Merrill Lynch
California
Municipal
Bond Fund
[FUND LOGO]
STRATEGIC
Performance
Semi-Annual Report
February 28, 1997
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
Municipal Bond Fund
Merrill Lynch California
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011 #10329 -- 2/97
Merrill Lynch California Municipal Bond Fund February 28, 1997
TO OUR SHAREHOLDERS
The Municipal Market Environment
During the three month period ended February 28, 1997, long-term
municipal revenue bond yields rose moderately. As measured by the Bond
Buyer Revenue Index, A-rated uninsured tax-exempt revenue bond yields
increased approximately 15 basis points (0.15%) to 5.93%. During
December 1996 and January 1997, evidence for continued strong economic
growth increased inflationary fears and pushed fixed-income rates
higher. Long-term, tax-exempt bond yields rose to approximately 6% at
the end of January 1997 before slightly declining during February. US
Treasury bond yields followed a similar pattern, but exhibited far
greater volatility. By late January 1997, US Treasury bond yields rose
approximately 60 basis points to approximately 6.95% before falling
modestly to end the February quarter at 6.80%. In total, US Treasury
bond yields increased 45 basis points during the February quarter, while
municipal bond yields rose approximately 15 basis points.
The municipal bond market's ability to withstand the pressure of higher
bond yields in recent months was mainly the result of a continued strong
technical position. During the six months ended February 28, 1997,
approximately $100 billion in new long-term municipal securities was
issued, essentially unchanged from issuance of a year earlier.
Approximately $45 billion in tax-exempt bonds was issued during the
quarter ended February 28, 1997, representing a decline of approximately
8% compared to the quarter ended February 29, 1996. This declining trend
has been even more pronounced thus far in 1997. During January and
February 1997, slightly over $21 billion in new long-term municipal
bonds was underwritten, a decline of over 15% from the first two months
of 1996.
While the recent demand for long-term tax-exempt bonds has not been
overwhelming, it was more than adequate to prevent the more significant
yield increases seen in the taxable bond markets. In early January 1997,
long-term investors did receive over $20 billion in coupon income, bond
maturities and proceeds from early redemptions. Much of these monies,
despite the continued lure of the equity market, was reallocated to the
municipal bond market. Continued strong demand from certain insurance
companies generated considerable scarcity of higher-rated tax-exempt
bonds in the 15-year -- 20-year maturity sector. Additionally, the
increasingly short supply of attractively priced municipal securities in
the 25-year -- 30-year maturity sector prevented many institutional
investors from raising large cash reserve positions. Scarce supply made
the reinvestment of such positions uncertain and, given increased market
volatility, the timing of such reinvestment became even more
problematic.
Looking forward, the supply of new bond issuance in 1997 is expected to
be very similar to that of 1996, with most annual estimates falling in
the $170 billion -- $175 billion range. Investor demand is also expected
to regain some of its former strength with 1997 total municipal
redemptions (refundings, maturities and coupon payments) in the $175
billion -- $185 billion range. This overall balance suggests that the
positive technical backdrop enjoyed in 1996 may continue in 1997. The
near-term direction of interest rates remains uncertain. Recent renewed
economic growth has not yet resulted in renewed inflationary pressures.
The interest rate volatility seen in recent months, however, is likely
to continue until either the rate of recent economic growth declines or
the Federal Reserve Board raises interest rates to restrict further
growth. The tax-exempt bond market's technical position, however, is
likely to be strong enough for much of 1997 to continue to dampen much
of this interest rate volatility. This suggests that municipal bond
yields may continue to trade in a relatively narrow range, rewarding
neither an overly aggressive nor defensive portfolio strategy.
Portfolio Strategy
We continue to manage Merrill Lynch California Municipal Bond Fund with
the strategy of providing both a high current yield of tax-exempt income
combined with capital appreciation potential. The six months ended
February 28, 1997 witnessed a fairly volatile environment for the fixed-
income markets. However, throughout this period, the municipal bond
market remained within a relatively identifiable trading range. We
attempted to take advantage of this trading range by purchasing
municipal revenue bonds, when available, as municipal interest rates
approached 6%, and selling securities when interest rates declined into
the neighborhood of 5.50%. At the lower end of this range, the demand
for municipal securities has historically evaporated, limiting the
risk/reward relationship for further appreciation in prices going
forward.
We maintained an above-average industry level of current return within
the portfolio mix in order to seek to provide a generous level of tax-
exempt income. Also, this relatively high coupon structure serves the
Fund well in periods of rising interest rates because these securities
are less sensitive to negative price movements. We expect to keep the
Fund within this trading range until there are clear signs of economic
strength or weakness providing clues to the next move by the Federal
Reserve Board and a corresponding change in the trend of short-term and
long-term interest rates. Now that long-term US Treasury interest rates
have breached 7%, we believe this situation provides an outstanding
opportunity to pursue a more aggressive investment strategy. Long-term
municipal bond yields near the 6% level would provide excellent value
for long-term investors, and we would use that type of buying
opportunity to become fully invested. We remain committed to maintaining
a majority of total assets in AA or better rated securities because of
the lack of any real credit quality spreads. Currently 77% of the Fund's
net assets are rated AA or better by at least one of the major rating
agencies.
