MERRILL LYNCH
MASSACHUSETTS
MUNICIPAL
BOND FUND
FUND LOGO
Semi-Annual Report
January 31, 1996
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
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
<PAGE>
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
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 Massachusetts
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011
TO OUR SHAREHOLDERS
Although the partial shutdown of the US Government curtailed the
release of most economic data in the latter part of the six-month
period ended January 31, 1996, it was nonetheless apparent that
gross domestic product (GDP) growth was losing momentum. Consumer
spending is barely growing, the industrial sector is at a virtual
standstill and, despite lower mortgage rates, there is little or no
pick-up in housing activity. With inflationary pressures subdued,
the Federal Reserve Board responded to the slowing economy by
continuing to modestly lower short-term interest rates.
Historically, it has taken some time for shifts in monetary policy
to have an impact on economic growth. Therefore, the Federal Reserve
Board's gradual shift to lowering interest rates, which began early
last year, may not be reflected in a pick-up in real economic growth
until later this year.
<PAGE>
The impasse between the Clinton Administration and Congress over the
Federal budget continues, although both sides have made concessions
since the debate began. It appears that investors are currently
focusing on the progress that has been made rather than on the
differences that remain. Initially, President Clinton proposed
deficits of about $190 billion annually through fiscal year 2002,
but now proposes balanced budgets, as do the Republicans. Current
indications are that a piecemeal budget accord is the most likely
outcome. Even without the proposed policy changes, it appears that
the US Federal budget deficit would remain stable at about 2% of GDP
for the rest of the decade. This would be far better than is the
case for most Group of Seven industrial nations, and for the United
States would represent a great improvement over the last 15 years.
Although this may fall short of investors' best expectations, it
appears that the Federal budget debate over the past year has
resulted in a trend toward a more conservative fiscal policy.
The Municipal Market
The municipal bond market rallied strongly during the six months
ended January 31, 1996. Long-term, tax-exempt revenue bond yields,
as measured by the Bond Buyer Revenue Bond Index, declined over 65
basis points (0.65%) to end the January period at 5.69%. Continued
weak economic conditions coupled with low inflation fostered a very
positive environment for almost all fixed-income investments during
the last three months of 1995. Long-term US Treasury bond yields
also declined approximately 65 basis points to 6.00% by January 31,
1996. Both US Treasury and long-term tax-exempt bond yields are near
their lowest levels in the past two years.
The municipal bond market had to contend with a number of
difficulties for much of 1995. Various tax reform proposals have
made the future tax advantage of municipal bonds uncertain. This
has, at a minimum, reduced the overall demand for tax-exempt
securities. At the same time, as municipal bond yields declined, tax-
exempt authorities have rushed to issue debt at near historic low
yield levels. During the six-month period ended January 31, 1996,
approximately $90 billion in municipal securities were underwritten,
an increase of over 30% compared to the same period last year.
However, as early 1995 issuance was significantly reduced, the last
12 months issuance of approximately $160 billion remained the same
as that issued a year earlier. Tax-exempt bond yields declined
throughout the six months ended January 31, 1996, despite investor
uncertainty and increased supply pressures.
<PAGE>
It is likely that the municipal market will regain much of the
technical support it enjoyed earlier in 1995. 1995 issuance remained
significantly below levels underwritten in 1993, when over $290
billion in long-term tax-exempt securities were issued. Also,
municipal investors received over $25 billion in bond maturities,
coupon income and early redemptions on January 1, 1996. This $25
billion is almost twice the average monthly issuance for 1995. The
amount of outstanding municipal securities will continue to decline
throughout 1996 and into early 1997. As the uncertainties
surrounding proposed tax reforms are resolved in 1996, the tax-
exempt bond market's renewed technical position should provide
support to municipal bond prices.
