MERRILL LYNCH
CALIFORNIA
INSURED
MUNICIPAL
BOND FUND
[GRAPHIC OMITTED]
STRATEGIC
Performance
Semi-Annual Report
February 29, 2000
<PAGE>
Merrill Lynch California Insured Municipal Bond Fund February 29, 2000
TO OUR SHAREHOLDERS
The Municipal Market Environment
Throughout most of the period ended February 29, 2000, US fixed-income interest
rates were under pressure as domestic economic growth remained robust and rising
commodity prices, especially oil, rekindled investor concerns regarding a
reemergence of inflationary pressures. US economic growth, in part intensified
by Year 2000 (Y2K) preparations, grew at a 6.9% rate in the fourth quarter of
1999 and at a 4.4% annual rate for all of 1999.
However, despite these significant growth rates, no price measure indicator has
shown any considerable signs of pressures at either the consumer level or from
labor, despite the lowest unemployment rates since January 1970. Given no signs
of an economic slowdown, the Federal Reserve Board continued to raise short-term
interest rates in August and November 1999 and again in early February 2000. In
each instance, the Federal Reserve Board cited both the continued growth of US
employment and the impressive strength of the US equity markets as reasons for
attempting to moderate US economic growth before inflationary price increases
are realized. In this environment, long-term US Treasury bond yields rose almost
60 basis points (0.60%) by mid-January 2000 to 6.75%, their highest yield level
since June 1997.
However, in late January and early February 2000, the US Treasury announced that
it intended to use present and future surpluses to purchase existing high-coupon
debt, as well as to limit future issuance of longer maturity debt. While
complete details have not been released, we expect the reduced supply of
long-term US Treasury bonds to be significant and easily exceed demand on the
part of the world's financial institutions and governments. US Treasury bond
prices began rising as investors began hoarding what is expected to become a
scarce commodity. While US Treasury yields have remained high through the past
ten years, the yield on 30-year US Treasury bonds fell dramatically, by
declining more than 50 basis points to end the period at 6.14%.
The municipal bond market has also been under pressure throughout the entire
period. By mid-January 2000, yields on long-term, uninsured revenue bonds rose
more than 50 basis points to 6.35%, as measured by the Bond Buyer Revenue Bond
Index. While some states such as California and Maryland have announced that
their present and expected budget surpluses will allow for the cancellation
and/or postponement of expected bond issuance, the municipal bond market has
been unable to match the sort of price improvement that US Treasury bonds have
shown in recent weeks. Municipal bond yields declined approximately 10 basis
points to 6.24% by February 29, 2000. During the last few months, long-term
tax-exempt bond yields rose more than 40 basis points to their highest level
since August 1995.
The relative underperformance of the municipal bond market in recent months has
been especially disappointing given the strong technical position the tax-exempt
bond market has enjoyed. The issuance of long-term tax-exempt securities has
dramatically declined. Over the last year, $212 billion in new long-term
municipal securities was issued, a decline of more than 20% compared to the same
period a year earlier. For the three months ended February 29, 2000, less than
$40 billion in new tax-exempt bonds was underwritten, a decline of more than 30%
compared to the February 28, 1999 quarter. Thus far in 2000, total bond issuance
volume is less than $20 billion, a decline of more than 40% compared to the
first two months of 1999.
Although investors received more than $30 billion in coupon payments, bond
maturities and the proceeds from early bond redemptions coupled with the highest
municipal bond yields in three years, overall investor demand has diminished.
Long-term municipal bond mutual funds have seen consistent outflows in recent
months as the yields of individual securities have risen faster than those of
larger, more diverse mutual funds. Over the last six months, tax-exempt mutual
funds have had net redemptions of approximately $9 billion. Also, the demand
from property and casualty insurance companies has weakened as a result of the
losses and anticipated losses incurred from a series of damaging storms across
much of the eastern United States. Additionally, many institutional investors
who have in recent years been attracted to the municipal bond market by
historically attractive tax-exempt bond yield ratios of over 90%, found other
asset classes even more attractive. Even with a reduced supply position,
tax-exempt issuers have
1
<PAGE>
Merrill Lynch California Insured Municipal Bond Fund February 29, 2000
been forced repeatedly to raise municipal bond yields in an attempt to attract
adequate demand.
However, the recent relative underperformance of the municipal bond market has
resulted in the opportunity for long-term investors to purchase tax-exempt
issues whose yields are in excess of taxable US Treasury securities. At February
29, 2000, long-term uninsured municipal revenue bond yields were 101.5% of
comparable US Treasury securities. In recent months, many taxable asset classes,
such as corporate bonds, mortgage-backed securities, and US Government agency
issues have all accelerated debt issuance. This acceleration occurred largely to
avoid issuing securities at year-end and thereby avoid any associated potential
Y2K problems. However, this increased issuance also resulted in higher yield
levels in the various asset classes as lower bond prices became necessary to
attract sufficient investor demand. Going forward, we believe that the pace of
non-US Government debt is likely to slow significantly. As the supply of this
debt declines, many institutional investors are likely to return to the
municipal bond market and the attractive yield ratios available. Furthermore,
with the potential scarcity of longer maturity debt, the attractiveness of the
US municipal bond market should be further enhanced.