In Conclusion
We appreciate your ongoing interest in Merrill Lynch California
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/WALTER C. O'CONNOR
Walter C. O'Connor
Vice President and Portfolio Manager
April 7, 1997
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill
Lynch Select PricingSM System, which offers four pricing alternatives:
(bullet) 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.
(bullet) 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.)
(bullet) 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.
(bullet) 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. 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.
<TABLE>
<CAPTION>
Recent Performance Results
12 Month 3 Month
2/28/97 11/30/96 2/29/96 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $11.67 $11.81 $11.73 -0.51% -1.19%
Class B Shares* 11.67 11.81 11.74 -0.60 -1.19
Class C Shares* 11.67 11.81 11.74 -0.60 -1.19
Class D Shares* 11.67 11.81 11.74 -0.60 -1.19
Class A Shares -- Total Return* +5.13(1) +0.17(2)
Class B Shares -- Total Return* +4.51(3) +0.04(4)
Class C Shares -- Total Return* +4.41(5) +0.02(6)
Class D Shares -- Total Return* +4.94(7) +0.14(8)
Class A Shares -- Standardized 30-day Yield 4.66%
Class B Shares -- Standardized 30-day Yield 4.35%
Class C Shares -- Standardized 30-day Yield 4.25%
Class D Shares -- Standardized 30-day Yield 4.57%
* Investment results shown do not reflect sales charges; results shown would be lower if a sales charge was included.
(1) Percent change includes reinvestment of $0.644 per share ordinary income dividends.
(2) Percent change includes reinvestment of $0.158 per share ordinary income dividends.
(3) Percent change includes reinvestment of $0.585 per share ordinary income dividends.
(4) Percent change includes reinvestment of $0.143 per share ordinary income dividends.
(5) Percent change includes reinvestment of $0.573 per share ordinary income dividends.
(6) Percent change includes reinvestment of $0.140 per share ordinary income dividends.
(7) Percent change includes reinvestment of $0.632 per share ordinary income dividends.
(8) Percent change includes reinvestment of $0.155 per share ordinary income dividends.
</TABLE>
<TABLE>
<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 + 8.58
1993 11.64 12.13 0.158 0.808 +12.78
1994 12.13 10.62 -- 0.662 - 7.08
1995 10.62 11.83 -- 0.636 +17.77
1996 11.83 11.69 -- 0.637 + 4.39
1/1/97 -- 2/28/97 11.69 11.67 -- 0.094 + 0.73
Total $0.314 Total $6.059
Cumulative total return as of 2/28/97: +84.50%**
* 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.
</TABLE>
<TABLE>
<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 + 7.94
1993 11.64 12.13 0.158 0.747 +12.22
1994 12.13 10.63 -- 0.606 - 7.50
1995 10.63 11.83 -- 0.578 +17.07
1996 11.83 11.69 -- 0.578 + 3.87
1/1/97 -- 2/28/97 11.69 11.67 -- 0.086 + 0.65
Total $0.360 Total $7.830
Cumulative total return as of 2/28/97: +139.94%**
* 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.
</TABLE>
<TABLE>
<CAPTION>
Performance Summary -- Class C Shares
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94 -- 12/31/94 $10.94 $10.63 -- $0.116 - 1.76%
1995 10.63 11.83 -- 0.566 +16.95
1996 11.83 11.69 -- 0.566 + 3.76
1/1/97 -- 2/28/97 11.69 11.67 -- 0.084 + 0.63
Total $1.332
Cumulative total return as of 2/28/97: +19.97%**
* 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.
</TABLE>
<TABLE>
<CAPTION>
Performance Summary -- Class D Shares
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94 -- 12/31/94 $10.94 $10.63 -- $0.127 - 1.65%
1995 10.63 11.83 -- 0.623 +17.53
1996 11.83 11.69 -- 0.625 + 4.29
1/1/97 -- 2/28/97 11.69 11.67 -- 0.093 + 0.72
Total $1.468
Cumulative total return as of 2/28/97: +21.42%**
* 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.
