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 811-4375
Name of Fund: Florida Municipal Bond Fund of Merrill Lynch Multi-State Municipal
Series Trust
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President, Florida
Municipal Bond Fund of Merrill Lynch Multi-State 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: (609) 282-2800
Date of fiscal year end: 07/31/03
Date of reporting period: 08/01/02 - 1/31/03
Item 1 - Attach shareholder report
[LOGO] Merrill Lynch Investment Managers
Semi-Annual Report
January 31, 2003
Merrill Lynch
Florida Municipal
Bond Fund
www.mlim.ml.com
Merrill Lynch Florida Municipal Bond Fund January 31, 2003
DEAR SHAREHOLDERS
The Municipal Market Environment
During the six-month period ended January 31, 2003, long-term fixed income
interest rates continued to move lower. As they had in 2002, declining U.S.
equity markets and escalating worldwide political tensions easily overshadowed
the incipient U.S. economic recovery, allowing bond yields to fall to recent
historical lows. Economic releases, such as national employment and purchasing
manager surveys, were generally weak early in the period. Additionally, at its
August 2002 meeting, the Federal Reserve Board indicated that concerns about
future economic weakness outweighed those of rising inflation. This signaled
that the Federal Reserve Board was more likely to continue to lower short-term
interest rates to boost economic activity rather than to raise them to reduce
inflationary pressures. These factors combined to generate a very favorable
fixed income environment during August and September 2002. The dramatic decline
in equity values in late August and September triggered a significant fixed
income rally as investors sought the safe-haven status of U.S. Treasury issues.
By the end of September, U.S. Treasury bond yields had fallen to 4.65%.
Bolstered by an unexpected decline in the national unemployment rate to 5.6% in
early October, U.S. equity markets staged a strong rally throughout much of the
month. The Standard & Poor's 500 (S&P 500) Index rose over 8% for October,
triggered by stronger-than-expected earnings reports from a large number of
companies, such as General Electric Company, International Business Machines
Corporation and Microsoft Corporation. As they have throughout most of the
period, bond prices traded in an inverse relationship to equity prices.
Consequently, as stocks rallied, bond yields rose in October, despite generally
weak economic releases. During October, the U.S. housing sector remained quite
robust, but retail sales and industrial production slowed. Fixed income bond
yields remained under pressure in November as U.S. equity markets continued to
strengthen. During November, the S&P 500 Index rose an additional 5.5%. Equity
prices were supported by further signs of U.S. economic recovery, especially
improving labor market activity. By the end of November, third quarter gross
domestic product growth was 4%. Financial conditions were also strengthened by a
larger-than-expected reduction in short-term interest rates by the Federal
Reserve Board in early November. The Federal Funds target rate was lowered 50
basis points (.50%) to 1.25%, its lowest level since the 1960s. Recent action by
the Federal Reserve Board was largely viewed as being taken to bolster the
sputtering U.S. economic recovery. Rebounding U.S. equity markets and the
prospects for a more substantial U.S. economic recovery pushed long-term U.S.
Treasury yield levels to 5.10% by late November.
In December 2002 and January 2003, softer equity prices and renewed investor
concerns about potential military action against Iraq and nuclear tensions in
North Korea again pushed bond prices higher. The S&P 500 Index declined more
than 5% in December on disappointing earnings reports and anticipated weak
holiday retail sales. During January, the S&P 500 Index declined an additional
2.5% as businesses tried to scale back analysts' expectations of future
earnings. In early 2003, investors again sought the safety of U.S. Treasury
securities. U.S. Treasury bond yields declined more than 25 basis points in
December and January to end the period at approximately 4.85%. Over the last six
months, U.S. Treasury bond yields fell more than 45 basis points.
For the six-month period ended January 31, 2003, tax-exempt bond prices also
generally rose. In recent months, municipal bond yields have declined in
response to the positive fixed income environment engendered by falling equity
valuations. Price advances in tax-exempt issues have not been able to keep pace
with U.S. Treasury bond price improvement as municipal bonds cannot offer
foreign investors the safe-haven status U.S. Treasury obligations enjoy in
periods of economic and political instability. Additionally, tax-exempt bond
issuance increased dramatically in the last half of 2002, removing some of the
positive technical support the municipal bond market enjoyed earlier in 2002. At
the end of January 2003, long-term municipal bond yields, as measured by the
Bond Buyer Revenue Bond Index, stood at 5.34%, a decline of approximately 15
basis points during the last six months.
Investor demand for tax-exempt products remained positive throughout the period.
In addition to the
1
Merrill Lynch Florida Municipal Bond Fund January 31, 2003
approximately $75 billion investors received from June to August 2002 from bond
maturities, coupon income and proceeds from early redemptions, investors also
received approximately $30 billion from these sources in January 2003. The
Investment Company Institute reported that in 2002 municipal bond funds net cash
flows were very positive at more than $16 billion, an increase of over 40%
compared to 2001. However, these positive demand factors have not been able to
offset the increase in tax-exempt new-issue supply that has resulted in the
underperformance seen in recent months. This price underperformance served to
make municipal bonds a particularly attractive purchase relative to their
taxable counterparts. Throughout most of the yield curve, municipal bonds have
been available for purchase at yields near or exceeding those of comparable U.S.
Treasury issues. Compared to their recent historical averages of 82% - 88% of
U.S. Treasury yields, municipal bond yield ratios in their current 95% - 105%
range are likely to prove attractive to long-term investors.
Continued uncertainty regarding the pace of the current U.S. economic recovery
as well as the resolution of the U.N./Iraq confrontation are likely to keep
interest rates near their present levels for the immediate future. Equity market
declines over the past three years have helped push interest rates lower than
economic fundamentals alone would support. When U.S. business conditions improve
and equity markets stabilize, any associated interest rate increases should not
be extreme. Inflationary pressures are negligible and any move by the Federal
Reserve Board to raise short-term interest rates is unlikely before late 2003.
As equity valuations are likely to only gradually improve, the U.S. economic
recovery is also likely to be a moderate process. This suggests that the pace of
any interest rate increases will also be gradual. As the municipal bond market's
strong technical position can be expected to remain supportive in the coming
months, future tax-exempt interest rate increases should be more restrained than
their taxable counterparts.
Specific to Florida, the state's General Fund budget proposal for fiscal year
2003-2004 is $53.9 billion, a 7% increase from the prior year. This budget will
attempt to close a $2 billion fiscal year 2004 operating shortfall. It includes
currently passed referendums for smaller class sizes, enrolling four-year olds
as pre-kindergartners and a high-speed rail line. Florida is projected to end
fiscal year 2002-2003 with an operating surplus of $140 million and a Rainy Day
Fund at $960 million, a sharp contrast to most other states. With the
implementation of the constitutional amendments, spending will increase faster
than revenues and will force the state to borrow. In fiscal 2004, $3 billion is
earmarked for schools. However, this is just part of an estimated $4 billion -
$27 billion cost for education during the next eight years. With this increase
in spending in the current fiscal year, other programs will be reduced and/or
eliminated to pick up the expense. Some proposed cuts include $200 million from
transportation, $111 million from universities and $51 million from juvenile
crime prevention. Additional expenditure savings will be derived by outsourcing
state agency functions such as payroll and benefits administration, totaling
another $200 million. These reductions, along with an increase in the corporate
tax structure, the inclusion of video lottery terminals at racetracks and
improving sales tax collections are estimated to generate more than $1 billion.
Proposed expenditure reductions and revenue increases, along with a sizeable
Rainy Day Fund, will enable the state to operate without increasing other taxes.
