MERRILL LYNCH
OHIO
MUNICIPAL
BOND FUND
[FUND LOGO]
STRATEGIC
Performance
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
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 prospec-tus. 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, maybe 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 #16156 -- 1/97
Merrill Lynch Ohio Municipal Bond Fund January 31, 1997
TO OUR SHAREHOLDERS
The Municipal Market Environment
Long-term fixed-income bond yields generally declined over the six
months ended January 31, 1997. Initially, US Treasury bond yields
declined over 45 basis points (0.45%) to 6.45% by late November as low
employment growth and continued low inflation combined to support lower
bond yields. Concurrently, long-term municipal revenue bond yields, as
measured by the Bond Buyer Revenue Bond Index, declined over 20 basis
points to approximately 5.80%. However, signs of increased economic
activity and renewed inflation fears pushed bond yields up for the
remainder of the period. By the end of January 1997, US Treasury bond
yields rose 35 basis points to end the period at approximately 6.80%.
Similarly, long-term municipal revenue bond yields rose approximately 20
basis points from their lows in late November to approximately 6.00%.
During the six months ended January 31, 1997, US Treasury bond yields
declined approximately 10 basis points, while tax-exempt bond yields
were essentially unchanged.
Recently, tax-exempt bond yields underperformed their taxable
counterparts despite a continued strong supply position. During the six-
month period ended January 31, 1997, over $88 billion in long-term tax-
exempt bonds was underwritten, essentially unchanged from issuance a
year ago. Approximately $50 billion in new municipal bonds was issued
during the three-month period ended January 31, 1997, representing a
decline of over 5% compared to the same period in 1996. This declining
trend in bond issuance was even more apparent recently. Slightly more
than $10 billion in long-term bonds was issued in January 1997, a
decrease of over 15% compared to January 1996 issuance.
The municipal bond market's recent underperformance relative to Treasury
issues was the result of a number of other factors. The historic
strength of the US equity market has attracted significant investor
interest. Additionally, as tax-exempt bond yields declined again below
6%, some investors temporarily lost interest in the municipal bond
market. If interest rates continue to decline, as they did at the end of
1994 and throughout 1995, investors, in general, will quickly adjust to
the new levels. The tax advantages generated by municipal bonds quickly
outweigh low nominal yields, and investor demand increases.
The Presidential and Congressional elections this past November
resurrected some investor concerns regarding continued Federal deficit
reduction and potential legislative restrictions upon the municipal bond
market. This situation was similar to that at the beginning of 1996 when
tax-exempt bond yields were negatively impacted by fears that
legislation reducing the tax advantage of municipal bonds would be
introduced to aid further deficit reductions.
However, the US Treasury bond market's recent relatively strong
performance resulted in municipal bonds becoming a particularly
attractive investment alternative. At current levels, long-term tax-
exempt revenue bonds yield over 88% of comparable US Treasury bond
yields. Current levels make tax-advantaged products more attractive than
they were at mid-year when yield ratios declined to approximately 85%.
For example, to an investor in the 36% Federal income tax bracket, a
current tax-exempt bond yield of 6% represents a taxable equivalent
yield of approximately 9.37%.
Looking forward, the supply of new bond issuance for 1997 is expected to
be very similar to that of 1996, with most annual estimates falling in
the $170 billion -- $175 billion range. Investor demand is also expected
to regain its former strength, with 1997 total municipal redemptions
(refundings, maturities and coupon payments) in the $175 billion -- $185
billion range. This overall balance suggests that the positive technical
backdrop the municipal bond market enjoyed in 1996 could continue in
1997. However, it is likely that seasonal factors may temporarily
distort this overall balanced technical scenario. During periods of
reduced bond issuance, the ease and ability to purchase tax-advantaged
products at their current attractive levels may be greatly restricted.
Portfolio Strategy
During the six-month period ended January 31, 1997, 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 Ohio was far greater than that in the
national marketplace. During the six months ended January 31, 1997, over
$3 billion in long-term securities was issued by Ohio municipalities, an
increase of almost 40% compared to the same period in 1996. Likewise,
during the three months ended January 31, 1997, over $1.5 billion in
municipal bonds was issued in Ohio, an increase of 70% compared to same
period in 1996. Unfortunately, from the Fund's viewpoint, this dramatic
increase in supply was concentrated on a limited number of large issues.
