UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-4375
Name of Fund: Merrill Lynch 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, Merrill Lynch
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: 07/31/04
Date of reporting period: 08/01/03 - 01/31/04
Item 1 - Report to Shareholders
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
Merrill Lynch
Florida Municipal
Bond Fund
Semi-Annual Report
January 31, 2004
[LOGO] Merrill Lynch Investment Managers
Merrill Lynch Florida Municipal Bond Fund
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
2 MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JANUARY 31, 2004
A Letter From the President
Dear Shareholder
In my 35 years in the asset management business, 2003 was among the more
memorable. The year, which opened with geopolitical turmoil, unrelenting
economic uncertainty and a dismal continuation of a three-year equity market
slump, vigorously reversed course in the months that followed.
As we entered 2004, the equity markets maintained their positive momentum from
year-end 2003. For the six-month and 12-month periods ended January 31, 2004,
the Standard & Poor's (S&P) 500 Index returned +15.23% and +34.57%,
respectively. In the fixed income markets, investors willing to accept the
greatest risk were rewarded the most. This trend held true in the municipal bond
market as well, where high yield issues generally outperformed investment grade
bonds. For the six-month and 12-month periods ended January 31, 2004, the Lehman
Brothers Non-Investment Grade Index of municipal bonds posted respective returns
of +9.99% and +15.33%.
The major signposts indicate that we are seeing a shift from economic growth
fueled primarily by fiscal and monetary stimulus to a broader-based,
self-sustaining economic expansion. Gross domestic product growth, which peaked
at an annualized rate of 8.2% in the third quarter of 2003, is estimated at a
more sustainable 4% in the fourth quarter. That level of growth is expected to
repeat itself in the first quarter of 2004. For its part, the Federal Reserve
Board has reiterated its willingness to keep short-term interest rates at
current low levels to ensure the economy's strength.
Accompanying the increase in economic activity was an improvement in corporate
earnings. By the end of January, 298 of the S&P 500 companies had reported their
fourth-quarter results, and 67.4% of those exceeded expectations. In the
meantime, the American consumer, who continued to spend despite the faltering
economy, may get further incentive from another round of Federal tax refunds in
2004.
At Merrill Lynch Investment Managers, we believe the events and efforts of 2003
leave us with a much stronger economy and recent optimism suggests it is time
for investors to consider what can go right in 2004. We encourage you to revisit
your portfolio and your asset allocation strategy to ensure you are well
positioned to take advantage of the opportunities that lie ahead.
We thank you for trusting Merrill Lynch Investment Managers with your investment
assets, and we look forward to serving you in the months and years ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Trustee
MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JANUARY 31, 2004 3
[LOGO] Merrill Lynch Investment Managers
A Discussion With Your Fund's Portfolio Manager
Our strategy has been and continues to be focused on increasing the Fund's
yield while protecting net asset value in what has been a volatile interest rate
environment.
Discuss the recent market environment relative to municipal bonds.
Over the past six months, long-term fixed income interest rates generally
declined as the U.S. economy gained strength. Gross domestic product growth
expanded at an annualized rate of 8.2% in the third quarter of 2003, with
fourth-quarter growth estimated at 4.0%. These figures were well above the 1.4%
rate of growth registered in the first quarter of 2003. Improving economic
conditions benefited equity markets, as the Standard & Poor's 500 Index, a
widely recognized measure of U.S. stock market performance, returned +15.23% for
the six months ended January 31, 2004. Despite the strong growth, the Federal
Reserve Board seemed apt to leave short-term interest rates at their current low
levels, citing subdued employment growth and the absence of material
inflationary pressures.
While short-term interest rates remained at historic lows, long-term interest
rates generally declined over the past six months. At the end of January 2004,
long-term U.S. Treasury bond yields stood at 4.96%, having dropped 40 basis
points (.40%) from six months earlier. In the tax-exempt bond market, long-term
revenue bond yields also fell 40 basis points to 5.02%, as measured by the Bond
Buyer Revenue Bond Index. Both 30-year and 10-year Aaa-rated municipal issues --
the highest rated -- saw their yields decrease approximately 50 basis points
during the six-month period ended January 31, 2004, as reported by Municipal
Market Data.
Although improving U.S. equity valuations took some attention away from fixed
income markets, overall demand for tax-exempt products remained positive. With
tax-exempt money market rates at or below 1% and low nominal municipal bond
yields in general, many investors have moved increasingly further out on the
municipal yield curve to generate the desired level of tax-exempt income. This
gravitation toward longer maturities helped support the strong demand and
performance exhibited by tax-exempt products during the period.
The municipal bond market's performance also benefited from a notable
improvement in supply/demand dynamics. In recent months, the pace of new
municipal bond issuance has greatly declined. For the 12 months ended January
31, 2004, municipalities issued more than $375 billion in new securities, an
increase of approximately 5% compared to last year's issuance. Clearly,
municipalities viewed the historically low interest rates over the past year as
an opportunity to finance existing infrastructure needs and to refinance
outstanding, higher-coupon debt. Over the past six months, however, new issuance
fell 11.5% compared to the same period a year earlier. The decline was even more
pronounced in the last three months, with a decrease of more than 13% compared
to the same three months last year. This decline in supply helped strengthen the
municipal market's positive technical position and enhanced recent performance.
New-issue supply is expected to remain manageable in early 2004 and should help
support the tax-exempt bond market's position as an attractive fixed income
investment alternative.
Describe conditions in the State of Florida.
Overall, conditions in Florida remained favorable. The state maintained solid
credit ratings of Aa2 from Moody's, AA+ from Standard & Poor's and AA from
Fitch. All three rating agencies held a stable outlook for Florida's finances.
This was based on an improving and diverse economy, solid finances, moderate
debt and a proactive government that responds to economic downturns quicker than
other states.
Florida's economy is bolstered by strong population growth, which is attributed
to its attractive physical environment and favorable business climate.
Population growth is one reason Florida's economy typically has performed better
than the national economy. Although the growth in population has put a strain on
services such as education, transportation and health care, it also has allowed
the state to recover quickly from the recent sub par economic trends.
Currently, the state's revenues are modestly higher than projected and
expenditures remain under control due to strong fiscal oversight. The fiscal
year 2004 budget was pressured by only modest revenue increases, but was brought
into balance through tight expenditure controls, including outsourcing work and
requiring local governments to pick up costs historically incurred by the state.
To pay for these additional expenses, municipalities imposed increases to
property taxes and/or local sales taxes through voter initiatives.
