MERRILL LYNCH
MARYLAND
MUNICIPAL
BOND FUND
[FUND LOGO]
STRATIGIC
Performance
Semi-Annual Report
January 31, 1998
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
Robert E. Putney, III, 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 -- 1/98
[RECYCLE LOGO]
Printed on post-consumer recycled paper
Merrill Lynch Maryland Muncipal Bond Fund January 31, 1998
TO OUR SHAREHOLDERS
The Municipal Market Environment
During the six months ended January 31, 1998, long-term bond yields
declined to recent historic lows. Prior to late October, the ongoing
positive combination of moderate economic growth and low inflation had
allowed interest rates to gradually move lower. During the last three
months, however, the decline in interest rates was driven more by the
continued turmoil in Asian equity markets than by fundamen-tal
concerns. A significant "flight to quality" has benefited the US
Treasury bond market, particularly longer-maturity US Treasury bonds,
as foreign investors have sought safe haven in the relative stability
of US financial markets. Over the six months ended January 31, 1998,
US Treasury bond yields declined approximately 50 basis points (0.50%)
to 5.81%.
Without the ability to benefit from the tax advantage inherent in
municipal bonds, foreign investors have not participated in the tax-
exempt market. Conse-quently, municipal bond yields have not declined
dramatically as have taxable US Treasury securities. Long-term
municipal revenue bond yields, as measured by the Bond Buyer Revenue
Index, declined only 15 basis points to end the six-month period ended
January 31, 1998 at 5.33%. Nevertheless, tax-exempt bond yields have
not reached these levels since the mid-1970s.
The increase in new municipal bond issuance over the past six months
has also prevented the tax-exempt bond market from more closely
mirroring the yield declines exhibited by its taxable counterpart.
During the last six months, over $120 billion in new long-term
municipal bonds were underwritten, an increase of over 30% compared to
the same six-month period one year ago. As interest rates have
continued to decline in recent months, new tax-exempt bond issuance
has remained strong. Over $60 million in new long-term municipal
securities were issued during the last three months, an increase of
over 20% compared to the same three-month period ended January 31,
1997. During the past month, over $16 billion in new long-term
municipal securities were underwritten, representing an increase of
over 40% compared to the January 1997 level.
In our opinion, the recent correction in world equity markets has
enhanced the near-term prospects for continued low, if not declining,
interest rates in the United States. It is likely that the recent
correction will result in slower US domestic growth in the coming
months. This decline should be generated in part by reduced US export
growth. Additionally, some decline in consumer spending can also be
expected because of reduced consumer confidence. Perhaps more
importantly, it is likely that, barring a dramatic and unexpected
resurgence in domestic growth, the Federal Reserve Board will be
unwilling to raise interest rates until the full impact of the equity
market's corrections can be established.
All of these factors suggest that over the near term, interest rates,
including tax-exempt bond yields, are unlikely to rise by any
appreciable amount. It is probable that municipal bond yields will
remain under some relative pressure because of continued strong new-
issue supply. However, the recent pace of muni-cipal bond issuance is
likely to be unsustainable. Continued increases in bond issuance will
require lower and lower tax-exempt bond yields to generate the economic
savings necessary for additional municipal bond refinancings.
Preliminary estimates of 1998 total municipal bond issuance are
presently in the $195 billion -- $220 billion range. These estimates
suggest that recent supply pressures are likely to abate somewhat next
year, or at least exert only minimal technical pressure during 1998.
Additionally, municipal bond investors received approximately $23
billion in January coupon payments, bond maturities and proceeds from
early redemptions, which should serve to intensify investor demand in
the near future. With tax-exempt bond yields at already attractive yield
ratios relative to US Treasury bonds (approximately 90% at the end of
December 1997), any further pressure on the municipal market may
represent an attractive investment opportunity.