</TABLE>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/96 +4.39% +0.22%
Five Years Ended 12/31/96 +6.95 +6.08
Inception (10/25/88)
through 12/31/96 +7.68 +7.14
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/96 +3.87% -0.09%
Five Years Ended 12/31/96 +6.38 +6.38
Ten Years Ended 12/31/96 +6.48 +6.48
* 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 12/31/96 +3.76% +2.77%
Inception (10/21/94)
through 12/31/96 +8.34 +8.34
* 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 12/31/96 +4.29% +0.12%
Inception (10/21/94)
through 12/31/96 +8.89 +6.88
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
<TABLE>
<CAPTION>
Merrill Lynch California Municipal Bond Fund February 28, 1997
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
California -- 97.3%
<S> <C> <C> <C> <C>
NR* NR* $3,750 Alameda, California, Public Financing Authority, Local Agency Special Tax Revenue
Refunding Bonds (Community Facility #1), Series A, 7% due 8/01/2019 $3,896
AAA Aaa 34,440 Anaheim, California, Public Financing Authority, Lease Revenue Bonds (Public
Improvements Project), Series C, 6.04%** due 9/01/2030 (f) 4,735
AAA Aaa 3,000 Anaheim, California, Public Financing Authority, Tax Allocation Revenue Bonds,
Registered RITES, 9.07% due 12/28/2018 (c)(j) 3,476
Antioch, California, Improvement Bonds (1915 Assessment District No.27--Lone Tree):
NR* NR* 655 Series D, 6.40% due 9/02/2003 676
NR* NR* 4,955 Series D, 7.30% due 9/02/2013 5,131
NR* NR* 3,995 Series E, 7.125% due 9/02/2016 4,128
AAA Aaa 3,140 Brea, California, Public Financing Authority, Tax Allocation Revenue Bonds
(Redevelopment Project AB), Series A, 6.75% due 8/01/2022 (c) 3,448
AAA Aaa 2,025 Brentwood, California, GO, Unified School District, 6.85% due 2/01/1999 (a)(d) 2,176
California HFA, Home Mortgage Revenue Bonds:
AA- Aa 3,620 AMT, Series A, 7.70% due 8/01/2030 3,805
AA- Aa 470 AMT, Series B, 8% due 8/01/2029 491
AA- Aa 10,115 AMT, Series F-1, 7% due 8/01/2026 10,738
AA- Aa 715 AMT, Series G, 8.15% due 8/01/2019 743
AA- Aa 2,060 Series A, 8.125% due 8/01/2019 2,156
AA- Aa 2,115 Series D, 7.25% due 8/01/2017 2,232
California HFA, Revenue Bonds, AMT:
AA- Aa 4,100 RIB, 9.112% due 8/01/2023 (j) 4,336
AAA Aaa 980 Series A, 7.20% due 2/01/2026 (c) 1,031
California Health Facilities Financing Authority Revenue Bonds, Series A:
AAA Aaa 4,350 (Kaiser Permanente), 7% due 10/01/2018 (c) 4,696
BB Aaa 5,150 Refunding (Good Samaritan Health System), 7.50% due 5/01/2000 (a) 5,735
AAA Aaa 4,000 (Scripps Memorial Hospital), 6.25% due 10/01/2013 (c) 4,232
NR* A 5,780 (Scripps Research Institute), 6.625% due 7/01/2014 6,215
California Pollution Control Financing Authority, PCR, Refunding (Pacific Gas and
Electric Co.), VRDN (b):
A1+ NR* 1,300 Series C, 3.35% due 11/01/2026 1,300
A1+ NR* 2,700 Series F, 3.35% due 11/01/2026 2,700
California State Department of Water Resources, Water Systems Revenue Bonds
(Central Valley Project):
AAA Aaa 5,500 Refunding, Series Q, 5.375% due 12/01/2027 (c) 5,234
AA Aa 5,000 Series O, 5% due 12/01/2022 4,542
California State Public Works Board, Lease Revenue Bonds:
A Aaa 10,675 (Department of Corrections-Monterey County Soledad II), Series A, 7% due
11/01/2004 (a) 12,557
A A 3,555 High Technology Facilities (San Jose Facilities), Series A, 7.75% due 8/01/2006 4,003
A Aaa 7,000 (Various Community College Projects), Series B, 7% due 3/01/2004 (a) 8,154
AAA Aaa 10,775 (Various University of California Projects), Series A, 6.40% due 12/01/2002 (a)(d) 12,074
A- A1 1,475 (Various University of California Projects), Series B, 6.625% due 12/01/2004 (a) 1,695
California State, Veterans' Bonds, AMT, UT:
A+ A1 16,300 Series AW, 7.70% due 4/01/2009 17,152
AAA Aaa 20,000 Series BD, BE and BF, 6.375% due 2/01/2027 (d) 20,595
AA Aa 4,750 California Statewide Communities Development Authority Revenue Bonds,
(Saint Joseph Health System Group), COP, 6.625% due 7/01/2021 5,160
Central Coast, California, Water Authority Revenue Bonds (State Water Project
Regional Facilities) (d):
AAA Aaa 5,000 6.60% due 10/01/2002 (a) 5,638
AAA Aaa 10,000 Refunding, Series A, 5% due 10/01/2022 9,113
A1 VMIG1+ 1,800 Chula Vista, California, IDR, Refunding (San Diego Gas), VRDN, Series A, 3.35%
due 7/01/2021 (b) 1,800
