MERRILL LYNCH
NEW JERSEY
MUNICIPAL
BOND FUND
[FUND LOGO]
STRATEGIC
Performance
Semi-Annual Report
January 31, 1998
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 #11298 -- 1/98
[RECYCLE LOGO] Printed on post-consumer recycled paper
Merrill Lynch New Jersey Municipal Bond Fund January 31, 1998
TO OUR SHAREHOLDERS
The Municipal Market Environment
During the six months ended January 31, 1998, long-term bond yields
declined to recent historic lows. Prior to late October, the ongoing
positive combination of moderate economic growth and low inflation had
allowed interest rates to gradually move lower. During the last three
months, however, the decline in interest rates was driven more by the
continued turmoil in Asian equity markets than by fundamental concerns.
A significant "flight to quality" has benefited the US Treasury bond
market, particularly longer-maturity US Treasury bonds, as foreign
investors have sought safe haven in the relative stability of US
financial markets. Over the six months ended January 31, 1998, US
Treasury bond yields declined approximately 50 basis points (0.50%)
to 5.81%.
Without the ability to benefit from the tax advantage inherent in
municipal bonds, foreign investors have not participated in the
tax-exempt market. Consequently, municipal bond yields have not
declined dramatically as have taxable US Treasury securities.
Long-term municipal revenue bond yields, as measured by the Bond Buyer
Revenue Index, declined only 15 basis points to end the six-month
period ended January 31, 1998 at 5.33%. Nevertheless, tax-exempt
bond yields have not reached these levels since the mid-1970s.
The increase in new municipal bond issuance over the past six months has
also prevented the tax-exempt bond market from more closely mirroring
the yield declines exhibited by its taxable counterpart. During the last
six months, over $120 billion in new long-term municipal bonds were
underwritten, an increase of over 30% compared to the same six-month
period one year ago. As interest rates have continued to decline in
recent months, new tax-exempt bond issuance has remained strong. Over
$60 million in new long-term municipal securities were issued during the
last three months, an increase of over 20% compared to the same three-
month period ended January 31, 1997. During the past month, over $16
billion in new long-term municipal securities were underwritten,
representing an increase of over 40% compared to the January 1997 level.
In our opinion, the recent correction in world equity markets has
enhanced the near-term prospects for continued low, if not declining,
interest rates in the United States. It is likely that the recent
correction will result in slower US domestic growth in the coming
months. This decline should be generated in part by reduced US export
growth. Additionally, some decline in consumer spending can also be
expected because of reduced consumer confidence. Perhaps more
importantly, it is likely that, barring a dramatic and unexpected
resurgence in domestic growth, the Federal Reserve Board will be
unwilling to raise interest rates until the full impact of the equity
corrections can be established.
All of these factors suggest that over the near term, interest rates,
including tax-exempt bond yields, are unlikely to rise by any
appreciable amount. It is probable that municipal bond yields will
remain under some relative pressure because of continued strong new-
issue supply. However, the recent pace of municipal bond issuance is
likely to be unsustainable. Continued increases in bond issuance will
require lower and lower tax-exempt bond yields to generate the economic
savings necessary for additional municipal bond refinancings.
Preliminary estimates of 1998 total municipal bond issuance are
presently in the $195 billion -- $220 billion range. These estimates
suggest that recent supply pressures are likely to abate somewhat next
year, or at least exert only minimal technical pressure during 1998.
Additionally, municipal bond investors received approximately $23
billion in January coupon payments, bond maturities and proceeds from
early redemptions, which should serve to intensify investor demand in
the near future. With tax-exempt bond yields at already attractive yield
ratios relative to US Treasury bonds (approximately 90% at the end of
December 1997), any further pressure on the municipal market may well
represent an attractive investment opportunity.
Portfolio Strategy
We adopted a slightly defensive investment strategy going into the
second half of 1997. We believed that economic growth would resurge and
that the Federal Reserve Board would have to raise interest rates in
order to keep inflation under control. However, in late October 1997,
the Asian equity market turmoil created an increased demand for
securities in the US Treasury bond market. In response to the Asian
financial crisis and the continued low domestic inflationary
environment, we shifted Merrill Lynch New Jersey Municipal Bond Fund
toward a more aggressive strategy by early November 1997.
