CMA
CMA Arizona
Municipal Money Fund
Semi-Annual Report
September 30, 1996
MERRILL LYNCH BULL LOGO
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, which will fluctuate. The Fund
seeks to maintain a consistent $1.00 net asset value per share,
although this cannot be assured. An investment in the Fund is
neither insured nor guaranteed by the US Government. Statements and
other information herein are as dated and are subject to change.
<PAGE>
CMA Arizona
Municipal Money Fund
Box 9011
Princeton, NJ 08543-9011
Printed on post-consumer recycled paper
TO OUR SHAREHOLDERS:
For the six-month period ended September 30, 1996, CMA Arizona
Municipal Money Fund paid shareholders a net annualized yield of
2.81%*. As of September 30, 1996, the Fund's 7-day yield was 2.98%.
The Environment
Although the US stock and bond markets rallied late in the six-month
period ended September 30, 1996, much of the period was marked by
volatility in the capital markets. The US economy demonstrated
surprising resilience during the first half of the year. As a
result, when economic data releases appeared to indicate that the US
economy was expanding at a stronger-than-expected (and potentially
inflationary) rate, investors focused on the increasing possibility
of monetary policy tightening by the Federal Reserve Board. During
these periods, stock prices declined and long-term interest rates
moved higher. However, with inflationary pressures still under
control, the US central bank did not tighten monetary policy at its
September 24 meeting. This development, coupled with several
economic data releases that showed growth was at or below
expectations, helped to assuage investors' concerns about an
overheating economy. Stock and bond prices improved, with stock
market averages reaching historic high levels.
<PAGE>
The shifts in perceptions were exemplified by investors' reactions
to the release of recent employment reports. Inflationary concerns
were heightened in early July with the release of a stronger-than-
expected employment report for June. However, more subdued job
growth and decelerating hourly wage gains were subsequently reported
for the month of July. Although the employment report for August
showed that unemployment had dropped to its lowest level since 1989,
these results were generally in line with expectations, and were
received favorably by investors. The greatest boost in investor
confidence occurred in early October with the release of September's
employment report, which showed a slight increase in unemployment.
[FN]
*Based on a constant investment throughout the period, with
dividends compounded daily, and reflecting a net return to the
investor after all expenses.
Investors will continue to monitor economic data releases to
determine the probable direction of the US economy. The outcome of
the upcoming November election will also increasingly influence
investor psychology in the weeks ahead.
Investment Outlook and Strategy
During the six-month period ended September 30, 1996, the State of
Arizona's economy performed quite well. For the May--July months,
the State ranked sixth among the 50 states in terms of employment
growth. In addition, manufacturing employment reported a 3.1% gain
over the same period last year. Moreover, through July 31, 1996,
Arizona ranked fourth in manufacturing growth in the United States.
The State also performed relatively well by adding 6,400
manufacturing jobs, compared to national manufacturing payrolls
which plunged by 319,000 jobs for the same period. The fastest
growing area remains metropolitan Phoenix which reported employment
growth of 4.7% for the first six months of 1996. These employment
figures are very impressive considering that for the first three
years of the decade, Arizona ranked 28th, 20th and 22nd,
respectively, in terms of employment growth. However, as the second
half of the year began, growing levels of consumer debt and rising
interest rates were both potential concerns for the State's economy.
In addition, residential construction, which was positive for an
extended period, is expected to moderate because of slowing
population growth and the absence of any pent-up demand. Ultimately,
state officials feel these factors will cause the Arizona economy to
grow more slowly for the remainder of 1996.
<PAGE>
During the six-month period ended September 30, 1996, the majority
of economic data reported pointed to strong domestic growth. For
example, final revision to second-quarter gross domestic product
showed the economy grew at an impressive 4.7% during the period.
Therefore, with the increasing probability that the Federal Reserve
Board would tighten monetary policy, we opted to maintain a
relatively short average portfolio maturity in the 30-day range for
the first half of the September period. In addition, during most of
the period, we found it difficult to extend the average portfolio
maturity of the Fund because Arizona's short-term, fixed-rate supply
is traditionally issued during August. For example, through July 31,
1996, the State did not issue any short-term, fixed-rate issues.
