MERRILL LYNCH
NEW YORK
MUNICIPAL
BOND FUND
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
September 30, 2000
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 2000
TO OUR SHAREHOLDERS
The Municipal Market Environment
During the six-month period ended September 30, 2000, long-term US Treasury bond
yields drifted slightly higher. A number of economic indicators, particularly
employment, new home sales and consumer spending, have suggested that US
economic growth, while still robust, has moderated from its 1999 levels.
Consensus estimates for the third-quarter 2000 US gross domestic product are
centered around 3%, well below the 4.8% growth rate of the first-quarter and
second-quarter 2000 gross domestic product growth of 5.62%. This expected
decline in economic growth suggests to some analysts that the Federal Reserve
Board is approaching the end of its current tightening cycle. Given the ongoing
US Treasury debt reduction program and forecasts of sizeable Federal budgeting
surpluses going forward, investor emphasis has largely remained focused upon
longer-dated maturity US Treasury bonds. By late August, US Treasury bond yields
declined more than 15 basis points (0.15%) to 5.66%, their lowest level in more
than a year.
However, for the remainder of the period bond yields were unable to maintain
their earlier gains. Rising prices were the major factor behind the decline in
bond prices, as many investors feared that higher oil prices would result in
increased inflationary pressures. Additionally, US corporations have been
issuing large amounts of taxable debt in order to take advantage of the current
low interest rate environment. During the last three months, US corporations
have issued more than $100 billion in investment-grade securities, offering
yields in the 7.25%-9% range, and many investors found these taxable issues an
attractive and more plentiful alternative to US Treasury bonds. As the demand
for US Treasury issues weakened in recent weeks, US bond yields rose. By the end
of September, US Treasury bonds rose to 5.88%, an increase of five basis points
over the last six months.
The six-month period ended September 30, 2000 was one of the few periods in
recent years in which the tax-exempt bond market has outperformed its taxable
counterpart. This has largely been a reflection of the continuing reduction in
new municipal bond issuance and a moderate increase in investor demand. Thus for
this year, just $141 billion in new long-term tax-exempt bonds was issued, a
decline of almost 20% compared to the same period in 1999. Recent issuance has
been even more restricted. In September 2000, just over $14 billion in municipal
bonds was underwritten, a decline of more than 25% from September 1999 levels.
Recently, investor demand has been stronger, particularly among individual
retail investors. Investors received more than $45 billion in coupon payments,
bond maturities and the proceeds from early redemptions during June and July.
Traditional institutional investors, such as mutual funds, have not played a
major role during recent months, as fund flows, although slowing, have remained
negative. However, non-traditional buyers, hedge funds and arbitrageurs have
noticeably increased their activity as may be expected when tax-exempt bond
yield ratios exceed 100% of their taxable counterparts as they have in recent
weeks. Property/casualty insurers, after being unprofitable for a number of
years, have also begun to return to the tax-exempt bond market. During the
period, long-term municipal revenue bond yields, as measured by the Bond Buyer
Revenue Bond Index, declined by more than 15 basis points to end the period at
5.85%.
However, tax-exempt bond yields have generally declined throughout most of this
year. Much of the resulting price appreciation has been triggered by the
significant improvement in the long-term US Treasury market. While the technical
position of the municipal bond market has been very positive this year, it was
also positive for most of 1999 when tax-exempt bond yields rose dramatically.
From that perspective, it may be too early to become overly positive about the
extent to which the municipal bond market can continue to improve. The US
Treasury bond market demonstrated on a number of occasions this year that its
positive technical backdrop can quickly be subordinated by resurgent domestic
economic growth.
Fiscal Year in Review
The 12-month period ended September 30, 2000 was not an easy environment in
which to manage a municipal bond fund. Although yields were lower in September
2000 than in September 1999, there was extreme volatility during the year. This
was attributed mainly to an inflation scare caused by the extremely low
unemployment rate and the raising of short-term
1
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 2000
interest rates by the Federal Reserve Board. However, this volatility afforded
us the opportunity to purchase bonds that helped boost the Fund's income, while
limiting volatility and lengthening the duration when bonds were perceived to be
inexpensive relative to economic conditions. The overall strategy of the Fund
worked well during the 12-month period, as the Fund's Class A, Class B, Class C
and Class D Shares had total returns of +5.19%, +4.75%, +4.55% and +5.08%,
respectively, compared to the industry average of +5.0%, as measured by Lipper
Analytical Services Inc. (Investment results shown do not reflect sales charges
and would be lower if sales charges were included. Complete performance
information can be found on pages 3-5 of this report to shareholders.)
We managed the Fund with the intent of sustaining an appealing level of
tax-exempt income for our shareholders. Our strategy was to stay invested in the
highest-yielding bonds that could be purchased, without sacrificing the credit
quality of the Fund, and maintain a slightly longer duration than the Fund's
peer group. Therefore, we purchased discount bonds in the 15-year-20-year sector
and sold par bonds in the 20-year-30-year maturity range. These efforts
generated a substantial pickup in yield because of the underperformance of
discount bonds during the prior six months. Our strategy proved successful as
yields declined about 15 basis points.
