MERRILL LYNCH
NEW MEXICO
MUNICIPAL
BOND FUND
FUND LOGO
Semi-Annual Report
January 31, 1996
<PAGE>
Officers and Trustees
Arthur Zeikel, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Kenneth A. Jacob, Vice President
William R. Bock, Portfolio Manager
Gerald M. Richard, Treasurer
Jerry Weiss, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
<PAGE>
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 datedand are subject
to change.
Merrill Lynch New Mexico
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011
TO OUR SHAREHOLDERS
Although the partial shutdown of the US Government curtailed the
release of most economic data in the latter part of the six-month
period ended January 31, 1996, it was nonetheless apparent that
gross domestic product (GDP) growth was losing momentum. Consumer
spending is barely growing, the industrial sector is at a virtual
standstill and, despite lower mortgage rates, there is little or no
pick-up in housing activity. With inflationary pressures subdued,
the Federal Reserve Board responded to the slowing economy by
continuing to modestly lower short-term interest rates.
Historically, it has taken some time for shifts in monetary policy
to have an impact on economic growth. Therefore, the Federal Reserve
Board's gradual shift to lowering interest rates, which began early
last year, may not be reflected in a pick-up in real economic growth
until later this year.
The impasse between the Clinton Administration and Congress over the
Federal budget continues, although both sides have made concessions
since the debate began. It appears that investors are currently
focusing on the progress that has been made rather than on the
differences that remain. Initially, President Clinton proposed
deficits of about $190 billion annually through fiscal year 2002,
but now proposes balanced budgets, as do the Republicans. Current
indications are that a piecemeal budget accord is the most likely
outcome. Even without the proposed policy changes, it appears that
the US Federal budget deficit would remain stable at about 2% of GDP
for the rest of the decade. This would be far better than is the
case for most Group of Seven industrial nations, and for the United
States would represent a great improvement over the last 15 years.
Although this may fall short of investors' best expectations, it
appears that the Federal budget debate over the past year has
resulted in a trend toward a more conservative fiscal policy.
<PAGE>
The Municipal Market
The municipal bond market rallied strongly over the six months ended
January 31, 1996. Long-term, tax-exempt revenue bond yields, as
measured by the Bond Buyer Revenue Bond Index, declined over 65
basis points (0.65%) to end the January period at 5.69%. Continued
weak economic conditions coupled with low inflation fostered a very
positive environment for almost all fixed-income investments during
the last three months of 1995. Long-term US Treasury bond yields
also declined approximately 65 basis points to 6.00% by January 31,
1996. Both US Treasury and long-term tax-exempt bond yields are near
their lowest levels in the past two years.
The municipal bond market had to contend with a number of
difficulties for much of 1995. Various tax reform proposals have
made the future tax advantage of municipal bonds uncertain. This
has, at a minimum, reduced the overall demand for tax-exempt
securities. At the same time, as municipal bond yields declined, tax-
exempt authorities have rushed to issue debt at near historic low
yield levels. During the six-month period ended January 31, 1996,
approximately $90 billion in municipal securities were underwritten,
an increase of over 30% compared to the same period last year.
However, as early 1995 issuance was significantly reduced, the last
12 months issuance of approximately $160 billion remained the same
as that issued a year earlier. Tax-exempt bond yields declined
throughout the three months ended January 31, 1996, despite investor
uncertainty and increased supply pressures.
It is likely that the municipal market will regain much of the
technical support it enjoyed earlier in 1995. 1995 issuance remained
significantly below levels underwritten in 1993, when over $290
billion in long-term tax-exempt securities were issued. Also,
municipal investors received over $25 billion in bond maturities,
coupon income and early redemptions on January 1, 1996. This $25
billion is almost twice the average monthly issuance for 1995. The
amount of outstanding municipal securities will continue to decline
throughout 1996 and into early 1997. As the uncertainties
surrounding proposed tax reforms are resolved in 1996, the tax-
exempt bond market's renewed technical position should provide
support to municipal bond prices.
