MERRILL LYNCH
MUNICIPAL
INTERMEDIATE
TERM FUND
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
October 31, 1999
<PAGE>
MERRILL LYNCH MUNICIPAL INTERMEDIATE TERM FUND
Officers and Trustees
Terry K. Glenn, President and Trustee
Ronald W. Forbes, Trustee
Cynthia A. Montgomery, Trustee
Charles C. Reilly, Trustee
Kevin A. Ryan, Trustee
Richard R. West, Trustee
Arthur Zeikel, Trustee
Vincent R. Giordano, Senior Vice President
William R. Bock, Vice President
Kenneth A. Jacob, Vice President
Donald C. Burke, Vice President and Treasurer
William E. Zitelli, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
Important Tax Information
(unaudited)
All of the net investment income distributions paid by Merrill Lynch Municipal
Intermediate Term Fund of the Merrill Lynch Municipal Series Trust during
taxable year ended October 31, 1999 qualify as tax-exempt interest dividends for
Federal income tax purposes. Additionally, the following table summarizes the
taxable distributions paid by the Fund during the year:
- --------------------------------------------------------------------------------
Payable Ordinary Long-Term
Date Income Capital Gains*
- --------------------------------------------------------------------------------
Common Shareholders 12/31/98 $.076851 $.155356
- --------------------------------------------------------------------------------
* The entire distribution is subject to the 20% tax rate.
Please retain this information for your records.
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, October 31, 1999
TO OUR SHAREHOLDERS
The Municipal Market Environment
The combination of steady strong domestic economic growth, improvement in
foreign economies (most notably in Japan) and increasing investor concerns
regarding potential increases in US inflation put upward pressure on bond yields
throughout the 12-month period ended October 31, 1999. Continued strong US
employment growth, particularly the decline in the US unemployment rate to 4.2%
in early June, was among the reasons the Federal Reserve Board cited for raising
short-term interest rates in late June and again in late August. US Treasury
bond yields reacted by climbing above 6.375% by late October. However, by
October 31, 1999, economic indicators were released suggesting that despite
strong economic and employment growth in the third fiscal quarter of 1999,
inflationary pressures have remained extremely well-contained. This resulted in
a significant rally in the US Treasury bond market, pushing US Treasury bond
yields downward to approximately 6.15% by October 31, 1999. During the last six
months, yields on 30-year US Treasury bonds increased more than 50 basis points
(0.50%).
Long-term tax-exempt bond yields also rose during the six months ended October
31, 1999. Until early May, the municipal bond market was able to withstand much
of the upward pressure on bond yields. However, investor concerns of additional
moves by the Federal Reserve Board to moderate US economic growth and, more
importantly, the loss of the strong technical support that the tax-exempt market
enjoyed in early 1999 helped push municipal bond yields significantly higher for
the remainder of the period. The yields on long-term tax-exempt revenue bonds
rose almost 90 basis points to 6.18% by October 31, 1999, as measured by the
Bond Buyer Revenue Bond Index.
In recent months, the significant decline in new tax-exempt bond issuance has
remained a positive factor within the municipal bond market, as it had been for
much of the past year. During the last six months, more than $110 billion in
long-term municipal bonds was issued, a decline of almost 20% compared to the
same period a year ago. During the past three months, $55 billion in municipal
bonds was underwritten, representing a decline of nearly 10% compared to the
corresponding period in 1998. Additionally, in June and July, investors received
more than $40 billion in coupon income and proceeds from bond maturities and
early bond redemptions. These proceeds have generated considerable retail
investor interest, which has helped absorb the recent diminished supply.
Although tax-exempt bond yields are at their highest level in over two years and
have attracted significant retail investor interest, institutional demand has
declined sharply. Long-term municipal mutual funds have seen consistent outflows
in recent months as the yields of individual securities have risen faster than
those of larger, more diverse mutual funds. In addition, the demand from
property/casualty insurance companies has weakened as a result of the losses,
and anticipated losses, incurred as a result of the series of damaging storms
across much of the eastern United States. Additionally, many institutional
investors who were attracted to the municipal bond market in recent years by
historically attractive tax-exempt bond yield ratios of over 90% have found
other asset classes even more attractive. Even with a reduced supply position,
tax-exempt issuers have been forced to repeatedly raise municipal bond yields in
the attempt to attract adequate demand.
The recent relative underperformance of the municipal bond market has resulted
in an opportunity for long-term investors to purchase tax-exempt issues whose
yields are nearly identical to taxable US Treasury securities. At October 31,
1999, long-term uninsured municipal revenue bond yields were 100% of comparable
US Treasury securities. In recent months, many taxable asset classes, such as
corporate bonds, mortgage-backed securities and US agency debt, have all
accelerated debt issuance. This acceleration was initiated largely to avoid
issuing securities at year-end and to minimize any associated Year 2000 (Y2K)
problems that may develop. However, this increased issuance has also resulted in
higher yield levels in the various asset classes as lower bond prices became
necessary to attract sufficient investor demand. Going forward, it is believed
that the pace of non-US Government debt issuance is likely to slow
significantly. As the supply of this debt declines, we would expect many
institutional investors to return to the municipal bond market and the
attractive yield ratios available.
Looking ahead, it appears to us that long-term municipal bond yields will remain
under pressure, trading in a broad range centered near current levels. Y2K
considerations may prohibit a series of Federal Reserve Board moves at the end
of the year and the beginning of 2000. Any improvement in bond prices will
probably be contingent upon weakening in both US employment growth and consumer
spending. The 100 basis point rise in US Treasury bond yields seen thus far this
year may negatively affect US economic growth. The US housing market will be
among the first sectors likely to be affected, as some declines have already
been evidenced in response to higher mortgage rates. We believe that it is also
unrealistic to expect double-digit returns in US equity markets to continue
indefinitely. Much of the US consumer's wealth is tied to recent stock market
appreciation. Any slowing in these incredible growth rates is likely to reduce
consumer spending. We believe that these factors suggest that the worst of the
recent increase in bond yields has passed and stable, if not slightly improving,
bond prices may be expected.