These issues were structured to appeal to individual investors and
consequently were only of limited value to the Fund. Despite a
historically large supply in recent months, we have found few
attractively priced securities. This relative scarcity supported 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.
In Conclusion
We appreciate your ongoing interest in Merrill Lynch Ohio Municipal Bond
Fund, and we look forward to serving your investment needs in the months
and years ahead.
Sincerely,
/S/ARTHUR ZEIKEL
Arthur Zeikel
President
/S/VINCENT R. GIORDANO
Vincent R. Giordano
Senior Vice President
/S/FRED K. STEUBE
Fred K. Steube
Vice President and Portfolio Manager
March 10, 1997
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill
Lynch Select PricingSM System, which offers four pricing alternatives:
(bullet) Class A Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees. Class A Shares are available only to eligible investors.
(bullet) Class B Shares are subject to a maximum contingent deferred
sales charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B Shares
are subject to a distribution fee of 0.25% and an account maintenance
fee of 0.25%. These shares automatically convert to Class D Shares after
approximately 10 years. (There is no initial sales charge for automatic
share conversions.)
(bullet) Class C Shares are subject to a distribution fee of 0.35% and
an account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within one
year of purchase.
(bullet) Class D Shares incur a maximum initial sales charge of 4% and
an account maintenance fee of 0.10% (but no distribution fee).
None of the past results shown should be considered a representation of
future performance. Investment return and principal value of shares will
fluctuate so that shares, when redeemed, may be worth more or less than
their original cost. Dividends paid to each class of shares will vary
because of the different levels of account maintenance, distribution and
transfer agency fees applicable to each class, which are deducted from
the income available to be paid to shareholders.
<TABLE>
<CAPTION>
Recent Performance Results
12 Month 3 Month
1/31/97 10/31/96 1/31/96 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $10.85 $10.82 $11.01 -1.45% +0.28%
Class B Shares* 10.85 10.82 11.01 -1.45 +0.28
Class C Shares* 10.84 10.82 11.01 -1.54 +0.18
Class D Shares* 10.84 10.81 11.01 -1.54 +0.28
Class A Shares -- Total Return* +3.67(1) +1.59(2)
Class B Shares -- Total Return* +3.14(3) +1.46(4)
Class C Shares -- Total Return* +2.94(5) +1.34(6)
Class D Shares -- Total Return* +3.47(7) +1.57(8)
Class A Shares -- Standardized 30-day Yield 4.62%
Class B Shares -- Standardized 30-day Yield 4.30%
Class C Shares -- Standardized 30-day Yield 4.20%
Class D Shares -- Standardized 30-day Yield 4.52%
* Investment results shown do not reflect sales charges; results shown would be lower
if a sales charge was included.
(1) Percent change includes reinvestment of $0.550 per share ordinary income dividends.
(2) Percent change includes reinvestment of $0.147 per share ordinary income dividends.
(3) Percent change includes reinvestment of $0.494 per share ordinary income dividends.
(4) Percent change includes reinvestment of $0.133 per share ordinary income dividends.
(5) Percent change includes reinvestment of $0.483 per share ordinary income dividends.
(6) Percent change includes reinvestment of $0.130 per share ordinary income dividends.
(7) Percent change includes reinvestment of $0.539 per share ordinary income dividends.
(8) Percent change includes reinvestment of $0.144 per share ordinary income dividends.
</TABLE>
<TABLE>
<CAPTION>
Performance Summary -- Class A Shares
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
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
1996 11.00 10.88 -- 0.541 + 4.00
1/1/97 -- 1/31/97 10.88 10.85 -- 0.040 + 0.18
Total $0.013 Total $2.847
Cumulative total return as of 1/31/97: +42.11%**
* Figures may include short-term capital gains distributions.
** Figures assume reinvestment of all dividends and capital gains distributions at net asset
value on the payable date, and do not include sales charge; results would be lower if sales
charge was included.