AAA Aaa 10,355 Contra Costa, California, Transportation Authority, Sales Tax Revenue Bonds, Series A,
6% due 3/01/2007 (e) 11,256
BBB NR* 1,000 Contra Costa County, California, Public Financing Authority, Tax Allocation Revenue
Refunding Bonds, Series A, 7.10% due 8/01/2022 1,066
Corona, California, COP (Corona Community):
AAA Aaa 1,915 8% due 3/01/2009 (a) 2,433
AAA Aaa 2,065 8% due 3/01/2010 (a) 2,629
AAA Aaa 2,230 8% due 3/01/2011 (a) 2,859
AAA Aaa 2,410 8% due 3/01/2012 (a) 3,110
AAA Aaa 2,605 8% due 3/01/2013 (a) 3,378
AAA Aaa 2,810 8% due 3/01/2014 (a) 3,650
AAA Aaa 3,035 8% due 3/01/2015 (i) 3,953
AAA Aaa 5,670 East Bay, California, Municipal Utilities District, Wastewater Treatment System, Revenue
Refunding Bonds, 5% due 6/01/2016 (e) 5,278
AAA Aaa 5,000 El Cajon, California, Redevelopment Agency, Tax Allocation Bonds (El Cajon
Redevelopment Project), 6.60% due 10/01/2022 (d) 5,447
BBB+ NR* 4,600 Fontana, California, Redevelopment Agency, Tax Allocation Refunding Bonds (Jurupa
Hills Redevelopment Project), Series A, 7.20% due 10/01/2024 5,021
AAA Aaa 2,230 Irvine, California, Unified School District, Special Tax Community Facilities Bonds
(District No. 86-1), Series A, 8.10% due 11/15/2013 (c) 2,420
AAA Aaa 5,000 Long Beach, California, Harbor Revenue Bonds, AMT, 5.375% due 5/15/2020 (c) 4,730
Long Beach, California, Improvement Bonds (1915 Assessment District 90-2):
NR* NR* 465 7% due 9/02/2001 482
NR* NR* 495 7.05% due 9/02/2002 513
NR* NR* 530 7.10% due 9/02/2003 549
NR* NR* 570 7.15% due 9/02/2004 590
NR* NR* 610 7.20% due 9/02/2005 630
NR* NR* 655 7.25% due 9/02/2006 677
NR* NR* 4,065 7.50% due 9/02/2011 4,225
NR* NR* 5,695 Long Beach, California, M/F Housing Redevelopment Agency Revenue Bonds (Pacific
Court Apartments), Issue B, AMT, 6.95% due 9/01/2023 3,702
NR* NR* 4,545 Long Beach, California, Special Tax Community Facilities Bonds (District No. 3-Pine
Avenue), 6.375% due 9/01/2023 4,423
AAA Aaa 5,150 Los Angeles, California, Community Redevelopment Agency, Tax Allocation Refunding
Bonds (Bunker Hill), Series H, 6.50% due 12/01/2016 (f) 5,637
AAA Aaa 17,050 Los Angeles, California, Convention and Exhibition Center Authority, COP, 9% due
12/01/2005 (a) 22,450
A+ Aa 10,000 Los Angeles, California, Department of Water and Power, Electric Plant Revenue Bonds,
Registered RITR, 8.678% due 2/01/2020 (j) 11,125
AAA Aaa 5,000 Los Angeles, California, Department of Water and Power, Waterworks Revenue Bonds,
6.30% due 7/01/2024 (c) 5,368
Los Angeles, California, Harbor Department Revenue Bonds:
AAA NR* 10,000 7.60% due 10/01/2018 (i) 12,542
AAA Aaa 5,000 AMT, RITR, Series 7, 8.642% due 11/01/2026 (c)(j) 5,556
AAA Aaa 7,890 Los Angeles, California, Wastewater System Revenue Bonds, Series D, 6.625%
due 12/01/2012 (c) 8,611
AAA Aaa 10,000 Los Angeles County, California, COP (Correctional Facilities Project), 6.50% due
9/01/2000 (a)(c) 10,926
AAA Aaa 10,000 Los Angeles County, California, Metropolitan Transportation Authority, Sales Tax Revenue
Bonds (Proposition C), Second Series A, 5% due 7/01/2025 (d) 9,021
AAA Aaa 6,250 Marysville, California, Hospital Revenue Bonds (Fremont-Rideout Health Group),
Series A, 6.30% due 1/01/2022 (d) 6,638
Metropolitan Water District, Southern California, Waterworks Revenue Bonds:
AA Aa 11,650 RIB, 7.91% due 8/05/2022 (j) 11,927
AA Aa 5,500 Series C, 5% due 7/01/2027 4,976
AAA Aaa 6,000 Series C, 5% due 7/01/2027 (c) 5,437
AAA Aaa 5,635 Ontario, California, Redevelopment Financing Authority Revenue Bonds (Cimarron Project
No. 1 - Center City), 6.375% due 8/01/2020 (c) 6,012
A NR* 3,000 Palmdale, California, Civic Authority, Revenue Refunding Bonds (Merged Redevelopment
Project), Series A, 6.60% due 9/01/2034 3,244
AAA Aaa 11,620 Pittsburg, California, Redevelopment Agency, Residential Mortgage Revenue Bonds,
9.60% due 6/01/2016 (i) 16,796
NR* NR* 8,480 Pleasanton, California, Joint Powers Financing Authority, Revenue Reassessment Bonds,
Sub-Series B, 6.75% due 9/02/2017 8,769
AAA Aaa 3,450 Rancho, California, Water District Financing Authority Revenue Bonds, RITES, 9.124%
due 9/11/2001 (a)(d)(j) 4,162
Redwood City, California, Public Financing Authority, Local Agency Revenue Bonds:
AAA Aaa 1,500 Refunding, Series A, 6.50% due 7/15/2011 (d) 1,635
A- NR* 2,500 Series B, 7.25% due 7/15/2011 2,730
