MERRILL LYNCH
MINNESOTA
MUNICIPAL
BOND FUND
FUND LOGO
Semi-Annual Report
January 31, 1995
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, NJ
08543-9011
<PAGE>
TO OUR SHAREHOLDERS
The combination of heightened inflationary concerns, anticipation of
further tightening of monetary policy by the Federal Reserve Board
and the turmoil of the Mexican currency crisis all exerted negative
influences on the US financial markets during the January quarter.
On the positive side, increasing signs that the US economy may be
losing momentum suggested that most of the interest rate increases
for this economic cycle may be behind us. As a result of these
economic crosscurrents, the US stock and bond markets continued to
be volatile during the period.
The manufacturing sector proved to be the driving force behind the
US economy through the final quarter of 1994, making an important
contribution to the substantial increase in corporate earnings. US
companies have been successful at containing labor costs, which are
an important component of the inflation outlook. Growth in the
economy has not been translated into higher wages and benefits for
US workers. Consumer spending is growing at a slower pace than in
previous economic recoveries, but households are nonetheless
spending more than saving, as the personal savings rate fell to an
all-time annual low in 1994.
In the weeks ahead, investors will continue to assess economic data
and inflationary trends in order to gauge whether further increases
in short-term interest rates are likely as 1995 unfolds. Despite the
widespread concerns about rising prices for raw materials and
incipient inflationary pressures, 1994's inflation results were as
positive as those in 1993, creating the best sustained inflation
performance in 30 years. However, it is not likely that such
positive inflation results will be duplicated in 1995. Investors
will also focus on the progress that the new Congress makes on both
reducing spending and the Federal budget deficit and passing tax
cuts that promote savings and investment. Legislative progress,
combined with continued indications of moderate and sustainable
levels of economic growth, would be positive for the US capital
markets. However, the lagged effects of higher interest rates could
slow the economy sharply and with it, the growth of corporate
profits.
The Municipal Market
The municipal bond market continued to exhibit considerable interest
rate volatility during the three months ended January 31, 1995.
Yields on A-rated municipal revenue bonds continued to rise
throughout November to a high of 7.37% as measured by the Bond Buyer
Revenue Bond Index. The tax-exempt bond market improved dramatically
for the remainder of the quarter, and yields fell by approximately
60 basis points (0.60%) to a four month low of 6.78%. However, the
Index failed to capture much of the rally that occurred at the end
of January as market yields declined a further ten basis points into
the 6.65% range. Municipal bond prices have now recaptured most of
their declines of the last six months.
<PAGE>
This improvement in municipal bond prices during the January quarter
was largely the result of significant positive change in investor
sentiment. The series of interest rate increases engineered during
1994 have gone a long way in confirming the Federal Reserve Board's
anti-inflationary resolve. Additionally, the recent signs of a
weakening domestic economy, as well as the negative near-term impact
of the Kobe earthquake and Mexican currency situation, have allowed
investors to become more comfortable with the concept that the vast
majority of the recent rise in fixed-income rates has already
occurred and that yields during 1995 are more likely to remain
stable or decline than they are to significantly rise again.
Consequently, current yield levels are being viewed as attractive to
long-term investors.
In addition to this more positive outlook the ongoing strong
technical position of the municipal bond market has only fostered
the increase in tax-exempt bond prices seen in recent months. Over
$25 billion in bond proceeds became available to investors at year
end 1994 from bond maturities, coupon payments and early
redemptions. However, during the recent January quarter, new bond
issuance was less than $25 billion, down 50% from the January 1994
quarter. In January 1995, less than $7 billion in long-term
municipal securities were issued, making this past January's
issuance the lowest monthly total since the mid-1980s. Investor
demand has easily surpassed supply, causing bond prices to rise
rapidly. Also, as 1995 annual issuance is expected to be below the
recent historically low 1994 levels, this positive technical
environment should continue to support the recent improvements in
municipal bond prices into the coming quarters.
