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 811-4264
Name of Fund: Merrill Lynch California Insured Municipal Bond Fund of Merrill
Lynch California 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
California Insured Municipal Bond Fund of Merrill Lynch California
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: 08/31/04
Date of reporting period: 09/01/03 - 02/29/04
Item 1 - Report to Stockholders
[LOGO] Merril Lynch Investment Managers www.mlim.ml.com
Merrill Lynch
California Insured Municipal
Bond Fund
Semi-Annual Report
February 29, 2004
[LOGO] Merril Lynch Investment Managers
Merrill Lynch California Insured 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
Walter C. O'Connor, Vice President
Donald C. Burke, Vice President and Treasurer
Phillip S. Gillespie, Secretary
Custodian
The Bank of New York
100 Church Street
New York, NY 10286
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
800-637-3863
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.
2 MERRILL LYNCH CALIFORNIA INSURED MUNICIPAL BOND FUND FEBRUARY 29, 2004
A Letter From the President
Dear Shareholder
As I write to you at February month-end, fixed income markets in the United
States continued to reward those investors willing to accept greater risk. The
trend held true in the tax-exempt market, where the Lehman Brothers
Non-Investment Grade Index of municipal bonds posted respective returns of
+10.96% and +16.15% for the six-month and 12-month periods ended February 29,
2004. This compared to a six-month return of +6.52% and a 12-month return of
+6.30% for the broader-based Lehman Brothers Municipal Bond Index.
At the same time, equity markets maintained their positive momentum from
year-end 2003. For the six-month and 12-month periods ended February 29, 2004,
the Standard & Poor's (S&P) 500 Index returned +14.59% and +38.52%,
respectively. Much of the boost came from improving economic conditions in the
United States.
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, was 4.1% in the
fourth quarter. A similar level of growth is expected 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 February 10, 2004, 392 of the S&P 500 companies had reported their
fourth-quarter 2003 results, and 67.6% 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
this year.
At Merrill Lynch Investment Managers, we believe the events and efforts of 2003
leave us with a much stronger economy and that 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 CALIFORNIA INSURED MUNICIPAL BOND FUND FEBRUARY 29, 2004 3
[LOGO] Merril Lynch Investment Managers
A Discussion With Your Fund's Portfolio Manager
We sought to keep the Fund's credit quality relatively high during the
past six months given the uncertainty surrounding California's economic and
fiscal situation.
Describe the recent market environment relative to municipal bonds.
Over the past six months, long-term fixed income interest rates generally
declined while the U.S. economy gained strength. Gross domestic product expanded
at an annualized rate of 8.2% in the third quarter of 2003, with fourth-quarter
growth reported at 4.1%. Notwithstanding the impressive economic 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.
At the end of February 2004, long-term U.S. Treasury bond yields stood at 4.84%,
representing a decline of nearly 40 basis points (.40%) over the past six
months. Tax-exempt municipal bond yields also moved sharply lower during the
period, while their prices -- which move opposite of their yields -- rose
accordingly. Yields on long-term revenue bonds, as measured by the Bond Buyer
Revenue Bond Index, fell almost 60 basis points. The same was true of 30-year
issues rated AAA -- the highest rated -- according to Municipal Market Data.
Shorter-maturity bonds fared even better, as yields on 10-year AAA-rated bonds
declined approximately 65 basis points during the period.
Supporting the recent yield declines was a pronounced decrease in new bond
issuance. This translated into favorable supply/demand dynamics in the municipal
marketplace. Approximately $170 billion in municipal bonds was underwritten
during the past six months, a drop of approximately 10% compared to the same
period a year earlier. In February, just $22 billion in new long-term municipal
bonds was underwritten, a decline of more than 25% versus February 2003. New
supply of municipal bonds is expected to remain manageable in 2004, a trend we
believe will continue to support the tax-exempt market's performance relative to
the taxable bond market.
While investor enthusiasm for stocks has taken some attention away from fixed
income markets, overall demand for tax-exempt municipal bonds has remained
positive. Municipal yields have recently ranged from 88% to 91% of Treasury
yields, slightly higher than their recent historical average. Moreover,
municipal investors generally preferred longer-dated securities, which offered
somewhat higher yields in the low interest rate environment. This maturity
extension helped support the strong demand for and performance of tax-exempt
products in recent months.
Describe conditions in the State of California.
As the period began, California was facing political and economic uncertainty. A
gubernatorial recall election was triggered by concerns about the state's $38
billion budget deficit, which had led Standard & Poor's to downgrade
California's credit rating to BBB, making the state the lowest-rated in the
nation. Conditions improved somewhat as the state passed a new budget and voters
elected Arnold Schwarzenegger to the governorship. The budget, however, included
a significant amount of new general obligation debt -- backed by the state's
precarious revenues -- as well as new "fiscal recovery" bonds to reduce the
deficit.
Toward the end of 2003, credit-rating agencies Fitch and Moody's followed
Standard & Poor's lead and downgraded California's credit rating. The downgrade
was prompted by Governor Schwarzenegger's repeal of the unpopular vehicle
licensing fee, which reduced the state's revenues, and a lack of consensus on
how California's budget crisis would be resolved.
Shortly after the end of the period, some near-term resolution was reached with
the passage of a $15 billion bond referendum and accompanying balanced budget
proposition. As a result, the state will issue new municipal securities to
finance substantial short-term obligations due in June 2004. The approval of
this debt issuance had a positive effect on the California municipal market. In
response, Standard & Poor's placed the state on its positive watch list and
indicated that further deficit-reduction progress could result in future credit
rating upgrades. Although there are still structural problems to be addressed,
the California municipal market is already responding with tightening credit
spreads for the state's bonds.
4 MERRILL LYNCH CALIFORNIA INSURED MUNICIPAL BOND FUND FEBRUARY 29, 2004
How did the Fund perform during the period in light of the existing market
conditions?
For the six-month period ended February 29, 2004, the Fund's Class A, Class B,
Class C and Class I Shares had total returns of +6.29%, +6.17%, +6.03% and
+6.34%, respectively. (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.) For the same period, the
Fund's unmanaged benchmark, the Lehman Brothers Municipal Bond Index, returned
+6.52%. The Fund's comparable Lipper category of California Insured Municipal
Debt Funds had an average return of +6.89% for the same six-month period. (Funds
in this Lipper category invest primarily in securities exempt from taxation in
California and insured as to timely payment.)
Although the Fund's total return lagged its Lipper category average, the Fund
provided the highest yield among its peers in the same competitive group. A high
current yield is desirable in a stable or rising interest rate environment, a
future scenario for which we have prepared the portfolio. During the past six
months, however, the market rallied more strongly than anticipated, resulting in
underperformance relative to our benchmark and peers.
What changes were made to the portfolio during the period?
We made very few significant changes to the Fund's structure. Because of the
uncertainty surrounding California's economic and fiscal situation, we sought to
keep the Fund's credit quality relatively high. More than 90% of the portfolio's
assets were held in securities rated AAA, the highest possible credit rating. In
addition, we did not own any uninsured California general obligation debt during
the period. This is because we did not find lower-rated credits offering enough
additional yield to compensate for the added risk of investing in unenhanced
bonds.
