MERRILL LYNCH
U.S. TREASURY
MONEY FUND
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
November 30, 1998
<PAGE>
Merrill Lynch U.S. Treasury Money Fund November 30, 1998
DEAR SHAREHOLDER
For the year ended November 30, 1998, Merrill Lynch U.S. Treasury Money Fund
paid shareholders a net annualized dividend of 4.68%.* For the six-month period
ended November 30, 1998, Merrill Lynch U.S. Treasury Money Fund paid
shareholders a net annualized dividend of 4.43%.* The Fund's 7-day yield as of
November 30, 1998 was 3.98%.
The average portfolio maturity for Merrill Lynch U.S. Treasury Money Fund at
November 30, 1998 was 78 days, compared to 80 days as of May 31, 1998.
The Environment
During the six-month period ended November 30, 1998, stock and bond market
volatility reflected shifting investor perceptions regarding global economic
prospects. Early in the period, the deteriorating outlook for corporate profits
amid signs of a weakening economy led to lower share prices in world stock
markets. The leverage/derivatives-related problems of a major hedge fund and
possible impeachment of President Clinton further heightened investor
uncertainties, as did Russia's devaluation and effective repudiation of its debt
in August. With the high degree of investor uncertainty, the resulting flight to
quality pushed the 30-year US Treasury bond to record low yields. Yields also
declined in sovereign bond markets of other major industrialized countries. In
contrast, corporate bonds, mortgage-backed securities and emerging markets debt
underperformed US Treasury securities by a wide margin. Although a one-quarter
point cut in the Federal Funds rate in late September did not restore investor
confidence, an unexpected one quarter-point cut in October sparked a rally in
stock and bond prices. The rally was fueled further by another easing of
monetary policy in mid-November. However, by November quarter-end, share prices
had resumed their decline amidst renewed investor uncertainties regarding global
economic prospects. Against this backdrop, we maintained a constructive posture
for the Fund because of low inflation and global economic turmoil.
As long as worldwide economic conditions appear fragile, it is likely that stock
and bond market volatility will continue. For the overall global economy, the
deepening recession in Japan is of great concern as well as the difficulties in
emerging economies such as Russia and Brazil. The announcements of banking
system reform and fiscal stimulus packages in Japan provided some encouragement
to investors, but the effectiveness of these programs remains to be seen. A
multilateral aid package to Brazil initially bolstered investor confidence
regarding the prospects for this country and other emerging markets. Further
progress in easing strains within the global financial system, combined with
continued monetary easing on the part of the Federal Reserve Board, would likely
provide an important element of stability to the volatile investment
environment.
In Conclusion
We appreciate your interest in Merrill Lynch U.S. Treasury Money Fund, and we
look forward to assisting you with your investment needs in the months and years
ahead.
Sincerely,
/s/ Arthur Zeikel
Arthur Zeikel
President
/s/ Marie Dwyer
Marie Dwyer
Vice President and Portfolio Manager
December 28, 1998
* 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 November 30, 1998
SCHEDULE OF INVESTMENTS (in Thousands)
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
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US Government Obligations--99.1%
- --------------------------------------------------------------------------------
US Treasury Bills $ 2,333 4.50% 1/07/99 $ 2,323
142 4.61 1/07/99 141
500 4.94 1/07/99 498
205 5.00 1/07/99 204
600 5.005 1/07/99 597
2,000 4.515 1/14/99 1,990
2,000 4.355 1/21/99 1,987
2,000 4.46 1/21/99 1,987
582 4.56 1/21/99 578
471 4.30 1/28/99 468
98 4.06 2/04/99 97
166 4.17 2/04/99 165
64 4.23 2/04/99 63
97 4.30 2/04/99 96
153 4.40 2/04/99 152
2,500 4.43 2/04/99 2,480
349 4.445 2/04/99 346
366 4.47 2/04/99 363
282 4.55 2/04/99 280
150 4.36 2/11/99 149
600 4.37 2/11/99 595
199 4.415 2/11/99 197
1,800 4.42 2/11/99 1,784
3,000 4.48 2/18/99 2,971
1,000 4.985 2/18/99 990
91 4.395 2/25/99 90
900 4.41 2/25/99 890
300 3.95 3/04/99 297
118 3.965 3/04/99 117
99 4.11 3/04/99 98
108 4.18 3/04/99 107
186 4.00 3/11/99 184
1,207 4.35 3/11/99 1,192
138 3.89 3/25/99 136
1,000 4.44 3/25/99 986
500 4.23 4/08/99 492
600 3.69 4/22/99 589
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US Treasury Notes 1,600 5.75 12/31/98 1,602
900 6.375 1/15/99 903
3,552 5.875 1/31/99 3,559
3,200 8.875 2/15/99 3,227
3,260 5.50 2/28/99 3,266
3,200 5.875 2/28/99 3,209
