MERRILL LYNCH
MUNICIPAL
INTERMEDIATE
TERM FUND
[GRAPHIC OMITTED]
STRATEGIC
Performance
Semi-Annual Report
April 30, 1998
<PAGE>
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
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, April 30, 1998
DEAR SHAREHOLDER
The Municipal Market Environment
During the three months ended April 30, 1998, bond yields generally moved
higher. While low inflation has supported lower interest rates, much of the
decline in bond yields in late 1997 and early 1998 were driven more by the
turmoil in Asian financial markets than by domestic economic fundamentals. Weak
economic conditions in Asia were expected to negatively impact US growth through
reduced export demand. Additionally, inflation in the United States was also
expected to decline in response to lower prices on goods imported from Asian
manufacturers. However, in recent months, many investors have become
increasingly concerned that most of the downturn in Asia, especially in Japan,
has already occurred and any future deterioration will not be severe enough to
constrain US economic growth and inflationary pressures. These concerns served
to push interest rates higher in the latter part of the period, causing
fixed-income yields to retrace much of their earlier gains. At April 30, 1998,
the 30-year US Treasury bond yield was 5.95%, rising 14 basis points (0.14%)
during the last three months. Long-term municipal revenue bond yields declined
less than 20 basis points to end April at 5.52%.
Thus far in 1998, the municipal bond market has experienced unexpectedly strong
supply pressures. These supply pressures have prevented tax-exempt bond yields
from declining as much as US Treasury bond yields. Over the last six months,
more than $135 billion in new tax-exempt bonds were underwritten, an increase of
over 40% compared to the same period a year ago. During the last three months,
municipalities issued more than $72 billion in new securities, an increase of
over 60% compared to the same three-month period in 1997. Additionally,
corporate issuers have also viewed current interest rate levels as an
opportunity to issue significant amounts of taxable securities. Thus far in
1998, more than $100 billion in investment-grade corporate bonds have been
underwritten, an increase of over 60% relative to the comparable period a year
ago. This sizeable corporate bond issuance has tended to support generally
higher fixed-income yields and reduce the demand for tax-exempt bonds.
However, the recent pace of new municipal bond issuance is unlikely to be
maintained. Continued increases in bond issuance will require lower and lower
tax-exempt bond yields to generate the economic savings necessary for additional
municipal bond refinancing. Preliminary estimates for 1998 total municipal bond
issuance are presently in the $200 billion-$225 billion range. These estimates
suggest that recent supply pressures are likely to abate later in the year.
Municipal bond investors received approximately $30 billion earlier this year in
coupon payments, bond maturities and proceeds from early redemptions. The demand
generated by these assets has helped offset the increase in supply seen thus far
this year. Furthermore, looking ahead, June and July have also tended to be
periods of strong investor demand as seasonal factors are likely to generate
strong income flows similar to those seen earlier this year.
It is also possible that at least some of the recent economic strength seen in
the United States will be reversed in the coming months. A particularly mild
winter has been partially responsible for a strong housing sector, as well as
other construction industries. This recent strong trend may not be sustained and
may lead to weaker construction growth later this year. Additionally, strong
economic growth in 1997 and the increased use of electronic tax filing have
resulted in larger and earlier Federal and state income tax refunds to many
individuals. These refunds appear to have supported strong consumer spending in
recent months, but may be borrowing against weaker spending later this year. In
addition, the continued impact of the Asian financial crisis on the US domestic
economy's future growth remains unclear. Barring a dramatic and unexpected
resurgence of domestic inflation, we do not believe that the Federal Reserve
Board will be willing to raise interest rates until the full impact of the Asian
situation can be established.
All these factors suggest that over the near term, tax-exempt as well as taxable
bond yields are unlikely to rise by any appreciable amount. Recent supply
pressures have caused municipal bond yield ratios to rise relative to US
Treasury bond yields. At April 30, 1998, long-term tax-exempt bond yields were
at attractive yield ratios relative to comparable US Treasury securities (over
90%), and well in excess of their expected range of 85%-88%. Any further
pressure upon the municipal market may well represent a very attractive
investment opportunity.
Portfolio Strategy
During the six-month period ended April 30, 1998, we continued to follow the
portfolio strategy that we had adopted during the prior six-month period. At
that time, our outlook was constructive toward the municipal market because we
believed any risk was biased toward lower rather than higher interest rates.
Therefore, we followed a more aggressive investment strategy. We have
essentially maintained a fully invested position since that time and have kept
cash reserves at a minimum to seek to enhance the Fund's dividend and capital
appreciation potential.
Looking ahead, we expect to remain fully invested during the next several
months. We will continue to monitor economic data for any signs of inflationary
pressure or economic downturn so that we can modify our portfolio strategy in an
effort to seek to preserve the Fund's capital or enhance total return.
