MERRILL LYNCH
OHIO MUNICIPAL
BOND FUND
[FUND LOGO]
STRATEGIC
Performance
Annual Report
July 31, 1997
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 #16156 -- 7/97
[RECYCLE LOGO]
Printed on post-consumer recycled paper
Merrill Lynch Ohio Municipal Bond Fund July 31, 1997
TO OUR SHAREHOLDERS
The Municipal Market Environment
During the six months ended July 31, 1997, a number of very favorable
factors combined to push both tax-exempt and taxable bond yields to
recent historic lows. A slowing domestic economy, a continued benign,
if not improving, inflationary environment, a declining Federal budget
deficit with resultant reduced Treasury borrowing needs, and a
successful Congressional budget accord all resulted in significant
declines in fixed-income yields. By the end of July, 30-year US
Treasury bond yields had declined approximately 50 basis points
(0.50%) to 6.30%, their lowest level in over a year. Similarly, as
measured by the Bond Buyer Revenue Bond Index, long-term municipal
revenue bond yields fell over 50 basis points to end the July 31, 1997
quarter at 5.49%, their lowest level since early 1994.
The decline in tax-exempt yields in recent months was even more
impressive given that the municipal market lost much of the technical
support it enjoyed for over a year. In previous quarters, new tax-
exempt bond issuance declined, or remained stable. During the six
months ended July 31, 1997, approximately $100 billion in new long-
term municipal securities was under-written, an increase of over 7.5%
versus the comparable period in 1996. As tax-exempt bond yields
declined, many municipal bond issuers took this opportunity to both
issue new debt as well as refinance older, higher-couponed debt with
new, lower-yielding issues. This refinancing led to a surge in tax-
exempt issuance in recent months. Over the three months ended July 31,
1997, new long-term tax-exempt bond issuance totaled approximately $55
billion, an increase of over 15% versus the July 31, 1996 quarter.
The decline in municipal bond yields also resulted in some reduction
in retail investor demand. In earlier episodes of rapidly declining
interest rates, individual investor demand initially fell until
investors became more acclimated to the current levels. Should
interest rates stabilize, we expect investor demand to return to
earlier levels. Also, this past June and July, municipal bond
investors received over $50 billion in assets from coupon income
payments, bond maturities, and the proceeds from early bond
redemptions. Despite the continued allure of the US equity market, it
is likely that much of these assets will be reallocated to the
municipal bond market as investors adjust to the new investment
environment.
Looking forward, given the extent of the recent bond market rally,
some retrenchment or at least a period of consolidation is likely.
However, the positive backdrop of modest economic growth and low
inflation suggests that any such adjustment is not likely to
be excessive. Despite recent increases in new bond issuance, supply
for all of 1997 is not expected to be materially different than
earlier estimates of approximately $175 billion. It is likely that the
recent increase in issuance has largely borrowed from that originally
scheduled for later this year. Additionally, any significant increase
in tax-exempt bond yields will prevent any further bond refinancings,
reducing future supply. Unless the current positive economic
fundamentals undergo immediate and significant deterioration, any
increase in municipal bond yields is likely to be viewed as an
opportunity to purchase more attractively priced tax-exempt
securities.
Fiscal Year in Review
During the past 12 months, the municipal bond market was characterized
by tremendous price volatility within a narrow trading range. We
focused on purchasing long-term bonds as yields approached 6.00% and
selling these securities as yields rallied to 5.50%. The Fund was
fully invested in long-term securities during most of the fiscal year
to seek to achieve a yield greater than that of similar Ohio municipal
bond funds. The Fund's cash equivalent reserves fluctuated between 5%
- -- 10% of total assets, and a large portion of assets committed to
longer-term maturities currently have coupons structured for income
rather than price appreciation. During the 12 months ended July 31,
1997, the Fund's slightly defensive strategy, coupled with an
essentially fully invested position, generated a total return
performance above the industry average as well as an above-average
yield.
Portfolio Matters
During the six months ended July 31, 1997, we maintained the slightly
defensive posture adopted in late 1996. Our principal concern was that
the strong economic growth seen in the fourth quarter of 1996 would
continue into 1997, causing the Federal Reserve Board to raise
interest rates so that growth would not result in a significant
increase in inflation. However, US economic growth slowed in the
second quarter of 1997 and inflation remained subdued, allowing
interest rates to decline. We believed the Fund's structure would
allow it to perform well during periods of market improvement.
