MERRILL LYNCH
TEXAS
MUNICIPAL
BOND FUND
FUND LOGO
Annual Report
July 31, 1996
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.
<PAGE>
Merrill Lynch Texas
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011
TO OUR SHAREHOLDERS
The Municipal Market Environment
Municipal bond yields rose dramatically during the six-month period
ended July 31, 1996. Investors became increasingly alarmed that
earlier forecasts of continued moderate growth were overly
optimistic. As indications of stronger growth were released,
particularly the strong employment reports released beginning in
March, fears of associated inflationary pressures mounted and yields
rose in response. By May and June, long-term municipal bond yields
rose into the 6.25%--6.30% range.
However, in early July the combination of the Federal Reserve Board
suggesting that growth was expected to slow later in 1996 and a
temporary stock market correction allowed municipal bond yields to
fall as investors scrambled to purchase relatively scarce
securities. As measured by the Bond Buyer Revenue Bond Index, long-
term, A-rated uninsured tax-exempt bonds yielded 6.02% at July 31,
1996, an increase of over 30 basis points (0.30%) in the last six
months. Long-term US Treasury bond yields rose significantly over
the same period. By July 31, 1996, yields on US Treasury bonds
increased almost 100 basis points to end the six-month period at
6.97%.
<PAGE>
The municipal bond market's recent outperformance as compared to its
taxable counterpart was largely the result of two principal factors.
First, much of the concern in the tax-exempt market regarding the
potential loss of the inherent tax-advantage of the municipal bonds
dissipated. For much of 1995, various tax proposals, such as the
flat tax or national sales tax, were put forward either to reduce
the national debt or reform the current tax system. Most of these
proposals would have severely limited the tax advantages enjoyed by
the municipal bond market. However, in February, 1996, the Kemp Com-
mission released its findings regarding various tax reform
proposals. While noting that numerous changes should be made, no
mention of curtailing or stopping municipal bonds' current favored
tax status was made.
The second major factor leading to the municipal bond market's
recent outperformance was the return of a more favorable technical
environment. The rate of increase in new bond issuance recently
slowed. Over the last 12 months, approximately $175 billion in long-
term municipal securities were issued, an increase of over 27% as
compared to the same period a year earlier. Much of this increase
was the result of issuers seeking to refinance their existing higher-
couponed debt as interest rates declined in 1995 and early 1996. As
interest rates rose, these financings became increasingly
economically impractical and issuance declined. Over the last six
months, less than $70 billion in long-term tax-exempt securities
were underwritten, an increase of 20% versus the comparable period a
year earlier. Only $43 billion in tax-exempt securities were issued
in the last three months, a total essentially unchanged from the
comparable quarter in 1995. In July 1996, less than $10 billion in
long-term municipal bonds were issued, representing the lowest
issuance for the month of July since 1990.
At the same time investor demand remained consistently strong. With
nominal new-issue yields above 6%, retail investor interest was
steady. Additionally, investors received over $50 billion this June
and July in assets derived from coupon income, bond maturities and
proceeds from early redemptions. Annual new bond issuance has
declined in recent years and is expected to remain below levels seen
in the early 1990s. Consequently, as the higher-coupon bonds issued
in the early-to-mid 1980s were redeemed at their first optional call
dates, the total number of outstanding tax-exempt bonds has
declined. This combination of a declining net supply and significant
amounts of assets helped maintain investor demand in recent months.
It is unlikely that the municipal bond market will continue to
significantly outperform US Treasury securities in the near future.
The tax-exempt bond market's recent performance led to the yield
ratio between long-term taxable and tax-exempt securities falling
from in excess of 90% to approximately 85%. While historically still
very attractive, some institutional investors, particularly short-
term traders, began to view the tax-exempt bond market's recent
outperformance as an opportunity to sell a relatively expensive
asset. However, to the long-term investor, such a sale would
represent the loss of an attractively priced asset which may not be
easily replaced given the relative scarcity of municipal bonds under
present supply conditions.
<PAGE>
Looking ahead, no clear consensus for the direction of interest
rates currently exists. Perhaps, the primary focus going forward
will be the extent to which the increase in interest rates seen thus
far in 1996 will negatively impact future economic growth. Should
growth slow in the interest rate-sensitive sectors of the economy,
like housing, auto, and consumer spending, as many economists assert
is likely, then bond yields are likely to decline. Under such a
scenario, the municipal bond market's performance is likely to
closely mirror that of the US Treasury bond market.
