MERRILL LYNCH
NEW MEXICO
MUNICIPAL
BOND FUND
[FUND LOGO]
STRATEGIC
Performance
Semi-Annual Report
January 31, 1997
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 New Mexico
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011 #18035 -- 1/97
Merrill Lynch New Mexico Municipal Bond Fund January 31, 1997
TO OUR SHAREHOLDERS
The Municipal Market Environment
Long-term fixed-income bond yields generally declined over the six
months ended January 31, 1997. Initially, US Treasury bond yields
declined over 45 basis points (0.45%) to 6.45% by late November as low
employment growth and continued low inflation combined to support
lower bond yields. Concurrently, long-term municipal revenue bond
yields, as measured by the Bond Buyer Revenue Bond Index, declined
over 20 basis points to approximately 5.80%. However, signs of
increased economic activity and renewed inflation fears pushed bond
yields up for the remainder of the period. By the end of January 1997,
US Treasury bond yields rose 35 basis points to end the period at
approximately 6.80%. Similarly, long-term municipal revenue bond
yields rose approximately 20 basis points from their lows in late
November to approximately 6.00%. During the six months ended January
31, 1997, US Treasury bond yields declined approximately 10 basis
points, while tax-exempt bond yields were essentially unchanged.
Recently, tax-exempt bond yields underperformed their taxable
counterparts despite a continued strong supply position. During the
six-month period ended January 31, 1997, over $88 billion in long-term
tax-exempt bonds was underwritten, essentially unchanged from issuance
a year ago. Approximately $50 billion in new municipal bonds was
issued during the three-month period ended January 31, 1997,
representing a decline of over 5% compared to the same period in 1996.
This declining trend in bond issuance was even more apparent recently.
Slightly more than $10 billion in long-term bonds was issued in
January 1997, a decrease of over 15% compared to January 1996
issuance.
The municipal bond market's recent underperformance relative to
Treasury issues was the result of a number of other factors. The
historic strength of the US equity market has attracted significant
investor interest. Additionally, as tax-exempt bond yields declined
again below 6%, some investors temporarily lost interest in the
municipal bond market. If interest rates continue to decline, as they
did at the end of 1994 and throughout 1995, investors, in general,
will quickly adjust to the new levels. The tax advantages generated by
municipal bonds quickly outweigh low nominal yields, and investor
demand increases.
The Presidential and Congressional elections this past November
resurrected some investor concerns regarding continued Federal deficit
reduction and potential legislative restrictions upon the municipal
bond market. This situation was similar to that at the beginning of
1996 when tax-exempt bond yields were negatively impacted by fears
that legislation reducing the tax advantage of municipal bonds would
be introduced to aid further deficit reductions.
However, the US Treasury bond market's recent relatively strong
performance resulted in municipal bonds becoming a particularly
attractive investment alternative. At current levels, long-term tax-
exempt revenue bonds yield over 88% of comparable US Treasury bond
yields. Current levels make tax-advantaged products more attractive
than they were at mid-year when yield ratios declined to approximately
85%. For example, to an investor in the 36% Federal income tax
bracket, a current tax-exempt bond yield of 6% represents a taxable
equivalent yield of approximately 9.37%.
Looking forward, the supply of new bond issuance for 1997 is expected
to be very similar to that of 1996, with most annual estimates falling
in the $170 billion -- $175 billion range. Investor demand is also
expected to regain its former strength, with 1997 total municipal
redemptions (refundings, maturities and coupon payments) in the $175
billion -- $185 billion range. This overall balance suggests that the
positive technical backdrop the municipal bond market enjoyed in 1996
could continue in 1997. However, it is likely that seasonal factors
may temporarily distort this overall balanced technical scenario.
During periods of reduced bond issuance, the ease and ability to
purchase tax-advantaged products at their current attractive levels
may be greatly restricted.
