MERRILL LYNCH
NORTH CAROLINA
MUNICIPAL
BOND FUND
FUND LOGO
Semi-Annual Report
January 31, 1999
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
Merrill Lynch North Carolina
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
Merrill Lynch North Carolina Municipal Bond Fund
January 31, 1999
TO OUR SHAREHOLDERS
The Municipal Market Environment
During the six months ended January 31, 1999, long-term bond yields
moved significantly lower. US domestic economic growth remained
moderate, with losses in the manufacturing sector offset by strong
growth in service-oriented industries. Industrial commodity prices
recently fell to their lowest level in over a decade. This suggests
that the current positive inflationary environment is unlikely to be
challenged in the near term. Additionally, the Federal Reserve Board
lowered short-term interest rates in September, October and
November, in part to ensure that US domestic economic growth would
not be negatively impacted by ongoing weak economic growth overseas.
However, various external factors, as well as increased volatility,
contributed to the decline in bond yields as they have for much of
the past year. Episodes of foreign economic instability generated a
significant "flight to quality" rally in US Treasury securities, as
well as fostering lower tax-exempt bond yields as a result. Periods
of strong foreign equity market appreciation, particularly in Asia,
have at times resulted in higher US bond yields as foreign investors
have sold US fixed-income instruments to reinvest the proceeds in
their own domestic equity markets. Additionally, the continued
distraction of President Clinton's impeachment trial added to recent
interest rate volatility. However, on balance, the favorable
fundamental economic scenario supported lower bond yields. During
the six-month period ended January 31, 1999, the yield on the US
Treasury 30-year bond fell over 60 basis points (0.60%) to 5.09%,
and long-term municipal revenue bond yields declined almost 20 basis
points to 5.17%, as measured by the Bond Buyer Revenue Bond Index.
Throughout most of 1998, the municipal bond market's performance was
impeded by a significant increase in new-issue supply. However, in
recent months, the technical position of the tax-exempt market
improved. Over the last 12 months, almost $285 billion in new long-
term tax-exempt bonds was underwritten, an increase of almost 30%
compared to the same period a year ago. As municipal bond yields
declined in recent years, it has taken increasingly lower bond
yields to generate the cost savings necessary to refinance remaining
higher-couponed debt. Consequently, the rate of increases in
municipal bond issuance slowed in recent quarters. During the last
six months, more than $125 billion in new tax-exempt bonds was
issued, an increase of approximately 5% compared to the same period
a year ago. During the January 31, 1999 quarter, $63 billion in new
long-term municipal bonds was underwritten, representing an increase
of 5% compared to the January 31, 1998 quarter.
The pace of tax-exempt issuance continued to slow in 1999. January's
monthly issuance was less than $15 billion, representing a decline
of almost 25% compared to January 1998's volume. Additionally,
investors received more than $22 billion in coupon payments,
maturities and proceeds from early redemptions in January. Investors
can also expect to receive an additional $15 billion--$18 billion
in February for reinvestment. Consequently, investor demand has been
strong in recent months, easily matching, if not at times exceeding,
available supply. We will monitor this trend closely in the coming
months to determine if the supply pressures exerted in 1998 are
abating and fostering a more balanced supply/demand environment for
1999. Such an environment should allow the tax-exempt market's
performance to more closely mirror that of its taxable counterpart.
Foreign investors have rarely been active investors in the tax-
exempt bond market since they are unable to benefit from the
inherent tax advantage of municipal securities. Consequently, the
municipal bond market has not been able to benefit from the strong
flight to quality demand enjoyed by US Treasury securities since
late 1997. This inability has in large part resulted in
significantly smaller declines in municipal bond yields compared to
US Treasury securities. However, this has resulted in the
opportunity to purchase tax-exempt securities with yields very close
to or, in some instances, exceeding those of comparable US Treasury
bonds. By January 31, 1999, long-term tax-exempt bond yields were at
102% of US Treasury securities of comparable maturities, nearly
matching the least expensive level of the past year. Municipal bond
yield ratios have averaged approximately 95% for the last six months
and 92% for all of 1998. During 1997, tax-exempt bond yield ratios
averaged 84%. It is likely that the combination of the increase in
new-issue volume and the "safe-haven" status of US Treasury
securities drove municipal bond yield ratios to their present
attractive levels. Should new volume decline and/or foreign
financial markets regain stability in 1999, tax-exempt bond yield
ratios could quickly return to their more historic levels (85%--
88%).
