UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-4375
Name of Fund: Merrill Lynch Florida Municipal Bond Fund of Merrill Lynch
Multi-State Municipal Series Trust
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President, Merrill Lynch
Florida Municipal Bond Fund of Merrill Lynch Multi-State Municipal
Series Trust, 800 Scudders Mill Road, Plainsboro, NJ 08536. Mailing
address: P.O. Box 9011, Princeton, NJ 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 07/31/04
Date of reporting period: 08/01/03 - 07/31/04
Item 1 - Report to Stockholders
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
Merrill Lynch
Florida Municipal
Bond Fund
Annual Report
July 31, 2004
[LOGO] Merrill Lynch Investment Managers
Merrill Lynch Florida Municipal Bond Fund
Distribution by Market Sector
Percent of Total
As of July 31, 2004 Market Value
- --------------------------------------------------------------------------------
Other Revenue Bonds ....................................... 83.6%
General Obligation Bonds .................................. 8.8
Prerefunded Bonds* ........................................ 5.1
Mutual Funds .............................................. 2.5
-----
Total ..................................................... 100.0%
=====
* Backed by an escrow fund.
Important Tax Information
All of the net investment income distributions paid monthly by Merrill Lynch
Florida Municipal Bond Fund during its taxable year ended July 31, 2004 qualify
as tax-exempt interest dividends for federal income tax purposes.
Please retain this information for your records.
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Forms N-Q are available on the SEC's Web site at
http://www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
2 MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JULY 31, 2004
A Letter From the President
Dear Shareholder
In recent months, the Federal Reserve Board (the Fed) has taken center stage as
it shifts away from its long-accommodative monetary stance. In a
much-anticipated move, the Fed raised the Federal Funds rate 25 basis points
(.25%) on June 30, representing the first interest rate increase in four years.
Shortly after period-end, the Fed announced an additional 25 basis point rate
hike, bringing the target short-term interest rate to 1.50% -- still low by
historical standards. The Fed has been very deliberate in telegraphing its
intention to take a "measured" approach to the interest rate increases in order
to avoid upsetting the economy or the financial markets. Still, the Fed has
stated that it may move more aggressively if inflation and economic growth
accelerate more than anticipated. In addition to the Fed policy change, the
financial markets recently have had to grapple with a tense geopolitical
environment, higher oil prices and the worry and anticipation that accompanies a
presidential election.
While inflation has moved up on a cyclical basis, this is an indication that the
Fed has been successful in avoiding deflation -- just as it set out to do a year
ago. The challenge now is to normalize interest rates in order to keep inflation
within acceptable limits. The futures curve currently projects further increases
in short-term interest rates before year-end.
The transition to higher rates can cause concern among equity and fixed income
investors alike. For bond investors, rising rates means the value of older
issues declines because they bear the former lower rates. In addition,
increasing inflation erodes the purchasing power of fixed income securities. But
because municipal bonds offer the advantage of tax-exempt income, they continue
to be an attractive alternative for many fixed income investors. For the
six-month and 12-month periods ended July 31, 2004, municipal bonds posted
returns of +.06% and +5.79%, respectively, as measured by the Lehman Brothers
Municipal Bond Index.
As always, our investment professionals are closely monitoring the markets, the
economy and the overall environment in an effort to make well-informed decisions
for the portfolios they manage. Our goal is to provide shareholders with
competitive returns, while always keeping one eye on managing the unavoidable
risk inherent in investing.
We thank you for trusting Merrill Lynch Investment Managers with your investment
assets, and we look forward to serving you in the months and years ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Trustee
MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JULY 31, 2004 3
[LOGO] Merrill Lynch Investment Managers
A Discussion With Your Fund's Portfolio Manager
We continued to focus on increasing the Fund's yield and seeking to
protect net asset value, and the Fund ultimately outperformed its benchmark and
its peer group for the fiscal year.
Discuss the recent market environment relative to municipal bonds.
Over the past 12 months, long-term U.S. Treasury bond yields, while displaying
considerable month-to-month volatility, were little changed. As the period
began, bond prices were on the rise as yields, which move in the opposite
direction, declined. Despite continued improvement in U.S. economic conditions,
solid job creation remained elusive. Consumer confidence faltered, and investors
became increasingly convinced that the Federal Reserve Board (the Fed) would
hold short-term interest rates at their historic lows. Under the circumstances,
long-term U.S. Treasury bond yields fell to 4.65% by mid-March 2004.
Beginning in early April, however, monthly employment reports began to show
unexpectedly large gains. In response, bond prices fell (yields increased).
Associated improvements in consumer confidence and spending led some investors
to reverse their earlier expectations, believing instead that the Fed would soon
be forced to raise short-term interest rates to ward off potential inflation. By
early June, long-term U.S. Treasury bond yields had risen to over 5.50%.
For the remainder of the period, bond yields generally declined. While economic
growth remained positive, inflationary measures continued to be negligible. More
importantly, on June 30, the Fed raised its short-term interest rate target for
the first time in four years -- from 1% to 1.25%. In doing so, the Fed indicated
a tendency toward a measured, moderate monetary tightening cycle, which helped
support higher bond prices (and lower yields). By the end of July 2004,
long-term U.S. Treasury bond yields stood at 5.20%, a decline of 10 basis points
(.10%) over the past year. The yield on the 10-year U.S. Treasury note ended the
period at 4.48%, an increase of less than 10 basis points during the past 12
months.
Tax-exempt issues, supported by a favorable technical backdrop, experienced less
volatility than their taxable counterparts during the year. Declining supply
trends allowed tax-exempt bond prices to register modest gains. Long-term
revenue bond yields, as measured by the Bond Buyer Revenue Bond Index, fell
approximately 10 basis points over the last year to 5.31%. According to
Municipal Market Data, yields on AAA-rated issues maturing in 30 years declined
more than 15 basis points to 4.90% at July 31, while yields on 10-year AAA-rated
issues fell more than 25 basis points to 3.79%.
During the past 12 months, more than $360 billion in new long-term tax-exempt
bonds was underwritten, a decline of approximately 8% versus last year.
Approximately $100 billion in long-term tax-exempt bonds was issued in the last
three months of the period, a decline of more than 15% compared to the same
period a year ago. The tax-exempt bond market maintained a positive
supply/demand position throughout the year, allowing municipal issues to
outperform their taxable counterparts.
Describe conditions in the State of Florida.
Overall, conditions in Florida remained favorable. The state maintained solid
credit ratings of Aa2 from Moody's, AA+ from Standard & Poor's and AA from
Fitch. All three rating agencies held a stable outlook for Florida's finances.
This was based on an improving and diverse economy, solid finances, moderate
debt and a proactive government that responds to economic downturns more quickly
than other states.
Florida's economy is bolstered by strong population growth, which is attributed
to its attractive physical environment and favorable business climate. The
population growth is one reason Florida's economy typically has performed better
than the national economy. Although the growth in population has put a strain on
services such as education, transportation and healthcare, it also has allowed
the state to recover quickly from the recent sub par economic trends.
Currently, Florida's revenues are modestly higher than projected and
expenditures remain under control because of strong fiscal oversight. The fiscal
year 2005 budget was pressured by only modest revenue increases, but was brought
into balance through tight expenditure controls, including outsourcing work and
requiring local governments to pick up costs historically incurred by the state.
To pay for these additional expenses, municipalities imposed increases to
property taxes and/or local sales taxes through voter initiatives.
4 MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JULY 31, 2004
Florida continues to maintain sound and solid fund balances with consistent
General Fund operations. In addition, the state has a working Capital Reserve
Fund and a Budget Stabilization Fund in excess of $1.3 billion. Our strategy in
purchasing Florida issues has been to favor insured General Obligation Bonds and
their equivalents rather than uninsured bonds. We believe this is a prudent
approach, as there is no meaningful yield offered in exchange for the additional
risk associated with uninsured bonds.
How did the Fund perform during the period in light of the existing market
conditions?
For the 12-month period ended July 31, 2004, the Fund's Class A, Class B, Class
C and Class I Shares had total returns of +6.24%, +5.70%, +5.70% and +6.24%,
respectively. This compared to a return of +5.79% for the benchmark Lehman
Brothers Municipal Bond Index for the same period. (Fund results shown do not
reflect sales charges and would be lower if sales charges were included.
Complete performance information can be found on pages 6 - 8 of this report to
shareholders.)
The Fund significantly outperformed its comparable Lipper category of Florida
Municipal Debt Funds, which had an average return of +4.87% for the 12-month
period ended July 31, 2004. (Funds in this Lipper category limit their
investment to those securities exempt from taxation in the State of Florida.) In
addition to its favorable total return performance for the period, the Fund's
12-month yield exceeded that of its peers.
The Fund's outperformance over the past year can be attributed to our continued
focus on longer-dated municipal bonds. Our observations and research reveal that
the longer end of the yield curve has held firm while the intermediate end and
shorter end of the yield curve have been subject to more significant bouts of
volatility. By taking advantage of the steep yield curve, we have successfully
been able to increase the Fund's yield while muting its price volatility. We
also maintained a slightly defensive duration profile, which positioned the Fund
for relative outperformance at times when interest rates rose during the period.
What changes were made to the portfolio during the period?
We made no significant changes to the portfolio or our investment strategy. We
maintained our focus on increasing the income provided to shareholders and
muting the Fund's net asset value volatility. As alluded to earlier, the most
volatile part of the yield curve during the period continued to be the 10-year -
15-year sector. During periods of sustained strength in the bond market, we
sought to reduce some of our holdings in this maturity range. With the proceeds
from the sales, we looked to purchase premium-coupon bonds in the 20-year -
30-year maturity range whenever they became available. This proved to be a
challenge at times, as new-issue volume has shown a considerable decline in
recent months. New supply of Florida municipal bonds fell 31% over the past
year, 43% in the past six months and 46% in the final three months of the
period.