Florida continues to maintain sound and solid fund balances with consistent
General Fund operations. In addition, the
4 MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JANUARY 31, 2004
state has a working Capital Reserve Fund and a Budget Stabilization Fund in
excess of $1.8 billion. Our strategy in purchasing Florida issues has been to
favor insured general obligation bonds and their equivalents rather than
uninsured bonds. We believe this is a prudent approach, as there is no
meaningful yield offered in exchange for the additional risk associated with
uninsured bonds.
How did the Fund perform during the period in light of the existing market
conditions?
For the six-month period ended January 31, 2004, the Fund's Class A, Class B,
Class C and Class I Shares had total returns of +5.73%, +5.51%, +5.46% and
+5.78%, respectively. Results were generally in line with the +5.73% return of
the unmanaged benchmark Lehman Brothers Municipal Bond Index for the same
period. (Fund results shown do not reflect sales charges and would be lower if
sales charges were included. Complete performance information can be found on
pages 6 and 7 of this report to shareholders.)
The Fund outperformed its comparable Lipper category of Florida Municipal Debt
Funds, which had an average return of +4.94% for the six-month period ended
January 31, 2004. (Funds in this Lipper category limit their investment to those
securities exempt from taxation in the State of Florida.)
What changes were made to the portfolio during the period?
We made no significant changes to the portfolio or our investment strategy in
the past six months. We maintained our focus on enhancing income provided to
shareholders and seeking to mute the Fund's net asset value volatility. The most
volatile part of the yield curve during the period continued to be the 10-year -
15-year sector. During periods of sustained strength in the bond market, we
sought to reduce some of our holdings in this maturity range. With the proceeds
from the sales, we looked to purchase premium-coupon bonds in the 20-year -
30-year maturity range whenever they became available. Our observations and
research reveal that the longer end of the yield curve has held firm. As such,
this is where we have found the greatest value. By taking advantage of the steep
yield curve, we have successfully been able to enhance the Fund's yield while
muting its net asset value volatility.
How would you characterize the portfolio's position at the close of the period?
In our view, the municipal market will continue to be volatile over the next few
months. Should interest rates continue to decline, we intend to shift to a more
defensive position to prepare the Fund to perform well when interest rates
eventually head higher. As long as the municipal yield curve remains steep, we
will continue to sell the intermediate part of the curve and use periods of
volatility to structure higher-coupon bonds whenever they are attractively
priced.
Robert D. Sneeden
Vice President and Portfolio Manager
February 13, 2004
MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JANUARY 31, 2004 5
[LOGO] Merrill Lynch Investment Managers
Performance Data
About Fund Performance
Effective April 14, 2003, Class A Shares were redesignated Class I Shares and
Class D Shares were redesignated Class A Shares. Investors are able to purchase
shares of the Fund through multiple pricing alternatives:
o Class A Shares incur a maximum initial sales charge of 4% and an account
maintenance fee of 0.10% (but no distribution fee).
o 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 A
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 I Shares incur a maximum initial sales charge (front-end load) of 4%
and bear no ongoing distribution or account maintenance fees. Class I
Shares are available only to eligible investors.
None of the past results shown should be considered a representation of future
performance. Current performance may be lower or higher than the performance
data quoted. Refer to www.mlim.ml.com to obtain more current performance
information. 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.
Recent Performance Results
10-Year/
6-Month 12-Month Since Inception Standardized
As of January 31, 2004 Total Return Total Return Total Return 30-Day Yield
====================================================================================================================
ML Florida Municipal Bond Fund Class A Shares* +5.73% +6.25% +74.69% 3.92%
- --------------------------------------------------------------------------------------------------------------------
ML Florida Municipal Bond Fund Class B Shares* +5.51 +5.92 +53.70 3.68
- --------------------------------------------------------------------------------------------------------------------
ML Florida Municipal Bond Fund Class C Shares* +5.46 +5.72 +66.68 3.58
- --------------------------------------------------------------------------------------------------------------------
ML Florida Municipal Bond Fund Class I Shares* +5.78 +6.46 +61.68 4.02
- --------------------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index** +5.73 +6.19 +78.50/+91.05 --
- --------------------------------------------------------------------------------------------------------------------
* 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 10-year/since inception dates are 10
years for Class B & Class I Shares and from 10/21/94 for Class A & Class C
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 10 years and from 10/31/94.
6 MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JANUARY 31, 2004
Performance Data (concluded)
Average Annual Total Return
Return Without Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
One Year Ended 1/31/04 +6.25% +2.00%
- --------------------------------------------------------------------------------
Five Years Ended 1/31/04 +4.71 +3.86
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 1/31/04 +6.20 +5.73
- --------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
Return Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
One Year Ended 1/31/04 +5.92% +1.92%
- --------------------------------------------------------------------------------
Five Years Ended 1/31/04 +4.29 +3.96
- --------------------------------------------------------------------------------
Ten Years Ended 1/31/04 +4.39 +4.39
- --------------------------------------------------------------------------------
* 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 1/31/04 +5.72% +4.72%
- --------------------------------------------------------------------------------
Five Years Ended 1/31/04 +4.18 +4.18
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 1/31/04 +5.66 +5.66
- --------------------------------------------------------------------------------
* 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 I Shares*
================================================================================
One Year Ended 1/31/04 +6.46% +2.20%
- --------------------------------------------------------------------------------
Five Years Ended 1/31/04 +4.82 +3.96
- --------------------------------------------------------------------------------
Ten Years Ended 1/31/04 +4.92 +4.49
- --------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JANUARY 31, 2004 7
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (in Thousands)
S&P Moody's Face
Ratings Ratings Amount Municipal Bonds Value
=================================================================================================================================
Florida--89.5%
- ---------------------------------------------------------------------------------------------------------------------------------
AAA Aaa $ 1,095 Altamonte Springs, Florida, Health Facilities Authority, Hospital
Revenue Bonds (Adventist Health Systems--Sunbelt), 7% due 10/01/2014 (d) $ 1,420
-------------------------------------------------------------------------------------------------------------------
