MERRILL LYNCH
CONNECTICUT
MUNICIPAL
BOND FUND
[GRAPHIC OMITTED]
STRATEGIC
Performance
Semi-Annual Report
January 31, 1999
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund January 31, 1999
TO OUR SHAREHOLDERS
The Municipal Market Environment
During the six months ended January 31, 1999, long-term bond yields moved
significantly lower. US domestic economic growth remained moderate, with losses
in the manufacturing sector offset by strong growth in service-oriented
industries. Industrial commodity prices recently fell to their lowest level in
over a decade. This suggests that the current positive inflationary environment
is unlikely to be challenged in the near term. Additionally, the Federal Reserve
Board lowered short-term interest rates in September, October and November, in
part to ensure that US domestic economic growth would not be negatively impacted
by ongoing weak economic growth overseas. However, various external factors, as
well as increased volatility, contributed to the decline in bond yields as they
have for much of the past year. Episodes of foreign economic instability
generated a significant "flight to quality" rally in US Treasury securities, as
well as fostering lower tax-exempt bond yields as a result. Periods of strong
foreign equity market appreciation, particularly in Asia, have at times resulted
in higher US bond yields as foreign investors have sold US fixed-income
instruments to reinvest the proceeds in their own domestic equity markets.
Additionally, the continued distraction of President Clinton's impeachment trial
added to recent interest rate volatility. However, on balance, the favorable
fundamental economic scenario supported lower bond yields. During the six-month
period ended January 31, 1999, the yield on the US Treasury 30-year bond fell
over 60 basis points (0.60%) to 5.09%, and long-term municipal revenue bond
yields declined almost 20 basis points to 5.17%, as measured by the Bond Buyer
Revenue Bond Index.
Throughout most of 1998, the municipal bond market's performance was impeded by
a significant increase in new-issue supply. However, in recent months, the
technical position of the tax-exempt market improved. Over the last 12 months,
almost $285 billion in new long-term tax-exempt bonds was underwritten, an
increase of almost 30% compared to the same period a year ago. As municipal bond
yields declined in recent years, it has taken increasingly lower bond yields to
generate the cost savings necessary to refinance remaining higher-couponed debt.
Consequently, the rate of increases in municipal bond issuance slowed in recent
quarters. During the last six months, more than $125 billion in new tax-exempt
bonds was issued, an increase of approximately 5% compared to the same period a
year ago. During the January 31, 1999 quarter, $63 billion in new long-term
municipal bonds was underwritten, representing an increase of 5% compared to the
January 31, 1998 quarter.
The pace of tax-exempt issuance continued to slow in 1999. January's monthly
issuance was less than $15 billion, representing a decline of almost 25%
compared to January 1998's volume. Additionally, investors received more than
$22 billion in coupon payments, maturities and proceeds from early redemptions
in January. Investors can also expect to receive an additional $15 billion-$18
billion in February for reinvestment. Consequently, investor demand has been
strong in recent months, easily matching, if not at times exceeding, available
supply. We will monitor this trend closely in the coming months to determine if
the supply pressures exerted in 1998 are abating and fostering a more balanced
supply/demand environment for 1999. Such an environment should allow the
tax-exempt market's performance to more closely mirror that of its taxable
counterpart.
Foreign investors have rarely been active investors in the tax-exempt bond
market since they are unable to benefit from the inherent tax advantage of
municipal securities. Consequently, the municipal bond market has not been able
to benefit from the strong flight to quality demand enjoyed by US Treasury
securities since late 1997. This inability has in large part resulted in
significantly smaller declines in municipal bond yields compared to US Treasury
securities. However, this has resulted in the opportunity to purchase tax-exempt
securities with yields very close to or, in some instances, exceeding those of
comparable US Treasury bonds. By January 31, 1999, long-term tax-exempt bond
yields were at 102% of US Treasury securities of comparable maturities, nearly
matching the least expensive level of the past year. Municipal bond yield ratios
have averaged approximately 95% for the last six months and 92% for all of 1998.
During 1997, tax-exempt bond yield ratios averaged 84%. It is likely
1
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund January 31, 1999
that the combination of the increase in new-issue volume and the "safe-haven"
status of US Treasury securities drove municipal bond yield ratios to their
present attractive levels. Should new volume decline and/or foreign financial
markets regain stability in 1999, tax-exempt bond yield ratios could quickly
return to their more historic levels (85%-88%).
