MERRILL
LYNCH
MASSACHUSETTS
MUNICIPAL
BOND FUND
Annual Report July 31, 1994
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Merrill Lynch Massachusetts
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, New Jersey
08543-9011
<PAGE>
TO OUR SHAREHOLDERS
The expectation of increasing inflationary pressures and higher
interest rates initially heightened investor concerns and increased
financial market volatility during the July quarter. However, as the
quarter progressed, it was the weakness of the US dollar in foreign
exchange markets that dominated the financial news and prolonged
stock and bond market declines. Although the US dollar had
strengthened slightly by July quarter-end, which may have improved
investor confidence in the stock and bond markets, the possibility
of continued tightening by the Federal Reserve Board resurfaced
following Chairman Alan Greenspan's recent congressional testimony.
Nevertheless, as the quarter drew to a close, a lower-than-expected
rate of growth reported for the US economy during the second
calendar quarter allayed investor concerns and led to stock and bond
market rallies.
During the July quarter, the US dollar's weakness relative to other
major currencies reflected the deteriorating US trade deficit and
widening net long-term capital outflows. In 1993, an expanding US
economy and recession in other industrial countries led to a higher
level of imports and weaker export growth, widening the US trade
deficit further. In addition, global investors favored non-US dollar
denominated assets throughout 1993, which has further depressed the
dollar's value. This trend is not improving significantly thus far
in 1994 since foreign inflows into US capital markets continue to
decline, although US investors are investing outside of the United
States to a lesser degree.
Over the longer term, if the economies of the United States' major
trading partners expand (improving the prospects for US export
growth), the outlook for the US dollar is likely to improve. In the
near term, central banks have attempted to reverse the dollar's
decline through currency market intervention. These efforts have met
with limited success thus far, giving rise to the concern that the
Federal Reserve Board will be forced to continue to raise short-term
interest rates to attract investment capital back to the United
States and bolster the dollar's value. However, further interest
rate increases may jeopardize the US economic expansion. Despite
evidence of a moderating trend in the US economy, Federal Reserve
Board Chairman Alan Greenspan indicated in his July Humphrey-Hawkins
testimony that the central bank would prefer to err on the side of
too much monetary tightening rather than too little. In the weeks
ahead, investors will continue to assess economic data and
inflationary trends as they focus on the US dollar in order to gauge
whether further increases in short-term interest rates are imminent.
Continued indications of moderate and sustainable levels of economic
growth would be positive for the US capital markets.
<PAGE>
The Municipal Market
Long-term tax-exempt bond yields ended the July quarter essentially
unchanged. The Bond Buyer Revenue Bond Index rose five basis points
(0.05%) to 6.47%. The Index, however, failed to capture the dramatic
bond rally on July 29, 1994, when municipal bond yields had their
largest one-day decline thus far this year. Responding to reports of
a continued mild inflationary outlook and a potentially weakening
economy, municipal bond yields declined by approximately 10 basis
points. US Treasury bonds displayed a similar pattern over the last
three months, ending with an equally dramatic rally on July 29,
1994. Long-term US Treasury bonds ended the quarter yielding
approximately 7.40%.
The tax-exempt bond market has continued to be very volatile with
yields fluctuating by as much as 15 basis points from week to week.
This continued volatility is largely a reflection of the same lack
of conviction regarding the near-term direction of interest rates
that has prevailed for much of 1994. Throughout this past quarter,
the municipal bond market had been unable to maintain a consensus
regarding either the potential strength of the current economic
recovery or the resultant response by the Federal Reserve Board.
However, a number of economic indicators released in late July began
to suggest that the robust pace of recent economic growth was
slowing. This promoted a more positive market environment,
culminating in the market rally on July 29.
The municipal bond market's technical position has remained
supportive. Approximately $40 billion in long-term securities were
issued during the three months ended July 31, 1994. This represents
a decline of over 50% versus the July quarter from the previous
year. As discussed in earlier reports, this reduction in new-issue
supply has minimized the selling pressure by larger institutional
investors who fear being unable to purchase sizable amounts of
securities in the future. Such a significant decline in issuance
would normally be expected to trigger a decline in yields as
investors chase a commodity in scarce supply. Investor demand,
however, has also diminished somewhat in recent months as net flows
into long-term municipal bond funds have dramatically slowed or, in
some instances, reversed. Consequently, the supply/demand
relationship within the municipal bond market has remained in
balance, promoting the overall stability in yield levels seen in the
past months.
