MERRILL LYNCH
MICHIGAN
MUNICIPAL
BOND FUND
[GRAPHIC OMITTED]
STRATEGIC
Performance
Semi-Annual Report
January 31, 2000
<PAGE>
Merrill Lynch Michigan Municipal Bond Fund January 31, 2000
DEAR SHAREHOLDER
The Municipal Market Environment
During the six months ended January 31, 2000, continued strong domestic growth,
gradual improvement in foreign economies and investor concerns regarding future
inflationary pressures pushed long-term fixed-income bond yields higher. The
Federal Reserve Board continued to raise short-term interest rates in August and
November 1999 as well as just after the period's close, seeking to moderate US
economic growth and maintain the existing benign inflationary environment. US
economic growth, in part intensified by Year 2000 preparations, grew 5.8% during
the last fiscal quarter of 1999 and had an annual rate of 4.1% for 1999. A
number of inflationary indicators have also begun to signal some increase in
price pressures.
However, most investors believe that the Federal Reserve Board will be extremely
vigilant in preventing such pressures from any material escalation. US Treasury
bond yields responded by rising approximately 60 basis points (0.60%) by
mid-January 2000. A strong rally, largely based upon an expected significant
reduction in the future supply of US Treasury 30-year maturity bonds, pushed
yields lower to 6.50% at January 31, 2000. Over the last six months, yields on
30-year US Treasury bonds rose approximately 40 basis points.
The tax-exempt bond market was also under pressure throughout the entire period.
Despite receiving more than $30 billion in coupon payments, bond maturities and
proceeds from early redemptions in December and January, overall investor demand
has diminished. It is likely that the returns generated by the US equity market
have continued to attract investor attention and have left little demand for
competing investment alternatives. At January 31, 2000, the long-term tax-exempt
revenue bond yield, as measured by the Bond Buyer Revenue Index, was 6.34%, an
increase of nearly 70 basis points over the last six months.
Issuance by municipalities has significantly declined in recent months. Over the
last six months, less than $100 billion in long-term tax-exempt bonds were
issued, representing a decline of over 20% compared to the same period a year
ago. During the last three months, less than $45 billion in long-term bonds were
issued by various municipalities. This most recent quarterly issuance is 30%
below the level of the January 31, 1999 quarter. Additionally, during January
2000, less than $8 billion in municipal debt was underwritten, down more than
50% from January 1999 levels. This represents the lowest monthly issuance in
over five years. Toward the end of 1999, consensus estimates for 2000 annual
issuance were in the $210 billion-$215 billion range. January's underwritings,
as well as those expected to be issued in the near future, have led some
analysts to revise their forecasts to the $190 billion range.
We believe an overall reduction in bond supply in the coming year should help
support the municipal bond market's overall technical position. While tax-exempt
bond yields, which are at their highest level in over three years, have
attracted significant retail investor interest, institutional demand declined
sharply. Long-term municipal mutual funds have seen consistent outflows in
recent months as the yields of individual securities rose faster than those of
larger, more diverse mutual funds. During the six months ended January 31, 2000,
tax-exempt mutual funds have had net redemptions of approximately $9 billion.
Also, the demand from property and casualty insurance companies has weakened as
a result of the losses and anticipated losses incurred from a series of damaging
storms across much of the eastern United States. Additionally, many
institutional investors who have in recent years been attracted to the municipal
bond market by historically attractive tax-exempt bond yield ratios of over 90%,
found other asset classes even more attractive. Even with a reduced supply
position, tax-exempt issuers have been forced to repeatedly raise municipal bond
yields in an attempt to attract adequate demand. We believe a reduced bond
supply going forward is likely to promote a more closely balanced supply/demand
structure and foster a more stable tax-exempt interest rate environment.
Looking ahead, it appears to us that long-term tax-exempt bond yields will
remain under pressure, trading in a broad range centered around current levels.
Investors are also likely to remain concerned regarding future action by the
Federal Reserve Board in early 2000. Any improvement in bond prices may be
contingent upon weakening in both US employment growth and consumer spending.
The 100 basis point
1
<PAGE>
Merrill Lynch Michigan Municipal Bond Fund January 31, 2000
rise in US Treasury bond yields seen thus far could negatively affect US
economic growth. The US housing market is likely to be among the first sectors
to be affected, as some declines have already been evidenced because of higher
mortgage rates. We believe it is also unrealistic to expect double-digit returns
in US equity markets to continue indefinitely. Much of the US consumer's wealth
is tied to recent stock market appreciation. Any slowing in these incredible
growth rates may reduce consumer spending. We believe that these factors suggest
that the worst of the recent increase in bond yields has passed and stable, if
not slightly improving, bond prices may be expected.
