MERRILL LYNCH
MARYLAND
MUNICIPAL
BOND FUND
[FUND LOGO]
STRATEGIC
Performance
Semi-Annual Report
January 31, 1997
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
Donald C. Burke, Vice President
Kenneth A. Jacob, Vice President
Robert D. Sneeden, 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. Statements and other information
herein are as dated and are subject to change.
Merrill Lynch Maryland
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011 #16859 -- 1/97
Merrill Lynch Maryland Municipal Bond Fund January 31, 1997
TO OUR SHAREHOLDERS
The Municipal Market Environment
Long-term fixed-income bond yields generally declined over the six
months ended January 31, 1997. Initially, US Treasury bond yields
declined over 45 basis points (0.45%) to 6.45% by late November as low
employment growth and continued low inflation combined to support lower
bond yields. Concurrently, long-term municipal revenue bond yields, as
measured by the Bond Buyer Revenue Bond Index, declined over 20 basis
points to approximately 5.80%. However, signs of increased economic
activity and renewed inflation fears pushed bond yields up for
the remainder of the period. By the end of January 1997, US Treasury
bond yields rose 35 basis points to end the period at approximately
6.80%. Similarly, long-term municipal revenue bond yields rose
approximately 20 basis points from their lows in late November to
approximately 6.00%. During the six months ended January 31, 1997, US
Treasury bond yields declined approximately 10 basis points, while tax-
exempt bond yields were essentially unchanged.
Recently, tax-exempt bond yields underperformed their taxable
counterparts despite a continued strong supply position. During the six-
month period ended January 31, 1997, over $88 billion in long-term tax-
exempt bonds was underwritten, essentially unchanged from issuance a
year ago. Approximately $50 billion in new municipal bonds was issued
during the three-month period ended January 31, 1997, representing a
decline of over 5% compared to the same period in 1996. This declining
trend in bond issuance was even more apparent recently. Slightly more
than $10 billion in long-term bonds was issued in January 1997, a
decrease of over 15% compared to January 1996 issuance.
The municipal bond market's recent underperformance relative to Treasury
issues was the result of a number of other factors. The historic
strength of the US equity market has attracted significant investor
interest. Additionally, as tax-exempt bond yields declined again below
6%, some investors temporarily lost interest in the municipal bond
market. If interest rates continue to decline as they did at the end of
1994 and throughout 1995, investors, in general, will quickly adjust to
the new levels. The tax advantages generated by municipal bonds quickly
outweigh low nominal yields, and investor demand increases.
The Presidential and Congressional elections this past November
resurrected some investor concerns regarding continued Federal deficit
reduction and potential legislative restrictions upon the municipal bond
market. This situation was similar to that at the beginning of 1996 when
tax-exempt bond yields were negatively impacted by fears that
legislation reducing the tax advantage of municipal bonds would be
introduced to aid further deficit reductions.
However, the US Treasury bond market's recent relatively strong
performance resulted in municipal bonds becoming a particularly
attractive investment alternative. At current levels, long-term tax-
exempt revenue bonds yield over 88% of comparable US Treasury bond
yields. Current levels make tax-advantaged products more attractive than
they were at mid-year when yield ratios declined to approximately 85%.
For example, to an investor in the 36% Federal income tax bracket, a
current tax-exempt bond yield of 6% represents a taxable equivalent
yield of approximately 9.37%.
Looking forward, the supply of new bond issuance for 1997 is expected to
be very similar to that of 1996, with most annual estimates falling in
the $170 billion -- $175 billion range. Investor demand is also expected
to regain its former strength, with 1997 total municipal redemptions
(refundings, maturities and coupon payments) in the $175 billion -- $185
billion range. This overall balance suggests that the positive technical
backdrop the municipal bond market enjoyed in 1996 could continue in
1997. However, it is likely that seasonal factors may temporarily
distort this overall balanced technical scenario. During periods of
reduced bond issuance, the ease and ability to purchase tax-advantaged
products at their current attractive levels may be greatly restricted.
Portfolio Strategy
During the six-month period ended January 31, 1997, we primarily
maintained the defensive posture of the Fund which we adopted in mid-
1996. Our principal strategy was to favor higher-couponed issues over
more interest rate-sensitive securities that have greater potential for
capital appreciation. We believed that tax-exempt interest rates would
fluctuate in a broad range and larger-couponed securities would offer
both greater principal preservation and generous tax-exempt income. In
addition, we maintained minimal cash reserves in recent months to
further augment shareholder income.
