MERRILL LYNCH
MASSACHUSETTS
MUNICIPAL
BOND FUND
[GRAPHIC OMITTED]
STRATEGIC
Performance
Semi-Annual Report
January 31, 2000
<PAGE>
Merrill Lynch Massachusetts Municipal Bond Fund January 31, 2000
TO OUR SHAREHOLDERS
The Municipal Market Environment
During the six months ended January 31, 2000, continued strong domestic growth,
gradual improvement in foreign economies and investor concerns regarding future
inflationary pressures pushed long-term fixed-income bond yields higher. The
Federal Reserve Board continued to raise short-term interest rates in August and
November 1999 as well as just after the period's close, seeking to moderate US
economic growth and maintain the existing benign inflationary environment. US
economic growth, in part intensified by Year 2000 preparations, grew 5.8% during
the last fiscal quarter of 1999 and had an annual rate of 4.1% for 1999. A
number of inflationary indicators have also begun to signal some increase in
price pressures.
However, most investors believe that the Federal Reserve Board will be extremely
vigilant in preventing such pressures from any material escalation. US Treasury
bond yields responded by rising approximately 60 basis points (0.60%) by
mid-January 2000. A strong rally, largely based upon an expected significant
reduction in the future supply of US Treasury 30-year maturity bonds, pushed
yields lower to 6.50% at January 31, 2000. Over the last six months, yields on
30-year US Treasury bonds rose approximately 40 basis points.
The tax-exempt bond market was also under pressure throughout the entire period.
Despite receiving more than $30 billion in coupon payments, bond maturities and
proceeds from early redemptions in December and January, overall investor demand
has diminished. It is likely that the returns generated by the US equity market
have continued to attract investor attention and have left little demand for
competing investment alternatives. At January 31, 2000, the long-term tax-exempt
revenue bond yield, as measured by the Bond Buyer Revenue Index, was 6.34%, an
increase of nearly 70 basis points over the last six months.
Issuance by municipalities has significantly declined in recent months. Over the
last six months, less than $100 billion in long-term tax-exempt bonds were
issued, representing a decline of over 20% compared to the same period a year
ago. During the last three months, less than $45 billion in long-term bonds were
issued by various municipalities. This most recent quarterly issuance is 30%
below the level of the January 31, 1999 quarter. Additionally, during January
2000, less than $8 billion in municipal debt was underwritten, down more than
50% from January 1999 levels. This represents the lowest monthly issuance in
over five years. Toward the end of 1999, consensus estimates for 2000 annual
issuance were in the $210 billion-$215 billion range. January's underwritings,
as well as those expected to be issued in the near future, have led some
analysts to revise their forecasts to the $190 billion range.
We believe an overall reduction in bond supply in the coming year should help
support the municipal bond market's overall technical position. While tax-exempt
bond yields, which are at their highest level in over three years, have
attracted significant retail investor interest, institutional demand declined
sharply. Long-term municipal mutual funds have seen consistent outflows in
recent months as the yields of individual securities rose faster than those of
larger, more diverse mutual funds. During the six months ended January 31, 2000,
tax-exempt mutual funds have had net redemptions of approximately $9 billion.
Also, the demand from property and casualty insurance companies has weakened as
a result of the losses and anticipated losses incurred from a series of damaging
storms across much of the eastern United States. Additionally, many
institutional investors who have in recent years been attracted to the municipal
bond market by historically attractive tax-exempt bond yield ratios of over 90%,
found other asset classes even more attractive. Even with a reduced supply
position, tax-exempt issuers have been forced to repeatedly raise municipal bond
yields in an attempt to attract adequate demand. We believe a reduced bond
supply going forward is likely to promote a more closely balanced supply/demand
structure and foster a more stable tax-exempt interest rate environment.
Looking ahead, it appears to us that long-term tax-exempt bond yields will
remain under pressure, trading in a broad range centered around current levels.
Investors are also likely to remain concerned regarding future action by the
Federal Reserve Board in early 2000. Any improvement in bond prices may be
contingent upon weakening in both US employment growth and consumer spending.