Any significantly lower municipal bond yields are still likely to require weaker
US employment growth and consumer spending. The tightening actions taken in
recent months by the Federal Reserve Board, as well as those expected in March
and perhaps May 2000, should eventually slow US economic growth. The recent
decline in US home sales is perhaps the first sign that consumer spending is
being slowed by higher interest rates. Until further signs develop, it is likely
that the municipal bond market's current favorable technical position will
dampen significant tax-exempt interest rate volatility and provide a stable
environment for an eventual improvement in municipal bond prices.
Portfolio Strategy
During the six months ended February 29, 2000, our investment strategy focused
on seeking to provide an attractive level of income exempt from Federal and
California income taxes. During the period, we slightly restructured the Fund by
increasing the average level of coupon issues to seek to improve our current
return. We also shortened the Fund's average portfolio maturity in an effort to
reduce volatility. This restructuring has been a slow process and is ongoing,
largely because of a lack of California issuance and a relatively illiquid
secondary market. However, this newer structure is less interest rate sensitive,
and we expect it should provide a higher current coupon income. We also
continued to emphasize credit quality. We purposely underutilized the portion of
Fund assets that can be committed to uninsured securities. At the close of the
six-month period, 100% of the Fund's assets were rated AA or better by at least
one of the major rating agencies, and 97% of the portfolio was rated AAA with
bond insurance. Our high-quality issues helped Fund performance as lower-rated
credits did not perform well in last year's rising interest rate environment.
In Conclusion
We appreciate your interest in Merrill Lynch California Insured Municipal Bond
Fund, and we look forward to assisting you with your financial needs in the
months and years ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Trustee
/s/ Vincent R. Giordano
Vincent R. Giordano
Senior Vice President
/s/ Walter C. O'Connor
Walter C. O'Connor
Vice President and Portfolio Manager
March 30, 2000
2
<PAGE>
Merrill Lynch California Insured Municipal Bond Fund February 29, 2000
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 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. The Fund's Investment Adviser voluntarily waived
a portion of its management fee. Without such waiver, the Fund's
performance would have been lower.
3
<PAGE>
Merrill Lynch California Insured Municipal Bond Fund February 29, 2000
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
- --------------------------------------------------------------------------------
Class A Shares*
- --------------------------------------------------------------------------------
Year Ended 12/31/99 -4.43% -8.25%
- --------------------------------------------------------------------------------
Five Years Ended 12/31/99 +6.55 +5.68
- --------------------------------------------------------------------------------
Inception (2/26/93)
through 12/31/99 +4.60 +3.98
- --------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
- --------------------------------------------------------------------------------
% Return % Return
Without CDSC With CDSC**
- --------------------------------------------------------------------------------
Class C Shares*
- --------------------------------------------------------------------------------
Year Ended 12/31/99 -5.02% -5.93%
- --------------------------------------------------------------------------------
Five Years Ended 12/31/99 +5.88 +5.88
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 12/31/99 +5.37 +5.37
- --------------------------------------------------------------------------------
* 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 B Shares*
- --------------------------------------------------------------------------------
Year Ended 12/31/99 -4.91% -8.56%
- --------------------------------------------------------------------------------
Five Years Ended 12/31/99 +5.99 +5.99
- --------------------------------------------------------------------------------
Inception (2/26/93)
through 12/31/99 +4.08 +4.08
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after
4 years.
** Assuming payment of applicable contingent deferred sales charge.
- --------------------------------------------------------------------------------
% Return Without % Return With
Sales Charge Sales Charge**
- --------------------------------------------------------------------------------
Class D Shares*
- --------------------------------------------------------------------------------
Year Ended 12/31/99 -4.62% -8.43%
- --------------------------------------------------------------------------------
Five Years Ended 12/31/99 +6.42 +5.55
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 12/31/99 +5.93 +5.10
- --------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
Recent Performance Results*
<TABLE>
<CAPTION>
6 Month 12 Month Since Inception Standardized
As of February 29, 2000 Total Return Total Return Total Return 30-Day Yield
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ML California Insured Municipal Bond Fund Class A Shares -1.17% -4.40% +37.04% 4.88%
- -----------------------------------------------------------------------------------------------------------------------
ML California Insured Municipal Bond Fund Class B Shares -1.32 -4.87 +32.42 4.58
- -----------------------------------------------------------------------------------------------------------------------
ML California Insured Municipal Bond Fund Class C Shares -1.37 -4.98 +32.19 4.48
- -----------------------------------------------------------------------------------------------------------------------
ML California Insured Municipal Bond Fund Class D Shares -1.12 -4.48 +35.98 4.79
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Investment results shown do not reflect sales charges; results shown would
be lower if a sales charge was included. Total investment returns are
based on changes in net asset values for the periods shown, and assume
reinvestment of all dividends and capital gains distributions at net asset
value on the payable date. The Fund's since inception dates are from
2/26/93 for Class A & Class B Shares and from 10/21/94 for Class C & Class
D Shares.
