MERRILL LYNCH
MASSACHUSETTS
MUNICIPAL
BOND FUND
[GRAPHIC OMITTED]
STRATEGIC
Performance
Semi-Annual Report
January 31, 1999
<PAGE>
Merrill Lynch Massachusetts Municipal Bond Fund January 31, 1999
TO OUR SHAREHOLDERS
The Municipal Market Environment
During the six months ended January 31, 1999, long-term bond yields moved
significantly lower. US domestic economic growth remained moderate, with losses
in the manufacturing sector offset by strong growth in service-oriented
industries. Industrial commodity prices recently fell to their lowest level in
over a decade. This suggests that the current positive inflationary environment
is unlikely to be challenged in the near term. Additionally, the Federal Reserve
Board lowered short-term interest rates in September, October and November, in
part to ensure that US domestic economic growth would not be negatively impacted
by ongoing weak economic growth overseas. However, various external factors, as
well as increased volatility, contributed to the decline in bond yields as they
have for much of the past year. Episodes of foreign economic instability
generated a significant "flight to quality" rally in US Treasury securities, as
well as fostering lower tax-exempt bond yields as a result. Periods of strong
foreign equity market appreciation, particularly in Asia, have at times resulted
in higher US bond yields as foreign investors have sold US fixed-income
instruments to reinvest the proceeds in their own domestic equity markets.
Additionally, the continued distraction of President Clinton's impeachment trial
added to recent interest rate volatility. However, on balance, the favorable
fundamental economic scenario supported lower bond yields. During the six-month
period ended January 31, 1999, the yield on the US Treasury 30-year bond fell
over 60 basis points (0.60%) to 5.09%, and long-term municipal revenue bond
yields declined almost 20 basis points to 5.17%, as measured by the Bond Buyer
Revenue Bond Index.
Throughout most of 1998, the municipal bond market's performance was impeded by
a significant increase in new-issue supply. However, in recent months, the
technical position of the tax-exempt market improved. Over the last 12 months,
almost $285 billion in new long-term tax-exempt bonds was underwritten, an
increase of almost 30% compared to the same period a year ago. As municipal bond
yields declined in recent years, it has taken increasingly lower bond yields to
generate the cost savings necessary to refinance remaining higher-couponed debt.
Consequently, the rate of increases in municipal bond issuance slowed in recent
quarters. During the last six months, more than $125 billion in new tax-exempt
bonds was issued, an increase of approximately 5% compared to the same period a
year ago. During the January 31, 1999 quarter, $63 billion in new long-term
municipal bonds was underwritten, representing an increase of 5% compared to the
January 31, 1998 quarter.
The pace of tax-exempt issuance continued to slow in 1999. January's monthly
issuance was less than $15 billion, representing a decline of almost 25%
compared to January 1998's volume. Additionally, investors received more than
$22 billion in coupon payments, maturities and proceeds from early redemptions
in January. Investors can also expect to receive an additional $15 billion-$18
billion in February for reinvestment. Consequently, investor demand has been
strong in recent months, easily matching, if not at times exceeding, available
supply. We will monitor this trend closely in the coming months to determine if
the supply pressures exerted in 1998 are abating and fostering a more balanced
supply/demand environment for 1999. Such an environment should allow the
tax-exempt market's performance to more closely mirror that of its taxable
counterpart.
Foreign investors have rarely been active investors in the tax-exempt bond
market since they are unable to benefit from the inherent tax advantage of
municipal securities. Consequently, the municipal bond market has not been able
to benefit from the strong flight to quality demand enjoyed by US Treasury
securities since late 1997. This inability has in large part resulted in
significantly smaller declines in municipal bond yields compared to US Treasury
securities. However, this has resulted in the opportunity to purchase tax-
exempt securities with yields very close to or, in some instances, exceeding
those of comparable US Treasury bonds. By January 31, 1999, long-term tax-exempt
bond yields were at 102% of US Treasury securities of comparable maturities,
nearly matching the least expensive level of the past year. Municipal bond yield
ratios have averaged approximately 95% for the last six months and 92% for all
of 1998. During 1997, tax-exempt bond yield ratios averaged 84%. It is likely
that the combination of the increase in new-issue volume and the "safe-haven"
status of US Treasury securities drove municipal bond yield ratios to their
present attractive levels. Should new volume decline
1
<PAGE>
Merrill Lynch Massachusetts Municipal Bond Fund January 31, 1999
and/or foreign financial markets regain stability in 1999, tax-exempt bond yield
ratios could quickly return to their more historic levels (85%-88%).