The 100 basis point rise in US Treasury bond yields seen thus far could
negatively affect US economic growth. The US housing
1
<PAGE>
Merrill Lynch Massachusetts Municipal Bond Fund January 31, 2000
market is likely to be among the first sectors to be affected, as some declines
have already been evidenced because of higher mortgage rates. We believe it is
also unrealistic to expect double-digit returns in US equity markets to continue
indefinitely. Much of the US consumer's wealth is tied to recent stock market
appreciation. Any slowing in these incredible growth rates may reduce consumer
spending. We believe that these factors suggest that the worst of the recent
increase in bond yields has passed and stable, if not slightly improving, bond
prices may be expected.
Portfolio Strategy
The volatility within the municipal market during the past six months stands in
sharp contrast to the relative stability that typified the environment for the
first half of last year. The degree and suddenness of the decline caught many
investors by surprise as few anticipated the extent to which tax-exempt yields
would climb relative to their taxable counterparts. Much emphasis had been
placed on the favorable implications of a sharp reduction in new-issue supply
coupled with vigorous retail investor demand. Instead, institutional selling
proved the market's undoing as both mutual funds and casualty insurers moved
aggressively to liquidate tax-exempt holdings. Consequently, yield ratios on
long-term municipal bonds are once again approaching 100% of Treasury bond
yields and therefore represent one of the more compelling values in the
fixed-income marketplace.
Despite a sharp reduction in new-issue volume relative to the more modest
contraction experienced throughout the country, developments within the
Massachusetts municipal market mirrored those of the overall marketplace. At the
beginning of the six months ended January 31, 2000, our investment outlook was
for a fairly stable interest rate environment. We reduced our cash reserve
position on the expectation that an income-oriented approach would generate the
most favorable returns for the Fund. While we achieved modest success through
the use of selective restructuring, hindsight suggests that Fund performance
would have benefited from a more consistent and prolonged defensive strategy
designed to preserve unrealized gains from last year's market rally. More
recently, with long-term interest rates at their highest level in over two
years, we have turned our efforts to seeking to limit tax liabilities through a
program designed to offset existing capital gains with the realization of losses
incurred in recent months.
We are comfortable with the Fund's current position given the absolute level of
long-term interest rates as well as the inherent value in the tax-exempt sector.
Economic fundamentals point to a modestly slower pace of economic growth with no
solid evidence of a broad-based pickup in inflation. Investors' increased level
of comfort with Federal Reserve Board monetary policy combined with a favorable
seasonal outlook for municipal bonds suggest that a more constructive outlook
may soon be warranted.
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,
/s/ Terry K. Glenn
Terry K. Glenn
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 3, 2000
2
<PAGE>
Merrill Lynch Massachusetts Municipal Bond Fund January 31, 2000
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>
6 Month 12 Month Since Inception Standardized
As of January 31, 2000 Total Return Total Return Total Return 30-Day Yield
=======================================================================================================================
<S> <C> <C> <C> <C>
ML Massachusetts Municipal Bond Fund Class A Shares -5.25% -8.20% +51.22% 4.52%
- -----------------------------------------------------------------------------------------------------------------------
ML Massachusetts Municipal Bond Fund Class B Shares -5.49 -8.66 +45.27 4.20
- -----------------------------------------------------------------------------------------------------------------------
ML Massachusetts Municipal Bond Fund Class C Shares -5.54 -8.76 +23.65 4.10
- -----------------------------------------------------------------------------------------------------------------------
ML Massachusetts Municipal Bond Fund Class D Shares -5.29 -8.29 +27.21 4.43
=======================================================================================================================
</TABLE>
* Investment results shown do not reflect sales charges; results would be
lower if a sales charge was included. Total investment returns are based
on changes in net asset values for the periods shown, and assume
reinvestment of all dividends and capital gains distributions at net asset
value on the payable date. The Fund's since inception dates are from
2/28/92 for Class A & Class B Shares and from 10/21/94 for Class C & Class
D Shares.