BBB NR* 2,430 Riverside County, California, Redevelopment Agency Bonds (Tax Allocation
Redevelopment Project No. 4), Series A, 7.50% due 10/01/2026 2,629
AAA Aaa 3,000 Rohnert Park, California, Community Development Agency, Tax Allocation Refunding
Bonds (Rohnert Park Redevelopment Project), 6.50% due 8/01/2020 (d) 3,241
Sacramento, California, Municipal Utility District, Electric Revenue Bonds:
AAA Aaa 7,000 INFLOS, 8.666% due 8/15/2018 (e)(j) 7,875
AAA Aaa 5,000 Series B, 6.375% due 8/15/2022 (c) 5,367
AA Aa 2,500 San Bernardino, California, Health Care System Revenue Bonds (Sisters of Charity),
Series A, 7% due 7/01/2001 (a) 2,801
San Diego, California, Public Facilities Financing Authority, Sewer Revenue Bonds (e):
AAA Aaa 7,000 5% due 5/15/2020 6,415
AAA Aaa 9,750 5% due 5/15/2025 8,848
San Francisco, California, City and County Airport Commission, International Airport
Revenue Bonds, Second Series (d):
AAA Aaa 3,240 AMT, Issue 6, 6.50% due 5/01/2018 3,451
AAA Aaa 8,000 AMT, Issue 6, 6.60% due 5/01/2020 8,633
AAA Aaa 8,500 Refunding, Issue 1, 6.30% due 5/01/2011 9,113
San Francisco, California, City and County, Public Utilities Commission, Water Revenue
Refunding Bonds, Series A:
AA- Aa 8,870 5% due 11/01/2021 8,151
AA- Aa 6,990 5% due 11/01/2026 6,349
NR* NR* 1,280 San Francisco, California, City and County Redevelopment Agency, Community Facilities
District Special Tax No. 1 Bonds (South Beach), 8.20% due 8/01/2013 1,361
AAA Aaa 4,150 Santa Clara, California, Electric Revenue Bonds, Series A, 6.50% due 7/01/2021 (c) 4,521
AAA Aaa 10,000 Santa Clara County, California, Financing Authority, Lease Revenue Bonds (VMC
Facility Replacement Project), Series A, 6.75% due 11/15/2020 (d) 11,217
AA A1 1,000 Santa Clara County, California, Transportation District, Sales Tax Revenue Bonds,
Series A, 6.75% due 6/01/2011 1,088
AAA Aaa 2,000 Santa Fe Springs, California, Redevelopment Agency, Tax Allocation Bonds (Consolidated
Redevelopment Project), Series A, 6.40% due 9/01/2022 (c) 2,148
AAA Aaa 3,500 Santa Rosa, California, Wastewater Revenue Refunding Bonds (Subregional Wastewater
Project), Series A, 5% due 9/01/2022 (e) 3,190
Southern California Home Financing Authority, S/F Mortgage Revenue Bonds, AMT (h):
AAA NR* 3,830 (Mortgage-Backed Security), Series A, 7.625% due 10/01/2023 4,043
AAA NR* 2,450 (Mortgage-Backed Security), Series A, 7.35% due 9/01/2024 (g) 2,582
AAA NR* 1,040 Series B, 7.75% due 3/01/2024 (g) 1,101
BBB+ NR* 19,300 Stanislaus, California, Waste-to-Energy Financing Agency, Solid Waste Facility Revenue
Refunding Certificates (Ogden Martin System Inc. Project), 7.625% due 1/01/2010 20,751
AAA Aaa 6,500 Stockton, California, Revenue Bonds (Wastewater Treatment Plant Expansion), COP,
Series A, 6.80% due 9/01/2024 (e) 7,293
AAA Aaa 4,000 Tri-City, California, Hospital District Revenue Bonds (Tri-City Hospital), 7.50%
due 2/01/2002 (a)(c) 4,612
University of California Revenue Bonds (Multiple Purpose Projects):
A NR* 14,700 Refunding, Series A, 6.875% due 9/01/2002 (a) 16,663
AAA Aaa 8,000 Series D, 6.25% due 9/01/2012 (c) 8,512
AAA Aaa 6,000 Series D, 6.375% due 9/01/2019 (c) 6,427
AAA Aaa 11,845 Series D, 6.375% due 9/01/2024 (c) 12,689
A A2 6,000 West Covina, California, COP (Queen of the Valley Hospital), 6.95% due 8/15/2023 6,591
AAA Aaa 6,000 West Sacramento, California, Redevelopment Agency, Tax Allocation Bonds (West
Sacramento Redevelopment Project), 6.25% due 9/01/2010 (c) 6,410
Puerto Rico -- 1.2%
A Baa1 5,000 Puerto Rico Commonwealth, GO, UT, 6.45% due 7/01/2017 5,330
AAA Aaa 2,000 Puerto Rico Commonwealth, Highway and Transportation Authority, Highway Revenue
Bonds, Series T, 6.625% due 7/01/2002 (a) 2,240
Total Investments (Cost -- $580,974) -- 98.5% 624,018
Other Assets Less Liabilities -- 1.5% 9,489
----------
Net Assets -- 100.0% $633,507
==========
(a) Prerefunded.
(b) The interest rate is subject to change periodically based upon prevailing market rates. The interest rate
shown is the rate in effect at February 28, 1997.
(c) MBIA Insured.
(d) AMBAC Insured.
(e) FGIC Insured.
(f) FSA Insured.
(g) FNMA Collateralized.
(h) GNMA Collateralized.
(I) Escrowed to Maturity.
(j) 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 28, 1997.
* Not Rated.
