MERRILL LYNCH
TEXAS 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 Texas
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.
<PAGE>
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.
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.
<PAGE>
Portfolio Strategy
Structural changes to the Fund included improving credit quality in
both the health care and Industrial Development Bond/Pollution
Control Revenue Bond sectors. We also replaced bonds with short-term
optional calls with bonds that have superior performance
characteristics, and reduced the Fund's cash reserves to a minimum
amount. We anticipate that the value of high-grade revenue bonds
will increase relative to lesser quality bonds. Finally, the overall
tone in the fixed-income markets improved over the January quarter
as investors realized that the Federal Reserve Board was clearly
committed to and thus far successful at fighting inflation.
Therefore, we reduced the Fund's cash position to seek to further
improve the yield to shareholders.
In general, after the peak in yields reached in November, retail
investors and dealers returned to the market looking to purchase
bonds in the 20-year--25-year maturity range. Having repositioned
the Fund to participate in this type of movement, we look forward to
seeking to enhance the Fund's performance in 1995.
In Conclusion
We appreciate your ongoing interest in Merrill Lynch Texas 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 and Portfolio Manager
February 28, 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:
<PAGE>
* 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).
Performance data for the Fund's Class A and Class B Shares are
presented in the "Performance Summary," "Average Annual Total
Return" and "Recent Performance Results" 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
below and 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 (net of reimbursement)
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.
<PAGE>
<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* $10.25 $10.03 $11.26 -8.97% +2.19%
Class B Shares* 10.25 10.03 11.26 -8.97 +2.19
Class C Shares* 10.26 10.03 10.16 +0.98 +2.29
Class D Shares* 10.26 10.03 10.16 +0.98 +2.29
Class A Shares--Total Return* -3.65(1) +3.68(2)
Class B Shares--Total Return* -4.14(3) +3.55(4)
Class C Shares--Total Return* +2.38(5) +3.59(6)
Class D Shares--Total Return* +2.56(7) +3.76(8)
Class A Shares--Standardized 30-day Yield 5.59%
Class B Shares--Standardized 30-day Yield 5.32%
Class C Shares--Standardized 30-day Yield 5.00%
Class D Shares--Standardized 30-day Yield 5.49%
<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 $0.587 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.144 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.534 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.131 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.127 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.125 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.144 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.142 per share ordinary
income dividends.
</TABLE>
PERFORMANCE DATA (concluded)
<PAGE>
<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>
8/30/91--12/31/91 $10.00 $10.25 -- $0.242 + 4.97%
1992 10.25 10.59 -- 0.722 +10.70
1993 10.59 11.15 $0.094 0.775 +13.81
1994 11.15 9.98 -- 0.589 - 5.28
1/1/95--1/31/95 9.98 10.25 -- 0.034 + 3.15
------ ------
Total $0.094 Total $2.362
Cumulative total return as of 1/31/95: +29.21%**
<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>
8/30/91--12/31/91 $10.00 $10.25 -- $0.224 + 4.79%
1992 10.25 10.59 -- 0.669 +10.14
1993 10.59 11.15 $0.094 0.719 +13.24
1994 11.15 9.98 -- 0.536 - 5.76