The municipal market in Maryland continued to see very little activity
during the six months ended January 31, 1997. We believe this was
because of the small amount of new issuance (just over $900 million in
municipal bonds) in the Maryland tax-exempt market. This represents a
decline of 6% compared to the same six-month period in 1996. During the
three months ended January 31, 1997, just under $500 million in
municipal bonds was issued in Maryland, which is a slight increase
compared to the same period a year earlier. The decline in new bond
supply was perhaps the major determining factor in our decision to
maintain a fully invested position.
We believe that economic growth should slow by mid-1997, perhaps aided
by an increase in interest rates by the Federal Reserve Board. Slower
growth, combined with continued low inflation, may result in materially
lower interest rates. Additionally, the prospect for further Federal
deficit reduction may provide a positive backdrop for more significant
declines in long-term bond yields. Signs that such a scenario is
developing would trigger us to move to a more aggressive strategy for
the Fund, utilizing more interest rate-sensitive issues in order to seek
to enhance the Fund's principal appreciation. At the same time, however,
we will still seek to generate an attractive level of tax-exempt income.
In Conclusion
We appreciate your ongoing interest in Merrill Lynch Maryland Municipal
Bond Fund, and we look forward to serving your investment needs in the
months and years ahead.
Sincerely,
/S/ARTHUR ZEIKEL
Arthur Zeikel
President
/S/VINCENT R. GIORDANO
Vincent R. Giordano
Senior Vice President
/S/ROBERT D. SNEEDEN
Robert D. Sneeden
Portfolio Manager
March 5, 1997
We are pleased to announce that Robert D. Sneeden is responsible for the
day-to-day management of Merrill Lynch Maryland Municipal Bond Fund. Mr.
Sneeden has been employed by Merrill Lynch Asset Management, L.P. (an
affiliate of the Fund's investment adviser) since 1994 as Portfolio
Manager. Prior thereto, he was Vice President with Lehman Brothers from
1990 to 1994.
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill
Lynch Select PricingSM System, which offers four pricing alternatives:
(bullet) 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.
(bullet) 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.)
(bullet) 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.
(bullet) 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. 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>
<CAPTION>
Recent Performance Results
12 Month 3 Month
1/31/97 10/31/96 1/31/96 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $9.33 $9.33 $9.52 -2.00% 0.00%
Class B Shares* 9.33 9.34 9.52 -2.00 -0.11
Class C Shares* 9.33 9.34 9.53 -2.10 -0.11
Class D Shares* 9.33 9.33 9.52 -2.00 0.00
Class A Shares -- Total Return* +3.05(1) +1.32(2)
Class B Shares -- Total Return* +2.52(3) +1.08(4)
Class C Shares -- Total Return* +2.30(5) +1.05(6)
Class D Shares -- Total Return* +2.95(7) +1.29(8)
Class A Shares -- Standardized 30-day Yield 4.67%
Class B Shares -- Standardized 30-day Yield 4.35%
Class C Shares -- Standardized 30-day Yield 4.25%
Class D Shares -- Standardized 30-day Yield 4.57%
* Investment results shown do not reflect sales charges; results shown would be lower
if a sales charge was included.
(1) Percent change includes reinvestment of $0.469 per share ordinary income dividends.
(2) Percent change includes reinvestment of $0.128 per share ordinary income dividends.
(3) Percent change includes reinvestment of $0.421 per share ordinary income dividends.
(4) Percent change includes reinvestment of $0.115 per share ordinary income dividends.
(5) Percent change includes reinvestment of $0.411 per share ordinary income dividends.
(6) Percent change includes reinvestment of $0.112 per share ordinary income dividends.
(7) Percent change includes reinvestment of $0.460 per share ordinary income dividends.
(8) Percent change includes reinvestment of $0.125 per share ordinary income dividends.
