MERRILL
LYNCH
NEW JERSEY
MUNICIPAL
BOND FUND
Annual Report July 31, 1994
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.
Merrill Lynch New Jersey
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, New Jersey
08543-9011
<PAGE>
TO OUR SHAREHOLDERS
The expectation of increasing inflationary pressures and higher
interest rates initially heightened investor concerns and increased
financial market volatility during the July quarter. However, as the
quarter progressed, it was the weakness of the US dollar in foreign
exchange markets that dominated the financial news and prolonged
stock and bond market declines. Although the US dollar had
strengthened slightly by July quarter-end, which may have improved
investor confidence in the stock and bond markets, the possibility
of continued tightening by the Federal Reserve Board resurfaced
following Chairman Alan Greenspan's recent congressional testimony.
Nevertheless, as the quarter drew to a close, a lower-than-expected
rate of growth reported for the US economy during the second
calendar quarter allayed investor concerns and led to stock and bond
market rallies.
During the July quarter, the US dollar's weakness relative to other
major currencies reflected the deteriorating US trade deficit and
widening net long-term capital outflows. In 1993, an expanding US
economy and recession in other industrial countries led to a higher
level of imports and weaker export growth, widening the US trade
deficit further. In addition, global investors favored non-US dollar
denominated assets throughout 1993, which has further depressed the
dollar's value. This trend is not improving significantly thus far
in 1994 since foreign inflows into US capital markets continue to
decline, although US investors are investing outside of the United
States to a lesser degree.
Over the longer term, if the economies of the United States' major
trading partners expand (improving the prospects for US export
growth), the outlook for the US dollar is likely to improve. In the
near term, central banks have attempted to reverse the dollar's
decline through currency market intervention. These efforts have met
with limited success thus far, giving rise to the concern that the
Federal Reserve Board will be forced to continue to raise short-term
interest rates to attract investment capital back to the United
States and bolster the dollar's value. However, further interest
rate increases may jeopardize the US economic expansion. Despite
evidence of a moderating trend in the US economy, Federal Reserve
Board Chairman Alan Greenspan indicated in his July Humphrey-Hawkins
testimony that the central bank would prefer to err on the side of
too much monetary tightening rather than too little. In the weeks
ahead, investors will continue to assess economic data and
inflationary trends as they focus on the US dollar in order to gauge
whether further increases in short-term interest rates are imminent.
Continued indications of moderate and sustainable levels of economic
growth would be positive for the US capital markets.
<PAGE>
The Municipal Market
Long-term tax-exempt bond yields ended the July quarter essentially
unchanged. The Bond Buyer Revenue Bond Index rose five basis points
(0.05%) to 6.47%. The Index, however, failed to capture the dramatic
bond rally on July 29, 1994, when municipal bond yields had their
largest one-day decline thus far this year. Responding to reports of
a continued mild inflationary outlook and a potentially weakening
economy, municipal bond yields declined by approximately 10 basis
points. US Treasury bonds displayed a similar pattern over the last
three months, ending with an equally dramatic rally on July 29,
1994. Long-term US Treasury bonds ended the quarter yielding
approximately 7.40%.
The tax-exempt bond market has continued to be very volatile with
yields fluctuating by as much as 15 basis points from week to week.
This continued volatility is largely a reflection of the same lack
of conviction regarding the near-term direction of interest rates
that has prevailed for much of 1994. Throughout this past quarter,
the municipal bond market had been unable to maintain a consensus
regarding either the potential strength of the current economic
recovery or the resultant response by the Federal Reserve Board.
However, a number of economic indicators released in late July began
to suggest that the robust pace of recent economic growth was
slowing. This promoted a more positive market environment,
culminating in the market rally on July 29.
The municipal bond market's technical position has remained
supportive. Approximately $40 billion in long-term securities were
issued during the three months ended July 31, 1994. This represents
a decline of over 50% versus the July quarter from the previous
year. As discussed in earlier reports, this reduction in new-issue
supply has minimized the selling pressure by larger institutional
investors who fear being unable to purchase sizable amounts of
securities in the future. Such a significant decline in issuance
would normally be expected to trigger a decline in yields as
investors chase a commodity in scarce supply. Investor demand,
however, has also diminished somewhat in recent months as net flows
into long-term municipal bond funds have dramatically slowed or, in
some instances, reversed. Consequently, the supply/demand
relationship within the municipal bond market has remained in
balance, promoting the overall stability in yield levels seen in the
past months.
With after-tax equivalents in excess of 10%, long-term tax-exempt
bonds continue to represent considerable value relative to other
investment alternatives. We continue to anticipate that municipal
bond yields will decline further in late 1994 and into 1995. The
economic impact of the significant interest rate increases
experienced since early February have yet to be totally realized.
The resultant drag on the economy should provide the foundation for
further interest rate declines. Under such a scenario, current tax-
exempt bond yields may prove to represent considerable value.
