MERRILL LYNCH
NEW JERSEY
MUNICIPAL
BOND FUND
FUND LOGO
Annual Report
July 31, 1997
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
Gerald M. Richard, Treasurer
Robert E. Putney III, Secretary
<PAGE>
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are
subject to change.
Merrill Lynch New Jersey
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
TO OUR SHAREHOLDERS
<PAGE>
The Municipal Market Environment
During the six months ended July 31, 1997, a number of very
favorable factors combined to push both tax-exempt and taxable bond
yields to recent historic lows. A slowing domestic economy, a
continued benign, if not improving, inflationary environment, a
declining Federal budget deficit with resultant reduced Treasury
borrowing needs, and a successful Congressional budget accord all
resulted in significant declines in fixed-income yields. By the end
of July, 30-year US Treasury bond yields had declined approximately
50 basis points (0.50%) to 6.30%, their lowest level in over a year.
Similarly, as measured by the Bond Buyer Revenue Bond Index, long-
term municipal revenue bond yields fell over 50 basis points to end
the July 31, 1997 quarter at 5.49%, their lowest level since early
1994.
The decline in tax-exempt yields in recent months was even more
impressive given that the municipal market lost much of the
technical support it enjoyed for over a year. In previous quarters,
new tax-exempt bond issuance declined, or remained stable. During
the six months ended July 31, 1997, approximately $100 billion in
new long-term municipal securities was underwritten, an increase of
over 7.5% versus the comparable period in 1996. As tax-exempt bond
yields declined, many municipal bond issuers took this opportunity
to both issue new debt as well as refinance older, higher-couponed
debt with new, lower-yielding issues. This refinancing led to a
surge in tax-exempt issuance in recent months. Over the three months
ended July 31, 1997, new long-term tax-exempt bond issuance totaled
approximately $55 billion, an increase of over 15% versus the July
31, 1996 quarter.
The decline in municipal bond yields also resulted in some reduction
in retail investor demand. In earlier episodes of rapidly declining
interest rates, individual investor demand initially fell until
investors became more acclimated to the current levels. Should
interest rates stabilize, we expect investor demand to return to
earlier levels. Also, this past June and July, municipal bond
investors received over $50 billion in assets from coupon income
payments, bond maturities, and the proceeds from early bond
redemptions. Despite the continued allure of the US equity market,
it is likely that much of these assets will be reallocated to the
municipal bond market as investors adjust to the new investment
environment.
Looking forward, given the extent of the recent bond market rally,
some retrenchment or at least a period of consolidation is likely.
However, the positive backdrop of modest economic growth and low
inflation suggests that any such adjustment is not likely to be
excessive. Despite recent increases in new bond issuance, supply for
all of 1997 is not expected to be materially different than earlier
estimates of approximately $175 billion. It is likely that the
recent increase in issuance has largely borrowed from that
originally scheduled for later this year. Additionally, any
significant increase in tax-exempt bond yields will prevent any
further bond refinancings, reducing future supply. Unless the
current positive economic fundamentals undergo immediate and
significant deterioration, any increase in municipal bond yields is
likely to be viewed as an opportunity to purchase more attractively
priced tax-exempt securities.
<PAGE>
Fiscal Year in Review
During the fiscal year ended July 31, 1997, the increased volatility
in the bond market caused us to maintain a flexible strategy. The
everchanging perception of the economy and the need for monetary
tightening by the Federal Reserve Board created large swings in
interest rates. Flexibility enabled us to take advantage of market
fluctuations and enhance the Fund's total return.
The Fund's defensive posture at the beginning of the fiscal year
protected it from the increase in bond yields through early
September 1996. At that time, we started purchasing interest rate-
sensitive bonds which helped the Fund perform well in the bond
market rally through the end of November. Our investment strategy
remained constructive based on the forecast of a continued moderate
economy for the first half of 1997. Unfortunately, this forecast did
not come to be as the economy actually surged during the first three
months of 1997. Interest rates increased bringing New Jersey tax-
exempt yields back to 5.90%. Although the economy accelerated at a
rapid pace during the first quarter of 1997, inflation remained
benign. We remained constructive on the market enabling the Fund to
fully participate in the rally that lasted through the end of July.
During the fiscal year, long-term New Jersey issuance actually
increased by over 41% versus the comparable period a year earlier.
