MERRILL LYNCH
NEW MEXICO
MUNICIPAL
BOND FUND
FUND LOGO
Semi-Annual Report
January 31, 1995
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
<PAGE>
Merrill Lynch New Mexico
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011
TO OUR SHAREHOLDERS
The combination of heightened inflationary concerns, anticipation of
further tightening of monetary policy by the Federal Reserve Board
and the turmoil of the Mexican currency crisis all exerted negative
influences on the US financial markets during the January quarter.
On the positive side, increasing signs that the US economy may be
losing momentum suggested that most of the interest rate increases
for this economic cycle may be behind us. As a result of these
economic crosscurrents, the US stock and bond markets continued to
be volatile during the period.
The manufacturing sector proved to be the driving force behind the
US economy through the final quarter of 1994, making an important
contribution to the substantial increase in corporate earnings. US
companies have been successful at containing labor costs, which are
an important component of the inflation outlook. Growth in the
economy has not been translated into higher wages and benefits for
US workers. Consumer spending is growing at a slower pace than in
previous economic recoveries, but households are nonetheless
spending more than saving, as the personal savings rate fell to an
all-time annual low in 1994.
In the weeks ahead, investors will continue to assess economic data
and inflationary trends in order to gauge whether further increases
in short-term interest rates are likely as 1995 unfolds. Despite the
widespread concerns about rising prices for raw materials and
incipient inflationary pressures, 1994's inflation results were as
positive as those in 1993, creating the best sustained inflation
performance in 30 years. However, it is not likely that such
positive inflation results will be duplicated in 1995. Investors
will also focus on the progress that the new Congress makes on both
reducing spending and the Federal budget deficit and passing tax
cuts that promote savings and investment. Legislative progress,
combined with continued indications of moderate and sustainable
levels of economic growth, would be positive for the US capital
markets. However, the lagged effects of higher interest rates could
slow the economy sharply and with it, the growth of corporate
profits.
<PAGE>
The Municipal Market
The municipal bond market continued to exhibit considerable interest
rate volatility during the three months ended January 31, 1995.
Yields on A-rated municipal revenue bonds continued to rise
throughout November to a high of 7.37% as measured by the Bond Buyer
Revenue Bond Index. The tax-exempt bond market improved dramatically
for the remainder of the quarter, and yields fell by approximately
60 basis points (0.60%) to a four-month low of 6.78%. However, the
Index failed to capture much of the rally that occurred at the end
of January as market yields declined a further ten basis points into
the 6.65% range. Municipal bond prices have now recaptured most of
their declines of the last six months.
This improvement in municipal bond prices during the January quarter
was largely the result of significant positive change in investor
sentiment. The series of interest rate increases engineered during
1994 have gone a long way in confirming the Federal Reserve Board's
anti-inflationary resolve. Additionally, the recent signs of a
weakening domestic economy, as well as the negative near-term impact
of the Kobe earthquake and Mexican currency situation, have allowed
investors to become more comfortable with the concept that the vast
majority of the recent rise in fixed-income rates has already
occurred and that yields during 1995 are more likely to remain
stable or decline than they are to significantly rise again.
Consequently, current yield levels are being viewed as attractive to
long-term investors.
In addition to this more positive outlook, the ongoing strong
technical position of the municipal bond market has only fostered
the increase in tax-exempt bond prices seen in recent months. Over
$25 billion in bond proceeds became available to investors at year-
end 1994 from bond maturities, coupon payments and early
redemptions. However, during the recent January quarter, new bond
issuance was less than $25 billion, down 50% from the January 1994
quarter. In January 1995, less than $7 billion in long-term
municipal securities were issued, making this past January's
issuance the lowest monthly total since the mid-1980s. Investor
demand has easily surpassed supply, causing bond prices to rise
rapidly. Also, as 1995 annual issuance is expected to be below the
recent historically low 1994 levels, this positive technical
environment should continue to support the recent improvements in
municipal bond prices into the coming quarters.
