MERRILL LYNCH
CONNECTICUT
MUNICIPAL
BOND FUND
STRATEGIC
Performance
[GRAPHIC OMITTED]
Annual Report
July 31, 1999
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund July 31, 1999
TO OUR SHAREHOLDERS
The Municipal Market Environment
During the six months ended July 31, 1999, long-term bond yields rose
significantly. Steady US economic growth combined with improvement in foreign
economies, most notably Japan and Brazil, as well as an inflation scare in early
May put upward pressure on bond yields throughout the period. Continued strong
US employment growth, particularly the decline in the US unemployment rate to
4.2% in early June, was among the reasons the Federal Reserve Board cited for
raising short-term interest rates in late June. US Treasury bond yields reacted
by climbing above 6.15% by late June before improving somewhat to 6.10% by July
31, 1999. During the last six months, yields on long-term US Treasury securities
increased approximately 100 basis points (1.00%).
Long-term tax-exempt bond yields also rose during the last six months. Until
early May, the municipal bond market had been able to withstand much of the
upward pressure on bond yields. However, investor concerns regarding ongoing US
economic strength and the fear of additional moves by the Federal Reserve Board
eventually pushed municipal bond yields higher throughout June and July. During
the period, the yields on long-term tax-exempt revenue bonds rose almost 50
basis points to 5.65%, as measured by the Bond Buyer Revenue Bond Index.
The ability of the tax-exempt bond market to withstand much of the recent upward
pressure on long-term fixed-income bond yields has been a reflection of the
continued strong technical position the municipal bond market has enjoyed in
recent quarters. During the last six months, more than $120 billion in long-term
municipal bonds was underwritten, a decrease of more than 20% compared to the
same period a year ago. During the past three months, more than $60 billion in
municipal bonds was underwritten. This quarterly issuance represents a decline
of nearly 25% compared to the same three-month period in 1998.
Recently, the municipal supply position deteriorated even further. Total
issuance in July 1999 of $16.5 billion was more than 30% lower than July 1998
levels. Additionally, in June and July, investors received more than $40 billion
in coupon income and proceeds from bond maturities and early bond redemptions.
These proceeds have generated significant retail investor interest, easily
absorbing the recent diminished supply. This very favorable supply/demand
position allowed the tax-exempt bond market to outperform its taxable
counterpart in recent months.
However, the recent relative outperformance of the municipal bond market has
somewhat reduced the very attractive tax-exempt bond yield ratios that were
available at the end of 1998. In December 1998, long-term, uninsured municipal
bond yields were higher than those of their taxable counterparts. Historically,
long-term tax-exempt bond yields have been approximately 82%-85% of long-term US
Treasury bond yields. Municipal bond yields rose at a lower rate in recent
months than US Treasury bond yields, causing the yield ratio to decline. At July
31, 1999, long-term municipal bond yields were approximately 92% of their
taxable counterparts. Current ratios, while lower than those available at the
end of 1998, still represent historically attractive levels. We expect the
municipal bond market to maintain its strong technical position for the
remainder of 1999. Consequently, there appears to be little reason for the
tax-exempt bond market to underperform the taxable US Treasury bond market. This
suggests that the present bond yield ratio is likely to remain stable in the
coming months and a return to a ratio in excess of 100% of taxable Treasury
securities is improbable.
Looking ahead, it appears to us that long-term municipal bond yields will trade
in a relatively tight range near current levels. Strong US economic performance
is being balanced by nearly negligible inflation data, as well as improvements
in productivity in both manufacturing and service industries. Future moves by
the Federal Reserve Board have largely been discounted by bond markets and are
to a great extent reflected in present bond yields.
Any improvement in bond prices is likely to be contingent upon weakening in both
US employment growth and consumer spending. The 100 basis point rise in US
Treasury bond yields seen thus far this year is likely to negatively affect US
economic growth. The US housing market will be among the first sectors likely to
be affected, as some declines have already been evidenced because of higher
mortgage rates.
1
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund July 31, 1999
We believe it is also unrealistic to expect double-digit returns in US equity
markets to continue indefinitely. Much of the US consumer's wealth is tied to
recent stock market appreciation. Any slowing in these incredible growth rates
is likely to reduce consumer spending. These factors suggest that the worst of
the recent increase in bond yields has passed and stable, if not slightly
improving, bond prices may be expected.
Fiscal Year in Review
At the beginning of the fiscal year ended July 31, 1999, we had a positive
outlook toward the municipal bond market. This was based on our belief that
lower interest rates were imminent. Consequently, we remained fully invested
during the first half of the fiscal year.