During the six months ended January 31, 1998, new issuance was just over
$3.4 billion in the New Jersey tax-exempt bond market. This represented
an increase of approximately 20% compared to the same period a year ago.
Additionally, the majority of new issuance in New Jersey was dominated by
current-coupon bonds, which would not enhance the Fund's overall structure.
Looking ahead, we expect to maintain the Fund's fully invested position.
We believe that interest rates will remain in a narrow trading range. We
plan to use periods of higher interest rates to structure the portfolio
more aggressively. However, an anticipated lack of new issuance in New
Jersey may curtail our ability to execute this strategy.
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,
/S/ARTHUR ZEIKEL
Arthur Zeikel
President
/S/VINCENT R. GIORDANO
Vincent R. Giordano
Senior Vice President
/S/ROBERT D. SNEEDEN
Robert D. Sneeden
Vice President and Portfolio Manager
March 3, 1998
We are pleased to announce that Robert D. Sneeden is responsible for the
day-to-day management of Merrill Lynch New Jersey Municipal Bond Fund.
Mr. Sneeden has been employed by Merrill Lynch Asset Management, L.P.
(an affiliate of the Fund's investment adviser) since 1994 as Portfolio
Manager. Prior thereto, he was vice president with Lehman Brothers from
1990 to 1994.
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill
Lynch Select PricingSM System, which offers four pricing alternatives:
[bullet] 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.
[bullet] 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.)
[bullet] 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.
[bullet] 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.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/97 +8.79% +4.44%
Five Years Ended 12/31/97 +6.41 +5.54
Inception (8/31/90)
through 12/31/97 +7.66 +7.06
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/97 +8.24% +4.24%
Five Years Ended 12/31/97 +5.85 +5.85
Inception (8/31/90)
through 12/31/97 +7.11 +7.11
* Maximum contingent deferred sales charge is 4% and is reduced
to 0% after 4 years.
** Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 12/31/97 +8.13% +7.13%
Inception (10/21/94)
through 12/31/97 +7.48 +7.48
* Maximum contingent deferred sales charge is 1% and is reduced
to 0% after 1 year.
** Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 12/31/97 +8.68% +4.33%
Inception (10/21/94)
through 12/31/97 +8.07 +6.69
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
<TABLE>
<CAPTION>
Performance Summary -- Class A Shares
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
1997 10.85 11.19 0.010 0.574 + 8.79
1/1/98 -- 1/31/98 11.19 11.24 -- 0.040 + 0.89
Total $0.068 Total $4.570
Cumulative total return as of 1/31/98: +73.34%**
* 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>
<CAPTION>
Performance Summary -- Class B Shares
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
1997 10.85 11.19 0.010 0.519 + 8.24
1/1/98 -- 1/31/98 11.19 11.24 -- 0.036 + 0.84
Total $0.068 Total $4.169
Cumulative total return as of 1/31/98: +66.95%**
* 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>
<CAPTION>
Performance Summary -- Class C Shares
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
1997 10.84 11.18 $0.010 0.507 + 8.13
1/1/98 -- 1/31/98 11.18 11.24 -- 0.035 + 0.93
Total $0.010 Total $1.666
Cumulative total return as of 1/31/98: +27.09%**
* 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>
<CAPTION>
Performance Summary -- Class D Shares
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
1997 10.85 11.19 $0.010 0.563 + 8.68
1/1/98 -- 1/31/98 11.19 11.24 -- 0.039 + 0.88
Total $0.010 Total $1.846
Cumulative total return as of 1/31/98: +29.25%**
* 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>
<CAPTION>
Recent Performance Results
12 Month 3 Month
1/31/98 10/31/97 1/31/97 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $11.24 $11.07 $10.80 +4.17%(1) +1.63%(1)
Class B Shares* 11.24 11.07 10.80 +4.17(1) +1.63(1)
Class C Shares* 11.24 11.07 10.79 +4.27(1) +1.63(1)
Class D Shares* 11.24 11.07 10.80 +4.17(1) +1.63(1)
Class A Shares -- Total Return* +9.75(2) +2.94(3)
Class B Shares -- Total Return* +9.20(4) +2.81(5)
Class C Shares -- Total Return* +9.19(6) +2.78(7)
Class D Shares -- Total Return* +9.64(8) +2.91(9)
Class A Shares -- Standardized 30-day Yield 4.05%
Class B Shares -- Standardized 30-day Yield 3.71%
Class C Shares -- Standardized 30-day Yield 3.61%
Class D Shares -- Standardized 30-day Yield 3.96%
* 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 $0.010 per share capital gains distributions.