<PAGE>
Portfolio Strategy
In our July annual report to shareholders, we discussed how strong
economic growth and fears of rising inflation led us to adopt a
cautious investment outlook. These concerns have subsided, at least
for the time being. For the quarter ended January 31, 1995, the
municipal bond market bottomed out and staged a dramatic rebound.
Merrill Lynch New Mexico Municipal Bond Fund is fully invested and
has benefited from the increase in municipal bond market prices. New-
issue supply fell by a staggering 70% this quarter over the same
quarter last year. Because of the scarcity of new-issue supply, we
have kept the Fund's cash reserves to a minimum amount. We continue
to emphasize quality securities with over 92% of the portfolio rated
A or better by at least one of the major rating services. Looking
forward, our portfolio strategy, while cautiously optimistic, will
continue to be to invest new assets in high-quality, reasonably
priced securities that we expect to yield attractive amounts of tax-
exempt income.
In Conclusion
We appreciate your ongoing interest in Merrill Lynch New Mexico
Municipal Bond Fund, and we look forward to assisting you with your
financial needs in the months and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
February 24, 1995
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
Kenneth S. Axelson, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Jerry Weiss, Secretary
<PAGE>
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, Massachusetts 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
PERFORMANCE DATA
About Fund Performance
Since October 21, 1994, investors have been able to purchase shares
of the Fund through the Merrill Lynch Select Pricing SM System,
which offers four pricing alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees. Class A Shares are available only to eligible investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.25% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after approximately 10 years.
* Class C Shares are subject to a distribution fee of 0.35% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.10% (but no distribution fee.)
Performance data for all of the Fund's shares are presented in the
"Aggregate Total Return" and the "Recent Performance Results" tables
below and on page 4. The "Recent Performance Results" table shows
investment results before the deduction of any sales charges for
Class A and Class B Shares for the since inception (May 6, 1994) and
3-month periods ended January 31, 1995 and for Class C and Class D
Shares for the since inception (October 21, 1994) and 3-month
periods ended January 31, 1995. All data in this table assume
imposition of the actual total expenses incurred by each class of
shares during the relevant period.
<PAGE>
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. Dividends paid to each class
of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
Aggregate Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Inception (5/6/94)
through 12/31/94 +0.87% -3.17%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Inception (5/6/94)
through 12/31/94 +0.53% -3.35%
[FN]
*Maximum contingent 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*
Inception (10/21/94)
through 12/31/94 -0.90% -1.88%
[FN]
*Maximum contingent sales charge is 1% and is reduced
to 0% after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Inception (10/21/94)
through 12/31/94 -0.67% -4.65%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
PERFORMANCE DATA (concluded)
<TABLE>
Recent Performance Results
<CAPTION>
Since Inception 3 Month
1/31/95 10/31/94 Inception++ % Change++ % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $9.97 $9.74 $10.00 -0.30% +2.36%
Class B Shares* 9.97 9.74 10.00 -0.30 +2.36
Class C Shares* 9.98 9.74 9.89 +0.91 +2.46
Class D Shares* 9.97 9.74 9.89 +0.81 +2.36
Class A Shares--Total Return* +4.14(1) +4.03(2)
Class B Shares--Total Return* +3.76(3) +3.90(4)
Class C Shares--Total Return* +2.37(5) +3.82(6)
Class D Shares--Total Return* +2.55(7) +4.01(8)
Class A Shares--Standardized 30-day Yield 5.94%
Class B Shares--Standardized 30-day Yield 5.69%
Class C Shares--Standardized 30-day Yield 5.55%
Class D Shares--Standardized 30-day Yield 5.85%
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
++Class A and Class B Shares commenced operations on 5/6/94. Class C
and Class D Shares commenced operations on 10/21/94.
(1)Percent change includes reinvestment of $0.423 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.156 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.387 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.143 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.128 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.127 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.155 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.154 per share ordinary
income dividends.
