MERRILL LYNCH U S TREASURY MONEY FUND, 485BPOS, 1998-02-27

MERRILL LYNCH U S TREASURY MONEY FUND
485BPOS, 1998-02-27

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 27, 1998

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. 8 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 10 [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)

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

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

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

---------------------
IT IS PROPOSED THAT THIS FILING 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.
---------------------

TITLE OF SECURITIES BEING REGISTERED: Shares of Beneficial Interest, par
value $.10 per share

================================================================================
<PAGE> 2

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....... General Information
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

PART C
</TABLE>

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> 3

PROSPECTUS

FEBRUARY 27, 1998

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 Blueprint(SM) Program is $500
(or $50 if the shareholder elects to participate in the automatic investment of
sale proceeds option on the Merrill Lynch Blueprint(SM) 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 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 February 27, 1998 (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 Commission maintains a
Website (http://www.sec.gov) that contains the Statement of Additional
Information, material incorporated by reference and other information regarding
the Fund. 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> 4

FEE TABLE

ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS) FOR THE
FISCAL YEAR ENDED NOVEMBER 30, 1997:

<TABLE>
<S> <C>
Management Fees(a)............................................................ 0.50%
Rule 12b-1 Fees(b)............................................................ 0.13%
Other Expenses(c)............................................................. 0.50%
----
Total Fund Operating Expenses(d).............................................. 1.13%
====
</TABLE>

- ---------------
(a) See "Management of the Fund -- Management and Advisory Arrangements" -- page
6.

(b) See "Purchase of Shares -- Distribution Plan" -- page 9.

(d) Merrill Lynch Asset Management, L.P. ("MLAM" or the "Manager") voluntarily
elected to waive $189,611 of its management fee for the fiscal year ended
November 30, 1997. 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, 1997 was 0.78%.

EXAMPLE:

<TABLE>
<CAPTION>
CUMULATIVE EXPENSES PAID FOR THE
PERIOD OF:
-------------------------------------------
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 (1) an operating expense ratio of
1.13% and (2) a 5% annual return throughout the
periods................................................ $ 12 $36 $62 $137
</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> 5

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, 1997 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,
--------------------------------------------------------- 1991+ TO
1997 1996 1995 1994 1993 1992 NOV. 30, 1991
------- ------- ------- ------- ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Asset Value:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- ------- -------
Investment income -- net............. .0451 .0447 .0484 .0317 .0262 .0312 .0328
Realized and unrealized gain (loss)
on investments -- net.............. .0002 .0003 .0009 (.0002) .0010 .0014 .0029
------- ------- ------- ------- ------- ------- -------
Total from investment operations....... .0453 .0450 .0493 .0315 .0272 .0326 .0357
------- ------- ------- ------- ------- ------- -------
Less dividends and distributions:
Investment income -- net............. (.0451) (.0447) (.0484) (.0317) (.0262) (.0312) (.0328)
Realized gain on
investments -- net................. (.0003) (.0004) (.0004) (.0002) (.0004) (.0020) (.0029)++
------- ------- ------- ------- ------- ------- -------
Total dividends and distributions...... (.0454) (.0451) (.0488) (.0319) (.0266) (.0332) (.0357)
------- ------- ------- ------- ------- ------- -------
Net asset value, end of period......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= ======= =======
Total Investment Return................ 4.65% 4.70% 4.98% 3.21% 2.69% 3.36% 5.58%*
======= ======= ======= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement......... .78% .77% .83% .71% .53% .65% .39%*
======= ======= ======= ======= ======= ======= =======
Expenses............................... 1.13% 1.12% 1.18% 1.06% .96% 1.16% 1.55%*
======= ======= ======= ======= ======= ======= =======
Investment income and realized gain on
investments -- net................... 4.57% 4.55% 4.89% 3.16% 2.66% 3.41% 5.45%*
======= ======= ======= ======= ======= ======= =======
SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)........................... $49,742 $47,945 $56,318 $57,184 $70,544 $80,978 $94,301
======= ======= ======= ======= ======= ======= =======
</TABLE>

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

3
<PAGE> 6

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
--------------------------------------
JANUARY 30, 1998 NOVEMBER 30, 1997
---------------- -----------------
<S> <C> <C>
Annualized Yield:
Including gains and losses................................. 4.79% 4.48%
Excluding gains and losses................................. 4.77% 4.48%
Compounded Annualized Yield.................................. 4.89% 4.58%
Average maturity of portfolio at end of period............... 69 days 69 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(TM) 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
that may not be changed without a vote of a majority of the outstanding shares
of the Fund.

4
<PAGE> 7

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.
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, 1997, 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. It is expected to provide 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, 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 or sell portfolio securities on
a forward commitment basis at fixed purchase terms. The purchase or sale 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 U.S. Treasury securities having a market value
at all times at least equal to the amount of the forward purchase 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 U.S. Treasury securities
having a market value at all times at least equal to the amount of its
commitments in connection with such purchase transactions.

5
<PAGE> 8

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 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 seven individuals, six 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* -- Chairman of the Manager and its affiliate, Fund Asset
Management, L.P. ("FAM"); Chairman and Director of Princeton Services, Inc.
("Princeton Services"); and Executive Vice President of Merrill Lynch & Co.,
Inc. ("ML & Co.").

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).

FRED G. WEISS -- Managing Director of FGW Associates and Director of Noven
Corporation (a pharmaceutical company).

- ---------------
* 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 advisory and management services. The Manager or an affiliate of the
Manager, FAM, acts as the investment adviser for more than 140 registered
investment companies and provides investment advisory services to individual and
institutional accounts. As of January 31, 1998, the Manager and FAM had a total
of approximately $287.0 billion in investment company and other portfolio assets
under management, including accounts of certain affiliates of the Manager.

6
<PAGE> 9

The Fund's management agreement with the Manager (the "Management
Agreement") provides that, subject to the supervision 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 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, 1997, the total management fee payable by the Fund to the Manager
aggregated $270,872 (based on average daily net assets of approximately $54.3
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, 1997, the
Fund paid $35,361 to the Manager in connection with accounting services, and the
ratio of total expenses to average net assets was 1.13%.

Marie Heumiller, Vice President and Portfolio Manager of the Fund, is
primarily responsible for the day-to-day management of the Fund.

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 up to $15.00 per shareholder account,
and is entitled to reimbursement for certain transaction charges and
out-of-pocket expenses incurred by the Transfer Agent under the Transfer Agency
Agreement. Additionally, a $.20 monthly closed account charge will be assessed
on all accounts that close during the calendar year. Application of this fee
will commence the month following the month the account is closed. At the end of
the calendar year, no further fees will be due. For purposes of 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, 1997, the total fee paid by the Fund to the Transfer
Agent pursuant to the Transfer Agency Agreement was $34,933.