</TABLE>
<TABLE>
<CAPTION>
Performance Summary -- Class A Shares
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
1995 8.58 9.52 -- 0.505 +17.22
1996 9.52 9.36 -- 0.462 + 3.33
1/1/97 -- 1/31/97 9.36 9.33 -- 0.034 + 0.13
Total $1.589
Cumulative total return as of 1/31/97: +10.93%**
* 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>
<CAPTION>
Performance Summary -- Class B Shares
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
1995 8.58 9.53 -- 0.459 +16.75
1996 9.53 9.37 -- 0.415 + 2.81
1/1/97 -- 1/31/97 9.37 9.33 -- 0.031 - 0.02
Total $1.437
Cumulative total return as of 1/31/97: + 9.09%**
* 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>
<TABLE>
<CAPTION>
Performance Summary -- Class C Shares
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94 -- 12/31/94 $8.79 $8.58 -- $0.089 - 1.35%
1995 8.58 9.53 -- 0.449 +16.63
1996 9.53 9.37 -- 0.405 + 2.70
1/1/97 -- 1/31/97 9.37 9.33 -- 0.030 - 0.03
Total $0.973
Cumulative total return as of 1/31/97: +18.12%**
* 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>
<TABLE>
<CAPTION>
Performance Summary -- Class D Shares
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94 -- 12/31/94 $8.79 $8.58 -- $0.098 - 1.25%
1995 8.58 9.52 -- 0.496 +17.11
1996 9.52 9.36 -- 0.453 + 3.23
1/1/97 -- 1/31/97 9.36 9.33 -- 0.034 + 0.12
Total $1.081
Cumulative total return as of 1/31/97: +19.53%**
* 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>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/96 +3.33% -0.80%
Inception (10/29/93)
through 12/31/96 +3.28 +1.96
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/96 +2.81% -1.13%
Inception (10/29/93)
through 12/31/96 +2.79 +2.51
* 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 12/31/96 +2.70% +1.71%
Inception (10/21/94)
through 12/31/96 +7.90 +7.90
* 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 12/31/96 +3.23% -0.90%
Inception (10/21/94)
through 12/31/96 +8.41 +6.41
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
<TABLE>
<CAPTION>
Merrill Lynch Maryland Municipal Bond Fund January 31, 1997
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <C> <C> <C> <C>
Maryland -- 90.4%
AA+ Aa $765 Anne Arundel County, Maryland, Water and Sewer, GO, 5% due 9/01/2018 $711
AAA Aaa 1,295 Baltimore County, Maryland, Metropolitan District, UT, 65th Series,
5.50% due 6/01/2004 1,364
AA- Aa2 1,000 Baltimore, Maryland, Port Facilities Revenue Bonds (Consolidated Coal
Sales Co.), 6.50% due 12/01/2010 1,089
AA Aa 600 Carroll County, Maryland, Registered Revenue Bonds (County Commissioners-
Consolidated Public Improvement), UT, 6.50% due 10/01/2024 658
AA- Aaa 1,000 Frederick County, Maryland, Public Facilities Refunding Bonds, Series B,
6.30% due 7/01/2002 (h) 1,102
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 518
NR* Aa 250 6th Series, 7.05% due 4/01/2017 265
NR* Aa 490 7th Series, AMT, 7.30% due 4/01/2025 516
Maryland Health and Higher Educational Facilities Authority Revenue Bonds:
NR* VMIG1+ 400 (Pooled Loan Program), VRDN, Series A, 3.20% due 2/03/1997 (i) 400
AAA Aaa 1,500 Refunding (Loyola College), Series A, 5.375% due 10/01/2026 (b) 1,453
AA- Aa 1,000 Refunding (Johns Hopkins University), 7.50% due 7/01/2020 1,062
A A 1,200 Refunding (Memorial Hospital of Cumberland), 6.50% due 7/01/2017 1,271
AAA Aaa 625 (University of Maryland Medical Systems), Series B, 7% due 7/01/2022 (a) 743
AAA Aaa 1,000 Maryland State and Local Facilities Loan, First Series, UT, 5.10% due 3/15/2002 1,030
A- NR* 1,000 Maryland State Energy Financing Administration, Solid Waste Disposal
Revenue Bonds, Limited Obligation (Wheelabrator Water Project), AMT,
6.45% due 12/01/2016 1,040
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) 522
Maryland Water Quality Financing Administration, Revolving Loan Fund
Revenue Bonds, Series A:
AA Aa 300 6.375% due 9/01/2010 321
AA Aa 500 6.55% due 9/01/2014 537
AAA Aaa 500 Montgomery County, Maryland, Consolidated Public Improvement Bonds, UT,
Series A, 5.90% due 10/01/2008 535