Looking ahead, the expected combination of moderate economic growth in the
United States and continued negligible inflation suggests a relatively stable
interest rate environment into early 1999. However, it is likely that foreign
financial markets will again be a critical factor in determining US bond yields.
Economic problems in Russia and Brazil remain unresolved, suggesting that
additional shocks to the world's financial system are possible. On the other
hand, the continued robustness of the US economy has led to some back up in
interest rates. However, at present these factors indicate that there is little
immediate risk of sustained significant increases in long-term bond yields.
Portfolio Strategy
During the six months ended January 31, 1999, our portfolio strategy was driven
mainly by our constructive investment outlook. A number of factors contributed
to this optimistic assessment, not the least of which was the steady decline in
the rate of inflation. While the economy proved to be surprisingly resilient
despite the economic and financial turbulence faced by much of the world during
the period, the absence of emergent price pressures suggested that the
environment for long-term interest rates would remain favorable. Consequently,
we sought to build and maintain a maximum exposure to tax-exempt securities that
possessed strong performance characteristics. In the absence of any material
growth in the Fund's assets by way of new subscriptions, funding for these
purchases originated from the sale of more seasoned holdings that we believed
faced a high probability of being redeemed on their first call date within the
next few years. During the period, we preferred to redeploy the Fund's assets at
a time of our own choosing rather than face the uncertain reinvestment risk at
some point in the future.
During the six months ended January 31, 1999, new long-term issuance of
tax-exempt debt in Massachusetts failed to keep pace with volume at the national
level. This relative decline in supply, coupled with healthy demand both from
retail and institutional investors, created an environment in which
Massachusetts issues outperformed the broader market. However, expected issuance
during the months ahead should alleviate matters somewhat since the
extraordinary relative value inherent in current market levels will likely
sustain demand for the foreseeable future.
Looking ahead, we expect to maintain our current strategy in an effort to
capitalize on the fundamentally positive environment for fixed-income markets.
In addition, we will continue to seek out opportunities to upgrade the average
quality of the portfolio. Quality spreads remain historically narrow in the
municipal marketplace, and we believe there is insufficient compensation for the
increased risk of holding lower-rated credit longer term.
In Conclusion
We appreciate your ongoing interest in Merrill Lynch Massachusetts Municipal
Bond Fund, and we look forward to serving your investment needs in the months
and years ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
Executive Vice President
/s/ Vincent R. Giordano
Vincent R. Giordano
Senior Vice President
/s/ Theodore R. Jaeckel Jr.
Theodore R. Jaeckel Jr.
Vice President and Portfolio Manager
March 8, 1999
2
<PAGE>
Merrill Lynch Massachusetts Municipal Bond Fund January 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 1/31/99
=================================================================================================================
<S> <C> <C> <C> <C>
ML Massachusetts Municipal Bond Fund Class A Shares +4.93% +0.63% +64.72% 3.54%
- -----------------------------------------------------------------------------------------------------------------
ML Massachusetts Municipal Bond Fund Class B Shares +4.40 +0.50 +59.04 3.18
- -----------------------------------------------------------------------------------------------------------------
ML Massachusetts Municipal Bond Fund Class C Shares +4.29 +0.48 +35.53 3.08
- -----------------------------------------------------------------------------------------------------------------
ML Massachusetts Municipal Bond Fund Class D Shares +4.73 +0.60 +38.71 3.44
=================================================================================================================
</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 periods are Class A
& Class B Shares, from 2/28/92 to 1/31/99 and Class C & Class D Shares,
from 10/21/94 to 1/31/99.
3
<PAGE>
Merrill Lynch Massachusetts Municipal Bond Fund January 31, 1999
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
Year Ended 12/31/98 +5.47% +1.26%
- --------------------------------------------------------------------------------
Five Years Ended 12/31/98 +5.28 +4.43
- --------------------------------------------------------------------------------
Inception (2/28/92)
through 12/31/98 +7.47 +6.83
- --------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
Year Ended 12/31/98 +4.94% +0.94%
- --------------------------------------------------------------------------------
Five Years Ended 12/31/98 +4.75 +4.75
- --------------------------------------------------------------------------------
Inception (2/28/92)
through 12/31/98 +6.93 +6.93
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after
4 years.
