MERRILL LYNCH
MASSACHUSETTS
MUNICIPAL
BOND FUND
FUND LOGO
Semi-Annual Report
January 31, 1995
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
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
<PAGE>
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Merrill Lynch Massachusetts
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011
TO OUR SHAREHOLDERS
The combination of heightened inflationary concerns, anticipation of
further tightening of monetary policy by the Federal Reserve Board
and the turmoil of the Mexican currency crisis all exerted negative
influences on the US financial markets during the January quarter.
On the positive side, increasing signs that the US economy may be
losing momentum suggested that most of the interest rate increases
for this economic cycle may be behind us. As a result of these
economic crosscurrents, the US stock and bond markets continued to
be volatile during the period.
The manufacturing sector proved to be the driving force behind the
US economy through the final quarter of 1994, making an important
contribution to the substantial increase in corporate earnings. US
companies have been successful at containing labor costs, which are
an important component of the inflation outlook. Growth in the
economy has not been translated into higher wages and benefits for
US workers. Consumer spending is growing at a slower pace than in
previous economic recoveries but households are nonetheless spending
more than saving, as the personal savings rate fell to an all-time
annual low in 1994.
In the weeks ahead, investors will continue to assess economic data
and inflationary trends in order to gauge whether further increases
in short-term interest rates are likely as 1995 unfolds. Despite the
widespread concerns about rising prices for raw materials and
incipient inflationary pressures, 1994's inflation results were as
positive as those in 1993, creating the best sustained inflation
performance in 30 years. However, it is not likely that such
positive inflation results will be duplicated in 1995. Investors
will also focus on the progress that the new Congress makes on both
reducing spending and the Federal budget deficit and passing tax
cuts that promote savings and investment. Legislative progress,
combined with continued indications of moderate and sustainable
levels of economic growth, would be positive for the US capital
markets. However, the lagged effects of higher interest rates could
slow the economy sharply and with it, the growth of corporate
profits.
<PAGE>
The Municipal Market
The municipal bond market continued to exhibit considerable interest
rate volatility during the three months ended January 31, 1995.
Yields on A-rated municipal revenue bonds continued to rise
throughout November to a high of 7.37% as measured by the Bond Buyer
Revenue Bond Index. The tax-exempt bond market improved dramatically
for the remainder of the quarter, and yields fell by approximately
60 basis points (0.60%) to a four-month low of 6.78%. However, the
Index failed to capture much of the rally that occurred at the end
of January as market yields declined a further ten basis points into
the 6.65% range. Municipal bond prices have now recaptured most of
their declines of the last six months.
This improvement in municipal bond prices during the January quarter
was largely the result of significant positive change in investor
sentiment. The series of interest rate increases engineered during
1994 have gone a long way in confirming the Federal Reserve Board's
anti-inflationary resolve. Additionally, the recent signs of a
weakening domestic economy, as well as the negative near-term impact
of the Kobe earthquake and Mexican currency situation, have allowed
investors to become more comfortable with the concept that the vast
majority of the recent rise in fixed-income rates has already
occurred and that yields during 1995 are more likely to remain
stable or decline than they are to significantly rise again.
Consequently, current yield levels are being viewed as attractive to
long-term investors.
In addition to this more positive outlook, the ongoing strong
technical position of the municipal bond market has only fostered
the increase in tax-exempt bond prices seen in recent months. Over
$25 billion in bond proceeds became available to investors at year-
end 1994 from bond maturities, coupon payments and early
redemptions. However, during the recent January quarter, new bond
issuance was less than $25 billion, down 50% from the January 1994
quarter. In January 1995, less than $7 billion in long-term
municipal securities were issued, making this past January's
issuance the lowest monthly total since the mid-1980s. Investor
demand has easily surpassed supply, causing bond prices to rise
rapidly. Also, as 1995 annual issuance is expected to be below the
recent historically low 1994 levels, this positive technical
environment should continue to support the recent improvements in
municipal bond prices into the coming quarters.