We remained fully invested throughout the period. With short-term borrowing
interest rates still at historically low levels, the performance penalty for
holding assets in cash reserves was far too severe.
How would you characterize the Fund's position at the close of the period?
We believe the Fed will continue to increase the target interest rate at a
measured pace. As investors anticipate and react to Fed actions, we would expect
to see continued volatility from both the equity and bond markets. As long as
the municipal yield curve remains steep, we will continue to sell the
intermediate part of the yield curve and use periods of volatility to structure
higher-coupon bonds whenever they are attractively priced. Should interest rates
decline, our strategy would be to shift to a more defensive posture to prepare
the Fund for relative outperformance when interest rates inevitably head higher.
Should the Fed become more aggressive and market rates increase more than
expected, we would take the opportunity to pursue a higher coupon structure.
Robert D. Sneeden
Vice President and Portfolio Manager
August 11, 2004
MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JULY 31, 2004 5
[LOGO] Merrill Lynch Investment Managers
Performance Data
About Fund Performance
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 July 31, 2004 Total Return Total Return Total Return 30-Day Yield
==================================================================================================================
ML Florida Municipal Bond Fund Class A Shares* +0.48% +6.24% +75.53% 4.47%
- ------------------------------------------------------------------------------------------------------------------
ML Florida Municipal Bond Fund Class B Shares* +0.18 +5.70 +63.90 4.25
- ------------------------------------------------------------------------------------------------------------------
ML Florida Municipal Bond Fund Class C Shares* +0.23 +5.70 +67.06 4.15
- ------------------------------------------------------------------------------------------------------------------
ML Florida Municipal Bond Fund Class I Shares* +0.44 +6.24 +72.41 4.57
- ------------------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index** +0.06 +5.79 +85.65/+91.15 --
- ------------------------------------------------------------------------------------------------------------------
* Investment results shown do not reflect sales charges; results would be
lower if a sales charge was included. Total investment returns are based
on changes in net asset values for the periods shown, and assume
reinvestment of all dividends and capital gains distributions at net asset
value on the payable date. The Fund's 10-year/since inception dates are 10
years for Class B & Class I Shares and from 10/21/94 for Class A & Class C
Shares.
** This unmanaged Index consists of long-term revenue bonds, prerefunded
bonds, general obligation bonds and insured bonds. Ten-year/since
inception total returns are for 10 years and from 10/31/94.
6 MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JULY 31, 2004
Performance Data (continued)
A line graph depicting the growth of an investment in the Fund's Class A Shares
and Class C Shares compared to growth of an investment in the Lehman Brothers
Municipal Bond Index. Values are from October 21, 1994 to July 2004:
10/21/94** 7/95 7/96 7/97 7/98 7/99
ML Florida
Municipal Bond Fund+--
Class A Shares* $ 9,600 $10,401 $11,034 $12,125 $12,789 $12,978
ML Florida
Municipal Bond Fund+--
Class C Shares* $10,000 $10,791 $11,390 $12,453 $13,069 $13,195
7/00 7/01 7/02 7/03 7/04
ML Florida
Municipal Bond Fund+--
Class A Shares* $13,181 $14,462 $15,301 $15,861 $16,851
ML Florida
Municipal Bond Fund+--
Class C Shares* $13,333 $14,556 $15,309 $15,805 $16,706
10/31/94 7/95 7/96 7/97 7/98 7/99
Lehman Brothers Municipal
Bond Index++ $10,000 $11,107 $11,840 $13,054 $13,837 $14,235
7/00 7/01 7/02 7/03 7/04
Lehman Brothers Municipal
Bond Index++ $14,848 $16,345 $17,441 $18,070 $19,115
* Assuming maximum sales charge, transaction costs and other operating
expenses, including advisory fees.
** Commencement of operations.
+ ML Florida Municipal Bond Fund invests primarily in long-term investment
grade obligations issued by or on behalf of the state of Florida, its
political subdivisions, agencies and instrumentalities and obligations of
other qualifying issuers.
++ This unmanaged Index consists of long-term revenue bonds, prerefunded
bonds, general obligation bonds and insured bonds. The starting date for
the Index in the Class A & Class C Shares' graph is from 10/31/94.
Past performance is not predictive of future results.
Average Annual Total Return
Return Without Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
One Year Ended 7/31/04 +6.24% +1.99%
- --------------------------------------------------------------------------------
Five Years Ended 7/31/04 +5.36 +4.50
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 7/31/04 +5.92 +5.48
- --------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
Return Return
Without CDSC With CDSC**
================================================================================
Class C Shares*
================================================================================
One Year Ended 7/31/04 +5.70% +4.70%
- --------------------------------------------------------------------------------
Five Years Ended 7/31/04 +4.83 +4.83
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 7/31/04 +5.39 +5.39
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after
one year.
** Assuming payment of applicable contingent deferred sales charge.
MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JULY 31, 2004 7
[LOGO] Merrill Lynch Investment Managers
Performance Data (concluded)
A line graph depicting the growth of an investment in the Fund's Class B Shares
and Class I Shares compared to growth of an investment in the Lehman Brothers
Municipal Bond Index. Values are from July 1994 to July 2004:
7/94 7/95 7/96 7/97 7/98
ML Florida
Municipal Bond Fund+--
Class B Shares* $10,000 $10,492 $11,098 $12,145 $12,758
ML Florida
Municipal Bond Fund+--
Class I Shares* $ 9,600 $10,125 $10,763 $11,838 $12,499
7/99 7/00 7/01 7/02 7/03 7/04
ML Florida
Municipal Bond Fund+--
Class B Shares* $12,895 $13,044 $14,238 $15,004 $15,506 $16,390
ML Florida
Municipal Bond Fund+--
Class I Shares* $12,697 $12,909 $14,162 $15,000 $15,580 $16,551
7/94 7/95 7/96 7/97 7/98
Lehman Brothers Municipal
Bond Index++ $10,000 $10,787 $11,499 $12,678 $13,438
7/99 7/00 7/01 7/02 7/03 7/04
Lehman Brothers Municipal
Bond Index++ $13,824 $14,420 $15,874 $16,939 $17,549 $18,565
* Assuming maximum sales charge, transaction costs and other operating
expenses, including advisory fees.
+ ML Florida Municipal Bond Fund invests primarily in long-term investment
grade obligations issued by or on behalf of the state of Florida, its
political subdivisions, agencies and instrumentalities and obligations of
other qualifying issuers.
++ This unmanaged Index consists of long-term revenue bonds, prerefunded
bonds, general obligation bonds and insured bonds.
Past performance is not predictive of future results.
Average Annual Total Return
Return Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
One Year Ended 7/31/04 +5.70% +1.70%
- --------------------------------------------------------------------------------
Five Years Ended 7/31/04 +4.91 +4.58
- --------------------------------------------------------------------------------
Ten Years Ended 7/31/04 +5.06 +5.06
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after
six years.
** Assuming payment of applicable contingent deferred sales charge.
Return Without Return With
Sales Charge Sales Charge**
================================================================================
Class I Shares*
================================================================================
One Year Ended 7/31/04 +6.24% +1.99%
- --------------------------------------------------------------------------------
Five Years Ended 7/31/04 +5.44 +4.58
- --------------------------------------------------------------------------------
Ten Years Ended 7/31/04 +5.60 +5.17
- --------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
8 MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JULY 31, 2004
Disclosure of Expenses
Shareholders of this Fund may incur the following charges: (a) expenses related
to transactions, including sales charges, redemption fees, and exchange fees;
and (b) operating expenses including advisory fees, distribution fees including
12(b)-1 fees, and other Fund expenses. The following example (which is based on
a hypothetical investment of $1,000 invested on February 1, 2004 and held
through July 31, 2004) is intended to assist shareholders both in calculating
expenses based on an investment in the Fund and in comparing these expenses with
similar costs of investing in other mutual funds.
The first table below provides information about actual account values and
actual expenses. In order to estimate the expenses a shareholder paid during the
period covered by this report, shareholders can divide their account value by
$1,000 and then multiply the result by the number in the first line under the
heading entitled "Expenses Paid During the Period."
The second table below provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses. In order to assist
shareholders in comparing the ongoing expenses of investing in this Fund and
other funds, compare the 5% hypothetical example with the 5% hypothetical
examples that appear in other funds' shareholder reports.
The expenses shown in the table are intended to highlight shareholders ongoing
costs only and do not reflect any transactional expenses, such as sales charges,
redemption fees, or exchange fees. Therefore, the second table is useful in
comparing ongoing expenses only, and will not help shareholders determine the
relative total expenses of owning different funds. If these transactional
expenses were included, shareholder expenses would have been higher.
Expenses Paid
Beginning Ending During the Period*
Account Value Account Value February 1, 2004
February 1, 2004 July 31, 2004 to July 31, 2004
================================================================================
Actual
================================================================================
Class A $1,000 $1,004.80 $4.32
- --------------------------------------------------------------------------------
Class B $1,000 $1,001.80 $6.35
- --------------------------------------------------------------------------------
Class C $1,000 $1,002.30 $6.85
- --------------------------------------------------------------------------------
Class I $1,000 $1,004.40 $3.83
================================================================================
Hypothetical (5% annual return before expenses)**
================================================================================
Class A $1,000 $1,020.48 $4.36
- --------------------------------------------------------------------------------
Class B $1,000 $1,018.45 $6.41
- --------------------------------------------------------------------------------
Class C $1,000 $1,017.95 $6.91
- --------------------------------------------------------------------------------
Class I $1,000 $1,020.98 $3.86
- --------------------------------------------------------------------------------
* For each class of the Fund, expenses are equal to the annualized expense
ratio for the class (.87% for Class A, 1.28% for Class B, 1.38% for Class
C and .77% for Class I), multiplied by the average account value over the
period, multiplied by 182/367 (to reflect the one-half year period shown).