Looking ahead, the expected combination of moderate economic growth in the
United States and continued negligible inflation suggests a relatively stable
interest rate environment into early 1999. However, it is likely that foreign
financial markets will again be a critical factor in determining US bond yields.
Economic problems in Russia and Brazil remain unresolved, suggesting that
additional shocks to the world's financial system are possible. On the other
hand, the continued robustness of the US economy has led to some back up in
interest rates. However, at present these factors indicate that there is little
immediate risk of sustained significant increases in long-term bond yields.
Portfolio Strategy
At the beginning of the six-month period ended January 31, 1999, we had a
positive outlook toward the municipal bond market with the expectation that
lower interest rates were imminent. Consequently, we remained fully invested
during the period and continued our emphasis on purchasing higher-quality bonds
that maintained the duration of the Fund.
Our constructive strategy enabled the Fund to fully participate in the bond
market rally and realize attractive total returns during the period. We believe
that municipal bond interest rates are likely to trend slightly lower in the
months ahead, even with the Federal Reserve Board maintaining its neutral stance
for the foreseeable future.
Our positive view toward the municipal market is based on the forecast that the
huge increase in issuance in 1998 will not be duplicated in 1999, and the ratio
between US Treasury and municipal yields should return to more historic levels.
Consequently, we expect that our investment outlook will remain positive. We
will continue to closely monitor economic data for any sign of inflationary
pressure that would cause interest rates to change direction so that we can
modify our portfolio strategy to a more defensive one.
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,
/s/ Terry K. Glenn
Terry K. Glenn
Executive Vice President
/s/ Vincent R. Giordano
Vincent R. Giordano
Senior Vice President
/s/ William R. Bock
William R. Bock
Vice President and Portfolio Manager
March 9, 1999
2
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund January 31, 1999
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:
o 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.
o 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 conversions.)
o 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.
o 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. Figures shown in the "Recent Performance Results" and
"Average Annual Total Return" tables assume reinvestment of all dividends
and capital gains distributions at net asset value on the payable date.
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.
Recent Performance Results*
<TABLE>
<CAPTION>
Standardized
12 Month 3 Month Since Inception 30-Day Yield
Total Return Total Return Total Return As of 1/31/99
=============================================================================================================
<S> <C> <C> <C> <C>
ML Connecticut Municipal Bond Fund Class A Shares +6.64% +1.88% +41.06% 3.65%
- -------------------------------------------------------------------------------------------------------------
ML Connecticut Municipal Bond Fund Class B Shares +6.10 +1.75 +37.84 3.30
- -------------------------------------------------------------------------------------------------------------
ML Connecticut Municipal Bond Fund Class C Shares +6.00 +1.73 +37.63 3.20
- -------------------------------------------------------------------------------------------------------------
ML Connecticut Municipal Bond Fund Class D Shares +6.53 +1.86 +40.51 3.55
=============================================================================================================
</TABLE>
* Investment results shown do not reflect sales charges; results would be
lower if a sales charge was included. Total investment returns are based
on changes in net asset values for the periods shown, and assume
reinvestment of all dividends and capital gains distributions at net asset
value on the payable date. The Fund's since inception periods are Class A
& Class B Shares, from 7/01/94 to 1/31/99 and Class C & Class D Shares,
from 10/21/94 to 1/31/99.