</TABLE>
<TABLE>
<CAPTION>
Performance Summary -- Class B Shares
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
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
1996 11.00 10.88 -- 0.486 + 3.47
1/1/97 -- 1/31/97 10.88 10.85 -- 0.036 + 0.13
Total $0.013 Total $2.581
Cumulative total return as of 1/31/97: +38.60%**
* Figures may include short-term capital gains distributions.
** Figures assume reinvestment of all dividends and capital gains distributions at net
asset value on the payable date, and do not reflect deduction of any sales charge;
results would be lower if sales charge was deducted.
</TABLE>
<TABLE>
<CAPTION>
Performance Summary -- Class C Shares
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94 -- 12/31/94 $10.09 $9.89 -- $0.091 - 1.06%
1995 9.89 11.00 -- 0.480 +16.37
1996 11.00 10.87 -- 0.475 + 3.28
1/1/97 -- 1/31/97 10.87 10.84 -- 0.035 + 0.12
Total $1.081
Cumulative total return as of 1/31/97: +19.06%**
* Figures may include short-term capital gains distributions.
** Figures assume reinvestment of all dividends and capital gains distributions at net asset
value on the payable date, and do not reflect deduction of any sales charge; results would
be lower if sales charge was deducted.
</TABLE>
<TABLE>
<CAPTION>
Performance Summary -- Class D Shares
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94 -- 12/31/94 $10.09 $9.89 -- $0.103 - 0.95%
1995 9.89 11.00 -- 0.534 +16.97
1996 11.00 10.87 -- 0.530 + 3.80
1/1/97 -- 1/31/97 10.87 10.84 -- 0.039 + 0.17
Total $1.206
Cumulative total return as of 1/31/97: +20.47%**
* 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 +4.00% -0.16%
Inception (2/28/92)
through 12/31/96 +7.49 +6.59
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/96 +3.47% -0.48%
Inception (2/28/92)
through 12/31/96 +6.95 +6.95
* 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 +3.28% +2.29%
Inception (10/21/94)
through 12/31/96 +8.21 +8.21
* 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 +3.80% -0.35%
Inception (10/21/94)
through 12/31/96 +8.77 +6.77
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
<TABLE>
<CAPTION>
Merrill Lynch Ohio Municipal Bond Fund January 31, 1997
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <C> <C> <C> <C>
Ohio -- 94.5%
NR* Baa1 $900 Ashtabula County, Ohio, IDR, Refunding (Ashland Oil Inc. Project), Series A, 6.90%
due 5/01/2010 $953
AAA Aaa 1,000 Avon, Ohio, Local School District, UT, 6% due 12/01/2020 (b) 1,030
NR* A 4,000 Barberton, Ohio, Hospital Facilities Revenue Bonds (Barberton Citizens Hospital Co.
Project), 7.25% due 1/01/2012 4,486
AAA Aaa 2,370 Brecksville-Broadview Heights, Ohio, City School District, UT, 5.25% due 12/01/2021 (c) 2,253
Cleveland, Ohio, Public Power System, Revenue Refunding Bonds, First Mortgage, Series 1 (d):
AAA Aaa 1,500 5.125% due 11/15/2018 1,405
AAA Aaa 2,000 5% due 11/15/2020 1,833
AAA Aaa 2,000 Cleveland, Ohio, Regional Sewer District, Water Resources Revenue Refunding Bonds, 6.75%
due 5/15/2004 (b)(h) 2,248
Cleveland, Ohio, Water Works Revenue Bonds, First Mortgage, Series F-92 A (b):
AAA Aaa 2,250 6.50% due 1/01/2002 (h) 2,483
AAA Aaa 3,665 6.25% due 1/01/2015 3,840
Cuyahoga County, Ohio, M/F Revenue Bonds (Dalebridge Apartments), AMT (e):
NR* Aaa 1,000 6.50% due 10/20/2020 1,032
