- -------------------------------------------------------------------------------
Dear Shareholder:
We are pleased to provide you with this Semi-Annual Report for the Merrill
Lynch Funds For Institutions Series, including, for the first time, Merrill
Lynch Rated Institutional Fund which commenced operations on June 15, 1998. In
this and future shareholder reports we will highlight each Fund's performance,
describe recent investment activities, and examine some of the important market
developments that helped shape our investment strategy during the period under
review.
Merrill Lynch Premier Institutional Fund
For the six months ended October 31, 1998, the Fund's net annualized yield
was 5.46%. The Fund's seven-day net annualized yield as of October 31, 1998,
was 5.12%. The average portfolio maturity for the Merrill Lynch Premier
Institutional Fund at October 31, 1998, was 80 days, compared to 73 days at
April 30, 1998.
During the six months ended October 31, 1998, Merrill Lynch Premier
Institutional Fund's average life ranged from a low of 60 days to a high of 87
days. We attempted to maintain the Fund's average life at the longer end of the
allowed spectrum because we believed that the turmoil in the global financial
markets could slow US economic growth. As a result of safe haven buying of
Treasury securities, quality yield spreads in general have been at their widest
levels in some time. However, yield spreads between Federal Agency issues and
corporate securities remained tight. We took this opportunity to sell one-year
bank issues and purchase one-year Federal Agency coupon bonds and discount
notes in the six-month-nine-month range. We continue to view variable rate
securities as an attractive alternative to short-term money market issues,
favoring those linked to the three-month London Interbank Offered Rate (LIBOR),
the Federal Funds rate or the Prime rate.
Looking ahead, we believe that a slowing US economy and continued
fragility in global financial markets will keep interest rates on a downward
trend. However, it is possible that there may be an acceleration of consumer
spending during the holiday season.
Merrill Lynch Institutional Fund
For the six months ended October 31, 1998, the Fund's net annualized yield
was 5.37%. The Fund's seven-day net annualized yield as of October 31, 1998,
was 5.09%. The average portfolio maturity for the Merrill Lynch Institutional
Fund at October 31, 1998, was 72 days, compared to 75 days at April 30, 1998.
During the six months ended October 31, 1998, Merrill Lynch Institutional
Fund's average life ranged from 66 days to 88 days. In view of the meltdown in
world markets and the massive hedge fund deleveraging that occurred in recent
months, we believed that the Federal Open Market Committee would continue to
conduct monetary policy in an accommodative manner. With the general aversion
in the marketplace to any securities not issued by the US Government, we
believed it was prudent to increase our positions in Federal Agency coupons and
US Treasury bills and notes. We attempted to purchase commercial paper maturing
in December to assure maximum liquidity with the potential for a spike in the
Federal Funds rate at year-end. We continue to view variable rate securities as
an attractive alternative to short-term money markets, favoring those linked to
the three-month LIBOR, the Federal Funds rate or the Prime rate.
Looking ahead, we believe that a slowing US economy and continued
fragility in global financial markets will keep interest rates on a downward
trend. However, it is possible that there may be an acceleration of consumer
spending during the holiday season.
1
<PAGE>
Merrill Lynch Rated Institutional Fund
For the period ended October 31, 1998, the Fund's net annualized yield was
5.39%. The Fund's seven-day net annualized yield as of October 31, 1998, was
5.12%. The average portfolio maturity for the Merrill Lynch Rated Institutional
Fund at October 31, 1998, was 47 days.
Since the Fund's inception (June 15, 1998) through October 31, 1998,
Merrill Lynch Rated Institutional Fund's average life ranged from 1 day to 59
days. The wide range is a reflection of the Fund's growth as well as
anticipation of future interest rate cuts. During the period, the Fund's assets
reached a high of $370 million. As a result of the continued Asian crisis and
turmoil in the world financial markets, we were confident that the Federal
Reserve Board would lower interest rates. This belief led us to maintain the
Fund's average life toward the longer end of the allowed spectrum. We gradually
decreased the Fund's need for overnight investments as our assets grew,
bringing the overnight cash position to a range of 15%-20% of the Fund's net
assets. We utilized a "barbelled" portfolio strategy, combining both overnight
investments and longer-dated agency and Treasury products, in addition to
increasing the Fund's exposure to three-month, LIBOR-linked floating rate
issues.
Looking ahead, we believe that the Federal Reserve Board will remain
focused on the global marketplace and may assist in adding needed liquidity,
while remaining vigilant in its effort to maintain growth without inflation
within the US economy. We believe that the Federal Reserve Board is likely to
continue its efforts to lessen the credit crunch and that its easing policy
will persist if the current global economic stability should change.
Merrill Lynch Government Fund
For the six months ended October 31, 1998, the Fund's net annualized yield
was 5.30%. The Fund's seven-day net annualized yield as of October 31, 1998,
was 4.94%. The average portfolio maturity for the Merrill Lynch Government Fund
at October 31, 1998, was 52 days, compared to 58 days at April 30, 1998.
For the six months ended October 31, 1998, Merrill Lynch Government Fund's
average life ranged from 49 days to 60 days. During the six-month period, our
interest rate outlook was relatively positive. From the beginning of May
through the middle of August, the Federal Reserve Board kept interest rates
unchanged despite a robust economy. We opted to hold larger positions overnight
and utilized one-year Government Agency issues for yield enhancement. As the
Asian crisis became the focus of the Federal Reserve Board's decision-making
process, we believed that interest rates would head lower. We maintained our
average life by reducing overnight positions in favor of short-term Government
Agency obligations, while still increasing our longer-term holdings whenever
possible.
Merrill Lynch Treasury Fund
For the six months ended October 31, 1998, the Fund's net annualized yield
was 4.96%. The Fund's seven-day net annualized yield as of October 31, 1998,
was 4.55%. The average portfolio maturity for Merrill Lynch Treasury Fund at
October 31, 1998, was 50 days, compared to 60 days at April 30, 1998.
For the six months ended October 31, 1998, Merrill Lynch Treasury Fund's
average life ranged from 46 days to 60 days. For most of the period, we kept
the Fund's average life toward the longer end of the band, reflecting strong
technical demand for Treasury issues and our outlook toward interest rates. As
the six-month period began, the Treasury's need for funds remained muted.
Scarcity of Treasury bills drove their yields well below those of similarly
dated notes. Consequently, we favored Treasury notes over bills. By
mid-September, front-end issuance had increased dramatically, narrowing the
yield spreads between the Treasury issues. Since then, we have shifted a larger
portion of our assets into bills rather than notes.
2
<PAGE>
Merrill Lynch Institutional Tax-Exempt Fund
For the six months ended October 31, 1998, the Fund's net annualized yield
was 3.37%. The Fund's seven-day net annualized yield as of October 31, 1998,
was 3.23%. The average portfolio maturity for the Merrill Lynch Tax-Exempt Fund
at October 31, 1998, was 31 days, compared to 42 days at April 30, 1998.
Merrill Lynch Institutional Tax-Exempt Fund began the six-month period
ended October 31, 1998, with a neutral approach to the market. During the first
three months of the period, the municipal yield curve remained fairly flat. We
maintained the Fund's average life in the 35-day range taking advantage of
variable rate demand note (VRDN) yield levels and selectively purchasing
longer-term municipal notes that we believed were attractively priced for
diversification purposes. As the second half of the period unfolded, our focus
on the technical considerations in investing in the municipal market shifted to
a focus on the fundamental aspects of the market.
As the turmoil in Asia continued to unfold, new crises began to appear in
both Russia and Latin America. These crises began to unsettle the world's stock
markets, creating a rally in US Treasury securities as investors searched for a
safe haven for their assets. Although the municipal note market was slow to
react to such events, a combination of historically high relative values to
Treasury securities and a reduction in municipal note issuance created from
strong domestic economic conditions caused interest rates on municipal notes to
fall approximately 50 basis points (0.50%). We sought to shift the Fund's
investment strategy to a more aggressive approach; however, as a result of
strong economic conditions there has been a reduction in the amount of
longer-term municipal note issuance. Consequently, it has been difficult to
extend the Fund's average life. The municipal yield curve continued to remain
fairly flat as we increased the Fund's purchases of longer-term municipal
notes, when available, and at the same time increased the Fund's exposure to
shorter-term tax-exempt commercial paper (TECP).
As investors reacted to the turbulent world financial markets, Treasury
yields declined by as much as 100 basis points in anticipation of the Federal
Reserve Board's September meeting. In a move that was expected, the Federal
Reserve Board reduced the Federal Funds rate by 25 basis points at its
September 29, 1998, meeting. Two weeks later, the Federal Reserve Board
unexpectedly reduced the Federal Funds rate another 25 basis points to 5.00%
and at its November meeting cut the discount rate 25 basis points to 4.75%.
Most analysts believe the Federal Reserve Board will continue to reduce
interest rates in order to stem the anticipated slow down in domestic economic
conditions. However, recent economic data combined with better-than-expected
corporate earnings may allow the Federal Reserve Board to delay any additional
interest rate reductions. These factors have caused the one-year US Treasury
bill to increase approximately 30 basis points from its lows of mid-October.
Overall, the Fund was well situated throughout the period, and we were able to
take advantage of the various interest rate movements on the yield curve.
3
<PAGE>
During the coming months, we expect to monitor the volatile market
conditions, choosing a conservative strategy to the market as we anticipate the
municipal yield curve to remain flat or inverted. We will continue to seek a
balance of predominantly VRDN and short-term TECP securities, while selectively
purchasing longer-term municipal note securities for diversification purposes.
We will look to increase the Fund's structured product holdings to help
stabilize its yield as we prepare for year-end pressures and large seasonal
inflows in January. In addition, we will continue to closely monitor credit
quality while seeking to offer an attractive tax-exempt yield to shareholders.
Sincerely,
[Signature of Robert W. Crook]
Robert W. Crook
President and Trustee
Merrill Lynch Funds For Institutions Series
[Signature of P. Michael Walsh]
P. Michael Walsh
Vice President and Portfolio Manager
Merrill Lynch Premier Institutional Fund
Merrill Lynch Institutional Fund
[Signature of John Ng]
John Ng
Vice President and Portfolio Manager
Merrill Lynch Government Fund
Merrill Lynch Treasury Fund
[Signature of Kevin Schiatta]
Kevin Schiatta
Vice President and Portfolio Manager
Merrill Lynch Institutional Tax-Exempt Fund
[Signature of Robert Sabatino]
Robert Sabatino
Vice President and Portfolio Manager
Merrill Lynch Rated Institutional Fund
November 27, 1998
4
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Premier Institutional Fund
Schedule of Investments
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. $ 25,000,000 U.S. Treasury Bills ................... 3.75% 10/14/99 $ 24,036,111
Government & 80,000,000 U.S. Treasury Bills ................... 3.89 10/14/99 76,915,556
Agency 12,500,000 U.S. Treasury Notes ................... 5.88 11/15/99 12,687,500
Issues -- 11.4% 12,500,000 U.S. Treasury Notes ................... 7.75 01/31/00 13,007,812
15,000,000 U.S. Treasury Notes ................... 5.38 01/31/00 15,187,500
24,310,000 U.S. Treasury Notes ................... 5.88 02/15/00 24,765,813
10,000,000 Federal Home Loan Banks ............... 5.67 01/20/00 10,012,600
10,000,000 Federal Home Loan Banks ............... 5.88 08/18/00 10,003,125
40,000,000 Federal Home Loan Banks ............... 5.56 09/18/00 40,022,400
15,000,000 Federal Home Loan Mortgage Corp. ...... 5.98 11/24/99 15,004,500
10,280,000 Student Loan Marketing Assoc. ......... 5.89 11/17/99 10,411,070
21,000,000 Student Loan Marketing Assoc. ......... 6.00 12/16/99 21,019,687
32,000,000 Federal Farm Credit Banks D/N ......... 4.80 09/10/99 30,781,387
25,000,000 Federal Farm Credit Banks D/N ......... 4.30 10/29/99 23,911,486
20,000,000 Federal Home Loan Banks D/N ........... 4.26 10/15/99 19,162,867
35,000,000 Federal Home Loan Mortgage Corp.
D/N ................................. 4.88 04/01/99 34,310,014
13,460,000 Federal Home Loan Mortgage Corp.
D/N ................................. 4.84 04/01/99 13,194,651
25,000,000 Federal Home Loan Mortgage Corp.
D/N ................................. 4.63 07/02/99 24,237,250
25,000,000 Federal National Mortgage Assoc. D/N 5.25 03/22/99 24,535,875
100,000,000 Federal National Mortgage Assoc. D/N 4.87 04/01/99 98,028,611
50,000,000 Federal National Mortgage Assoc. D/N 4.85 04/01/99 49,014,306
105,830,000 Federal National Mortgage Assoc. D/N 4.76 05/03/99 103,312,304
50,000,000 Federal National Mortgage Assoc. D/N 4.68 06/09/99 48,594,444
50,000,000 Federal National Mortgage Assoc. D/N 4.63 06/11/99 48,581,667
10,000,000 Federal National Mortgage Assoc. D/N 4.65 06/25/99 9,698,444
19,380,000 Federal National Mortgage Assoc. D/N 4.65 06/30/99 18,783,204
25,000,000 Federal National Mortgage Assoc. D/N 4.60 07/07/99 24,221,556
27,931,000 Federal National Mortgage Assoc. D/N 4.59 07/08/99 27,057,784
70,000,000 Federal National Mortgage Assoc. D/N 4.53 08/16/99 67,502,400
10,600,000 Federal National Mortgage Assoc. D/N 4.60 08/20/99 10,216,539
- --------------------------------------------------------------------------------------------------------------
Total U.S. Government & Agency
Issues (Cost $947,670,080) ............ 948,218,463
- --------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Premier Institutional Fund
Schedule of Investments -- Continued
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. $75,000,000 Federal Home Loan Banks ................ 4.61% 03/26/99 $ 74,985,103
Government 50,000,000 Federal Home Loan Banks ................ 4.61 04/01/99 49,989,658
Agency 95,000,000 Federal Home Loan Banks ................ 4.70 09/02/99 94,960,308
Issues -- 85,000,000 Federal National Mortgage Assoc. ....... 4.56 01/21/99 84,990,568
Variable 31,000,000 Federal National Mortgage Assoc. ....... 4.56 03/03/99 30,995,337
Rate -- 9.0% 50,000,000 Federal National Mortgage Assoc. ....... 4.64 04/09/99 49,989,110
10,000,000 Federal National Mortgage Assoc. ....... 4.30 07/26/99 9,987,646
50,000,000 Federal National Mortgage Assoc. ....... 4.35 07/30/99 49,968,809
18,000,000 Federal National Mortgage Assoc. ....... 4.30 09/22/99 17,971,663
48,000,000 Federal National Mortgage Assoc. ....... 4.67 10/27/99 47,977,725
24,000,000 Student Loan Marketing Assoc. .......... 4.64 11/25/98 23,999,390
30,000,000 Student Loan Marketing Assoc. .......... 4.16 08/02/99 29,944,708
50,000,000 Student Loan Marketing Assoc. .......... 4.57 01/12/00 49,988,982
60,000,000 Student Loan Marketing Assoc. .......... 4.37 02/02/00 59,981,931
76,000,000 Student Loan Marketing Assoc. .......... 4.62 02/04/00 75,977,013
- --------------------------------------------------------------------------------------------------------------
Total U.S. Government Agency
Issues -- Variable Rate
(Cost $751,707,951) .................... 751,707,951
- --------------------------------------------------------------------------------------------------------------
Certificates of 25,000,000 Bank of America N.T. & S.A. ............ 5.60 01/12/99 25,008,066
Deposit -- 0.9% 50,000,000 Morgan Guaranty Trust Co. .............. 5.55 02/02/99 50,027,447
- --------------------------------------------------------------------------------------------------------------
Total Certificates of Deposit
(Cost $74,991,098) ..................... 75,035,513
- --------------------------------------------------------------------------------------------------------------
Certificates of 75,000,000 Bankers Trust Company .................. 5.07 02/19/99 74,983,613
Deposit -- 75,000,000 Bankers Trust Company .................. 5.39 03/18/99 74,988,951
Variable 25,000,000 National City Bank, Kentucky ........... 5.12 01/20/99 24,997,260
Rate -- 2.1%
- --------------------------------------------------------------------------------------------------------------
Total Certificates of Deposit --
Variable Rate (Cost $174,969,824) ...... 174,969,824
- --------------------------------------------------------------------------------------------------------------
Euro 25,000,000 Bayerische Hypotheken-und
Certificates of Wechsel-Bank AG, Germany ............... 5.66 04/07/99 25,056,289
Deposit -- 0.3%
- --------------------------------------------------------------------------------------------------------------
Total Euro Certificates of Deposit
(Cost $25,000,940) ..................... 25,056,289
- --------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Premier Institutional Fund
Schedule of Investments -- Continued
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Yankee $100,000,000 Bank of Tokyo Mitsubishi Ltd., NY ......... 5.89% 11/05/98 $100,000,110
Certificates of 24,000,000 Bayerische Landesbank
Deposit -- 7.9% Girozentrale, NY ........................ 5.64 03/15/99 24,035,146
28,000,000 Canadian Imperial Bank of
Commerce, NY ............................ 5.55 02/10/99 28,017,163
50,000,000 Commerzbank AG, NY ........................ 5.54 02/02/99 50,026,221
50,000,000 Deutsche Bank AG, NY ...................... 5.67 03/26/99 50,087,835
25,000,000 Societe Generale, NY ...................... 5.55 02/09/99 25,015,120
25,000,000 Societe Generale, NY ...................... 5.58 02/10/99 25,017,320
50,000,000 Societe Generale, NY ...................... 5.68 03/22/99 50,086,402
25,000,000 Societe Generale, NY ...................... 5.73 03/30/99 25,051,324
22,000,000 Societe Generale, NY ...................... 5.69 07/16/99 22,122,706
25,000,000 Svenska Handelsbanken, NY ................. 5.79 05/07/99 25,094,943
20,000,000 Svenska Handelsbanken, NY ................. 5.78 05/28/99 20,085,009
50,000,000 Svenska Handelsbanken, NY ................. 5.75 06/09/99 50,233,751
100,000,000 Westdeutsche Landesbank
Girozentrale, NY ........................ 5.28 12/31/98 100,001,903
25,000,000 Westpac Banking Corp., NY ................. 5.64 04/09/99 25,055,060
34,000,000 Westpac Banking Corp., NY ................. 5.73 04/23/99 34,097,042
- --------------------------------------------------------------------------------------------------------------------
Total Yankee Certificates of
Deposit (Cost $652,891,443) ............... 654,027,055
- --------------------------------------------------------------------------------------------------------------------
Yankee 35,000,000 Credit Suisse First Boston Inc., NY ....... 5.21 12/11/98 35,000,000
Certificates of 20,000,000 Credit Suisse First Boston Inc., NY ....... 5.35 05/12/99 20,000,000
Deposit -- 50,000,000 Societe Generale, NY ...................... 5.25 01/19/99 49,994,773
Variable 80,000,000 Societe Generale, NY ...................... 5.29 05/07/99 79,975,207
Rate -- 3.7% 50,000,000 Societe Generale, NY ...................... 5.32 08/11/99 49,974,464
25,000,000 Svenska Handelsbanken, NY ................. 5.11 07/21/99 24,989,387
50,000,000 Toronto-Dominion Bank Ltd., Canada 5.06 07/13/99 49,977,384
- --------------------------------------------------------------------------------------------------------------------
Total Yankee Certificates of
Deposit -- Variable Rate
(Cost $309,911,215) ....................... 309,911,215
- --------------------------------------------------------------------------------------------------------------------
Time 100,000,000 Deutsche Bank AG, NY ...................... 5.69 11/02/98 100,000,000
Deposits -- 3.1% 160,200,000 SunTrust Bank, Atlanta .................... 5.50 11/02/98 160,200,000
- --------------------------------------------------------------------------------------------------------------------
Total Time Deposits
(Cost $260,200,000) ....................... 260,200,000
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Premier Institutional Fund
Schedule of Investments -- Continued
