Fund has entered into a transfer agency, shareholder servicing agency
and proxy agency agreement (the 'Transfer Agency Agreement') with Merrill Lynch
Financial Data Services, Inc. (the 'Transfer Agent'), a subsidiary of ML & Co.
Pursuant to the Transfer Agency Agreement, the Transfer Agent is responsible for
the issuance, transfer and redemption of shares and the opening and maintenance
of shareholder accounts. Pursuant to the Transfer Agency Agreement, the Transfer
Agent receives a fee at the annual rate of $15.00 per shareholder account, and
is entitled to reimbursement from the Fund for out-of-pocket expenses incurred
by the Transfer Agent under the Transfer Agency Agreement. For the fiscal year
ended November 30, 1995, the total fee paid by the Fund to the Transfer Agent
pursuant to the Transfer Agency Agreement was $38,247. At February 29, 1996, the
Fund had 1,439 shareholder accounts. At this level of accounts, the annual fee
payable to the Transfer Agent would aggregate approximately $21,585, plus
out-of-pocket expenses.

PURCHASE OF SHARES

The Fund is offering its shares without a sales charge at a public offering
price equal to the net asset value (normally $1.00 per share) next determined
after a purchase order becomes effective. Share purchase orders are effective on
the date Federal funds become available to the Fund. If Federal funds are
available to the Fund prior to the determination of net asset value (generally
4:00 P.M., New York time) on any business day, the order will be effective on
that day. Shares purchased will begin accruing dividends on the day following
the date of purchase. Any order may be rejected by the Fund or the Distributor.

The minimum initial purchase is $5,000 and the minimum subsequent purchase

is $1,000, except that lower minimums apply in the case of purchases made under
certain retirement plans. The Fund may, at its discretion, establish reduced
minimum initial and subsequent purchase requirements with respect to various
types of accounts. Participants in the self-directed retirement plans for which
Merrill Lynch acts as passive custodian may invest in shares of the Fund with a
minimum initial purchase of $100 and a minimum subsequent purchase of $1.
Information concerning investments in the Fund by participants in retirement
plans for which Merrill Lynch acts as passive custodian is set forth under
'Purchase and Redemption of Shares through Merrill Lynch Retirement

7
<PAGE>
Plans' in the Statement of Additional Information. A variety of retirement plans
are also available from the Distributor. The minimum initial investment under
these plans is $100 and the minimum subsequent investment is $1. In addition,
there is no minimum investment under certain corporate pension and
profit-sharing plans which have established self-directed employee sub-accounts
with Merrill Lynch. The minimum initial purchase with respect to other
retirement plans and pension and profit-sharing plans is $100 and the minimum
subsequent investment is $1. For accounts advised by banks and registered
investment advisers, the minimum initial purchase is $300 and the minimum
subsequent purchase is $100.

METHODS OF PAYMENT

Payment Through Securities Dealers. Investment in the Fund may be made
through securities dealers, including Merrill Lynch, who have entered into
selected dealer agreements with the Distributor. In such a case, the dealer will
transmit payment to the Fund on behalf of the investor and will supply the Fund
with the required account information. Generally, purchase orders placed through
Merrill Lynch will be made effective on the day following the day the order is
placed with Merrill Lynch, except that orders received through the Merrill Lynch
Blueprint(Service Mark) Program ('Blueprint') in some circumstances may be
executed two business days following the day the order is placed with Merrill
Lynch. Investments in the Fund through Blueprint may be made only through
Merrill Lynch. Such orders should be sent to Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Attention: The Blueprint(Service Mark) Program, P.O. Box
30441, New Brunswick, New Jersey 08989-0441. Blueprint maintains a toll-free
telephone number for inquiries: (800) 637-3766. Investors who are not placing
orders through Blueprint and who desire same day effectiveness should utilize
the Payment by Wire procedure described below. Merrill Lynch has an order
procedure pursuant to which investors can have the proceeds from the sale of
listed securities invested in shares of the Fund on the day investors receive
such proceeds in their Merrill Lynch securities accounts. Investors with free
cash credit balances (i.e., immediately available funds) in securities accounts
of Merrill Lynch will not have their funds invested in the Fund until the day
after the order is placed with Merrill Lynch and will not receive the daily
dividend which would have been received had their funds been invested in the
Fund on the day the order was placed with Merrill Lynch.

Payment by Wire. An expeditious method of investing in the Fund is
available through the transmittal of Federal funds by wire to the Transfer
Agent. The Fund will not be responsible for delays in the wiring system. To

purchase shares by wiring Federal funds, payment should be wired to First Union
National Bank of Florida. Shareholders should give their financial institutions
the following wiring instructions: ABA #063000021, DDA #2112600061186, Merrill
Lynch Financial Data Services, Inc. The wire should be identified as a payment
to Merrill Lynch U.S. Treasury Money Fund and should include the shareholder's
name and account number. Failure to submit the required information may delay
investment. Investors are urged to make payment by wire in Federal funds.

Payment to the Transfer Agent. Purchase orders for which remittance is to
be made by check may be submitted directly by mail or otherwise to the Transfer
Agent. Purchase orders by mail should be sent to Merrill Lynch Financial Data
Services, Inc., P.O. Box 45290, Jacksonville, Florida 32232-5290. Purchase
orders which are sent by hand should be delivered to Merrill Lynch Financial
Data Services, Inc., 4800 Deer Lake Drive East, Jacksonville, Florida
32246-6484. Investors opening a new account must enclose a completed Purchase
Application. Existing shareholders should enclose the detachable stub from a
monthly account statement which they have received. Checks should be made
payable to Merrill Lynch Funds Distributor, Inc. Certified checks are not
necessary, but checks are accepted subject to collection at full face value in
U.S. funds and must be drawn in

8
<PAGE>

U.S. dollars on a U.S. bank. Payments for the accounts of corporations,
foundations and other organizations may not be made by third party checks.

DISTRIBUTION PLAN

The Fund has adopted a shareholder servicing plan and agreement (the
'Plan') in compliance with Rule 12b-1 under the Investment Company Act pursuant
to which the Fund is authorized to pay Merrill Lynch a fee at the annual rate of
0.125% of the average daily net asset value of Fund accounts maintained through
Merrill Lynch. The Plan reimburses Merrill Lynch only for actual expenses
incurred in the fiscal year in which the fee is paid. The fee is principally to
provide compensation to Merrill Lynch financial consultants and other Merrill
Lynch personnel for providing certain services to shareholders who maintain
their Fund accounts through Merrill Lynch. The fee is for direct personal
services to Fund shareholders. Under the Plan, Merrill Lynch, in its sole
discretion, may expend out of the fee an amount not exceeding 0.01% of such
average daily net asset value as reimbursement for expenditures incurred in
advertising activities promoting the sale, marketing and distribution of the
shares of the Fund. For the fiscal year ended November 30, 1995, $73,258 was
paid to Merrill Lynch pursuant to the Plan (based on average net assets subject
to the Plan of $61.2 million). At February 29, 1996, the net assets of the Fund
subject to the Plan aggregated approximately $59.5 million. At this asset level,
the annual fee payable to Merrill Lynch pursuant to the Plan would aggregate
$74,350.

REDEMPTION OF SHARES

The Fund is required to redeem for cash all full and fractional shares of
the Fund. The redemption price is the net asset value per share next determined
after receipt by the Transfer Agent of proper notice of redemption as described
in accordance with one of the procedures set forth below. If such notice is
received by the Transfer Agent prior to the determination of net asset value
(generally 4:00 P.M., New York time), on any day during which the New York Stock
Exchange or New York banks are open for business, the redemption will be
effective on such day and payment will be made on the next business day. If the
notice is received after the determination of net asset value has been made, the
redemption will be effective on the next business day and payment will be made
on the second business day thereafter. If notice of a redemption of shares held
in connection with Blueprint is received by Merrill Lynch prior to the Fund's
determination of net asset value, it will be effective on the business day
following receipt of the redemption request. If the notice is received after the
determination of net asset value has been made, the redemption will be effective
on the second business day thereafter.

At various times, the Fund may be requested to redeem shares for which it
has not yet received good payment (e.g., cash, Federal funds or a certified
check drawn on a U.S. bank). The Fund may delay or cause to be delayed the
mailing of a redemption check until such time as good payment has been collected
for the purchase of such Fund shares, which may take up to 10 days.

Information concerning redemptions by participants in the self-directed
retirement plans for which Merrill Lynch acts as passive custodian is set forth
in the Statement of Additional Information.

9
<PAGE>
METHODS OF REDEMPTION

Set forth below is information as to the five methods pursuant to which
shareholders may redeem shares. In certain instances, the Transfer Agent may
require additional documents in connection with redemptions.

Redemption by Check. Shareholders may redeem shares by check in an amount
not less than $500. At the shareholder's request, the Transfer Agent will
provide the shareholder with checks drawn on the custody account of the Fund
with the Custodian. These checks can be made payable to the order of any person
in any amount not less than $500; however, these checks may not be used to
purchase securities in transactions with Merrill Lynch. The payee of the check
may cash or deposit it like any check drawn on a bank. When such a check is
presented to the Transfer Agent for payment, the Transfer Agent will present the
check to the Fund as authority to redeem a sufficient number of full and
fractional shares in the shareholder's account to cover the amount of the check.
This enables the shareholder to continue earning daily dividends until the check
is cleared. Cancelled checks will be returned to the shareholder by the Transfer
Agent.

Shareholders will be subject to the Transfer Agent's rules and regulations
governing such checking accounts, including the right of the Transfer Agent not
to honor checks in amounts exceeding the value of the shareholder's account at
the time the check is presented for payment. The Fund or the Transfer Agent may
modify or terminate the redemption by check privilege at any time on 30 days'
notice to participating shareholders. In order to be eligible for the redemption
by check privilege, purchasers should check the box under the caption 'Check
Redemption Privilege' in the Purchase Application. The Transfer Agent will then
send checks to the shareholder.

Federal Funds Redemption. Shareholders also may arrange to have redemption
proceeds of $5,000 or more wired in Federal funds to a pre-designated bank
account. In order to be eligible for Federal funds redemption, the shareholder
must designate on his or her Purchase Application the domestic commercial bank
and account number to receive the proceeds of his or her redemption and must
have his or her signature on the Purchase Application guaranteed. The redemption
request for Federal funds redemption may be made by telephone, wire or by letter
to the Transfer Agent and, if received before the determination of net asset
value of the Fund on any business day (generally 4:00 P.M., New York time), the
redemption proceeds will be wired to the investor's predesignated bank account
on the next business day. Shareholders may effect Federal funds redemptions by
telephoning the Transfer Agent at (800) 221-7210 toll-free. The Fund will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine; if it does not, the Fund may be liable for any losses due to fraudulent
or unauthorized instructions. Among other things, redemption proceeds may only
be wired into the bank account designated on the Purchase Application. The
investor must independently verify this information at the time the redemption
request is made.

Repurchase Through Securities Dealers. The Fund will repurchase shares
through securities dealers. The Fund normally will accept orders to repurchase
shares by wire or telephone from dealers for customers at the net asset value
next computed after receipt of the order from the dealer, provided that such
request for repurchase is received from the dealer prior to the determination of
net asset value of the Fund (generally 4:00 P.M., New York time) on any business
day.

The foregoing repurchase arrangements are for the convenience of
shareholders and do not involve a charge by the Fund; however, dealers may
impose a charge on the shareholder for transmitting the notice of repurchase to
the Fund. Redemption of Fund shares held in connection with Blueprint may be
made only through Merrill Lynch. Such a redemption may be made by submitting a
written notice by mail directly to Merrill Lynch, Pierce,

10
<PAGE>

Fenner & Smith Incorporated, Attention: The Blueprint(Service Mark) Program,
P.O. Box 30441, New Brunswick, New Jersey 08989-0441. Investors whose shares are
held through Blueprint also may effect notice of redemption by telephoning
Merrill Lynch at (800) 637-3766 toll-free. The Fund reserves the right to reject
any order for repurchase through a securities dealer, but it may not reject

properly submitted requests for redemption as described below. The Fund will
promptly notify any shareholder of any rejection of a repurchase with respect to
his or her shares. For shareholders repurchasing through their securities
dealer, payment will be made by the Transfer Agent to the dealer.

Regular Redemption. Shareholders may redeem shares by submitting a written
notice by mail directly to the Transfer Agent, Merrill Lynch Financial Data
Services, Inc., P.O. Box 45290, Jacksonville, Florida 32232-5290. Redemption
requests which are sent by hand should be delivered to Merrill Lynch Financial
Data Services, Inc., 4800 Deer Lake Drive East, Jacksonville, Florida
32246-6484. Redemption requests should not be sent to the Fund. The notice
requires the signatures of all persons in whose names the shares are registered,
signed exactly as their names appear on the Transfer Agent's register. The
signatures on the redemption request must be guaranteed by an 'eligible
guarantor institution' as such is defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934, the existence and validity of which may be verified by the
Transfer Agent through the use of industry publications. Notarized signatures
are not sufficient.

Automatic Redemption. Merrill Lynch has instituted an automatic redemption
procedure applicable to shareholders of the Fund who maintain securities
accounts with Merrill Lynch. Merrill Lynch may utilize this procedure, which is
not applicable to margin accounts, to satisfy amounts due it by the shareholder
as a result of account fees and expenses owed to Merrill Lynch or one of its
affiliates or as a result of purchases of securities or other transactions in
the shareholder's securities account. Under this procedure, unless the
shareholder notifies Merrill Lynch to the contrary, the shareholder's Merrill
Lynch securities account will be scanned each business day prior to the
determination of net asset value of the Fund (generally 4:00 P.M., New York
time); after application of any cash balances in the account, a sufficient
number of Fund shares will be redeemed at net asset value, as determined on that
day, to satisfy any amounts for which the shareholder is obligated to make
payment to Merrill Lynch or one of its affiliates. Redemptions will be effected
on the business day preceding the date the shareholder is obligated to make such
payment, and Merrill Lynch or its affiliate will receive the redemption proceeds
on the business day following the redemption date. Shareholders will receive all
dividends declared and reinvested through the date of redemption.

------------------------

Due to the relatively high cost of maintaining accounts of less than
$1,000, the Fund reserves the right to redeem shares in any account (other than
accounts which have a minimum initial purchase of less than $1,000) for their
then current value (which will be promptly paid to the shareholder), if at any
time the total investment does not have a value of at least $1,000. Shareholders
will be notified that the value of their account is less than $1,000 and allowed
two months to make an additional investment before the redemption is processed.
In such event, the $1,000 minimum on subsequent investment will not be
applicable.

<PAGE>
SHAREHOLDER SERVICES

The Fund offers a number of shareholder services designed to facilitate
investment in its shares. Full details as to each of such services, copies of
the various plans described below and instructions as to how to participate in
the various services or plans, or to change options with respect thereto can be
obtained from the Fund, the Distributor or Merrill Lynch. Included in such
services are the following:

Investment Account. Each shareholder whose account is maintained at the
Transfer Agent has an Investment Account and will receive from the Transfer
Agent a monthly report showing the activity in his or her account for the month.
A shareholder may make additions to his or her Investment Account at any time by
purchasing shares at the public offering price either through his or her
securities dealer, by wire or by mail directly to the Transfer Agent, acting as
agent for his or her dealer. A shareholder may ascertain the number of shares in
his or her Investment Account by telephoning the Transfer Agent at (800)
221-7210 toll-free. The Transfer Agent will furnish this information only after
the shareholder has specified the name, address, account number and social
security number of the registered owner or owners. Shareholders also may
maintain their accounts through Merrill Lynch. Upon the transfer of shares out
of a Merrill Lynch brokerage account, an Investment Account in the transferring
shareholder's name may be opened automatically, without charge, at the Transfer
Agent. Shareholders considering transferring a tax-deferred retirement account
such as an individual retirement account from Merrill Lynch to another brokerage
firm or financial institution should be aware that, if the firm to which the
retirement account is to be transferred will not take delivery of shares of the
Fund, a shareholder must either redeem the shares so that the cash proceeds can
be transferred to the account at the new firm, or such shareholder must continue
to maintain a retirement account at Merrill Lynch for those shares.

Exchange Privilege. Shareholders of the Fund have an exchange privilege
with Class D shares of certain other mutual funds advised by the Manager or FAM
('MLAM-advised mutual funds'). Alternatively, shareholders may exchange shares
of the Fund for Class A shares of one of the MLAM-advised mutual funds if the
shareholder holds any Class A shares of that fund in his or her account in which
the exchange is made at the time of the exchange or is otherwise an eligible
Class A investor. Shareholders of the Fund also may exchange shares of the Fund
into shares of certain MLAM-advised money market funds specifically designated
as available for exchange by holders of Fund shares. There is currently no
limitation on the number of times a shareholder may exercise the exchange
privilege. The exchange privilege may be modified or terminated at any time in
accordance with the rules of the Securities and Exchange Commission. Exercise of
the exchange privilege is treated as a sale for Federal income tax purposes. For
further information, see 'Shareholder Services--Exchange Privilege' in the
Statement of Additional Information.

Accrued Monthly Payout Plan. Shareholders desiring their dividends in cash

may enroll in this plan and receive monthly cash payments resulting from the
redemption of the shares received on dividend reinvestments during the month.

Systematic Withdrawal Plan. A shareholder may elect to receive systematic
withdrawal checks from his or her Investment Account on either a monthly or
quarterly basis.

Automatic Investment Plan. Regular additions may be made to an investor's
Investment Account by prearranged charges to his or her regular bank account at
a minimum of $50 per month.

12
<PAGE>
PORTFOLIO TRANSACTIONS

The portfolio securities in which the Fund invests are traded in the
over-the-counter market. The Fund will deal directly with the dealers who make a
market in the securities involved, except in those circumstances where better
prices and execution are available elsewhere. Such dealers usually are acting as
principal for their own account. On occasion, securities may be purchased
directly from the U.S. Treasury. Portfolio securities generally are traded on a
net basis and normally do not involve either brokerage commissions or transfer
taxes. The cost of executing portfolio transactions primarily will consist of
dealer spreads. Under the Investment Company Act, persons affiliated with the
Fund are prohibited from dealing with the Fund as a principal in the purchase
and sale of securities unless an exemptive order allowing such transactions is
obtained from the Securities and Exchange Commission. An affiliated person of
the Fund may serve as its broker in over-the-counter transactions conducted on
an agency basis.