Portfolio Strategy
During the quarter ended October 31, 1999, we continued our strategy of reducing
the duration of the Fund's portfolio. Throughout the quarter, the municipal
market underperformed the US Treasury market. This sub-par performance can be
attributed to a lack of institutional demand and a large increase of corporate
and agency issues, resulting in a wider yield spread to US Treasury issues and
certain allocations away from municipal bonds. Additionally, the US economy
continued its robust performance, which caused the Federal Reserve Board to
tighten monetary policy twice during the quarter. As a further defensive
measure, we focused on AA-rated or better, premium-coupon securities. We also
continued to increase our cash reserve position in anticipation of re-entering
the market at a more appropriate time when the supply of new-issue corporate and
municipal bonds is reduced.
Fiscal Year in Review
For the 12-month period ended October 31, 1999, we anticipated a benign interest
rate environment. This strategy was based on our belief that inflation would
remain subdued during the fiscal year because of disruptive upheavals in the
world economic and financial markets. However, early in 1999, interest rates
began to inch higher as financial markets regained continuity and signs of
strong economic growth started to appear. A change in investor psychology
occurred, and interest rates increased because of investor concerns that the
economic environment could lead to inflation. Consequently, we revised our
strategy and structured the Fund to be more defensive. Although these efforts
proved to be somewhat beneficial, the full impact of the bond market's decline
was unavoidable and resulted in below-average returns for the Fund.
In Conclusion
We thank you for your support of Merrill Lynch Municipal Intermediate Term Fund,
and we look forward to serving your investment needs in the months and years
ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Trustee
/s/ Vincent R. Giordano
Vincent R. Giordano
Senior Vice President
/s/ William R. Bock
William R. Bock
Vice President and Portfolio Manager
December 6, 1999
2 & 3
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, October 31, 1999
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill Lynch
Select Pricing(SM) System, which offers four pricing alternatives:
o Class A Shares incur a maximum initial sales charge (front-end load) of 1%
and bear no ongoing distribution or account maintenance fees. Class A
Shares are available only to eligible investors.
o Class B Shares are subject to a maximum contingent deferred sales charge
of 1% if redeemed during the first year, decreasing 1% thereafter to 0%
after the first year. In addition, Class B Shares are subject to a
distribution fee of 0.10% and an account maintenance fee of 0.20%. These
shares automatically convert to Class D Shares after approximately 10
years. (There is no initial sales charge for automatic share conversions.)
o Class C Shares are subject to a distribution fee of 0.10% and an account
maintenance fee of 0.20%. In addition, Class C Shares are subject to a 1%
contingent deferred sales charge if redeemed within one year of purchase.
o Class D Shares incur a maximum initial sales charge of 1% and an account
maintenance fee of 0.10% (but no distribution fee).
None of the past results shown should be considered a representation of
future performance. Figures shown in the "Recent Performance Results" and
"Average Annual Total Return" tables assume reinvestment of all dividends
and capital gains distributions at net asset value on the payable date.
Investment return and principal value of shares will fluctuate so that
shares, when redeemed, may be worth more or less than their original cost.
Dividends paid to each class of shares will vary because of the different
levels of account maintenance, distribution and transfer agency fees
applicable to each class, which are deducted from the income available to
be paid to shareholders.
Recent Performance Results*
<TABLE>
<CAPTION>
Ten Years/
3 Month 12 Month Since Inception Standardized
As of October 31, 1999 Total Return Total Return Total Return 30-Day Yield
==================================================================================================================
<S> <C> <C> <C> <C>
ML Municipal Intermediate Term Fund Class A Shares -1.18% -2.16% +80.48% 4.33%
- ------------------------------------------------------------------------------------------------------------------
ML Municipal Intermediate Term Fund Class B Shares -1.16 -2.46 +74.98 4.06
- ------------------------------------------------------------------------------------------------------------------
ML Municipal Intermediate Term Fund Class C Shares -1.26 -2.58 +26.91 4.05
- ------------------------------------------------------------------------------------------------------------------
ML Municipal Intermediate Term Fund Class D Shares -1.20 -2.35 +28.34 4.24
==================================================================================================================
</TABLE>
* Investment results shown do not reflect sales charges; results shown would
be lower if a sales charge was included. Total investment returns are
based on changes in net asset values for the periods shown, and assume
reinvestment of all dividends and capital gains distributions at net asset
value on the payable date. The Fund's ten-year/since inception periods are
ten years for Class A & Class B Shares and from 10/21/94 for Class C &
Class D Shares.
Class A and Class B Shares
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund's Class A Shares
& Class B Shares compared to growth of an investment in the Lehman Brothers
Municipal Bond Index. Beginning and ending values are:
10/89 10/99
================================================================================
ML Municipal Intermediate Term Fund+--
Class A Shares* $ 9,900 $17,868
- --------------------------------------------------------------------------------
ML Municipal Intermediate Term Fund+--
Class B Shares* $10,000 $17,499
- --------------------------------------------------------------------------------
Lehman Brothers Municipal
Bond Index++ $10,000 $19,912
================================================================================
* Assuming maximum sales charge, transaction costs and other operating
expenses, including advisory fees.
+ ML Municipal Intermediate Term Fund invests primarily in a diversified
portfolio of investment-grade obligations whose interest is exempt from
Federal income taxes, with a dollar-weighted average maturity from five to
twelve years.
++ This unmanaged Index consists of revenue bonds, prerefunded bonds, general
obligation bonds and insured bonds. Past performance is not predictive of
future performance.
Class A and Class B Shares
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
Year Ended 9/30/99 -1.71% -2.69%
- --------------------------------------------------------------------------------
Five Years Ended 9/30/99 +5.31 +5.10
- --------------------------------------------------------------------------------
Ten Years Ended 9/30/99 +6.23 +6.12
- --------------------------------------------------------------------------------
* Maximum sales charge is 1%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
Year Ended 9/30/99 -2.02% -2.94%
- --------------------------------------------------------------------------------
Five Years Ended 9/30/99 +5.00 +5.00
- --------------------------------------------------------------------------------
Ten Years Ended 9/30/99 +5.90 +5.90
================================================================================
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after
1 year.
