MERRILL LYNCH
MARYLAND
MUNICIPAL
BOND FUND
FUND LOGO
Annual Report
July 31, 1999
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
Merrill Lynch Maryland
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
Merrill Lynch Maryland Municipal Bond Fund
July 31, 1999
TO OUR SHAREHOLDERS
The Municipal Market Environment
During the six months ended July 31, 1999, long-term bond yields
rose significantly. Steady US economic growth combined with
improvement in foreign economies, most notably Japan and Brazil, as
well as an inflation scare in early May put upward pressure on bond
yields throughout the period. Continued strong US employment growth,
particularly the decline in the US unemployment rate to 4.2% in
early June, was among the reasons the Federal Reserve Board cited
for raising short-term interest rates in late June. US Treasury bond
yields reacted by climbing above 6.15% by late June before improving
somewhat to 6.10% by July 31, 1999. During the last six months,
yields on long-term US Treasury securities increased approximately
100 basis points (1.00%).
Long-term tax-exempt bond yields also rose during the last six
months. Until early May, the municipal bond market had been able to
withstand much of the upward pressure on bond yields. However,
investor concerns regarding ongoing US economic strength and the
fear of additional moves by the Federal Reserve Board eventually
pushed municipal bond yields higher throughout June and July. During
the period, the yields on long-term tax-exempt revenue bonds rose
almost 50 basis points to 5.65%, as measured by the Bond Buyer
Revenue Bond Index.
The ability of the tax-exempt bond market to withstand much of the
recent upward pressure on long-term fixed-income bond yields has
been a reflection of the continued strong technical position the
municipal bond market has enjoyed in recent quarters. During the
last six months, more than $120 billion in long-term municipal bonds
was underwritten, a decrease of more than 20% compared to the same
period a year ago. During the past three months, more than $60
billion in municipal bonds was underwritten. This quarterly issuance
represents a decline of nearly 25% compared to the same three-month
period in 1998.
Recently, the municipal supply position deteriorated even further.
Total issuance in July 1999 of $16.5 billion was more than 30% lower
than July 1998 levels. Additionally, in June and July, investors
received more than $40 billion in coupon income and proceeds from
bond maturities and early bond redemptions. These proceeds have
generated significant retail investor interest, easily absorbing the
recent diminished supply. This very favorable supply/demand position
allowed the tax-exempt bond market to outperform its taxable
counterpart in recent months.
However, the recent relative outperformance of the municipal bond
market has somewhat reduced the very attractive tax-exempt bond
yield ratios that were available at the end of 1998. In December
1998, long-term, uninsured municipal bond yields were higher than
those of their taxable counterparts. Historically, long-term tax-
exempt bond yields have been approximately 82%--85% of long-term US
Treasury bond yields. Municipal bond yields rose at a lower rate in
recent months than US Treasury bond yields, causing the yield ratio
to decline. At July 31, 1999, long-term municipal bond yields were
approximately 92% of their taxable counterparts. Current ratios,
while lower than those available at the end of 1998, still represent
historically attractive levels. We expect the municipal bond market
to maintain its strong technical position for the remainder of 1999.
Consequently, there appears to be little reason for the tax-exempt
bond market to underperform the taxable US Treasury bond market.
This suggests that the present bond yield ratio is likely to remain
stable in the coming months and a return to a ratio in excess of
100% of taxable Treasury securities is improbable.
Looking ahead, it appears to us that long-term municipal bond yields
will trade in a relatively tight range near current levels. Strong
US economic performance is being balanced by nearly negligible
inflation data, as well as improvements in productivity in both
manufacturing and service industries. Future moves by the Federal
Reserve Board have largely been discounted by bond markets and are
to a great extent reflected in present bond yields.
Any improvement in bond prices is likely to be contingent upon
weakening in both US employment growth and consumer spending. The
100 basis point rise in US Treasury bond yields seen thus far this
year is likely to negatively affect US economic growth. The US
housing market will be among the first sectors likely to be
affected, as some declines have already been evidenced because of
higher mortgage rates. We believe it is also unrealistic to expect
double-digit returns in US equity markets to continue indefinitely.