Looking forward, we believe that interest rates will trend sideways until there
is a substantial slowdown in the economy. However, we anticipate there may also
be some volatility because of the increase in energy prices. In our opinion,
this inflation scare could present an opportunity to extend the duration of the
Fund in preparation for a significant decline in yields when the economy slows
enough for the Federal Reserve Board to stop raising short-term interest rates.
In Conclusion
We appreciate your ongoing interest 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
November 6, 2000
2
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 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:
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/
6 Month 12 Month Since Inception Standardized
As of September 30, 2000 Total Return Total Return Total Return 30-Day Yield
====================================================================================================================================
<S> <C> <C> <C> <C>
ML New York Municipal Bond Fund Class A Shares +3.97% +5.19% +84.29% 4.58%
------------------------------------------------------------------------------------------------------------------------------------
ML New York Municipal Bond Fund Class B Shares +3.80 +4.75 +75.18 4.26
------------------------------------------------------------------------------------------------------------------------------------
ML New York Municipal Bond Fund Class C Shares +3.75 +4.55 +31.48 4.16
------------------------------------------------------------------------------------------------------------------------------------
ML New York Municipal Bond Fund Class D Shares +4.02 +5.08 +35.39 4.49
====================================================================================================================================
</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, 2000
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment--Class A & B 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:
9/90 9/00
ML New York Municipal Bond Fund+--
Class A Shares* $9,600 $17,691
ML New York Municipal Bond Fund+--
Class B Shares* $10,000 $17,516
Lehman Brothers Municipal Bond
Index++ $10,000 $20,259
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** 9/00
ML New York Municipal Bond Fund+--
Class C Shares* $10,000 $13,148
ML New York Municipal Bond Fund+--
Class D Shares* $9,600 $12,996
Lehman Brothers Municipal Bond
Index++ $10,000 $15,000
* 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' graph is from 10/31/94.
Past performance is not predictive of future results.
4
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 2000
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
One Year Ended 9/30/00 +5.19% +0.98%
--------------------------------------------------------------------------------
Five Years Ended 9/30/00 +4.71 +3.86
--------------------------------------------------------------------------------
Ten Years Ended 9/30/00 +6.30 +5.87
--------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
One Year Ended 9/30/00 +4.75% +0.75%
--------------------------------------------------------------------------------
Five Years Ended 9/30/00 +4.20 +4.20
--------------------------------------------------------------------------------
Ten Years Ended 9/30/00 +5.77 +5.77
================================================================================
* 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*
================================================================================
One Year Ended 9/30/00 +4.55% +3.55%
--------------------------------------------------------------------------------
Five Years Ended 9/30/00 +4.10 +4.10
--------------------------------------------------------------------------------
Inception (10/21/94)
through 9/30/00 +4.71 +4.71
================================================================================
* 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*
================================================================================
One Year Ended 9/30/00 +5.08% +0.88%
--------------------------------------------------------------------------------
Five Years Ended 9/30/00 +4.62 +3.77
--------------------------------------------------------------------------------
Inception (10/21/94)
through 9/30/00 +5.23 +4.51
================================================================================
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
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, 2000 qualify as tax-exempt interest
dividends for Federal income tax purposes.
Additionally, the Fund paid a long-term capital gains distribution of $.008797
per share, payable on December 31, 1999 to shareholders of record as of December
20, 1999. The entire distribution is subject to a 20% tax rate.
Please retain this information for your records.
5
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 2000
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face
Ratings Ratings Amount Issue Value
<C> <C> <C> <S> <C>
------------------------------------------------------------------------------------------------------------------------------------
New York--92.5%
------------------------------------------------------------------------------------------------------------------------------------
AA NR* $ 1,175 Albany, New York, IDA, Civic Facility Revenue Bonds (University Heights--Albany Law
School), Series A, 6.75% due 12/01/2019 $ 1,302
------------------------------------------------------------------------------------------------------------------------------------
Buffalo, New York, GO, General Improvement, Series D (d):
AAA Aaa 2,245 5.50% due 12/01/2008 2,347
AAA Aaa 1,905 5.625% due 12/01/2010 2,014
------------------------------------------------------------------------------------------------------------------------------------
NR* Aa2 5,100 Hornell, New York, IDA, IDR (Crowley Foods, Inc. Facility), 7.75% due 12/01/2016 5,342
------------------------------------------------------------------------------------------------------------------------------------
A1+ VMIG1@ 100 Long Island Power Authority, New York, Electric System Revenue Bonds, VRDN, Sub-Series 5,
5.50% due 5/01/2033 (h) 100
------------------------------------------------------------------------------------------------------------------------------------
Long Island Power Authority, New York,