Fortunately, investor interest in New Jersey tax-exempt bonds helped
absorb this increase in supply. Heavy New Jersey supply caused
yields to become inexpensive relative to the rest of the municipal
market, but we anticipate that this relationship will reverse in the
future.
Looking forward, we plan to maintain a neutral posture until the
economy shows signs of accelerating. We believe the economy will
reaccelerate in the second half of 1997 causing the Federal Reserve
Board to raise short-term interest rates again to control inflation.
In Conclusion
We appreciate your ongoing interest in Merrill Lynch New Jersey
Municipal Bond Fund, and we look forward to serving your investment
needs in the months and years to come.
Sincerely,
<PAGE>
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Robert A. DiMella)
Robert A. DiMella
Portfolio Manager
September 2, 1997
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. Figures shown in the "Average Annual Total
Return" tables as well as the total returns and cumulative total
returns in the "Performance Summary" tables assume reinvestment of
all dividends and capital gains distributions at net asset value on
the payable date. Investment return and principal value of shares
will fluctuate so that shares, when redeemed, may be worth more or
less than their original cost. Dividends paid to each class of
shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
7/31/97 4/30/97 7/31/96 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $11.15 $10.69 $10.69 +4.30% +4.30%
Class B Shares* 11.15 10.69 10.69 +4.30 +4.30
Class C Shares* 11.14 10.69 10.69 +4.21 +4.21
Class D Shares* 11.15 10.70 10.70 +4.21 +4.21
Class A Shares--Total Return* +9.95(1) +5.69(2)
Class B Shares--Total Return* +9.39(3) +5.55(4)
Class C Shares--Total Return* +9.18(5) +5.43(6)
Class D Shares--Total Return* +9.73(7) +5.56(8)
Class A Shares--Standardized 30-day Yield 4.42%
Class B Shares--Standardized 30-day Yield 4.10%
Class C Shares--Standardized 30-day Yield 4.00%
Class D Shares--Standardized 30-day Yield 4.32%
<PAGE>
<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 $0.569 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.143 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.515 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.129 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.503 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.127 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.559 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.140 per share ordinary
income dividends.
</TABLE>
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:
8/30/90** 7/97
ML New Jersey Municipal Bond Fund++--
Class A Shares* $ 9,600 $16,069
ML New Jersey Municipal Bond Fund++--
Class B Shares* $10,000 $16,160
Lehman Brothers Municipal Bond Index++++ $10,000 $17,641
Total Return Based on a $10,000 Investment--Class C Shares and
Class D Shares
A line graph depicting the growth of an investment in the Fund's
Class C Shares and Class D Shares compared to growth of an
investment in the Lehman Brothers Municipal Bond Index. Beginning
and ending values are:
<PAGE>
10/21/94** 7/97
ML New Jersey Municipal Bond Fund++--
Class C Shares* $10,000 $12,298
ML New Jersey Municipal Bond Fund++--
Class D Shares* $ 9,600 $11,986
Lehman Brothers Municipal Bond Index++++ $10,000 $13,054
[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.
Past performance is not predictive of future performance.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/97 +7.71% +3.41%
Five Years Ended 6/30/97 +5.98 +5.11
Inception (8/31/90)
through 6/30/97 +7.35 +6.71
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/97 +7.17% +3.17%
Five Years Ended 6/30/97 +5.44 +5.44
Inception (8/31/90)
through 6/30/97 +6.80 +6.80
<PAGE>
[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 6/30/97 +6.96% +5.96%
Inception (10/21/94)
through 6/30/97 +6.78 +6.78
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 6/30/97 +7.61% +3.30%
Inception (10/21/94)
through 6/30/97 +7.37 +5.75
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
PERFORMANCE DATA (continued)
<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
1996 11.09 10.85 -- 0.574 + 3.18
1/1/97--7/31/97 10.85 11.15 -- 0.318 + 5.97
------ ------
Total $0.058 Total $4.274
<PAGE>
Cumulative total return as of 7/31/97: +67.36%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures 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**
<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
1996 11.09 10.85 -- 0.519 + 2.66
1/1/97--7/31/97 10.85 11.15 -- 0.287 + 5.66
------ ------
Total $0.058 Total $3.901
Cumulative total return as of 7/31/97: +61.60%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures 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
1996 11.09 10.84 -- 0.508 + 2.46
1/1/97--7/31/97 10.84 11.14 -- 0.281 + 5.60
------
Total $1.405
<PAGE>
Cumulative total return as of 7/31/97: +22.98%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not reflect deduction of any sales charge; results
would be lower if sales charge was deducted.