Portfolio Strategy
We adopted a slightly defensive investment strategy going into the
second half of 1997. We believed that economic growth would resurge
and that the Fed-eral Reserve Board would have to raise interest rates
in order to keep inflation under control. However, in late October
1997, the Asian equity market turmoil created an increased demand for
securities in the US Treasury bond market. In response to the Asian
financial crisis and the continued low domestic inflationary
environment, we shifted Merrill Lynch Maryland Municipal Bond Fund
toward a more aggressive strategy by early November 1997.
During the six months ended January 31, 1998, new issuance was just
over $1.6 billion in the Maryland tax-exempt bond market. This
represented an increase of approximately 23% compared to the same
period a year ago. Additionally, the majority of new issuance in
Maryland was dominated by current coupons and lesser call protection,
which would not enhance the Fund's overall structure.
Looking ahead, we expect to maintain the Fund's fully invested
position. We believe that interest rates will remain in a narrow
trading range. We plan to use periods of higher interest rates to
structure the portfolio more aggressively. However, an anticipated
lack of new issuance in Maryland may curtail our ability to execute
this strategy.
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 to come.
Sincerely,
/S/ARTHUR ZEIKEL
Arthur Zeikel
President
/S/VINCENT R. GIORDANO
Vincent R. Giordano
Senior Vice President
/S/ROBERT D. SNEEDEN
Robert D. Sneeden
Vice President and Portfolio Manager
March 6, 1998
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. Figures shown in the "Average Annual Total
Return" tables as well as the total returns and cumulative total
returns in the "Performance Summary" 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>
<CAPTION>
Recent Performance Results
12 Month 3 Month
1/31/98 10/31/97 1/31/97 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $9.84 $9.62 $9.33 + 5.47% +2.29%
Class B Shares* 9.84 9.62 9.33 + 5.47 +2.29
Class C Shares* 9.84 9.63 9.33 + 5.47 +2.18
Class D Shares* 9.84 9.62 9.33 + 5.47 +2.29
Class A Shares -- Total Return* +10.88(1) +3.52(2)
Class B Shares -- Total Return* +10.32(3) +3.39(4)
Class C Shares -- Total Return* +10.21(5) +3.25(6)
Class D Shares -- Total Return* +10.77(7) +3.49(8)
Class A Shares -- Standardized 30-day Yield 3.98%
Class B Shares -- Standardized 30-day Yield 3.64%
Class C Shares -- Standardized 30-day Yield 3.54%
Class D Shares -- Standardized 30-day Yield 3.89%
* 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 $0.478 per share ordinary income dividends.
(2) Percent change includes reinvestment of $0.117 per share ordinary income dividends.
(3) Percent change includes reinvestment of $0.430 per share ordinary income dividends.
(4) Percent change includes reinvestment of $0.105 per share ordinary income dividends.
(5) Percent change includes reinvestment of $0.420 per share ordinary income dividends.
(6) Percent change includes reinvestment of $0.102 per share ordinary income dividends.
(7) Percent change includes reinvestment of $0.469 per share ordinary income dividends.
(8) Percent change includes reinvestment of $0.115 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
1997 9.36 9.77 -- 0.480 + 9.79
1/1/98 -- 1/31/98 9.77 9.84 -- 0.032 + 1.13
Total $2.067
Cumulative total return as of 1/31/98: +23.00%**
*Figures may include short-term capital gains distributions.
**Figures 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
1997 9.37 9.78 -- 0.432 + 9.23
1/1/98 -- 1/31/98 9.78 9.84 -- 0.029 + 0.98
Total $1.867
Cumulative total return as of 1/31/98: +20.35%**
*Figures may include short-term capital gains distributions.
**Figures 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
1997 9.37 9.78 -- 0.422 + 9.12
1/1/98 -- 1/31/98 9.78 9.84 -- 0.028 + 0.97
Total $1.393
Cumulative total return as of 1/31/98: +30.17%**
*Figures may include short-term capital gains distributions.
**Figures 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
1997 9.36 9.77 -- 0.471 + 9.68
1/1/98 -- 1/31/98 9.77 9.84 -- 0.032 + 1.12
Total $1.550
Cumulative total return as of 1/31/98: +32.40%**
*Figures may include short-term capital gains distributions.
