MERRILL LYNCH
FLORIDA MUNICIPAL
BOND FUND
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
July 31, 1998
<PAGE>
Merrill Lynch Florida Municipal Bond Fund July 31, 1998
TO OUR SHAREHOLDERS
The Municipal Market Environment
During the six months ended July 31, 1998, long-term tax-exempt revenue bond
yields were little changed. Throughout the period, the near absence of
inflationary pressures continued to support low interest rates. However,
consistently strong domestic economic growth has caused some investors to fear
that the Federal Reserve Board will be forced eventually to raise short-term
interest rates. Such action would be taken to ensure that the US economy's
present rate of growth would decelerate before any inflationary pressures could
develop. These concerns pushed bond yields modestly higher by late April.
However, the weakening financial conditions in many Asian countries subsequently
calmed investor fears of Federal Reserve Board intervention, and fixed-income
prices again moved higher. Long-term uninsured municipal bond yields, as
measured by the Bond Buyer Revenue Bond Index, rose less than 5 basis points
(0.05%) to end the July quarter at 5.36%. As in late 1997 and early 1998, US
Treasury bond yields benefited from a "flight to quality" as foreign investors
were drawn to the relative safe haven of US Government securities. Long-term US
Treasury bond yields declined approximately 10 basis points to end the July
quarter at 5.71%.
Thus far in 1998, the municipal bond market has experienced unexpectedly strong
supply pressures. These supply pressures have prevented tax-exempt bond yields
from declining as much as US Treasury bond yields. During the first six months
of 1998, more than $153 billion in new tax-exempt bonds were underwritten, an
increase of almost 50% compared to the same period a year ago. During the
quarter ended July 31, 1998, municipalities issued over $75 billion in new
securities, an increase of more than 35% compared to the same three-month period
in 1997. Additionally, corporate issuers have also viewed current interest rate
levels as an opportunity to issue significant amounts of taxable securities.
Thus far in 1998, over $500 billion in investment-grade corporate bonds have
been underwritten, an increase of more than 70% compared to the same period a
year ago. This sizeable corporate bond issuance has tended to both support
generally higher fixed-income yields and reduce the demand for tax-exempt bonds.
However, the recent pace of new municipal bond issuance is unlikely to be
maintained. Continued increases in bond issuance will require lower and lower
tax-exempt bond yields to generate the economic savings necessary for additional
municipal bond refinancings. Preliminary estimates for 1998 total municipal bond
issuance are in the $200 billion-$225 billion range. These estimates suggest
that recent supply pressures are likely to abate later in the year. Earlier this
year, municipal bond investors received approximately $30 billion in coupon
payments, bond maturities and proceeds from early redemptions. The demand
generated by these assets has helped to offset the increase in supply seen thus
far in 1998.
The continued impact of the Asian financial crisis on the US domestic economy's
future growth remains unclear. Current Asian economic conditions continue to
reflect ongoing weakness. Recent trade data indicated that reduced US exports to
these countries may have lowered US economic growth by as much as 2% in the
first quarter of 1998. Since further trade deterioration is possible in the
coming months, we do not believe that the Federal Reserve Board will be willing
to raise interest rates, barring a dramatic and unexpected resurgence of
domestic inflation.
These factors suggest that over the near term, interest rates are unlikely to
rise by any appreciable amount. Recent supply pressures have caused municipal
bond yield ratios to rise relative to US Treasury bond yields. At July 31, 1998,
long-term tax-exempt bond yields were at attractive yield ratios relative to US
Treasury securities of comparable maturities (over 90%), well in excess of their
expected range of 85%-88%. Tax-exempt bond yield ratios rarely exceeded 90% in
the 1980s and 1990s. Previous instances have usually been associated with
poten-tial changes in Federal tax code that would have adversely affected the
tax-favored status of municipal bonds. The present situation has developed
largely because of a temporary supply imbalance. These imbalances should soon be
corrected as tax-exempt bond issuance slows from its current rapid pace later
this year. Any further pressure on the municipal market may well represent a
very attractive investment opportunity.
1
<PAGE>
Merrill Lynch Florida Municipal Bond Fund July 31, 1998
Portfolio Strategy
During the six-month period ended July 31, 1998, our investment outlook for
Merrill Lynch Florida Municipal Bond Fund was basically constructive. The
deterioration in the Asian economies helped keep interest rates low, even in the
face of strong domestic economic growth. This combination of strong growth and
low inflation has kept bond yields within a rather narrow trading range over the
past six months.
Issuance of new Florida tax-exempt municipal bonds was just over $7 billion
during the six-month period ended July 31, 1998. This represents an increase of
more than 15% compared to the same six-month period a year ago.
Looking ahead, we expect to continue to maintain our fully invested position and
our constructive portfolio strategy to seek to benefit from a lower interest
rate environment.
Fiscal Year in Review
During the fiscal year ended July 31, 1998, total municipal issuance increased
by more than 40% compared to the same period last year, while Florida municipal
issuance increased by more than 20% over the same period. Both the tax-exempt
and US Treasury markets experienced a decline in yields, although the greater
increase in tax-exempt issuance resulted in municipal performance lagging that
of US Treasury securities.
Given the narrow trading range of the municipal bond market, we maintained a
slightly defensive strategy going into the second half of 1997. We believed that
economic growth would resurge and the Federal Reserve Board would raise interest
rates in order to keep inflation under control. However, in late October 1997,
the Asian equity market turmoil created an increased demand for US Treasury
securities, causing a rally in the bond market. In response to the Asian
economic crisis and the continued domestic low inflation environment, we shifted
the Fund to a more aggressive position by early November 1997. We remained
constructive through July 31, 1998, participating in the continued bond market
rally, which brought interest rates to their recent historic lows.