Fiscal Year in Review
During the year ended July 31, 1996, we slowly shifted away from the
neutral posture we adopted for the Fund in late 1995 and early 1996
toward a more defensive structuring. This shift largely involved the
sale of interest rate-sensitive issues and the corresponding
purchase of higher-couponed, more income-oriented securities. We
increased the Fund's cash reserve position at times to help preserve
the Fund's principal valuation during periods of significant
interest rate volatility. However, we were reluctant to raise
significant cash reserves or to maintain these reserves for an
extended period of time. While tax-exempt interest rates generally
rose over the past six months, there were a number of episodes of
declining interest rates. Continuously held large cash reserves
would impede the Fund from recouping the short-term price
appreciation associated with these episodes. More important, raising
large cash reserves would have a significant negative impact on the
Fund's yields.
New-issue supply in Texas was similar to national issuance over the
past six months. Over $5.9 billion in long-term municipal securities
were issued by Texas municipalities during the six months ended July
31, 1996. However, much of this issuance was concentrated in a few
larger issues which inhibited the Fund's ability to diversify its
holdings somewhat. Additionally, given the strong investor demand as
we noted, much of the Texas new bond issuance was structured in
favor of individual retail investors. The resultant current coupon
issues were unattractive given the Fund's current defensive
strategy. The Fund's present strategy, as well as the more
aggressive posture it maintained in late 1995 and early 1996,
benefited its total returns for the fiscal year. Despite its present
higher-than-normal cash reserve position, the Fund continued to
provide its shareholders with attractive yields for the 12 months
ended July 31, 1996.
Looking ahead for the remainder of 1996, we expect to maintain the
Fund's present defensive posture until a clearer consensus regarding
the near-term direction of interest rates can be established. This
strategy may result in some potential limiting of capital
appreciation should tax-exempt bond yields fall suddenly and
dramatically. However, the Fund's present structure should enable it
to better preserve much of its principal valuation and maintain its
attractive current dividend should municipal bond yields either
remain stable or resume their decline.
<PAGE>
In Conclusion
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
Senior Vice President
(Fred K. Stuebe)
Fred K. Stuebe
Vice President and Portfolio Manager
September 11, 1996
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:
<PAGE>
*Class A Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees. Class A Shares are available only to eligible investors.
*Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.25% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after approximately 10 years. (There is no initial
sales charge for automatic share conversions.)
*Class C Shares are subject to a distribution fee of 0.35% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
*Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.10% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. Dividends paid to each class
of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
7/31/96 4/30/96 7/31/95 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $10.57 $10.53 $10.57 0.00% +0.38%
Class B Shares* 10.57 10.53 10.57 0.00 +0.38
Class C Shares* 10.58 10.54 10.57 +0.09 +0.38
Class D Shares* 10.58 10.54 10.59 -0.09 +0.38
Class A Shares--Total Return* +5.44(1) +1.70(2)
Class B Shares--Total Return* +4.89(3) +1.57(4)
Class C Shares--Total Return* +4.88(5) +1.54(6)
Class D Shares--Total Return* +5.23(7) +1.67(8)
Class A Shares--Standardized 30-day Yield 4.60%
Class B Shares--Standardized 30-day Yield 4.29%
Class C Shares--Standardized 30-day Yield 4.18%
Class D Shares--Standardized 30-day Yield 4.51%
<PAGE>
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
(1)Percent change includes reinvestment of $0.564 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.137 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.510 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.124 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.499 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.121 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.554 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.134 per share ordinary
income dividends.
</TABLE>
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment--Class A Shares and Class B Shares
A line graph depicting the growth of an investment in the Fund's
Class A Shares and Class B Shares compared to growth of an
investment in the Lehman Brothers Municipal Bond Index. Beginning
and ending values are:
8/30/91** 7/96
ML Texas Municipal Bond Fund++--
Class A Shares* $ 9,600 $13,863
ML Texas Municipal Bond Fund++--
Class B Shares* $10,000 $14,085
Lehman Brothers Municipal Bond
Index++++ $10,000 $14,313
<PAGE>
Total Return Based on a $10,000 Investment--Class C Shares and Class D Shares
A line graph depicting the growth of an investment in the Fund's
Class C Shares and Class D Shares compared to growth of an
investment in the Lehman Brothers Municipal Bond Index. Beginning
and ending values are:
10/21/94** 7/96
ML Texas Municipal Bond Fund++--
Class C Shares* $10,000 $11,334
ML Texas Municipal Bond Fund++--
Class D Shares* $ 9,600 $10,985
Lehman Brothers Municipal Bond
Index++++ $10,000 $11,840
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of Operations.
