MERRILL LYNCH
U.S. TREASURY
MONEY FUND
[FUND LOGO]
STRATEGIC
Performance
Annual Report
November 30, 1997
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless accompanied
or preceded by the Fund's current prospectus. Past performance results
shown in this report should not be considered a representation of
future performance, which will fluctuate. The Fund seeks to maintain a
consistent $1.00 net asset value per share, although this cannot be
assured. An investment in the Fund is neither insured nor guaranteed
by the US Government. Statements and other information herein are as
dated and are subject to change.
Merrill Lynch
U.S. Treasury Money Fund
Box 9011
Princeton, NJ
08543-9011 #13966 -- 11/97
[RECYCLE LOGO]
Printed on post-consumer recycled paper
Merrill Lynch U.S. Treasury Money Fund November 30, 1997
DEAR SHAREHOLDER
For the year ended November 30, 1997, Merrill Lynch U.S. Treasury
Money Fund paid shareholders a net annualized dividend of 4.66%*. For
the six-month period ended November 30, 1997, Merrill Lynch U.S.
Treasury Money Fund paid shareholders a net annualized dividend of
4.57%*. The Fund's 7-day yield as of November 30, 1997 was 4.48%.
The average portfolio maturity for Merrill Lynch U.S. Treasury Money
Fund at November 30, 1997 was 69 days, compared to 70 days as of May
31, 1997.
The Environment
Volatility highlighted stock and bond markets worldwide during the
six-month period ended November 30, 1997. The difficulties began in
Southeast Asia. Following the currency devaluations in several
Southeast Asian countries this summer, the Hong Kong dollar -- the
value of which is pegged to the US dollar -- came under speculative
attack in foreign currency markets. Monetary authorities in Hong Kong
raised interest rates to support the currency, and the Hong Kong stock
market declined sharply. This event raised investor concerns worldwide
regarding the viability of continued global economic growth.
At first, US stock market investors focused on the challenges that
would face US multinational corporations in the wake of the poorer
Asian economic prospects. The sell-off then broadened to other stocks
as well. Although the decline proved to be short-lived, investor
confidence was not definitively restored, and stock market volatility
continued. Although the US bond market benefited during periods when
investors anticipated slower economic growth, the release of stronger-
than-expected economic statistics led to periods of declining bond
prices.
During the six-month period ended November 30, 1997, we held a
modestly constructive view, consistent with our outlook for an
unchanged Federal Reserve Board policy and limited issuance of front-
end Treasury securities.
As 1997 draws to a close, investors are likely to continue to focus on
the prospects for the US economy. Although the Federal Reserve Board
did not tighten monetary policy at its November 12, 1997 meeting, it
remains to be seen whether US economic growth remains moderate enough
and inflationary pressures sufficiently contained to preclude an
increase in short-term interest rates in the near term.
In Conclusion
We appreciate your interest in Merrill Lynch U.S. Treasury Money Fund,
and we look forward to assisting you with your financial needs in the
months and years ahead.
Sincerely,
/S/ARTHUR ZEIKEL
Arthur Zeikel
President
/S/ JOHN NG
John Ng
Vice President and Portfolio Manager
December 30, 1997
* Based on a constant investment throughout the period, with dividends
compounded daily, and reflecting a net return to the investor after
all expenses.
<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>
<TABLE>
<CAPTION>
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>
<TABLE>
<CAPTION>
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>
<TABLE>
<CAPTION>
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>
<TABLE>
<CAPTION>
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>
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 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.
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, l997, the
results of its operations, the changes in its net assets, and the
financial highlights for the respective stated periods in conformity
with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
January 6, 1998
IMPORTANT TAX INFORMATION (unaudited)
None of the ordinary income distributions paid daily by Merrill Lynch
U.S. Treasury Money Fund during its fiscal year ended November 30, 1997
qualify for the dividends-received deduction for corporations.
Additionally, there were no long-term capital gains distributed by the
Fund during the year.
The law varies in each state as to whether and what percentage of
dividend income attributable to Federal obligations is exempt from
state income tax. We recommend that you consult your tax adviser to
determine if any portion of the dividends you received is exempt from
state income tax.
Listed at right are the percentages of total assets of the Fund
invested in Federal obligations as of the end of each quarter of the
fiscal year.
Percentage
of Federal
For the Quarter Ended Obligations*
February 28, 1997 74.52%
May 31, 1997 88.13%
August 31, 1997 94.02%
November 30, 1997 99.84%
Of the Fund's ordinary income dividends paid during its fiscal year
ended November 30, 1997, 99.45% was attributable to Federal
obligations. In calculating the foregoing percentage, expenses of the
Fund have been allocated on a pro rata basis.
Please retain this information for your records.
* For purposes of this calculation, Federal obligations include US
Treasury Notes, US Treasury Bills, and US Treasury Bonds. Also
included are obligations issued by the following agencies: Banks for
Cooperatives, Federal Intermediate Credit Banks, Federal Land Banks,
Federal Home Loan Banks, and the Student Loan Marketing Association.
Repurchase agreements are not included in this calculation.
Officers and Trustees
Arthur Zeikel, President and Trustee
Donald Cecil, Trustee
M. Colyer Crum, Trustee
Edward H. Meyer, Trustee
Jack B. Sunderland, Trustee
J. Thomas Touchton, Trustee
Terry K. Glenn, Executive Vice President
Kevin J. McKenna, Senior Vice President
Joseph T. Monagle Jr., Senior Vice President
Donald C. Burke, Vice President
John Ng, Vice President
Gerald M. Richard, Treasurer
Thomas D. Jones, III, Secretary
Custodian
The Bank of New York
90 Washington Street, 12th Floor
New York, NY 10286
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 221-7210
