MERRILL LYNCH
ARIZONA
MUNICIPAL
BOND FUND
STRATEGIC
Performance
[GRAPHIC OMITTED]
Semi-Annual Report
January 31, 1999
<PAGE>
Merrill Lynch Arizona Municipal Bond Fund January 31, 1999
TO OUR SHAREHOLDERS
The Municipal Market Environment
During the six months ended January 31, 1999, long-term bond yields moved
significantly lower. US domestic economic growth remained moderate, with losses
in the manufacturing sector offset by strong growth in service-oriented
industries. Industrial commodity prices recently fell to their lowest level in
over a decade. This suggests that the current positive inflationary environment
is unlikely to be challenged in the near term. Additionally, the Federal Reserve
Board lowered short-term interest rates in September, October and November, in
part to ensure that US domestic economic growth would not be negatively impacted
by ongoing weak economic growth overseas. However, various external factors, as
well as increased volatility, contributed to the decline in bond yields as they
have for much of the past year. Episodes of foreign economic instability
generated a significant "flight to quality" rally in US Treasury securities, as
well as fostering lower tax-exempt bond yields as a result. Periods of strong
foreign equity market appreciation, particularly in Asia, have at times resulted
in higher US bond yields as foreign investors have sold US fixed-income
instruments to reinvest the proceeds in their own domestic equity markets.
Additionally, the continued distraction of President Clinton's impeachment trial
added to recent interest rate volatility. However, on balance, the favorable
fundamental economic scenario supported lower bond yields. During the six-month
period ended January 31, 1999, the yield on the US Treasury 30-year bond fell
over 60 basis points (0.60%) to 5.09%, and long-term municipal revenue bond
yields declined almost 20 basis points to 5.17%, as measured by the Bond Buyer
Revenue Bond Index.
Throughout most of 1998, the municipal bond market's performance was impeded by
a significant increase in new-issue supply. However, in recent months, the
technical position of the tax-exempt market improved. Over the last 12 months,
almost $285 billion in new long-term tax-exempt bonds was underwritten, an
increase of almost 30% compared to the same period a year ago. As municipal bond
yields declined in recent years, it has taken increasingly lower bond yields to
generate the cost savings necessary to refinance remaining higher-couponed debt.
Consequently, the rate of increases in municipal bond issuance slowed in recent
quarters. During the last six months, more than $125 billion in new tax-exempt
bonds was issued, an increase of approximately 5% compared to the same period a
year ago. During the January 31, 1999 quarter, $63 billion in new long-term
municipal bonds was underwritten, representing an increase of 5% compared to the
January 31, 1998 quarter.
The pace of tax-exempt issuance continued to slow in 1999. January's monthly
issuance was less than $15 billion, representing a decline of almost 25%
compared to January 1998's volume. Additionally, investors received more than
$22 billion in coupon payments, maturities and proceeds from early redemptions
in January. Investors can also expect to receive an additional $15 billion-$18
billion in February for reinvestment. Consequently, investor demand has been
strong in recent months, easily matching, if not at times exceeding, available
supply. We will monitor this trend closely in the coming months to determine if
the supply pressures exerted in 1998 are abating and fostering a more balanced
supply/ demand environment for 1999. Such an environment should allow the
tax-exempt market's performance to more closely mirror that of its taxable
counterpart.
Foreign investors have rarely been active investors in the tax-exempt bond
market since they are unable to benefit from the inherent tax advantage of
municipal securities. Consequently, the municipal bond market has not been able
to benefit from the strong flight to quality demand enjoyed by US Treasury
securities since late 1997. This inability has in large part resulted in
significantly smaller declines in municipal bond yields compared to US Treasury
securities. However, this has resulted in the opportunity to purchase tax-exempt
securities with yields very close to or, in some instances, exceeding those of
comparable US Treasury bonds. By January 31, 1999, long-term tax-exempt bond
yields were at 102% of US Treasury securities of comparable maturities, nearly
matching the least expensive level of the past year. Municipal bond yield ratios
have averaged approximately 95% for the last six months and 92% for all of 1998.
During 1997, tax-exempt bond yield ratios averaged 84%. It is likely that the
combination of the increase in new-issue volume and the "safe-haven" status of
US Treasury securities drove municipal bond yield ratios to their present
attractive levels. Should new volume decline and/or foreign financial markets
regain stability in
1
<PAGE>
Merrill Lynch Arizona Municipal Bond Fund January 31, 1999
1999, tax-exempt bond yield ratios could quickly return to their more historic
levels (85%-88%).
Looking ahead, the expected combination of moderate economic growth in the
United States and continued negligible inflation suggests a relatively stable
interest rate environment into early 1999. However, it is likely that foreign
financial markets will again be a critical factor in determining US bond yields.
Economic problems in Russia and Brazil remain unresolved, suggesting that
additional shocks to the world's financial system are possible. On the other
hand, the continued robustness of the US economy has led to some back up in
interest rates. However, at present these factors indicate that there is little
immediate risk of sustained significant increases in long-term bond yields.
