MERRILL LYNCH
MICHIGAN
MUNICIPAL
BOND FUND
FUND LOGO
Semi-Annual Report
January 31, 1997
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
Donald C. Burke, Vice President
Kenneth A. Jacob, Vice President
Fred K. Stuebe, Vice President
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.
Merrill Lynch Michigan
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011
TO OUR SHAREHOLDERS
<PAGE>
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%.
<PAGE>
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, we primarily
maintained the defensive posture of the Fund which we adopted in mid-
1996. Our principal strategy was to favor higher-couponed issues
over more interest rate-sensitive securities that have greater
potential for capital appreciation. We believed that tax-exempt
interest rates would fluctuate in a broad range and larger-couponed
securities would offer both greater principal preservation and a
generous tax-exempt income. In addition, we maintained minimal cash
reserves in recent months to further augment shareholder income.
New long-term bond issuance in Michigan was lower than that in the
national marketplace. During the six months ended January 31, 1997,
over $2.1 billion in long-term securities were issued by Michigan
municipalities, a decline of over 30% compared to the same period in
1996. Likewise, during the three months ended January 31, 1997, $900
million in municipal bonds were issued in Michigan, a decline of 45%
compared to the same period in 1996. This dramatic decline in new
bond supply was perhaps the major determining factor in our decision
to maintain a fully invested position. While 1997 annual issuance is
expected to be similar to that of 1996, more advantageous supply
conditions are not expected until late 1997. Consequently, we expect
to remain fully invested throughout much of 1997.
We believe that economic growth should slow by mid-1997, perhaps
aided by an increase in interest rates by the Federal Reserve Board.
Slower growth, combined with continued low inflation, may result in
materially lower interest rates. Additionally, the prospect for
further Federal deficit reduction may provide a positive backdrop
for more significant declines in long-term bond yields. Signs that
such a scenario is developing would trigger us to move to a more
aggressive strategy for the Fund, utilizing more interest rate-
sensitive issues in order to enhance the Fund's principal
appreciation. At the same time, however, we will still seek to
generate an attractive level of tax-exempt income.
<PAGE>
In Conclusion
We appreciate your ongoing interest in Merrill Lynch Michigan
Municipal Bond Fund, and we look forward to serving your investment
needs in the months and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Fred K. Stuebe)
Fred K. Stuebe
Vice President and Portfolio Manager
March 3, 1997
PERFORMANCE DATA
About Fund Performance
<PAGE>
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. 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
1/31/97 10/31/96 1/31/96 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $10.05 $10.05 $10.30 -2.43% 0.00%
Class B Shares* 10.05 10.05 10.30 -2.43 0.00
Class C Shares* 10.05 10.05 10.30 -2.43 0.00
Class D Shares* 10.04 10.04 10.29 -2.43 0.00
Class A Shares--Total Return* +2.89(1) +1.36(2)
Class B Shares--Total Return* +2.36(3) +1.23(4)
Class C Shares--Total Return* +2.26(5) +1.20(6)
Class D Shares--Total Return* +2.79(7) +1.33(8)