Also to manage risk, we kept the Fund's duration below average during the past
six months. In general, lower-duration investments are less sensitive to
interest rate moves and will, therefore, outperform in a stable-to-rising
interest rate environment. With interest rates still at historically low levels,
we anticipate an eventual rise in interest rates and have positioned the Fund
accordingly.
In an effort to temper the Fund's future net asset volatility, we reduced our
weighting in inverse floating rate securities from 15% of net assets to 11%. We
also remained fully invested throughout the period; in fact, we reduced the
Fund's cash position from nearly 3% of net assets to less than 1%. With
California cash equivalent securities yielding less than 1%, we felt that
holding cash would produce too large a drag on returns.
How would you characterize the portfolio's position at the close of the period?
Consistent with our approach over the past six months, we do not plan to make
major changes to the Fund's positioning in the months ahead. At period end, the
Fund remained fully invested and defensively positioned, with a
shorter-than-average duration. We believe this stance readies the Fund for a
potential rise in interest rates. In our opinion, the low interest rate climate
has yielded few attractive opportunities for new investment. Under these
circumstances, we are emphasizing current income and continuing to favor
securities backed by high-rated issuers.
Walter C. O'Connor
Vice President and Portfolio Manager
March 18, 2004
MERRILL LYNCH CALIFORNIA INSURED MUNICIPAL BOND FUND FEBRUARY 29, 2004 5
[LOGO] Merril 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 gain distributions, if any, 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 February 29, 2004 Total Return Total Return Total Return 30-Day Yield
========================================================================================================================
ML California Insured Municipal Bond Fund Class A Shares* +6.29% +5.35% +80.81% 2.92%
- ------------------------------------------------------------------------------------------------------------------------
ML California Insured Municipal Bond Fund Class B Shares* +6.17 +5.02 +66.76 2.64
- ------------------------------------------------------------------------------------------------------------------------
ML California Insured Municipal Bond Fund Class C Shares* +6.03 +4.83 +72.46 2.54
- ------------------------------------------------------------------------------------------------------------------------
ML California Insured Municipal Bond Fund Class I Shares* +6.34 +5.46 +75.31 3.01
- ------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index** +6.52 +6.30 +86.00/+93.92 --
- ------------------------------------------------------------------------------------------------------------------------
* Investment results shown do not reflect sales charges; results shown would
be lower if a sales charge was included. Total investment returns are
based on changes in net asset values for the periods shown, and assume
reinvestment of all dividends and capital gains distributions at net asset
value on the payable date. The Fund's 10-year/since inception periods 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 CALIFORNIA INSURED MUNICIPAL BOND FUND FEBRUARY 29, 2004
Performance Data (concluded)
Average Annual Total Return
Return Without Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
One Year Ended 2/29/04 +5.35% +1.14%
- --------------------------------------------------------------------------------
Five Years Ended 2/29/04 +5.30 +4.44
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 2/29/04 +6.54 +6.07
- --------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
Return Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
One Year Ended 2/29/04 +5.02% +1.02%
- --------------------------------------------------------------------------------
Five Years Ended 2/29/04 +4.89 +4.56
- --------------------------------------------------------------------------------
Ten Years Ended 2/29/04 +5.25 +5.25
- --------------------------------------------------------------------------------
* 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 2/29/04 +4.83% +3.83%
- --------------------------------------------------------------------------------
Five Years Ended 2/29/04 +4.77 +4.77
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 2/29/04 +6.00 +6.00
- --------------------------------------------------------------------------------
* 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 2/29/04 +5.46% +1.24%
- --------------------------------------------------------------------------------
Five Years Ended 2/29/04 +5.42 +4.56
- --------------------------------------------------------------------------------
Ten Years Ended 2/29/04 +5.77 +5.34
- --------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
MERRILL LYNCH CALIFORNIA INSURED MUNICIPAL BOND FUND FEBRUARY 29, 2004 7
[LOGO] Merril Lynch Investment Managers
Schedule of Investments (in Thousands)
S&P Moody's Face
Ratings Ratings Amount Municipal Bonds Value
===================================================================================================================================
California--96.7%
- -----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa $ 2,625 ABAG Finance Authority for Nonprofit Corporations, California,
COP (Children's Hospital Medical Center), 6% due 12/01/2029 (a) $ 3,070
---------------------------------------------------------------------------------------------------------
NR* NR* 3,750 Alameda, California, Public Financing Authority, Local Agency
Special Tax Revenue Bonds (Community Facility Number 1),
Series A, 7% due 8/01/2019 4,095
---------------------------------------------------------------------------------------------------------
AAA Aaa 3,600 Alameda Corridor Transportation Authority, California, Revenue
Bonds, Senior Lien, Series A, 5.25% due 10/01/2021 (g) 3,935
---------------------------------------------------------------------------------------------------------
AAA Aaa 4,000 Anaheim, California, Public Financing Authority, Tax Allocation
Revenue Refunding Bonds, RITES, 11.969% due 12/28/2018 (g)(h) 5,429
---------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Bakersfield, California, COP, Refunding (Convention Center
Expansion Project), 5.875% due 4/01/2022 (g) 2,251
---------------------------------------------------------------------------------------------------------
AAA Aaa 6,000 Bay Area Government Association, California, Revenue Refunding
Bonds (California Redevelopment Agency Pool), Series A, 6%
due 12/15/2024 (f) 6,334
---------------------------------------------------------------------------------------------------------
California Educational Facilities Authority, Revenue Refunding
Bonds (g):
NR* Aaa 9,000 RIB, Series 413, 10.78% due 10/01/2026 (h) 11,212
NR* Aaa 1,025 (University of the Pacific), 5.875% due 11/01/2020 1,194
---------------------------------------------------------------------------------------------------------
California HFA, Home Mortgage Revenue Bonds, VRDN (i):
A1+ VMIG1** 200 AMT, Series N, 0.92% due 8/01/2021 200
A1 VMIG1** 3,000 Series F, 0.92% due 2/01/2033 (a) 3,000
---------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 California Health Facilities Finance Authority, Insured Health
Facility Revenue Refunding Bonds (Catholic Healthcare West),
Series A, 6% due 7/01/2017 (g) 3,358
---------------------------------------------------------------------------------------------------------
California Health Facilities Finance Authority Revenue Bonds:
AAA NR* 5,000 (Kaiser Permanente), RIB, Series 26, 9.76%
due 6/01/2022 (f)(h) 6,195
AAA Aaa 2,000 (Scripps Memorial Hospital), Series A, 6.375%
due 10/01/2022 (g) 2,029
NR* Aa3 5,780 (Scripps Research Institute), Series A, 6.625%
due 7/01/2014 5,985
---------------------------------------------------------------------------------------------------------
A1+ VMIG1** 300 California Health Facilities Finance Authority, Revenue
Refunding Bonds (Adventist Hospital), VRDN, Series A, 0.90%
due 9/01/2028 (g)(i) 300
---------------------------------------------------------------------------------------------------------
California Health Facilities Financing Authority Revenue Bonds:
AAA NR* 10,000 DRIVERS, Series 181, 9.798% due 6/01/2022 (f)(h) 12,391
AA- A1 2,080 (Sutter Health), Series A, 6.25% due 8/15/2035 2,388
---------------------------------------------------------------------------------------------------------
BBB+ Baa2 14,000 California Pollution Control Financing Authority, Solid Waste
Disposal Revenue Refunding Bonds (Republic Services Inc.