1/1/95--1/31/95 9.98 10.25 -- 0.031 + 3.12
------ ------
Total $0.094 Total $2.179
Cumulative total return as of 1/31/95: +27.01%**
<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>
<PAGE>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/94 -5.28% -9.07%
Inception (8/30/91)
through 12/31/94 +6.98 +5.68
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/94 -5.76% -9.33%
Inception (8/30/91)
through 12/31/94 +6.44 +6.18
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
Aggregate Total Return
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Inception (10/21/94)
through 12/31/94 -0.80% -1.79%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced
to 0% after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Inception (10/21/94)
through 12/31/94 -0.57% -4.54%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
PORTFOLIO ABBREVIATIONS
To simplify the listings of Merrill Lynch Texas 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
INFLOS Inverse Floating Rate Municipal Bonds
PARS Periodic Auction Reset Securities
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
SAVRS Select Auction Variable Rate Securities
S/F Single-Family
TRAN Tax Revenue Anticipation Notes
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)
Texas--98.1%
<S> <S> <C> <S> <C>
BB+ Baa2 $ 1,500 Alliance Airport Authority Incorporated, Texas, Special Facilities
Revenue Bonds (AMR Corp./American Airlines, Incorporated Project),
AMT, 7% due 12/01/2011 $ 1,418
AAA Aaa 2,800 Austin, Texas, Utility System Revenue Refunding Bonds, 6.25%
due 5/15/2016 (d) 2,800
<PAGE>
AAA NR* 2,610 Cameron County, Texas, Housing Finance Corporation, S/F Mortgage
Revenue Refunding Bonds, Series B-1, 6.75% due 9/01/2025 (e)(f) 2,619
AAA Aaa 1,000 Dallas-Fort Worth, Texas, International Airport Facilities Improvement
Corporation Revenue Bonds (United Parcel Service, Inc.), AMT, 6.60%
due 5/01/2032 978
BBB A 1,500 Ector County, Texas, Hospital District, Hospital Revenue Bonds
(Medical Center Hospital), 7.30% due 4/15/2012 1,539
NR* NR* 750 Gulf Coast, Texas, Waste Disposal Authority, Pollution Control and Solid
Waste Disposal Revenue Bonds (Diamond Shamrock Corporation Project),
6.75% due 6/01/2009 727
BBB Baa1 1,750 Gulf Coast, Texas, Waste Disposal Authority, Revenue Bonds
(Champion International Corporation), AMT, 7.25% due 4/01/2017 1,744
A- A 1,000 Harris County, Texas, Health Facilities Development Corporation,
Hospital Crossover Revenue Refunding Bonds (Memorial Hospital
System Project), 7.125% due 6/01/2015 1,017
A- A 2,000 Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds (Memorial Hospital Systems Project), Series A,
6.625% due 6/01/2024 1,895
AA Aa 2,000 Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds (Saint Luke's Episcopal Hospital Project),
Series A, 6.625% due 2/15/2012 1,975
AAA Aaa 1,000 Harris County, Texas, Health Facilities Development Corporation,
Special Facilities Revenue Bonds (Texas Medical Center Project),
7.375% due 5/15/2020 (b) 1,049
AAA Aaa 1,630 Harris County, Texas, Toll Road, Senior Lien Revenue Bonds, Series A,
6.25% due 8/15/2015 (b) 1,615
AAA Aaa 1,000 Harris County, Texas, Toll Road, Senior Lien Revenue Refunding Bonds,
5.30% due 8/15/2013 (a) 891
AAA Aaa 1,010 Houston, Texas, Airport System, Sub-Lien Revenue Bonds, Series B,
6.625% due 7/01/2022 (d) 1,020
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Texas (continued)
<S> <S> <C> <S> <C>
SP1+ MIG1++ $2,350 Houston, Texas, TRAN, 4.50% due 6/29/1995 $ 2,349
AAA Aaa 1,000 Houston, Texas, Water and Sewer Systems, Junior Lien Revenue Bonds,
Series A, 6.375% due 12/01/2022 (b) 994
BBB- Baa 2,455 Jefferson County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds (Baptist Healthcare System Project), 8.875%
