MERRILL LYNCH
NORTH CAROLINA
MUNICIPAL
BOND FUND
FUND LOGO
Semi-Annual Report
January 31, 1995
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Merrill Lynch North Carolina
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011
<PAGE>
TO OUR SHAREHOLDERS
The combination of heightened inflationary concerns, anticipation of
further tightening of monetary policy by the Federal Reserve Board
and the turmoil of the Mexican currency crisis all exerted negative
influences on the US financial markets during the January quarter.
On the positive side, increasing signs that the US economy may be
losing momentum suggested that most of the interest rate increases
for this economic cycle may be behind us. As a result of these
economic crosscurrents, the US stock and bond markets continued to
be volatile during the period.
The manufacturing sector proved to be the driving force behind the
US economy through the final quarter of 1994, making an important
contribution to the substantial increase in corporate earnings. US
companies have been successful at containing labor costs, which are
an important component of the inflation outlook. Growth in the
economy has not been translated into higher wages and benefits for
US workers. Consumer spending is growing at a slower pace than in
previous economic recoveries, but households are nonetheless
spending more than saving, as the personal savings rate fell to an
all-time annual low in 1994.
In the weeks ahead, investors will continue to assess economic data
and inflationary trends in order to gauge whether further increases
in short-term interest rates are likely as 1995 unfolds. Despite the
widespread concerns about rising prices for raw materials and
incipient inflationary pressures, 1994's inflation results were as
positive as those in 1993, creating the best sustained inflation
performance in 30 years. However, it is not likely that such
positive inflation results will be duplicated in 1995. Investors
will also focus on the progress that the new Congress makes on both
reducing spending and the Federal budget deficit and passing tax
cuts that promote savings and investment. Legislative progress,
combined with continued indications of moderate and sustainable
levels of economic growth, would be positive for the US capital
markets. However, the lagged effects of higher interest rates could
slow the economy sharply and with it, the growth of corporate
profits.
The Municipal Market
The municipal bond market continued to exhibit considerable interest
rate volatility during the three months ended January 31, 1995.
Yields on A-rated municipal revenue bonds continued to rise
throughout November to a high of 7.37% as measured by the Bond Buyer
Revenue Bond Index. The tax-exempt bond market improved dramatically
for the remainder of the quarter, and yields fell by approximately
60 basis points (0.60%) to a four-month low of 6.78%. However, the
Index failed to capture much of the rally that occurred at the end
of January as market yields declined a further ten basis points into
the 6.65% range. Municipal bond prices have now recaptured most of
their declines of the last six months.
<PAGE>
This improvement in municipal bond prices during the January quarter
was largely the result of significant positive change in investor
sentiment. The series of interest rate increases engineered during
1994 have gone a long way in confirming the Federal Reserve Board's
anti-inflationary resolve. Additionally, the recent signs of a
weakening domestic economy, as well as the negative near-term impact
of the Kobe earthquake and Mexican currency situation, have allowed
investors to become more comfortable with the concept that the vast
majority of the recent rise in fixed-income rates has already
occurred and that yields during 1995 are more likely to remain
stable or decline than they are to significantly rise again.
Consequently, current yield levels are being viewed as attractive to
long-term investors.
In addition to this more positive outlook, the ongoing strong
technical position of the municipal bond market has only fostered
the increase in tax-exempt bond prices seen in recent months. Over
$25 billion in bond proceeds became available to investors at year-
end 1994 from bond maturities, coupon payments and early
redemptions. However, during the recent January quarter, new bond
issuance was less than $25 billion, down 50% from the January 1994
quarter. In January 1995, less than $7 billion in long-term
municipal securities were issued, making this past January's
issuance the lowest monthly total since the mid-1980s. Investor
demand has easily surpassed supply, causing bond prices to rise
rapidly. Also, as 1995 annual issuance is expected to be below the
recent historically low 1994 levels, this positive technical
environment should continue to support the recent improvements in
municipal bond prices into the coming quarters.