</TABLE>
PERFORMANCE DATA (concluded)
<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
1996 11.09 10.85 -- 0.563 + 3.08
1/1/97--7/31/97 10.85 11.15 -- 0.312 + 5.91
------
Total $1.556
Cumulative total return as of 7/31/97: +24.86%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures 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.
<PAGE>
AMT Alternative Minimum Tax (subject to)
CARS Complementary Auction Rate Securities
EDA Economic Development Authority
GO General Obligation Bonds
M/F Multi-Family
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)
New Jersey--97.2%
<S> <S> <C> <S> <C>
A- NR* $ 1,000 Atlantic City, New Jersey, Municipal Utilities Authority, Water System
Revenue Bonds, 7.75% due 5/01/2000 (g) $ 1,112
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 6,886
AAA Aaa 4,500 Refunding, 6.80% due 3/01/2021 5,528
AAA Aaa 1,730 Essex County, New Jersey, Improvement Authority, Guaranteed Lease Bonds
(Sportsplex Project), UT, Series E, 5.50% due 10/01/2027 (c) 1,749
Essex County, New Jersey, Improvement Authority, Utility System Revenue
Bonds (Orange Franchise), UT, Series A (d):
AAA Aaa 1,400 5.375% due 7/01/2018 1,406
AAA Aaa 2,300 5.75% due 7/01/2027 2,398
Freehold Township, New Jersey, Board of Education, GO, UT (h):
AAA Aaa 1,030 5.375% due 7/15/2018 1,045
AAA Aaa 1,145 5.375% due 7/15/2020 1,158
AAA Aaa 1,455 5.40% due 7/15/2024 1,472
AAA Aaa 1,540 5.40% due 7/15/2025 1,557
AAA Aaa 4,000 Highland Park, New Jersey, School District Refunding Bonds, UT, 5.125% due
2/15/2025 (d) 3,933
Jersey City, New Jersey, School, GO, UT:
AA A3 3,200 6.65% due 2/15/2002 (g) 3,572
AA A3 3,080 Refunding, Series A, 6.25% due 10/01/2012 3,546
AAA Aaa 3,250 Landis, New Jersey, Sewer Authority, Revenue Refunding Bonds, CARS,
6.82% due 9/19/2019 (b)(f) 3,701
<PAGE>
NR* NR* 5,750 Middlesex County, New Jersey, Pollution Control Financing Authority, Revenue
Refunding Bonds (Amerada Hess), 6.875% due 12/01/2022 6,269
AAA Aaa 1,100 Middlesex County, New Jersey, Utilities Authority, Sewer Revenue Bonds,
Series A, 6.50% due 3/15/2001 (f)(g) 1,208
AAA Aaa 1,000 Monmouth County, New Jersey, Improvement Authority Revenue Bonds (Howell
Township Board of Education Project), UT, 5.80% due 7/15/2017 (c) 1,055
AAA Aaa 2,000 Monmouth County, New Jersey, Improvement Authority, Sewer Facilities Revenue
Refunding Bonds, 6.75% due 2/01/2001 (d)(g) 2,208
AAA Aaa 2,500 New Jersey, EDA (Lease Rental--Liberty State Park Project), 6.80% due
3/15/2002 (g) 2,813
AAA Aaa 1,000 New Jersey EDA, Package Facilities Revenue Bonds (Elizabeth Development
Company Project), 5.60% due 10/15/2026 (f) 1,035
New Jersey, EDA, Revenue Bonds:
BBB- Baa2 4,000 (American Airlines Inc. Project), AMT, 7.10% due 11/01/2031 4,364
AAA Aaa 1,700 (Education Testing Services), Series B, 6.25% due 5/15/2025 (d) 1,867
A+ NR* 2,000 Refunding (Heath Village--1996 Project), 6% due 5/01/2016 2,099
AAA Aaa 2,500 Refunding (RWJ Health Care Corporation), 6.50% due 7/01/2024 (h) 2,776
</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 Health Care Facilities Financing Authority Revenue Bonds:
A- A3 $ 2,000 Refunding (Atlantic City Medical Center), Series C, 6.80% due 7/01/2011 $ 2,180
BBB Baa2 4,980 Refunding (Englewood Hospital and Medical Center), 6.75% due 7/01/2024 5,414
AAA Aaa 2,000 Refunding (Hackensack Medical Center), 6.625% due 7/01/2017 (f) 2,190
AAA Aaa 5,000 Refunding (Holy Name Hospital), 5.25% due 7/01/2020 (c) 4,980
AAA Aaa 7,745 Refunding (Jersey Shore Medical Center), 6.75% due 7/01/2019 (c) 8,721