Portfolio Strategy
Structural changes to the Fund included lengthening the maturities
in the one-year--ten-year range, significantly increasing the
percentage of education revenue bonds over general obligation bonds,
and reducing the Fund's cash position to a minimum amount. By
lengthening maturities in the one-year--ten-year range, we were able
to add incremental yield while improving the Fund's performance
characteristics. We anticipate that the value of high-grade revenue
bonds will increase relative to general obligation bonds. Lastly, as
the overall tone in the fixed-income markets improved during the
January quarter as investors perceived that the Federal Reserve
Board was clearly committed to and successful at fighting inflation,
we reduced the Fund's cash position to seek to further improve the
yield to shareholders.
<PAGE>
In general, after the November peak in yields, retail and
institutional investors returned to the market looking to purchase
bonds in the 20-year--25-year range. Having repositioned the Fund to
participate in this type of movement, we are looking forward to
seeking an enhanced performance in 1995.
In Conclusion
We appreciate your ongoing interest in Merrill Lynch Massachusetts
Municipal Bond Fund, and we look forward to assisting you with your
financial needs in the months and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
March 1, 1995
PERFORMANCE DATA
About Fund Performance
Since October 21, 1994, investors have been able to purchase shares
of the Fund through the Merrill Lynch Select Pricing SM System,
which offers four pricing alternatives:
* 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.
* 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.
<PAGE>
* 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.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.10% (but no distribution fee).
Performance data for the Fund's Class A and Class B Shares are
presented in the "Recent Performance Results," "Performance Summary"
and "Average Annual Total Return" tables below and on page 4. Data
for Class C and Class D Shares are also presented in the "Recent
Performance Results" and "Aggregate Total Return" tables on page 4.
The "Recent Performance Results" table shows investment results
before the deduction of any sales charges for Class A and Class B
Shares for the 12-month and 3-month periods ended January 31, 1995
and for Class C and Class D Shares for the since inception and 3-
month periods ended January 31, 1995. All data in this table assume
imposition of the actual total expenses incurred by each class of
shares during the relevant period.
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>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <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
1994 11.22 9.84 -- 0.571 - 7.33
1/1/95--1/31/95 9.84 10.13 -- 0.032 + 3.38
------ ------
Total $0.103 Total $1.797
Cumulative total return as of 1/31/95: +21.23%**
<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.
</TABLE>
<PAGE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <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
1994 11.22 9.84 -- 0.518 - 7.80
1/1/95--1/31/95 9.84 10.13 -- 0.029 + 3.35
------ ------
Total $0.103 Total $1.641
Cumulative total return as of 1/31/95: +19.47%**
<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>
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/94 -7.33% -11.03%
Inception (2/28/92)
through 12/31/94 +5.77 + 4.26
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/94 -7.80% -11.29%
Inception (2/28/92)
through 12/31/94 +5.23 + 4.61
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
Aggregate Total Return
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Inception (10/21/94)
through 12/31/94 -1.00% -1.98%
[FN]
*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*
Inception (10/21/94)
through 12/31/94 -0.85% -4.81%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
1/31/95 10/31/94 1/31/94++ % Change++ % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $10.13 $9.87 $11.35 -10.75% + 2.63%
Class B Shares* 10.13 9.87 11.35 -10.75 + 2.63
Class C Shares* 10.12 9.87 10.03 + 0.90 + 2.53
Class D Shares* 10.13 9.87 10.03 + 1.00 + 2.63
Class A Shares--Total Return* - 5.67(1) + 4.06(2)
Class B Shares--Total Return* - 6.15(3) + 3.93(4)
Class C Shares--Total Return* + 2.21(5) + 3.75(6)
Class D Shares--Total Return* + 2.50(7) + 4.04(8)
Class A Shares--Standardized 30-day Yield 5.32%
Class B Shares--Standardized 30-day Yield 5.01%
Class C Shares--Standardized 30-day Yield 4.97%
Class D Shares--Standardized 30-day Yield 5.27%
<PAGE>
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
++Investment results shown for Class C and Class D Shares are since
inception (10/21/94).
