MERRILL LYNCH
MUNICIPAL
INTERMEDIATE
TERM FUND
FUND LOGO
Semi-Annual Report
April 30, 1996
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. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
<PAGE>
Merrill Lynch Municipal
Intermediate Term Fund
Merrill Lynch Municipal
Series Trust
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH MUNICIPAL INTERMEDIATE TERM FUND
Officers and
Trustees
Arthur Zeikel, President and Trustee
Ronald W. Forbes, Trustee
Cynthia A. Montgomery, Trustee
Charles C. Reilly, Trustee
Kevin A. Ryan, Trustee
Richard R. West, Trustee
Terry K. Glenn, Executive Vice President
Vincent R. Giordano, Senior Vice President
William R. Bock, Vice President
Donald C. Burke, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Susan B. Baker, Secretary
<PAGE>
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, Massachusetts 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
TO OUR SHAREHOLDERS
Investor perceptions regarding the US economy changed over the
course of the April quarter. In February, it appeared that the US
economy was losing momentum. Lackluster retail sales, increases in
initial unemployment claims (along with weak job and income growth),
and evidence of slowing in the manufacturing sector all suggested
that the rate of economic growth was decelerating, with some
forecasters even suggesting the possibility of an imminent
recession.
However, the consensus outlook for the rate of future economic
growth changed dramatically with the report of stronger-than-
expected employment data for February and March. As a result,
investors began to anticipate renewed economic growth. Long-term
interest rates rose, and the Federal Reserve Board left monetary
policy on hold. Adding to investor concerns was the report that the
Knight Ridder-Commodity Research Bureau Index was near an eight-year
high, largely because of an increase in agricultural prices and an
upward spike in the price of crude oil.
Investors are likely to continue to focus on the probable direction
of economic activity and Federal Reserve Board monetary policy in
the weeks ahead. At this time, inflationary pressures do not seem to
be building and the capital spending, housing and consumption
sectors are still relatively weak, which suggest that the economy is
not on the verge of overheating. Nevertheless, it is likely that
further indications of stronger economic activity in the weeks ahead
may add to investor concerns that accelerating economic activity
could lead to higher inflation and interest rates.
<PAGE>
The Municipal Market
Tax-exempt bond yields rose dramatically over the three-month period
ended April 30, 1996. Investors have become increasingly concerned
that earlier forecasts of continued moderate economic growth were
overly optimistic. As indications of stronger growth were released
during the April quarter, particularly the strong employment report
released in early March, fears of associated inflationary pressures
mounted and yields rose in response. As measured by the Bond Buyer
Revenue Bond Index, yields on uninsured, A-rated municipal revenue
bonds rose over 60 basis points (0.60%) to end the April quarter at
6.32%. The rise in US Treasury bond yields was even more
significant. Over the last three months, yields on long-term US
Treasury securities increased by almost 90 basis points to end the
three-month period ended April 30, 1996 at 6.90%. The April quarter
saw the municipal bond market reverse the trend seen throughout much
of 1995 and significantly outperform its taxable counterpart.
The second major factor leading to the municipal bond market's
recent improvement was the return of a more favorable technical
environment. Over the past three months, approximately $40 billion
in municipal securities were underwritten, an increase of
approximately 35% versus the comparable period a year earlier.
However, much of this increase was biased by recent underwritings
dedicated toward refinancing. Like individual homeowners, municipal
issuers sought to refinance their existing higher-couponed debt as
tax-exempt bond yields declined from their highs in 1995. In recent
months such refinancings were estimated to represent at least 50% of
total issuance. However, the recent rise in tax-exempt interest
rates slowed the pace of such refinancings. At current interest rate
levels large amounts of refundings are unlikely and the rate of new
bond issuance should continue to decline.
Additionally, investors continue to receive significant amounts of
assets derived from coupon income, bond maturities, and proceeds
from early redemptions. In recent months investors received over $30
billion in such assets. These cash flows helped maintain individual
retail investor demand in recent months. Additionally, major
institutional investors, such as certain insurance companies whose
underwriting profits were cyclically high, demonstrated significant
ongoing interest in the tax-exempt bond market, particularly on
higher-quality securities. Individual and institutional investor
demand was strong enough during the three-month period ended April
30, 1996 to absorb the relative increase in bond issuance.
Looking ahead, we believe the municipal bond market is likely to
continue to outperform the US Treasury market. Investor demand
should remain adequate to absorb new bond issuance. It is also
unlikely that the rapid pace of issuance seen thus far in 1996 will
be maintained. The recent rise in yields made further bond
refinancings economically unfeasible. Since these refinancings were
the driving force of recent bond issuance, as the amount of these
refundings decline, overall issuance should decline. This should
allow the current demand/supply balance to be easily maintained in
upcoming months.
<PAGE>
Additionally, as a percentage of US Treasury bond yields, long-term
municipal bond yields remain historically attractive. It is likely
that recent interest rate increases will have a negative impact on
economic growth, perhaps as early as late summer 1996. With long-
term mortgage rates above 8%, the domestic housing sector has
already indicated signs of slower growth. If other interest rate
sectors of the economy, such as the automobile industry, begin to
show similar adverse effects, taxable interest rates would be poised
to resume their decline. With long-term tax-exempt revenue bonds
yielding approximately 90% of their taxable counterparts, municipal
bond yields are poised to decline further.
Portfolio Strategy
As we entered the six-month period ended April 30, 1996, we
anticipated that municipal bond yields would decline because of the
continued slowing of the economy and the prospect of additional
easing by the Federal Reserve Board. With this expectation, our
portfolio strategy concentrated on seeking to enhance the Fund's
total return with the acquisition of performance-oriented
securities. However, given the recent strength evident in the
economic data, we became cautious toward the market. Therefore, in
order to be more defensive we added higher-coupon issues and raised
the Fund's cash reserve level.
