MERRILL LYNCH
MUNICIPAL
INTERMEDIATE
TERM FUND
[GRAPHIC OMITTED]
STRATEGIC
Performance
Semi-Annual Report
April 30, 1999
<PAGE>
MERRILL LYNCH MUNICIPAL INTERMEDIATE TERM FUND
Officers and Trustees
Terry K. Glenn, President and Trustee
Ronald W. Forbes, Trustee
Cynthia A. Montgomery, Trustee
Charles C. Reilly, Trustee
Kevin A. Ryan, Trustee
Richard R. West, Trustee
Arthur Zeikel, Trustee
Vincent R. Giordano, Senior Vice President
William R. Bock, Vice President
Kenneth A. Jacob, Vice President
Donald C. Burke, Vice President and Treasurer
William E. Zitelli, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
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, 1999
DEAR SHAREHOLDER
The Municipal Market Environment
During the three months ended April 30, 1999, long-term bond yields generally
moved higher. Most of this increase in yields occurred in February and early
March. However, during February, a number of data releases suggested that US
economic growth would likely remain strong throughout most of 1999.
Consequently, long-term US Treasury bond yields rose more than 60 basis points
(0.60%) to 5.70% by early March. During the remainder of the three-month period,
US Treasury bond yields traded between 5.50% and 5.70% as the lack of
inflationary pressures offset much of the concerns generated by continued strong
economic growth. Long-term uninsured municipal bond yields rose over 15 basis
points to 5.34% by early March, then declined slightly to close the April
quarter at 5.29%, as measured by the Bond Buyer Revenue Bond Index.
In recent months, the tax-exempt market was better able to withstand much of the
upward pressure on bond yields because of its stronger technical position. While
the continued positive inflationary environment limited some of the recent
increases in taxable bond yields, a deteriorating supply/demand position helped
push taxable bond yields significantly higher than municipal bond yields. Much
of the US Treasury bond market's underperformance in recent months can be
attributed to the large amounts of taxable corporate issuance. Large taxable
corporate underwritings reduced the demand for US Government securities in
recent months, pushing US Treasury bond yields higher.
On the other hand, the tax-exempt bond market enjoyed only limited new-issue
supply. During the six months ended April 30, 1999, more than $123 billion in
new long-term tax-exempt securities was underwritten, a decline of 10% compared
to the same period a year ago. Municipalities issued less than $60 billion in
long-term tax-exempt securities during the three months ended April 30, 1999, a
decline of 25% compared to the April 30, 1998 quarter. More recently, the rate
of new tax-exempt issuance has declined even further. During April 1999, just
over $15 billion in long-term tax-exempt securities was marketed, a decline of
over 33% compared to April 1998 levels. As municipal bond yields fell and
stabilized in recent quarters, the ability of municipalities to refinance
existing higher-couponed debt declined. This led to a significant decrease in
refunding issuance and an overall drop in new municipal bond supply. When
coupled with ongoing, moderate retail and institutional demand, the tax-exempt
bond market was able to avoid much of the yield volatility exhibited by US
Treasury securities.
Looking ahead, the expected combination of moderate economic growth in the
United States and continued negligible inflation suggests a relatively stable
interest rate environment. However, in recent years, bond yields reached their
annual peaks in early May and declined for the remainder of the year. A
meaningful decline in fixed-income bond yields would require either evidence of
a significant slowdown in the US economy or the resumption of concerns regarding
renewed shocks to the world's economic system. Currently, neither condition
exists or seems likely in the immediate future. In our opinion, this suggests a
continuation of the narrow trading ranges seen in recent months.
Portfolio Strategy
During the last several months, we adopted a neutral, fully invested investment
strategy, since indicators pointed to a continuation of both benign inflation
and healthy domestic economic growth. These favorable conditions led us to
believe that long-term tax-exempt bond yields would remain trading within a
somewhat narrow range. Therefore, we chose to focus on income-producing
securities rather than on those issues with the potential for capital gains. We
believed that coupon income could be the more significant component of total
return for the Fund if the tax-exempt bond market performed as anticipated.
Keeping shareholder income in mind, Merrill Lynch Municipal Intermediate Term
Fund remained fully invested for most of the past several months, and we expect
to maintain this position going forward.