3
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund January 31, 1999
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
Year Ended 12/31/98 +6.62% +2.35%
- --------------------------------------------------------------------------------
Inception (7/01/94)
through 12/31/98 +7.71 +6.74
- --------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
Year Ended 12/31/98 +6.08% +2.08%
- --------------------------------------------------------------------------------
Inception (7/01/94)
through 12/31/98 +7.16 +7.16
- --------------------------------------------------------------------------------
* 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 12/31/98 +5.97% +4.97%
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 12/31/98 +7.67 +7.67
- --------------------------------------------------------------------------------
* 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 12/31/98 +6.41% +2.15%
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 12/31/98 +8.20 +7.15
- --------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
4
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund January 31, 1999
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
- --------------------------------------------------------------------------------------------------------------------------
Connecticut -- 93.2%
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AAA Aaa $1,000 Connecticut State Clean Water Fund Revenue Bonds, 5.80% due 6/01/2016 $ 1,092
- --------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Connecticut State Development Authority, Governmental Lease Revenue Bonds,
6.60% due 6/15/2014 (b) 1,137
- --------------------------------------------------------------------------------------------------------------------------
NR* VMIG1+ 300 Connecticut State Development Authority, Health Care Revenue Refunding
Bonds (Independent Living Project), VRDN, 2.45% due 7/01/2015 (a) 300
- --------------------------------------------------------------------------------------------------------------------------
B+ Ba3 1,000 Connecticut State Development Authority, PCR, Refunding (Connecticut Light &
Power Company), Series A, 5.85% due 9/01/2028 1,003
- --------------------------------------------------------------------------------------------------------------------------
AA- A1 2,000 Connecticut State Development Authority Revenue Bonds (General Fund),
Series A, 6.375% due 10/15/2024 2,244
- --------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,500 Connecticut State Development Authority, Solid Waste Disposal Facilities Revenue
Bonds (Pfizer Inc. Project), AMT, 7% due 7/01/2025 1,759
- --------------------------------------------------------------------------------------------------------------------------
Connecticut State Development Authority, Water Facility Revenue Bonds
(Bridgeport Hydraulic Co. Project):
A+ NR* 1,250 AMT, 6.15% due 4/01/2035 1,370
A+ NR* 3,000 AMT, 6% due 9/01/2036 3,224
AAA Aaa 1,000 Refunding, Series A, 6.05% due 3/01/2029 (b) 1,109
AAA Aaa 1,890 Refunding, Series B, 5.50% due 6/01/2028 (b) 1,970
- --------------------------------------------------------------------------------------------------------------------------
Connecticut State, GO:
AA Aa3 1,000 Series A, 5.50% due 5/15/2014 1,075
AA Aa3 3,750 Series C, 5.25% due 8/01/2017 3,913
AA Aa3 2,000 Series C, 4.50% due 10/15/2017 1,941
- --------------------------------------------------------------------------------------------------------------------------
Connecticut State, HFA, Revenue Bonds (Housing Mortgage Finance Program):
AA Aa2 900 AMT, Series A, Sub-Series A-2, 6.20% due 11/15/2022 964
AA Aa2 210 AMT, Series A, Sub-Series A-2, 6.50% due 5/15/2027 225
AA Aa2 1,000 AMT, Series B, Sub-Series B-2, 5.70% due 5/15/2017 1,048
AAA Aaa 2,110 Series B, 6.75% due 11/15/2023 (b) 2,301
AA Aa2 1,200 Series C-1, 6.30% due 11/15/2017 1,297
AA Aa2 3,000 Series H-1, 5.20% due 11/15/2028 3,019
- --------------------------------------------------------------------------------------------------------------------------
Connecticut State Health and Educational Facilities Authority Revenue Bonds:
AAA Aaa 1,000 (Bridgeport Hospital), Series A, 6.625% due 7/01/2018 (b) 1,100
AAA Aaa 1,400 (Newington Children's Hospital), Series A, 6.30% due 7/01/2021 (b) 1,565
AA- A1 2,000 (Nursing Home Program -- AHF/Hartford), 7.125% due 11/01/2004 (e) 2,380
BBB- Baa3 1,000 Refunding (Sacred Heart University), Series C, 6.625% due 7/01/2026 1,131
AAA Aaa 900 Refunding (Trinity College), Series D, 6.125% due 7/01/2004 (c)(e) 1,024
AAA Aaa 1,000 Refunding (Trinity College), Series F, 5% due 7/01/2028 (b) 1,004
BBB- Baa3 1,000 (Sacred Heart University), Series D, 6.20% due 7/01/2007 (e) 1,167
A1+ VMIG1+ 2,300 VRDN (Yale University), Series T-2, 2.30% due 7/01/2029 (a) 2,300
AAA Aaa 1,000 (Yale -- New Haven Hospital Issue), Series G, 6.50% due 7/01/2012 (b) 1,094
AAA Aaa 1,000 (Yale -- New Haven Hospital Issue), Series H, 5.70% due 7/01/2025 (b) 1,061
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
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
VRDN Variable Rate Demand Notes
5
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund January 31, 1999
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
- --------------------------------------------------------------------------------------------------------------------------
Connecticut (concluded)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NR* A1 $ 675 Connecticut State Higher Education, Supplemental Loan Authority Revenue Bonds
(Family Education Loan Program), AMT, Series A, 6.40% due 11/15/2014 $ 722
- --------------------------------------------------------------------------------------------------------------------------
NR* NR* 1,000 Connecticut State Regional Learning Educational Service Center Revenue Bonds
(Office/Education Center Facility), 7.75% due 2/01/2015 1,134
- --------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Connecticut State Resource Recovery Authority, Revenue Refunding Bonds
(Mid-Connecticut System), Series A, 5.50% due 11/15/2012 (b) 1,093
- --------------------------------------------------------------------------------------------------------------------------