</TABLE>
<PAGE>
PORTFOLIO ABBREVIATIONS
To simplify the listings of Merrill Lynch New Mexico
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
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
New Mexico--86.8%
<S> <S> <C> <S> <C>
AAA Aaa $1,500 Albuquerque, New Mexico, Airport Revenue Bonds, AMT, Series A, 6.60% due
7/01/2016 (d) $ 1,507
AA Aa 500 Albuquerque, New Mexico, General Purpose Bonds, UT, Series A, 5.80%
due 7/01/2000 510
AA Aa 500 Albuquerque, New Mexico, Municipal School District Number 012, GO, UT,
5.70% due 8/01/2008 490
NR* A 500 Carlsbad, New Mexico, Sales Tax Revenue Bonds, 6.30% due 10/01/2010 508
A1+ P1 500 Farmington, New Mexico, PCR (Arizona Public Service Company), VRDN, AMT,
Series C, 4.30% due 9/01/2024 (a) 500
Farmington, New Mexico, PCR, Refunding, Series A:
AAA Aaa 500 (Public Service Company of New Mexico), 6.375% due 12/15/2022 (d) 501
A+ Aa3 1,000 (Southern California Edison Company), 7.20% due 4/01/2021 1,032
AAA Aaa 500 Farmington, New Mexico, Utility System Revenue Refunding Bonds,
5.75% due 5/15/2013 (c) 474
AAA Aaa 1,780 Gallup, New Mexico, PCR, Refunding (Plains Electric Generation),
6.65% due 8/15/2017 (b) 1,819
<PAGE>
AAA Aaa 1,000 Las Cruces, New Mexico, Health Facilities Revenue Refunding Bonds
(Evangelical Lutheran Project), Capital Guaranty, 6.45% due 12/01/2017 1,003
A A3 750 Lordsburg, New Mexico, PCR, Refunding (Phelps Dodge Corporation Project),
6.50% due 4/01/2013 744
AAA Aaa 500 Los Alamos County, New Mexico, Utility System Revenue Refunding Bonds,
Series A, 6% due 7/01/2015 (e) 485
AAA Aaa 425 Los Lunas, New Mexico, Gross Receipt Tax Revenue Refunding Bonds, 5.50% due
7/01/2009 (b) 401
NR* Aaa 750 New Mexico Mortgage Finance Authority, Mortgage-Backed Securities, Series A,
6.875% due 1/01/2025 (f)(g) 791
A1 VMIG1++ 600 New Mexico State Hospital Equipment Loan Council, Hospital Equipment and
Improvement Revenue Bonds (Health Facilities), VRDN, 3.70% due 5/01/2009 (a)(b) 600
AA A1 750 New Mexico State University, Revenue Refunding and Improvement Bonds, 5.75%
due 4/01/2016 699
NR* Aa 600 New Mexico System Revenue Bonds (Military Institution at Rosewell), 6% due
6/01/2013 589
NR* A 750 San Juan County, New Mexico, Gross Receipts Gas Tax Revenue Bonds, Series B,
7% due 9/15/2009 770
Santa Fe, New Mexico, Revenue Bonds, Series A (d):
AAA Aaa 750 6.25% due 6/01/2015 749
AAA Aaa 1,000 6.30% due 6/01/2024 1,000
University of New Mexico, University Revenue Bonds:
AA A1 500 Refunding, Series A, 6% due 6/01/2021 470
AA A1 500 Series B, 5.75% due 6/01/2022 451
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Puerto Rico--11.7%
<S> <S> <C> <S> <C>
A Baa $ 500 Puerto Rico Commonwealth, Aqueduct and Sewer Authority Revenue
Bonds, Series A, 7% due 7/01/2019 $ 510
A Baa1 300 Puerto Rico Commonwealth, GO, UT, 6.45% due 7/01/2017 300
A- Baa1 500 Puerto Rico Electric Power Authority, Power Revenue Refunding Bonds,
Series S, 7% due 7/01/2007 533
<PAGE>
BBB- NR* 400 Puerto Rico Industrial, Tourist, Educational, Medical and Environmental
Control Facilities Financing Authority, Higher Education Revenue Bonds
(PolyTechnic University of Puerto Rico Project), Series A, 5.50% due 8/01/2024 326
A+ A 500 Puerto Rico Telephone Authority, Revenue Refunding Bonds, Series L,
6.125% due 1/01/2022 484
Total Investments (Cost--$18,248)--98.5% 18,246
Other Assets Less Liabilities--1.5% 285
-------
Net Assets--100.0% $18,531
=======
<FN>
*Not Rated.