** Hypothetical 5% annual return before expenses is calculated by multiplying
the number of days in the most recent fiscal half-year divided by 367.
MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JULY 31, 2004 9
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (in Thousands)
S&P Moody's Face
Ratings@ Ratings@ Amount Municipal Bonds Value
===================================================================================================================================
Florida--90.3%
- -----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa $ 1,095 Altamonte Springs, Florida, Health Facilities Authority,
Hospital Revenue Bonds (Adventist Health Systems--Sunbelt),
7% due 10/01/2014 (d) $ 1,375
---------------------------------------------------------------------------------------------------------
NR* NR* 105 Arbor Greene, Florida, Community Development District, Special
Assessment Revenue Bonds, 6.50% due 5/01/2007 105
---------------------------------------------------------------------------------------------------------
NR* NR* 1,265 Ballantrae, Florida, Community Development District, Capital
Improvement Revenue Bonds, 6% due 5/01/2035 1,253
---------------------------------------------------------------------------------------------------------
Broward County, Florida, HFA, M/F Housing Revenue Refunding
Bonds (Lakeside Apartments Project) (c):
AAA NR* 1,100 6.90% due 8/01/2015 1,132
AAA NR* 1,100 7% due 2/01/2025 1,131
---------------------------------------------------------------------------------------------------------
AA- A3 1,250 Broward County, Florida, Resource Recovery Revenue Refunding
Bonds (Wheelabrator South Broward), Series A, 5.375%
due 12/01/2009 1,353
---------------------------------------------------------------------------------------------------------
NR* NR* 1,000 CFM Community Development District, Florida, Capital Improvement
Revenue Bonds, Series B, 5.875% due 5/01/2014 1,006
---------------------------------------------------------------------------------------------------------
NR* Baa3 550 Capital Trust Agency, Florida, Air Cargo Revenue Bonds, AMT,
6.25% due 1/01/2019 549
---------------------------------------------------------------------------------------------------------
AAA Aaa 780 Celebration Community Development District, Florida (Special
Assessment), 6% due 5/01/2010 (b) 791
---------------------------------------------------------------------------------------------------------
Citrus County, Florida, Hospital Board Revenue Refunding Bonds
(Citrus Memorial Hospital):
NR* Baa3 985 6.25% due 8/15/2023 1,010
NR* Baa3 1,500 6.375% due 8/15/2032 1,531
---------------------------------------------------------------------------------------------------------
NR* Aaa 290 Clay County, Florida, HFA, S/F Mortgage Revenue Bonds
(Multi-County), AMT, 6.30% due 10/01/2020 (c)(e) 296
---------------------------------------------------------------------------------------------------------
AAA Aaa 175 Clearwater, Florida, Revenue Bonds (Spring Training Facility),
5.375% due 3/01/2027 (b) 188
---------------------------------------------------------------------------------------------------------
NR* NR* 1,000 Concorde Estates Community Development District, Florida, Capital
Improvements Revenue Bonds, Series B, 5% due 5/01/2011 995
---------------------------------------------------------------------------------------------------------
NR* NR* 580 Double Branch Community, Florida, Development District, Special
Assessment Bonds, Series B-1, 5.60% due 5/01/2007 580
---------------------------------------------------------------------------------------------------------
AAA Aaa 5,330 Escambia County, Florida, HFA, S/F Mortgage Revenue Refunding
Bonds, AMT, 7% due 4/01/2028 (c)(e) 5,481
---------------------------------------------------------------------------------------------------------
NR* Aaa 3,045 Escambia County, Florida, Health Facilities Authority, Health
Facility Revenue Bonds (Florida Health Care Facility Loan),
5.95% due 7/01/2020 (a) 3,151
---------------------------------------------------------------------------------------------------------
BBB Baa2 11,370 Escambia County, Florida, PCR (Champion International
Corporation Project), AMT, 6.90% due 8/01/2022 11,629
---------------------------------------------------------------------------------------------------------
NR* NR* 1,500 Fiddlers Creek, Florida, Community Development District Number 2,
Special Assessment Revenue Bonds, Series A, 6.375% due 5/01/2035 1,529
---------------------------------------------------------------------------------------------------------
AAA Aaa 1,955 Florida HFA, Homeowner Mortgage Revenue Bonds, AMT, Series 3,
6.35% due 7/01/2028 (b) 2,033
---------------------------------------------------------------------------------------------------------
A1+ NR* 5,210 Florida HFA, Revenue Bonds, DRIVERS, AMT, Series 189, 12.565%
due 2/01/2035 (a)(g) 5,484
---------------------------------------------------------------------------------------------------------
AAA Aaa 930 Florida Housing Finance Corporation, Homeowner Mortgage Revenue
Refunding Bonds, AMT, Series 4, 6.25% due 7/01/2022 (f) 957
---------------------------------------------------------------------------------------------------------
AAA NR* 5,000 Florida State Board of Education, Lottery Revenue Bonds,
DRIVERS, Series 222, 11.196% due 7/01/2017 (g)(i) 6,517
Portfolio Abbreviations
To simplify the listings of Merrill Lynch Florida Municipal Bond Fund's
portfolio holdings in the Schedule of Investments, we have abbreviated the names
of many of the securities according to the list at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
DRIVERS Derivative Inverse Tax-Exempt Receipts
HFA Housing Finance Agency
IDA Industrial Development Authority
M/F Multi-Family
PCR Pollution Control Revenue Bonds
S/F Single-Family
VRDN Variable Rate Demand Notes
10 MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JULY 31, 2004
Schedule of Investments (continued) (in Thousands)
S&P Moody's Face
Ratings@ Ratings@ Amount Municipal Bonds Value
===================================================================================================================================
Florida (continued)
- -----------------------------------------------------------------------------------------------------------------------------------
AAA NR* $ 2,500 Florida State Turnpike Authority, Turnpike Revenue Bonds,
DRIVERS, Series 218, 10.945% due 7/01/2029 (g)(i) $ 3,168
---------------------------------------------------------------------------------------------------------
NR* NR* 985 Harbor Bay, Florida, Community Development District, Capital
Improvement Special Assessment Revenue Bonds, Series A, 7%
due 5/01/2033 1,043
---------------------------------------------------------------------------------------------------------
NR* NR* 405 Heritage Isles Community Development District, Florida, Special
Assessment Revenue Refunding Bonds, 5.90% due 11/01/2006 405
---------------------------------------------------------------------------------------------------------
NR* NR* 375 Heritage Palms, Florida, Community Development District, Capital
Improvement Revenue Bonds, 6.25% due 11/01/2004 375
---------------------------------------------------------------------------------------------------------
A A3 3,500 Highlands County, Florida, Health Facilities Authority, Hospital
Revenue Bonds (Adventist Health System), Series A, 6%
due 11/15/2031 3,683
---------------------------------------------------------------------------------------------------------
Hillsborough County, Florida, IDA, Exempt Facilities Revenue
Bonds (National Gypsum), AMT:
NR* NR* 1,000 Series A, 7.125% due 4/01/2030 1,052
NR* NR* 1,750 Series B, 7.125% due 4/01/2030 1,842
---------------------------------------------------------------------------------------------------------
Jacksonville, Florida, Economic Development Commission, Health
Care Facilities Revenue Bonds (Mayo Clinic--Jacksonville):
AA Aa2 1,000 Series A, 5.50% due 11/15/2036 1,022
AAA Aaa 1,000 Series A, 5.50% due 11/15/2036 (b) 1,044
AA Aa2 2,000 Series B, 5.50% due 11/15/2036 2,046
AAA Aaa 410 Series B, 5.50% due 11/15/2036 (b) 430
---------------------------------------------------------------------------------------------------------
AA- Aa2 2,800 Jacksonville, Florida, Electric Authority, Electric System
Revenue Bonds, Series 3-C, 5.50% due 10/01/2030 2,878
---------------------------------------------------------------------------------------------------------
AAA Aaa 3,420 Jacksonville, Florida, Electric Authority, Electric System
Revenue Refunding Bonds, Series Three, 6.0% due 4/01/2005 (b)(j) 3,557
---------------------------------------------------------------------------------------------------------
AAA Aaa 1,200 Jacksonville, Florida, Guaranteed Entitlement Revenue Refunding
and Improvement Bonds, 5.25% due 10/01/2032 (i) 1,230
---------------------------------------------------------------------------------------------------------
BBB+ NR* 2,320 Martin County, Florida, Health Facilities Authority, Hospital
Revenue Bonds (Martin Memorial Medical Center), Series A, 5.875%
due 11/15/2032 2,309
---------------------------------------------------------------------------------------------------------
AAA Aaa 2,495 Miami-Dade County, Florida, Expressway Authority, Toll System
Revenue Bonds, Series B, 5.25% due 7/01/2026 (i) 2,589
---------------------------------------------------------------------------------------------------------
NR* NR* 1,000 Middle Village Community Development District, Florida, Special
Assessment Bonds, Series A, 6% due 5/01/2035 1,001
---------------------------------------------------------------------------------------------------------
NR* NR* 2,000 Midtown Miami, Florida, Community Development District, Special
Assessment Revenue Bonds, Series A, 6.25% due 5/01/2037 2,026
---------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Ocoee, Florida, Water and Sewer System, Revenue Refunding and
Improvement Bonds, 5.125% due 10/01/2033 (a) 1,014