Portfolio Strategy
In our last shareholder letter, we discussed our cautious investment
outlook because of strong economic growth and fears of rising
inflation. These fears have temporarily subsided. For the quarter
ended January 31, 1995, the municipal bond market bottomed out and
staged a dramatic rebound. Merrill Lynch Minnesota Municipal Bond
Fund is fully invested and benefited from the increase in municipal
bond market prices. New-issue supply fell by a staggering 63% this
quarter compared to the same quarter in 1994. Because of the
shortage of new-issue supply, we kept cash reserves to a minimum
amount. We continue to emphasize quality securities with over 85% of
the Fund's portfolio rated A or better by one of the major rating
services. Looking forward, while being cautiously optimistic, we
expect to continue to invest new cash flows in high-quality,
reasonably priced securities that are expected to provide attractive
amounts of tax-exempt income.
In Conclusion
We appreciate your ongoing interest in Merrill Lynch Minnesota
Municipal Bond Fund, and we look forward to assisting you with your
financial needs in the months and years ahead.
<PAGE>
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
March 7, 1995
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
State Street Bank and Trust Company
P.O. Box 351
Boston, Massachusetts 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
<PAGE>
PERFORMANCE DATA
About Fund Performance
Since October 21, 1994, investors have been able to purchase shares
of the Fund through the Merrill Lynch Select Pricing SM System,
which offers four pricing alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees. Class A Shares are available only to eligible investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.25% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after approximately 10 years.
* Class C Shares are subject to a distribution fee of 0.35% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.10% (but no distribution fee).
Performance data for the Fund's Class A and Class B Shares are
presented in the "Recent Performance Results," "Performance Summary"
and "Average Annual Total Return" tables below and on page 4. Data
for Class C and Class D Shares are also presented in the "Recent
Performance Results" and "Aggregate Total Return" tables on page 4.
The "Recent Performance Results" table shows investment results
before the deduction of any sales charges for Class A and Class B
Shares for the 12-month and 3-month periods ended January 31, 1995
and for Class C and Class D Shares for the since inception and 3-
month periods ended January 31, 1995. All data in this table assume
imposition of the actual total expenses incurred by each class of
shares during the relevant period.
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. Dividends paid to each class
of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
<PAGE>
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
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%
1994 10.92 9.69 -- 0.558 - 6.27
1/1/95--1/31/95 9.69 10.02 -- 0.032 + 3.84
------ ------
Total $0.081 Total $1.726
Cumulative total return as of 1/31/95: +19.19%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
include sales charge; results would be lower if sales charge was
included.
</TABLE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
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%
1994 10.92 9.70 -- 0.506 - 6.65
1/1/95--1/31/95 9.70 10.02 -- 0.029 + 3.71
------ ------
Total $0.081 Total $1.576
Cumulative total return as of 1/31/95: +17.49%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
<PAGE>
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/94 -6.27% -10.02%
Inception (3/27/92)
through 12/31/94 +5.11 +3.57
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/94 -6.65% -10.20%
Inception (3/27/92)
through 12/31/94 +4.62 +3.98
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
Aggregate Total Return
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Inception (10/21/94)
through 12/31/94 -1.94% -2.91%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced
to 0% after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Inception (10/21/94)
through 12/31/94 -1.83% -5.75%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
1/31/95 10/31/94 1/31/94++ % Change++ % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $10.02 $9.83 $11.02 -9.07% +1.93%
Class B Shares* 10.02 9.83 11.02 -9.07 +1.93
Class C Shares* 10.02 9.83 9.99 +0.30 +1.93
Class D Shares* 10.02 9.83 9.99 +0.30 +1.93
Class A Shares--Total Return* -3.94(1) +3.40(2)
Class B Shares--Total Return* -4.43(3) +3.27(4)
Class C Shares--Total Return* +1.68(5) +3.22(6)
Class D Shares--Total Return* +1.84(7) +3.37(8)
Class A Shares--Standardized 30-day Yield 5.40%
Class B Shares--Standardized 30-day Yield 5.63%
Class C Shares--Standardized 30-day Yield 5.63%
Class D Shares--Standardized 30-day Yield 5.41%
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
++Investment results shown for Class C and Class D Shares are since
inception (10/21/94).
