MERRILL LYNCH
MICHIGAN
MUNICIPAL
BOND FUND
FUND LOGO
Semi-Annual Report
January 31, 1996
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
Fred K. Stuebe, Portfolio Manager
Gerald M. Richard, Treasurer
Jerry Weiss, Secretary
<PAGE>
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
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.
<PAGE>
Merrill Lynch Michigan
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 during 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 six 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
Throughout the six-month period ended January 31, 1996, Merrill
Lynch Michigan Municipal Bond Fund maintained the neutral posture we
adopted in late 1995. We believe that the current combination of a
weak domestic economy and benign inflationary environment justify
the interest rate declines seen during the past 12 months. However,
until further economic weakness develops, we do not expect
additional significant interest rate declines. The Fund's portfolio
at January 31, 1996, while not as aggressive as it was in early
1995, remained well structured to take advantage of any further
improvements in interest rates.
Looking ahead, we intend to keep the Fund fully invested in order to
seek to enhance shareholder income. In addition, despite a
significant increase in new Michigan bond issuance over the past six
months, the availability of attractively priced, insured Michigan
tax-exempt securities remained limited. Over the past six months,
Michigan municipalities issued over $3 billion in securities, an
increase of approximately 75% compared to the same period a year
ago. However, the majority of these recent issues were lower-
couponed securities which are very responsive to interest rate
changes. Therefore, the supply of attractively priced, current
coupon Michigan municipal bonds remained restricted.
We expect that the majority of the Fund's total return in 1996 may
be generated more by coupon income accrual than by capital gains
derived from interest rate declines, and therefore we kept the Fund
fully invested. Although we believe it may be unrealistic to expect
to duplicate the total returns achieved over the last 12 months, the
current economic environment could easily support tax-exempt
interest rates at their current levels for much of 1996. This
scenario could produce attractive total returns for the coming year.
<PAGE>
In Conclusion
We thank you for your investment in Merrill Lynch Michigan Municipal
Bond Fund, and we look forward to discussing our outlook and
strategy in our next report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President
(Fred K. Stuebe)
Fred K. Stuebe
Portfolio Manager
March 4, 1996
We are pleased to announce that Fred K. Stuebe is responsible for
the day-to-day management of Merrill Lynch Michigan Municipal Bond
Fund. Mr. Stuebe has been employed by Merrill Lynch Asset
Management, L.P. (an affiliate of the Fund's investment
adviser) since 1989 as Vice President.
<PAGE>
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.
* 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.
<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* $10.30 $10.08 $9.56 + 7.74% +2.18%
Class B Shares* 10.30 10.08 9.56 + 7.74 +2.18
Class C Shares* 10.30 10.08 9.56 + 7.74 +2.18
Class D Shares* 10.29 10.07 9.55 + 7.75 +2.18
Class A Shares--Total Return* +13.72(1) +3.53(2)
Class B Shares--Total Return* +13.15(3) +3.40(4)
Class C Shares--Total Return* +13.03(5) +3.37(6)
Class D Shares--Total Return* +13.62(7) +3.51(8)
Class A Shares--Standardized 30-day Yield 4.77%
Class B Shares--Standardized 30-day Yield 4.46%
Class C Shares--Standardized 30-day Yield 4.36%
Class D Shares--Standardized 30-day Yield 4.67%
<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 $0.541 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.135 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.490 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.122 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.479 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.119 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.531 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.132 per share ordinary
income dividends.