Throughout the fiscal year ended July 31, 1998, we maintained the Fund's fully
invested position. These strategies produced total returns of +5.61%, +5.07%,
+4.97% and +5.51% for the Fund's Class A, Class B, Class C and Class D Shares,
respectively, for the year ended July 31, 1998. This compares to the Lipper
Analytical Services, Inc. average total return of +5.49% for similar Florida
tax-exempt funds during the same 12-month period.
In Conclusion
We appreciate your ongoing interest in Merrill Lynch Florida Municipal Bond
Fund, and we look forward to serving your investment needs in the months and
years to come.
Sincerely,
/s/ Arthur Zeikel
Arthur Zeikel
President
/s/ Vincent R. Giordano
Vincent R. Giordano
Senior Vice President
/s/ Robert A. DiMella
Robert A. DiMella
Vice President and Co-Portfolio Manager
/s/ Robert D. Sneeden
Robert D. Sneeden
Co-Portfolio Manager
September 4, 1998
================================================================================
Effective July 1998, Robert D. Sneeden became co-portfolio manager of Merrill
Lynch Florida Municipal Bond Fund. Mr. Sneeden has been employed by Merrill
Lynch Asset Management, L.P. (an affiliate of the Fund's investment adviser)
since 1994 as Portfolio Manager. Prior thereto, he was a vice president at
Lehman Brothers from 1990 to 1994.
================================================================================
2
<PAGE>
Merrill Lynch Florida Municipal Bond Fund July 31, 1998
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill Lynch
Select Pricing(SM) System, which offers four pricing alternatives:
o Class A Shares incur a maximum initial sales charge (front-end load) of 4%
and bear no ongoing distribution or account maintenance fees. Class A
Shares are available only to eligible investors.
o Class B Shares are subject to a maximum contingent deferred sales charge
of 4% if redeemed during the first year, decreasing to 1% each year
thereafter to 0% after the fourth year. In addition, Class B Shares are
subject to a distribution fee of 0.25% and an account maintenance fee of
0.25%. These shares automatically convert to Class D Shares after
approximately 10 years. (There is no initial sales charge for automatic
share conversions.)
o Class C Shares are subject to a distribution fee of 0.35% and an account
maintenance fee of 0.25%. In addition, Class C Shares are subject to a 1%
contingent deferred sales charge if redeemed within one year of purchase.
o Class D Shares incur a maximum initial sales charge of 4% and an account
maintenance fee of 0.10% (but no distribution fee).
None of the past results shown should be considered a representation of
future performance. Figures shown in the "Recent Performance Results" and
"Average Annual Total Return" tables assume reinvestment of all dividends
and capital gains distributions at net asset value on the payable date.
Investment return and principal value of shares will fluctuate so that
shares, when redeemed, may be worth more or less than their original cost.
Dividends paid to each class of shares will vary because of the different
levels of account maintenance, distribution and transfer agency fees
applicable to each class, which are deducted from the income available to
be paid to shareholders.
Recent Performance Results*
<TABLE>
<CAPTION>
Standardized
12 Month 3 Month Since Inception 30-Day Yield
Total Return Total Return Total Return As of 7/31/98
=============================================================================================================
<S> <C> <C> <C> <C>
ML Florida Municipal Bond Fund Class A Shares +5.61% +2.27% +62.52% 4.31%
- -------------------------------------------------------------------------------------------------------------
ML Florida Municipal Bond Fund Class B Shares +5.07 +2.13 +56.74 3.98
- -------------------------------------------------------------------------------------------------------------
ML Florida Municipal Bond Fund Class C Shares +4.97 +2.11 +30.72 3.88
- -------------------------------------------------------------------------------------------------------------
ML Florida Municipal Bond Fund Class D Shares +5.51 +2.24 +33.26 4.21
=============================================================================================================
</TABLE>
* 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 inception dates are: Class A and
Class B Shares, 5/31/91; and Class C and Class D Shares, 10/21/94.
3
<PAGE>
Merrill Lynch Florida Municipal Bond Fund July 31, 1998
PERFORMANCE DATA (concluded)
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund's Class A Shares
and Class B Shares compared to growth of an investment in the Lehman Brothers
Municipal B ond Index. Beginning and ending values are:
5/31/91** 7/98
ML Florida Municipal Bond Fund+--
Class A Shares* $ 9,600 $15,603
ML Florida Municipal Bond Fund+--
Class B Shares* $10,000 $15,674
Lehman Brothers Municipal Bond
Index++ $10,000 $17,136
A line graph depicting the growth of an investment in the Fund's Class C Shares
and Class D Shares compared to growth of an investment in the Lehman Brothers
Municipal Bond Index. Beginning and ending values are:
10/21/94** 7/98
ML Florida Municipal Bond Fund+--
Class C Shares* $10,000 $13,072
ML Florida Municipal Bond Fund+--
Class D Shares* $ 9,600 $12,793
Lehman Brothers Municipal Bond
Index++ $10,000 $13,837
* 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 C & Class D Shares graph is 10/31/94.
Past performance is not predictive of future performance.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
Year Ended 6/30/98 +8.30% +3.96%
- --------------------------------------------------------------------------------
Five Years Ended 6/30/98 +5.37 +4.51
- --------------------------------------------------------------------------------
Inception (5/31/91)
through 6/30/98 +7.06 +6.44
- --------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
Year Ended 6/30/98 +7.75% +3.75%
- --------------------------------------------------------------------------------
Five Years Ended 6/30/98 +4.83 +4.83
- --------------------------------------------------------------------------------
Inception (5/31/91)
through 6/30/98 +6.52 +6.52
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after 4
years.
** Assuming payment of applicable contingent deferred sales charge.
================================================================================
% Return % Return
Without CDSC With CDSC**
================================================================================
Class C Shares*
================================================================================
Year Ended 6/30/98 +7.65% +6.65%
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 6/30/98 +7.47 +7.47
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after 1
year.