Merrill Lynch North Carolina Municipal Bond Fund
January 31, 1999
Looking ahead, the expected combination of moderate economic growth
in the United States and continued negligible inflation suggests a
relatively stable interest rate environment into early 1999.
However, it is likely that foreign financial markets will again be a
critical factor in determining US bond yields. Economic problems in
Russia and Brazil remain unresolved, suggesting that additional
shocks to the world's financial system are possible. On the other
hand, the continued robustness of the US economy has led to some
back up in interest rates. However, at present these factors
indicate that there is little immediate risk of sustained
significant increases in long-term bond yields.
Portfolio Strategy
Throughout the six months ended January 31, 1999, we maintained a
constructive investment strategy for Merrill Lynch North Carolina
Municipal Bond Fund. We believed that strong domestic economic
growth seen in late 1998 and thus far this year would be offset by a
combination of deteriorating global economic conditions and low
inflation. Consequently, as 1998 ended, we expected tax-exempt bond
yields to trade in a relatively narrow range, with a bias toward
lower bond yields. We maintained the Fund's fully invested position
in order to seek to enhance shareholder income and participate fully
in any market improvement.
Looking ahead, we expect little change in the Fund's existing
structure. Current economic fundamentals and a strong domestic
economy offset by the lack of significant inflationary pressures
suggest that interest rates should remain stable.
In Conclusion
We appreciate your ongoing interest in Merrill Lynch North Carolina
Municipal Bond Fund, and we look forward to serving your investment
needs in the months and years to come.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
Executive Vice President
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Hugh T. Hurley III)
Hugh T. Hurley III
Vice President and Portfolio Manager
March 4, 1999
Merrill Lynch North Carolina Municipal Bond Fund
January 31, 1999
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* 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. (There is no initial
sales charge for automatic share conversions.)
* 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).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Recent Performance
Results" and "Average Annual Total Return" tables assume
reinvestment of all dividends and capital gains distributions
at net asset value on the payable date. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Dividends paid to each class of shares will vary because of the
different levels of account maintenance, distribution and transfer
agency fees applicable to each class, which are deducted from the
income available to be paid to shareholders.
<TABLE>
Recent Performance Results*
<CAPTION>
Standardized
12 Month 3 Month Since Inception 30-Day Yield
Total Return Total Return Total Return As of 1/31/99
<S> <C> <C> <C> <C>
ML North Carolina Municipal Bond Fund Class A Shares +5.54% +1.39% +53.55% 3.73%
ML North Carolina Municipal Bond Fund Class B Shares +5.10 +1.26 +48.84 3.38
ML North Carolina Municipal Bond Fund Class C Shares +4.90 +1.24 +36.27 3.28
ML North Carolina Municipal Bond Fund Class D Shares +5.52 +1.37 +39.38 3.63
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included. Total
investment returns are based on changes in net asset values for the
periods shown, and assume reinvestment of all dividends and capital
gains distributions at net asset value on the payable date. The
Fund's since inception periods are Class A & Class B Shares, from
9/25/92 to 1/31/99 and Class C & Class D Shares, from 10/21/94 to
1/31/99.
