MERRILL LYNCH
U.S. TREASURY
MONEY FUND
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
November 30, 1999
<PAGE>
Merrill Lynch U.S. Treasury Money Fund November 30, 1999
DEAR SHAREHOLDER
For the year ended November 30, 1999, Merrill Lynch U.S. Treasury Money Fund
paid shareholders a net annualized dividend of 3.93%.* For the six-month period
ended November 30, 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
November 30, 1999 was 4.02%.
The average portfolio maturity for Merrill Lynch U.S. Treasury Money Fund at
November 30, 1999 was 68 days, compared to 80 days as of May 31, 1999.
The Environment
During the six-month period ended November 30, 1999, US economic growth
continued strengthening while inflationary pressures remained contained. The US
financial markets were volatile, as stock prices declined for the third
consecutive month in September, but then rebounded in October and advanced on a
technology-driven rally in November. Significant strength in
small-capitalization stocks also emerged in November, particularly in the small
cap growth sector as reflected in the +10.57% rise in the unmanaged Russell 2000
Growth Index.
Throughout the latter half of the period, investor psychology was mixed as to
whether the Federal Reserve Board would increase interest rates for the third
time this year. At its meeting on November 16, 1999, the central bank announced
its move to tighten 25 basis points (0.25%), essentially putting short-term
interest rates back to where they were before the three quarter-point cuts that
were made last fall. Favorable technical conditions in short-term Treasury bills
caused the front end of the yield curve to steepen. During this period, we
maintained an average maturity in the 70-day range in order to take advantage of
higher yields. Although long-term bond yields also increased during the period,
investors appeared to accept that the move by the Federal Reserve Board would
contain inflationary pressure. However, this view may not hold if economic
growth continues unabated in the New Year.
In Conclusion
We thank you for your investment in Merrill Lynch U.S. Treasury Money Fund, and
we look forward to reviewing our investment strategy and outlook with you in our
next report to shareholders.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Trustee
/s/ Jacqueline Rogers
Jacqueline Rogers
Vice President and Portfolio Manager
January 3, 2000
* Based on a constant investment throughout the period, with dividends
compounded daily, and reflecting a net return to the investor after all
expenses.
1
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Merrill Lynch U.S. Treasury Money Fund November 30, 1999
SCHEDULE OF INVESTMENTS (in Thousands)
Face Interest Maturity
Issue Amount Rate* Date Value
- ------------------------------------------------------------------------------
US Government Obligations--100.1%
- ------------------------------------------------------------------------------
US Treasury Bills $ 916 4.75 % 12/02/99 $ 916
1,217 4.77 12/02/99 1,217
200 4.785 12/02/99 200
2,000 4.80 12/02/99 2,000
452 4.55 12/09/99 452
500 4.68 12/09/99 499
100 4.72 1/06/00 100
1,000 4.735 1/06/00 995
550 4.775 1/06/00 547
3,000 4.80 1/06/00 2,986
353 4.895 1/06/00 351
133 4.91 1/06/00 132
855 4.80 1/13/00 850
1,500 5.285 1/13/00 1,490
3,000 5.17 1/20/00 2,979
207 5.20 1/20/00 206
2,000 4.95 1/27/00 1,984
1,614 4.97 1/27/00 1,601
2,000 4.98 1/27/00 1,984
538 4.945 2/03/00 533
112 5.045 2/10/00 111
885 5.085 2/10/00 876
146 4.81 3/02/00 144
1,727 5.15 3/02/00 1,704
154 4.91 3/09/00 152
1,000 4.83 3/30/00 983
2,000 5.155 3/30/00 1,966
2,000 4.91 4/06/00 1,964
213 5.06 4/20/00 209
1,000 5.05 4/27/00 978
124 5.095 4/27/00 121
527 5.22 5/04/00 515
- ------------------------------------------------------------------------------
US Treasury Notes 1,500 5.375 1/31/00 1,500
3,642 7.75 1/31/00 3,656
1,500 5.875 2/15/00 1,501
2,500 5.50 2/29/00 2,500
474 5.50 3/31/00 474
500 5.625 4/30/00 500
200 4.00 10/31/00 197
200 4.625 12/31/00 197
- ------------------------------------------------------------------------------
Total US Government Obligations
(Cost--$42,281) .................................................... 42,270
- ------------------------------------------------------------------------------
Total Investments (Cost--$42,281)--100.1% .......................... 42,270
Liabilities in Excess of Other Assets--(0.1%) ...................... (29)
-------
Net Assets--100.0% ................................................. $42,241
=======
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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, 1999
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of November 30, 1999
<TABLE>
<S> <C> <C>
Assets: Investments, at value (identified cost--$42,280,983*) ............... $42,269,519
Receivables:
Interest .......................................................... $ 191,469
Investment adviser ................................................ 24,257
Beneficial interest sold .......................................... 2,000 217,726
---------
Prepaid registration fees and other assets .......................... 55,200