3
<PAGE>
Merrill Lynch Massachusetts Municipal Bond Fund January 31, 2000
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
Year Ended 12/31/99 -6.77% -10.50%
- --------------------------------------------------------------------------------
Five Years Ended 12/31/99 +5.41 + 4.55
- --------------------------------------------------------------------------------
Inception (2/28/92)
through 12/31/99 +5.54 + 4.99
- --------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
Year Ended 12/31/99 -7.24% -10.76%
- --------------------------------------------------------------------------------
Five Years Ended 12/31/99 +4.88 + 4.88
- --------------------------------------------------------------------------------
Inception (2/28/92)
through 12/31/99 +5.01 + 5.01
- --------------------------------------------------------------------------------
* 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 12/31/99 -7.34% -8.22%
- --------------------------------------------------------------------------------
Five Years Ended 12/31/99 +4.75 +4.75
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 12/31/99 +4.37 +4.37
- --------------------------------------------------------------------------------
* 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 12/31/99 -6.86% -10.58%
- --------------------------------------------------------------------------------
Five Years Ended 12/31/99 +5.31 + 4.45
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 12/31/99 +4.93 + 4.11
- --------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
4
<PAGE>
Merrill Lynch Massachusetts Municipal Bond Fund January 31, 2000
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face
Ratings Ratings Amount Issue Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Massachusetts--96.6%
- ------------------------------------------------------------------------------------------------------------------------------------
AA- Aa2 $1,000 Massachusetts Bay Transportation Authority Revenue Bonds (General Transportation
System), Series A, 7% due 3/01/2021 $ 1,108
- ------------------------------------------------------------------------------------------------------------------------------------
AA- Aa2 1,750 Massachusetts Bay Transportation Authority, Revenue Refunding Bonds (General
Transportation System), Series A, 7% due 3/01/2011 1,966
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 755 Massachusetts Education Loan Authority, Education Loan Revenue Bonds, AMT, Issue E,
Series A, 7.375% due 1/01/2012 (a) 788
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 940 Massachusetts Educational Financing Authority, Education Loan Revenue Refunding Bonds,
AMT, Issue E, 5.85% due 7/01/2014 (a) 917
- ------------------------------------------------------------------------------------------------------------------------------------
BBB+ NR* 1,000 Massachusetts State Development Finance Agency Revenue Bonds (YMCA of Greater
Boston Issue), 5.45% due 11/01/2028 810
- ------------------------------------------------------------------------------------------------------------------------------------
BBB+ A3 2,500 Massachusetts State Development Finance Agency, Revenue Refunding Bonds (Boston
University), Series P, 5.45% due 5/15/2059 2,056
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Massachusetts State, HFA, Revenue Refunding Bonds (Residential Development),
Series C, 6.875% due 11/15/2011 (c) 2,101
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,695 Massachusetts State, HFA, S/F Housing Revenue Bonds, AMT, Series 48,
6.35% due 6/01/2026 (e) 1,690
- ------------------------------------------------------------------------------------------------------------------------------------
A+ Aa3 1,980 Massachusetts State, HFA, S/F Housing Revenue Refunding Bonds, AMT, Series 40,
6.65% due 12/01/2027 2,008
- ------------------------------------------------------------------------------------------------------------------------------------
Massachusetts State Health and Educational Facilities Authority Revenue Bonds:
AAA Aaa 5,150 (Medical Center of Central Massachusetts), CARS, Series B, 8.97% due 6/23/2022 (a)(g) 5,472
A1+ VMIG1+ 600 (Wellesley College), VRDN, Series G, 3.50% due 7/01/2039 (h) 600
- ------------------------------------------------------------------------------------------------------------------------------------
Massachusetts State Health and Educational Facilities Authority, Revenue Refunding Bonds:
NR* Ba2 805 (Bay Cove Human Services Issue), Series A, 5.85% due 4/01/2004 776
AAA Aaa 85 (Boston College), Series J, 6.625% due 7/01/2021 (b) 88
AAA NR* 2,450 (Brandeis University), Series I, 4.75% due 10/01/2028 (e) 1,922
