MERRILL LYNCH
MASSACHUSETTS
MUNICIPAL
BOND FUND
FUND LOGO
Annual Report
July 31, 1995
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.
<PAGE>
Merrill Lynch Massachusetts
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011
TO OUR SHAREHOLDERS
In the July quarter, economic data generally showed evidence of
slowing activity. Gross domestic product growth for the first three
months of 1995 was reported at 2.7%, the weakest showing in the past
18 months. Other signs of a sluggish economy included lackluster
durable goods orders, slowing growth in the manufacturing sector,
and three consecutive months of declines in the Index of Leading
Economic Indicators, an occurrence which has often (but not always)
forecast recessions. As a result, concerns arose that the economic
"soft landing" could turn into an actual recession. However, at the
same time there were also expectations that a few months of very
slow or zero growth would be followed by a pickup in economic
activity later in the year. This view was supported by the stronger-
than-expected employment data for June and an upward revision in
May's employment figures, as well as improving housing activity
measures and consumer confidence surveys.
<PAGE>
Thus far in 1995, economic developments have been very positive for
the US stock and bond markets, and most US stock market averages
recently have attained record levels. In contrast, the US dollar has
been persistently weak, especially relative to the yen. Following
the Federal Reserve Board's cut in short-term interest rates in
early July, continued signs of a moderating expansion and well-
contained inflationary pressures could provide further assurance
that the peak in US interest rates is behind us, creating a stronger
foundation for higher stock and bond prices. On the other hand,
indications of reaccelerating growth and increasing inflationary
pressures would likely suggest that higher interest rates are on the
horizon, a negative development for the US financial markets. The
outcome of the current deliberations on reducing the Federal budget
deficit will also play a role in the investment outlook for the US
capital markets.
The Municipal Market
Tax-exempt bond yields exhibited considerable volatility during the
three months ended July 31, 1995. Municipal bond yields initially
fell throughout May into early June as evidence of a slowing
domestic economy and moderate inflationary pressures accumulated. As
measured by the Bond Buyer Revenue Bond Index, yields of A-rated,
uninsured tax-exempt revenue bonds declined 35 basis points (0.35%)
to 5.94%. By late June, however, amid signs of a potentially
resurgent economy, particularly in the rebounding housing sector,
bond yields returned to their April quarter's levels of
approximately 6.30%. The lowering of short-term interest rates by
the Federal Reserve Board in early July temporarily restored
investor confidence and tax-exempt bond yields fell to 6.05%. As
additional economic indicators were released during July, investors
again saw signs that the economy was regaining momentum and that the
Federal Reserve Board action had been premature. Fears that an
expanding economy would have negative inflationary consequences
pushed municipal bond yields higher, ending the July 31, 1995
quarter essentially unchanged at 6.27%. US Treasury bond yields
exhibited a similar pattern of volatility during the July quarter.
However, US Treasury bond yields continued to decline, falling
approximately 50 basis points to 6.85%.
Municipal bonds have underperformed US Treasury securities for a
number of reasons. The record highs of the US equity market have
continued to attract retail investors seeking further capital gains.
Investor demand has also been diminished in recent months by the
"sticker shock" effect that periodically affects the municipal bond
market. Investors who had become accustomed to purchasing tax-exempt
securities in the 6.50%-7.00% range six to seven months ago have
demonstrated understandable reluctance to purchase similar
securities at current levels. The strong fundamental structure of
the municipal bond market, however, suggests that such hesitancy may
prove costly.
<PAGE>
However, the major reason by far for the tax-exempt market's recent
underperformance has been concerns regarding the implication for
municipal bonds' tax advantage resulting from various proposed tax
law changes (for example, flat tax, value-added tax or national
sales tax) that have reduced investor demand for tax-exempt
products. Such concerns are likely to quickly recede as investors
realize that such, if any, changes are unlikely to be enacted before
late 1996 at the earliest. Long-term investors will also recall 1986
when similar tax proposals were made, municipal bond yields
initially rose, in some instances, to over 100% of taxable yields.