AAA Aaa 4,000 Connecticut State Special Tax Obligation Revenue Bonds, Transportation
Infrastructure, Series B, 4.75% due 11/01/2018 (d) 3,974
- --------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 East Haven, Connecticut, GO, 5.50% due 9/01/2014 (c) 1,070
- --------------------------------------------------------------------------------------------------------------------------
AAA Aaa 500 Hartford, Connecticut, GO, 5.75% due 10/01/2015 (c) 546
- --------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 New Haven, Connecticut, GO, Series A, 4.75% due 2/01/2019 (c) 1,970
- --------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,400 South Central Connecticut, Regional Water Authority, Water System Revenue
Bonds, 11th Series, 5.75% due 8/01/2012 (c) 1,524
- --------------------------------------------------------------------------------------------------------------------------
Trumbull, Connecticut, GO:
AA Aa2 1,000 5% due 1/15/2017 1,017
AA Aa2 1,200 5% due 1/15/2018 1,215
- --------------------------------------------------------------------------------------------------------------------------
AA NR* 1,870 Waterbury, Connecticut, GO, 5% due 2/15/2018 1,874
- --------------------------------------------------------------------------------------------------------------------------
NR* Aaa 1,530 Westport, Connecticut, GO, Series A, 4.50% due 9/15/2018 1,489
- --------------------------------------------------------------------------------------------------------------------------
NR* Aaa 1,240 Wilton, Connecticut, GO, 4.70% due 7/15/2016 1,265
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Puerto Rico -- 8.8%
- --------------------------------------------------------------------------------------------------------------------------
AAA Baa1 2,450 Puerto Rico Commonwealth, GO, 5.85% due 7/01/2002 (e) 2,678
- --------------------------------------------------------------------------------------------------------------------------
A1+ VMIG1+ 800 Puerto Rico Commonwealth, Government Development Bank, Revenue Refunding
Bonds, VRDN, 2.35% due 12/01/2015 (a)(b) 800
- --------------------------------------------------------------------------------------------------------------------------
BBB+ Baa1 1,500 Puerto Rico Electric Power Authority, Power Revenue Refunding Bonds, Series EE,
4.75% due 7/01/2024 1,446
- --------------------------------------------------------------------------------------------------------------------------
AA- Aa3 1,000 Puerto Rico Industrial, Medical and Environmental Pollution Control Facilities,
Financing Authority Revenue Bonds (Motorola Inc. Project), Series A, 6.75%
due 1/01/2014 1,093
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost -- $65,190) -- 102.0% 69,727
Liabilities in Excess of Other Assets -- (2.0%) (1,375)
--------
Net Assets -- 100.0% $ 68,352
========
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(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,
1999.
(b) MBIA Insured.
(c) FGIC Insured.
(d) FSA Insured.
(e) Prerefunded.
* Not Rated.
+ Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
6
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund January 31, 1999
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of January 31, 1999
<TABLE>
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $65,189,699) (Note 1a) .............. $ 69,727,212
Cash ........................................................................ 17,786
Receivables:
Interest .................................................................. $ 851,305
Beneficial interest sold .................................................. 47,030 898,335
----------
Deferred organization expenses (Note 1e) .................................... 6,692
Prepaid registration fees and other assets (Note 1e) ........................ 4,626
------------
Total assets ................................................................ 70,654,651
------------
- --------------------------------------------------------------------------------------------------------------------------------
Liabilities: Payables:
Securities purchased ...................................................... 1,953,802
Beneficial interest redeemed .............................................. 202,687
Dividends to shareholders (Note 1f) ....................................... 45,304
Investment adviser (Note 2) ............................................... 23,373
Distributor (Note 2) ...................................................... 20,497 2,245,663
----------
Accrued expenses and other liabilities ...................................... 57,081
------------
Total liabilities ........................................................... 2,302,744
------------
- --------------------------------------------------------------------------------------------------------------------------------
Net Assets: Net assets .................................................................. $ 68,351,907
============
- --------------------------------------------------------------------------------------------------------------------------------
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited number of
Consist of: shares authorized ........................................................... $ 87,592
Class B Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized ........................................................... 407,597
Class C Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized ........................................................... 55,830
Class D Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized ........................................................... 70,836
Paid-in capital in excess of par ............................................ 63,170,968
Undistributed realized capital gains on investments -- net (Note 5) ........... 21,571
Unrealized appreciation on investments -- net ................................. 4,537,513
------------
Net assets .................................................................. $ 68,351,907
============
- --------------------------------------------------------------------------------------------------------------------------------