NR* Aaa 2,850 6.60% due 10/20/2030 2,949
BBB- NR* 1,000 Dayton, Ohio, Special Facilities Revenue Refunding Bonds (Emery Air Freight Corp. /
Emery Worldwide Air Inc.), Series F, 6.05% due 10/01/2009 1,020
A A 1,220 Erie County, Ohio, Hospital Improvement Revenue Refunding Bonds (Firelands Community
Hospital Project), 6.75% due 1/01/2015 1,283
AA Aa3 2,500 Franklin County, Ohio, Hospital Revenue Refunding Bonds (Holy Cross Health System Corp.),
5.875% due 6/01/2021 2,492
AAA Aaa 1,200 Huron County, Ohio, Human Services, Building Revenue Bonds, 7.25% due 12/01/2013 (d) 1,380
NR* Aaa 5,530 Kent, Ohio, M/F Housing Mortgage Revenue Bonds (Silver Meadows), AMT, 7.30%
due 12/20/2036 (e) 6,037
AAA Aaa 1,740 Lakota, Ohio, Local School District Revenue Bonds, GO, UT, 7% due 12/01/2010 (b) 2,039
A NR* 1,660 Loveland, Ohio, City School District, GO, UT, 6.65% due 12/01/2015 1,792
BBB+ NR* 2,000 Lucas County, Ohio, Hospital Revenue Bonds (Flower Hospital), 6.125% due 12/01/2004 (h) 2,182
AAA Aaa 2,500 Mahoning County, Ohio, Hospital Facilities Revenue Refunding Bonds (YHA Inc. Project),
Series A, 7% due 10/15/2014 (d) 2,725
A- A3 2,000 Moraine, Ohio, Solid Waste Disposal Revenue Bonds (General Motors Corp. Project), AMT,
6.75% due 7/01/2014 2,233
AAA Aaa 3,000 North Canton City, Ohio, School District Improvement Bonds, GO, UT, 6.70%
due 12/01/2019 (b) 3,330
AAA NR* 965 Ohio HFA, Residential Mortgage Revenue Bonds, AMT, Series B-2, 6.70% due 3/01/2025 (e) 998
AAA Aaa 1,150 Ohio HFA, S/F Mortgage Revenue Bonds, AMT, RIB, Series B-4, 9.943% due
3/31/2031 (e)(g) 1,259
Ohio State Air Quality Development Authority, Revenue Refunding Bonds:
NR* Baa1 1,000 (Ashland Oil Inc. Project), 6.85% due 4/01/2010 1,040
A1+ VMIG1+ 800 (Cincinnati Gas & Electric), VRDN, Series B, 3.70% due 9/01/2030 (a) 800
AA- Aa3 4,200 (Coll-Dayton Power & Light Project), Series B, 6.40% due 8/15/2027 4,436
AAA Aaa 1,505 PCR (Ohio-Edison), Series B, 7.10% due 6/01/2018 (c) 1,639
Ohio State Higher Educational Facility, Common Revenue Bonds:
AA A1 1,000 (Denison University Project), 5.25% due 11/01/2016 953
AA A1 1,000 (Denison University Project), 5.30% due 11/01/2021 946
NR* NR* 1,000 (University of Findlay Project), 6.125% due 9/01/2016 987
AA- Aa 1,410 Ohio State Higher Educational Facility, Crossover Revenue Refunding Bonds
(Case Western Reserve University), 6.25% due 10/01/2016 1,527
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 2,091
NR* Aa3 1,000 Toledo Lucas County, Ohio, Port Authority, Development Revenue Refunding Bonds
(Cargill Inc. Project), 5.90% due 12/01/2015 1,021
AAA Aaa 1,000 University of Cincinnati, Ohio (University Center Project), COP, 5.125% due 6/01/2024 (d) 927
AAA Aaa 1,000 Upper Arlington, Ohio, City School District, UT, 5.25% due 12/01/2022 (d) 950
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)(f) 2,262
Puerto Rico -- 3.3%
A1+ Baa1 2,500 Puerto Rico Commonwealth, Highway and Transportation Authority, Highway Revenue
Bonds, RITES, Series X, 6.122% due 7/01/2004 (g) 2,547
Total Investments (Cost -- $71,800) -- 97.8% 75,408
Other Assets Less Liabilities -- 2.2% 1,735
--------
Net Assets -- 100.0% $77,143
========
(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) AMBAC Insured.
(c) FGIC Insured.
(d) MBIA Insured.
(e) GNMA Collateralized.
