MERRILL LYNCH
NORTH CAROLINA
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 North Carolina
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011
<PAGE>
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 law 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 North Carolina continued to see very little
activity during the past year. This was in response to the small
amount of new issuance ($1.1 billion) coming to market in the North
Carolina tax-exempt market. This represented a decline of 68.0% 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 an average 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 North Carolina
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
September 5, 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 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" tables on page 5 and "Average Annual Total Return" tables
on page 4. Data for Class C and Class D Shares are also presented in
the "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 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* $10.29 $10.13 $10.19 + 0.98% + 1.58%
Class B Shares* 10.29 10.14 10.19 + 0.98 + 1.48
Class C Shares* 10.28 10.13 9.80 + 4.90 + 1.48
Class D Shares* 10.29 10.14 9.80 + 5.00 + 1.48
Class A Shares--Total Return* + 6.60(1) + 2.90(2)
Class B Shares--Total Return* + 6.06(3) + 2.67(4)
Class C Shares--Total Return* + 8.87(5) + 2.64(6)
Class D Shares--Total Return* + 9.39(7) + 2.77(8)
Class A Shares--Standardized 30-day Yield 5.02%
Class B Shares--Standardized 30-day Yield 4.72%
Class C Shares--Standardized 30-day Yield 4.62%
Class D Shares--Standardized 30-day Yield 4.93%
<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 $0.542 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.134 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.492 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.121 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.363 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.118 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.402 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.131 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:
9/25/92** 7/95
ML North Carolina Municipal
Bond Fund++--Class A Shares* $ 9,600 $11,539
<PAGE>
ML North Caroline Municipal
Bond Fund++--Class B Shares* $10,000 $11,651
Lehman Brothers Municipal
Bond Index++++ $10,000 $12,000
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 North Carolina Municipal
Bond Fund++--Class C Shares* $10,000 $10,787
ML North Caroline Municipal
Bond Fund++--Class D Shares* $ 9,600 $10,502
Lehman Brothers Municipal
Bond Index++++ $10,000 $11,107
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of Operations.
++ML North Carolina Municipal Bond Fund invests primarily in
long-term investment-grade obligations issued by or on behalf
of the State of North Carolina, 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.
<PAGE>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/95 +8.32% +3.99%
Inception (9/25/92)
through 6/30/95 +6.62 +5.06
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/95 +7.88% +3.88%
Inception (9/25/92)
through 6/30/95 +6.09 +5.44
[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 6/30/95 +8.28% +7.28%
[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 6/30/95 +8.75% +4.40%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
PERFORMANCE DATA (concluded)
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
9/25/92-12/31/92 $10.00 $10.16 -- $0.138 + 3.00%
1993 10.16 10.90 -- 0.616 +13.62
1994 10.90 9.63 -- 0.540 - 6.78
1/1/95-7/31/95 9.63 10.29 -- 0.304 +10.18
------
Total $1.598
Cumulative total return as of 7/31/95: +20.20%**
<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>
<PAGE>
<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>
9/25/92-12/31/92 $10.00 $10.16 -- $0.124 + 2.86%
1993 10.16 10.90 -- 0.562 +13.06
1994 10.90 9.63 -- 0.490 - 7.25
1/1/95-7/31/95 9.63 10.29 -- 0.275 + 9.87
------
Total $1.451
Cumulative total return as of 7/31/95: +18.51%**
<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 North Carolina
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.
