MERRILL LYNCH
COLORADO
MUNICIPAL
BOND FUND
FUND LOGO
Semi-Annual Report
January 31, 2000
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 Colorado
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
Merrill Lynch Colorado Municipal Bond Fund
January 31, 2000
TO OUR SHAREHOLDERS
The Municipal Market Environment
During the six months ended January 31, 2000, continued strong
domestic growth, gradual improvement in foreign economies and
investor concerns regarding future inflationary pressures pushed
long-term fixed-income bond yields higher. The Federal Reserve Board
continued to raise short-term interest rates in August and November
1999 as well as just after the period's close, seeking to moderate
US economic growth and maintain the existing benign inflationary
environment. US economic growth, in part intensified by Year 2000
preparations, grew 5.8% during the last fiscal quarter of 1999 and
had an annual rate of 4.1% for 1999. A number of inflationary
indicators have also begun to signal some increase in price
pressures.
However, most investors believe that the Federal Reserve Board will
be extremely vigilant in preventing such pressures from any material
escalation. US Treasury bond yields responded by rising
approximately 60 basis points (0.60%) by mid-January 2000. A strong
rally, largely based upon an expected significant reduction in the
future supply of US Treasury 30-year maturity bonds, pushed yields
lower to 6.50% at January 31, 2000. Over the last six months, yields
on 30-year US Treasury bonds rose approximately 40 basis points.
The tax-exempt bond market was also under pressure throughout the
entire period. Despite receiving more than $30 billion in coupon
payments, bond maturities and proceeds from early redemptions in
December and January, overall investor demand has diminished. It is
likely that the returns generated by the US equity market have
continued to attract investor attention and have left little demand
for competing investment alternatives. At January 31, 2000, the long-
term tax-exempt revenue bond yield, as measured by the Bond Buyer
Revenue Index, was 6.34%, an increase of nearly 70 basis points over
the last six months.
Issuance by municipalities has significantly declined in recent
months. Over the last six months, less than $100 billion in long-
term tax-exempt bonds were issued, representing a decline of over
20% compared to the same period a year ago. During the last three
months, less than $45 billion in long-term bonds were issued by
various municipalities. This most recent quarterly issuance is 30%
below the level of the January 31, 1999 quarter. Additionally,
during January 2000, less than $8 billion in municipal debt was
underwritten, down more than 50% from January 1999 levels. This
represents the lowest monthly issuance in over five years. Toward
the end of 1999, consensus estimates for 2000 annual issuance were
in the $210 billion--$215 billion range. January's underwritings, as
well as those expected to be issued in the near future, have led
some analysts to revise their forecasts to the $190 billion range.
We believe an overall reduction in bond supply in the coming year
should help support the municipal bond market's overall technical
position. While tax-exempt bond yields, which are at their highest
level in over three years, have attracted significant retail
investor interest, institutional demand declined sharply. Long-term
municipal mutual funds have seen consistent outflows in recent
months as the yields of individual securities rose faster than those
of larger, more diverse mutual funds. During the six months ended
January 31, 2000, tax-exempt mutual funds have had net redemptions
of approximately $9 billion. Also, the demand from property and
casualty insurance companies has weakened as a result of the losses
and anticipated losses incurred from a series of damaging storms
across much of the eastern United States. Additionally, many
institutional investors who have in recent years been attracted to
the municipal bond market by historically attractive tax-exempt bond
yield ratios of over 90%, found other asset classes even more
attractive. Even with a reduced supply position, tax-exempt issuers
have been forced to repeatedly raise municipal bond yields in an
attempt to attract adequate demand. We believe a reduced bond supply
going forward is likely to promote a more closely balanced
supply/demand structure and foster a more stable tax-exempt interest
rate environment.
Looking ahead, it appears to us that long-term tax-exempt bond
yields will remain under pressure, trading in a broad range centered
around current levels. Investors are also likely to remain concerned
regarding future action by the Federal Reserve Board in early 2000.