++ML Texas Municipal Bond Fund invests primarily in long-term
investment-grade obligations issued by or on behalf of the State of
Texas, its political subdivisions, agencies and instrumentalities
and obligations of other qualifying issuers.
++++This unmanaged Index consists of long-term revenue bonds,
prerefunded bonds, general obligation bonds and insured bonds.
Past Performance is not predictive of future performance.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/96 +4.93% +0.73%
Inception (8/30/91)
through 6/30/96 +7.69 +6.79
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/96 +4.39% +0.41%
Inception (8/30/91)
through 6/30/96 +7.15 +7.15
[FN]
*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 6/30/96 +4.38% +3.38%
Inception (10/21/94)
through 6/30/96 +7.14 +7.14
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced
to 0% after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 6/30/96 +4.82% +0.63%
Inception (10/21/94)
through 6/30/96 +7.78 +5.21
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<PAGE>
PERFORMANCE DATA (concluded)
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
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
1994 11.15 9.98 -- 0.589 - 5.28
1995 9.98 11.00 -- 0.578 +16.38
1/1/96--7/31/96 11.00 10.57 -- 0.310 - 0.95
------ ------
Total $0.094 Total $3.216
Cumulative total return as of 7/31/96: +44.39%**
</TABLE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change***
<S> <C> <C> <C> <C> <C>
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
1994 11.15 9.98 -- 0.536 - 5.76
1995 9.98 11.00 -- 0.524 +15.80
1/1/96--7/31/96 11.00 10.57 -- 0.280 - 1.24
------ ------
Total $0.094 Total $2.952
Cumulative total return as of 7/31/96: +40.85%***
</TABLE>
<TABLE>
Performance Summary--Class C Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change***
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $10.16 $ 9.98 -- $0.097 - 0.80%
1995 9.98 11.01 -- 0.512 +15.77
1/1/96--7/31/96 11.01 10.58 -- 0.274 - 1.30
------
Total $0.883
Cumulative total return as of 7/31/96: +13.34%***
</TABLE>
<PAGE>
<TABLE>
Performance Summary--Class D Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $10.16 $ 9.99 -- $0.111 - 0.57%
1995 9.99 11.02 -- 0.568 +16.36
1/1/96--7/31/96 11.02 10.58 -- 0.305 - 1.10
------
Total $0.984
Cumulative total return as of 7/31/96: +14.43%**
<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.
***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>
PORTFOLIO ABBREVIATIONS
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 Minimun Tax (subject to)
GO General Obligation Bonds
IDA Industrial Development Authority
INFLOS Inverse Floating Rate Municipal Bonds
PCR Pollution Control Revenue Bonds
S/F Single-Family
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<PAGE>
Texas--100.2%
<S> <S> <C> <S> <C>
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 $ 1,612
Brazos River Authority, Texas, PCR (Utilities Electric Co.), VRDN, AMT (c):
A1+ VMIG1++ 200 Refunding, Series C, 3.80% due 6/01/2030 200
A1+ VMIG1++ 200 Series A, 3.75% due 4/01/2030 200
AAA NR* 2,610 Cameron County, Texas, Housing Finance Corporation, S/F Mortgage Revenue
Refunding Bonds, Series B-1, 6.75% due 9/01/2025 (e)(f) 2,719
Cypress-Fairbanks, Texas, Independent School District, UT:
AAA Aaa 1,000 5.375% due 2/15/2017 955
AAA Aaa 1,050 5.375% due 2/15/2018 1,002
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 1,044
A- A 2,000 Ector County, Texas, Hospital District, Hospital Revenue Bonds (Medical
Center Hospital), 7.30% due 4/15/2012 2,183
NR* VMIG1++ 600 Gulf Coast, Texas, IDA, Solid Waste Disposal Revenue Bonds (CITGO Petroleum
Corp. Project), VRDN, AMT, 3.80% due 5/01/2025 (c) 600
Gulf Coast, Texas, Waste Disposal Authority, Solid Waste Disposal
Revenue Bonds, AMT:
A1+ VMIG1++ 1,000 (Amoco Oil Co. Project),VRDN, 3.75% due 7/01/2027 (c) 1,000
BBB Baa1 1,750 (Champion International Corporation Project), 7.25% due 4/01/2017 1,842
A- A 1,000 Harris County, Texas, Health Facilities Development Corporation, Hospital
Crossover Revenue Refunding Bonds (Memorial Hospital System Project),
7.125% due 6/01/2015 1,072
