MERRILL LYNCH
CONNECTICUT
MUNICIPAL
BOND FUND
[FUND LOGO]
STRATEGIC
Performance
Semi-Annual Report
January 31, 1997
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
Vincent R. Giordano, Senior Vice President
William R. Bock, Vice President
Donald C. Burke, 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
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 #18138 -- 1/97
Merrill Lynch Connecticut Municipal Bond Fund January 31, 1997
TO OUR SHAREHOLDERS
The Municipal Market Environment
Long-term fixed-income bond yields generally declined over the six
months ended January 31, 1997. Initially, US Treasury bond yields
declined over 45 basis points (0.45%) to 6.45% by late November as low
employment growth and continued low inflation combined to support lower
bond yields. Concurrently, long-term municipal revenue bond yields, as
measured by the Bond Buyer Revenue Bond Index, declined over 20 basis
points to approximately 5.80%. However, signs of increased economic
activity and renewed inflation fears pushed bond yields up for the
remainder of the period. By the end of January 1997, US Treasury bond
yields rose 35 basis points to end the period at approximately 6.80%.
Similarly, long-term municipal revenue bond yields rose approximately 20
basis points from their lows in late November to approximately 6.00%.
During the six months ended January 31, 1997, US Treasury bond yields
declined approximately 10 basis points, while tax-exempt bond yields
were essentially unchanged.
Recently, tax-exempt bond yields underperformed their taxable
counterparts despite a continued strong supply position. During the six-
month period ended January 31, 1997, over $88 billion in long-term tax-
exempt bonds was underwritten, essentially unchanged from issuance a
year ago. Approximately $50 billion in new municipal bonds was issued
during the three-month period ended January 31, 1997, representing a
decline of over 5% compared to the same period in 1996. This declining
trend in bond issuance was even more apparent recently. Slightly more
than $10 billion in long-term bonds was issued in January 1997, a
decrease of over 15% compared to January 1996 issuance.
The municipal bond market's recent underperformance relative to Treasury
issues was the result of a number of other factors. The historic
strength of the US equity market has attracted significant investor
interest. Additionally, as tax-exempt bond yields declined again below
6%, some investors temporarily lost interest in the municipal bond
market. If interest rates continue to decline as they did at the end of
1994 and throughout 1995, investors, in general, will quickly adjust to
the new levels. The tax advantages generated by municipal bonds quickly
outweigh low nominal yields and investor demand increases.
The Presidential and Congressional elections this past November
resurrected some investor concerns regarding continued Federal deficit
reduction and potential legislative restrictions upon the municipal bond
market. This situation was similar to that at the beginning of 1996 when
tax-exempt bond yields were negatively impacted by fears that
legislation reducing the tax advantage of municipal bonds would be
introduced to aid further deficit reductions. However, the US Treasury
bond market's recent relatively strong performance resulted in municipal
bonds becoming a particularly attractive investment alternative. At current
levels, long-term tax-exempt revenue bonds yield over 88% of comparable US
Treasury bond yields. Current levels make tax-advantaged products more
attractive than they were at mid-year when yield ratios declined to
approximately 85%. For example, to an investor in the 36% Federal income tax
bracket, a current tax-exempt bond yield of 6% represents a taxable equivalent
yield of approximately 9.37%.
Looking forward, the supply of new bond issuance for 1997 is expected to
be very similar to that of 1996, with most annual estimates falling in
the $170 billion -- $175 billion range. Investor demand is also expected
to regain its former strength, with 1997 total municipal redemptions
(refundings, maturities and coupon payments) in the $175 billion -- $185
billion range. This overall balance suggests that the positive technical
backdrop the municipal bond market enjoyed in 1996 could continue in
1997. However, it is likely that seasonal factors may temporarily distort
this overall balanced technical scenario. During periods of reduced bond
issuance, the ease and ability to purchase tax-advantaged products at
their current attractive levels may be greatly restricted.
Portfolio Strategy
During the six-month period ended January 31, 1997, our portfolio
strategy reflected a decidedly more optimistic view toward the municipal
bond market. We expected that the municipal bond market would continue
to experience a strong technical position compared to the US Treasury
market, which would therefore result in lower bond municipal interest
rates. We continued to concentrate on sustaining an appealing level of
tax-exempt income, and we partially restructured the Fund to seek to
enhance its total return potential with the acquisition of high-quality
securities.
