MERRILL LYNCH
CONNECTICUT
MUNICIPAL
BOND FUND
FUND LOGO
Semi-Annual Report
January 31, 1995
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 Connecticut
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011
<PAGE>
TO OUR SHAREHOLDERS
The combination of heightened inflationary concerns, anticipation of
further tightening of monetary policy by the Federal Reserve Board
and the turmoil of the Mexican currency crisis all exerted negative
influences on the US financial markets during the January quarter.
On the positive side, increasing signs that the US economy may be
losing momentum suggested that most of the interest rate increases
for this economic cycle may be behind us. As a result of these
economic crosscurrents, the US stock and bond markets continued to
be volatile during the period.
The manufacturing sector proved to be the driving force behind the
US economy through the final quarter of 1994, making an important
contribution to the substantial increase in corporate earnings. US
companies have been successful at containing labor costs, which are
an important component of the inflation outlook. Growth in the
economy has not been translated into higher wages and benefits for
US workers. Consumer spending is growing at a slower pace than in
previous economic recoveries, but households are nonetheless
spending more than saving, as the personal savings rate fell to an
all-time annual low in 1994.
In the weeks ahead, investors will continue to assess economic data
and inflationary trends in order to gauge whether further increases
in short-term interest rates are likely as 1995 unfolds. Despite the
widespread concerns about rising prices for raw materials and
incipient inflationary pressures, 1994's inflation results were as
positive as those in 1993, creating the best sustained inflation
performance in 30 years. However, it is not likely that such
positive inflation results will be duplicated in 1995. Investors
will also focus on the progress that the new Congress makes on both
reducing spending and the Federal budget deficit and passing tax
cuts that promote savings and investment. Legislative progress,
combined with continued indications of moderate and sustainable
levels of economic growth, would be positive for the US capital
markets. However, the lagged effects of higher interest rates could
slow the economy sharply and with it, the growth of corporate
profits.
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.
<PAGE>
This improvement in municipal bond prices during the January quarter
was largely the result of significant positive change in investor
sentiment. The series of interest rate increases engineered during
1994 have gone a long way in confirming the Federal Reserve Board's
anti-inflationary resolve. Additionally, the recent signs of a
weakening domestic economy, as well as the negative near-term impact
of the Kobe earthquake and Mexican currency situation, have allowed
investors to become more comfortable with the concept that the vast
majority of the recent rise in fixed-income rates has already
occurred and that yields during 1995 are more likely to remain
stable or decline than they are to significantly rise again.
Consequently, current yield levels are being viewed as attractive to
long-term investors.
In addition to this more positive outlook, the ongoing strong
technical position of the municipal bond market has only fostered
the increase in tax-exempt bond prices seen in recent months. Over
$25 billion in bond proceeds became available to investors at year-
end 1994 from bond maturities, coupon payments and early
redemptions. However, during the recent January quarter, new bond
issuance was less than $25 billion, down 50% from the January 1994
quarter. In January 1995, less than $7 billion in long-term
municipal securities were issued, making this past January's
issuance the lowest monthly total since the mid-1980s. Investor
demand has easily surpassed supply, causing bond prices to rise
rapidly. Also, as 1995 annual issuance is expected to be below the
recent historically low 1994 levels, this positive technical
environment should continue to support the recent improvements in
municipal bond prices into the coming quarters.
Portfolio Strategy
In our July annual report to shareholders, we discussed how strong
economic growth and fears of rising inflation led us to adopt a
cautious investment outlook. These concerns have subsided, at least
for the time being. For the quarter ended January 31, 1995, the
municipal bond market bottomed out and staged a dramatic rebound.
Merrill Lynch Connecticut Municipal Bond Fund is fully invested and
has benefited from the increase in municipal bond market prices. New-
issue supply fell by a staggering 50% this quarter over the same
quarter last year. Because of the scarcity of new-issue supply, we
have kept the Fund's cash reserves to a minimum amount. We continue
to emphasize quality securities with 94% of the portfolio rated A or
better by at least one of the major rating services. Looking
forward, our portfolio strategy, while cautiously optimistic, will
continue to be to invest new assets in high-quality, reasonably
priced securities that we expect to yield an attractive level of tax-
exempt income.
