<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 25, 1997
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. 7 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 9 /X/
(CHECK APPROPRIATE BOX OR BOXES)
------------------------
MERRILL LYNCH U.S. TREASURY MONEY FUND
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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:
COUNSEL FOR THE FUND: PHILIP L. KIRSTEIN, ESQ.
BROWN & WOOD LLP 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.
------------------------
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 24, 1997.
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)............ 57,439,552 $1.00 $57,439,552 $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 165,055,231 shares of beneficial interest.
(3) 107,945,679 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) 57,109,552 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
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
- -------------------------------------------- --------------------------------
<S> <C> <C>
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.......................... Yield Information
Item 23. Financial Statements............ Financial Statements; Yield
Information
</TABLE>
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 25, 1997
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 that seeks preservation of capital,
liquidity and current income through investment exclusively in a diversified
portfolio of short-term marketable securities that are direct obligations of the
U.S. Treasury. For purposes of its investment policies, the Fund defines
short-term marketable securities that are direct obligations of the U.S.
Treasury as any U.S. Treasury obligations that have 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 BlueprintSM Program is $500 (or
$50 if the shareholder elects to participate in the automatic investment of sale
proceeds option on the Merrill Lynch BlueprintSM 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 that 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 NOR HAS THE SECURITIES AND EXCHANGE 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 25, 1997 (the 'Statement of Additional
Information'), has been filed with the Securities and Exchange Commission (the
'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
<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES (AS A
PERCENTAGE OF AVERAGE NET ASSETS)
FOR THE FISCAL YEAR ENDED NOVEMBER
30, 1996:
Management Fees(a)................. 0.50%
Rule 12b-1 Fees(b)................. 0.13%
Other Expenses(c).................. 0.49%
--
Total Fund Operating Expenses(d)... 1.12%
--
--
</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) Merrill Lynch Asset Management, L.P. (the 'Manager') voluntarily elected to
waive $195,829 of its management fee for the fiscal year ended November 30,
1996. 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, 1996 was 0.77%.
<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 1.12% and a 5%
annual return throughout the
periods............................ $ 11 $ 36 $ 62 $ 136
</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
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.
2
<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 fiscal
year ended November 30, 1996 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 NOV.
VALUE: 1996 1995 1994 1993 1992 30, 1991
------- ------- ------- ------- ------- --------------
<S> <C> <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 $ 1.00
------- ------- ------- ------- ------- --------------
Investment income--net........... .0447 .0484 .0317 .0262 .0312 .0328
Realized and unrealized gain
(loss) on investments--net..... .0003 .0009 (.0002) .0010 .0014 .0029
------- ------- ------- ------- ------- --------------
Total from investment operations... .0450 .0493 .0315 .0272 .0326 .0357
------- ------- ------- ------- ------- --------------
Less dividends and distributions:
Investment income--net........... (.0447) (.0484) (.0317) (.0262) (.0312) (.0328)
Realized gain on
investments--net............... (.0004) (.0004) (.0002) (.0004) (.0020) (.0029)++
------- ------- ------- ------- ------- --------------
Total dividends and
distributions.................... (.0451) (.0488) (.0319) (.0266) (.0332) (.0357)
------- ------- ------- ------- ------- --------------
Net asset value, end of period..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- --------------
------- ------- ------- ------- ------- --------------
Total Investment Return............ 4.63% 4.99% 3.22% 2.69% 3.37% 5.58%*
------- ------- ------- ------- ------- --------------
------- ------- ------- ------- ------- --------------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement..... .77% .83% .71% .53% .65% .39%*
------- ------- ------- ------- ------- --------------
------- ------- ------- ------- ------- --------------
Expenses........................... 1.12% 1.18% 1.06% .96% 1.16% 1.55%*
------- ------- ------- ------- ------- --------------
------- ------- ------- ------- ------- --------------
Investment income and realized gain
on investments--net.............. 4.55% 4.89% 3.16% 2.66% 3.41% 5.45%*
------- ------- ------- ------- ------- --------------
------- ------- ------- ------- ------- --------------
SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)....................... $47,945 $56,318 $57,184 $70,544 $80,978 $ 94,301
------- ------- ------- ------- ------- --------------
------- ------- ------- ------- ------- --------------
</TABLE>
- ---------------
* Annualized.
+ Commencement of Operations.
++ Includes unrealized gain (loss).
3
<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 28, 1997 NOVEMBER 30, 1996
------------------ ------------------
<S> <C> <C>
Annualized Yield:
Including gains and losses......... 4.56% 4.48%
Excluding gains and losses......... 4.45% 4.48%
Compounded Annualized Yield............. 4.67% 4.59%
Average maturity of portfolio at end of
period................................ 64 days 70 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
obligations, average portfolio maturity and operating expenses. Current yield
information may not provide a basis for comparison with bank deposits or other
investments that 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 that 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 a 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 potentially more risky money market securities.
For purposes of its investment objectives, the Fund defines short-term
marketable securities that are direct obligations of the U.S. Treasury as any
U.S. Treasury obligations that have 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, 1996, the average
maturity of its portfolio ranged from 34 days to 86 days.
