MERRILL
LYNCH
TEXAS
MUNICIPAL
BOND FUND
Semi-Annual Report January 31, 1994
This report is not authorized for use as an offer of sale or a solici-
tation of an offer to buy shares of the Fund unless accompanied or preceded
by the Fund's current prospectus. Past performance results shown in this
report should not be considered a representation of future performance.
Investment return and principal value of shares will fluctuate so that
shares, when redeemed, may be worth more or less than their original cost.
Merrill Lynch Texas
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, New Jersey
08543-9011
TO OUR SHAREHOLDERS
As 1993 drew to a close, the US economy showed signs of strong improvement.
The initial estimate for gross domestic product (GDP) growth in the final
quarter of 1993 was +5.9% in real terms, the strongest quarterly perform-
ance since the fourth quarter of 1987. GDP growth was led by interest rate-
sensitive sectors, such as housing, durable goods orders and business invest-
ment in capital equipment. Consumer confidence also improved after remaining
lackluster throughout most of 1993. While the exceptionally robust rate of
growth may not be sustainable in the first quarter of 1994,(especially con-
sidering the harsh winter weather experienced by virtually half of the country
in January), this strong showing suggests that the US economy may at last be
gaining momentum. This was supported by the December increase in the Index of
Leading Economic Indicators, the fifth monthly rise in this indicator of
future economic activity.
<PAGE>
At the same time, the rate of inflation remains in check. Nevertheless, con-
cerns arose late in 1993 that the rate of business activity might increase
inflationary pressures, which were reflected in an upturn of longer-term
interest rates. In January, Federal Reserve Board Chairman Alan Greenspan
indicated in Congressional testimony that continued strong expansion of
economic activity would lead the central bank to tighten monetary policy
in an effort to contain inflation. On February 4, 1994, the central bank
broke with tradition and publicly announced an increase in short-term
interest rates. In the weeks ahead, investors will continue to gauge the
pace of the economic expansion and watch for signs of an overheating
economy that could prompt successive Federal Reserve Board actions to
raise short-term interest rates.
The Municipal Market
Yields on tax-exempt securities generally declined over the three months
ended January 31, 1994. Long-term revenue bond yields, as measured by the
Bond Buyer Revenue Bond Index, declined an additional six basis points
(0.06%) to end the quarter at 5.50%. US Treasury bond yields, however,
rose approximately 25 basis points to end the period at approximately
6.20%. This outperformance by municipal securities is likely to be the
dominant theme for much of 1994.
During the January quarter, taxable yields remained volatile in reaction
to the inherent conflicts between the extremely strong economic recovery
seen during the last quarter of 1993 and continued low inflationary
pressures. Tax-exempt bond yields, however, reflected very positive
technical factors. During the 12 months ended January 31, 1994, muni-
cipalities issued more than $288 billion in securities, an increase of
more than 21% versus one year ago. As we have discussed in earlier
reports to shareholders, much of this increase has been the result of
municipalities refinancing existing higher-couponed debt. At current
yield levels, few of these issues remain to be refunded. This has led
to estimates of municipal bond issuance declining to approximately $175
billion for all of 1994. More than $290 billion in long-term tax-exempt
securities was issued in 1993.
In addition to this dramatic decline in issuance, investor demand is
expected to increase in the coming year. Greater demand should be gene-
rated by a number of factors, with the recent increases in marginal
Federal income tax rates the most important. Also, bond calls and early
redemptions are expected to increase significantly in the coming quarters
and last at least into early 1995. The combination of declining new-issue
volume and increasing numbers of bonds redeemed prior to their stated
maturities will eventually lead to a net decline in the number of bonds
outstanding. In such a scenario, investor demand rises as bondholders
are forced to continually purchase new municipal bonds to replace their
previous holdings.
The outlook for the municipal market is very favorable. While the historic
declines in yields seen over the last year are unlikely to be repeated,
the strong technical framework within the tax-exempt market would support
further modest declines in tax-exempt yields. At the very least, should
interest rates rise in response to continued strong economic growth and a
resurgence in inflationary pressures, we believe that municipal bond price
deterioration will be minimal in comparison to taxable investment alterna-
tives.