Portfolio Strategy
In our July annual report to shareholders, we discussed how strong
economic growth and fears of rising inflation led us to adopt a
cautious investment outlook. These concerns have subsided, at least
for the time being. For the quarter ended January 31, 1995, the
municipal bond market bottomed out and staged a dramatic rebound.
Merrill Lynch North Carolina Municipal Bond Fund is fully invested
and has benefited from the increase in municipal bond market prices.
New-issue supply fell by a staggering 82% this quarter over the same
quarter last year. Because of the scarcity of new-issue supply, we
have kept the Fund's cash reserves to a minimum amount. We continue
to emphasize quality securities, with 90% of the portfolio rated A
or better by at least one of the major rating services. Looking
ahead, our portfolio strategy, while cautiously optimistic, will
continue to be to invest new assets in high-quality, reasonably
priced securities that we expect to yield attractive amounts of
tax-exempt income.
We appreciate your ongoing interest in Merrill Lynch North Carolina
Municipal Bond Fund, and we look forward to assisting you with your
financial needs in the months and years ahead.
<PAGE>
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
February 28, 1995
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
Kenneth S. Axelson, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Jerry Weiss, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, Massachusetts 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
<PAGE>
PERFORMANCE DATA
About Fund Performance
Since October 21, 1994, investors have been able to purchase shares
of the Fund through the Merrill Lynch Select Pricing SM System,
which offers four pricing alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees. Class A Shares are available only to eligible investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.25% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after approximately 10 years.
* Class C Shares are subject to a distribution fee of 0.35% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.10% (but no distribution fee).
Performance data for the Fund's Class A and Class B Shares are
presented in the "Recent Performance Results," "Performance Summary"
and "Average Annual Total Return" tables below and on page 4. Data
for Class C and Class D Shares are also presented in the "Recent
Performance Results" and "Aggregate Total Return" tables on page 4.
The "Recent Performance Results" table shows investment results
before the deduction of any sales charges for Class A and Class B
Shares for the 12-month and 3-month periods ended January 31, 1995
and for Class C and Class D Shares for the since inception and 3-
month periods ended January 31, 1995. All data in this table assume
imposition of the actual total expenses incurred by each class of
shares during the relevant period.
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. Dividends paid to each class
of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
<PAGE>
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
9/25/92--12/31/92 $10.00 $10.16 -- $0.138 + 3.00%
1993 10.16 10.90 -- 0.616 +13.62
1994 10.90 9.63 -- 0.540 - 6.78
1/1/95--1/31/95 9.63 9.94 -- 0.032 + 3.66
------
Total $1.326
Cumulative total return as of 1/31/95: +13.09%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
include sales charge; results would be lower if sales charge was
included.
</TABLE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
9/25/92--12/31/92 $10.00 $10.16 -- $0.124 + 2.86%
1993 10.16 10.90 -- 0.562 +13.06
1994 10.90 9.63 -- 0.490 - 7.25
1/1/95--1/31/95 9.63 9.94 -- 0.029 + 3.63
------
Total $1.205
Cumulative total return as of 1/31/95: +11.78%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
<PAGE>
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/94 -6.78% -10.51%
Inception (9/25/92)
through 12/31/94 +3.92 + 2.06
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/94 -7.25% -10.77%
Inception (9/25/92)
through 12/31/94 +3.40 + 2.59
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
Aggregate Total Return
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Inception (10/21/94)
through 12/31/94 - 0.76% - 1.74%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Inception (10/21/94)
through 12/31/94 -0.66% -4.63%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
1/31/95 10/31/94 1/31/94++ % Change++ % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $9.94 $9.62 $11.03 -9.88% +3.33%
Class B Shares* 9.94 9.62 11.03 -9.88 +3.33
Class C Shares* 9.94 9.62 9.80 +1.43 +3.33
Class D Shares* 9.94 9.62 9.80 +1.43 +3.33
Class A Shares--Total Return* -4.89(1) +4.80(2)
Class B Shares--Total Return* -5.36(3) +4.67(4)
Class C Shares--Total Return* +2.84(5) +4.64(6)
Class D Shares--Total Return* +2.97(7) +4.77(8)
Class A Shares--Standardized 30-day Yield 5.40%
Class B Shares--Standardized 30-day Yield 5.12%
Class C Shares--Standardized 30-day Yield 5.02%
Class D Shares--Standardized 30-day Yield 5.31%
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
++Investment results shown for Class C and Class D Shares are since
inception (10/21/94).