** Assuming payment of applicable contingent deferred sales charge.
================================================================================
% Return % Return
Without CDSC With CDSC**
================================================================================
Class C Shares*
- --------------------------------------------------------------------------------
Year Ended 12/31/98 +4.83% +3.83%
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 12/31/98 +7.37 +7.37
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after
1 year.
** Assuming payment of applicable contingent deferred sales charge.
================================================================================
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class D Shares*
- --------------------------------------------------------------------------------
Year Ended 12/31/98 +5.37% +1.15%
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 12/31/98 +7.95 +6.91
- --------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Vincent R. Giordano, Senior Vice President
Kenneth A. Jacob, Vice President
Theodore R. Jaeckel Jr., Vice President
Donald C. Burke, Vice President and Treasurer
Robert E. Putney, III, 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
- --------------------------------------------------------------------------------
Gerald M. Richard, Treasurer of Merrill Lynch Massachusetts Municipal Bond Fund
has recently retired. His colleagues at Merrill Lynch Asset Management, L.P.
join the Fund's Board of Trustees in wishing Mr. Richard well in his retirement.
- --------------------------------------------------------------------------------
4
<PAGE>
Merrill Lynch Massachusetts Municipal Bond Fund January 31, 1999
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
- --------------------------------------------------------------------------------------------------------------------------
Massachusetts--86.5%
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AAA Aaa $2,500 Boston, Massachusetts, Water and Sewer Commission Revenue Bonds (Water
Utility Improvement), General Senior Series D, 5% due 11/01/2028 (b) $ 2,484
- --------------------------------------------------------------------------------------------------------------------------
Massachusetts Bay Transportation Authority Revenue Bonds (Massachusetts
General Transportation Systems), Series A:
AA- Aa3 1,000 7% due 3/01/2021 1,263
AA- Aa3 1,750 Refunding, 7% due 3/01/2011 2,192
- --------------------------------------------------------------------------------------------------------------------------
AAA Aaa 850 Massachusetts Education Loan Authority, Educational Loan Revenue Bonds,
AMT, Issue E, Series A, 7.375% due 1/01/2012 (a) 943
- --------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,880 Massachusetts Educational Financing Authority, Educational Loan Revenue
Refunding Bonds, AMT, Issue E, 5.85% due 7/01/2014 (a) 2,046
- --------------------------------------------------------------------------------------------------------------------------
BBB+ NR* 1,000 Massachusetts State Development Financing Agency Revenue Bonds (YMCA
Greater Boston Issue), 5.45% due 11/01/2028 1,000
- --------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Massachusetts State, HFA, Revenue Refunding Bonds (Residential Development),
Series C, 6.875% due 11/15/2011 (c) 2,182
- --------------------------------------------------------------------------------------------------------------------------
Massachusetts State, HFA, S/F Housing Revenue Bonds, AMT:
A+ Aa3 1,500 Series 38, 7.20% due 12/01/2026 1,638
A+ Aa3 2,000 Series 40, 6.65% due 12/01/2027 2,162
AAA Aaa 1,825 Series 48, 6.35% due 6/01/2026 (d) 1,956
- --------------------------------------------------------------------------------------------------------------------------
Massachusetts State Health and Educational Facilities Authority Revenue Bonds:
NR* Ba2 855 (Bay Cove Human Issue), Series A, 5.85% due 4/01/2004 875
AAA Aaa 5,150 (Central Massachusetts Medical Center), CARS, Series B, 9.22% due 6/23/2022 (a)(h) 6,850
- --------------------------------------------------------------------------------------------------------------------------
