MERRILL LYNCH
OHIO MUNICIPAL
BOND FUND
FUND LOGO
Annual Report
July 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
Vincent R. Giordano, Senior Vice President
Donald C. Burke, Vice President
Kenneth A. Jacob, Vice President
William M. Petty, 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 Ohio
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011
TO OUR SHAREHOLDERS
The Municipal Market Environment
Municipal bond yields rose dramatically during the six-month period
ended July 31, 1996. Investors became increasingly alarmed that
earlier forecasts of continued moderate growth were overly
optimistic. As indications of stronger growth were released,
particularly the strong employment reports released beginning in
March, fears of associated inflationary pressures mounted and yields
rose in response. By May and June, long-term municipal bond yields
rose into the 6.25%--6.30% range.
<PAGE>
However, in early July the combination of the Federal Reserve Board
suggesting that growth was expected to slow later in 1996 and a
temporary stock market correction allowed municipal bond yields to
fall as investors scrambled to purchase relatively scarce
securities. As measured by the Bond Buyer Revenue Bond Index, long-
term, A-rated uninsured tax-exempt bonds yielded 6.02% at July 31,
1996, an increase of over 30 basis points (0.30%) in the last six
months. Long-term US Treasury bond yields rose significantly over
the same period. By July 31, 1996, yields on US Treasury bonds
increased almost 100 basis points to end the six-month period at
6.97%.
The municipal bond market's recent outperformance as compared to its
taxable counterpart was largely the result of two principal factors.
First, much of the concern in the tax-exempt market regarding the
potential loss of the inherent tax-advantage of the municipal bonds
dissipated. For much of 1995, various tax proposals, such as the
flat tax or national sales tax, were put forward either to reduce
the national debt or reform the current tax system. Most of these
proposals would have severely limited the tax advantages enjoyed by
the municipal bond market. However, in February 1996, the Kemp
Commission released its findings regarding various tax reform
proposals. While noting that numerous changes should be made, no
mention of curtailing or stopping municipal bonds' current favored
tax status was made.
The second major factor leading to the municipal bond market's
recent outperformance was the return of a more favorable technical
environment. The rate of increase in new bond issuance recently
slowed. Over the last 12 months, approximately $175 billion in long-
term municipal securities were issued, an increase of over 27% as
compared to the same period a year earlier. Much of this increase
was the result of issuers seeking to refinance their existing higher-
couponed debt as interest rates declined in 1995 and early 1996. As
interest rates rose, these financings became increasingly
economically impractical and issuance declined. Over the last six
months, less than $70 billion in long-term tax-exempt securities
were underwritten, an increase of 20% versus the comparable period a
year earlier. Only $43 billion in tax-exempt securities were issued
in the last three months, a total essentially unchanged from the
comparable quarter in 1995. In July 1996, less than $10 billion in
long-term municipal bonds were issued, representing the lowest
issuance for the month of July since 1990.
<PAGE>
At the same time investor demand remained consistently strong. With
nominal new-issue yields above 6%, retail investor interest was
steady. Additionally, investors received over $50 billion this June
and July in assets derived from coupon income, bond maturities and
proceeds from early redemptions. Annual new bond issuance has
declined in recent years and is expected to remain below levels seen
in the early 1990s. Consequently, as the higher-coupon bonds issued
in the early-to-mid 1980s were redeemed at their first optional call
dates, the total number of outstanding tax-exempt bonds has
declined. This combination of a declining net supply and significant
amounts of assets helped maintain investor demand in recent months.
It is unlikely that the municipal bond market will continue to
significantly outperform US Treasury securities in the near future.
The tax-exempt bond market's recent performance led to the yield
ratio between long-term taxable and tax-exempt securities falling
from in excess of 90% to approximately 85%. While historically still
very attractive, some institutional investors, particularly short-
term traders, began to view the tax-exempt bond market's recent
outperformance as an opportunity to sell a relatively expensive
asset. However, to the long-term investor, such a sale would
represent the loss of an attractively priced asset which may not be
easily replaced given the relative scarcity of municipal bonds under
present supply conditions.
Looking ahead, no clear consensus for the direction of interest
rates currently exists. Perhaps, the primary focus going forward
will be the extent to which the increase in interest rates seen thus
far in 1996 will negatively impact future economic growth. Should
growth slow in the interest rate-sensitive sectors of the economy,
like housing, auto, and consumer spending, as many economists assert
is likely, then bond yields are likely to decline. Under such a
scenario, the municipal bond market's performance is likely to
closely mirror that of the US Treasury bond market.