<PAGE>
With after-tax equivalents in excess of 10%, long-term tax-exempt
bonds continue to represent considerable value relative to other
investment alternatives. We continue to anticipate that municipal
bond yields will decline further in late 1994 and into 1995. The
economic impact of the significant interest rate increases
experienced since early February have yet to be totally realized.
The resultant drag on the economy should provide the foundation for
further interest rate declines. Under such a scenario, current tax-
exempt bond yields should prove to represent considerable value.
Portfolio Strategy
During the quarter ended July 31, 1994, the portfolio strategy was
similar to the prior quarter and consisted of selling discounted
bonds and replacing them with higher yielding current coupon bonds.
Furthermore, cash reserves averaged 5% of net assets for the
quarter, and premium coupon bonds were purchased when available. The
net effect of this strategy generated an increased yield for the
shareholders, while restructuring the Fund more defensively.
Fiscal Year In Review
For the year ended July 31, 1994, our portfolio strategy was based
on the expectation that the economy would gather momentum with help
from the low interest rate environment during the first half of the
fiscal year. With this in mind, we sold discounted bonds and
replaced them with premium coupon bonds in a more defensive
strategy. Cash reserves were not increased significantly in order to
maintain a competitive yield for shareholders. Also, finding
suitable replacement bonds has proven to be difficult. A main cause
of this concern was a 40% decrease in municipal issuance of
Massachusetts bonds for this fiscal year versus the prior fiscal
year. This decrease made it difficult to purchase bonds that would
have fulfilled our investment strategy and left the Fund somewhat
vulnerable during the February to March rise in interest rates,
thereby decreasing total returns of the Fund's Class A and Class B
Shares. Looking ahead, we believe the reduction of supply should
help Massachusetts issues perform attractively relative to national
issues.
During the upcoming quarter, we expect interest rates will fluctuate
within a relatively narrow range. To take full advantage of this
scenario, we will attempt to increase the Fund's holdings of current
coupon bonds to generate a more competitive yield for shareholders.
We appreciate your ongoing interest in Merrill Lynch Massachusetts
Municipal Bond Fund, and we look forward to serving your investment
needs and objectives in the months and years to come.
<PAGE>
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
August 23, 1994
PERFORMANCE DATA
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of
Class A and Class B Shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Average Annual Total Return--Class A Shares*
% Return Without % Return With
Sales Charge Sales Charge**
Year Ended 6/30/94 -1.22% -5.17%
Inception (2/28/92)
through 6/30/94 +7.78 +5.92
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
GRAPHIC MATERIAL APPEARS HERE. SEE APPENDIX,
GRAPHIC AND IMAGE MATERIAL: Item 1.
Average Annual Total Return--Class B Shares*
<PAGE>
% Return % Return
Without CDSC With CDSC**
Year Ended 6/30/94 -1.72% -5.40%
Inception (2/28/92)
through 6/30/94 +7.20 +6.42
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced
to 0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
GRAPHIC MATERIAL APPEARS HERE. SEE APPENDIX,
GRAPHIC AND IMAGE MATERIAL: Item 2.
PERFORMANCE DATA (concluded)
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
2/28/92--12/31/92 $10.00 $10.46 -- $0.542 +10.24%
1993 10.46 11.22 $0.103 0.652 +14.79
1/1/94--7/31/94 11.22 10.48 -- 0.326 - 3.60
------ ------
Total $0.103 Total $1.520
Cumulative total return as of 7/31/94: +21.99%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
include sales charge; results would be lower if sales charge was
included.
</TABLE>
<PAGE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
2/28/92--12/31/92 $10.00 $10.46 -- $0.498 + 9.77%
1993 10.46 11.22 $0.103 0.596 +14.21
1/1/94--7/31/94 11.22 10.48 -- 0.296 - 3.87
------ ------
Total $0.103 Total $1.390
Cumulative total return as of 7/31/94: +20.52%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
<TABLE>
Recent Performance Results*
<CAPTION>
12 Month 3 Month
7/31/94 4/30/94 7/31/93 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $10.48 $10.34 $11.07 -4.46%(1) +1.35%
Class B Shares 10.48 10.34 11.07 -4.46(1) +1.35
Class A Shares--Total Return +1.26(2) +2.77(3)
Class B Shares--Total Return +0.75(4) +2.64(5)
Class A Shares--Standardized 30-day Yield 5.37%
Class B Shares--Standardized 30-day Yield 5.09%
<PAGE>
<FN>
*Investment results shown for the 3-month and 12-month periods are
before the deduction of any sales charges.