However, the state balanced its budget by burdening local governments and
universities by asking the voters to increase local sales taxes and/or increase
tuition to meet local operations. Even though the state is being pressured by a
weak national economy, we believe it is in a position in the coming year to
perform well given its prospective management and financial flexibility.
Portfolio Strategy
For the six months ended January 31, 2003, we maintained the Fund's neutral
position, as we continued to focus on reducing the volatility of the Fund.
During the period, U.S. equity and fixed income markets were quite volatile. The
Federal Reserve Board lowered short-term interest rates in November 2002 and the
municipal bond yield curve remained very steep. We continued to sell some of the
Fund's 10-year - 15-year bonds and with the proceeds purchased larger-couponed
bonds maturing in 20 years - 30 years. These longer-dated maturities are
expected to enhance the Fund's income stream and help preserve asset valuations
during future periods of market volatility.
2
Merrill Lynch Florida Municipal Bond Fund January 31, 2003
During the period, new-issue supply was up approximately 27% compared to the
same period a year ago. Despite the heavy supply, retail and institutional
demand has remained quite strong. This limited us from fully implementing our
desired strategy of continuing to sell some of the Fund's 10-year - 15-year
bonds and purchase larger-couponed bonds maturing in 20 years - 30 years as they
become available. Going forward, the municipal bond curve is expected to remain
quite steep. Therefore, we look to maintain the Fund's neutral position and will
remain fully invested in an effort to enhance shareholder income.
In Conclusion
We appreciate your ongoing interest in Merrill Lynch Florida Municipal Bond
Fund, and we look forward to serving your investment needs in the months and
years to come.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Trustee
/s/ Kenneth A. Jacob
Kenneth A. Jacob
Senior Vice President
/s/ John M. Loffredo
John M. Loffredo
Senior Vice President
/s/ Robert D. Sneeden
Robert D. Sneeden
Vice President and Portfolio Manager
March 7, 2003
3
Merrill Lynch Florida Municipal Bond Fund January 31, 2003
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill Lynch
Select Pricing(SM) System, which offers four pricing alternatives:
o Class A Shares incur a maximum initial sales charge (front-end load) of 4%
and bear no ongoing distribution or account maintenance fees. Class A
Shares are available only to eligible investors.
o Effective December 1, 2002, Class B Shares are subject to a maximum
contingent deferred sales charge of 4%, declining to 0% after six years.
All Class B Shares purchased prior to December 1, 2002 will maintain the
four-year schedule. In addition, Class B Shares are subject to a
distribution fee of 0.25% and an account maintenance fee of 0.25%. These
shares automatically convert to Class D Shares after approximately ten
years. (There is no initial sales charge for automatic share conversions.)
o Class C Shares are subject to a distribution fee of 0.35% and an account
maintenance fee of 0.25%. In addition, Class C Shares are subject to a 1%
contingent deferred sales charge if redeemed within one year of purchase.
o Class D Shares incur a maximum initial sales charge of 4% and an account
maintenance fee of 0.10% (but no distribution fee).
None of the past results shown should be considered a representation of
future performance. 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 each of the following tables assume
reinvestment of all dividends and capital gains distributions at net asset
value on the payable date. Investment return and principal value of shares
will fluctuate so that shares, when redeemed, may be worth more or less
than their original cost. Dividends paid to each class of shares will vary
because of the different levels of account maintenance, distribution and
transfer agency fees applicable to each class, which are deducted from the
income available to be paid to shareholders.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
==============================================================================
Class A Shares*
==============================================================================
One Year Ended 1/31/03 +7.29% +3.00%
- ------------------------------------------------------------------------------
Five Years Ended 1/31/03 +4.75 +3.90
- ------------------------------------------------------------------------------
Ten Years Ended 1/31/03 +5.56 +5.13
- ------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
==============================================================================
Class B Shares*
==============================================================================
One Year Ended 1/31/03 +6.75% +2.75%
- ------------------------------------------------------------------------------
Five Years Ended 1/31/03 +4.22 +3.89
- ------------------------------------------------------------------------------
Ten Years Ended 1/31/03 +5.03 +5.03
- ------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after
six years.
** Assuming payment of applicable contingent deferred sales charge.
==============================================================================
% Return % Return
Without CDSC With CDSC**
==============================================================================
Class C Shares*
==============================================================================
One Year Ended 1/31/03 +6.64% +5.64%
- ------------------------------------------------------------------------------
Five Years Ended 1/31/03 +4.14 +4.14
- ------------------------------------------------------------------------------
Inception (10/21/94)
through 1/31/03 +5.65 +5.65
- ------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after
one year.
** Assuming payment of applicable contingent deferred sales charge.
==============================================================================
% Return Without % Return With
Sales Charge Sales Charge**
==============================================================================
Class D Shares*
==============================================================================
One Year Ended 1/31/03 +7.19% +2.90%
- ------------------------------------------------------------------------------
Five Years Ended 1/31/03 +4.66 +3.81
- ------------------------------------------------------------------------------
Inception (10/21/94)
through 1/31/03 +6.19 +5.67
- ------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
4
Merrill Lynch Florida Municipal Bond Fund January 31, 2003
PERFORMANCE DATA (concluded)
Recent Performance Results
Ten Years/
6-Month 12-Month Since Inception Standardized
As of January 31, 2003 Total Return Total Return Total Return 30-Day Yield
==================================================================================================================
ML Florida Municipal Bond Fund Class A Shares* +3.21% +7.29% +71.84% 4.46%
- ------------------------------------------------------------------------------------------------------------------
ML Florida Municipal Bond Fund Class B Shares* +2.94 +6.75 +63.36 4.14
- ------------------------------------------------------------------------------------------------------------------
ML Florida Municipal Bond Fund Class C Shares* +2.99 +6.64 +57.66 4.04
- ------------------------------------------------------------------------------------------------------------------
ML Florida Municipal Bond Fund Class D Shares* +3.16 +7.19 +64.41 4.36
- ------------------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index** +3.16 +7.46 +88.71/+79.92 --
==================================================================================================================
* Investment results shown do not reflect sales charges; results would be
lower if a sales charge was included. Total investment returns are based
on changes in net asset values for the periods shown, and assume
reinvestment of all dividends and capital gains distributions at net asset
value on the payable date. The Fund's ten year/since inception dates are
ten years for Class A & Class B Shares and from 10/21/94 for Class C &
Class D Shares.
** This unmanaged Index consists of long-term revenue bonds, prerefunded
bonds, general obligation bonds and insured bonds. Ten-year/since
inception total returns are for ten years and from 10/31/94, respectively.