Many of the features that made tax-exempt products attractive to
investors last year are still in place. Long-term, A-rated municipal
revenue bonds continue to yield well over 90% of comparable US
Treasury bond yields. Historically, analysts have considered yields
in excess of 82% attractive for long-term investors. For example,
currently available tax-exempt bond yields generate taxable
equivalent yields in excess of 8.50% for an investor in the 36%
Federal income tax bracket. While the uncertainties regarding
potential changes in current tax law remain, it appears that, at
current price levels, bond investors have discounted at least some
of the uncertainty.
Looking ahead, it may be unreasonable to expect to duplicate the
double-digit returns produced by most tax-exempt issues in 1995,
given current municipal bond yields. Municipal bond yields would
have to decline to levels not seen since the 1960s in order to
generate such significant returns in the coming years. While the
current economic environment may still justify additional declines
in interest rates, it may be prudent to expect some period of
consolidation before the interest rate decline resumes. Tax- exempt
bond market performance in 1996 is likely to be generated more by
enhancing current income and limiting credit risk than by
significant interest rate declines.
Portfolio Strategy
For the three-month period ended January 31, 1996, the Fund
continued to participate in the bond market rally. We still maintain
the very constructive outlook for bonds we adopted in 1995.
During the past several months, investors were very bullish toward
the bond market even after an impressive rally caused some investors
to become somewhat cautious. The ongoing debate in Washington over
the Federal budget, the recent sharp rise in the price of various
commodities such as gas, grains and gold, and the discussions
regarding a flat tax have overshadowed the fundamental weakness in
the economy. We believe the slowing economy will prompt the Federal
Reserve Board to ease monetary policy further, which would lead to
higher bond prices.
<PAGE>
We used some of the extreme market weakness in late 1995 to purchase
attractive issues, and subsequently sold issues which we expected to
underperform. In addition, we maintained our overweighting to
interest rate-sensitive issues, which should continue to offer
attractive total returns when investors refocus on the fundamentals
of the economy and inflation.
In Conclusion
We appreciate your ongoing interest in Merrill Lynch Massachusetts
Municipal Bond Fund, and we look forward to serving your investment
needs in the months and years to come.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President
(Roberto Roffo)
Roberto Roffo
Portfolio Manager
March 8, 1996
We are pleased to announce that Roberto Roffo is responsible for the
day-to-day management of Merrill Lynch Massachusetts Municipal Bond
Fund. Mr. Roffo has been employed by Merrill Lynch Asset Management,
L.P. (an affiliate of the Fund's investment adviser) since 1992 and
as Vice President since 1996. Prior thereto, he was Operations
Manager with State Street Bank and Trust Company from 1989 to 1992.
<PAGE>
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* 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.
* 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).
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.
<PAGE>
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
1/31/96 10/31/95 1/31/95 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $11.02 $10.72 $10.13 + 8.79% +2.80%
Class B Shares* 11.02 10.72 10.13 + 8.79 +2.80
Class C Shares* 11.01 10.72 10.12 + 8.79 +2.71
Class D Shares* 11.02 10.73 10.13 + 8.79 +2.70
Class A Shares--Total Return* +14.61(1) +4.11(2)
Class B Shares--Total Return* +14.04(3) +3.98(4)
Class C Shares--Total Return* +13.92(5) +3.86(6)
Class D Shares--Total Return* +14.49(7) +3.99(8)
Class A Shares--Standardized 30-day Yield 4.51%
Class B Shares--Standardized 30-day Yield 4.19%
Class C Shares--Standardized 30-day Yield 4.09%
Class D Shares--Standardized 30-day Yield 4.42%
<FN>
*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 $0.555 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.139 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.501 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.125 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.490 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.122 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.545 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.136 per share ordinary
income dividends.