Portfolio Strategy
During the six-month period ended January 31, 1997, our portfolio
strategy reflected a decidedly more optimistic view toward the
municipal bond market. We expected that the municipal bond market
would continue to experience a strong technical position compared to
the US Treasury market, which would therefore result in lower bond
municipal interest rates. We continued to concentrate on sustaining an
appealing level of tax-exempt income, and we partially restructured
the Fund to seek to enhance its total return potential with the
acquisition of high-quality securities.
Looking ahead, we expect the municipal bond market to continue to
experience volatility within a narrow trading range with interest
rates trending lower. Therefore, our investment strategy will continue
to stress the purchase of quality current coupon bonds with extended
call protection.
In Conclusion
We appreciate your ongoing interest in Merrill Lynch New Mexico
Municipal Bond Fund, and we look forward to serving your investment
needs in the months and years ahead.
Sincerely,
/S/ARTHUR ZEIKEL
Arthur Zeikel
President
/S/VINCENT R. GIORDANO
Vincent R. Giordano
Senior Vice President
/S/WILLIAM R. BOCK
William R. Bock
Vice President and Portfolio Manager
March 10, 1997
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill
Lynch Select PricingSM System, which offers four pricing alternatives:
(bullet) Class A Shares incur a maximum initial sales charge (front-
end load) of 4% and bear no ongoing distribution or account
maintenance fees. Class A Shares are available only to eligible
investors.
(bullet) Class B Shares are subject to a maximum contingent deferred
sales charge of 4% if redeemed during the first year, decreasing 1%
each year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.25% and an account
maintenance fee of 0.25%. These shares automatically convert to Class
D Shares after approximately 10 years. (There is no initial sales
charge for automatic share conversions.)
(bullet) Class C Shares are subject to a distribution fee of 0.35% and
an account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
(bullet) Class D Shares incur a maximum initial sales charge of 4% and
an account maintenance fee of 0.10% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of shares
will fluctuate so that shares, when redeemed, may be worth more or
less than their original cost. Dividends paid to each class of shares
will vary because of the different levels of account maintenance,
distribution and transfer agency fees applicable to each class, which
are deducted from the income available to be paid to shareholders.
<TABLE>
<CAPTION>
Recent Performance Results
12 Month 3 Month
1/31/97 10/31/96 1/31/96 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $10.49 $10.49 $10.76 -2.51% 0.00%
Class B Shares* 10.49 10.49 10.76 -2.51 0.00
Class C Shares* 10.49 10.49 10.76 -2.51 0.00
Class D Shares* 10.49 10.48 10.76 -2.51 +0.10
Class A Shares -- Total Return* +2.71(1) +1.32(2)
Class B Shares -- Total Return* +2.19(3) +1.19(4)
Class C Shares -- Total Return* +2.08(5) +1.16(6)
Class D Shares -- Total Return* +2.61(7) +1.39(8)
Class A Shares -- Standardized 30-day Yield 4.64%
Class B Shares -- Standardized 30-day Yield 4.33%
Class C Shares -- Standardized 30-day Yield 4.23%
Class D Shares -- Standardized 30-day Yield 4.54%
* 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 $0.550 per share ordinary income dividends.
(2) Percent change includes reinvestment of $0.145 per share ordinary income dividends.
(3) Percent change includes reinvestment of $0.496 per share ordinary income dividends.
(4) Percent change includes reinvestment of $0.130 per share ordinary income dividends.
(5) Percent change includes reinvestment of $0.485 per share ordinary income dividends.
(6) Percent change includes reinvestment of $0.127 per share ordinary income dividends.
(7) Percent change includes reinvestment of $0.539 per share ordinary income dividends.
(8) Percent change includes reinvestment of $0.142 per share ordinary income dividends.