(f) Escrowed to maturity.
(g) The interest rate is subject to change periodically and inversely based upon prevailing market rates.
The interest rate shown is the rate in effect at January 31, 1997.
(h) Prerefunded.
* Not Rated.
+ Highest short-term rating by Moody's Investors Service, Inc.
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)
COP Certificates of Participation
GO General Obligation Bonds
HFA Housing Finance Agency
IDR Industrial Development Revenue Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
RITES Residual Interest Tax-Exempt Securities
S/F Single-Family
UT Unlimited Tax
VRDN Variable Rate Demand Notes
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of January 31, 1997
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $71,799,832)(Note 1a) $75,408,132
Cash 85,752
Receivables:
Interest $977,350
Securities sold 953,594
Beneficial interest sold 78,849 2,009,793
-----------
Deferred organization expenses (Note 1e) 6,777
Prepaid registration fees and other assets (Note 1e) 9,469
-----------
Total assets 77,519,923
-----------
Liabilities: Payables:
Beneficial interest redeemed 179,593
Dividends to shareholders (Note 1f) 59,905
Investment adviser (Note 2) 37,071
Distributor (Note 2) 29,258 305,827
-----------
Accrued expenses and other liabilities 71,144
-----------
Total liabilities 376,971
-----------
Net Assets: Net assets $77,142,952
===========
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited number of
Consist of: shares authorized $69,910
Class B Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 580,944
Class C Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 23,579
Class D Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 36,895
Paid-in capital in excess of par 73,985,401
Accumulated realized capital losses on investments -- net (Note 5) (789,086)
Accumulated distribution in excess of realized capital
gains -- net (Note 1f) (372,991)
Unrealized appreciation on investments -- net 3,608,300
-----------
Net assets $77,142,952
===========
Net Asset Value: Class A -- Based on net assets of $7,581,909 and 699,102 shares of
beneficial interest outstanding $10.85
===========
Class B -- Based on net assets of $63,004,469 and 5,809,440 shares of
beneficial interest outstanding $10.85
===========
Class C -- Based on net assets of $2,556,901 and 235,787 shares of
beneficial interest outstanding $10.84
===========
Class D -- Based on net assets of $3,999,673 and 368,953 shares of
beneficial interest outstanding $10.84
===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Six Months Ended January 31, 1997
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned $2,306,223
(Note 1d):
Expenses: Investment advisory fees (Note 2) $216,231
Account maintenance and distribution fees -- Class B (Note 2) 161,536
Professional fees 27,852
Accounting services (Note 2) 22,292
Transfer agent fees -- Class B (Note 2) 18,469
Printing and shareholder reports 14,016
Registration fees (Note 1e) 8,609
Account maintenance and distribution fees -- Class C (Note 2) 8,304
Amortization of organization expenses (Note 1e) 3,810
Pricing fees 3,372
Custodian fees 2,583
Trustees' fees and expenses 2,243
Account maintenance fees -- Class D (Note 2) 1,927
Transfer agent fees -- Class A (Note 2) 1,733
Transfer agent fees -- Class D (Note 2) 902
Transfer agent fees -- Class C (Note 2) 786
Other 1,273
-----------
Total expenses 495,938
-----------
Investment income -- net 1,810,285
-----------
Realized & Realized gain on investments -- net 603,280
Unrealized Gain on Change in unrealized appreciation on investments -- net 426,263
Investments -- Net -----------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations $2,839,828
===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: Jan. 31, 1997 July 31, 1996
<S> <C> <C> <C>
Operations: Investment income -- net $1,810,285 $3,607,605
Realized gain on investments -- net 603,280 58,034
Change in unrealized appreciation on investments -- net 426,263 854,639