Class A Shares--Standardized 30-day Yield 4.84%
Class B Shares--Standardized 30-day Yield 4.53%
Class C Shares--Standardized 30-day Yield 4.42%
Class D Shares--Standardized 30-day Yield 4.74%
<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 $0.536 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.142 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.484 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.128 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.473 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.126 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.525 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.139 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
1996 10.29 10.10 -- 0.529 + 3.47
1/1/97-1/31/97 10.10 10.05 -- 0.038 - 0.03
------
Total $2.177
Cumulative total return as of 1/31/97: +25.01%**
<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
1996 10.29 10.10 -- 0.477 + 2.94
1/1/97-1/31/97 10.10 10.05 -- 0.034 - 0.07
------
Total $1.972
Cumulative total return as of 1/31/97: +22.49%**
<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
1996 10.29 10.10 -- 0.467 + 2.83
1/1/97-1/31/97 10.10 10.05 -- 0.034 - 0.08
------
Total $1.070
Cumulative total return as of 1/31/97: +18.70%**
<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>
PERFORMANCE DATA (concluded)
<PAGE>
<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
1996 10.29 10.09 -- 0.518 + 3.26
1/1/97-1/31/97 10.09 10.04 -- 0.037 - 0.04
------
Total $1.187
Cumulative total return as of 1/31/97: +20.01%**
<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>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/96 +3.47% -0.67%
Inception (1/29/93)
through 12/31/96 +5.87 +4.77
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/96 +2.94% -0.99%
Inception (1/29/93)
through 12/31/96 +5.33 +5.11
<PAGE>
[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 12/31/96 +2.83% +1.85%
Inception (10/21/94)
through 12/31/96 +8.17 +8.17
[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 12/31/96 +3.26% -0.87%
Inception (10/21/94)
through 12/31/96 +8.68 +6.68
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
PORTFOLIO ABBREVIATIONS
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
PCR Pollution Control Revenue Bonds
S/F Single-Family
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Michigan--98.9%
<S> <S> <C> <S> <C>
AA Aa $ 1,000 Breitung Township, Michigan, School District, Refunding, UT, 6.30% due
5/01/2019 $ 1,045
AAA Aaa 1,000 Davison, Michigan, Community School District, UT, 5.375% due 5/01/2016 (c) 964
AAA Aaa 1,000 Dearborn, Michigan, Sewage Disposal System Revenue Bonds, Series A, 5.125%
due 4/01/2014 (b) 955
AAA Aaa 5,800 Detroit, Michigan, Water Supply System Revenue Bonds, 6.375% due
7/01/2022 (c) 6,104
BBB Baa1 3,460 Dickinson County, Michigan, Economic Development Corp., Solid Waste
Disposal Revenue Refunding Bonds (Champion International), 6.55% due
3/01/2007 3,605
AAA Aaa 2,750 Eastern Michigan University, General Revenue Bonds, 5.50% due 6/01/2027 (c) 2,655
AAA Aaa 3,100 Flat Rock, Michigan, Community School District, UT, Series 95, 5.25% due
5/01/2018 (b) 2,915
AAA Aaa 2,500 Grand Ledge, Michigan, Public Schools District, UT, 6.60% due 5/01/2004
(b)(e) 2,818
A1+ VMIG1++ 900 Grand Rapids, Michigan, Water Supply System, Revenue Refunding Bonds, VRDN,
3.45% due 1/01/2020 (a)(c) 900
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) 3,124