-----------
Total assets ........................................................ 42,542,445
-----------
- ----------------------------------------------------------------------------------------------------------------------
Liabilities: Payables:
Beneficial interest redeemed ...................................... 141,604
Distributor ....................................................... 18,477 160,081
---------
Accrued expenses and other liabilities .............................. 141,633
-----------
Total liabilities ................................................... 301,714
-----------
- ----------------------------------------------------------------------------------------------------------------------
Net Assets: Net assets .......................................................... $42,240,731
===========
- ----------------------------------------------------------------------------------------------------------------------
Net Assets Shares of beneficial interest, $.10 par value, unlimited number of ..
Consist of: shares authorized ................................................... $ 4,225,220
Paid-in capital in excess of par .................................... 38,026,975
Unrealized depreciation on investments--net ......................... (11,464)
-----------
Net assets--Equivalent to $1.00 per share based on 42,252,195 shares
of beneficial interest outstanding .................................. $42,240,731
===========
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* As of November 30, 1999, net unrealized depreciation for Federal
income tax purposes amounted to $11,464, of which $3,970 related to
appreciated securities and $15,434 related to depreciated
securities. The aggregate cost of investments at November 30, 1999
for Federal income tax purposes was $42,280,983.
See Notes to Financial Statements.
Statement of Operations
<TABLE>
<CAPTION>
For the Year Ended
November 30, 1999
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income: Interest and amortization of premium and discount earned ............ $ 2,488,585
- ----------------------------------------------------------------------------------------------------------------------
Expenses: Investment advisory fees ............................................ $ 264,197
Professional fees ................................................... 87,624
Trustees' fees and expenses ......................................... 72,828
Distribution fees ................................................... 65,533
Registration fees ................................................... 46,701
Accounting services ................................................. 40,218
Transfer agent fees ................................................. 26,175
Printing and shareholder reports .................................... 8,483
Custodian fees ...................................................... 8,460
Other ............................................................... 3,140
----------
Total expenses before reimbursement ................................. 623,359
Reimbursement of expenses ........................................... (184,938)
----------
Total expenses after reimbursement .................................. 438,421
-----------
Investment income--net .............................................. 2,050,164
-----------
- ----------------------------------------------------------------------------------------------------------------------
Realized & Unreal- Realized gain on investments--net ................................... 10,661
ized Gain (Loss) on Change in unrealized appreciation/depreciation on investments--net .. (23,555)
Investments--Net: -----------
Net Increase in Net Assets Resulting from Operations ................ $ 2,037,270
===========
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
Merrill Lynch U.S. Treasury Money Fund November 30, 1999
FINANCIAL INFORMATION (concluded)
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Year Ended November 30,
-------------------------------
Increase (Decrease) in Net Assets: 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations: Investment income--net ....................................................... $ 2,050,164 $ 2,306,803
Realized gain on investments--net ............................................ 10,661 30,536
Change in unrealized appreciation/depreciation on investments--net ........... (23,555) 13,276
------------ -------------
Net increase in net assets resulting from operations ......................... 2,037,270 2,350,615
------------ -------------
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends & Investment income--net ....................................................... (2,050,164) (2,306,803)
Distributions to Realized gain on investments--net ............................................ (10,661) (30,536)
Shareholders: ------------ -------------
Net decrease in net assets resulting from dividends and
distributions to shareholders ................................................ (2,060,825) (2,337,339)
------------ -------------
- -----------------------------------------------------------------------------------------------------------------------------------