NR* NR* 395 Arbor Greene, Florida, Community Development District,
Special Assessment Revenue Bonds, 6.50% due 5/01/2007 399
-------------------------------------------------------------------------------------------------------------------
NR* NR* 350 Bonnet Creek Resort, Florida, Community Development District,
Special Assessment Revenue Bonds, 7.50% due 5/01/2034 372
-------------------------------------------------------------------------------------------------------------------
NR* NR* 115 Brooks of Bonita Springs II, Florida, Community Development
District, Capital Improvement Revenue Bonds, Series B, 6.60%
due 5/01/2007 116
-------------------------------------------------------------------------------------------------------------------
Broward County, Florida, HFA, M/F Housing Revenue Refunding
Bonds (Lakeside Apartments Project) (c):
AAA NR* 1,100 6.90% due 8/01/2015 1,144
AAA NR* 1,100 7% due 2/01/2025 1,142
-------------------------------------------------------------------------------------------------------------------
AA- A3 5,000 Broward County, Florida, Resource Recovery Revenue Refunding
Bonds (Wheelabrator South Broward), Series A, 5.375%
due 12/01/2009 5,557
-------------------------------------------------------------------------------------------------------------------
NR* Baa3 550 Capital Trust Agency, Florida, Air Cargo Revenue Bonds, AMT,
6.25% due 1/01/2019 557
-------------------------------------------------------------------------------------------------------------------
AAA Aaa 945 Celebration Community Development District, Florida (Special
Assessment), 6% due 5/01/2010 (b) 966
-------------------------------------------------------------------------------------------------------------------
Citrus County, Florida, Hospital Board Revenue Refunding Bonds
(Citrus Memorial Hospital):
NR* Baa3 995 6.25% due 8/15/2023 1,025
NR* Baa3 1,500 6.375% due 8/15/2032 1,554
-------------------------------------------------------------------------------------------------------------------
NR* Aaa 495 Clay County, Florida, HFA, S/F Mortgage Revenue Bonds
(Multi-County), AMT, 6.30% due 10/01/2020 (c)(e) 532
-------------------------------------------------------------------------------------------------------------------
AAA Aaa 675 Clearwater, Florida, Revenue Bonds (Spring Training Facility),
5.375% due 3/01/2027 (b) 752
-------------------------------------------------------------------------------------------------------------------
NR* Aaa 2,100 Daytona Beach, Florida, Utility System Revenue Refunding
Bonds, Series A, 5% due 11/15/2032 (a) 2,171
-------------------------------------------------------------------------------------------------------------------
NR* NR* 910 Double Branch Community, Florida, Development District,
Special Assessment Bonds, Series B-1, 5.60% due 5/01/2007 913
-------------------------------------------------------------------------------------------------------------------
AAA Aaa 6,760 Escambia County, Florida, HFA, S/F Mortgage Revenue Refunding
Bonds, AMT, 7% due 4/01/2028 (c)(e) 7,010
-------------------------------------------------------------------------------------------------------------------
NR* Aaa 3,045 Escambia County, Florida, Health Facilities Authority, Health
Facility Revenue Bonds (Florida Health Care Facility Loan),
5.95% due 7/01/2020 (a) 3,213
-------------------------------------------------------------------------------------------------------------------
BBB Baa2 11,370 Escambia County, Florida, PCR (Champion International
Corporation Project), AMT, 6.90% due 8/01/2022 11,843
-------------------------------------------------------------------------------------------------------------------
NR* NR* 1,500 Fiddlers Creek, Florida, Community Development District
Number 2, Special Assessment Revenue Bonds, Series A, 6.375%
due 5/01/2035 1,537
-------------------------------------------------------------------------------------------------------------------
NR* NR* 975 Fishhawk, Florida, Community Development District II, Special
Assessment Revenue Bonds, Series B, 5% due 11/01/2007 975
-------------------------------------------------------------------------------------------------------------------
NR* NR* 75 Fleming Island Plantation Community Development District,
Florida, Special Assessment Bonds, Series A, 6.30%
due 2/01/2005 75
-------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,300 Florida HFA, Homeowner Mortgage Revenue Bonds, AMT, Series 3,
6.35% due 7/01/2028 (b) 2,418
-------------------------------------------------------------------------------------------------------------------
AAA NR* 5,210 Florida HFA, Revenue Bonds, DRIVERS, AMT, Series 189, 12.696%
due 2/01/2035 (a)(g) 5,572
-------------------------------------------------------------------------------------------------------------------
AAA Aaa 795 Florida Housing Finance Corporation, Homeowner Mortgage
Revenue Bonds, Series 10, 5.50% due 7/01/2017 (f) 848
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 at right.
AMT Alternative Minimum Tax (subject to)
DRIVERS Derivative Inverse Tax-Exempt Receipts
HFA Housing Finance Agency
IDA Industrial Development Authority
M/F Multi-Family
PCR Pollution Control Revenue Bonds
S/F Single-Family
8 MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JANUARY 31, 2004
Schedule of Investments (continued) (in Thousands)
S&P Moody's Face
Ratings Ratings Amount Municipal Bonds Value
=================================================================================================================================
Florida (continued)
- ---------------------------------------------------------------------------------------------------------------------------------
AAA Aaa $ 1,070 Florida Housing Finance Corporation, Homeowner Mortgage
Revenue Refunding Bonds, AMT, Series 4, 6.25%
due 7/01/2022 (f) $ 1,136
-------------------------------------------------------------------------------------------------------------------
AAA NR* 5,000 Florida State Board of Education, Lottery Revenue Bonds,
DRIVERS, Series 222, 11.495% due 7/01/2017 (g)(h) 6,893
-------------------------------------------------------------------------------------------------------------------
Florida State Governmental Utility Authority, Utility Revenue
Bonds (a):
AAA Aaa 1,000 (Citrus Utility System), 5.125% due 10/01/2033 1,044
AAA Aaa 1,000 (Lehigh Utility System), 5.125% due 10/01/2028 1,046
AAA Aaa 1,000 (Lehigh Utility System), 5.125% due 10/01/2033 1,044
-------------------------------------------------------------------------------------------------------------------
AAA NR* 2,500 Florida State Turnpike Authority, Turnpike Revenue Bonds,
DRIVERS, Series 218, 11.237% due 7/01/2029 (g)(h) 3,402
-------------------------------------------------------------------------------------------------------------------
NR* NR* 1,000 Gateway Services Community Development District, Florida,
Special Assessment Bonds (Stoneybrook Project), 5.50%
due 7/01/2008 1,003
-------------------------------------------------------------------------------------------------------------------
NR* NR* 1,000 Harbor Bay, Florida, Community Development District, Capital
Improvement Special Assessment Revenue Bonds, Series A, 7%
due 5/01/2033 1,058
-------------------------------------------------------------------------------------------------------------------
NR* NR* 600 Heritage Isles Community Development District, Florida,
Special Assessment Revenue Refunding Bonds, 5.90%
due 11/01/2006 601
-------------------------------------------------------------------------------------------------------------------
NR* NR* 480 Heritage Palms, Florida, Community Development District,
Capital Improvement Revenue Bonds, 6.25% due 11/01/2004 481
-------------------------------------------------------------------------------------------------------------------
