MERRILL LYNCH
NEW MEXICO
MUNICIPAL
BOND FUND
FUND LOGO
Semi-Annual Report
January 31, 1999
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
Merrill Lynch New Mexico
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
Merrill Lynch New Mexico Municipal Bond Fund
January 31, 1999
TO OUR SHAREHOLDERS
The Municipal Market Environment
During the six months ended January 31, 1999, long-term bond yields
moved significantly lower. US domestic economic growth remained
moderate, with losses in the manufacturing sector offset by strong
growth in service-oriented industries. Industrial commodity prices
recently fell to their lowest level in over a decade. This suggests
that the current positive inflationary environment is unlikely to be
challenged in the near term. Additionally, the Federal Reserve Board
lowered short-term interest rates in September, October and
November, in part to ensure that US domestic economic growth would
not be negatively impacted by ongoing weak economic growth overseas.
However, various external factors, as well as increased volatility,
contributed to the decline in bond yields as they have for much of
the past year. Episodes of foreign economic instability generated a
significant "flight to quality" rally in US Treasury securities, as
well as fostering lower tax-exempt bond yields as a result. Periods
of strong foreign equity market appreciation, particularly in Asia,
have at times resulted in higher US bond yields as foreign investors
have sold US fixed-income instruments to reinvest the proceeds in
their own domestic equity markets. Additionally, the continued
distraction of President Clinton's impeachment trial added to recent
interest rate volatility. However, on balance, the favorable
fundamental economic scenario supported lower bond yields. During
the six-month period ended January 31, 1999, the yield on the US
Treasury 30-year bond fell over 60 basis points (0.60%) to 5.09%,
and long-term municipal revenue bond yields declined almost 20 basis
points to 5.17%, as measured by the Bond Buyer Revenue Bond Index.
Throughout most of 1998, the municipal bond market's performance was
impeded by a significant increase in new-issue supply. However, in
recent months, the technical position of the tax-exempt market
improved. Over the last 12 months, almost $285 billion in new long-
term tax-exempt bonds was underwritten, an increase of almost 30%
compared to the same period a year ago. As municipal bond yields
declined in recent years, it has taken increasingly lower bond
yields to generate the cost savings necessary to refinance remaining
higher-couponed debt. Consequently, the rate of increases in
municipal bond issuance slowed in recent quarters. During the last
six months, more than $125 billion in new tax-exempt bonds was
issued, an increase of approximately 5% compared to the same period
a year ago. During the January 31, 1999 quarter, $63 billion in new
long-term municipal bonds was underwritten, representing an increase
of 5% compared to the January 31, 1998 quarter.
The pace of tax-exempt issuance continued to slow in 1999. January's
monthly issuance was less than $15 billion, representing a decline
of almost 25% compared to January 1998's volume. Additionally,
investors received more than $22 billion in coupon payments,
maturities and proceeds from early redemptions in January. Investors
can also expect to receive an additional $15 billion--$18 billion in
February for reinvestment. Consequently, investor demand has been
strong in recent months, easily matching, if not at times exceeding,
available supply. We will monitor this trend closely in the coming
months to determine if the supply pressures exerted in 1998 are
abating and fostering a more balanced supply/demand environment for
1999. Such an environment should allow the tax-exempt market's
performance to more closely mirror that of its taxable counterpart.
Foreign investors have rarely been active investors in the tax-
exempt bond market since they are unable to benefit from the
inherent tax advantage of municipal securities. Consequently, the
municipal bond market has not been able to benefit from the strong
flight to quality demand enjoyed by US Treasury securities since
late 1997. This inability has in large part resulted in
significantly smaller declines in municipal bond yields compared to
US Treasury securities. However, this has resulted in the
opportunity to purchase tax-exempt securities with yields very close
to or, in some instances, exceeding those of comparable US Treasury
bonds. By January 31, 1999, long-term tax-exempt bond yields were at
102% of US Treasury securities of comparable maturities, nearly
matching the least expensive level of the past year. Municipal bond
yield ratios have averaged approximately 95% for the last six months
and 92% for all of 1998. During 1997, tax-exempt bond yield ratios
averaged 84%. It is likely that the combination of the increase in
new-issue volume and the "safe-haven" status of US Treasury
securities drove municipal bond yield ratios to their present
attractive levels. Should new volume decline and/or foreign
financial markets regain stability in 1999, tax-exempt bond
yield ratios could quickly return to their more historic
levels (85%--88%).