In Conclusion
We appreciate your ongoing interest in Merrill Lynch Municipal Intermediate Term
Fund, and we look forward to assisting you with your financial needs in the
months and years ahead.
Sincerely,
/s/ Arthur Zeikel
Arthur Zeikel
President
/s/ Vincent R. Giordano
Vincent R. Giordano
Senior Vice President
/s/ William R. Bock
William R. Bock
Vice President and
Portfolio Manager
June 4, 1998
2 & 3
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, April 30, 1998
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:
o 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.
o 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. (There is no initial sales charge for automatic share conversions.)
o 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.
o 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. Figures shown in the "Average Annual Total Return" tables assume
reinvestment of all dividends and capital gains distributions at net asset value
on the payable date. 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.
Recent Performance Results*
<TABLE>
<CAPTION>
Ten Years/ Standardized
12 Month 3 Month Since Inception 30-day Yield
Total Return Total Return Total Return As of 4/30/98
=======================================================================================================================
<S> <C> <C> <C> <C>
ML Municipal Intermediate Term Fund Class A Shares +8.38% -0.83% +83.49% 4.01%
- -----------------------------------------------------------------------------------------------------------------------
ML Municipal Intermediate Term Fund Class B Shares +8.04 -0.90 +84.18 3.73
- -----------------------------------------------------------------------------------------------------------------------
ML Municipal Intermediate Term Fund Class C Shares +7.92 -0.91 +23.46 3.72
- -----------------------------------------------------------------------------------------------------------------------
ML Municipal Intermediate Term Fund Class D Shares +8.27 -0.85 +24.55 3.91
=======================================================================================================================
</TABLE>
* Investment results shown do not reflect sales charges; results shown would
be lower if a sales charge was included. Total investment returns are based
on changes in net asset value for the periods shown, and assume reinvestment
of all dividends and capital gains distributions at net asset value on the
payable date. The Fund's ten-year/inception dates are: Class A Shares,
10/31/88; Class B Shares, ten years ended 4/30/98; and Class C and Class D
Shares, 10/21/94.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
Year Ended 3/31/98 +9.80% +8.70%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/98 +5.63 +5.42
- --------------------------------------------------------------------------------
Inception (10/31/88) through 3/31/98 +6.74 +6.63
- --------------------------------------------------------------------------------
* Maximum sales charge is 1%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
Year Ended 3/31/98 +9.46% +8.46%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/98 +5.30 +5.30
- --------------------------------------------------------------------------------
Ten Years Ended 3/31/98 +6.43 +6.43
- --------------------------------------------------------------------------------
* 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 3/31/98 +9.44% +8.44%
- --------------------------------------------------------------------------------
Inception (10/21/94) through 3/31/98 +6.58 +6.58
- --------------------------------------------------------------------------------
* 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 D Shares*
================================================================================
Year Ended 3/31/98 +9.69% +8.60%
- --------------------------------------------------------------------------------
Inception (10/21/94) through 3/31/98 +6.81 +6.50
- --------------------------------------------------------------------------------
* Maximum sales charge is 1%.
** Assuming maximum sales charge.
4 & 5
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, April 30, 1998
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
===================================================================================================================================
<S> <C> <C> <C> <C>
Alaska--1.1% AAA Aaa $ 2,250 Alaska, Student Loan Revenue Bonds (Student Loan Corp.), AMT,
Series A, 5.65% due 7/01/2012 (c) $ 2,332
===================================================================================================================================
Arizona--1.0% NR* NR* 2,000 Mohave County, Arizona, IDA, IDR (North Star Steel Co.