(2) Percent change includes reinvestment of $0.573 per share ordinary income dividends and $0.010 per share capital gains
distributions.
(3) Percent change includes reinvestment of $0.143 per share ordinary income dividends and $0.010 per share capital gains
distributions.
(4) Percent change includes reinvestment of $0.518 per share ordinary income dividends and $0.010 per share capital gains
distributions.
(5) Percent change includes reinvestment of $0.129 per share ordinary income dividends and $0.010 per share capital gains
distributions.
(6) Percent change includes reinvestment of $0.506 per share ordinary income dividends and $0.010 per share capital gains
distributions.
(7) Percent change includes reinvestment of $0.126 per share ordinary income dividends and $0.010 per share capital gains
distributions.
(8) Percent change includes reinvestment of $0.562 per share ordinary income dividends and $0.010 per share capital gains
distributions.
(9) Percent change includes reinvestment of $0.140 per share ordinary income dividends and $0.010 per share capital gains
distributions.
</TABLE>
<TABLE>
<CAPTION>
Merrill Lynch New Jersey Municipal Bond Fund January 31, 1998
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <C> <C> <C> <C>
New Jersey -- 96.6%
A- NR* $1,000 Atlantic City, New Jersey, Municipal Utilities Authority, Water System Revenue
Bonds, 7.75% due 5/01/2000 (g) $1,100
AA A1 2,195 Bernards Township, New Jersey, School District Refunding Bonds (State School District
Enhancement Program), UT, 5.30% due 1/01/2018 2,240
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 6,950
AAA Aaa 4,500 Refunding, 6.80% due 3/01/2021 5,610
AAA Aaa 3,800 Essex County, New Jersey, Improvement Authority, Utility System Revenue Bonds
(Orange Franchise), UT, Series A, 5.75% due 7/01/2027 (d) 4,045
Freehold Township, New Jersey, Board of Education, GO, UT (h):
AAA Aaa 1,030 5.375% due 7/15/2018 1,054
AAA Aaa 1,145 5.375% due 7/15/2020 1,170
AAA Aaa 1,455 5.40% due 7/15/2024 1,488
AAA Aaa 1,540 5.40% due 7/15/2025 1,574
AA Aa3 3,200 Jersey City, New Jersey, School, GO, UT, 6.65% due 2/15/2002 (g) 3,559
AAA Aaa 3,250 Landis, New Jersey, Sewer Authority, Revenue Bonds, CARS, 7.37% due 9/19/2019 (b)(f) 3,847
NR* NR* 5,750 Middlesex County, New Jersey, Pollution Control Financing Authority, Revenue Refunding
Bonds (Amerada Hess), 6.875% due 12/01/2022 6,303
AAA Aaa 1,100 Middlesex County, New Jersey, Utilities Authority, Sewer Revenue Bonds, Series A,
6.50% due 3/15/2001 (f)(g) 1,200
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) 1,078
AAA Aaa 2,000 Monmouth County, New Jersey, Improvement Authority, Sewer Facilities Revenue Refunding
Bonds, 6.75% due 2/01/2001 (d)(g) 2,191
New Jersey EDA, First Mortgage Revenue Bonds (Franciscan Oaks Project):
NR* NR* 1,250 5.70% due 10/01/2017 1,259
NR* NR* 2,000 5.75% due 10/01/2023 2,019
AAA Aaa 2,500 New Jersey EDA, Lease Rental (Liberty State Park Project), 6.80% due 3/15/2002 (g) 2,803
AAA Aaa 1,000 New Jersey EDA, Package Facilities Revenue Bonds (Elizabeth Development Company
Project), 5.60% due 10/15/2026 (f) 1,054
New Jersey EDA, Revenue Bonds:
BBB- Baa2 4,000 (American Airlines Inc. Project), AMT, 7.10% due 11/01/2031 4,399
AAA Aaa 1,700 (Educational Testing Services), Series B, 6.25% due 5/15/2025 (d) 1,897
A+ NR* 2,000 Refunding (Health Village -- 1996 Project), 6% due 5/01/2016 2,155
AAA Aaa 2,500 Refunding (RJW Health Care Corporation), 6.50% due 7/01/2024 (h) 2,808
New Jersey EDA, Water Facilities Revenue Bonds:
AAA Aaa 2,500 (American Water Co., Inc.), AMT, Series B, 5.375% due 5/01/2032 (f) 2,532
A1+ VMIG1+ 1,200 Refunding (United Water of New Jersey, Inc. Project), VRDN, Series A, 3.30% due
11/01/2026 (a)(c) 1,200
New Jersey Health Care Facilities Financing Authority Revenue Bonds:
AAA Aaa 3,270 Refunding (AHS Hospital Corporation), Series A, 5.375% due 7/01/2019 (c) 3,330
A- A3 2,000 Refunding (Atlantic City Medical Center), Series C, 6.80% due 7/01/2011 2,210
A- Baa1 1,000 Refunding (Capital Health System Obligation Group), 5.25% due 7/01/2017 995
A- Baa1 1,500 Refunding (Capital Health System Obligation Group), 5.25% due 7/01/2027 1,482
BBB Baa2 4,980 Refunding (Englewood Hospital & Medical Center), 6.75% due 7/01/2024 5,493
AAA Aaa 2,000 Refunding (Hackensack Medical Center), 6.625% due 7/01/2017 (f) 2,178
AAA Aaa 7,745 Refunding (Jersey Shore Medical Center), 6.75% due 7/01/2019 (c) 8,805
BBB Baa2 4,000 Refunding (Saint Elizabeth Hospital Obligation Group), 6% due 7/01/2027 4,201
AAA Aaa 2,950 (Saint Elizabeth Hospital), Series B, 8.25% due 7/01/2000 (g) 3,297
New Jersey State Educational Facilities Authority Revenue Bonds:
AA+ Aaa 2,325 (Institute for Advanced Study), Series G, 5% due 7/01/2028 2,296
AAA Aaa 5,620 Refunding (Institute for Advanced Study), Series B, 6.35% due 7/01/2001 (g) 6,091
AA+ Aaa 2,130 Refunding (Institute for Advanced Study), Series F, 5% due 7/01/2021 2,115
AAA Aaa 1,150 (Seton Hall University Project), Series C, 6.85% due 7/01/1999 (e)(g) 1,221
AAA Aaa 500 (Seton Hall University Project), Series C, 6.85% due 7/01/2019 (e) 529
BBB+ Baa1 500 (Seton Hall University Project), Series D, 7% due 7/01/2021 540
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) 5,281
New Jersey State Housing and Mortgage Finance Agency, M/F Housing Revenue Bonds:
A+ NR* 1,095 (Montclarion Project), AMT, Series J, 7.70% due 11/01/2029 1,160
AAA NR* 7,000 Refunding (Presidential Plaza), 6.95% due 5/01/2013 (i) 7,605
AAA Aaa 14,700 New Jersey State Transportation Trust Fund Authority, RITR, Series RI-1, 7.645% due
6/15/2014 (b) 16,905
AAA Aaa 1,000 Newark, New Jersey (School Qualified Board Act), UT, 5.30% due 9/01/2015 1,029
AAA Aaa 2,120 Passaic Valley, New Jersey, Water Commission, Water Supply Revenue Bonds, Series A,
6.40% due 12/15/2002 (f)(g) 2,375
Port Authority of New York and New Jersey, Consolidated Revenue Bonds:
AA- A1 3,800 69th Series, 7.125% due 6/01/2025 4,076
AA- A1 5,250 72nd Series, 7.35% due 10/01/2002 (g) 6,021
AAA Aaa 3,300 96th Series, AMT, 6.60% due 10/01/2023 (f) 3,657
AA- A1 2,815 109th Series, 4th Installment, 5.375% due 1/15/2032 2,889
AAA A1 1,000 Rutgers State University, New Jersey, University Revenue Bonds, Series P, 6.85%
due 5/01/2001 (g) 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) 2,521
BBB NR* 1,090 South Jersey Transportation Authority, Lease Revenue Bonds (Raytheon Aircraft
Service, Inc. Project), AMT, Series A, 6.15% due 1/01/2022 1,165
AAA Aaa 2,500 Trenton, New Jersey, GO, UT, 6.55% due 8/15/2002 (d)(g) 2,801
AAA Aaa 2,185 Union County, New Jersey, Improvement Authority Revenue Bonds (Plainfield Board of
Education Project), 5.85% due 8/01/2026 (f) 2,345
University of Medicine and Dentistry, New Jersey (g):
AA- A3 1,170 Refunding, Series D, 6.50% due 12/01/2001 1,293
AA- A3 2,750 Series E, 6.50% due 12/01/2001 3,038
Puerto Rico -- 2.8%
AAA NR* 1,000 Puerto Rico Commonwealth, Highway Authority, Highway Revenue Bonds, Series Q,
7.75% due 7/01/2000 (g) 1,108
AAA NR* 2,055 Puerto Rico Commonwealth, Public Improvement Bonds, GO, 7.70% due 7/01/2000 (g) 2,275
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 1,660
Total Investments (Cost -- $166,847) -- 99.4% 180,625
Other Assets Less Liabilities -- 0.6% 1,158
--------
Net Assets -- 100.0% $181,783
========
(a) The interest rate is subject to change periodically based upon prevailing market rates. The interest rates shown are those
in effect at January 31, 1998.
(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 January 31, 1998.