In Conclusion
We appreciate your ongoing interest in Merrill Lynch Municipal Intermediate Term
Fund, and we look forward to serving your investment needs in the months and
years ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President
/s/ Vincent R. Giordano
Vincent R. Giordano
Senior Vice President
/s/ William R. Bock
William R. Bock
Vice President and Portfolio Manager
June 11, 1999
================================================================================
After more than 20 years of service, Arthur Zeikel recently retired as Chairman
of Merrill Lynch Asset Management, L.P. (MLAM). Mr. Zeikel served as President
of MLAM from 1977 to 1997 and as Chairman since December 1997. Mr. Zeikel is one
of the country's most respected leaders in asset management and presided over
the growth of Merrill Lynch's asset management business. During his tenure,
client assets under management grew from $300 million to over $500 billion. Mr.
Zeikel will remain on Merrill Lynch Municipal Intermediate Term Fund's Board of
Trustees. We are pleased to announce that Terry K. Glenn has been elected
President and Trustee of the Fund. Mr. Glenn has held the position of Executive
Vice President of MLAM since 1983.
Mr. Zeikel's colleagues at MLAM join the Fund's Board of Trustees in wishing him
well in his retirement from Merrill Lynch and are pleased that he will continue
as a member of the Fund's Board of Trustees.
================================================================================
2 & 3
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, April 30, 1999
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 "Recent Performance Results" and
"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 4/30/99
========================================================================================================================
<S> <C> <C> <C> <C>
ML Municipal Intermediate Term Fund Class A Shares +6.73% -1.13% +92.80% 3.80%
- ------------------------------------------------------------------------------------------------------------------------
ML Municipal Intermediate Term Fund Class B Shares +6.29 -1.31 +86.95 3.52
- ------------------------------------------------------------------------------------------------------------------------
ML Municipal Intermediate Term Fund Class C Shares +6.39 -1.22 +31.34 3.51
- ------------------------------------------------------------------------------------------------------------------------
ML Municipal Intermediate Term Fund Class D Shares +6.52 -1.16 +32.68 3.70
========================================================================================================================
</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 values 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/since inception periods are
Class A & Class B Shares, for the ten years ended 4/30/99 and Class C &
Class D Shares, from 10/21/94 to 4/30/99.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
Year Ended 3/31/99 +5.60% +4.54%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/99 +6.15 +5.93
- --------------------------------------------------------------------------------
Ten Years Ended 3/31/99 +6.95 +6.85
- --------------------------------------------------------------------------------
* Maximum sales charge is 1%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
Year Ended 3/31/99 +5.27% +4.28%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/99 +5.81 +5.81
- --------------------------------------------------------------------------------
Ten Years Ended 3/31/99 +6.62 +6.62
- --------------------------------------------------------------------------------
* 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 3/31/99 +5.26% +4.27%
- --------------------------------------------------------------------------------
Inception (10/21/94) through 3/31/99 +6.28 +6.28
- --------------------------------------------------------------------------------
* 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 3/31/99 +5.49% +4.44%
- --------------------------------------------------------------------------------
Inception (10/21/94) through 3/31/99 +6.52 +6.28
- --------------------------------------------------------------------------------
* Maximum sales charge is 1%.
** Assuming maximum sales charge.
4 & 5
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, April 30, 1999
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> <C>
Alabama--2.7% A1 VMIG1+ $ 5,100 Columbia, Alabama, IDB, PCR, Refunding (Alabama Power Company Project),
VRDN, Series A, 4.20% due 5/01/2022 (a) $ 5,100
===================================================================================================================================
Alaska--1.3% AAA Aaa 2,250 Alaska Student Loan Corporation, Student Loan Revenue Bonds, AMT,
Series A, 5.65% due 7/01/2012 (b) 2,375
===================================================================================================================================
Arizona--1.1% NR* NR* 2,000 Mohave County, Arizona, IDA, IDR (North Star Steel Company Project),
AMT, 6.70% due 3/01/2020 2,149
===================================================================================================================================
California--10.6% AAA Aaa 2,000 Beverly Hills, California, Public Financing Authority, Lease Revenue
Refunding Bonds, Series A, 5.125% due 6/01/2010 (c) 2,130
AAA Aaa 5,000 California State, GO (Veterans Bonds), AMT, Series BH, 5.20% due
12/01/2011 (e) 5,075
California State Public Works Board, Lease Revenue Refunding Bonds:
A A1 3,000 (Department of Justice Building), Series B, 5.25% due 5/01/2011 3,195
A A1 5,000 (Department of Corrections), Series C, 5.25% due 11/01/2010 5,348
AAA Aaa 4,000 Oxnard, California, Financing Authority, Solid Waste Revenue Bonds, AMT,
5.75% due 5/01/2010 (b) 4,311
===================================================================================================================================