</TABLE>
<TABLE>
<CAPTION>
Performance Summary -- Class A Shares
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
5/6/94 -- 12/31/94 $10.00 $9.70 -- $0.388 + 0.87%
1995 9.70 10.75 -- 0.621 +17.65
1996 10.75 10.54 -- 0.543 + 3.27
1/1/97 -- 1/31/97 10.54 10.49 -- 0.039 - 0.02
Total $1.591
Cumulative total return as of 1/31/97: +22.52%**
* 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>
<CAPTION>
Performance Summary -- Class B Shares
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
5/6/94 -- 12/31/94 $10.00 $9.70 -- $0.355 + 0.53%
1995 9.70 10.75 -- 0.569 +17.06
1996 10.75 10.54 -- 0.490 + 2.75
1/1/97 -- 1/31/97 10.54 10.49 -- 0.035 - 0.07
Total $1.449
Cumulative total return as of 1/31/97: +20.83%**
* 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>
<CAPTION>
Performance Summary -- Class C Shares
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94 -- 12/31/94 $9.89 $9.70 -- $0.099 - 0.90%
1995 9.70 10.76 -- 0.556 +17.02
1996 10.76 10.55 -- 0.479 + 2.64
1/1/97 -- 1/31/97 10.55 10.49 -- 0.034 - 0.17
Total $1.168
Cumulative total return as of 1/31/97: +18.82%**
* 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>
<CAPTION>
Performance Summary -- Class D Shares
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94 -- 12/31/94 $9.89 $9.70 -- $0.121 - 0.67%
1995 9.70 10.75 -- 0.611 +17.53
1996 10.75 10.54 -- 0.533 + 3.17
1/1/97 -- 1/31/97 10.54 10.49 -- 0.038 - 0.03
Total $1.303
Cumulative total return as of 1/31/97: +20.40%**
* 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>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/96 +3.27% -0.86%
Inception (5/6/94)
through 12/31/96 +7.96 +6.31
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/96 +2.75% -1.18%
Inception (5/6/94)
through 12/31/96 +7.41 +6.74
* Maximum contingent deferred sales charge is 4% and is reduced
to 0% after 4 years.
** Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 12/31/96 +2.64% +1.66%
Inception (10/21/94)
through 12/31/96 +8.26 +8.26
* 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 12/31/96 +3.17% -0.96%
Inception (10/21/94)
through 12/31/96 +8.84 +6.84
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
<TABLE>
<CAPTION>
Merrill Lynch New Mexico Municipal Bond Fund January 31,1997
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <C> <C> <C> <C>
New Mexico -- 93.8%
AAA Aaa $1,000 Albuquerque, New Mexico, Airport Revenue Bonds, AMT, Series A, 6.60%
due 7/01/2016 (d) $1,081
Bernalillo County, New Mexico, Gross Receipts Tax Revenue Bonds, Series A:
AA Aa 500 5.75% due 4/01/2016 503
AA Aa 500 5.75% due 4/01/2021 498
NR* A 500 Carlsbad, New Mexico, Sales Tax Revenue Bonds, 6.30% due 10/01/2010 516
A1+ NR* 200 Eddy County, New Mexico, PCR, Refunding (IMC Fertilizer Inc. Project), VRDN,
3.55% due 2/01/2003 (a) 200
Farmington, New Mexico, PCR, Refunding, Series A:
AAA Aaa 500 (Public Service Company of New Mexico), 6.375% due 12/15/2022 (d) 531
BB+ Ba1 500 (Public Service Company of San Juan), 6.30% due 12/01/2016 501
A+ A2 1,000 (Southern California Edison Company), 7.20% due 4/01/2021 1,093
AAA Aaa 1,780 Gallup, New Mexico, PCR, Refunding (Plains Electric Generation), 6.65% due 8/15/2017(b) 1,947
AAA Aaa 1,000 Las Cruces, New Mexico, Health Facilities Revenue Refunding Bonds
(Evangelical Lutheran Project), 6.45% due 12/01/2017 (e) 1,062
AAA Aaa 1,000 Las Cruces, New Mexico, Revenue Bonds, AMT, 5.50% due 12/01/2015 (b) 968
A A2 1,450 Lordsburg, New Mexico, PCR, Refunding (Phelps Dodge Corporation Project), 6.50%
due 4/01/2013 1,528
AAA Aaa 2,000 Los Alamos County, New Mexico, Utility System Revenue Refunding Bonds, Series A, 6%
due 7/01/2015 (e) 2,065