BBB Baa2 4,000 Refunding (Saint Elizabeth Hospital Obligation Group), 6% due 7/01/2027 4,105
AAA Aaa 2,950 (Saint Elizabeth Hospital), Series B, 8.25% due 7/01/2000 (g) 3,349
New Jersey State Educational Facilities Authority Revenue Bonds:
AA Aaa 5,620 Refunding (Institute for Advanced Study), Series B, 6.35% due 7/01/2021 6,039
AAA Aaa 1,150 (Seton Hall University Project), Series C, 6.85% due 7/01/1999 (e)(g) 1,232
AAA Aaa 850 (Seton Hall University Project), Series C, 6.85% due 7/01/2019 (e) 911
BBB+ Baa1 500 (Seton Hall University Project), Series D, 7% due 7/01/2021 534
AAA Aaa 3,750 (Trenton State College), Series A, 5.125% due 7/01/2024 (d) 3,688
<PAGE>
AAA Aaa 4,855 New Jersey State Housing and Mortgage Finance Agency, Home Buyer Revenue
Bonds, AMT, Series M, 7% due 10/01/2026 (d) 5,257
New Jersey State Housing and Mortgage Finance Agency, M/F Housing
Revenue Bonds:
A+ NR* 1,100 (Montclarion Project), AMT, Series J, 7.70% due 11/01/2029 1,173
AAA NR* 7,000 Refunding (Presidential Plaza), 6.95% due 5/01/2013 (i) 7,600
AA+ Aa1 2,000 New Jersey State, Refunding, UT, Series D, 5.90% due 2/15/2008 2,162
NR* Aaa 14,700 New Jersey State Transportation Trust Fund Authority, RITR, Series RI,
7.445% due 6/15/2014 (b)(d) 16,390
AAA Aaa 2,120 Passaic Valley, New Jersey, Water Commission, Water Supply Revenue Bonds,
Series A, 6.40% due 12/15/2002 (f)(g) 2,377
Port Authority of New York and New Jersey, Consolidated Bonds:
AA- A1 3,800 69th Series, 7.125% due 6/01/2025 4,123
AA- A1 5,250 72nd Series, 7.35% due 10/01/2002 (g) 6,063
AA- A1 2,000 78th Series, 6.50% due 4/15/2011 2,178
AAA Aaa 3,300 96th Series, AMT, 6.60% due 10/01/2023 (f) 3,646
Port Authority of New York and New Jersey, Special Obligation Revenue
Bonds (Versatile Structure Obligation), VRDN (a):
A1+ VMIG1++ 2,000 Refunding, Series 3, 3.65% due 6/01/2020 (d) 2,000
A1+ VMIG1++ 3,600 Series 2, 3.50% due 5/01/2019 3,600
A1+ VMIG1++ 2,500 Series 5, 3.55% due 8/01/2024 2,500
</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>
AA A1 $ 1,000 Rutgers State University, New Jersey, University Revenue Bonds, Series P,
6.85% due 5/01/2021 $ 1,103
AAA Aaa 2,215 South Brunswick Township, New Jersey, Board of Education Revenue Bonds,
UT, 6.40% due 8/01/2005 (f)(g) 2,505
BBB NR* 1,090 South Jersey Transportation Authority, New Jersey, Lease Revenue Bonds
(Raytheon Aircraft Service, Inc. Project), AMT, Series A, 6.15% due
1/01/2022 1,135
AAA Aaa 2,500 Trenton, New Jersey, GO, UT, 6.55% due 8/15/2009 (d) 2,791
<PAGE>
AAA Aaa 2,185 Union County, New Jersey, Improvement Authority Revenue Bonds (Plainfield
Board of Education Project), 5.85% due 8/01/2026 (f) 2,316
University of Medicine and Dentistry, New Jersey, Revenue Bonds (g):
AA- A3 1,170 Refunding, Series D, 6.50% due 12/01/2001 1,299
AA- A3 2,750 Series E, 6.50% due 12/01/2001 3,053
Puerto Rico--4.0%
A Baa1 1,000 Puerto Rico Commonwealth, GO, 5.50% due 7/01/2017 1,015
AAA NR* 1,000 Puerto Rico Commonwealth, Highway Authority, Highway Revenue Bonds,
Series Q, 7.75% due 7/01/2000 (g) 1,122
BBB+ Baa1 1,195 Puerto Rico Commonwealth, Infrastructure Special Financing Authority
Revenue Bonds, Series A, 7.75% due 7/01/2008 1,262
AAA NR* 2,055 Puerto Rico Commonwealth, Public Improvement Bonds, GO, 7.70% due
7/01/2000 (g) 2,303
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 1,658
Total Investments (Cost--$175,404)--101.2% 188,731
Liabilities in Excess of Other Assets--(1.2%) (2,190)
--------
Net Assets--100.0% $186,541
========
<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, 1997.