Electric System Revenue Refunding Bonds, Series A (d):
AAA Aaa 3,500 5.125% due 12/01/2016 3,375
AAA Aaa 2,500 5% due 12/01/2018 2,333
------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 5,000 Metropolitan Transportation Authority, New York, Commuter Facilities Revenue Refunding
Bonds, Series D, 5% due 7/01/2016 (e) 4,759
------------------------------------------------------------------------------------------------------------------------------------
Metropolitan Transportation Authority, New York, Dedicated Tax Fund Revenue Bonds, Series A:
AAA Aaa 1,000 6.125% due 4/01/2014 (b) 1,071
AAA Aaa 1,000 6.125% due 4/01/2015 (b) 1,066
AAA Aaa 2,000 6.125% due 4/01/2017 (b) 2,117
AAA Aaa 6,440 5.25% due 4/01/2023 (d) 6,075
------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Metropolitan Transportation Authority, New York, Transit Facilities Revenue Bonds,
Series C-1, 5.50% due 7/01/2022 (b) 1,958
------------------------------------------------------------------------------------------------------------------------------------
New York City, New York, City Municipal Water Finance Authority, Water and Sewer System
Revenue Refunding Bonds:
AA Aa3 11,250 Series B, 6.50% due 6/15/2031 12,282
A1+ VMIG1@ 100 VRDN, Series G, 5.50% due 6/15/2024 (b)(h) 100
------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 6,120 New York City, New York, City Transit Authority, Metropolitan Transportation Authority, COP
(Triborough), Series A, 5.625% due 1/01/2013 (a) 6,339
------------------------------------------------------------------------------------------------------------------------------------
New York City, New York, City Transitional Finance Authority Revenue Bonds, Future Tax
Secured:
AAA Aaa 10,000 Series B, 4.50% due 11/15/2027 (b) 8,134
AA Aa3 2,250 Series C, 5% due 5/01/2026 2,011
------------------------------------------------------------------------------------------------------------------------------------
A A2 5,000 New York City, New York, GO, Refunding, Series F, 5.25% due 8/01/2017 4,821
------------------------------------------------------------------------------------------------------------------------------------
New York City, New York, GO, VRDN (h):
A1+ VMIG1@ 100 Series B, 5.50% due 10/01/2020 (b) 100
NR* VMIG1@ 800 Series B-2, Sub-Series B-5, 5.55% due 8/15/2009 (e) 800
------------------------------------------------------------------------------------------------------------------------------------
</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)
COP Certificates of Participation
DATES Daily Adjustable Tax-Exempt Securities
FLOATS Floating Rate Securities
GO General Obligation Bonds
HFA Housing Finance Agency
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, 2000
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face
Ratings Ratings Amount Issue Value
<C> <C> <C> <S> <C>
------------------------------------------------------------------------------------------------------------------------------------
New York (continued)
------------------------------------------------------------------------------------------------------------------------------------
New York City, New York, IDA, Civic Facilities Revenue Bonds:
BBB NR* $ 1,000 (College of Aeronautics Project), 5.45% due 5/01/2018 $ 936
BBB NR* 3,200 (College of Aeronautics Project), 5.50% due 5/01/2028 2,925
NR* NR* 6,895 (New York Blood Center Inc. Project), 7.25% due 5/01/2004 (f) 7,483
AAA Aaa 4,690 (USTA National Tennis Center Project), 6.60% due 11/15/2011 (d) 5,068
------------------------------------------------------------------------------------------------------------------------------------
A A3 9,250 New York City, New York, IDA, Special Facilities Revenue Bonds (Terminal One Group
Association Project), AMT, 6.125% due 1/01/2024 9,383
------------------------------------------------------------------------------------------------------------------------------------
New York State Dormitory Authority, Lease Revenue Bonds (e):
AAA NR* 2,800 (Court Facilities--Westchester County), 5.25% due 8/01/2018 2,705
AAA Aaa 1,755 (Office Facilities of Audit and Control), 4.90% due 4/01/2017 1,621
------------------------------------------------------------------------------------------------------------------------------------
New York State Dormitory Authority Revenue Refunding Bonds:
AAA Aaa 13,750 (City University System--Consolidated Second Generation), Series A,
6.125% due 7/01/2011 (a) 15,074
AAA NR* 4,000 (City University--Third Generation Resources), Series 2, 5% due 7/01/2028 (d) 3,563
AAA Aaa 1,000 (Hospital for Special Surgery), 5% due 2/01/2028 (c)(e) 880
AA NR* 1,500 (Long Island University), 5.125% due 9/01/2019 1,404
AA NR* 1,800 (Long Island University), 5.125% due 9/01/2023 1,643
AA NR* 1,400 (Long Island University), 5.25% due 9/01/2028 1,291
BBB+ Baa1 3,000 (Mount Sinai Health), Series A, 6.50% due 7/01/2016 3,203
BBB+ Baa1 4,850 (Mount Sinai Health), Series A, 6.625% due 7/01/2018 5,225
BBB+ Baa1 2,500 (Mount Sinai Health), Series A, 6.625% due 7/01/2019 2,685
BBB+ Baa1 2,385 (Mount Sinai Health), Series A, 6.75% due 7/01/2020 2,574
AAA Aaa 3,000 (Rockefeller University), 5% due 7/01/2028 2,711
AAA Aaa 2,500 (Saint John's University), 4.75% due 7/01/2028 (e) 2,117
AAA Aaa 3,700 (State University Educational Facilities), 5% due 5/15/2015 (e) 3,588
AAA Aaa 11,850 (State University Educational Facilities), Series A, 4.75% due 5/15/2025 (e) 10,146
------------------------------------------------------------------------------------------------------------------------------------
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 454
------------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 3,200 New York State Energy Research and Development Authority, Facilities Revenue Refunding
Bonds, Trust Receipts, Class R, Series 12, 6.508% due 8/15/2020 (a)(g) 3,439
------------------------------------------------------------------------------------------------------------------------------------
New York State Energy Research and Development Authority, PCR (Niagara Mohawk
Power Corporation Project) (h):
A1+ NR* 2,500 DATES, Series A, 5.50% due 7/01/2015 2,500
A1+ NR* 4,800 VRDN, AMT, 5.55% due 12/01/2023 4,800
------------------------------------------------------------------------------------------------------------------------------------
