MERRILL LYNCH
NORTH CAROLINA
MUNICIPAL
BOND FUND
FUND LOGO
Semi-Annual Report
January 31, 1996
Officers and Trustees
Arthur Zeikel, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Kenneth A. Jacob, Vice President
Fred K. Stuebe, Portfolio Manager
Gerald M. Richard, Treasurer
Jerry Weiss, Secretary
<PAGE>
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
Merrill Lynch North Carolina
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011
TO OUR SHAREHOLDERS
<PAGE>
Although the partial shutdown of the US Government curtailed the
release of most economic data in the latter part of the six-month
period ended January 31, 1996, it was nonetheless apparent that
gross domestic product (GDP) growth was losing momentum. Consumer
spending is barely growing, the industrial sector is at a virtual
standstill and, despite lower mortgage rates, there is little or no
pick-up in housing activity. With inflationary pressures subdued,
the Federal Reserve Board responded to the slowing economy by
continuing to modestly lower short-term interest rates.
Historically, it has taken some time for shifts in monetary policy
to have an impact on economic growth. Therefore, the Federal Reserve
Board's gradual shift to lowering interest rates, which began early
last year, may not be reflected in a pick-up in real economic growth
until later this year.
The impasse between the Clinton Administration and Congress over the
Federal budget continues, although both sides have made concessions
since the debate began. It appears that investors are currently
focusing on the progress that has been made rather than on the
differences that remain. Initially, President Clinton proposed
deficits of about $190 billion annually through fiscal year 2002,
but now proposes balanced budgets, as do the Republicans. Current
indications are that a piecemeal budget accord is the most likely
outcome. Even without the proposed policy changes, it appears that
the US Federal budget deficit would remain stable at about 2% of GDP
for the rest of the decade. This would be far better than is the
case for most Group of Seven industrial nations, and for the United
States would represent a great improvement over the last 15 years.
Although this may fall short of investors' best expectations, it
appears that the Federal budget debate over the past year has
resulted in a trend toward a more conservative fiscal policy.
The Municipal Market
The municipal bond market rallied strongly over the six months ended
January 31, 1996. Long-term, tax-exempt revenue bond yields, as
measured by the Bond Buyer Revenue Bond Index, declined over 65
basis points (0.65%) to end the January period at 5.69%. Continued
weak economic conditions coupled with low inflation fostered a very
positive environment for almost all fixed-income investments during
the last three months of 1995. Long-term US Treasury bond yields
also declined approximately 65 basis points to 6.00% by January 31,
1996. Both US Treasury and long-term tax-exempt bond yields are near
their lowest levels in the past two years.
<PAGE>
The municipal bond market had to contend with a number of
difficulties for much of 1995. Various tax reform proposals have
made the future tax advantage of municipal bonds uncertain. This
has, at a minimum, reduced the overall demand for tax-exempt
securities. At the same time, as municipal bond yields declined, tax-
exempt authorities have rushed to issue debt at near historic low
yield levels. During the six-month period ended January 31, 1996,
approximately $90 billion in municipal securities were underwritten,
an increase of over 30% compared to the same period last year.
However, as early 1995 issuance was significantly reduced, the last
12 months issuance of approximately $160 billion remained the same
as that issued a year earlier. Tax-exempt bond yields declined
throughout the six months ended January 31, 1996, despite investor
uncertainty and increased supply pressures.
It is likely that the municipal market will regain much of the
technical support it enjoyed earlier in 1995. 1995 issuance remained
significantly below levels underwritten in 1993, when over $290
billion in long-term tax-exempt securities were issued. Also,
municipal investors received over $25 billion in bond maturities,
coupon income and early redemptions on January 1, 1996. This $25
billion is almost twice the average monthly issuance for 1995. The
amount of outstanding municipal securities will continue to decline
throughout 1996 and into early 1997. As the uncertainties
surrounding proposed tax reforms are resolved in 1996, the tax-
exempt bond market's renewed technical position should provide
support to municipal bond prices.
Many of the features that made tax-exempt products attractive to
investors last year are still in place. Long-term, A-rated municipal
revenue bonds continue to yield well over 90% of comparable US
Treasury bond yields. Historically, analysts have considered yields
in excess of 82% attractive for long-term investors. For example,
currently available tax-exempt bond yields generate taxable
equivalent yields in excess of 8.50% for an investor in the 36%
Federal income tax bracket. While the uncertainties regarding
potential changes in current tax law remain, it appears that, at
current price levels, bond investors have discounted at least some
of the uncertainty.