Looking ahead, we expect the municipal bond market to continue to
experience volatility within a narrow trading range with interest rates
trending lower. Therefore, our investment strategy will continue to
stress the purchase of quality current coupon bonds with extended call
protection.
In Conclusion
We appreciate your ongoing interest in Merrill Lynch Connecticut
Municipal Bond Fund, and we look forward to serving your investment
needs in the months and years ahead.
Sincerely,
/S/ARTHUR ZEIKEL
Arthur Zeikel
President
/S/VINCENT R. GIORDANO
Vincent R. Giordano
Senior Vice President
/S/WILLIAM R. BOCK
William R. Bock
Vice President and Portfolio Manager
March 11, 1997
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill
Lynch Select PricingSM System, which offers four pricing alternatives:
(bullet) 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.
(bullet) 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. (There is no initial sales charge for automatic
share conversion.)
(bullet) 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.
(bullet) 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.
<TABLE>
<CAPTION>
Recent Performance Results
12 Month 3 Month
1/31/97 10/31/96 1/31/96 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $10.39 $10.42 $10.65 -2.44% -0.29%
Class B Shares* 10.38 10.41 10.64 -2.44 -0.29
Class C Shares* 10.39 10.42 10.65 -2.44 -0.29
Class D Shares* 10.39 10.42 10.65 -2.44 -0.29
Class A Shares -- Total Return* +3.12(1) +1.13(2)
Class B Shares -- Total Return* +2.60(3) +1.00(4)
Class C Shares -- Total Return* +2.50(5) +0.98(6)
Class D Shares -- Total Return* +3.02(7) +1.11(8)
Class A Shares -- Standardized 30-day Yield 4.90%
Class B Shares -- Standardized 30-day Yield 4.60%
Class C Shares -- Standardized 30-day Yield 4.50%
Class D Shares -- Standardized 30-day Yield 4.81%
* 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 $0.581 per share ordinary income dividends.
(2) Percent change includes reinvestment of $0.155 per share ordinary income dividends.
(3) Percent change includes reinvestment of $0.527 per share ordinary income dividends.
(4) Percent change includes reinvestment of $0.140 per share ordinary income dividends.
(5) Percent change includes reinvestment of $0.517 per share ordinary income dividends.
(6) Percent change includes reinvestment of $0.138 per share ordinary income dividends.
(7) Percent change includes reinvestment of $0.570 per share ordinary income dividends.
(8) Percent change includes reinvestment of $0.152 per share ordinary income dividends.
</TABLE>
<TABLE>
<CAPTION>
Performance Summary -- Class A Shares
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
1996 10.64 10.45 -- 0.574 + 3.79
1/1/97 -- 1/31/97 10.45 10.39 -- 0.040 - 0.10
Total $1.511
Cumulative total return as of 1/31/97: +20.56%**
* 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>
<CAPTION>
Performance Summary -- Class B Shares
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
1996 10.64 10.44 -- 0.521 + 3.17
1/1/97 -- 1/31/97 10.44 10.38 -- 0.037 - 0.14
Total $1.378
Cumulative total return as of 1/31/97: +18.87%**
* 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>
<CAPTION>
Performance Summary -- Class C Shares
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
1996 10.65 10.45 -- 0.511 + 3.07
1/1/97 -- 1/31/97 10.45 10.39 -- 0.036 - 0.15
Total $1.193
Cumulative total return as of 1/31/97: +18.94%**
* 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>
<CAPTION>
Performance Summary -- Class D Shares
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
1996 10.64 10.45 -- 0.564 + 3.69
1/1/97 -- 1/31/97 10.45 10.39 -- 0.040 - 0.11
Total $1.311
Cumulative total return as of 1/31/97: +20.32%**
* Figures may include short-term capital gains distributions.
** Figures assume reinvestment of all dividends and capital gains distributions at net asset
value on the payable date, and do not include sales charge; results would be lower if sales
charge was included.