due 6/01/2021 2,617
AAA NR* 4,000 Laredo, Texas, Housing Finance Corporation, S/F Mortgage Revenue
Backed Securities Program Bonds, AMT, 6.95% due 10/01/2027 (e)(f) 4,065
A A 1,000 Laredo, Texas, International Toll Bridge Revenue Bonds, 7% due 10/01/2010 1,047
AA Aa2 2,000 Lower Neches Valley Authority, Texas, Industrial Development Corporation,
PCR, Refunding (Neches Treatment--Mobil Corp.), 5.65% due 2/01/2029 1,683
AAA Aaa 1,000 Matagorda County, Texas, Navigational District No. 1, Collateral Revenue
Refunding Bonds (Houston Light and Power Company), UT, Series C, 7.125%
due 7/01/2019 (d) 1,034
Matagorda County, Texas, Navigational District No. 1, PCR (Central
Power and Light Company Project):
A A2 3,100 7.50% due 12/15/2014 3,274
A- A3 2,250 Refunding, 6% due 7/01/2028 2,052
BBB NR* 1,500 Midland County, Texas, Hospital District Revenue Bonds (Midland
Memorial Hospital), 7.50% due 6/01/2016 1,527
AA Aa 6,000 North Central, Texas, Health Facilities Development Corporation Revenue
Bonds (Baylor University Medical Center), Linked PARS and INFLOS, Series A,
6.85% due 5/15/2016 6,055
AAA Aaa 2,000 North Central, Texas, Health Facilities Development Corporation Revenue
Bonds (Presbyterian Health Systems), 6.685% due 6/22/2021 (b) 2,019
NR* P1 100 Port of Port Arthur, Texas, Navigational District, Industrial Development
Corporation, PCR (American Petrofina Incorporation), VRDN, 4.25%
due 5/01/2003 (c) 100
NR* VMIG1++ 800 Port of Port Arthur, Texas, Navigational District, PCR, Refunding
(Texaco Inc. Project), VRDN, 4.10% due 10/01/2024 (c) 800
<PAGE>
AAA Aaa 3,000 Port of Port Arthur, Texas, Navigational District, UT, 6% due 3/01/2015 (a) 2,915
AA Aa1 3,695 San Antonio, Texas, Electric and Gas Revenue Refunding Bonds, Series B,
5% due 2/01/2016 3,065
Southeast Texas, Housing Finance Corporation, S/F Mortgage Revenue
Collateral Bonds, AMT:
NR* Aaa 2,960 Series A, 8% due 11/01/2025 (e) 3,441
NR* Aaa 2,300 Series B, 8.50% due 11/01/2025 2,687
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Texas (continued)
<S> <S> <C> <S> <C>
NR* VMIG1++ $ 400 Southwest Texas, Higher Education Authority Incorporated, Revenue
Refunding Bonds (Crossover--Southern Methodist University), VRDN,
4.10% due 7/01/2015 (c) $ 400
A+ Aa 2,175 Texas Housing Agency, S/F Mortgage Revenue Refunding Bonds, Series A,
7.15% due 9/01/2012 2,241
AAA Aaa 1,000 Texas Municipal Power Agency, Revenue Refunding Bonds, 5.25%
due 9/01/2009 (b) 915
A- A 3,000 Texas National Research Laboratory Commission Financing Corporation,
Lease Revenue Bonds (Super Conducting, Super Collider Project), 7.10%
due 12/01/2021 3,045
AAA NR* 525 Texas State Department of Housing and Community Affairs, Home Mortgage,
Collateral Revenue Refunding Bonds, Series A, 6.95% due 7/01/2023 (e) 534
AA Aa 3,225 Texas State, GO, Water Development Board, UT, 7% due 8/01/2020 3,377
AA Aa 4,000 Texas State, Registered Special Linked RIB and SAVRS, UT, Series B1 and B2,
6.058% due 9/30/2011 4,028
AA Aa 3,000 Texas State, Veterans Housing Assistance, AMT, UT, Fund II, Series A,
7% due 12/01/2025 3,030
AAA Aa 1,500 Texas Water Development Board, Water Revenue Bonds (State Revolving
Fund--Senior Lien), 5.25% due 7/15/2015 1,279
AAA NR* 520 Travis County, Texas, Housing Finance Corporation, Residential Mortgage
Revenue Refunding Bonds, Series A, 7% due 12/01/2011 (e)(f) 536
BBB Baa2 1,700 West Side Calhoun County, Texas, Navigational District, Solid Waste
Disposal Revenue Bonds (Union Carbide Chemicals and Plastics), AMT,
8.20% due 3/15/2021 1,811
Total Investments (Cost--$82,908)--98.1% 84,207
Other Assets Less Liabilities--1.9% 1,627
-------
Net Assets--100.0% $85,834
=======
<PAGE>
<FN>
(a)AMBAC Insured.