We generally maintained the Fund's cash reserves below 5% of net
assets in order to seek to enhance the Fund's dividend stream and in
response to the continued scarcity of attractively priced tax-exempt
Ohio issues. During the last six months, approximately $3.1 billion in
Ohio municipal securities was underwritten, an increase of over 5% as
compared to the same period a year ago. However, the majority of
recent Ohio issuance was dominated by current-couponed issues, with
poor call protection features, which would not have enhanced the
Fund's overall structure.
Looking forward, we expect to maintain our current strategy of waiting
for an environment characterized by higher interest rates before
adopting a more aggressive portfolio structure. In such an
environment, we expect to emphasize higher-couponed issues over more
interest rate-sensitive securities. The generation of an optimal
amount of tax-exempt income remains the focus for the Fund. As new
bond issuance is expected to be approximately $175 billion on an
annual basis for all of 1997, we expect at this time to maintain the
Fund's fully invested position.
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 to come.
Sincerely,
/S/ARTHUR ZEIKEL
Arthur Zeikel
President
/S/VINCENT R. GIORDANO
Vincent R. Giordano
Senior Vice President
/S/FRED K. STUEBE
Fred K. Stuebe
Vice President and Portfolio Manager
September 5, 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. Figures shown in the "Average Annual Total Return"
tables as well as the total returns and cumulative total returns in the
"Performance Summary" tables assume reinvestment of all dividends and
capital gains distributions at net asset value on the payable date.
Investment return and principal value of shares will fluctuate so that
shares, when redeemed, may be worth more or less than their original
cost. Dividends paid to each class of shares will vary because of the
different levels of account maintenance, distribution and transfer
agency fees applicable to each class, which are deducted from the income
available to be paid to shareholders.
<TABLE>
<CAPTION>
Recent Performance Results
12 Month 3 Month
7/31/97 4/30/97 7/31/96 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $11.17 $10.75 $10.70 +4.39% +3.91%
Class B Shares* 11.17 10.75 10.70 +4.39 +3.91
Class C Shares* 11.17 10.74 10.70 +4.39 +4.00
Class D Shares* 11.16 10.74 10.70 +4.30 +3.91
Class A Shares -- Total Return* +9.80(1) +5.22(2)
Class B Shares -- Total Return* +9.25(3) +5.09(4)
Class C Shares -- Total Return* +9.14(5) +5.16(6)
Class D Shares -- Total Return* +9.60(7) +5.20(8)
Class A Shares -- Standardized 30-day Yield 4.35%
Class B Shares -- Standardized 30-day Yield 4.03%
Class C Shares -- Standardized 30-day Yield 3.93%
Class D Shares -- Standardized 30-day Yield 4.26%
* 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 $0.548 per share ordinary income dividends.
(2) Percent change includes reinvestment of $0.137 per share ordinary income dividends.
(3) Percent change includes reinvestment of $0.493 per share ordinary income dividends.
(4) Percent change includes reinvestment of $0.123 per share ordinary income dividends.
(5) Percent change includes reinvestment of $0.482 per share ordinary income dividends.
(6) Percent change includes reinvestment of $0.121 per share ordinary income dividends.
(7) Percent change includes reinvestment of $0.537 per share ordinary income dividends.
(8) Percent change includes reinvestment of $0.134 per share ordinary income dividends.
</TABLE>
[GRAPHIC LINE CHART OMITTED: TOTAL RETURN BASED ON A $10,000 INVESTMENT]
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:
2/28/92** 7/97
ML Ohio Municipal Bond Fund+-
Class A Shares* $9,600 $14,398
ML Ohio Municipal Bond Fund+-
Class B Shares* $10,000 $14,591
Lehman Brothers Municipal Bond Index++ $10,000 $15,032
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** 7/97
ML Ohio Municipal Bond Fund+-
Class C Shares* $10,000 $12,540
ML Ohio Municipal Bond Fund+-
Class D Shares* $9,600 $12,200
Lehman Brothers Municipal Bond Index++ $10,000 $13,054
* 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*
Year Ended 6/30/97 +7.96% +3.64%
Five Years Ended 6/30/97 +6.88 +6.01
Inception (2/28/92)
through 6/30/97 +7.35 +6.53
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/97 +7.41% +3.41%
Five Years Ended 6/30/97 +6.34 +6.34
Inception (2/28/92)
through 6/30/97 +6.81 +6.81
* 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 6/30/97 +7.20% +6.20%
Inception (10/21/94)
through 6/30/97 +7.68 +7.68
* 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 6/30/97 +7.85% +3.54%
Inception (10/21/94)
through 6/30/97 +8.24 +6.61
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
<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 -- 7/31/97 10.88 11.17 -- 0.305 + 5.73
Total $0.013 Total $3.112
Cumulative total return as of 7/31/97: +49.98%**
* Figures may include short-term capital gains distributions.