AA Aa 4,000 Haslett, Michigan, Public School District, Refunding, UT, 6.625% due
5/01/2019 4,289
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) 2,112
<PAGE>
AAA Aaa 1,300 Lincoln Park, Michigan, School District, UT, 5.90% due 5/01/2026 (c) 1,317
A1 VMIG1++ 500 Michigan Higher Education Student Loan Authority Revenue Bonds, VRDN, AMT,
Series XII-D, 3.55% due 10/01/2015 (a)(d) 500
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) 1,090
Michigan Municipal Bond Authority Revenue Bonds (State Revolving Fund),
Series A (e):
AA Aa 1,000 6.55% due 10/01/2002 1,113
AA Aa 1,500 6.60% due 10/01/2002 1,672
AA- A1 2,000 Michigan State Building Authority, Revenue Refunding Bonds, Series I,
6.75% due 10/01/2011 2,150
A+ NR* 2,000 Michigan State, HDA, Rental Housing Revenue Refunding Bonds, Series A,
6.60% due 4/01/2012 2,063
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Michigan (concluded)
<S> <S> <C> <S> <C>
Michigan State, HDA, S/F Mortgage Revenue Bonds:
AA+ NR* $ 895 AMT, Series B, 7.05% due 6/01/2026 $ 936
AA+ NR* 3,605 Refunding, AMT, Series D, 6.85% due 6/01/2026 3,754
AA+ NR* 2,150 Series A, 6.50% due 12/01/2017 2,229
AA+ NR* 2,420 Series B, 6.95% due 12/01/2020 2,539
Michigan State Hospital Finance Authority Revenue Bonds:
AAA Aaa 1,250 (Mercy Health Services) Series Q, 5.375% due 8/15/2026 (d) 1,179
A A 3,500 Refunding (Detroit Medical Center Obligation Group), Series A, 6.50%
due 8/15/2018 3,651
AA Aa 3,500 Refunding (Henry Ford Health Systems), Series A, 5.25% due 11/15/2020 3,331
AAA Aaa 3,000 (Saint John Hospital and Medical Center), Series A, 5.25% due
5/15/2026 (d) 2,796
Michigan State Strategic Fund, Limited Obligation Revenue Bonds:
AAA Aaa 2,000 Refunding (Detroit Edison Co. Project), 6.875% due 12/01/2021 (c) 2,207
A+ A1 1,250 Refunding (Ford Motor Co. Project), Series A, 7.10% due 2/01/2006 1,430
A+ A1 1,000 (Waste Management Inc. Project), AMT, 6.625% due 12/01/2012 1,079
NR* P1 1,800 Michigan State Strategic Fund, PCR, Refunding (Consumers Power Project),
VRDN, Series A, 3.70% due 4/15/2018 (a) 1,800
<PAGE>
NR* VMIG1++ 100 Michigan State Strategic Fund, Solid Waste Disposal Revenue Bonds
(Grayling Generating Project), VRDN, AMT, 3.65% due 1/01/2014 (a) 100
AAA Aaa 2,435 Michigan State University, General Revenue Bonds, Series A, 5% due
2/15/2026 (d) 2,201
Royal Oak, Michigan, Hospital Finance Authority Revenue Bonds:
AAA Aaa 215 Refunding (Beaumont Properties, Inc.), Series E, 6.625% due
1/01/2002 (e) 237
AA- Aa3 1,785 Refunding (Beaumont Properties, Inc.), Series E, 6.625% due 1/01/2019 1,895
AA Aaa 2,000 (William Beaumont Hospital), Series D, 6.75% due 1/01/2001 (e) 2,195
AAA Aaa 2,065 Saint Clair County, Michigan, Building Authority, 5.25% due 4/01/2018 (b) 1,959
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) 1,079
AAA Aaa 1,000 Sandusky, Michigan, Community School District, Refunding, UT, 5.25% due
5/01/2021 (d) 935
AAA Aaa 1,250 School Craft, Michigan, Community School District, UT, 5.375% due
5/01/2026 (c) 1,191
AAA Aaa 2,300 Three Rivers, Michigan, Community Schools Building and Site, UT, 6% due
5/01/2023 (b) 2,358
AAA Aaa 1,500 Western Michigan University, General Revenue Bonds, 6.125% due
11/15/2022 (c) 1,547
Total Investments (Cost--$81,065)--98.9% 84,019
Other Assets Less Liabilities--1.1% 958
-------
Net Assets--100.0% $84,977
=======
<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, 1997.
(b)MBIA Insured.
(c)FGIC Insured.
(d)AMBAC Insured.
