MERRILL LYNCH
MINNESOTA
MUNICIPAL
BOND FUND
FUND LOGO
Annual Report
July 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.
<PAGE>
Merrill Lynch Minnesota
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011
TO OUR SHAREHOLDERS
In the July quarter, economic data generally showed evidence of
slowing activity. Gross domestic product growth for the first three
months of 1995 was reported at 2.7%, the weakest showing in the past
18 months. Other signs of a sluggish economy included lackluster
durable goods orders, slowing growth in the manufacturing sector,
and three consecutive months of declines in the Index of Leading
Economic Indicators, an occurrence which has often (but not always)
forecast recessions. As a result, concerns arose that the economic
"soft landing" could turn into an actual recession. However, at the
same time there were also expectations that a few months of very
slow or zero growth would be followed by a pickup in economic
activity later in the year. This view was supported by the
stronger-than-expected employment data for June and an upward
revision in May's employment figures, as well as improving housing
activity measures and consumer confidence surveys.
Thus far in 1995, economic developments have been very positive for
the US stock and bond markets, and most US stock market averages
recently have attained record levels. In contrast, the US dollar has
been persistently weak, especially relative to the yen. Following
the Federal Reserve Board's cut in short-term interest rates in
early July, continued signs of a moderating expansion and
well-contained inflationary pressures could provide further
assurance that the peak in US interest rates is behind us, creating
a stronger foundation for higher stock and bond prices. On the other
hand, indications of reaccelerating growth and increasing
inflationary pressures would likely suggest that higher interest
rates are on the horizon, a negative development for the US
financial markets. The outcome of the current deliberations on
reducing the Federal budget deficit will also play a role in the
investment outlook for the US capital markets.
<PAGE>
The Municipal Market
Tax-exempt bond yields exhibited considerable volatility during the
three months ended July 31, 1995. Municipal bond yields initially
fell throughout May into early June as evidence of a slowing
domestic economy and moderate inflationary pressures accumulated. As
measured by the Bond Buyer Revenue Bond Index, yields of A-rated,
uninsured tax-exempt revenue bonds declined 35 basis points (0.35%)
to 5.94%. By late June, however, amid signs of a potentially
resurgent economy, particularly in the rebounding housing sector,
bond yields returned to their April quarter's levels of
approximately 6.30%. The lowering of short-term interest rates by
the Federal Reserve Board in early July temporarily restored
investor confidence and tax-exempt bond yields fell to 6.05%. As
additional economic indicators were released during July, investors
again saw signs that the economy was regaining momentum and that the
Federal Reserve Board action had been premature. Fears that an
expanding economy would have negative inflationary consequences
pushed municipal bond yields higher, ending the July 31, 1995
quarter essentially unchanged at 6.27%. US Treasury bond yields
exhibited a similar pattern of volatility during the July quarter.
However, US Treasury bond yields continued to decline, falling
approximately 50 basis points to 6.85%.
Municipal bonds have underperformed US Treasury securities for a
number of reasons. The record highs of the US equity market have
continued to attract retail investors seeking further capital gains.
Investor demand has also been diminished in recent months by the
"sticker shock" effect that periodically affects the municipal bond
market. Investors who had become accustomed to purchasing tax-exempt
securities in the 6.50%--7.00% range six to seven months ago have
demonstrated understandable reluctance to purchase similar
securities at current levels. The strong fundamental structure of
the municipal bond market, however, suggests that such hesitancy may
prove costly.
However, the major reason by far for the tax-exempt market's recent
underperformance has been concerns regarding the implication for
municipal bonds' tax advantage resulting from various proposed tax
law changes (for example, flat tax, value-added tax or national
sales tax) that have reduced investor demand for tax-exempt
products. Such concerns are likely to quickly recede as investors
realize that such, if any, changes are unlikely to be enacted before
late 1996 at the earliest. Long-term investors will also recall 1986
when similar tax proposals were made, municipal bond yields
initially rose, in some instances, to over 100% of taxable yields.
Tax-exempt bond yields quickly declined as investors' fears proved
to be unfounded.