Project), AMT, Series C, 5.25% due 6/01/2023 14,831
---------------------------------------------------------------------------------------------------------
California State Department of Transportation Revenue Bonds
(Federal Highway Grant Anticipation Bonds), Series A (g):
AAA Aaa 7,000 4% due 2/01/2010 7,596
AAA Aaa 2,000 4% due 2/01/2011 2,161
---------------------------------------------------------------------------------------------------------
California State Department of Water Resources, Power Supply
Revenue Bonds:
BBB+ A3 4,500 Series A, 5.75% due 5/01/2017 5,080
A1+ VMIG1** 3,100 VRDN, Series C-2, 0.94% due 5/01/2022 (a)(i) 3,100
---------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 California State Department of Water Resources, Water System
Revenue Refunding Bonds (Central Valley Project), Series Q,
5.375% due 12/01/2027 (g) 2,186
Portfolio Abbreviations
To simplify the listings of Merrill Lynch California Insured 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)
COP Certificates of Participation
DRIVERS Derivative Inverse Tax-Exempt Receipts
GO General Obligation Bonds
HFA Housing Finance Agency
RIB Residual Interest Bonds
RITES Residual Interest Tax-Exempt Securities
RITR Residual Interest Trust Receipts
VRDN Variable Rate Demand Notes
8 MERRILL LYNCH CALIFORNIA INSURED MUNICIPAL BOND FUND FEBRUARY 29, 2004
Schedule of Investments (continued) (in Thousands)
S&P Moody's Face
Ratings Ratings Amount Municipal Bonds Value
===================================================================================================================================
California (continued)
- -----------------------------------------------------------------------------------------------------------------------------------
California State Public Works Board, Lease Revenue Bonds,
Series A:
AAA NR* $10,000 (Department of Corrections), 7% due 11/01/2019 (a) $ 10,608
AAA Aaa 1,000 (Department of Corrections--Ten Administrative
Segregation Housing Units), 5% due 3/01/2027 1,044
AAA Aaa 2,800 (Department of Health Services), 5.625%
due 11/01/2019 (g) 3,089
AAA Baa2 3,000 (Various Community College Projects), 5.625%
due 3/01/2016 (a) 3,291
---------------------------------------------------------------------------------------------------------
California State Public Works Board, Lease Revenue Refunding
Bonds, Series B:
AAA Aaa 10,000 (Department of Corrections), 5.625% due 11/01/2019 (g) 11,188
AAA Aaa 1,500 (Various Community College Projects), 5.625%
due 3/01/2019 (a) 1,646
---------------------------------------------------------------------------------------------------------
AAA Aaa 1,580 California State University and Colleges, Housing System
Revenue Refunding Bonds, 5.80% due 11/01/2017 (d) 1,729
---------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 California State University and Colleges, Systemwide Revenue
Refunding Bonds, Series A, 5% due 11/01/2033 (a) 1,046
---------------------------------------------------------------------------------------------------------
AAA NR* 6,000 California Statewide Communities Development Authority, COP,
Refunding (Huntington Memorial Hospital), 5.80%
due 7/01/2026 (b) 6,631
---------------------------------------------------------------------------------------------------------
A- A3 2,475 California Statewide Communities Development Authority, Health
Facility Revenue Bonds (Memorial Health Services), Series A,
6% due 10/01/2023 2,690
---------------------------------------------------------------------------------------------------------
NR* NR* 1,200 Capistrano, California, Unified School District, Community
Facility District, Special Tax Bonds (No. 90-2 Talega), 6%
due 9/01/2032 1,236
---------------------------------------------------------------------------------------------------------
AAA Aaa 5,585 Contra Costa County, California, Public Financing Authority,
Lease Revenue Refunding Bonds (Various Capital Facilities),
Series A, 5.35% due 8/01/2024 (g) 6,066
---------------------------------------------------------------------------------------------------------
Corona, California, COP, Refunding (Corona Community):
AAA Aaa 1,915 8% due 3/01/2009 (e) 2,436
AAA Aaa 2,065 8% due 3/01/2010 (e) 2,700
AAA Aaa 2,230 8% due 3/01/2011 (e) 2,974
AAA Aaa 2,410 8% due 3/01/2012 (e) 3,264
AAA Aaa 2,605 8% due 3/01/2013 (e) 3,570
AAA Aaa 2,810 8% due 3/01/2014 (e) 3,890
AAA Aaa 3,035 8% due 3/01/2015 (c) 4,250
---------------------------------------------------------------------------------------------------------
AAA Aaa 1,250 Cucamonga, California, County Water District, COP, Refunding,
5.50% due 9/01/2024 (d) 1,382
---------------------------------------------------------------------------------------------------------
A1+ VMIG1** 2,790 Eastern Municipal Water District, California, Water and Sewer
Revenue Refunding Bonds, COP, VRDN, Series B, 0.92%
due 7/01/2020 (d)(i) 2,790
---------------------------------------------------------------------------------------------------------
NR* NR* 1,000 Elk Grove, California, East Franklin Community Number 1 Special
Tax, Series A, 6% due 8/01/2033 1,030
---------------------------------------------------------------------------------------------------------
NR* NR* 3,000 Etiwanda School District, California, Community Facilities
District Number 8, Special Tax, 6.25% due 9/01/2032 3,089
---------------------------------------------------------------------------------------------------------
BBB Baa2 2,900 Golden State Tobacco Securitization Corporation of California,
Tobacco Settlement Revenue Bonds, Series A-4, 7.80%
due 6/01/2042 3,127
---------------------------------------------------------------------------------------------------------
Grossmont, California, Unified High School District, COP (f):
AAA Aaa 1,220 5.65% due 9/01/2017 1,407
AAA Aaa 2,250 5.75% due 9/01/2026 2,556
---------------------------------------------------------------------------------------------------------
AAA Aaa 2,750 Hawthorne, California, School District, GO, Series A, 5.50%
due 5/01/2022 (d) 3,063
---------------------------------------------------------------------------------------------------------
AAA Aaa 5,080 Irvine, California, Unified School District, Special Tax
Refunding Bonds (Community Facilities District No. 86-1), 5.50%
due 11/01/2017 (a) 5,750
---------------------------------------------------------------------------------------------------------
NR* NR* 1,000 Long Beach, California, Special Tax Bonds (Community Facilities
District No. 3--Pine Ave.), 6.375% due 9/01/2023 1,063
---------------------------------------------------------------------------------------------------------
NR* Aaa 4,000 Los Angeles, California, COP (Sonnenblick Del Rio West Los
Angeles), 6.20% due 11/01/2031 (a) 4,753
---------------------------------------------------------------------------------------------------------
Los Angeles, California, Community College District, GO,
Series A (g):
AAA Aaa 12,265 5.50% due 8/01/2020 13,831
AAA Aaa 5,035 5.50% due 8/01/2021 5,652
---------------------------------------------------------------------------------------------------------
AAA Aaa 5,150 Los Angeles, California, Community Redevelopment Agency, Tax