Massachusetts State Health and Educational Facilities Authority, Revenue Refunding Bonds:
NR* Caa 1,000 (New England Memorial Hospital), Series B, 6.125% due 7/01/2013 300
AAA Aaa 1,000 (Northeastern University), Series E, 6.55% due 10/01/2022 (d) 1,108
AAA NR* 2,500 RIB, Series 80, 7.325% due 7/01/2028 (d)(h) 2,603
AAA Aaa 85 Series J, 6.625% due 7/01/2021 (b) 92
AAA Aaa 1,000 (Stonehill College), Series E, 6.60% due 7/01/2020 (d) 1,104
A NR* 1,500 (Vinfen Corp. Issues), Series A, 5.30% due 11/15/2028 1,495
NR* A2 2,335 (Wheaton College), Series C, 5.25% due 7/01/2019 2,381
- --------------------------------------------------------------------------------------------------------------------------
BBB NR* 2,000 Massachusetts State Industrial Finance Agency, Resources Recovery Revenue
Refunding Bonds (Ogden Haven Hill Project), AMT, Series A, 5.60% due 12/01/2019 2,019
- --------------------------------------------------------------------------------------------------------------------------
AA- Aa3 3,000 Massachusetts State Port Authority, Revenue Refunding Bonds, Series A, 5% due
7/01/2023 2,979
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
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
GO General Obligation Bonds
HFA Housing Finance Agency
RIB Residual Interest Bonds
S/F Single-Family
VRDN Variable Rate Demand Notes
5
<PAGE>
Merrill Lynch Massachusetts Municipal Bond Fund January 31, 1999
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
- --------------------------------------------------------------------------------------------------------------------------
Massachusetts (concluded)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AAA Aaa $1,000 Massachusetts State Turnpike Authority, Metropolitan Highway System, Revenue
Refunding Bonds, Senior Series A, 5% due 1/01/2037 (d) $ 987
- --------------------------------------------------------------------------------------------------------------------------
Massachusetts State Water Pollution Abatement Trust Revenue Bonds, Series A:
AAA Aaa 4,000 (Pooled Loan Program), 4.70% due 8/01/2012 (e) 2,173
AA+ Aa3 1,680 (Secured Loan Program), 6.375% due 2/01/2015 1,879
- --------------------------------------------------------------------------------------------------------------------------
A A1 6,000 Massachusetts State Water Resource Authority Revenue Bonds, Series A, 6.50% due
7/15/2019 7,189
- --------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 South Essex, Massachusetts, Sewer District, GO, Series A, 5.25% due 6/15/2024 (d) 1,020
- --------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,210 Southern Berkshire, Massachusetts, Regional School District, GO, 7% due 4/15/2003
(d)(f) 1,371
- --------------------------------------------------------------------------------------------------------------------------
NR* Baa3 1,500 Springfield, Massachusetts, School Project Loan, GO, Series B, 7.10% due
9/01/2002 (f) 1,704
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Puerto Rico--6.7%
- --------------------------------------------------------------------------------------------------------------------------
A Baa1 1,150 Puerto Rico Commonwealth, GO, Public Improvement, 4.75% due 7/01/2023 1,114
- --------------------------------------------------------------------------------------------------------------------------
A1+ VMIG1+ 3,200 Puerto Rico Commonwealth, Government Development Bank, Revenue Refunding Bonds,
VRDN, 2.35% due 12/01/2015 (d)(g) 3,200
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost--$55,944)--93.2% 60,309
Other Assets Less Liabilities--6.8% 4,376
--------
Net Assets--100.0% $ 64,685
========
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) AMBAC Insured.
(b) FGIC Insured.
(c) FNMA Collateralized.
(d) MBIA Insured.
(e) Represents a zero coupon or step bond; the interest rate shown is the
effective yield at the time of purchase by the Fund.
(f) Prerefunded.
(g) The interest rate is subject to change periodically based upon prevailing
market rates. The interest rate shown is the rate in effect at January 31,
1999.
(h) The interest rate is subject to change periodically and inversely based
upon prevailing market rates.
The interest rate shown is the rate in effect at January 31, 1999.
* Not rated.
+ Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
6
<PAGE>
Merrill Lynch Massachusetts Municipal Bond Fund January 31, 1999
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of January 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$55,943,710) (Note 1a) .. $ 60,308,864
Cash ............................................................ 636,497
Receivables:
Securities sold ............................................... $ 3,419,922
Interest ...................................................... 542,089
Beneficial interest sold ...................................... 5,660 3,967,671
-----------
Prepaid registration fees and other assets (Note 1e) ............ 5,498
------------
Total assets .................................................... 64,918,530
------------
- ----------------------------------------------------------------------------------------------------------------
Liabilities: Payables:
Beneficial interest redeemed .................................. 107,547
Dividends to shareholders (Note 1f) ........................... 43,238
Investment adviser (Note 2) ................................... 27,112
Distributor (Note 2) .......................................... 21,537 199,434
Accrued expenses and other liabilities .......................... 34,449
------------
Total liabilities ............................................... 233,883
------------
- ----------------------------------------------------------------------------------------------------------------
Net Assets: Net assets ...................................................... $ 64,684,647
============
- ----------------------------------------------------------------------------------------------------------------
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited
Consist of: number of shares authorized ..................................... $ 50,076
Class B Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized ..................................... 460,919
Class C Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized ..................................... 30,490
Class D Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized ..................................... 35,238
Paid-in capital in excess of par ................................ 59,837,965
Accumulated realized capital losses on investments--net (Note 5) (95,195)
Unrealized appreciation on investments--net ..................... 4,365,154
------------
Net assets ...................................................... $ 64,684,647
============
- ----------------------------------------------------------------------------------------------------------------
Net Asset Value: Class A--Based on net assets of $5,616,941 and 500,763 shares
of beneficial interest outstanding .............................. $ 11.22
============
Class B--Based on net assets of $51,697,241 and 4,609,186 shares
of beneficial interest outstanding .............................. $ 11.22
============
Class C--Based on net assets of $3,417,025 and 304,902 shares
of beneficial interest outstanding .............................. $ 11.21
============
Class D--Based on net assets of $3,953,440 and 352,384 shares
of beneficial interest outstanding .............................. $ 11.22
============
- ----------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
</TABLE>
7
<PAGE>
Merrill Lynch Massachusetts Municipal Bond Fund January 31, 1999
FINANCIAL INFORMATION (continued)
Statement of Operations
<TABLE>
<CAPTION>
For the Six Months Ended
January 31, 1999
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned ......... $ 1,760,799
(Note 1d):
- -----------------------------------------------------------------------------------------------------------------
Expenses: Investment advisory fees (Note 2) ................................ $ 174,937
Account maintenance and distribution fees--Class B (Note 2) ...... 129,073
Professional fees ................................................ 32,090
Printing and shareholder reports ................................. 27,166
Accounting services (Note 2) ..................................... 15,485
Transfer agent fees--Class B (Note 2) ............................ 10,456
Account maintenance and distribution fees--Class C (Note 2) ...... 8,696
Registration fees (Note 1e) ...................................... 6,697
Pricing fees ..................................................... 2,181
Account maintenance fees--Class D (Note 2) ....................... 1,626
Trustees' fees and expenses ...................................... 1,603
Custodian fees ................................................... 1,568
Transfer agent fees--Class A (Note 2) ............................ 929
Transfer agent fees--Class C (Note 2) ............................ 571
Transfer agent fees--Class D (Note 2) ............................ 529
Other ............................................................ 761
----------
Total expenses ................................................... 414,368
-----------
Investment income--net ........................................... 1,346,431
-----------
- -----------------------------------------------------------------------------------------------------------------
Realized & Unreal- Realized gain on investments--net ................................ 1,238,718
ized Gain (Loss) Change in unrealized appreciation on investments--net ............ (859,639)
on Investments--Net -----------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations ............. $ 1,725,510
===========
- -----------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
</TABLE>
8
<PAGE>
Merrill Lynch Massachusetts Municipal Bond Fund January 31, 1999
FINANCIAL INFORMATION (continued)
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
January 31, July 31,
Increase (Decrease) in Net Assets: 1999 1998
- --------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Operations: Investment income--net ............................................ $ 1,346,431 $ 2,804,178