New York State Energy Research and Development Authority, PCR, Refunding, Series A:
AAA Aaa 3,500 (Central Hudson Gas and Electric), 5.45% due 8/01/2027 (a) 3,377
NR* P1 2,100 (Niagara Mohawk Corporation Project), FLOATS, 5.50% due 3/01/2027 (h) 2,100
------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 New York State Environmental Facilities Corporation, Special Obligation Revenue Refunding
Bonds (Riverbank State Park), 6.25% due 4/01/2012 (a) 3,322
------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 6,000 New York State HFA Revenue Refunding Bonds, Housing Mortgage Project, Series A,
6.10% due 11/01/2015 (d) 6,164
------------------------------------------------------------------------------------------------------------------------------------
NR* Aa1 5,000 New York State Mortgage Agency, Homeowner Mortgage Revenue Bonds, AMT, Series 90,
6.35% due 10/01/2030 5,201
------------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 2,800 New York State Mortgage Agency Revenue Bonds, AMT, 27th Series, 5.875% due 4/01/2030 2,778
------------------------------------------------------------------------------------------------------------------------------------
AA- Aa3 3,000 New York State Thruway Authority, General Revenue Bonds, Series D, 5.50% due 1/01/2016 3,012
------------------------------------------------------------------------------------------------------------------------------------
AA- Aa3 4,000 New York State Thruway Authority, Revenue Refunding Bonds, Series E, 5% due 1/01/2025 3,586
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 2000
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face
Ratings Ratings Amount Issue Value
<C> <C> <C> <S> <C>
------------------------------------------------------------------------------------------------------------------------------------
New York (concluded)
------------------------------------------------------------------------------------------------------------------------------------
New York State Urban Development Corporation Revenue Bonds:
AAA NR* $ 6,000 (Correctional Capital Facilities--Service Contract), Series A, 5% due 1/01/2028 (d) $ 5,354
A NR* 305 (Youth Facilities Services Contract), Series B, 6% due 4/01/2015 318
A NR* 665 (Youth Facilities Services Contract), Series B, 6% due 4/01/2016 690
A NR* 705 (Youth Facilities Services Contract), Series B, 6% due 4/01/2017 729
A NR* 750 (Youth Facilities Services Contract), Series B, 6.125% due 4/01/2018 783
A NR* 615 (Youth Facilities Services Contract), Series B, 6.25% due 4/01/2020 645
------------------------------------------------------------------------------------------------------------------------------------
New York State Urban Development Corporation, Revenue Refunding Bonds:
A Baa1 1,685 (Clarkson Center Advance Materials), 5.50% due 1/01/2020 1,648
AAA Aaa 1,850 (Correctional Capital Facilities), 5% due 1/01/2020 (e) 1,702
AAA Aaa 10,955 (Correctional Capital Facilities), Series A, 6.50% due 1/01/2010 (d) 12,220
AAA Aaa 4,470 (Correctional Facilities), Series A, 5.50% due 1/01/2014 (a) 4,601
A Baa1 3,500 (University Facility Grants), 5.50% due 1/01/2019 3,448
------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 North Country, New York, Development Authority, Solid Waste Management System Revenue
Refunding Bonds, 6% due 5/15/2015 (d) 1,075
------------------------------------------------------------------------------------------------------------------------------------
AAA NR* 1,850 Otsego County, New York, IDA, Civic Facility Revenue Refunding Bonds (Aurelia Osborn
Fox Memorial Hospital), Series A, 5.35% due 10/01/2017 (d) 1,797
------------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 4,075 Port Authority of New York and New Jersey, Revenue Bonds, Trust Receipts, AMT, Class R,
Series 10, 6.051% due 1/15/2017 (d)(g) 4,297
------------------------------------------------------------------------------------------------------------------------------------
Port Authority of New York and New Jersey, Special Obligation Revenue Bonds, AMT:
AAA Aaa 5 (JFK International Air Terminal Project), Series 6, 5.75% due 12/01/2022 (e) 5
NR* Aaa 6,000 RIB, Series 243, 6.70% due 12/01/2010 (g) 7,203
------------------------------------------------------------------------------------------------------------------------------------
NR* NR* 3,000 Suffolk County, New York, IDA, IDR, Refunding (Nissequogue Cogeneration Partners Facility),
AMT, 5.50% due 1/01/2023 2,551
------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 7,155 Suffolk County, New York, IDA, Solid Waste Disposal Facility Revenue Refunding Bonds
(Ogden Martin System--Huntington), AMT, 6.25% due 10/01/2012 (a) 7,880
------------------------------------------------------------------------------------------------------------------------------------
NR* NR* 2,005 Utica, New York, IDA, Civic Facility Revenue Bonds (Utica College Project), Series A,
5.75% due 8/01/2028 1,886
------------------------------------------------------------------------------------------------------------------------------------
NR* NR* 3,500 Westchester County, New York, IDA, Civic Facility Revenue Bonds (Rippowam-Cisqua
School Project), 5.75% due 6/01/2029 3,423
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Puerto Rico--4.7%
------------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 2,630 Puerto Rico Commonwealth, GO, RIB, Series 244, 5.45% due 7/01/2021 (e)(g) 2,594
------------------------------------------------------------------------------------------------------------------------------------
AAAr Aaa 4,750 Puerto Rico Commonwealth, GO, Refunding, RITR, Class R, Series 3, 6.131% due 7/01/2016 (e)(g) 5,052
------------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 1,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Trust Receipts, Class R,
Series 16 HH, 6.297% due 7/01/2013 (g) 1,098
------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 4,750 Puerto Rico Public Buildings Authority Revenue Bonds (Government Facilities), Series B,
5% due 7/01/2027 (a) 4,383
------------------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost--$265,230)--97.2% 270,786
Other Assets Less Liabilities--2.8% 7,888
--------
Net Assets--100.0% $278,674
========
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(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 September 30, 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 September
30, 2000.