Looking ahead, we expect the municipal bond market to increase in
volatility within a wide trading range over the next few months. Our
investment strategy will be circumspect. We intend to increase the
cash level as the bond market moves higher and selectively buy
during periods of market weakness, particularly emphasizing high-
quality issues of high-tax states.
In Conclusion
We thank you for your support of Merrill Lynch Municipal
Intermediate Term Fund, and we look forward to serving your
investment needs in the months and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
<PAGE>
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(William R. Bock)
William R. Bock
Vice President and Portfolio Manager
June 6, 1996
We are pleased to announce that William R. Bock is responsible for
the day-to-day management of Merrill Lynch Municipal Intermediate
Term Fund. Mr. Bock has been employed by Merrill Lynch Asset
Management, L.P. (an affiliate of the Fund's investment adviser)
since 1989 as Vice President and Portfolio Manager. Prior thereto,
Mr. Bock was employed by Bear Stearns and E.F. Hutton in the Tax-
Exempt Bond Division from 1978 to 1989.
PERFORMANCE DATA
About Fund
Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 1% and bear no ongoing distribution or account maintenance
fees. Class A Shares are available only to eligible investors.
<PAGE>
* Class B Shares are subject to a maximum contingent deferred sales
charge of 1% if redeemed during the first year, decreasing 1%
thereafter to 0% after the first year. In addition, Class B Shares
are subject to a distribution fee of 0.10% and an account
maintenance fee of 0.20%. These shares automatically convert to
Class D Shares after approximately 10 years.
* Class C Shares are subject to a distribution fee of 0.10% and an
account maintenance fee of 0.20%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 1% and an
account maintenance fee of 0.10% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. Dividends paid to each class
of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 3/31/96 +6.14% +5.08%
Five Years Ended 3/31/96 +6.88 +6.66
Inception (10/31/88) through +6.68 +6.53
3/31/96
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
<PAGE>
Year Ended 3/31/96 +5.81% +4.81%
Five Years Ended 3/31/96 +6.55 +6.55
Inception (11/26/86) through +5.63 +5.63
3/31/96
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 3/31/96 +5.75% +4.75%
Inception (10/21/94) through +6.46 +6.46
3/31/96
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 3/31/96 +6.04% +4.98%
Inception (10/21/94) through +6.75 +6.01
3/31/96
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
<TABLE>
Performance
Summary--
Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/31/88--12/31/88 $ 9.45 $ 9.29 -- $0.117 - 0.45%
1989 9.29 9.41 -- 0.606 + 8.07
1990 9.41 9.31 -- 0.594 + 5.45
1991 9.31 9.73 -- 0.597 +11.28
1992 9.73 9.89 -- 0.582 + 7.88
1993 9.89 10.42 -- 0.538 +11.04
1994 10.42 9.52 -- 0.521 - 3.69
1995 9.52 10.13 -- 0.519 +12.13
1/1/96--4/30/96 10.13 9.83 -- 0.148 - 1.41
------
Total $4.222
<PAGE>
Cumulative total return as of 4/30/96: +61.01%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
include sales charge; results would be lower if sales charge was
included.
</TABLE>
<TABLE>
Performance
Summary--
Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
11/26/86--12/31/86 $10.00 $ 9.94 -- $0.030 - 0.10%
1987 9.94 9.27 -- 0.579 - 1.09
1988 9.27 9.29 -- 0.564 + 6.43
1989 9.29 9.41 -- 0.577 + 7.74
1990 9.41 9.31 -- 0.566 + 5.14
1991 9.31 9.73 -- 0.568 +10.94
1992 9.73 9.89 -- 0.552 + 7.55
1993 9.89 10.42 -- 0.507 +10.71
1994 10.42 9.52 -- 0.490 - 3.99
1995 9.52 10.13 -- 0.488 +11.79
1/1/96--4/30/96 10.13 9.83 -- 0.139 - 1.51
------
Total $5.060
Cumulative total return as of 4/30/96: +66.34%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
<PAGE>
<TABLE>
Performance
Summary--
Class C Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $ 9.70 $ 9.52 -- $0.093 - 0.89%
1995 9.52 10.13 -- 0.493 +11.84
1/1/96--4/30/96 10.13 9.83 -- 0.138 - 1.51
------
Total $0.724
Cumulative total return as of 4/30/96: +9.17%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
PERFORMANCE DATA (concluded)
<TABLE>
Performance
Summary--
Class D Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $ 9.70 $ 9.52 -- $0.100 - 0.81%
1995 9.52 10.13 -- 0.509 +12.02
1/1/96--4/30/96 10.13 9.83 -- 0.145 - 1.44
------
Total $0.754
Cumulative total return as of 4/30/96: +9.51%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
include sales charge; results would be lower if sales charge was
included.
</TABLE>
<PAGE>
<TABLE>
Recent
Performance
Results
<CAPTION>
12 Month 3 Month
4/30/96 1/31/96 4/30/95 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $9.83 $10.17 $9.76 +0.72% -3.34%
Class B Shares* 9.83 10.16 9.75 +0.82 -3.25
Class C Shares* 9.83 10.16 9.75 +0.82 -3.25
Class D Shares* 9.83 10.17 9.75 +0.82 -3.34
Class A Shares--Total Return* +5.88(1) -2.17(2)
Class B Shares--Total Return* +5.65(3) -2.15(4)
Class C Shares--Total Return* +5.69(5) -2.15(6)
Class D Shares--Total Return* +5.88(7) -2.19(8)
Class A Shares--Standardized 30-day Yield 4.40%
Class B Shares--Standardized 30-day Yield 4.12%
Class C Shares--Standardized 30-day Yield 4.10%
Class D Shares--Standardized 30-day Yield 4.30%
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
(1)Percent change includes reinvestment of $0.498 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.120 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.467 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.113 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.470 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.112 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.488 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.118 per share ordinary
income dividends.