** Represents a zero coupon bond; the interest rate is shown is the effective yield at the time of purchase
by the Fund.
+ Highest short-term rating by Moody's Investors Service, Inc.
PORTFOLIO ABBREVIATIONS
To simplify the listings of Merrill Lynch California 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
IDR Industrial Development Revenue Bonds
INFLOS Inverse Floating Rate Municipal Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
RITES Residual Interest Tax-Exempt Securities
RITR Residual Interest Trust Receipts
S/F Single - Family
UT Unlimited Tax
VRDN Variable Rate Demand Notes
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of February 28, 1997
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $580,973,634)(Note 1a) $624,017,550
Cash 81,358
Receivables:
Interest $11,197,766
Beneficial interest sold 668,581 11,866,347
------------
Prepaid registration fees and other assets (Note 1e) 117,848
------------
Total assets 636,083,103
------------
Liabilities: Payables:
Beneficial interest redeemed 1,319,970
Dividends to shareholders (Note 1f) 544,442
Investment adviser (Note 2) 265,617
Distributor (Note 2) 180,432 2,310,461
------------
Accrued expenses and other liabilities 265,318
------------
Total liabilities 2,575,779
------------
Net Assets: Net assets $633,507,324
============
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited number of
Consist of: shares authorized $373,328
Class B Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 3,606,040
Class C Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 77,547
Class D Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 1,370,873
Paid-in capital in excess of par 601,395,958
Accumulated realized capital losses on investments -- net (Note 5) (14,094,707)
Accumulated distribution in excess of realized capital gains -- net (Note 1f) (2,265,631)
Unrealized appreciation on investments -- net 43,043,916
------------
Net assets $633,507,324
============
Net Asset Value: Class A -- Based on net assets of $43,562,007 and 3,733,277 shares of
beneficial interest outstanding $11.67
============
Class B -- Based on net assets of $420,900,497 and 36,060,399 shares of
beneficial interest outstanding $11.67
============
Class C -- Based on net assets of $9,049,570 and 775,469 shares of
beneficial interest outstanding $11.67
============
Class D -- Based on net assets of $159,995,250 and 13,708,730 shares of
beneficial interest outstanding $11.67
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Six Months Ended
February 28, 1997
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned $19,374,640
(Note 1d):
Expenses: Investment advisory fees (Note 2) $1,731,220
Account maintenance and distribution fees -- Class B (Note 2) 1,122,654
Transfer agent fees -- Class B (Note 2) 92,142
Account maintenance fees -- Class D (Note 2) 67,989
Accounting services (Note 2) 42,650
Registration fees (Note 1e) 37,342
Custodian fees 34,004
Professional fees 30,821
Account maintenance and distribution fees -- Class C (Note 2) 26,021
Transfer agent fees -- Class D (Note 2) 23,307
Trustees' fees and expenses 20,598
Printing and shareholder reports 13,297
Transfer agent fees -- Class A (Note 2) 7,234
Pricing fees 1,943
Transfer agent fees -- Class C (Note 2) 1,931
------------
Total expenses 3,253,153
------------
Investment income -- net 16,121,487
------------
Realized & Realized gain on investments -- net 2,878,350
Unrealized Change in unrealized appreciation on investments -- net 7,048,532
Gain on ------------
Investments -- Net Net Increase in Net Assets Resulting from Operations $26,048,369
(Notes 1b, 1d & 3): ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: Feb. 28, 1997 Aug. 31, 1996
<S> <C> <C> <C>
Operations: Investment income -- net $16,121,487 $33,842,706
Realized gain on investments -- net 2,878,350 4,306,220
Change in unrealized appreciation on investments -- net 7,048,532 1,206,892
------------ ------------
Net increase in net assets resulting from operations 26,048,369 39,355,818
------------ ------------
Dividends to Investment income -- net:
Shareholders Class A (1,151,312) (2,457,264)
(Note 1f): Class B (11,117,350) (27,350,656)
Class C (210,145) (287,834)
Class D (3,642,680) (3,746,952)
------------ ------------
Net decrease in net assets resulting from dividends to shareholders (16,121,487) (33,842,706)
------------ ------------
Beneficial Net decrease in net assets derived from beneficial interest (19,684,332) (29,652,521)
Interest transactions ------------ ------------
Transactions
(Note 4):
Net Assets: Total decrease in net assets (9,757,450) (24,139,409)
Beginning of period 643,264,774 667,404,183
------------ ------------
End of period $633,507,324 $643,264,774
============ ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Class A
For the Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
Feb. 28, For the Year Ended August 31,
1997 1996 1995 1994 1993
Increase (Decrease) in Net Asset Value: ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $11.49 $11.40 $11.32 $12.38 $11.80
Operating ------- ------- ------- ------- -------
Performance: Investment income -- net .32 .64 .64 .68 .70
Realized and unrealized gain (loss) on
investments -- net .18 .09 .08 (.78) .78
------- ------- ------- ------- -------
Total from investment operations .50 .73 .72 (.10) 1.48
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income -- net (.32) (.64) (.64) (.68) (.70)
Realized gain on investments -- net -- -- -- (.19) (.20)
In excess of realized gain on
investments -- net -- -- -- (.09) --
------- ------- ------- ------- -------
Total dividends and distributions (.32) (.64) (.64) (.96) (.90)
------- ------- ------- ------- -------
Net asset value, end of period $11.67 $11.49 $11.40 $11.32 $12.38
======= ======= ======= ======= =======
Total Investment Based on net asset value per share 4.34%++ 6.53% 6.75% (.92%) 13.19%
Return:** ======= ======= ======= ======= =======
Ratios to Expenses .64%* .65% .65% .62% .63%
Average ======= ======= ======= ======= =======
Net Assets: Investment income -- net 5.46%* 5.51% 5.83% 5.65% 5.87%
======= ======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $43,562 $42,668 $44,228 $60,017 $64,526
Data: ======= ======= ======= ======= =======
Portfolio turnover 43.17% 53.79% 53.40% 75.66% 61.24%
======= ======= ======= ======= =======
* Annualized.
