MERRILL LYNCH
ARIZONA
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 Arizona
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.
<PAGE>
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
We made few substantial changes to Merrill Lynch Arizona Municipal
Bond Fund's portfolio during the January quarter. We maintained a
fully invested posture to position the Fund for a technically tight
marketplace. New issuance was practically non-existent in Arizona,
and dealer inventories are rarely diversified among a variety of
issuers.
The recent history of the municipal bond market is one marked with
extreme price volatility resulting from the uncertain condition of
the national economy. During the January quarter, portfolio strategy
for Merrill Lynch Arizona Municipal Bond Fund involved cushioning
the effects of negative price action through the purchase of higher,
more market-neutral couponed holdings.
Looking forward into 1995, a slowing US economy combined with
extremely positive municipal market technical conditions may produce
strong gains for tax-exempt securities. To position the Fund to
participate in any resulting positive market movement, we anticipate
maintaining a fully invested posture with minimal cash reserves. The
credit quality of the Fund's portfolio mix is relatively strong, with
65% of total assets currently rated AA or better by at least one of
the major rating services.
We appreciate your ongoing interest in Merrill Lynch Arizona
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
<PAGE>
(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:
* 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 "Recent Performance Results," "Performance Summary"
and "Average Annual Total Return" tables on pages 3 and 4. Data for
Class C and Class D Shares are also presented in the "Recent
Performance Results" and "Aggregate Total Return" tables on pages 3
and 4.
<PAGE>
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.
PERFORMANCE DATA (continued)
<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>
11/29/91--12/31/91 $10.00 $10.24 -- $0.052 + 2.92%
1992 10.24 10.49 -- 0.741 +10.02
1993 10.49 11.07 $0.065 0.739 +13.48
1994 11.07 9.79 0.054 0.568 - 6.03
1/1/95--1/31/95 9.79 10.11 -- 0.032 + 3.71
------ ------
Total $0.119 Total $2.132
Cumulative total return as of 1/31/95: +25.21%**
<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>
<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>
11/29/91--12/31/91 $10.00 $10.24 -- $0.047 + 2.87%
1992 10.24 10.49 -- 0.688 + 9.46
1993 10.49 11.07 $0.065 0.684 +12.91
1994 11.07 9.79 0.054 0.516 - 6.50
1/1/95--1/31/95 9.79 10.11 -- 0.029 + 3.68
------ ------
Total $0.119 Total $1.964
Cumulative total return as of 1/31/95: +23.24%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/94 -6.03% -9.79%
Inception (11/29/91)
through 12/31/94 +6.29 +4.89
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/94 -6.50% -10.03%
Inception (11/29/91)
through 12/31/94 +5.75 + 5.47
[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 -1.13% -2.10%
[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 -1.07% -5.03%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
PERFORMANCE DATA (concluded)
<TABLE>
Recent Performance Results
12 Month 3 Month
1/31/95 10/31/94 1/31/94++ % Change++ % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $10.11 $9.90 $11.18 -9.07%(1) +2.68%(1)
Class B Shares* 10.11 9.90 11.18 -9.07(1) +2.68(1)
Class C Shares* 10.10 9.89 10.05 +1.05(1) +2.68(1)
Class D Shares* 10.10 9.89 10.05 +1.05(1) +2.68(1)
Class A Shares--Total Return* -3.88(2) +4.15(3)
Class B Shares--Total Return* -4.37(4) +4.02(5)
Class C Shares--Total Return* +2.40(6) +3.93(7)
Class D Shares--Total Return* +2.59(8) +4.13(9)
Class A Shares--Standardized 30-day Yield 5.37%
Class B Shares--Standardized 30-day Yield 5.09%
Class C Shares--Standardized 30-day Yield 4.93%
Class D Shares--Standardized 30-day Yield 5.28%
<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 $0.054 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.567 per share ordinary
income dividends and $0.054 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.139 per share ordinary
income dividends and $0.054 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.515 per share ordinary
income dividends and $0.054 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.126 per share ordinary
income dividends and $0.054 per share capital gains distributions.
(6)Percent change includes reinvestment of $0.119 per share ordinary
income dividends and $0.054 per share capital gains distributions.
(7)Percent change includes reinvestment of $0.118 per share ordinary
income dividends and $0.054 per share capital gains distributions.
(8)Percent change includes reinvestment of $0.138 per share ordinary
income dividends and $0.054 per share capital gains distributions.
(9)Percent change includes reinvestment of $0.137 per share ordinary
income dividends and $0.054 per share capital gains distributions.