(1)Percent change includes reinvestment of $0.539 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.135 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.488 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.123 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.122 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.121 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.135 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.133 per share ordinary
income dividends.
</TABLE>
<PAGE>
PORTFOLIO ABBREVIATIONS
To simplify the listings of Merrill Lynch North Carolina 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 below and at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
GO General Obligation Bonds
HFA Housing Finance Authority
LEVRRS Leverage Reverse Rate Securities
S/F Single-Family
UT Unlimited Tax
VRDN Variable Rate Demand Notes
YCN Yield Curve Notes
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
North Carolina--83.9%
<S> <S> <C> <S> <C>
AAA Aaa $ 1,000 Buncombe County, North Carolina, Metropolitan Sewer District Sewer
Systems, Revenue Refunding Bonds, Series A, 5.50% due 7/01/2022 (f) $ 891
AAA Aaa 600 Catawba County, North Carolina, Hospital Revenue Refunding Bonds
(Catawba Memorial Hospital Project), 6.20% due 10/01/2009 (b) 608
Charlotte, North Carolina, COP (Convention Facility Project) (b):
AAA Aaa 2,500 6.75% due 12/01/2001 (g) 2,704
AAA Aaa 1,000 Refunding, Series C, 5.25% due 12/01/2020 861
AA Aa 3,000 Charlotte, North Carolina, Health Care System, Revenue Refunding Bonds
(Charlotte-Mecklenberg Hospital Authority), 6.25% due 1/01/2020 2,944
A A2 500 Chatham County, North Carolina, Industrial Facilities and Pollution
Control Financing Authority, Pollution Revenue Bonds (Carolina Power
and Light Company), 6.30% due 6/15/2014 486
AAA Aaa 1,000 Concord, North Carolina, Utilities System Revenue Bonds, 5.75% due
12/01/2017 (c) 937
AAA Aaa 1,000 Cumberland County, North Carolina, COP (Civic Center Project), Series
A, 6.40% due 12/01/2024 (b) 1,004
<PAGE>
AAA Aaa 500 Fayetteville, North Carolina, Public Works Commission Revenue Bonds,
Series A, 6% due 3/01/2016 (d) 484
AAA Aaa 1,000 Gastonia, North Carolina, Combined Utilities System Revenue Bonds, 6%
due 5/01/2014 (c) 973
AAA Aa1 1,000 Greensboro, North Carolina, Public Improvement Bonds, UT, 6.30% due
3/01/2010 1,036
BBB Baa1 2,500 Haywood County, North Carolina, Industrial Facilities and Pollution
Control Financing Authority, Solid Waste Disposal Revenue Bonds
(Champion International Corporation Project), AMT, 5.50% due 10/01/2018 2,025
A A2 3,500 Martin County, North Carolina, Industrial Facilities and Pollution
Control Financing Authority Revenue Bonds (Solid Waste Disposal--
Weyerhaeuser Company), AMT, 6.80% due 5/01/2024 3,535
AAA Aaa 1,500 Mecklenburg County, North Carolina, Public Improvement Bonds, GO, UT,
6.25% due 1/01/2002 (g) 1,582
A A 1,000 Monroe, North Carolina, Combined Enterprise Systems Revenue Bonds, 6%
due 3/01/2019 943
A A2 300 New Hanover County, North Carolina, Industrial Facilities and Pollution