(e)Prerefunded.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of January 31, 1997
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$81,064,953) (Note 1a) $ 84,018,988
Cash 5,321
Receivables:
Interest $ 1,139,197
Beneficial interest sold 98,728 1,237,925
------------
Deferred organization expenses (Note 1e) 14,854
Prepaid registration fees and other assets (Note 1e) 5,804
------------
Total assets 85,282,892
------------
Liabilities: Payables:
Beneficial interest redeemed 120,494
Dividends to shareholders (Note 1f) 67,168
Distributor (Note 2) 31,245
Investment adviser (Note 2) 22,439 241,346
------------
Accrued expenses and other liabilities 64,244
------------
Total liabilities 305,590
------------
Net Assets: Net assets $ 84,977,302
============
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 115,750
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 680,488
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 16,672
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 32,946
Paid-in capital in excess of par 85,242,481
Accumulated realized capital losses on investments--net
(Note 5) (3,702,658)
Accumulated distributions in excess of realized capital
gains--net (Note 1f) (362,412)
Unrealized appreciation on investments--net 2,954,035
------------
Net assets $ 84,977,302
============
<PAGE>
Net Asset Value: Class A--Based on net assets of $11,628,890 and 1,157,502
shares of beneficial interest outstanding $ 10.05
============
Class B--Based on net assets of $68,365,659 and 6,804,884
shares of beneficial interest outstanding $ 10.05
============
Class C--Based on net assets of $1,674,901 and 166,718
shares of beneficial interest outstanding $ 10.05
============
Class D--Based on net assets of $3,307,852 and 329,463
shares of beneficial interest outstanding $ 10.04
============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months Ended January 31, 1997
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 2,492,359
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 237,427
Account maintenance and distribution fees--Class B (Note 2) 176,234
Professional fees 27,142
Transfer agent fees--Class B (Note 2) 20,954
Accounting services (Note 2) 19,951
Registration fees (Note 1e) 13,034
Printing and shareholder reports 12,158
Account maintenance and distribution fees--Class C (Note 2) 5,709
Amortization of organization expenses (Note 1e) 5,096
Pricing fees 3,438
Transfer agent fees--Class A (Note 2) 2,814
Trustees' fees and expenses 2,188
Custodian fees 2,101
Account maintenance fees--Class D (Note 2) 1,146
Transfer agent fees--Class C (Note 2) 605
Transfer agent fees--Class D (Note 2) 553
Other 1,586
------------
Total expenses before reimbursement 532,136
Reimbursement of expenses (Note 2) (107,921)
------------
Total expenses after reimbursement 424,215
------------
Investment income--net 2,068,144
------------
<PAGE>
Realized & Realized gain on investments--net 212,416
Unrealized Gain on Change in unrealized appreciation on investments--net 880,019
Investments--Net ------------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations $ 3,160,579
============
</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, 1997 July 31, 1996
<S> <S> <C> <C>
Operations: Investment income--net $ 2,068,144 $ 3,958,994
Realized gain (loss) on investments--net 212,416 (1,097,627)
Change in unrealized appreciation on investments--net 880,019 1,413,924
------------ ------------
Net increase in net assets resulting from operations 3,160,579 4,275,291
------------ ------------
Dividends to Investment income--net:
Shareholders Class A (304,306) (627,353)
(Note 1f): Class B (1,661,163) (3,183,853)
Class C (43,835) (66,935)
Class D (58,840) (80,853)
------------ ------------
Net decrease in net assets resulting from dividends to
shareholders (2,068,144) (3,958,994)
------------ ------------
Beneficial Interest Net increase in net assets derived from beneficial interest
Transactions transactions 934,112 8,213,020
(Note 4): ------------ ------------
Net Assets: Total increase in net assets 2,026,547 8,529,317
Beginning of period 82,950,755 74,421,438
------------ ------------
End of period $ 84,977,302 $ 82,950,755
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
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 1993++ to
Jan. 31, For the Year Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.92 $ 9.85 $ 9.84 $ 10.29 $ 10.00
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .27 .54 .53 .53 .26
Realized and unrealized gain (loss) on
investments--net .13 .07 .01 (.40) .29
-------- -------- -------- -------- --------
Total from investment operations .40 .61 .54 .13 .55
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.27) (.54) (.53) (.53) (.26)
In excess of realized gain on
investments--net -- -- -- (.05) --
-------- -------- -------- -------- --------
Total dividends and distributions (.27) (.54) (.53) (.58) (.26)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.05 $ 9.92 $ 9.85 $ 9.84 $ 10.29
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 4.04%+++ 6.25% 5.79% 1.22% 5.61%+++
Return:** ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement .55%* .49% .50% .31% .08%*