(b)MBIA Insured.
(c)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, 1995.
(d)FGIC Insured.
(e)GNMA Collateralized.
(f)FNMA Collateralized.
(g)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, 1995.
++Highest short-term rating by Moody's Investors Service, Inc.
*Not Rated.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of January 31, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$82,907,764) (Note 1a) $84,206,886
Receivables:
Securities sold $ 3,793,262
Interest 1,569,771
Beneficial interest sold 31,906 5,394,939
-----------
Deferred organization expenses (Note 1e) 18,324
Prepaid registration fees and other assets (Note 1e) 37,100
-----------
Total assets 89,657,249
-----------
Liabilities: Payables:
Securities purchased 3,236,760
Beneficial interest redeemed 227,607
Dividends to shareholders (Note 1f) 100,119
Investment adviser (Note 2) 37,049
Distributor (Note 2) 29,061 3,630,596
-----------
Accrued expenses and other liabilities 193,018
-----------
Total liabilities 3,823,614
-----------
Net Assets: Net assets $85,833,635
===========
<PAGE>
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 112,702
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 720,840
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 1,764
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 1,806
Paid-in capital in excess of par 86,311,963
Accumulated realized capital losses on investments--net (2,614,562)
Unrealized appreciation on investments--net 1,299,122
-----------
Net assets $85,833,635
===========
Net Asset Value: Class A--Based on net assets of $11,556,102 and 1,127,022
shares of beneficial interest outstanding $ 10.25
===========
Class B--Based on net assets of $73,911,268 and 7,208,400
shares of beneficial interest outstanding $ 10.25
===========
Class C--Based on net assets of $180,930 and 17,636
shares of beneficial interest outstanding $ 10.26
===========
Class D--Based on net assets of $185,335 and 18,065
shares of beneficial interest outstanding $ 10.26
===========
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 $ 2,876,006
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 241,387
Distribution fees--Class B (Note 2) 188,719
Professional fees 25,687
Printing and shareholder reports 25,584
Transfer agent fees--Class B (Note 2) 18,453
<PAGE> Accounting services (Note 2) 16,319
Custodian fees 7,239
Registration fees (Note 1e) 6,997
Pricing fees 3,729
Trustees' fees and expenses 2,543
Transfer agent fees--Class A (Note 2) 2,497
Amortization of organization expenses (Note 1e) 265
Distribution fees--Class C (Note 2) 64
Account maintenance fees--Class D (Note 2) 22
Transfer agent fees--Class D (Note 2) 10
Transfer agent fees--Class C (Note 2) 9
Other 5,755
-----------
Total expenses before reimbursement 545,279
Reimbursement of expenses (Note 2) (6,131)
-----------
Total expenses after reimbursement 539,148
-----------
Investment income--net 2,336,858
-----------
Realized & Realized loss on investments--net (2,391,358)
Unrealized Change in unrealized appreciation on investments--net 31,268
Gain (Loss) on -----------
Investments--Net Net Decrease in Net Assets Resulting from Operations $ (23,232)
(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 $ 2,336,858 $ 4,659,262
Realized gain (loss) on investments--net (2,391,358) 380,407
Change in unrealized appreciation/depreciation on
investments--net 31,268 (3,519,965)
----------- -----------
Net increase (decrease) in net assets resulting from operations (23,232) 1,519,704
----------- -----------
<PAGE>
Dividends & Investment income--net:
Distributions to Class A (352,094) (772,091)
Shareholders Class B (1,982,944) (3,887,171)
(Note 1f): Class C (556) --
Class D (1,264) --
Realized gain on investments--net:
Class A -- (304,751)
Class B -- (1,656,370)
In excess of realized gain on investments--net:
Class A -- (34,685)
Class B -- (188,519)
----------- -----------
Net decrease in net assets resulting from dividends and
distributions to shareholders (2,336,858) (6,843,587)
----------- -----------
Beneficial Interest Net increase (decrease) in net assets derived from beneficial
Transactions interest transactions (3,737,816) 10,741,291