Portfolio Strategy
For most of the six months ended January 31, 2000, we have sought to enhance the
Fund's dividend structure as well as to help protect the Fund's assets from
price declines associated with rising bond yields. Consequently, we maintained
the Fund's fully invested position and concentrated on purchasing securities
that offered the least sensitivity to changes in interest rates. However, the
relative scarcity of municipal bond issuance in Michigan in recent months
hindered our attempts to adopt a more neutral portfolio structure. For example,
in January, less than $80 million in long-term tax-exempt securities were issued
by Michigan municipalities, a decline of more than 70% compared to January 1999
levels. Consequently, any opportunities to affect a significant change in the
Fund's portfolio composition were limited.
Looking ahead, we intend to remain fully invested in an effort to enhance
shareholder income. Given the recent increases in short-term interest rates by
the Federal Reserve Board, as well as those expected in the near future, we
anticipate that economic growth in 2000 should be somewhat slower than in 1999.
We expect tax-exempt bond yields to remain in their present range until the
impact of the recent moves taken by the Federal Reserve Board can be more fully
established. As Michigan issuance increases in the coming months, we look to
purchase higher-couponed issues whenever they become available at attractive
price levels. These issues should provide the Fund with a high level of coupon
income.
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
President
/s/ Vincent R. Giordano
Vincent R. Giordano
Senior Vice President
/s/ Fred K. Stuebe
Fred K. Stuebe
Vice President and Portfolio Manager
March 7, 2000
2
<PAGE>
Merrill Lynch Michigan Municipal Bond Fund January 31, 2000
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill
Lynch Select Pricing(SM) System, which offers four pricing alternatives:
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 dis tributions 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 share holders. The Fund's Investment Adviser voluntarily waived
a portion of its management fee. Without such waiver, the Fund's
performance would have been lower.
Recent Performance Results*
<TABLE>
<CAPTION>
6 Month 12 Month Since Inception Standardized
As of January 31, 2000 Total Return Total Return Total Return 30-Day Yield
====================================================================================================================================
<S> <C> <C> <C> <C>
ML Michigan Municipal Bond Fund Class A Shares -5.51% -8.22% +31.14% 5.06%
- ------------------------------------------------------------------------------------------------------------------------------------
ML Michigan Municipal Bond Fund Class B Shares -5.75 -8.68 +26.55 4.76
- ------------------------------------------------------------------------------------------------------------------------------------
ML Michigan Municipal Bond Fund Class C Shares -5.80 -8.77 +22.26 4.66
- ------------------------------------------------------------------------------------------------------------------------------------
ML Michigan Municipal Bond Fund Class D Shares -5.66 -8.32 +25.50 4.95
====================================================================================================================================
</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 dates are from
1/29/93 for Class A & Class B Shares and from 10/21/94 for Class C & Class
D Shares.
3
<PAGE>
Merrill Lynch Michigan Municipal Bond Fund January 31, 2000
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
Year Ended 12/31/99 -6.13% -9.89%
- --------------------------------------------------------------------------------
Five Years Ended 12/31/99 +5.25 +4.39
- --------------------------------------------------------------------------------
Inception (1/29/93)
through 12/31/99 +4.18 +3.57
- --------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
Year Ended 12/31/99 -6.61% -10.18%
- --------------------------------------------------------------------------------
Five Years Ended 12/31/99 +4.72 + 4.72
- --------------------------------------------------------------------------------
Inception (1/29/93)
through 12/31/99 +3.65 + 3.65
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after
4 years.
** Assuming payment of applicable contingent deferred sales charge.
================================================================================
% Return % Return
Without CDSC With CDSC**
================================================================================
Class C Shares*
================================================================================
Year Ended 12/31/99 -6.70% -7.60%
- --------------------------------------------------------------------------------
Five Years Ended 12/31/99 +4.61 +4.61
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 12/31/99 +4.20 +4.20
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after
1 year.
** Assuming payment of applicable contingent deferred sales charge.
================================================================================
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class D Shares*
================================================================================
Year Ended 12/31/99 -6.14% -9.89%
- --------------------------------------------------------------------------------
Five Years Ended 12/31/99 +5.15 +4.29
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 12/31/99 +4.74 +3.92
- --------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
OFFICERS AND TRUSTEES
Terry K. Glenn, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Arthur Zeikel, Trustee
Vincent R. Giordano, Senior Vice President
Kenneth A. Jacob, Vice President
Fred K. Stuebe, Vice President
Donald C. Burke, Vice President and Treasurer
Alice A. Pellegrino, Secretary
- --------------------------------------------------------------------------------
Robert R. Martin, Trustee of Merrill Lynch Michigan Municipal Bond Fund has
recently retired. The Fund's Board of Trustees wishes Mr. Martin well in his
retirement.