(1)Percent change includes reinvestment of $0.568 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.136 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.516 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.123 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.117 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.115 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.135 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.133 per share ordinary
income dividends.
</TABLE>
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 below and at right.
AMT Alternative Minimum Tax (subject to)
ARCS Auction Rate Certificates
GO General Obligation Bonds
HFA Housing Finance Authority
INFLOS Inverse Floating Rate Municipal Bonds
LEVRRS Leveraged Reverse Rate Securities
PARS Periodic Auction Rate Securities
PCR Pollution Control Revenue Bonds
S/F Single-Family
UPDATES Unit Price Daily Adjustable Tax-Exempt Securities
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Massachusetts--95.6%
<S> <S> <C> <S> <C>
AAA Aaa $ 1,650 Beverly, Massachusetts, GO, 6.60% due 3/15/2009 (e) $ 1,716
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 884
AAA Aaa 3,500 Chelsea, Massachusetts, School Project Loan Act of 1948, UT, 6.50% due
6/15/2012 (b) 3,567
NR* Baa 1,000 Greater New Bedford, Massachusetts, Regional Refuse Management District
Revenue Bonds (Massachusetts Landfill), AMT, 5.875% due 5/01/2013 904
Massachusetts Bay Transportation Authority Revenue Bonds (Massachusetts
General Transportation Systems), Series A:
A+ Aaa 805 7% due 3/01/2001 (f) 876
A+ A1 1,500 7% due 3/01/2021 1,646
A+ A1 2,000 Refunding, 7% due 3/01/2011 2,155
AAA Aaa 1,000 Massachusetts Education Loan Authority, Educational Loan Revenue Bonds,
AMT, Series A, Issue E, 7.375% due 1/01/2012 (b) 1,068
Massachusetts State Health and Educational Facilities Authority Revenue
Bonds:
NR* Baa1 2,000 (Anna Jaques Hospital), Series B, 6.875% due 10/01/2012 1,880
AAA Aaa 4,000 (Beth Israel), Linked PARS and INFLOS, 6% due 7/01/2025 (b) 3,771
AAA Aaa 3,030 (Boston College), Series J, 6.625% due 7/01/2021 (g) 3,066
A A1 1,000 (Brigham and Women's Hospital), Series C, 7% due 6/01/2018 1,016
A A1 2,770 (Brigham and Women's Hospital), Series C, 6.75% due 6/01/2021 2,778
A1+ VMIG1++ 300 (Capital Asset Program), VRDN, Series C, 4% due 7/01/2005 (a)(d) 300
AAA Aaa 1,000 (New England Medical Center), Series F, 6.50% due 7/01/2012 (g) 1,014
AAA Aaa 2,200 (Newton Wellesley Hospital), Series D, 7% due 7/01/2015 (d) 2,290
AAA Aaa 1,000 (Northeastern University), Series E, 6.55% due 10/01/2022 (d) 1,011
A+ A1 2,000 Refunding (Boston College), Series K, 5.25% due 6/01/2023 1,678
NR* Ba 1,000 Refunding (New England Memorial Hospital), Series B, 6.125% due 7/01/2013 800
AAA Aaa 1,000 Refunding (Stonehill College), Series E, 6.60% due 7/01/2020 (d) 1,011