The Securities and Exchange Commission has issued an exemptive order
permitting the Fund to conduct certain principal transactions with Merrill Lynch
Government Securities, Inc. or its subsidiary, Merrill Lynch Money Markets,
Inc., subject to certain terms and conditions. During the fiscal year ended
November 30, 1995, the Fund engaged in no transactions pursuant to such order.

ADDITIONAL INFORMATION

DIVIDENDS

All of the net income of the Fund is declared as dividends daily. The
Fund's net income for dividend purposes is determined by the Manager at the
close of business on the New York Stock Exchange (generally 4:00 P.M., New York
time), on each day the New York Stock Exchange is open for business, immediately
prior to the determination of the Fund's net asset value on that day. See
'Determination of Net Asset Value'. Net income of the Fund (from the time of the
immediately preceding determination thereof) consists of (i) interest accrued
and/or discount earned (including both original issue and market discount), (ii)

less the estimated expenses of the Fund (including the fees payable to the
Manager) applicable to that dividend period and (iii) plus or minus all realized
gains and losses on the portfolio securities. Dividends are declared and
reinvested daily in the form of additional full and fractional shares of the
Fund at net asset value.

DETERMINATION OF NET ASSET VALUE

The net asset value of the Fund is determined by the Manager once daily,
immediately after the daily declaration of dividends, on each day during which
the New York Stock Exchange or New York banks are open for business. Such
determination is made as of the close of business on the New York Stock Exchange
(generally 4:00 P.M., New York time) or, on days when the New York Stock
Exchange is closed but New York banks are open, at 4:00 P.M., New York time. The
net asset value is computed pursuant to the 'penny rounding' method by dividing
the fair value of all securities held by the Fund plus any cash or other assets
(including interest accrued but not yet received) minus all liabilities by the
total number of shares outstanding at such time. The result of this computation
will be rounded to the nearest whole cent. It is anticipated that the net asset
value will remain constant at $1.00 per share.

13
<PAGE>

The securities of the Fund are valued at the most recent bid price or yield
equivalent as obtained from dealers that make markets in such securities. 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. Securities with a remaining maturity of 60 days or less are valued on an
amortized cost basis, i.e., by valuing an instrument at its cost and thereafter
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument.

TAXES

The Fund intends to continue to qualify for the special tax treatment
afforded regulated investment companies ('RICs') under the Internal Revenue Code
of 1986, as amended (the 'Code'). If it so qualifies, the Fund (but not its
shareholders) will not be subject to Federal income tax on the part of its net
ordinary income and net realized capital gains which it distributes to
shareholders. The Fund intends to distribute substantially all of such income.

received by the shareholder. Distributions in excess of the Fund's earnings and
profits will first reduce the adjusted tax basis of a holder's shares and, after
such adjusted tax basis is reduced to zero, will constitute capital gains to
such holder (assuming the shares are held as a capital asset).

Dividends are taxable to shareholders even though they are reinvested in
additional shares of the Fund. Not later than 60 days after the close of its
taxable year, the Fund will provide its shareholders with a written notice
designating the amounts of any ordinary income dividends or capital gain
dividends. Distributions by the Fund, whether from ordinary income or capital
gains, will not be eligible for the dividends received deduction allowed to
corporations under the Code. If the Fund pays a dividend in January which was
declared in the previous October, November or December to shareholders of record
on a specified date in one of such months, then such dividend will be treated
for tax purposes as being paid by the Fund and received by its shareholders on
December 31 of the year in which such dividend was declared.

If the value of assets held by the Fund declines, the Board of Directors
may authorize a reduction in the number of outstanding shares in shareholders'
accounts so as to preserve a net asset value of $1.00 per share. After such a
reduction, the basis of eliminated shares would be added to the basis of
shareholders' remaining Fund shares, and any shareholders disposing of shares at
that time may recognize a capital loss. Distributions, including distributions
reinvested in additional shares of the Fund, will nonetheless be fully taxable,
even if the number of shares in shareholders' accounts has been reduced as
described above.

Ordinary income dividends paid to shareholders who are nonresident aliens
or foreign entities will be subject to a 30% United States withholding tax under
existing provisions of the Code applicable to foreign individuals and entities
unless a reduced rate of withholding or a withholding exemption is provided
under applicable treaty law. Nonresident shareholders are urged to consult their
own tax advisers concerning the applicability of the United States withholding
tax.

14
<PAGE>

Under certain provisions of the Code, some shareholders may be subject to a
31% withholding tax on ordinary income dividends, capital gain dividends and
redemption payments ('backup withholding'). Generally, shareholders subject to
backup withholding will be those for whom no certified taxpayer identification
number is on file with the Fund or who, to the Fund's knowledge, have furnished
an incorrect number. When establishing an account, an investor must certify
under penalty of perjury that such number is correct and that such investor is
not otherwise subject to backup withholding.

A loss realized on a sale or exchange of shares of the Fund will be
disallowed if other Fund shares are acquired (whether through the automatic
reinvestment of dividends or otherwise) within a 61-day period beginning 30 days
before and ending 30 days after the date that the shares are disposed of. In
such a case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss.

The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
the Treasury regulations promulgated thereunder. The Code and the Treasury
regulations are subject to change by legislative, judicial or administrative
action either prospectively or retroactively.

Ordinary income and capital gain dividends may also be subject to state and
local taxes.

Certain states exempt from state income taxation dividends paid by RICs
which are derived from interest on U.S. Treasury obligations. State law varies
as to whether dividend income attributable to U.S. Treasury obligations is
exempt from state income tax.

Shareholders are urged to consult their tax advisers regarding specific
questions as to Federal, foreign, state or local taxes. Foreign investors should
consider applicable foreign taxes in their evaluation of an investment in the
Fund.

ORGANIZATION OF THE FUND

The Fund was organized on October 30, 1990 as a business trust under the
laws of the Commonwealth of Massachusetts.

The Fund is a no-load, diversified, open-end investment company. The
Declaration of Trust of the Fund permits the Trustees to issue an unlimited
number of full and fractional shares of a single class. Upon liquidation of the
Fund, shareholders of the Fund are entitled to share pro rata in the net assets
of the Fund available for distribution to shareholders. Shares are fully paid
and nonassessable by the Fund. Shareholders are entitled to one vote for each
full share held and fractional votes for fractional shares held and to vote in
the election of Trustees and on other matters submitted to the vote of
shareholders.

The Declaration of Trust of the Fund does not require that the Fund hold
annual meetings of shareholders. However, the Fund will be required to call
special meetings of shareholders in accordance with the requirements of the
Investment Company Act to seek approval of new management and advisory
arrangements, of a material increase in distribution fees or of a change in the
fundamental policies, objectives or restrictions of the Fund. The Fund also
would be required to hold a special shareholders' meeting to elect new Trustees
at such time as less than a majority of the Trustees holding office have been
elected by shareholders. The Fund's Declaration of Trust provides that a

shareholders' meeting may be called for any reason at the request of 10% of the
outstanding

15
<PAGE>
shares of the Fund or by a majority of the Trustees. Except as set forth above,
the Trustees shall continue to hold office and appoint successor Trustees.

SHAREHOLDER INQUIRIES

Shareholder inquiries may be addressed to the Fund at the address or
telephone number set forth on the cover page of this Prospectus.

SHAREHOLDER REPORTS

Only one copy of each shareholder report and certain shareholder
communications will be mailed to each identified shareholder regardless of the
number of accounts such shareholder has. If a shareholder wishes to receive
separate copies of each report and communication for all of the shareholder's
related accounts the shareholder should notify in writing:

Merrill Lynch Financial Data Services, Inc.
P.O. Box 45290
Jacksonville, FL 32232-5290

The notification should include the shareholder's name, address, tax
identification number and Merrill Lynch, Pierce, Fenner & Smith Incorporated
and/or mutual fund account numbers. If you have any questions regarding this,
please call your Merrill Lynch financial consultant or Merrill Lynch Financial
Data Services, Inc. at 800-221-7210.

------------------------

The Declaration of Trust establishing the Fund, a copy of which, together
with all amendments thereto (the 'Declaration'), is on file in the office of the
Secretary of the Commonwealth of Massachusetts, provides that the name 'Merrill
Lynch U.S. Treasury Money Fund' refers to the Trustees under the Declaration
collectively as Trustees, but not as individuals or personally; and except for
his or her own bad faith, willful misfeasance, gross negligence or reckless
disregard of his or her duties, no Trustee, shareholder, officer, employee or
agent of the Fund shall be held to any personal liability, nor shall resort be
had to their private property for the satisfaction of any obligation or claim or
otherwise in connection with the affairs of the Fund but the 'Trust Property'
(as defined in the Declaration) only shall be liable.

<PAGE>
MERRILL LYNCH U.S. TREASURY MONEY FUND PURCHASE APPLICATION
- --------------------------------------------------------------------------------

INSTRUCTIONS Send this completed form to:
MERRILL LYNCH FINANCIAL DATA SERVICES, INC., P.O. Box 45290, Jacksonville,
Florida 32232-5290 Note: This form may not be used for purchases through the
Merrill Lynch Blueprint(Service Mark) Program. You may request a Merrill Lynch
Blueprint(Service Mark) Program application form by calling toll free (800)
637-3766.

- --------------------------------------------------------------------------------

1. TO REGISTER SHARES THE ACCOUNT SHOULD BE REGISTERED AS FOLLOWS:

(Please print
except for / / / / / / / / / / / / / / / / / / / / / / / / /
signatures)
Print Applicant's Name. For clarity, please
skip a space between names.

/ / / / / / / / / /
Social Security No.
or Tax ID No.

/ / / / / / / / / / / / / / / / / / / / / / / / /
Print Joint Registrant's Name, if any. In case of joint
registration, a joint tenancy with right of survivorship will be
presumed, unless otherwise indicated.

- ------------------------------------------------------------------------------

- ------------------------------------------------------------------------------
Street Address City State Zip Code

- ------------------------------------------------------------------------------
Occupation Name and Address of Employer

---------------------------------

Amount of Investment $
- --------------------------------------------------------------------------------

Please make any check payable to Merrill Lynch Financial Data Services, Inc.
Home Phone No. (Include Area Code) Business Phone No.

- --------------------------------------------------------------------------------

2. CHECK REDEMPTION PRIVILEGE (SEE TERMS AND CONDITIONS IN THE PROSPECTUS)

<TABLE>
<S> <C>
/ / I hereby request and authorize Merrill Lynch Financial Data
Check Box Services, Inc. (the 'Transfer Agent') to honor checks or
(If desired) automatic clearing house ('ACH') debits drawn by me on my Merrill
Lynch U.S. Treasury Money Fund (the 'Fund') account subject to
acceptance by the Fund, with payment therefor to be made by
redeeming sufficient shares in my account without a signature
guarantee. The Transfer Agent and the Fund do hereby reserve all
their lawful rights for honoring checks or ACH debits drawn by me
and for effecting redemptions pursuant to the Check Redemption
Privilege. I understand that this election does not create a
checking or other bank account relationship between myself and
the Transfer Agent or the Fund and that the relationship between
myself and the Transfer Agent is that of shareholder-transfer
agent.
FOR JOINT ACCOUNT: CHECK HERE WHETHER EITHER OWNER / / IS
AUTHORIZED, OR ALL OWNERS / / ARE REQUIRED TO SIGN CHECKS.
</TABLE>

<PAGE>
- --------------------------------------------------------------------------------

3. FEDERAL FUNDS REDEMPTION (SEE TERMS AND CONDITIONS IN THE PROSPECTUS)

<TABLE>
<S> <C>
/ / The undersigned hereby authorizes and directs Merrill Lynch
Check Box Financial Data Services, Inc. (the 'Transfer Agent') to act on
(If desired) telephonic, telegraphic or other instructions (without signature
guarantee) from any person representing himself to be either the
investor or any authorized representative of the investor,
directing redemption of shares in an amount of $5,000 or more of
Merrill Lynch U.S. Treasury Money Fund (the 'Fund') held by the
Transfer Agent on behalf of the undersigned, and to transmit the
proceeds by wire only to the bank account designated below.
Any change in the bank account designated to receive redemption
proceeds shall require a signature guarantee. The investor
understands and agrees that the Fund and the Transfer Agent
reserve the right to refuse any instructions.
The Transfer Agent requires additional documentation from
corporations, partnerships, trustees and similar institutional
investors in addition to this authorization (see No. 9 below).
Absent its own negligence, and so long as reasonable procedures
to confirm the validity of telephoned instructions are employed,
neither the Fund nor Merrill Lynch Financial Data Services, Inc.
shall be liable for any redemption caused by unauthorized
instructions. Investors may effect notice of this type of
redemption by telephoning the Transfer Agent at the toll-free
number (800) 221-7210. Shares which are being repurchased through
securities dealers will not qualify for Federal Funds redemption.
</TABLE>

FILL OUT THE REST OF THIS SPACE ONLY IF THE ABOVE BOX IS CHECKED. IN ADDITION,
YOUR SIGNATURE(S) MUST BE GUARANTEED. YOUR BANK MUST BE A MEMBER OF THE FEDERAL
RESERVE OR HAVE A CORRESPONDENT BANKING RELATIONSHIP WITH A BANK THAT DOES
BELONG TO THE FEDERAL RESERVE.

IF YOUR BANK IS NOT A MEMBER OF THE
ENCLOSE A SPECIMEN COPY OF YOUR FEDERAL RESERVE:
PERSONAL CHECK (MARKED 'VOID') FOR THE
BANK ACCOUNT LISTED BELOW. --------------------------------------
IF YOUR BANK IS A MEMBER OF THE Correspondent Bank Name Routing Code
FEDERAL RESERVE:

- -------------------------------------- --------------------------------------
Your Bank Name Bank Routing Code Your Bank Name Bank Routing Code

- -------------------------------------- --------------------------------------
Your Account Name Account Number Your Account Name Your Account Number

- -------------------------------------- --------------------------------------
Address of Bank City State Zip Code Your Bank Address City State Zip Code

- --------------------------------------------------------------------------------

4. AUTOMATIC INVESTMENT PLAN PRIVILEGE (SEE TERMS AND CONDITIONS IN THE
STATEMENT OF ADDITIONAL INFORMATION)

/ / Check this box only if you wish to have an Authorization Form sent to you.

- --------------------------------------------------------------------------------

5. SYSTEMATIC WITHDRAWAL PLAN (SEE TERMS AND CONDITIONS IN THE STATEMENT OF
ADDITIONAL INFORMATION)

Minimum Requirements: $10,000 for monthly disbursement, $5,000 for quarterly, of
shares in Merrill Lynch U.S. Treasury Money Fund at cost or current offering
price. In addition, your signature(s) must be guaranteed. This option is
available only if you do not check No. 5.

The undersigned hereby authorizes and directs Merrill Lynch Financial Data
Services, Inc. on (check only one)

/ / the 24th of each month

/ / March 24, June 24, September 24 and December 24

/ / to redeem a sufficient number of shares in my account to generate
redemption proceeds of $ ____________; or

/ / to redeem _________% of the shares in my account on such date and pay
the redemption proceeds by check

payable to the order of (check only one)

/ / the registered owner as indicated in item 1 hereinabove.

/ / (other) _______________________________________________

Such checks or ACH debits shall be mailed to (check only one)

/ / the address indicated in item 1 hereinabove.

/ / the following name and address:

___________________________________________________________

6. ACCRUED MONTHLY PAYOUT PLAN (SEE TERMS AND CONDITIONS IN THE STATEMENT OF
ADDITIONAL INFORMATION)

<TABLE>

<S> <C>
/ /
Check Box The undersigned hereby authorizes and directs Merrill Lynch
(if desired) Financial Data Services, Inc. to redeem as of the last
Friday of each month all shares purchased during such month
through reinvestment of dividends and distributions and send
the proceeds to me.
</TABLE>

<PAGE>
- --------------------------------------------------------------------------------

7. OTHER INFORMATION

This application enables you to take advantage of any or all of the optional
services available to Merrill Lynch U.S. Treasury Money Fund shareholders and
will update any options in effect for your account.

If you select the Check Redemption Privilege, a supply of checks imprinted with
your name and shareholder account number will be sent to you in approximately 10
days. You should be certain that a sufficient number of shares are held by the
Transfer Agent for your account to cover the amount of any check drawn by you.
If insufficient shares are in the account, the check will be returned or the ACH
debit will be dishonored marked insufficient funds. Since the dollar value of
your account is constantly changing, the total value of your account cannot be
determined in advance and the account cannot be entirely redeemed by check or
ACH debit. If the Check Redemption Privilege is being requested for an account
in the name of a corporation or other institution, the following additional
documents must be submitted with this authorization.

CORPORATIONS--'Certification of Corporate Resolution,' indicating the names and
titles of officers authorized to write checks or to draw ACH debits, must be
signed by an officer other than one empowered to execute transactions, with his
signature guaranteed and the corporate seal affixed.

PARTNERSHIPS--'Certificate of Partnership,' naming the partners and the required
number that may act in accordance with the terms of the Partnership Agreement,
is to be executed by a general partner with his signature guaranteed.

TRUSTS--'Certification of Trustees,' naming the trustees and the required number
that may act in accordance with the terms of the Trust Agreement, must be
executed by a certifying trustee with his signature guaranteed and under the
corporate seal.

If you are adding or reinstating the Federal Funds Redemption option, the
signature(s) must be guaranteed in the space provided below. Your signature(s)
must be guaranteed by a commercial bank (not a savings bank) in New York City or
one having a New York City correspondent, or by a member firm of any national
securities exchange. (A Notary Public's seal does not constitute a signature
guarantee.)