1,305 6.25 3/31/99 1,312
200 6.375 4/30/99 201
500 6.375 5/15/99 504
400 6.75 6/30/99 405
840 6.00 8/15/99 847
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Total US Government Obligations (Cost--$45,702) ................... 45,714
- --------------------------------------------------------------------------------
Total Investments (Cost--$45,702)--99.1% .......................... 45,714
Other Assets Less Liabilities--0.9% ............................... 394
-------
Net Assets--100.0% ................................................ $46,108
=======
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* 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
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Merrill Lynch U.S. Treasury Money Fund November 30, 1998
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities as of November 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets: Investments, at value (identified cost--$45,701,726*)
(Note 1a) ............................................. $ 45,713,817
Cash .................................................. 30,242
Receivables:
Interest ............................................$345,101
Beneficial interest sold ............................ 21,423 366,524
--------
Prepaid registration fees and other assets (Note 1d) .. 43,353
------------
Total assets .......................................... 46,153,936
------------
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Liabilities: Payables:
Distributor (Note 2) ................................ 9,663
Investment adviser (Note 2) ......................... 5,986
Beneficial interest redeemed ........................ 4,333 19,982
--------
Accrued expenses and other liabilities ................ 26,151
------------
Total liabilities ..................................... 46,133
------------
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Net Assets: Net assets ............................................ $ 46,107,803
============
- -------------------------------------------------------------------------------------------------------
Net Assets Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized ................. $ 4,609,571
Paid-in capital in excess of par ...................... 41,486,141
Unrealized appreciation on investments--net ........... 12,091
------------
Net assets--Equivalent to $1.00 per share based on
46,095,713 shares of beneficial interest outstanding .. $ 46,107,803
============
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</TABLE>
* As of November 30, 1998, net unrealized appreciation for Federal income
tax purposes amounted to $11,941, of which $21,116 related to appreciated
securities and $9,175 related to depreciated securities. The aggregate
cost at November 30, 1998 for Federal income tax purposes was $45,701,876.
- --------------------------------------------------------------------------------
Statement of Operations
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<TABLE>
<CAPTION>
For the Year Ended
November 30, 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income Interest and amortization of premium and
(Note 1c): discount earned .................................... $ 2,686,014
- -------------------------------------------------------------------------------------------------------
Expenses: Investment advisory fees (Note 2) .................. $ 253,898
Trustees' fees and expenses ........................ 69,647
Professional fees .................................. 65,694
Distribution fees (Note 2) ......................... 60,006
Accounting services (Note 2) ....................... 30,449
Transfer agent fees (Note 2) ....................... 25,559
Printing and shareholder reports ................... 24,332
Registration fees (Note 1d) ........................ 16,313
Custodian fees ..................................... 7,898
Other .............................................. 3,143
---------
Total expenses before reimbursement ................ 556,939
Reimbursement of expenses (Note 2) ................. (177,728)
---------
Total expenses after reimbursement ................. 379,211
-----------
Investment income--net ............................. 2,306,803
-----------
- -------------------------------------------------------------------------------------------------------
Realized & Realized gain on investments--net .................. 30,536
Unrealized Gain on Change in unrealized appreciation/depreciation on
Investments--Net investments--net ................................... 13,276
(Note 1c): -----------
Net Increase in Net Assets Resulting from Operations $ 2,350,615
===========
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</TABLE>
See Notes to Financial Statements.