Looking ahead, it may be unreasonable to expect to duplicate the
double-digit returns produced by most tax-exempt issues in 1995,
given current municipal bond yields. Municipal bond yields would
have to decline to levels not seen since the 1960s in order to
generate such significant returns in the coming years. While the
current economic environment may still justify additional declines
in interest rates, it may be prudent to expect some period of
consolidation before the interest rate decline resumes. Tax-exempt
bond market performance in 1996 is likely to be generated more by
enhancing current income and limiting credit risk than by
significant interest rate declines.
<PAGE>
Portfolio Strategy
During the six-month period ended January 31, 1996, with the
continued decline of interest rates, we shifted the Fund's portfolio
strategy from a neutral posture to one that is more constructive on
interest rates. We achieved this by extending the duration of the
Fund in order to seek to enhance any capital appreciation. New-issue
volume in the North Carolina tax-exempt market was just over $500
million in bonds during the three months ended January 31, 1996.
With the slight increase of new issuance in the State of North
Carolina and no significant increase on the horizon, we kept the
Fund's cash reserve position at approximately 1%-3% of net assets.
Looking ahead, we will continue our strategy to seek to enhance the
total returns of the Fund as opportunities in the marketplace arise.
In Conclusion
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.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President
(Fred K. Stuebe)
Fred K. Stuebe
Portfolio Manager
<PAGE>
March 6, 1996
We are pleased to announce that Fred K. Stuebe is responsible for
the day-to-day management of Merrill Lynch North Carolina Municipal
Bond Fund. Mr. Stuebe has been employed by Merrill Lynch Asset
Management, L.P. (an affiliate of the Fund's investment adviser)
since 1989 as Vice President in the Tax-Exempt Bond Department.
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end load)
of 4% and bear no ongoing distribution or account maintenance fees.
Class A Shares are available only to eligible investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.25% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after approximately 10 years.
* Class C Shares are subject to a distribution fee of 0.35% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.10% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. Dividends paid to each class
of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
<PAGE>
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
1/31/96 10/31/95 1/31/95 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $10.77 $10.49 $9.94 + 8.35% + 2.67%
Class B Shares* 10.77 10.49 9.94 + 8.35 + 2.67
Class C Shares* 10.77 10.49 9.94 + 8.35 + 2.67
Class D Shares* 10.77 10.50 9.94 + 8.35 + 2.57
Class A Shares--Total Return* +14.03(1) + 3.91(2)
Class B Shares--Total Return* +13.46(3) + 3.78(4)
Class C Shares--Total Return* +13.34(5) + 3.75(6)
Class D Shares--Total Return* +13.92(7) + 3.78(8)
Class A Shares--Standardized 30-day Yield 4.31%
Class B Shares--Standardized 30-day Yield 3.98%
Class C Shares--Standardized 30-day Yield 3.88%
Class D Shares--Standardized 30-day Yield 4.22%
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
(1)Percent change includes reinvestment of $0.533 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.129 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.480 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.115 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.470 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.113 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.523 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.126 per share ordinary
income dividends.
</TABLE>
<PAGE>
PERFORMANCE DATA (continued)
<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
1995 9.63 10.78 -- 0.535 +17.88
1/1/96--1/31/96 10.78 10.77 -- 0.029 + 0.27
------
Total $1.858
Cumulative total return as of 1/31/96: +28.96%**
<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
1995 9.63 10.78 -- 0.483 +17.29
1/1/96--1/31/96 10.78 10.77 -- 0.026 + 0.25
------
Total $1.685
Cumulative total return as of 1/31/96: +26.82%**
<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>
<TABLE>
Performance Summary--Class C Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $ 9.80 $ 9.63 -- $0.094 - 0.76%
1995 9.63 10.78 -- 0.473 +17.17
1/1/96--1/31/96 10.78 10.77 -- 0.026 + 0.24
------
Total $0.593
Cumulative total return as of 1/31/96: +16.56%**
<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>
PERFORMANCE DATA (concluded)
<TABLE>
Performance Summary--Class D Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $ 9.80 $ 9.63 -- $0.103 - 0.66%
1995 9.63 10.78 -- 0.525 +17.76
1/1/96--1/31/96 10.78 10.77 -- 0.029 + 0.27
------
Total $0.657
Cumulative total return as of 1/31/96: +17.30%**
<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.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
<PAGE>
Class A Shares*
Year Ended 12/31/95 +17.88% +13.16%
Inception (9/25/92)
through 12/31/95 + 8.01 + 6.67
<FN>
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/95 +17.29% +13.29%
Inception (9/25/92)
through 12/31/95 + 7.47 + 7.20
<FN>
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 12/31/95 +17.17% +16.17%
Inception (10/21/94)
through 12/31/95 +13.46 +13.46
<FN>
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
<PAGE>
Year Ended 12/31/95 +17.76% +13.05%
Inception (10/21/94)
through 12/31/95 +14.04 +10.20
<FN>
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
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.