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Bank Notes -- $39,000,000 First National Bank of Chicago .......... 5.73% 5/19/99 $ 39,184,144
0.5%
- --------------------------------------------------------------------------------------------------------------
Total Bank Notes
(Cost $38,990,345) ...................... 39,184,144
- --------------------------------------------------------------------------------------------------------------
Bank Notes -- 39,000,000 American Express Centurion Bank ......... 5.36 03/19/99 39,000,000
Variable 37,500,000 Comerica Bank, Detroit .................. 5.29 02/02/99 37,496,311
Rate -- 4.2% 23,500,000 Comerica Bank, Detroit .................. 5.34 02/09/99 23,496,893
50,000,000 FCC National Bank, Wilmington ........... 5.06 05/12/99 49,984,598
20,000,000 First Tennessee Bank N.A.,
Memphis ............................... 5.57 02/08/99 19,997,887
25,000,000 First Tennessee Bank N.A.,
Memphis ............................... 5.57 02/18/99 24,997,122
95,000,000 First Union National Bank of North
Carolina, Memphis ..................... 5.17 09/01/99 95,000,000
15,000,000 Huntington National Bank
(Columbus) ............................ 5.12 01/20/99 14,998,389
15,000,000 Huntington National Bank
(Columbus) ............................ 5.11 01/22/99 14,998,315
27,700,000 Old Kent Bank & Trust Co. ............... 5.06 06/30/99 27,689,192
- --------------------------------------------------------------------------------------------------------------
Total Bank Notes--Variable Rate
(Cost $347,658,707) ..................... 347,658,707
- --------------------------------------------------------------------------------------------------------------
Corporate 25,000,000 Abbey National Treasury Services
Notes -- 2.7% PLC ................................... 5.50 02/02/99 25,000,000
22,000,000 Chrysler Financial Corp. ................ 6.44 06/16/99 22,168,960
9,969,109 Copelco Capital Funding Trust ........... 5.68 08/16/99 9,970,668
21,108,000 Deutsche Pfandbrief und
Hypothekenbank ........................ 6.13 04/09/99 21,177,656
421,733 Ford Credit Auto Owner Trust 1998-A ..... 5.55 02/16/99 421,733
12,661,000 General Motors Acceptance Corp. ......... 7.75 01/15/99 12,712,657
25,000,000 International Lease Finance Corp. ....... 5.50 01/15/99 25,000,000
5,000,000 International Lease Finance Corp. ....... 6.44 05/03/99 5,028,100
8,500,000 Lehman Brothers Holdings Inc. ........... 10.00 05/15/99 8,682,750
16,000,000 Lehman Brothers Holdings Inc. ........... 6.92 06/01/99 16,067,200
14,900,000 Lehman Brothers Holdings Inc. ........... 7.63 07/15/99 15,059,728
5,000,000 Lehman Brothers Holdings Inc. ........... 6.90 07/15/99 5,053,600
5,500,000 Lehman Brothers Holdings Inc. ........... 6.30 08/11/99 5,510,945
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Premier Institutional Fund
Schedule of Investments -- Continued
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Corporate $25,000,000 Lehman Brothers Holdings Inc. ............ 6.44% 08/13/99 $ 25,062,500
Notes 20,000,000 Lehman Brothers Holdings Inc. ............ 6.84 10/07/99 20,150,000
(continued) 8,694,791 Premier Auto Trust 1998-2 ................ 5.62 02/08/99 8,694,791
- --------------------------------------------------------------------------------------------------------------
Total Corporate Notes
(Cost $225,821,838) ...................... 225,761,288
- --------------------------------------------------------------------------------------------------------------
Corporate 65,000,000 Abbey National Treasury Services
Notes -- PLC .................................... 5.10 07/15/99 64,966,624
Variable 50,000,000 Abbey National Treasury Services
Rate -- 17.8% PLC .................................... 5.04 07/20/99 49,971,397
85,000,000 Abbey National Treasury Services
PLC .................................... 5.27 08/17/99 84,830,000
45,000,000 Abbey National Treasury Services
PLC .................................... 5.25 10/29/99 45,000,000
43,000,000 Abbey National Treasury Services
PLC .................................... 5.25 11/01/99 43,000,000
50,000,000 American Honda Finance Corp. ............. 5.27 04/08/99 50,000,000
25,000,000 Bank of Nova Scotia ...................... 5.16 01/29/99 24,999,121
70,000,000 Bear Stearns Companies Inc. .............. 5.39 12/11/98 70,000,000
50,000,000 Bear Stearns Companies Inc. .............. 5.63 02/16/99 50,000,000
30,000,000 Bear Stearns Companies Inc. .............. 5.57 03/02/99 30,000,000
70,000,000 Bear Stearns Companies Inc. .............. 5.38 06/15/99 70,000,000
20,000,000 Chrysler Financial Corp. ................. 5.22 03/11/99 20,001,380
10,000,000 Chrysler Financial Corp. ................. 5.21 03/11/99 10,000,514
25,000,000 CIT Group Holdings Inc. .................. 5.06 04/19/99 24,993,223
26,700,000 CIT Group Holdings Inc. .................. 5.05 05/24/99 26,689,807
30,000,000 CIT Group Holdings Inc. .................. 5.08 08/30/99 29,463,099
25,000,000 Ford Motor Credit Co. .................... 5.21 01/08/99 25,000,000
21,000,000 General Electric Capital Corp. ........... 5.07 06/03/99 20,993,960
20,000,000 General Electric Capital Corp. ........... 5.59 09/03/99 19,996,000
55,000,000 General Motors Acceptance Corp. .......... 5.61 02/24/99 54,998,361
30,000,000 General Motors Acceptance Corp. .......... 5.20 07/06/99 29,987,345
23,000,000 General Motors Acceptance Corp. .......... 5.60 08/26/99 22,965,730
15,000,000 General Motors Acceptance Corp. .......... 5.22 10/08/99 14,978,010
22,000,000 General Motors Acceptance Corp. .......... 5.72 02/27/01 22,000,000
20,000,000 Goldman Sachs Group L.P. ................. 5.26 02/01/99 20,003,112
15,000,000 Goldman Sachs Group L.P. ................. 5.35 11/12/99 14,992,500
20,000,000 Household Finance Corp. .................. 5.64 09/13/99 19,964,000
40,000,000 Lehman Brothers Holdings Inc. ............ 5.21 03/22/99 40,000,370
6,600,000 Lehman Brothers Holdings Inc. ............ 6.01 05/18/99 6,611,252
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Premier Institutional Fund
Schedule of Investments -- Continued
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Corporate $ 25,000,000 Lehman Brothers Holdings Inc. ........... 5.37% 05/24/99 $ 25,016,550
Notes -- 28,000,000 Lehman Brothers Holdings Inc. ........... 5.30 08/20/99 28,016,646
Variable 90,000,000 Liberty Lighthouse US Cap Co., LLC 5.30 10/08/99 89,838,000
Rate 50,000,000 Liberty Lighthouse US Cap Co., LLC 5.33 10/15/99 49,985,270
(continued) 50,000,000 Morgan (J.P.) & Co., Inc. ............... 5.08 02/24/99 49,993,914
25,000,000 Morgan Stanley, Dean Witter,
Discover & Co. ........................ 5.18 11/20/98 25,000,000
25,000,000 Morgan Stanley, Dean Witter,
Discover & Co. ........................ 5.66 12/10/98 25,003,749
23,000,000 Morgan Stanley, Dean Witter,
Discover & Co. ........................ 5.30 01/15/99 23,000,000
25,000,000 Pepsico Inc. ............................ 5.50 08/19/99 24,957,500
34,000,000 Racers 1998-MM-7-1 ...................... 5.40 08/13/99 34,000,000
75,000,000 Svenska Handelsbanken Inc. .............. 5.63 05/18/99 74,993,874
20,000,000 Xerox Capital (Europe) PLC .............. 5.58 08/20/99 19,974,000
- ----------------------------------------------------------------------------------------------------------------
Total Corporate Notes -- Variable
Rate (Cost $1,477,081,181) .............. 1,476,185,308
- ----------------------------------------------------------------------------------------------------------------
Master 7,000,000 Goldman Sachs Group L.P. ................ 5.09 01/08/99 7,000,000
Notes -- 200,000,000 Goldman Sachs Group L.P. ................ 5.14 02/22/99 200,000,000
Variable 30,000,000 Jackson National Life Insurance Co. ..... 5.36 05/03/99 30,000,000
Rate -- 6.6% 28,000,000 John Hancock Mutual
Life Insurance Co. .................... 5.38 07/30/99 28,000,000
233,650,000 Morgan (J.P.) & Co., Inc. ............... 5.14 01/12/99 233,650,000
10,000,000 Pacific Life Insurance Co. .............. 5.37 06/01/99 10,000,000
10,000,000 Pacific Life Insurance Co. .............. 5.37 10/01/99 10,000,000
20,000,000 Travelers Insurance Company (The) ....... 5.37 01/21/99 20,000,000
10,000,000 Travelers Insurance Company (The) ....... 5.37 02/01/99 10,000,000
- ----------------------------------------------------------------------------------------------------------------
Total Master Notes -- Variable
Rate (Cost $548,650,000) ................ 548,650,000
- ----------------------------------------------------------------------------------------------------------------
Commercial 76,100,000 Aesop Funding Corp. ..................... 5.18 12/16/98 75,607,252
Paper -- 28.9% 13,004,000 American Honda Finance Corp. ............ 5.50 11/18/98 12,970,226
35,000,000 American Honda Finance Corp. ............ 5.48 11/20/98 34,898,772
35,869,000 Amsterdam Funding Corp. ................. 5.26 12/11/98 35,659,366
29,000,000 Amsterdam Funding Corp. ................. 5.35 01/29/99 28,612,850
18,575,000 Apex Funding Corp. ...................... 5.75 11/02/98 18,572,033
20,022,000 Apex Funding Corp. ...................... 5.75 11/05/98 20,009,208
30,000,000 Apreco Inc. ............................. 5.47 12/03/98 29,854,133
22,929,000 Banner Receivables Corp. ................ 5.74 11/06/98 22,910,720
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Premier Institutional Fund
Schedule of Investments -- Continued
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial $ 15,200,000 Certain Funding Ltd. ...................... 5.40% 12/15/98 $15,099,680
Paper 12,172,000 Certain Funding Ltd. ...................... 5.37 12/18/98 12,086,664
(continued) 100,000,000 CIT Group Holdings Inc. ................... 5.46 12/28/98 99,135,500
45,000,000 Concord Minuteman Capital Co. LLC 5.26 01/22/99 44,446,500
25,000,000 Concord Minuteman Capital Co. LLC 5.28 01/22/99 24,692,500
55,000,000 Concord Minuteman Capital Co. LLC 5.30 01/26/99 54,290,500
50,000,000 Corporate Asset Funding Co. Inc. .......... 5.16 12/18/98 49,663,167
35,000,000 CXC Inc. .................................. 5.46 12/04/98 34,824,825
76,877,000 Edison Asset Securitization LLC ........... 5.30 01/22/99 75,931,413
25,000,000 Edison Asset Securitization LLC ........... 5.40 02/02/99 24,664,167
50,000,000 Eureka Securitization Inc. ................ 5.47 12/03/98 49,756,889
10,000,000 Finova Capital Corp. ...................... 5.51 11/30/98 9,955,614
25,000,000 Finova Capital Corp. ...................... 5.50 01/25/99 24,681,250
30,000,000 Finova Capital Corp. ...................... 5.50 01/26/99 29,613,000
50,000,000 Finova Capital Corp. ...................... 5.50 01/28/99 49,340,000
10,000,000 Finova Capital Corp. ...................... 5.50 01/29/99 9,866,500
50,000,000 Finova Capital Corp. ...................... 5.35 02/26/99 49,155,000
50,000,000 General Electric Capital Corp. ............ 5.47 02/18/99 49,212,778
50,000,000 General Electric Capital Corp. ............ 5.48 02/26/99 49,155,000
100,000,000 General Electric Capital Corp. ............ 5.48 03/02/99 98,285,833
75,000,000 General Electric Capital Corp. ............ 5.47 03/03/99 73,703,750
50,000,000 Greenwich Funding Corp. ................... 5.45 11/16/98 49,886,458
25,000,000 Greyhawk Capital Corp. .................... 5.48 12/04/98 24,874,417
25,000,000 Greyhawk Capital Corp. .................... 5.32 12/07/98 24,867,000
40,000,000 Greyhawk Capital Corp. .................... 5.48 02/26/99 39,324,000
40,000,000 Lexington Parker Capital Corp. ............ 5.48 12/04/98 39,799,067
60,000,000 Lexington Parker Capital Corp. ............ 5.23 01/22/99 59,262,000
80,000,000 Lexington Parker Capital Corp. ............ 5.28 01/22/99 79,016,000
25,000,000 Minmetals Capital & Securities Inc. ....... 5.14 03/25/99 24,490,000
10,000,000 Mont Blanc Capital Corp. .................. 5.30 12/17/98 9,932,278
36,398,000 Old Line Funding Corp. .................... 5.44 11/19/98 36,298,997
17,231,000 Old Line Funding Corp. .................... 5.44 11/20/98 17,181,528
44,636,000 Park Avenue Receivables Corp. ............. 5.47 11/16/98 44,534,267
29,815,000 Park Avenue Receivables Corp. ............. 5.20 12/09/98 29,651,349
60,000,000 Park Avenue Receivables Corp. ............. 5.35 01/25/99 59,235,000
29,300,000 Preferred Receivables Funding Corp. 5.25 12/02/98 29,167,539
63,835,000 Preferred Receivables Funding Corp. 5.25 12/07/98 63,499,866
10,115,000 Preferred Receivables Funding Corp. 5.25 12/22/98 10,039,770
100,000,000 Prudential Funding Corp. .................. 5.72 11/02/98 99,984,111
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Premier Institutional Fund
Schedule of Investments -- Continued
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial $ 47,837,000 Repeat Offering Securitization Entity ... 5.26% 12/02/98 $ 47,620,325
Paper 32,823,000 Repeat Offering Securitization Entity ... 5.31 12/07/98 32,648,710
(continued) 100,000,000 Salomon Smith Barney Holdings Inc. ...... 5.48 02/22/99 98,367,778
50,000,000 Salomon Smith Barney Holdings Inc. ...... 5.49 02/23/99 49,176,667
76,201,000 Thames Asset Global Securities .......... 5.47 12/08/98 75,772,602
150,000,000 Variable Funding Capital Corp. .......... 5.75 11/02/98 149,976,042
- ----------------------------------------------------------------------------------------------------------------
Total Commercial Paper
(Cost $2,400,821,062) ................... 2,401,260,861
- ----------------------------------------------------------------------------------------------------------------
Repurchase 30,000,000 Lehman Brothers Holdings Inc.,
Agreements** purchased on 10/30/98 ................... 5.58 11/02/98 30,000,000
- -- 0.8% 33,000,000 State Street Bank & Trust Company,
purchased on 10/30/98 ................... 5.25 11/02/98 33,000,000
- ----------------------------------------------------------------------------------------------------------------
Total Repurchase Agreements
(Cost $63,000,000) ...................... 63,000,000
- ----------------------------------------------------------------------------------------------------------------
Total Investments -- 99.9%
(Cost $8,299,365,684) ................... 8,300,826,618
- ----------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 0.1% 7,057,589
- ----------------------------------------------------------------------------------------------------------------
Net Assets -- Equivalent to $1.00
Per Share on 8,306,423,273
Shares of Beneficial Interest
Outstanding -- 100.0% ................... $8,307,884,207
================================================================================================================
</TABLE>
Note--Costs for federal income tax purposes are the same as those shown above.
At October 31, 1998, net unrealized appreciation amounted to $1,460,934 and is
comprised of $2,885,304 in appreciation and $1,424,370 in depreciation.
*Commercial Paper and some U.S. Government and Agency Issues are traded on a
discount basis; the interest rate shown is the discount rate paid at the time
of purchase by the Fund. Other securities bear interest at the rates shown,
payable at fixed dates or upon maturity; the rates shown are the rates in
effect at October 31, 1998. For variable rate instruments, the next date on
which the interest rate is to be adjusted is deemed the maturity date for
valuation.
**Repurchase Agreements are fully collateralized by U.S. Government and Agency
Obligations.
D/N--Discount Notes
See Notes to Financial Statements.
12
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Premier Institutional Fund
Statement of Assets and Liabilities
October 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Total investments at value (identified cost $8,299,365,684) (Note 1a) ............. $8,300,826,618
Cash .............................................................................. 1,799,203
Interest receivable ............................................................... 52,250,697
Receivable for investments sold ................................................... 40,515,278
Prepaid expense ................................................................... 714,971
--------------
Total assets ................................................................... 8,396,106,767
--------------
Liabilities:
Advisory fee payable (Note 2) ..................................................... 1,071,420
Payable for investments purchased ................................................. 83,495,855
Dividends payable ................................................................. 3,547,333
Accrued expenses .................................................................. 107,952
--------------
Total liabilities .............................................................. 88,222,560
--------------
Net Assets: (Equivalent to $1.00 per share, offering and redemption price, based on
8,306,423,273 shares of beneficial interest outstanding) ......................... $8,307,884,207
==============
</TABLE>
- --------------------------------------------------------------------------------
Merrill Lynch Premier Institutional Fund
Statement of Operations
For the Six Months Ended October 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income:
Interest and discount earned (Note 1d) ........................... $214,286,192
------------
Expenses:
Investment advisory fee (Note 2) ................................. 5,729,633
Registration fees ................................................ 744,665
Accounting and custodian services ................................ 185,101
Legal and audit fees ............................................. 85,229
Trustees' fees (Note 5) .......................................... 38,426
Printing and shareholder reports ................................. 37,992
Dividend and transfer agency fees ................................ 34,226
Insurance ........................................................ 15,538
Miscellaneous .................................................... 5,000
------------
Total expense ................................................. 6,875,810
------------
Net investment income ......................................... 207,410,382
Realized and Unrealized Gain on Investments:
Net realized gain from investment transactions ...... $ 680,151
Net unrealized appreciation of investments .......... 2,410,922
---------
Net realized and unrealized gain from investments ............. 3,091,073
------------
Net Increase in Net Assets Resulting From Operations ............. $210,501,455
============
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Merrill Lynch Premier Institutional Fund Six Months Year
Statement of Changes in Net Assets (Unaudited) Ended Ended
October 31, 1998 April 30, 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in Net Assets:
Operations:
Net investment income ............................................. $ 207,410,382 $ 298,115,643
Net realized gain from investment transactions .................... 680,151 558,082
Net unrealized appreciation (depreciation) of investments ......... 2,410,922 (13,174)
-------------- --------------
Net increase in net assets resulting from operations .............. 210,501,455 298,660,551
Total declared as dividends to shareholders (Note 4) .............. (208,090,533) (298,673,725)
Capital share transactions (Note 3) ............................... 1,660,950,652 3,821,339,552
-------------- --------------
Net increase in net assets ........................................ 1,663,361,574 3,821,326,378
Net Assets:
Beginning of period ............................................... 6,644,522,633 2,823,196,255
-------------- --------------
End of period ..................................................... $8,307,884,207 $6,644,522,633
============== ==============
</TABLE>
- --------------------------------------------------------------------------------
Merrill Lynch Premier Institutional Fund
Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Six Months Year For the Period
Ended Ended January 27, 1997*
October 31, 1998 April 30, 1998 to April 30, 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, beginning of period ............................ $ 1.00 $1.00 $1.00
Income from Investment Operations:
Net investment income .......................................... .027 .055 .014
Less Distributions:
Dividends from net investment income ........................... (.027) (.055) (.014)
------ ------ ------
Net Asset Value, end of period .................................. $1.00 $1.00 $1.00
====== ====== ======
Total Return .................................................... 2.78%(2) 5.69% 1.40%(2)
Ratios/Supplemental Data:
Net Assets, end of period (000) ................................ $8,307,884 $6,644,523 $2,823,196
Ratio of expenses to average net assets (before waiver) .18%(1) .18% .18%(1)
Ratio of expenses to average net assets (after waiver) ......... -- -- .17%(1)
Ratio of net investment income, including realized and
unrealized gains and losses, to average net assets
(before waiver) ............................................... 5.51%(1) 5.55% 5.26%(1)
Ratio of net investment income, including realized and
unrealized gains and losses, to average net assets
(after waiver) ................................................ -- -- 5.27%(1)
</TABLE>
*Commencement of operations
(1) On an annualized basis
(2) Cumulative total return
See Notes to Financial Statements.