</TABLE>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/96 +3.79% -0.36%
Inception (7/1/94)
through 12/31/96 +7.80 +6.06
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/96 +3.17% -0.76%
Inception (7/1/94)
through 12/31/96 +7.22 +6.49
* 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 12/31/96 +3.07% +2.08%
Inception (10/21/94)
through 12/31/96 +8.30 +8.30
* 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 12/31/96 +3.69% -0.46%
Inception (10/21/94)
through 12/31/96 +8.85 +6.84
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
<TABLE>
<CAPTION>
Merrill Lynch Connecticut Municipal Bond Fund January 31, 1997
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <C> <C> <C> <C>
Connecticut -- 94.5%
AA+ Aaa $1,000 Connecticut State Clean Water Fund Revenue Bonds, 5.80% due 6/01/2016 $1,010
AAA Aaa 1,000 Connecticut State Development Authority, Governmental Lease Revenue Bonds, 6.60%
due 6/15/2014 (b) 1,100
Connecticut State Development Authority, PCR, Refunding (Connecticut Light & Power
Co. Project), VRDN (a):
A1+ VMIG1+ 300 AMT, Series B, 3.45% due 9/01/2028 300
A1+ VMIG1+ 1,200 Series A, 3.55% due 9/01/2028 1,200
AA- A1 2,000 Connecticut State Development Authority Revenue Bonds (General Fund), Series A,
6.375% due 10/15/2024 2,121
AAA Aaa 1,500 Connecticut State Development Authority, Solid Waste Disposal Facilities Revenue Bonds
(Pfizer Inc. Project), AMT, 7% due 7/01/2025 1,706
Connecticut State Development Authority, Water Facility Revenue Refunding Bonds
(Bridgeport Hydraulic Co.):
A+ NR* 1,250 AMT, 6.15% due 4/01/2035 1,258
A+ NR* 1,000 AMT, 6% due 9/01/2036 988
AAA Aaa 1,000 Refunding, Series A, 6.05% due 3/01/2029 (b) 1,031
AAA Aaa 1,890 Refunding, Series B, 5.50% due 6/01/2028 (b) 1,806
AA- Aa 1,000 Connecticut State, GO, Series A, 5.50% due 5/15/2014 998
Connecticut State, HFA, Revenue Bonds (Housing Mortgage Finance Program):
AA Aa 1,000 AMT, Series A, Sub-Series A-2, 6.20% due 11/15/2022 1,006
AA Aa 985 AMT, Series A, Sub-Series A-2, 6.50% due 5/15/2027 1,006
AA Aa 1,500 AMT, Series D, Sub-Series D-2, 6.90% due 5/15/2020 1,570
AA Aa 2,395 Series B, 6.75% due 11/15/2023 2,505
AAA Aaa 2,395 Series B, 6.75% due 11/15/2023 (b) 2,505
AA Aa 1,200 Series C-1, 6.30% due 11/15/2017 1,236
Connecticut State Health and Educational Facilities Authority Revenue Bonds:
AAA Aaa 1,000 (Bridgeport Hospital), Series A, 6.625% due 7/01/2018 (b) 1,075
AAA Aaa 2,000 (Choate Rosemary Hall), Series A, 7% due 7/01/2025 (b) 2,235
AAA Aaa 1,000 (Loomis Chaffee School Project), Series B, 6% due 7/01/2025 (b) 1,030
AAA Aaa 1,400 (Newington Children's Hospital), Series A, 6.30% due 7/01/2021 (b) 1,477
AA- A1 2,000 (Nursing Home Program-AHF/Hartford), 7.125% due 11/01/2024 2,259
AA- A1 1,000 Refunding (Nursing Home Program-3030 Fairfield Park Health Center Project),
6% due 11/01/2015 1,020
BBB- Baa3 1,000 Refunding (Sacred Heart University), Series C, 6.625% due 7/01/2026 1,034
AAA Aaa 900 Refunding (Trinity College), Series D, 6.125% due 7/01/2024 (c) 933
BBB- NR* 1,000 (University of New Haven), Series D, 6% due 7/01/2006 1,012
BBB- NR* 500 (University of New Haven), Series D, 6.625% due 7/01/2016 510
AAA Aaa 1,000 (Yale-New Haven Hospital), Series G, 6.50% due 7/01/2012 (b) 1,069
AAA Aaa 1,000 (Yale-New Haven Hospital), Series H, 5.70% due 7/01/2025 (b) 990
NR* A1 755 Connecticut State Higher Education, Supplemental Loan Authority Revenue Bonds
(Family Education Loan Program), AMT, Series A, 6.40% due 11/15/2014 782
NR* NR* 1,000 Connecticut State Regional Learning Educational Service Center Revenue Bonds
(Office/Education Center Facility), 7.75% due 2/01/2015 1,102
AA- Baa1 1,000 Connecticut State Resource Recovery Authority Revenue Bonds (American Refuse Fuel),
AMT, Series A, 8% due 11/15/2015 1,078
Connecticut State Special Tax Obligation Revenue Bonds (Transportation Infrastructure):
AA- A1 1,000 Series B, 6.125% due 9/01/2012 1,081
A1+ VMIG1+ 1,000 VRDN, Second Lien, Series 1, 3.50% due 12/01/2010 (a) 1,000
AAA Aaa 1,000 East Haven, Connecticut, GO, UT, 5.50% due 9/01/2014 (c) 996
AAA Aaa 500 Hartford, Connecticut, GO, UT, 5.75% due 10/01/2015 (c) 505