PORTFOLIO ABBREVIATIONS
To simplify the listings of Merrill Lynch Arizona
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)
COP Certificates of Participation
GO General Obligation Bonds
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
LEVRRS Leveraged Reverse Rate Securities
PCR Pollution Control Revenue Bonds
UT Unlimited Tax
VRDN Variable Rate Demand Notes
YCN Yield Curve Notes
<PAGE>
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Arizona--89.2%
<S> <S> <C> <S> <C>
Arizona Educational Loan Marketing Corporation, Educational Loan Revenue Bonds,
AMT, Series B:
NR* A $ 1,600 7% due 3/01/2003 $ 1,660
NR* A 1,100 7% due 3/01/2005 1,140
NR* A 750 Arizona Educational Loan Marketing Corporation, Educational Loan Revenue Bonds,
AMT, Sub-Series, 6.625% due 9/01/2005 771
AAA Aaa 1,750 Arizona Health Facilities Authority, Hospital Systems Revenue Bonds (Samaritan
Health Services), 6.25% due 12/01/2006 (d) 1,805
NR* Ba 2,360 Arizona Health Facilities Authority, Hospital Systems Revenue Refunding Bonds
(Saint Luke's Health Systems), 7.25% due 11/01/2014 2,432
AAA Aaa 245 Arizona Health Facilities Authority Revenue Bonds (Yavapai Community Hospital),
Series B, 7.25% due 10/01/2013 (b) 256
A+ A 850 Arizona State University, COP (Towers Project), 7.05% due 7/01/2010 890
AA A1 2,750 Arizona State University, Revenue Refunding Bonds, Series A, 5.50% due 7/01/2019 2,462
NR* Aa 2,000 Arizona Student Loan Acquisition Authority, Student Loan Revenue Bonds, AMT,
Senior Series B, 6.60% due 5/01/2010 2,048
AA+ Aa 2,000 Arizona Wastewater Management Authority, Wastewater Treatment Financial
Assistance Revenue Bonds, 6.80% due 7/01/2011 2,114
AAA Aaa 700 Avondale, Arizona, Municipal Development Corporation, Municipal Facilities
Revenue Bonds, 6.625% due 7/01/2011 (d) 727
Coconino and Yavapai Counties, Arizona, Joint Unified School District No. 9
Revenue Bonds (Sedona Oak Creek), Series A, UT:
A- Baa1 200 6.70% due 7/01/2006 204
A- Baa1 250 6.75% due 7/01/2007 259
AAA NR* 2,100 Coconino County, Arizona, IDA, IDR (Citizens Utilities Company Project), AMT,
5.80% due 11/15/2028 1,874
AAA Aaa 3,620 Gilbert, Arizona, Water and Sewer Revenue Refunding Bonds, 6.50% due 7/01/2022 (b) 3,740
AAA NR* 1,000 Glendale, Arizona, IDA, Educational Facilities Revenue Refunding Bonds (American
Graduate School International), 7.125% due 7/01/2020 (i) 1,068
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Arizona--(continued)
<S> <S> <C> <S> <C>
AAA Aaa $ 4,500 Maricopa County, Arizona, Elementary School District No. 068, Revenue Refunding
Bonds (Alhambra), Series A, UT, 6.75% due 7/01/2014 (h) $ 4,745
AAA Aaa 2,000 Maricopa County, Arizona, IDA, Health Facilities Revenue Bonds (Saint Joseph's
Care Center Project), Series A, 7.75% due 7/01/2020 (d) 2,192
Maricopa County, Arizona, IDA, Hospital Facilities Revenue Refunding Bonds:
AAA Aaa 2,800 (John C. Lincoln Hospital), 7.50% due 12/01/2013 (c) 3,032
AAA Aaa 750 (Samaritan Health Services), Series A, 7% due 12/01/2013 (d) 790
BB Ba2 1,000 Maricopa County, Arizona, Pollution Control Corporation, PCR, Refunding (Public
Service Company-Palo Verde), Series A, 6.375% due 8/15/2023 875
AA A1 1,900 Maricopa County, Arizona, School District No. 3 Revenue Bonds (Tempe Elementary
Projects of 1991), Series C, UT, 6% due 7/01/2011 1,882
AAA Aaa 500 Maricopa County, Arizona, Unified School District No. 11--Peoria, Revenue
Refunding Bonds, 6.40% due 7/01/2010 (d) 513
AAA Aaa 2,000 Mesa, Arizona, IDA, Health Care Facilities Revenue Bonds (Western Health
Network), Series A-1, 7.625% due 1/01/2019 (a) 2,149
AAA Aaa 2,325 Mohave County, Arizona, Unified High School District No. 30--Mohave Revenue