A A3 3,500 Highlands County, Florida, Health Facilities Authority,
Hospital Revenue Bonds (Adventist Health System), Series A,
6% due 11/15/2031 3,710
-------------------------------------------------------------------------------------------------------------------
Hillsborough County, Florida, IDA, Exempt Facilities Revenue
Bonds (National Gypsum), AMT:
NR* NR* 1,000 Series A, 7.125% due 4/01/2030 1,078
NR* NR* 1,750 Series B, 7.125% due 4/01/2030 1,887
-------------------------------------------------------------------------------------------------------------------
NR* Baa1 285 Hillsborough County, Florida, IDA, Hospital Revenue Refunding
Bonds (Tampa General Hospital Project), Series B, 5.25%
due 10/01/2028 284
-------------------------------------------------------------------------------------------------------------------
NR* NR* 1,000 Islands at Doral, Florida, Special Assessment Bonds, 6.375%
due 5/01/2035 1,034
-------------------------------------------------------------------------------------------------------------------
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 1,047
AA Aa2 2,000 Series B, 5.50% due 11/15/2036 2,096
AAA Aaa 410 Series B, 5.50% due 11/15/2036 (b) 442
-------------------------------------------------------------------------------------------------------------------
AA Aa2 2,800 Jacksonville, Florida, Electric Authority, Electric System
Revenue Bonds, Series 3-C, 5.50% due 10/01/2030 2,940
-------------------------------------------------------------------------------------------------------------------
AAA NR* 3,920 Jacksonville, Florida, Electric Authority, Electric System
Revenue Refunding Bonds, Series Three, 6.0% due 4/01/2005
(b)(i) 4,179
-------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,200 Jacksonville, Florida, Guaranteed Entitlement Revenue
Refunding and Improvement Bonds, 5.25% due 10/01/2032 (h) 1,267
-------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Lee County, Florida, IDA, Utility System Revenue Bonds (Bonita
Springs Utilities Inc. Project), AMT, 5% due 11/01/2027 (b) 1,014
-------------------------------------------------------------------------------------------------------------------
BBB+ NR* 2,320 Martin County, Florida, Health Facilities Authority, Hospital
Revenue Bonds (Martin Memorial Medical Center), Series A,
5.875% due 11/15/2032 2,353
-------------------------------------------------------------------------------------------------------------------
NR* NR* 1,000 Mediterra, Florida, South Community Development District,
Capital Improvement Revenue Bonds, Series B, 5.50%
due 5/01/2010 995
-------------------------------------------------------------------------------------------------------------------
AAA Aaa 3,850 Miami-Dade County, Florida, Expressway Authority, Toll System
Revenue Bonds, 6.375% due 7/01/2010 (h)(i) 4,696
-------------------------------------------------------------------------------------------------------------------
NR* NR* 830 Middle Village Community Development District, Florida,
Special Assessment Bonds, Series C, 5.125% due 5/01/2009 830
MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JANUARY 31, 2004 9
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) (in Thousands)
S&P Moody's Face
Ratings Ratings Amount Municipal Bonds Value
=================================================================================================================================
Florida (concluded)
- ---------------------------------------------------------------------------------------------------------------------------------
AAA Aaa $ 1,000 Ocoee, Florida, Water and Sewer System Revenue Refunding and Improvement
Bonds, 5.125% due 10/01/2033 (a) $ 1,044
-------------------------------------------------------------------------------------------------------------------
Orange County, Florida, Health Facilities Authority, Hospital
Revenue Bonds:
A A3 500 (Adventist Health System), 6.25% due 11/15/2024 539
A- A2 2,705 (Orlando Regional Healthcare), 6% due 12/01/2028 2,868
A- A2 200 (Orlando Regional Healthcare), 5.75% due 12/01/2032 207
-------------------------------------------------------------------------------------------------------------------
AAA Aaa 6,500 Orange County, Florida, Tourist Development, Tax Revenue
Bonds, 5.50% due 10/01/2031 (a) 7,035
-------------------------------------------------------------------------------------------------------------------
NR* NR* 1,000 Orlando, Florida, Urban Community Development District,
Capital Improvement Special Assessment Bonds, Series A, 6.95%
due 5/01/2033 1,060
-------------------------------------------------------------------------------------------------------------------
NR* Aaa 1,265 Osceola County, Florida, Infrastructure Sales Surplus Tax
Revenue Bonds, 5.25% due 10/01/2025 (a) 1,337
-------------------------------------------------------------------------------------------------------------------
AAA Aaa 925 Osceola County, Tourist Development Tax Revenue Bonds,
Series A, 5.50% due 10/01/2027 (h) 1,001
-------------------------------------------------------------------------------------------------------------------
BBB+ NR* 700 Palm Beach County, Florida, Health Facilities Authority,
Retirement Community Revenue Bonds (Acts Obligation Group),
5.625% due 11/15/2020 711
-------------------------------------------------------------------------------------------------------------------
NR* NR* 460 Panther Trace, Florida, Community Development District,
Special Assessment Revenue Bonds, Series B, 6.50%
due 5/01/2009 465
-------------------------------------------------------------------------------------------------------------------
Park Place Community Development District, Florida, Special
Assessment Revenue Bonds:
NR* NR* 500 6.75% due 5/01/2032 528
NR* NR* 1,000 6.375% due 5/01/2034 1,027
-------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,080 Pasco County, Florida, Health Facilities Authority, Gross
Revenue Bonds (Adventist Health System--Sunbelt), 7%
due 10/01/2014 (d) 2,677
-------------------------------------------------------------------------------------------------------------------
NR* A1 2,000 Pinellas County, Florida, Health Facilities Authority Revenue
Bonds (BayCare Health System Inc.), 5.75% due 11/15/2029 2,082
-------------------------------------------------------------------------------------------------------------------
NR* NR* 805 Reunion East Community Development District, Florida, Special
Assessment, Series B, 5.90% due 11/01/2007 808
-------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Saint Johns County, Florida, Transportation Improvement
Revenue Bonds, 5.125% due 10/01/2032 (a) 1,044
-------------------------------------------------------------------------------------------------------------------
AAA NR* 2,320 South Broward, Florida, Hospital District Revenue Bonds,
DRIVERS, Series 337, 9.956% due 5/01/2032 (b)(g) 2,764
-------------------------------------------------------------------------------------------------------------------
South Lake County, Florida, Hospital District Revenue Bonds
(South Lake Hospital Inc.):
A- A2 1,000 5.80% due 10/01/2034 1,026
NR* Baa3 995 6.375% due 10/01/2034 1,016
-------------------------------------------------------------------------------------------------------------------
NR* NR* 1,000 Sterling Hill, Florida, Community Development District,
Capital Improvement Revenue Refunding Bonds, Series B, 5.50%
due 11/01/2010 1,004
-------------------------------------------------------------------------------------------------------------------
NR* NR* 535 Stoneybrook West, Florida, Community Development District,
Special Assessment Revenue Bonds, Series B, 6.45%
due 5/01/2010 545
-------------------------------------------------------------------------------------------------------------------
NR* NR* 970 Verandah West, Florida, Community Development District,
Capital Improvement Revenue Bonds, Series B, 5.25%
