<PAGE>
MERRILL
LYNCH
MASSACHUSETTS
MUNICIPAL
BOND FUND
Semi-Annual Report January 31, 1994
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 re-
deemed, may be worth more or less than their original cost.
Merrill Lynch Massachusetts
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, New Jersey
08543-9011
TO OUR SHAREHOLDERS
As 1993 drew to a close, the US economy showed signs of strong improvement.
The initial estimate for gross domestic product (GDP) growth in the final
quarter of 1993 was +5.9% in real terms, the strongest quarterly performance
since the fourth quarter of 1987. GDP growth was led by interest rate-
sensitive sectors, such as housing, durable goods orders and business in-
vestment in capital equipment. Consumer confidence also improved after
remaining lackluster throughout most of 1993. While the exceptionally
robust rate of growth may not be sustainable in the first quarter of 1994
(especially considering the harsh winter weather experienced by virtually
half of the country in January), this strong showing suggests that the US
economy may at last be gaining momentum. This was supported by the December
increase in the Index of Leading Economic Indicators, the fifth monthly
rise in this indicator of future economic activity.
At the same time, the rate of inflation remains in check. Nevertheless,
concerns arose late in 1993 that the rate of business activity might
increase inflationary pressures, which were reflected in an upturn of
longer-term interest rates. In January, Federal Reserve Board Chairman
Alan Greenspan indicated in Congressional testimony that continued strong
expansion of economic activity would lead the central bank to tighten
monetary policy in an effort to contain inflation. On February 4, 1994,
the central bank broke with tradition and publicly announced an in-
crease in short-term interest rates. In the weeks ahead, investors
will continue to gauge the pace of the economic expansion and watch
for signs of an overheating economy that could prompt successive
Federal Reserve Board actions to raise short-term interest rates.
<PAGE>
The Municipal Market
Yields on tax-exempt securities generally declined over the three months
ended January 31, 1994. Long-term revenue bond yields, as measured by the
Bond Buyer Revenue Bond Index, declined an additional six basis points
(0.06%) to end the quarter at 5.50%. US Treasury bond yields, however,
rose approximately 25 basis points to end the period at approximately
6.20%. This outperformance by municipal securities is likely to be the
dominant theme for much of 1994.
During the January quarter, taxable yields remained volatile in reaction
to the inherent conflicts between the extremely strong economic recovery
seen during the last quarter of 1993 and continued low inflationary
pressures. Tax-exempt bond yields, however, reflected very positive
technical factors. During the 12 months ended January 31, 1994,
municipalities issued more than $288 billion in securities, an in-
crease of more than 21% versus one year ago. As we have discussed
in earlier reports to shareholders, much of this increase has been
the result of municipalities refinancing existing higher-couponed
debt. At current yield levels, few of these issues remain to be
refunded. This has led to estimates of municipal bond issuance
declining to approximately $175 billion for all of 1994. More than
$290 billion in long-term tax-exempt securities was issued in 1993.
In addition to this dramatic decline in issuance, investor demand
is expected to increase in the coming year. Greater demand should be
generated by a number of factors, with the recent increases in marginal
Federal income tax rates the most important. Also, bond calls and early
redemptions are expected to increase significantly in the coming quarters
and last at least into early 1995. The combination of declining new-
issue volume and increasing numbers of bonds redeemed prior to their
stated maturities will eventually lead to a net decline in the number
of bonds outstanding. In such a scenario, investor demand rises as
bondholders are forced to continually purchase new municipal bonds
to replace their previous holdings.
The outlook for the municipal bond market is very favorable. While
the historic decline in yields seen over the last year are unlikely
to be repeated, the strong technical framework within the tax-exempt
market would support further modest declines in tax-exempt yields.
At the very least, should interest rates rise in response to con-
tinued strong economic growth and a resurgence in inflationary
pressures, we believe that municipal bond price deterioration will
be minimal in comparison to any taxable investment alternative.
Portfolio Strategy
During the January quarter, the Fund's portfolio strategy consisted of
selling discounted bonds and replacing them with higher-yielding current
coupon bonds. This strategy enhanced the Fund's current income in a re-
latively stable market. Looking ahead, the current strength of the
economic recovery is not likely to be sustained, and inflation will be
kept in check. With this in mind, the bond market is likely to remain
in a trading range with long-term yields eventually trending lower.