During the second half of the fiscal year ended July 31, 1999, the municipal
market was relatively stable compared to other fixed-income markets, which were
relatively volatile. As we began the period, we had an aggressive investment
strategy designed to seek to take advantage of further declines in long-term
interest rates. We revised our strategy when these declines did not seem
probable as a result of the strong economic growth in the first quarter of 1999.
Given this robust economic environment, we shifted our focus to income-producing
securities rather than those issues with the potential for capital gains. We
believed that coupon income could be the more significant component of total
return for the Fund if the tax-exempt bond market performed as anticipated.
Keeping shareholder income in mind, Merrill Lynch Connecticut Municipal Bond
Fund remained essentially fully invested for most of the past several months,
and we expect to maintain this position going forward.
During the fiscal year ended July 31, 1999, our investment strategies benefited
the Fund's performance as the Fund had total returns of +2.50%, +1.99%, +1.79%
and +2.40% for Class A, Class B, Class C and Class D Shares, respectively.
(Complete performance information can be found on pages 3-5 of this report to
shareholders.)
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 to come.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President
/s/ Vincent R. Giordano
Vincent R. Giordano
Senior Vice President
/s/ William R. Bock
William R. Bock
Vice President and Portfolio Manager
September 7, 1999
2
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund July 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 7/31/99
=================================================================================================================
<S> <C> <C> <C> <C>
ML Connecticut Municipal Bond Fund Class A Shares +2.50% -1.97% +38.14% 4.06%
- -----------------------------------------------------------------------------------------------------------------
ML Connecticut Municipal Bond Fund Class B Shares +1.99 -2.09 +34.64 3.72
- -----------------------------------------------------------------------------------------------------------------
ML Connecticut Municipal Bond Fund Class C Shares +1.79 -2.11 +34.25 3.62
- -----------------------------------------------------------------------------------------------------------------
ML Connecticut Municipal Bond Fund Class D Shares +2.40 -1.99 +37.53 3.96
=================================================================================================================
</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 dates are from
7/01/94 for Class A & Class B Shares and from 10/21/94 for Class C & Class
D Shares.
3
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund July 31, 1999
PERFORMANCE DATA (continued)
ML Connecticut Municipal Bond Fund's Class A and Class B Shares--Total Return
Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Portfolio's Class A
Shares and Class B Shares compared to growth of an investment in the Lehman
Brothers Municipal Bond Index. Beginning and ending values are:
7/01/94** 7/99
ML Connecticut
Municipal Bond Fund+--
Class A Shares* $ 9,600 $13,262
ML Connecticut
Municipal Bond Fund+--
Class B Shares* $10,000 $13,464
Lehman Brothers Municipal
Bond Index++ $10,000 $14,078
ML Connecticut Municipal Bond Fund's Class C and Class D Shares--Total Return
Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Portfolio's Class C
and Class D Shares compared to growth of an investment in the Lehman Brothers
Municipal Bond Index. Beginning and ending values are:
10/21/94** 7/99
ML Connecticut
Municipal Bond Fund+--
Class C Shares* $10,000 $13,425
ML Connecticut
Municipal Bond Fund+--
Class D Shares* $ 9,600 $13,203
Lehman Brothers Municipal
Bond Index++ $10,000 $14,235
* Assuming maximum sales charge, transaction costs and other operating
expenses, including advisory fees.
** Commencement of operations.
+ ML Connecticut Municipal Bond Fund invests primarily in long-term,
investment-grade obligations issued by or on behalf of the state of
Connecticut, its political subdivisions, agencies and instrumentalities
and obligations of other qualifying issuers.
++ This unmanaged Index consists of long-term revenue bonds, prerefunded
bonds, general obligation bonds and insured bonds. The starting date for
the Index in the Class A & Class B Shares' graph is from 6/30/94 and in
the Class C & Class D Shares' graph is from 10/31/94.
Past performance is not predictive of future performance.
4
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund July 31, 1999
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
Year Ended 6/30/99 +2.33% -1.76%
- --------------------------------------------------------------------------------
Inception (7/01/94)
through 6/30/99 +6.62 +5.75
- --------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
Year Ended 6/30/99 +1.82% -2.07%
- --------------------------------------------------------------------------------
Inception (7/01/94)
through 6/30/99 +6.08 +6.08
- --------------------------------------------------------------------------------
* 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 6/30/99 +1.81% +0.84%
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 6/30/99 +6.45 +6.45
- --------------------------------------------------------------------------------
* 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 6/30/99 +2.23% -1.86%
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 6/30/99 +6.96 +6.04
- --------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
PORTFOLIO ABBREVIATIONS
To simplify the listings of Merrill Lynch Connecticut Municipal Bond Fund's
portfolio holdings in the Schedule of Investments, we have abbreviated the names
of many of the securities according to the list at right.
