UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-04802
Name of Fund: BlackRock Intermediate Municipal Fund of
BlackRock Municipal Series Trust
Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809
Name and address of agent for service: Donald C. Burke, Chief Executive
Officer, BlackRock Intermediate Municipal Fund of BlackRock Municipal
Series Trust, 800 Scudders Mill Road, Plainsboro, NJ 08536. Mailing
address: P.O. Box 9011, Princeton, NJ 08543-9011
Registrant's telephone number, including area code: (800) 441-7762
Date of fiscal year end: 05/31/2008
Date of reporting period: 06/01/2007 - 05/31/2008
Item 1 - Report to Stockholders
EQUITIES FIXED INCOME REAL ESTATE
LIQUIDITY ALTERNATIVES BLACKROCK SOLUTIONS
BlackRock Intermediate BLACKROCK
Municipal Fund
OF BLACKROCK MUNICIPAL SERIES TRUST
ANNUAL REPORT | MAY 31, 2008
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
Table of Contents
================================================================================
Page
- --------------------------------------------------------------------------------
A Letter to Shareholders ................................................. 3
Annual Report:
Fund Summary ............................................................. 4
About Fund Performance ................................................... 6
Disclosure of Expenses ................................................... 6
Portfolio Summary ........................................................ 7
Financial Statements:
Schedule of Investments .............................................. 8
Statement of Assets and Liabilities .................................. 11
Statements of Operations ............................................. 12
Statements of Changes in Net Assets .................................. 13
Financial Highlights ..................................................... 14
Notes to Financial Statements ............................................ 18
Report of Independent Registered Public Accounting Firm .................. 26
Important Tax Information (Unaudited) .................................... 26
Officers and Trustees .................................................... 27
Additional Information ................................................... 31
Mutual Fund Family ....................................................... 34
2 BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008
A Letter to Shareholders
Dear Shareholder
For much of the reporting period, investors grappled with the repercussions of
the credit crisis that surfaced last summer, and with the effects of a weakening
economy and surging energy and food prices. These factors were offset by the
positive impact from robust export activity, strength in the non-financial
corporate sector and monetary and fiscal stimuli.
Amid the market turbulence, the Federal Reserve Board (the "Fed") initiated a
series of moves to restore liquidity and bolster financial market stability.
Since September 2007, the central bank slashed the target federal funds rate 325
basis points (3.25%), bringing the rate to 2.0% as of period-end. Also of
significance were its other policy decisions, which included extending use of
the discount window to broker-dealers and investment banks and backstopping the
rescue of ill-fated Bear Stearns. Notably, on April 30, the Fed dropped previous
references to downside growth risks and added more emphasis on inflationary
pressures, indicating the central bankers have likely concluded the current
cycle of monetary easing.
Nevertheless, the Fed's response to the financial crisis helped to ease credit
turmoil and investor anxiety. Since hitting a low point on March 17, following
the collapse of Bear Stearns, stocks appreciated 10% (through May 30). Most
international markets, which had outperformed U.S. stocks for some time, saw a
reversal in that trend, as the troubled credit situation and downward pressures
on growth fanned recession fears.
In fixed income markets, Treasury securities rallied (yields fell as prices
correspondingly rose), as a broad "flight-to-quality" theme persisted. The yield
on 10-year Treasury issues, which touched 5.30% in June 2007 (its highest level
in five years), fell to a low of 3.34% in March 2008 before rising to 4.06% by
May 31 as investors grew more risk tolerant and shifted out of Treasury issues
in favor of stocks and other high-quality fixed income sectors. Tax-exempt
issues underperformed throughout most of the reporting period, pressured by
problems among municipal bond insurers and the freeze in the market for auction
rate securities. However, the final two months saw a firmer tone in the
municipal market, as investors took advantage of unusually high yields.
On the whole, results for the major benchmark indexes generally reflected
heightened investor risk aversion:
Total Returns as of May 31, 2008 6-month 12-month
==========================================================================================================
U.S. equities (S&P 500 Index) (4.47%) (6.70%)
- ----------------------------------------------------------------------------------------------------------
Small cap U.S. equities (Russell 2000 Index) (1.87) (10.53)
- ----------------------------------------------------------------------------------------------------------
International equities (MSCI Europe, Australasia, Far East Index) (5.21) (2.53)
- ----------------------------------------------------------------------------------------------------------
Fixed income (Lehman Brothers U.S. Aggregate Index) 1.49 6.89
- ----------------------------------------------------------------------------------------------------------
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) 1.44 3.87
- ----------------------------------------------------------------------------------------------------------
High yield bonds (Lehman Brothers U.S. Corporate High Yield 2% Issuer Capped Index) 1.81 (1.08)
- ----------------------------------------------------------------------------------------------------------
Past performance is no guarantee of future results. Index performance shown for
illustrative purposes only.
You cannot invest directly in an index.
As you navigate today's volatile markets, we encourage you to review your
investment goals with your financial professional and to make portfolio changes,
as needed. For more up-to-date commentary on the economy and financial markets,
we invite you to visit www.blackrock.com/funds. As always, we thank you for
entrusting BlackRock with your investment assets, and we look forward to
continuing to serve you in the months and years ahead.
Sincerely,
/s/ Rob Kapito
Rob Kapito
President, BlackRock Advisors, LLC
3
THIS PAGE NOT PART OF YOUR FUND REPORT
Fund Summary
Portfolio Management Commentary
How did the Fund perform?
o The Fund recently changed its fiscal year end to May 31. The Fund
underperformed the broad-market Lehman Brothers Municipal Bond Index and
the Lipper Intermediate Municipal Debt Funds category average for the
12-month period ended May 31, 2008.
o The Fund focuses its investments on the intermediate portion of the
municipal yield curve; therefore, the Lipper category average provides a
truer representation of the Fund's composition and a more comparable means
for measurement.
What factors influenced performance?
o U.S. Treasury yields generally moved lower (while prices correspondingly
rose) during the year in response to weaker domestic economic growth and
declining equity valuations. The Federal Reserve Board cut short-term
interest rates seven times from 5.25% to 2.0%. Ten-year Treasury note
yields declined nearly three times as much as 30-year bond yields.
o The municipal market underperformed U.S. Treasury issues, as credit
downgrades of the monoline insurers and disruption of the auction rate
securities market weighed heavily on the sector. Long-term municipal bond
yields were acutely affected. New issuance for the fiscal year was strong
and essentially unchanged versus the same period in 2007, despite a 12%
decline in the past six months. More recently, the pace has increased,
alongside improved investor demand.
o The Fund's lower-rated holdings detracted from comparative results amid a
widening of credit spreads over the past year. An above-average cash
reserve position (in keeping with a more defensive posture, particularly
in early 2008) also curbed performance somewhat, as it prevented the Fund
from fully participating in market improvement late in the period.
o On the positive side, Fund performance benefited from an increase in
exposure to high-quality municipals, including AAA-rated general
obligation and pre-refunded bonds, which outperformed the broader market.
Management intends to continue this portfolio restructuring going forward.
Describe recent portfolio activity.
o The Fund's cash flows were relatively stable throughout the 12-month
period. We did commit some of the Fund's cash reserves to higher-quality
issues as opportunities presented themselves. In addition, we purchased
select lower-rated issues, particularly during periods of market
volatility when market yields became historically attractive. The recent
purchases moved the Fund's duration posture closer to that of its Lipper
peers and also improved its distribution rate.
Describe Fund positioning at period-end.
o The Fund ended the annual period with a relatively neutral duration versus
its Lipper peer group, a positioning that we believe should benefit
performance in a stable to modestly rising interest rate environment.
The views expressed reflect the opinions of BlackRock as of the date of this
report and are subject to change based on changes in market, economic or other
conditions. These views are not intended to be a forecast of future events and
are no guarantee of future results.
Performance Summary for the Period Ended May 31, 2008
Average Annual Total Returns 1
-----------------------------------------------------------
1 Year 5 Years 10 Years
------------------ ------------------ ------------------
Standardized 6-Month w/o sales w/sales w/o sales w/sales w/o sales w/sales
30-Day Yield Total Returns charge charge charge charge charge charge
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional .......................... 3.49% 1.04% 3.65% -- 2.76% -- 4.32% --
Investor A ............................. 3.12 1.03 3.51 (0.89%) 2.52 1.64% 4.07 3.62%
Investor A1 ............................ 3.38 0.99 3.65 2.61 2.67 2.47 4.21 4.11
Investor B ............................. 3.13 0.88 3.32 2.32 2.45 2.45 3.99 3.99
Investor C ............................. 2.48 0.55 2.73 1.73 1.76 1.76 3.29 3.29
Lehman Brothers Municipal Bond Index 2 . -- 1.44 3.87 -- 3.67 -- 5.06 --
- ------------------------------------------------------------------------------------------------------------------------------------
1 Assuming maximum sales charges. See "About Fund Performance" on page 6 for
a detailed description of share classes, including any related sales
charges and fees.
2 This unmanaged Index consists of revenue bonds, prerefunded bonds, general
obligation bonds and insured bonds.
4 BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund's Institutional
and Investor A Shares compared to growth of an investment in the Lehman Brothers
Municipal Bond Index. Values are from May 1998 to May 2008:
Lehman Brothers
Institutional Investor A Municipal Bond
Shares(1,2) Shares(1,2) Index(3)
5/98 $10,000 $9,575 $10,000
5/99 $10,373 $9,908 $10,467
5/00 $10,317 $9,830 $10,377
5/01 $11,389 $10,823 $11,637
5/02 $12,132 $11,501 $12,394
5/03 $13,321 $12,597 $13,679
5/04 $13,312 $12,557 $13,674
5/05 $14,010 $13,183 $14,763
5/06 $14,163 $13,293 $15,042
5/07 $14,723 $13,784 $15,771
5/08 $15,260 $14,268 $16,381
1 Assuming maximum sales charge, if any, transaction costs and other
operating expenses, including advisory fees.
2 The 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 12 years.
3 This unmanaged Index consists of revenue bonds, prerefunded bonds, general
obligation bonds and insured bonds.
Past performance is not indicative of future results.
Expense Example Including Interest Expense and Fees
Actual Hypothetical 2
------------------------------------------------------ -----------------------------------------------------
Beginning Ending Beginning Ending
Account Value Account Value Expenses Paid Account Value Account Value Expenses Paid
December 1, 2007 May 31, 2008 During the Period 1 December 1, 2007 May 31, 2008 During the Period 1
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional ........ $1,000 $1,010.40 $4.10 $1,000 $1,020.82 $4.12
Investor A ........... $1,000 $1,010.30 $5.25 $1,000 $1,019.68 $5.27
Investor A1 .......... $1,000 $1,009.90 $4.60 $1,000 $1,020.33 $4.62
Investor B ........... $1,000 $1,008.80 $5.74 $1,000 $1,019.18 $5.77
Investor C ........... $1,000 $1,005.50 $9.13 $1,000 $1,015.80 $9.17
- ------------------------------------------------------------------------------------------------------------------------------------
1 For each class of the Fund, expenses are equal to the annualized expense
ratio for the class (0.82% for Institutional, 1.05% for Investor A, 0.92%
for Investor A1, 1.15% for Investor B and 1.83% for Investor C),
multiplied by the average account value over the period, multiplied by
182/366 (to reflect the one-half year period shown).
2 Hypothetical 5% annual return before expenses is calculated by pro-rating
the number of days in the most recent fiscal half year divided by 366.
See "Disclosure of Expenses" on page 6 for further information on how
expenses were calculated.
Expense Example Excluding Interest Expense and Fees
Actual Hypothetical 2
------------------------------------------------------ -----------------------------------------------------
Beginning Ending Beginning Ending
Account Value Account Value Expenses Paid Account Value Account Value Expenses Paid
December 1, 2007 May 31, 2008 During the Period 1 December 1, 2007 May 31, 2008 During the Period 1
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional 3 ...... $1,000 $1,010.40 $3.70 $1,000 $1,021.22 $3.72
Investor A 3 ......... $1,000 $1,010.30 $4.85 $1,000 $1,020.08 $4.87
Investor A1 3 ........ $1,000 $1,009.90 $4.20 $1,000 $1,020.72 $4.22
Investor B 3 ......... $1,000 $1,008.80 $5.34 $1,000 $1,019.58 $5.37
Investor C 3 ......... $1,000 $1,005.50 $8.73 $1,000 $1,016.20 $8.77
- ------------------------------------------------------------------------------------------------------------------------------------
1 For each class of the Fund, expenses are equal to the annualized expense
ratio for the class (0.74% for Institutional, 0.97% for Investor A, 0.84%
for Investor A1, 1.07% for Investor B and 1.75% for Investor C),
multiplied by the average account value over the period, multiplied by
182/366 (to reflect the one-half year period shown).
2 Hypothetical 5% annual return before expenses is calculated by pro-rating
the number of days in the most recent fiscal half year divided by 366.
3 Expenses are net of waiver, excluding interest expense and fees.
See "Disclosure of Expenses" on page 6 for further information on how
expenses were calculated.
BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008 5
About Fund Performance
o Institutional Shares are not subject to any sales charge. Institutional
Shares bear no ongoing distribution or service fees and are available only
to eligible investors.
o Investor A Shares incur a maximum initial sales charge (front-end load) of
4.25% and a service fee of 0.25% per year (but no distribution fee).
Investor A Shares commenced operations on October 2, 2006. Prior to
Investor A Shares' inception, the returns for Investor A Shares are based
upon the performance of the Fund's Institutional Shares. The returns for
Investor A Shares, however, are adjusted to reflect the service (12b-1)
fees applicable to Investor A Shares.
o Investor A1 Shares incur a maximum initial sales charge (front-end load)
of 1% and a service fee of 0.10% per year (but no distribution fee).
o Investor B Shares are subject to a maximum contingent deferred sales
charge of 1%, declining to 0% after three years. In addition, Investor B
Shares are subject to a distribution fee of 0.10% per year and a service
fee of 0.20% per year. These shares automatically convert to Investor A1
Shares after approximately 10 years. (There is no initial sales charge for
automatic share conversions.)
o Investor C Shares are subject to a distribution fee of 0.75% per year and
a service fee of 0.25% per year. In addition, Investor C Shares are
subject to a 1% contingent deferred sales charge if redeemed within one
year of purchase. Investor C Shares commenced operations on October 2,
2006. Prior to Investor C Shares' inception, the returns for Investor C
Shares are based upon the performance of the Fund's Institutional Shares.