Much of the US consumer's wealth is tied to recent stock market
appreciation. Any slowing in these incredible growth rates is likely
to reduce consumer spending. These factors suggest that the worst of
the recent increase in bond yields has passed and stable, if not
slightly improving, bond prices may be expected.
Merrill Lynch Maryland Municipal Bond Fund
July 31, 1999
Fiscal Year in Review
The Fund started the fiscal year ended July 31, 1999 fully invested
based on our expectations for steady economic growth and low
inflation. This scenario characterized the first six months of the
fiscal year. Therefore, we held a neutral-to-aggressive investment
posture for much of this period. We maintained the Fund's fully
invested position and structured the portfolio in an effort to
enable us to participate in any bond market rally, thus enhancing
the total return to shareholders. In addition, we carefully
monitored our call protection in order to seek to achieve ample tax-
exempt income for our shareholders for many years to come.
During the second half of the fiscal year, the combination of strong
growth and accelerating inflationary concerns caused the Federal
Reserve Board to raise short-term interest rates by 25 basis points.
Over the last few months of the fiscal year, we realized that both
growth and inflationary fears could negatively impact the bond
market, and we shifted our portfolio strategy. We adopted a
defensive position by reducing our exposure to the bond market and
by maintaining a cash reserve position of about 10%--15% of net
assets.
Looking ahead, we are seeking an opportune time to reenter the bond
market. Since long-term Treasury yields are now over 6% and long-
term municipal bonds are trading at approximately 95% of Treasury
issues (as compared to the historic average of between 85%--90%), we
are considering this opportunity to reinvest the Fund's cash
reserves at significantly higher yields than just a few months
earlier.
During the fiscal year ended July 31, 1999, our investment
strategies benefited the Fund's performance, as the Fund had total
returns of +1.87%, +1.36%, +1.26% and +1.67% for Class A, Class B,
Class C and Class D Shares, respectively. (Complete performance
information can be found on pages 3-5 of this report to
shareholders.)
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,
(Terry K. Glenn)
Terry K. Glenn
President
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Hugh T. Hurley III)
Hugh T. Hurley III
Vice President and Portfolio Manager
September 8, 1999
Merrill Lynch Maryland Municipal Bond Fund
July 31, 1999
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees. Class A Shares are available only to eligible investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.25% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after approximately 10 years. (There is no initial
sales charge for automatic share conversions.)
* Class C Shares are subject to a distribution fee of 0.35% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.10% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Recent Performance
Results" and "Average Annual Total Return" tables assume
reinvestment of all dividends and capital gains distributions at net
asset value on the payable date. Investment return and principal
value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Dividends paid to each
class of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
<TABLE>
Recent Performance Results*
<CAPTION>
Standardized
12 Month 3 Month Since Inception 30-Day Yield
Total Return Total Return Total Return As of 7/31/99
<S> <C> <C> <C> <C>
ML Maryland Municipal Bond Fund Class A Shares +1.87% -1.92% +27.74% 3.52%
ML Maryland Municipal Bond Fund Class B Shares +1.36 -2.14 +24.04 3.16
ML Maryland Municipal Bond Fund Class C Shares +1.26 -2.16 +33.96 3.06
ML Maryland Municipal Bond Fund Class D Shares +1.67 -2.04 +37.16 3.43
<FN>
*Investment results shown do not reflect sales charges; results
would be lower if a sales charge was included. Total investment
returns are based on changes in net asset values for the periods
shown, and assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date. The Fund's
since inception dates are from 10/29/93 for Class A & Class B Shares
and from 10/21/94 for Class C & Class D Shares.
</TABLE>
Merrill Lynch Maryland Municipal Bond Fund
July 31, 1999
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment--Class A Shares and
Class B Shares
A line graph depictign the growth of an investment in the Fund's
Class A Shares and Class B Shares compared to growth of an
investment in the Lehman Brothers Municipal Bond Index. Beginning
and ending values are:
10/29/93** 7/99
ML Maryland Municipal Bond Fund++--
Class A Shares* $ 9,600 $12,263
ML Maryland Municipal Bond Fund++--
Class B Shares* $10,000 $12,404
Lehman Brothers Municipal Bond
Index++++ $10,000 $13,614
Total Return Based on a $10,000 Investment--Class C Shares and
Class D Shares
A line graph depictign the growth of an investment in the Fund's
Class C Shares and Class D Shares compared to growth of an
investment in the Lehman Brothers Municipal Bond Index. Beginning
and ending values are:
10/21/94** 7/99
ML Maryland Municipal Bond Fund++--
Class C Shares* $10,000 $13,396
ML Maryland Municipal Bond Fund++--
Class D Shares* $ 9,600 $13,168
Lehman Brothers Municipal Bond
Index++++ $10,000 $14,235
[FN]
*Assuming maximum sales charge, 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 unmanaged Index consists of long-term revenue bonds,
prerefunded bonds, general obligation bonds and insured bonds. The
starting date for the Index in the Class C & Class D Shares' graph
is from 10/31/94.
