MERRILL LYNCH
NEW JERSEY
MUNICIPAL
BOND FUND
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
July 31, 1999
<PAGE>
Merrill Lynch New Jersey Municipal Bond Fund July 31, 1999
TO OUR SHAREHOLDERS
The Municipal Market Environment
During the six months ended July 31, 1999, long-term bond yields rose
significantly. Steady US economic growth combined with improvement in foreign
economies, most notably Japan and Brazil, as well as an inflation scare in early
May put upward pressure on bond yields throughout the period. Continued strong
US employment growth, particularly the decline in the US unemployment rate to
4.2% in early June, was among the reasons the Federal Reserve Board cited for
raising short-term interest rates in late June. US Treasury bond yields reacted
by climbing above 6.15% by late June before improving somewhat to 6.10% by July
31, 1999. During the six-month period ended July 31, 1999, yields on long-term
US Treasury bonds increased approximately 100 basis points (1.00%).
Long-term tax-exempt bond yields also rose during the last six months. Until
early May, the municipal bond market had been able to withstand much of the
upward pressure on bond yields. However, investor concerns regarding ongoing US
economic strength and the fear of additional moves by the Federal Reserve Board
eventually pushed municipal bond yields higher throughout June and July. The
yields on long-term tax-exempt revenue bonds rose almost 50 basis points to
5.65%, as measured by the Bond Buyer Revenue Bond Index.
The ability of the tax-exempt bond market to withstand much of the recent upward
pressure on long-term fixed-income bond yields has been a reflection of the
continued strong technical position the municipal bond market has enjoyed in
recent quarters. During the last six months, more than $120 billion in long-term
municipal bonds was underwritten, a decrease of more than 20% compared to the
same period a year ago. During the past three months, more than $60 billion in
municipal bonds was underwritten. This quarterly issuance represents a decline
of nearly 25% compared to the same three-month period in 1998.
Recently, the municipal supply position deteriorated even further. Total
issuance in July 1999 of $16.5 billion was more than 30% lower than July 1998
levels. Additionally, in June and July, investors received more than $40 billion
in coupon income and proceeds from bond maturities and early bond redemptions.
These proceeds have generated significant retail investor interest, easily
absorbing the recent diminished supply. This very favorable supply/demand
position allowed the tax-exempt bond market to outperform its taxable
counterpart in recent months.
However, the recent relative outperformance of the municipal bond market has
somewhat reduced the very attractive tax-exempt bond yield ratios that were
available at the end of 1998. In December 1998, long-term, uninsured municipal
bond yields were higher than those of their taxable counterparts. Historically,
long-term tax-exempt bond yields have been approximately 82% - 85% of long-term
US Treasury bond yields. Municipal bond yields rose at a lower rate in recent
months than US Treasury bond yields, causing the yield ratio to decline. At July
31, 1999, long-term municipal bond yields were approximately 92% of their
taxable counterparts. Current ratios, while lower than those available at the
end of 1998, still represent historically attractive levels. We expect the
municipal bond market to maintain its strong technical position for the
remainder of 1999. Consequently, there appears to be little reason for the
tax-exempt bond market to underperform the taxable US Treasury bond market. This
suggests that the present bond yield ratio is likely to be stable in the coming
months and a return to a ratio in excess of 100% of taxable Treasury securities
is improbable.
Looking ahead, it appears to us that long-term municipal bond yields will trade
in a relatively tight range near current levels. Strong US economic performance
is being balanced by nearly negligible inflation data, as well as improvements
in productivity in both manufacturing and service industries. We believe that
future moves by the Federal Reserve Board have largely been discounted by bond
markets and are to a great extent reflected in present bond yields.
Any improvement in bond prices is likely to be contingent upon weakening in both
US employment growth and consumer spending. The 100 basis point rise in US
Treasury bond yields seen thus far this year is likely to negatively affect US
economic growth. The US housing market will be among the first sectors likely to
be affected, as some declines have already been evidenced because of higher
mortgage rates.
1
<PAGE>
Merrill Lynch New Jersey Municipal Bond Fund July 31, 1999
We believe it is also unrealistic to expect double-digit returns in US equity
markets to continue indefinitely. Much of the US consumer's wealth is tied to
recent stock market appreciation. Any slowing in these incredible growth rates
is likely to reduce consumer spending. We believe that these factors suggest
that the worst of the recent increase in bond yields has passed and stable, if
not slightly improving, bond prices may be expected.
Fiscal Year in Review
At the start of the fiscal year ended July 31, 1999, the US economy was strong
and inflation was low. We opted to maintain a fully invested position going into
the second half of the year and sought to maintain a high level of tax-exempt
income. We believed that in the absence of any material inflationary pressures
and given the enhanced productivity of US companies, any increases in US
economic strength would not result in significant increases in interest rates.
However, the Federal Reserve Board raised interest rates in May. Modest
improvements in foreign economies also played a factor in the Federal Reserve
Board's decision to raise short-term interest rates, which pushed long-term
interest rates higher as well. We remained fully invested, believing that the
recent spike in bond yields would be temporary. Unfortunately, concerns lingered
that the Federal Reserve Board would continue to tighten monetary policy, which
occurred after the close of the period at the end of August. These concerns
pushed long-term bond yields higher and faster than we expected, negatively
affecting Fund performance for the latter half of the fiscal year. For the 12
months ended July 31, 1999, the Fund achieved slightly below-average total
returns, as compared to similar New Jersey tax-exempt bond funds as measured by
Lipper Analytical Services.
Fortunately, while structuring for a benign interest rate environment the Fund
was heavily weighted with bonds that would enhance the Fund's tax-exempt income.