** Assuming payment of applicable contingent deferred sales charge.
================================================================================
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class D Shares*
================================================================================
Year Ended 6/30/98 +8.20% +3.87%
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 6/30/98 +8.02 +6.83
- --------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
4
<PAGE>
Merrill Lynch Florida Municipal Bond Fund July 31, 1998
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
- --------------------------------------------------------------------------------
Florida--90.4%
- --------------------------------------------------------------------------------
AAA Aaa $ 1,095 Altamonte Springs, Florida, Health
Facilities Authority, Hospital
Revenue Bonds (Adventist Health
Systems--Sunbelt), 7% due 10/01/2014(e) $ 1,347
- --------------------------------------------------------------------------------
AAA Aaa 3,000 Bay Medical Center, Florida, Hospital
Revenue Bonds (Bay Medical Center
Project), 5% due 10/01/2022(b) 2,910
- --------------------------------------------------------------------------------
NR* Aaa 4,140 Brevard County, Florida, HFA, S/F
Mortgage Revenue Bonds, AMT, 6.70%
due 9/01/2027(f) 4,419
- --------------------------------------------------------------------------------
AAA Aaa 1,375 Brevard County, Florida, Health
Facilities Authority, Revenue
Refunding Bonds (Wuesthoff Memorial
Hospital), Series B, 6.90% due
4/01/2002(c)(e) 1,503
- --------------------------------------------------------------------------------
Broward County, Florida, HFA, M/F
Housing Revenue Refunding Bonds
(Lakeside Apartments Project)(i):
AAA NR* 1,100 6.90% due 8/01/2015 1,205
AAA NR* 1,100 7% due 2/01/2025 1,211
- --------------------------------------------------------------------------------
AAA Aaa 4,000 Celebration Community Development
District, Florida (Special Assessment),
6% due 5/01/2010(c) 4,332
- --------------------------------------------------------------------------------
AAA Aaa 7,650 Charlotte County, Florida, Health
Care Facilities Revenue Bonds
(Bon Secours Health System), RIB,
8.026% due 8/26/2027(g)(h) 8,759
- --------------------------------------------------------------------------------
A+ A1 11,215 Citrus County, Florida, PCR,
Refunding (Florida Power
Corporation--Crystal River),
Series A, 6.625% due 1/01/2027 12,169
- --------------------------------------------------------------------------------
AAA Aaa 4,320 Collier County, Florida, School
Board, COP, 5% due 2/15/2016(g) 4,285
- --------------------------------------------------------------------------------
Dade County, Florida, HFA, S/F
Mortgage Revenue Bonds, AMT:
NR* Aaa 165 Series B, 7.25% due 9/01/2023(d) 174
NR* Aaa 3,155 Series C, 7.75% due 9/01/2022(f) 3,310
- --------------------------------------------------------------------------------
AA- VMIG1+ 100 Dade County, Florida, IDA, Exempt
Facilities Revenue Refunding Bonds
(Florida Power and Light Company),
VRDN, 3.65% due 6/01/2021(a) 100
- --------------------------------------------------------------------------------
A1+ VMIG1+ 2,100 Dade County, Florida, Water and
Sewer System Revenue Bonds, VRDN,
3.40% due 10/05/2022(a)(k) 2,100
- --------------------------------------------------------------------------------
AAA Aaa 12,000 Escambia County, Florida, HFA, S/F
Mortgage Revenue Refunding Bonds
(Multi-County Program), AMT, 7%
due 4/01/2028(d) 13,180
- --------------------------------------------------------------------------------
Escambia County, Florida, PCR (Champion
International Corporation Project):
BBB Baa1 11,620 AMT, 6.90% due 8/01/2022 12,893
BBB Baa1 2,500 Refunding, 6.95% due 11/01/2007 2,744
- --------------------------------------------------------------------------------
PORTFOLIO ABBREVIATIONS
To simplify the listings of Merrill Lynch Florida Municipal Bond Fund's
portfolio holdings in the Schedule of Investments, we have abbreviated the names
of many of the securities according to the list below and at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
DATES Daily Adjustable Tax-Exempt Securities
HFA Housing Finance Agency
IDA Industrial Development Authority
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
RITES Residual Interest Tax-Exempt Securities
S/F Single-Family
UT Unlimited Tax
VRDN Variable Rate Demand Notes
5
<PAGE>
Merrill Lynch Florida Municipal Bond Fund July 31, 1998
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
- --------------------------------------------------------------------------------
Florida (continued)
- --------------------------------------------------------------------------------
NR* Aaa $ 1,450 Florida HFA, Home Ownership Revenue
Bonds, AMT, Series G-1, 7.90% due
3/01/2022(f) $ 1,530
- --------------------------------------------------------------------------------
AAA Aaa 10,420 Florida HFA (Maitland Club Apartments),
AMT, Series B-1, 7% due 2/01/2035(b) 11,477
- --------------------------------------------------------------------------------
AAA Aaa 1,000 Florida State Board of Education,
Capital Outlay, Public Education,
Series 1994-C, 5.60% due 6/01/2020(c) 1,036
- --------------------------------------------------------------------------------
NR* Aaa 2,885 Florida State Mid-Bay Bridge Authority
Revenue Bonds, Series A, 5.50%** due
10/01/2026(b) 639
- --------------------------------------------------------------------------------
Florida State Turnpike Authority,
Turnpike Revenue Bonds
(Department of Transportation):
AAA Aaa 7,395 Series A, 4.50% due 7/01/2027(k) 6,676
AAA Aaa 5,950 Series B, 5.25% due 7/01/2011(c) 6,206
AAA Aaa 8,165 Series B, 5% due 7/01/2017(c) 8,066
- --------------------------------------------------------------------------------
A A3 10,000 Hillsborough County, Florida, Capital
Improvement Revenue Bonds (County
Center Project), Second Series, 6.75%
due 7/01/2002(j) 11,105