** Figures 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 -- 7/31/97 10.88 11.17 -- 0.275 + 5.42
Total $0.013 Total $2.820
Cumulative total return as of 7/31/97: +45.91%**
* Figures may include short-term capital gains distributions.
** Figures 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 -- 7/31/97 10.87 11.17 -- 0.269 + 5.45
Total $1.315
Cumulative total return as of 7/31/97: +25.40%**
* Figures may include short-term capital gains distributions.
** Figures 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 -- 7/31/97 10.87 11.16 -- 0.299 + 5.67
Total $1.466
Cumulative total return as of 7/31/97: +27.09%**
* Figures may include short-term capital gains distributions.
** Figures do not include sales charge; results would be lower if sales charge was included.
</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 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
RIB Residual Interest Bonds
RITES Residual Interest Tax-Exempt Securities
S/F Single-Family
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
<CAPTION>
Merrill Lynch Ohio Municipal Bond Fund July 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 -- 97.3%
NR* Baa1 $900 Ashtabula County, Ohio, IDR, Refunding (Ashland Oil Inc. Project), Series A,
6.90% due 5/01/2010 $967
AAA Aaa 1,000 Avon, Ohio, Local School District, GO, UT, 6% due 12/01/2020 (b) 1,075
NR* A 4,000 Barberton, Ohio, Hospital Facilities Revenue Bonds (Barberton Citizens Hospital Co.
Project), 7.25% due 1/01/2002 (h) 4,538
AAA Aaa 2,620 Brecksville-Broadview Heights, Ohio, City School District, UT, 5.25% due 12/01/2021 2,609
Cleveland, Ohio, Public Power System, Revenue Refunding Bonds, First Mortgage,
Series 1 (d):
AAA Aaa 1,500 5.125% due 11/15/2018 1,485
AAA Aaa 2,000 5% due 11/15/2020 1,944
AAA Aaa 1,000 5% due 11/15/2024 968
AAA Aaa 3,665 Cleveland, Ohio, Water Works Revenue Bonds, First Mortgage, Series F-92 A, 6.25%
due 1/01/2015 (b) 3,962
Cuyahoga County, Ohio, M/F Revenue Bonds (Dalebridge Apartments), AMT (e):
NR* Aaa 1,000 6.50% due 10/20/2020 1,052
NR* Aaa 2,850 6.60% due 10/20/2030 2,994
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 1,056
AAA Aaa 1,500 Dublin, Ohio, City School District Revenue Refunding Bonds, 5% due 12/01/2019 (d) 1,451
A A 2,120 Erie County, Ohio, Hospital Improvement Revenue Refunding Bonds (Firelands
Community Hospital Project), 6.75% due 1/01/2015 2,306
AAA Aaa 1,200 Finneytown, Ohio, Local School District Revenue Bonds, UT, 5.80% due 12/01/2024 (c) 1,273
AAA Aaa 1,200 Huron County, Ohio, Human Services, Building Revenue Bonds, 7.25% due 12/01/2013 (d) 1,422
NR* Aaa 3,030 Kent, Ohio, M/F Housing Mortgage Revenue Bonds (Silver Meadows), AMT, 7.30% due
12/20/2036 (e) 3,374
AAA Aaa 1,740 Lakota, Ohio, Local School District, GO, UT, 7% due 12/01/2010 (b) 2,125
A NR* 1,660 Loveland, Ohio, City School District, GO, UT, 6.65% due 12/01/2015 1,826