Merrill Lynch New Mexico Municipal Bond Fund
January 31, 1999
Looking ahead, the expected combination of moderate economic growth
in the United States and continued negligible inflation suggests a
relatively stable interest rate environment into early 1999.
However, it is likely that foreign financial markets will again be a
critical factor in determining US bond yields. Economic problems in
Russia and Brazil remain unresolved, suggesting that additional
shocks to the world's financial system are possible. On the other
hand, the continued robustness of the US economy has led to some
back up in interest rates. However, at present these factors
indicate that there is little immediate risk of sustained
significant increases in long-term bond yields.
Portfolio Strategy
Throughout the six months ended January 31, 1999, we maintained a
constructive investment strategy for Merrill Lynch New Mexico
Municipal Bond Fund. We believed that strong domestic economic
growth seen in late 1998 and thus far this year would be offset by a
combination of deteriorating global economic conditions and low
inflation. Consequently, as 1998 ended, we expected tax-exempt bond
yields to trade in a relatively narrow range, with a bias toward
lower bond yields. We maintained the Fund's fully invested position
in order to seek to enhance shareholder income and participate fully
in any market improvement.
Looking ahead, we expect little change in the Fund's existing
structure. Current economic fundamentals and a strong domestic
economy offset by the lack of significant inflationary pressures
suggest that interest rates should remain stable.
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 to come.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
Executive Vice President
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Hugh T. Hurley III)
Hugh T. Hurley III
Vice President and Portfolio Manager
March 9, 1999
Merrill Lynch New Mexico Municipal Bond Fund
January 31, 1999
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees. Class A Shares are available only to eligible investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.25% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after approximately 10 years. (There is no initial
sales charge for automatic share conversions.)
* Class C Shares are subject to a distribution fee of 0.35% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.10% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Recent Performance
Results" and "Average Annual Total Return" tables assume
reinvestment of all dividends and capital gains distributions at net
asset value on the payable date. Investment return and principal
value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Dividends paid to each
class of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
<TABLE>
Recent Performance Results*
<CAPTION>
Standardized
12 Month 3 Month Since Inception 30-Day Yield
Total Return Total Return Total Return As of 1/31/99
<S> <C> <C> <C> <C>
ML New Mexico Municipal Bond Fund Class A Shares +5.33% +1.24% +41.21% 3.09%
ML New Mexico Municipal Bond Fund Class B Shares +4.71 +1.11 +37.86 2.72
ML New Mexico Municipal Bond Fund Class C Shares +4.70 +1.09 +35.43 2.61
ML New Mexico Municipal Bond Fund Class D Shares +5.23 +1.21 +38.50 3.00
<FN>
*Investment results shown do not reflect sales charges; results
would be lower if a sales charge was included. Total investment
returns are based on changes in net asset values for the periods
shown, and assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date. The Fund's
since inception periods are Class A & Class B Shares, from 5/06/94
to 1/31/99 and Class C & Class D Shares, from 10/21/94 to 1/31/99.