AAA Aaa 2,000 (Massachusetts General Hospital), Series F, 6.25% due 7/01/2012 (a) 2,137
NR* Ca 915 (New England Memorial Hospital), Series B, 6.125% due 7/01/2013 (i) 230
AAA Aaa 1,000 (Northeastern University), Series E, 6.55% due 10/01/2022 (e) 1,017
AAA Aaa 450 (Stonehill College), Series E, 6.60% due 7/01/2002 (e)(f) 477
AAA Aaa 550 (Stonehill College), Series E, 6.60% due 7/01/2020 (e) 561
AAA Aaa 1,500 (Stonehill College), Series G, 5.25% due 7/01/2028 (e) 1,292
NR* A2 1,000 (Wheaton College), Series C, 5.25% due 7/01/2019 870
- ------------------------------------------------------------------------------------------------------------------------------------
</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
S/F Single-Family
VRDN Variable Rate Demand Notes
5
<PAGE>
Merrill Lynch Massachusetts Municipal Bond Fund January 31, 2000
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face
Ratings Ratings Amount Issue Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Massachusetts (concluded)
- ------------------------------------------------------------------------------------------------------------------------------------
BBB NR* $1,500 Massachusetts State Industrial Financial Agency, Resource Recovery Revenue Refunding
Bonds (Ogden Haven Hill Project), AMT, Series A, 5.60% due 12/01/2019 $ 1,261
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,500 Massachusetts State Turnpike Authority, Metropolitan Highway System, Revenue Refunding
Bonds, Senior-Series A, 5% due 1/01/2027 (e) 1,240
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Massachusetts State Water Pollution Abatement Trust Revenue Bonds (Pooled Loan
Program), Series 4, 4.70%** due 8/01/2012 485
- ------------------------------------------------------------------------------------------------------------------------------------
AA+ Aa3 1,680 Massachusetts State Water Pollution Abatement Trust, Water Pollution Abatement Revenue
Bonds (Secured Loan Program), Series A, 6.375% due 2/01/2015 1,746
- ------------------------------------------------------------------------------------------------------------------------------------
Massachusetts State Water Resource Authority Revenue Bonds, Series A:
A+ A1 6,000 6.50% due 7/15/2019 6,330
AAA Aaa 930 4.75% due 8/01/2027 (d) 733
- ------------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 1,600 Montachusett, Massachusetts, Regional Vocational Technical School District, GO,
5.95% due 1/15/2020 (e) 1,576
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,210 Southern Berkshire, Massachusetts, Regional School District, GO, 7% due 4/15/2011 (e) 1,288
- ------------------------------------------------------------------------------------------------------------------------------------
NR* Baa3 1,500 Springfield, Massachusetts, GO (School Project Loan), Series B, 7.10% due 9/01/2002 (f) 1,610
- ------------------------------------------------------------------------------------------------------------------------------------
A+ Aa2 1,000 University of Massachusetts Building Authority, Revenue Refunding Bonds, Series B,
6.875% due 5/01/2014 1,117
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Puerto Rico--2.7%
- ------------------------------------------------------------------------------------------------------------------------------------
A1+ VMIG1+ 1,300 Puerto Rico Commonwealth Highway and Transportation Authority, Transportation Revenue
Refunding Bonds, VRDN, Series A, 2.85% due 7/01/2028 (a)(h) 1,300
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost--$48,931)--99.3% 47,572
Other Assets Less Liabilities--0.7% 334
-------
Net Assets--100.0% $47,906
=======
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) AMBAC Insured.
(b) FGIC Insured.
(c) FNMA Collateralized.
(d) FSA Insured.
(e) MBIA Insured.
(f) Prerefunded.
(g) The interest rate is subject to change periodically and inversely based
upon prevailing market rates. The interest rate shown is the rate in
effect at January 31, 2000.
(h) 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,
2000.
(i) Non-income producing.
* Not rated.
** Represents a zero coupon; the interest rate shown reflects the effective
yield at the time of purchase by the Fund.
+ 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, 2000
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of January 31, 2000
<TABLE>
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$48,931,168) ..................... $ 47,571,678
Cash ..................................................................... 98,205
Receivables: .............................................................