BBB Baa1 2,000 (Sisters of Providence Health Systems), Series A, 6.625% due 11/15/2022 1,799
AA+ Aa1 2,250 (Wellesley College), Series D, 5.30% due 7/01/2014 1,975
A+ A1 2,000 Massachusetts State, HFA, Housing Projects, Revenue Refunding Bonds,
Series A, 6.375% due 4/01/2021 1,908
Massachusetts State, HFA, Revenue Bonds (Residential Development) (c):
AAA Aaa 2,690 Series C, 6.875% due 11/15/2011 2,767
AAA Aaa 5,000 Series C, 6.90% due 11/15/2021 5,085
AAA Aaa 1,000 Series D, Section 8, 6.875% due 11/15/2021 1,010
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Massachusetts (concluded)
<S> <S> <C> <S> <C>
A+ Aa $ 1,700 Massachusetts State, HFA, S/F Housing Revenue Bonds, AMT, Series 38,
7.20% due 12/01/2026 $ 1,742
NR* MIG1++ 100 Massachusetts State Industrial Finance Agency, Health Care Facility
Revenue Bonds (Beverly Enterprises), VRDN, 3.80% due 4/12/2009 (a) 100
Massachusetts State Industrial Finance Agency, PCR, Refunding:
BBB- Baa2 1,000 (Boston Edison Company Project), Series A, 5.75% due 2/01/2014 862
BBB- Baa2 2,750 (Eastern Edison Company Project), 5.875% due 8/01/2008 2,500
Massachusetts State Industrial Finance Agency Revenue Bonds:
AAA Aaa 1,000 (Babson College), Series A, 6.50% due 10/01/2022 (d) 1,008
AAA Aaa 1,725 (Brandeis University), Series C, 6.80% due 10/01/2019 (d) 1,749
A+ A1 1,795 Refunding (Holy Cross College--II), 6.375% due 11/01/2015 1,783
A1 VMIG1++ 700 Refunding (Showa Women's Institute Inc.), VRDN, 3.95% due 3/15/2004 (a) 700
A1+ VMIG1++ 200 Massachusetts State Municipal Wholesale Electric Company, Power
Supply System, Revenue Bonds, VRDN, Series C, 3.50% due 7/01/2019 (a) 200
AA- Aa 3,500 Massachusetts State Port Authority Revenue Bonds, Series B, 6% due
7/01/2023 3,317
A1 VMIG1++ 200 Massachusetts State, UPDATES, VRDN, Series B, 3.80% due 12/01/1997 (a) 200
AA- Aa 2,880 Massachusetts State Water Pollution Abatement Trust, Revenue Secured
Loan Program, Series A, 6.375% due 2/01/2015 2,888
A A 6,000 Massachusetts State Water Resource Authority Revenue Bonds, Series
A, 6.50% due 7/15/2019 6,022
AAA Aaa 1,000 Southern Berkshire, Massachusetts, Regional School District Revenue
Bonds, UT, 7% due 4/15/2011 (d) 1,056
NR* Baa 1,500 Springfield, Massachusetts, School Project, Loan Revenue Bonds, Series
B, 7.10% due 9/01/2011 1,525
Puerto Rico--3.9%
AAA Aaa 2,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Linked
ARCS and LEVRRS, 5.929% due 7/01/2023 (e) 1,920
A- Baa1 1,000 Puerto Rico Electric Power Authority, Power Revenue Refunding
Bonds, Series N, 7% due 7/01/2007 1,037
Total Investments (Cost--$77,319)--99.5% 76,584
Other Assets Less Liabilities--0.5% 409
-------
Net Assets--100.0% $76,993
<PAGE> =======
<FN>
(a)The interest rate is subject to change periodically based on
prevailing market rates. The interest rate shown is the rate in
effect at January 31, 1995.
(b)AMBAC Insured.
(c)FNMA Collateralized.
(d)MBIA Insured.
(e)FSA Insured.
(f)Prerefunded.
