MERRILL LYNCH
U.S. TREASURY
MONEY FUND
STRATEGIC
Performance
Semi-Annual Report
May 31, 1997
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless accompanied or
preceded by the Fund's current prospectus. Past performance results
shown in this report should not be considered a representation of future
performance, which will fluctuate. The Fund seeks to maintain a
consistent $1.00 net asset value per share, although this cannot be
assured. An investment in the Fund is neither insured nor guaranteed by
the US Government. Statements and other information herein are as dated
and are subject to change.
Merrill Lynch
U.S. Treasury Money Fund
Box 9011
Princeton, NJ
08543-9011 #13966 -- 5/97
Merrill Lynch U.S. Treasury Money Fund May 31, 1997
DEAR SHAREHOLDER
For the six-month period ended May 31, 1997, Merrill Lynch U.S. Treasury
Money Fund paid shareholders a net annualized dividend of 4.45%.* The
Fund's 7-day yield as of May 31, 1997 was 4.60%.
The average portfolio maturity for Merrill Lynch U.S. Treasury Money
Fund remained unchanged from November 30, 1996 to May 31, 1997 at
70 days.
The Environment
Stock and bond market turbulence increased during the six-month period
ended May 31, 1997. Mounting evidence of stronger-than-expected economic
growth suggested to investors that the Federal Reserve Board would make
a preemptive strike to contain inflationary pressures. These concerns
were heightened by statements made by Federal Reserve Board Chairman
Alan Greenspan, and culminated in an increase in the Federal Funds rate
of 0.25% to 5.50% on March 25. As investors became concerned that this
might prove to be only the first in a series of monetary policy
tightening moves, interest rates rose and stock and bond prices
declined.
Following the Federal Reserve Board's action, investor sentiment
fluctuated from negative to more positive, depending upon whether the
latest economic data releases were perceived to suggest an overheating
or moderating trend. Stock prices were given a boost following a series
of strong corporate earnings reports and the likelihood that a capital
gains tax cut would be part of the Federal balanced budget agreement.
Nonetheless, clear-cut signs of continued low inflation and moderate
economic growth, as well as no further indications of monetary policy
tightening, are probably needed to bring stability to the financial
markets. Another potential positive for the US financial markets would
be a successful conclusion to the Federal budget agreement currently
under discussion by Congress and the Clinton Administration. Despite
the interest rate hike in March, securities at the front end of the
yield curve remained well bid. Smaller Treasury bill auctions prompted
us to favor Treasury notes while enabling the Fund to follow a relatively
constructive strategy.
In Conclusion
We appreciate your interest in Merrill Lynch U.S. Treasury Money Fund,
and we look forward to assisting you with your financial needs in the
months and years ahead.
Sincerely,
/S/ARTHUR ZEIKEL
Arthur Zeikel
President
/S/JOHN NG
John Ng
Vice President and Portfolio Manager
June 24, 1997
* Based on a constant investment throughout the period, with dividends
compounded daily, and reflecting a net return to the investor after
all expenses.
Merrill Lynch U.S. Treasury Money Fund May 31, 1997
SCHEDULE OF INVESTMENTS (in Thousands)
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
US Government
Obligations -- 99.8%
US Treasury Bills $6,000 5.24% 6/17/97 $5,988
953 5.18 7/24/97 946
2,200 5.19 7/24/97 2,184
4,000 5.20 8/07/97 3,964
824 5.27 8/14/97 816
1,579 5.285 8/14/97 1,563
3,000 5.32 8/21/97 2,967
2,175 5.07 9/04/97 2,146
2,000 5.185 9/11/97 1,971
1,093 5.19 9/11/97 1,077
810 5.03 9/18/97 798
186 5.18 9/18/97 183
947 5.23 9/18/97 932
1,656 5.29 9/18/97 1,630
150 5.31 9/18/97 148
US Treasury Notes 6,300 5.50 7/31/97 6,304
9,500 5.875 7/31/97 9,512
3,000 5.75 9/30/97 3,004
Total US Government
Obligations (Cost -- $46,106) 46,133
Total Investments (Cost -- $46,106) -- 99.8% 46,133
Other Assets Less Liabilities -- 0.2% 109
-------
Net Assets -- 100.0% $46,242
=======
* US Treasury Bills are traded on a discount basis; the interest rates
shown are the discount rates paid at the time of purchase by the Fund.
