<PAGE>
MERRILL LYNCH
CONNECTICUT
MUNICIPAL
BOND FUND
FUND LOGO
Semi-Annual Report
January 31, 1996
Officers and Trustees
Arthur Zeikel, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Kenneth A. Jacob, Vice President
William R. Bock, Portfolio Manager
Gerald M. Richard, Treasurer
Jerry Weiss, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
<PAGE>
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
Merrill Lynch Connecticut
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011
TO OUR SHAREHOLDERS
Although the partial shutdown of the US Government curtailed the
release of most economic data in the latter part of the six-month
period ended January 31, 1996, it was nonetheless apparent that
gross domestic product (GDP) growth was losing momentum. Consumer
spending is barely growing, the industrial sector is at a virtual
standstill and, despite lower mortgage rates, there is little or no
pick-up in housing activity. With inflationary pressures subdued,
the Federal Reserve Board responded to the slowing economy by
continuing to modestly lower short-term interest rates.
Historically, it has taken some time for shifts in monetary policy
to have an impact on economic growth. Therefore, the Federal Reserve
Board's gradual shift to lowering interest rates, which began early
last year, may not be reflected in a pick-up in real economic growth
until later this year.
<PAGE>
The impasse between the Clinton Administration and Congress over the
Federal budget continues, although both sides have made concessions
since the debate began. It appears that investors are currently
focusing on the progress that has been made rather than on the
differences that remain. Initially, President Clinton proposed
deficits of about $190 billion annually through fiscal year 2002,
but now proposes balanced budgets, as do the Republicans. Current
indications are that a piecemeal budget accord is the most likely
outcome. Even without the proposed policy changes, it appears that
the US Federal budget deficit would remain stable at about 2% of GDP
for the rest of the decade. This would be far better than is the
case for most Group of Seven industrial nations, and for the United
States would represent a great improvement over the last 15 years.
Although this may fall short of investors' best expectations, it
appears that the Federal budget debate over the past year has
resulted in a trend toward a more conservative fiscal policy.
The Municipal Market
The municipal bond market rallied strongly during the six months
ended January 31, 1996. Long-term, tax-exempt revenue bond yields,
as measured by the Bond Buyer Revenue Bond Index, declined over 65
basis points (0.65%) to end the January period at 5.69%. Continued
weak economic conditions coupled with low inflation fostered a very
positive environment for almost all fixed-income investments during
the last three months of 1995. Long-term US Treasury bond yields
also declined approximately 65 basis points to 6.00% by January 31,
1996. Both US Treasury and long-term tax-exempt bond yields are near
their lowest levels in the past two years.
The municipal bond market had to contend with a number of
difficulties for much of 1995. Various tax reform proposals have
made the future tax advantage of municipal bonds uncertain. This
has, at a minimum, reduced the overall demand for tax-exempt
securities. At the same time, as municipal bond yields declined, tax-
exempt authorities have rushed to issue debt at near historic low
yield levels. During the six-month period ended January 31, 1996,
approximately $90 billion in municipal securities were underwritten,
an increase of over 30% compared to the same period last year.
However, as early 1995 issuance was significantly reduced, the last
12 months issuance of approximately $160 billion remained the same
as that issued a year earlier. Tax-exempt bond yields declined
throughout the six months ended January 31, 1996, despite investor
uncertainty and increased supply pressures.
<PAGE>
It is likely that the municipal market will regain much of the
technical support it enjoyed earlier in 1995. 1995 issuance remained
significantly below levels underwritten in 1993, when over $290
billion in long-term tax-exempt securities were issued. Also,
municipal investors received over $25 billion in bond maturities,
coupon income and early redemptions on January 1, 1996. This $25
billion is almost twice the average monthly issuance for 1995. The
amount of outstanding municipal securities will continue to decline
throughout 1996 and into early 1997. As the uncertainties
surrounding proposed tax reforms are resolved in 1996, the tax-
exempt bond market's renewed technical position should provide
support to municipal bond prices.
