MERRILL LYNCH
MUNICIPAL
INTERMEDIATE
TERM FUND
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
October 31, 2000
<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
Roscoe S. Suddarth, Trustee
Richard R. West, Trustee
Arthur Zeikel, Trustee
Edward D. Zinbarg, Trustee
Vincent R. Giordano, Senior Vice President
William R. Bock, Vice President
Kenneth A. Jacob, Vice President
Donald C. Burke, Vice President and Treasurer
Jodi M. Pinedo, 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, 2000 qualify as tax-exempt interest dividends for
Federal income tax purposes. Additionally, there were no capital gains
distributions paid by the Fund during the year.
Please retain this information for your records.
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, October 31, 2000
TO OUR SHAREHOLDERS
The Municipal Market Environment
During the six months ended October 31, 2000, long-term US Treasury bond yields
generally drifted lower. A number of economic indicators, particularly
employment, new home sales and consumer spending, have suggested that US
economic growth, while still strong, has moderated from 1999's robust levels.
Preliminary estimates for third-quarter 2000 US gross domestic product growth
were recently released at 2.7%, well below the first-quarter 2000 rate of 4.8%
and the second-quarter 2000 rate of 5.6%. This decline in economic growth
suggests to some analysts that the Federal Reserve Board has finished raising
interest rates for its current interest rate cycle. The Federal Reserve Board
increased short-term interest rates at its May meeting and has since kept
monetary policy steady at its subsequent meetings. Given the potential for
stable short-term interest rates in the coming months, investor emphasis focused
on the continuing US Treasury debt reduction program and forecasts of sizeable
Federal budgetary surpluses going forward. Many investors have concluded that
there will be a significant future shortage of longer-dated maturity US Treasury
securities. By late August, US Treasury bond yields declined 30 basis points
(0.30%) to 5.66%, their lowest level in more than a year.
However, for the remainder of the period, bond yields were unable to maintain
their earlier gains. Rising oil prices were the major focus behind the decline
in bond prices, as many investors feared that higher oil prices would result in
increased inflationary pressures. Additionally, US corporations issued large
amounts of taxable debt in order to take advantage of the current low interest
rate environment. During the last three months, US corporations issued more than
$100 billion in investment-grade securities, offering yields in the 7.25%-9%
range. Many investors found these taxable issues an attractive and more
plentiful alternative to US Treasury bonds. As the demand for US Treasury issues
weakened, US bond yields rose. Although US Treasury bond yields rose to 5.78% by
the end of October 2000, overall they declined almost 20 basis points during the
last six months.
The six-month period ended October 31, 2000 was one of the few periods in recent
years in which the tax-exempt bond market outperformed its taxable counterpart,
the US Treasury bond market. While municipal bond yields followed the similar
seesaw pattern of Treasury bond yields, tax-exempt bond price volatility was
significantly reduced. Municipal bond yields traded in a relatively narrow range
during much of October 2000. Overall investor demand for municipal bonds
remained strong, allowing tax-exempt bond yields, as measured by the Bond Buyer
Revenue Bond Index, to decline 30 basis points to end the period at 5.75%.
In the past three months, new long-term municipal bond issuance has continued to
decline, albeit at a slower rate than earlier this year. During this period,
more than $53 billion in new long-term municipal bonds was issued, a decline of
3% compared to the same three-month period in 1999. During the last six months,
more than $105 billion in tax-exempt bonds was underwritten, a decline of 8%
compared to the same six-month period in 1999. Just under $200 billion in new
municipal securities was marketed during the past year, a decline of more than
16% compared to the same 12-month period in 1999.
The demand for municipal bonds came from a number of non-traditional and
conventional sources. Derivative/arbitrage programs and insurance companies
remained the dominant institutional buyers, while individual retail purchases
also remained strong. Traditional, open-end tax-exempt mutual funds have
continued to see significant disintermediation. It was recently reported that
thus far during the 2000 calendar year, long-term municipal bond mutual funds
experienced net cash outflows of more than $15 billion. Fortunately, the
combination of reduced new bond issuance and ongoing demand from non-traditional
sources has been able to more than offset the decline in demand from tax-exempt
mutual funds. This favorable balance has fostered a significant decline in
municipal bond yields in recent months.
Currently, there is no reason to expect that the positive technical position of
the municipal bond market will significantly deteriorate. The steeply positive
yield curve and the relatively high credit quality that the tax-exempt bond
market offers should continue to attract different classes of institutional
buyers. Strong state and local governmental financial conditions also suggest
that issuance should remain manageable into next year.
However, the results of the presidential election may affect the tax-exempt bond
market. Various tax and spending programs proposed by both candidates have
obvious implications for state and local governments as well as corporate and
individual taxpayers. Political history has shown that the enactment of campaign
promises, both Republican and Democratic, has very often been a long, laborious
process. This suggests that during the next few months, US economic factors will
most likely have a greater effect on bond yields than political considerations.