**Figures 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 12/31/97 +9.79% +5.40%
Inception (10/29/93)
through 12/31/97 +4.80 +3.78
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/97 +9.23% +5.23%
Inception (10/29/93)
through 12/31/97 +4.30 +4.30
*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 12/31/97 +9.12% +8.12%
Inception (10/21/94)
through12/31/97 +8.28 +8.28
*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 12/31/97 +9.68% +5.30%
Inception (10/21/94)
through 12/31/97 +8.80 +7.42
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<TABLE>
<CAPTION>
Merrill Lynch Maryland Municipal Bond Fund January 31, 1998
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <C> <C> <C> <C>
Maryland -- 85.7%
AA- Aa3 $1,000 Baltimore, Maryland, Port Facilities Revenue Bonds (Consolidated
Coal Sales Co.), 6.50% due 12/01/2010 $1,107
AA Aa3 600 Carroll County, Maryland, Registered Bonds (County
Commissioners-Consolidated Public Improvement), UT,
6.50% due 10/01/2024 681
NR* Aa2 1,250 Maryland Community Development Administration, Department of
Housing and Community Development Refunding Bonds (Residential),
Series A, 5.60% due 3/01/2017 1,294
Maryland Community Development Administration, S/F Program Bonds
(Department of Housing and Community Development):
NR* Aa 500 4th Series, 6.45% due 4/01/2014 535
NR* Aa 250 6th Series, 7.05% due 4/01/2017 270
NR* Aa 490 7th Series, AMT, 7.30% due 4/01/2025 527
Maryland Health and Higher Educational Facilities Authority Revenue Bonds:
NR* VMIG1+ 200 (Pooled Loan Program), VRDN, Series A, 3.60% due 4/01/2035 (i) 200
NR* Baa1 1,250 Refunding (Kennedy Krieger Issue), 5.125% due 7/01/2022 1,220
AAA Aaa 1,470 Refunding (Maryland General Hospital), 6.125% due 7/01/2019 (b) 1,617
A A 1,200 Refunding (Memorial Hospital of Cumberland), 6.50% due 7/01/2004 (h) 1,351
AAA Aaa 625 (University of Maryland Medical Systems), Series B, 7% due 7/01/2022 (a) 797
AAA NR* 1,000 Maryland State Economic Development Corporation, Health Care Facilities
Revenue Bonds (Crescent Cities Project), Series A, 5.30%
due 12/20/2018 (f) 1,012
A- NR* 1,000 Maryland State Energy Financing Administration, Solid Waste Disposal
Revenue Bonds, Limited Obligation (Wheelabrator Water Projects), AMT,
6.45% due 12/01/2016 1,110
AAA Aaa 500 Maryland State Transportation Authority, Special Obligation Revenue
Bonds (Baltimore/Washington International Airport Project), AMT,
Series A, 6.25% due 7/01/2014 (a) 547
Maryland Water Quality Financing Administration, Revolving Loan Fund
Revenue Bonds, Series A:
AA Aa2 300 6.375% due 9/01/2010 332
AA Aa2 500 6.55% due 9/01/2014 551
NR* Aa2 500 Montgomery County, Maryland, Housing Opportunities Commission,
S/F Mortgage Revenue Bonds, Series A, 5.75% due 7/01/2013 527
AAA Aaa 500 Montgomery County, Maryland, Parking Revenue Refunding Bonds
(Silver Spring Parking Lot), Series A, 6.25% due 6/01/2009 (a) 549
NR* Baa 1,000 Montgomery County, Maryland, Revenue Authority, Golf Course
System Revenue Bonds, Series A, 6.125% due 10/01/2022 1,068
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 1,073
AAA Aaa 1,000 Prince Georges County, Maryland, Consolidated Public
Improvement Bonds, 5.50% due 3/15/2016 (b) 1,049
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) 998
Prince Georges County, Maryland, PCR, Refunding (Potomac
Electric Project):
A A1 1,000 5.75% due 3/15/2010 1,115
A A1 250 6.375% due 1/15/2023 270
University of Maryland, University Revenue Bonds, VRDN (e)(i):
A1+ VMIG1+ 300 (Equipment Loan Program), Series A, 3.40% due 7/01/2015 300
A1+ VMIG1+ 300 (Revolving Equipment Loan Program), Series B, 3.40% due 7/01/2015 300
AAA Aaa 1,000 Washington, D.C., Metropolitan Area Transportation Authority,
Gross Revenue Refunding Bonds, 6% due 7/01/2010 (a) 1,139
AA Aaa 500 Washington Suburban Sanitation District, Maryland, Registered,
General Construction Bonds, UT, 6.625% due 6/01/2004 (h) 566
Puerto Rico -- 16.6%
AAA Aaa 510 Puerto Rico Commonwealth, Highway and Transportation
Authority, Highway Revenue
Bonds, Series T, 6.625% due 7/01/2002 (h) 571