4
<PAGE>
Merrill Lynch California Insured Municipal Bond Fund February 29, 2000
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face
Ratings Ratings Amount Issue Value
- ---------------------------------------------------------------------------------------------------------------------------------
California--97.3%
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alameda Corridor Transportation Authority, California, Revenue Bonds, Senior Lien,
Series A (e):
AAA Aaa $2,845 5.25% due 10/01/2021 $ 2,611
AAA Aaa 1,000 5% due 10/01/2029 854
- ---------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Alameda County, California, Water District Revenue Refunding Bonds, 4.75% due 6/01/2020 (e) 1,711
- ---------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Anaheim, California, Public Financing Authority, Lease Revenue Bonds (Public Improvements
Project), Series A, 5% due 9/01/2027 (d) 860
- ---------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Anaheim, California, Public Financing Authority, Tax Allocation Revenue Refunding Bonds,
RITES, 8.87% due 12/28/2018 (e)(g) 1,104
- ---------------------------------------------------------------------------------------------------------------------------------
AA- Aa2 790 California HFA, Home Mortgage Revenue Bonds, AMT, Series F-1, 7% due 8/01/2026 (c) 811
- ---------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 California Health Facilities Finance Authority Revenue Bonds (Scripps Memorial Hospital),
Series A, 6.375% due 10/01/2022 (e) 2,040
- ---------------------------------------------------------------------------------------------------------------------------------
A1+ NR* 600 California Pollution Control Financing Authority, PCR, Refunding (Pacific Gas and Electric),
VRDN, Series F, 3.20% due 11/01/2026 (h) 600
- ---------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 California State Department of Water Resources, Water System Revenue Refunding Bonds
(Central Valley Project), Series Q, 5.375% due 12/01/2027 (e) 1,833
- ---------------------------------------------------------------------------------------------------------------------------------
A+ Aaa 2,000 California State Public Works Board, Lease Revenue Bonds (Department of Corrections),
Series A, 7% due 11/01/2004 (f) 2,230
- ---------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,500 California State Public Works Board, Lease Revenue Refunding Bonds (Various Community
College Project), Series B, 5.625% due 3/01/2019 (a) 1,472
- ---------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,700 Contra Costa County, California, Public Financing Authority, Lease Revenue Refunding Bonds
(Various Capital Facilities), Series A, 5.35% due 8/01/2024 (e) 2,491
- ---------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 East Bay, California, Municipal Utilities District, Water System Revenue Bonds, 4.75%
due 6/01/2028 (e) 817
- ---------------------------------------------------------------------------------------------------------------------------------
Grossmont, California, Unified High School District, COP (d):
AAA Aaa 1,220 5.65% due 9/01/2017 1,211
AAA Aaa 2,250 5.75% due 9/01/2026 2,202
- ---------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,500 Industry, California, Urban Development Agency, Tax Allocation Refunding Bonds
(Transportation District Industrial Redevelopment Project 2), 6.50% due 11/01/2016 (e)(i) 2,632
- ---------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Irvine, California, Public Facilities and Infrastructure Authority, Assessment Revenue
Refunding Bonds, Series A, 5.05% due 9/02/2022 (a) 882
- ---------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 2,000 Los Angeles, California, Convention and Exhibition Center Authority, Lease Revenue
Refunding Bonds, RITR, Series 21, 7.97% due 8/15/2018 (e)(g) 1,800
- ---------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 2,000 Los Angeles, California, Harbor Department Revenue Bonds, RITR,
AMT, Series RI-7, 9.595% due 11/01/2026 (e)(g) 2,056
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PORTFOLIO ABBREVIATIONS
To simplify the listings of Merrill Lynch California Insured Municipal Bond
Fund's portfolio holdings in the Schedule of Investments, we have abbreviated
the names of many of the securities according to the list below and at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
GO General Obligation Bonds
HFA Housing Finance Agency
INFLOS Inverse Floating Rate Municipal Bonds
PCR Pollution Control Revenue Bonds
RITES Residual Interest Tax-Exempt Securities
RITR Residual Interest Trust Receipts
VRDN Variable Rate Demand Notes
5
<PAGE>
Merrill Lynch California Insured Municipal Bond Fund February 29, 2000
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face
Ratings Ratings Amount Issue Value
- ---------------------------------------------------------------------------------------------------------------------------------
California (concluded)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AAA Aaa $1,000 Los Angeles County, California, Metropolitan Transportation Authority, Sales Tax Revenue
Refunding Bonds, Proposition A--First Tier, Senior Series C, 5% due 7/01/2026 (a) $ 861
- ---------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,140 Mount Diablo, California, Unified School District, Community Facilities District Special Tax
No. 1, 6.30% due 8/01/2022 (a) 2,175
- ---------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,500 Mountain View, California, Capital Improvements Financing Authority, Revenue Refunding
Bonds (City Hall Community Theatre), 6.50% due 8/01/2016 (e) 2,606
- ---------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 Orchard, California, School District, GO, Series A, 6.50% due 8/01/2005 (b)(f) 3,302
- ---------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 Pomona, California, Public Financing Authority, Revenue Refunding Bonds (Southwest
Pomona Redevelopment Project), Series W, 5% due 2/01/2024 (e) 2,608
- ---------------------------------------------------------------------------------------------------------------------------------
Sacramento, California, Municipal Utility District, Electric Revenue Refunding Bonds:
AAA Aaa 2,000 INFLOS, 9.173% due 8/15/2018 (b)(g) 2,105
AAA Aaa 2,625 Series L, 5.125% due 7/01/2022 (e) 2,341
- ---------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,500 Salida, California, Area Public Facilities Financing Agency, Community Facilities District
Special Tax Refunding Bonds (No. 1988-1), 5.25% due 9/01/2028 (d) 2,246
- ---------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 San Diego, California, Public Facilities Financing Authority, Sewer Revenue Bonds, Series A,
5.25% due 5/15/2027 (b) 1,804