Therefore, we used the Fund's commercial paper to modestly extend
its maturity when appropriate, while awaiting the expected issuance
toward the end of the period. Moreover, the purchase of fixed-rate
notes at attractive levels during last year's traditional supply
period benefited the Fund as cash inflows in early June and July
caused interest rates on variable rate demand notes to underperform
those on fixed-rate products.
As we entered the second half of the period ended September 30,
1996, it became evident that the Federal Reserve Board was
comfortable with the fact that current economic growth was not
strong enough to cause any significant inflationary pressures.
Furthermore, with traditional short-term supply entering the market
during late July and August, the short-term tax-exempt yield curve
steepened with interest rates on one-year paper approaching 4%.
Consequently, we expect monetary policy to be on hold for awhile,
and extended the Fund's average portfolio maturity to the 60-day
range by mid-September 1996. During the six-month period ended
September 30, 1996, the State of Arizona's short-term issuance
totaled $94 million. Diversification and credit quality remain
important to the Fund, and we will continue to closely monitor the
everchanging marketplace.
In Conclusion
We thank you for your support of CMA Arizona Municipal Money Fund,
and we look forward to serving your investment needs in the future.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
<PAGE>
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Darrin J. San Fillippo)
Darrin J. San Fillippo
Vice President and Portfolio Manager
October 29, 1996
Portfolio Abbreviations for CMA Arizona Municipal Money Fund
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
CP Commercial Paper
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
TAN Tax Anticipation Notes
UPDATES Unit Priced Demand Adjustable Tax-Exempt Securities
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
CMA ARIZONA MUNICIPAL MONEY FUND
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1996 (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
Arizona-- $ 6,200 Apache County, Arizona, IDA, IDR (Tucson Electric Power-Springerville
95.9% Project), VRDN, 3.85% due 12/15/2018 (a) $ 6,200
5,400 Arizona Educational Loan Marketing Corp., Educational Loan Revenue Bonds,
VRDN, AMT, Series A, 4% due 3/01/2015 (a)(c) 5,400
290 Arizona Health Facilities Authority Revenue Bonds (Arizona Voluntary
Hospital Federation), VRDN, Series B, 3.90% due 10/01/2015 (a)(d) 290
<PAGE>
1,100 Arizona State Transportation Board, Highway Revenue Bonds, 7.80% due 7/01/1997 1,131
6,000 Cochise County, Arizona, Pollution Control Corp., Solid Waste Disposal Revenue
Bonds (Arizona Electric Power Cooperative, Inc. Project), AMT, 3.70% due
3/01/1997 6,000
13,900 Coconino County, Arizona, Pollution Control Corp., Arizona Public Service
Revenue Bonds (Navajo Project), VRDN, AMT, Series A, 4.10% due 10/01/2029 (a) 13,900
1,400 Coconino County, Arizona, Unified School District No. 1 (Flagstaff), TAN,
Series A, 4.40% due 7/31/1997 (b) 1,405
Maricopa County, Arizona, IDA, M/F Housing Revenue Bonds, VRDN, AMT (a):
3,700 (Privado Park Apartments Project), Series A, 4% due 6/01/2034 3,700
4,000 (Vista Ventana Apartments Project), Series D, 4% due 6/01/2034 4,000
Maricopa County, Arizona, Pollution Control Corp., PCR, CP (Southern California
Edison--Palo Verde Project):