Many of the features that made tax-exempt products attractive to
investors last year are still in place. Long-term, A-rated municipal
revenue bonds continue to yield well over 90% of comparable US
Treasury bond yields. Historically, analysts have considered yields
in excess of 82% attractive for long-term investors. For example,
currently available tax-exempt bond yields generate taxable
equivalent yields in excess of 8.50% for an investor in the 36%
Federal income tax bracket. While the uncertainties regarding
potential changes in current tax law remain, it appears that, at
current price levels, bond investors have discounted at least some
of the uncertainty.
<PAGE>
Looking ahead, it may be unreasonable to expect to duplicate the
double-digit returns produced by most tax-exempt issues in 1995,
given current municipal bond yields. Municipal bond yields would
have to decline to levels not seen since the 1960s in order to
generate such significant returns in the coming years. While the
current economic environment may still justify additional declines
in interest rates, it may be prudent to expect some period of
consolidation before the interest rate decline resumes. Tax-exempt
bond market performance in 1996 is likely to be generated more by
enhancing current income and limiting credit risk than by
significant interest rate declines.
Portfolio Strategy
During the six-month period ended January 31, 1996, our portfolio
strategy continued to focus on partially restructuring the portfolio
to give the Fund a more performance-oriented posture in the
marketplace. The reason for this emphasis is that we remain
optimistic that long-term municipal interest rates will decline
further as a consequence of below-trend growth in the economy and
further cuts in short-term interest rates by the Federal Reserve
Board. We sold selected current coupons and shorter call securities
and replaced them with higher-quality performance-oriented bonds
that we believe will perform effectively in a falling interest rate
environment. We still consider it appropriate to maintain a balance
between seeking an attractive level of tax-exempt income and total
return.
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
<PAGE>
(Vincent R. Giordano)
Vincent R. Giordano
Vice President
(William R. Bock)
William R. Bock
Portfolio Manager
March 5, 1996
We are pleased to announce that William R. Bock is responsible for
the day-to-day management of Merrill Lynch New Mexico Municipal Bond
Fund. Mr. Bock has been employed by Merrill Lynch Asset Management,
L.P. (an affiliate of the Fund's investment adviser) since 1989 as
Vice President.
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.
<PAGE>
* 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. 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.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/95 +17.65% +12.95%
Inception (5/6/94)
through 12/31/95 +10.90 + 8.20
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/95 +17.06% +13.06%
Inception (5/6/94) through 12/31/95 +10.34 + 8.63
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced
to 0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 12/31/95 +17.02% +16.02%
Inception (10/21/94)
through 12/31/95 +13.20 +13.20
[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 12/31/95 +17.53% +12.83%
Inception (10/21/94) through 12/31/95 +13.84 +10.01
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
PERFORMANCE DATA (continued)
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
5/6/94--12/31/94 $10.00 $ 9.70 -- $0.388 + 0.87%
1995 9.70 10.75 -- 0.621 +17.65
1/1/96--1/31/96 10.75 10.76 -- 0.032 + 0.48
------
Total $1.041
Cumulative total return as of 1/31/96: +19.24%**
<PAGE>
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
include sales charge; results would be lower if sales charge was
included.
</TABLE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
5/6/94--12/31/94 $10.00 $ 9.70 -- $0.355 + 0.53%
1995 9.70 10.75 -- 0.569 +17.06
1/1/96--1/31/96 10.75 10.76 -- 0.029 + 0.45
------
Total $0.953
Cumulative total return as of 1/31/96: +18.21%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
<TABLE>
Performance Summary--Class C Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $ 9.89 $ 9.70 -- $0.099 - 0.90%
1995 9.70 10.76 -- 0.556 +17.02
1/1/96--1/31/96 10.76 10.76 -- 0.028 + 0.35
------
Total $0.683
Cumulative total return as of 1/31/96: +16.38%**
<PAGE>
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
<TABLE>
Performance Summary--Class D Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $ 9.89 $ 9.70 -- $0.121 - 0.67%
1995 9.70 10.75 -- 0.611 +17.53
1/1/96--1/31/96 10.75 10.76 -- 0.031 + 0.48
------
Total $0.763
Cumulative total return as of 1/31/96: +17.30%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
include sales charge; results would be lower if sales charge was
included.