</TABLE>
Portfolio Abbreviations
<PAGE>
To simplify the listings of Merrill Lynch Municipal Intermediate
Term Fund's portfolio holdings in the Schedule of Investments, we
have abbreviated the names of many of the securities according to
the list below and at right.
ACES SM Adjustable Convertible Extendable Securities
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
EDA Economic Development Authority
GO General Obligation Bonds
HDA Housing Development Authority
HFA Housing Finance Agency
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
PCR Pollution Control Revenue Bonds
RITES Residual Interest Tax-Exempt Securities
UPDATES Unit Priced Demand Adjustable Tax-Exempt Securities
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Alabama--2.2% AA Aa $2,750 Alabama Special Care Facilities Financing Authority,
Birmingham Revenue Refunding Bonds (Daughters Charity--Saint
Vincent's), 5.375% due 11/01/2012 $ 2,588
AAA Aaa 2,270 Alabama Water Pollution Control Authority (Revolving Fund
Loan), Series A, 5.25% due 8/15/2011 (c) 2,175
Alaska--1.9% AAA Aaa 2,575 Alaska State Housing Finance Corporation, Refunding, Series A,
5.30% due 6/01/2007 (d)(i)(k) 2,540
Anchorage, Alaska, Telephone Utility Revenue Bonds, Series A (d):
AAA Aaa 1,000 5.30% due 3/01/2007 990
AAA Aaa 1,000 5.40% due 3/01/2008 989
Arizona--0.9% NR* NR* 2,000 Mohave County, Arizona, IDA, IDR (North Star Steel Co. Project),
AMT, 6.70% due 3/01/2020 2,107
<PAGE>
California AAA Aaa 3,000 Los Angeles County, California, Metropolitan Transportation
- --11.6% Authority, Sales Tax Revenue Bonds, Proposition C, Second
Senior Series B, 5.30% due 7/01/2012 (c) 2,857
AA Aa 1,975 Los Angeles County, California, Sanitation Districts Financing
Authority Revenue Bonds (Capital Projects), Series A, 5.375%
due 10/01/2013 1,859
AAA Aaa 4,000 Oxnard, California, Finance Authority, Solid Waste Revenue
Bonds, AMT, 5.75% due 5/01/2010 (c) 3,951
AAA Aaa 4,000 Southern California Public Power Authority, Power Project Revenue
Bonds (San Juan Unit 3), Series A, 5.375% due 1/01/2010 (d) 3,924
AAA Aaa 3,000 Southern California Rapid Transportation District Revenue Bonds
(Special Benefit Assessment District), Series A-1, 5.50% due
9/01/2009 (c) 2,991
NR* Aa 1,750 University of California, COP (UCLA Central Chiller
Cogeneration), 10.75% due 11/01/1998 2,004
A- NR* 1,610 University of California, Research Facilities Revenue Bonds,
Series B, 6.50% due 9/01/2003 1,704
AAA Aaa 4,000 University of California, Revenue Refunding Bonds (Multiple
Purpose Projects), Series C, 5.125% due 9/01/2009 (c) 3,838
AAA Aaa 3,000 West & Central Basin, California, Financing Authority, Revenue
Refunding Bonds(West Basin Project), Series A, 5% due
8/01/2010 (c) 2,797
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Colorado--5.1% AA Aa $3,155 Arapahoe County, Colorado, School District No. 005 (Cherry
Creek), UT, Series B, 5% due 12/15/2010 $ 2,970
AA Aa 2,000 Arapahoe County, Colorado, School District No. 006 (Littleton),
UT, Series A, 5.25% due 12/01/2010 1,940
AAA Aaa 1,000 Colorado Springs, Colorado, Utilities Revenue Improvement Bonds,
Series A, 9.875% due 11/15/2000 (b) 1,224
A+ A 2,000 Denver, Colorado, City and County Revenue Bonds, COP (School
District No. 001),UT, Series B, 10% due 12/01/1999 2,340
A NR* 1,225 Denver, Colorado, Urban Renewal Authority, Tax Increment Revenue
Bonds (Downtown Denver), AMT, Series A, 7.25% due 9/01/2017 1,298
NR* A 1,470 Larimer County, Colorado, COP (School District Number R-1), 10%
due 12/01/2001 1,841
Florida--2.9% AAA Aaa 3,500 Dade County, Florida, Educational Facilities Authority,
Exchangeable Revenue Bonds(University of Miami), 7.65% due
4/01/2010 (d) 3,876
AAA Aaa 2,500 Florida, HFA (Antigua Club Apartments), AMT, Series A-1, 6.875%
due 8/01/2026 (c) 2,639
A1+ VMIG1++ 100 Jacksonville, Florida, PCR, Refunding (Florida Power and Light
Co. Project), VRDN,4% due 5/01/2029 (a) 100
Georgia--0.4% A1 VMIG1++ 900 Burke County, Georgia, Development Authority, PCR (Georgia Power
Co.--Plant Vogtle Project), VRDN, Second Series, 4.15% due
4/01/2025 (a) 900
<PAGE>
Hawaii--2.9% AAA Aaa 4,000 Hawaii State Department of Budget and Finance, Special Purpose
Mortgage Revenue Bonds (Hawaiian Electric Company), AMT, Series C,
7.375% due 12/01/2020 (d) 4,356
AA Aa 2,350 Hawaii State Refunding, UT, Series CC, 5.125% due 2/01/2007 2,318
llinois AAA Aaa 2,000 Chicago, Illinois, O'Hare International Airport, Revenue
- --12.0% Refunding Bonds (General Airport), Second Lien, Series A, 6.375%
due 1/01/2012 (d) 2,099
Cook County, Illinois, COP (Community College District No.
