MERRILL LYNCH
U.S. TREASURY
MONEY FUND
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
November 30, 2000
<PAGE>
Merrill Lynch U.S. Treasury Money Fund November 30, 2000
DEAR SHAREHOLDER
For the year ended November 30, 2000, Merrill Lynch U.S. Treasury Money Fund
paid shareholders a net annualized dividend of 4.80%.* For the six-month period
ended November 30, 2000, Merrill Lynch U.S. Treasury Money Fund paid
shareholders a net annualized dividend of 4.93%.* The Fund's 7-day yield as of
November 30, 2000 was 5.02%.
The average portfolio maturity for Merrill Lynch U.S. Treasury Money Fund at
November 30, 2000 was 65 days, compared to 62 days as of May 31, 2000.
The Environment
By November 30, 2000, there was ample evidence to indicate that the economy was
finally beginning to moderate from the unsustainable growth rate of the previous
three quarters. The increases in the Federal Funds rate so far this year have
begun to have an effect. Since our last letter to shareholders, the US equity
market has also moderated, with major equity indexes experiencing volatility.
Recently, weaker earnings reports by several technology leaders drove the
technology-heavy NASDAQ significantly lower. The optimism that fueled
unrealistic expectations in the equity market earlier this year is almost gone,
as a weak euro slowed demand from overseas. Stock and bond markets were driven
by expectations of the neutral monetary policy from the Federal Reserve Board,
but concern remains in the equity market that the economy may have a harder
landing than is currently anticipated. Although the labor market is still tight,
with the unemployment rate hovering around 4%, continued productivity gains will
most likely alleviate inflationary pressures from gains in wages and benefits.
The extraordinary rise in oil and gasoline prices, while eating into corporate
profits, has also contributed to the drop in consumer confidence. Investors are
hoping that the economy has a soft landing, with gross domestic product growth
more in line with the Federal Reserve Board's target of about 3%.
Portfolio Matters
During the six-month period ended November 30, 2000, we maintained an average
life for Merrill Lynch U.S. Treasury Money Fund that ranged from a low of 57
days to a high of 70 days. Early in the period, our conservative investment
strategy was the result of rising short-term interest rates as the Federal
Reserve Board continued to tighten monetary policy. However, by mid-May, we
believed that the Federal Reserve Board would refrain from tightening again
until the full effect of previous tightenings could be realized. At that time,
we increased our average life to the 60-day area with an emphasis on three-month
Treasury bills that offered the best available value. During the past three
months, interest rates in general have declined, while increases in the size of
Treasury bill auctions have caused short-term Treasury bill rates to rise. Since
we believed that the Federal Reserve Board had reached the culmination of its
tightening cycle, we viewed this as a buying opportunity for the Fund as
three-month and six-month Treasury bills represented more attractive levels.
In Conclusion
We thank you for your interest in Merrill Lynch U.S. Treasury Money Fund, and we
look forward to assisting you with your financial needs in the months and years
ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Trustee
/s/ Donaldo S. Benito
Donaldo S. Benito
Portfolio Manager
January 5, 2001
* 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, 2000
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
Face Interest Maturity
Issue Amount Rate* Date Value
-----------------------------------------------------------------------------------------------------------------
US Government Obligations--99.6%
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
US Treasury Bills $ 2,600 6.39 % 12/15/2000 $ 2,594
910 6.36 12/18/2000 907
75 6.37 12/18/2000 75
511 5.985 12/21/2000 509
250 5.99 12/21/2000 249
1,225 6.00 12/21/2000 1,221
1,284 6.36 12/21/2000 1,280
471 6.375 12/21/2000 469
487 6.03 12/28/2000 485
1,000 6.08 12/28/2000 995
194 6.05 1/04/2001 193
1,332 6.07 1/04/2001 1,325
1,018 6.025 1/11/2001 1,011
1,000 6.05 1/11/2001 993
1,000 6.055 1/11/2001 993
1,000 6.13 1/18/2001 992
748 6.17 1/18/2001 742
996 6.04 1/25/2001 987
94 6.05 1/25/2001 93
500 6.165 1/25/2001 496
684 6.18 2/01/2001 677
548 6.195 2/01/2001 542
323 6.22 2/01/2001 320
234 6.06 2/08/2001 231
400 6.065 2/08/2001 396
512 6.09 2/08/2001 506
331 6.195 2/08/2001 327
700 6.205 2/08/2001 692
1,000 6.065 2/22/2001 986
17 6.07 2/22/2001 17
200 6.075 2/22/2001 197
200 6.085 2/22/2001 197
767 6.16 2/22/2001 757
891 6.03 3/01/2001 878
1,187 5.98 4/12/2001 1,161
633 6.06 5/03/2001 617
670 6.07 5/10/2001 652
485 6.055 5/17/2001 472
1,115 6.06 5/17/2001 1,084
750 6.065 5/31/2001 728
-----------------------------------------------------------------------------------------------------------------
US Treasury Notes 3,639 4.625 12/31/2000 3,632
878 4.50 1/31/2001 875
1,000 5.375 2/15/2001 998
574 6.625 7/31/2001 576
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Total US Government Obligations (Cost--$34,122) ......................................................... 34,127
-----------------------------------------------------------------------------------------------------------------
