MERRILL LYNCH
NEW JERSEY
MUNICIPAL
BOND FUND
FUND LOGO
Annual Report
July 31, 1996
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.
<PAGE>
Merrill Lynch New Jersey
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011
TO OUR SHAREHOLDERS
The Municipal Market Environment
Municipal bond yields rose dramatically during the six-month period
ended July 31, 1996. Investors became increasingly alarmed that
earlier forecasts of continued moderate growth were overly
optimistic. As indications of stronger growth were released,
particularly the strong employment reports released beginning in
March, fears of associated inflationary pressures mounted and yields
rose in response. By May and June, long-term municipal bond yields
rose into the 6.25%--6.30% range.
However, in early July the combination of the Federal Reserve Board
suggesting that growth was expected to slow later in 1996 and a
temporary stock market correction allowed municipal bond yields to
fall as investors scrambled to purchase relatively scarce
securities. As measured by the Bond Buyer Revenue Bond Index, long-
term, A-rated uninsured tax-exempt bonds yielded 6.02% at July 31,
1996, an increase of over 30 basis points (0.30%) in the last six
months. Long-term US Treasury bond yields rose significantly over
the same period. By July 31, 1996, yields on US Treasury bonds
increased almost 100 basis points to end the six-month period at
6.97%.
The municipal bond market's recent outperformance as compared to its
taxable counterpart was largely the result of two principal factors.
First, much of the concern in the tax-exempt market regarding the
potential loss of the inherent tax-advantage of the municipal bonds
dissipated. For much of 1995, various tax proposals, such as the
flat tax or national sales tax, were put forward either to reduce
the national debt or reform the current tax system. Most of these
proposals would have severely limited the tax advantages enjoyed by
the municipal bond market. However, in February 1996, the Kemp
Commission released its findings regarding various tax reform
proposals. While noting that numerous changes should be made, no
mention of curtailing or stopping municipal bonds' current favored
tax status was made.
<PAGE>
The second major factor leading to the municipal bond market's
recent outperformance was the return of a more favorable technical
environment. The rate of increase in new bond issuance recently
slowed. Over the last 12 months, approximately $175 billion in long-
term municipal securities were issued, an increase of over 27% as
compared to the same period a year earlier. Much of this increase
was the result of issuers seeking to refinance their existing higher-
couponed debt as interest rates declined in 1995 and early 1996. As
interest rates rose, these financings became increasingly
economically impractical and issuance declined. Over the last six
months, less than $70 billion in long-term tax-exempt securities
were underwritten, an increase of 20% versus the comparable period a
year earlier. Only $43 billion in tax-exempt securities were issued
in the last three months, a total essentially unchanged from the
comparable quarter in 1995. In July 1996, less than $10 billion in
long-term municipal bonds were issued, representing the lowest
issuance for the month of July since 1990.
At the same time investor demand remained consistently strong. With
nominal new-issue yields above 6%, retail investor interest was
steady. Additionally, investors received over $50 billion this June
and July in assets derived from coupon income, bond maturities and
proceeds from early redemptions. Annual new bond issuance has
declined in recent years and is expected to remain below levels seen
in the early 1990s. Consequently, as the higher-coupon bonds issued
in the early-to-mid 1980s were redeemed at their first optional call
dates, the total number of outstanding tax-exempt bonds has
declined. This combination of a declining net supply and significant
amounts of assets helped maintain investor demand in recent months.
It is unlikely that the municipal bond market will continue to
significantly outperform US Treasury securities in the near future.
The tax-exempt bond market's recent performance led to the yield
ratio between long-term taxable and tax-exempt securities falling
from in excess of 90% to approximately 85%. While historically still
very attractive, some institutional investors, particularly short-
term traders, began to view the tax-exempt bond market's recent
outperformance as an opportunity to sell a relatively expensive
asset. However, to the long-term investor, such a sale would
represent the loss of an attractively priced asset which may not be
easily replaced given the relative scarcity of municipal bonds under
present supply conditions.
Looking ahead, no clear consensus for the direction of interest
rates currently exists. Perhaps, the primary focus going forward
will be the extent to which the increase in interest rates seen thus
far in 1996 will negatively impact future economic growth. Should
growth slow in the interest rate-sensitive sectors of the economy,
like housing, auto, and consumer spending, as many economists assert
is likely, then bond yields are likely to decline. Under such a
scenario, the municipal bond market's performance is likely to
closely mirror that of the US Treasury bond market.