</TABLE>
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>
1/29/93--12/31/93 $10.00 $10.52 -- $0.545 +10.87%
1994 10.52 9.24 -- 0.524 - 7.29
1995 9.24 10.29 -- 0.541 +17.59
1/1/96--1/31/96 10.29 10.30 -- 0.031 + 0.50
------
Total $1.641
Cumulative total return as of 1/31/96: +21.46%**
<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>
<PAGE>
<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>
1/29/93--12/31/93 $10.00 $10.53 -- $0.497 +10.46%
1994 10.53 9.24 -- 0.474 - 7.85
1995 9.24 10.29 -- 0.490 +16.99
1/1/96--1/31/96 10.29 10.30 -- 0.028 + 0.47
------
Total $1.489
Cumulative total return as of 1/31/96: +19.63%**
<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 $ 9.44 $ 9.24 -- $0.090 - 1.15%
1995 9.24 10.29 -- 0.479 +16.87
1/1/96--1/31/96 10.29 10.30 -- 0.027 + 0.46
------
Total $0.596
Cumulative total return as of 1/31/96: +16.06%**
<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>
<PAGE>
PERFORMANCE DATA (concluded)
<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 $ 9.44 $ 9.24 -- $0.101 - 1.03%
1995 9.24 10.29 -- 0.531 +17.47
1/1/96--1/31/96 10.29 10.29 -- 0.030 + 0.39
------
Total $0.662
Cumulative total return as of 1/31/96: +16.72%**
<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)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/95 +17.59% +12.89%
Inception (1/29/93)
through 12/31/95 + 6.70 + 5.22
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/95 +16.99% +12.99%
Inception (1/29/93)
through 12/31/95 + 6.16 + 5.55
[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 12/31/95 +16.87% +15.87%
Inception (10/21/94)
through 12/31/95 +12.84 +12.84
[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 +17.47% +12.77%
Inception (10/21/94)
through 12/31/95 +13.44 + 9.63
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
PORTFOLIO ABBREVIATIONS
<PAGE>
To simplify the listings of Merrill Lynch Michigan 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)
HDA Housing Development Authority
INFLOS Inverse Floating Rate Securities
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)
<S> <S> <C> <S> <C>
Michigan--98.0%
AAA Aaa $1,000 Big Rapids, Michigan, Public Schools (District Building and Site), UT,
5.625% due 5/01/2020 (c) $ 1,011
AA Aa 1,000 Breitung Township, Michigan, School District, Refunding, UT, 6.30%
due 5/01/2019 (g) 1,058
AAA Aaa 1,000 Dearborn, Michigan, Municipal Building Authority, 5% due 6/01/2016 (d) 964
AAA Aaa 2,150 Detroit, Michigan, Sewage Disposal Revenue Bonds (Water Supply System--
Second Lien), Series A, 5.25% due 7/01/2015 (b) 2,127
AAA Ba1 3,000 Detroit, Michigan, UT, 8% due 4/01/2001 (e) 3,579
AAA Aaa 2,900 Detroit, Michigan, Water Supply System Revenue Bonds, INFLOS, 8.461% due
7/01/2022 (c)(f) 3,292
BBB Baa1 3,460 Dickinson County, Michigan, Economic Development Corp., Solid Waste
Disposal Revenue Refunding Bonds (Champion International), 6.55% due
3/01/2007 3,643
AAA Aaa 2,475 Eaton Rapids, Michigan, Public Schools Building and Site Revenue Bonds,
UT, 5.50% due 5/01/2020 (b) 2,465
AAA Aaa 2,500 Grand Ledge, Michigan, Public Schools District, UT, 6.60% due 5/01/2004
(b)(e) 2,904
AAA Aaa 3,000 Grand Traverse County, Michigan, Hospital Finance Authority, Hospital
Revenue Refunding Bonds (Munson Healthcare), Series A, 6.25% due
7/01/2022 (d) 3,187
<PAGE>
AA Aa 4,000 Haslett, Michigan, Public School District, Refunding, UT, 6.625% due
5/01/2019 4,329
AA- A1 985 Kalamazoo, Michigan, Building Authority, Series A, 5.90% due 10/01/2017 1,021
AAA Aaa 2,000 Kalamazoo, Michigan, Hospital Finance Authority, Hospital Facility