(g)FGIC Insured.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of January 31, 1995
<CAPTION>
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$77,319,031) (Note 1a) $76,584,021
Cash 56,418
Receivables:
Interest $ 1,064,522
Beneficial interest sold 61,151 1,125,673
-----------
Deferred organization expenses (Note 1e) 26,707
Prepaid registration fees and other assets (Note 1e) 19,834
-----------
Total assets 77,812,653
-----------
Liabilities: Payables:
Beneficial interest redeemed 608,103
Dividends to shareholders (Note 1f) 86,246
Investment adviser (Note 2) 33,272
Distributor (Note 2) 27,610 755,231
Accrued expenses and other liabilities 64,407
-----------
Total liabilities 819,638
-----------
Net Assets: Net assets $76,993,015
<PAGE> ===========
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited
Consist of: number of shares authorized $ 68,474
Class B Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 688,660
Class C Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 519
Class D Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 2,397
Paid-in capital in excess of par 79,018,855
Accumulated realized capital losses on investments--net (2,050,880)
Unrealized depreciation on investments--net (735,010)
-----------
Net assets $76,993,015
===========
Net Asset Value: Class A--Based on net assets of $6,936,642 and 684,737 shares
of beneficial interest outstanding $ 10.13
===========
Class B--Based on net assets of $69,761,046 and 6,886,601 shares
of beneficial interest outstanding $ 10.13
===========
Class C--Based on net assets of $52,583 and 5,195 shares of
beneficial interest outstanding $ 10.12
===========
Class D--Based on net assets of $242,744 and 23,965 shares of
beneficial interest outstanding $ 10.13
===========
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months
Ended January 31, 1995
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 2,570,038
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 221,764
Distribution fees--Class B (Note 2) 182,451
Printing and shareholder reports 34,240
Professional fees 26,449
<PAGE> Accounting services (Note 2) 24,127
Transfer agent fees--Class B (Note 2) 24,006
Registration fees (Note 1e) 11,679
Amortization of organization expenses (Note 1e) 5,021
Custodian fees 4,238
Pricing fees 3,455
Transfer agent fees--Class A (Note 2) 2,110
Trustees' fees and expenses 2,084
Distribution fees--Class C (Note 2) 40
Account maintenance fees--Class D (Note 2) 32
Transfer agent fees--Class D (Note 2) 19
Transfer agent fees--Class C (Note 2) 7
Other 2,434
-----------
Total expenses before reimbursement 544,156
Reimbursement of expenses (Note 2) (22,680)
-----------
Total expenses after reimbursement 521,476
-----------
Investment income--net 2,048,562
-----------
Realized & Realized loss on investments--net (1,978,103)
Unrealized Change in unrealized appreciation/depreciation on investments--net (1,076,623)
Loss on -----------
Investments-- Net Decrease in Net Assets Resulting from Operations $(1,006,164)
Net (Notes ===========
1b, 1d & 3):
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the
Six Months For the
Ended Year Ended
January 31, July 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 2,048,562 $ 4,128,004
Realized gain (loss) on investments--net (1,978,103) 21,770
Change in unrealized appreciation/depreciation on
investments--net (1,076,623) (3,726,694)
----------- -----------
Net increase (decrease) in net assets resulting from
operations (1,006,164) 423,080
----------- -----------
<PAGE>
Dividends & Investment income--net:
Distributions to Class A (210,131) (441,160)
Shareholders Class B (1,836,361) (3,686,844)
(Note 1f): Class C (331) --
Class D (1,739) --
Realized gain on investments--net:
Class A -- (119,994)
Class B -- (1,037,479)
In excess of realized gain on investments--net:
Class A -- (7,544)
Class B -- (65,233)
----------- -----------
Net decrease in net assets resulting from dividends and
distributions to shareholders (2,048,562) (5,358,254)
----------- -----------
Beneficial Net increase (decrease) in net assets derived from beneficial
Interest interest transactions (4,755,547) 11,216,720
Transactions ----------- -----------
(Note 4):
Net Assets: Total increase (decrease) in net assets (7,810,273) 6,281,546
Beginning of period 84,803,288 78,521,742
----------- -----------
End of period $76,993,015 $84,803,288
=========== ===========
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
Class A
For the For the
Six Period
The following per share data and ratios have been derived Months Feb. 28,