Interest ............................................................... $ 578,294
Variation margin ....................................................... 912
Beneficial interest sold ............................................... 673 579,879
---------
Prepaid registration fees and other assets ............................... 5,568
------------
Total assets ............................................................. 48,255,330
------------
- ------------------------------------------------------------------------------------------------------------------------------
Liabilities: Payables:
Beneficial interest redeemed ........................................... 180,221
Dividends to shareholders .............................................. 43,448
Investment adviser ..................................................... 21,333
Distributor ............................................................ 16,993 261,995
---------
Accrued expenses and other liabilities ................................... 87,037
------------
Total liabilities ........................................................ 349,032
------------
- ------------------------------------------------------------------------------------------------------------------------------
Net Assets: Net assets ............................................................... $ 47,906,298
============
- ------------------------------------------------------------------------------------------------------------------------------
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited number of
Consist of: shares authorized ........................................................ $ 40,987
Class B Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized ........................................................ 392,705
Class C Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized ........................................................ 26,115
Class D Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized ........................................................ 31,451
Paid-in capital in excess of par ......................................... 51,112,448
Accumulated realized capital losses on investments--net .................. (2,337,918)
Unrealized depreciation on investments--net .............................. (1,359,490)
------------
Net assets ............................................................... $ 47,906,298
============
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value: Class A--Based on net assets of $3,997,113 and 409,865 shares
of beneficial interest outstanding ....................................... $ 9.75
============
Class B--Based on net assets of $38,296,776 and 3,927,053 shares
of beneficial interest outstanding ....................................... $ 9.75
============
Class C--Based on net assets of $2,544,503 and 261,150 shares
of beneficial interest outstanding ....................................... $ 9.74
============
Class D--Based on net assets of $3,067,906 and 314,509 shares
of beneficial interest outstanding ....................................... $ 9.75
============
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
Merrill Lynch Massachusetts Municipal Bond Fund January 31, 2000
FINANCIAL INFORMATION (continued)
Statement of Operations
<TABLE>
<CAPTION>
For the Six Months Ended
January 31, 2000
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income: Interest and amortization of premium and discount earned .......... $ 1,603,799
- ----------------------------------------------------------------------------------------------------------------------
Expenses: Investment advisory fees .......................................... $ 145,106
Account maintenance and distribution fees--Class B ................ 104,534
Accounting services ............................................... 44,366
Professional fees ................................................. 40,749
Printing and shareholder reports .................................. 12,578
Transfer agent fees--Class B ...................................... 11,241
Registration fees ................................................. 9,894
Account maintenance and distribution fees--Class C ................ 9,313
Pricing fees ...................................................... 2,964
Custodian fees .................................................... 2,954
Trustees' fees and expenses ....................................... 1,928
Account maintenance fees--Class D ................................. 1,617
Transfer agent fees--Class A ...................................... 1,026
Transfer agent fees--Class C ...................................... 810
Transfer agent fees--Class D ...................................... 718
Other ............................................................. 1,282
-----------
Total expenses .................................................... 391,080
-----------
Investment income--net ............................................ 1,212,719
-----------
- ----------------------------------------------------------------------------------------------------------------------
Realized & Realized loss on investments--net ................................. (1,609,255)
Unrealized Loss on Change in unrealized appreciation/depreciation on investments--net. (2,649,330)
Investments--Net: -----------
Net Decrease in Net Assets Resulting from Operations ............. $(3,045,866)
===========
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
Merrill Lynch Massachusetts Municipal Bond Fund January 31, 2000
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: 2000 1999
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations: Investment income--net .............................................. $ 1,212,719 $ 2,609,314
Realized gain (loss) on investments--net ............................ (1,609,255) 961,543
Change in unrealized appreciation/depreciation on investments--net .. (2,649,330) (3,934,953)
------------ ------------
Net decrease in net assets resulting from operations ................ (3,045,866) (364,096)
------------ ------------
- -------------------------------------------------------------------------------------------------------------------------------
Dividends & Investment income--net:
Distributions to Class A ........................................................... (116,276) (258,922)
Shareholders: Class B ........................................................... (947,643) (2,055,046)
Class C ........................................................... (68,854) (137,236)
Class D ........................................................... (79,946) (158,110)
Realized gain on investments--net:
Class A ........................................................... (30,447) --
Class B ........................................................... (283,915) --
Class C ........................................................... (18,997) --
Class D ........................................................... (22,933) --
------------ ------------
Net decrease in net assets resulting from dividends and distributions
to shareholders ..................................................... (1,569,011) (2,609,314)
------------ ------------
- -------------------------------------------------------------------------------------------------------------------------------
Beneficial Interest Net decrease in net assets derived from beneficial
Transactions: interest transactions ............................................... (6,007,493) (129,628)
------------ ------------
- -------------------------------------------------------------------------------------------------------------------------------
Net Assets: Total decrease in net assets ........................................ (10,622,370) (3,103,038)
Beginning of period ................................................. 58,528,668 61,631,706
------------ ------------
End of period ....................................................... $ 47,906,298 $ 58,528,668
============ ============
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
Merrill Lynch Massachusetts Municipal Bond Fund January 31, 2000
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: 2000 1999 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ... $ 10.63 $ 11.15 $ 11.07 $ 10.60 $ 10.46
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net ................. .26 .51 .56 .56 .56
Realized and unrealized gain (loss) on .