<PAGE>
Fiscal Year in Review
During the past 12 months, the municipal bond market has been
extremely volatile. As measured by the Bond Buyer Revenue Bond
Index, long-term tax-exempt bond yields ranged from a low of 5.41%
on October 14, 1993, to a high of 6.60% on May 12, 1994. At fiscal
year-end July 31, 1994, the Index yield was near the peak for the
period at 6.47%. The change in direction of long-term interest rates
occurred as a result of the US economy heating up during the fourth
quarter of 1993 and generating momentum which carried forward into
1994. This led the Federal Reserve Board to tighten monetary policy
in February in an attempt to prevent an increase in inflationary
pressures on the economy. In response to the rapidly changing
investment climate, prices of long-term fixed-income securities fell
sharply.
Merrill Lynch New Jersey Municipal Bond Fund altered its portfolio
strategy during the past 12 months as market psychology changed.
Entering the fiscal year fully invested, the Fund took advantage of
the decline in interest rates through the fall of 1993. However, as
evidence of a booming economy emerged early in 1994, we became
cautious on the market. Our strategy centered on raising the Fund's
cash reserves to approximately 10% of net assets and restructuring
the portfolio's holdings to include a greater percentage of
defensive bonds. This entailed selling discount coupons and buying
higher coupon bonds which are priced to call. As a result, we were
able to mute some of the volatility that occurred and, in effect,
limit the decline to some degree in total returns that the Fund's
Class A and Class B Shares experienced during this very difficult
period.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
August 24, 1994
<PAGE>
IMPORTANT TAX INFORMATION
All of the net investment income distributions paid monthly by
Merrill Lynch New Jersey Municipal Bond Fund during its taxable year
ended July 31, 1994 qualify as tax-exempt interest dividends for
Federal income tax purposes.
Additionally, the Fund distributed short-term capital gains of
$.031574 per share and long-term capital gains of $.014828 per share
to shareholders of record on December 22, 1993.
Please retain this information for your records.
PERFORMANCE DATA
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of
Class A and Class B Shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Average Annual Total Return--Class A Shares*
% Return Without % Return With
Sales Charge Sales Charge**
Year Ended 6/30/94 -1.47% -5.41%
Inception (8/31/90)
through 6/30/94 +7.80 +6.66
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
GRAPHIC MATERIAL APPEARS HERE. SEE APPENDIX,
GRAPHIC AND IMAGE MATERIAL: Item 1.
Average Annual Total Return--Class B Shares*
% Return % Return
Without CDSC With CDSC**
Year Ended 6/30/94 -2.06% -5.77%
Inception (8/31/90)
through 6/30/94 +7.24 +7.02
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced
to 0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
GRAPHIC MATERIAL APPEARS HERE. SEE APPENDIX,
GRAPHIC AND IMAGE MATERIAL: Item 2.
<PAGE>
PERFORMANCE DATA (concluded)
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C.
8/31/90--12/31/90 $10.00 $10.17 -- $0.236 + 4.10%
1991 10.17 10.57 $0.007 0.704 +11.27
1992 10.57 10.78 0.036 0.649 + 8.74
1993 10.78 11.39 0.015 0.635 +11.94
1/1/94--7/31/94 11.39 10.63 -- 0.323 - 3.75
------ ------
Total $0.058 Total $2.547
Cumulative total return as of 7/31/94: +35.71%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
include sales charge; results would be lower if sales charge was
included.
</TABLE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
8/31/90--12/31/90 $10.00 $10.17 -- $0.219 + 3.92%
1991 10.17 10.57 $0.007 0.651 +10.72
1992 10.57 10.79 0.036 0.595 + 8.29
1993 10.79 11.39 0.015 0.579 +11.27
1/1/94--7/31/94 11.39 10.63 -- 0.292 - 4.02
------ ------
Total $0.058 Total $2.336
Cumulative total return as of 7/31/94: +33.06%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
<PAGE>
<TABLE>
Recent Performance Results*
<CAPTION>
12 Month 3 Month
7/31/94 4/30/94 7/31/93 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $10.63 $10.55 $11.23 -5.22%(1) +0.76%
Class B Shares 10.63 10.55 11.23 -5.22(1) +0.76
Class A Shares--Total Return +0.19(2) +2.12(3)
Class B Shares--Total Return -0.31(4) +1.99(5)
Class A Shares--Standardized 30-day Yield 5.03%
Class B Shares--Standardized 30-day Yield 4.74%
<FN>
*Investment results shown for the 3-month and 12-month periods are
before the deduction of any sales charges.
(1)Percent change includes reinvestment of $0.015 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.615 per share ordinary
income dividends and $0.015 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.142 per
share ordinary income dividends.
(4)Percent change includes reinvestment of $0.559 per share ordinary
income dividends and $0.015 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.129 per share ordinary
income dividends.