Fiscal Year in Review
During the year ended July 31, 1996, we slowly shifted away from the
neutral posture we adopted for the Fund in late 1995 and early 1996
toward a more defensive structuring. This shift largely involved the
sale of interest rate-sensitive issues and the corresponding
purchase of higher-couponed, more income-oriented securities. We
increased the Fund's cash reserve position at times to help preserve
the Fund's principal valuation during periods of significant
interest rate volatility. However, we were reluctant to raise
significant cash reserves or to maintain these reserves for an
extended period of time. While tax-exempt interest rates generally
rose over the past six months, there were a number of episodes of
declining interest rates. Continuously held large cash reserves
would impede the Fund from recouping the short-term price
appreciation associated with these episodes. More important, raising
large cash reserves would have a significant negative impact on the
Fund's yields.
<PAGE>
New-issue supply in Ohio was similar to national issuance over the
past six months. Over $2.8 billion in long-term municipal securities
were issued by Ohio municipalities during the six months ended July
31, 1996. However, much of this issuance was concentrated in a few
larger issues which inhibited the Fund's ability to diversify its
holdings somewhat. Additionally, given the strong investor demand as
we noted, much of the Ohio new bond issuance was structured in favor
of individual retail investors. The resultant current coupon issues
were unattractive given the Fund's current defensive strategy. The
Fund's present strategy, as well as the more aggressive posture it
maintained in late 1995 and early 1996, benefited its total returns
for the fiscal year. Despite its present higher-than-normal cash
reserve position, the Fund continued to provide its shareholders
with attractive yields for the 12 months ended July 31, 1996.
Looking ahead for the remainder of 1996, we expect to maintain the
Fund's present defensive posture until a clearer consensus regarding
the near-term direction of interest rates can be established. This
strategy may result in some potential limiting of capital
appreciation should tax-exempt bond yields fall suddenly and
dramatically. However, the Fund's present structure should enable it
to preserve much of its principal valuation and maintain its
attractive current dividends should municipal bond yields either
remain stable or resume their decline.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
<PAGE>
(Fred K. Stuebe)
Fred K. Stuebe
Vice President and Portfolio Manager
September 10, 1996
We are pleased to announce that Fred K. Stuebe is responsible for
the day-to-day management of Merrill Lynch Ohio 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 in the Tax-Exempt Bond Department.
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).
<PAGE>
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
7/31/96 4/30/96 7/31/95 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $10.70 $10.57 $10.56 +1.33% +1.23%
Class B Shares* 10.70 10.57 10.56 +1.33 +1.23
Class C Shares* 10.70 10.57 10.56 +1.33 +1.23
Class D Shares* 10.70 10.56 10.56 +1.33 +1.33
Class A Shares--Total Return* +6.56(1) +2.50(2)
Class B Shares--Total Return* +6.01(3) +2.37(4)
Class C Shares--Total Return* +5.90(5) +2.35(6)
Class D Shares--Total Return* +6.45(7) +2.57(8)
Class A Shares--Standardized 30-day Yield 4.69%
Class B Shares--Standardized 30-day Yield 4.38%
Class C Shares--Standardized 30-day Yield 4.29%
Class D Shares--Standardized 30-day Yield 4.59%
<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 $0.537 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.131 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.483 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.118 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.472 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.115 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.527 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.128 per share ordinary
income dividends.
</TABLE>
<PAGE>
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment--Class A Shares and Class B Shares
A line graph depicting the growth of an investment in the Fund's
Class A Shares and Class B Shares compared to growth of an
investment in the Lehman Brothers Municipal Bond Index. Beginning
and ending values are:
8/30/91** 7/96
ML Ohio Municipal Bond Fund++--
Class A Shares* $ 9,600 $13,113
ML Ohio Municipal Bond Fund++--
Class B Shares* $10,000 $13,356
Lehman Brothers Municipal Bond
Index++++ $10,000 $13,634
Total Return Based on a $10,000 Investment--Class C Shares and Class D Shares
A line graph depicting the growth of an investment in the Fund's
Class C Shares and Class D Shares compared to growth of an
investment in the Lehman Brothers Municipal Bond Index. Beginning
and ending values are:
10/21/94** 7/96
ML Ohio Municipal Bond Fund++--
Class C Shares* $10,000 $11,490
ML Ohio Municipal Bond Fund++--
Class D Shares* $ 9,600 $11,132
Lehman Brothers Municipal Bond
Index++++ $10,000 $11,840
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of Operations.