investments--net ....................... (.81) (.52) .08 .47 .14
--------- --------- --------- --------- ---------
Total from investment operations ....... (.55) (.01) .64 1.03 .70
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net ............... (.26) (.51) (.56) (.56) (.56)
Realized gain on investments--net .... (.07) -- -- -- --
--------- --------- --------- --------- ---------
Total dividends and distributions ...... (.33) (.51) (.56) (.56) (.56)
--------- --------- --------- --------- ---------
Net asset value, end of period ......... $ 9.75 $ 10.63 $ 11.15 $ 11.07 $ 10.60
========= ========= ========= ========= =========
- ----------------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ..... (5.25%)+ (.21%) 5.92% 10.02% 6.78%
Return:** ========= ========= ========= ========= =========
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Expenses ............................... 1.04%* .95% .86% .83% .84%
Net Assets: ========= ========= ========= ========= =========
Investment income--net ................. 5.06%* 4.58% 5.02% 5.22% 5.23%
========= ========= ========= ========= =========
- ----------------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) $ 3,997 $ 5,080 $ 5,705 $ 5,757 $ 5,887
Data: ========= ========= ========= ========= =========
Portfolio turnover ..................... 24.49% 89.30% 23.32% 24.64% 56.05%
========= ========= ========= ========= =========
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<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: 2000 1999 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ... $ 10.63 $ 11.15 $ 11.07 $ 10.60 $ 10.46
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net ................. .23 .45 .50 .51 .51
Realized and unrealized gain (loss) on
investments--net ....................... (.81) (.52) .08 .47 .14
--------- --------- --------- --------- ---------
Total from investment operations ....... (.58) (.07) .58 .98 .65
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net ............... (.23) (.45) (.50) (.51) (.51)
Realized gain on investments--net .... (.07) -- -- -- --
--------- --------- --------- --------- ---------
Total dividends and distributions ...... (.30) (.45) (.50) (.51) (.51)
--------- --------- --------- --------- ---------
Net asset value, end of period ......... $ 9.75 $ 10.63 $ 11.15 $ 11.07 $ 10.60
========= ========= ========= ========= =========
- ----------------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ..... (5.49%)+ (.71%) 5.38% 9.46% 6.23%
Return:** ========= ========= ========= ========= =========
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Expenses ............................... 1.55%* 1.46% 1.37% 1.34% 1.35%
Net Assets: ========= ========= ========= ========= =========
Investment income--net ................. 4.55%* 4.07% 4.51% 4.71% 4.72%
========= ========= ========= ========= =========
- ----------------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) $ 38,297 $ 45,988 $ 51,255 $ 53,336 $ 59,868
Data: ========= ========= ========= ========= =========
Portfolio turnover ..................... 24.49% 89.30% 23.32% 24.64% 56.05%
========= ========= ========= ========= =========
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Aggregate total investment return.
See Notes to Financial Statements.
10
<PAGE>
Merrill Lynch Massachusetts Municipal Bond Fund January 31, 2000
FINANCIAL INFORMATION (concluded)
Financial Highlights (concluded)
<TABLE>
<CAPTION>
Class C
------------------------------------------------------------------
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: 2000 1999 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ... $ 10.62 $ 11.14 $ 11.06 $ 10.60 $ 10.46
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net ................. .22 .44 .49 .49 .49
Realized and unrealized gain (loss) on
investments--net ....................... (.81) (.52) .08 .46 .14
--------- --------- --------- --------- ---------
Total from investment operations ....... (.59) (.08) .57 .95 .63
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net ............... (.22) (.44) (.49) (.49) (.49)
Realized gain on investments--net .... (.07) -- -- -- --
--------- --------- --------- --------- ---------
Total dividends and distributions ...... (.29) (.44) (.49) (.49) (.49)
--------- --------- --------- --------- ---------
Net asset value, end of period ......... $ 9.74 $ 10.62 $ 11.14 $ 11.06 $ 10.60
========= ========= ========= ========= =========
- ----------------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ..... (5.54%)+ (.81%) 5.28% 9.25% 6.12%
Return:** ========= ========= ========= ========= =========
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Expenses ............................... 1.65%* 1.57% 1.47% 1.43% 1.45%
Net Assets: ========= ========= ========= ========= =========
Investment income--net ................. 4.45%* 3.96% 4.40% 4.63% 4.61%
========= ========= ========= ========= =========
- ----------------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) $ 2,544 $ 3,814 $ 1,835 $ 1,495 $ 1,185
Data: ========= ========= ========= ========= =========
Portfolio turnover ..................... 24.49% 89.30% 23.32% 24.64% 56.05%
========= ========= ========= ========= =========
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class D
------------------------------------------------------------------
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: 2000 1999 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ... $ 10.63 $ 11.15 $ 11.07 $ 10.61 $ 10.47
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net ................. .25 .50 .55 .55 .55
Realized and unrealized gain (loss) on