</TABLE>
PORTFOLIO ABBREVIATIONS
To simplify the listings of Merrill Lynch New Jersey
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)
COP Certificates of Participation
EDA Economic Development Authority
GO General Obligation Bonds
M/F Multi-Family
S/F Single-Family
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
New Jersey--94.5%
<S> <S> <C> <S> <C>
A- NR $1,000 Atlantic City, New Jersey, Municipal Utilities Authority, Water Systems Revenue
Bonds, 7.75% due 5/01/2000 (g) $ 1,149
Atlantic County, New Jersey, Utilities Authority, Solid Waste Revenue Bonds:
NR Baa 4,000 7% due 3/01/2008 4,016
NR Baa 3,000 7.125% due 3/01/2016 3,003
AAA Aaa 1,500 Camden County, New Jersey, Municipal Utilities Authority, Sewer Revenue Bonds,
8.125% due 12/01/2007 (f) 1,677
BBB+ Baa1 4,750 Camden County, New Jersey, Pollution Control Financing Authority, Solid Waste
Resource Recovery Revenue Bonds, Series D, 7.25% due 12/01/2010 4,797
AAA Aaa 4,500 Cape May County, New Jersey, Industrial Pollution Control Financing Authority,
Revenue Refunding Bonds (Atlantic City Electric Company), Series A, 6.80% due
3/01/2021 (d) 4,975
NR A 500 Delaware River Joint Toll Bridge Commission, Pennsylvania, Bridge Revenue Bonds,
7.875% due 7/01/1998 (g) 562
BBB+ Baa1 1,000 Essex County, New Jersey, Improvement Authority, Lease Revenue Bonds (Newark),
6.60% due 4/01/2014 1,010
AAA Aaa 4,000 Essex County, New Jersey, Improvement Authority Revenue Bonds (Irvington Township
School District), 6.625% due 10/01/2002 (g)(h) 4,419
AAA Aaa 2,500 Hudson County, New Jersey, COP (Correctional Facilities), Refunding Bonds, 6.60%
due 12/01/2021 (d) 2,611
NR Baa1 3,000 Mercer County, New Jersey, Improvement Authority, Revenue Refunding Bonds (Solid
Waste), Series B, AMT, 6.80% due 4/01/2005 3,021
AAA Aaa 2,000 Middlesex County, New Jersey, COP, 6.125% due 2/15/2019 (d) 2,015
NR NR 5,750 Middlesex County, New Jersey, Pollution Control Authority, Revenue Refunding
Bonds (Amerada Hess), 6.875% due 12/01/2022 5,866
<PAGE>
AAA Aaa 1,100 Middlesex County, New Jersey, Utilities Authority, Sewer Revenue Bonds, Series A,
6.50% due 9/15/2011 (f) 1,145
AAA Aaa 2,000 Monmouth County, New Jersey, Improvement Authority, Sewer Facilities
Revenue Refunding Bonds, 6.75% due 2/01/2001 (d)(g) 2,206
New Jersey, Economic Development Revenue Bonds:
BB+ Baa2 2,000 (American Airlines Inc. Project), AMT, 7.10% due 11/01/2031 2,004
NR P1 600 Refunding (Dow Chemical-El Dorado Term 1984), Series A, VRDN, 2.75% due
5/01/2001 (a) 600
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
New Jersey (continued)
<S> <S> <C> <S> <C>
New Jersey, EDA, Dock Facility Revenue Refunding Bonds (Bayonne International
Matex Tank Terminal Project), Series A, VRDN (a):
NR VMIG1 $ 100 2.70% due 12/01/2027 $ 100
NR VMIG1 1,800 2.75% due 12/01/2027 1,800
A A1 4,500 New Jersey, EDA, Lease Rental Revenue Bonds (Liberty State Park Project), 6.80%
due 3/15/2022 4,690
AAA Aaa 9,000 New Jersey, EDA, Natural Gas Facilities, Revenue Refunding Bonds (NUI Corp.),
Series A, 6.35% due 10/01/2022 (c) 9,060
<PAGE>
New Jersey Health Care Facilities Financing Authority Revenue Bonds:
NR Baa1 2,725 (Deborah Heart and Lung Center), 6.30% due 7/01/2023 2,647
