MERRILL LYNCH
U.S. TREASURY
MONEY FUND
[GRAPHIC OMITTED]
STRATEGIC
Performance
Semi-Annual Report
May 31, 2000
<PAGE>
Merrill Lynch U.S. Treasury Money Fund May 31, 2000
DEAR SHAREHOLDER
For the six-month period ended May 31, 2000, Merrill Lynch U.S. Treasury Money
Fund paid shareholders a net annualized dividend of 4.52%.* The Fund's 7-day
yield as of May 31, 2000 was 4.60%.
The average portfolio maturity for Merrill Lynch U.S. Treasury Money Fund at May
31, 2000 was 62 days, compared to 68 days as of November 30, 1999.
The Environment
As 1999 drew to close, the Federal Reserve Board took extraordinary steps to
ensure liquidity in the financial markets. The Federal Reserve Board tightened
monetary policy once during the last quarter of 1999, but adopted a neutral bias
through the year-end in an effort to reassure investors and eliminate
uncertainty. However, growth remained strong and two additional 25 basis point
(0.25%) interest rate increases were implemented in February and March 2000. At
that time, the US Treasury also announced anticipated changes to the auction
schedule. The Federal budget surplus has made it necessary to decrease the
amount of securities sold by the Treasury; therefore, the changes will include
reduced auctions, reduced auction sizes, and a buy-back program (the Treasury
intends to buy back old off-the-run less liquid issues in order to keep current
issues liquid). The announcement caused unintended results as the yield curve
inverted dramatically as investors rushed to buy the longer-term issues.
At this time, it is unclear when this technical inversion will be unwound, as it
seems likely that further short-term interest rate increases will be forthcoming
as long as the current economic momentum continues. Reinvestment of the three
rounds of cash management bills in April along with the Federal Reserve Board's
impending interest rate increases have combined to keep the front-end of the
yield curve steep. Although Treasury yields fell sharply, other fixed-income
asset classes did not participate to the same extent. In addition, the business
practices of Government-sponsored agencies were placed under scrutiny by
Congress, which pressured quality spreads across the yield curve.
In early May, investors began to price in a 50 basis point move, with a greater
probability of more increases later in the summer. New home sales grew by an
alarming 966,000 and the unemployment rate fell to 3.9%. Citing the risk of
accelerating inflation, the Federal Reserve Board increased interest rates by 50
basis points at its meeting on May 16, 2000. As US consumers appear unimpeded by
the Federal Reserve Board's gradualistic approach, more forceful action may be
warranted and another 25 basis point increase could be a possibility at the next
meeting of the Federal Reserve Board on June 28, 2000. In this environment, we
generally maintained a conservative approach to the market. During the six-month
period ended May 31, 2000, Treasury bills with smaller competitive pools were
our main investment.
In Conclusion
We thank you for your 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/ Donaldo S. Benito
Donaldo S. Benito
Portfolio Manager
June 27, 2000
--------------------------------------------------------------------------------
We are pleased to announce that Donaldo S. Benito is responsible for the
day-to-day management of Merrill Lynch U.S. Treasury Money Fund. Mr. Benito has
been Vice President of Merrill Lynch Asset Management, L.P. since 1986.