ACES SM Adjustable Convertible Extendable Securities
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
DATES Daily Adjustable Tax-Exempt Securities
GO General Obligation Bonds
HFA Housing Finance Agency
LEVRRS Leveraged Reverse Rate Securities
S/F Single-Family
UT Unlimited Tax
YCN Yield Curve Notes
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
North Carolina--91.1%
<S> <S> <C> <S> <C>
Charlotte, North Carolina, COP:
AA NR* $ 1,500 (Law Enforcement Facilities Project), Series A, 6.10% due 12/01/2015 $ 1,501
AAA Aaa 3,500 Refunding (Convention Facility Project), Series C, 5.25% due 12/01/2020 (b) 3,181
AA Aa 3,000 Charlotte, North Carolina, Health Care System, Revenue Refunding Bonds
(Charlotte-Mecklenberg Hospital Authority), 6.25% due 1/01/2020 3,045
AAA Aaa 500 Charlotte, North Carolina, Refunding, GO, UT, 5% due 2/01/2012 473
A A2 500 Chatham County, North Carolina, Industrial Facilities and Pollution Control
Financing Authority, Pollution Revenue Bonds (Carolina Power and Light
Company), 6.30% due 6/15/2014 509
AAA Aaa 500 Cleveland County, North Carolina, GO, UT, 7.20% due 6/01/2000 (b)(g) 569
AAA Aaa 1,500 Concord, North Carolina, Utilities System Revenue Bonds, 5.75% due 12/01/2017 (c) 1,480
AAA Aaa 2,000 Craven, North Carolina, Regional Medical Authority, Health Care Facilities
Revenue Refunding Bonds, 5.625% due 10/01/2017 (c) 1,916
AAA Aaa 1,000 Cumberland County, North Carolina, COP (Civic Center Project), Series A, 6.40%
due 12/01/2024 (b) 1,035
AAA Aaa 2,000 Fayetteville, North Carolina, Public Works Commission Revenue Bonds, Series A,
6% due 3/01/2016 (d) 2,001
AAA Aaa 1,000 Gastonia, North Carolina, Combined Utilities System Revenue Bonds, 6%
due 5/01/2014 (c) 1,001
AAA Aa1 1,000 Greensboro, North Carolina, Public Improvement Bonds, UT, 6.30% due 3/01/2010 1,061
BBB Baa1 2,500 Haywood County, North Carolina, Industrial Facilities and Pollution Control
Financing Authority, Solid Waste Disposal Revenue Bonds (Champion International
Corporation Project), AMT, 5.50% due 10/01/2018 2,178
A A2 3,500 Martin County, North Carolina, Industrial Facilities and Pollution Control
Financing Authority Revenue Bonds (Solid Waste Disposal-Weyerhaeuser Company),
AMT, 6.80% due 5/01/2024 3,657
A A 2,225 Monroe, North Carolina, Combined Enterprise Systems Revenue Bonds,
6% due 3/01/2019 2,219
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
North Carolina (concluded)
<S> <S> <C> <S> <C>
A A2 $ 300 New Hanover County, North Carolina, Industrial Facilities and Pollution
Control Financing Authority Revenue Bonds (Carolina Power and Light
Company), 6.30% due 6/15/2014 $ 305
A- Aaa 3,055 North Carolina Eastern Municipal Power Agency, Power System Revenue
Refunding Bonds, Series A, 6.50% due 1/01/2018 (i) 3,301
North Carolina Educational Facilities, Finance Agency Revenue Bonds:
AA Aa1 2,000 (Duke University Project), Series C, 6.75% due 10/01/2021 2,115
AAA NR* 900 Refunding (Elon College Project), 6.375% due 1/01/2007 (e) 948
North Carolina HFA, Revenue Bonds, GO:
A+ Aa 2,750 AMT, Series V, 6.80% due 9/01/2025 2,809
AA Aa 1,340 Refunding, Series F, 6.60% due 7/01/2017 (h) 1,380
A+ Aa 665 Series U, 6.70% due 3/01/2018 691
North Carolina HFA, S/F Revenue Bonds, GO:
A+ Aa 1,805 AMT, Series X, 6.70% due 9/01/2026 1,835
A+ Aa 2,000 Series W, 6.50% due 3/01/2018 2,041
North Carolina Medical Care Community, Hospital Revenue Bonds:
AAA Aaa 2,000 (Moore Regional Hospital Project), 5% due 10/01/2018 (b) 1,751
NR* VMIG1++ 2,500 (Pooled Financing Project), ACES, Series B, 3.90% due 10/01/2013 (a) 2,500
AA Aa 1,000 Refunding (Presbyterian Health Services Project), 5.50% due 10/01/2020 940
A+ A1 1,500 (Rex Hospital Project), 6.25% due 6/01/2017 1,543
AAA Aaa 1,620 (Wilson Memorial Hospital Project), 6.50% due 11/01/2020 (b) 1,698
AAA Aaa 1,000 North Carolina Municipal Power Agency, Revenue Refunding Bonds (Catawba
Electric Project Number 1), 5% due 1/01/2015 (c) 888
Onslow County, North Carolina, GO, UT (c):
AAA Aaa 1,000 5.70% due 3/01/2012 1,013
AAA Aaa 1,000 5.70% due 3/01/2013 1,013
AA Aa 1,000 Orange County, North Carolina, Water and Sewer Authority, Revenue Refunding
Bonds, 5.20% due 7/01/2016 919