++ML Ohio Municipal Bond Fund invests primarily in long-term
investment grade obligations issued by or on behalf of the
State of Ohio, its political subdivisions, agencies and
instrumentalities and obligations of other qualifying issuers.
++++This unmanaged Index consists of long-term revenue bonds,
prerefunded bonds, general obligation bonds and insured bonds.
Past performance is not predictive of future performance.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
<PAGE>
Year Ended 6/30/96 +6.44% +2.18%
Inception (2/28/92)
through 6/30/96 +7.21 +6.21
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/96 +5.89% +1.89%
Inception (2/28/92)
through 6/30/96 +6.67 +6.67
[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 6/30/96 +5.78% +4.78%
Inception (10/21/94)
through 6/30/96 +7.95 +7.95
[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 6/30/96 +6.23% +1.98%
Inception (10/21/94)
through 6/30/96 +8.45 +5.87
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<PAGE>
PERFORMANCE DATA (concluded)
<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>
2/28/92--12/31/92 $10.00 $10.40 -- $0.525 + 9.46%
1993 10.40 11.22 $0.013 0.648 +14.53
1994 11.22 9.90 -- 0.548 - 6.98
1995 9.90 11.00 -- 0.545 +16.97
1/1/96--7/31/96 11.00 10.70 -- 0.298 + 0.14
------ ------
Total $0.013 Total $2.564
Cumulative total return as of 7/31/96: +36.59%**
</TABLE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change***
<S> <C> <C> <C> <C> <C>
2/28/92--12/31/92 $10.00 $10.40 -- $0.481 + 8.99%
1993 10.40 11.22 $0.013 0.592 +13.95
1994 11.22 9.90 -- 0.495 - 7.45
1995 9.90 11.00 -- 0.491 +16.38
1/1/96--7/31/96 11.00 10.70 -- 0.268 - 0.15
------ ------
Total $0.013 Total $2.327
Cumulative total return as of 7/31/96: +33.56%***
</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 $10.09 $ 9.89 -- $0.091 - 1.06%
1995 9.89 11.00 -- 0.480 +16.37
1/1/96--7/31/96 11.00 10.70 -- 0.262 - 0.21
------
Total $0.833
<PAGE>
Cumulative total return as of 7/31/96: +14.90%***
</TABLE>
<TABLE>
Performance Summary--Class D Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $10.09 $ 9.89 -- $0.103 - 0.95%
1995 9.89 11.00 -- 0.534 +16.97
1/1/96--7/31/96 11.00 10.70 -- 0.292 + 0.09
------
Total $0.929
Cumulative total return as of 7/31/96: +15.96%**
<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.
***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>
PORTFOLIO ABBREVIATIONS
To simplify the listings of Merrill Lynch Ohio 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 below and at right.