Portfolio Strategy
Throughout the six months ended January 31, 1999, we maintained the Fund's
constructive investment strategy. We believed that strong domestic economic
growth seen in late 1998 and thus far this year would be offset by a combination
of an extremely constructive inflationary environment and deteriorating Asian
and Latin American economic conditions. Consequently, as 1998 ended, we expected
tax-exempt bond yields to trade in a relatively narrow range, with a bias toward
lower bond yields. In fact, as 1998 ended, municipal bond yields were very
attractive relative to taxable securities. We maintained the Fund's fully
invested position because of these attractive municipal yield ratios in order to
seek to enhance shareholder income. We believe that municipal bond prices are in
a good position to appreciate should interest rates decline. At January 31,
1999, 75.5% of Fund assets were rated AA or better by at least one of the major
rating agencies.
Looking ahead, we expect little change in the Fund's existing structure. Current
economic fundamentals and a strong domestic economy offset by the lack of
significant inflationary pressures suggest that interest rates should trade in a
narrow range. Should economic weakness in Asia reverse in the coming months and
no longer constrain US economic growth, we will look to adopt a more defensive
position for the Fund.
In Conclusion
We appreciate your ongoing interest in Merrill Lynch Arizona Municipal Bond
Fund, and we look forward to serving your investment needs in the months and
years to come.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
Executive Vice President
/s/ Vincent R. Giordano
Vincent R. Giordano
Senior Vice President
/s/ Walter C. O'Connor
Walter C. O'Connor
Vice President and Portfolio Manager
March 3, 1999
2
<PAGE>
Merrill Lynch Arizona Municipal Bond Fund January 31, 1999
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill Lynch
Select Pricing(SM) System, which offers four pricing alternatives:
o Class A Shares incur a maximum initial sales charge (front-end load) of 4%
and bear no ongoing distribution or account maintenance fees. Class A
Shares are available only to eligible investors.
o Class B Shares are subject to a maximum contingent deferred sales charge
of 4% if redeemed during the first year, decreasing 1% each year
thereafter to 0% after the fourth year. In addition, Class B Shares are
subject to a distribution fee of 0.25% and an account maintenance fee of
0.25%. These shares automatically convert to Class D Shares after
approximately 10 years. (There is no initial sales charge for automatic
share conversions.)
o Class C Shares are subject to a distribution fee of 0.35% and an account
maintenance fee of 0.25%. In addition, Class C Shares are subject to a 1%
contingent deferred sales charge if redeemed within one year of purchase.
o Class D Shares incur a maximum initial sales charge of 4% and an account
maintenance fee of 0.10% (but no distribution fee).
None of the past results shown should be considered a representation of future
performance. Figures shown in the "Recent Performance Results" and "Average
Annual Total Return" tables assume reinvestment of all dividends and capital
gains distributions at net asset value on the payable date. Investment return
and principal value of shares will fluctuate so that shares, when redeemed, may
be worth more or less than their original cost. Dividends paid to each class of
shares will vary because of the different levels of account maintenance,
distribution and transfer agency fees applicable to each class, which are
deducted from the income available to be paid to shareholders.
Recent Performance Results*
<TABLE>
<CAPTION>
Standardized
12 Month 3 Month Since Inception 30-Day Yield
Total Return Total Return Total Return As of 1/31/99
=============================================================================================================
<S> <C> <C> <C> <C>
ML Arizona Municipal Bond Fund Class A Shares +5.64% +1.57% +67.82% 3.72%
- -------------------------------------------------------------------------------------------------------------
ML Arizona Municipal Bond Fund Class B Shares +5.10 +1.44 +61.85 3.37
- -------------------------------------------------------------------------------------------------------------
ML Arizona Municipal Bond Fund Class C Shares +5.10 +1.42 +34.07 3.27
- -------------------------------------------------------------------------------------------------------------
ML Arizona Municipal Bond Fund Class D Shares +5.53 +1.54 +36.98 3.62
=============================================================================================================
</TABLE>
* Investment results shown do not reflect sales charges; results would be
lower if a sales charge was included. Total investment returns are based
on changes in net asset values for the periods shown, and assume
reinvestment of all dividends and capital gains distributions at net asset
value on the payable date. The Fund's since inception periods are Class A
& Class B Shares, from 11/29/91 to 1/31/99 and Class C & Class D Shares,
from 10/21/94 to 1/31/99.
3
<PAGE>
Merrill Lynch Arizona Municipal Bond Fund January 31, 1999
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
Year Ended 12/31/98 +5.60% +1.37%
- --------------------------------------------------------------------------------
Five Years Ended 12/31/98 +5.30 +4.44
- --------------------------------------------------------------------------------
Inception (11/29/91)
through 12/31/98 +7.44 +6.82
- --------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
================================================================================
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
Year Ended 12/31/98 +5.06% +1.08%
- --------------------------------------------------------------------------------
Five Years Ended 12/31/98 +4.76 +4.76
- --------------------------------------------------------------------------------
Inception (11/29/91)
through 12/31/98 +6.90 +6.90
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after
4 years.