14
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Schedule of Investments
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. $25,000,000 U.S. Treasury Bills .................... 3.75% 10/14/99 $24,036,111
Government & 13,000,000 U.S. Treasury Notes .................... 6.88 08/31/99 13,260,000
Agency 12,500,000 U.S. Treasury Notes .................... 5.88 11/15/99 12,687,500
Issues -- 11.2% 12,500,000 U.S. Treasury Notes .................... 7.75 01/31/00 13,007,813
10,000,000 U.S. Treasury Notes .................... 5.38 01/31/00 10,125,000
13,000,000 U.S. Treasury Notes .................... 5.88 02/15/00 13,243,750
22,500,000 U.S. Treasury Notes .................... 4.50 09/30/00 22,621,288
20,000,000 Federal Home Loan Banks ................ 5.88 08/18/00 20,006,250
35,000,000 Federal Home Loan Banks ................ 5.56 09/18/00 35,019,600
15,000,000 Federal Home Loan Mortgage
Corp. ................................ 5.98 11/24/99 15,006,300
25,000,000 Federal Home Loan Mortgage
Corp. ................................ 5.88 05/19/00 25,112,500
50,000,000 Federal National Mortgage Assoc. 6.00 09/02/99 50,511,500
20,000,000 Student Loan Marketing Assoc. .......... 5.89 11/17/99 20,255,000
20,550,000 Student Loan Marketing Assoc. .......... 6.00 12/16/99 20,569,266
31,000,000 Federal Farm Credit Banks D/N .......... 4.80 09/10/99 29,819,468
25,000,000 Federal Farm Credit Banks D/N .......... 4.30 10/29/99 23,911,486
28,400,000 Federal Home Loan Banks D/N ............ 4.26 10/15/99 27,211,271
50,000,000 Federal Home Loan Mortgage
Corp. D/N ............................ 5.19 02/19/99 49,251,389
50,000,000 Federal Home Loan Mortgage
Corp. D/N ............................ 5.07 03/25/99 49,052,000
25,000,000 Federal Home Loan Mortgage
Corp. D/N ............................ 4.63 07/02/99 24,237,250
38,000,000 Federal National Mortgage Assoc.
D/N .................................. 5.21 02/04/99 37,508,639
40,000,000 Federal National Mortgage Assoc.
D/N .................................. 5.15 02/25/99 39,368,444
25,000,000 Federal National Mortgage Assoc.
D/N .................................. 5.25 03/17/99 24,552,333
75,000,000 Federal National Mortgage Assoc.
D/N .................................. 5.25 03/22/99 73,607,625
46,000,000 Federal National Mortgage Assoc.
D/N .................................. 5.08 04/05/99 45,069,139
50,000,000 Federal National Mortgage Assoc.
D/N .................................. 4.68 06/09/99 48,594,444
50,000,000 Federal National Mortgage Assoc.
D/N .................................. 4.63 06/11/99 48,581,667
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Schedule of Investments -- Continued
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. $50,000,000 Federal National Mortgage Assoc.
Government & D/N .................................. 4.60% 07/06/99 $ 48,449,389
Agency 25,000,000 Federal National Mortgage Assoc.
Issues D/N .................................. 4.60 07/07/99 24,221,556
(continued) 75,000,000 Federal National Mortgage Assoc.
D/N .................................. 4.53 08/16/99 72,324,000
- -----------------------------------------------------------------------------------------------------------------------
Total U.S. Government & Agency
Issues (Cost $960,202,088) ............. 961,221,978
- -----------------------------------------------------------------------------------------------------------------------
U.S. 75,000,000 Federal Home Loan Banks ................ 4.61 03/26/99 74,985,103
Government 50,000,000 Federal Home Loan Banks ................ 4.61 04/01/99 49,989,657
Agency 60,000,000 Federal Home Loan Banks ................ 4.61 08/12/99 59,972,591
Issues -- 91,000,000 Federal Home Loan Banks ................ 4.70 09/02/99 90,961,980
Variable 50,000,000 Federal National Mortgage Assoc......... 4.42 11/03/98 49,999,808
Rate -- 9.2% 75,000,000 Federal National Mortgage Assoc......... 4.56 01/21/99 74,991,678
100,000,000 Federal National Mortgage Assoc......... 4.56 03/03/99 99,984,959
50,000,000 Federal National Mortgage Assoc......... 4.64 04/09/99 49,989,110
100,000,000 Federal National Mortgage Assoc......... 4.35 07/30/99 99,937,617
44,000,000 Federal National Mortgage Assoc......... 4.67 10/27/99 43,979,582
55,000,000 Student Loan Marketing Assoc. .......... 4.57 01/12/00 54,987,880
40,000,000 Student Loan Marketing Assoc. .......... 4.37 02/02/00 39,987,954
- -----------------------------------------------------------------------------------------------------------------------
Total U.S. Government Agency
Issues -- Variable Rate
(Cost $789,767,919) .................... 789,767,919
- -----------------------------------------------------------------------------------------------------------------------
Certificates of 25,000,000 Bank of America N.T. & S.A. ............ 5.60 01/12/99 25,008,066
Deposit -- 1.2% 25,000,000 Bank One, Wisconsin .................... 5.74 05/11/99 25,091,019
25,000,000 Chase Manhattan Bank N.A. .............. 5.70 07/02/99 25,131,953
25,000,000 Morgan Guaranty Trust Co. .............. 5.55 02/02/99 25,013,724
- -----------------------------------------------------------------------------------------------------------------------
Total Certificates of Deposit
(Cost $99,975,180) ..................... 100,244,762
- -----------------------------------------------------------------------------------------------------------------------
Certificates 50,000,000 Fleet National Bank, RI ................ 5.07 03/19/99 49,989,852
of Deposit -- 25,000,000 National City Bank, Kentucky ........... 5.12 01/20/99 24,997,260
Variable
Rate -- 0.9%
- -----------------------------------------------------------------------------------------------------------------------
Total Certificates of Deposit --
Variable Rate
(Cost $74,987,113) ..................... 74,987,112
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Schedule of Investments -- Continued
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Euro $25,000,000 Bayerische Hypotheken-und
Certificates of Wechsel-Bank AG, London ............. 5.66% 04/07/99 $25,056,724
Deposit -- 0.3%
- -------------------------------------------------------------------------------------------------------------------
Total Euro Certificates of
Deposit (Cost $25,000,940) ........... 25,056,724
- -------------------------------------------------------------------------------------------------------------------
Yankee 40,000,000 Bank of Montreal ..................... 5.69 06/15/99 40,179,690
Certificates of 25,000,000 Barclays Bank PLC, NY ................ 5.71 04/16/99 25,065,641
Deposit -- 7.1% 78,000,000 Canadian Imperial Bank of
Commerce, NY ........................ 5.55 02/10/99 78,048,449
50,000,000 Canadian Imperial Bank of
Commerce, NY ........................ 5.74 04/01/99 50,124,313
20,000,000 Canadian Imperial Bank of
Commerce, NY ........................ 5.71 06/21/99 20,094,997
24,000,000 Canadian Imperial Bank of
Commerce, NY ........................ 5.71 06/23/99 24,115,412
69,000,000 Credit Suisse First Boston Inc.,
NY .................................. 5.74 01/07/99 69,037,913
25,000,000 Credit Suisse First Boston Inc.,
NY .................................. 5.60 01/29/99 25,010,955
50,000,000 Credit Suisse First Boston Inc.,
NY .................................. 5.72 03/29/99 50,373,630
50,000,000 Deutsche Bank AG, NY ................. 5.62 02/26/99 50,048,770
25,000,000 Deutsche Bank AG, NY ................. 5.70 03/30/99 25,048,280
25,000,000 Deutsche Bank AG, NY ................. 5.73 04/15/99 25,067,908
25,000,000 Norddeutsche Landesbank
Girozentrale, NY .................... 5.72 04/16/99 25,067,295
50,000,000 Westdeutsche Landesbank
Girozentrale, NY .................... 5.25 02/16/99 50,017,440
50,000,000 Westdeutsche Landesbank
Girozentrale, NY .................... 5.35 03/18/99 50,050,764
- -------------------------------------------------------------------------------------------------------------------
Total Yankee Certificates of
Deposit (Cost $605,921,526) .......... 607,351,457
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
17
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Schedule of Investments -- Continued
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Yankee $50,000,000 Bank of Montreal ........................ 5.11% 07/22/99 $49,978,888
Certificates of 95,000,000 Barclays Bank PLC, NY ................... 5.03 06/01/99 94,951,532
Deposit -- 35,000,000 Credit Suisse First Boston Inc.,
Variable NY .................................... 5.21 12/11/98 35,000,000
Rate -- 3.3% 25,000,000 National City Bank, Indiana ............. 5.27 02/05/99 24,996,826
80,000,000 Norddeutsche Landesbank
Girozentrale, NY ....................... 5.28 02/02/99 79,990,163
- -------------------------------------------------------------------------------------------------------------------------
Total Yankee Certificates of
Deposit -- Variable Rate
(Cost $284,917,409) ..................... 284,917,409
- -------------------------------------------------------------------------------------------------------------------------
Time 300,000,000 Deutsche Bank AG, NY .................... 5.69 11/02/98 300,000,000
Deposits -- 25,000,000 SunTrust Bank, Atlanta .................. 5.50 11/02/98 25,000,000
6.6% 41,000,000 SunTrust Bank, Atlanta .................. 5.00 11/02/98 41,000,000
200,000,000 Westdeutsche Landesbank
Girozentrale, NY ....................... 5.44 11/02/98 200,000,000
- -------------------------------------------------------------------------------------------------------------------------
Total Time Deposits
(Cost $566,000,000) ..................... 566,000,000
- -------------------------------------------------------------------------------------------------------------------------
Bank Notes -- 15,000,000 FCC National Bank, Wilmington ........... 5.70 01/07/99 14,995,408
1.6% 30,000,000 First National Bank of Chicago .......... 5.63 03/16/99 30,021,370
39,000,000 First National Bank of Chicago .......... 5.73 05/19/99 39,085,171
5,000,000 First Tennessee Bank, N.A. .............. 5.82 04/30/99 5,013,278
25,000,000 Huntington National Bank
(Columbus) ............................ 5.60 01/29/99 24,991,760
20,000,000 Lasalle National Bank, Chicago .......... 5.55 02/22/99 20,079,280
- -------------------------------------------------------------------------------------------------------------------------
Total Bank Notes
(Cost $133,974,798) ..................... 134,186,267
- -------------------------------------------------------------------------------------------------------------------------
Bank Notes -- 40,000,000 Comerica Bank, Detroit .................. 5.29 02/02/99 39,996,065
Variable 29,000,000 Comerica Bank, Detroit .................. 5.34 02/09/99 28,996,166
Rate -- 6.4% 66,000,000 FCC National Bank, Wilmington ........... 5.05 02/23/99 65,985,983
19,000,000 FCC National Bank, Wilmington ........... 5.06 05/12/99 18,994,147
34,000,000 First National Bank of Chicago .......... 5.05 02/23/99 33,992,779
25,000,000 First Tennessee Bank, N.A. .............. 5.57 02/18/99 24,997,122
22,000,000 First Tennessee Bank, N.A. .............. 5.45 06/09/99 21,992,192
27,000,000 First Union National Bank of North
Carolina .............................. 5.17 08/30/99 27,000,000
95,000,000 First Union National Bank of North
Carolina .............................. 5.17 09/01/99 95,000,000
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Schedule of Investments -- Continued
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Bank Notes -- $100,000,000 Fleet National Bank, RI ................. 5.05% 05/11/99 $ 99,964,249
Variable 16,000,000 Huntington National Bank
Rate (Columbus) ............................ 5.12 01/20/99 15,998,282
(continued) 40,000,000 Huntington National Bank
(Columbus) ............................ 5.11 01/22/99 39,995,507
35,000,000 SouthTrust Bank, N.A. ................... 5.08 04/21/99 34,991,965
- -----------------------------------------------------------------------------------------------------------------------
Total Bank Notes -- Variable Rate
(Cost $547,904,457) ..................... 547,904,457
- -----------------------------------------------------------------------------------------------------------------------
Corporate 587,413 Ford Credit Auto Owner Trust
Notes -- 0.7% 1998-A ................................ 5.55 02/16/99 587,414
39,000,000 Ford Credit Auto Owner Trust
1998-C ................................ 5.67 06/15/99 39,000,000
7,000,000 Lehman Brothers Holdings Inc. ........... 5.75 11/15/98 6,999,573
8,694,791 Premier Auto Trust 1998-2 ............... 5.62 02/08/99 8,694,791
- -----------------------------------------------------------------------------------------------------------------------
Total Corporate Notes
(Cost $55,281,964) ...................... 55,281,778
- -----------------------------------------------------------------------------------------------------------------------
Corporate 50,000,000 Abbey National Treasury Services
Notes -- PLC ................................... 5.04 07/20/99 49,971,397
Variable 25,000,000 Abbey National Treasury Services
Rate -- 12.9% PLC ................................... 5.54 08/17/99 24,950,000
100,000,000 Abbey National Treasury Services
PLC ................................... 5.27 08/17/99 99,800,000
42,500,000 Abbey National Treasury Services
PLC ................................... 5.25 10/29/99 42,500,000
42,500,000 Abbey National Treasury Services
PLC ................................... 5.25 11/01/99 42,500,000
78,000,000 Chase Manhattan Corp .................... 5.41 03/25/99 77,996,981
17,500,000 CIT Group Holdings Inc. ................. 5.07 03/22/99 17,496,702
50,000,000 CIT Group Holdings Inc. ................. 5.06 04/19/99 49,986,445
28,000,000 CIT Group Holdings Inc. ................. 5.05 05/24/99 27,989,311
15,000,000 CIT Group Holdings Inc. ................. 5.08 08/30/99 14,994,081
24,000,000 Dean Witter, Discover & Co. ............. 5.40 02/05/99 24,014,898
25,000,000 Ford Motor Credit Co. ................... 5.21 01/08/99 25,000,000
22,000,000 General Electric Capital Corp. .......... 5.07 06/03/99 21,983,500
25,000,000 General Electric Capital Corp. .......... 5.46 06/03/99 24,981,250
50,000,000 General Electric Capital Corp. .......... 5.46 06/04/99 49,973,015
50,000,000 General Motors Acceptance Corp. 5.30 07/06/99 49,983,678
100,000,000 General Motors Acceptance Corp. 5.20 07/06/99 99,961,765
</TABLE>
See Notes to Financial Statements.
19
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Schedule of Investments -- Continued
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Corporate $23,000,000 General Motors Acceptance Corp. 5.60% 08/26/99 $ 22,965,730
Notes -- 19,000,000 General Motors Acceptance Corp. 5.72 02/27/01 19,000,000
Variable 17,000,000 Goldman Sachs Group L.P. ............. 5.35 11/12/99 16,991,500
Rate 22,000,000 Household Finance Corp. .............. 5.64 09/13/99 21,960,400
(continued) 40,000,000 Liberty Lighthouse US Cap Co.,
LLC ................................ 5.30 10/08/99 39,928,000
50,000,000 Liberty Lighthouse US Cap Co.,
LLC ................................ 5.33 10/15/99 49,985,270
25,000,000 Morgan Stanley, Dean Witter,
Discover & Co. ..................... 5.18 11/20/98 25,000,000
52,000,000 Morgan Stanley, Dean Witter,
Discover & Co. ..................... 5.19 12/24/98 52,000,000
10,000,000 Morgan Stanley, Dean Witter,
Discover & Co. ..................... 5.26 02/01/99 10,002,729
20,000,000 Pepsico Inc. ......................... 5.50 08/19/99 19,966,000
25,000,000 Republic Mase Australia Ltd. ......... 5.55 02/17/99 24,995,724
35,000,000 Racers 1998-MM-7-1 ................... 5.40 08/13/99 35,000,000
20,000,000 Xerox Capital (Europe) PLC ........... 5.58 08/20/99 19,974,000
- --------------------------------------------------------------------------------------------------------------------
Total Corporate Notes -- Variable Rate
(Cost $1,102,227,875) ................ 1,101,852,376
- --------------------------------------------------------------------------------------------------------------------
Master 240,000,000 Morgan (J.P.) & Co., Inc. ............ 5.14 01/12/99 240,000,000
Notes -- 250,000,000 Goldman Sachs Group L.P. ............. 5.14 02/22/99 250,000,000
Variable
Rate -- 5.7%
- --------------------------------------------------------------------------------------------------------------------
Total Master Notes -- Variable Rate
(Cost $490,000,000) .................. 490,000,000
- --------------------------------------------------------------------------------------------------------------------
Commercial 29,700,000 Aesop Funding Corp. .................. 5.18 12/23/98 29,477,778
Paper -- 31.4% 46,178,000 Amsterdam Funding Corp. .............. 5.25 01/15/99 45,658,497
18,550,000 Amsterdam Funding Corp. .............. 5.35 01/29/99 18,302,358
25,000,000 Apreco Inc. .......................... 5.20 02/16/99 24,613,611
185,000,000 Associates Corp. of North America 5.70 11/02/98 184,970,708
39,000,000 Banco de Galicia y Buenos Aires ...... 5.15 02/26/99 38,340,900
100,000,000 Bankers Trust Corp. .................. 5.48 03/08/99 98,200,833
100,000,000 CIT Group Holdings Inc. .............. 5.46 12/28/98 99,135,500
55,000,000 Concord Minutemen Capital Co.,
LLC ................................ 5.40 12/14/98 54,645,250
44,570,000 Concord Minutemen Capital Co.,
LLC ................................ 5.26 01/22/99 44,021,789
</TABLE>
See Notes to Financial Statements.
20
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Schedule of Investments -- Continued
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial $25,000,000 Concord Minutemen Capital Co.,
Paper LLC .................................... 5.28% 01/22/99 $24,692,500
(continued) 26,000,000 ContiFinancial Corp. ..................... 5.27 02/04/99 25,643,222
50,000,000 Corporate Asset Funding Co. Inc. 5.16 12/18/98 49,663,167
25,000,000 Credit Suisse First Boston Inc. .......... 5.50 12/11/98 24,847,222
30,000,000 Finova Capital Corp. ..................... 5.54 11/30/98 29,866,117
25,000,000 Finova Capital Corp. ..................... 5.50 01/29/99 24,666,250
33,000,000 Finova Capital Corp. ..................... 5.53 02/04/99 32,547,167
50,000,000 First Data Corp. ......................... 5.75 11/02/98 49,992,014
20,000,000 Formosa Plastics Corp., U.S.A. ........... 5.40 12/17/98 19,862,000
50,000,000 General Electric Capital Corp. ........... 5.47 02/18/99 49,212,778
100,000,000 General Electric Capital Corp. ........... 5.48 02/26/99 98,310,000
100,000,000 General Electric Capital Corp. ........... 5.48 03/02/99 98,285,833
80,402,000 Greenwich Funding Corp. .................. 5.40 11/09/98 80,305,518
20,230,000 Greenwich Funding Corp. .................. 5.48 11/30/98 20,140,696
45,000,000 Greyhawk Capital Corp. ................... 5.32 12/07/98 44,760,600
45,000,000 Greyhawk Capital Corp. ................... 5.48 02/26/99 44,239,500
61,000,000 Knight-Ridder Inc. ....................... 5.53 11/12/98 60,896,927
50,000,000 Lehman Brothers Holdings Inc. ............ 5.51 02/18/99 49,212,778
43,000,000 Lehman Brothers Holdings Inc. ............ 5.51 02/19/99 42,316,778
50,000,000 Lehman Brothers Holdings Inc. ............ 5.51 02/22/99 49,183,889
47,075,000 Lexington Parker Capital Corp. ........... 5.41 12/03/98 46,848,831
50,000,000 Lexington Parker Capital Corp. ........... 5.46 12/09/98 49,711,833
50,000,000 Lexington Parker Capital Corp. ........... 5.41 12/09/98 49,714,472
32,000,000 Lexington Parker Capital Corp. ........... 5.23 01/22/99 31,606,400
30,000,000 Minmetals Capital & Securities Inc. ...... 5.53 11/02/98 29,995,392
17,700,000 Monsanto Co. ............................. 5.32 02/12/99 17,436,663
28,029,000 Mont Blanc Capital Corp. ................. 5.46 12/08/98 27,871,711
40,000,000 Mont Blanc Capital Corp. ................. 5.40 12/17/98 39,724,000
35,000,000 Mont Blanc Capital Corp. ................. 5.40 12/21/98 34,737,500
64,098,000 Park Avenue Receivables Corp. ............ 5.20 12/09/98 63,746,173
21,813,000 Park Avenue Receivables Corp. ............ 5.35 01/25/99 21,534,884
25,000,000 Preferred Receivables Funding
Corp. .................................. 5.25 12/02/98 24,886,979
100,000,000 Prudential Funding Corp. ................. 5.72 11/02/98 99,984,111
25,000,000 Repeat Offering Securitization
Entity ................................. 5.31 12/07/98 24,867,250
50,000,000 Salomon Smith Barney Holdings Inc. 5.49 02/19/99 49,205,556
25,000,000 Salomon Smith Barney Holdings Inc. 5.49 02/22/99 24,591,944
</TABLE>
See Notes to Financial Statements.