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* 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, 2000
SCHEDULE OF INVESTMENTS (in Thousands)
Face Interest Maturity
Issue Amount Rate* Date Value
--------------------------------------------------------------------------------
US Government Obligations--105.8%
--------------------------------------------------------------------------------
US Treasury Bills $ 1,426 5.595% 6/01/00 $ 1,426
2,600 5.60 6/01/00 2,600
972 5.65 6/08/00 971
172 5.71 6/08/00 172
291 5.72 6/08/00 291
34 5.71 6/15/00 34
709 5.58 6/22/00 707
400 5.73 6/29/00 398
2,893 5.62 7/06/00 2,878
2,000 5.63 7/06/00 1,989
1,014 5.66 7/06/00 1,008
629 5.67 7/06/00 625
2,210 5.68 7/06/00 2,197
1,277 5.62 7/13/00 1,269
807 5.64 7/13/00 802
1,030 5.65 7/13/00 1,023
2,104 5.66 7/13/00 2,090
280 5.82 8/03/00 277
630 5.86 8/03/00 624
240 5.915 8/10/00 237
1,000 5.92 8/10/00 990
200 5.95 8/10/00 198
630 5.685 8/24/00 622
100 5.735 8/24/00 99
535 5.74 8/24/00 528
2,000 5.74 8/31/00 1,972
91 5.82 8/31/00 90
300 5.84 9/07/00 295
1,600 5.825 9/21/00 1,572
523 5.83 9/21/00 514
90 5.725 10/05/00 88
2,000 5.78 10/05/00 1,959
660 5.79 10/05/00 647
303 5.795 10/05/00 297
437 5.805 10/05/00 428
377 5.84 10/05/00 369
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US Treasury Notes 923 5.375 7/31/00 922
1,756 6.00 8/15/00 1,756
222 5.125 8/31/00 222
200 4.00 10/31/00 198
200 4.625 12/31/00 198
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Total US Government Obligations (Cost--$35,575) .................... 35,582
--------------------------------------------------------------------------------
Total Investments (Cost--$35,575)--105.8% .......................... 35,582
Liabilities in Excess of Other Assets--(5.8%) ...................... (1,955)
--------
Net Assets--100.0% ................................................. $ 33,627
========
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* 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. 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, 2000
FINANCIAL INFORMATION
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Statement of Assets and Liabilities as of May 31, 2000
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$35,574,573*) .............. $35,581,862
Cash ............................................................... 3,546
Receivables:
Interest ......................................................... $ 52,284
Beneficial interest sold ......................................... 688 52,972
----------
Prepaid registration fees and other assets ......................... 55,213
-----------
Total assets ....................................................... 35,693,593
-----------
--------------------------------------------------------------------------------------------------------------
Liabilities: Payables:
Securities purchased ............................................. 1,970,981
Beneficial interest redeemed ..................................... 31,646
Distributor ...................................................... 17,442
Investment adviser ............................................... 3,653 2,023,722
----------
Accrued expenses and other liabilities ............................. 43,051
-----------
Total liabilities .................................................. 2,066,773
-----------
--------------------------------------------------------------------------------------------------------------
Net Assets: Net assets ......................................................... $33,626,820
===========
--------------------------------------------------------------------------------------------------------------
Net Assets Shares of beneficial interest, $.10 par value, unlimited number of
Consist of: shares authorized .................................................. $ 3,361,953
Paid-in capital in excess of par ................................... 30,257,578
Unrealized appreciation on investments--net ........................ 7,289
-----------
Net assets--Equivalent to $1.00 per share based on 33,619,531 shares
of beneficial interest outstanding ................................. $33,626,820
===========
--------------------------------------------------------------------------------------------------------------
</TABLE>
* As of May 31, 2000, net unrealized appreciation for Federal income tax
purposes amounted to $7,289, of which $10,755 related to appreciated
securities and $3,466 related to depreciated securities. The aggregate
cost of investments at May 31, 2000 for Federal income tax purposes was
$35,574,573.
See Notes to Financial Statements.
3
<PAGE>
Merrill Lynch U.S. Treasury Money Fund May 31, 2000
FINANCIAL INFORMATION (continued)
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Statement of Operations
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<TABLE>
<CAPTION>
For the Six Months Ended
May 31, 2000
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income: Interest and amortization of premium and discount earned ......... $ 1,313,848
------------------------------------------------------------------------------------------------------------------
Expenses: Investment advisory fees ......................................... $ 119,673
Professional fees ................................................ 43,891
Trustees' fees and expenses ...................................... 35,943
Accounting fees .................................................. 27,704
Distribution fees ................................................ 25,163
Registration fees ................................................ 23,383
Printing and shareholder reports ................................. 14,815
Transfer agent fees .............................................. 13,104
Custodian fees ................................................... 4,232
Other ............................................................ 1,715
---------
Total expenses before reimbursement .............................. 309,623
Reimbursement of expenses ........................................ (83,771)
---------
Total expenses after reimbursement ............................... 225,852
-----------
Investment income--net ........................................... 1,087,996
-----------
------------------------------------------------------------------------------------------------------------------
Realized & Unreal- Realized gain on investments--net ................................ 3,283
ized Gain on Change in unrealized appreciation/depreciation on investments--net 18,753
Investments--Net: -----------
Net Increase in Net Assets Resulting from Operations ............. $ 1,110,032
===========
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</TABLE>
See Notes to Financial Statements.