Bonds, Series B, UT, 6.70% due 7/01/2001 (b)(e) 2,489
Peoria, Arizona, Improvement District No. 8802, Special Assessment Bonds:
BBB NR* 430 7.20% due 1/01/2010 441
BBB NR* 510 7.20% due 1/01/2013 522
Peoria, Arizona, Improvement District, Special Assessment Bonds (North Valley
Power Center No. 8801):
BBB NR* 200 7.30% due 1/01/2009 211
BBB NR* 395 7.30% due 1/01/2011 414
AAA Aaa 1,000 Peoria, Arizona, Water and Sewer Revenue Refunding Bonds, 6.625% due
7/01/2006 (b) 1,051
Phoenix, Arizona, Civic Improvement Corporation, Excise Tax Revenue Bonds:
AA+ Aa 2,000 (New City Hall Project), Senior Lien, 5.10% due 7/01/2018 1,680
AA+ Aa 750 Refunding (Airport Improvements), Series B, 6.30% due 7/01/2014 756
AAA Aaa 2,000 Phoenix, Arizona, Civic Improvement Corporation, Municipal Facilities Excise
Tax Revenue Bonds, 6.90% due 7/01/2021 (d) 2,126
<PAGE>
AA+ Aa 2,060 Phoenix, Arizona, GO, Refunding, UT, 6.375% due 7/01/2013 2,093
BBB+ NR* 1,000 Phoenix, Arizona, IDA, Hospital Revenue Bonds (John C. Lincoln Hospital and
Health Services), 6% due 12/01/2014 868
Phoenix, Arizona, Street and Highway User Revenue Bonds:
AAA Aaa 1,750 Refunding, Junior Lien, Series A, 6.10% due 7/01/2011 (b) 1,766
AA NR* 2,000 Senior Lien, 6.25% due 7/01/2011 (j) 2,014
AAA Aaa 950 Pima County, Arizona, Sewer Revenue Refunding Bonds, 6.75% due 7/01/2015 (b) 987
AAA Aaa 1,600 Pima County, Arizona, Unified School District No. 1--Tucson School
Improvement, Series D, UT, 6.10% due 7/01/2012 (b) 1,609
A1 NR* 200 Pinal County, Arizona, IDA, IDR (Calsonic Incorporated Project), VRDN,
3.55% due 12/01/2005 (f) 200
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Arizona (concluded)
<S> <S> <C> <S> <C>
AA P1 $ 1,400 Pinal County, Arizona, IDA, PCR (Magma-Copper-Newmont Mining Corporation),
VRDN, 3.95% due 12/01/2009 (f) $ 1,400
BBB- NR* 750 Prescott Valley, Arizona, Improvement District, Special Assessment Sewer
Collection System, Roadway Repair Revenue Bonds, 7.90% due 1/01/2012 803
AA Aa 4,000 Salt River Project, Arizona, Agricultural Improvement and Power District,
Electric System Revenue Bonds, Series A, 6.50% due 1/01/2022 4,076
BBB NR* 1,600 Sedona, Arizona, Sewer Revenue Refunding Bonds, 7% due 7/01/2012 1,647
AAA Aaa 500 Tucson, Arizona, Airport Authority Revenue Bonds, AMT, Series B, 7.25% due
6/01/2020 (d) 524
AAA Aaa 1,725 Tucson, Arizona, Local Development, Business Development Finance Corporation,
Lease Revenue Refunding Bonds, 6.25% due 7/01/2012 (b) 1,746
A+ NR* 1,650 Tucson, Arizona, Water Revenue Bonds, Series D, 6.75% due 7/01/2001 (e) 1,781
Tucson, Arizona, Water Revenue Refunding Bonds:
A+ A1 1,250 6.50% due 7/01/2016 1,264
A+ A1 2,400 Series A, 5.75% due 7/01/2018 2,219
<PAGE>
AAA Aaa 1,000 University of Arizona, Medical Center Corporation, Hospital Revenue
Refunding Bonds, 6.25% due 7/01/2016 (d) 1,003
University of Arizona Revenue Bonds:
AA Aa 2,000 Refunding, Series A, 6.20% due 6/01/2016 2,000
AA NR* 1,920 Series B, 6.90% due 6/01/2000 (e) 2,072
Puerto Rico--10.2%
A Baa 3,000 Puerto Rico Commonwealth, Aqueduct and Sewer Authority Revenue Bonds,
Series A, 7% due 7/01/2019 3,063
Puerto Rico Commonwealth, Highway and Transportation Authority, Highway
Revenue Bonds:
A Baa1 1,000 Refunding, Series V, 6.625% due 7/01/2012 1,008
A Baa1 1,500 Series T, 6.625% due 7/01/2018 1,509
AAA Aaa 2,000 Puerto Rico Commonwealth, YCN, 7.132% due 7/01/2020 (c)(g) 1,795
AAA Aaa 1,900 Puerto Rico Electric Power Authority, Power Revenue Bonds, LEVRRS,
7.238% due 7/01/2023 (c)(g) 1,748
Total Investments (Cost--$87,961)--99.4% 88,513
Other Assets Less Liabilities--0.6% 491
-------
Net Assets--100.0% $89,004
=======
<FN>
(a)BIG Insured.
