MERRILL LYNCH
MICHIGAN
MUNICIPAL
BOND FUND
[GRAPHIC OMITTED]
STRATEGIC
Performance
Semi-Annual Report
January 31, 1999
<PAGE>
Merrill Lynch Michigan Municipal Bond Fund January 31, 1999
DEAR SHAREHOLDER
The Municipal Market Environment
During the six months ended January 31, 1999, long-term bond yields moved
significantly lower. US domestic economic growth remained moderate, with losses
in the manufacturing sector offset by strong growth in service-oriented
industries. Industrial commodity prices recently fell to their lowest level in
over a decade. This suggests that the current positive inflationary environment
is unlikely to be challenged in the near term. Additionally, the Federal Reserve
Board lowered short-term interest rates in September, October and November, in
part to ensure that US domestic economic growth would not be negatively impacted
by ongoing weak economic growth overseas. However, various external factors, as
well as increased volatility, contributed to the decline in bond yields as they
have for much of the past year. Episodes of foreign economic instability
generated a significant "flight to quality" rally in US Treasury securities, as
well as fostering lower tax-exempt bond yields as a result. Periods of strong
foreign equity market appreciation, particularly in Asia, have at times resulted
in higher US bond yields as foreign investors have sold US fixed-income
instruments to reinvest the proceeds in their own domestic equity markets.
Additionally, the continued distraction of President Clinton's impeachment trial
added to recent interest rate volatility. However, on balance, the favorable
fundamental economic scenario supported lower bond yields. During the six-month
period ended January 31, 1999, the yield on the US Treasury 30-year bond fell
over 60 basis points (0.60%) to 5.09%, and long-term municipal revenue bond
yields declined almost 20 basis points to 5.17%, as measured by the Bond Buyer
Revenue Bond Index.
Throughout most of 1998, the municipal bond market's performance was impeded by
a significant increase in new-issue supply. However, in recent months, the
technical position of the tax-exempt market improved. Over the last 12 months,
almost $285 billion in new long-term tax-exempt bonds was underwritten, an
increase of almost 30% compared to the same period a year ago. As municipal bond
yields declined in recent years, it has taken increasingly lower bond yields to
generate the cost savings necessary to refinance remaining higher-couponed debt.
Consequently, the rate of increases in municipal bond issuance slowed in recent
quarters. During the last six months, more than $125 billion in new tax-exempt
bonds was issued, an increase of approximately 5% compared to the same period a
year ago. During the January 31, 1999 quarter, $63 billion in new long-term
municipal bonds was underwritten, representing an increase of 5% compared to the
January 31, 1998 quarter.
The pace of tax-exempt issuance continued to slow in 1999. January's monthly
issuance was less than $15 billion, representing a decline of almost 25%
compared to January 1998's volume. Additionally, investors received more than
$22 billion in coupon payments, maturities and proceeds from early redemptions
in January. Investors can also expect to receive an additional $15 billion-$18
billion in February for reinvestment. Consequently, investor demand has been
strong in recent months, easily matching, if not at times exceeding, available
supply. We will monitor this trend closely in the coming months to determine if
the supply pressures exerted in 1998 are abating and fostering a more balanced
supply/demand environment for 1999. Such an environment should allow the
tax-exempt market's performance to more closely mirror that of its taxable
counterpart.
Foreign investors have rarely been active investors in the tax-exempt bond
market since they are unable to benefit from the inherent tax advantage of
municipal securities. Consequently, the municipal bond market has not been able
to benefit from the strong flight to quality demand enjoyed by US Treasury
securities since late 1997. This inability has in large part resulted in
significantly smaller declines in municipal bond yields compared to US Treasury
securities. However, this has resulted in the opportunity to purchase tax-exempt
securities with yields very close to or, in some instances, exceeding those of
comparable US Treasury bonds. By January 31, 1999, long-term tax-exempt bond
yields were at 102% of US Treasury securities of comparable maturities, nearly
matching the least expensive level of the past year. Municipal bond yield ratios
have averaged approximately 95% for the last six months and 92% for all of 1998.
During 1997, tax-exempt bond yield ratios averaged 84%. It is likely that the
combination of the increase in new-issue volume and the "safe-haven" status of
US Treasury
1
<PAGE>
Merrill Lynch Michigan Municipal Bond Fund January 31, 1999
securities drove municipal bond yield ratios to their present attractive levels.
Should new volume decline and/or foreign financial markets regain stability in
1999, tax-exempt bond yield ratios could quickly return to their more historic
levels (85%-88%).
Looking ahead, the expected combination of moderate economic growth in the
United States and continued negligible inflation suggests a relatively stable
interest rate environment into early 1999. However, it is likely that foreign
financial markets will again be a critical factor in determining US bond yields.
Economic problems in Russia and Brazil remain unresolved, suggesting that
additional shocks to the world's financial system are possible. On the other
hand, the continued robustness of the US economy has led to some back up in
interest rates. However, at present these factors indicate that there is little
immediate risk of sustained significant increases in long-term bond yields.