due 5/01/2008 966
-------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Village Center Community Development District, Florida,
Utility Revenue Bonds, 5.125% due 10/01/2028 (b) 1,050
-------------------------------------------------------------------------------------------------------------------
NR* NR* 1,500 Vista Lakes Community Development District, Florida, Capital
Improvement Revenue Bonds, Series A, 6.75% due 5/01/2034 1,577
10 MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JANUARY 31, 2004
Schedule of Investments (concluded) (in Thousands)
S&P Moody's Face
Ratings Ratings Amount Municipal Bonds Value
=================================================================================================================================
Puerto Rico--7.3%
- ---------------------------------------------------------------------------------------------------------------------------------
Children's Trust Fund Project of Puerto Rico, Tobacco
Settlement Revenue Refunding Bonds:
BBB Baa2 $ 1,695 5.375% due 5/15/2033 $ 1,617
BBB Baa2 580 5.50% due 5/15/2039 541
-------------------------------------------------------------------------------------------------------------------
A Baa1 2,800 Puerto Rico Commonwealth, Highway and Transportation
Authority, Transportation Revenue Refunding Bonds, Series D,
5.75% due 7/01/2041 3,091
-------------------------------------------------------------------------------------------------------------------
NR* Baa3 1,365 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 1,443
-------------------------------------------------------------------------------------------------------------------
BBB+ Baa3 4,000 Puerto Rico Public Finance Corporation, Commonwealth
Appropriation Revenue Bonds, Series E, 5.75% due 8/01/2030 4,324
-------------------------------------------------------------------------------------------------------------------
Total Municipal Bonds (Cost--$137,454)--96.8% 145,068
===================================================================================================================
=================================================================================================================================
Shares
Held Mutual Funds
===================================================================================================================
23 BlackRock Florida Insured Municipal 2008 Term Trust 377
-------------------------------------------------------------------------------------------------------------------
Total Mutual Funds (Cost--$379)--0.3% 377
===================================================================================================================
=================================================================================================================================
Short-Term Investments
===================================================================================================================
2,713 Merrill Lynch Institutional Tax-Exempt Fund (j) 2,713
-------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments (Cost--$2,713)--1.8% 2,713
=================================================================================================================================
Total Investments (Cost--$140,546)--98.9% 148,158
Other Assets Less Liabilities--1.1% 1,662
--------
Net Assets--100.0% $149,820
========
(a) AMBAC Insured.
(b) MBIA Insured.
(c) FNMA Collateralized.
(d) Escrowed to maturity.
(e) GNMA Collateralized.
(f) FSA Insured.
(g) 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, 2004.
(h) FGIC Insured.
(i) Prerefunded.
(j) 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 Dividend
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Institutional
Tax-Exempt Fund 1,700 $9
--------------------------------------------------------------------------
* Not Rated.
See Notes to Financial Statements.
MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JANUARY 31, 2004 11
[LOGO] Merrill Lynch Investment Managers
Statement of Assets and Liabilities
As of January 31, 2004
======================================================================================================================
Assets
- ----------------------------------------------------------------------------------------------------------------------
Investments, at value (identified cost--$140,546,154) ...... $ 148,157,521
Cash ....................................................... 48,168
Receivables:
Interest ................................................ $ 2,586,382
Beneficial interest sold ................................ 142,991
Securities sold ......................................... 105,000
Dividends ............................................... 529 2,834,902
-------------
Prepaid expenses ........................................... 7,079
-------------
Total assets ............................................... 151,047,670
-------------
======================================================================================================================
Liabilities
- ----------------------------------------------------------------------------------------------------------------------
Payables:
Securities purchased .................................... 828,190
Dividends to shareholders ............................... 192,041
Investment adviser ...................................... 78,692
Beneficial interest redeemed ............................ 65,037
Distributor ............................................. 35,063
Other affiliates ........................................ 15,744 1,214,767
-------------
Accrued expenses and other liabilities ..................... 12,467
-------------
Total liabilities .......................................... 1,227,234
-------------
======================================================================================================================
Net Assets
- ----------------------------------------------------------------------------------------------------------------------
Net assets ................................................. $ 149,820,436
=============
======================================================================================================================
Net Assets Consist of
- ----------------------------------------------------------------------------------------------------------------------
Class A Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized ..................... $ 585,535
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized ..................... 495,342
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized ..................... 147,632
Class I Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized ..................... 217,385
Paid-in capital in excess of par ........................... 149,162,047
Undistributed investment income--net ....................... $ 118,353
Accumulated realized capital losses on investments--net .... (8,517,225)
Unrealized appreciation on investments--net ................ 7,611,367
-------------
Total accumulated losses--net .............................. (787,505)
-------------
Net Assets ................................................. $ 149,820,436
=============
======================================================================================================================
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------
Class A--Based on net assets of $60,619,286 and 5,855,352
shares of beneficial interest outstanding ................. $ 10.35
=============
Class B--Based on net assets of $51,371,840 and 4,953,421
shares of beneficial interest outstanding ................. $ 10.37
=============
Class C--Based on net assets of $15,284,845 and 1,476,322
shares of beneficial interest outstanding ................. $ 10.35
=============
Class I--Based on net assets of $22,544,465 and 2,173,854
shares of beneficial interest outstanding ................. $ 10.37
=============
See Notes to Financial Statements.