<PAGE>
The municipal bond market's strong technical position has diminished
somewhat in recent months. New-issue supply over the last six months
has totaled approximately $71 billion, or a decline of over 20%
compared to the corresponding period in 1994. In recent months,
however, municipalities issued approximately $41 billion in new
securities, which represents only a 6% decline versus the same
period a year earlier. Investor demand has remained muted in recent
months despite significant funds available to investors. By the end
of July investors, both individual and institutional, are expected
to have received as much as $80 billion from tax-exempt bond
maturities, coupon payments and the proceeds of early bond
redemptions. Little new money has entered the municipal market in
recent months, largely in response to the factors mentioned above.
Consequently, much of the technical support the municipal market
enjoyed earlier this year has evaporated, causing municipal bond
yields to decline at a slower rate than their taxable counterparts.
However, the recent relative underperformance of municipal bonds has
made them particularly attractive to long-term investors. Tax-exempt
bonds currently yield well over 90% of US Treasury securities. In
some instances, A-rated, long-term revenue bonds have yielded almost
95% of US Treasury bonds. Analysts usually consider municipal bonds
yielding over 82% of US Treasury securities to be historically
attractive. With inflation-adjusted, "real" after-tax equivalent
tax-exempt yields of over 6.50%, municipal securities appear to
represent considerable value.
Current tax-exempt yield levels appear to be overcompensating for
any proposed changes in tax laws that can reasonably be expected to
be enacted. As Congressional hearings on this matter would continue
into 1996, and the revenue losses resultant from such changes become
more apparent, the likelihood of any significant changes to tax
codes and the resultant decline of municipal bonds' inherent tax
advantage should decline. Under such a scenario, tax-exempt bond
yields would quickly decline and currently available municipal bond
yields would return to their normal historic relationship.
Fiscal Year in Review
At the beginning of the fiscal year ended July 31, 1995, the bond
market was very volatile. As a result, we maintained a defensive
investment strategy from August 1994 to November 1994. As interest
rates peaked in November, we shifted to a more constructive posture
on interest rates and remained constructive until the end of June.
In July, we shifted back to a cautious view of the bond market. The
municipal market in Minnesota continued to see very little activity
during the past year. This was in response to the small amount of
new issuance ($3.0 billion) coming to market in the Minnesota
tax-exempt market. This represented a decline of 32% from the
previous fiscal year. We kept cash reserves at a minimum in order to
seek to enhance income for our shareholders. While this strategy
allowed the Fund to provide a competitive total return, it also
enabled the Fund to provide an attractive current yield. Looking
ahead, we expect our strategy to consist of seeking to enhance the
Fund's total returns and provide an attractive level of tax-exempt
income for shareholders.
<PAGE>
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.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
August 30, 1995
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.
<PAGE>
* 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 all of the Fund's shares are presented in the
"Total Return Based on a $10,000 Investment" graphs on page 4 and
the "Recent Performance Results" table below. Data for the Fund's
Class A and Class B Shares are presented in the "Performance
Summary" and "Average Annual Total Return" tables on page 5. Data
for Class C and Class D Shares are also presented in the "Aggregate
Total Return" tables on page 5.
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 July 31, 1995 and
for Class C and Class D Shares for the since inception and 3-month
periods ended July 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.
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
7/31/95 4/30/95 7/31/94++ % Change++ % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $10.31 $10.18 $10.33 -0.19% +1.28%
Class B Shares* 10.31 10.18 10.33 -0.19 +1.28
Class C Shares* 10.31 10.18 9.99 +3.20 +1.28
Class D Shares* 10.31 10.18 9.99 +3.20 +1.28
Class A Shares--Total Return* +5.44(1) +2.61(2)
Class B Shares--Total Return* +4.91(3) +2.48(4)
Class C Shares--Total Return* +7.13(5) +2.45(6)
Class D Shares--Total Return* +7.57(7) +2.59(8)
Class A Shares--Standardized 30-day Yield 5.18%
Class B Shares--Standardized 30-day Yield 4.87%
Class C Shares--Standardized 30-day Yield 4.76%
Class D Shares--Standardized 30-day Yield 5.17%
<PAGE>
<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 $0.555 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.136 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.503 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.123 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.367 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.120 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.408 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.133 per share ordinary
income dividends.