Portfolio Strategy
At the beginning of the six-month period ended October 31, 2000, we continued to
gradually restructure the Fund to have a more neutral duration in an effort to
temper portfolio volatility. In doing so, our focus was to increase coupon
income with the purchase of current and premium-couponed issues in the
15-year-20-year maturity range. We initially maintained this position into the
period, but because of market appreciation, the duration of the Fund was reduced
below what we considered neutral. Also, because of reduced new issuance, we
believed that it would be prudent to return duration to a slightly higher level.
Looking ahead, we anticipate that we will maintain our current fully invested
position in an effort to enhance shareholder income. We believe that any
increase in duration will likely generate incremental yield to shareholders with
limited associated increase in price volatility.
Fiscal Year in Review
For the 12-month period ended October 31, 2000, our focal point was the
reduction of duration and the subsequent decrease in portfolio volatility. We
also structured the Fund with bonds that we believed would enhance the Fund's
tax-exempt income. We were successful in bringing the Fund to a more neutral
duration during the course of the past 12 months. This strategy allowed the
Fund's Class A, Class B, Class C and Class D Shares to achieve total returns of
+7.80%, +7.35%, +7.45% and +7.69%, respectively. (Investment results shown do
not reflect sales charges and would be lower if sales charges were included.
Complete performance can be found on pages 5-7 of this report to shareholders.)
In Conclusion
We thank you for your support of the 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 1, 2000
2 & 3
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, October 31, 2000
PROXY RESULTS
During the six-month period ended October 31, 2000, Merrill Lynch Municipal
Intermediate Term Fund shareholders voted on the following proposals. Proposals
1 and 2 were approved at a shareholders' meeting on July 25, 2000. With respect
to Proposal 3, the meeting was adjourned until December 20, 2000. The
description of each proposal and number of shares voted are as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
Shares Voted
For
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. To elect the Fund's Board of Trustees: Terry K. Glenn 11,906,414
Ronald W. Forbes 11,913,861
Cynthia A. Montgomery 11,901,730
Charles C. Reilly 11,900,188
Kevin A. Ryan 11,903,205
Roscoe S. Suddarth 11,903,048
Richard R. West 11,906,411
Arthur Zeikel 11,907,198
Edward D. Zinbarg 11,900,595
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. To ratify the selection of Deloitte & Touche LLP as the Fund's
independent auditors for the current fiscal year. 11,549,550 132,692 470,606
-----------------------------------------------------------------------------------------------------------------------
3. To convert the Fund to "master/feeder" structure. Adjourned Adjourned Adjourned
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
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/
6 Month 12 Month Since Inception Standardized
As of October 31, 2000 Total Return Total Return Total Return 30-Day Yield
===========================================================================================================================
<S> <C> <C> <C> <C>
ML Municipal Intermediate Term Fund Class A Shares +5.35% +7.80% +83.55% 4.34%
---------------------------------------------------------------------------------------------------------------------------
ML Municipal Intermediate Term Fund Class B Shares +5.08 +7.35 +77.75 4.07
---------------------------------------------------------------------------------------------------------------------------
ML Municipal Intermediate Term Fund Class C Shares +5.08 +7.45 +36.37 4.07
---------------------------------------------------------------------------------------------------------------------------
ML Municipal Intermediate Term Fund Class D Shares +5.19 +7.69 +38.21 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.
4 & 5
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, October 31, 2000
PERFORMANCE DATA (concluded)
Merrill Lynch Municipal Intermediate Term Fund's 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:
10/90 10/00
ML Municipal Intermediate Term Fund+--
Class A Shares* $ 9,900 $18,173
ML Municipal Intermediate Term Fund+--
Class B Shares* $10,000 $17,775
Lehman Brothers Municipal
Bond Index++ $10,000 $20,115
* 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.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
One Year Ended 9/30/00 +5.64% +4.58%
--------------------------------------------------------------------------------
Five Years Ended 9/30/00 +5.04 +4.82
--------------------------------------------------------------------------------
Ten Years Ended 9/30/00 +6.26 +6.15
--------------------------------------------------------------------------------
* Maximum sales charge is 1%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
One Year Ended 9/30/00 +5.31% +4.31%
--------------------------------------------------------------------------------
Five Years Ended 9/30/00 +4.70 +4.70
--------------------------------------------------------------------------------
Ten Years Ended 9/30/00 +5.93 +5.93
--------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after
1 year.