We appreciate your ongoing interest in Merrill Lynch Connecticut
Municipal Bond Fund, and we look forward to assisting you with your
financial needs in the months and years ahead.
<PAGE>
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
February 23, 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, Massachusetts 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
PERFORMANCE DATA
<PAGE>
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 all of the Fund's shares are 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 since inception (July 1, 1994)
and 3-month periods ended January 31, 1995 and for Class C and Class
D Shares for the since inception (October 21, 1994) and 3-month
periods ended January 31, 1995. All data in this table assume
imposition of the actual total expenses incurred by each class of
shares during the relevant period.
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. Dividends paid to each class
of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
<PAGE>
Aggregate Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Inception (7/1/94)
through 12/31/94 -0.84% -4.81%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Inception (7/1/94)
through 12/31/94 -1.10% -4.94%
[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*
Inception (10/21/94)
through 12/31/94 -0.93% -1.91%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced
to 0% after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Inception (10/21/94)
through 12/31/94 -0.83% -4.79%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<PAGE>
PERFORMANCE DATA (concluded)
<TABLE>
Recent Performance Results
<CAPTION>
Since Inception 3 Month
1/31/95 10/31/94 Inception++ % Change++ % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $9.92 $9.67 $10.00 -0.80% +2.59%
Class B Shares* 9.92 9.67 10.00 -0.80 +2.59
Class C Shares* 9.92 9.68 9.82 +1.02 +2.48
Class D Shares* 9.92 9.67 9.82 +1.02 +2.59
Class A Shares--Total Return* +2.73(1) +4.24(2)
Class B Shares--Total Return* +2.44(3) +4.11(4)
Class C Shares--Total Return* +2.60(5) +3.97(6)
Class D Shares--Total Return* +2.74(7) +4.21(8)
Class A Shares--Standardized 30-day Yield 6.12%
Class B Shares--Standardized 30-day Yield 5.88%
Class C Shares--Standardized 30-day Yield 5.78%
Class D Shares--Standardized 30-day Yield 6.03%
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
++Class A and Class B Shares commenced operations on 7/1/94. Class C
and Class D Shares commenced operations on 10/21/94.
(1)Percent change includes reinvestment of $0.333 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.153 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.305 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.141 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.139 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.138 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.152 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.151 per share ordinary
income dividends.
</TABLE>
PORTFOLIO ABBREVIATIONS
<PAGE>
To simplify the listings of Merrill Lynch Connecticut
Municipal Bond Fund's portfolio holdings in the Schedule
of Investments, we have abbreviated the names of many
of the securities according to the list at right.
AMT Alternative Minimum Tax (subject to)
GO General Obligation Bonds
HFA Housing Finance Authority
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)
Connecticut --85.6%
<S> <S> <C> <S> <C>
AA+ Aa $1,500 Connecticut State Clean Water Fund Revenue Bonds, 5.80% due 6/01/2016 $ 1,421
AAA Aaa 1,000 Connecticut State Development Authority, Governmental Lease Revenue Bonds,
