MERRILL LYNCH
NEW YORK
MUNICIPAL
BOND FUND
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
September 30, 1999
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 1999
TO OUR SHAREHOLDERS
The Municipal Market Environment
The combination of steady strong domestic economic growth, improvement in
foreign economies (most notably in Japan) and increasing investor concerns
regarding potential increases in US inflation put upward pressure on bond yields
throughout the six-month period ended September 30, 1999. Continued strong US
employment growth, particularly the decline in the US unemployment rate to 4.2%
in early June, was among the reasons the Federal Reserve Board cited for raising
short-term interest rates in late June and again in late August. US Treasury
bond yields reacted by climbing above 6.25% by mid-August before improving
somewhat to 6.05% by September 30, 1999. During the period, yields on 30-year US
Treasury bonds increased over 40 basis points (0.40%).
Long-term tax-exempt bond yields also rose during the six months ended September
30, 1999. Until early May, the municipal bond market was able to withstand much
of the upward pressure on bond yields. However, investor concerns of additional
moves by the Federal Reserve Board to moderate US economic growth and, more
importantly, the loss of the strong technical support that the tax-exempt market
enjoyed in early 1999 helped push municipal bond yields significantly higher for
the remainder of the period. The yields on long-term tax-exempt revenue bonds
rose over 65 basis points to 5.96% by September 30, 1999, as measured by the
Bond Buyer Revenue Bond Index.
In recent months, the significant decline in new tax-exempt bond issuance has
remained a positive factor within the municipal bond market, as it has been for
much of the past year. During the last six months, more than $113 billion in
long-term municipal bonds was issued, a decline of over 20% compared to the same
period a year ago. During the past three months, $55 billion in municipal bonds
was underwritten, representing a decline of nearly 15% compared to the
corresponding period in 1998. Additionally, in June and July, investors received
more than $40 billion in coupon income and proceeds from bond maturities and
early bond redemptions. These proceeds have generated considerable retail
investor interest, which has helped absorb the recent diminished supply.
Although tax-exempt bond yields are at their highest level in over two years and
have attracted significant retail investor interest, institutional demand has
declined sharply. Long-term municipal mutual funds have seen consistent outflows
in recent months as the yields of individual securities have risen faster than
those of larger, more diverse mutual funds. In addition, the demand from
property/casualty insurance companies has weakened as a result of the losses,
and anticipated losses, incurred as a result of the series of damaging storms
across much of the eastern United States. Additionally, many institutional
investors who were attracted to the municipal bond market in recent years by
historically attractive tax-exempt bond yield ratios of over 90% have 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
the attempt to attract adequate demand.
The recent relative underperformance of the municipal bond market has resulted
in an opportunity for long-term investors to purchase tax-exempt issues whose
yields are nearly identical to taxable US Treasury securities. At September 30,
1999, long-term uninsured municipal revenue bond yields were almost 99% of
comparable US Treasury securities. In recent months, many taxable asset classes,
such as corporate bonds, mortgage-backed securities and US agency debt, have all
accelerated debt issuance. This acceleration was initiated largely to avoid
issuing securities at year-end and to minimize any associated Year 2000 (Y2K)
problems that may develop. However, this increased issuance has also resulted in
higher yield levels in the various asset classes as lower bond prices became
necessary to attract sufficient investor demand. Going forward, it is believed
that the pace of non-US Government debt issuance is likely to slow
significantly. As the supply of this debt declines, we would expect many
institutional investors to return to the municipal bond market and the
attractive yield ratios available.
Looking ahead, it appears to us that long-term municipal bond yields will remain
under pressure, trading in a broad range centered near current levels. Investors
are likely to remain concerned about future action by the Federal Reserve Board.
Y2K
1
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 1999
considerations may prohibit a series of Federal Reserve Board moves at the end
of the year and the beginning of 2000. Any improvement in bond prices will
probably be contingent upon weakening in both US employment growth and consumer
spending. The 100 basis point rise in US Treasury bond yields seen thus far this
year may negatively affect US economic growth. The US housing market will be
among the first sectors likely to be affected, as some declines have already
been evidenced in response to higher mortgage rates. We believe that it is also
unrealistic to expect double-digit returns in US equity markets to continue
indefinitely. Much of the US consumer's wealth is tied to recent stock market
appreciation. Any slowing in these incredible growth rates is likely to reduce
consumer spending. 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.
Fiscal Year in Review
For most of the fiscal year ended September 30, 1999, we underestimated the
underlying strength of both the US economy and equity markets. We believed that
in the absence of any material inflationary pressures and given the enhanced
productivity of US companies, any increases in domestic economic strength would
not result in meaningful increases in interest rates. However, while
inflationary pressures have yet to surface as increases in productivity have
kept US labor costs low, investor concerns about future inflation pushed
long-term bond yields far higher and faster than we expected. Modest
improvements in foreign economies also allowed the Federal Reserve Board to
raise short-term interest rates, pushing long-term interest rates higher as
well.
Consequently, since we structured the Fund anticipating a benign interest rate
environment the Fund had below-average total returns for the fiscal year ended
September 30, 1999. Fortunately, the Fund was heavily weighted with bonds that
enhanced the Fund's tax-exempt income. As a result, this strategy led to the
Fund providing yields that were much higher than the average for New York
tax-exempt bond funds.
We have opted to maintain a fully invested position. Overall, the portfolio
composition has largely been constructive toward the municipal bond market. This
has, in part, been a reflection of our belief that the recent spike in bond
yields should prove temporary. As municipal bond yields are expected to remain
within a relatively narrow range, we expect little change in the Fund's
portfolio structure and composition. Should either the US economy or equity
markets exhibit any significant weakness, we are prepared to adopt a more
aggressive position in an effort to enhance portfolio appreciation.