(Note 4): ----------- -----------
Net Assets: Total increase (decrease) in net assets (6,097,906) 5,417,408
Beginning of period 91,931,541 86,514,133
----------- -----------
End of period $85,833,635 $91,931,541
=========== ===========
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 Aug. 30,
from information provided in the financial statements. Ended For the Year Ended 1991++ 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 $ 10.51 $ 11.09 $ 10.84 $ 10.00
Operating ------- ------- ------- -------
Performance: Investment income--net .28 .60 .62 .61
Realized and unrealized gain (loss)
on investments--net (.26) (.32) .32 .85
------- ------- ------- -------
<PAGE> Total from investment operations .02 .28 .94 1.46
------- ------- ------- -------
Less dividends and distributions:
Investment income--net (.28) (.60) (.62) (.61)
Realized gain on investments--net -- (.23) (.07) (.01)
In excess of realized gain on
investments--net -- (.03) -- --
------- ------- ------- -------
Total dividends and distributions (.28) (.86) (.69) (.62)
------- ------- ------- -------
Net asset value, end of period $ 10.25 $ 10.51 $ 11.09 $ 10.84
======= ======= ======= =======
Total Investment Based on net asset value per share .38%+++ 2.41% 9.15% 15.16%+++
Return:** ======= ======= ======= =======
Ratios to Expenses, net of reimbursement .79%* .67% .70% .49%*
Average ======= ======= ======= =======
Net Assets: Expenses .81%* .84% .94% 1.10%*
======= ======= ======= =======
Investment income--net 5.76%* 5.45% 5.77% 6.39%*
======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $11,556 $12,973 $14,033 $11,232
Data: ======= ======= ======= =======
Portfolio turnover 61.37% 59.68% 56.10% 72.34%
======= ======= ======= =======
<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)
<PAGE>
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class B
For the For the
The following per share data and ratios Six Period
have been derived from information provided Months Aug. 30, For the Period
in the financial statements. Ended For the Year Ended 1991++ to Oct. 21. 1994++ to
Jan. 31, July 31, July 31, Jan. 31, 1995
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992 Class C Class D
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.51 $ 11.09 $ 10.84 $ 10.00 $ 10.16 $ 10.16
Operating ------- ------- ------- ------- ------- -------
Performance: Investment income--net .26 .55 .57 .56 .14 .16
Realized and unrealized gain (loss) on
investments--net (.26) (.32) .32 .85 .10 .10
------- ------- ------- ------- ------- -------
Total from investment operations -- .23 .89 1.41 .24 .26
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net (.26) (.55) (.57) (.56) (.14) (.16)
Realized gain on investments--net -- (.23) (.07) (.01) -- --
In excess of realized gain on
investments--net -- (.03) -- -- -- --
------- ------- ------- ------- ------- -------
Total dividends and distributions (.26) (.81) (.64) (.57) (.14) (.16)
------- ------- ------- ------- ------- -------
Net asset value, end of period $ 10.25 $ 10.51 $ 11.09 $ 10.84 $ 10.26 $ 10.26
======= ======= ======= ======= ======= =======
Total Investment Based on net asset value per share .12%+++ 1.89% 8.60% 14.64%+++ 2.38%+++ 2.56%+++
Return:** ======= ======= ======= ======= ======= =======
Ratios to Expenses, excluding account maintenance
Average and distribution fees and net of
Net Assets: reimbursement .80%* .67% .70% .51%* .86%* .82%*
======= ======= ======= ======= ======= =======
Expenses, net of reimbursement 1.30%* 1.17% 1.20% 1.01%* 1.46%* .92%*
======= ======= ======= ======= ======= =======
Expenses 1.31%* 1.34% 1.44% 1.60%* 1.46%* .92%*
======= ======= ======= ======= ======= =======
Investment income--net 5.25%* 4.95% 5.26% 5.88%* 5.18%* 5.74%*
======= ======= ======= ======= ======= =======
Supplemental Net assets, end of period (in
Data: thousands) $73,911 $78,958 $72,482 $50,612 $ 181 $ 185
======= ======= ======= ======= ======= =======
Portfolio turnover 61.37% 59.68% 56.10% 72.34% 61.37% 61.37%
======= ======= ======= ======= ======= =======
<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 Texas 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.