NR* Baa 1,000 Montgomery County, Maryland, Golf Course System Revenue Authority, Series A,
6.125% due 10/01/2022 991
AAA Aaa 500 Montgomery County, Maryland, Parking Revenue Refunding Bonds (Silver Spring
Parking Lot), Series A, 6.25% due 6/01/2009 (a) 534
NR* A 1,000 Northeast Maryland, Waste Disposal Authority, Solid Waste Revenue Bonds
(Montgomery County Resource Recovery Project), AMT, Series A, 6.30% due 7/01/2016 1,014
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) 534
AAA NR* 935 Prince Georges County, Maryland, Housing Authority, S/F Mortgage Revenue Bonds,
AMT, Series A, 6.60% due 12/01/2025 (g) 962
Prince Georges County, Maryland, PCR, Refunding (Potomac Electric Project):
A A1 1,000 5.75% due 3/15/2010 1,044
A A1 250 6.375% due 1/15/2023 264
A1+ VMIG1+ 300 University of Maryland, University Revenue Bonds (Revolving Equipment
Loan Program), VRDN, Series A, 2.80% due 2/03/1997 (e)(i) 300
AAA Aaa 1,000 Washington, D.C., Metropolitan Area Transportation Authority, Gross
Revenue Refunding Bonds, 5.25% due 7/01/2014 (a) 961
Washington Suburban Sanitation District, Maryland, Registered, General
Construction Bonds, UT:
AA Aa1 500 6.625% due 6/01/2004 (h) 557
AA Aa1 1,500 5.25% due 6/01/2019 1,432
Puerto Rico -- 8.2%
AAA Aaa 510 Puerto Rico Commonwealth, Highway and Transportation Authority, Highway Revenue
Bonds, Series T, 6.625% due 7/01/2002 (h) 570
Puerto Rico Electric Power Authority, Power Revenue Bonds:
BBB+ Aaa 1,000 Series P, 7% due 7/01/2001 (h) 1,122
AAA Aaa 400 Series T, Registered, STRIPES, 7.85% due 7/01/2005 (c)(d) 450
Total Investments (Cost -- $24,816) -- 98.6% 25,872
Other Assets Less Liabilities -- 1.4% 372
-------
Net Assets -- 100.0% $26,244
=======
(a) FGIC Insured.
(b) MBIA Insured.
(c) FSA Insured.
(d) The interest rate is subject to change periodically and inversely based upon prevailing market rates.
The interest rates shown are those in effect at January 31, 1997.
(e) SLMA Insured.
(f) GNMA Insured.
(g) FNMA/GNMA Insured.
(h) Prerefunded.
(i) The interest rate is subject to change periodically based upon prevailing market rates.
The interest rates shown are those in effect at January 31, 1997.
* Not Rated.
+ Highest short-term rating by Moody's Investors Service, Inc.
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
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
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of January 31, 1997
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $24,816,437) (Note 1a) $25,871,985
Cash 78,775
Receivables:
Interest $307,916
Beneficial interest sold 92,616
Investment adviser (Note 2) 20,502 421,034
-----------
Deferred organization expenses (Note 1e) 35,892
Prepaid expenses and other assets (Note 1e) 7,361
-----------
Total assets 26,415,047
-----------
Liabilities: : Payables:
Beneficial interest redeemed 93,724
Dividends to shareholders (Note 1f) 20,077
Distributor (Note 2) 10,882 124,683
-----------
Accrued expenses and other liabilities 46,567
-----------
Total liabilities 171,250
-----------
Net Assets: Net assets $26,243,797
===========
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited number of
Consist of: shares authorized $15,670
Class B Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 232,587
Class C Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 26,483
Class D Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 6,551
Paid-in capital in excess of par 26,768,852
Accumulated realized capital losses on investments -- net (Note 5) (1,861,894)
Unrealized appreciation on investments -- net 1,055,548
-----------
Net assets $26,243,797
===========
Net Asset Value: Class A -- Based on net assets of $1,461,681 and 156,698 shares
of beneficial interest outstanding $9.33
===========
Class B -- Based on net assets of $21,699,590 and 2,325,870 shares
of beneficial interest outstanding $9.33
===========
Class C -- Based on net assets of $2,471,658 and 264,827 shares
of beneficial interest outstanding $9.33