ACES SM Adjustable Convertible Extendable Securities
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
DATES Daily Adjustable Tax-Exempt Securities
GO General Obligation Bonds
HFA Housing Finance Agency
S/F Single-Family
UT Unlimited Tax
VRDN Variable Rate Demand Notes
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
North Carolina--93.6%
<S> <S> <C> <S> <C>
Charlotte, North Carolina, COP (Convention Facility Project) (b):
AAA Aaa $1,000 6.75% due 12/01/2001 (g) $ 1,152
AAA Aaa 3,000 Refunding, Series C, 5.25% due 12/01/2020 2,919
AA Aa 3,000 Charlotte, North Carolina, Health Care System, Revenue Refunding Bonds
(Charlotte-Mecklenberg Hospital Authority), 6.25% due 1/01/2020 3,137
<PAGE>
Charlotte, North Carolina, Refunding, GO, UT:
AAA Aaa 2,000 4.75% due 2/01/2006 2,041
AAA Aaa 500 5% due 2/01/2012 503
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 526
AAA Aaa 500 Cleveland County, North Carolina, GO, UT, 7.20% due 6/01/2000 (b)(g) 572
Cumberland County, North Carolina, COP (Civic Center Project), Series A (b):
AAA Aaa 1,050 6.40% due 12/01/2019 1,151
AAA Aaa 1,000 6.40% due 12/01/2024 1,096
AAA Aaa 3,000 Fayetteville, North Carolina, Public Works Commission, Revenue Refunding
Bonds, 4.75% due 3/01/2014 (d) 2,823
AAA Aaa 1,000 Gastonia, North Carolina, Combined Utilities System Revenue Bonds, 6%
due 5/01/2014 (c) 1,057
AAA Aa1 1,000 Greensboro, North Carolina, Public Improvement Bonds, UT, 6.30% due
3/01/2010 1,091
NR* Baa1 1,500 Haywood County, North Carolina, Industrial Facilities and Pollution
Control Financing Authority, Environmental Improvement Revenue Bonds
(Champion International Corporation Project), AMT, 6.25% due 9/01/2025 1,557
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 3,809
AAA Aaa 500 Mecklenburg County, North Carolina, GO, UT, 6.75% due 4/01/2000 (g) 557
AAA Aaa 3,425 Mecklenburg County, North Carolina, Public Improvement Bonds, GO, UT,
Series A and B, 6.20% due 4/01/2001 (g) 3,812
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 315
BBB+ Aaa 3,055 North Carolina Eastern Municipal Power Agency, Power System Revenue
Refunding Bonds, Series A, 6.50% due 1/01/2018 (f) 3,665
North Carolina Educational Facilities, Finance Agency Revenue Bonds:
AA+ Aa1 2,000 (Duke University Project), Series C, 6.75% due 10/01/2021 2,232
AAA NR* 900 Refunding (Elon College Project), 6.375% due 1/01/2007 (e) 979
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
North Carolina (concluded)
<S> <S> <C> <S> <C>
North Carolina HFA, Revenue Bonds, GO:
A+ Aa $2,750 AMT, Series V, 6.80% due 9/01/2025 $ 2,855
AA Aa 1,340 Refunding, Series F, 6.60% due 7/01/2017 (h) 1,406
A+ Aa 665 Series U, 6.70% due 3/01/2018 699
North Carolina HFA, S/F Revenue Bonds, GO:
A+ Aa 1,755 AMT, Series X, 6.70% due 9/01/2026 1,817
A+ Aa 1,940 Series W, 6.50% due 3/01/2018 2,027
North Carolina Medical Care Community, Hospital Revenue Bonds:
NR* VMIG1++ 700 (Carol Woods Project), VRDN, 3.80% due 4/01/2021 (a) 700
A+ A 2,000 (Gaston Memorial Hospital Project), 5.50% due 2/15/2019 1,989
AAA Aaa 2,000 (Moore Regional Hospital Project), 5% due 10/01/2018 (b) 1,891
NR* VMIG1++ 400 (Pooled Financing Project), ACES, Series B, 3.75% due 10/01/2013 (a) 400
A+ A1 1,500 (Rex Hospital Project), 6.25% due 6/01/2017 1,612
AAA Aaa 1,620 (Wilson Memorial Hospital Project), 6.50% due 11/01/2020 (b) 1,746
AAA Aaa 1,000 North Carolina Municipal Power Agency, Revenue Refunding Bonds
(Catawba Electric Project Number 1), 5% due 1/01/2015 (c) 959
AA Aa 1,500 Orange County, North Carolina, Water and Sewer Authority, Revenue
Refunding Bonds, 5.20% due 7/01/2016 1,487
AAA Aaa 1,120 Pasquotank County, North Carolina, COP (Public Schools Project), 5%
due 6/01/2015 (c) 1,081
NR* VMIG1++ 100 Person County, North Carolina, Industrial Facilities and Pollution
Control Financing Authority, Solid Waste Disposal Revenue Bonds
(Carolina Power and Light Company), AMT, DATES, 3.90% due
11/01/2016 (a) 100
A- A 1,000 Shelby, North Carolina, Combined Enterprise System, Revenue Refunding
Bonds, Series B, 5.50% due 5/01/2017 999
A- A 700 Shelby, North Carolina, Combined Producing Facilities System Revenue
Bonds (Capital Improvement), 6.625% due 6/01/2002 (g) 802
AA- A1 800 University of North Carolina, Chapel Hill, Hospital Revenue Bonds (Board
of Governors), 6.375% due 2/15/2017 853
AAA Aaa 1,250 Wake County, North Carolina, Hospital Revenue Refunding Bonds, 5.125%
due 10/01/2026 (c) 1,197
Puerto Rico--4.7%
<PAGE>
AAA NR* 700 Puerto Rico Commonwealth, Public Improvement Bonds, UT, Series A, 6.50%
due 7/01/1999 (g) 760
AA Aa3 2,000 Puerto Rico Industrial, Medical and Environmental Pollution Control
Facilities, Financing Authority Revenue Bonds, Series A, 6.75% due
1/01/2014 2,212
Total Investments (Cost--$58,637)--98.3% 62,586
Other Assets Less Liabilities--1.7% 1,083
-------
Net Assets--100.0% $63,669
=======
<FN>
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at January 31, 1996.
(b)AMBAC Insured.
(c)MBIA Insured.
(d)FGIC Insured.
(e)Insured by Connie Lee.
(f)Escrowed to maturity.
(g)Prerefunded.