Investment in Fund shares offers several potential 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 the reduced risk that generally results from
diversification of assets. The shareholder is also relieved from the
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
Emeritus, 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
investment 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 28, 1997, the Manager and FAM had a total of
approximately $248.2 billion in investment company and other portfolio assets
under management, including accounts of certain affiliates of the Manager.
The Fund's management 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 the Manager
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
6
<PAGE>
administrative services and provides all of the office space, facilities,
equipment and necessary personnel for portfolio management of the Fund.
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, 1996, the total management fee payable by the Fund to the Manager
aggregated $279,756 (based on average net assets of approximately $56.1
million).
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, 1996, the
Fund paid $29,737 to the Manager in connection with accounting services, and the
ratio of total expenses to average net assets was 1.12%.
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 Fund 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. The term 'account'
includes a shareholder account maintained directly by the Transfer Agent and any
other account representing the beneficial interest of a person in the shares in
a recordkeeping system, provided the recordkeeping system is maintained by a
subsidiary of ML & Co. For the fiscal year ended November 30, 1996, the total
fee paid by the Fund to the Transfer Agent pursuant to the Transfer Agency
Agreement was $28,229.
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.
7
<PAGE>
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 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 that
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 that 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 that they have received. Checks should be made payable
to Merrill Lynch Financial Data Services, Inc. Certified checks
8
<PAGE>
are not necessary, but checks are accepted subject to collection at full face
value in U.S. funds and must be drawn in 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, 1996, $66,020 was
paid to Merrill Lynch pursuant to the Plan (based on average net assets subject
to the Plan of $56.1 million).
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 (the 'NYSE') 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
Writing 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 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 toll-free at (800) 221-7210. 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 toll-free at (800) 637-3766. 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 that 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, as amended, 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. Unless
otherwise requested, in those instances where shareholders request transactions
that settle on a 'same-day' basis (such as Federal funds wire redemptions,
branch office checks, transfers to other Merrill Lynch accounts and certain
securities transactions) the Fund shares necessary to effect such transactions
will be deemed to have been transferred to Merrill Lynch prior to the Fund's
declaration of dividends on that day. In such instances, shareholders will
receive all dividends declared and reinvested through the date immediately
preceding 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 investments will not be
applicable.
11
<PAGE>
SHAREHOLDER SERVICES
The Fund offers a number of shareholder services, described below, that are
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 toll-free at
(800) 221-7210. 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. U.S. 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 certain of the MLAM-advised
mutual funds if the shareholder holds any Class A shares of a fund in the
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 other 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
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>
FEE-BASED PROGRAMS
Fund shares may be held in certain Merrill Lynch fee-based programs,
including pricing alternatives for securities transactions (each referred to in
this paragraph as a 'Program'). These Programs generally prohibit such shares
from being transferred to another account at Merrill Lynch, to another
broker-dealer or to the Transfer Agent. Except in limited circumstances (which
may also involve an exchange as described above), such shares must be redeemed
and new shares purchased in order for the investment not to be subject to
Program fees. Additional information regarding a specific Program (including
charges and limitations on transferability applicable to shares that may be held
in such Program) is available in such Program's client agreement and from
Merrill Lynch Investor Services at (800) MER-FUND (637-3863).
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 principals in the purchase and
sale of securities unless an exemptive order allowing such transactions is
obtained from the Commission. An affiliated person of the Fund may serve as its
broker in over-the-counter transactions conducted on an agency basis.
The 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, 1996, the Fund engaged in
3 transactions pursuant to such order in an aggregate amount of $15,689,851.
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 NYSE (generally 4:00 p.m., New York time), on each day
the NYSE 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.
13
<PAGE>
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 NYSE or New York banks are open for business. Such determination is made as
of the close of business on the NYSE (generally 4:00 p.m., New York time) or, on
days when the NYSE 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.
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'). As long as 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 that it distributes to
shareholders. The Fund intends to distribute substantially all of such income.
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).
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.
14
<PAGE>
If the value of assets held by the Fund declines, the Board of Trustees 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.
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
15
<PAGE>
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 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. toll-free 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.
16
<PAGE>
<TABLE>
<S> <C>
MERRILL LYNCH U.S. TREASURY MONEY FUND PURCHASE APPLICATION [ ][ ][ ] - [ ][ ][ ][ ][ ]
U.S. Treasury Money Fund Account Number
(If account is already established)
</TABLE>
<TABLE>
<S> <C>
TYPE OF ACCOUNT OWNER(S) AND OTHER INFORMATION
ACCOUNT INDIVIDUAL OR JOINT ACCOUNT
Check appropriate
box: ----------------------------------------------------------------------------------------------------
/ / Single First MI Last Name Tax ID or Social Security No.
/ / Joint
/ / UGMA/UTMA ----------------------------------------------------------------------------------------------------
/ / Estate Joint Tenant's First Name MI Last Name
/ / Trust* Joint tenants with rights of survivorship (not tenants in common) will be presumed
/ / Corporation* unless otherwise specified. No joint tenants with right of survivorship registrations
/ / Partnership* are permitted for residents of Louisiana.