<PAGE>
Fiscal Year in Review
During the year ended July 31, 1996, the municipal bond market was
extremely volatile. As measured by the Bond Buyer Revenue Bond
Index, long-term tax-exempt bond yields ranged from a high of 6.44%
on August 17, 1995 to a low of 5.63% on January 4, 1996. At fiscal
year-end July 31, 1996, the Index was near the middle of the range
for the period, yielding 6.10%. After peaking in mid-August 1995,
long-term interest rates rallied significantly during the balance of
1995 as economic growth slowed to a trickle while inflationary
pressures, as measured by the consumer price index, bottomed in
December at 2.5%. This combination of slow growth and low inflation
prompted the Federal Reserve Board to ease monetary policy by
lowering the Federal Funds target rate 0.25% at both its December
1995 and January 1996 meetings. Ironically, the January monetary
policy move coincided with the trough in long-term interest rates as
economic growth rebounded sharply during the first half of 1996,
pushing interest rates higher.
Merrill Lynch New Jersey Municipal Bond Fund entered the fiscal year
in a neutral posture, and we maintained that strategy through
September 1995. By remaining fully invested, the Fund was able to
provide attractive dividends while seeking to limit interest rate
risk. By September we had become more constructive on the interest
rate environment and began to extend the duration of the portfolio
by purchasing securities which would seek to enhance total returns
to our shareholders in a period of declining interest rates.
The Fund participated in the strong bond market rally through
January of this year. However, strong job growth led an economic
revival from February through July, which forced a major change in
investor psychology. We shifted the portfolio to a defensive posture
to help protect the Fund's net asset values as yields on long-term
municipal bonds surged approximately 0.75% between January and mid-
June. Since peaking in June, interest rates have declined somewhat
as the economy showed early signs of cooling. We shifted the Fund to
a more neutral posture once again.
Looking ahead, we will maintain the Fund's neutral position until
there appears to be a clearer path for interest rates. We expect
this strategy to provide shareholders with attractive yields while
offering decreased sensitivity to changes in long-term interest
rates.
In Conclusion
We appreciate your ongoing interest in Merrill Lynch New Jersey
Municipal Bond Fund, and we look forward to assisting you with your
financial needs in the months and years to come.
Sincerely,
<PAGE>
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(William M. Petty)
William M. Petty
Vice President and Portfolio Manager
August 30, 1996
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:
*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.
<PAGE>
*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.)
*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.
*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. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. Dividends paid to each class
of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
7/31/96 4/30/96 7/31/95 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $10.69 $10.62 $10.71 -0.19% +0.66%
Class B Shares* 10.69 10.62 10.71 -0.19 +0.66
Class C Shares* 10.69 10.62 10.71 -0.19 +0.66
Class D Shares* 10.70 10.63 10.71 -0.09 +0.66
Class A Shares--Total Return* +5.32(1) +2.04(2)
Class B Shares--Total Return* +4.77(3) +1.91(4)
Class C Shares--Total Return* +4.66(5) +1.89(6)
Class D Shares--Total Return* +5.31(7) +2.02(8)
Class A Shares--Standardized 30-day Yield 4.86%
Class B Shares--Standardized 30-day Yield 4.56%
Class C Shares--Standardized 30-day Yield 4.46%
Class D Shares--Standardized 30-day Yield 4.76%
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
(1)Percent change includes reinvestment of $0.576 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.144 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.522 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.131 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.510 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.128 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.566 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.141 per share ordinary
income dividends.
</TABLE>
<PAGE>
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment--Class A Shares and Class B Shares
A line graph depicting the growth of an investment in the Fund's
Class A Shares and Class B Shares compared to growth of an
investment in the Lehman Brothers Municipal Bond Index. Beginning
and ending values are:
8/31/90** 7/96
ML New Jersey Municipal Bond Fund++--
Class A Shares* $ 9,600 $14,614
ML New Jersey Municipal Bond Fund++--
Class B Shares* $10,000 $14,773
Lehman Brothers Municipal Bond Index++++ $10,000 $16,001
Total Return Based on a $10,000 Investment--Class C Shares and Class D Shares
A line graph depicting the growth of investment in the Fund's Class
B Shares and Class D Shares compared to growth of an investment in
the Lehman Brothers Municipal Bond Index. Beginning and ending
values are:
10/21/94** 7/96
ML New Jersey Municipal Bond Fund++--
Class C Shares* $10,000 $11,264
ML New Jersey Municipal Bond Fund++--
Class D Shares* $ 9,600 $10,924
Lehman Brothers Municipal Bond Index++++ $10,000 $11,840
[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,
prefunded bonds, general obligation bonds and insured bonds.