(h)FHA Insured.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of January 31, 1996
<CAPTION>
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$58,637,291) (Note 1a) $ 62,586,069
Cash 46,942
Receivables:
Interest $ 923,979
Beneficial interest sold 280,828 1,204,807
------------
Deferred organization expenses (Note 1e) 22,149
Prepaid expenses and other assets (Note 1e) 26,630
------------
Total assets 63,886,597
------------
<PAGE>
Liabilities: Payables:
Dividends to shareholders (Note 1f) 68,234
Beneficial interest redeemed 41,746
Distributor (Note 2) 21,909
Investment adviser (Note 2) 20,727 152,616
------------
Accrued expenses and other liabilities 64,818
------------
Total liabilities 217,434
------------
Net Assets: Net assets $ 63,669,163
============
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited
Consist of: number of shares authorized $ 81,414
Class B Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 482,690
Class C Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 11,987
Class D Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 15,099
Paid-in capital in excess of par 60,814,948
Accumulated realized capital losses on investments--net (Note 5) (1,328,308)
Accumulated distributions in excess of realized capital gains--net (357,445)
Unrealized appreciation on investments--net 3,948,778
------------
Net assets $ 63,669,163
============
Net Asset Value: Class A--Based on net assets of $8,766,819 and 814,137 shares
of beneficial interest outstanding $ 10.77
============
Class B--Based on net assets of $51,985,253 and 4,826,902 shares
of beneficial interest outstanding $ 10.77
============
Class C--Based on net assets of $1,290,613 and 119,868 shares
of beneficial interest outstanding $ 10.77
============
Class D--Based on net assets of $1,626,478 and 150,988 shares
of beneficial interest outstanding $ 10.77
============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months Ended January 31, 1996
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 1,782,795
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 172,027
Account maintenance and distribution fees--Class B (Note 2) 127,217
Professional fees 28,810
Printing and shareholder reports 27,604
Accounting services (Note 2) 22,116
Transfer agent fees--Class B (Note 2) 15,280
Amortization of organization expenses (Note 1e) 5,178
Account maintenance and distribution fees--Class C (Note 2) 3,208
Pricing fees 2,844
Custodian fees 2,478
Transfer agent fees--Class A (Note 2) 2,256
Trustees' fees and expenses 1,571
Registration fees (Note 1e) 752
Account maintenance fees--Class D (Note 2) 734
Transfer agent fees--Class D (Note 2) 362
Transfer agent fees--Class C (Note 2) 313
Other 1,073
------------
Total expenses before reimbursement 413,823
Reimbursement of expenses (Note 2) (56,878)
------------
Total expenses after reimbursement 356,945
------------
Investment income--net 1,425,850
------------
Realized & Realized gain on investments--net 259,424
Unrealized Gain on Change in unrealized appreciation on investments--net 2,595,472
Investments--Net ------------
(Notes 1b, Net Increase in Net Assets Resulting from Operations $ 4,280,746
1d & 3): ============
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: Jan. 31, 1996 July 31, 1995
<S> <C> <C> <C>
Operations: Investment income--net $ 1,425,850 $ 3,016,993
Realized gain (loss) on investments--net 259,424 (919,952)
Change in unrealized appreciation/depreciation on investments--net 2,595,472 1,391,157
------------ ------------
Net increase in net assets resulting from operations 4,280,746 3,488,198
------------ ------------
Dividends to Investment income--net:
Shareholders Class A (227,886) (541,099)
(Note 1f): Class B (1,138,806) (2,428,396)
Class C (23,317) (11,006)
Class D (35,841) (36,492)
------------ ------------
Net decrease in net assets resulting from dividends to shareholders (1,425,850) (3,016,993)
------------ ------------
Beneficial Interest Net decrease in net assets derived from beneficial interest
Transactions transactions (509,020) (883,695)
(Note 4): ------------ ------------
Net Assets: Total increase (decrease) in net assets 2,345,876 (412,490)
Beginning of period 61,323,287 61,735,777
------------ ------------
End of period $ 63,669,163 $ 61,323,287
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
Class A
For the For the
Six Period
The following per share data and ratios have been derived Months Sept. 25,
from information provided in the financial statements. Ended For the Year 1992++ to
Jan. 31, Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.29 $ 10.19 $ 10.67 $ 10.00
Operating -------- -------- -------- --------
Performance: Investment income--net .26 .54 .54 .46
Realized and unrealized gain (loss) on
investments--net .48 .10 (.42) .67
-------- -------- -------- --------
Total from investment operations .74 .64 .12 1.13
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.26) (.54) (.54) (.46)
In excess of realized gain on investments--net -- -- (.06) --
-------- -------- -------- --------
<PAGE>
Total dividends and distributions (.26) (.54) (.60) (.46)
-------- -------- -------- --------
Net asset value, end of period $ 10.77 $ 10.29 $ 10.19 $ 10.67
======== ======== ======== ========
Total Investment Based on net asset value per share 7.28%+++ 6.60% 1.11% 11.52%+++
Return:** ======== ======== ======== ========
Ratios to Expenses, net of reimbursement .71%* .71% .50% .20%*
Average ======== ======== ======== ========
Net Assets: Expenses .89%* .93% .96% 1.15%*
======== ======== ======== ========