Additionally, low inflation coupled with decreasing municipal issuance
and larger tax bills set the stage for a strong technical environment
in the municipal market. In fact, issuance of Massachusetts bonds during
the January quarter versus the same period last year declined 3%. In
conjunction with these developments, the Fund will continue to increase
its holdings of good-quality current coupon bonds to seek to generate a
higher yield for shareholders.
<PAGE>
We appreciate your ongoing interest in
Merrill Lynch Massachusetts 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
March 2, 1994
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.
<TABLE>
Recent Performance Results*
<CAPTION> 12 Month 3 Month
1/31/94 10/31/93 1/31/93 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $11.35 $11.43 $ 10.54 + 8.67%(1) + 0.21%(1)
Class B Shares 11.35 11.43 10.54 + 8.67(1) + 0.21(1)
Class A Shares--Total Return +15.17(2) + 2.01(3)
Class B Shares--Total Return +14.60(4) + 1.88(5)
Class A Shares--Standardized 30-day Yield 4.56%
Class B Shares--Standardized 30-day Yield 4.24%
<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 $0.103 per share capital gains distributions.
(2)Percent change includes reinvestment of $0.649 per share ordinary income dividends and $0.103
per share capital gains distributions.
(3)Percent change includes reinvestment of $0.202 per share ordinary income dividends and $0.103
per share capital gains distributions.
(4)Percent change includes reinvestment of $0.593 per share ordinary income dividends and $0.103
per share capital gains distributions.
(5)Percent change includes reinvestment of $0.187 per share ordinary income dividends and $0.103
per share capital gains distributions.
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Performance Summary--Class A Shares
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
2/28/92--12/31/92 $10.00 $10.46 -- $0.542 +10.24%
1993 10.46 11.22 $0.103 0.652 +14.79
1/1/94--1/31/94 11.22 11.35 -- 0.035 + 1.57
------ ------
Total $0.103 Total $1.229
Cumulative total return as of 1/31/94: +28.52%**
<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**
<C> <C> <C> <C> <C> <C>
2/28/92--12/31/92 $10.00 $10.46 -- $0.498 + 9.77%
1993 10.46 11.22 $0.103 0.596 +14.21
1/1/94--1/31/94 11.22 11.35 -- 0.032 + 1.53
------ ------
Total $0.103 Total $1.126
Cumulative total return as of 1/31/94: 27.29%**
<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.
</TABLE>
Average Annual Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 12/31/93 +14.79% +10.20%
Inception (2/28/92)
through 12/31/93 +13.64 +11.15
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<PAGE>
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 12/31/93 +14.21% +10.21%
Inception (2/28/92)
through 12/31/93 +13.07 +11.59
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
PORTFOLIO ABBREVIATIONS
To simplify the listings of Merrill Lynch Massachusetts Municipal Bond Fund's
portfolio holdings in the Schedule of Investments, we have abbreviated the
names of many of the securities according to the list at right.