Harris County, Texas, Health Facilities Development Corporation, Hospital
Revenue Bonds, Series A:
A- A 2,000 (Memorial Hospital Systems Project), 6.625% due 6/01/2024 2,059
AA Aa 2,000 (Saint Luke's Episcopal Hospital Project), 6.625% due 2/15/2012 2,090
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<PAGE>
Texas (continued)
<S> <S> <C> <S> <C>
A1+ NR* $ 800 Harris County, Texas, Industrial Development Corporation, PCR
(Exxon Corp. Project), VRDN, AMT, 3.75% due 8/15/2027 (c) $ 800
AAA Aaa 1,010 Houston, Texas, Airport System, Sub-Lien Revenue Bonds, Series B,
6.625% due 7/01/2022 (d) 1,081
AAA NR* 4,000 Laredo, Texas, Housing Finance Corporation, S/F Mortgage Backed Securities
Program Revenue Bonds, AMT, 6.95% due 10/01/2027 (e)(f) 4,155
A A 1,000 Laredo, Texas, International Toll Bridge Revenue Bonds, 7% due 10/01/2002 (h) 1,124
Matagorda County, Texas, Navigation District No. 1:
A A2 3,100 (Central Power and Light Company Project), PCR, 7.50% due 12/15/2014 3,419
AAA Aaa 1,000 (Houston Light and Power Company), Refunding, Series C, 7.125%
due 7/01/2019 (d) 1,081
BBB NR* 1,500 Midland County, Texas, Hospital District Revenue Bonds (Midland Memorial
Hospital), 7.50% due 6/01/2016 1,594
North Central Texas, Health Facilities Development Corporation Revenue Bonds:
AA Aa 3,000 (Baylor University Medical Center), INFLOS, Series A, 9.968%
due 5/15/2016 (g) 3,630
AAA Aaa 4,000 (Presbyterian Health Systems), 6.685% due 6/22/2021 4,227
Port Neches-Groves, Texas, Independent School District, UT:
AAA Aaa 1,000 5% due 2/15/2015 913
AAA Aaa 1,000 5% due 2/15/2016 910
AAA Aaa 1,000 5% due 2/15/2017 908
NR* VMIG1++ 3,700 Port of Port Arthur, Texas, Navigational District, PCR, Refunding (Texaco
Inc. Project), VRDN, 3.65% due 10/01/2024 (c) 3,700
AAA Aaa 1,000 Red River Authority, Texas, PCR (West Texas Utilities Co.), 6%
due 6/01/2020 (b) 1,000
AAA Aaa 1,575 Round Rock, Texas, Independent School District, UT, Series B, 5.25%
due 8/01/2016 1,482
Southeast Texas, Housing Finance Corporation, S/F Mortgage Collateral Revenue
Bonds, AMT:
NR* Aaa 2,960 Series A, 8% due 11/01/2025 (e) 3,324
NR* Aaa 1,890 Series B, 8.50% due 11/01/2025 2,155
NR* VMIG1++ 100 Southwest Texas, Higher Education Authority Incorporated, Crossover Revenue
Refunding Bonds (Southern Methodist University), VRDN, 3.50% due 7/01/2015 (c) 100
A+ Aa 1,475 Texas Housing Agency, S/F Mortgage Revenue Refunding Bonds, Series A,
7.15% due 9/01/2012 1,531
<PAGE>
Texas National Research Laboratory Commission Financing Corporation (h):
AAA Aaa 1,360 Lease Revenue Bonds (Superconducting, Super Collider Project), 7.10%
due 12/01/2001 1,538
AA Aaa 1,600 Refunding (Superconductor), 7.125% due 4/01/2000 1,768
AAA NR* 505 Texas State Department of Housing and Community Affairs, Home Mortgage
Collateral Revenue Refunding Bonds, Series A, 6.95% due 7/01/2023 (e) 528
AA Aa 3,225 Texas State, GO, Water Development Board, UT, 7% due 8/01/2020 3,630
</TABLE>
<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 Aa $4,000 Texas State, UT, Series B1 and B2, 6.20% due 9/30/2011 $ 4,263
AA Aa 985 Texas State, Veterans Housing Assistance, AMT, UT, Fund II, Series A, 7%
due 12/01/2025 1,026
AAA NR* 435 Travis County, Texas, Housing Finance Corporation, Residential Mortgage
Revenue Refunding Bonds, Series A, 7% due 12/01/2011 (e)(f) 456
A-1 VMIG1++ 2,800 Trinity River Authority, Texas, PCR (Texas Utilities Electric), VRDN,
AMT, Series 96A, 3.75% due 3/01/2026 (a)(c) 2,800
A1+ Aa3 200 West Side Calhoun County, Texas, Navigation District, Sewer and Solid
Waste Disposal Revenue Bonds (BP Chemicals Inc. Project), VRDN, AMT,
3.80% due 4/01/2031 (c) 200
BBB Baa2 1,700 West Side Calhoun County, Texas, Navigation District, Solid Waste Disposal
Revenue Bonds (Union Carbide Chemicals and Plastics), AMT, 8.20%
due 3/15/2021 1,894
AAA Aaa 1,300 Wimberley, Texas, Independent School District, Refunding, UT, 6.60%
due 8/15/2022 (i) 1,424
Total Investments (Cost--$71,367)--100.2% 75,239
Liabilities in Excess of Other Assets--(0.2%) (114)
-------
Net Assets--100.0% $75,125
=======
<PAGE>
<FN>
(a)AMBAC Insured.