Colorado--2.9% AAA Aaa 5,000 Jefferson County, Colorado, School District No. R-001, GO, Series A,
5.50% due 12/15/2009 (d) 5,448
===================================================================================================================================
Connecticut--2.8% AA Aa3 5,000 Connecticut State, GO, Series D, 5.25% due 12/15/2011 5,319
===================================================================================================================================
District of AAA Aaa 4,700 District of Columbia, GO, Refunding, Series A, 5.375% due 6/01/2010 (b) 4,945
Columbia--2.6%
===================================================================================================================================
Georgia--0.4% A1 VMIG1+ 700 Bartow County, Georgia, Development Authority, PCR, Refunding (Georgia
Power Company Plant--Bowen Project), VRDN, 4.25% due 3/01/2024 (a) 700
===================================================================================================================================
Hawaii--3.0% AAA Aaa 5,000 Hawaii State, GO, Refunding, Series CO, 6% due 3/01/2009 (d) 5,590
===================================================================================================================================
Idaho--1.8% AA- Aa2 3,180 Ada and Canyon Counties, Idaho, GO, Joint School District No. 2,
Refunding (Meridan), 5.50% due 7/30/2010 3,452
===================================================================================================================================
Illinois--8.3% BB+ Baa2 4,500 Chicago, Illinois, O'Hare International Airport, Special Facilities
Revenue Refunding Bonds (United Airlines Project), AMT, Series B,
5.20% due 4/01/2011 4,546
AAA Aaa 3,585 Cook County, Illinois, GO, Capital Improvement Bonds, Series A, 5.125%
due 11/15/2012 (d) 3,687
NR* VMIG1+ 7,400 Illinois Health Facilities Authority, Revenue Refunding Bonds
(Resurrection Health Care System), VRDN, 4.20% due 5/01/2011 (a) 7,400
===================================================================================================================================
Kansas--2.9% AA+ Aa2 5,000 Kansas State Department of Transportation, Highway Revenue Refunding
Bonds, 5.50% due 9/01/2010 5,449
===================================================================================================================================
Louisiana--0.5% A1+ VMIG1+ 900 Louisiana State Offshore Terminal Authority, Deepwater Port Revenue
Refunding Bonds (1st Stage A-Loop Inc.), VRDN, 4.10% due 9/01/2008 (a) 900
===================================================================================================================================
Maine--1.4% NR* A 2,585 Maine Educational Loan Marketing Corporation, Student Loan Revenue
Refunding Bonds, AMT, 6.90% due 11/01/2003 2,706
===================================================================================================================================
Massachusetts--1.2% AAA Aaa 2,295 Massachusetts State Turnpike Authority, Western Turnpike Revenue
Refunding Bonds, Series A, 5.55% due 1/01/2017 (c) 2,321
===================================================================================================================================
Michigan--0.6% NR* A 1,000 Michigan Higher Education, Student Loan Authority Revenue Bonds, AMT,
Series XIV-A, 6.75% due 10/01/2006 1,055
===================================================================================================================================
Minnesota--2.8% AAA Aaa 5,000 Minneapolis and Saint Paul, Minnesota, Metropolitan Airports Commission,
Airport Revenue Bonds, AMT, Series B, 5.25% due 1/01/2011 (b) 5,207
===================================================================================================================================
Nebraska--3.4% AAA Aaa 5,965 American Public Energy Agency, Nebraska, Gas Supply Revenue Bonds
(Nebraska Public Gas Agency Project), Series A, 5.25% due 6/01/2008 (b) 6,323
===================================================================================================================================
Nevada--2.3% AA Aa2 4,205 Nevada State, GO, Refunding, Series A, 5% due 7/01/2013 4,279
===================================================================================================================================
New Jersey--4.1% AA+ Aa1 7,265 New Jersey State, GO, 5% due 2/01/2007 7,656
===================================================================================================================================
New York--14.3% A1+ VMIG1+ 200 Long Island Power Authority, New York, Electric System Revenue Bonds,
VRDN, Sub-Series 7, 4.10% due 4/01/2025 (a)(c) 200
AA Aa2 5,000 Municipal Assistance Corporation for City of New York, Revenue
Refunding Bonds, Series O, 5.25% due 7/01/2008 5,345
A- A3 5,000 New York City, New York, GO, Refunding, Series F, 5.125% due 8/01/2011 5,153
A A2 5,000 New York State, GO, Refunding, Series F, 5.25% due 9/15/2011 5,270
AA- Aa3 5,000 New York State Thruway Authority, General Revenue Bonds, Series D,
5.40% due 1/01/2010 5,355
AAA Aaa 5,000 Westchester County, New York, IDA, Resource Recovery Revenue Bonds
(Westchester Resco Company Project), AMT, 6% due 7/01/2008 (b) 5,546
===================================================================================================================================
Ohio--3.3% AA- Aa3 5,940 Ohio State Building Authority, Revenue Refunding Bonds (James A. Rhodes
State Office), Series A, 5.25% due 6/01/2010 6,293
===================================================================================================================================
Oregon--2.2% AAA Aaa 3,790 Port of Portland, Oregon, Airport Revenue Bonds (Portland International
Airport), AMT, Series 11, 5.40% due 7/01/2008 (d) 4,046
===================================================================================================================================
</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.