- --------------------------------------------------------------------------------

8. SIGNATURES

Under penalty of perjury, I certify (1) that the number set forth above is my
correct Social Security Number or Taxpayer Identification Number and (2) that I
am not subject to backup withholding (as discussed under 'Additional
Information--Taxes') either because I have not been notified that I am subject
thereto as a result of a failure to report all interest or dividends, or the
Internal Revenue Service ('IRS') has notified me that I am no longer subject
thereto.

INSTRUCTIONS: You must strike out the language in (2) above if you have been
notified that you are subject to backup withholding due to underreporting and
you have not received a notice from the IRS that backup withholding has been
terminated. By your signature below, you authorize the furnishing of this
certification to other Merrill-Lynch-sponsored mutual funds.

By the execution of this Purchase Application, the investor represents and
warrants that the investor has full right, power and authority to make the
investment applied for pursuant to this Application, and the person or persons
signing on behalf of the investor represent and warrant that they are duly
authorized to sign this Application and to purchase or redeem shares of the Fund
on behalf of the investor.

The investor hereby affirms that he or she has received a current Fund
Prospectus and appoints Merrill Lynch Financial Data Services, Inc. as his or
her agent to receive dividends and distributions for their automatic
reinvestment in additional Fund shares.

- --------------------------- -------- --------------------------------------
Signature of Investor Date Signature of Joint Registrant, if any

</TABLE>

Signature(s) Guaranteed: (only for those electing No. 3 or No. 5)

<TABLE>
<S> <C>
NOTE: The Guarantor must be either a U.S.
commercial bank (not a savings bank) or a trust
company in New York City or one that is a
correspondent of a New York City commercial bank
or trust company, or a member firm of a national
securities exchange. (A Notary Public's seal
does not constitute a signature guarantee.)

By:
- ------------------------------
(Authorized Signatory)
</TABLE>

- --------------------------------------------------------------------------------

<PAGE>
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20
<PAGE>
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21
<PAGE>
[This page intentionally left blank]

<PAGE>

MANAGER
Merrill Lynch Asset Management
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Mailing Address:
P.O. Box 9011
Princeton, New Jersey 08543-9011

DISTRIBUTOR
Merrill Lynch Funds Distributor, Inc.
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Mailing Address:
P.O. Box 9081
Princeton, New Jersey 08543-9081

CUSTODIAN
The Bank of New York
90 Washington Street
12th Floor
New York, New York 10286

TRANSFER AGENT
Merrill Lynch Financial Data Services, Inc.
Administrative Offices:
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
Mailing Address:
P.O. Box 45290
Jacksonville, Florida 32232-5290

INDEPENDENT AUDITORS
Deloitte & Touche LLP
117 Campus Drive
Princeton, New Jersey 08540-6400

COUNSEL
Brown & Wood
One World Trade Center
New York, New York 10048-0557

<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFERS CONTAINED THEREIN, AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE FUND, THE MANAGER, OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY STATE IN WHICH SUCH OFFERING
MAY NOT LAWFULLY BE MADE.

------------------------

TABLE OF CONTENTS

PAGE
----
Fee Table..................... 2
Financial Highlights.......... 3
Yield Information............. 4
Investment Objectives and
Policies.................... 4
Management of the Fund........ 6
Trustees.................... 6
Management and Advisory
Arrangements............. 6
Transfer Agency Services.... 7
Purchase of Shares............ 7
Methods of Payment.......... 8
Distribution Plan........... 9
Redemption of Shares.......... 9
Methods of Redemption....... 10
Shareholder Services.......... 12
Portfolio Transactions........ 13
Additional Information........ 13
Dividends................... 13
Determination of Net Asset
Value.................... 13
Taxes....................... 14
Organization of the Fund.... 15
Shareholder Inquiries....... 16
Shareholder Reports......... 16
Purchase Application.......... 17

Code # 11624-0396

[LOGO] MERRILL LYNCH

[ARTWORK]

Merrill Lynch U.S. Treasury
Money Fund is organized
as a Massachusetts business
trust. It is not a bank nor
does it offer fiduciary or
trust services. Shares of the
Fund are not equivalent to
a bank account. A share-
holder's investment in the
Fund is not insured by any
Government agency.

PROSPECTUS

March 28, 1996
Distributor:
Merrill Lynch
Funds Distributor, Inc.

This prospectus should be
retained for future reference.

<PAGE>
STATEMENT OF ADDITIONAL INFORMATION

MERRILL LYNCH U.S. TREASURY MONEY FUND
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 o PHONE NO. (609) 282-2800

------------------------

This Statement of Additional Information of the Fund is not a prospectus
and should be read in conjunction with the prospectus of the Fund dated March
28, 1996 (the 'Prospectus'), which has been filed with the Securities and
Exchange Commission and can be obtained without charge by calling or writing to
the Fund at the above telephone number or address. This Statement of Additional
Information has been incorporated by reference into the Prospectus. Capitalized
terms used but not defined herein have the same meanings as in the Prospectus.

------------------------

MERRILL LYNCH ASSET MANAGEMENT--MANAGER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.--DISTRIBUTOR

------------------------

The date of this Statement of Additional Information is March 28, 1996.

<PAGE>
INVESTMENT OBJECTIVES AND POLICIES

The Fund is a no-load money market fund. Reference is made to 'Investment
Objectives and Policies' in the Prospectus of the Fund for a discussion of the
investment objectives and policies of the Fund.

The Fund has adopted the following restrictions and policies relating to
the investment of its assets and its activities, which are fundamental policies
and may not be changed without the approval of the holders of a majority of the
Fund's outstanding voting securities (which for this purpose means the lesser of
(i) 67% of the shares represented at a meeting at which more than 50% of the
outstanding shares are represented or (ii) more than 50% of the outstanding
shares). The Fund may not: (1) purchase any securities other than direct
obligations of the U.S. Treasury having maturities no more than 762 days (25
months); (2) act as an underwriter of securities issued by other persons; (3)
purchase any securities on margin, except for use of short-term credit necessary
for clearance of purchases and sales of portfolio securities; (4) make short
sales of securities or maintain a short position or write, purchase or sell
puts, calls, straddles, spreads or combinations thereof; (5) make loans to other
persons, provided that the Fund may purchase short-term marketable securities
which are direct obligations of the U.S. Treasury; (6) borrow amounts in excess
of 20% of its total assets, taken at market value (including the amount
borrowed), and then only from banks as a temporary measure for extraordinary or
emergency purposes [Usually only 'leveraged' investment companies may borrow in
excess of 5% of their assets; however, the Fund will not borrow to increase
income but only to meet redemption requests which might otherwise require
untimely dispositions of portfolio securities. The Fund will not purchase
securities while borrowings are outstanding. Interest paid on such borrowings
will reduce net income.]; and (7) mortgage, pledge, hypothecate or in any manner
transfer as security for indebtedness any securities owned or held by the Fund
except as may be necessary in connection with borrowings mentioned in (6) above,
and then such mortgaging, pledging or hypothecating may not exceed 10% of the
Fund's net assets, taken at market value.

MANAGEMENT OF THE FUND

TRUSTEES AND OFFICERS

The Trustees and executive officers of the Fund, their ages and their
principal occupations for at least the last five years are set forth below.
Unless otherwise noted, the address of each Trustee and executive officer is
Merrill Lynch Asset Management, P.O. Box 9011, Princeton, New Jersey 08543-9011.

ARTHUR ZEIKEL (63)--President and Trustee (1)(2)--President of Merrill
Lynch Asset Management, L.P. (the 'Manager' or 'MLAM', which term as used herein
includes its corporate predecessors) since 1977; President of Fund Asset
Management, L.P. ('FAM', which term as used herein includes its corporate
predecessors) since 1977; President and Director of Princeton Services, Inc.
('Princeton Services') since 1993; Executive Vice President of Merrill Lynch &
Co., Inc. ('ML & Co.') since 1990; Director of Merrill Lynch Funds Distributor,
Inc. (the 'Distributor').

DONALD CECIL (69)--Trustee (2)--1114 Avenue of the Americas, New York, New
York 10036. Special Limited Partner of Cumberland Partners (an investment
partnership) since 1982; Member of Institute of Chartered Financial Analysts;
Member and Chairman of Westchester County (N.Y.) Board of Transportation.

M. COLYER CRUM (63)--Trustee (2)--Soldiers Field Road, Boston,
Massachusetts 02163. James R. Williston Professor of Investment Management,
Harvard Business School, since 1971; Director of Cambridge Bancorp, Copley
Properties, Inc. and Sun Life Assurance Company of Canada.

EDWARD H. MEYER (69)--Trustee (2)--777 Third Avenue, New York, New York
10017. President of Grey Advertising, Inc. since 1968, Chief Executive Officer
since 1970 and Chairman of the Board of Directors since

2
<PAGE>
1972; Director of The May Department Stores Company, Bowne & Co. Inc. (financial
printers), Ethan Allen Interiors, Inc. and Harman International Industries, Inc.

JACK B. SUNDERLAND (67)--Trustee (2)--P.O. Box 7, West Cornwall,
Connecticut 06796. President and Director of American Independent Oil Company,
Inc. (an energy company) since 1987; Member of Council on Foreign Relations
since 1971.

J. THOMAS TOUCHTON (57)--Trustee (2)--Suite 3405, One Tampa City Center,
Tampa, Florida 33602. Managing Partner of The Witt-Touchton Company and its
predecessor The Witt Co. (a private investment partnership) since 1972; Trustee
Emeritus of Washington and Lee University; Director of TECO Energy, Inc. (an
electric utility holding company).

TERRY K. GLENN (55)--Executive Vice President (1)(2)--Executive Vice
President of the Manager and FAM since 1983; Executive Vice President and
Director of Princeton Services since 1993; President of the Distributor since
1986 and Director thereof since 1991; President of Princeton Administrators,
L.P. since 1988.

JOSEPH T. MONAGLE, JR. (47)--Senior Vice President (1)(2)--Senior Vice
President of the Manager and FAM since 1990; Vice President of the Manager from
1978 to 1990; Senior Vice President of Princeton Services since 1993.

JOHN NG (42)--Vice President (1)(2)--Vice President of the Manager since
1993.

DONALD C. BURKE (35)--Vice President (1)(2)--Vice President and Director of
Taxation of the Manager since 1990; employee of Deloitte & Touche LLP from 1982
to 1990.

GERALD M. RICHARD (46)--Treasurer (1)(2)--Senior Vice President and
Treasurer of the Manager and FAM since 1984; Senior Vice President and Treasurer
of Princeton Services since 1993; Vice President of the Distributor since 1981
and Treasurer since 1984.

MARK B. GOLDFUS (49)--Secretary (1)(2)--Vice President of the Manager and
FAM since 1985.

- ------------------
(1) Interested person, as defined in the Investment Company Act of 1940, as
amended (the 'Investment Company Act'), of the Fund.
(2) Such Trustee or officer is a director or officer of certain other investment
companies for which the Manager or FAM acts as investment adviser.

At February 29, 1996 the Trustees and officers of the Fund as a group (12
persons) owned an aggregate of less than 1% of the outstanding shares of
beneficial interest of the Fund. At such date, Mr. Zeikel and the other officers
of the Fund owned an aggregate of less than 1% of the outstanding common stock
of ML & Co.

3
<PAGE>
COMPENSATION OF TRUSTEES

Pursuant to the terms of its management agreement (the 'Management
Agreement') with the Fund, the Manager pays all compensation of officers and
employees of the Fund as well as the fees of all Trustees of the Fund who are
affiliated persons of ML & Co. or its subsidiaries. The Fund pays each
unaffiliated Trustee an annual fee of $4,000 plus a fee of $1,000 for each
meeting attended and pays all Trustees' actual out-of-pocket expenses relating
to attendance at meetings. Additionally, the Fund has established an Audit
Committee of the Board of Trustees of which all of the unaffiliated Trustees are
members. Each member of such committee receives an annual fee of $3,500 and the
chairman of such committee receives an annual fee of $1,500. The total Trustees'
fees and expenses aggregated $58,340 for the fiscal year ended November 30,
1995.

The following table sets forth for the fiscal year ended November 30, 1995,
compensation paid by the Fund to the non-interested Trustees and for the
calendar year ended December 31, 1995, the aggregate compensation paid by all
investment companies advised by MLAM and its affiliate, FAM ('MLAM/FAM Advised
Funds'), to the non-interested Trustees.

<TABLE>
<CAPTION>
TOTAL
COMPENSATION
PENSION OR FROM FUND AND
AGGREGATE RETIREMENT BENEFITS MLAM/FAM ADVISED
NAME OF COMPENSATION ACCRUED AS PART OF FUNDS PAID TO
TRUSTEE FROM FUND FUND EXPENSES TRUSTEES
- ------------------------- ------------ -------------------- ----------------
<S> <C> <C> <C>
Donald Cecil(1).......... $ 13,000 None $271,850
M. Colyer Crum(1)........ $ 11,500 None $126,600
Edward H. Meyer(1)....... $ 11,500 None $239,225
Jack B. Sunderland(1).... $ 11,500 None $134,600
J. Thomas Touchton(1).... $ 11,500 None $134,600
</TABLE>

- ------------------

<TABLE>
<S> <C>
(1) The Trustees serve on the boards of other MLAM/FAM Advised Funds as follows: Mr. Cecil (34 funds and
portfolios), Mr. Crum (17 funds and portfolios), Mr. Meyer (34 funds and portfolios), Mr. Sunderland (18 funds
and portfolios) and Mr. Touchton (18 funds and portfolios).
</TABLE>

MANAGEMENT AND ADVISORY ARRANGEMENTS

Reference is made to 'Management of the Fund--Management and Advisory
Arrangements' in the Prospectus for certain information concerning the
management arrangements of the Fund.

Subject to the direction of the Board of Trustees, the Manager is
responsible for the actual management of the Fund's portfolio and constantly
reviews the Fund's holdings in light of its own research analysis and that from
other relevant sources. The responsibility for making decisions to buy, sell or
hold a particular security rests with the Manager. The Manager performs certain

of the other administrative services and provides all of the office space,
facilities, equipment and necessary personnel for portfolio management of the
Fund.

The Manager has access to the expertise of its affiliate, Merrill Lynch
Government Securities, Inc. ('GSI'), which is a wholly-owned subsidiary of ML &
Co. In terms of dollar volume of trading, GSI is one of the largest dealers in
U.S. Government securities and U.S. Government agency securities, acting both as
a primary dealer and a secondary market trader. GSI is one of the reporting
dealers in U.S. Government securities who report their daily position and
activity to the Federal Reserve Bank of New York. In addition, the total
securities and economic research facilities of Merrill Lynch are available to
the Manager.

4
<PAGE>
Securities held by the Fund may also be held by, or be appropriate
investments for, other funds or clients (collectively referred to as 'clients')
for which the Manager, or its affiliate, FAM, acts as an investment adviser.
Because of different investment objectives or other factors, a particular
security may be bought for one or more clients when one or more clients are
selling the security. If purchases or sales of securities for the Fund or other
clients arise for consideration at or about the same time, transactions in such
securities will be made, insofar as feasible, for the respective clients in a
manner deemed equitable to all by the Manager or FAM. To the extent that
transactions on behalf of more than one client of the Manager or FAM during the
same period may increase the demand for securities being purchased or the supply
of securities being sold, there may be an adverse effect on price.

As compensation for its services to the Fund, the Manager presently
receives a fee from the Fund at the end of each month at the annual rate of
0.50% of the average daily net assets of the Fund. For the fiscal years ended
November 30, 1993, 1994 and 1995, the total management fees payable by the Fund
to the Manager aggregated $379,689, $337,407 and $305,869, respectively. For the
fiscal years ended November 30, 1993, 1994 and 1995, the Manager voluntarily
waived $327,310, $236,185 and $214,109 of its fee, respectively. This voluntary
waiver may be withdrawn by the Manager at any time and without prior notice.

The State of California imposes limitations on the expenses of the Fund.
This annual expense limitation applicable to the Fund requires that the Manager
reimburse the Fund in any amount necessary to prevent such operating expenses
(excluding interest, taxes, distribution fees, brokerage fees and commissions
and extraordinary charges such as litigation costs) of the Fund from exceeding
in any fiscal year 2.5% of the Fund's first $30 million of average net assets,
2.0% of the next $70 million of average net assets and 1.5% of the remaining
average net assets. No fee payment will be made to the Manager during any year
which will cause such expenses to exceed the pro rata expense limitation at the
time of such payment. At the date of this Statement of Additional Information,
the Manager has not been required to make any reimbursement to the Fund pursuant

to limitations on operating expenses.

The Management Agreement obligates the Manager to provide investment
advisory services, to furnish administrative services, office space and
facilities for management of the affairs of the Fund, to pay all compensation of
and furnish office space for officers and employees of the Fund, as well as the
fees of all Trustees of the Fund who are affiliated persons of ML & Co. or any
of its subsidiaries. Except for certain expenses incurred by the Distributor
(see 'Purchase and Redemption of Shares'), the Fund pays all other expenses
incurred in its operations, including, among other things, taxes, expenses for
legal and auditing services, costs of printing proxies, reports, prospectuses
and statements of additional information sent to current shareholders, charges
of the Custodian and the Transfer Agent, expenses of redemption of shares,
Securities and Exchange Commission fees, expenses of registering the shares
under Federal and state securities laws, fees and expenses of unaffiliated
Trustees, accounting and pricing costs (including the daily calculation of net
asset value), insurance, interest, brokerage costs, litigation and other
extraordinary or non-recurring expenses and other expenses properly payable by
the Fund. Accounting services are provided by the Manager and the Fund
reimburses the Manager for its costs in connection with such services provided
to the Fund. For the fiscal year ended November 30, 1995, the Fund paid $38,315
to the Manager in connection with accounting services.

For information as to the distribution fee to be paid by the Fund to
Merrill Lynch pursuant to the Distribution Agreement, see 'Purchase and
Redemption of Shares'.