Portfolio Strategy
We continued to maintain the constructive investment strategy that we had
adopted in mid-1998. We believed that economic weakness in Asia, Russia and,
more recently, Brazil would offset the current strength of the US economy. More
important, we expected the absence of any inflationary pressure in the United
States and most of the industrialized world to promote a relatively stable
interest rate environment in the near term. Some interest rate volatility can be
expected as international economic crises, such as the recent currency
devaluation in Brazil, are difficult to predict. However, these episodes are
usually brief in duration, which would allow interest rates in the United States
to remain in their current range.
During the six months ended January 31, 1999, new long-term tax-exempt bond
issuance by Michigan municipalities increased at a faster rate than issuance at
the national level. Almost $4 billion in long-term municipal securities was
issued during the six-month period ended January 31, 1999, representing an
increase of more than 15% as compared to the same period a year earlier. This
above-average increase in supply resulted in Michigan tax-exempt issues trading
at yields very similar to those of national municipal securities. On a
historical basis, long-term Michigan tax-exempt bond yields usually have been 5
basis points-10 basis points lower than comparable national municipal
securities. The recent relative increase in Michigan municipal bond issuance has
provided extremely attractive investment opportunities. Consequently, we expect
to remain fully invested in order to seek to take advantage of the ability to
purchase high-quality Michigan credits at historically attractive yield ratios.
Looking ahead, we expect little change in our current strategy or portfolio
composition. Preservation of the Fund's current income stream is paramount. We
will monitor bond holdings that are subject to redemption in the coming year
with a view toward replacing them with comparable issues bearing increased call
protection. We intend to seek to make these substitutions whenever the yield
sacrifice can be limited.
In Conclusion
We appreciate your ongoing interest in Merrill Lynch Michigan 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
Executive Vice President
/s/ Vincent R. Giordano
Vincent R. Giordano
Senior Vice President
/s/ Fred K. Stuebe
Fred K. Stuebe
Vice President and Portfolio Manager
March 3, 1999
2
<PAGE>
Merrill Lynch Michigan Municipal Bond Fund January 31, 1999
Merrill Lynch Michigan Municipal Bond Fund January 31, 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>
Standardized
12 Month 3 Month Since Inception 30-Day Yield
Total Return Total Return Total Return As of 1/31/99
=============================================================================================================
<S> <C> <C> <C> <C>
ML Michigan Municipal Bond Fund Class A Shares +5.06% +1.14% +42.88% 4.05%
- -------------------------------------------------------------------------------------------------------------
ML Michigan Municipal Bond Fund Class B Shares +4.53 +1.01 +38.59 3.71
- -------------------------------------------------------------------------------------------------------------
ML Michigan Municipal Bond Fund Class C Shares +4.42 +1.08 +34.02 3.61
- -------------------------------------------------------------------------------------------------------------
ML Michigan Municipal Bond Fund Class D Shares +4.95 +1.11 +36.89 3.95
=============================================================================================================
</TABLE>
* Investment results shown do not reflect sales charges; results would be
lower if a sales charge was included. Total investment returns are based
on changes in net asset values for the periods shown, and assume
reinvestment of all dividends and capital gains distributions at net asset
value on the payable date. The Fund's since inception periods are Class A
& Class B Shares, from 1/29/93 to 1/31/99 and Class C & Class D Shares,
from 10/21/94 to 1/31/99.
3
<PAGE>
Merrill Lynch Michigan Municipal Bond Fund January 31, 1999
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
Year Ended 12/31/98 +4.70% +0.52%
- --------------------------------------------------------------------------------
Five Years Ended 12/31/98 +4.99 +4.14
- --------------------------------------------------------------------------------
Inception (1/29/93)
through 12/31/98 +6.03 +5.30
- --------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
Year Ended 12/31/98 +4.17% +0.17%
- --------------------------------------------------------------------------------
Five Years Ended 12/31/98 +4.44 +4.44
- --------------------------------------------------------------------------------
Inception (1/29/93)
through 12/31/98 +5.49 +5.49
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after
4 years.
** Assuming payment of applicable contingent deferred sales charge.
================================================================================
% Return % Return
Without CDSC With CDSC**
================================================================================
Class C Shares*
================================================================================
Year Ended 12/31/98 +4.16% +3.16%
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 12/31/98 +6.98 +6.98
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after
1 year.
================================================================================
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class D Shares*
================================================================================
Year Ended 12/31/98 +4.60% +0.41%
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 12/31/98 +7.51 +6.47
- --------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Vincent R. Giordano, Senior Vice President
Kenneth A. Jacob, Vice President
Fred K. Stuebe, Vice President
Donald C. Burke, Vice President
and Treasurer
Robert E. Putney, III, Secretary
- --------------------------------------------------------------------------------
Gerald M. Richard, Treasurer of Merrill Lynch Michigan Municipal Bond Fund has
recently retired. His colleagues at Merrill Lynch Asset Management, L.P. join
the Fund's Board of Trustees in wishing Mr. Richard well in his retirement.
