MERRILL LYNCH
U.S. TREASURY
MONEY FUND
[GRAPHIC OMITTED]
STRATEGIC
Performance
Semi-Annual Report
May 31, 1999
<PAGE>
Merrill Lynch U.S. Treasury Money Fund May 31, 1999
DEAR SHAREHOLDER
For the six-month period ended May 31, 1999, Merrill Lynch U.S. Treasury Money
Fund paid shareholders a net annualized dividend of 3.90%.* The Fund's 7-day
yield as of May 31, 1999 was 3.79%.
The average portfolio maturity for Merrill Lynch U.S. Treasury Money Fund at May
31, 1999 was 76 days, compared to 78 days as of November 30, 1998.
The Environment
There were some conflicting signals regarding the future direction of the US
economy during the six months ended May 31, 1999. However, on balance the
economic outlook continued to be positive. The US economic expansion is ongoing,
especially in the consumer sector. Economic growth is not occurring at
inflationary rates, although the Organization of Petroleum Exporting Countries
(OPEC) successfully engineered a near-term increase in the price of crude oil.
Against this backdrop, the US Federal Reserve Board kept monetary policy on
hold, although near the period's close it moved toward a tightening bias. On
June 30, 1999, an increase of 0.25% was made in the Federal Funds rate. Outside
of the United States, signs of growth are less apparent in other major
industrial economies. Although the crisis in Yugoslavia has raised serious
geopolitical concerns, it was not a significant factor in the economic or
investment outlook. In Japan, there are not yet clear signs that Japan's economy
is improving. There were growing signs of improvement in some emerging economies
(most notably South Korea and Mexico), although concerns remain for others (such
as Brazil and Argentina).
In the US capital markets, long-term interest rates rose during the six-month
period. Although the spread between yields on Treasury securities and corporate
issues of similar maturities has narrowed somewhat, it remains wide by historic
standards. While the US stock market exhibited greater price volatility, its
advances broadened beyond relatively few growth stocks to the previously
languishing cyclical sectors.
Throughout most of the six-month period ended May 31, 1999, we maintained a
constructive average life. However, in recent weeks we moved toward a more
cautious stance in response to concerns over the future direction of monetary
policy.
In Conclusion
We thank you for your continued investment in Merrill Lynch U.S. Treasury Money
Fund, and we look forward to serving your investment needs in the months and
years ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Trustee
/s/ Jacqueline Rogers
Jacqueline Rogers
Portfolio Manager
July 2, 1999
================================================================================
We are pleased to announce that Jacqueline Rogers is responsible for the
day-to-day management of Merrill Lynch U.S. Treasury Money Fund. Ms. Rogers has
been employed by Merrill Lynch Asset Management, L.P. since 1985 as Vice
President.
================================================================================
* Based on a constant investment throughout the period, with dividends
compounded daily, and reflecting a net return to the investor after all
expenses.
1
<PAGE>
Merrill Lynch U.S. Treasury Money Fund May 31, 1999
SCHEDULE OF INVESTMENTS (in Thousands)
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
US Government Obligations--102.4%
US Treasury Bills $ 37 4.40% 6/10/99 $ 37
2,500 4.43 6/10/99 2,496
346 4.435 6/10/99 345
1,000 4.72 6/15/99 998
3,724 4.38 6/17/99 3,715
921 4.36 7/15/99 916
1,000 4.345 7/22/99 993
369 4.44 7/22/99 367
1,000 4.29 7/29/99 993
149 4.335 7/29/99 148
1,263 4.415 7/29/99 1,253
1,403 4.45 8/05/99 1,391
338 4.46 8/05/99 335
388 4.465 8/05/99 385
1,348 4.475 8/05/99 1,337
1,658 4.485 8/05/99 1,644
750 4.45 8/12/99 743
4,000 4.49 8/12/99 3,962
3,075 4.55 8/12/99 3,046
67 4.46 8/19/99 66
2,000 4.495 8/26/99 1,977
2,000 4.52 8/26/99 1,977
- ------------------------------------------------------------------------------
US Treasury Notes 3,632 6.75 5/31/99 3,632
1,500 6.00 6/30/99 1,502
400 6.75 6/30/99 401
2,800 5.875 7/31/99 2,805
4,000 6.875 7/31/99 4,012
840 6.00 8/15/99 842
1,000 5.875 8/31/99 1,003
200 5.75 9/30/99 201
2,000 7.125 9/30/99 2,015
1,400 5.625 10/31/99 1,404
2,000 5.875 11/15/99 2,008
310 7.875 11/15/99 322
1,500 5.375 1/31/00 1,504
200 4.00 10/31/00 196
200 4.625 12/31/00 198
- ------------------------------------------------------------------------------
Total US Government Obligations (Cost--$51,177) ...................... 51,169
- ------------------------------------------------------------------------------
Total Investments (Cost--$51,177)--102.4% ............................ 51,169
Liabilities in Excess of Other Assets--(2.4%) ........................ (1,213)
-------
Net Assets--100.0% ................................................... $49,956
=======
- ------------------------------------------------------------------------------
* US Treasury Bills are traded on a discount basis; the interest rates shown
reflect the discount rates paid at the time of purchase by the Fund. US
Treasury Notes bear interest at the rates shown, payable at fixed rates
upon maturity.