(1)Percent change includes reinvestment of $0.556 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.138 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.504 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.126 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.123 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.122 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.137 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.136 per share ordinary
income dividends.
</TABLE>
<PAGE>
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 below and at right.
AMT Alternative Minimum Tax (subject to)
EDA Economic Development Authority
GO Government Obligation Bonds
HFA Housing Finance Authority
IDR Industrial Development Revenue Bonds
IRS Inverse Rate Securities
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 (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Minnesota--100.6%
<S> <S> <C> <S> <C>
NR* A $1,475 Alexandria, Minnesota, Independent School District No. 206, UT,
Series A, 6.30% due 2/01/2010 $ 1,482
A1+ Aa3 2,225 Anoka County, Minnesota, Solid Waste Disposal Revenue Bonds (National
Rural Utilities), AMT, Series A, 6.95% due 12/01/2008 2,308
NR* A1 660 Blaine, Minnesota, EDA, Public Project, Revenue Refunding Bonds, Bank
Qualified, Series A, 6.25% due 12/01/2010 (f) 670
NR* Baa1 1,000 Clay County, Minnesota, Housing and Redevelopment Authority, Lease Revenue
Bonds, Bank Qualified, 6.50% due 2/01/2014 971
AAA NR* 3,530 Coon Rapids, Minnesota, M/F Housing Revenue Refunding Bonds (Browns Meadow),
AMT, 6.85% due 8/01/2033 (h) 3,518
A1+ NR* 1,000 Dakota County, Minnesota, Housing and Redevelopment Authority, M/F Mortgage
Revenue Refunding Bonds (Southview Gables Apartment Project), VRDN, 3.70%
due 12/01/2016 (a) 1,000
<PAGE>
AAA NR* 1,000 Duluth, Minnesota, EDA, Hospital Facilities Revenue Refunding Bonds
(Saint Luke's Hospital of Duluth), Series B, 6.40% due 5/01/2018 (c) 1,004
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 1,846
A1+ NR* 700 Hubbard County, Minnesota, Solid Waste Disposal Revenue Bonds (Potlatch
Corporation Project), VRDN, AMT, 3.75% due 8/01/2014 (a) 700
AA- A1 200 Mankato, Minnesota, PCR (Northern States Power Company Project), VRDN,
3.50% due 3/01/2011 (a) 200
A A 1,000 Metropolitan Council, Minnesota, Minneapolis--Saint Paul Area, Sports
Facilities, Revenue Refunding Bonds (Hubert H. Humphrey Metrodome), 6%
due 10/01/2009 990
A- A 2,000 Minneapolis and Saint Paul, Minnesota, Housing and Redevelopment Authority,
Health Care System Revenue Bonds (Group Health Plan Incorporated Project),
6.90% due 10/15/2022 2,018
AAA Aaa 3,000 Minneapolis, Minnesota, Hospital Revenue Refunding Bonds (Fairview Hospital
and Healthcare), Series A, 6.50% due 1/01/2011 (d) 3,079
AAA Aaa 1,500 Minneapolis, Minnesota, Refunding, Sales Tax GO, UT, 6.25% due 4/01/2012 1,517
AAA Aa 1,300 Minnesota Public Facilities Authority, Water PCR, Series A, 6.50%
due 3/01/2014 1,336
Minnesota State GO, UT:
AAA NR* 1,000 6.625% due 8/01/2001 (g) 1,060