AMT Alternative Minimum Tax (subject to)
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 July 31, 1999
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
- ------------------------------------------------------------------------------------------------------------------------------------
Connecticut--93.1%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AAA Aaa $1,000 Connecticut State Clean Water Fund, Revenue Refunding Bonds, 5.80% due 6/01/2016 $ 1,039
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Connecticut State Development Authority, Governmental Lease Revenue Bonds,
6.60% due 6/15/2014 (b) 1,095
- ------------------------------------------------------------------------------------------------------------------------------------
NR* VMIG1+ 2,390 Connecticut State Development Authority, Health Care Revenue Refunding Bonds
(Independent Living Project), VRDN, 2.95% due 7/01/2015 (a) 2,390
- ------------------------------------------------------------------------------------------------------------------------------------
BB- Ba1 1,000 Connecticut State Development Authority, PCR, Refunding (Connecticut Light & Power
Company), Series A, 5.85% due 9/01/2028 965
- ------------------------------------------------------------------------------------------------------------------------------------
AA A1 2,000 Connecticut State Development Authority Revenue Bonds (General Fund), Series A,
6.375% due 10/15/2024 2,167
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,500 Connecticut State Development Authority, Solid Waste Disposal Facilities Revenue Bonds
(Pfizer Inc. Project), AMT, 7% due 7/01/2025 1,688
- ------------------------------------------------------------------------------------------------------------------------------------
Connecticut State Development Authority, Water Facility Revenue Bonds
(Bridgeport Hydraulic Co. Project), AMT:
AA- NR* 1,250 6.15% due 4/01/2035 1,312
A+ NR* 3,000 6% due 9/01/2036 3,084
- ------------------------------------------------------------------------------------------------------------------------------------
Connecticut State Development Authority, Water Facility Revenue Refunding Bonds
(Bridgeport Hydraulic Co. Project) (b):
AAA Aaa 1,000 Series A, 6.05% due 3/01/2029 1,046
AAA Aaa 1,890 Series B, 5.50% due 6/01/2028 1,891
- ------------------------------------------------------------------------------------------------------------------------------------
Connecticut State, GO:
AA Aa3 5,000 Series A, 5% due 6/15/2018 4,828
AA Aa3 3,750 Series C, 5.25% due 8/01/2017 3,746
- ------------------------------------------------------------------------------------------------------------------------------------
Connecticut State, HFA, Revenue Bonds (Housing Mortgage Finance Program):
AA Aa2 850 AMT, Series A, Sub-Series A-2, 6.20% due 11/15/2022 887
AAA Aaa 2,110 Series B, 6.75% due 11/15/2023 (b) 2,261
- ------------------------------------------------------------------------------------------------------------------------------------
Connecticut State, HFA, Revenue Refunding Bonds (Housing Mortgage Finance Program):
AA Aa2 1,000 AMT, Series B, Sub-Series B-2, 5.70% due 5/15/2017 1,016
AA Aa2 1,310 Series A-1, 5% due 5/15/2017 1,264
AA Aa2 1,200 Series C-1, 6.30% due 11/15/2017 1,266
- ------------------------------------------------------------------------------------------------------------------------------------
Connecticut State Health and Educational Facilities Authority Revenue Bonds:
AAA Aaa 1,000 (Bridgeport Hospital), Series A, 6.625% due 7/01/2018 (b) 1,070
AAA Aaa 1,400 (Newington Children's Hospital), Series A, 6.30% due 7/01/2021 (b) 1,484
BBB- Baa3 1,000 (Sacred Heart University), Series D, 6.20% due 7/01/2007 (e) 1,106
AAA Aaa 1,000 (Yale--New Haven Hospital Issue), Series G, 6.50% due 7/01/2012 (b) 1,065
A1+ VMIG1+ 2,000 (Yale University), VRDN, Series T-1, 2.75% due 7/01/2029 (a) 2,000
A1+ VMIG1+ 900 (Yale University), VRDN, Series T-2, 2.75% due 7/01/2029 (a) 900
- ------------------------------------------------------------------------------------------------------------------------------------
Connecticut State Health and Educational Facilities Authority, Revenue Refunding Bonds:
AA- A1 2,000 (Nursing Home Program--AHF/Hartford), 7.125% due 11/01/2004 (e) 2,281
BBB- NR* 870 (Sacred Heart University), Series C, 6.625% due 7/01/2006 (e) 982
BBB- Baa3 130 (Sacred Heart University), Series C, 6.625% due 7/01/2026 138
AAA Aaa 900 (Trinity College), Series D, 6.125% due 7/01/2004 (c)(e) 984
AAA Aaa 1,000 (Yale--New Haven Hospital Issue), Series H, 5.70% due 7/01/2025 (b) 1,019
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund July 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 $ 640 Connecticut State Higher Education, Supplemental Loan Authority Revenue Bonds
(Family Education Loan Program), AMT, Series A, 6.40% due 11/15/2014 $ 673
- ------------------------------------------------------------------------------------------------------------------------------------
NR* NR* 1,000 Connecticut State Regional Learning Educational Service Center Revenue Bonds
(Office/Education Center Facility), 7.75% due 2/01/2015 1,107
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Connecticut State Resource Recovery Authority, Revenue Refunding Bonds, Series A,
5.50% due 11/15/2012 (b) 1,030
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 4,000 Connecticut State Special Tax Obligation Revenue Bonds, Transportation Infrastructure,
Series B, 4.75% due 11/01/2018 (d) 3,677
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 East Haven, Connecticut, GO, 5.50% due 9/01/2014 (c) 1,015
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 500 Hartford, Connecticut, GO, 5.75% due 10/01/2015 (c) 522
- ------------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 500 New Canaan, Connecticut, GO, Refunding, 4.75% due 2/01/2019 464
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 New Haven, Connecticut, GO, Series A, 4.75% due 2/01/2019 (c) 908
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,500 South Central Connecticut Regional Water Authority, Water System Revenue
Refunding Bonds, Fifteenth, Series A, 5.125% due 8/01/2029 (c) 1,420