Allocation Refunding Bonds (Bunker Hill), Series H, 6.50%
due 12/01/2016 (f) 5,277
MERRILL LYNCH CALIFORNIA INSURED MUNICIPAL BOND FUND FEBRUARY 29, 2004 9
[LOGO] Merril Lynch Investment Managers
Schedule of Investments (continued) (in Thousands)
S&P Moody's Face
Ratings Ratings Amount Municipal Bonds Value
===================================================================================================================================
California (continued)
- -----------------------------------------------------------------------------------------------------------------------------------
AAA NR* $ 7,000 Los Angeles, California, Convention and Exhibition Center
Authority, COP, 9% due 12/01/2020 (a) $ 7,958
---------------------------------------------------------------------------------------------------------
Los Angeles, California, Harbor Department Revenue Bonds, AMT:
AAA Aaa 7,000 RITR, Series RI-7, 11.115% due 11/01/2026 (g)(h) 8,555
AAA Aaa 1,750 Series B, 5.375% due 11/01/2019 (g) 1,890
AA Aa2 1,000 Series B, 5.375% due 11/01/2023 1,065
---------------------------------------------------------------------------------------------------------
AAA NR* 5,000 Los Angeles, California, Harbor Department Revenue Refunding
Bonds, 7.60% due 10/01/2018 (c)(g) 6,471
---------------------------------------------------------------------------------------------------------
Los Angeles, California, Water and Power Revenue Refunding
Bonds (Power System):
AAA Aaa 5,400 Series A-A-1, 5.25% due 7/01/2020 (f) 5,944
AAA Aaa 4,000 Series A-A-2, 5.375% due 7/01/2021 (g) 4,433
---------------------------------------------------------------------------------------------------------
AAA Aaa 6,000 Los Angeles County, California, Metropolitan Transportation
Authority, Sales Tax Revenue Refunding Bonds, Proposition A,
First Tier Senior Series A, 2.125% due 7/01/2005 (f) 6,087
---------------------------------------------------------------------------------------------------------
A1+ VMIG1** 3,000 M-S-R Public Power Agency, California, Revenue Refunding Bonds
(San Juan Project), VRDN, Sub-Lien, Series D, 0.93%
due 7/01/2018 (g)(i) 3,000
---------------------------------------------------------------------------------------------------------
AAA Aaa 2,780 Morgan Hill, California, Unified School District, GO, 5.25%
due 8/01/2019 (d) 3,082
---------------------------------------------------------------------------------------------------------
AAA Aaa 2,255 Moulton-Niguel, California, Water District, GO, Refunding, 2%
due 9/01/2006 (a) 2,295
---------------------------------------------------------------------------------------------------------
AAA Aaa 1,025 Palm Desert, California, Financing Authority, Tax Allocation
Revenue Refunding Bonds (Project Area Number 1), 5.45%
due 4/01/2018 (g) 1,143
---------------------------------------------------------------------------------------------------------
NR* Aaa 1,000 Petaluma, California, Community Development Commission Tax
Allocation Bonds (Petaluma Community Development Project),
Series A, 5.75% due 5/01/2030 (g) 1,141
---------------------------------------------------------------------------------------------------------
NR* NR* 7,835 Pleasanton, California, Joint Powers Financing Authority,
Revenue Refunding Reassessment Bonds, Sub-Series B, 6.75%
due 9/02/2017 8,006
---------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Port Oakland, California, Port Revenue Refunding Bonds,
Series I, 5.60% due 11/01/2019 (g) 1,135
---------------------------------------------------------------------------------------------------------
AAAr Aaa 8,295 Port Oakland, California, RITR, AMT, Class R, Series 5, 10.277%
due 11/01/2012 (d)(h) 10,544
---------------------------------------------------------------------------------------------------------
AAA Aaa 12,710 Port Oakland, California, Revenue Refunding Bonds, AMT,
Series L, 5.375% due 11/01/2027 (d) 13,520
---------------------------------------------------------------------------------------------------------
AAA Aaa 1,750 Riverside County, California, Asset Leasing Corporation,
Leasehold Revenue Refunding Bonds (Riverside County Hospital
Project), Series B, 5.70% due 6/01/2016 (g) 2,023
---------------------------------------------------------------------------------------------------------
AAA Aaa 3,865 Sacramento, California, City Financing Authority, Capital
Improvement Revenue Bonds (Solid Waste and Redevelopment
Project), 5.75% due 12/01/2022 (a) 4,430
---------------------------------------------------------------------------------------------------------
AAA Aaa 8,000 Sacramento, California, Municipal Utility District, Electric
Revenue Refunding Bonds, Series L, 5.125% due 7/01/2022 (g) 8,599
---------------------------------------------------------------------------------------------------------
AAA Aaa 10,000 Sacramento County, California, Airport System Revenue Refunding
Bonds, Sub-Series B, 5% due 7/01/2026 (d) 10,361
---------------------------------------------------------------------------------------------------------
AAA Aaa 3,500 Saddleback Valley, California, Unified School District, Public
Financing Authority, Special Tax Revenue Refunding Bonds,
Series A, 5.65% due 9/01/2017 (f) 3,793
---------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 San Bernardino, California, Joint Powers Financing Authority,
Lease Revenue Bonds (Department of Transportation Lease),
Series A, 5.50% due 12/01/2020 (g) 2,171
---------------------------------------------------------------------------------------------------------
AAA Aaa 4,000 San Bernardino, California, Joint Powers Financing Authority,
Tax Allocation Revenue Refunding Bonds, Series A, 5.75%
due 10/01/2015 (f) 4,358
---------------------------------------------------------------------------------------------------------
AAA NR* 4,000 San Bernardino County, California, COP, Refunding (Medical
Center Financing Project), 5.50% due 8/01/2019 (g) 4,149
---------------------------------------------------------------------------------------------------------
AAA Aaa 10,000 San Diego, California, Certificates of Undivided Interest,
Water Utility Fund, Net System Revenue Bonds, 5%
due 8/01/2021 (d) 10,674
---------------------------------------------------------------------------------------------------------
San Diego, California, Public Facilities Financing Authority,
Sewer Revenue Bonds (d):
AAA Aaa 4,450 Series A, 5.25% due 5/15/2027 4,804
AAA Aaa 6,175 Series B, 5.25% due 5/15/2027 6,666
---------------------------------------------------------------------------------------------------------
San Francisco, California, City and County Airports Commission,
International Airport Revenue Bonds, AMT, Second Series:
AAA Aaa 6,500 Issue 6, 6.60% due 5/01/2020 (a) 6,689
AAA Aaa 5,500 Issue 11, 6.25% due 5/01/2005 (d)(e) 5,879
10 MERRILL LYNCH CALIFORNIA INSURED MUNICIPAL BOND FUND FEBRUARY 29, 2004
Schedule of Investments (continued) (in Thousands)
S&P Moody's Face
Ratings Ratings Amount Municipal Bonds Value
===================================================================================================================================