** Assuming payment of applicable contingent deferred sales charge.
================================================================================
% Return % Return
Without CDSC With CDSC**
================================================================================
Class C Shares*
================================================================================
Year Ended 12/31/98 +4.86% +3.87%
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 12/31/98 +6.99 +6.99
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after
1 year.
** Assuming payment of applicable contingent deferred sales charge.
================================================================================
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class D Shares*
================================================================================
Year Ended 12/31/98 +5.49% +1.27%
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 12/31/98 +7.56 +6.51
- --------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
4
<PAGE>
Merrill Lynch Arizona Municipal Bond Fund January 31, 1999
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
====================================================================================================================
Arizona--90.7%
====================================================================================================================
<S> <C> <C> <C> <C>
Arizona Health Facilities Authority, Hospital System Revenue Refunding Bonds:
AAA Aaa $2,160 (Northern Arizona Healthcare System), 4.75% due 10/01/2030 (a) $ 2,081
NR* Aaa 2,115 (Saint Luke's Health Systems), 7.25% due 11/01/2003 (f) 2,430
- --------------------------------------------------------------------------------------------------------------------
AA+ Aa1 2,000 Arizona State Wastewater Management Authority, Wastewater Treatment Financial
Assistance Revenue Bonds (City of Phoenix), 6.80% due 7/01/2011 2,225
- --------------------------------------------------------------------------------------------------------------------
NR* Aa 2,000 Arizona Student Loan Acquisition Authority, Student Loan Revenue Refunding
Bonds, AMT, Senior Series B, 6.60% due 5/01/2010 2,157
- --------------------------------------------------------------------------------------------------------------------
Coconino County, Arizona, Pollution Control Corporation, PCR (Nevada Power Co.
Project), AMT:
BBB- NR* 1,750 6.375% due 10/01/2036 1,901
BBB- NR* 2,500 Series B, 5.80% due 11/01/2032 2,540
- --------------------------------------------------------------------------------------------------------------------
AAA Aaa 3,620 Gilbert, Arizona, Water and Sewer Revenue Refunding Bonds, 6.50% due
7/01/2022 (c) 4,071
- --------------------------------------------------------------------------------------------------------------------
Glendale, Arizona, Development Authority, Educational Facilities Revenue
Refunding Bonds (American Graduate School International) (b):
AAA NR* 1,000 7.125% due 7/01/2005 (f) 1,194
AAA NR* 500 5.875% due 7/01/2015 545
- --------------------------------------------------------------------------------------------------------------------
Glendale, Arizona, Union High School District Number 205, GO (c):
AAA Aaa 1,700 (Projects of 1993), Series B, 5.70% due 7/01/2005 (f) 1,899
NR* Aaa 3,650 Refunding, 5% due 7/01/2008 3,937
- --------------------------------------------------------------------------------------------------------------------
AAA Aaa 4,500 Maricopa County, Arizona, Elementary School District No. 68 (Alhambra), GO,
Refunding, Series A, 6.75% due 7/01/2014 (a) 5,151
- --------------------------------------------------------------------------------------------------------------------
BBB Baa1 1,000 Maricopa County, Arizona, Hospital Revenue Refunding Bonds (Sun Health
Corporation), 6.125% due 4/01/2018 1,065
- --------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Maricopa County, Arizona, IDA, Health Facilities Revenue Bonds (Saint
Joseph's Care Center Project), Series A, 7.75% due 7/01/2000 (e)(f) 2,148
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
PORTFOLIO ABBREVIATIONS
To simplify the listings of Merrill Lynch Arizona 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 below and at right.
