MERRILL LYNCH
MARYLAND
MUNICIPAL
BOND FUND
FUND LOGO
Annual Report
July 31, 2000
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, 2000
TO OUR SHAREHOLDERS
The Municipal Market Environment
During the six months ended July 31, 2000, US domestic economic
growth remained robust. After growing at a 4.2% annual rate in 1999,
US domestic economic growth expanded at a 4.8% rate during the first
quarter of 2000 and at a 5.2% rate during the second quarter.
However, despite these significant growth rates, few price measure
indicators have shown any meaningful signs of future price pressures
at the consumer level, despite the lowest unemployment rates since
1970. With few signs of any economic slowdown, the Federal Reserve
Board continued to raise short-term interest rates in February,
March and May 2000. The Federal Reserve Board cited both the
continued growth of US employment and the continued strength of US
equity markets as reasons for attempting to moderate US economic
growth before inflationary price pressures can occur.
However, since then fixed-income markets have largely ignored strong
economic fundamentals and concentrated upon very positive technical
supply factors. Declining bond issuance--both current, and more
importantly, expected future issuance--helped push bond yields lower
into mid-April 2000. In late January and early February 2000, the US
Treasury announced its intention to reduce the amounts to be
auctioned in the quarterly Treasury note and bond auctions.
Furthermore, budgetary surpluses allowed the US Treasury to
repurchase outstanding, higher-couponed Treasury issues, primarily
in the 15-year and longer maturity sector. Both these actions
resulted in significant reduction in the outstanding supply of
longer-dated maturity US Treasury debt. Domestic and international
investors quickly began to accumulate what was expected to become a
scarce commodity and bond prices quickly rose.
By mid-April 2000, US Treasury bond yields had declined more than 80
basis points (0.80%) to 5.67%. During the remainder of the period,
US Treasury bond prices were volatile as strong economic reports and
investors' concerns of additional moves by the Federal Reserve Board
occasionally overshadowed the positive technical position of the
long-term US Treasury bond market.
Recently, a number of economic indicators have begun to suggest that
the actions taken by the Federal Reserve Board in 1999 and early
2000 have started to affect US economic growth. Both new home sales
and consumer spending have slowed, suggesting that economic growth
may subside into a 4%--4.5% range by late 2000. In our opinion, this
range of growth was targeted by the Federal Reserve Board as being
sustainable, given current productivity measures, without
endangering the present benign inflationary environment.
By June, investor focus returned to the dwindling supply of long-
term US Treasury securities and bond prices generally rose for the
remainder of the period. The decline in long-term US Treasury bond
yields resulted in an inverted yield curve as short-term and
intermediate-term interest rates did not fall proportionately to
long-term interest rates as the Federal Reserve Board was expected
to continue to raise short-term interest rates. The current
inversion has had as much to do with debt reduction and US Treasury
buybacks as with investor expectations of slower economic growth.
During the last six months, US Treasury bond yields have declined
more than 70 basis points to end the period at 5.78%, their lowest
monthly closing level since May 1999.
Tax-exempt bond yields also have declined in recent months. The
decline has largely been in response to the rally in US Treasury
securities, as well as a continued positive technical supply
environment. States such as California and Maryland have announced
that their large current and anticipated future budget surpluses
will permit the cancellation or postponement of expected bond
issuance. Additionally, some issuers have also initiated tenders to
repurchase existing debt, reducing the supply of tax-exempt bonds in
the secondary market as well. Given the decline in available long-
term US Treasury securities, some investors who need longer maturity
investment vehicles have begun to consider long-term municipal bonds
as potential substitutes. This has further strengthened the overall
positive technical position of the tax-exempt market. During the
last six months, long-term municipal revenue bond yields have
declined nearly 50 basis points to 5.85%, their lowest level since
late August 1999, as measured by the Bond Buyer Revenue Bond Index.