<PAGE>
Portfolio Strategy
During the January quarter, the Fund's portfolio strategy consisted of
selling discounted bonds and replacing them with higher-yielding current
coupon bonds. This strategy enhanced the Fund's current income in a rela-
tively stable market. Looking ahead, the current strength of the economic
recovery is not likely to be sustained, and inflation will be kept in check.
With this in mind, the bond market is likely to remain in a trading range
with long-term yields eventually trending lower. Additionally, low inflation
coupled with decreasing municipal issuance and larger tax bills set the stage
for a strong technical environment in the municipal market. In fact, issuance
of Texas bonds during the January quarter compared to the same period last
year declined 9.5%. In conjunction with these developments, the Fund will
continue to increase its holdings of high-quality current coupon bonds to
seek to generate a higher yield for shareholders.
We appreciate your ongoing interest in Merrill Lynch Texas Municipal Bond
Fund, and we look forward to serving your investment needs and objectives
in the months and years to come.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
March 11, 1994
PERFORMANCE DATA
None of the past results shown should be considered a representation of
future performance. Investment return and principal value of Class A and
Class B Shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost.
<TABLE>
Recent Performance Results*
<CAPTION>
<PAGE>
12 Month 3 Month
1/31/94 10/31/93 1/31/93 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $11.26 $11.43 $10.63 + 6.82%(1) -0.65%(1)
Class B Shares 11.26 11.43 10.63 + 6.82(1) -0.65(1)
Class A Shares--Total Return +14.44(2) +2.17(3)
Class B Shares--Total Return +13.87(4) +2.04(5)
Class A Shares--Standardized 30-day Yield 4.56%
Class B Shares--Standardized 30-day Yield 4.25%
<FN>
*Investment results shown for the 3-month and 12-month periods
are before the deduction of any sales charges.
(1)Percent change includes reinvestment of $0.094 per share
capital gains distributions.
(2)Percent change includes reinvestment of $0.772 per share
ordinary income dividends and $0.094 per share capital gains
distributions.
(3)Percent change includes reinvestment of $0.317 per share
ordinary income dividends and $0.094 per share capital gains
distributions.
(4)Percent change includes reinvestment of $0.716 per share
ordinary income dividends and $0.094 per share capital gains
distributions.
(5)Percent change includes reinvestment of $0.303 per share
ordinary income dividends and $0.094 per share capital gains
distributions.
</TABLE>
PERFORMANCE DATA (concluded)
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
8/30/91--12/31/91 $10.00 $10.25 -- $0.242 + 4.97%
1992 10.25 10.59 -- 0.722 +10.70
1993 10.59 11.15 $0.094 0.775 +13.81
1/1/94--1/31/94 11.15 11.26 -- 0.036 + 1.40
------ ------
Total $0.094 Total $1.775
Cumulative total return as of 1/31/94: +34.11%**
<FN>
*Figures may include short-term capital gains
distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
include sales charge; results would be lower if sales charge was
included.