See Notes to Financial Statements.
2
<PAGE>
Merrill Lynch U.S. Treasury Money Fund May 31, 1999
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of May 31, 1999
<TABLE>
<S> <C> <C>
Assets: Investments, at value (identified cost--$51,177,452*) (Note 1a) ..... $51,169,078
Cash ................................................................ 30,720
Interest receivable ................................................. 403,428
Prepaid registration fees and other assets (Note 1d) ................ 66,796
-----------
Total assets ........................................................ 51,670,022
-----------
- ---------------------------------------------------------------------------------------------------------------
Liabilities: Payables:
Securities purchased .............................................. $ 998,165
Beneficial interest redeemed ...................................... 696,585
Distributor (Note 2) .............................................. 9,452
Investment adviser (Note 2) ....................................... 5,747 1,709,949
----------
Accrued expenses and other liabilities .............................. 4,394
-----------
Total liabilities ................................................... 1,714,343
-----------
- ---------------------------------------------------------------------------------------------------------------
Net Assets: Net assets .......................................................... $49,955,679
===========
- ---------------------------------------------------------------------------------------------------------------
Net Assets Shares of beneficial interest, $.10 par value, unlimited number of
Consist of: shares authorized ................................................... $ 4,996,405
Paid-in capital in excess of par .................................... 44,967,648
Unrealized depreciation on investments--net ......................... (8,374)
-----------
Net assets--Equivalent to $1.00 per share based on 49,964,052 shares
of beneficial interest outstanding .................................. $49,955,679
===========
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
* As of May 31, 1999, net unrealized depreciation for Federal income
tax purposes amounted to $8,374, of which $9,497 related to
appreciated securities and $17,871 related to depreciated
securities. The aggregate cost of investments at May 31, 1999 for
Federal income tax purposes was $51,177,452.
See Notes to Financial Statements.
