MERRILL LYNCH
MARYLAND
MUNICIPAL
BOND FUND
FUND LOGO
Annual Report
July 31, 1995
<PAGE>
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, MA 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
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 Maryland
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 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 Maryland continued to see very little activity
during the past year. This was in response to the small amount of
new issuance ($2.5 billion) coming to market in the Maryland tax-
exempt market. This represented a decline of 50.0% 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 Maryland
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 8, 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" and "Average Annual Total Return" tables on pages 4 and 5.
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* $9.15 $9.03 $9.20 -0.54% +1.33%
Class B Shares* 9.16 9.03 9.20 -0.43 +1.44
Class C Shares* 9.16 9.03 8.79 +4.21 +1.44
Class D Shares* 9.16 9.03 8.79 +4.21 +1.44
Class A Shares--Total Return* +5.39(1) +2.75(2)
Class B Shares--Total Return* +4.96(3) +2.73(4)
Class C Shares--Total Return* +8.51(5) +2.71(6)
Class D Shares--Total Return* +8.94(7) +2.84(8)
Class A Shares--Standardized 30-day Yield 5.37%
Class B Shares--Standardized 30-day Yield 5.07%
Class C Shares--Standardized 30-day Yield 4.96%
Class D Shares--Standardized 30-day Yield 5.27%
<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 $0.517 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.129 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.472 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.117 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.351 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.114 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.387 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.126 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 and Class B Shares compared to the growth of an investment
in the Lehman Brothers Municipal Bond Index. Beginning and ending
values are:
10/29/93** 7/95
ML Maryland Municipal Bond Fund++--
Class A Shares* $ 9,600 $ 9,680
ML Maryland Municipal Bond Fund++--
Class B Shares* $10,000 $ 9,730
Lehman Brothers Municipal
Bond Index++++ $10,000 $10,623
<PAGE>
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 and Class D Shares compared to the growth of an investment
in the Lehman Brothers Municipal Bond Index. Beginning and ending
values are:
10/21/94** 7/95
ML Maryland Municipal Bond Fund++--
Class C Shares* $10,000 $10,752
ML Maryland Municipal Bond Fund++--
Class D Shares* $ 9,600 $10,458
Lehman Brothers Municipal
Bond Index++++ $10,000 $11,107
[FN]
*Assuming transaction costs and other operating expenses, including
advisory fees.
**Commencement of Operations.
++ML Maryland Municipal Bond Fund invests primarily in long-term
investment-grade obligations issued by or on behalf of the State
of Maryland, its political subdivisions, agencies and
instrumentalities and obligations of other qualifying issuers.
++++This inmanaged Index consists of long-term revenue bonds.
prerefunded bonds general obligation bonds and insured bonds.
Past performance is not predictive of future performance.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/95 +7.13% +2.84%
Inception (10/29/93)
through 6/30/95 +0.11 -2.31
<PAGE>
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/95 +6.57% +2.57%
Inception (10/29/93) through 6/30/95 -0.40 -2.20
[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 +7.74% +6.74%
[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 +8.12% +3.80%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<PAGE>
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>
10/29/93-12/31/93 $10.00 $10.07 -- $0.077 + 1.48%
1994 10.07 8.58 -- 0.511 - 9.87
1/1/95-7/31/95 8.58 9.15 -- 0.293 +10.25
------
Total $0.881
Cumulative total return as of 7/31/95: + 0.84%**
<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>
10/29/93-12/31/93 $10.00 $10.07 -- $0.068 + 1.38%
1994 10.07 8.58 -- 0.464 -10.33
1/1/95-7/31/95 8.58 9.16 -- 0.267 +10.06
------
Total $0.799
Cumulative total return as of 7/31/95: + 0.05%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