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,

7
<PAGE> 10

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, among other things, 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 $1.00. 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
$1.00. 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 $1.00. 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(SM) 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(SM) 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

8
<PAGE> 11

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 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, 1997, $62,430 was
paid to Merrill Lynch pursuant to the Plan (based on average daily net assets
subject to the Plan of approximately $54.3 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 business 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.

9
<PAGE> 12

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.

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.

10
<PAGE> 13

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, Fenner & Smith
Incorporated, Attention: The Blueprint(SM) 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 Fund's 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(s) on the redemption request must be guaranteed by an "eligible
guarantor institution" as such term is defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended, and the existence and validity 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

11
<PAGE> 14

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.

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

12
<PAGE> 15

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. The Fund is not responsible for any failure of delivery to the
shareholder's address of record and no interest will accrue on amounts
represented by uncashed distribution or redemption checks.

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.

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 the
Transfer Agent 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.
subject to certain terms and conditions. During the fiscal year ended November
30, 1997, the Fund engaged in 4 transactions pursuant to such order in an
aggregate amount of $21,321,418.

13
<PAGE> 16

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.

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. 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.

14
<PAGE> 17

Fund shares held for six months or less 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). Recent legislation creates additional
categories of capital gains taxable at different rates. Generally 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 gains dividends, as well as the amount of capital
gain dividends in the different categories of capital gain referred to above.

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

If the value of assets held by the Fund declines, the Board of 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.

15
<PAGE> 18

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

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

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

ORGANIZATION OF THE FUND

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

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

The Declaration of Trust of the Fund does not require that the Fund hold
annual meetings of shareholders. However, the Fund will be required to call
special meetings of shareholders in accordance with the requirements of the
Investment Company Act to seek approval of new management and advisory
arrangements, of a material increase in distribution fees or of a change in the
fundamental policies, objectives or restrictions of the Fund. The Fund also
would be required to hold a special shareholders' meeting to elect new Trustees
at such time as less than a majority of the Trustees holding office have been
elected by shareholders. The Fund's Declaration of Trust provides that a
shareholders' meeting may be called for any reason at the request of 10% of the
outstanding 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

16
<PAGE> 19

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 and 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.

17
<PAGE> 20

[This page intentionally left blank]

18
<PAGE> 21

MERRILL LYNCH U.S. TREASURY MONEY FUND PURCHASE APPLICATION
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
========= ==========
-
U.S. Treasury Money Fund Account
Number
(If account is already established)

<S> <C> <C> <C> <C>
---------

</TABLE>

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

<TABLE>
<S> <C>
TYPE OF ACCOUNT OWNER(S) AND OTHER INFORMATION
ACCOUNT
Check appropriate INDIVIDUAL OR JOINT ACCOUNT
box:
[ ] Single ................................................................................................
[ ] Joint First MI Last Name Tax ID
[ ] UGMA/UTMA or Social Security No.
[ ] Estate
[ ] Trust* ................................................................................................
[ ] Corporation* Joint Tenant's First Name MI Last Name
[ ] Partnership* Joint tenants with rights of survivorship (not tenants in common)
[ ] Transfer On will be presumed unless otherwise specified.
Death*
[ No joint tenants with right of survivorship registrations are
] Other*............. permitted for residents of Louisiana.
--------------------------------------------------------------------
GIFT/TRANSFER TO MINOR ACCOUNTS -- UGMA/UTMA
................................................................................................
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, Exact Name of Corporation, Partnership, or other
PLEASE SEE Organization Taxpayer Identification Number
ADDITIONAL
INFORMATION ................................................................................................
ON PAGE 20 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>

19
<PAGE> 22

MERRILL LYNCH U.S. TREASURY MONEY FUND PURCHASE APPLICATION -- (CONTINUED)
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
CHECK I hereby request and authorize Merrill Lynch Financial Data
WRITING Services, Inc. (the "Transfer Agent") to honor checks drawn by me on
PRIVILEGE my Merrill Lynch U.S. Treasury Money Fund (the "Fund") account
subject to acceptance by the Fund, with payment therefor to be made
Check box [ ] by redeeming sufficient shares in my account without a signature
guarantee. The Transfer Agent and the Fund do hereby reserve all
their lawful rights for honoring checks 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. 20)
- ----------------------------------------------------------------------------------------------
FEDERAL The undersigned hereby authorize(s) and direct(s) Merrill Lynch
FUNDS Financial Data Services, Inc. (the "Transfer Agent") to act on
REDEMPTION telephonic, telegraphic, or other instructions (without signature
guarantee) from any person representing himself to be either the
Check box [ ] investor or any authorized representative of the investor, directing
redemption of shares in an amount of $5,000.00 or more of Merrill
Signature Guarantee Lynch U.S. Treasury Money Fund (the "Fund") held by the Transfer
required for this Agent on behalf of the undersigned, and to transmit the proceeds by
option wire only to the bank account designated below. Any change in the
bank account designated to receive redemption proceeds shall require
a signature guarantee. 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 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. 20 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>

20
<PAGE> 23

MERRILL LYNCH U.S. TREASURY MONEY FUND PURCHASE APPLICATION -- (CONTINUED)
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ACCRUED MONTHLY The undersigned hereby authorizes and directs Merrill Lynch
PAYOUT PLAN Financial Data Services, Inc. to redeem on the last Friday of the
month all shares purchased during such month through the daily
Check box [ ] reinvestment of dividends and distributions and send the proceeds to
me.
- ----------------------------------------------------------------------------------------------
SYSTEMATIC To establish this feature minimum balance requirements are:
WITHDRAWAL PLAN $10,000.00 for monthly disbursements and $5,000.00 for quarterly
disbursements of shares in Merrill Lynch U.S. Treasury Money Fund at
Check box [ ] cost or current offering price. IN ADDITION, YOUR SIGNATURE(S) MUST
BE GUARANTEED TO ESTABLISH THIS PLAN. A national bank, trust company
Signature Guarantee or a member of the Federal Reserve system may guarantee a signature.
required for this A commercial bank or trust company located in or having a
option. 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.
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
B: [ ] to redeem a sufficient number of shares in my account to
generate redemption proceeds of $ OR
[ ] to redeem % of the shares in my account on such date.
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 M Corporations -- "Certification of Corporate Resolution,"
INFORMATION 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.
M 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.
M 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.
M Transfer On Death -- "Transfer on Death Beneficiary Form," must be
completed by the account holder(s) with the signature(s) guaranteed.
M 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>

21
<PAGE> 24

MERRILL LYNCH U.S. TREASURY MONEY FUND PURCHASE APPLICATION -- (CONTINUED)
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
REQUIRED By the execution of this Purchase Application, the investor
SIGNATURES represents and warrants that the investor has full right, power and
authority to make the investment applied for pursuant to this
Application, and the person or persons signing on behalf of the
investor represent and warrant that they are duly authorized to sign
this Application and to purchase or redeem shares of the Fund on
behalf of the investor. The investor hereby affirms that he 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
.............................. .............................. ...............
XPrint Name Signature of Investor Date
.............................. .............................. ...............
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>

22
<PAGE> 25

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> 26

- ------

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.............. 14
Dividends......................... 14
Determination of Net Asset
Value.......................... 14
Taxes............................. 14
Organization of the Fund.......... 16
Shareholder Inquiries............. 16
Shareholder Reports............... 16
Purchase Application................ 19
Code #11624-0298
</TABLE>

[MERRILL LYNCH LOGO]

MERRILL LYNCH
U.S. TREASURY
MONEY FUND

[MLYNCH COMPASS]
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

February 27, 1998

Distributor:
Merrill Lynch
Funds Distributor, Inc.