12 MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JANUARY 31, 2004
Statement of Operations
For the Six Months Ended January 31, 2004
======================================================================================================================
Investment Income
- ----------------------------------------------------------------------------------------------------------------------
Interest ................................................... $ 4,536,528
Dividends from affiliates .................................. 9,204
Dividends .................................................. 469
-------------
Total income ............................................... 4,546,201
-------------
======================================================================================================================
Expenses
- ----------------------------------------------------------------------------------------------------------------------
Investment advisory fees ................................... $ 422,003
Account maintenance and distribution fees--Class B ......... 141,161
Accounting services ........................................ 49,304
Account maintenance and distribution fees--Class C ......... 44,892
Professional fees .......................................... 33,231
Account maintenance fees--Class A .......................... 29,853
Printing and shareholder reports ........................... 24,076
Registration fees .......................................... 17,511
Transfer agent fees--Class B ............................... 12,440
Transfer agent fees--Class A ............................... 11,238
Trustees' fees and expenses ................................ 7,150
Custodian fees ............................................. 5,960
Pricing fees ............................................... 5,201
Transfer agent fees--Class I ............................... 4,203
Transfer agent fees--Class C ............................... 3,269
Other ...................................................... 8,229
-------------
Total expenses before reimbursement ........................ 819,721
Reimbursement of expenses .................................. (2,252)
-------------
Total expenses after reimbursement ......................... 817,469
-------------
Investment income--net ..................................... 3,728,732
-------------
======================================================================================================================
Realized & Unrealized Gain on Investments--Net
- ----------------------------------------------------------------------------------------------------------------------
Realized gain on investments--net .......................... 77,633
Change in unrealized appreciation on investments--net ...... 4,530,307
-------------
Total realized and unrealized gain on investments--net ..... 4,607,940
-------------
Net Increase in Net Assets Resulting from Operations ....... $ 8,336,672
=============
See Notes to Financial Statements.
MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JANUARY 31, 2004 13
[LOGO] Merrill Lynch Investment Managers
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
January 31, July 31,
Increase (Decrease) in Net Assets: 2004 2003
======================================================================================================================
Operations
- ----------------------------------------------------------------------------------------------------------------------
Investment income--net ..................................... $ 3,728,732 $ 7,829,442
Realized gain on investments--net .......................... 77,633 1,750,211
Change in unrealized appreciation on investments--net ...... 4,530,307 (3,989,228)
-------------------------------
Net increase in net assets resulting from operations ....... 8,336,672 5,590,425
-------------------------------
======================================================================================================================
Dividends to Shareholders
- ----------------------------------------------------------------------------------------------------------------------
Investment income--net:
Class A ................................................. (1,503,020) (2,726,805)
Class B ................................................. (1,309,083) (3,195,112)
Class C ................................................. (338,914) (630,460)
Class I ................................................. (573,293) (1,270,981)
-------------------------------
Net decrease in net assets resulting from dividends to
shareholders .............................................. (3,724,310) (7,823,358)
-------------------------------
======================================================================================================================
Beneficial Interest Transactions
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets derived from
beneficial interest transactions .......................... (10,312,406) 4,435,091
-------------------------------
======================================================================================================================
Net Assets
- ----------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets .................... (5,700,044) 2,202,158
Beginning of period ........................................ 155,520,480 153,318,322
-------------------------------
End of period* ............................................. $ 149,820,436 $ 155,520,480
===============================
* Undistributed investment income--net .................. $ 118,353 $ 113,931
===============================
See Notes to Financial Statements.
14 MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JANUARY 31, 2004
Financial Highlights
Class A
------------------------------------------------------------------
The following per share data and ratios have been derived For the Six For the
from information provided in the financial statements. Months Ended Year Ended July 31,++
January 31, --------------------------------------------------
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001 2000
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 10.04 $ 10.19 $ 10.13 $ 9.71 $ 10.06
-----------------------------------------------------------------
Investment income--net ................. .26+ .52+ .51 .49 .49
Realized and unrealized gain (loss) on
investments--net ...................... .31 (.15) .06 .43 (.35)
-----------------------------------------------------------------
Total from investment operations ....... .57 .37 .57 .92 .14
-----------------------------------------------------------------
Less dividends and distributions:
Investment income--net .............. (.26) (.52) (.51) (.49) (.49)
In excess of realized gain on
investments--net ................... -- -- -- (.01) --
-----------------------------------------------------------------
Total dividends and distributions ...... (.26) (.52) (.51) (.50) (.49)
-----------------------------------------------------------------
Net asset value, end of period ......... $ 10.35 $ 10.04 $ 10.19 $ 10.13 $ 9.71
=================================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 5.73%@ 3.66% 5.81% 9.72% 1.55%
=================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement ......... .88%* .88% .89% .86% .80%
=================================================================
Expenses ............................... .88%* .88% .89% .86% .80%
=================================================================
Investment income--net ................. 5.03%* 5.08% 5.07% 4.99% 5.07%
=================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 60,619 $ 57,610 $ 43,909 $ 38,564 $ 25,725
=================================================================
Portfolio turnover ..................... 14.74% 45.50% 41.29% 81.27% 79.33%
=================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
++ Effective April 14, 2003, Class D Shares were redesignated Class A Shares.
@ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JANUARY 31, 2004 15
[LOGO] Merrill Lynch Investment Managers
Financial Highlights (continued)
Class B
------------------------------------------------------------------
The following per share data and ratios have been derived For the Six For the
from information provided in the financial statements. Months Ended Year Ended July 31,
January 31, --------------------------------------------------
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001 2000
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 10.06 $ 10.20 $ 10.14 $ 9.73 $ 10.08
-----------------------------------------------------------------
Investment income--net ................. .24+ .48+ .47 .46 .45
Realized and unrealized gain (loss) on
investments--net ...................... .31 (.14) .06 .42 (.35)
-----------------------------------------------------------------
Total from investment operations ....... .55 .34 .53 .88 .10
-----------------------------------------------------------------
Less dividends and distributions:
Investment income--net .............. (.24) (.48) (.47) (.46) (.45)
In excess of realized gain on
investments--net ................... -- -- -- (.01) --
-----------------------------------------------------------------
Total dividends and distributions ...... (.24) (.48) (.47) (.47) (.45)
-----------------------------------------------------------------
Net asset value, end of period ......... $ 10.37 $ 10.06 $ 10.20 $ 10.14 $ 9.73
=================================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 5.51%@ 3.35% 5.38% 9.16% 1.14%
=================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement ......... 1.28%* 1.28% 1.29% 1.26% 1.20%
=================================================================
Expenses ............................... 1.29%* 1.28% 1.29% 1.26% 1.20%
=================================================================
Investment income--net ................. 4.63%* 4.67% 4.65% 4.59% 4.66%
=================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 51,372 $ 61,098 $ 73,034 $ 86,433 $100,059
=================================================================
Portfolio turnover ..................... 14.74% 45.50% 41.29% 81.27% 79.33%
=================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
@ Aggregate total investment return.