Net Asset Value: Class A -- Based on net assets of $9,627,554 and 875,921 shares
of beneficial interest outstanding .......................................... $ 10.99
============
Class B -- Based on net assets of $44,797,293 and 4,075,966 shares
of beneficial interest outstanding .......................................... $ 10.99
============
Class C -- Based on net assets of $6,140,140 and 558,295 shares
of beneficial interest outstanding .......................................... $ 11.00
============
Class D -- Based on net assets of $7,786,920 and 708,365 shares
of beneficial interest outstanding .......................................... $ 10.99
============
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund January 31, 1999
FINANCIAL INFORMATION (continued)
Statement of Operations
<TABLE>
<CAPTION>
For the Six Months Ended
January 31, 1999
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned ................... $ 1,693,497
(Note 1d):
- -------------------------------------------------------------------------------------------------------------------------------
Expenses: Investment advisory fees (Note 2) .......................................... $ 175,921
Account maintenance and distribution fees -- Class B (Note 2) .............. 109,011
Professional fees .......................................................... 38,826
Printing and shareholder reports ........................................... 36,718
Account maintenance and distribution fees -- Class C (Note 2) .............. 15,941
Accounting services (Note 2) ............................................... 14,558
Transfer agent fees -- Class B (Note 2) .................................... 6,346
Pricing fees ............................................................... 3,494
Amortization of organization expenses (Note 1e) ............................ 3,080
Account maintenance fees -- Class D (Note 2) ............................... 2,946
Registration fees (Note 1e) ................................................ 2,854
Custodian fees ............................................................. 1,917
Trustees' fees and expenses ................................................ 1,624
Transfer agent fees -- Class A (Note 2) .................................... 1,075
Transfer agent fees -- Class C (Note 2) .................................... 758
Transfer agent fees -- Class D (Note 2) .................................... 701
Other ...................................................................... 920
----------
Total expenses before reimbursement ........................................ 416,690
Reimbursement of expenses (Note 2) ......................................... (31,986)
----------
Total expenses after reimbursement ......................................... 384,704
-----------
Investment income -- net ................................................... 1,308,793
-----------
- -------------------------------------------------------------------------------------------------------------------------------
Realized & Realized gain on investments--net .......................................... 610,395
Unrealized Gain on Change in unrealized appreciation on investments--net ...................... 840,369
Investments--Net -----------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations ....................... $ 2,759,557
===========
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund January 31, 1999
FINANCIAL INFORMATION (continued)
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
January 31, July 31,
Increase (Decrease) in Net Assets: 1999 1998
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations: Investment income -- net .................................................. $ 1,308,793 $ 2,472,706
Realized gain on investments -- net ....................................... 610,395 619,908
Change in unrealized appreciation on investments -- net ................... 840,369 (1,223)
------------ ------------
Net increase in net assets resulting from operations ...................... 2,759,557 3,091,391
------------ ------------
- -------------------------------------------------------------------------------------------------------------------------------
Dividends & Investment income -- net:
Distributions to Class A ................................................................. (206,031) (412,542)
Shareholders Class B ................................................................. (870,394) (1,687,290)
(Note 1f): Class C ................................................................. (103,216) (169,203)
Class D ................................................................. (129,152) (203,671)
Realized gain on investments -- net:
Class A ................................................................. (46,064) --
Class B ................................................................. (216,886) --
Class C ................................................................. (30,363) --
Class D ................................................................. (37,833) --
------------ ------------
Net decrease in net assets resulting from dividends and distributions
to shareholders ........................................................... (1,639,939) (2,472,706)
------------ ------------
- -------------------------------------------------------------------------------------------------------------------------------
Beneficial Interest Net increase in net assets derived from beneficial interest transactions .. 7,380,462 9,834,240
Transactions ------------ ------------
(Note 4):
- -------------------------------------------------------------------------------------------------------------------------------
Net Assets: Total increase in net assets .............................................. 8,500,080 10,452,925
Beginning of period ....................................................... 59,851,827 49,398,902
------------ ------------
End of period ............................................................. $ 68,351,907 $ 59,851,827
============ ============
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund January 31, 1999
FINANCIAL INFORMATION (continued)