This strategy resulted in yields that were above the average of similar New
Jersey tax-exempt bond funds.
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/ Terry K. Glenn
Terry K. Glenn
President
/s/ Vincent R. Giordano
Vincent R. Giordano
Senior Vice President
/s/ Roberto Roffo
Roberto Roffo
Vice President and Portfolio Manager
September 13, 1999
2
<PAGE>
Merrill Lynch New Jersey Municipal Bond Fund July 31, 1999
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill
Lynch Select Pricing(SM) System, which offers four pricing alternatives:
o Class A Shares incur a maximum initial sales charge (front-end load) of 4%
and bear no ongoing distribution or account maintenance fees. Class A
Shares are available only to eligible investors.
o Class B Shares are subject to a maximum contingent deferred sales charge
of 4% if redeemed during the first year, decreasing 1% each year
thereafter to 0% after the fourth year. In addition, Class B Shares are
subject to a distribution fee of 0.25% and an account maintenance fee of
0.25%. These shares automatically convert to Class D Shares after
approximately 10 years. (There is no initial sales charge for automatic
share conversions.)
o Class C Shares are subject to a distribution fee of 0.35% and an account
maintenance fee of 0.25%. In addition, Class C Shares are subject to a 1%
contingent deferred sales charge if redeemed within one year of purchase.
o Class D Shares incur a maximum initial sales charge of 4% and an account
maintenance fee of 0.10% (but no distribution fee).
None of the past results shown should be considered a representation of
future performance. Figures shown in the "Recent Performance Results" and
"Average Annual Total Return" tables assume reinvestment of all dividends
and capital gains 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.
Recent Performance Results*
<TABLE>
<CAPTION>
Standardized
12 Month 3 Month Since Inception 30-Day Yield
Total Return Total Return Total Return As of 7/31/99
==================================================================================================================
<S> <C> <C> <C> <C>
ML New Jersey Municipal Bond Fund Class A Shares +1.50% -2.60% +79.24% 4.45%
- ------------------------------------------------------------------------------------------------------------------
ML New Jersey Municipal Bond Fund Class B Shares +0.99 -2.72 +71.33 4.13
- ------------------------------------------------------------------------------------------------------------------
ML New Jersey Municipal Bond Fund Class C Shares +0.89 -2.74 +30.24 4.03
- ------------------------------------------------------------------------------------------------------------------
ML New Jersey Municipal Bond Fund Class D Shares +1.31 -2.71 +33.45 4.36
==================================================================================================================
</TABLE>
* Investment results shown do not reflect sales charges; results would be
lower if a sales charge was included. Total investment returns are based
on changes in net asset values for the periods shown, and assume
reinvestment of all dividends and capital gains distributions at net asset
value on the payable date. The Fund's since inception dates are from
8/31/90 for Class A & Class B Shares and from 10/21/94 for Class C & Class
D Shares.
3
<PAGE>
Merrill Lynch New Jersey Municipal Bond Fund July 31, 1999
PERFORMANCE DATA (concluded)
Total Return Based on a $10,000 Investment
ML New Jersey Municipal Bond Fund's Class A and Class B Shares--Total Return
Based on a $10,000 Investment
[A line graph depicting the growth of an investment in the Portfolio's Class A
Shares and Class B Shares compared to growth of an investment in the Lehman
Brothers Municipal Bond Index. Beginning and ending values are:]
8/31/90** 7/99
ML New Jersey
Municipal Bond Fund+ --
Class A Shares* $9,600 $17,208
ML New Jersey
Municipal Bond Fund+ --
Class B Shares* $10,000 $17,133
Lehman Brothers Municipal
Bond Index++ $10,000 $19,237
ML New Jersey Municipal Bond Fund's Class C and Class D Shares--Total Return
Based on a $10,000 Investment
[A line graph depicting the growth of an investment in the Portfolio's Class C
and Class D Shares compared to growth of an investment in the Lehman Brothers
Municipal Bond Index. Beginning and ending values are:]
10/21/94** 7/99
ML New Jersey
Municipal Bond Fund+ --
Class C Shares* $10,000 $13,024
ML New Jersey
Municipal Bond Fund+ --
Class D Shares* $9,600 $12,811
Lehman Brothers Municipal
Bond Index++ $10,000 $14,235
* 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. The starting date for
the Index in the Class C & Class D Shares' graph is from 10/31/94. 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 6/30/99 +1.47% -2.59%
- --------------------------------------------------------------------------------
Five Years Ended 6/30/99 +6.04 +5.18
- --------------------------------------------------------------------------------
Inception (8/31/90)
through 6/30/99 +6.80 +6.31
- --------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
Year Ended 6/30/99 +0.96% -2.83%
- --------------------------------------------------------------------------------
Five Years Ended 6/30/99 +5.52 +5.52
- --------------------------------------------------------------------------------
Inception (8/31/90)
through 6/30/99 +6.27 +6.27
- --------------------------------------------------------------------------------
* 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 6/30/99 +0.86% -0.08%
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 6/30/99 +5.76 +5.76
- --------------------------------------------------------------------------------
* 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 6/30/99 +1.28% -2.77%
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 6/30/99 +6.30 +5.38
- --------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
4
<PAGE>
Merrill Lynch New Jersey Municipal Bond Fund July 31, 1999
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