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face
Ratings Ratings Amount Issue Value
====================================================================================================================================
California--2.1%
====================================================================================================================================
A A1 $ 3,400 Golden State Tobacco Securitization Corporation, California, Tobacco Settlement
Revenue Bonds, Series 2003-A-1, 6.75% due 6/01/2039 $ 3,310
====================================================================================================================================
Florida--90.7%
====================================================================================================================================
AAA Aaa 1,095 Altamonte Springs, Florida, Health Facilities Authority, Hospital Revenue
Bonds (Adventist Health Systems--Sunbelt), 7% due 10/01/2014 (e) 1,395
- ------------------------------------------------------------------------------------------------------------------------------------
NR* NR* 885 Arbor Greene, Florida, Community Development District, Special Assessment
Revenue Bonds, 6.50% due 5/01/2007 895
- ------------------------------------------------------------------------------------------------------------------------------------
AA NR* 1,665 Beacon Tradeport Community Development District, Florida, Special Assessment
Revenue Refunding Bonds (Commercial Project), Series A, 5.625% due 5/01/2032 (k) 1,739
- ------------------------------------------------------------------------------------------------------------------------------------
NR* NR* 700 Bonnet Creek Resort, Florida, Community Development District, Special Assessment
Revenue Bonds, 7.50% due 5/01/2034 711
- ------------------------------------------------------------------------------------------------------------------------------------
NR* NR* 300 Brooks of Bonita Springs II, Florida, Community Development District,
Capital Improvement Revenue Bonds, Series B, 6.60% due 5/01/2007 304
- ------------------------------------------------------------------------------------------------------------------------------------
PORTFOLIO ABBREVIATIONS
To simplify the listings of Merrill Lynch Florida Municipal Bond Fund's
portfolio holdings in the Schedule of Investments, we have abbreviated the names
of many of the securities according to the list below and at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
DRIVERS Derivative Inverse Tax-Exempt Receipts
GO General Obligation Bonds
HFA Housing Finance Agency
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
S/F Single-Family
VRDN Variable Rate Demand Notes
5
Merrill Lynch Florida Municipal Bond Fund January 31, 2003
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face
Ratings Ratings Amount Issue Value
====================================================================================================================================
Florida (continued)
====================================================================================================================================
Broward County, Florida, HFA, M/F Housing Revenue Refunding Bonds
(Lakeside Apartments Project) (d):
AAA NR* $ 1,100 6.90% due 8/01/2015 $ 1,158
AAA NR* 1,100 7% due 2/01/2025 1,157
- ------------------------------------------------------------------------------------------------------------------------------------
AA- A3 5,000 Broward County, Florida, Resource Recovery Revenue Refunding Bonds
(Wheelabrator South Broward), Series A, 5.375% due 12/01/2009 5,417
- ------------------------------------------------------------------------------------------------------------------------------------
NR* Baa3 550 Capital Trust Agency, Florida, Air Cargo Revenue Bonds, AMT, 6.25% due 1/01/2019 536
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Celebration Community Development District, Florida (Special Assessment),
6% due 5/01/2010 (c) 1,065
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 7,000 Charlotte County, Florida, Health Care Facilities Revenue Refunding Bonds
(Bon Secours Health System), RIB, 10.57% due 8/26/2027 (g)(h) 7,404
- ------------------------------------------------------------------------------------------------------------------------------------
NR* Baa3 1,000 Citrus County, Florida, Hospital Board Revenue Refunding Bonds
(Citrus Memorial Hospital), 6.25% due 8/15/2023 987
- ------------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 1,340 Clay County, Florida, HFA, S/F Mortgage Revenue Bonds (Multi-County), AMT,
6.30% due 10/01/2020 (d)(f) 1,432
- ------------------------------------------------------------------------------------------------------------------------------------
NR* NR* 1,000 Double Branch Community, Florida, Development District, Special Assessment Bonds,
Series B-1, 5.60% due 5/01/2007 999
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 12,000 Escambia County, Florida, HFA, S/F Mortgage Revenue Refunding Bonds, AMT,
7% due 4/01/2028 (d)(f) 12,641
- ------------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 3,145 Escambia County, Florida, Health Facilities Authority, Health Facility Revenue Bonds
(Florida Health Care Facility Loan), 5.95% due 7/01/2020 (b) 3,459
- ------------------------------------------------------------------------------------------------------------------------------------
BBB Baa2 11,370 Escambia County, Florida, PCR (Champion International Corporation Project),
AMT, 6.90% due 8/01/2022 11,833
- ------------------------------------------------------------------------------------------------------------------------------------
BBB Baa2 1,500 Escambia County, Florida, PCR, Refunding (Champion International
Corporation Project), 6.95% due 11/01/2007 1,533
- ------------------------------------------------------------------------------------------------------------------------------------
NR* NR* 365 Fleming Island Plantation, Florida, Community Development District,
Special Assessment Bonds, Series A, 6.30% due 2/01/2005 367
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 3,105 Florida HFA, Homeowner Mortgage Revenue Bonds, AMT, Series 3, 6.35% due 7/01/2028 (c) 3,277
- ------------------------------------------------------------------------------------------------------------------------------------
AAA NR* 5,210 Florida HFA Revenue Bonds, DRIVERS, AMT, Series 189, 12.50% due 2/01/2035 (b)(h) 5,693
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 885 Florida Housing Finance Corporation, Homeowner Mortgage Revenue Bonds,
Series 10, 5.50% due 7/01/2017 (g) 931
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,635 Florida Housing Finance Corporation, Homeowner Mortgage Revenue Refunding Bonds,
AMT, Series 4, 6.25% due 7/01/2022 (g) 1,745
- ------------------------------------------------------------------------------------------------------------------------------------
AAA NR* 5,000 Florida State Board of Education, Lottery Revenue Bonds, DRIVERS, Series 222,
11.04% due 7/01/2017 (h)(i) 6,635
- ------------------------------------------------------------------------------------------------------------------------------------
AAA NR* 1,750 Florida State Board of Education, Public Education, GO, Refunding,
Series D, 5.75% due 6/01/2022 (g) 1,908
- ------------------------------------------------------------------------------------------------------------------------------------
AAA NR* 2,500 Florida State Turnpike Authority, Turnpike Revenue Bonds, DRIVERS,
Series 218, 11.04% due 7/01/2029 (h)(i) 3,284
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 135 Gulf Breeze, Florida, Miami Beach Local Government Revenue Bonds, Series C,
5% due 12/01/2015 (i) 145
- ------------------------------------------------------------------------------------------------------------------------------------
NR* NR* 1,000 Harbor Bay, Florida, Community Development District, Capital Improvement Special
Assessment Revenue Bonds, Series A, 7% due 5/01/2033 1,023
- ------------------------------------------------------------------------------------------------------------------------------------
NR* NR* 885 Heritage Isles Community Development District, Florida, Special Assessment Revenue
Refunding Bonds, 5.90% due 11/01/2006 885
- ------------------------------------------------------------------------------------------------------------------------------------
6
Merrill Lynch Florida Municipal Bond Fund January 31, 2003
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face
Ratings Ratings Amount Issue Value
====================================================================================================================================
Florida (continued)
====================================================================================================================================
NR* NR* $ 675 Heritage Palms, Florida, Community Development District, Capital Improvement
Revenue Bonds, 6.25% due 11/01/2004 $ 678
- ------------------------------------------------------------------------------------------------------------------------------------
A- A3 3,000 Highlands County, Florida, Health Facilities Authority Revenue Bonds
(Adventist Health System/Sunbelt Obligated Group), Series A, 6% due 11/15/2031 3,113
Hillsborough County, Florida, IDA, Exempt Facilities Revenue Bonds (National Gypsum), AMT:
- ------------------------------------------------------------------------------------------------------------------------------------
NR* NR* 1,000 Series A, 7.125% due 4/01/2030 982
NR* NR* 1,250 Series B, 7.125% due 4/01/2030 1,228
- ------------------------------------------------------------------------------------------------------------------------------------