Tax-exempt bond yields quickly declined as investors' fears proved
to be unfounded.
The municipal bond market's strong technical position has diminished
somewhat in recent months. New-issue supply over the last six months
has totaled approximately $71 billion, or a decline of over 20%
compared to the corresponding period in 1994. In recent months,
however, municipalities issued approximately $41 billion in new
securities, which represents only a 6% decline versus the same
period a year earlier. Investor demand has remained muted in recent
months despite significant funds available to investors. By the end
of July investors, both individual and institutional, are expected
to have received as much as $80 billion from tax-exempt bond
maturities, coupon payments and the proceeds of early bond
redemptions. Little new money has entered the municipal market in
recent months, largely in response to the factors mentioned above.
Consequently, much of the technical support the municipal market
enjoyed earlier this year has evaporated, causing municipal bond
yields to decline at a slower rate than their taxable counterparts.
However, the recent relative underperformance of municipal bonds has
made them particularly attractive to long-term investors. Tax-exempt
bonds currently yield well over 90% of US Treasury securities. In
some instances, A-rated, long-term revenue bonds have yielded almost
95% of US Treasury bonds. Analysts usually consider municipal bonds
yielding over 82% of US Treasury securities to be historically
attractive. With inflation-adjusted, "real" after-tax equivalent tax-
exempt yields of over 6.50%, municipal securities appear to
represent considerable value.
<PAGE>
Current tax-exempt yield levels appear to be overcompensating for
any proposed changes in tax law that can reasonably be expected to
be enacted. As Congressional hearings on this matter would continue
into 1996, and the revenue losses resultant from such changes become
more apparent, the likelihood of any significant changes to tax
codes and the resultant decline of municipal bonds' inherent tax
advantage should decline. Under such a scenario, tax-exempt bond
yields would quickly decline and currently available municipal bond
yields would return to their normal historic relationship.
Fiscal Year in Review
At the beginning of the Fund's fiscal year, conditions in the bond
market caused us to become defensive and to look to reduce the
volatility of the Fund's net asset value. As the backup in interest
rates became extreme, we anticipated an improving situation for
bonds and extended maturities through spring of 1995. As the bond
market improved, we continued to believe that the Federal Reserve
Board would need to relax monetary conditions to encourage growth,
and the Fund participated in the resulting municipal bond market
rally. After the Federal Reserve Board signaled a change in monetary
policy by lowering interest rates, investors initially showed their
approval. However, investor sentiment turned sharply negative and
the market abruptly reversed course, causing a severe backup in
interest rates. Nevertheless, our strategy of being fully invested
in a generally declining interest rate environment produced a
positive total return for our shareholders.
Municipal bond market yields, as measured by the Bond Buyer Revenue
Bond Index, began and ended the year almost unchanged at 6.47% and
6.27%, respectively. This belies the tremendous fluctuations in
yields during the year from a high of 7.37% to a low of 5.94%.
During the year ended July 31, 1995, we attempted to take advantage
of opportunities to purchase and hold securities which would benefit
the Fund as long-term holdings. Many of the higher-yielding health
care holdings, for example, represent value which investors in
general have yet to recognize. We believe that this strategy will
benefit shareholders over time.
Looking ahead, we are cautious regarding the prospects for a
continuation of a bond market rally and may look for opportunities
to seek to protect the Fund's net asset value.
In Conclusion
We appreciate your ongoing interest in Merrill Lynch Massachusetts
Municipal Bond Fund, and we look forward to assisting you with your
financial needs in the months and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
<PAGE>
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
September 8, 1995
PERFORMANCE DATA
About Fund Performance
Since October 21, 1994, investors have been able to purchase shares
of the Fund through the Merrill Lynch Select Pricing SM System,
which offers four pricing alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees. Class A Shares are available only to eligible investors.