<PAGE>
PORTFOLIO ABBREVIATIONS
To simplify the listings of Merrill Lynch Maryland 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)
GO General Obligation Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
S/F Single-Family
STRIPES Short-Term Rate Inverse Payment Exempt Securities
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <S> <C> <S> <C>
Maryland--88.5%
AA- Aa $ 425 Annapolis, Maryland, Bank Qualified, GO, UT, 5.50% due 4/01/2014 $ 412
AA+ Aa 400 Anne Arundel County, Maryland, Consolidated Water and Sewer Refunding
Bonds, 5.30% due 4/15/2017 371
A A2 500 Anne Arundel County, Maryland, PCR, Refunding (Baltimore Gas and
Electric Company Project), 6% due 4/01/2024 496
AA+ Aaa 500 Baltimore County, Maryland, Refunding Bonds (County Pension Funding),
UT, 6.70% due 7/01/2016 537
AAA Aaa 500 Baltimore, Maryland, Consolidated Public Improvement Refunding Bonds,
UT, GO, Series D, 5.40% due 10/15/2012 (b) 487
BBB+ A3 500 Baltimore, Maryland, PCR (General Motors Corporation), 5.35% due 4/01/2008 480
AAA Aaa 500 Baltimore, Maryland, Registered Revenue Refunding Bonds (Kidder Maryland
Water Projects), Series A, 5.65% due 7/01/2020 (e) 482
AA- Aa 600 Carroll County, Maryland, Registered Revenue Bonds (Commissioners-
Consolidated Public Improvement), UT, 6.50% due 10/01/2024 635
<PAGE>
NR* Aa 400 Maryland Community Development Administration, M/F Housing Insured Mortgage
Revenue Refunding Bonds (Department of Housing and Community Development),
Series H, 5.60% due 5/15/2026 (i) 369
Maryland Community Development Administration, S/F Program Revenue Bonds
(Department of Housing and Community Development):
NR* Aa 500 4th Series, 6.45% due 4/01/2014 515
NR* Aa 250 6th Series, 7.05% due 4/01/2017 265
NR* Aa 500 7th Series, AMT, 7.30% due 4/01/2025 531
NR* VMIG1++ 200 Maryland Energy Financing Administration, Limited Obligation Revenue Bonds
(Baltimore Ferst Project), VRDN, AMT, 3.85% due 7/01/2011 (j) 200
AAA Aaa 625 Maryland Health and Higher Educational Facilities Authority
Revenue Bonds (University of Maryland Medical Systems), Series B,
7% due 7/01/2022 (a) 713
Maryland Health and Higher Educational Facilities Authority,
Revenue Refunding Bonds:
BBB Baa1 400 (Howard County General Hospital), 5.50% due 7/01/2013 348
AA- Aa 500 (Johns Hopkins), 5% due 7/01/2023 423
A A 500 (Memorial Hospital of Cumberland), 6.50% due 7/01/2017 504
AAA Aaa 500 (Peninsula Regional Medical Project), 5% due 7/01/2023 (e) 430
AAA Aaa 500 (Sinai Hospital-Baltimore), 5.50% due 7/01/2013 (b) 479
AAA Aaa 500 Maryland Transportation Authority, Special Obligation Revenue Bonds
(Baltimore/Washington International Airport Project), AMT, Series A,
6.25% due 7/01/2014 (a) 506
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <S> <C> <S> <C>
Maryland (concluded)
Maryland Water Quality Financing Administration, Revolving Loan
Fund Revenue Bonds, Series A:
AA Aa $ 300 6.375% due 9/01/2010 $ 316
AA Aa 500 6.55% due 9/01/2014 530
AAA Aaa 500 Montgomery County, Maryland, Consolidated Public Improvement Bonds,
Series B, 7.10% due 10/01/2000 (h) 568
<PAGE>
NR* Aa 450 Montgomery County, Maryland, Housing Opportunities Community, S/F
Mortgage Revenue Bonds, Series B, 6.65% due 7/01/2017 464
AAA Aaa 500 Montgomery County, Maryland, Parking Revenue Refunding Bonds (Silver
Spring Parking Lot), Series A, 6.25% due 6/01/2009 (a) 521
NR* A 515 Northeast Maryland, Waste Disposal Authority, Solid Waste Revenue Bonds
(Montgomery County Resource Recovery Project), AMT, Series A, 6.30%
due 7/01/2016 510
AA- A 1,000 Prince Georges County, Maryland, Consolidated Public Improvement Refunding
Bonds, 5.25% due 10/01/2011 957
AAA NR* 500 Prince Georges County, Maryland, Housing Authority, Mortgage Revenue
Refunding Bonds (Parker Apartments Project), Series A, 7.25% due 11/20/2016 (f) 538
AAA NR* 1,000 Prince Georges County, Maryland, Housing Authority, S/F Mortgage
Revenue Bonds, AMT, Series A, 6.60% due 12/01/2025 (g) 1,018
Prince Georges County, Maryland, PCR, Refunding (Potomac Electric Project):
A A1 1,000 5.75% due 3/15/2010 999
A A1 250 6.375% due 1/15/2023 264
University of Maryland, Systems Auxiliary Facilities and Tuition Revenue Bonds:
AA+ Aa 400 Refunding, Series C, 5% due 10/01/2011 371
AA+ Aa 500 Series A, 5.60% due 4/01/2016 483
AAA Aaa 500 Washington, District of Columbia, Metropolitan Area Transportation
Authority, Gross Revenue Refunding Bonds, 5.25% due 7/01/2014 (a) 461
Washington Suburban Sanitation District, Maryland, Registered, General
Construction Bonds, UT:
AA Aa1 500 6.625% due 6/01/2017 527
AAA Aaa 585 Refunding, 6.40% due 11/01/2001 (h) 651
AAA Aaa 400 Second Series, 6.90% due 6/01/2001 (h) 453
Puerto Rico--9.7%
A Baa1 510 Puerto Rico Commonwealth, Highway and Transportation Authority,
Highway Revenue Bonds, Series T, 6.625% due 7/01/2018 530
Puerto Rico Electric Power Authority, Power Revenue Bonds:
A- Baa1 1,000 Series P, 7% due 7/01/2021 1,088
AAA Aaa 400 Series T, Registered, STRIPES, 7.538% due 7/01/2005 (c)(d) 441
Total Investments (Cost--$20,458)--98.2% 20,873
<PAGE>
Other Assets Less Liabilities--1.8% 390
-------
Net Assets--100.0% $21,263
=======
<FN>
(a)FGIC Insured.
(b)AMBAC Insured.
(c)FSA Insured.
(d)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.
(e)MBIA Insured.
(f)GNMA Insured.
(g)FNMA/GNMA Insured.
(h)Prerefunded.
(i)FHA Insured.
(j)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.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche
LLP.
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--$20,458,132) (Note 1a) $ 20,872,908
Cash 25,532
Receivables:
Interest $ 261,123
Beneficial interest sold 104,501
Investment adviser (Note 2) 44,846 410,470
------------
Deferred organization expenses (Note 1e) 51,951
Prepaid expenses (Note 1e) 10,341
------------
Total assets 21,371,202
------------
<PAGE>
Liabilities: Payables:
Beneficial interest redeemed 24,454
Dividends to shareholders (Note 1f) 20,566
Distributor (Note 2) 7,783 52,803
------------
Accrued expenses 54,923
------------
Total liabilities 107,726
------------
Net Assets: Net assets $ 21,263,476
============
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 14,881
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 200,631
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 11,057
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 5,650
Paid-in capital in excess of par 22,247,263
Accumulated realized capital losses on investments--net (Note 5) (1,630,782)
Unrealized appreciation on investments--net 414,776
------------
Net assets $ 21,263,476
============
Net Asset Value: Class A--Based on net assets of $1,362,352 and 148,812 shares
of beneficial interest outstanding $ 9.15
============
Class B--Based on net assets of $18,371,164 and 2,006,311 shares
of beneficial interest outstanding $ 9.16
============
Class C--Based on net assets of $1,012,663 and 110,563 shares
of beneficial interest outstanding $ 9.16
============
Class D--Based on net assets of $517,297 and 56,500 shares
of beneficial interest outstanding $ 9.16
============
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 $ 1,066,711
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 98,737
Account maintenance and distribution fees--Class B (Note 2) 80,128
Professional fees 54,457
Printing and shareholder reports 37,396
Accounting services (Note 2) 29,053
Registration fees (Note 1e) 17,274
Transfer agent fees--Class B (Note 2) 16,450
Amortization of organization expenses (Note 1e) 16,015
Pricing fees 4,512
Custodian fees 2,384
Account maintenance and distribution fees--Class C (Note 2) 1,587
Transfer agent fees--Class A (Note 2) 1,349
Trustees' fees and expenses 883
Transfer agent fees--Class C (Note 2) 263
Account maintenance fees--Class D (Note 2) 144
Transfer agent fees--Class D (Note 2) 112
Other 4,018
------------
Total expenses before reimbursement 364,762
Reimbursement of expenses (Note 2) (255,443)
------------
Total expenses after reimbursement 109,319
------------
Investment income--net 957,392
------------
Realized & Realized loss on investments--net (1,600,414)
Unrealized Change in unrealized depreciation on investments--net 1,578,565
Gain (Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 935,543
(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 For the Period
Ended Oct. 29, 1993++
July 31, to July 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 957,392 $ 485,315