AMT Alternative Minimum Tax (subject to)
GO General Obligation Bonds
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
LEVRRS Leveraged Reverse Rate Securities
M/F Multi-Family
PCR Pollution Control Revenue Bonds
YCN Yield Curve Notes
5
<PAGE>
Merrill Lynch Arizona Municipal Bond Fund January 31, 1999
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
====================================================================================================================
Arizona (concluded)
====================================================================================================================
<S> <C> <C> <C> <C>
AAA NR* $2,235 Maricopa County, Arizona, IDA, M/F Housing Revenue Bonds (Stanford Court
Apartments Project), Series A, 5.30% due 7/01/2028 (e) $ 2,277
- --------------------------------------------------------------------------------------------------------------------
Maricopa County, Arizona, Pollution Control Corporation, PCR, Refunding,
Series A:
BB+ Ba1 1,500 (Public Service Company), 5.75% due 11/01/2022 1,489
BB+ Ba1 1,500 (Public Service Company of New Mexico), 6.30% due 12/01/2026 1,593
- --------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Maricopa County, Arizona, School District No. 69 (Paradise Valley), GO,
Refunding, 5.25% due 7/01/2011 (d) 1,079
- --------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,125 Mesa, Arizona, Utility System Revenue Bonds, 6.125% due 7/01/2007 (c)(f) 1,309
- --------------------------------------------------------------------------------------------------------------------
NR* NR* 2,000 Mohave County, Arizona, IDA, IDR (North Star Steel Co. Project), AMT,
6.70% due 3/01/2020 2,165
- --------------------------------------------------------------------------------------------------------------------
Peoria, Arizona, Improvement District, Special Assessment Bonds No. 8801:
BBB NR* 200 7.30% due 1/01/2009 220
BBB NR* 395 7.30% due 1/01/2011 434
- --------------------------------------------------------------------------------------------------------------------
Peoria, Arizona, Improvement District No. 8401, Special Assessment Bonds
No. 8802:
BBB NR* 430 7.20% due 1/01/2010 471
BBB NR* 510 7.20% due 1/01/2013 559
- --------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Phoenix, Arizona, Civic Improvement Corporation, Municipal Facilities
Excise Tax Revenue Bonds, 6.90% due 7/01/2004 (e)(f) 2,348
- --------------------------------------------------------------------------------------------------------------------
AA- Aaa 1,250 Phoenix, Arizona, Civic Improvement Corporation, Water System Revenue
Bonds, Junior Lien, 6% due 7/01/2006 (e)(f) 1,420
- --------------------------------------------------------------------------------------------------------------------
AA+ Aa1 3,450 Phoenix, Arizona, GO, 4.50% due 7/01/2022 3,282
- --------------------------------------------------------------------------------------------------------------------
AAA Aaa 750 Pima County, Arizona, IDA, Revenue Refunding Bonds (Healthpartners),
Series A, 5.625% due 4/01/2014 (e) 815
- --------------------------------------------------------------------------------------------------------------------
AAA Aaa 950 Pima County, Arizona, Sewer Revenue Refunding Bonds, 6.75% due 7/01/2015 (c) 1,025
- --------------------------------------------------------------------------------------------------------------------
BBB NR* 750 Prescott Valley, Arizona, Improvement District, Special Assessment Bonds
(Sewer Collection System Roadway Repair), 7.90% due 1/01/2012 846
- --------------------------------------------------------------------------------------------------------------------
AA Aa1 2,000 Scottsdale, Arizona, Water and Sewer Revenue Bonds (Project of 1989),
Series E, 4.50% due 7/01/2023 1,889
- --------------------------------------------------------------------------------------------------------------------
BBB+ NR* 1,600 Sedona, Arizona, Sewer Revenue Refunding Bonds, 7% due 7/01/2012 1,767
- --------------------------------------------------------------------------------------------------------------------
A+ A1 1,250 Tucson, Arizona, Water Revenue Refunding Bonds, 6.50% due 7/01/2016 (a) 1,351
- --------------------------------------------------------------------------------------------------------------------
AA A1 2,000 University of Arizona, University Revenue Refunding Bonds, Series A,
6.20% due 6/01/2016 2,349
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
Merrill Lynch Arizona Municipal Bond Fund January 31, 1999
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
====================================================================================================================
Puerto Rico--6.6%
====================================================================================================================
<S> <C> <C> <C> <C>
AAA Aaa $2,000 Puerto Rico Commonwealth, GO, Refunding, YCN, 7.982% due 7/01/2020 (d)(g) $ 2,273
- --------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,900 Puerto Rico Electric Power Authority, Power Revenue Refunding Bonds,
LEVRRS, 8.228% due 7/01/2002 (d)(f)(g) 2,233
- --------------------------------------------------------------------------------------------------------------------
Total Investments (Cost--$61,070)--97.3% 66,538
Other Assets Less Liabilities--2.7% 1,869
-------
Net Assets--100.0% $68,407
=======
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) AMBAC Insured.
(b) Connie Lee Insured.
(c) FGIC Insured.
(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 rates shown are those in effect
at January 31, 1999.
* Not Rated.
See Notes to Financial Statements.