- ------------------------------------------------------------------------------------------------------------------------------------
New Jersey -- 92.0%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AAA Aaa $ 6,000 Cape May County, New Jersey, Industrial Pollution Control Financing Authority Revenue
Bonds (Atlantic City Electric Company Project), AMT, Series A, 7.20% due 11/01/2029 (e) $ 6,701
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 4,500 Cape May County, New Jersey, Industrial Pollution Control Financing Authority,
Revenue Refunding Bonds (Atlantic City Electric Company Project), Series A,
6.80% due 3/01/2021 (e)(i) 5,349
- ------------------------------------------------------------------------------------------------------------------------------------
East Orange, New Jersey, Board of Education, COP (d)**:
AAA Aaa 1,845 5.206% due 2/01/2020 601
AAA Aaa 2,500 5.34% due 8/01/2020 792
AAA Aaa 2,845 5.216% due 8/01/2021 848
AAA Aaa 1,400 5.235% due 8/01/2023 373
AAA Aaa 2,850 5.38% due 2/01/2028 586
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 645 Edison Township, New Jersey, Board of Education, COP, 4.75% due 12/15/2018 (d) 594
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,685 Essex County, New Jersey, Improvement Authority, Revenue Bonds (Riverbank Park Project),
4.625% due 9/01/2018 (e) 1,536
- ------------------------------------------------------------------------------------------------------------------------------------
Essex County, New Jersey, Improvement Authority, Revenue Refunding Bonds, Senior Citizen
Housing (Jewish Federation Project) (c):
AAA NR* 625 5.05% due 6/01/2019 612
AAA NR* 1,225 5.10% due 6/01/2029 1,194
- ------------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 2,500 Essex County, New Jersey, Utilities Authority, Solid Waste Revenue Refunding Bonds, Series A,
4.875% due 4/01/2018 (d) 2,347
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 3,250 Landis, New Jersey, Sewer Authority, Sewer Revenue Refunding Bonds, CARS,
7.67% due 9/19/2019 (b)(g) 3,518
- ------------------------------------------------------------------------------------------------------------------------------------
AA+ Aaa 1,000 Middlesex County, New Jersey, Improvement Authority, Revenue Refunding Bonds
(Educational Services Commission Projects), 4.875% due 9/15/2019 937
- ------------------------------------------------------------------------------------------------------------------------------------
AAA NR* 1,000 Monmouth County, New Jersey, Improvement Authority Revenue Bonds (Howell Township
Board of Education Project), 5.80% due 7/15/2017 (a) 1,044
- ------------------------------------------------------------------------------------------------------------------------------------
A+ NR* 2,000 New Jersey EDA, Economic Development Revenue Refunding Bonds (Heath Village -- 1996
Project), 6% due 5/01/2016 2,093
- ------------------------------------------------------------------------------------------------------------------------------------
A1+ VMIG1+ 1,500 New Jersey EDA, Natural Gas Facilities Revenue Bonds (NUI Corporation Project),
VRDN, AMT, Series A, 3.30% due 6/01/2026 (a)(h) 1,500
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,700 New Jersey EDA, Revenue Bonds (Educational Testing Service), Series B,
6.25% due 5/15/2005 (e)(f) 1,881
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PORTFOLIO ABBREVIATIONS
To simplify the listings of Merrill Lynch New Jersey Municipal Bond Fund's
portfolio holdings in the Schedule of Investments, we have abbreviated the names
of many of the securities according to the list at right.
AMT Alternative Minimum Tax (subject to)
CARS Complementary Auction Rate Securities
COP Certificates of Participation
EDA Economic Development Authority
GO General Obligation Bonds
RITR Residual Interest Trust Receipts
VRDN Variable Rate Demand Notes
5
<PAGE>
Merrill Lynch New Jersey Municipal Bond Fund July 31, 1999
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
- ------------------------------------------------------------------------------------------------------------------------------------
New Jersey (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AAA Aaa $ 2,500 New Jersey EDA, Revenue Refunding Bonds (RWJ Health Care Corporation),
6.50% due 7/01/2024 (d) $ 2,715
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 5,500 New Jersey EDA, Water Facilities Revenue Bonds (American Water Company Inc.),
AMT, Series A, 5.25% due 7/01/2038 (b) 5,271
- ------------------------------------------------------------------------------------------------------------------------------------
New Jersey Environmental Infrastructure Trust Revenue Bonds:
AAA Aaa 3,425 Series A, 4.50% due 9/01/2018 3,053
AAA Aaa 940 (Wastewater Treatment Project), 5% due 9/01/2014 922
- ------------------------------------------------------------------------------------------------------------------------------------
New Jersey Health Care Facilities Financing Authority, Revenue Refunding Bonds:
NR* Aaa 1,000 (Bayonne Hospital Obligation Group), 4.75% due 7/01/2027 (d) 895
AAA Aaa 10,650 (Centrastate Medical Center Obligation Group), 4.50% due 7/01/2028 (a) 8,995
BBB Baa2 4,980 (Englewood Hospital and Medical Center), 6.75% due 7/01/2024 5,338
AAA Aaa 9,570 (Meridan Health System Obligation Group), 5.375% due 7/01/2024 (d) 9,421
AAA Aaa 4,875 (Meridan Health System Obligation Group), 5.25% due 7/01/2029 (d) 4,704
AAA Aaa 6,500 (Saint Barnabas Health), Series B, 5.25% due 7/01/2014 (e) 6,493
BBB Baa2 4,000 (Saint Elizabeth Hospital Obligation Group), 6% due 7/01/2027 4,006
AAA Aaa 1,600 (Virtua Health Issue), 4.50% due 7/01/2028 (d) 1,355
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 New Jersey Sports and Exposition Authority, Convention Center Luxury Tax Revenue
Refunding Bonds, 5.125% due 9/01/2012 (e) 3,003
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,875 New Jersey State Educational Facilities Authority Revenue Bonds (William Paterson