</TABLE>
PERFORMANCE DATA (concluded)
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
1/31/96 10/31/95 1/31/95 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $10.76 $10.50 $9.97 + 7.92% +2.48%
Class B Shares* 10.76 10.50 9.97 + 7.92 +2.48
Class C Shares* 10.76 10.51 9.98 + 7.82 +2.38
Class D Shares* 10.76 10.50 9.97 + 7.92 +2.48
Class A Shares--Total Return* +14.50(1) +4.14(2)
Class B Shares--Total Return* +13.92(3) +4.01(4)
Class C Shares--Total Return* +13.68(5) +3.89(6)
Class D Shares--Total Return* +14.38(7) +4.12(8)
Class A Shares--Standardized 30-day Yield 4.61%
Class B Shares--Standardized 30-day Yield 4.30%
Class C Shares--Standardized 30-day Yield 4.19%
Class D Shares--Standardized 30-day Yield 4.51%
<PAGE>
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
(1)Percent change includes reinvestment of $0.618 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.173 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.566 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.160 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.554 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.157 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.608 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.171 per share ordinary
income dividends.
</TABLE>
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)
PCR Pollution Control Revenue Bonds
S/F Single Family
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)
<PAGE>
New Mexico--90.6%
<S> <S> <C> <S> <C>
AAA Aaa $ 1,000 Albuquerque, New Mexico, Airport Revenue Bonds, AMT, Series A,
6.60% due 7/01/2016 (d) $ 1,097
NR* A 500 Carlsbad, New Mexico, Sales Tax Revenue Bonds, 6.30% due 10/01/2010 529
A1+ NR* 100 Eddy County, New Mexico, PCR, Refunding (IMC Fertilizer Inc. Project),
VRDN,3.10% due 2/01/2003 (a) 100
Farmington, New Mexico, PCR (Arizona Public Service Co.), VRDN (a):
A1+ P1 400 AMT, Series C, 3.95% due 9/01/2024 400
A1+ P1 100 Refunding, Series B, 3.70% due 9/01/2024 100
Farmington, New Mexico, PCR, Refunding, Series A:
AAA Aaa 500 (Public Service Company of New Mexico), 6.375% due 12/15/2022 (d) 538
A+ Aa3 1,000 (Southern California Edison Company), 7.20% due 4/01/2021 1,103
AAA Aaa 500 Farmington, New Mexico, Utility System Revenue Refunding Bonds, 5.75%
due 5/15/2013 (c) 519
AAA Aaa 1,780 Gallup, New Mexico, PCR, Refunding (Plains Electric Generation), 6.65%
due 8/15/2017 (b) 1,969
A1+ P1 1,200 Hurley, New Mexico, PCR (Kennecott Santa Fe), VRDN, 3.85% due
12/01/2015 (a) 1,200
AAA Aaa 1,000 Las Cruces, New Mexico, Health Facilities Revenue Refunding Bonds
(Evangelical Lutheran Project), 6.45% due 12/01/2017 (e) 1,082
AAA Aaa 1,000 Las Cruces, New Mexico, Revenue Bonds, AMT, 5.50% due 12/01/2015 (b) 997
A A2 1,450 Lordsburg, New Mexico, PCR, Refunding (Phelps Dodge Corporation Project),
6.50% due 4/01/2013 1,534
AAA Aaa 2,000 Los Alamos County, New Mexico, Utility System Revenue Refunding Bonds,
Series A, 6% due 7/01/2015 (e) 2,104
New Mexico Mortgage Finance Authority, Mortgage-Backed Securities (f)(g):
NR* Aaa 750 Series A, 6.875% due 1/01/2025 827
AAA NR* 500 Series F, 7% due 1/01/2026 555
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<PAGE>
New Mexico (concluded)
<S> <S> <C> <S> <C>
New Mexico Mortgage Finance Authority, S/F Mortgage Program, AMT (f):
AAA NR* $ 900 Series A (Class D), 6.65% due 7/01/2026 $ 931
AAA NR* 1,000 Series H, 6.60% due 7/01/2015 1,035
AA A1 750 New Mexico State University, Revenue Refunding and Improvement Bonds,
5.75% due 4/01/2016 760
NR* A 750 San Juan County, New Mexico, Gross Receipts, Gas Tax Revenue Bonds,
Series B, 7% due 9/15/2004 (h) 885
Santa Fe, New Mexico, Revenue Bonds, Series A (d)(h):
AAA Aaa 750 6.25% due 6/01/2004 844
AAA Aaa 1,260 6.30% due 6/01/2004 1,427
AAA Aaa 1,000 Santa Fe, New Mexico, Utility Revenue Refunding Bonds, Series A, 5.25%
due 6/01/2017 (d) 991