Any improvement in bond prices may be contingent upon weakening in
both US employment growth and consumer spending. The 100 basis point
Merrill Lynch Colorado Municipal Bond Fund
January 31, 2000
rise in US Treasury bond yields seen thus far could negatively
affect US economic growth. The US housing market is likely to be
among the first sectors to be affected, as some declines have
already been evidenced because of higher mortgage rates. We believe
it is also unrealistic to expect double-digit returns in US equity
markets to continue indefinitely. Much of the US consumer's wealth
is tied to recent stock market appreciation. Any slowing in these
incredible growth rates may reduce consumer spending. We believe
that these factors suggest that the worst of the recent increase in
bond yields has passed and stable, if not slightly improving, bond
prices may be expected.
Portfolio Strategy
During the six months ended January 31, 2000, we initially retained
a defensive position toward the municipal bond market, then
gradually moved to a neutral stance. We accomplished this shift by
swapping bonds with shorter maturties and/or higher coupons for
bonds with longer maturities and/or lower coupons. Our strategy has
been to seek to enhance income and to take advantage of the highest
absolute municipal yields. During the period, we also sought to
capitalize on market discrepancies, caused in part by Year 2000
concerns, as we purchased bonds we believed to be undervalued
combined with selling bonds we believed to be overvalued.
Colorado bond issuance was comparatively heavy during the six-month
period ended January 31, 2000. Colorado bond prices traded more like
those at the national level because of the heavy issuance. However,
the strong issuance did present us with opportunities to change the
Fund's structure, which we believe will benefit the Fund.
Looking ahead, we intend to remain fully invested in the municipal
market in an effort to enhance shareholder income. We do not expect
to significantly alter our present stance toward the market given
the current economic backdrop. We will continue to take advantage of
any opportunities in the municipal marketplace that we believe is
appropriate.
In Conclusion
We appreciate your ongoing interest in Merrill Lynch Colorado
Municipal Bond Fund, and we look forward to assisting you with your
financial needs in the months and years ahead.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Michael Kalinoski)
Michael Kalinoski
Vice President and Portfolio Manager
March 6, 2000
We are pleased to announce that Michael A. Kalinoski is responsible
for the day-to-day management of Merrill Lynch Colorado Municipal
Bond Fund. Mr. Kalinoski has been employed by Merrill Lynch Asset
Management, L.P. since 1999 as Vice President and Portfolio Manager.
Mr. Kalinoski was previously employed from 1993 to 1999 as a
municipal trader with Strong Capital Management.
Merrill Lynch Colorado Municipal Bond Fund
January 31, 2000
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. (There is no initial
sales charge for automatic share conversions.)
* 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. Figures shown in the "Recent Performance
Results" and "Average Annual Total Return" tables assume
reinvestment of all dividends and capital gains distributions at net
asset value on the payable date. Investment return and principal
value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Dividends paid to each
class of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders. The Fund's Investment Adviser voluntarily waived a
portion of its management fee. Without such waiver, the Fund's
performance would have been lower.
<TABLE>
Recent Performance Results*
<CAPTION>
6 Month 12 Month Since Inception Standardized
As of January 31, 2000 Total Return Total Return Total Return 30-Day Yield
<S> <C> <C> <C> <C>
ML Colorado Municipal Bond Fund Class A Shares -3.47% -6.69% +24.11% 4.44%
ML Colorado Municipal Bond Fund Class B Shares -3.72 -7.16 +20.27 4.12
ML Colorado Municipal Bond Fund Class C Shares -3.76 -7.15 +26.81 4.02
ML Colorado Municipal Bond Fund Class D Shares -3.52 -6.78 +30.32 4.35
*Investment results shown do not reflect sales charges; results
would be lower if a sales charge was included. Total investment
returns are based on changes in net asset values for the periods
shown, and assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date. The Fund's
since inception total return periods are from 11/26/93 for Class A &
Class B Shares and from 10/21/94 for Class C & Class D Shares.