Revenue Refunding and Improvement Bonds (Bronson Methodist), Series A,
6.375% due 5/15/2017 (b) 2,170
AAA Aaa 1,000 Lansing, Michigan, Sewage Disposal System, Revenue Refunding Bonds,
5.85% due 5/01/2014 (c) 1,046
AAA Aaa 1,000 Michigan Municipal Bond Authority Revenue Bonds (Local Government Loan
Program-Marquette Building), Series D, 6.75% due 5/01/2021 (d) 1,104
Michigan Municipal Bond Authority Revenue Bonds (State Revolving Fund),
Series A:
AA Aa 1,000 6.55% due 10/01/2013 1,093
AA Aa 1,500 6.60% due 10/01/2018 1,622
AA- A1 3,500 Michigan Public Power Agency, Revenue Refunding Bonds (Belle River
Project), Series A, 5.25% due 1/01/2018 3,385
AA- A1 2,000 Michigan State Building Authority, Revenue Refunding Bonds, Series I,
6.75% due 10/01/2011 2,208
A+ NR* 2,000 Michigan State, HDA, Rental Housing Revenue Refunding Bonds, Series A,
6.60% due 4/01/2012 2,083
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <S> <C> <S> <C>
Michigan (concluded)
Michigan State, HDA, S/F Mortgage Revenue Bonds:
AA+ NR* $1,000 AMT, Series B, 7.05% due 6/01/2026 $ 1,050
AA+ NR* 1,500 Refunding, AMT, Series D, 6.85% due 6/01/2026 1,568
AA+ NR* 2,440 Series A, 6.50% due 12/01/2017 2,538
AA+ NR* 2,600 Series B, 6.95% due 12/01/2020 2,739
Michigan State Hospital Finance Authority Revenue Bonds, Series A:
NR* Aaa 1,950 (McLaren Obligated Group), 7.50% due 9/15/2001 (e) 2,304
A A 3,500 Refunding (Detroit Medical Center Obligated Group), 6.50% due 8/15/2018 3,696
AA Aa 3,000 Refunding (Henry Ford Health Systems), 5.25% due 11/15/2020 2,907
<PAGE>
Michigan State Strategic Fund, Limited Obligation Revenue Bonds:
A+ A1 1,250 Refunding (Ford Motor Co. Project), Series A, 7.10% due 2/01/2006 1,434
A+ A1 1,000 (Waste Management Inc. Project), AMT, 6.625% due 12/01/2012 1,059
NR* VMIG1++ 100 Michigan State Strategic Fund, Solid Waste Disposal Revenue Bonds (Grayling
Generating Project), VRDN, AMT, 3.30% due 1/01/2014 (a) 100
AA- A1 1,900 Michigan State Trunk Line, Series A, 5.75% due 10/01/2004 2,059
AA- A1 1,500 Michigan State University, General Revenue Refunding Bonds, Series A,
6% due 8/15/2016 1,555
AAA Aaa 2,000 Monroe County, Michigan, PCR (Detroit Edison Co. Project), AMT, Series I,
7.30% due 9/01/2019 (d) 2,234
AAA Aaa 2,000 Muskegon, Michigan, Public Schools, UT, Series 95, 5.25% due 5/01/2021 (c) 1,951
AAA Aaa 1,000 Oxford, Michigan, Area Community School District, UT, 5.40% due 5/01/2025 (c) 992
AAA Aaa 2,045 Pinckney, Michigan, Community School District, Revenue Refunding Bonds
(Livingston and Washtenaw Counties), UT, 5% due 5/01/2014 (c) 1,974
Royal Oak, Michigan, Hospital Finance Authority Revenue Bonds:
AA- Aa 2,000 Refunding (Beaumont Properties, Inc.), Series E, 6.625% due 1/01/2019 2,149
AA Aa 2,000 (William Beaumont Hospital), Series D, 6.75% due 1/01/2020 2,143
AAA Aaa 1,000 Saint Clair County, Michigan, Economic Development Corp., PCR, Refunding
(Detroit Edison), Collateral, Series AA, 6.40% due 8/01/2024 (d) 1,114
University of Michigan, University Hospital Revenue Bonds, VRDN,
Series A (a):
A1+ VMIG1++ 400 3.75% due 12/01/2027 400
A1+ VMIG1++ 100 Refunding, 3.75% due 12/01/2019 100
AAA Aaa 1,500 Western Michigan University, General Revenue Bonds, 6.125% due
11/15/2022 (c) 1,588
Total Investments (Cost--$77,807)--98.0% 81,945
Other Assets Less Liabilities--2.0% 1,698
-------
Net Assets--100.0% $83,643
=======
<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)Prerefunded.
(f)The interest rate is subject to change periodically and inversely
based upon prevailing market rates. The interest rate shown is the
rate in effect at January 31, 1996.