508--Chicago), UT (e):
AAA Aaa 2,000 8.10% due 1/01/1999 2,176
AAA Aaa 1,000 8.50% due 1/01/2002 1,172
Illinois Health Facilities Authority Revenue Bonds, VRDN (a):
A1+ VMIG1++ 1,700 (Northwest Community Hospital), 4.45% due 7/01/2025 1,700
A1+ VMIG1++ 5,000 (Northwestern Memorial Hospital), 3.95% due 8/15/2025 5,000
NR* VMIG1++ 600 (Resurrection Health Care System), 4.10% due 5/01/2011 600
AAA Aaa 2,500 Illinois Health Facilities Authority, Revenue Refunding Bonds
(Lutheran General Health), Series C, 7% due 4/01/2008 (h) 2,832
AA- A1 2,000 Illinois State, GO, 6.60% due 6/01/2009 2,163
AAA Aaa 3,555 Illinois State Regional Transportation Authority Refunding
Bonds, 5.25% due 6/01/2010 (d) 3,438
AAA Aaa 3,000 Sangamon County, Illinois, School District No. 186, Refunding
(Springfield School), UT, 6.50% due 3/01/2008 (e) 3,305
AAA Aaa 2,045 University of Illinois, COP, Series A, 7.25% due 8/15/2000 (h) 2,218
Indiana--0.9% NR* Baa 1,000 Indiana State Educational Facility Authority Revenue Bonds
(University Evansville Project), 5.65% due 2/15/2011 941
A+ NR* 1,000 Indianapolis, Indiana, Local Public Improvement Bond Bank,
Refunding, Series D,6.50% due 2/01/2006 1,075
Kentucky--0.1% A1+ VMIG1++ 200 Carroll County, Kentucky, Solid Waste Disposal Facilities Revenue
Bonds (Kentucky Utilities Co. Project), VRDN, AMT, Series A, 4.25%
due 11/01/2024 (a) 200
Louisiana AAA Aaa 2,330 Louisiana Public Facilities Authority Revenue Bonds (Department
- --2.5% of Public Safety--Equipment Leasing), 5% due 8/01/2005 (c) 2,271
A1+ P1 1,000 Louisiana State Offshore Terminal Authority, Deepwater Port
Revenue Refunding Bonds(Loop Inc.--First Stage), ACES, 4.10% due
9/01/2006 (a) 1,000
AAA Aaa 2,190 New Orleans, Louisiana, Refunding, 6.25% due 10/01/2006 (c) 2,375
Maine--2.5% NR* A 3,080 Maine Educational Loan Marketing Corporation, Student Loan
Revenue Refunding Bonds,AMT, 6.90% due 11/01/2003 3,266
Maine State Turnpike Authority, Turnpike Revenue Bonds (d):
AAA Aaa 1,000 7.125% due 7/01/2008 1,164
AAA Aaa 1,000 7.50% due 7/01/2009 1,198
<PAGE>
Massachusetts BBB+ Aaa 1,745 Massachusetts Municipal Wholesale Electric Company, Power Supply
- --6.7% System Revenue Bonds, Series B, 6.75% due 7/01/2002 (b) 1,955
A+ A1 1,500 Massachusetts State, GO, UT, Series B, 9.25% due 7/01/2000 1,759
AAA Aaa 1,575 Massachusetts State, HFA, Revenue Refunding Bonds, Series A,
5.25% due 12/01/2006 (d) 1,559
AAA Aaa 2,060 Massachusetts State Revenue Refunding Bonds (Lowell Building
Authority), Fifth Series A, 5.625% due 11/01/2008 (c) 2,106
AA- Aa 1,850 Massachusetts State Water Pollution Abatement Trust, Revenue
Secured Loan Program,Series A, 6.375% due 2/01/2015 1,934
AAA Aaa 5,000 Massachusetts State Water Resource Authority, Series A, 6.50%
due 7/15/2002 (b) 5,531
Michigan--2.6% NR* A 1,000 Michigan Higher Education, Student Loan Authority Revenue
Bonds, AMT, Series XIV-A,6.75% due 10/01/2006 1,043
Michigan State Hospital Finance Authority, Revenue Refunding
Bonds, Series A:
A A 1,000 (Detroit Medical Center Obligation Group), 6.375% due 8/15/2009 1,010
NR* A1 3,280 (McLaren Obligation Group), 5.75% due 10/15/2003 3,342
NR* P1 300 Michigan State Strategic Fund, PCR, Refunding (Consumers Power
Project), VRDN, Series A, 4.10% due 4/15/2018 (a) 300
Mississippi Mississippi Higher Education Assistance Corporation, Student
- --3.0% Loan Revenue Refunding
Bonds, AMT, Series C:
A NR* 2,370 6.40% due 1/01/2003 2,442
A NR* 1,440 6.50% due 7/01/2004 1,491
NR* P1 2,600 Perry County, Mississippi, PCR, Refunding (Leaf River Forest
Project), VRDN, 4.10% due 3/01/2002 (a) 2,600
Missouri AAA Aaa 3,000 Kansas City, Missouri, Municipal Assistance Corporation, Revenue
- --1.3% Refunding Bonds (Leasehold--H. Roe Bartle), Series A, 5.125% due
4/15/2010 (d) 2,878
Nevada--0.5% AAA Aaa 1,000 Clark County, Nevada, School District, Series A, 9.75% due
6/01/2000 (d) 1,189
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
New Jersey AAA Aaa $4,000 New Jersey EDA, State Lease Revenue Refunding Bonds (Trenton
- --3.7% Office Complex), 5.25% due 6/15/2008 (c) $ 3,957
AAA Aaa 575 New Jersey State Housing and Mortgage Finance Agency Revenue
Bonds, AMT, Series F,7.80% due 10/01/2010 (d) 588
AAA Aaa 3,750 New Jersey State Transportation Trust Fund Authority
(Transportation System), Series A, 5% due 12/15/2010 (d) 3,520
<PAGE>
New Mexico A1+ P1 900 Hurley, New Mexico, PCR (Kennecott Santa Fe), VRDN, 4.10% due
- --3.5% 12/01/2015 (a) 900
AAA Aaa 4,210 Las Cruces, New Mexico, Revenue Bonds, AMT, 5.35% due 12/01/2007
(d) 4,149
AAA Aaa 2,855 Santa Fe, New Mexico, Gross Tax Receipts, Revenue Refunding
Bonds, Series A, 5.30% due 6/01/2010 (c) 2,775
New York--6.3% New York City, New York, GO, UT:
AAA Aaa 1,700 Refunding, Series E, 6.20% due 8/01/2008 (d) 1,841
A- Aaa 2,000 Series A, 8% due 11/01/1998 (g) 2,178
BBB+ Baa1 3,000 Series D, 5.75% due 2/15/2008 2,883
A1+ NR* 100 New York City, New York, IDA, IDR (Japan Airlines Company Ltd.