University), Series D, 5.125% due 7/01/2019 (a) 2,827
- ------------------------------------------------------------------------------------------------------------------------------------
New Jersey State Educational Facilities Authority, Revenue Refunding Bonds:
AA+ Aaa 230 (Institute of Advanced Study), Series F, 5% due 7/01/2021 220
AAA Aaa 1,000 (Seton Hall University Project), 5% due 7/01/2018 (a) 970
- ------------------------------------------------------------------------------------------------------------------------------------
AA+ Aa1 5,620 New Jersey State, GO, 4.50% due 2/01/2016 5,101
- ------------------------------------------------------------------------------------------------------------------------------------
AAA NR* 1,890 New Jersey State Higher Education Assistance Authority, Student Loan Revenue Bonds, AMT,
Series A, 5% due 6/01/2011 (e) 1,855
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 3,495 New Jersey State Housing and Mortgage Finance Agency Revenue Bonds, Home Buyer, AMT,
Series M, 7% due 10/01/2026 (e) 3,764
- ------------------------------------------------------------------------------------------------------------------------------------
New Jersey State Transportation Trust Fund Authority Revenue Bonds,
Transportation System, Series A:
AA- Aa2 3,800 5% due 6/15/2017 3,673
AA- Aa2 3,000 5.75% due 6/15/2018 3,149
AAA Aaa 2,500 4.50% due 6/15/2019 (d) 2,219
AA- Aa2 3,000 5.75% due 6/15/2020 3,140
- ------------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 14,700 New Jersey State Transportation Trust Fund Authority, Revenue Refunding Bonds, RITR,
Series RI, 8.095% due 6/15/2014 (e)(g) 15,943
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,215 South Brunswick Township, New Jersey, Board of Education, GO, 6.40% due 8/01/2005 (b)(f) 1,339
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,190 South Jersey Port Corporation, New Jersey, Revenue Refunding Bonds (Marine Terminal),
Series J, 5% due 1/01/2020 (e) 2,095
- ------------------------------------------------------------------------------------------------------------------------------------
BBB NR* 1,040 South Jersey Transportation Authority, New Jersey, Lease Revenue Bonds (Raytheon Aircraft
Service, Inc. Project), AMT, 6.15% due 1/01/2022 1,061
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 3,705 South Jersey Transportation Authority, New Jersey, Transportation System Revenue Refunding
Bonds, 5% due 11/01/2018 (a) 3,580
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
Merrill Lynch New Jersey Municipal Bond Fund July 31, 1999
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
- ------------------------------------------------------------------------------------------------------------------------------------
New Jersey (concluded)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Stafford Township, New Jersey, GO, Refunding (b):
NR* Aaa $ 1,010 4.80% due 2/01/2021 $ 934
NR* Aaa 1,070 4.80% due 2/01/2023 985
NR* Aaa 1,097 4.80% due 2/01/2024 1,007
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,540 Toms River, New Jersey, School District, GO, Refunding (Regional Schools),
5% due 7/15/2022 (b) 2,426
- ------------------------------------------------------------------------------------------------------------------------------------
AAA NR* 2,185 Union County, New Jersey, Improvement Authority Revenue Bonds (Plainfield Board of
Education Project), 5.85% due 8/01/2007 (b)(f) 2,375
- ------------------------------------------------------------------------------------------------------------------------------------
Union County, New Jersey, Utilities Authority, Revenue Refunding Bonds:
AA+ Aaa 500 (County Deficiency), Series C-2, 5% due 6/15/2028 472
AAA Aaa 1,000 (Ogden Martin System of Union), Senior Lease, AMT, Series A, 5% due 6/01/2015 (a) 959
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,140 Wall Township, New Jersey, School District, GO, 4.50% due 7/15/2017 (d) 1,923
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
New York -- 8.9%
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,300 Port Authority of New York and New Jersey, Consolidated Revenue Bonds, 116th Series,
4.25% due 10/01/2026 (b) 1,880
- ------------------------------------------------------------------------------------------------------------------------------------
Port Authority of New York and New Jersey, Consolidated Revenue Refunding Bonds:
AA- A1 3,250 72nd Series, 7.35% due 10/01/2027 3,582
AAA Aaa 3,300 AMT, 96th Series, 6.60% due 10/01/2023 (b) 3,574
- ------------------------------------------------------------------------------------------------------------------------------------
Port Authority of New York and New Jersey, Special Obligation Revenue Refunding Bonds
(Versatile Structure Obligation), VRDN (h):
NR* VMIG1+ 4,150 AMT, Series 6, 3.30% due 12/01/2017 4,150
A1+ VMIG1+ 1,350 Series 2, 3.20% due 5/01/2019 1,350
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania -- 1.5%
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,500 Delaware River Port Authority of Pennsylvania and New Jersey Revenue Bonds (Port District
Project), Series B, 5% due 1/01/2026 (e)2,374
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost -- $167,563) -- 102.4% 167,604
Variation Margin on Financial Futures Contracts*** -- 0.0% 48
Liabilities in Excess of Other Assets -- (2.4%) (3,897)
--------
Net Assets -- 100.0% $163,755
========
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) AMBAC Insured.
(b) FGIC Insured.
(c) FHA Insured.
(d) FSA Insured.
(e) MBIA Insured.
(f) Prerefunded.
(g) 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, 1999.
(h) 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,
1999.
(i) All or a portion of security held as collateral in connection with open
financial futures contracts.
* Not Rated.
** Represents a zero coupon bond; the interest rate shown is the effective
yield at the time of purchase by the Fund.