21
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Schedule of Investments -- Continued
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial $50,000,000 Salomon Smith Barney Holdings
Paper Inc. .................................. 5.48% 02/26/99 $ 49,155,000
(continued) 14,737,000 Shell Finance (UK) PLC .................. 5.48 11/23/98 14,687,647
26,400,000 Sinochem American C.P. Inc. ............. 5.50 11/18/98 26,331,433
14,500,000 Sinochem American C.P. Inc. ............. 5.41 12/02/98 14,432,450
45,021,000 Thames Asset Global Securities .......... 5.48 12/04/98 44,794,845
72,020,000 Thames Asset Global Securities .......... 5.47 12/04/98 71,658,880
78,000,000 Thames Asset Global Securities .......... 5.47 12/08/98 77,561,488
11,266,000 Three Rivers Funding Corp. .............. 5.45 11/13/98 11,245,533
150,000,000 Variable Funding Capital Corp. .......... 5.75 11/02/98 149,976,042
22,289,000 Windmill Funding Corp. .................. 5.50 11/20/98 22,224,300
14,000,000 Woolwich PLC ............................ 5.47 11/23/98 13,953,201
- ------------------------------------------------------------------------------------------------------------------------
Total Commercial Paper
(Cost $2,687,826,495) ................... 2,688,496,698
- ------------------------------------------------------------------------------------------------------------------------
Repurchase 100,000,000 Nikko Securities Co. International,
Agreements** Inc., purchased on 10/30/98 ............. 5.65 11/02/98 100,000,000
-- 1.2%
- ------------------------------------------------------------------------------------------------------------------------
Total Repurchase Agreements
(Cost $100,000,000) ..................... 100,000,000
- ------------------------------------------------------------------------------------------------------------------------
Total Investments -- 99.7%
(Cost $8,523,987,764) ................... 8,527,268,937
- ------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 0.3% 23,130,770
- ------------------------------------------------------------------------------------------------------------------------
Net Assets -- Equivalent to $1.00
Per Share on 8,547,118,534 Shares
of Beneficial Interest
Outstanding -- 100.0% ................... $8,550,399,707
========================================================================================================================
</TABLE>
Note--Costs for federal income tax purposes are the same as those shown above.
At October 31, 1998, net unrealized appreciation amounted to $3,281,173 and is
comprised of $3,940,117 in appreciation and $658,944 in depreciation.
*Commercial Paper and some U.S. Government and Agency Issues are traded on a
discount basis; the interest rate shown is the discount rate paid at the time
of purchase by the Fund. Other securities bear interest at the rates shown,
payable at fixed dates or upon maturity; the rates shown are the rates in
effect at October 31, 1998. For variable rate instruments, the next date on
which the interest rate is to be adjusted is deemed the maturity date for
valuation.
**Repurchase Agreements are fully collateralized by U.S. Government and Agency
Obligations.
D/N--Discount Notes
See Notes to Financial Statements.
22
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Statement of Assets and Liabilities
October 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Total investments at value (identified cost $8,523,987,764) (Note 1a) .......... $8,527,268,937
Cash ........................................................................... 505,261
Interest receivable ............................................................ 52,418,173
Receivable for investments sold ................................................ 17,300,000
Prepaid expense ................................................................ 33,952
--------------
Total assets ................................................................ 8,597,526,323
--------------
Liabilities:
Advisory fee payable (Note 2) .................................................. 1,384,473
Payable for investments purchased .............................................. 42,500,000
Dividends payable .............................................................. 2,465,722
Accrued expenses ............................................................... 776,421
--------------
Total liabilities ........................................................... 47,126,616
--------------
Net Assets: (Equivalent to $1.00 per share, offering and redemption price, based
on 8,547,118,534 shares of beneficial interest outstanding) ................... $8,550,399,707
==============
</TABLE>
- --------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Statement of Operations
For the Six Months Ended October 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income:
Interest and discount earned (Note 1d) ................................ $217,414,485
------------
Expenses:
Investment advisory fee (Note 2) ....................... $12,813,775
Registration fees ...................................... 700,087
Dividend and transfer agency fees ...................... 631,975
Accounting and custodian services ...................... 202,983
Legal and audit fees ................................... 99,431
Printing and shareholder reports ....................... 48,727
Trustees' fees (Note 5) ................................ 39,351
Insurance .............................................. 16,709
Miscellaneous .......................................... 37,500
-----------
Total expense ..................................... 14,590,538
Waived investment advisory fee (Note 2) ................ (5,044,708) 9,545,830
----------- ------------
Net investment income ............................. 207,868,655
Realized and Unrealized Gain on Investments:
Net realized gain from investment transactions ......... 598,363
Net unrealized appreciation of investments ............. 4,551,031
-----------
Net realized and unrealized gain from investments ................ 5,149,394
------------
Net Increase in Net Assets Resulting From Operations .................. $213,018,049
============
</TABLE>
See Notes to Financial Statements.
23
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Merrill Lynch Institutional Fund Six Months Year
Statement of Changes in Net Assets (Unaudited) Ended Ended
October 31, 1998 April 30, 1998
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in Net Assets:
Operations:
Net investment income ........................................ $ 207,868,655 $ 358,043,491
Net realized gain from investment transactions ............... 598,363 235,380
Net unrealized appreciation of investments ................... 4,551,031 2,160,230
-------------- --------------
Net increase in net assets resulting from operations ......... 213,018,049 360,439,101
Total declared as dividends to shareholders (Note 4) ......... (208,467,018) (358,278,871)
Capital share transactions (Note 3) .......................... 1,173,423,729 1,172,386,778
-------------- --------------
Net increase in net assets ................................... 1,177,974,760 1,174,547,008
Net Assets:
Beginning of period .......................................... 7,372,424,947 6,197,877,939
-------------- --------------
End of period ................................................ $8,550,399,707 $7,372,424,947
============== ==============
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Six Months
Merrill Lynch Institutional Fund Ended
Financial Highlights October 31,
(Unaudited) 1998
- -------------------------------------------------------------------------------
<S> <C>
Net Asset Value, beginning of period .......... $1.00
Income from Investment Operations:
Net investment income ........................ .027
Less Distributions:
Dividends from net investment income ......... (.027)
-------
Net Asset Value, end of period ................ $1.00
=======
Total Return .................................. 2.74%(2)
Ratios/Supplemental Data:
Net Assets, end of period (000) .............. $8,550,400
Ratio of expenses to average net assets
(before waiver) ............................. .37%(1)
Ratio of expenses to average net assets
(after waiver) .............................. .24%(1)
Ratio of net investment income, including
realized and unrealized gains and
losses, to average net assets (before
waiver) ..................................... 5.35%(1)
Ratio of net investment income, including
realized and unrealized gains and
losses, to average net assets (after
waiver) ..................................... 5.48%(1)
<CAPTION>
Year Ended April 30,
------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income ........................ .054 .052 .056 .050 .031
Less Distributions:
Dividends from net investment income ......... (.054) (.052) (.056) (.050) (.031)
------ ------ ------ ------ ------
Net Asset Value, end of period ................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total Return .................................. 5.57% 5.34% 5.81% 5.11% 3.20%
Ratios/Supplemental Data:
Net Assets, end of period (000) .............. $7,372,425 $6,197,878 $7,615,126 $6,580,086 $3,775,121
Ratio of expenses to average net assets
(before waiver) ............................. .38% .38% .37% .37% .37%
Ratio of expenses to average net assets
(after waiver) .............................. .25% .25% .24% .24% .24%
Ratio of net investment income, including
realized and unrealized gains and
losses, to average net assets (before
waiver) ..................................... 5.34% 5.12% 5.42% 5.00% 2.91%
Ratio of net investment income, including
realized and unrealized gains and
losses, to average net assets (after
waiver) ..................................... 5.47% 5.25% 5.55% 5.13% 3.04%
</TABLE>
(1) On an annualized basis
(2) Cumulative total return
See Notes to Financial Statements.
24
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Rated Institutional Fund
Schedule of Investments
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. $2,000,000 U.S. Treasury Notes ................... 6.88% 08/31/99 $2,040,000
Government & 2,475,000 Federal Home Loan Banks ............... 8.38 10/25/99 2,562,318
Agency 500,000 Federal National Mortgage Assoc. ...... 5.77 06/28/00 501,750
Issues -- 6.0% 3,000,000 Federal Farm Credit Banks D/N ......... 4.80 09/10/99 2,885,755
12,125,000 Federal National Mortgage Assoc. D/N 5.07 03/23/99 11,898,303
- ---------------------------------------------------------------------------------------------------------------------
Total U.S. Government & Agency Issues
(Cost $19,857,079) .................... 19,888,126
- ---------------------------------------------------------------------------------------------------------------------
U.S. 20,000,000 Federal Home Loan Banks ............... 4.70 09/02/99 19,991,644
Government 5,000,000 Federal National Mortgage Assoc. ...... 4.35 07/30/99 4,996,881
Agency
Issues --
Variable
Rate -- 7.5%
- ---------------------------------------------------------------------------------------------------------------------
Total U.S. Government Agency Issues --
Variable Rate (Cost $24,988,525) 24,988,525
- ---------------------------------------------------------------------------------------------------------------------
Yankee 1,000,000 Canadian Imperial Bank of
Certificates of Commerce, NY .......................... 5.71 06/23/99 1,004,809
Deposit -- 0.3%
- ---------------------------------------------------------------------------------------------------------------------
Total Yankee Certificates of
Deposit (Cost $999,632) ............... 1,004,809
- ---------------------------------------------------------------------------------------------------------------------
Yankee 5,000,000 Bank of Montreal (Chicago) ............ 5.07 07/15/99 4,998,289
Certificates of
Deposit --
Variable
Rate -- 1.5%
- ---------------------------------------------------------------------------------------------------------------------
Total Yankee Certificates of
Deposit -- Variable Rate
(Cost $4,998,289) ..................... 4,998,289
- ---------------------------------------------------------------------------------------------------------------------
Time 10,000,000 Deutsche Bank AG, NY .................. 5.69 11/02/98 10,000,000
Deposits -- 7.5% 15,000,000 SunTrust Bank, Atlanta ................ 5.50 11/02/98 15,000,000
- ---------------------------------------------------------------------------------------------------------------------
Total Time Deposits
(Cost $25,000,000) .................... 25,000,000
- ---------------------------------------------------------------------------------------------------------------------
Bank 5,000,000 Bank One, Texas, National
Notes -- 1.5% Association .......................... 5.88 08/02/99 5,028,500
- ---------------------------------------------------------------------------------------------------------------------
Total Bank Notes
(Cost $5,006,250) ..................... 5,028,500
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
25
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Rated Institutional Fund
Schedule of Investments -- Continued
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Bank Notes -- $7,000,000 Bankers Trust Corp., NY ................. 5.40% 02/03/99 $7,000,193
Variable 10,000,000 First Union National Bank of North
Rate -- 5.1% Carolina ............................... 5.17 09/01/99 10,000,000
- ---------------------------------------------------------------------------------------------------------------------
Total Bank Notes -- Variable Rate
(Cost $17,000,193) ...................... 17,000,193
- ---------------------------------------------------------------------------------------------------------------------
Corporate 1,000,000 Ford Credit Auto Owner Trust
Notes -- 0.6% 1998-C ................................ 5.67 06/15/99 1,000,000
1,000,000 General Motors Acceptance Corp. 6.05 10/04/99 1,007,410
- ---------------------------------------------------------------------------------------------------------------------
Total Corporate Notes
(Cost $2,004,981) ....................... 2,007,410
- ---------------------------------------------------------------------------------------------------------------------
Corporate 5,000,000 Abbey National Treasury Services
Notes -- PLC ................................... 5.10 07/15/99 4,997,433
Variable 1,500,000 Abbey National Treasury Services
Rate -- 19.2% PLC ................................... 5.25 10/29/99 1,500,000
1,500,000 Abbey National Treasury Services
PLC ................................... 5.25 11/01/99 1,500,000
15,000,000 CIT Group Holdings Inc. ................. 5.08 08/30/99 14,994,067
5,000,000 General Electric Capital Corp. .......... 5.59 09/03/99 4,999,000
1,000,000 General Motors Acceptance Corp. 5.60 08/26/99 998,510
10,000,000 General Motors Acceptance Corp. 5.22 10/08/99 9,985,340
2,000,000 Household Finance Corp. ................. 5.64 09/13/99 1,996,400
14,000,000 Liberty Lighthouse US Capital Co.,
LLC ................................... 5.30 10/08/99 13,974,800
5,000,000 Pepsico Inc. ............................ 5.50 08/19/99 4,991,500
1,000,000 Racers 1998-MM-7-1 ...................... 5.40 08/13/99 1,000,000
2,700,000 Xerox Capital (Europe) PLC .............. 5.58 08/20/99 2,696,490
- ---------------------------------------------------------------------------------------------------------------------
Total Corporate Notes -- Variable Rate
(Cost $63,669,915) ...................... 63,633,540
- ---------------------------------------------------------------------------------------------------------------------
Master Notes -- 1,000,000 John Hancock Mutual Life
Variable Insurance Co. .......................... 5.38 07/30/99 1,000,000
Rate -- 0.3%
- ---------------------------------------------------------------------------------------------------------------------
Total Master Notes -- Variable Rate
(Cost $1,000,000) ....................... 1,000,000
- ---------------------------------------------------------------------------------------------------------------------
Commercial 2,280,000 Allomon Funding Corp. ................... 5.52 11/05/98 2,278,602
Paper -- 48.0% 15,000,000 Apreco Inc. ............................. 5.80 11/02/98 14,997,583
15,000,000 Associates Corp. of North America 5.70 11/02/98 14,997,625
6,000,000 Atlantis One Funding Corp. .............. 5.35 01/15/99 5,932,500
</TABLE>
See Notes to Financial Statements.
26
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Rated Institutional Fund
Schedule of Investments -- Continued
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial $10,000,000 Concord Minutemen Capital Co. LLC 5.51% 11/13/98 $ 9,981,633
Paper 10,000,000 First Data Corp. ........................... 5.75 11/02/98 9,998,403
(continued) 5,000,000 General Electric Capital Corp. ............. 5.48 03/02/99 4,914,292
15,000,000 Greyhawk Capital Corp. ..................... 5.48 02/26/99 14,746,500
6,000,000 Knight-Ridder Inc. ......................... 5.54 11/13/98 5,988,920
5,000,000 Lehman Brothers Holdings Inc. .............. 5.50 02/25/99 4,916,222
3,000,000 Lehman Brothers Holdings Inc. .............. 5.42 02/25/99 2,949,733
15,000,000 Lexington Parker Capital
Company LLC .............................. 5.35 01/25/99 14,808,750
14,000,000 Old Line Funding Corp. ..................... 5.44 11/20/98 13,959,804
12,261,000 Park Avenue Receivables Corp. .............. 5.47 11/16/98 12,233,055
14,000,000 Prudential Funding Corp. ................... 5.72 11/02/98 13,997,776
10,000,000 Variable Funding Capital Corp. ............. 5.75 11/02/98 9,998,403
3,007,000 Variable Funding Capital Corp. ............. 5.40 11/20/98 2,998,430
- ------------------------------------------------------------------------------------------------------------------------
Total Commercial Paper
(Cost $159,673,631) ........................ 159,698,231
- ------------------------------------------------------------------------------------------------------------------------
Repurchase 7,825,000 State Street Bank & Trust Company,
Agreements** purchased on 10/30/98 ..................... 5.25 11/02/98 7,825,000
- --2.4%
- ------------------------------------------------------------------------------------------------------------------------
Total Repurchase Agreements
(Cost $7,825,000) .......................... 7,825,000
- ------------------------------------------------------------------------------------------------------------------------
Total Investments -- 99.9%
(Cost $332,023,495) ........................ 332,072,623
- ------------------------------------------------------------------------------------------------------------------------
Other Assets Less
Liabilities -- 0.1% ........................ 401,972
- ------------------------------------------------------------------------------------------------------------------------
Net Assets -- Equivalent to $1.00
Per Share on 332,425,467 Shares
of Beneficial Interest Outstanding -- 100.0% $332,474,595
========================================================================================================================
</TABLE>
Note--Costs for federal income tax purposes are the same as those shown above.
At October 31, 1998, unrealized appreciation amounted to $49,128 and is
comprised of $87,899 of appreciation and $38,771 in depreciation.
*Commercial Paper and some U.S. Government and Agency Issues are traded on a
discount basis; the interest rate shown is the discount rate paid at the time
of the purchase by the Fund. Other securities bear interest at the rates
shown, payable at fixed dates or upon maturity; the rates shown are the rates
in effect at October 31, 1998. For variable rate instruments, the next date on
which the interest rate is to be adjusted is deemed the maturity date for
valuation.
**Repurchase Agreements are fully collateralized by U.S. Government and Agency
Obligations.
D/N--Discount Notes
See Notes to Financial Statements.
27
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Rated Institutional Fund
Statement of Assets and Liabilities
October 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Total investments at value (identified cost $332,023,495) (Note 1a) ................ $332,072,623
Cash ............................................................................... 994,522
Receivable for investments sold .................................................... 2,000,754
Interest receivable ................................................................ 975,290
Prepaid expense .................................................................... 12,088
------------
Total assets .................................................................... 336,055,277
------------
Liabilities:
Advisory fee payable (Note 2) ...................................................... 29,172
Payable for investments purchased .................................................. 3,497,102
Dividends payable .................................................................. 37,398
Accrued expenses ................................................................... 17,010
------------
Total liabilities ............................................................... 3,580,682
------------
Net Assets: (Equivalent to $1.00 per share, offering and redemption price, based
on 332,425,467 shares of beneficial interest outstanding) ......................... $332,474,595
============
</TABLE>
- --------------------------------------------------------------------------------
Merrill Lynch Rated Institutional Fund
Statement of Operations
For the Period June 15, 1998 (Commencement of Operations) to October 31, 1998
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income:
Interest and discount earned (Note 1d) ............................. $4,869,864
----------
Expenses:
Investment advisory fee (Note 2) ....................... $ 174,587
Accounting and custodian services ...................... 27,875
Legal and audit fees ................................... 14,164
Dividend and transfer agency fees ...................... 8,598
Registration fees ...................................... 4,215
Trustees' fees (Note 5) ................................ 908
Insurance .............................................. 450
Miscellaneous .......................................... 5,905
---------
Total expense ..................................... 236,702
Waived investment advisory fee (Note 2) ................ (48,571) 188,131
--------- ----------
Net investment income ............................. 4,681,733
Realized and Unrealized Gain on Investments:
Net realized gain from investment transactions ......... 13,188
Net unrealized appreciation of investments ............. 49,128
---------
Net realized and unrealized gain from investments ............. 62,316
----------
Net Increase in Net Assets Resulting From Operations ............... $4,744,049
==========
</TABLE>
See Notes to Financial Statements.
28
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Rated Institutional Fund
Statement of Changes in Net Assets
For the Period June 15, 1998 (Commencement of Operations) to October 31, 1998
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Increase in Net Assets:
Operations:
Net investment income ........................................ $ 4,681,733
Net realized gain from investment transactions ............... 13,188
Net unrealized appreciation of investments ................... 49,128
------------
Net increase in net assets resulting from operations ......... 4,744,049
Total declared as dividends to shareholders (Note 4) ......... (4,694,921)
Capital share transactions (Note 3) .......................... 332,325,467
------------
Net increase in net assets ................................... 332,374,595
Net Assets:
Beginning of period (Note 3) ................................. 100,000
------------
End of period ................................................ $332,474,595
============
</TABLE>
- --------------------------------------------------------------------------------
Merrill Lynch Rated Institutional Fund
Financial Highlights
For the Period June 15, 1998 (Commencement of Operations) to October 31, 1998
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Net Asset Value, beginning of period .................................................. $ 1.00
Income from Investment Operations:
Net investment income ................................................................ .020
Less Distributions:
Dividends from net investment income ................................................. (.020)
--------
Net Asset Value, end of period ........................................................ $ 1.00
========
Total Return .......................................................................... 2.07%(2)
Ratios/Supplemental Data:
Net Assets, end of period (000) ...................................................... $332,475
Ratio of expenses to average net assets (before waiver) .............................. .27%(1)
Ratio of expenses to average net assets (after waiver) ............................... .21%(1)
Ratio of net investment income, including realized and unrealized gains and losses, to
average net assets (before waiver) .................................................. 5.37%(1)
Ratio of net investment income, including realized and unrealized gains and losses, to
average net assets (after waiver) ................................................... 5.43%(1)
</TABLE>
(1) On an annualized basis
(2) Cumulative total return
See Notes to Financial Statements.