NR* A 955 New Mexico Educational Assistance Foundation, Student Loan Revenue Bonds,
AMT, First Sub-Series A-2, 6.65% due 11/01/2025 971
New Mexico Mortgage Finance Authority, Mortgage-Backed Securities (f)(g):
NR* Aaa 750 Series A, 6.875% due 1/01/2025 808
AAA NR* 500 Series F, 7% due 1/01/2026 542
New Mexico Mortgage Finance Authority, S/F Mortgage Program, AMT (f):
AAA NR* 895 Series A (Class D), 6.65% due 7/01/2026 921
AAA NR* 985 Series H, 6.60% due 7/01/2015 1,019
AA A1 750 New Mexico State University, Revenue Refunding and Improvement Bonds, 5.75%
due 4/01/2016 752
AAA Aaa 600 Rio Rancho, New Mexico, Water and Wastewater System Revenue Bonds, Series A, 6%
due 5/15/2022 (e) 613
NR* A 750 San Juan County, New Mexico, Gross Receipts, Gas Tax Revenue Bonds, Series B, 7%
due 9/15/2004 (c) 864
University of New Mexico, University Revenue Bonds:
AAA Aaa 1,000 5.50% due 6/01/2016 (b) 980
AA A1 500 Series B, 5.75% due 6/01/2022 486
Puerto Rico-- 4.8%
BBB+ Baa1 1,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series T,
6.375% due 7/01/2024 1,048
Total Investments (Cost -- $20,566) -- 98.6% 21,497
Other Assets Less Liabilities -- 1.4% 300
-------
Net Assets -- 100.0% $21,797
=======
(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, 1997.
(b) MBIA Insured.
(c) Prerefunded.
(d) AMBAC Insured.
(e) FSA Insured.
(f) GNMA/FNMA Insured.
(g) FHA Insured.
* Not Rated.
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
VRDN Variable Rate Demand Notes
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of January 31, 1997
<S> <C> <C> <C>
Assets: Investments, at value (identified cost
-- $20,566,250) (Note 1a) $21,496,909
Cash 59,005
Receivables:
Interest $304,927
Beneficial interest sold 59,750
Investment adviser (Note 2) 2,489 367,166
--------
Deferred organization expenses (Note 1e) 31,960
Prepaid registration fees and other assets (Note 1e) 11,206
-----------
Total assets 21,966,246
-----------
Liabilities: Payables:
Beneficial interest redeemed 105,201
Dividends to shareholders (Note 1f) 17,261
Distributor (Note 2) 6,994 129,456
--------
Accrued expenses and other liabilities 39,714
-----------
Total liabilities 169,170
-----------
Net Assets: Net assets $21,797,076
===========
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $43,156
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 134,952
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 8,380
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 21,315
Paid-in capital in excess of par 20,749,207
Accumulated realized capital losses on investments -- net (4,246)
Accumulated distributions in excess of realized capital gains
-- net (Note 1f) (86,347)
Unrealized appreciation on investments -- net 930,659
-----------
Net assets $21,797,076
===========
Net Asset Value: Class A -- Based on net assets of $4,526,595 and 431,565
shares of beneficial interest outstanding $10.49
===========
Class B -- Based on net assets of $14,155,481
and 1,349,517 shares of beneficial interest outstanding $10.49
===========
Class C -- Based on net assets of $879,431 and 83,799 shares
of beneficial interest outstanding $10.49
===========
Class D -- Based on net assets of $2,235,569
and 213,152 shares of beneficial interest outstanding $10.49
===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Six Months Ended
January 31, 1997
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned $662,771
(Note 1d):
Expenses: Investment advisory fees (Note 2) $62,467
Account maintenance and distribution fees -- Class B (Note 2) 36,850
Professional fees 27,330
Accounting services (Note 2) 19,843
Printing and shareholder reports 18,804
Amortization of organization expenses (Note 1e) 5,941
Registration fees (Note 1e) 5,223