---------------------------------------------------------------------------------------------------------
A A3 Orange County, Florida, Health Facilities Authority, Hospital
Revenue Bonds:
500 (Adventist Health System), 6.25% due 11/15/2024 535
2,705 (Orlando Regional Healthcare), 6% due 12/01/2028 2,825
---------------------------------------------------------------------------------------------------------
AAA Aaa 6,500 Orange County, Florida, Tourist Development, Tax Revenue Bonds,
5.50% due 10/01/2031 (a) 6,782
---------------------------------------------------------------------------------------------------------
Orlando, Florida, Urban Community Development District, Capital
Improvement Special Assessment Bonds:
NR* NR* 1,000 6.25% due 5/01/2034 1,005
NR* NR* 990 Series A, 6.95% due 5/01/2033 1,042
---------------------------------------------------------------------------------------------------------
NR* Aaa 1,265 Osceola County, Florida, Infrastructure Sales Surplus Tax
Revenue Bonds, 5.25% due 10/01/2025 (a) 1,311
---------------------------------------------------------------------------------------------------------
NR* Aaa 2,000 Osceola County, Florida, School Board, COP, Series A, 5.25%
due 6/01/2027 (a) 2,063
MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JULY 31, 2004 11
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) (in Thousands)
S&P Moody's Face
Ratings@ Ratings@ Amount Municipal Bonds Value
===================================================================================================================================
Florida (concluded)
- -----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa $ 925 Osceola County, Florida, Tourist Development Tax Revenue
Bonds, Series A, 5.50% due 10/01/2027 (i) $ 980
---------------------------------------------------------------------------------------------------------
NR* NR* 250 Panther Trace, Florida, Community Development District, Special
Assessment Revenue Bonds, Series B, 6.50% due 5/01/2009 251
---------------------------------------------------------------------------------------------------------
Park Place Community Development District, Florida, Special
Assessment Revenue Bonds:
NR* NR* 500 6.75% due 5/01/2032 523
NR* NR* 1000 6.375% due 5/01/2034 1,015
---------------------------------------------------------------------------------------------------------
AAA Aaa 2,080 Pasco County, Florida, Health Facilities Authority, Gross
Revenue Bonds (Adventist Health System--Sunbelt), 7%
due 10/01/2014 (d) 2,586
---------------------------------------------------------------------------------------------------------
NR* A1 2,000 Pinellas County, Florida, Health Facilities Authority Revenue
Bonds (BayCare Health System Inc.), 5.75% due 11/15/2029 2,061
---------------------------------------------------------------------------------------------------------
AAA Aaa 2,600 Port St. Lucie, Florida, Utility Revenue Bonds, 5.125%
due 9/01/2031 (b) 2,631
---------------------------------------------------------------------------------------------------------
NR* NR* 1,000 Preserve at Wilderness Lake, Florida, Community Development
District, Capital Improvement Bonds, Series A, 5.90%
due 5/01/2034 971
---------------------------------------------------------------------------------------------------------
NR* NR* 595 Reunion East Community Development District, Florida, Special
Assessment, Series B, 5.90% due 11/01/2007 595
---------------------------------------------------------------------------------------------------------
AAA NR* 2,320 South Broward, Florida, Hospital District Revenue Bonds,
DRIVERS, Series 337, 9.843% due 5/01/2032 (b)(g) 2,627
---------------------------------------------------------------------------------------------------------
South Lake County, Florida, Hospital District Revenue Bonds
(South Lake Hospital Inc.):
A A2 1,000 5.80% due 10/01/2034 1,013
NR* Baa3 995 6.375% due 10/01/2034 1,000
---------------------------------------------------------------------------------------------------------
NR* NR* 1,000 Sterling Hill, Florida, Community Development District, Capital
Improvement Revenue Refunding Bonds, Series B, 5.50%
due 11/01/2010 1,003
---------------------------------------------------------------------------------------------------------
NR* NR* 385 Stoneybrook West, Florida, Community Development District,
Special Assessment Revenue Bonds, Series B, 6.45% due 5/01/2010 389
---------------------------------------------------------------------------------------------------------
NR* NR* 910 Verandah West, Florida, Community Development District, Capital
Improvement Revenue Bonds, Series B, 5.25% due 5/01/2008 910
---------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Village Center Community Development District, Florida, Utility
Revenue Bonds, 5.125% due 10/01/2028 (b) 1,015
---------------------------------------------------------------------------------------------------------
NR* NR* 1,485 Vista Lakes Community Development District, Florida, Capital
Improvement Revenue Bonds, Series A, 6.75% due 5/01/2034 1,543
===================================================================================================================================
New York--0.4%
- -----------------------------------------------------------------------------------------------------------------------------------
A1+ NR* 500 New York State Local Government Assistance Corporation, Revenue
Refunding Bonds, Sub-Lien, VRDN, Series 4V, 1.08%
due 4/01/2022 (f)(h) 500
===================================================================================================================================
Texas--1.8%
- -----------------------------------------------------------------------------------------------------------------------------------
AAA VMIG1+ 2,395 Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds (Texas Children's Hospital), VRDN, Series
B-1, 1.08% due 10/01/2029 (b)(h) 2,395
===================================================================================================================================
Puerto Rico--5.4%
- -----------------------------------------------------------------------------------------------------------------------------------
BBB Baa3 1,660 Children's Trust Fund Project of Puerto Rico, Tobacco Settlement
Revenue Refunding Bonds, 5.375% due 5/15/2033 1,447
---------------------------------------------------------------------------------------------------------
NR* Baa3 1,365 Puerto Rico Industrial, Tourist, Educational, Medical and
Environmental Control Facilities Revenue Bonds (Cogeneration
Facility--AES Puerto Rico Project), AMT, 6.625% due 6/01/2026 1,416
---------------------------------------------------------------------------------------------------------
A- Baa1 1,000 Puerto Rico Public Buildings Authority, Government Facilities
Revenue Refunding Bonds, Series I, 5% due 7/01/2036 974
---------------------------------------------------------------------------------------------------------
BBB+ Baa2 3,000 Puerto Rico Public Finance Corporation, Commonwealth
Appropriation Revenue Bonds, Series E, 5.75% due 8/01/2007 (j) 3,255
---------------------------------------------------------------------------------------------------------
Total Municipal Bonds (Cost--$125,788)--97.9% 129,453
12 MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JULY 31, 2004
Schedule of Investments (concluded) (in Thousands)
Shares
Held Mutual Funds Value
=========================================================================================================
211 BlackRock Florida Insured Municipal 2008 Term Trust $ 3,317
---------------------------------------------------------------------------------------------------------
Total Mutual Funds (Cost--$3,496)--2.5% 3,317
=========================================================================================================
Short-Term Investments
=========================================================================================================
13 Merrill Lynch Institutional Tax-Exempt Fund (k) 13
---------------------------------------------------------------------------------------------------------
Total Short-Term Investments (Cost--$13)--0.0% 13
=========================================================================================================
Total Investments (Cost--$129,297**)--100.4% 132,783
Liabilities in Excess of Other Assets--(0.4%) (495)
---------
Net Assets--100.0% $ 132,288
=========
+ Highest short-term rating by Moody's Investors Service, Inc.
@ Ratings of issues shown are unaudited.
* Not Rated.
** The cost and unrealized appreciation/depreciation of investments as of
July 31, 2004, as computed for federal income tax purposes were as
follows:
(in Thousands)
--------------------------------------------------------------------------
Aggregate cost ................................. $ 129,263
=========
Gross unrealized appreciation .................. $ 4,180
Gross unrealized depreciation .................. (660)
---------
Net unrealized appreciation .................... $ 3,520
=========
(a) AMBAC Insured.
(b) MBIA Insured.
(c) FNMA Collateralized.
(d) Escrowed to maturity.
(e) GNMA Collateralized.
(f) FSA Insured.
(g) The interest rate is subject to change periodically and inversely based
upon prevailing market rates. The interest rate shown is the rate in
effect at July 31, 2004.
(h) The interest rate is subject to change periodically based upon prevailing
market rates. The interest rate shown is the rate in effect at July 31,
2004.
(i) FGIC Insured.
(j) Prerefunded.
(k) Investments in companies considered to be an affiliate of the Fund (such
companies are defined as "Affiliated Companies" in Section 2(a)(3) of the
Investment Company Act of 1940) are as follows:
(in Thousands)
--------------------------------------------------------------------------
Net Dividend
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Institutional
Tax-Exempt Fund (1,000) $ 15
--------------------------------------------------------------------------
See Notes to Financial Statements.
MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JULY 31, 2004 13
[LOGO] Merrill Lynch Investment Managers
Statement of Assets and Liabilities
As of July 31, 2004
=============================================================================================================================
Assets
- -----------------------------------------------------------------------------------------------------------------------------
Investments, in unaffiliated securities, at value (identified
cost--$129,283,747) .............................................. $ 132,770,026
Investments, in affiliated securities, at value (identified
cost--$13,329) ................................................... 13,329
Cash .............................................................. 61,739
Receivables:
Interest ....................................................... $ 2,377,664
Securities sold ................................................ 150,813
Dividends ...................................................... 13,188
Beneficial interest sold ....................................... 1,000 2,542,665
-------------
Prepaid expenses .................................................. 12,559
-------------
Total assets ...................................................... 135,400,318
-------------
=============================================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------
Payables:
Securities purchased ........................................... 2,669,157
Dividends to shareholders ...................................... 169,480
Beneficial interest redeemed ................................... 140,105
Investment adviser ............................................. 69,837
Distributor .................................................... 30,438
Other affiliates ............................................... 9,966 3,088,983
-------------
Accrued expenses and other liabilities ............................ 23,808
-------------
Total liabilities ................................................. 3,112,791
-------------
=============================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------
Net assets ........................................................ $ 132,287,527
=============
=============================================================================================================================
Net Assets Consist of
- -----------------------------------------------------------------------------------------------------------------------------
Class A Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized ...................................... $ 567,425
Class B Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized ...................................... 410,687
Class C Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized ...................................... 131,992
Class I Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized ...................................... 193,810
Paid-in capital in excess of par .................................. 133,433,102
Undistributed investment income--net .............................. $ 121,782
Accumulated realized capital losses on investments--net ........... (6,057,550)
Unrealized appreciation on investments--net ....................... 3,486,279
-------------
Total accumulated losses--net ..................................... (2,449,489)
-------------
Net Assets ........................................................ $ 132,287,527
=============
=============================================================================================================================
Net Asset Value
- -----------------------------------------------------------------------------------------------------------------------------
Class A--Based on net assets of $57,521,225 and 5,674,246 shares
of beneficial interest outstanding ............................... $ 10.14
=============
Class B--Based on net assets of $41,705,117 and 4,106,873 shares
of beneficial interest outstanding ............................... $ 10.15
=============
Class C--Based on net assets of $13,380,685 and 1,319,922 shares
of beneficial interest outstanding ............................... $ 10.14
=============
Class I--Based on net assets of $19,680,500 and 1,938,102 shares
of beneficial interest outstanding ............................... $ 10.15
=============
See Notes to Financial Statements.
14 MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JULY 31, 2004
Statement of Operations
For the Year Ended July 31, 2004
=============================================================================================================================
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------
Interest .......................................................... $ 8,647,193
Dividends (including $15,358 from affiliates) ..................... 63,231
-------------
Total income ...................................................... 8,710,424
-------------
=============================================================================================================================
Expenses
- -----------------------------------------------------------------------------------------------------------------------------
Investment advisory fees .......................................... $ 806,364
Account maintenance and distribution fees--Class B ................ 256,165
Accounting services ............................................... 96,583
Account maintenance and distribution fees--Class C ................ 88,999
Account maintenance fees--Class A ................................. 59,217
Professional fees ................................................. 58,957
Printing and shareholder reports .................................. 43,451
Transfer agent fees--Class B ...................................... 23,119
Transfer agent fees--Class A ...................................... 22,839
Registration fees ................................................. 20,822
Custodian fees .................................................... 11,851
Trustees' fees and expenses ....................................... 11,318
Pricing fees ...................................................... 10,370
Transfer agent fees--Class I ...................................... 8,238
Transfer agent fees--Class C ...................................... 6,615
Other ............................................................. 27,195
-------------
Total expenses before reimbursement ............................... 1,552,103
Reimbursement of expenses ......................................... (3,764)
-------------
Total expenses after reimbursement ................................ 1,548,339
-------------
Investment income--net ............................................ 7,162,085
-------------
=============================================================================================================================
Realized & Unrealized Gain on Investments--Net
- -----------------------------------------------------------------------------------------------------------------------------
Realized gain from investments--net ............................... 1,182,484
Change in unrealized appreciation from investments--net ........... 405,219
-------------
Total realized and unrealized gain--net ........................... 1,587,703
-------------
Net Increase in Net Assets Resulting from Operations .............. $ 8,749,788
=============
See Notes to Financial Statements.
MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JULY 31, 2004 15
[LOGO] Merrill Lynch Investment Managers
Statements of Changes in Net Assets
For the Year Ended
July 31,
-------------------------------
Increase (Decrease) in Net Assets: 2004 2003
=============================================================================================================================
Operations
- -----------------------------------------------------------------------------------------------------------------------------
Investment income--net ............................................ $ 7,162,085 $ 7,829,442
Realized gain on investments--net ................................. 1,182,484 1,750,211
Change in unrealized appreciation on investments--net ............. 405,219 (3,989,228)
-------------------------------
Net increase in net assets resulting from operations .............. 8,749,788 5,590,425
-------------------------------
=============================================================================================================================
Dividends to Shareholders
- -----------------------------------------------------------------------------------------------------------------------------
Investment income--net:
Class A ........................................................ (2,995,637) (2,726,805)
Class B ........................................................ (2,383,130) (3,195,112)
Class C ........................................................ (675,142) (630,460)
Class I ........................................................ (1,099,859) (1,270,981)
-------------------------------
Net decrease in net assets resulting from dividends to shareholders (7,153,768) (7,823,358)
-------------------------------
=============================================================================================================================
Beneficial Interest Transactions
- -----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets derived from beneficial
interest transactions ............................................ (24,828,973) 4,435,091
-------------------------------
=============================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets ........................... (23,232,953) 2,202,158
Beginning of year ................................................. 155,520,480 153,318,322
-------------------------------
End of year* ...................................................... $ 132,287,527 $ 155,520,480
===============================
* Undistributed investment income--net ......................... $ 121,782 $ 113,931
===============================
See Notes to Financial Statements.
16 MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JULY 31, 2004
Financial Highlights
Class A
The following per share data and ratios have been derived -----------------------------------------------------------------------
from information provided in the financial statements. For the Year Ended July 31,
-----------------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2004 2003++ 2002++ 2001++ 2000++
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ... $ 10.04 $ 10.19 $ 10.13 $ 9.71 $ 10.06
-----------------------------------------------------------------------
Investment income--net ............... .52+ .52+ .51 .49 .49
Realized and unrealized gain (loss)
on investments--net ................. .10 (.15) .06 .43 (.35)
-----------------------------------------------------------------------
Total from investment operations ..... .62 .37 .57 .92 .14
-----------------------------------------------------------------------
Less dividends and distributions:
Investment income--net ............ (.52) (.52) (.51) (.49) (.49)
In excess of realized gain on
investments--net ................. -- -- -- (.01) --
-----------------------------------------------------------------------
Total dividends and distributions .... (.52) (.52) (.51) (.50) (.49)
-----------------------------------------------------------------------
Net asset value, end of year ......... $ 10.14 $ 10.04 $ 10.19 $ 10.13 $ 9.71
=======================================================================
==================================================================================================================================
Total Investment Return*
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ... 6.24% 3.66% 5.81% 9.72% 1.55%
=======================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement ....... .87% .88% .89% .86% .80%
=======================================================================
Expenses ............................. .88% .88% .89% .86% .80%
=======================================================================
Investment income--net ............... 5.05% 5.08% 5.07% 4.99% 5.07%
=======================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) $57,521 $57,610 $43,909 $38,564 $25,725
=======================================================================
Portfolio turnover ................... 31.83% 45.50% 41.29% 81.27% 79.33%
=======================================================================
* Total investment returns exclude the effect of sales charges.
+ Based on average shares outstanding.
++ Effective April 14, 2003, Class D Shares were redesignated Class A Shares.
See Notes to Financial Statements.
MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JULY 31, 2004 17
[LOGO] Merrill Lynch Investment Managers
Financial Highlights (continued)
Class B
The following per share data and ratios have been derived -----------------------------------------------------------------------
from information provided in the financial statements. For the Year Ended July 31,
-----------------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001 2000
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ... $ 10.06 $ 10.20 $ 10.14 $ 9.73 $ 10.08
-----------------------------------------------------------------------
Investment income--net ............... .48+ .48+ .47 .46 .45
Realized and unrealized gain (loss)
on investments--net ................. .09 (.14) .06 .42 (.35)
-----------------------------------------------------------------------
Total from investment operations ..... .57 .34 .53 .88 .10
-----------------------------------------------------------------------
Less dividends and distributions:
Investment income--net ............ (.48) (.48) (.47) (.46) (.45)
In excess of realized gain on
investments--net ................. -- -- -- (.01) --
-----------------------------------------------------------------------
Total dividends and distributions .... (.48) (.48) (.47) (.47) (.45)
-----------------------------------------------------------------------
Net asset value, end of year ......... $ 10.15 $ 10.06 $ 10.20 $ 10.14 $ 9.73
=======================================================================
==================================================================================================================================
Total Investment Return*
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ... 5.70% 3.35% 5.38% 9.16% 1.14%
=======================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement ....... 1.28% 1.28% 1.29% 1.26% 1.20%
=======================================================================
Expenses ............................. 1.28% 1.28% 1.29% 1.26% 1.20%
=======================================================================
Investment income--net ............... 4.64% 4.67% 4.65% 4.59% 4.66%
=======================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) $41,705 $61,098 $73,034 $86,433 $100,059
=======================================================================
Portfolio turnover ................... 31.83% 45.50% 41.29% 81.27% 79.33%
=======================================================================
* Total investment returns exclude the effect of sales charges.
+ Based on average shares outstanding.
See Notes to Financial Statements.
18 MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JULY 31, 2004
Financial Highlights (continued)
Class C
The following per share data and ratios have been derived -----------------------------------------------------------------------
from information provided in the financial statements. For the Year Ended July 31,
-----------------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001 2000
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ... $ 10.04 $ 10.18 $ 10.13 $ 9.71 $ 10.06
-----------------------------------------------------------------------
Investment income--net ............... .47+ .47+ .46 .44 .44
Realized and unrealized gain (loss)
on investments--net ................. .10 (.14) .05 .43 (.35)
-----------------------------------------------------------------------
Total from investment operations ..... .57 .33 .51 .87 .09
-----------------------------------------------------------------------
Less dividends and distributions:
Investment income--net ............ (.47) (.47) (.46) (.44) (.44)
In excess of realized gain on
investments--net ................. -- -- -- (.01) --
-----------------------------------------------------------------------
Total dividends and distributions .... (.47) (.47) (.46) (.45) (.44)
-----------------------------------------------------------------------
Net asset value, end of year ......... $ 10.14 $ 10.04 $ 10.18 $ 10.13 $ 9.71
=======================================================================
==================================================================================================================================
Total Investment Return*
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ... 5.70% 3.24% 5.17% 9.17% 1.04%
=======================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement ....... 1.38% 1.38% 1.39% 1.36% 1.30%
=======================================================================
Expenses ............................. 1.38% 1.39% 1.39% 1.36% 1.30%
=======================================================================
Investment income--net ............... 4.54% 4.57% 4.56% 4.49% 4.57%
=======================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) $13,381 $14,759 $10,489 $ 9,110 $ 8,497
=======================================================================
Portfolio turnover ................... 31.83% 45.50% 41.29% 81.27% 79.33%
=======================================================================
* Total investment returns exclude the effect of sales charges.