In Conclusion
We appreciate your investment in Merrill Lynch New York Municipal Bond Fund, and
we look forward to assisting you with your financial needs in the months and
years ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Trustee
/s/ Vincent R. Giordano
Vincent R. Giordano
Senior Vice President
/s/ Roberto Roffo
Roberto Roffo
Vice President and Portfolio Manager
October 29, 1999
2
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 1999
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill Lynch
Select Pricing(SM) System, which offers four pricing alternatives:
o Class A Shares incur a maximum initial sales charge (front-end load) of 4%
and bear no ongoing distribution or account maintenance fees. Class A
Shares are available only to eligible investors.
o Class B Shares are subject to a maximum contingent deferred sales charge
of 4% if redeemed during the first year, decreasing 1% each year
thereafter to 0% after the fourth year. In addition, Class B Shares are
subject to a distribution fee of 0.25% and an account maintenance fee of
0.25%. These shares automatically convert to Class D Shares after
approximately 10 years. (There is no initial sales charge for automatic
share conversions.)
o Class C Shares are subject to a distribution fee of 0.35% and an account
maintenance fee of 0.25%. In addition, Class C Shares are subject to a 1%
contingent deferred sales charge if redeemed within one year of purchase.
o Class D Shares incur a maximum initial sales charge of 4% and an account
maintenance fee of 0.10% (but no distribution fee).
None of the past results shown should be considered a representation of future
performance. Figures shown in the "Recent Performance Results" and "Average
Annual Total Return" tables assume reinvestment of all dividends and capital
gains distributions at net asset value on the payable date. Investment return
and principal value of shares will fluctuate so that shares, when redeemed, may
be worth more or less than their original cost. Dividends paid to each class of
shares will vary because of the different levels of account maintenance,
distribution and transfer agency fees applicable to each class, which are
deducted from the income available to be paid to shareholders.
Recent Performance Results*
<TABLE>
<CAPTION>
Ten Years/
3 Month 12 Month Since Inception Standardized
As of September 30, 1999 Total Return Total Return Total Return 30-Day Yield
==============================================================================================================
<S> <C> <C> <C> <C>
ML New York Municipal Bond Fund Class A Shares -2.75% -5.70% +82.95% 4.93%
- --------------------------------------------------------------------------------------------------------------
ML New York Municipal Bond Fund Class B Shares -2.88 -6.18 +73.93 4.62
- --------------------------------------------------------------------------------------------------------------
ML New York Municipal Bond Fund Class C Shares -2.81 -6.26 +25.76 4.52
- --------------------------------------------------------------------------------------------------------------
ML New York Municipal Bond Fund Class D Shares -2.69 -5.79 +28.84 4.83
==============================================================================================================
</TABLE>
* Investment results shown do not reflect sales charges; results shown 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 ten-year/since inception periods are
ten years for Class A & Class B Shares and from 10/21/94 for Class C &
Class D Shares.
3
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 1999
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment
Merrill Lynch New York Municipal Bond Fund
Total Return Based on a $10,000 Investment--Class A Shares
A line graph depicting the growth of an investment in the Fund's Class A & Class
B Shares compared to growth of an investment in the Lehman Brothers Municipal
Bond Index. Beginning and ending values are:
9/89/ 9/99
ML New York Municipal Bond Fund+--
Class A Shares* $ 9,600 $17,562
ML New York Municipal Bond Fund*--
Class B Shares* $10,000 $17,380
Lehman Brothers Municipal Bond
Index++ $10,000 $20,377
Total Return Based on a $10,000 Investment--Class C & D Shares
A line graph depicting the growth of an investment in the Fund's Class C & Class
D Shares compared to growth of an investment in the Lehman Brothers Municipal
Bond Index. Beginning and ending values are:
10/21/94** 9/99
ML New York Municipal Bond Fund+--
Class C Shares* $10,000 $12,576
ML New York Municipal Bond Fund+--
Class D Sahres* $ 9,600 $12,368
Lehman Brothers Municipal Bond
Index++ $10,000 $14,126
* Assuming maximum sales charge, transaction costs and other operating
expenses, including advisory fees.
** Commencement of Operations.
+ ML New York Municipal Bond Fund invests primarily in long-term
investment-grade obligations issued by or on behalf of the state of New
York, its political subdivisions, agencies and instrumentalities and
obligations of other qualifying issuers.
++ This unmanaged Index consists of long-term revenue bonds, prerefunded
bonds, general obligation bonds and insured bonds. The starting date for
the Index in the Class C & Class D Shares's graph is from 10/31/94. Past
performance is not predictive of future performance.
4
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 1999
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
Year Ended 9/30/99 -5.70% -9.47%
- --------------------------------------------------------------------------------
Five Years Ended 9/30/99 +5.14 +4.29
- --------------------------------------------------------------------------------
Ten Years Ended 9/30/99 +6.23 +5.79
- --------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
Year Ended 9/30/99 -6.18% -9.65%
- --------------------------------------------------------------------------------
Five Years Ended 9/30/99 +4.61 +4.61
- --------------------------------------------------------------------------------
Ten Years Ended 9/30/99 +5.69 +5.69
- --------------------------------------------------------------------------------
* 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 9/30/99 -6.26% -7.13%
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 9/30/99 +4.75 +4.75
- --------------------------------------------------------------------------------
* 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 9/30/99 -5.79% -9.56%
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 9/30/99 +5.26 +4.39
- --------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
OFFICERS AND TRUSTEES
Terry K. Glenn, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Arthur Zeikel, Trustee
Vincent R. Giordano, Senior Vice President
Kenneth A. Jacob, Vice President
Roberto Roffo, Vice President
Donald C. Burke, Vice President and Treasurer
Alice A. Pellegrino, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
5
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 1999
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