NR* VMIG1++ 800 Person County, North Carolina, Industrial Facilities and Pollution Control
Financing Authority, Solid Waste Disposal Revenue Bonds (Carolina Power and
Light Company), AMT, DATES, 4.50% due 11/01/2016 (a) 800
A- A 700 Shelby, North Carolina, Combined Producing Facilities System Revenue Bonds
(Capital Improvement), 6.625% due 6/01/2017 732
AA- A1 800 University of North Carolina, Chapel Hill, Hospital Revenue Bonds (Board of
Governors), 6.375% due 2/15/2017 823
<PAGE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
</TABLE>
<TABLE>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<CAPTION>
Puerto Rico--8.5%
<S> <S> <C> <S> <C>
A Baa1 $ 700 Puerto Rico Commonwealth, GO, UT, 6.45% due 7/01/2017 $ 718
AAA NR* 700 Puerto Rico Commonwealth, Public Improvement Bonds, UT, Series A,
6.50% due 7/01/1999 (g) 757
AAA Aaa 1,250 Puerto Rico Commonwealth, YCN, 7.682% due 7/01/2020 (d)(f) 1,189
AAA Aaa 400 Puerto Rico Electric Power Authority, Power Revenue Bonds, LEVRRS, 8.018%
due 7/01/2023 (d)(f) 391
AA Aa3 2,000 Puerto Rico Industrial, Medical and Environmental Pollution Control
Facilities Financing Authority Revenue Bonds (Motorola Inc. Project),
Series A, 6.75% due 1/01/2014 2,163
Total Investments (Cost--$59,735)--99.6% 61,089
Other Assets Less Liabilities--0.4% 234
-------
Net Assets--100.0% $61,323
=======
<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)MBIA Insured.
(d)FSA Insured.
(e)Insured by Connie Lee.
(f)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.
(g)Prerefunded.
(h)FHA Insured.
(i)Escrowed to maturity.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
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--$59,735,499) (Note 1a) $ 61,088,805
Cash 42,774
Receivables:
Interest $ 884,077
Beneficial interest sold 29,716 913,793
------------
Deferred organization expenses (Note 1e) 22,149
Prepaid registration fees and other assets (Note 1e) 26,528
------------
Total assets 62,094,049
------------
Liabilities: Payables:
Securities purchased 572,075
Beneficial interest redeemed 56,653
Dividends to shareholders (Note 1f) 54,760
Distributor (Note 2) 20,464
Investment adviser (Note 2) 17,182 721,134
------------
Accrued expenses and other liabilities 49,628
------------
Total liabilities 770,762
------------
Net Assets: Net assets $ 61,323,287
============
<PAGE>
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 89,990
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 485,811
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 6,932
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 13,376
Paid-in capital in excess of par 61,319,049
Accumulated realized capital losses on investments--net (Note 5) (1,587,732)
Accumulated distributions in excess of realized capital gains--net (357,445)
Unrealized appreciation on investments--net 1,353,306
------------
Net assets $ 61,323,287
============
Net Asset Value: Class A--Based on net assets of $9,256,261 and 899,900 shares
of beneficial interest outstanding $ 10.29
============
Class B--Based on net assets of $49,977,593 and 4,858,115 shares
of beneficial interest outstanding $ 10.29
============
Class C--Based on net assets of $712,907 and 69,316 shares
of beneficial interest outstanding $ 10.28
============
Class D--Based on net assets of $1,376,526 and 133,759 shares
of beneficial interest outstanding $ 10.29
============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<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 $ 3,700,624
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 331,791
Account maintenance and distribution fees--Class B (Note 2) 247,176
Professional fees 66,371
Printing and shareholder reports 59,913
Transfer agent fees--Class B (Note 2) 35,428
Accounting services (Note 2) 34,887
Amortization of organization expenses (Note 1e) 10,285
Pricing fees 6,797
Transfer agent fees--Class A (Note 2) 6,014
Custodian fees 4,134
Registration fees (Note 1e) 3,846
Trustees' fees and expenses 2,967
Account maintenance and distribution fees--Class C (Note 2) 1,413
Account maintenance fees--Class D (Note 2) 691
Transfer agent fees--Class D (Note 2) 444
Transfer agent fees--Class C (Note 2) 179
Other 4,369
------------
Total expenses before reimbursement 816,705