** Assuming payment of applicable contingent deferred sales charge.
Merrill Lynch Municipal Intermediate Term Fund's 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** 10/00
ML Municipal Intermediate Term Fund+--
Class C Shares* $10,000 $13,637
ML Municipal Intermediate Term Fund+--
Class D Shares* $ 9,900 $13,684
Lehman Brothers Municipal
Bond Index++ $10,000 $15,163
* 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.
Average Annual Total Return
% Return % Return
Without CDSC With CDSC**
================================================================================
Class C Shares*
================================================================================
One Year Ended 9/30/00 +5.41% +4.41%
--------------------------------------------------------------------------------
Five Years Ended 9/30/00 +4.71 +4.71
--------------------------------------------------------------------------------
Inception (10/21/94) through 9/30/00 +5.17 +5.17
--------------------------------------------------------------------------------
* 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*
================================================================================
One Year Ended 9/30/00 +5.53% +4.48%
--------------------------------------------------------------------------------
Five Years Ended 9/30/00 +4.93 +4.72
--------------------------------------------------------------------------------
Inception (10/21/94) through 9/30/00 +5.41 +5.23
--------------------------------------------------------------------------------
* Maximum sales charge is 1%.
** Assuming maximum sales charge.
6 & 7
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, October 31, 2000
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Alaska--1.9% AAA Aaa $ 2,250 Alaska Student Loan Corporation, Student Loan Revenue Bonds,
AMT, Series A, 5.65% due 7/01/2012 (b) $ 2,285
A1+ VMIG1+ 300 Valdez, Alaska, Marine Terminal Revenue Refunding Bonds
(Exxon Pipeline Company Project), VRDN, Series B, 4.55%
due 12/01/2033 (a) 300
====================================================================================================================================
Arizona--1.9% A1 VMIG1+ 500 Maricopa County, Arizona, Pollution Control Corporation, PCR,
Refunding (Southern California Edison Company), VRDN, Series A,
4.60% due 6/01/2035 (a) 500
NR* NR* 2,000 Mohave County, Arizona, IDA, IDR (North Star Steel Company Project),
AMT, 6.70% due 3/01/2020 2,067
====================================================================================================================================
California--11.2% BBB+ Baa1 5,730 California Statewide Communities Development Authority, COP
(Catholic Healthcare West), 6% due 7/01/2009 5,859
AAA Aaa 4,000 Oxnard, California, Financing Authority, Solid Waste
Revenue Bonds, AMT, 5.75% due 5/01/2010 (b) 4,212
AAA Aaa 5,000 Port Oakland, California, Revenue Bonds, AMT, Series K, 5.75%
due 11/01/2014 (d) 5,261
====================================================================================================================================
Colorado--3.2% NR* Aaa 4,180 Broomfield, Colorado, Open Space Park and Recreational Facilities,
COP, 5.75% due 12/01/2013 (b) 4,412
====================================================================================================================================
District of Columbia-- AAA Aaa 5,000 District of Columbia, GO, Refunding, Series B, 5.50%
3.8% due 6/01/2013 (e) 5,129
====================================================================================================================================
Georgia--3.9% AAA Aaa 5,000 Georgia State, GO, Series D, 5.80% due 11/01/2007 5,356
====================================================================================================================================
Illinois--4.0% AA- A1 5,000 Illinois State Toll Highway Authority, Toll Highway Priority
Revenue Bonds, Series A, 6.30% due 1/01/2011 5,517
====================================================================================================================================
Indiana--5.0% AA- NR* 6,325 Franklin Township, Indiana, School Building Corporation, Marion
County, First Mortgage Revenue Bonds, 6% due 7/15/2013 6,821
====================================================================================================================================
Maine--1.2% NR* A 1,675 Maine Educational Loan Marketing Corporation, Student Loan Revenue
Refunding Bonds, AMT, 6.90% due 11/01/2003 1,702
====================================================================================================================================
Massachusetts--7.8% AA- Aa2 10,000 Massachusetts State, Consolidated Loan, GO, Series C, 5.75%
due 10/01/2011 10,726
====================================================================================================================================
Mississippi--1.9% NR* VMIG1+ 2,600 Jackson County, Mississippi, PCR, Refunding (Chevron U.S.A. Inc.