BBB+ NR* 2,000 Lucas County, Ohio, Hospital Revenue Bonds (Flower Hospital), 6.125% due 12/01/2004 (h) 2,218
AAA Aaa 2,500 Mahoning County, Ohio, Hospital Facilities Revenue Refunding Bonds (YHA Inc. Project),
Series A, 7% due 10/15/2014 (d) 2,744
A- A3 2,000 Moraine, Ohio, Solid Waste Disposal Revenue Bonds (General Motors Corp. Project),
AMT, 6.75% due 7/01/2014 2,341
AAA Aaa 3,000 North Canton City, Ohio, School District Improvement Bonds, GO, UT, 6.70% due
12/01/2019 (b) 3,417
Ohio HFA, Residential Mortgage Revenue Bonds, AMT (e):
AAA NR* 1,750 Series A-1, 6.15% due 3/01/2029 1,812
AAA NR* 965 Series B-2, 6.70% due 3/01/2025 1,026
AAA Aaa 1,050 Ohio HFA, S/F Mortgage Revenue Bonds, AMT, RIB, Series B-4, 9.669% due 3/31/2031 (e)(g) 1,183
A1+ NR* 1,000 Ohio State Air Quality Development Authority Revenue Bonds, VRDN, Series B, 3.50%
due 12/01/2015 (a) 1,000
Ohio State Air Quality Development Authority, Revenue Refunding Bonds:
NR* Baa1 1,000 (Ashland Oil Inc. Project), 6.85% due 4/01/2010 1,058
A1+ VMIG1+ 600 (Cincinnati Gas & Electric), VRDN, Series B, 3.55% due 9/01/2030 (a) 600
AA- Aa3 4,200 (Coll - Dayton Power & Light Project), Series B, 6.40% due 8/15/2027 4,508
AAA Aaa 1,505 PCR (Ohio-Edison), Series B, 7.10% due 6/01/2018 (c) 1,646
Ohio State Higher Educational Facility, Commission Revenue Bonds:
AA A1 1,000 (Denison University Project), 5.25% due 11/01/2016 1,012
NR* NR* 1,000 (University of Findlay Project), 6.125% due 9/01/2016 1,039
AA Aa 1,410 Ohio State Higher Educational Facility, Crossover Revenue Refunding Bonds (Case Western
Reserve University), 6.25% due 10/01/2016 1,622
AAA Aaa 1,000 Ohio State Water Development Authority, Pollution Control Facilities Revenue Refunding
Bonds (Pennsylvania Power Co. Project), 6.15% due 8/01/2023 (b) 1,078
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 2,171
A1+ Aaa 1,000 Scioto County, Ohio, Hospital Facilities Revenue Bonds (VHA Central Inc. Capital Asset),
VRDN, Series E, 3.65% due 12/01/2025 (a)(b) 1,000
NR* Aa3 1,000 Toledo Lucas County, Ohio, Port Authority, Development Revenue Refunding Bonds
(Cargill Inc. Project), 5.90% due 12/01/2015 1,050
AAA Aaa 1,000 University of Akron, Ohio, Refunding, 5.25% due 1/01/2022 (b) 996
AAA Aaa 1,000 Upper Arlington, Ohio, City School District, UT, 5.25% due 12/01/2022 (d) 996
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) 2,331
Puerto Rico -- 3.6%
A1+ Baa1 2,500 Puerto Rico Commonwealth, Highway and Transportation Authority, Highway Revenue
Bonds, RITES, Series X, 6.243% due 7/01/2004 (g) 2,706
Total Investments (Cost -- $70,406) -- 100.9% 75,981
Liabilities in Excess of Other Assets -- (0.9%) (681)
-------
Net Assets -- 100.0% $75,300
=======
(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, 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 July 31, 1997.
(h) Prerefunded.
* Not Rated.
+ Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Statement of Assets and Liabilities as of July 31, 1997
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $70,406,059) (Note 1a) $75,981,389
Cash 109,539
Receivables:
Interest $927,821
Beneficial interest sold 23,698 951,519
------------
Prepaid registration fees and other assets (Note 1e) 951
------------
Total assets 77,043,398
------------
Liabilities: Payables:
Securities purchased 1,453,227
Beneficial interest redeemed 99,734
Dividends to shareholders (Note 1f) 91,273
Investment adviser (Note 2) 34,900
Distributor (Note 2) 26,924 1,706,058
------------
Accrued expenses and other liabilities 37,268
------------
Total liabilities 1,743,326
------------
Net Assets: Net assets $75,300,072
============
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $76,151
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 537,846
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 21,594
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 38,609
Paid-in capital in excess of par 70,012,823
Accumulated realized capital losses on investments --
net (Note 5) (962,281)
Unrealized appreciation on investments -- net 5,575,330
------------
Net assets $75,300,072
============
Net Asset Value: Class A -- Based on net assets of $8,505,538 and 761,511
shares of beneficial interest outstanding $11.17
============
Class B -- Based on net assets of $60,072,484 and 5,378,455
shares of beneficial interest outstanding $11.17
============
Class C -- Based on net assets of $2,411,704 and 215,941
shares of beneficial interest outstanding $11.17
============
Class D -- Based on net assets of $4,310,346 and 386,088
shares of beneficial interest outstanding $11.16
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Year Ended
July 31, 1997
<S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $4,468,647
(Note 1d):
Expenses: Investment advisory fees (Note 2) $418,770
Account maintenance and distribution fees -- Class B (Note 2) 310,021
Professional fees 49,663
Accounting services (Note 2) 44,658
Transfer agent fees -- Class B (Note 2) 32,104
Printing and shareholder reports 28,614
Registration fees (Note 1e) 18,435
Account maintenance and distribution fees -- Class C (Note 2) 15,210
Amortization of organization expenses (Note 1e) 6,777
Pricing fees 4,992
Custodian fees 4,328
Account maintenance fees -- Class D (Note 2) 3,931
Transfer agent fees -- Class A (Note 2) 3,185
Transfer agent fees -- Class D (Note 2) 1,633
Transfer agent fees -- Class C (Note 2) 1,320
Trustees' fees and expenses 234
------------
Total expenses 943,875
------------
Investment income -- net 3,524,772
------------
Realized & Realized gain on investments -- net 803,076
Unrealized Gain on Change in unrealized appreciation on investments -- net 2,393,293
Investments -- Net ------------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations $6,721,141
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the Year Ended July 31,
-------------------------------
1997 1996
<S> <C> <C> <C>
Increase (Decrease) in Net Assets:
Operations: Investment income -- net $3,524,772 $3,607,605
Realized gain on investments -- net 803,076 58,034
Change in unrealized appreciation on investments -- net 2,393,293 854,639
------------ ------------
Net increase in net assets resulting from operations 6,721,141 4,520,278
------------ ------------
Dividends to Investment income -- net:
Shareholders Class A (388,948) (373,206)
(Note 1f): Class B (2,827,393) (2,995,936)
Class C (113,014) (76,853)
Class D (195,417) (161,610)
------------ ------------
Net decrease in net assets resulting from dividends
to shareholders (3,524,772) (3,607,605)
------------ ------------
Beneficial Interest Net increase (decrease) in net assets derived
Transactions from beneficial interest transactions (5,807,300) 1,552,305
(Note 4): ------------ ------------
Net Assets: Total increase (decrease) in net assets (2,610,931) 2,464,978
Beginning of year 77,911,003 75,446,025
------------ ------------
End of year $75,300,072 $77,911,003
------------ ------------
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
The following per share data and ratios have been derived
from information provided in the financial statements. Class A
-----------------------------------------------------------------
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 year $10.70 $10.56 $10.50 $11.02 $10.56
Operating --------- --------- --------- --------- ---------
Performance: Investment income -- net .55 .54 .55 .56 .58
Realized and unrealized gain (loss) on
investments -- net .47 .14 .06 (.43) .49
--------- --------- --------- --------- ---------
Total from investment operations 1.02 .68 .61 .13 1.07
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income -- net (.55) (.54) (.55) (.56) (.58)
Realized gain on investments -- net -- -- -- -- (.03)