Past Performance is not predictive of future performance.
<PAGE>
PERFORMANCE DATA (continued)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/96 +4.87% +0.67%
Five Years Ended 6/30/96 +6.79 +5.92
Inception (8/31/90)
through 6/30/96 +7.28 +6.53
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/96 +4.33% +0.36%
Five Years Ended 6/30/96 +6.23 +6.23
Inception (8/31/90)
through 6/30/96 +6.74 +6.74
[FN]
*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 6/30/96 +4.22% +3.23%
Inception (10/21/94)
through 6/30/96 +6.67 +6.67
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 6/30/96 +4.76% +0.57%
Inception (10/21/94)
through 6/30/96 +7.22 +4.66
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <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 + 8.73
1993 10.78 11.39 0.015 0.635 +11.94
1994 11.39 10.15 -- 0.579 - 5.86
1995 10.15 11.09 -- 0.579 +15.32
1/1/96--7/31/96 11.09 10.69 -- 0.322 - 0.55
------ ------
Total $0.058 Total $3.704
Cumulative total return as of 7/31/96: +52.22%**
<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>
<PAGE>
PERFORMANCE DATA (concluded)
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <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 + 8.28
1993 10.79 11.39 0.015 0.579 +11.27
1994 11.39 10.15 -- 0.526 - 6.33
1995 10.15 11.09 -- 0.525 +14.73
1/1/96--7/31/96 11.09 10.69 -- 0.292 - 0.84
------ ------
Total $0.058 Total $3.387
Cumulative total return as of 7/31/96: +47.73%**
<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>
<TABLE>
Performance Summary--Class C Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $10.34 $10.15 -- $0.103 - 0.83%
1995 10.15 11.09 -- 0.513 +14.61
1/1/96--7/31/96 11.09 10.69 -- 0.286 - 0.90
------
Total $0.902
Cumulative total return as of 7/31/96: +12.64%**
<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>
Performance Summary--Class D Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $10.34 $10.15 -- $0.113 - 0.72%
1995 10.15 11.09 -- 0.568 +15.20
1/1/96--7/31/96 11.09 10.70 -- 0.316 - 0.51
------
Total $0.997
Cumulative total return as of 7/31/96: +13.78%**
<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>
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)
CARS Complementary Auction Rate Securities
EDA Economic Development Authority
GO General Obligation Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RITR Residual Interest Trust Receipts
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<PAGE>
New Jersey--89.7%
<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)(j) $ 1,123
NR* Aaa 2,000 Bergen County, New Jersey, GO, UT, 5.05% due 6/15/2003 2,041
Cape May County, New Jersey, Industrial Pollution Control Financing Authority
Revenue Bonds (Atlantic City Electric Company Project), Series A (d):
AAA Aaa 6,000 AMT, 7.20% due 11/01/2029 6,758
AAA Aaa 4,500 Refunding, 6.80% due 3/01/2021 5,183
AA A 3,200 Jersey City, New Jersey, School GO, UT, 6.65% due 2/15/2017 3,474
AAA Aaa 3,250 Landis, New Jersey, Sewer Authority Revenue Bonds, CARS, 7.32% due 9/19/2019
(b)(f) 3,165
NR* NR* 5,750 Middlesex County, New Jersey, Pollution Control Financing Authority, Revenue
Refunding Bonds (Amerada Hess), 6.875% due 12/01/2022 5,971
AAA Aaa 1,100 Middlesex County, New Jersey, Utilities Authority, Sewer Revenue Bonds,
Series A, 6.50% due 3/15/2001 (f)(g) 1,205
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
BB+ Baa2 2,000 New Jersey, EDA, Economic Development Revenue Bonds (American Airlines Inc.
Project), AMT, 7.10% due 11/01/2031 2,105
A+ NR* 3,200 New Jersey, EDA, Economic Development Revenue Refunding Bonds
(Health Village 1996 Project), 6% due 5/01/2016 3,238
A A1 4,500 New Jersey, EDA, Lease Rental Revenue Bonds (Liberty State Park Project),
6.80% due 3/15/2002 (g) 5,015
A1 VMIG1++ 2,600 New Jersey, EDA, Natural Gas Facilities Revenue Bonds (NUI Corp. Project),
VRDN, Series A, 3.35% due 6/01/2026 (a)(c) 2,600
AAA Aaa 2,500 New Jersey, EDA, Revenue Refunding Bonds (RWJ Health Care Corporation),
6.50% due 7/01/2024 (h) 2,630
AAA Aaa 4,500 New Jersey, EDA, Water Facilities Revenue Bonds (NJ American Water Co., Inc.