- --------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
4
<PAGE>
Merrill Lynch Michigan Municipal Bond Fund January 31, 2000
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face
Ratings Ratings Amount Issue Value
- ------------------------------------------------------------------------------------------------------------------------------------
Michigan -- 97.4%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AA+ Aa2 $1,000 Breitung Township, Michigan, School District, GO, Refunding, 6.30% due 5/01/2019 $ 1,010
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,575 Detroit, Michigan, City School District, GO, Series B, 5% due 5/01/2021 (c) 2,175
- ------------------------------------------------------------------------------------------------------------------------------------
A+ A3 1,000 Detroit, Michigan, Local Development Finance Authority, Tax Allocation Refunding Bonds,
Tax Increment, Senior Series A, 5.375% due 5/01/2021 881
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,900 Detroit, Michigan, Water Supply System, Revenue Refunding Bonds, INFLOS,
8.106% due 7/01/2022 (c)(e) 2,980
- ------------------------------------------------------------------------------------------------------------------------------------
Eastern Michigan University, Revenue Refunding Bonds (d):
AAA Aaa 1,025 6% due 6/01/2020 1,017
AAA Aaa 1,000 6% due 6/01/2024 984
- ------------------------------------------------------------------------------------------------------------------------------------
A1+ VMIG1+ 1,100 Grand Rapids, Michigan, Water Supply Revenue Refunding Bonds, VRDN,
3.10% due 1/01/2020 (a)(c) 1,100
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 970 Grand Traverse County, Michigan, Hospital Revenue Refunding Bonds (Munson Healthcare),
Series A, 6.25% due 7/01/2022 (d) 970
- ------------------------------------------------------------------------------------------------------------------------------------
AA+ Aa2 2,500 Haslett, Michigan, Public School District, GO, Refunding, 6.625% due 5/01/2019 (h) 2,572
- ------------------------------------------------------------------------------------------------------------------------------------
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 (b) 2,125
- ------------------------------------------------------------------------------------------------------------------------------------
Kalamazoo, Michigan, Hospital Finance Authority, Hospital Facility Revenue Refunding
Bonds (Bronson Methodist Hospital) (b):
NR* Aaa 1,340 5.25% due 5/15/2018 1,183
NR* Aaa 1,500 RIB, Series 138, 7.42% due 5/15/2028 (e) 1,151
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Lincoln, Michigan, Consolidated School District, GO, 5% due 5/01/2028 (f) 823
- ------------------------------------------------------------------------------------------------------------------------------------
AAA VMIG1+ 300 Michigan Higher Education Student Loan Authority, Student Loan Revenue Bonds, VRDN,
AMT, Series XII-D, 3.25% due 10/01/2015 (a)(d) 300
- ------------------------------------------------------------------------------------------------------------------------------------
Michigan State, HDA, Rental Housing Revenue Refunding Bonds, Series A:
AAA Aaa 1,000 AMT, 5.625% due 10/01/2010 (d) 983
AA- NR* 1,895 6.60% due 4/01/2012 1,973
- ------------------------------------------------------------------------------------------------------------------------------------
AA+ NR* 65 Michigan State, HDA, Revenue Bonds, Series A, 6.50% due 12/01/2017 66
- ------------------------------------------------------------------------------------------------------------------------------------
Michigan State, HDA, Revenue Refunding Bonds, AMT (g):
AA+ NR* 1,000 Series B, 6.20% due 6/01/2027 997
AA+ NR* 1,795 Series D, 6.85% due 6/01/2026 1,836
- ------------------------------------------------------------------------------------------------------------------------------------
Michigan State, Hospital Finance Authority, Revenue Refunding Bonds, Series A:
AAA Aaa 1,000 (Ascension Health Credit), 6.125% due 11/15/2023 (b) 983
AA Aa2 2,500 (Ascension Health Credit), 6.125% due 11/15/2026 2,391
NR* A1 1,500 (McLaren Health Care Corp.), 5% due 6/01/2028 1,124
AAA Aaa 1,000 (Mercy Mount Clemens), 6% due 5/15/2014 (b) 1,002
- ------------------------------------------------------------------------------------------------------------------------------------
</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
VRDN Variable Rate Demand Notes