AMT Alternative Minimum Tax (subject to)
GO General Obligation Bonds
HFA Housing Finance Agency
IDR Industrial Development Revenue Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RAN Revenue Anticipation Notes
RIB Residual Interest Bonds
RITES Residual Interest Tax-Exempt Securities
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)
Ohio--94.7%
<S> <S> <C> <S> <C>
NR* Baa1 $ 900 Ashtabula County, Ohio, IDR, Refunding (Ashland Oil Inc. Project),
Series A, 6.90% due 5/01/2010 $ 942
NR* A 4,000 Barberton, Ohio, Hospital Facilities Revenue Bonds (Barberton Citizens
Hospital Co. Project), 7.25% due 1/01/2012 4,282
AAA Aaa 2,370 Brecksville-Broadview Heights, Ohio, City School District, UT, 5.25% due
12/01/2021 (c) 2,234
AAA Aaa 1,000 Buckeye Valley, Ohio, Local School District (Delaware County), Series A, UT,
6.85% due 12/01/2015 (d) 1,146
NR* NR* 710 Cincinnati, Ohio, Student Loan Funding Corporation, Revenue Refunding Bonds,
AMT, Sub-Series B, 6.75% due 1/01/2007 734
AAA Aaa 2,000 Cleveland, Ohio, Regional Sewer District, Water Resources Revenue Refunding
Bonds, 6.75% due 5/15/2004 (b)(g) 2,241
AAA Aaa 3,665 Cleveland, Ohio, Water Works Revenue Bonds, Series F-92A, 6.25% due
1/01/2015 (b) 3,830
NR* VMIG1++ 800 Cuyahoga County, Ohio, Hospital Revenue Improvement Bonds (Cleveland
University Hospital), VRDN, 3.65% due 1/01/2016 (a) 800
Cuyahoga County, Ohio, M/F Revenue Bonds (Dalebridge Apartments), AMT (e):
NR* Aaa 1,000 6.50% due 10/20/2020 1,021
NR* Aaa 2,850 6.60% due 10/20/2030 2,936
NR* A1 3,100 Dayton, Ohio, Special Facilities Revenue Bonds (Emery Air Freight Project),
VRDN, Series C, 3.60% due 10/01/2009 (a) 3,100
A- A 1,220 Erie County, Ohio, Hospital Improvement Revenue Refunding Bonds (Firelands
Community Hospital Project), 6.75% due 1/01/2015 1,281
AAA Aaa 1,000 Franklin County, Ohio, Convention Facilities Authority, Tax and Lease Bonds,
RAN, 7% due 12/01/2000 (d)(g) 1,112
<PAGE>
NR* Aa 1,500 Franklin County, Ohio, Hospital Revenue Refunding and Improvement Bonds
(Childrens Hospital Project), Series A, 5.75% due 11/01/2020 1,480
BBB Baa1 2,750 Hamilton County, Ohio, Health System Revenue Refunding Bonds
(Providence Hospital-Franciscan), 6.875% due 7/01/2015 2,786
AAA Aaa 1,200 Huron County, Ohio, Human Services Building Revenue Bonds, 7.25% due
12/01/2013 (d)(h) 1,374
NR* Aaa 5,530 Kent, Ohio, M/F Housing Mortgage Revenue Bonds (Silver Meadows), AMT,
7.30% due 12/20/2036 (e) 5,991
AAA Aaa 1,740 Lakota, Ohio, Local School District Revenue Bonds, GO, UT, 7% due
12/01/2010 (b) 2,025
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Ohio (concluded)
<S> <S> <C> <S> <C>
A NR* $1,660 Loveland, Ohio, City School District, GO, UT, 6.65% due 12/01/2015 $ 1,791
BBB+ NR* 2,000 Lucas County, Ohio, Hospital Revenue Bonds (Flower Hospital), 6.125% due
12/01/2003 (g) 2,179
AAA Aaa 1,500 Mahoning County, Ohio, Hospital Facilities Revenue Refunding Bonds (YHA Inc.
Project), Series A, 7% due 10/15/2014 (d) 1,628
A- A3 2,000 Moraine, Ohio, Solid Waste Disposal Revenue Bonds (General Motors Corp.
Project), AMT, 6.75% due 7/01/2014 2,171
AAA Aaa 3,000 North Canton, Ohio, City School District Improvement Bonds, GO, UT, 6.70%
due 12/01/2019 (b) 3,263
AAA NR* 995 Ohio HFA, Residential Mortgage Revenue Bonds, AMT, Series B-2, 6.70% due
3/01/2025 (e) 1,023
Ohio HFA, S/F Mortgage Revenue Bonds, AMT (e):
AAA Aaa 1,200 RIB, Series B-4, 9.872% due 3/31/2031 (f) 1,257
AAA Aaa 35 Series B, 6.903% due 3/31/2031 36
<PAGE>
Ohio State Air Quality Development Authority, Revenue Refunding Bonds:
NR* Baa1 1,000 (Ashland Oil Inc. Project), 6.85% due 4/01/2010 1,028
AA- Aa3 4,200 (Coll-Dayton Power & Light Project), Series B, 6.40% due 8/15/2027 4,338
AAA Aaa 1,505 PCR (Ohio Edison), Series B, 7.10% due 6/01/2018 (c) 1,638
AAA Aaa 1,000 Ohio State Education Loan Revenue Bonds, AMT, Series A-1, 6.35% due
12/01/2014 (b) 1,020
AA- Aa 1,410 Ohio State Higher Educational Facility, Crossover Revenue Refunding Bonds
(Case Western Reserve University), 6.25% due 10/01/2016 1,525
A1+ P1 3,600 Ohio State PCR, Refunding (Sohio Water Project-BP Petroleum), VRDN,
3.45% due 5/01/2022 (a) 3,600
AAA Aaa 2,300 Ohio State Turnpike Commission, Turnpike Revenue Bonds, Series A, 5.50% due
2/15/2026 (d) 2,231
A A2 2,000 Ohio State Water Development Authority, Solid Waste Disposal Revenue Bonds
(North Star BHP Steel Project-Broken Hill), AMT, 6.45% due 9/01/2020 2,051