This prospectus should be
retained for future reference.
<PAGE> 27

STATEMENT OF ADDITIONAL INFORMATION

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 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 February
27, 1998 (the "Prospectus"), which has been filed with the Securities and
Exchange Commission (the "Commission") and can be obtained without charge, by
calling or writing 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 February 27, 1998.

<PAGE> 28

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 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 (65) -- President and Trustee (1)(2) -- Chairman of Merrill
Lynch Asset Management, L.P. ("MLAM" or the "Manager") (which term as used
herein includes its corporate predecessors) since 1997; Chairman of Fund Asset
Management, L.P. ("FAM," which term as used herein includes its corporate
predecessors) since 1997; President of the Manager and FAM from 1977 to 1997;
Chairman of Princeton Services, Inc. ("Princeton Services") since 1997 and
Director since 1993; President of Princeton Services from 1993 to 1997;
Executive Vice President of Merrill Lynch & Co., Inc. ("ML & Co.") since 1990.

DONALD CECIL (71) -- 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.

2
<PAGE> 29

M. COLYER CRUM (65) -- Trustee (2) -- Soldiers Field Road, Boston,
Massachusetts 02163. Currently James R. Williston Professor of Investment
Management Emeritus, Harvard Business School; James R. Williston 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 (71) -- 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 (69) -- 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 (59) -- 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).

FRED G. WEISS (56) -- Trustee (2) -- 5141 Via de Amalfi Drive, Boca Raton,
Florida 33496. Managing Director of FGW Associates since 1997; Vice President,
Planning, Investment, and Development of Warner-Lambert Co. from 1979 to 1997;
Director of Noven Corporation (a pharmaceutical company) since 1997.

TERRY K. GLENN (57) -- 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 Merrill Lynch Funds
Distributor, Inc. (the "Distributor") since 1986 and Director thereof since
1991; President of Princeton Administrators, L.P. since 1988.

JOSEPH T. MONAGLE, JR. (49) -- Senior Vice President (1)(2) -- Senior Vice
President and Department Head of the Global Fixed Income Division of the Manager
and FAM since 1990; Vice President of the Manager from 1978 to 1990; Senior Vice
President of Princeton Services since 1993.

KEVIN J. MCKENNA (41) -- Senior Vice President (1)(2) -- First Vice
President of the Manager since 1997; Vice President of the Manager from 1985 to
1997.

MARIE HEUMILLER (33) -- Vice President and Portfolio Manager (1)(2) -- Vice
President of the Manager since 1991.

DONALD C. BURKE (37) -- Vice President (1)(2) -- First Vice President of
the Manager since 1997; Vice President of the Manager from 1990 to 1997; and
Director of Taxation of the Manager since 1990.

GERALD M. RICHARD (48) -- 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 thereof since 1984.

THOMAS D. JONES, III (32) -- Secretary(1)(2) -- Vice President of the
Manager since 1998; and Attorney with the Manager since 1992.

- ---------------
(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.

3
<PAGE> 30

At February 2, 1998 the Trustees and officers of the Fund as a group (14
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.

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-affiliated 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-affiliated 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-affiliated Trustees that were allocated to the Fund aggregated $59,203
for the fiscal year ended November 30, 1997.

The following table sets forth, for the fiscal year ended November 30,
1997, compensation paid by the Fund to the non-affiliated Trustees and, for the
calendar year ended December 31, 1997, the aggregate compensation paid by all
registered investment companies advised by MLAM and its affiliate, FAM
("MLAM/FAM Advised Funds"), to the non-affiliated Trustees.

<TABLE>
<CAPTION>
TOTAL
COMPENSATION
PENSION OR FROM FUND AND
AGGREGATE RETIREMENT BENEFITS MLAM/FAM ADVISED
COMPENSATION ACCRUED AS PART OF FUNDS PAID TO
NAME OF TRUSTEE FROM FUND FUND EXPENSES TRUSTEES
- ------------------------------------------- ------------ ------------------- ----------------
<S> <C> <C> <C>
Donald Cecil(1)............................ $ 13,000 None $275,850
M. Colyer Crum(1).......................... $ 11,500 None $115,600
Edward H. Meyer(1)......................... $ 11,500 None $222,100
Jack B. Sunderland(1)...................... $ 11,500 None $132,600
J. Thomas Touchton(1)...................... $ 11,500 None $132,100
Fred G. Weiss(1)........................... $ 0 None $ 0
</TABLE>

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

(1) The Trustees serve on the boards of MLAM/FAM Advised Funds as follows: Mr.
Cecil (33 registered investment companies consisting of 33 portfolios), Mr.
Crum (15 registered investment companies consisting of 15 portfolios), Mr.
Meyer (33 registered investment companies consisting of 33 portfolios), Mr.
Sunderland (18 registered investment companies consisting of 30 portfolios),
Mr. Touchton (18 registered investment companies consisting of 30
portfolios) and Mr. Weiss (15 registered investment companies consisting of
15 portfolios).

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

4
<PAGE> 31

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.

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, 1995, 1996 and 1997, the total management fees payable by the Fund
to the Manager aggregated $305,869, $279,756 and $270,872, respectively. For the
fiscal years ended November 30, 1995, 1996 and 1997, the Manager voluntarily
waived $214,109, $195,829 and $189,611 of its fees, 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, 1997, the Fund paid $35,361 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

5
<PAGE> 32

Company Act) because of their ownership of its voting securities or their power
to exercise a controlling influence over its management or policies.