Realized gain on investments--net ................................. 1,238,718 239,318
Change in unrealized appreciation on investments--net ............. (859,639) 157,464
------------ ------------
Net increase in net assets resulting from operations .............. 1,725,510 3,200,960
------------ ------------
- --------------------------------------------------------------------------------------------------------------------
Dividends to Investment income--net:
Shareholders Class A ......................................................... (136,497) (288,288)
(Note 1f): Class B ......................................................... (1,076,692) (2,368,275)
Class C ......................................................... (58,862) (68,440)
Class D ......................................................... (74,380) (79,175)
------------ ------------
Net decrease in net assets resulting from dividends to shareholders (1,346,431) (2,804,178)
------------ ------------
- --------------------------------------------------------------------------------------------------------------------
Beneficial Interest Net increase (decrease) in net assets derived from beneficial
Transactions interest transactions ............................................. 2,673,862 (954,651)
(Note 4): ------------ ------------
- --------------------------------------------------------------------------------------------------------------------
Net Assets: Total increase (decrease) in net assets ........................... 3,052,941 (557,869)
Beginning of period ............................................... 61,631,706 62,189,575
------------ ------------
End of period ..................................................... $ 64,684,647 $ 61,631,706
============ ============
- --------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
</TABLE>
9
<PAGE>
Merrill Lynch Massachusetts Municipal Bond Fund January 31, 1999
FINANCIAL INFORMATION (continued)
Financial Highlights
<TABLE>
<CAPTION>
Class A
------------------------------------------------
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended For the Year Ended July 31,
Jan. 31, -----------------------------------
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ...... $ 11.15 $ 11.07 $ 10.60 $ 10.46 $ 10.48
Operating ------- ------- ------- ------- -------
Performance: Investment income--net .................... .26 .56 .56 .56 .56
Realized and unrealized gain (loss) on
investments--net .......................... .07 .08 .47 .14 (.02)
------- ------- ------- ------- -------
Total from investment operations .......... .33 .64 1.03 .70 .54
------- ------- ------- ------- -------
Less dividends from investment income--net (.26) (.56) (.56) (.56) (.56)
------- ------- ------- ------- -------
Net asset value, end of period ............ $ 11.22 $ 11.15 $ 11.07 $ 10.60 $ 10.46
======= ======= ======= ======= =======
- ----------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ........ 3.00%+ 5.92% 10.02% 6.78% 5.35%
Return:** ======= ======= ======= ======= =======
- ----------------------------------------------------------------------------------------------------------------
Ratios to Average Expenses, net of reimbursement ............ .86%* .86% .83% .84% .88%
Net Assets: ======= ======= ======= ======= =======
Expenses .................................. .86%* .86% .83% .84% .91%
======= ======= ======= ======= =======
Investment income--net .................... 4.68%* 5.02% 5.22% 5.23% 5.42%
======= ======= ======= ======= =======
- ----------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) .. $ 5,617 $ 5,705 $ 5,757 $ 5,887 $ 6,630
Data: ======= ======= ======= ======= =======
Portfolio turnover ........................ 56.80% 23.32% 24.64% 56.05% 89.62%
======= ======= ======= ======= =======
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Aggregate total investment return.
See Notes to Financial Statements.
10
<PAGE>
Merrill Lynch Massachusetts Municipal Bond Fund January 31, 1999
FINANCIAL INFORMATION (continued)
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
------------------------------------------------
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended For the Year Ended July 31,
Jan. 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 ...... $ 11.15 $ 11.07 $ 10.60 $ 10.46 $ 10.48
Operating ------- ------- ------- ------- -------
Performance: Investment income--net .................... .23 .50 .51 .51 .50
Realized and unrealized gain (loss) on
investments--net .......................... .07 .08 .47 .14 (.02)
------- ------- ------- ------- -------
Total from investment operations .......... .30 .58 .98 .65 .48
------- ------- ------- ------- -------
Less dividends from investment income--net (.23) (.50) (.51) (.51) (.50)
------- ------- ------- ------- -------
Net asset value, end of period ............ $ 11.22 $ 11.15 $ 11.07 $ 10.60 $ 10.46
======= ======= ======= ======= =======
- ----------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ........ 2.74%+ 5.38% 9.46% 6.23% 4.82%
Return:** ======= ======= ======= ======= =======
- ----------------------------------------------------------------------------------------------------------------
Ratios to Average Expenses, net of reimbursement ............ 1.37%* 1.37% 1.34% 1.35% 1.39%
Net Assets: ======= ======= ======= ======= =======
Expenses .................................. 1.37%* 1.37% 1.34% 1.35% 1.42%
======= ======= ======= ======= =======
Investment income--net .................... 4.17%* 4.51% 4.71% 4.72% 4.91%
======= ======= ======= ======= =======
- ----------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) .. $51,697 $51,255 $53,336 $59,868 $66,927
Data: ======= ======= ======= ======= =======
Portfolio turnover ........................ 56.80% 23.32% 24.64% 56.05% 89.62%
======= ======= ======= ======= =======
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Aggregate total investment return.
See Notes to Financial Statements.