** Assuming payment of applicable contingent deferred sales charge.
4 & 5
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, October 31, 1999
PERFORMANCE DATA (concluded)
Class C and Class D Shares
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund's Class C & Class
D Shares compared to growth of an investment in the Lehman Brothers Municipal
Bond Index. Beginning and ending values are:
10/21/94** 10/99
================================================================================
ML Municipal Intermediate Term Fund+--
Class C Shares* $10,000 $12,691
- --------------------------------------------------------------------------------
ML Municipal Intermediate Term Fund+--
Class D Shares* $ 9,900 $12,707
- --------------------------------------------------------------------------------
Lehman Brothers Municipal
Bond Index++ $10,000 $13,973
================================================================================
* Assuming maximum sales charge, transaction costs and other operating
expenses, including advisory fees.
** Commencement of operations.
+ ML Municipal Intermediate Term Fund invests primarily in a diversified
portfolio of investment-grade obligations whose interest is exempt from
Federal income taxes, with a dollar-weighted average maturity from five to
twelve years.
++ This unmanaged Index consists of revenue bonds, prerefunded bonds, general
obligation bonds and insured bonds. The starting date for the Index in the
Class C & Class D Shares graph is 10/31/94.
Past performance is not predictive of future performance.
Class C and Class D Shares
Average Annual Total Return
% Return % Return
Without CDSC With CDSC**
================================================================================
Class C Shares*
================================================================================
Year Ended 9/30/99 -2.04% -2.96%
- --------------------------------------------------------------------------------
Inception (10/21/94) through 9/30/99 +5.13 +5.13
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after
1 year.
** Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class D Shares*
================================================================================
Year Ended 9/30/99 -1.72% -2.70%
- --------------------------------------------------------------------------------
Inception (10/21/94) through 9/30/99 +5.38 +5.17
- --------------------------------------------------------------------------------
* Maximum sales charge is 1%.
** Assuming maximum sales charge.
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Alaska--2.9% AAA Aaa $2,250 Alaska Student Loan Corporation, Student Loan Revenue Bonds, AMT,
Series A, 5.65% due 7/01/2012 (b) $ 2,220
Valdez, Alaska, Marine Terminal Revenue Refunding Bonds (Exxon
Pipeline Company Project), VRDN (a):
A1+ VMIG1+ 600 Series A, 3.50% due 12/01/2033 600
A1+ VMIG1+ 1,600 Series B, 3.50% due 12/01/2033 1,600
===================================================================================================================================
Arizona--3.5% NR* Aaa 1,700 Arizona Student Loan Acquisition Authority, Student Loan Revenue
Refunding Bonds, AMT, Senior Series A-1, 5.45% due 5/01/2011 1,677
A1+ P1 1,700 Maricopa County, Arizona, Pollution Control Corporation, PCR,
Refunding (Arizona Public Service Company), VRDN, Series A, 3.50%
due 5/01/2029 (a) 1,700
NR* NR* 2,000 Mohave County, Arizona, IDA, IDR (North Star Steel Company Project),
AMT, 6.70% due 3/01/2020 2,062
===================================================================================================================================
California--4.2% AAA Aaa 2,500 California State, GO, Refunding (Veterans Bonds), AMT, Series BH,
5.20% due 12/01/2011 (e) 2,447
AAA Aaa 4,000 Oxnard, California, Financing Authority, Solid Waste Revenue Bonds,
AMT, 5.75% due 5/01/2010 (b) 4,093
===================================================================================================================================
Colorado--3.2% AA Aa2 5,000 Metro Wastewater Reclamation District, Colorado, Gross Sewer Revenue
Refunding Bonds, 5.45% due 4/01/2012 4,998
===================================================================================================================================
District of Columbia-- AAA Aaa 4,700 District of Columbia, GO, Refunding, Series A, 5.375% due
3.0% 6/01/2010 (b) 4,653
===================================================================================================================================
Florida--8.4% AAA Aaa 5,000 Florida State Division, Bond Finance Department, General Services
Revenue Bonds (Environmental Protection Preservation 2000), Series A,
5.25% due 7/01/2012 (d) 4,909
AAA Aaa 5,000 Florida State Division, Bond Finance Department, General Services
Revenue Refunding Bonds (Environmental Protection Preservation 2000),
Series A, 6% due 7/01/2011 (e) 5,284
A1+ VMIG1+ 1,200 Martin County, Florida, PCR, Refunding (Florida Power & Light Co.
Project), VRDN, 3.50% due 9/01/2024 (a) 1,200
A1+ VMIG1+ 1,600 Saint Lucie County, Florida, PCR, Refunding (Florida Power and Light
Company Project), VRDN, 3.50% due 1/01/2026 (a) 1,600
===================================================================================================================================
</TABLE>
Portfolio Abbreviations
To simplify the listings of Merrill Lynch Municipal Intermediate Term Fund's
portfolio holdings in the Schedule of Investments, we have abbreviated the names
of many of the securities according to the list at right.