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

PURCHASE OF SHARES

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

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

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

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

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

DISTRIBUTION PLAN

6
<PAGE> 33

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,
1995, $73,258 was paid to Merrill Lynch pursuant to the Plan (based on average
daily net assets subject to the Plan of approximately $61.2 million). For the
fiscal year ended November 30, 1996, $66,020 was paid to Merrill Lynch pursuant
to the Plan (based on average daily net assets subject to the Plan of
approximately $56.1 million). For the fiscal year ended November 30, 1997,
$62,430 was paid to Merrill Lynch pursuant to the Plan (based on average daily
net assets subject to the Plan of approximately $54.3 million). All of such
amounts were allocated to Merrill Lynch Financial Consultants, other Merrill
Lynch personnel and related administrative costs.

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

REDEMPTION OF SHARES

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

The right to receive payment with respect to any redemption of Fund shares
may be suspended by the Fund for a period of up to seven days. Suspensions of
more than seven days may not be made except (1) for any period (a) during which
the New York Stock Exchange (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

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<PAGE> 34

(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.

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(TM)
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(SM)
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

8
<PAGE> 35

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 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(SM) 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(SM)
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

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<PAGE> 36

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.

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 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, 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. During the fiscal year
ended November 30, 1997, the Fund engaged in four such transactions aggregating
approximately $21.3 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

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<PAGE> 37

both the NYSE and New York banks are closed. Both the NYSE and New York banks
are closed for New Year's Day, Martin Luther King, Jr. 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.

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

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<PAGE> 38

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.

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.

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<PAGE> 39

ACCRUED MONTHLY PAYOUT PLAN

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

SYSTEMATIC WITHDRAWAL PLANS

A shareholder may elect to make systematic withdrawals from an Investment
Account on either a monthly or quarterly basis as provided below. Quarterly
withdrawals are available for shareholders who have acquired shares of the Fund
having a value, based on cost or the current offering price of $5,000 or more,
and monthly withdrawals for shareholders with shares having a value of $10,000
or more. The Fund is not responsible for any failure of delivery to the
shareholder's address of record and no interest will accrue on amounts
represented by uncashed distribution or redemption checks. 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

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<PAGE> 40

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

U.S. 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
MLAM/FAM Advised Funds on the basis described below. Shares with a net asset
value of at least $250 are required to qualify for the exchange privilege. It is
contemplated that the exchange privilege may be applicable to other new mutual
funds whose shares may be distributed by the Distributor. The exchange privilege
available to participants in the Merrill Lynch Blueprint(SM) 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/FAM Advised 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/FAM Advised Funds; participants in certain investment programs
including TMA(SM) 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/FAM Advised
Funds, 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.

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<PAGE> 41

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 of the exchanged
shares and a purchase of the new shares for Federal income tax purposes and
depending on the circumstances, a short- or long-term capital gain or loss may
be realized with different long-term capital gains rates potentially applicable,
if gain on the sale is long-term. In addition, an exchanging shareholder of any
of the funds may be subject to backup withholding unless such shareholder
certifies under penalty of perjury that the taxpayer identification number on
file with any such fund is correct, and that he or she is not otherwise subject
to backup withholding. See "Taxes."

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

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 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). Recent
legislation creates additional categories of capital gains taxable at different
rates. Generally 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 gains dividends, as well as the
amount of capital gain dividends in the different categories of capital gain
referred to above.

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<PAGE> 42

Dividends are taxable to shareholders even though they are reinvested in
additional shares of the Fund. 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.

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

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

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<PAGE> 43

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.

GENERAL INFORMATION

DESCRIPTION OF SHARES

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

Shareholders are entitled to one vote for each full share held and
fractional votes for fractional shares held in the election of Trustees and on
other matters submitted to the vote of shareholders. Voting rights are not
cumulative, so that the holders of more than 50% of the shares voting in the
election of Trustees can, if they choose to do so, elect all 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

17
<PAGE> 44

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.

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 February 2, 1998.

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

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> 45

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, 1997, 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, 1997 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, 1997, the results of its operations, the
changes in its net assets, and the financial highlights for the respective
stated periods in conformity with generally accepted accounting principles.

[DELOITTE & TOUCHE SIGNATURE]

Deloitte & Touche LLP

Princeton, New Jersey

January 6, 1998

19
<PAGE> 46
<TABLE>
<CAPTION>

Merrill Lynch U.S. Treasury Money Fund November 30, 1997

SCHEDULE OF INVESTMENTS (in Thousands)

Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
<S> <C> <C> <C> <C>

US Government Obligations -- 100.2%

US Treasury Bills $2,923 4.90% 1/08/98 $2,906
3,160 5.00 1/08/98 3,141
177 5.14 1/08/98 176
1,357 4.895 1/15/98 1,348
888 4.92 1/15/98 882
213 5.04 1/15/98 212
2,000 5.16 1/22/98 1,984
600 5.165 1/22/98 595
225 5.19 1/22/98 223
6,179 5.205 1/22/98 6,130
7,000 5.21 1/22/98 6,945
130 5.01 2/05/98 129
2,128 5.08 2/05/98 2,106
1,972 5.13 2/05/98 1,953
100 5.14 2/05/98 99
566 5.17 2/05/98 560
3,521 5.00 2/12/98 3,483
2,585 5.13 2/12/98 2,557
869 5.185 2/12/98 860
2,400 5.22 2/12/98 2,374
2,000 5.145 2/26/98 1,975
2,210 5.15 2/26/98 2,182
3,042 5.16 2/26/98 3,003
920 5.015 3/05/98 907
507 5.03 3/05/98 500
1,382 5.045 3/05/98 1,363
178 5.32 5/28/98 173
251 5.34 5/28/98 244
198 5.415 5/28/98 193
100 5.205 6/25/98 97
113 5.22 6/25/98 110
185 5.225 6/25/98 179
265 5.355 6/25/98 257
-------
Total US Government Obligations (Cost -- $49,848) 49,846
-------
Total Investments (Cost -- $49,848) -- 100.2% 49,846
Liabilities in Excess of Other Assets -- (0.2%) (104)
-------
Net Assets -- 100.0% $49,742
=======
* 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> 47

FINANCIAL INFORMATION

Statement of Assets and Liabilities as of November 30, 1997
<S> <C> <C> <C>

Assets: Investments, at value (identified cost -- $49,847,635*) (Note 1a) $49,846,450
Cash 33,560
Prepaid registration fees and other assets (Note 1d) 33,732
-----------
Total assets 49,913,742
-----------

Liabilities: Payables:
Beneficial interest redeemed $39,869
Distributor (Note 2) 11,079
Investment adviser (Note 2) 5,920 56,868
-----------
Accrued expenses and other liabilities 114,401
-----------
Total liabilities 171,269
-----------

Net Assets: Net assets $49,742,473
===========

Net Assets Shares of beneficial interest, $.10 par value, unlimited number of
Consist of: shares authorized $4,974,366
Paid-in capital in excess of par 44,769,292
Unrealized depreciation on investments -- net (1,185)
-----------
Net assets -- Equivalent to $1.00 per share based on 49,743,659 shares
of beneficial interest outstanding $49,742,473
===========
* Cost for Federal income tax purposes. As of November 30,
1997, net unrealized depreciation for Federal income tax
purposes amounted to $1,185, of which $3,023 related to
appreciated securities and $4,208 related to depreciated
securities.