</TABLE>
Merrill Lynch North Carolina Municipal Bond Fund
January 31, 1999
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/98 +5.48% +1.26%
Five Years Ended 12/31/98 +5.37 +4.52
Inception (9/25/92)
through 12/31/98 +6.92 +6.22
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/98 +5.03% +1.11%
Five Years Ended 12/31/98 +4.86 +4.86
Inception (9/25/92)
through 12/31/98 +6.39 +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.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 12/31/98 +4.84% +3.86%
Inception (10/21/94)
through 12/31/98 +7.42 +7.42
[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*
Year Ended 12/31/98 +5.46% +1.25%
Inception (10/21/94)
through 12/31/98 +7.98 +6.94
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch North Carolina Municipal Bond Fund
January 31, 1999
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 at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
GO General Obligation Bonds
HFA Housing Finance Agency
S/F Single-Family
VRDN Variable Rate Demand Notes
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
North Carolina--91.9%
<S> <S> <C> <S> <C>
AA Aa3 $2,250 Charlotte-Mecklenberg Hospital Authority, North Carolina, Health Care System
Revenue Bonds, Series A, 5.875% due 1/15/2026 $ 2,442
A A2 500 Chatham County, North Carolina, Industrial Facilities and Pollution Control
Financing Authority Revenue Bonds (Carolina Power and Light Company), 6.30%
due 6/15/2014 541
NR* Aa2 1,200 Craven County, North Carolina, Industrial Facilities and Pollution Control
Financing Authority Revenue Bonds (Cravenwood Energy Project),VRDN, AMT, Series C,
2.90% due 5/01/2011(h) 1,200
Cumberland County, North Carolina, COP (Civic Center Project)(a):
AAA Aaa 1,000 Refunding, 5% due 12/01/2024 1,003
AAA Aaa 1,000 Series A, 6.40% due 12/01/2004(g) 1,159
AAA Aaa 1,000 Dare County, North Carolina, Utility System Revenue Bonds, Series A, 4.75% due
6/01/2024(f) 971
AAA Aaa 3,025 Gastonia, North Carolina, Combined Utilities System Revenue Refunding Bonds, 4.75%
due 5/01/2015(f) 3,049
AAA Aa1 1,225 Greensboro, North Carolina, GO, Public Improvement, 4.75% due 4/01/2018 1,223
NR* Baa1 1,500 Haywood County, North Carolina, Industrial Facilities and Pollution Control
Financing Authority Revenue Bonds (Champion International Corporation Project),
AMT, 6.25% due 9/01/2025 1,589
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 3,843
AAA Aaa 2,000 Monroe, North Carolina, Combined Enterprise System Revenue Bonds, 4.50% due
3/01/2023(e) 1,890
AAA Aaa 500 Morganton, North Carolina, GO, Water and Sewer, 5.70% due 6/01/2013(c) 547
AAA Aaa 1,500 New Hanover County, North Carolina, Hospital Revenue Bonds (New Hanover
Regional Medical Center Project), 5.75% due 10/01/2026(a) 1,604
AAA Aaa 2,000 North Carolina Eastern Municipal Power Agency, Power System Revenue Refunding
Bonds, Series B, 5.875% due 1/01/2021(f) 2,168
North Carolina Educational Facilities Finance Agency Revenue Bonds:
AA+ Aa1 2,000 (Duke University Project), Series C, 6.75% due 10/01/2021 2,186
AAA NR* 900 (Elon College Project), 6.375% due 1/01/2007(b) 983
</TABLE>
Merrill Lynch North Carolina Municipal Bond Fund
January 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
North Carolina (concluded)
<S> <S> <C> <S> <C>
North Carolina HFA, S/F Revenue Bonds:
AA Aa2 $2,720 AMT, Series V, 6.80% due 9/01/2025(d) $ 2,891
AA Aa2 1,755 AMT, Series X, 6.70% due 9/01/2026 1,882
AA Aa2 1,940 Series W, 6.50% due 3/01/2018 2,085
North Carolina Medical Care Commission, Health Care Facilities Revenue Bonds
(Duke University Health System):
AA Aa3 2,500 Refunding, Series A, 4.75% due 6/01/2028 2,367
AA Aa3 2,000 Series B, 4.75% due 6/01/2021 1,915
AA- Aa3 3,000 North Carolina Medical Care Commission, Hospital Revenue Refunding Bonds
(Pitt County Memorial Hospital), Series A, 4.75% due 12/01/2028 2,822
NR* A 2,375 North Carolina State Educational Assistance Authority Revenue Bonds (Guaranteed
Student Loan), AMT, Sub-Lien, Series C, 6.35% due 7/01/2016 2,554
NR* P1 1,400 Person County, North Carolina, Industrial Facilities and Pollution Control
Financing Authority, Solid Waste Disposal Revenue Bonds (Carolina Power and
Light), VRDN, AMT, 2.90% due 11/01/2016(h) 1,400