(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 Services, Inc.
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
RITR Residual Interest Trust Receipts
UT Unlimited Tax
VRDN Variable Rate Demand Notes
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of January 31, 1998
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $166,847,131) (Note 1a) $180,624,718
Cash 1,215,201
Receivables:
Interest $2,370,008
Beneficial interest sold 341,849 2,711,857
----------
Prepaid registration fees and other assets (Note 1e) 13,952
------------
Total assets 184,565,728
------------
Liabilities: Payables:
Securities purchased 1,202,576
Beneficial interest redeemed 1,201,985
Dividends to shareholders (Note 1f) 144,137
Investment adviser (Note 2) 85,466
Distributor (Note 2) 59,534 2,693,698
----------
Accrued expenses and other liabilities 88,748
------------
Total liabilities 2,782,446
------------
Net Assets: Net assets $181,783,282
============
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited number of
Consist of: shares authorized $348,507
Class B Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 1,173,431
Class C Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 49,375
Class D Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 45,868
Paid-in capital in excess of par 168,919,387
Accumulated realized capital losses on investments -- net (Note 5) (2,530,873)
Unrealized appreciation on investments -- net 13,777,587
------------
Net assets $181,783,282
============
Net Asset Value: Class A -- Based on net assets of $39,172,247 and 3,485,073 shares
of beneficial interest outstanding $11.24
============
Class B -- Based on net assets of $131,905,346 and 11,734,311 shares
of beneficial interest outstanding $11.24
============
Class C -- Based on net assets of $5,548,677 and 493,752 shares
of beneficial interest outstanding $11.24
============
Class D -- Based on net assets of $5,157,012 and 458,682 shares
of beneficial interest outstanding $11.24
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Six Months Ended
January 31, 1998
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned $5,408,465
(Note 1d):
Expenses: Investment advisory fees (Note 2) $507,011
Account maintenance and distribution fees -- Class B (Note 2) 336,219
Professional fees 34,210
Transfer agent fees -- Class B (Note 2) 33,716
Accounting services (Note 2) 25,026
Printing and shareholder reports 22,608
Account maintenance and distribution fees -- Class C (Note 2) 15,220
Transfer agent fees -- Class A (Note 2) 8,231
Custodian fees 5,422
Trustees' fees and expenses 5,368
Registration fees (Note 1e) 4,153
Pricing fees 3,887
Account maintenance fees -- Class D (Note 2) 2,408
Transfer agent fees -- Class C (Note 2) 1,320
Transfer agent fees -- Class D (Note 2) 990
Other 2,827
--------
Total expenses 1,008,616
----------
Investment income -- net 4,399,849
----------
Realized & Realized gain on investments -- net 1,198,502
Unrealized Gain on Change in unrealized appreciation on investments -- net 450,397
Investments -- Net ----------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations $6,048,748
==========
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the For the
Six Months Year
Ended Ended
January 31, July 31,
Increase (Decrease) in Net Assets: 1998 1997
<S> <C> <C> <C>
Operations: Investment income -- net $4,399,849 $9,212,587
Realized gain on investments -- net 1,198,502 2,401,190
Change in unrealized appreciation on investments -- net 450,397 5,264,581
------------ ------------
Net increase in net assets resulting from operations 6,048,748 16,878,358
------------ ------------
Dividends & Investment income -- net:
Distributions Class A (1,032,427) (1,957,776)
Shareholders Class B (3,130,020) (6,816,441)