(1)Percent change includes reinvestment of $0.103 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.638 per share ordinary
income dividends and $0.103 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.145 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.583 per share ordinary
income dividends and $0.103 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.132 per share ordinary
income dividends.
</TABLE>
PORTFOLIO ABBREVIATIONS
To simplify the listing of Merrill Lynch Massachusetts 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)
GO General Obligation Bonds
HFA Housing Finance Authority
INFLOS Inverse Floating Rate Municipal Bonds
LEVRRS Leveraged Reverse Rate Securities
PCR Pollution Control Revenue Bonds
UPDATES Unit Priced Daily Adjustable Tax-Exempt Securities
UT Unlimited Tax
VRDN Variable Rate Demand Notes
YCN Yield Curve Notes
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Massachusetts--94.6%
<S> <S> <C> <S> <C>
AAA Aaa $ 1,650 Beverly, Massachusetts, GO, 6.60% due 3/15/2009 (f) $ 1,753
BBB Baa1 865 Boston, Massachusetts, Industrial Development Financing Authority, Sewer
Facility Revenue Bonds (Harbor Electric Energy Company Project), AMT, 7.375%
due 5/15/2015 906
<PAGE>
NR Aaa 600 Boston, Massachusetts, Revenue Bonds (Boston City Hospital), Series A, 7.625%
due 8/15/2000 (c)(g) 690
A NR 300 Boston, Massachusetts, Water and Sewer Community Revenue Bonds, Series A, 7.10%
due 11/01/1999 (g) 335
NR Baa 1,000 Greater New Bedford, Massachusetts, Regional Refuse Management District Revenue
Bonds (Massachusetts Landfill), AMT, 5.875% due 5/01/2013 948
NR Aaa 1,650 Lowell, Massachusetts, GO, 7.625% due 2/15/2001 (g) 1,912
Massachusetts Bay Transportation Authority Revenue Bonds (Massachusetts General
Transportation Systems):
A+ A 2,000 Refunding, Series A, 7% due 3/01/2011 2,206
A+ A 1,250 Refunding, Series B, 6.20% due 3/01/2016 1,263
A+ Aaa 3,305 Series A, 7% due 3/01/2001 (g) 3,700
A+ A 1,500 Series A, 7% due 3/01/2021 1,705
A+ A 1,285 Massachusetts State GO, Consolidated Loan, Series A, 6.50% due 6/01/2008 1,342
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Massachusetts (continued)
<S> <S> <C> <S> <C>
Massachusetts State Health and Educational Facilities Authority Revenue Bonds:
NR Baa $2,000 (Anna Jaques Hospital), Series B, 6.875% due 10/01/2012 $ 2,018
AAA Aaa 2,000 (Beth Israel), INFLOS, 8.776% due 7/01/2025 (b)(j) 1,915
AAA Aaa 2,385 (Boston College), Series J, 6.625% due 7/01/2021 (h) 2,465
A Aa 1,000 (Brigham and Women's Hospital), Series C, 7% due 6/01/2018 1,045
Al+ VMIG1 700 (Capital Asset Program), VRDN, Series B, 2.80% due 7/01/2005 (a)(e) 700
Al+ VMIG1 1,000 (Capital Asset Program), VRDN, Series C, 2.80% due 7/01/2005 (a)(e) 1,000
AAA Aaa 1,000 (Massachusetts General Hospital), Series F, 6.25% due 7/01/2020 (b) 1,010
AAA Aaa 1,000 (New England Medical Center), Series F, 6.50% due 7/01/2012 (h) 1,040
AAA Aaa 2,900 (New England Medical Center Hospitals), YCN, 7.08% due 7/01/2018 (e)(j) 2,244
AAA Aaa 2,200 (Newton Wellesley Hospital), Series D, 7% due 7/01/2015 (e) 2,378
AAA Aaa 1,000 (Northeastern University), Series E, 6.55% due 10/01/2022 (e) 1,031
A+ A1 2,000 Refunding (Boston College), Series K, 5.25% due 6/01/2023 1,748
NR Baa1 500 Refunding (Holyoke Hospital), Series B, 6.50% due 7/01/2015 480