- --------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
4
<PAGE>
Merrill Lynch Michigan Municipal Bond Fund January 31, 1999
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
- --------------------------------------------------------------------------------------------------------------------------
Michigan--94.2%
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NR* Aaa $1,000 Baldwin, Michigan, Community Schools, GO, 5.20% due 5/01/2023 (g) $ 1,014
- --------------------------------------------------------------------------------------------------------------------------
AA+ Aa2 1,000 Breitung Township, Michigan, School District, Refunding, GO,
6.30% due 5/01/2019 1,087
- --------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,500 Brighton, Michigan, Area School District, Revenue Refunding Bonds,
Series II, 4.90%** due 5/01/2015 (d) 1,149
- --------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Detroit, Michigan, Sewage Disposal Revenue Bonds, Series A, 5% due 7/01/2027 (b) 1,988
- --------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,900 Detroit, Michigan, Water Supply System, Revenue Refunding Bonds,
INFLOS, 9.323% due 7/01/2022 (c)(f) 3,440
- --------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,500 Grand Ledge, Michigan, Public Schools District, 6.60% due 5/01/2004 (b)(e) 2,887
- --------------------------------------------------------------------------------------------------------------------------
AAA Aaa 5,850 Grand Rapids, Michigan, Sanitation Sewer System, Revenue Refunding and
Improvement Bonds, Series A, 4.75% due 1/01/2028 (c) 5,636
- --------------------------------------------------------------------------------------------------------------------------
Grand Traverse County, Michigan, Hospital Revenue
Refunding Bonds (Munson Healthcare), Series A (d):
AAA NR* 2,030 6.25% due 7/01/2002 (e) 2,243
AAA Aaa 970 6.25% due 7/01/2022 1,057
- --------------------------------------------------------------------------------------------------------------------------
AA+ Aa2 2,500 Haslett, Michigan, Public School District, Refunding, GO, 6.625% due 5/01/2019 2,745
- --------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Kalamazoo, Michigan, Hospital Finance Authority, Hospital Facility Revenue
Refunding and Improvement Bonds (Bronson Methodist Hospital), Series A,
6.375% due 5/15/2017 2,251
- --------------------------------------------------------------------------------------------------------------------------
NR* Aaa 1,340 Kalamazoo, Michigan, Hospital Finance Authority, Hospital Finance Revenue
Refunding Bonds (Bronson Methodist Hospital), 5.25% due 5/15/2018 1,369
- --------------------------------------------------------------------------------------------------------------------------
AAA VMIG1+ 300 Michigan Higher Education Student Loan Revenue Bonds, VRDN, AMT,
Series XII-D, 2.75% due 10/01/2015 (a)(d) 300
- --------------------------------------------------------------------------------------------------------------------------
AA+ Aa1 1,000 Michigan Municipal Bond Authority Revenue Bonds (State Revolving Fund),
Series A, 6.55% due 10/01/2002 (e) 1,121
- --------------------------------------------------------------------------------------------------------------------------
AA Aa2 5,000 Michigan State Building Authority, Revenue Refunding Bonds (Facilities Program),
Series 1, 4.75% due 10/15/2021 4,818
- --------------------------------------------------------------------------------------------------------------------------
AA- NR* 1,895 Michigan State, HDA, Rental Housing Revenue Refunding Bonds, Series A,
6.60% due 4/01/2012 2,046
- --------------------------------------------------------------------------------------------------------------------------
Michigan State, HDA, S/F Mortgage Revenue Bonds:
AA+ NR* 2,610 Refunding, AMT, Series D, 6.85% due 6/01/2026 (h) 2,771
AA+ NR* 1,450 Series A, 6.50% due 12/01/2017 1,550
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
PORTFOLIO ABBREVIATIONS
To simplify the listings of Merrill Lynch Michigan 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 at right.