</TABLE>
Merrill Lynch Colorado Municipal Bond Fund
January 31, 2000
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/99 -4.96% -8.76%
Five Years Ended 12/31/99 +5.98 +5.12
Inception (11/26/93)
through 12/31/99 +3.73 +3.03
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/99 -5.44% -9.07%
Five Years Ended 12/31/99 +5.44 +5.44
Inception (11/26/93)
through 12/31/99 +3.20 +3.20
*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 12/31/99 -5.43% -6.34%
Five Years Ended 12/31/99 +5.36 +5.36
Inception (10/21/94)
through 12/31/99 +4.83 +4.83
*Maximum contingent deferred sales charge is 1% and is reduced
to 0% after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 12/31/99 -5.05% -8.85%
Five Years Ended 12/31/99 +5.87 +5.01
Inception (10/21/94)
through 12/31/99 +5.38 +4.55
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch Colorado Municipal Bond Fund
January 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face
Ratings Ratings Amount Issue Value
Colorado--99.1%
<S> <S> <C> <S> <C>
AAA Aaa $1,000 Arapahoe County, Colorado, Capital Improvement Trust Fund, Highway Revenue
Bonds (E-470 Vehicle Registration), 6.15% due 8/31/2026 (e) $ 996
Arvada, Colorado, Sales and Use Tax Revenue Refunding and Improvement Bonds (b):
AAA NR* 575 6.25% due 12/01/2002 (f) 598
AAA Aaa 600 6.25% due 12/01/2017 611
AAA Aaa 500 Bayfield, Colorado, Joint School District No. 10 Revenue Bonds, GO, 6.65%
due 6/01/2005 (e)(f) 539
AAA NR* 555 Boulder County, Colorado, M/F Mortgage Revenue Bonds (Sinton Apartments Project),
AMT, 6.625% due 7/01/2034 (c) 561
AAA Aaa 500 Clear Creek, Colorado, School District No. 1, 6.25% due 12/01/2014 (d) 522
Colorado HFA, Revenue Bonds (S/F Program), AMT:
NR* Aa2 620 Senior Series A2, 7.50% due 4/01/2031 673
NR* Aa2 1,000 Senior Series B2, 6.80% due 4/01/2030 1,036
Colorado HFA, Revenue Refunding Bonds (S/F Program):
NR* Aa2 1,000 Senior Series A3, 6.50% due 11/01/2029 1,029
NR* Aa2 930 Senior Series B3, 6.80% due 11/01/2028 978
NR* Aaa 1,000 Colorado Health Facilities Authority, Hospital Revenue Refunding Bonds
(Poudre Valley Health Care), Series A, 5.625% due 12/01/2019 (d) 924
AA Aa2 1,000 Colorado Springs, Colorado, Utilities Revenue Bonds, Sub-Lien Improvement,
Series A, 5.75% due 11/15/2028 945
AA Aa2 500 Colorado Springs, Colorado, Utilities Revenue Refunding Bonds, Series A,
6.50% due 11/15/2015 523
AAA Aaa 1,000 Colorado Water Resource Power Development Authority, Clean Water Revenue Bonds,
Series A, 6.30% due 9/01/2014 1,036
BBB+ Baa1 500 Denver, Colorado, City and County Airport Revenue Bonds, AMT, Series D,