- --------------------------------------------------------------------------------
AA Aa3 2,250 Hillsborough County, Florida, IDA, PCR,
Refunding (Tampa Electric Company
Project), Series 91, 7.875%
due 8/01/2021 2,536
- --------------------------------------------------------------------------------
AAA Aaa 5,000 Hillsborough County, Florida, School
Board, COP, Refunding (Master Lease
Program), Series A, 5% due 7/01/2023(c) 4,868
- --------------------------------------------------------------------------------
AAA Aaa 2,750 Hillsborough County, Florida, Utility
Revenue Refunding Bonds, Series B,
6.50% due 8/01/2016(c) 2,970
- --------------------------------------------------------------------------------
A1+ VMIG1+ 2,400 Jacksonville, Florida, PCR, Refunding
(Florida Power and Light Co. Project),
VRDN, 3.60% due 5/01/2029(a) 2,400
- --------------------------------------------------------------------------------
AAA Aaa 4,000 Lakeland, Florida, Electric and Water
Revenue Bonds, 4.47%** due 10/01/2009(b) 2,391
- --------------------------------------------------------------------------------
Leesburg, Florida, Hospital Revenue
Refunding Bonds (Leesburg Regional
Medical Center Project):
A- A3 6,110 Series A, 6.125% due 7/01/2018 6,504
A- A3 1,515 Series B, 5.625% due 7/01/2013 1,574
- --------------------------------------------------------------------------------
A1+ VMIG1+ 300 Manatee County, Florida, PCR, Refunding
(Florida Power and Light Co. Project),
VRDN, 3.60% due 9/01/2024(a) 300
- --------------------------------------------------------------------------------
AAA Aaa 6,400 Miami--Dade County, Florida,
Professional Sports Franchise
Facilities, Tax Revenue Refunding
Bonds, 4.75% due 10/01/2030(c) 5,971
- --------------------------------------------------------------------------------
Miami--Dade County, Florida, Special
Obligation, Refunding, Series A(c):
AAA Aaa 10,000 5.46%** due 10/01/2018 3,397
AAA Aaa 24,385 5.59%** due 10/01/2023 6,306
- --------------------------------------------------------------------------------
AAA Aaa 7,000 Orlando and Orange County, Florida,
Expressway Authority, Revenue
Refunding Bonds (Junior Lien),
5% due 7/01/2021(k) 6,841
- --------------------------------------------------------------------------------
AA Aa2 1,900 Palm Beach County, Florida, Refunding,
UT, 5.50% due 12/01/2013 2,039
- --------------------------------------------------------------------------------
AAA Aaa 2,080 Pasco County, Florida, Health
Facilities Authority, Revenue
Refunding Bonds (Gross Adventist
Health System--Sunbelt), 7% due
10/01/2014(e) 2,564
- --------------------------------------------------------------------------------
6
<PAGE>
Merrill Lynch Florida Municipal Bond Fund July 31, 1998
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
- --------------------------------------------------------------------------------
Florida (concluded)
- --------------------------------------------------------------------------------
Pinellas County, Florida, HFA, S/F
Mortgage Revenue Bonds (Multi-County
Program), AMT, Series C(d):
NR* Aaa $ 1,750 5.70% due 9/01/2018 $ 1,788
NR* Aaa 2,000 5.80% due 3/01/2029 2,046
- --------------------------------------------------------------------------------
A1+ VMIG1+ 2,000 Pinellas County, Florida, Health
Facilities Authority, Revenue
Refunding Bonds (Pooled Hospital
Loan Program), DATES, 3.65%
due 12/01/2015(a) 2,000
- --------------------------------------------------------------------------------
AAA Aaa 5,000 Pinellas County, Florida, Sewer
Revenue Refunding Bonds, 5% due
10/01/2024(k) 4,865
- --------------------------------------------------------------------------------
A1+ VMIG1+ 880 Putnam County, Florida, Development
Authority, PCR, Refunding (Florida
Power & Light Company Project), VRDN,
3.60% due 9/01/2024(a) 880
- --------------------------------------------------------------------------------
A1+ VMIG1+ 700 Saint Lucie County, Florida, PCR,
Refunding (Florida Power & Light
Company Project), VRDN, 3.60%
due 3/01/2027(a) 700
- --------------------------------------------------------------------------------
AAA Aaa 3,250 Saint Petersburg, Florida, Health
Facilities Authority Revenue Bonds
(Allegheny Health System), Series A,
7% due 12/01/2001(c)(j) 3,609
- --------------------------------------------------------------------------------
AAA Aaa 2,800 South Broward, Florida, Hospital
District, Hospital Revenue Bonds,
RIB, Series C, 9.237%
due 5/01/2001(b)(h)(j) 3,279
- --------------------------------------------------------------------------------
AAA Aaa 1,475 Tampa, Florida, Allegheny Health
System Revenue Bonds (Saint Joseph),
6.75% due 12/01/2001(c)(j) 1,627
- --------------------------------------------------------------------------------
AAA Aaa 5,000 Village Center Community Development
District, Florida Recreational
Revenue Refunding Bonds, Senior
Series A, 5% due 11/01/2021(c) 4,885
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Puerto Rico--10.8%
- --------------------------------------------------------------------------------
Puerto Rico Commonwealth, Highway and
Transportation Authority, Highway
Revenue Bonds, RITES, Series X(h):
A1+ Baa1 7,600 5.932% due 7/01/2004 8,322
A1+ Baa1 10,000 6.032% due 7/01/2005 11,050
- --------------------------------------------------------------------------------
A Baa1 4,400 Puerto Rico Public Buildings Authority
Revenue Bonds (Guaranteed Government
Facilities), Series B, 5.25%
due 7/01/2021 4,388
- --------------------------------------------------------------------------------
Total Investments (Cost--$209,808)--101.2% 223,476
Liabilities in Excess of Other Assets--(1.2%) (2,639)
---------
Net Assets--100.0% $220,837
========
- --------------------------------------------------------------------------------
(a) 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,
1998.
(b) AMBAC Insured.
(c) MBIA Insured.
(d) FNMA/GNMA Collateralized.
(e) Escrowed to maturity.