Financial Highlights
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended For the Year Ended July 31,
Jan. 31, -------------------------------------------
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ........ $ 10.79 $ 10.68 $ 10.29 $ 10.23 $ 10.22
Operating ------- ------- ------- ------- -------
Performance: Investment income -- net .................... .25 .52 .56 .58 .60
Realized and unrealized gain on
investments -- net .......................... .25 .11 .39 .06 .01
------- ------- ------- ------- -------
Total from investment operations ............ .50 .63 .95 .64 .61
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income -- net .................. (.25) (.52) (.56) (.58) (.60)
Realized gain on investments -- net ....... (.05) -- -- -- --+
------- ------- ------- ------- -------
Total dividends and distributions ........... (.30) (.52) (.56) (.58) (.60)
------- ------- ------- ------- -------
Net asset value, end of period .............. $ 10.99 $ 10.79 $ 10.68 $ 10.29 $ 10.23
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share .......... 4.67%++ 6.00% 9.51% 6.37% 6.30%
Return:** ======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to Average Expenses, net of reimbursement .............. .80%* .77% .52% .34% .07%
Net Assets: ======= ======= ======= ======= =======
Expenses .................................... .90%* .89% .92% .98% 1.19%
======= ======= ======= ======= =======
Investment income -- net .................... 4.50%* 4.79% 5.38% 5.58% 6.02%
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) .... $ 9,628 $ 8,855 $ 8,380 $ 7,589 $ 7,979
Data: ======= ======= ======= ======= =======
Portfolio turnover .......................... 20.13% 53.99% 32.46% 57.58% 60.99%
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales
loads.
+ Amount is less than $.01 per share.
++ Aggregate total investment return.
See Notes to Financial Statements.
10
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund January 31, 1999
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
<TABLE>
<CAPTION>
Class B
---------------------------------------------------------
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended For the Year Ended July 31,
Jan. 31, -------------------------------------------
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ........ $ 10.79 $ 10.68 $ 10.29 $ 10.23 $ 10.22
Operating ------- ------- ------- ------- -------
Performance: Investment income -- net .................... .22 .46 .51 .53 .55
Realized and unrealized gain on
investments -- net .......................... .25 .11 .39 .06 .01
------- ------- ------- ------- -------
Total from investment operations ............ .47 .57 .90 .59 .56
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income -- net .................. (.22) (.46) (.51) (.53) (.55)
Realized gain on investments -- net ....... (.05) -- -- -- --+
------- ------- ------- ------- -------
Total dividends and distributions ............ (.27) (.46) (.51) (.53) (.55)
------- ------- ------- ------- -------
Net asset value, end of period ............... $ 10.99 $ 10.79 $ 10.68 $ 10.29 $ 10.23
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share .......... 4.41%++ 5.47% 8.96% 5.82% 5.77%
Return:** ======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to Average Expenses, net of reimbursement .............. 1.30%* 1.27% 1.02% .85% .58%
Net Assets: ======= ======= ======= ======= =======
Expenses .................................... 1.40%* 1.40% 1.43% 1.49% 1.70%
======= ======= ======= ======= =======
Investment income -- net .................... 3.99%* 4.28% 4.87% 5.07% 5.51%
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) .... $44,797 $41,964 $35,563 $31,359 $30,265
Data: ======= ======= ======= ======= =======
Portfolio turnover .......................... 20.13% 53.99% 32.46% 57.58% 60.99%
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales
loads.
+ Amount is less than $.01 per share.
++ Aggregate total investment return.
See Notes to Financial Statements.
11
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund January 31, 1999
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
<TABLE>
<CAPTION>
Class C
-------------------------------------------------------
For the For the
Six Period
The following per share data and ratios have been derived Months Oct. 21,
from information provided in the financial statements. Ended For the Year Ended July 31, 1994+ to
Jan. 31, ------------------------------- July 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ........ $ 10.80 $ 10.69 $ 10.30 $ 10.24 $ 9.82
Operating ------- ------- ------- ------- -------
Performance: Investment income -- net .................... .21 .45 .50 .52 .42
Realized and unrealized gain on
investments -- net .......................... .25 .11 .39 .06 .42
------- ------- ------- ------- -------
Total from investment operations ............ .46 .56 .89 .58 .84
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income -- net .................. (.21) (.45) (.50) (.52) (.42)
Realized gain on investments -- net ....... (.05) -- -- -- --++
------- ------- ------- ------- -------
Total dividends and distributions ........... (.26) (.45) (.50) (.52) (.42)
------- ------- ------- ------- -------
Net asset value, end of period .............. $ 11.00 $ 10.80 $ 10.69 $ 10.30 $ 10.24
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share .......... 4.36%# 5.36% 8.84% 5.72% 8.79%#
Return:** ======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to Average Expenses, net of reimbursement .............. 1.41%* 1.37% 1.12% .95% .74%*
Net Assets: ======= ======= ======= ======= =======
Expenses .................................... 1.51%* 1.50% 1.53% 1.58% 1.77%*
======= ======= ======= ======= =======
Investment income -- net .................... 3.88%* 4.17% 4.77% 4.96% 5.43%*
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) .... $ 6,140 $ 4,399 $ 2,016 $ 1,829 $ 820
Data: ======= ======= ======= ======= =======
Portfolio turnover .......................... 20.13% 53.99% 32.46% 57.58% 60.99%
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* 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.