BBB+ NR 1,000 (East Orange General Hospital), Series B, 7.75% due 7/01/2020 1,057
AAA Aaa 7,000 (Jersey Shore Medical Center), 6.75% due 7/01/2019 (c) 7,387
AAA Aaa 3,040 (Mercer Medical Center), 6.50% due 7/01/2021 (d) 3,131
AAA Aaa 4,000 (Newark Beth Israel Medical Center), 6% due 7/01/2024 (h) 3,907
A- NR 1,665 (Pascack Valley Hospital Association), 6.90% due 7/01/2021 1,717
A- A 2,000 Refunding (Atlantic City Medical Center), Series C, 6.80% due 7/01/2011 2,085
AAA Aaa 2,000 Refunding (Hackensack Medical Center), 6.625% due 7/01/2017 (f) 2,073
AAA Aaa 5,250 Refunding (Monmouth Medical Center), Series C, 6.25% due 7/01/2024 (j) 5,285
BBB- Baa 3,150 Refunding (Saint Mary Hospital), 5.875% due 7/01/2012 2,872
AAA Aaa 5,000 Refunding (West Jersey Health Systems), 6.125% due 7/01/2012 (d) 5,046
BBB- Baa 2,950 (Saint Elizabeth Hospital), Series B, 8.25% due 7/01/2020 3,192
AAA Aaa 670 (Saint Peter's Medical Center), Series C, 8.60% due 7/01/1997 (d)(g) 754
AAA Aaa 130 (Saint Peter's Medical Center), Series C, 8.60% due 7/01/2017 (d) 146
NR Baa 1,000 (Southern Ocean County Hospital), Series A, 6.125% due 7/01/2013 956
New Jersey Sports and Exposition Authority Revenue Bonds (State Contract):
A+ Aa 3,000 Series A, 6.50% due 3/01/2019 3,101
A1 VMIG1 3,200 Series C, VRDN, 1.90% due 9/01/2024 (a)(d) 3,200
AAA Aaa 6,650 New Jersey State Educational Facilities Authority Revenue Bonds (Jersey City
State College), Series D, 6.125% due 7/01/2022 (d) 6,701
New Jersey State Educational Facilities Authority Revenue Bonds (Seton Hall
University Project):
AAA Aaa 2,000 Series C, 6.85% due 7/01/2019 (e) 2,108
BBB Baa 500 Series D, 7% due 7/01/2021 524
AAA Aaa 5,240 New Jersey State Educational Facilities Authority, Revenue Refunding Bonds
(Rider College), Series D, 6.20% due 7/01/2017 (c) 5,317
New Jersey State Highway Authority, General Revenue Bonds (Garden State
Parkway):
AA- Aaa 1,000 7.25% due 1/01/l999 (g) 1,109
AAA Aaa 5,000 6.15% due 1/01/2007 (c) 5,203
AA- A1 3,250 6.25% due 1/01/2014 3,312
New Jersey State Housing and Mortgage Finance Agency, Home Buyer Revenue
Bonds (d):
AAA Aaa 725 Series A, 7.50% due 4/01/2015 754
AAA Aaa 955 Series B, AMT, 7.90% due 10/01/2022 995
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
New Jersey (concluded)
<S> <S> <C> <S> <C>
New Jersey State Housing and Mortgage Finance Agency, Home Mortgage Revenue
Bonds (d):
AAA Aaa $ 600 Series A, 7.875% due 10/01/2016 $ 636
AAA Aaa 255 Series C, 8.375% due 4/01/2017 266
A+ NR 5,000 New Jersey State Housing and Mortgage Finance Agency, Housing Revenue Refunding
Bonds, Series A, 6.95% due 11/01/2013 5,226
A+ NR 1,125 New Jersey State Housing and Mortgage Finance Agency, M/F Housing Revenue Bonds
(Mont Clarion Project), Series J, AMT, 7.70% due 11/01/2029 1,212
AAA NR 10,410 New Jersey State Housing and Mortgage Finance Agency, M/F Housing Revenue
Refunding Bonds (Presidential Plaza), 6.95% due 5/01/2013 (i) 10,658
New Jersey State Turnpike Authority, Turnpike Revenue Refunding Bonds:
A A 3,260 Series C, 6.50% due 1/01/2009 3,454
A A 10,000 Series C, 6.50% due 1/01/2016 10,610
AAA VMIG1 11,200 Series D, VRDN, 2.60% due 1/01/2018 (a)(f) 11,200
New Jersey State Various Purpose Revenue Bonds (k):
AA+ Aa1 500 9.40% due 4/01/2000 608
AA+ Aa1 1,500 7.25% due 4/15/2000 1,646