NR Baa 1,000 Refunding (New England Memorial Hospital), Series B, 6.125% due 7/01/2013 940
AAA Aaa 1,000 Refunding (Stonehill College), Series E, 6.60% due 7/01/2020 (e) 1,044
BBB Baa1 2,000 (Sisters of Providence Health Systems), Series A, 6.625% due 11/15/2022 1,915
AA- Aa 4,490 (Smith College), Series D, 5.75% due 7/01/2024 4,234
AAA NR 1,000 (Suffolk University), Series B, 6.35% due 7/01/2022 (i) 1,008
Al+ NR 1,000 (Williams College), VRDN, Series E, 2.80% due 8/01/2014 (a) 1,000
<PAGE>
A+ Aa 3,250 Massachusetts State, HFA, Revenue Bonds, AMT, Series A, 6.75% due 6/01/2026 3,276
Massachusetts State, HFA, Revenue Bonds (Residential Development) (d):
AAA Aaa 1,000 Series C, 6.90% due 11/15/2021 1,035
AAA Aaa 1,000 Series F, 6.30% due 11/15/2024 984
NR MIG1++ 100 Massachusetts State Industrial Finance Agency, Health Care Facility Revenue
Bonds(Beverly Enterprises), VRDN, 2.90% due 4/01/2009 (a) 100
Massachusetts State Industrial Finance Agency, PCR, Refunding:
BBB Baa2 1,000 (Boston Edison Company Project), Series A, 5.75% due 2/01/2014 906
BBB Baa2 2,750 (Eastern Edison Company Project), 5.875% due 8/01/2008 2,628
BBB Baa1 3,000 Massachusetts State Industrial Finance Agency Resource Recovery Revenue
Refunding Bonds (Refusetech Inc. Project), Series A, 6.30% due 7/01/2005 3,035
Massachusetts State Industrial Finance Agency Revenue Bonds:
AAA Aaa 1,000 (Babson College), Series A, 6.50% due 10/01/2022 (e) 1,038
A+ A1 1,460 Refunding (Holly Cross College-II), 6.375% due 11/01/2015 1,495
BBB+ A 2,000 Massachusetts State Municipal Wholesale Electric Company, Power Supply System,
Revenue Refunding Bonds, Series A, 6.75% due 7/01/2011 2,091
A+ A 2,000 Massachusetts State, Refunding, GO, Series B, 6.50% due 8/01/2008 2,133
A+ A1 1,000 Massachusetts State Turnpike Authority, Turnpike Revenue Refunding Bonds,
Series A, 5% due 1/01/2020 845
Massachusetts State, UPDATES, VRDN (a):
A1 VMIG1 1,000 2.80% due 12/01/1997 1,000
A1+ VMIG1 1,700 2.80% due 6/01/1995 1,700
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Massachusetts (concluded)
<S> <S> <C> <S> <C>
Massachusetts State Water Resource Authority Revenue Bonds, Series A:
A A $ 6,000 6.50% due 7/15/2019 $ 6,242
A A 1,100 5.50% due 7/15/2022 982
NR A l,000 New England Educational Loan Marketing Corporation, Massachusetts, Student
Loan Revenue Bonds, Sub-Issue H, AMT, 6.90% due 11/01/2009 l,030
<PAGE>
AAA Aaa l,000 Southern Berkshire, Massachusetts, Regional School District Revenue Bonds, UT,
7% due 4/15/2011 (e) 1,087
NR Baa 1,500 Springfield, Massachusetts, School Project, Loan Revenue Bonds, Series B,
7.10% due 9/01/2011 1,548
A+ A 1,000 Woods Hole--Martha's Vineyard and Nantucket, Massachusetts, Revenue Refunding
Bonds, 6.60% due 3/01/2003 1,084
Puerto Rico--5.0%
BB Baa 2,000 Puerto Rico Commonwealth, Aqueduct and Sewer Authority Revenue Bonds, Series A,
7.875% due 7/01/2017 2,174
AAA Aaa 1,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, LEVRRS, 8.778%
due 7/01/2023 (f)(j) 966
A- Baa1 1,000 Puerto Rico Electric Power Authority, Power Revenue Refunding Bonds, Series
N, 7% due 7/01/2007 1,091
Total Investments (Cost--$84,103)--99.6% 84,445
Other Assets Less Liabilities--0.4% 358
-------
Net Assets--100.0% $84,803
=======
<FN>
(a)The interest rate is subject to change periodically based upon
the prevailing market rate. The interest rate shown is the rate in
effect at July 31, 1994.