5
<PAGE>
Merrill Lynch Michigan Municipal Bond Fund January 31, 2000
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face
Ratings Ratings Amount Issue Value
- ------------------------------------------------------------------------------------------------------------------------------------
Michigan (concluded)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michigan State Strategic Fund, Limited Obligation Revenue Bonds:
A1+ P1 $ 300 VRDN, Reserve 1, 3.60% due 9/01/2030 (a) $ 300
BBB Ba1 1,000 (Waste Management Inc. Project), AMT, 6.625% due 12/01/2012 960
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Michigan State Trunk Line, Revenue Refunding Bonds, Series A, 5% due 11/01/2026 (b) 1,654
- ------------------------------------------------------------------------------------------------------------------------------------
Muskegon Heights, Michigan, Public Schools, GO (b):
AAA Aaa 3,390 5% due 5/01/2024 2,831
AAA Aaa 1,000 5% due 5/01/2029 820
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Ravenna, Michigan, Public Schools, GO, 5.25% due 5/01/2024 (c) 1,743
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 3,235 Richmond, Michigan, Community School District, GO, Refunding, 4.75% due 5/01/2022 (c) 2,606
- ------------------------------------------------------------------------------------------------------------------------------------
AA VMIG1+ 1,000 Royal Oak, Michigan, Hospital Finance Authority, Hospital Revenue Bonds (William
Beaumont Hospital), VRDN, Series L, 3.60% due 1/01/2027 (a) 1,000
- ------------------------------------------------------------------------------------------------------------------------------------
AA Aa3 1,785 Royal Oak, Michigan, Hospital Finance Authority Revenue Bonds (Beaumont Properties,
Inc.), Series E, 6.625% due 1/01/2019 1,820
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,300 Saint Clair County, Michigan, Economic Revenue Refunding Bonds (Detroit Edison Co.
Project), Series AA, 6.40% due 8/01/2024 (d) 2,345
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,500 Southgate, Michigan, Community School District, GO, 5% due 5/01/2025 (c) 1,248
- ------------------------------------------------------------------------------------------------------------------------------------
A1+ VMIG1+ 1,100 University of Michigan, University Hospital Revenue Bonds, VRDN, Series A,
3.60% due 12/01/2027 (a) 1,100
- ------------------------------------------------------------------------------------------------------------------------------------
A1+ VMIG1+ 300 University of Michigan, University Revenue Bonds (Medical Service Plan), VRDN, Series A,
3.60% due 12/01/2027 (a) 300
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,500 Warren, Michigan, Water and Sewer Revenue Bonds, 5.25% due 11/01/2026 (f) 1,297
- ------------------------------------------------------------------------------------------------------------------------------------
Wayne Charter County, Michigan, Airport Revenue Bonds (Detroit Metropolitan -- Wayne
County Airport) (b):
AAA Aaa 1,840 AMT, Series A, 5% due 12/01/2028 1,469
AAA Aaa 2,185 Series B, 5% due 12/01/2028 1,782
- ------------------------------------------------------------------------------------------------------------------------------------
Wayne State University, Michigan, University Revenue Refunding Bonds (c):
AAA Aaa 1,350 5.25% due 11/15/2019 1,206
AAA Aaa 3,500 5.125% due 11/15/2029 2,934
- ------------------------------------------------------------------------------------------------------------------------------------
Puerto Rico -- 3.4%
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,225 Puerto Rico Commonwealth, GO, 5.375% due 7/01/2021 (b) 2,043
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost -- $63,931) -- 100.8% 60,084
Variation Margin on Financial Futures Contracts** -- 0.1% 55
Liabilities in Excess of Other Assets -- (0.9%) (536)
-------
Net Assets -- 100.0% $59,603
=======
- ------------------------------------------------------------------------------------------------------------------------------------
</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,
2000.
(b) MBIA Insured.
(c) FGIC Insured.
(d) AMBAC Insured.
(e) The interest rate is subject to change periodically and inversely based
upon prevailing market rates. The interest rate shown is the rate in
effect at January 31, 2000.
(f) FSA Insured.
(g) FHA Insured.
(h) All or a portion of security held as collateral in connection with open
financial futures contracts.
* Not Rated.