A A 1,000 New Jersey Wastewater Treatment Revenue Bonds, 7.90% due 9/01/2007 1,108
AAA Aaa 3,000 New Jersey Water Supply Authority Revenue Bonds (Delaware and Raritan System),
Custodial Receipts/Certificates, AMT, 7.875% due 11/01/2013 (d) 3,360
AAA Aaa 1,300 Newark, New Jersey, Board of Education, GO, UT, 6% due 10/15/2010 (c) 1,315
Passaic Valley, New Jersey, Water Commission Water Supply Bonds, Series A (f):
AAA Aaa 2,120 6.40% due 12/15/2002 (g) 2,314
AAA Aaa 205 6.40% due 12/15/2022 211
Port Authority of New York and New Jersey, Consolidated Bonds:
AA- A1 3,000 69th Series, 7.125% due 6/01/2025 3,298
AA- A1 3,000 74th Series, 5.30% due 8/01/2013 (l) 923
AA- A1 2,000 78th Series, 6.50% due 4/15/2011 2,104
AA- A1 2,000 83rd Series, 6.375% due 10/15/2017 2,040
AA- A1 1,905 Refunding, 87th Series, 5.25% due 7/15/2017 1,687
A1+ VMIG1 1,200 Port Authority of New York and New Jersey, Versatile Structure Special Obligation
Revenue Bonds, VRDN, Series 1, 2.55% due 8/01/2028 (a) 1,200
<PAGE>
Rutgers State University, New Jersey, University Revenue Bonds:
AA A1 1,000 Refunding, Series A, 6.50% due 5/01/2018 1,039
AAA Aaa 1,675 Series O, 7.90% due 5/01/1998 (g) 1,887
AA A1 1,000 Series P, 6.85% due 5/01/2021 1,057
AA Aa2 4,000 Salem County, New Jersey, Pollution Control Financing Authority, Waste Disposal
Revenue Bonds (EI duPont Chambers Works Projects), Series A, AMT, 6.50% due
11/15/2021 4,044
University of Medicine and Dentistry, New Jersey, Revenue Bonds:
AA A 1,170 Refunding, Series D, 6.50% due 12/01/2005 1,278
AA A 2,750 Series E, 6.50% due 12/01/2018 2,847
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Puerto Rico--7.6%
<S> <S> <C> <S> <C>
BB Baa $ 2,760 Puerto Rico Commonwealth, Aqueduct and Sewer Authority Revenue Bonds, Series A,
7.875% due 7/01/2017 $ 3,000
A Baa1 4,450 Puerto Rico Commonwealth, GO, UT, 6.45% due 7/01/2017 4,569
AAA NR 1,000 Puerto Rico Commonwealth, Highway Authority, Highway Revenue Bonds, Series Q,
7.75% due 7/01/2000 (g) 1,161
BBB+ Baa1 1,195 Puerto Rico Commonwealth, Infrastructure Financing Authority Revenue Bonds,
Series A, 7.75% due 7/01/2008 1,319
AAA NR 2,055 Puerto Rico Commonwealth, Public Improvement, GO, 7.70% due 7/01/2020 2,381
A- Baa1 2,250 Puerto Rico Electric Power Authority, Power Revenue Refunding Bonds, Series S, 7%
due 7/01/2006 2,511
AAA Aaa 655 Puerto Rico Housing Finance Corporation, S/F Mortgage Revenue Bonds (Portfolio 1),
Series B, 7.65% due 10/15/2022 (b) 679
AA Aa3 1,500 Puerto Rico Industrial, Medical and Environmental Pollution Control Facilities,
Financing Authority Revenue Bonds (Motorola Inc. Project), Series A, 6.75% due
1/01/2014 1,587
Total Investments (Cost--$224,272)--102.1% 229,740
Liabilities in Excess of Other Assets--(2.1)% (4,748)
--------
Net Assets--100.0% $224,992
========
<PAGE>
<FN>
(a)The interest rate is subject to change periodically based upon
the prevailing market rate. The interest rates shown are those
in effect at July 31, 1994.
(b)GNMA Collateralized.
(c)AMBAC Insured.
(d)MBIA Insured.
(e)BIG Insured.
(f)FGIC Insured.
(g)Prerefunded.
(h)FSA Insured.
(i)FHA Collateralized.
(j)Capital Guaranty.
(k)Interest secured by escrow.
(l)Represents yield to maturity on this zero coupon issue.
NR--Not Rated.