(b)FGIC Insured.
(c)FSA Insured.
(d)MBIA Insured.
(e)Prerefunded.
(f)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.
(g)The interest rate is subject to change periodically and inversely
to the prevailing market rate. The interest rate shown is the rate
in effect at January 31, 1995.
(h)AMBAC Insured.
(i)Insured by Connie Lee.
(j)Escrowed to maturity.
*Not Rated.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of January 31, 1995
<CAPTION>
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$87,960,712) (Note 1a) $88,513,275
Cash 37,868
Receivables:
Securities sold $ 2,010,400
Interest 782,700
Beneficial interest sold 61,870 2,854,970
-----------
Deferred organization expenses (Note 1e) 34,775
Prepaid expenses (Note 1e) 13,115
-----------
Total assets 91,454,003
-----------
Liabilities: Payables:
Securities purchased 2,022,733
Beneficial interest redeemed 174,783
Dividends to shareholders (Note 1f) 101,020
Investment adviser (Note 2) 38,319
Distributor (Note 2) 28,267 2,365,122
-----------
Accrued expenses 84,452
-----------
Total liabilities 2,449,574
-----------
Net Assets: Net assets $89,004,429
===========
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 164,581
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 712,552
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 119
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 3,515
Paid-in capital in excess of par 90,018,071
Accumulated realized capital losses--net (2,446,972)
Unrealized appreciation on investments--net 552,563
-----------
Net assets $89,004,429
===========
<PAGE>
Net Asset Value: Class A--Based on net assets of $16,631,534 and 1,645,807
shares of beneficial interest outstanding $ 10.11
===========
Class B--Based on net assets of $72,005,807 and 7,125,517
shares of beneficial interest outstanding $ 10.11
===========
Class C--Based on net assets of $12,065 and 1,194 shares
of beneficial interest outstanding $ 10.10
===========
Class D--Based on net assets of $355,023 and 35,155 shares
of beneficial interest outstanding $ 10.10
===========
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 $ 2,944,727
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 254,817
Distribution fees--Class B (Note 2) 188,082
Printing and shareholder reports 31,921
Professional fees 27,058
Transfer agent fees--Class B (Note 2) 21,065
Accounting services (Note 2) 15,395
Custodian fees 7,454
Amortization of organization expenses (Note 1e) 7,340
Registration fees (Note 1e) 4,580
Transfer agent fees--Class A (Note 2) 4,070
Pricing fees 4,061
Trustees' fees and expenses 2,369
Account maintenance fees--Class D (Note 2) 45
Transfer agent fees--Class D (Note 2) 23
Distribution fees--Class C (Note 2) 12
Transfer agent fees--Class C (Note 2) 3
Other 3,441
-----------
Total expenses before reimbursement 571,736
Reimbursement of expenses (Note 2) (19,758)
-----------
Total expenses after reimbursement 551,978
-----------
Investment income--net 2,392,749
-----------
<PAGE>
Realized & Realized loss on investments--net (2,097,135)
Unrealized Change in unrealized appreciation on investments--net (468,118)
Loss on -----------
Investments Net Decrease in Net Assets Resulting from Operations $ (172,504)
- --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 For the
Months Ended Year Ended
January 31, July 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 2,392,749 $ 5,062,068
Realized gain (loss) on investments--net (2,097,135) 1,099,669
Change in unrealized appreciation/depreciation on
investments--net (468,118) (5,162,578)
----------- -----------
Net increase (decrease) in net assets resulting from
operations (172,504) 999,159
----------- -----------
Dividends & Investment income--net:
Distributions to Class A (483,404) (1,026,371)
Shareholders Class B (1,906,767) (4,035,697)
(Note 1f): Class C (100) --
Class D (2,478) --
Realized gain on investments--net:
Class A (88,442) (387,548)
Class B (388,204) (1,714,015)
Class C (47) --
Class D (916) --
----------- -----------
Net decrease in net assets resulting from dividends and