** Financial futures contracts sold as of January 31, 2000 were as follows:
----------------------------------------------------------------------
(in Thousands)
----------------------------------------------------------------------
Number of Expiration
Contracts Issue Date Value
----------------------------------------------------------------------
60 US Treasury Bonds March 2000 $5,533
----------------------------------------------------------------------
Total Financial Futures Contracts Sold
(Total Contract Price -- $5,403) $5,533
----------------------------------------------------------------------
+ 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, 2000
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of January 31, 2000
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $63,931,427)............................ $60,084,494
Cash.............................................................................. 30,882
Receivables:
Securities sold................................................................. $2,280,260
Interest........................................................................ 779,454
Variation margin................................................................ 55,105
Beneficial interest sold........................................................ 4,843 3,119,662
----------
Prepaid expenses and other assets................................................. 1,319
-----------
Total assets...................................................................... 63,236,357
-----------
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities: Payables:
Securities purchased............................................................ 3,336,421
Beneficial interest redeemed.................................................... 92,962
Dividends to shareholders....................................................... 55,889
Investment adviser.............................................................. 26,810
Distributor..................................................................... 19,651 3,531,733
----------
Accrued expenses and other liabilities............................................ 101,920
-----------
Total liabilities................................................................. 3,633,653
-----------
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets: Net assets........................................................................ $59,602,704
===========
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited number of
Consist of: shares authorized................................................................. $ 107,362
Class B Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized................................................................. 484,514
Class C Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized................................................................. 35,411
Class D Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized................................................................. 25,603
Paid-in capital in excess of par.................................................. 66,575,701
Accumulated realized capital losses on investments -- net......................... (3,648,641)
Unrealized depreciation on investments -- net..................................... (3,977,246)
-----------
Net assets........................................................................ $59,602,704
===========
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value: Class A -- Based on net assets of $9,801,294 and 1,073,624 shares
of beneficial interest outstanding................................................ $ 9.13
===========
Class B -- Based on net assets of $44,233,052 and 4,845,137 shares
of beneficial interest outstanding................................................ $ 9.13
===========
Class C -- Based on net assets of $3,232,845 and 354,111 shares
of beneficial interest outstanding................................................ $ 9.13
===========
Class D -- Based on net assets of $2,335,513 and 256,031 shares
of beneficial interest outstanding................................................ $ 9.12
===========
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
Merrill Lynch Michigan Municipal Bond Fund January 31, 2000
FINANCIAL INFORMATION (continued)
Statement of Operations
<TABLE>
<CAPTION>
For the Six Months Ended
January 31, 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Income: Interest and amortization of premium and discount earned................... $ 1,970,076
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expenses: Investment advisory fees................................................... $185,085
Account maintenance and distribution fees -- Class B....................... 122,011
Professional fees.......................................................... 45,123
Transfer agent fees -- Class B............................................. 15,953
Account maintenance and distribution fees -- Class C....................... 11,147
Printing and shareholder reports........................................... 6,730
Accounting services........................................................ 6,705
Registration fees.......................................................... 5,509
Custodian fees............................................................. 4,484
Pricing fees............................................................... 3,868
Transfer agent fees -- Class A............................................. 3,112
Trustees' fees and expenses................................................ 2,868
Account maintenance fees -- Class D........................................ 1,868
Transfer agent fees -- Class C............................................. 1,185
Transfer agent fees -- Class D............................................. 1,054
Other...................................................................... 1,720
--------
Total expenses............................................................. 418,422
-----------
Investment income -- net .................................................. 1,551,654
-----------
- ------------------------------------------------------------------------------------------------------------------------------------
Realized & Realized loss on investments -- net ....................................... (1,577,885)
Unrealized Loss on Change in unrealized appreciation/depreciation on investments -- net....... (4,012,026)
Investments -- Net: -----------
Net Decrease in Net Assets Resulting from Operations....................... $(4,038,257)