investments--net ....................... (.81) (.52) .08 .46 .14
--------- --------- --------- --------- ---------
Total from investment operations ....... (.56) (.02) .63 1.01 .69
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net ............... (.25) (.50) (.55) (.55) (.55)
Realized gain on investments--net .... (.07) -- -- -- --
--------- --------- --------- --------- ---------
Total dividends and distributions ...... (.32) (.50) (.55) (.55) (.55)
--------- --------- --------- --------- ---------
Net asset value, end of period ......... $ 9.75 $ 10.63 $ 11.15 $ 11.07 $ 10.61
========= ========= ========= ========= =========
- ----------------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ..... (5.29%)+ (.30%) 5.82% 9.80% 6.67%
Return:** ========= ========= ========= ========= =========
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Expenses ............................... 1.14%* 1.06% .96% .93% .94%
Net Assets: ========= ========= ========= ========= =========
Investment income--net ................. 4.96%* 4.47% 4.91% 5.13% 5.12%
========= ========= ========= ========= =========
- ----------------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) $ 3,068 $ 3,647 $ 2,837 $ 1,602 $ 1,290
Data: ========= ========= ========= ========= =========
Portfolio turnover ..................... 24.49% 89.30% 23.32% 24.64% 56.05%
========= ========= ========= ========= =========
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Aggregate total investment return.
See Notes to Financial Statements.
11
<PAGE>
Merrill Lynch Massachusetts Municipal Bond Fund January 31, 2000
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.
12
<PAGE>
Merrill Lynch Massachusetts Municipal Bond Fund January 31, 2000
(d) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Interest income is recognized on the accrual basis. Discounts and market
premiums are amortized into interest income. Realized gains and losses on
security transactions are determined on the identified cost basis.
(e) Prepaid registration fees--Prepaid registration fees are charged to expense
as the related shares are issued.
(f) Dividends and distributions--Dividends from net investment income are
declared daily and paid monthly. Distributions of capital gains are recorded on
the ex-dividend dates.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML &
Co."), which is the limited partner. The Fund has also entered into a
Distribution Agreement and Distribution Plans with Merrill Lynch Funds
Distributor ("MLFD" or the "Distributor"), a division of Princeton Funds
Distributor, Inc. ("PFD"), which is a wholly-owned subsidiary of Merrill Lynch
Group, Inc.
FAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee
based upon the average daily value of the Fund's net assets at the following
annual rates: .55% of the Fund's average daily net assets not exceeding $500
million; .525% of average daily net assets in excess of $500 million but not
exceeding $1 billion; and .50% of average daily net assets in excess of $1
billion.
Pursuant to the Distribution Plans adopted by the Fund in accordance with Rule
12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are accrued daily
and paid monthly at annual rates based upon the average daily net assets of the
shares as follows:
- --------------------------------------------------------------------------------
Account Distribution
Maintenance Fee Fee
- --------------------------------------------------------------------------------
Class B .............................. .25% .25%
Class C .............................. .25% .35%
Class D .............................. .10% --
- --------------------------------------------------------------------------------
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Incorpo- rated ("MLPF&S"), a subsidiary of ML & Co., also provides
account maintenance and distribu- tion 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, 2000, 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 ............................ $ 58 $ 750
Class D ............................ $ 581 $3,660
- --------------------------------------------------------------------------------
For the six months ended January 31, 2000, MLPF&S received contingent deferred
sales charges of $26,414 and $7,596 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.
13
<PAGE>
Merrill Lynch Massachusetts Municipal Bond Fund January 31, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
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, 2000 were $12,195,454 and $19,767,921, respectively.
Net realized gains (losses) for the six months ended January 31, 2000 and net
unrealized losses as of January 31, 2000 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Losses
- --------------------------------------------------------------------------------
Long-term investments ................ $(1,820,947) $(1,359,490)
Financial futures contracts .......... 211,692 --
----------- -----------
Total ................................ $(1,609,255) $(1,359,490)
=========== ===========
- --------------------------------------------------------------------------------
As of January 31, 2000, net unrealized depreciation for Federal income tax
purposes aggregated $1,359,490, of which $685,802 related to appreciated
securities and $2,045,292 related to depreciated securities. The aggregate cost
of investments at January 31, 2000 for Federal income tax purposes was
$48,931,168.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest transactions was
$6,007,493 and $129,628 for the six months ended January 31, 2000 and for the
year ended July 31, 1999, respectively.