Ratings of issues have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
Kenneth S. Axelson, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Jerry Weiss, Secretary
Custodian
National Westminster Bank NJ
10 Exchange Place Centre
Jersey City, New Jersey 07302
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
<PAGE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of July 31, 1994
<CAPTION>
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$224,272,469) (Note 1a) $ 229,739,867
Cash 1,737,938
Receivables:
Securities sold $ 8,938,247
Interest 2,524,729
Beneficial interest sold 423,844 11,886,820
-------------
Deferred organization expenses (Note 1e) 16,734
Prepaid registration fees and other assets (Note 1e) 36,128
-------------
Total assets 243,417,487
-------------
Liabilities: Payables:
Securities purchased 16,301,368
Beneficial interest redeemed 1,685,678
Dividends to shareholders (Note 1f) 181,407
Investment adviser (Note 2) 104,453
Distributor (Note 2) 75,381 18,348,287
-------------
Accrued expenses and other liabilities 77,381
-------------
Total liabilities 18,425,668
-------------
Net Assets: Net assets $ 224,991,819
=============
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 439,095
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 1,677,551
Paid-in capital in excess of par 221,623,425
Accumulated realized capital losses--net (3,248,492)
Accumulated distribution in excess of realized capital gains--net (967,158)
Unrealized appreciation on investments--net 5,467,398
-------------
Net assets $ 224,991,819
=============
<PAGE>
Net Asset Class A--Based on net assets of $46,669,424 and 4,390,955 shares
Value: of beneficial interest outstanding $ 10.63
=============
Class B--Based on net assets of $178,322,395 and 16,775,508 shares
of beneficial interest outstanding $ 10.63
=============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended July 31, 1994
<S> <S> <C>
Investment Interest and amortization of premium and discount earned $ 13,811,274
Income
(Note 1d):
Expenses: Investment advisory fees (Note 2) 1,272,352
Distribution fees--Class B (Note 2) 917,444
Transfer agent fees--Class B (Note 2) 78,242
Professional fees 63,079
Accounting services (Note 2) 54,207
Printing and shareholder reports 50,751
Custodian fees 24,145
Transfer agent fees--Class A (Note 2) 17,619
Registration fees (Note 1e) 15,789
Amortization of organization expenses (Note 1e) 15,448
Pricing fees 10,353
Trustees' fees and expenses 10,091
Other 1,177
-------------
Total expenses 2,530,697
-------------
Investment income--net 11,280,577
-------------
Realized & Realized loss on investments--net (3,460,520)
Unrealized Change in unrealized appreciation on investments--net (9,190,582)
Loss on -------------
Investments Net Decrease in Net Assets Resulting from Operations $ (1,370,525)
- --Net (Notes =============
1d & 3):
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended July 31,
Increase (Decrease) in Net Assets: 1994 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 11,280,577 $ 9,638,126
Realized gain (loss) on investments--net (3,460,520) 493,380
Change in unrealized appreciation/depreciation on investments--net (9,190,582) 4,325,705
------------- -------------
Net increase (decrease) in net assets resulting from operations (1,370,525) 14,457,211
------------- -------------
Dividends & Investment income--net:
Distribu- Class A (2,525,082) (2,223,253)
tions to Class B (8,755,495) (7,414,873)
Shareholders Realized gain on investments--net:
(Note 1f): Class A -- (153,506)
Class B -- (580,052)
In excess of realized gain on investments--net:
Class A (197,825) --
Class B (769,333) --
------------- -------------
Net decrease in net assets resulting from dividends and distri-
butions to shareholders (12,247,735) (10,371,684)
------------- -------------
Beneficial Net increase in net assets derived from beneficial interest
Interest transactions 20,934,073 49,072,852
Transactions ------------- -------------
(Note 4):
Net Assets: Total increase in net assets 7,315,813 53,158,379
Beginning of year 217,676,006 164,517,627
------------- -------------
End of year $ 224,991,819 $ 217,676,006
============= =============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Financial Highlights
<CAPTION>
Class A
For the
Period
The following per share data and ratios have been derived August 31,
from information provided in the financial statements. 1990++ to
For the Year Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1994 1993 1992 1991
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.23 $ 11.03 $ 10.37 $ 10.00
Operating -------- -------- -------- --------
Performance: Investment income--net .58 .62 .66 .61
Realized and unrealized gain (loss) on investments--net (.55) .24 .70 .37
-------- -------- -------- --------
Total from investment operations .03 .86 1.36 .98
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.58) (.62) (.66) (.61)
Realized gain on investments--net -- (.04) (.04) --
In excess of realized gain on investments--net (.05) -- -- --
-------- -------- -------- --------
Total dividends and distributions (.63) (.66) (.70) (.61)
-------- -------- -------- --------
Net asset value, end of period $ 10.63 $ 11.23 $ 11.03 $ 10.37
======== ======== ======== ========
Total Based on net asset value per share .19% 8.16% 13.57% 10.28%+++
Investment ======== ======== ======== ========
Return:**
Ratios to Expenses, net of reimbursement .69% .71% .60% .46%*
Average ======== ======== ======== ========
Net Assets: Expenses .69% .72% .77% 1.09%*
======== ======== ======== ========
Investment income--net 5.28% 5.62% 6.15% 6.63%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 46,669 $ 47,024 $ 35,042 $ 18,368
Data: ======== ======== ======== ========
Portfolio turnover 65.97% 16.28% 29.58% 15.81%
======== ======== ======== ========
<FN>
++Commencement of Operations.
+++Aggregate total investment return.
*Annualized.
**Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<PAGE>
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class B
For the
Period
The following per share data and ratios have been derived August 31,
from information provided in the financial statements. 1990++ to
For the Year Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1994 1993 1992 1991
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.23 $ 11.03 $ 10.37 $ 10.00
Operating -------- -------- -------- --------
Performance: Investment income--net .53 .56 .61 .56
Realized and unrealized gain (loss) on investments--net (.55) .24 .70 .37
-------- -------- -------- --------
Total from investment operations (.02) .80 1.31 .93
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.53) (.56) (.61) (.56)
Realized gain on investments--net -- (.04) (.04) --
In excess of realized gain on investments--net (.05) -- -- --
-------- -------- -------- --------
Total dividends and distributions (.58) (.60) (.65) (.56)
-------- -------- -------- --------
Net asset value, end of period $ 10.63 $ 11.23 $ 11.03 $ 10.37
======== ======== ======== ========
Total Based on net asset value per share (.31%) 7.61% 13.10% 9.68%+++
Investment ======== ======== ======== ========
Return:**
Ratios to Expenses, excluding distribution fees and net of
Average reimbursement .70% .71% .60% .50%*
Net Assets: ======== ======== ======== ========
Expenses, net of reimbursement 1.20% 1.21% 1.10% 1.00%*
======== ======== ======== ========
Expenses 1.20% 1.22% 1.28% 1.58%*
======== ======== ======== ========
Investment income--net 4.77% 5.11% 5.67% 6.08%*
======== ======== ======== ========
<PAGE>
Supplemental Net assets, end of period (in thousands) $178,322 $170,652 $129,475 $ 77,165
Data: ======== ======== ======== ========
Portfolio turnover 65.97% 16.28% 29.58% 15.81%
======== ======== ======== ========
<FN>
++Commencement of Operations.
+++Aggregate total investment return.
*Annualized.
**Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch New Jersey 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 offers
both Class A and Class B Shares. Class A Shares are sold with a
front-end sales charge. Class B Shares may be subject to a
contingent deferred sales charge. Both classes of shares have
identical voting, dividend, liquidation and other rights and the
same terms and conditions, except that Class B Shares bear certain
expenses related to the distribution of such shares and have
exclusive voting rights with respect to matters relating to such
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 a remaining maturity of sixty days or less are
valued on an amortized cost basis, which approximates market value.
Options, which are traded on exchanges, are valued at their last
sale price as of the close of such exchanges or, lacking any sales,
at the last available bid price. 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.
<PAGE>
(b) Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing 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) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a five-year period. Prepaid registration fees are
charged to expense as the related shares are issued.
(f) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates. Distributions in excess
of realized capital gains are due primarily to differing tax
treatments for futures transactions and post October losses.
<PAGE>
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). Effective January 1, 1994, the
investment advisory business of FAM was reorganized from a
corporation to a limited partnership. Both prior to and after the
reorganization, ultimate control of FAM was vested with Merrill
Lynch & Co., Inc. ("ML & Co."). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of ML & Co. The limited partners are ML & Co. and Fund
Asset Management, Inc. ("FAMI"), which is also an indirect wholly-
owned subsidiary of ML & Co. The Fund has also entered into
Distribution Agreements and a Distribution Plan with Merrill Lynch
Funds Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Investment Management, Inc. ("MLIM"),
which is also an indirect wholly-owned subsidiary of ML & Co.
NOTES TO FINANCIAL STATEMENTS (concluded)
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. The Investment Advisory Agreement obligates
FAM to reimburse the Fund to the extent the Fund's expenses
(excluding interest, taxes, distribution fees, brokerage fees and
commissions, and extraordinary items) exceed 2.5% of the Fund's
first $30 million of average daily net assets, 2.0% of the next $70
million of average daily net assets, and 1.5% of the average daily
net assets in excess thereof. FAM's obligation to reimburse the Fund
is limited to the amount of the management fee. No fee payment will
be made to the Investment Adviser during any fiscal year which will
cause such expenses to exceed expense limitations at the time of
such payment.
<PAGE>
The Fund has adopted a Plan of Distribution (the "Plan") in
accordance with Rule 12b-1 under the Investment Company Act of 1940,
pursuant to which the Fund pays the distributor ongoing account
maintenance and distribution fees relating to Class B Shares, which
are accrued daily and paid monthly at the annual rates of 0.25% and
0.25%, respectively, of the average daily net assets of the Class B
Shares of the Fund. Pursuant to a sub-agreement with the
Distributor, Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S"),
an affiliate 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
distribution and account maintenance services to Class B
shareholders. As authorized by the Plan, the Distributor has entered
into an agreement with MLPF&S, which provides for the compensation
of MLPF&S for providing distribution-related services to the Fund.
For the year ended July 31, 1994, MLFD earned under-writing
discounts of $8,366, and MLPF&S earned dealer concessions of
$89,001, on sales of the Fund's Class A Shares.
MLPF&S also received contingent deferred sales charges of $474,329
for the sale of Class B Shares during the period.
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, FAMI, PSI, MLIM, MLFD, FDS, MLPF&S, and/or ML &
Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended July 31, 1994 were $170,084,042 and $147,371,725,
respectively.
<PAGE>
Net realized and unrealized gains (losses) as of July 31, 1994 were
as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $ (5,210,691) $ 5,467,398
Short-term investments (4,766) --
Financial futures contracts 1,754,937 --
------------ -----------
Total $ (3,460,520) $ 5,467,398
============ ===========
As of July 31, 1994, net unrealized appreciation for Federal income
tax purposes aggregated $5,467,398, of which $6,707,012 related to
appreciated securities and $1,239,614 related to depreciated
securities. The aggregate cost of investments at July 31, 1994 for
Federal income tax purposes was $224,272,469.