NR* Aaa 400 New Canaan, Connecticut, GO, UT, 5.50% due 2/01/2015 402
Puerto Rico -- 6.6%
A1+ VMIG1+ 1,400 Puerto Rico Commonwealth, Government Development Bank, Refunding, VRDN, 3.20%
due 12/01/2015 (a) 1,400
A1+ VMIG1+ 100 Puerto Rico Commonwealth, Highway and Transportation Authority, Highway Revenue
Bonds, VRDN, Series X, 3.20% due 7/01/1999 (a) 100
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 1,641
Total Investments (Cost -- $45,499) -- 101.1% 48,077
Liabilities in Excess of Other Assets -- (1.1%) (523)
--------
Net Assets -- 100.0% $47,554
========
(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, 1997.
(b) MBIA Insured.
(c) FGIC Insured.
* Not Rated.
+ Highest short-term rating by Moody's Investors Service, Inc.
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)
GO General Obligation Bonds
HFA Housing Finance Agency
PCR Pollution Control Revenue Bonds
UT Unlimited Tax
VRDN Variable Rate Demand Notes
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of January 31, 1997
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $45,498,673)(Note 1a) $48,076,714
Cash 52,303
Receivables:
Interest $557,617
Securities sold 228,282
Beneficial interest sold 7,166 793,065
------------
Deferred organization expenses (Note 1e) 21,316
Prepaid registration fees and other assets (Note 1e) 5,020
------------
Total assets 48,948,418
------------
Liabilities: Payables:
Securities purchased 1,250,000
Beneficial interest redeemed 51,063
Dividends to shareholders (Note 1f) 38,595
Distributor (Note 2) 16,313
Investment adviser (Note 2) 4,077 1,360,048
------------
Accrued expenses and other liabilities 34,859
------------
Total liabilities 1,394,907
------------
Net Assets: Net assets $47,553,511
============
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited number of
Consist of: shares authorized $78,123
Class B Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 333,570
Class C Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 18,351
Class D Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 27,858
Paid-in capital in excess of par 45,623,518
Accumulated realized capital losses on investments -- net (Note 5) (1,105,950)
Unrealized appreciation on investments -- net 2,578,041
------------
Net assets $47,553,511
============
Net Asset Value: Class A -- Based on net assets of $8,113,375 and 781,233 shares of
beneficial interest outstanding $10.39
============
Class B -- Based on net assets of $34,639,742 and 3,335,695 shares of
beneficial interest outstanding $10.38
============
Class C -- Based on net assets of $1,906,846 and 183,507 shares of
beneficial interest outstanding $10.39
============
Class D -- Based on net assets of $2,893,548 and 278,579 shares of
beneficial interest outstanding $10.39
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Six Months Ended
January 31, 1997
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned $1,362,957
(Note 1d):
Expenses: Investment advisory fees (Note 2) $127,227
Account maintenance and distribution fees -- Class B (Note 2) 84,027
Professional fees 26,964
Accounting services (Note 2) 19,644
Printing and shareholder reports 18,353
Transfer agent fees -- Class B (Note 2) 6,254
Account maintenance and distribution fees -- Class C (Note 2) 5,496
Registration fees (Note 1e) 4,286
Amortization of organization expenses (Note 1e) 3,644
Pricing fees 2,096
Account maintenance fees -- Class D (Note 2) 1,424
Transfer agent fees -- Class A (Note 2) 1,194
Trustees' fees and expenses 1,104
Custodian fees 1,003
Transfer agent fees -- Class D (Note 2) 426
Transfer agent fees -- Class C (Note 2) 348
Other 906
------------
Total expenses before reimbursment 304,396
Reimbursement of expenses (Note 2) (123,149)
------------
Total expenses after reimbursement 181,247
------------
Investment income -- net 1,181,710
------------
Realized & Realized loss on investments -- net (34,822)
Unrealized Change in unrealized appreciation on investments -- net 418,841
Gain (Loss) on ------------
Investments -- Net Net Increase in Net Assets Resulting from Operations $1,565,729
(Notes 1b, 1d & 3): ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