AAA Aaa 1,000 Upper Arlington, Ohio, City School District, UT, 5.25% due 12/01/2022 (d) 942
AAA Aaa 2,000 Westerville, Ohio, Minerva Park and Blendon Joint Township, Hospital
District Revenue Refunding Bonds (Saint Ann's Hospital), Series B, 7% due
9/15/2012 (b)(i) 2,239
NR* A1 475 Wood County, Ohio, Sewer District Water Assessment Improvement Bonds,
Issue II, 6.55% due 12/01/2014 (h) 516
Puerto Rico--4.4%
Puerto Rico Commonwealth, Highway and Transportation Authority, Highway
Revenue Bonds:
A1+ Baa1 2,500 RITES, Series X, 5.951% due 7/01/2004 (f) 2,472
A Baa1 1,000 Series Y, 5.50% due 7/01/2026 936
Total Investments (Cost--$74,016)--99.1% 77,199
Other Assets Less Liabilities--0.9% 712
-------
Net Assets--100.0% $77,911
=======
<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 July 31, 1996.
(b)AMBAC Insured.
(c)FGIC Insured.
(d)MBIA Insured.
(e)GNMA Collateralized.
(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 July 31, 1996.
(g)Prerefunded.
(h)Bank Qualified.
(i)Escrowed to Maturity.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
<PAGE>
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of July 31, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$74,016,498) (Note 1a) $ 77,198,535
Cash 130,669
Receivables:
Interest $ 950,703
Beneficial interest sold 40,376 991,079
------------
Deferred organization expenses (Note 1e) 6,777
Prepaid registration fees and other assets (Note 1e) 9,469
------------
Total assets 78,336,529
------------
Liabilities: Payables:
Beneficial interest redeemed 179,728
Dividends to shareholders (Note 1f) 92,325
Investment adviser (Note 2) 36,299
Distributor (Note 2) 28,954 337,306
------------
Accrued expenses and other liabilities 88,220
------------
Total liabilities 425,526
------------
Net Assets: Net assets $ 77,911,003
============
<PAGE>
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 68,034
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 601,739
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 25,420
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 32,839
Paid-in capital in excess of par 75,766,291
Accumulated realized capital losses on investments--net (Note 5) (1,392,366)
Accumulated distributions in excess of realized capital
gains--net (Note 1f) (372,991)
Unrealized appreciation on investments--net 3,182,037
------------
Net assets $ 77,911,003
============
Net Asset Value: Class A--Based on net assets of $7,280,847 and 680,340
shares of beneficial interest outstanding $ 10.70
============
Class B--Based on net assets of $64,397,021 and 6,017,388
shares of beneficial interest outstanding $ 10.70
============
Class C--Based on net assets of $2,720,150 and 254,200
shares of beneficial interest outstanding $ 10.70
============
Class D--Based on net assets of $3,512,985 and 328,390
shares of beneficial interest outstanding $ 10.70
============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended July 31, 1996
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 4,640,782
(Note 1d):
<PAGE>
Expenses: Investment advisory fees (Note 2) $ 431,325
Account maintenance and distribution fees--Class B (Note 2) 330,142
Accounting services (Note 2) 68,930
Professional fees 53,116
Printing and shareholder reports 44,477
Transfer agent fees--Class B (Note 2) 40,460
Registration fees (Note 1e) 15,097
Amortization of organization expenses (Note 1e) 11,868
Account maintenance and distribution fees--Class C (Note 2) 10,407
Pricing fees 5,663
Custodian fees 5,594
Trustees' fees and expenses 3,822
Transfer agent fees--Class A (Note 2) 3,756
Account maintenance fees--Class B (Note 2) 3,267
Transfer agent fees--Class D (Note 2) 1,674
Transfer agent fees--Class C (Note 2) 1,112
Other 2,467
------------
Total expenses 1,033,177
------------
Investment income--net 3,607,605
------------
Realized & Realized gain on investments--net 58,034
Unrealized Gain on Change in unrealized appreciation on investments--net 854,639
Investments--Net ------------
(Notes 1d & 3): Net Increase in Net Assets Resulting from Operations $ 4,520,278
============
</TABLE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended July 31,
Increase (Decrease) in Net Assets: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 3,607,605 $ 3,552,858
Realized gain (loss) on investments--net 58,034 (1,392,365)
Change in unrealized appreciation on investments--net 854,639 1,835,744
------------ ------------