Past performance is not predictive of future performance.
Merrill Lynch Maryland Municipal Bond Fund
July 31, 1999
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/99 +1.72% -2.35%
Five Years Ended 6/30/99 +6.36 +5.49
Inception (10/29/93)
through 6/30/99 +4.35 +3.60
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/99 +1.31% -2.58%
Five Years Ended 6/30/99 +5.84 +5.84
Inception (10/29/93)
through 6/30/99 +3.84 +3.84
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 6/30/99 +1.21% +0.23%
Inception (10/21/94)
through 6/30/99 +6.39 +6.39
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 6/30/99 +1.72% -2.35%
Inception (10/21/94)
through 6/30/99 +6.91 +5.99
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch Maryland Municipal Bond Fund
July 31, 1999
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
VRDN Variable Rate Demand Notes
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Maryland--86.6%
<S> <S> <C> <S> <C>
AAA Aaa $1,000 Baltimore, Maryland, Baltimore City Parking System Facilities, Revenue
Refunding Bonds, Series A, 5.25% due 7/01/2021 (b) $ 991
A1+ Aa3 1,000 Baltimore, Maryland, Port Facilities Revenue Refunding Bonds (Consolidated
Coal Sales), 6.50% due 12/01/2010 1,077
AA Aa3 600 Carroll County, Maryland, GO (County Commissioners-Consolidated Public
Improvement), 6.50% due 10/01/2024 658
Maryland State Community Development Administration, Department of Housing and
Community Development, Revenue Refunding Bonds (Residential):
NR* Aa2 1,000 AMT, Series D, 5.25% due 9/01/2029 959
NR* Aa2 1,250 Series A, 5.60% due 3/01/2017 (c) 1,260
Maryland State Community Development Administration, S/F Program Revenue
Refunding Bonds (Department of Housing and Community Development):
NR* Aa2 375 AMT, 7th Series, 7.30% due 4/01/2025 390
NR* Aa2 500 4th Series, 6.45% due 4/01/2014 526
NR* Aa2 250 6th Series, 7.05% due 4/01/2017 263
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 1,058
Maryland State Health and Higher Educational Facilities Authority Revenue Bonds:
AA+ Aa2 2,165 (Hospital-Charity Obligation Group), Series A, 5% due 11/01/2029 1,997
AAA Aaa 1,000 (Johns Hopkins Medicine), 5% due 7/01/2029 (g) 940
AAA Aaa 625 (University of Maryland Medical Systems), Series B, 7% due 7/01/2022 (b) 754
Maryland State Health and Higher Educational Facilities Authority, Revenue
Refunding Bonds:
AAA Aaa 1,470 (Maryland General Hospital), 6.125% due 7/01/2019 (g) 1,544
AA+ A2 1,200 (Memorial Hospital of Cumberland), 6.50% due 7/01/2004 (h) 1,310
NR* VMIG1++ 1,500 (Pooled Loan Program), VRDN, Series A, 3.15% due 4/01/2035 (j) 1,500
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 (b) 531
Maryland Water Quality Financing Administration, Revolving Loan Fund Revenue
Bonds, Series A:
AA Aa2 300 6.375% due 9/01/2010 323
AA Aa2 500 6.55% due 9/01/2014 534
NR* Aa2 440 Montgomery County, Maryland, Housing Opportunities Commission, S/F Mortgage
Revenue Refunding Bonds, Series A, 5.75% due 7/01/2013 458
AAA Aaa 500 Montgomery County, Maryland, Parking Authority, Revenue Refunding Bonds (Silver
Spring Parking Lot), Series A, 6.25% due 6/01/2009 (b) 534
</TABLE>
Merrill Lynch Maryland Municipal Bond Fund
July 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Maryland (concluded)
<S> <S> <C> <S> <C>
NR* Baa $1,000 Montgomery County, Maryland, Revenue Authority, Golf Course System Revenue
Bonds, Series A, 6.125% due 10/01/2022 $ 1,021
NR* A2 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 1,048
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)(k) 527
AAA NR* 855 Prince Georges County, Maryland, Housing Authority, S/F Mortgage Revenue Bonds,
AMT, Series A, 6.60% due 12/01/2025 (d) 899
Prince Georges County, Maryland, PCR, Refunding (Potomac Electric Project):
A A1 2,250 5.75% due 3/15/2010 2,391
A A1 250 6.375% due 1/15/2023 266
University of Maryland, University Revenue Bonds, VRDN (j):
A1+ VMIG1++ 1,200 (Equipment Loan Program), Series A, 3.15% due 7/01/2015 1,200
A1+ VMIG1++ 200 (Revolving Equipment Loan Program), Series B, 3.15% due 7/01/2015 200
AAA Aaa 1,000 Washington, D.C., Metropolitan Area Transit Authority, Gross Revenue
Refunding Bonds, 6% due 7/01/2010 (b) 1,083
AA Aaa 500 Washington Suburban Sanitation District, Maryland, GO, 6.625% due 6/01/2004 (h) 548
Puerto Rico--13.2%
A1+ VMIG1++ 1,200 Puerto Rico Commonwealth, Government Development Bank, Revenue Refunding Bonds,
VRDN, 2.55% due 12/01/2015 (g)(j) 1,200
A Aaa 510 Puerto Rico Commonwealth, Highway and Transportation Authority, Highway Revenue
Bonds, Series T, 6.625% due 7/01/2002 (h) 553
A1+ VMIG1++ 800 Puerto Rico Commonwealth Highway and Transportation Authority, Transportation
Revenue Refunding Bonds, VRDN, Series A, 2.85% due 7/01/2028 (a)(j) 800
Puerto Rico Electric Power Authority, Power Revenue Bonds:
AAA Aaa 400 STRIPES, Series T, 7.742% due 7/01/2005 (e)(i) 453
BBB+ Aaa 1,000 Series P, 7% due 7/01/2001 (h) 1,076
Total Investments (Cost--$29,927)--99.8% 30,872
Variation Margin on Financial Futures Contracts**--0.0% 10
Other Assets Less Liabilities--0.2% 55
-------
Net Assets--100.0% $30,937
=======
<FN>
(a)AMBAC Insured.
(b)FGIC Insured.
(c)FHA Insured.
(d)FNMA/GNMA Collateralized.
(e)FSA Insured.
(f)GNMA Collateralized.
(g)MBIA Insured.
(h)Prerefunded.
(i)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, 1999.
(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, 1999.
(k)All or a portion of security held as collateral in connection
with open financial futures contracts.
*Not Rated.
