MERRILL
LYNCH
MINNESOTA
MUNICIPAL
BOND FUND
Semi-Annual Report January 31, 1994
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.
Merrill Lynch Minnesota
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, New Jersey
08543-9011
TO OUR SHAREHOLDERS
As 1993 drew to a close, the US economy showed signs of strong
improvement. The initial estimate for gross domestic product
(GDP) growth in the final quarter of 1993 was +5.9% in real
terms, the strongest quarterly performance since the fourth
quarter of 1987. GDP growth was led by interest rate-sensitive
sectors, such as housing, durable goods orders and business
investment in capital equipment. Consumer confidence also
improved after remaining lackluster throughout most of 1993.
While the exceptionally robust rate of growth may not be
sustainable in the first quarter of 1994 (especially considering
the harsh winter weather experienced by virtually half of the
country in January), this strong showing suggests that the US
economy may at last be gaining momentum. This was supported by
the December increase in the Index of Leading Economic
Indicators, the fifth monthly rise in this indicator of future
economic activity.
<PAGE>
At the same time, the rate of inflation remains in check.
Nevertheless, concerns arose late in 1993 that the rate of
business activity might increase inflationary pressures, which
were reflected in an upturn of longer-term interest rates. In
January, Federal Reserve Board Chairman Alan Greenspan indicated
in Congressional testimony that continued strong expansion of
economic activity would lead the central bank to tighten monetary
policy in an effort to contain inflation. On February 4, 1994,
the central bank broke with tradition and publicly announced an
increase in short-term interest rates. In the weeks ahead,
investors will continue to gauge the pace of the economic
expansion and watch for signs of an overheating economy that
could prompt successive Federal Reserve Board actions to raise
short-term interest rates.
The Municipal Market
Yields on tax-exempt securities generally declined over the three
months ended January 31, 1994. Long-term revenue bond yields, as
measured by the Bond Buyer Revenue Bond Index, declined an
additional six basis points (0.06%) to end the quarter at 5.50%.
US Treasury bond yields, however, rose approximately 25 basis
points to end the period at approximately 6.20%. This
outperformance by municipal securities is likely to be the
dominant theme for much of 1994.
During the January quarter, taxable yields remained volatile in
reaction to the inherent conflicts between the extremely strong
economic recovery seen during the last quarter of 1993 and
continued low inflationary pressures. Tax-exempt bond yields,
however, reflected very positive technical factors. During the 12
months ended January 31, 1994, municipalities issued more than
$288 billion in securities, an increase of more than 21% versus
one year ago. As we have discussed in earlier reports to
shareholders, much of this increase has been the result of
municipalities refinancing existing higher-couponed debt. At
current yield levels, few of these issues remain to be refunded.
This has led to estimates of municipal bond issuance declining to
approximately $175 billion for all of 1994. More than $290
billion in long-term tax-exempt securities was issued in 1993.
In addition to this dramatic decline in issuance, investor demand
is expected to increase in the coming year. Greater demand should
be generated by a number of factors, with the recent increases in
marginal Federal income tax rates the most important. Also, bond
calls and early redemptions are expected to increase significantly
in the coming quarters and last into early 1995, at least. The
combination of declining new-issue volume and increasing numbers
of bonds redeemed prior to their stated maturities will eventually
lead to a net decline in the number of bonds outstanding. In such
a scenario, investor demand rises as bondholders are forced to
continually purchase new municipal bonds to replace their previous
holdings.
<PAGE>
The outlook for the municipal bond market is very favorable.
While the historic declines in yields seen over the last year are
unlikely to be repeated, the strong technical framework within
the tax-exempt market would support further modest declines in
tax-exempt yields. At the very least, should interest rates rise
in response to continued strong economic growth and a resurgence
in inflationary pressures, we believe that municipal bond price
deterioration will be limited in comparison to taxable investment
alternatives.
Portfolio Strategy
For the quarter ended January 31, 1994, Merrill Lynch Minnesota
Municipal Bond Fund's net assets totaled $69.5 million, virtually
unchanged from October 31, 1993. Demand for municipal bonds
remains high as investors expect dwindling volume. The Minnesota
sector of the tax-exempt bond market outperformed the general
market as supply remained low. As a result, the Fund is fully
invested in long-term Minnesota tax-exempt securities. Looking
ahead, portfolio strategy will continue to focus on investing new
assets in high-quality securities that will yield an attractive
level of income while offering superior price appreciation
potential.