Project), VRDN, AMT,4.10% due 11/01/2015 (a) 100
New York State Dormitory Authority Revenue Bonds:
BBB+ Baa1 2,750 (Court Facilities Lease), Series A, 5.50% due 5/15/2010 2,586
BBB Baa1 2,250 (Department of Health), 5.75% due 7/01/2007 2,233
BBB Baa1 2,325 (Department of Health), 5.375% due 7/01/2008 2,212
North Dakota NR* Aa 1,000 North Dakota State Student Loan Revenue Refunding
- --0.5% Bonds, Series A, 5.90% due 7/01/1998 1,030
Ohio--0.5% AAA Aaa 1,000 Lakota, Ohio, Local School District, UT, 7% due 12/01/2007 (c) 1,159
Oregon--4.0% AA- Aa 4,800 Multnomah County, Oregon, School District No. 1-J (Portland),
UT, 4.35% due 6/01/1999 4,809
AAA Aaa 4,190 Oregon State, Department Administrative Services, COP,
Series A, 5.25% due 5/01/2008 (d) 4,142
Tennessee A+ A1 2,960 Tennessee HDA, Mortgage Finance, Refunding, Series A, 5.65% due
- --1.3% 1/01/2007 2,951
Texas--10.8% NR* A 660 Brazos, Texas, Higher Education Authority Inc., Student Loan
Revenue Refunding Bonds, AMT, Series A, 6.70% due 9/01/2001 692
NR* VMIG1++ 1,000 Gulf Coast, Texas, IDA, Solid Waste Disposal Revenue Bonds (CITGO
Petroleum Corp.Project), VRDN, AMT, 4.30% due 5/01/2025 (a) 1,000
A1+ NR* 8,600 Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds (Methodist Hospital), VRDN, 4.20% due
12/01/2025 (a) 8,600
AA Aa 1,375 San Antonio, Texas, General Improvement Bonds, 8.625% due 8/01/1999 1,546
AA Aa 2,700 Texas State Public Finance Authority Revenue Bonds, Series C, 9%
due 10/01/1999 3,086
Texas State Turnpike Authority, Dallas North Thruway Revenue Bonds
(President George Bush Turnpike) (c)(f):
AAA Aaa 2,750 5.30% due 1/01/2007 1,526
AAA Aaa 3,000 5.40% due 1/01/2008 1,548
AAA Aaa 1,950 Trinity River Authority, Texas, Regional Wastewater System
Revenue Bonds, 5.30% due 8/01/2007 (c) 1,949
AA+ Aaa 3,545 University of Texas, Refunding (Permanent University Fund), 9.50%
due 7/01/2000 4,189
<PAGE>
Virginia AAA Aa2 4,500 Peninsula Ports Authority, Virginia, Revenue Refunding Bonds
- --4.4% (Port Facility--Shell Oil
Company), UPDATES, Series A, 4.10% due 12/01/2005 (a) 4,500
Virginia State, HDA, Commonwealth Mortgage Revenue Bonds:
AA+ Aa1 2,585 Series H, 6.50% due 7/01/2007 2,686
AA+ Aa1 1,365 Series J, Sub-Series J-2, 6.45% due 1/01/2010 1,399
AA+ Aa1 1,300 Series J, Sub-Series J-2, 6.50% due 1/01/2011 1,334
Washington AAA Aaa 1,500 Snohomish County, Washington, Public Utilities Electric
- --1.5% Revenue Bonds (District No. 001), Series B, 9.75% due
1/01/1999 (e) 1,697
AA Aa 1,500 Washington State, Public Power Supply System, Revenue
Refunding Bonds (Nuclear Project No. 3), Series B, 7.375% due
7/01/2004 1,635
Wisconsin AA Aa 2,000 Wisconsin State Housing and Economic Development Authority,
- --2.2% Home Ownership Revenue Bonds, AMT, Series F, 7.40% due
7/01/2013 (j) 2,106
AA Aa 3,080 Wisconsin State Refunding, UT, Series 1, 5% due 5/01/2014 2,810
Puerto Rico A1+ Baa1 3,950 Puerto Rico Commonwealth, Highway and Transportation
- --1.7% Authority, Highway Revenue Bonds,
RITES, Series X, 6.321% due 7/01/2005 (l) 3,718
Total Investments (Cost--$224,392)--100.4% 224,482
Liabilities in Excess of Other Assets--(0.4%) (957)
--------
Net Assets--100.0% $223,525
========
<FN>
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at April 30, 1996.