See Notes to Financial Statements.
</TABLE>

Statement of Operations

For the Year Ended
November 30, 1997
<S> <C> <C> <C>

Investment Income Interest and amortization of premium and discount earned $2,880,373
(Note 1c):

Expenses: Investment advisory fees (Note 2) $270,872
Distribution fees (Note 2) 62,430
Trustees' fees and expenses 59,203
Professional fees 47,855
Registration fees (Note 1d) 38,373
Accounting services (Note 2) 35,361
Transfer agent fees (Note 2) 34,933
Printing and shareholder reports 26,741
Custodian fees 7,860
Other 26,445
----------
Total expenses before reimbursement 610,073
Reimbursement of expenses (Note 2) (189,611)
----------
Total expenses after reimbursement 420,462
----------
Investment income -- net 2,459,911
----------

Realized & Unreal- Realized gain on investments -- net 15,612
ized Gain (Loss) on Change in unrealized appreciation/depreciation on investments -- net (3,252)
Investments -- Net ----------
(Note 1c): Net Increase in Net Assets Resulting from Operations $2,472,271
==========
See Notes to Financial Statements.
</TABLE>

21
<PAGE> 48

Statements of Changes in Net Assets

For the Year Ended November 30,
-------------------------------
Increase (Decrease) in Net Assets: 1997 1996
<S> <C> <C> <C>

Operations: Investment income -- net $2,459,911 $2,528,094
Realized gain on investments -- net 15,612 22,095
Change in unrealized appreciation/depreciation on investments -- net (3,252) (3,879)
----------- -----------
Net increase in net assets resulting from operations 2,472,271 2,546,310
----------- -----------

Dividends & Investment income -- net (2,459,911) (2,528,094)
Distributions to Realized gain on investments -- net (15,612) (22,095)
Shareholders ----------- -----------
(Note 1e): Net decrease in net assets resulting from dividends and distributions
to shareholders (2,475,523) (2,550,189)
----------- -----------

Beneficial Interest Net proceeds from sale of shares 156,556,056 154,142,818
Transactions Net asset value of shares issued to shareholders in reinvestment
(Note 3): of dividends and distributions (Note 1e) 2,465,505 2,543,309
----------- -----------
159,021,561 156,686,127
Cost of shares redeemed (157,221,246) (165,055,231)
----------- -----------
Net increase (decrease) in net assets derived from beneficial
interest transactions 1,800,315 (8,369,104)
----------- -----------

Net Assets: Total increase (decrease) in net assets 1,797,063 (8,372,983)
Beginning of year 47,945,410 56,318,393
----------- -----------
End of year $49,742,473 $47,945,410
=========== ===========
See Notes to Financial Statements.

</TABLE>

Financial Highlights

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: 1997 1996 1995 1994 1993
<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 .0451 .0447 .0484 .0317 .0262
Realized and unrealized gain (loss)
on investments -- net .0002 .0003 .0009 (.0002) .0010
------- ------ ------- ------- -------
Total from investment operations .0453 .0450 .0493 .0315 .0272
------- ------ ------- ------- -------
Less dividends and distributions:
Investment income -- net (.0451) (.0447) (.0484) (.0317) (.0262)
Realized gain on investments -- net (.0003) (.0004) (.0004) (.0002) (.0004)
------- ------ ------- ------- -------
Total dividends and distributions (.0454) (.0451) (.0488) (.0319) (.0266)
------- ------ ------- ------- -------
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= =======
Total investment return 4.65% 4.70% 4.98% 3.21% 2.69%
======= ======= ======= ======= =======

Ratios to Average Expenses, net of reimbursement .78% .77% .83% .71% .53%
Net Assets: ======= ======= ======= ======= =======
Expenses 1.13% 1.12% 1.18% 1.06% .96%
======= ======= ======= ======= =======
Investment income and realized gain on
investments -- net 4.57% 4.55% 4.89% 3.16% 2.66%
======= ======= ======= ======= =======

Supplemental Data: Net assets, end of year (in thousands) $49,742 $47,945 $56,318 $57,184 $70,544
======= ======= ======= ======= =======

See Notes to Financial Statements.

</TABLE>

22
<PAGE> 49
Merrill Lynch U.S. Treasury Money Fund November 30, 1997

NOTES TO FINANCIAL STATEMENTS

1. Significant Accounting Policies:
Merrill Lynch U.S. Treasury Money Fund (the "Fund") is registered under the
Investment Company Act of 1940 as a no load, diversified, open-end management
investment company. The following is a summary of significant accounting
policies followed by the Fund.

(a) Valuation of investments -- The Treasury securities in which the Fund
invests are traded primarily in the over-the-counter markets. Except as set
forth below, these securities are valued at the most recent bid price or yield
equivalent as obtained from dealers that make markets in Treasury securities.
When securities are valued with sixty days or less to maturity, the difference
between the valuation existing on the sixty-first day before maturity and
maturity value is amortized on a straight-line basis to maturity. Investments
maturing within sixty days from their date of acquisition are valued at
amortized cost, which approximates market value. Assets for which market
quotations are not readily available are valued at fair value as determined in
good faith by or under the direction of the Board of Trustees of the Fund.

(b) Income taxes -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to its shareholders. Therefore, no Federal
income tax provision is required.

(c) Security transactions and investment income -- Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Interest income (including amortization of premium and discount) is recognized
on the accrual basis. Realized gains and losses on security transactions are
determined on the identified cost basis.

(d) Prepaid registration fees -- Prepaid registration fees are charged to
expense as the related shares are issued.

(e) Dividends and distributions to shareholders -- The Fund declares dividends
daily and reinvests daily such dividends in additional fund shares at net asset
value. Dividends and distributions are declared from the total of net
investment income and net realized gain or loss on investments.

2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Merrill Lynch
Asset Management, L.P. ("MLAM"). The general partner of MLAM is Princeton
Services, Inc. ("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch &
Co., Inc. ("ML & Co."), which is the limited partner. The Fund has entered into
a Distribution Agreement and Distribution Plans with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned subsidiary of
Merrill Lynch Group, Inc.

MLAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee
at the annual rate of 0.50% of the average daily net assets of the Fund.

For the year ended November 30, 1997, MLAM earned fees of $270,872, of which
$189,611 was voluntarily waived.