AA- A1 500 University of New Mexico, University Revenue Bonds, Series B, 5.75% due
6/01/2022 505
Puerto Rico--10.2%
AAA Aaa 1,000 Puerto Rico Commonwealth, Highway and Transportation Authority Revenue
Bonds, Series W, 5.50% due 7/01/2017 (e) 1,010
A Baa1 1,000 Puerto Rico Commonwealth, Refunding and Improvement Bonds, UT, 5.50%
due 7/01/2013 982
A- Baa1 500 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series X,
5.50% due 7/01/2025 490
Total Investments (Cost--$22,995)--100.8% 24,514
Liabilities in Excess of Other Assets--(0.8%) (195)
--------
Net Assets--100.0% $ 24,319
========
<FN>
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at January 31, 1996.
(b)MBIA Insured.
(c)FGIC Insured.
(d)AMBAC Insured.
(e)FSA Insured.
(f)GNMA/FNMA Insured.
(g)FHA Insured.
(h)Prerefunded.
*Not Rated.
<PAGE>
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of January 31, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$22,995,248) (Note 1a) $24,514,322
Cash 1,247
Receivables:
Interest $ 278,750
Investment adviser (Note 2) 24,138 302,888
-----------
Deferred organization expenses (Note 1e) 35,664
Prepaid registration fees and other assets (Note 1e) 40,352
-----------
Total assets 24,894,473
-----------
Liabilities: Payables:
Securities purchased 488,153
Dividends to shareholders (Note 1f) 28,880
Distributor (Note 2) 6,067 523,100
-----------
Accrued expenses and other liabilities 52,841
-----------
Total liabilities 575,941
-----------
Net Assets: Net assets $24,318,532
===========
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited number
Consist of: of shares authorized $ 72,372
Class B Shares of beneficial interest, $.10 par value, unlimited number
of shares authorized 131,963
Class C Shares of beneficial interest, $.10 par value, unlimited number
of shares authorized 2,788
Class D Shares of beneficial interest, $.10 par value, unlimited number
of shares authorized 18,912
Paid-in capital in excess of par 22,593,121
Accumulated realized capital losses on investments--net (19,698)
Unrealized appreciation on investments--net 1,519,074
-----------
Net assets $24,318,532
===========
<PAGE>
Net Asset Value: Class A--Based on net assets of $7,786,216 and 723,721 shares
of beneficial interest outstanding $ 10.76
===========
Class B--Based on net assets of $14,197,631 and 1,319,634 shares
of beneficial interest outstanding $ 10.76
===========
Class C--Based on net assets of $300,135 and 27,881 shares
of beneficial interest outstanding $ 10.76
===========
Class D--Based on net assets of $2,034,550 and 189,123 shares
of beneficial interest outstanding $ 10.76
===========
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months Ended
January 31, 1996
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 665,360
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 62,771
Account maintenance & distribution fees--Class B (Note 2) 32,833
Printing and shareholder reports 28,268
Accounting services (Note 2) 25,198
Professional fees 24,866
Registration fees (Note 1e) 7,004
Amortization of organization expenses (Note 1e) 5,696
Transfer agent fees--Class B (Note 2) 3,277
Pricing fees 1,962
Transfer agent fees--Class A (Note 2) 1,570
Custodian fees 1,167
Account maintenance fees--Class D (Note 2) 888
Account maintenance & distribution fees--Class C (Note 2) 675
Trustees' fees and expenses 574
Transfer agent fees--Class D (Note 2) 362
Transfer agent fees--Class C (Note 2) 64
Other 624
-----------
Total expenses before reimbursement 197,799
Reimbursement of expenses (Note 2) (115,228)
-----------
Total expenses after reimbursement 82,571
-----------
Investment income--net 582,789
-----------
<PAGE>
Realized & Realized gain on investments--net 162,438
Unrealized Gain on Change in unrealized appreciation on investments--net 916,268
Investments--Net -----------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations $ 1,661,495
===========