January 31, July 31,
Increase (Decrease) in Net Assets: 1997 1996
<S> <C> <C> <C>
Operations: Investment income -- net $1,181,710 $2,082,774
Realized loss on investments -- net (34,822) (336,579)
Change in unrealized appreciation on investments -- net 418,841 453,596
------------ ------------
Net increase in net assets resulting from operations 1,565,729 2,199,791
------------ ------------
Dividends to Investment income -- net:
Shareholders Class A (219,559) (408,628)
(Note 1f): Class B (840,274) (1,511,028)
Class C (44,867) (66,587)
Class D (77,010) (96,531)
------------ ------------
Net decrease in net assets resulting from dividends to shareholders (1,181,710) (2,082,774)
------------ ------------
Beneficial Interest Net increase in net assets derived from beneficial interest transactions 3,735,307 3,186,036
Transactions ------------ ------------
(Note 4):
Net Assets: Total increase in net assets 4,119,326 3,303,053
Beginning of period 43,434,185 40,131,132
------------ ------------
End of period $47,553,511 $43,434,185
============ ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Class A
For the For the Period
Six Months July 1,
The following per share data and ratios have been derived Ended For the Year 1994+ to
from information provided in the financial statements. Jan. 31, Ended July 31, July 31,
1997 1996 1995 1994
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $10.29 $10.23 $10.22 $10.00
Operating ------ ------ ------ ------
Performance: Investment income -- net .29 .58 .60 .05
Realized and unrealized gain on investments -- net .10 .06 .01 .22
------ ------ ------ ------
Total from investment operations .39 .64 .61 .27
------ ------ ------ ------
Less dividends and distributions:
Investment income -- net (.29) (.58) (.60) (.05)
Realized gain on investments -- net -- -- --++ --
------ ------ ------ ------
Total dividends and distributions (.29) (.58) (.60) (.05)
------ ------ ------ ------
Net asset value, end of period $10.39 $10.29 $10.23 $10.22
====== ====== ====== ======
Total Investment Based on net asset value per share 3.84%+++ 6.37% 6.30% 2.68%+++
Return:** ====== ====== ====== ======
Ratios to Average Expenses, net of reimbursement .38%* .34% .07% .00%*
Net Assets: ====== ====== ====== ======
Expenses .92%* .98% 1.19% 1.54%*
====== ====== ====== ======
Investment income -- net 5.51%* 5.58% 6.02% 5.48%*
====== ====== ====== ======
Supplemental Net assets, end of period (in thousands) $8,113 $7,589 $7,979 $6,557
Data: ====== ====== ====== ======
Portfolio turnover 10.68% 57.58% 60.99% 3.07%
====== ====== ====== ======
<CAPTION>
Class B
For the For the Period
Six Months July 1,
The following per share data and ratios have been derived Ended For the Year 1994+ to
from information provided in the financial statements. Jan. 31, Ended July 31, July 31,
1997 1996 1995 1994
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $10.29 $10.23 $10.22 $10.00
Operating ------ ------ ------ ------
Performance: Investment income -- net .26 .53 .55 .04
Realized and unrealized gain on investments -- net .09 .06 .01 .22
------ ------ ------ ------
Total from investment operations .35 .59 .56 .26
------ ------ ------ ------
Less dividends and distributions:
Investment income -- net (.26) (.53) (.55) (.04)
Realized gain on investments -- net -- -- --++ --
------ ------ ------ ------
Total dividends and distributions (.26) (.53) (.55) (.04)
------ ------ ------ ------
Net asset value, end of period $10.38 $10.29 $10.23 $10.22
====== ====== ====== ======
Total Investment Based on net asset value per share 3.47%+++ 5.82% 5.77% 2.64%+++
Return:** ====== ====== ====== ======
Ratios to Average Expenses, net of reimbursement .89%* .85% .58% .50%*
Net Assets: ====== ====== ====== ======
Expenses 1.42%* 1.49% 1.70% 2.04%*
====== ====== ====== ======
Investment income -- net 5.00%* 5.07% 5.51% 5.00%*
====== ====== ====== ======
Supplemental Net assets, end of period (in thousands) $34,640 $31,359 $30,265 $16,889
Data: ====== ====== ====== ======
Portfolio turnover 10.68% 57.58% 60.99% 3.07%
====== ====== ====== ======
* Annualized.