(b)AMBAC Insured.
(c)FHA Insured.
(d)FNMA Collateralized.
(e)MBIA Insured.
(f)FSA Insured.
(g)Prerefunded.
(h)FGIC Insured.
(i)Connie Lee Insured.
(j)The interest rate is subject to change periodically and inversely
based upon the prevailing market rate. The interest rate shown is
the rate in effect at July 31, 1994.
++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.
</TABLE>
<PAGE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of July 31, 1994
<CAPTION>
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$84,103,398) (Note 1a) $84,445,011
Cash 10,091
Receivables:
Securities sold $ 2,928,378
Interest 1,087,787
Beneficial interest sold 102,162 4,118,327
-----------
Deferred organization expenses (Note 1e) 26,707
Prepaid registration fees and other assets (Note 1e) 19,834
-----------
Total assets 88,619,970
-----------
Liabilities: Payables:
Securities purchased 3,510,736
Beneficial interest redeemed 125,728
Dividends to shareholders (Note 1f) 68,728
Distributor (Note 2) 31,865
Investment adviser (Note 2) 24,782 3,761,839
-----------
Accrued expenses and other liabilities 54,843
-----------
Total liabilities 3,816,682
-----------
Net Assets: Net assets $84,803,288
===========
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited
Consist of: number of shares authorized $ 79,842
Class B Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 729,339
Paid-in capital in excess of par 83,725,271
Accumulated distribution in excess of realized capital gains--net (72,777)
Unrealized appreciation on investments--net 341,613
-----------
Net assets $84,803,288
===========
<PAGE>
Net Asset Class A--Based on net assets of $8,367,548 and 798,416 shares of
Value: beneficial interest outstanding $ 10.48
===========
Class B--Based on net assets of $76,435,740 and 7,293,392 shares of
beneficial interest outstanding $ 10.48
===========
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
July 31, 1994
<S> <S> <C>
Investment Interest and amortization of premium and discount earned $ 5,037,381
Income
(Note 1d):
Expenses: Investment advisory fees (Note 2) 465,743
Distribution fees--Class B (Note 2) 382,048
Printing and shareholder reports 79,831
Professional fees 53,898
Transfer agent fees--Class B (Note 2) 37,639
Accounting services (Note 2) 36,930
Custodian fees 13,374
Registration fees (Note 1e) 12,735
Amortization of organization expenses (Note 1e) 10,370
Pricing fees 6,922
Trustees' fees and expenses 3,699
Transfer agent fees--Class A (Note 2) 3,522
Other 2,154
-----------
Total expenses before reimbursement 1,108,865
Reimbursement of expenses (Note 2) (199,488)
-----------
Total expenses after reimbursement 909,377
-----------
Investment income--net 4,128,004
-----------
<PAGE>
Realized & Realized gain on investments--net 21,770
Unrealized Change in unrealized appreciation on investments--net (3,726,694)
Gain -----------
(Loss) on Net Increase in Net Assets Resulting from Operations $ 423,080
Investments ===========
- --Net
(Notes
1d & 3):
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended July 31,
Increase (Decrease) in Net Assets: 1994 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 4,128,004 $ 3,173,589
Realized gain on investments--net 21,770 1,192,844
Change in unrealized appreciation on investments--net (3,726,694) 1,786,432
----------- -----------
Net increase in net assets resulting from operations 423,080 6,152,865
----------- -----------
Dividends & Investment income--net:
Distributions Class A (441,160) (300,336)
to Share- Class B (3,686,844) (2,873,253)
holders Realized gain on investments--net:
(Note 1f): Class A (119,994) (10,398)
Class B (1,037,479) (128,953)
In excess of realized gain on investments--net:
Class A (7,544) --
Class B (65,233) --
----------- -----------
Net decrease in net assets resulting from dividends and distributions
to shareholders (5,358,254) (3,312,940)
----------- -----------
Beneficial Net increase in net assets derived from beneficial interest transactions 11,216,720 31,906,779
Interest ----------- -----------
Transactions
(Note 4):
<PAGE>
Net Assets: Total increase in net assets 6,281,546 34,746,704
Beginning of year 78,521,742 43,775,038
----------- -----------
End of year $84,803,288 $78,521,742
=========== ===========
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<PAGE>
<TABLE>
Financial Highlights
<CAPTION>
Class A Class B
For the For the
Period Period
