MERRILL
LYNCH
CALIFORNIA
MUNICIPAL
BOND FUND
FUND LOGO
Quarterly Report November 30, 1993
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.
Merrill Lynch California
Municipal Bond Fund
Merrill Lynch California
Municipal Series Trust
Box 9011
Princeton, New Jersey
08543-9011
TO OUR SHAREHOLDERS
The US economy began to show some signs of improvement during the November
quarter with little evidence of an appreciable increase in the rate of
inflation. The industrial sector is demonstrating growing strength, yet
capacity utilization is still well below the levels associated with rising
inflation. Consumer spending has improved, but the labor market remains
soft. Despite the areas of economic weakness that persist, concerns arose
during the quarter that the rate of business activity might increase
inflationary pressures.
<PAGE>
Other developments during the November quarter had significant long-term
implications for the US financial markets. Although Boris Yeltsin's swift
and apparently decisive victory over his hard-line opponents in Russia
created little immediate disruption in the world financial markets, the
future of political and economic reform in the former Soviet Union is far
from certain. Evidence of greater progress toward a free-market economy and
democratic government in Russia would have more positive implications for
the US financial markets over the longer term. The outline for proposed
healthcare reform is also very important for the US economy. As the various
healthcare reform proposals are debated, investors will focus on their
potential effects on the Federal budget, the US economy and the quality
of healthcare delivery in the United States. Finally, the ratification of
the North American Free Trade Agreement (NAFTA) by the US Congress was
important not only for the prospect of expanding trade with Canada and Mexico,
but also as a positive influence on the recently concluded round of
negotiations on the General Agreement on Tariffs and Trade (GATT). Further
economic integration and growth through trade liberalization would be
positive for the capital markets in the United States and around the world.
The Municipal Market
The municipal bond market exhibited considerable volatility during
the quarter ended November 30, 1993. From September through mid-October,
municipal bond yields continued their earlier decline. By mid-October,
yields on tax-exempt revenue bonds maturing in 30 years, as reflected
by the Bond Buyer Revenue Bond Index, had declined an additional 15 basis
points (0.15%) to another record low of 5.41%. However, the municipal bond
market then reacted sympathetically to a nervous US Treasury bond market
during the remainder of the quarter, and tax-exempt bond yields rose to end
the quarter at 5.47%. Despite the increase in bond yields late in the
quarter, it is important to note that tax-exempt bond yields have declined
approximately 70 basis points since the beginning of 1993.
The pace of new municipal bond issuance slowed during the November quarter.
More than $62 billion in tax-exempt securities were issued over the last
three months, an increase of more than 5% versus the November 1992 quarter's
issuance. In recent quarters, however, new bond issuance had been increasing
at a rate of approximately 25%. Even this relative decline in supply
was unable to provide any technical support for the municipal bond market
as investors became extremely concerned that economic growth would
dramatically accelerate during the last calendar quarter of 1993 and
continue into early 1994. This projected growth and expected associated
inflationary pressures combined to cause yields to rise significantly in
late October and November.
<PAGE>
A number of additional factors have been involved in the recent increase in
tax-exempt bond yields. Individual investors have demonstrated only limited
interest in the municipal bond market over the last month. This probably has
been related to a combination of seasonal factors and the desire to avoid
the tax liability resulting from the large capital gains expected to be
declared by most bond funds this year. Also, many larger institutional
investors have been reluctant participants in the markets in order not to
jeopardize their already strong year-to-date performances. Consequently,
recent interest rate volatility has been intensified by this decline in
demand. By early 1994, however, it is likely that demand will increase
significantly. The proceeds from bond maturities, bond calls and coupon
payments beginning in January will all need to be reinvested. The new
higher marginal Federal tax rates will also go into effect in January.
Given the ongoing attractive after-tax benefits municipal bonds provide,
it is likely that both individual and institutional investors will
return to the tax-exempt bond market. This increased demand should serve
to stabilize the market in early 1994.
Portfolio Strategy
Merrill Lynch California Municipal Bond Fund has benefited from the general
decline in long-term interest rates by maintaining a relatively low cash
equivalent reserve position of 4% of total assets. Our basic strategy in
terms of the Fund's composition over the past quarter involved the sale
of certain higher-coupon holdings that have limited capabilities for further
price appreciation because they have been prerefunded or contain short-
call provisions. We sold these holdings, along with some serial maturity
positions, and are temporarily keeping the proceeds in short-term reserves.
This additional liquidity allowed the Fund to purchase more performance-
oriented coupons as the market traded off. We also took advantage of a
seasonally high primary calendar of new issuance to invest these proceeds
in California municipal bonds that will participate more fully if yields
should decline again into the next year. We have also paid close attention
to a general widening of credit yield spreads for lower-rated California
bonds. In conjunction with our research department, we purchased some
lower-rated credits to seek to enhance the current return to the shareholder.
However, we do not intend to significantly alter the Fund's credit makeup.