Raleigh Durham, North Carolina, Airport Authority, Special Facility Revenue
Refunding Bonds (American Airlines), VRDN(h):
A1+ NR* 700 Series A, 3.20% due 11/01/2015 700
A1+ NR* 100 Series B, 2.85% due 11/01/2005 100
A1+ NR* 300 Series B, 2.85% due 11/01/2015 300
AA Aa3 800 University of North Carolina, Chapel Hill, Hospital Revenue Bonds, 6.375% due
2/15/2017 870
AAA Aaa 1,575 University of North Carolina, System Pool Revenue Bonds, Series B, 4.50% due
10/01/2023(f) 1,483
Puerto Rico--8.8%
BBB+ Baa1 2,500 Puerto Rico Electric Power Authority, Power Revenue Refunding Bonds, Series EE,
4.75% due 7/01/2024 2,411
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 2,186
Total Investments (Cost--$49,897)--100.7% 52,364
Liabilities in Excess of Other Assets--(0.7%) (351)
--------
Net Assets--100.0% $ 52,013
========
<FN>
(a)AMBAC Insured.
(b)Connie Lee Insured.
(c)FGIC Insured.
(d)FNMA/GNMA Collateralized.
(e)FSA Insured.
(f)MBIA Insured.
(g)Prerefunded.
(h)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at January 31, 1999.
*Not Rated.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch North Carolina Municipal Bond Fund
January 31, 1999
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Statement of Assets and Liabilities as of January 31, 1999
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$49,897,299) (Note 1a) $ 52,363,987
Cash 799,233
Receivables:
Interest $ 653,124
Beneficial interest sold 8,716 661,840
------------
Prepaid registration fees and other assets (Note 1e) 933
------------
Total assets 53,825,993
------------
Liabilities: Payables:
Securities purchased 1,503,185
Beneficial interest redeemed 185,037
Dividends to shareholders (Note 1f) 33,879
Investment adviser (Note 2) 22,030
Distributor (Note 2) 15,718 1,759,849
------------
Accrued expenses and other liabilities 53,086
------------
Total liabilities 1,812,935
------------
Net Assets: Net assets $ 52,013,058
============
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited
Consist of: number of shares authorized $ 82,785
Class B Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 343,518
Class C Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 22,324
Class D Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 31,401
Paid-in capital in excess of par 49,288,502
Accumulated realized capital loss on investments--net (222,160)
Unrealized appreciation on investments--net 2,466,688
------------
Net assets $ 52,013,058
============
Net Asset Value: Class A--Based on net assets of $8,968,691 and 827,845 shares
of beneficial interest outstanding $ 10.83
============
Class B--Based on net assets of $37,222,566 and 3,435,175 shares
of beneficial interest outstanding $ 10.84
============
Class C--Based on net assets of $2,418,558 and 223,237 shares
of beneficial interest outstanding $ 10.83
============
Class D--Based on net assets of $3,403,243 and 314,007 shares
of beneficial interest outstanding $ 10.84
============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch North Carolina Municipal Bond Fund
January 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months Ended
January 31, 1999
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 1,400,733
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 142,525
Account maintenance and distribution fees--Class B (Note 2) 94,013
Accounting services (Note 2) 28,999
Printing and shareholder reports 27,729
Professional fees 27,499
Transfer agent fees--Class B (Note 2) 9,019
Account maintenance and distribution fees--Class C (Note 2) 7,088
Pricing fees 2,468
Custodian fees 2,372
Transfer agent fees--Class A (Note 2) 1,735
Account maintenance fees--Class D (Note 2) 1,490
Registration fees (Note 1e) 1,429
Trustees' fees and expenses 1,378
Transfer agent fees--Class D (Note 2) 586
Transfer agent fees--Class C (Note 2) 557
Other 1,340
------------
Total expenses 350,227
------------
Investment income--net 1,050,506
------------
Realized & Realized gain on investments--net 589,535
Unrealized Change in unrealized appreciation on investments--net 3,092
Gain on ------------
Investments Net Increase in Net Assets Resulting from Operations $ 1,643,133
- --Net ============
(Notes 1b,
1d & 3):
See Notes to Financial Statements.