The following per share data and ratios have been derived Feb 28, Feb 28,
from information provided in the financial statements. For the Year 1992++ to For the Year 1992++ to
Ended July 31, July 31, Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1994 1993 1992 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.07 $ 10.68 $ 10.00 $ 11.07 $ 10.68 $ 10.00
Operating -------- -------- -------- -------- -------- --------
Performance: Investment income--net .58 .63 .25 .53 .57 .23
Realized and unrealized gain (loss)
on investments--net (.43) .42 .68 (.43) .42 .68
-------- -------- -------- -------- -------- --------
Total from investment operations .15 1.05 .93 .10 .99 .91
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.58) (.63) (.25) (.53) (.57) (.23)
Realized gain on investments--net (.15) (.03) -- (.15) (.03) --
In excess of realized gain on
investments--net (.01) -- -- (.01) -- --
-------- -------- -------- -------- -------- --------
Total dividends and distributions (.74) (.66) (.25) (.69) (.60) (.23)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 10.48 $ 11.07 $ 10.68 $ 10.48 $ 11.07 $ 10.68
======== ======== ======== ======== ======== ========
Total Based on net asset value per share 1.26% 10.08% 9.44%+++ 0.75% 9.53% 9.22%+++
Investment ======== ======== ======== ======== ======== ========
Return:**
Ratios to Expenses, excluding distribution
Average fees and net of reimbursement -- -- -- 62% .43% .12%*
Net Assets: ======== ======== ======== ======== ======== ========
Expenses, net of reimbursement .62% .42% .12%* 1.12% .93% .62%*
======== ======== ======== ======== ======== ========
Expenses .85% .95% 1.16%* 1.36% 1.45% 1.68%*
======== ======== ======== ======== ======== ========
Investment income--net 5.33% 5.75% 5.82%* 4.83% 5.24% 5.32%*
======== ======== ======== ======== ======== ========
Supplemental Net assets, end of period
Data: (in thousands) $ 8,367 $ 7,093 $ 4,828 $76,436 $71,429 $38,947
======== ======== ======== ======== ======== ========
Portfolio turnover 72.13% 39.37% 18.86% 72.13% 39.37% 18.86%
======== ======== ======== ======== ======== ========
<FN>
++Commencement of Operations.
+++Aggregate total investment return.
*Annualized.
**Total investment returns exclude the effects of sales loads.
<PAGE>
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Massachusetts Municipal Bond Fund (the "Fund") is part
of Merrill Lynch Multi-State Municipal Series Trust (the "Trust").
The Fund is registered under the Investment Company Act of 1940 as a
non-diversified, open-end management investment company. The Fund
offers both Class A and Class B Shares. Class A Shares are sold with
a front-end sales charge. Class B Shares must be subject to a
contingent deferred sales charge. Both classes of shares have
identical voting, dividend, liquidation and other rights and the
same terms and conditions, except that Class B Shares bear certain
expenses related to the distribution of such shares and have
exclusive voting rights with respect to matters relating to such
distribution expenditures. The following is a summary of significant
accounting policies followed by the Fund.
(a) Valuation of investments--Municipal bonds and other portfolio
securities in which the Fund invests are traded primarily in the
over-the-counter municipal bond and money markets and are valued at
the last available bid price in the over-the-counter market or on
the basis of yield equivalents as obtained from one or more dealers
that make markets in the securities. Financial futures contracts and
options thereon, which are traded on exchanges, are valued at their
settlement prices as of the close of such exchanges. Short-term
investments with a remaining maturity of sixty days or less are
valued on an amortized cost basis, which approximates market value.
Options, which are traded on exchanges, are valued at their last
sale price as of the close of such exchanges or, lacking any sales,
at the last available bid price. Securities and assets for which
market quotations are not readily available are valued at fair value
as determined in good faith by or under the direction of the Board
of Trustees of the Trust, including valuations furnished by a
pricing service retained by the Trust, which may utilize a matrix
system for valuations. The procedures of the pricing service and its
valuations are reviewed by the officers of the Trust under the
general supervision of the Trustees.