Jacksonville, Florida, Economic Development Commission, Health Care Facilities
Revenue Bonds (Mayo Clinic--Jacksonville):
AA Aa2 1,000 Series A, 5.50% due 11/15/2036 1,025
AA Aa2 2,000 Series B, 5.50% due 11/15/2036 2,054
AAA Aaa 750 Series B, 5.50% due 11/15/2036 (c) 788
- ------------------------------------------------------------------------------------------------------------------------------------
AA Aa2 2,800 Jacksonville, Florida, Electric Authority, Electric System Revenue Bonds,
Series 3-C, 5.50% due 10/01/2030 2,889
- ------------------------------------------------------------------------------------------------------------------------------------
AAA NR* 4,920 Jacksonville, Florida, Electric Authority, Electric System Revenue Refunding Bonds,
Series Three, 6% due 10/01/2025 (c) 5,349
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,200 Jacksonville, Florida, Guaranteed Entitlement Revenue Refunding and
Improvement Bonds, 5.25% due 10/01/2032 (i) 1,237
- ------------------------------------------------------------------------------------------------------------------------------------
NR* Baa3 500 Jacksonville, Florida, Health Facilities Authority, IDR (National Benevolent
Association--Cypress Village), Series A, 7.05% due 3/01/2024 469
- ------------------------------------------------------------------------------------------------------------------------------------
NR* Baa3 1,000 Jacksonville, Florida, Health Facilities Authority, IDR, Refunding (National Benevolent
Association, Cypress Village Florida Project), 7% due 12/01/2022 939
- ------------------------------------------------------------------------------------------------------------------------------------
NR* NR* 435 Lexington Oaks, Florida, Community Development District, Special Assessment
Revenue Bonds, Series B, 6.70% due 5/01/2007 443
- ------------------------------------------------------------------------------------------------------------------------------------
BBB+ NR* 1,570 Martin County, Florida, Health Facilities Authority, Hospital Revenue Bonds
(Martin Memorial Medical Center), Series A, 5.875% due 11/15/2032 1,508
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 9,500 Miami--Dade County, Florida, Expressway Authority, Toll System Revenue Bonds,
6.375% due 7/01/2010 (i)(j) 11,486
- ------------------------------------------------------------------------------------------------------------------------------------
Miami--Dade County, Florida, School Board COP, Series C (g):
AAA Aaa 715 5.50% due 10/01/2016 787
AAA Aaa 1,000 5.50% due 10/01/2018 1,089
- ------------------------------------------------------------------------------------------------------------------------------------
Orange County, Florida, Health Facilities Authority, Hospital Revenue Bonds:
A- A3 500 (Adventist Health System), 6.25% due 11/15/2024 526
A- A2 2,705 (Orlando Regional Healthcare), 6% due 12/01/2028 2,800
A- A2 700 (Orlando Regional Healthcare), 5.75% due 12/01/2032 706
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 6,500 Orange County, Florida, Tourist Development, Tax Revenue Bonds, 5.50% due 10/01/2031 (b) 6,768
- ------------------------------------------------------------------------------------------------------------------------------------
NR* NR* 1,000 Orlando, Florida, Urban Community Development District, Capital Improvement
Special Assessment Bonds, Series A, 6.95% due 5/01/2033 1,014
- ------------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 1,265 Osceola County, Florida, Infrastructure Sales Surplus Tax Revenue Bonds,
5.25% due 10/01/2025 (b) 1,309
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 925 Osceola County, Tourist Development Tax Revenue Bonds, Series A, 5.50% due 10/01/2027 (i) 979
- ------------------------------------------------------------------------------------------------------------------------------------
BBB+ NR* 1,000 Palm Beach County, Florida, Health Facilities Authority, Retirement Community
Revenue Bonds (Acts Obligation Group), 5.625% due 11/15/2020 1,007
- ------------------------------------------------------------------------------------------------------------------------------------
NR* NR* 910 Panther Trace, Florida, Community Development District, Special Assessment
Revenue Bonds, Series B, 6.50% due 5/01/2009 911
- ------------------------------------------------------------------------------------------------------------------------------------
7
Merrill Lynch Florida Municipal Bond Fund January 31, 2003
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
S&P Moody's Face
Ratings Ratings Amount Issue Value
====================================================================================================================================
Florida (concluded)
====================================================================================================================================
NR* NR* $ 500 Park Place Community Development District, Florida, Special Assessment
Revenue Bonds, 6.75% due 5/01/2032 $ 498
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,080 Pasco County, Florida, Health Facilities Authority, Gross Revenue Bonds (Adventist Health
System--Sunbelt), 7% due 10/01/2014 (e) 2,636
- ------------------------------------------------------------------------------------------------------------------------------------
NR* NR* 1,000 Reunion East Community Development District, Florida, Special Assessment,
Series B, 5.90% due 11/01/2007 1,001
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 795 Saint John's County, Florida, IDA, IDR, Refunding (Professional Golf Project),
5.50% due 9/01/2013 (c) 892
- ------------------------------------------------------------------------------------------------------------------------------------
AAA NR* 4,640 South Broward, Florida, Hospital District, Hospital Revenue Bonds, 5.625% due 5/01/2032 (c) 4,945
- ------------------------------------------------------------------------------------------------------------------------------------
NR* NR* 835 Stoneybrook West, Florida, Community Development District, Special Assessment
Revenue Bonds, Series B, 6.45% due 5/01/2010 845
- ------------------------------------------------------------------------------------------------------------------------------------
NR* NR* 1,500 Vista Lakes Community Development District, Florida, Capital Improvement
Revenue Bonds, Series A, 6.75% due 5/01/2034 1,513
- ------------------------------------------------------------------------------------------------------------------------------------
North Carolina--0.7%
- ------------------------------------------------------------------------------------------------------------------------------------
A1 NR* 1,200 North Carolina Medical Care Commission, Health Care Facilities, First Mortgage
Revenue Refunding Bonds (Carol Woods Project), VRDN, 1.25% due 4/01/2031 (a)(k) 1,200
- ------------------------------------------------------------------------------------------------------------------------------------
Puerto Rico--3.3%
- ------------------------------------------------------------------------------------------------------------------------------------
NR* Baa2 1,000 Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control
Facilities Revenue Bonds (Cogeneration Facility--AES Puerto Rico Project),
AMT, 6.625% due 6/01/2026 1,030
- ------------------------------------------------------------------------------------------------------------------------------------
BBB+ Baa3 4,000 Puerto Rico Public Finance Corporation, Commonwealth Appropriation
Revenue Bonds, Series E, 5.75% due 8/01/2030 4,298
- ------------------------------------------------------------------------------------------------------------------------------------
Total Municipal Bonds (Cost--$147,477)--96.8% 154,810
- ------------------------------------------------------------------------------------------------------------------------------------
Shares
Held Common Stock
- ------------------------------------------------------------------------------------------------------------------------------------
1,113 Merrill Lynch Institutional Tax-Exempt Fund+ 1,113
- ------------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost--$1,113)--0.7% 1,113
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost--$148,590)--97.5% 155,923
Other Assets Less Liabilities--2.5% 3,974
--------
Net Assets--100.0% $159,897
========
- ------------------------------------------------------------------------------------------------------------------------------------
(a) The interest rate is subject to change periodically based upon prevailing
market rates. The interest rate shown is the rate in effect at January 31,
2003.
(b) AMBAC Insured.
(c) MBIA Insured.
(d) FNMA Collateralized.
(e) Escrowed to maturity.
(f) GNMA Collateralized.
(g) FSA Insured.
(h) The interest rate is subject to change periodically and inversely based
upon prevailing market rates. The interest rate shown is the rate in
effect at January 31, 2003.
(i) FGIC Insured.
(j) Prerefunded.
(k) Radian Insured.
* Not Rated.
+ Investments in companies considered to be an affiliate of the Fund (such
companies are defined as "Affiliated Companies" in Section 2(a)(3) of the
Investment Company Act of 1940) are as follows:
(in Thousands)
--------------------------------------------------------------------------
Net Share Net Dividend
Affiliate Activity Cost Income
--------------------------------------------------------------------------
Merrill Lynch Institutional
Tax-Exempt Fund 1,113 $1,113 $18
--------------------------------------------------------------------------
See Notes to Financial Statements.