AA+ Aa1 1,500 6% due 10/01/2014 1,481
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Minnesota (concluded)
<S> <S> <C> <S> <C>
Minnesota State HFA, S/F Mortgage:
AA+ Aa $1,750 AMT, Series E, 6.85% due 1/01/2024 $ 1,760
AA+ Aa 1,500 AMT, Series L, 6.70% due 7/01/2020 1,487
AA+ Aa 950 Series A, 6.95% due 7/01/2016 973
AA+ Aa 1,715 Series D-1, 6.50% due 1/01/2017 1,695
AA+ Aa 1,000 Series F, 6.30% due 7/01/2025 960
<PAGE>
Minnesota State Higher Educational Facilities Authority,
Mortgage Revenue Bonds:
AAA NR* 1,000 (Augsburg College), Series 3G, 6.50% due 1/01/2011 (c) 1,025
NR* Baa 1,000 Refunding (Saint Mary's College), Series 3Q, 6.15% due 10/01/2023 913
Minnesota State Higher Educational Facilities Authority Revenue Bonds:
NR* Baa 1,500 (College Saint Benedict), Series 3W, 6.375% due 3/01/2020 1,413
AA- NR* 550 Refunding (Macalester College), Series 3J, 6.30% due 3/01/2014 545
AA- Aa 1,250 Refunding (Macalester College), Series 3J, 6.40% due 3/01/2022 1,245
A A 890 Northern Minnesota Municipal Power Agency, Electric System Revenue
Refunding Bonds, Series A, 7.25% due 1/01/2016 925
NR* A 500 Northfield, Minnesota, College Facilities Revenue Refunding Bonds (Saint
Olaf College Project), 6.40% due 10/01/2021 495
AA+ NR* 6,900 Rochester, Minnesota, Health Care Facilities Revenue Bonds (Mayo
Foundation), IRS, Series H, 6.026% due 11/15/2015 (i) 6,651
AAA Aaa 1,000 Saint Francis, Minnesota, Independent School District No. 015, Capital
Guaranty, UT, Series A, 6.35% due 2/01/2013 1,025
Saint Paul, Minnesota, Housing and Redevelopment Authority Revenue Bonds:
A- NR* 1,750 Parking, Series A, 6.55% due 8/01/2012 1,723
A A 3,175 Sales Tax (Civic Center Project), 5.55% due 11/01/2023 2,748
AAA NR* 975 S/F Mortgage, Refunding, Series C, 6.95% due 12/01/2031 (e) 982
AA Aa 1,125 Saint Paul, Minnesota, Independent School District No. 625, UT, Series B,
6.25% due 2/01/2013 1,135
AA+ Aa 1,025 Saint Paul, Minnesota, Tax Increment Refunding Bonds, GO, UT (Riverfront),
Series C, 5.90% due 2/01/2012 1,005
BBB Baa1 990 Sartell, Minnesota, IDR, Refunding (Champion International), 6.95%
due 7/01/2012 986
BBB Baa1 665 Sartell, Minnesota, PCR, Refunding (Champion International), 6.95%
due 10/01/2012 665
Western Minnesota Municipal Power Agency, Power Supply Revenue Bonds, Series A:
AAA Aaa 820 6.375% due 1/01/2016 (f) 833
A A1 1,000 Refunding, 7% due 1/01/2013 1,024
AAA Aaa 1,750 Willmar, Minnesota, Independent School District No. 347, GO, UT,
Series C, 6.25% due 2/01/2015 (b) 1,766
Total Investments (Cost--$58,969)--100.6% 59,159
Liabilities in Excess of Other Assets--(0.6%) (325)
-------
Net Assets--100.0% $58,834
<PAGE> =======
<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, 1995.
(b)AMBAC Insured.
(c)Insured by Connie Lee.
(d)MBIA Insured.
(e)FNMA Collateralized.
(f)Escrowed to maturity.
(g)Prerefunded.
(h)FHA Insured.
(i)The interest rate is subject to change periodically and inversely
based on prevailing market rates. The interest rate shown is the
rate in effect at January 31, 1995.