Transfer agent fees -- Class B (Note 2) 3,521
Account maintenance and distribution fees -- Class C (Note 2) 2,385
Pricing fees 1,967
Account maintenance fees -- Class D (Note 2) 1,108
Custodian fees 1,086
Transfer agent fees -- Class A (Note 2) 988
Trustees' fees and expenses 538
Transfer agent fees -- Class D (Note 2) 440
Transfer agent fees -- Class C (Note 2) 209
Other 496
-------
Total expenses before reimbursement 189,196
Reimbursement of expenses (Note 2) (68,555)
-------
Total expenses after reimbursement 120,641
--------
Investment income -- net 542,130
--------
Realized & Realized gain on investments -- net 96,577
Unrealized Gain on Change in unrealized appreciation on investments -- net 180,129
Investments -- Net --------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations $818,836
========
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: Jan. 31, 1997 July 31, 1996
<S> <C> <C> <C>
Operations: Investment income -- net $542,130 $1,146,648
Realized gain (loss) on investments -- net 96,577 (5,034)
Change in unrealized appreciation on investments -- net 180,129 147,724
----------- -----------
Net increase in net assets resulting from operations 818,836 1,289,338
----------- -----------
Dividends & Investment income -- net:
Distributions to Class A (127,460) (379,304)
Shareholders Class B (340,920) (653,404)
(Note 1f): Class C (17,976) (15,894)
Class D (55,774) (98,046)
In excess of realized gain on investment -- net
Class A -- (24,218)
Class B -- (43,528)
Class C -- (813)
Class D -- (6,212)
----------- -----------
Net decrease in net assets resulting from dividends
and distributions to shareholders (542,130) (1,221,419)
----------- -----------
Beneficial Interest Net increase (decrease) in net assets derived
Transactions from beneficial interest transactions
(Note 4): (552,924) 453,019
----------- -----------
Net Assets: Total increase (decrease) in net assets (276,218) 520,938
Beginning of period 22,073,294 21,552,356
----------- -----------
End of period $21,797,076 $22,073,294
=========== ===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Class A
For the For the
Six Period
The following per share data and ratios have been derived Months May 6,
from information provided in the financial statements. Ended For the Year 1994+ to
Jan. 31, Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $10.36 $10.29 $10.24 $10.00
Operating ------ ------ ------ ------
Performance: Investment income -- net .27 .56 .60 .13
Realized and unrealized gain on
investments -- net .13 .10 .06 .24
------ ------ ------ ------
Total from investment operations .40 .66 .66 .37
------ ------ ------ ------
Less dividends and distributions:
Investment income -- net (.27) (.56) (.60) (.13)
In excess of realized gain on investments -- net -- (.03) (.01) --
------ ------ ------ ------
Total dividends and distributions (.27) (.59) (.61) (.13)
------ ------ ------ ------
Net asset value, end of period $10.49 $10.36 $10.29 $10.24
====== ====== ====== ======
Total Investment Based on net asset value per share 3.93%++ 6.53% 6.65% 3.76%++
Return:** ====== ====== ====== ======
Ratios to Expenses, net of reimbursement .70%* .49% .07% 0.00%*
Average ====== ====== ====== ======
Net Assets: Expenses 1.31%* 1.42% 1.65% 2.47%*
====== ====== ====== ======
Investment income -- net 5.13%* 5.33% 5.92% 5.49%*
====== ====== ====== ======
Supplemental Net assets, end of period (in thousands) $4,527 $5,287 $7,715 $8,166
Data: ====== ====== ====== ======
Portfolio turnover 13.97% 63.02% 28.16% 16.06%
====== ====== ====== ======
* Annualized.
** Total investment returns exclude the effect of sales loads.
+ Commencement of Operations.