</TABLE>
<PAGE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
8/30/91--12/31/91 $10.00 $10.25 -- $0.224 + 4.79%
1992 10.25 10.59 -- 0.669 +10.14
1993 10.59 11.15 $0.094 0.719 +13.24
1/1/94--1/31/94 11.15 11.26 -- 0.033 + 1.37
------ ------
Total $0.094 Total $1.645
Cumulative total return as of 1/31/94: +32.49%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
Average Annual Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 12/31/93 +13.81% + 9.26%
Inception (8/30/91)through 12/31/93 +12.69 +10.74
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 12/31/93 +13.24% +9.24%
Inception (8/30/91)through 12/31/93 +12.12 +11.39
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
PORTFOLIO ABBREVIATIONS
<PAGE>
To simplify the listings of Merrill Lynch Texas
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)
COP Certificate of Participation
DATES Daily Adjustable Tax-Exempt Securities
INFLOS Inverse Floating Rate Municipal Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
RITES Residual Interest Tax-Exempt Securities
S/F Single-Family
TRAN Tax and Revenue Anticipation Notes
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Texas--100.7%
<S> <S> <C> <S> <C>
NR A1 $ 1,390 Abilene, Texas, Higher Education Authority Incorporated, Student Loan Revenue
Bonds, Sub-Series C, AMT, 6.10% due 7/01/2008 $ 1,475
BB+ Baa2 1,500 Alliance Airport Authority Incorporated, Texas, Special Facilities Revenue
Bonds (AMR Corp./American Airlines, Incorporated Project), AMT, 7%
due 12/01/2011 1,670
AAA Aaa 1,000 Austin, Texas, Hotel Occupancy Revenue Refunding Bonds, Series A,
5.125% due 11/15/2019 (a) 978
AAA Aaa 2,000 Austin, Texas, Utility System Combined Revenue Bonds, Prior Lien, UT, Series C,
7.30% due 11/15/2001 (g) 2,416
NR Aaa 1,500 Baytown, Texas, Properties Management and Development Corporation, Mortgage
Revenue Refunding Bonds (Baytown Terrace Project), Series A, 6.10%
due 8/15/2021 (f)(h) 1,582
A- NR 1,500 Brazos County, Texas, Health Facilities Development Corporation, Franciscan
Services Corporation, Revenue Refunding Bonds (Saint Joseph Hospital & Health
Center), Series B, 6% due 1/01/2013 1,532
BBB Baa2 2,500 Brazos River Authority, Texas, PCR (Texas Utilities Electric Company Project),
AMT, UT, 7.875% due 3/01/2017 2,794
AAA Aaa 1,500 Brazos River Authority, Texas, Revenue Refunding Bonds (Houston Light & Power Company),
5.60% due 12/01/2017 (b) 1,527
<PAGE>
AAA Aaa 1,000 Dallas-Fort Worth, Texas, International Airport Facilities Improvement Corporation
Revenue Bonds (United Parcel Service, Inc.), AMT, 6.60% due 5/01/2032 1,102
BBB Baa1 1,500 Ector County, Texas, Hospital District, Hospital Revenue Bonds (Medical Center
Hospital), 7.30% due 4/15/2012 1,646
NR A 1,640 Gainesville, Texas, Housing Authority, M/F Mortgage Revenue Bonds, Series A,
6.625% due 12/01/2011 1,761
NR NR 750 Gulf Coast, Texas, Waste Disposal Authority, Pollution Control and Solid Waste
Disposal Revenue Bonds (Diamond Shamrock Corporation Project), 6.75% due 6/01/2009 759
BBB Baa1 2,250 Gulf Coast, Texas, Waste Disposal Authority Revenue Bonds (Champion International
Corporation), AMT, 7.45% due 5/01/2026 2,546
A- A 1,000 Harris County, Texas, Health Facilities Development Corporation, Hospital Revenue
Crossover Refunding Bonds (Memorial Hospital System Project), 7.125% due 6/01/2015 1,149
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Texas--100.7%
<S> <S> <C> <S> <C>
Texas (continued)
A1+ VMIG1 $ 200 Harris County, Texas, Health Facilities Development Corporation, Special Facilities
Revenue Bonds (Texas Medical Center Project), VRDN, 2.25% due 2/15/2022 (b)(c) $ 200
A- Baa1 1,000 Harris County, Texas, Industrial Development Corporation, Marine Terminal Revenue
Refunding Bonds (GATX Terminal Corporation Project), 6.95% due 2/01/2022 1,100
A1+ Aaa 100 Harris County, Texas, Industrial Development Corporation, PCR (Exxon
Project--1984), DATES, 1984 Series B, VRDN, 2.15% due 3/01/2024 (c) 100