</TABLE>
Merrill Lynch North Carolina Municipal Bond Fund
January 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: Jan. 31, 1999 July 31, 1998
<S> <S> <C> <C>
Operations: Investment income--net $ 1,050,506 $ 2,164,729
Realized gain on investments--net 589,535 1,537,021
Change in unrealized appreciation on investments--net 3,092 (930,814)
------------ ------------
Net increase in net assets resulting from operations 1,643,133 2,770,936
------------ ------------
Dividends & Investment income--net:
Distributions to Class A (197,854) (400,953)
Shareholders Class B (742,266) (1,571,462)
(Note 1f): Class C (45,455) (90,652)
Class D (64,931) (101,662)
Realized gain on investments--net:
Class A (242,724) (2,557)
Class B (1,027,380) (11,105)
Class C (64,531) (640)
Class D (87,131) (602)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (2,472,272) (2,179,633)
------------ ------------
Beneficial Net increase (decrease) in net assets derived from beneficial
Interest interest transactions 1,823,985 (3,435,751)
Transactions ------------ ------------
(Note 4):
Net Assets: Total increase (decrease) in net assets 994,846 (2,844,448)
Beginning of period 51,018,212 53,862,660
------------ ------------
End of period $ 52,013,058 $ 51,018,212
============ ============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch North Carolina Municipal Bond Fund
January 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
Class A
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended
Jan. 31, For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.00 $ 10.87 $ 10.36 $ 10.29 $ 10.19
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .25 .50 .51 .51 .54
Realized and unrealized gain on invest-
ments--net .13 .13 .51 .07 .10
-------- -------- -------- -------- --------
Total from investment operations .38 .63 1.02 .58 .64
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.25) (.50) (.51) (.51) (.54)
Realized gain on investments--net (.30) --++ -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.55) (.50) (.51) (.51) (.54)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.83 $ 11.00 $ 10.87 $ 10.36 $ 10.29
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 3.45%+++ 5.99% 10.17% 5.76% 6.60%
Return:** ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement .95%* .90% .80% .75% .71%
Average ======== ======== ======== ======== ========
Net Assets: Expenses .95%* .90% .88% .90% .93%
======== ======== ======== ======== ========
Investment income--net 4.46%* 4.59% 4.89% 4.92% 5.43%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 8,969 $ 8,753 $ 8,542 $ 8,043 $ 9,256
Data: ======== ======== ======== ======== ========
Portfolio turnover 26.04% 125.23% 94.59% 90.22% 52.33%
======== ======== ======== ======== ========
<CAPTION>
Class B
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended
Jan. 31, For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.01 $ 10.88 $ 10.36 $ 10.29 $ 10.19
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .22 .45 .46 .46 .49
Realized and unrealized gain on
investments--net .13 .13 .52 .07 .10
-------- -------- -------- -------- --------
Total from investment operations .35 .58 .98 .53 .59
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.22) (.45) (.46) (.46) (.49)
Realized gain on investments--net (.30) --++ -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.52) (.45) (.46) (.46) (.49)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.84 $ 11.01 $ 10.88 $ 10.36 $ 10.29
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 3.19%+++ 5.45% 9.71% 5.21% 6.06%
Return:** ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement 1.46%* 1.41% 1.31% 1.26% 1.22%