Realized loss on investments--net (1,600,414) (30,368)
Change in unrealized depreciation on investments--net 1,578,565 (1,163,789)
------------ ------------
Net increase (decrease) in net assets resulting from
operations 935,543 (708,842)
------------ ------------
Dividends to Investment income--net:
Shareholders Class A (88,115) (64,177)
(Note 1f): Class B (847,823) (421,138)
Class C (13,425) --
Class D (8,029) --
------------ ------------
Net decrease in net assets resulting from dividends to
shareholders (957,392) (485,315)
------------ ------------
Beneficial Net increase in net assets derived from beneficial interest
Interest transactions 5,212,416 17,167,066
Transactions ------------ ------------
(Note 4):
Net Assets: Total increase in net assets 5,190,567 15,972,909
Beginning of period 16,072,909 100,000
------------ ------------
End of period $ 21,263,476 $ 16,072,909
============ ============
<FN>
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<PAGE>
<TABLE>
Financial Highlights
<CAPTION>
Class A Class B Class C Class D
For the For the For the For the
For the Period For the Period Period Period
The following per share data and ratios have been derived Year Oct. 29, Year Oct. 29, Oct. 21, Oct. 21,
from information provided in the financial statements. Ended 1993++ to Ended 1993++ to 1994++ to 1994++ to
July 31, July 31, July 31, July 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1995 1994 1995 1995
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of
Operating period $ 9.20 $ 10.00 $ 9.20 $ 10.00 $ 8.79 $ 8.79
Performance: -------- -------- -------- -------- -------- --------
Investment income--net .52 .37 .47 .33 .36 .40
Realized and unrealized gain
(loss) on investments--net (.05) (.80) (.04) (.80) .37 .37
-------- -------- -------- -------- -------- --------
Total from investment operations .47 (.43) .43 (.47) .73 .77
-------- -------- -------- -------- -------- --------
Less dividends from investment
income--net (.52) (.37) (.47) (.33) (.36) (.40)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 9.15 $ 9.20 $ 9.16 $ 9.20 $ 9.16 $ 9.16
======== ======== ======== ======== ======== =======
Total Based on net asset value per
Investment share 5.39% (4.32%)+++ 4.96% (4.68%)+++ 8.51%+++ 8.94%+++
Return:** ======== ======== ======== ======== ======== =======
Ratios to Expenses, excluding account
Average maintenance and distribution
Net Assets: fees and net of reimbursement .13% .03%* .15% .03%* .22%* .21%*
======== ======== ======== ======== ======== =======
Expenses, net of reimbursement .13% .03%* .65% .53%* .82%* .31%*
======== ======== ======== ======== ======== =======
Expenses 1.57% 1.76%* 2.08% 2.27%* 2.08%* 1.55%*
======== ======== ======== ======== ======== =======
Investment income--net 5.80% 5.30%* 5.29% 4.74%* 5.08%* 5.57%*
======== ======== ======== ======== ======== =======
Supplemental Net assets, end of period (in
Data: thousands) $ 1,362 $ 1,589 $ 18,371 $ 14,484 $ 1,013 $ 517
======== ======== ======== ======== ======== =======
Portfolio turnover 73.99% 29.40% 73.99% 29.40% 73.99% 73.99%
======== ======== ======== ======== ======== =======
<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 Maryland 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.
(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.
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. For the year ended July 31, 1995, FAM earned
fees of $98,737, all of which was voluntarily waived. FAM also
reimbursed the Fund additional expenses of $156,706.
Pursuant to the distribution plans ("the Distribution Plans")
adopted by the Fund in accordance with Rule 12b-1 under the
Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are
accrued daily and paid monthly at annual rates based upon the
average daily net assets of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.25%
Class C 0.25% 0.35%
Class D 0.10% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the 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 $252 $2,924
Class D $ 99 $1,586
<PAGE>
For the year ended July 31, 1995, MLPF&S received contingent
deferred sales charges of $49,880 and $25 relating to transactions
in Class B and Class C Shares, respectively.