Project), AMT, 6.70% due 3/01/20 202,182
===================================================================================================================================
California--13.1% AAA Aaa 5,000 California State, Veterans, GO, AMT, Series BH, 5.20% due
12/01/2011 (f) 5,026
A- Baa3 10,000 Northern California Power Agency, Public Power Revenue Refunding
Bonds (Geothermal Project No. 3), Series A, 5.65% due 7/01/2007 10,443
AAA Aaa 4,000 Oxnard, California, Financing Authority, Solid Waste Revenue
Bonds, AMT, 5.75% due 5/01/2010 (c) 4,227
AA- Aa3 4,000 San Francisco, California, Bay Area Rapid Transit District,
Sales Tax Revenue Refunding Bonds, 5.25% due 7/01/2010 4,157
SP1+ MIG1+ 4,000 Santa Clara County, California, TRAN, 4.75% due 10/01/1998 4,015
===================================================================================================================================
Colorado--3.1% A NR* 1,225 Denver, Colorado, Urban Renewal Authority, Tax Increment Revenue
Bonds (Downtown Denver), AMT, Series A, 7.25% due 9/01/2017 1,344
AAA Aaa 5,000 Jefferson County, Colorado, School District No. R-001, UT,
Series A, 5.50% due 12/15/2009 (e) 5,323
===================================================================================================================================
Connecticut--2.4% AA- Aa3 5,000 Connecticut State, Refunding, Series A, 5.25% due 3/15/2010 5,197
===================================================================================================================================
District of District of Columbia, Refunding, UT:
Columbia--7.3% AAA Aaa 4,700 Series A, 5.375% due 6/01/2010 (c) 4,804
AAA Aaa 10,000 Series B, 5.75% due 6/01/2010 (d) 10,655
===================================================================================================================================
Florida--3.6% AAA Aaa 7,500 Florida State Divisional Board of Finance, Department of General
Services Revenue Bonds (Environmental Protection Preservation),
Series 2000-B, 5.25% due 7/01/2011 (f) 7,723
===================================================================================================================================
Hawaii--6.9% AAA Aaa 5,000 Hawaii State, GO, Refunding, Series CO, 6% due 3/01/2009 (e) 5,502
AAA Aaa 8,950 Hawaii State, GO, Series CR, 5.25% due 4/01/2010 (d) 9,197
===================================================================================================================================
Illinois--0.4% A1+ VMIG1+ 800 Illinois Health Facilities Authority Revenue Bonds (Northwestern
Memorial Hospital), VRDN, 3.95% due 8/15/2025 (a) 800
===================================================================================================================================
Kansas--3.5% Kansas State, Department of Transportation, Highway Revenue
Refunding Bonds:
AA+ Aa2 5,000 5.50% due 9/01/2010 5,332
AA+ Aa2 2,000 5.50% due 9/01/2012 2,114
===================================================================================================================================
Kentucky--2.0% AAA Aaa 4,320 Louisville and Jefferson County, Kentucky, Metropolitan Sewer
District Revenue Refunding Bonds (Sewer and Drain System),
Series A, 5% due 5/15/2011 (e) 4,324
===================================================================================================================================
Louisiana--3.1% A1+ P1 100 East Baton Rouge Parish, Louisiana, PCR, Refunding (Exxon
Project), VRDN, 4.10% due 3/01/2022 (a) 100
AAA Aaa 4,000 Louisiana State, GO, Refunding, Series A, 5.25% due
4/15/2010 (c) 4,126
Louisiana State Offshore Terminal Authority, Deepwater Port
Revenue Refunding Bonds (Loop Inc.--First Stage) (a):
A1+ P1 1,000 ACES, 4.05% due 9/01/2006 1,000
A1+ VMIG1+ 1,400 Series A, VRDN, 4.10% due 9/01/2008 1,400
===================================================================================================================================
Maine--1.3% NR* A 2,670 Maine Educational Loan Marketing Corporation, Student Loan
Revenue Refunding Bonds, AMT, Series 1991, 6.90% due 11/01/2003 2,808
===================================================================================================================================
Massachusetts--1.2% AAA Aaa 2,500 Massachusetts State Turnpike Authority, Western Turnpike Revenue
Bonds, Series A, 5.55% due 1/01/2017 (d) 2,526
===================================================================================================================================
Michigan--0.5% NR* A 1,000 Michigan Higher Education, Student Loan Authority Revenue Bonds,
AMT, Series XIV-A, 6.75% due 10/01/2006 1,070
===================================================================================================================================
New Mexico--2.3% A1+ P1 4,900 Farmington, New Mexico, PCR, Refunding (Arizona Public Service
Company), VRDN, Series B, 4.05% due 9/01/2024 (a) 4,900
===================================================================================================================================
New York--14.5% BBB+ A3 5,000 New York City, New York, Refunding, UT, Series D, 6.50% due
11/01/2009 5,617
New York State Dormitory Authority, Revenue Refunding Bonds:
BBB+ Baa1 5,000 (Secured Hospital--Bronx/Lebanon), Series E, 5% due 2/15/2010 4,908
BBB+ Baa1 5,000 (Secured Hospital--Jamaica Hospital), Series F, 5% due
2/15/2010 4,908
AAA Aaa 1,565 (University of Rochester), Series A, 5% due 7/01/2011 (d) 1,563
A1+ NR* 3,300 New York State Energy, Research and Development Authority, PCR
(Niagara Mohawk Power Corporation Project), DATES, Series A,
4.05% due 7/01/2015 (a) 3,300
AA- Aa3 5,000 New York State Thruway Authority, General Revenue Bonds, Series