===========
Class D -- Based on net assets of $610,868 and 65,507 shares
of beneficial interest outstanding $9.33
===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Six Months Ended January 31, 1997
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned $733,489
(Note 1d):
Expenses: Investment advisory fees (Note 2) $73,741
Account maintenance and distribution fees -- Class B (Note 2) 56,101
Professional fees 28,097
Accounting services (Note 2) 27,984
Printing and shareholder reports 15,011
Transfer agent fees -- Class B (Note 2) 8,372
Amortization of organization expenses (Note 1e) 8,071
Account maintenance and distribution fees -- Class C (Note 2) 7,173
Registration fees (Note 1e) 5,650
Pricing fees 2,572
Custodian fees 1,202
Transfer agent fees -- Class C (Note 2) 936
Trustees' fees and expenses 664
Transfer agent fees -- Class A (Note 2) 388
Account maintenance fees -- Class D (Note 2) 369
Transfer agent fees -- Class D (Note 2) 230
Other 769
--------
Total expenses before reimbursement 237,330
Reimbursement of expenses (Note 2) (113,354)
--------
Total expenses after reimbursement 123,976
--------
Investment income -- net 609,513
--------
Realized & Realized gain on investments -- net 116,109
Unrealized Gain on Change in unrealized appreciation on investments -- net 217,096
Investments -- Net Net Increase in Net Assets Resulting from Operations --------
(Notes 1b, 1d & 3): $942,718
========
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: Jan. 31, 1997 July 31, 1996
<S> <C> <C> <C>
Operations: Investment income -- net $609,513 $1,110,219
Realized gain (loss) on investments -- net 116,109 (347,221)
Change in unrealized appreciation on investments -- net 217,096 423,676
----------- -----------
Net increase in net assets resulting from operations 942,718 1,186,674
----------- -----------
Dividends to Investment income -- net:
Shareholders Class A (31,369) (64,371)
(Note 1f): Class B (507,122) (946,432)
Class C (52,835) (68,646)
Class D (18,187) (30,770)
----------- -----------
Net decrease in net assets resulting from dividends to shareholders (609,513) (1,110,219)
----------- -----------
Beneficial Interest Net increase (decrease) in net assets derived from beneficial
Transactions interest transactions (270,689) 4,841,350
(Note 4): ----------- -----------
Net Assets: Total increase in net assets 62,516 4,917,805
Beginning of period 26,181,281 21,263,476
----------- -----------
End of period $26,243,797 $26,181,281
=========== ===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Class A
For the For the
Six Period
The following per share data and ratios have been derived Months Oct. 29,
from information provided in the financial statements. Ended For the Year 1993+ to
Jan. 31, Ended July 31, July 31,
1997 1996 1995 1994
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $9.21 $9.15 $9.20 $10.00
Operating ------ ------ ------ ------
Performance: Investment income -- net .24 .47 .52 .37
Realized and unrealized gain (loss) on investments -- net .12 .06 (.05) (.80)
------ ------ ------ ------
Total from investment operations .36 .53 .47 (.43)
------ ------ ------ ------
Less dividends from investment income -- net (.24) (.47) (.52) (.37)
------ ------ ------ ------
Net asset value, end of period $9.33 $9.21 $9.15 $9.20
====== ====== ====== ======
Total Investment Based on net asset value per share 3.93%++ 5.85% 5.39% (4.32%)++
Return:** ====== ====== ====== ======
Ratios to Expenses, net of reimbursement .44%* .37% .13% .03%*
Average ====== ====== ====== ======
Net Assets: Expenses 1.28%* 1.26% 1.57% 1.76%*
====== ====== ====== ======
Investment income -- net 5.03%* 5.04% 5.80% 5.30%*
====== ====== ====== ======
Supplemental Net assets, end of period (in thousands) $1,462 $1,252 $1,362 $1,589
Data: ====== ====== ====== ======
Portfolio turnover 24.77% 81.87% 73.99% 29.40%
====== ====== ====== ======
* Annualized.
** Total investment returns exclude the effect of sales loads.
+ Commencement of Operations.