Merrill Lynch Maryland Municipal Bond Fund
July 31, 2000
The relative underperformance of the municipal bond market in recent
months has been especially disappointing given the strong technical
position the tax-exempt bond market has enjoyed. The issuance of
long-term tax-exempt securities has dramatically declined. During
the last year, almost $200 billion in new long-term municipal
securities was issued, a decline of almost 20% compared to the same
period a year earlier. For the six months ended July 31, 2000,
approximately $100 billion in new tax-exempt bonds was underwritten,
a decline of 17% compared to the same period in 1999.
Although investors received more than $45 billion in coupon
payments, bond maturities and the proceeds from early bond
redemptions during June and July, overall investor demand has
diminished. Long-term municipal bond mutual funds have seen
consistent outflows in recent months as the yields of individual
securities have risen faster than those of larger, more diverse
mutual funds. Thus far this year, tax-exempt mutual funds have had
net redemptions of more than $12 billion.
However, the rate at which these redemptions have been occurring has
slowed in recent months. Recent US equity market volatility,
especially in the NASDAQ, has reduced some investor interest in the
stock market. This investor interest, especially earlier this year,
had been siphoning away demand for municipal bonds by retail
investors. Also, the demand from property and casualty companies is
expected to increase in the coming months. These firms are becoming
more profitable after experiencing losses in the past few years
resulting from a series of weather-related natural disasters. Yet as
positive as the tax-exempt bond market's technical environment has
been for much of this year, investor response to the reduction in
both current and future supply of US Treasury bonds has been
overwhelmingly positive and municipal bond yields have
underperformed their taxable counterparts.
Significantly lower municipal bond yields are still likely to
require weaker US employment growth and consumer spending. The
actions taken in recent months by the Federal Reserve Board should
eventually slow US economic growth. Recent declines in US new home
sales are perhaps the first sign that consumer spending is being
slowed by higher interest rates. Until further signs develop, it is
likely that the municipal bond market's current favorable technical
position will dampen significant tax-exempt interest rate volatility
and provide a stable environment for eventual improvement in
municipal bond prices.
Fiscal Year in Review
We entered the fiscal year ended July 31, 2000 in a defensive
position in response to heightened economic growth and inflationary
fears. During the first six months of the fiscal year, we initially
retained our defensive position toward the municipal bond market,
then gradually shifted to a neutral stance. We accomplished this
shift by investing the majority of the Fund's cash reserve and by
purchasing bonds with longer maturities in exchange for bonds with
shorter maturities. Our goal in this shift of strategy was to both
enhance shareholder income and to take advantage of the highest
absolute municipal yields since the spring of 1997. During the last
six months, we maintained our neutral investment position and fully
invested status for the majority of the period. We found it prudent
to maintain this position in anticipation of clearer signs regarding
future economic growth and inflation expectations. Our shift in
strategy to a neutral stance from a defensive one aided the Fund's
performance during the last six months as municipal yields declined
in conjunction with the US Treasury market.
During the fiscal year, the Fund's investment restructuring was
somewhat inhibited by a lack of municipal bond issuance. Maryland
municipal issuance declined 15% from year-ago levels. While the lack
of supply may have aided in keeping the prices of Maryland municipal
bonds relatively firm, it also limited our options of coupon
structuring, issuer diversification and call protection. We
continually monitor the call protection, credit quality, coupon
structuring and diversification of the Fund in an effort to provide
optimal performance. The decline in new municipal bond issuance can
be traced, in part, to the strong fiscal performance of municipal
entities at most levels of government.
Merrill Lynch Maryland Municipal Bond Fund
July 31, 2000
Our strategy resulted in above-average total returns of +3.19%,
+2.67%, +2.57% and +3.09% for the Fund's Class A, Class B, Class C
and Class D Shares, respectively, for the year ended July 31, 2000.
This compares to the Lipper Analytical Services, Inc. average total
return of +2.28% for similar Maryland municipal tax-exempt funds for
the same 12-month period. (Investment results shown do not reflect
sales charges and would be lower if sales charges were included. For
complete performance information, see pages 4 and 5 of this report
to shareholders.) Looking ahead, we intend to remain fully invested
in the municipal market in an effort to enhance shareholder income.