/ / Transfer On ----------------------------------------------------------------------------------------------------
Death* GIFT/TRANSFER TO MINOR ACCOUNTS--UGMA/UTMA
/ / Other*
----------------------------------------------------------------------------------------------------
Custodian's Name (one only) Under Uniform Gift/Transfer to Minors Act of (State)
----------------------------------------------------------------------------------------------------
Minor's Name (one only) Minor's Social Security Number
----------------------------------------------------------------------------------------------------
FOR CERTAIN ACCOUNTS CORPORATE, PARTNERSHIP, TRUST OR OTHER ACCOUNTS
(*) ADDITIONAL
DOCUMENTATION MAY ----------------------------------------------------------------------------------------------------
BE REQUIRED, PLEASE Exact Name of Corporation, Partnership, or other Organization Taxpayer Identification Number
SEE ADDITIONAL
INFORMATION ON ----------------------------------------------------------------------------------------------------
PAGE 19 Trustee Accounts Only: Name(s) of all Trustee(s) required by trust agreement to sell/purchase shares
----------------------------------------------------------------------------------------------------
Date of Trust Agreement Taxpayer Identification Number of Trust
----------------------------------------------------------------------------------------------------
Name of Trust (Trust Registrations only) For the benefit of (Name of Beneficiary)
For multiple trustees, provide additional names required in registration on a separate sheet and
attach.
-----------------------------------------------------------------------------------------------------
MAILING ADDRESS
----------------------------------------------------------------------------------------------------
Street Address Apt. Number
----------------------------------------------------------------------------------------------------
City State Zip
( ) ( )
----------------------------------------------------------------------------------------------------
Daytime Phone Home Phone
Citizenship
/ / US / / Resident Alien / / Non Resident Alien (indicate Country of residence)
-----------------------------
</TABLE>
17
<PAGE>
<TABLE>
<S> <C>
CHECK I hereby request and authorize Merrill Lynch Financial Data Services, Inc. (the
WRITING 'Transfer Agent') to honor checks drawn by me on my Merrill Lynch U.S. Treasury Money
PRIVILEGE 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
Check box / / checks 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 any owner / / is authorized, or all owners / /
are required to sign checks.
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 in
your account to cover the amount of any check drawn by you. If insufficient shares are
in the account, the check will be returned marked insufficient funds.
Since the aggregate dollar value of your account fluctuates daily, the total value of
your account cannot be determined in advance and the account cannot be fully redeemed
by check. If the Check Redemption Privilege is being requested for an account in the
name of a corporation, trust or other organization, additional documents will be
required. (See ADDITIONAL INFORMATION on pg. 19)
- ---------------------------------------------------------------------------------------------------------------------
FEDERAL The undersigned hereby authorize(s) and direct(s) Merrill Lynch Financial Data
FUNDS Services, Inc. (the 'Transfer Agent') to act on telephonic, telegraphic, or other
REDEMPTION instructions (without signature guarantee) from any person representing himself to be
either the investor or any authorized representative of the investor, directing
Check box / / redemption of shares in an amount of $5,000.00 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
Signature Guarantee receive redemption proceeds shall require a signature guarantee. A national bank,
required for this option trust company or a member of the Federal Reserve system may guarantee a signature. A
commercial bank or trust company located in or having a correspondent in New York
City, a member firm of a national securities exchange or a member of the National
Association of Securities Dealers may also guarantee a signature. PLEASE NOTE THAT A
NOTARY PUBLIC'S SEAL DOES NOT CONSTITUTE A SIGNATURE GUARANTEE. The investor
understands and agrees that the Fund and 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 ADDITIONAL INFORMATION on pg. 19 to establish this
privilege). Absent its own negligence, and so long as reasonable procedures
to confirm the validity of telephone instructions are employed, neither the
Fund nor the Transfer Agent 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.
PLEASE PROVIDE THE FOLLOWING INFORMATION IF THE ABOVE BOX IS CHECKED. Your bank must
be a member of the Federal Reserve or have a correspondent banking relation with a
bank that does belong to the Federal Reserve.
ENCLOSE A COPY OF YOUR PERSONAL CHECK (MARKED 'VOID') FOR THE BANK ACCOUNT LISTED
BELOW:
-------------------------------------------------------------------------------------
Your Bank Name Bank Routing Code
-------------------------------------------------------------------------------------
Your Account Name Your Account Number
-------------------------------------------------------------------------------------
Your Bank Address City State Zip
Code
-------------------------------------------------------------------------------------
Correspondent Bank Name Routing Code
(complete if your bank is not a member of the Federal Reserve)
</TABLE>
18
<PAGE>
<TABLE>
<S> <C>
ACCRUED MONTHLY The undersigned hereby authorizes and directs Merrill Lynch Financial Data Services, Inc.
PAYOUT PLAN to redeem on the last Friday of the month all shares purchased during such month through the daily
reinvestment of dividends and distributions and send the proceeds to me.