(f) GNMA Collateralized.
(g) FSA Insured.
(h) The interest rate is subject to change periodically and inversely based
upon prevailing market rates. The interest rate shown is the rate in
effect at July 31, 1998.
(i) FNMA Collateralized.
(j) Prerefunded.
(k) FGIC Insured.
* Not Rated.
** Represents a zero coupon bond; the interest rate shown is the effective
yield at the time of purchase by the Fund.
+ Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche llp.
See Notes to Financial Statements.
7
<PAGE>
Merrill Lynch Florida Municipal Bond Fund July 31, 1998
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of July 31, 1998
Assets: Investments, at value
(identified cost--$209,807,749)
(Note 1a) ..................... $223,475,767
Cash .......................... 64,628
Receivables:
Interest ................... $ 2,964,816
Beneficial interest sold ... 171,214 3,136,030
Prepaid registration fees -----------
and other assets (Note 1e) .... 5,507
------------
Total assets .................. 226,681,932
------------
- --------------------------------------------------------------------------------
Liabilities: Payables:
Securities purchased ....... 4,888,111
Beneficial interest redeemed 544,976
Dividends to shareholders
(Note 1f) .................. 170,067
Investment adviser (Note 2) 110,148
Distributor (Note 2) ....... 72,234 5,785,536
Accrued expenses and other -----------
liabilities ................... 59,362
------------
Total liabilities ............. 5,844,898
------------
- --------------------------------------------------------------------------------
Net Assets: Net assets .................... $220,837,034
============
- --------------------------------------------------------------------------------
Net Assets Class A Shares of beneficial
Consist of: interest, $.10 par value,
unlimited number of shares
authorized .................... $ 424,394
Class B Shares of beneficial
interest, $.10 par value,
unlimited number of shares
authorized .................... 1,378,688
Class C Shares of beneficial
interest, $.10 par value,
unlimited number of shares
authorized .................... 85,654
Class D Shares of beneficial
interest, $.10 par value,
unlimited number of shares
authorized .................... 233,543
Paid-in capital in excess
of par ........................ 219,820,175
Accumulated realized capital
losses on investments--net
(Note 5) ...................... (13,990,624)
Accumulated distributions in
excess of realized capital
gains--net (Note 1f) .......... (782,814)
Unrealized appreciation on
investments--net .............. 13,668,018
------------
Net assets .................... $220,837,034
============
- --------------------------------------------------------------------------------
Net Asset Value: Class A--Based on net assets
of $44,172,932 and 4,243,940
shares of beneficial interest
outstanding ................... $ 10.41
============
Class B--Based on net assets
of $143,496,603 and 13,786,877
shares of beneficial interest
outstanding ................... $ 10.41
============
Class C--Based on net assets
of $8,899,850 and 856,535
shares of beneficial interest
outstanding ................... $ 10.39
============
Class D--Based on net assets
of $24,267,649 and 2,335,428
shares of beneficial interest
outstanding ................... $ 10.39
============
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
8
<PAGE>
Merrill Lynch Florida Municipal Bond Fund July 31, 1998
FINANCIAL INFORMATION (continued)
Statement of Operations
For the Year Ended
July 31, 1998
- --------------------------------------------------------------------------------
Investment Income Interest and amortization of
(Note 1d): premium and discount earned ... $ 12,932,394
- --------------------------------------------------------------------------------
Expenses: Investment advisory fees
(Note 2) ...................... $ 1,237,408
Account maintenance and
distribution fees--Class B
(Note 2) ...................... 753,007
Accounting services (Note 2) .. 86,605
Printing and shareholder
reports ....................... 63,999
Professional fees ............. 58,535
Transfer agent fees--Class B
(Note 2) ...................... 57,193
Account maintenance and
distribution fees--Class C
(Note 2) ...................... 43,931
Account maintenance fees--
Class D (Note 2) .............. 21,886
Transfer agent fees--Class A
(Note 2) ...................... 13,739
Custodian fees ................ 12,666
Trustees' fees and expenses ... 12,533
Transfer agent fees--Class D
(Note 2) ...................... 6,626
Pricing fees .................. 5,723
Transfer agent fees--Class C
(Note 2) ...................... 2,733
Registration fees (Note 1e) ... 2,100
Other ......................... 2,390
-----------
Total expenses ................ 2,381,074
------------
Investment income--net ........ 10,551,320
------------
- --------------------------------------------------------------------------------
Realized & Realized gain on
Unrealized Gain investments--net .............. 3,911,295
(Loss) on Change in unrealized appreciation
Investments--Net on investments--net ........... (3,082,526)
(Notes 1b, 1d & 3): Net Increase in Net Assets ------------
Resulting from Operations ..... $ 11,380,089
============
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
9
<PAGE>
Merrill Lynch Florida Municipal Bond Fund July 31, 1998
FINANCIAL INFORMATION (continued)
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Year Ended July 31,
-------------------------------
Increase (Decrease) in Net Assets: 1998 1997
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations: Investment income--net ................................................. $ 10,551,320 $ 12,272,696
Realized gain on investments--net ...................................... 3,911,295 4,923,619
Change in unrealized appreciation on investments--net .................. (3,082,526) 5,108,135
------------- -------------
Net increase in net assets resulting from operations ................... 11,380,089 22,304,450
------------- -------------
- -------------------------------------------------------------------------------------------------------------------------------
Dividends to Investment income--net:
Shareholders Class A ............................................................. (2,285,733) (2,498,485)
(Note 1f): Class B ............................................................. (6,855,902) (8,512,919)
Class C ............................................................. (325,426) (284,124)
Class D ............................................................. (1,084,259) (977,168)
------------- -------------
Net decrease in net assets resulting from dividends to shareholders .... (10,551,320) (12,272,696)
------------- -------------
- -------------------------------------------------------------------------------------------------------------------------------