We appreciate your ongoing interest in Merrill Lynch Minnesota
Municipal Bond Fund, and we look forward to serving your
investment needs and objectives in the months and years to come.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
March 8, 1994
<PAGE>
<TABLE>
PERFORMANCE DATA
None of the past results shown should be considered a representation of future performance.
Investment return and principal value of Class A and Class B Shares will fluctuate so
that shares, when redeemed, may be worth more or less than their original cost.
<CAPTION>
Recent Performance Results* 12 Month 3 Month
1/31/94 10/31/93 1/31/93 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $11.02 $11.09 $10.41 + 6.65%(1) +0.11%(1)
Class B Shares 11.02 11.09 10.41 + 6.65(1) +0.11(1)
Class A Shares--Total Return +13.03(2) +2.04(3)
Class B Shares--Total Return +12.46(4) +1.91(5)
Class A Shares--Standardized 30-day Yield 4.49%
Class B Shares--Standardized 30-day Yield 4.17%
<FN>
*Investment results shown for the 3-month and 12-month periods
are before the deduction of any sales charges.
(1) Percent change includes reinvestment of $0.081 per share capital gains distributions.
(2) Percent change includes reinvestment of $0.634 per share ordinary income dividends
and $0.081 per share capital gains distributions.
(3) Percent change includes reinvestment of $0.210 per share ordinary income dividends
and $0.081 per share capital gains distributions.
(4) Percent change includes reinvestment of $0.579 per share ordinary income dividends
and $0.081 per share capital gains distributions.
(5) Percent change includes reinvestment of $0.196 per share ordinary income dividends
and $0.081 per share capital gains distributions.
</TABLE>
<TABLE>
PERFORMANCE DATA (concluded)
<CAPTION>
Performance Summary--Class A Shares
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
3/27/92--12/31/92 $10.00 $10.34 -- $0.500 + 8.56%
1993 10.34 10.92 $0.081 0.636 +12.81
1/1/94--1/31/94 10.92 11.02 -- 0.034 + 1.32
------ ------
Total $0.081 Total $1.170
Cumulative total return as of 1/31/94: +24.08%**
<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.
<PAGE>
<CAPTION>
Performance Summary--Class B Shares
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
3/27/92--12/31/92 $10.00 $10.34 -- $0.460 + 8.13%
1993 10.34 10.92 $0.081 0.581 + 12.24
1/1/94--1/31/94 10.92 11.02 -- 0.031 + 1.29
------ ------
Total $0.081 Total $1.072
Cumulative total return as of 1/31/94: +22.93%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains distributions at
net asset value on the payable date, and do not reflect deduction of any sales charge;
results would be lower if sales charge was deducted.
</TABLE>
Average Annual Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 12/31/93 +12.81% +8.30%
Inception (3/27/92)
through 12/31/93 +12.17 +9.61
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 12/31/93 +12.24% + 8.24%
Inception (3/27/92)
through 12/31/93 +11.60 +10.03
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced
to 0% after 4 years.
**Assuming payment of applicable contingent deferred sales
charge.