Project), VRDN, 4.55% due 12/01/2016 (a) 2,600
====================================================================================================================================
New Mexico--2.6% A1+ P1 300 Farmington, New Mexico, PCR, Refunding (Arizona Public
Service Company), VRDN, Series A, 4.60% due 5/01/2024 (a) 300
AA+ Aa2 3,000 New Mexico State Highway Commission, Tax Revenue Bonds,
Senior Sub-Lien, Series A, 6% due 6/15/2013 3,220
====================================================================================================================================
New York--20.7% A1+ VMIG1+ 2,000 Long Island Power Authority, New York, Electric System Revenue Bonds,
VRDN, Sub-Series 5, 4.60% due 5/01/2033 (a) 2,000
AAA Aaa 5,000 Metropolitan Transportation Authority, New York, Transit Facilities
Revenue Refunding Bonds, Series C, 5.125% due 7/01/2013 (e) 5,019
A A2 5,000 New York City, New York, GO, Refunding, Series A, 6.50% due
5/15/2011 5,595
New York State Dormitory Authority, Revenue Refunding Bonds:
BBB+ Baa1 5,000 (Mount Sinai Health), Series A, 6% due 7/01/2009 5,237
AAA NR* 5,000 (State University Educational Facilities), Series 1989,
6% due 5/15/2013 (c) 5,419
AAA Aaa 5,000 Triborough Bridge and Tunnel Authority, New York Special Obligation
Revenue Refunding Bonds, Series A, 6% due 1/01/2019 (c) 5,004
====================================================================================================================================
North Carolina-- A1+ NR* 450 Raleigh Durham, North Carolina, Airport Authority, Special Facility
0.3% Revenue Refunding Bonds (American Airlines Inc.), VRDN, Series B,
4.60% due 11/01/2015 (a) 450
====================================================================================================================================
Ohio--2.0% A1+ VMIG1+ 1,100 Cuyahoga County, Ohio, Hospital Revenue Bonds (The Cleveland Clinic),
VRDN, Series D, 4.60% due 1/01/2026 (a) 1,100
A1+ NR* 1,600 Ohio State, PCR, Refunding (Sohio Air Project), VRDN, 4.60% due
5/01/2022 (a) 1,600
====================================================================================================================================
Oregon--8.1% AAA Aaa 5,475 Oregon State Department of Administrative Services, COP, Series A,
5.75% due 5/01/2011 (b) 5,858
AAA Aaa 5,000 Oregon State Department of Administrative Services, Lottery Revenue
Bonds, Series B, 5.75% due 4/01/2013 (e) 5,271
====================================================================================================================================
Pennsylvania--1.9% A1+ NR* 2,600 Pennsylvania State Higher Educational Facilities Authority, Revenue
Refunding Bonds (Carnegie Mellon University), VRDN, Series C, 4.60%
due 11/01/2029 (a) 2,600
====================================================================================================================================
Tennessee--1.2% AA Aa2 1,600 Tennessee HDA, Revenue Bonds (Homeownership Program), AMT,
Series 2-C, 5.85% due 7/01/2009 1,669
====================================================================================================================================
Texas--1.0% A1+ NR* 300 Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Refunding Bonds (Methodist Hospital), VRDN, 4.60%
due 12/01/2025 (a) 300
AAA Aaa 1,000 Houston, Texas, Airport System Revenue Refunding Bonds, Sub-Lien,
AMT, Series A, 5.875% due 7/01/2012 (e) 1,051
====================================================================================================================================
Virginia--1.1% AA+ Aa1 1,365 Virginia State, HDA, Commonwealth Mortgage Revenue Bonds, Series J,
Sub-Series J-2, 6.45% due 1/01/2010 1,448
====================================================================================================================================
Washington--15.5% NR* Aa1 4,860 Pierce County, Washington, School District Number 416, White River,
GO, 6% due 12/01/2012 5,253
AAA Aaa 4,885 Port Seattle, Washington, Revenue Bonds, AMT, Series B, 6% due
2/01/2014 (c) 5,217
AA Aa2 5,000 Seattle, Washington, Municipal Light and Power Revenue Bonds, 6%
due 10/01/2012 5,371
AA+ Aa1 5,000 Washington State, GO, Series B, 6% due 1/01/2012 5,364
====================================================================================================================================
Wisconsin--3.9% AA Aa2 285 Wisconsin Housing and Economic Development Authority, Home Ownership
Revenue Refunding Bonds, AMT, Series F, 7.40% due 7/01/2013 297
AAA Aaa 5,000 Wisconsin State Transportation Revenue Bonds, Series A, 5.50% due
7/01/2015 (d) 5,086
====================================================================================================================================
</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)
COP Certificates of Participation
GO General Obligation Bonds
HDA Housing Development Authority
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
PCR Pollution Control Revenue Bonds
VRDN Variable Rate Demand Notes
8 & 9
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, October 31, 2000
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face
Ratings Ratings Amount Issue Value
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Puerto Rico--0.8% AA Aa2 $ 1,000 Puerto Rico, Industrial, Tourist, Educational, Medical and
Environmental Control Facilities Revenue Bonds (Hospital de
la Concepcion), Series A, 6.375% due 11/15/2015 $ 1,094
===================================================================================================================================
Total Investments (Cost--$139,616)--104.9% 143,570
Liabilities in Excess of Other Assets--(4.9%) (6,650)
--------
Net Assets--100.0% $136,920
========
===================================================================================================================================
</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,
2000.