Project), AMT, 5.95% due 11/01/2029 (f) 4,503
New Jersey Health Care Facilities Financing Authority Revenue Bonds:
A- A 2,000 Refunding (Atlantic City Medical Center), Series C, 6.80% due 7/01/2011 2,118
AAA Aaa 3,685 Refunding (Berkeley Heights Convalescent Center), 5% due 7/01/2026 (c) 3,240
BBB Baa 4,980 Refunding (Englewood Hospital & Medical Center), 6.75% due 7/01/2024 5,052
AAA Aaa 2,000 Refunding (Hackensack Medical Center), 6.625% due 7/01/2017 (f) 2,149
AAA Aaa 7,745 Refunding (Jersey Shore Medical Center), 6.75% due 7/01/2019 (c) 8,470
BBB- Baa 2,950 (Saint Elizabeth Hospital), Series B, 8.25% due 7/01/2020 3,221
</TABLE>
<PAGE>
<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>
A1+ VMIG1++ $ 1,200 New Jersey Sports and Exposition Authority Revenue Bonds (State Contract),
VRDN, Series C, 3.30% due 9/01/2024 (a)(d) $ 1,200
New Jersey State Educational Facilities Authority Revenue Bonds:
AAA Aaa 2,000 (Seton Hall University Project), Series C, 6.85% due 7/01/2019 (e) 2,135
BBB Baa1 500 (Seton Hall University Project), Series D, 7% due 7/01/2021 523
AAA Aaa 7,485 (Trenton State College), Series A, 5.10% due 7/01/2021 (d) 6,882
New Jersey State, GO:
AAA Aa1 2,000 6.50% due 9/15/2001 (g) 2,180
AA+ Aa1 11,000 Refunding, UT, Series E, 5% due 7/15/2004 11,108
AAA Aaa 5,000 New Jersey State Housing and Mortgage Finance Agency, Home Buyer Revenue
Bonds, AMT, Series M, 7% due 10/01/2026 (d) 5,219
A+ NR* 1,110 New Jersey State Housing and Mortgage Finance Agency, M/F Housing Revenue
Bonds (Mont Clarion Project), AMT, Series J, 7.70% due 11/01/2029 1,188
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) 10,989
A1 VMIG1++ 14,700 New Jersey State Transportation Trust Fund Authority, RITR, Series 1,
7.54% due 6/15/2014 (b) 14,957
AAA VMIG1++ 6,500 New Jersey State Turnpike Authority, Revenue Refunding Bonds, VRDN, Series D,
3.35% due 1/01/2018 (a)(f) 6,500
AAA Aaa 2,120 Passaic Valley, New Jersey, Water Commission Water Supply Revenue Bonds,
Series A, 6.40% due 12/15/2002 (f)(g) 2,347
Port Authority of New York and New Jersey, Consolidated Bonds:
AA- A1 6,800 69th Series, 7.125% due 6/01/2025 7,359
AA- A1 5,250 72nd Series, 7.35% due 10/01/2002 (g) 6,026
AA- A1 2,000 78th Series, 6.50% due 4/15/2011 2,120
AA- A1 2,000 83rd Series, 6.375% due 10/15/2017 2,078
AAA Aaa 3,300 96th Series, AMT, 6.60% due 10/01/2023 (f) 3,512
A1+ VMIG1++ 100 Port Authority of New York and New Jersey, Versatile Structure Special
Obligation Revenue Bonds, VRDN, Series 2, 3.35% due 5/01/2019 (a) 100
AA A1 1,000 Rutgers State University, New Jersey, University Revenue Bonds, Series P,
6.85% due 5/01/2021 1,092
<PAGE>
South Brunswick Township, New Jersey, Board of Education Revenue Bonds, UT (f):
AAA Aaa 1,215 6.40% due 8/01/2015 1,281
AAA Aaa 1,000 6.40% due 8/01/2016 1,054
AAA Aaa 2,500 Trenton, New Jersey, GO, UT, 6.55% due 8/15/2009 (d) 2,718
A1+ P1 2,000 Union County, New Jersey, Industrial Pollution Control Financing Authority,
PCR, Refunding (Exxon Project), VRDN, 3.20% due 7/01/2033 (a) 2,000
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
New Jersey (concluded)
<S> <S> <C> <S> <C>
University of Medicine and Dentistry, New Jersey, Revenue Bonds (g):
AA A $ 1,170 Refunding, Series D, 6.50% due 12/01/2001 $ 1,291
AA A 2,750 Series E, 6.50% due 12/01/2001 3,035
AAA Aaa 3,805 West New York, New Jersey, Municipal Utilities Authority, Sewer Revenue
Refunding Bonds, 5.601%** due 12/15/2019 (f) 989
Puerto Rico--9.5%
AAA Baa1 2,760 Puerto Rico Commonwealth, Aqueduct and Sewer Authority Revenue Bonds,
Series A, 7.875% due 7/01/1998 (g) 3,009
A Baa1 7,000 Puerto Rico Commonwealth, Highway and Transportation Authority, Highway
Revenue Bonds, Series Y, 5.50% due 7/01/2026 6,553
AAA NR* 1,000 Puerto Rico Commonwealth, Highway Authority, Highway Revenue Bonds, Series Q,
7.75% due 7/01/2000 (g) 1,137
BBB+ Baa1 1,195 Puerto Rico Commonwealth, Infrastructure Special Financing Authority Revenue
Bonds, Series A, 7.75% due 7/01/2008 1,288
AAA NR* 2,055 Puerto Rico Commonwealth, Public Improvement Bonds, GO, 7.70% due 7/01/2000 (g) 2,332