</TABLE>
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment--Class A Shares and Class B Shares
A line graph depicting the growth of an investment in the Fund's
Class A Shares and Class B Shares compared to growth of an
investment in the Lehman Brothers Municipal Bond Index. Beginning
and ending values are:
3/27/92** 7/95
ML Minnesota Municipal
Bond Fund++--Class A Shares* $ 9,600 $12,092
ML Minnesota Municipal
Bond Fund++--Class B Shares* $10,000 $12,285
Lehman Brothers Municipal
Bond Index++++ $10,000 $12,785
<PAGE>
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of Operations.
++ML Minnesota Municipal Bond Fund invests primarily in long-term
investment-grade obligations issued by or on behalf of the State
of Minnesota, its political subdivisions, agencies and
instrumentalities and obligations of other qualifying issuers.
++++This unmanaged Index consists of long-term revenue bonds,
prerefunded bonds, general obligation bonds and insured bonds.
Past performance is not predictive of future performance.
Total Return Based on a $10,000 Investment--Class C Shares and Class D Shares
A line graph depicting the growth of an investment in the Fund's
Class C Shares and Class D Shares compared to growth of an
investment in the Lehman Brothers Municipal Bond Index. Beginning
and ending values are:
10/21/94** 7/95
ML Minnesota Municipal
Bond Fund++--Class C Shares* $10,000 $10,613
ML Minnesota Municipal
Bond Fund++--Class D Shares* $ 9,600 $10,327
Lehman Brothers Municipal
Bond Index++++ $10,000 $11,107
<PAGE>
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of Operations.
++ML Minnesota Municipal Bond Fund invests primarily in long-term
investment-grade obligations issued by or on behalf of the State
of Minnesota, its political subdivisions, agencies and
instrumentalities and obligations of other qualifying issuers.
++++This unmanaged Index consists of long-term revenue bonds,
prerefunded bonds, general obligation bonds and insured bonds.
Past performance is not predictive of future performance.
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/95 +6.90% +2.63%
Inception (3/27/92)
through 6/30/95 +7.20 +5.87
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/95 +6.46% +2.46%
Inception (3/27/92)
through 6/30/95 +6.66 +6.39
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced
to 0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
Aggregate Total Return
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Inception (10/21/94)
through 6/30/95 +6.74% +5.74%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced
to 0% after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Inception (10/21/94)
through 6/30/95 +7.14% +2.85%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
3/27/92-12/31/92 $10.00 $10.34 -- $0.500 + 8.55%
1993 10.34 10.92 $0.081 0.636 +12.81
1994 10.92 9.69 -- 0.558 - 6.27
1/1/95-7/31/95 9.69 10.31 -- 0.308 + 9.74
------ ------
Total $0.081 Total $2.002
Cumulative total return as of 7/31/95: +25.96%**
<PAGE>
<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**
<S> <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
1/1/95-7/31/95 9.70 10.31 -- 0.279 + 9.32
------ ------
Total $0.081 Total $1.826
Cumulative total return as of 7/31/95: +23.85%**
<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>
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 Agency
IDR Industrial Development Revenue Bonds
IRS Inverse Residual Securities
M/F Multi-Family
PCR Pollution Control Revenue Bonds
S/F Single-Family
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Minnesota--98.6%
<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 $ 1,521
Al+ Aa3 2,225 Anoka County, Minnesota, Solid Waste Disposal Revenue Bonds (National
Rural Utilities), AMT, Series A, 6.95% due 12/01/2008 2,359
NR* NR* 2,700 Beltrami County, Minnesota, Environmental Control Revenue Bonds (Northwood
Panelboard Co. Project), VRDN, 3.80% due 7/01/2025 (a) 2,700