8
Merrill Lynch Florida Municipal Bond Fund January 31, 2003
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of January 31, 2003
Assets: Investments, at value (identified cost--$148,589,760) .......................... $155,923,294
Cash ........................................................................... 57,272
Receivables:
Interest ..................................................................... $ 2,613,566
Securities sold .............................................................. 1,581,149
Beneficial interest sold ..................................................... 311,267
Dividends .................................................................... 32 4,506,014
------------
Prepaid expenses ............................................................... 3,959
------------
Total assets ................................................................... 160,490,539
------------
- ----------------------------------------------------------------------------------------------------------------------------------
Liabilities: Payables:
Beneficial interest redeemed ................................................. 332,934
Dividends to shareholders .................................................... 130,631
Investment adviser ........................................................... 84,846
Distributor .................................................................. 42,161 590,572
------------
Accrued expenses ............................................................... 2,867
------------
Total liabilities .............................................................. 593,439
------------
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets: Net assets ..................................................................... $159,897,100
============
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited number of
Consist of: shares authorized .............................................................. $ 232,439
Class B Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized .............................................................. 661,369
Class C Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized .............................................................. 140,036
Class D Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized .............................................................. 526,748
Paid-in capital in excess of par 167,212,944
Undistributed investment income--net ........................................... $ 109,893
Accumulated realized capital losses on investments--net ........................ (16,319,863)
Unrealized appreciation on investments--net .................................... 7,333,534
------------
Total accumulated losses--net .................................................. (8,876,436)
------------
Net assets ..................................................................... $159,897,100
============
- ----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value: Class A--Based on net assets of $23,832,665 and 2,324,394 shares
of beneficial interest outstanding ............................................. $ 10.25
============
Class B--Based on net assets of $67,813,728 and 6,613,693 shares
of beneficial interest outstanding ............................................. $ 10.25
============
Class C--Based on net assets of $14,334,022 and 1,400,364 shares
of beneficial interest outstanding ............................................. $ 10.24
============
Class D--Based on net assets of $53,916,685 and 5,267,483 shares
of beneficial interest outstanding ............................................. $ 10.24
============
- ----------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
9
Merrill Lynch Florida Municipal Bond Fund January 31, 2003
FINANCIAL INFORMATION (continued)
Statement of Operations
For the Six Months Ended
January 31, 2003
- ----------------------------------------------------------------------------------------------------------------------------
Investment Income: Interest ............................................................ $ 4,854,805
Dividends ........................................................... 18,026
-----------
Total income ........................................................ 4,872,831
-----------
- ----------------------------------------------------------------------------------------------------------------------------
Expenses: Investment advisory fees ............................................ $ 445,769
Account maintenance and distribution fees--Class B .................. 181,556
Accounting services ................................................. 50,121
Account maintenance and distribution fees--Class C .................. 38,690
Professional fees ................................................... 36,995
Account maintenance fees--Class D ................................... 25,329
Printing and shareholder reports .................................... 20,543
Transfer agent fees--Class B ........................................ 16,097
Registration fees ................................................... 15,190
Transfer agent fees--Class D ........................................ 9,565
Trustees' fees and expenses ......................................... 7,395
Custodian fees ...................................................... 5,700
Pricing fees ........................................................ 4,984
Transfer agent fees--Class A ........................................ 4,879
Transfer agent fees--Class C ........................................ 2,828
Other ............................................................... 6,143
---------
Total expenses before reimbursement ................................. 871,784
Reimbursement of expenses ........................................... (2,879)
---------
Total expenses after reimbursement .................................. 868,905
-----------
Investment income--net .............................................. 4,003,926
-----------
- ----------------------------------------------------------------------------------------------------------------------------
Realized & Realized gain on investments--net ................................... 494,285
Unrealized Change in unrealized appreciation on investments--net ............... 263,246
Gain on -----------
Investments--Net: Total realized and unrealized gain on investments--net .............. 757,531
-----------
Net Increase in Net Assets Resulting from Operations ................ $ 4,761,457
===========
- ----------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
10
Merrill Lynch Florida Municipal Bond Fund January 31, 2003
FINANCIAL INFORMATION (continued)
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
January 31, July 31,
Increase (Decrease) in Net Assets: 2003 2002
- ----------------------------------------------------------------------------------------------------------------------------
Operations: Investment income--net ........................................... $ 4,003,926 $ 7,682,408
Realized gain on investments--net ................................ 494,285 1,155,663
Change in unrealized appreciation on investments--net ............ 263,246 (336,243)
------------ ------------
Net increase in net assets resulting from operations ............. 4,761,457 8,501,828
------------ ------------
- ----------------------------------------------------------------------------------------------------------------------------
Dividends to Investment income--net:
Shareholders: Class A ........................................................ (679,479) (1,417,464)
Class B ........................................................ (1,719,819) (3,725,318)
Class C ........................................................ (299,235) (412,106)
Class D ........................................................ (1,303,347) (2,117,956)
------------ ------------
Net decrease in net assets resulting from dividends to
shareholders ..................................................... (4,001,880) (7,672,844)
------------ ------------
- ----------------------------------------------------------------------------------------------------------------------------
Beneficial Interest Net increase (decrease) in net assets derived from beneficial
Transactions: interest transactions ............................................ 5,819,201 (10,670,581)
------------ ------------
- ----------------------------------------------------------------------------------------------------------------------------
Net Assets: Total increase (decrease) in net assets .......................... 6,578,778 (9,841,597)
Beginning of period .............................................. 153,318,322 163,159,919
------------ ------------
End of period* ................................................... $159,897,100 $153,318,322
============ ============
- ----------------------------------------------------------------------------------------------------------------------------
* Undistributed investment income--net ............................. $ 109,893 $ 107,847
============ ============
- ----------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
11
Merrill Lynch Florida Municipal Bond Fund January 31, 2003
FINANCIAL INFORMATION (continued)
Financial Highlights
Class A
-----------------------------------------------------------
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended For the Year Ended July 31,
Jan. 31, --------------------------------------------
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
Per Share Net asset value, beginning of period .......... $ 10.20 $ 10.14 $ 9.73 $ 10.08 $ 10.41
Operating -------- -------- -------- -------- --------
Performance: Investment income--net ........................ .27+ .52 .51 .50 .50
Realized and unrealized gain (loss) on
investments--net .............................. .05 .06 .42 (.35) (.33)
-------- -------- -------- -------- --------
Total from investment operations .............. .32 .58 .93 .15 .17
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net ...................... (.27) (.52) (.51) (.50) (.50)
In excess of realized gain on
investments--net ............................ -- -- (.01) -- --
-------- -------- -------- -------- --------
Total dividends and distributions ............. (.27) (.52) (.52) (.50) (.50)
-------- -------- -------- -------- --------
Net asset value, end of period ................ $ 10.25 $ 10.20 $ 10.14 $ 9.73 $ 10.08
======== ======== ======== ======== ========
- ----------------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ............ 3.21%++ 5.91% 9.71% 1.66% 1.57%
Return:** ======== ======== ======== ======== ========
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Expenses, net of reimbursement ................ .77%* .79% .76% .70% .72%
Net Assets: ======== ======== ======== ======== ========
Expenses ...................................... .77%* .79% .76% .70% .72%
======== ======== ======== ======== ========
Investment income--net ........................ 5.25%* 5.16% 5.10% 5.17% 4.80%
======== ======== ======== ======== ========
- ----------------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) ...... $ 23,832 $ 25,886 $ 29,053 $ 30,242 $ 38,214
Data: ======== ======== ======== ======== ========
Portfolio turnover ............................ 12.64% 41.29% 81.27% 79.33% 120.54%
======== ======== ======== ======== ========
- ----------------------------------------------------------------------------------------------------------------------------------
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
++ Aggregate total investment return.
See Notes to Financial Statements.