AAA Aaa 2,000 Harris County, Texas, Toll Road Senior Lien, Revenue Refunding Bonds, UT, 5.375%
due 8/15/2020 (d) 1,990
AA+ Aa 1,000 Harris County, Texas, Toll Road Sub-Lien, Revenue Refunding Bonds, UT, 6.75%
due 8/01/2014 1,134
A A 3,500 Houston, Texas, Water & Sewer Systems Revenue Refunding Bonds, Senior Lien, Series B,
6.375% due 12/01/2014 3,848
AAA Aaa 1,425 Houston, Texas, Water Conveyance Systems Contract COP, Series J, 6.25%
due 12/15/2015 (a) 1,637
BBB- Baa 2,480 Jefferson County, Texas, Health Facilities Development Corporation, Hospital Revenue
Bonds (Baptist Healthcare Systems Project), 8.875% due 6/01/2021 2,956
<PAGE>
Katy, Texas, Independent School District, Refunding Bonds, Series A:
AAA Aaa 5,000 6% due 2/15/2008 2,414
AAA Aaa 1,500 6% due 8/15/2008 706
AAA Aaa 1,805 UT, 6.05% due 8/15/2009 800
A A 1,000 Laredo, Texas, International Toll Bridge Revenue Bonds, 7% due 10/01/2010 1,181
AA Aa2 2,000 Lower Neches Valley Authority, Texas, Industrial Development Corporation, PCR,
Refunding (NRTC Project), 5.35% due 11/01/2028 1,984
A1+ VMIG1 300 Lubbock, Texas, Health Facilities Development Corporation Revenue Bonds (Saint
Joseph Health System), VRDN, Series A, 2% due 7/01/2013 (c) 300
AAA Aaa 1,000 Matagorda County, Texas, Navigational District No. 1, Collateral Revenue
Refunding Bonds (Houston Light and Power Company), UT, Series C, 7.125%
due 7/01/2019 (d) 1,138
Matagorda County, Texas, Navigational District No. 1, PCR (Central Power
and Light Company Project):
A A2 2,650 7.50% due 12/15/2014 3,058
A- A3 2,500 Refunding, 6% due 7/01/2028 2,583
BBB NR 2,750 Midland County, Texas, Hospital District Revenue Bonds (Midland Memorial Hospital),
7.50% due 6/01/2016 3,076
AA Aa 3,000 North Central, Texas, Health Facilities Development Corporation Revenue Bonds
(Baylor University Medical Center), INFLOS, Series A, 10.891% due 5/15/2016 (c) 3,750
AAA Aaa 1,000 North Central, Texas, Health Facilities Development Corporation Revenue Bonds
(Presbyterian Healthcare Systems), Registered RITES, Series C, 10.845%
due 6/15/2021 (b)(c) 1,251
North Texas Higher Education Authority Incorporation, Student Loan Revenue
Refunding Bonds, Student Loan Marketing Association, VRDN (c):
A1+ NR 2,100 2.25% due 3/01/1999 2,100
A1+ NR 500 2.25% due 3/01/2005 500
NR P1 200 Port Arthur, Texas, Navigational District, Industrial Development Corporation, PCR
(American Petrofina Incorporation), VRDN, 2.30% due 5/01/2003(c) 200
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Texas (concluded)
<S> <S> <C> <S> <C>
AA- A2 $ 1,000 Red River Authority, Texas, PCR (Hoechst Celanese Corporation Project), AMT, 6.875%
due 4/01/2017 $ 1,109
AA Aa1 4,430 San Antonio, Texas, Electric and Gas Revenue Refunding Bonds, 5% due 2/01/2017 4,289
BBB Baa 1,400 Tarrant County, Texas, Health Facilities Development Corporation, Hospital Revenue
Refunding and Improvement Bonds (Fort Worth Osteopathic), 7% due 5/15/2028 1,484
AAA Aaa 2,500 Tarrant County, Texas, Water Control and Improvement District No. 1, Water Revenue
Refunding Bonds, 4.50% due 3/01/2011 (a) 2,338
A+ Aa 3,185 Texas Housing Agency, S/F Mortgage Revenue Refunding Bonds, Series A, 7.15%
due 9/01/2012 3,493
AAA Aaa 1,100 Texas Municipal Power Agency, Revenue Refunding Bonds, 5.50% due 9/01/2010 (b) 1,167
A- A 3,000 Texas National Research Laboratory Commission Financing Corporation, Lease Revenue
Bonds (SuperConducting, Super Collider Project), 7.10% due 12/01/2021 3,098
AAA NR 605 Texas State Department of Housing & Community Affairs, Home Mortgage Collateral,
Revenue Refunding Bonds, Series A, 6.95% due 7/01/2023 (e) 654
AAA Aaa 1,000 Texas State, Public Property Finance Corporation Revenue Refunding Bonds,
Mental Health and Retardation, 5.50% due 9/01/2013 (i) 1,014
AA Aa 2,000 Texas State, Register RIB, UT, Series B1 & B2, 9.176% due 9/30/2011 (c) 2,545
SP1+ MIG1++ 1,900 Texas State, TRAN, 3.25% due 8/31/1994 1,911