* 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.
* Class C Shares are subject to a distribution fee of 0.35% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.10% (but no distribution fee).
<PAGE>
Performance data for all of the Fund's shares are presented in the
"Total Return Based on a $10,000 Investment" graphs on page 5 and
the "Recent Performance Results" table below. Data for the Fund's
Class A and Class B Shares are presented in the "Performance
Summary" and "Average Annual Total Return" tables on pages 5 and 6.
Data for Class C and Class D Shares are also presented in the
"Aggregate Total Return" tables on page 5.
The "Recent Performance Results" table shows investment results
before the deduction of any sales charges for Class A and Class B
Shares for the 12-month and 3-month periods ended July 31, 1995 and
for Class C and Class D Shares for the since inception and 3-month
periods ended July 31, 1995. All data in this table assume
imposition of the actual total expenses incurred by each class of
shares during the relevant period.
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. Dividends paid to each class
of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
7/31/95 4/30/95 7/31/94++ % Change++ % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $10.46 $10.36 $10.48 -0.19% +0.97%
Class B Shares* 10.46 10.36 10.48 -0.19 +0.97
Class C Shares* 10.46 10.35 10.03 +4.29 +1.06
Class D Shares* 10.47 10.36 10.03 +4.39 +1.06
Class A Shares--Total Return* +5.35(1) +2.30(2)
Class B Shares--Total Return* +4.82(3) +2.17(4)
Class C Shares--Total Return* +8.13(5) +2.24(6)
Class D Shares--Total Return* +8.70(7) +2.37(8)
Class A Shares--Standardized 30-day Yield 5.13%
Class B Shares--Standardized 30-day Yield 4.84%
Class C Shares--Standardized 30-day Yield 4.73%
Class D Shares--Standardized 30-day Yield 5.03%
<PAGE>
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
++Investment results shown for Class C and Class D Shares are since
inception (10/21/94).
(1)Percent change includes reinvestment of $0.554 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.139 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.502 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.126 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.361 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.123 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.406 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.137 per share ordinary
income dividends.
</TABLE>
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment--Class A Shares and Class B Shares
A line graph depicting the growth of an investment in the Fund's
Class A Shares and Class B Shares compared to growth of an
investment in the Lehman Brothers Municipal Bond Index. Beginning
and ending values are:
2/28/92** 7/95
ML Massachusetts Municipal
Bond Fund++--Class A Shares* $ 9,600 $12,338
ML Massachusetts Municipal
Bond Fund++--Class B Shares* $10,000 $12,533
Lehman Brothers Municipal
Bond Index++++ $10,000 $12,790
<PAGE>
Total Return Based on a $10,000 Investment--Class C Shares and Class D Shares
A line graph depicting the growth of an investment in the Fund's
Class C Shares and Class D Shares compared to growth of an
investment in the Lehman Brothers Municipal Bond Index. Beginning
and ending values are:
10/21/94** 7/95
ML Massachusetts Municipal
Bond Fund++--Class C Shares* $10,000 $10,713
ML Massachusetts Municipal
Bond Fund++--Class D Shares* $ 9,600 $10,436
Lehman Brothers Municipal
Bond Index++++ $10,000 $11,107
[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.
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 6/30/95 +7.33% +3.04%
Inception (2/28/92)
through 6/30/95 +7.65 +6.34
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/95 +6.88% +2.88%
Inception (2/28/92) through 6/30/95 +7.10 +6.85
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced
to 0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
Aggregate Total Return
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Inception (10/21/94) through 6/30/95 +7.53% +6.53%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced
to 0% after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Inception (10/21/94) through 6/30/95 +8.06% +3.74%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
PERFORMANCE DATA (concluded)
<PAGE>
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
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%
1994 11.22 9.84 -- 0.571 - 7.33
1/1/95-7/31/95 9.84 10.46 -- 0.309 + 9.59
------ ------
Total $0.103 Total $2.074
Cumulative total return as of 7/31/95: +28.52%**
<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
include sales charge; results would be lower if sales charge was
included.