12
Merrill Lynch Florida Municipal Bond Fund January 31, 2003
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
Class B
-----------------------------------------------------------
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended For the Year Ended July 31,
Jan. 31, ----------------------------------------------
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
Per Share Net asset value, beginning of period .......... $ 10.20 $ 10.14 $ 9.73 $ 10.08 $ 10.41
Operating -------- -------- -------- --------- ---------
Performance: Investment income--net ........................ .25+ .47 .46 .45 .45
Realized and unrealized gain (loss) on
investments--net .............................. .05 .06 .42 (.35) (.33)
-------- -------- -------- --------- ---------
Total from investment operations .............. .30 .53 .88 .10 .12
-------- -------- -------- --------- ---------
Less dividends and distributions:
Investment income--net ...................... (.25) (.47) (.46) (.45) (.45)
In excess of realized gain on
investments--net ............................ -- -- (.01) -- --
-------- -------- -------- --------- ---------
Total dividends and distributions ............. (.25) (.47) (.47) (.45) (.45)
-------- -------- -------- --------- ---------
Net asset value, end of period ................ $ 10.25 $ 10.20 $ 10.14 $ 9.73 $ 10.08
======== ======== ======== ========= =========
- ----------------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ............ 2.94%++ 5.38% 9.16% 1.14% 1.06%
Return:** ======== ======== ======== ========= =========
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Expenses, net of reimbursement ................ 1.27%* 1.29% 1.26% 1.20% 1.23%
Net Assets: ======== ======== ======== ========= =========
Expenses ...................................... 1.28%* 1.29% 1.26% 1.20% 1.23%
======== ======== ======== ========= =========
Investment income--net ........................ 4.74%* 4.65% 4.59% 4.66% 4.29%
======== ======== ======== ========= =========
- ----------------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) ...... $ 67,814 $ 73,034 $ 86,433 $ 100,059 $ 133,276
Data: ======== ======== ======== ========= =========
Portfolio turnover ............................ 12.64% 41.29% 81.27% 79.33% 120.54%
======== ======== ======== ========= =========
- ----------------------------------------------------------------------------------------------------------------------------------
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
++ Aggregate total investment return.
See Notes to Financial Statements.
13
Merrill Lynch Florida Municipal Bond Fund January 31, 2003
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
Class C
----------------------------------------------------------
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended For the Year Ended July 31,
Jan. 31, -------------------------------------------
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
Per Share Net asset value, beginning of period ............ $ 10.18 $ 10.13 $ 9.71 $ 10.06 $ 10.39
Operating -------- -------- -------- -------- ---------
Performance: Investment income--net .......................... .24+ .46 .44 .44 .43
Realized and unrealized gain (loss) on
investments--net ................................ .06 .05 .43 (.35) (.33)
-------- -------- -------- -------- ---------
Total from investment operations ................ .30 .51 .87 .09 .10
-------- -------- -------- -------- ---------
Less dividends and distributions:
Investment income--net ........................ (.24) (.46) (.44) (.44) (.43)
In excess of realized gain on
investments--net .............................. -- -- (.01) -- --
-------- -------- -------- -------- ---------
Total dividends and distributions ............... (.24) (.46) (.45) (.44) (.43)
-------- -------- -------- -------- ---------
Net asset value, end of period .................. $ 10.24 $ 10.18 $ 10.13 $ 9.71 $ 10.06
======== ======== ======== ======== =========
- ----------------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share .............. 2.99%++ 5.17% 9.17% 1.04% .95%
Return:** ======== ======== ======== ======== =========
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Expenses, net of reimbursement .................. 1.37%* 1.39% 1.36% 1.30% 1.33%
Net Assets: ======== ======== ======== ======== =========
Expenses ........................................ 1.38%* 1.39% 1.36% 1.30% 1.33%
======== ======== ======== ======== =========
Investment income--net .......................... 4.64%* 4.56% 4.49% 4.57% 4.19%
======== ======== ======== ======== =========
- ----------------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) ........ $ 14,334 $ 10,489 $ 9,110 $ 8,497 $ 10,897
Data: ======== ======== ======== ======== =========
Portfolio turnover .............................. 12.64% 41.29% 81.27% 79.33% 120.54%
======== ======== ======== ======== =========
- ----------------------------------------------------------------------------------------------------------------------------------
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
++ Aggregate total investment return.
See Notes to Financial Statements.
14
Merrill Lynch Florida Municipal Bond Fund January 31, 2003
FINANCIAL INFORMATION (concluded)
Financial Highlights (concluded)
Class D
----------------------------------------------------------
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended For the Year Ended July 31,
Jan. 31, --------------------------------------------
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
Per Share Net asset value, beginning of period .......... $ 10.19 $ 10.13 $ 9.71 $ 10.06 $ 10.39
Operating -------- -------- -------- -------- --------
Performance: Investment income--net ........................ .27+ .51 .49 .49 .49
Realized and unrealized gain (loss) on
investments--net .............................. .05 .06 .43 (.35) (.33)
-------- -------- -------- -------- --------
Total from investment operations .............. .32 .57 .92 .14 .16
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net ...................... (.27) (.51) (.49) (.49) (.49)
In excess of realized gain on
investments--net ............................ -- -- (.01) -- --
-------- -------- -------- -------- --------
Total dividends and distributions ............. (.27) (.51) (.50) (.49) (.49)
-------- -------- -------- -------- --------
Net asset value, end of period ................ $ 10.24 $ 10.19 $ 10.13 $ 9.71 $ 10.06
======== ======== ======== ======== ========
- ---------------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ............ 3.16%++ 5.81% 9.72% 1.55% 1.46%
Return:** ======== ======== ======== ======== ========
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Expenses, net of reimbursement ................ .87%* .89% .86% .80% .82%
Net Assets: ======== ======== ======== ======== ========
Expenses ...................................... .87%* .89% .86% .80% .82%
======== ======== ======== ======== ========
Investment income--net ........................ 5.15%* 5.07% 4.99% 5.07% 4.69%
======== ======== ======== ======== ========
- ---------------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) ...... $ 53,917 $ 43,909 $ 38,564 $ 25,725 $ 37,713
Data: ======== ======== ======== ======== ========
Portfolio turnover ............................ 12.64% 41.29% 81.27% 79.33% 120.54%
======== ======== ======== ======== ========
- ---------------------------------------------------------------------------------------------------------------------------------
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
++ Aggregate total investment return.
See Notes to Financial Statements.
15
Merrill Lynch Florida Municipal Bond Fund January 31, 2003
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Florida Municipal Bond Fund (the "Fund") is part of Merrill Lynch
Multi-State Municipal Series Trust (the "Trust"). The Fund is registered under
the Investment Company Act of 1940 as a non-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. These unaudited
financial statements reflect all adjustments, which are, in the opinion of
management, necessary to a fair statement of the results for the interim period
presented. All such adjustments are of a normal, recurring nature. The Fund
offers four classes of shares under the Merrill Lynch Select Pricing(SM) System.
Shares of Class A and Class D are sold with a front-end sales charge. Shares of
Class B and Class C may be subject to a contingent deferred sales charge. All
classes of shares have identical voting, dividend, liquidation and other rights
and the same terms and conditions, except that Class B, Class C and Class D
Shares bear certain expenses related to the account maintenance of such shares,
and Class B and Class C Shares also bear certain expenses related to the
distribution of such shares. Each class has exclusive voting rights with respect
to matters relating to its account maintenance and distribution expenditures.
Income, expenses (other than expenses attributable to a specific class) and
realized and unrealized gains and losses on investments are allocated daily to
each class based on its related net assets. The following is a summary of
significant accounting policies followed by the Fund.