</TABLE>
Merrill Lynch New Mexico Municipal Bond Fund
January 31, 1999
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/98 +5.37% +1.15%
Inception (5/06/94)
through 12/31/98 +7.51 +6.57
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/98 +4.83% +0.93%
Inception (5/06/94)
through 12/31/98 +6.97 +6.97
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 12/31/98 +4.82% +3.85%
Inception (10/21/94)
through 12/31/98 +7.31 +7.31
[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 12/31/98 +5.26% +1.05%
Inception (10/21/94)
through 12/31/98 +7.87 +6.83
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch New Mexico Municipal Bond Fund
January 31, 1999
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
UPDATES Unit Priced Demand Adjustable Tax-Exempt
Securities
VRDN Variable Rate Demand Notes
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
New Mexico--98.2%
<S> <S> <C> <S> <C>
AAA Aaa $1,000 Albuquerque, New Mexico, Airport Revenue Bonds, AMT, Series A, 6.60% due
7/01/2016 (a) $ 1,084
AA Aa3 500 Bernalillo County, New Mexico, Gross Receipts Tax Revenue Bonds, Series A,
5.75% due 4/01/2006 (e) 557
NR* A 500 Carlsbad, New Mexico, Sales Tax Revenue Bonds, 6.30% due 10/01/2010 547
NR* Aaa 500 Dona Ana, County, New Mexico, Gross Receipt Tax Revenue Refunding and
Improvement Bonds, 5.50% due 6/01/2016 (a) 549
A1+ NR* 400 Eddy County, New Mexico, PCR, Refunding (IMC Fertilizer Inc. Project), VRDN,
2.65% due 2/01/2003 (f) 400
A+ A1 1,000 Farmington, New Mexico, PCR, Refunding (Southern California Edison Company),
Series A, 7.20% due 4/01/2021 1,086
A1+ P1 400 Hurley, New Mexico, PCR (Kennecott Santa Fe), UPDATES, 3.20% due 12/01/2015 (f) 400
AAA Aaa 500 Las Cruces, New Mexico, Health Facilities Revenue Refunding Bonds (Evangelical
Lutheran Project), 6.45% due 12/01/2017 (d) 552
AAA Aaa 500 Los Alamos County, New Mexico, Utility System Revenue Refunding Bonds, Series A,
6% due 7/01/2015 (d) 545
AAA Aaa 250 New Mexico Finance Authority Revenue Bonds (Federal Highway Grant Anticipation),
Series A, 5.25% due 9/01/2014 (a) 263
New Mexico Mortgage Finance Authority Revenue Bonds, S/F Mortgage Program,
AMT (c):
AAA NR* 895 Series A, 6.65% due 7/01/2026 962
AAA NR* 975 Series H, 6.60% due 7/01/2015 1,049
New Mexico Mortgage Finance Authority, Revenue Refunding Bonds (Mortgage-
Backed Securities):
NR* Aaa 750 Series A, 6.875% due 1/01/2025 (b) 862
AAA NR* 500 Series F, 7% due 1/01/2026 (c) 575
AA+ Aa2 500 New Mexico State Highway Commission, Tax Revenue Bonds, Senior Subordinate
Lien, Series A, 5.125% due 6/15/2010 534
NR* Baa1 500 New Mexico State Hospital Equipment Loan Council, Hospital Revenue Bonds
(Memorial Medical Center Inc. Project), 5.50% due 6/01/2028 498
AA A1 500 New Mexico State University Revenue Refunding and Improvement Bonds, 5.75% due
4/01/2016 534
AAA NR* 500 Rio Rancho, New Mexico, Water and Wastewater System, Revenue Refunding Bonds,
4.75% due 5/15/2022 (a) 485
</TABLE>
Merrill Lynch New Mexico Municipal Bond Fund
January 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
New Mexico (concluded)
<S> <S> <C> <S> <C>
Santa Fe, New Mexico, Educational Facilities Revenue Bonds:
BBB- NR* $ 350 (College of Santa Fe Project), Series A, 5.50% due 10/01/2028 $ 354
BBB- NR* 500 Refunding (St. John's College Project), 5.50% due 3/01/2024 506
AA A1 500 University of New Mexico, University Revenue Refunding Bonds, Series B,
5.75% due 6/01/2022 530
Puerto Rico--6.3%
BBB+ Baa1 500 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series T,
6.375% due 7/01/2004 (e) 575
AAA Aaa 250 Puerto Rico Public Buildings Authority Revenue Bonds, Guaranteed Government
Facilities, Series B, 5% due 7/01/2027 (a) 251
Total Investments (Cost--$12,764)--104.5% 13,698
Liabilities in Excess of Other Assets--(4.5%) (590)
-------
Net Assets--100.0% $13,108
=======
<FN.
(a)AMBAC Insured.
(b)FHA Insured.