Total Investments (Cost--$34,122)--99.6% ................................................................ 34,127
Other Assets Less Liabilities--0.4% ..................................................................... 137
-------
Net Assets--100.0% ...................................................................................... $34,264
=======
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</TABLE>
* 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 November 30, 2000
FINANCIAL INFORMATION
--------------------------------------------------------------------------------
Statement of Assets and Liabilities as of November 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$34,121,789*) ................ $ 34,126,921
Cash ................................................................. 2,595
Receivables:
Securities sold .................................................... $ 2,592,191
Beneficial interest sold ........................................... 756,919
Interest ........................................................... 112,122 3,461,232
-----------
Prepaid registration fees and other assets ........................... 32,207
------------
Total assets ......................................................... 37,622,955
------------
---------------------------------------------------------------------------------------------------------------------------
Liabilities: Payables:
Securities purchased ............................................... 2,593,539
Beneficial interest redeemed ....................................... 636,702
Distributor ........................................................ 16,504
Investment adviser ................................................. 2,950 3,249,695
-----------
Accrued expenses and other liabilities ............................... 109,031
------------
Total liabilities .................................................... 3,358,726
------------
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Net Assets: Net assets ........................................................... $34,264,229
============
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Net Assets Shares of beneficial interest, $.10 par value, unlimited number of
Consist of: shares authorized .................................................... $ 3,425,910
Paid-in capital in excess of par ..................................... 30,833,187
Unrealized appreciation on investments--net .......................... 5,132
------------
Net assets--Equivalent to $1.00 per share based on 34,259,097 shares
of beneficial interest outstanding ................................... $ 34,264,229
============
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</TABLE>
* As of November 30, 2000, net unrealized appreciation for Federal income
tax purposes amounted to $5,069, of which $6,328 related to appreciated
securities and $1,259 related to depreciated securities. The aggregate
cost of investments at November 30, 2000 for Federal income tax purposes
was $34,121,852.
See Notes to Financial Statements.
3
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Merrill Lynch U.S. Treasury Money Fund November 30, 2000
FINANCIAL INFORMATION (continued)
--------------------------------------------------------------------------------
Statement of Operations
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended
November 30, 2000
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------
Investment Income: Interest and amortization of premium and discount earned ............. $ 2,373,952
-----------------------------------------------------------------------------------------------------------------------
Expenses: Investment advisory fees ............................................. $ 206,023
Accounting services .................................................. 94,511
Professional fees .................................................... 83,560
Trustees' fees and expenses .......................................... 79,291
Distribution fees .................................................... 43,864
Printing and shareholder reports ..................................... 27,447
Transfer agent fees .................................................. 25,532
Registration fees .................................................... 17,766
Custodian fees ....................................................... 8,752
Pricing fees ......................................................... 1,460
Other ................................................................ 2,786
----------
Total expenses before reimbursement .................................. 590,992
Reimbursement of expenses ............................................ (144,216)
----------
Total expenses after reimbursement ................................... 446,776
-----------
Investment income--net ............................................... 1,927,176
-----------
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Realized & Realized gain on investments--net 4,280
Unrealized Gain on Change in unrealized appreciation/depreciation on investments--net ... 16,596
Investments--Net: -----------
Net Increase in Net Assets Resulting from Operations ................. $ 1,948,052
===========
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</TABLE>
See Notes to Financial Statements.