* 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, 2000
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of September 30, 2000
<TABLE>
<C> <S> <C> <C>
Assets: Investments, at value (identified cost--$265,230,284) ...................... $270,785,803
Cash ....................................................................... 20,702
Receivables:
Interest ................................................................. $ 5,018,404
Securities sold .......................................................... 2,973,709
Beneficial interest sold ................................................. 1,032,596 9,024,709
------------
Prepaid registration fees and other assets ................................. 90,740
------------
Total assets ............................................................... 279,921,954
------------
-----------------------------------------------------------------------------------------------------------------------------
Liabilities: Payables:
Beneficial interest redeemed ............................................. 665,815
Dividends to shareholders ................................................ 209,381
Investment adviser ....................................................... 114,295
Distributor .............................................................. 71,853 1,061,344
------------
Accrued expenses and other liabilities ..................................... 187,080
------------
Total liabilities .......................................................... 1,248,424
------------
-----------------------------------------------------------------------------------------------------------------------------
Net Assets: Net assets ................................................................. $278,673,530
============
-----------------------------------------------------------------------------------------------------------------------------
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited number of
Consist of: shares authorized .......................................................... $ 119,861
Class B Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized .......................................................... 1,268,691
Class C Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized .......................................................... 64,533
Class D Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized .......................................................... 1,202,370
Paid-in capital in excess of par ........................................... 294,808,831
Accumulated realized capital losses on investments--net .................... (22,952,951)
Accumulated distributions in excess of realized capital gains on
investments--net ........................................................... (1,393,324)
Unrealized appreciation on investments--net ................................ 5,555,519
------------
Net assets ................................................................. $278,673,530
============
-----------------------------------------------------------------------------------------------------------------------------
Net Asset Value: Class A--Based on net assets of $12,579,229 and 1,198,607 shares
of beneficial interest outstanding $ 10.49
============
Class B--Based on net assets of $133,180,113 and 12,686,905 shares
of beneficial interest outstanding $ 10.50
============
Class C--Based on net assets of $6,776,337 and 645,332 shares
of beneficial interest outstanding $ 10.50
============
Class D--Based on net assets of $126,137,851 and 12,023,701 shares
of beneficial interest outstanding $ 10.49
============
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 2000
FINANCIAL INFORMATION (continued)
Statement of Operations
<TABLE>
<CAPTION>
For the Year Ended
September 30, 2000
------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Investment Income: Interest and amortization of premium and discount earned .................. $ 16,923,559
------------------------------------------------------------------------------------------------------------------------------------
Expenses: Investment advisory fees .................................................. $ 1,644,795
Account maintenance and distribution fees--Class B ........................ 758,436
Account maintenance fees--Class D ......................................... 127,485
Accounting services ....................................................... 79,603
Transfer agent fees--Class B .............................................. 77,535
Professional fees ......................................................... 75,404
Printing and shareholder reports .......................................... 57,051
Transfer agent fees--Class D .............................................. 53,109
Registration fees ......................................................... 44,363
Account maintenance and distribution fees--Class C ........................ 40,910
Trustees' fees and expenses ............................................... 19,481
Custodian fees ............................................................ 17,024
Pricing fees .............................................................. 13,131
Transfer agent fees--Class A .............................................. 5,462
Transfer agent fees--Class C .............................................. 3,419
Other ..................................................................... 7,978
------------
Total expenses ............................................................ 3,025,186
------------
Investment income--net .................................................... 13,898,373
------------
------------------------------------------------------------------------------------------------------------------------------------
Realized & Unreal- Realized loss on investments--net ......................................... (22,952,951)
ized Gain (Loss) on Change in unrealized appreciation/depreciation on investments--net ........ 22,072,504
Investments--Net: ------------
Net Increase in Net Assets Resulting from Operations ...................... $ 13,017,926
============
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 2000
FINANCIAL INFORMATION (continued)
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Year Ended
September 30,
----------------------------
Increase (Decrease) in Net Assets: 2000 1999
----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Operations: Investment income--net ...................................................... $ 13,898,373 $ 16,415,213