- ---------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 San Francisco, California, Bay Area Rapid Transit District, Sales Tax Revenue Refunding
Bonds, 5% due 7/01/2028 (a) 856
- ---------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,500 San Francisco, California, City and County Airport Commission, International Airport
Revenue Bonds, AMT, Second Series, Issue 11, 6.25% due 5/01/2026 (b) 2,530
- ---------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 San Jose, California, Redevelopment Agency Tax Allocation Bonds (Merged Area
Redevelopment Project), 5% due 8/01/2026 (a) 1,722
- ---------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,500 Stockton, California, Revenue Bonds, COP (Wastewater Treatment Plant Expansion), Series A,
6.70% due 9/01/2004 (b)(f) 2,750
- ---------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,630 Temecula Valley, California, Unified School District, GO, Series F, 5.80% due 9/01/2014 (d) 1,666
- ---------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,500 Turlock, California, Irrigation District Revenue Refunding Bonds, Series A,
5% due 1/01/2026 (e) 2,156
- ---------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,500 University of California, Revenue Refunding Bonds (Research Facilities), Series C,
5% due 9/01/2021 (d) 1,320
- ---------------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost--$62,860)--97.3% 63,265
Variation Margin on Financial Futures Contracts**--(0.0%) (14)
Other Assets Less Liabilities--2.7% 1,751
-------
Net Assets--100.0% $65,002
=======
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) AMBAC Insured.
(b) FGIC Insured.
(c) FHA Insured.
(d) FSA Insured.
(e) MBIA Insured.
(f) Prerefunded.
(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 February 29, 2000.
(h) The interest rate is subject to change periodically based upon prevailing
market rates. The interest rate shown is the rate in effect at February
29, 2000.
(i) All or a portion of security held as collateral in connection with open
financial futures contracts.
* Not Rated.
** Financial futures contracts sold as of February 29, 2000 were as follows:
- --------------------------------------------------------------------------------
(in Thousands)
- --------------------------------------------------------------------------------
Number of Expiration
Contracts Issue Date Value
- --------------------------------------------------------------------------------
50 US Treasury Bonds March 2000 $4,664
- --------------------------------------------------------------------------------
Total Financial Futures Contracts Sold
(Total Contract Price--$4,612) $4,664
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
6
<PAGE>
Merrill Lynch California Insured Municipal Bond Fund February 29, 2000
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities as of February 29, 2000
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$62,860,248) ..................... $ 63,264,511
Cash ..................................................................... 129,596
Receivables:
Interest ............................................................... $ 1,033,703
Securities sold ........................................................ 872,327
Beneficial interest sold ............................................... 5,102 1,911,132
------------
Prepaid registration fees and other assets ............................... 12,333
------------
Total assets ............................................................. 65,317,572
------------
- ----------------------------------------------------------------------------------------------------------------------------
Liabilities: Payables:
Beneficial interest redeemed ........................................... 99,705
Dividends to shareholders .............................................. 70,048
Investment adviser ..................................................... 22,828
Distributor ............................................................ 21,084
Variation margin ....................................................... 14,063 227,728
------------
Accrued expenses and other liabilities ................................... 87,602
------------
Total liabilities ........................................................ 315,330
------------
- ----------------------------------------------------------------------------------------------------------------------------
Net Assets: Net assets ............................................................... $ 65,002,242
============
- ----------------------------------------------------------------------------------------------------------------------------
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited number of
Consist of: shares authorized ........................................................ $ 80,255
Class B Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized ........................................................ 492,044
Class C Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized ........................................................ 29,172
Class D Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized ........................................................ 75,912
Paid-in capital in excess of par ......................................... 67,473,459
Accumulated realized capital losses on investments--net .................. (3,251,148)
Accumulated distributions in excess of realized capital gains--net ....... (249,215)
Unrealized appreciation on investments--net .............................. 351,763
------------
Net assets ............................................................... $ 65,002,242
============
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value: Class A--Based on net assets of $7,700,096 and 802,551 shares
of beneficial interest outstanding ....................................... $ 9.59
============
Class B--Based on net assets of $47,215,906 and 4,920,437 shares
of beneficial interest outstanding ....................................... $ 9.60
============
Class C--Based on net assets of $2,797,866 and 291,722 shares
of beneficial interest outstanding ....................................... $ 9.59
============
Class D--Based on net assets of $7,288,374 and 759,123 shares
of beneficial interest outstanding ....................................... $ 9.60
============
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
Merrill Lynch California Insured Municipal Bond Fund February 29, 2000
FINANCIAL INFORMATION (continued)
Statement of Operations
<TABLE>
<CAPTION>
For the Six Months Ended
February 29, 2000
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income: Interest and amortization of premium and discount earned .... $ 2,128,069
- ------------------------------------------------------------------------------------------------------------