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <S> <C> <S> <C>
Minnesota--99.3%
NR A $ 1,475 Alexandria, Minnesota, Independent School District No. 206, GO, UT, Series A,
6.30% due 2/01/2010 $ 1,610
A+ Aa3 2,225 Anoka County, Minnesota, Solid Waste Disposal Revenue Bonds (National Rural
Utilities), AMT, Series A, 6.95% due 12/01/2008 2,462
<PAGE>
A1+ NR 600 Beltrami County, Minnesota, Environmental Control, Revenue Refunding Bonds,
VRDN, 2.20% due 12/01/2021 (a) 600
NR A1 660 Blaine, Minnesota, EDA, Public Project, Revenue Refunding Bonds, Series A,
6.25% due 12/01/2010 728
Carver County, Minnesota, Housing and Redevelopment Authority Revenue Bonds
(Jail Facilities), Series A (d):
AAA Aaa 370 6.35% due 2/01/2005 410
AAA Aaa 395 6.40% due 2/01/2006 435
NR Baa1 1,000 Clay County, Minnesota, Housing and Redevelopment Authority, Lease Revenue Bonds,
Bank Qualified, 6.50% due 2/01/2014 1,043
AAA NR 3,530 Coon Rapids, Minnesota, M/F Housing Revenue Refunding Bonds, FHA (Browns Meadow),
AMT, 6.85% due 8/01/2033 3,833
AAA NR 1,500 Duluth, Minnesota, EDA, Hospital Facilities Revenue Refunding Bonds (Saint Luke's
Hospital of Duluth), Series B, 6.40% due 5/01/2018 (c) 1,644
BBB+ NR 2,000 Fergus Falls, Minnesota, Health Care Facilities, Revenue Refunding Bonds (Lake Region
Hospital Corporation Project), Series A, 6.50% due 9/01/2018 2,119
</TABLE>
PORTFOLIO ABBREVIATIONS
To simplify the listings of Merrill Lynch Minnesota Municipal
Bond Fund's portfolio holdings in the Schedule of Investments,
we have abbreviated the names of many of the securities according
to the list at right.
AMT Alternative Minimum Tax (subject to)
EDA Economic Development Authority
FHA Federal Housing Administration
GO Government Obligation Bonds
HFA Housing Finance Agency
IDR Industrial Development Revenue Bonds
INFLOS Inverse Floating Rate Municipal Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
S/F Single-Family
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <S> <C> <S> <C>
Minnesota (continued)
AAA Aaa $ 1,000 Hopkins, Minnesota, Independent School District No. 270, Series A, UT,
4.85% due 2/01/2012 (d) $ 984
<PAGE>
A A 1,500 Metropolitan Council, Minnesota, Minneapolis--Saint Paul Area, Sports Facilities,
Revenue Refunding Bonds (Hubert H. Humphrey Metrodome), 6% due 10/01/2009 1,624
Minneapolis and Saint Paul, Minnesota, Housing and Redevelopment Authority,
Health Care System Revenue Bonds:
A- A 2,000 (Group Health Plan Incorporated Project), 6.90% due 10/15/2022 2,244
AAA Aaa 2,000 Refunding (Health Plan), Series A, 4.75% due 11/15/2018 (b) 1,895
AAA Aaa 2,000 Minneapolis, Minnesota, Convention Center Facilities, GO, UT, 5.45% due 4/01/2014 2,053
AAA Aaa 1,000 Minneapolis, Minnesota, Hospital Revenue Refunding Bonds (Fairview Hospital and
Healthcare), Series A, 6.50% due 1/01/2011 (d) 1,120
AAA Aaa 1,500 Minneapolis, Minnesota, Refunding, Sales Tax, GO, UT, 6.25% due 4/01/2012 1,666
AAA Aaa 1,000 Minneapolis, Minnesota, Revenue Refunding Bonds, Series B, UT, 5.20% due 3/01/2010 1,022
AA+ NR 1,300 Minnesota Public Facilities Authority, Water PCR, Series A, 6.50% due 3/01/2014 1,459
AAA NR 1,000 Minnesota State, GO, UT, 6.625% due 8/01/2008 (g) 1,155
Minnesota State, HFA, S/F Mortgage Revenue Bonds:
AA+ Aa 750 AMT, Series E, 6.85% due 1/01/2024 811
AA+ Aa 985 Series A, 6.95% due 7/01/2016 1,086
AA+ Aa 1,715 Series D-1, 6.50% due 1/01/2017 1,822