(b)MBIA Insured.
(c)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at July 31, 1996.
(d)FGIC Insured.
(e)GNMA Collateralized.
(f)FNMA Collateralized.
(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 July 31, 1996.
(h)Prerefunded.
(i)Bank Qualified.
++Highest short-term rating by Moody's Investors Service, Inc.
*Not Rated.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of July 31, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$71,367,046) (Note 1a) $ 75,239,480
Cash 25,445
Receivables:
Interest $ 1,107,016
Beneficial interest sold 59,996
Securities sold 56,639 1,223,651
------------
Deferred organization expenses (Note 1e) 654
Prepaid registration fees and other assets (Note 1e) 8,920
------------
Total assets 76,498,150
------------
Liabilities: Payables:
Securities purchased 1,006,167
Beneficial interest redeemed 118,427
Dividends to shareholders (Note 1f) 87,048
Investment adviser (Note 2) 34,980
Distributor (Note 2) 27,602 1,274,224
------------
Accrued expenses and other liabilities 99,301
------------
Total liabilities 1,373,525
------------
<PAGE>
Net Assets: Net assets $ 75,124,625
============
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited
Consist of: number of shares authorized $ 92,791
Class B Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 603,158
Class C Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 11,119
Class D Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 3,878
Paid-in capital in excess of par 72,988,895
Accumulated realized capital losses on investments--net (Note 5) (2,224,446)
Accumulated distributions in excess of realized capital gains--net (Note 1f) (223,204)
Unrealized appreciation on investments--net 3,872,434
------------
Net assets $ 75,124,625
============
Net Asset Value: Class A--Based on net assets of $9,805,417 and 927,906 shares
of beneficial interest outstanding $ 10.57
============
Class B--Based on net assets of $63,732,659 and 6,031,584 shares
of beneficial interest outstanding $ 10.57
============
Class C--Based on net assets of $1,176,043 and 111,191 shares
of beneficial interest outstanding $ 10.58
============
Class D--Based on net assets of $410,506 and 38,783 shares
of beneficial interest outstanding $ 10.58
============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
July 31, 1996
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 4,955,016
(Note 1d):
<PAGE>
Expenses: Investment advisory fees (Note 2) $ 442,684
Account maintenance and distribution fees--Class B (Note 2) 344,119
Accounting services (Note 2) 77,109
Professional fees 55,343
Printing and shareholder reports 39,105
Transfer agent fees--Class B (Note 2) 33,060
Registration fees (Note 1e) 14,584
Amortization of organization expenses (Note 1e) 8,835
Custodian fees 6,281
Pricing fees 6,029
Account maintenance and distribution fees--Class C (Note 2) 5,535
Transfer agent fees--Class A (Note 2) 4,168
Trustees' fees and expenses 4,132
Transfer agent fees--Class C (Note 2) 527
Account maintenance fees--Class D (Note 2) 304
Transfer agent fees--Class D (Note 2) 124
Other 2,344
------------
Total expenses 1,044,283
------------
Investment income--net 3,910,733
------------
Realized & Realized loss on investments--net (491,651)
Unrealized Change in unrealized appreciation on investments--net 577,503
Gain (Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 3,996,585
(Notes 1b, 1d & 3): ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended July 31,
Increase (Decrease) in Net Assets: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 3,910,733 $ 4,519,687
Realized loss on investments--net (491,651) (1,732,796)
Change in unrealized appreciation on investments--net 577,503 2,027,077
------------ ------------
Net increase in net assets resulting from operations 3,996,585 4,813,968
------------ ------------
Dividends to Investment income--net:
Shareholders Class A (553,259) (668,810)
(Note 1f): Class B (3,298,727) (3,827,656)
Class C (43,024) (9,161)
Class D (15,723) (14,060)
------------ ------------
Net decrease in net assets resulting from dividends to shareholders (3,910,733) (4,519,687)
------------ ------------
<PAGE>
Beneficial Net decrease in net assets derived from beneficial interest
Interest transactions (8,419,639) (8,767,410)
Transactions ------------ ------------
(Note 4):
Net Assets: Total decrease in net assets (8,333,787) (8,473,129)
Beginning of year 83,458,412 91,931,541
------------ ------------
End of year $ 75,124,625 $ 83,458,412
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
Class A
For the
Period
The following per share data and ratios have been derived Aug. 30,
from information provided in the financial statements. 1991++ to
For the Year Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.57 $ 10.51 $ 11.09 $ 10.84 $ 10.00
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .57 .57 .60 .62 .61
Realized and unrealized gain (loss) on
investments--net -- .06 (.32) .32 .85
-------- -------- -------- -------- --------