AMT Alternative Minimum Tax (subject to)
GO General Obligation Bonds
HDA Housing Development Authority
INFLOS Inverse Floating Rate Municipal Bonds
RIB Residual Interest Bonds
RITR Residual Interest Trust Receipts
S/F Single-Family
VRDN Variable Rate Demand Notes
5
<PAGE>
Merrill Lynch Michigan Municipal Bond Fund January 31, 1999
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
- --------------------------------------------------------------------------------------------------------------------------
Michigan (concluded)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A- Baa2 $2,500 Michigan State Hospital Finance Authority Revenue Bonds (Detroit Medical
Center Obligation Group), Series A, 5.25% due 8/15/2028 $ 2,307
- --------------------------------------------------------------------------------------------------------------------------
Michigan State Hospital Finance Authority, Revenue Refunding Bonds:
A- A3 3,500 (Detroit Medical Center Obligation Group), Series A, 6.50% due 8/15/2018 3,694
NR* A1 2,000 (McLaren Health Care Corp.), Series A, 5% due 6/01/2028 1,905
AA- Aa3 1,330 (Mercy Health Services), Series S, 5.50% due 8/15/2020 1,377
AAA Aaa 1,000 (St. John Health System), Series A, 5% due 5/15/2018 (d) 997
- --------------------------------------------------------------------------------------------------------------------------
BBB+ Baa3 1,000 Michigan State Strategic Fund, Limited Obligation Revenue Bonds
(Waste Management Inc. Project), AMT, 6.625% due 12/01/2012 1,080
- --------------------------------------------------------------------------------------------------------------------------
Michigan State Trunk Line, Revenue Refunding Bonds:
AAA Aaa 3,500 Series A, 4.75% due 11/01/2020 (b) 3,412
AAA Aaa 2,500 Series A, 5% due 11/01/2026 (b) 2,489
AAA Aaa 1,435 Series B, 4.85%** due 10/01/2012 (d) 770
- --------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,600 Richmond, Michigan, Community School District, GO, Refunding, 4.75% due 5/01/2022 (c) 1,547
- --------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Romulus, Michigan, Community Schools, GO, Refunding, 5.22%** due 5/01/2021 (c) 328
- --------------------------------------------------------------------------------------------------------------------------
AA VMIG1+ 4,000 Royal Oak, Michigan, Hospital Finance Authority, Hospital Revenue Bonds
(William Beaumont Hospital), VRDN, Series L, 3.20% due 1/01/2027 (a) 4,000
- --------------------------------------------------------------------------------------------------------------------------
NR* Aa3 1,785 Royal Oak, Michigan, Hospital Finance Authority Revenue Bonds (Beaumont
Properties, Inc.), Series E, 6.625% due 1/01/2019 1,930
- --------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Saint Clair County, Michigan, Economic Revenue Refunding Bonds (Detroit
Edison), Series AA, 6.40% due 8/01/2024 (d) 1,144
- --------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,300 Three Rivers, Michigan, Community Schools, GO, 6% due 5/01/2006 (b)(e) 2,625
- --------------------------------------------------------------------------------------------------------------------------
University of Michigan, University Revenue Bonds, VRDN, Series A (a):
A1+ VMIG1+ 100 2.95% due 12/01/2027 100
A1+ VMIG1+ 1,150 (Medical Service Plan), 2.95% due 12/01/2027 1,150
- --------------------------------------------------------------------------------------------------------------------------
A1+ VMIG1+ 100 University of Michigan, University Revenue Refunding Bonds (Medical Service Plan),
VRDN, Series A-1, 2.95% due 12/01/2021 (a) 100
- --------------------------------------------------------------------------------------------------------------------------
NR* Aaa 2,000 Wayne Charter County, Michigan, Airport Revenue Bonds, RIB, AMT, Series 68,
7.425% due 12/01/2017 (b)(f) 2,143
- --------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Ypsilanti, Michigan, School District, GO, Refunding, 5.375% due 5/01/2026 (c) 2,062
- --------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Zeeland, Michigan, Public Schools, GO, 5.25% due 5/01/2023 (c) 1,019
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Puerto Rico--4.0%
- --------------------------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 Puerto Rico, RITR, 7.67% due 7/01/2027 (f) 3,248
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost--$75,142)--98.2% 78,899
Other Assets Less Liabilities--1.8% 1,427
-------
Net Assets--100.0% $80,326
=======
- --------------------------------------------------------------------------------------------------------------------------
</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 January 31,
1999.
(b) MBIA Insured.
(c) FGIC Insured.
(d) AMBAC Insured.
(e) Prerefunded.
(f) The interest rate is subject to change periodically and inversely based
upon prevailing market rates. The interest rate shown is the rate in
effect at January 31, 1999.
(g) FSA Insured.
(h) FHA Insured.
* Not Rated.
** Represents a zero coupon bond; the interest rate shown is the effective
yield at the time of purchase by the Fund.
+ Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
6
<PAGE>
Merrill Lynch Michigan Municipal Bond Fund January 31, 1999
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of January 31, 1999
<TABLE>
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$75,141,632) (Note 1a) .............. $ 78,898,610
Cash ........................................................................ 441,164
Receivables:
Securities sold ........................................................... $ 1,759,905
Interest .................................................................. 864,798
Beneficial interest sold .................................................. 233,601 2,858,304
------------
Prepaid expenses and other assets ........................................... 1,293
------------
Total assets ................................................................ 82,199,371
------------
- --------------------------------------------------------------------------------------------------------------------------------
Liabilities: Payables:
Securities purchased ...................................................... 1,526,271
Beneficial interest redeemed .............................................. 162,374
Dividends to shareholders (Note 1e) ....................................... 54,401
Investment adviser (Note 2) ............................................... 34,007
Distributor (Note 2) ...................................................... 25,595 1,802,648
------------
Accrued expenses and other liabilities ...................................... 70,653
------------
Total liabilities ........................................................... 1,873,301
------------
- --------------------------------------------------------------------------------------------------------------------------------
Net Assets: Net assets .................................................................. $ 80,326,070
============
- --------------------------------------------------------------------------------------------------------------------------------
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited number of
Consist of: shares authorized ........................................................... $ 101,836
Class B Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized ........................................................... 584,539
Class C Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized ........................................................... 37,898
Class D Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized ........................................................... 46,115
Paid-in capital in excess of par ............................................ 77,704,192
Accumulated realized capital losses on investments--net (Note 5) ............ (1,905,488)
Unrealized appreciation on investments--net ................................. 3,756,978
------------
Net assets .................................................................. $ 80,326,070
============
- --------------------------------------------------------------------------------------------------------------------------------
Net Asset Value: Class A--Based on net assets of $10,618,831 and 1,018,360 shares
of beneficial interest outstanding .......................................... $ 10.43
============
Class B--Based on net assets of $60,950,359 and 5,845,390 shares
of beneficial interest outstanding .......................................... $ 10.43
============
Class C--Based on net assets of $3,951,419 and 378,976 shares
of beneficial interest outstanding .......................................... $ 10.43
============
Class D--Based on net assets of $4,805,461 and 461,148 shares
of beneficial interest outstanding .......................................... $ 10.42
============
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
Merrill Lynch Michigan Municipal Bond Fund January 31, 1999
FINANCIAL INFORMATION (continued)
Statement of Operations
<TABLE>
<CAPTION>
For the Six Months Ended
January 31, 1999
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned .................... $ 2,191,856
(Note 1d):
- --------------------------------------------------------------------------------------------------------------------------------
Expenses: Investment advisory fees (Note 2) ........................................... $ 221,045
Account maintenance and distribution fees--Class B (Note 2) ................. 153,953
Printing and shareholder reports ............................................ 50,192
Professional fees ........................................................... 27,808
Accounting services (Note 2) ................................................ 23,151
Transfer agent fees--Class B (Note 2) ....................................... 14,729
Account maintenance and distribution fees--Class C (Note 2) ................. 10,197
Registration fees ........................................................... 4,005
Custodian fees .............................................................. 2,915
Pricing fees ................................................................ 2,769
Transfer agent fees--Class A (Note 2) ....................................... 2,200
Trustees' fees and expenses ................................................. 2,102
Account maintenance fees--Class D (Note 2) .................................. 2,081
Transfer agent fees--Class D (Note 2) ....................................... 823
Transfer agent fees--Class C (Note 2) ....................................... 813
Other ....................................................................... 1,306
------------
Total expenses .............................................................. 520,089
Investment income--net ...................................................... 1,671,767
------------
- --------------------------------------------------------------------------------------------------------------------------------
Realized & Unreal- Realized gain on investments--net ........................................... 1,384,329
ized Gain (Loss) on Change in unrealized appreciation on investments--net ....................... (603,226)
Investments--Net ------------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations ....................... $ 2,452,870
============
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
Merrill Lynch Michigan Municipal Bond Fund January 31, 1999
FINANCIAL INFORMATION (continued)
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
January 31, July 31,
Increase (Decrease) in Net Assets: 1999 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations: Investment income--net ...................................................... $ 1,671,767 $ 3,575,530
Realized gain on investments--net ........................................... 1,384,329 654,487
Change in unrealized appreciation on investments--net ....................... (603,226) (746,032)
------------ ------------
Net increase in net assets resulting from operations ........................ 2,452,870 3,483,985
------------ ------------
- --------------------------------------------------------------------------------------------------------------------------------
Dividends to Investment income--net:
Shareholders Class A ................................................................... (257,407) (592,425)
(Note 1e): Class B ................................................................... (1,253,697) (2,738,487)
Class C ................................................................... (67,439) (75,788)
Class D ................................................................... (93,224) (168,830)
------------ ------------
Net decrease in net assets resulting from dividends to shareholders ......... (1,671,767) (3,575,530)
------------ ------------
- --------------------------------------------------------------------------------------------------------------------------------
Beneficial Interest Net decrease in net assets derived from beneficial interest
Transactions transactions ................................................................ (742,865) (1,440,463)
(Note 4): ------------ ------------
- --------------------------------------------------------------------------------------------------------------------------------
Net Assets: Total increase (decrease) in net assets ..................................... 38,238 (1,532,008)
Beginning of period ......................................................... 80,287,832 81,819,840
------------ ------------
End of period ............................................................... $ 80,326,070 $ 80,287,832
============ ============
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
Merrill Lynch Michigan Municipal Bond Fund January 31, 1999
FINANCIAL INFORMATION (continued)
Financial Highlights
<TABLE>
<CAPTION>
For the Class A
The following per share data and ratios have been derived Six Months -------------------------------------------
from information provided in the financial statements. Ended For the Year Ended July 31,
Jan. 31, -------------------------------------------
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 ........ $ 10.33 $ 10.34 $ 9.92 $ 9.85 $ 9.84
Operating ------- ------- ------- ------- -------
Performance: Investment income--net ...................... .24 .50 .52 .54 .53
Realized and unrealized gain (loss) on
investments--net ............................ .10 (.01) .42 .07 .01
------- ------- ------- ------- -------
Total from investment operations ............ .34 .49 .94 .61 .54
------- ------- ------- ------- -------
Less dividends from investment income--net .. (.24) (.50) (.52) (.54) (.53)
------- ------- ------- ------- -------
Net asset value, end of period .............. $ 10.43 $ 10.33 $ 10.34 $ 9.92 $ 9.85
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share .......... 3.30%+ 4.84% 9.79% 6.25% 5.79%
Return:** ======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to Expenses, net of reimbursement .............. .87%* .80% .57% .49% .50%
Average ======= ======= ======= ======= =======
Net Assets: Expenses .................................... .87%* .83% .80% .82% .88%
======= ======= ======= ======= =======
Investment income--net ...................... 4.58%* 4.81% 5.21% 5.35% 5.57%
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) .... $10,619 $11,762 $11,841 $11,468 $11,838
Data: ======= ======= ======= ======= =======
Portfolio turnover .......................... 47.76% 65.39% 35.09% 69.34% 123.61%
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales
loads.