</TABLE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
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
1994 11.22 9.84 -- 0.518 - 7.80
1/1/95-7/31/95 9.84 10.46 -- 0.279 + 9.28
------ ------
Total $0.103 Total $1.891
Cumulative total return as of 7/31/95: +26.33%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
<PAGE>
PORTFOLIO ABBREVIATIONS
To simplify the listings 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)
CARS Complementary Auction Rate Securities
HFA Housing Finance Agency
INFLOS Inverse Floating Rate Municipal Bonds
PCR Pollution Control Revenue Bonds
S/F Single-Family
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Massachusetts--95.3%
<S> <S> <C> <S> <C>
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 $ 904
NR* Baa 1,000 Greater New Bedford, Massachusetts, Regional Refuse Management
District Revenue Bonds (Massachusetts Landfill), AMT, 5.875% due
5/01/2013 957
Massachusetts Bay Transportation Authority Revenue Bonds (Massachusetts
General Transportation Systems), Series A:
A+ A1 1,500 7% due 3/01/2021 1,686
A+ A1 2,000 Refunding, 7% due 3/01/2011 2,248
AAA Aaa 1,000 Massachusetts Education Loan Authority, Educational Loan Revenue Bonds,
AMT, Series A, Issue E, 7.375% due 1/01/2012 (b) 1,088
Massachusetts State Health and Educational Facilities Authority
Revenue Bonds:
AAA Aaa 2,000 (Beth Israel), INFLOS, 8.015% due 7/01/2025 (b)(f) 1,895
AAA Aaa 3,030 (Boston College), Series J, 6.625% due 7/01/2021 (e) 3,183
A A1 1,000 (Brigham and Women's Hospital), Series C, 7% due 6/01/2018 1,063
A A1 2,520 (Brigham and Women's Hospital), Series C, 6.75% due 6/01/2021 2,598
A1+ VMIG1++ 200 (Capital Asset Program), VRDN, Series C, 3.75% due 7/01/2005 (a)(d) 200
AAA Aaa 5,150 (Central Massachusetts Medical Center), CARS, Series B, 8.88% due
6/23/2022 (b)(f) 5,556
AAA Aaa 2,500 (Newton Wellesley Hospital), Series D, 7% due 7/01/2015 (d) 2,701
AAA Aaa 1,000 (Northeastern University), Series E, 6.55% due 10/01/2022 (d) 1,058
NR* Ba 1,000 Refunding (New England Memorial Hospital), Series B, 6.125% due
7/01/2013 807
AAA Aaa 1,000 Refunding (Stonehill College), Series E, 6.60% due 7/01/2020 (d) 1,062
NR* A 2,335 Refunding (Wheaton College), Series C, 5.25% due 7/01/2019 2,095
BBB Baa1 2,000 (Sisters of Providence Health Systems), Series A, 6.625% due
11/15/2022 1,890
<PAGE>
A+ A1 2,000 Massachusetts State, HFA, Housing Projects, Revenue Refunding
Bonds, Series A, 6.375% due 4/01/2021 1,993
Massachusetts State, HFA, Revenue Bonds (Residential Development) (c):
AAA Aaa 2,690 Series C, 6.875% due 11/15/2011 2,825
AAA Aaa 5,000 Series C, 6.90% due 11/15/2021 5,210
AAA Aaa 1,000 Series D, Section 8, 6.875% due 11/15/2021 1,040
Massachusetts State, HFA, S/F Housing Revenue Bonds, AMT:
A+ Aa 1,700 Series 38, 7.20% due 12/01/2026 1,794
A+ Aa 2,000 Series 40, 6.65% due 12/01/2027 2,026
</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>
BBB Baa2 $ 1,000 Massachusetts State Industrial Finance Agency, PCR, Refunding (Boston
Edison Company Project), Series A, 5.75% due 2/01/2014 $ 915
Massachusetts State Industrial Finance Agency Revenue Bonds:
AAA Aaa 1,000 (Babson College), Series A, 6.50% due 10/01/2022 (d) 1,056
AAA Aaa 3,175 (Brandeis University), Series C, 6.80% due 10/01/2019 (d) 3,403
A+ A1 1,795 Refunding (Holy Cross College-II), 6.375% due 11/01/2015 1,843
A1+ VMIG1++ 2,400 Massachusetts State Municipal Wholesale Electric Company, Power
Supply System Revenue Bonds, VRDN, Series C, 3.65% due 7/01/2019 (a) 2,400
A1+ P1 100 Massachusetts State Port Authority Revenue Refunding Bonds, VRDN,
Series A, 3.60% due 7/01/2015 (a) 100
A+ A1 3,000 Massachusetts State Turnpike Authority, Revenue Refunding Bonds,
Series A, 5% due 1/01/2020 2,590
AA- Aa 1,680 Massachusetts State Water Pollution Abatement Trust, Revenue Secured
Loan Program, Series A, 6.375% due 2/01/2015 1,744