*** Financial futures contracts sold as of July 31, 1999 were as follows:
--------------------------------------------------------------------------
(in Thousands)
--------------------------------------------------------------------------
Number of Expiration Value
Contracts Issue Date (Notes 1a & 1b)
--------------------------------------------------------------------------
140 US Treasury Bonds September 1999 $16,095
--------------------------------------------------------------------------
Total Financial Futures Contracts Sold
(Total Contract Price -- $16,358) $16,095
=======
--------------------------------------------------------------------------
+ Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
7
<PAGE>
Merrill Lynch New Jersey Municipal Bond Fund July 31, 1999
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of July 31, 1999
<TABLE>
<S> <C> <C>
Assets: Investments, at value (identified cost -- $167,563,150)
(Note 1a) ................................................... $167,603,663
Cash ........................................................ 205,468
Receivables:
Interest .................................................. $ 1,845,126
Beneficial interest sold .................................. 854,954
Variation margin (Note 1b) ................................ 48,125 2,748,205
------------
Prepaid registration fees and other assets (Note 1e) ........ 12,325
------------
Total assets ................................................ 170,569,661
------------
- --------------------------------------------------------------------------------------------------------------
Liabilities: Payables:
Securities purchased ...................................... 6,263,932
Beneficial interest redeemed .............................. 143,099
Dividends to shareholders (Note 1f) ....................... 116,172
Investment adviser (Note 2) ............................... 79,381
Distributor (Note 2) ...................................... 56,417 6,659,001
------------
Accrued expenses and other liabilities ...................... 155,894
------------
Total liabilities ........................................... 6,814,895
------------
- --------------------------------------------------------------------------------------------------------------
Net Assets: Net assets .................................................. $163,754,766
============
- --------------------------------------------------------------------------------------------------------------
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized ....................... $ 287,588
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized ....................... 1,074,349
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized ....................... 90,467
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized ....................... 92,616
Paid-in capital in excess of par ............................ 161,256,207
Undistributed realized capital gains on investments -- net .. 650,526
Unrealized appreciation on investments -- net ............... 303,013
------------
Net assets .................................................. $163,754,766
============
- --------------------------------------------------------------------------------------------------------------
Net Asset Value: Class A -- Based on net assets of $30,479,825 and 2,875,879
shares of beneficial interest outstanding ................... $ 10.60
============
Class B -- Based on net assets of $113,869,145 and 10,743,491
shares of beneficial interest outstanding ................... $ 10.60
============
Class C -- Based on net assets of $9,585,338 and 904,668
shares of beneficial interest outstanding ................... $ 10.60
============
Class D -- Based on net assets of $9,820,458 and 926,159
shares of beneficial interest outstanding ................... $ 10.60
============
- --------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
Merrill Lynch New Jersey Municipal Bond Fund July 31, 1999
FINANCIAL INFORMATION (continued)
Statement of Operations
<TABLE>
<CAPTION>
For the Year Ended
July 31, 1999
- -----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned .... $ 9,547,101
(Note 1d):
- -----------------------------------------------------------------------------------------------------------------
Expenses: Investment advisory fees (Note 2) ........................... $ 960,931
Account maintenance and distribution fees -- Class B (Note 2) 621,078
Professional fees ........................................... 92,534
Accounting services (Note 2) ................................ 89,985
Printing and shareholder reports ............................ 75,238
Account maintenance and distribution fees -- Class C (Note 2) 54,828
Transfer agent fees -- Class B (Note 2) ..................... 49,792
Custodian fees .............................................. 13,013
Trustees' fees and expenses ................................. 10,186
Transfer agent fees -- Class A (Note 2) ..................... 10,101
Pricing fees ................................................ 9,547
Account maintenance fees -- Class D (Note 2) ................ 9,480
Registration fees (Note 1e) ................................. 4,114
Transfer agent fees -- Class C (Note 2) ..................... 3,585
Transfer agent fees -- Class D (Note 2) ..................... 3,026
Other ....................................................... 3,337
------------
Total expenses .............................................. 2,010,775
------------
Investment income -- net .................................... 7,536,326
------------
- -----------------------------------------------------------------------------------------------------------------
Realized & Unreal- Realized gain on investments -- net ......................... 5,241,434
ized Gain (Loss) on Change in unrealized appreciation on investments -- net ..... (10,792,746)
Investments -- Net ------------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations ........ $ 1,985,014
============
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
Merrill Lynch New Jersey Municipal Bond Fund July 31, 1999
FINANCIAL INFORMATION (continued)
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Year Ended
July 31,
------------------------------
Increase (Decrease) in Net Assets: 1999 1998
- --------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Operations: Investment income -- net .............................. $ 7,536,326 $ 8,653,479
Realized gain on investments -- net ................... 5,241,434 2,594,585
Change in unrealized appreciation on investments -- net (10,792,746) (2,231,431)
------------- -------------
Net increase in net assets resulting from operations .. 1,985,014 9,016,633
------------- -------------
- --------------------------------------------------------------------------------------------------------------
Dividends & Investment income -- net:
Distributions to Class A ............................................. (1,502,506) (2,003,879)
Shareholders Class B ............................................. (5,223,571) (6,087,084)
(Note 1f): Class C ............................................. (374,099) (268,273)
Class D ............................................. (436,150) (294,243)
Realized gain on investments -- net:
Class A ............................................. (624,592) --
Class B ............................................. (2,460,892) --
Class C ............................................. (172,401) --
Class D ............................................. (198,232) --
In excess of realized gain on investments -- net:
Class A ............................................. -- (37,255)
Class B ............................................. -- (122,063)