In excess of realized gain on
investments -- net -- -- -- (.09) --
--------- --------- --------- --------- ---------
Total dividends and distributions (.55) (.54) (.55) (.65) (.61)
--------- --------- --------- --------- ---------
Net asset value, end of year $11.17 $10.70 $10.56 $10.50 $11.02
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 9.80% 6.56% 6.03% 1.10% 10.51%
Return:* ========= ========= ========= ========= =========
Ratios to Average Expenses, net of reimbursement .80% .87% .86% .65% .51%
Net Assets:
========= ========= ========= ========= =========
Expenses .80% .87% .89% .89% 1.04%
========= ========= ========= ========= =========
Investment income -- net 5.07% 5.03% 5.30% 5.12% 5.44%
========= ========= ========= ========= =========
Supplemental Net assets, end of year (in thousands) $8,506 $7,281 $7,270 $9,373 $8,446
Data ========= ========= ========= ========= =========
Portfolio turnover 52.57% 118.21% 169.34% 44.83% 41.51%
========= ========= ========= ========= =========
*Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class B
-----------------------------------------------------------------
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 year $10.70 $10.56 $10.50 $11.02 $10.56
Operating --------- --------- --------- --------- ---------
Performance: Investment income -- net .49 .49 .49 .50 .52
Realized and unrealized gain (loss) on
investments -- net .47 .14 .06 (.43) .49
--------- --------- --------- --------- ---------
Total from investment operations .96 .63 .55 .07 1.01
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income -- net (.49) (.49) (.49) (.50) (.52)
Realized gain on investments -- net -- -- -- -- (.03)
In excess of realized gain on
investments -- net -- -- -- (.09) --
--------- --------- --------- --------- ---------
Total dividends and distributions (.49) (.49) (.49) (.59) (.55)
--------- --------- --------- --------- ---------
Net asset value, end of year $11.17 $10.70 $10.56 $10.50 $11.02
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 9.25% 6.01% 5.49% .59% 9.95%
Return* ========= ========= ========= ========= =========
Ratios to Average Expenses, net of reimbursement 1.31% 1.38% 1.37% 1.16% 1.02%
Net assets: ========= ========= ========= ========= =========
Expenses 1.31% 1.38% 1.40% 1.39% 1.55%
========= ========= ========= ========= =========
Investment income -- net 4.56% 4.52% 4.79% 4.61% 4.93%
========= ========= ========= ========= =========
Supplemental Net assets, end of year (in thousands) $60,072 $64,397 $64,068 $65,610 $53,341
Data: ========= ========= ========= ========= =========
Portfolio turnover 52.57% 118.21% 169.34% 44.83% 41.51%
========= ========= ========= ========= =========
* Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
---------------------------------- ----------------------------
For the For the For the For the
The following per share data and ratios have been derived Year Period Year Period
from information provided in the financial statements. Ended Oct. 21, Ended Oct. 21,
July 31, 1994+ to July 31, 1994+ to
------------------ July 31, ---------------- July 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $10.70 $10.56 $10.09 $10.70 $10.56 $10.09
Operating --------- --------- --------- --------- --------- ---------
Performance: Investment income -- net .48 .48 .37 .54 .53 .41
Realized and unrealized gain on
investments -- net .47 .14 .47 .46 .14 .47
--------- --------- --------- --------- --------- ---------
Total from investment operations .95 .62 .84 1.00 .67 .88
--------- --------- --------- --------- --------- ---------
Less dividends from investment
income -- net (.48) (.48) (.37) (.54) (.53) (.41)
--------- --------- --------- --------- --------- ---------
Net asset value, end of period $11.17 $10.70 $10.56 $11.16 $10.70 $10.56
========= ========= ========= ========= ========= =========
Total
Investment Based on net asset value per share 9.14% 5.90% 8.50%++ 9.60% 6.45% 8.93%++++
Return:** ========= ========= ========= ========= ========= =========
Ratios to
Average Expenses 1.41% 1.49% 1.50%* .90% .97% .99%*
Net Assets: ========= ========= ========= ========= ========= =========
Investment income -- net 4.46% 4.42% 4.62%* 4.97% 4.93% 5.17%*
========= ========= ========= ========= ========= =========
Supplemental Net assets, end of period
Data: (in thousands) $2,412 $2,720 $874 $4,310 $3,513 $3,234
========= ========= ========= ========= ========= =========
Portfolio turnover 52.57% 118.21% 169.34% 52.57% 118.21% 169.34%
========= ========= ========= ========= ========= =========
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of Operations.
++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Ohio Municipal Bond Fund July 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. 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 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.