----------- -----------
Net increase in net assets resulting from operations 2,839,828 4,520,278
----------- -----------
Dividends to Investment income -- net:
Shareholders Class A (186,739) (373,206)
(Note 1f): Class B (1,466,703) (2,995,936)
Class C (61,440) (76,853)
Class D (95,403) (161,610)
----------- -----------
Net decrease in net assets resulting from dividends to shareholders (1,810,285) (3,607,605)
----------- -----------
Beneficial Interest Net increase (decrease) in net assets derived from beneficial
Transactions interest transactions (1,797,594) 1,552,305
(Note 4): ----------- -----------
Net Assets: Total increase (decrease) in net assets (768,051) 2,464,978
Beginning of period 77,911,003 75,446,025
----------- -----------
End of period $77,142,952 $77,911,003
=========== ===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Class A
For the Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
Jan. 31, For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $10.70 $10.56 $10.50 $11.02 $10.56
Operating -------- -------- -------- -------- --------
Performance: Investment income -- net .28 .54 .55 .56 .58
Realized and unrealized gain (loss) on
investments -- net .15 .14 .06 (.43) .49
-------- -------- -------- -------- --------
Total from investment operations .43 .68 .61 .13 1.07
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income -- net (.28) (.54) (.55) (.56) (.58)
Realized gain on investments -- net -- -- -- -- (.03)
In excess of realized gain on
investments -- net -- -- -- (.09) --
-------- -------- -------- -------- --------
Total dividends and distributions (.28) (.54) (.55) (.65) (.61)
-------- -------- -------- -------- --------
Net asset value, end of period $10.85 $10.70 $10.56 $10.50 $11.02
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 4.04%++ 6.56% 6.03% 1.10% 10.51%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement .82%* .87% .86% .65% .51%
Net Assets: ======== ======== ======== ======== ========
Expenses .82%* .87% .89% .89% 1.04%
======== ======== ======== ======== ========
Investment income -- net 5.05%* 5.03% 5.30% 5.12% 5.44%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $7,582 $7,281 $7,270 $9,373 $8,446
Data: ======== ======== ======== ======== ========
Portfolio turnover 26.92% 118.21% 169.34% 44.83% 41.51%
======== ======== ======== ======== ========
* Annualized.
** Total investment returns exclude the effect of sales loads.
++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
Class B
For the Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
Jan. 31, For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $10.70 $10.56 $10.50 $11.02 $10.56
Operating -------- -------- -------- -------- --------
Performance: Investment income -- net .25 .49 .49 .50 .52
Realized and unrealized gain (loss) on
investments -- net .15 .14 .06 (.43) .49
-------- -------- -------- -------- --------
Total from investment operations .40 .63 .55 .07 1.01
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income -- net (.25) (.49) (.49) (.50) (.52)
Realized gain on investments -- net -- -- -- -- (.03)
In excess of realized gain on
investments -- net -- -- -- (.09) --
-------- -------- -------- -------- --------
Total dividends and distributions (.25) (.49) (.49) (.59) (.55)
-------- -------- -------- -------- --------
Net asset value, end of period $10.85 $10.70 $10.56 $10.50 $11.02
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 3.77%++ 6.01% 5.49% .59% 9.95%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.33%* 1.38% 1.37% 1.16% 1.02%
Net Assets: ======== ======== ======== ======== ========
Expenses 1.33%* 1.38% 1.40% 1.39% 1.55%
======== ======== ======== ======== ========
Investment income -- net 4.54%* 4.52% 4.79% 4.61% 4.93%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $63,004 $64,397 $64,068 $65,610 $53,341
Data: ======== ======== ======== ======== ========
Portfolio turnover 26.92% 118.21% 169.34% 44.83% 41.51%
======== ======== ======== ======== ========
* Annualized.