Puerto Rico Electric Power Authority, Power Revenue Bonds:
BBB+ Aaa 1,000 Series P, 7% due 7/01/2001 (h) 1,114
AAA Aaa 400 Series T, STRIPES, 7.772% due 7/01/2005 (c)(d) 483
AAA Aaa 1,000 Puerto Rico Municipal Finance Agency, UT, Series A, 5.50%
due 7/01/2021 (c) 1,044
AAA Aaa 1,000 Puerto Rico Public Buildings Authority, Guaranteed
Government Facilities Revenue Bonds, Series A, 6.25% due 7/01/2012 (j) 1,175
Total Investments (Cost -- $25,052) -- 102.3% 27,026
Liabilities in Excess of Other Assets -- (2.3%) (613)
----------
Net Assets -- 100.0% $26,413
==========
(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, 1998.
(e) SLMA Insured.
(f) GNMA Collateralized.
(g) FNMA/GNMA Collateralized.
(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, 1998.
(j) AMBAC Insured.
* 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)
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, 1998
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $25,052,353) (Note 1a) $27,026,473
Cash 83,847
Receivables:
Interest $292,712
Securities sold 134,933
Beneficial interest sold 35,153 462,798
-------------
Deferred organization expenses (Note 1e) 19,877
Prepaid registration fees and other assets (Note 1e) 5,027
-------------
Total assets 27,598,022
-------------
Liabilities: Payables:
Securities purchased 1,009,230
Beneficial interest redeemed 89,357
Dividends to shareholders (Note 1f) 18,592
Distributor (Note 2) 10,099
Investment adviser (Note 2) 734 1,128,012
-------------
Accrued expenses and other liabilities 56,525
-------------
Total liabilities 1,184,537
-------------
Net Assets: Net assets $26,413,485
=============
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited number of
Consist of: shares authorized $21,924
Class B Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 219,158
Class C Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 17,134
Class D Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 10,194
Paid-in capital in excess of par 25,589,202
Accumulated realized capital losses on investments -- net (Note 5) (1,418,247)
Unrealized appreciation on investments -- net 1,974,120
-------------
Net assets $26,413,485
=============
Net Asset Value: Class A -- Based on net assets of $2,157,112 and 219,235 shares
of beneficial interest outstanding $9.84
=============
Class B -- Based on net assets of $21,567,064 and 2,191,575 shares
of beneficial interest outstanding $9.84
=============
Class C -- Based on net assets of $1,686,596 and 171,337 shares
of beneficial interest outstanding $9.84
=============
Class D -- Based on net assets of $1,002,713 and 101,937 shares
of beneficial interest outstanding $9.84
=============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Six Months Ended
January 31, 1998
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned $731,855
(Note 1d):
Expenses: Investment advisory fees (Note 2) $72,308
Account maintenance and distribution fees -- Class B (Note 2) 53,605
Professional fees 26,403
Accounting services (Note 2) 23,337
Printing and shareholder reports 13,827
Amortization of organization expenses (Note 1e) 8,151
Transfer agent fees -- Class B (Note 2) 7,525
Registration fees (Note 1e) 6,005
Account maintenance and distribution fees -- Class C (Note 2) 5,605
Pricing fees 2,264
Custodian fees 1,198
Trustees' fees and expenses 743
Transfer agent fees -- Class C (Note 2) 694
Transfer agent fees -- Class A (Note 2) 609
Account maintenance fees -- Class D (Note 2) 459
Transfer agent fees -- Class D (Note 2) 271
Other 1,410
----------
Total expenses before reimbursement 224,414
Reimbursement of expenses (Note 2) (78,467)
----------
Total expenses after reimbursement 145,947
----------
Investment income -- net 585,908
----------
Realized & Realized gain on investments -- net 200,653
Unrealized Gain on Change in unrealized appreciation on investments -- net 256,900
Investments -- Net ----------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations $1,043,461
==========
See Notes to Financial Statements.