++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
Class B
For the For the
The following per share data and ratios have been derived Six Period
from information provided in the financial statements. Months Oct.29,
Ended For the Year 1993+ to
Jan. 31, Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $9.21 $9.16 $9.20 $10.00
Operating ------- ------- ------- -------
Performance: Investment income -- net .21 .42 .47 .33
Realized and unrealized gain (loss) on investments -- net .12 .05 (.04) (.80)
------- ------- ------- -------
Total from investment operations .33 .47 .43 (.47)
------- ------- ------- -------
Less dividends from investment income -- net (.21) (.42) (.47) (.33)
------- ------- ------- -------
Net asset value, end of period $9.33 $9.21 $9.16 $9.20
======= ======= ======= =======
Total Investment Based on net asset value per share 3.66%++ 5.19% 4.96% (4.68%)++
Return:** ======= ======= ======= =======
Ratios to Expenses, net of reimbursement .95%* .88% .65% .53%*
Average ======= ======= ======= =======
Net Assets: Expenses 1.80%* 1.77% 2.08% 2.27%*
======= ======= ======= =======
Investment income -- net 4.52%* 4.52% 5.29% 4.74%*
======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $21,699 $22,053 $18,371 $14,484
Data: ======= ======= ======= =======
Portfolio turnover 24.77% 81.87% 73.99% 29.40%
======= ======= ======= =======
* Annualized.
** Total investment returns exclude the effect of sales loads.
+ Commencement of Operations.
++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (concluded)
Class C
For the For the
The following per share data and ratios have been derived Six For the Period
from information provided in the financial statements. Months Year Oct. 21,
Ended Ended 1994+ to
Jan. 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995
<S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $9.22 $9.16 $8.79
Operating ------- ------- -------
Performance: Investment income -- net .21 .41 .36
Realized and unrealized gain on investments -- net .11 .06 .37
------- ------- -------
Total from investment operations .32 .47 .73
------- ------- -------
Less dividends from investment income -- net (.21) (.41) (.36)
------- ------- -------
Net asset value, end of period $9.33 $9.22 $9.16
======= ======= =======
Total Investment Based on net asset value per share 3.49%++ 5.18% 8.51%++
Return:** ======= ======= =======
Ratios to Average Expenses, net of reimbursement 1.05%* 1.00% .82%*
Net Assets: ======= ======= =======
Expenses 1.90%* 1.88% 2.08%*
======= ======= =======
Investment income -- net 4.42%* 4.39% 5.08%*
======= ======= =======
Supplemental Net assets, end of period (in thousands) $2,472 $2,229 $1,013
Data: ======= ======= =======
Portfolio turnover 24.77% 81.87% 73.99%
======= ======= =======
<CAPTION>
Class D
For the For the
The following per share data and ratios have been derived Six For the Period
from information provided in the financial statements. Months Year Oct. 21,
Ended Ended 1994+ to
Jan. 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995
<S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $9.21 $9.16 $8.79
Operating ------- ------- -------
Performance: Investment income -- net .23 .46 .40
Realized and unrealized gain on investments -- net .12 .05 .37
------- ------- -------
Total from investment operations .35 .51 .77
------- ------- -------
Less dividends from investment income -- net (.23) (.46) (.40)
------- ------- -------
Net asset value, end of period $9.33 $9.21 $9.16
======= ======= =======
Total Investment Based on net asset value per share 3.88%++ 5.63% 8.94%++
Return:** ======= ======= =======
Ratios to Average Expenses, net of reimbursement .54%* .47% .31%*
Net Assets: ======= ======= =======
Expenses 1.38%* 1.36% 1.55%*
======= ======= =======
Investment income -- net 4.93%* 4.91% 5.57%*
======= ======= =======
Supplemental Net assets, end of period (in thousands) $611 $647 $517
Data: ======= ======= =======
Portfolio turnover 24.77% 81.87% 73.99%
======= ======= =======
* Annualized.
** Total investment returns exclude the effect of sales loads.
+ Commencement of Operations.
++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Maryland Municipal Bond Fund January 31, 1997
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. 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 PricingSM 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.
(bullet) 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.
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 six months ended January 31, 1997, FAM earned fees of $73,741,
all of which was voluntarily waived. FAM also reimbursed the Fund
additional expenses of $39,613.
Pursuant to the distribution plans (the "Distribution Plans") adopted by
the Fund in accordance with Rule 12b-1 under the Investment Company Act
of 1940, the Fund pays the Distributor ongoing account maintenance and
distribution fees. The fees are accrued daily and paid monthly at annual
rates based upon the average daily net assets of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.25%
Class C 0.25% 0.35%
Class D 0.10% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce,
Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co., also provides
account maintenance and distribution services to the Fund. The ongoing
account maintenance fee compensates the Distributor and MLPF&S for
providing account maintenance services to Class B, Class C and Class D
shareholders. The ongoing distribution fee compensates the Distributor
and MLPF&S for providing shareholder and distribution-related services
to Class B and Class C shareholders.