(a)The interest rate is subject to change periodically based upon
the prevailing market rate. The interest rate shown is the rate in
effect at January 31, 1995.
(b)MBIA Insured.
(c)FGIC Insured.
(d)AMBAC Insured.
(e)FSA Insured.
(f)GNMA/FNMA Insured.
(g)FHA Insured.
++Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of January 31, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$18,247,659) (Note 1a) $18,245,873
Cash 49,127
Receivables:
Interest $ 287,017
Beneficial interest sold 121,594
Investment adviser (Note 2) 97,738 506,349
-----------
Deferred organization expenses (Note 1e) 47,237
Prepaid registration fees and other assets (Note 1e) 14,005
-----------
Total assets 18,862,591
-----------
<PAGE>
Liabilities: Payables:
Securities purchased 249,500
Dividends to shareholders (Note 1f) 23,587
Distributor (Note 2) 3,771 276,858
-----------
Accrued expenses and other liabilities 54,387
-----------
Total liabilities 331,245
-----------
Net Assets: Net assets $18,531,346
===========
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 79,480
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 98,866
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 300
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 7,167
Paid-in capital in excess of par 18,451,828
Accumulated realized capital losses--net (104,509)
Unrealized depreciation on investments--net (1,786)
-----------
Net assets $18,531,346
===========
Net Asset Value: Class A--Based on net assets of $7,926,595 and
794,798 shares of beneficial interest outstanding $ 9.97
===========
Class B--Based on net assets of $9,860,074 and
988,659 shares of beneficial interest outstanding $ 9.97
===========
Class C--Based on net assets of $29,890 and
2,995 shares of beneficial interest outstanding $ 9.98
===========
Class D--Based on net assets of $714,787 and
71,673 shares of beneficial interest outstanding $ 9.97
===========
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months Ended
January 31, 1995
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 515,560
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 47,455
Printing and shareholder reports 30,680
Professional fees 27,220
Distribution fees--Class B (Note 2) 22,290
Accounting services (Note 2) 18,267
Amortization of organization expenses (Note 1e) 5,747
Registration fees (Note 1e) 4,877
Custodian fees 3,098
Transfer agent fees--Class B (Note 2) 2,248
Pricing fees 1,788
Transfer agent fees--Class A (Note 2) 1,649
Trustees' fees and expenses 469
Account maintenance fees--Class D (Note 2) 119
Transfer agent fees--Class D (Note 2) 50
Distribution fees--Class C (Note 2) 10
Transfer agent fees--Class C (Note 2) 2
Other 1,642
-----------
Total expenses before reimbursement 167,611
Reimbursement of expenses (Note 2) (145,193)
-----------
Total expenses after reimbursement 22,418
-----------
Investment income--net 493,142
-----------
Realized & Realized loss on investments--net (85,462)
Unrealized Change in unrealized appreciation/depreciation on investments--net (333,222)
Loss on -----------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 74,458
(Notes 1b, 1d ===========
& 3):
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the
For the Six Period
Months Ended May 6, 1994++
January 31, to July 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 493,142 $ 173,345
Realized loss on investments--net (85,462) (7,470)
Change in unrealized appreciation/depreciation on
investments--net (333,222) 331,436
----------- -----------
Net increase in net assets resulting from operations 74,458 497,311
----------- -----------
Dividends & Investment income--net:
Distributions to Class A (241,748) (88,620)
Shareholders Class B (243,992) (84,725)
(Note 1f): Class C (87) --
Class D (7,315) --
Realized gain on investments--net:
Class A (5,153) --
Class B (6,007) --
Class C (1) --
Class D (416) --
----------- -----------
Net decrease in net assets resulting from dividends and
distributions to shareholders (504,719) (173,345)
----------- -----------
Beneficial Interest Net increase in net assets derived from beneficial interest
Transactions transactions 2,290,042 16,247,599
(Note 4):
----------- -----------
Net Assets: Total increase in net assets 1,859,781 16,571,565
Beginning of period 16,671,565 100,000
----------- -----------