Total from investment operations .57 .63 .28 .94 1.46
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.57) (.57) (.60) (.62) (.61)
Realized gain on investments--net -- -- (.23) (.07) (.01)
In excess of realized gain on
investments--net -- -- (.03) -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.57) (.57) (.86) (.69) (.62)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.57 $ 10.57 $ 10.51 $ 11.09 $ 10.84
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 5.44% 6.39% 2.41% 9.15% 15.16%+++
Return:** ======== ======== ======== ======== ========
<PAGE>
Ratios to Expenses, net of reimbursement .85% .82% .67% .70% .49%*
Average ======== ======== ======== ======== ========
Net Assets: Expenses .85% .83% .84% .94% 1.10%*
======== ======== ======== ======== ========
Investment income--net 5.29% 5.64% 5.45% 5.77% 6.39%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 9,805 $ 11,012 $ 12,973 $ 14,033 $ 11,232
Data: ======== ======== ======== ======== ========
Portfolio turnover 110.16% 99.40% 59.68% 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>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class B
For the
Period
The following per share data and ratios have been derived Aug. 30,
from information provided in the financial statements. 1991++ to
For the Year Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.57 $ 10.51 $ 11.09 $ 10.84 $ 10.00
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .51 .52 .55 .57 .56
Realized and unrealized gain (loss) on
investments--net -- .06 (.32) .32 .85
-------- -------- -------- -------- --------
Total from investment operations .51 .58 .23 .89 1.41
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.51) (.52) (.55) (.57) (.56)
Realized gain on investments--net -- -- (.23) (.07) (.01)
In excess of realized gain on
investments--net -- -- (.03) -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.51) (.52) (.81) (.64) (.57)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.57 $ 10.57 $ 10.51 $ 11.09 $ 10.84
======== ======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share 4.89% 5.85% 1.89% 8.60% 14.64%+++
Return:** ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement 1.36% 1.33% 1.17% 1.20% 1.01%*
Average ======== ======== ======== ======== ========
Net Assets: Expenses 1.36% 1.34% 1.34% 1.44% 1.60%*
======== ======== ======== ======== ========
Investment income--net 4.78% 5.13% 4.95% 5.26% 5.88%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands). $ 63,733 $ 71,783 $ 78,958 $ 72,482 $ 50,612
Data: ======== ======== ======== ======== ========
Portfolio turnover 110.16% 99.40% 59.68% 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>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class C Class D
For the For the
For the Period For the Period
The following per share data and ratios have been derived Year Oct. 21, Year Oct. 21,
from information provided in the financial statements. Ended 1994++ to Ended 1994++ to
July 31, July 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1996 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.57 $ 10.16 $ 10.59 $ 10.16
Operating -------- -------- -------- --------
Performance: Investment income--net .50 .39 .56 .44
Realized and unrealized gain (loss) on investments--net .01 .41 (.01) .43
-------- -------- -------- --------
Total from investment operations .51 .80 .55 .87
-------- -------- -------- --------
Less dividends from investment income--net (.50) (.39) (.56) (.44)
-------- -------- -------- --------
Net asset value, end of period $ 10.58 $ 10.57 $ 10.58 $ 10.59
======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share 4.88% 8.07%+++ 5.23% 8.74%+++
Return:** ======== ======== ======== ========
Ratios to Expenses 1.47% 1.48%* .96% .95%*
Average Net ======== ======== ======== ========
Assets: Investment income--net 4.65% 4.87%* 5.15% 5.41%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 1,176 $ 501 $ 411 $ 163
Data: ======== ======== ======== ========
Portfolio turnover 110.16% 99.40% 110.16% 99.40%
======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects
of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch 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
four classes of shares under the Merrill Lynch Select Pricing SM
System. Shares of Class A and Class D are sold with a front-end
sales charge. Shares of Class B and Class C may be subject to a
contingent deferred sales charge. All classes of shares have
identical voting, dividend, liquidation and other rights and the
same terms and conditions, except that Class B, Class C and Class D
Shares bear certain expenses related to the account maintenance of
such shares, and Class B and Class C Shares also bear certain
expenses related to the distribution of such shares. Each class has
exclusive voting rights with respect to matters relating to its
account maintenance and distribution expenditures. The following is
a summary of significant accounting policies followed by the Fund.