12
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund January 31, 1999
FINANCIAL INFORMATION (concluded)
Financial Highlights (concluded)
<TABLE>
<CAPTION>
Class D
------------------------------------------------------
For the For the
Six Period
The following per share data and ratios have been derived Months Oct. 21,
from information provided in the financial statements. Ended For the Year Ended July 31, 1994+ to
Jan. 31, ------------------------------- July 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ....... $ 10.79 $ 10.68 $ 10.29 $ 10.23 $ 9.82
Operating ------- ------- ------- ------- -------
Performance: Investment income -- net ................... .24 .51 .55 .57 .46
Realized and unrealized gain on
investments -- net ......................... .25 .11 .39 .06 .41
------- ------- ------- ------- -------
Total from investment operations ........... .49 .62 .94 .63 .87
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income -- net ................. (.24) (.51) (.55) (.57) (.46)
Realized gain on investments -- net ...... (.05) -- -- -- --++
------- ------- ------- ------- -------
Total dividends and distributions .......... (.29) (.51) (.55) (.57) (.46)
------- ------- ------- ------- -------
Net asset value, end of period ............. $ 10.99 $ 10.79 $ 10.68 $ 10.29 $ 10.23
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ......... 4.62%# 5.90% 9.40% 6.26% 9.10%#
Return:** ======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------------
Ratios to Average Expenses, net of reimbursement ............. .90%* .87% .62% .44% .22%*
Net Assets: ======= ======= ======= ======= =======
Expenses ................................... 1.00%* .99% 1.03% 1.07% 1.27%*
======= ======= ======= ======= =======
Investment income -- net ................... 4.38%* 4.67% 5.27% 5.46% 5.96%*
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) ... $ 7,787 $ 4,634 $ 3,440 $ 2,657 $ 1,067
Data: ======= ======= ======= ======= =======
Portfolio turnover ......................... 20.13% 53.99% 32.46% 57.58% 60.99%
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
* 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.
13
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund January 31, 1999
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. The Fund's financial statements are prepared in
accordance with generally accepted accounting principles which may require the
use of management accruals and estimates. 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.
o Financial futures contracts -- The Fund may purchase or sell financial 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
14
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund January 31, 1999
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
period not exceeding five years. 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 ("MLFD" or
"Distributor"), a division of Princeton Funds Distributor, Inc. ("PFD"), which
is 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, 1999, FAM earned fees of $175,921,
of which $31,986 was voluntarily waived.
Pursuant to the Distribution Plans adopted by the Fund in accordance with Rule
12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are accrued daily
and paid monthly at annual rates based upon the average daily net assets of the
shares as follows:
- --------------------------------------------------------------------------------
Account
Maintenance Distribution
Fee Fee
- --------------------------------------------------------------------------------
Class B ......................................... 0.25% 0.25%
Class C ......................................... 0.25% 0.35%
Class D ......................................... 0.10% --
- --------------------------------------------------------------------------------
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("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, 1999, MLFD earned underwriting discounts
and direct commissions 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 .......................................... -- $ 660
Class D .......................................... $677 $51,620
- --------------------------------------------------------------------------------
15
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund January 31, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
For the six months ended January 31, 1999, MLPF&S received contingent deferred
sales charges of $15,175 and $100 relating to transactions in Class B and Class
C Shares, respectively.
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, FDS, PFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended January 31, 1999 were $20,511,244 and $12,481,337, respectively.
Net realized gains for the six months ended January 31, 1999 and net unrealized
gains as of January 31, 1999 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
- --------------------------------------------------------------------------------
Long-term investments ......................... $ 610,395 $ 4,537,513
--------- ------------
Total ......................................... $ 610,395 $ 4,537,513
========= ===========
- --------------------------------------------------------------------------------
As of January 31, 1999, net unrealized appreciation for Federal income tax
purposes aggregated $4,537,513, all of which related to appreciated securities.