4. Beneficial Interest Transactions:
Net increase in net assets derived from beneficial interest
transactions was $20,934,073 and $49,072,852 for the years ended
July 31, 1994 and July 31, 1993, respectively.
Transactions in shares of beneficial interest for Class A and Class
B Shares were as follows:
Class A Shares for the Year Dollar
Ended July 31, 1994 Shares Amount
Shares sold 1,095,757 $12,136,853
Shares issued to shareholders
in reinvestment of dividends
and distributions 120,076 1,329,884
------------ -----------
Total issued 1,215,833 13,466,737
Shares redeemed (1,011,632) (11,085,681)
------------ -----------
Net increase 204,201 $ 2,381,056
============ ===========
<PAGE>
Class A Shares for the Year Dollar
Ended July 31, 1993 Shares Amount
Shares sold 1,665,944 $18,267,413
Shares issued to shareholders
in reinvestment of dividends
and distributions 103,657 1,133,213
------------ -----------
Total issued 1,769,601 19,400,626
Shares redeemed (760,681) (8,310,908)
------------ -----------
Net increase 1,008,920 $11,089,718
============ ===========
Class B Shares for the Dollar
Year Ended July 31, 1994 Shares Amount
Shares sold 4,388,673 $49,079,880
Shares issued to shareholders
in reinvestment of dividends
and distributions 468,309 5,185,597
------------ -----------
Total issued 4,856,982 54,265,477
Shares redeemed (3,273,476) (35,712,460)
------------ -----------
Net increase 1,583,506 $18,553,017
============ ===========
Class B Shares for the Dollar
Year Ended July 31, 1993 Shares Amount
Shares sold 5,267,606 $57,919,146
Shares issued to shareholders
in reinvestment of dividends
and distributions 394,724 4,316,350
------------ -----------
Total issued 5,662,330 62,235,496
Shares redeemed (2,210,388) (24,252,362)
------------ -----------
Net increase 3,451,942 $37,983,134
============ ===========
<PAGE>
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
Merrill Lynch New Jersey Municipal Bond Fund of Merrill Lynch Multi-
State Municipal Series Trust:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Merrill Lynch
New Jersey Municipal Bond Fund of Merrill Lynch Multi-State
Municipal Series Trust as of July 31, 1994, the related statements
of operations for the year then ended and changes in net assets for
each of the years in the two-year period then ended, and the
financial highlights for the three-year period then ended and for the
period August 31, 1990 (commencement of operations) to July 31,
1991. These financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and the financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at July 31,
1994 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch New Jersey Municipal Bond Fund of Merrill Lynch Multi-
State Municipal Series Trust as of July 31, 1994, the results of its
operations, the changes in its net assets, and the financial
highlights for the respective stated periods in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
August 29, 1994
</AUDIT-REPORT>
<PAGE>
APPENDIX: GRAPHIC AND IMAGE MATERIAL.
Item 1:
Total Return Based on a $10,000 Investment--Class A Shares*
A line graph depicting the growth of an investment in the Fund's
Class A Shares compared to growth of an investment in the Lehman
Brothers Municipal Bond Index. Beginning and ending values are:
<PAGE>
8/31/90** 7/94
ML New Jersey Municipal
Bond Fund++ $ 9,600 $13,028
Lehman Brothers Municipal
Bond Index++++ $10,000 $13,915
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses including advisory fees.
**Commencement of Operations.
++ML New Jersey Municipal Bond Fund invests primarily in
long-term investment-grade obligations issued by or on behalf of
the State of New Jersey, its political subdivisions,
agencies and instrumentalities and obligations of other qulaifying issuers.
++++This unmanaged Index consists of long-term revenue bonds,
prerefunded bonds, general obligation bonds and insured bonds.
<PAGE>
Item 2:
Total Return Based on a $10,000 Investment--Class B Shares*
A line graph depicting the growth of an investment in the Fund's
Class B Shares compared to growth of an investment in the Lehman
Brothers Municipal Bond Index. Beginning and ending values are:
8/31/90** 7/94
ML New Jersey Municipal
Bond Fund++ $10,000 $13,206
Lehman Brothers Municipal
Bond Index++++ $10,000 $13,915
<PAGE>
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses including advisory fees.
**Commencement of Operations.
++ML New Jersey Municipal Bond Fund invests primarily in
long-term investment-grade obligations issued by or on behalf of
the State of New Jersey, its political subdivisions,
agencies and instrumentalities and obligations of other qualifying issuers.
++++This unmanaged Index consists of long-term revenue bonds,
prerefunded bonds, general obligation bonds and insured bonds.