Class C ............................................. -- (4,660)
Class D ............................................. -- (4,509)
------------- -------------
Net decrease in net assets resulting from dividends and
distributions to shareholders ......................... (10,992,443) (8,821,966)
------------- -------------
- --------------------------------------------------------------------------------------------------------------
Beneficial Interest Net decrease in net assets derived from beneficial .... (1,135,156) (12,838,456)
Transactions interest transactions ................................. ------------- -------------
(Note 4):
- --------------------------------------------------------------------------------------------------------------
Net Assets: Total decrease in net assets .......................... (10,142,585) (12,643,789)
Beginning of year ..................................... 173,897,351 186,541,140
------------- -------------
End of year ........................................... $ 163,754,766 $ 173,897,351
============= =============
- --------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
Merrill Lynch New Jersey Municipal Bond Fund July 31, 1999
FINANCIAL INFORMATION (continued)
Financial Highlights
<TABLE>
<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: 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ... $ 11.16 $ 11.15 $ 10.69 $ 10.71 $ 10.63
Operating --------- --------- --------- --------- ---------
Performance: Investment income -- net ............. .52 .58 .57 .58 .58
Realized and unrealized gain (loss) on
investments -- net ................... (.34) .02 .46 (.02) .08
--------- --------- --------- --------- ---------
Total from investment operations ..... .18 .60 1.03 .56 .66
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income -- net ........... (.52) (.58) (.57) (.58) (.58)
Realized gain on investments -- net (.22) -- -- -- --
In excess of realized gain on
investments -- net ................. -- (.01) -- -- --
--------- --------- --------- --------- ---------
Total dividends and distributions .... (.74) (.59) (.57) (.58) (.58)
--------- --------- --------- --------- ---------
Net asset value, end of year ......... $ 10.60 $ 11.16 $ 11.15 $ 10.69 $ 10.71
========= ========= ========= ========= =========
- -------------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ... 1.50% 5.51% 9.95% 5.32% 6.51%
Return:* ========= ========= ========= ========= =========
- -------------------------------------------------------------------------------------------------------------------------------
Ratios to Expenses ............................. .75% .69% .70% .71% .74%
Average ========= ========= ========= ========= =========
Net Assets: Investment income -- net ............. 4.71% 5.17% 5.29% 5.36% 5.57%
========= ========= ========= ========= =========
- -------------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of year (in thousands) $ 30,480 $ 32,571 $ 39,343 $ 38,173 $ 39,482
Data: ========= ========= ========= ========= =========
Portfolio turnover ................... 120.46% 57.00% 54.02% 60.21% 57.17%
========= ========= ========= ========= =========
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Total investment returns exclude the effects of sales
charges.
See Notes to Financial Statements.
11
<PAGE>
Merrill Lynch New Jersey Municipal Bond Fund July 31, 1999
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
<TABLE>
<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: 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ... $ 11.16 $ 11.15 $ 10.69 $ 10.71 $ 10.63
Operating -------- -------- -------- -------- --------
Performance: Investment income -- net ............. .46 .52 .52 .52 .53
Realized and unrealized gain (loss) on
investments -- net ................... (.34) .02 .46 (.02) .08
-------- -------- -------- -------- --------
Total from investment operations ..... .12 .54 .98 .50 .61
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income -- net ........... (.46) (.52) (.52) (.52) (.53)
Realized gain on investments -- net (.22) -- -- -- --
In excess of realized gain on
investments -- net ................. -- (.01) -- -- --
Total dividends and distributions .... (.68) (.53) (.52) (.52) (.53)
-------- -------- -------- -------- --------
Net asset value, end of year ......... $ 10.60 $ 11.16 $ 11.15 $ 10.69 $ 10.71
======== ======== ======== ======== ========
- ------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ... .99% 4.98% 9.39% 4.77% 5.97%
Return:* ======== ======== ======== ======== ========
- ------------------------------------------------------------------------------------------------------------------------
Ratios to Expenses ............................. 1.26% 1.20% 1.21% 1.21% 1.25%
Average ======== ======== ======== ======== ========
Investment income -- net ............. 4.21% 4.66% 4.78% 4.85% 5.06%
Net Assets: ======== ======== ======== ======== ========
- ------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of year (in thousands) $113,869 $126,606 $137,485 $149,455 $164,020
Data: ======== ======== ======== ======== ========
Portfolio turnover ................... 120.46% 57.00% 54.02% 60.21% 57.17%
======== ======== ======== ======== ========
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Total investment returns exclude the effects of sales
charges.
See Notes to Financial Statements.
12
<PAGE>
Merrill Lynch New Jersey Municipal Bond Fund July 31, 1999
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
<TABLE>
<CAPTION>
Class C
-----------------------------------------------------------------
For the
Period
The following per share data and ratios have been derived Oct. 21,
from information provided in the financial statements. For the Year Ended July 31, 1994+ to
--------------------------------------------------- July 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ... $ 11.16 $ 11.14 $ 10.69 $ 10.71 $ 10.34
Operating --------- --------- --------- --------- ---------
Performance: Investment income -- net ............... .45 .51 .50 .51 .40
Realized and unrealized gain (loss) on
investments -- net ..................... (.34) .03 .45 (.02) .37
--------- --------- --------- --------- ---------
Total from investment operations ....... .11 .54 .95 .49 .77
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income -- net ............. (.45) (.51) (.50) (.51) (.40)
Realized gain on investments -- net .. (.22) -- -- -- --
In excess of realized gain on
investments -- net ................... -- (.01) -- -- --
--------- --------- --------- --------- ---------
Total dividends and distributions ...... (.67) (.52) (.50) (.51) (.40)
--------- --------- --------- --------- ---------
Net asset value, end of period ......... $ 10.60 $ 11.16 $ 11.14 $ 10.69 $ 10.71
========= ========= ========= ========= =========
- -------------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ..... .89% 4.96% 9.18% 4.66% 7.62%++
Return:** ========= ========= ========= ========= =========
- -------------------------------------------------------------------------------------------------------------------------------
Ratios to Expenses ............................... 1.36% 1.30% 1.31% 1.32% 1.39%*
Average ========= ========= ========= ========= =========
Net Assets: Investment income -- net ............... 4.09% 4.56% 4.68% 4.76% 4.83%*
========= ========= ========= ========= =========
- -------------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) $ 9,585 $ 7,252 $ 5,088 $ 4,179 $ 1,337
Data: ========= ========= ========= ========= =========
Portfolio turnover ..................... 120.46% 57.00% 54.02% 60.21% 57.17%
========= ========= ========= ========= =========
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales
charges.