Average ======== ======== ======== ======== ========
Net Assets: Expenses 1.46%* 1.41% 1.39% 1.41% 1.44%
======== ======== ======== ======== ========
Investment income--net 3.95%* 4.08% 4.39% 4.41% 4.91%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 37,223 $ 37,204 $ 41,137 $ 47,236 $ 49,978
Data: ======== ======== ======== ======== ========
Portfolio turnover 26.04% 125.23% 94.59% 90.22% 52.33%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Amount is less than $.01 per share.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch North Carolina Municipal Bond Fund
January 31, 1999
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class C
For the For the
The following per share data and ratios have been derived Six Months Period
from information provided in the financial statements. Ended Oct. 21, 1994++
Jan. 31, For the Year Ended July 31, to July 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.00 $ 10.87 $ 10.36 $ 10.28 $ 9.80
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .21 .44 .45 .45 .37
Realized and unrealized gain on
investments--net .13 .13 .51 .08 .48
-------- -------- -------- -------- --------
Total from investment operations .34 .57 .96 .53 .85
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.21) (.44) (.45) (.45) (.37)
Realized gain on investments--net (.30) --++++ -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.51) (.44) (.45) (.45) (.37)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.83 $ 11.00 $ 10.87 $ 10.36 $ 10.28
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 3.14%+++ 5.35% 9.50% 5.20% 8.87%+++
Return:** ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement 1.56%* 1.51% 1.41% 1.37% 1.37%*
Average ======== ======== ======== ======== ========
Net Assets: Expenses 1.56%* 1.51% 1.49% 1.51% 1.57%*
======== ======== ======== ======== ========
Investment income--net 3.85%* 3.98% 4.28% 4.29% 4.67%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 2,418 $ 2,527 $ 2,052 $ 1,772 $ 713
Data: ======== ======== ======== ======== ========
Portfolio turnover 26.04% 125.23% 94.59% 90.22% 52.33%
======== ======== ======== ======== ========
<CAPTION>
Class D
For the For the
The following per share data and ratios have been derived Six Months Period
from information provided in the financial statements. Ended Oct. 21, 1994++
Jan. 31, For the Year Ended July 31, to July 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.01 $ 10.88 $ 10.37 $ 10.29 $ 9.80
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .24 .49 .50 .50 .41
Realized and unrealized gain on
investments--net .13 .13 .51 .08 .49
-------- -------- -------- -------- --------
Total from investment operations .37 .62 1.01 .58 .90
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.24) (.49) (.50) (.50) (.41)
Realized gain on investments--net (.30) --++++ -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.54) (.49) (.50) (.50) (.41)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.84 $ 11.01 $ 10.88 $ 10.37 $ 10.29
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 3.40%+++ 5.88% 10.05% 5.75% 9.39%+++
Return:** ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement 1.05%* 1.00% .90% .85% .85%*
Average ======== ======== ======== ======== ========
Net Assets: Expenses 1.05%* 1.00% .98% 1.00% 1.05%*
======== ======== ======== ======== ========
Investment income--net 4.36%* 4.49% 4.79% 4.81% 5.28%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 3,403 $ 2,534 $ 2,132 $ 1,880 $ 1,377
Data: ======== ======== ======== ======== ========
Portfolio turnover 26.04% 125.23% 94.59% 90.22% 52.33%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of operations.