3,300 Series C, 3.60% due 10/17/1996 3,300
500 Series D, 3.50% due 10/11/1996 500
1,100 Series E, 3.50% due 10/11/1996 1,100
1,500 Series G, 3.60% due 10/17/1996 1,500
12,000 Maricopa County, Arizona, Pollution Control Corp., PCR, Refunding (El Paso
Electric), VRDN, Series A, 4.05% due 8/01/2015 (a) 12,000
Maricopa County, Arizona, School District:
1,000 No. 5 (Issac Elementary), Series A, 4.25% due 7/31/1997 (b) 1,002
4,300 No. 6 (Washington Elementary), UT, Series A, 7% due 7/01/1997 (e) 4,396
Maricopa County, Arizona, Unified School District, TAN, Series A:
4,300 No. 41 (Gilbert), 4.45% due 7/31/1997 4,314
5,500 No. 97 (Deer Valley), 4.45% due 7/31/1997 5,517
5,300 Mesa, Arizona, Municipal Development Corp., Special Tax, UPDATES, CP,
3.50% due 10/16/1996 (a) 5,300
Mohave County, Arizona, IDA, IDR (Citizens Utilities), CP, AMT:
5,400 3.70% due 10/15/1996 5,400
4,500 3.75% due 12/10/1996 4,500
2,100 Phoenix, Arizona, Civic Improvement Corp., Excise Tax Revenue Bonds
(Airport Improvements), VRDN, AMT, 3.95% due 6/01/2020 (a) 2,100
Phoenix, Arizona, IDA, M/F Housing Revenue Bonds, VRDN (a):
4,000 Refunding (Paradise Lakes Apartments Project), 4.05% due 7/01/2025 4,000
6,070 (Sunset Ranch), 3.75% due 12/01/2027 6,070
</TABLE>
<TABLE>
CMA ARIZONA MUNICIPAL MONEY FUND
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1996 (CONCLUDED) (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
Arizona $ 1,650 Pima County, Arizona, IDA, Industrial Revenue Refunding Bonds (Tucson
(concluded) Retirement Center), VRDN, 3.625% due 1/01/2009 (a) $ 1,650
Pima County, Arizona, IDA, M/F Housing Revenue Bonds, VRDN, AMT (a):
1,000 (Quail Ridge Apartments), Series B, 4% due 6/01/2034 1,000
1,900 (Saguaro Crest Apartments), Series A, 4% due 6/01/2034 1,900
<PAGE>
6,300 Pima County, Arizona, IDA, Revenue Refunding Bonds (Guaranteed Mortgage
Obligation), VRDN, AMT, Series A, 4.10% due 6/30/2021 (a) 6,300
2,000 Pinal County, Arizona, IDA, Hospital Revenue Bonds (Casa Grande Regional
Medical Center), VRDN, 3.75% due 12/01/2022 (a) 2,000
Salt River Project, Arizona, Agricultural Improvement and Power Distribution,
Electric System Revenue Bonds (Promissary Notes), CP:
1,900 3.70% due 10/01/1996 1,900
1,300 3.65% due 12/16/1996 1,300
1,200 Special Fund of Industrial Community, Arizona, Tax-Exempt COP, Refunding,
CP, 3.55% due 10/17/1996 (d) 1,200
1,000 Tempe, Arizona, IDA, M/F Revenue Bonds (Elliots Crossing), VRDN, 3.80% due
10/01/2008 (a) 1,000
1,000 Tempe, Arizona, Unified High School District No. 213, Refunding, 4.20% due
7/01/1997 (d) 1,003
3,100 Yavapai County, Arizona, IDA, IDR (Citizen Utilities), CP, AMT, 3.75%
due 10/16/1996 3,100
500 Yuma, Arizona, IDA, IDR (Ardco Inc. Project), VRDN, 4% due 7/01/2003 (a) 500
3,840 Yuma, Arizona, IDA, M/F Housing Revenue Bonds (El Encanto Apartments),
VRDN, Series A, 3.75% due 11/01/2008 (a) 3,840
Puerto Rico-- Puerto Rico Commonwealth, Government Development Bank:
2.7% 1,400 CP, 3.50% due 10/15/1996 1,400
2,200 Refunding, VRDN, 3.50% due 12/01/2015 (a) 2,200
Total Investments (Cost--$133,318*)--98.6% 133,318
Other Assets Less Liabilities--1.4% 1,827
--------
Net Assets--100.0% $135,145
========
<FN>
(a)The interest rate is subject to change periodically based on
certain indexes. The interest rate shown is the interest rate in
effect at September 30, 1996.
(b)Bank Qualified.
(c)MBIA Insured.
(d)FGIC Insured.
(e)AMBAC Insured.