Pursuant to the Distribution Plan (the "Plan") adopted by the Fund in
accordance with Rule 12b-1 under the Investment Company Act of 1940, the Fund
pays the Distributor an ongoing distribution fee 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

23
<PAGE> 50
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, 1997, MLFD
earned $62,430 under the Plan, all of which was paid to MLPF&S pursuant to the
agreement.

Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-owned
subsidiary of ML & Co., is the Fund's transfer agent.

Accounting services are provided to the Fund by MLAM at cost.

Certain officers and/or trustees of the Fund are officers and/or directors of
MLAM, PSI, MLFDS, MLFD, and/or ML & Co.

3. Shares of Beneficial Interest:
The number of shares purchased and redeemed during the periods
corresponds to the amounts included in the Statements of Changes in
Net Assets for net proceeds from sale of shares and cost of shares
redeemed, respectively, since shares are recorded at $1.00 per share.

24
<PAGE> 51

[This page intentionally left blank]

25
<PAGE> 52

[This page intentionally left blank]

26
<PAGE> 53

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...... 13
Systematic Withdrawal Plans...... 13
Retirement Plans................. 13
Exchange Privilege............... 14
Taxes.............................. 15
General Information................ 17
Description of Shares............ 17
Custodian........................ 17
Transfer Agent................... 17
Independent Auditors............. 17
Legal Counsel.................... 18
Reports to Shareholders.......... 18
Additional Information........... 18
Independent Auditors' Report....... 19
Financial Statements............... 20
</TABLE>

Code # 11625-0298

[MERRILL LYNCH LOGO]
MERRILL LYNCH
U.S. TREASURY
MONEY FUND

STATEMENT OF
ADDITIONAL
INFORMATION

February 27, 1998

Distributor:
Merrill Lynch
Funds Distributor, Inc.
<PAGE> 54

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 occurrence in the text.

DESCRIPTION OF OMITTED LOCATION OF GRAPHIC
GRAPHIC OR IMDATE OR IMAGE IN TEST
- ---------------------- -------------------
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.

<PAGE> 55

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 six-year period
ended November 30, 1997 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, 1997
Statement of Assets and Liabilities as of November 30, 1997
Statement of Operations for the year ended November 30, 1997
Statements of Changes in Net Assets for each of the years in the
two-year period ended November 30, 1997
Financial Highlights for each of the years in the five-year period
ended November 30, 1997

(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 -- None.
11 -- Consent of Deloitte & Touche LLP, independent auditors for Registrant.
12 -- None.
13 -- Certificate of Merrill Lynch Asset Management, L.P.(a)
14(a) -- IRA, SEP and Self-Directed Plans, as defined in Parts A and B of this
Registration Statement.(c)
(b) -- Prototype Merrill Lynch Tax-Deferred Basic(TM) 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, 1997.
18 -- None.
</TABLE>

- ---------------
(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-1
<PAGE> 56

(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).

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 DECEMBER 31, 1997
- ----------------------------------------------------------------------------- -----------------
<S> <C>
Shares of beneficial interest, par value $0.10 per share..................... 1,867
</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

C-2
<PAGE> 57

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 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 registered 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 Convertible 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 Growth 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 Real Estate
Fund, Inc., 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., Merrill Lynch Variable Series Funds, Inc. and
Hotchkis and Wiley Funds (advised by Hotchkis and Wiley, a division of MLAM);
and the following closed-end registered investment companies: Merrill Lynch High
Income Municipal Bond Fund, Inc. and Merrill Lynch Senior Floating Rate Fund,
Inc. MLAM also acts as sub-adviser to Merrill Lynch World Strategy Portfolio and
Merrill Lynch Basic Value Equity Portfolio, two investment portfolios of EQ
Advisors Trust.

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

C-3
<PAGE> 58

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., Corporate High Yield Fund III, Inc., Debt Strategies
Fund, Inc., Income Opportunities Fund 1999, Inc., Income Opportunities Fund
2000, Inc., Merrill Lynch Municipal Strategy Fund, Inc., MuniAssets Fund, Inc.,
MuniEnhanced Fund, Inc., MuniHoldings Fund, Inc., MuniHoldings Fund II, Inc.,
MuniHoldings California Insured Fund, Inc., MuniHoldings California Insured Fund
II, Inc., MuniHoldings Florida Insured Fund, MuniHoldings Florida Insured Fund
II, Inc., MuniHoldings New York Insured Fund, Inc., MuniHoldings New York 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 Fund, MuniYield Quality Fund, Inc., MuniYield Quality Fund II,
Inc., Senior High Income Portfolio, 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
Intermediate Government Bond Fund is One Financial Center, 23rd 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, 1995 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 first two
paragraphs of this Item 28, and Messrs. Giordano, Harvey, Kirstein and Monagle
are officers or directors/trustees of one or more of such companies.

<TABLE>
<CAPTION>
POSITION WITH OTHER SUBSTANTIAL BUSINESS,
NAME MANAGER PROFESSION, VOCATION OR EMPLOYMENT
- ------------------------------ ---------------------- ----------------------------------------
<S> <C> <C>
ML & Co....................... Limited Partner Financial Services Holding Company
Princeton Services............ General Partner General Partner of FAM
Arthur Zeikel................. Chairman Chairman of FAM; President of the
Manager and FAM from 1977 to 1997;
Chairman and Director of Princeton
Services; President of Princeton
Services from 1993 to 1997; Executive
Vice President of ML & Co.
Jeffrey M. Peek............... President President of FAM since 1997; President
and Director of Princeton Services since
1997; Executive Vice President of ML &
Co.
Terry K. Glenn................ Executive Vice Executive Vice President of FAM;
President Executive Vice President and Director of
Princeton Services; President and
Director of MLFD; Director of MLFDS;
President of Princeton Administrators,
L.P.
</TABLE>

C-4
<PAGE> 59

<TABLE>
<CAPTION>
POSITION WITH OTHER SUBSTANTIAL BUSINESS,
NAME MANAGER PROFESSION, VOCATION OR EMPLOYMENT
- ------------------------------ ---------------------- ----------------------------------------
<S> <C> <C>
Linda L. Federici............. Senior Vice President Senior Vice President of MLAM; Senior
Vice President of Princeton Services
Vincent R. Giordano........... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
Elizabeth A. Griffin.......... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
Norman R. Harvey.............. Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
Michael J. Hennewinkel........ Senior Vice President Senior Vice President of FAM;Senior Vice
President of Princeton Services
Philip L. Kirstein............ Senior Vice President, Senior Vice President, General Counsel
General Counsel and and Secretary of FAM; Senior Vice
Secretary President, General Counsel, Director
and Secretary of Princeton Services
Ronald M. Kloss............... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
Debra W. Landsman-Yaros....... Senior Vice President Senior Vice President of FAM; Vice
President of MLFD; Senior Vice
President of Princeton Services
Stephen M.M. Miller........... Senior Vice President Executive Vice President of Princeton
Administrators, L.P.; Senior Vice
President of Princeton Services
Joseph T. Monagle, Jr. ....... Senior Vice President Senior Vice President of FAM; 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 1989
to 1995
Richard L. Reller............. Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services;
Director of MLFD
Gerald M. Richard............. Senior Vice President Senior Vice President and Treasurer of
and Treasurer FAM; Senior Vice President and Treasurer
of Princeton Services; Vice President
and Treasurer of MLFD
Gregory D. Upah............... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
Ronald L. Welburn............. 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.