- -----------------------------------------------------------------------------------------------------
New York--99.0%
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NR* Aaa $ 1,150 Appleridge Retirement Community Inc., New York, Mortgage
Revenue Bonds (Appleridge Project), 5.70% due 9/01/2031 (j) $ 1,120
- -----------------------------------------------------------------------------------------------------
A A2 10,000 Battery Park City Authority, New York, Revenue
Refunding Bonds, Junior Series A, 5.80% due 11/01/2022 10,020
- -----------------------------------------------------------------------------------------------------
AAA Aaa 1,300 Buffalo, New York, Sewer Authority, Revenue Refunding
Bonds, Series F, 6% due 7/01/2013 (b) 1,384
- -----------------------------------------------------------------------------------------------------
Hempstead Town, New York, IDA, Civic Facilities
Revenue Refunding Bonds (Adelphi University Civic Facility):
A- NR* 1,395 5.25% due 2/01/2010 1,377
A- NR* 1,000 5.25% due 2/01/2011 977
A- NR* 1,540 5.25% due 2/01/2012 1,491
A- NR* 625 5.25% due 2/01/2013 598
- -----------------------------------------------------------------------------------------------------
NR* Aa2 5,400 Hornell, New York, IDA, IDR (Crowley Foods, Inc. Facility),
7.75% due 12/01/2016 5,776
- -----------------------------------------------------------------------------------------------------
AAA Aaa 12,800 Long Island Power Authority, New York, Electric System
Revenue Refunding Bonds, Series A, 5.50% due 12/01/2029 (c) 12,255
- -----------------------------------------------------------------------------------------------------
AAA Aaa 3,500 Metropolitan Transportation Authority, New York, Commuter
Facilities Revenue Refunding Bonds, Series B, 4.75%
due 7/01/2026 (b) 2,937
- -----------------------------------------------------------------------------------------------------
AAA Aaa 15,100 Metropolitan Transportation Authority, New York, Dedicated
Tax Fund Revenue Bonds, Series A, 5% due 4/01/2029 (g) 13,230
- -----------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Metropolitan Transportation Authority, New York, Transit
Facilities Revenue Bonds, Series C-1, 5.50% due 7/01/2022 (b) 1,934
- -----------------------------------------------------------------------------------------------------
Metropolitan Transportation Authority, New York, Transit
Facilities Revenue Refunding Bonds:
AAA Aaa 1,000 Series A, 4.75% due 7/01/2021 (c) 859
AAA Aaa 5,000 Series A, 4.75% due 7/01/2024 (c) 4,233
AAA Aaa 350 Series B, 4.75% due 7/01/2026 (b) 294
AAA Aaa 7,000 Series C, 4.75% due 7/01/2016 (g) 6,184
- -----------------------------------------------------------------------------------------------------
A1+ NR* 2,250 Nassau County, New York, IDA, Civic Facilities Revenue
Refunding and Improvement Bonds (Cold Spring Harbor),
VRDN, 3.90% due 1/01/2034 (a) 2,250
- -----------------------------------------------------------------------------------------------------
AAA Aaa 5,500 Nassau Health Care Corporation, New York, Health System
Revenue Bonds, 5.75% due 8/01/2029 (g) 5,407
- -----------------------------------------------------------------------------------------------------
NR* A1 4,960 New York City, New York, City Municipal Water Finance
Authority, Water and Sewer System Revenue Bonds, RITR,
Series 21, 7.07% due 6/15/2029 (h) 4,725
- -----------------------------------------------------------------------------------------------------
New York City, New York, City Transitional Finance Authority
Revenue Bonds, Future Tax Secured, Series B:
AA Aa3 4,000 5.125% due 11/01/2014 3,812
AA Aa3 15,500 4.75% due 11/15/2023 13,080
AAA Aaa 6,250 4.75% due 11/15/2023 (b) 5,310
AA Aa3 12,000 4.50% due 11/15/2027 9,637
- -----------------------------------------------------------------------------------------------------
</TABLE>
PORTFOLIO ABBREVIATIONS
To simplify the listings of Merrill Lynch New York 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)
GO General Obligation Bonds
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
RITR Residual Interest Trust Receipts
VRDN Variable Rate Demand Notes
6
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 1999
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
- -----------------------------------------------------------------------------------------------------
New York (continued)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York City, New York, City Transitional Finance
Authority Revenue Bonds, Future Tax Secured, Series C:
AA Aa3 $ 5,000 5.50% due 5/01/2025 $ 4,807
AA Aa3 2,250 5% due 5/01/2026 1,985
NR* VMIG1+ 3,900 VRDN, 3.95% due 5/01/2028 (a) 3,900
- -----------------------------------------------------------------------------------------------------
A1+ VMIG1+ 100 New York City, New York, City Trust Cultural Resource
Revenue Bonds (Soloman R.Guggenheim Foundation), VRDN,
Series B, 3.90% due 12/01/2015 (a) 100
- -----------------------------------------------------------------------------------------------------
A- A3 5,000 New York City, New York, GO, Refunding, Series F, 5.25%
due 8/01/2017 4,634
- -----------------------------------------------------------------------------------------------------
New York City, New York, Health and Hospital Corporation,
Revenue Refunding Bonds (Health System), Series A (e):
AAA Aaa 3,900 5% due 2/15/2008 3,913
AAA Aaa 8,000 5.125% due 2/15/2014 7,620
- -----------------------------------------------------------------------------------------------------
New York City, New York, IDA, Civic Facilities Revenue Bonds:
BBB NR* 1,000 (College of Aeronautics Project), 5.45% due 5/01/2018 947
BBB NR* 3,200 (College of Aeronautics Project), 5.50% due 5/01/2028 2,986
NR* NR* 6,895 (New York Blood Center Inc. Project), 7.25% due
5/01/2004 (d) 7,628
AAA Aaa 4,690 (USTA National Tennis Center Project), 6.60% due
11/15/2011 (g) 5,143
- -----------------------------------------------------------------------------------------------------
NR* A 5,000 New York City, New York, IDA, Special Facilities Revenue
Bonds, RITR, AMT, Series RI-6, 7.695% due 1/01/2024 (h) 5,146
- -----------------------------------------------------------------------------------------------------
New York State Dormitory Authority Revenue Bonds:
AAA Aaa 9,400 (Memorial Sloan Kettering Cancer Center), 5.50% due
7/01/2023 (c) 9,168
AAA Aaa 3,000 (New York University), Series A, 5.75% due 7/01/2027 (c) 3,029
NR* Aaa 2,000 RIB, Series 156, 6.853% due 8/01/2029 (e)(f)(h) 1,760
NR* Aaa 15,000 RITR, Series 1, 7.365% due 7/01/2027 (c)(h) 15,247
- -----------------------------------------------------------------------------------------------------
New York State Dormitory Authority, Revenue Refunding Bonds:
AAA NR* 6,500 (City University System-Consolidated), Series A, 5.625%
due 7/01/2016 (g) 6,588
AAA Aaa 1,000 (Hospital for Special Surgery), 5% due 2/01/2028 (c)(f) 875
AA NR* 1,500 (Long Island University), 5.125% due 9/01/2019 1,353
AA NR* 1,800 (Long Island University), 5.125% due 9/01/2023 1,608