from information provided in the financial statements. Ended For the Year Ended 1992++ to
Jan. 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.48 $ 11.07 $ 10.68 $ 10.00
Operating -------- -------- -------- --------
Performance: Investment income--net .28 .58 .63 .25
Realized and unrealized gain (loss) on
investments--net (.35) (.43) .42 .68
-------- -------- -------- --------
Total from investment operations (.07) .15 1.05 .93
<PAGE>
Less dividends and distributions:
Investment income--net (.28) (.58) (.63) (.25)
Realized gain on investments--net -- (.15) (.03) --
In excess of realized gain on investments--net -- (.01) -- --
-------- -------- -------- --------
Total dividends and distributions (.28) (.74) (.66) (.25)
-------- -------- -------- --------
Net asset value, end of period $ 10.13 $ 10.48 $ 11.07 $ 10.68
======== ======== ======== ========
Total Based on net asset value per share (.62%)+++ 1.26% 10.08% 9.44%+++
Investment ======== ======== ======== ========
Return:**
Ratios to Expenses, net of reimbursement .83%* .62% .42% .12%*
Average ======== ======== ======== ========
Net Assets: Expenses .89%* .85% .95% 1.16%*
======== ======== ======== ========
Investment income--net 5.54%* 5.33% 5.75% 5.82%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 6,937 $ 8,367 $ 7,093 $ 4,828
Data: ======== ======== ======== ========
Portfolio turnover 51.76% 72.13% 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>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class B
For the For the
Six Period
The following per share data and ratios have been derived Months Feb. 28,
from information provided in the financial statements. Ended For the Year Ended 1992++ to
Jan. 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.48 $ 11.07 $ 10.68 $ 10.00
Operating -------- -------- -------- --------
Performance: Investment income--net .25 .53 .57 .23
Realized and unrealized gain (loss) on
investments--net (.35) (.43) .42 .68
-------- -------- -------- --------
Total from investment operations (.10) .10 .99 .91
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.25) (.53) (.57) (.23)
Realized gain on investments--net -- (.15) (.03) --
In excess of realized gain on investments--net -- (.01) -- --
-------- -------- -------- --------
Total dividends and distributions (.25) (.69) (.60) (.23)
-------- -------- -------- --------
Net asset value, end of period $ 10.13 $ 10.48 $ 11.07 $ 10.68
======== ======== ======== ========
Total Based on net asset value per share (.87%)+++ .75% 9.53% 9.22%+++
Investment ======== ======== ======== ========
Return:**
Ratios to Expenses, excluding distribution fees and
Average net of reimbursement .84%* .62% .43% .12%*
Net Assets: ======== ======== ======== ========
Expenses, net of reimbursement 1.34%* 1.12% .93% .62%*
======== ======== ======== ========
Expenses 1.40%* 1.36% 1.45% 1.68%*
======== ======== ======== ========
Investment income--net 5.03%* 4.83% 5.24% 5.32%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 69,761 $ 76,436 $ 71,429 $ 38,947
Data: ======== ======== ======== ========
Portfolio turnover 51.76% 72.13% 39.37% 18.86%
======== ======== ======== ========
<PAGE>
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. Oct. 21, 1994++
to Jan. 31, 1995
Increase (Decrease) in Net Asset Value: Class C Class D
<S> <S> <C> <C>
Per Share Net asset value, beginning of period $ 10.03 $ 10.03
Operating ----------- -----------
Performance: Investment income--net .13 .15
Realized and unrealized gain on investments--net .09 .10
----------- -----------
Total from investment operations .22 .25
----------- -----------
Less dividends:
Investment income--net (.13) (.15)
----------- -----------
Net asset value, end of period $ 10.12 $ 10.13
=========== ===========
Total Based on net asset value per share 2.21%++ 2.50%++
Investment =========== ===========
Return:**
Ratios to Expenses, excluding distribution and account maintenance
Average fees and net of reimbursement .96%* .92%*
Net Assets: =========== ===========
Expenses, net of reimbursement 1.56%* 1.02%*
=========== ===========
Expenses 1.56%* 1.02%*
=========== ===========
Investment income--net 4.97%* 5.51%*
=========== ===========
Supplemental Net assets, end of period (in thousands) $ 53 $ 243
Data: =========== ===========
Portfolio turnover 51.76% 51.76%
=========== ===========
<PAGE>
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
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. 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 Pricing SM 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.
<PAGE>
(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.