The returns for Investor C Shares, however, are adjusted to reflect the
distribution and service (12b-1) fees applicable to Investor C Shares.
Performance information reflects past performance and does not guarantee
future results. Current performance may be lower or higher than the
performance data quoted. Refer to www.blackrock.com/funds to obtain
performance data current to the most recent month-end. Performance results
do not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. Figures shown in the
performance tables on pages 4 and 5 assume reinvestment of all dividends
and capital gain distributions, if any, at net asset value on the payable
date. The Fund's investment adviser reimbursed a portion of the Fund's
expenses. Without such reimbursement, the Fund's performance would have
been lower. 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 service, distribution and transfer agency fees
applicable to each class, which are deducted from the income available to
be paid to shareholders.
Disclosure of Expenses
Shareholders of this Fund may incur the following charges: (a) expenses related
to transactions, including sales charges, redemption fees and exchange fees; and
(b) operating expenses, including advisory fees, distribution fees including
12b-1 fees, and other Fund expenses. The expense example on page 5 (which is
based on a hypothetical investment of $1,000 invested on December 1, 2007 and
held through May 31, 2008) is intended to assist shareholders both in
calculating expenses based on an investment in the Fund and in comparing these
expenses with similar costs of investing in other mutual funds.
The table provides information about actual account values and actual expenses.
In order to estimate the expenses a shareholder paid during the period covered
by this report, shareholders can divide their account value by $1,000 and then
multiply the result by the number corresponding to their share class under the
heading entitled "Expenses Paid During the Period."
The table also provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses. In order to assist shareholders
in comparing the ongoing expenses of investing in this Fund and other funds,
compare the 5% hypothetical example with the 5% hypothetical examples that
appear in other funds' shareholder reports.
The expenses shown in the table are intended to highlight shareholders' ongoing
costs only and do not reflect any transactional expenses, such as sales charges,
redemption fees or exchange fees. Therefore, the hypothetical table is useful in
comparing ongoing expenses only, and will not help shareholders determine the
relative total expenses of owning different funds. If these transactional
expenses were included, shareholder expenses would have been higher.
6 BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008
Portfolio Summary
As of May 31, 2008
Percent of
Distribution by Market Sector Long-Term Investments
- --------------------------------------------------------------------------------
Other Revenue Bonds ..................................................... 68%
General Obligation Bonds ................................................ 26
Mutual Funds ............................................................ 3
Prerefunded Bonds 1 ..................................................... 3
- --------------------------------------------------------------------------------
1 Backed by an escrow fund.
Quality Ratings by Percent of
S&P/Moody's 2 Long-Term Investments
- --------------------------------------------------------------------------------
AAA/Aaa ................................................................. 55%
AA/Aa ................................................................... 16
A/A ..................................................................... 8
BBB/Baa ................................................................. 11
BB/Ba ................................................................... 1
Not Rated ............................................................... 9
- --------------------------------------------------------------------------------
2 Using the higher of Standard & Poor's or Moody's Investors Service
ratings.
BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008 7
Schedule of Investments May 31, 2008 (Percentages shown are based on Net Assets)
Par
Municipal Bonds (000) Value
===============================================================================
Alabama -- 0.3%
Tuscaloosa, Alabama, Special Care Facilities
Financing Authority, Residential Care Facility
Revenue Bonds (Capstone Village, Inc. Project),
Series A, 5.125%, 8/01/15 $ 500 $ 469,965
===============================================================================
Arizona -- 4.6%
Arizona State Transportation Board, Highway Revenue
Bonds, Series B, 5%, 7/01/17 5,000 5,452,250
Maricopa County, Arizona, School District Number 69
(Paradise Valley), GO (School Improvement Project),
Series C, 4%, 7/01/14 (a) 1,185 1,230,374
Salt Verde Financial Corporation, Arizona, Senior Gas
Revenue Bonds, 5.25%, 12/01/19 2,000 1,992,140
------------
8,674,764
===============================================================================
California -- 15.8%
Agua Caliente Band of Cahuilla Indians, California,
Casino Revenue Bonds, 5.60%, 7/01/13 875 871,780
Antelope Valley, California, Health Care District
Revenue Bonds, Series A, 5.25%, 9/01/17 2,000 2,011,480
California County Tobacco Securitization Agency,
Tobacco Revenue Bonds (Los Angeles County
Securitization Corporation), 5.25%, 6/01/21 (c) 5,225 4,089,817
California State Department of Water Resources,
Power Supply Revenue Bonds, Series A,
5.50%, 5/01/14 (d) 10,000 10,873,800
California State, GO, Refunding:
5%, 8/01/19 5,000 5,264,850
(Veterans Bonds), Series BG, 5.05%, 12/01/11 1,000 1,020,310
Golden State Tobacco Securitization Corporation of
California, Tobacco Settlement Revenue Refunding
Bonds, Senior Series A-1, 5%, 6/01/16 3,000 2,915,250
Southern California Public Power Authority, Natural
Gas Project Number 1 Revenue Bonds, Series A,
5.25%, 11/01/19 2,445 2,520,795
------------
29,568,082
===============================================================================
Colorado -- 2.6%
Denver, Colorado, City and County Airport Revenue
Bonds, AMT, Series D, 7.75%, 11/15/13 (d) 4,430 4,947,114
===============================================================================
Connecticut -- 1.6%
Hartford, Connecticut, GO, Series A,
5.25%, 8/15/18 (d) 2,685 2,943,190
===============================================================================
Florida -- 8.1%
Broward County, Florida, School Board, COP, Series C,
5.25%, 7/01/17 (e) 3,410 3,647,609
Middle Village Community Development District,
Florida, Special Assessment Bonds, Series C,
5.125%, 5/01/09 200 197,746
Orange County, Florida, School Board, COP, VRDN,
Series B, 2.50%, 8/01/27 (b)(f) 1,100 1,100,000
Orlando, Florida, Greater Orlando Aviation Authority,
Airport Facilities Revenue Bonds, AMT, Series A,
5.25%, 10/01/18 (g) 5,440 5,455,341
Panther Trace Community Development District II,
Florida, Special Assessment Revenue Bonds:
5.125%, 11/01/13 995 915,360
Series A, 5%, 11/01/10 610 585,454
Sterling Hill Community Development District, Florida,
Capital Improvement Revenue Refunding Bonds,
Series B, 5.50%, 11/01/10 185 183,179
Tolomato Community Development District, Florida,
Special Assessment Bonds, 6.375%, 5/01/17 3,130 3,091,157
------------
15,175,846
===============================================================================
Georgia -- 2.0%
Fulton County, Georgia, Residential Care Facilities,
Revenue Refunding Bonds (Canterbury Court
Project), Series A, 5%, 2/15/14 1,050 1,033,053
Georgia State, GO, Series G, 5%, 12/01/17 (l) 2,500 2,788,725
------------
3,821,778
===============================================================================
Idaho -- 2.9%
Ada and Canyon Counties, Idaho, Joint School District
Number 2 (Meridian), GO, 5%, 8/15/17 5,000 5,436,300
===============================================================================
Illinois -- 1.7%
Chicago, Illinois, Tax Allocation Bonds (Kingsbury
Redevelopment Project), Series A, 6.57%, 2/15/13 1,000 1,004,610
Granite City, Madison County, Illinois, Disposal
Revenue Bonds (Waster Management, Inc. Project),
AMT, 5%, 5/03/10 1,500 1,498,260
Illinois State Finance Authority Revenue Bonds
(Primary Health Care Centers Program),
5.90%, 7/01/14 715 703,860
------------
3,206,730
===============================================================================
Indiana -- 1.1%
Indiana Bond Bank, Special Program Gas Revenue
Bonds, Series A, 5%, 10/15/17 2,000 2,000,040
===============================================================================
Kentucky -- 1.1%
Kenton County, Kentucky, Airport Board, Airport
Revenue Refunding Bonds (Cincinnati/Northern
Kentucky International Airport), AMT, Series A,
5.625%, 3/01/15 (f) 2,000 2,062,940
===============================================================================
Portfolio Abbreviations
To simplify the listings of portfolio holdings in the Schedule of Investments,
the names of many of the securities have been abbreviated according to the list
on the right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
EDA Economic Development Authority
GO General Obligation Bonds
HDA Housing Development Authority
IDA Industrial Development Authority
PCR Pollution Control Revenue Bonds
VRDN Variable Rate Demand Notes
See Notes to Financial Statements.
8 BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008
Schedule of Investments (continued) (Percentages shown are based on Net Assets)
Par
Municipal Bonds (000) Value
===============================================================================
Louisiana -- 0.5%
Morehouse Parish, Louisiana, PCR, Refunding
(International Paper Company Project), Series A,
5.25%, 11/15/13 $ 1,000 $ 1,014,650
===============================================================================
Maryland -- 2.5%
Anne Arundel County, Maryland, Consolidated General
Improvements, GO, Refunding, 5%, 3/01/15 1,455 1,603,555
Maryland State, GO (State and Local Facilities Loan),
First Series, 5%, 3/01/15 2,745 3,028,778
------------
4,632,333
===============================================================================
Massachusetts -- 5.2%
Massachusetts State Industrial Finance Agency,
Resource Recovery Revenue Refunding Bonds
(Ogden Haverhill Project), AMT, Series A,
5.30%, 12/01/09 3,300 3,369,795
Massachusetts State Port Authority, Special Facilities
Revenue Bonds (Delta Air Lines Inc. Project), AMT,
Series A (d):
5.50%, 1/01/14 2,500 2,469,175
5.50%, 1/01/15 4,000 3,915,640
------------
9,754,610
===============================================================================
Michigan -- 1.4%
Detroit, Michigan, Sewer Disposal Revenue Bonds,
Senior Lien, VRDN, Series B, 1.25%, 7/01/33 (b)(e) 1,000 1,000,000
Michigan State Strategic Fund, PCR (General Motors
Corporation Project), VRDN, 7%, 12/01/08 (b) 1,555 1,555,000
------------
2,555,000
===============================================================================
Minnesota -- 1.5%
Minnesota State, GO, 5%, 6/01/18 2,500 2,727,500
===============================================================================
Mississippi -- 0.5%
Mississippi Business Finance Corporation, Mississippi,
PCR, Refunding (System Energy Resources Inc.
Project), 5.90%, 5/01/22 1,000 990,590
===============================================================================
Nebraska -- 1.4%
Omaha Convention Hotel Corporation, Nebraska, First
Tier Revenue Refunding Bonds, 5%, 2/01/19 (d) 2,435 2,552,805
===============================================================================
New Jersey -- 1.4%
New Jersey EDA, School Facilities Construction,
Revenue Refunding Bonds, Series W, 5%, 9/01/15 2,500 2,694,550
===============================================================================
New York -- 5.9%
New York City, New York, GO, Refunding, Series A,
5%, 8/01/19 2,500 2,652,575
New York State Dormitory Authority, Non-State
Supported Debt, Revenue Refunding Bonds
(New York University Hospital Center), Series A,
5%, 7/01/16 1,140 1,135,451
New York State, GO, Series A, 4%, 3/01/16 2,000 2,068,680
Port Authority of New York and New Jersey,
Consolidated Revenue Bonds, AMT:
131st Series, 5%, 12/15/14 1,000 1,052,110
Thirty-Seventh Series, 5.50%, 7/15/18 (e) 3,000 3,170,820
Westchester County, New York, IDA, Continuing Care
Retirement, Mortgage Revenue Bonds (Kendal on
the Hudson Project), Series A, 5.625%, 1/01/13 1,000 1,002,950
------------
11,082,586
===============================================================================
North Carolina -- 4.9%
North Carolina Municipal Power Agency Number 1,
Catawba Electric Revenue Bonds, Series A,
5.25%, 1/01/20 (f) 3,500 3,642,835
North Carolina State, GO, Refunding, Series B,
5%, 4/01/17 5,000 5,557,550
------------
9,200,385
===============================================================================
Ohio -- 2.5%
Ohio State, GO, Series L, 5%, 10/01/14 1,835 2,016,922
Ohio State, Highway Capital Improvements, GO,
Series L, 5%, 5/01/16 2,340 2,582,588
------------
4,599,510
===============================================================================
Oregon -- 3.0%
Oregon State Department of Transportation,
Highway User Tax Revenue Bonds, Series A,
5%, 11/15/16 (h) 5,000 5,551,900
===============================================================================
Pennsylvania -- 0.5%
Lancaster County, Pennsylvania, Hospital Authority
Revenue Bonds (Brethren Village Project), Series A,
5.20%, 7/01/12 1,000 1,015,680
===============================================================================
Tennessee -- 0.9%
Tennessee HDA, Revenue Bonds (Homeownership
Program), AMT, Series 2-C, 5.85%, 7/01/09 1,600 1,619,312
===============================================================================
Texas -- 10.1%
Bell County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds (Scott &
White Memorial Hospital), VRDN, Series B-2,
1.35%, 8/15/29 (b)(f) 235 235,000
Dallas-Fort Worth, Texas, International Airport, Joint
Revenue Bonds, AMT, Sub-Series C-1, 4.75%,
11/01/13 (f) 2,500 2,506,025
Dallas-Fort Worth, Texas, International Airport
Revenue Refunding and Improvement Bonds, AMT,
Series A, 5.75%, 11/01/14 (g) 5,000 5,155,550
Houston, Texas, Airport System, Subordinate Lien
Revenue Refunding Bonds, AMT, Series A,
5.875%, 7/01/15 (e) 5,000 5,218,800
Houston, Texas, Combined Utility System, First Lien
Revenue Refunding Bonds, Series B,
5%, 11/15/18 (g) 2,475 2,599,789
San Antonio, Texas, Airport System, Improvement
Revenue Bonds, AMT, 5.25%, 7/01/19 (e) 3,055 3,150,591
------------
18,865,755
===============================================================================
Virginia -- 3.5%
Fredericksburg, Virginia, EDA, Hospital Facilities
Revenue Refunding Bonds (MediCorp Health
System), 5%, 6/15/17 2,500 2,610,850
The Shops at White Oak Village Community
Development Authority, Virginia, Special
Assessment Revenue Bonds, 5.30%, 3/01/17 4,000 3,861,200
------------
6,472,050
===============================================================================
Washington -- 2.7%
Kitsap County, Washington, School District
Number 400 (North Kitsap), GO, Refunding,
5.125%, 12/01/16 (e) 4,650 5,098,865
===============================================================================
See Notes to Financial Statements.
BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008 9
Schedule of Investments (concluded) (Percentages shown are based on Net Assets)
Par
Municipal Bonds (000) Value
===============================================================================
Puerto Rico -- 3.1%
Puerto Rico Commonwealth Government
Development Bank, Senior Revenue Bonds,
Series B, 5%, 12/01/17 $ 1,500 $ 1,502,475
Puerto Rico Commonwealth Infrastructure Financing
Authority, Special Tax and Capital Appreciation
Revenue Bonds, Series B, 5%, 7/01/18 3,250 3,255,200
Puerto Rico Commonwealth, Public Improvement, GO,
Series B, 5.25%, 7/01/17 1,000 1,019,410
------------
5,777,085
===============================================================================
Total Municipal Bonds
(Cost -- $174,464,659) -- 93.3% 174,511,915
===============================================================================
Municipal Bonds Transferred to
Tender Option Bond Trusts (i)
===============================================================================
Illinois -- 5.6%
Chicago, Illinois, O'Hare International Airport,
General Airport Revenue Refunding Bonds,
Third Lien, AMT, Series A-2 (e):
5.25%, 1/01/13 5,000 5,249,075
5.25%, 1/01/14 5,000 5,249,075
- -------------------------------------------------------------------------------
Total Municipal Bonds Transferred to
Tender Option Bond Trusts
(Cost -- $10,631,414) -- 5.6% 10,498,150
===============================================================================
Mutual Funds Shares Value
===============================================================================
BlackRock Insured Municipal 2008 Term Trust, Inc. (j) 244,000 $ 3,669,760
BlackRock Insured Municipal Term Trust, Inc. (j) 99,700 1,011,955
- -------------------------------------------------------------------------------
Total Mutual Funds (Cost -- $5,249,625) -- 2.5% 4,681,715
===============================================================================
===============================================================================
Short-Term Securities
===============================================================================
Merrill Lynch Institutional Tax-Exempt Fund,
1.71% (j)(k) 19,316 19,316
- -------------------------------------------------------------------------------
Total Short-Term Securities (Cost -- $19,316) -- 0.0% 19,316
===============================================================================
Total Investments (Cost -- $190,365,014*) -- 101.4% 189,711,096
Other Assets Less Liabilities -- 1.3% 2,399,277
Liability for Trust Certificates, Including
Interest Expense and Fees Payable -- (2.7%) (5,058,575)
------------
Net Assets -- 100.0% $187,051,798
============
* The cost and unrealized appreciation (depreciation) of investments as of
May 31, 2008, as computed for federal income tax purposes, were as
follows:
Aggregate cost ......................................... $ 185,160,550
=============
Gross unrealized appreciation .......................... $ 2,287,396
Gross unrealized depreciation .......................... (2,736,850)
-------------
Net unrealized depreciation ............................ $ (449,454)
=============
(a) Assured Guaranty Insured.
(b) Variable rate security. Rate shown is as of report date. Maturity shown is
the final maturity date.
(c) Represents a zero-coupon bond. Rate shown reflects the effective yield at
the time of purchase.
(d) AMBAC Insured.
(e) FSA Insured.
(f) MBIA Insured.
(g) FGIC Insured.
(h) U.S. government securities, held in escrow, are used to pay interest on
this security as well as to retire the bond in full at the date indicated,
typically at a premium to par.
(i) Securities represent bonds transferred to a tender option bond trust in
exchange for which the Fund acquired residual interest certificates. These
securities serve as collateral in a financing transaction. See Note 1 of
the Notes to Financial Statements for details of municipal bonds
transferred to tender option bond trusts.
(j) Investments in companies considered to be an affiliate of the Fund, for
purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as
follows:
--------------------------------------------------------------------------
Purchase Sale Realized Dividend
Affiliate Cost Cost Gain Income
--------------------------------------------------------------------------
Merrill Lynch Institutional
Tax-Exempt Fund $26 1 -- -- $ 2,219
BlackRock Insured Municipal
2008 Term Trust, Inc. -- -- -- $92,620
BlackRock Insured Municipal
Term Trust, Inc. -- -- -- $22,143
--------------------------------------------------------------------------
1 Represents net purchase cost.
(k) Represents the current yield as of report date.
(l) When-issued security.
See Notes to Financial Statements.
10 BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008
Statement of Assets and Liabilities
May 31, 2008
===================================================================================================================================
Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Investments at value -- unaffiliated (cost -- $185,096,073) ...................................................... $ 185,010,065
Investments at value -- affiliated (cost -- $5,268,941) .......................................................... 4,701,031
Cash ............................................................................................................. 73,816
Interest receivable .............................................................................................. 2,585,414
Capital shares sold receivable ................................................................................... 522,759
Dividends from affiliates receivable ............................................................................. 14,623
Prepaid expenses ................................................................................................. 23,827
-------------
Total assets ..................................................................................................... 192,931,535
-------------
===================================================================================================================================
Accrued Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Income dividends payable ......................................................................................... 529,759
Capital shares redeemed payable .................................................................................. 102,423
Investment advisory fees payable ................................................................................. 81,576
Interest expense and fees payable ................................................................................ 58,575
Other liabilities payable ........................................................................................ 177
Distribution fees payable ........................................................................................ 11,659
Officer's and Trustees' fees payable ............................................................................. 3,202
Other affiliates payable ......................................................................................... 16,322
Other accrued expenses payable ................................................................................... 76,044
-------------
Total accrued liabilities ........................................................................................ 879,737
-------------
===================================================================================================================================
Other Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Trust certificates 1 ............................................................................................. 5,000,000
-------------
Total Liabilities ................................................................................................ 5,879,737
-------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets ....................................................................................................... $ 187,051,798
=============
===================================================================================================================================
Net Assets Consist of
- -----------------------------------------------------------------------------------------------------------------------------------
Institutional Shares, $0.10 par value ............................................................................ $ 1,125,050
Investor A Shares, $0.10 par value ............................................................................... 55,149
Investor A1 Shares, $0.10 par value .............................................................................. 562,021
Investor B Shares, $0.10 par value ............................................................................... 61,050
Investor C Shares, $0.10 par value ............................................................................... 42,855
Paid-in capital in excess of par ................................................................................. 186,605,032
Undistributed net investment income .............................................................................. 184,586
Accumulated net realized loss .................................................................................... (930,027)
Net unrealized appreciation/depreciation ......................................................................... (653,918)
-------------
Net assets ....................................................................................................... $ 187,051,798
=============
===================================================================================================================================
Net Asset Value
- -----------------------------------------------------------------------------------------------------------------------------------
Institutional -- Based on net assets of $114,011,543 and 11,250,495 shares of beneficial interests outstanding ... $ 10.13
=============
Investor A -- Based on net assets of $5,584,969 and 551,494 shares of beneficial interests outstanding ........... $ 10.13
=============
Investor A1 -- Based on net assets of $56,928,185 and 5,620,214 shares of beneficial interests outstanding ....... $ 10.13
=============
Investor B -- Based on net assets of $6,185,843 and 610,503 shares of beneficial interests outstanding ........... $ 10.13
=============
Investor C -- Based on net assets of $4,341,258 and 428,548 shares of beneficial interests outstanding ........... $ 10.13
=============
1 Represents short-term floating rate certificates issued by tender option
bond trusts.
See Notes to Financial Statements.
BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008 11
Statements of Operations
Period
November 1,
2007 to Year Ended
May 31, October 31,
2008 2007
===================================================================================================================================
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------------
Interest ........................................................................................... $ 5,147,641 $ 8,506,532
Dividends from affiliates .......................................................................... 116,982 376,413
---------------------------
Total income ....................................................................................... 5,264,623 8,882,945
---------------------------
===================================================================================================================================
Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Investment advisory ................................................................................ 620,789 1,020,973
Accounting services ................................................................................ 48,676 84,317
Professional ....................................................................................... 45,340 86,154
Printing ........................................................................................... 44,179 63,246
Registration ....................................................................................... 44,795 59,143
Service -- Investor A .............................................................................. 6,818 4,391
Service -- Investor A1 ............................................................................. 34,118 64,316
Service and distribution -- Investor B ............................................................. 11,749 24,522
Service and distribution -- Investor C ............................................................. 17,947 13,185
Transfer agent -- Institutional .................................................................... 32,458 53,627
Transfer agent -- Investor A ....................................................................... 428 1,013
Transfer agent -- Investor A1 ...................................................................... 16,097 28,395
Transfer agent -- Investor B ....................................................................... 2,476 4,736
Transfer agent -- Investor C ....................................................................... 520 648
Officer and Trustees ............................................................................... 16,386 23,943
Custodian .......................................................................................... 8,647 13,838
Miscellaneous ...................................................................................... 26,052 40,751
---------------------------
Total expenses excluding interest expense and fees ................................................. 977,475 1,587,198
Interest expense and fees1 ......................................................................... 95,924 423,737
---------------------------
Total expenses ..................................................................................... 1,073,399 2,010,935
Less fees waived by advisor ........................................................................ (56,538) (92,856)
Less fees paid indirectly .......................................................................... (277) --
---------------------------
Total expenses after fees waived and paid indirectly ............................................... 1,016,584 1,918,079
---------------------------
Net investment income .............................................................................. 4,248,039 6,964,866
---------------------------
===================================================================================================================================
Realized and Unrealized Gain (Loss)
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments .................................................................................... 1,135,401 352,145
Futures and forward interest rate swaps ........................................................ (80,018) (100,200)
---------------------------
1,055,383 251,945
---------------------------
Net change in unrealized appreciation/depreciation on:
Investments .................................................................................... (1,726,345) (2,606,099)
Forward interest rate swaps .................................................................... -- 251,982
---------------------------
(1,726,345) (2,354,117)
---------------------------
Total realized and unrealized loss ................................................................. (670,962) (2,102,172)
---------------------------
Net Increase in Net Assets Resulting from Operations ............................................... $ 3,577,077 $ 4,862,694
===========================
1 Related to tender option bond trusts.
See Notes to Financial Statements.
12 BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008
Statements of Changes in Net Assets
Period
November 1, Year Ended
2007 to October 31,
May 31, -----------------------------
Increase (Decrease) in Net Assets: 2008 2007 2006
===================================================================================================================================
Operations
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income ............................................................. $ 4,248,039 $ 6,964,866 $ 6,463,395
Net realized gain (loss) .......................................................... 1,055,383 251,945 (1,688,727)
Net change in unrealized appreciation/depreciation ................................ (1,726,345) (2,354,117) 4,081,586
---------------------------------------------
Net increase in net assets resulting from operations .............................. 3,577,077 4,862,694 8,856,254
---------------------------------------------
===================================================================================================================================
Dividends and Distributions to Shareholders From
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income:
Institutional ................................................................. (2,677,237) (4,106,295) (3,600,332)
Investor A .................................................................... (98,132) (60,549) (243)
Investor A1 ................................................................... (1,271,996) (2,341,365) (1,810,323)
Investor B .................................................................... (137,590) (280,255) (405,591)
Investor C .................................................................... (50,440) (35,579) (206)
Class C ....................................................................... -- -- (646,700)
Net realized gain:
Institutional ................................................................. -- -- (2,007,396)
Investor A .................................................................... -- -- --
Investor A1 ................................................................... -- -- (969,703)
Investor B .................................................................... -- -- (284,047)
Investor C .................................................................... -- -- --
Class C ....................................................................... -- -- (491,006)
---------------------------------------------
Decrease in net assets resulting from dividends and distributions to shareholders . (4,235,395) (6,824,043) (10,215,547)
---------------------------------------------
===================================================================================================================================
Beneficial Interest Transactions
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets derived from beneficial interest transactions (4,775,783) 13,314,783 (8,046,361)
---------------------------------------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets ........................................... (5,434,101) 11,353,434 (9,405,654)
Beginning of period ............................................................... 192,485,899 181,132,465 190,538,119
=============================================
End of period ..................................................................... $ 187,051,798 $ 192,485,899 $ 181,132,465
=============================================
End of period undistributed net investment income ................................. $ 184,586 $ 177,757 $ 36,934
=============================================
See Notes to Financial Statements.
BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008 13
Financial Highlights
Institutional
------------------------------------------------------------------------------
Period
Nov. 1,
2007 to Year Ended October 31,
May 31, ----------------------------------------------------------------
2008 2007 2006 2005 2004 2003
=======================================================================================================================
Per Share Operating Performance
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .. $ 10.17 $ 10.28 $ 10.36 $ 10.76 $ 10.71 $ 10.69
------------------------------------------------------------------------------
Net investment income 1 ............... 0.23 0.39 0.37 0.38 0.40 0.40
Net realized and unrealized gain (loss) (0.04) (0.12) 0.13 (0.34) 0.08 0.10
------------------------------------------------------------------------------
Net increase from investment operations 0.19 0.27 0.50 0.04 0.48 0.50
------------------------------------------------------------------------------
Dividends and distributions from:
Net investment income ............. (0.23) (0.38) (0.37) (0.38) (0.40) (0.41)
Net realized gain ................. -- -- (0.21) (0.06) (0.03) (0.07)
------------------------------------------------------------------------------
Total dividends and distributions ..... (0.23) (0.38) (0.58) (0.44) (0.43) (0.48)
------------------------------------------------------------------------------
Net asset value, end of period ........ $ 10.13 $ 10.17 $ 10.28 $ 10.36 $ 10.76 $ 10.71
==============================================================================
=======================================================================================================================
Total Investment Return 2
Based on net asset value .............. 1.85% 3 2.69% 4.96% 0.40% 4.57% 4.77%
==============================================================================
=======================================================================================================================
Ratios to Average Net Assets
- -----------------------------------------------------------------------------------------------------------------------
Total expenses after fees waived and
paid indirectly and excluding
interest expense and fees 4 ......... 0.75% 5 0.75% 0.73% 0.74% 0.79% 0.85%
==============================================================================
Total expenses after fees waived and
paid indirectly ..................... 0.84% 5 0.98% 1.11% 1.00% 0.91% 0.94%
==============================================================================
Total expenses after fees waived and
before fees paid indirectly ......... 0.84% 5 0.98% 1.11% 1.00% 0.91% 0.94%
==============================================================================
Total expenses ........................ 0.89% 5 1.03% 1.16% 1.05% 0.94% 0.96%
==============================================================================
Net investment income ................. 3.82% 5 3.81% 3.61% 3.63% 3.76% 3.80%
==============================================================================
=======================================================================================================================
Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000) ....... $114,012 $120,499 $ 99,678 $100,831 $ 78,777 $ 44,372
==============================================================================
Portfolio turnover .................... 32% 54% 102% 162% 176% 179%
==============================================================================
1 Based on average shares outstanding.
2 Total investment returns exclude the effects of any sales charges.
3 Aggregate total investment return.
4 Interest expense and fees relate to tender option bond trusts. See Note 1
of the Notes to Financial Statements for details of municipal bonds
transferred to tender option bond trusts.
5 Annualized.
See Notes to Financial Statements.
14 BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008
Financial Highlights (continued)
Investor A
-------------------------------------
Period Period
Nov. 1, Year Oct. 2,
2007 to Ended 2006 1 to
May 31, Oct. 31, Oct. 31,
2008 2007 2006
==============================================================================
Per Share Operating Performance
- ------------------------------------------------------------------------------
Per Share Operating Performance
Net asset value, beginning of period .. $ 10.16 $ 10.27 $ 10.26
-------------------------------------
Net investment income 2 ............... 0.22 0.36 0.02
Net realized and unrealized gain (loss) (0.04) (0.11) 0.02
-------------------------------------
Net increase from investment operations 0.18 0.25 0.04
-------------------------------------
Dividends and distributions from:
Net investment income ............. (0.21) (0.36) (0.03)
Net realized gain ................. -- -- --
-------------------------------------
Total dividends and distributions ..... (0.21) (0.36) (0.03)
-------------------------------------
Net asset value, end of period ........ $ 10.13 $ 10.16 $ 10.27
=====================================
==============================================================================
Total Investment Return 3
- ------------------------------------------------------------------------------
Based on net asset value .............. 1.82% 4 2.43% 0.36% 4
=====================================
==============================================================================
Ratios to Average Net Assets
- ------------------------------------------------------------------------------
Total expenses after fees waived and
paid indirectly and excluding
interest expense and fees 5 ......... 0.97% 6 1.01% 0.97% 6
=====================================
Total expenses after fees waived and
paid indirectly ..................... 1.06% 6 1.23% 1.34% 6
=====================================
Total expenses after fees waived and
before fees paid indirectly ......... 1.06% 6 1.23% 1.34% 6
=====================================
Total expenses ........................ 1.11% 6 1.28% 1.39% 6
=====================================
Net investment income ................. 3.60% 6 3.54% 3.08% 6
=====================================
==============================================================================
Supplemental Data
- ------------------------------------------------------------------------------
Net assets, end of period (000) ....... $ 5,585 $ 2,786 $ 160
=====================================
Portfolio turnover .................... 32% 54% 102%
=====================================
Investor A1
------------------------------------------------------------------------------
Period
Nov. 1,
2007 to Year Ended November 30,
May 31, ----------------------------------------------------------------
2008 2007 2006 2005 2004 2003
=======================================================================================================================
Per Share Operating Performance
- -----------------------------------------------------------------------------------------------------------------------
Per Share Operating Performance
Net asset value, beginning of period .. $ 10.16 $ 10.28 $ 10.35 $ 10.76 $ 10.71 $ 10.69
------------------------------------------------------------------------------
Net investment income 2 ............... 0.22 0.38 0.35 0.38 0.39 0.40
Net realized and unrealized gain (loss) (0.03) (0.13) 0.15 (0.36) 0.08 0.09
------------------------------------------------------------------------------
Net increase from investment operations 0.19 0.25 0.50 0.02 0.47 0.49
------------------------------------------------------------------------------
Dividends and distributions from:
Net investment income ............. (0.22) (0.37) (0.36) (0.37) (0.39) (0.40)
Net realized gain ................. -- -- (0.21) (0.06) (0.03) (0.07)
------------------------------------------------------------------------------
Total dividends and distributions ..... (0.22) (0.37) (0.57) (0.43) (0.42) (0.47)
------------------------------------------------------------------------------
Net asset value, end of period ........ $ 10.13 $ 10.16 $ 10.28 $ 10.35 $ 10.76 $ 10.71
==============================================================================
=======================================================================================================================
Total Investment Return 3
- -----------------------------------------------------------------------------------------------------------------------
Based on net asset value .............. 1.89% 4 2.49% 4.96% 0.20% 4.47% 4.68%
==============================================================================
=======================================================================================================================
Ratios to Average Net Assets
- -----------------------------------------------------------------------------------------------------------------------
Total expenses after fees waived and
paid indirectly and excluding
interest expense and fees 5 ......... 0.85% 6 0.84% 0.83% 0.84% 0.89% 0.95%
==============================================================================
Total expenses after fees waived and
paid indirectly ..................... 0.94% 6 1.07% 1.20% 1.11% 1.01% 1.04%
==============================================================================
Total expenses after fees waived and
before fees paid indirectly ......... 0.94% 6 1.07% 1.20% 1.11% 1.01% 1.04%
==============================================================================
Total expenses ........................ 0.99% 6 1.12% 1.25% 1.16% 1.04% 1.06%
==============================================================================
Net investment income ................. 3.71% 6 3.71% 3.50% 3.54% 3.66% 3.70%
==============================================================================
=======================================================================================================================
Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000) ....... $ 56,928 $ 60,208 $ 71,327 $ 48,524 $ 55,128 $ 51,786
==============================================================================
Portfolio turnover .................... 32% 54% 102% 162% 176% 179%
==============================================================================
1 Commencement of operations.
2 Based on average shares outstanding.
3 Total investment returns exclude the effects of sales charges.
4 Aggregate total investment return.
5 Interest expense and fees relate to tender option bond trusts. See Note 1
of the Notes to Financial Statements for details of municipal bonds
transferred to tender option bond trusts.
6 Annualized.
See Notes to Financial Statements.
BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008 15
Financial Highlights (continued)
Investor B
------------------------------------------------------------------------------
Period
Nov. 1,
2007 to Year Ended October 31,
May 31, ----------------------------------------------------------------
2008 2007 2006 2005 2004 2003
=======================================================================================================================
Per Share Operating Performance
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .. $ 10.17 $ 10.28 $ 10.36 $ 10.76 $ 10.71 $ 10.69
------------------------------------------------------------------------------
Net investment income 1 ............... 0.21 0.36 0.34 0.35 0.37 0.38
Net realized and unrealized gain (loss) (0.04) (0.12) 0.15 (0.34) 0.08 0.09
------------------------------------------------------------------------------
Net increase from investment operations 0.17 0.24 0.49 0.01 0.45 0.47
------------------------------------------------------------------------------
Dividends and distributions from:
Net investment income ............. (0.21) (0.35) (0.36) (0.35) (0.37) (0.38)
Net realized gain ................. -- -- (0.21) (0.06) (0.03) (0.07)
------------------------------------------------------------------------------
Total dividends and distributions ..... (0.21) (0.35) (0.57) (0.41) (0.40) (0.45)
------------------------------------------------------------------------------
Net asset value, end of period ........ $ 10.13 $ 10.17 $ 10.28 $ 10.36 $ 10.76 $ 10.71
==============================================================================
=======================================================================================================================
Total Investment Return 2
- -----------------------------------------------------------------------------------------------------------------------
Based on net asset value .............. 1.66% 3 2.36% 4.64% 0.08% 4.24% 4.46%
==============================================================================
=======================================================================================================================
Ratios to Average Net Assets
- -----------------------------------------------------------------------------------------------------------------------
Total expenses after fees waived and
paid indirectly and excluding
interest expense and fees 4 ......... 1.06% 5 1.06% 1.05% 1.05% 1.10% 1.17%
==============================================================================
Total expenses after fees waived and
paid indirectly ..................... 1.15% 5 1.29% 1.42% 1.32% 1.22% 1.26%
==============================================================================
Total expenses after fees waived and
before fees paid indirectly ......... 1.15% 5 1.29% 1.42% 1.32% 1.22% 1.26%
==============================================================================
Total expenses ........................ 1.20% 5 1.34% 1.47% 1.37% 1.25% 1.27%
==============================================================================
Net investment income ................. 3.50% 5 3.50% 3.30% 3.34% 3.45% 3.48%
==============================================================================
=======================================================================================================================
Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000) ....... $ 6,186 $ 6,920 $ 9,760 $ 14,982 $ 21,623 $ 28,678
==============================================================================
Portfolio turnover .................... 32% 54% 102% 162% 176% 179%
==============================================================================
1 Based on average shares outstanding.
2 Total investment returns exclude the effects of sales charges.
3 Aggregate total investment return.
4 Interest expense and fees relate to tender option bond trusts. See Note 1
of the Notes to Financial Statements for details of municipal bonds
transferred to tender option bond trusts.
5 Annualized.
See Notes to Financial Statements.
16 BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008
Financial Highlights (concluded)
Investor C
Investor C
-------------------------------------
Period Period
Nov. 1, October 2,
2007 to Year Ended 2006 1 to
May 31, October 31, October 31,
2008 2007 2006
=================================================================================================================================
Per Share Operating Performance
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ................................................... $ 10.17 $ 10.28 $ 10.26
-------------------------------------
Net investment income 2 ................................................................ 0.17 0.28 0.01
Net realized and unrealized gain (loss) ................................................ (0.04) (0.11) 0.03
-------------------------------------
Net increase from investment operations ................................................ 0.13 0.17 0.04
-------------------------------------
Dividends from net investment income ................................................... (0.17) (0.28) (0.02)
-------------------------------------
Net asset value, end of period ......................................................... $ 10.13 $ 10.17 $ 10.28
=====================================
================================================================================================================================
Total Investment Return 3
- --------------------------------------------------------------------------------------------------------------------------------
Based on net asset value ............................................................... 1.27% 4 1.67% 0.40% 4
=====================================
================================================================================================================================
Ratios to Average Net Assets
- --------------------------------------------------------------------------------------------------------------------------------
Total expenses after fees waived and paid indirectly and excluding interest
expense and fees 5 1.75% 6 1.75% 1.73% 6
=====================================
Total expenses after fees waived and paid indirectly ................................... 1.83% 6 1.98% 2.09% 6
=====================================
Total expenses after fees waived and before fees paid underway ......................... 1.83% 6 1.98% 2.09% 6
=====================================
Total expenses ......................................................................... 1.88% 6 2.03% 2.14% 6
=====================================
Net investment income .................................................................. 2.82% 6 2.79% 2.36% 6
=====================================
================================================================================================================================
Supplemental Data
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000) ........................................................ $ 4,341 $ 2,074 $ 207
=====================================
Portfolio turnover ..................................................................... 32% 54% 102%
=====================================
1 Commencement of operations.
2 Based on average shares outstanding.
3 Total investment returns exclude the effects of sales charges.
4 Aggregate total investment return.
5 Interest expense and fees relate to tender option bond trusts. See Note 1
of the Notes to Financial Statements for details of municipal bonds
transferred to tender option bond trusts.
6 Annualized.
See Notes to Financial Statements.
BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008 17
Notes to Financial Statements
1. Significant Accounting Policies:
BlackRock Intermediate Municipal Fund (the "Fund") is presently the only series
of BlackRock Municipal Series Trust (the "Trust"). The Fund is registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), 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. Actual results may differ from these
estimates. The Fund recently changed its fiscal year end to May 31. The Fund
offers multiple classes of shares. Institutional Shares are sold only to certain
eligible investors. Investor A Shares are generally sold with a front-end sales
charge. Investor A1 and Investor B Shares are not generally available except for
dividend and capital gains investment. Shares of Investor B and Investor 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 Investor A, Investor A1, Investor B and Investor C
Shares bear certain expenses related to the shareholder servicing of such
shares, and Investor B and Investor 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 shareholder servicing and distribution
expenditures (except that Investor B shareholders may vote on material changes
to the Investor A1 distribution plan).
The following is a summary of significant accounting policies followed by the
Fund:
Valuation of Investments: Municipal investments (including commitments to
purchase such investments on a "when-issued" basis) are valued on the basis of
prices provided by dealers or pricing services selected under the supervision of
the Trust's Board of Trustees (the "Board"). In determining the value of a
particular investment, pricing services may use certain information with respect
to transactions in such investments, quotations from dealers, pricing matrixes,
market transactions in comparable investments and various relationships between
investments. Financial futures contracts are traded on exchanges and are valued
at their last sale price. Short-term securities are valued at amortized cost.