AA NR* 1,400 (Long Island University), 5.25% due 9/01/2028 1,262
AAA Aaa 2,810 (State University Athletic Facility), 5.25% due
7/01/2018 (c) 2,653
AAA NR* 3,500 (State University Educational Facilities), Series A,
5.50% due 5/15/2019 (g) 3,462
AAA Aaa 5,750 (State University Educational Facilities), Series A,
4.75% due 5/15/2025 (c) 4,848
- -----------------------------------------------------------------------------------------------------
A- Baa3 500 New York State Energy Research and Development Authority,
Electric Facilities Revenue Bonds (LILCO Project), AMT,
Series B, 5.30% due 11/01/2023 455
- -----------------------------------------------------------------------------------------------------
NR* Aaa 3,200 New York State Energy Research and Development Authority,
Facilities Revenue Refunding Bonds, RITR, Series 19, 8.02%
due 8/15/2020 (e)(h) 3,358
- -----------------------------------------------------------------------------------------------------
NR* NR* 4,455 New York State Energy Research and Development Authority,
Gas Facilities Revenue Bonds, RITR, Series 9, 6.82%
due 1/01/2021 (c)(h) 4,194
- -----------------------------------------------------------------------------------------------------
AAA NR* 3,000 New York State Energy Research and Development Authority,
PCR (New York State Electric and Gas Co. Project), AMT,
Series A, 6.15% due 7/01/2026 (c) 3,035
- -----------------------------------------------------------------------------------------------------
New York State Energy Research and Development Authority,
PCR, Refunding:
AAA Aaa 3,500 (Central Hudson Gas and Electric), Series A, 5.45%
due 8/01/2027 (e) 3,330
A1+ VMIG1+ 4,550 (New York State Electric & Gas), VRDN, Series D, 3.95%
due 10/01/2029 (a) 4,550
- -----------------------------------------------------------------------------------------------------
AA- Aa1 1,705 New York State Environmental Facilities Corporation, PCR
(State Water Revolving), Series E, 6.875% due 6/15/2014 1,862
- -----------------------------------------------------------------------------------------------------
AAA Aaa 10,000 New York State Local Government Assistance Corporation,
Revenue Refunding Bonds, Series E, 5% due 4/01/2021 (c) 9,104
- -----------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 1999
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
- -----------------------------------------------------------------------------------------------------
New York (concluded)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AAA NR* $ 2,000 New York State Medical Care Facilities Finance Agency,
Revenue Refunding Bonds (Hospitals & Nursing), Series B,
6.25% due 2/15/2025 (f) $ 2,091
- -----------------------------------------------------------------------------------------------------
NR* Aa2 2,495 New York State Mortgage Agency, Revenue Refunding Bonds,
Homeowner Mortgage, AMT, Series 67, 5.80% due 10/01/2028 2,485
- -----------------------------------------------------------------------------------------------------
NR* NR* 2,000 New York State Mortgage Agency, Revenue Refunding Bonds,
RITR, AMT, Series 24, 7.27% due 10/01/2028 (h) 1,983
- -----------------------------------------------------------------------------------------------------
New York State Thruway Authority, General Revenue Refunding
Bonds, Series E:
AA- Aa3 20,000 4.75% due 1/01/2019 17,352
AA- Aa3 15,000 5% due 1/01/2025 13,255
- -----------------------------------------------------------------------------------------------------
AAA Aaa 1,000 New York State Urban Development Corporation Revenue Bonds
(Correctional Facilities Service Contract), Series B, 4.75%
due 1/01/2028 (e) 836
- -----------------------------------------------------------------------------------------------------
New York State Urban Development Corporation, Revenue
Refunding Bonds:
BBB+ Baa1 1,685 (Clarkson Center Advance Materials), 5.50% due 1/01/2020 1,627
AAA Aaa 2,250 (Correctional Capital Facilities), 5% due 1/01/2009 (c) 2,238
AAA Aaa 4,470 (Correctional Facilities), Series A, 5.50% due
1/01/2014 (e) 4,500
BBB+ Baa1 9,475 (State Facilities), 5.70% due 4/01/2020 9,407
BBB+ Baa1 3,500 (University Facility Grants), 5.50% due 1/01/2019 3,387
- -----------------------------------------------------------------------------------------------------
AAA Aaa 1,000 North Country, New York, Development Authority, Solid Waste
Management System Revenue Refunding Bonds, 6% due
5/15/2015 (g) 1,061
- -----------------------------------------------------------------------------------------------------
AAA NR* 3,850 Otsego County, New York, IDA, Civic Facilities Revenue
Refunding Bonds (Aurelia Osborn Fox Memorial Hospital),
Series A, 5.35% due 10/01/2017 (g) 3,647
- -----------------------------------------------------------------------------------------------------
NR* Aaa 4,000 Port Authority of New York and New Jersey, RITR, AMT,
108th Series, 7.385% due 1/15/2017 (g)(h) 4,105
- -----------------------------------------------------------------------------------------------------
Port Authority of New York and New Jersey, Special
Obligation Revenue Bonds (JFK International Air Terminal
Project), AMT, Series 6 (c):
AAA Aaa 5 5.75% due 12/01/2022 5
AAA Aaa 6,190 5.75% due 12/01/2025 6,209
- -----------------------------------------------------------------------------------------------------
NR* NR* 2,000 Suffolk County, New York, IDA, IDR, Refunding (Nissequogue
Cogeneration Partners Facility), AMT, 5.50% due 1/01/2023 1,812
- -----------------------------------------------------------------------------------------------------
AAA Aaa 6,000 Triborough Bridge and Tunnel Authority, New York, General
Purpose Revenue Refunding Bonds, Series Y, 6.125% due
1/01/2021 (i) 6,365
- -----------------------------------------------------------------------------------------------------
AAA Aaa 7,600 Triborough Bridge and Tunnel Authority, New York, Special
Obligation Revenue Refunding Bonds, Series A, 4.75%
due 1/01/2024 (c) 6,445
- -----------------------------------------------------------------------------------------------------
NR* NR* 2,005 Utica, New York, IDA, Civic Facilities Revenue Bonds
(Utica College Project), Series A, 5.75% due 8/01/2028 1,901
- -----------------------------------------------------------------------------------------------------
NR* NR* 3,500 West Chester County, New York, IDA, Civic Facilities
Revenue Bonds (Rippowam-Cisqua School Project), 5.75%
due 6/01/2029 3,317
- -----------------------------------------------------------------------------------------------------
Total Investments (Cost--$349,985)--99.0% 333,468
Other Assets Less Liabilities--1.0% 3,284
--------
Net Assets--100.0% $336,752
========
- -----------------------------------------------------------------------------------------------------
</TABLE>
(a) The interest rate is subject to change periodically based upon prevailing
market rates. The interest rate shown is the rate in effect at September
30, 1999.