Control Financing Authority Revenue Bonds (Carolina Power and Light
Company), 6.30% due 6/15/2014 295
North Carolina Eastern Municipal Power Agency, Power System Revenue
Refunding Bonds, Series A:
A- A 1,000 6.50% due 1/01/2017 950
A- Aaa 3,055 6.50% due 1/01/2018 (i) 3,162
North Carolina Educational Facilities, Finance Agency Revenue Bonds:
NR* VMIG1++ 200 (Bowman Grey School of Medicine Project), VRDN, 2.75% due 9/01/2020 (a) 200
AA Aa1 2,000 (Duke University Project), Series C, 6.75% due 10/01/2021 2,047
AAA NR* 900 Refunding (Elon College Project), 6.375% due 1/01/2007 (e) 924
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<PAGE>
North Carolina (concluded)
<S> <S> <C> <S> <C>
North Carolina HFA, Revenue Bonds, GO:
A+ Aa $2,755 AMT, Series V, 6.80% due 9/01/2025 $ 2,761
AA Aa 1,340 Refunding, Series F, 6.60% due 7/01/2017 (h) 1,342
A+ Aa 665 Series U, 6.70% due 3/01/2018 671
North Carolina HFA, S/F Revenue Bonds, GO:
A+ Aa 1,805 AMT, Series X, 6.70% due 9/01/2026 1,775
A+ Aa 2,000 Series W, 6.50% due 3/01/2018 1,986
North Carolina Medical Care Community, Hospital Revenue Bonds:
NR* Baa1 975 (Halifax Memorial Hospital Project), 6.75% due 8/15/2024 933
AAA Aaa 2,000 (Moore Regional Hospital Project), 5% due 10/01/2018 (b) 1,661
A+ A1 1,500 (Rex Hospital Project), 6.25% due 6/01/2017 1,442
AAA Aaa 1,000 (Wilson Memorial Hospital Project), 6.50% due 11/01/2020 (b) 1,004
A A 4,350 North Carolina Municipal Power Agency, Revenue Refunding Bonds (Catawba
Electric Project Number 1), 6.25% due 1/01/2017 4,117
AA Aa 1,000 Orange County, North Carolina, Water and Sewer Authority, Revenue
Refunding Bonds, 5.20% due 7/01/2016 878
A+ A 800 Rocky Mountain, North Carolina, Water and Sewer Revenue Bonds, GO,
UT, 6.30% due 5/01/2009 813
A- A 700 Shelby, North Carolina, Combined Producing Facilities System Revenue
Bonds (Capital Improvement), 6.625% due 6/01/2017 706
AA- A1 800 University of North Carolina, Chapel Hill, Hospital Revenue Bonds
(Board of Governors), 6.375% due 2/15/2017 777
Puerto Rico--14.8%
A Baa1 700 Puerto Rico Commonwealth, GO, UT, 6.45% due 7/01/2017 699
Puerto Rico Commonwealth, Highway and Transportation Authority, Highway
Revenue Bonds, Series T:
AAA NR* 1,000 6.50% due 7/01/2002 (g) 1,073
A NR* 200 6.625% due 7/01/2002 (g) 216
A Baa1 1,000 6.625% due 7/01/2018 1,006
AAA NR* 700 Puerto Rico Commonwealth, Public Improvement Bonds, UT, Series A, 6.50%
due 7/01/l999 (g) 733
AAA Aaa 1,250 Puerto Rico Commonwealth, YCN, 7.132% due 7/01/2020 (d)(j) 1,122
Puerto Rico Electric Power Authority, Power Revenue Bonds:
AAA Aaa 400 LEVRRS, 7.238% due 7/01/2023 (d)(j) 368
A- Baa1 1,500 Series O, 6% due 7/01/2010 1,445
AA Aa3 2,000 Puerto Rico Industrial, Medical and Environmental Pollution Control
Facilities Financing Authority Revenue Bonds (Motorola Inc. Project),
Series A, 6.75% due 1/01/2014 2,079
<PAGE>
Total Investments (Cost--$58,901)--98.7% 58,198
Other Assets Less Liabilities--1.3% 764
-------
Net Assets--100.0% $58,962
=======
<FN>
*Not Rated.