A- Baa1 2,250 Puerto Rico Electric Power Authority, Power Revenue Refunding Bonds, Series S,
7% due 7/01/2006 2,576
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 1,641
Total Investments (Cost--$185,770)--99.2% 193,886
<PAGE>
Variation Margin on Financial Futures Contracts++++--(0.1%) (133)
Other Assets Less Liabilities--0.9% 1,706
--------
Net Assets--100.0% $195,459
========
<FN>
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at July 31, 1996.
(b)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 July 31, 1996.
(c)AMBAC Insured.
(d)MBIA Insured.
(e)BIG Insured.
(f)FGIC Insured.
(g)Prerefunded.
(h)FSA Insured.
(i)FHA Collateralized.
(j)All or portion of security held as collateral in connection with
open financial futures contracts.
*Not Rated.
**Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of purchase by the Fund.
++Highest short-term rating by Moody's Investors Service, Inc.
++++Financial futures contracts sold as of July 31, 1996 were as
follows (in thousands):
Number of Expiration Value
Contracts Issue Date (Notes 1a & 1b)
194 US Treasury Bonds September 1996 $21,170
Total Financial Futures Contracts
Sold (Total Contract Price--$21,116) $21,170
=======
Ratings of issues shown have not been audited by Deloitte & Touche
LLP.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL INFORMATION
<CAPTION>
Statement of Assets and Liabilities as of July 31, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$185,770,228) (Note 1a) $193,886,369
Cash 1,344,128
Receivables:
Interest $ 2,249,444
Beneficial interest sold 214,534 2,463,978
------------
Prepaid expenses and other assets (Note 1e) 17,062
------------
Total assets 197,711,537
------------
Liabilities: Payables:
Securities purchased 1,202,677
Beneficial interest redeemed 405,766
Dividends to shareholders (Note 1f) 243,657
Variation margin (Note 1b) 133,375
Investment adviser (Note 2) 90,220
Distributor (Note 2) 65,300 2,140,995
------------
Accrued expenses and other liabilities 111,187
------------
Total liabilities 2,252,182
------------
Net Assets: Net assets $195,459,355
============
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited
Consist of: number of shares authorized $ 356,990
Class B Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 1,397,526
Class C Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 39,082
Class D Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 34,146
Paid-in capital in excess of par 191,531,081
Accumulated realized capital losses on investments--net (Note 5) (5,962,079)
Unrealized appreciation on investments--net 8,062,609
------------
Net assets $195,459,355
============
Net Asset Value: Class A--Based on net assets of $38,173,092 and 3,569,899 shares
of beneficial interest outstanding $ 10.69
<PAGE> ============
Class B--Based on net assets of $149,455,401 and 13,975,259 shares
of beneficial interest outstanding $ 10.69
============
Class C--Based on net assets of $4,178,527 and 390,817 shares
of beneficial interest outstanding $ 10.69
============
Class D--Based on net assets of $3,652,335 and 341,459 shares
of beneficial interest outstanding $ 10.70
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL INFORMATION (continued)
<CAPTION>
Statement of Operations
For the Year Ended
July 31, 1996
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 12,315,675
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 1,114,474
Account maintenance and distribution fees--Class B (Note 2) 794,100
Transfer agent fees--Class B (Note 2) 78,121
Professional fees 69,898
Accounting services (Note 2) 63,833
Printing and shareholder reports 58,819
Account maintenance and distribution fees--Class C (Note 2) 17,096
Transfer agent fees--Class A (Note 2) 15,210
Custodian fees 11,338
Trustees' fees and expenses 10,174
Registration fees (Note 1e) 8,775
Pricing fees 8,400
Account maintenance fees--Class D (Note 2) 2,836
Transfer agent fees--Class C (Note 2) 1,495
Amortization of organization expenses (Note 1e) 1,286