Many of the features that made tax-exempt products attractive to
investors last year are still in place. Long-term, A-rated municipal
revenue bonds continue to yield well over 90% of comparable US
Treasury bond yields. Historically, analysts have considered yields
in excess of 82% attractive for long-term investors. For example,
currently available tax-exempt bond yields generate taxable
equivalent yields in excess of 8.50% for an investor in the 36%
Federal income tax bracket. While the uncertainties regarding
potential changes in current tax law remain, it appears that, at
current price levels, bond investors have discounted at least some
of the uncertainty.
Looking ahead, it may be unreasonable to expect to duplicate the
double-digit returns produced by most tax-exempt issues in 1995,
given current municipal bond yields. Municipal bond yields would
have to decline to levels not seen since the 1960s in order to
generate such significant returns in the coming years. While the
current economic environment may still justify additional declines
in interest rates, it may be prudent to expect some period of
consolidation before the interest rate decline resumes. Tax-exempt
bond market performance in 1996 is likely to be generated more by
enhancing current income and limiting credit risk than by
significant interest rate declines.
Portfolio Strategy
During the three months ended January 31, 1996, our portfolio
strategy continued to focus on partially restructuring the Fund
following a more performance-oriented investment strategy. We chose
this strategy because we remain optimistic that long-term municipal
interest rates will decline further as a result of below-trend
economic growth and further cuts in short-term interest rates by the
Federal Reserve Board. We sold selected current coupons and shorter
call securities and replaced them with high quality performance-
oriented bonds that can take advantage of a falling interest rate
environment. We still consider it appropriate to seek to maintain a
balance between an attractive level of tax-exempt income and total
return.
<PAGE>
In Conclusion
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.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President
(William R. Bock)
William R. Bock
Portfolio Manager
March 1, 1996
<PAGE>
We are pleased to announce that William R. Bock is responsible for
the day-to-day management of Merrill Lynch Connecticut Municipal
Bond Fund. Mr. Bock has been employed by Merrill Lynch Asset
Management, L.P. (an affiliate of the Fund's investment adviser)
since 1989 as a Vice President.
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
*Class A Shares incur a maximum initial sales charge (front-end load)
of 4% and bear no ongoing distribution or account maintenance fees.
Class A Shares are available only to eligible investors.
*Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.25% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after approximately 10 years.
*Class C Shares are subject to a distribution fee of 0.35% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
*Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.10% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. Dividends paid to each class
of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
<PAGE>
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
1/31/96 10/31/95 1/31/95 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $10.65 $10.42 $9.92 + 7.36% +2.21%
Class B Shares* 10.64 10.41 9.92 + 7.26 +2.21
Class C Shares* 10.65 10.42 9.92 + 7.36 +2.21
Class D Shares* 10.65 10.42 9.92 + 7.36 +2.21
Class A Shares--Total Return* +13.75(1) +3.62(2)
Class B Shares--Total Return* +13.07(3) +3.50(4)
Class C Shares--Total Return* +13.07(5) +3.47(6)
Class D Shares--Total Return* +13.64(7) +3.60(8)
Class A Shares--Standardized 30-day Yield 4.94%
Class B Shares--Standardized 30-day Yield 4.64%
Class C Shares--Standardized 30-day Yield 4.54%
Class D Shares--Standardized 30-day Yield 4.85%
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
(1)Percent change includes reinvestment of $0.598 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.146 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.546 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.133 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.536 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.130 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.588 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.144 per share ordinary
income dividends.
</TABLE>
PERFORMANCE DATA (continued)
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
7/1/94--12/31/94 $10.00 $ 9.62 -- $0.297 - 0.84%
1995 9.62 10.64 -- 0.600 +17.25
1/1/96--1/31/96 10.64 10.65 -- 0.034 + 0.51
------
Total $0.931
Cumulative total return as of 1/31/96: +16.86%**
<PAGE>
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
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**
<S> <C> <C> <C> <C> <C>
7/1/94--12/31/94 $10.00 $ 9.62 -- $0.271 - 1.10%
1995 9.62 10.64 -- 0.549 +16.67
1/1/96--1/31/96 10.64 10.64 -- 0.031 + 0.38
------
Total $0.851
Cumulative total return as of 1/31/96: +15.83%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
<TABLE>
Performance Summary--Class C Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $ 9.82 $ 9.62 -- $0.107 - 0.93%
1995 9.62 10.65 -- 0.539 +16.66
1/1/96--1/31/96 10.65 10.65 -- 0.030 + 0.38
------
Total $0.676
Cumulative total return as of 1/31/96: +16.01%**
<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.