3
<PAGE>
Merrill Lynch U.S. Treasury Money Fund May 31, 1999
FINANCIAL INFORMATION (continued)
Statement of Operations
<TABLE>
<CAPTION>
For the Six Months Ended
May 31, 1999
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income Interest and amortization of premium and discount earned ............ $ 1,352,201
(Note 1c):
- -------------------------------------------------------------------------------------------------------------------
Expenses: Investment advisory fees (Note 2) ................................... $ 144,941
Professional fees ................................................... 52,128
Distribution fees (Note 2) .......................................... 34,979
Trustees' fees and expenses ......................................... 33,699
Registration fees (Note 1d) ......................................... 19,130
Transfer agent fees (Note 2) ........................................ 13,658
Printing and shareholder reports .................................... 9,324
Custodian fees ...................................................... 4,740
Other ............................................................... 1,813
----------
Total expenses before reimbursement ................................. 314,412
Reimbursement of expenses (Note 2) .................................. (101,459)
----------
Total expenses after reimbursement .................................. 212,953
-----------
Investment income--net .............................................. 1,139,248
-----------
- -------------------------------------------------------------------------------------------------------------------
Realized & Unreal- Realized gain on investments--net ................................... 1,979
ized Gain (Loss) on Change in unrealized appreciation/depreciation on investments--net .. (20,465)
Investments--Net -----------
(Note 1c): Net Increase in Net Assets Resulting from Operations ................ $ 1,120,762
===========
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: May 31, 1999 Nov. 30, 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations: Investment income--net .............................................. $ 1,139,248 $ 2,306,803
Realized gain on investments--net ................................... 1,979 30,536
Change in unrealized appreciation/depreciation on investments--net .. (20,465) 13,276
------------ ------------
Net increase in net assets resulting from operations ................ 1,120,762 2,350,615
------------ ------------
- --------------------------------------------------------------------------------------------------------------------------
Dividends & Investment income--net .............................................. (1,139,248) (2,306,803)
Distributions to Realized gain on investments--net ................................... (1,979) (30,536)
Shareholders ------------ ------------
(Note 1e): Net decrease in net assets resulting from dividends and
distributions to shareholders ....................................... (1,141,227) (2,337,339)
------------ ------------
- --------------------------------------------------------------------------------------------------------------------------
Beneficial Interest Net proceeds from sale of shares .................................... 113,034,120 123,393,263
Transactions Net asset value of shares issued to shareholders in reinvestment
(Note 3): of dividends and distributions (Note 1e) ............................ 1,137,336 2,326,904
------------ ------------
114,171,456 125,720,167
Cost of shares redeemed ............................................. (110,303,115) (129,368,113)
------------ ------------
Net increase (decrease) in net assets derived from beneficial
interest transactions ............................................... 3,868,341 (3,647,946)
------------ ------------
- --------------------------------------------------------------------------------------------------------------------------
Net Assets: Total increase (decrease) in net assets ............................. 3,847,876 (3,634,670)
Beginning of period ................................................. 46,107,803 49,742,473
------------ ------------
End of period ....................................................... $ 49,955,679 $ 46,107,803
============ ============
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
Merrill Lynch U.S. Treasury Money Fund May 31, 1999
FINANCIAL INFORMATION (concluded)
Financial Highlights
<TABLE>
<CAPTION>
For the
Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended For the Year Ended November 30,
May 31, -------------------------------------
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Operating ------- ------- ------- ------- -------
Performance: Investment income--net ................................... .0190 .0453 .0451 .0447 .0484
Realized and unrealized gain (loss) on investments--net .. (.0003) .0009 .0002 .0003 .0009
------- ------- ------- ------- -------
Total from investment operations ......................... .0187 .0462 .0453 .0450 .0493
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net ................................. (.0190) (.0453) (.0451) (.0447) (.0484)
Realized gain on investments--net ...................... (.0001) (.0006) (.0003) (.0004) (.0004)
------- ------- ------- ------- -------
Total dividends and distributions ........................ (.0191) (.0459) (.0454) (.0451) (.0488)
------- ------- ------- ------- -------
Net asset value, end of period ........................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total investment return .................................. 3.90%* 4.66% 4.65% 4.70% 4.98%
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Expenses, net of reimbursement ........................... .73%* .75% .78% .77% .83%
Net Assets: ======= ======= ======= ======= =======
Expenses ................................................. 1.08%* 1.10% 1.13% 1.12% 1.18%
======= ======= ======= ======= =======
Investment income and realized gain on
investments--net ......................................... 3.94%* 4.60% 4.57% 4.55% 4.89%
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------------------
Supplemental Data: Net assets, end of period (in thousands) ................. $49,956 $46,108 $49,742 $47,945 $56,318
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
See Notes to Financial Statements.
5
<PAGE>
Merrill Lynch U.S. Treasury Money Fund May 31, 1999
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 Fund's financial statements are prepared in accordance
with generally accepted accounting principles which may require the use of
management accruals and estimates. These unaudited financial statements reflect
all adjustments which are, in the opinion of management, necessary to a fair
statement of the results for the interim period presented. All such adjustments
are of a normal recurring nature. The following is a summary of significant
accounting policies followed by the Fund.