C-5
<PAGE> 60

(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, 23rd
Floor, Massachusetts 02111-2633.

<TABLE>
<CAPTION>
(2) (3)
(1) POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH MLFD WITH REGISTRANT
--------------------------------- ----------------------------- -------------------------
<S> <C> <C>
Terry K. Glenn................... President and Director Executive Vice President
Richard L. Reller................ Director None
Thomas J. Verage................. 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. Landsman-Yaros.......... Vice President None
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>

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 are
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> 61

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE
INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT CERTIFIES THAT IT MEETS ALL OF
THE REQUIREMENTS FOR EFFECTIVENESS OF THIS AMENDMENT TO ITS REGISTRATION
STATEMENT PURSUANT TO RULE 485(b) OF THE SECURITIES ACT OF 1933 AND HAS DULY
CAUSED THIS AMENDMENT TO ITS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE TOWNSHIP OF PLAINSBORO,
AND STATE OF NEW JERSEY, ON THE 27TH DAY OF FEBRUARY, 1998.

Merrill Lynch U.S. Treasury Money
Fund
(Registrant)

By: /s/ GERALD M. RICHARD

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

(Gerald M. Richard, Treasurer)

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
- ------------------------------------------ -------------------------- ------------------
<C> <S> <C>

ARTHUR ZEIKEL* President and Trustee February 27, 1998
- ------------------------------------------ (Principal Executive
(Arthur Zeikel) Officer)

GERALD M. RICHARD* Treasurer (Principal February 27, 1998
- ------------------------------------------ Financial and Accounting
(Gerald M. Richard) 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)
FRED G. WEISS* Trustee
- ------------------------------------------
(Fred G. Weiss)

*By /s/ GERALD M. RICHARD February 27, 1998
- ------------------------------------------
(Gerald M. Richard, Attorney-in-Fact)
</TABLE>

C-7
<PAGE> 62

The undersigned hereby authorizes Arthur Zeikel, Terry K. Glenn or Gerald
M. Richard, or any of them, as attorney-in-fact, to sign on his behalf,
individually and in the capacity stated below, any amendments to this
Registration Statement (including post-effective amendments) and to file the
same, with all exhibits thereto, with the Securities and Exchange Commission.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ --------------------------- ------------------
<S> <C> <C>
/s/ FRED G. WEISS Trustee February 18, 1998
- ------------------------------------------
(Fred G. Weiss)
</TABLE>

C-8
<PAGE> 63

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------------------
<C> <C> <S> <C>

11 -- Consent of Deloitte & Touche LLP, independent auditors for Registrant.

15 -- Amended and Restated Shareholder Servicing Plan and Agreement.

17 -- Financial Data Schedule for the fiscal year ended November 30, 1997.
</TABLE>

<PAGE> 1

INDEPENDENT AUDITORS' CONSENT

Merrill Lynch U.S. Treasury Money Fund:

We consent to the use in Post-Effective Amendment No. 8 to Registration
Statement No. 33-37537 of our report dated January 6, 1998 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.

[DELOITTE SIGNATURE]

Deloitte & Touche LLP

Princeton, New Jersey

February 25, 1998

<PAGE> 1

AMENDED AND RESTATED
SHAREHOLDER SERVICING PLAN AND AGREEMENT

AMENDED AND RESTATED SHAREHOLDER SERVICING PLAN AND AGREEMENT made as
of the 5th day of November, 1996 by and between Merrill Lynch U.S. Treasury
Money Fund, a Massachusetts business trust (the "Fund"), and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, a Delaware corporation ("MLPF&S").

WHEREAS, the Fund is a no-load, diversified, open-end investment
company registered under the Investment Company Act of 1940, as amended (the
"Investment Company Act"), which operates as a money market fund;

WHEREAS, MLPF&S acts as a dealer selling shares of the Fund to its
customers and substantially all of the shareholders of the Fund are MLPF&S
customers who maintain their Fund accounts through MLPF&S (such accounts being
referred to herein as the "MLPF&S Fund Accounts");

WHEREAS, MLPF&S provides a variety of administrative and operational
services to MLPF&S Fund Accounts including processing shareholder orders and
administering MLPF&S Fund Accounts (such services being referred to as "MLPF&S
Administrative Services") which are being provided pursuant to the management
arrangements between the Fund and Merrill Lynch Asset Management, L.P.
("MLAM");

WHEREAS, MLPF&S account executives and other personnel spend
substantial amounts of time providing shareholder services to existing and
prospective MLPF&S Fund Accounts, including furnishing information as to the
status of such MLPF&S Fund Accounts and handling purchase and redemption orders
for Fund shares, for which they receive no compensation (such services being
referred to herein as "MLPF&S Shareholder Services and Activities");
<PAGE> 2
WHEREAS, pursuant to a Shareholder Servicing Plan and Agreement made
as of February 5, 1991 with MLPF&S (the "Plan") and continued annually
thereafter, pursuant to the provisions of Rule 12b-1 under the Investment
Company Act, the Trustees of the Fund have determined that the Trust should
make direct payments to MLPF&S for distribution to its financial consultants
and other directly involved MLPF&S personnel as compensation for the MLPF&S
Shareholder Services and Activities and that such payments should be in
addition to the management compensation being paid to MLAM;

WHEREAS, the Trustees of the Fund have determined that the Fund should
make direct payments to MLPF&S for distribution to its account executives and
other directly involved Merrill Lynch personnel as compensation for the MLPF&S
Shareholder Services and Activities and that such payments should be in
addition to the management compensation being paid to MLAM;

WHEREAS, the Trustees of the Fund have determined that in addition to
providing the services and activities provided in the Plan, MLPF&S in its
discretion may promote the sale, marketing and distribution of the shares of
the Fund by engaging in advertising activities in newspapers, magazines, radio,
television and other media and through direct mail solicitations and that a
portion of the aforesaid direct payments made to MLPF&S may be utilized to
reimburse MLPF&S for the costs (or a portion thereof) of preparing, running and
otherwise engaging in such advertising activities (the "Advertising
Expenditures");