(b) FGIC Insured.
(c) MBIA Insured.
(d) Prerefunded.
(e) AMBAC Insured.
(f) FHA Insured.
(g) FSA Insured.
(h) 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 September 30, 1999.
(i) CAPMAC Insured.
(j) GNMA Collateralized.
* Not Rated.
+ Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche llp.
See Notes to Financial Statements.
8
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 1999
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of September 30, 1999
<TABLE>
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$349,984,820) (Note 1a) . $333,467,835
Cash ............................................................ 19,616
Receivables:
Interest ...................................................... $ 5,814,883
Beneficial interest sold ...................................... 54,381 5,869,264
------------
Prepaid registration fees and other assets (Note 1e) ............ 66,900
------------
Total assets .................................................... 339,423,615
------------
- ----------------------------------------------------------------------------------------------------------------
Liabilities: Payables:
Beneficial interest redeemed .................................. 1,157,141
Securities purchased .......................................... 840,051
Dividends to shareholders (Note 1f) ........................... 430,416
Distributor (Note 2) .......................................... 90,167
Investment adviser (Note 2) ................................... 20,446 2,538,221
------------
Accrued expenses ................................................ 133,532
------------
Total liabilities ............................................... 2,671,753
------------
- ----------------------------------------------------------------------------------------------------------------
Net Assets: Net assets ...................................................... $336,751,862
============
- ----------------------------------------------------------------------------------------------------------------
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized ........................... $ 147,961
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized ........................... 1,711,502
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized ........................... 76,706
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized ........................... 1,274,039
Paid-in capital in excess of par ................................ 351,184,367
Accumulated distributions in excess of realized capital
gains on investments--net (Note 1f) ............................. (1,125,728)
Unrealized depreciation on investments--net ..................... (16,516,985)
------------
Net assets ...................................................... $336,751,862
============
- ----------------------------------------------------------------------------------------------------------------
Net Asset Value: Class A--Based on net assets of $15,521,710 and 1,479,608
shares of beneficial interest outstanding ....................... $ 10.49
============
Class B--Based on net assets of $179,583,560 and 17,115,021
shares of beneficial interest outstanding ....................... $ 10.49
============
Class C--Based on net assets of $8,050,806 and 767,061 shares
of beneficial interest outstanding .............................. $ 10.50
============
Class D--Based on net assets of $133,595,786 and 12,740,391
shares of beneficial interest outstanding ....................... $ 10.49
============
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 1999
FINANCIAL INFORMATION (continued)
Statement of Operations
<TABLE>
<CAPTION>
For the Year Ended
September 30, 1999
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned ........... $ 20,429,361
(Note 1d):
- ---------------------------------------------------------------------------------------------------------------------
Expenses: Investment advisory fees (Note 2) .................................. $ 2,125,229
Account maintenance and distribution fees--Class B (Note 2) ........ 1,076,883
Account maintenance fees--Class D (Note 2) ......................... 145,517
Transfer agent fees--Class B (Note 2) .............................. 111,210
Accounting services (Note 2) ....................................... 98,680
Professional fees .................................................. 95,063
Registration fees (Note 1e) ........................................ 89,033
Printing and shareholder reports ................................... 80,068
Transfer agent fees--Class D (Note 2) .............................. 62,773
Account maintenance and distribution fees--Class C (Note 2) ........ 51,714
Trustees' fees and expenses ........................................ 23,618
Custodian fees ..................................................... 23,077
Pricing fees ....................................................... 13,270
Transfer agent fees--Class A (Note 2) .............................. 7,280
Transfer agent fees--Class C (Note 2) .............................. 4,425
Other .............................................................. 6,308
-----------
Total expenses ..................................................... 4,014,148
------------
Investment income--net ............................................. 16,415,213
------------
- ---------------------------------------------------------------------------------------------------------------------
Realized & Unreal- Realized gain on investments--net .................................. 3,896,726
ized Gain (Loss) on Change in unrealized appreciation/depreciation on investments--net.. (42,817,466)
Investments--Net ------------
(Notes 1b, 1d & 3): Net Decrease in Net Assets Resulting from Operations ............... $(22,505,527)
============
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 1999
FINANCIAL INFORMATION (continued)
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Year Ended
September 30,
--------------------------
Increase (Decrease) in Net Assets: 1999 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations: Investment income--net ............................................ $16,415,213 $ 19,506,165
Realized gain on investments--net ................................. 3,896,726 18,921,395
Change in unrealized appreciation/depreciation on investments--net. (42,817,466) 946,799
------------ ------------
Net increase (decrease) in net assets resulting from operations ... (22,505,527) 39,374,359
------------ ------------
- -------------------------------------------------------------------------------------------------------------------
Dividends & Investment income--net:
Distributions to Class A ......................................................... (774,757) (976,856)
Shareholders Class B ......................................................... (8,769,481) (11,274,157)
(Note 1f): Class C ......................................................... (343,304) (249,953)
Class D ......................................................... (6,527,671) (7,005,199)
Realized gain on investments--net:
Class A ......................................................... (465,772) --
Class B ......................................................... (6,256,850) --
Class C ......................................................... (227,365) --
Class D ......................................................... (3,896,418) --
In excess of realized gain on investments--net:
Class A ......................................................... (48,342) --
Class B ......................................................... (649,386) --
Class C ......................................................... (23,598) --
Class D ......................................................... (404,402) --
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders ..................................... (28,387,346) (19,506,165)
------------ ------------
- -------------------------------------------------------------------------------------------------------------------
Beneficial Interest Net decrease in net assets derived from beneficial interest
Transactions transactions ...................................................... (34,154,005) (44,668,971)
(Note 4): ------------ ------------
- -------------------------------------------------------------------------------------------------------------------
Net Assets: Total decrease in net assets ...................................... (85,046,878) (24,800,777)
Beginning of year ................................................. 421,798,740 446,599,517
------------ ------------
End of year ....................................................... $336,751,862 $421,798,740
============ ============
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 1999
FINANCIAL INFORMATION (continued)
Financial Highlights
<TABLE>
<CAPTION>
The following per share data and ratios have been derived Class A
from information provided in the financial statements. ------------------------------------------------
For the Year Ended September 30,
------------------------------------------------
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year .......... $ 12.00 $ 11.46 $ 11.12 $ 11.04 $ 10.88
Operating ------- ------- ------- ------- -------
Performance: Investment income--net ...................... .51 .57 .60 .59 .61
Realized and unrealized gain (loss) on
investments--net ............................ (1.16) .54 .34 .08 .16
------- ------- ------- ------- -------
Total from investment operations ............ (.65) 1.11 .94 .67 .77
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net .................... (.51) (.57) (.60) (.59) (.61)
Realized gain on investments--net ......... (.32) -- --+ -- --
In excess of realized gain on
investments--net .......................... (.03) -- -- -- --
------- ------- ------- ------- -------
Total dividends and distributions ........... (.86) (.57) (.60) (.59) (.61)
------- ------- ------- ------- -------
Net asset value, end of year ................ $ 10.49 $ 12.00 $ 11.46 $ 11.12 $ 11.04
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share .......... (5.70%) 9.94% 8.69% 6.19% 7.37%
Return:* ======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------
Ratios to Expenses .................................... .70% .67% .65% .66% .67%
Average ======= ======= ======= ======= =======
Net Assets: Investment income--net ...................... 4.59% 4.92% 5.30% 5.31% 5.67%
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of year (in thousands) ...... $15,522 $17,727 $22,301 $21,762 $23,304
Data: ======= ======= ======= ======= =======
Portfolio turnover .......................... 135.17% 163.12% 97.22% 114.78% 181.21%
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
* Total investment returns exclude the effects of sales charges.
+ Amount is less than $.01 per share.
See Notes to Financial Statements.
12
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 1999
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
<TABLE>
<CAPTION>
The following per share data and ratios have been derived Class B
from information provided in the financial statements. -----------------------------------------------------
For the Year Ended September 30,
-----------------------------------------------------
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ......... $ 12.00 $ 11.46 $ 11.12 $ 11.04 $ 10.88
Operating -------- ------- ------- -------- --------
Performance: Investment income--net ..................... .46 .51 .54 .54 .56
Realized and unrealized gain (loss) on
investments--net ........................... (1.16) .54 .34 .08 .16
-------- ------- ------- -------- --------
Total from investment operations ........... (.70) 1.05 .88 .62 .72
-------- ------- ------- -------- --------
Less dividends and distributions:
Investment income--net ................... (.46) (.51) (.54) (.54) (.56)
Realized gain on investments--net ........ (.32) -- --+ -- --
In excess of realized gain on
investments--net ......................... (.03) -- -- -- --
-------- ------- ------- -------- --------
Total dividends and distributions .......... (.81) (.51) (.54) (.54) (.56)
-------- ------- ------- -------- --------
Net asset value, end of year ............... $ 10.49 $ 12.00 $ 11.46 $ 11.12 $ 11.04
======== ======== ======== ======== ========
- -------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ......... (6.18%) 9.38% 8.14% 5.66% 6.82%
Return:* ======== ======== ======== ======== ========
- -------------------------------------------------------------------------------------------------------------------------
Ratios to Expenses ................................... 1.21% 1.18% 1.16% 1.16% 1.18%
Average ======== ======== ======== ======== ========
Net Assets: Investment income--net ..................... 4.07% 4.40% 4.79% 4.80% 5.16%
======== ======== ======== ======== ========
- -------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of year (in thousands) ..... $179,583 $242,811 $279,754 $403,403 $564,963
Data: ======== ======== ======== ======== ========
Portfolio turnover ......................... 135.17% 163.12% 97.22% 114.78% 181.21%
======== ======== ======== ======== ========
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Total investment returns exclude the effects of sales charges.
+ Amount is less than $.01 per share.
See Notes to Financial Statements.