7
<PAGE>
Merrill Lynch Arizona Municipal Bond Fund January 31, 1999
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of January 31, 1999
<TABLE>
<S> <C> <C>
Assets: Investments, at value (identified cost--$61,069,666) (Note 1a) .. $ 66,537,787
Cash ............................................................ 66,892
Receivables:
Securities sold ............................................... $ 1,434,255
Interest ...................................................... 552,163
Beneficial interest sold ...................................... 27,262 2,013,680
-----------
Prepaid expenses and other assets ............................... 5,348
------------
Total assets .................................................... 68,623,707
------------
- ----------------------------------------------------------------------------------------------------------------
Liabilities: Payables:
Beneficial interest redeemed .................................. 66,779
Dividends to shareholders (Note 1e) ........................... 49,907
Investment adviser (Note 2) ................................... 28,972
Distributor (Note 2) .......................................... 19,923 165,581
-----------
Accrued expenses and other liabilities .......................... 50,915
------------
Total liabilities ............................................... 216,496
------------
- ----------------------------------------------------------------------------------------------------------------
Net Assets: Net assets ...................................................... $ 68,407,211
============
- ----------------------------------------------------------------------------------------------------------------
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited
Consist of: number of shares authorized ..................................... $ 127,132
Class B Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized ..................................... 448,938
Class C Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized ..................................... 12,377
Class D Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized ..................................... 36,273
Paid-in capital in excess of par ................................ 62,916,252
Accumulated realized capital losses on investments--net ......... (601,882)
Unrealized appreciation on investments--net ..................... 5,468,121
------------
Net assets ...................................................... $ 68,407,211
============
- ----------------------------------------------------------------------------------------------------------------
Net Asset Value: Class A--Based on net assets of $13,921,471 and 1,271,322 shares
of beneficial interest outstanding .............................. $ 10.95
============
Class B--Based on net assets of $49,162,558 and 4,489,375 shares
of beneficial interest outstanding .............................. $ 10.95
============
Class C--Based on net assets of $1,354,741 and 123,774 shares
of beneficial interest outstanding .............................. $ 10.95
============
Class D--Based on net assets of $3,968,441 and 362,732 shares
of beneficial interest outstanding .............................. $ 10.94
============
- ----------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
</TABLE>
8
<PAGE>
Merrill Lynch Arizona Municipal Bond Fund January 31, 1999
FINANCIAL INFORMATION (continued)
Statement of Operations
<TABLE>
<CAPTION>
For the Six Months Ended
January 31, 1999
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned ......... $ 1,956,042
(Note 1d):
- ------------------------------------------------------------------------------------------------------------------
Expenses: Investment advisory fees (Note 2) ................................ $ 190,900
Account maintenance and distribution fees--Class B (Note 2) ...... 126,988
Printing and shareholder reports ................................. 39,670
Professional fees ................................................ 35,099
Accounting services (Note 2) ..................................... 13,225
Transfer agent fees--Class B (Note 2) ............................ 10,244
Registration fees ................................................ 8,286
Account maintenance and distribution fees--Class C (Note 2) ...... 4,041
Pricing fees ..................................................... 3,055
Custodian fees ................................................... 2,438
Transfer agent fees--Class A (Note 2) ............................ 2,309
Trustees' fees and expenses ...................................... 1,916
Account maintenance fees--Class D (Note 2) ....................... 1,649
Transfer agent fees--Class D (Note 2) ............................ 549
Transfer agent fees--Class C (Note 2) ............................ 267
Other ............................................................ 926
----------
Total expenses ................................................... 441,562
-----------
Investment income--net ........................................... 1,514,480
-----------
- ------------------------------------------------------------------------------------------------------------------
Realized & Realized gain on investments--net ................................ 567,689
Unrealized Gain on Change in unrealized appreciation on investments--net ............ 574,354
Investments--Net -----------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations ............. $ 2,656,523
===========
- ------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
</TABLE>
9
<PAGE>
Merrill Lynch Arizona Municipal Bond Fund January 31, 1999
FINANCIAL INFORMATION (continued)
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
January 31, July 31,
Increase (Decrease) in Net Assets: 1999 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations: Investment income--net .................................. $ 1,514,480 $ 3,278,116
Realized gain on investments--net ....................... 567,689 1,528,306
Change in unrealized appreciation on investments--net ... 574,354 (1,500,179)
----------- -----------
Net increase in net assets resulting from operations .... 2,656,523 3,306,243
----------- -----------
- ----------------------------------------------------------------------------------------------------------
Dividends & Investment income--net:
Distributions to Class A ............................................... (332,042) (709,010)
Shareholders Class B ............................................... (1,077,887) (2,401,175)
(Note 1e): Class C ............................................... (27,902) (46,121)
Class D ............................................... (76,649) (121,810)
Realized gain on investments--net:
Class A ............................................... (141,226) --
Class B ............................................... (507,086) --
Class C ............................................... (14,324) --
Class D ............................................... (39,718) --
----------- -----------
Net decrease in net assets resulting from dividends
and distributions to shareholders ....................... (2,216,834) (3,278,116)
----------- -----------
- ---------------------------------------------------------------------------------------------------------
Beneficial Interest Net decrease in net assets derived from beneficial
Transactions interest transactions ................................... (1,383,660) (6,115,987)
(Note 4): ----------- -----------
- ---------------------------------------------------------------------------------------------------------
Net Assets: Total decrease in net assets ............................ (943,971) (6,087,860)
Beginning of period ..................................... 69,351,182 75,439,042
----------- -----------
End of period ........................................... $68,407,211 $69,351,182
=========== ===========
- ---------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
</TABLE>
10
<PAGE>
Merrill Lynch Arizona Municipal Bond Fund January 31, 1999
FINANCIAL INFORMATION (continued)
Financial Highlights
<TABLE>
<CAPTION>
Class A
-------------------------------------------
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended For the Year Ended July 31,
Jan. 31, --------------------------------
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ........ $ 10.88 $ 10.87 $ 10.54 $ 10.46 $ 10.40
Operating ------- ------- ------- ------- -------
Performance: Investment income--net ...................... .26 .55 .55 .54 .55
Realized and unrealized gain on
investments--net ............................ .18 .01 .33 .08 .11
------- ------- ------- ------- -------
Total from investment operations ............ .44 .56 .88 .62 .66
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net .................... (.26) (.55) (.55) (.54) (.55)
Realized gain on investments--net ......... (.11) -- -- -- (.01)
In excess of realized gain on
investments--net .......................... -- -- -- -- (.04)
------- ------- ------- ------- -------
Total dividends and distributions ........... (.37) (.55) (.55) (.54) (.60)
------- ------- ------- ------- -------
Net asset value, end of period .............. $ 10.95 $ 10.88 $ 10.87 $ 10.54 $ 10.46
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share .......... 4.10%+ 5.25% 8.63% 6.04% 6.76%
Return:** ======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------
Ratios to Expenses, net of reimbursement .............. .88%* .82% .79% .79% .80%
Average ======= ======= ======= ======= =======
Net Assets: Expenses .................................... .88%* .82% .79% .79% .83%
======= ======= ======= ======= =======
Investment income--net ...................... 4.75%* 5.01% 5.21% 5.09% 5.44%
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) .... $13,921 $13,875 $14,012 $14,988 $14,893
Data: ======= ======= ======= ======= =======
Portfolio turnover .......................... 19.52% 53.75% 29.68% 36.39% 62.65%
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------
*Annualized.