Realized gain (loss) on investments--net .................................... (22,952,951) 3,896,726
Change in unrealized appreciation/depreciation on investments--net .......... 22,072,504 (42,817,466)
------------ ------------
Net increase (decrease) in net assets resulting from operations ............. 13,017,926 (22,505,527)
------------ ------------
----------------------------------------------------------------------------------------------------------------------------------
Dividends & Investment income--net:
Distributions to Class A ................................................................... (648,507) (774,757)
Shareholders: Class B ................................................................... (6,757,382) (8,769,481)
Class C ................................................................... (296,795) (343,304)
Class D ................................................................... (6,195,689) (6,527,671)
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 ................................................................... (11,932) (48,342)
Class B ................................................................... (139,749) (649,386)
Class C ................................................................... (5,949) (23,598)
Class D ................................................................... (109,966) (404,402)
------------ ------------
Net decrease in net assets resulting from dividends and distributions
to shareholders ............................................................. (14,165,969) (28,387,346)
------------ ------------
----------------------------------------------------------------------------------------------------------------------------------
Beneficial Interest Net decrease in net assets derived from beneficial interest transactions .... (56,930,289) (34,154,005)
Transactions: ------------ ------------
----------------------------------------------------------------------------------------------------------------------------------
Net Assets: Total decrease in net assets ................................................ (58,078,332) (85,046,878)
Beginning of year ........................................................... 336,751,862 421,798,740
------------ ------------
End of year ................................................................. $278,673,530 $336,751,862
============ ============
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 2000
FINANCIAL INFORMATION (continued)
Financial Highlights
<TABLE>
<CAPTION>
Class A
The following per share data and ratios have been derived ---------------------------------------------------------
from information provided in the financial statements. For the Year Ended September 30,
---------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ................ $ 10.49 $ 12.00 $ 11.46 $ 11.12 $ 11.04
Operating -------- -------- -------- -------- --------
Performance: Investment income--net ............................ .51 .51 .57 .60 .59
Realized and unrealized gain (loss) on
investments--net .................................. .01 (1.16) .54 .34 .08
-------- -------- -------- -------- --------
Total from investment operations .................. .52 (.65) 1.11 .94 .67
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net .......................... (.51) (.51) (.57) (.60) (.59)
Realized gain on investments--net ............... -- (.32) -- --+ --
In excess of realized gain on
investments--net ................................ (.01) (.03) -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions ................. (.52) (.86) (.57) (.60) (.59)
-------- -------- -------- -------- --------
Net asset value, end of year ...................... $ 10.49 $ 10.49 $ 12.00 $ 11.46 $ 11.12
======== ======== ======== ======== ========
------------------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ................ 5.19% (5.70%) 9.94% 8.69% 6.19%
Return:* ======== ======== ======== ======== ========
------------------------------------------------------------------------------------------------------------------------------------
Ratios to Expenses .......................................... .70% .70% .67% .65% .66%
Average ======== ======== ======== ======== ========
Net Assets: Investment income--net ............................ 4.95% 4.59% 4.92% 5.30% 5.31%
======== ======== ======== ======== ========
------------------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of year (in thousands) ............ $ 12,579 $ 15,522 $ 17,727 $ 22,301 $ 21,762
Data: ======== ======== ======== ======== ========
Portfolio turnover ................................ 149.47% 135.17% 163.12% 97.22% 114.78%
======== ======== ======== ======== ========
------------------------------------------------------------------------------------------------------------------------------------
</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, 2000
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
<TABLE>
<CAPTION>
Class B
The following per share data and ratios have been derived ---------------------------------------------------------
from information provided in the financial statements. For the Year Ended September 30,
---------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ................ $ 10.49 $ 12.00 $ 11.46 $ 11.12 $ 11.04
Operating -------- -------- -------- -------- --------
Performance: Investment income--net ............................ .46 .46 .51 .54 .54
Realized and unrealized gain (loss) on
investments--net .................................. .02 (1.16) .54 .34 .08
-------- -------- -------- -------- --------
Total from investment operations .................. .48 (.70) 1.05 .88 .62
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net .......................... (.46) (.46) (.51) (.54) (.54)
Realized gain on investments--net ............... -- (.32) -- --+ --
In excess of realized gain on
investments--net ................................ (.01) (.03) -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions ................. (.47) (.81) (.51) (.54) (.54)
-------- -------- -------- -------- --------
Net asset value, end of year ...................... $ 10.50 $ 10.49 $ 12.00 $ 11.46 $ 11.12
======== ======== ======== ======== ========
------------------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ................ 4.75% (6.18%) 9.38% 8.14% 5.66%
Return:* ======== ======== ======== ======== ========
------------------------------------------------------------------------------------------------------------------------------------