distributions to shareholders (2,870,358) (7,163,631)
----------- -----------
Beneficial Net increase (decrease) in net assets derived from beneficial
Interest interest transactions (6,931,485) 6,077,308
Transactions ----------- -----------
(Note 4):
<PAGE>
Net Assets: Total decrease in net assets (9,974,347) (87,164)
Beginning of period 98,978,776 99,065,940
----------- -----------
End of period $89,004,429 $98,978,776
=========== ===========
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 Nov. 29,
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 $ 10.40 $ 11.01 $ 10.74 $ 10.00
Operating -------- -------- -------- --------
Performance: Investment income--net .28 .57 .60 .41
Realized and unrealized gain (loss) on invest-
ments--net (.24) (.39) .39 .74
-------- -------- -------- --------
Total from investment operations .04 .18 .99 1.15
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.28) (.57) (.60) (.41)
Realized gain on investments--net (.05) (.22) (.12) --
-------- -------- -------- --------
Total dividends and distributions (.33) (.79) (.72) (.41)
-------- -------- -------- --------
Net asset value, end of period $ 10.11 $ 10.40 $ 11.01 $ 10.74
======== ======== ======== ========
Total Investment Based on net asset value per share .51%+++ 1.62% 9.63% 11.82%+++
Return:** ======== ======== ======== ========
Ratios to Expenses, net of reimbursement .78%* .56% .41% .22%*
Average ======== ======== ======== ========
Net Assets: Expenses .82%* .80% .81% .98%*
======== ======== ======== ========
Investment income--net 5.58%* 5.32% 5.57% 5.99%*
======== ======== ======== ========
<PAGE>
Supplemental Net assets, end of period (in thousands) $ 16,632 $ 18,363 $ 17,988 $ 14,564
Data: ======== ======== ======== ========
Portfolio turnover 21.71% 53.35% 73.48% 66.50%
======== ======== ======== ========
<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>
Class B
For the For the
The following per share data and ratios have Six Period
been derived from information provided in the Months Nov. 29, For the Period
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
Operating of period $ 10.40 $ 11.01 $ 10.74 $ 10.00 $ 10.05 $ 10.05
Performance: -------- -------- -------- -------- -------- --------
Investment income--net .26 .52 .54 .38 .13 .15
Realized and unrealized gain
(loss) on investments and foreign
currency transactions--net (.24) (.39) .39 .74 .10 .10
-------- -------- -------- -------- -------- --------
Total from investment operations .02 .13 .93 1.12 .23 .25
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.26) (.52) (.54) (.38) (.13) (.15)
Realized gain on invest-
ments--net (.05) (.22) (.12) -- (.05) (.05)
-------- -------- -------- -------- -------- --------
Total dividends and distribu-
tions (.31) (.74) (.66) (.38) (.18) (.20)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 10.11 $ 10.40 $ 11.01 $ 10.74 $ 10.10 $ 10.10
======== ======== ======== ======== ======== ========
Total Investment Based on net asset value
Return:** per share .26%+++ 1.11% 9.08% 11.45%+++ 2.40%+++ 2.59%+++
======== ======== ======== ======== ======== ========
<PAGE>
Ratios to Expenses, excluding account main-
Average tenance anddistribution fees, net
Net Assets: of reimbursement .79%* .57% .42% .24%* .95%* .85%*
======== ======== ======== ======== ======== ========
Expenses, net of reimbursement 1.29%* 1.07% .92% .74%* 1.55%* .95%*
======== ======== ======== ======== ======== ========
Expenses 1.33%* 1.30% 1.32% 1.47%* 1.55%* .95%*
======== ======== ======== ======== ======== ========
Investment income--net 5.07%* 4.82% 5.06% 5.48%* 5.00%* 5.59%*
======== ======== ======== ======== ======== ========
Supplemental Net assets, end of period (in
Data: thousands) $ 72,006 $ 80,616 $ 81,078 $ 59,881 $ 12 $ 355
======== ======== ======== ======== ======== ========
Portfolio turnover 21.71% 53.35% 73.48% 66.50% 21.71% 21.71%
======== ======== ======== ======== ======== ========
<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 Arizona Municipal Bond Fund (the "Fund") is a series
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.