(a) Valuation of investments -- Municipal bonds and other portfolio securities
in which the Fund invests are traded primarily in the over-the-counter municipal
bond and money markets and are valued at the last available bid price in the
over-the-counter market or on the basis of yield equivalents as obtained from
one or more dealers that make markets in the securities. Financial futures
contracts and options thereon, which are traded on exchanges, are valued at
their settlement prices as of the close of such exchanges. Short-term
investments with remaining maturities of sixty days or less are valued at
amortized cost, which approximates market value. Securities and assets for which
market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of Trustees of
the Trust, including valuations furnished by a pricing service retained by the
Trust, which may utilize a matrix system for valuations. The procedures of the
pricing service and its valuations are reviewed by the officers of the Trust
under the general supervision of the Trustees.
(b) Derivative financial instruments -- The Fund may engage in various portfolio
investment strategies to increase or decrease the level of risk to which the
Fund is exposed more quickly and efficiently than transactions in other types of
instruments. Losses may arise due to changes in the value of the contract or if
the counterparty does not perform under the contract.
o Financial futures contracts -- The Fund may purchase or sell financial futures
contracts and options on such futures contracts for the purpose of hedging the
market risk on existing securities or the intended purchase of securities.
Futures contracts are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a contract, the
Fund deposits and maintains as collateral such initial margin as required by the
exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.
(c) Income taxes -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.
(d) Security transactions and investment income -- Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual basis. The
16
Merrill Lynch Florida Municipal Bond Fund January 31, 2003
Fund amortizes all premiums and discounts on debt securities.
(e) 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.
(f) Expenses -- Certain expenses have been allocated to the individual Funds in
the Trust on a pro rata basis based upon the respective aggregate net asset
value of each Fund included in the Trust.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect, wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML
& Co."), which is the limited partner. The Fund has also entered into a
Distribution Agreement and Distribution Plans with FAM Distributors, Inc.
("FAMD" or the "Distributor"), which is a wholly-owned subsidiary of Merrill
Lynch Group, Inc.
FAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee
based upon the average daily value of the Fund's net assets at the following
annual rates: .55% of the Fund's average daily net assets not exceeding $500
million; .525% of average daily net assets in excess of $500 million but not
exceeding $1 billion; and .50% of average daily net assets in excess of $1
billion. For the six months ended January 31, 2003, FAM reimbursed the Fund in
the amount of $2,879.
Pursuant to the Distribution Plans adopted by the Fund in accordance with Rule
12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are accrued daily
and paid monthly at annual rates based upon the average daily net assets of the
shares as follows:
- --------------------------------------------------------------------------------
Account Distribution
Maintenance Fee Fee
- --------------------------------------------------------------------------------
Class B .......................... .25% .25%
Class C .......................... .25% .35%
Class D .......................... .10% --
- --------------------------------------------------------------------------------
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., also provides account
maintenance and distribution services to the Fund. The ongoing account
maintenance fee compensates the Distributor and MLPF&S for providing account
maintenance services to Class B, Class C and Class D shareholders. The ongoing
distribution fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B and Class C
shareholders.
For the six months ended January 31, 2003, FAMD earned underwriting discounts
and MLPF&S earned dealer concessions on sales of the Fund's Class A and Class D
Shares as follows:
- --------------------------------------------------------------------------------
FAMD MLPF&S
- --------------------------------------------------------------------------------
Class A .......................... $ 41 $ 498
Class D .......................... $1,453 $15,544
- --------------------------------------------------------------------------------
For the six months ended January 31, 2003, MLPF&S received contingent deferred
sales charges of $34,498 and $1,349 relating to transactions in Class B and
Class C Shares, respectively.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co., is
the Fund's transfer agent.
For the six months ended January 31, 2003, the Fund reimbursed FAM $1,702 for
certain accounting services.
Certain officers and/or trustees of the Fund are officers and/or directors of
FAM, PSI, FDS, FAMD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended January 31, 2003 were $30,500,779 and $19,324,128, respectively.
Net realized gains for the six months ended January 31, 2003 and net unrealized
gains as of January 31, 2003 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
- --------------------------------------------------------------------------------
Long-term investments ............ $ 494,285 $ 7,333,534
----------- -----------
Total ............................ $ 494,285 $ 7,333,534
=========== ===========
- --------------------------------------------------------------------------------
As of January 31, 2003, net unrealized appreciation for Federal income tax
purposes aggregated
17
Merrill Lynch Florida Municipal Bond Fund January 31, 2003
NOTES TO FINANCIAL STATEMENTS (concluded)
$7,358,661, of which $7,578,132 related to appreciated securities and $219,471
related to depreciated securities. The aggregate cost of investments at January
31, 2003 for Federal income tax purposes was $148,564,633.
4. Beneficial Interest Transactions:
Net increase (decrease) in net assets derived from beneficial interest
transactions was $5,819,201 and $(10,670,581) for the six months ended January
31, 2003 and for the year ended July 31, 2002, respectively.
Transactions in shares of beneficial interest for each class were as follows:
- -------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended January 31, 2003 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ................................ 125,667 $ 1,293,056
Shares issued to shareholders
in reinvestment of dividends ............... 32,480 333,441
------------ ------------
Total issued ............................... 158,147 1,626,497
Shares redeemed ............................ (371,117) (3,805,930)
------------ ------------
Net decrease ............................... (212,970) $ (2,179,433)
============ ============
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended July 31, 2002 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ................................ 184,593 $ 1,866,094
Shares issued to shareholders
in reinvestment of dividends ............... 71,456 722,256
------------ ------------
Total issued ............................... 256,049 2,588,350
Shares redeemed ............................ (582,992) (5,896,534)
------------ ------------
Net decrease ............................... (326,943) $ (3,308,184)
============ ============
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class B Shares for the Six Months Dollar
Ended January 31, 2003 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ................................ 565,947 $ 5,820,181
Shares issued to shareholders
in reinvestment of dividends ............... 62,109 637,538
------------ ------------
Total issued ............................... 628,056 6,457,719
Automatic conversion
of shares .................................. (350,512) (3,604,078)
Shares redeemed ............................ (822,294) (8,441,707)
------------ ------------
Net decrease ............................... (544,750) $ (5,588,066)
============ ============
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended July 31, 2002 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ................................ 1,037,222 $ 10,511,437
Shares issued to shareholders
in reinvestment of dividends ............... 140,201 1,417,079
------------ ------------
Total issued ............................... 1,177,423 11,928,516
Automatic conversion
of shares .................................. (1,036,517) (10,510,916)
Shares redeemed ............................ (1,503,799) (15,189,951)
------------ ------------
Net decrease ............................... (1,362,893) $(13,772,351)
============ ============
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class C Shares for the Six Months Dollar
Ended January 31, 2003 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ................................ 454,637 $ 4,667,652
Shares issued to shareholders
in reinvestment of dividends ............... 13,541 138,777
------------ ------------
Total issued ............................... 468,178 4,806,429
Shares redeemed ............................ (97,701) (1,000,092)
------------ ------------
Net increase ............................... 370,477 $ 3,806,337
============ ============
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended July 31, 2002 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ................................ 465,382 $ 4,701,880
Shares issued to shareholders
in reinvestment of dividends ............... 18,545 187,103
------------ ------------
Total issued ............................... 483,927 4,888,983
Shares redeemed ............................ (353,786) (3,578,123)
------------ ------------
Net increase ............................... 130,141 $ 1,310,860
============ ============
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class D Shares for the Six Months Dollar
Ended January 31, 2003 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ................................ 1,034,272 $ 10,572,049
Automatic conversion
of shares .................................. 351,159 3,604,078
Shares issued to shareholders
in reinvestment of dividends ............... 42,478 435,576
------------ ------------
Total issued ............................... 1,427,909 14,611,703
Shares redeemed ............................ (471,380) (4,831,340)
------------ ------------
Net increase ............................... 956,529 $ 9,780,363
============ ============
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18
Merrill Lynch Florida Municipal Bond Fund January 31, 2003
- -------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended July 31, 2002 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ................................ 254,156 $ 2,558,043
Automatic conversion
of shares .................................. 1,038,328 10,510,916
Shares issued to shareholders
in reinvestment of dividends ............... 55,928 564,161
------------ ------------
Total issued ............................... 1,348,412 13,633,120
Shares redeemed ............................ (845,743) (8,534,026)
------------ ------------
Net increase ............................... 502,669 $ 5,099,094
============ ============
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5. Short-Term Borrowings:
The Fund, along with certain other funds managed by FAM and its affiliates, is a
party to a $500,000,000 credit agreement with Bank One, N.A. and certain other
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. The Fund pays a commitment fee of .09% per
annum based on the Fund's pro rata share of the unused portion of the credit
agreement. Amounts borrowed under the credit agreement bear interest at a rate
equal to, at each fund's election, the Federal Funds rate plus .50% or a base
rate as determined by Bank One, N.A. On November 29, 2002, the credit agreement
was renewed for one year under the same terms, except that the total commitment
was reduced from $1,000,000,000 to $500,000,000. The Fund did not borrow under
the credit agreement during the six months ended January 31, 2003.