We will be looking for opportunities provided by new Maryland
municipal issuance to enhance the Fund's call protection and issuer
diversification. We will also consider taking a more aggressive
investment stance should the economic indicators continue to point
to a cooling of growth and a more stable inflation environment.
In Conclusion
We appreciate your ongoing interest in Merrill Lynch Maryland
Municipal Bond Fund, and we look forward to assisting you with your
financial needs in the months and years ahead.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Trustee
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Robert D. Sneeden)
Robert D. Sneeden
Portfolio Manager
September 8, 2000
We are pleased to announce that Robert D. Sneeden is responsible for
the day-to-day management of Merrill Lynch Maryland Municipal Bond
Fund. Mr. Sneeden has been employed by Merrill Lynch Investment
Managers since 1994 as Assistant Vice President and Portfolio
Manager.
Merrill Lynch Maryland Municipal Bond Fund
July 31, 2000
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. The Fund's Investment Adviser voluntarily waived a
portion of its management fee. Without such waiver, the Fund's
performance would have been lower.
<TABLE>
Recent Performance Results*
<CAPTION>
6 Month 12 Month Since Inception Standardized
As of July 31, 2000 Total Return Total Return Total Return 30-Day Yield
<S> <C> <C> <C> <C>
ML Maryland Municipal Bond Fund Class A Shares +6.12% +3.19% +31.82% 4.65%
ML Maryland Municipal Bond Fund Class B Shares +5.86 +2.67 +27.36 4.34
ML Maryland Municipal Bond Fund Class C Shares +5.80 +2.57 +37.40 4.24
ML Maryland Municipal Bond Fund Class D Shares +5.96 +3.09 +41.39 4.56
*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 periods 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, 2000
PERFORMANCE DATA (concluded)
Total Return Based on a $10,000 Investment
A line graph depicting the growth of ML Maryland Municipal
Bond Fund's Class A and Class B Shares compared to the Lehman
Brothers Municipal Bond Index++++. Beginning and ending values are:
10/29/93** 7/00
ML Maryland Municipal
Bond Fund++--Class A Shares* $ 9,600 $12,654
ML Maryland Municipal
Bond Fund++--Class B Shares* $10,000 $12,736
Lehman Brothers Municipal
Bond Index++++ $10,000 $14,202
A line graph depicting the growth of ML Maryland Municipal
Bond Fund's Class C and Class D Shares compared to the Lehman
Brothers Municipal Bond Index++++. Beginning and ending values are:
10/31/94** 7/00
ML Maryland Municipal
Bond Fund++--Class C Shares* $10,000 $13,740
ML Maryland Municipal
Bond Fund++--Class D Shares* $ 9,600 $13,575
Lehman Brothers Municipal
Bond Index++++ $10,000 $14,849
*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.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
One Year Ended 6/30/00 +2.06% -2.02%
Five Years Ended 6/30/00 +5.33 +4.88
Inception(10/29/93)through6/30/00 +4.00 +3.37
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
One Year Ended 6/30/00 +1.44% -2.45%
Five Years Ended 6/30/00 +4.80 +4.80
Inception (10/29/93) through 6/30/00 +3.47 +3.47
*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*
One Year Ended 6/30/00 +1.44% +0.47%
Five Years Ended 6/30/00 +4.71 +4.71
Inception(10/21/94)through6/30/00 +5.50 +5.50
*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*
One Year Ended 6/30/00 +1.96% -2.12%
Five Years Ended 6/30/00 +5.23 +4.37
Inception (10/21/94) through 6/30/00 +6.02 +5.26
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch Maryland Municipal Bond Fund
July 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face
Ratings Ratings Amount Issue Value
Maryland--93.7%
<S> <S> <C> <S> <C>
NR* NR* $ 500 Anne Arundel County, Maryland, Special Obligation Revenue Bonds
(Arundel Mills Project), 7.10% due 7/01/2029 $ 501
AAA Aaa 1,000 Baltimore, Maryland, Baltimore City Parking System Facilities,
Revenue Refunding Bonds, Series A, 5.25% due 7/01/2021 (b) 973