7.75% due 11/15/2013 568
Denver, Colorado, City and County Airport Revenue Refunding Bonds (e):
NR* Aaa 1,500 RITR, Series 13, 6.87% due 11/15/2023 (g) 1,114
AAA Aaa 1,500 Series E, 5.25% due 11/15/2023 1,305
AA- Aa3 2,000 Denver, Colorado, City and County School District No. 1, GO, Refunding,
Series A, 6.50% due 12/01/2010 2,182
</TABLE>
PORTFOLIO ABBREVIATIONS
To simplify the listings of Merrill Lynch Colorado 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 Agency
IDR Industrial Development Revenue Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RITR Residual Interest Trust Receipts
S/F Single-Family
VRDN Variable Rate Demand Notes
Merrill Lynch Colorado Municipal Bond Fund
January 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face
Ratings Ratings Amount Issue Value
Colorado (concluded)
<S> <S> <C> <S> <C>
BB+ Baa3 $ 500 Denver, Colorado, City and County Special Facilities, Airport Revenue Bonds
(United Air Lines Project), AMT, Series A, 6.875% due 10/01/2032 $ 484
AA- Aa3 1,000 El Paso County, Colorado, School District No. 11, GO (Colorado Springs), 6.50%
due 12/01/2010 1,079
NR* Aa1 1,000 El Paso County, Colorado, School District No. 12, GO (Cheyenne Mountain), 6.65%
due 9/15/2005 (f) 1,081
NR* NR* 850 Highlands Ranch, Colorado, Metropolitan District No. 4, GO, Refunding, Series A,
6.30% due 12/01/2017 831
AA NR* 1,500 Interlocken, Colorado, GO, Refunding (Metropolitan District), Series A, 5.75%
due 12/15/2019 1,410
AAA Aaa 240 La Plata County, Colorado, School District No. 9 (R Durango), GO, 6.60%
due 11/01/2017 (b) 248
AAA VMIG1++ 200 Moffat County, Colorado, PCR, Refunding (Pacificorp Projects), VRDN, 3.60%
due 5/01/2013 (a)(h) 200
NR* A2 750 Pitkin County, Colorado, GO, Refunding and Improvement Bonds, 6.875% due
12/01/2024 807
A1+ NR* 400 Pitkin County, Colorado, IDR, Refunding (Aspen Skiing Company Project), VRDN, AMT,
Series B, 3.80% due 4/01/2014 (h) 400
AAA Aaa 500 Westminster, Colorado, COP, 5.625% due 9/01/2019 (e) 470
Puerto Rico--1.7%
A1+ VMIG1++ 400 Puerto Rico Commonwealth Highway and Transportation Authority, Transportation
Revenue Refunding Bonds, VRDN, Series A, 2.85% due 7/01/2028 (a)(h) 400
Total Investments (Cost--$24,036)--100.8% 23,550
Liabilities in Excess of Other Assets--(0.8%) (191)
-------
Net Assets--100.0% $23,359
=======
(a)AMBAC Insured.
(b)FGIC Insured.
(c)FHA Insured.
(d)FSA Insured.
(e)MBIA Insured.
(f)Prerefunded.
(g)The interest rate is subject to change periodically and inversely
based upon prevailing market rates. The interest rate shown is the
rate in effect at January 31, 2000.