The Manager is a limited partnership, the partners of which are ML & Co.
and Princeton Services. ML & Co. and Princeton Services are 'controlling
persons' of the Manager (as defined in the Investment

5
<PAGE>

Company Act of 1940, as amended (the 'Investment Company Act')) because of their
ownership of its voting securities or their power to exercise a controlling
influence over its management or policies.

Duration and Termination. Unless earlier terminated as described below,
the Management Agreement will continue in effect from year to year if approved
annually (a) by the Trustees of the Fund or by a majority of the outstanding
voting shares of the Fund and (b) by a majority of the Trustees who are not
parties to such contract or interested persons (as defined in the Investment
Company Act) of any such party. Such contract is not assignable and may be
terminated without penalty on 60 days' written notice at the option of either
party thereto or by the vote of the shareholders of the Fund.

PURCHASE OF SHARES

Reference is made to 'Purchase of Shares' in the Prospectus of the Fund for
certain information as to the purchase of Fund shares.

The Fund is offering its shares without a sales charge at a public offering
price equal to the net asset value next determined after a purchase order
becomes effective. It is anticipated that the net asset value will remain
constant at $1.00 per share, although this cannot be assured.

The Distributor acts as the distributor in the continuous offering of the
Fund's shares. Shares may be purchased directly from the Distributor or from
other securities dealers, including Merrill Lynch, with whom the Distributor has
entered into a selected dealer agreement. Securities dealers may charge
investors a fee in connection with such transactions. Merrill Lynch has informed
the Fund that it does not charge such a fee.

The Fund's distribution agreement with the Distributor is renewable
annually and may be terminated on 60 days' written notice by either party. Under
such agreement, after the prospectuses, statements of additional information and
periodic reports have been prepared and set in type, the Distributor will pay
for the printing and distribution of copies thereof used in connection with the
offering to dealers and investors. The Distributor also will pay for other
supplementary sales literature.

It is the Fund's policy to be as fully invested as reasonably practicable
at all times to maximize the yield on the Fund's portfolio. The money markets in
which the Fund will purchase and sell portfolio securities normally require
immediate settlement of transactions in Federal funds. Federal funds are a
commercial bank's deposits in a Federal Reserve Bank and can be transferred from
one member bank's account to that of another member bank on the same day and
thus are considered to be immediately available funds. Orders for the purchase
of Fund shares shall become effective on the day Federal funds become available
to the Fund and the shares being purchased will be issued at the net asset value
per share next determined. If Federal funds are available to the Fund prior to
4:00 P.M., New York time, on any business day, the order will be effective on
that day. Shares purchased will begin accruing dividends on the day following
the date of purchase.

DISTRIBUTION PLAN

The Fund has adopted a Shareholder Servicing Plan and Agreement (the
'Plan') in compliance with Rule 12b-1 under the Investment Company Act pursuant
to which the Fund is authorized to pay Merrill Lynch a fee at the end of each
month at the annual rate of 0.125% of average daily net assets of Fund accounts
maintained through Merrill Lynch. The Plan reimburses Merrill Lynch only for
actual expenses incurred in the fiscal year in which the fees are paid. The fee
is principally to provide compensation to Merrill Lynch financial consultants
and other Merrill Lynch personnel for providing direct personal services to
shareholders of the Fund. The distribution fee is not compensation for the
administrative and operational services rendered to shareholders by Merrill
Lynch

<PAGE>
which are covered under the Management Agreement (see 'Management of the
Fund--Management and Advisory Arrangements') between the Fund and the Manager.

The Trustees believe that the Fund's expenditures under the Plan benefit
the Fund and its shareholders by providing better shareholder services and by
facilitating the sale and distribution of Fund shares. Under the Plan, Merrill
Lynch, in its sole discretion, may expend out of the fee an amount not exceeding
0.01% of such average daily net asset value as reimbursement for expenditures
incurred in advertising activities promoting the sale, marketing and
distribution of the shares of the Fund. For the fiscal year ended November 30,
1995, $73,258 was paid to Merrill Lynch pursuant to the Plan (based on average
net assets subject to the Plan of $61.2 million). At February 29, 1996, the net
assets of the Fund subject to the Plan aggregated approximately $59.5 million.
At this asset level, the annual fee payable to Merrill Lynch pursuant to the
Plan would aggregate $74,350. All of such amounts were allocated to Merrill
Lynch financial consultants, other Merrill Lynch personnel and related
administrative costs.

Among other things, the Plan provides that Merrill Lynch shall provide and
the Trustees of the Fund shall review quarterly reports of the distribution
expenditures made by Merrill Lynch pursuant to the Plan. In their consideration
of the Plan, the Trustees must consider all factors they deem relevant,
including information regarding the benefits of the Plan to the Fund and its
shareholders. The Plan further provides that, so long as the Plan remains in
effect, the selection and nomination of Trustees of the Fund who are not
'interested persons' of the Fund as defined in the Investment Company Act
('Independent Trustees') shall be committed to the discretion of the Independent
Trustees then in office. The Plan can be terminated at any time, without
penalty, by the vote of a majority of the Independent Trustees or by the vote of
the holders of a majority of the outstanding voting securities of the Fund.
Finally, the Plan cannot be amended to increase materially the amount to be
spent by the Fund thereunder without shareholder approval, and all material
amendments are required to be approved by vote of the Trustees of the Fund,
including a majority of the Independent Trustees, cast in person at a meeting
called for that purpose.

REDEMPTION OF SHARES

Reference is made to 'Redemption of Shares' in the Prospectus for certain
information as to the repurchase and redemption of Fund shares.

The right to receive payment with respect to any redemption of Fund shares
may be suspended by the Fund for a period of up to seven days. Suspensions of
more than seven days may not be made except (1) for any period (a) during which
the New York Stock Exchange is closed other than customary weekend and holiday
closings or (b) during which trading on the New York Stock Exchange is
restricted; (2) for any period during which an emergency exists as a result of
which (a) disposal by the Fund of portfolio securities is not reasonably
practicable or (b) it is not reasonably practicable for the Fund fairly to
determine the value of its net assets; or (3) for such other periods as the
Securities and Exchange Commission may by order permit for the protection of

security holders of the Fund. The Commission shall by rules and regulations
determine the conditions under which (i) trading shall be deemed to be
restricted and (ii) an emergency shall be deemed to exist within the meaning of
clause (2) above.

The total value of the shareholder's investment in the Fund at the time of
redemption may be more or less than his or her cost, depending on the market
value of the securities held by the Fund at such time and income earned.

<PAGE>
PURCHASE AND REDEMPTION OF SHARES
THROUGH MERRILL LYNCH RETIREMENT PLANS

Merrill Lynch offers four types of self-directed retirement plans for which
it acts as passive custodian (the 'Retirement Plans'). These plans are an
individual retirement account ('IRA'), The Merrill Lynch Tax-Deferred
Basic(Trademark) Retirement Plan, designed for sole proprietors, partnerships
and small corporations (the 'Basic Plan'), a simplified employee pension plan
('SEP') and a special IRA available through payroll deductions to individuals
through their employers, labor unions and other employee associations that have
chosen to make such IRAs available on a voluntary basis through the Merrill
Lynch Blueprint(Service Mark) Program. Information concerning the establishment
and maintenance of Retirement Plans and investments by Retirement Plan accounts
is contained in the Retirement Plan documents available from Merrill Lynch.

PURCHASE BY RETIREMENT PLANS

Special purchase procedures apply in the case of the Retirement Plans. The
minimum initial purchase for participants in Retirement Plans is $100, and the
minimum subsequent purchase is $1. In addition, participants in the Retirement
Plans may elect to have cash balances in their Retirement Plan account
automatically invested in the Fund.

Cash balances of participants who elect to have such funds automatically
invested in the Fund will be invested as follows. Cash balances arising from the
sale of securities held in the Retirement Plan account which do not settle on
the day of the transaction (such as most common and preferred stock
transactions) become available to the Fund and will be invested in shares of the
Fund on the business day following the day that proceeds with respect thereto
are received in the Retirement Plan account. Proceeds giving rise to cash
balances from the sale of securities held in the Retirement Plan account
settling on a same day basis and from principal repayments on debt securities
held in the account become available to the Fund and will be invested in shares
of the Fund on the next business day following receipt. Cash balances arising
from dividends or interest payments on securities held in the Retirement Plan
account or from a contribution to the Retirement Plan are invested in shares of
the Fund on the business day following the date the payment is received in the
Retirement Plan account. Cash balances of less than $1.00 will not be invested
and no return will be earned.

A participant in the IRA, Basic or SEP Retirement Plans who has not elected
to have cash balances automatically invested in shares of the Fund may enter a
purchase order through his or her Merrill Lynch financial consultant.

REDEMPTIONS BY RETIREMENT PLANS

Distributions from Retirement Plans to a participant prior to the time the
participant reaches age 59 1/2 may subject the participant to penalty taxes.
There are, however, no adverse tax consequences resulting from redemptions of
shares of the Fund where the redemption proceeds remain in the Retirement Plan
account or are otherwise invested therein.

The Fund has instituted an automatic redemption procedure for participants
in the Retirement Plans who have elected to have cash balances in their accounts
automatically invested in shares of the Fund. In the case of such participants,
unless directed otherwise, Merrill Lynch will redeem a sufficient number of
shares of the Fund

8
<PAGE>

to purchase other securities (such as common stocks) that the participant has
selected for investment in his or her Retirement Plan account.

Any shareholder may redeem shares of the Fund by submitting a written
notice of redemption to Merrill Lynch. Participants in IRA, Basic and SEP
Retirement Plans should contact their Merrill Lynch financial consultant to
effect such redemptions. Participants in the IRA program through the Merrill
Lynch Blueprint(Service Mark) Program should contact Merrill Lynch at the
toll-free number furnished to them to effect such redemptions. Redemption
requests should not be sent to the Fund. If inadvertently sent to the Fund, they
will be forwarded to Merrill Lynch. The notice must bear the signature of the
person in whose name the Retirement Plan is maintained, signed exactly as his or
her name appears on his or her Retirement Plan adoption agreement.

CONFIRMATIONS

All purchases and redemptions of Fund shares and dividend reinvestments
will be confirmed to participants in the IRA, Basic and SEP Retirement Plans
(rounded to the nearest share) in the statement which is sent quarterly to all
participants in IRA Retirement Plans and monthly to all participants in Basic
and SEP Retirement Plans.

Participants in the IRA program through the Merrill Lynch Blueprint(Service
Mark) Program will receive quarterly statements reflecting all purchases,
redemptions and dividend reinvestments of Fund shares, and, at least monthly,
will receive an individual confirmation with respect to each redemption of Fund
shares and each purchase of such shares other than purchases which are made
automatically through payroll deductions.

PORTFOLIO TRANSACTIONS

The Fund has no obligation to deal with any dealer or group of dealers in
the execution of transactions in portfolio securities. Subject to policy
established by the Board of Trustees of the Fund, the Manager is primarily
responsible for the Fund's portfolio decisions and the placing of the Fund's
portfolio transactions. In placing orders, it is the policy of the Fund to
obtain the best net results taking into account such factors as price (including
the applicable dealer spread) of the securities offered, the size, type and
difficulty of transaction involved, the firm's general execution and operational
facilities and the firm's risk in positioning the securities involved. While the
Manager generally seeks reasonably competitive spreads or commissions, the Fund

will not necessarily be paying the lowest spread or commission available. The
Fund's policy of investing in securities with short maturities will result in
high portfolio turnover.

The securities in which the Fund invests are traded in the over-the-counter
market. Where possible, the Fund will deal directly with the dealers who make a
market in the securities involved except in those circumstances where better
prices and execution are available elsewhere. Such dealers usually are acting as
principal for their own accounts. On occasion, securities may be purchased
directly from the U.S. Treasury. The Treasury securities in which the Fund
invests are generally traded on a net basis and do not normally involve either
brokerage commissions or transfer taxes. The cost of executing portfolio
securities transactions of the Fund primarily will consist of dealer spreads.
Under the Investment Company Act, persons affiliated with the Fund are
prohibited from dealing with the Fund as a principal in the purchase and sale of
securities unless an exemptive order allowing such transactions is obtained from
the Securities and Exchange Commission. Since over-the-counter transactions are
usually principal transactions, affiliated persons of the Fund, including GSI
and Merrill Lynch,

9
<PAGE>

may not serve as the Fund's dealer in connection with such transactions, except
pursuant to the exemptive order described below. However, an affiliated person
of the Fund may serve as its broker in over-the-counter transactions conducted
on an agency basis.

The Securities and Exchange Commission has issued an exemptive order
permitting the Fund to conduct principal transactions with GSI in U.S.
Government securities. This order contains a number of conditions, including
conditions designed to insure that the price to the Fund from GSI is equal to or
better than that available from other sources. GSI has informed the Fund that it
will in no way, at any time, attempt to influence or control the activities of
the Fund or the Manager in placing such principal transactions. The exemptive
order allows GSI or its subsidiary, Merrill Lynch Money Markets, Inc., to
receive a dealer spread on any transaction with the Fund no greater than its
customary dealer spread from transactions of the type involved. Generally such
spreads do not exceed 0.25% of the principal amount of the securities involved.
During the fiscal year ended November 30, 1994, the Fund engaged in four such
transactions aggregating approximately $32.7 million. During the fiscal year
ended November 30, 1995 the Fund engaged in no such transactions.

The Trustees of the Fund have considered the possibilities of recapturing
for the benefit of the Fund expenses of possible portfolio transactions, such as
dealer spreads, by conducting such portfolio transactions through affiliated
entities, including GSI and Merrill Lynch. For example, dealer spreads received
by GSI or its subsidiary on transactions conducted pursuant to the permissive
order described above could be offset against the management fee payable by the
Fund to the Manager. After considering all factors deemed relevant, the Trustees

made a determination not to seek such recapture. The Trustees will reconsider
this matter from time to time. The Manager has arranged for the Fund's custodian
to receive any tender offer solicitation fees on behalf of the Fund payable with
respect to portfolio securities of the Fund.

The Fund does not expect to use one particular dealer, but, subject to
obtaining the best price and execution, dealers who provide supplemental
investment research (such as economic data and market forecasts) to the Manager
may receive orders for transactions by the Fund. Information so received will be
in addition to and not in lieu of the services required to be performed by the
Manager under the Management Agreement, and the expenses of the Manager will not
necessarily be reduced as a result of the receipt of such supplemental
information.

DETERMINATION OF NET ASSET VALUE

The net asset value of the Fund is determined by the Manager once daily,
immediately after the daily declaration of dividends, on each day during which
the New York Stock Exchange or New York banks are open for business. Such
determination is made as of the close of business on the New York Stock Exchange
(generally 4:00 P.M., New York time) or, on days when the New York Stock
Exchange is closed but New York banks are open, at 4:00 P.M., New York time. As
a result of this procedure, the net asset value is determined each day except
for days on which both the New York Stock Exchange and New York banks are
closed. Both the New York Stock Exchange and New York banks are closed for New
Year's Day, Presidents' Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. The net asset value per share is computed
under the 'penny rounding' method by adding the value of all securities and
other assets in the portfolio, deducting the portfolio's liabilities, dividing
by the number of shares outstanding and rounding the result to the nearest
whole cent.

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<PAGE>

The Fund values its portfolio securities with remaining maturities of 60
days or less on an amortized cost basis and values its securities with remaining
maturities of greater than 60 days for which market quotations are readily
available at market value. Other securities held by the Fund are valued at their
fair value as determined in good faith by or under the direction of the Board of
Trustees.

In accordance with the Securities and Exchange Commission rule applicable
to the valuation of its portfolio securities, the Fund will maintain a
dollar-weighted average portfolio maturity of 90 days or less and will purchase
instruments having remaining maturities of not more than 397 days (13 months),
with the exception of U.S. Government securities which may have remaining
maturities of up to 762 days (25 months). The Fund will invest only in
securities determined by the Trustees to be of high quality with minimal
credit risks. In addition, the Trustees have established procedures
designed to stabilize, to the extent reasonably possible, the Fund's price
per share as computed for the purpose of sales and redemptions at $1.00.

Deviations of more than an insignificant amount between the net asset value
calculated using market quotations and that calculated on a 'penny rounded'
basis will be reported to the Trustees by the Manager. In the event the Trustees
determine that a deviation exists which may result in material dilution or other
unfair results to investors or existing shareholders, the Fund will take such
corrective action as it regards as necessary and appropriate, including the
reduction of the number of outstanding shares of the Fund by having each
shareholder proportionately contribute shares to the Fund's capital; the sale of
portfolio instruments prior to maturity to realize capital gains or losses or to
shorten average portfolio maturity; withholding dividends; or establishing a net
asset value per share solely by using available market quotations. If the number
of outstanding shares is reduced in order to maintain a constant penny-rounded
net asset value of $1.00 per share, the shareholders will contribute
proportionately to the Fund's capital. Each shareholder will be deemed to have
agreed to such contribution by such shareholder's investment in the Fund.

Since the net income of the Fund (including realized gains and losses on
the portfolio securities) is determined and declared as a dividend immediately
prior to each time the net asset value of the Fund is determined, the net asset
value per share of the Fund normally remains at $1.00 per share immediately
after each such dividend declaration. Any increase in the value of a
shareholder's investment in the Fund, representing the reinvestment of dividend
income, is reflected by an increase in the number of shares of the Fund in the
account and any decrease in the value of a shareholder's investment may be
reflected by a decrease in the number of shares in the account. See 'Taxes'.

YIELD INFORMATION

The Fund normally computes its annualized yield by determining the net
income for a seven-day base period for a hypothetical pre-existing account
having a balance of one share at the beginning of the base period, dividing the
net income by the net asset value of the account at the beginning of the base
period to obtain the base period return, multiplying the result by 365 and then
dividing by seven. Under this calculation, the yield on the Fund shares reflects
realized gains and losses on portfolio securities. In accordance with
regulations adopted by the Securities and Exchange Commission, the Fund is
required to disclose its annualized yield for certain seven-day periods in a
standardized manner which does not take into consideration any realized or
unrealized gains or losses on portfolio securities. The Securities and Exchange
Commission also permits the calculation of a standardized effective or
compounded yield. This is computed by compounding the unannualized base period
return which is done by adding one to the base period return, raising the sum
to a power equal to 365 divided by seven and

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<PAGE>
subtracting one from the result. This compounded yield calculation also
reflects realized gains or losses on portfolio securities.