(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, 1997.
(c)AMBAC Insured.
(d)MBIA Insured.
(e)BIG Insured.
(f)FGIC Insured.
(g)Prerefunded.
(h)FSA Insured.
(i)FHA Insured.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche
LLP.
<PAGE>
FINANCIAL INFORMATION
</TABLE>
<TABLE>
Statement of Assets and Liabilities as of July 31, 1997
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$175,403,994) (Note 1a) $188,731,184
Cash 112,772
Receivables:
Interest $ 2,210,087
Beneficial interest sold 301,221
Securities sold 148,383 2,659,691
------------
Prepaid registration fees and other assets (Note 1e) 13,952
------------
Total assets 191,517,599
------------
Liabilities: Payables:
Securities purchased 4,051,693
Beneficial interest redeemed 450,597
Dividends to shareholders (Note 1f) 244,768
Investment adviser (Note 2) 86,235
Distributor (Note 2) 60,895 4,894,188
------------
Accrued expenses and other liabilities 82,271
------------
Total liabilities 4,976,459
------------
Net Assets: Net assets $186,541,140
============
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 353,009
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 1,233,477
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 45,662
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 41,480
Paid-in capital in excess of par 175,101,211
Accumulated realized capital losses on investments--net (Note 5) (3,560,889)
Unrealized appreciation on investments--net 13,327,190
------------
Net assets $186,541,140
============
<PAGE>
Net Asset Value: Class A--Based on net assets of $39,343,123 and 3,530,088
shares of beneficial interest outstanding $ 11.15
============
Class B--Based on net assets of $137,485,316 and 12,334,773
shares of beneficial interest outstanding $ 11.15
============
Class C--Based on net assets of $5,088,348 and 456,623
shares of beneficial interest outstanding $ 11.14
============
Class D--Based on net assets of $4,624,353 and 414,804
shares of beneficial interest outstanding $ 11.15
============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
July 31, 1997
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 11,293,637
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 1,037,450
Account maintenance and distribution fees--Class B (Note 2) 713,523
Transfer agent fees--Class B (Note 2) 68,973
Accounting services (Note 2) 66,702
Professional fees 60,766
Printing and shareholder reports 44,008
Account maintenance and distribution fees--Class C (Note 2) 27,438
Transfer agent fees--Class A (Note 2) 14,453
Custodian fees 10,293
Trustees' fees and expenses 9,760
Registration fees (Note 1e) 8,816
Pricing fees 6,809
Account maintenance fees--Class D (Note 2) 4,322
Transfer agent fees--Class C (Note 2) 2,317
Transfer agent fees--Class D (Note 2) 1,687
Other 3,733
------------
Total expenses 2,081,050
------------
Investment income--net 9,212,587
------------
<PAGE>
Realized & Realized gain on investments--net 2,401,190
Unrealized Gain on Change in unrealized appreciation on investments--net 5,264,581
Investments--Net ------------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations $ 16,878,358
============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended
July 31,
Increase (Decrease) in Net Assets: 1997 1996
<S> <S> <C> <C>
Operations: Investment income--net $ 9,212,587 $ 10,053,726
Realized gain on investments--net 2,401,190 1,002,823
Change in unrealized appreciation on investments--net 5,264,581 (1,113,252)
------------ ------------
Net increase in net assets resulting from operations 16,878,358 9,943,297
------------ ------------
Dividends to Investment income--net:
Shareholders Class A (1,957,776) (2,047,744)
(Note 1f): Class B (6,816,441) (7,720,083)
Class C (213,894) (136,121)
Class D (224,476) (149,778)
------------ ------------
Net decrease in net assets resulting from dividends to
shareholders (9,212,587) (10,053,726)
------------ ------------
Beneficial Interest Net decrease in net assets derived from beneficial interest
Transactions transactions (16,583,986) (11,660,281)
(Note 4): ------------ ------------
Net Assets: Total decrease in net assets (8,918,215) (11,770,710)
Beginning of year 195,459,355 207,230,065
------------ ------------
End of year $186,541,140 $195,459,355
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived Class A
from information provided in the financial statements.