Check box / /
- -----------------------------------------------------------------------------------------------------------------------------------
SYSTEMATIC To establish this feature minimum balance requirements are: $10,000.00 for monthly
WITHDRAWAL PLAN disbursements and $5,000.00 for quarterly disbursements of shares in Merrill Lynch U.S. Treasury Money
Fund at cost or current offering price. IN ADDITION, YOUR SIGNATURE(S) MUST BE GUARANTEED TO ESTABLISH
THIS PLAN. A national bank, trust company or a member of the Federal Reserve system may guarantee a
signature. A commercial bank or trust company located in or having a correspondent in New York City, a
member firm of a national securities exchange or a member of the National Association of Securities
Dealers may also guarantee a signature. PLEASE NOTE THAT A NOTARY PUBLIC'S SEAL DOES NOT CONSTITUTE
Check box / / This option is only available if you do not select the Accrued Monthly Payout Plan. The undersigned
hereby authorizes and directs Merrill Lynch Financial Data Services, Inc. on (check only one in each
category):
A: / / the 24th of each month OR
/ / March 24th, June 24th, September 24th, and December 24th
Signature Guarantee B: / / to redeem a sufficient number of shares in my account to generate redemption
required for this option. proceeds of $ OR
/ / to redeem % of the shares in my account on such date.
C: / / Pay the redemption proceeds by check payable to the order of
the registered owner(s) OR
/ / other
--------------------------------------------------------------------------------------------------------
Name
--------------------------------------------------------------------------------------------------------
Address
--------------------------------------------------------------------------------------------------------
City State Zip Code
ADDITIONAL
INFORMATION
/ / Corporations--'Certification of Corporate Resolution,' indicating the names and
titles of officers authorized to write checks, must be signed by an officer other than
one empowered to execute transactions, with his/her 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 Agreements is to be
executed by a general partner with his/her 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/her signature guaranteed.
/ / Transfer On Death--'Transfer on Death Beneficiary Form,' must be completed by the
account holder(s) with the signature(s) guaranteed.
/ / If you are adding or reinstating the Federal Funds Redemption and/or the Systematic
Withdrawal Plan options, the signature(s) must be guaranteed in the space provided below.
A national bank, trust company or a member of the Federal Reserve system may
guarantee a signature. A commercial bank or trust company located in or having a
correspondent in New York City, a member firm of the National Securities Exchange or
a member of the National Association of Securities Dealers may also guarantee a
signature. PLEASE NOTE THAT A NOTARY PUBLIC'S SEAL DOES NOT CONSTITUTE A SIGNATURE
GUARANTEE.
</TABLE>
19
<PAGE>
<TABLE>
<S> <C>
REQUIRED By the execution of this Purchase Application, the investor represents and warrants
SIGNATURES 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 has received a current Fund Prospectus and appoints Merrill
Lynch Financial Data Services, Inc. as his agent to receive dividends and
distributions for their automatic reinvestment in additional Fund shares.
X ------------------------------ ------------------------------------------- -------------
Print Name Signature of Investor Date
X ------------------------------ ------------------------------------------- -------------
Print Name Signature of Joint Registrant, if any Date
Signature(s) Guaranteed: (for those electing the Federal Funds Redemption or
Systematic Withdrawal Plan)
AFFIX SIGNATURE GUARANTEE HERE:
By:--------------------------------------------------
(Authorized Signatory)
TAX CERTIFICATION Under penalty of perjury, I certify that:
1. The number shown on this form is my correct Taxpayer Identification Number (or I am
waiting for a number to be issued to me), and 2. I am not subject to backup
withholding (as discussed in the Prospectus under 'Additional Information--Taxes')
either because: (a) I am exempt from backup withholding, or (b) I have not been
notified by the Internal Revenue Service ('IRS') that I am subject to backup
withholding as a result of failure to report all interest or dividends, or (c) the IRS
has notified me that I am no longer subject to backup withholding.
Please check box and write in the word exempt if you are exempt from backup
withholding / /.
---------------------
CERTIFICATION INSTRUCTIONS: You must cross out item 2 above if you have been notified
by the IRS that you are currently subject to backup withholding because of
underreporting interest or dividends on your tax return. By your signature below, you
authorize the furnishing of this certification to other mutual funds sponsored by
Merrill Lynch Asset Management or its affiliates.
X ---------------------------- ------------- ------------------------------------------
Signature Date Title (For Special Accounts, e.g. Trustee)
</TABLE>
20
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21
<PAGE>
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22
<PAGE>
[This page intentionally left blank]
23
<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 LLP
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
<TABLE>
<CAPTION>
PAGE
--
<S> <C>
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
Fee-Based Programs............ 13
Portfolio Transactions........ 13
Additional Information........ 13
Dividends................... 13
Determination of Net Asset
Value.................... 14
Taxes....................... 14
Organization of the Fund.... 15
Shareholder Inquiries....... 16
Shareholder Reports......... 16
Purchase Application.......... 17
</TABLE>
Code #11624-0397
[Artwork]
[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 25, 1997
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
------------------------
Merrill Lynch U.S. Treasury Money Fund (the 'Fund') is a no-load,
diversified, open-end investment company that seeks preservation of capital,
liquidity and current income through investment exclusively in a diversified
portfolio of short-term marketable securities that are direct obligations of the
U.S. Treasury. For purposes of its investment policies, the Fund defines
short-term marketable securities that are direct obligations of the U.S.
Treasury as any U.S. Treasury obligations that have 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 Fund pays Merrill Lynch, Pierce, Fenner &
Smith Incorporated ('Merrill Lynch') a distribution fee for providing certain
services in connection with the distribution of Fund shares. See 'Purchase of
Shares.'
------------------------
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
25, 1997 (the 'Prospectus'), which has been filed with the Securities and
Exchange Commission (the '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 25, 1997.