** Total investment returns exclude the effect of sales loads.
++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (concluded)
Class C
For the For the
Six For the Period
The following per share data and ratios have been derived Months Year Oct. 21,
from information provided in the financial statements. Ended Ended 1994+ to
Jan. 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995
<S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $10.70 $10.56 $10.09
Operating -------- -------- --------
Performance: Investment income -- net .24 .48 .37
Realized and unrealized gain on investments -- net .14 .14 .47
-------- -------- --------
Total from investment operations .38 .62 .84
-------- -------- --------
Less dividends from investment income -- net (.24) (.48) (.37)
-------- -------- --------
Net asset value, end of period $10.84 $10.70 $10.56
======== ======== ========
Total Investment Based on net asset value per share 3.62%++ 5.90% 8.50%++
Return:** ======== ======== ========
Ratios to Average Expenses 1.43%* 1.49% 1.50%*
Net Assets: ======== ======== ========
Investment income -- net 4.44%* 4.42% 4.62%*
======== ======== ========
Supplemental Net assets, end of period (in thousands) $2,557 $2,720 $874
Data: ======== ======== ========
Portfolio turnover 26.92% 118.21% 169.34%
======== ======== ========
<CAPTION>
Class D
For the For the
Six For the Period
The following per share data and ratios have been derived Months Year Oct. 21,
from information provided in the financial statements. Ended Ended 1994+ to
Jan. 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995
<S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $10.70 $10.56 $10.09
Operating -------- -------- --------
Performance: Investment income-- net 0.27 0.53 0.41
Realized and unrealized gain on investments -- net 0.14 0.14 0.47
-------- -------- --------
Total from investment operations 0.41 0.67 0.88
-------- -------- --------
Less dividends from investment income -- net (0.27) (0.53) (0.41)
-------- -------- --------
Net asset value, end of period $10.84 $10.70 $10.56
======== ======== ========
Total Investment Based on net asset value per share 3.89%++ 6.45% 8.93%++
Return:** ======== ======== ========
Ratios to Average Expenses .91%* 0.97% .99%*
Net Assets: ======== ======== ========
Investment income -- net 4.95%* 4.93% 5.17%*
======== ======== ========
Supplemental Net assets, end of period (in thousands) $4,000 $3,513 $3,234
Data: ======== ======== ========
Portfolio turnover 26.92% 118.21% 169.34%
======== ======== ========
* Annualized.
** Total investment returns exclude the effect of sales loads.
+ Commencement of Operations.
++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Ohio Municipal Bond Fund January 31, 1997
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. These unaudited
financial statements reflect all adjustments which are, in the opinion
of management, necessary to a fair statement of the results for the
interim period presented. All such adjustments are of a normal recurring
nature. The Fund offers four classes of shares under the Merrill Lynch
Select PricingSM System. Shares of Class A and Class D are sold with a
front-end sales charge. Shares of Class B and Class C may be subject to
a contingent deferred sales charge. All classes of shares have identical
voting, dividend, liquidation and other rights and the same terms and
conditions, except that Class B, Class C and Class D bear certain
expenses related to the account maintenance of such shares, and Class B
and Class C Shares also bear certain expenses related to the
distribution of such shares. Each class has exclusive voting rights with
respect to matters relating to its account maintenance and distribution
expenditures. The following is a summary of significant accounting
policies followed by the Fund.
(a) Valuation of investments -- Municipal bonds and other portfolio
securities in which the Fund invests are traded primarily in the over-
the-counter municipal bond and money markets and are valued at the last
available bid price in the over-the-counter market or on the basis of
yield equivalents as obtained from one or more dealers that make markets
in the securities. Financial futures contracts and options thereon,
which are traded on exchanges, are valued at their settlement prices as
of the close of such exchanges. Short-term investments with remaining
maturities of sixty days or less are valued at amortized cost, which
approximates market value. Securities and assets for which market
quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of
Trustees of the Trust, including valuations furnished by a pricing
service retained by the Trust, which may utilize a matrix system for
valuations. The procedures of the pricing service and its valuations are
reviewed by the officers of the Trust under the general supervision of
the Trustees.
(b) Derivative financial instruments -- The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the counterparty
does not perform under the contract.
(bullet) Financial futures contracts -- The Fund may purchase or sell
interest rate futures contracts and options on such futures contracts
for the purpose of hedging the market risk on existing securities or the
intended purchase of securities. Futures contracts are contracts for
delayed delivery of securities at a specific future date and at a
specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required by
the exchange on which the transaction is effected. Pursuant to the
contract, the Fund agrees to receive from or pay to the broker an amount
of cash equal to the daily fluctuation in value of the contract. Such
receipts or payments are known as variation margin and are recorded by
the Fund as unrealized gains or losses. When the contract is closed, the
Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the
time it was closed.
(c) Income taxes -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its taxable
income to its shareholders. Therefore, no Federal income tax provision
is required.