6. Capital Loss Carryforward:
On July 31, 2002, the Fund had a net capital loss carryforward of $15,775,152,
of which $8,249,262 expires in 2003, $2,275,703 expires in 2004, $4,131,859
expires in 2008 and $1,118,328 expires in 2009. This amount will be available to
offset like amounts of any future taxable gains.
OFFICERS AND TRUSTEES
Terry K. Glenn, President and Trustee
James H. Bodurtha, Trustee
Joe Grills, Trustee
Herbert I. London, Trustee
Andre F. Perold, Trustee
Roberta Cooper Ramo, Trustee
Robert S. Salomon, Jr., Trustee
Stephen B. Swensrud, Trustee
Kenneth A. Jacob, Senior Vice President
John M. Loffredo, Senior Vice President
Robert D. Sneeden, Vice President
Donald C. Burke, Vice President and Treasurer
Brian D. Stewart, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
800-637-3863
- --------------------------------------------------------------------------------
Melvin R. Seiden, Trustee of Merrill Lynch Florida Municipal Bond Fund, has
recently retired. The Fund's Board of Trustees wishes Mr. Seiden well in his
retirement.
- --------------------------------------------------------------------------------
19
[LOGO] Merrill Lynch Investment Managers
[GRAPHICS OMITTED]
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of the Fund unless accompanied or preceded by the Fund's
current prospectus. Past performance results shown in this report should not be
considered a representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Statements and other information
herein are as dated and are subject to change.
Merrill Lynch Florida Municipal Bond Fund of
Merrill Lynch Multi-State Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011
[RECYCLED LOGO] Printed on post-consumer recycled paper #16031--1/03
Item 2 - Did registrant adopt a code of ethics, as of the end of the period
covered by this report, that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant
or a third party? If not, why not? Briefly describe any amendments or
waivers that occurred during the period. State here if code of
ethics/amendments/waivers are on website and give website address-.
State here if fund will send code of ethics to shareholders without
charge upon request-- N/A (not answered until July 15, 2003 and only
annually for funds)
Item 3 - Did the registrant's board of directors determine that the registrant
either: (i) has at least one audit committee financial expert serving
on its audit committee; or (ii) does not have an audit committee
financial expert serving on its audit committee? If yes, disclose name
of financial expert and whether he/she is "independent," (fund may, but
is not required, to disclose name/independence of more than one
financial expert) If no, explain why not. -N/A (not answered until July
15, 2003 and only annually for funds)
Item 4 - Disclose annually only (not answered until December 15, 2003)
(a) Audit Fees - Disclose aggregate fees billed for each of the last two
fiscal years for professional services rendered by the
principal accountant for the audit of the registrant's
annual financial statements or services that are
normally provided by the accountant in connection with
statutory and regulatory filings or engagements for
those fiscal years. N/A.
(b) Audit-Related Fees - Disclose aggregate fees billed in each of the
last two fiscal years for assurance and related
services by the principal accountant that are
reasonably related to the performance of the
audit of the registrant's financial statements
and are not reported under paragraph (a) of this
Item. Registrants shall describe the nature of
the services comprising the fees disclosed under
this category. N/A.
(c) Tax Fees - Disclose aggregate fees billed in each of the last two
fiscal years for professional services rendered by the
principal accountant for tax compliance, tax advice, and
tax planning. Registrants shall describe the nature of the
services comprising the fees disclosed under this category.
N/A.
(d) All Other Fees - Disclose aggregate fees billed in each of the last
two fiscal years for products and services provided
by the principal accountant, other than the services
reported in paragraphs (a) through (c) of this Item.
Registrants shall describe the nature of the
services comprising the fees disclosed under this
category. N/A.
(e)(1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. N/A.
(e)(2) Disclose the percentage of services described in each of paragraphs
(b) through (d) of this Item that were approved by the audit
committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X. N/A.
(f) If greater than 50%, disclose the percentage of hours expended on
the principal accountant's engagement to audit the registrant's
financial statements for the most recent fiscal year that were
attributed to work performed by persons other than the principal
accountant's full-time, permanent employees. N/A.
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and rendered to
the registrant's investment adviser (not including any sub-adviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant for each of the
last two fiscal years of the registrant. N/A.
(h) Disclose whether the registrant's audit committee has considered
whether the provision of non-audit services that were rendered to
the registrant's investment adviser (not including any subadviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another 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. N/A.
Items 5-6 - Reserved
Item 7 - For closed-end funds that contain voting securities in their portfolio,
describe the policies and procedures that it uses to determine how to
vote proxies relating to those portfolio securities. N/A.
Item 8 -- Reserved
Item 9(a) - Disclose the conclusions of the registrant's principal executive
officer or officers and principal financial officer or officers, or
persons performing similar functions, about the effectiveness of the
registrant's disclosure controls and procedures (as defined in Rule
30a-2(c) under the Act (17 CFR 270.30a-2(c))) based on their
evaluation of these controls and procedures as of a date within 90
days of the filing date of the report that includes the disclosure
required by this paragraph. N/A.
Item 9(b) -- There were no significant changes in the registrant's internal
controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and
material weaknesses.
Item 10 - Exhibits
10(a) - Attach code of ethics or amendments/waivers, unless code of ethics or
amendments/waivers is on website or offered to shareholders upon request
without charge. N/A.
10(b) - Attach certifications (4 in total pursuant to Sections 302 and 906 for
CEO/CFO). 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.
Florida Municipal Bond Fund of Merrill Lynch Multi-State Municipal Series Trust
By: /s/ Terry K. Glenn
-------------------------------
Terry K. Glenn,
President of
Florida Municipal Bond Fund of Merrill Lynch Multi-State Municipal Series
Trust
Date: March 17, 2003
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/ Terry K. Glenn
-------------------------------
Terry K. Glenn,
President of
Florida Municipal Bond Fund of Merrill Lynch Multi-State Municipal Series
Trust
Date: March 17, 2003
By: /s/ Donald C. Burke
-------------------------------
Donald C. Burke,
Chief Financial Officer of
Florida Municipal Bond Fund of Merrill Lynch Multi-State Municipal Series
Trust
Date: March 17, 2003