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. Distributions in excess
of realized capital gains are due primarily to differing tax
treatments for futures transactions and post-October losses.
<PAGE>
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 $241,387, of which $6,131 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
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, 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:
<PAGE>
MLFD MLPF&S
Class A $266 $2,855
Class D $ 91 $ 788
MLPF&S received contingent deferred sales charges of $86,297
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
$49,361,182 and $58,424,862, respectively.
Net realized and unrealized gains (losses) as of January 31, 1995
were as follows:
Unrealized
Realized Gains
Losses (Losses)
Long-term investments $(2,179,024) $ 1,303,525
Short-term investments (6,610) (4,403)
Financial futures contracts (205,724) 1
----------- -----------
Total $(2,391,358) $ 1,299,122
=========== ===========
As of January 31, 1995, net unrealized appreciation for Federal
income tax purposes aggregated $1,299,122, of which $1,905,944
related to appreciated securities and $606,822 related to
depreciated securities. The aggregate cost of investments at January
31, 1995 for Federal income tax purposes was $82,907,764.
4. Beneficial Interest Transactions:
Net increase (decrease) in net assets derived from beneficial
interest transactions was $(3,737,816) and $10,741,291 for the six
months ended January 31, 1995 and the year ended July 31, 1994,
respectively.
Transactions in shares of beneficial interest for each class were as
follows:
<PAGE>
Class A Shares for the
Six Months Ended Dollar
January 31, 1995 Shares Amount
Shares sold 71,662 $ 728,227
----------- -----------
Shares issued to share-
holders in reinvestment of
dividends 17,454 176,143
Total issued 89,116 904,370
Shares redeemed (196,334) (1,976,257)
----------- -----------
Net decrease (107,218) $(1,071,887)
=========== ===========
Class A Shares for the
Year Ended Dollar
July 31, 1994 Shares Amount
Shares sold 196,267 $ 2,137,113
Shares issued to shareholders
in reinvestment of dividends
and distributions 46,773 549,313
----------- -----------
Total issued 243,040 2,686,426
Shares redeemed (273,904) (2,943,253)
----------- -----------
Net decrease (30,864) $ (256,827)
=========== ===========
Class B Shares for the
Six Months Ended Dollar
January 31, 1995 Shares Amount
Shares sold 535,774 $ 5,415,609
Shares issued to share-
holders in reinvestment of
dividends 91,474 923,176
----------- -----------
Total issued 627,248 6,338,785
Shares redeemed (930,637) (9,361,058)
----------- -----------
Net decrease (303,389) $(3,022,273)
=========== ===========
<PAGE>
Class B Shares for the Dollar
Year Ended July 31, 1994 Shares Amount
Shares sold 1,961,356 $21,507,864
Shares issued to shareholders
in reinvestment of dividends
and distributions 249,570 2,897,719
----------- -----------
Total issued 2,210,926 24,405,583
Shares redeemed (1,233,752) (13,407,465)
----------- -----------
Net increase 977,174 $10,998,118
=========== ===========
Class C Shares for the
Period October 21, 1994++ Dollar
to January 31, 1995 Shares Amount
Shares sold 17,601 $ 176,790
Shares issued to share-
holders in reinvestment of
dividends 35 352
----------- -----------
Total issued 17,636 177,142
Shares redeemed -- --
----------- -----------
Net increase 17,636 $ 177,142
=========== ===========
[FN]
++Commencement of Operations.
Class D Shares for the
Period October 21, 1994++ Dollar
to January 31, 1995 Shares Amount
Shares sold 18,021 $ 178,761
Shares issued to share-
holders in reinvestment of
dividends 45 449
----------- -----------
Total issued 18,066 179,210
Shares redeemed (1) (8)
----------- -----------
Net increase 18,065 $ 179,202
=========== ===========
[FN]
++Commencement of Operations.