Reimbursement of expenses (Note 2) (133,074)
------------
Total expenses after reimbursement 683,631
------------
Investment income--net 3,016,993
------------
Realized & Realized loss on investments--net (919,952)
Unrealized Change in unrealized appreciation/depreciation on investments--net 1,391,157
Gain (Loss) on ------------
Investments Net Increase in Net Assets Resulting from Operations $ 3,488,198
--Net (Notes 1b, ============
1d & 3):
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<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 $ 3,016,993 $ 2,783,373
Realized loss on investments--net (919,952) (685,668)
Change in unrealized appreciation/depreciation on
investments--net 1,391,157 (2,097,393)
------------ ------------
Net increase in net assets resulting from operations 3,488,198 312
------------ ------------
Dividends & Investment income--net:
Distributions to Class A (541,099) (564,183)
Shareholders Class B (2,428,396) (2,219,190)
(Note 1f): Class C (11,006) --
Class D (36,492) --
In excess of realized gain on investments--net:
Class A -- (70,229)
Class B -- (287,216)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (3,016,993) (3,140,818)
------------ ------------
Beneficial Net increase (decrease) in net assets derived from beneficial
Interest interest transactions (883,695) 15,594,348
Transactions ------------ ------------
(Note 4):
Net Assets: Total increase (decrease) in net assets (412,490) 12,453,842
Beginning of year 61,735,777 49,281,935
------------ ------------
End of year $ 61,323,287 $ 61,735,777
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
Class A
For the
Period
The following per share data and ratios have been derived Sept. 25,
from information provided in the financial statements. For the Year 1992++ to
Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.19 $ 10.67 $ 10.00
Operating -------- -------- --------
Performance: Investment income--net .54 .54 .46
Realized and unrealized gain (loss) on
investments--net .10 (.42) .67
-------- -------- --------
Total from investment operations .64 .12 1.13
-------- -------- --------
Less dividends and distributions:
Investment income--net (.54) (.54) (.46)
In excess of realized gain on investments--net -- (.06) --
-------- -------- --------
Total dividends and distributions (.54) (.60) (.46)
-------- -------- --------
Net asset value, end of period $ 10.29 $ 10.19 $ 10.67
======== ======== ========
Total Investment Based on net asset value per share 6.60% 1.11% 11.52%+++
Return:** ======== ======== ========
Ratios to Expenses, net of reimbursement .71% .50% .20%*
Average ======== ======== ========
Net Assets: Expenses .93% .96% 1.15%*
======== ======== ========
Investment income--net 5.43% 5.14% 5.26%*
======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 9,256 $ 11,071 $ 9,311
Data: ======== ======== ========
Portfolio turnover 52.33% 74.35% 27.98%
======== ======== ========
<PAGE>
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class B
For the
Period
The following per share data and ratios have been derived Sept. 25,
from information provided in the financial statements. For the Year 1992++ to
Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.19 $ 10.67 $ 10.00
Operating -------- -------- --------
Performance: Investment income--net .49 .49 .41
Realized and unrealized gain (loss) on
investments--net .10 (.42) .67
-------- -------- --------
Total from investment operations .59 .07 1.08
-------- -------- --------
Less dividends and distributions:
Investment income--net (.49) (.49) (.41)
In excess of realized gain on investments--net -- (.06) --
-------- -------- --------
Total dividends and distributions (.49) (.55) (.41)
-------- -------- --------
Net asset value, end of period $ 10.29 $ 10.19 $ 10.67
======== ======== ========
Total Investment Based on net asset value per share 6.06% .60% 11.06%+++
Return:** ======== ======== ========
<PAGE>
Ratios to Expenses, excluding account maintenance and
Average distribution fees and net of reimbursement .72% .51% .20%*
Net Assets: ======== ======== ========
Expenses, net of reimbursement 1.22% 1.01% .70%*
======== ======== ========
Expenses 1.44% 1.46% 1.67%*
======== ======== ========