The aggregate cost of investments at January 31, 1999 for Federal income tax
purposes was $65,189,699.
4. Beneficial Interest Transactions:
Net increase in net assets derived from beneficial interest transactions was
$7,380,462 and $9,834,240 for the six months ended January 31, 1999 and for the
year ended July 31, 1998, respectively.
Transactions in shares of beneficial interest for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended January 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................................. 98,113 $ 1,076,128
Shares issued to shareholders
in reinvestment of dividends
and distributions ............................ 14,138 154,591
--------- -----------
Total issued ................................. 112,251 1,230,719
Shares redeemed .............................. (56,700) (623,262)
--------- -----------
Net increase ................................. 55,551 $ 607,457
========= ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................................. 170,255 $ 1,827,909
Shares issued to shareholders
in reinvestment of dividends ................. 26,123 280,243
--------- -----------
Total issued ................................. 196,378 2,108,152
Shares redeemed .............................. (160,568) (1,724,041)
--------- -----------
Net increase ................................. 35,810 $ 384,111
========= ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Six Months Dollar
Ended January 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................................. 366,723 $ 4,010,546
Shares issued to shareholders
in reinvestment of dividends
and distributions ............................ 55,389 605,459
--------- -----------
Total issued ................................. 422,112 4,616,005
Automatic conversion
of shares .................................... (1,485) (16,261)
Shares redeemed .............................. (232,595) (2,541,314)
--------- -----------
Net increase ................................. 188,032 $ 2,058,430
========= ===========
- --------------------------------------------------------------------------------
16
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund January 31, 1999
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................................. 953,149 $10,228,638
Shares issued to shareholders
in reinvestment of dividends ................. 84,480 907,228
--------- -----------
Total issued ................................. 1,037,629 11,135,866
Automatic conversion
of shares .................................... (26,169) (284,672)
Shares redeemed .............................. (453,359) (4,873,260)
--------- -----------
Net increase ................................. 558,101 $ 5,977,934
========= ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Six Months Dollar
Ended January 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................................. 167,272 $ 1,836,259
Shares issued to shareholders
in reinvestment of dividends
and distributions ............................ 8,983 98,269
--------- -----------
Total issued ................................. 176,255 1,934,528
Shares redeemed .............................. (25,236) (276,588)
--------- -----------
Net increase ................................. 151,019 $ 1,657,940
========= ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................................. 304,263 $ 3,243,701
Shares issued to shareholders
in reinvestment of dividends ................. 9,956 107,137
--------- -----------
Total issued ................................. 314,219 3,350,838
Shares redeemed .............................. (95,563) (1,031,660)
--------- -----------
Net increase ................................. 218,656 $ 2,319,178
========= ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Six Months Dollar
Ended January 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................................. 352,768 $ 3,861,611
Automatic conversion
of shares .................................... 1,485 16,261
Shares issued to shareholders
in reinvestment of dividends
and distributions ............................ 7,994 87,381
--------- -----------
Total issued ................................. 362,247 3,965,253
Shares redeemed .............................. (83,198) (908,618)
--------- -----------
Net increase ................................. 279,049 $ 3,056,635
========= ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................................. 211,578 $ 2,284,155
Automatic conversion
of shares .................................... 26,169 284,672
Shares issued to shareholders
in reinvestment of dividends ................. 8,148 87,646
--------- -----------
Total issued ................................. 245,895 2,656,473
Shares redeemed .............................. (138,645) (1,503,456)
--------- -----------
Net increase ................................. 107,250 $ 1,153,017
========= ===========
- --------------------------------------------------------------------------------
5. Capital Loss Carryforward:
At July 31, 1998, the Fund had a net capital loss carryforward of approximately
$49,000, all of which expires in 2005. This amount will be available to offset
like amounts of any future taxable gains.
17
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund January 31, 1999
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
Kenneth A. Jacob, Vice President
Donald C. Burke, Vice President and Treasurer
Robert E. Putney, III, Secretary
- --------------------------------------------------------------------------------
Gerald M. Richard, Treasurer of Merrill Lynch Connecticut Municipal Bond Fund
has recently retired. His colleagues at Merrill Lynch Asset Management, L.P.
join the Fund's Board of Trustees in wishing Mr. Richard well in his retirement.
- --------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
18
<PAGE>
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of the Fund unless accompanied or preceded by the Fund's
current prospectus. Past performance results shown in this report should not be
considered a representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. 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 -- 1/99
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