**Financial futures contracts sold as of July 31, 1999 were as
follows:
(in Thousands)
Value
Number of Expiration (Notes
Contracts Issue Date 1a & 1b)
30 US Treasury Bonds September 1999 $3,449
------
Total Financial Futures Contracts Sold
(Total Contract Price--$3,426) $3,449
======
++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>
Merrill Lynch Maryland Municipal Bond Fund
July 31, 1999
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of July 31, 1999
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$29,926,687) (Note 1a) $ 30,872,053
Cash 58,580
Receivables:
Interest $ 327,019
Variation margin (Note 1b) 10,312 337,331
------------
Prepaid registration fees and other assets (Note 1e) 427
------------
Total assets 31,268,391
------------
Liabilities: Payables:
Beneficial interest redeemed 175,774
Dividends to shareholders (Note 1f) 19,227
Distributor (Note 2) 12,579
Investment adviser (Note 2) 6,878 214,458
------------
Accrued expenses and other liabilities 117,231
------------
Total liabilities 331,689
------------
Net Assets: Net assets $ 30,936,702
============
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 24,157
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 259,178
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 28,880
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 11,417
Paid-in capital in excess of par 31,010,865
Accumulated realized capital losses on investments--net (Note 5) (1,319,724)
Unrealized appreciation on investments--net 921,929
------------
Net assets $ 30,936,702
============
Net Asset Value: Class A--Based on net assets of $2,308,784 and 241,571 shares of
beneficial interest outstanding $ 9.56
============
Class B--Based on net assets of $24,775,452 and 2,591,785 shares of
beneficial interest outstanding $ 9.56
============
Class C--Based on net assets of $2,761,576 and 288,800 shares of
beneficial interest outstanding $ 9.56
============
Class D--Based on net assets of $1,090,890 and 114,172 shares of
beneficial interest outstanding $ 9.55
============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Maryland Municipal Bond Fund
July 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
July 31, 1999
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 1,678,779
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 174,502
Account maintenance and distribution fees--Class B (Note 2) 126,181
Professional fees 75,787
Printing and shareholder reports 66,559
Accounting services (Note 2) 45,934
Account maintenance and distribution fees--Class C (Note 2) 17,318
Transfer agent fees--Class B (Note 2) 13,482
Registration fees (Note 1e) 8,264
Pricing fees 5,571
Amortization of organization expenses (Note 1e) 3,861
Custodian fees 2,977
Trustees' fees and expenses 1,764
Transfer agent fees--Class C (Note 2) 1,598
Account maintenance fees--Class D (Note 2) 1,271
Transfer agent fees--Class A (Note 2) 1,030
Transfer agent fees--Class D (Note 2) 561
Other 1,164
------------
Total expenses before reimbursement 547,824
Reimbursement of expenses (Note 2) (101,766)
------------
Total expenses after reimbursement 446,058
------------
Investment income--net 1,232,721
------------
Realized & Realized loss on investments--net (1,243)
Unrealized Loss on Change in unrealized appreciation on investments--net (845,175)
Investments--Net ------------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations $ 386,303
============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Maryland Municipal Bond Fund
July 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended July 31,
Increase (Decrease) in Net Assets: 1999 1998
<S> <S> <C> <C>
Operations: Investment income--net $ 1,232,721 $ 1,167,335
Realized gain (loss) on investments--net (1,243) 300,420
Change in unrealized appreciation on investments--net (845,175) 49,884
------------ ------------
Net increase in net assets resulting from operations 386,303 1,517,639
------------ ------------
Dividends to Investment income--net:
Shareholders Class A (101,565) (102,297)
(Note 1f): Class B (969,356) (939,203)
Class C (107,774) (80,611)
Class D (54,026) (45,224)
------------ ------------
Net decrease in net assets resulting from
dividends to shareholders (1,232,721) (1,167,335)
------------ ------------
Beneficial Net increase in net assets derived from beneficial
Interest interest transactions 2,759,849 1,972,509
Transactions ------------ ------------
(Note 4):
Net Assets: Total increase in net assets 1,913,431 2,322,813
Beginning of year 29,023,271 26,700,458
------------ ------------
End of year $ 30,936,702 $ 29,023,271
============ ============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Maryland Municipal Bond Fund
July 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class A
For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 9.80 $ 9.66 $ 9.21 $ 9.15 $ 9.20
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .43 .47 .48 .47 .52
Realized and unrealized gain (loss) on
investments--net (.24) .14 .45 .06 (.05)
-------- -------- -------- -------- --------
Total from investment operations .19 .61 .93 .53 .47
-------- -------- -------- -------- --------
Less dividends from investment income--net (.43) (.47) (.48) (.47) (.52)
-------- -------- -------- -------- --------
Net asset value, end of year $ 9.56 $ 9.80 $ 9.66 $ 9.21 $ 9.15
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 1.87% 6.46% 10.35% 5.85% 5.39%
Return:* ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement .94% .73% .47% .37% .13%
Net Assets: ======== ======== ======== ======== ========
Expenses 1.26% 1.21% 1.32% 1.26% 1.57%
======== ======== ======== ======== ========