*Not Rated.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of January 31, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$58,968,692) (Note 1a) $59,158,554
Cash 172,662
Receivables:
Interest $ 954,120
Beneficial interest sold 62,431 1,016,551
-----------
Deferred organization expenses (Note 1e) 21,394
Prepaid registration fees and other assets (Note 1e) 35,147
-----------
Total assets 60,404,308
-----------
Liabilities: Payables:
Securities purchased 996,250
Beneficial interest redeemed 381,260
Dividends to shareholders (Note 1f) 66,236
Distributor (Note 2) 20,086
Investment adviser (Note 2) 18,352 1,482,184
-----------
Accrued expenses and other liabilities 87,968
-----------
Total liabilities 1,570,152
-----------
<PAGE>
Net Assets: Net assets $58,834,156
===========
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 68,921
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 515,606
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 516
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 2,343
Paid-in capital in excess of par 59,664,128
Accumulated realized capital losses on investments--net (1,607,220)
Unrealized appreciation on investments--net 189,862
-----------
Net assets $58,834,156
===========
Net Asset Value: Class A--Based on net assets of $6,902,722 and 689,206
shares of beneficial interest outstanding $ 10.02
===========
Class B--Based on net assets of $51,644,935 and 5,156,066
shares of beneficial interest outstanding $ 10.02
===========
Class C--Based on net assets of $51,703 and 5,160 shares
of beneficial interest outstanding $ 10.02
===========
Class D--Based on net assets of $234,796 and 23,429 shares
of beneficial interest outstanding $ 10.02
===========
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months
Ended January 31, 1995
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 1,943,317
(Note 1d):
<PAGE>
Expenses: Investment advisory fees (Note 2) $ 168,688
Distribution fees--Class B (Note 2) 133,672
Printing and shareholder reports 24,105
Professional fees 21,767
Transfer agent fees--Class B (Note 2) 19,361
Accounting services (Note 2) 17,715
Registration fees (Note 1e) 6,582
Amortization of organization expenses (Note 1e) 4,004
Custodian fees 3,949
Pricing fees 3,547
Transfer agent fees--Class A (Note 2) 2,372
Trustees' fees and expenses 1,589
Distribution fees--Class C (Note 2) 41
Account maintenance fees--Class D (Note 2) 27
Transfer agent fees--Class D (Note 2) 18
Transfer agent fees--Class C (Note 2) 9
Other 887
-----------
Total expenses before reimbursement 408,333
Reimbursement of expenses (Note 2) (59,046)
-----------
Total expenses after reimbursement 349,287
------------
Investment income--net 1,594,030
Realized & Realized loss on investments--net (797,280)
Unrealized Change in unrealized appreciation on investments--net (1,363,255)
Loss on -----------
Investments--Net Net Decrease in Net Assets Resulting from Operations $ (566,505)
(Notes 1b, 1d & 3): ===========
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the For the
Six Months Year
Ended Ended
January 31, July 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 1,594,030 $ 3,228,049
Realized loss on investments--net (797,280) (135,210)
Change in unrealized appreciation on investments--net (1,363,255) (2,079,420)
----------- -----------
Net increase (decrease) in net assets resulting from operations (566,505) 1,013,419
----------- -----------
<PAGE>
Dividends & Investment income--net:
Distributions to Class A (220,162) (529,859)
Shareholders Class B (1,372,031) (2,698,190)
(Note 1f): Class C (348) --
Class D (1,489) --
In excess of realized gain on investments--net:
Class A -- (124,483)
Class B -- (819,198)
----------- -----------
Net decrease in net assets resulting from dividends and
distributions to shareholders (1,594,030) (4,171,730)
----------- -----------
Beneficial Interest Net increase (decrease) in net assets derived from
Transactions beneficial interest transactions (4,774,585) 1,147,471
(Note 4): ----------- -----------
Net Assets: Total decrease in net assets (6,935,120) (2,010,840)
Beginning of period 65,769,276 67,780,116
----------- -----------
End of period $58,834,156 $65,769,276
=========== ===========
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
Class A
For the For the
Six Period
The following per share data and ratios have been derived Months Mar. 27,
from information provided in the financial statements. Ended For the Year Ended 1992++ to
Jan. 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.33 $ 10.83 $ 10.58 $ 10.00
Operating ------- ------- ------- -------
Performance: Investment income--net .28 .55 .58 .20
Realized and unrealized gain (loss)
on investments--net (.31) (.35) .30 .58
------- ------- ------- -------
Total from investment operations (.03) .20 .88 .78