*Cost for Federal income tax purposes.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CMA ARIZONA MUNICIPAL MONEY FUND
STATEMENT OF ASSETS AND LIABILITIES AS OF SEPTEMBER 30, 1996
<S> <C> <C>
Assets:
Investments, at value (identified cost--$133,318,071) (Note 1a) $ 133,318,071
Cash 93,775
Interest receivable 550,503
Deferred organization expenses (Note 1d) 14,087
Prepaid registration fees and other assets (Note 1d) 1,311,888
-------------
Total assets 135,288,324
-------------
Liabilities:
Payables:
Investment adviser (Note 2) $ 59,606
Distributor (Note 2) 33,529
Beneficial interest redeemed 2 93,137
-------------
Accrued expenses and other liabilities 50,567
-------------
Total liabilities 143,704
-------------
Net Assets $ 135,144,620
=============
Net Assets Consist of:
Shares of beneficial interest, $0.10 par value, unlimited number of shares authorized $ 13,518,057
Paid-in capital in excess of par 121,662,445
Accumulated realized capital losses--net (Note 4) (35,882)
-------------
Net Assets--Equivalent to $1.00 per share based on 135,180,567 shares of beneficial
interest outstanding $ 135,144,620
=============
See Notes to Financial Statements.
</TABLE>
<TABLE>
CMA ARIZONA MUNICIPAL MONEY FUND
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996
<S> <C> <C>
Investment Income (Note 1c):
Interest and amortization of premium earned $ 2,516,895
<PAGE>
Expenses:
Investment advisory fees (Note 2) $ 352,961
Distribution fees (Note 2) 87,022
Registration fees (Note 1d) 22,842
Professional fees 20,797
Accounting services (Note 2) 20,436
Transfer agent fees (Note 2) 10,565
Printing and shareholder reports 6,861
Custodian fees 6,545
Amortization of organization expenses (Note 1d) 3,514
Pricing fees 2,207
Trustees' fees and expenses 626
Other 1,197
-------------
Total expenses 535,573
-------------
Investment income--net 1,981,322
Realized Loss on Investments--Net (Note 1c) (29,188)
-------------
Net Increase in Net Assets Resulting from Operations $ 1,952,134
=============
See Notes to Financial Statements.
</TABLE>
<TABLE>
CMA ARIZONA MUNICIPAL MONEY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Six For the
Months Ended Year Ended
September 30, March 31,
Increase (Decrease) in Net Assets: 1996 1996
<S> <C> <C>
Operations:
Investment income--net $ 1,981,322 $ 4,017,445
Realized loss on investments--net (29,188) (6,694)
------------- -------------
Net increase in net assets resulting from operations 1,952,134 4,010,751
------------- -------------
Dividends & Distributions to Shareholders (Note 1e):
Investment income--net (1,981,322) (4,017,445)
Realized gain on investments--net -- (2,500)
------------- -------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (1,981,322) (4,019,945)
------------- -------------
<PAGE>
Beneficial Interest Transactions (Note 3):
Net proceeds from sale of shares 317,592,115 527,733,700
Net asset value of shares issued to shareholders in reinvestment of dividends
and distributions (Note 1e) 1,981,277 4,019,977
------------- -------------
319,573,392 531,753,677
Cost of shares redeemed (321,919,833) (497,941,093)
------------- -------------
Net increase (decrease) in net assets derived from beneficial interest transactions (2,346,441) 33,812,584
------------- -------------
Net Assets:
Total increase (decrease) in net assets (2,375,629) 33,803,390
Beginning of period 137,520,249 103,716,859
------------- -------------
End of period $ 135,144,620 $ 137,520,249
============= =============
See Notes to Financial Statements.
</TABLE>
<TABLE>
CMA ARIZONA MUNICIPAL MONEY FUND
FINANCIAL HIGHLIGHTS
<CAPTION>
For the For the
Six Period
The following per share data and ratios have been derived Months Feb. 8,
from information provided in the financial statements Ended 1993++ to
Sept. 30, For the Year Ended March 31, March 31,
Increase (Decrease) in Net Asset Value: 1996 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Investment income--net .01 .03 .03 .02 .002
-------- -------- -------- -------- --------
Total from investment operations .01 .03 .03 .02 .002
-------- -------- -------- -------- --------
Less dividends from investment income--net (.01) (.03) (.03) (.02) (.002)
-------- -------- -------- -------- --------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Investment Return 2.81%* 3.36% 2.83% 1.90% 1.78%*
======== ======== ======== ======== ========
<PAGE>
Ratios to Average Net Assets:
Expenses, net of reimbursement .76%* .58% .54% .59% .46%*
======== ======== ======== ======== ========
Expenses .76%* .77% .85% .98% 1.15%*
======== ======== ======== ======== ========
Investment income--net 2.80%* 3.27% 2.84% 1.89% 1.86%*
======== ======== ======== ======== ========
Supplemental Data:
Net assets, end of period (in thousands) $135,145 $137,520 $103,717 $ 73,414 $ 41,437
======== ======== ======== ======== ========
<FN>
*Annualized.