<PAGE>
</TABLE>
<TABLE>
Performance Summary--Class D Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $ 9.82 $ 9.62 -- $0.117 - 0.83%
1995 9.62 10.64 -- 0.590 +17.14
1/1/96--1/31/96 10.64 10.65 -- 0.033 + 0.50
------
Total $0.740
Cumulative total return as of 1/31/96: +16.75%**
<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>
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/95 +17.25% +12.56%
Inception (7/1/94)
through 12/31/95 +10.56 + 7.59
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
<PAGE>
Year Ended 12/31/95 +16.67% +12.67%
Inception (7/1/94)
through 12/31/95 +10.00 + 8.09
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 12/31/95 +16.66% +15.66%
Inception (10/21/94)
through 12/31/95 +12.88 +12.88
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 12/31/95 +17.14% +12.45%
Inception (10/21/94)
through 12/31/95 +13.37 + 9.56
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
PORTFOLIO ABBREVIATIONS
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)
HFA Housing Finance Agency
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Connecticut--96.2%
<S> <S> <C> <S> <C>
AA+ Aa $1,000 Connecticut State Clean Water Fund Revenue Bonds, 5.80% due 6/01/2016 $ 1,036
AAA Aaa 1,000 Connecticut State Development Authority, Governmental Lease Revenue
Bonds, 6.60% due 6/15/2014 (b) 1,120
NR* VMIG1++ 195 Connecticut State Development Authority, Health Care Revenue Bonds
(Independent Living Project), VRDN, 3.15% due 7/01/2015 (a) 195
Connecticut State Development Authority Revenue Bonds (General Fund),
Series A:
AA- A1 2,000 6.375% due 10/15/2024 2,132
AA- A1 1,500 (Special Obligations), 5.55% due 12/15/2015 1,529
AAA Aaa 1,500 Connecticut State Development Authority, Solid Waste Disposal Facilities
Revenue Bonds(Pfizer Inc. Project), AMT, 7% due 7/01/2025 1,685
Connecticut State Development Authority, Water Facility, Revenue Refunding
Bonds:
AAA Aaa 1,000 (Bridgeport Hydraulic), Series A, 6.05% due 3/01/2029 (b) 1,055
AAA Aaa 1,150 (The Connecticut Water Company Project), AMT, Series A, 5.75% due
7/01/2028 (d) 1,162
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Connecticut--96.2%
<S> <S> <C> <S> <C>
A1 VMIG1++ $1,200 Connecticut State Economic Recovery Notes, VRDN, Series B, 3.15%
due 6/01/1996 (a) $ 1,200
<PAGE>
Connecticut State Health and Educational Facilities Authority Revenue Bonds:
AAA Aaa 1,000 (Bridgeport Hospital), Series A, 6.625% due 7/01/2018 (b) 1,099
AAA Aaa 2,000 (Choate Rosemary Hall), Series A, 7% due 7/01/2025 (b) 2,296
NR* Baa1 500 (Griffin Hospital), Series A, 5.75% due 7/01/2023 456
AAA Aaa 1,000 (Loomis Chaffee School Project), Series B, 6% due 7/01/2025 (b) 1,057
AAA Aaa 1,400 (Newington Children's Hospital), Series A, 6.30% due 7/01/2021 (b) 1,507
AA- A1 2,000 (Nursing Home Program--AHF/Hartford), 7.125% due 11/01/2024 2,304
AAA Aaa 900 Refunding (Trinity College), Series D, 6.125% due 7/01/2024 (c) 963
AAA Aaa 1,000 (Yale-New Haven Hospital), Series G, 6.50% due 7/01/2012 (b) 1,095
Connecticut State HFA Revenue Bonds (Housing Mortgage Finance Program):
AA Aa 1,000 AMT, Series A, Sub-Series A-2, 6.50% due 5/15/2027 1,018
AA Aa 1,500 AMT, Series D, Sub-Series D-2, 6.90% due 5/15/2020 1,557
AA Aa 2,500 Series B, 6.75% due 11/15/2023 2,625
AAA Aaa 2,500 Series B, 6.75% due 11/15/2023 (b) 2,639
NR* A1 790 Connecticut State Higher Education, Supplemental Loan Authority Revenue
Bonds(Family Education Loan Program), AMT, Series A, 6.40% due 11/15/2014 829
AAA Aaa 1,000 Connecticut State Municipal Electric Energy, Power Supply System Revenue
Bonds(Co-Op), Series A, 5% due 1/01/2012 (b) 980
NR* NR* 1,000 Connecticut State Regional Learning Educational Service Center Revenue
Bonds(Office/Education Center Facilities), 7.75% due 2/01/2015 1,120
AAA Aaa 1,000 Connecticut State Resource Recovery Authority, Revenue Refunding Bonds
(American Refuse Fuel), AMT, Series A, 8% due 11/15/2015 1,105
Connecticut State, Series B:
AA- Aa 1,000 5.375% due 10/01/2012 1,019
AA- Aa 1,000 5.375% due 10/01/2013 1,015
Connecticut State Special Tax Obligation Revenue Bonds (Transportation
Infrastructure):
AA- A1 1,000 Series B, 6.125% due 9/01/2012 1,114
AA- A1 1,000 Series C, 5% due 10/01/2013 969