See Notes to Financial Statements.
16 MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JANUARY 31, 2004
Financial Highlights (continued)
Class C
------------------------------------------------------------------
The following per share data and ratios have been derived For the Six For the
from information provided in the financial statements. Months Ended Year Ended July 31,
January 31, --------------------------------------------------
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001 2000
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 10.04 $ 10.18 $ 10.13 $ 9.71 $ 10.06
-----------------------------------------------------------------
Investment income--net ................. .23+ .47+ .46 .44 .44
Realized and unrealized gain (loss) on
investments--net ...................... .31 (.14) .05 .43 (.35)
-----------------------------------------------------------------
Total from investment operations ....... .54 .33 .51 .87 .09
-----------------------------------------------------------------
Less dividends and distributions:
Investment income--net .............. (.23) (.47) (.46) (.44) (.44)
In excess of realized gain on
investments--net ................... -- -- -- (.01) --
-----------------------------------------------------------------
Total dividends and distributions ...... (.23) (.47) (.46) (.45) (.44)
-----------------------------------------------------------------
Net asset value, end of period ......... $ 10.35 $ 10.04 $ 10.18 $ 10.13 $ 9.71
=================================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 5.46%@ 3.24% 5.17% 9.17% 1.04%
=================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement ......... 1.38%* 1.38% 1.39% 1.36% 1.30%
=================================================================
Expenses ............................... 1.39%* 1.39% 1.39% 1.36% 1.30%
=================================================================
Investment income--net ................. 4.52%* 4.57% 4.56% 4.49% 4.57%
=================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 15,285 $ 14,759 $ 10,489 $ 9,110 $ 8,497
=================================================================
Portfolio turnover ..................... 14.74% 45.50% 41.29% 81.27% 79.33%
=================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
@ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JANUARY 31, 2004 17
[LOGO] Merrill Lynch Investment Managers
Financial Highlights (concluded)
Class I
------------------------------------------------------------------
The following per share data and ratios have been derived For the Six For the
from information provided in the financial statements. Months Ended Year Ended July 31,++
January 31, --------------------------------------------------
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001 2000
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 10.06 $ 10.20 $ 10.14 $ 9.73 $ 10.08
-----------------------------------------------------------------
Investment income--net ................. .27+ .53+ .52 .51 .50
Realized and unrealized gain (loss) on
investments--net ...................... .31 (.14) .06 .42 (.35)
-----------------------------------------------------------------
Total from investment operations ....... .58 .39 .58 .93 .15
-----------------------------------------------------------------
Less dividends and distributions:
Investment income--net .............. (.27) (.53) (.52) (.51) (.50)
In excess of realized gain on
investments--net ................... -- -- -- (.01) --
-----------------------------------------------------------------
Total dividends and distributions ...... (.27) (.53) (.52) (.52) (.50)
-----------------------------------------------------------------
Net asset value, end of period ......... $ 10.37 $ 10.06 $ 10.20 $ 10.14 $ 9.73
=================================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 5.78%@ 3.87% 5.91% 9.71% 1.66%
=================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement ......... .78%* .77% .79% .76% .70%
=================================================================
Expenses ............................... .78%* .78% .79% .76% .70%
=================================================================
Investment income--net ................. 5.13%* 5.18% 5.16% 5.10% 5.17%
=================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 22,544 $ 22,053 $ 25,886 $ 29,053 $ 30,242
=================================================================
Portfolio turnover ..................... 14.74% 45.50% 41.29% 81.27% 79.33%
=================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
++ Effective April 14, 2003, Class A Shares were redesignated Class I Shares.
@ Aggregate total investment return.
See Notes to Financial Statements.
18 MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JANUARY 31, 2004
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 amended, 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 multiple classes of shares. Shares of Class A and Class
I 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 A, Class B and Class C 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 are traded primarily in the
over-the-counter markets and are valued at the last available bid price in the
over-the-counter market or on the basis of yield equivalents as obtained by the
Fund's pricing service from one or more dealers that make markets in the
securities. Financial futures contracts and options thereon, which are traded on
exchanges, are valued at their closing prices as of the close of such exchanges.
Options written or purchased are valued at the last sale price in the case of
exchange-traded options. In the case of options traded in the over-the-counter
market, valuation is the last asked price (options written) or the last bid
price (options purchased). Swap agreements are valued by quoted fair values
received daily by the Fund from the counterparty. Short-term investments with a
remaining maturity of sixty days or less are valued at amortized cost, which
approximates market value. Securities and assets for which market quotations are
not readily available are valued at fair value as determined in good faith by or
under the direction of the Board of Trustees of the 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
Board of Trustees.
(b) 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 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. 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.
MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JANUARY 31, 2004 19
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (continued)
(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 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, 2004, FAM reimbursed the Fund in
the amount of $2,252.
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 A ................................ .10% --
Class B ................................ .25% .25%
Class C ................................ .25% .35%
- --------------------------------------------------------------------------------
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 A, Class B and Class C 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, 2004, FAMD earned underwriting discounts
and MLPF&S earned dealer concessions on sales of the Fund's Class A and Class I
Shares as follows:
- --------------------------------------------------------------------------------
FAMD MLPF&S
- --------------------------------------------------------------------------------
Class A .............................. $1,315 $8,480
Class I .............................. $ 179 $1,690
- --------------------------------------------------------------------------------
For the six months ended January 31, 2004, MLPF&S received contingent deferred
sales charges of $62,591 and $2,872 relating to transactions in Class B and
Class C Shares, respectively. Furthermore, MLPF&S received contingent deferred
sales charges of $717 relating to transactions subject to front-end sales charge
waivers in Class A Shares.
In addition, MLPF&S received $1,549 in commissions on the execution of portfolio
security transactions for the Fund for the six months ended January 31, 2004.
20 MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JANUARY 31, 2004
Notes to Financial Statements (continued)
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, 2004, the Fund reimbursed FAM $1,605 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, 2004 were $21,625,782 and $31,433,147, respectively.
Net realized gains for the six months ended January 31, 2004 and net unrealized
gains as of January 31, 2004 were as follows:
- -------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
- -------------------------------------------------------------------------------
Long-term investments .................... $ 77,633 $ 7,611,367
-------------------------------
Total .................................... $ 77,633 $ 7,611,367
===============================
As of January 31, 2004, net unrealized appreciation for Federal income tax
purposes aggregated $7,586,790, of which $7,936,446 related to appreciated
securities and $349,656 related to depreciated securities. The aggregate cost of
investments at January 31, 2004 for Federal income tax purposes was
$140,570,731.