**Total investment returns exclude the effects of sales loads.
+Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
11
<PAGE>
Merrill Lynch Arizona Municipal Bond Fund January 31, 1999
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
<TABLE>
<CAPTION>
Class B
------------------------------------------------
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended For the Year Ended July 31,
Jan. 31, -------------------------------------
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ... $ 10.88 $ 10.87 $ 10.54 $ 10.46 $ 10.40
Operating ------- ------- ------- ------- -------
Performance: Investment income--net ................. .23 .49 .50 .49 .50
Realized and unrealized gain on
investments--net ....................... .18 .01 .33 .08 .11
------- ------- ------- ------- -------
Total from investment operations ....... .41 .50 .83 .57 .61
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net ............... (.23) (.49) (.50) (.49) (.50)
Realized gain on investments--net .... (.11) -- -- -- (.01)
In excess of realized gain on
investments--net ..................... -- -- -- -- (.04)
------- ------- ------- ------- -------
Total dividends and distributions ...... (.34) (.49) (.50) (.49) (.55)
------- ------- ------- ------- -------
Net asset value, end of period ......... $ 10.95 $ 10.88 $ 10.87 $ 10.54 $ 10.46
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ..... 3.84%+ 4.71% 8.08% 5.49% 6.22%
Return:** ======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------
Ratios to Expenses, net of reimbursement ......... 1.39%* 1.32% 1.30% 1.30% 1.31%
Average ======= ======= ======= ======= =======
Net Assets: Expenses ............................... 1.39%* 1.32% 1.30% 1.30% 1.33%
======= ======= ======= ======= =======
Investment income--net ................. 4.24%* 4.50% 4.70% 4.59% 4.92%
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) $49,163 $51,503 $58,282 $66,497 $72,090
Data: ======= ======= ======= ======= =======
Portfolio turnover ..................... 19.52% 53.75% 29.68% 36.39% 62.65%
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------
*Annualized.
**Total investment returns exclude the effects of sales loads.
+Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
12
<PAGE>
Merrill Lynch Arizona Municipal Bond Fund January 31, 1999
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
<TABLE>
<CAPTION>
Class C
-------------------------------------------------
For the For the
Six Period
The following per share data and ratios have been derived Months Oct. 21,
from information provided in the financial statements. Ended For the Year Ended July 31, 1994+ to
Jan. 31, ------------------------------ July 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period .... $ 10.88 $ 10.87 $ 10.54 $ 10.46 $ 10.05
Operating ------- ------- ------- ------- -------
Performance: Investment income--net .................. .23 .48 .49 .48 .37
Realized and unrealized gain on
investments--net ........................ .18 .01 .33 .08 .46
------- ------- ------- ------- -------
Total from investment operations ........ .41 .49 .82 .56 .83
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net ................ (.23) (.48) (.49) (.48) (.37)
Realized gain on investments--net ..... (.11) -- -- -- (.01)
In excess of realized gain on
investments--net ...................... -- -- -- -- (.04)
------- ------- ------- ------- -------
Total dividends and distributions ....... (.34) (.48) (.49) (.48) (.42)
------- ------- ------- ------- -------
Net asset value, end of period .......... $ 10.95 $ 10.88 $ 10.87 $ 10.54 $ 10.46
======= ======= ======= ======= =======
- ----------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ...... 3.79%++ 4.61% 7.97% 5.38% 8.53%++
Return:** ======= ======= ======= ======= =======
- ----------------------------------------------------------------------------------------------------------------
Ratios to Expenses ................................ 1.49%* 1.42% 1.40% 1.40% 1.43%*
Average ======= ======= ======= ======= =======
Net Assets: Investment income--net .................. 4.14%* 4.39% 4.59% 4.49% 4.58%*
======= ======= ======= ======= =======
- ----------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) $ 1,355 $ 1,233 $ 957 $ 1,499 $ 729
Data: ======= ======= ======= ======= =======
Portfolio turnover ...................... 19.52% 53.75% 29.68% 36.39% 62.65%
======= ======= ======= ======= =======
- ----------------------------------------------------------------------------------------------------------------
*Annualized.