AMT Alternative Minimum Tax (subject to)
GO General Obligation Bonds
HDA Housing Development Authority
IDA Industrial Development Authority
IDB Industrial Development Board
IDR Industrial Development Revenue Bonds
PCR Pollution Control Revenue Bonds
RITES Residual Interest Tax-Exempt Securities
VRDN Variable Rate Demand Notes
6 & 7
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, April 30, 1999
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> <C>
Pennsylvania--3.8% AAA Aaa $ 5,000 Pennsylvania State, GO, First Series, 5.125% due 3/15/2011 (b) $ 5,211
A1+ NR* 1,800 Pennsylvania State Higher Educational Facilities Authority, Revenue
Refunding Bonds (Carnegie Mellon University), VRDN,
Series B, 4.20% due 11/01/2027 (a) 1,800
A1+ VMIG1+ 200 Philadelphia, Pennsylvania, Hospitals and Higher Education Facilities
Authority, Hospital Revenue Bonds (Children's Hospital Project), VRDN,
Series A, 4.20% due 3/01/2027 (a) 200
===================================================================================================================================
Texas--5.6% AA Aa1 10,000 San Antonio, Texas, Electric and Gas Revenue Refunding Bonds, Series A,
5.25% due 2/01/2010 10,589
===================================================================================================================================
Virginia--1.5% Virginia State, HDA, Commonwealth Mortgage Revenue Bonds, Series J,
Sub-Series J-2:
AA+ Aa1 1,365 6.45% due 1/01/2010 1,465
AA+ Aa1 1,300 6.50% due 1/01/2011 1,390
===================================================================================================================================
Washington--14.8% AA Aa1 5,030 King County, Washington, GO, School District No. 414, Refunding Bonds
(Lake Washington), Series B, 5.25% due 12/01/2012 5,230
AA+ Aa1 5,000 King County, Washington, GO, Series D, 5.70% due 12/01/2010 5,486
AAA Aaa 2,880 Port of Seattle, Washington, Revenue Refunding Bonds, Series A, 5.25%
due 6/01/2011 (d) 3,015
AA+ Aa1 5,000 Washington State, GO, Series A, 5.25% due 7/01/2011 5,237
Washington State Public Power Supply System, Revenue Refunding Bonds
(Nuclear Project No. 3), Series A (b):
AAA Aaa 5,250 5.50% due 7/01/2007 5,661
AAA Aaa 3,015 5.60% due 7/01/2008 3,277
===================================================================================================================================
Wisconsin--0.3% AA Aa2 435 Wisconsin Housing and Economic Development Authority, Home Ownership
Revenue Refunding Bonds, AMT, Series F, 7.40% due 7/01/2013 470
===================================================================================================================================
Puerto Rico--2.3% A1+ Baa1 3,950 Puerto Rico Commonwealth Highway and Transportation Authority, Highway
Revenue Refunding Bonds, RITES, Series X, 6.703% due 7/01/2005 (f) 4,409
===================================================================================================================================
Total Investments (Cost--$192,919)--104.8% 197,314
Liabilities in Excess of Other Assets--(4.8%) (8,968)
--------
Net Assets--100.0% $188,346
========
===================================================================================================================================
</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, 1999.
(b) AMBAC Insured.
(c) MBIA Insured.
(d) FGIC Insured.
(e) FSA Insured.
(f) 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, 1999.
* Not Rated.
+ Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
As of April 30, 1999
=============================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$192,919,279) (Note 1a) ................. $197,314,360
Cash ............................................................................ 31,268
Receivables:
Interest ...................................................................... $ 2,897,155
Beneficial interest sold ...................................................... 36,839 2,933,994
------------
Prepaid registration fees and other assets (Note 1e) ............................ 65,457
------------
Total assets .................................................................... 200,345,079
------------
=============================================================================================================================
Liabilities: Payables:
Securities purchased .......................................................... 10,741,502
Beneficial interest redeemed .................................................. 896,347
Dividends to shareholders (Note 1f) ........................................... 118,454
Investment adviser (Note 2) ................................................... 91,307
Distributor (Note 2) .......................................................... 22,668 11,870,278
------------
Accrued expenses and other liabilities .......................................... 128,506
------------
Total liabilities ............................................................... 11,998,784
------------
=============================================================================================================================
Net Assets: Net assets ...................................................................... $188,346,295
============
=============================================================================================================================
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited number of
Consist of: shares authorized ............................................................... $ 705,745
Class B Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized ............................................................... 641,140
Class C Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized ............................................................... 35,652
Class D Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized ............................................................... 450,632
Paid-in capital in excess of par ................................................ 180,622,985
Undistributed realized capital gains on investments--net ........................ 1,495,060
Unrealized appreciation on investments--net ..................................... 4,395,081
------------
Net assets ...................................................................... $188,346,295
============
=============================================================================================================================
Net Asset Class A--Based on net assets of $72,521,254 and 7,057,450 shares of beneficial
Value: interest outstanding ............................................................ $ 10.28
============
Class B--Based on net assets of $65,874,025 and 6,411,395 shares of beneficial
interest outstanding ............................................................ $ 10.27
============
Class C--Based on net assets of $3,661,313 and 356,521 shares of beneficial
interest outstanding ............................................................ $ 10.27
============
Class D--Based on net assets of $46,289,703 and 4,506,321 shares of beneficial
interest outstanding ............................................................ $ 10.27
============
=============================================================================================================================
</TABLE>
See Notes to Financial Statements.
8 & 9
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, April 30, 1999
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Six Months Ended April 30, 1999
===============================================================================================================================
<S> <C> <C> <C>
Investment Interest and amortization of premium and discount earned .................. $ 4,573,285
Income (Note 1d):
===============================================================================================================================
Expenses: Investment advisory fees (Note 2) ......................................... $ 536,308
Account maintenance and distribution fees--Class B (Note 2) ............... 106,072
Printing and shareholder reports .......................................... 45,549
Accounting services (Note 2) .............................................. 44,609
Professional fees ......................................................... 34,407
Registration fees (Note 1e) ............................................... 33,715
Transfer agent fees--Class B (Note 2) ..................................... 25,229
Account maintenance fees--Class D (Note 2) ................................ 23,768
Transfer agent fees--Class A (Note 2) ..................................... 20,381
Transfer agent fees--Class D (Note 2) ..................................... 13,376
Custodian fees ............................................................ 6,564
Account maintenance and distribution fees--Class C (Note 2) ............... 6,542
Trustees' fees and expenses ............................................... 4,456
Pricing fees .............................................................. 3,458
Transfer agent fees--Class C (Note 2) ..................................... 1,806
Other ..................................................................... 4,748
------------
Total expenses ............................................................ 910,988
------------
Investment income--net .................................................... 3,662,297
------------
===============================================================================================================================
Realized & Realized gain on investments--net ......................................... 1,850,651
Unrealized Change in unrealized appreciation on investments--net ..................... (3,621,511)
Gain (Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations ...................... $ 1,891,437
(Notes 1b, 1d & 3): ============
===============================================================================================================================
</TABLE>
See Notes to Financial Statements.
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: 1999 1998
===============================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net .................................................... $ 3,662,297 $ 8,579,176
Realized gain on investments--net ......................................... 1,850,651 6,515,794
Change in unrealized appreciation on investments--net ..................... (3,621,511) 1,008,301
------------ ------------
Net increase in net assets resulting from operations ...................... 1,891,437 16,103,271
------------ ------------
===============================================================================================================================
Dividends & Investment income--net:
Distributions to Class A ................................................................. (1,412,675) (3,169,968)
Shareholders Class B ................................................................. (1,267,972) (3,258,706)
(Note 1f): Class C ................................................................. (77,928) (225,677)
Class D ................................................................. (903,722) (1,924,825)
Realized gain on investments--net:
Class A ................................................................. (1,610,597) --
Class B ................................................................. (1,600,128) --
Class C ................................................................. (103,866) --
Class D ................................................................. (1,085,249) --
------------ ------------
Net decrease in net assets resulting from dividends and distributions
to shareholders ........................................................... (8,062,137) (8,579,176)
------------ ------------
===============================================================================================================================
Beneficial Interest Net decrease in net assets derived from beneficial interest transactions .. (7,925,061) (25,237,007)
Transactions ------------ ------------
(Note 4):
===============================================================================================================================
Net Assets: Total decrease in net assets .............................................. (14,095,761) (17,712,912)
Beginning of period ....................................................... 202,442,056 220,154,968
------------ ------------
End of period ............................................................. $188,346,295 $202,442,056
============ ============
===============================================================================================================================
</TABLE>
See Notes to Financial Statements.