For the six months ended January 31, 1997, 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 $27 $300
Class D $530 $4,678
For the six months ended January 31, 1997, MLPF&S received contingent
deferred sales charges of $51,483 and $793 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, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for
the six months ended January 31, 1997 were $7,650,738 and $6,267,769,
respectively.
Net realized and unrealized gains as of January 31, 1997 were as
follows:
Realized Unrealized
Gains Gains
Long-term investments $116,109 $1,055,548
-------- ----------
Total $116,109 $1,055,548
======== ==========
As of January 31, 1997, net unrealized appreciation for Federal income
tax purposes aggregated $1,055,548, of which $1,064,741 related to
appreciated securities and $9,193 related to depreciated securities. The
aggregate cost of investments at January 31, 1997 for Federal income tax
purposes was $24,816,437.
4. Beneficial Interest Transactions:
Net increase (decrease) in net assets derived from beneficial interest
transactions was $(270,689) and $4,841,350 for the six months ended
January 31, 1997 and for the year ended July 31, 1996, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the
Six Months Ended Dollar
January 31, 1997 Shares Amount
Shares sold 51,508 $479,986
Shares issued to shareholders
in reinvestment of dividends 2,330 21,652
------- --------
Total issued 53,838 501,638
Shares redeemed (33,083) (307,833)
------- --------
Net increase 20,755 $193,805
======= ========
Class A Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 35,220 $327,383
Shares issued to shareholders
in reinvestment of dividends 4,930 45,725
------- --------
Total issued 40,150 373,108
Shares redeemed (53,019) (492,616)
------- --------
Net decrease (12,869) $(119,508)
======= ========
Class B Shares for the
Six Months Ended Dollar
January 31, 1997 Shares Amount
Shares sold 221,847 $2,065,475
Shares issued to shareholders
in reinvestment of dividends 29,045 270,117
------- ---------
Total issued 250,892 2,335,592
Automatic conversion
of shares (2,939) (27,297)
Shares redeemed (315,970) (2,942,185)
------- ---------
Net decrease (68,017) $(633,890)
======= =========
Class B Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 813,901 $7,573,305
Shares issued to shareholders
in reinvestment of dividends 52,676 488,754
------- ----------
Total issued 866,577 8,062,059
Automatic conversion
of shares (2,990) (27,266)
Shares redeemed (476,011) (4,423,212)
------- ----------
Net increase 387,576 $3,611,581
======= ==========
Class C Shares for the
Six Months Ended Dollar
January 31, 1997 Shares Amount
Shares sold 61,606 $575,008
Shares issued to shareholders
in reinvestment of dividends 4,327 40,261
------- ----------
Total issued 65,933 615,269
Shares redeemed (43,020) (400,901)
------- ----------
Net increase 22,913 $214,368
======= ==========
Class C Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 156,426 $1,445,652
Shares issued to shareholders
in reinvestment of dividends 4,723 43,828
------- ----------
Total issued 161,149 1,489,480
Shares redeemed (29,798) (271,440)
------- ----------
Net increase 131,351 $1,218,040
======= ==========
Class D Shares for the
Six Months Ended Dollar
January 31, 1997 Shares Amount
Shares sold 22,502 $207,421
Automatic conversion of shares 2,939 27,297
Shares issued to shareholders
in reinvestment of dividends 1,322 12,294
------- ----------
Total issued 26,763 247,012
Shares redeemed (31,472) (291,984)
------- ----------
Net decrease (4,709) $(44,972)
======= ==========
Class D Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 30,212 $282,355
Automatic conversion of shares 2,993 27,266
Shares issued to shareholders
in reinvestment of dividends 1,971 18,290
------- ----------
Total issued 35,176 327,911
Shares redeemed (21,460) (196,674)
------- ----------
Net increase 13,716 $131,237
======= ==========
5. Capital Loss Carryforward:
At July 31, 1996, the Fund had a net capital loss carryforward of
approximately $1,677,000, of which $899,000 expires in 2003 and
$778,000 expires in 2004. This amount will be available to offset
like amounts of any future taxable gains.