End of period $18,531,346 $16,671,565
=========== ===========
<FN>
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
Class A
For the
The following per share data and ratios have been derived For the Six Period
from information provided in the financial statements. Months Ended May 6, 1994++
January 31, to July 31,
Increase (Decrease) in Net Asset Value: 1995 1994
<S> <S> <C> <C>
Per Share Net asset value, beginning of period $ 10.24 $ 10.00
Operating ----------- -----------
Performance: Investment income--net .30 .13
Realized and unrealized gain (loss) on investments--net (.26) .24
----------- -----------
Total from investment operations .04 .37
----------- -----------
Less dividends and distributions:
Investment income--net (.30) (.13)
Realized gain on investments--net (.01) --
----------- -----------
Total dividends and distributions (.31) (.13)
----------- -----------
Net asset value, end of period $ 9.97 $ 10.24
=========== ===========
Total Investment Based on net asset value per share 0.37%+++ 3.76%+++
Return:** =========== ===========
Ratios to Expenses, net of reimbursement -- --
Average =========== ===========
Net Assets: Expenses 1.68%* 2.47%*
=========== ===========
Investment income--net 5.97%* 5.49%*
=========== ===========
Supplemental Net assets, end of period (in thousands) $ 7,927 $ 8,166
Data: =========== ===========
Portfolio turnover 8.87% 16.06%
=========== ===========
<FN>
*Annualized.
**Total investment returns exclude the effect
of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class B
For the
The following per share data and ratios have been derived For the Six Period
from information provided in the financial statements. Months Ended May 6, 1994++
January 31, to July 31,
Increase (Decrease) in Net Asset Value: 1995 1994
<S> <S> <C> <C>
Per Share Net asset value, beginning of period $ 10.24 $ 10.00
Operating ----------- -----------
Performance: Investment income--net .27 .12
Realized and unrealized gain (loss) on investments--net (.26) .24
----------- -----------
Total from investment operations .01 .36
----------- -----------
Less dividends and distributions:
Investment income--net (.27) (.12)
Realized gain on investments--net (.01) --
----------- -----------
Total dividends and distributions (.28) (.12)
----------- -----------
Net asset value, end of period $ 9.97 $ 10.24
=========== ===========
Total Investment Based on net asset value per share 0.12%+++ 3.64%+++
Return:** =========== ===========
Ratios to Expenses, excluding distribution fees and net of reimbursement -- --
Average =========== ===========
Net Assets: Expenses, net of reimbursement .50%* .50%*
=========== ===========
Expenses 2.19%* 2.97%*
=========== ===========
Investment income--net 5.47%* 4.98%*
=========== ===========
Supplemental Net assets, end of period (in thousands) $ 9,860 $ 8,505
Data: =========== ===========
Portfolio turnover 8.87% 16.06%
=========== ===========
<FN>
*Annualized.
**Total investment returns exclude the effect
of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. October 21, 1994++ to
January 31, 1995
Increase (Decrease) in Net Asset Value: Class C Class D
<S> <S> <C> <C>
Per Share Net asset value, beginning of period $ 9.89 $ 9.89
Operating ----------- -----------
Performance: Investment income--net .13 .16
Realized and unrealized gain on investments--net .10 .09
----------- -----------
Total from investment operations .23 .25
----------- -----------
Less dividends and distributions:
Investment income--net (.13) (.16)
Realized gain on investments--net (.01) (.01)
----------- -----------
Total dividends and distributions (.14) (.17)
----------- -----------
Net asset value, end of period $ 9.98 $ 9.97
=========== ===========
Total Investment Based on net asset value per share 2.37%+++ 2.55%+++
Return:** =========== ===========
Ratios to Expenses, excluding account maintenance and distribution
Average fees and net of reimbursement -- --
Net Assets: =========== ===========
Expenses, net of reimbursement .60%* .10%*
=========== ===========
Expenses 2.39%* 1.80%*
=========== ===========
Investment income--net 5.43%* 6.13%*
=========== ===========
Supplemental Net assets, end of period (in thousands) $ 30 $ 715
Data: =========== ===========
Portfolio turnover 8.87% 8.87%
=========== ===========
<FN>
*Annualized.