- ------------------------------------------------------------------------------------------------------------------------------------
Trumbull, Connecticut, GO:
AA Aa2 1,000 5% due 1/15/2017 972
AA Aa2 1,200 5% due 1/15/2018 1,158
- ------------------------------------------------------------------------------------------------------------------------------------
AA Baa3 1,870 Waterbury, Connecticut, GO, 5% due 2/15/2018 1,746
- ------------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 730 Westport, Connecticut, GO, Refunding, 5.25% due 7/15/2019 727
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Guam--1.4%
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Guam Power Authority, Revenue Refunding Bonds, Series A, 5% due 10/01/2024 (f) 943
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Puerto Rico--4.8%
- ------------------------------------------------------------------------------------------------------------------------------------
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 1,077
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Puerto Rico Public Finance Corporation Revenue Bonds, Commonwealth Appropriation,
Series A, 5.375% due 6/01/2017 (f) 2,031
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost--$62,620)--99.3% 64,444
Other Assets Less Liabilities--0.7% 423
-------
Net Assets--100.0% $64,867
=======
- ------------------------------------------------------------------------------------------------------------------------------------
</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 July 31,
1999.
(b) MBIA Insured.
(c) FGIC Insured.
(d) FSA Insured.
(e) Prerefunded.
(f) AMBAC Insured.
* Not Rated.
+ Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
7
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund July 31, 1999
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of July 31, 1999
<TABLE>
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$62,619,954) (Note 1a) ............... $64,444,295
Cash ......................................................................... 66,298
Receivables:
Interest ................................................................... $ 847,567
Beneficial interest sold ................................................... 10,724 858,291
----------
Prepaid registration fees and other assets (Note 1e) ......................... 794
-----------
Total assets ................................................................. 65,369,678
-----------
- -----------------------------------------------------------------------------------------------------------------------------------
Liabilities: Payables:
Beneficial interest redeemed ............................................... 289,484
Dividends to shareholders (Note 1f) ........................................ 43,692
Investment adviser (Note 2) ................................................ 25,716
Distributor (Note 2) ....................................................... 22,655 381,547
----------
Accrued expenses and other liabilities ....................................... 120,735
-----------
Total liabilities ............................................................ 502,282
-----------
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets: Net assets ................................................................... $64,867,396
===========
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited number of
Consist of: shares authorized ............................................................ $ 85,627
Class B Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized ............................................................ 397,462
Class C Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized ............................................................ 64,911
Class D Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized ............................................................ 68,220
Paid-in capital in excess of par ............................................. 62,616,724
Undistributed realized capital gains on investments--net ..................... 141,256
Accumulated distributions in excess of realized capital gains on
investments--net (Note 1f) ................................................... (331,145)
Unrealized appreciation on investments--net .................................. 1,824,341
-----------
Net assets ................................................................... $64,867,396
===========
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value: Class A--Based on net assets of $9,013,542 and 856,270 shares
of beneficial interest outstanding ........................................... $ 10.53
===========
Class B--Based on net assets of $41,834,915 and 3,974,620 shares
of beneficial interest outstanding ........................................... $ 10.53
===========
Class C--Based on net assets of $6,836,843 and 649,107 shares
of beneficial interest outstanding ........................................... $ 10.53
===========
Class D--Based on net assets of $7,182,096 and 682,196 shares
of beneficial interest outstanding ........................................... $ 10.53
===========
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund July 31, 1999
FINANCIAL INFORMATION (continued)
Statement of Operations
<TABLE>
<CAPTION>
For the Year Ended
July 31, 1999
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned ................ $ 3,465,106
(Note 1d):
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses: Investment advisory fees (Note 2) ....................................... $ 361,239
Account maintenance and distribution fees--Class B (Note 2) ............. 219,055
Professional fees ....................................................... 86,365
Printing and shareholder reports ........................................ 78,924
Accounting services (Note 2) ............................................ 43,334
Account maintenance and distribution fees--Class C (Note 2) ............. 35,497
Transfer agent fees--Class B (Note 2) ................................... 13,517
Registration fees (Note 1e) ............................................. 10,606
Pricing fees ............................................................ 6,971