AA Aa3 600 Carroll County, Maryland, GO (County Commissioners - Consolidated
Public Improvement), 6.50% due 10/01/2024 636
AA Aa2 1,000 Frederick County, Maryland, GO, Refunding (Public Facilities),
5.25% due 7/01/2016 990
NR* Aa2 1,000 Maryland State Community Development Administration, Department of Housing and
Community Development, Housing Revenue Bonds, AMT, Series B, 6.15% due 1/01/2021 1,010
NR* Aa2 1,250 Maryland State Community Development Administration, Department of
Housing and Community Development, Residential Revenue Refunding Bonds,
Series A, 5.60% due 3/01/2017 (c) 1,246
Maryland State Community Development Administration, Department of Housing and
Community Development Revenue Refunding Bonds, S/F Program:
NR* Aa2 500 4th Series, 6.45% due 4/01/2014 510
NR* Aa2 250 6th Series, 7.05% due 4/01/2017 257
AA Aa2 500 Maryland State Department of Transportation, Consolidated Transportation
Revenue Bonds, 5.75% due 12/15/2014 516
NR* NR* 445 Maryland State Economic Development Corporation Revenue Bonds (Health and Mental
Hygiene Program), Series A, 7.125% due 3/01/2006 447
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 1,016
Maryland State Health and Higher Educational Facilities Authority Revenue Bonds:
AA Aa2 1,915 (Charity Obligation Group), Series A, 5% due 11/01/2029 1,715
AAA Aaa 1,000 (Johns Hopkins Medicine), 5% due 7/01/2029 (g) 904
AAA Aaa 625 (University of Maryland Medical System), Series B, 7% due 7/01/2022 (b) 736
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) 1,516
NR* A2 900 (Memorial Hospital of Cumberland), 6.50% due 7/01/2004 (h) 959
NR* VMIG1++ 400 (Pooled Loan Program), VRDN, Series A, 4.15% due 4/01/2035 (j) 400
</TABLE>
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
RITR Residual Interest Trust Receipts
S/F Single-Family
STRIPES Short-Term Rate Inverse Payment Exempt Securities
VRDN Variable Rate Demand Notes
Merrill Lynch Maryland Municipal Bond Fund
July 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face
Ratings Ratings Amount Issue Value
Maryland (concluded)
<S> <S> <C> <S> <C>
Maryland Water Quality Financing Administration, Revolving Loan Fund
Revenue Bonds, Series A:
AA Aa2 $ 300 6.375% due 9/01/2010 $ 317
AA Aa2 500 6.55% due 9/01/2014 523
NR* Aa2 435 Montgomery County, Maryland, Housing Opportunities Commission,
S/F Mortgage Revenue Refunding Bonds, Series A, 5.75% due 7/01/2013 445
AAA Aaa 500 Montgomery County, Maryland, Parking Authority, Revenue Refunding Bonds
(Silver Spring Parking Lot), Series A, 6.25% due 6/01/2009 (b) 524
NR* Baa3 1,000 Montgomery County, Maryland, Revenue Authority, Golf Course System Revenue Bonds,
Series A, 6.125% due 10/01/2022 949
NR* A2 1,500 Northeast Maryland, Waste Disposal Authority, Solid Waste Revenue Bonds
(Montgomery County Resource Recovery Project), AMT, Series A, 6.30%
due 7/01/2016 1,533
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) 525
AAA NR* 740 Prince Georges County, Maryland, Housing Authority, S/F Mortgage Revenue
Bonds, AMT, Series A, 6.60% due 12/01/2025 (d) 755
A A1 1,500 Prince Georges County, Maryland, PCR, Refunding (Potomac Electric Project),
5.75% due 3/15/2010 1,586
AA+ Aa3 1,000 University of Maryland, System Auxiliary Facility and Tuition Revenue Bonds,
Series A, 5.75% due 10/01/2019 1,018
Puerto Rico--5.7%
AAA Aaa 500 Puerto Rico Commonwealth, GO, Refunding, RITR, Class R, Series 3, 5.85% due
7/01/2016 (g)(i) 527
A1+ VMIG1++ 400 Puerto Rico Commonwealth, Highway and Transportation Authority, Transportation
Revenue Refunding Bonds, VRDN, Series A, 3.85% due 7/01/2028 (a)(j) 400
AAA Aaa 400 Puerto Rico Electric Power Authority, Power Revenue Bonds, STRIPES, Series T,
7.449% due 7/01/2005 (e)(i) 439
Total Investments (Cost--$23,721)--99.4% 23,873
Other Assets Less Liabilities--0.6% 135
-------
Net Assets--100.0% $24,008
=======
(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, 2000.