<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 that have maturities of 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
Information about the Trustees and executive officers of the Fund,
including their ages and their principal occupations for at least the last five
years, is set forth below. Unless otherwise noted, the address of each Trustee
and executive officer is c/o Merrill Lynch Asset Management, P.O. Box 9011,
Princeton, New Jersey 08543-9011.
ARTHUR ZEIKEL (64)--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') since 1977.
DONALD CECIL (70)--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 (64)--Trustee (2)--Soldiers Field Road, Boston,
Massachusetts 02163. Currently James R. Williston Professor of Investment
Management Emeritus, Harvard Business School; James R. Williston
2
<PAGE>
Professor of Investment Management, Harvard Business School, from 1971 to 1996;
Director of Cambridge Bancorp, Copley Properties, Inc. and Sun Life Assurance
Company of Canada.
EDWARD H. MEYER (70)--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 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 (68)--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 (58)--Trustee (2)--Suite 3405, One Tampa City Center,
201 North Franklin Street, 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 (56)--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. (48)--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 (43)--Vice President (1)(2)--Vice President of the Manager since
1984.
DONALD C. BURKE (36)--Vice President (1)(2)--Vice President and Director of
Taxation of the Manager since 1990.
GERALD M. RICHARD (47)--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 (50)--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 28, 1997 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 Trustee
not affiliated with the Manager (each a 'non-interested 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 and Nominating Committee of the Board of
Trustees that consists of all of the non-interested Trustees. 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 fees and expenses paid to
the non-interested Trustees that were allocated to the Fund aggregated $59,222
for the fiscal year ended November 30, 1996.
The following table sets forth, for the fiscal year ended November 30, 1996,
compensation paid by the Fund to the non-interested Trustees and, for the
calendar year ended December 31, 1996, the aggregate compensation paid by all
registered 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 $268,933
M. Colyer Crum(1)........ $ 11,500 None $117,600
Edward H. Meyer(1)....... $ 11,500 None $227,933
Jack B. Sunderland(1).... $ 11,500 None $128,100
J. Thomas Touchton(1).... $ 11,500 None $128,100
</TABLE>
- ------------------
<TABLE>
<S> <C>
(1) The Trustees serve on the boards of MLAM/FAM Advised Funds as follows: Mr. Cecil (32 registered investment
companies consisting of 32 portfolios), Mr. Crum (14 registered investment companies consisting of 14
portfolios), Mr. Meyer (32 registered investment companies consisting of 32 portfolios), Mr. Sunderland (16
registered investment companies consisting of 25 portfolios) and Mr. Touchton (16 registered investment
companies consisting of 25 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, 1994, 1995 and 1996, the total management fees payable by the Fund
to the Manager aggregated $337,407, $305,869 and $279,756, respectively. For the
fiscal years ended November 30, 1994, 1995 and 1996, the Manager voluntarily
waived $236,185, $214,109 and $195,829 of its fee, respectively. This voluntary
waiver may be withdrawn by the Manager at any time and without prior notice.
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 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,
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, 1996, the Fund paid $29,737 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 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 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.
5
<PAGE>
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 the 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 which are covered under the Management Agreement (see 'Management
of the Fund-- Management and Advisory Arrangements').
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,
1996, $66,020 was paid to Merrill Lynch pursuant to the Plan (based on average
net assets subject to the Plan of $56.1 million). All
6
<PAGE>
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 (the 'NYSE') is closed other than customary weekend
and holiday closings or (b) during which trading on the NYSE 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 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.
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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
sales of securities held in the Retirement Plan account that 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
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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 that 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 that 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
('OTC') 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 principals 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 principals in the purchase and sale of
securities unless an exemptive order allowing such transactions is obtained from
the Commission. Since OTC transactions are usually principal transactions,
affiliated persons of the Fund, including GSI and Merrill Lynch, 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 OTC transactions conducted on an agency basis.
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The 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. During the fiscal year ended November
30, 1996, the Fund engaged in three such transactions aggregating approximately
$15.7 million.
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 exemptive
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 business day
during which the NYSE or New York banks are open for business. Such
determination is made as of the close of business on the NYSE (generally 4:00
p.m., New York time) or, on days when the NYSE 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 business day except for days on which both the NYSE and
New York banks are closed. Both the NYSE 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.
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.
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In accordance with the 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 U.S. Treasury obligations that
have maturities of not more than 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 that 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 Commission, the Fund is required to disclose its
annualized yield for certain seven-day periods in a standardized manner that
does not take into consideration any realized or unrealized gains or losses on
portfolio securities. The 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 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
obligations, average portfolio maturity 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.
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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 toll-free at (800)
221-7210. 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.
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.
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<PAGE>
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 NYSE 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
that 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 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
certain 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
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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 the 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 certain Merrill Lynch fee-based programs; 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 the following money market funds: Merrill Lynch Ready Assets Trust, Merrill
Lynch Retirement Reserves Money Fund (available only if the exchange occurs
within retirement plans) and Merrill Lynch U.S.A. Government Reserves.
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.
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
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<PAGE>
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 Commission. The Fund reserves the right to limit the
number of times an 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
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'). As long as 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 that it distributes to
shareholders. The Fund intends to distribute substantially all of such income.