AMT Alternative Minimum Tax (subject to)
GO General Obligation Bonds
HFA Housing Finance Authority
INFLOS Inverse Floating Rate Municipal Bonds
LEVRRS Leveraged Reverse Rate Securities
PCR Pollution Control Revenue Bonds
RAN Revenue Anticipation Notes
RIB Residual Interest Bonds
UT Unlimited Tax
VRDN Variable Rate Demand Notes
YCN Yield Curve Notes
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <S> <C> <S> <C>
Massachusetts--94.8%
BBB Baa1 $ 865 Boston, Massachusetts, Industrial Development Financing Authority, Sewer Facility
Revenue Bonds (Harbor Electric Energy Company Project), AMT, 7.375% due 5/15/2015 $ 967
NR Aaa 600 Boston, Massachusetts, Revenue Bonds (Boston City Hospital), Series A, 7.625%
due 8/15/2000 (c)(g) 732
Boston, Massachusetts, Water and Sewer Community Revenue Bonds:
A A 375 Refunding, Series A, 5.75% due 11/01/2013 405
A NR 300 Series A, 7.10% due 11/01/1999 (g) 354
A- Baa 1,000 Brockton, Massachusetts, GO, 6.125% due 6/15/2018 1,057
NR Baa 1,000 Greater New Bedford Regional Refuse Management District (Massachusetts Landfill),
AMT, 5.875% due 5/01/2013 1,002
<PAGE>
Lowell, Massachusetts, GO:
NR Baa1 1,650 7.625% due 2/15/2001 (g) 2,018
AAA Aaa 2,000 Refunding, Series A, 5.50% due 1/15/2010 (f) 2,064
Massachusetts Bay Transportation Authority Revenue Bonds:
A+ A 1,250 Refunding, Series B, 6.20% due 3/01/2016 1,411
A+ Aaa 3,305 Series A, 7% due 3/01/2001 (g) 3,927
A+ A 1,000 Massachusetts State Convention Center Authority Revenue Bonds (Boston Common
Parking Garage), Series A, 5.375% due 9/01/2013 1,010
Massachusetts State GO, Consolidated Loan:
A+ A 1,285 Series A, 6.50% due 6/01/2008 1,447
A+ A 2,000 Series B, UT, 4.875% due 10/01/2010 1,963
A+ Aaa 3,250 Series C, UT, 7% due 12/01/2000 (g) 3,819
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <S> <C> <S> <C>
Massachusetts (continued)
Massachusetts State Health and Educational Facilities Authority Revenue Bonds:
NR Baa $2,000 (Anna Jaques Hospital), Series B, 6.875% due 10/01/2012 $2,178
AAA Aaa 2,000 (Beth Israel), INFLOS, 9.384% due 7/01/2025 (j) 2,270
SP1+ VMIG1 700 (Capital Asset Program), Series D, 2.20% due 1/01/2035 (a)(e) 700
A1+ VMIG1 400 (Capital Asset Program), VRDN, Series B, 2.30% due 7/01/2005 (a)(e) 400
A- NR 1,000 (Jordan Hospital), Series B, 6.875% due 10/01/2015 1,099
A- NR 1,250 (Jordan Hospital), Series C, 6.875% due 10/01/2022 1,360
AAA Aaa 1,000 (Massachusetts General Hospital), Series F, 6.25% due 7/01/2020 (b) 1,097
NR A 2,000 (Metro West Health), Series C, 6.50% due 11/15/2018 2,163
A A 2,020 (New England Deaconess Hospital), Series D, 6.875% due 4/01/2022 2,262
AAA Aaa 1,000 (New England Medical Center), YCN, Series F, 6.50% due 7/01/2012 (h) 1,134
AAA Aaa 2,900 (New England Medical Center Hospitals), RIB, 7.88% due 7/01/2018 (e)(i) 2,907
NR Baa 1,000 (New England Memorial Hospital), Series B, 6.125% due 7/01/2013 1,036
AAA Aaa 1,000 (Northeastern University), Series E, 6.55% due 10/01/2022 (e) 1,141
BBB Baa1 2,000 (Sisters of Providence Health Systems), Series A, 6.625% due 11/15/2022 2,100
AAA Aaa 1,000 (Stonehill College), Series E, 6.60% due 7/01/2020 (e) 1,146
AAA NR 1,000 (Suffolk University), Series B, 6.35% due 7/01/2022 (i) 1,087
AAA NR 3,445 (Wentworth Technology Institute), Series B, 5.50% due 10/01/2023 (i) 3,465
A1+ NR 100 (Williams College), VRDN, Series E, 2.15% due 8/01/2014 (a) 100