</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, 1998 July 31, 1997
<S> <C> <C> <C>
Operations: Investment income -- net $585,908 $1,207,658
Realized gain on investments -- net 200,653 359,102
Change in unrealized appreciation on investments -- net 256,900 878,768
------------- -------------
Net increase in net assets resulting from operations 1,043,461 2,445,528
------------- -------------
Dividends to Investment income -- net:
Shareholders Class A (50,791) (75,091)
(Note 1f): Class B (472,722) (998,749)
Class C (40,286) (97,508)
Class D (22,109) (36,310)
------------- -------------
Net decrease in net assets resulting from dividends
to shareholders (585,908) (1,207,658)
------------- -------------
Beneficial Interest Net decrease in net assets derived from
Transactions beneficial interest transactions (744,526) (718,693)
(Note 4): ------------- -------------
Net Assets: Total increase (decrease) in net assets (286,973) 519,177
Beginning of period 26,700,458 26,181,281
------------- -------------
End of period $26,413,485 $26,700,458
============= =============
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 1993+ to
Jan. 31, For the Year Ended July 31, July 31,
1998 1997 1996 1995 1994
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $9.66 $9.21 $9.15 $9.20 $10.00
Operating --------- --------- --------- --------- ---------
Performance: Investment income -- net .24 .48 .47 .52 .37
Realized and unrealized gain (loss) on
investments -- net .18 .45 .06 (.05) (.80)
--------- --------- --------- --------- ---------
Total from investment operations .42 .93 .53 .47 (.43)
--------- --------- --------- --------- ---------
Less dividends from investment
income -- net (.24) (.48) (.47) (.52) (.37)
--------- --------- --------- --------- ---------
Net asset value, end of period $9.84 $9.66 $9.21 $9.15 $9.20
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 4.43%++++ 10.35% 5.85% 5.39% (4.32%)++++
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses, net of reimbursement .65%* .47% .37% .13% .03%*
Net Assets: ========= ========= ========= ========= =========
Expenses 1.24%* 1.32% 1.26% 1.57% 1.76%*
========= ========= ========= ========= =========
Investment income -- net 4.92%* 5.11% 5.04% 5.80% 5.30%*
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $2,157 $1,928 $1,252 $1,362 $1,589
Data: ========= ========= ========= ========= =========
Portfolio turnover 43.28% 94.90% 81.87% 73.99% 29.40%
========= ========= ========= ========= =========
* Annualized.