Transfer agent fees--Class D (Note 2) 1,129
Other 4,965
------------
Total expenses 2,261,949
------------
Investment income--net 10,053,726
------------
Realized & Realized gain on investments--net 1,002,823
Unrealized Gain Change in unrealized appreciation on investments--net (1,113,252)
(Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 9,943,297
(Notes 1b, 1d & 3): ============
<FN>
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL INFORMATION (continued)
<CAPTION>
Statements of Changes in Net Assets
For the Year Ended July 31,
Increase (Decrease) in Net Assets: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 10,053,726 $ 10,826,491
Realized gain (loss) on investments--net 1,002,823 (2,749,284)
Change in unrealized appreciation on investments--net (1,113,252) 3,708,463
------------ ------------
Net increase in net assets resulting from operations 9,943,297 11,785,670
------------ ------------
Dividends to Investment income--net:
Shareholders Class A (2,047,744) (2,302,263)
(Note 1f): Class B (7,720,083) (8,428,820)
Class C (136,121) (23,237)
Class D (149,778) (72,171)
------------ ------------
Net decrease in net assets resulting from dividends to shareholders (10,053,726) (10,826,491)
------------ ------------
Beneficial Net decrease in net assets derived from beneficial interest
Interest transactions (11,660,281) (18,720,933)
Transactions ------------ ------------
(Note 4):
Net Assets: Total decrease in net assets (11,770,710) (17,761,754)
Beginning of year 207,230,065 224,991,819
------------ ------------
End of year $195,459,355 $207,230,065
============ ============
</TABLE>
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class A
For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 10.71 $ 10.63 $ 11.23 $ 11.03 $ 10.37
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .58 .58 .58 .62 .66
Realized and unrealized gain (loss) on
investments--net (.02) .08 (.55) .24 .70
-------- -------- -------- -------- --------
Total from investment operations .56 .66 .03 .86 1.36
<PAGE> -------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.58) (.58) (.58) (.62) (.66)
Realized gain on investments--net -- -- -- (.04) (.04)
In excess of realized gain on
investments--net -- -- (.05) -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.58) (.58) (.63) (.66) (.70)
-------- -------- -------- -------- --------
Net asset value, end of year $ 10.69 $ 10.71 $ 10.63 $ 11.23 $ 11.03
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 5.32% 6.51% .19% 8.15% 13.57%
Return:* ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement .71% .74% .69% .71% .60%
Average ======== ======== ======== ======== ========
Net Assets: Expenses .71% .74% .69% .72% .77%
======== ======== ======== ======== ========
Investment income--net 5.36% 5.57% 5.28% 5.62% 6.15%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 38,173 $ 39,482 $ 46,669 $ 47,024 $ 35,042
Data: ======== ======== ======== ======== ========
Portfolio turnover 60.21% 57.17% 65.97% 16.28% 29.58%
======== ======== ======== ======== ========
<FN>
*Total investment returns exclude the effect of sales loads.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class B
For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 10.71 $ 10.63 $ 11.23 $ 11.03 $ 10.37
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .52 .53 .53 .56 .61
Realized and unrealized gain (loss) on
investments--net (.02) .08 (.55) .24 .70
-------- -------- -------- -------- --------
Total from investment operations .50 .61 (.02) .80 1.31
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.52) (.53) (.53) (.56) (.61)
Realized gain on investments--net -- -- -- (.04) (.04)
In excess of realized gain on
investments--net -- -- (.05) -- --
======== ======== ======== ======== ========
Total dividends and distributions (.52) (.53) (.58) (.60) (.65)
======== ======== ======== ======== ========
Net asset value, end of year $ 10.69 $ 10.71 $ 10.63 $ 11.23 $ 11.03
======== ======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share 4.77% 5.97% (.31%) 7.61% 13.10%