D, 5.40% due 1/01/20 105,228
AAA Aaa 5,000 Westchester County, New York, IDA, Resource Recovery Revenue
Bonds (Westchester Recovery Company Project), AMT, 6%
due 7/01/2008 (c) 5,419
===================================================================================================================================
</TABLE>
Portfolio Abbreviations
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)
BAN Bond Anticipation Notes
DATES Daily Adjustable Tax-Exempt Securities GO General Obligation Bonds
HDA Housing Development Authority
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
PCR Pollution Control Revenue Bonds
RITES Residual Interest Tax-Exempt Securities
TRAN Tax and Revenue Anticipation Notes
UT Unlimited Tax
VRDN Variable Rate Demand Notes
6 & 7
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, April 30, 1998
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <C> <C> <C> <C>
===================================================================================================================================
North Carolina--1.4% AAA Aaa $ 3,000 North Carolina Medical Care Commission, Health Care Facilities,
Revenue Refunding Bonds (Novant Health Project), Series A, 5.10%
due 10/01/2010 (d) $ 3,052
===================================================================================================================================
Ohio--1.7% Columbus, Ohio, Municipal Airport Authority Revenue Bonds
(Airport Improvement), Port Columbus, Series B (c):
AAA Aaa 2,225 5.25% due 1/01/2009 2,310
AAA Aaa 1,340 5.25% due 1/01/2010 1,387
===================================================================================================================================
Oregon--8.7% AAA Aaa 3,295 Deschutes County, Oregon, GO, Administrative School District
No. 1, 5.25% due 12/01/2010 (e) 3,427
AAA Aaa 3,790 Port of Portland, Oregon, International Airport Revenue Bonds
(Portland International Airport), AMT, Series 11, 5.40% due
7/01/2008 (e) 3,940
AA Aa1 5,550 Washington County, Oregon, GO, Refunding, Criminal Justice
Facilities, UT, 5% due 12/01/2010 5,617
Washington, Multnomah and Yamhill Counties, Oregon, School
District No. 1-J (Hillsboro), Refunding, UT:
NR* Aa3 2,060 5.25% due 11/01/2009 2,151
NR* Aa3 2,290 5% due 11/01/2010 2,324
NR* Aa3 1,115 5% due 11/01/2011 1,122
===================================================================================================================================
Texas--4.4% A1+ NR* 8,700 Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds (Methodist Hospital), VRDN, 4.15% due
12/01/2025 (a) 8,700
A1+ VMIG1+ 100 Lubbock, Texas, Health Facilities Development Corporation
Revenue Bonds (Saint Joseph Health System), VRDN, Series A,
4.10% due 7/01/2013 (a) 100
NR* VMIG1+ 200 Port of Arthur, Texas, Navigational District, PCR, Refunding
(Texaco Incorporated Project), VRDN, 4.15% due 10/01/2024 (a) 200
A1+ VMIG1+ 300 Sabine River Authority, Texas, PCR, Refunding (Texas Utilities
Project), VRDN, Series A, 4.10% due 3/01/2026 (a)(c) 300
===================================================================================================================================
Utah--0.8% A1+ VMIG1+ 1,600 Emery County, Utah, PCR, Refunding (Pacificorp Projects), VRDN,
4.15% due 11/01/2024 (a)(c) 1,600
===================================================================================================================================
Virginia--1.4% Virginia State HDA, Commonwealth Mortgage, Series J, Sub-Series J-2:
AA+ Aa1 1,365 6.45% due 1/01/2010 1,461
AA+ Aa1 1,300 6.50% due 1/01/2011 1,400
===================================================================================================================================
Washington--10.7% AA+ Aa1 5,000 King County, Washington, GO, Series D, 5.70% due 12/01/2010 5,401
AA Aa2 5,245 Seattle, Washington, Municipal Light and Power Revenue Refunding
Bonds, 5% due 7/01/20 105,307
AA+ Aa1 3,270 Seattle, Washington, Refunding, Limited Tax, Series B, 5.50%
due 3/01/2011 3,446
Washington State Public Power Supply System, Revenue Refunding
Bonds (Nuclear Project No. 3), Series A (c):
AAA Aaa 5,250 5.50% due 7/01/2007 5,520
AAA Aaa 3,015 5.60% due 7/01/2008 3,195
===================================================================================================================================
Wisconsin--4.5% A+ Aa3 7,500 Kenosha, Wisconsin, Waterworks Revenue Bonds, BAN, 4.70% due
12/01/2001 (h) 7,515
AA Aa2 2,000 Wisconsin State Housing and Economic Development Authority, Home
Ownership Revenue Bonds, AMT, Series F, 7.40% due 7/01/2013 (b) 2,159
===================================================================================================================================
Wyoming--2.7% Cheyenne, Wyoming, Refunding, Water, UT:
AA NR* 2,705 5.25% due 12/01/2009 2,800
AA NR* 2,850 5.25% due 12/01/2010 2,940
===================================================================================================================================
Puerto Rico--2.0% A1+ Baa1 3,950 Puerto Rico Commonwealth, Highway and Transportation Authority,
Highway Revenue Bonds, RITES, Series X, 6.061% due 7/01/2005 (g) 4,325
===================================================================================================================================
Total Investments (Cost--$222,417)--105.6% 225,269
Liabilities in Excess of Other Assets--(5.6%) (11,901)
--------
Net Assets--100.0% $213,368
========
===================================================================================================================================
</TABLE>
(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,
1998.