(c)FNMA/GNMA Collateralized.
(d)FSA Insured.
(e)Prerefunded.
(f)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, 1999.
*Not Rated.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch New Mexico Municipal Bond Fund
January 31, 1999
<TABLE>
FINANCIAL INFORMATION
<CAPTION>
Statement of Assets and Liabilities as of January 31, 1999
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$12,764,444) (Note 1a) $ 13,698,154
Cash 2,778
Interest receivable 144,607
Deferred organization expenses (Note 1e) 8,814
Prepaid registration fees and other assets (Note 1e) 11,092
------------
Total assets 13,865,445
------------
Liabilities: Payables:
Securities purchased $ 483,270
Beneficial interest redeemed 198,711
Dividends to shareholders (Note 1f) 8,093
Distributor (Note 2) 3,189
Investment adviser (Note 2) 1,538 694,801
------------
Accrued expenses and other liabilities 62,274
------------
Total liabilities 757,075
------------
Net Assets: Net assets $ 13,108,370
============
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 34,779
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 68,371
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 6,796
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 16,665
Paid-in capital in excess of par 12,139,039
Accumulated realized capital losses on investments--net (90,990)
Unrealized appreciation on investments--net 933,710
------------
Net assets $ 13,108,370
============
Net Asset Value: Class A--Based on net assets of $3,600,622 and 347,793 shares of
beneficial interest outstanding $ 10.35
============
Class B--Based on net assets of $7,078,710 and 683,708 shares of
beneficial interest outstanding $ 10.35
============
Class C--Based on net assets of $703,981 and 67,961 shares of
beneficial interest outstanding $ 10.36
============
Class D--Based on net assets of $1,725,057 and 166,651 shares of
beneficial interest outstanding $ 10.35
============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch New Mexico Municipal Bond Fund
January 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months Ended
January 31, 1999
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 378,975
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 37,729
Professional fees 36,386
Account maintenance and distribution fees--Class B (Note 2) 18,321
Accounting services (Note 2) 18,319
Printing and shareholder reports 17,934
Registration fees (Note 1e) 7,023
Amortization of organization expenses (Note 1e) 4,314
Account maintenance and distribution fees--Class C (Note 2) 2,420
Transfer agent fees--Class B (Note 2) 2,028
Pricing fees 1,747
Transfer agent fees--Class A (Note 2) 894
Account maintenance fees--Class D (Note 2) 858
Custodian fees 817
Trustees' fees and expenses 408
Transfer agent fees--Class D (Note 2) 396
Transfer agent fees--Class C (Note 2) 229
Other 1,056
------------
Total expenses before reimbursement 150,879
Reimbursement of expenses (Note 2) (27,439)
------------
Total expenses after reimbursement 123,440
------------
Investment income--net 255,535
------------
Realized & Realized gain on investments--net 141,212
Unrealized Change in unrealized appreciation on investments--net 28,254
Gain on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 425,001
(Notes 1b, 1d & 3): ============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch New Mexico Municipal Bond Fund
January 31, 1999
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: 1999 1998
<S> <S> <C> <C>
Operations: Investment income--net $ 255,535 $ 660,736
Realized gain on investments--net 141,212 518,170
Change in unrealized appreciation on investments--net 28,254 (367,637)
------------ ------------
Net increase in net assets resulting from operations 425,001 811,269
------------ ------------
Dividends & Investment income--net:
Distributions to Class A (78,267) (175,945)
Shareholders Class B (129,579) (346,758)
(Note 1f): Class C (13,841) (36,414)
Class D (33,848) (101,619)
Realized gain on investments--net:
Class A (131,904) (126,513)
Class B (250,316) (258,634)
Class C (23,963) (35,045)
Class D (59,667) (81,643)
------------ ------------
Net decrease in net assets resulting from dividends
and distributions to shareholders (721,385) (1,162,571)
------------ ------------
Beneficial Net decrease in net assets derived from beneficial
Interest interest transactions (385,577) (5,204,291)
Transactions ------------ ------------
(Note 4):
Net Assets: Total decrease in net assets (681,961) (5,555,593)
Beginning of period 13,790,331 19,345,924
------------ ------------
End of period $ 13,108,370 $ 13,790,331