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 $17,520,704 and $12,392,634,
respectively.
Net realized and unrealized gains (losses) as of July 31, 1995 were
as follows:
Realized Unrealized
Losses Gains
Long-term investments $ (1,406,020) $ 414,776
Financial futures contracts (194,394) --
------------ ------------
Total $ (1,600,414) $ 414,776
============ ============
As of July 31, 1995, net unrealized appreciation for Federal income
tax purposes aggregated $414,776, of which $650,276 related to
appreciated securities and $235,500 related to depreciated
securities. The aggregate cost of investments at July 31, 1995 for
Federal income tax purposes was $20,458,132.
NOTES TO FINANCIAL STATEMENTS (concluded)
4. Beneficial Interest Transactions:
Net increase in net assets derived from beneficial interest
transactions was $5,212,416 and $17,167,066 for the year ended July
31, 1995 and the period ended July 31, 1994, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
<PAGE>
Class A Shares for the Year Dollar
Ended July 31, 1995 Shares Amount
Shares sold 42,092 $ 376,856
Shares issued to share-
holders in reinvestment
of dividends 6,413 57,046
----------- ------------
Total issued 48,505 433,902
Shares redeemed (72,388) (638,705)
----------- ------------
Net decrease (23,883) $ (204,803)
=========== ============
Class A Shares for the Period
October 29, 1993++ to Dollar
July 31, 1994 Shares Amount
Shares sold 386,420 $ 3,845,684
Shares issued to share-
holders in reinvestment
of dividends 4,247 39,820
----------- ------------
Total issued 390,667 3,885,504
Shares redeemed (222,972) (2,132,507)
----------- ------------
Net increase 167,695 $ 1,752,997
=========== ============
[FN]
++Prior to October 29, 1993 (commencement of operations), the Fund
issued 5,000 shares to FAM for $50,000.
Class B Shares for the Year Dollar
Ended July 31, 1995 Shares Amount
Shares sold 835,712 $ 7,482,027
Shares issued to share-
holders in reinvestment
of dividends 46,080 410,971
----------- ------------
Total issued 881,792 7,892,998
Shares redeemed (449,753) (3,996,258)
----------- ------------
Net increase 432,039 $ 3,896,740
=========== ============
<PAGE>
Class B Shares for the Period
October 29, 1993++ to Dollar
July 31, 1994 Shares Amount
Shares sold 1,674,753 $ 16,422,297
Shares issued to share-
holders in reinvestment
of dividends 19,843 187,176
----------- ------------
Total issued 1,694,596 16,609,473
Shares redeemed (125,324) (1,195,404)
----------- ------------
Net increase 1,569,272 $ 15,414,069
=========== ============
[FN]
++Prior to October 29, 1993 (commencement of operations), the Fund
issued 5,000 shares to FAM for $50,000.
Class C Shares for the Period
October 21, 1994++ to Dollar
July 31, 1995 Shares Amount
Shares sold 123,204 $ 1,119,811
Shares issued to share-
holders in reinvestment
of dividends 965 8,788
----------- ------------
Total issued 124,169 1,128,599
Shares redeemed (13,606) (123,782)
----------- ------------
Net increase 110,563 $ 1,004,817
=========== ============
[FN]
++Commencement of Operations.
<PAGE>
Class D Shares for the Period
October 21, 1994++ to Dollar
July 31, 1995 Shares Amount
Shares sold 56,794 $ 518,419
Shares issued to share-
holders in reinvestment
of dividends 586 5,352
----------- ------------
Total issued 57,380 523,771
Shares redeemed (880) (8,109)
----------- ------------
Net increase 56,500 $ 515,662
=========== ============
[FN]
++Commencement of Operations.
5. Capital Loss Carryforward:
At July 31, 1995, the Fund had a net capital loss carryforward of
approximately $899,000, 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 Maryland 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
Maryland 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 the
year then ended and for the period October 29, 1993 (commencement of
operations) to July 31, 1994, and the financial highlights for the
year then ended and for the period October 29, 1993 (commencement of
operations) to July 31, 1994. 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.
<PAGE>
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.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch Maryland 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 period October 29, 1993 to July 31, 1994 in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
September 8, 1995
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid monthly by
Merrill Lynch Maryland 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.