Average ======== ======== ======== ======== ========
Net Assets: Expenses .80%* .82% .88% 1.00% 1.02%*
======== ======== ======== ======== ========
Investment income--net 5.22%* 5.35% 5.57% 5.18% 5.20%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 11,629 $ 11,468 $ 11,838 $ 15,064 $ 13,276
Data: ======== ======== ======== ======== ========
Portfolio turnover 14.81% 69.34% 123.61% 71.70% 31.23%
======== ======== ======== ======== ========
<PAGE>
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
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 1993++ to
Jan. 31, For the Year Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.92 $ 9.85 $ 9.84 $ 10.29 $ 10.00
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .24 .49 .49 .48 .24
Realized and unrealized gain (loss) on
investments--net .13 .07 .01 (.40) .29
-------- -------- -------- -------- --------
Total from investment operations .37 .56 .50 .08 .53
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.24) (.49) (.49) (.48) (.24)
In excess of realized gain on
investments--net -- -- -- (.05) --
-------- -------- -------- -------- --------
Total dividends and distributions (.24) (.49) (.49) (.53) (.24)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.05 $ 9.92 $ 9.85 $ 9.84 $ 10.29
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 3.77%+++ 5.70% 5.25% .71% 5.35%+++
Return:** ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement 1.06%* 1.00% 1.02% .81% .58%*
Average ======== ======== ======== ======== ========
Net Assets: Expenses 1.31%* 1.33% 1.40% 1.51% 1.53%*
======== ======== ======== ======== ========
Investment income--net 4.71%* 4.84% 5.05% 4.68% 4.71%*
======== ======== ======== ======== ========
<PAGE>
Supplemental Net assets, end of period (in thousands) $ 68,365 $ 67,770 $ 60,699 $ 59,049 $ 44,692
Data: ======== ======== ======== ======== ========
Portfolio turnover 14.81% 69.34% 123.61% 71.70% 31.23%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class C Class D
For the For For the For the For For the
Six the Period Six the Period
The following per share data and ratios have been derived Months Year Oct. 21, Months Year Oct. 21,
from information provided in the financial statements. Ended Ended 1994++ to Ended Ended 1994++ to
Jan. 31, July 31, July 31, Jan. 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning
Operating of period $ 9.92 $ 9.85 $ 9.44 $ 9.91 $ 9.85 $ 9.44
Performance: -------- -------- -------- -------- -------- --------
Investment income--net .24 .48 .37 .26 .53 .41
Realized and unrealized gain on
investments--net .13 .07 .41 .13 .06 .41
-------- -------- -------- -------- -------- --------
Total from investment operations .37 .55 .78 .39 .59 .82
-------- -------- -------- -------- -------- --------
Less dividends from investment
income--net (.24) (.48) (.37) (.26) (.53) (.41)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 10.05 $ 9.92 $ 9.85 $ 10.04 $ 9.91 $ 9.85
======== ======== ======== ======== ======== ========
Total Investment Based on net asset value per share 3.71%+++ 5.59% 8.39%+++ 3.99%+++ 6.04% 8.84%+++
Return:** ======== ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement 1.16%* 1.11% 1.16%* .65%* .59% .63%*
Average Net ======== ======== ======== ======== ======== ========
Assets: Expenses 1.41%* 1.43% 1.51%* .90%* .91% .98%*
======== ======== ======== ======== ======== ========
Investment income--net 4.61%* 4.73% 4.91%* 5.14%* 5.24% 5.46%*
======== ======== ======== ======== ======== ========
<PAGE>
Supplemental Net assets, end of period
Data: (in thousands) $ 1,675 $ 1,871 $ 839 $ 3,308 $ 1,842 $ 1,045
======== ======== ======== ======== ======== ========
Portfolio turnover 14.81% 69.34% 123.61% 14.81% 69.34% 123.61%
======== ======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch 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 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.
(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.
<PAGE>
(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.
NOTES TO FINANCIAL STATEMENTS (concluded)
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is a
limited partner. The Fund had also entered into a Distribution
Agreement and Distribution Plans with Merill 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 $237,427, of which $107,921 was voluntarily waived.
Pursuant to the distribution plans (the "Distribution Plans")
adopted by the Fund in accordance with Rule 12b-1 under the
Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are
accrued daily and paid monthly at annual rates based upon the
average daily net assets of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.25%
Class C 0.25% 0.35%
Class D 0.10% --
<PAGE>
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the six months ended January 31, 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 $177 $1,157
Class D $290 $3,353
For the six months ended January 31, 1997, MLPF&S received
contingent deferred sales charges of $89,820 and $299 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, 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 $18,149,063 and
$11,726,449, respectively.