============ ============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch New Mexico Municipal Bond Fund
January 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
Class A
For the
Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
Jan. 31, For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.58 $ 10.82 $ 10.36 $ 10.29 $ 10.24
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .21 .47 .53 .56 .60
Realized and unrealized gain on
investments--net .13 .10 .46 .10 .06
-------- -------- -------- -------- --------
Total from investment operations .34 .57 .99 .66 .66
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.21) (.47) (.53) (.56) (.60)
Realized gain on investments--net (.36) (.34) -- -- --
In excess of realized gain on
investments--net -- -- -- (.03) (.01)
-------- -------- -------- -------- --------
Total dividends and distributions (.57) (.81) (.53) (.59) (.61)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.35 $ 10.58 $ 10.82 $ 10.36 $ 10.29
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 3.33%++ 5.52% 9.86% 6.53% 6.65%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.48%* 1.23% .79% .49% .07%
Net Assets: ======== ======== ======== ======== ========
Expenses 1.88%* 1.63% 1.33% 1.42% 1.65%
======== ======== ======== ======== ========
Investment income--net 4.05%* 4.41% 5.08% 5.33% 5.92%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 3,600 $ 3,873 $ 3,862 $ 5,287 $ 7,715
Data: ======== ======== ======== ======== ========
Portfolio turnover 20.11% 50.91% 40.53% 63.02% 28.16%
======== ======== ======== ======== ========
<CAPTION>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch New Mexico Municipal Bond Fund
January 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class B
For the
Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
Jan. 31, For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.58 $ 10.82 $ 10.36 $ 10.29 $ 10.24
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .19 .42 .48 .50 .54
Realized and unrealized gain on
investments--net .13 .10 .46 .10 .06
-------- -------- -------- -------- --------
Total from investment operations .32 .52 .94 .60 .60
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.19) (.42) (.48) (.50) (.54)
Realized gain on investments--net (.36) (.34) -- -- --
In excess of realized gain on
investments--net -- -- -- (.03) (.01)
-------- -------- -------- -------- --------
Total dividends and distributions (.55) (.76) (.48) (.53) (.55)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.35 $ 10.58 $ 10.82 $ 10.36 $ 10.29
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 3.07%++ 4.99% 9.30% 5.98% 6.11%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.99%* 1.71% 1.30% 1.01% .59%
Net Assets: ======== ======== ======== ======== ========
Expenses 2.39%* 2.12% 1.84% 1.92% 2.16%
======== ======== ======== ======== ========
Investment income--net 3.54%* 3.93% 4.57% 4.81% 5.40%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 7,079 $ 7,422 $ 11,703 $ 13,964 $ 12,104
Data: ======== ======== ======== ======== ========
Portfolio turnover 20.11% 50.91% 40.53% 63.02% 28.16%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch New Mexico Municipal Bond Fund
January 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class C
For the For the
Six Period
The following per share data and ratios have been derived Months Oct. 21,
from information provided in the financial statements. Ended 1994++ to
Jan. 31, For the Year Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.59 $ 10.83 $ 10.36 $ 10.30 $ 9.89
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .18 .41 .47 .49 .40
Realized and unrealized gain on
investments--net .13 .10 .47 .09 .42
-------- -------- -------- -------- --------
Total from investment operations .31 .51 .94 .58 .82
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.18) (.41) (.47) (.49) (.40)
Realized gain on investments--net (.36) (.34) -- -- --
In excess of realized gain on
investments--net -- -- -- (.03) (.01)
-------- -------- -------- -------- --------
Total dividends and distributions (.54) (.75) (.47) (.52) (.41)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.36 $ 10.59 $ 10.83 $ 10.36 $ 10.30
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 3.02%+++ 4.88% 9.29% 5.76% 8.44%+++
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 2.09%* 1.82% 1.42% 1.15% .80%*
Net Assets: ======== ======== ======== ======== ========
Expenses 2.49%* 2.22% 1.95% 2.03% 2.27%*
======== ======== ======== ======== ========
Investment income--net 3.43%* 3.81% 4.45% 4.67% 5.20%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 704 $ 800 $ 1,082 $ 712 $ 164
Data: ======== ======== ======== ======== ========