The yield on the Fund's shares normally will fluctuate on a daily basis.
Therefore, the yield for any given past period is not an indication or
representation by the Fund of future yields or rates of return on its shares.

The yield is affected by such factors as changes in interest rates on Treasury
securities, average portfolio maturity, the types and quality of portfolio
securities held and operating expenses. The yield on Fund shares for various
reasons may not be comparable to the yield on shares of other money market funds
or other investments.

SHAREHOLDER SERVICES

The Fund offers a number of shareholder services described below designed
to facilitate investment in its shares. Full details as to each of such services
and copies of the various plans described below can be obtained from the Fund,
the Distributor or Merrill Lynch.

INVESTMENT ACCOUNT

Every shareholder whose account is maintained at the Transfer Agent has an
Investment Account and will receive from the Transfer Agent a monthly report
showing the activity in his or her account for the month. A shareholder may make
additions to his or her Investment Account at any time by purchasing shares at
the applicable public offering price either through his or her securities
dealer, by wire or by mail directly to the Transfer Agent, acting as agent for
his or her dealer. A shareholder may ascertain the number of shares in his or
her Investment Account by telephoning the Transfer Agent at (800) 221-7210
toll-free. The Transfer Agent will furnish this information only after the
shareholder has specified the name, address, account number and social security
number of the registered owner or owners.

In the interest of economy and convenience and because of the operating
procedures of the Fund, certificates representing the Fund's shares will not be
issued physically. Shares are maintained by the Fund on its register maintained
by the Transfer Agent, and the holders thereof will have the same rights and
ownership with respect to such shares as if certificates had been issued.

AUTOMATIC INVESTMENT PLAN

The Fund offers an Automatic Investment Plan in connection with accounts
maintained at the Transfer Agent whereby the Transfer Agent is authorized
through preauthorized checks of $50 or more to charge the regular bank account
of the shareholder on a regular basis to provide systematic additions to the
Investment Account of such shareholder. See the Purchase Application in the
Prospectus. A shareholder's Automatic Investment Plan may be terminated at any
time without charge or penalty by the shareholder, the Fund, the Transfer Agent
or the Distributor.

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<PAGE>
ACCRUED MONTHLY PAYOUT PLAN

The dividends of the Fund are reinvested automatically in additional
shares. Shareholders with accounts maintained at the Transfer Agent desiring
cash payments may enroll in the Accrued Monthly Payout Plan, under which shares

equal in number to shares credited through the automatic reinvestment of
dividends and distributions during each month are redeemed at net asset value on
the last Friday of such month in order to meet the monthly distribution.
Investors may open an Accrued Monthly Payout Plan by completing the appropriate
portion of the Purchase Application in the Prospectus. A shareholder's Accrued
Monthly Payout Plan may be terminated at any time without charge or penalty by
the shareholder, the Fund, the Transfer Agent or the Distributor.

SYSTEMATIC WITHDRAWAL PLANS

A shareholder may elect to make systematic withdrawals from an Investment
Account on either a monthly or quarterly basis as provided below. Quarterly
withdrawals are available for shareholders who have acquired shares of the Fund
having a value, based on cost or the current offering price of $5,000 or more,
and monthly withdrawals for shareholders with shares with such a value of
$10,000 or more. The quarterly periods end on the 24th day of March, June,
September and December. See the Purchase Application in the Prospectus.

At the time of each withdrawal payment, sufficient shares are redeemed from
those on deposit in the shareholder's account to provide the withdrawal payment
specified by the shareholder. The shareholder may specify either a dollar amount
or a percentage of the value of his or her shares. Redemptions will be made at
net asset value as determined at the close of business on the New York Stock
Exchange on the 24th day of each month or the 24th day of the last month of each
quarter, whichever is applicable. A shareholder's Systematic Withdrawal Plan may
be terminated at any time, without charge or penalty, by the shareholder, the
Fund, the Transfer Agent or the Distributor. A shareholder may not elect to make
systematic withdrawals while he or she is enrolled in the Accrued Monthly Payout
Plan.

Withdrawal payments should not be considered as dividends, yield or income.
Withdrawals are sales of shares and may result in taxable gain or loss. If
periodic withdrawals continuously exceed reinvested dividends, the shareholder's
original investment will be reduced correspondingly. Shareholders are cautioned
not to designate withdrawal programs that result in an undue reduction of
principal. There are no minimums on amounts that may be systematically
withdrawn. Periodic investments may not be made into an Investment Account in
which the shareholder has elected to make systematic withdrawals.

RETIREMENT PLANS

Self-directed individual retirement accounts and other retirement plans are
available from Merrill Lynch. Under these plans, investments may be made in the
Fund and certain of the other mutual funds sponsored by Merrill Lynch as well as
in other securities. Merrill Lynch charges an initial establishment fee and an
annual custodial fee for each account. Information with respect to these plans
is available upon request from Merrill Lynch. In addition, eligible shareholders
of the Fund may participate in a variety of qualified employee benefit plans
which are available from the Distributor. Participants in these plans may invest
in the Fund and in certain other mutual funds sponsored by Merrill Lynch.
Information with respect to these plans is available upon request

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<PAGE>
from the Distributor. See 'Purchase of Shares' in the Prospectus and 'Purchase
and Redemption of Shares through Merrill Lynch Retirement Plans' herein.

Capital gains and income received in each of the plans referred to above
are exempt from Federal taxation until distributed from the plans. Investors
considering participation in any such plan should review specific tax laws
relating thereto and should consult their attorneys or tax advisers with respect
to the establishment and maintenance of any such plan.

EXCHANGE PRIVILEGE

Shareholders of the Fund who have held all or part of their shares for at
least 15 days may exchange their shares of the Fund for Class D shares of mutual
funds advised by the Manager or FAM described below (collectively referred to as
the 'MLAM-advised mutual funds') on the basis described below. Shares with a net
asset value of at least $250 are required to qualify for the exchange privilege.
It is contemplated that the exchange privilege may be applicable to other new
mutual funds whose shares may be distributed by the Distributor. The exchange
privilege available to participants in the Merrill Lynch Blueprint(Service Mark)
Program may be different from that available to other investors.

Alternatively, shareholders may exchange shares of the Fund for Class A
shares of one of the MLAM-advised mutual funds if the shareholder holds any
Class A shares of that fund in his or her account in which the exchange is made
at the time of the exchange or is otherwise an eligible Class A investor. An
eligible Class A investor includes the following: certain employer sponsored
retirement or savings plans, including eligible 401(k) plans, provided such
plans meet the required minimum number of eligible employees or required amount
of assets advised by MLAM or any of its affiliates; corporate warranty insurance
reserve fund programs provided that the program has $3 million or more initially
invested in MLAM-advised mutual funds; participants in certain investment
programs including TMA(Service Mark) Managed Trusts to which Merrill Lynch Trust
Company provides discretionary trustee services and certain purchases made in
connection with the Merrill Lynch Mutual Fund Adviser program; and ML & Co. and
its subsidiaries and their directors and employees and members of the Boards of
MLAM-advised investment companies, including the Fund.

Shareholders of the Fund also may exchange shares of the Fund into shares
of Class A Share Money Market Funds, as listed below.

Under the exchange privilege, each of the funds offers to exchange its
shares ('new shares') for shares ('outstanding shares') of any of the other
funds, on the basis of relative net asset value per share, plus an amount equal
to the difference, if any, between the sales charge previously paid on the
outstanding shares and the sales charge payable at the time of the exchange on
the new shares. At the present time, the shares of each of the funds are sold
with varying sales charges. With respect to outstanding shares as to which
previous exchanges have taken place, the 'sales charge previously paid' shall
include the aggregate of the charges paid with respect to such shares in the
initial purchase and any subsequent exchange. Shares issued pursuant to dividend

reinvestment are sold on a no-load basis in each of the funds. For purposes of
the exchange privilege, dividend reinvestment shares shall be deemed to have
been sold with a sales charge equal to the sales charge previously paid on the
shares on which the dividend was paid. Based on this formula, an exchange of
shares of the Fund, which are sold on a no-load basis, for shares of the other
funds, which are sold with a sales charge, generally will require the payment of
a sales charge.

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<PAGE>
The investment objectives of the other funds into which exchanges can be
made are as follows:

Funds Issuing Class A, Class B, Class C and Class D Shares:

<TABLE>
<S> <C>
MERRILL LYNCH ADJUSTABLE RATE
SECURITIES FUND, INC................ High current income, consistent with a
policy of limiting the degree of
fluctuation in net asset value by
investing primarily in a portfolio
of adjustable rate securities
consisting principally of mortgage-
backed and asset-backed securities.

MERRILL LYNCH AMERICAS INCOME FUND,
INC................................. A high level of current income,
consistent with prudent investment
risk, by investing primarily in debt
securities denominated in a currency
of a country located in the Western
Hemisphere (i.e., North and South
America and the surrounding waters).

MERRILL LYNCH ARIZONA LIMITED MATURITY
MUNICIPAL BOND FUND................. A portfolio of Merrill Lynch
Multi-State Limited Maturity Municipal
Series Trust, a series fund, whose
objective is to provide as high a
level of income exempt from Federal
and Arizona income taxes as is
consistent with prudent investment
management through investment in a
portfolio primarily of
intermediate-term investment grade
Arizona Municipal Bonds.

MERRILL LYNCH ARIZONA MUNICIPAL
BOND FUND........................... A portfolio of Merrill Lynch
Multi-State Municipal Series Trust, a
series fund, whose objective is to
provide as high a level of income
exempt from Federal and Arizona

income taxes as is consistent with
prudent investment management.

MERRILL LYNCH ARKANSAS MUNICIPAL
BOND FUND........................... A portfolio of Merrill Lynch
Multi-State Municipal Series Trust, a
series fund, whose objective is to
provide as high a level of income
exempt from Federal and Arkansas
income taxes as is consistent with
prudent investment management.
</TABLE>

15
<PAGE>

<TABLE>
<S> <C>
MERRILL LYNCH ASSET GROWTH FUND,
INC................................. High total investment return,
consistent with prudent risk, from
investment in United States and
foreign equity, debt and money
market securities the combination of
which will be varied both with
respect to types of securities and
markets in response to changing
market and economic trends.

MERRILL LYNCH ASSET INCOME FUND,
INC................................. A high level of current income through
investment primarily in United States
fixed income securities.

MERRILL LYNCH BASIC VALUE FUND,
INC................................. Capital appreciation and, secondarily,
income through investment in
securities, primarily equities, that
are undervalued and therefore
represent basic investment value.

MERRILL LYNCH CALIFORNIA INSURED
MUNICIPAL BOND FUND................. A portfolio of Merrill Lynch
California Municipal Series Trust, a
series fund, whose objective is to
provide as high a level of income
exempt from Federal and California
income taxes as is consistent with
prudent investment management
Merrill Lynch California Insured
through investment in a portfolio
consisting primarily of insured
California Municipal Bonds.

MERRILL LYNCH CALIFORNIA LIMITED
MATURITY MUNICIPAL BOND FUND........ A portfolio of Merrill Lynch
Multi-State Limited Maturity Municipal
Series Trust, a series fund, whose
objective is to provide as high a
level of income exempt from Federal
and California income taxes as is
consistent with prudent investment
management through investment in a
Merrill Lynch California Limited
portfolio primarily of
intermediate-term investment grade
California Municipal Bonds.

MERRILL LYNCH CALIFORNIA MUNICIPAL
BOND FUND........................... A portfolio of Merrill Lynch
California Municipal Series Trust, a
series fund, whose objective is to
provide as high a level of income
exempt from Federal and California
income taxes as is consistent with
prudent investment management.
</TABLE>

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<PAGE>
<TABLE>
<S> <C>
MERRILL LYNCH CAPITAL FUND, INC....... The highest total investment return
consistent with prudent risk through a
fully managed investment policy
utilizing equity, debt and
convertible securities.

MERRILL LYNCH COLORADO MUNICIPAL
BOND FUND........................... A portfolio of Merrill Lynch
Multi-State Municipal Series Trust, a
series fund, whose objective is to
provide as high a level of income
exempt from Federal and Colorado
income taxes as is consistent with
prudent investment management.

MERRILL LYNCH CONNECTICUT MUNICIPAL
BOND FUND........................... A portfolio of Merrill Lynch
Multi-State Municipal Series Trust, a
series fund, whose objective is to
provide as high a level of income
exempt from Federal and Connecticut
income taxes as is consistent with
prudent investment management.

MERRILL LYNCH CORPORATE BOND FUND,

INC................................. Current income from three separate
diversified portfolios of fixed income
securities.

MERRILL LYNCH DEVELOPING CAPITAL
MARKETS FUND, INC................... Long-term capital appreciation through
investment in securities, principally
equities, of issuers in countries
having smaller capital markets.

MERRILL LYNCH DRAGON FUND, INC........ Capital appreciation primarily through
investment in equity and debt
securities of issuers domiciled in
developing countries located in Asia
and the Pacific Basin.

MERRILL LYNCH EUROFUND................ Capital appreciation primarily through
investment in equity securities of
corporations domiciled in Europe.

MERRILL LYNCH FEDERAL SECURITIES
TRUST............................... High current return through
investments in U.S. Government and
Government agency securities,
including GNMA mortgage-backed
certificates and other
mortgage-backed Government
securities.
</TABLE>

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<PAGE>

<TABLE>
<S> <C>
MERRILL LYNCH FLORIDA LIMITED MATURITY
MUNICIPAL BOND FUND................. A portfolio of Merrill Lynch
Multi-State Limited Maturity Municipal
Series Trust, a series fund, whose
objective is to provide as high a
level of income exempt from Federal
income taxes as is consistent with
prudent investment management while
serving to offer shareholders the
opportunity to own securities exempt
from Florida intangible personal
property taxes through investment in
a portfolio primarily of
intermediate-term investment grade
Florida Municipal Bonds.

MERRILL LYNCH FLORIDA MUNICIPAL
BOND FUND........................... A portfolio of Merrill Lynch
Multi-State Municipal Series Trust, a

series fund, whose objective is to
provide as high a level of income
exempt from Federal income taxes as
is consistent with prudent
investment management while seeking
to offer shareholders the
opportunity to own securities exempt
from Florida intangible personal
property taxes.

MERRILL LYNCH FUND FOR TOMORROW,
INC................................. Long-term growth through investment in
a portfolio of good quality
securities, primarily common stock,
potentially positioned to benefit
from demographic and cultural
changes as they affect consumer
markets.

MERRILL LYNCH FUNDAMENTAL GROWTH
FUND, INC........................... Long-term growth through investment in
a diversified portfolio of equity
securities placing particular
emphasis on companies that have
exhibited above-average growth rate
in earnings.

MERRILL LYNCH FUNDAMENTAL VALUE
PORTFOLIO .......................... A portfolio of Merrill Lynch Asset
(Available only for exchanges by Builder Program, Inc., a series fund,
certain individual retirement whose objective is to provide
accounts forwhich Merrill Lynch capital appreciation and income by
acts as custodian and by investing in securities, with at
certain CBA(Registered) Accounts least 65% of the portfolio's assets
and CMA(Registered) Sub-Accounts) being invested in equities.

</TABLE>

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<PAGE>

<TABLE>
<S> <C>
MERRILL LYNCH GLOBAL ALLOCATION
FUND, INC........................... High total return, consistent with
prudent risk, through a fully-managed
investment policy utilizing United
States and foreign equity, debt and
money market securities, the
combination of which will be varied
from time to time both with respect
to types of securities and markets
in response to changing market and

economic trends.

MERRILL LYNCH GLOBAL BOND FUND FOR
INVESTMENT AND RETIREMENT........... High total investment return from
investment in a global portfolio of
debt instruments denominated in
various currencies and multinational
currency units.

MERRILL LYNCH GLOBAL CONVERTIBLE
FUND, INC........................... High total return from investment
primarily in an internationally
diversified portfolio of convertible
debt securities, convertible
preferred stock and 'synthetic'
convertible securities consisting of
a combination of debt securities or
preferred stock and warrants or
options.

MERRILL LYNCH GLOBAL HOLDINGS,
INC. ............................... The highest total investment return
(Residents of Arizona must meet consistent with prudent risk through
investor suitability standards) worldwide investment in an
internationally diversified
portfolio of securities.

MERRILL LYNCH GLOBAL OPPORTUNITY
PORTFOLIO .......................... A portfolio of Merrill Lynch Asset
(Available only for exchanges by Builder Program, Inc., a series fund,
certain individual retirement whose objective is to provide a high
accounts for which Merrill total investment return through an
Lynch acts as custodian and by investment policy utilizing U.S. and
certain CBA(Registered) Accounts and foreign equity, debt and money
CMA(Registered) Sub-Accounts) market securities, the combination
of which will vary depending upon
changing market and economic trends.

MERRILL LYNCH GLOBAL RESOURCES
TRUST............................... Long-term growth and protection of
capital from investment in securities
of domestic and foreign companies
that possess substantial natural
resource assets.

MERRILL LYNCH GLOBAL SMALLCAP FUND,
INC................................. Long-term growth of capital by
investing primarily in equity
securities of companies with
relatively small market
capitalizations located in various
foreign countries and in the United
States.
</TABLE>

19
<PAGE>

<TABLE>
<S> <C>
MERRILL LYNCH GLOBAL UTILITY FUND,
INC................................. Capital appreciation and current
income through investment of at least
65% of its total assets in equity
and debt securities issued by
domestic and foreign companies which
are primarily engaged in the
ownership or operation of facilities
used to generate, transmit or
distribute electricity,
telecommunications, gas or water.

MERRILL LYNCH GROWTH FUND FOR
INVESTMENT AND RETIREMENT........... Growth of capital and, secondarily,
income from investment in a
diversified portfolio of equity
securities placing principal
emphasis on those securities which
management of the fund believes to
be undervalued.