+ Based on average shares outstanding.
See Notes to Financial Statements.
MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JULY 31, 2004 19
[LOGO] Merrill Lynch Investment Managers
Financial Highlights (concluded)
Class I
The following per share data and ratios have been derived -----------------------------------------------------------------------
from information provided in the financial statements. For the Year Ended July 31,
-----------------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2004 2003++ 2002++ 2001++ 2000++
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ... $ 10.06 $ 10.20 $ 10.14 $ 9.73 $ 10.08
-----------------------------------------------------------------------
Investment income--net ............... .53+ .53+ .52 .51 .50
Realized and unrealized gain (loss)
on investments--net ................. .09 (.14) .06 .42 (.35)
-----------------------------------------------------------------------
Total from investment operations ..... .62 .39 .58 .93 .15
-----------------------------------------------------------------------
Less dividends and distributions:
Investment income--net ............ (.53) (.53) (.52) (.51) (.50)
In excess of realized gain on
investments--net ................. -- -- -- (.01) --
-----------------------------------------------------------------------
Total dividends and distributions .... (.53) (.53) (.52) (.52) (.50)
-----------------------------------------------------------------------
Net asset value, end of year ......... $ 10.15 $ 10.06 $ 10.20 $ 10.14 $ 9.73
=======================================================================
==================================================================================================================================
Total Investment Return*
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ... 6.24% 3.87% 5.91% 9.71% 1.66%
=======================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement ....... .78% .77% .79% .76% .70%
=======================================================================
Expenses ............................. .78% .78% .79% .76% .70%
=======================================================================
Investment income--net ............... 5.15% 5.18% 5.16% 5.10% 5.17%
=======================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) $19,681 $22,053 $25,886 $29,053 $30,242
=======================================================================
Portfolio turnover ................... 31.83% 45.50% 41.29% 81.27% 79.33%
=======================================================================
* Total investment returns exclude the effect of sales charges.
+ Based on average shares outstanding.
++ Effective April 14, 2003, Class A Shares were redesignated Class I Shares.
See Notes to Financial Statements.
20 MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JULY 31, 2004
Notes to Financial Statements
1. Significant Accounting Policies:
Merrill Lynch Florida Municipal Bond Fund (the "Fund") is part of Merrill Lynch
Multi-State Municipal Series Trust (the "Trust"). The Fund is registered under
the Investment Company Act of 1940, as amended, as a non-diversified, open-end
management investment company. The Fund's financial statements are prepared in
conformity with U.S. generally accepted accounting principles, which may require
the use of management accruals and estimates. Actual results may differ from
these estimates. The Fund offers multiple classes of shares. Shares of Class A
and Class I are sold with a front-end sales charge. Shares of Class B and Class
C may be subject to a contingent deferred sales charge. All classes of shares
have identical voting, dividend, liquidation and other rights and the same terms
and conditions, except that Class A, Class B and Class C Shares bear certain
expenses related to the account maintenance of such shares, and Class B and
Class C Shares also bear certain expenses related to the distribution of such
shares. Each class has exclusive voting rights with respect to matters relating
to its account maintenance and distribution expenditures. Income, expenses
(other than expenses attributable to a specific class) and realized and
unrealized gains and losses on investments are allocated daily to each class
based on its relative net assets. The following is a summary of significant
accounting policies followed by the Fund.
(a) Valuation of investments -- Municipal bonds are traded primarily in the
over-the-counter markets and are valued at the last available bid price in the
over-the-counter market or on the basis of yield equivalents as obtained by the
Fund's pricing service from one or more dealers that make markets in the
securities. Financial futures contracts and options thereon, which are traded on
exchanges, are valued at their closing prices as of the close of such exchanges.
Options written or purchased are valued at the last sale price in the case of
exchange-traded options. In the case of options traded in the over-the-counter
market, valuation is the last asked price (options written) or the last bid
price (options purchased). Swap agreements are valued by quoted fair values
received daily by the Fund from the counterparty. Short-term investments with a
remaining maturity of sixty days or less are valued at amortized cost, which
approximates market value. Securities and assets for which market quotations are
not readily available are valued at fair value as determined in good faith by or
under the direction of the Board of Trustees of the Trust, including valuations
furnished by a pricing service retained by the Trust, which may utilize a matrix
system for valuations. The procedures of the pricing service and its valuations
are reviewed by the officers of the Trust under the general supervision of the
Board of Trustees.
(b) Derivative financial instruments -- The Fund may engage in various portfolio
investment strategies both to increase the return of the Fund and to hedge, or
protect, its exposure to interest rate movements and movements in the securities
markets. Losses may arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
o Financial futures contracts -- The Fund may purchase or sell financial
futures contracts and options on such futures contracts. Futures contracts
are contracts for delayed delivery of securities at a specific future date
and at a specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required by
the exchange on which the transaction is effected. Pursuant to the
contract, the Fund agrees to receive from or pay to the broker an amount
of cash equal to the daily fluctuation in value of the contract. Such
receipts or payments are known as variation margin and are recorded by the
Fund as unrealized gains or losses. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the value
of the contract at the time it was opened and the value at the time it was
closed.
(c) Income taxes -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
(d) Security transactions and investment income -- Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual basis. The Fund amortizes all
premiums and discounts on debt securities.
(e) Dividends and distributions -- Dividends from net investment income are
declared daily and paid monthly. Distributions of capital gains are recorded on
the ex-dividend dates.
MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JULY 31, 2004 21
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (continued)
(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) Reclassifications -- U.S. generally accepted accounting principles require
that certain components of net assets be adjusted to reflect permanent
differences between financial and tax reporting. Accordingly, during the current
year, $1,354,358 has been reclassified between paid in capital in excess of par
and accumulated realized capital losses on investments and $466 has been
reclassified between undistributed net investment income and accumulated
realized capital losses on investments as a result of permanent differences
attributable to the expiration of capital loss carryforwards and amortization
methods for premiums and discounts on fixed income securities. These
reclassifications have no effect on net assets or net asset values per share.
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 year ended July 31, 2004, FAM reimbursed the Fund in the amount
of $3,764.
Pursuant to the Distribution Plans adopted by the Fund in accordance with Rule
12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are accrued daily
and paid monthly at annual rates based upon the average daily net assets of the
shares as follows:
- --------------------------------------------------------------------------------
Account Distribution
Maintenance Fee Fee
- --------------------------------------------------------------------------------
Class A ................................ .10% --
Class B ................................ .25% .25%
Class C ................................ .25% .35%
- --------------------------------------------------------------------------------
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., also provides account
maintenance and distribution services to the Fund. The ongoing account
maintenance fee compensates the Distributor and MLPF&S for providing account
maintenance services to Class A, Class B and Class C shareholders. The ongoing
distribution fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B and Class C
shareholders.
For the year ended July 31, 2004, FAMD earned underwriting discounts and MLPF&S
earned dealer concessions on sales of the Fund's Class A and Class I Shares as
follows:
- --------------------------------------------------------------------------------
FAMD MLPF&S
- --------------------------------------------------------------------------------
Class A ............................ $ 3,755 $24,751
Class I ............................ $ 602 $ 3,616
- --------------------------------------------------------------------------------
For the year ended July 31, 2004, MLPF&S received contingent deferred sales
charges of $98,562 and $4,388 relating to transactions in Class B and Class C
Shares, respectively. Furthermore, MLPF&S received contingent deferred sales
charges of $717 relating to transactions subject to front-end sales charge
waivers in Class A Shares.
In addition, MLPF&S received $7,189 in commissions on the execution of portfolio
security transactions for the Fund for the year ended July 31, 2004.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co., is
the Fund's transfer agent.
For the year ended July 31, 2004, the Fund reimbursed FAM $3,006 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
year ended July 31, 2004 were $45,096,316 and $67,331,283, respectively.
22 MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JULY 31, 2004
Notes to Financial Statements (continued)
4. Beneficial Interest Transactions:
Net increase (decrease) in net assets derived from beneficial interest
transactions was $(24,828,973) and $4,435,091 for the years ended July 31, 2004
and July 31, 2003, respectively.