Minnesota State Higher Educational Facilities Authority, Mortgage Revenue Bonds:
AAA NR 1,000 (Augsburg College), Series 3G, 6.50% due 1/01/2011 (c) 1,095
NR Baa 1,000 Refunding (Saint Mary's College), Series 3Q, 6.15% due 10/01/2023 1,070
Minnesota State Higher Educational Facilities Authority Revenue Bonds:
AA- NR 550 Refunding (Macalester College), Series 3J, 6.30% due 3/01/2014 596
AA- NR 1,250 Refunding (Macalester College), Series 3J, 6.40% due 3/01/2022 1,375
BBB+ NR 1,085 (Saint John's University), Series 3H, 6.10% due 10/01/2002 1,160
NR A1 1,000 Minnesota State Higher Educational Facilities Authority, Revenue Refunding Bonds
(University of Saint Thomas), Series 3R2, 5.60% due 9/01/2014 1,045
A A 890 Northern Minnesota, Municipal Power Agency, Electric System Revenue Refunding Bonds,
Series A, 7.25% due 1/01/2016 1,008
NR A 500 Northfield, Minnesota, College Facilities Revenue Refunding Bonds (Saint Olaf College
Project), 6.40% due 10/01/2021 559
Rochester, Minnesota, Health Care Facilities Revenue Bonds:
AA+ NR 1,000 (Mayo Foundation/Mayo Medical Center), Series I, 5.75% due 11/15/2021 1,045
AA+ NR 2,000 Series H, 9.142% due 11/15/2015 (a) 2,258
NR Aa 1,200 Saint Louis Park, Minnesota, Independent School District No. 283, GO, UT,
5.90% due 2/01/2007 1,281
<PAGE>
Saint Paul, Minnesota, Housing and Redevelopment Authority Revenue Bonds:
BBB- Baa 2,000 Hospital Refunding (Crossover Healtheast Project), Series A, 6.625% due 11/01/2017 2,081
BBB- Baa 1,000 Hospital Refunding (Crossover Healtheast Project), Series B, 6.625% due 11/01/2017 1,041
A- NR 1,750 Parking, Series A, 6.55% due 8/01/2012 1,861
A A 4,000 Sales Tax (Civic Center Project), 5.55% due 11/01/2023 4,065
AAA NR 980 S/F Mortgage, Refunding, Series C, 6.95% due 12/01/2031 (e) 1,059
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <S> <C> <S> <C>
Minnesota (concluded)
AA+ Aa $ 1,025 Saint Paul, Minnesota, Tax Increment Refunding Bonds, GO, UT (Riverfront),
Series C, 5.90% due 2/01/2012 $ 1,075
BBB Baa1 990 Sartell, Minnesota, IDR, Refunding (Champion International), 6.95% due 7/01/2012 1,101
BBB Baa1 665 Sartell, Minnesota, PCR, Refunding (Champion International), 6.95% due 10/01/2012 740
Southern Minnesota Municipal Power Agency, Power Supply Systems, Revenue Refunding
Bonds, Series A:
A+ A1 2,000 5% due 1/01/2012 1,970
A+ A1 1,500 4.75% due 1/01/2016 1,425
AA Aa 1,500 University of Minnesota, INFLOS, Revenue Refunding Bonds, 6.93% due 8/15/2003 (h) 1,586
Western Minnesota Municipal Power Agency, Power Supply Revenue Bonds, Series A:
AAA Aaa 820 6.375% due 1/01/2016 (f) 945
A- A 850 Refunding, 6.875% due 1/01/2007 931
A- A 1,000 Refunding, 7% due 1/01/2013 1,099
AAA Aaa 1,750 Willmar, Minnesota, Independent School District No. 347, GO, UT, Series C, 6.25% due
2/01/2015 (b) 1,911
Total Investments (Cost--$64,127)--99.3% 69,207
Other Assets Less Liabilities--0.7% 481
---------
Net Assets--100.0% $ 69,688
=========
<FN>
(a) The interest rate is subject to change periodically based upon prevailing market rates.
The interest rate shown is the rate in effect at January 31, 1994.
(b) AMBAC Insured.
(c) Insured by Connie Lee.
(d) MBIA Insured.
(e) FNMA Collateralized.
(f) Escrowed to Maturity.
(g) Prerefunded.
(h) The interest rate is subject to change periodically and inversely based upon prevailing
market rates. The interest rate shown is the rate in effect at January 31, 1994.