MERRILL LYNCH GROWTH OPPORTUNITY
PORTFOLIO .......................... A portfolio of Merrill Lynch Asset
(Available only for exchanges by Builder Program, Inc., a series fund,
certain individual retirement whose objective is to seek long- term
accounts for which Merrill Lynch growth of capital by investing in a
acts as custodian and by certain portfolio of equity securities
CBA(Registered) Accounts and placing particular emphasis on
CMA(Registered) Sub-Accounts) companies that have exhibited
above-average growth rates in
earnings.

MERRILL LYNCH HEALTHCARE FUND,
INC. ............................... Capital appreciation through worldwide
(Residents of Wisconsin must meet investment in equity securities of
investor suitability standards) companies that derive or are
suitability standards) expected to derive a substantial
portion of their sales from products
and services in healthcare.

MERRILL LYNCH INTERNATIONAL EQUITY
FUND................................ Capital appreciation and, secondarily,
income by investing in a diversified
portfolio of equity securities of
issuers located in countries other
than the United States.

MERRILL LYNCH LATIN AMERICA FUND,
INC................................. Capital appreciation by investing
primarily in Latin American equity and
debt securities.

MERRILL LYNCH MARYLAND MUNICIPAL
BOND FUND........................... A portfolio of Merrill Lynch
Multi-State Municipal Series Trust, a
series fund, whose objective is to
provide as high a level of income
exempt from Federal and Maryland
income taxes as is consistent with
prudent investment management.
</TABLE>

20
<PAGE>

<TABLE>
<S> <C>
MERRILL LYNCH MASSACHUSETTS LIMITED
MATURITY MUNICIPAL BOND FUND........ A portfolio of Merrill Lynch
Multi-State Limited Maturity Municipal
Series Trust, a series fund, whose
objective is to provide as high a
level of income exempt from Federal
and Massachusetts income taxes as is
consistent with prudent investment
management through investment in a
portfolio primarily of
intermediate-term investment grade
Massachusetts Municipal Bonds.

MERRILL LYNCH MASSACHUSETTS MUNICIPAL
BOND FUND........................... A portfolio of Merrill Lynch
Multi-State Municipal Series Trust, a
series fund, whose objective is to
provide as high a level of income
exempt from Merrill Lynch
Massachusetts Municipal Federal and
Massachusetts income taxes as is
consistent with prudent investment
management.

MERRILL LYNCH MICHIGAN LIMITED
MATURITY MUNICIPAL BOND FUND........ A portfolio of Merrill Lynch
Multi-State Limited Maturity Municipal
Series Trust, a series fund, whose
objective is to provide as high a
level of income exempt from Federal
and Michigan income taxes as is
consistent with prudent investment
management through investment in a

portfolio primarily of
intermediate-term investment grade
Michigan Municipal Bonds.

MERRILL LYNCH MICHIGAN MUNICIPAL
BOND FUND........................... A portfolio of Merrill Lynch
Multi-State Municipal Series Trust, a
series fund, whose objective is to
provide as high a level of income
exempt from Federal and Michigan
income taxes as is consistent with
prudent investment management.

MERRILL LYNCH MINNESOTA MUNICIPAL
BOND FUND........................... A portfolio of Merrill Lynch
Multi-State Municipal Series Trust, a
series fund, whose objective is to
provide as high a level of income
exempt from Federal and Minnesota
income taxes as is consistent with
prudent investment management.

MERRILL LYNCH MUNICIPAL BOND FUND,
INC................................. Tax-exempt income from three separate
diversified portfolios of municipal
bonds.
</TABLE>

21
<PAGE>

<TABLE>
<S> <C>
MERRILL LYNCH MUNICIPAL INTERMEDIATE
TERM FUND........................... Currently the only portfolio of
Merrill Lynch Municipal Series Trust,
a series fund, whose objective is to
provide as high a level as possible
of income exempt from Federal income
taxes by investing in investment
grade obligations with a dollar
weighted average maturity of five to
twelve years.

MERRILL LYNCH NEW JERSEY LIMITED
MATURITY MUNICIPAL BOND FUND........ A portfolio of Merrill Lynch
Multi-State Limited Maturity Municipal
Series Trust, a series fund, whose
objective is to provide as high a
level of income exempt from Federal
and New Jersey income taxes as is
consistent with prudent investment
management through a portfolio

primarily of intermediate-term
investment grade New Jersey
Municipal Bonds.

MERRILL LYNCH NEW JERSEY MUNICIPAL
BOND FUND........................... A portfolio of Merrill Lynch
Multi-State Municipal Series Trust, a
series fund, whose objective is to
provide as high a level of income
exempt from Federal and New Jersey
income taxes as is consistent with
prudent investment management.

MERRILL LYNCH NEW MEXICO MUNICIPAL
BOND FUND........................... A portfolio of Merrill Lynch
Multi-State Municipal Series Trust, a
series fund, whose objective is to
provide as high a level of income
exempt from Federal and New Mexico
income taxes as is consistent with
prudent investment management.

MERRILL LYNCH NEW YORK LIMITED
MATURITY MUNICIPAL BOND FUND........ A portfolio of Merrill Lynch
Multi-State Limited Maturity Municipal
Series Trust, a series fund, whose
objective is to provide as high a
level of income exempt from Federal,
New York State and New York City
income taxes as is consistent with
prudent investment management
through investment in a portfolio
primarily of intermediate-term
investment grade New York Municipal
Bonds.
</TABLE>

22
<PAGE>

<TABLE>
<S> <C>
MERRILL LYNCH NEW YORK MUNICIPAL
BOND FUND........................... A portfolio of Merrill Lynch
Multi-State Municipal Series Trust, a
series fund, whose objective is to
provide as high a level of income
exempt from Federal, New York State
and New York City income taxes as is
consistent with prudent investment
management.

MERRILL LYNCH NORTH CAROLINA MUNICIPAL

BOND FUND........................... A portfolio of Merrill Lynch
Multi-State Municipal Series Trust, a
series fund, whose objective is to
provide as high a level of income
exempt from Federal and North
Carolina income taxes as is
consistent with prudent investment
management.

MERRILL LYNCH OHIO MUNICIPAL BOND
FUND................................ A portfolio of Merrill Lynch
Multi-State Municipal Series Trust, a
series fund, whose objective is to
provide as high a level of income
exempt from Federal and Ohio income
taxes as is consistent with prudent
investment management.

MERRILL LYNCH OREGON MUNICIPAL
BOND FUND........................... A portfolio of Merrill Lynch
Multi-State Municipal Series Trust, a
series fund, whose objective is to
provide as high a level of income
exempt from Federal and Oregon
income tax as is consistent with
prudent investment management.

MERRILL LYNCH PACIFIC FUND, INC....... Capital appreciation by investing in
equity securities of corporations
domiciled in Far Eastern and Western
Pacific countries, including Japan,
Australia, Hong Kong, and Singapore.

MERRILL LYNCH PENNSYLVANIA LIMITED
MATURITY MUNICIPAL BOND FUND........ A portfolio of Merrill Lynch
Multi-State Limited Maturity Municipal
Series Trust, a series fund, whose
objective is to provide as high a
level of income exempt from Federal
and Pennsylvania income taxes as is
consistent with prudent investment
management through investment in a
portfolio of intermediate-term
investment grade Pennsylvania
Municipal Bonds.
</TABLE>

23
<PAGE>

<TABLE>
<S> <C>
MERRILL LYNCH PENNSYLVANIA MUNICIPAL

BOND FUND........................... A portfolio of Merrill Lynch
Multi-State Municipal Series Trust, a
series fund, whose objective is to
provide as high a level of income
exempt from Federal and Pennsylvania
income taxes as is consistent with
prudent investment management.

MERRILL LYNCH PHOENIX FUND, INC....... Long-term growth of capital by
investing in equity and fixed income
securities, including tax-exempt
securities, of issuers in weak
financial condition or experiencing
poor operating results believed to
be undervalued relative to the
current or prospective conditions of
such issuer.

MERRILL LYNCH QUALITY BOND
PORTFOLIO .......................... A portfolio of Merrill Lynch Asset
(Available only for exchanges by Builder Program, Inc., a series fund,
certain individual retirement whose objective is to provide a high
accounts for which Merrill Lynch level of current income through
acts as custodian and by certain investment in a diversified
CBA(Registered) Accounts and portfolio of debt obligations, such
CMA(Registered) Sub-Accounts) as corporate bonds and notes,
convertible securities, preferred
stocks and governmental obligations.

MERRILL LYNCH SHORT-TERM GLOBAL INCOME
FUND, INC........................... As high a level of current income as
is consistent with prudent investment
management from a global portfolio
of high quality debt securities
denominated in various currencies
and multinational currency units and
having remaining maturities not
exceeding three years.

MERRILL LYNCH SPECIAL VALUE FUND,
INC................................. Long-term growth of capital from
investments in securities, primarily
common stocks, of relatively small
companies believed to have special
investment value and emerging growth
companies regardless of size.

MERRILL LYNCH STRATEGIC DIVIDEND
FUND................................ Long-term total return from investment
in dividend-paying common stocks which
yield more than Standard & Poor's
500 Composite Stock Price Index.

MERRILL LYNCH TECHNOLOGY FUND, INC.... Capital appreciation through worldwide

investment in equity securities of
companies that derive or are
expected to derive a substantial
portion of their sales from products
and services in technology.
</TABLE>

24
<PAGE>

<TABLE>
<S> <C>
MERRILL LYNCH TEXAS MUNICIPAL BOND
FUND................................ A portfolio of Merrill Lynch
Multi-State Municipal Series Trust, a
series fund, whose objective is to
provide as high a level of income
exempt from Federal income taxes as
is consistent with prudent
investment management by investing
primarily in a portfolio of
long-term, investment grade
obligations issued by the State of
Texas, its political sub-divisions,
agencies and instrumentalities.

MERRILL LYNCH U.S. GOVERNMENT
SECURITIES PORTFOLIO ............... A portfolio of Merrill Lynch Asset
(Available only for exchanges by Builder Program, Inc., a series fund,
certain individual retirement whose objective is to provide a high
accounts for which Merrill Lynch current return through investments
acts as custodian and by certain in U.S. Government and government
CBA(Registered) Accounts and agency securities, including GNMA
CMA(Registered) Sub-Accounts) mortgage-backed government
securities.

MERRILL LYNCH UTILITY INCOME FUND,
INC................................. High current income through investment
in equity and debt securities issued
by companies which are primarily
engaged in the ownership or
operation of facilities used to
generate, transmit or distribute
electricity, telecommunications, gas
or water.

MERRILL LYNCH WORLD INCOME FUND,
INC................................. High current income by investing in a
global portfolio of fixed income
securities denominated in various
currencies, including multinational

currencies.

Class A Share Money Market Funds:

MERRILL LYNCH READY ASSETS TRUST...... Preservation of capital, liquidity and
the highest possible current income
consistent with the foregoing
objectives from the short-term money
market securities in which the Trust
invests.

MERRILL LYNCH RETIREMENT RESERVES
MONEY FUND ......................... Currently the only portfolio of
(Available only if the exchange Merrill Lynch Retirement Series Trust,
occurs within certain retirement a series fund, whose objectives are
plans) current income, preservation of
capital and liquidity available from
investing in a diversified portfolio
of short-term money market
securities.

MERRILL LYNCH U.S.A. GOVERNMENT
RESERVES............................ Preservation of capital, current
income and liquidity available from
investing in direct obligations of
the U.S. Government and repurchase
agreements relating to such
securities.
</TABLE>

25
<PAGE>
<TABLE>
<S> <C>
Class B, Class C and Class D Share
Money Market Funds:
MERRILL LYNCH GOVERNMENT FUND......... A portfolio of Merrill Lynch Funds for
Institutions Series, a series fund,
whose objective is to provide
current income consistent with
liquidity and security of principal
from investment in securities issued
or guaranteed by the U.S.
Government, its agencies and
instrumentalities and in repurchase
agreements secured by such
obligations.

MERRILL LYNCH INSTITUTIONAL FUND...... A portfolio of Merrill Lynch Funds for
Institutions Series, a series fund,
whose objective is to provide
maximum current income consistent
with liquidity and the maintenance

of a high quality portfolio of money
market securities.

MERRILL LYNCH INSTITUTIONAL
TAX-EXEMPT FUND..................... A portfolio of Merrill Lynch Funds for
Institutions Series, a series fund,
whose objective is to provide
current income exempt from Federal
income taxes, preservation of
capital and liquidity available from
investing in a diversified portfolio
of short-term, high quality
municipal bonds.

MERRILL LYNCH TREASURY FUND........... A portfolio of Merrill Lynch Funds for
Institutions Series, a series fund,
whose objective is to provide
current income consistent with
liquidity and security of principal
from investment in direct
obligations of the U.S. Treasury and
up to 10% of its total assets in
repurchase agreements secured by
such obligations.
</TABLE>

Before effecting an exchange, shareholders of the Fund should obtain a
currently effective prospectus of the fund into which the exchange is to be
made. Exercise of the exchange privilege is treated as a sale for Federal income
tax purposes and depending on the circumstances, a short- or long-term capital
gain or loss may be realized. In addition, an exchanging shareholder of any of
the funds may be subject to backup withholding unless such shareholder certifies
under penalty of perjury that the taxpayer identification number on file with
any such fund is correct, and that he or she is not otherwise subject to backup
withholding. See 'Taxes'.

To exercise the exchange privilege, shareholders may either contact their
listed securities dealer, who will advise the Fund of the exchange, or write to
the Transfer Agent requesting that the exchange be effected. Such letter must be
signed by an 'eligible guarantor institution' as such is defined in Rule 17Ad-15
under the Securities Exchange Act of 1934, as amended, the existence and
validity of which may be verified by the Transfer Agent through the use of
industry publications. Shareholders of the Fund, and shareholders of the other
funds described above with shares for which certificates have not been issued,
may exercise the exchange privilege by wire through their securities dealer. The
Fund reserves the right to require a properly completed Exchange Application.
This exchange privilege may be modified or terminated at any time in accordance
with the rules of the Securities and Exchange Commission. The Fund reserves the
right to limit the number of times an

26
<PAGE>
investor may exercise the exchange privilege. Certain funds may suspend the
continuous offering of their shares at any time and may thereafter resume such

offering from time to time. The exchange privilege is available only to U.S.
shareholders in states where the exchange legally may be made.

TAXES

FEDERAL

Dividends paid by the Fund from its ordinary income or from an excess of
net short-term capital gains over net long-term capital losses (together
referred to hereafter as 'ordinary income dividends') are taxable to
shareholders as ordinary income. Distributions made from an excess of net
long-term capital gains over net short-term capital losses ('capital gain
dividends') are taxable to shareholders as long-term capital gains, regardless
of the length of time the shareholder has owned Fund shares. Any loss upon the
sale or exchange of Fund shares held for six months or less, however, will be
treated as long-term capital loss to the extent of any capital gain dividends
received by the shareholder. Distributions in excess of the Fund's earnings and
profits will first reduce the adjusted tax basis of a holder's shares and, after
such adjusted tax basis is reduced to zero, will constitute capital gains to
such holder (assuming the shares are held as a capital asset).

Ordinary income dividends paid to shareholders who are nonresident aliens

or foreign entities will be subject to a 30% United States withholding tax under
existing provisions of the Code applicable to foreign individuals and entities
unless a reduced rate of withholding or a withholding exemption is provided
under applicable treaty law. Nonresident shareholders are urged to consult their
own tax advisers concerning the applicability of the United States withholding
tax.

27
<PAGE>
shareholders subject to backup withholding will be those for whom no certified
taxpayer identification number is on file with the Fund or who, to the Fund's
knowledge, have furnished an incorrect number. When establishing an account, an
investor must certify under penalty of perjury that such number is correct and
that such investor is not otherwise subject to backup withholding.

The Code requires a RIC to pay a nondeductible 4% excise tax to the extent
it does not distribute, during each calendar year, 98% of its ordinary income,
determined on a calendar year basis, and 98% of its capital gains, determined,
in general, on an October 31 year end, plus certain undistributed amounts from
previous years. While the Fund intends to distribute its income and gains in the
manner necessary to minimize imposition of the excise tax, there can be no
assurance that sufficient amounts of the Fund's taxable ordinary income and
capital gains will be distributed to avoid entirely the imposition of the tax.
In such event, the Fund will be liable for the tax only on the amount by which
it does not meet the foregoing distribution requirements.

Ordinary income and capital gain dividends may also be subject to state and
local taxes.

GENERAL INFORMATION

DESCRIPTION OF SHARES

The Declaration of Trust of the Fund permits the Trustees to issue an
unlimited number of full and fractional shares of a single class and to divide
or combine the shares into a greater or lesser number of shares without thereby
changing the proportionate beneficial interest in the Fund. Each share
represents an equal proportionate interest in the Fund with each other share.
Upon liquidation of the Fund, shareholders are entitled to share pro rata in the
net assets of the Fund available for distribution to shareholders. Shares have
no preemptive or conversion rights. The rights of redemption and exchange are
described elsewhere herein and in the Prospectus of the Fund. Shares of the Fund
are fully paid and non-assessable by the Fund.

Shareholders are entitled to one vote for each full share held and
fractional votes for fractional shares held in the election of Trustees and on
other matters submitted to the vote of shareholders. Voting rights are not
cumulative, so that the holders of more than 50% of the shares voting in the
election of Trustees can, if they choose to do so, elect all the Trustees of the
Fund, in which event the holders of the remaining shares are unable to elect any
person as a Trustee. No amendment may be made to any Declaration of Trust
without the affirmative vote of a majority of the outstanding shares of the
Fund.

28
<PAGE>
CUSTODIAN

The Bank of New York (the 'Custodian'), 90 Washington Street, 12th Floor,
New York, New York 10286, acts as custodian of the Fund's assets. The custodian
is responsible for safeguarding and controlling the Fund's cash and securities,
handling the receipt and delivery of securities and collecting interest on the
Fund's investments.