Currently, more than 64% of the Fund's assets are rated AA or better by
Moody's Investors Service, Inc. or Standard & Poor's Corp.
We appreciate your ongoing interest in Merrill Lynch California Municipal
Bond Fund, and we look forward to serving your investment needs and objectives
in the months and years to come.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
<PAGE>
December 17, 1993
<TABLE>
PERFORMANCE DATA
None of the past results shown should be considered a representation of
future performance. Investment return and principal value of Class A and
Class B Shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost.
<CAPTION>
Performance Summary--Class A Shares
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/25/88--12/31/88 $11.02 $10.99 -- $0.148 + 1.08%
1989 10.99 11.31 -- 0.761 +10.14
1990 11.31 11.22 -- 0.755 + 6.14
1991 11.22 11.61 $0.031 0.751 +10.79
1992 11.61 11.64 0.125 0.807 + 8.60
1/1/93--11/30/93 11.64 12.20 -- 0.609 +10.28
Total $0.156 Total $3.831
Cumulative total return as of 11/30/93: +56.80%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains distributions
at net asset value on the payable date, and do not include sales charge; results
would be lower if sales charge was included.
<CAPTION>
Performance Summary--Class B Shares
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
9/30/85--12/31/85 $10.00 $10.60 -- $0.175 + 8.00%
1986 10.60 11.63 $0.046 0.763 +17.80
1987 11.63 10.73 -- 0.745 - 1.45
1988 10.73 10.99 -- 0.707 + 9.28
1989 10.99 11.32 -- 0.705 + 9.69
1990 11.32 11.22 -- 0.698 + 5.51
1991 11.22 11.62 0.031 0.694 +10.33
1992 11.62 11.64 0.125 0.748 + 7.96
1/1/93--11/30/93 11.64 12.20 -- 0.555 + 9.79
Total $0.202 Total $5.790
Cumulative total return as of 11/30/93: +107.38%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains distributions at
net asset value on the payable date, and do not reflect deduction of any sales charge;
results would be lower if sales charge was deducted.
<PAGE>
</TABLE>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/93 +13.97% +9.41%
Inception (10/25/88)
through 9/30/93 + 9.84 +8.93
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/93 +13.40% +9.40%
Five Years Ended 9/30/93 + 9.47 +9.47
Inception (9/30/85) through 9/30/93 + 9.74 +9.74
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
<TABLE>
PERFORMANCE DATA (concluded)
<CAPTION>
Recent Performance Results*
12 Month 3 Month
11/30/93 8/31/93 11/30/92 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $12.20 $12.38 $11.76 + 4.86%(1) -1.45%
Class B Shares 12.20 12.38 11.77 + 4.77(1) -1.45
Class A Shares--Total Return +11.73(2) -0.10(3)
Class B Shares--Total Return +11.08(4) -0.23(5)
Class A Shares--Standardized 30-day Yield 4.53%
Class B Shares--Standardized 30-day Yield 4.21%
<FN>
*Investment results shown for the 3-month and 12-month periods are before the deduction of any sales charges.
(1)Percent change includes reinvestment of $0.125 per share capital gains distributions.
(2)Percent change includes reinvestment of $0.766 per share ordinary income dividends and $0.125 per share capital gains
distributions.
(3)Percent change includes reinvestment of $0.168 per share ordinary income dividends.
(4)Percent change includes reinvestment of $0.705 per share ordinary income dividends and $0.125 per share capital gains
distributions.
(5)Percent change includes reinvestment of $0.153 per share ordinary income dividends.
</TABLE>
<PAGE>
PORTFOLIO COMPOSITION
For the Quarter Ended November 30, 1993
Distribution by Market Sector*
Other Revenue Bonds 36.7%
General Obligations & Tax Revenue Bonds 33.1
Prerefunded Bonds** 17.6
Utility Revenue Bonds 12.6
-----
Total 100.0%
=====
Net assets as of November 30, 1993 were $881,982,078.
[FN]
*Based on total market value of the portfolio as of November 30, 1993.
**Backed by an escrow fund.
++Temporary investments in short-term municipal securities.
GRAPHIC AND IMAGE MATERIAL APPEARS HERE. SEE APPENDIX 1, ITEM 1.
Officers and Trustees
Arthur Zeikel, President and Trustee
Kenneth S. Axelson, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Jerry Weiss, Secretary
Custodian
The Bank of New York
110 Washington Street
New York, New York 10286
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
APPENDIX 1. ITEM 1:
Merrill Lynch California Municipal Bond Fund
<PAGE>
Quality Rating*
(Based on Nationally Recognized Rating Services)
A pie chart illustrating the following percentages:
AAA/Aaa 46%
AA/Aa 20%
A/A 18%
BBB/Baa 6%
Other++ 1%
NR 9%
[FN]
*Based on total market value of the portfolio as of November 30, 1993.
++Temporary investments in short-term municipal securities.