</TABLE>
PERFORMANCE DATA (continued)
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
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
1994 11.22 9.84 -- 0.571 - 7.33
1995 9.84 11.02 -- 0.555 +18.03
1/1/96--1/31/96 11.02 11.02 -- 0.032 + 0.39
------ ------
Total $0.103 Total $2.352
<PAGE>
Cumulative total return as of 1/31/96: +38.95%**
<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>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
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
1994 11.22 9.84 -- 0.518 -7.80
1995 9.84 11.02 -- 0.501 +17.44
1/1/96--1/31/96 11.02 11.02 -- 0.029 + 0.36
------ ------
Total $0.103 Total $2.142
Cumulative total return as of 1/31/96: +36.23%**
<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
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
<TABLE>
Performance Summary--Class C Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $10.03 $ 9.84 -- $0.088 - 1.00%
1995 9.84 11.01 -- 0.490 +17.20
1/1/96-- 1/31/96 11.01 11.01 -- 0.028 + 0.35
------
Total $0.606
Cumulative total return as of 1/31/96: +16.44%**
<PAGE>
<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)
<TABLE>
Performance Summary--Class D Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $10.03 $ 9.84 -- $0.103 - 0.85%
1995 9.84 11.02 -- 0.545 +17.91
1/1/96--1/31/96 11.02 11.02 -- 0.032 + 0.38
------
Total $0.680
Cumulative total return as of 1/31/96: +17.35%**
<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>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/95 +18.03% +13.31%
Inception (2/28/92)
through 12/31/95 + 8.83 + 7.68
<PAGE>
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/95 +17.44% +13.44%
Inception (2/28/92)
through 12/31/95 + 8.28 + 8.07
[FN]
*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 12/31/95 +17.20% +16.20%
Inception (10/21/94)
through 12/31/95 +13.26 +13.26
[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*
Year Ended 12/31/95 +17.91% +13.19%
Inception (10/21/94)
through 12/31/95 +13.97 +10.14
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<PAGE>
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)
CARS Complementary Auction Rate Securities
GO General Obligation Bonds
HFA Housing Finance Agency
INFLOS Inverse Floating Rate Municipal Bonds
S/F Single-Family
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<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 $ 1,170 Attleboro, Massachusetts, GO, 5.125% due 12/01/2015 (b) $ 1,144
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 946
Massachusetts Bay Transportation Authority Revenue Bonds (Massachusetts
General Transportation Systems), Series A:
A+ A1 1,500 7% due 3/01/2021 1,851
A+ A1 1,750 Refunding, UT, 7% due 3/01/2011 2,109
AAA Aaa 1,000 Massachusetts Education Loan Authority, Educational Loan Revenue Bonds, AMT,
Series A, Issue E, 7.375% due 1/01/2012(b) 1,059
<PAGE>
Massachusetts State Health and Educational Facilities Authority Revenue Bonds:
AAA Aaa 2,000 (Beth Israel), INFLOS, 7.808% due 7/01/2025 (a)(b) 2,160
AAA Aaa 3,030 (Boston College), Series J, 6.625% due 7/01/2021 (e) 3,319