NR* A1 660 Blaine, Minnesota, EDA, Public Project, Revenue Refunding Bonds, Series A,
6.25% due 12/01/2010 (f) 681
NR* Baal 1,000 Clay County, Minnesota, Housing and Redevelopment Authority, Lease
Revenue Bonds, 6.50% due 2/01/2014 1,013
AAA NR* 3,530 Coon Rapids, Minnesota, M/F Housing Revenue Refunding Bonds (Browns
Meadow), AMT, 6.85% due 8/01/2033 (h) 3,621
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) 1,018
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 1,926
A1+ NR* 100 Hubbard County, Minnesota, Solid Waste Disposal Revenue Bonds (Potlatch
Corporation Project), VRDN, AMT, 3.95% due 8/01/2014 (a) 100
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 12/01/2022 2,093
AA- A1 100 Minneapolis, Minnesota, Community Development Agency, PCR (Northern States
Power Co. Project), VRDN, 3.95% due 3/01/2011 (a) 100
Minneapolis, Minnesota, Refunding, GO:
AAA Aaa 1,500 Sales Tax, UT, 6.25% due 4/01/2012 1,558
AAA Aaa 1,000 Series B, 5.20% due 3/01/2013 945
<PAGE>
AAA Aa 1,300 Minnesota Public Facilities Authority, Water PCR, Series A, 6.50% due
3/01/2014 1,376
AA+ Aa1 1,500 Minnesota State GO, UT, 6% due 10/01/2014 1,528
Minnesota State Higher Educational Facilities Authority, Mortgage
Revenue Bonds:
AAA NR* 1,000 (Augsburg College), Series 3-G, 6.50% due 1/01/2011 (c) 1,052
NR* Baa 1,000 Refunding (Saint Mary's College), Series 3-Q, 6.15% due 10/01/2023 959
Minnesota State Higher Educational Facilities Authority Revenue Bonds:
NR* Baa 1,500 (College State Benedict), Series 3-W, 6.375% due 3/01/2020 1,459
AA- NR* 550 Refunding (Macalester College), Series 3-J, 6.30% due 3/01/2014 560
AA- Aa 1,250 Refunding (Macalester College), Series 3-J, 6.40% due 3/01/2022 1,279
</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 $ 1,802
A+ Aa 1,500 AMT, Series L, 6.70% due 7/01/2020 1,533
AA+ Aa 940 Series A, 6.95% due 7/01/2016 988
AA+ Aa 1,715 Series D-1, 6.50% due 1/01/2017 1,756
AA+ Aa 1,000 Series F, 6.30% due 7/01/2025 1,004
A A 890 Northern Minnesota Municipal Power Agency, Electric System Revenue
Refunding Bonds, Series A, 7.25% due 1/01/2016 969
NR* A 500 Northfield, Minnesota, College Facilities Revenue Refunding Bonds
(Saint Olaf College Project), 6.40% due 10/01/2021 512
AA+ NR* 6,900 Rochester, Minnesota, Health Care Facilities Revenue Bonds (Mayo Foundation),
IRS, Series H, 6.026% due 11/15/2015 (i) 6,907
AA Aa 750 Rosemount, Minnesota, Independent School District No. 196, UT, Series A,
5.875% due 6/01/2014 748
AAA Aaa 1,000 Saint Francis, Minnesota, Independent School District No. 015,
Capital Guaranty, UT, Series A, 6.35% due 2/01/2013 1,049
<PAGE>
Saint Paul, Minnesota, Housing and Redevelopment Authority Revenue Bonds:
A- NR* 1,750 Parking, Series A, 6.55% due 8/01/2000 (g) 1,934
A A 3,175 Sales Tax (Civic Center Project), 5.55% due 11/01/2023 2,961
AAA NR* 940 S/F Mortgage, Refunding, Series C, 6.95% due 12/01/2031 (e) 969
AA Aa 1,125 Saint Paul, Minnesota, Independent School District No. 625, UT,
Series B, 6.25% due 2/01/2013 1,152
AA+ Aa 1,025 Saint Paul, Minnesota, Tax Increment Refunding Bonds (Riverfront), GO,
UT, Series C, 5.90% due 2/01/2012 1,035
Sartell, Minnesota, Refunding (Champion International):
BBB Baa1 990 IDR, 6.95% due 7/01/2012 1,034
BBB Baa1 665 PCR, 6.95% due 10/01/2012 695
AAA Aaa 4,000 Southern Minnesota Municipal Power Agency, Power Supply Systems, Revenue
Refunding Bonds, Series A, 6.085%** due 1/01/2024 (d) 725
Western Minnesota Municipal Power Agency, Power Supply Revenue Bonds,
Series A:
AAA Aaa 820 6.375% due 1/01/2016 (f) 852
A A1 1,000 Refunding, 7% due 1/01/2013 1,046
AAA Aaa 1,750 Wilmar, Minnesota, Independent School District No. 347, GO, UT,
Series C, 6.25% due 2/01/2015 (b) 1,790
Total Investments (Cost--$57,249)--98.6% 59,309
Other Assets Less Liabilities--1.4% 820
-------
Net Assets--100.0% $60,129
=======
<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 July 31, 1995.