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
CMA ARIZONA MUNICIPAL MONEY FUND
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
CMA Arizona Municipal Money Fund (the "Fund") is part of CMA 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 following is a summary of significant
accounting policies followed by the Fund.
(a) Valuation of investments--Investments are valued at amortized
cost, which approximates market value. For the purpose of valuation,
the maturity of a variable rate demand instrument is deemed to be
the next coupon date on which the interest rate is to be adjusted.
In the case of a floating rate instrument, the remaining maturity is
the demand notice payment period.
(b) 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.
<PAGE>
(c) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income (including amortization of
premium and discount) is recognized on the accrual basis. Realized
gains and losses on security transactions are determined on the
identified cost basis.
(d) 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.
(e) Dividends and distributions to shareholders--The Fund declares
dividends daily and reinvests daily such dividends (net of non-
resident alien tax withheld) in additional fund shares at net asset
value. Dividends are declared from the total of net investment
income, excluding discounts earned other than original issue
discounts. Net realized capital gains, if any, are normally
distributed annually after deducting prior years' loss carryforward.
The Fund may distribute capital gains more frequently than annually
in order to maintain the Fund's net asset value at $1.00 per share.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM" or "Adviser"). 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.
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: 0.50%
of the first $500 million of average daily net assets; 0.425% of
average daily net assets in excess of $500 million but not exceeding
$1 billion; and 0.375% of average daily net assets in excess of $1
billion.
Pursuant to the Distribution and Shareholder Servicing Plan in
compliance with Rule 12b-1 under the Investment Company Act of 1940,
Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S") receives a
distribution fee from the Fund at the end of each month at the
annual rate of 0.125% of average daily net assets of the Fund. The
distribution fee is to compensate MLPF&S financial consultants and
other directly involved branch office personnel for selling shares
of the Fund and for providing direct personal services to
shareholders. The distribution fee is not compensation for the
administrative and operational services rendered to the Fund by
MLPF&S in processing share orders and administering shareholder
accounts.
<PAGE>
CMA ARIZONA MUNICIPAL MONEY FUND
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
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, and/or ML & Co.
3. Shares of Beneficial Interest:
The number of shares purchased and redeemed during the period
corresponds to the amounts included in the Statements of Changes in
Net Assets for net proceeds from sale of shares and cost of shares
redeemed, respectively, since shares are recorded at $1.00 per
share.
4. Capital Loss Carryforward:
At March 31, 1996, the Fund had a net capital loss carryforward of
approximately $6,000, all of which expires in 2004. This amount will
be available to offset like amounts of any future taxable gains.
CMA ARIZONA
MUNICIPAL MONEY FUND
Officers and Trustees
Arthur Zeikel--President and Trustee
Ronald W. Forbes--Trustee
Cynthia A. Montgomery--Trustee
Charles C. Reilly--Trustee
Kevin A. Ryan--Trustee
Richard R. West--Trustee
Terry K. Glenn--Executive Vice President
Vincent R. Giordano--Senior Vice President
Edward J. Andrews--Vice President
Donald C. Burke--Vice President
Peter J. Hayes--Vice President
Kenneth A. Jacob--Vice President
Darrin J. San Fillipo--Vice President
Kevin A. Schiatta--Vice President
Helen Marie Sheehan--Vice President
Gerald M. Richard--Treasurer
Robert Harris--Secretary
<PAGE>
Custodian
State Street Bank and Trust Company
P.O. Box 1713
Boston, Massachusetts 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 221-7210*
[FN]
*For inquiries regarding your CMA account,
call (800) CMA-INFO [(800) 262-4636].