TRANSFER AGENT

Merrill Lynch Financial Data Services, Inc. (the 'Transfer Agent'), 4800
Deer Lake Drive East, Jacksonville, Florida 32246-6484, a subsidiary of ML &
Co., acts as the Fund's transfer agent. The Transfer Agent is responsible for
the issuance, transfer and redemption of shares and the opening, maintenance and

servicing of shareholder accounts.

INDEPENDENT AUDITORS

Deloitte & Touche LLP, 117 Campus Drive, Princeton, New Jersey 08540, has
been selected as the independent auditors of the Fund. The selection of
independent auditors is subject to ratification by the shareholders of the Fund.
The independent auditors are responsible for auditing the annual financial
statements of the Fund.

LEGAL COUNSEL

Brown & Wood, One World Trade Center, New York, New York 10048-0557, is
counsel for the Fund.

REPORTS TO SHAREHOLDERS

The fiscal year of the Fund ends on the last day of November of each year.
The Fund will send to its shareholders at least semi-annually reports showing
its portfolio and other information. An annual report containing financial
statements audited by independent auditors is sent to the shareholders each
year. After the end of each year shareholders will receive Federal income tax
information regarding dividends and capital gains distributions.

ADDITIONAL INFORMATION

The Prospectus and this Statement of Additional Information do not contain
all of the information set forth in the Registration Statement and the exhibits
relating thereto, which the Fund has filed with the Securities and Exchange
Commission, Washington, D.C., under the Securities Act of 1933 and the
Investment Company Act, to which reference is hereby made.

To the knowledge of the Fund, no person or entity owned beneficially 5% or
more of the Fund's shares on March 1, 1996.

All time references are to New York time.

------------------------------

The Declaration of Trust establishing the Fund, a copy of which, together
with all amendments thereto (the 'Declaration') is on file in the office of the
Secretary of the Commonwealth of Massachusetts, provides that the name 'Merrill
Lynch U.S. Treasury Money Fund' refers to the Trustees under the Declaration
collectively as Trustees, but not as individuals or personally; and except for
his or her own bad faith, willful misfeasance, gross negligence or reckless

disregard of his or her duties, no Trustee, shareholder, officer, employee or
agent of the Fund shall be held to any personal liability, nor shall resort be
had to their private property for the satisfaction of any obligation or claim or
otherwise in connection with the affairs of the Fund but the 'Trust Property'
(as defined in the Declaration) only shall be liable.

<PAGE>

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, 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 four-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 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 November
30, 1995 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, 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
January 5, 1996

<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
Face Interest Maturity Value
Issue Amount Rate Date (Note 1a)
<S> <C> <C> <C> <C>
US Government Obligations--100.9%
<PAGE>
US Treasury Bills* $ 80 5.32 % 12/07/95 $ 80
716 5.365 12/21/95 714
294 5.38 12/21/95 293
4,414 5.40 12/21/95 4,400
4,982 5.60 12/21/95 4,966
596 5.61 12/21/95 594
367 5.23 1/04/96 365
1,650 5.27 1/04/96 1,642
5,000 5.26 1/11/96 4,969
1,764 5.29 1/11/96 1,753
318 5.31 1/11/96 316
6,008 5.315 1/11/96 5,971
603 5.385 1/11/96 599
143 5.41 1/18/96 142
5,000 5.405 1/25/96 4,959
3,204 5.42 2/01/96 3,174
376 5.26 2/08/96 372
3,339 5.315 2/08/96 3,304
139 5.34 2/08/96 138
87 5.355 2/08/96 86
105 5.36 2/08/96 104
413 5.385 2/08/96 409
5,000 5.325 2/15/96 4,943
2,000 5.36 2/15/96 1,977
393 5.32 3/07/96 387
2,199 5.335 3/07/96 2,167
2,000 5.42 7/25/96 1,931

US Treasury Notes 1,400 4.625 2/29/96 1,397
2,650 9.375 4/15/96 2,686
2,000 5.875 5/31/96 2,003

Total US Government Obligations (Cost--$56,835) 56,841

Total Investments (Cost--$56,835)--100.9% 56,841

Liabilities in Excess of Other Assets--(0.9%) (523)
-------
Net Assets--100.0% $56,318
=======

<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>

FINANCIAL INFORMATION

<TABLE>
Statement of Assets and Liabilities as of November 30, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$56,835,418*)(Note 1a) $ 56,841,364
Cash 5,195
Interest receivable 47,412
Deferred organization expenses (Note 1d) 4,176
Prepaid registration fees and other assets (Note 1d) 32,185
-------------
Total assets 56,930,332
-------------

Liabilities: Payables:
Beneficial interest redeemed $ 537,723
Distributor (Note 2) 12,341
Investment adviser (Note 2) 7,163 557,227
-------------
Accrued expenses and other liabilities 54,712
-------------
Total liabilities 611,939
-------------

Net Assets: Net assets $ 56,318,393
=============

Net Assets Shares of beneficial interest, $.10 par value, unlimited number of
Consist of: shares authorized $ 5,631,245
Paid-in capital in excess of par 50,681,202
Unrealized appreciation on investments--net 5,946
-------------
Net assets--Equivalent to $1.00 per share based on 56,312,447 shares
of beneficial interest outstanding $ 56,318,393
=============

<FN>
*Cost for Federal income tax purposes. As of November 30, 1995, net
unrealized appreciation for Federal income tax purposes amounted to
$5,946, of which $6,870 related to appreciated securities and $924
related to depreciated securities.
</TABLE>

<PAGE>
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended November 30, 1995
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 3,466,655
(Note 1c): -------------

Expenses: Investment advisory fees (Note 2) $ 305,869
Professional fees 77,728
Distribution fees (Note 2) 73,258
Trustees' fees and expenses 58,340
Registration fees (Note 1d) 57,680
Printing and shareholder reports 42,696
Accounting services (Note 2) 38,315
Transfer agent fees (Note 2) 38,247
Amortization of organization expenses (Note 1d) 11,208
Custodian fees 8,921
Other 6,804
-------------
Total expenses before reimbursement 719,066
Reimbursement of expenses (Note 2) (214,109)
-------------
Total expenses after reimbursement 504,957
-------------
Investment incomes--net 2,961,698
-------------

Realized & Realized gain on investments--net 27,069
Unrealized Gain Change in unrealized appreciation/depreciation on investments--net 29,282
(Loss) on -------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 3,018,049
(Note 1c): =============

See Notes to Financial Statements.
</TABLE>

FINANCIAL INFORMATION (concluded)

<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended November 30,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 2,961,698 $ 2,116,526
Realized gain on investments--net 27,069 13,396
Change in unrealized appreciation/depreciation on
investments--net 29,282 (23,496)
------------- -------------
Net increase in net assets resulting from operations 3,018,049 2,106,426
------------- -------------
<PAGE>
Dividends & Investment income--net (2,961,698) (2,116,526)
Distributions to Realized gain on investments--net (27,069) (13,396)
Shareholders ------------- -------------
(Note 1e): Net decrease in net assets resulting from dividends and
distributions to shareholders (2,988,767) (2,129,922)
------------- -------------

Beneficial Net proceeds from sale of shares 162,573,091 188,819,746
Interest Net asset value of shares issued to shareholders in
Transactions reinvestment of dividends and distributions (Note 1e) 2,976,127 2,122,334
(Note 3): ------------- -------------
165,549,218 190,942,080
Cost of shares redeemed (166,444,550) (204,278,073)
------------- -------------
Net decrease in net assets derived from beneficial interest
transactions (895,332) (13,335,993)
------------- -------------

Net Assets: Total decrease in net assets (866,050) (13,359,489)
Beginning of year 57,184,443 70,543,932
------------- -------------
End of year $ 56,318,393 $ 57,184,443
============= =============
</TABLE>

<TABLE>
Financial Highlights
<CAPTION>
For the
Period
The following per share data and ratios have been derived April 15,
from information provided in the financial statements. 1991++ to
For the Year Ended November 30, Nov. 30,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992 1991
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00

Operating ------- ------- ------- ------- -------
Performance: Investment income--net .0484 .0317 .0262 .0312 .0328
Realized and unrealized gain (loss) on
investments--net .0009 (.0002) .0010 .0014 .0029
------- ------- ------- ------- -------
Total from investment operations .0493 .0315 .0272 .0326 .0357
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net (.0484) (.0317) (.0262) (.0312) (.0328)
Realized gain on investments--net (.0004) (.0002) (.0004) (.0020) (.0029)*
------- ------- ------- ------- -------
Total dividends and distributions (.0488) (.0319) (.0266) (.0332) (.0357)
------- ------- ------- ------- -------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total investment return 4.99% 3.22% 2.69% 3.37% 5.58%**
======= ======= ======= ======= =======

<PAGE>
Ratios to Average Expenses, net of reimbursement and excluding
Net Assets: distribution fees .71% .59% .41% .53% .27%**
======= ======= ======= ======= =======
Expenses, net of reimbursement .83% .71% .53% .65% .39%**
======= ======= ======= ======= =======
Expenses 1.18% 1.06% .96% 1.16% 1.55%**
======= ======= ======= ======= =======
Investment income and realized gain on
investments--net 4.89% 3.16% 2.66% 3.41% 5.45%**
======= ======= ======= ======= =======

Supplemental Net assets, end of period (in thousands) $56,318 $57,184 $70,544 $80,978 $94,301
Data: ======= ======= ======= ======= =======

<FN>
++Commencement of Operations.
*Includes unrealized gain (loss).
**Annualized.

See Notes to Financial Statements.
</TABLE>

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.
<PAGE>
(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 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 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
Merrill Lynch Asset Management, L.P. ("MLAM"). The general partner
of MLAM is Princeton Services, Inc. ("PSI"), an indirect wholly-
owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is

the limited partner. The Fund has entered into a Distribution
Agreement and Distribution Plan with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
<PAGE>
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, 1995, MLAM
earned fees of $305,869, of which $214,109 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 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

NOTES TO FINANCIAL STATEMENTS (concluded)

services relate to the sale, promotion, and marketing of the shares
of the Fund. For the year ended November 30, 1995, MLFD earned
$73,258 under the Plan, all of which was paid to MLPF&S pursuant to
the agreement.

Merrill Lynch Financial Data Services, Inc. ("MLFDS"), 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 MLAM, PSI, MLFDS, 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.

<PAGE>
------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objectives and
Policies.................... 2
Management of the Fund........ 2
Trustees and Officers....... 2
Compensation of Trustees.... 4
Management and Advisory
Arrangements............. 4
Purchase of Shares............ 6
Distribution Plan........... 6
Redemption of Shares.......... 7
Purchase and Redemption of
Shares
through Merrill Lynch
Retirement Plans............ 8
Portfolio Transactions........ 9
Determination of Net Asset
Value....................... 10
Yield Information............. 11
Shareholder Services.......... 12
Investment Account.......... 12
Automatic Investment Plan... 12
Accrued Monthly Payout
Plan..................... 13
Systematic Withdrawal
Plans.................... 13
Retirement Plans............ 13
Exchange Privilege.......... 14
Taxes......................... 27
Federal..................... 27
General Information........... 28
Description of Shares....... 28
Custodian................... 29
Transfer Agent.............. 29
Independent Auditors........ 29
Legal Counsel............... 29
Reports to Shareholders..... 29
Additional Information...... 29
Independent Auditors'
Report...................... 30
Financial Statements.......... 31
</TABLE>

Code #11625-0396

[Artwork]

STATEMENT OF
ADDITIONAL
INFORMATION

March 28, 1996

Distributor:
Merrill Lynch
Funds Distributor, Inc.

<PAGE>

PART C: OTHER INFORMATION:

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.

(a) Financial Statements:

Contained in Part A:

Financial Highlights for each of the years in the four-year period ended
November 30, 1995 and the period April 15, 1991 (commencement of
operations) to November 30, 1991.

Contained in Part B:

Schedule of Investments as of November 30, 1995

Statement of Assets and Liabilities as of November 30, 1995

Statement of Operations for the year ended November 30, 1995

Statements of Changes in Net Assets for the years ended November 30, 1995
and 1994

Financial Highlights for each of the years in the four-year period ended
November 30, 1995 and the period April 15, 1991 (commencement of
operations) to November 30, 1991

(b) Exhibits:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C> <C>
1 (a) -- Declaration of Trust dated October 30, 1990.(a)
(b) -- Amendment to the Declaration of Trust dated February 1, 1991.(a)
2 -- By-Laws of Registrant.(a)
3 -- None.

4 -- Copies of instruments defining the rights of shareholders,
including the relevant portions of the Declaration of Trust, as
amended, and By-Laws of the Registrant.(b)
5 (a) -- Management Agreement between Registrant and Merrill Lynch Asset
Management, L.P.(a)

5 (b) -- Supplement to Management Agreement between Registrant and Merrill
Lynch Asset Management, L.P. (a)

6 (a) -- Distribution Agreement between Registrant and Merrill Lynch Funds
Distributor, Inc.(a)
(b) -- Selected Dealer Agreement.(a)
7 -- None.
8 -- Custody Agreement between Registrant and The Bank of New York.(a)
9 -- Transfer Agency, Shareholder Servicing Agency and Proxy Agency
Agreement between Registrant and Merrill Lynch Financial Data
Services, Inc.(a)

10 -- Opinion of Brown & Wood, counsel for Registrant.

11 -- Consent of Deloitte & Touche LLP, independent auditors for
Registrant.
12 -- None.
13 -- Certificate of Merrill Lynch Asset Management, L.P.(a)
14 (a) -- IRA, SEP and Self-Directed Plans, as defined in Parts A and B of
this Registration Statement.(c)
(b) -- Prototype Merrill Lynch Tax-Deferred Basic(TradeMark) Retirement
Plan available from Merrill Lynch, Pierce, Fenner & Smith
Incorporated.(c)
15 -- Form of Shareholder Servicing Plan and Agreement of
Registrant.(a)
16 -- None.
17 -- Financial Data Schedule for the fiscal year ended November 30,
1995.
18 -- None.
</TABLE>

- ---------------

<TABLE>
<S> <C>
(a) Filed as an Exhibit to Post-Effective Amendment No. 5 to the
Registrant's Registration Statement under the Securities Act of 1933
on Form N-1A (the 'Registration Statement').
(b) Reference is made to Article II, Section 2.3 and Articles V, VI, VIII,
IX, X and XI of the Registrant's Declaration of Trust, filed as
Exhibit 1(a) to the Registration Statement and to Articles I, V and
VII of the Registrant's By-Laws, filed as Exhibit 2 to the
Registration Statement.
(c) Incorporated by reference to Exhibit 14 to Post-Effective Amendment
No. 1 to the Registration Statement under the Securities Act of 1933
on Form N-1A of Merrill Lynch Retirement Series Trust (File No.
2-74584).
</TABLE>

C-1
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.

Registrant is not controlled by or under common control with any person.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES.

<TABLE>
<CAPTION>
NUMBER OF
HOLDERS AT
TITLE OF CLASS FEBRUARY 29, 1996
- ------------------------------------------------------- --------------------
<S> <C>
Shares of beneficial interest, par value $0.10 per
share................................................ 1439
</TABLE>

Note: The number of holders shown above includes holders of record
plus beneficial owners, whose shares are held of record by
Merrill Lynch, Pierce, Fenner & Smith Incorporated.

ITEM 27. INDEMNIFICATION.

Section 5.3 of the Registrant's Declaration of Trust provides as
follows:

'The Trust shall indemnify each of its Trustees, officers, employees,
and agents (including persons who serve at its request as directors,
officers or trustees of another organization in which it has any interest as
a shareholder, creditor or otherwise) against all liabilities and expenses
(including amounts paid in satisfaction of judgments, in compromise, as
fines and penalties, and as counsel fees) reasonably incurred by him in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, in which he may be involved or with
which he may be threatened, while in office or thereafter, by reason of his
being or having been such a trustee, officer, employee or agent, except with
respect to any matter as to which he shall have been adjudicated to have
acted in bad faith, willful misfeasance, gross negligence or reckless
disregard of his duties; provided, however, that as to any matter disposed
of by a compromise payment by such person, pursuant to a consent decree or
otherwise, no indemnification either for said payment or for any other
expenses shall be provided unless the Trust shall have received a written
opinion from independent legal counsel approved by the Trustees to the
effect that if either the matter of willful misfeasance, gross negligence or
reckless disregard of duty, or the matter of good faith and reasonable
belief as to the best interests of the Trust, had been adjudicated, it would
have been adjudicated in favor of such person. The rights accruing to any
Person under these provisions shall not exclude any other right to which he

may be lawfully entitled; provided that no Person may satisfy any right of
indemnity or reimbursement granted herein or in Section 5.1 or to which he
may be otherwise entitled except out of the property of the Trust, and no
Shareholder shall be personally liable to any Person with respect to any
claim for indemnity or reimbursement or otherwise. The Trustees may make
advance payments in connection with indemnification under this Section 5.3,
provided that the indemnified person shall have given a written undertaking
to reimburse the Trust in the event it is subsequently determined that he is
not entitled to such indemnification.'

The Registrant's by-laws provide that insofar as the conditional advancing
of indemnification moneys pursuant to Section 5.3 of the Declaration of Trust
for actions based upon the Investment Company Act of 1940, as amended (the
'Investment Company Act') may be concerned, such payments will be made only on
the following conditions: (i) the advances must be limited to amounts used, or
to be used, for the preparation or presentation of a defense to the action,
including costs connected with the preparation of a settlement; (ii) advances
may be made only upon receipt of a written promise by, or on behalf of, the
recipient to repay that amount of the advance which exceeds the amount which it
is ultimately determined that he is entitled to receive from the Registrant by
reason of indemnification; and (iii) (a) such promise must be secured by a
surety bond, other suitable insurance or an equivalent form of security which
assures that any repayments may be obtained by the Registrant without delay or
litigation, which bond, insurance or other form of security must be provided by
the recipient of the advance, or (b) a majority of a quorum of the Registrant's
disinterested, non-party Trustees, or an independent legal counsel in a written
opinion, shall determine, based upon a review of readily available facts, that
the recipient of the advance ultimately will be found entitled to
indemnification.