WHEREAS, the Fund desires to adopt this Amended and Restated
Shareholder Servicing Plan and Agreement (referred to herein as the "Amended
Plan", which term shall be deemed to include the Plan when the context
requires) in the manner and on the terms and conditions hereinafter set forth,
which Amended Plan must be adopted pursuant to Rule 12b-1 under the

2
<PAGE> 3
Investment Company Act because the services for which compensation is to be
provided under the Amended Plan may include services associated with the
distribution of Fund shares;

WHEREAS, MLPF&S desires to enter into the Amended Plan on said terms
and conditions; and

WHEREAS, the Trustees of the Fund have determined that there is a
reasonable likelihood that adoption of the Amended Plan will benefit the Fund
and its shareholders:

NOW, THEREFORE, the Fund hereby adopts the Amended Plan in accordance
with Rule 12b-1 under the Investment Company Act and the parties hereto enter
into this agreement on the following terms and conditions:

1. The Fund is hereby authorized to utilize its assets to make
payments to MLPF&S pursuant to the Amended Plan to (i) compensate MLPF&S
account executives and other directly involved MLPF&S personnel for providing
the MLPF&S Shareholder Services and Activities with respect to MLPF&S Fund
Accounts and (ii) subject to the limitations specified in Paragraph 2,
reimburse MLPF&S for part or all of any Advertising Expenditures incurred by
MLPF&S with respect to shares of the Fund.

2. The Fund shall pay MLPF&S a fee at the end of each month at
the annual rate of 0.125% of the average daily net asset value of the MLPF&S
Fund Accounts. Out of such fee, MLPF&S, in its sole discretion, may expend an
amount not exceeding 0.01% of the average daily net asset value of the MLPF&S
Fund Accounts as reimbursement for Advertising Expenditures; MLPF&S is
obligated to expend the remaining amount of the fee for compensation, including
incentives and bonuses, to MLPF&S account executives and other directly
involved MLPF&S personnel (such expenditures of the fee, including Advertising

3
<PAGE> 4
Expenditures, being referred to as the "Plan Expenditures"). The fee is for
direct personal services and is not to be considered compensation for the
MLPF&S Administrative Services.

3. MLPF&S shall provide the Fund for review by the Trustees, and
the Trustees shall review, at least quarterly, a written report complying with
the requirements of Rule 12b-1 regarding the disbursement of the fee for Plan
Expenditures during such period. The report shall include an itemization of the
Plan Expenditures made by MLPF&S and the purpose of such Plan Expenditures.

4. In the event that the aggregate payments received by MLPF&S
under the Amended Plan in any year shall exceed the Plan Expenditures in such
fiscal year, MLPF&S shall be required to reimburse the Fund the amount of such
excess.

5. MLPF&S will use its best efforts in rendering and causing its
employees to render services to the Fund, but in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations hereunder, MLPF&S shall not be liable to the Fund or any of its
shareholders for any error of judgment or mistake of law or for any act of
omission or for any losses sustained by the Fund or its shareholders.

6. Nothing contained in the Amended Plan shall prevent MLPF&S or
any affiliated person of MLPF&S from performing services similar to those to be
performed hereunder for any other person, firm or corporation or for its or
their own accounts or for the accounts of others.

7. The Amended Plan shall not take effect until it has been
approved by votes of a majority of both (a) the Trustees of the Fund and (b)
those Trustees of the Fund who are not "interested persons" of the Fund, as
defined in the Investment Company Act, and have no direct or indirect financial
interest in the operation of the Amended Plan or any agreements related to

4
<PAGE> 5
it (the "Rule 12b-1 Trustees"), cast in person at a meeting or meetings called
for the purpose of voting on the Amended Plan.

8. The Amended Plan shall continue in effect for so long as such
continuance is specifically approved at least annually in the manner provided
for approval of the Amended Plan in Paragraph 7.

9. The Amended Plan may be terminated at any time by vote of a
majority of the Rule 12b-1 Trustees, or by vote of a majority of the
outstanding voting securities of the Fund.

10. The Amended Plan may not be amended to increase materially the
fee provided for in Paragraph 2 unless and until such amendment is approved in
the manner provided for in Paragraph 7 and approved by a vote of at least a
majority, as defined in the Investment Company Act, of the outstanding voting
securities of the Fund, and no other material amendment to the Amended Plan
shall be made unless approved in the manner provided for in Paragraph 7.

11. While the Amended Plan is in effect, the selection and
nomination of the Trustees who are not interested persons, as defined in the
Investment Company Act, of the Fund shall be committed to the discretion of the
Trustees who are not interested persons.

12. The Fund shall preserve copies of the Plan and the Amended
Plan and any related agreements and all reports made pursuant to Paragraph 3,
for a period of not less than six years from the date of the Amended Plan, or
the agreements or such report, as the case may be, the first two years in an
easily accessible place.

13. The Declaration of Trust establishing Merrill Lynch U.S.
Treasury Money Fund, dated October 30, 1990, 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,

5
<PAGE> 6
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 no Trustee, shareholder, officer, employee or agent of
Merrill Lynch U.S. Treasury Money 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 of said Merrill Lynch U.S. Treasury
Money Fund, but the Trust Property (as defined in the Declaration) only shall
be liable.

WHEREAS, the parties hereto have executed and delivered this Amended
and Restated Shareholder Servicing Plan and Agreement as of the date first
above written.

MERRILL LYNCH U.S. TREASURY MONEY FUND

By:
---------------------------------

MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED

By:
---------------------------------

<PAGE> 1
[ARTICLE] 6
[CIK] 0000869663
[NAME] MERRILL LYNCH U.S. TREASURY MONEY FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] NOV-30-1997
[PERIOD-START] DEC-01-1996
[PERIOD-END] NOV-30-1997
[INVESTMENTS-AT-COST] 49847635
[INVESTMENTS-AT-VALUE] 49846450
[RECEIVABLES] 0
[ASSETS-OTHER] 67292
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 49913742
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 171269
[TOTAL-LIABILITIES] 171269
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 49743658
[SHARES-COMMON-STOCK] 49743659
[SHARES-COMMON-PRIOR] 47943343
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (1185)
[NET-ASSETS] 49742473
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 2880373
[OTHER-INCOME] 0
[EXPENSES-NET] (420462)
[NET-INVESTMENT-INCOME] 2459911
[REALIZED-GAINS-CURRENT] 15612
[APPREC-INCREASE-CURRENT] (3252)
[NET-CHANGE-FROM-OPS] 2472271
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (2459911)
[DISTRIBUTIONS-OF-GAINS] (15612)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 156556057
[NUMBER-OF-SHARES-REDEEMED] (157221246)
[SHARES-REINVESTED] 2465505
[NET-CHANGE-IN-ASSETS] 1797063
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 270872
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 610073
[AVERAGE-NET-ASSETS] 54338818
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .05
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] (.05)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 1.13
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>