Massachusetts State Water Resource Authority Revenue Bonds:
A A 2,000 Refunding, Series C, 6% due 12/01/2011 2,029
A A 6,000 Series A, 6.50% due 7/15/2019 6,331
<PAGE>
AAA Aaa 1,210 Southern Berkshire, Massachusetts, Regional School District Revenue
Bonds, UT, 7% due 4/15/2011 (d) 1,327
NR* Baa 1,500 Springfield, Massachusetts, School Project, Loan Revenue Bonds,
Series B, 7.10% due 9/01/2011 1,599
Guam--1.3%
BBB NR* 1,000 Guam Power Authority Revenue Bonds, Series A, 6.75% due 10/01/2024 1,012
Total Investments (Cost--$70,897)--96.6% 72,228
Other Assets Less Liabilities--3.4% 2,512
-------
Net Assets--100.0% $74,740
=======
<FN>
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at July 31, 1995.
(b)AMBAC Insured.
(c)FNMA Collateralized.
(d)MBIA Insured.
(e)FGIC Insured.
(f)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, 1995.
*Not Rated.
++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>
FINANCIAL INFORMATION
<PAGE>
<TABLE>
Statement of Assets and Liabilities as of July 31, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$70,896,692) (Note 1a) $ 72,227,723
Cash 5,360
Receivables:
Securities sold $ 2,478,604
Interest 897,018
Beneficial interest sold 35,005 3,410,627
------------
Deferred organization expenses (Note 1e) 16,337
Prepaid registration fees and other assets (Note 1e) 15,675
------------
Total assets 75,675,722
------------
Liabilities: Payables:
Beneficial interest redeemed 727,330
Dividends to shareholders (Note 1f) 71,212
Investment adviser (Note 2) 33,258
Distributor (Note 2) 27,299 859,099
------------
Accrued expenses and other liabilities 77,006
------------
Total liabilities 936,105
------------
Net Assets: Net assets $ 74,739,617
============
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 63,368
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 639,665
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 4,131
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 7,171
Paid-in capital in excess of par 74,267,863
Accumulated realized capital losses on investments--net
(Note 5) (1,500,835)
Accumulated distribution in excess of realized capital
gains--net (72,777)
Unrealized appreciation on investments--net 1,331,031
------------
Net assets $ 74,739,617
============
<PAGE>
Net Asset Value: Class A--Based on net assets of $6,630,045 and 633,679
shares of beneficial interest outstanding $ 10.46
============
Class B--Based on net assets of $66,927,212 and 6,396,651
shares of beneficial interest outstanding $ 10.46
============
Class C--Based on net assets of $431,940 and 41,312 shares
of beneficial interest outstanding $ 10.46
============
Class D--Based on net assets of $750,420 and 71,707 shares
of beneficial interest outstanding $ 10.47
============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
July 31, 1995
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 4,976,833
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 433,979
Account maintenance and distribution fees--Class B (Note 2) 355,433
Printing and shareholder reports 67,718
Professional fees 65,355
Transfer agent fees--Class B (Note 2) 51,090
Accounting services (Note 2) 49,939
Registration fees (Note 1e) 22,306
Amortization of organization expenses (Note 1e) 10,370
Custodian fees 7,070
Pricing fees 5,654
Transfer agent fees--Class A (Note 2) 4,526
Trustees' fees and expenses 4,034
Account maintenance and distribution fees--Class C (Note 2) 917
Account maintenance fees--Class D (Note 2) 322
Transfer agent fees--Class D (Note 2) 214
Transfer agent fees--Class C (Note 2) 129
Other 5,697
------------
Total expenses before reimbursement 1,084,753
Reimbursement of expenses (Note 2) (22,680)
------------
Total expenses after reimbursement 1,062,073
------------
Investment income--net 3,914,760
------------
<PAGE>
Realized & Realized loss on investments--net (1,500,843)
Unrealized Change in unrealized appreciation on investments--net 989,418