===========
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
Merrill Lynch Michigan Municipal Bond Fund January 31, 2000
FINANCIAL INFORMATION (continued)
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Six For the Year
Months Ended Ended
January 31, July 31,
Increase (Decrease) in Net Assets: 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations: Investment income -- net .................................................. $ 1,551,654 $ 3,205,418
Realized gain (loss) on investments -- net ................................ (1,577,885) 1,219,061
Change in unrealized appreciation/depreciation on investments -- net....... (4,012,026) (4,325,424)
------------ -----------
Net increase (decrease) in net assets resulting from operations............ (4,038,257) 99,055
------------ -----------
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends to Investment income -- net:
Shareholders: Class A.................................................................. (277,264) (484,014)
Class B.................................................................. (1,100,605) (2,386,410)
Class C.................................................................. (81,952) (144,265)
Class D.................................................................. (91,833) (190,729)
------------ -----------
Net decrease in net assets resulting from dividends to shareholders........ (1,551,654) (3,205,418)
------------ -----------
- ------------------------------------------------------------------------------------------------------------------------------------
Beneficial Interest Net decrease in net assets derived from beneficial interest
Transactions: transactions............................................................... (6,712,670) (5,276,184)
------------ -----------
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets: Total decrease in net assets............................................... (12,302,581) (8,382,547)
Beginning of period........................................................ 71,905,285 80,287,832
------------ -----------
End of period.............................................................. $ 59,602,704 $71,905,285
============ ===========
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
Merrill Lynch Michigan Municipal Bond Fund January 31, 2000
FINANCIAL INFORMATION (continued)
Financial Highlights
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------
For the
Six Months
The following per share data and ratios have been derived Ended For the Year Ended July 31,
from information provided in the financial statements. Jan. 31, --------------------------------------------
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period............ $ 9.91 $ 10.33 $ 10.34 $ 9.92 $ 9.85
Operating ------- -------- ------- ------- -------
Performance: Investment income -- net........................ .24 .46 .50 .52 .54
Realized and unrealized gain (loss) on
investments -- net (.78) (.42) (.01) .42 .07
------- -------- ------- ------- -------
Total from investment operations................ (.54) .04 .49 .94 .61
------- -------- ------- ------- -------
Less dividends from investment income -- net.... (.24) (.46) (.50) (.52) (.54)
------- -------- ------- ------- -------
Net asset value, end of period.................. $ 9.13 $ 9.91 $ 10.33 $ 10.34 $ 9.92
======= ======== ======= ======= =======
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share.............. (5.51%)+ .34% 4.84% 9.79% 6.25%
Return:** ======= ======== ======= ======= =======
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Expenses, net of reimbursement.................. .83%* .93% .80% .57% .49%
Average ======= ======== ======= ======= =======
Net Assets: Expenses........................................ .83%* .93% .83% .80% .82%
======= ======== ======= ======= =======
Investment income -- net......................... 5.01%* 4.51% 4.81% 5.21% 5.35%
======= ======== ======= ======= =======
- ------------------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands)........ $ 9,801 $ 9,384 $11,762 $11,841 $11,468
Data: ======= ======== ======= ======= =======
Portfolio turnover.............................. 39.82% 129.08% 65.39% 35.09% 69.34%
======= ======== ======= ======= =======
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Aggregate total investment return.
See Notes to Financial Statements.
10
<PAGE>
Merrill Lynch Michigan Municipal Bond Fund January 31, 2000
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
<TABLE>
<CAPTION>
Class B
---------------------------------------------------------
For the
Six Months
The following per share data and ratios have been derived Ended For the Year Ended July 31,
from information provided in the financial statements. Jan. 31, --------------------------------------------
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period............ $ 9.91 $ 10.33 $ 10.34 $ 9.92 $ 9.85
Operating ------- -------- ------- ------- -------
Performance: Investment income -- net........................ .21 .41 .45 .47 .49
Realized and unrealized gain (loss) on
investments -- net (.78) (.42) (.01) .42 .07
------- -------- ------- ------- -------
Total from investment operations................ (.57) (.01) .44 .89 .56
------- -------- ------- ------- -------
Less dividends from investment income -- net.... (.21) (.41) (.45) (.47) (.49)
------- -------- ------- ------- -------
Net asset value, end of period.................. $ 9.13 $ 9.91 $ 10.33 $ 10.34 $ 9.92
======= ======== ======= ======= =======
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share.............. (5.75%)+ (.17%) 4.31% 9.23% 5.70%
Return:** ======= ======== ======= ======= =======
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Expenses, net of reimbursement.................. 1.34%* 1.44% 1.31% 1.08% 1.00%
Average ======= ======== ======= ======= =======
Net Assets: Expenses........................................ 1.34%* 1.44% 1.34% 1.31% 1.33%
======= ======== ======= ======= =======
Investment income -- net........................ 4.50%* 4.00% 4.30% 4.70% 4.84%
======= ======== ======= ======= =======
- ------------------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands)........ $44,233 $ 54,259 $61,918 $65,166 $67,770
Data: ======= ======== ======= ======= =======
Portfolio turnover.............................. 39.82% 129.08% 65.39% 35.09% 69.34%
======= ======== ======= ======= =======
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Aggregate total investment return.
See Notes to Financial Statements.