Investment income--net 4.35% 4.80% 5.11% 5.04% 5.80%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $ 2,309 $ 2,303 $ 1,928 $ 1,252 $ 1,362
Data: ======== ======== ======== ======== ========
Portfolio turnover 30.98% 88.89% 94.90% 81.87% 73.99%
======== ======== ======== ======== ========
<FN>
*Total investment returns exclude the effects of sales charges.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Maryland Municipal Bond Fund
July 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class B
For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 9.80 $ 9.66 $ 9.21 $ 9.16 $ 9.20
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .38 .42 .43 .42 .47
Realized and unrealized gain (loss) on
investments--net (.24) .14 .45 .05 (.04)
-------- -------- -------- -------- --------
Total from investment operations .14 .56 .88 .47 .43
-------- -------- -------- -------- --------
Less dividends from investment income--net (.38) (.42) (.43) (.42) (.47)
-------- -------- -------- -------- --------
Net asset value, end of year $ 9.56 $ 9.80 $ 9.66 $ 9.21 $ 9.16
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 1.36% 5.92% 9.79% 5.19% 4.96%
Return:* ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.45% 1.23% .97% .88% .65%
Net Assets: ======== ======== ======== ======== ========
Expenses 1.77% 1.72% 1.82% 1.77% 2.08%
======== ======== ======== ======== ========
Investment income--net 3.84% 4.29% 4.59% 4.52% 5.29%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $ 24,775 $ 23,306 $ 21,851 $ 22,053 $ 18,371
Data: ======== ======== ======== ======== ========
Portfolio turnover 30.98% 88.89% 94.90% 81.87% 73.99%
======== ======== ======== ======== ========
<FN>
*Total investment returns exclude the effects of sales charges.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Maryland Municipal Bond Fund
July 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class C
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. Oct. 21, 1994++
For the Year Ended July 31, to July 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.80 $ 9.67 $ 9.22 $ 9.16 $ 8.79
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .37 .41 .42 .41 .36
Realized and unrealized gain (loss) on
investments--net (.24) .13 .45 .06 .37
-------- -------- -------- -------- --------
Total from investment operations .13 .54 .87 .47 .73
-------- -------- -------- -------- --------
Less dividends from investment income--net (.37) (.41) (.42) (.41) (.36)
-------- -------- -------- -------- --------
Net asset value, end of period $ 9.56 $ 9.80 $ 9.67 $ 9.22 $ 9.16
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 1.26% 5.70% 9.67% 5.18% 8.51%+++
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.56% 1.34% 1.07% 1.00% .82%*
Net Assets: ======== ======== ======== ======== ========
Expenses 1.88% 1.82% 1.92% 1.88% 2.08%*
======== ======== ======== ======== ========
Investment income--net 3.73% 4.19% 4.47% 4.39% 5.08%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 2,762 $ 2,307 $ 2,038 $ 2,229 $ 1,013
Data: ======== ======== ======== ======== ========
Portfolio turnover 30.98% 88.89% 94.90% 81.87% 73.99%
======== ======== ======== ======== ========
<FN>
*Annualized.
*Total investment returns exclude the effects of sales charges.
++Commencement of operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Maryland Municipal Bond Fund
July 31, 1999
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class D
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. Oct. 21, 1994++
For the Year Ended July 31, to July 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.80 $ 9.66 $ 9.21 $ 9.16 $ 8.79
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .42 .46 .47 .46 .40
Realized and unrealized gain (loss) on
investments--net (.25) .14 .45 .05 .37
-------- -------- -------- -------- --------
Total from investment operations .17 .60 .92 .51 .77
-------- -------- -------- -------- --------
Less dividends from investment income--net (.42) (.46) (.47) (.46) (.40)
-------- -------- -------- -------- --------
Net asset value, end of period $ 9.55 $ 9.80 $ 9.66 $ 9.21 $ 9.16
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 1.67% 6.35% 10.24% 5.63% 8.94%+++
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.04% .83% .56% .47% .31%*
Net Assets: ======== ======== ======== ======== ========
Expenses 1.36% 1.31% 1.41% 1.36% 1.55%*
======== ======== ======== ======== ========
Investment income--net 4.25% 4.70% 5.00% 4.91% 5.57%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 1,091 $ 1,107 $ 883 $ 647 $ 517
Data: ======== ======== ======== ======== ========
Portfolio turnover 30.98% 88.89% 94.90% 81.87% 73.99%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Commencement of operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Maryland Municipal Bond Fund
July 31, 1999
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's
financial statements are prepared in accordance with generally
accepted accounting principles, which may require the use of
management accruals and estimates. The Fund offers four classes of
shares under the Merrill Lynch Select Pricing SM System. Shares of
Class A and Class D are sold with a front-end sales charge. Shares
of Class B and Class C may be subject to a contingent deferred sales
charge. All classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions,
except that Class B, Class C and Class D Shares bear certain
expenses related to the account maintenance of such shares, and
Class B and Class C Shares also bear certain expenses related to the
distribution of such shares. Each class has exclusive voting rights
with respect to matters relating to its account maintenance and
distribution expenditures. The following is a summary of significant
accounting policies followed by the Fund.