Gain (Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 3,403,335
(Notes 1b, 1d ============
& 3):
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended July 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 3,914,760 $ 4,128,004
Realized gain (loss) on investments--net (1,500,843) 21,770
Change in unrealized appreciation on investments--net 989,418 (3,726,694)
------------ ------------
Net increase in net assets resulting from operations 3,403,335 423,080
------------ ------------
Dividends & Investment income--net:
Distributions to Class A (398,237) (441,160)
Shareholders Class B (3,492,562) (3,686,844)
(Note 1f): Class C (7,152) --
Class D (16,809) --
Realized gain on investments--net:
Class A -- (119,994)
Class B -- (1,037,479)
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 (3,914,760) (5,358,254)
------------ ------------
Beneficial Net increase (decrease) in net assets derived from
Interest beneficial interest transactions (9,552,246) 11,216,720
Transactions ------------ ------------
(Note 4):
Net Assets: Total increase (decrease) in net assets (10,063,671) 6,281,546
Beginning of year 84,803,288 78,521,742
------------ ------------
End of year $ 74,739,617 $ 84,803,288
============ ============
<PAGE>
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
Class A
For the
Period
The following per share data and ratios have been derived Feb. 28,
from information provided in the financial statements. 1992++ to
For the Year Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.48 $ 11.07 $ 10.68 $ 10.00
Operating -------- -------- -------- --------
Performance: Investment income--net .56 .58 .63 .25
Realized and unrealized gain (loss) on
investments--net (.02) (.43) .42 .68
-------- -------- -------- --------
Total from investment operations .54 .15 1.05 .93
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.56) (.58) (.63) (.25)
Realized gain on investments--net -- (.15) (.03) --
In excess of realized gain on investments--net -- (.01) -- --
-------- -------- -------- --------
Total dividends and distributions (.56) (.74) (.66) (.25)
-------- -------- -------- --------
Net asset value, end of period $ 10.46 $ 10.48 $ 11.07 $ 10.68
======== ======== ======== ========
Total Investment Based on net asset value per share 5.35% 1.26% 10.08% 9.44%+++
Return:** ======== ======== ======== ========
Ratios to Expenses, net of reimbursement .88% .62% .42% .12%*
Average ======== ======== ======== ========
Net Assets: Expenses .91% .85% .95% 1.16%*
======== ======== ======== ========
Investment income--net 5.42% 5.33% 5.75% 5.82%*
======== ======== ======== ========
<PAGE>
Supplemental Net assets, end of period (in thousands) $ 6,630 $ 8,367 $ 7,093 $ 4,828
Data: ======== ======== ======== ========
Portfolio turnover 89.62% 72.13% 39.37% 18.86%
======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class B
For the
Period
The following per share data and ratios have been derived Feb. 28,
from information provided in the financial statements. 1992++ to
For the Year Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.48 $ 11.07 $ 10.68 $ 10.00
Operating -------- -------- -------- --------
Performance: Investment income--net .50 .53 .57 .23
Realized and unrealized gain (loss) on
investments--net (.02) (.43) .42 .68
-------- -------- -------- --------
Total from investment operations .48 .10 .99 .91
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.50) (.53) (.57) (.23)
Realized gain on investments--net -- (.15) (.03) --
In excess of realized gain on investments--net -- (.01) -- --
-------- -------- -------- --------
Total dividends and distributions (.50) (.69) (.60) (.23)
-------- -------- -------- --------
Net asset value, end of period $ 10.46 $ 10.48 $ 11.07 $ 10.68
======== ======== ======== ========
Total Investment Based on net asset value per share 4.82% .75% 9.53% 9.22%+++