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Statements of Changes in Net Assets
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: May 31, 2000 Nov. 30, 1999
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations: Investment income--net ........................................... $ 1,087,996 $ 2,050,164
Realized gain on investments--net ................................ 3,283 10,661
Change in unrealized appreciation/depreciation on investments--net 18,753 (23,555)
------------- -------------
Net increase in net assets resulting from operations ............. 1,110,032 2,037,270
------------- -------------
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Dividends & Investment income--net ........................................... (1,087,996) (2,050,164)
Distributions to Realized gain on investments--net ................................ (3,283) (10,661)
Shareholders: ------------- -------------
Net decrease in net assets resulting from dividends and
distributions to shareholders .................................... (1,091,279) (2,060,825)
------------- -------------
---------------------------------------------------------------------------------------------------------------------------
Beneficial Interest Net proceeds from sale of shares ................................. 98,575,661 133,775,070
Transactions: Net asset value of shares issued to shareholders in reinvestment
of dividends and distributions ................................... 1,087,118 2,052,615
------------- -------------
99,662,779 135,827,685
Cost of shares redeemed .......................................... (108,295,443) (139,671,202)
------------- -------------
Net decrease in net assets derived from beneficial
interest transactions ............................................ (8,632,664) (3,843,517)
------------- -------------
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Net Assets: Total decrease in net assets ..................................... (8,613,911) (3,867,072)
Beginning of period .............................................. 42,240,731 46,107,803
------------- -------------
End of period .................................................... $ 33,626,820 $ 42,240,731
============= =============
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
Merrill Lynch U.S. Treasury Money Fund May 31, 2000
FINANCIAL INFORMATION (concluded)
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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: 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
<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 ................................ .0227 .0386 .0453 .0451 .0447
Realized and unrealized gain (loss) on
investments--net .................................... .0005 (.0002) .0009 .0002 .0003
-------- -------- -------- -------- --------
Total from investment operations ...................... .0232 .0384 .0462 .0453 .0450
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net .............................. (.0227) (.0386) (.0453) (.0451) (.0447)
Realized gain on investments--net ................... (.0001) (.0002) (.0006) (.0003) (.0004)
-------- -------- -------- -------- --------
Total dividends and distributions ..................... (.0228) (.0388) (.0459) (.0454) (.0451)
-------- -------- -------- -------- --------
Net asset value, end of period ........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total investment return** ............................. 4.52%* 3.93% 4.66% 4.65% 4.70%
======== ======== ======== ======== ========
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Ratios to Average Expenses, net of reimbursement ........................ .94%* .83% .75% .78% .77%
Net Assets: ======== ======== ======== ======== ========
Expenses .............................................. 1.29%* 1.18% 1.10% 1.13% 1.12%
======== ======== ======== ======== ========
Investment income and realized gain on
investments--net ...................................... 4.55%* 3.90% 4.60% 4.57% 4.55%
======== ======== ======== ======== ========
------------------------------------------------------------------------------------------------------------------------------------
Supplemental Data: Net assets, end of period (in thousands) .............. $ 33,627 $ 42,241 $ 46,108 $ 49,742 $ 47,945
======== ======== ======== ======== ========
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</TABLE>
* Annualized.
** The Fund's Investment Adviser voluntarily waived a portion of its
management fee. Without such waiver, the Fund's performance would have been
lower.
See Notes to Financial Statements.
5
<PAGE>
Merrill Lynch U.S. Treasury Money Fund May 31, 2000
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 accounting principles generally accepted in the United States of America,
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, for which market quotations are readily available, are
valued at market value. 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 .50% of the average daily net assets of the Fund.
For the six months ended May 31, 2000, MLAM earned fees of $119,673, of which
$83,771 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 .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.
6
<PAGE>
Merrill Lynch U.S. Treasury Money Fund May 31, 2000
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, 2000, MLFD earned $25,163 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 sold, reinvested 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, value of shares reinvested and cost of
shares redeemed, respectively, since shares are recorded at $1.00 per share.
OFFICERS AND TRUSTEES
Terry K. Glenn, President and Trustee
M. Colyer Crum, Trustee
Laurie Simon Hodrick, 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
William E. Zitelli, 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
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--5/00
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