(b) AMBAC Insured.
(c) MBIA Insured.
(d) FGIC Insured.
(e) FSA Insured.
* 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.
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
As of October 31, 2000
===================================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$139,615,786) ........................... $ 143,569,835
Cash ............................................................................ 310,445
Receivables:
Securities sold ............................................................... $ 2,974,038
Interest ...................................................................... 2,517,310
Beneficial interest sold ...................................................... 32,923 5,524,271
-------------
Prepaid registration fees and other assets ...................................... 107,378
-------------
Total assets .................................................................... 149,511,929
-------------
===================================================================================================================================
Liabilities: Payables:
Securities purchased .......................................................... 11,732,233
Beneficial interest redeemed .................................................. 471,676
Dividends to shareholders ..................................................... 133,295
Investment adviser ............................................................ 61,835
Distributor ................................................................... 15,259 12,414,298
-------------
Accrued expenses and other liabilities .......................................... 177,522
-------------
Total liabilities ............................................................... 12,591,820
-------------
===================================================================================================================================
Net Assets: Net assets ...................................................................... $ 136,920,109
=============
===================================================================================================================================
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited number
Consist of: of shares authorized ........................................................ $ 514,383
Class B Shares of beneficial interest, $.10 par value, unlimited number
of shares authorized ......................................................... 463,632
Class C Shares of beneficial interest, $.10 par value, unlimited number
of shares authorized ......................................................... 37,292
Class D Shares of beneficial interest, $.10 par value, unlimited number
of shares authorized ......................................................... 347,829
Paid-in capital in excess of par ................................................ 134,666,531
Accumulated realized capital losses on investments--net ......................... (658,087)
Accumulated distributions in excess of realized capital gains on
investments--net ............................................................. (2,405,520)
Unrealized appreciation on investments--net ..................................... 3,954,049
-------------
Net assets ...................................................................... $ 136,920,109
=============
===================================================================================================================================
Net Asset Class A--Based on net assets of $51,675,188 and 5,143,829 shares of beneficial
Value: interest outstanding ........................................................ $ 10.05
=============
Class B--Based on net assets of $46,570,726 and 4,636,316 shares of beneficial
interest outstanding ........................................................ $ 10.04
=============
Class C--Based on net assets of $3,744,393 and 372,918 shares of beneficial
interest outstanding ........................................................ $ 10.04
=============
Class D--Based on net assets of $34,929,802 and 3,478,292 shares of beneficial
interest outstanding ......................................................... $ 10.04
=============
===================================================================================================================================
</TABLE>
See Notes to Financial Statements.
10 & 11
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, October 31, 2000
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended October 31, 2000
=======================================================================================================================
<S> <C> <C> <C>
Investment Interest and amortization of premium and discount earned ......... $ 7,568,348
Income:
=======================================================================================================================
Expenses: Investment advisory fees ......................................... $ 786,931
Account maintenance and distribution fees--Class B ............... 152,969
Professional fees ................................................ 73,385
Accounting services .............................................. 70,941
Transfer agent fees--Class B ..................................... 44,587
Transfer agent fees--Class A ..................................... 37,805
Account maintenance fees--Class D ................................ 36,365
Printing and shareholder reports ................................. 27,761
Transfer agent fees--Class D ..................................... 26,488
Registration fees ................................................ 20,929
Custodian fees ................................................... 11,572
Account maintenance and distribution fees--Class C ............... 11,163
Trustees' fees and expenses ...................................... 10,609
Pricing fees ..................................................... 6,823
Transfer agent fees--Class C ..................................... 3,450
Other ............................................................ 38,537
------------
Total expenses ................................................... 1,360,315
------------
Investment income--net ........................................... 6,208,033
------------
=======================================================================================================================
Realized & Realized loss on investments--net ................................ (658,087)
Unrealized Gain Change in unrealized appreciation/depreciation on investments--net 4,978,056
(Loss) on ------------
Investments--Net: Net Increase in Net Assets Resulting from Operations ............. $ 10,528,002
============
=======================================================================================================================
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Year
Ended October 31,
-----------------------------