+ Commencement of operations.
++ Aggregate total investment return.
See Notes to Financial Statements.
13
<PAGE>
Merrill Lynch New Jersey Municipal Bond Fund July 31, 1999
FINANCIAL INFORMATION (concluded)
Financial Highlights (concluded)
<TABLE>
<CAPTION>
Class D
-----------------------------------------------------------------
For the
Period
The following per share data and ratios have been derived Oct. 21,
from information provided in the financial statements. For the Year Ended July 31, 1994+ to
--------------------------------------------------- July 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ... $ 11.17 $ 11.15 $ 10.70 $ 10.71 $ 10.34
Operating --------- --------- --------- --------- ---------
Performance: Investment income -- net ............... .51 .57 .56 .57 .44
Realized and unrealized gain (loss) on
investments -- net ..................... (.35) .03 .45 (.01) .37
--------- --------- --------- --------- ---------
Total from investment operations ....... .16 .60 1.01 .56 .81
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income -- net ............. (.51) (.57) (.56) (.57) (.44)
Realized gain on investments -- net .. (.22) -- -- -- --
In excess of realized gain on
investments -- net ................... -- (.01) -- -- --
--------- --------- --------- --------- ---------
Total dividends and distributions ...... (.73) (.58) (.56) (.57) (.44)
--------- --------- --------- --------- ---------
Net asset value, end of period ......... $ 10.60 $ 11.17 $ 11.15 $ 10.70 $ 10.71
========= ========= ========= ========= =========
- -------------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ..... 1.31% 5.50% 9.73% 5.31% 8.05%++
Return:** ========= ========= ========= ========= =========
- -------------------------------------------------------------------------------------------------------------------------------
Ratios to Expenses ............................... .85% .79% .80% .80% .86%*
Average ========= ========= ========= ========= =========
Net Assets: Investment income -- net ............... 4.60% 5.07% 5.19% 5.27% 5.45%*
========= ========= ========= ========= =========
- -------------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) $ 9,821 $ 7,468 $ 4,625 $ 3,652 $ 2,390
Data: ========= ========= ========= ========= =========
Portfolio turnover ..................... 120.46% 57.00% 54.02% 60.21% 57.17%
========= ========= ========= ========= =========
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales
charges.
+ Commencement of operations.
++ Aggregate total investment return.
See Notes to Financial Statements.
14
<PAGE>
Merrill Lynch New Jersey Municipal Bond Fund July 31, 1999
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's financial statements are prepared in
accordance with generally accepted accounting principles, which may require the
use of management accruals and estimates. 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.
o Financial futures contracts -- The Fund may purchase or sell financial futures
contracts and options on such futures contracts for the purpose of hedging the
market risk on existing securities or the intended purchase of securities.
Futures contracts are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a contract, the
Fund deposits and maintains as collateral such initial margin as required by the
exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.
(c) Income taxes -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.
(d) Security transactions and investment income -- Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Interest income is recognized on the accrual basis. Discounts and market
premiums are amortized into interest income. Realized gains and losses on
security transactions are determined on the identified cost basis.
(e) 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. Distributions in excess of
15
<PAGE>
Merrill Lynch New Jersey Municipal Bond Fund July 31, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
realized capital gains are due primarily to differing tax treatments for
financial futures transactions.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML &
Co."), which is the limited partner. The Fund has also entered into a
Distribution Agreement and Distribution Plans with Merrill Lynch Funds
Distributor ("MLFD" or the "Distributor"), a division of Princeton Funds
Distributor, Inc. ("PFD"), which is a wholly-owned subsidiary of Merrill Lynch
Group, Inc. FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain other
services necessary to the operations of the Fund. For such services, the Fund
pays a monthly fee based upon the average daily value of the Fund's net assets
at the following annual rates: .55% of the Fund's average daily net assets not
exceeding $500 million; .525% of average daily net assets in excess of $500
million but not exceeding $1 billion; and .50% of average daily net assets in
excess of $1 billion.
Pursuant to the Distribution Plans adopted by the Fund in accordance with Rule
12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are accrued daily
and paid monthly at annual rates based upon the average daily net assets of the
shares as follows:
- --------------------------------------------------------------------------------
Account Distribution
Maintenance Fee Fee
- --------------------------------------------------------------------------------
Class B ........................................... .25% .25%
Class C ........................................... .25% .35%
Class D ........................................... .10% --
- --------------------------------------------------------------------------------
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., also provides account
maintenance and distribution services to the Fund. The ongoing account
maintenance fee compensates the Distributor and MLPF&S for providing account
maintenance services to Class B, Class C and Class D shareholders. The ongoing
distribution fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B and Class C
shareholders.