** Total investment returns exclude the effect of sales loads.
+ Commencement of Operations.
++ Amount is less than $.01 per share.
+++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (concluded)
Class C Class D
For the For the For the For the
Six For the Period Six For the Period
Months Year Oct. 21, Months Year Oct. 21,
The following per share data and ratios have been derived Ended Ended 1994+ to Ended Ended 1994+ to
from information provided in the financial statements. Jan. 31., July 31, July 31, July 31, July 31, July 31,
1997 1996 1995 1997 1996 1995
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $10.30 $10.24 $9.82 $10.29 $10.23 $9.82
Operating ------ ------ ------ ------ ------ ------
Performance: Investment income -- net .26 .52 .42 .29 .57 .46
Realized and unrealized gain
on investments -- net .09 .06 .42 .10 .06 .41
------ ------ ------ ------ ------ ------
Total from investment operations .35 .58 .84 .39 .63 .87
------ ------ ------ ------ ------ ------
Less dividends and distributions:
Investment income -- net (.26) (.52) (.42) (.29) (.57) (.46)
Realized gain on investments -- net -- -- --++ -- -- --++
------ ------ ------ ------ ------ ------
Total dividends and distributions (.26) (.52) (.42) (.29) (.57) (.46)
------ ------ ------ ------ ------ ------
Net asset value, end of period $10.39 $10.30 $10.24 $10.39 $10.29 $10.23
====== ====== ====== ====== ====== ======
Total Investment Based on net asset value per share 3.42%+++ 5.72% 8.79%+++ 3.79%+++ 6.26% 9.10%+++
Return:** ====== ====== ====== ====== ====== ======
Ratios to Expenses, net of reimbursement .99%* .95% .74%* .48%* .44% .22%*
Average ====== ====== ====== ====== ====== ======
Net Assets: Expenses 1.53%* 1.58% 1.77%* 1.02%* 1.07% 1.27%*
====== ====== ====== ====== ====== ======
Investment income -- net 4.90%* 4.96% 5.43%* 5.41%* 5.46% 5.96%*
====== ====== ====== ====== ====== ======
Supplemental Net assets, end of period (in thousands) $1,907 $1,829 $820 $2,894 $2,657 $1,067
Data: ====== ====== ====== ====== ====== ======
Portfolio turnover 10.68% 57.58% 60.99% 10.68% 57.58% 60.99%
====== ====== ====== ====== ====== ======
* Annualized.
** Total investment returns exclude the effect of sales loads.
+ Commencement of Operations.
++ Amount is less than $.01 per share.
+++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Connecticut Municipal Bond Fund January 31, 1997
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 PricingSM 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.
(bullet) 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.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is Princeton
Services, Inc. ("PSI"), an indirect wholly-owned subsidiary of Merrill
Lynch & Co., Inc. ("ML & Co."), which is the limited partner. The Fund
has also entered into a Distribution Agreement and Distribution Plans
with Merrill Lynch Funds Distributor, Inc. ("MLFD" or "Distributor"), a
wholly-owned subsidiary of Merrill Lynch Group, Inc.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee based upon the average daily value
of the Fund's net assets at the following annual rates: 0.55% of the
Fund's average daily net assets not exceeding $500 million; 0.525% of
average daily net assets in excess of $500 million but not exceeding $1
billion; and 0.50% of average daily net assets in excess of $1 billion.
For the six months ended January 31, 1997, FAM earned fees of $127,227,
of which $123,149 was voluntarily waived.