Net increase in net assets resulting from operations 4,520,278 3,996,237
------------ ------------
Dividends to Investment income--net:
Shareholders Class A (373,206) (402,108)
(Note 1f): Class B (2,995,936) (3,039,531)
Class C (76,853) (15,289)
Class D (161,610) (95,930)
------------ ------------
Net decrease in net assets resulting from dividends to
shareholders (3,607,605) (3,552,858)
------------ ------------
Beneficial Interest Net increase in net assets derived from beneficial interest
Transactions transactions 1,552,305 20,090
(Note 4): ------------ ------------
Net Assets: Total increase in net assets 2,464,978 463,469
Beginning of year 75,446,025 74,982,556
------------ ------------
End of year $ 77,911,003 $ 75,446,025
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
Class A
For the
Period
The following per share data and ratios have been derived Feb. 28,
from information provided in the financial statements. 1992++ to
For the Year Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.56 $ 10.50 $ 11.02 $ 10.56 $ 10.00
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .54 .55 .56 .58 .25
Realized and unrealized gain (loss) on
investments--net .14 .06 (.43) .49 .56
-------- -------- -------- -------- --------
Total from investment operations .68 .61 .13 1.07 .81
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.54) (.55) (.56) (.58) (.25)
Realized gain on investments--net -- -- -- (.03) --
In excess of realized gain on
investments--net -- -- (.09) -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.54) (.55) (.65) (.61) (.25)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.70 $ 10.56 $ 10.50 $ 11.02 $ 10.56
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 6.56% 6.03% 1.10% 10.51% 8.21%+++
Return:** ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement .87% .86% .65% .51% .16%*
Average ======== ======== ======== ======== ========
Net Assets: Expenses .87% .89% .89% 1.04% 1.36%*
======== ======== ======== ======== ========
Investment income--net 5.03% 5.30% 5.12% 5.44% 5.75%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 7,281 $ 7,270 $ 9,373 $ 8,446 $ 4,209
Data: ======== ======== ======== ======== ========
Portfolio turnover 118.21% 169.34% 44.83% 41.51% 13.21%
======== ======== ======== ======== ========
<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 B
For the Period
The following per share data and ratios have been derived Feb. 28,
from information provided in the financial statements. 1992++ to
For the Year Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.56 $ 10.50 $ 11.02 $ 10.56 $ 10.00
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .49 .49 .50 .52 .23
Realized and unrealized gain (loss) on
investments--net .14 .06 (.43) .49 .56
-------- -------- -------- -------- --------
Total from investment operations .63 .55 .07 1.01 .79
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.49) (.49) (.50) (.52) (.23)
Realized gain on investments--net -- -- -- (.03) --
In excess of realized gain on
investments--net -- -- (.09) -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.49) (.49) (.59) (.55) (.23)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.70 $ 10.56 $ 10.50 $ 11.02 $ 10.56
======== ======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share 6.01% 5.49% .59% 9.95% 7.98%+++
Return:** ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement 1.38% 1.37% 1.16% 1.02% .67%*
Average ======== ======== ======== ======== ========
Net Assets: Expenses 1.38% 1.40% 1.39% 1.55% 1.86%*
======== ======== ======== ======== ========
Investment income--net 4.52% 4.79% 4.61% 4.93% 5.26%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands). $ 64,397 $ 64,068 $ 65,610 $ 53,341 $ 26,244
Data: ======== ======== ======== ======== ========
Portfolio turnover 118.21% 169.34% 44.83% 41.51% 13.21%
======== ======== ======== ======== ========
<CAPTION>
Class C Class D
For the For the
For the Period For the Period
The following per share data and ratios have been derived Year Oct. 21, Year Oct. 21,
from information provided in the financial statements. Ended 1994++ to Ended 1994++ to
July 31, July 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1996 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.56 $ 10.09 $ 10.56 $ 10.09
Operating -------- -------- -------- --------
Performance: Investment income--net .48 .37 .53 .41
Realized and unrealized gain on investments--net .14 .47 .14 .47