(a)The interest rate is subject to change periodically based upon
the prevailing market rate. The interest rate shown is the rate in
effect at January 31, 1995.
(b)AMBAC Insured.
(c)MBIA Insured.
(d)FSA Insured.
(e)Insured by Connie Lee.
(f)FGIC Insured.
(g)Prerefunded.
(h)FHA Insured.
(i)Escrowed to maturity.
(j)The interest rate is subject to change periodically and inversely
based upon the prevailing market rate. The interest rate shown is
the rate in effect at January 31, 1995.
++Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of January 31, 1995
<CAPTION>
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$58,900,507) (Note 1a) $58,198,019
Cash 264,839
Receivables:
Interest $ 789,800
Beneficial interest sold 250,884 1,040,684
-----------
Deferred organization expenses (Note 1e) 32,434
Prepaid registration fees and other assets (Note 1e) 11,081
-----------
Total assets 59,547,057
-----------
<PAGE>
Liabilities: Payables:
Beneficial interest redeemed 239,738
Securities purchased 169,842
Dividends to shareholders (Note 1f) 67,506
Distributor (Note 2) 18,892
Investment adviser (Note 2) 16,110 512,088
-----------
Accrued expenses and other liabilities 73,087
-----------
Total liabilities 585,175
-----------
Net Assets: Net assets $58,961,882
===========
Net Assets Class A Shares of beneficial interest, $0.10 par value,
Consist of: unlimited number of shares authorized $ 97,783
Class B Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 485,262
Class C Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 1,134
Class D Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 9,089
Paid-in capital in excess of par 61,039,101
Accumulated realized capital losses--net (1,967,999)
Unrealized depreciation on investments--net (702,488)
-----------
Net assets $58,961,882
===========
Net Asset Value: Class A--Based on net assets of $9,717,053 and 977,835 shares
of beneficial interest outstanding $ 9.94
===========
Class B--Based on net assets of $48,228,586 and 4,852,624
shares of beneficial interest outstanding $ 9.94
===========
Class C--Based on net assets of $112,629 and 11,335 shares of
beneficial interest outstanding $ 9.94
===========
Class D--Based on net assets of $903,614 and 90,886 shares of
beneficial interest outstanding $ 9.94
===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months
Ended January 31, 1995
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 1,853,593
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 163,947
Distribution fees--Class B (Note 2) 122,149
Professional fees 29,359
Printing and shareholder reports 27,557
Transfer agent fees--Class B (Note 2) 16,153
Accounting services (Note 2) 15,695
Custodian fees 5,308
Amortization of organization expenses (Note 1e) 4,981
Pricing fees 3,429
Transfer agent fees--Class A (Note 2) 2,862
Trustees' fees and expenses 1,474
Registration fees (Note 1e) 1,038
Distribution fees--Class C (Note 2) 158
Account maintenance fees--Class D (Note 2) 153
Transfer agent fees--Class D (Note 2) 92
Transfer agent fees--Class C (Note 2) 18
Other 1,256
-----------
Total expenses before reimbursement 395,629
Reimbursement of expenses (Note 2) (72,040)
-----------
Total expenses after reimbursement 323,589
-----------
Investment income--net 1,530,004
-----------
Realized & Realized loss on investments--net (942,769)
Unrealized Change in unrealized depreciation on investments--net (664,637)
Loss on -----------
Investments Net Decrease in Net Assets Resulting from Operations $ (77,402)
- --Net (Notes ===========
1b, 1d & 3):
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the
Six Months For the
Ended Year Ended
January 31, July 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 1,530,004 $ 2,783,373
Realized loss on investments--net (942,769) (685,668)
Change in unrealized appreciation/depreciation on investments--net (664,637) (2,097,393)
----------- -----------
Net increase (decrease) in net assets resulting from operations (77,402) 312
----------- -----------
Dividends & Investment income--net:
Distributions to Class A (288,557) (564,183)
Shareholders Class B (1,231,509) (2,219,190)
(Note 1f): Class C (1,349) --
Class D (8,589) --
In excess of realized gain on investments--net:
Class A -- (70,229)
Class B -- (287,216)
----------- -----------
Net decrease in net assets resulting from dividends and
distributions to shareholders (1,530,004) (3,140,818)
----------- -----------
Beneficial Net increase (decrease) in net assets derived from beneficial
Interest interest transactions (1,166,489) 15,594,348
Transactions ----------- -----------
(Note 4):
Net Assets: Total increase (decrease) in net assets (2,773,895) 12,453,842
Beginning of period 61,735,777 49,281,935
----------- -----------
End of period $58,961,882 $61,735,777
=========== ===========
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Financial Highlights
<CAPTION>
Class A
For the For the
Six For the Period
The following per share data and ratios have been derived Months Year Sept. 25,
from information provided in the financial statements. Ended Ended 1992++ to
Jan. 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.19 $ 10.67 $ 10.00
Operating -------- -------- --------
Performance: Investment income--net .27 .54 .46
Realized and unrealized gain (loss) on investments--net (.25) (.42) .67
-------- -------- --------
Total from investment operations .02 .12 1.13
-------- -------- --------
Less dividends and distributions:
Investment income--net (.27) (.54) (.46)
In excess of realized gain on investments--net -- (.06) --
-------- -------- --------
Total dividends and distributions (.27) (.60) (.46)
-------- -------- --------
Net asset value, end of period $ 9.94 $ 10.19 $ 10.67
======== ======== ========
Total Investment Based on net asset value per share .29%+++ 1.11% 11.52%+++
Return:** ======== ======== ========
Ratios to Expenses, net of reimbursement .66%* .50% .20%*
Average ======== ======== ========
Net Assets: Expenses .91%* .96% 1.15%*
======== ======== ========
Investment income--net 5.55%* 5.14% 5.26%*
======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 9,717 $ 11,071 $ 9,311
Data: ======== ======== ========
Portfolio turnover 13.73% 74.35% 27.98%
======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class B
For the For the
Six For the Period
The following per share data and ratios have been derived Months Year Sept. 25,
from information provided in the financial statements. Ended Ended 1992++ to
Jan. 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.19 $ 10.67 $ 10.00
Operating -------- -------- --------
Performance: Investment income--net .25 .49 .41
Realized and unrealized gain (loss) on investments--net (.25) (.42) .67
-------- -------- --------
Total from investment operations -- .07 1.08
-------- -------- --------
Less dividends and distributions:
Investment income--net (.25) (.49) (.41)
In excess of realized gain on investments--net -- (.06) --
-------- -------- --------
Total dividends and distributions (.25) (.55) (.41)
-------- -------- --------
Net asset value, end of period $ 9.94 $ 10.19 $ 10.67
======== ======== ========
Total Investment Based on net asset value per share .04%+++ .60% 11.06%+++
Return:** ======== ======== ========
Ratios to Expenses, excluding distribution fees and net
Average of reimbursement .68%* .51% .20%*
Net Assets: ======== ======== ========
Expenses, net of reimbursement 1.18%* 1.01% .70%*
======== ======== ========
Expenses 1.42%* 1.46% 1.67%*
======== ======== ========
Investment income--net 5.04%* 4.64% 4.77%*
======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 48,229 $ 50,664 $ 39,970
Data: ======== ======== ========
Portfolio turnover 13.73% 74.35% 27.98%
======== ======== ========
<PAGE>
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. October 21, 1994++
to January 31, 1995
Increase (Decrease) in Net Asset Value: Class C Class D
<S> <S> <C> <C>
Per Share Net asset value, beginning of period $ 9.80 $ 9.80
Operating ----------- -----------
Performance: Investment income--net .13 .15
Realized and unrealized gain on investments--net .14 .14
----------- -----------
Total from investment operations .27 .29
----------- -----------
Less dividends:
Investment income--net (.13) (.15)
----------- -----------
Net asset value, end of period $ 9.94 $ 9.94
=========== ===========
Total Investment Based on net asset value per share 2.84%+++ 2.97%+++