++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
Class B
For the For the
Six Period
The following per share data and ratios have been derived Months May 6,
from information provided in the financial statements. Ended For the Year 1994+ to
Jan. 31, Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $10.36 $10.29 $10.24 $10.00
Operating ------- ------- ------- -------
Performance: Investment income -- net .25 .50 .54 .12
Realized and unrealized gain on
investments -- net .13 .10 .06 .24
------- ------- ------- -------
Total from investment operations .38 .60 .60 .36
------- ------- ------- -------
Less dividends and distributions:
Investment income -- net (.25) (.50) (.54) (.12)
In excess of realized gain
on investments -- net -- (.03) (.01) --
------- ------- ------- -------
Total dividends and distributions (.25) (.53) (.55) (.12)
------ ------ ------ ------
Net asset value, end of period $10.49 $10.36 $10.29 $10.24
======= ======= ======= =======
Total Investment Based on net asset value per share 3.66%++ 5.98% 6.11% 3.64%++
Return:** ======= ======= ======= =======
Ratios to Expenses, net of reimbursement 1.21%* 1.01% .59% .50%*
Average ======= ======= ======= ======
Net Assets: Expenses 1.81%* 1.92% 2.16% 2.97%*
======= ======= ======= ======
Investment income -- net 4.63%* 4.81% 5.40% 4.98%*
======= ======= ======= ======
Supplemental Net assets, end of period (in thousands) $14,155 $13,964 $12,104 $8,505
Data: ======= ======= ======= ======
Portfolio turnover 13.97% 63.02% 28.16% 16.06%
======= ======= ======= =======
* Annualized.
** Total investment returns exclude the effect of sales loads.
+ Commencement of Operations.
++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
Class C
For the For the
Six For the Period
The following per share data and ratios have been derived Months Year Oct. 21,
from information provided in the financial statements. Ended Ended 1994+ to
Jan. 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995
<S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $10.36 $10.30 $9.89
Operating ------ ------ ------
Performance: Investment income -- net .24 .49 .40
Realized and unrealized gain on investments -- net .13 .09 .42
------ ------ ------
Total from investment operations .37 .58 .82
------ ------ ------
Less dividends and distributions:
Investment income -- net (.24) (.49) (.40)
In excess of realized gain on investments -- net -- (.03) (.01)
------ ------ ------
Total dividends and distributions (.24) (.52) (.41)
------ ------ ------
Net asset value, end of period $10.49 $10.36 $10.30
====== ====== ======
Total Investment Based on net asset value per share 3.61%++ 5.76% 8.44%++
Return:** ====== ====== ======
Ratios to Expenses, net of reimbursement 1.32%* 1.15% .80%*
Average ====== ====== ======
Net Assets: Expenses 1.92%* 2.03% 2.27%*
====== ====== ======
Investment income -- net 4.52%* 4.67% 5.20%*
====== ====== ======
Supplemental Net assets, end of period (in thousands) $879 $712 $164
Data: ====== ====== ======
Portfolio turnover 13.97% 63.02% 28.16%
====== ====== ======
* Annualized.
** Total investment returns exclude the effect of sales loads.
+ Commencement of Operations.
++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (concluded)
Class D
For the For the
Six For the Period
The following per share data and ratios have been derived Months Year Oct. 21,
from information provided in the financial statements. Ended Ended 1994+ to
Jan. 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995
<S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $10.36 $10.29 $9.89
Operating ------ ------ ------
Performance: Investment income -- net .27 .55 .46
Realized and unrealized gain on investments -- net .13 .10 .41
------ ------ ------
Total from investment operations .40 .65 .87
------ ------ ------
Less dividends and distributions:
Investment income -- net (.27) (.55) (.46)
In excess of realized gain on investments -- net -- (.03) (.01)
------ ------ ------
Total dividends and distributions (.27) (.58) (.47)
------ ------ ------
Net asset value, end of period $10.49 $10.36 $10.29
====== ====== ======
Total Investment Based on net asset value per share 3.88%++ 6.42% 8.91%++
Return:** ====== ====== ======
Ratios to Average Expenses, net of reimbursement .80%* .61% .23%*
Net Assets: ====== ====== ======
Expenses 1.40%* 1.51% 1.74%*
====== ====== ======
Investment income -- net 5.03%* 5.21% 5.80%*
====== ====== ======
Supplemental Net assets, end of period (in thousands) $2,236 $2,110 $1,569
Data: ====== ====== ======
Portfolio turnover 13.97% 63.02% 28.16%
====== ====== ======
* Annualized.