Investment income--net 4.91% 4.64% 4.77%*
======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 49,978 $ 50,664 $ 39,970
Data: ======== ======== ========
Portfolio turnover 52.33% 74.35% 27.98%
======== ======== ========
<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
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 $ 9.80 $ 9.80
Operating -------- --------
Performance: Investment income--net .37 .41
Realized and unrealized gain on investments--net .48 .49
-------- --------
Total from investment operations .85 .90
-------- --------
Less dividends from investment income--net (.37) (.41)
-------- --------
Net asset value, end of period $ 10.28 $ 10.29
-------- --------
Total Investment Based on net asset value per share 8.87%+++ 9.39%+++
Return:** ======== ========
<PAGE>
Ratios to Expenses, excluding account maintenance and distribution
Average fees and net of reimbursement .77%* .75%*
Net Assets: ======== ========
Expenses, net of reimbursement 1.37%* .85%*
======== ========
Expenses 1.57%* 1.05%*
======== ========
Investment income--net 4.67%* 5.28%*
======== ========
Supplemental Net assets, end of period (in thousands) $ 713 $ 1,377
Data: ======== ========
Portfolio turnover 52.33% 52.33%
======== ========
<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 North Carolina Municipal Bond Fund (the "Fund") is
part of Merrill Lynch Multi-State Municipal Series Trust (the
"Trust"). The Fund is registered under the Investment Company Act of
1940 as a non-diversified, open-end management investment company.
The Fund offers four classes of shares under the Merrill Lynch
Select Pricing SM System. Shares of Class A and Class D are sold with
a front-end sales charge. Shares of Class B and Class C may be
subject to a contingent deferred sales charge. All classes of shares
have identical voting, dividend, liquidation and other rights and
the same terms and conditions, except that Class B, Class C and
Class D Shares bear certain expenses related to the account
maintenance of such shares, and Class B and Class C Shares also bear
certain expenses related to the distribution of such shares. Each
class has exclusive voting rights with respect to matters relating
to its account maintenance and distribution expenditures. The
following is a summary of significant accounting policies followed
by the Fund.
<PAGE>
(a) Valuation of investments--Municipal bonds and other portfolio
securities in which the Fund invests are traded primarily in the
over-the-counter municipal bond and money markets and are valued at
the last available bid price in the over-the-counter market or on
the basis of yield equivalents as obtained from one or more dealers
that make markets in the securities. Financial futures contracts and
options thereon, which are traded on exchanges, are valued at their
settlement prices as of the close of such exchanges. Short-term
investments with remaining maturities of sixty days or less are
valued at amortized cost, which approximates market value.
Securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or
under the direction of the Board of Trustees of the Trust, including
valuations furnished by a pricing service retained by the Trust,
which may utilize a matrix system for valuations. The procedures of
the pricing service and its valuations are reviewed by the officers
of the Trust under the general supervision of the Trustees.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
* Financial futures contracts--The Fund may purchase or sell interest
rate futures contracts and options on such futures contracts for the
purpose of hedging the market risk on existing securities or the
intended purchase of securities. Futures contracts are contracts for
delayed delivery of securities at a specific future date and at a
specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to
the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin
and are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
<PAGE>
(e) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a five-year period. Prepaid registration fees are
charged to expense as the related shares are issued.
(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.