3
<PAGE>
Merrill Lynch U.S. Treasury Money Fund November 30, 1998
FINANCIAL INFORMATION (concluded)
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended November 30,
-------------------------------
Increase (Decrease) in Net Assets: 1998 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations: Investment income--net ........................... $ 2,306,803 $ 2,459,911
Realized gain on investments--net ................ 30,536 15,612
Change in unrealized appreciation/depreciation
on investments--net .............................. 13,276 (3,252)
------------- -------------
Net increase in net assets resulting from
operations ....................................... 2,350,615 2,472,271
------------- -------------
- --------------------------------------------------------------------------------------------------------
Dividends & Investment income--net ........................... (2,306,803) (2,459,911)
Distributions to Realized gain on investments--net ................ (30,536) (15,612)
Shareholders ------------- -------------
(Note 1e): Net decrease in net assets resulting from
dividends and distributions to shareholders ...... (2,337,339) (2,475,523)
------------- -------------
- --------------------------------------------------------------------------------------------------------
Beneficial Interest Net proceeds from sale of shares ................. 123,393,263 156,556,056
Transactions Net asset value of shares issued to shareholders
(Note 3): in reinvestment of dividends and distributions
(Note 1e) ........................................ 2,326,904 2,465,505
------------- -------------
125,720,167 159,021,561
Cost of shares redeemed .......................... (129,368,113) (157,221,246)
------------- -------------
Net increase (decrease) in net assets derived
from beneficial interest transactions ............ (3,647,946) 1,800,315
------------- -------------
- --------------------------------------------------------------------------------------------------------
Net Assets: Total increase (decrease) in net assets .......... (3,634,670) 1,797,063
Beginning of year ................................ 49,742,473 47,945,410
------------- -------------
End of year ...................................... $ 46,107,803 $ 49,742,473
============= =============
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</TABLE>
See Notes to Financial Statements.
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Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. For the Year Ended November 30,
------------------------------------------------
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <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 ............... .0453 .0451 .0447 .0484 0317
Realized and unrealized gain (loss)
on investments--net .................. .0009 .0002 .0003 .0009 (.0002)
------- ------- ------- ------- -------
Total from investment operations ..... .0462 .0453 .0450 .0493 .0315
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net ............. (.0453) (.0451) (.0447) (.0484) (.0317)
Realized gain on investments--net .. (.0006) (.0003) (.0004) (.0004) (.0002)
------- ------- ------- ------- -------
Total dividends and distributions .... (.0459) (.0454) (.0451) (.0488) (.0319)
------- ------- ------- ------- -------
Net asset value, end of year ......... $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= =======
Total investment return .............. 4.66% 4.65% 4.70% 4.98% 3.21%
======= ======= ======= ======= =======
- -------------------------------------------------------------------------------------------------------------
Ratios to Average Expenses, net of reimbursement ....... .75% .78% .77% .83% .71%
Net Assets ======= ======= ======= ======= =======
Expenses ............................. 1.10% 1.13% 1.12% 1.18% 1.06%
======= ======= ======= ======= =======
Investment income and realized
gain on investments--net ............. 4.60% 4.57% 4.55% 4.89% 3.16%
======= ======= ======= ======= =======
- -------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of year
Data: (in thousands) ....................... $46,108 $49,742 $47,945 $56,318 $57,184
======= ======= ======= ======= =======
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
Merrill Lynch U.S. Treasury Money Fund November 30, 1998
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. 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 "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 year ended November 30, 1998, MLAM earned fees of $253,898, of which
$176,379 was voluntarily waived. MLAM also reimbursed the Fund for additional
expenses of $1,349.
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
5
<PAGE>
Merrill Lynch U.S. Treasury Money Fund November 30, 1998
NOTES TO FINANCIAL STATEMENTS (concluded)
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, 1998, MLFD earned
$60,006 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.
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, 1998, 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, 1998 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, 1998, 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 8, 1999
6
<PAGE>
Merrill Lynch U.S. Treasury Money Fund November 30, 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, 1998 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, 1998 .......... 90.56%
May 31, 1998 ............... 89.92%
August 31, 1998 ............ 88.56%
November 30, 1998 .......... 99.02%
- ------------------------------------------
Of the Fund's ordinary income dividends paid during its fiscal year ended
November 30, 1998, 98.55% 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
Fred G. Weiss, 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
Marie Dwyer, 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
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 221-7210
<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. Past performance results shown in this report should not be
considered a representation of future performance, which will fluctuate. 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. 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--11/98
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