+ Aggregate total investment return.
See Notes to Financial Statements.
10
<PAGE>
Merrill Lynch Michigan Municipal Bond Fund January 31, 1999
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
<TABLE>
<CAPTION>
For the Class B
The following per share data and ratios have been derived Six Months -------------------------------------------
from information provided in the financial statements. Ended For the Year Ended July 31,
Jan. 31, -------------------------------------------
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 ........ $ 10.33 $ 10.34 $ 9.92 $ 9.85 $ 9.84
Operating ------- ------- ------- ------- -------
Performance: Investment income--net ...................... .21 .45 .47 .49 .49
Realized and unrealized gain (loss) on
investments--net ............................ .10 (.01) .42 .07 .01
------- ------- ------- ------- -------
Total from investment operations ............ .31 .44 .89 .56 .50
------- ------- ------- ------- -------
Less dividends from investment income--net .. (.21) (.45) (.47) (.49) (.49)
------- ------- ------- ------- -------
Net asset value, end of period .............. $ 10.43 $ 10.33 $ 10.34 $ 9.92 $ 9.85
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share .......... 3.04%+ 4.31% 9.23% 5.70% 5.25%
Return:** ======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to Expenses, net of reimbursement .............. 1.38%* 1.31% 1.08% 1.00% 1.02%
Average ======= ======= ======= ======= =======
Net Assets: Expenses .................................... 1.38%* 1.34% 1.31% 1.33% 1.40%
======= ======= ======= ======= =======
Investment income--net ...................... 4.07%* 4.30% 4.70% 4.84% 5.05%
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) .... $60,950 $61,918 $65,166 $67,770 $60,699
Data: ======= ======= ======= ======= =======
Portfolio turnover .......................... 47.76% 65.39% 35.09% 69.34% 123.61%
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales
loads.
+ Aggregate total investment return.
See Notes to Financial Statements.
11
<PAGE>
Merrill Lynch Michigan Municipal Bond Fund January 31, 1999
FINANCIAL INFORMATION (concluded)
Financial Highlights (concluded)
<TABLE>
<CAPTION>
Class C
-------------------------------------------------------
For the For the
Six Period
The following per share data and ratios have been derived Months Oct. 21,
from information provided in the financial statements. Ended For the Year Ended July 31, 1994+ to
Jan. 31, ------------------------------- July 31,
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 ........ $ 10.32 $ 10.33 $ 9.92 $ 9.85 $ 9.44
Operating ------- ------- ------- ------- -------
Performance: Investment income--net ...................... .21 .43 .46 .48 .37
Realized and unrealized gain (loss) on
investments--net ............................ .11 (.01) .41 .07 .41
------- ------- ------- ------- -------
Total from investment operations ............ .32 .42 .87 .55 .78
------- ------- ------- ------- -------
Less dividends from investment income--net .. (.21) (.43) (.46) (.48) (.37)
------- ------- ------- ------- -------
Net asset value, end of period .............. $ 10.43 $ 10.32 $ 10.33 $ 9.92 $ 9.85
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share .......... 3.08%++ 4.20% 9.01% 5.59% 8.39%++
Return:** ======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to Expenses, net of reimbursement .............. 1.48%* 1.42% 1.18% 1.11% 1.16%*
Average ======= ======= ======= ======= =======
Net Assets: Expenses .................................... 1.48%* 1.45% 1.41% 1.43% 1.51%*
======= ======= ======= ======= =======
Investment income--net ...................... 3.97%* 4.18% 4.60% 4.73% 4.91%*
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) .... $ 3,951 $ 2,802 $ 1,319 $ 1,871 $ 839
Data: ======= ======= ======= ======= =======
Portfolio turnover .......................... 47.76% 65.39% 35.09% 69.34% 123.61%
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class D
-------------------------------------------------------
For the For the
Six Period
The following per share data and ratios have been derived Months Oct. 21,
from information provided in the financial statements. Ended For the Year Ended July 31, 1994+ to
Jan. 31, ------------------------------- July 31,
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 ........ $ 10.32 $ 10.33 $ 9.91 $ 9.85 $ 9.44
Operating ------- ------- ------- ------- -------
Performance: Investment income--net ...................... .23 .49 .51 .53 .41
Realized and unrealized gain (loss) on
investments--net ............................ .10 (.01) .42 .06 .41
------- ------- ------- ------- -------
Total from investment operations ............ .33 .48 .93 .59 .82
------- ------- ------- ------- -------
Less dividends from investment income--net .. (.23) (.49) (.51) (.53) (.41)
------- ------- ------- ------- -------
Net asset value, end of period .............. $ 10.42 $ 10.32 $ 10.33 $ 9.91 $ 9.85
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share .......... 3.25%++ 4.74% 9.69% 6.04% 8.84%++
Return:** ======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to Expenses, net of reimbursement .............. .98%* .90% .68% .59% .63%*
Average ======= ======= ======= ======= =======
Net Assets: Expenses .................................... .98%* .93% .90% .91% .98%*
======= ======= ======= ======= =======
Investment income--net ...................... 4.48%* 4.71% 5.11% 5.24% 5.46%*
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) .... $ 4,806 $ 3,806 $ 3,494 $ 1,842 $ 1,045
Data: ======= ======= ======= ======= =======
Portfolio turnover .......................... 47.76% 65.39% 35.09% 69.34% 123.61%
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales
loads.