Expenses: Investment advisory fees ......................................... $ 196,989
Account maintenance and distribution fees--Class B ............... 130,067
Professional fees ................................................ 31,359
Registration fees ................................................ 26,067
Accounting services .............................................. 25,226
Printing and shareholder reports ................................. 19,027
Account maintenance and distribution fees--Class C ............... 10,758
Transfer agent fees--Class B ..................................... 10,659
Custodian fees ................................................... 6,815
Account maintenance fees--Class D ................................ 3,772
Trustees' fees and expenses ...................................... 3,219
Pricing fees ..................................................... 2,673
Transfer agent fees--Class A ..................................... 1,472
Transfer agent fees--Class D ..................................... 1,314
Transfer agent fees--Class C ..................................... 776
Other ............................................................ 4,972
-----------
Total expenses ................................................... 475,165
-----------
Investment income--net ........................................... 1,652,904
-----------
- ------------------------------------------------------------------------------------------------------------
Realized & Realized loss on investments--net ................................ (3,200,568)
Unrealized Change in unrealized appreciation/depreciation on investments--net 455,371
Gain -----------
(Loss) on Net Decrease in Net Assets Resulting from Operations ............. $(1,092,293)
Invest- ===========
ments--Net:
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
Merrill Lynch California Insured Municipal Bond Fund February 29, 2000
FINANCIAL INFORMATION (continued)
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Six For the Year
Months Ended Ended
February 29, August 31,
Increase (Decrease) in Net Assets: 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations: Investment income--net ................................................. $ 1,652,904 $ 3,665,898
Realized gain (loss) on investments--net ............................... (3,200,568) 815,769
Change in unrealized appreciation/depreciation on investments--net ..... 455,371 (5,579,600)
------------ ------------
Net decrease in net assets resulting from operations ................... (1,092,293) (1,097,933)
------------ ------------
- ----------------------------------------------------------------------------------------------------------------------------
Dividends & Investment income--net:
Distributions to Class A .............................................................. (212,896) (458,272)
Shareholders: Class B .............................................................. (1,175,172) (2,554,677)
Class C .............................................................. (79,085) (180,916)
Class D .............................................................. (185,751) (472,033)
In excess of realized gain on investments--net:
Class A .............................................................. -- (28,215)
Class B .............................................................. -- (177,057)
Class C .............................................................. -- (12,805)
Class D .............................................................. -- (31,138)
------------ ------------
Net decrease in net assets resulting from dividends and distributions
to shareholders ........................................................ (1,652,904) (3,915,113)
------------ ------------
- ----------------------------------------------------------------------------------------------------------------------------
Beneficial Interest Net decrease in net assets derived from beneficial interest transactions (12,499,170) (8,725,912)
Transactions: ------------ ------------
- ----------------------------------------------------------------------------------------------------------------------------
Net Assets: Total decrease in net assets ........................................... (15,244,367) (13,738,958)
Beginning of period .................................................... 80,246,609 93,985,567
------------ ------------
End of period .......................................................... $ 65,002,242 $ 80,246,609
============ ============
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
Merrill Lynch California Insured Municipal Bond Fund February 29, 2000
FINANCIAL INFORMATION (continued)
Financial Highlights
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended For the Year Ended August 31,
Feb. 29, -------------------------------------------
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ........... $ 9.95 $ 10.54 $ 10.25 $ 9.84 $ 9.65
Operating ------ ------- ------- ------- -------
Performance: Investment income--net ......................... .24 .47 .49 .50 .52
Realized and unrealized gain (loss) on
investments--net ............................... (.36) (.56) .29 .41 .19
------ ------- ------- ------- -------
Total from investment operations ............... (.12) (.09) .78 .91 .71
------ ------- ------- ------- -------
Less dividends and distributions:
Investment income--net ....................... (.24) (.47) (.49) (.50) (.52)
In excess of realized gain on investments--net -- (.03) -- -- --
------ ------- ------- ------- -------
Total dividends and distributions .............. (.24) (.50) (.49) (.50) (.52)
------ ------- ------- ------- -------
Net asset value, end of period ................. $ 9.59 $ 9.95 $ 10.54 $ 10.25 $ 9.84
====== ======= ======= ======= =======
- -----------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ............. (1.17%)+ (1.01%) 7.79% 9.50% 7.44%
Return:** ====== ======= ======= ======= =======
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to Expenses, net of reimbursement ................. .92%* .92% .81% .63% .49%
Average ====== ======= ======= ======= =======
Net Assets: Expenses ....................................... .92%* .92% .82% .89% .85%
====== ======= ======= ======= =======
Investment income--net ......................... 5.01%* 4.47% 4.74% 5.03% 5.20%
====== ======= ======= ======= =======
- -----------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) ....... $7,700 $ 9,663 $12,520 $12,438 $14,183
Data: ====== ======= ======= ======= =======
Portfolio turnover ............................. 65.34% 151.45% 82.91% 67.28% 87.77%
====== ======= ======= ======= =======
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales
charges.