(b)Prerefunded.
(c)AMBAC Insured.
(d)MBIA Insured.
(e)FGIC Insured.
(f)Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of purchase by the Fund.
(g)Escrowed to Maturity.
(h)FSAInsured.
(i)FNMA Collateralized.
(j)FHA Insured.
(k)GNMA Collateralized.
(l)The interest rate is subject to change periodically and inversely
based upon prevailing market rates. The interest rate shown is the
rate in effect at April 30, 1996.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
<PAGE>
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of April 30, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$224,392,180)(Note 1a) $224,482,487
Cash 12,468
Receivables:
Interest $ 3,689,941
Beneficial interest sold 236,416 3,926,357
------------
Prepaid registration fees and other assets (Note 1e) 79,798
------------
Total assets 228,501,110
------------
Liabilities: Payables:
Securities purchased 3,965,547
Beneficial interest redeemed 546,380
Dividends to shareholders (Note 1f) 226,035
Investment adviser (Note 2) 101,196
Distributor (Note 2) 45,382 4,884,540
------------
Accrued expenses and other liabilities 91,400
------------
Total liabilities 4,975,940
------------
Net Assets: Net assets $223,525,170
============
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited
Consist of: number of shares authorized $ 340,035
Class B Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 1,765,547
Class C Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 78,438
Class D Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 90,149
Paid-in capital in excess of par 232,493,392
Accumulated realized capital losses on investments--net (Note 5) (11,332,698)
Unrealized appreciation on investments--net 90,307
------------
Net assets $223,525,170
============
<PAGE>
Net Asset Class A--Based on net assets of $33,425,960 and 3,400,350 shares
Value: of beneficial interest outstanding $ 9.83
============
Class B--Based on net assets of $173,529,465 and 17,655,467 shares
of beneficial interest outstanding $ 9.83
============
Class C--Based on net assets of $7,707,499 and 784,383 shares
of beneficial interest outstanding $ 9.83
============
Class D--Based on net assets of $8,862,246 and 901,484 shares of
beneficial interest outstanding $ 9.83
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Six Months Ended April 30, 1996
<S> <S> <C> <C>
Investment Interest and amortization of premium and discount earned $ 6,513,293
Income (Note 1d):
Expenses: Investment advisory fees (Note 2) $ 632,949
Account maintenance and distribution fees--Class B (Note 2) 269,743
Transfer agent fees--Class B (Note 2) 96,068
Printing and shareholder reports 53,219
Registration fees (Note 1e) 40,132
Professional fees 37,343
Accounting services (Note 2) 26,709
Transfer agent fees--Class A (Note 2) 15,504
Account maintenance and distribution fees--Class C (Note 2) 10,523
Trustees' fees and expenses 7,658
Pricing fees 6,279
Custodian fees 6,210
Transfer agent fees--Class C (Note 2) 4,581
Account maintenance fees--Class D (Note 2) 4,209
Transfer agent fees--Class D (Note 2) 3,774
Other 4,295
------------
Total expenses 1,219,196
------------
Investment income--net 5,294,097
------------
<PAGE>
Realized & Realized gain on investments--net 2,422,109
Unrealized Gain Change in unrealized appreciation on investments--net (6,263,701)
(Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 1,452,505
(Notes 1b, 1d & 3): ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: April 30, 1996 Oct. 31, 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 5,294,097 $ 8,852,570
Realized gain (loss) on investments--net 2,422,109 (5,179,687)
Change in unrealized appreciation/depreciation on investments
--net (6,263,701) 11,774,800
------------ ------------
Net increase in net assets resulting from operations 1,452,505 15,447,683
------------ ------------
Dividends to Investment income--net:
Shareholders Class A (843,883) (1,507,705)
(Note 1f): Class B (4,086,425) (7,096,365)
Class C (163,328) (70,020)
Class D (200,461) (178,480)
------------ ------------
Net decrease in net assets resulting from dividends to
shareholders (5,294,097) (8,852,570)
------------ ------------
Beneficial Net increase (decrease) in net assets derived from beneficial
Interest interest transactions (2,729,099) 53,625,113
Transactions ------------ ------------
(Note 4):
Net Assets: Total increase (decrease) in net assets (6,570,691) 60,220,226
Beginning of period 230,095,861 169,875,635
------------ ------------
End of period $223,525,170 $230,095,861
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios
have been derived from information Class A
provided in the financial statements. For the Six
Months Ended For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: April 30, 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.00 $ 9.62 $ 10.39 $ 9.70 $ 9.61
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .24 .53 .52 .54 .59
Realized and unrealized gain (loss) on
investments--net (.17) .38 (.77) .69 .09
-------- -------- -------- -------- --------
Total from investment operations .07 .91 (.25) 1.23 .68
-------- -------- -------- -------- --------
Less dividends from investment income--net (.24) (.53) (.52) (.54) (.59)
-------- -------- -------- -------- --------
Net asset value, end of period $ 9.83 $ 10.00 $ 9.62 $ 10.39 $ 9.70
======== ======== ======== ======== ========
Total Investment Based on net asset value per share .70%+++ 9.68% (2.49%) 13.01% 7.16%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses .80%* .81% .76% .75% .86%
Net Assets: ======== ======== ======== ======== ========
Investment income--net 4.85%* 5.36% 5.19% 5.35% 5.97%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 33,426 $ 34,970 $ 27,653 $ 24,173 $ 14,068
Data: ======== ======== ======== ======== ========
Portfolio turnover 50.63% 115.78% 52.56% 83.66% 74.20%
======== ======== ======== ======== ========
<CAPTION>
The following per share data and ratios
have been derived from information Class B
provided in the financial statements. For the Six
Months Ended For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: April 30, 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.00 $ 9.62 $ 10.39 $ 9.69 $ 9.61