(Note 1f): Class C (115,484) (213,894)
Class D (121,918) (224,476)
Realized gain on investments -- net:
Class A (37,255) --
Class B (122,063) --
Class C (4,659) --
Class D (4,509) --
------------ ------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (4,568,335) (9,212,587)
------------ ------------
Beneficial Interest Net decrease in net assets derived from beneficial interest transaction (6,238,271) (16,583,986)
Transactions ------------ ------------
(Note 4):
Net Assets: Total decrease in net assets (4,757,858) (8,918,215)
Beginning of period 186,541,140 195,459,355
------------ ------------
End of period $181,783,282 $186,541,140
============ ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Class A
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended
Jan. 31, For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $11.15 $10.69 $10.71 $10.63 $11.23
Operating ------- ------- ------- ------- -------
Performance: Investment income -- net .29 .57 .58 .58 .58
Realized and unrealized gain (loss) on
investments -- net .10 .46 (.02) .08 (.55)
------- ------- ------- ------- -------
Total from investment operations .39 1.03 .56 .66 .03
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income -- net (.29) (.57) (.58) (.58) (.58)
Realized gain on investments -- net (.01) -- -- -- --
In excess of realized gain on
investments -- net -- -- -- -- (.05)
------- ------- ------- ------- -------
Total dividends and distributions (.30) (.57) (.58) (.58) (.63)
------- ------- ------- ------- -------
Net asset value, end of period $11.24 $11.15 $10.69 $10.71 $10.63
======= ======= ======= ======= =======
Total Investment Based on net asset value per share 3.57%++++ 9.95 5.32% 6.51% .19%
Return:** ======= ======= ======= ======= =======
Ratios to Expenses .70%* .70% .71% .74% .69%
Average ======= ======= ======= ======= =======
Net Assets: Investment income -- net 5.16%* 5.29% 5.36% 5.57% 5.28%
======= ======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $39,172 $39,343 $38,173 $39,482 $46,669
Data ======= ======= ======= ======= =======
Portfolio turnover 24.11% 54.02% 60.21% 57.17% 65.97%
======= ======= ======= ======= =======
* Annualized.
** Total investment returns exclude the effects of sales loads.
++++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
Class B
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended
Jan. 31, For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $11.15 $10.69 $10.71 $10.63 $11.23
Operating -------- -------- -------- -------- --------
Performance: Investment income -- net .26 .52 .52 .53 .53
Realized and unrealized gain (loss) on
investments -- net .10 .46 (.02) .08 (.55)
-------- -------- -------- -------- --------
Total from investment operations .36 .98 .50 .61 (.02)
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income -- net (.26) (.52) (.52) (.53) (.53)
Realized gain on investments -- net (.01) -- -- -- --
In excess of realized gain on
investments -- net -- -- -- -- (.05)
-------- -------- -------- -------- --------
Total dividends and distributions (.27) (.52) (.52) (.53) (.58)
-------- -------- -------- -------- --------
Net asset value, end of period $11.24 $11.15 $10.69 $10.71 $10.63
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 3.30%++++ 9.39% 4.77% 5.97% (.31%)
Return:** ======== ======== ======== ======== ========
Ratios to Expenses 1.21%* 1.21% 1.21% 1.25% 1.20%
Average ======== ======== ======== ======== ========
Net Assets: Investment income -- net 4.65%* 4.78% 4.85% 5.06% 4.77%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands). $131,905 $137,485 $149,455 $164,020 $178,322
Data: ======== ======== ======== ======== ========
Portfolio turnover 24.11% 54.02% 60.21% 57.17% 65.97%
======== ======== ======== ======== ========
* Annualized.