Massachusetts State HFA Revenue Bonds (Residential Development) (d):
AAA Aaa 1,000 Series C, 6.90% due 11/15/2021 1,106
AAA Aaa 1,000 Series F, 6.30% due 11/15/2024 1,062
A+ A1 1,500 Massachusetts State HFA, Revenue Refunding Bonds (Housing Projects), Series A,
6.375% due 4/01/2021 1,579
NR MIG1++ 100 Massachusetts State Industrial Finance Agency, Health Care Facility Revenue Bonds
(Beverly Enterprises), VRDN, 2.20% due 4/01/2009 (a) 100
<PAGE>
BBB Baa2 2,750 Massachusetts State Industrial Finance Agency, PCR, Refunding (Eastern Edison
Company Project), 5.875% due 8/01/2008 2,849
Massachusetts State Industrial Finance Agency, Resource Recovery Revenue
Refunding Bonds:
A1+ VMIG1 300 (Odgen Haverhill Project), Series A, VRDN, 2.05% due 12/01/2006 (a) 300
BBB Baa1 3,000 (Refusetech Inc. Project), Series A, 6.30% due 7/01/2005 3,173
Massachusetts State Industrial Finance Agency Revenue Bonds:
AAA Aaa 1,000 (Babson College), Series A, 6.50% due 10/01/2022 (e) 1,132
NR Aa 2,500 (Whitehead Biomedical Research), 5.125% due 7/01/2026 2,455
Massachusetts State Municipal Wholesale Electric Company Revenue Bonds
(Power Supply System):
BBB+ A 2,000 Refunding, Series A, 6.75% due 7/01/2011 2,237
BBB+ A 2,750 Series E, 6.125% due 7/01/2019 2,869
A+ A1 2,500 Massachusetts State Turnpike Authority, Revenue Refunding Bonds, Series A,
5% due 1/01/2020 2,405
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <S> <C> <S> <C>
Massachusetts (concluded)
Massachusetts State Water Resource Authority Revenue Bonds:
A A $2,000 Series A, 6.50% due 7/15/2019 $ 2,310
A A 2,000 Series B, 6.25% due 11/01/2010 2,176
A A 1,000 Series B, 5.25% due 3/01/2013 993
A A 2,000 Series B, 5% due 3/01/2022 1,879
NR A 1,000 New England Educational Loan Marketing Corporation, Massachusetts, Student Loan
Revenue Bonds, Sub-Issue H, AMT, 6.90% due 11/01/2009 1,120
AAA Aaa 1,000 Southern Berkshire, Massachusetts, Regional School District Revenue Bonds,
GO, UT, 7% due 4/15/2011 (e) 1,172
AAA Aaa 1,000 Springfield, Massachusetts, GO, Series B, 6% due 1/15/2013 (e) 1,083
NR NR 1,000 Springfield, Massachusetts, RAN, 3.30% due 2/04/1994 1,000
NR Baa 1,500 Springfield, Massachusetts, School Project Loan Revenue Bonds, Series B,
7.10% due 9/01/2011 1,700
A+ A 1,000 Woods Hole-Martha's Vineyard and Nantucket, Massachusetts, Revenue Refunding Bonds,
6.60% due 3/01/2003 1,147
<PAGE>
Puerto Rico--3.5%
BBB Baa 750 Puerto Rico Commonwealth, Aqueduct and Sewer Authority Revenue Bonds, Series A,
7.875% due 7/01/2017 861
AAA Aaa 1,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, LEVRRS, RIB, 9.428%
due 7/01/2023 (f)(j) 1,160
A- Baa1 1,000 Puerto Rico Electric Power Authority, Power Revenue Refunding Bonds, Series N, 7%
due 7/01/2007 1,133
Total Investments (Cost--$81,855)--98.3% 88,822
Other Assets Less Liabilities--1.7% 1,563
-------
Net Assets--100.0% $90,385
=======
<FN>
(a)The interest rate is subject to change periodically based upon the
prevailing market rate. The interest rate shown is the rate in
effect at January 31, 1994.
(b)AMBAC Insured.
(c)FHA Insured.
(d)FNMA Collateralized.
(e)MBIA Insured.
(f)FSA Insured.
(g)Prerefunded.
(h)FGIC Insured.
(i)Connie Lee Insured.
(j)The interest rate is subject to change periodically and inversely based upon the prevailing market rate.
The interest rate shown is the rate in effect at January 31, 1994.
++Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL INFORMATION
<CAPTION>
Statement of Assets and Liabilities as of January 31, 1994
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$81,855,021) (Note 1a) $88,821,729
Cash 105,947
Receivables:
Securities sold $4,038,333
Interest 1,216,401
Beneficial interest sold 505,437 5,760,171
----------
Deferred organization expenses (Note 1e) 37,078
Prepaid expenses and other assets (Note 1e) 24,336
-----------
Total assets 94,749,261
<PAGE> -----------
Liabilities: Payables:
Securities purchased 4,077,962
Dividends to shareholders (Note 1f) 80,887
Beneficial interest redeemed 80,196
Distributor (Note 2) 31,721
Investment adviser (Note 2) 21,168 4,291,934
----------
Accrued expenses and other liabilities 71,988
-----------
Total liabilities 4,363,922
-----------
Net Assets: Net assets $90,385,339
===========
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited number of
Consist of: shares authorized $ 78,964
Class B Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 717,344
Paid-in capital in excess of par 82,376,011
Undistributed realized capital gains--net 246,312
Unrealized appreciation on investments--net 6,966,708
-----------
Net assets $90,385,339
===========
Net Asset Value: Class A--Based on net assets of $8,962,887 and 789,641 shares of
beneficial interest outstanding $ 11.35
===========
Class B--Based on net assets of $81,422,452 and 7,173,435 shares of
beneficial interest outstanding $ 11.35
===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL INFORMATION (continued)
<CAPTION>
Statement of Operations
For the
Six Months Ended
January 31, 1994
<S> <S> <C>
Investment Income Interest and amortization of premium and discount earned $ 2,451,958
(Note 1d):
Expenses: Investment advisory fees (Note 2) 236,016
Distribution fees--Class B (Note 2) 193,816
Professional fees 31,512
Printing and shareholder reports 25,695
Transfer agent fees--Class B (Note 2) 20,551
Accounting services (Note 2) 18,485
Registration fees (Note 1e) 7,284
Custodian fees 6,526
Amortization of organization expenses (Note 1e) 5,482
Pricing fees 3,679
Trustees' fees and expenses 1,964
Transfer agent fees--Class A (Note 2) 1,924
Other 1,206
<PAGE> -----------
Total expenses before reimbursement 554,140
Reimbursement of expenses (Note 2) (114,353)
-----------
Total expenses after reimbursement 439,787
-----------
Investment income--net 2,012,171
-----------
Realized & Realized gain on investments--net 340,859
Unrealized Change in unrealized appreciation on investments--net 2,898,401
Gain on -----------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 5,251,431
(Notes 1d & 3): ===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL INFORMATION (continued)
<CAPTION>
Statements of Changes in Net Assets
For the Six For the Year
Months Ended Ended
Increase (Decrease) in Net Assets: Jan. 31, 1994 July 31, 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 2,012,171 $ 3,173,589
Realized gain on investments--net 340,859 1,192,844
Change in unrealized appreciation on investments--net 2,898,401 1,786,432
----------- -----------
Net increase in net assets resulting from operations 5,251,431 6,152,865
----------- -----------
Dividends & Investment income--net:
Distributions to Class A (213,538) (300,336)
Shareholders Class B (1,798,633) (2,873,253)
(Note 1f): Realized gain on investments--net:
Class A (127,538) (10,398)
Class B (1,102,712) (128,953)
----------- -----------
Net decrease in net assets resulting from dividends and distributions
to shareholders (3,242,421) (3,312,940)
----------- -----------
Beneficial Net increase in net assets derived from beneficial interest
Interest transactions 9,854,587 31,906,779
Transactions ----------- -----------
(Note 4):
Net Assets: Total increase in net assets 11,863,597 34,746,704
Beginning of period 78,521,742 43,775,038
----------- -----------
End of period $90,385,339 $78,521,742
=========== ===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL INFORMATION (continued)
Financial Highlights
<CAPTION>
Class A
For the
The following per share data and ratios have been derived Six Months Year Feb. 28,
from information provided in the financial statements. Ended Ended 1992++ to
January 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1994 1993 1992
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $11.07 $10.68 $10.00
Operating ------ ------ ------
Performance: Investment income--net .29 .63 .25
Realized and unrealized gain on investments--net .44 .42 .68
------ ------ ------
Total from investment operations .73 1.05 .93
------ ------ ------
Less dividends and distributions:
Investment income--net (.29) (.63) (.25)
Realized gain on investments--net (.16) (.03) --
------ ------ ------
Total dividends and distributions (.45) (.66) (.25)
------ ------ ------
Net asset value, end of period $11.35 $11.07 $10.68
====== ====== ======
Total Investment Based on net asset value per share 6.68%+++ 10.08% 9.44%+++
Return:** ====== ====== ======
Ratios to Expenses, net of reimbursement .57%* .42% .12%*
Average ====== ====== ======
Net Assets: Expenses .83%* .95% 1.16%*
====== ====== ======
Investment income--net 5.15%* 5.75% 5.82%*
====== ====== ======
Supplemental Net assets, end of period (in thousands) $8,963 $7,093 $4,828
Data: ====== ====== ======
Portfolio turnover 19.48% 39.37% 18.86%
====== ====== ======
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL INFORMATION (concluded)
<CAPTION>
Financial Highlights (concluded)
Class B
For the
For the For the Period
The following per share data and ratios have been derived Six Months Year Feb. 28,
from information provided in the financial statements. Ended Ended 1992++ to
January 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1994 1993 1992
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.07 $ 10.68 $ 10.00
Operating ------- ------- -------
Performance: Investment income--net .26 .57 .23
Realized and unrealized gain on investments--net .44 .42 .68
------- ------- -------
Total from investment operations .70 .99 .91
------- ------- -------
Less dividends and distributions:
Investment income--net (.26) (.57) (.23)
Realized gain on investments--net (.16) (.03) --
------- ------- -------
Total dividends and distributions (.42) (.60) (.23)
------- ------- -------
Net asset value, end of period $ 11.35 $ 11.07 $ 10.68
======= ======= =======
Total Investment Based on net asset value per share 6.41%+++ 9.53% 9.22%+++
Return:** ======= ======= =======
Ratios to Expenses, excluding distribution fees and net of
Average reimbursement .57%* .43% .12%*
Net Assets: ======= ======= =======
Expenses, net of reimbursement 1.07%* .93% .62%*
======= ======= =======
Expenses 1.34%* 1.45% 1.68%*
======= ======= =======
Investment income--net 4.64%* 5.24% 5.32%*
======= ======= =======
Supplemental Net assets, end of period (in thousands) $81,422 $71,429 $38,947
Data: ======= ======= =======
Portfolio turnover 19.48% 39.37% 18.86%
======= ======= =======
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Massachusetts Municipal Bond Fund (the "Fund") is part
of Merrill Lynch Multi-State Municipal Series Trust (the "Trust"). The
Fund is registered under the Investment Company Act of 1940 as a non-
diversified, open-end management investment company. The Fund offers
both Class A and Class B Shares. Class A Shares are sold with a front-
end sales charge. Class B Shares may be subject to a contingent deferred
sales charge. Both classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except
that Class B Shares bear certain expenses related to the distribution
of such shares and have exclusive voting rights with respect to matters
relating to such 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. Options, which are traded on exchanges, are
valued at their last sale price as of the close of such exchanges or,
lacking any sales, at the last available bid price. 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) 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 in-
tended purchase of securities. Futures contracts are contracts for de-
layed 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 share-
holders. Therefore, no Federal income tax provision is required.
<PAGE>
(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. Original issue discounts
and market premiums are amortized into interest income. Realized gains and
losses on security transactions are determined on the identified cost basis.
(e) Deferred organization expenses and prepaid registration fees--Deferred
organization expenses are charged to expense on a straight-line basis over
a five-year period. 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 re-
corded on the ex-dividend dates.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). Effective January 1, 1994, the investment advisory
business of FAM was reorganized from a corporation to a limited partnership.
Both prior to and after the reorganization, ultimate control of FAM has vested
with Merrill Lynch & Co., Inc. ("ML & Co."). The general partner of FAM is
Princeton Services, Inc., an indirect wholly-owned subsidiary of ML & Co.
The limited partners are ML & Co. and Merrill Lynch Investment Management,
Inc. ("MLIM"), which is also an indirect wholly-owned subsidiary of ML & Co.