Beneficial Interest Net decrease in net assets derived from beneficial interest transactions (13,639,151) (39,215,251)
Transactions ------------- -------------
(Note 4):
- -------------------------------------------------------------------------------------------------------------------------------
Net Assets: Total decrease in net assets ........................................... (12,810,382) (29,183,497)
Beginning of year ...................................................... 233,647,416 262,830,913
------------- -------------
End of year ............................................................ $ 220,837,034 $ 233,647,416
============= =============
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
Merrill Lynch Florida Municipal Bond Fund July 31, 1998
FINANCIAL INFORMATION (continued)
Financial Highlights
<TABLE>
<CAPTION>
The following per share data and ratios have been derived Class A
from information provided in the financial statements. -------------------------------------------------------
For the Year Ended July 31,
-------------------------------------------------------
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ... $ 10.37 $ 9.94 $ 9.86 $ 9.88 $ 10.78
Operating ------- ------- ------- ------- -------
Performance: Investment income--net ............... .53 .53 .53 .53 .55
Realized and unrealized gain (loss) on
investments--net ..................... .04 .43 .08 (.02) (.48)
------- ------- ------- ------- -------
Total from investment operations ..... .57 .96 .61 .51 .07
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net ............. (.53) (.53) (.53) (.53) (.55)
In excess of realized gain on
investments--net ..................... -- -- -- -- (.42)
------- ------- ------- ------- -------
Total dividends and distributions .... (.53) (.53) (.53) (.53) (.97)
------- ------- ------- ------- -------
Net asset value, end of year ......... $ 10.41 $ 10.37 $ 9.94 $ 9.86 $ 9.88
======= ======= ======= ======= =======
- -------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ... 5.61% 9.99% 6.30% 5.47% .39%
Return:* ======= ======= ======= ======= =======
- -------------------------------------------------------------------------------------------------------------------
Ratios to Average Expenses ............................. .69% .69% .68% .70% .68%
Net Assets: ======= ======= ======= ======= =======
Investment income--net ............... 5.06% 5.31% 5.30% 5.54% 5.23%
======= ======= ======= ======= =======
- -------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of year (in thousands) $44,173 $47,598 $46,765 $51,805 $69,409
Data: ======= ======= ======= ======= =======
Portfolio turnover ................... 101.75% 84.69% 162.83% 178.62% 205.94%
======= ======= ======= ======= =======
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
*Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
11
<PAGE>
Merrill Lynch Florida Municipal Bond Fund July 31, 1998
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
<TABLE>
<CAPTION>
The following per share data and ratios have been derived Class B
from information provided in the financial statements. ------------------------------------------------------------
For the Year Ended July 31,
------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ... $ 10.37 $ 9.94 $ 9.86 $ 9.88 $ 10.78
Operating -------- -------- -------- -------- --------
Performance: Investment income--net ............... .47 .48 .48 .49 .49
Realized and unrealized gain (loss) on
investments--net ..................... .04 .43 .08 (.02) (.48)
-------- -------- -------- -------- --------
Total from investment operations ..... .51 .91 .56 .47 .01
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net ............. (.47) (.48) (.48) (.49) (.49)
In excess of realized gain on
investments--net ................... -- -- -- -- (.42)
-------- -------- -------- -------- --------
Total dividends and distributions .... (.47) (.48) (.48) (.49) (.91)
-------- -------- -------- -------- --------
Net asset value, end of year ......... $ 10.41 $ 10.37 $ 9.94 $ 9.86 $ 9.88
======== ======== ======== ======== ========
- ------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ... 5.07% 9.43% 5.76% 4.93% (.11%)
Return:* ======== ======== ======== ======== ========
- ------------------------------------------------------------------------------------------------------------------------
Ratios to Average Expenses ............................. 1.20% 1.20% 1.18% 1.21% 1.18%
Net Assets: ======== ======== ======== ======== ========
Investment income--net ............... 4.55% 4.80% 4.79% 5.03% 4.73%
======== ======== ======== ======== ========
- ------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of year (in thousands) $143,496 $160,562 $195,097 $205,362 $224,915
Data: ======== ======== ======== ======== ========
Portfolio turnover ................... 101.75% 84.69% 162.83% 178.62% 205.94%
======== ======== ======== ======== ========
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
12
<PAGE>
Merrill Lynch Florida Municipal Bond Fund July 31, 1998
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
<TABLE>
<CAPTION>
Class C
--------------------------------------------------
For the
Period
The following per share data and ratios have been derived Oct. 21,
from information provided in the financial statements. For the Year Ended July 31, 1994+ to
------------------------------------ July 31,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ... $ 10.35 $ 9.92 $ 9.85 $ 9.48
Operating ------- ------ ------- -------
Performance: Investment income--net ................. .46 .47 .47 .37
Realized and unrealized gain on
investments--net ....................... .04 .43 .07 .37
------- ------ ------- -------
Total from investment operations ....... .50 .90 .54 .74
------- ------ ------- -------
Less dividends from investment
income--net ............................ (.46) (.47) (.47) (.37)
------- ------ ------- -------
Net asset value, end of period ......... $ 10.39 $10.35 $ 9.92 $ 9.85
======= ====== ======= =======
- ----------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ..... 4.97% 9.33% 5.54% 7.92%++
Return:** ======= ====== ======= =======
- ----------------------------------------------------------------------------------------------------------------
Ratios to Average Expenses ............................... 1.30% 1.30% 1.28% 1.33%*
Net Assets: ======= ====== ======= =======
Investment income--net ................. 4.44% 4.70% 4.70% 4.84%*
======= ====== ======= =======
- ----------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) $ 8,900 $5,976 $ 5,738 $ 1,954
Data: ======= ====== ======= =======
Portfolio turnover ..................... 101.75% 84.69% 162.83% 178.62%
======= ====== ======= =======
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales
loads.
+ Commencement of operations.
++ Aggregate total investment return.
See Notes to Financial Statements.