+ Commencement of operations.
++ Aggregate total investment return.
See Notes to Financial Statements.
12
<PAGE>
Merrill Lynch Michigan Municipal Bond Fund January 31, 1999
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Michigan Municipal Bond Fund (the "Fund") is part of Merrill Lynch
Multi-State Municipal Series Trust (the "Trust"). The Fund is registered under
the Investment Company Act of 1940 as a non-diversified, open-end management
investment company. The Fund's financial statements are prepared in accordance
with generally accepted accounting principles which may require the use of
management accruals and estimates. These unaudited financial statements reflect
all adjustments which are, in the opinion of management, necessary to a fair
statement of results for the interim period presented. All such adjustments are
of a normal recurring nature. The Fund offers four classes of shares under the
Merrill Lynch Select Pricingsm System. Shares of Class A and Class D are sold
with a front-end sales charge. Shares of Class B and Class C may be subject to a
contingent deferred sales charge. All classes of shares have identical voting,
dividend, liquidation and other rights and the same terms and conditions, except
that Class B, Class C and Class D Shares bear certain expenses related to the
account maintenance of such shares, and Class B and Class C Shares also bear
certain expenses related to the distribution of such shares. Each class has
exclusive voting rights with respect to matters relating to its account
maintenance and distribution expenditures. The following is a summary of
significant accounting policies followed by the Fund.
(a) Valuation of investments--Municipal bonds and other portfolio securities in
which the Fund invests are traded primarily in the over-the-counter municipal
bond and money markets and are valued at the last available bid price in the
over-the-counter market or on the basis of yield equivalents as obtained from
one or more dealers that make markets in the securities. Financial futures
contracts and options thereon, which are traded on exchanges, are valued at
their settlement prices as of the close of such exchanges. Short-term
investments with remaining maturities of sixty days or less are valued at
amortized cost, which approximates market value. Securities and assets for which
market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of Trustees of
the Trust, including valuations furnished by a pricing service retained by the
Trust, which may utilize a matrix system for valuations. The procedures of the
pricing service and its valuations are reviewed by the officers of the Trust
under the general supervision of the Trustees.
(b) Derivative financial instruments--The Fund may engage in various portfolio
strategies to seek to increase its return by hedging its portfolio against
adverse movements in the debt markets. Losses may arise due to changes in the
value of the contract or if the counterparty does not perform under the
contract.
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) Dividends and distributions--Dividends from net investment income are
declared daily and paid
13
<PAGE>
Merrill Lynch Michigan Municipal Bond Fund January 31, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
monthly. Distributions of capital gains are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML &
Co."), which is a limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds Distributor ("MLFD" or
"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: 0.55% of the Fund's average daily net assets not exceeding $500
million; 0.525% of average daily net assets in excess of $500 million but not
exceeding $1 billion; and 0.50% of average daily net assets in excess of $1
billion.
Pursuant to the Distribution Plans adopted by the Fund in accordance with Rule
12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are accrued daily
and paid monthly at annual rates based upon the average daily net assets of the
shares as follows:
- --------------------------------------------------------------------------------
Account
Maintenance Distribution
Fee Fee
- --------------------------------------------------------------------------------
Class B ..................................... 0.25% 0.25%
Class C ..................................... 0.25% 0.35%
Class D ..................................... 0.10% --
- --------------------------------------------------------------------------------
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., also provides account
maintenance and distribution services to the Fund. The ongoing account
maintenance fee compensates the Distributor and MLPF&S for providing account
maintenance services to Class B, Class C and Class D shareholders. The ongoing
distribution fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B and Class C
shareholders.