**Total investment returns exclude the effect
of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch New Mexico Municipal Bond Fund (the "Fund") is part of
Merrill Lynch Multi-State Municipal Series Trust (the "Trust"). The
Fund is registered under the Investment Company Act of 1940 as a non-
diversified, open-end management investment company. These unaudited
financial statements reflect all adjustments which are, in the
opinion of management, necessary to a fair statement of the results
for the interim period presented. All such adjustments are of a
normal recurring nature. The Fund offers four classes of shares
under the Merrill Lynch Select Pricing SM System. Shares of Class A
and Class D are sold with a front-end sales charge. Shares of Class
B and Class C may be subject to a contingent deferred sales charge.
All classes of shares have identical voting, dividend, liquidation
and other rights and the same terms and conditions, except that
Class B, Class C and Class D Shares bear certain expenses related to
the account maintenance of such shares, and Class B and Class C
Shares also bear certain expenses related to the distribution of
such shares. Each class has exclusive voting rights with respect to
matters relating to its account maintenance and distribution
expenditures. The following is a summary of significant accounting
policies followed by the Fund.
(a) Valuation of investments--Municipal bonds and other portfolio
securities in which the Fund invests are traded primarily in the
over-the-counter municipal bond and money markets and are valued at
the last available bid price in the over-the-counter market or on
the basis of yield equivalents as obtained from one or more dealers
that make markets in the securities. Financial futures contracts and
options thereon, which are traded on exchanges, are valued at their
settlement prices as of the close of such exchanges. Short-term
investments with remaining maturities of sixty days or less are
valued at amortized cost, which approximates market value.
Securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or
under the direction of the Board of Trustees of the Trust, including
valuations furnished by a pricing service retained by the Trust,
which may utilize a matrix system for valuations. The procedures of
the pricing service and its valuations are reviewed by the officers
of the Trust under the general supervision of the Trustees.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
<PAGE>
* Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures contracts
are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a
contract, the Fund deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is
effected. Pursuant to the contract, the Fund agrees to receive from
or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are
known as variation margin and are recorded by the Fund as unrealized
gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a five-year period. Prepaid registration fees are
charged to expense as the related shares are issued.
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, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
<PAGE>
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee based upon the average daily
value of the Fund's net assets at the following annual rates: 0.55%
of the Fund's average daily net assets not exceeding $500 million;
0.525% of average daily net assets in excess of $500 million but not
exceeding $1 billion; and 0.50% of average daily net assets in
excess of $1 billion. The Investment Advisory Agreement obligates
FAM to reimburse the Fund to the extent the Fund's expenses
(excluding interest, taxes, distribution fees, brokerage fees and
commissions, and extraordinary items) exceed 2.5% of the Fund's
first $30 million of the average daily net assets, 2.0% of the next
$70 million of average daily net assets, and 1.5% of the average
daily net assets in excess thereof. FAM's obligation to reimburse
the Fund is limited to the amount of the management fee. No fee
payment will be made to the Investment Adviser during any fiscal
year which will cause such expenses to exceed expense limitations at
the time of payment. For the six months ended January 31, 1995, FAM
earned fees of $47,455, all of which was voluntarily waived. FAM
also reimbursed the Fund additional expenses of $97,738.