AAA Aaa 500 Hartford, Connecticut, UT, 5.75% due 10/01/2015 (c) 522
Puerto Rico--7.9%
A Baa1 1,500 Puerto Rico Commonwealth, Highway and Transportation Authority,
Highway Revenue Bonds, Series W, 5.50% due 7/01/2017 1,468
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 1,659
Total Investments (Cost--$38,445)--104.1% 41,530
Liabilities in Excess of Other Assets--(4.1%) (1,628)
<PAGE> -------
Net Assets--100.0% $39,902
=======
<FN>
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at January 31, 1996.
(b)MBIA Insured.
(c)FGIC Insured.
(d)AMBAC Insured.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of January 31, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$38,444,907) (Note 1a) $41,529,860
Cash 101,156
Receivables:
Interest $ 474,306
Beneficial interest sold 168,471
Investment adviser (Note 2) 12,094 654,871
-----------
Deferred organization expenses (Note 1e) 28,648
Prepaid registration fees and other assets (Note 1e) 15,002
-----------
Total assets 42,329,537
-----------
Liabilities: Payables:
Beneficial interest redeemed 1,341,613
Securities purchased 969,944
Dividends to shareholders (Note 1f) 51,315
Distributor (Note 2) 13,268 2,376,140
-----------
Accrued expenses and other liabilities 50,936
-----------
Total liabilities 2,427,076
-----------
Net Assets: Net assets $39,902,461
===========
<PAGE>
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited
Consist of: number of shares authorized $ 67,937
Class B Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 279,504
Class C Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 10,788
Class D Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 16,612
Paid-in capital in excess of par 37,080,444
Accumulated realized capital losses on investments--net (Note 5) (637,777)
Unrealized appreciation on investments--net 3,084,953
-----------
Net assets $39,902,461
===========
Net Asset Value: Class A--Based on net assets of $7,232,335 and 679,366 shares
of beneficial interest outstanding $ 10.65
===========
Class B--Based on net assets of $29,752,629 and 2,795,044 shares
of beneficial interest outstanding $ 10.64
===========
Class C--Based on net assets of $1,148,923 and 107,877 shares
of beneficial interest outstanding $ 10.65
===========
Class D--Based on net assets of $1,768,574 and 166,116 shares
of beneficial interest outstanding $ 10.65
===========
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
<PAGE>
For the Six Months
Ended January 31, 1996
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 1,166,962
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 107,245
Account maintenance and distribution fees--Class B (Note 2) 73,057
Professional fees 27,516
Printing and shareholder reports 25,942
Accounting services (Note 2) 19,300
Transfer agent fees--Class B (Note 2) 6,335
Registration fees (Note 1e) 5,221
Amortization of organization expenses (Note 1e) 3,935
Account maintenance and distribution fees--Class C (Note 2) 3,146
Pricing fees 2,543
Custodian fees 1,526
Transfer agent fees--Class A (Note 2) 1,327
Trustees' fees and expenses 1,065
Account maintenance fees--Class D (Note 2) 703
Transfer agent fees--Class D (Note 2) 253
Transfer agent fees--Class C (Note 2) 233
Other 778
-----------
Total expenses before reimbursement 280,125
Reimbursement of expenses (Note 2) (137,167)
-----------
Total expenses after reimbursement 142,958
-----------
Investment income--net 1,024,004
-----------
Realized & Realized gain on investments--net 96,772
Unrealized Gain on Change in unrealized appreciation on investments--net 1,379,349
Investments--Net -----------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations $ 2,500,125
===========
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
<PAGE>
For the Six For the
Months Ended Year Ended
January 31, July 31,
Increase (Decrease) in Net Assets: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 1,024,004 $ 1,940,306
Realized gain (loss) on investments--net 96,772 (733,977)
Change in unrealized appreciation on investments--net 1,379,349 1,220,984
----------- -----------
Net increase in net assets resulting from operations 2,500,125 2,427,313
----------- -----------