For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 10.69 $ 10.71 $ 10.63 $ 11.23 $ 11.03
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .57 .58 .58 .58 .62
Realized and unrealized gain (loss) on
investments--net .46 (.02) .08 (.55) .24
-------- -------- -------- -------- --------
Total from investment operations 1.03 .56 .66 .03 .86
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.57) (.58) (.58) (.58) (.62)
Realized gain on investments--net -- -- -- -- (.04)
In excess of realized gain on
investments--net -- -- -- (.05) --
-------- -------- -------- -------- --------
Total dividends and distributions (.57) (.58) (.58) (.63) (.66)
-------- -------- -------- -------- --------
Net asset value, end of year $ 11.15 $ 10.69 $ 10.71 $ 10.63 $ 11.23
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 9.95% 5.32% 6.51% .19% 8.15%
Return:* ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement .70% .71% .74% .69% .71%
Average ======== ======== ======== ======== ========
Net Assets: Expenses .70% .71% .74% .69% .72%
======== ======== ======== ======== ========
Investment income--net 5.29% 5.36% 5.57% 5.28% 5.62%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $ 39,343 $ 38,173 $ 39,482 $ 46,669 $ 47,024
Data: ======== ======== ======== ======== ========
Portfolio turnover 54.02% 60.21% 57.17% 65.97% 16.28%
======== ======== ======== ======== ========
<FN>
*Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Financial Highlights (continued)
<CAPTION>
The following per share data and ratios have been derived Class B
from information provided in the financial statements.
For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 10.69 $ 10.71 $ 10.63 $ 11.23 $ 11.03
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .52 .52 .53 .53 .56
Realized and unrealized gain (loss) on
investments--net .46 (.02) .08 (.55) .24
-------- -------- -------- -------- --------
Total from investment operations .98 .50 .61 (.02) .80
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.52) (.52) (.53) (.53) (.56)
Realized gain on investments--net -- -- -- -- (.04)
In excess of realized gain on
investments--net -- -- -- (.05) --
-------- -------- -------- -------- --------
Total dividends and distributions (.52) (.52) (.53) (.58) (.60)
-------- -------- -------- -------- --------
Net asset value, end of year $ 11.15 $ 10.69 $ 10.71 $ 10.63 $ 11.23
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 9.39% 4.77% 5.97% (.31%) 7.61%
Return:* ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement 1.21% 1.21% 1.25% 1.20% 1.21%
Average ======== ======== ======== ======== ========
Net Assets: Expenses 1.21% 1.21% 1.25% 1.20% 1.22%
======== ======== ======== ======== ========
Investment income--net 4.78% 4.85% 5.06% 4.77% 5.11%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands). $137,485 $149,455 $164,020 $178,322 $170,652
Data: ======== ======== ======== ======== ========
Portfolio turnover 54.02% 60.21% 57.17% 65.97% 16.28%
======== ======== ======== ======== ========
<FN>
*Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class C Class D
For the For the
Period Period
The following per share data and ratios have been derived For the Oct. 21, For the Oct. 21,
from information provided in the financial statements. Year Ended 1994++ to Year Ended 1994++ to
July 31, July 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.69 $ 10.71 $ 10.34 $ 10.70 $ 10.71 $ 10.34
Operating -------- -------- -------- -------- -------- --------
Performance: Investment income--net .50 .51 .40 .56 .57 .44
Realized and unrealized gain (loss)
on investments--net .45 (.02) .37 .45 (.01) .37
-------- -------- -------- -------- -------- --------
Total from investment operations .95 .49 .77 1.01 .56 .81
-------- -------- -------- -------- -------- --------
Less dividends from investment
income--net (.50) (.51) (.40) (.56) (.57) (.44)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 11.14 $ 10.69 $ 10.71 $ 11.15 $ 10.70 $ 10.71
======== ======== ======== ======== ======== ========
Total Investment Based on net asset value per share 9.18% 4.66% 7.62%+++ 9.73% 5.31% 8.05%+++
Return:** ======== ======== ======== ======== ======== ========
Ratios to Expenses 1.31% 1.32% 1.39%* .80% .80% .86%*
Average ======== ======== ======== ======== ======== ========
Net Assets: Investment income--net 4.68% 4.76% 4.83%* 5.19% 5.27% 5.45%*
======== ======== ======== ======== ======== ========
Supplemental Net assets, end of period
Data: (in thousands) $ 5,088 $ 4,179 $ 1,337 $ 4,625 $ 3,652 $ 2,390
======== ======== ======== ======== ======== ========
Portfolio turnover 54.02% 60.21% 57.17% 54.02% 60.21% 57.17%
======== ======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
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.