Amortization of organization expenses (Note 1e) ......................... 6,691
Account maintenance fees--Class D (Note 2) .............................. 6,647
Custodian fees .......................................................... 4,417
Trustees' fees and expenses ............................................. 3,601
Transfer agent fees--Class A (Note 2) ................................... 2,343
Transfer agent fees--Class C (Note 2) ................................... 1,788
Transfer agent fees--Class D (Note 2) ................................... 1,702
Other ................................................................... 1,959
----------
Total expenses before reimbursement ..................................... 884,656
Reimbursement of expenses (Note 2) ...................................... (65,679)
----------
Total expenses after reimbursement ...................................... 818,977
-----------
Investment income--net .................................................. 2,646,129
-----------
- -----------------------------------------------------------------------------------------------------------------------------------
Realized & Realized gain on investments--net ....................................... 398,934
Unrealized Gain Change in unrealized appreciation on investments--net ................... (1,872,803)
(Loss) on -----------
Investments--Net Net Increase in Net Assets Resulting from Operations .................... $ 1,172,260
(Notes 1b, 1d & 3): ===========
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund July 31, 1999
FINANCIAL INFORMATION (continued)
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Year Ended
July 31,
----------------------------
Increase (Decrease) in Net Assets: 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations: Investment income--net ..................................................... $ 2,646,129 $ 2,472,706
Realized gain on investments--net .......................................... 398,934 619,908
Change in unrealized appreciation on investments--net ...................... (1,872,803) (1,223)
----------- -----------
Net increase in net assets resulting from operations ....................... 1,172,260 3,091,391
----------- -----------
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends & Investment income--net:
Distributions to Class A .................................................................. (412,500) (412,542)
Shareholders Class B .................................................................. (1,720,492) (1,687,290)
(Note 1f): Class C .................................................................. (225,980) (169,203)
Class D .................................................................. (287,157) (203,671)
In excess of realized gain on investments--net:
Class A .................................................................. (46,064) --
Class B .................................................................. (216,885) --
Class C .................................................................. (30,363) --
Class D .................................................................. (37,833) --
----------- -----------
Net decrease in net assets resulting from dividends and distributions
to shareholders ............................................................ (2,977,274) (2,472,706)
----------- -----------
- ----------------------------------------------------------------------------------------------------------------------------------
Beneficial Interest Net increase in net assets derived from beneficial interest transactions ... 6,820,583 9,834,240
Transactions ----------- -----------
(Note 4):
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets: Total increase in net assets ............................................... 5,015,569 10,452,925
Beginning of year .......................................................... 59,851,827 49,398,902
----------- -----------
End of year ................................................................ $64,867,396 $59,851,827
=========== ===========
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund July 31, 1999
FINANCIAL INFORMATION (continued)
Financial Highlights
<TABLE>
<CAPTION>
The following per share data and ratios have been derived Class A
from information provided in the financial statements. ------------------------------------------------
For the Year Ended 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 year ........... $ 10.79 $ 10.68 $ 10.29 $ 10.23 $ 10.22
Operating ------- ------- ------- ------- -------
Performance: Investment income--net ....................... .48 .52 .56 .58 .60
Realized and unrealized gain (loss) on
investments--net ............................. (.21) .11 .39 .06 .01
------- ------- ------- ------- -------
Total from investment operations ............. .27 .63 .95 .64 .61
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net ..................... (.48) (.52) (.56) (.58) (.60)
In excess of realized gain on
investments--net ........................... (.05) -- -- -- --+
------- ------- ------- ------- -------
Total dividends and distributions ............ (.53) (.52) (.56) (.58) (.60)
------- ------- ------- ------- -------
Net asset value, end of year ................. $ 10.53 $ 10.79 $ 10.68 $ 10.29 $ 10.23
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ........... 2.50% 6.00% 9.51% 6.37% 6.30%
Return:* ======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------
Ratios to Average Expenses, net of reimbursement ............... .84% .77% .52% .34% .07%
Net Assets: ======= ======= ======= ======= =======
Expenses ..................................... .94% .89% .92% .98% 1.19%
======= ======= ======= ======= =======
Investment income--net ....................... 4.43% 4.79% 5.38% 5.58% 6.02%
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of year (in thousands) ....... $ 9,013 $ 8,855 $ 8,380 $ 7,589 $ 7,979
Data: ======= ======= ======= ======= =======
Portfolio turnover ........................... 47.62% 53.99% 32.46% 57.58% 60.99%
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
* Total investment returns exclude the effects of sales charges.