** Total investment returns exlude the effect of sales loads.
+ Commencement of Operations.
++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch New Mexico Municipal Bond Fund January 31, 1997
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 PricingSM System. Shares of Class A and
Class D are sold with a front-end sales charge. Shares of Class B and
Class C may be subject to a contingent deferred sales charge. All
classes of shares have identical voting, dividend, liquidation and
other rights and the same terms and conditions, except that Class B,
Class C and Class D Shares bear certain expenses related to the
account maintenance of such shares, and Class B and Class C Shares
also bear certain expenses related to the distribution of such
shares. Each class has exclusive voting rights with respect to
matters relating to its account maintenance and distribution
expenditures. The following is a summary of significant accounting
policies followed by the Fund.
(a) Valuation of investments -- Municipal bonds and other portfolio
securities in which the Fund invests are traded primarily in the
over-the-counter municipal bond and money markets and are valued at
the last available bid price in the over-the-counter market or on the
basis of yield equivalents as obtained from one or more dealers that
make markets in the securities. Financial futures contracts and
options thereon, which are traded on exchanges, are valued at their
settlement prices as of the close of such exchanges. Short-term
investments with remaining maturities of sixty days or less are
valued at amortized cost, which approximates market value. Securities
and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the
direction of the Board of Trustees of the Trust, including valuations
furnished by a pricing service retained by the Trust, which may
utilize a matrix system for valuations. The procedures of the pricing
service and its valuations are reviewed by the officers of the Trust
under the general supervision of the Trustees.
(b) Derivative financial instruments -- The Fund may engage in
various portfolio strategies to seek to increase its return by
hedging its portfolio against adverse movements in the debt markets.
Losses may arise due to changes in the value of the contract or if
the counterparty does not perform under the contract.
(bullet) Financial futures contracts -- The Fund may purchase or sell
interest rate futures contracts and options on such futures contracts
for the purpose of hedging the market risk on existing securities or
the intended purchase of securities. Futures contracts are contracts
for delayed delivery of securities at a specific future date and at a
specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to the
contract, the Fund agrees to receive from or pay to the broker an
amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin and
are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was
opened and the value at the time it was closed.
(c) Income taxes -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income -- Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Deferred organization expenses and prepaid registration fees --
Deferred organization expenses are charged to expense on a straight-
line basis over a five-year period. Prepaid registration fees are
charged to expense as the related shares are issued.
(f) Dividends and distributions -- Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates. Distributions in excess
of realized capital gains are due primarily to differing tax
treatments for post-October losses.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned subsidiary
of Merrill Lynch & Co., Inc. ("ML & Co."), which is the limited
partner. The Fund has also entered into a Distribution Agreement and
Distribution Plans with Merrill Lynch Funds Distributor, Inc. ("MLFD"
or "Distributor"), a wholly-owned subsidiary of Merrill Lynch Group,
Inc.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee based upon the average daily
value of the Fund's net assets at the following annual rates: 0.55%
of the Fund's average daily net assets not exceeding $500 million;
0.525% of average daily net assets in excess of $500 million but not
exceeding $1 billion; and 0.50% of average daily net assets in excess
of $1 billion.
For the six months ended January 31, 1997, FAM earned fees of
$62,467, all of which was voluntarily waived. FAM also reimbursed the
Fund additional expenses of $6,088.