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 shareholder's shares and,
after such adjusted tax basis is reduced to zero, will constitute capital gains
to such shareholder (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 that 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 Trustees 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
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applicable treaty law. Nonresident shareholders are urged to consult their
own tax advisers concerning the applicability of the United States withholding
tax.
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 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.
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
that 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.
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
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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 of 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 the Declaration of Trust
without the affirmative vote of a majority of the outstanding shares of the
Fund.
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, which is a subsidiary of
ML & Co., acts as the Fund's transfer agent pursuant to a transfer agency,
shareholder servicing agency and proxy agency agreement (the 'Transfer Agency
Agreement').
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 LLP, 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.
17
<PAGE>
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 Commission, Washington,
D.C., under the Securities Act of 1933, as amended, 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, 1997.
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.
18
<PAGE>
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
Merrill Lynch U.S. Treasury Money Fund:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Merrill Lynch
U.S. Treasury Money Fund as of November 30, 1996, 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 five-year
period then ended. 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, 1996 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, l996, 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.
<PAGE>
Deloitte & Touche LLP
Princeton, New Jersey
January 3, 1997
</AUDIT-REPORT>
19
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
Face Interest Maturity Value
Issue Amount Rate Date (Note 1a)
US Government Obligations--99.6%
<S> <C> <C> <C> <C>
US Treasury Bills* $ 937 5.10 % 12/19/96 $ 934
4,038 5.11 12/19/96 4,027
3,932 5.135 12/19/96 3,921
170 5.155 12/19/96 169
3,000 5.18 12/26/96 2,989
2,100 5.02 1/30/97 2,082
713 5.015 2/06/97 706
98 5.02 2/06/97 97
375 5.00 2/13/97 371
6,000 5.01 2/13/97 5,937
2,500 5.02 2/13/97 2,474
3,125 5.03 2/27/97 3,086
369 5.11 3/13/97 364
2,100 5.14 3/13/97 2,070
366 5.065 4/10/97 359
2,099 5.075 4/10/97 2,060
1,129 5.095 4/10/97 1,108
2,000 5.10 4/10/97 1,963
US Treasury Notes 7,000 7.50 1/31/97 7,024
6,000 6.875 2/28/97 6,023
Total US Government Obligations (Cost--$47,762) 47,764
Total Investments (Cost--$47,762)--99.6% 47,764
Other Assets Less Liabilities--0.4% 181
-------
Net Assets--100.0% $47,945
=======
<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>
20
<PAGE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of November 30, 1996
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$47,761,714*)(Note 1a) $ 47,763,781
Cash 2,259
Receivables:
Interest $ 275,178
Beneficial interest sold 10,655 285,833
-------------
Prepaid registration fees and other assets (Note 1d) 32,872
-------------
Total assets 48,084,745
-------------
Liabilities: Payables:
Beneficial interest redeemed 43,080
Distributor (Note 2) 10,878
Investment adviser (Note 2) 5,860
Dividends to shareholders (Note 1e) 4 59,822
-------------
Accrued expenses and other liabilities 79,513
-------------
Total liabilities 139,335
-------------
Net Assets: Net assets $ 47,945,410
=============
Net Assets Shares of beneficial interest, $.10 par value, unlimited number of
Consist of: shares authorized $ 4,794,334
Paid-in capital in excess of par 43,149,009
Unrealized appreciation on investments--net 2,067
-------------
Net assets--Equivalent to $1.00 per share based on 47,943,343 shares
of beneficial interest outstanding $ 47,945,410
=============
<FN>
*Cost for Federal income tax purposes. As of November 30, 1996, net
unrealized appreciation for Federal income tax purposes amounted to
$2,067, of which $3,608 related to appreciated securities and $1,541
related to depreciated securities.
See Notes to Financial Statements.
</TABLE>
21
<PAGE>
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended November 30, 1996
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 2,958,810
(Note 1c):
Expenses: Investment advisory fees (Note 2) $ 279,756
Distribution fees (Note 2) 66,020
Professional fees 61,458
Trustees' fees and expenses 59,222
Registration fees (Note 1d) 54,667
Printing and shareholder reports 33,224
Accounting services (Note 2) 29,737
Transfer agent fees (Note 2) 28,229
Custodian fees 9,112
Amortization of organization expenses (Note 1d) 4,176
Other 944
-------------
Total expenses before reimbursement 626,545
Reimbursement of expenses (Note 2) (195,829)
-------------
Total expenses after reimbursement 430,716
-------------
Investment income--net 2,528,094
-------------
Realized & Realized gain on investments--net 22,095
Unrealized Gain Change in unrealized appreciation on investments--net (3,879)
(Loss) on -------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 2,546,310
(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: 1996 1995
<S> <C> <C> <C>
Operations: Investment income--net $ 2,528,094 $ 2,961,698
Realized gain on investments--net 22,095 27,069
Change in unrealized appreciation/depreciation on
investments--net (3,879) 29,282
------------- -------------
Net increase in net assets resulting from operations 2,546,310 3,018,049
------------- -------------
<PAGE>
Dividends & Investment income--net (2,528,094) (2,961,698)
Distributions to Realized gain on investments--net (22,095) (27,069)
Shareholders ------------- -------------
(Note 1e): Net decrease in net assets resulting from dividends and
distributions to shareholders (2,550,189) (2,988,767)
------------- -------------
Beneficial Net proceeds from sale of shares 154,142,818 162,573,091
Interest Net asset value of shares issued to shareholders in
Transactions reinvestment of dividends and distributions (Note 1e) 2,543,309 2,976,127
(Note 3): ------------- -------------
156,686,127 165,549,218
Cost of shares redeemed (165,055,231) (166,444,550)
------------- -------------
Net decrease in net assets derived from beneficial interest
transactions (8,369,104) (895,332)
------------- -------------
Net Assets: Total decrease in net assets (8,372,983) (866,050)
Beginning of year 56,318,393 57,184,443
------------- -------------
End of year $ 47,945,410 $ 56,318,393
============= =============
See Notes to Financial Statements.