US Treasury Notes bear interest at the rates shown, payable at fixed
rates or upon maturity.
See Notes to Financial Statements.
<TABLE>
<CAPTION>
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of May 31, 1997
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $46,106,006*)(Note 1a) $46,132,560
Cash 5,270
Receivables:
Securities sold $5,855,487
Interest 322,278 6,177,765
------------
Prepaid registration fees and other assets (Note 1d) 32,872
------------
Total assets 52,348,467
------------
Liabilities: Payables:
Securities purchased 5,987,774
Beneficial interest redeemed 72,757
Distributor (Note 2) 6,530
Investment adviser (Note 2) 5,767 6,072,828
------------
Accrued expenses and other liabilities 33,169
------------
Total liabilities 6,105,997
------------
Net Assets: Net assets $46,242,470
============
Net Assets Shares of beneficial interest, $.10 par value, unlimited number of
Consist of: shares authorized $4,621,592
Paid-in capital in excess of par 41,594,324
Unrealized appreciation on investments -- net 26,554
------------
Net assets -- Equivalent to $1.00 per share based on 46,215,916 shares
of beneficial interest outstanding $46,242,470
============
*Cost for Federal income tax purposes. As of May 31, 1997, net unrealized appreciation for Federal
income tax purposes amounted to $26,554, of which $26,604 related to appreciated securities and $50
related to depreciated securities.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Six Months Ended May 31, 1997
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned $1,529,428
(Note 1c):
Expenses: Investment advisory fees (Note 2) $144,359
Distribution fees (Note 2) 33,326
Trustees' fees and expenses 29,330
Registration fees (Note 1d) 26,593
Professional fees 25,731
Accounting services (Note 2) 17,526
Transfer agent fees (Note 2) 14,432
Printing and shareholder reports 14,063
Custodian fees 4,348
Other 10,194
------------
Total expenses before reimbursement 319,902
Reimbursement of expenses (Note 2) (101,051)
------------
Total expenses after reimbursement 218,851
------------
Investment income -- net 1,310,577
------------
Realized & Realized gain on investments -- net 8,060
Unrealized Gain on Change in unrealized appreciation on investments -- net 24,487
Investments -- Net ------------
(Note 1c): Net Increase in Net Assets Resulting from Operations $1,343,124
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
May 31, 1997 Nov. 30, 1996
Increase (Decrease) in Net Assets:
<S> <C> <C> <C>
Operations: Investment income -- net $1,310,577 $2,528,094
Realized gain on investments -- net 8,060 22,095
Change in unrealized appreciation/depreciation on investments -- net 24,487 (3,879)
------------ ------------
Net increase in net assets resulting from operations 1,343,124 2,546,310
------------ ------------
Dividends & Investment income -- net (1,310,577) (2,528,094)
Distributions to Realized gain on investments -- net (8,060) (22,095)
Shareholders ------------ ------------
(Note 1e): Net decrease in net assets resulting from dividends and distributions
to shareholders (1,318,637) (2,550,189)
------------ ------------
Beneficial Interest Net proceeds from sale of shares 122,255,093 154,142,818
Transactions Net asset value of shares issued to shareholders in reinvestment
(Note 3): of dividends and distributions (Note 1e) 1,314,314 2,543,309
------------ ------------
123,569,407 156,686,127
Cost of shares redeemed (125,296,834) (165,055,231)
------------ ------------
Net decrease in net assets derived from beneficial interest transactions (1,727,427) (8,369,104)
------------ ------------
Net Assets: Total decrease in net assets (1,702,940) (8,372,983)
Beginning of period 47,945,410 56,318,393
------------ ------------
End of period $46,242,470 $47,945,410
============ ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
For the
Six
Months
The following per share data and ratios have been derived Ended
from information provided in the financial statements. May 31, For the Year Ended November 30,
1997 1996 1995 1994 1993
Increase (Decrease) in Net Asset Value:
<S> <C> <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 .0227 .0447 .0484 .0317 .0262
Realized and unrealized gain (loss) on