6.60% due 6/15/2014 (b) 1,033
AA- A1 1,380 Connecticut State Development Authority Revenue Bonds (General Fund),
Series A, 6.375% due 10/15/2024 1,379
AAA Aaa 1,500 Connecticut State Development Authority, Solid Waste Disposal Facilities
Revenue Bonds (Pfizer Inc. Project), AMT, 7% due 7/01/2025 1,563
Connecticut State Development Authority, Water Facilities, Revenue
Refunding Bonds:
AAA Aaa 1,000 (Bridgeport Hydraulic), Series A, 6.05% due 3/01/2029 (b) 960
AAA Aaa 1,150 (The Connecticut Water Company Project), AMT, Series A, 5.75%
due 7/01/2028 (d) 1,031
A+ NR* 500 (Stamford Water Company Project), 5.30% due 9/01/2028 398
Connecticut State Health and Educational Facilities Authority Revenue Bonds:
AAA Aaa 1,000 (Bridgeport Hospital), Series A, 6.625% due 7/01/2018 (b) 1,023
AAA Aaa 2,000 (Choate Rosemary Hall), Series A, 7% due 7/01/2025 (b) 2,106
NR* Baa1 500 (Griffin Hospital), Series A, 5.75% due 7/01/2023 398
AAA Aaa 1,400 (Newington Children's Hospital), Series A, 6.30% due 7/01/2021 (b) 1,393
AA- A1 2,000 (Nursing Home Program), 7.125% due 11/01/2024 2,073
AAA Aaa 900 Refunding (Trinity College), Series D, 6.125% due 7/01/2024 (c) 880
AAA Aaa 1,450 (Yale-New Haven Hospital), Series G, 6.50% due 7/01/2012 (b) 1,484
<PAGE>
Connecticut State HFA Revenue Bonds (Housing Mortgage Finance Program):
AA Aa 1,500 AMT, Series D, Subseries D-2, 6.90% due 5/15/2020 1,512
AA Aa 2,500 Series B, 6.75% due 11/15/2023 2,517
AAA Aaa 2,500 Series B, 6.75% due 11/15/2023 (b) 2,532
NR* A1 810 Connecticut State Higher Education, Supplemental Loan Authority Revenue
Bonds (Family Education Loan Program), AMT, Series A, 6.40% due 11/01/2014 797
AA- A 1,000 Connecticut State Resource Recovery Authority Revenue Bonds (American
Refuse Fuel), AMT, Series A, 8% due 11/15/2015 1,073
A1+ VMIG1++ 1,300 Connecticut State Special Assessment, Unemployment Compensation,
Advanced Fund Revenue Bonds (Connecticut Unemployment), VRDN, Series B,
3.65% due 11/01/2001 (a) 1,300
AAA NR* 1,000 Connecticut State Special Tax Obligation Revenue Bonds (Transportation
Infrastructure), Series A, 7.125% due 6/01/2001 (e) 1,090
AAA Aaa 1,000 South Central Connecticut, Regulation Water Authority, Water System
Revenue Bonds, 11th Series, 5.75% due 8/01/2012 (c) 966
Westport, Connecticut, GO, UT:
NR* Aaa 580 5.75% due 6/15/2013 553
NR* Aaa 580 5.75% due 6/15/2014 559
AAA Aaa 340 Woodstock, Connecticut, GO, UT, 6% due 2/15/2012 (c) 338
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Puerto Rico--13.4%
<S> <S> <C> <S> <C>
A1+ VMIG1++ $ 400 Puerto Rico Commonwealth, Government Development Bank, Revenue
Refunding Bonds, VRDN, 2.95% due 12/01/2015 (a) $ 400
A Baa1 865 Puerto Rico Commonwealth, Highway and Transportation Authority,
Highway Revenue Bonds, Series T, 6.625% due 7/01/2018 870
Puerto Rico Electric Power Authority, Power Revenue Bonds:
A- Baa1 500 Series R, 6.25% due 7/01/2017 482
A- Baa1 500 Series T, 6% due 7/01/2016 470
AA Aa3 1,500 Puerto Rico Industrial, Medical and Environmental Pollution
Control Facilities, Financing Authority Revenue Bonds
(Motorola Inc. Project), Series A, 6.75% due 1/01/2014 1,559
A+ A 1,000 Puerto Rico Telephone Authority, Revenue Refunding Bonds,
Series L, 6.125% due 1/01/2022 968
<PAGE>
Total Investments (Cost--$34,524)--99.0% 35,128
Other Assets Less Liabilities--1.0% 374
-------
Net Assets--100.0% $35,502
=======
<FN>
(a)The interest rate is subject to change periodically based upon
the prevailing market rate. The interest rate shown is the rate in
effect at January 31, 1995.
(b)MBIA Insured.
(c)FGIC Insured.
(d)AMBAC Insured.