Transactions in shares of beneficial interest for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended July 31, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 296,843 $ 3,037,472
Automatic conversion of shares ........... 897,388 9,133,101
Shares issued to shareholders in
reinvestment of dividends ............. 122,927 1,256,246
----------------------------
Total issued ............................. 1,317,158 13,426,819
Shares redeemed .......................... (1,379,798) (14,069,718)
----------------------------
Net decrease ............................. (62,640) $ (642,899)
============================
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended July 31, 2003 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 1,547,946 $ 15,889,188
Automatic conversion of shares ........... 821,171 8,470,978
Shares issued to shareholders in
reinvestment of dividends ............. 100,849 1,038,009
----------------------------
Total issued ............................. 2,469,966 25,398,175
Shares redeemed .......................... (1,044,034) (10,756,232)
----------------------------
Net increase ............................. 1,425,932 $ 14,641,943
============================
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended July 31, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 309,980 $ 3,168,039
Shares issued to shareholders in
reinvestment of dividends ............. 77,843 796,616
----------------------------
Total issued ............................. 387,823 3,964,655
Automatic conversion of shares ........... (896,109) (9,133,101)
Shares redeemed .......................... (1,458,472) (14,903,551)
----------------------------
Net decrease ............................. (1,966,758) $(20,071,997)
============================
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended July 31, 2003 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 934,159 $ 9,639,968
Shares issued to shareholders in
reinvestment of dividends ............. 112,118 1,154,469
----------------------------
Total issued ............................. 1,046,277 10,794,437
Automatic conversion of shares ........... (819,750) (8,470,978)
Shares redeemed .......................... (1,311,339) (13,502,533)
----------------------------
Net decrease ............................. (1,084,812) $(11,179,074)
============================
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended July 31, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 249,163 $ 2,566,138
Shares issued to shareholders in
reinvestment of dividends ............. 28,959 295,973
----------------------------
Total issued ............................. 278,122 2,862,111
Shares redeemed .......................... (427,929) (4,341,021)
----------------------------
Net decrease ............................. (149,807) $ (1,478,910)
============================
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended July 31, 2003 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 632,468 $ 6,510,644
Shares issued to shareholders in
reinvestment of dividends ............. 28,425 292,402
----------------------------
Total issued ............................. 660,893 6,803,046
Shares redeemed .......................... (221,052) (2,269,789)
----------------------------
Net increase ............................. 439,841 $ 4,533,257
============================
- --------------------------------------------------------------------------------
Class I Shares for the Year Dollar
Ended July 31, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 324,251 $ 3,335,139
Shares issued to shareholders in
reinvestment of dividends ............. 44,636 456,863
----------------------------
Total issued ............................. 368,887 3,792,002
Shares redeemed .......................... (623,105) (6,427,169)
----------------------------
Net decrease ............................. (254,218) $ (2,635,167)
============================
- --------------------------------------------------------------------------------
Class I Shares for the Year Dollar
Ended July 31, 2003 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 202,678 $ 2,091,809
Shares issued to shareholders in
reinvestment of dividends ............. 58,654 604,123
----------------------------
Total issued ............................. 261,332 2,695,932
Shares redeemed .......................... (606,376) (6,256,967)
----------------------------
Net decrease ............................. (345,044) $ (3,561,035)
============================
5. Short-Term Borrowings:
The Fund, along with certain other funds managed by FAM and its affiliates, is a
party to a $500,000,000 credit agreement with Bank One, N.A. and certain other
lenders. The Fund may borrow under the credit agreement to fund shareholder
redemptions and for other lawful purposes other than for leverage. The Fund may
borrow up to the maximum amount allowable under the Fund's current prospectus
and statement of additional information, subject to various other legal,
regulatory or contractual limits. The Fund pays a commitment fee of .09% per
annum based on the Fund's pro rata share of the
MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JULY 31, 2004 23
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (concluded)
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 year ended July
31, 2004.
6. Distributions to Shareholders:
The tax character of distributions paid during the fiscal years ended July 31,
2004 and July 31, 2003 was as follows:
- --------------------------------------------------------------------------------
7/31/2004 7/31/2003
- --------------------------------------------------------------------------------
Distributions paid from:
Tax-exempt income .................... $7,153,768 $7,823,358
------------------------------
Total distributions .................... $7,153,768 $7,823,358
==============================
As of July 31, 2004, the components of accumulated losses on a tax basis were as
follows:
- -----------------------------------------------------------------------------
Undistributed tax-exempt income--net .................... $ 87,356
Undistributed long-term capital gains--net .............. --
-----------
Total undistributed earnings--net ....................... 87,356
Capital loss carryforward ............................... (5,250,187)*
Unrealized gains--net ................................... 2,713,342**
-----------
Total accumulated losses--net ........................... $(2,449,489)
===========
* On July 31, 2004, the Fund had a net capital loss carryforward of
$5,250,187, of which $4,131,859 expires in 2008 and $1,118,328 expires in
2009. This amount will be available to offset like amounts of any future
taxable gains.
** The difference between book-basis and tax-basis net unrealized gains is
attributable primarily to the tax deferral of losses on wash sales, the
tax deferral of losses on straddles and the difference between book and
tax amortization methods for premiums and discounts on fixed income
securities.
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees of
Merrill Lynch Multi-State Municipal Series Trust:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Merrill Lynch Florida Municipal Bond Fund of
Merrill Lynch Multi-State Municipal Series Trust (the "Trust") as of July 31,
2004, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of July 31, 2004 by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Merrill Lynch Florida Municipal Bond Fund of Merrill Lynch Multi-State Municipal
Series Trust as of July 31, 2004, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended, and its financial highlights for each of the five years in
the period then ended, in conformity with U.S. generally accepted accounting
principles.
Deloitte & Touche LLP
Princeton, New Jersey
September 17, 2004
24 MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JULY 31, 2004
Officers and Trustees (unaudited)
Number of
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Held with Time Overseen by Held by
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years Trustee Trustee
====================================================================================================================================
Interested Trustee
- ------------------------------------------------------------------------------------------------------------------------------------
Terry K. P.O. Box 9011 President 1999 to President of the Merrill Lynch Investment Managers, 125 Funds None
Glenn* Princeton, NJ and present L.P. ("MLIM")/Fund Asset Management, L.P. 160 Portfolios
08543-9011 Trustee and ("FAM")--Advised Funds since 1999; Chairman
Age: 63 1992 to (Americas Region) of MLIM from 2000 to 2002;
present Executive Vice President of MLIM and FAM (which
terms as used herein include their corporate
predecessors) from 1983 to 2002; President of
FAM Distributors, Inc. ("FAMD") from 1986 to 2002
and Director thereof from 1991 to 2002; Executive
Vice President and Director of Princeton Services,
Inc. ("Princeton Services") from 1993 to 2002;
President of Princeton Administrators, L.P. from
1989 to 2002; Director of Financial Data Services,
Inc. since 1985.
------------------------------------------------------------------------------------------------------------------------
* Mr. Glenn is a director, trustee or member of an advisory board of certain other investment companies for which MLIM
or FAM acts as investment adviser. Mr. Glenn is an "interested person," as described in the Investment Company Act, of
the Trust based on his present and former positions with MLIM, FAM, FAMD, Princeton Services and Princeton
Administrators, L.P. The Trustee's term is unlimited. Trustees serve until their resignation, removal or death, or
until December 31 of the year in which they turn 72. As Trust President, Mr. Glenn serves at the pleasure of the Board
of Trustees.
====================================================================================================================================
Independent Trustees*
- ------------------------------------------------------------------------------------------------------------------------------------
James H. P.O. Box 9095 Trustee 1995 to Director, The China Business Group, Inc. since 38 Funds None
Bodurtha Princeton, NJ present 1996 and Executive Vice President thereof from 55 Portfolios
08543-9095 1996 to 2003; Chairman of the Board, Berkshire
Age: 60 Holding Corporation since 1980; Partner, Squire,
Sanders & Dempsey from 1980 to 1993.
- ------------------------------------------------------------------------------------------------------------------------------------
Joe Grills P.O. Box 9095 Trustee 2002 to Member of the Committee of Investment of 38 Funds Kimco Realty
Princeton, NJ present Employee Benefit Assets of the Association of 55 Portfolios Corporation
08543-9095 Financial Professionals ("CIEBA") since 1986;
Age: 69 Member of CIEBA's Executive Committee since
1988 and its Chairman from 1991 to 1992;
Assistant Treasurer of International Business
Machines Corporation ("IBM") and Chief
Investment Officer of IBM Retirement Funds
from 1986 to 1993; Member of the Investment
Advisory Committee of the State of New York
Common Retirement Fund since 1989; Member
of the Investment Advisory Committee of the
Howard Hughes Medical Institute from 1997 to
2000; Director, Duke University Management
Company from 1992 to 2004, Vice Chairman
thereof from 1998 to 2004 and Director Emeritus
thereof since 2004; Director, LaSalle Street Fund
from 1995 to 2001; Director, Kimco Realty
Corporation since 1997; Member of the Investment
Advisory Committee of the Virginia Retirement
System since 1998 and Vice Chairman thereof since
2002; Director, Montpelier Foundation since 1998
and its Vice Chairman since 2000; Member of the
Investment Committee of the Woodberry Forest
School since 2000; Member of the Investment
Committee of the National Trust for Historic
Preservation since 2000.
MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JULY 31, 2004 25
[LOGO] Merrill Lynch Investment Managers
Officers and Trustees (unaudited) (continued)
Number of
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Held with Time Overseen by Held by
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years Trustee Trustee
====================================================================================================================================
Independent Trustees* (concluded)
- ------------------------------------------------------------------------------------------------------------------------------------
Herbert I. P.O. Box 9095 Trustee 1987 to John M. Olin Professor of Humanities, New York 38 Funds None
London Princeton, NJ present University since 1993 and Professor thereof since 55 Portfolios
08543-9095 1980; President, Hudson Institute since 1997
Age: 65 and Trustee thereof since 1980; Dean, Gallatin
Division of New York University from 1976 to 1993;
Distinguished Fellow, Herman Kahn Chair, Hudson
Institute from 1984 to 1985; Director, Damon Corp.
from 1991 to 1995; Overseer, Center for Naval
Analyses from 1983 to 1993; Director, Level Playing
Field (education) from 2000 to 2003.