(a) Valuation of investments--Municipal bonds and other portfolio
securities in which the Fund invests are traded primarily in the
over-the-counter municipal bond and money markets and are valued at
the last available bid price in the over-the-counter market or on
the basis of yield equivalents as obtained from one or more dealers
that make markets in the securities. Financial futures contracts and
options thereon, which are traded on exchanges, are valued at their
settlement prices as of the close of such exchanges. Short-term
investments with remaining maturities of sixty days or less are
valued at amortized cost, which approximates market value.
Securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or
under the direction of the Board of Trustees of the Trust, including
valuations furnished by a pricing service retained by the Trust,
which may utilize a matrix system for valuations. The procedures of
the pricing service and its valuations are reviewed by the officers
of the Trust under the general supervision of the Trustees.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
* Financial futures contracts--The Fund may purchase or sell financial
futures contracts and options on such futures contracts for the
purpose of hedging the market risk on existing securities or the
intended purchase of securities. Futures contracts are contracts for
delayed delivery of securities at a specific future date and at a
specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to
the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin
and are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a period not exceeding five years. Prepaid
registration fees are charged to expense as the related shares are
issued.
Merrill Lynch Maryland Municipal Bond Fund
July 31, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
(f) Dividends and distributions - Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor ("MLFD" or the "Distributor"), a division of Princeton
Funds Distributor, Inc. ("PFD"), which is a wholly-owned subsidiary
of Merrill Lynch Group, Inc.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee based upon the average daily
value of the Fund's net assets at the following annual rates: .55%
of the Fund's average daily net assets not exceeding $500 million;
.525% of average daily net assets in excess of $500 million but not
exceeding $1 billion; and .50% of average daily net assets in excess
of $1 billion.
For the year ended July 31, 1999, FAM earned fees of $174,502, of
which $101,766 was voluntarily waived.
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 .25% .25%
Class C .25% .35%
Class D .10% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of ML &
Co., also provides account maintenance and distribution services to
the Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the year ended July 31, 1999, MLFD earned underwriting discounts
and MLPF&S earned dealer concessions on sales of the Fund's Class A
and Class D Shares as follows:
MLFD MLPF&S
Class A $ 53 $ 563
Class D $651 $6,440
For the year ended July 31, 1999, MLPF&S received contingent
deferred sales charges of $51,953 and $1,780 relating to
transactions in Class B and Class C Shares, respectively.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, FDS, PFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended July 31, 1999 were $9,029,495 and $10,261,423,
respectively.
Net realized losses for the year ended July 31, 1999 and net
unrealized gains (losses) as of July 31, 1999 were as follows:
Unrealized
Realized Gains
Losses (Losses)
Long-term investments $ (1,243) $ 945,366
Financial futures contracts -- (23,437)
---------- ----------
Total $ (1,243) $ 921,929
========== ==========
As of July 31, 1999, net unrealized appreciation for Federal income
tax purposes aggregated $945,366, of which $1,169,631 was related to
appreciated securities and $224,265 was related to depreciated
securities.
Merrill Lynch Maryland Municipal Bond Fund
July 31, 1999
The aggregate cost of investments at July 31, 1999 for Federal
income tax purposes was $29,926,687.