Return:** ======== ======== ======== ========
<PAGE>
Ratios to Expenses, excluding account maintenance and
Average distribution fees and net of reimbursement .89% .62% .43% .12%*
Net Assets: ======== ======== ======== ========
Expenses, net of reimbursement 1.39% 1.12% .93% .62%*
======== ======== ======== ========
Expenses 1.42% 1.36% 1.45% 1.68%*
======== ======== ======== ========
Investment income--net 4.91% 4.83% 5.24% 5.32%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 66,927 $ 76,436 $ 71,429 $ 38,947
Data: ======== ======== ======== ========
Portfolio turnover 89.62% 72.13% 39.37% 18.86%
======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. October 21, 1994++
to July 31, 1995
Increase (Decrease) in Net Asset Value: Class C Class D
<S> <S> <C> <C>
Per Share Net asset value, beginning of period $ 10.03 $ 10.03
Operating -------- --------
Performance: Investment income--net .37 .42
Realized and unrealized gain on investments--net .43 .44
-------- --------
Total from investment operations .80 .86
-------- --------
Less dividends from investment income--net (.37) (.42)
-------- --------
Net asset value, end of period $ 10.46 $ 10.47
-------- --------
<PAGE>
Total Investment Based on net asset value per share 8.13%+++ 8.70%+++
Return:** ======== ========
Ratios to Expenses, excluding account maintenance and distribution
Average fees and net of reimbursement .96%* .94%*
Net Assets: ======== ========
Expenses, net of reimbursement 1.56%* 1.04%*
======== ========
Expenses 1.56%* 1.04%*
======== ========
Investment income--net 4.68%* 5.22%*
======== ========
Supplemental Net assets, end of period (in thousands) $ 432 $ 750
Data: ======== ========
Portfolio turnover 89.62% 89.62%
======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch 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 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.
<PAGE>
(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.
* Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures contracts
are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a
contract, the Fund deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is
effected. Pursuant to the contract, the Fund agrees to receive from
or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are
known as variation margin and are recorded by the Fund as unrealized
gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
<PAGE>
(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.
NOTES TO FINANCIAL STATEMENTS (concluded)
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee based upon the average daily
value of the Fund's net assets at the following annual rates: 0.55%
of the Fund's average daily net assets not exceeding $500 million;
0.525% of average daily net assets in excess of $500 million but not
exceeding $1 billion; and 0.50% of average daily net assets in
excess of $1 billion. For the year ended July 31, 1995, FAM earned
fees of $433,979, of which $22,680 was voluntarily waived.
Pursuant to the distribution plans ("the Distribution Plans")
adopted by the Fund in accordance with Rule 12b-1 under the
Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are
accrued daily and paid monthly at annual rates based upon the
average daily net assets of the shares as follows:
<PAGE>
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.25%
Class C 0.25% 0.35%
Class D 0.10% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the year ended July 31, 1995, 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 $189 $1,838
Class D $621 $6,434
For the year ended July 31, 1995, MLPF&S received contingent
deferred sales charges of $294,149 and $73 relating to transactions
in Class B and Class C Shares, respectively.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, MLPF&S, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended July 31, 1995 were $66,125,029 and $78,274,484,
respectively.