** Total investment returns exclude the effects of sales loads.
++++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
Class C
For the For the
Six Period
The following per share data and ratios have been derived Months For the Oct. 21,
from information provided in the financial statements. Ended Year Ended 1994+ to
Jan. 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $11.14 $10.69 $10.71 $10.34
Operating ------- ------- ------- -------
Performance: Investment income -- net .26 .50 .51 .40
Realized and unrealized gain (loss) on investments -- net .11 .45 (.02) .37
------- ------- ------- -------
Total from investment operations .37 .95 .49 .77
------- ------- ------- -------
Less dividends and distributions:
Investment income -- net (.26) (.50) (.51) (.40)
Realized gain on investments -- net (.01) -- -- --
------- ------- ------- -------
Total dividends and distributions (.27) (.50) (.51) (.40)
------- ------- ------- -------
Net asset value, end of period $11.24 $11.14 $10.69 $10.71
======= ======= ======= =======
Total Investment Based on net asset value per share 3.34%++++ 9.18% 4.66% 7.62%++++
Return:** ======= ======= ======= =======
Ratios to Expenses 1.31%* 1.31% 1.32% 1.39%*
Average ======= ======= ======= =======
Net Assets: Investment income -- net 4.55%* 4.68% 4.76% 4.83%*
======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $5,549 $5,088 $4,179 $1,337
Data: ======= ======= ======= =======
Portfolio turnover 24.11% 54.02% 60.21% 57.17%
======= ======= ======= =======
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (concluded)
Class D
For the For the
Six Period
The following per share data and ratios have been derived Months For the Oct. 21,
from information provided in the financial statements. Ended Year Ended 1994+ to
Jan. 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $11.15 $10.70 $10.71 $10.34
Operating ------- ------- ------- -------
Performance: Investment income -- net .28 .56 .57 .44
Realized and unrealized gain (loss) on transactions -- net .10 .45 (.01) .37
------- ------- ------- -------
Total from investment operations .38 1.01 .56 .81
------- ------- ------- -------
Less dividends and distributions:
Investment income -- net (.28) (.56) (.57) (.44)
Realized gain on investments -- net (.01) -- -- --
------- ------- ------- -------
Total dividends and distributions (.29) (.56) (.57) (.44)
------- ------- ------- -------
Net asset value, end of period $11.24 $11.15 $10.70 $10.71
======= ======= ======= =======
Total Investment Based on net asset value per share 3.52%++++ 9.73% 5.31% 8.05%++++
Return:** ======= ======= ======= =======
Ratios to Expenses .80%* .80% .80% .86%*
Average ======= ======= ======= =======
Net Assets: Investment income -- net 5.06%* 5.19% 5.27% 5.45%*
======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $5,157 $4,625 $3,652 $2,390
Data: ======= ======= ======= =======
Portfolio turnover 24.11% 54.02% 60.21% 57.17%
======= ======= ======= =======
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch New Jersey Municipal Bond Fund January 31, 1998
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. These unaudited
financial statements reflect all adjustments which are, in the opinion
of management, necessary to a fair statement of the results for the
interim period presented. All such adjustments are of a normal recurring
nature. The Fund offers four classes of shares under the Merrill Lynch
Select PricingSM System. Shares of Class A and Class D are sold with a
front-end sales charge. Shares of Class B and Class C may be subject to
a contingent deferred sales charge. All classes of shares have identical
voting, dividend, liquidation and other rights and the same terms and
conditions, except that Class B, Class C and Class D Shares bear certain
expenses related to the account maintenance of such shares, and Class B
and Class C Shares also bear certain expenses related to the distribution
of such shares. Each class has exclusive voting rights with respect to
matters relating to its account maintenance and distribution expenditures.
The following is a summary of significant accounting policies followed
by the Fund.
(a) Valuation of investments -- Municipal bonds and other portfolio
securities in which the Fund invests are traded primarily in the over-
the-counter municipal bond and money markets and are valued at the last
available bid price in the over-the-counter market or on the basis of
yield equivalents as obtained from one or more dealers that make markets
in the securities. Financial futures contracts and options thereon,
which are traded on exchanges, are valued at their settlement prices as
of the close of such exchanges. Short-term investments with remaining
maturities of sixty days or less are valued at amortized cost, which
approximates market value. Securities and assets for which market
quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of
Trustees of the Trust, including valuations furnished by a pricing
service retained by the Trust, which may utilize a matrix system for
valuations. The procedures of the pricing service and its valuations are
reviewed by the officers of the Trust under the general supervision of
the Trustees.