13
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 1999
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
<TABLE>
<CAPTION>
Class C
-----------------------------------------------------
For the
Period
The following per share data and ratios have been derived Oct. 21,
from information provided in the financial statements. For the Year Ended September 30, 1994+ to
------------------------------------------ Sept. 30,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ....... $ 12.01 $ 11.47 $ 11.12 $ 11.04 $ 10.76
Operating ------- ------- ------- ------- -------
Performance: Investment income--net ..................... .45 .50 .53 .52 .51
Realized and unrealized gain (loss) on
investments--net ........................... (1.16) .54 .35 .08 .28
------- ------- ------- ------- -------
Total from investment operations ........... (.71) 1.04 .88 .60 .79
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net ................... (.45) (.50) (.53) (.52) (.51)
Realized gain on investments--net ........ (.32) -- --++ -- --
In excess of realized gain on
investments--net ......................... (.03) -- -- -- --
------- ------- ------- ------- -------
Total dividends and distributions .......... (.80) (.50) (.53) (.52) (.51)
------- ------- ------- ------- -------
Net asset value, end of period ............. $ 10.50 $ 12.01 $ 11.47 $ 11.12 $ 11.04
======= ======= ======= ======= =======
- -------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ......... (6.26%) 9.27% 8.13% 5.55% 7.57%+++
Return:** ======= ======= ======= ======= =======
- -------------------------------------------------------------------------------------------------------------------------
Ratios to Expenses ................................... 1.31% 1.28% 1.26% 1.27% 1.27%*
Average ======= ======= ======= ======= =======
Net Assets: Investment income--net ..................... 3.98% 4.27% 4.69% 4.70% 4.91%*
======= ======= ======= ======= =======
- -------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) ... $ 8,051 $ 8,229 $ 5,034 $ 4,175 $ 3,556
Data: ======= ======= ======= ======= =======
Portfolio turnover ......................... 135.17% 163.12% 97.22% 114.78% 181.21%
======= ======= ======= ======= =======
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Commencement of operations.
++ Amount is less than $.01 per share.
+++ Aggregate total investment return.
See Notes to Financial Statements.
14
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 1999
FINANCIAL INFORMATION (concluded)
Financial Highlights (concluded)
<TABLE>
<CAPTION>
Class D
-----------------------------------------------------
For the
Period
The following per share data and ratios have been derived Oct. 21,
from information provided in the financial statements. For the Year Ended September 30, 1994+ to
------------------------------------------ Sept. 30,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ...... $ 12.00 $ 11.46 $ 11.11 $ 11.03 $ 10.76
Operating -------- -------- -------- ------- -------
Performance: Investment income--net .................... .50 .56 .58 .58 .56
Realized and unrealized gain (loss) on
investments--net .......................... (1.16) .54 .35 .08 .27
-------- -------- -------- ------- -------
Total from investment operations ....... (.66) 1.10 .93 .66 .83
-------- -------- -------- ------- -------
Less dividends and distributions:
Investment income--net ............... (.50) (.56) (.58) (.58) (.56)
Realized gain on investments--net .... (.32) -- --++ -- --
In excess of realized gain on
investments--net ..................... (.03) -- -- -- --
-------- -------- -------- ------- -------
Total dividends and distributions ...... (.85) (.56) (.58) (.58) (.56)
-------- -------- -------- ------- -------
Net asset value, end of period ......... $ 10.49 $ 12.00 $ 11.46 $ 11.11 $ 11.03
======== ======== ======== ======== =======
- -------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ........ (5.79%) 9.83% 8.68% 6.09% 7.99%+++
Return:** ======== ======== ======== ======== =======
- -------------------------------------------------------------------------------------------------------------------------
Ratios to Expenses .................................. .80% .77% .75% .76% .76%*
Average ======== ======== ======== ======== =======
Net Assets: Investment income--net .................... 4.49% 4.79% 5.20% 5.21% 5.46%*
======== ======== ======== ======== =======
- -------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) .. $133,596 $153,032 $139,511 $ 94,297 $ 2,572
Data: ======== ======== ======== ======== =======
Portfolio turnover ........................ 135.17% 163.12% 97.22% 114.78% 181.21%
======== ======== ======== ======== =======
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Commencement of operations.
++ Amount is less than $.01 per share.
+++ Aggregate total investment return.
See Notes to Financial Statements.
15
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 1999
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch New York Municipal Bond Fund (the "Fund") is part of the 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. The Fund's financial statements are prepared in accordance
with generally accepted accounting principles, which may require the use of
management accruals and estimates. The Fund offers four classes of shares under
the Merrill Lynch Select PricingSM System. Class A and Class D Shares are sold
with a front-end sales charge. Class B and Class C Shares 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 are
traded primarily in the over-the-counter municipal bond and money markets and
are valued at the last available bid price or 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 a remaining maturity of sixty days or less are valued at
amortized cost, which approximates market value. Securities and assets for which
market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of Trustees of
the Trust, including valuations furnished by a pricing service retained by the
Trust, which may utilize a matrix system for valuations. The procedures of the
pricing service and its valuations are reviewed by the officers of the Trust
under the general supervision of the Trustees.
(b) Derivative financial instruments--The Fund may engage in various portfolio
strategies to seek to increase its return by hedging its portfolio against
adverse movements in the debt markets. Losses may arise due to changes in the
value of the contract or if the counterparty does not perform under the
contract.
o Financial futures contracts--The Fund may purchase or sell financial futures
contracts and options on such futures contracts for the purpose of hedging the
market risk on existing securities or the intended purchase of securities.
Futures contracts are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a contract, the
Fund deposits and maintains as collateral such initial margin as required by the
exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.
(c) Income taxes--It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.
(d) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Interest income is recognized on the accrual basis. Discounts and market
premiums are amortized into interest income. Realized gains and losses on
security transactions are determined on the identified cost basis.
(e) 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. Distribution in excess of realized capital gains are due
primarily to differing
16
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 1999
tax treatments for futures transactions and post-October losses.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML &
Co."), which is the limited partner. The Fund has 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.
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 an
ongoing account maintenance fee and a distribution fee. These fees are accrued
daily and paid monthly, at the annual rates based upon the average daily net
assets of the shares as follows:
- --------------------------------------------------------------------------------
Account Distribution
Maintenance Fee Fee
- --------------------------------------------------------------------------------
Class B ................................. .25% .25%
Class C ................................. .25% .35%
Class D ................................. .10% --
- --------------------------------------------------------------------------------
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., also provides account
maintenance and distribution services to the Fund. The ongoing account
maintenance fee compensates the Distributor and MLPF&S for providing account
maintenance services to Class B, Class C and Class D shareholders. The ongoing
distribution fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B and Class C
shareholders.