** Total investment returns exclude the effects 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
Six Period
The following per share data and ratios have been derived Months Oct. 29,
from information provided in the financial statements. Ended 1993+ to
Jan. 31, For the Year Ended July 31, July 31,
1998 1997 1996 1995 1994
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $9.66 $9.21 $9.16 $9.20 $10.00
Operating --------- --------- --------- --------- ---------
Performance: Investment income -- net .22 .43 .42 .47 .33
Realized and unrealized gain (loss) on
investments -- net .18 .45 .05 (.04) (.80)
--------- --------- --------- --------- ---------
Total from investment operations .40 .88 .47 .43 (.47)
--------- --------- --------- --------- ---------
Less dividends from investment
income -- net (.22) (.43) (.42) (.47) (.33)
--------- --------- --------- --------- ---------
Net asset value, end of period $9.84 $9.66 $9.21 $9.16 $9.20
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 4.16%++++ 9.79% 5.19% 4.96% (4.68%)++++
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses, net of reimbursement 1.16%* .97% .88% .65% .53%*
Net Assets: ========= ========= ========= ========= =========
Expenses 1.75%* 1.82% 1.77% 2.08% 2.27%*
========= ========= ========= ========= =========
Investment income -- net 4.41%* 4.59% 4.52% 5.29% 4.74%*
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $21,567 $21,851 $22,053 $18,371 $14,484
Data: ========= ========= ========= ========= =========
Portfolio turnover 43.28% 94.90% 81.87% 73.99% 29.40%
========= ========= ========= ========= =========
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Class C
For For the
the Six Period
The following per share data and ratios have been derived Months For the Year Oct. 21,
from information provided in the financial statements. Ended Ended 1994+ to
Jan. 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $9.67 $9.22 $9.16 $8.79
Operating --------- --------- --------- ---------
Performance: Investment income -- net .21 .42 .41 .36
Realized and unrealized gain on
investments -- net .17 .45 .06 .37
--------- --------- --------- ---------
Total from investment operations .38 .87 .47 .73
--------- --------- --------- ---------
Less dividends from investment income -- net (.21) (.42) (.41) (.36)
--------- --------- --------- ---------
Net asset value, end of period $9.84 $9.67 $9.22 $9.16
========= ========= ========= =========
Total Investment Based on net asset value per share 4.00%++++ 9.67% 5.18% 8.51%++++
Return:** ========= ========= ========= =========
Ratios to Expenses, net of reimbursement 1.26%* 1.07% 1.00% .82%*
Average ========= ========= ========= =========
Net Assets: Expenses 1.86%* 1.92% 1.88% 2.08%*
========= ========= ========= =========
Investment income -- net 4.31%* 4.47% 4.39% 5.08%*
========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $1,686 $2,038 $2,229 $1,013
Data: ========= ========= ========= =========
Portfolio turnover 43.28% 94.90% 81.87% 73.99%
========= ========= ========= =========
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Class D
For For the
the Six Period
The following per share data and ratios have been derived Months For the Year Oct. 21,
from information provided in the financial statements. Ended Ended 1994+ to
Jan. 31, July 31, July 31,
1998 1997 1996 1995
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $9.66 $9.21 $9.16 $8.79
Operating --------- --------- --------- ---------
Performance: Investment income -- net .24 .47 .46 .40
Realized and unrealized gain on
investments -- net .18 .45 .05 .37
--------- --------- --------- ---------
Total from investment operations .42 .92 .51 .77
--------- --------- --------- ---------
Less dividends from investment income -- net (.24) (.47) (.46) (.40)
--------- --------- --------- ---------
Net asset value, end of period $9.84 $9.66 $9.21 $9.16
========= ========= ========= =========
Total Investment Based on net asset value per share 4.38%++++ 10.24% 5.63% 8.94%++++
Return:** ========= ========= ========= =========
Ratios to Expenses, net of reimbursement .75%* .56% .47% .31%*
Average ========= ========= ========= =========
Net Assets: Expenses 1.34%* 1.41% 1.36% 1.55%*
========= ========= ========= =========
Investment income -- net 4.82%* 5.00% 4.91% 5.57%*
========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $1,003 $883 $647 $517
Data: ========= ========= ========= =========
Portfolio turnover 43.28% 94.90% 81.87% 73.99%
========= ========= ========= =========
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Maryland Municipal Bond Fund January 31, 1998
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 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.
[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, 1998, FAM earned fees of
$72,308, of which $69,367 was voluntarily waived. FAM also reimbursed
the Fund additional expenses of $9,100.
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 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, 1998, 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 $193 $2,655
Class D $102 $1,501
For the six months ended January 31, 1998, MLPF&S received contingent
deferred sales charges of $31,194 and $28 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, 1998 were $12,410,046 and
$10,789,984, respectively.