(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, 2000.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche
LLP.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Maryland Municipal Bond Fund
July 31, 2000
<TABLE>
FINANCIAL INFORMATION
<CAPTION>
Statement of Assets and Liabilities as of July 31, 2000
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$23,721,010) $ 23,873,309
Cash 995
Interest receivable 267,425
Prepaid expenses and other assets 464
------------
Total assets 24,142,193
------------
Liabilities: Payables:
Dividends to shareholders $ 20,468
Distributor 8,640
Investment adviser 4,744
Beneficial interest redeemed 1,316 35,168
------------
Accrued expenses and other liabilities 98,904
------------
Total liabilities 134,072
------------
Net Assets: Net assets $ 24,008,121
============
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 18,844
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 204,902
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 21,300
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 10,407
Paid-in capital in excess of par 24,777,446
Accumulated realized capital losses on investments--net (1,177,077)
Unrealized appreciation on investments--net 152,299
------------
Net assets $ 24,008,121
============
Net Asset Value: Class A--Based on net assets of $1,770,562 and 188,438 shares of
beneficial interest outstanding $ 9.40
============
Class B--Based on net assets of $19,257,507 and 2,049,023 shares of
beneficial interest outstanding $ 9.40
============
Class C--Based on net assets of $2,002,426 and 213,002 shares of
beneficial interest outstanding $ 9.40
============
Class D--Based on net assets of $977,626 and 104,069 shares of
beneficial interest outstanding $ 9.39
============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Maryland Municipal Bond Fund
July 31, 2000
<TABLE>
FINANCIAL INFORMATION (continued)
<CAPTION>
Statement of Operations
For the Year Ended
July 31, 2000
<S> <S> <C> <C>
Investment Income: Interest and amortization of premium and discount earned $ 1,499,816
Expenses: Investment advisory fees $ 143,689
Account maintenance and distribution fees--Class B 104,280
Professional fees 73,414
Accounting services 43,512
Printing and shareholder reports 27,700
Account maintenance and distribution fees--Class C 13,754
Transfer agent fees--Class B 11,872
Trustees' fees and expenses 4,231
Pricing fees 3,767
Custodian fees 3,591
Registration fees 2,293
Transfer agent fees--Class C 1,381
Account maintenance fees--Class D 1,028
Transfer agent fees--Class A 920
Transfer agent fees--Class D 483
Other 2,241
------------
Total expenses before reimbursement 438,156
Reimbursement of expenses (78,376)
------------
Total expenses after reimbursement 359,780
------------
Investment income--net 1,140,036
------------
Realized & Realized gain on investments--net 142,647
Unrealized Change in unrealized appreciation on investments--net (769,630)
Gain (Loss) on ------------
Investments--Net: Net Increase in Net Assets Resulting from Operations $ 513,053
============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Maryland Municipal Bond Fund
July 31, 2000
<TABLE>
FINANCIAL INFORMATION (continued)
<CAPTION>
Statements of Changes in Net Assets
For the Year Ended July 31,
Increase (Decrease) in Net Assets: 2000 1999
<S> <S> <C> <C>
Operations: Investment income--net $ 1,140,036 $ 1,232,721
Realized gain (loss) on investments--net 142,647 (1,243)
Change in unrealized appreciation on investments--net (769,630) (845,175)
------------ ------------
Net increase in net assets resulting from operations 513,053 386,303
------------ ------------
Dividends to Investment income--net:
Shareholders: Class A (94,113) (101,565)
Class B (900,913) (969,356)
Class C (96,299) (107,774)
Class D (48,711) (54,026)
------------ ------------
Net decrease in net assets resulting from dividends
to shareholders (1,140,036) (1,232,721)
------------ ------------
Beneficial Net increase (decrease) in net assets derived from
Interest beneficial interest
Transactions: transactions (6,301,598) 2,759,849
------------ ------------