4. Beneficial Interest Transactions:
Net increase in net assets derived from beneficial interest
transactions was $2,759,849 and $1,972,509 for the years ended July
31, 1999 and July 31, 1998, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Year Dollar
Ended July 31, 1999 Shares Amount
Shares sold 86,202 $ 850,321
Shares issued to shareholders
in reinvestment of dividends 7,497 73,803
---------- -----------
Total issued 93,699 924,124
Shares redeemed (87,187) (858,231)
---------- -----------
Net increase 6,512 $ 65,893
========== ===========
Class A Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
Shares sold 86,747 $ 841,841
Shares issued to shareholders
in reinvestment of dividends 7,424 72,228
---------- -----------
Total issued 94,171 914,069
Shares redeemed (58,645) (568,023)
---------- -----------
Net increase 35,526 $ 346,046
========== ===========
Class B Shares for the Year Dollar
Ended July 31, 1999 Shares Amount
Shares sold 669,526 $ 6,623,529
Shares issued to shareholders
in reinvestment of dividends 47,928 472,323
---------- -----------
Total issued 717,454 7,095,852
Automatic conversion of shares (10,128) (99,875)
Shares redeemed (493,512) (4,864,156)
---------- -----------
Net increase 213,814 $ 2,131,821
========== ===========
Class B Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
Shares sold 485,875 $ 4,742,543
Shares issued to shareholders
in reinvestment of dividends 48,688 473,559
---------- -----------
Total issued 534,563 5,216,102
Automatic conversion of shares (324) (3,128)
Shares redeemed (417,311) (4,045,533)
---------- -----------
Net increase 116,928 $ 1,167,441
========== ===========
Class C Shares for the Year Dollar
Ended July 31, 1999 Shares Amount
Shares sold 134,939 $ 1,337,283
Shares issued to shareholders
in reinvestment of dividends 6,135 60,412
---------- -----------
Total issued 141,074 1,397,695
Shares redeemed (87,531) (854,386)
---------- -----------
Net increase 53,543 $ 543,309
========== ===========
Class C Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
Shares sold 87,052 $ 850,640
Shares issued to shareholders
in reinvestment of dividends 6,538 63,584
---------- -----------
Total issued 93,590 914,224
Shares redeemed (69,148) (666,153)
---------- -----------
Net increase 24,442 $ 248,071
========== ===========
Class D Shares for the Year Dollar
Ended July 31, 1999 Shares Amount
Shares sold 40,336 $ 401,924
Automatic conversion of shares 10,138 99,875
Shares issued to shareholders
in reinvestment of dividends 2,986 29,407
---------- -----------
Total issued 53,460 531,206
Shares redeemed (52,307) (512,380)
---------- -----------
Net increase 1,153 $ 18,826
========== ===========
Class D Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
Shares sold 53,290 $ 520,726
Automatic conversion of shares 324 3,128
Shares issued to shareholders
in reinvestment of dividends 2,627 25,556
---------- -----------
Total issued 56,241 549,410
Shares redeemed (34,670) (338,459)
---------- -----------
Net increase 21,571 $ 210,951
========== ===========
5. Capital Loss Carryforward:
At July 31, 1999, the Fund had a net capital loss carryforward of
approximately $1,193,000, of which $415,000 expires in 2003 and
$778,000 expires in 2004. This amount will be available to offset
like amounts of any future taxable gains.
Merrill Lynch Maryland Municipal Bond Fund
July 31, 1999
<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, 1999, the related statements of
operations for the year then ended and changes in net assets for
each of the years in the two-year period then ended, and the
financial highlights for each of the years in the five-year period
then ended. These financial statements and the financial highlights
are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at July 31,
1999 by correspondence with the custodian and broker. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch Maryland Municipal Bond Fund of Merrill Lynch Multi-
State Municipal Series Trust as of July 31, 1999, the results of its
operations, the changes in its net assets, and the financial
highlights for the respective stated periods in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
September 10, 1999
</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, 1999 qualify as tax-exempt interest dividends for
Federal income tax purposes.
Additionally, there were no capital gains distributed by the Fund
during the year.
Please retain this information for your records.
Merrill Lynch Maryland Municipal Bond Fund
July 31, 1999
OFFICERS AND TRUSTEES
Terry K. Glenn, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Arthur Zeikel, Trustee
Vincent R. Giordano, Senior Vice President
Hugh T. Hurley III, Vice President
Kenneth A. Jacob, Vice President
Donald C. Burke, Vice President and Treasurer
Alice A. Pellegrino, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