AMT Alternative Minimum Tax (subject to)
GO General Obligation Bonds
HDA Housing Development Authority
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
PCR Pollution Control Revenue Bonds
RITES Residual Interest Tax-Exempt Securities
VRDN Variable Rate Demand Notes
6 & 7
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, October 31, 1999
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Georgia--0.3% NR* P1 $ 500 Hapeville, Georgia, Development Authority, IDR (Hapeville Hotel
Ltd.), VRDN, 3.50% due 11/01/2015 (a) $ 500
===================================================================================================================================
Hawaii--8.2% Hawaii State, GO:
AAA Aaa 5,000 Refunding, Series CO, 6% due 3/01/2009 (d) 5,285
AAA Aaa 7,380 Series CT, 5.625% due 9/01/2012 (e) 7,446
===================================================================================================================================
Illinois--10.1% AAA Aaa 5,000 Chicago, Illinois, Public Building Commission, Building Revenue
Bonds, Series C, 5.50% due 2/01/2006 (d) 5,124
A1+ VMIG1+ 500 Illinois Health Facilities Authority, Revenue Refunding Bonds
(University of Chicago Hospitals), VRDN, 3.55% due 8/01/2026 (a)(c) 500
AAA Aaa 5,000 Illinois State, GO, 5.375% due 6/01/2011 (d) 4,955
AAA Aaa 5,000 Regional Transportation Authority, Illinois, GO, Refunding, 5.75%
due 6/01/2010 (e) 5,156
===================================================================================================================================
Louisiana--3.2% AAA Aaa 5,000 Louisiana State Office Facilities Corporation, Lease Revenue Bonds
(Capital Complex Program), Series A, 5.50% due 3/01/2011 (c) 5,011
===================================================================================================================================
Maine--1.7% NR* A 2,535 Maine Educational Loan Marketing Corporation, Student Loan Revenue
Refunding Bonds, AMT, 6.90% due 11/01/2003 2,613
===================================================================================================================================
Maryland--2.3% NR* VMIG1+ 3,500 Montgomery County, Ohio, Revenue Refunding Bonds (Miami Valley
Hospital), VRDN, Series A, 3.50% due 11/15/2022 (a) 3,500
===================================================================================================================================
Michigan--3.6% NR* A 1,000 Michigan Higher Education, Student Loan Revenue Bonds, AMT, Series
XIV-A, 6.75% due 10/01/2006 1,039
Michigan Municipal Bond Authority Revenue Bonds:
AA+ Aa1 2,000 (Clean Water Revolving Fund), 5.625% due 10/01/2011 2,025
AA+ Aa1 2,415 (Drinking Water Revolving Fund), 5.625% due 10/01/2011 2,445
===================================================================================================================================
Minnesota--3.1% AAA Aaa 5,000 Minneapolis and Saint Paul, Minnesota, Metropolitan Airports
Commission, Airport Revenue Bonds, AMT, Series B, 5.25% due
1/01/2011 (b) 4,884
===================================================================================================================================
New Mexico--3.5% A1+ P1 5,500 Farmington, New Mexico, PCR, Refunding (Arizona Public Service
Company), VRDN, Series A, 3.55% due 5/01/2024 (a) 5,500
===================================================================================================================================
New York--10.8% A1+ VMIG1+ 1,500 Long Island Power Authority, New York, Electric System Revenue Bonds,
VRDN, Sub-Series 5, 3.50% due 5/01/2033 (a) 1,500
AAA Aaa 5,000 Nassau Health Care Corporation, New York, Health System Revenue
Bonds (Nassau County), 6% due 8/01/2011 (e) 5,166
AAA NR* 5,000 New York State Thruway Authority, Service Contract Revenue Bonds
(Local Highway and Bridge Project), 5.625% due 4/01/2012 (c) 5,035
AAA Aaa 5,000 Port Authority of New York and New Jersey, Consolidated Revenue
Refunding Bonds, AMT, 119th Series, 5.75% due 9/15/2011 (d) 5,101
===================================================================================================================================
Pennsylvania--2.1% Pennsylvania State Higher Educational Facilities Authority, Revenue
Refunding Bonds (Carnegie Mellon University), VRDN (a):
A1+ NR* 300 Series B, 3.50% due 11/01/2027 300
A1+ NR* 2,900 Series C, 3.50% due 11/01/2029 2,900
A1+ VMIG1+ 100 Philadelphia, Pennsylvania, Hospitals and Higher Education Facilities
Authority, Hospital Revenue Bonds (Children's Hospital Project),
VRDN, Series A, 3.50% due 3/01/2027 (a) 100
===================================================================================================================================
Texas--9.8% AAA Aaa 5,000 Lower Colorado River Authority, Texas, Revenue Refunding Bonds,
Series B, 6% due 5/15/2012 (e) 5,174
AAA Aaa 5,000 Travis County, Texas, Health Facilities Development Corporation,
Revenue Refunding Bonds (Ascension Health Credit), Series A, 5.75%
due 11/15/2011 (c) 5,077
AAA Aa1 5,000 University of Texas, University Revenue Refunding Notes (Financing
System), Series B, 5.50% due 8/15/2011 5,041
===================================================================================================================================
Virginia--1.8% Virginia State, HDA, Commonwealth Mortgage Revenue Bonds, Series J,
Sub-Series J-2:
AA+ Aa1 1,365 6.45% due 1/01/2010 1,407
AA+ Aa1 1,300 6.50% due 1/01/2011 1,333
===================================================================================================================================
Washington--17.0% AA+ Aa1 5,000 King County, Washington, GO, Series D, 5.70% due 12/01/2010 5,143
AA Aa1 5,030 King County, Washington, School District No. 414, Lake Washington,
GO, Refunding, Series B, 5.25% due 12/01/2012 4,863
AAA Aaa 2,880 Port of Seattle, Washington, Revenue Refunding Bonds, Series A, 5.25%
due 6/01/2011 (d) 2,816
AA Aa2 5,000 Seattle, Washington, Municipal Light and Power Revenue Bonds, 6% due
10/01/2012 5,170
Washington State Public Power Supply System, Revenue Refunding Bonds
(Nuclear Project No. 3), Series A (b):
AAA Aaa 5,250 5.50% due 7/01/2007 5,378
AAA Aaa 3,015 5.60% due 7/01/2008 3,096
===================================================================================================================================
Wisconsin--0.2% AA Aa2 360 Wisconsin Housing and Economic Development Authority, Home Ownership
Revenue Refunding Bonds, AMT, Series F, 7.40% due 7/01/2013 377
===================================================================================================================================
Puerto Rico--2.7% A1+ Baa1 3,950 Puerto Rico Commonwealth Highway and Transportation Authority,
Highway Revenue Refunding Bonds, RITES, Series X, 6.159% due
7/01/2005 (f) 4,108
===================================================================================================================================
Total Investments (Cost--$165,135)--105.6% 164,111
Liabilities in Excess of Other Assets--(5.6%) (8,752)
--------
Net Assets--100.0% $155,359
========
===================================================================================================================================
</TABLE>
(a) The interest rate is subject to change periodically based upon prevailing
market rates. The interest rate shown is the rate in effect at October 31,
1999.
(b) AMBAC Insured.
(c) MBIA Insured.
(d) FGIC Insured.
(e) FSA Insured.
(f) The interest rate is subject to change periodically and inversely based
upon prevailing market rates. The interest rate shown is the rate in
effect at October 31, 1999.
* Not Rated.
+ Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
Portfolio Abbreviations
8 & 9
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, October 31, 1999
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
As of October 31, 1999
===================================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$165,135,411) (Note 1a) .......................... $ 164,111,404
Cash ..................................................................................... 90,275
Receivables:
Interest ............................................................................... $ 2,120,779
Securities sold ........................................................................ 50,000
Beneficial interest sold ............................................................... 1,974 2,172,753
-----------
Prepaid registration fees and other assets (Note 1e) ..................................... 59,021
-------------
Total assets ............................................................................. 166,433,453
-------------
===================================================================================================================================
Liabilities: Payables:
Securities purchased ................................................................... 10,339,250
Beneficial interest redeemed ........................................................... 362,533
Dividends to shareholders (Note 1f) .................................................... 107,264
Investment adviser (Note 2) ............................................................ 83,890
Distributor (Note 2) ................................................................... 18,371 10,911,308
-----------
Accrued expenses and other liabilities ................................................... 163,293
-------------
Total liabilities ........................................................................ 11,074,601
-------------
===================================================================================================================================
Net Assets: Net assets ............................................................................... $ 155,358,852
=============
===================================================================================================================================
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited number of shares
Consist of: authorized ............................................................................... $ 601,504
Class B Shares of beneficial interest, $.10 par value, unlimited number of shares
authorized ............................................................................... 559,753
Class C Shares of beneficial interest, $.10 par value, unlimited number of shares
authorized ............................................................................... 33,617
Class D Shares of beneficial interest, $.10 par value, unlimited number of shares
authorized ............................................................................... 399,085
Paid-in capital in excess of par ......................................................... 157,194,420
Accumulated distributions in excess of realized capital gains on investments--net
(Note 1f) ................................................................................ (2,405,520)
Unrealized depreciation on investments--net .............................................. (1,024,007)
-------------
Net assets ............................................................................... $ 155,358,852
=============
===================================================================================================================================
Net Asset Class A--Based on net assets of $58,635,350 and 6,015,045 shares of beneficial interest
Value: outstanding .............................................................................. $ 9.75
=============
Class B--Based on net assets of $54,559,023 and 5,597,533 shares of beneficial interest
outstanding .............................................................................. $ 9.75
=============
Class C--Based on net assets of $3,275,109 and 336,166 shares of beneficial interest
outstanding .............................................................................. $ 9.74
=============
Class D--Based on net assets of $38,889,370 and 3,990,852 shares of beneficial interest
outstanding .............................................................................. $ 9.74
=============
===================================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended October 31, 1999
===================================================================================================================================
<S> <C> <C>
Investment Interest and amortization of premium and discount earned $ 8,758,738
Income (Note 1d):
===================================================================================================================================
Expenses: Investment advisory fees (Note 2) ........................................... $ 1,010,665
Account maintenance and distribution fees--Class B (Note 2) ................. 196,461
Printing and shareholder reports ............................................ 94,080
Professional fees ........................................................... 77,443
Accounting services (Note 2) ................................................ 74,624
Registration fees (Note 1e) ................................................. 67,528
Transfer agent fees--Class B (Note 2) ....................................... 47,939
Account maintenance fees--Class D (Note 2) .................................. 45,322
Transfer agent fees--Class A (Note 2) ....................................... 40,059
Transfer agent fees--Class D (Note 2) ....................................... 26,281
Account maintenance and distribution fees--Class C (Note 2) ................. 11,785
Custodian fees .............................................................. 10,478
Trustees' fees and expenses ................................................. 8,989
Pricing fees ................................................................ 7,168
Transfer agent fees--Class C (Note 2) ....................................... 3,317
Other ....................................................................... 6,562
------------
Total expenses .............................................................. 1,728,701
-----------
Investment income--net ...................................................... 7,030,037
-----------
===================================================================================================================================
Realized & Realized loss on investments--net ........................................... (2,049,930)
Unrealized Loss on Change in unrealized appreciation/depreciation on investments--net .......... (9,040,599)
Investments--Net -----------
(Notes 1b, 1d & 3): Net Decrease in Net Assets Resulting from Operations ........................ $(4,060,492)
===========
===================================================================================================================================
</TABLE>
See Notes to Financial Statements.
10 & 11
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, October 31, 1999
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Year
Ended October 31,
---------------------------
Increase (Decrease) in Net Assets: 1999 1998
============================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net ................................................... $ 7,030,037 $ 8,579,176
Realized gain (loss) on investments--net ................................. (2,049,930) 6,515,794
Change in unrealized appreciation/depreciation on investments--net ....... (9,040,599) 1,008,301
------------ ------------
Net increase (decrease) in net assets resulting from operations .......... (4,060,492) 16,103,271
------------ ------------
============================================================================================================================
Dividends & Investment income--net:
Distributions to Class A ................................................................ (2,740,214) (3,169,968)
Shareholders Class B ................................................................ (2,391,903) (3,258,706)
(Note 1f): Class C ................................................................ (143,019) (225,677)
Class D ................................................................ (1,754,901) (1,924,825)
Realized gain on investments--net:
Class A ................................................................ (730,036) --
Class B ................................................................ (725,291) --
Class C ................................................................ (47,080) --
Class D ................................................................ (491,912) --
In excess of realized gain on investments--net:
Class A ................................................................ (880,561) --
Class B ................................................................ (874,836) --
Class C ................................................................ (56,786) --
Class D ................................................................ (593,337) --
------------ ------------
Net decrease in net assets resulting from dividends and distributions to
shareholders ............................................................. (11,429,876) (8,579,176)
------------ ------------
============================================================================================================================
Beneficial Interest Net decrease in net assets derived from beneficial interest transactions.. (31,592,836) (25,237,007)
Transactions ------------ ------------
(Note 4):
============================================================================================================================
Net Assets: Total decrease in net assets ............................................. (47,083,204) (17,712,912)
Beginning of year ........................................................ 202,442,056 220,154,968
------------ ------------
End of year .............................................................. $155,358,852 $202,442,056
============ ============
============================================================================================================================
</TABLE>
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Class A