In the event that application of these methods of valuation results in a price
for an investment which is deemed not to be representative of the market value
of such investment, the investment will be valued by a method approved by the
Board as reflecting fair value ("Fair Value Assets"). When determining the price
for Fair Value Assets, the investment advisor and/or the sub-advisor seeks to
determine the price that the Fund might reasonably expect to receive from the
current sale of that asset in an arm's-length transaction. Fair value
determinations shall be based upon all available factors that the investment
advisor and/or the sub-advisor deems relevant. The pricing of all Fair Value
Assets is subsequently reported to the Board or a committee thereof.
Derivative Financial Instruments: The Fund may engage in various portfolio
investment strategies both to increase the return of the Fund and to hedge, or
protect, its exposure to interest rate movements and movements in the securities
markets. Losses may arise if the value of the contract decreases due to an
unfavorable change in the price of the underlying security 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 financial futures contracts. 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 margin variation and are
recognized 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.
o Forward interest rate swaps -- The Fund may enter into forward interest
rate swaps. In a forward interest rate swap, the Fund and the counterparty
agree to make periodic net payments on a specified notional contract
amount, commencing on a specified future effective date, unless terminated
earlier. Changes in the value of the forward interest rate swap are
recognized as unrealized gains and losses. When the agreement is closed,
the Fund records a realized gain or loss in an amount equal to the value
of the agreement. The Fund generally intends to close each forward
interest rate swap before the effective date specified in the agreement
and therefore avoid entering into the interest rate swap underlying each
forward interest rate swap.
18 BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008
Notes to Financial Statements (continued)
Forward Commitments and When-Issued Delayed Delivery Securities: The Fund may
purchase securities on a when-issued basis and may purchase or sell securities
on a forward commitment basis. Settlement of such transactions normally occurs
within a month or more after the purchase or sale commitment is made. The Fund
may purchase securities under such conditions only with the intention of
actually acquiring them, but may enter into a separate agreement to sell the
securities before the settlement date. Since the value of securities purchased
may fluctuate prior to settlement, the Fund may be required to pay more at
settlement than the security is worth. In addition, the purchaser is not
entitled to any of the interest earned prior to settlement. Upon making a
commitment to purchase a security on a when-issued basis, the Fund will hold
liquid assets worth at least the equivalent of the amount due.
Municipal Bonds Transferred to Tender Option Bond Trusts: The Fund leverages its
assets through the use of tender option bond trusts ("TOBs"). A TOB is
established by a third party sponsor forming a special purpose entity, into
which one or more funds, or an agent on behalf of the funds, transfers municipal
securities. Other funds managed by the investment advisor may also contribute
municipal securities to a TOB into which the Fund has contributed securities. A
TOB typically issues two classes of beneficial interests: short-term floating
rate certificates, which are sold to third party investors, and residual
certificates ("TOB Residuals"), which are generally issued to the participating
funds that made the transfer. The TOB Residuals held by the Fund include the
right of the Fund (1) to cause the holders of a proportional share of the
floating rate certificates to tender their certificates at par, and (2) to
transfer, within seven days, a corresponding share of the municipal securities
from the TOB to the Fund. The cash received by the TOB from the sale of the
short-term floating rate certificates, less transaction expenses, is paid to the
Fund, which typically invests the cash in additional municipal securities. The
Fund's transfer of the municipal securities to a TOB is accounted for as a
secured borrowing, therefore the municipal securities deposited into a TOB are
presented in the Fund's Schedule of Investments and the proceeds from the
transaction are reported as a liability of the Fund.
Interest income from the underlying securities is recorded by the Fund on an
accrual basis. Interest expense incurred on the secured borrowing and other
expenses related to remarketing, administration and trustee services to a TOB
are reported as expenses of the Fund. The floating rate certificates have
interest rates that generally reset weekly and their holders have the option to
tender certificates to the TOB for redemption at par at each reset date. At May
31, 2008, the aggregate value of the underlying municipal securities transferred
to TOBs was $10,498,150, the related liability for trust certificates was
$5,000,000, and the interest rate was 2.793%.
Financial transactions executed through TOBs generally will underperform the
market for fixed rate municipal bonds in a rising interest rate environment, but
tend to outperform the market for fixed rate bonds when interest rates decline
or remain relatively stable. Should short-term interest rates rise, the Fund's
investment in TOBs likely will adversely affect the Fund's investment income and
dividends to shareholders. Fluctuations in the market value of municipal
securities deposited into the TOB may adversely affect the Fund's net asset
values per share.
Zero-Coupon Bonds: The Fund may invest in zero-coupon bonds, which are normally
issued at a significant discount from face value and do not provide for periodic
interest payments. Zero-coupon bonds may experience greater volatility in market
value than similar maturity debt obligations which provide for regular interest
payments.
Segregation: In cases in which the 1940 Act and the interpretive positions of
the Securities and Exchange Commission ("SEC") require that the Fund segregate
assets in connection with certain investments (e.g., futures), the Fund will,
consistent with certain interpretive letters issued by the SEC, designate on its
books and records cash or other liquid debt securities having a market value at
least equal to the amount that would otherwise be required to be physically
segregated.
Investment Transactions and Investment Income: Investment transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are deter-mined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual basis. The Fund amortizes all
premiums and discounts on debt securities. Income and realized and unrealized
gains and losses are allocated daily to each class based on its relative net
assets.
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.
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.
BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008 19
Notes to Financial Statements (continued)
Effective April 30, 2008, the Fund implemented Financial Accounting Standards
Board ("FASB") Interpretation No. 48, "Accounting for Uncertainty in Income
Taxes -- an interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48
prescribes the minimum recognition threshold a tax position must meet in
connection with accounting for uncertainties in income tax positions taken or
expected to be taken by an entity, including investment companies, before being
measured and recognized in the financial statements. The investment advisor has
evaluated the application of FIN 48 to the Fund, and has determined that the
adoption of FIN 48 does not have a material impact on the Fund's financial
statements. The Fund files U.S. federal and various state and local tax returns.
No income tax returns are currently under examination. The statute of
limitations on the Fund's U.S. federal tax returns remains open for the years
ended October 31, 2005 through October 31, 2007. The statutes of limitations on
the Fund's state and local tax returns may remain open for an additional year
depending upon the jurisdiction.
Recent Accounting Pronouncements: In September 2006, Statement of Financial
Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"), was issued
and is effective for fiscal years beginning after November 15, 2007. FAS 157
defines fair value, establishes a framework for measuring fair value and expands
disclosures about fair value measurements. The impact on the Fund's financial
statement disclosures, if any, is currently being assessed.
In addition, in February 2007, Statement of Financial Accounting Standards No.
159,"The Fair Value Option for Financial Assets and Financial Liabilities" ("FAS
159"), was issued and is effective for fiscal years beginning after November 15,
2007. FAS 159 permits entities to choose to measure many financial instruments
and certain other items at fair value that are not currently required to be
measured at fair value. FAS 159 also establishes presentation and disclosure
requirements designed to facilitate comparisons between entities that choose
different measurement attributes for similar types of assets and liabilities.
The impact on the Fund's financial statement disclosures, if any, is currently
being assessed.
In March 2008, Statement of Financial Accounting Standards No. 161, "Disclosures
about Derivative Instruments and Hedging Activities -- an amendment of FASB
Statement No. 133" ("FAS 161"), was issued and is effective for fiscal years
beginning after November 15, 2008. FAS 161 is intended to improve financial
reporting for derivative instruments by requiring enhanced disclosure that
enables investors to understand how and why an entity uses derivatives, how
derivatives are accounted for, and how derivative instruments affect an entity's
results of operations and financial position. The impact on each of the Fund's
financial statement disclosures, if any, is currently being assessed.
Other: Expenses directly related to the Fund or its classes are charged to that
Fund or class. Other operating expenses shared by several funds are pro-rated
among those funds on the basis of relative net assets or other appropriate
methods. Other expenses of the Fund are allocated daily to each class based on
its relative net assets.
2. Investment Advisory Agreement and Other Transactions with Affiliates
The Fund entered into an Investment Advisory Agreement with BlackRock Advisors,
LLC (the "Advisor"), an indirect, wholly owned subsidiary of BlackRock, Inc., to
provide investment advisory and administration services. Merrill Lynch & Co.,
Inc. ("Merrill Lynch") and The PNC Financial Services Group, Inc. ("PNC") are
principal owners of BlackRock, Inc.
The Advisor is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain other
services necessary to the operation of the Fund. For such services, the Fund
pays the Advisor a monthly fee at an annual rate of 0.55% of the average daily
value of the Fund's net assets.
The Advisor has contractually agreed to waive 0.05% of the average daily net
assets of the Fund. For the period November 1, 2007 to May 31, 2008, the Advisor
waived $56,435, which is included in fees waived by advisor on the Statements of
Operations.
For the period November 1, 2007 to May 31, 2008, the Fund reimbursed the Advisor
$2,004 for certain accounting services, which is included in accounting services
in the Statements of Operations.
The Advisor has voluntarily agreed to waive its advisory fee by the amount of
investment advisory fees the Fund pays to the Advisor indirectly through its
investment in Merrill Lynch Institutional Tax-Exempt Fund. For the period
November 1, 2007 to May 31, 2008, the Advisor waived $103, which is included in
fees waived by advisor on the Statements of Operations.
The Advisor has entered into a separate sub-advisory agreement with BlackRock
Investment Management, LLC ("BIM"), an affiliate of the Advisor, under which the
Advisor pays BIM for services it provides, a monthly fee that is a percentage of
the investment advisory fee paid by the Fund to the Advisor.
20 BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008
Notes to Financial Statements (continued)
Pursuant to the terms of the custody agreement, custodian fees may be reduced by
amounts calculated on uninvested cash balances ("custody credits"), which are on
the Statements of Operations as fees paid indirectly.
The Fund has also entered into separate Distribution Agreements and Distribution
Plans with FAM Distributors, Inc. ("FAMD") and BlackRock Distributors, Inc. and
its affiliates ("BDI") (collectively, the "Distributor"). FAMD is a wholly owned
subsidiary of Merrill Lynch Group, Inc., and BDI is an affiliate of BlackRock,
Inc.
Pursuant to the Distribution Plans adopted by the Fund in accordance with Rule
12b-1 under the 1940 Act, the Fund pays the Distributor ongoing service 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:
- --------------------------------------------------------------------------------
Service Distribution
Fee Fee
- --------------------------------------------------------------------------------
Investor A ........................................ 0.25% --
Investor A1 ....................................... 0.10% --
Investor B ........................................ 0.20% 0.10%
Investor C ........................................ 0.25% 0.75%
- --------------------------------------------------------------------------------
Pursuant to sub-agreements with each Distributor, broker-dealers, including
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a wholly owned
subsidiary of Merrill Lynch, and the Distributor provide shareholder servicing
and distribution services to the Fund. The ongoing service and/or distribution
fee compensates the Distributor and each broker-dealer for providing shareholder
servicing and/or distribution-related services to Investor A, Investor A1,
Investor B and Investor C shareholders.
For the period November 1, 2007 to May 31, 2008, the Distributor earned
underwriting discounts, direct commissions and dealer concessions on sales of
the Fund's Investor A Shares, which totaled $14,097. For the period November 1,
2007 to May 31, 2008, affiliates received contingent deferred sales charges of
$117 and $1,052 relating to transactions in Investor B and Investor C Shares,
respectively. These amounts include payments to Hilliard Lyons, which was
considered an affiliate for a portion of the period.
Pursuant to written agreements, certain affiliates provide the Fund with
sub-accounting, recordkeeping, sub-transfer agency and other administrative
services with respect to sub-accounts they service. For these services, these
affiliates receive an annual fee per shareholder account which will vary
depending on share class. For the period November 1, 2007 to May 31, 2008, the
Fund paid $42,980 in return for these services.
PNC Global Investment Servicing (U.S.) Inc., formerly PFPC Inc., an indirect,
wholly owned subsidiary of PNC and an affiliate of the Advisor, serves as
transfer agent and dividend disbursing agent. Each class of the Fund bears the
costs of transfer agent fees associated with such respective classes. Transfer
agency fees borne by each class of the Fund are comprised of those fees charged
for all shareholder communications including the mailing of shareholder reports,
dividend and distribution notices, and proxy materials for shareholders
meetings, as well as per account and per transaction fees related to servicing
and maintenance of shareholder accounts, including the issuing, redeeming and
transferring of shares of each class of the Fund, 12b-1 fee calculation, check
writing, anti-money laundering services, and customer identification services.
The Advisor maintains a call center, which is responsible for providing certain
shareholder services to the Fund, such as responding to shareholder inquiries
and processing transactions based upon instructions from shareholders with
respect to the subscription and redemption of Fund shares. During the period
November 1, 2007 to May 31, 2008, the Fund reimbursed the Advisor the following
amounts for costs incurred running the call center, which are a component of the
transfer agent fees in the accompanying Statements of Operations.
- --------------------------------------------------------------------------------
Call Center Fees
- --------------------------------------------------------------------------------
Institutional ................................................. $408
Investor A .................................................... $ 39
Investor A1 ................................................... $503
Investor B .................................................... $ 64
Investor C .................................................... $ 18
- --------------------------------------------------------------------------------
Certain officers and/or trustees of the Trust are officers and/or directors of
BlackRock, Inc. or its affiliates.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
period November 1, 2007 to May 31, 2008 were $58,110,303 and $58,695,422,
respectively.
BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008 21
Notes to Financial Statements (continued)
4. Beneficial Interest Transactions:
There are an unlimited number of shares authorized for all classes. Transactions
in beneficial interest for each class were as follows:
Period
November 1, 2007 to Year Ended
May 31, 2008 October 31, 2007
----------------------------- -----------------------------
Shares Dollar Amount Shares Dollar Amount
- -----------------------------------------------------------------------------------------------------------------------------------
Institutional
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold .................................................... 2,395,306 $ 24,477,654 4,555,700 $ 46,355,829
Shares issued to shareholders in reinvestment of dividends ..... 30,064 305,531 47,552 484,344
----------------------------- -----------------------------
Total issued ................................................... 2,425,370 24,783,185 4,603,252 46,840,173
Shares redeemed ................................................ (3,024,414) (30,876,339) (2,446,319) (24,932,556)
----------------------------- -----------------------------
Net increase (decrease) ........................................ (599,044) $ (6,093,154) 2,156,933 $ 21,907,617
============================= =============================
Year Ended
October 31, 2006
-----------------------------
Shares Dollar Amount
- -----------------------------------------------------------------------------------------------------------------------------------
Institutional
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold ..................................................................................... 4,020,988 $ 40,960,524
Shares issued to shareholders in reinvestment of dividends and distributions .................... 99,237 1,011,100
-----------------------------
Total issued .................................................................................... 4,120,225 41,971,624
Shares redeemed ................................................................................. (4,163,299) (42,438,080)
-----------------------------
Net decrease .................................................................................... (43,074) $ (466,456)
=============================
Period
November 1, 2007 to Year Ended
May 31, 2008 October 31, 2007
----------------------------- -----------------------------
Shares Dollar Amount Shares Dollar Amount
- -----------------------------------------------------------------------------------------------------------------------------------
Investor A
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold .................................................... 317,235 $ 3,251,586 259,672 $ 2,652,562
Shares issued to shareholders in reinvestment of dividends ..... 6,201 62,935 3,714 37,721
----------------------------- -----------------------------
Total issued ................................................... 323,436 3,314,521 263,386 2,690,283
Shares redeemed ................................................ (46,078) (467,714) (4,847) (49,436)
----------------------------- -----------------------------
Net increase ................................................... 277,358 $ 2,846,807 258,539 $ 2,640,847
============================= =============================
Period
October 2, 2006+ to
October 31, 2006
-----------------------------
Shares Dollar Amount
- -----------------------------------------------------------------------------------------------------------------------------------
Investor A
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold ..................................................................................... 15,604 $ 159,487
Shares redeemed ................................................................................. (7) (67)
-----------------------------
Net increase .................................................................................... 15,597 $ 159,420
=============================
+ Commencement of operations.
22 BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008
Notes to Financial Statements (continued)
Period
November 1, 2007 to Year Ended
May 31, 2008 October 31, 2007
----------------------------- -----------------------------
Shares Dollar Amount Shares Dollar Amount
- -----------------------------------------------------------------------------------------------------------------------------------
Investor A1
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold and the automatic conversion of shares ............. 67,918 $ 694,169 106,014 $ 1,079,829
Shares issued to shareholders in reinvestment of dividends ..... 71,985 731,542 133,046 1,354,908
----------------------------- -----------------------------
Total issued ................................................... 139,903 1,425,711 239,060 2,434,737
Shares redeemed ................................................ (443,025) (4,521,733) (1,254,806) (12,806,788)
----------------------------- -----------------------------
Net decrease ................................................... (303,122) $ (3,096,022) (1,015,746) $(10,372,051)
============================= =============================
Year Ended
October 31, 2006
-----------------------------
Shares Dollar Amount
- -----------------------------------------------------------------------------------------------------------------------------------
Investor A1
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold ..................................................................................... 428,799 $ 4,375,953
Automatic conversion of shares .................................................................. 125,138 1,275,870
Shares issued to shareholders in reinvestment of dividends and distributions .................... 152,300 1,551,857
Shares issued resulting from conversion of Class C .............................................. 2,403,412 24,544,146
-----------------------------
Total issued .................................................................................... 3,109,649 31,747,826
Shares redeemed ................................................................................. (858,199) (8,752,391)
-----------------------------
Net increase .................................................................................... 2,251,450 $ 22,995,435
=============================
Period
November 1, 2007 to Year Ended
May 31, 2008 October 31, 2007
----------------------------- -----------------------------
Shares Dollar Amount Shares Dollar Amount
- -----------------------------------------------------------------------------------------------------------------------------------
Investor B
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold .................................................... 30,174 $ 307,941 8,995 $ 91,185
Shares issued to shareholders in reinvestment of dividends ..... 7,689 78,170 15,345 156,359
----------------------------- -----------------------------
Total issued ................................................... 37,863 386,111 24,340 247,544
Shares redeemed and the automatic conversion of shares ......... (107,943) (1,103,637) (292,910) (2,986,145)
----------------------------- -----------------------------
Net decrease ................................................... (70,080) $ (717,526) (268,570) $ (2,738,601)
============================= =============================
Year Ended
October 31, 2006
-----------------------------
Shares Dollar Amount
- -----------------------------------------------------------------------------------------------------------------------------------
Investor B
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold ..................................................................................... 51,287 $ 524,293
Shares issued to shareholders in reinvestment of dividends and distributions .................... 36,382 370,767
-----------------------------
Total issued .................................................................................... 87,669 895,060
-----------------------------
Automatic conversion of shares .................................................................. (125,110) (1,275,870)
Shares redeemed ................................................................................. (460,278) (4,695,757)
-----------------------------
Total redeemed .................................................................................. (585,388) (5,971,627)
-----------------------------
Net decrease .................................................................................... (497,719) $ (5,076,567)
=============================
BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008 23
Notes to Financial Statements (continued)
Period
November 1, 2007 to Year Ended
May 31, 2008 October 31, 2007
----------------------------- -----------------------------
Shares Dollar Amount Shares Dollar Amount
- -----------------------------------------------------------------------------------------------------------------------------------
Investor C
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold .................................................... 269,846 $ 2,782,039 209,893 $ 2,140,147
Shares issued to shareholders in reinvestment of dividends ..... 7,672 43,108 3,333 33,849
----------------------------- -----------------------------
Total issued ................................................... 277,518 2,825,147 213,226 2,173,996
Shares redeemed ................................................ (52,981) (541,035) (29,335) (297,025)
----------------------------- -----------------------------
Net increase ................................................... 224,537 $ 2,284,112 183,891 $ 1,876,971
============================= =============================
Period
October 2, 2006+ to
October 31, 2006
-----------------------------
Shares Dollar Amount
- -----------------------------------------------------------------------------------------------------------------------------------
Investor C
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold ..................................................................................... 20,126 $ 205,721
Shares redeemed ................................................................................. (6) (69)
-----------------------------
Net increase .................................................................................... 20,120 $ 205,652
=============================
+ Commencement of operations.
Period
November 1, 2005 to
August 25, 2006+
-----------------------------
Shares Dollar Amount
- -----------------------------------------------------------------------------------------------------------------------------------
Class C
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold ..................................................................................... 511,348 $ 5,215,735
Shares issued to shareholders in reinvestment of dividends and distributions .................... 69,597 708,846
-----------------------------
Total issued .................................................................................... 580,945 5,924,581
-----------------------------
Shares redeemed ................................................................................. (708,517) (7,244,280)
Shares redeemed resulting from conversion to Investor A1 ........................................ (2,403,368) (24,544,146)
-----------------------------
Total redeemed .................................................................................. (3,111,885) (31,788,426)
-----------------------------
Net decrease .................................................................................... (2,530,940) $(25,863,845)
=============================
+ On August 25, 2006, Class C was converted to Class A (Investor A1).
24 BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008
Notes to Financial Statements (concluded)
5. Short-Term Borrowings:
The Fund, along with certain other funds managed by the Advisor and its
affiliates, is a party to a $500,000,000 credit agreement with a group of
lenders. The Fund may borrow under the credit agreement to fund shareholder
redemptions and for 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. On November 21, 2007, the credit agreement was
renewed for one year under substantially the same terms. The Fund pays a
commitment fee of 0.06% per annum based on the Fund's pro rata share of the
unused portion of the credit agreement, which is included in miscellaneous in
the Statements of Operations. Amounts borrowed under the credit agreement bear
interest at a rate equal to, at each fund's election, the federal funds rate
plus 0.35% or a base rate as defined in the credit agreement. The Fund did not
borrow under the credit agreement during the period November 1, 2007 to May 31,
2008.
6. Income Tax Information:
Reclassification: Accounting principles generally accepted in the United States
of America require that certain components of net assets be adjusted to reflect
permanent differences between financial and tax reporting. Accordingly, during
the current year, $5,815 has been reclassified between undistributed net
investment income and accumulated net realized loss, as a result of permanent
differences attributable to the classification of income and amortization
methods on fixed income securities. This reclassification has no effect on net
assets or net asset values per share.
The tax character of distributions paid during the period November 1, 2007 to
May 31, 2008 and years ended October 31, 2007 and October 31, 2006 was as
follows:
- --------------------------------------------------------------------------------
5/31/2008 10/31/2007 10/31/06
- --------------------------------------------------------------------------------
Distributions paid from:
Tax-exempt income ................. $4,235,395 $6,824,043 $ 6,463,395
Ordinary income ................... -- -- 77,571
Long-term capital gains ........... -- -- 3,674,581
-----------------------------------------
Total distributions ................. $4,235,395 $6,824,043 $10,215,547
=========================================
As of May 31, 2008, the components of accumulated losses on a tax basis were as
follows:
- -----------------------------------------------------------------------------
Undistributed tax-exempt net income .......................... $ 31,119
Undistributed ordinary income ................................ 4,911
Undistributed long-term net capital gains .................... --
-----------
Total undistributed net earnings ............................. 36,030
Capital loss carryforward .................................... (985,935)*
Net unrealized losses ........................................ (449,454)**
-----------
Total accumulated losses ..................................... $(1,399,359)
===========
* On May 31, 2008, the Fund had a capital loss carryforward of $985,935, all
of which expires in 2014. This amount will be available to offset future
realized capital gains.
** The difference between book-basis and tax-basis net unrealized losses is
attributable primarily to the difference between the book and tax
treatment of residual interests in tender option bonds.
7. Concentration Risk:
The Fund's investments are concentrated in certain states, which may be affected
by adverse financial, social, environmental, economic, regulatory and political
factors.
Many municipalities insure repayment of their bonds, which reduces the risk of
loss due to issuer default. The market value of these bonds may fluctuate for
other reasons and there is no assurance that the insurer will meet its
obligation.
BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008 25
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees of
BlackRock Municipal Series Trust:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of BlackRock Intermediate Municipal Fund of
BlackRock Municipal Series Trust (the "Trust") as of May 31, 2008, and the
related statements of operations for the period November 1, 2007 to May 31, 2008
and for the year ended October 31, 2007, the statements of changes in net assets
for the period November 1, 2007 to May 31, 2008 and for each of the two years in
the period ended October 31, 2007, and the financial highlights for each of the
respective periods presented. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Trust
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Trust's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of May 31, 2008, by correspondence with the custodian. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
BlackRock Intermediate Municipal Fund of BlackRock Municipal Series Trust as of
May 31, 2008, the results of its operations for the period November 1, 2007 to
May 31, 2008 and for the year ended October 31, 2007, the changes in its net
assets for the period November 1, 2007 to May 31, 2008 and for each of the two
years in the period ended October 31, 2007, and the financial highlights for
each of the respective periods presented, in conformity with accounting
principles generally accepted in the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
July 28, 2008
Important Tax Information (Unaudited)
All of the net investment income distributions paid by BlackRock Intermediate
Municipal Fund of BlackRock Municipal Series Trust during the taxable period
ended May 31, 2008 qualify as tax-exempt interest dividends for federal income
tax purposes.
26 BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008
Officers and Trustees
Number of
Length of BlackRock-
Position(s) Time Served Advised Funds
Name, Address Held with as a Principal Occupation(s) and Portfolios
and Year of Birth Fund Trustee 2 During Past Five Years Overseen Public Directorships
====================================================================================================================================
Non-Interested Trustees 1
- ------------------------------------------------------------------------------------------------------------------------------------
James H. Bodurtha Trustee Since 2007 Director, The China Business Group, Inc. 37 Funds None
40 East 52nd Street (consulting firm) since 1996 and formerly 104 Portfolios
New York, NY 10022 Executive Vice President thereof from
1944 1996 to 2003; Chairman of the Board,
Berkshire Holding Corporation since 1980.
- ------------------------------------------------------------------------------------------------------------------------------------
Bruce R. Bond Trustee Since 2007 Formerly Trustee and Member of the 37 Funds None
40 East 52nd Street Governance Committee, State Street 104 Portfolios
New York, NY 10022 Research Mutual Funds from 1997 to 2005;
1946 Formerly Board Member of Governance,
Audit and Finance Committee, Avaya Inc.
(computer equipment) from 2003 to 2007.
- ------------------------------------------------------------------------------------------------------------------------------------
Donald W. Burton Trustee Since 2007 Managing General Partner, The Burton 37 Funds Knology, Inc.
40 East 52nd Street Partnership, LP (an investment 104 Portfolios (telecommunications);
New York, NY 10022 partnership) since 1979; Managing General Capital Southwest
1944 Partner, The South Atlantic Venture Funds (financial)
since 1983; Member of the Investment
Advisory Council of the Florida State
Board of Administration from 2001 to
2007.
- ------------------------------------------------------------------------------------------------------------------------------------
Honorable Trustee Since 2007 Partner and Head of International 37 Funds UPS Corporation
Stuart E. Eizenstat Practice, Covington and Burling (law 104 Portfolios (delivery service)
40 East 52nd Street firm) since 2001; International Advisory
New York, NY 10022 Board Member, The Coca Cola Company since
1943 2002; Advisory Board Member BT Americas
(telecommunications) since 2004; Member
of the Board of Directors, Chicago
Climate Exchange (environmental) since
2006; Member of the International
Advisory Board GML (energy) since 2003.
- ------------------------------------------------------------------------------------------------------------------------------------
Kenneth A. Froot Trustee Since 2007 Professor, Harvard University since 1992. 37 Funds None
40 East 52nd Street 104 Portfolios
New York, NY 10022
1957
- ------------------------------------------------------------------------------------------------------------------------------------
Robert M. Hernandez Chairman of the Since 2007 Formerly Director, Vice Chairman and 37 Funds ACE Limited
40 East 52nd Street Board, Trustee Chief Financial Officer of USX 104 Portfolios (insurance company);
New York, NY 10022 and Member of Corporation (energy and steel business) Eastman Chemical
1944 the Audit from 1991 to 2001. Company (chemical);
Committee RTI International
Metals, Inc.