Pursuant to the distribution plans (the "Distribution Plans")
adopted by the Fund in accordance with Rule 12b-1 under the
Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are
accrued daily and paid monthly at annual rates based upon the
average daily net assets of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B .25% .25%
Class C .25% .35%
Class D .10% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
<PAGE>
For the six-months ended January 31, 1995, MLFD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the
Fund's Class A and Class D Shares as follows:
MLFD MLPF&S
Class A $1,903 $14,307
Class D $1,490 $ 6,925
MLPF&S received contingent deferred sales charges of $5,873 relating
to transactions in Class B Shares of beneficial interest for the six
months ended January 31, 1995.
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, MLPF&S, FDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended January 31, 1995 were $4,781,133 and
$1,373,602, respectively.
Net realized and unrealized losses as of January 31, 1995 were as
follows:
Realized Unrealized
Losses Losses
Long-term investments $ (28,058) $ (1,786)
Financial futures contracts (57,404) --
--------- -----------
Total $ (85,462) $ (1,786)
========= ===========
As of January 31, 1995, net unrealized depreciation for Federal
income tax purposes aggregated $1,786, of which $114,173 related to
depreciated securities and $115,959 related to depreciated
securities. The aggregate cost of investments at January 31, 1995
for Federal income tax purposes was $18,247,659.
<PAGE>
4. Beneficial Interest Transactions:
Net increase in net assets derived from beneficial interest
transactions was $2,290,042 and $16,247,599 for the six months ended
January 31, 1995 and the year ended July 31, 1994, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the
Six Months Ended Dollar
January 31, 1995 Shares Amount
Shares sold 115,860 $ 1,163,234
Shares issued to shareholders
in reinvestment of dividends
& distributions 3,367 32,928
--------- -----------
Total issued 119,227 1,196,162
Shares redeemed (121,677) (1,195,321)
--------- -----------
Net increase (decrease) (2,450) $ 841
========= ===========
Class A Shares for the
Period May 6, 1994++ to Dollar
July 31, 1994 Shares Amount
Shares sold 811,846 $ 8,154,057
Shares issued to shareholders
in reinvestment of dividends 461 4,692
--------- -----------
Total issued 812,307 8,158,749
--------- -----------
Shares redeemed (20,059) (201,258)
--------- -----------
Net increase 792,248 $ 7,957,491
========== ===========
[FN]
++Prior to May 6, 1994 (commencement of operations), the Fund issued
5,000 shares to FAM for $50,000.
<PAGE>
Class B Shares for the
Six Months Ended Dollar
January 31, 1995 Shares Amount
Shares sold 222,397 $ 2,197,905
Shares issued to shareholders
in reinvestment of dividends
& distributions 4,890 47,743
--------- -----------
Total issued 227,287 2,245,648
Shares redeemed (68,969) (670,425)
--------- -----------
Net increase 158,318 $ 1,575,223
========= ===========
Class B Shares for the Period Dollar
May 6, 1994++ to July 31, 1994 Shares Amount
Shares sold . 835,841 $ 8,396,609
Shares issued to shareholders
in reinvestment of dividends 818 8,343
--------- -----------
Total issued 836,659 8,404,952
Shares redeemed (11,318) (114,844)
--------- -----------
Net increase 825,341 $ 8,290,108
========= ===========
[FN]
++Prior to May 6, 1994 (commencement of operations), the Fund issued
5,000 shares to FAM for $50,000.
Class C Shares for the
Period October 21, 1994++ to Dollar
January 31, 1995 Shares Amount
Shares sold . 2,994 $ 29,419
Shares issued to shareholders
in reinvestment of dividends
& distributions 1 14
--------- -----------
Net increase 2,995 $ 29,433
========= ===========
[FN]
++Commencement of Operations.
<PAGE>
Class D Shares for the
Period October 21, 1994++ to Dollar
January 31, 1995 Shares Amount
Shares sold . 90,983 $ 871,832
Shares issued to shareholders
in reinvestment of dividends
& distributions 421 4,105
--------- -----------
Total issued 91,404 875,937
Shares redeemed (19,731) (191,392)
--------- -----------
Net increase 71,673 $ 684,545
========= ===========
[FN]
++Commencement of Operations.