<PAGE>
(a) Valuation of investments--Municipal bonds and other portfolio
securities in which the Fund invests are traded primarily in the
over-the-counter municipal bond and money markets and are valued at
the last available bid price in the over-the-counter market or on
the basis of yield equivalents as obtained from one or more dealers
that make markets in the securities. Financial futures contracts and
options thereon, which are traded on exchanges, are valued at their
settlement prices as of the close of such exchanges. Short-term
investments with remaining maturities of sixty days or less are
valued at amortized cost, which approximates market value.
Securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or
under the direction of the Board of Trustees of the Trust, including
valuations furnished by a pricing service retained by the Trust,
which may utilize a matrix system for valuations. The procedures of
the pricing service and its valuations are reviewed by the officers
of the Trust under the general supervision of the Trustees.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
* Financial futures contracts--The Fund may purchase or sell interest
rate futures contracts and options on such futures contracts for the
purpose of hedging the market risk on existing securities or the
intended purchase of securities. Futures contracts are contracts for
delayed delivery of securities at a specific future date and at a
specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to
the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin
and are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
<PAGE>
(e) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a five-year period. Prepaid registration fees are
charged to expense as the related shares are issued.
NOTES TO FINANCIAL STATEMENTS (continued)
(f) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates. Distributions in excess
of realized capital gains are due primarily to differing tax
treatments for futures transactions and post-October losses.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), as a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee based upon the average daily
value of the Fund's net assets at the following annual rates: 0.55%
of the Fund's average daily net assets not exceeding $500 million;
0.525% of average daily net assets in excess of $500 million but not
exceeding $1 billion; and 0.50% of average daily net assets in
excess of $1 billion.
Pursuant to the distribution plans (the "Distribution Plans")
adopted by the Fund in accordance with Rule 12b-1 under the
Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are
accrued daily and paid monthly at annual rates based upon the
average daily net assets of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.25%
Class C 0.25% 0.35%
Class D 0.10% --
<PAGE>
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the year ended July 31, 1996, 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 $219 $2,416
Class D $385 $3,303
For the year ended July 31, 1996, MLPF&S received contingent
deferred sales charges of $94,963 and $987 relating to transactions
in Class B and Class C Shares, respectively.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, MLPF&S, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended July 31, 1996 were $85,455,060 and $95,036,869,
respectively.