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
January 31, July 31,
Increase (Decrease) in Net Assets: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 582,789 $ 1,058,469
Realized gain (loss) on investments--net 162,438 (88,319)
Change in unrealized appreciation on investments--net 916,268 271,370
----------- -----------
Net increase in net assets resulting from operations 1,661,495 1,241,520
----------- -----------
Dividends & Investment income--net:
Distributions to Class A (208,418) (475,870)
Shareholders Class B (321,923) (536,222)
(Note 1f): Class C (5,360) (2,737)
Class D (47,088) (43,640)
Realized gain on investments--net:
Class A (24,218) --
Class B (43,528) --
Class C (813) --
Class D (6,212) --
In excess of realized gain on investments--net:
Class A -- (5,153)
Class B -- (6,007)
Class C -- (1)
Class D -- (415)
----------- -----------
Net decrease in net assets resulting from dividends and distributions
to shareholders (657,560) (1,070,045)
----------- -----------
<PAGE>
Beneficial Interest Net increase in net assets derived from beneficial interest 1,762,241 4,709,316
Transactions transactions ----------- -----------
(Note 4):
Net Assets: Total increase in net assets 2,766,176 4,880,791
Beginning of period 21,552,356 16,671,565
----------- -----------
End of period $24,318,532 $21,552,356
=========== ===========
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
Class A Class B
For the For the For the For the
Six For the Period Six For the Period
The following per share data and ratios have been derived Months Year May 6, Months Year May 6,
from information provided in the financial statements. Ended Ended 1994++ to Ended Ended 1994++ to
Jan. 31, July 31, July 31, Jan. 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.29 $ 10.24 $ 10.00 $ 10.29 $ 10.24 $ 10.00
Operating -------- -------- -------- -------- -------- --------
Performance Investment income--net .29 .60 .13 .26 .54 .12
Realized and unrealized gain on
investments--net .50 .06 .24 .50 .06 .24
-------- -------- -------- -------- -------- --------
Total from investment operations .79 .66 .37 .76 .60 .36
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.29) (.60) (.13) (.26) (.54) (.12)
Realized gain on investments--net (.03) -- -- (.03) -- --
In excess of realized gain on
investments--net -- (.01) -- -- (.01) --
-------- -------- -------- -------- -------- --------
Total dividends and distributions (.32) (.61) (.13) (.29) (.55) (.12)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 10.76 $ 10.29 $ 10.24 $ 10.76 $ 10.29 $ 10.24
======== ======== ======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share 7.75%+++ 6.65% 3.76%+++ 7.48%+++ 6.11% 3.64%+++
Return:** ======== ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement .41%* .07% .00%* .92%* .59% .50%*
Average Net ======== ======== ======== ======== ======== ========
Assets: Expenses 1.42%* 1.65% 2.47%* 1.93%* 2.16% 2.97%*
======== ======== ======== ======== ======== ========
Investment income--net 5.40%* 5.92% 5.49%* 4.89%* 5.40% 4.98%*
======== ======== ======== ======== ======== ========
Supplemental Net assets, end of period
Data: (in thousands) $ 7,786 $ 7,715 $ 8,166 $ 14,198 $ 12,104 $ 8,505
======== ======== ======== ======== ======== ========
Portfolio turnover 31.63% 28.16% 16.06% 31.63% 28.16% 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>
FINANCIAL INFORMATION (concluded)
<PAGE>
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class C Class D
For the For the
For the Period For the Period
The following per share data and ratios have been derived Six Months Oct. 21, Six Months Oct. 21,
from information provided in the financial statements. Ended 1994++ to Ended 1994++ to
Jan. 31, July 31, Jan. 31, July 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1996 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.30 $ 9.89 $ 10.29 $ 9.89