**Total investment returns exclude the effects of sales loads.
+Commencement of operations.
++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
13
<PAGE>
Merrill Lynch Arizona Municipal Bond Fund January 31, 1999
FINANCIAL INFORMATION (concluded)
Financial Highlights (concluded)
<TABLE>
<CAPTION>
Class D
----------------------------------------------------
For the For the
Six Period
The following per share data and ratios have been derived Months Oct. 21,
from information provided in the financial statements. Ended For the Year Ended July 31, 1994+ to
Jan. 31, ------------------------------ July 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period .... $ 10.87 $ 10.86 $ 10.53 $ 10.45 $ 10.05
Operating ------- ------- ------- ------- -------
Performance: Investment income--net .................. .25 .54 .54 .53 .42
Realized and unrealized gain on
investments--net ........................ .18 .01 .33 .08 .45
------- ------- ------- ------- -------
Total from investment operations ........ .43 .55 .87 .61 .87
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net ................ (.25) (.54) (.54) (.53) (.42)
Realized gain on investments--net ..... (.11) -- -- -- (.01)
In excess of realized gain on
investments--net ...................... -- -- -- -- (.04)
------- ------- ------- ------- -------
Total dividends and distributions ....... (.36) (.54) (.54) (.53) (.47)
------- ------- ------- ------- -------
Net asset value, end of period .......... $ 10.94 $ 10.87 $ 10.86 $ 10.53 $ 10.45
======= ======= ======= ======= =======
- ----------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ...... 4.05%++ 5.14% 8.52% 5.93% 8.92%++
Return:** ======= ======= ======= ======= =======
- ----------------------------------------------------------------------------------------------------------------
Ratios to Expenses ................................ .99%* .92% .89% .89% .93%*
Average ======= ======= ======= ======= =======
Net Assets: Investment income--net .................. 4.65%* 4.90% 5.11% 5.01% 5.23%*
======= ======= ======= ======= =======
- ----------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) $ 3,968 $ 2,740 $ 2,188 $ 1,871 $ 617
Data: ======= ======= ======= ======= =======
Portfolio turnover ...................... 19.52% 53.75% 29.68% 36.39% 62.65%
======= ======= ======= ======= =======
- ----------------------------------------------------------------------------------------------------------------
*Annualized.
**Total investment returns exclude the effects of sales loads.
+Commencement of operations.
++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
14
<PAGE>
Merrill Lynch Arizona Municipal Bond Fund January 31, 1999
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Arizona 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 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.
15
<PAGE>
Merrill Lynch Arizona Municipal Bond Fund January 31, 1999
NOTES TO FINANCIAL STATEMENTS (continued)
(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) 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 "Distributor"), a division of Princeton Funds
Distributor, Inc. ("PFD"), which is a wholly-owned subsidiary of Merrill Lynch
Group, Inc.
FAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee
based upon the average daily value of the Fund's net assets at the following
annual rates: 0.55% of the Fund's average daily net assets not exceeding $500
million; 0.525% of average daily net assets in excess of $500 million but not
exceeding $1 billion; and 0.50% of average daily net assets in excess of $1
billion.
Pursuant to the Distribution Plans adopted by the Fund in accordance with Rule
12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are accrued daily
and paid monthly at annual rates based upon the average daily net assets of the
shares as follows:
- --------------------------------------------------------------------------------
Account Distribution
Maintenance Fee Fee
- --------------------------------------------------------------------------------
Class B .................................. 0.25% 0.25%
Class C .................................. 0.25% 0.35%
Class D .................................. 0.10% --
- --------------------------------------------------------------------------------
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., also provides account
maintenance and distribution services to the Fund. The ongoing account
maintenance fee compensates the Distributor and MLPF&S for providing account
maintenance services to Class B, Class C and Class D shareholders. The ongoing
distribution fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B and Class C
shareholders.
For the six months ended January 31, 1999, MLFD earned underwriting discounts
and direct commissions 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 ................................. $ 74 $ 3,275
Class D ................................. $117 $17,871
- --------------------------------------------------------------------------------
For the six months ended January 31, 1999, MLPF&S received contingent deferred
sales charges of $40,903 relating to transactions in Class B.
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.
16
<PAGE>
Merrill Lynch Arizona Municipal Bond Fund January 31, 1999
Certain officers and/or trustees of the Fund are officers and/or directors of
FAM, PSI, FDS, PFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended January 31, 1999 were $13,285,207 and $14,435,692, respectively.