Return:* ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement 1.21% 1.25% 1.20% 1.21% 1.10%
Average ======== ======== ======== ======== ========
Net Assets: Expenses 1.21% 1.25% 1.20% 1.22% 1.28%
======== ======== ======== ======== ========
Investment income--net 4.85% 5.06% 4.77% 5.11% 5.67%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands). $149,455 $164,020 $178,322 $170,652 $129,475
Data: ======== ======== ======== ======== ========
Portfolio turnover 60.21% 57.17% 65.97% 16.28% 29.58%
======== ======== ======== ======== ========
<FN>
*Total investment returns exclude the effect of sales loads.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class C Class D
For the For the
For the Period For the Period
The following per share data and ratios have been derived Year Oct. 21, Year Oct. 21,
from information provided in the financial statements. Ended 1994++ to Ended 1994++ to
July 31, July 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1996 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.71 $ 10.34 $ 10.71 $ 10.34
Operating -------- -------- -------- --------
Performance: Investment income--net .51 .40 .57 .44
Realized and unrealized gain (loss) on investments--net (.02) .37 (.01) .37
-------- -------- -------- --------
Total from investment operations .49 .77 .56 .81
-------- -------- -------- --------
Less dividends from investment income--net (.51) (.40) (.57) (.44)
-------- -------- -------- --------
Net asset value, end of period $ 10.69 $ 10.71 $ 10.70 $ 10.71
======== ======== ======== ========
Total Investment Based on net asset value per share 4.66% 7.62%+++ 5.31% 8.05%+++
Return:** ======== ======== ======== ========
Ratios to Average Expenses 1.32% 1.39%* .80% .86%*
Net Assets: ======== ======== ======== ========
Investment income--net 4.76% 4.83%* 5.27% 5.45%*
======== ======== ======== ========
<PAGE>
Supplemental Net assets, end of period (in thousands) $ 4,179 $ 1,337 $ 3,652 $ 2,390
Data: ======== ======== ======== ========
Portfolio turnover 60.21% 57.17% 60.21% 57.17%
======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
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
four classes of shares under the Merrill Lynch Select Pricing SM
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.
<PAGE>
(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.
* 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 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) 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.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
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, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee based upon the average daily
value of the Fund's net assets at the following annual rates: 0.55%
of the Fund's average daily net assets not exceeding $500 million;
0.525% of average daily net assets in excess of $500 million but not
exceeding $1 billion; and 0.50% of average daily net assets in
excess of $1 billion. 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 FAM during any fiscal year which will cause such expenses
to exceed expense limitations at the time of payment.
Pursuant to the distribution plans (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 Distribution
Maintenance Fee Fee
Class B 0.25% 0.25%
Class C 0.25% 0.35%
Class D 0.10% --
<PAGE>
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the year ended July 31, 1996, MLFD earned underwriting discounts
and MLPF&S earned dealer concessions on sales of the Fund's Class A
and Class D Shares as follows:
MLFD MLPF&S
Class A $912 $10,810
Class D $832 $ 8,349
For the year ended July 31, 1996, MLPF&S received contingent
deferred sales charges of $309,886 and $2,854 relating to
transactions in Class B and Class C Shares, respectively.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), 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, MLPF&S, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended July 31, 1996 were $117,329,038 and $151,276,992,
respectively.