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% --
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, 1997, 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 $145 $1,720
Class D $123 $1,518
For the six months ended January 31, 1997, MLPF&S received contingent
deferred sales charges of $38,676 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, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended January 31, 1997 were $3,671,278 and
$2,973,961, respectively.
Net realized and unrealized gains as of January 31, 1997 were as
follows:
Realized Unrealized
Gains Gains
Long-term investments $96,577 $930,659
------- --------
Total $96,577 $930,659
------- --------
As of January 31, 1997, net unrealized appreciation for Federal
income tax purposes aggregated $930,659, of which $933,868 related to
appreciated securities and $3,209 related to depreciated securities.
The aggregate cost of investments at January 31, 1997 for Federal
income tax purposes was $20,566,250.
4. Beneficial Interest Transactions:
Net increase (decrease) in net assets derived from beneficial
interest transactions was $(552,924) and $453,019 for the six months
ended January 31, 1997 and for the year ended July 31, 1996,
respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Six Months Dollar
Ended January 31, 1997 Shares Amount
Shares sold 48,008 $503,902
Shares issued to shareholders
in reinvestment of dividends 2,954 30,870
-------- -----------
Total issued 50,962 534,772
Shares redeemed (129,853) (1,361,833)
-------- -----------
Net decrease (78,891) $(827,061)
======== ===========
Class A Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 35,804 $375,197
Shares issued to shareholders
in reinvestment of dividends
and distributions 6,444 67,522
-------- ----------
Total issued 42,248 442,719
Shares redeemed (281,275) (2,905,316)
-------- -----------
Net decrease (239,027) $(2,462,597)
======== ===========
Class B Shares for the
Six Months Ended Dollar
January 31, 1997 Shares Amount
Shares sold 213,342 $2,240,325
Shares issued to shareholders
in reinvestment of dividends 14,235 148,862
-------- -----------
Total issued 227,577 2,389,187
Automatic conversion
of shares (258) (2,704)
Shares redeemed (226,025) (2,368,362)
-------- -----------
Net increase 1,294 $18,121
======== ===========
Class B Shares for the Year
Ended July 31, 1996 Dollar
Shares Amount
Shares sold 379,728 $3,988,696
Shares issued to shareholders
in reinvestment of dividends
and distributions 20,659 216,452
-------- -----------
Total issued 400,387 4,205,148
Shares redeemed (227,902) (2,381,102)
-------- -----------
Net increase 172,485 $1,824,046
======== ===========
Class C Shares for the
Six Months Ended Dollar
January 31, 1997 Shares Amount
Shares sold 15,421 $161,203
Shares issued to shareholders
in reinvestment of dividends 1,393 14,572
-------- -----------
Total issued 16,814 175,775
Shares redeemed (1,734) (18,150)
-------- -----------
Net increase 15,080 $157,625
======== ===========
Class C Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 63,403 $667,096
Shares issued to shareholders
in reinvestment of dividends
and distributions 1,180 12,350
-------- -----------
Total issued 64,583 679,446
Shares redeemed (11,803) (126,868)
-------- -----------
Net increase 52,780 $552,578
======== ===========
Class D Shares for the
Six Months Ended Dollar
January 31, 1997 Shares Amount
Shares sold 8,109 $84,693
Automatic conversion of shares 258 2,704
Shares issued to shareholders
in reinvestment of dividends 2,877 30,073
-------- -----------
Total issued 11,244 117,470
Shares redeemed (1,820) (19,079)
-------- -----------
Net increase 9,424 $98,391
======== ===========
Class D Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 53,269 $558,846
Shares issued to shareholders
in reinvestment of dividends
and distributions 5,883 61,650
-------- -----------
Total issued 59,152 620,496
Shares redeemed (7,864) (81,504)
-------- -----------
Net increase 51,288 $538,992
======== ===========
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andra F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Vincent R. Giordano, Senior Vice President
William R. Bock, Vice President
Donald C. Burke, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Jerry Weiss, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, Massachusetts 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