The following per share data and ratios have been derived ----------------------------------------------------
from information provided in the financial statements. For the Year Ended October 31,
----------------------------------------------------
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ....................... $ 10.60 $ 10.23 $ 9.94 $ 10.00 $ 9.62
Operating -------- -------- -------- -------- --------
Performance: Investment income--net ................................... .40 .43 .45 .48 .53
Realized and unrealized gain (loss) on investments--net .. (.62) .37 .29 (.06) .38
-------- -------- -------- -------- --------
Total from investment operations ......................... (.22) .80 .74 .42 .91
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net .................................. (.40) (.43) (.45) (.48) (.53)
Realized gain on investments--net ....................... (.10) -- -- -- --
In excess of realized gain on investments--net .......... (.13) -- -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions ........................ (.63) (.43) (.45) (.48) (.53)
-------- -------- -------- -------- --------
Net asset value, end of year ............................. $ 9.75 $ 10.60 $ 10.23 $ 9.94 $ 10.00
======== ======== ======== ======== ========
==================================================================================================================================
Total Investment Based on net asset value per share ....................... (2.16%) 8.00% 7.59% 4.27% 9.69%
Return:* ======== ======== ======== ======== ========
==================================================================================================================================
Ratios to Average Expenses ................................................. .80% .74% .79% .81% .81%
Net Assets: ======== ======== ======== ======== ========a
Investment income--net ................................... 3.97% 4.17% 4.40% 4.79% 5.36%
======== ======== ======== ======== ========
==================================================================================================================================
Supplemental Net assets, end of year (in thousands) ................... $ 58,635 $ 73,769 $ 71,684 $ 30,353 $ 34,970
Data: ======== ======== ======== ======== ========
Portfolio turnover ....................................... 159.37% 174.64% 167.41% 146.82% 115.78%
======== ======== ======== ======== ========
==================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class B
The following per share data and ratios have been derived ----------------------------------------------------
from information provided in the financial statements. For the Year Ended October 31,
----------------------------------------------------
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ....................... $ 10.60 $ 10.23 $ 9.93 $ 10.00 $ 9.62
Operating -------- -------- -------- -------- --------
Performance: Investment income--net ................................... .37 .40 .41 .44 .50
Realized and unrealized gain (loss) on investments--net .. (.62) .37 .30 (.07) .38
-------- -------- -------- -------- --------
Total from investment operations ......................... (.25) .77 .71 .37 .88
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net .................................. (.37) (.40) (.41) (.44) (.50)
Realized gain on investments--net ....................... (.10) -- -- -- --
In excess of realized gain on investments--net .......... (.13) -- -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions ........................ (.60) (.40) (.41) (.44) (.50)
-------- -------- -------- -------- --------
Net asset value, end of year ............................. $ 9.75 $ 10.60 $ 10.23 $ 9.93 $ 10.00
======== ======== ======== ======== ========
==================================================================================================================================
Total Investment Based on net asset value per share ....................... (2.46%) 7.67% 7.35% 3.84% 9.34%
Return:* ======== ======== ======== ======== ========
==================================================================================================================================
Ratios to Average Expenses ................................................. 1.11% 1.06% 1.11% 1.13% 1.13%
Net Assets: ======== ======== ======== ======== ========
Investment income--net ................................... 3.65% 3.86% 4.13% 4.47% 5.05%
======== ======== ======== ======== ========
==================================================================================================================================
Supplemental Net assets, end of year (in thousands) ................... $ 54,559 $ 75,688 $ 94,552 $169,441 $181,640
Data: ======== ======== ======== ======== ========
Portfolio turnover ....................................... 159.37% 174.64% 167.41% 146.82% 115.78%
======== ======== ======== ======== ========
==================================================================================================================================
</TABLE>
* Total investment returns exclude the effects of sales charges.
See Notes to Financial Statements.
12 & 13
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, October 31, 1999
FINANCIAL HIGHLIGHTS (concluded)
<TABLE>
<CAPTION>
Class C
The following per share data and ratios have been derived ----------------------------------------------------
from information provided in the financial statements. For the Year Ended October 31,
----------------------------------------------------
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ....................... $ 10.60 $ 10.23 $ 9.93 $ 10.00 $ 9.62
Operating -------- -------- -------- -------- --------
Performance: Investment income--net ................................... .37 .40 .41 .44 .50
Realized and unrealized gain (loss) on investments--net .. (.63) .37 .30 (.07) .38
-------- -------- -------- -------- --------
Total from investment operations ......................... (.26) .77 .71 .37 .88
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net .................................. (.37) (.40) (.41) (.44) (.50)
Realized gain on investments--net ....................... (.10) -- -- -- --
In excess of realized gain on investments--net .......... (.13) -- -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions ........................ (.60) (.40) (.41) (.44) (.50)
-------- -------- -------- -------- --------
Net asset value, end of year ............................. $ 9.74 $ 10.60 $ 10.23 $ 9.93 $ 10.00
======== ======== ======== ======== ========
==================================================================================================================================
Total Investment Based on net asset value per share ....................... (2.58%) 7.65% 7.34% 3.82% 9.36%
Return:* ======== ======== ======== ======== ========
==================================================================================================================================
Ratios to Average Expenses ................................................. 1.12% 1.07% 1.13% 1.15% 1.01%
Net Assets: ======== ======== ======== ======== ========
Investment income--net ................................... 3.64% 3.85% 4.10% 4.44% 4.76%
======== ======== ======== ======== ========
==================================================================================================================================
Supplemental Net assets, end of year (in thousands) ................... $ 3,275 $ 5,116 $ 6,110 $ 8,313 $ 6,485
Data: ======== ======== ======== ======== ========
Portfolio turnover ....................................... 159.37% 174.64% 167.41% 146.82% 115.78%
======== ======== ======== ======== ========
==================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class D
The following per share data and ratios have been derived ----------------------------------------------------
from information provided in the financial statements. For the Year Ended October 31,
----------------------------------------------------
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ....................... $ 10.60 $ 10.23 $ 9.94 $ 10.00 $ 9.62
Operating -------- -------- -------- -------- --------
Performance: Investment income--net ................................... .39 .42 .44 .47 .52
Realized and unrealized gain (loss) on investments--net .. (.63) .37 .29 (.06) .38
-------- -------- -------- -------- --------
Total from investment operations ......................... (.24) .79 .73 .41 .90
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net .................................. (.39) (.42) (.44) (.47) (.52)
Realized gain on investments--net ....................... (.10) -- -- -- --
In excess of realized gain on investments--net .......... (.13) -- -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions ........................ (.62) (.42) (.44) (.47) (.52)
-------- -------- -------- -------- --------
Net asset value, end of year ............................. $ 9.74 $ 10.60 $ 10.23 $ 9.94 $ 10.00
======== ======== ======== ======== ========
===================================================================================================================================
Total Investment Based on net asset value per share ....................... (2.35%) 7.90% 7.48% 4.17% 9.58%
Return:* ======== ======== ======== ======== ========
===================================================================================================================================
Ratios to Average Expenses ................................................. .90% .84% .89% .91% .90%
Net Assets: ======== ======== ======== ======== ========
Investment income--net ................................... 3.87% 4.07% 4.31% 4.68% 5.12%
======== ======== ======== ======== ========
===================================================================================================================================
Supplemental Net assets, end of year (in thousands) ................... $ 38,890 $ 47,869 $ 47,809 $ 8,375 $ 7,000
Data: ======== ======== ======== ======== ========
Portfolio turnover ....................................... 159.37% 174.64% 167.41% 146.82% 115.78%
======== ======== ======== ======== ========
==================================================================================================================================
</TABLE>
* Total investment returns exclude the effects of sales charges.