(g)Bank Qualified.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
<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--$77,806,881) (Note 1a) $ 81,945,468
Cash 67,332
Receivables:
Securities sold $ 2,347,772
Interest 1,252,942
Beneficial interest sold 293,230 3,893,944
------------
Deferred organization expenses (Note 1e) 24,830
Prepaid registration fees and other assets (Note 1e) 22,504
------------
Total assets 85,954,078
------------
Liabilities: Payables:
Securities purchased 1,948,002
Beneficial interest redeemed 119,906
Dividends to shareholders (Note 1f) 99,150
Distributor (Note 2) 28,495
Investment adviser (Note 2) 13,517 2,209,070
------------
Accrued expenses and other liabilities 101,766
------------
Total liabilities 2,310,836
------------
Net Assets: Net assets $ 83,643,242
============
<PAGE>
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 117,263
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 663,845
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 15,273
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 16,092
Paid-in capital in excess of par 81,910,206
Accumulated realized capital losses on investments--net (Note 5) (2,855,612)
Accumulated distributions in excess of realized capital gains--net (362,412)
Unrealized appreciation on investments--net 4,138,587
------------
Net assets $ 83,643,242
============
Net Asset Value: Class A--Based on net assets of $12,072,333 and 1,172,629 shares
of beneficial interest outstanding $ 10.30
============
Class B--Based on net assets of $68,343,015 and 6,638,450 shares
of beneficial interest outstanding $ 10.30
============
Class C--Based on net assets of $1,572,362 and 152,725 shares
of beneficial interest outstanding $ 10.30
============
Class D--Based on net assets of $1,655,532 and 160,917 shares
of beneficial interest outstanding $ 10.29
============
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 $ 2,314,679
(Note 1d):
<PAGE>
Expenses: Investment advisory fees (Note 2) $ 216,490
Account maintenance and distribution fees--Class B (Note 2) 160,815
Printing and shareholder reports 25,374
Professional fees 25,266
Transfer agent fees--Class B (Note 2) 23,866
Accounting services (Note 2) 19,051
Registration fees (Note 1e) 6,693
Amortization of organization expenses (Note 1e) 4,996
Transfer agent fees--Class A (Note 2) 3,663
Pricing fees 3,335
Account maintenance and distribution fees--Class C (Note 2) 3,302
Custodian fees 3,107
Trustees' fees and expenses 1,781
Account maintenance fees--Class D (Note 2) 694
Transfer agent fees--Class C (Note 2) 432
Transfer agent fees--Class D (Note 2) 424
Other 1,530
------------
Total expenses before reimbursement 500,819
Reimbursement of expenses (Note 2) (137,767)
------------
Total expenses after reimbursement 363,052
------------
Investment income--net 1,951,627
------------
Realized & Unreal- Realized loss on investments--net (38,165)
ized Gain Change in unrealized appreciation on investments--net 3,478,495
(Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 5,391,957
(Notes 1b, ============
1d & 3):
</TABLE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: Jan. 31, 1996 July 31, 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 1,951,627 $ 3,740,366
Realized loss on investments--net (38,165) (2,488,261)
Change in unrealized appreciation on investments--net 3,478,495 2,602,308
------------ ------------
Net increase in net assets resulting from operations 5,391,957 3,854,413
------------ ------------
Dividends to Investment income--net:
Shareholders Class A (320,897) (730,859)
(Note 1f): Class B (1,567,875) (2,965,026)
Class C (26,205) (17,131)
Class D (36,650) (27,350)
------------ ------------
Net decrease in net assets resulting from dividends
to shareholders (1,951,627) (3,740,366)
------------ ------------
<PAGE>
Beneficial Interest Net increase in net assets derived from beneficial
Transactions interest transactions 5,781,474 194,946
(Note 4): ------------ ------------
Net Assets: Total increase in net assets 9,221,804 308,993
Beginning of period 74,421,438 74,112,445
------------ ------------
End of period $ 83,643,242 $ 74,421,438
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
Class A
For the For the
Six Period
The following per share data and ratios have been derived Months Jan. 29,
from information provided in the financial statements. Ended For the Year 1993++ to
Jan. 31, Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.85 $ 9.84 $ 10.29 $ 10.00
Operating -------- -------- -------- --------
Performance: Investment income--net .27 .53 .53 .26
Realized and unrealized gain (loss) on