Net realized gains for the six months ended January 31, 1999 and net unrealized
gains as of January 31, 1999 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
- --------------------------------------------------------------------------------
Long-term investments ........................ $500,890 $5,468,121
Financial futures contracts .................. 66,799 --
-------- ----------
Total ........................................ $567,689 $5,468,121
======== ==========
- --------------------------------------------------------------------------------
As of January 31, 1999, net unrealized appreciation for Federal income tax
purposes aggregated $5,468,121, of which $5,479,416 related to appreciated
securities and $11,295 related to depreciated securities. The aggregate cost of
investments at January 31, 1999 for Federal income tax purposes was $61,069,666.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest transactions was
$1,383,660 and $6,115,987 for the six months ended January 31, 1999 and for the
year ended July 31, 1998, respectively.
Transactions in shares of beneficial interest for each class were as follows:
- -------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended January 31, 1999 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ................................. 76,462 $ 840,209
Shares issued to shareholders
in reinvestment of dividends
and distributions ........................... 24,240 265,223
--------- -----------
Total issued ................................ 100,702 1,105,432
Shares redeemed ............................. (104,193) (1,144,187)
--------- -----------
Net decrease ................................ (3,491) $ (38,755)
========= ===========
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ................................. 175,556 $ 1,909,593
Shares issued to shareholders
in reinvestment of dividends ................ 36,527 397,097
-------- -----------
Total issued ................................ 212,083 2,306,690
Shares redeemed ............................. (225,839) (2,456,398)
-------- -----------
Net decrease ................................ (13,756) $ (149,708)
======== ===========
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Six Months Dollar
Ended January 31, 1999 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ................................. 281,729 $ 3,090,146
Shares issued to shareholders
in reinvestment of dividends
and distributions ........................... 60,137 657,845
-------- -----------
Total issued ................................ 341,866 3,747,991
Automatic conversion
of shares ................................... (8,377) (91,848)
Shares redeemed ............................. (575,816) (6,332,581)
-------- -----------
Net decrease ................................ (242,327) $(2,676,438)
======== ===========
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ................................ 536,958 $ 5,842,041
Shares issued to shareholders
in reinvestment of dividends ............... 88,306 959,568
---------- ------------
Total issued ............................... 625,264 6,801,609
Automatic conversion
of shares .................................. (7,775) (84,480)
Shares redeemed ............................ (1,245,399) (13,515,437)
---------- ------------
Net decrease ............................... (627,910) $ (6,798,308)
========== ============
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Six Months Dollar
Ended January 31, 1999 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................. 17,592 $ 193,381
Shares issued to shareholders
in reinvestment of dividends
and distributions ............................ 2,061 22,519
------- ---------
Total issued ................................. 19,653 215,900
Shares redeemed .............................. (9,197) (100,047)
------- ---------
Net increase ................................. 10,456 $ 115,853
======= =========
- -------------------------------------------------------------------------------
17
<PAGE>
Merrill Lynch Arizona Municipal Bond Fund January 31, 1999
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................................. 50,035 $ 547,389
Shares issued to shareholders
in reinvestment of dividends ................. 2,131 23,155
-------- ---------
Total issued ................................. 52,166 570,544
Shares redeemed .............................. (26,897) (291,649)
-------- ---------
Net increase ................................. 25,269 $ 278,895
======== =========
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Six Months Dollar
Ended January 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ................................. 105,656 $ 1,160,198
Automatic conversion
of shares ................................... 8,385 91,848
Shares issued to shareholders
in reinvestment of dividends
and distributions ........................... 4,492 49,052
-------- -----------
Total issued ................................ 118,533 1,301,098
Shares redeemed ............................. (7,776) (85,418)
-------- -----------
Net increase ................................ 110,757 $ 1,215,680
======== ===========
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ................................. 92,554 $ 1,006,808
Automatic conversion
of shares ................................... 7,782 84,480
Shares issued to shareholders
in reinvestment of dividends ................ 4,643 50,442
-------- -----------
Total issued ................................ 104,979 1,141,730
Shares redeemed ............................. (54,421) (588,596)
-------- -----------
Net increase ................................ 50,558 $ 553,134
======== ===========
- -------------------------------------------------------------------------------
18
<PAGE>
Merrill Lynch Arizona Municipal Bond Fund January 31, 1999
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Vincent R. Giordano, Senior Vice President
Kenneth A. Jacob, Vice President
Walter C. O'Connor, Vice President
Donald C. Burke, Vice President
and Treasurer
Robert E. Putney, III, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
- --------------------------------------------------------------------------------
Gerald M. Richard, Treasurer of Merrill Lynch Arizona Municipal Bond Fund has
recently retired. His colleagues at Merrill Lynch Asset Management, L.P. join
the Fund's Board of Trustees in wishing Mr. Richard well in his retirement.
- --------------------------------------------------------------------------------
19
<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 Arizona
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011 16238--1/99
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