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Municipal Intermediate Term Fund (the "Fund") is presently the
only series of Merrill Lynch Municipal Series Trust (the "Trust"). The Fund is
registered under the Investment Company Act of 1940 as a diversified, open-end
management investment company. The Fund's financial statements are prepared in
accordance with generally accepted accounting principles, which may require the
use of management accruals and estimates. The Fund offers four classes of shares
under the Merrill Lynch Select Pricing(SM) System. Shares of Class A and Class D
are sold with a front-end sales charge. Shares of Class B and Class C may be
subject to a contingent deferred sales charge. All classes of shares have
identical voting, dividend, liquidation and other rights and the same terms and
conditions, except that Class B, Class C and Class D Shares bear certain
expenses related to the account maintenance of such shares, and Class B and
Class C Shares also bear certain expenses related to the distribution of such
shares. Each class has exclusive voting rights with respect to matters relating
to its account maintenance and distribution expenditures. The following is a
summary of significant accounting policies followed by the Fund.
(a) Valuation of investments--Municipal bonds and other portfolio securities in
which the Fund invests are traded primarily in the over-the-counter municipal
bond and money markets and are valued at the last available bid price in the
over-the-counter market or on the basis of yield equivalents as obtained by the
Fund's pricing service from one or more dealers that make markets in the
securities. Financial futures contracts, which are traded on exchanges, are
valued at their last sale price as of the close of such exchanges. Options on
financial futures contracts on US Government securities, which are traded on
exchanges, are valued at their last bid price in the case of options purchased
and their last asked price in the case of options written. Short-term
investments with a remaining maturity of sixty days or less are valued at
amortized cost, which approximates market value. Securities and assets for which
market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of Trustees of
the Fund, including valuations furnished by a pricing service retained by the
Fund, which may utilize a matrix system for valuations. The procedures of the
pricing service and its valuations are reviewed by the officers of the Fund
under the general supervision of the Board of Trustees.
(b) Derivative financial instruments--The Fund may engage in various portfolio
strategies to seek to increase its return by hedging its portfolio against
adverse movements in the debt markets. Losses may arise due to changes in the
value of the contract or if the counterparty does not perform under the
contract.
o Financial futures contracts--The Fund may purchase or sell financial futures
contracts and options on such futures contracts for the purpose of hedging the
market risk on
14 & 15
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, October 31, 1999
NOTES TO FINANCIAL STATEMENTS (continued)
existing securities or the intended purchase of securities. Futures contracts
are contracts for delayed delivery of securities at a specific future date and
at a specific price or yield. Upon entering into a contract, the Fund deposits
and maintains as collateral such initial margin as required by the exchange on
which the transaction is effected. Pursuant to the contract, the Fund agrees to
receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known as
variation margin and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.
(c) Income taxes--It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.
(d) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Interest income is recognized on the accrual basis. Discounts and market
premiums are amortized into interest income. Realized gains and losses on
security transactions are determined on the identified cost basis.
(e) Prepaid registration fees--Prepaid registration fees are charged to expense
as the related shares are issued.
(f) Dividends and distributions--Dividends from net investment income are
declared daily and paid monthly. Distributions of capital gains are recorded on
the ex-dividend dates. Distributions in excess of realized capital gains are due
primarily to timing differences in book/tax recognition of realized losses.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Merrill Lynch
Asset Management, L.P. ("MLAM"). The general partner of MLAM is Princeton
Services, Inc. ("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch &
Co., Inc. ("ML & Co."), which is the limited partner. The Fund has also entered
into a Distribution Agreement and Distribution Plans with Merrill Lynch Funds
Distributor ("MLFD" or the "Distributor"), a division of Princeton Funds
Distributor, Inc. ("PFD"), which is a wholly-owned subsidiary of Merrill Lynch
Group, Inc.
MLAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee of
.55% on the average daily value of the Fund's net assets.
Pursuant to the Distribution Plans adopted by the Fund in accordance with Rule
12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are accrued daily
and paid monthly at annual rates based upon the average daily net assets of the
shares as follows:
- --------------------------------------------------------------------------------
Account Distribution
Maintenance Fee Fee
- --------------------------------------------------------------------------------
Class B .................................... .20% .10%
Class C .................................... .20% .10%
Class D .................................... .10% --
- --------------------------------------------------------------------------------
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., also provides account
maintenance and distribution services to the Fund. The ongoing account
maintenance fee compensates the Distributor and MLPF&S for providing account
maintenance services to Class B, Class C and Class D shareholders. The ongoing
distribution fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B and Class C
shareholders.