A A1 1,000 (Brigham and Women's Hospital), Series C, 7% due 6/01/2018 1,076
A A1 2,520 (Brigham and Women's Hospital), Series C, 6.75% due 6/01/2021 2,693
AAA Aaa 5,150 (Central Massachusetts Medical Center), CARS, Series B, 9.12% due
6/23/2022 (a)(b) 6,444
AAA Aaa 2,500 (Newton Wellesley Hospital), Series D, 7% due 7/01/2015 (d) 2,789
AAA Aaa 1,000 (Northeastern University), Series E, 6.55% due 10/01/2022 (d) 1,100
A- NR* 1,000 Refunding (Melrose-Wakefield Hospital), Series B, 5.875% due 7/01/2018 992
NR* Ba 1,000 Refunding (New England Memorial Hospital), Series B, 6.125% due 7/01/2013 842
AAA Aaa 1,000 Refunding (Stonehill College), Series E, 6.60% due 7/01/2020 (d) 1,100
NR* A 2,335 Refunding (Wheaton College), Series C, 5.25% due 7/01/2019 2,274
A+ A1 1,955 Massachusetts State, HFA, Housing Projects, Revenue Refunding Bonds,
Series A, 6.375% due 4/01/2021 1,984
Massachusetts State, HFA, Revenue Bonds (Residential Development) (c):
AAA Aaa 2,000 Series C, 6.875% due 11/15/2011 2,142
AAA Aaa 5,000 Series C, 6.90% due 11/15/2021 5,287
AAA Aaa 1,000 Series D, Section 8, 6.875% due 11/15/2021 1,053
</TABLE>
<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>
Massachusetts State, HFA, S/F Housing Revenue Bonds, AMT:
A+ Aa $ 1,500 Series 38, 7.20% due 12/01/2026 $ 1,596
A+ Aa 2,000 Series 40, 6.65% due 12/01/2027 2,062
Massachusetts State Industrial Finance Agency Revenue Bonds:
AAA Aaa 1,000 (Babson College), Series A, 6.50% due 10/01/2022 (d) 1,097
AAA Aaa 3,175 (Brandeis University), Series C, 6.80% due 10/01/2019 (d) 3,498
A+ A1 1,795 Refunding (Holy Cross College-II), 6.375% due 11/01/2015 1,908
AAA Aaa 2,665 Refunding (Saint Mark's School), 5.375% due 1/01/2021 (d) 2,649
Massachusetts State Municipal Wholesale Electric Company, Power Supply
System Revenue Bonds:
AAA Aaa 2,950 Series A, 5% due 7/01/2017 (b) 2,830
A1+ VMIG1++ 100 VRDN, Series C, 2.85% due 7/01/2019 (f) 100
A1+ P1 400 Massachusetts State Port Authority Revenue Refunding Bonds, VRDN, Series A,
3.70% due 7/01/2015 (f) 400
Massachusetts State Water Pollution Abatement Trust, Revenue Secured
Loan Program, Series A:
AA- Aa 1,680 6.375% due 2/01/2015 1,822
A+ Aa 1,000 MWRA Loan Program, 5% due 8/01/2015 956
<PAGE>
Massachusetts State Water Resource Authority Revenue Bonds:
A A 6,000 Series A, 6.50% due 7/15/2019 6,916
AAA Aaa 1,940 Series B, 4.75% due 12/01/2021 (d) 1,788
AAA Aaa 1,210 Southern Berkshire, Massachusetts, Regional School District Revenue Bonds,
UT, 7% due 4/15/2011 (d) 1,406
NR* Baa 1,500 Springfield, Massachusetts, School Project, Loan Revenue Bonds, Series B,
7.10% due 9/01/2011 1,662
Puerto Rico--3.7%
A Baa1 3,000 Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue Refunding
Bonds, 5% due 7/01/2019 2,822
Total Investments (Cost--$70,534)--99.3% 75,876
Other Assets Less Liabilities--0.7% 501
-------
Net Assets--100.0% $76,377
=======
<FN>
(a)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 January 31, 1996.
(b)AMBAC Insured.
(c)FNMA Collateralized.
(d)MBIA Insured.
(e)FGIC Insured.