+ Amount is less than $.01 per share.
See Notes to Financial Statements.
11
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund July 31, 1999
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
<TABLE>
<CAPTION>
The following per share data and ratios have been derived Class B
from information provided in the financial statements. ------------------------------------------------
For the Year Ended 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 year ........... $ 10.79 $ 10.68 $ 10.29 $ 10.23 $ 10.22
Operating ------- ------- ------- ------- -------
Performance: Investment income--net ....................... .43 .46 .51 .53 .55
Realized and unrealized gain (loss) on
investments--net ............................. (.21) .11 .39 .06 .01
------- ------- ------- ------- -------
Total from investment operations ............. .22 .57 .90 .59 .56
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net ..................... (.43) (.46) (.51) (.53) (.55)
In excess of realized gain on
investments--net ........................... (.05) -- -- -- --+
------- ------- ------- ------- -------
Total dividends and distributions ............ (.48) (.46) (.51) (.53) (.55)
------- ------- ------- ------- -------
Net asset value, end of year ................. $ 10.53 $ 10.79 $ 10.68 $ 10.29 $ 10.23
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ........... 1.99% 5.47% 8.96% 5.82% 5.77%
Return:* ======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------
Ratios to Average Expenses, net of reimbursement ............... 1.35% 1.27% 1.02% .85% .58%
Net Assets: ======= ======= ======= ======= =======
Expenses ..................................... 1.45% 1.40% 1.43% 1.49% 1.70%
======= ======= ======= ======= =======
Investment income--net ....................... 3.93% 4.28% 4.87% 5.07% 5.51%
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of year (in thousands) ....... $41,835 $41,964 $35,563 $31,359 $30,265
Data: ======= ======= ======= ======= =======
Portfolio turnover ........................... 47.62% 53.99% 32.46% 57.58% 60.99%
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
* Total investment returns exclude the effects of sales charges.
+ Amount is less than $.01 per share.
See Notes to Financial Statements.
12
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund July 31, 1999
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
<TABLE>
<CAPTION>
Class C
------------------------------------------------
For the
Period
The following per share data and ratios have been derived Oct. 21,
from information provided in the financial statements. For the Year Ended July 31, 1994+ to
-------------------------------------- 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 ....................... .41 .45 .50 .52 .42
Realized and unrealized gain (loss) on
investments--net ............................. (.22) .11 .39 .06 .42
------- ------- ------- ------- -------
Total from investment operations ............. .19 .56 .89 .58 .84
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net ..................... (.41) (.45) (.50) (.52) (.42)
In excess of realized gain on
investments--net ........................... (.05) -- -- -- --++
------- ------- ------- ------- -------
Total dividends and distributions ............ (.46) (.45) (.50) (.52) (.42)
------- ------- ------- ------- -------
Net asset value, end of period ............... $ 10.53 $ 10.80 $ 10.69 $ 10.30 $ 10.24
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ........... 1.79% 5.36% 8.84% 5.72% 8.79%+++
Return:** ======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------
Ratios to Average Expenses, net of reimbursement ............... 1.45% 1.37% 1.12% .95% .74%*
Net Assets: ======= ======= ======= ======= =======
Expenses ..................................... 1.55% 1.50% 1.53% 1.58% 1.77%*
======= ======= ======= ======= =======
Investment income--net ....................... 3.82% 4.17% 4.77% 4.96% 5.43%*
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) ..... $ 6,837 $ 4,399 $ 2,016 $ 1,829 $ 820
Data: ======= ======= ======= ======= =======
Portfolio turnover ........................... 47.62% 53.99% 32.46% 57.58% 60.99%
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ 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 July 31, 1999
FINANCIAL INFORMATION (concluded)
Financial Highlights (concluded)
<TABLE>
<CAPTION>
Class D
------------------------------------------------
For the
Period
The following per share data and ratios have been derived Oct. 21,
from information provided in the financial statements. For the Year Ended July 31, 1994+ to
-------------------------------------- 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 ....................... .47 .51 .55 .57 .46
Realized and unrealized gain (loss) on
investments--net ............................. (.21) .11 .39 .06 .41
------- ------- ------- ------- -------
Total from investment operations ............. .26 .62 .94 .63 .87
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net ..................... (.47) (.51) (.55) (.57) (.46)
In excess of realized gain on
investments--net ........................... (.05) -- -- -- --++
------- ------- ------- ------- -------