(e)Prerefunded.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of January 31, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$34,524,042) (Note 1a) $35,127,586
Cash 247,678
Receivables:
Interest $ 426,437
Beneficial interest sold 168,496
Investment adviser (Note 2) 106,424 701,357
-----------
Deferred organization expenses (Note 1e) 46,792
Prepaid registration fees and other assets (Note 1e) 5,053
-----------
Total assets 36,128,466
-----------
Liabilities: Payables:
Securities purchased 505,783
Dividends to shareholders (Note 1f) 45,096
Distributor (Note 2) 10,244 561,123
-----------
Accrued expenses and other liabilities 65,837
-----------
Total liabilities 626,960
-----------
Net Assets: Net assets $35,501,506
<PAGE> ===========
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 81,150
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 265,831
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 3,641
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 7,196
Paid-in capital in excess of par 35,312,621
Accumulated realized capital losses on investments--net (772,477)
Unrealized appreciation on investments--net 603,544
-----------
Net assets $35,501,506
===========
Net Asset Value: Class A--Based on net assets of $8,051,389 and 811,499 shares
of beneficial interest outstanding $ 9.92
===========
Class B--Based on net assets of $26,374,882 and 2,658,313 shares
of beneficial interest outstanding $ 9.92
===========
Class C--Based on net assets of $361,388 and 36,413 shares
of beneficial interest outstanding $ 9.92
===========
Class D--Based on net assets of $713,847 and 71,963 shares
of beneficial interest outstanding $ 9.92
===========
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 $ 929,688
(Note 1d):
<PAGE>
Expenses: Investment advisory fees (Note 2) $ 84,416
Distribution fees--Class B (Note 2) 57,549
Printing and shareholder reports 35,450
Professional fees 25,435
Accounting services (Note 2) 18,890
Registration fees (Note 1e) 9,121
Amortization of organization expenses (Note 1e) 4,704
Transfer agent fees--Class B (Note 2) 4,694
Pricing fees 2,586
Custodian fees 2,363
Transfer agent fees--Class A (Note 2) 1,260
Trustees' fees and expenses 766
Distribution fees--Class C (Note 2) 385
Account maintenance fees--Class D (Note 2) 133
Transfer agent fees--Class D (Note 2) 44
Transfer agent fees--Class C (Note 2) 26
Other 1,086
-----------
Total expenses before reimbursement 248,908
Reimbursement of expenses (Note 2) (190,841)
-----------
Total expenses after reimbursement 58,067
-----------
Investment income--net 871,621
-----------
Realized & Realized loss on investments--net (771,906)
Unrealized Change in unrealized appreciation/depreciation on
Gain (Loss) on investments--net 118,924
Investments--Net -----------
(Notes 1b, 1d Net Increase in Net Assets Resulting from Operations $ 218,639
& 3): ===========
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the
For the Six Period
Months Ended July 1, 1994++
January 31, to July 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 871,621 $ 84,724
Realized gain (loss) on investments--net (771,906) 5,752
Change in unrealized appreciation/depreciation on
investments--net 118,924 484,620
----------- -----------
Net increase in net assets resulting from operations 218,639 575,096
----------- -----------
<PAGE>
Dividends & Investment income--net:
Distributions to Class A (220,606) (26,747)
Shareholders Class B (638,925) (57,977)
(Note 1f): Class C (3,719) --
Class D (8,371) --
Realized gain on investments--net:
Class A (1,473) --
Class B (4,654) --
Class C (67) --
Class D (129) --
----------- -----------
Net decrease in net assets resulting from dividends and
distributions to shareholders (877,944) (84,724)
----------- -----------
Beneficial Interest Net increase in net assets derived from beneficial interest
Transactions transactions 12,714,843 22,855,596
(Note 4): ----------- -----------
Net Assets: Total increase in net assets 12,055,538 23,345,968
Beginning of period 23,445,968 100,000
----------- -----------
End of period $35,501,506 $23,445,968
=========== ===========
<FN>
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION> Class A
For the
The following per share data and ratios have been derived For the Six Period
from information provided in the financial statements. Months Ended July 1, 1994++
January 31, to July 31,
Increase (Decrease) in Net Asset Value: 1995 1994
<S> <S> <C> <C>