(f)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at January 31, 1996.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<PAGE>
<TABLE>
Statement of Assets and Liabilities as of January 31, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$70,534,000) (Note 1a) $ 75,875,722
Cash 49,593
Receivables:
Interest $ 846,378
Beneficial interest sold 25,995 872,373
------------
Deferred organization expenses (Note 1e) 16,337
Prepaid expenses and other assets (Note 1e) 16,242
------------
Total assets 76,830,267
------------
Liabilities: Payables:
Beneficial interest redeemed 202,112
Dividends to shareholders (Note 1f) 88,711
Investment adviser (Note 2) 34,629
Distributor (Note 2) 28,488 353,940
------------
Accrued expenses and other liabilities 98,899
------------
Total liabilities 452,839
------------
Net Assets: Net assets $ 76,377,428
============
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 61,457
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 616,590
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 6,691
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 8,308
Paid-in capital in excess of par 71,966,359
Accumulated realized capital losses on investments--net (Note 5) (1,550,922)
Accumulated distributions in excess of realized capital gains--net (72,777)
Unrealized appreciation on investments--net 5,341,722
------------
Net assets $ 76,377,428
============
<PAGE>
Net Asset Value: Class A--Based on net assets of $6,772,941 and 614,566 shares
of beneficial interest outstanding $ 11.02
============
Class B--Based on net assets of $67,951,846 and 6,165,897 shares
of beneficial interest outstanding $ 11.02
============
Class C--Based on net assets of $736,937 and 66,912 shares
of beneficial interest outstanding $ 11.01
============
Class D--Based on net assets of $915,704 and 83,079 shares
of beneficial interest outstanding $ 11.02
============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months Ended January 31, 1996
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 2,327,318
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 210,384
Account maintenance and distribution fees--Class B (Note 2) 170,227
Professional fees 32,745
Transfer agent fees--Class B (Note 2) 21,776
Accounting services (Note 2) 20,811
Printing and shareholder reports 20,300
Registration fees (Note 1e) 9,681
Amortization of organization expenses (Note 1e) 5,602
Custodian fees 2,837
Pricing fees 2,496
Trustees' fees and expenses 2,022
Account maintenance and distribution fees--Class C (Note 2) 1,962
Transfer agent fees--Class A (Note 2) 1,832
Account maintenance fees--Class D (Note 2) 490
Transfer agent fees--Class D (Note 2) 264
Transfer agent fees--Class C (Note 2) 215
Other 1,193
------------
Total expenses 504,837
------------
Investment income--net 1,822,481
------------
<PAGE>
Realized & Realized loss on investments--net (50,087)
Unrealized Gain Change in unrealized appreciation on investments--net 4,010,691
(Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 5,783,085
(Notes 1b, 1d & 3): ============
<CAPTION>
Statements of Changes in Net Assets
For the
Six Months For the
Ended Year Ended
Increase (Decrease) in Net Assets: Jan. 31, 1996 July 31, 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 1,822,481 $ 3,914,760
Realized loss on investments--net (50,087) (1,500,843)
Change in unrealized appreciation on investments--net 4,010,691 989,418
------------ ------------
Net increase in net assets resulting from operations 5,783,085 3,403,335
------------ ------------
Dividends to Investment income--net:
Shareholders Class A (177,091) (398,237)
(Note 1f): Class B (1,605,294) (3,492,562)
Class C (15,034) (7,152)
Class D (25,062) (16,809)
------------ ------------
Net decrease in net assets resulting from dividends
to shareholders (1,822,481) (3,914,760)
------------ ------------
Beneficial Interest Net decrease in net assets derived from beneficial
Transactions interest transactions (2,322,793) (9,552,246)
(Note 4):
Net Assets: Total increase (decrease) in net assets 1,637,811 (10,063,671)
Beginning of period 74,739,617 84,803,288
------------ ------------
End of period $ 76,377,428 $ 74,739,617
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<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 1992++ to
Jan. 31, For the Year Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.46 $ 10.48 $ 11.07 $ 10.68 $ 10.00
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .28 .56 .58 .63 .25
Realized and unrealized gain (loss) on
investments--net .56 (.02) (.43) .42 .68
-------- -------- -------- -------- --------
Total from investment operations .84 .54 .15 1.05 .93
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.28) (.56) (.58) (.63) (.25)
Realized gain on investments--net -- -- (.15) (.03) --
In excess of realized gain on