Ratios to Expenses .......................................... 1.20% 1.21% 1.18% 1.16% 1.16%
Average ======== ======== ======== ======== ========
Net Assets: Investment income--net ............................ 4.44% 4.07% 4.40% 4.79% 4.80%
======== ======== ======== ======== ========
------------------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of year (in thousands) ............ $133,180 $179,583 $242,811 $279,754 $403,403
Data: ======== ======== ======== ======== ========
Portfolio turnover ................................ 149.47% 135.17% 163.12% 97.22% 114.78%
======== ======== ======== ======== ========
------------------------------------------------------------------------------------------------------------------------------------
</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, 2000
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
<TABLE>
<CAPTION>
Class C
The following per share data and ratios have been derived ---------------------------------------------------------
from information provided in the financial statements. For the Year Ended September 30,
---------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ................ $ 10.50 $ 12.01 $ 11.47 $ 11.12 $ 11.04
Operating -------- -------- -------- -------- --------
Performance: Investment income--net ............................ .45 .45 .50 .53 .52
Realized and unrealized gain (loss) on
investments--net .................................. .01 (1.16) .54 .35 .08
-------- -------- -------- -------- --------
Total from investment operations .................. .46 (.71) 1.04 .88 .60
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net .......................... (.45) (.45) (.50) (.53) (.52)
Realized gain on investments--net ............... -- (.32) -- --+ --
In excess of realized gain on
investments--net ................................ (.01) (.03) -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions ................. (.46) (.80) (.50) (.53) (.52)
-------- -------- -------- -------- --------
Net asset value, end of year ...................... $ 10.50 $ 10.50 $ 12.01 $ 11.47 $ 11.12
======== ======== ======== ======== ========
------------------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ................ 4.55% (6.26%) 9.27% 8.13% 5.55%
Return:* ======== ======== ======== ======== ========
------------------------------------------------------------------------------------------------------------------------------------
Ratios to Expenses .......................................... 1.30% 1.31% 1.28% 1.26% 1.27%
Average ======== ======== ======== ======== ========
Net Assets: Investment income--net ............................ 4.34% 3.98% 4.27% 4.69% 4.70%
======== ======== ======== ======== ========
------------------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of year (in thousands) ............ $ 6,777 $ 8,051 $ 8,229 $ 5,034 $ 4,175
Data: ======== ======== ======== ======== ========
Portfolio turnover ................................ 149.47% 135.17% 163.12% 97.22% 114.78%
======== ======== ======== ======== ========
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Total investment returns exclude the effects of sales charges.
+ Amount is less than $.01 per share.
See Notes to Financial Statements.
14
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 2000
FINANCIAL INFORMATION (concluded)
Financial Highlights (concluded)
<TABLE>
<CAPTION>
Class D
The following per share data and ratios have been derived ---------------------------------------------------------
from information provided in the financial statements. For the Year Ended September 30,
---------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ................ $ 10.49 $ 12.00 $ 11.46 $ 11.11 $ 11.03
Operating -------- -------- ------- -------- --------
Performance: Investment income--net ............................ .50 .50 .56 .58 .58
Realized and unrealized gain (loss) on
investments--net .................................. .01 (1.16) .54 .35 .08
-------- -------- ------- -------- --------
Total from investment operations .................. .51 (.66) 1.10 .93 .66
-------- -------- ------- -------- --------
Less dividends and distributions:
Investment income--net .......................... (.50) (.50) (.56) (.58) (.58)
Realized gain on investments--net ............... -- (.32) -- --+ --
In excess of realized gain on
investments--net ................................ (.01) (.03) -- -- --
-------- -------- ------- -------- --------
Total dividends and distributions ................. (.51) (.85) (.56) (.58) (.58)
-------- -------- ------- -------- --------
Net asset value, end of year ...................... $ 10.49 $ 10.49 $ 12.00 $ 11.46 $ 11.11
======== ======== ======== ======== ========
------------------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ................ 5.08% (5.79%) 9.83% 8.68% 6.09%
Return:* ======== ======== ======== ======== ========
------------------------------------------------------------------------------------------------------------------------------------
Ratios to Expenses .......................................... .79% .80% .77% .75% .76%
Average ======== ======== ======== ======== ========
Net Assets: Investment income--net ............................ 4.85% 4.49% 4.79% 5.20% 5.21%
======== ======== ======== ======== ========
------------------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of year (in thousands) ............ $126,138 $133,596 $153,032 $139,511 $ 94,297
Data: ======== ======== ======== ======== ========
Portfolio turnover ................................ 149.47% 135.17% 163.12% 97.22% 114.78%
======== ======== ======== ======== ========
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Total investment returns exclude the effects of sales charges.
+ Amount is less than $.01 per share.
See Notes to Financial Statements.
15
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 2000
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 conformity
with accounting principles generally accepted in the United States of America,
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
investment strategies to increase or decrease the level of risk to which the
Fund is exposed more quickly and efficiently than transactions in other types of
instruments. 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 the 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. Distributions in excess of realized capital gains are due
primarily to differing tax treatments for futures transactions and post-October
losses.