For the year ended July 31, 1999, 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 ........................................... $ 248 $ 3,939
Class D ........................................... $1,517 $62,359
- --------------------------------------------------------------------------------
For the year ended July 31, 1999, MLPF&S received contingent deferred sales
charges of $172,067 and $4,477 relating to transactions in Class B and Class C
Shares, respectively.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co., is
the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or directors of
FAM, PSI, FDS, PFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended July 31, 1999 were $202,770,216 and $203,178,279, respectively.
Net realized gains for the year ended July 31, 1999 and net unrealized gains as
of July 31, 1999 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
- --------------------------------------------------------------------------------
Long-term investments $ 5,009,838 $ 40,513
Financial futures contracts 231,596 262,500
----------- ----------
Total $ 5,241,434 $ 303,013
=========== ==========
- --------------------------------------------------------------------------------
As of July 31, 1999, net unrealized appreciation for Federal income tax purposes
aggregated $10,627, of which $3,699,114 related to appreciated securities and
$3,688,487 related to depreciated securities. The aggregate cost of investments
at July 31, 1999 for Federal income tax purposes was $167,593,036.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest transactions was
$1,135,156 and $12,838,456
16
<PAGE>
Merrill Lynch New Jersey Municipal Bond Fund July 31, 1999
for the years ended July 31, 1999 and July 31, 1998, respectively.
Transactions in shares of beneficial interest for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended July 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 240,370 $ 2,645,122
Shares issued to share-
holders in reinvestment of
dividends and distributions .............. 101,677 1,125,507
----------- -----------
Total issued ............................. 342,047 3,770,629
Shares redeemed .......................... (384,364) (4,235,146)
----------- -----------
Net decrease ............................. (42,317) $ (464,517)
=========== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 381,222 $ 4,240,657
Shares issued to share-
holders in reinvestment of
dividends and distributions .............. 100,156 1,114,966
----------- -----------
Total issued ............................. 481,378 5,355,623
Shares redeemed .......................... (1,093,270) (12,202,101)
----------- -----------
Net decrease ............................. (611,892) $(6,846,478)
=========== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended July 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 2,027,650 $22,635,018
Shares issued to share-
holders in reinvestment of
dividends and distributions .............. 363,509 4,025,694
----------- -----------
Total issued ............................. 2,391,159 26,660,712
----------- -----------
Automatic conversion
of shares ................................ (28,941) (319,927)
Shares redeemed .......................... (2,961,623) (32,803,526)
----------- -----------
Net decrease ............................. (599,405) $(6,462,741)
=========== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 1,689,073 $18,826,264
Shares issued to share-
holders in reinvestment of
dividends and distributions .............. 287,713 3,202,655
----------- -----------
Total issued ............................. 1,976,786 22,028,919
Automatic conversion
of shares ................................ (34,629) (384,276)
Shares redeemed .......................... (2,934,034) (32,654,647)
----------- -----------
Net decrease ............................. (991,877) $(11,010,004)
=========== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended July 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 501,480 $ 5,578,896
Shares issued to share-
holders in reinvestment of
dividends and distributions .............. 35,070 387,666
----------- -----------
Total issued ............................. 536,550 5,966,562
Shares redeemed .......................... (281,832) (3,090,534)
----------- -----------
Net increase ............................. 254,718 $ 2,876,028
=========== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 379,219 $ 4,239,001
Shares issued to share-
holders in reinvestment of
dividends and distributions .............. 17,631 196,384
----------- -----------
Total issued ............................. 396,850 4,435,385
Shares redeemed .......................... (203,523) (2,261,041)
----------- -----------
Net increase ............................. 193,327 $ 2,174,344
=========== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended July 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 342,639 $ 3,854,415
Automatic conversion of
shares ................................... 28,924 319,927
Shares issued to share-
holders in reinvestment of
dividends and distributions .............. 28,371 313,589
----------- -----------
Total issued ............................. 399,934 4,487,931
Shares redeemed .......................... (142,577) (1,571,857)
----------- -----------
Net increase ............................. 257,357 $ 2,916,074
=========== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 601,822 $ 6,735,516
Automatic conversion of
shares ................................... 34,617 384,276
Shares issued to share-
holders in reinvestment of
dividends and distributions .............. 13,765 153,429
----------- -----------
Total issued ............................. 650,204 7,273,221
Shares redeemed .......................... (396,206) (4,429,539)
----------- -----------
Net increase ............................. 253,998 $ 2,843,682
=========== ===========
- --------------------------------------------------------------------------------
17
<PAGE>
Merrill Lynch New Jersey Municipal Bond Fund July 31, 1999
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, 1999, 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,
1999 by correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Merrill Lynch New
Jersey Municipal Bond Fund of Merrill Lynch Multi-State Municipal Series Trust
as of July 31, 1999, 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 8, 1999
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, 1999 qualify
as tax-exempt interest dividends for Federal income tax purposes.
Additionally, the following table summarizes the capital gains distributions
paid by the Fund during the year:
- --------------------------------------------------------------------------------
Record Payable Ordinary Long-Term
Date Date Income Capital Gains
- --------------------------------------------------------------------------------
12/21/98 12/31/98 $.110202 $.107595*
- --------------------------------------------------------------------------------
* The entire distribution is subject to the 20% tax rate.
Please retain this information for your records.
18
<PAGE>
Merrill Lynch New Jersey Municipal Bond Fund July 31, 1999
OFFICERS AND TRUSTEES
Terry K. Glenn, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Arthur Zeikel, Trustee
Vincent R. Giordano, Senior Vice President
Kenneth A. Jacob, Vice President
Roberto Roffo, Vice President
Donald C. Burke, Vice President and Treasurer
Alice A. Pellegrino, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
19
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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 -- 7/99
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