investments -- net .0005 .0003 .0009 (.0002) .0010
-------- -------- -------- -------- --------
Total from investment operations .0232 .0450 .0493 .0315 .0272
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income -- net (.0227) (.0447) (.0484) (.0317) (.0262)
Realized gain on investments -- net (.0001) (.0004) (.0004) (.0002) (.0004)
-------- -------- -------- -------- --------
Total dividends and distributions (.0228) (.0451) (.0488) (.0319) (.0266)
-------- -------- -------- -------- --------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ======== ======== ========
Total investment return 4.45%* 4.63% 4.99% 3.22% 2.69%
======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement .76%* .77% .83% .71% .53%
Net Assets: ======== ======== ======== ======== ========
Expenses 1.11%* 1.12% 1.18% 1.06% .96%
======== ======== ======== ======== ========
Investment income and realized gain on
investments -- net 4.56%* 4.55% 4.89% 3.16% 2.66%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $46,242 $47,945 $56,318 $57,184 $70,544
Data: ======== ======== ======== ======== ========
* Annualized.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch U.S. Treasury Money Fund May 31, 1997
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 no load, diversified, open-end
management investment company. These unaudited financial statements
reflect all adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the interim period
presented. All such adjustments are of a normal recurring nature. The
following is a summary of significant accounting policies followed by
the Fund.
(a) Valuation of investments -- The Treasury securities in which the
Fund invests are traded primarily in the over-the-counter markets.
Except as set forth below, these securities are valued at the most
recent bid price or yield equivalent as obtained from dealers that make
markets in Treasury securities. When securities are valued with sixty
days or less to maturity, the difference between the valuation existing
on the sixty-first day before maturity and maturity value is amortized
on a straight-line basis to maturity. Investments maturing within sixty
days from their date of acquisition are valued at amortized cost, which
approximates market value. Assets for which market quotations are not
readily available are valued at fair value as determined in good faith
by or under the direction of the 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) Prepaid registration fees -- Prepaid registration fees are charged
to expense as the related shares are issued.
(e) Dividends and distributions to shareholders -- The Fund declares
dividends daily and reinvests daily such dividends in additional fund
shares at net asset value. Dividends and distributions 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
Plans with Merrill Lynch Funds Distributor, Inc. ("MLFD" or
"Distributor"), a wholly-owned subsidiary of Merrill Lynch Group, Inc.
MLAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at the annual rate of 0.50% of the
average daily net assets of the Fund.
For the six months ended May 31, 1997, MLAM earned fees of $144,359, of
which $101,051 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 services
relate to the sale, promotion, and marketing of the shares of the Fund.
For the six months ended May 31, 1997, MLFD earned $33,326 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, and/or ML & Co.
3. Shares of Beneficial Interest:
The number of shares purchased and redeemed during the periods
corresponds to the amounts included in the Statements of Changes in Net
Assets for net proceeds from sale of shares and cost of shares redeemed,
respectively, since shares are recorded at $1.00 per share.
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
Donald Cecil, Trustee
M. Colyer Crum, Trustee
Edward H. Meyer, Trustee
Jack B. Sunderland, Trustee
J. Thomas Touchton, Trustee
Terry K. Glenn, Executive Vice President
Joseph T. Monagle Jr., Senior Vice President
Donald C. Burke, Vice President
John Ng, Vice President
Gerald M. Richard, Treasurer
Custodian
The Bank of New York
90 Washington Street, 12th Floor
New York, NY 10286
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 221-7210