(b)AMBAC Insured.
(c)Insured by Connie Lee.
(d)MBIA Insured.
(e)FNMAInsured.
(f)Escrowed to Maturity.
(g)Prerefunded.
(h)FHA Insured.
(i)The interest rate is subject to change periodically and inversely
based upon prevailing market rates. The interest rate shown is the
rate in effect at July 31, 1995.
*Not Rated.
**Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of purchase by the Fund.
Ratings of issues shown have not been audited by Deloitte & Touche
LLP.
<PAGE>
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of July 31, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$57,249,126) (Note 1a) $ 59,309,189
Cash 24,657
Receivables:
Interest $ 940,858
Beneficial interest sold 49,091 989,949
------------
Deferred organization expenses (Note 1e) 13,319
Prepaid registration fees and other assets (Note 1e) 43,597
------------
Total assets 60,380,711
------------
Liabilities: Payables:
Beneficial interest redeemed 70,904
Dividends to shareholders (Note 1f) 55,179
Distributor (Note 2) 21,120
Investment adviser (Note 2) 19,253 166,456
------------
Accrued expenses and other liabilities 84,840
------------
Total liabilities 251,296
------------
Net Assets: Net assets $ 60,129,415
============
<PAGE>
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 67,300
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 504,761
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 3,635
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 7,716
Paid-in capital in excess of par 59,241,380
Accumulated realized capital losses on investments--net (Note 5) (945,500)
Accumulated distributions in excess of realized capital
gains--net (809,940)
Unrealized appreciation on investments--net 2,060,063
------------
Net assets $ 60,129,415
============
Net Asset Value: Class A--Based on net assets of $6,935,745 and 673,003 shares
of beneficial interest outstanding $ 10.31
============
Class B--Based on net assets of $52,023,359 and 5,047,608 shares
of beneficial interest outstanding $ 10.31
============
Class C--Based on net assets of $374,702 and 36,346 shares
of beneficial interest outstanding $ 10.31
============
Class D--Based on net assets of $795,609 and 77,157 shares
of beneficial interest outstanding $ 10.31
============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
July 31, 1995
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 3,806,510
(Note 1d):
<PAGE>
Expenses: Investment advisory fees (Note 2) $ 334,353
Account maintenance and distribution fees--Class B (Note 2) 264,978
Professional fees 63,553
Printing and shareholder reports 51,260
Transfer agent fees--Class B (Note 2) 37,753
Accounting services (Note 2) 34,563
Registration fees (Note 1e) 17,543
Amortization of organization expenses (Note 1e) 8,075
Pricing fees 6,875
Transfer agent fees--Class A (Note 2) 4,370
Trustees' fees and expenses 3,225
Custodian fees 3,094
Account maintenance and distribution fees--Class C (Note 2) 789
Account maintenance fees--Class D (Note 2) 281
Transfer agent fees--Class D (Note 2) 187
Transfer agent fees--Class C (Note 2) 123
Other 3,818
------------
Total expenses before reimbursement 834,840
Reimbursement of expenses (Note 2) (104,227)
------------
Total expenses after reimbursement 730,613
------------
Investment income--net 3,075,897
------------
Realized & Realized loss on investments--net (945,500)
Unrealized Change in unrealized appreciation on investments--net 506,946
Gain (Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 2,637,343
(Notes 1b, 1d ============
& 3):
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended July 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 3,075,897 $ 3,228,049
Realized loss on investments--net (945,500) (135,210)
Change in unrealized appreciation on investments--net 506,946 (2,079,420)
------------ ------------
Net increase in net assets resulting from operations 2,637,343 1,013,419
------------ ------------
<PAGE>
Dividends & Investment income--net:
Distributions to Class A (407,132) (529,859)
Shareholders Class B (2,647,786) (2,698,190)
(Note 1f): Class C (6,180) --
Class D (14,799) --
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 (3,075,897) (4,171,730)
------------ ------------
Beneficial Net increase (decrease) in net assets derived from beneficial
Interest interest transactions (5,201,307) 1,147,471
Transactions ------------ ------------
(Note 4):
Net Assets: Total decrease in net assets (5,639,861) (2,010,840)
Beginning of year 65,769,276 67,780,116
------------ ------------
End of year $ 60,129,415 $ 65,769,276
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
Class A
For the
Period
The following per share data and ratios have been derived March 27,
from information provided in the financial statements. 1992++ to