California (concluded)
- -----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa $ 1,250 San Francisco, California, City and County Airports Commission,
International Airport, Special Facilities Lease Revenue Bonds
(SFO Fuel Company LLC), AMT, Series A, 6.10% due 1/01/2020 (f) $ 1,410
---------------------------------------------------------------------------------------------------------
AAA Aaa 6,730 San Francisco, California, City and County Airports,
International Airport Revenue Refunding Bonds, Second Series ,
Issue 29-B, 3% due 5/01/2007 (d) 7,028
---------------------------------------------------------------------------------------------------------
AAA Aaa 4,000 San Francisco, California, State Building Authority, Lease
Revenue Bonds (San Francisco Civic Center Complex), Series A,
5.25% due 12/01/2021 (a) 4,374
---------------------------------------------------------------------------------------------------------
San Joaquin Hills, California, Transportation Corridor Agency,
Toll Road Revenue Refunding Bonds, Series A (g):
AAA Aaa 5,790 5.375% due 1/15/2029 6,271
AAA Aaa 3,410 5.25% due 1/15/2030 3,662
---------------------------------------------------------------------------------------------------------
AAA Aaa 5,000 San Jose, California, Redevelopment Agency Tax Allocation Bonds
(Merged Area Redevelopment Project), 5% due 8/01/2026 (a) 5,197
---------------------------------------------------------------------------------------------------------
AAA Aaa 2,735 San Jose, California, Unified School District, Santa Clara
County, GO, Series A, 4% due 8/01/2005 (f) 2,849
---------------------------------------------------------------------------------------------------------
AAA Aaa 1,420 San Jose--Evergreen, California, Community College District,
GO, Series B, 5.50% due 9/01/2021 (d) 1,598
---------------------------------------------------------------------------------------------------------
San Juan, California, Unified School District, GO:
AAA Aaa 3,740 5.625% due 8/01/2017 (d) 4,329
AAA Aaa 3,000 5.70% due 8/01/2019 (f) 3,474
AAA Aaa 4,345 5.625% due 8/01/2020 (d) 4,963
---------------------------------------------------------------------------------------------------------
AAA Aaa 2,240 San Mateo County, California, Joint Powers Authority, Lease
Revenue Refunding Bonds (Capital Projects), Series A, 5.125%
due 7/15/2028 (f) 2,332
---------------------------------------------------------------------------------------------------------
AAA Aaa 10,000 Santa Clara County, California, Financing Authority, Lease
Revenue Bonds (VMC Facility Replacement Project), Series A,
6.75% due 11/15/2004 (a)(e) 10,613
---------------------------------------------------------------------------------------------------------
NR* NR* 1,650 Santa Margarita, California, Water Disposal Special Tax
Refunding Bonds (Community Facilities District Number 99-1),
6.20% due 9/01/2020 1,727
---------------------------------------------------------------------------------------------------------
AAA Aaa 4,000 Santa Monica, California, Redevelopment Agency, Tax Allocation
Bonds (Earthquake Recovery Redevelopment Project), 6%
due 7/01/2029 (a) 4,681
---------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Santa Rosa, California, High School District, GO, 5.70%
due 5/01/2021 (f) 1,139
---------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Southwestern Community College, District of California, GO,
5.625% due 8/01/2018 (a) 1,154
---------------------------------------------------------------------------------------------------------
AAA Aaa 5,920 University of California Revenue Bonds (Multiple Purpose
Projects), Series Q, 3% due 9/01/2005 (f) 6,093
---------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Vacaville, California, Unified School District, GO (Election
of 2001), 5.25% due 8/01/2028 (f) 1,080
---------------------------------------------------------------------------------------------------------
AAA Aaa 4,215 Vista, California, Unified School District, GO, Series A,
5.25% due 8/01/2025 (f) 4,542
---------------------------------------------------------------------------------------------------------
AAA Aaa 1,475 West Basin, California, Municipal Water District Revenue
Refunding Bonds, COP, Series A, 5% due 8/01/2030 1,552
===================================================================================================================================
Puerto Rico--3.7%
- -----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Puerto Rico Commonwealth Highway and Transportation Authority,
Transportation Revenue Bonds, Series B, 5.75% due 7/01/2018 (g) 2,345
---------------------------------------------------------------------------------------------------------
AAA Aaa 6,790 Puerto Rico Commonwealth, Public Improvement, GO, 5.75%
due 7/01/2018 (g) 8,108
---------------------------------------------------------------------------------------------------------
AAA Aaa 6,610 Puerto Rico Commonwealth, Public Improvement, GO, Refunding,
5.70% due 7/01/2020 (g) 7,684
---------------------------------------------------------------------------------------------------------
Total Municipal Bonds (Cost--$448,561)--100.4% 495,508
=========================================================================================================
MERRILL LYNCH CALIFORNIA INSURED MUNICIPAL BOND FUND FEBRUARY 29, 2004 11
[LOGO] Merril Lynch Investment Managers
Schedule of Investments (concluded) (in Thousands)
Face
Amount Mutual Funds Value
=========================================================================================================
$ 69 BlackRock California Insured Municipal 2008 Term Trust, Inc. $ 1,172
---------------------------------------------------------------------------------------------------------
Total Mutual Funds (Cost--$1,156)--0.2% 1,172
=========================================================================================================
Shares
Held Short-Term Securities
=========================================================================================================
6 CMA California Municipal Money Fund (j) 6
---------------------------------------------------------------------------------------------------------
Total Short-Term Securities (Cost--$6)--0.0% 6
=========================================================================================================
Total Investments (Cost--$449,723)--100.6% 496,686
Liabilities in Excess of Other Assets--(0.6%) (3,166)
--------
Net Assets--100.0% $493,520
========
(a) AMBAC Insured.
(b) Connie Lee Insured.
(c) Escrowed to maturity.
(d) FGIC Insured.
(e) Prerefunded.
(f) FSA Insured.
(g) MBIA 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 February 29, 2004.
(i) The interest rate is subject to change periodically based upon prevailing
market rates. The interest rate shown is the rate in effect at February
29, 2004.
(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
--------------------------------------------------------------------------
CMA California Municipal Money Fund -- --+
--------------------------------------------------------------------------
+ Amount is less than one thousand.
* Not Rated.
** Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
12 MERRILL LYNCH CALIFORNIA INSURED MUNICIPAL BOND FUND FEBRUARY 29, 2004
Statement of Assets and Liabilities
As of February 29, 2004
=============================================================================================================
Assets
- -------------------------------------------------------------------------------------------------------------
Investments, at value (identified cost--$449,722,750) . $496,685,509
Cash .................................................. 76,655
Receivables:
Interest ........................................... $ 7,209,539
Beneficial interest sold ........................... 500,633
Dividends .......................................... 4,410 7,714,582
-----------
Prepaid registration fees ............................. 36,349
------------
Total assets .......................................... 504,513,095
------------
=============================================================================================================
Liabilities
- -------------------------------------------------------------------------------------------------------------
Payables:
Securities purchased ............................... 9,774,660
Beneficial interest redeemed ....................... 420,877
Dividends to shareholders .......................... 407,430
Investment adviser ................................. 207,872
Distributor ........................................ 97,606
Other affiliates ................................... 47,388 10,955,833
-----------
Accrued expenses ...................................... 37,441
------------
Total liabilities ..................................... 10,993,274
------------
=============================================================================================================
Net Assets
- -------------------------------------------------------------------------------------------------------------
Net assets ............................................ $493,519,821
============
=============================================================================================================
Net Assets Consist of
- -------------------------------------------------------------------------------------------------------------
Class A Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized ................ $ 2,204,666
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized ................ 1,161,010
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized ................ 438,902
Class I Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized ................ 309,919
Paid-in capital in excess of par ...................... 453,575,136
Undistributed investment income--net .................. $ 781,207
Accumulated realized capital losses on investments--net (11,913,778)
Unrealized appreciation on investments--net ........... 46,962,759
-----------
Total accumulated earnings--net ....................... 35,830,188
------------
Net Assets ............................................ $493,519,821
============
=============================================================================================================
Net Asset Value
- -------------------------------------------------------------------------------------------------------------
Class A--Based on net assets of $264,421,373 and
22,046,662 shares of beneficial interest outstanding . $ 11.99
============
Class B--Based on net assets of $139,284,606 and
11,610,095 shares of beneficial interest outstanding . $ 12.00
============
Class C--Based on net assets of $52,644,808 and
4,389,018 shares of beneficial interest outstanding .. $ 11.99
============
Class I--Based on net assets of $37,169,034 and
3,099,187 shares of beneficial interest outstanding .. $ 11.99
============
See Notes to Financial Statements
MERRILL LYNCH CALIFORNIA INSURED MUNICIPAL BOND FUND FEBRUARY 29, 2004 13
[LOGO] Merril Lynch Investment Managers
Statement of Operations
For the Six Months Ended February 29, 2004
==============================================================================================================
Investment Income
- --------------------------------------------------------------------------------------------------------------
Interest ............................................. $ 13,170,700
Dividends (including $45 from affiliates) ............ 28,789
-------------
Total income ......................................... 13,199,489
-------------
==============================================================================================================
Expenses
- --------------------------------------------------------------------------------------------------------------
Investment advisory fees ............................. $ 1,337,701
Account maintenance and distribution fees--Class B ... 357,598
Account maintenance and distribution fees--Class C ... 152,190
Account maintenance fees--Class A .................... 127,129
Accounting services .................................. 93,594
Transfer agent fees--Class A ......................... 45,716
Professional fees .................................... 32,497
Printing and shareholder reports ..................... 30,752
Transfer agent fees--Class B ......................... 30,153
Registration fees .................................... 25,558
Custodian fees ....................................... 12,663
Trustees' fees and expenses .......................... 11,090
Transfer agent fees--Class C ......................... 10,578
Pricing fees ......................................... 7,688
Transfer agent fees--Class I ......................... 6,912
Reorganization expenses .............................. 788
Other ................................................ 16,473
-----------
Total expenses before reimbursement .................. 2,299,080
Reimbursement of expenses ............................ (43)
-----------
Total expenses after reimbursement ................... 2,299,037
-------------
Investment income--net ............................... 10,900,452
-------------
==============================================================================================================
Realized & Unrealized Gain on Investments--Net
- --------------------------------------------------------------------------------------------------------------
Realized gain on investments--net .................... 978,194
Change in unrealized appreciation on investments--net 18,009,248
-------------
Total realized and unrealized gain on investments--net 18,987,442
-------------
Net Increase in Net Assets Resulting from Operations . $ 29,887,894
=============
See Notes to Financial Statements.
14 MERRILL LYNCH CALIFORNIA INSURED MUNICIPAL BOND FUND FEBRUARY 29, 2004
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
February 29, August 31,
Increase (Decrease) in Net Assets: 2004 2003
================================================================================================================
Operations
- ----------------------------------------------------------------------------------------------------------------
Investment income--net ............................... $ 10,900,452 $ 23,195,829
Realized gain on investments--net .................... 978,194 1,302,358
Change in unrealized appreciation on investments--net 18,009,248 (13,513,864)
-------------------------------
Net increase in net assets resulting from operations . 29,887,894 10,984,323
-------------------------------
================================================================================================================
Dividends to Shareholders
- ----------------------------------------------------------------------------------------------------------------
Investment income--net:
Class A ........................................... (5,882,851) (11,484,980)
Class B ........................................... (3,022,957) (7,656,305)
Class C ........................................... (1,045,520) (1,923,362)
Class I ........................................... (908,716) (2,037,876)
-------------------------------
Net decrease in net assets resulting from dividends to
shareholders ........................................ (10,860,044) (23,102,523)
-------------------------------
================================================================================================================
Beneficial Interest Transactions
- ----------------------------------------------------------------------------------------------------------------
Net decrease in net assets derived from beneficial
interest transactions ............................... (14,005,561) (10,154,091)
-------------------------------
================================================================================================================
Net Assets
- ----------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets .............. 5,022,289 (22,272,291)
Beginning of period .................................. 488,497,532 510,769,823
-------------------------------
End of period* ....................................... $ 493,519,821 $ 488,497,532
===============================
* Undistributed investment income--net ............ $ 781,207 $ 740,799
===============================
See Notes to Financial Statements.
MERRILL LYNCH CALIFORNIA INSURED MUNICIPAL BOND FUND FEBRUARY 29, 2004 15
[LOGO] Merril Lynch Investment Managers
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 August 31,++
February 29, -----------------------------------------------
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001 2000
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ...... $ 11.54 $ 11.82 $ 11.77 $ 11.26 $ 11.10
-------------------------------------------------------------
Investment income--net .................... .27+ .56+ .57+ .58 .57
Realized and unrealized gain (loss)
on investments--net ...................... .45 (.28) .05 .51 .16
-------------------------------------------------------------
Total from investment operations .......... .72 .28 .62 1.09 .73
-------------------------------------------------------------
Less dividends from investment
income--net .............................. (.27) (.56) (.57) (.58) (.57)
-------------------------------------------------------------
Net asset value, end of period ............ $ 11.99 $ 11.54 $ 11.82 $ 11.77 $ 11.26
=============================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ........ 6.29%@ 2.35% 5.46% 9.93% 6.91%
=============================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses, net of waiver and reimbursement
and excluding reorganization expenses .... .78%* .78% .81% .79% .77%
=============================================================
Expenses, excluding reorganization expenses .78%* .78% .81% .79% .77%
=============================================================
Expenses .................................. .78%* .78% .84% .84% .77%
=============================================================
Investment income--net .................... 4.63%* 4.74% 4.93% 4.96% 5.25%
=============================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) .. $264,421 $247,184 $236,181 $219,442 $193,497
=============================================================
Portfolio turnover ........................ 11.15% 29.70% 37.35% 55.75% 84.36%
=============================================================
* 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.