<PAGE> ------- ------- ------- -------
Less dividends and distributions:
Investment income--net (.28) (.55) (.58) (.20)
Realized gain on investments--net -- -- (.05) --
In excess of realized gain on
investments--net -- (.15) -- --
------- ------- ------- -------
Total dividends and distributions (.28) (.70) (.63) (.20)
------- ------- ------- -------
Net asset value, end of period $ 10.02 $ 10.33 $ 10.83 $ 10.58
======= ======= ======= =======
Total Investment Based on net asset value per share (.22%)+++ 1.87% 8.71% 7.88%+++
Return:** ======= ======= ======= =======
Ratios to Expenses, net of reimbursement .69%* .69% .45% .12%*
Average ======= ======= ======= =======
Net Assets: Expenses .88%* 1.03% 1.04% 1.18%*
======= ======= ======= =======
Investment income--net 5.64%* 5.18% 5.56% 5.73%*
======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $ 6,903 $ 8,810 $12,859 $ 9,493
Data: ======= ======= ======= =======
Portfolio turnover 12.17% 58.67% 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 (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class B
For the For the
Six Period
The following per share data and ratios have been derived Months Mar. 27,
from information provided in the financial statements. Ended For the Year Ended 1992++ to
Jan. 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.33 $ 10.83 $ 10.58 $ 10.00
Operating ------- ------- ------- -------
Performance: Investment income--net .26 .50 .53 .18
Realized and unrealized gain (loss)
on investments--net (.31) (.35) .30 .58
<PAGE> ------- ------- ------- -------
Total from investment operations (.05) .15 .83 .76
------- ------- ------- -------
Less dividends and distributions:
Investment income--net (.26) (.50) (.53) (.18)
Realized gain on investments--net -- -- (.05) --
In excess of realized gain
on investments--net -- (.15) -- --
------- ------- ------- -------
Total dividends and distributions (.26) (.65) (.58) (.18)
------- ------- ------- -------
Net asset value, end of period $ 10.02 $ 10.33 $ 10.83 $ 10.58
======= ======= ======= =======
Total Investment Based on net asset value per share (.48%)+++ 1.35% 8.16% 7.69%+++
Return:** ======= ======= ======= =======
Ratios to Expenses, excluding distribution fees
Average and net of reimbursement .70%* .71% .46% .12%*
Net Assets: ======= ======= ======= =======
Expenses, net of reimbursement 1.20%* 1.21% .96% .62%*
======= ======= ======= =======
Expenses 1.40%* 1.54% 1.55% 1.70%*
======= ======= ======= =======
Investment income--net 5.13%* 4.70% 5.03% 5.13%*
======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $51,645 $56,960 $54,921 $32,686
Data: ======= ======= ======= =======
Portfolio turnover 12.17% 58.67% 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>
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. October 21, 1994++
to January 31, 1995
Increase (Decrease) in Net Asset Value: Class C Class D
<S> <S> <C> <C>
Per Share Net asset value, beginning of period $ 9.99 $ 9.99
Operating ----------- -----------
Performance: Investment income--net .13 .15
Realized and unrealized gain on investments--net .03 .03
<PAGE> ----------- -----------
Total from investment operations .16 .18
----------- -----------
Less dividends:
Investment income--net (.13) (.15)
----------- -----------
Net asset value, end of period $ 10.02 $ 10.02
=========== ===========
Total Investment Based on net asset value per share 1.68%+++ 1.84%+++
Return:** =========== ===========
Ratios to Expenses, excluding account maintenance and distribution
Average fees and net of reimbursement .83%* .77%*
Net Assets: =========== ===========
Expenses, net of reimbursement 1.43%* .87%*
=========== ===========
Expenses 1.58%* 1.01%*
=========== ===========
Investment income--net 5.04%* 5.61%*
=========== ===========
Supplemental Net assets, end of period (in thousands) $ 52 $ 235
Data: =========== ===========
Portfolio turnover 12.17% 12.17%
=========== ===========
*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
<PAGE>
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. 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.
<PAGE>
* Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures contracts
are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a
contract, the Fund deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is
effected. Pursuant to the contract, the Fund agrees to receive from
or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are
known as variation margin and are recorded by the Fund as unrealized
gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(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. Distributions in excess
of realized capital gains are due primarily to differing tax
treatments for futures transactions and post-October losses.