Dividends & Investment income--net:
Distributions to Class A (207,001) (461,871)
Shareholders Class B (751,679) (1,421,132)
(Note 1f): Class C (26,379) (21,114)
Class D (38,945) (36,189)
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 (1,024,004) (1,946,629)
----------- -----------
Beneficial Interest Net increase (decrease) in net assets derived from beneficial
Transactions interest transactions (1,704,792) 16,204,480
(Note 4): ----------- -----------
Net Assets: Total increase (decrease) in net assets (228,671) 16,685,164
Beginning of period 40,131,132 23,445,968
----------- -----------
End of period $39,902,461 $40,131,132
=========== ===========
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
<PAGE>
Class A Class B
For the For the
For the Six For the Period For the For the Period
The following per share data and ratios have been derived Months Year July 1, Six Months Year July 1,
from information provided in the financial statements. Ended Ended 1994++ to Ended Ended 1994++ to
Jan. 31, July 31, July 31, Jan. 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.23 $ 10.22 $ 10.00 $ 10.23 $ 10.22 $ 10.00
Operating ------- ------- ------- ------- ------- -------
Performance: Investment income--net .30 .60 .05 .27 .55 .04
Realized and unrealized gain
on investments--net .42 .01 .22 .41 .01 .22
------- ------- ------- ------- ------- -------
Total from investment operations .72 .61 .27 .68 .56 .26
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net (.30) (.60) (.05) (.27) (.55) (.04)
Realized gain on investments--net -- --++++ -- -- --++++ --
------- ------- ------- ------- ------- -------
Total dividends and distributions (.30) (.60) (.05) (.27) (.55) (.04)
------- ------- ------- ------- ------- -------
Net asset value, end of period $ 10.65 $ 10.23 $10.22 $ 10.64 $ 10.23 $ 10.22
======= ======= ======= ======= ======= =======
Total Investment Based on net asset value per share 7.06%+++ 6.30% 2.68%+++ 6.70%+++ 5.77% 2.64%+++
Return:** ======= ======= ======= ======= ======= =======
Ratios to Expenses, net of reimbursement .33%* .07% .00%* .84%* .58% .50%*
Average ======= ======= ======= ======= ======= =======
Net Assets: Expenses 1.03%* 1.19% 1.54%* 1.54%* 1.70% 2.04%*
======= ======= ======= ======= ======= =======
Investment income--net 5.64%* 6.02% 5.48%* 5.13%* 5.51% 5.00%*
======= ======= ======= ======= ======= =======
Supplemental Net assets, end of period
Data: (in thousands) $ 7,232 $ 7,979 $6,557 $29,753 $30,265 $16,889
======= ======= ======= ======= ======= =======
Portfolio turnover 27.20% 60.99% 3.07% 27.20% 60.99% 3.07%
======= ======= ======= ======= ======= =======
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
++++Amount is less than $.01 per share.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class C Class D
For the
For the For the For the Period
The following per share data and ratios have been derived Six Months Oct. 21, Six Months Oct. 21,
from information provided in the financial statements. Ended 1994++ to Ended 1994++ to
Jan. 31, July 31, Jan. 31, July 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1996 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.24 $ 9.82 $ 10.23 $ 9.82
Operating -------- -------- -------- --------
Performance: Investment income--net .26 .42 .29 .46
Realized and unrealized gain on investments--net .41 .42 .42 .41
-------- -------- -------- --------
Total from investment operations .67 .84 .71 .87
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.26) (.42) (.29) (.46)
Realized gain on investments--net -- --++++ -- --++++
-------- -------- -------- --------
Total dividends and distributions (.26) (.42) (.29) (.46)
-------- -------- -------- --------
Net asset value, end of period $ 10.65 $ 10.24 $ 10.65 $ 10.23
======== ======== ======== ========
Total Investment Based on net asset value per share 6.64%+++ 8.79%+++ 7.01%+++ 9.10%+++
Return:** ======== ======== ======== ========
Ratios to Expenses, net of reimbursement .94%* .74%* .43%* .22%*
Average ======== ======== ======== ========
Net Assets: Expenses 1.64%* 1.77%* 1.13%* 1.27%*
======== ======== ======== ========