For the year ended September 30, 1999, MLFD earned underwriting discounts and
direct commissions and MLPF&S earned dealer concessions on the sales of the
Fund's Class A and Class D Shares as follows:
- --------------------------------------------------------------------------------
MLFD MLPF&S
- --------------------------------------------------------------------------------
Class A ................................. $ 77 $ 1,938
Class D ................................. $ 2,074 $46,655
- --------------------------------------------------------------------------------
For the year ended September 30, 1999, MLPF&S received contingent deferred sales
charges of $179,512 and $2,576 relating to transactions in Class B and Class C
Shares, respectively.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co., is
the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or directors of
FAM, PSI, FDS, PFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended September 30, 1999 were $496,300,224 and $530,240,605, respectively.
Net realized gains for the year ended September 30, 1999 and net unrealized
losses as of September 30, 1999 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains Losses
- --------------------------------------------------------------------------------
Long-term investments ................... $ 1,358,521 $(16,516,985)
Financial futures contracts ............. 2,538,205 --
------------ ------------
Total ................................... $ 3,896,726 $(16,516,985)
============ ============
- --------------------------------------------------------------------------------
As of September 30, 1999, net unrealized depreciation for Federal income tax
purposes aggregated $16,688,305, of which $2,765,938 related to appreciated
securities and $19,454,243 related to depreciated securities. The aggregate cost
of investments at September 30, 1999 for Federal income tax purposes was
$350,156,140.
17
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest transactions was
$34,154,005 and $44,668,971 for the years ended September 30, 1999 and September
30, 1998, respectively.
Transactions in shares of beneficial interest for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended September 30, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 266,858 $ 2,960,766
Shares issued to shareholders
in reinvestment of
dividends & distributions .............. 66,382 732,222
------------ ------------
Total issued ........................... 333,240 3,692,988
Shares redeemed ........................ (330,583) (3,661,101)
------------ ------------
Net increase ........................... 2,657 $ 31,887
============ ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended September 30, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 251,370 $ 2,928,526
Shares issued to shareholders
in reinvestment of dividends ........... 53,497 624,368
------------ ------------
Total issued ........................... 304,867 3,552,894
Shares redeemed ........................ (773,614) (9,022,698)
------------ ------------
Net decrease ........................... (468,747) $ (5,469,804)
============ ============
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended September 30, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 2,081,274 $ 23,838,859
Shares issued to shareholders
in reinvestment of
dividends & distributions .............. 710,911 8,070,009
------------ ------------
Total issued ........................... 2,792,185 31,908,868
Automatic conversion
of shares .............................. (1,448,707) (16,390,769)
Shares redeemed ........................ (4,454,592) (50,357,335)
------------ ------------
Net decrease ........................... (3,111,114) $(34,839,236)
============ ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended September 30, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 2,086,550 $ 24,426,414
Shares issued to shareholders
in reinvestment of dividends ........... 506,565 5,919,940
------------ ------------
Total issued ........................... 2,593,115 30,346,354
Automatic conversion
of shares .............................. (1,517,785) (17,683,070)
Shares redeemed ........................ (5,254,351) (61,333,845)
------------ ------------
Net decrease ........................... (4,179,021) $(48,670,561)
============ ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended September 30, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 159,427 $ 1,841,554
Shares issued to shareholders
in reinvestment of
dividends & distributions .............. 42,473 481,711
------------ ------------
Total issued ........................... 201,900 2,323,265
Shares redeemed ........................ (120,073) (1,342,314)
------------ ------------
Net increase ........................... 81,827 $ 980,951
============ ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended September 30, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 371,611 $ 4,358,246
Shares issued to shareholders
in reinvestment of dividends ........... 18,797 220,005
------------ ------------
Total issued ........................... 390,408 4,578,251
Shares redeemed ........................ (144,268) (1,680,882)
------------ ------------
Net increase ........................... 246,140 $ 2,897,369
============ ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended September 30, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 7,373,462 $ 84,923,122
Automatic conversion
of shares .............................. 1,449,776 16,390,769
Shares issued to shareholders
in reinvestment of
dividends & distributions .............. 419,954 4,758,904
------------ ------------
Total issued ........................... 9,243,192 106,072,795
Shares redeemed ........................ (9,258,453) (106,400,402)
------------ ------------
Net decrease ........................... (15,261) $ (327,607)
============ ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended September 30, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 6,327,245 $ 73,822,777
Automatic conversion
of shares .............................. 1,518,544 17,683,070
Shares issued to shareholders
in reinvestment of dividends ........... 254,369 2,969,158
------------ ------------
Total issued ........................... 8,100,158 94,475,005
Shares redeemed ........................ (7,522,615) (87,900,980)
------------ ------------
Net increase ........................... 577,543 $ 6,574,025
============ ============
- --------------------------------------------------------------------------------
18
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 1999
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders, Merrill Lynch New York Municipal Bond
Fund of Merrill Lynch Multi-State Municipal Series Trust:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Merrill Lynch New York Municipal Bond Fund of
Merrill Lynch Multi-State Municipal Series Trust as of September 30, 1999, the
related statements of operations for the year then ended and changes in net
assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the five-year period then ended.
These financial statements and the financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at
September 30, 1999 by correspondence with the custodian and broker. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Merrill Lynch New
York Municipal Bond Fund of Merrill Lynch Multi-State Municipal Series Trust as
of September 30, 1999, the results of its operations, the changes in its net
assets, and the financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
Deloitte & Touche llp
Princeton, New Jersey
November 2, 1999
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid monthly by Merrill Lynch New
York Municipal Bond Fund of Merrill Lynch Multi-State Municipal Series Trust
during its taxable year ended September 30, 1999 qualify as tax-exempt interest
dividends for Federal income tax purposes.
Additionally, the following table summarizes the taxable distributions paid by
the Fund during the year:
- --------------------------------------------------------------------------------
Record Payable Ordinary Long-Term
Date Date Income Capital Gains*
- --------------------------------------------------------------------------------
12/21/98 12/31/98 $.014444 $.332529
- --------------------------------------------------------------------------------
* The entire distribution is subject to the 20% tax rate.
Please retain this information for your records.
19
<PAGE>
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of the Fund unless accompanied or preceded by the Fund's
current prospectus. Past performance results shown in this report should not be
considered a representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Statements and other information
herein are as dated and are subject to change.
Merrill Lynch New York
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011 10344--9/99
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