Per Share Net asset value, beginning of period $ 10.22 $ 10.00
Operating ---------- ----------
Performance: Investment income--net .30 .05
Realized and unrealized gain (loss) on investments--net (.30) .22
<PAGE> ---------- ----------
Total from investment operations -- .27
---------- ----------
Less dividends and distributions:
Investment income--net (.30) (.05)
Realized gain on investments--net --++++ --
---------- ----------
Total dividends and distributions (.30) (.05)
Net asset value, end of period $ 9.92 $ 10.22
========== ==========
Total Investment Based on net asset value per share .05%+++ 2.68%+++
Return:** ========== ==========
Ratios to Expenses, net of reimbursement .00%* .00%*
Average ========== ==========
Net Assets: Expenses 1.24%* 1.54%*
========== ==========
Investment income--net 6.06%* 5.48%*
========== ==========
Supplemental Net assets, end of period (in thousands) $ 8,052 $ 6,557
Data: ========== ==========
Portfolio turnover 43.75% 3.07%
========== ==========
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
++++Amount was less than $.01 per share.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class B
For the
The following per share data and ratios have been derived For the Six Period
from information provided in the financial statements. Months Ended July 1, 1994++
January 31, to July 31,
Increase (Decrease) in Net Asset Value: 1995 1994
<S> <S> <C> <C>
Per Share Net asset value, beginning of period $ 10.22 $ 10.00
Operating ---------- ----------
Performance: Investment income--net .27 .04
Realized and unrealized gain (loss) on investments--net (.30) .22
<PAGE> ---------- ----------
Total from investment operations (.03) .26
---------- ----------
Less dividends and distributions:
Investment income--net (.27) (.04)
Realized gain on investments--net --++++ --
---------- ----------
Total dividends and distributions (.27) (.04)
---------- ----------
Net asset value, end of period $ 9.92 $ 10.22
========== ===========
Total Investment Based on net asset value per share (.20%)+++ 2.64%+++
Return:** ========== ===========
Ratios to Expenses, excluding distribution fees and net of reimbursement .00%* .00%*
Average ========== ===========
Net Assets: Expenses, net of reimbursement .50%* .50%*
========== ===========
Expenses 1.74%* 2.04%*
========== ===========
Investment income--net 5.55%* 5.00%*
========== ===========
Supplemental Net assets, end of period (in thousands) $ 26,375 $ 16,889
Data: ========== ===========
Portfolio turnover 43.75% 3.07%
========== ===========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
++++Amount was less than $.01 per share.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<PAGE>
<TABLE>
Financial Highlights (concluded)
<CAPTION>
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. October 21, 1994++ to
January 31, 1995
Increase (Decrease) in Net Asset Value: Class C Class D
<S> <S> <C> <C>
Per Share Net asset value, beginning of period $ 9.82 $ 9.82
Operating ---------- ----------
Performance: Investment income--net .15 .16
Realized and unrealized gain on investments--net .10 .10
---------- ----------
Total from investment operations .25 .26
---------- ----------
Less dividends and distributions:
Investment income--net (.15) (.16)
Realized gain on investments--net --++++ --++++
---------- ----------
Total dividends and distributions (.15) (.16)
---------- ----------
Net asset value, end of period $ 9.92 $ 9.92
========== ==========
Total Investment Based on net asset value per share 2.60%+++ 2.74%+++
Return:** ========== ==========
Ratios to Expenses, excluding account maintenance and distribution
Average fees and net of reimbursement .00%* .00%*
Net Assets: ========== ==========
Expenses, net of reimbursement .60%* .10%*
========== ==========
Expenses 1.81%* 1.31%*
========== ==========
Investment income--net 5.80%* 6.30%*
========== ==========
Supplemental Net assets, end of period (in thousands) $ 361 $ 714
Data: ========== ==========
Portfolio turnover 43.75% 43.75%
========== ==========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
++++Amount was less than $.01 per share.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Connecticut 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 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 the 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 $84,416, all of which was voluntarily waived. FAM
also reimbursed the Fund additional expenses of $106,425.