Total dividends and distributions ............ (.52) (.51) (.55) (.57) (.46)
------- ------- ------- ------- -------
Net asset value, end of period ............... $ 10.53 $ 10.79 $ 10.68 $ 10.29 $ 10.23
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ........... 2.40% 5.90% 9.40% 6.26% 9.10%+++
Return:** ======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------
Ratios to Average Expenses, net of reimbursement ............... .95% .87% .62% .44% .22%*
Net Assets: ======= ======= ======= ======= =======
Expenses ..................................... 1.05% .99% 1.03% 1.07% 1.27%*
======= ======= ======= ======= =======
Investment income--net ....................... 4.32% 4.67% 5.27% 5.46% 5.96%*
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) ..... $ 7,182 $ 4,634 $ 3,440 $ 2,657 $ 1,067
Data: ======= ======= ======= ======= =======
Portfolio turnover ........................... 47.62% 53.99% 32.46% 57.58% 60.99%
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Commencement of operations.
++ Amount is less than $.01 per share.
+++ Aggregate total investment return.
See Notes to Financial Statements.
14
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund July 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. The Fund offers four classes of shares
under the Merrill Lynch Select Pricing(SM) System. Shares of Class A and Class D
are sold with a front-end sales charge. Shares of Class B and Class C may be
subject to a contingent deferred sales charge. All classes of shares have
identical voting, dividend, liquidation and other rights and the same terms and
conditions, except that Class B, Class C and Class D Shares bear certain
expenses related to the account maintenance of such shares, and Class B and
Class C Shares also bear certain expenses related to the distribution of such
shares. Each class has exclusive voting rights with respect to matters relating
to its account maintenance and distribution expenditures. The following is a
summary of significant accounting policies followed by the Fund.
(a) Valuation of investments--Municipal bonds and other portfolio securities in
which the Fund invests are traded primarily in the over-the-counter municipal
bond and money markets and are valued at the last available bid price in the
over-the-counter market or on the basis of yield equivalents as obtained from
one or more dealers that make markets in the securities. Financial futures
contracts and options thereon, which are traded on exchanges, are valued at
their settlement prices as of the close of such exchanges. Short-term
investments with remaining maturities of sixty days or less are valued at
amortized cost, which approximates market value. Securities and assets for which
market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of Trustees of
the Trust, including valuations furnished by a pricing service retained by the
Trust, which may utilize a matrix system for valuations. The procedures of the
pricing service and its valuations are reviewed by the officers of the Trust
under the general supervision of the Trustees.
(b) Derivative financial instruments--The Fund may engage in various portfolio
strategies to seek to increase its return by hedging its portfolio against
adverse movements in the debt markets. Losses may arise due to changes in the
value of the contract or if the counterparty does not perform under the
contract.
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 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.
15
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund July 31, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
(f) Dividends and distributions--Dividends from net investment income are
declared daily and paid monthly. Distributions of capital gains are recorded on
the ex-dividend dates. Distributions in excess of realized capital gains are due
primarily to differing tax treatments for post-October losses.
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 the "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: .55% of the Fund's average daily net assets not exceeding $500
million; .525% of average daily net assets in excess of $500 million but not
exceeding $1 billion; and .50% of average daily net assets in excess of $1
billion. For the year ended July 31, 1999, FAM earned fees of $361,239, of which
$65,679 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 Distribution
Maintenance Fee Fee
- --------------------------------------------------------------------------------
Class B ................................ .25% .25%
Class C ................................ .25% .35%
Class D ................................ .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 year ended July 31, 1999, 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 ........................................ $ 62 $ 562
Class D ........................................ $831 $53,137
- --------------------------------------------------------------------------------
For the year ended July 31, 1999, MLPF&S received contingent deferred sales
charges of $30,299 and $674 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 year
ended July 31, 1999 were $33,384,394 and $29,587,814, respectively.