29
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Government Fund
Schedule of Investments
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. $23,400,000 U.S. Treasury Bills .................... 3.87% 04/22/99 $22,934,353
Government & 25,000,000 Federal Farm Credit Banks .............. 5.65 01/04/99 25,020,000
Agency 20,250,000 Federal Home Loan Banks ................ 5.80 12/18/98 20,257,700
Issues -- 40.2% 7,000,000 Federal Home Loan Banks ................ 5.45 02/19/99 7,006,440
10,000,000 Federal Home Loan Banks ................ 5.56 03/25/99 10,016,000
50,000,000 Federal Home Loan Banks ................ 5.63 04/09/99 50,135,000
10,000,000 Federal Home Loan Banks ................ 5.72 05/06/99 10,038,500
25,000,000 Federal Home Loan Banks ................ 5.56 08/04/99 25,142,500
15,000,000 Federal Home Loan Banks ................ 5.56 09/18/00 15,008,400
10,000,000 Federal Home Loan Mortgage
Corp. ................................ 5.00 12/15/98 9,994,397
34,610,000 Federal National Mortgage Assoc. 5.12 01/22/99 34,611,384
10,000,000 Federal National Mortgage Assoc. 5.38 02/12/99 10,006,000
20,000,000 Federal National Mortgage Assoc. 5.52 03/26/99 20,038,600
8,000,000 Federal National Mortgage Assoc. 5.77 06/28/00 8,028,000
10,000,000 Federal National Mortgage Assoc. 4.89 10/13/00 9,990,000
21,110,000 Student Loan Marketing Assoc. .......... 5.40 02/10/99 21,123,933
12,000,000 Federal Farm Credit Banks D/N .......... 4.65 05/03/99 11,717,640
14,032,000 Federal Farm Credit Banks D/N .......... 5.27 06/11/99 13,633,959
10,000,000 Federal Farm Credit Banks D/N .......... 5.26 06/25/99 9,698,444
23,200,000 Federal Home Loan Banks D/N ............ 4.78 11/13/98 23,163,035
29,035,000 Federal Home Loan Banks D/N ............ 4.79 11/18/98 28,969,324
8,000,000 Federal Home Loan Banks D/N ............ 5.27 03/22/99 7,851,480
30,000,000 Federal Home Loan Banks D/N ............ 4.57 03/23/99 29,439,100
18,896,000 Federal Home Loan Banks D/N ............ 5.25 05/21/99 18,402,248
48,500,000 Federal Home Loan Mortgage
Corp. D/N ............................ 4.79 11/04/98 48,480,661
50,000,000 Federal Home Loan Mortgage
Corp. D/N ............................ 4.79 11/05/98 49,973,417
16,880,000 Federal Home Loan Mortgage
Corp. D/N ............................ 4.78 11/09/98 16,862,070
25,000,000 Federal Home Loan Mortgage
Corp. D/N ............................ 4.79 11/10/98 24,970,062
70,638,000 Federal Home Loan Mortgage
Corp. D/N ............................ 4.79 11/17/98 70,487,620
5,095,000 Federal Home Loan Mortgage
Corp. D/N ............................ 4.78 11/30/98 5,075,381
50,000,000 Federal Home Loan Mortgage
Corp. D/N ............................ 5.18 02/05/99 49,346,667
</TABLE>
See Notes to Financial Statements.
30
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Government Fund
Schedule of Investments -- Continued
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. $25,000,000 Federal Home Loan Mortgage
Government & Corp. D/N .......................... 5.15% 02/24/99 $ 24,608,680
Agency 35,000,000 Federal Home Loan Mortgage
Issues Corp. D/N .......................... 4.97 02/25/99 34,447,389
(continued) 15,000,000 Federal Home Loan Mortgage
Corp. D/N .......................... 4.85 03/26/99 14,713,625
9,200,000 Federal National Mortgage Assoc.
D/N ................................ 4.78 11/10/98 9,189,006
8,700,000 Federal National Mortgage Assoc.
D/N ................................ 4.78 11/12/98 8,687,293
50,000,000 Federal National Mortgage Assoc.
D/N ................................ 5.18 02/18/99 49,258,194
5,800,000 Federal National Mortgage Assoc.
D/N ................................ 5.28 03/04/99 5,706,069
25,000,000 Federal National Mortgage Assoc.
D/N ................................ 5.18 04/05/99 24,494,097
12,000,000 Federal National Mortgage Assoc.
D/N ................................ 5.27 06/01/99 11,674,933
5,000,000 Federal National Mortgage Assoc.
D/N ................................ 5.26 06/01/99 4,864,556
10,000,000 Federal National Mortgage Assoc.
D/N ................................ 5.24 08/04/99 9,658,067
30,000,000 Federal National Mortgage Assoc.
D/N ................................ 5.15 08/20/99 28,914,733
15,000,000 Federal National Mortgage Assoc.
D/N ................................ 5.13 08/20/99 14,457,367
25,000,000 International Bank for
Reconstruction & Development
D/N ................................ 4.78 11/19/98 24,940,250
50,000,000 International Bank for
Reconstruction & Development
D/N ................................ 4.78 11/20/98 49,873,861
14,955,000 International Bank for
Reconstruction & Development
D/N ................................ 4.79 11/23/98 14,911,223
- -----------------------------------------------------------------------------------------------------------------
Total U.S. Government & Agency Issues
(Cost $1,036,649,199) ................. 1,037,821,658
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
31
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Government Fund
Schedule of Investments -- Continued
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. $40,000,000 Federal Farm Credit Banks .............. 5.04% 01/14/99 $39,997,258
Government 75,000,000 Federal Farm Credit Banks .............. 4.97 08/19/99 74,964,960
Agency 20,000,000 Federal Farm Credit Banks .............. 5.29 07/24/00 20,078,858
Issues -- 50,000,000 Federal Home Loan Mortgage
Variable Corp. ................................ 5.02 01/26/99 49,991,836
Rate -- 25.0% 20,000,000 Federal National Mortgage Assoc. 4.56 03/03/99 19,996,992
100,000,000 Federal National Mortgage Assoc. 4.57 07/15/99 99,964,932
100,000,000 Federal National Mortgage Assoc. 5.00 07/28/99 99,938,093
25,000,000 Federal National Mortgage Assoc. 4.99 07/30/99 24,985,422
54,800,000 Federal National Mortgage Assoc. 4.35 07/30/99 54,766,148
25,000,000 Federal National Mortgage Assoc. 4.64 08/19/99 24,985,350
100,000,000 Student Loan Marketing Assoc. .......... 5.19 09/15/99 99,931,429
25,000,000 Student Loan Marketing Assoc. .......... 4.57 01/12/00 24,994,491
10,000,000 Student Loan Marketing Assoc. .......... 4.62 02/04/00 9,996,975
- -------------------------------------------------------------------------------------------------------------------
Total U.S. Government Agency Issues
-- Variable Rate
(Cost $644,592,744) .................... 644,592,744
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
32
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Government Fund
Schedule of Investments -- Continued
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Repurchase $200,000,000 Barclays Capital Inc., purchased
Agreements** on 10/30/98 ..................... 5.58% 11/02/98 $ 200,000,000
--34.3% 260,000,000 HSBC Securities Inc., purchased
on 10/30/98 ..................... 5.58 11/02/98 260,000,000
240,000,000 Lehman Brothers Inc., purchased
on 10/30/98 ..................... 5.58 11/02/98 240,000,000
150,000,000 Salomon Smith Barney Inc.,
purchased on 10/30/98 ........... 5.58 11/02/98 150,000,000
33,167,000 State Street Bank & Trust Company,
purchased on 10/30/98 ........... 5.25 11/02/98 33,167,000
- ---------------------------------------------------------------------------------------------------------------------
Total Repurchase Agreements
(Cost $883,167,000) ............... 883,167,000
- ---------------------------------------------------------------------------------------------------------------------
Total Investments -- 99.5%
(Cost $2,564,408,943) ............. 2,565,581,402
- ---------------------------------------------------------------------------------------------------------------------
Other Assets
Less Liabilities -- 0.5% .......... 12,866,633
- ---------------------------------------------------------------------------------------------------------------------
Net Assets -- Equivalent to $1.00
Per Share on 2,577,275,576 Shares
of Beneficial Interest
Outstanding -- 100.0% ............. $2,578,448,035
=====================================================================================================================
</TABLE>
Note--Costs for federal income tax purposes are the same as those shown above.
At October 31, 1998, unrealized appreciation amounted to $1,172,459 and is
comprised of $1,232,684 of appreciation and $60,225 in depreciation.
*Repurchase Agreements bear interest payable at fixed dates or upon maturity.
U.S. Government and Agency Issues are purchased on a discount basis; the
interest rate shown is the discount paid at the time of purchase by the Fund.
Other U.S. Government and Agency Issues bear interest at the rates shown,
payable at fixed dates or upon maturity; the rates shown are the rates in
effect at October 31, 1998. For variable rate instruments, the next date on
which the interest rate is to be adjusted is deemed the maturity date for
valuation.
**Repurchase Agreements are fully collateralized by U.S. Government and Agency
Obligations.
D/N--Discount Notes
See Notes to Financial Statements.
33
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Government Fund
Statement of Assets and Liabilities
October 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities subject to repurchase agreements ............... $ 883,167,000
Investments in other marketable securities ............................... 1,682,414,402
-------------
Total investments at value (identified cost $2,564,408,943) (Note 1a) .................. $2,565,581,402
Cash ...................................................................................... 2,013,183
Receivable for investments sold ........................................................... 17,506,937
Interest receivable ....................................................................... 6,517,628
Prepaid expense ........................................................................... 9,203
--------------
Total assets ........................................................................... 2,591,628,353
--------------
Liabilities:
Advisory fee payable (Note 2) ............................................................. 448,941
Payable for investments purchased ......................................................... 11,717,900
Dividends payable ......................................................................... 746,576
Accrued expenses .......................................................................... 266,901
--------------
Total liabilities ...................................................................... 13,180,318
--------------
Net Assets: (Equivalent to $1.00 per share, offering and redemption
price, based on 2,577,275,576 shares of beneficial interest outstanding) ................. $2,578,448,035
==============
</TABLE>
- --------------------------------------------------------------------------------
Merrill Lynch Government Fund
Statement of Operations
For the Six Months Ended October 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income:
Interest and discount earned (Note 1d) ................................. $63,409,956
-----------
Expenses:
Investment advisory fee (Note 2) ....................... $ 3,636,483
Dividend and transfer agency fees ...................... 173,141
Registration fees ...................................... 172,397
Accounting and custodian services ...................... 87,981
Legal and audit fees ................................... 42,989
Printing and shareholder reports ....................... 13,761
Trustees' fees (Note 5) ................................ 11,847
Insurance .............................................. 4,751
Miscellaneous .......................................... 13,000
------------
Total expense ....................................... 4,156,350
Waived investment advisory fee (Note 2) ................ (1,342,389) 2,813,961
------------ -----------
Net investment income ............................................... 60,595,995
Realized and Unrealized Gain on Investments:
Net realized gain from investment transactions ......... 116,232
Net unrealized appreciation of investments ............. 1,374,357
------------
Net realized and unrealized gain from investments ................... 1,490,589
-----------
Net Increase in Net Assets Resulting From Operations ................... $62,086,584
===========
</TABLE>
See Notes to Financial Statements.
34
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Six Months Year
Merrill Lynch Government Fund Ended Ended
Statement of Changes in Net Assets (Unaudited) October 31, 1998 April 30, 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in Net Assets:
Operations:
Net investment income ........................................ $ 60,595,995 $ 105,733,741
Net realized gain from investment transactions ............... 116,232 113,052
Net unrealized appreciation of investments ................... 1,374,357 216,971
-------------- --------------
Net increase in net assets resulting from operations ......... 62,086,584 106,063,764
Total declared as dividends to shareholders (Note 4) ......... (60,712,227) (105,846,793)
Capital share transactions (Note 3) .......................... 462,481,249 96,976,511
-------------- --------------
Net increase in net assets ................................... 463,855,606 97,193,482
Net Assets:
Beginning of period .......................................... 2,114,592,429 2,017,398,947
-------------- --------------
End of period ................................................ $2,578,448,035 $2,114,592,429
============== ==============
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Six Months
Merrill Lynch Government Fund Ended
Financial Highlights October 31,
(Unaudited) 1998
- --------------------------------------------------------------------------------
<S> <C>
Net Asset Value, beginning of period .......... $ 1.00
Income from Investment Operations:
Net investment income ........................ .027
Less Distributions:
Dividends from net investment income ......... (.027)
-------
Net Asset Value, end of period ................ $ 1.00
=======
Total Return .................................. 2.70%(2)
Ratios/Supplemental Data:
Net Assets, end of period (000) ............ $2,578,448
Ratio of expenses to average net assets
(before waiver) ............................. .36%(1)
Ratio of expenses to average net assets
(after waiver) .............................. .24%(1)
Ratio of net investment income, to
average net assets (before waiver) .......... 5.29%(1)
Ratio of net investment income, to
average net assets (after waiver) ........... 5.41%(1)
<CAPTION>
Year Ended April 30,
------------------------------------------------------------------
1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income ........................ .053 .052 .055 .049 .030
Less Distributions:
Dividends from net investment income ......... (.053) (.052) ( .055) ( .049) (.030)
------ ------ ------ ------ ------
Net Asset Value, end of period ................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total Return .................................. 5.48% 5.31% 5.67% 4.99% 3.06%
Ratios/Supplemental Data:
Net Assets, end of period (000) .............. $2,114,592 $2,017,399 $1,643,625 $1,601,085 $1,533,478
Ratio of expenses to average net assets
(before waiver) ............................. .37% .38% .38% .37% .38%
Ratio of expenses to average net assets
(after waiver) .............................. .25% .26% .26% .24% .32%
Ratio of net investment income, to
average net assets (before waiver) .......... 5.24% 5.07% 5.37% 4.82% 2.83%
Ratio of net investment income, to
average net assets (after waiver) ........... 5.36% 5.19% 5.49% 4.95% 2.89%
</TABLE>
(1) On an annualized basis
(2) Cumulative total return
See Notes to Financial Statements.
35
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Treasury Fund
Schedule of Investments
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. $ 26,900,000 U.S. Treasury Bills ......... 4.98% 11/05/98 $ 26,885,115
Government 10,099,000 U.S. Treasury Bills ......... 4.97 11/05/98 10,093,429
Issues -- 98.6% 4,000,000 U.S. Treasury Bills ......... 4.98 11/19/98 3,990,040
870,000 U.S. Treasury Bills ......... 4.97 11/19/98 867,838
5,151,000 U.S. Treasury Bills ......... 4.95 11/19/98 5,138,264
19,099,000 U.S. Treasury Bills ......... 4.92 11/27/98 19,031,135
7,448,000 U.S. Treasury Bills ......... 5.07 12/03/98 7,414,434
834,000 U.S. Treasury Bills ......... 5.06 12/03/98 830,249
9,500,000 U.S. Treasury Bills ......... 5.15 12/10/98 9,446,998
27,525,000 U.S. Treasury Bills ......... 4.94 12/10/98 27,377,695
4,307,000 U.S. Treasury Bills ......... 4.95 12/10/98 4,283,927
44,669,000 U.S. Treasury Bills ......... 4.35 12/10/98 44,458,497
173,000 U.S. Treasury Bills ......... 5.01 01/07/99 171,683
30,458,000 U.S. Treasury Bills ......... 4.36 01/07/99 30,226,155
2,782,000 U.S. Treasury Bills ......... 4.41 01/07/99 2,760,824
3,008,000 U.S. Treasury Bills ......... 4.22 01/07/99 2,985,103
25,000,000 U.S. Treasury Bills ......... 4.39 01/14/99 24,785,708
2,175,000 U.S. Treasury Bills ......... 4.02 01/14/99 2,156,357
10,000,000 U.S. Treasury Bills ......... 5.02 01/28/99 9,896,356
2,041,000 U.S. Treasury Bills ......... 4.05 01/28/99 2,019,846
30,000,000 U.S. Treasury Bills ......... 4.18 01/28/99 29,689,067
8,915,000 U.S. Treasury Bills ......... 4.15 01/28/99 8,822,601
9,000,000 U.S. Treasury Bills ......... 4.30 02/04/99 8,896,925
10,871,000 U.S. Treasury Bills ......... 4.20 02/04/99 10,746,497
7,000,000 U.S. Treasury Bills ......... 4.21 02/04/99 6,919,831
15,000,000 U.S. Treasury Bills ......... 4.10 04/15/99 14,712,625
77,000,000 U.S. Treasury Notes ......... 4.75 10/31/98 77,000,000
114,200,000 U.S. Treasury Notes ......... 5.50 11/15/98 114,221,730
37,000,000 U.S. Treasury Notes ......... 8.88 11/15/98 37,058,064
78,380,000 U.S. Treasury Notes ......... 5.13 11/30/98 78,376,491
15,000,000 U.S. Treasury Notes ......... 5.13 12/31/98 15,015,234
20,000,000 U.S. Treasury Notes ......... 5.75 12/31/98 20,065,626
</TABLE>
See Notes to Financial Statements.
36
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Treasury Fund
Schedule of Investments -- Continued
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. $45,000,000 U.S. Treasury Notes ................. 6.38% 01/15/99 $ 45,186,327
Government 29,000,000 U.S. Treasury Notes ................. 5.00 02/15/99 29,031,721
Issues 56,794,000 U.S. Treasury Notes ................. 5.50 02/28/99 56,958,169
(continued) 9,700,000 U.S. Treasury Notes ................. 6.25 03/31/99 9,769,719
- --------------------------------------------------------------------------------------------------------
Total Investments -- 98.6%
(Cost $797,174,992) ................. 797,290,280
- --------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.4% 10,973,525
- --------------------------------------------------------------------------------------------------------
Net Assets -- Equivalent to $1.00
Per Share on 808,148,517 Shares
of Beneficial Interest
Outstanding -- 100.0% ............... $808,263,805
========================================================================================================
</TABLE>
Note--Costs for federal income tax purposes are the same as those shown above.
At October 31, 1998, net unrealized appreciation amounted to $115,287 and is
comprised of $185,661 in appreciation and $70,374 in depreciation.
*U.S. Treasury Bills are purchased on a discount basis; the interest rate shown
is the discount paid at the time of purchase by the Fund. U.S. Treasury Notes
bear interest payable at fixed dates or upon maturity.
See Notes to Financial Statements.
37
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Treasury Fund
Statement of Assets and Liabilities
October 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Total investments at value (identified cost $797,174,992) (Note 1a) ................ $797,290,280
Cash ............................................................................... 941,587
Interest receivable ................................................................ 10,299,392
Prepaid expense .................................................................... 3,107
------------
Total assets .................................................................... 808,534,366
------------
Liabilities:
Advisory fee payable (Note 2) ...................................................... 131,358
Accrued expenses ................................................................... 97,895
Dividends payable .................................................................. 41,308
------------
Total liabilities ............................................................... 270,561
------------
Net Assets: (Equivalent to $1.00 per share, offering and redemption price, based
on 808,148,517 shares of beneficial interest outstanding) ......................... $808,263,805
============
</TABLE>
- --------------------------------------------------------------------------------
Merrill Lynch Treasury Fund
Statement of Operations
For the Six Months Ended October 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income:
Interest and discount earned (Note 1d) ............................... $18,388,895
-----------
Expenses:
Investment advisory fee (Note 2) ....................... $1,235,616
Registration fees ...................................... 80,609
Dividend and transfer agency fees ...................... 51,039
Accounting and custodian services ...................... 45,278
Legal and audit fees ................................... 9,684
Printing and shareholder reports ....................... 4,866
Trustees' fees (Note 5) ................................ 4,169
Insurance .............................................. 1,717
Miscellaneous .......................................... 3,500
----------
Total expense ....................................... 1,436,478
Waived investment advisory fee (Note 2) ................ (520,268) 916,210
---------- -----------
Net investment income ............................... 17,472,685
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain from investment transactions ......... 250,115
Net unrealized depreciation of investments ............. (824,538)
----------
Net realized and unrealized loss from investments ................. (574,423)
-----------
Net Increase in Net Assets Resulting From Operations ................. $16,898,262
===========
</TABLE>
See Notes to Financial Statements.