13
<PAGE>
Merrill Lynch Florida Municipal Bond Fund July 31, 1998
FINANCIAL INFORMATION (concluded)
Financial Highlights (concluded)
<TABLE>
<CAPTION>
Class D
--------------------------------------------
For the
Period
The following per share data and ratios have been derived Oct. 21,
from information provided in the financial statements. For the Year Ended July 31, 1994+ to
------------------------------ July 31,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ... $ 10.35 $ 9.92 $ 9.85 $ 9.48
Operating ------- ------- ------- -------
Performance: Investment income--net ................. .52 .52 .52 .40
Realized and unrealized gain on
investments--net ....................... .04 .43 .07 .37
------- ------- ------- -------
Total from investment operations ....... .56 .95 .59 .77
------- ------- ------- -------
Less dividends from investment
income--net ............................ (.52) (.52) (.52) (.40)
------- ------- ------- -------
Net asset value, end of period ......... $ 10.39 $ 10.35 $ 9.92 $ 9.85
======= ======= ======= =======
- ----------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ..... 5.51% 9.89% 6.09% 8.34%++
Return:** ======= ======= ======= =======
- ----------------------------------------------------------------------------------------------------------
Ratios to Average Expenses ............................... .79% .79% .78% .81%*
Net Assets: ======= ======= ======= =======
Investment income--net ................. 4.95% 5.21% 5.20% 5.39%*
======= ======= ======= =======
- ----------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) $24,268 $19,511 $15,231 $ 9,179
Data: ======= ======= ======= =======
Portfolio turnover ..................... 101.75% 84.69% 162.83% 178.62%
======= ======= ======= =======
- ----------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales
loads.
+ Commencement of operations.
++ Aggregate total investment return.
See Notes to Financial Statements.
14
<PAGE>
Merrill Lynch Florida Municipal Bond Fund July 31, 1998
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Florida Municipal Bond Fund (the "Fund") is part of Merrill Lynch
Multi-State Municipal Series Trust (the "Trust"). The Fund is registered under
the Investment Company Act of 1940 as a non-diversified, open-end management
investment company. The Fund offers four classes of shares under the Merrill
Lynch Select Pricingsm System. Shares of Class A and Class D are sold with a
front-end sales charge. Shares of Class B and Class C may be subject to a
contingent deferred sales charge. All classes of shares have identical voting,
dividend, liquidation and other rights and the same terms and conditions, except
that Class B, Class C and Class D Shares bear certain expenses related to the
account maintenance of such shares, and Class B and Class C Shares also bear
certain expenses related to the distribution of such shares. Each class has
exclusive voting rights with respect to matters relating to its account
maintenance and distribution expenditures. The following is a summary of
significant accounting policies followed by the Fund.
(a) Valuation of investments--Municipal bonds and other portfolio securities in
which the Fund invests are traded primarily in the over-the-counter municipal
bond and money markets and are valued at the last available bid price in the
over-the-counter market or on the basis of yield equivalents as obtained from
one or more dealers that make markets in the securities. Financial futures
contracts and options thereon, which are traded on exchanges, are valued at
their settlement prices as of the close of such exchanges. Short-term
investments with remaining maturities of sixty days or less are valued at
amortized cost, which approximates market value. Securities and assets for which
market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of Trustees of
the Trust, including valuations furnished by a pricing service retained by the
Trust, which may utilize a matrix system for valuations. The procedures of the
pricing service and its valuations are reviewed by the officers of the Trust
under the general supervision of the Trustees.
(b) Derivative financial instruments--The Fund may engage in various portfolio
strategies to seek to increase its return by hedging its portfolio against
adverse movements in the debt 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 for the purpose of hedging the
market risk on existing securities or the intended purchase of securities.
Futures contracts are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a contract, the
Fund deposits and maintains as collateral such initial margin as required by the
exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.
(c) Income taxes--It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.
(d) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Interest income is recognized on the accrual basis. Discounts and market
premiums are amortized into interest income. Realized gains and losses on
security transactions are determined on the identified cost basis.
(e) Prepaid registration fees--Prepaid registration fees are charged to expense
as the related shares are issued.
(f) 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. Distributions in excess of realized capital gains are due
primarily to differing tax treatments for futures transactions and post-October
losses.
15
<PAGE>
Merrill Lynch Florida Municipal Bond Fund July 31, 1998
NOTES TO FINANCIAL STATEMENTS (concluded)
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 Merrill Lynch Funds
Distributor ("MLFD" or "Distributor"), a division of Princeton Funds
Distributor, Inc. ("PFD"), 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: 0.55% of the Fund's average daily net assets not exceeding $500
million; 0.525% of average daily net assets in excess of $500 million but not
exceeding $1 billion; and 0.50% of average daily net assets in excess of $1
billion.
Pursuant to the Distribution Plans adopted by the Fund in accordance with Rule
12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are accrued daily
and paid monthly at annual rates based upon the average daily net assets of the
shares as follows:
- --------------------------------------------------------------------------------
Account Distribution
Maintenance Fee Fee
- --------------------------------------------------------------------------------
Class B ..................................... 0.25% 0.25%
Class C ..................................... 0.25% 0.35%
Class D ..................................... 0.10% --
- --------------------------------------------------------------------------------
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Inc. ("MLPF&S"), a subsidiary of ML & Co., also provides account
maintenance and distribution services to the Fund. The ongoing account
maintenance fee compensates the Distributor and MLPF&S for providing account
maintenance services to Class B, Class C and Class D shareholders. The ongoing
distribution fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B and Class C
shareholders.
For the year ended July 31, 1998, MLFD earned underwriting discounts and MLPF&S
earned dealer concessions on sales of the Fund's Class A and Class D Shares as
follows:
- --------------------------------------------------------------------------------
MLFD MLPF&S
- --------------------------------------------------------------------------------
Class A ..................................... $1,243 $11,800
Class D ..................................... $2,713 $23,511
- --------------------------------------------------------------------------------
For the year ended July 31, 1998, MLPF&S received contingent deferred sales
charges of $125,313 and $1,169 relating to transactions in Class B and Class C
Shares, respectively. Furthermore, MLPF&S received contingent deferred sales
charges of $10,000 relating to transactions subject to front-end sales charge
waivers in Class D Shares.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co., is
the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or directors of
FAM, PSI, FDS, PFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended July 31, 1998 were $221,982,308 and $238,250,796, respectively.