4
<PAGE>
Merrill Lynch U.S. Treasury Money Fund November 30, 2000
FINANCIAL INFORMATION (continued)
--------------------------------------------------------------------------------
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended November 30,
------------------------------
Increase (Decrease) in Net Assets: 2000 1999
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations: Investment income--net ................................................. $ 1,927,176 $ 2,050,164
Realized gain on investments--net ...................................... 4,280 10,661
Change in unrealized appreciation/depreciation on investments--net ..... 16,596 (23,555)
------------- -------------
Net increase in net assets resulting from operations ................... 1,948,052 2,037,270
------------- -------------
----------------------------------------------------------------------------------------------------------------------------------
Dividends & Investment income--net ................................................. (1,927,176) (2,050,164)
Distributions to Realized gain on investments--net ...................................... (4,280) (10,661)
Shareholders: ------------- -------------
Net decrease in net assets resulting from dividends and
distributions to shareholders .......................................... (1,931,456) (2,060,825)
------------- -------------
----------------------------------------------------------------------------------------------------------------------------------
Beneficial Interest Net proceeds from sale of shares ....................................... 117,238,805 133,775,070
Transactions: Value of shares issued to shareholders in reinvestment
of dividends and distributions ......................................... 1,921,105 2,052,615
------------- -------------
119,159,910 135,827,685
Cost of shares redeemed ................................................ (127,153,008) (139,671,202)
------------- -------------
Net decrease in net assets derived from beneficial interest transactions (7,993,098) (3,843,517)
------------- -------------
----------------------------------------------------------------------------------------------------------------------------------
Net Assets: Total decrease in net assets ........................................... (7,976,502) (3,867,072)
Beginning of year ...................................................... 42,240,731 46,107,803
------------- -------------
End of year ............................................................ $ 34,264,229 $ 42,240,731
============= =============
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
Merrill Lynch U.S. Treasury Money Fund November 30, 2000
FINANCIAL INFORMATION (concluded)
--------------------------------------------------------------------------------
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: 2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Operating ------- ------- ------- ------- -------
Performance: Investment income--net .................................. .0469 .0386 .0453 .0451 .0447
Realized and unrealized gain (loss) on investments--net . .0005 (.0002) .0009 .0002 .0003
------- ------- ------- ------- -------
Total from investment operations ........................ .0474 .0384 .0462 .0453 .0450
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net ............................... (.0469) (.0386) (.0453) (.0451) (.0447)
Realized gain on investments--net .................... (.0001) (.0002) (.0006) (.0003) (.0004)
------- ------- ------- ------- -------
Total dividends and distributions ....................... (.0470) (.0388) (.0459) (.0454) (.0451)
------- ------- ------- ------- -------
Net asset value, end of year ............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total investment return* ................................ 4.80% 3.93% 4.66% 4.65% 4.70%
======= ======= ======= ======= =======
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Ratios to Average Expenses, net of reimbursement .......................... 1.08% .83% .75% .78% .77%
Net Assets: ======= ======= ======= ======= =======
Expenses ................................................ 1.43% 1.18% 1.10% 1.13% 1.12%
======= ======= ======= ======= =======
Investment income and realized gain
on investments--net ..................................... 4.68% 3.90% 4.60% 4.57% 4.55%
======= ======= ======= ======= =======
-----------------------------------------------------------------------------------------------------------------------------------
Supplemental Data: Net assets, end of year (in thousands) .................. $34,264 $42,241 $46,108 $49,742 $47,945
======= ======= ======= ======= =======
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</TABLE>
* The Fund's Investment Adviser waived a portion of its management fee.
Without such a waiver, the Fund's performance would have been lower.
See Notes to Financial Statements.
6
<PAGE>
Merrill Lynch U.S. Treasury Money Fund November 30, 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 conformity
with accounting principles generally accepted in the United States of America,
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
Investment Management, L.P. ("MLIM"). The general partner of MLIM 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 FAM Distributors, Inc.
("FAMD" or the "Distributor"), which is a wholly-owned subsidiary of Merrill
Lynch Group, Inc.
MLIM 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, 2000, MLIM earned fees of $206,023, of which
$144,216 was 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 FAMD for the
services it provides and the expenses borne by FAMD under the Distribution
Agreement.
7
<PAGE>
Merrill Lynch U.S. Treasury Money Fund November 30, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
As authorized by the Plan, FAMD 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, 2000, FAMD earned $43,864 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 were provided to the Fund by MLIM.
Certain officers and/or trustees of the Fund are officers and/or directors of
MLIM, PSI, FAMD, FDS, 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.
8
<PAGE>
Merrill Lynch U.S. Treasury Money Fund November 30, 2000
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, 2000, 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 auditing standards generally accepted
in the United States of America. 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, 2000 by correspondence with the custodian and
broker. 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, 2000, the results of its operations, the
changes in its net assets, and the financial highlights for the respective
stated periods in conformity with accounting principles generally accepted in
the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
January 9, 2001
9
<PAGE>
Merrill Lynch U.S. Treasury Money Fund November 30, 2000
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, 2000 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.
Of the Fund's ordinary income dividends paid during its fiscal year ended
November 30, 2000, 99.81% was attributable to Federal obligations. In
calculating the foregoing percentage, expenses of the Fund have been allocated
on a pro rata basis. Additionally, at least 50% of the assets of the Fund was
invested in Federal obligations at the end of each quarter of the fiscal year.
Please retain this information for your records.
10
<PAGE>
Merrill Lynch U.S. Treasury Money Fund November 30, 2000
OFFICERS AND TRUSTEES
Terry K. Glenn, President and Trustee
M. Colyer Crum, Trustee
Laurie Simon Hodrick, Trustee
J. Thomas Touchton, Trustee
Fred G. Weiss, Trustee
Kevin J. McKenna, Senior Vice President
Joseph T. Monagle Jr., Senior Vice President
Donald C. Burke, Vice President and Treasurer
Phillip S. Gillespie, 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
--------------------------------------------------------------------------------
Jack B. Sunderland and Arthur Zeikel, Trustees of Merrill Lynch U.S. Treasury
Money Fund have recently retired. The Fund's Board of Trustees wishes Messrs.
Sunderland and Zeikel well in their retirements.
--------------------------------------------------------------------------------
11
<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--11/00
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