The Fund has also entered into Distribution Agreements and a Distribution
Plan with Merrill Lynch Funds Distributor, Inc. ("MLFD" or "Distributor"),
a wholly-owned subsidiary of MLIM.
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. For the six months ended January 31, 1994,
FAM earned fees of $236,016, of which $114,353 was voluntarily waived.
Pursuant to a distribution plan ("the Plan") adopted by the Fund under
Rule 12b-1 under the Investment Company Act of 1940, the Fund pays the
Distributor ongoing account maintenance and distribution fees relating
to Class B Shares which are accrued daily and paid monthly at the annual
rates of 0.25% and 0.25%, respectively, of the average daily net assets
of the Class B Shares of the Fund. This fee is to compensate the Distri-
butor for services provided and the expenses borne by the Distributor under
the Distribution Agreement. As authorized by the Plan, the Distributor has
entered into an agreement with Merrill Lynch, Pierce, Fenner & Smith Inc.
("MLPF&S"), an affiliate of FAM, which provides for the compensation of
MLPF&S for providing distribution-related services to the Fund.
For the six months ended January 31, 1994, MLFD earned underwriting dis-
counts of $3,532, and MLPF&S earned dealer concessions of $28,766 on sales
of the Fund's Class A Shares.
MLPF&S also received contingent deferred sales charges of $128,544 for the
sale of Class B Shares during the period.
<PAGE>
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, MLIM, MLFD, FDS, MLPF&S, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for
the six months ended January 31, 1994 were $25,030,095 and $15,814,026,
respectively.
Net realized and unrealized gains (losses) as of January 31, 1994 were as
follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Long-term investments $ 346,247 $6,966,771
Short-term investments -- (63)
Futures contracts (5,388) --
--------- ----------
Total $ 340,859 $6,966,708
========= ==========
As of January 31, 1994, net unrealized appreciation for Federal income
tax purposes aggregated $6,966,708, of which $6,966,771 related to
appreciated securities and $63 related to depreciated securities. The
aggregate cost of investments at January 31, 1994 for Federal income
tax purposes was $81,855,021.
NOTES TO FINANCIAL STATEMENTS (concluded)
4. Beneficial Interest Transactions:
Net increase in net assets derived from beneficial interest transactions
was $9,854,587 and $31,906,779 for the six months ended January 31, 1994
and the year ended July 31, 1993, respectively.
Transactions in shares of beneficial interest for Class A and Class B
Shares were as follows:
Class A Shares for the Dollar
Six Months Ended Jan. 31, 1994 Shares Amount
Shares sold 209,384 $ 2,383,071
Shares issued to shareholders
in reinvestment of dividends
and distributions 11,230 126,521
------- -----------
Total issued 220,614 2,509,592
Shares redeemed (71,682) (838,786)
------- -----------
Net increase 148,932 $ 1,670,806
======= ===========
<PAGE>
Class A Shares for the Dollar
Year Ended July 31, 1993 Shares Amount
Shares sold 354,701 $ 3,828,180
Shares issued to shareholders in
reinvestment of dividends and
distributions 13,015 138,508
------- -----------
Total issued 367,716 3,966,688
Shares redeemed (179,030) (1,881,614)
------- -----------
Net increase 188,686 $ 2,085,074
======= ===========
Class B Shares for the Dollar
Six Months Ended Jan. 31, 1994 Shares Amount
Shares sold 1,147,604 $12,992,518
Shares issued to shareholders in
reinvestment of dividends and
distributions 153,145 1,725,433
--------- -----------
Total issued 1,300,749 14,717,951
Shares redeemed (579,257) (6,534,170)
--------- -----------
Net increase 721,492 $ 8,183,781
========= ===========
Class B Shares for the Dollar
Year Ended July 31, 1993 Shares Amount
Shares sold 3,127,040 $33,253,505
Shares issued to shareholders in
reinvestment of dividends and
distributions 159,939 1,704,515
--------- -----------
Total issued 3,286,979 34,958,020
Shares redeemed (481,243) (5,136,315)
--------- -----------
Net increase 2,805,736 $29,821,705
========= ===========
<PAGE>
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
National Westminster Bank NJ
10 Exchange Place
Jersey City, New Jersey 07302
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