AAA Aaa 1,750 Texas State Turnpike Authority, Dallas North Tollway Revenue Refunding Bonds,
5% due 1/01/2020 (a) 1,696
AAA Aa 5,500 Texas Water Development Board, Water Revenue Bonds (State Revolving Fund-Senior
Lien), 6% due 7/15/2013 5,893
AAA NR 990 Travis County, Texas, Housing Finance Corporation, Residential Mortgage Revenue
Refunding Bonds, Series A, 7% due 12/01/2011 (e)(f) 1,070
AA+ Aa1 2,500 University of Texas, Permanent University Fund, Refunding Bonds, Series A, 6.25%
due 7/01/2013 2,711
BBB Baa2 1,700 West Side Calhoun County, Texas, Navigational District, Solid Waste Disposal
Revenue Bonds (Union Carbide Chemicals and Plastics), AMT, 8.20% due 3/15/2021 1,981
Total Investments (Cost--$89,843)--100.7% 97,396
Liabilities in Excess of Other Assets--(0.7)% (707)
-------
Net Assets --100.0% $96,689
<PAGE> =======
<FN>
(a) AMBAC Insured.
(b) MBIA Insured.
(c) The interest rate is subject to change periodically based
upon the prevailing market rate. The interest rate shown is the
rate in effect at January 31, 1994.
(d) FGIC Insured.
(e) GNMA Collateralized.
(f) FNMA Collateralized.
(g) Prerefunded.
(h) FHA Collateralized.
(i) Capital Guaranty.
++Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of January 31, 1994
<CAPTION>
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$89,843,100) (Note 1a) $97,395,598
Cash 53,616
Receivables:
Interest $1,248,163
Beneficial interest sold 341,718 1,589,881
----------
Deferred organization expenses (Note 1e) 27,160
Prepaid registration fees and other assets (Note 1e) 40,887
-----------
Total assets 99,107,142
-----------
Liabilities: Payables:
Securities purchased 1,971,486
Beneficial interest redeemed 172,826
Dividends to shareholders (Note 1f) 89,666
Distributor (Note 2) 31,954
Investment adviser (Note 2) 26,464 2,292,396
----------
Accrued expenses and other liabilities 126,115
-----------
Total liabilities 2,418,511
-----------
Net Assets: Net assets $96,688,631
===========
<PAGE>
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 131,217
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 727,103
Paid-in capital in excess of par 88,129,935
Undistributed realized capital gains--net 147,878
Unrealized appreciation on investments--net 7,552,498
-----------
Net assets $96,688,631
===========
Net Asset Value: Class A--Based on net assets of $14,781,493 and 1,312,165 shares of
beneficial interest outstanding $ 11.26
===========
Class B--Based on net assets of $81,907,138 and 7,271,032 shares of
beneficial interest outstanding $ 11.26
===========
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Six
Months Ended
January 31, 1994
<S> <S> <C>
Investment Income Interest and amortization of premium and discount earned $ 2,783,318
(Note 1d):
Expenses: Investment advisory fees (Note 2) 256,657
Distribution fees--Class B (Note 2) 196,584
Printing and shareholder reports 34,500
Professional fees 27,326
Registration fees (Note 1e) 24,774
Accounting services (Note 2) 17,994
Transfer agent fees--Class B (Note 2) 17,692
Custodian fees 8,297
Amortization of organization expenses (Note 1e) 4,506
Pricing fees 3,922
Transfer agent fees--Class A (Note 2) 2,926
Trustees' fees and expenses 2,231
Other 1,648
------------
Total expenses before reimbursement 599,057
Reimbursement of expenses (Note 2) (93,330)
------------
Total expenses after reimbursement 505,727
------------
Investment income--net 2,277,591
------------
<PAGE>
Realized & Realized gain on investments--net 751,489
Unrealized Change in unrealized appreciation on investments--net 2,764,679
Gain on ------------
Investments--Net Net increase in Net Assets Resulting from Operations $ 5,793,759
(Notes 1d & 3): ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the
Six Months For the
Ended Year Ended
January 31, July 31,
Increase (Decrease) in Net Assets: 1994 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 2,277,591 $ 3,903,671
Realized gain on investments--net 751,489 1,580,712