16 MERRILL LYNCH CALIFORNIA INSURED MUNICIPAL BOND FUND FEBRUARY 29, 2004
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 August 31,
February 29, -----------------------------------------------
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001 2000
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ...... $ 11.54 $ 11.82 $ 11.77 $ 11.26 $ 11.10
-------------------------------------------------------------
Investment income--net .................... .25+ .51+ .52+ .53 .53
Realized and unrealized gain (loss)
on investments--net ...................... .46 (.28) .05 .51 .16
-------------------------------------------------------------
Total from investment operations .......... .71 .23 .57 1.04 .69
-------------------------------------------------------------
Less dividends from investment
income--net .............................. (.25) (.51) (.52) (.53) (.53)
-------------------------------------------------------------
Net asset value, end of period ............ $ 12.00 $ 11.54 $ 11.82 $ 11.77 $ 11.26
=============================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ........ 6.17%@ 1.93% 5.04% 9.48% 6.48%
=============================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses, net of waiver and reimbursement
and excluding reorganization expenses .... 1.18%* 1.19% 1.22% 1.20% 1.18%
=============================================================
Expenses, excluding reorganization expenses 1.18%* 1.19% 1.22% 1.20% 1.18%
=============================================================
Expenses .................................. 1.18%* 1.19% 1.25% 1.25% 1.18%
=============================================================
Investment income--net .................... 4.23%* 4.34% 4.52% 4.55% 4.85%
=============================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) .. $139,285 $151,276 $194,733 $221,516 $200,409
=============================================================
Portfolio turnover ........................ 11.15% 29.70% 37.35% 55.75% 84.36%
=============================================================
* 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 CALIFORNIA INSURED MUNICIPAL BOND FUND FEBRUARY 29, 2004 17
[LOGO] Merril Lynch Investment Managers
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 August 31,
February 29, -----------------------------------------------
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001 2000
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ...... $ 11.54 $ 11.82 $ 11.77 $ 11.26 $ 11.10
-------------------------------------------------------------
Investment income--net .................... .24+ .50+ .51+ .52 .52
Realized and unrealized gain (loss)
on investments--net ...................... .45 (.28) .05 .51 .16
-------------------------------------------------------------
Total from investment operations .......... .69 .22 .56 1.03 .68
-------------------------------------------------------------
Less dividends from investment
income--net .............................. (.24) (.50) (.51) (.52) (.52)
-------------------------------------------------------------
Net asset value, end of period ............ $ 11.99 $ 11.54 $ 11.82 $ 11.77 $ 11.26
=============================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ........ 6.03%@ 1.83% 4.94% 9.37% 6.37%
=============================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses, net of waiver and reimbursement
and excluding reorganization expenses .... 1.28%* 1.29% 1.32% 1.30% 1.28%
=============================================================
Expenses, excluding reorganization expenses 1.28%* 1.29% 1.32% 1.30% 1.28%
=============================================================
Expenses .................................. 1.28%* 1.29% 1.35% 1.35% 1.28%
=============================================================
Investment income--net .................... 4.13%* 4.24% 4.42% 4.45% 4.75%
=============================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) .. $ 52,645 $ 50,197 $ 36,983 $ 16,357 $ 10,262
=============================================================
Portfolio turnover ........................ 11.15% 29.70% 37.35% 55.75% 84.36%
=============================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
@ Aggregate total investment return.
See Notes to Financial Statements.
18 MERRILL LYNCH CALIFORNIA INSURED MUNICIPAL BOND FUND FEBRUARY 29, 2004
Financial Highlights (concluded)
Class I
--------------------------------------------------------------
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 August 31,++
February 29, -----------------------------------------------
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001 2000
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ...... $ 11.54 $ 11.81 $ 11.77 $ 11.26 $ 11.10
-------------------------------------------------------------
Investment income--net .................... .28+ .57+ .58+ .59 .58
Realized and unrealized gain (loss)
on investments--net ...................... .45 (.27) .04 .51 .16
-------------------------------------------------------------
Total from investment operations .......... .73 .30 .62 1.10 .74
-------------------------------------------------------------
Less dividends from investment
income--net .............................. (.28) (.57) (.58) (.59) (.58)
-------------------------------------------------------------
Net asset value, end of period ............ $ 11.99 $ 11.54 $ 11.81 $ 11.77 $ 11.26
=============================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ........ 6.34%@ 2.54% 5.48% 10.04% 7.02%
=============================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses, net of waiver and reimbursement
and excluding reorganization expenses .... .68%* .68% .71% .69% .67%
=============================================================
Expenses, excluding reorganization expenses .68%* .68% .71% .69% .67%
=============================================================
Expenses .................................. .68%* .68% .74% .75% .67%
=============================================================
Investment income--net .................... 4.74%* 4.84% 5.03% 5.06% 5.35%
=============================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) .. $ 37,169 $ 39,841 $ 42,873 $ 40,877 $ 31,868
=============================================================
Portfolio turnover ........................ 11.15% 29.70% 37.35% 55.75% 84.36%
=============================================================
* 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.
MERRILL LYNCH CALIFORNIA INSURED MUNICIPAL BOND FUND FEBRUARY 29, 2004 19
[LOGO] Merril Lynch Investment Managers
Notes to Financial Statements
1. Significant Accounting Policies:
Merrill Lynch California Insured Municipal Bond Fund (the "Fund") is part of
Merrill Lynch California Municipal Series Trust (the "Trust"). The Fund is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. The Fund's financial
statements are prepared in conformity with accounting principles generally
accepted in the United States of America, which may require the use of
management accruals and estimates. 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.
Shares of Class I and Class A 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 relative 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 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 Fund, which may utilize a matrix system for
valuations. The procedures of the pricing service and its valuations are
reviewed by the officers of the 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.
o Forward interest rate swaps -- The Fund may enter into forward interest
rate swaps. In a forward interest rate swap, the Fund and the counterparty
agree to make periodic net payments on a specified notional contract
amount, commencing on a specified future effective date, unless terminated
earlier. When the agreement is closed, the Fund records a realized gain or
loss in an amount equal to the value of the agreement.
20 MERRILL LYNCH CALIFORNIA INSURED MUNICIPAL BOND FUND FEBRUARY 29, 2004
Notes to Financial Statements (continued)
(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 Fund amortizes all
premiums and discounts on debt securities.