** Total investment returns exclude the effect of sales loads.
++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Class B
For the Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
Feb. 28, For the Year Ended August 31,
1997 1996 1995 1994 1993
Increase (Decrease) in Net Asset Value: ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $11.49 $11.40 $11.32 $12.38 $11.80
Operating ------- ------- ------- ------- -------
Performance: Investment income -- net .29 .58 .59 .61 0.64
Realized and unrealized gain (loss) on
investments -- net .18 .09 .08 (.78) 0.78
------- ------- ------- ------- -------
Total from investment operations .47 .67 .67 (.17) 1.42
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income -- net (.29) (.58) (.59) (.61) (.64)
Realized gain on investments -- net -- -- -- (.19) (.20)
In excess of realized gain on
investments -- net -- -- -- (.09) --
------- ------- ------- ------- -------
Total dividends and distributions (.29) (.58) (.59) (.89) (.84)
------- ------- ------- ------- -------
Net asset value, end of period $11.67 $11.49 $11.40 $11.32 $12.38
======= ======= ======= ======= =======
Total Investment Based on net asset value per share 4.08%++ 5.99% 6.25% (1.50%) 12.62%
Return:** ======= ======= ======= ======= =======
Ratios to Expenses 1.14%* 1.16% 1.16% 1.13% 1.13%
Average ======= ======= ======= ======= =======
Net Assets: Investment income -- net 4.95%* 5.01% 5.32% 5.15% 5.38%
======= ======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $420,900 $480,668 $616,199 $726,888 $821,220
Data: ======= ======= ======= ======= =======
Portfolio turnover 43.17% 53.79% 53.40% 75.66% 61.24%
======= ======= ======= ======= =======
* Annualized.
** Total investment returns exclude the effect of sales loads.
++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Class C
For the For the
Six For the Period
The following per share data and ratios have been derived Months Year Oct. 21,
from information provided in the financial statements. Ended Ended 1994+ to
Feb. 28, Aug. 31, Aug. 31,
1997 1996 1995
------- ------- -------
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $11.49 $11.40 $10.94
Operating ------- ------- -------
Performance: Investment income -- net .28 .57 .49
Realized and unrealized gain on
investments -- net .18 .09 .46
------- ------- -------
Total from investment operations .46 .66 .95
------- ------- -------
Less dividends from investment income -- net (.28) (.57) (.49)
------- ------- -------
Net asset value, end of period $11.67 $11.49 $11.40
======= ======= =======
Total Investment Based on net asset value per share 4.03%++ 5.88% 8.91%++
Return:** ======= ======= =======
Ratios to Expenses 1.25%* 1.26% 1.27%*
Average ======= ======= =======
Net Assets: Based on net asset value per share 4.85%* 4.91% 5.04%*
======= ======= =======
Supplemental Net assets, end of period (in thousands) $9,050 $8,112 $3,131
Data: ======= ======= =======
Portfolio turnover 43.17% 53.79% 53.40%
======= ======= =======
<CAPTION>
Class D
For the For the
Six For the Period
The following per share data and ratios have been derived Months Year Oct. 21,
from information provided in the financial statements. Ended Ended 1994+ to
Feb. 28, Aug. 31, Aug. 31,
1997 1996 1995
------- ------- -------
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $11.49 $11.40 $10.94
Operating ------- ------- -------
Performance: Investment income -- net .31 .63 .54
Realized and unrealized gain on
investments -- net .18 .09 .46
------- ------- -------
Total from investment operations .49 .72 1.00
------- ------- -------
Less dividends from investment income -- net (.31) (.63) (.54)
------- ------- -------
Net asset value, end of period $11.67 $11.49 $11.40
======= ======= =======
Total Investment Based on net asset value per share 4.29%++ 6.43% 9.39%++
Return:** ======= ======= =======
Ratios to Expenses .74%* .75% .76%*
Average ======= ======= =======
Net Assets: Based on net asset value per share 5.36%* 5.42% 5.59%*
======= ======= =======
Supplemental Net assets, end of period (in thousands) $159,995 $111,817 $3,846
Data: ======= ======= =======
Portfolio turnover 43.17% 53.79% 53.40%
======= ======= =======
* Annualized.
** Total investment returns exclude the effect of sales loads.
+ Commencement of Operations.
++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch California Municipal Bond Fund February 28, 1997
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch California 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 diversified,
open-end management investment company. 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 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.
(bullet) Financial futures contracts -- The Fund may purchase or sell
interest rate 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.