Net realized and unrealized gains (losses) as of July 31, 1995 were
as follows:
<PAGE>
Realized Unrealized
Losses Gains
Long-term investments $ (1,058,390) $ 1,331,031
Financial futures contracts (442,453) --
------------ ------------
Total $ (1,500,843) $ 1,331,031
============ ============
As of July 31, 1995, net unrealized appreciation for Federal income
tax purposes aggregated $1,331,031, of which $2,066,959 related to
appreciated securities and $735,928 related to depreciated
securities. The aggregate cost of investments at July 31, 1995 for
Federal income tax purposes was $70,896,692.
4. Beneficial Interest Transactions:
Net increase (decrease) in net assets derived from beneficial
interest transactions was $(9,552,246) and $11,216,720 for the years
ended July 31, 1995 and July 31, 1994, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares
for the Year Ended Dollar
July 31, 1995 Shares Amount
Shares sold 117,446 $ 1,163,219
Shares issued to share-
holders in reinvestment
of dividends 15,843 174,421
----------- ------------
Total issued 133,289 1,337,640
Shares redeemed (298,026) (3,003,666)
----------- ------------
Net decrease (164,737) $ (1,666,026)
=========== ============
Class A Shares
for the Year Ended Dollar
July 31, 1994 Shares Amount
Shares sold 307,747 $ 3,438,464
Shares issued to share-
holders 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 B Shares
for the Year Ended Dollar
July 31, 1995 Shares Amount
Shares sold 958,141 $ 9,838,263
Shares issued to share-
holders in reinvestment
of dividends 184,447 1,882,663
----------- ------------
Total issued 1,142,588 11,720,926
Shares redeemed (2,039,329) (20,760,936)
----------- ------------
Net decrease (896,741) $ (9,040,010)
=========== ============
Class B Shares
for the Year Ended Dollar
July 31, 1994 Shares Amount
Shares sold 1,809,726 $ 19,990,791
Shares issued to share-
holders 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 C Shares for the
Period Oct. 21, 1994++ to Dollar
July 31, 1995 Shares Amount
Shares sold 67,137 $ 696,018
Shares issued to share-
holders in reinvestment
of dividends 528 5,534
----------- ------------
Total issued 67,665 701,552
Shares redeemed (26,353) (280,287)
----------- ------------
Net increase 41,312 $ 421,265
=========== ============
<PAGE>
[FN]
++Commencement of Operations.
Class D Shares for the
Period Oct. 21, 1994++ to Dollar
July 31, 1995 Shares Amount
Shares sold 78,584 $ 802,915
Shares issued to share-
holders in reinvestment
of dividends 312 3,255
----------- ------------
Total issued 78,896 806,170
Shares redeemed (7,189) (73,645)
----------- ------------
Net increase 71,707 $ 732,525
=========== ============
[FN]
++Commencement of Operations.
5. Capital Loss Carryforward:
At July 31, 1995, the Fund had a net capital loss carryforward of
approximately $1,315,000, all of which expires in 2003. This amount
will be available to offset like amounts of any future taxable
gains.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
Merrill Lynch Massachusetts Municipal Bond
Fund of Merrill Lynch Multi-State Municipal
Series Trust:
<PAGE>
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, 1995, 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 three-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,
1995 by correspondence with the custodian. 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, 1995, 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, 1995
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid monthly by
Merrill Lynch Massachusetts Municipal Bond Fund during its taxable
year ended July 31, 1995 qualify as tax-exempt interest dividends
for Federal income tax purposes.
Additionally, there were no capital gains distributions during the
year.
Please retain this information for your records.
<PAGE>
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Jerry Weiss, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