Increase (Decrease) in Net Assets: 2000 1999
=======================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net ........................................... $ 6,208,033 $ 7,030,037
Realized loss on investments--net ................................ (658,087) (2,049,930)
Change in unrealized appreciation/depreciation on investments--net 4,978,056 (9,040,599)
------------ ------------
Net increase (decrease) in net assets resulting from operations .. 10,528,002 (4,060,492)
------------ ------------
=======================================================================================================================
Dividends & Investment income--net:
Distributions to Class A ........................................................ (2,331,976) (2,740,214)
Shareholders: Class B ........................................................ (2,126,580) (2,391,903)
Class C ........................................................ (155,168) (143,019)
Class D ........................................................ (1,594,309) (1,754,901)
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 .................................. (6,208,033) (11,429,876)
------------ ------------
=======================================================================================================================
Beneficial Net decrease in net assets derived from
Interest beneficial interest transactions ............................... (22,758,712) (31,592,836)
Transactions: ------------ ------------
=======================================================================================================================
Net Assets: Total decrease in net assets ..................................... (18,438,743) (47,083,204)
Beginning of year ................................................ 155,358,852 202,442,056
------------ ------------
End of year ...................................................... $136,920,109 $155,358,852
============ ============
=======================================================================================================================
</TABLE>
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: 2000 1999 1998 1997 1996
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ....................... $ 9.75 $ 10.60 $ 10.23 $ 9.94 $ 10.00
Operating ------- ------- ------- ------- -------
Performance: Investment income--net ................................... .44 .40 .43 .45 .48
Realized and unrealized gain (loss) on investments--net .. .30 (.62) .37 .29 (.06)
------- ------- ------- ------- -------
Total from investment operations ......................... .74 (.22) .80 .74 .42
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net ................................. (.44) (.40) (.43) (.45) (.48)
Realized gain on investments--net ...................... -- (.10) -- -- --
In excess of realized gain on investments--net ......... -- (.13) -- -- --
------- ------- ------- ------- -------
Total dividends and distributions ........................ (.44) (.63) (.43) (.45) (.48)
------- ------- ------- ------- -------
Net asset value, end of year ............................. $ 10.05 $ 9.75 $ 10.60 $ 10.23 $ 9.94
======= ======= ======= ======= =======
==================================================================================================================================
Total Investment Based on net asset value per share ....................... 7.80% (2.16%) 8.00% 7.59% 4.27%
Return:* ======= ======= ======= ======= =======
==================================================================================================================================
Ratios to Expenses ................................................. .80% .80% .74% .79% .81%
Average ======= ======= ======= ======= =======
Net Assets:
Investment income--net ................................... 4.47% 3.97% 4.17% 4.40% 4.79%
======= ======= ======= ======= =======
==================================================================================================================================
Supplemental Net assets, end of year (in thousands) ................... $51,675 $58,635 $73,769 $71,684 $30,353
Data: ======= ======= ======= ======= =======
Portfolio turnover ....................................... 210.04% 159.37% 174.64% 167.41% 146.82%
======= ======= ======= ======= =======
==================================================================================================================================
</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, 2000
FINANCIAL HIGHLIGHTS (concluded)
<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: 2000 1999 1998 1997 1996
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year .................... $ 9.75 $ 10.60 $ 10.23 $ 9.93 $ 10.00
Operating ------- ------- ------- ------- -------
Performance: Investment income--net ................................ .41 .37 .40 .41 .44
Realized and unrealized gain (loss) on investments--net .29 (.62) .37 .30 (.07)
------- ------- ------- ------- -------
Total from investment operations ...................... .70 (.25) .77 .71 .37
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net .............................. (.41) (.37) (.40) (.41) (.44)
Realized gain on investments--net ................... -- (.10) -- -- --
In excess of realized gain on investments--net ...... -- (.13) -- -- --
------- ------- ------- ------- -------
Total dividends and distributions ..................... (.41) (.60) (.40) (.41) (.44)
------- ------- ------- ------- -------
Net asset value, end of year .......................... $ 10.04 $ 9.75 $ 10.60 $ 10.23 $ 9.93
======= ======= ======= ======= ========
===================================================================================================================================
Total Investment Based on net asset value per share .................... 7.35% (2.46%) 7.67% 7.35% 3.84%
Return:* ======= ======= ======= ======= ========
===================================================================================================================================
Ratios to Average Expenses .............................................. 1.12% 1.11% 1.06% 1.11% 1.13%
Net Assets ======= ======= ======= ======= ========
Investment income--net ................................ 4.16% 3.65% 3.86% 4.13% 4.47%
======= ======= ======= ======= ========
===================================================================================================================================
Supplemental Net assets, end of year (in thousands) ................ $46,571 $54,559 $75,688 $94,552 $169,441
Data: ======= ======= ======= ======= ========
Portfolio turnover .................................... 210.04% 159.37% 174.64% 167.41% 146.82%
======= ======= ======= ======= ========
===================================================================================================================================
</TABLE>