-------- -------- -------- --------
Total from investment operations .62 .84 .67 .88
-------- -------- -------- --------
Less dividends from investment income--net (.48) (.37) (.53) (.41)
-------- -------- -------- --------
Net asset value, end of period $ 10.70 $ 10.56 $ 10.70 $ 10.56
======== ======== ======== ========
Total Investment Based on net asset value per share 5.90% 8.50%+++ 6.45% 8.93%+++
Return:** ======== ======== ======== ========
Ratios to Expenses 1.49% 1.50%* .97% .99%*
Average Net ======== ======== ======== ========
Assets: Investment income--net 4.42% 4.62%* 4.93% 5.17%*
======== ======== ======== ========
<PAGE>
Supplemental Net assets, end of period (in thousands) $ 2,720 $ 874 $ 3,513 $ 3,234
Data: ======== ======== ======== ========
Portfolio turnover 118.21% 169.34% 118.21% 169.34%
======== ======== ======== ========
<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 Ohio 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 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.
<PAGE>
* Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures contracts
are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a
contract, the Fund deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is
effected. Pursuant to the contract, the Fund agrees to receive from
or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are
known as variation margin and are recorded by the Fund as unrealized
gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a five-year period. Prepaid registration fees are
charged to expense as the related shares are issued.
(f) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates. Distributions in excess
of realized capital gains are primarily due to differing tax
treatments for futures transactions and post-October losses.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is a
limited partner. The Fund had 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.
<PAGE>
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee based upon the average daily
value of the Fund's net assets at the following annual rates: 0.55%
of the Fund's average daily net assets not exceeding $500 million;
0.525% of average daily net assets in excess of $500 million but not
exceeding $1 billion; and 0.50% of average daily net assets in
excess of $1 billion. The Investment Advisory Agreement obligates
FAM to reimburse the Fund to the extent the Fund's expenses
(excluding interest, taxes, distribution fees, brokerage fees and
commissions, and extraordinary items) exceed 2.5% of the Fund's
first $30 million of average daily net assets, 2.0% of the next $70
million of average daily net assets, and 1.5% of the average daily
net assets in excess thereof. FAM's obligation to reimburse the Fund
is limited to the amount of the management fee. No fee payment will
be made to FAM during any fiscal year which will cause such expenses
to exceed expense limitations at the time of payment.
Pursuant to the distribution plans (the "Distribution Plans")
adopted by the Fund in accordance with Rule 12b-1 under the
Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are
accrued daily and paid monthly at annual rates based upon the
average daily net assets of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.25%
Class C 0.25% 0.35%
Class D 0.10% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the year ended July 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:
<PAGE>
MLFD MLPF&S
Class A $ 92 $ 893
Class D $218 $1,339
For the year ended July 31, 1996, MLPF&S received contingent
deferred sales charges of $136,374 and $863 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.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended July 31, 1996 were $86,023,122 and $89,477,408,
respectively.
Net realized and unrealized gains (losses) as of July 31, 1996 were
as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $ 41,381 $ 3,182,037
Short-term investments (117,170) --
Financial futures contracts 133,823 --
----------- -----------
Total $ 58,034 $ 3,182,037
=========== ===========
NOTES TO FINANCIAL STATEMENTS (concluded)
As of July 31, 1996, net unrealized appreciation for Federal income
tax purposes aggregated $3,182,037, of which $3,283,792 related to
appreciated securities and $101,755 related to depreciated
securities. The aggregate cost of investments at July 31, 1996 for
Federal income tax purposes was $74,016,498.