(b) FHA Insured.
(c) AMBAC Insured.
(d) MBIA Insured.
(e) FGIC Insured.
(f) FSA Insured.
(g) 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, 1998.
(h) Prerefunded.
* Not Rated.
+ Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
8 & 9
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, April 30, 1998
STATEMENT OF ASSETS AND LIABILITIES
As of April 30, 1998
<TABLE>
<CAPTION>
========================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $222,416,817) (Note 1a) ......... $225,268,694
Cash ...................................................................... 25,021
Receivables:
Securities sold ......................................................... $ 4,504,855
Interest ................................................................ 2,796,242
Beneficial interest sold ................................................ 116,555 7,417,652
----------
Prepaid registration fees and other assets (Note 1e) ...................... 69,538
-------------
Total assets .............................................................. 232,780,905
-------------
========================================================================================================================
Liabilities: Payables:
Securities purchased .................................................... 18,471,696
Beneficial interest redeemed ............................................ 422,852
Dividends to shareholders (Note 1f) ..................................... 237,308
Investment adviser (Note 2) ............................................. 98,123
Distributor (Note 2) .................................................... 26,686 19,256,665
----------
Accrued expenses and other liabilities .................................... 156,694
-------------
Total liabilities ......................................................... 19,413,359
-------------
========================================================================================================================
Net Assets: Net assets ................................................................ $213,367,546
=============
========================================================================================================================
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited
Consist of: number of shares authorized ............................................ $ 748,494
Class B Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized ............................................ 819,564
Class C Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized ............................................ 58,093
Class D Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized ............................................ 455,651
Paid-in capital in excess of par .......................................... 206,334,260
Undistributed realized capital gains on investments--net (Note 5) ......... 2,099,607
Unrealized appreciation on investments -- net ............................. 2,851,877
-------------
Net assets ................................................................ $213,367,546
=============
========================================================================================================================
Net Asset Class A--Based on net assets of $76,724,379 and 7,484,939 shares of
Value: beneficial interest outstanding ........................................ $ 10.25
=============
Class B--Based on net assets of $84,000,760 and 8,195,640 shares of
beneficial interest outstanding ........................................ $ 10.25
=============
Class C--Based on net assets of $5,951,450 and 580,928 shares of
beneficial interest outstanding ........................................ $ 10.24
=============
Class D--Based on net assets of $46,690,957 and 4,556,512 shares of
beneficial interest outstanding ........................................ $ 10.25
=============
========================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 1998
<TABLE>
<CAPTION>
=============================================================================================================================
<S> <C> <C> <C>
Investment Interest and amortization of premium and discount earned .................. $ 5,395,089
Income (Note 1d):
=============================================================================================================================
Expenses: Investment advisory fees (Note 2) ......................................... $ 595,205
Account maintenance and distribution fees--Class B (Note 2) ............... 134,104
Transfer agent fees--Class B (Note 2) ..................................... 43,639
Printing and shareholder reports .......................................... 30,793
Transfer agent fees--Class A (Note 2) ..................................... 30,549
Professional fees ......................................................... 30,363
Registration fees (Note 1e) ............................................... 26,226
Account maintenance fees--Class D (Note 2) ................................ 23,405
Accounting services (Note 2) .............................................. 22,511
Transfer agent fees--Class D (Note 2) ..................................... 19,292
Account maintenance and distribution fees--Class C (Note 2) ............... 9,084
Trustees' fees and expenses ............................................... 6,841
Custodian fees ............................................................ 5,934
Pricing fees .............................................................. 3,820
Transfer agent fees--Class C (Note 2) ..................................... 3,255
Other ..................................................................... 4,758
-----------
Total expenses ............................................................ 989,779
------------
Investment income--net .................................................... 4,405,310
------------
=============================================================================================================================
Realized & Realized gain on investments--net ......................................... 4,571,152
Unrealized Change in unrealized appreciation on investments--net ..................... (4,156,414)
Gain (Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations ...................... $ 4,820,048
(Notes 1b, 1d & 3): ============
=============================================================================================================================
</TABLE>
See Notes to Financial Statements.