Pursuant to distribution plans (the "Distribution Plans") adopted by
the Fund in accordance with Rule 12b-1 under the Investment Company
Act of 1940, the Fund pays the Distributor ongoing account
maintenance and distribution fees. The fees are accrued daily and
paid monthly at annual rates based upon the average daily net assets
of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.25%
Class C 0.25% 0.35%
Class D 0.10% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
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 $2,263 $22,485
Class D $ 791 $ 9,778
MLPF&S recieved contingent deferred sales charges of $24,545
relating to transactions in Class B Shares of beneficial interest
for the six months ended January 31, 1995.
<PAGE>
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, 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 $24,115,194 and
$11,880,384, respectively.
Net realized and unrealized gains (losses) as of January 31, 1995
were as follows:
Realized Unrealized
Losses Gains
Long-term investments $(663,766) $ 603,544
Short-term investments (4,375) --
Financial futures contracts (103,765) --
--------- -----------
Total $(771,906) $ 603,544
========= ===========
As of January 31, 1995, net unrealized appreciation for Federal
income tax purposes aggregated $603,544, of which $763,178 related
to appreciated securities and $159,634 related to depreciated
securities. The aggregate cost of investments at January 31, 1995
for Federal income tax purposes was $34,524,042.
4. Beneficial Interest Transactions:
Net increase in net assets derived from beneficial interest
transactions was $12,714,843 and $22,855,596 for the six months
ended January 31, 1995 and the period ended July 31, 1994,
respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Six Months Dollar
Ended January 31, 1995 Shares Amount
Shares sold 164,497 $ 1,621,712
Shares issued to shareholders
in reinvestment of dividends
& distributions 14,723 142,956
--------- -----------
<PAGE>
Total issued 179,220 1,764,668
Shares redeemed (9,218) (87,753)
--------- -----------
Net increase 170,002 $ 1,676,915
========= ===========
Class A Shares for the Period Dollar
July 1, 1994++ to July 31, 1994 Shares Amount
Shares sold 635,204 $ 6,356,790
Shares issued to shareholders
in reinvestment of dividends 1,293 13,068
--------- -----------
Total issued 636,497 6,369,858
Shares redeemed -- --
--------- -----------
Net increase 636,497 $ 6,369,858
========= ===========
[FN]
++Prior to July 1, 1994 (commencement of operations), the Fund
issued 5,000 shares to FAM for $50,000.
Class B Shares for the Six Months Dollar
Ended January 31, 1995 Shares Amount
Shares sold 1,243,066 $12,292,890
Shares issued to shareholders
in reinvestment of dividends
& distributions 45,879 445,275
--------- -----------
Total issued 1,288,945 12,738,165
Shares redeemed (282,843) (2,725,660)
--------- -----------
Net increase 1,006,102 $10,012,505
========= ===========
Class B Shares for the Period Dollar
July 1, 1994++ to July 31, 1994 Shares Amount
Shares sold 1,702,575 $17,045,224
Shares issued to shareholders
in reinvestment of dividends 2,852 28,836
--------- -----------
Total issued 1,705,427 17,074,060
Shares redeemed (58,216) (588,322)
--------- -----------
Net increase 1,647,211 $16,485,738
========= ===========
<PAGE>
[FN]
++Prior to July 1, 1994 (commencement of operations), the Fund
issued 5,000 shares to FAM for $50,000.
Class C Shares for the Period
October 21, 1994++ to Dollar
January 31, 1995 Shares Amount
Shares sold 37,985 $ 363,763
Shares issued to shareholders
in reinvestment of dividends
& distributions 167 1,605
--------- -----------
Total issued 38,152 365,368
Shares redeemed (1,739) (16,975)
--------- -----------
Net increase 36,413 $ 348,393
========= ===========
[FN]
++Commencement of Operations.
Class D Shares for the Period
October 21, 1994++ to Dollar
January 31, 1995 Shares Amount
Shares sold . 74,183 $ 698,104
Shares issued to shareholders
in reinvestment of dividends
& distributions 162 1,555
--------- -----------
Total issued 74,345 699,659
Shares redeemed (2,382) (22,629)
--------- -----------
Net increase 71,963 $ 677,030
========= ===========
[FN]
++Commencement of Operations.