+ Aggregate total investment return.
See Notes to Financial Statements.
10
<PAGE>
Merrill Lynch California Insured Municipal Bond Fund February 29, 2000
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
<TABLE>
<CAPTION>
Class B
----------------------------------------------------------
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended For the Year Ended August 31,
Feb. 29, -------------------------------------------
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ........... $ 9.95 $ 10.55 $ 10.25 $ 9.84 $ 9.65
Operating ------- ------- ------- ------- -------
Performance: Investment income--net ......................... .22 .41 .44 .45 .47
Realized and unrealized gain (loss) on
investments--net ............................... (.35) (.57) .30 .41 .19
------- ------- ------- ------- -------
Total from investment operations ............... (.13) (.16) .74 .86 .66
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net ....................... (.22) (.41) (.44) (.45) (.47)
In excess of realized gain on investments--net -- (.03) -- -- --
------- ------- ------- ------- -------
Total dividends and distributions .............. (.22) (.44) (.44) (.45) (.47)
------- ------- ------- ------- -------
Net asset value, end of period ................. $ 9.60 $ 9.95 $ 10.55 $ 10.25 $ 9.84
======= ======= ======= ======= =======
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ............. (1.32%)+ (1.61%) 7.35% 8.95% 6.89%
Return:** ======= ======= ======= ======= =======
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to Expenses, net of reimbursement ................. 1.42%* 1.42% 1.31% 1.14% .99%
Average ======= ======= ======= ======= =======
Net Assets: Expenses ....................................... 1.42%* 1.42% 1.32% 1.39% 1.36%
======= ======= ======= ======= =======
Investment income--net ......................... 4.51%* 3.96% 4.24% 4.52% 4.69%
======= ======= ======= ======= =======
- ------------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) ....... $47,216 $57,410 $66,805 $69,320 $73,292
Data: ======= ======= ======= ======= =======
Portfolio turnover ............................. 65.34% 151.45% 82.91% 67.28% 87.77%
======= ======= ======= ======= =======
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales
charges.
+ Aggregate total investment return.
See Notes to Financial Statements.
11
<PAGE>
Merrill Lynch California Insured Municipal Bond Fund February 29, 2000
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
<TABLE>
<CAPTION>
Class C
------------------------------------------------------
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended For the Year Ended August 31,
Feb. 29, ----------------------------------------
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ........... $ 9.94 $ 10.54 $10.24 $ 9.84 $ 9.64
Operating ------ ------- ------ ------ ------
Performance: Investment income--net ......................... .21 .40 .43 .44 .46
Realized and unrealized gain (loss) on
investments--net ............................... (.35) (.57) .30 .40 .20
------ ------- ------ ------ ------
Total from investment operations ............... (.14) (.17) .73 .84 .66
------ ------- ------ ------ ------
Less dividends and distributions:
Investment income--net ....................... (.21) (.40) (.43) (.44) (.46)
In excess of realized gain on investments--net -- (.03) -- -- --
------ ------- ------ ------ ------
Total dividends and distributions .............. (.21) (.43) (.43) (.44) (.46)
------ ------- ------ ------ ------
Net asset value, end of period ................. $ 9.59 $ 9.94 $10.54 $10.24 $ 9.84
====== ======= ====== ====== ======
- --------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ............. (1.37%)+ (1.71%) 7.25% 8.74% 6.90%
Return:** ====== ======= ====== ====== ======
- --------------------------------------------------------------------------------------------------------------------------
Ratios to Expenses, net of reimbursement ................. 1.52%* 1.53% 1.42% 1.24% 1.10%
Average ====== ======= ====== ====== ======
Net Assets: Expenses ....................................... 1.52%* 1.53% 1.42% 1.49% 1.46%
====== ======= ====== ====== ======
Investment income--net ......................... 4.40%* 3.86% 4.13% 4.42% 4.59%
====== ======= ====== ====== ======
- --------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) ....... $2,798 $ 4,027 $4,537 $5,361 $4,901
Data: ====== ======= ====== ====== ======
Portfolio turnover ............................. 65.34% 151.45% 82.91% 67.28% 87.77%
====== ======= ====== ====== ======
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales
charges.