10 & 11
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, April 30, 1998
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 1998 1997
==================================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net ...................................................... $ 4,405,310 $ 9,080,729
Realized gain on investments--net ........................................... 4,571,152 4,147,015
Change in unrealized appreciation/depreciation on investments--net .......... (4,156,414) 2,357,789
------------ ------------
Net increase in net assets resulting from operations ........................ 4,820,048 15,585,533
------------ ------------
==================================================================================================================================
Dividends to Investment income--net:
Shareholders Class A ................................................................... (1,568,690) (2,263,578)
(Note 1f): Class B ................................................................... (1,751,164) (4,858,261)
Class C ................................................................... (118,262) (278,427)
Class D ................................................................... (967,194) (1,680,463)
------------ ------------
Net decrease in net assets resulting from dividends to shareholders ......... (4,405,310) (9,080,729)
------------ ------------
==================================================================================================================================
Beneficial Interest Net decrease in net assets derived from beneficial interest transactions .... (7,202,160) (2,831,837)
Transactions ------------ ------------
(Note 4):
==================================================================================================================================
Net Assets: Total increase (decrease) in net assets ..................................... (6,787,422) 3,672,967
Beginning of period ......................................................... 220,154,968 216,482,001
------------ ------------
End of period ............................................................... $213,367,546 $220,154,968
============ ============
==================================================================================================================================
</TABLE>
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Class A
---------------------------------------------------
For the Six
The following per share data and ratios have been derived Months Ended For the Year Ended October 31,
from information provided in the financial statements. April 30, --------------------------------------
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ..................... $ 10.23 $ 9.94 $ 10.00 $ 9.62 $ 10.39
Operating --------- ------- ------- ------- -------
Performance: Investment income--net ................................... .21 .45 .48 .53 .52
Realized and unrealized gain (loss) on investments--net .. .02 .29 (.06) .38 (.77)
--------- ------- ------- ------- -------
Total from investment operations ......................... .23 .74 .42 .91 (.25)
--------- ------- ------- ------- -------
Less dividends from investment income--net ............... (.21) (.45) (.48) (.53) (.52)
--------- ------- ------- ------- -------
Net asset value, end of period ........................... $ 10.25 $ 10.23 $ 9.94 $ 10.00 $ 9.62
========= ======= ======= ======= =======
==================================================================================================================================
Total Investment Based on net asset value per share ....................... 2.29%++ 7.59% 4.27% 9.69% (2.49%)
Return:** ========= ======= ======= ======= =======
==================================================================================================================================
Ratios to Average Expenses ................................................. .75%* .79% .81% .81% .76%
Net Assets: ========= ======= ======= ======= =======
Investment income--net ................................... 4.23%* 4.40% 4.79% 5.36% 5.19%
========= ======= ======= ======= =======
==================================================================================================================================
Supplemental Net assets, end of period (in thousands) ................. $ 76,724 $71,684 $30,353 $34,970 $27,653
Data: ========= ======= ======= ======= =======
Portfolio turnover ....................................... 95.91% 167.41% 146.82% 115.78% 52.56%
========= ======= ======= ======= =======
==================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class B
---------------------------------------------------
For the Six
The following per share data and ratios have been derived Months Ended For the Year Ended October 31,
from information provided in the financial statements. April 30, --------------------------------------
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
==================================================================================================================================
Per Share Net asset value, beginning of period ..................... $ 10.23 $ 9.93 $ 10.00 $ 9.62 $ 10.39
Operating --------- ------- ------- ------- -------
Performance: Investment income--net ................................... .20 .41 .44 .50 .49
Realized and unrealized gain (loss) on investments--net .. .02 .30 (.07) .38 (.77)
--------- ------- ------- ------- -------
Total from investment operations ......................... .22 .71 .37 .88 (.28)
--------- ------- ------- ------- -------
Less dividends from investment income--net ............... (.20) (.41) (.44) (.50) (.49)
--------- ------- ------- ------- -------
Net asset value, end of period ........................... $ 10.25 $ 10.23 $ 9.93 $ 10.00 $ 9.62
========= ======= ======= ======= =======
==================================================================================================================================
Total Investment Based on net asset value per share ....................... 2.14%++ 7.35% 3.84% 9.34% (2.79%)
Return:** ========= ======= ======= ======= =======
==================================================================================================================================
Ratios to Average Expenses ................................................. 1.07%* 1.11% 1.13% 1.13% 1.07%
Net Assets: ========= ======= ======= ======= =======
Investment income--net ................................... 3.92%* 4.13% 4.47% 5.05% 4.87%
========= ======= ======= ======= =======
==================================================================================================================================
Supplemental Net assets, end of period (in thousands) ................. $ 84,001 $94,552 $169,441 $181,640 $142,152
Data: ========= ======= ======= ======= =======
Portfolio turnover ....................................... 95.91% 167.41% 146.82% 115.78% 52.56%
========= ======= ======= ======= =======
==================================================================================================================================
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales loads.