Net realized and unrealized gains (losses) as of July 31, 1996 were
as follows:
Realized Unrealized
Losses Gains
Long-term investments $ (21,605) $ 3,872,434
Financial futures contracts (470,046) --
----------- -----------
Total $ (491,651) $ 3,872,434
=========== ===========
<PAGE>
As of July 31, 1996, net unrealized appreciation for Federal income
tax purposes aggregated $3,872,434, all of which related to
appreciated securities. The aggregate cost of investments at July
31, 1996 for Federal income tax purposes was $71,367,046.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest
transactions was $8,419,639 and $8,767,410 for the years ended July
31, 1996 and July 31, 1995, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Dollar
Year Ended July 31, 1996 Shares Amount
Shares sold 38,470 $ 413,050
Shares issued to share-
holders in reinvestment
of dividends 24,896 266,171
----------- -----------
Total issued 63,366 679,221
Shares redeemed (177,467) (1,893,072)
----------- -----------
Net decrease (114,101) $(1,213,851)
=========== ===========
Class A Shares for the Dollar
Year Ended July 31, 1995 Shares Amount
Shares sold 87,162 $ 889,976
Shares issued to share-
holders in reinvestment
of dividends 32,604 335,993
----------- -----------
Total issued 119,766 1,225,969
Shares redeemed (311,999) (3,202,546)
----------- -----------
Net decrease (192,233) $(1,976,577)
=========== ===========
<PAGE>
Class B Shares for the Dollar
Year Ended July 31, 1996 Shares Amount
Shares sold 639,049 $ 6,853,336
Shares issued to share-
holders in reinvestment
of dividends 150,166 1,605,891
----------- -----------
Total issued 789,215 8,459,227
Automatic conversion of shares (7,859) (83,042)
Shares redeemed (1,542,242) (16,527,560)
----------- -----------
Net decrease (760,886) $(8,151,375)
=========== ===========
Class B Shares for the Dollar
Year Ended July 31, 1995 Shares Amount
Shares sold 873,516 $ 8,972,030
Shares issued to share-
holders in reinvestment
of dividends 174,460 1,798,859
----------- -----------
Total issued 1,047,976 10,770,889
Automatic conversion
of shares (326) (3,493)
Shares redeemed (1,766,969) (18,188,989)
----------- -----------
Net decrease (719,319) $(7,421,593)
=========== ===========
Class C Shares for the Dollar
Year Ended July 31, 1996 Shares Amount
Shares sold 94,085 $ 1,013,741
Shares issued to share-
holders in reinvestment
of dividends 3,298 35,266
----------- -----------
Total issued 97,383 1,049,007
Shares redeemed (33,556) (353,847)
----------- -----------
Net increase 63,827 $ 695,160
=========== ===========
<PAGE>
Class C Shares for the Period Dollar
Oct. 21, 1994++ to July 31, 1995 Shares Amount
Shares sold 54,172 $ 564,922
Shares issued to share-
holders in reinvestment
of dividends 726 7,662
----------- -----------
Total issued 54,898 572,584
Shares redeemed (7,534) (80,283)
----------- -----------
Net increase 47,364 $ 492,301
=========== ===========
[FN]
++Commencement of Operations.
Class D Shares for the Dollar
Year Ended July 31, 1996 Shares Amount
Shares sold 20,102 $ 215,896
Automatic conversion
of shares 7,850 83,042
Shares issued to share-
holders in reinvestment
of dividends 984 10,543
----------- -----------
Total issued 28,936 309,481
Shares redeemed (5,540) (59,054)
----------- -----------
Net increase 23,396 $ 250,427
=========== ===========
NOTES TO FINANCIAL STATEMENTS (concluded)
Class D Shares for the Period Dollar
Oct. 21, 1994++ to July 31, 1995 Shares Amount
Shares sold 79,452 $ 822,941
Automatic conversion
of shares 326 3,493
Shares issued to share-
holders in reinvestment
of dividends 739 7,793
----------- -----------
Total issued 80,517 834,227
Shares redeemed (65,130) (695,768)
----------- -----------
Net increase 15,387 $ 138,459
=========== ===========
[FN]
++Commencement of Operations.
<PAGE>
5. Capital Loss Carryforward:
At July 31, 1996, the Fund had a net capital loss carryforward of
approximately $1,052,000, all of which expires in 2003. This amount
will be available to offset like amounts of any future taxable
gains.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
Merrill Lynch Texas Municipal Bond Fund of
Merrill Lynch Multi-State Municipal Series Trust:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Merrill Lynch
Texas Municipal Bond Fund of Merrill Lynch Multi-State Municipal
Series Trust as of July 31, 1996, the related statements of
operations for the year then ended and changes in net assets for
each of the years in the two-year period then ended, and the
financial highlights for each of the years in the four-year period
then ended and for the period August 30, 1991 (commencement of
operations) to July 31, 1992. These financial statements and the
financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at July 31,
1996 by correspondence with the custodian and broker. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch Texas Municipal Bond Fund of Merrill Lynch Multi-State
Municipal Series Trust as of July 31, 1996, the results of its
operations, the changes in its net assets, and the financial
highlights for the respective stated periods in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
September 11, 1996
</AUDIT-REPORT>
<PAGE>
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid monthly by
Merrill Lynch Texas Municipal Bond Fund during its taxable year
ended July 31, 1996 qualify as tax-exempt interest dividends for
Federal income tax purposes.
Additionally, there were no capital gains distributed by the Fund
during the year.
Please retain this information for your records.
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Vincent R. Giordano, Senior Vice President
Donald C. Burke, Vice President
Kenneth A. Jacob, Vice President
Fred K. Stuebe, Vice President
Gerald M. Richard, Treasurer
Jerry Weiss, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, Massachussetts 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