++++Amount is less than $.01 per share.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch North Carolina Municipal Bond Fund
January 31, 1999
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's financial statements are prepared in accordance with
generally accepted accounting principles which may require the use
of management accruals and estimates. These unaudited financial
statements reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results for the
interim period presented. All such adjustments are of a normal
recurring nature. The Fund offers four classes of shares under the
Merrill Lynch Select Pricing SM System. Shares of Class A and Class D
are sold with a front-end sales charge. Shares of Class B and Class
C may be subject to a contingent deferred sales charge. All classes
of shares have identical voting, dividend, liquidation and other
rights and the same terms and conditions, except that Class B, Class
C and Class D Shares bear certain expenses related to the account
maintenance of such shares, and Class B and Class C Shares also bear
certain expenses related to the distribution of such shares. Each
class has exclusive voting rights with respect to matters relating
to its account maintenance and distribution expenditures. The
following is a summary of significant accounting policies followed
by the Fund.
(a) Valuation of investments--Municipal bonds and other portfolio
securities in which the Fund invests are traded primarily in the
over-the-counter municipal bond and money markets and are valued at
the last available bid price in the over-the-counter market or on
the basis of yield equivalents as obtained from one or more dealers
that make markets in the securities. Financial futures contracts and
options thereon, which are traded on exchanges, are valued at their
settlement prices as of the close of such exchanges. Short-term
investments with remaining maturities of sixty days or less are
valued at amortized cost, which approximates market value.
Securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or
under the direction of the Board of Trustees of the Trust, including
valuations furnished by a pricing service retained by the Trust,
which may utilize a matrix system for valuations. The procedures of
the pricing service and its valuations are reviewed by the officers
of the Trust under the general supervision of the Trustees.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
* Financial futures contracts--The Fund may purchase or sell
financial futures contracts and options on such futures contracts
for the purpose of hedging the market risk on existing securities or
the intended purchase of securities. Futures contracts are contracts
for delayed delivery of securities at a specific future date and at
a specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to
the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin
and are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(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) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
Merrill Lynch North Carolina Municipal Bond Fund
January 31, 1999
(f) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor ("MLFD" or "Distributor"), a division of Princeton Funds
Distributor, Inc. ("PFD"), which is a wholly-owned subsidiary of
Merrill Lynch Group, Inc.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee based upon the average daily
value of the Fund's net assets at the following annual rates: 0.55%
of the Fund's average daily net assets not exceeding $500 million;
0.525% of average daily net assets in excess of $500 million but not
exceeding $1 billion; and 0.50% of average daily net assets in
excess of $1 billion.
Pursuant to the Distribution Plans adopted by the Fund in accordance
with Rule 12b-1 under the Investment Company Act of 1940, the Fund
pays the Distributor ongoing account maintenance and distribution
fees. The fees are accrued daily and paid monthly at annual rates
based upon the average daily net assets of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.25%
Class C 0.25% 0.35%
Class D 0.10% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of ML &
Co., also provides account maintenance and distribution services to
the Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the six months ended January 31, 1999, MLFD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the
Fund's Class A and Class D Shares as follows:
MLFD MLPF&S
Class A $ 29 $1,214
Class D $360 $8,337
For the six months ended January 31, 1999, MLPF&S received
contingent deferred sales charges of $15,253 relating to
transactions in Class B Shares.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, FDS, PFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended January 31, 1999 were $12,863,150 and
$15,566,003, respectively.
Net realized gains for the six months ended January 31, 1999 and
unrealized gains as of January 31, 1999 were as follows:
Realized Unrealized
Gains Gains
Long-term investments. $ 589,535 $ 2,466,688
----------- -----------
Total $ 589,535 $ 2,466,688
=========== ===========
As of January 31, 1999, net unrealized appreciation for Federal
income tax purposes aggregated $2,466,688, of which $2,469,751 was
related to appreciated securities and $3,063 was related to
depreciated securities. The aggregate cost of investments at January
31, 1999 for Federal income tax purposes was $49,897,299.