Operating ------- ------- ------- -------
Performance: Investment income--net .25 .40 .28 .46
Realized and unrealized gain on investments--net .49 .42 .50 .41
------- ------- ------- -------
Total from investment operations .74 .82 .78 .87
------- ------- ------- -------
Less dividends and distributions:
Investment income--net (.25) (.40) (.28) (.46)
Realized gain on investments--net (.03) -- (.03) --
In excess of realized gain on investments--net -- (.01) -- (.01)
------- ------- ------- -------
Total dividends and distributions (.28) (.41) (.31) (.47)
------- ------- ------- -------
Net asset value, end of period $ 10.76 $ 10.30 $ 10.76 $ 10.29
======= ======= ======= =======
Total Investment Based on net asset value per share 7.32%+++ 8.44%+++ 7.70%+++ 8.91%+++
Return:** ======= ======= ======= =======
Ratios to Expenses, net of reimbursement 1.04%* .80%* .52%* .23%*
Average ======= ======= ======= =======
Net Assets: Expenses 2.04%* 2.27%* 1.52%* 1.74%*
======= ======= ======= =======
Investment income--net 4.75%* 5.20%* 5.29%* 5.80%*
======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $ 300 $ 164 $ 2,035 $ 1,569
Data: ======= ======= ======= =======
Portfolio turnover 31.63% 28.16% 31.63% 28.16%
======= ======= ======= =======
<PAGE>
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
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.
<PAGE>
(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 interest
rate futures contracts and options on such futures contracts for the
purpose of hedging the market risk on existing securities or the
intended purchase of securities. Futures contracts are contracts for
delayed delivery of securities at a specific future date and at a
specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to
the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin
and are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a five-year period. Prepaid registration fees are
charged to expense as the related shares are issued.
(f) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates. Distributions in excess
of realized capital gains are due primarily to differing tax
treatments for futures transactions and post-October losses.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded)
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee based upon the average daily
value of the Fund's net assets at the following annual rates: 0.55%
of the Fund's average daily net assets not exceeding $500 million;
0.525% of average daily net assets in excess of $500 million but not
exceeding $1 billion; and 0.50% of average daily net assets in
excess of $1 billion. 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 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 FAM during any fiscal year which will cause such expenses
to exceed expense limitation at the time of payment. For the six
months ended January 31, 1996, FAM earned fees of $62,771, all of
which was voluntarily waived. FAM also reimbursed the Fund
additional expenses of $52,457.
Pursuant to the distribution plans (the "Distribution Plans")
adopted by the Fund in accordance with Rule 12b-1 under the
Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are
accrued daily and paid monthly at annual rates based upon the
average daily net assets of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.25%
Class C 0.25% 0.35%
Class D 0.10% --
<PAGE>
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the six months ended January 31, 1996, 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 $146 $1,595
Class D $306 $3,930
For the six months ended January 31, 1996, MLPF&S received
contingent deferred sales charges of $16,171 relating to
transactions in Class B Shares.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, MLPF&S, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended January 31, 1996 were $7,548,932 and
$6,800,208, respectively.