Net realized and unrealized gains as of January 31, 1998 were as
follows:
Realized Unrealized
Gains Gains
Long-term investments $200,653 $1,974,120
-------- ----------
Total $200,653 $1,974,120
======== ==========
As of January 31, 1998, net unrealized appreciation for Federal
income tax purposes aggregated $1,974,120, all of which was related
to appreciated securities. The aggregate cost of investments at
January 31, 1998 for Federal income tax purposes was $25,052,353.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest
transactions was $744,526 and $718,693 for the six months ended
January 31, 1998 and for the year ended July 31, 1997, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Six Dollar
Months Ended Jan. 31, 1998 Shares Amount
Shares sold 47,988 $462,018
Shares issued to shareholders
in reinvestment of dividends 3,710 35,844
------------ ------------
Total issued 51,698 497,862
Shares redeemed (31,996) (307,848)
------------ ------------
Net increase 19,702 $190,014
============ ============
Class A Shares for the Dollar
Year Ended July 31, 1997 Shares Amount
Shares sold 120,518 $1,126,625
Shares issued to shareholders
in reinvestment of dividends 5,205 48,633
------------ ------------
Total issued 125,723 1,175,258
Shares redeemed (62,133) (579,345)
------------ ------------
Net increase 63,590 $595,913
============ ============
Class B Shares for the Six Dollar
Months Ended Jan. 31, 1998 Shares Amount
Shares sold 150,734 $1,460,075
Shares issued to shareholders
in reinvestment of dividends 24,708 238,649
------------ ------------
Total issued 175,442 1,698,724
Automatic conversion
of shares (173) (1,653)
Shares redeemed (244,737) (2,356,357)
------------ ------------
Net decrease (69,468) $(659,286)
============ ============
Class B Shares for the Dollar
Year Ended July 31, 1997 Shares Amount
Shares sold 421,213 $3,938,104
Shares issued to shareholders
in reinvestment of dividends 54,885 512,408
------------ ------------
Total issued 476,098 4,450,512
Automatic conversion
of shares (4,674) (43,514)
Shares redeemed (604,268) (5,645,241)
------------ ------------
Net decrease (132,844) $(1,238,243)
============ ============
Class C Shares for the Six Dollar
Months Ended Jan. 31, 1998 Shares Amount
Shares sold 13,181 $126,875
Shares issued to shareholders
in reinvestment of dividends 3,386 32,692
------------ ------------
Total issued 16,567 159,567
Shares redeemed (56,045) (537,712)
------------ ------------
Net decrease (39,478) $(378,145)
============ ============
Class C Shares for the Dollar
Year Ended July 31, 1997 Shares Amount
Shares sold 118,650 $1,117,582
Shares issued to shareholders
in reinvestment of dividends 7,916 73,884
------------ ------------
Total issued 126,566 1,191,466
Shares redeemed (157,665) (1,466,129)
------------ ------------
Net decrease (31,099) $(274,663)
============ ============
Class D Shares for the Six Dollar
Months Ended Jan. 31, 1998 Shares Amount
Shares sold 11,111 $108,680
Automatic conversion of shares 173 1,653
Shares issued to shareholders
in reinvestment of dividends 1,220 11,781
------------ ------------
Total issued 12,504 122,114
Shares redeemed (2,015) (19,223)
------------ ------------
Net increase 10,489 $102,891
============ ============
Class D Shares for the Dollar
Year Ended July 31, 1997 Shares Amount
Shares sold 52,917 $493,288
Automatic conversion of shares 4,675 43,514
Shares issued to shareholders
in reinvestment of dividends 2,245 20,953
------------ ------------
Total issued 59,837 557,755
Shares redeemed (38,605) (359,455)
------------ ------------
Net increase 21,232 $198,300
============ ============
5. Capital Loss Carryforward:
At July 31, 1997, the Fund had a net capital loss
carryforward of approximately $1,534,000, of which $756,000 expires
in 2003 and $778,000 expires in 2004. This amount will be available
to offset like amounts of any future taxable gains.