Net Assets: Total increase (decrease) in net assets (6,928,581) 1,913,431
Beginning of year 30,936,702 29,023,271
------------ ------------
End of year $ 24,008,121 $ 30,936,702
============ ============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Maryland Municipal Bond Fund
July 31, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived Class A
from information provided in the financial statements. For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 9.56 $ 9.80 $ 9.66 $ 9.21 $ 9.15
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .45 .43 .47 .48 .47
Realized and unrealized gain (loss) on
investments--net (.16) (.24) .14 .45 .06
-------- -------- -------- -------- --------
Total from investment operations .29 .19 .61 .93 .53
-------- -------- -------- -------- --------
Less dividends from investment income--net (.45) (.43) (.47) (.48) (.47)
-------- -------- -------- -------- --------
Net asset value, end of year $ 9.40 $ 9.56 $ 9.80 $ 9.66 $ 9.21
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 3.19% 1.87% 6.46% 10.35% 5.85%
Return:* ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement .91% .94% .73% .47% .37%
Net Assets: ======== ======== ======== ======== ========
Expenses 1.21% 1.26% 1.21% 1.32% 1.26%
======== ======== ======== ======== ========
Investment income--net 4.82% 4.35% 4.80% 5.11% 5.04%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $ 1,771 $ 2,309 $ 2,303 $ 1,928 $ 1,252
Data: ======== ======== ======== ======== ========
Portfolio turnover 35.57% 30.98% 88.89% 94.90% 81.87%
======== ======== ======== ======== ========
*Total investment returns exclude the effects of sales charges.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Maryland Municipal Bond Fund
July 31, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
The following per share data and ratios have been derived Class B
from information provided in the financial statements. For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 9.56 $ 9.80 $ 9.66 $ 9.21 $ 9.16
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .40 .38 .42 .43 .42
Realized and unrealized gain (loss) on
investments--net (.16) (.24) .14 .45 .05
-------- -------- -------- -------- --------
Total from investment operations .24 .14 .56 .88 .47
-------- -------- -------- -------- --------
Less dividends from investment income--net (.40) (.38) (.42) (.43) (.42)
-------- -------- -------- -------- --------
Net asset value, end of year $ 9.40 $ 9.56 $ 9.80 $ 9.66 $ 9.21
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 2.67% 1.36% 5.92% 9.79% 5.19%
Return:* ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.42% 1.45% 1.23% .97% .88%
Net Assets: ======== ======== ======== ======== ========
Expenses 1.72% 1.77% 1.72% 1.82% 1.77%
======== ======== ======== ======== ========
Investment income--net 4.31% 3.84% 4.29% 4.59% 4.52%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $ 19,257 $ 24,775 $ 23,306 $ 21,851 $ 22,053
Data: ======== ======== ======== ======== ========
Portfolio turnover 35.57% 30.98% 88.89% 94.90% 81.87%
======== ======== ======== ======== ========
*Total investment returns exclude the effects of sales charges.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Maryland Municipal Bond Fund
July 31, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
The following per share data and ratios have been derived Class C
from information provided in the financial statements. For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 9.56 $ 9.80 $ 9.67 $ 9.22 $ 9.16
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .39 .37 .41 .42 .41
Realized and unrealized gain (loss) on
investments--net (.16) (.24) .13 .45 .06
-------- -------- -------- -------- --------
Total from investment operations .23 .13 .54 .87 .47
-------- -------- -------- -------- --------
Less dividends from investment income--net (.39) (.37) (.41) (.42) (.41)
-------- -------- -------- -------- --------
Net asset value, end of year $ 9.40 $ 9.56 $ 9.80 $ 9.67 $ 9.22
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 2.57% 1.26% 5.70% 9.67% 5.18%