For the Year Ended 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 .55 .55 .58 .20
Realized and unrealized gain (loss) on
investments--net (.02) (.35) .30 .58
-------- -------- -------- --------
Total from investment operations .53 .20 .88 .78
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.55) (.55) (.58) (.20)
Realized gain on investments--net -- -- (.05) --
In excess of realized gain on investments--net -- (.15) -- --
-------- -------- -------- --------
Total dividends and distributions (.55) (.70) (.63) (.20)
-------- -------- -------- --------
Net asset value, end of period $ 10.31 $ 10.33 $ 10.83 $ 10.58
======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share 5.44% 1.87% 8.71% 7.88%+++
Return:** ======== ======== ======== ========
Ratios to Expenses, net of reimbursement .75% .69% .45% .12%*
Average ======== ======== ======== ========
Net Assets: Expenses .92% 1.03% 1.04% 1.18%*
======== ======== ======== ========
Investment income--net 5.51% 5.18% 5.56% 5.73%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 6,936 $ 8,810 $ 12,859 $ 9,493
Data: ======== ======== ======== ========
Portfolio turnover 22.36% 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)
<PAGE>
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class B
For the
Period
The following per share data and ratios have been derived March 27,
from information provided in the financial statements. 1992++ to
For the Year Ended 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 .50 .50 .53 .18
Realized and unrealized gain (loss) on
investments--net (.02) (.35) .30 .58
-------- -------- -------- --------
Total from investment operations .48 .15 .83 .76
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.50) (.50) (.53) (.18)
Realized gain on investments--net -- -- (.05) --
In excess of realized gain on investments--net -- (.15) -- --
-------- -------- -------- --------
Total dividends and distributions (.50) (.65) (.58) (.18)
-------- -------- -------- --------
Net asset value, end of period $ 10.31 $ 10.33 $ 10.83 $ 10.58
======== ======== ======== ========
Total Based on net asset value per share 4.91% 1.35% 8.16% 7.69%+++
Investment ======== ======== ======== ========
Return:**
Ratios to Expenses, excluding account maintenance and
Average distribution fees and net of reimbursement .77% .71% .46% .12%*
Net Assets: ======== ======== ======== ========
Expenses, net of reimbursement 1.27% 1.21% .96% .62%*
======== ======== ======== ========
Expenses 1.44% 1.54% 1.55% 1.70%*
======== ======== ======== ========
Investment income--net 5.00% 4.70% 5.03% 5.13%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 52,023 $ 56,960 $ 54,921 $ 32,686
Data: ======== ======== ======== ========
Portfolio turnover 22.36% 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>
<PAGE>
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 July 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 .37 .41
Realized and unrealized gain on investments--net .32 .32
-------- --------
Total from investment operations .69 .73
-------- --------
Less dividends from investment income--net (.37) (.41)
-------- --------
Net asset value, end of period $ 10.31 $ 10.31
======== ========
Total Investment Based on net asset value per share 7.13%+++ 7.57%+++
Return:** ======== ========
Ratios to Expenses, excluding account maintenance and distribution fees
Average and net of reimbursement .86%* .82%*
Net Assets: ======== ========
Expenses, net of reimbursement 1.46%* .92%*
======== ========
Expenses 1.61%* 1.07%*
======== ========
Investment income--net 4.70%* 5.27%*
======== ========
Supplemental Net assets, end of period (in thousands) $ 375 $ 796
Data: ======== ========
Portfolio turnover 22.36% 22.36%
======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch 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 four classes of shares under the Merrill Lynch Select Pricing
SM System. Shares of Class A and Class D are sold with a frontend
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.
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 year ended July 31, 1995, FAM earned fees of
$334,353, of which $104,227 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 share-
holders.
NOTES TO FINANCIAL STATEMENTS (concluded)
<PAGE>
For the year ended July 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:
MLFD MLPF&S
Class A $520 $5,500
Class D $549 $6,833
For the year ended July 31, 1995, MLPF&S received contingent
deferred sales charges of $133,898 relating to transactions in Class
B Shares.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a
wholly-owned subsidiary of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, MLPF&S, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended July 31, 1995 were $12,864,704 and $19,789,075,
respectively.