<PAGE>
(b) Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing or
the intended purchase of securities. Futures contracts are contracts
for delayed delivery of securities at a specific future date and at
a specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as re-
quired by the exchange on which the transaction is effected.
Pursuant to the contract, the Fund agrees to receive from or pay to
the broker an amount of cash equal to the daily fluctuation in value
of the contract. Such receipts or payments are known as variation
margin and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or
loss equal to the difference between the value of the contract at
the time it was opened and the value at the time it was closed.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a five-year period. Prepaid registration fees are
charged to expense as the related shares are issued.
(f) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates. Distributions in excess
of realized capital gains are due primarily to differing tax
treatments for futures transactions and post October losses.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). Effective January 1, 1994, the
investment advisory business of FAM was reorganized from a
corporation to a limited partnership. Both prior to and after the
reorganization, ultimate control of FAM was vested with Merrill
Lynch & Co., Inc. ("ML & Co."). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of ML & Co. The limited partners are ML & Co. and Fund
Asset Management, Inc. ("FAMI"), which is also an indirect wholly-
owned subsidiary of ML & Co. The Fund has also entered into
Distribution Agreements and a Distribution Plan with Merrill Lynch
Funds Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Investment Management, Inc. ("MLIM"), an
indirect wholly-owned subsidiary of ML & Co.
<PAGE>
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee based upon the average daily
value of the Fund's net assets at the following annual rates: 0.55%
of the Fund's average daily net assets not exceeding $500 million;
0.525% of average daily net assets exceeding $500 million but not
exceeding $1 billion; and 0.50% of the average daily net assets
exceeding $1.0 billion. For the year ended July 31, 1994, FAM earned
fees of $465,743, of which $199,488 was voluntarily waived.
The Fund has adopted a Plan of Distribution (the "Plan") in
accordance with Rule 12b-1 under the Investment Company Act of 1940
pursuant to which the Fund pays the Distributor ongoing account
maintenance and distribution fees relating to Class B Shares, which
are accrued daily and paid monthly at the annual rates of 0.25% and
0.25%, respectively, of the average daily net assets of the Class B
Shares of the Fund. Pursuant to a sub-agreement with the
Distributor, Merrill Lynch, Pierce, Fenner & Smith, Inc. ("MLPF&S"),
an affilliate of ML & Co., also provides account maintenance and
distribution services to the Fund. The ongoing account maintenance
fee compensates the Distributor and MLPF&S for providing
distribution and account maintenance services to Class B
shareholders. As authorized by the Plan, the Distributor has entered
into an agreement with MLPF&S, an affiliate of ML & Co., which
provides for the compensation of MLPF&S for providing distribution-
related services to the Fund. For the year ended July 31, 1994, MLFD
earned underwriting discounts of $4,115, and MLPF&S earned dealer
concessions of $35,085 on sales of the Fund's Class A Shares.
MLPF&S also received contingent deferred sales charges of $258,962
for the sale of Class B Shares during the period.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, FAMI, PSI, MLIM, MLFD, FDS, MLPF&S, and/or ML &
Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended July 31, 1994 were $63,776,218 and $57,233,376,
respectively.
Net realized and unrealized gains (losses) as of July 31, 1994 were
as follows:
<PAGE>
Realized
Gains Unrealized
Total (Losses) Gains
Long-term investments $ (500,555) $ 341,613
Financial futures contracts 522,325 --
----------- -----------
Total $ 21,770 $ 341,613
=========== ===========
As of July 31, 1994, net unrealized depreciation for Federal income
tax purposes aggregated $341,613, of which $1,838,644 related to
appreciated securities and $1,497,031 related to depreciated
securities. The aggregate cost of investments at July 31, 1994 for
Federal income tax purposes was $84,103,398.
NOTES TO FINANCIAL STATEMENTS (concluded)
4. Beneficial Interest Transactions:
Net increase in net assets derived from beneficial interest
transactions was $11,216,720 and $31,906,779 for the years ended
July 31, 1994, and July 31, 1993, respectively.