<PAGE>
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of January 31, 1994
<CAPTION>
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$64,126,510) (Note 1a) $ 69,207,160
Cash 655,945
Receivables:
Interest $ 1,237,420
Beneficial interest sold 559,302
Securities sold 200,012 1,996,734
------------
Deferred organization expenses (Note 1e) 29,469
Prepaid registration fees and other assets (Note 1e) 46,725
------------
Total assets 71,936,033
------------
Liabilities: Payables:
Securities purchased 2,018,709
Dividends to shareholders (Note 1f) 61,818
Beneficial interest redeemed 32,255
Distributor (Note 2) 23,617
Investment adviser (Note 2) 10,893 2,147,292
------------
Accrued expenses and other liabilities 101,212
------------
Total liabilities 2,248,504
------------
Net Assets: Net assets $ 69,687,529
============
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited number
Consist of: of shares authorized $ 84,877
Class B Shares of beneficial interest, $.10 par value, unlimited number
of shares authorized 547,251
Paid-in capital in excess of par 63,924,432
Undistributed realized capital gains--net 50,319
Unrealized appreciation on investments--net 5,080,650
------------
Net assets $ 69,687,529
============
Net Asset Value: Class A--Based on net assets of $9,357,066 and 848,769 shares of
beneficial interest outstanding $ 11.02
============
Class B--Based on net assets of $60,330,463 and 5,472,509 shares of
beneficial interest outstanding $ 11.02
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Six
Months Ended
January 31, 1994
<S> <S> <C>
Investment Income Interest and amortization of premium and discount earned $ 2,000,168
(Note 1d):
Expenses: Investment advisory fees (Note 2) 192,071
Distribution fees--Class B (Note 2) 145,293
Printing and shareholder reports 44,780
Professional fees 33,860
Accounting services (Note 2) 27,485
Registration fees (Note 1e) 25,774
Transfer agent fees--Class B (Note 2) 16,847
Custodian fees 6,125
Pricing fees 3,315
Transfer agent fees--Class A (Note 2) 2,949
Trustees' fees and expenses 1,690
Amortization of organization expenses (Note 1e) 1,435
Other 4,351
------------
Total expenses before reimbursement 505,975
Reimbursement of expenses (Note 2) (128,224)
------------
Total expenses after reimbursement 377,751
------------
Investment income--net 1,622,417
------------
Realized & Realized gain on investments--net 725,048
Unrealized Change in unrealized appreciation on investments--net 1,448,113
Gain on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 3,795,578
(Notes 1d & 3): ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
<PAGE>
For the For the
Six Months Year
Ended Ended
January 31, July 31,
Increase (Decrease) in Net Assets: 1994 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 1,622,417 $ 2,813,091
Realized gain on investments--net 725,048 289,144
Change in unrealized appreciation on investments--net 1,448,113 1,726,579
------------ ------------
Net increase in net assets resulting from operations 3,795,578 4,828,814
------------ ------------
Dividends & Investment income--net:
Distributions to Class A (296,751) (605,885)
Shareholders Class B (1,325,666) (2,207,206)
(Note 1f): Realized gain on investments--net:
Class A (124,483) (47,086)
Class B (819,198) (182,537)
------------ ------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (2,566,098) (3,042,714)
------------ ------------
Beneficial Interest Net increase in net assets derived from beneficial interest transactions 677,933 23,815,104
Transactions ------------ ------------
(Note 4):
Net Assets: Total increase in net assets 1,907,413 25,601,204
Beginning of period 67,780,116 42,178,912
------------ ------------
End of period $ 69,687,529 $ 67,780,116
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
Class A
-----------------------------------
For the
For the For the Period
The following per share data and ratios have been derived Six Months Year March 27,
from information provided in the financial statements. Ended Ended 1992++ to
January 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1994 1993 1992
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.83 $ 10.58 $ 10.00
Operating ------- ------- -------
Performance: Investment income--net .28 .58 .20
Realized and unrealized gain on investments--net .34 .30 .58
------- ------- -------
Total from investment operations .62 .88 .78
------- ------- -------
Less dividends and distributions:
Investment income--net (.28) (.58) (.20)
Realized gain on investments--net (.15) (.05) --
------- ------- -------
Total dividends and distributions (.43) (.63) (.20)
------- ------- -------
<PAGE>
Net asset value, end of period $ 11.02 $ 10.83 $ 10.58
======= ======= =======
Total Investment Based on net asset value per share 5.80%+++ 8.71% 7.88%+++
Return** ======= ======= =======
Ratios to Expenses, net of reimbursement .66%* .45% .12%*
Average ======= ======= =======
Net Assets: Expenses 1.03%* 1.04% 1.18%*
======= ======= =======
Investment income--net 5.06%* 5.56% 5.73%*
======= ======= =======
Supplemental Net assets, end of period (in thousands) $ 9,357 $12,859 $ 9,493
Data: ======= ======= =======
Portfolio turnover 31.50% 23.83% 30.39%
======= ======= =======
<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 B