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, Inc. ("MLFD" or "Distributor"), 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 (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 six months ended February 28, 1997, 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 $ 379 $ 3,960
Class D $2,990 $29,780
For the six months ended February 28, 1997, MLPF&S received contingent
deferred sales charges of $221,857 and $1,627 relating to transactions
in Class B and Class C Shares, respectively.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), 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, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for
the six months ended February 28, 1997 were $268,483,010 and
$264,781,012, respectively.
Net realized and unrealized gains (losses) as of February 28, 1997
were as follows:
Realized
Gains Unrealized
(Losses) Gains
Long-term investments $4,950,095 $ 43,043,916
Short-term investments (1,182) --
Financial futures contracts (2,070,563) --
----------- ------------
Total $2,878,350 $ 43,043,916
=========== ============
As of February 28, 1997, net unrealized appreciation for Federal income
tax purposes aggregated $43,043,916, of which $45,588,392 related to
appreciated securities and $2,544,476 related to depreciated securities.
The aggregate cost of investments at February 28, 1997 for Federal
income tax purposes was $580,973,634.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest transactions
was $19,684,332 and $29,652,521 for the six months ended February 28,
1997 and for the year ended August 31, 1996, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the
Six Months Ended Dollar
February 28, 1997 Shares Amount
Shares sold 332,589 $ 3,877,285
Shares issued to share-
holders in reinvestment
of dividends 43,277 504,157
----------- ------------
Total issued 375,866 4,381,442
Shares redeemed (356,293) (4,142,776)
----------- ------------
Net increase 19,573 $ 238,666
=========== ============
Class A Shares for the Year Dollar
Ended August 31, 1996 Shares Amount
Shares sold 343,484 $ 3,993,921
Shares issued to share-
holders in reinvestment
of dividends 91,475 1,056,965
----------- ------------
Total issued 434,959 5,050,886
Shares redeemed (602,254) (6,955,693)
----------- ------------
Net decrease (167,295) $(1,904,807)
=========== ============
Class B Shares for the
Six Months Ended Dollar
February 28, 1997 Shares Amount
Shares sold 1,525,103 $17,765,335
Shares issued to share-
holders in reinvestment
of dividends 427,519 4,982,389
----------- ------------
Total issued 1,952,622 22,747,724
Automatic conversion
of shares (4,113,757) (47,941,830)
Shares redeemed (3,600,990) (41,922,868)
----------- ------------
Net decrease (5,762,125) $ (67,116,974)
=========== ============
Class B Shares for the Year Dollar
Ended August 31, 1996 Shares Amount
Shares sold 3,684,831 $ 42,602,905
Shares issued to share-
holders in reinvestment
of dividends 1,050,882 12,150,317
----------- ------------
Total issued 4,735,713 54,753,222
Automatic conversion
of shares (9,424,309) (109,009,248)
Shares redeemed (7,544,434) (87,132,865)
----------- ------------
Net decrease (12,233,030) $(141,388,891)
=========== ============
Class C Shares for the
Six Months Ended Dollar
February 28, 1997 Shares Amount
Shares sold 223,169 $ 2,598,572
Shares issued to share-
holders in reinvestment
of dividends 10,114 117,869
----------- ------------
Total issued 233,283 2,716,441
Shares redeemed (163,764) (1,910,841)
----------- ------------
Net increase 69,519 $ 805,600
=========== ============
Class C Shares for the Year Dollar
Ended August 31, 1996 Shares Amount
Shares sold 544,866 $ 6,303,679
Shares issued to share-
holders in reinvestment
of dividends 12,095 139,565
----------- ------------
Total issued 556,961 6,443,244
Shares redeemed (125,720) (1,452,025)
----------- ------------
Net increase 431,241 $ 4,991,219
=========== ============
Class D Shares for the
Six Months Ended Dollar
February 28, 1997 Shares Amount
Shares sold 576,814 $ 6,724,708
Automatic conversion
of shares 4,113,757 47,941,830
Shares issued to share-
holders in reinvestment
of dividends 137,768 1,606,069
----------- ------------
Total issued 4,828,339 56,272,607
Shares redeemed (849,580) (9,884,231)
----------- ------------
Net increase 3,978,759 $ 46,388,376
=========== ============
Class D Shares for the Year Dollar
Ended August 31, 1996 Shares Amount
Shares sold 623,197 $ 7,211,474
Automatic conversion
of shares 9,424,309 109,009,248
Shares issued to share-
holders in reinvestment
of dividends 142,594 1,645,562
----------- ------------
Total issued 10,190,100 117,866,284
Shares redeemed (797,598) (9,216,326)
----------- ------------
Net increase 9,392,502 $ 108,649,958
=========== ============
5. Capital Loss Carryforward:
At August 31, 1996, the Fund had a net capital loss carryforward of
approximately $16,951,000, of which $9,806,000 expires in 2003 and
$7,145,000 expires in 2004. This amount will be available to offset like
amounts of any future taxable gains.
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
Kenneth A. Jacob, Vice President
Walter C. O'Connor, Vice President
Gerald M. Richard, Treasurer
Jerry Weiss, Secretary
Custodian
The Bank of New York
90 Washington Street, 12th Floor
New York, New York 10286
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