Change in unrealized appreciation on investments--net 2,764,679 1,038,052
----------- -----------
Net increase in net assets resulting from operations 5,793,759 6,522,435
----------- -----------
Dividends & Investment income--net:
Distributions to Class A (389,913) (704,588)
Shareholders Class B (1,887,678) (3,199,083)
(Note 1f): Realized gain on investments--net:
Class A (339,436) (80,744)
Class B (1,844,889) (400,700)
----------- -----------
Net decrease in net assets resulting from dividends and distributions
to shareholders (4,461,916) (4,385,115)
----------- -----------
Beneficial Interest Net increase in net assets derived from beneficial
Transactions interest transactions 8,842,655 22,532,723
(Note 4): ----------- -----------
Net Assets: Total increase in net assets 10,174,498 24,670,043
Beginning of period 86,514,133 61,844,090
----------- -----------
End of period $96,688,631 $86,514,133
=========== ===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
Class A
For the
For the For the Period
The following per share data and ratios have been derived Six Months Year August 30,
from information provided in the financial statements. Ended Ended 1991++ to
January 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1994 1993 1992
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.09 $ 10.84 $ 10.00
Operating ------- ------- -------
Performance: Investment income--net .30 .62 .61
Realized and unrealized gain on investments--net .43 .32 .85
------- ------- -------
Total from investment operations .73 .94 1.46
------- ------- -------
Less dividends and distributions:
Investment income--net (.30) (.62) (.61)
Realized gain on investments--net (.26) (.07) (.01)
------- ------- -------
Total dividends and distributions (.56) (.69) (.62)
------- ------- -------
Net asset value, end of period $ 11.26 $ 11.09 $ 10.84
======= ======= =======
Total Investment Based on net asset value per share 6.69%+++ 9.15% 15.16%+++
Return:** ======= ======= =======
Ratios to Expenses, net of reimbursement .66%* .70% .49%*
Average ======= ======= =======
Net Assets: Expenses .86%* .94% 1.10%*
======= ======= =======
Investment income--net 5.31%* 5.77% 6.39%*
======= ======= =======
Supplemental Net assets, end of period (in thousands). $14,781 $14,033 $11,232
Data: ======= ======= =======
Portfolio turnover 22.81% 56.10% 72.34%
======= ======= =======
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class B
For the
For the For the Period
The following per share data and ratios have been derived Six Months Year August 30,
from information provided in the financial statements. Ended Ended 1991++ to
January 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1994 1993 1992
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.09 $ 10.84 $ 10.00
Operating ------- ------- -------
Performance: Investment income--net .27 .57 .56
Realized and unrealized gain on investments--net .43 .32 .85
------- ------- -------
Total from investment operations .70 .89 1.41
------- ------- -------
Less dividends and distributions:
Investment income--net (.27) (.57) (.56)
Realized gain on investments--net (.26) (.07) (.01)
------- ------- -------
Total dividends and distributions (.53) (.64) (.57)
------- ------- -------
Net asset value, end of period $ 11.26 $ 11.09 $ 10.84
======= ======= =======
Total Investment Based on net asset value per share 6.42+++ 8.60% 14.64%+++
Return:** ======= ======= =======
Ratios to Expenses, excluding distribution fees and net of
Average reimbursement .66%* .70% .51%*
Net Assets: ======= ======= =======
Expenses, net of reimbursement 1.16%* 1.20% 1.01%*
======= ======= =======
Expenses 1.36%* 1.44% 1.60%*
======= ======= =======
Investment income--net 4.80%* 5.26% 5.88%*
======= ======= =======
Supplemental Net assets, end of period (in thousands) $81,907 $72,482 $50,612
Data: ======= ======= =======
Portfolio turnover 22.81% 56.10% 72.34%
======= ======= =======