investments--net -- -- (.01) -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.28) (.56) (.74) (.66) (.25)
-------- -------- -------- -------- --------
Net asset value, end of period $ 11.02 $ 10.46 $ 10.48 $ 11.07 $ 10.68
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 8.11%+++ 5.35% 1.26% 10.08% 9.44%+++
Return:** ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement .86%* .88% .62% .42% .12%*
Average ======== ======== ======== ======== ========
Net Assets: Expenses .86%* .91% .85% .95% 1.16%*
======== ======== ======== ======== ========
Investment income--net 5.21%* 5.42% 5.33% 5.75% 5.82%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 6,773 $ 6,630 $ 8,367 $ 7,093 $ 4,828
Data: ======== ======== ======== ======== ========
Portfolio turnover 40.67% 89.62% 72.13% 39.37% 18.86%
======== ======== ======== ======== ========
*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 Highlights
<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 1992++ to
Jan. 31, For the Year Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.46 $ 10.48 $ 11.07 $ 10.68 $ 10.00
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .26 .50 .53 .57 .23
Realized and unrealized gain (loss) on
investments--net .56 (.02) (.43) .42 .68
-------- -------- -------- -------- --------
Total from investment operations .82 .48 .10 .99 .91
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.26) (.50) (.53) (.57) (.23)
Realized gain on investments--net -- -- (.15) (.03) --
In excess of realized gain on
investments--net -- -- (.01) -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.26) (.50) (.69) (.60) (.23)
-------- -------- -------- -------- --------
Net asset value, end of period $ 11.02 $ 10.46 $ 10.48 $ 11.07 $ 10.68
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 7.84%+++ 4.82% .75% 9.53% 9.22%+++
Return:** ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement 1.37%* 1.39% 1.12% .93% .62%*
Average ======== ======== ======== ======== ========
Net Assets: Expenses 1.37%* 1.42% 1.36% 1.45% 1.68%*
======== ======== ======== ======== ========
Investment income--net 4.70%* 4.91% 4.83% 5.24% 5.32%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands). $ 67,952 $ 66,927 $ 76,436 $ 71,429 $ 38,947
Data: ======== ======== ======== ======== ========
Portfolio turnover 40.67% 89.62% 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>
<PAGE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class C Class D
For the For the
For the Period For the Period
The following per share data and ratios have been derived Six Months Oct. 21, Six Months Oct. 21,
from information provided in the financial statements. Ended 1994++ to Ended 1994++ to
Jan. 31, July 31, Jan. 31, July 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1996 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.46 $ 10.03 $ 10.47 $ 10.03
Operating -------- -------- -------- --------
Performance: Investment income--net .25 .37 .28 .42
Realized and unrealized gain on investments--net .55 .43 .55 .44
-------- -------- -------- --------
Total from investment operations .80 .80 .83 .86
-------- -------- -------- --------
Less dividends from investment income--net (.25) (.37) (.28) (.42)
-------- -------- -------- --------
Net asset value, end of period $ 11.01 $ 10.46 $ 11.02 $ 10.47
======== ======== ======== ========
Total Investment Based on net asset value per share 7.69%+++ 8.13%+++ 7.96%+++ 8.70%+++
Return:** ======== ======== ======== ========
Ratios to Average Expenses 1.47%* 1.56%* .96%* 1.04%*
Net Assets: ======== ======== ======== ========
Investment income--net 4.58%* 4.68%* 5.10%* 5.22%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 737 $ 432 $ 915 $ 750
Data: ======== ======== ======== ========
Portfolio turnover 40.67% 89.62% 40.67% 89.62%
======== ======== ======== ========
<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. 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.
(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.
<PAGE>
* 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.
NOTES TO FINANCIAL STATEMENTS (concluded)
(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.
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.
<PAGE>
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
Maintenance Distribution
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 January 31, 1996, 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 $42 $532
Class D $77 $954
For the six months ended January 31, 1996, MLPF&S received
contingent deferred sales charges of $82,923 and $1,874 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.
<PAGE>
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, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding
short-term securities, for the six months ended January 31, 1996
were $30,769,542 and $28,977,113, respectively.