-----------------------------------
For the
For the For the Period
The following per share data and ratios have been derived Six Months Year March 27,
from information provided in the financial statements. Ended Ended 1992++ to
January 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1994 1993 1992
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.83 $ 10.58 $ 10.00
Operating ------- ------- -------
Performance: Investment income--net .25 .53 .18
Realized and unrealized gain on investments--net .34 .30 .58
------- ------- -------
Total from investment operations .59 .83 .76
------- ------- -------
Less dividends and distributions:
Investment income--net (.25) (.53) (.18)
Realized gain on investments--net (.15) (.05) --
------- ------- -------
Total dividends and distributions (.40) (.58) (.18)
------- ------- -------
<PAGE>
Net asset value, end of period $ 11.02 $ 10.83 $ 10.58
======= ======= =======
Total Investment Based on net asset value per share 5.54%+++ 8.16% 7.69%+++
Return:** ======= ======= =======
Ratios to Expenses, excluding distribution fees and net of
Average reimbursement .67%* .46% .12%*
Net Assets: ======= ======= =======
Expenses, net of reimbursement 1.17%* .96% .62%*
======= ======= =======
Expenses 1.53%* 1.55% 1.70%*
======= ======= =======
Investment income--net 4.56%* 5.03% 5.13%*
======= ======= =======
Supplemental Net assets, end of period (in thousands) $60,330 $54,921 $32,686
Data: ======= ======= =======
Portfolio turnover 31.50% 23.83% 30.39%
======= ======= =======
<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 Minnesota Municipal Bond Fund (the "Fund") is part
of Merrill Lynch Multi-State Municipal Series Trust (the
"Trust"). The Fund is registered under the Investment Company Act
of 1940 as a non-diversified, open-end management investment
company. The Fund offers both Class A and Class B Shares. Class A
Shares are sold with a front-end sales charge. Class B Shares may
be subject to a contingent deferred sales charge. Both classes of
shares have identical voting, dividend, liquidation and other
rights and the same terms and conditions, except that Class B
Shares bear certain expenses related to the distribution of such
shares and have exclusive voting rights with respect to matters
relating to such distribution expenditures. The following is a
summary of significant accounting policies followed by the Fund.
<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. Options, which are traded on exchanges, are valued at
their last sale price as of the close of such exchanges or,
lacking any sales, at the last available bid price. Short-term
investments with a remaining maturity of sixty days or less are
valued on an amortized cost basis, 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) 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
positions 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. Original issue discounts and market premiums
are amortized into interest income. Realized gains and losses on
security transactions are determined on the identified cost
basis.
<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.
(f) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of
capital gains are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and Transactions with
Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Fund Asset Management, L.P. ("FAM"). Effective January 1, 1994,
the investment advisory business of FAM was reorganized from a
corporation to a limited partnership. Both prior to and after the
reorganization, ultimate control of FAM was vested with Merrill
Lynch & Co., Inc. ("ML & Co."). The general partner of FAM is
Princeton Services, Inc., an indirect wholly-owned subsidiary of
ML & Co. The limited partners are ML & Co. and Merrill Lynch
Investment Management, Inc. ("MLIM"), which is also an indirect
wholly-owned subsidiary of ML & Co. The Fund has also entered into
Distribution Agreements and a Distribution Plan with Merrill
Lynch Funds Distributor, Inc. ("MLFD" or "Distributor"), a
wholly-owned subsidiary of MLIM.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and
certain other services necessary to the operations of the Fund.
For such services, the Fund pays a monthly fee based upon the
average daily value of the Fund's net assets at the following
annual rates: 0.55% of the Fund's average daily net assets not
exceeding $500 million; 0.525% of average daily net assets in
excess of $500 million but not exceeding $1 billion; and 0.50% of
average daily net assets in excess of $1 billion. The Investment
Advisory Agreement obligates FAM to reimburse the Fund to the
extent the Fund's expenses (excluding interest, taxes,
distribution fees, brokerage fees and commissions, and
extraordinary items) exceed 2.5% of the Fund's first $30 million
of average daily net assets, 2.0% of the next $70 million of
average daily net assets and 1.5% of the average daily net assets
in excess thereof. FAM's obligation to reimburse the Fund is
limited to the amount of the management fee. No fee payment will
be made to the Investment Adviser during any fiscal year which
will cause such expenses to exceed expense limitation at the time
of such payment. For the six months ended January 31, 1994, FAM
earned fees of $192,071, of which $128,224 was voluntarily
waived.