- ------------------------------------------------------------------------------------------------------------------------------------
Andre F. P.O. Box 9095 Trustee 1995 to Harvard Business School: George Gund Professor 38 Funds None
Perold Princeton, NJ present of Finance and Banking since 2000; Senior 55 Portfolios
08543-9095 Associate Dean, Director of Faculty Recruiting
Age: 52 since 2001; Finance Area Chair from 1996 to
2001; Sylvan C. Coleman Professor of Financial
Management from 1993 to 2000; Director,
Genbel Securities Limited and Gensec Bank from
1999 to 2003; Director, Stockback, Inc. from 2000
to 2002; Director, Sanlam Limited from 2001 to
2003; Trustee, Commonfund from 1989 to 2001;
Director, Sanlam Investment Management from
1999 to 2001; Director, Bulldogresearch.com from
2000 to 2001; Director, Quantec Limited from 1991
to 1999; Director and Chairman of the Board of
UNX Inc. since 2003.
- ------------------------------------------------------------------------------------------------------------------------------------
Roberta P.O. Box 9095 Trustee 2000 to Shareholder of Modrall, Sperling, Roehl, Harris & 38 Funds None
Cooper Princeton, NJ present Sisk, P.A. since 1993; President, American Bar 55 Portfolios
Ramo 08543-9095 Association from 1995 to 1996 and Member of
Age: 61 the Board of Governors thereof from 1994 to 1997;
Shareholder of Poole, Kelly & Ramo, Attorneys at
Law, P.C. from 1977 to 1993; Director, Coopers, Inc.
since 1999; Director of ECMC Group (service
provider to students, schools and lenders) since
2001; Director, United New Mexico Bank (now
Wells Fargo) from 1983 to 1988; Director, First
National Bank of New Mexico (now Wells Fargo)
from 1975 to 1976.
- ------------------------------------------------------------------------------------------------------------------------------------
Robert S. P.O. Box 9095 Trustee 2002 to Principal of STI Management (investment adviser) 38 Funds None
Salomon, Princeton, NJ present since 1994; Chairman and CEO of Salomon 55 Portfolios
Jr. 08543-9095 Brothers Asset Management from 1992 to 1995;
Age: 67 Chairman of Salomon Brothers equity mutual funds
from 1992 to 1995; regular columnist with Forbes
Magazine from 1992 to 2002; Director of Stock
Research and U.S. Equity Strategist at Salomon
Brothers from 1975 to 1991; Trustee, Commonfund
from 1980 to 2001.
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen B. P.O. Box 9095 Trustee 2002 to Chairman of Fernwood Advisors (investment 39 Funds None
Swensrud Princeton, NJ present adviser) since 1996; Principal, Fernwood Associates 56 Portfolios
08543-9095 (financial consultants) since 1975; Chairman of
Age: 71 R.P.P. Corporation (manufacturing) since 1978;
Director of International Mobile Communications,
Incorporated (telecommunications) since 1998.
------------------------------------------------------------------------------------------------------------------------
* The Trustee's term is unlimited. Trustees serve until their resignation, removal or death, or until December 31 of the
year in which they turn 72.
26 MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JULY 31, 2004
Officers and Trustees (unaudited) (concluded)
Position(s) Length of
Held with Time
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years
====================================================================================================================================
Trust Officers*
- ------------------------------------------------------------------------------------------------------------------------------------
Donald C. P.O. Box 9011 Vice 1993 to First Vice President of MLIM and FAM since 1997 and Treasurer thereof since 1999;
Burke Princeton, NJ President present Senior Vice President and Treasurer of Princeton Services since 1999; Vice
08543-9011 and and President of FAMD since 1999; Director of MLIM Taxation since 1990.
Age: 44 Treasurer 1999 to
present
- ------------------------------------------------------------------------------------------------------------------------------------
Kenneth A. P.O. Box 9011 Senior Vice 2002 to Managing Director of MLIM since 2000; Director (Municipal Tax-Exempt Fund
Jacob Princeton, NJ President present Management) of MLIM from 1997 to 2000.
08543-9011
Age: 53
- ------------------------------------------------------------------------------------------------------------------------------------
John M. P.O. Box 9011 Senior Vice 2002 to Managing Director of MLIM since 2000; Director (Municipal Tax-Exempt Fund
Loffredo Princeton, NJ President present Management) of MLIM from 1998 to 2000.
08543-9011
Age: 40
- ------------------------------------------------------------------------------------------------------------------------------------
Robert D. P.O. Box 9011 Vice 1998 to Vice President of MLIM since 1998.
Sneeden Princeton, NJ President present
08543-9011
Age: 51
- ------------------------------------------------------------------------------------------------------------------------------------
Phillip S. P.O. Box 9011 Secretary 2003 to First Vice President of MLIM since 2001; Director (Legal Advisory) of MLIM from
Gillespie Princeton, NJ present 2000 to 2001; Vice President of MLIM from 1999 to 2000 and Attorney associated with
08543-9011 MLIM since 1998.
Age: 40
------------------------------------------------------------------------------------------------------------------------
* Officers of the Trust serve at the pleasure of the Board of Trustees.
- ------------------------------------------------------------------------------------------------------------------------------------
Further information about the Trust's Officers and Trustees is available in the Trust's Statement of Additional
Information, which can be obtained without charge by calling 1-800-MER-FUND.
- ------------------------------------------------------------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
800-637-3863
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 Web
site http://www.icsdelivery.com/live and follow the instructions. When you visit
this site, you will obtain a personal identification number (PIN). You will need
this PIN should you wish to update your e-mail address, choose to discontinue
this service and/or make any other changes to the service. This service is not
available for certain retirement accounts at this time.
MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND JULY 31, 2004 27
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of the Fund unless accompanied or preceded by the Fund's
current prospectus. Past performance results shown in this report should not be
considered a representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Statements and other information
herein are as dated and are subject to change.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free 1-800-MER-FUND (1-800-637-3863); (2)
at www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's
Web site at http://www.sec.gov. Information about how the Fund voted proxies
relating to securities held in the Fund's portfolio during the most recent
12-month period ended June 30 is available (1) at www.mutualfunds.ml.com and (2)
on the Securities and Exchange Commission's Web site at http://www.sec.gov.
Merrill Lynch Florida Municipal Bond Fund of
Merrill Lynch Multi-State Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011
#16031 -- 7/04
Item 2 - Code of Ethics - The registrant has adopted a code of ethics, as of the
end of the period covered by this report, that applies to the
registrant's principal executive officer, principal financial officer
and principal accounting officer, or persons performing similar
functions. A copy of the code of ethics is available without charge
upon request by calling toll-free 1-800-MER-FUND (1-800-637-3863).
Item 3 - Audit Committee Financial Expert - The registrant's board of directors
has determined that (i) the registrant has the following audit
committee financial experts serving on its audit committee and (ii)
each audit committee financial expert is independent: (1) Joe Grills,
(2) Andre F. Perold, (3) Robert S. Salomon, Jr., and (4) Stephen B.
Swensrud.
Item 4 - Principal Accountant Fees and Services
(a) Audit Fees - Fiscal Year Ending July 31, 2004 - $25,000
Fiscal Year Ending July 31, 2003 - $26,000
(b) Audit-Related Fees - Fiscal Year Ending July 31, 2004 - $0
Fiscal Year Ending July 31, 2003 - $0
(c) Tax Fees - Fiscal Year Ending July 31, 2004 - $5,610
Fiscal Year Ending July 31, 2003 - $4,800
The nature of the services include tax compliance, tax advice and tax
planning.
(d) All Other Fees - Fiscal Year Ending July 31, 2004 - $0
Fiscal Year Ending July 31, 2003 - $0
(e)(1) The registrant's audit committee (the "Committee") has adopted
policies and procedures with regard to the pre-approval of services.
Audit, audit-related and tax compliance services provided to the
registrant on an annual basis require specific pre-approval by the
Committee. The Committee also must approve other non-audit services
provided to the registrant and those non-audit services provided to the
registrant's affiliated service providers that relate directly to the
operations and the financial reporting of the registrant. Certain of
these non-audit services that the Committee believes are a) consistent
with the SEC's auditor independence rules and b) routine and recurring
services that will not impair the independence of the independent
accountants may be approved by the Committee without consideration on a
specific case-by-case basis ("general pre-approval"). However, such
services will only be deemed pre-approved provided that any individual
project does not exceed $5,000 attributable to the registrant or
$50,000 for all of the registrants the Committee oversees. Any proposed
services exceeding the pre-approved cost levels will require specific
pre-approval by the Committee, as will any other services not subject
to general pre-approval (e.g., unanticipated but permissible services).
The Committee is informed of each service approved subject to general
pre-approval at the next regularly scheduled in-person board meeting.
(e)(2) 0%
(f) Not Applicable
(g) Fiscal Year Ending July 31, 2004 - $15,735,706
Fiscal Year Ending July 31, 2003 - $18,108,889
(h) The registrant's audit committee has considered and determined that
the provision of non-audit services that were rendered to the
registrant's investment adviser and any entity controlling, controlled
by, or under common control with the investment adviser that provides
ongoing services to the registrant that were not pre-approved pursuant
to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible
with maintaining the principal accountant's independence.
Regulation S-X Rule 2-01(c)(7)(ii) - $945,000, 0%
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 second 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 - See Item 2
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 Florida Municipal Bond Fund of Merrill Lynch Multi-State
Municipal Series Trust
By: /s/ Terry K. Glenn
-----------------------------
Terry K. Glenn,
President of
Merrill Lynch Florida Municipal Bond Fund of Merrill Lynch
Multi-State Municipal Series Trust
Date: September 17, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by
the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
By: /s/ Terry K. Glenn
-----------------------------
Terry K. Glenn,
President of
Merrill Lynch Florida Municipal Bond Fund of Merrill Lynch
Multi-State Municipal Series Trust
Date: September 17, 2004
By: /s/ Donald C. Burke
-----------------------------
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch Florida Municipal Bond Fund of Merrill Lynch
Multi-State Municipal Series Trust
Date: September 17, 2004