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Texas Municipal Bond Fund (the "Fund") is part of Merrill Lynch
Multi-State Municipal Series Trust (the "Trust"). The Fund is registered under
the Investment Company Act of 1940 as a non-diversified, open-end management
investment company. The Fund offers both Class A and Class B Shares. Class A
Shares are sold with a front-end sales charge. Class B Shares may be subject
to a contingent deferred sales charge. Both classes of shares have identical
voting, dividend, liquidation and other rights and the same terms and condi-
tions, except that Class B Shares bear certain expenses related to the distri-
bution of such shares and have exclusive voting rights with respect to matters
relating to such distribution expenditures. The following is a summary of
significant accounting policies followed by the Fund.
(a) Valuation of investments--Municipal bonds and other portfolio securit-
ies 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. Options, which are traded on exchanges, are valued
at their last sale price as of the close of such exchanges or, lacking any
sales, at the last available bid price. Securities and assets for which mar-
ket quotations are not readily available are valued at fair value as deter-
mined 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) Financial futures contracts -- The Fund may purchase or sell interest rate
futures contracts and options on such futures contracts for the purpose of
hedging the market risk on existing or the intended purchase of securities.
Futures contracts are contracts for delayed delivery of securities at a
specific future date and at a specific price or yield. Upon entering into
a contract, the Fund deposits and maintains as collateral such initial
margin as 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.
<PAGE>
(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. Original issue discounts
and market premiums are amortized into interest income. Realized gains and
losses on security transactions are determined on the identified cost basis.
(e) Deferred organization expenses and prepaid registration fees--Deferred
organization expenses are charged to expense on a straight-line basis over
a five-year period. Prepaid registration fees are charged to expense as the
related shares are issued.
(f) Dividends and distributions--Dividends from net investment income are
declared daily and paid monthly. Distributions of capital gains are recorded
on the ex-dividend dates.
2. Investment Advisory Agreement and Transactions with
Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). Effective January 1, 1994, the investment advisory
business of FAM was reorganized from a corporation to a limited partnership.
Both prior to and after the reorganization, ultimate control of FAM was
vested with Merrill Lynch & Co., Inc. ("ML & Co."). The general partner
of FAM is Princeton Services, Inc., an indirect wholly-owned subsidiary
of ML & Co. The limited partners are ML & Co. and Merrill Lynch Investment
Management, Inc. ("MLIM"), which is also an indirect wholly-owned subsidiary
of ML & Co. The Fund has also entered into Distribution Agreements and a
Distribution Plan with Merrill Lynch Funds Distributor, Inc. ("MLFD" or
"Distributor"), a wholly-owned subsidiary of MLIM.
FAM is responsible for the management of the Fund's portfolio and provides
the necessary personnel, facilities, equipment and certain other services
necessary to the operations of the Fund. For such services, the Fund pays
a monthly fee based upon the average daily value of the Fund's net assets
at the following annual rates: 0.55% of the Fund's average daily net assets
not exceeding $500 million; 0.525% of average daily net assets in excess of
$500 million but not exceeding $1 billion; and 0.50% of average daily net
assets in excess of $1 billion. For the six months ended January 31, 1994,
FAM earned fees of $256,657, of which $93,330 was waived.