Investment income--net 5.02%* 5.43%* 5.52%* 5.96%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 1,149 $ 820 $ 1,768 $ 1,067
Data: ======== ======== ======== ========
Portfolio turnover 27.20% 60.99% 27.20% 60.99%
======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
++++Amount is less than $.01 per share.
+++Aggregate total investment return.
<PAGE>
See Notes to Financial Statements.
</TABLE>
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 interim period presented. All such adjustments are
of a normal recurring nature. The Fund offers four classes of shares
under the Merrill Lynch Select Pricing SM System. Shares of Class A
and Class D are sold with a front-end sales charge. Shares of Class
B and Class C may be subject to a contingent deferred sales charge.
All classes of shares have identical voting, dividend, liquidation
and other rights and the same terms and conditions, except that
Class B, Class C and Class D Shares bear certain expenses related to
the account maintenance of such shares, and Class B and Class C
Shares also bear certain expenses related to the distribution of
such shares. Each class has exclusive voting rights with respect to
matters relating to its account maintenance and distribution
expenditures. The following is a summary of significant accounting
policies followed by the Fund.
(a) Valuation of investments--Municipal bonds and other portfolio
securities in which the Fund invests are traded primarily in the
over-the-counter municipal bond and money markets and are valued at
the last available bid price in the over-the-counter market or on
the basis of yield equivalents as obtained from one or more dealers
that make markets in the securities. Financial futures contracts and
options thereon, which are traded on exchanges, are valued at their
settlement prices as of the close of such exchanges. Short-term
investments with remaining maturities of sixty days or less are
valued at amortized cost, which approximates market value.
Securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or
under the direction of the Board of Trustees of the Trust, including
valuations furnished by a pricing service retained by the Trust,
which may utilize a matrix system for valuations. The procedures of
the pricing service and its valuations are reviewed by the officers
of the Trust under the general supervision of the Trustees.
<PAGE>
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
*Financial futures contracts--The Fund may purchase or sell interest
rate futures contracts and options on such futures contracts for the
purpose of hedging the market risk on existing securities or the
intended purchase of securities. Futures contracts are contracts for
delayed delivery of securities at a specific future date and at a
specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to
the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin
and are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a five-year period. Prepaid registration fees are
charged to expense as the related shares are issued.
(f) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates.
<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. 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. No fee payment will be made to FAM
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, 1996, FAM earned fees of $107,245, all of which was
voluntarily waived. FAM also reimbursed the Fund additional expenses
of $29,922.
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% --
<PAGE>
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the six months ended January 31, 1996, MLFD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the
Fund's Class A and Class D Shares as follows:
MLFD MLPF&S
Class A $ 411 $ 4,003
Class D $1,387 $15,231
For the six months ended January 31, 1996, MLPF&S received
contingent deferred sales charges of $97,216 and $323 relating to
transactions in Class B and Class C Shares, respectively.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, MLPF&S, MLFDS, MLFD, and/or ML & Co.
NOTES TO FINANCIAL STATEMENTS (concluded)
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended January 31, 1996 were $11,174,661 and
$10,150,165, respectively.