10 & 11
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, April 30, 1999
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Class A
The following per share data and ratios have -------------------------------------------------------
been derived from information provided in the For the Six
financial statements. Months Ended For the Year Ended October 31,
April 30, -----------------------------------------
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ................ $ 10.60 $ 10.23 $ 9.94 $ 10.00 $ 9.62
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .............................. .20 .43 .45 .48 .53
Realized and unrealized gain (loss) on
investments--net .................................... (.09) .37 .29 (.06) .38
-------- -------- -------- -------- --------
Total from investment operations .................... .11 .80 .74 .42 .91
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net ............................. (.20) (.43) (.45) (.48) (.53)
Realized gain on investments--net .................. (.23) -- -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions ................... (.43) (.43) (.45) (.48) (.53)
-------- -------- -------- -------- --------
Net asset value, end of period ...................... $ 10.28 $ 10.60 $ 10.23 $ 9.94 $ 10.00
======== ======== ======== ======== ========
==================================================================================================================================
Total Investment Based on net asset value per share .................. 1.09%+ 8.00% 7.59% 4.27% 9.69%
Return:** ======== ======== ======== ======== ========
==================================================================================================================================
Ratios to Average Expenses ............................................ .79%* .74% .79% .81% .81%
Net Assets: ======== ======== ======== ======== ========
Investment income--net .............................. 3.90%* 4.17% 4.40% 4.79% 5.36%
======== ======== ======== ======== ========
==================================================================================================================================
Supplemental Net assets, end of period (in thousands) ............ $ 72,521 $ 73,769 $ 71,684 $ 30,353 $ 34,970
Data: ======== ======== ======== ======== ========
Portfolio turnover .................................. 68.37% 174.64% 167.41% 146.82% 115.78%
======== ======== ======== ======== ========
==================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class B
The following per share data and ratios have -------------------------------------------------------
been derived from information provided in the For the Six
financial statements. Months Ended For the Year Ended October 31,
April 30, -----------------------------------------
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ................ $ 10.60 $ 10.23 $ 9.93 $ 10.00 $ 9.62
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .............................. .19 .40 .41 .44 .50
Realized and unrealized gain (loss) on
investments--net .................................... (.10) .37 .30 (.07) .38
-------- -------- -------- -------- --------
Total from investment operations .................... .09 .77 .71 .37 .88
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net ............................. (.19) (.40) (.41) (.44) (.50)
Realized gain on investments--net .................. (.23) -- -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions ................... (.42) (.40) (.41) (.44) (.50)
-------- -------- -------- -------- --------
Net asset value, end of period ...................... $ 10.27 $ 10.60 $ 10.23 $ 9.93 $ 10.00
======== ======== ======== ======== ========
==================================================================================================================================
Total Investment Based on net asset value per share .................. .83%+ 7.67% 7.35% 3.84% 9.34%
Return:** ======== ======== ======== ======== ========
==================================================================================================================================
Ratios to Average Expenses ............................................ 1.10%* 1.06% 1.11% 1.13% 1.13%
Net Assets: ======== ======== ======== ======== ========
Investment income--net .............................. 3.59%* 3.86% 4.13% 4.47% 5.05%
======== ======== ======== ======== ========
==================================================================================================================================
Supplemental Net assets, end of period (in thousands) ............ $ 65,874 $ 75,688 $ 94,552 $169,441 $181,640
Data: ======== ======== ======== ======== ========
Portfolio turnover .................................. 68.37% 174.64% 167.41% 146.82% 115.78%
======== ======== ======== ======== ========
==================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class C
The following per share data and ratios have -------------------------------------------------------
been derived from information provided in the For the Six
financial statements. Months Ended For the Year Ended October 31,
April 30, -----------------------------------------
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ................ $ 10.60 $ 10.23 $ 9.93 $ 10.00 $ 9.62
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .............................. .19 .40 .41 .44 .50
Realized and unrealized gain (loss) on
investments--net .................................... (.10) .37 .30 (.07) .38
-------- -------- -------- -------- --------
Total from investment operations .................... .09 .77 .71 .37 .88
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net ............................. (.19) (.40) (.41) (.44) (.50)
Realized gain on investments--net .................. (.23) -- -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions ................... (.42) (.40) (.41) (.44) (.50)
-------- -------- -------- -------- --------
Net asset value, end of period ...................... $ 10.27 $ 10.60 $ 10.23 $ 9.93 $ 10.00
======== ======== ======== ======== ========
==================================================================================================================================
Total Investment Based on net asset value per share .................. .83%+ 7.65% 7.34% 3.82% 9.36%
Return:** ======== ======== ======== ======== ========
==================================================================================================================================
Ratios to Average Expenses ............................................ 1.11%* 1.07% 1.13% 1.15% 1.01%
Net Assets: ======== ======== ======== ======== ========
Investment income--net .............................. 3.57%* 3.85% 4.10% 4.44% 4.76%
======== ======== ======== ======== ========
==================================================================================================================================
Supplemental Net assets, end of period (in thousands) ............ $ 3,661 $ 5,116 $ 6,110 $ 8,313 $ 6,485
Data: ======== ======== ======== ======== ========
Portfolio turnover .................................. 68.37% 174.64% 167.41% 146.82% 115.78%
======== ======== ======== ======== ========
==================================================================================================================================
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Aggregate total investment return.