4. Beneficial Interest Transactions:
Net increase (decrease) in net assets derived from beneficial interest
transactions was $(10,312,406) and $4,435,091 for the six months ended January
31, 2004 and for the year ended July 31, 2003, respectively.
Transactions in shares of beneficial interest for each class were as follows:
- -------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended January 31, 2004 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 194,979 $ 1,994,498
Automatic conversion of shares ........... 514,759 5,240,532
Shares issued to shareholders in
reinvestment of dividends .............. 62,173 635,675
-------------------------------
Total issued ............................. 771,911 7,870,705
Shares redeemed .......................... (653,445) (6,652,455)
-------------------------------
Net increase ............................. 118,466 $ 1,218,250
===============================
- -------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended July 31, 2003 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 1,547,946 $ 15,889,188
Automatic conversion of shares ........... 821,171 8,470,978
Shares issued to shareholders in
reinvestment of dividends .............. 100,849 1,038,009
-------------------------------
Total issued ............................. 2,469,966 25,398,175
Shares redeemed .......................... (1,044,034) (10,756,232)
-------------------------------
Net increase ............................. 1,425,932 $ 14,641,943
===============================
- -------------------------------------------------------------------------------
Class B Shares for the Six Months Dollar
Ended January 31, 2004 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 203,536 $ 2,083,813
Shares issued to shareholders in
reinvestment of dividends .............. 43,282 443,003
-------------------------------
Total issued ............................. 246,818 2,526,816
Automatic conversion of shares ........... (513,948) (5,240,532)
Shares redeemed .......................... (853,080) (8,719,035)
-------------------------------
Net decrease ............................. (1,120,210) $(11,432,751)
===============================
- -------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended July 31, 2003 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 934,159 $ 9,639,968
Shares issued to shareholders in
reinvestment of dividends .............. 112,118 1,154,469
-------------------------------
Total issued ............................. 1,046,277 10,794,437
Automatic conversion of shares ........... (819,750) (8,470,978)
Shares redeemed .......................... (1,311,339) (13,502,533)
-------------------------------
Net decrease ............................. (1,084,812) $(11,179,074)
===============================
- -------------------------------------------------------------------------------
Class C Shares for the Six Months Dollar
Ended January 31, 2004 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 142,913 $ 1,461,223
Shares issued to shareholders in
reinvestment of dividends .............. 15,669 160,168
-------------------------------
Total issued ............................. 158,582 1,621,391
Shares redeemed .......................... (151,989) (1,542,833)
-------------------------------
Net increase ............................. 6,593 $ 78,558
===============================
- -------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended July 31, 2003 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 632,468 $ 6,510,644
Shares issued to shareholders in
reinvestment of dividends .............. 28,425 292,402
-------------------------------
Total issued ............................. 660,893 6,803,046
Shares redeemed .......................... (221,052) (2,269,789)
-------------------------------
Net increase ............................. 439,841 $ 4,533,257
===============================
MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JANUARY 31, 2004 21
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (concluded)
- -------------------------------------------------------------------------------
Class I Shares for the Six Months Dollar
Ended January 31, 2004 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 145,555 $ 1,498,354
Shares issued to shareholders in
reinvestment of dividends .............. 22,845 234,006
-------------------------------
Total issued ............................. 168,400 1,732,360
Shares redeemed .......................... (186,866) (1,908,823)
-------------------------------
Net decrease ............................. (18,466) $ (176,463)
===============================
- -------------------------------------------------------------------------------
Class I Shares for the Year Dollar
Ended July 31, 2003 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 202,678 $ 2,091,809
Shares issued to shareholders in
reinvestment of dividends .............. 58,654 604,123
-------------------------------
Total issued ............................. 261,332 2,695,932
Shares redeemed .......................... (606,376) (6,256,967)
-------------------------------
Net decrease ............................. (345,044) $ (3,561,035)
===============================
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 28, 2003, the credit agreement
was renewed for one year under the same terms. The Fund did not borrow under the
credit agreement during the six months ended January 31, 2004.
6. Capital Loss Carryforward:
On July 31, 2003, the Fund had a net capital loss carryforward of $7,525,890, of
which $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.
22 MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JANUARY 31, 2004
Electronic Delivery
The Fund offers electronic delivery of communications to its shareholders. In
order to receive this service, you must register your account and provide us
with e-mail information. To sign up for this service, simply access this website
http://www.icsdelivery.com/live and follow the instructions. When you visit this
site, you will obtain a personal identification number (PIN). You will need this
PIN should you wish to update your e-mail address, choose to discontinue this
service and/or make any other changes to the service. This service is not
available for certain retirement accounts at this time.
MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JANUARY 31, 2004 23
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
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.
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 1-800-MER-FUND (1-800-637-3863); (2)
on www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's
website at http://www.sec.gov.
Merrill Lynch Florida Municipal Bond Fund of
Merrill Lynch Multi-State Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011
#16031 -- 1/04
Item 2 - Code of Ethics - Not Applicable to this semi-annual report
Item 3 - Audit Committee Financial Expert - Not Applicable to this semi-annual
report
Item 4 - Principal Accountant Fees and Services - Not Applicable to this
semi-annual report
Item 5 - Audit Committee of Listed Registrants - Not Applicable
Item 6 - Reserved
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable
Item 8 - Reserved
Item 9 - Submission of Matters to a Vote of Security Holders - Not Applicable
Item 10 - Controls and Procedures
10(a) - The registrant's certifying officers have reasonably designed such
disclosure controls and procedures to ensure material information
relating to the registrant is made known to us by others particularly
during the period in which this report is being prepared. The
registrant's certifying officers have determined that the registrant's
disclosure controls and procedures are effective based on our evaluation
of these controls and procedures as of a date within 90 days prior to
the filing date of this report.
10(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 11 - Exhibits attached hereto
11(a) - Not Applicable
11(b) - 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.
Merrill Lynch Florida Municipal Bond Fund of Merrill Lynch Multi-State
Municipal Series Trust
By: /s/ Terry K. Glenn
-------------------------------
Terry K. Glenn,
President of
Merrill Lynch Florida Municipal Bond Fund of Merrill Lynch
Multi-State Municipal Series Trust
Date: March 19, 2004
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
Merrill Lynch Florida Municipal Bond Fund of Merrill Lynch
Multi-State Municipal Series Trust
Date: March 19, 2004
By: /s/ Donald C. Burke
-------------------------------
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch Florida Municipal Bond Fund of Merrill Lynch
Multi-State Municipal Series Trust
Date: March 19, 2004