* 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) 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 recorded on the ex-dividend dates. Distributions in excess
of realized capital gains are due primarily to differing tax
treatments for futures transactions and post-October losses.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded)
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor, 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. For the six months ended January 31, 1995, FAM
earned fees of $221,764, of which $22,680 was voluntarily waived.
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.
<PAGE>
For the six-months ended January 31, 1995, 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 $175 $1,650
Class D $270 $3,061
MLPF&S received contingent deferred sales charges of $150,778
relating to transactions in Class B Shares of beneficial interest
for the six months ended January 31, 1995.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, MLPF&S, FDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended January 31, 1995 were $38,327,170 and
$40,415,187, respectively.
Net realized and unrealized gains (losses) as of January 31, 1995
were as follows:
Realized Unrealized
Losses Losses
Long-term investments $ (778,996) $ (735,010)
Short-term investments (1,012,518) --
Financial futures contracts (186,589) --
------------ ------------
Total $ (1,978,103) $ (735,010)
============ ============
As of January 31, 1995, net unrealized depreciation for Federal
income tax purposes aggregated $735,010, of which $1,018,226 related
to appreciated securities and $1,753,236 related to depreciated
securities. The aggregate cost of investments at January 31, 1995
for Federal income tax purposes was $77,319,031.
4. Beneficial Interest Transactions:
Net increase (decrease) in net assets derived from beneficial
interest transactions was $(4,755,547) and $11,216,720 for the six
months ended January 31, 1995 and the year ended July 31, 1994,
respectively.
<PAGE>
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the
Six Months Ended Dollar
January 31, 1995 Shares Amount
Shares sold 100,319 $ 998,381
Shares issued to shareholders
in reinvestment of dividends 8,889 88,680
------------ ------------
Total issued 109,208 1,087,061
Shares redeemed (222,887) (2,213,588)
------------ ------------
Net decrease (113,679) $ (1,126,527)
============ ============
Class A Shares
for the Year Ended Dollar
July 31, 1994 Shares Amount
Shares sold 307,747 $ 3,438,464
Shares issued to shareholders
in reinvestment of dividends
and distributions 19,821 217,018
------------ ------------
Total issued 327,568 3,655,482
Shares redeemed (169,861) (1,887,059)
------------ ------------
Net increase 157,707 $ 1,768,423
============ ============
Class B Shares for the
Six Months Ended Dollar
January 31, 1995 Shares Amount
Shares sold 544,437 $ 5,495,386
Shares issued to shareholders
in reinvestment of dividends 99,531 992,771
------------ ------------
Total issued 643,968 6,488,157
Shares redeemed (1,050,759) (10,401,007)
------------ ------------
Net decrease (406,791) $ (3,912,850)
============ ============
<PAGE>
Class B Shares for the Dollar
Year Ended July 31, 1994 Shares Amount
Shares sold 1,809,726 $ 19,990,791
Shares issued to shareholders
in reinvestment of dividends
and distributions 254,694 2,796,404
------------ ------------
Total issued 2,064,420 22,787,195
Shares redeemed (1,222,971) (13,338,898)
------------ ------------
Net increase 841,449 $ 9,448,297
============ ============
Class C Shares for the Period
October 21, 1994++ to Dollar
January 31, 1995 Shares Amount
Shares sold 5,167 $ 50,219
Shares issued to shareholders
in reinvestment of dividends 28 274
------------ ------------
Total issued 5,195 50,493
Shares redeemed -- --
------------ ------------
Net increase 5,195 $ 50,493
============ ============
[FN]
++Commencement of Operations.
Class D Shares for the Period
October 21, 1994++ to Dollar
January 31, 1995 Shares Amount
Shares sold 26,464 $ 258,191
Shares issued to shareholders
in reinvestment of dividends 38 368
------------ ------------
Total issued 26,502 258,559
Shares redeemed (2,537) (25,222)
------------ ------------
Net increase 23,965 $ 233,337
============ ============
[FN]
++Commencement of Operations.