Investment income--net 4.98%* 5.43% 5.14% 5.26%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 8,767 $ 9,256 $ 11,071 $ 9,311
Data: ======== ======== ======== ========
Portfolio turnover 61.04% 52.33% 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>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class B
For the For the
Six Period
The following per share data and ratios have been derived Months Sept. 25,
from information provided in the financial statements. Ended For the Year 1992++ to
Jan. 31, Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.29 $ 10.19 $ 10.67 $ 10.00
Operating -------- -------- -------- --------
Performance: Investment income--net .24 .49 .49 .41
Realized and unrealized gain (loss) on
investments--net .48 .10 (.42) .67
-------- -------- -------- --------
Total from investment operations .72 .59 .07 1.08
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.24) (.49) (.49) (.41)
In excess of realized gain on investments--net -- -- (.06) --
-------- -------- -------- --------
Total dividends and distributions (.24) (.49) (.55) (.41)
-------- -------- -------- --------
Net asset value, end of period $ 10.77 $ 10.29 $ 10.19 $ 10.67
======== ======== ======== ========
Total Investment Based on net asset value per share 7.01%+++ 6.06% .60% 11.06%+++
Return:** ======== ======== ======== ========
Ratios to Expenses, net of reimbursement 1.22%* 1.22% 1.01% .70%*
Average ======== ======== ======== ========
Net Assets: Expenses 1.40%* 1.44% 1.46% 1.67%*
======== ======== ======== ========
Investment income--net 4.46%* 4.91% 4.64% 4.77%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 51,985 $ 49,978 $ 50,664 $ 39,970
Data: ======== ======== ======== ========
Portfolio turnover 61.04% 52.33% 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>
FINANCIAL INFORMATION (concluded)
<PAGE>
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class C Class D
For the For the For the For the
Six Period Six Period
Months Oct. 21, Months Oct. 21,
The following per share data and ratios have been derived Ended 1994++ to Ended 1994++ to
from information provided in the financial statements. Jan. 31, July 31, Jan. 31, July 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1996 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.28 $ 9.80 $ 10.29 $ 9.80
Operating -------- -------- -------- --------
Performance: Investment income--net .23 .37 .26 .41
Realized and unrealized gain on investments--net .49 .48 .48 .49
-------- -------- -------- --------
Total from investment operations .72 .85 .74 .90
-------- -------- -------- --------
Less dividends from investment income--net (.23) (.37) (.26) (.41)
-------- -------- -------- --------
Net asset value, end of period $ 10.77 $ 10.28 $ 10.77 $ 10.29
======== ======== ======== ========
Total Investment Based on net asset value per share 7.06%+++ 8.87%+++ 7.23%+++ 9.39%+++
Return:** ======== ======== ======== ========
Ratios to Expenses, net of reimbursement 1.32%* 1.37%* .81%* .85%*
Average ======== ======== ======== ========
Net Assets: Expenses 1.50%* 1.57%* .99%* 1.05%*
======== ======== ======== ========
Investment income--net 4.35%* 4.67%* 4.87%* 5.28%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 1,291 $ 713 $ 1,626 $ 1,377
Data: ======== ======== ======== ========
Portfolio turnover 61.04% 52.33% 61.04% 52.33%
======== ======== ======== ========
<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
<PAGE>
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 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.
(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.
<PAGE>
* Financial futures contracts--The Fund may purchase or sell interest
rate futures contracts and options on such futures contracts for the
purpose of hedging the market risk on existing securities or the
intended purchase of securities. Futures contracts are contracts for
delayed delivery of securities at a specific future date and at a
specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to
the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin
and are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a five-year period. Prepaid registration fees are
charged to expense as the related shares are issued.
(f) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates.
NOTES TO FINANCIAL STATEMENTS (concluded)
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 Merill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
<PAGE>
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, 1996, FAM
earned fees of $172,027, of which $56,878 was voluntarily waived.
Pursuant to the distribution plans (the "Distribution Plans")
adopted by the Fund in accordance with Rule 12b-1 under the
Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are
accrued daily and paid monthly at annual rates based upon the
average daily net assets of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.25%
Class C 0.25% 0.35%
Class D 0.10% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the six months ended January 31, 1996, MLFD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the
Fund's Class A and Class D Shares as follows:
MLFD MLPF&S
Class A $275 $3,030
Class D $382 $3,233
For the six months ended January 31, 1996, MLPF&S received
contingent deferred sales charges of $45,207 and $606 relating to
transactions in Class B and Class C Shares, respectively.
<PAGE>
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, MLPF&S, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended January 31, 1996 were $37,310,837 and
$36,535,059, respectively.