investments--net .45 .01 (.40) .29
-------- -------- -------- --------
Total from investment operations .72 .54 .13 .55
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.27) (.53) (.53) (.26)
In excess of realized gain on
investments--net -- -- (.05) --
-------- -------- -------- --------
Total dividends and distributions (.27) (.53) (.58) (.26)
-------- -------- -------- --------
Net asset value, end of period $ 10.30 $ 9.85 $ 9.84 $ 10.29
======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share 7.40%+++ 5.79% 1.22% 5.61%+++
Return:** ======== ======== ======== ========
Ratios to Expenses, net of reimbursement .49%* .50% .31% .08%*
Average ======== ======== ======== ========
Net Assets: Expenses .84%* .88% 1.00% 1.02%*
======== ======== ======== ========
Investment income--net 5.37%* 5.57% 5.18% 5.20%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 12,072 $ 11,838 $ 15,064 $ 13,276
Data: ======== ======== ======== ========
Portfolio turnover 28.92% 123.61% 71.70% 31.23%
======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class B
For the For the
Six Period
The following per share data and ratios have been derived Months Jan. 29,
from information provided in the financial statements. Ended For the Year 1993++ to
Jan. 31, Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.85 $ 9.84 $ 10.29 $ 10.00
Operating -------- -------- -------- --------
Performance: Investment income--net .25 .49 .48 .24
Realized and unrealized gain (loss) on
investments--net .45 .01 (.40) .29
-------- -------- -------- --------
Total from investment operations .70 .50 .08 .53
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.25) (.49) (.48) (.24)
In excess of realized gain on
investments--net -- -- (.05) --
-------- -------- -------- --------
Total dividends and distributions (.25) (.49) (.53) (.24)
-------- -------- -------- --------
Net asset value, end of period $ 10.30 $ 9.85 $ 9.84 $ 10.29
======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share 7.13%+++ 5.25% .71% 5.35%+++
Return:** ======== ======== ======== ========
Ratios to Expenses, net of reimbursement 1.00%* 1.02% .81% .58%*
Average ======== ======== ======== ========
Net Assets: Expenses 1.35%* 1.40% 1.51% 1.53%*
======== ======== ======== ========
Investment income--net 4.86%* 5.05% 4.68% 4.71%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 68,343 $ 60,699 $ 59,049 $ 44,692
Data: ======== ======== ======== ========
Portfolio turnover 28.92% 123.61% 71.70% 31.23%
======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class C Class D
For the For the For the For the
Six Period Six Period
The following per share data and ratios have been derived Months Oct. 21, 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 $ 9.85 $ 9.44 $ 9.85 $ 9.44
Operating -------- -------- -------- --------
Performance: Investment income--net .24 .37 .27 .41
Realized and unrealized gain on investments--net .45 .41 .44 .41
-------- -------- -------- --------
Total from investment operations .69 .78 .71 .82
-------- -------- -------- --------
Less dividends from investment income--net (.24) (.37) (.27) (.41)
-------- -------- -------- --------
Net asset value, end of period $ 10.30 $ 9.85 $ 10.29 $ 9.85
======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share 7.07%+++ 8.39%+++ 7.24%+++ 8.84%+++
Return:** ======== ======== ======== ========
Ratios to Expenses, net of reimbursement 1.11%* 1.16%* .59%* .63%*
Average Net ======== ======== ======== ========
Assets: Expenses 1.45%* 1.51%* .94%* .98%*
======== ======== ======== ========
Investment income--net 4.75%* 4.91%* 5.26%* 5.46%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 1,572 $ 839 $ 1,656 $ 1,045
Data: ======== ======== ======== ========
Portfolio turnover 28.92% 123.61% 28.92% 123.61%
======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects 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 Michigan 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.
<PAGE>
(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
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.
<PAGE>
(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.
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, 1996, FAM
earned fees of $216,490, of which $137,767 was voluntarily waived.
<PAGE>
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
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 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 $ 66 $ 901
Class D $612 $6,691
For the six months ended January 31, 1996, MLPF&S received
contingent deferred sales charges of $52,877 and $162 relating to
transactions in Class B and Class C Shares, respectively.