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 Distri-
bution Plans with Merill Lynch Funds Distributor, Inc. ("MLFD" or
"Distributor"), a wholly-owned subsidiary of Merrill Lynch Group, Inc.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee based upon the average daily
value of the Fund's net assets at the following annual rates: 0.55% of
the Fund's average daily net assets not exceeding $500 million; 0.525%
of average daily net assets in excess of $500 million but not
exceeding $1 billion; and 0.50% of average daily net assets in excess
of $1 billion.
Pursuant to the distribution plans (the "Distribution Plans") adopted
by the Fund in accordance with Rule 12b-1 under the Investment Company
Act of 1940, the Fund pays the Distributor ongoing account maintenance
and distribution fees. The fees are accrued daily and paid monthly at
annual rates based upon the average daily net assets of the shares as
follows:
Account
Maintenance Distribution
Fee Fee
Class B 0.25% 0.25%
Class C 0.25% 0.35%
Class D 0.10% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co., also
provides account maintenance and distribution services to the Fund.
The ongoing account maintenance fee compensates the Distributor and
MLPF&S for providing account maintenance services to Class B, Class C
and Class D shareholders. The ongoing distribution fee compensates the
Distributor and MLPF&S for providing shareholder and distribution-
related services to Class B and Class C shareholders.
For the year ended July 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 $216 $2,028
Class D $449 $3,930
For the year ended July 31, 1997, MLPF&S received contingent deferred
sales charges of $116,317 and $518 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 year ended July 31, 1997 were $38,744,323 and $38,154,029,
respectively.
Net realized and unrealized gains as of July 31, 1997 were as follows:
Realized Unrealized
Gains Gains
Long-term investments $803,076 $5,575,330
---------- ----------
Total $803,076 $5,575,330
========== ==========
As of July 31, 1997, net unrealized appreciation for Federal income
tax purposes aggregated $5,575,330, all of which related to
appreciated securities. The aggregate cost of investments at
July 31, 1997 for Federal income tax purposes was $70,406,059.
4. Beneficial Interest Transactions:
Net increase (decrease) in net assets derived from beneficial interest
transactions was $(5,807,300) and $1,552,305 for the years ended July
31, 1997 and July 31, 1996, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
Shares sold 281,570 $3,056,459
Shares issued to shareholders
in reinvestment of dividends 16,807 182,136
----------- -----------
Total issued 298,377 3,238,595
Shares redeemed (217,206) (2,351,978)
----------- -----------
Net increase 81,171 $886,617
=========== ===========
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 Year Dollar
Ended July 31, 1997 Shares Amount
Shares sold 764,584 $8,274,531
Shares issued to shareholders
in reinvestment of dividends 142,649 1,544,704
----------- ------------
Total issued 907,233 9,819,235
Automatic conversion of shares (40,791) (443,365)
Shares redeemed (1,505,375) (16,285,923)
----------- -----------
Net decrease (638,933) $(6,910,053)
=========== ============
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 Year Dollar
Ended July 31, 1997 Shares Amount
Shares sold 102,395 $1,112,984
Shares issued to shareholders
in reinvestment of dividends 7,211 78,087
----------- -------------
Total issued 109,606 1,191,071
Shares redeemed (147,865) (1,601,650)
----------- -------------
Net decrease (38,259) $(410,579)
=========== =============
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 Year Dollar
Ended July 31, 1997 Shares Amount
Shares sold 48,281 $522,360
Automatic conversion of shares 40,810 443,365
Shares issued to shareholders
in reinvestment of dividends 4,829 52,300
----------- -------------
Total issued 93,920 1,018,025
Shares redeemed (36,222) (391,310)
----------- -------------
Net increase 57,698 $626,715
=========== =============
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, 1997, the Fund had a net capital loss carryforward of
approximately $206,000, all of which expires in 2004. This amount will
be available to offset like amounts of any future taxable gains.
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, 1997, 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 five-year period then ended. 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, 1997 by
correspondence with the custodian and broker. 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, 1997, the results of its
operations, 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 5, 1997
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid monthly by Merrill
Lynch Ohio Municipal Bond Fund during its taxable year ended July 31,
1997 qualify as tax-exempt interest dividends for Federal income tax
purposes.
Additionally, there were no capital gains distributions made
by the Fund during the year.
Please retain this information for your records.
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
Robert E. Putney, III, 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