<PAGE>
4. Beneficial Interest Transactions:
Net increase in net assets derived from beneficial interest
transactions was $1,552,305 and $20,090 for the years ended July 31,
1996 and July 31, 1995, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 86,942 $ 941,587
Shares issued to share-
holders in reinvestment
of dividends 14,338 153,697
----------- -----------
Total issued 101,280 1,095,284
Shares redeemed (109,186) (1,171,549)
----------- -----------
Net decrease (7,906) $ (76,265)
=========== ===========
Class A Shares for the Year Dollar
Ended July 31, 1995 Shares Amount
Shares sold 181,071 $ 1,870,062
Shares issued to share-
holders in reinvestment of
dividends 17,661 181,209
----------- -----------
Total issued 198,732 2,051,271
Shares redeemed (403,178) (4,123,436)
----------- -----------
Net decrease (204,446) $(2,072,165)
=========== ===========
Class B Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 1,044,627 $11,201,909
Shares issued to share-
holders in reinvestment
of dividends 156,760 1,680,914
----------- -----------
Total issued 1,201,387 12,882,823
Automatic conversion
of shares (24,446) (258,404)
Shares redeemed (1,224,936) (13,097,953)
----------- -----------
Net decrease (47,995) $ (473,534)
=========== ===========
<PAGE>
Class B Shares for the Year Dollar
Ended July 31, 1995 Shares Amount
Shares sold 1,171,885 $12,053,962
Shares issued to share-
holders in reinvestment
of dividends 169,857 1,744,620
----------- -----------
Total issued 1,341,742 13,798,582
Automatic conversion
of shares (600) (6,397)
Shares redeemed (1,524,736) (15,586,483)
----------- -----------
Net decrease (183,594) $(1,794,298)
=========== ===========
Class C Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 193,104 $ 2,070,410
Shares issued to share-
holders in reinvestment
of dividends 4,969 53,252
----------- -----------
Total issued 198,073 2,123,662
Shares redeemed (26,599) (284,250)
----------- -----------
Net increase 171,474 $ 1,839,412
=========== ===========
Class C Shares for the Period
October 21, 1994++ to Dollar
July 31, 1995 Shares Amount
Shares sold 88,400 $ 911,000
Shares issued to share-
holders in reinvestment
of dividends 1,135 11,864
----------- -----------
Total issued 89,535 922,864
Shares redeemed (6,809) (71,984)
----------- -----------
Net increase 82,726 $ 850,880
=========== ===========
<PAGE>
[FN]
++Commencement of Operations.
Class D Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 91,966 $ 997,428
Automatic conversion
of shares 24,448 258,404
Shares issued to share-
holders in reinvestment
of dividends 3,739 40,076
----------- -----------
Total issued 120,153 1,295,908
Shares redeemed (98,084) (1,033,216)
----------- -----------
Net increase 22,069 $ 262,692
=========== ===========
Class D Shares for the Period Dollar
Oct. 21, 1994++ to July 31, 1995 Shares Amount
Shares sold 303,361 $ 3,004,430
Automatic conversion
of shares 600 6,397
Shares issued to share-
holders in reinvestment of
dividends 3,127 32,727
----------- -----------
Total issued 307,088 3,043,554
Shares redeemed (767) (7,881)
----------- -----------
Net increase 306,321 $ 3,035,673
=========== ===========
[FN]
++Commencement of Operations.
5. Capital Loss Carryforward:
At July 31, 1996, the Fund had a net capital loss of approximately
$1,005,000, of which $750,000 expires in 2003 and $255,000 expires
in 2004. This amount will be available to offset like amounts of any
future taxable gains.
<PAGE>
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
Merrill Lynch Ohio Municipal Bond Fund of
Merrill Lynch Multi-State Municipal Series Trust:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Merrill Lynch
Ohio Municipal Bond Fund of Merrill Lynch Multi-State Municipal
Series Trust as of July 31, 1996, the related statements of
operations for the year then ended and changes in net assets for
each of the years in the two-year period then ended, and the
financial highlights for each of the years in the four-year period
then ended and for the period February 28, 1992 (commencement of
operations) to July 31, 1992. These financial statements and the
financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at July 31,
1996 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch Ohio Municipal Bond Fund of Merrill Lynch Multi-State
Municipal Series Trust as of July 31, 1996, the results of its oper-
ations, the changes in its net assets, and the financial highlights
for the respective stated periods in conformity with generally
accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
September 10, 1996
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (unaudited)
<PAGE>
All of the net investment income distributions paid monthly by
Merrill Lynch Ohio Municipal Bond Fund during its taxable year ended
July 31, 1996 qualify as tax-exempt interest dividends for Federal
income tax purposes.
Additionally, there were no capital gains distributed by the Fund
during the year.
Please retain this information for your records.