Net realized and unrealized gains (losses) as of January 31, 1996
were as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $ 70,163 $ 5,341,722
Financial futures contracts (120,250) --
------------ ------------
Total $ (50,087) $ 5,341,722
============ ============
As of January 31, 1996, net unrealized appreciation for Federal
income tax purposes aggregated $5,341,722, of which $5,486,330
related to appreciated securities and $144,608 related to
depreciated securities. The aggregate cost of investments at January
31, 1996 for Federal income tax purposes was $70,534,000.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest
transactions was $2,322,793 and $9,552,246 for the six months ended
January 31, 1996 and for the year ended July 31, 1995, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Six Months Dollar
Ended January 31, 1996 Shares Amount
Shares sold 6,409 $ 68,689
Shares issued to shareholders
in reinvestment of dividends 7,571 81,124
------------ ------------
Total issued 13,980 149,813
Shares redeemed (33,093) (357,851)
------------ ------------
Net decrease (19,113) $ (208,038)
============ ============
<PAGE>
Class A Shares for the Year Dollar
Ended July 31, 1995 Shares Amount
Shares sold 117,446 $ 1,163,219
Shares issued to shareholders
in reinvestment of dividends 15,843 174,421
------------ ------------
Total issued 133,289 1,337,640
Shares redeemed (298,026) (3,003,666)
------------ ------------
Net decrease (164,737) $ (1,666,026)
============ ============
Class B Shares for the Six Months Dollar
Ended January 31, 1996 Shares Amount
Shares sold 301,010 $ 3,219,567
Shares issued to shareholders
in reinvestment of dividends 78,486 841,691
------------ ------------
Total issued 379,496 4,061,258
Shares redeemed (610,250) (6,561,051)
------------ ------------
Net decrease (230,754) $ (2,499,793)
------------ ------------
Class B Shares for the Year Dollar
Ended July 31, 1995 Shares Amount
Shares sold 958,141 $ 9,838,263
Shares issued to shareholders
in reinvestment of dividends 184,447 1,882,663
------------ ------------
Total issued 1,142,588 11,720,926
Shares redeemed (2,039,329) (20,760,936)
------------ ------------
Net decrease (896,741) $ (9,040,010)
============ ============
Class C Shares for the
Six Months Ended Dollar
January 31, 1996 Shares Amount
Shares sold 42,476 $ 465,071
Shares issued to shareholders
in reinvestment of dividends 1,673 9,476
------------ ------------
Total issued 44,149 474,547
Shares redeemed (18,549) (201,847)
------------ ------------
Net increase 25,600 $ 272,700
============ ============
<PAGE>
Class C Shares for the Period
October 21, 1994++ to Dollar
July 31, 1995 Shares Amount
Shares sold 67,137 $ 696,018
Shares issued to shareholders
in reinvestment of dividends 528 5,534
------------ ------------
Total issued 67,665 701,552
Shares redeemed (26,353) (280,287)
------------ ------------
Net increase 41,312 $ 421,265
============ ============
[FN]
++Commencement of Operations.
Class D Shares for the
Six Months Ended Dollar
January 31, 1996 Shares Amount
Shares sold 42,735 $ 453,849
Shares issued to shareholders
in reinvestment of dividends 452 4,856
------------ ------------
Total issued 43,187 458,705
Shares redeemed (31,815) (346,367)
------------ ------------
Net increase 11,372 $ 112,338
============ ============
Class D Shares for the Period
October 21, 1994++ to Dollar
July 31, 1995 Shares Amount
Shares sold 78,584 $ 802,915
Shares issued to shareholders
in reinvestment of dividends 312 3,255
------------ ------------
Total issued 78,896 806,170
Shares redeemed (7,189) (73,645)
------------ ------------
Net increase 71,707 $ 732,525
============ ============
[FN]
++Commencement of Operations.
<PAGE>
5. Capital Loss Carryforward:
At July 31, 1995, the Fund had a net capital loss carryforward of
approximately $1,315,000, all of which expires in 2003. This amount
will be available to offset like amounts of any future taxable
gains.