Net realized gains (losses) for the year ended July 31, 1998 and net unrealized
gains as of July 31, 1998 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Gains
- --------------------------------------------------------------------------------
Long-term investments ....................... $ 4,718,760 $ 13,668,018
Financial futures contracts ................. (807,465) --
----------- ------------
Total ....................................... $ 3,911,295 $ 13,668,018
=========== ============
- --------------------------------------------------------------------------------
As of July 31, 1998, net unrealized appreciation for Federal income tax purposes
aggregated $13,624,801, of which $13,777,727 related to appreciated securities
and $152,926 related to depreciated securities. The aggregate cost of
investments at July 31, 1998 for Federal income tax purposes was $209,850,966.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest transactions was
$13,639,151 and $39,215,251 for the years ended July 31, 1998 and July 31, 1997,
respectively.
16
<PAGE>
Merrill Lynch Florida Municipal Bond Fund July 31, 1998
Transactions in shares of beneficial interest for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ................................. 648,986 $ 6,738,638
Shares issued to share-
holders in reinvestment of
dividends ................................... 102,167 1,060,119
---------- ------------
Total issued ................................ 751,153 7,798,757
Shares redeemed ............................. (1,098,382) (11,394,663)
---------- ------------
Net decrease ................................ (347,229) $ (3,595,906)
========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ................................. 1,198,024 $ 12,044,059
Shares issued to share-
holders in reinvestment of
dividends ................................... 102,957 1,034,308
---------- ------------
Total issued ................................ 1,300,981 13,078,367
Shares redeemed ............................. (1,415,548) (14,209,728)
---------- ------------
Net decrease ................................ (114,567) $ (1,131,361)
========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ................................. 1,857,210 $ 19,281,640
Shares issued to share-
holders in reinvestment of
dividends ................................... 241,773 2,508,474
---------- ------------
Total issued ................................ 2,098,983 21,790,114
Automatic conversion
of shares ................................... (44,185) (459,536)
Shares redeemed ............................. (3,756,113) (38,946,230)
---------- ------------
Net decrease ................................ (1,701,315) $(17,615,652)
========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ................................. 1,862,462 $ 18,706,803
Shares issued to share-
holders in reinvestment of
dividends ................................... 314,901 3,162,398
---------- ------------
Total issued ................................ 2,177,363 21,869,201
Automatic conversion
of shares ................................... (88,402) (887,789)
Shares redeemed ............................. (6,233,558) (62,569,290)
---------- ------------
Net decrease ................................ (4,144,597) $(41,587,878)
========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ................................. 367,401 $ 3,807,777
Shares issued to shareholders
in reinvestment of dividends ................ 17,062 176,743
---------- ------------
Total issued ................................ 384,463 3,984,520
Shares redeemed ............................. (105,334) (1,094,008)
---------- ------------
Net increase ................................ 279,129 $ 2,890,512
========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ................................. 325,779 $ 3,269,654
Shares issued to shareholders
in reinvestment of dividends ................ 17,881 179,309
---------- ------------
Total issued ................................ 343,660 3,448,963
Shares redeemed ............................. (344,557) (3,461,143)
---------- ------------
Net decrease ................................ (897) $ (12,180)
========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ................................. 762,178 $ 7,918,934
Automatic conversion
of shares ................................... 44,259 459,536
Shares issued to shareholders
in reinvestment of dividends ................ 43,073 446,045
---------- ------------
Total issued ................................ 849,510 8,824,515
Shares redeemed ............................. (399,214) (4,142,620)
---------- ------------
Net increase ................................ 450,296 $ 4,681,895
========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ................................. 873,825 $ 8,795,859
Automatic conversion
of shares ................................... 88,522 887,789
Shares issued to shareholders
in reinvestment of dividends ................ 36,575 366,988
---------- ------------
Total issued ................................ 998,922 10,050,636
Shares redeemed ............................. (648,762) (6,534,468)
---------- ------------
Net increase ................................ 350,160 $ 3,516,168
========== ============
- --------------------------------------------------------------------------------
5. Capital Loss Carryforward:
At July 31, 1998, the Fund had a capital loss carryforward of approximately
$12,540,000, of which $10,264,000 expires in 2003 and $2,276,000 expires in
2004. This amount will be available to offset like amounts of any future taxable
gains.
17
<PAGE>
Merrill Lynch Florida Municipal Bond Fund July 31, 1998
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders, Merrill Lynch Florida Municipal Bond
Fund 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 as of July 31, 1998, the
related statements of operations for the year then ended and changes in net
assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the five-year period then ended.
These financial statements and the financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the 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 at July 31,
1998 by correspondence with the custodian and broker. 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, such financial statements and financial highlights 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, 1998, the results of its operations, the changes in its net
assets, and the financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
September 8, 1998
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid monthly by Merrill Lynch
Florida Municipal Bond Fund during its taxable year ended July 31, 1998 qualify
as tax-exempt interest dividends for Federal income tax purposes.
Additionally, there were no capital gains distributions made by the Fund during
the year.
Please retain this information for your records.
18
<PAGE>
Merrill Lynch Florida Municipal Bond Fund July 31, 1998
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Vincent R. Giordano, Senior Vice President
Donald C. Burke, Vice President
Robert A. DiMella, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Robert E. Putney, III, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
19
<PAGE>
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of the Fund unless accompanied or preceded by the Fund's
current prospectus. Past performance results shown in this report should not be
considered a representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Statements and other information
herein are as dated and are subject to change.
Merrill Lynch Florida
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011 #16031--7/98
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