(h)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, 2000.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Colorado Municipal Bond Fund
January 31, 2000
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of January 31, 2000
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$24,035,807) $ 23,549,620
Cash 43,163
Receivables:
Interest $ 362,143
Beneficial interest sold 309 362,452
-------------
Prepaid registration fees and other assets 25,798
-------------
Total assets 23,981,033
-------------
Liabilities: Payables:
Securities purchased 522,687
Dividends to shareholders 20,585
Distributor 5,264
Investment adviser 4,700
Beneficial interest redeemed 336 553,572
-------------
Accrued expenses and other liabilities 68,721
-------------
Total liabilities 622,293
-------------
Net Assets: Net assets $ 23,358,740
=============
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 84,903
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 127,214
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 7,423
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 36,480
Paid-in capital in excess of par 24,937,206
Accumulated realized capital losses on investments--net (1,348,299)
Unrealized depreciation on investments--net (486,187)
-------------
Net assets $ 23,358,740
=============
Net Asset Value: Class A--Based on net assets of $7,746,944 and 849,026 shares of
beneficial interest outstanding $ 9.12
=============
Class B--Based on net assets of $11,607,623 and 1,272,140 shares of
beneficial interest outstanding $ 9.12
=============
Class C--Based on net assets of $677,505 and 74,230 shares of
beneficial interest outstanding $ 9.13
=============
Class D--Based on net assets of $3,326,668 and 364,800 shares of
beneficial interest outstanding $ 9.12
=============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Colorado Municipal Bond Fund
January 31, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months Ended
January 31, 2000
<S> <S> <C> <C>
Investment Income: Interest and amortization of premium and discount earned $ 732,516
Expenses: Investment advisory fees $ 70,394
Accounting services 37,534
Professional fees 36,500
Account maintenance and distribution fees--Class B 32,506
Printing and shareholder reports 21,988
Registration fees 3,873
Transfer agent fees--Class B 2,761
Pricing fees 2,199
Account maintenance and distribution fees--Class C 2,164
Custodian fees 2,046
Account maintenance fees--Class D 1,789
Transfer agent fees--Class A 1,391
Trustees' fees and expenses 904
Transfer agent fees--Class D 600
Transfer agent fees--Class C 159
Other 913
-------------
Total expenses before reimbursement 217,721
Reimbursement of expenses (38,397)
-------------
Total expenses after reimbursement 179,324
-------------
Investment income--net 553,192
-------------
Realized & Realized loss on investments--net (555,200)
Unrealized Change in unrealized appreciation/depreciation on investments--net (946,872)
Loss on -------------
Investments--Net: Net Decrease in Net Assets Resulting from Operations $ (948,880)
=============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Colorado Municipal Bond Fund
January 31, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
January 31, July 31,
Increase (Decrease) in Net Assets: 2000 1999
<S> <S> <C> <C>
Operations: Investment income--net $ 553,192 $ 1,155,910
Realized gain (loss) on investments--net (555,200) 30,236
Change in unrealized appreciation/depreciation on
investments--net (946,872) (853,621)
------------ ------------
Net increase (decrease) in net assets resulting from operations (948,880) 332,525
------------ ------------
Dividends to Investment income--net:
Shareholders: Class A (191,407) (415,669)
Class B (266,626) (603,837)
Class C (14,396) (31,559)
Class D (80,763) (104,845)
------------ ------------
Net decrease in net assets resulting from dividends to
shareholders (553,192) (1,155,910)
------------ ------------
Beneficial Net increase (decrease) in net assets derived from beneficial
Interest interest transactions (2,650,160) 620,215
Transactions: ------------ ------------
Net Assets: Total decrease in net assets (4,152,232) (203,170)
Beginning of period 27,510,972 27,714,142
------------ ------------
End of period $ 23,358,740 $ 27,510,972
============ ============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Colorado Municipal Bond Fund
January 31, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
Class A
For the
Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
Jan. 31, For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.67 $ 9.96 $ 9.89 $ 9.45 $ 9.41
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .22 .44 .47 .47 .50
Realized and unrealized gain (loss) on
investments--net (.55) (.29) .07 .44 .04
-------- -------- -------- -------- --------
Total from investment operations (.33) .15 .54 .91 .54
-------- -------- -------- -------- --------
Less dividends from investment income--net (.22) (.44) (.47) (.47) (.50)
-------- -------- -------- -------- --------
Net asset value, end of period $ 9.12 $ 9.67 $ 9.96 $ 9.89 $ 9.45
======== ======== ======== ======== ========
Total Investment Based on net asset value per share (3.47%)++ 1.45% 5.56% 9.93% 5.83%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.11%* .98% .72% .62% .47%