11
<PAGE>
Merrill Lynch Massachusetts Municipal Bond Fund January 31, 1999
FINANCIAL INFORMATION (concluded)
- --------------------------------------------------------------------------------
Financial Highlights (concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
--------------------------------------------------
For the For the
Six Period
The following per share data and ratios have been derived Months Oct. 21,
from information provided in the financial statements. Ended For the Year Ended July 31, 1994+ to
Jan. 31, ----------------------------- July 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ........ $ 11.14 $ 11.06 $ 10.60 $ 10.46 $ 10.03
Operating ------- ------- ------- ------- -------
Performance: Investment income--net ...................... .23 .49 .49 .49 .37
Realized and unrealized gain on
investments--net ............................ .07 .08 .46 .14 .43
------- ------- ------- ------- -------
Total from investment operations ............ .30 .57 .95 .63 .80
------- ------- ------- ------- -------
Less dividends from investment income--net .. (.23) (.49) (.49) (.49) (.37)
------- ------- ------- ------- -------
Net asset value, end of period .............. $ 11.21 $ 11.14 $ 11.06 $ 10.60 $ 10.46
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share .......... 2.69%++ 5.28% 9.25% 6.12% 8.13%++
Return:** ======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------
Ratios to Average Expenses .................................... 1.47%* 1.47% 1.43% 1.45% 1.56%*
Net Assets: ======= ======= ======= ======= =======
Investment income--net ...................... 4.06%* 4.40% 4.63% 4.61% 4.68%*
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) .... $ 3,417 $ 1,835 $ 1,495 $ 1,185 $ 432
Data: ======= ======= ======= ======= =======
Portfolio turnover .......................... 56.80% 23.32% 24.64% 56.05% 89.62%
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class D
--------------------------------------------------
For the For the
Six Period
The following per share data and ratios have been derived Months Oct. 21,
from information provided in the financial statements. Ended For the Year Ended July 31, 1994+ to
Jan. 31, ----------------------------- July 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ....... $ 11.15 $ 11.07 $ 10.61 $ 10.47 $ 10.03
Operating ------- ------- ------- ------- -------
Performance: Investment income--net ..................... .26 .55 .55 .55 .42
Realized and unrealized gain on
investments--net ........................... .07 .08 .46 .14 .44
------- ------- ------- ------- -------
Total from investment operations ........... .33 .63 1.01 .69 .86
------- ------- ------- ------- -------
Less dividends from investment income--net . (.26) (.55) (.55) (.55) (.42)
------- ------- ------- ------- -------
Net asset value, end of period ............. $ 11.22 $ 11.15 $ 11.07 $ 10.61 $ 10.47
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ......... 2.95%++ 5.82% 9.80% 6.67% 8.70%++
Return:** ======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------
Ratios to Average Expenses ................................... .96%* .96% .93% .94% 1.04%*
Net Assets: ======= ======= ======= ======= =======
Investment income--net ..................... 4.57%* 4.91% 5.13% 5.12% 5.22%*
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) ... $ 3,954 $ 2,837 $ 1,602 $ 1,290 $ 750
Data: ======= ======= ======= ======= =======
Portfolio turnover ......................... 56.80% 23.32% 24.64% 56.05% 89.62%
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++ Aggregate total investment return.
See Notes to Financial Statements.
12
<PAGE>
Merrill Lynch Massachusetts Municipal Bond Fund January 31, 1999
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's financial statements are prepared in
accordance with generally accepted accounting principles which may require the
use of management accruals and estimates. These unaudited financial statements
reflect all adjustments which are, in the opinion of management, necessary to a
fair statement of the results for the interim period presented. All such
adjustments are of a normal recurring nature. The Fund offers four classes of
shares under the Merrill Lynch Select 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.
13
<PAGE>
Merrill Lynch Massachusetts Municipal Bond Fund January 31, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
(e) Prepaid registration fees--Prepaid registration fees are charged to expense
as the related shares are issued.
(f) Dividends and distributions--Dividends from net investment income are
declared daily and paid monthly. Distributions of capital gains are recorded on
the ex-dividend dates.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML &
Co."), which is the limited partner. The Fund has also entered into a
Distribution Agreement and Distribution Plans with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), a 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: 0.55% of the Fund's average daily net assets not exceeding $500
million; 0.525% of average daily net assets in excess of $500 million but not
exceeding $1 billion; and 0.50% of average daily net assets in excess of $1
billion.
Pursuant to the Distribution Plans adopted by the Fund in accordance with Rule
12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are accrued daily
and paid monthly at annual rates based upon the average daily net assets of the
shares as follows:
- --------------------------------------------------------------------------------
Account 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 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 six months ended January 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 ................................................. $ 22 $ 300
Class D ................................................. $156 $24,225
- --------------------------------------------------------------------------------
For the six months ended January 31, 1999, MLPF&S received contingent deferred
sales charges of $14,353 and $658 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 six
months ended January 31, 1999 were $34,091,652 and $36,120,330, respectively.