(d) Security transactions and investment income -- Security transactions
are recorded on the dates the transactions are entered into (the trade
dates). Interest income is recognized on the accrual basis. Discounts
and market premiums are amortized into interest income. Realized gains
and losses on security transactions are determined on the identified
cost basis.
(e) Deferred organization expenses and prepaid registration fees --
Deferred organization expenses are charged to expense on a straight-line
basis over a five-year period. Prepaid registration fees are charged to
expense as the related shares are issued.
(f) Dividends and distributions -- Dividends from net investment income
are declared daily and paid monthly. Distributions of capital gains are
recorded on the ex-dividend dates. Distributions in excess of realized
capital gains are 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.
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.
Pursuant to the distribution plans (the "Distribution Plans") adopted by
the Fund in accordance with Rule 12b-1 under the Investment Company Act
of 1940, the Fund pays the Distributor ongoing account maintenance and
distribution fees. The fees are accrued daily and paid monthly at annual
rates based upon the average daily net assets of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.25%
Class C 0.25% 0.35%
Class D 0.10% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce,
Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co., also provides
account maintenance and distribution services to the Fund. The ongoing
account maintenance fee compensates the Distributor and MLPF&S for
providing account maintenance services to Class B, Class C and Class D
shareholders. The ongoing distribution fee compensates the Distributor
and MLPF&S for providing shareholder and distribution-related services
to Class B and Class C shareholders.
For the six months ended January 31, 1997, MLFD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the Fund's
Class A and Class D Shares as follows:
MLFD MLPF&S
Class A $116 $1,273
Class D $293 $2,521
For the six months ended January 31, 1997, MLPF&S received contingent
deferred sales charges of $66,015 and $212 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 $23,707,399 and $19,757,183,
respectively.
Net realized and unrealized gains as of January 31, 1997 were as
follows:
Realized Unrealized
Gains Gains
Long-term investments $603,280 $3,608,300
----------- -----------
Total $603,280 $3,608,300
=========== ===========
As of January 31, 1997, net unrealized appreciation for Federal income
tax purposes aggregated $3,608,300, of which $3,706,166 related to
appreciated securities and $97,866 related to depreciated securities.
The aggregate cost of investments at January 31, 1997 for Federal income
tax purposes was $71,799,832.
4. Beneficial Interest Transactions:
Net increase (decrease) in net assets derived from beneficial interest
transactions was $(1,797,594) and $1,552,305 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 Ended Dollar
January 31, 1997 Shares Amount
Shares sold 73,892 $799,887
Shares issued to shareholders
in reinvestment of dividends 7,638 82,425
------------ ------------
Total issued 81,530 882,312
Shares redeemed (62,768) (678,087)
------------ ------------
Net increase 18,762 $204,225
============ ============
Class A Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 86,942 $941,587
Shares issued to shareholders
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 B Shares for the
Six Months Ended Dollar
January 31, 1997 Shares Amount
Shares sold 438,454 $4,723,738
Shares issued to shareholders
in reinvestment of dividends 76,951 830,387
------------ ------------
Total issued 515,405 5,554,125
Automatic conversion
of shares (24,264) (262,589)
Shares redeemed (699,089) (7,532,843)
------------ ------------
Net decrease (207,948) $(2,241,307)
============ ============
Class B Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 1,044,627 $11,201,909
Shares issued to shareholders
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)
============ ============
Class C Shares for the Six Dollar
Months Ended Jan. 31, 1997 Shares Amount
Shares sold 27,963 $301,946
Shares issued to shareholders
in reinvestment of dividends 4,111 44,362
------------ ------------
Total issued 32,074 346,308
Shares redeemed (50,487) (545,998)
------------ ------------
Net decrease (18,413) $(199,690)
============ ============
Class C Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 193,104 $2,070,410
Shares issued to shareholders
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 D Shares for the Six Dollar
Months Ended Jan. 31, 1997 Shares Amount
Shares sold 31,532 $340,645
Automatic conversion
of shares 24,273 262,589
Shares issued to shareholders
in reinvestment of dividends 2,434 26,261
------------ ------------
Total issued 58,239 629,495
Shares redeemed (17,676) (190,317)
------------ ------------
Net increase 40,563 $439,178
============ ============
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 shareholders
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
============ ============
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.