(b) Derivative financial instruments -- The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the counterparty
does not perform under the contract.
[bullet] 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.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee based upon the average daily value
of the Fund's net assets at the following annual rates: 0.55% of the
Fund's average daily net assets not exceeding $500 million; 0.525% of
average daily net assets in excess of $500 million but not exceeding $1
billion; and 0.50% of average daily net assets in excess of $1 billion.
Pursuant to the Distribution Plans adopted by the Fund in accordance
with Rule 12b-1 under the Investment Company Act of 1940, the Fund pays
the Distributor ongoing account maintenance and distribution fees. The
fees are accrued daily and paid monthly at annual rates based upon the
average daily net assets of the shares as follows:
Account
Maintenance Distribution
Fee Fee
Class B 0.25% 0.25%
Class C 0.25% 0.35%
Class D 0.10% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce,
Fenner & Smith 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 six months ended January 31, 1998, 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 $241 $2,838
Class D $724 $8,204
For the six months ended January 31, 1998, MLPF&S received contingent
deferred sales charges of $108,480 and $1,041 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, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for
the six months ended January 31, 1998 were $43,531,307 and $46,647,560,
respectively.
Net realized and unrealized gains (losses) as of January 31, 1998 were
as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $1,560,842 $13,777,587
Financial futures contracts (362,340) --
---------- -----------
Total $1,198,502 $13,777,587
========== ===========
As of January 31, 1998, net unrealized appreciation for Federal income
tax purposes aggregated $13,777,587, of which $13,820,939 related to
appreciated securities and $43,352 related to depreciated securities.
The aggregate cost of investments at January 31, 1998 for Federal income
tax purposes was $166,847,131.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest transactions
was $6,238,271 and $16,583,986 for the six months ended January 31, 1998
and the year ended July 31, 1997, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Six Months Dollar
Ended January 31, 1998 Shares Amount
Shares sold 199,465 $2,208,576
Shares issued to shareholders
in reinvestment of dividends
and distributions 53,440 592,831
----------- -----------
Total issued 252,905 2,801,407
Shares redeemed (297,920) (3,318,483)
----------- -----------
Net decrease (45,015) $(517,076)
=========== ===========
Class A Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
Shares sold 526,344 $5,690,235
Shares issued to shareholders
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)
=========== ===========
Class B Shares for the Six Months Dollar
Ended January 31, 1998 Shares Amount
Shares sold 729,699 $8,107,611
Shares issued to shareholders
in reinvestment of dividends
and distributions 154,177 1,709,833
----------- -----------
Total issued 883,876 9,817,444
Automatic conversion
of shares (14,086) (155,512)
Shares redeemed (1,470,252) (16,298,114)
----------- -----------
Net decrease (600,462) $(6,636,182)
=========== ===========
Class B Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
Shares sold 1,761,373 $19,014,349
Shares issued to shareholders
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 C Shares for the Six Months Dollar
Ended January 31, 1998 Shares Amount
Shares sold 127,332 $1,421,042
Shares issued to shareholders
in reinvestment of dividends
and distributions 7,831 86,868
----------- -----------
Total issued 135,163 1,507,910
Shares redeemed (98,034) (1,082,738)
----------- -----------
Net increase 37,129 $425,172
=========== ===========
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 D Shares for the Six Months Dollar
Ended January 31, 1998 Shares Amount
Shares sold 51,274 $572,550
Automatic conversion
of shares 14,085 155,512
Shares issued to shareholders
in reinvestment of dividends
and distributions 5,788 64,233
----------- -----------
Total issued 71,147 792,295
Shares redeemed (27,269) (302,480)
----------- -----------
Net increase 43,878 $489,815
=========== ===========
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
=========== ===========
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.
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
Robert D. Sneeden, Vice President
Gerald M. Richard, Treasurer
Robert E. Putney, III, Secretary
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