See Notes to Financial Statements.
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, April 30, 1999
FINANCIAL HIGHLIGHTS (concluded)
<TABLE>
<CAPTION>
Class D
The following per share data and ratios have -------------------------------------------------------
been derived from information provided in the For the Six
financial statements. Months Ended For the Year Ended October 31,
April 30, -----------------------------------------
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ................ $ 10.60 $ 10.23 $ 9.94 $ 10.00 $ 9.62
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .20 .42 .44 .47 .52
Realized and unrealized gain (loss) on
investments--net .................................. (.10) .37 .29 (.06) .38
-------- -------- -------- -------- --------
Total from investment operations .................... .10 .79 .73 .41 .90
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net ............................. (.20) (.42) (.44) (.47) (.52)
Realized gain on investments--net .................. (.23) -- -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions ................... (.43) (.42) (.44) (.47) (.52)
-------- -------- -------- -------- --------
Net asset value, end of period ...................... $ 10.27 $ 10.60 $ 10.23 $ 9.94 $ 10.00
======== ======== ======== ======== ========
==================================================================================================================================
Total Investment Based on net asset value per share .................. .94%+ 7.90% 7.48% 4.17% 9.58%
Return:** ======== ======== ======== ======== ========
==================================================================================================================================
Ratios to Average Expenses ............................................ .89%* .84% .89% .91% .90%
Net Assets: ======== ======== ======== ======== ========
Investment income--net .............................. 3.80%* 4.07% 4.31% 4.68% 5.12%
======== ======== ======== ======== ========
==================================================================================================================================
Supplemental Net assets, end of period (in thousands) ............ $ 46,290 $ 47,869 $ 47,809 $ 8,375 $ 7,000
Data: ======== ======== ======== ======== ========
Portfolio turnover .................................. 68.37% 174.64% 167.41% 146.82% 115.78%
======== ======== ======== ======== ========
==================================================================================================================================
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ 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. The Fund's financial statements are prepared in
accordance with generally accepted accounting principles which may require the
use of management accruals and estimates. These unaudited financial statements
reflect all adjustments which are, in the opinion of management, necessary to a
fair statement of the results for the interim period presented. All such
adjustments are of a normal recurring nature. The 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 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.
14 & 15
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, April 30, 1999
NOTES TO FINANCIAL STATEMENTS (continued)
(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 ("MLFD" or the "Distributor"), a division of Princeton Funds
Distributor, Inc. ("PFD"), which is a wholly-owned subsidiary of Merrill Lynch
Group, Inc.
MLAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee 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 Incorporated ("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, 1999, MLFD earned underwriting discounts and
MLPF&S earned dealer con-cessions on sales of the Fund's Class A and Class D
Shares as follows:
- -------------------------------------------------------------------------------
MLFD MLPF&S
- -------------------------------------------------------------------------------
Class A .......................................... $ 17 $ 321
Class D .......................................... $133 $1,514
- -------------------------------------------------------------------------------
For the six months ended April 30, 1999, MLPF&S received contingent deferred
sales charges of $26,207 and $235 relating to transactions in Class B and Class
C Shares, respectively.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co., is
the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or trustees of the Fund are officers and/or directors of
MLAM, PSI, PFD, FDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for six
months ended April 30, 1999, were $129,246,357 and $145,741,688, respectively.