For the six months ended January 31, 1999, MLFD earned underwriting discounts
and MLPF&S earned dealer concessions on sales of the Fund's Class A and Class D
shares as follows:
- --------------------------------------------------------------------------------
MLFD MLPF&S
- --------------------------------------------------------------------------------
Class A ..................................... $ 236 $ 2,196
Class D ..................................... $ 524 $ 15,784
- --------------------------------------------------------------------------------
For the six months ended January 31, 1999, MLPF&S received contingent deferred
sales charges of $25,647 and $1,639 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 six
months ended January 31, 1999 were $35,808,222 and $38,121,605, respectively.
Net realized gains for the six months ended January 31, 1999 and net unrealized
gains as of January 31, 1999 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
- --------------------------------------------------------------------------------
Long-term investments ....................... $1,384,329 $3,756,978
- --------------------------------------------------------------------------------
Total ....................................... $1,384,329 $3,756,978
========== ==========
- --------------------------------------------------------------------------------
As of January 31, 1999, net unrealized appreciation for Federal income tax
purposes aggregated $3,756,978, of which $3,922,992 is related to appreciated
securities and $166,014 is related to depreciated securities. The aggregate cost
of investments at January 31, 1999 for Federal income tax purposes was
$75,141,632.
14
<PAGE>
Merrill Lynch Michigan Municipal Bond Fund January 31, 1999
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest transactions was
$742,865 and $1,440,463 for the six months ended January 31, 1999 and for the
year ended July 31, 1998, respectively.
Transactions in shares of beneficial interest for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended January 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ................................. 77,302 $ 808,078
Shares issued to shareholders
in reinvestment of dividends ................ 12,733 132,517
--------- ----------
Total issued ................................ 90,035 940,595
--------- ----------
Shares redeemed ............................. (210,774) (2,197,189)
--------- ----------
Net decrease ................................ (120,739) $(1,256,594)
========= ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ................................. 241,289 $2,488,207
Shares issued to shareholders
in reinvestment of dividends ................ 29,942 308,701
-------- ----------
Total issued ................................ 271,231 2,796,908
--------- ----------
Shares redeemed ............................. (277,717) (2,866,081)
--------- ----------
Net decrease ................................ (6,486) $ (69,173)
========= ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Six Months Dollar
Ended January 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ................................. 358,509 $3,734,304
Shares issued to shareholders
in reinvestment of dividends ................ 43,477 452,414
--------- ----------
Total issued ................................ 401,986 4,186,718
Automatic conversion
of shares ................................... (3,402) (35,509)
Shares redeemed ............................. (549,847) (5,721,919)
--------- ----------
Net decrease ................................ (151,263) $(1,570,710)
========= ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ................................. 810,906 $8,356,107
Shares issued to shareholders
in reinvestment of dividends ................ 95,226 981,498
-------- ----------
Total issued ................................ 906,132 9,337,605
Automatic conversion
of shares ................................... (727) (7,562)
Shares redeemed ............................. (1,213,594) (12,500,841)
--------- ----------
Net decrease ................................ (308,189) $(3,170,798)
========= ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Six Months Dollar
Ended January 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ................................. 123,691 $1,292,948
Shares issued to shareholders
in reinvestment of dividends ................ 5,012 52,144
--------- ----------
Total issued ................................ 128,703 1,345,092
Shares redeemed ............................. (21,180) (223,223)
--------- ----------
Net increase ................................ 107,523 $1,121,869
========= ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ................................. 165,102 $1,701,603
Shares issued to shareholders
in reinvestment of dividends ................ 5,574 57,489
--------- ----------
Total issued ................................ 170,676 1,759,092
Shares redeemed ............................. (26,859) (276,788)
--------- ----------
Net increase ................................ 143,817 $1,482,304
========= ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Six Months Dollar
Ended January 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ................................. 116,199 $1,210,728
Automatic conversion
of shares ................................... 3,403 35,509
Shares issued to shareholders
in reinvestment of dividends ................ 6,018 62,557
--------- ----------
Total issued ................................ 125,620 1,308,794
Shares redeemed ............................. (33,297) (346,224)
--------- ----------
Net increase ................................ 92,323 $ 962,570
========= ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ................................. 68,559 $ 708,322
Automatic conversion
of shares ................................... 727 7,562
Shares issued to shareholders
in reinvestment of dividends ................ 10,438 107,539
--------- ----------
Total issued ................................ 79,724 823,423
Shares redeemed ............................. (49,201) (506,219)
--------- ----------
Net increase ................................ 30,523 $ 317,204
========= ===========
- --------------------------------------------------------------------------------
5. Capital Loss Carryforward:
At July 31, 1998, the Fund had a capital loss carryforward of approximately
$2,427,000, of which $936,000 expires in 2003, $1,034,000 expires in 2004 and
$457,000 expires in 2005. This amount will be available to offset like amounts
of any future taxable gains.
15
<PAGE>
Merrill Lynch Michigan Municipal Bond Fund January 31, 1999
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 Michigan
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011 # 16561--1/99
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