11
<PAGE>
Merrill Lynch Michigan Municipal Bond Fund January 31, 2000
FINANCIAL INFORMATION (concluded)
Financial Highlights (concluded)
<TABLE>
<CAPTION>
Class C
---------------------------------------------------------
For the
Six Months
The following per share data and ratios have been derived Ended For the Year Ended July 31,
from information provided in the financial statements. Jan. 31, --------------------------------------------
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period............ $ 9.91 $ 10.32 $ 10.33 $ 9.92 $ 9.85
Operating ------- -------- ------- ------- -------
Performance: Investment income -- net........................ .21 .40 .43 .46 .48
Realized and unrealized gain (loss) on
investments -- net (.78) (.41) (.01) .41 .07
------- -------- ------- ------- -------
Total from investment operations................ (.57) (.01) .42 .87 .55
------- -------- ------- ------- -------
Less dividends from investment income -- net.... (.21) (.40) (.43) (.46) (.48)
------- -------- ------- ------- -------
Net asset value, end of period.................. $ 9.13 $ 9.91 $ 10.32 $ 10.33 $ 9.92
======= ======== ======= ======= =======
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share.............. (5.80%) + (.17%) 4.20% 9.01% 5.59%
Return:** ======= ======== ======= ======= =======
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Expenses, net of reimbursement.................. 1.44%* 1.55% 1.42% 1.18% 1.11%
Average ======= ======== ======= ======= =======
Expenses........................................ 1.44%* 1.55% 1.45% 1.41% 1.43%
======= ======== ======= ======= =======
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets: Investment income -- net........................ 4.40%* 3.89% 4.18% 4.60% 4.73%
Supplemental ======= ======== ======= ======= =======
Data: Net assets, end of period (in thousands)........ $ 3,233 $ 3,950 $ 2,802 $ 1,319 $ 1,871
======= ======== ======= ======= =======
Portfolio turnover.............................. 39.82% 129.08% 65.39% 35.09% 69.34%
======= ======== ======= ======= =======
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class D
---------------------------------------------------------
For the
Six Months
The following per share data and ratios have been derived Ended For the Year Ended July 31,
from information provided in the financial statements. Jan. 31, --------------------------------------------
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period............ $ 9.91 $ 10.32 $ 10.33 $ 9.91 $ 9.85
Operating ------- -------- ------- ------- -------
Performance: Investment income -- net........................ .23 .45 .49 .51 .53
Realized and unrealized gain (loss) on
investments -- net (.79) (.41) (.01) .42 .06
------- -------- ------- ------- -------
Total from investment operations................ (.56) .04 .48 .93 .59
------- -------- ------- ------- -------
Less dividends from investment income -- net.... (.23) (.45) (.49) (.51) (.53)
------- -------- ------- ------- -------
Net asset value, end of period.................. $ 9.12 $ 9.91 $ 10.32 $ 10.33 $ 9.91
======= ======== ======= ======= =======
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share.............. (5.66%)+ .34% 4.74% 9.69% 6.04%
Return:** ======= ======== ======= ======= =======
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Expenses, net of reimbursement.................. .93%* 1.04% .90% .68% .59%
Average ======= ======== ======= ======= =======
Net Assets: Expenses........................................ .93%* 1.04% .93% .90% .91%
======= ======== ======= ======= =======
Investment income -- net........................ 4.90%* 4.40% 4.71% 5.11% 5.24%
======= ======== ======= ======= =======
- ------------------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands)........ $ 2,336 $ 4,312 $ 3,806 $ 3,494 $ 1,842
Data: ======= ======== ======= ======= =======
Portfolio turnover.............................. 39.82% 129.08% 65.39% 35.09% 69.34%
======= ======== ======= ======= =======
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Aggregate total investment return.
See Notes to Financial Statements.
12
<PAGE>
Merrill Lynch Michigan Municipal Bond Fund January 31, 2000
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 the results for the interim period presented. All such adjustments
are of a normal recurring nature. The Fund offers four classes of shares under
the Merrill Lynch Select 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 monthly. Distributions of capital gains are recorded on
the ex-dividend dates.
13
<PAGE>
Merrill Lynch Michigan Municipal Bond Fund January 31, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML &
Co."), which is the limited partner. The Fund has also entered into a
Distribution Agreement and Distribution Plans with Merrill Lynch Funds
Distributor ("MLFD" or the "Distributor"), a division of Princeton Funds
Distributor, Inc. ("PFD"), which is a wholly-owned subsidiary of Merrill Lynch
Group, Inc.
FAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee
based upon the average daily value of the Fund's net assets at the following
annual rates: .55% of the Fund's average daily net assets not exceeding $500
million; .525% of average daily net assets in excess of $500 million but not
exceeding $1 billion; and .50% of average daily net assets in excess of $1
billion.
Pursuant to the Distribution Plans adopted by the Fund in accordance with Rule
12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are accrued daily
and paid monthly at annual rates based upon the average daily net assets of the
shares as follows:
- --------------------------------------------------------------------------------
Account
Maintenance Distribution
Fee Fee
- --------------------------------------------------------------------------------
Class B.................................... .25% .25%
Class C.................................... .25% .35%
Class D.................................... .10% --
- --------------------------------------------------------------------------------
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., also provides account
maintenance and distribution services to the Fund. The ongoing account
maintenance fee compensates the Distributor and MLPF&S for providing account
maintenance services to Class B, Class C and Class D shareholders. The ongoing
distribution fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B and Class C
shareholders.
For the six months ended January 31, 2000, MLFD earned underwriting discounts
and MLPF&S earned dealer concessions on sales of the Fund's Class D Shares as
follows:
- --------------------------------------------------------------------------------
MLFD MLPF&S
- --------------------------------------------------------------------------------
Class D..................................... $54 $287
- --------------------------------------------------------------------------------
For the six months ended January 31, 2000, MLPF&S received contingent deferred
sales charges of $30,698 and $280 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, 2000 were $24,173,460 and $31,408,230, respectively.