Net realized gains for the six months ended April 30, 1999 and net unrealized
gains as of April 30, 1999, were as follows:
- -------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
- -------------------------------------------------------------------------------
Long-term investments ........................ $ 1,850,651 $ 4,395,081
----------- -----------
Total ........................................ $ 1,850,651 $ 4,395,081
=========== ===========
- -------------------------------------------------------------------------------
As of April 30, 1999, net unrealized appreciation for Federal income tax
purposes aggregated $4,395,081, of which $4,848,561 related to appreciated
securities and $453,480 related to depreciated securities. The aggregate cost of
investments at April 30, 1999 for Federal income tax purposes was $192,919,279.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest transactions was
$7,925,061 and $25,237,007 for the six months ended April 30, 1999 and the year
ended October 31, 1998, respectively.
Transactions in shares of beneficial interest for each class were as follows:
- -------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended April 30, 1999 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................. 1,260,299 $13,106,578
Shares issued to shareholders
in reinvestment of dividends
and distributions ............................ 213,534 2,219,391
----------- -----------
Total issued ................................. 1,473,833 15,325,969
Shares redeemed .............................. (1,373,298) (14,297,835)
----------- -----------
Net increase ................................. 100,535 $ 1,028,134
=========== ===========
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended October 31, 1998 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................. 2,776,863 $28,912,420
Shares issued to shareholders
in reinvestment of dividends ................. 203,200 2,117,109
----------- -----------
Total issued ................................. 2,980,063 31,029,529
Shares redeemed .............................. (3,027,631) (31,692,253)
----------- -----------
Net decrease ................................. (47,568) $ (662,724)
=========== ===========
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class B Shares for the Six Months Dollar
Ended April 30, 1999 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................. 416,551 $ 4,351,710
Shares issued to shareholders
in reinvestment of dividends
and distributions ............................ 184,169 1,914,325
----------- ------------
Total issued ................................. 600,720 6,266,035
Automatic conversion of shares ............... (60,845) (633,353)
Shares redeemed .............................. (1,267,293) (13,205,239)
----------- -----------
Net decrease ................................. (727,418) $(7,572,557)
=========== ===========
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended October 31, 1998 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................. 1,191,436 $ 12,448,339
Shares issued to shareholders
in reinvestment of dividends ................. 197,353 2,054,034
----------- ------------
Total issued ................................. 1,388,789 14,502,373
Automatic conversion of shares ............... (412,931) (4,284,457)
Shares redeemed .............................. (3,077,028) (31,991,532)
----------- ------------
Net decrease ................................. (2,101,170) $(21,773,616)
=========== ============
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class C Shares for the Six Months Dollar
Ended April 30, 1999 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................. 28,162 $ 294,414
Shares issued to shareholders
in reinvestment of dividends
and distributions ............................ 13,153 136,700
----------- -----------
Total issued ................................. 41,315 431,114
Shares redeemed .............................. (167,606) (1,743,729)
----------- -----------
Net decrease ................................. (126,291) $(1,312,615)
=========== ===========
- -------------------------------------------------------------------------------
16 & 17
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, April 30, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
- -------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended October 31, 1998 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................. 314,557 $ 3,282,954
Shares issued to shareholders
in reinvestment of dividends ................. 16,813 174,929
----------- -----------
Total issued ................................. 331,370 3,457,883
Shares redeemed .............................. (445,964) (4,636,065)
----------- -----------
Net decrease ................................. (114,594) $(1,178,182)
=========== ===========
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class D Shares for the Six Months Dollar
Ended April 30, 1999 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................. 384,814 $ 4,032,622
Shares issued to shareholders
in reinvestment of dividends
and distributions ............................ 92,101 957,172
Automatic conversion of shares ............... 60,870 633,353
----------- -----------
Total issued ................................. 537,785 5,623,147
Shares redeemed .............................. (547,512) (5,691,170)
----------- -----------
Net decrease ................................. (9,727) $ (68,023)
=========== ===========
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended October 31, 1998 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................. 250,935 $ 2,642,596
Shares issued to shareholders
in reinvestment of dividends ................. 88,066 916,938
Automatic conversion of shares ............... 412,978 4,284,457
----------- -----------
Total issued ................................. 751,979 7,843,991
Shares redeemed .............................. (909,048) (9,466,476)
----------- -----------
Net decrease ................................. (157,069) $(1,622,485)
=========== ===========
- -------------------------------------------------------------------------------
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--4/99
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