Net realized gains for the year ended July 31, 1999 and net unrealized gains as
of July 31, 1999 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
- --------------------------------------------------------------------------------
Long-term investments ......................... $398,934 $1,824,341
-------- ----------
Total ......................................... $398,934 $1,824,341
======== ==========
- --------------------------------------------------------------------------------
As of July 31, 1999, net unrealized appreciation for Federal income tax purposes
aggregated $1,824,341, of which $2,498,206 related to appreciated securities and
$673,865 related to depreciated securities. The aggregate cost of investments at
July 31, 1999 for Federal income tax purposes was $62,619,954.
16
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund July 31, 1999
4. Beneficial Interest Transactions:
Net increase in net assets derived from beneficial interest transactions was
$6,820,583 and $9,834,240 for the years ended July 31, 1999 and July 31, 1998,
respectively.
Transactions in shares of beneficial interest for each class were as follows:
- -------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended July 31, 1999 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .......................... 177,165 $ 1,934,587
Shares issued to shareholders
in reinvestment of dividends
and distributions .................... 25,662 278,945
----------- -----------
Total issued ......................... 202,827 2,213,532
Shares redeemed ...................... (166,927) (1,812,430)
----------- -----------
Net increase ......................... 35,900 $ 401,102
=========== ===========
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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 Year Dollar
Ended July 31, 1999 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .......................... 759,454 $ 8,251,448
Shares issued to shareholders
in reinvestment of dividends
and distributions .................... 96,851 1,052,027
----------- -----------
Total issued ......................... 856,305 9,303,475
Automatic conversion
of shares ............................ (1,859) (20,268)
Shares redeemed ...................... (767,760) (8,274,670)
----------- -----------
Net increase ......................... 86,686 $ 1,008,537
=========== ===========
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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 Year Dollar
Ended July 31, 1999 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .......................... 274,615 $ 2,996,710
Shares issued to shareholders
in reinvestment of dividends
and distributions .................... 17,146 186,113
----------- -----------
Total issued ......................... 291,761 3,182,823
Shares redeemed ...................... (49,930) (544,294)
----------- -----------
Net increase ......................... 241,831 $ 2,638,529
=========== ===========
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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 Year Dollar
Ended July 31, 1999 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .......................... 360,488 $ 3,945,264
Automatic conversion
of shares ............................ 1,859 20,268
Shares issued to shareholders
in reinvestment of dividends
and distributions .................... 15,941 172,967
----------- -----------
Total issued ......................... 378,288 4,138,499
Shares redeemed ...................... (125,408) (1,366,084)
----------- -----------
Net increase ......................... 252,880 $ 2,772,415
=========== ===========
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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
----------- -----------
- -------------------------------------------------------------------------------
17
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund July 31, 1999
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
Merrill Lynch Connecticut Municipal Bond Fund of
Merrill Lynch Multi-State Municipal Series Trust:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Merrill Lynch Connecticut Municipal Bond Fund of
Merrill Lynch Multi-State Municipal Series Trust as of July 31, 1999, the
related statements of operations for the year then ended and changes in net
assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the five-year period then ended.
These financial statements and the financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at July 31,
1999 by correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Merrill Lynch
Connecticut Municipal Bond Fund of Merrill Lynch Multi-State Municipal Series
Trust as of July 31, 1999, the results of its operations, the changes in its net
assets, and the financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
September 8, 1999
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid monthly by Merrill Lynch
Connecticut Municipal Bond Fund during its taxable year ended July 31, 1999
qualify as tax-exempt interest dividends for Federal income tax purposes.
Additionally, the following table summarizes the taxable distributions paid by
the Fund during the year:
- --------------------------------------------------------------------------------
Record Payable Ordinary Long-Term
Date Date Income Capital Gains*
- --------------------------------------------------------------------------------
12/21/98 12/31/98 $.034013 $.019906
- --------------------------------------------------------------------------------
* This entire distribution is subject to the 20% tax rate.
Please retain this information for your records.
18
<PAGE>
Merrill Lynch Connecticut Municipal Bond Fund July 31, 1999
OFFICERS AND TRUSTEES
Terry K. Glenn, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Arthur Zeikel, Trustee
Vincent R. Giordano, Senior Vice President
William R. Bock, Vice President
Kenneth A. Jacob, Vice President
Donald C. Burke, Vice President and Treasurer
Alice A. Pellegrino, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
19
<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--7/99
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