++ Aggregate total investment return.
See Notes to Financial Statements.
12 & 13
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, April 30, 1998
FINANCIAL HIGHLIGHTS (concluded)
<TABLE>
<CAPTION>
Class C
---------------------------------------------------
For the
Period
For the Six For the Year Oct. 21,
The following per share data and ratios have been derived Months Ended Ended October 31, 1994+ to
from information provided in the financial statements. April 30, ---------------------------- Oct. 31,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ..................... $ 10.23 $ 9.93 $ 10.00 $ 9.62 $ 9.70
Operating --------- ------- ------- ------- -------
Performance: Investment income--net ................................... .20 .41 .44 .50 .01
Realized and unrealized gain (loss) on investments--net .. .01 .30 (.07) .38 (.08)
--------- ------- ------- ------- -------
Total from investment operations ......................... .21 .71 .37 .88 (.07)
--------- ------- ------- ------- -------
Less dividends from investment income--net ............... (.20) (.41) (.44) (.50) (.01)
--------- ------- ------- ------- -------
Net asset value, end of period ........................... $ 10.24 $ 10.23 $ 9.93 $ 10.00 $ 9.62
========= ======= ======= ======= =======
==================================================================================================================================
Total Investment Based on net asset value per share ....................... 2.03%++ 7.34% 3.82% 9.36% (.71%)++
Return:** ========= ======= ======= ======= =======
==================================================================================================================================
Ratios to Average Expenses ................................................. 1.08%* 1.13% 1.15% 1.01% 1.18%*
Net Assets: ========= ======= ======= ======= =======
Investment income--net ................................... 3.91%* 4.10% 4.44% 4.76% 4.92%*
========= ======= ======= ======= =======
==================================================================================================================================
Supplemental Net assets, end of period (in thousands) ................. $ 5,952 $ 6,110 $ 8,313 $ 6,485 $ 1
Data: ========= ======= ======= ======= =======
Portfolio turnover ....................................... 95.91% 167.41% 146.82% 115.78% 52.56%
========= ======= ======= ======= =======
==================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class D
---------------------------------------------------
For the
Period
For the Six For the Year Oct. 21,
The following per share data and ratios have been derived Months Ended Ended October 31, 1994+ to
from information provided in the financial statements. April 30, ---------------------------- Oct. 31,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ..................... $ 10.23 $ 9.94 $ 10.00 $ 9.62 $ 9.70
Operating --------- ------- ------- ------- -------
Performance: Investment income--net ................................... .21 .44 .47 .52 .01
Realized and unrealized gain (loss) on investments--net .. .02 .29 (.06) .38 (.08)
--------- ------- ------- ------- -------
Total from investment operations ......................... .23 .73 .41 .90 (.07)
--------- ------- ------- ------- -------
Less dividends from investment income--net ............... (.21) (.44) (.47) (.52) (.01)
--------- ------- ------- ------- -------
Net asset value, end of period ........................... $ 10.25 $ 10.23 $ 9.94 $ 10.00 $ 9.62
========= ======= ======= ======= =======
==================================================================================================================================
Total Investment Based on net asset value per share ....................... 2.24%++ 7.48% 4.17% 9.58% (.71%)++
Return:** ========= ======= ======= ======= =======
==================================================================================================================================
Ratios to Average Expenses ................................................. .85%* .89% .91% .90% .97%*
Net Assets: ========= ======= ======= ======= =======
Investment income--net ................................... 4.13%* 4.31% 4.68% 5.12% 5.20%*
========= ======= ======= ======= =======
==================================================================================================================================
Supplemental Net assets, end of period (in thousands) ................. $ 46,691 $47,809 $ 8,375 $ 7,000 $ 70
Data: ========= ======= ======= ======= =======
Portfolio turnover ....................................... 95.91% 167.41% 146.82% 115.78% 52.56%
========= ======= ======= ======= =======
==================================================================================================================================
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++ Aggregate total investment return.
See Notes to Financial Statements.
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 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.
(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.
o Financial futures contracts--The Fund may purchase or sell financial 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
14 & 15
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, April 30, 1998
NOTES TO FINANCIAL STATEMENTS (continued)
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.
(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.
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.
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
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, 1998, 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 ......................... $23 $370
Class D ......................... $31 $484
- --------------------------------------------------------------------------------
For the six months ended April 30, 1998, MLPF&S received contingent deferred
sales charges of $48,857 and $171 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, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended April 30, 1998 were $200,377,377 and $209,543,993, respectively.