Transactions in shares of beneficial interest for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended January 31, 2000 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .......................... 10,708 $ 108,120
Shares issued to shareholders
in reinvestment of dividends
and distributions .................... 6,393 64,087
------- -----------
Total issued ......................... 17,101 172,207
Shares redeemed ...................... (85,025) (855,289)
------- -----------
Net decrease ......................... (67,924) $ (683,082)
======= ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended July 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .......................... 82,772 $ 924,254
Shares issued to shareholders
in reinvestment of dividends ......... 9,936 110,112
-------- -----------
Total issued ......................... 92,708 1,034,366
Shares redeemed ...................... (126,725) (1,402,310)
-------- -----------
Net decrease ......................... (34,017) $ (367,944)
======== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Six Months Dollar
Ended January 31, 2000 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .......................... 158,900 $ 1,606,706
Shares issued to shareholders
in reinvestment of dividends
and distributions .................... 63,777 638,622
-------- -----------
Total issued ......................... 222,677 2,245,328
Automatic conversion
of shares ............................ (11,023) (111,874)
Shares redeemed ...................... (610,179) (6,178,659)
-------- -----------
Net decrease ......................... (398,525) $(4,045,205)
======== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended July 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .......................... 529,211 $ 5,897,022
Shares issued to shareholders
in reinvestment of dividends ......... 97,126 1,076,842
------- -----------
Total issued ......................... 626,337 6,973,864
Automatic conversion
of shares ............................ (4,517) (48,743)
Shares redeemed ...................... (894,470) (9,884,471)
------- -----------
Net decrease ......................... (272,650) $(2,959,350)
======== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Six Months Dollar
Ended January 31, 2000 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .......................... 65,255 $ 651,626
Shares issued to shareholders
in reinvestment of dividends
and distributions .................... 7,122 71,398
------- -----------
Total issued ......................... 72,377 723,024
Shares redeemed ...................... (170,244) (1,710,583)
------- -----------
Net decrease ......................... (97,867) $ (987,559)
======= ===========
- --------------------------------------------------------------------------------
14
<PAGE>
Merrill Lynch Massachusetts Municipal Bond Fund January 31, 2000
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended July 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .......................... 275,198 $ 3,090,519
Shares issued to shareholders
in reinvestment of dividends ......... 10,688 117,964
------- -----------
Total issued ......................... 285,886 3,208,483
Shares redeemed ...................... (91,629) (1,010,515)
------- -----------
Net increase ......................... 194,257 $ 2,197,968
======= ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Six Months Dollar
Ended January 31, 2000 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .......................... 42,274 $ 425,951
Automatic conversion
of shares ............................ 11,023 111,874
Shares issued to shareholders
in reinvestment of dividends
and distributions .................... 3,258 32,620
------- -----------
Total issued ......................... 56,555 570,445
Shares redeemed ...................... (84,926) (862,092)
------- -----------
Net decrease ......................... (28,371) $ (291,647)
======= ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended July 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .......................... 141,301 $ 1,584,586
Automatic conversion
of shares ............................ 4,514 48,743
Shares issued to shareholders
in reinvestment of dividends ......... 4,215 46,523
------- -----------
Total issued ......................... 150,030 1,679,852
Shares redeemed ...................... (61,590) (680,154)
------- -----------
Net increase ......................... 88,440 $ 999,698
======= ===========
- --------------------------------------------------------------------------------
OFFICERS AND TRUSTEES
Terry K. Glenn, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Arthur Zeikel, Trustee
Vincent R. Giordano, Senior Vice President
Kenneth A. Jacob, Vice President
Theodore R. Jaeckel Jr., Vice President
Donald C. Burke, Vice President and Treasurer
Alice A. Pellegrino, Secretary
- --------------------------------------------------------------------------------
Robert R. Martin, Trustee of Merrill Lynch Massachusetts Municipal Bond Fund has
recently retired. The Fund's Board of Trustees wishes Mr. Martin well in his
retirement.
- --------------------------------------------------------------------------------
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
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--1/00
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