(metals); TYCO
Electronics
(electronics)
- ------------------------------------------------------------------------------------------------------------------------------------
John F. O'Brien Trustee Since 2007 Trustee, Woods Hole Oceanographic 37 Funds Cabot Corporation
40 East 52nd Street Institute since 2003; Formerly Director, 104 Portfolios (chemicals);
New York, NY 10022 Allmerica Financial Corporation from 1995 LKQ Corporation (auto
1943 to 2003; Formerly Director, ABIOMED from parts manufacturing);
1989 to 2006; Formerly Director, TJX Companies, Inc.
Ameresco, Inc. (energy solutions company) (retailer)
from 2006 to 2007.
- ------------------------------------------------------------------------------------------------------------------------------------
BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008 27
Officers and Trustees (continued)
Number of
Length of BlackRock-
Position(s) Time Served Advised Funds
Name, Address Held with as a Principal Occupation(s) and Portfolios
and Year of Birth Fund Trustee 2 During Past Five Years Overseen Public Directorships
====================================================================================================================================
Non-Interested Trustees 1 (concluded)
- ------------------------------------------------------------------------------------------------------------------------------------
Roberta Cooper Ramo Trustee Since 2007 Shareholder, Modrall, Sperling, Roehl, 37 Funds None
40 East 52nd Street Harris & Sisk, P.A. (law firm) since 104 Portfolios
New York, NY 10022 1993; Chairman of the Board, Cooper's
1942 Inc. (retail) since 2000; Director of
ECMC Group (service provider to students,
schools and lenders) since 2001;
President Elect, The American Law
Institute (non-profit), 2007; Formerly
President, American Bar Association from
1995 to 1996.
- ------------------------------------------------------------------------------------------------------------------------------------
Jean Margo Reid Trustee Since 2004 Self-employed consultant since 2001; 37 Funds None
40 East 52nd Street Director and Secretary, SCB, Inc. 104 Portfolios
New York, NY 10022 (holding company) since 1998; Director
1945 and Secretary, SCB Partners, Inc.
(holding company) since 2000; Formerly
Director, Covenant House (non-profit)
from 2001 to 2004.
- ------------------------------------------------------------------------------------------------------------------------------------
David H. Walsh Trustee Since 2007 Director, National Museum of Wildlife Art 37 Funds None
40 East 52nd Street since 2007; Director, Ruckleshaus 104 Portfolios
New York, NY 10022 Institute and Haub School of Natural
1941 Resources at the University of Wyoming
since 2006; Director, The American Museum
of Fly Fishing since 1997; Formerly
Consultant with Putnam Investments from
1993 to 2003; Formerly Director, The
National Audubon Society from 1998 to
2005.
- ------------------------------------------------------------------------------------------------------------------------------------
Fred G. Weiss Chairman of the Since 2007 Managing Director, FGW Associates 37 Funds Watson
40 East 52nd Street Audit Committee (consulting and investment company) since 104 Portfolios Pharmaceutical Inc.
New York, NY 10022 and Trustee 1997; Director, Michael J. Fox Foundation
1941 for Parkinson's Research since 2000;
Formerly Director of BTG International
Plc (a global technology
commercialization company) from 2001 to
2007.
- ------------------------------------------------------------------------------------------------------------------------------------
Richard R. West Trustee and Since 1986 Dean Emeritus, New York University's 37 Funds Bowne & Co., Inc.
40 East 52nd Street Member of the Leonard N. Stern School of Business 104 Portfolios (financial printers);
New York, NY 10022 Audit Committee Administration since 1995. Vornado Realty Trust
1938 (real estate
company); Alexander's
Inc. (real estate
company)
-------------------------------------------------------------------------------------------------------------
1 Trustees serve until their resignation, removal or death, or until December 31 of the year in which
they turn 72.
2 Following the combination of Merrill Lynch Investment Managers, L.P. ("MLIM") and BlackRock, Inc.
("BlackRock") in September 2006, the various legacy MLIM and legacy BlackRock Fund boards were
realigned and consolidated into three new Fund boards in 2007. As a result, although the chart shows
certain trustees as joining the Fund's board in 2007, each trustee first became a member of the board
of trustees of other legacy MLIM or legacy BlackRock Funds as follows: James H. Bodurtha since 1995;
Bruce R. Bond since 2005; Donald W. Burton since 2002; Stuart E. Eizenstat since 2001; Kenneth A. Froot
since 2005; Robert M. Hernandez since 1996; John F. O'Brien since 2004; Roberta Cooper Ramo since 2000;
Jean Margo Reid since 2004; David H. Walsh since 2003; Fred G. Weiss since 1998; and Richard R. West
since 1978.
28 BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008
Officers and Trustees (continued)
Number of
Length of BlackRock-
Position(s) Time Served Advised Funds
Name, Address Held with as a Principal Occupation(s) and Portfolios
and Year of Birth Fund Trustee During Past Five Years Overseen Public Directorships
====================================================================================================================================
Interested Trustees 1
- ------------------------------------------------------------------------------------------------------------------------------------
Richard S. Davis Fund President Since 2007 Managing Director, BlackRock, Inc. since 185 Funds None
40 East 52nd Street and Trustee 2005; Formerly Chief Executive Officer, 295 Portfolios
New York, NY 10022 State Street Research & Management
1945 Company from 2000 to 2005; Formerly
Chairman of the Board of Trustees, State
Street Research Mutual Funds from 2000 to
2005; Formerly Chairman, SSR Realty from
2000 to 2004.
- ------------------------------------------------------------------------------------------------------------------------------------
Laurence D. Fink Trustee Since 2007 Chairman and Chief Executive Officer of 37 Funds None
40 East 52nd Street BlackRock, Inc. since its formation in 104 Portfolios
New York, NY 10022 1998 and of BlackRock, Inc.'s predecessor
1952 entities since 1988 and Chairman of the
Executive and Management Committees;
Formerly Managing Director, The First
Boston Corporation, Member of its
Management Committee, Co-head of its
Taxable Fixed Income Division and Head of
its Mortgage and Real Estate Products
Group; Chairman of the Board of several
of BlackRock's alternative investment
vehicles; Director of several of
BlackRock's offshore funds; Member of the
Board of Trustees of New York University,
Chair of the Financial Affairs Committee
and a member of the Executive Committee,
the Ad Hoc Committee on Board Governance,
and the Committee on Trustees;
Co-Chairman of the NYU Hospitals Center
Board of Trustees, Chairman of the
Development/Trustee Stewardship Committee
and Chairman of the Finance Committee;
Trustee, The Boys' Club of New York.
- ------------------------------------------------------------------------------------------------------------------------------------
Henry Gabbay Trustee Since 2007 Consultant, BlackRock, Inc. since 2007; 184 Funds None
40 East 52nd Street Formerly Managing Director, BlackRock, 294 Portfolios
New York, NY 10022 Inc. from 1989 to 2007; Formerly Chief
1947 Administrative Officer, BlackRock
Advisors, LLC from 1998 to 2007; Formerly
President of BlackRock Funds and
BlackRock Bond Allocation Target Shares
from 2005 to 2007 and Treasurer of
certain closed-end Funds in the BlackRock
fund complex from 1989 to 2006.
-------------------------------------------------------------------------------------------------------------
1 Messrs. Davis, Fink and Gabbay are all "interested persons," as defined in the Investment Company Act
of 1940, of the Fund based on their positions with BlackRock, Inc. and its affiliates. Trustees serve
until their resignation, removal or death, or until December 31 of the year in which they turn 72.
BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008 29
Officers and Trustees (concluded)
Position(s)
Name, Address Held with Length of
and Year of Birth the Fund Time Served Principal Occupation(s) During Past Five Years
====================================================================================================================================
Fund Officers 1
- ------------------------------------------------------------------------------------------------------------------------------------
Donald C. Burke Chief Executive Since 2007 Managing Director of BlackRock, Inc. since 2006; Formerly Managing Director of
40 East 52nd Street Officer Merrill Lynch Investment Managers, L.P. ("MLIM") and Fund Asset Management,
New York, NY 10022 L.P. ("FAM") in 2006; First Vice President thereof from 1997 to 2005; Treasurer
1960 thereof from 1999 to 2006 and Vice President thereof from 1990 to 1997.
- ------------------------------------------------------------------------------------------------------------------------------------
Anne F. Ackerley Vice President Since 2007 Managing Director of BlackRock, Inc. since 2000; Chief Operating Officer of
40 East 52nd Street BlackRock's U.S. Retail Group since 2006; Head of BlackRock's Mutual Fund Group
New York, NY 10022 from 2000 to 2006; Merrill Lynch & Co., Inc. from 1984 to 1986 and from 1988 to
1962 2000, most recently as First Vice President and Operating Officer of the
Mergers and Acquisitions Group.
- ------------------------------------------------------------------------------------------------------------------------------------
Neal J. Andrews Chief Financial Since 2007 Managing Director of BlackRock, Inc. since 2006; Formerly Senior Vice President
40 East 52nd Street Officer and Line of Business Head of Fund Accounting and Administration at PFPC Inc.
New York, NY 10022 from 1992 to 2006.
1966
- ------------------------------------------------------------------------------------------------------------------------------------
Jay M. Fife Treasurer Since 2007 Managing Director of BlackRock, Inc. since 2007 and Director in 2006; Formerly
40 East 52nd Street Assistant Treasurer of the MLIM/FAM-advised Funds from 2005 to 2006; Director
New York, NY 10022 of MLIM Fund Services Group from 2001 to 2006.
1970
- ------------------------------------------------------------------------------------------------------------------------------------
Brian P. Kindelan Chief Since 2007 Chief Compliance Officer of the BlackRock-advised Funds since 2007; Anti-Money
40 East 52nd Street Compliance Laundering Officer of the BlackRock-advised Funds since 2007; Managing Director
New York, NY 10022 Officer and Senior Counsel of BlackRock, Inc. since 2005; Director and Senior Counsel
1959 of the Fund of BlackRock Advisors, Inc. from 2001 to 2004 and Vice President and Senior
Counsel thereof from 1998 to 2000; Formerly Senior Counsel of The PNC Bank
Corp. from 1995 to 1998.
- ------------------------------------------------------------------------------------------------------------------------------------
Howard Surloff Secretary Since 2007 Managing Director of BlackRock, Inc. and General Counsel of U.S. Funds at
40 East 52nd Street BlackRock, Inc. since 2006; Formerly General Counsel (U.S.) of Goldman Sachs
New York, NY 10022 Asset Management, L.P. from 1993 to 2006.
1965
-------------------------------------------------------------------------------------------------------------
1 Officers of the Fund serve at the pleasure of the Board of Trustees.
-------------------------------------------------------------------------------------------------------------
Further information about the Fund's Officers and Trustees is available in the Fund's Statement of Additional
Information, which can be obtained without charge by calling (800) 441-7762.
- ------------------------------------------------------------------------------------------------------------------------------------
Custodian
State Street Bank and
Trust Company
Boston, MA 02101
Transfer Agent
PNC Global Investment
Servicing (U.S.) Inc.
Wilmington, DE 19809
Accounting Agent
State Street Bank and
Trust Company
Princeton, NJ 08540
Independent Registered Public
Accounting Firm
Deloitte & Touche LLP
Princeton, NJ 08540
Legal Counsel
Willkie Farr & Gallagher LLP
New York, NY 10019
30 BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008
Additional Information
BlackRock Privacy Principles
BlackRock is committed to maintaining the privacy of its current and former fund
investors and individual clients (collectively, "Clients") and to safeguarding
their non-public personal information. The following information is provided to
help you understand what personal information BlackRock collects, how we protect
that information and why in certain cases we share such information with select
parties.
If you are located in a jurisdiction where specific laws, rules or regulations
require BlackRock to provide you with additional or different privacy-related
rights beyond what is set forth below, then BlackRock will comply with those
specific laws, rules or regulations.
BlackRock obtains or verifies personal non-public information from and about you
from different sources, including the following: (i) information we receive from
you or, if applicable, your financial intermediary, on applications, forms or
other documents; (ii) information about your transactions with us, our
affiliates, or others; (iii) information we receive from a consumer reporting
agency; and (iv) from visits to our websites.
BlackRock does not sell or disclose to non-affiliated third parties any
non-public personal information about its Clients, except as permitted by law or
as is necessary to respond to regulatory requests or to service Client accounts.
These non-affiliated third parties are required to protect the confidentiality
and security of this information and to use it only for its intended purpose.
We may share information with our affiliates to service your account or to
provide you with information about other BlackRock products or services that may
be of interest to you. In addition, BlackRock restricts access to non-public
personal information about its Clients to those BlackRock employees with a
legitimate business need for the information. BlackRock maintains physical,
electronic and procedural safeguards that are designed to protect the non-public
personal information of its Clients, including procedures relating to the proper
storage and disposal of such information.
BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008 31
Additional Information (continued)
Availability of Additional Information (concluded)
Electronic copies of most financial reports and prospectuses are available on
the Fund's website or shareholders can sign up for e-mail notifications of
quarterly statements, annual and semi-annual reports and prospectuses by
enrolling in the Fund's electronic delivery program.
To enroll:
Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages:
Please contact your financial advisor. Please note that not all investment
advisors, banks or brokerages may offer this service.
Shareholders Who Hold Accounts Directly with BlackRock:
1) Access the BlackRock website at http://www.blackrock.com/edelivery
2) Click on the applicable link and follow the steps to sign up
3) Log into your account
The Fund will mail only one copy of shareholder documents, including
prospectuses, annual and semi-annual reports and proxy statements, to
shareholders with multiple accounts at the same address. This practice is
commonly called "householding" and it is intended to reduce expenses and
eliminate duplicate mailings of shareholder documents. Mailings of your
shareholder documents may be householded indefinitely unless you instruct us
otherwise. If you do not want the mailing of these documents to be combined with
those for other members of your household, please contact the Fund at (800)
441-7762.