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .23 .50 .49 .51 .56
Realized and unrealized gain (loss) on
investments--net (.17) .38 (.77) .70 .08
-------- -------- -------- -------- --------
Total from investment operations .06 .88 (.28) 1.21 .64
-------- -------- -------- -------- --------
Less dividends from investment income--net (.23) (.50) (.49) (.51) (.56)
-------- -------- -------- -------- --------
Net asset value, end of period $ 9.83 $ 10.00 $ 9.62 $ 10.39 $ 9.69
======== ======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share .55%+++ 9.34% (2.79%) 12.78% 6.72%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses 1.11%* 1.13% 1.07% 1.06% 1.16%
Net Assets: ======== ======== ======== ======== ========
Investment income--net 4.53%* 5.05% 4.87% 5.07% 5.68%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $173,529 $181,640 $142,152 $158,061 $124,802
Data: ======== ======== ======== ======== ========
Portfolio turnover 50.63% 115.78% 52.56% 83.66% 74.20%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
Class C Class D
For the For the For the For the
The following per share data and ratios Six For the Period Six For the Period
have been derived from information Months Year Oct. 21, Months Year Oct. 21,
provided in the financial statements. Ended Ended 1994++ to Ended Ended 1994++ to
April 30, Oct. 31, Oct. 31, April 30, Oct. 31, Oct. 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of
Operating period $ 10.00 $ 9.62 $ 9.70 $ 10.00 $ 9.62 $ 9.70
Performance: -------- -------- -------- -------- -------- --------
Investment income--net .23 .50 .01 .24 .52 .01
Realized and unrealized gain
(loss) on investments--net (.17) .38 (.08) (.17) .38 (.08)
-------- -------- -------- -------- -------- --------
Total from investment operations .06 .88 (.07) .07 .90 (.07)
-------- -------- -------- -------- -------- --------
Less dividends from investment
income--net (.23) (.50) (.01) (.24) (.52) (.01)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 9.83 $ 10.00 $ 9.62 $ 9.83 $ 10.00 $ 9.62
======== ======== ======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share .54%+++ 9.36% (.71%)+++ .65%+++ 9.57% (.71%)+++
Return:** ======== ======== ======== ======== ======== ========
Ratios to Average Expenses 1.12%* 1.01% 1.18%* .90%* .90% .97%*
Net Assets: ======== ======== ======== ======== ======== ========
Investment income--net 4.52%* 4.76% 4.92%* 4.75%* 5.12% 5.20%*
======== ======== ======== ======== ======== ========
Supplemental Net assets, end of period
Data: (in thousands) $ 7,708 $ 6,485 $ 1 $ 8,862 $ 7,000 $ 70
======== ======== ======== ======== ======== ========
Portfolio turnover 50.63% 115.78% 52.56% 50.63% 115.78% 52.56%
======== ======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Municipal Intermediate Term Fund (the "Fund") is
presently the only series of Merrill Lynch Municipal Series Trust
(the "Trust"). The Fund is registered under the Investment Company
Act of 1940 as a diversified, open-end management investment
company. These unaudited interim 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 Fund offers
four classes of shares under the Merrill Lynch Select Pricing SM
System. Shares of Class A and Class D are sold with a front-end
sales charge. Shares of Class B and Class C may be subject to a
contingent deferred sales charge. All classes of shares have
identical voting, dividend, liquidation and other rights and the
same terms and conditions, except that Class B, Class C and Class D
Shares bear certain expenses related to the account maintenance of
such shares, and Class B and Class C Shares also bear certain
expenses related to the distribution of such shares. Each class has
exclusive voting rights with respect to matters relating to its
account maintenance and distribution expenditures. The following is
a summary of significant accounting policies followed by the Fund.
<PAGE>
(a) Valuation of investments--Municipal bonds and other portfolio
securities in which the Fund invests are traded primarily in the
over-the-counter municipal bond and money markets and are valued at
the last available bid price in the over-the-counter market or on
the basis of yield equivalents as obtained by the Fund's pricing
service from one or more dealers that make markets in the
securities. Financial futures contracts, which are traded on
exchanges, are valued at their last sale price as of the close of
such exchanges. Options on financial futures contracts on US
Government securities, which are traded on exchanges, are valued at
their last bid price in the case of options purchased and their last
asked price in the case of options written. Short-term investments
with a remaining maturity of sixty days or less are valued at
amortized cost, which approximates market value. Securities and
assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the
direction of the Board of Trustees of the Fund, including valuations
furnished by a pricing service retained by the Fund, which may
utilize a matrix system for valuations. The procedures of the
pricing service and its valuations are reviewed by the officers of
the Fund under the general supervision of the Board of Trustees.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
* Financial futures contracts--The Fund may purchase or sell interest
rate futures contracts and options on such futures contracts for the
purpose of hedging the market risk on existing securities or the
intended purchase of securities. Futures contracts are contracts for
delayed delivery of securities at a specific future date and at a
specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to
the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin
and are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
(c) 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 substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
<PAGE>
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(f) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates.
NOTES TO FINANCIAL STATEMENTS (concluded)
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 also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), 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 of 0.55% on the average daily
value of the Fund's net assets.