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.
<PAGE>
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended January 31, 1996 were $29,649,554 and
$22,307,000, respectively.
Net realized and unrealized gains (losses) as of January 31, 1996
were as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $ 113,741 $ 4,138,587
Financial futures contracts (151,906) --
----------- ------------
Total $ (38,165) $ 4,138,587
=========== ============
As of January 31, 1996, net unrealized appreciation for Federal
income tax purposes aggregated $4,138,587, all of which related to
appreciated securities. The aggregate cost of investments at January
31, 1996 for Federal income tax purposes was $77,806,881.
4. Beneficial Interest Transactions:
Net increase in net assets derived from beneficial interest
transactions was $5,781,474 and $194,946 for the six months ended
January 31, 1996 and 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 94,976 $ 961,496
Shares issued to shareholders
in reinvestment of dividends 11,992 120,681
------------ ------------
Total issued 106,968 1,082,177
Shares redeemed (135,776) (1,370,220)
------------ ------------
Net decrease (28,808) $ (288,043)
============ ============
<PAGE>
Class A Shares for the Year Dollar
Ended July 31, 1995 Shares Amount
Shares sold 150,627 $ 1,457,378
Shares issued to shareholders
in reinvestment of dividends 25,381 243,896
------------ ------------
Total issued 176,008 1,701,274
Shares redeemed (505,645) (4,848,236)
------------ ------------
Net decrease (329,637) $ (3,146,962)
============ ============
Class B Shares for the Six Months Dollar
Ended January 31, 1996 Shares Amount
Shares sold 863,145 $ 8,714,296
Shares issued to shareholders
in reinvestment of dividends 49,573 499,109
------------ ------------
Total issued 912,718 9,213,405
Shares redeemed (434,374) (4,376,569)
------------ ------------
Net increase 478,344 $ 4,836,836
============ ============
Class B Shares for the Year Dollar
Ended July 31, 1995 Shares Amount
Shares sold 1,624,665 $ 15,578,856
Shares issued to shareholders
in reinvestment of dividends 92,818 893,289
------------ ------------
Total issued 1,717,483 16,472,145
Shares redeemed (1,559,047) (14,954,039)
------------ ------------
Net increase 158,436 $ 1,518,106
============ ============
Class C Shares for the Six Months Dollar
Ended January 31, 1996 Shares Amount
Shares sold 71,800 $ 727,454
Shares issued to shareholders
in reinvestment of dividends 2,014 20,315
------------ ------------
Total issued 73,814 747,769
Shares redeemed (6,300) (63,563)
------------ ------------
Net increase 67,514 $ 684,206
============ ============
<PAGE>
Class C Shares for the Period Dollar
Oct. 21, 1994++ to July 31, 1995 Shares Amount
Shares sold 106,814 $ 1,035,707
Shares issued to shareholders
in reinvestment of dividends 1,304 12,848
------------ ------------
Total issued 108,118 1,048,555
Shares redeemed (22,907) (227,063)
------------ ------------
Net increase 85,211 $ 821,492
============ ============
[FN]
++Commencement of Operations.
Class D Shares for the Six Months Dollar
Ended January 31, 1996 Shares Amount
Shares sold 58,321 $ 584,326
Shares issued to shareholders
in reinvestment of dividends 1,037 10,486
------------ ------------
Total issued 59,358 594,812
Shares redeemed (4,564) (46,337)
------------ ------------
Net increase 54,794 $ 548,475
============ ============
Class D Shares for the Period Dollar
Oct. 21, 1994++ to July 31, 1995 Shares Amount
Shares sold 114,048 $ 1,078,383
Shares issued to shareholders
in reinvestment of dividends 333 3,269
------------ ------------
Total issued 114,381 1,081,652
Shares redeemed (8,258) (79,342)
------------ ------------
Net increase 106,123 $ 1,002,310
============ ============
[FN]
++Commencement of Operations.
<PAGE>
5. Capital Loss Carryforward:
At July 31, 1995, the Fund had a capital loss carryforward of
approximately $1,891,000, all of which expires in 2003. This amount
will be available to offset like amounts of any future taxable gains.