<PAGE>
Pursuant to a distribution plan (the "Distribution Plan") adopted
by the Fund in accordance with Rule 12b-1 under the Investment
Company Act of 1940, the Fund pays the Distributor ongoing
account maintenance and distribution fees which are accrued
daily and paid monthly at the annual rates of 0.25% and 0.25%,
respectively, of the average daily net assets of the Class B
Shares of the Fund. Pursuant to a sub-agreement with the
Distributor, Merrill Lynch also provides account maintenance and
distribution services to the Fund. As authorized by the Plan, the
Distributor has entered into an agreement with Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), an affiliate of FAM,
which provides for the compensation of MLPF&S for providing
distribution-related services to the Fund.
For the six months ended January 31, 1994, MLFD earned
underwriting discounts of $1,282, and MLPF&S earned dealer
concessions of $13,136 on sales of the Fund's Class A Shares.
MLPF&S also received contingent deferred sales charges of $79,719
relating to Class B Share transactions during the period.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary
of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, MLIM, MLFD, FDS, MLPF&S, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term
securities, for the six months ended January 31, 1994 were
$21,947,930 and $20,762,164, respectively.
Net realized and unrealized gains (losses) as of January 31, 1994
were as follows:
Realized Unrealized
Gains (Losses) (Gains)
Long-term investments $ 729,904 $ 4,736,900
Short-term investments -- 343,750
Financial futures contracts (4,856) --
----------- -----------
Total $ 725,048 $ 5,080,650
=========== ===========
NOTES TO FINANCIAL STATEMENTS (concluded)
As of January 31, 1994, net unrealized appreciation for Federal
income tax purposes aggregated $5,080,650, all of which related
to appreciated securities. The aggregate cost of investments at
January 31, 1994 for Federal income tax purposes was $64,126,510.
<PAGE>
4. Beneficial Interest Transactions:
Net increase in net assets derived from beneficial interest
transactions was $677,933 and $23,815,104 for the six months
ended January 31, 1994 and the year ended July 31, 1993,
respectively.
Transactions in shares of beneficial interest for Class A and
Class B Shares were as follows:
Class A Shares for the Six Months Dollar
Ended January 31, 1994 Shares Amount
Shares sold 93,154 $ 1,025,177
Shares issued to shareholders
in reinvestment of dividends
and distributions 16,125 176,941
----------- -----------
Total issued 109,279 1,202,118
Shares redeemed (448,274) (4,920,598)
----------- -----------
Net decrease (338,995) $(3,718,480)
=========== ===========
Class A Shares for the Year Dollar
Ended July 31, 1993 Shares Amount
Shares sold 449,628 $ 4,746,475
Shares issued to shareholders
in reinvestment of dividends
and distributions 22,621 237,123
----------- -----------
Total issued 472,249 4,983,598
Shares redeemed (182,088) (1,944,283)
----------- -----------
Net increase 290,161 $ 3,039,315
=========== ===========
Class B Shares for the Six Months Dollar
Ended January 31, 1994 Shares Amount
Shares sold 593,616 $ 6,540,975
Shares issued to shareholders
in reinvestment of dividends
and distributions 116,792 1,280,650
----------- -----------
Total issued 710,408 7,821,625
Shares redeemed (310,844) (3,425,212)
----------- -----------
Net increase 399,564 $ 4,396,413
=========== ===========
<PAGE>
Class B Shares for the Year Dollar
Ended July 31, 1993 Shares Amount
Shares sold 2,119,718 $22,234,514
Shares issued to shareholders
in reinvestment of dividends
and distributions 135,413 1,420,514
----------- -----------
Total issued 2,255,131 23,655,028
Shares redeemed (272,815) (2,879,239)
----------- -----------
Net increase 1,982,316 $20,775,789
=========== ===========
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
Kenneth S. Axelson, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Jerry Weiss, Secretary
Custodian
National Westminster Bank NJ
10 Exchange Place
Jersey City, New Jersey 07302
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