<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: 2000 1999 1998 1997 1996
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year .................... $ 9.74 $ 10.60 $ 10.23 $ 9.93 $ 10.00
Operating ------- ------- ------- ------- -------
Performance: Investment income--net ................................ .41 .37 .40 .41 .44
Realized and unrealized gain (loss) on investments--net .30 (.63) .37 .30 (.07)
------- ------- ------- ------- -------
Total from investment operations ...................... .71 (.26) .77 .71 .37
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net .............................. (.41) (.37) (.40) (.41) (.44)
Realized gain on investments--net ................... -- (.10) -- -- --
In excess of realized gain on investments--net ...... -- (.13) -- -- --
------- ------- ------- ------- -------
Total dividends and distributions ..................... (.41) (.60) (.40) (.41) (.44)
------- ------- ------- ------- -------
Net asset value, end of year .......................... $ 10.04 $ 9.74 $ 10.60 $ 10.23 $ 9.93
======= ======= ======= ======= =======
===================================================================================================================================
Total Investment Based on net asset value per share .................... 7.45% (2.58%) 7.65% 7.34% 3.82%
Return:* ======= ======= ======= ======= =======
===================================================================================================================================
Ratios to Average Expenses .............................................. 1.12% 1.12% 1.07% 1.13% 1.15%
Net Assets: ======= ======= ======= ======= =======
Investment income--net ................................ 4.16% 3.64% 3.85% 4.10% 4.44%
======= ======= ======= ======= =======
===================================================================================================================================
Supplemental Net assets, end of year (in thousands) ................ $ 3,744 $ 3,275 $ 5,116 $ 6,110 $ 8,313
Data: ======= ======= ======= ======= =======
Portfolio turnover .................................... 210.04% 159.37% 174.64% 167.41% 146.82%
======= ======= ======= ======= =======
===================================================================================================================================
</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: 2000 1999 1998 1997 1996
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year .................... $ 9.74 $ 10.60 $ 10.23 $ 9.94 $ 10.00
Operating ------- ------- ------- ------- -------
Performance: Investment income--net ................................ .43 .39 .42 .44 .47
Realized and unrealized gain (loss) on investments--net .30 (.63) .37 .29 (.06)
------- ------- ------- ------- -------
Total from investment operations ...................... .73 (.24) .79 .73 .41
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net .............................. (.43) (.39) (.42) (.44) (.47)
Realized gain on investments--net ................... -- (.10) -- -- --
In excess of realized gain on investments--net ...... -- (.13) -- -- --
------- ------- ------- ------- -------
Total dividends and distributions ..................... (.43) (.62) (.42) (.44) (.47)
------- ------- ------- ------- -------
Net asset value, end of year .......................... $ 10.04 $ 9.74 $ 10.60 $ 10.23 $ 9.94
======= ======= ======= ======= =======
===================================================================================================================================
Total Investment Based on net asset value per share .................... 7.69% (2.35%) 7.90% 7.48% 4.17%
Return:* ======= ======= ======= ======= =======
===================================================================================================================================
Ratios to Average Expenses .............................................. .90% .90% .84% .89% .91%
Net Assets: ======= ======= ======= ======= =======
Investment income--net ................................ 4.37% 3.87% 4.07% 4.31% 4.68%
======= ======= ======= ======= =======
===================================================================================================================================
Supplemental Net assets, end of year (in thousands) ................ $34,930 $38,890 $47,869 $47,809 $ 8,375
Data: ======= ======= ======= ======= =======
Portfolio turnover .................................... 210.04% 159.37% 174.64% 167.41% 146.82%
======= ======= ======= ======= =======
===================================================================================================================================
</TABLE>
* Total investment returns exclude the effects of sales charges.
See Notes to Financial Statements.
14 & 15
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, October 31, 2000
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
conformity with accounting principles generally accepted in the United States of
America, 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
investment strategies to increase or decrease the level of risk to which the
Fund is exposed more quickly and efficiently than transactions in other types of
instruments. Losses may arise due to changes in the value of the contract or if
the counterparty does not perform under the contract.
o Financial futures contracts -- The Fund may purchase or sell financial futures
contracts and options on such futures contracts for the purpose of hedging the
market risk on existing securities or the intended purchase of securities.
Futures contracts are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a contract, the
Fund deposits and maintains as collateral such initial margin as required by the
exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.
(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
Investment Managers, L.P. ("MLIM"). The general partner of MLIM 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 FAM Distributors,
Inc. ("FAMD" or the "Distributor"), which is a wholly-owned subsidiary of
Merrill Lynch Group, Inc.
MLIM 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, 2000, FAMD earned underwriting discounts and
MLPF&S earned dealer concessions on sales of the Fund's Class A and Class D
Shares as follows:
--------------------------------------------------------------------------------
FAMD MLPF&S
--------------------------------------------------------------------------------
Class A ........................................... $26 $643
Class D ........................................... $76 $725
--------------------------------------------------------------------------------
For the year ended October 31, 2000, MLPF&S received contingent deferred sales
charges of $16,427 and $3 relating to transactions in Class B and Class C
Shares, respectively.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co., is
the Fund's transfer agent.