38
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Merrill Lynch Treasury Fund Six Months Year
Statements of Changes in Net Assets (Unaudited) Ended Ended
October 31, 1998 April 30, 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in Net Assets:
Operations:
Net investment income ............................................. $ 17,472,685 $ 33,442,403
Net realized gain from investment transactions .................... 250,115 384,816
Net unrealized appreciation (depreciation) of investments ......... (824,538) 886,152
------------- -------------
Net increase in net assets resulting from operations .............. 16,898,262 34,713,371
Total declared as dividends to shareholders (Note 4) .............. (17,722,800) (33,827,219)
Capital share transactions (Note 3) ............................... 49,891,485 146,466,848
------------- -------------
Net increase in net assets ........................................ 49,066,947 147,353,000
Net Assets:
Beginning of period ............................................... 759,196,858 611,843,858
------------- -------------
End of period ..................................................... $ 808,263,805 $ 759,196,858
============= =============
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Six Months
Merrill Lynch Treasury Fund Ended
Financial Highlights October 31,
(Unaudited) 1998
- --------------------------------------------------------------------------
<S> <C>
Net Asset Value, beginning of period .................. $ 1.00
Income from Investment Operations:
Net investment income ................................ .025
Less Distributions:
Dividends from net investment income ................. (.025)
-------
Net Asset Value, end of period ........................ $1.00
=======
Total Return .......................................... 2.53%(2)
Ratios/Supplemental Data:
Net Assets, end of period (000) ...................... $808,264
Ratio of expenses to average net assets
(before waiver) ..................................... .40%(1)
Ratio of expenses to average net assets
(after waiver) ...................................... .25%(1)
Ratio of net investment income, including realized
and unrealized gains and losses, to average net
assets (before waiver) .............................. 4.57%(1)
Ratio of net investment income, including realized
and unrealized gains and losses, to average net
assets (after waiver) ............................... 4.72%(1)
<CAPTION>
Year Ended April 30,
----------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period .................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income ................................ .051 .049 .052 .045 .027
Less Distributions:
Dividends from net investment income ................. (.051) (.049) (.052) (.045) (.027)
-------- -------- -------- -------- --------
Net Asset Value, end of period ........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return .......................................... 5.24% 5.08% 5.37% 4.68% 2.82%
Ratios/Supplemental Data:
Net Assets, end of period (000) ...................... $759,197 $611,844 $514,123 $342,844 $266,953
Ratio of expenses to average net assets
(before waiver) ..................................... .41% .42% .41% .44% .45%
Ratio of expenses to average net assets
(after waiver) ...................................... .26% .27% .26% .29% .39%
Ratio of net investment income, including realized
and unrealized gains and losses, to average net
assets (before waiver) .............................. 5.11% 4.85% 5.09% 4.58% 2.67%
Ratio of net investment income, including realized
and unrealized gains and losses, to average net
assets (after waiver) ............................... 5.26% 5.00% 5.24% 4.73% 2.73%
</TABLE>
(1) On an annualized basis
(2) Cumulative total return
See Notes to Financial Statements.
39
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Schedule of Investments
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Value
Face Amount Issue (Note 1a)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Arizona -- $13,000,000 Maricopa County, Arizona PCR (El Paso Electric Co.
1.1% Project) VRDN 3.20% due 07/01/2014 (a) ....................... $13,000,000
11,100,000 Salt River Project of Arizona, Agricultural Improvement &
Electrical Systems Revenue CP 3.45% due 12/15/1998 ........... 11,100,000
- -----------------------------------------------------------------------------------------------------------------
California -- 4,500,000 San Francisco, California City & County Airports
0.2% Commission Revenue (Series A-48) DDN 4.00%
due 05/01/2029 (a) ........................................... 4,500,000
- -----------------------------------------------------------------------------------------------------------------
Colorado -- 11,695,000 Denver, Colorado City & County Airport Revenue
1.4% (Municipal Securities Trust Receipts--SGA 18) VRDN
3.27% due 11/15/2025 (a) ..................................... 11,695,000
11,300,000 Fort Morgan, Colorado Waterworks & Distribution
Enterprise Water Revenue VRDN 3.25%
due 12/01/2017 (a) ........................................... 11,300,000
6,000,000 Montrose, Colorado IDR (Scaled Manufacturing Inc.)
VRDN 3.35% due 12/01/2005 (a) ................................ 6,000,000
- -----------------------------------------------------------------------------------------------------------------
District of 15,000,000 District of Columbia (Municipal Securities Trust
Columbia -- Receipts--SGA 62) DDN 3.75% due 06/01/2017 (a) ............... 15,000,000
4.8% District of Columbia General Fund Recovery DDN:
38,800,000 (Series B-2) 3.75% due 06/01/2003 (a) .......................... 38,800,000
31,900,000 (Series B-3) 3.75% due 06/01/2003 (a) .......................... 31,900,000
16,000,000 District of Columbia Housing Finance Agency Mortgage
Revenue FXRDN 3.80% due 06/23/1999 ........................... 16,000,000
- -----------------------------------------------------------------------------------------------------------------
Florida -- 44,400,000 Capital Projects Finance Authority Revenue (Florida
5.4% Hospital Association) VRDN 3.25% due 06/01/2028 (a) .......... 44,400,000
9,900,000 Eagles Tax-Exempt Trust--Florida State Board of
Education FXRDN 3.70% due 02/19/1999 ......................... 9,900,000
11,500,000 Florida Local Government Finance Authority Revenue
(Pooled Loan Note-Series A) CP 3.40% due
12/10/1998 ................................................... 11,500,000
29,865,000 Florida State Board of Education Capital Outlay
(Municipal Securities Trust Receipts--SGA 67) DDN
3.75% due 06/01/2022 (a) ..................................... 29,865,000
2,900,000 Greater Orlando Aviation Authority Airport Facilities
Revenue (Orlando, Florida Airport--Series A-51) DDN
4.00% due 10/01/2023 (a) ..................................... 2,900,000
4,750,000 Lee County, Florida IDA Revenue (Raymond Building
Supply Corp.) VRDN 3.40% due 04/01/2017 (a) .................. 4,750,000
11,300,000 Miami and Dade County, Florida Special Obligation GO
(Series A-66) DDN 3.95% due 10/01/2037 (a) ................... 11,300,000
- -----------------------------------------------------------------------------------------------------------------
Georgia -- 6,860,000 Albany & Dougherty County, Georgia Hospital Authority
6.1% Revenue (Phoebe Putney Memorial Hospital) VRDN
3.25% due 09/01/2026 (a) ..................................... 6,860,000
</TABLE>
See Notes to Financial Statements.
40
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Schedule of Investments
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Value
Face Amount Issue (Note 1a)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Georgia $6,800,000 Atlanta, Georgia Urban Residential Finance Authority
(continued) M/F Revenue (The Park at Lakewood Project) VRDN
3.25% due 11/01/2022 (a) ................................... $6,800,000
5,400,000 Atlanta, Georgia Urban Residential Finance Authority
M/F Revenue (New Community East Lake Project)
VRDN 3.25% due 11/01/2028 (a) .............................. 5,400,000
7,250,000 Atlanta, Georgia Water & Sewer Revenue (Municipal
Securities Trust Receipts--SGA 57) VRDN 3.75% due
01/01/2020 (a) ............................................. 7,250,000
Burke County, Georgia Development Authority PCR
(Oglethorpe Power Corp.) CP:
35,000,000 3.60% due 11/12/1998 ......................................... 35,000,000
18,200,000 3.60% due 12/01/1998 ......................................... 18,200,000
1,000,000 Columbus, Georgia Development Authority IDR (Georgia
Packaging Inc.) VRDN 3.35% due 01/01/2012 (a) .............. 1,000,000
39,390,000 Eagles Tax-Exempt Trust--State of Georgia GO/FXRDN
3.70% due 01/26/1999 ....................................... 39,390,000
9,000,000 La Grange, Georgia Development Authority IDR (Reltec
Corp. Project) VRDN 3.25% due 12/01/2021 (a) ............... 9,000,000
- -------------------------------------------------------------------------------------------------------------
Idaho -- 3,755,000 Madison, Idaho Economic Development Corp. IDR
0.2% (Floyd Wilcox & Sons, Inc. Project) VRDN 3.40% due
08/01/2012 (a) ............................................. 3,755,000
- -------------------------------------------------------------------------------------------------------------
Illinois -- 2,700,000 Aurora, Illinois IDR (Aztech Engineering Inc. Project)
4.9% VRDN 3.45% due 10/01/2018 (a) .............................. 2,700,000
5,985,000 Chicago, Illinois Board of Education (BTP 238) FXRDN
3.30% due 02/23/1999 ....................................... 5,985,000
4,300,000 Chicago, Illinois IDR (Enterprise Center Project) VRDN
3.20% due 06/01/2022 (a) ................................... 4,300,000
6,700,000 Chicago, Illinois Solid Waste Disposal Facilities Revenue
(Groot Industries Inc.) VRDN 3.35% due 12/01/2015 (a) ...... 6,700,000
3,325,000 Des Plaines, Illinois IDR (East Golf Road LLC Project)
VRDN 3.40% due 05/01/2017 (a) .............................. 3,325,000
3,300,000 Elgin, Illinois IDR (Starro Precision Products Inc. Project)
VRDN 3.40% due 06/01/2025 (a) .............................. 3,300,000
2,200,000 Geneva, Illinois IDR (Continental Envelope Corp.
Project) VRDN 3.40% due 09/01/2006 (a) ..................... 2,200,000
8,000,000 Illinois Health Facilities Authority Revenue (Evanston
Hospital Corp. Project) CP 3.85% due 02/01/1999 ............ 8,000,000
4,000,000 Illinois Health Facilities Authority Revenue (Northwestern
Memorial Hospital) DDN 3.70% due 08/15/2025 (a) ............ 4,000,000
Illinois Housing Development Authority Revenue
(Homeowner Mortgage) FXRDN:
1,055,000 (Series B) 3.85% due 04/29/1999 .............................. 1,054,253
</TABLE>
See Notes to Financial Statements.
41
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Schedule of Investments -- Continued
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Value
Face Amount Issue (Note 1a)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Illinois $6,160,000 (Series B-2) 3.85% due 04/29/1999 .............................. $6,155,638
(continued) 5,000,000 Illinois Health Facilities Authority Revenue (Pekin
Memorial Hospital) VRDN 3.15% due 08/15/2017 (a) ............. 5,000,000
7,025,000 Illinois Health Facilities Authority Revenue (Riverside
Health Systems--Series B) VRDN 3.15% due
11/15/2016 (a) ............................................... 7,025,000
10,000,000 Illinois Health Facilities Authority Revenue (Friendship
Village of Schaumburg--Series B) VRDN 3.40% due
12/01/2020 (a) ............................................... 10,000,000
2,000,000 Illinois State Development Finance Authority IDR
(CPR/ Downers Grove Partnership) VRDN 3.68% due
12/01/2005 (a) ............................................... 2,000,000
1,700,000 Illinois State Development Finance Authority IDR (Revcor
Inc. Project) VRDN 3.20% due 06/01/2008 (a) .................. 1,700,000
3,245,000 Illinois State Development Finance Authority IDR
(Rockford College Project) VRDN 3.30% due
02/01/2001 (a) ............................................... 3,245,000
3,500,000 Illinois State Development Finance Authority IDR (Design
Automotive LLC Project) VRDN 3.40% due
06/01/2011 (a) ............................................... 3,500,000
2,500,000 Illinois State Educational Facilities Authority Revenue (Art
Institute of Chicago) VRDN 3.15% due 03/01/2027 (a) .......... 2,500,000
10,410,000 Metropolitan Pier & Exposition Authority State Tax
Revenue (Series A-69) DDN 3.95% due
06/15/2029 (a) ............................................... 10,410,000
2,570,000 Peoria, Illinois IDR (CDC Realty L.P. Project) VRDN
3.25% due 12/01/2014 (a) ..................................... 2,570,000
4,000,000 Upper Illinois River Valley Authority, Solid Waste
Disposal Revenue (Exolon-Esk Co. Project) VRDN
3.30% due 12/01/2021 (a) ..................................... 4,000,000
2,800,000 Wheeling, Illinois IDR (Circuit Services Inc. Project)
VRDN 3.25% due 04/01/2018 (a) ................................ 2,800,000
- --------------------------------------------------------------------------------------------------------------
Indiana -- 6,580,000 Anderson, Indiana EDR (Applecreek Commons L.P.
2.9% Project) VRDN 3.25% due 12/01/2027 (a) ....................... 6,580,000
2,805,000 Bloomington, Indiana EDR (Bloomington Square Project)
VRDN 3.15% due 12/01/2008 (a) ................................ 2,805,000
2,500,000 Connersville, Indiana EDR (Inland Southern Corp.
Project) VRDN 3.30% due 02/01/2012 (a) ....................... 2,500,000
2,500,000 Crawfordsville, Indiana EDR (Performance Master LLC
Project) VRDN 3.38% due 10/01/2018 (a) ....................... 2,500,000
4,555,000 Elkhart County, Indiana EDR (Patriot Homes Inc. Project)
VRDN 3.40% due 08/01/2012 (a) ................................ 4,555,000
3,000,000 Greencastle, Indiana IDR (Crown Equipment Corp.
Project) VRDN 3.30% due 02/01/2011 (a) ....................... 3,000,000
</TABLE>
See Notes to Financial Statements.
42
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Schedule of Investments -- Continued
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Value
Face Amount Issue (Note 1a)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Indiana $ 740,000 Greendale, Indiana EDR (Pripak Inc. Project) VRDN
(continued) 3.30% due 12/01/2003 (a) ............................. $ 740,000
2,490,000 Indiana State Development Finance Authority EDR
(Hart Housing Group Inc. Project) VRDN 3.40% due
06/01/2011 (a) ....................................... 2,490,000
3,300,000 Indiana State Development Finance Authority EDR
(Haulin Trailers Project) VRDN 3.45% due
12/01/2017 (a) ....................................... 3,300,000
1,960,000 Indiana State Development Finance Authority IDR
(Centurion Industries Inc. Project) VRDN 3.30% due
10/01/2005 (a) ....................................... 1,960,000
4,745,000 Indiana State Educational Facilities Authority Revenue
(Wesleyan University Project) VRDN 3.15% due
12/01/2015 (a) ....................................... 4,745,000
5,000,000 Indiana State Health Facilities Financing Authority
Revenue (Hartsfield Village Project) VRDN 3.15% due
08/15/2027 (a) ....................................... 5,000,000
2,000,000 Muncie, Indiana IDR (Diamond Plastics Corp. Project)
VRDN 3.30% due 10/01/2006 (a) ........................ 2,000,000
1,630,000 New Castle, Indiana EDR (Barden Homes Indiana Inc.)
VRDN 3.25% due 08/01/2010 (a) ........................ 1,630,000
12,100,000 Princeton, Indiana PCR (PSI Energy Inc. Project) DDN
3.75% due 04/01/2022 (a) ............................. 12,100,000
2,330,000 Saint Joseph County, Indiana Hospital Authority
(Madison Center Inc. Project) VRDN 3.25% due
03/04/2015 (a) ....................................... 2,330,000
2,000,000 Westfield, Indiana IDR (Standard Locknut Inc. Project)
VRDN 3.25% due 02/01/2002 (a) ........................ 2,000,000
- -------------------------------------------------------------------------------------------------------
Iowa -- 8,300,000 Iowa State Financial Authority Solid Waste Disposal
0.4% Revenue (Cedar River Paper Co. Project) DDN 3.85%
due 02/01/2032 (a) ................................... 8,300,000
- -------------------------------------------------------------------------------------------------------
Kansas -- 42,000,000 Butler County, Kansas Solid Waste Disposal &
2.0% Cogeneration Revenue (Texaco Refining & Marketing)
DDN 3.85% due 08/01/2024 (a) ......................... 42,000,000
1,150,000 Spring Hill, Kansas IDR (Abrasive Engineering Project)
VRDN 3.20% due 10/01/2016 (a) ........................ 1,150,000
- -------------------------------------------------------------------------------------------------------
Kentucky -- 6,000,000 Daviess County, Kentucky Solid Waste Disposal
5.9% Facilities Revenue (Scott Paper Co. Project) DDN
3.80% due 12/01/2023 (a) ............................. 6,000,000
2,810,000 Elva New Harmony--Oak Level Fire Protection District
(Series A-1) VRDN 3.25% due 12/01/2031 (a) ........... 2,810,000
3,500,000 Graves County, Kentucky IDR (Seaboard Farms Kentucky
Inc. Project) VRDN 3.25% due 12/01/2012 (a) .......... 3,500,000
</TABLE>
See Notes to Financial Statements.
43
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Schedule of Investments -- Continued
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Value
Face Amount Issue (Note 1a)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Kentucky $2,405,000 Harvey Brewers Fire Protection District (Lease Revenue--
(continued) Series G-1) VRDN 3.25% due 12/01/2031 (a) ............. $2,405,000
Jefferson County, Kentucky Industrial Building Revenue
(Thomas Development Project) VRDN:
1,700,000 3.30% due 04/10/2010 (a) ................................ 1,700,000
1,050,000 3.30% due 10/01/2011 (a) ................................ 1,050,000
Kentucky Area Development Districts Financing Trust
Lease Program Revenue (Calloway County Fire
District) VRDN:
3,075,000 (Series D-1) 3.25% due 12/01/2031 (a) ................... 3,075,000
490,000 (Series D-2) 3.25% due 12/01/2031 (a) ................... 490,000
3,410,000 (Series E-1) 3.25% due 12/01/2031 (a) ................... 3,410,000
3,810,000 (Series F-1) 3.25% due 12/01/2031 (a) ................... 3,810,000
490,000 (Series F-2) 3.25% due 12/01/2031 (a) ................... 490,000
Kentucky Area Development Districts Financing Trust
Lease Program Revenue (Lyon County Fire District)
VRDN:
3,710,000 (Series G-1) 3.25% due 12/01/2031 (a) ................... 3,710,000
490,000 (Series G-2) 3.25% due 12/01/2031 (a) ................... 490,000
3,195,000 (Series I-1) 3.25% due 12/01/2031 (a) ................... 3,195,000
490,000 (Series I-2) 3.25% due 12/01/2031 (a) ................... 490,000
4,200,000 Kentucky Area Development Districts Financing Trust
Lease Program Revenue (Symsonia County Fire
District--Series H-1) VRDN 3.25% due 12/01/2031 (a).... 4,200,000
18,850,000 Kentucky Economic Development Finance Authority
Revenue (Pooled Hospital Loan) VRDN 3.30% due
08/01/2018 (a) ........................................ 18,850,000
9,835,000 Kentucky Economic Development Finance Authority
Hospital Facilities Revenue (St. Elizabeth's Medical
Center Inc.) VRDN 3.25% due 05/01/2017 (a) ............ 9,835,000
19,700,000 Kentucky State Pollution Abatement and Water Resource
Finance Authority PCR (Toyota Motor) DDN 4.70%
due 08/13/2006 (a) .................................... 19,700,000
5,500,000 Middletown, Kentucky Revenue (Christian Academy
Project) VRDN 3.15% due 07/01/2022 (a) ................ 5,500,000
975,000 Muhlenberg County, Kentucky Airport District (Financing
Trust Lease Program Revenue--Series B-1) VRDN
3.25% due 12/01/2031 (a) .............................. 975,000
24,700,000 Ohio County, Kentucky PCR (Big Rivers Electric Corp.)
VRDN 3.25% due 10/01/2015 (a) ......................... 24,700,000
</TABLE>
See Notes to Financial Statements.
44
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Schedule of Investments -- Continued
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Value
Face Amount Issue (Note 1a)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Kentucky $3,500,000 Shelby County, Kentucky Industrial Building Revenue
(continued) (Truss Co. Inc./Kingbrook Project) VRDN 3.30% due
06/01/2018 (a) .......................................... $3,500,000
- --------------------------------------------------------------------------------------------------------------
Louisiana -- Calcasieu Parish Inc., Louisiana IDB Revenue (Citgo
2.4% Petroleum Corp. Project) DDN :
17,100,000 3.85% due 12/01/2024 (a) ................................... 17,100,000
6,500,000 3.85% due 03/01/2025 (a) ................................... 6,500,000
26,500,000 Louisiana Public Facilities Authority Hospital Revenue
(Series A-38) DDN 3.95% due 07/01/2025 (a) ............... 26,500,000
- --------------------------------------------------------------------------------------------------------------
Maine -- 11,600,000 Biddeford, Maine BAN 4.00% due 06/01/1999 .................. 11,612,936
1.2% 2,350,000 Gray, Maine Revenue (Advance Realty Project) VRDN
3.35% due 10/11/2011 (a) ................................. 2,350,000
1,580,000 Lewiston, Maine Revenue (Geiger Brothers Project)
VRDN 3.60% due 09/01/2004 (a) ............................ 1,580,000
3,865,000 Millinocket, Maine IDB Revenue (Gardner Chipmills
Project) VRDN 3.40% due 03/01/2005 (a) ................... 3,865,000
1,730,000 Saco, Maine IDR (First Light Technology Project) VRDN
3.40% due 04/01/2007 (a) ................................. 1,730,000
4,665,000 Topsham, Maine Revenue (Village Candle Inc.) VRDN
3.40% due 08/01/2013 (a) ................................. 4,665,000
- --------------------------------------------------------------------------------------------------------------
Maryland -- 1,300,000 Anne Arundel County, Maryland EDR (Atlas Container
0.7% Corp. Project) VRDN 3.35% due 04/01/2006 (a) ............. 1,300,000
10,000,000 Gaithersburg, Maryland EDR (Asbury Methodist) VRDN
3.15% due 07/01/2027 (a) ................................. 10,000,000
2,500,000 Maryland State Health & Higher Educational Facilities
Authority Revenue (Helix Health Hospital) VRDN
3.10% due 07/01/2026 (a) ................................. 2,500,000
- --------------------------------------------------------------------------------------------------------------
Massachusetts -- 11,035,000 Beverly, Massachusetts BAN 3.80% due 12/17/1998 ............ 11,037,719
6.0% 5,250,000 Boston, Massachusetts Revenue (Boston City Hospital--
Series A) VRDN 3.30% due 02/15/2021 (a) .................. 5,250,000
11,100,000 Central Berkshire Regional School District BAN 4.10%
due 12/15/1998 ........................................... 11,105,874
5,125,000 Clipper Tax-Exempt Trust VRDN 3.26% due
05/01/2007 (a) ........................................... 5,125,000
10,000,000 Fitchburg, Massachusetts BAN 3.90% due 02/26/1999 .......... 10,005,268
14,230,000 Massachusetts State GO (BTP 231) FXRDN 3.65% due
12/15/1998 ............................................... 14,230,000
9,900,000 Massachusetts State GO (BTP 259) FXRDN 3.30% due
02/01/1999 ............................................... 9,900,000
9,760,000 Massachusetts State (Series A-72) DDN 4.00% due
08/01/2010 (a) ........................................... 9,760,000
</TABLE>
See Notes to Financial Statements.