Pursuant to the distribution plans (the "Distribution Plans") adopted by
the Fund in accordance with Rule 12b-1 under the Investment Company Act
of 1940, the Fund pays the Distributor ongoing account maintenance and
distribution fees. The fees are accrued daily and paid monthly at annual
rates based upon the average daily net assets of the shares as follows:
Account 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, 1997, 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 $583 $5,401
Class D $579 $8,215
For the six months ended January 31, 1997, MLPF&S received contingent
deferred sales charges of $33,447 and $1,685 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, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding
short-term securities, for the six months ended
January 31, 1997 were $7,084,850 and $4,616,695, respectively.
Net realized and unrealized gains (losses) as of
January 31, 1997 were as follows:
Realized Unrealized
Losses Gains
Long-term investments $(34,822) $2,578,041
-------- ----------
Total $(34,822) $2,578,041
======== ==========
As of January 31, 1997, net unrealized appreciation for Federal income
tax purposes aggregated $2,578,041, all of which related to appreciated
securities. The aggregate cost of investments at January 31, 1997 for
Federal income tax purposes was $45,498,673.
4. Beneficial Interest Transactions:
Net increase in net assets derived from beneficial interest transactions
was $3,735,307 and $3,186,036 for the six months ended January 31, 1997
and the year ended July 31, 1996, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Six Months Dollar
Ended January 31, 1997 Shares Amount
Shares sold 41,015 $426,647
Shares issued to shareholders
in reinvestment of dividends 15,635 162,226
------------- ------------
Total issued 56,650 588,873
Shares redeemed (12,756) (132,238)
------------- ------------
Net increase 43,894 $456,635
============= ============
Class A Shares For the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 81,137 $836,173
Shares issued to shareholders
in reinvestment of dividends 27,123 281,553
------------- ------------
Total issued 108,260 1,117,726
Shares redeemed (150,587) (1,552,126)
------------- ------------
Net decrease (42,327) $(434,400)
============= ============
Class B Shares for the Six Months Dollar
Ended January 31, 1997 Shares Amount
Shares sold 486,346 $5,055,011
Shares issued to shareholders
in reinvestment of dividends 42,389 439,788
------------- ------------
Total issued 528,735 5,494,799
Automatic conversion of shares (1,697) (17,634)
Shares redeemed (238,452) (2,474,063)
------------- ------------
Net increase 288,586 $3,003,102
============= ============
Class B Shares For the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 1,083,666 $11,283,985
Shares issued to shareholders
in reinvestment of dividends 80,168 831,005
------------- ------------
Total issued 1,163,834 12,114,990
Automatic conversion of shares (11,364) (117,747)
Shares redeemed (1,062,427) (10,982,309)
------------- ------------
Net increase 90,043 $1,014,934
============= ============
Class C Shares for the Six Months Dollar
Ended January 31, 1997 Shares Amount
Shares sold 38,147 $396,578
Shares issued to shareholders
in reinvestment of dividends 2,608 27,082
------------- ------------
Total issued 40,755 423,660
Shares redeemed (34,929) (360,554)
------------- ------------
Net increase 5,826 $63,106
============= ============
Class C Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 106,625 $1,109,389
Shares issued to shareholders
in reinvestment of dividends 3,314 37,148
------------- ------------
Total issued 109,939 1,146,537
Shares redeemed (12,331) (128,277)
------------- ------------
Net increase 97,608 $1,018,260
============= ============
Class D Shares for the Six Months Dollar
Ended January 31, 1997 Shares Amount
Shares sold 43,366 $451,008
Automatic conversion
of shares 1,696 17,634
Shares issued to shareholders
in reinvestment of dividends 2,885 29,946
------------- ------------
Total issued 47,947 498,588
Shares redeemed (27,522) (286,124)
------------- ------------
Net increase 20,425 $212,464
============= ============
Class D Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 159,356 $1,647,385
Automatic conversion
of shares 11,364 117,747
Shares issued to shareholders
in reinvestment of dividends 3,379 34,993
------------- ------------
Total issued 174,099 1,800,125
Shares redeemed (20,252) (212,883)
------------- ------------
Net increase 153,847 $1,587,242
============= ============
5. Capital Loss Carryforward:
At July 31, 1996, the Fund had a net capital loss carryforward of
approximately $455,000, of which $63,000 expires in 2003 and $392,000
expires in 2004. This amount will be available to offset like amounts of
any future taxable gains.