Net realized gains for the six months ended April 30, 1998 and net unrealized
gains as of April 30, 1998, were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
- --------------------------------------------------------------------------------
Long-term investments ........... $ 4,569,123 $ 2,851,877
Short-term investments .......... 2,029 --
----------- ------------
Total ........................... $ 4,571,152 $ 2,851,877
=========== ============
- --------------------------------------------------------------------------------
As of April 30, 1998, net unrealized appreciation for Federal income tax
purposes aggregated $2,851,877, of which $4,114,741 related to appreciated
securities and $1,262,864 related to depreciated securities. The aggregate cost
of investments at April 30, 1998 for Federal income tax purposes was
$222,416,817.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest transactions was
$7,202,160 and $2,831,837 for the six months ended April 30, 1998 and for the
year ended October 31, 1997, respectively.
Transactions in shares of beneficial interest for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Six Dollar
Months Ended April 30, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ..................... 1,465,179 $ 15,195,192
Shares issued to shareholders
in reinvestment of dividends .... 97,538 1,010,466
----------- ------------
Total issued .................... 1,562,717 16,205,658
Shares redeemed ................. (1,082,261) (11,218,904)
----------- ------------
Net increase .................... 480,456 $ 4,986,754
=========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended October 31, 1997 Shares Amount
- --------------------------------------------------------------------------------
Shares sold 6,709,48 $ 67,140,511
Shares issued to shareholders
in reinvestment of dividends 131,599 1,326,752
----------- ------------
Total issued 6,841,087 68,467,263
Shares redeemed (2,891,728) (28,944,364)
----------- ------------
Net increase 3,949,359 $ 39,522,899
=========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Six Dollar
Months Ended April 30, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold 675,108 $ 7,022,986
Shares issued to shareholders
in reinvestment of dividends 103,934 1,076,554
----------- ------------
Total issued 779,042 8,099,540
Automatic conversion of shares (301,704) (3,123,983)
Shares redeemed (1,521,681) (15,770,915)
----------- ------------
Net decrease (1,044,343) $(10,795,358)
=========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended October 31, 1997 Shares Amount
- --------------------------------------------------------------------------------
Shares sold 2,459,944 $ 24,587,970
Shares issued to shareholders
in reinvestment of dividends 298,447 2,996,372
----------- ------------
Total issued 2,758,391 27,584,342
Automatic conversion of shares (4,335,272) (43,314,661)
Shares redeemed (6,240,186) (62,481,421)
----------- ------------
Net decrease (7,817,067) $(78,211,740)
=========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Six Dollar
Months Ended April 30, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold 97,118 $ 1,007,733
Shares issued to shareholders
in reinvestment of dividends 8,838 91,524
----------- ------------
Total issued 105,956 1,099,257
Shares redeemed (122,434) (1,267,270)
----------- ------------
Net decrease (16,478) $ (168,013)
=========== ============
- --------------------------------------------------------------------------------
16 & 17
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, April 30, 1998
NOTES TO FINANCIAL STATEMENTS (concluded)
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended October 31, 1997 Shares Amount
- --------------------------------------------------------------------------------
Shares sold 263,377 $ 2,624,458
Shares issued to shareholders
in reinvestment of dividends 22,330 224,277
----------- ------------
Total issued 285,707 2,848,735
Shares redeemed (525,342) (5,253,237)
----------- ------------
Net decrease (239,635) $ (2,404,502)
=========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Six Dollar
Months Ended April 30, 1998 Shares Amount
- -------------------------------------------------------------------------------
Shares sold 78,796 $ 817,273
Shares issued to shareholders
in reinvestment of dividends 43,218 447,554
----------- ------------
Automatic conversion of shares 301,743 3,123,983
Total issued 423,757 4,388,810
Shares redeemed (540,362) (5,614,353)
----------- ------------
Net decrease (116,605) $ (1,225,543)
=========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended October 31, 1997 Shares Amount
- --------------------------------------------------------------------------------
Shares sold 339,568 $ 3,413,939
Shares issued to shareholders
in reinvestment of dividends 76,475 769,028
----------- ------------
Automatic conversion of shares 4,335,272 43,314,661
Total issued 4,751,315 47,497,628
Shares redeemed (921,079) (9,236,122)
----------- ------------
Net increase 3,830,236 $ 38,261,506
=========== ============
- --------------------------------------------------------------------------------
5. Capital Loss Carryforward:
At October 31, 1997, the Fund had a net capital loss carryforward of
approximately $1,703,000, of which $1,434,000 expires in 2003 and $269,000
expires in 2004. This amount will be available to offset like amounts of any
future taxable gains.
18
<PAGE>
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of the Fund unless accompanied or preceded by the Fund's
current prospectus. Past performance results shown in this report should not be
considered a representation of future performance. 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.
Merrill Lynch Municipal
Intermediate Term Fund
Merrill Lynch Municipal
Series Trust
Box 9011
Princeton, NJ
08543-9011 #10437--4/98
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