45
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Schedule of Investments -- Continued
October 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------------------------------------
Value
Face Amount Issue (Note 1a)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Massachusetts $1,200,000 Massachusetts State Health & Educational Facilities
(continued) Authority Revenue (Capital Asset Program--Series E)
DDN 3.70% due 01/01/2035 (a) ................................. $1,200,000
2,685,000 Massachusetts State Industrial Finance Agency IDR
(Hi-Tech Mold & Tool) VRDN 3.35% due 06/01/2018 (a) .......... 2,685,000
Springfield, Massachusetts BAN:
10,000,000 4.25% due 11/20/1998 ........................................... 10,002,005
4,600,000 4.00% due 09/02/1999 ........................................... 4,616,697
13,800,000 Triton, Massachusetts Regional School District BAN
4.00% due 04/16/1999 ......................................... 13,815,063
10,350,000 Whitman-Hanson Regional School District BAN 3.75%
due 10/15/1999 ............................................... 10,391,939
6,900,000 Worcester, Massachusetts Regional Transit Authority
RAN 3.90% due 06/18/1999 ....................................... 6,906,251
- --------------------------------------------------------------------------------------------------------------
Michigan -- 7,000,000 Dearborn, Michigan Economic Development Corp.
0.7% Revenue (Henry Ford Village Inc. Project) VRDN
3.45% due 10/01/2023 (a) ..................................... 7,000,000
8,100,000 University of Michigan Revenue (Series A-2) DDN 3.75%
due 12/01/2024 (a) ............................................. 8,100,000
- --------------------------------------------------------------------------------------------------------------
Mississippi -- Mississippi State Hospital Equipment & Facilities
1.6% Authority Revenue (North Mississippi Health Services) CP:
13,700,000 (Series 1) 3.65% due 11/10/1998 .............................. 13,700,000
20,000,000 (Series 1) 3.60% due 12/01/1998 .............................. 20,000,000
- --------------------------------------------------------------------------------------------------------------
Missouri -- 720,000 Jefferson County, Missouri IDA Revenue (Sinclair &
1.2% Rush Inc. Project) VRDN 3.25% due 11/01/2001 (a) ............. 720,000
2,475,000 Missouri State Development Finance Board IDR
(Filtration Group Inc.) VRDN 3.40%
due 03/01/2012 (a) ........................................... 2,475,000
18,000,000 Missouri State Health & Educational Facilities Authority
Revenue (Medical Research Facilities) VRDN 3.15%
due 04/01/2038 (a) ........................................... 18,000,000
1,705,000 Missouri State Housing Development Commission
Mortgage Revenue (Series C) FXRDN 3.90% due
04/01/1999 ................................................... 1,705,000
2,070,000 Sikeston, Missouri IDA Revenue (Heritage American
Homes LP/North Ridge Homes Inc. Project) VRDN
3.40% due 07/01/2009 (a) ..................................... 2,070,000
- --------------------------------------------------------------------------------------------------------------
Nevada -- 11,290,000 Eagles Tax-Exempt Trust--Clark County School District
0.5% FXRDN 3.70% due 02/12/1999 ................................... 11,290,000
- --------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
46
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Schedule of Investments -- Continued
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Value
Face Amount Issue (Note 1a)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
New Hampshire -- $2,400,000 New Hampshire State Business Finance Authority
1.0% Revenue (Hydra LLC Inc.) VRDN 3.35% due
11/01/2006 (a) ............................................$2,400,000
1,150,000 New Hampshire State Business Finance Authority
Revenue (Freed's Bakery Inc. Project) VRDN 3.40%
due 05/02/2011 (a) ........................................ 1,150,000
6,400,000 New Hampshire State Business Finance Authority
Revenue (Montgomery Wire Corp.) VRDN 3.30% due
02/01/2014 (a) ............................................ 6,400,000
7,415,000 New Hampshire State Business Finance Authority
Resource Recovery Revenue (Wheelabrator Inc.
Project--Series A) VRDN 3.10% due 01/01/2018 (a) .......... 7,415,000
4,700,000 New Hampshire State Business Finance Authority IDR
(Wiggins Airway Inc. Project) VRDN 3.50% due
06/01/2023 (a) ............................................ 4,700,000
- --------------------------------------------------------------------------------------------------------------
New Jersey -- 18,720,000 Jersey City, New Jersey GO 4.25% due 01/15/1999 ........... 18,731,996
1.8% 9,550,000 North Bergen Township GO 4.00% due 04/23/1999 ............. 9,555,613
10,000,000 Passaic County, New Jersey BAN 4.00% due
09/24/1999 ................................................ 10,041,504
- --------------------------------------------------------------------------------------------------------------
New York -- 15,250,000 Long Island Power Authority Electrical Systems Revenue
4.9% (Series A-68) DDN 3.95% due 12/01/2022 (a) ................15,250,000
10,000,000 Municipal Securities Trust (Triborough Boarding & Tunnel
Authority) FXRDN 3.75% due 11/04/1998 .....................10,000,000
16,450,000 New York City, New York CP 3.40% due 11/16/1998 ........... 16,450,000
4,800,000 New York City, New York (Subseries A-10) DDN 3.60%
due 08/01/2017 (a) ........................................ 4,800,000
5,705,000 New York, New York (Municipal Securities Trust
Receipts--SGA 63) DDN 3.75% due 02/15/2026 (a) ............ 5,705,000
10,100,000 New York City, New York Municipal Water Finance
Authority (Series 3) CP 3.40% due 11/16/1998 ..............10,100,000
31,000,000 New York City, New York Municipal Water Finance
Authority & Sewer Systems Revenue (Municipal
Securities Trust Receipts--SGB 26) DDN 3.70% due
06/15/2025 (a) ............................................31,000,000
10,000,000 New York State Thruway Authority Service Contract
Revenue (Series A-75) DDN 3.95% due
04/01/2013 (a) ........................................... 10,000,000
- --------------------------------------------------------------------------------------------------------------
Ohio -- 7,000,000 Akron, Ohio Metropolitan Housing Authority Facilities
7.8% Revenue (Administration Building Project) VRDN
3.20% due 04/01/2018 (a) .................................. 7,000,000
5,000,000 Cincinnati, Ohio City School District TAN 4.08% due
12/31/1998 ................................................ 5,003,815
</TABLE>
See Notes to Financial Statements.
47
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Schedule of Investments -- Continued
October 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Face Amount Issue (Note 1a)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ohio $14,575,000 Cleveland, Ohio City School District (BTP 245)
(continued) RAN/FXRDN 3.30% due 02/23/1999 (a) ...................... $14,575,000
3,500,000 Eagles Tax-Exempt Trust--Ohio Water Development
Authority (Ohio Edison) VRDN 3.21% due
07/01/2015 (a) .......................................... 3,500,000
15,000,000 Eagles Tax-Exempt Trust--Cleveland Water FXRDN
3.50% due 12/29/1998 .................................... 15,000,000
22,065,000 Eagles Tax-Exempt Trust--Ohio State Turnpike Revenue
FXRDN 3.50% due 12/29/1998 (a) .......................... 22,065,000
5,305,000 Franklin County, Ohio M/F Revenue (Community
Housing Network) VRDN 3.20% due 03/01/2027 (a) .......... 5,305,000
8,750,000 Hamilton County, Ohio Hospital Facilities Revenue
(Children's Hospital Medical Center) VRDN 3.13% due
05/15/2017 (a) .......................................... 8,750,000
5,000,000 Lorain County, Ohio Independent Living Facilities
Revenue (Elyria United Methodist Project) VRDN
3.20% due 06/01/2022 (a) ................................ 5,000,000
4,370,000 Lucas-Beacon Place Housing Development Corp. M/F
Revenue (Beacon Place Apartments Project) FXRDN
3.65% due 03/15/1999 .................................... 4,370,000
7,040,000 Mahoning County, Ohio Health Care Facilities Revenue
(Shepherd of the Valley Lutheran Home & Retirement
Center) VRDN 3.15% due 09/01/2020 (a) ................... 7,040,000
5,605,000 Mahoning County, Ohio Health Care Facilities Revenue
(Shepherds Woods Project) VRDN 3.20% due
09/01/2022 (a) .......................................... 5,605,000
3,280,000 Mentor, Ohio IDR (Risch Investments LTP/ Roll-Kraft Inc.
Project) VRDN 3.25% due 08/01/2017 (a) .................. 3,280,000
13,850,000 Middleburg Heights, Ohio Hospital Revenue (Southwest
General Health) VRDN 3.15% due 08/15/2022 (a) ........... 13,850,000
9,485,000 Municipal Securities Trust (Hamilton County Sales Tax--
Football Project) FXRDN 3.80% due 11/04/1998 ............ 9,485,000
Ohio State Air Quality Development Authority Revenue
(Cincinnati Gas & Electric) DDN:
9,000,000 (Series A) 3.70% due 12/01/2015 (a) ..................... 9,000,000
11,900,000 (Series B) 3.70% due 12/01/2015 (a) ..................... 11,900,000
4,000,000 Ohio State Solid Waste Revenue (BP Exploration & Oil
Project) DDN 3.80% due 02/01/2033 (a) ................... 4,000,000
4,170,000 Ottawa County, Ohio IDR (Adrian Sand & Stone Inc.
Project) VRDN 3.30% due 10/01/2008 (a) .................. 4,170,000
6,500,000 Willoughby, Ohio IDR (Kennedy Group Inc. Project) DDN
3.30% due 09/01/2018 (a) ................................ 6,500,000
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
48
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Schedule of Investments -- Continued
October 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Face Amount Issue (Note 1a)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Oklahoma $5,000,000 Muskogee, Oklahoma Industrial PCR (Oklahoma Gas &
0.2% Electric Co.) VRDN 3.20% due 01/01/2025 (a) ............ $5,000,000
- ------------------------------------------------------------------------------------------------------------
Pennsylvania -- 1,200,000 Allegheny County, Pennsylvania IDA Revenue (Parkway
4.2% Center Mall Project) VRDN 3.15% due 05/01/2009 (a)...... 1,200,000
24,660,000 Dauphin County, Pennsylvania General Authority
Revenue (School District Pooled Financing) VRDN
3.20% due 09/01/2032 (a) ............................... 24,660,000
16,575,000 Harrisburg, Pennsylvania Authority Revenue (Pooled
Financing Fund) VRDN 3.25% due 07/01/2021 (a) .......... 16,575,000
Montgomery County, Pennsylvania Higher Education &
Health Authority Revenue (Higher Education & Health
Loan) VRDN:
22,750,000 3.15% due 06/01/2021 (a) ............................... 22,750,000
4,800,000 3.15% due 08/01/2021 (a) ............................... 4,800,000
2,700,000 Montgomery County, Pennsylvania Higher Education &
Health Authority Revenue (Philadelphia Presbytery)
VRDN 3.15% due 07/01/2025 (a) .......................... 2,700,000
Pennsylvania State GO (Tender Option) FXRDN:
7,425,000 (BTP-86) 3.30% due 02/23/1999 .......................... 7,425,000
9,030,000 (BTP-235) 3.30% due 02/23/1999 ......................... 9,030,000
- ------------------------------------------------------------------------------------------------------------
Rhode Island -- 2,500,000 Rhode Island State Industrial Facilities Corporation IDR
0.4% (Capital Development Corp. Project) VRDN 3.50% due
11/01/2005 (a) ......................................... 2,500,000
5,425,000 Rhode Island State Resource Recovery Corp. (Landfill
Lease) GO 4.00% due 07/30/1999 ......................... 5,436,672
- ------------------------------------------------------------------------------------------------------------
South Carolina -- 7,370,000 South Carolina Economic Development Authority IDR
3.2% (Corematerials Corp. Project) VRDN 3.40% due
04/01/2013 (a) ......................................... 7,370,000
South Carolina State Public Service Authority Electrical
Systems Revenue (Santee Cooper) CP:
18,632,000 3.40% due 12/01/1998 ................................... 18,632,000
20,000,000 3.50% due 12/08/1998 ................................... 20,000,000
22,420,000 3.40% due 12/09/1998 ................................... 22,420,000
- ------------------------------------------------------------------------------------------------------------
Tennessee -- 24,500,000 Clarksville, Tennessee Public Building Authority Revenue
4.1% (Pooled Financing) VRDN 3.15% due 11/01/2027 (a) ....... 24,500,000
4,000,000 Coffee County, Tennessee Industrial Board Inc. IDR
(Hillsdale Tool & Manufacturing Co. Project) VRDN
3.30% due 06/01/2017 (a) ............................... 4,000,000
19,775,000 Johnson County, Tennessee (Municipal Securities
Trust--SGA 45) DDN 3.75% due 05/01/2021 (a) ............ 19,775,000
</TABLE>
See Notes to Financial Statements.
49
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Schedule of Investments -- Continued
October 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Face Amount Issue (Note 1a)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tennessee $9,500,000 Memphis & Shelby County, Tennessee Industrial Board
(continued) PCR (Birmingham Steel Corp. Project) VRDN 3.30%
due 10/01/2026 (a) ................................... $9,500,000
7,000,000 Montgomery County, Tennessee Public Building Authority
(Pooled Financing Revenue) VRDN 3.15% due
07/01/2015 (a) ....................................... 7,000,000
4,300,000 Nashville & Davidson County, Tennessee IDB Revenue
(Gibson Guitar Project) VRDN 3.35% due 03/01/2011 (a) 4,300,000
2,700,000 Nashville & Davidson County, Tennessee IDB Revenue
(Hickory M/F Housing Revenue) VRDN 3.20% due
06/01/2015 (a) ....................................... 2,700,000
15,000,000 Shelby County, Tennessee (Series 98-A) CP 3.40% due
12/01/1998 ........................................... 15,000,000
- ------------------------------------------------------------------------------------------------------------
Texas -- Gulf Coast IDA Solid Waste Disposal Revenue (Citgo
9.5% Petroleum Corp. Project) DDN:
11,500,000 3.85% due 05/01/2025 (a) ............................. 11,500,000
24,700,000 3.85% due 04/01/2026 (a) ............................. 24,700,000
24,900,000 3.85% due 04/01/2028 (a) ............................. 24,900,000
27,900,000 Harris County, Texas Health Facilities Development
Corp. Revenue (Methodist Hospital) DDN 3.70% due
12/01/2025 (a) ....................................... 27,900,000
4,000,000 Mesquite, Texas IDR (Morrison Products) VRDN 3.40%
due 01/10/2010 (a) ................................... 4,000,000
1,540,000 Montgomery County, Texas IDA Revenue (Sawyer
Research Products Inc.) VRDN 3.40% due
02/04/2015 (a) ....................................... 1,540,000
22,000,000 North Central Texas Health Services CP 3.30% due
11/06/1998 ........................................... 21,999,267
4,800,000 Port Corpus Christi, Texas IDC Sewer & Solid Waste
Disposal Revenue (Citgo Petroleum Corp. Project)
DDN 3.85% due 04/01/2026 (a) ......................... 4,800,000
9,115,000 San Antonio, Texas Water Revenue (Municipal Securities
Trust Receipts--SGA 42) VRDN 3.27% due
05/15/2026 (a) ....................................... 9,115,000
65,700,000 Texas State (Series A-55) DDN 3.95% due
08/31/1999 (a) ....................................... 65,700,000
5,135,000 Texas State GO 3.30% due 02/23/1999 .................. 5,135,000
- ------------------------------------------------------------------------------------------------------------
Utah -- 10,700,000 Emery County, Utah PCR (Pacificorp Projects) DDN
1.7% 3.70% due 11/01/2024 (a) ............................. 10,700,000
15,000,000 Intermountain Power Agency Power Supply Revenue
(Series F) CP 3.40% due 11/18/1998 ................... 15,000,000
10,000,000 Intermountain Power Agency Power Supply Revenue
(Series A-63) FXRDN 3.50% due 02/01/1999 ............. 10,000,000
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
50
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Schedule of Investments -- Continued
October 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Face Amount Issue (Note 1a)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Vermont -- $2,300,000 Vermont IDA Revenue (Burlington Project) VRDN 3.20%
0.1% due 12/01/2011 (a) ............................................ $2,300,000
- -----------------------------------------------------------------------------------------------------------------
Virginia -- 2,100,000 Brunswick County, Virginia IDA Exempt Facilities
0.8% Revenue (Aegis Waste Solutions Inc.) VRDN 3.30%
due 01/01/2017 (a) ............................................ 2,100,000
13,900,000 Norfolk, Virginia IDA Revenue (Sentara Hospital System
Group) CP 3.30% due 12/07/1998 ................................ 13,900,000
- -----------------------------------------------------------------------------------------------------------------
Washington -- 26,745,000 Eagles Tax-Exempt Trust--Port of Seattle FXRDN 3.30%
3.9% due 01/27/1999 ................................................ 26,745,000
14,680,000 Eagles Tax-Exempt Trust--State Public Power Supply
System FXRDN 3.70% due 02/19/1999 ............................. 14,680,000
10,000,000 King County, Washington CP 3.50% due 12/09/1998 ............... 10,000,000
6,200,000 King County, Washington (Municipal Securities Trust
Receipts--SGA 19) VRDN 3.27% due 01/01/2027 (a) ............... 6,200,000
3,000,000 Pierce County, Washington Housing Authority Revenue
(Eagles Watch Project) VRDN 3.15% due
09/01/2020 (a) ................................................ 3,000,000
20,500,000 Port of Seattle, Washington Passenger Facilities Charge
Revenue DDN 3.95% due 12/01/2023 (a) .......................... 20,500,000
- -----------------------------------------------------------------------------------------------------------------
West Virginia -- 4,475,000 Preston County, West Virginia IDR (Allegheny Wood
0.4% Products Inc. Project) VRDN 3.25% due 12/01/2007 (a) .......... 4,475,000
3,240,000 Randolph County, West Virginia IDR (Allegheny Wood
Products Inc. Project) VRDN 3.25% due 12/01/2007 (a) .......... 3,240,000
- -----------------------------------------------------------------------------------------------------------------
Wisconsin -- 1,360,000 Appleton, Wisconsin IDR (Valley Packaging Industries
2.1% Inc. Project) VRDN 3.15% due 02/01/2011 (a) ................... 1,360,000
3,900,000 Ashland, Wisconsin School District TRAN 3.60% due
08/27/1999 .................................................... 3,903,100
3,700,000 De Forest, Wisconsin Area School District TRAN 3.80%
due 09/17/1999 ................................................ 3,710,965
Deerfield, Wisconsin IDR (Interpane Coatings Project)
VRDN:
1,300,000 3.15% due 05/01/2003 (a) ...................................... 1,300,000
2,035,000 3.30% due 05/01/2003 (a) ...................................... 2,035,000
2,440,000 Milwaukee, Wisconsin Redevelopment Authority
Revenue (Jensar Corp. Project) VRDN 3.40% due
03/01/2007 (a) ................................................ 2,440,000
1,105,000 Oshkosh, Wisconsin IDR (Automatic Handling Inc.)
VRDN 3.30% due 06/01/2006 (a) ................................. 1,105,000
500,000 Plymouth, Wisconsin IDR (Great Lakes Cheese Inc.
Project) VRDN 3.25% due 08/01/2024 (a) ........................ 500,000
5,000,000 Sturtevant, Wisconsin IDR (Andis Co. Project-Series A)
VRDN 3.25% due 12/01/2016 (a) ................................. 5,000,000
</TABLE>
See Notes to Financial Statements.