Net realized and unrealized gains as of January 31, 1996 were as
follows:
Realized Unrealized
Gains Gains
Long-term investments $259,424 $ 3,948,778
-------- -----------
Total $259,424 $ 3,948,778
======== ===========
As of January 31, 1996, net unrealized appreciation for Federal
income tax purposes aggregated $3,948,778 of which $3,978,297
related to appreciated securities and $29,519 related to depreciated
securities. The aggregate cost of investments at January 31, 1996
for Federal income tax purposes was $58,637,291.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest
transactions was $509,020 and $883,695 for the six months ended
January 31, 1996 and for the year ended July 31, 1995, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the
Six Months Ended Dollar
January 31, 1996 Shares Amount
Shares sold 32,685 $ 343,090
Shares issued to shareholders
in reinvestment of dividends 11,347 119,115
----------- -----------
<PAGE>
Total issued 44,032 462,205
Shares redeemed (129,795) (1,367,046)
----------- -----------
Net decrease (85,763) $ (904,841)
=========== ===========
Class A Shares for the
Year Ended Dollar
July 31, 1995 Shares Amount
Shares sold 84,037 $ 841,960
Shares issued to shareholders
in reinvestment of dividends 28,877 288,342
----------- -----------
Total issued 112,914 1,130,302
Shares redeemed (299,936) (2,960,930)
----------- -----------
Net decrease (187,022) $(1,830,628)
=========== ===========
Class B Shares for the
Six Months Ended Dollar
January 31, 1996 Shares Amount
Shares sold 277,097 $ 2,921,496
Shares issued to shareholders
in reinvestment of dividends 52,376 550,484
----------- -----------
Total issued 329,473 3,471,980
Automatic conversion
of shares (885) (9,229)
Shares redeemed (359,801) (3,776,347)
----------- -----------
Net decrease (31,213) $ (313,596)
=========== ===========
Class B Shares for the Year Dollar
Ended July 31, 1995 Shares Amount
Shares sold 881,166 $ 8,833,126
Shares issued to shareholders
in reinvestment of dividends 120,152 1,200,171
----------- -----------
Total issued 1,001,318 10,033,297
Automatic conversion
of shares (102) (1,063)
Shares redeemed (1,116,312) (11,088,915)
----------- -----------
<PAGE>
Net decrease (115,096) $(1,056,681)
=========== ===========
Class C Shares for the Six Months Dollar
Ended January 31, 1996 Shares Amount
Shares sold 63,345 $ 662,719
Shares issued to shareholders
in reinvestment of dividends 660 6,955
----------- -----------
Total issued 64,005 669,674
Shares redeemed (13,453) (142,894)
----------- -----------
Net increase 50,552 $ 526,780
=========== ===========
Class C Shares for the Period Dollar
October 21, 1994++ to July 31, 1995 Shares Amount
Shares sold 80,718 $ 831,926
Shares issued to shareholders
in reinvestment of dividends 590 6,034
----------- -----------
Total issued 81,308 837,960
Shares redeemed (11,992) (123,319)
----------- -----------
Net increase 69,316 $ 714,641
=========== ===========
[FN]
++Commencement of Operations.
Class D Shares for the Six Months Dollar
Ended January 31, 1996 Shares Amount
Shares sold 22,382 $ 238,410
Shares issued to shareholders
in reinvestment of dividends 843 8,876
Automatic conversion of shares 885 9,229
----------- -----------
Total issued 24,110 256,515
Shares redeemed (6,881) (73,878)
----------- -----------
Net increase 17,229 $ 182,637
=========== ===========
<PAGE>
Class D Shares for the Period Dollar
October 21, 1994++ to July 31, 1995 Shares Amount
Shares sold 136,785 $ 1,320,711
Shares issued to shareholders
in reinvestment of dividends 3,016 30,556
Automatic conversion of shares 102 1,063
----------- -----------
Total issued 139,903 1,352,330
Shares redeemed (6,144) (63,357)
----------- -----------
Net increase 133,759 $ 1,288,973
=========== ===========
[FN]
++Commencement of Operations.
5. Capital Loss Carryforward:
At July 31, 1995, the Fund had a net capital loss carryforward of
approximately $981,000, all of which expires in 2003. This amount
will be available to offset like amounts of any future taxable
gains.