(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.
<PAGE>
* 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) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(f) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates.
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.
<PAGE>
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee based upon the average daily
value of the Fund's net assets at the following annual rates: 0.55%
of the Fund's average daily net assets not exceeding $500 million;
0.525% of average daily net assets in excess of $500 million but not
exceeding $1 billion; and 0.50% of average daily net assets in
excess of $1 billion.
Pursuant to the distribution plans (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% --
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, 1997, 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 $302 $ 3,269
Class D $999 $11,027
For the year ended July 31, 1997, MLPF&S received contingent
deferred sales charges of $237,949 and $7,471 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.
<PAGE>
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended July 31, 1997 were $98,030,213 and $107,057,797,
respectively.
Net realized and unrealized gains (losses) as of July 31, 1997 were
as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $ 3,114,681 $ 13,327,190
Financial futures contracts (713,491) --
----------- ------------
Total $ 2,401,190 $ 13,327,190
=========== ============
As of July 31, 1997, net unrealized appreciation for Federal income
tax purposes aggregated $13,327,190, all of which was related to
appreciated securities. The aggregate cost of investments at July
31, 1997 for Federal income tax purposes was $175,403,994.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest
transactions was $16,583,986 and $11,660,281 for the years ended
July 31, 1997 and July 31, 1996, respectively.
NOTES TO FINANCIAL STATEMENTS (concluded)
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
Shares sold 526,344 $ 5,690,235
Shares issued to share-
holders in reinvestment of
dividends 88,609 956,809
------------ ------------
Total issued 614,953 6,647,044
Shares redeemed (654,764) (7,060,967)
------------ ------------
Net decrease (39,811) $ (413,923)
============ ============
<PAGE>
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 B Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
Shares sold 1,761,373 $ 19,014,349
Shares issued to share-
holders in reinvestment of
dividends 328,245 3,543,243
------------ ------------
Total issued 2,089,618 22,557,592
Automatic conversion of
shares (54,762) (591,748)
Shares redeemed (3,675,342) (39,652,155)
------------ ------------
Net decrease (1,640,486) $(17,686,311)
============ ============
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
Automatic conversion of
shares (42,313) (450,828)
Shares redeemed (3,488,182) (37,742,338)
------------ ------------
Net decrease (1,340,212) $(14,506,726)
============ ============
<PAGE>
Class C Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
Shares sold 239,355 $ 2,581,711
Shares issued to shareholders
in reinvestment of dividends 13,237 142,942
------------ ------------
Total issued 252,592 2,724,653
Shares redeemed (186,786) (2,015,866)
------------ ------------
Net increase 65,806 $ 708,787
============ ============
Class C Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 328,308 $ 3,577,687
Shares issued to shareholders
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
============ ============
Class D Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
Shares sold 148,901 $ 1,617,551
Automatic conversion of
shares 54,762 591,748
Shares issued to shareholders
in reinvestment of dividends 10,026 108,271
------------ ------------
Total issued 213,689 2,317,570
Shares redeemed (140,344) (1,510,109)
------------ ------------
Net increase 73,345 $ 807,461
============ ============
Class D Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
<PAGE>
Shares sold 148,809 $ 1,613,998
Automatic conversion of
shares 42,313 450,828
Shares issued to shareholders
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
============ ============
5. Capital Loss Carryforward:
At July 31, 1997, the Fund had a net capital loss carryforward of
approximately $521,000, 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, 1997, 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, 1997 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.
<PAGE>
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, 1997, 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, 1997
</AUDIT-REPORT>
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, 1997 qualify as tax-exempt interest dividends for
Federal income tax purposes.
Additionally, there were no capital gains distributions made by the
Fund during the year.
Please retain this information for your records.