51
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Schedule of Investments -- Continued
October 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Face Amount Issue (Note 1a)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Wisconsin $ 3,500,000 Tomah, Wisconsin School District TRAN 3.85% due
(continued) 09/21/1999 ................................................$ 3,511,998
2,000,000 Two Rivers, Wisconsin Public School District BAN
4.05% due 01/11/1999 ...................................... 2,000,385
3,750,000 Verona, Wisconsin Area School District TRAN 3.90%
due 08/26/1999 ............................................ 3,757,973
13,319,000 Wisconsin State Transportation Revenue (Series A) CP
3.60% due 11/19/1998 ...................................... 13,319,000
- ---------------------------------------------------------------------------------------------------------
Wyoming -- Laramie County, Wyoming IDR (Cheyenne Light Fuel &
1.6% Power Co.) VRDN:
3,500,000 3.30% due 09/01/2021 (a)................................... 3,500,000
5,000,000 3.30% due 03/01/2027 (a)................................... 5,000,000
24,200,000 Sweetwater County, Wyoming PCR (Idaho Power Co.
Project) (Series B) DDN 3.75% due 07/15/2026 (a) .......... 24,200,000
- ---------------------------------------------------------------------------------------------------------
Total Investments (Cost $2,052,542,931) -- 97.3% 2,052,542,931
- ---------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 2.7% ..................... 56,040,829
- ---------------------------------------------------------------------------------------------------------
Net Assets -- Equivalent to $1.00 Per Share on
2,108,707,270 Shares of Beneficial Interest
Outstanding -- 100.0% ..................................... $2,108,583,760
=========================================================================================================
</TABLE>
(a) The interest rate is subject to change periodically based on a certain
index. The rates shown are those in effect at October 31, 1998. For variable
rate demand instruments, the next coupon date on which the interest is to be
adjusted is deemed the maturity date for valuation.
Note--Cost for federal income tax purposes is the same as that shown above.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Portfolio Abbreviations for Merrill Lynch Institutional Tax-Exempt Fund
<S> <C> <C> <C> <C> <C>
BAN Bond Anticipation Notes GO General Obligation PCR Pollution Control Revenue
CP Commercial Paper IDA Industrial Development Authority RAN Revenue Anticipation Notes
DDN Daily Demand Notes IDB Industrial Development Board TAN Tax Anticipation Notes
EDR Economic Development Revenue IDC Industrial Development Corporation TRAN Tax and Revenue Anticipation Notes
FXRDN Fixed Rate Demand Notes IDR Industrial Development Revenue VRDN Variable Rate Demand Notes
M/F Multi-Family
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
52
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Statement of Assets and Liabilities
October 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at amortized cost and value (Note 1a) ................................ $2,052,542,931
Cash .............................................................................. 1,753,507
Receivable for investments sold ................................................... 41,539,597
Interest receivable ............................................................... 13,167,476
Prepaid expense ................................................................... 76,742
--------------
Total assets ................................................................... 2,109,080,253
--------------
Liabilities:
Advisory fee payable (Note 2) ..................................................... 354,522
Accrued expenses .................................................................. 70,987
Dividends payable ................................................................. 70,984
--------------
Total liabilities .............................................................. 496,493
--------------
Net Assets: (Equivalent to $1.00 per share, offering and redemption price, based on
2,108,707,270 shares of beneficial interest outstanding) ......................... $2,108,583,760
==============
</TABLE>
- --------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Statement of Operations
For the Six Months Ended October 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income:
Interest and discount earned (Note 1d) ................................ $35,813,345
-----------
Expenses:
Investment advisory fee (Note 2) ................ $ 4,393,366
Registration fees ............................... 206,798
Dividend and transfer agency fees ............... 110,942
Accounting and custodian services ............... 75,469
Legal and audit fees ............................ 24,934
Printing and shareholder reports ................ 11,539
Trustees' fees (Note 5) ......................... 9,513
Insurance ....................................... 4,179
Miscellaneous ................................... 7,000
------------
Total expense .............................. 4,843,740
Waived investment advisory fee (Note 2) ......... (2,413,140) 2,430,600
------------ -----------
Net investment income ............................................ 33,382,745
Net realized loss from investment transactions ........................ (327)
-----------
Net Increase in Net Assets Resulting From Operations .................. $33,382,418
===========
</TABLE>
See Notes to Financial Statements.
53
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Statements of Changes in Net Assets (Unaudited) Six Month Year
Ended Ended
October 31, 1998 April 30, 1998
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in Net Assets:
Operations:
Net investment income .................................................. $ 33,382,745 $ 54,181,204
Net realized loss from investment transactions ......................... (327) (15,572)
-------------- --------------
Net increase in net assets resulting from operations ................... 33,382,418 54,165,632
Total declared as dividends to shareholders (Note 4) ................... (33,376,506) (54,172,922)
Capital share transactions (Note 3) .................................... 304,136,239 800,793,413
-------------- --------------
Net increase in net assets ............................................. 304,142,151 800,786,123
Net Assets:
Beginning of period .................................................... 1,804,441,609 1,003,655,486
-------------- --------------
End of period, including undistributed net investment income of $140,840
and $134,601 and accumulated capital losses of $264,350 and $264,023
respectively (Note 1g and Note 4) ...................................... $2,108,583,760 $1,804,441,609
============== ==============
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Merrill Lynch Institutional Tax Exempt Fund
Financial Highlights
(Unaudited)
Six Months
Ended Year Ended April 30,
October 31, -------------------------------------------------------
1998 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
period ............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income .............. .02 .04 .03 .04 .03
Dividends from net investment
income ............................ (.02) (.04) (.03) (.04) (.03)
-------- --------- ---------- -------- --------
Net Asset Value, end of period ...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ========= ========== ======== ========
Total Return ........................ 1.71%(2) 3.59% 3.41% 3.68% 3.20%
Ratios/Supplemental Data:
Net Assets, end of period (000) $2,108,584 $1,804,442 $1,003,655 $667,205 $403,903
Ratio of expenses to average
net assets (before waiver) ........ .49%(1) .49% .52% .54% .56%
Ratio of expenses to average
net assets (after waiver) ......... .25%(1) .24% .27% .29% .31%
Ratio of net investment
income, to average net
assets (before waiver) ............ 3.13%(1) 3.28% 3.12% 3.35% 2.90%
Ratio of net investment
income, to average net
assets (after waiver) ............. 3.37%(1) 3.53% 3.37% 3.60% 3.15%
<CAPTION>
- --------------------------------------------------------------------------------
Five Months Year
Ended Ended
April 30, November 30,
1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, beginning of
period ............................. $ 1.00 $ 1.00
Net investment income .............. .01 .02
Dividends from net investment
income ............................ (.01) (.02)
-------- --------
Net Asset Value, end of period ...... $ 1.00 $ 1.00
======== ========
Total Return ........................ 2.14%(1) 2.14%
Ratios/Supplemental Data:
Net Assets, end of period (000) $390,375 $278,697
Ratio of expenses to average
net assets (before waiver) ........ .59%(1) .62%
Ratio of expenses to average
net assets (after waiver) ......... .34%(1) .45%
Ratio of net investment
income, to average net
assets (before waiver) ............ 1.92%(1) 1.96%
Ratio of net investment
income, to average net
assets (after waiver) ............. 2.17%(1) 2.13%
</TABLE>
(1) On an annualized basis
(2) Cumulative total return
See Notes to Financial Statements.
54
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Funds For Institutions Series
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Merrill Lynch Funds For Institutions Series (the "Trust") was organized as a
Massachusetts business trust on May 7, 1987, and is registered under the
Investment Company Act of 1940 as a diversified, open-end management company.
On June 15, 1998, the Merrill Lynch Rated Institutional Fund commenced
operations as a separate series of the Trust. On January 27, 1997, Merrill
Lynch Premier Institutional Fund commenced operations as a separate series of
the Trust. On February 18, 1994, Merrill Lynch Institutional Tax-Exempt Fund
was reorganized as a separate series of the Trust. The Trust has a fiscal year
end of April 30. The following is a summary of significant accounting policies
consistently followed by the Trust in conformity with generally accepted
accounting principles.
(a) The value of the Premier Institutional, Institutional, Rated
Institutional, Government and Treasury Fund portfolio securities is determined
on the basis of fair value as determined in good faith by the Trustees of the
Trust. In determining fair value, securities for which market quotations are
readily available are valued at market value. Other securities, if any, are
valued at their fair value in the best judgment of Fund Asset Management, L.P.,
("FAM") under procedures established by, and under the supervision of, the
Trustees. Securities with remaining maturities of 60 days or less are valued by
use of the amortized cost method. Institutional Tax-Exempt Fund's portfolio
securities are carried at amortized cost which approximates market value.
For the purpose of valuation, the maturity of a variable rate demand
instrument is deemed to be the next coupon date on which the interest rate is to
be adjusted. In the case of a floating rate instrument, the remaining maturity
is deemed to be the demand notice payment period.
(b) It is the Trust's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its taxable income to its shareholders. Therefore, no federal income tax
provision is required.
(c) Realized gains and losses on investments are computed on the basis of
identified cost of the security sold.
(d) Security transactions are accounted for on the date the securities are
purchased or sold (the trade date). Interest income (after adjustment for
amortization of premium or accretion of discount) is recorded as earned.
(e) Organizational costs are expensed as incurred. Prepaid registration fees
are charged to income as the related shares are sold.
(f) Repurchase agreements--The Premier Institutional Fund, the Institutional
Fund, Rated Institutional Fund and the Government Fund invest in U.S. Government
& Agency securities pursuant to repurchase agreements with member banks of the
Federal Reserve System or primary dealers in U.S. Government securities. Under
such agreements, the bank or primary dealer agrees to repurchase the security at
a mutually agreed upon time and price. The Trust takes possession of the
underlying securities, marks to market such securities daily and, if necessary,
receives additional securities to ensure that the contract is adequately
collateralized.
(g) During the year ended April 30, 1998, Merrill Lynch Institutional
Tax-Exempt Fund reclassified amounts to reflect a decrease of $8,254 in both
accumulated capital losses and undistributed net investment income as a result
of permanent differences arising from different treatments of market discount
for book and tax purposes.
2. Investment Advisory Fees and Other
Transactions with Affiliates
Fund Asset Management, L.P., a subsidiary of Merrill Lynch & Co., Inc.,
provides investment advisory and corporate administrative services to the Trust
for a fee, subject to certain limitations, at the following annual rates:
55
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Funds For Institutions Series
Notes to Financial Statements -- Continued (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Percentage of Average Daily Net Assets
------------------------------------------
Premier Institutional
Fund ....................... .15%
Institutional Fund ......... .40% up to and including $250,000,000
plus .375% over $250,000,000 up to and
including $500,000,000
plus .35% over $500,000,000 up to and
including $750,000,000
plus .325% over $750,000,000
Rated Institutional
Fund ....................... .20%
Government Fund
and Treasury Fund .......... .35% up to and including $500,000,000
plus .335% over $500,000,000 up to and
including $750,000,000
plus .32% over $750,000,000 up to and
including $1,000,000,000
plus .30% over $1,000,000,000
Institutional
Tax-Exempt Fund ............ .45% up to and including $1,500,000,000
plus .425% over $1,500,000,000 up to and
including $2,000,000,000
plus .40% over $2,000,000,000
</TABLE>
During its initial offering period, FAM has agreed to waive a portion of its
advisory fees for the Rated Institutional Fund. For the period ended October 31,
1998, the effective fee payable to FAM was 0.14% of the Fund's average daily
assets. FAM has agreed to waive a portion of its advisory fees for the
Institutional, Government, Treasury and Tax-Exempt Funds. The effective fee
payable to FAM will be at the annual rate of 0.20% of each Fund's average daily
net assets. FAM may discontinue waiver of the fee in whole or in part at any
time without notice.
For the period ended October 31, 1998, FAM waived a portion of its fees
amounting to $5,044,708 for the Institutional Fund, $48,571 for the Rated
Institutional Fund, $1,342,389 for the Government Fund, $520,268 for the
Treasury Fund and $2,413,140 for the Institutional Tax-Exempt Fund.
All officers and certain trustees of the Trust are Affiliated with Merrill
Lynch & Co., Inc.
3. Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited number of
shares of beneficial interest in the Premier Institutional Fund, Institutional
Fund, Rated Institutional Fund, Government Fund and Treasury Fund ($.01 par
value) and Institutional Tax-Exempt Fund ($.10 par value) of a single class. At
October 31, 1998, capital paid-in aggregated $8,306,423,273 for Premier
Institutional Fund, $8,547,118,534 for Institutional Fund, $322,425,467 for
Rated Institutional Fund, $2,577,275,576 for Government Fund, $808,148,517 for
Treasury Fund and $2,108,707,270 for Institutional Tax-Exempt Fund.
Transactions in shares at a constant net asset value of $1.00 per share were as
follows:
<TABLE>
<CAPTION>
Period Year
Ended Ended
October 31, April 30,
Premier Institutional Fund 1998 1998
- ----------------------------------- ---------------- -----------------
<S> <C> <C>
Shares sold ....................... 50,165,422,918 80,884,136,647
Shares issued to shareholders
in reinvestment of dividends ..... 168,296,635 239,118,722
-------------- --------------
Total ........................... 50,333,719,553 81,123,255,369
Shares redeemed ................... 48,672,768,901 77,301,915,817
-------------- --------------
Net increase .................... 1,660,950,652 3,821,339,552
============== ==============
</TABLE>
<TABLE>
<CAPTION>
Period Year
Ended Ended
October 31, April 30,
Institutional Fund 1998 1998
- ----------------------------------- ---------------- -----------------
<S> <C> <C>
Shares sold ....................... 20,038,158,715 42,976,137,621
Shares issued to shareholders
in reinvestment of dividends ..... 186,996,523 314,438,784
-------------- --------------
Total ........................... 20,225,155,238 43,290,576,405
Shares redeemed ................... 19,051,731,509 42,118,189,627
-------------- --------------
Net increase .................... 1,173,423,729 1,172,386,778
============== ==============
</TABLE>
<TABLE>
<CAPTION>
Period
Ended
October 31,
Rated Institutional Fund 1998
- ----------------------------------- ---------------
<S> <C>
Shares sold ....................... 1,293,002,344
Shares issued to shareholders
in reinvestment of dividends ..... 4,116,356
-------------
Total ........................... 1,297,118,700
Shares redeemed ................... 964,793,233
-------------
Net increase .................... 332,325,467
=============
</TABLE>
Prior to June 15, 1998 (commencement of operations) there were 100,000 shares
of beneficial interest outstanding which were owned by FAM.
56
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Funds For Institutions Series
Notes to Financial Statements -- Continued (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Year
Ended Ended
October 31, April 30,
Government Fund 1998 1998
- ----------------------------------- --------------- -----------------
<S> <C> <C>
Shares sold ....................... 6,620,880,722 11,216,903,849
Shares issued to shareholders
in reinvestment of dividends ..... 56,434,093 100,120,146
------------- --------------
Total ........................... 6,677,314,815 11,317,023,995
Shares redeemed ................... 6,214,833,566 11,220,047,484
------------- --------------
Net increase .................... 462,481,249 96,976,511
============= ==============
</TABLE>
<TABLE>
<CAPTION>
Period Year
Ended Ended
October 31, April 30,
Treasury Fund 1998 1998
- ----------------------------------- --------------- ----------------
<S> <C> <C>
Shares sold ....................... 1,302,794,196 4,496,611,001
Shares issued to shareholders
in reinvestment of dividends ..... 17,001,528 31,614,356
------------- -------------
Total ........................... 1,319,795,724 4,528,225,357
Shares redeemed ................... 1,269,904,239 4,381,758,509
------------- -------------
Net increase .................... 49,891,485 146,466,848
============= =============
</TABLE>
<TABLE>
<CAPTION>
Period Year
Ended Ended
Institutional October 31, April 30,
Tax-Exempt Fund 1998 1998
- ----------------------------------- --------------- ----------------
<S> <C> <C>
Shares sold ....................... 4,906,503,016 9,422,006,794
Shares issued to shareholders
in reinvestment of dividends ..... 31,670,619 50,969,555
------------- -------------
Total ........................... 4,938,173,635 9,472,976,349
Shares redeemed ................... 4,634,037,396 8,672,182,936
------------- -------------
Net increase .................... 304,136,239 800,793,413
============= =============
</TABLE>
4. Distributions
The Funds declare dividends daily, pay dividends monthly and automatically
reinvest such dividends in additional Fund shares at net asset value, unless
shareholders request payment in cash. Dividends for the Premier Institutional,
Institutional, Rated Institutional, Government and Treasury Funds are declared
from the total of net investment income, plus or minus realized gains or
losses, if any, on investments.
Dividends for the Institutional Tax-Exempt Fund are declared from net
investment income-excluding discounts earned other than original issue
discounts. Net realized capital gains, if any, are normally distributed
annually, after deducting prior years' loss carryovers. The Fund may distribute
capital gains more frequently than annually in order to maintain the Fund's net
asset value at $1.00 per share.
At April 30, 1998, the Institutional Tax-Exempt Fund had net capital loss
carryovers of $248,451 of which $90,891 expire in the year 2001, $17,520 expire
in 2002 and $140,040 expire in 2003.
5. Trustees' Fees
Each Trustee who is not affiliated with the Trust or its adviser is paid an
annual fee of $36,000 by the Trust. Trustees' fees are allocated among the six
series of the Trust based on the net assets under management.
57
<PAGE>
- --------------------------------------------------------------------------------
TRUSTEES, SENIOR OFFICERS AND PORTFOLIO MANAGERS
- --------------------------------------------------------------------------------
Robert W. Crook*
President & Trustee
Senior Vice President,
Merrill Lynch Asset Management, L.P.
A. Bruce Brackenridge
Trustee
Retired Group Executive,
J.P. Morgan & Co., Inc.
Charles C. Cabot, Jr.
Trustee
Partner, Sullivan & Worcester
James T. Flynn
Trustee
Retired Chief Financial Officer,
J.P. Morgan & Co., Inc.
Terry K. Glenn*
Trustee
Executive Vice President,
Merrill Lynch Asset Management, L.P.
Todd Goodwin
Trustee
General Partner,
Gibbons, Goodwin, van Amerongen
George W. Holbrook, Jr.
Trustee
Managing Partner,
Bradley Resources Company
W. Carl Kester
Trustee
James R. Williston Professor of Business Administration,
Harvard University Graduate School of
Business Administration
William M. Breen
Senior Vice President, Chief Financial
Officer & Treasurer
Michael J. Brady
Senior Vice President
Ann Catlin
Senior Vice President
James J. Fatseas
Senior Vice President
Joseph T. Monagle, Jr.
Senior Vice President
William Wasel
Senior Vice President
Mark E. Maguire
Senior Vice President
Kevin McKenna
Senior Vice President
Barry F. X. Smith
Senior Vice President
John Ng
Vice President & Portfolio Manager
Robert Sabatino
Vice President & Portfolio Manager
Kevin Schiatta
Vice President & Portfolio Manager
P. Michael Walsh
Vice President & Portfolio Manager
Phillip S. Gillespie
Secretary
*May be deemed to be an "interested person" of the Fund as such term is defined
in the Investment Company Act of 1940.
58
<PAGE>
This Page Intentionally Left Blank
<PAGE>
- --------------------------------------------------------------------------------
ADMINISTRATOR & DISTRIBUTOR
Merrill Lynch Funds Distributor, Inc.
One Financial Center
Boston, Massachusetts 02111
INVESTMENT ADVISER
Fund Asset Management, L.P.
P.O. Box 9011
Princeton, N.J. 08543-9011
CUSTODIAN & TRANSFER AGENT
State Street Bank & Trust Company
P.O. Box 8500
Boston, Massachusetts 02266-8500
LEGAL COUNSEL
Rogers & Wells
200 Park Avenue
New York, New York 10166
AUDITORS
Deloitte & Touche LLP
125 Summer Street
Boston, Massachusetts 02110-1617
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of the Trust unless accompanied or preceded by the
Trust's current prospectus. Past performance results shown in this report
should not be considered a representation of future performance, which will
fluctuate. Each Fund seeks to maintain a consistent $1.00 net asset value per
share, although this cannot be assured. An investment in the Funds is neither
insured nor guaranteed by the U.S. Government.
Merrill Lynch Premier Institutional Fund
Merrill Lynch Institutional Fund
Merrill Lynch Rated Institutional Fund
Merrill Lynch Government Fund
Merrill Lynch Treasury Fund
Merrill Lynch Institutional Tax-Exempt Fund
- ----------------------------------------------
Merrill Lynch
Funds For Institutions Series
- ----------------------------------------------
Merrill Lynch Premier Institutional Fund
Merrill Lynch Institutional Fund
Merrill Lynch Rated Institutional Fund
Merrill Lynch Government Fund
Merrill Lynch Treasury Fund
Merrill Lynch Institutional Tax-Exempt Fund
Semi-Annual Report
October 31, 1998