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. For the year ended July 31, 1995, FAM earned
fees of $331,791, of which $133,074 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:
<PAGE>
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 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 $1,108 $10,943
Class D $ 431 $ 4,681
For the year ended July 31, 1995, MLPF&S received contingent
deferred sales charges of $153,402 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 $29,710,738 and $33,845,186,
respectively.
Net realized and unrealized gains (losses) as of July 31, 1995 were
as follows:
<PAGE>
Realized Unrealized
Losses Gains
Long-term investments $ (431,704) $ 1,353,306
Financial futures contracts (488,248) --
----------- ------------
Total $ (919,952) $ 1,353,306
=========== ============
As of July 31, 1995, net unrealized appreciation for Federal income
tax purposes aggregated $1,353,306, of which $1,882,182 related to
appreciated securities and $528,876 related to depreciated
securities. The aggregate cost of investments at July 31, 1995 for
Federal income tax purposes was $59,735,499.
4. Beneficial Interest Transactions:
Net increase (decrease) in net assets derived from beneficial
interest transactions was $(883,695) and $15,594,348 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 84,037 $ 841,960
Shares issued to share-
holders in reinvestment
of dividends 28,877 288,342
----------- ------------
Total issued 112,914 1,130,302
Shares redeemed (299,936) (2,960,930)
----------- ------------
Net decrease (187,022) $ (1,830,628)
=========== ============
Class A Shares for the Year Dollar
Ended July 31, 1994 Shares Amount
Shares sold 461,410 $ 4,928,197
Shares issued to share-
holders in reinvestment
of dividends and
distributions 29,035 307,049
----------- ------------
Total issued 490,445 5,235,246
Shares redeemed (276,285) (2,887,349)
----------- ------------
Net increase 214,160 $ 2,347,897
=========== ============
<PAGE>
Class B Shares for the Year Dollar
Ended July 31, 1995 Shares Amount
Shares sold 881,166 $ 8,833,126
Shares issued to share-
holders in reinvestment
of dividends , 120,152 1,200,171
----------- ------------
Total issued 1,001,318 10,033,297
Automatic conversion
of shares (102) (1,063)
Shares redeemed (1,116,312) (11,088,915)
----------- ------------
Net decrease (115,096) $ (1,056,681)
=========== ============
Class B Shares for the Year Dollar
Ended July 31, 1994 Shares Amount
Shares sold 1,596,885 $ 17,101,455
Shares issued to share-
holders in reinvestment
of dividends and
distributions 119,538 1,266,444
----------- ------------
Total issued 1,716,423 18,367,899
Shares redeemed (489,131) (5,121,448)
----------- ------------
Net increase 1,227,292 $ 13,246,451
=========== ============
<PAGE>
Class C Shares for the Period
October 21, 1994++ to Dollar
July 31, 1995 Shares Amount
Shares sold 80,718 $ 831,926
Shares issued to share-
holders in reinvestment
of dividends 590 6,034
----------- ------------
Total issued 81,308 837,960
Shares redeemed (11,992) (123,319)
----------- ------------
Net increase 69,316 $ 714,641
=========== ============
[FN]
++Commencement of Operations.
Class D Shares for the Period
October 21, 1994++ to Dollar
July 31, 1995 Shares Amount
Shares sold 136,785 $ 1,320,711
Shares issued to share-
holders in reinvestment
of dividends 3,016 30,556
Automatic conversion
of shares 102 1,063
----------- ------------
Total issued 139,903 1,352,330
Shares redeemed (6,144) (63,357)
----------- ------------
Net increase 133,759 $ 1,288,973
=========== ============
[FN]
++Commencement of Operations.
5. Capital Loss Carryforward:
At July 31, 1995, the Fund had a net capital loss carryforward of
approximately $981,000, all of which expires in 2003. This amount
will be available to offset like amounts of any future taxable
gains.
<PAGE>
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
Merrill Lynch North Carolina 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
North Carolina 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 two-year period
then ended and for the period September 25, 1992 (commencement of
operations) to July 31, 1993. 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 and broker. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch North Carolina 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
September 5, 1995
</AUDIT-REPORT>
<PAGE>
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid monthly by
Merrill Lynch North Carolina 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 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
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, Massachusetts 02101
<PAGE>
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