Beneficial Interest Net proceeds from sale of shares ............................................. 133,775,070 123,393,263
Transactions: Net asset value of shares issued to shareholders in reinvestment
of dividends and distributions ............................................... 2,052,615 2,326,904
------------ -------------
135,827,685 125,720,167
Cost of shares redeemed ...................................................... (139,671,202) (129,368,113)
------------ -------------
Net decrease in net assets derived from beneficial interest transactions ..... (3,843,517) (3,647,946)
------------ -------------
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets: Total decrease in net assets ................................................. (3,867,072) (3,634,670)
Beginning of year ............................................................ 46,107,803 49,742,473
------------ -------------
End of year .................................................................. $ 42,240,731 $ 46,107,803
============ =============
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</TABLE>
See Notes to Financial Statements.
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: 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<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 ................................. .0386 .0453 .0451 .0447 .0484
Realized and unrealized gain (loss) on investments--net (.0002) .0009 .0002 .0003 .0009
------- ------- ------- ------- -------
Total from investment operations ....................... .0384 .0462 .0453 .0450 .0493
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net ............................... (.0386) (.0453) (.0451) (.0447) (.0484)
Realized gain on investments--net .................... (.0002) (.0006) (.0003) (.0004) (.0004)
------- ------- ------- ------- -------
Total dividends and distributions ...................... (.0388) (.0459) (.0454) (.0451) (.0488)
------- ------- ------- ------- -------
Net asset value, end of year ........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total investment return ............................. 3.93% 4.66% 4.65% 4.70% 4.98%
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Expenses, net of reimbursement ......................... .83% .75% .78% .77% .83%
Net Assets: ======= ======= ======= ======= =======
Expenses ............................................... 1.18% 1.10% 1.13% 1.12% 1.18%
======= ======= ======= ======= =======
Investment income and realized gain
on investments--net .................................... 3.90% 4.60% 4.57% 4.55% 4.89%
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------------
Supplemental Data: Net assets, end of year (in thousands) ................. $42,241 $46,108 $49,742 $47,945 $56,318
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
Merrill Lynch U.S. Treasury Money Fund November 30, 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. 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 year ended November 30, 1999, MLAM earned fees of $264,197, of which
$184,938 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
5
<PAGE>
Merrill Lynch U.S. Treasury Money Fund November 30, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
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 year ended
November 30, 1999, MLFD earned $65,533 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.
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, 1999, 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, 1999 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, 1999, 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 3, 2000
6
<PAGE>
Merrill Lynch U.S. Treasury Money Fund November 30, 1999
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, 1999 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, 1999 .......................................... 98.73%
May 31, 1999 ............................................... 99.03%
August 31, 1999 ............................................ 98.41%
November 30, 1999 .......................................... 99.67%
- --------------------------------------------------------------------------------
Of the Fund's ordinary income dividends paid during its fiscal year ended
November 30, 1999, 99.54% 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
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
Jacqueline Rogers, Vice President
Donald C. Burke, Vice President and Treasurer
William E. Zitelli, Secretary
================================================================================
Donald Cecil and Edward H. Meyer, Trustees of Merrill Lynch U.S. Treasury Money
Fund have recently retired. The Fund's Board of Trustees wishes Mr. Cecil and
Mr. Meyer well in their retirements.
================================================================================
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 US Government. There can be no assurance that the Fund will be able to
maintain a stable net asset value of $1.00 per share. 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--11/99
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