Return:** =========== ===========
Ratios to Expenses, excluding account maintenance and distribution
Average fees and net of reimbursement .75%* .74%*
Net Assets: =========== ===========
Expenses, net of reimbursement 1.35%* .84%*
=========== ===========
Expenses 1.55%* 1.04%*
=========== ===========
Investment income--net 5.12%* 5.63%*
=========== ===========
Supplemental Net assets, end of period (in thousands) $ 113 $ 904
Data: =========== ===========
Portfolio turnover 13.73% 13.73%
=========== ===========
<PAGE>
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch North Carolina Municipal Bond Fund (the "Fund") is
part of Merrill Lynch Multi-State Municipal Series Trust (the
"Trust"). The Fund is registered under the Investment Company Act of
1940 as a non-diversified, open-end management investment company.
These unaudited financial statements reflect all adjustments which
are, in the opinion of management, necessary to a fair statement of
the results for the interim period presented. All such adjustments
are of a normal recurring nature. The Fund offers four classes of
shares under the Merrill Lynch Select Pricing SM System. Shares of
Class A and Class D are sold with a front-end sales charge. Shares
of Class B and Class C may be subject to a contingent deferred sales
charge. All classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions,
except that Class B, Class C and Class D Shares bear certain
expenses related to the account maintenance of such shares, and
Class B and Class C Shares also bear certain expenses related to the
distribution of such shares. Each class has exclusive voting rights
with respect to matters relating to its account maintenance and
distribution expenditures. The following is a summary of significant
accounting policies followed by the Fund.
(a) Valuation of investments--Municipal bonds and other portfolio
securities in which the Fund invests are traded primarily in the
over-the-counter municipal bond and money markets and are valued at
the last available bid price in the over-the-counter market or on
the basis of yield equivalents as obtained from one or more dealers
that make markets in the securities. Financial futures contracts and
options thereon, which are traded on exchanges, are valued at their
settlement prices as of the close of such exchanges. Short-term
investments with remaining maturities of sixty days or less are
valued at amortized cost, which approximates market value.
Securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or
under the direction of the Board of Trustees of the Trust, including
valuations furnished by a pricing service retained by the Trust,
which may utilize a matrix system for valuations. The procedures of
the pricing service and its valuations are reviewed by the officers
of the Trust under the general supervision of the Trustees.
<PAGE>
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
* Financial futures contracts--The Fund may purchase or sell interest
rate futures contracts and options on such futures contracts for the
purpose of hedging the market risk on existing securities or the
intended purchase of securities. Futures contracts are contracts for
delayed delivery of securities at a specific future date and at a
specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to
the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin
and are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a
straight-line basis over a five-year period. Prepaid registration
fees are charged to expense as the related shares are issued.
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 futures transactions and post-October losses.
<PAGE>
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee based upon the average daily
value of the Fund's net assets at the following annual rates: 0.55%
of the Fund's average daily net assets not exceeding $500 million;
0.525% of average daily net assets in excess of $500 million but not
exceeding $1 billion; and 0.50% of average daily net assets in
excess of $1 billion. For the six months ended January 31, 1995, FAM
earned fees of $163,947, of which $71,477 was voluntarily waived.
FAM also reimbursed the Fund additional expenses of $563.