NOTES TO FINANCIAL STATEMENTS (concluded)
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
<PAGE>
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 limitations at the time of
payment. For the six months ended January 31, 1995, FAM earned fees
of $168,688, of which $59,046 was voluntarily waived.
Pursuant to the distribution plans ("the Distribution Plans")
adopted by the Fund in accordance with Rule 12b-1 under the
Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are
accrued daily and paid monthly at annual rates based upon the
average daily net assets of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.25%
Class C 0.25% 0.35%
Class D 0.10% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the six-months ended January 31, 1995, MLFD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the
Fund's Class A and Class D Shares as follows:
<PAGE>
MLFD MLPF&S
Class A $370 $3,684
Class D $475 $5,783
MLPF&S received contingent deferred sales charges of $85,646,
relating to transactions in Class B Shares of beneficial interest
for the six months ended January 31, 1995.
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, PSI, MLPF&S, FDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended January 31, 1995 were $6,917,714 and
$10,949,764, respectively.
Net realized and unrealized gains (losses) as of January 31, 1995
were as follows:
Realized Unrealized
Losses Gains
Long-term investments $ (592,606) $ 189,862
Financial futures contracts (204,674) --
----------- -----------
Total $ (797,280) $ 189,862
=========== ===========
As of January 31, 1995, net unrealized appreciation for Federal
income tax purposes aggregated $189,862, of which $784,744 related
to appreciated securities and $594,882 related to depreciated
securities. The aggregate cost of investments at January 31, 1995
for Federal income tax purposes was $58,968,692.
4. Beneficial Interest Transactions:
Net increase (decrease) in net assets derived from beneficial
interest transactions was $(4,774,585) and $1,147,471 for the six
months ended January 31, 1995 and the year ended July 31, 1994,
respectively.
<PAGE>
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Six Months Dollar
Ended January 31, 1995 Shares Amount
Shares sold 39,624 $ 391,474
Shares issued to shareholders
in reinvestment of dividends 11,009 108,651
----------- -----------
Total issued 50,633 500,125
Shares redeemed (213,961) (2,111,535)
----------- -----------
Net decrease (163,328) $(1,611,410)
=========== ===========
Class A Shares for the Dollar
Year Ended July 31, 1994 Shares Amount
Shares sold 243,419 $ 2,584,540
Shares issued to shareholders
in reinvestment of dividends
and distributions 27,404 294,088
----------- -----------
Total issued 270,823 2,878,628
Shares redeemed (606,053) (6,559,427)
----------- -----------
Net decrease (335,230) $(3,680,799)
=========== ===========
Class B Shares for the
Six Months Ended Dollar
January 31, 1995 Shares Amount
Shares sold 295,383 $ 2,928,335
Shares issued to shareholders
in reinvestment of dividends 76,268 752,747
----------- -----------
Total issued 371,651 3,681,082
Shares redeemed (727,394) (7,123,248)
----------- -----------
Net decrease (355,743) $(3,442,166)
=========== ===========
<PAGE>
Class B Shares for the Dollar
Year Ended July 31, 1994 Shares Amount
Shares sold 891,996 $ 9,650,171
Shares issued to shareholders
in reinvestment of dividends
and distributions 192,941 2,070,989
----------- -----------
Total issued 1,084,937 11,721,160
Shares redeemed (646,073) (6,892,890)
----------- -----------
Net increase 438,864 $ 4,828,270
----------- -----------
Class C Shares for the Period
October 21, 1994++ to Dollar
January 31, 1995 Shares Amount
Shares sold 5,128 $ 49,758
Shares issued to shareholders
in reinvestment of dividends 32 296
----------- -----------
Net increase 5,160 $ 50,054
=========== ===========
[FN]
++Commencement of Operations.
Class D Shares for the Period
October 21, 1994++ to Dollar
January 31, 1995 Shares Amount
Shares sold 23,401 $ 228,677
Shares issued to shareholders
in reinvestment of dividends 28 260
----------- -----------
Net increase 23,429 $ 228,937
----------- -----------
[FN]
++Commencement of Operations.