(a) Valuation of investments--Portfolio securities with remaining maturities of
greater than sixty days are valued at the most recent bid price or yield
equivalent as obtained from dealers that make markets in such securities. As
securities transition from sixty-one to sixty days 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. Securities
maturing sixty days or less from their date of acquisition are valued at
amortized cost, which approximates market value. For the purposes of valuation,
the maturity of variable rate securities is deemed to be the next coupon date on
which the interest rate is to be adjusted. Other investments for which market
value quotations are not available are valued at their fair value as determined
in good faith by or under the direction of the Fund's Board of Trustees.
(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 ("MLFD" or the "Distributor"), a division of Princeton Funds
Distributor, Inc. ("PFD"), which is a wholly-owned subsidiary of Merrill Lynch
Group, Inc.
MLAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee at
the annual rate of 0.50% of the average daily net assets of the Fund.
For the six months ended May 31, 1999, MLAM earned fees of $144,941, of which
$101,459 was voluntarily waived.
Pursuant to the Distribution Plans 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
6
<PAGE>
Merrill Lynch U.S. Treasury Money Fund May 31, 1999
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 Incorporated ("MLPF&S")
which provides for the compensation of MLPF&S for providing distribution-related
services to the Fund. Such services relate to the sale, promotion, and marketing
of the shares of the Fund. For the six months ended May 31, 1999, MLFD earned
$34,979 under the Plan, all of which was paid to MLPF&S pursuant to the
agreement.
Financial Data Services, Inc. ("FDS"), 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, FDS, PFD, and/or ML & Co.
3. Shares of Beneficial Interest:
The number of shares purchased and redeemed during the periods corresponds to
the amounts included in the Statements of Changes in Net Assets for net proceeds
from sale of shares and cost of shares redeemed, respectively, since shares are
recorded at $1.00 per share.
OFFICERS AND TRUSTEES
Terry K. Glenn, President and Trustee
Donald Cecil, Trustee
M. Colyer Crum, Trustee
Edward H. Meyer, Trustee
Jack B. Sunderland, Trustee
J. Thomas Touchton, Trustee
Fred G. Weiss, Trustee
Arthur Zeikel, Trustee
Kevin J. McKenna, Senior Vice President
Joseph T. Monagle Jr., Senior Vice President
Donald C. Burke, Vice President and Treasurer
Thomas D. Jones, III, Secretary
================================================================================
Gerald M. Richard, Treasurer of Merrill Lynch U.S. Treasury Money Fund has
recently retired. His colleagues at Merrill Lynch Asset Management, L.P. join
the Fund's Board of Trustees in wishing Mr. Richard well in his retirement.
================================================================================
Custodian
The Bank of New York
90 Washington Street, 12th Floor
New York, NY 10286
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 221-7210
================================================================================
After more than 20 years of service, Arthur Zeikel recently retired as Chairman
of Merrill Lynch Asset Management, L.P. (MLAM). Mr. Zeikel served as President
of MLAM from 1977 to 1997 and as Chairman since December 1997. Mr. Zeikel is one
of the country's most respected leaders in asset management and presided over
the growth of Merrill Lynch's asset management business. During his tenure,
client assets under management grew from $300 million to over $500 billion. Mr.
Zeikel will remain on Merrill Lynch U.S. Treasury Money Fund's Board of
Trustees. We are pleased to announce that Terry K. Glenn has been elected
President and Trustee of the Fund. Mr. Glenn has held the position of Executive
Vice President of MLAM since 1983.
Mr. Zeikel's colleagues at MLAM join the Fund's Board of Trustees in wishing him
well in his retirement from Merrill Lynch and are pleased that he will continue
as a member of the Fund's Board of Trustees.
================================================================================
7
<PAGE>
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. An investment in the Fund is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other Government agency.
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund. Past performance
results shown in this report should not be considered a representation of future
performance, which will fluctuate. Statements and other information herein are
as dated and are subject to change.
Merrill Lynch
U.S. Treasury Money Fund
Box 9011
Princeton, NJ
08543-9011 #13966--5/99
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