Pursuant to the distribution plans ("the Distribution Plans")
adopted by the Fund in accordance with Rule 12b-1 under the
Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are
accrued daily and paid monthly at annual rates based upon the
average daily net assets of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.25%
Class C 0.25% 0.35%
Class D 0.10% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML &Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
<PAGE>
For the six-months ended January 31, 1995, MLFD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the
Fund's Class A and Class D Shares as follows:
MLFD MLPF&S
Class A $490 $4,238
Class D $409 $4,392
MLPF&S received contingent deferred sales charges of $58,929
relating to transactions in Class B Shares of beneficial interest
for the six months ended January 31, 1995.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, MLPF&S, FDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended January 31, 1995 were $7,511,423 and
$9,070,112, respectively.
Net realized and unrealized losses as of January 31, 1995 were as
follows:
Realized Unrealized
Losses Losses
Long-term investments $ (751,146) $ (702,488)
Financial futures contracts (191,623) --
----------- -----------
Total $ (942,769) $ (702,488)
=========== ===========
As of January 31, 1995, net unrealized depreciation for Federal
income tax purposes aggregated $702,488, of which $948,926 related
to appreciated securities and $1,651,414 related to depreciated
securities. The aggregate cost of investments at January 31, 1995
for Federal income tax purposes was $58,900,507.
4. Beneficial Interest Transactions:
Net increase (decrease) in net assets derived from beneficial
interest transactions was $(1,166,489) and $15,594,348 for the six
months ended January 31, 1995 and the year ended July 31, 1994,
respectively.
<PAGE>
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the
Six Months Ended Dollar
January 31, 1995 Shares Amount
Shares sold 57,694 $ 571,962
Shares issued to shareholders
in reinvestment of dividends 15,503 150,865
----------- -----------
Total issued 73,197 722,827
Shares redeemed (182,284) (1,756,077)
----------- -----------
Net decrease (109,087) $(1,033,250)
=========== ===========
Class A Shares
for the Year Ended Dollar
July 31, 1994 Shares Amount
Shares sold 461,410 $ 4,928,197
Shares issued to shareholders
in reinvestment of dividends
and distributions 29,035 307,049
----------- -----------
Total issued 490,445 5,235,246
Shares redeemed (276,285) (2,887,349)
----------- -----------
Net increase 214,160 $ 2,347,897
=========== ===========
Class B Shares for the
Six Months Ended Dollar
January 31, 1995 Shares Amount
Shares sold 455,293 $ 4,458,948
Shares issued to shareholders
in reinvestment of dividends 63,143 614,042
----------- -----------
Total issued 518,436 5,072,990
Shares redeemed (639,023) (6,163,025)
----------- -----------
Net decrease (120,587) $(1,090,035)
=========== ===========
<PAGE>
Class B Shares for the Dollar
Year Ended July 31, 1994 Shares Amount
Shares sold 1,596,885 $17,101,455
Shares issued to shareholders
in reinvestment of dividends
and distributions 119,538 1,266,444
----------- -----------
Total issued 1,716,423 18,367,899
Shares redeemed (489,131) (5,121,448)
----------- -----------
Net increase 1,227,292 $13,246,451
=========== ===========
Class C Shares for the
Period October 21, 1994++ Dollar
to January 31, 1995 Shares Amount
Shares sold 11,270 $ 109,819
Shares issued to shareholders
in reinvestment of dividends 66 628
----------- -----------
Total issued 11,336 110,447
Shares redeemed (1) (5)
----------- -----------
Net increase 11,335 $ 110,442
=========== ===========
[FN]
++Commencement of Operations.
Class D Shares for the
Period October 21, 1994++ Dollar
to January 31, 1995 Shares Amount
Shares sold 90,124 $ 838,992
Shares issued to shareholders
in reinvestment of dividends 762 7,362
----------- -----------
Net increase 90,886 $ 846,354
=========== ===========
[FN]
++Commencement of Operations.