+ Aggregate total investment return.
See Notes to Financial Statements.
12
<PAGE>
Merrill Lynch California Insured Municipal Bond Fund February 29, 2000
FINANCIAL INFORMATION (continued)
Financial Highlights (concluded)
<TABLE>
<CAPTION>
Class D
------------------------------------------------------
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended For the Year Ended August 31,
Feb. 29, ----------------------------------------
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ........... $ 9.95 $ 10.55 $ 10.26 $ 9.85 $ 9.65
Operating ------ ------- ------- ------ ------
Performance: Investment income--net ......................... .24 .46 .48 .49 .51
Realized and unrealized gain (loss) on
investments--net ............................... (.35) (.57) .29 .41 .20
------ ------- ------- ------ ------
Total from investment operations ............... (.11) (.11) .77 .90 .71
------ ------- ------- ------ ------
Less dividends and distributions:
Investment income--net ....................... (.24) (.46) (.48) (.49) (.51)
In excess of realized gain on investments--net -- (.03) -- -- --
------ ------- ------- ------ ------
Total dividends and distributions .............. (.24) (.49) (.48) (.49) (.51)
------ ------- ------- ------ ------
Net asset value, end of period ................. $ 9.60 $ 9.95 $ 10.55 $10.26 $ 9.85
====== ======= ======= ====== ======
- --------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ............. (1.12%)+ (1.21%) 7.68% 9.39% 7.44%
Return:** ====== ======= ======= ====== ======
- --------------------------------------------------------------------------------------------------------------------------
Ratios to Expenses, net of reimbursement ................. 1.02%* 1.02% .91% .74% .59%
Average ====== ======= ======= ====== ======
Net Assets: Expenses ....................................... 1.02%* 1.02% .92% .98% .95%
====== ======= ======= ====== ======
Investment income--net ......................... 4.91%* 4.36% 4.63% 4.92% 5.09%
====== ======= ======= ====== ======
- --------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) ....... $7,288 $ 9,147 $10,124 $4,939 $4,304
Data: ====== ======= ======= ====== ======
Portfolio turnover ............................. 65.34% 151.45% 82.91% 67.28% 87.77%
====== ======= ======= ====== ======
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales
charges.
+ Aggregate total investment return.
See Notes to Financial Statements.
13
<PAGE>
Merrill Lynch California Insured Municipal Bond Fund February 29, 2000
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch California Insured Municipal Bond Fund (the "Fund") is part of
Merrill Lynch California Municipal Series Trust (the "Trust"). The Fund is
registered under the Investment Company Act of 1940 as a non-diversified,
open-end management investment company. The Fund's financial statements are
prepared in accordance with generally accepted accounting principles, which may
require the use of management accruals and estimates. These unaudited financial
statements reflect all adjustments, which are, in the opinion of management,
necessary to a fair statement of the results for the interim period presented.
All such adjustments are of a normal recurring nature. The Fund offers four
classes of shares under the Merrill Lynch Select 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 on an
amortized cost basis, 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
14
<PAGE>
Merrill Lynch California Insured Municipal Bond Fund February 29, 2000
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 date. Distributions in excess of realized capital gains are due
primarily to differing tax treatments for futures transactions and post-October
losses.
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 the "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: .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.
Pursuant to the Distribution Plans adopted by the Fund in accordance with Rule
12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are accrued daily
and paid monthly at annual rates based upon the average daily net assets of the
shares as follows:
- --------------------------------------------------------------------------------
Account Distribution
Maintenance Fee Fee
- --------------------------------------------------------------------------------
Class B ......................................... .25% .25%
Class C ......................................... .25% .35%
Class D ......................................... .10% --
- --------------------------------------------------------------------------------
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., also provides account
maintenance and distribution services to the Fund. The ongoing account
maintenance fee compensates the Distributor and MLPF&S for providing account
maintenance services to Class B, Class C and Class D shareholders. The ongoing
distribution fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B and Class C
shareholders.
For the six months ended February 29, 2000, 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 $ 10
Class D ......................................... $192 $1,215
- --------------------------------------------------------------------------------
For the six months ended February 29, 2000, MLPF&S received contingent deferred
sales charges of $65,914 and $1,158 relating to transactions in Class B and
Class C Shares, respectively.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co., is
the Fund's transfer agent.
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 six
months ended February 29, 2000 were $43,760,817 and $50,766,714, respectively.