The Investment Advisory Agreement obligates MLAM to reimburse the
Fund to the extent that expenses (excluding interest, taxes,
distribution fees, brokerage fees and commissions, and extraordinary
items) exceed 2.5% of the Fund's first $30 million of average daily
net assets, 2.0% of the Fund's next $70 million of average daily net
assets and 1.5% of the average daily net assets in excess thereof.
MLAM's obligation to reimburse the Fund is limited to the amount of
the management fee. No fee payment will be made to MLAM during any
fiscal year which will cause such expenses to exceed the expense
limitation applicable at the time of such payment.
<PAGE>
Pursuant to the distribution plans (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
ongoing account maintenance and distribution fees. The fees are
accrued daily and paid monthly at annual rates based upon the
average daily net assets of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.20% 0.10%
Class C 0.20% 0.10%
Class D 0.10% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the six months ended April 30, 1996, MLFD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the
Fund's Class A and Class D Shares as follows:
MLFD MLPF&S
Class A $115 $1,802
Class D $165 $2,836
For the six months ended April 30, 1996, MLPF&S received contingent
deferred sales charges of $80,601 and $1,965 relating to
transactions in Class B and Class C Shares, respectively.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), 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, MLFD, MLFDS, MLPF&S, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended April 30, 1996 were $108,144,022 and
$138,322,508, respectively.
<PAGE>
Net realized and unrealized gains as of April 30, 1996 were as
follows:
Realized Unrealized
Gains Gains
Long-term investments $ 2,422,109 $ 90,307
----------- -----------
Total $ 2,422,109 $ 90,307
=========== ===========
As of April 30, 1996, net unrealized appreciation for Federal income
tax purposes aggregated $90,307, of which $3,193,688 related to
appreciated securities and $3,103,381 related to depreciated
securities. The aggregate cost of investments at April 30, 1996 for
Federal income tax purposes was $224,392,180.
4. Beneficial Interest Transactions:
Net increase (decrease) in net assets derived from beneficial
interest transactions was $(2,729,099) and $53,625,113 for the six
months ended April 30, 1996 and the year ended October 31, 1995,
respectively. Transactions in shares of beneficial interest for each
class were as follows:
Class A Shares for the Six Dollar
Months Ended April 30, 1996 Shares Amount
Shares sold 466,705 $ 4,692,616
Shares issued to shareholders
in reinvestment of dividends 44,205 443,561
----------- -----------
Total issued 510,911 5,136,177
Shares redeemed (607,034) (6,093,914)
----------- -----------
Net decrease (96,124) $ (957,737)
=========== ===========
Class A Shares for the Year Dollar
Ended October 31, 1995 Shares Amount
Shares sold 1,647,907 $16,236,414
Shares issued to shareholders
in reinvestment of dividends 77,636 757,875
----------- -----------
Total issued 1,725,543 16,994,289
Shares redeemed (1,103,835) (10,743,665)
----------- -----------
Net increase 621,708 $ 6,250,624
=========== ===========
<PAGE>
Class B Shares for the Six Dollar
Months Ended April 30, 1996 Shares Amount
Shares sold 1,507,272 $15,131,103
Shares issued to shareholders
in reinvestment of dividends 238,145 2,389,218
----------- -----------
Total issued 1,745,417 17,520,321
Shares redeemed (2,230,661) (22,430,856)
Automatic conversion of shares (23,251) (231,353)
----------- -----------
Net decrease (508,495) $(5,141,888)
=========== ===========
Class B Shares for the Year Dollar
Ended October 31, 1995 Shares Amount
Shares sold 7,623,095 $75,241,383
Shares issued to shareholders
in reinvestment of dividends 351,003 3,428,515
----------- -----------
Total issued 7,974,098 78,669,898
Shares redeemed (4,590,100) (44,465,318)
----------- -----------
Net increase 3,383,998 $34,204,580
=========== ===========
Class C Shares for the Six Dollar
Months Ended April 30, 1996 Shares Amount
Shares sold 245,875 $ 2,464,801
Shares issued to shareholders
in reinvestment of dividends 12,975 130,083
----------- -----------
Total issued 258,850 2,594,884
Shares redeemed (123,112) (1,239,685)
----------- -----------
Net increase 135,738 $ 1,355,199
=========== ===========
<PAGE>
Class C Shares for the Year Dollar
Ended October 31, 1995 Shares Amount
Shares sold 692,677 $ 6,861,453
Shares issued to shareholders
in reinvestment of dividends 5,294 52,387
----------- -----------
Total issued . 697,971 6,913,840
Shares redeemed (49,436) (489,048)
----------- -----------
Net increase 648,535 $ 6,424,792
=========== ===========
Class D Shares for the Six Dollar
Months Ended April 30, 1996 Shares Amount
Shares sold 325,340 $ 3,271,145
Automatic conversion of shares 23,247 231,353
Shares issued to shareholders
in reinvestment of dividends 11,006 110,390
----------- -----------
Total issued 359,593 3,612,888
Shares redeemed (157,985) (1,597,561)
----------- -----------
Net increase 201,608 $ 2,015,327
=========== ===========
Class D Shares for the Year Dollar
Ended October 31, 1995 Shares Amount
Shares sold 1,260,691 $12,362,696
Shares issued to shareholders
in reinvestment of dividends 9,765 95,915
----------- -----------
Total issued 1,270,456 12,458,611
Shares redeemed (577,845) (5,713,494)
----------- -----------
Net increase 692,611 $ 6,745,117
=========== ===========
5. Capital Loss Carryforward:
At October 31, 1995, the Fund had a net capital loss carryforward of
approximately $11,887,000, of which $ 6,982,000 expires in 1996,
$456,000 expires in 1997, $795,000 expires in 1998, and $3,654,000
expires in 2003. This amount will be available to offset like
amounts of any future taxable gains.
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