(e) Prepaid registration fees -- Prepaid registration fees are charged to
expense as the related shares are issued.
(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.
(g) 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.
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 February 29, 2004, FAM reimbursed the Fund in
the amount of $43.
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 C shareholders.
For the six months ended February 29, 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 ............................ $ 5,448 $40,779
Class I ............................ $ 430 $ 3,761
- --------------------------------------------------------------------------------
For the six months ended February 29, 2004, MLPF&S received contingent deferred
sales charges of $69,127 and $28,798 relating to transactions in Class B and
Class C Shares, respectively.
In addition, MLPF&S received $1,917 in commissions on the execution of portfolio
security transactions for the Fund for the six months ended February 29, 2004.
MERRILL LYNCH CALIFORNIA INSURED MUNICIPAL BOND FUND FEBRUARY 29, 2004 21
[LOGO] Merril Lynch Investment Managers
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 February 29, 2004, the Fund reimbursed FAM $4,997 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 February 29, 2004 were $52,981,780 and $65,522,987, respectively.
Net realized gains for the six months ended February 29, 2004 and net unrealized
gains as of February 29, 2004 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
- --------------------------------------------------------------------------------
Long-term investments ................ $ 978,194 $46,962,759
--------------------------------
Total ................................ $ 978,194 $46,962,759
================================
As of February 29, 2004, net unrealized appreciation for Federal income tax
purposes aggregated $46,442,730, of which $46,454,392 related to appreciated
securities and $11,662 related to depreciated securities. The aggregate cost of
investments at February 29, 2004 for Federal income tax purposes was
$450,242,779.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest transactions was
$14,005,561 and $10,154,091 for the six months ended February 29, 2004 and for
the year ended August 31, 2003, respectively.
Transactions in shares of beneficial interest for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended February 29, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 891,018 $ 10,542,528
Automatic conversion of shares ........... 897,716 10,537,372
Shares issued to shareholders in
reinvestment of dividends .............. 234,607 2,777,278
-----------------------------
Total issued ............................. 2,023,341 23,857,178
Shares redeemed .......................... (1,401,384) (16,526,661)
-----------------------------
Net increase ............................. 621,957 $ 7,330,517
=============================
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended August 31, 2003 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 1,254,766 $ 14,903,047
Automatic conversion of shares ........... 2,593,787 30,828,314
Shares issued to shareholders in
reinvestment of dividends .............. 427,503 5,048,446
-----------------------------
Total issued ............................. 4,276,056 50,779,807
Shares redeemed .......................... (2,841,291) (33,533,908)
-----------------------------
Net increase ............................. 1,434,765 $ 17,245,899
=============================
- --------------------------------------------------------------------------------
Class B Shares for the Six Months Dollar
Ended February 29, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 309,239 $ 3,641,709
Shares issued to shareholders in
reinvestment of dividends .............. 110,601 1,308,509
-----------------------------
Total issued ............................. 419,840 4,950,218
Automatic conversion of shares ........... (897,360) (10,537,372)
Shares redeemed .......................... (1,020,784) (12,032,017)
-----------------------------
Net decrease ............................. (1,498,304) $(17,619,171)
=============================
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended August 31, 2003 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 1,516,169 $ 17,984,139
Shares issued to shareholders in
reinvestment of dividends .............. 276,563 3,267,758
-----------------------------
Total issued ............................. 1,792,732 21,251,897
Automatic conversion of shares ........... (2,592,997) (30,828,314)
Shares redeemed .......................... (2,569,199) (30,339,314)
-----------------------------
Net decrease ............................. (3,369,464) $(39,915,731)
=============================
22 MERRILL LYNCH CALIFORNIA INSURED MUNICIPAL BOND FUND FEBRUARY 29, 2004
Notes to Financial Statements (concluded)
- --------------------------------------------------------------------------------
Class C Shares for the Six Months Dollar
Ended February 29, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 538,056 $ 6,347,978
Shares issued to shareholders in
reinvestment of dividends .............. 52,099 616,608
-----------------------------
Total issued ............................. 590,155 6,964,586
Shares redeemed .......................... (551,614) (6,491,948)
-----------------------------
Net increase ............................. 38,541 $ 472,638
=============================
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended August 31, 2003 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 2,017,941 $ 23,936,180
Shares issued to shareholders in
reinvestment of dividends .............. 88,763 1,048,286
-----------------------------
Total issued ............................. 2,106,704 24,984,466
Shares redeemed .......................... (886,237) (10,443,796)
-----------------------------
Net increase ............................. 1,220,467 $ 14,540,670
=============================
- --------------------------------------------------------------------------------
Class I Shares for the Six Months Dollar
Ended February 29, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 211,598 $ 2,501,183
Shares issued to shareholders in
reinvestment of dividends .............. 37,425 442,945
-----------------------------
Total issued ............................. 249,023 2,944,128
Shares redeemed .......................... (603,282) (7,133,673)
-----------------------------
Net decrease ............................. (354,259) $ (4,189,545)
=============================
- --------------------------------------------------------------------------------
Class I Shares for the Year Dollar
Ended August 31, 2003 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 564,411 $ 6,700,020
Shares issued to shareholders in
reinvestment of dividends .............. 73,005 861,983
-----------------------------
Total issued ............................. 637,416 7,562,003
Shares redeemed .......................... (812,952) (9,586,932)
-----------------------------
Net decrease ............................. (175,536) $ (2,024,929)
=============================
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 February 29, 2004.
6. Capital Loss Carryforward:
On August 31, 2003, the Fund had a net capital loss carryforward of $11,521,108,
of which $898,962 expires in 2008 and $10,622,146 expires in 2009. This amount
will be available to offset like amounts of any future taxable gains.
MERRILL LYNCH CALIFORNIA INSURED MUNICIPAL BOND FUND FEBRUARY 29, 2004 23
[LOGO] Merril 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 California Insured Municipal Bond Fund of
Merrill Lynch California Municipal Series Trust
Box 9011
Princeton, NJ 08543-9011
#10329 -- 2/04
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 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable
Item 8 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
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 changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR
270.30a-3(d)) that occurred during the last fiscal half-year of the
period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
Item 11 - Exhibits attached hereto
11(a)(1) - Code of Ethics - Not Applicable to this semi-annual report
11(a)(2) - Certifications - Attached hereto
11(a)(3) - Not Applicable
11(b) - Certifications - Attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Merrill Lynch California Insured Municipal Bond Fund of Merrill Lynch
California Municipal Series Trust
By: /s/ Terry K. Glenn
------------------------------
Terry K. Glenn,
President of
Merrill Lynch California Insured Municipal Bond Fund of Merrill
Lynch California Municipal Series Trust
Date: April 16, 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 California Insured Municipal Bond Fund of Merrill
Lynch California Municipal Series Trust
Date: April 16, 2004
By: /s/ Donald C. Burke
------------------------------
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch California Insured Municipal Bond Fund of Merrill
Lynch California Municipal Series Trust
Date: April 16, 2004