Accounting services are provided to the Fund by MLIM.
Certain officers and/or trustees of the Fund are officers and/or directors of
MLIM, PSI, FAMD, FDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended October 31, 2000, were $280,267,576 and $295,137,713, respectively.
Net realized losses for the year ended October 31, 2000 and net unrealized gains
as of October 31, 2000, were as follows:
--------------------------------------------------------------------------------
Realized Unrealized
Losses Gains
--------------------------------------------------------------------------------
Long-term investments ................. $ (658,087) $3,954,049
---------- ----------
Total ................................. $ (658,087) $3,954,049
========== ==========
--------------------------------------------------------------------------------
As of October 31, 2000, net unrealized appreciation for Federal income tax
purposes aggregated $3,954,049, of which $3,961,316 related to appreciated
securities and $7,267 related to depreciated securities. The aggregate cost of
investments at October 31, 2000 for Federal income tax purposes was
$139,615,786.
16 & 17
<PAGE>
Merrill Lynch Municipal Intermediate Term Fund, October 31, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest transactions was
$22,758,712 and $31,592,836 for the years ended October 31, 2000 and October 31,
1999, respectively.
Transactions in shares of beneficial interest for each class were as follows:
-------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended October 31, 2000 Shares Amount
-------------------------------------------------------------------------------
Shares sold ............................ 1,631,150 $ 16,047,075
Shares issued to shareholders
in reinvestment of dividends ........... 163,691 1,612,284
---------- ------------
Total issued ........................... 1,794,841 17,659,359
Shares redeemed ........................ (2,666,057) (26,227,451)
---------- ------------
Net decrease ........................... (871,216) $ (8,568,092)
========== ============
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
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 B Shares for the Year Dollar
Ended October 31, 2000 Shares Amount
-------------------------------------------------------------------------------
Shares sold ............................ 1,187,329 $ 11,582,183
Shares issued to shareholders
in reinvestment of dividends ........... 139,028 1,368,865
---------- ------------
Total issued ........................... 1,326,357 12,951,048
Automatic conversion of shares ......... (207,640) (2,052,709)
Shares redeemed ........................ (2,079,934) (20,413,858)
---------- ------------
Net decrease ........................... (961,217) $ (9,515,519)
========== ============
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
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)
========== ============
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended October 31, 2000 Shares Amount
-------------------------------------------------------------------------------
Shares sold ............................ 198,711 $ 1,938,912
Shares issued to shareholders
in reinvestment of dividends ........... 13,284 130,828
-------- ------------
Total issued ........................... 211,995 2,069,740
Shares redeemed ........................ (175,243) (1,718,913)
-------- ------------
Net increase ........................... 36,752 $ 350,827
======== ============
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
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 D Shares for the Year Dollar
Ended October 31, 2000 Shares Amount
-------------------------------------------------------------------------------
Shares sold ............................ 421,151 $ 4,131,542
Shares issued to shareholders
in reinvestment of dividends ........... 81,118 798,632
Automatic conversion of shares ......... 207,747 2,052,709
---------- ------------
Total issued ........................... 710,016 6,982,883
Shares redeemed ........................ (1,222,576) (12,008,811)
---------- ------------
Net decrease ........................... (512,560) $ (5,025,928)
========== ============
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
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)
========== ============
-------------------------------------------------------------------------------
5. Short-Term Borrowings:
On December 3, 1999, the Fund, along with certain other funds managed by MLIM
and its affiliates, entered into a $1,000,000,000 credit agreement with Bank of
America, N.A. and certain other lenders. The Fund may borrow under the credit
agreement to fund shareholder redemptions and other lawful purposes other than
for leverage. The Fund may borrow up to the maximum amount allowable under the
Fund's current prospectus and statement of additional information, subject to
various other legal, regulatory or contractual limits. The Fund pays a
commitment fee of .09% per annum based on the Fund's pro rata share of the
unused portion of the facility. Amounts borrowed under the facility bear
interest at a rate equal to, at each fund's election, the Federal Funds rate
plus .50% or a base rate as determined by Bank of America, N.A. The Fund did not
borrow under the facility during the year ended October 31, 2000.
6. Capital Loss Carryforward:
At October 31, 2000, the Fund had a net capital loss carryforward of
approximately $2,878,000, of which $2,211,000 expires in 2007 and $667,000
expires in 2008. 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 (the "Fund") as of October 31, 2000, 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 auditing standards generally accepted
in the United States of America. 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, 2000 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, 2000, the results of its operations, the changes in its net assets,
and the financial highlights for the respective stated periods in conformity
with accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
December 5, 2000
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--10/00
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