Return:* ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.52% 1.56% 1.34% 1.07% 1.00%
Net Assets: ======== ======== ======== ======== ========
Expenses 1.82% 1.88% 1.82% 1.92% 1.88%
======== ======== ======== ======== ========
Investment income--net 4.19% 3.73% 4.19% 4.47% 4.39%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $ 2,002 $ 2,762 $ 2,307 $ 2,038 $ 2,229
Data: ======== ======== ======== ======== ========
Portfolio turnover 35.57% 30.98% 88.89% 94.90% 81.87%
======== ======== ======== ======== ========
*Total investment returns exclude the effects of sales charges.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Maryland Municipal Bond Fund
July 31, 2000
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
The following per share data and ratios have been derived Class D
from information provided in the financial statements. For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 9.55 $ 9.80 $ 9.66 $ 9.21 $ 9.16
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .44 .42 .46 .47 .46
Realized and unrealized gain (loss) on
investments--net (.16) (.25) .14 .45 .05
-------- -------- -------- -------- --------
Total from investment operations .28 .17 .60 .92 .51
-------- -------- -------- -------- --------
Less dividends from investment income--net (.44) (.42) (.46) (.47) (.46)
-------- -------- -------- -------- --------
Net asset value, end of year $ 9.39 $ 9.55 $ 9.80 $ 9.66 $ 9.21
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 3.09% 1.67% 6.35% 10.24% 5.63%
Return:* ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.01% 1.04% .83% .56% .47%
Net Assets: ======== ======== ======== ======== ========
Expenses 1.31% 1.36% 1.31% 1.41% 1.36%
======== ======== ======== ======== ========
Investment income--net 4.73% 4.25% 4.70% 5.00% 4.91%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $ 978 $ 1,091 $ 1,107 $ 883 $ 647
Data: ======== ======== ======== ======== ========
Portfolio turnover 35.57% 30.98% 88.89% 94.90% 81.87%
======== ======== ======== ======== ========
*Total investment returns exclude the effects of sales charges.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Maryland Municipal Bond Fund
July 31, 2000
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 accounting
principles generally accepted in the United States of America, 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 investment strategies to increase or decrease the level of
risk to which the Fund is exposed more quickly and efficiently than
transactions in other types of instruments. 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) 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.
Merrill Lynch Maryland Municipal Bond Fund
July 31, 2000
NOTES TO FINANCIAL STATEMENTS (continued)
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 FAMD Distributors, Inc.
("FAMD" or the "Distributor"), 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, 2000, FAM earned fees of $143,689, of
which $78,376 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, 2000, FAMD earned underwriting discounts
and MLPF&S earned dealer concessions on sales of the Fund's Class D
Shares as follows:
FAMD MLPF&S
Class D $4 $52
For the year ended July 31, 2000, MLPF&S received contingent
deferred sales charges of $55,392 and $2,021 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, FAMD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended July 31, 2000 were $8,615,438 and $10,872,630,
respectively.
Net realized gains (losses) for the year ended July 31, 2000 and net
unrealized gains as of July 31, 2000 were as follows:
Realized
Gains Unrealized
(Losses) Gains
Long-term investments $ 171,162 $ 152,299
Financial futures contracts (28,515) --
----------- ----------
Total $ 142,647 $ 152,299
=========== ==========
Merrill Lynch Maryland Municipal Bond Fund
July 31, 2000
As of July 31, 2000, net unrealized appreciation for Federal income
tax purposes aggregated $152,299, of which $489,965 was related to
appreciated securities and $337,666 was related to depreciated
securities. The aggregate cost of investments at July 31, 2000 for
Federal income tax purposes was $23,721,010.