For the year ended October 31, 1999, MLFD earned underwriting discounts and
MLPF&S earned dealer concessions on sales of the Fund's Class A and Class D
Shares as follows:
- -------------------------------------------------------------------------------
MLFD MLPF&S
- -------------------------------------------------------------------------------
Class A .................................... $ 23 $ 408
Class D .................................... $320 $3,415
- -------------------------------------------------------------------------------
For the year ended October 31, 1 999, MLPF&S received contingent deferred sales
charges of $47,538 and $421 relating to transactions in Class B and Class C
Shares, respectively. Furthermore, MLPF&S received contingent deferred sales
charges of $1,946 relating to transactions subject to front-end sales charge
waivers in Class D Shares.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co., is
the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or trustees of the Fund are officers and/or directors of
MLAM, PSI, PFD, FDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended October 31, 1999, were $277,047,909 and $322,458,299, respectively.
Net realized losses for the year ended October 31, 1999 and net unrealized
losses as of October 31, 1999, were as follows:
- -------------------------------------------------------------------------------
Realized Unrealized
Losses Losses
- -------------------------------------------------------------------------------
Long-term investments ...................... $(2,049,930) $(1,024,007)
----------- -----------
Total ...................................... $(2,049,930) $(1,024,007)
=========== ===========
- -------------------------------------------------------------------------------
As of October 31, 1999, net unrealized depreciation for Federal income tax
purposes aggregated $1,024,007, of which $1,002,127 related to appreciated
securities and $2,026,134 related to depreciated securities. The aggregate cost
of investments at October 31, 1999 for Federal income tax purposes was
$165,135,411.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest transactions was
$31,592,836 and $25,237,007 for the years ended October 31, 1999 and October 31,
1998, respectively.
Transactions in shares of beneficial interest for each class were as follows:
- -------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended October 31, 1999 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................... 1,712,913 $ 17,636,576
Shares issued to shareholders in reinvestment
of dividends and distributions ................. 306,689 3,143,960
------------ ------------
Total issued ................................... 2,019,602 20,780,536
Shares redeemed ................................ (2,961,472) (30,092,122)
------------ ------------
Net decrease ................................... (941,870) $ (9,311,586)
============ ============
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended October 31, 1998 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................... 2,776,863 $ 28,912,420
Shares issued to shareholders in reinvestment
of dividends ................................... 203,200 2,117,109
------------ ------------
Total issued ................................... 2,980,063 31,029,529
Shares redeemed ................................ (3,027,631) (31,692,253)
------------ ------------
Net decrease ................................... (47,568) $ (662,724)
============ ============
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended October 31, 1999 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................... 802,474 $ 8,254,703
Shares issued to shareholders in reinvestment
of dividends and distributions ................. 254,818 2,615,325
------------ ------------
Total issued ................................... 1,057,292 10,870,028
Automatic conversion of shares ................. (137,966) (1,398,296)
Shares redeemed ................................ (2,460,606) (25,100,577)
------------ ------------
Net decrease ................................... (1,541,280) $(15,628,845)
============ ============
- -------------------------------------------------------------------------------
16 & 17
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, October 31, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
- -------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended October 31, 1998 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................... 1,191,436 $ 12,448,339
Shares issued to shareholders in reinvestment
of dividends ................................... 197,353 2,054,034
------------ ------------
Total issued ................................... 1,388,789 14,502,373
Automatic conversion of shares ................. (412,931) (4,284,457)
Shares redeemed ................................ (3,077,028) (31,991,532)
------------ ------------
Net decrease ................................... (2,101,170) $(21,773,616)
============ ============
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended October 31, 1999 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................... 92,988 $ 942,941
Shares issued to shareholders
in reinvestment of dividends
and distributions .............................. 18,330 188,016
------------ ------------
Total issued ................................... 111,318 1,130,957
Shares redeemed ................................ (257,964) (2,639,330)
------------ ------------
Net decrease ................................... (146,646) $ (1,508,373)
============ ============
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended October 31, 1998 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................... 314,557 $ 3,282,954
Shares issued to shareholders in reinvestment
of dividends ................................... 16,813 174,929
------------ ------------
Total issued ................................... 331,370 3,457,883
Shares redeemed ................................ (445,964) (4,636,065)
------------ ------------
Net decrease ................................... (114,594) $ (1,178,182)
============ ============
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended October 31, 1999 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................... 489,473 $ 5,089,465
Shares issued to shareholders in reinvestment
of dividends and distributions ................. 131,541 1,348,494
Automatic conversion of shares ................. 137,994 1,398,296
------------ ------------
Total issued ................................... 759,008 7,836,255
Shares redeemed ................................ (1,284,204) (12,980,287)
------------ ------------
Net decrease ................................... (525,196) $ (5,144,032)
============ ============
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended October 31, 1998 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................... 250,935 $ 2,642,596
Shares issued to shareholders
in reinvestment of dividends ................... 88,066 916,938
Automatic conversion of shares ................. 412,978 4,284,457
------------ ------------
Total issued ................................... 751,979 7,843,991
Shares redeemed ................................ (909,048) (9,466,476)
------------ ------------
Net decrease ................................... (157,069) $ (1,622,485)
============ ============
- -------------------------------------------------------------------------------
5. Capital Loss Carryforward:
At October 31, 1999, the Fund had a net capital loss carryforward of
approximately $2,210,000, all of which expires in 2007. This amount will be
available to offset like amounts of any future taxable gains.
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders, Merrill Lynch Municipal Intermediate
Term Fund of Merrill Lynch Municipal Series Trust:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Merrill Lynch Municipal Intermediate Term Fund
of Merrill Lynch Municipal Series Trust as of October 31, 1999, the related
statements of operations for the year then ended and changes in net assets for
each of the years in the two-year period then ended, and the financial
highlights for each of the years in the five-year period then ended. These
financial statements and the financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at October
31, 1999 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Merrill Lynch
Municipal Intermediate Term Fund of Merrill Lynch Municipal Series Trust as of
October 31, 1999, the results of its operations, the changes in its net assets,
and the financial highlights for the respective stated periods in conformity
with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
December 8, 1999
18 & 19
<PAGE>
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of the Fund unless accompanied or preceded by the Fund's
current prospectus. Past performance results shown in this report should not be
considered a representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Statements and other information
herein are as dated and are subject to change.
Merrill Lynch Municipal
Intermediate Term Fund
Merrill Lynch Municipal
Series Trust
Box 9011
Princeton, NJ
08543-9011 #10437--10/99
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