16
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 2000
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 FAM Distributors, Inc. ("FAMD" or the
"Distributor"), 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, 2000, FAMD earned underwriting discounts and
MLPF&S earned dealer concessions on the sales of the Fund's Class A and Class D
Shares as follows:
--------------------------------------------------------------------------------
FAMD MLPF&S
--------------------------------------------------------------------------------
Class A .............................. $ 16 $ 183
Class D .............................. $ 1,288 $13,156
--------------------------------------------------------------------------------
For the year ended September 30, 2000, MLPF&S received contingent deferred sales
charges of $259,970 and $2,304 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, FAMD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended September 30, 2000 were $415,773,579 and $477,187,573, respectively.
Net realized losses for the year ended September 30, 2000 and net unrealized
gains as of September 30, 2000 were as follows:
--------------------------------------------------------------------------------
Realized Unrealized
Losses Gains
--------------------------------------------------------------------------------
Long-term investments ................... $(22,784,511) $ 5,555,519
Financial futures contracts ............. (168,440) --
------------ ------------
Total ................................... $(22,952,951) $ 5,555,519
============ ============
--------------------------------------------------------------------------------
As of September 30, 2000, net unrealized appreciation for Federal income tax
purposes aggregated $5,555,519, of which $7,842,061 related to appreciated
securities and $2,286,542 related to depreciated securities. The aggregate cost
of investments at September 30, 2000 for Federal income tax purposes was
$265,230,284.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest transactions was
$56,930,289 and
17
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
$34,154,005 for the years ended September 30, 2000 and September 30, 1999,
respectively.
Transactions in shares of beneficial interest for each class were as follows:
--------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended September 30, 2000 Shares Amount
--------------------------------------------------------------------------------
Shares sold ............................ 260,129 $ 2,691,227
Shares issued to shareholders
in reinvestment of
dividends & distributions .............. 31,450 322,331
------------- -------------
Total issued ........................... 291,579 3,013,558
Shares redeemed ........................ (572,580) (5,856,968)
------------- -------------
Net decrease ........................... (281,001) $ (2,843,410)
============= =============
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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 B Shares for the Year Dollar
Ended September 30, 2000 Shares Amount
--------------------------------------------------------------------------------
Shares sold ............................ 932,495 $ 9,574,088
Shares issued to shareholders
in reinvestment of
dividends & distributions .............. 335,183 3,434,308
------------- -------------
Total issued ........................... 1,267,678 13,008,396
Automatic conversion
of shares .............................. (959,003) (9,859,769)
Shares redeemed ........................ (4,736,791) (48,607,606)
------------- -------------
Net decrease ........................... (4,428,116) $ (45,458,979)
============= =============
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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 C Shares for the Year Dollar
Ended September 30, 2000 Shares Amount
--------------------------------------------------------------------------------
Shares sold ............................ 110,116 $ 1,124,770
Shares issued to shareholders
in reinvestment of
dividends & distributions .............. 21,844 224,077
------------- -------------
Total issued ........................... 131,960 1,348,847
Shares redeemed ........................ (253,689) (2,589,143)
------------- -------------
Net decrease ........................... (121,729) $ (1,240,296)
============= =============
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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 D Shares for the Year Dollar
Ended September 30, 2000 Shares Amount
--------------------------------------------------------------------------------
Shares sold ............................ 305,360 $ 3,075,560
Automatic conversion
of shares .............................. 959,609 9,859,769
Shares issued to shareholders
in reinvestment of
dividends & distributions .............. 293,708 3,011,510
------------- -------------
Total issued ........................... 1,558,677 15,946,839
Shares redeemed ........................ (2,275,367) (23,334,443)
------------- -------------
Net decrease ........................... (716,690) $ (7,387,604)
============= =============
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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)
============= =============
--------------------------------------------------------------------------------
18
<PAGE>
Merrill Lynch New York Municipal Bond Fund September 30, 2000
5. Short-Term Borrowings:
On December 3, 1999, the Fund, along with certain other funds managed by FAM and
its affiliates, entered into a $1,000,000,000 credit agreement with Bank of
America, N.A. and certain other lenders. The Fund may borrow under the credit
agreement to fund shareholder redemptions and other lawful purposes other than
for leverage. The Fund may borrow up to the maximum amount allowable under the
Fund's current prospectus and statement of additional information, subject to
various other legal, regulatory or contractual limits. The Fund pays a
commitment fee of .09% per annum based on the Fund's pro rata share of the
unused portion of the facility. Amounts borrowed under the facility bear
interest at a rate equal to, at each fund's election, the Federal Funds rate
plus .50% or a base rate as determined by Bank of America, N.A. The Fund did not
borrow under the facility during the year ended September 30, 2000.
6. Capital Loss Carryforward:
At September 30, 2000, the Fund had a net capital loss carryforward of
approximately $5,897,000, all of which expires in 2008. This amount will be
available to offset like amounts of any future taxable gains.
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, 2000, 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 auditing standards generally accepted
in the United States of America. 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, 2000 by correspondence with the custodian. 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, 2000, the results of its operations, the changes in its net
assets, and the financial highlights for the respective stated periods in
conformity with accounting principles generally accepted in the United States of
America.
Deloitte & Touche LLP
Princeton, New Jersey
November 3, 2000
19
<PAGE>
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
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
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--9/00
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