15
<PAGE>
Merrill Lynch California Insured Municipal Bond Fund February 29, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
Net realized gains (losses) for the six months ended February 29, 2000 and net
unrealized gains (losses) as of February 29, 2000 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Gains (Losses)
- --------------------------------------------------------------------------------
Long-term investments ........................... $(3,210,325) $404,263
Financial futures contracts ..................... 9,757 (52,500)
----------- --------
Total ........................................... $(3,200,568) $351,763
=========== ========
- --------------------------------------------------------------------------------
As of February 29, 2000, net unrealized appreciation for Federal income tax
purposes aggregated $404,263, of which $1,332,480 related to appreciated
securities and $928,217 related to depreciated securities. The aggregate cost of
investments at February 29, 2000 for Federal income tax purposes was
$62,860,248.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest transactions was
$12,499,170 and $8,725,912 for the six months ended February 29, 2000 and for
the year ended August 31, 1999, respectively.
Transactions in shares of beneficial interest for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended February 29, 2000 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 13,158 $ 125,608
Shares issued to shareholders
in reinvestment of
dividends .............................. 9,288 89,553
----------- -----------
Total issued ........................... 22,446 215,161
Shares redeemed ........................ (191,275) (1,843,053)
----------- -----------
Net decrease ........................... (168,829) $(1,627,892)
=========== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended August 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 97,727 $ 973,842
Shares issued to shareholders
in reinvestment of dividends
and distributions ...................... 15,300 205,667
----------- -----------
Total issued ........................... 113,027 1,179,509
Shares redeemed ........................ (329,069) (3,458,826)
----------- -----------
Net decrease ........................... (216,042) $(2,279,317)
=========== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Six Months Dollar
Ended February 29, 2000 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .......................... 195,231 $ 1,885,701
Shares issued to shareholders
in reinvestment of
dividends ............................ 46,464 447,681
------------ ------------
Total issued ......................... 241,695 2,333,382
Automatic conversion of
shares ............................... (14,614) (142,668)
Shares redeemed ...................... (1,076,988) (10,400,932)
------------ ------------
Net decrease ......................... (849,907) $ (8,210,218)
============ ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended August 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .......................... 688,131 $ 7,229,823
Shares issued to shareholders
in reinvestment of dividends
and distributions .................... 103,885 1,084,413
------------ ------------
Total issued ......................... 792,016 8,314,236
Automatic conversion of
shares ............................... (43,034) (449,770)
Shares redeemed ...................... (1,313,598) (13,668,474)
------------ ------------
Net decrease ......................... (564,616) $ (5,804,008)
============ ============
- --------------------------------------------------------------------------------
16
<PAGE>
Merrill Lynch California Insured Municipal Bond Fund February 29, 2000
- --------------------------------------------------------------------------------
Class C Shares for the Six Months Dollar
Ended February 29, 2000 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 9,953 $ 95,925
Shares issued to shareholders
in reinvestment of
dividends .............................. 5,157 49,697
----------- -----------
Total issued ........................... 15,110 145,622
Shares redeemed ........................ (128,321) (1,229,136)
----------- -----------
Net decrease ........................... (113,211) $(1,083,514)
=========== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended August 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 153,729 $ 1,618,701
Shares issued to shareholders
in reinvestment of dividends
and distributions ...................... 11,048 115,099
----------- -----------
Total issued ........................... 164,777 1,733,800
Shares redeemed ........................ (190,263) (1,972,579)
----------- -----------
Net decrease ........................... (25,486) $ (238,779)
=========== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Six Months Dollar
Ended February 29, 2000 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 31,064 $ 301,447
Automatic conversion of
shares ................................. 14,602 142,668
Shares issued to shareholders
in reinvestment of
dividends .............................. 10,283 99,078
----------- -----------
Total issued ........................... 55,949 543,193
Shares redeemed ........................ (215,742) (2,120,739)
----------- -----------
Net decrease ........................... (159,793) $(1,577,546)
=========== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended August 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 313,889 $ 3,295,923
Automatic conversion of
shares ................................. 43,021 449,770
Shares issued to shareholders
in reinvestment of dividends
and distributions ...................... 31,010 324,211
----------- -----------
Total issued ........................... 387,920 4,069,904
Shares redeemed ........................ (428,529) (4,473,712)
----------- -----------
Net decrease ........................... (40,609) $ (403,808)
=========== ===========
- --------------------------------------------------------------------------------
17
<PAGE>
Merrill Lynch California Insured Municipal Bond Fund February 29, 2000
OFFICERS AND TRUSTEES
Terry K. Glenn, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Arthur Zeikel, Trustee
Vincent R. Giordano, Senior Vice President
Kenneth A. Jacob, Vice President
Walter C. O'Connor, Vice President
Donald C. Burke, Vice President and Treasurer
Alice A. Pellegrino, Secretary
Robert R. Martin, Trustee of Merrill Lynch California Insured Municipal Bond
Fund has recently retired. The Fund's Board of Trustees wishes Mr. Martin well
in his retirement.
Custodian
The Bank of New York
90 Washington Street, 12th Floor
New York, NY 10286
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
18
<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
California Insured
Municipal Bond Fund
Merrill Lynch California
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011 16575--2/00
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