Net Assets: ======== ======== ======== ======== ========
Expenses 1.41%* 1.31% 1.07% 1.05% 1.12%
======== ======== ======== ======== ========
Investment income--net 4.60%* 4.41% 4.69% 4.94% 5.24%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 7,747 $ 8,946 $ 9,336 $ 8,481 $ 8,777
Data: ======== ======== ======== ======== ========
Portfolio turnover 65.60% 79.49% 131.91% 108.22% 49.13%
======== ======== ======== ======== ========
<CAPTION>
Class B
For the
Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
Jan. 31, For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.67 $ 9.96 $ 9.89 $ 9.45 $ 9.41
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .19 .39 .42 .42 .45
Realized and unrealized gain (loss) on
investments--net (.55) (.29) .07 .44 .04
-------- -------- -------- -------- --------
Total from investment operations (.36) .10 .49 .86 .49
-------- -------- -------- -------- --------
Less dividends from investment income--net (.19) (.39) (.42) (.42) (.45)
-------- -------- -------- -------- --------
Net asset value, end of period $ 9.12 $ 9.67 $ 9.96 $ 9.89 $ 9.45
======== ======== ======== ======== ========
Total Investment Based on net asset value per share (3.72%)++ .94% 5.03% 9.38% 5.29%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.62%* 1.49% 1.23% 1.13% .98%
Net Assets: ======== ======== ======== ======== ========
Expenses 1.92%* 1.81% 1.58% 1.56% 1.62%
======== ======== ======== ======== ========
Investment income--net 4.09%* 3.90% 4.19% 4.43% 4.73%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 11,608 $ 14,059 $ 15,588 $ 18,987 $ 18,407
Data: ======== ======== ======== ======== ========
Portfolio turnover 65.60% 79.49% 131.91% 108.22% 49.13%
======== ======== ======== ======== ========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class C
For the
Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
Jan. 31, For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.68 $ 9.97 $ 9.89 $ 9.46 $ 9.41
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .19 .38 .41 .41 .44
Realized and unrealized gain (loss) on
investments--net (.55) (.29) .08 .43 .05
-------- -------- -------- -------- --------
Total from investment operations (.36) .09 .49 .84 .49
-------- -------- -------- -------- --------
Less dividends from investment income--net (.19) (.38) (.41) (.41) (.44)
-------- -------- -------- -------- --------
Net asset value, end of period $ 9.13 $ 9.68 $ 9.97 $ 9.89 $ 9.46
======== ======== ======== ======== ========
Total Investment Based on net asset value per share (3.76%)++ .84% 5.03% 9.15% 5.29%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.72%* 1.60% 1.33% 1.23% 1.09%
Net Assets: ======== ======== ======== ======== ========
Expenses 2.02%* 1.92% 1.68% 1.66% 1.72%
======== ======== ======== ======== ========
Investment income--net 3.98%* 3.79% 4.08% 4.33% 4.62%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 677 $ 826 $ 674 $ 578 $ 449
Data: ======== ======== ======== ======== ========
Portfolio turnover 65.60% 79.49% 131.91% 108.22% 49.13%
======== ======== ======== ======== ========
<CAPTION>
Class D
For the
Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
Jan. 31, For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.67 $ 9.96 $ 9.88 $ 9.45 $ 9.40
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .21 .43 .46 .46 .49
Realized and unrealized gain (loss) on
investments--net (.55) (.29) .08 .43 .05
-------- -------- -------- -------- --------
Total from investment operations (.34) .14 .54 .89 .54
-------- -------- -------- -------- --------
Less dividends from investment income--net (.21) (.43) (.46) (.46) (.49)
-------- -------- -------- -------- --------
Net asset value, end of period $ 9.12 $ 9.67 $ 9.96 $ 9.88 $ 9.45
======== ======== ======== ======== ========
Total Investment Based on net asset value per share (3.52%)++ 1.35% 5.56% 9.71% 5.84%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.21%* 1.10% .82% .72% .58%
Net Assets: ======== ======== ======== ======== ========
Expenses 1.51%* 1.42% 1.17% 1.15% 1.21%
======== ======== ======== ======== ========
Investment income--net 4.50%* 4.29% 4.59% 4.84% 5.13%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 3,327 $ 3,680 $ 2,116 $ 2,647 $ 2,173
Data: ======== ======== ======== ======== ========
Portfolio turnover 65.60% 79.49% 131.91% 108.22% 49.13%
======== ======== ======== ======== ========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Colorado Municipal Bond Fund
January 31, 2000
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Colorado Municipal Bond Fund (the "Fund") is part of
Merrill Lynch Multi-State Municipal Series Trust (the "Trust"). The
Fund is registered under the Investment Company Act of 1940 as a non-
diversified, open-end management investment company. The Fund's
financial statements are prepared in accordance with generally
accepted accounting principles, which may require the use of
management accruals and estimates. These unaudited financial
statements reflect all adjustments, which are, in the opinion of
management, necessary to a fair statement of the results for the
interim period presented. All such adjustments are of a normal
recurring nature. The Fund offers four classes of shares under the
Merrill Lynch Select 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.