In Section 9 of the Distribution Agreement relating to the securities being
offered hereby, the Registrant agrees to indemnify the Distributor and each
person, if any, who controls the Distributor within the meaning of

C-2
<PAGE>

the Securities Act of 1933, as amended (the 'Securities Act'), against certain
types of civil liabilities arising in connection with the Registration Statement
or the Prospectus.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to Trustees, officers and controlling persons of the Registrant
and the principal underwriter pursuant to the foregoing provisions or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a Trustee, officer, or
controlling person of the Registrant and principal underwriter in connection

with the successful defense of any action or proceeding) is asserted by such
Trustee, officer or controlling person or the principal underwriter in
connection with shares being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

Merrill Lynch Asset Management, L.P. ('MLAM' or the 'Manager') acts as
investment adviser for the following open-end investment companies: Merrill
Lynch Adjustable Rate Securities Fund, Inc., Merrill Lynch Americas Income Fund,
Inc., Merrill Lynch Asset Builder Program, Inc., Merrill Lynch Asset Growth
Fund, Inc., Merrill Lynch Asset Income Fund, Inc., Merrill Lynch Capital Fund,
Inc., Merrill Lynch Developing Capital Markets Fund, Inc., Merrill Lynch Dragon
Fund, Inc., Merrill Lynch EuroFund, Merrill Lynch Fundamental Growth Fund, Inc.,
Merrill Lynch Fund For Tomorrow, Inc., Merrill Lynch Global Allocation Fund,
Inc., Merrill Lynch Global Bond Fund for Investment and Retirement, Merrill
Lynch Global Convertible Fund, Inc., Merrill Lynch Global Holdings, Merrill
Lynch Global Resources Trust, Merrill Lynch Global SmallCap Fund, Inc., Merrill
Lynch Global Utility Fund, Inc., Merrill Lynch Growth Fund for Investment and
Retirement, Merrill Lynch Healthcare Fund, Inc., Merrill Lynch Institutional
Intermediate Fund, Merrill Lynch International Equity Fund, Merrill Lynch Latin
America Fund, Inc., Merrill Lynch Middle East/Africa Fund, Inc., Merrill Lynch
Municipal Series Trust, Merrill Lynch Pacific Fund, Inc., Merrill Lynch Ready
Assets Trust, Merrill Lynch Retirement Series Trust, Merrill Lynch Series Fund,
Inc., Merrill Lynch Short-Term Global Income Fund, Inc., Merrill Lynch Strategic
Dividend Fund, Merrill Lynch Technology Fund, Inc., Merrill Lynch U.S.A.
Government Reserves, Merrill Lynch U.S. Treasury Money Fund, Merrill Lynch
Utility Income Fund, Inc. and Merrill Lynch Variable Series Funds, Inc.; and the
following closed-end investment companies: Convertible Holdings, Inc., Merrill
Lynch High Income Municipal Bond Fund, Inc. and Merrill Lynch Senior Floating
Rate Fund, Inc.

Fund Asset Management, L.P. ('FAM'), an affiliate of MLAM, acts as the
investment adviser for the following open-end investment companies: CBA Money
Fund, CMA Government Securities Fund, CMA Money Fund, CMA Multi-State Municipal
Series Trust, CMA Tax-Exempt Fund, CMA Treasury Fund, The Corporate Fund
Accumulation Program, Inc., Financial Institutions Series Trust, Merrill Lynch
Basic Value Fund, Inc., Merrill Lynch California Municipal Series Trust, Merrill
Lynch Corporate Bond Fund, Inc., Merrill Lynch Federal Securities Trust, Merrill
Lynch Funds for Institutions Series, Merrill Lynch Multi-State Limited Maturity
Municipal Series Trust, Merrill Lynch Multi-State Municipal Series Trust,
Merrill Lynch Phoenix Fund, Inc., Merrill Lynch Puerto Rico Tax-Exempt Fund,
Inc., Merrill Lynch Special Value Fund, Inc., Merrill Lynch World Income Fund,
Inc., and the Municipal Fund Accumulation Program, Inc.; and the following
closed-end investment companies: Apex Municipal Fund, Inc., Corporate High Yield
Fund, Inc., Corporate High Yield Fund II, Inc., Emerging Tigers Fund, Inc.,
Income Opportunities Fund 1999, Inc., Income Opportunities Fund 2000, Inc.,

Merrill Lynch Municipal Strategy Fund, Inc., MuniAssets Fund, Inc., MuniEnhanced
Fund, Inc., MuniInsured Fund, Inc., MuniVest Fund, Inc., MuniVest Fund II, Inc.,
MuniVest California Insured Fund, Inc., MuniVest Florida Fund, MuniVest Michigan
Insured Fund, Inc., MuniVest New Jersey Fund, Inc., MuniVest New York Insured
Fund, Inc., MuniVest Pennsylvania Insured Fund, MuniYield Arizona Fund, Inc.,
MuniYield California Fund, Inc., MuniYield California Insured Fund, Inc.,
MuniYield California Insured Fund II, Inc., MuniYield Florida Fund, MuniYield
Florida Insured Fund, MuniYield Fund, Inc., MuniYield Insured Fund, Inc.,
MuniYield Insured Fund II, Inc., MuniYield Michigan Fund, Inc., MuniYield
Michigan Insured Fund, Inc., MuniYield New Jersey Fund, Inc., MuniYield New
Jersey Insured Fund, Inc., MuniYield New York Insured

C-3
<PAGE>

Fund, Inc., MuniYield New York Insured Fund II, Inc., MuniYield New York Insured
Fund III, Inc., MuniYield Pennsylvania Fund, MuniYield Quality Fund, Inc.,
MuniYield Quality Fund II, Inc., Senior High Income Portfolio, Inc., Senior High
Income Portfolio II, Inc., Senior Strategic Income Fund, Inc., Taurus
MuniCalifornia Holdings, Inc., Taurus MuniNew York Holdings, Inc. and Worldwide
DollarVest Fund, Inc. The address of each of these investment companies is P.O.
Box 9011, Princeton, New Jersey 08543-9011 except that the address of Merrill
Lynch Institutional Intermediate Fund and Merrill Lynch Funds for Institutions
Series is One Financial Center, 15th Floor, Boston, Massachusetts 02111-2646.
The address of the Manager and FAM is also P.O. Box 9011, Princeton, New Jersey
08543-9011. The address of Merrill Lynch Funds Distributor, Inc. ('MLFD') is
P.O. Box 9081, Princeton, New Jersey 08543-9081. The address of Merrill Lynch,
Pierce, Fenner & Smith Incorporated ('Merrill Lynch') and Merrill Lynch & Co.,
Inc. ('ML & Co.') is World Financial Center, North Tower, 250 Vesey Street, New
York, New York 10281. The address of Merrill Lynch Financial Data Services, Inc.
('MLFDS') is 4800 Deer Lake Drive East, Jacksonville, Florida 32246-6484.

Set forth below is a list of each executive officer and partner of the
Manager indicating each business, profession, vocation or employment of a
substantial nature in which each such person or entity has been engaged since
December 1, 1993 for his or her or its own account or in the capacity of
director, officer, partner or trustee. In addition, Mr. Zeikel is President, Mr.
Glenn is Executive Vice President and Mr. Richard is Treasurer of all or
substantially all of the investment companies described in the preceding
paragraph and Messrs. Giordano, Harvey, Hewitt, Kirstein and Monagle are
officers or directors/trustees of one or more of such companies.

<TABLE>
<CAPTION>
OTHER SUBSTANTIAL BUSINESS
POSITIONS WITH PROFESSION, VOCATION OR
NAME MANAGER EMPLOYMENT
- -------------------- --------------------- ------------------------------
<S> <C> <C>

ML & Co............. Limited Partner Financial Services Holding
Company
Princeton
Services.......... General Partner General Partner of FAM

Arthur Zeikel....... President President of FAM; President
and Director of Princeton
Services; Director of MLFD;
Executive Vice President of
ML & Co.

Terry K. Glenn...... Executive Vice Executive Vice President of
President FAM; Executive Vice President
and Director of Princeton
Services; President and
Director of MLFD; Director
of MLFDS; President of
Princeton Administrators,
L.P.

Vincent R.
Giordano.......... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services

Elizabeth Griffin... Senior Vice President Senior Vice President of FAM

Norman R. Harvey.... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services

N. John Hewitt...... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services

Philip L.
Kirstein.......... Senior Vice President, Senior Vice President, General
General Counsel and Counsel and Secretary of FAM;
Secretary Senior Vice President,
General Counsel, Director
and Secretary of Princeton
Services; Director of MLFD

Ronald M. Kloss..... Senior Vice President Senior Vice President and
and Controller Controller of FAM; Senior Vice
President and Controller of
Princeton Services

Stephen M.M.
Miller............ Senior Vice President Executive Vice President of
Princeton Administrators, L.P.

Joseph T. Monagle,
Jr................ Senior Vice President Senior Vice President of FAM;

Senior Vice President of
Princeton Services

Richard L. Reller... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services

Gerald M. Richard... Senior Vice President Senior Vice President and
and Treasurer Treasurer of FAM; Senior Vice
President and Treasurer of
Princeton Services; Vice
President and Treasurer of
MLFD
</TABLE>

C-4
<PAGE>
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL BUSINESS
POSITIONS WITH PROFESSION, VOCATION OR
NAME MANAGER EMPLOYMENT
- -------------------- --------------------- ------------------------------
<S> <C> <C>
Ronald L. Welburn... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services

Anthony Wiseman..... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services
</TABLE>

ITEM 29. PRINCIPAL UNDERWRITERS.

(a) MLFD acts as the principal underwriter for the Registrant and for each
of the open-end investment companies referred to in the first two paragraphs of
Item 28 except CBA Money Fund, CMA Government Securities Fund, CMA Money Fund,
CMA Multi-State Municipal Series Trust, CMA Tax-Exempt Fund, CMA Treasury Fund,
Convertible Holdings, Inc., The Corporate Fund Accumulation Program, Inc., and
The Municipal Fund Accumulation Program, Inc., and MLFD also acts as the
principal underwriter for the following closed-end investment companies: Merrill
Lynch High Income Municipal Bond Fund, Inc., Merrill Lynch Municipal Strategy
Fund, Inc. and Merrill Lynch Senior Floating Rate Fund, Inc.

(b) Set forth below is information concerning each director and officer of
MLFD. The principal business address of each such person is P.O. Box 9081,
Princeton, New Jersey 08543-9081, except that the address of Messrs. Aldrich,
Crook, Brady, Breen, Fatseas and Wasel is One Financial Center, 15th Floor,
Boston, Massachusetts 02111-2633.

<TABLE>
<CAPTION>
(2) (3)
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH MLFD WITH REGISTRANT
- ------------------------- ----------------------- -------------------------------------------
<S> <C> <C>
Terry K. Glenn........... President and Director Executive Vice President
Arthur Zeikel............ Director President and Trustee
Philip L. Kirstein....... Director None
William E. Aldrich....... Senior Vice President None
Robert W. Crook.......... Senior Vice President None
Kevin P. Boman........... Vice President None
Michael J. Brady......... Vice President None
William M. Breen......... Vice President None
Sharon Creveling......... Vice President and None
Assistant Treasurer
Mark A. DeSario.......... Vice President None
James T. Fatseas......... Vice President None
Michelle T. Lau.......... Vice President None
Debra W.
Landsman-Yaros......... Vice President None
Gerald M. Richard........ Vice President and Treasurer
Treasurer
Salvatore Venezia........ Vice President None
William Wasel............ Vice President None
Robert Harris............ Secretary None
</TABLE>

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.

All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act and the rules thereunder will be
maintained at the offices of the Registrant, 800 Scudders Mill Road, Plainsboro,
New Jersey 08536, and Merrill Lynch Financial Data Services, Inc., 4800 Deer
Lake Drive East, Jacksonville, Florida 32246-6484.

C-5
<PAGE>
ITEM 31. MANAGEMENT SERVICES.

Other than as set forth under the caption 'Management of the
Fund--Management and Advisory Arrangements' in the Prospectus constituting Part
A of the Registration Statement and under the caption 'Management of the
Fund--Management and Advisory Arrangements' in the Statement of Additional
Information constituting Part B of the Registration Statement, Registrant is not

a party to any management-related services contract.

ITEM 32. UNDERTAKINGS.

(a) Not applicable.

(b) Not applicable.

(c) Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders
upon request and without charge.

C-6

<PAGE>
SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE
INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT CERTIFIES THAT IT MEETS ALL OF
THE REQUIREMENTS FOR EFFECTIVENESS OF THIS AMENDMENT TO ITS REGISTRATION
STATEMENT PURSUANT TO RULE 485(b) OF THE SECURITIES ACT OF 1933 AND HAS DULY
CAUSED THIS AMENDMENT TO ITS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE TOWNSHIP OF PLAINSBORO,
AND STATE OF NEW JERSEY, ON THE 27TH DAY OF MARCH, 1996.

MERRILL LYNCH U.S. TREASURY MONEY FUND
(Registrant)

By: /s/ TERRY K. GLENN
----------------------------------
(Terry K. Glenn, Executive Vice
President)

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATE(S) INDICATED.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------- ------------------------- --------------

<S> <C> <C>
ARTHUR ZEIKEL* President and Trustee March 27, 1996
- ------------------------- (Principal Executive
(Arthur Zeikel) Officer)
GERALD M. RICHARD*
- -------------------------
(Gerald M. Richard) Treasurer (Principal March 27, 1996
Financial and
Accounting Officer)
DONALD CECIL* Trustee
- -------------------------
(Donald Cecil)

M. COLYER CRUM* Trustee
- -------------------------
(M. Colyer Crum)

EDWARD H. MEYER* Trustee
- -------------------------

(Edward H. Meyer)

JACK B. SUNDERLAND* Trustee
- -------------------------
(Jack B. Sunderland)

J. THOMAS TOUCHTON* Trustee
- -------------------------
(J. Thomas Touchton)

*By /s/TERRY K. GLENN March 27, 1996
- -------------------------
(Terry K. Glenn,
Attorney-in-Fact)
</TABLE>

C-7

<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- --------------------------------------------------------------------------------------------------------
<S> <C>
10 --Opinion of Brown & Wood, counsel for the Registrant
11 --Consent of Deloitte & Touche LLP, independent auditors for the Registrant
17 --Financial Data Schedule for the fiscal year ended November 30, 1995
</TABLE>

BROWN & WOOD
ONE WORLD TRADE CENTER
NEW YORK, NEW YORK 10048-0557
TELEPHONE: 212-839-5300
FACSIMILE: 212-839-5599

March 28, 1996

Merrill Lynch U.S. Treasury Money Fund
800 Scudders Mill Road
Plainsboro, New Jersey 08536

Dear Sir or Madam:

This opinion is furnished in connection with the
registration by Merrill Lynch U.S. Treasury Money Fund, a
Massachusetts business trust (the "Fund"), of 48,740,448 shares
of beneficial interest, par value $0.10 per share (the "Shares"),
under the Securities Act of 1933 pursuant to a registration
statement on Form N-1A (File No. 33-37537), as amended (the
"Registration Statement").

As counsel for the Fund, we are familiar with the
proceedings taken by it in connection with the authorization,
issuance and sale of the Shares. In addition, we have examined
and are familiar with the Declaration of Trust of the Fund, the
By-Laws of the Fund and such other documents as we have deemed
relevant to the matters referred to in this opinion.

Based upon the foregoing, we are of the opinion that the
Shares, upon issuance and sale in the manner referred to in the
Registration Statement for consideration not less than the par
value thereof, will be legally issued, fully paid and non-
assessable, except that shareholders of the Fund may, under
certain circumstances, be held personally liable for the Fund's
obligations.

In rendering this opinion, we have relied as to matters of
Massachusetts law upon an opinion of Bingham, Dana & Gould
rendered to the Fund.

We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement and to the use of our name
in the prospectus and the statement of additional information
constituting parts thereof.

Very truly yours,

/s/ BROWN & WOOD

INDEPENDENT AUDITORS' CONSENT

Merrill Lynch U.S. Treasury Money Fund:

We consent to the use in Post-Effective Amendment No. 6 to Registration
Statement No. 33-37537 of our report dated January 5, 1996 appearing in the
Statement of Additional Information, which is a part of such Registration
Statement, and to the reference to us under the caption "Financial Highlights"
appearing in the Prospectus, which also is a part of such Registration
Statement.

/s/ DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Princeton, New Jersey
March 27, 1996

<ARTICLE> 6
<CIK> 0000869663
<NAME> MERRILL LYNCH U.S. TREASURY MONEY FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> DEC-01-1994
<PERIOD-END> NOV-30-1995
<INVESTMENTS-AT-COST> 56835418
<INVESTMENTS-AT-VALUE> 56841364
<RECEIVABLES> 47412
<ASSETS-OTHER> 41556
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 56930332
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 611939
<TOTAL-LIABILITIES> 611939
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 56312447
<SHARES-COMMON-STOCK> 56312447
<SHARES-COMMON-PRIOR> 57207779
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5946
<NET-ASSETS> 56318393
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3466655
<OTHER-INCOME> 0
<EXPENSES-NET> 504957
<NET-INVESTMENT-INCOME> 2961698
<REALIZED-GAINS-CURRENT> 27069
<APPREC-INCREASE-CURRENT> 29282
<NET-CHANGE-FROM-OPS> 3018049
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2961698
<DISTRIBUTIONS-OF-GAINS> 27069
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 162573091
<NUMBER-OF-SHARES-REDEEMED> 166444550
<SHARES-REINVESTED> 2976127
<NET-CHANGE-IN-ASSETS> (866050)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 305869
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 719066
<AVERAGE-NET-ASSETS> 61173849
<PER-SHARE-NAV-BEGIN> 1.00

<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .05
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.18
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>