Net realized gains (losses) for the six months ended January 31, 2000 and net
unrealized losses as of January 31, 2000 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Losses
- --------------------------------------------------------------------------------
Long-term investments................... $(2,128,639) $(3,846,933)
Financial futures contracts............. 550,754 (130,313)
----------- -----------
Total................................... $(1,577,885) $(3,977,246)
=========== ===========
- --------------------------------------------------------------------------------
As of January 31, 2000, net unrealized depreciation for Federal income tax
purposes aggregated $3,846,933, of which $484,567 is related to appreciated
securities and $4,331,500 is related to depreciated securities. The aggregate
cost of investments at January 31, 2000 for Federal income tax purposes was
$63,931,427.
14
<PAGE>
Merrill Lynch Michigan Municipal Bond Fund January 31, 2000
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest transactions was
$6,712,670 and $5,276,184 for the six months ended January 31, 2000 and for the
year ended July 31, 1999, respectively.
Transactions in shares of beneficial interest for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended January 31, 2000 Shares Amount
- --------------------------------------------------------------------------------
Shares sold......................... 334,938 $ 3,291,305
Shares issued to shareholders
in reinvestment of dividends 11,564 108,702
-------- -----------
Total issued........................ 346,502 3,400,007
Shares redeemed..................... (219,664) (2,078,678)
-------- -----------
Net increase........................ 126,838 $ 1,321,329
======== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended July 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold......................... 180,075 $ 1,866,875
Shares issued to shareholders
in reinvestment of dividends 24,067 247,826
-------- -----------
Total issued........................ 204,142 2,114,701
Shares redeemed..................... (396,455) (4,084,167)
-------- -----------
Net decrease........................ (192,313) $(1,969,466)
======== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Six Months Dollar
Ended January 31, 2000 Shares Amount
- --------------------------------------------------------------------------------
Shares sold......................... 129,383 $ 1,219,956
Shares issued to shareholders
in reinvestment of dividends 41,140 386,827
-------- -----------
Total issued........................ 170,523 1,606,783
Automatic conversion
of shares........................... (7,274) (69,738)
Shares redeemed..................... (792,303) (7,486,385)
-------- -----------
Net decrease........................ (629,054) $(5,949,340)
======== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended July 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold......................... 628,886 $ 6,491,705
Shares issued to shareholders
in reinvestment of dividends 84,862 873,290
Total issued........................ 713,748 7,364,995
---------- ------------
Automatic conversion
of shares........................... (11,568) (117,500)
Shares redeemed..................... (1,224,642) (12,574,959)
---------- ------------
Net decrease........................ (522,462) $ (5,327,464)
========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Six Months Dollar
Ended January 31, 2000 Shares Amount
- --------------------------------------------------------------------------------
Shares sold......................... 54,981 $ 522,990
Shares issued to shareholders
in reinvestment of dividends 6,625 62,254
-------- -----------
Total issued........................ 61,606 585,244
Shares redeemed..................... (106,036) (1,001,666)
-------- -----------
Net decrease........................ (44,430) $ (416,422)
======== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended July 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold......................... 194,056 $2,009,738
Shares issued to shareholders
in reinvestment of dividends 10,706 110,045
------- ----------
Total issued........................ 204,762 2,119,783
Shares redeemed..................... (77,674) (795,204)
------- ----------
Net increase........................ 127,088 $1,324,579
======= ==========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Six Months Dollar
Ended January 31, 2000 Shares Amount
- --------------------------------------------------------------------------------
Shares sold......................... 36,770 $ 347,850
Automatic conversion
of shares........................... 7,279 69,738
Shares issued to shareholders
in reinvestment of dividends 6,487 61,031
-------- -----------
Total issued........................ 50,536 478,619
Shares redeemed..................... (229,818) (2,146,856)
-------- -----------
Net decrease........................ (179,282) $(1,668,237)
======== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended July 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold......................... 135,821 $1,410,405
Automatic conversion
of shares........................... 11,575 117,500
Shares issued to shareholders
in reinvestment of dividends 12,826 131,764
------- ----------
Total issued........................ 160,222 1,659,669
Shares redeemed..................... (93,734) (963,502)
------- ----------
Net increase........................ 66,488 $ 696,167
======= ==========
- --------------------------------------------------------------------------------
5. Capital Loss Carryforward:
At July 31, 1999, the Fund had a capital loss carryforward of approximately
$1,165,000, of which $708,000 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>
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--1/00
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