Pursuant to a distribution plan ("the Distribution Plan") 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 relating to Class B Shares, which are accrued daily
and paid monthly at the annual rates of 0.25% and 0.25%, respectively,
of the average daily net assets of the Class B Shares of the Fund.
Pursuant to a sub-agreement with the Distributor, Merrill Lynch also
provides account maintenance and distribution services to the Fund.
This fee is to compensate the Distributor for services provided and
the expenses borne by the Distributor under the Distribution Agreement.
As authorized by the Plan, the Distributor has entered into an agreement
with Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S"), an affiliate
of FAM, which provides for the compensation of MLPF&S for providing
distribution-related services to the Fund. For the six months ended
January 31, 1994, MLFD earned underwriting discounts of $2,634, and
MLPF&S earned dealer concessions of $29,002 on sales of the Fund's
Class A Shares.
<PAGE>
MLPF&S also received contingent deferred sales charges of $103,369 for
the sale of Class B Shares during the period.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML
& Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or directors
of FAM, MLIM, MLFD, FDS, MLPF&S and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for
the six months ended January 31, 1994 were $26,916,733 and $19,740,462,
respectively.
Net realized and unrealized gains as of January 31, 1994 were as
follows:
Realized Unrealized
Gains Gains
Long-term investments $697,320 $7,547,901
Short-term investments -- 4,597
Financial futures contracts 54,169 --
-------- ----------
Total $751,489 $7,552,498
======== ==========
As of January 31, 1994, net unrealized appreciation for Federal income
tax purposes aggregated $7,552,498, all of which related to appreciated
securities. The aggregate cost of investments at January 31, 1994 for
Federal income tax purposes was $89,843,100.
NOTES TO FINANCIAL STATEMENTS (concluded)
4. Beneficial Interest Transactions:
Net increase in net assets derived from beneficial interest transactions
was $8,842,655 and $22,532,723 for the six months ended January 31, 1994
and the year ended July 31, 1993, respectively.
Transactions in shares of beneficial interest for Class A and Class B
Shares were as follows:
Class A Shares for the Six Months Dollar
Ended January 31,1994 Shares Amount
Shares sold 109,161 $ 1,229,498
Shares issued to shareholders
in reinvestment of dividends and
distributions 32,531 364,836
-------- -------------
Total issued 141,692 1,594,334
Shares redeemed (94,631) (1,065,061)
-------- ------------
Net increase 47,061 $ 529,273
======== ============
<PAGE>
Class A Shares for the Dollar
Year Ended July 31, 1993 Shares Amount
Shares sold 276,160 $2,989,624
Shares issued to shareholders
in reinvestment of dividends
and distributions 39,409 422,706
------- ----------
Total issued 315,569 3,412,330
Shares redeemed (86,918) (934,980)
------- ----------
Net increase 228,651 $2,477,350
======= ==========
Class B Shares for the
Six Months Ended Dollar
January 31, 1994 Shares Amount
Shares sold 1,118,477 $12,655,449
Shares issued to shareholders
in reinvestment of dividends
and distributions 172,067 1,928,478
--------- -----------
Total issued 1,290,544 14,583,927
Shares redeemed (554,127) (6,270,545)
--------- -----------
Net increase 736,417 $ 8,313,382
========= ===========
Class B Shares for the Dollar
Year Ended July 31, 1993 Shares Amount
Shares sold 2,439,177 $26,296,192
Shares issued to shareholders
in reinvestment of dividends
and distributions 157,083 1,687,035
--------- -----------
Total issued 2,596,260 27,983,227
Shares redeemed (731,892) (7,927,854)
--------- -----------
Net increase 1,864,368 $20,055,373
========= ===========
<PAGE>
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
Kenneth S. Axelson, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Jerry Weiss, Secretary
Custodian
National Westminster Bank NJ
10 Exchange Place
Jersey City, New Jersey 07302
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