<PAGE>
(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 market. 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.
<PAGE>
(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.
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 had 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. The Investment Advisory Agreement obligates
FAM to reimburse the Fund to the extent the Fund's expenses
(excluding interest, taxes, distribution fees, brokerage fees and
commissions, and extraordinary items) exceed 2.5% of the Fund's
first $30 million of average daily net assets, 2.0% of the next $70
million of average daily net assets, and 1.5% of the average daily
net assets in excess thereof. FAM's obligation to reimburse the Fund
is limited to the amount of the management fee. No fee payment will
be made to the Investment Adviser during any fiscal year which will
cause such expenses to exceed expense limitation at the time of
payment. For the six months ended January 31, 1995, FAM earned fees
of $254,817, of which $19,758 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 at the top of the
next column.
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.25%
Class C 0.25% 0.35%
Class D 0.10% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the six months ended 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 $1,682 $18,347
Class D $ 83 $ 1,214
<PAGE>
MLPF&S received contingent deferred sales charges of $138,885
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 $19,263,440 and
$21,029,784, respectively.
Realized Unrealized
Losses Gains
Long-term investments $(1,809,043) $ 552,563
Short-term investments (1,879) --
Financial futures contracts (286,213) --
----------- ------------
Total $(2,097,135) $ 552,563
=========== ============
As of January 31, 1995, net unrealized appreciation for Federal
income tax purposes aggregated $552,563, of which $2,318,081 related
to appreciated securities and $1,765,518 related to depreciated
securities. The aggregate cost of investments at January 31, 1995
for Federal income tax purposes was $87,960,712.
4. Beneficial Interest Transactions:
Net increase (decrease) in net assets derived from beneficial
interest transactions was $(6,931,485) and $6,077,308 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 Dollar
Ended January 31, 1995 Shares Amount
Shares sold 131,836 $ 1,322,999
Shares issued to shareholders
in reinvestment of dividends
and distributions 24,185 240,390
----------- ------------
Total issued 156,021 1,563,389
Shares redeemed (275,477) (2,700,198)
----------- ------------
Net decrease (119,456) $ (1,136,809)
=========== ============
Class A Shares
for the Year Dollar
Ended July 31, 1994 Shares Amount
Shares sold 627,096 $ 6,804,755
Shares issued to shareholders
in reinvestment of dividends
and distributions 67,361 730,862
----------- ------------
Total issued 694,457 7,535,617
Shares redeemed (562,798) (5,985,598)
----------- ------------
Net increase 131,659 $ 1,550,019
=========== ============
Class B Shares for the Six Dollar
Months Ended January 31, 1995 Shares Amount
Shares sold 475,102 $ 4,747,831
Shares issued to shareholders
in reinvestment of dividends
and distributions 74,608 741,327
----------- ------------
Total issued 549,710 5,489,158
Shares redeemed (1,173,861) (11,637,431)
----------- ------------
Net decrease (624,151) $ (6,148,273)
=========== ============
<PAGE>
Class B Shares for the Dollar
Year Ended July 31, 1994 Shares Amount
Shares sold 1,806,398 $ 19,567,507
Shares issued to shareholders
in reinvestment of dividends
and distributions 224,144 2,439,428
----------- ------------
Total issued 2,030,542 22,006,935
Shares redeemed (1,643,963) (17,479,646)
----------- ------------
Net increase 386,579 $ 4,527,289
=========== ============
Class C Shares for the Period
October 21, 1994++ to Dollar
January 31, 1995 Shares Amount
Shares sold 1,185 $ 11,471
Shares issued to shareholders
in reinvestment of dividends
and distributions 9 87
----------- ------------
Total issued 1,194 11,558
Shares redeemed -- --
----------- ------------
Net increase 1,194 $ 11,558
=========== ============
[FN]
++Commencement of Operations.
Class D Shares for the Period
October 21, 1994++ to Dollar
January 31, 1995 Shares Amount
Shares sold 35,101 $ 341,511
Shares issued to shareholders
in reinvestment of dividends
and distributions 54 532
----------- ------------
Total issued 35,155 342,043
Shares redeemed --* (4)
----------- ------------
Net increase 35,155 $ 342,039
=========== ============
<PAGE>
[FN]
++Commencement of Operations.
*Amount is less than 1 share.