Net realized and unrealized gains (losses) as of the year ended July
31, 1996 were as follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
Long-term investments $ 1,835,543 $ 8,116,141
Financial futures contracts (832,720) (53,532)
------------ ------------
Total $ 1,002,823 $ 8,062,609
============ ============
<PAGE>
As of July 31, 1996, net unrealized appreciation for Federal income
tax purposes aggregated $8,102,044, of which $9,560,180 related to
appreciated securities and $1,458,136 related to depreciated
securities. The aggregate cost of investments at July 31, 1996 for
Federal income tax purposes was $185,784,325.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest
transactions was $11,660,281 and $18,720,933 for the years ended
July 31, 1996 and July 31, 1995, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 364,984 $ 3,916,668
Shares issued to share-
holders in reinvestment of
dividends 90,119 973,226
------------ ------------
Total issued 455,103 4,889,894
Shares redeemed (572,401) (6,216,536)
------------ ------------
Net decrease (117,298) $ (1,326,642)
============ ============
Class A Shares for the Year Dollar
Ended July 31, 1995 Shares Amount
Shares sold 285,352 $ 2,994,554
Shares issued to share-
holders in reinvestment of
dividends 107,747 1,124,074
------------ ------------
Total issued 393,099 4,118,628
Shares redeemed (1,096,857) (11,448,312)
------------ ------------
Net decrease (703,758) $ (7,329,684)
============ ============
<PAGE>
Class B Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 1,810,139 $ 19,580,526
Shares issued to share-
holders in reinvestment of
dividends 380,144 4,105,914
------------ ------------
Total issued 2,190,283 23,686,440
Shares redeemed (3,488,182) (37,742,338)
Automatic conversion of
shares (42,313) (450,828)
------------ ------------
Net decrease (1,340,212) $(14,506,726)
============ ============
Class B Shares for the
Year Ended Dollar
July 31, 1995 Shares Amount
Shares sold 2,388,253 $ 24,978,371
Shares issued to share-
holders in reinvestment of
dividends 432,890 4,516,904
------------ ------------
Total issued 2,821,143 29,495,275
Shares redeemed (4,280,646) (44,462,443)
Automatic conversion of
shares (534) (5,764)
------------ ------------
Net decrease (1,460,037) $(14,972,932)
============ ============
Class C Shares for the
Year Ended Dollar
July 31, 1996 Shares Amount
Shares sold 328,308 $ 3,577,687
Shares issued to share-
holders in reinvestment of
dividends 7,789 83,871
------------ ------------
Total issued 336,097 3,661,558
Shares redeemed (70,149) (764,576)
------------ ------------
Net increase 265,948 $ 2,896,982
============ ============
<PAGE>
Class C Shares for the Period Dollar
Oct. 21, 1994++ to July 31, 1995 Shares Amount
Shares sold 133,835 $ 1,406,245
Shares issued to share-
holders in reinvestment of
dividends 1,527 16,223
------------ ------------
Total issued 135,362 1,422,468
Shares redeemed (10,493) (112,724)
------------ ------------
Net increase 124,869 $ 1,309,744
============ ============
[FN]
++Commencement of Operations.
Class D Shares for the
Year Ended Dollar
July 31, 1996 Shares Amount
Shares sold 148,809 $ 1,613,998
Automatic conversion of
shares 42,313 450,828
Shares issued to share-
holders in reinvestment of
dividends 5,398 58,224
------------ ------------
Total issued 196,520 2,123,050
Shares redeemed (78,221) (846,945)
------------ ------------
Net increase 118,299 $ 1,276,105
============ ============
NOTES TO FINANCIAL STATEMENTS (concluded)
Class D Shares for the Period Dollar
Oct. 21, 1994++ to July 31, 1995 Shares Amount
Shares sold 254,777 $ 2,604,492
Automatic conversion of
shares 534 5,764
Shares issued to share-
holders in reinvestment of
dividends 1,732 18,389
------------ ------------
Total issued 257,043 2,628,645
Shares redeemed (33,883) (356,706)
------------ ------------
Net increase 223,160 $ 2,271,939
============ ============
[FN]
++Commencement of Operations.
<PAGE>
5. Capital Loss Carryforward:
At July 31, 1996, the Fund had a net capital loss carryforward of
approximately $3,382,000, all of which expires in 2003. This amount
will be available to offset like amounts of any future taxable
gains.
<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, 1996, the related statements
of operations for the year then ended and changes in net assets for
each of the years in the two-year period then ended, and the
financial highlights for each of the years in the five-year period
then ended. These financial statements and the financial highlights
are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at July
31, 1996 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, 1996, 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
September 5, 1996
</AUDIT-REPORT>
<PAGE>
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid monthly by
Merrill Lynch New Jersey Municipal Bond Fund during its taxable year
ended July 31, 1996 qualify as tax-exempt interest dividends for
Federal income tax purposes.
Additionally, there were no capital gains distributed during the
year.
Please retain this information for your records.
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Vincent R. Giordano, Senior Vice President
Donald C. Burke, Vice President
Kenneth A. Jacob, Vice President
William M. Petty, Vice President
Gerald M. Richard, Treasurer
Jerry Weiss, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, Massachusetts 02101
<PAGE>
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