Availability of Proxy Voting Policies and Procedures
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free (800) 441-7762; (2) at
www.blackrock.com; and (3) on the Securities and Exchange Commission's (the
"SEC") website at http://www.sec.gov.
Availability of Proxy Voting Record
Information about how the Fund votes proxies relating to securities held in the
Fund's portfolio during the most recent 12-month period ended June 30 is
available upon request and without charge (1) at www.blackrock.com or by calling
(800) 441-7762 and (2) on the SEC's website at http://www.sec.gov.
Availability of Quarterly Portfolio Schedule
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q
are available on the SEC's website at http://www.sec.gov and may also be
reviewed and copied at the SEC's Public Reference Room in Washington, D.C.
Information on the operation of the Public Reference Room may be obtained by
calling (800) SEC-0330. The Fund's Forms N-Q may also be obtained upon request
and without charge by calling (800) 441-7762.
32 BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008
Additional Information (concluded)
Shareholder Privileges
Account Information
Call us at (800) 441-7762 from 8:00 AM to 6:00 PM EST to get information about
your account balances, recent transactions and share prices. You can also reach
us on the Web at www.blackrock.com/funds.
Automatic Investment Plans
Investor Class shareholders who want to invest regularly can arrange to have $50
or more automatically deducted from their checking or savings account and
invested in any of the BlackRock funds.
Systematic Withdrawal Plans
Investor Class shareholders can establish a systematic withdrawal plan and
receive periodic payments of $50 or more from their BlackRock funds, as long as
their account is at least $10,000.
Retirement Plans
Shareholders may make investments in conjunction with Traditional, Rollover,
Roth, Coverdell, Simple IRAs, SEP IRAs and 403(b) Plans.
BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008 33
A World-Class Mutual Fund Family
BlackRock offers a diverse lineup of open-end mutual funds crossing all
investment styles and managed by experts in equity, fixed income and tax-exempt
investing.
Equity Funds
BlackRock All-Cap Global Resources Portfolio
BlackRock Asset Allocation Portfolio+
BlackRock Aurora Portfolio
BlackRock Balanced Capital Fund+
BlackRock Basic Value Fund
BlackRock Capital Appreciation Portfolio
BlackRock Equity Dividend Fund
BlackRock EuroFund
BlackRock Focus Growth Fund
BlackRock Focus Value Fund
BlackRock Fundamental Growth Fund
BlackRock Global Allocation Fund+
BlackRock Global Dynamic Equity Fund
BlackRock Global Emerging Markets Fund
BlackRock Global Financial Services Fund
BlackRock Global Growth Fund
BlackRock Global Opportunities Portfolio
BlackRock Global Resources Portfolio
BlackRock Global Science & Technology Opportunities Portfolio
BlackRock Global SmallCap Fund
BlackRock Health Sciences Opportunities Portfolio*
BlackRock Healthcare Fund
BlackRock Index Equity Portfolio*
BlackRock International Fund
BlackRock International Index Fund
BlackRock International Opportunities Portfolio
BlackRock International Value Fund
BlackRock Large Cap Core Fund
BlackRock Large Cap Growth Fund
BlackRock Large Cap Value Fund
BlackRock Latin America Fund
BlackRock Mid-Cap Growth Equity Portfolio
BlackRock Mid-Cap Value Equity Portfolio
BlackRock Mid Cap Value Opportunities Fund
BlackRock Natural Resources Trust
BlackRock Pacific Fund
BlackRock Small Cap Core Equity Portfolio
BlackRock Small Cap Growth Equity Portfolio
BlackRock Small Cap Growth Fund II
BlackRock Small Cap Index Fund
BlackRock Small Cap Value Equity Portfolio*
BlackRock Small/Mid-Cap Growth Portfolio
BlackRock S&P 500 Index Fund
BlackRock Technology Fund
BlackRock U.S. Opportunities Portfolio
BlackRock Utilities and Telecommunications Fund
BlackRock Value Opportunities Fund
Fixed Income Funds
BlackRock Commodity Strategies Fund
BlackRock Emerging Market Debt Portfolio
BlackRock Enhanced Income Portfolio
BlackRock GNMA Portfolio
BlackRock Government Income Portfolio
BlackRock High Income Fund
BlackRock High Yield Bond Portfolio
BlackRock Income Portfolio
BlackRock Income Builder Portfolio
BlackRock Inflation Protected Bond Portfolio
BlackRock Intermediate Bond Portfolio II
BlackRock Intermediate Government Bond Portfolio
BlackRock International Bond Portfolio
BlackRock Long Duration Bond Portfolio
BlackRock Low Duration Bond Portfolio
BlackRock Managed Income Portfolio
BlackRock Short-Term Bond Fund
BlackRock Strategic Income Portfolio
BlackRock Total Return Fund
BlackRock Total Return Portfolio II
BlackRock World Income Fund
Municipal Bond Funds
BlackRock AMT-Free Municipal Bond Portfolio
BlackRock California Insured Municipal Bond Fund
BlackRock Delaware Municipal Bond Portfolio
BlackRock Florida Municipal Bond Fund
BlackRock High Yield Municipal Fund
BlackRock Intermediate Municipal Fund
BlackRock Kentucky Municipal Bond Portfolio
BlackRock Municipal Insured Fund
BlackRock National Municipal Fund
BlackRock New Jersey Municipal Bond Fund
BlackRock New York Municipal Bond Fund
BlackRock Ohio Municipal Bond Portfolio
BlackRock Pennsylvania Municipal Bond Fund
BlackRock Short-Term Municipal Fund
Target Risk & Target Date Funds
BlackRock Prepared Portfolios
Conservative Prepared Portfolio
Moderate Prepared Portfolio
Growth Prepared Portfolio
Aggressive Growth Prepared Portfolio
BlackRock Lifecycle Prepared Portfolios
Prepared Portfolio 2010
Prepared Portfolio 2015
Prepared Portfolio 2020
Prepared Portfolio 2025
Prepared Portfolio 2030
Prepared Portfolio 2035
Prepared Portfolio 2040
Prepared Portfolio 2045
Prepared Portfolio 2050
* See the prospectus for information on specific limitations on investments
in the fund.
+ Mixed asset fund.
BlackRock mutual funds are distributed by BlackRock Distributors, Inc. and
certain funds are also distributed by FAM Distributors, Inc. You should consider
the investment objectives, risks, charges and expenses of the funds under
consideration carefully before investing. Each fund's prospectus contains this
and other information and is available at www.blackrock.com or by calling (800)
882-0052 or from your financial advisor. The prospectus should be read carefully
before investing.
34 BLACKROCK INTERMEDIATE MUNICIPAL FUND MAY 31, 2008
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 returns 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.
BlackRock Intermediate Municipal Fund
Of BlackRock Municipal Series Trust
100 Bellevue Parkway
Wilmington, DE 19809
BLACKROCK
#10437-5/08
Item 2 - Code of Ethics - The registrant (or the "Fund") has adopted a code
of ethics, as of the end of the period covered by this report,
applicable to the registrant's principal executive officer,
principal financial officer and principal accounting officer, or
persons performing similar functions. During the period covered by
this report, there have been no amendments to or waivers granted
under the code of ethics. A copy of the code of ethics is available
without charge at www.blackrock.com.
Item 3 - Audit Committee Financial Expert - The registrant's board of
directors or trustees, as applicable (the "board of directors") has
determined that (i) the registrant has the following audit committee
financial experts serving on its audit committee and (ii) each audit
committee financial expert is independent:
Ronald W. Forbes (term ended, effective November 1, 2007)
Robert M. Hernandez (term began, effective November 1, 2007)
Fred G. Weiss (term began, effective November 1, 2007)
Richard R. West
Under applicable securities laws, a person determined to be an audit
committee financial expert will not be deemed an "expert" for any
purpose, including without limitation for the purposes of Section 11
of the Securities Act of 1933, as a result of being designated or
identified as an audit committee financial expert. The designation
or identification as an audit committee financial expert does not
impose on such person any duties, obligations, or liabilities
greater than the duties, obligations, and liabilities imposed on
such person as a member of the audit committee and board of
directors in the absence of such designation or identification.
Item 4 - Principal Accountant Fees and Services
- -----------------------------------------------------------------------------------------------------------------------------------
(a) Audit Fees (b) Audit-Related Fees(1) (c) Tax Fees(2) (d) All Other Fees(3)
- -----------------------------------------------------------------------------------------------------------------------------------
Current Previous Current Previous Current Previous Current Previous
Fiscal Year Fiscal Fiscal Year Fiscal Fiscal Year Fiscal Fiscal Year Fiscal
Entity Name End Year End End Year End End Year End End Year End
- -----------------------------------------------------------------------------------------------------------------------------------
BlackRock $27,900 $51,350 $0 $0 $6,100 $6,100 $1,049 $1,042
Intermediate
Municipal Fund of
BlackRock Municipal
Series Trust
- -----------------------------------------------------------------------------------------------------------------------------------
1 The nature of the services include assurance and related services reasonably
related to the performance of the audit of financial statements not included in
Audit Fees.
2 The nature of the services include tax compliance, tax advice and tax
planning.
3 The nature of the services include a review of compliance procedures and
attestation thereto.
(e)(1) Audit Committee Pre-Approval Policies and Procedures:
The registrant's audit committee (the "Committee") has adopted
policies and procedures with regard to the pre-approval of services.
Audit, audit-related and tax compliance services provided to the
registrant on an annual basis require specific pre-approval by the
Committee. The Committee also must approve other non-audit services
provided to the registrant and those non-audit services provided to
the registrant's affiliated service providers that relate directly
to the operations and the financial reporting of the registrant.
Certain of these non-audit services that the Committee believes are
a) consistent with the SEC's auditor independence rules and b)
routine and recurring services that will not impair the independence
of the independent accountants may be approved by the Committee
without consideration on a specific case-by-case basis ("general
pre-approval"). The term of any general pre-approval is 12 months
from the date of the pre-approval, unless the Committee provides for
a different period. Tax or other non-audit services provided to the
registrant which have a direct impact on the operation or financial
reporting of the registrant will only be deemed pre-approved
provided that any individual project does not exceed $10,000
attributable to the registrant or $50,000 for all of the registrants
the Committee oversees. For this purpose, multiple projects will be
aggregated to determine if they exceed the previously mentioned cost
levels.
Any proposed services exceeding the pre-approved cost levels
will require specific pre-approval by the Committee, as will any
other services not subject to general pre-approval (e.g.,
unanticipated but permissible services). The Committee is informed
of each service approved subject to general pre-approval at the next
regularly scheduled in-person board meeting. At this meeting, an
analysis of such services is presented to the Committee for
ratification. The Committee may delegate to one or more of its
members the authority to approve the provision of and fees for any
specific engagement of permitted non-audit services, including
services exceeding pre-approved cost levels.
(e)(2) None of the services described in each of Items 4(b) through
(d) were approved by the audit committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not Applicable
(g) Affiliates' Aggregate Non-Audit Fees:
--------------------------------------------------------------------
Current Fiscal Previous Fiscal
Entity Name Year End Year End
--------------------------------------------------------------------
BlackRock Intermediate Municipal $294,649 $713,975
Fund of
BlackRock Municipal Series Trust
--------------------------------------------------------------------
(h) The registrant's audit committee has considered and determined
that the provision of non-audit services that were rendered to the
registrant's investment adviser (not including any non-affiliated
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by the registrant's investment
adviser), and any entity controlling, controlled by, or under common
control with the investment adviser that provides ongoing services
to the registrant that were not pre-approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with
maintaining the principal accountant's independence.
Regulation S-X Rule 2-01(c)(7)(ii) - $287,500, 0%
Item 5 - Audit Committee of Listed Registrants - Not Applicable
Item 6 - Investments
(a) The registrant's Schedule of Investments is included as part of
the Report to Stockholders filed under Item 1 of this form.
(b) Not Applicable due to no such divestments during the semi-annual
period covered since the previous Form N-CSR filing.
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable
Item 8 - Portfolio Managers of Closed-End Management Investment Companies -
Not Applicable
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 10 - Submission of Matters to a Vote of Security Holders - The
registrant's Nominating and Governance Committee will consider
nominees to the board of directors recommended by shareholders when
a vacancy becomes available. Shareholders who wish to recommend a
nominee should send nominations which include biographical
information and set forth the qualifications of the proposed nominee
to the registrant's Secretary. There have been no material changes
to these procedures.
Item 11 - Controls and Procedures
11(a) - The registrant's principal executive and principal financial
officers or persons performing similar functions have concluded that
the registrant's disclosure controls and procedures (as defined in
Rule 30a-3(c) under the Investment Company Act of 1940, as amended
(the "1940 Act")) are effective as of a date within 90 days of the
filing of this report based on the evaluation of these controls and
procedures required by Rule 30a-3(b) under the 1940 Act and Rule
15d-15(b) under the Securities Exchange Act of 1934, as amended.
11(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act)
that occurred during the second fiscal quarter of the period covered
by this report that have materially affected, or are reasonably
likely to materially affect, the registrant's internal control over
financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - See Item 2
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(b) - Certifications - Attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
BlackRock Intermediate Municipal Fund of BlackRock Municipal Series Trust
By: /s/ Donald C. Burke
-----------------------------------
Donald C. Burke
Chief Executive Officer of
BlackRock Intermediate Municipal Fund of BlackRock Municipal Series Trust
Date: July 18, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Donald C. Burke
-----------------------------------
Donald C. Burke
Chief Executive Officer (principal executive officer) of
BlackRock Intermediate Municipal Fund of BlackRock Municipal Series Trust
Date: July 18, 2008
By: /s/ Neal J. Andrews
-----------------------------------
Neal J. Andrews
Chief Financial Officer (principal financial officer) of
BlackRock Intermediate Municipal Fund of BlackRock Municipal Series Trust
Date: July 18, 2008