Net realized and unrealized gains as of January 31, 1997 were as
follows:
Realized Unrealized
Gains Gains
Long-term investments $ 212,416 $ 2,628,916
Short-term investments -- 325,119
----------- -----------
Total $ 212,416 $ 2,954,035
=========== ===========
<PAGE>
As of January 31, 1997, net unrealized appreciation for Federal
income tax purposes aggregated $2,954,035, of which $3,033,789
related to appreciated securities and $79,754 related to depreciated
securities. The aggregate cost of investments at January 31, 1997
for Federal income tax purposes was $81,064,953.
4. Beneficial Interest Transactions:
Net increase in net assets derived from beneficial interest
transactions was $934,112 and $8,213,020 for the six months ended
January 31, 1997 and 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 194,220 $ 1,955,038
Shares issued to shareholders
in reinvestment of dividends 12,516 125,513
----------- -----------
Total issued 206,736 2,080,551
Shares redeemed (205,738) (2,062,050)
----------- -----------
Net increase 998 $ 18,501
=========== ===========
Class A Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 116,968 $ 1,178,454
Shares issued to shareholders
in reinvestment of dividends 24,119 241,300
----------- -----------
Total issued 141,087 1,419,754
Shares redeemed (186,020) (1,868,674)
----------- -----------
Net decrease (44,933) $ (448,920)
=========== ===========
Class B Shares for the Six Months Dollar
Ended January 31, 1997 Shares Amount
<PAGE>
Shares sold 609,977 $ 6,105,164
Shares issued to shareholders
in reinvestment of dividends 58,145 583,085
----------- -----------
Total issued 668,122 6,688,249
Automatic conversion of
shares (1,575) (15,738)
Shares redeemed (695,993) (6,981,758)
----------- -----------
Net decrease (29,446) $ (309,247)
=========== ===========
Class B Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 1,561,218 $15,682,673
Shares issued to shareholders
in reinvestment of dividends 106,325 1,063,827
----------- -----------
Total issued 1,667,543 16,746,500
Shares redeemed (993,319) (9,922,169)
----------- -----------
Net increase 674,224 $ 6,824,331
=========== ===========
Class C Shares for the Six Months Dollar
Ended January 31, 1997 Shares Amount
Shares sold 17,151 $ 171,941
Shares issued to shareholders
in reinvestment of dividends 3,326 33,353
----------- -----------
Total issued 20,477 205,294
Shares redeemed (42,449) (426,071)
----------- -----------
Net decrease (21,972) $ (220,777)
=========== ===========
Class C Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 129,079 $ 1,296,644
Shares issued to shareholders
in reinvestment of dividends 5,128 51,272
----------- -----------
Total issued 134,207 1,347,916
Shares redeemed (30,728) (305,293)
----------- -----------
Net increase 103,479 $ 1,042,623
=========== ===========
<PAGE>
Class D Shares for the Six Months Dollar
Ended January 31, 1997 Shares Amount
Shares sold 158,227 $ 1,592,111
Automatic conversion of
shares 1,575 15,738
Shares issued to shareholders
in reinvestment of dividends 2,677 26,811
----------- -----------
Total issued 162,479 1,634,660
Shares redeemed (18,903) (189,025)
----------- -----------
Net increase 143,576 $ 1,445,635
=========== ===========
Class D Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 95,065 $ 949,498
Shares issued to shareholders
in reinvestment of dividends 2,640 26,425
----------- -----------
Total issued 97,705 975,923
Shares redeemed (17,941) (180,937)
----------- -----------
Net increase 79,764 $ 794,986
=========== ===========
5. Capital Loss Carryforward:
At July 31, 1996, the Fund had a capital loss carryforward of
approximately $2,924,000, of which $1,890,000 expires in 2003 and
$1,034,000 expires in 2004. This amount will be available to offset
like amounts of any future taxable gains.