Merrill Lynch North Carolina Municipal Bond Fund
January 31, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
4. Beneficial Interest Transactions:
Net increase (decrease) in net assets derived from beneficial
interest transactions was $1,823,985 and $(3,435,751) for the six
months ended January 31, 1999 and for the year ended July 31, 1998,
respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Six Months Dollar
Ended January 31, 1999 Shares Amount
Shares sold 84,791 $ 940,715
Shares issued to share-
holders in reinvestment of
dividends and distributions 25,938 281,447
----------- -----------
Total issued 110,729 1,222,162
Shares redeemed (78,306) (868,365)
----------- -----------
Net increase 32,423 $ 353,797
=========== ===========
Class A Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
Shares sold 124,471 $ 1,355,634
Shares issued to share-
holders in reinvestment of
dividends and distributions 21,812 238,394
----------- -----------
Total issued 146,283 1,594,028
Shares redeemed (136,396) (1,489,167)
----------- -----------
Net increase 9,887 $ 104,861
=========== ===========
Class B Shares for the Six Months Dollar
Ended January 31, 1999 Shares Amount
Shares sold 253,007 $ 2,800,642
Shares issued to share-
holders in reinvestment of
dividends and distributions 89,820 975,149
----------- -----------
Total issued 342,827 3,775,791
Shares redeemed (287,814) (3,159,072)
----------- -----------
Net increase 55,013 $ 616,719
=========== ===========
Class B Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
Shares sold 435,471 $ 4,752,873
Shares issued to share-
holders in reinvestment of
dividends and distributions 75,510 825,183
----------- -----------
Total issued 510,981 5,578,056
Automatic conversion of
shares (4,284) (57,714)
Shares redeemed (908,721) (9,881,981)
----------- -----------
Net decrease (402,024) $(4,361,639)
=========== ===========
Class C Shares for the Six Months Dollar
Ended January 31, 1999 Shares Amount
Shares sold 25,447 $ 281,768
Shares issued to share-
holders in reinvestment of
dividends and distributions 5,134 55,663
----------- -----------
Total issued 30,581 337,431
Shares redeemed (36,939) (407,417)
----------- -----------
Net decrease (6,358) $ (69,986)
=========== ===========
Class C Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
Shares sold 70,224 $ 764,628
Shares issued to share-
holders in reinvestment of
dividends and distributions 3,214 35,146
----------- -----------
Total issued 73,438 799,774
Shares redeemed (32,508) (355,671)
----------- -----------
Net increase 40,930 $ 444,103
=========== ===========
Class D Shares for the Six Months Dollar
Ended January 31, 1999 Shares Amount
Shares sold 110,591 $ 1,213,353
Shares issued to share-
holders in reinvestment of
dividends and distributions 7,783 84,479
----------- -----------
Total issued 118,374 1,297,832
Shares redeemed (34,529) (374,377)
----------- -----------
Net increase 83,845 $ 923,455
=========== ===========
Class D Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
Shares sold 53,147 $ 573,421
Automatic conversion of
shares 4,284 57,714
Shares issued to share-
holders in reinvestment of
dividends and distributions 4,392 48,065
----------- -----------
Total issued 61,823 679,200
Shares redeemed (27,648) (302,276)
----------- -----------
Net increase 34,175 $ 376,924
=========== ===========
Merrill Lynch North Carolina Municipal Bond Fund
January 31, 1999
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Vincent R. Giordano, Senior Vice President
Hugh T. Hurley III, Vice President
Kenneth A. Jacob, Vice President
Donald C. Burke, Vice President and Treasurer
Robert E. Putney, III, Secretary
Gerald M. Richard, Treasurer of Merrill Lynch North Carolina
Municipal Bond Fund has recently retired. His colleagues at Merrill
Lynch Asset Management, L.P. join the Fund's Board of Trustees in
wishing Mr. Richard well in his retirement.
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