</TABLE>
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements.
For the Year Ended November 30,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Operating ------- ------- ------- ------- -------
Performance: Investment income--net .0447 .0484 .0317 .0262 .0312
Realized and unrealized gain (loss) on
investments--net .0003 .0009 (.0002) .0010 .0014
------- ------- ------- ------- -------
Total from investment operations .0450 .0493 .0315 .0272 .0326
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net (.0447) (.0484) (.0317) (.0262) (.0312)
Realized gain on investments--net (.0004) (.0004) (.0002) (.0004) (.0020)
------- ------- ------- ------- -------
Total dividends and distributions (.0451) (.0488) (.0319) (.0266) (.0332)
------- ------- ------- ------- -------
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total investment return 4.63% 4.99% 3.22% 2.69% 3.37%
======= ======= ======= ======= =======
<PAGE>
Ratios to Average Expenses, net of reimbursement .77% .83% .71% .53% .65%
Net Assets: ======= ======= ======= ======= =======
Expenses 1.12% 1.18% 1.06% .96% 1.16%
======= ======= ======= ======= =======
Investment income and realized gain
on investments--net 4.55% 4.89% 3.16% 2.66% 3.41%
======= ======= ======= ======= =======
Supplemental Net assets, end of year (in thousands) $47,945 $56,318 $57,184 $70,544 $80,978
Data: ======= ======= ======= ======= =======
See Notes to Financial Statements.
</TABLE>
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch U.S. Treasury Money Fund (the "Fund") is registered
under the Investment Company Act of 1940 as a no load, diversified,
open-end management investment company. The following is a summary
of significant accounting policies followed by the Fund.
(a) Valuation of investments--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.
<PAGE>
(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 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 year ended November 30, 1996, MLAM earned fees of $279,756,
of which $195,829 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 year ended November
30, 1996, MLFD earned $66,020 under the Plan, all of which was paid
to MLPF&S pursuant to the agreement.
23
NOTES TO FINANCIAL STATEMENTS (concluded)
<PAGE>
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.
24
<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
Purchase by Retirement
Plans.................... 8
Redemptions by Retirement
Plans.................... 8
Confirmations............... 9
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..................... 12
Systematic Withdrawal
Plans.................... 13
Retirement Plans............ 13
Exchange Privilege.......... 13
Taxes......................... 15
General Information........... 16
Description of Shares....... 16
Custodian................... 17
Transfer Agent.............. 17
Independent Auditors........ 17
Legal Counsel............... 17
Reports to Shareholders..... 17
Additional Information...... 18
Independent Auditors'
Report...................... 19
Financial Statements.......... 20
</TABLE>
Code #11625-0397
[Artwork]
[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.
STATEMENT OF
ADDITIONAL
INFORMATION
MARCH 25, 1997
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 five-year period ended
November 30, 1996 and for the period April 15, 1991 (commencement of
operations) to November 30, 1991
Contained in Part B:
Schedule of Investments as of November 30, 1996
Statement of Assets and Liabilities as of November 30, 1996
Statement of Operations for the year ended November 30, 1996
Statements of Changes in Net Assets for each of the years in the two-year
period ended November 30, 1996
Financial Highlights for each of the years in the five-year period ended
November 30, 1996
(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 LLP, 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 BasicTM 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,
1996.
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 28, 1997
- ------------------------------------------------------- --------------------
<S> <C>
Shares of beneficial interest, par value $0.10 per
share................................................ 1,292
</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 the
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 Global Value Fund, Inc., Merrill
Lynch Growth Fund, Merrill Lynch Healthcare Fund, Inc., Merrill Lynch
Intermediate Government Bond 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 registered 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 registered 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 Emerging Tigers 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
registered investment companies: Apex Municipal Fund, Inc., Corporate High Yield
Fund, Inc., Corporate High Yield Fund II, 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 Florida Fund,
MuniVest Michigan Insured Fund, Inc., MuniVest New Jersey 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 Michigan Fund,
Inc., MuniYield Michigan Insured Fund, Inc., MuniYield New Jersey Fund, Inc.,
MuniYield New Jersey Insured Fund, Inc., MuniYield New York Insured Fund, Inc.,
MuniYield New York Insured Fund II, Inc., MuniYield Pennsylvania
C-3
<PAGE>
Fund, MuniYield Quality Fund, Inc., MuniYield Quality Fund II, Inc., Senior High
Income Portfolio, 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 is One Financial Center, 15th Floor, Boston,
Massachusetts 02111-2646. The address of the Manager, FAM, Princeton Services,
Inc. ('Princeton Services'), and Princeton Administrators, L.P. 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, 1994 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 General Partner General Partner of FAM
Services..........