Net realized and unrealized gains (losses) as of January 31, 1996
were as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $ 190,159 $ 1,519,074
Financial futures contracts (27,721) --
----------- -----------
Total $ 162,438 $ 1,519,074
=========== ===========
<PAGE>
As of January 31, 1996, net unrealized appreciation for Federal
income tax purposes aggregated $1,519,074, all of which related to
appreciated securities. The aggregate cost of investments at January
31, 1996 for Federal income tax purposes was $22,995,248.
4. Beneficial Interest Transactions:
Net increase in net assets derived from beneficial interest
transactions was $1,762,241 and $4,709,316 for the six months ended
January 31, 1996 and for the year ended July 31, 1995, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Six Months Dollar
Ended January 31, 1996 Shares Amount
Shares sold 25,093 $ 263,708
Shares issued to share-
holders in reinvestment of
dividends & distributions 3,287 34,675
----------- -----------
Total issued 28,380 298,383
Shares redeemed (54,142) (561,744)
----------- -----------
Net decrease (25,762) $ (263,361)
=========== ===========
Class A Shares for the Year Dollar
Ended July 31, 1995 Shares Amount
Shares sold 149,880 $ 1,513,497
Shares issued to share-
holders in reinvestment of
dividends & distributions 7,205 72,400
----------- -----------
Total issued 157,085 1,585,897
Shares redeemed (204,850) (2,052,561)
----------- -----------
Net decrease (47,765) $ (466,664)
=========== ===========
<PAGE>
Class B Shares for the Six Months Dollar
Ended January 31, 1996 Shares Amount
Shares sold 245,202 $ 2,580,888
Shares issued to share-
holders in reinvestment of
dividends & distributions 10,407 109,867
----------- -----------
Total issued 255,609 2,690,755
Shares redeemed (111,713) (1,178,809)
----------- -----------
Net increase 143,896 $ 1,511,946
=========== ===========
Class B Shares for the Year Dollar
Ended July 31, 1995 Shares Amount
Shares sold 486,365 $ 4,913,636
Shares issued to share-
holders in reinvestment of
dividends & distributions 12,721 128,330
----------- -----------
Total issued 499,086 5,041,966
Shares redeemed (153,689) (1,543,514)
----------- -----------
Net increase 345,397 $ 3,498,452
=========== ===========
Class C Shares for the Six Months Dollar
Ended January 31, 1996 Shares Amount
Shares sold 23,262 $ 247,451
Shares issued to share-
holders in reinvestment of
dividends & distributions 482 5,093
----------- -----------
Total issued 23,744 252,544
Shares redeemed (11,802) (126,855)
----------- -----------
Net increase 11,942 $ 125,689
=========== ===========
<PAGE>
Class C Shares for the Period Dollar
Oct. 21, 1994++ to July 31, 1995 Shares Amount
Shares sold 16,143 $ 165,258
Shares issued to share-
holders in reinvestment of
dividends & distributions 171 1,769
----------- -----------
Total issued 16,314 167,027
Shares redeemed (375) (3,827)
----------- -----------
Net increase 15,939 $ 163,200
=========== ===========
[FN]
++Commencement of Operations.
Class D Shares for the Six Months Dollar
Ended January 31, 1996 Shares Amount
Shares sold 35,380 $ 374,277
Shares issued to share-
holders in reinvestment of
dividends & distributions 3,178 33,515
----------- -----------
Total issued 38,558 407,792
Shares redeemed (1,875) (19,825)
----------- -----------
Net increase 36,683 $ 387,967
=========== ===========
Class D Shares for the Period Dollar
Oct. 21, 1994++ to July 31, 1995 Shares Amount
Shares sold 175,397 $ 1,739,218
Shares issued to share-
holders in reinvestment of
dividends & distributions 2,514 25,634
----------- -----------
Total issued 177,911 1,764,852
Shares redeemed (25,471) (250,524)
----------- -----------
Net increase 152,440 $ 1,514,328
=========== ===========
<PAGE>
[FN]
++Commencement of Operations.