Transactions in shares of beneficial interest for Class A and Class
B Shares were as follows:
Class A Shares for the Dollar
Year Ended July 31, 1994 Shares Amount
Shares sold 307,747 $ 3,438,464
Shares issued to shareholders
in reinvestment of dividends
and distributions 19,821 217,018
----------- -----------
Total issued 327,568 3,655,482
Shares redeemed (169,861) (1,887,059)
----------- -----------
Net increase 157,707 $ 1,768,423
=========== ===========
<PAGE>
Class A Shares for the Dollar
Year Ended July 31, 1993 Shares Amount
Shares sold 354,701 $ 3,828,180
Shares issued to shareholders
in reinvestment of dividends
and distributions 13,015 138,508
----------- -----------
Total issued 367,716 3,966,688
Shares redeemed (179,030) (1,881,614)
----------- -----------
Net increase 188,686 $ 2,085,074
=========== ===========
Class B Shares for the Dollar
Year Ended July 31, 1994 Shares Amount
Shares sold 1,809,726 $19,990,791
Shares issued to shareholders
in reinvestment of dividends
and distributions 254,694 2,796,404
----------- -----------
Total issued 2,064,420 22,787,195
Shares redeemed (1,222,971) (13,338,898)
----------- -----------
Net increase 841,449 $ 9,448,297
=========== ===========
Class B Shares for the Dollar
Year Ended July 31, 1993 Shares Amount
Shares sold 3,127,040 $33,253,505
Shares issued to shareholders
in reinvestment of dividends
and distributions 159,939 1,704,515
----------- -----------
Total issued 3,286,979 34,958,020
Shares redeemed (481,243) (5,136,315)
----------- -----------
Net increase 2,805,736 $29,821,705
=========== ===========
<PAGE>
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
Kenneth S. Axelson, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Jerry Weiss, Secretary
Custodian
National Westminster Bank NJ
10 Exchange Place
Jersey City, New Jersey 07302
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
<PAGE>
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
Merrill Lynch Massachusetts 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
Massachusetts Municipal Bond Fund of Merrill Lynch Multi-State
Municipal Series Trust as of July 31, 1994, the related statements
of operations for the year then ended and changes in net assets for
each of the years in the two-year period then ended, and the
financial highlights for each of the years in the two-year period
then ended and for the period February 28, 1992 (commencement of
operations) to July 31, 1992. These financial statements and the
financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at July 31,
1994 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch Massachusetts Municipal Bond Fund of Merrill Lynch
Multi-State Municipal Series Trust as of July 31, 1994, the results
of its operations, the changes in its net assets, and the financial
highlights for the respective stated periods in conformity with
generally accepted accounting principles.
<PAGE>
Deloitte & Touche LLP
Princeton, New Jersey
August 29, 1994
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION
All of the net investment income distributions paid monthly by
Merrill Lynch Massachusetts Municipal Bond Fund during its taxable
year ended July 31, 1994 qualify as tax-exempt interest dividends
for Federal income tax purposes.
Additionally, the Fund distributed short-term capital gains of
$.056479 per share and long-term capital gains of $.102848 per share
to shareholders of record on December 22, 1993.
Please retain this information for your records.
APPENDIX: GRAPHIC AND IMAGE MATERIAL.
Item 1:
Total Return Based on a $10,000 Investment--Class A Shares*
A line graph depicting the growth of an investment in the Fund's
Class A Shares compared to growth of an investment in the Lehman
Brothers Municipal Bond Index. Beginning and ending values are:
<PAGE>
2/28/92** 7/94
ML Massachusetts Municipal
Bond Fund++ $ 9,600 $11,711
Lehman Brothers Municipal
Bond Index++++ $10,000 $11,857
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of Operations.
++ML Massachusetts Municipal Bond Fund invests primarily in
long-term investment-grade obligations issued by or on the behalf of
the Commonwealth of Massachusetts, 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.
<PAGE>
Item 2:
Total Return Based on a $10,000 Investment--Class B Shares*
A line graph depicting the growth of an investment in the Fund's
Class B Shares compared to growth of an investment in the Lehman
Brothers Municipal Bond Index. Beginning and ending values are:
2/28/92** 7/94
ML Massachusetts Municipal
Bond Fund++ $10,000 $11,852
Lehman Brothers Municipal
Bond Index++++ $10,000 $11,857
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of Operations.
++ML Massachusetts Municipal Bond Fund invests primarily in
long-term investment-grade obligations issued by or on the behalf of
the Commonwealth of Massachusetts, 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.