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. Senior Vice President Senior Vice President of FAM;
Giordano.......... 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
Michael J. Senior Vice President Senior Vice President of FAM;
Hennewinkel....... Senior Vice President of
Princeton Services
Philip L. Senior Vice Senior Vice President, General
Kirstein.......... President, Counsel and Secretary of FAM;
General Counsel and Senior Vice President,
Secretary 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. Senior Vice President Executive Vice President of
Miller............ Princeton Administrators,
L.P.; Senior Vice President
of Princeton Services
Joseph T. Monagle, Senior Vice President Senior Vice President of FAM;
Jr................ Senior Vice President of
Princeton Services
Michael L. Quinn.... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services; Managing
Director and First Vice
President of Merrill Lynch
from 1985 to 1989
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL BUSINESS
POSITIONS WITH PROFESSION, VOCATION OR
NAME MANAGER EMPLOYMENT
- -------------------- --------------------- ------------------------------
Richard L. Reller... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services
<S> <C> <C>
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
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, 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
Michael G. Clark......... Vice President None
Mark A. DeSario.......... Vice President None
James T. Fatseas......... Vice President None
Michelle T. Lau.......... Vice President None
Debra W. Vice President None
Landsman-Yaros.........
Gerald M. Richard........ Vice President and Treasurer
Treasurer
Richard L. Rufener....... Vice President None
Salvatore Venezia........ Vice President None
William Wasel............ Vice President None
Robert Harris............ Secretary None
</TABLE>
(c) Not applicable.
C-5
<PAGE>
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.
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 24TH DAY OF MARCH, 1997.
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>
ARTHUR ZEIKEL* President and Trustee March 24, 1997
(Arthur Zeikel) (Principal
Executive Officer)
GERALD M. RICHARD* Treasurer (Principal March 24, 1997
(Gerald M. Richard) 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 24, 1997
(Terry K. Glenn,
Attorney-in-Fact)
</TABLE>
<PAGE>
APPENDIX FOR GRAPHIC AND IMAGE MATERIAL
Pursuant to Rule 304 of Regulation S-T, the following table
presents fair and accurate narrative descriptions of graphic and image
material omitted from this EDGAR Submission file due to
ASCII-incompatibility and cross-references this material to the location
of each occurence in the text.
DESCRIPTION OF OMITTED LOCATION OF GRAPHIC
GRAPHIC OR IMAGE OR IMAGE IN TEXT
- --------------------- -------------------
compass plate, circular Back cover of Prospectus and
graph paper and Merrill Lynch back cover of Statement of
logo including stylized market Additional Information
bull
C-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- --------------------------------------------------------------------------------------------------------
<S> <C>
10 --Opinion of Brown & Wood LLP, 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, 1996
</TABLE>
BROWN & WOOD LLP
ONE WORLD TRADE CENTER
NEW YORK, NEW YORK 10048-0557
TELEPHONE: (212) 839-5300
FACSIMILE: (212) 839-5599
March 25, 1997
Merrill Lynch U.S. Treasury Money Fund
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Dear Sirs and Mesdames:
This opinion is furnished in connection with the registration by
Merrill Lynch U.S. Treasury Money Fund, a Massachusetts business trust (the
"Trust") of 57,439,552 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 Trust, 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
Trust, the By-Laws of the Trust 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 Trust may under
certain circumstances be held personally liable for the Trust's obligations.
In rendering this opinion, we have relied as to matters of
Massachusetts law upon an opinion of Bingham, Dana & Gould, dated March 24,
1997, rendered to the Trust.
<PAGE>
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
statement of additional information constituting parts thereof.
Very truly yours,
/S/ BROWN & WOOD LLP
<PAGE>
INDEPENDENT AUDITORS' CONSENT
Merrill Lynch U.S. Treasury Money Fund
We consent to the use in Post-Effective Amendment No. 7 to
Registration Statement No. 33-37537 of our report dated January 3, 1997
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 21, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000869663
<NAME> MERRILL LYNCH U.S. TREASURY MONEY FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 47761714
<INVESTMENTS-AT-VALUE> 47763781
<RECEIVABLES> 285833
<ASSETS-OTHER> 35131
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 48084745
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 139335
<TOTAL-LIABILITIES> 139335
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 47943343
<SHARES-COMMON-STOCK> 47943343
<SHARES-COMMON-PRIOR> 56312447
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2067
<NET-ASSETS> 47945410
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2958810
<OTHER-INCOME> 0
<EXPENSES-NET> (430716)
<NET-INVESTMENT-INCOME> 2528094
<REALIZED-GAINS-CURRENT> 22095
<APPREC-INCREASE-CURRENT> (3879)
<NET-CHANGE-FROM-OPS> 2546310
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2528094)
<DISTRIBUTIONS-OF-GAINS> (22095)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 154142818
<NUMBER-OF-SHARES-REDEEMED> (165055231)
<SHARES-REINVESTED> 2543309
<NET-CHANGE-IN-ASSETS> (8372983)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 279756
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 626545
<AVERAGE-NET-ASSETS> 56090463
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .04
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.04)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.12
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