4. Beneficial Interest Transactions:
Net increase (decrease) in net assets derived from beneficial
interest transactions was ($6,301,598) and $2,759,849 for the years
ended July 31, 2000 and July 31, 1999, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Year Dollar
Ended July 31, 2000 Shares Amount
Shares sold 22,974 $ 212,144
Shares issued to shareholders
in reinvestment of dividends 7,384 68,253
---------- -----------
Total issued 30,358 280,397
Shares redeemed (83,491) (770,096)
---------- -----------
Net decrease (53,133) $ (489,699)
========== ===========
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 B Shares for the Year Dollar
Ended July 31, 2000 Shares Amount
Shares sold 188,466 $ 1,748,293
Shares issued to shareholders
in reinvestment of dividends 44,854 414,719
---------- -----------
Total issued 233,320 2,163,012
Automatic conversion of shares (8,236) (77,454)
Shares redeemed (767,846) (7,111,106)
---------- -----------
Net decrease (542,762) $(5,025,548)
========== ===========
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 C Shares for the Year Dollar
Ended July 31, 2000 Shares Amount
Shares sold 43,483 $ 404,543
Shares issued to shareholders
in reinvestment of dividends 5,911 54,716
---------- -----------
Total issued 49,394 459,259
Shares redeemed (125,193) (1,153,731)
---------- -----------
Net decrease (75,799) $ (694,472)
========== ===========
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 D Shares for the Year Dollar
Ended July 31, 2000 Shares Amount
Shares sold 5,707 $ 52,823
Automatic conversion of shares 8,237 77,454
Shares issued to shareholders
in reinvestment of dividends 2,785 25,730
---------- -----------
Total issued 16,729 156,007
Shares redeemed (26,831) (247,886)
---------- -----------
Net decrease (10,102) $ (91,879)
========== ===========
Merrill Lynch Maryland Municipal Bond Fund
July 31, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
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
========== ===========
5. Short-Term Borrowings:
On December 3, 1999, the Fund, along with certain other funds
managed by FAM and its affiliates, entered into a one-year,
unsecured $1,000,000,000 credit agreement with The Bank of New York
and other lenders. The funds may borrow money for temporary or
emergency purposes to meet shareholder redemptions. Each fund may
borrow up to the maximum amount allowable under the fund's current
prospectus and statement of additional information, subject to
various other legal, regulatory or contractual limits. The funds
collectively pay a commitment fee of .09% per annum on the available
portion of the facility. Amounts borrowed under the facility bear
interest at the Federal Funds rate plus .50%. The Fund did not
borrow from the facility during the year ended July 31, 2000.
6. Capital Loss Carryforward:
At July 31, 2000, the Fund had a net capital loss carryforward of
approximately $1,111,000, of which $333,000 expires in 2003 and
$778,000 expires in 2004. This amount will be available to offset
like amounts of any future taxable gains.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
Merrill Lynch Maryland Municipal Bond Fund of
Merrill Lynch Multi-State Municipal Series Trust:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Merrill Lynch
Maryland Municipal Bond Fund of Merrill Lynch Multi-State Municipal
Series Trust as of July 31, 2000, 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 auditing standards
generally accepted in the United States of America. 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, 2000 by correspondence
with the custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch Maryland Municipal Bond Fund of Merrill Lynch Multi-
State Municipal Series Trust as of July 31, 2000, the results of its
operations, the changes in its net assets, and the financial
highlights for the respective stated periods in conformity with
accounting principles generally accepted in the United States of
America.
Deloitte & Touche LLP
Princeton, New Jersey
September 11, 2000
</AUDIT-REPORT>
Merrill Lynch Maryland Municipal Bond Fund
July 31, 2000
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, 2000 qualify as tax-exempt interest dividends for
Federal income tax purposes.
Additionally, there were no capital gains distributions paid by the
Fund during the year.
Please retain this information for your records.
OFFICERS AND TRUSTEES
Terry K. Glenn, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Arthur Zeikel, Trustee
Vincent R. Giordano, Senior Vice President
Kenneth A. Jacob, Vice President
Michael A. Kalinoski, 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