* Financial futures contracts--The Fund may purchase or sell
financial futures contracts and options on such futures contracts
for the purpose of hedging the market risk on existing securities or
the intended purchase of securities. Futures contracts are contracts
for delayed delivery of securities at a specific future date and at
a specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to
the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin
and are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
Merrill Lynch Colorado Municipal Bond Fund
January 31, 2000
(e) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(f) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor ("MLFD" or the "Distributor"), a division of Princeton
Funds Distributor, Inc. ("PFD"), which is a wholly-owned subsidiary
of Merrill Lynch Group, Inc.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee based upon the average daily
value of the Fund's net assets at the following annual rates: .55%
of the Fund's average daily net assets not exceeding $500 million;
.525% of average daily net assets in excess of $500 million but not
exceeding $1 billion; and .50% of average daily net assets in excess
of $1 billion.
For the six months ended January 31, 2000, FAM earned fees of
$70,394, of which $38,397 was voluntarily waived.
Pursuant to the Distribution Plans adopted by the Fund in accordance
with Rule 12b-1 under the Investment Company Act of 1940, the Fund
pays the Distributor ongoing account maintenance and distribution
fees. The fees are accrued daily and paid monthly at annual rates
based upon the average daily net assets of the shares as follows:
Account
Maintenance Distribution
Fee Fee
Class B .25% .25%
Class C .25% .35%
Class D .10% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of ML &
Co., also provides account maintenance and distribution services to
the Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the six months ended January 31, 2000, 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 $114 $ 633
Class D $180 $2,500
For the six months ended January 31, 2000, MLPF&S received
contingent deferred sales charges of $9,154 and $241 relating to
transactions in Class B and Class C Shares, respectively.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, FDS, PFD, and/or ML & Co.
Merrill Lynch Colorado Municipal Bond Fund
January 31, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended January 31, 2000 were $16,141,557 and
$15,540,608, respectively.
Net realized losses for the six months ended January 31, 2000, and
unrealized losses as of January 31, 2000 were as follows:
Realized Unrealized
Losses Losses
Long-term investments $ (527,935) $ (486,187)
Financial futures contracts (27,265) --
---------- ----------
Total $ (555,200) $ (486,187)
========== ==========
As of January 31, 2000, net unrealized depreciation for Federal
income tax purposes aggregated $486,187, of which $384,801 was
related to appreciated securities and $870,988 was related to
depreciated securities. The aggregate cost of investments
at January 31, 2000 for Federal income tax purposes was $24,035,807.