Portfolio turnover 20.11% 50.91% 40.53% 63.02% 28.16%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects 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, 1999
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class D
For the For the
Six Period
The following per share data and ratios have been derived Months Oct. 21,
from information provided in the financial statements. Ended 1994++ to
Jan. 31, For the Year Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.58 $ 10.82 $ 10.36 $ 10.29 $ 9.89
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .21 .46 .52 .55 .46
Realized and unrealized gain on
investments--net .13 .10 .46 .10 .41
-------- -------- -------- -------- --------
Total from investment operations .34 .56 .98 .65 .87
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.21) (.46) (.52) (.55) (.46)
Realized gain on investments--net (.36) (.34) -- -- --
In excess of realized gain on
investments--net -- -- -- (.03) (.01)
-------- -------- -------- -------- --------
Total dividends and distributions (.57) (.80) (.52) (.58) (.47)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.35 $ 10.58 $ 10.82 $ 10.36 $ 10.29
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 3.28%+++ 5.42% 9.75% 6.42% 8.91%+++
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.58%* 1.31% .90% .61% .23%*
Net Assets: ======== ======== ======== ======== ========
Expenses 1.98%* 1.71% 1.44% 1.51% 1.74%*
======== ======== ======== ======== ========
Investment income--net 3.95%* 4.32% 4.97% 5.21% 5.80%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 1,725 $ 1,695 $ 2,699 $ 2,110 $ 1,569
Data: ======== ======== ======== ======== ========
Portfolio turnover 20.11% 50.91% 40.53% 63.02% 28.16%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects 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, 1999
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. The Fund's
financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of
management accruals and estimates. 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.
* Financial futures contracts--The Fund may purchase or sell
financial futures contracts and options on such futures contracts
for the purpose of hedging the market risk on existing securities or
the intended purchase of securities. Futures contracts are contracts
for delayed delivery of securities at a specific future date and at
a specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to
the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin
and are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
Merrill Lynch New Mexico Municipal Bond Fund
January 31, 1999
(e) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a period not exceeding five years. Prepaid
registration fees are charged to expense as the related shares are
issued.
(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 Merill Lynch Funds Distributor
("MLFD" or "Distributor"), a division of Princeton Funds
Distributor, Inc. ("PFD"), which is a wholly-owned subsidiary of
Merrill Lynch Group, Inc.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee based upon the average daily
value of the Fund's net assets at the following annual rates: 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, 1999, FAM earned fees of
$37,729, of which $27,439 was voluntarily waived.
Pursuant to the Distribution Plans adopted by the Fund in accordance
with Rule 12b-1 under the Investment Company Act of 1940, the Fund
pays the Distributor ongoing account maintenance and distribution
fees. The fees are accrued daily and paid monthly at annual rates
based upon the average daily net assets of the shares as follows:
Account
Maintenance Distribution
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 Incorporated ("MLPF&S"), a subsidiary of ML &
Co., also provides account maintenance and distribution services to
the Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the six months ended January 31, 1999, MLFD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the
Fund's Class A and Class D Shares as follows:
MLFD MLPF&S
Class A $129 $1,385
Class D $ 29 $ 375
For the six months ended January 31, 1999, MLPF&S received
contingent deferred sales charges of $9,598 and $750 relating to
transactions in Class B and Class C Shares, respectively.
Financial Data Services, Inc., a wholly-owned subsidiary of ML &
Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Merrill Lynch New Mexico Municipal Bond Fund
January 31, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, PFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended January 31, 1999 were $2,721,188 and
$2,617,879, respectively.