Net realized and unrealized gains (losses) as of January 31, 1996
were as follows:
<PAGE>
Realized Unrealized
Gains (Losses) Gains
Long-term investments $ 153,314 $ 3,084,953
Short-term investments (2,973) --
Financial futures contracts (53,569) --
------------ ------------
Total $ 96,772 $ 3,084,953
============ ============
As of January 31, 1996, net unrealized appreciationfor Federal
income tax purposes aggregated $3,084,953, all of which is related
to appreciated securities. The aggregate cost of investments at
January 31, 1996 for Federal income tax purposes was $38,444,907.
4. Beneficial Interest Transactions:
Net increase (decrease) in net assets derived from beneficial
interest transactions was $(1,704,792) and $16,204,480 for the six
months ended January 31, 1996 and for the year ended July 31, 1995,
respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Six Months Dollar
Ended January 31, 1996 Shares Amount
Shares sold 27,040 $ 280,567
Shares issued to share-
holders in reinvestment
of dividends 13,997 145,739
------------ ------------
Total issued 41,037 426,306
Shares redeemed (141,337) (1,458,040)
------------ ------------
Net decrease (100,300) $ (1,031,734)
============ ============
Class A Shares for the Year Dollar
Ended July 31, 1995 Shares Amount
Shares sold 209,452 $ 2,077,114
Shares issued to share-
holders in reinvestment of
dividends & distributions 29,893 297,919
------------ ------------
Total issued 239,345 2,375,033
Shares redeemed (101,176) (1,024,995)
------------ ------------
Net increase 138,169 $ 1,350,038
============ ============
<PAGE>
Class B Shares for the Six Months Dollar
Ended January 31, 1996 Shares Amount
Shares sold 503,712 $ 5,253,512
Shares issued to share-
holders in reinvestment of
dividends 42,476 441,670
------------ ------------
Total issued 546,188 5,695,182
Shares redeemed (708,210) (7,299,457)
------------ ------------
Net decrease (162,022) $ (1,604,275)
============ ============
Class B Shares for the Year Dollar
Ended July 31, 1995 Shares Amount
Shares sold 1,748,461 $ 17,443,829
Shares issued to share-
holders in reinvestment of
dividends & distributions 98,302 980,903
------------ ------------
Total issued 1,846,763 18,424,732
Shares redeemed (541,908) (5,365,859)
------------ ------------
Net increase 1,304,855 $ 13,058,873
============ ============
Class C Shares for the Six Months Dollar
Ended January 31, 1996 Shares Amount
Shares sold 35,222 $ 365,058
Shares issued to share-
holders in reinvestment of
dividends 1,417 14,811
------------ ------------
Total issued 36,639 379,869
Shares redeemed (8,835) (92,700)
------------ ------------
Net increase 27,804 $ 287,169
============ ============
<PAGE>
Class C Shares for the Period
October 21, 1994++ to Dollar
July 31, 1995 Shares Amount
Shares sold 86,725 $ 857,547
Shares issued to share-
holders in reinvestment of
dividends & distributions 885 8,941
------------ ------------
Total issued 87,610 866,488
Shares redeemed (7,537) (76,804)
------------ ------------
Net increase 80,073 $ 789,684
============ ============
[FN]
++Commencement of Operations.
Class D Shares for the
Six Months Ended Dollar
January 31, 1996 Shares Amount
Shares sold 73,638 $ 769,016
Shares issued to share-
holders in reinvestment of
dividends 1,242 12,951
------------ ------------
Total issued 74,880 781,967
Shares redeemed (13,071) (137,919)
------------ ------------
Net increase 61,809 $ 644,048
============ ============
Class D Shares for the Period
October 21, 1994++ to Dollar
July 31, 1995 Shares Amount
Shares sold 109,791 $ 1,061,351
Shares issued to share-
holders in reinvestment of
dividends & distributions 960 9,053
------------ ------------
<PAGE>
Total issued 110,751 1,070,404
Shares redeemed (6,444) (64,519)
------------ ------------
Net increase 104,307 $ 1,005,885
============ ============
[FN]
++Commencement of Operations.
5. Capital Loss Carryforward:
At July 31, 1995, the Fund had a net capital loss carryforward of
approximately $62,000, all of which expires in 2003. This amount
will be available to offset like amounts of any future taxable
gains.