Net realized and unrealized gains (losses) as of July 31, 1995 were
as follows:
Realized Unrealized
Losses Gains
Long-term investments $ (433,264) $ 2,060,063
Financial futures contracts (512,236) --
------------ ------------
Total $ (945,500) $ 2,060,063
============ ============
As of July 31, 1995, net unrealized appreciation for Federal income
tax purposes aggregated $2,060,063, of which $2,158,944 related to
appreciated securities and $98,881 related to depreciated
securities. The aggregate cost of investments at July 31, 1995 for
Federal income tax purposes was $57,249,126.
<PAGE>
4. Beneficial Interest Transactions:
Net increase (decrease) in net assets derived from beneficial
interest transactions was $(5,201,307) and $1,147,471 for the years
ended July 31, 1995 and July 31, 1994, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Year Dollar
Ended July 31, 1995 Shares Amount
Shares sold 49,385 $ 491,560
Shares issued to shareholders
in reinvestment of dividends 20,298 204,295
----------- ------------
Total issued 69,683 695,855
Shares redeemed (249,214) (2,473,727)
----------- ------------
Net decrease (179,531) $ (1,777,872)
=========== ============
Class A Shares for the Year Dollar
Ended July 31, 1994 Shares Amount
Shares sold 243,419 $ 2,584,540
Shares issued to share-
holders 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 Year Dollar
Ended July 31, 1995 Shares Amount
Shares sold 500,298 $ 5,026,448
Shares issued to shareholders
in reinvestment of dividends 145,027 1,460,745
----------- ------------
Total issued 645,325 6,487,193
Shares redeemed (1,109,526) (11,061,375)
----------- ------------
Net decrease (464,201) $ (4,574,182)
=========== ============
<PAGE>
Class B Shares for the Year Dollar
Ended July 31, 1994 Shares Amount
Shares sold 891,996 $ 9,650,171
Shares issued to share-
holders 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
July 31, 1995 Shares Amount
Shares sold 38,161 $ 389,432
Shares issued to share-
holders in reinvestment
of dividends 559 5,738
----------- ------------
Total issued 38,720 395,170
Shares redeemed (2,374) (24,700)
----------- ------------
Net increase 36,346 $ 370,470
=========== ============
[FN]
++Commencement of Operations.
Class D Shares for the Period
October 21, 1994++ to Dollar
July 31, 1995 Shares Amount
Shares sold 76,912 $ 777,785
Shares issued to share-
holders in reinvestment
of dividends 673 6,941
----------- ------------
Total issued 77,585 784,726
Shares redeemed (428) (4,449)
----------- ------------
Net increase 77,157 $ 780,277
=========== ============
[FN]
++Commencement of Operations.
<PAGE>
5. Capital Loss Carryforward:
At July 31, 1995, the Fund had a net capital loss carryforward of
approximately $881,000, all of which expires in 2003. This amount
will be available to offset like amounts of any future taxable
gains.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
Merrill Lynch Minnesota Municipal Bond Fund of
Merrill Lynch Multi-State Municipal Series Trust:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Merrill Lynch
Minnesota Municipal Bond Fund of Merrill Lynch Multi-State Municipal
Series Trust as of July 31, 1995, the related statements of
operations for the year then ended and changes in net assets for
each of the years in the two-year period then ended, and the
financial highlights for each of the years in the three-year period
then ended and for the period March 27, 1992 (commencement of
operations) to July 31, 1992. These financial statements and the
financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at July 31,
1995 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
<PAGE>
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch Minnesota Municipal Bond Fund of Merrill Lynch Multi-
State Municipal Series Trust as of July 31, 1995, the results of its
operations, the changes in its net assets, and the financial
highlights for the respective stated periods in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
August 30, 1995
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid monthly by
Merrill Lynch Minnesota Municipal Bond Fund during its taxable year
ended July 31, 1995 qualify as tax-exempt interest dividends for
Federal income tax purposes.
Additionally, there were no capital gains distributions paid by the
Fund during the year.
Please retain this information for your records.
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Jerry Weiss, Secretary
<PAGE>
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, Massachusetts 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