4. Beneficial Interest Transactions:
Net increase (decrease) in net assets derived from beneficial
interest transactions was $(2,650,160) and $620,215 for the six
months ended January 31, 2000 and for the year ended July 31, 1999,
respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Six Months Dollar
Ended January 31, 2000 Shares Amount
Shares sold 18,701 $ 174,766
Shares issued to shareholders
in reinvestment of dividends 3,669 34,217
----------- -----------
Total issued 22,370 208,983
Shares redeemed (98,158) (921,056)
----------- -----------
Net decrease (75,788) $ (712,073)
=========== ===========
Class A Shares for the Year Dollar
Ended July 31, 1999 Shares Amount
Shares sold 94,007 $ 954,456
Shares issued to shareholders
in reinvestment of dividends 8,622 86,652
----------- -----------
Total issued 102,629 1,041,108
Shares redeemed (114,708) (1,154,651)
----------- -----------
Net decrease (12,079) $ (113,543)
=========== ===========
Class B Shares for the Six Months Dollar
Ended January 31, 2000 Shares Amount
Shares sold 30,904 $ 292,234
Shares issued to shareholders
in reinvestment of dividends 13,757 128,301
----------- -----------
Total issued 44,661 420,535
Automatic conversion of shares (697) (6,514)
Shares redeemed (225,320) (2,104,065)
----------- -----------
Net decrease (181,356) $(1,690,044)
=========== ===========
Class B Shares for the Year Dollar
Ended July 31, 1999 Shares Amount
Shares sold 207,946 $ 2,088,502
Shares issued to shareholders
in reinvestment of dividends 29,410 295,503
----------- -----------
Total issued 237,356 2,384,005
Automatic conversion of shares (2,233) (22,164)
Shares redeemed (345,950) (3,462,280)
----------- -----------
Net decrease (110,827) $(1,100,439)
=========== ===========
Class C Shares for the Six Months Dollar
Ended January 31, 2000 Shares Amount
Shares sold 9,348 $ 86,815
Shares issued to shareholders
in reinvestment of dividends 1,191 11,109
----------- -----------
Total issued 10,539 97,924
Shares redeemed (21,713) (202,929)
----------- -----------
Net decrease (11,174) $ (105,005)
=========== ===========
Merrill Lynch Colorado Municipal Bond Fund
January 31, 2000
Class C Shares for the Year Dollar
Ended July 31, 1999 Shares Amount
Shares sold 68,437 $ 688,318
Shares issued to shareholders
in reinvestment of dividends 2,499 25,089
----------- -----------
Total issued 70,936 713,407
Shares redeemed (53,111) (533,397)
----------- -----------
Net increase 17,825 $ 180,010
=========== ===========
Class D Shares for the Six Months Dollar
Ended January 31, 2000 Shares Amount
Shares sold 50,228 $ 470,727
Automatic conversion of shares 698 6,514
Shares issued to shareholders
in reinvestment of dividends 5,086 47,357
----------- -----------
Total issued 56,012 524,598
Shares redeemed (71,898) (667,636)
----------- -----------
Net decrease (15,886) $ (143,038)
=========== ===========
Class D Shares for the Year Dollar
Ended July 31, 1999 Shares Amount
Shares sold 226,589 $ 2,237,707
Automatic conversion of shares 2,233 22,164
Shares issued to shareholders
in reinvestment of dividends 3,748 37,526
----------- -----------
Total issued 232,570 2,297,397
Shares redeemed (64,362) (643,210)
----------- -----------
Net increase 168,208 $ 1,654,187
=========== ===========
5. Capital Loss Carryforward:
At July 31, 1999, the Fund had a net capital loss carryforward of
approximately $298,000, of which $172,000 expires in 2003 and
$126,000 expires in 2004. This amount will be available to offset
like amounts of any future taxable gains.
Merrill Lynch Colorado Municipal Bond Fund
January 31, 2000
OFFICERS AND TRUSTEES
Terry K. Glenn, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Arthur Zeikel, Trustee
Vincent R. Giordano, Senior Vice President
Kenneth A. Jacob, Vice President
Michael A. Kalinoski, Vice President
Donald C. Burke, Vice President and Treasurer
Alice A. Pellegrino, Secretary
Robert R. Martin, Trustee of Merrill Lynch Colorado Municipal Bond
Fund has recently retired. The Fund's Board of Trustees wishes Mr.
Martin well in his retirement.
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863