Net realized gains for the six months ended January 31, 1999 and net
unrealized gains as of January 31, 1999 were as follows:
Realized Unrealized
Gains Gains
Long-term investments $ 141,212 $ 933,710
---------- ----------
Total $ 141,212 $ 933,710
========== ==========
As of January 31, 1999, net unrealized appreciation for Federal
income tax purposes aggregated $933,710, of which $937,535 was
related to appreciation securities and $3,825 was related to
depreciated securities. The aggregate cost of investments at January
31, 1999 for Federal income tax purposes was $12,764,444.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest
transactions was $385,577 and $5,204,291 for the six months ended
January 31, 1999 and for the year ended July 31, 1998, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Six Months Dollar
Ended January 31, 1999 Shares Amount
Shares sold 28,752 $ 304,477
Shares issued to shareholders
in reinvestment of dividends
and distributions 11,677 121,166
----------- -----------
Total issued 40,429 425,643
Shares redeemed (58,590) (614,388)
----------- -----------
Net decrease (18,161) $ (188,745)
=========== ===========
Class A Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
Shares sold 84,935 $ 904,945
Shares issued to shareholders
in reinvestment of dividends
and distributions 14,038 148,768
----------- -----------
Total issued 98,973 1,053,713
Shares redeemed (89,885) (955,239)
----------- -----------
Net increase 9,088 $ 98,474
=========== ===========
Class B Shares for the Six Months Dollar
Ended January 31, 1999 Shares Amount
Shares sold 58,655 $ 626,131
Shares issued to shareholders
in reinvestment of dividends
and distributions 18,755 194,622
----------- -----------
Total issued 77,410 820,753
Automatic conversion of shares (123) (1,310)
Shares redeemed (94,793) (1,002,295)
----------- -----------
Net decrease (17,506) $ (182,852)
=========== ===========
Class B Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
Shares sold 73,887 $ 786,905
Shares issued to shareholders
in reinvestment of dividends
and distributions 27,170 288,281
----------- -----------
Total issued 101,057 1,075,186
Automatic conversion of shares (1,979) (21,160)
Shares redeemed (479,244) (5,158,099)
----------- -----------
Net decrease (380,166) $(4,104,073)
=========== ===========
Class C Shares for the Six Months Dollar
Ended January 31, 1999 Shares Amount
Shares sold 12,033 $ 128,139
Shares issued to shareholders
in reinvestment of dividends
in distributions 2,530 26,266
----------- -----------
Total issued 14,563 154,405
Shares redeemed (22,110) (236,263)
----------- -----------
Net decrease (7,547) $ (81,858)
=========== ===========
Merrill Lynch New Mexico Municipal Bond Fund
January 31, 1999
Class C Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
Shares sold 18,013 $ 191,561
Shares issued to shareholders
in reinvestment of dividends
and distributions 4,392 46,556
----------- -----------
Total issued 22,405 238,117
Shares redeemed (46,780) (495,353)
----------- -----------
Net decrease (24,375) $ (257,236)
=========== ===========
Class D Shares for the Six Months Dollar
Ended January 31, 1999 Shares Amount
Shares sold 9,286 $ 99,133
Automatic conversion of shares 123 1,310
Shares issued to shareholders
in reinvestment of dividends
and distributions 7,634 79,299
----------- -----------
Total issued 17,043 179,742
Shares redeemed (10,582) (111,864)
----------- -----------
Net increase 6,461 $ 67,878
=========== ===========
Class D Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
Shares sold 6,214 $ 66,341
Automatic conversion of shares 1,981 21,160
Shares issued to shareholders
in reinvestment of dividends
and distributions 12,448 131,913
----------- -----------
Total issued 20,643 219,414
Shares redeemed (109,910) (1,160,870)
----------- -----------
Net decrease (89,267) $ (941,456)
=========== ===========
Merrill Lynch New Mexico Municipal Bond Fund
January 31, 1999
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
Vincent R. Giordano, Senior Vice President
Hugh T. Hurley III, Vice President
Kenneth A. Jacob, Vice President
Donald C. Burke, Vice President and Treasurer
Robert E. Putney, III, Secretary
Gerald M. Richard, Treasurer of Merrill Lynch New Mexico Municipal
Bond Fund has recently retired. His colleagues at Merrill Lynch
Asset Management, L.P. join the Fund's Board of Trustees in wishing
Mr. Richard well in his retirement.
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