Net realized gains for the six months ended January 31, 1999 and net unrealized
gains as of January 31, 1999 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
- --------------------------------------------------------------------------------
Long-term investments ............................... $1,238,718 $4,365,154
---------- ----------
Total ............................................... $1,238,718 $4,365,154
========== ==========
- --------------------------------------------------------------------------------
As of January 31, 1999, net unrealized appreciation for Federal income tax
purposes aggregated $4,365,154, of which $5,050,560 related to appreciated
securities and $685,406 related to depreciated securities. The aggregate cost of
investments at January 31, 1999 for Federal income tax purposes was $55,943,710.
14
<PAGE>
Merrill Lynch Massachusetts Municipal Bond Fund January 31, 1999
4. Beneficial Interest Transactions:
Net increase (decrease) in net assets derived from beneficial interest
transactions was $2,673,862 and $(954,651) for the six months ended January 31,
1999 and for the year ended July 31, 1998, respectively.
Transactions in shares of beneficial interest for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended January 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .......................................... 62,532 $ 700,648
Shares issued to shareholders
in reinvestment of dividends ......................... 4,984 55,968
-------- -----------
Total issued ......................................... 67,516 756,616
Shares redeemed ...................................... (78,559) (881,923)
-------- -----------
Net decrease ......................................... (11,043) $ (125,307)
======== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .......................................... 55,712 $ 618,548
Shares issued to shareholders
in reinvestment of dividends ......................... 9,979 110,642
-------- -----------
Total issued ......................................... 65,691 729,190
Shares redeemed ...................................... (73,879) (821,852)
-------- -----------
Net decrease ......................................... (8,188) $ (92,662)
======== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Six Months Dollar
Ended January 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .......................................... 319,749 $ 3,592,390
Shares issued to shareholders
in reinvestment of dividends ......................... 50,663 568,910
-------- -----------
Total issued ......................................... 370,412 4,161,300
Automatic conversion
of shares ............................................ (833) (9,341)
Shares redeemed ...................................... (358,621) (4,040,207)
-------- -----------
Net increase ......................................... 10,958 $ 111,752
======== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .......................................... 479,010 $ 5,315,771
Shares issued to shareholders
in reinvestment of dividends ......................... 115,457 1,279,860
-------- -----------
Total issued ......................................... 594,467 6,595,631
Automatic conversion
of shares ............................................ (14,966) (165,584)
Shares redeemed ...................................... (798,678) (8,856,952)
-------- -----------
Net decrease ......................................... (219,177) $(2,426,905)
======== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Six Months Dollar
Ended January 31, 199 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .......................................... 177,306 $ 2,003,557
Shares issued to shareholders
in reinvestment of dividends ......................... 4,356 48,841
-------- -----------
Total issued ......................................... 181,662 2,052,398
Shares redeemed ...................................... (41,520) (467,431)
-------- -----------
Net increase ......................................... 140,142 $ 1,584,967
======== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .......................................... 67,852 $ 755,430
Shares issued to shareholders
in reinvestment of dividends ......................... 4,793 53,138
-------- -----------
Total issued ......................................... 72,645 808,568
Shares redeemed ...................................... (43,020) (474,178)
-------- -----------
Net increase ......................................... 29,625 $ 334,390
======== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Six Months Dollar
Ended January 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .......................................... 123,430 $ 1,389,130
Automatic conversion
of shares ............................................ 833 9,341
Shares issued to shareholders
in reinvestment of dividends ......................... 1,602 17,972
-------- -----------
Total issued ......................................... 125,865 1,416,443
Shares redeemed ...................................... (27,921) (313,993)
-------- -----------
Net increase ......................................... 97,944 $ 1,102,450
======== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .......................................... 128,646 $ 1,434,340
Automatic conversion
of shares ............................................ 14,965 165,584
Shares issued to shareholders
in reinvestment of dividends ......................... 1,763 19,572
-------- -----------
Total issued ......................................... 145,374 1,619,496
Shares redeemed ...................................... (35,553) (388,970)
-------- -----------
Net increase ......................................... 109,821 $ 1,230,526
======== ===========
- --------------------------------------------------------------------------------
5. Capital Loss Carryforward:
At July 31, 1998, the Fund had a net capital loss carryforward of approximately
$915,000, all of which expires in 2003. This amount will be available to offset
like amounts of any future taxable gains.
15
<PAGE>
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 Massachusetts
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011 #16150--1/99
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