MERRILL LYNCH
OHIO MUNICIPAL
BOND FUND
[FUND LOGO]
STRATEGIC
Performance
Semi-Annual Report
January 31, 1998
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 -- 1/98
[RECYCLE LOGO]
Printed on post-consumer recycled paper
Merrill Lynch Ohio Municipal Bond Fund January 31, 1998
TO OUR SHAREHOLDERS
The Municipal Market Environment
During the six months ended January 31, 1998, long-term bond yields
declined to recent historic lows. Prior to late October, the ongoing
positive combination of moderate economic growth and low inflation had
allowed interest rates to gradually move lower. During the last three
months, however, the decline in interest rates was driven more by the
continued turmoil in Asian equity markets than by fundamental concerns.
A significant "flight to quality" has benefited the US Treasury bond
market, particularly longer-maturity US Treasury bonds, as foreign
investors have sought safe haven in the relative stability of US
financial markets. Over the six months ended January 31, 1998,
US Treasury bond yields declined approximately 50 basis points (0.50%)
to 5.81%.
Without the ability to benefit from the tax advantage inherent in
municipal bonds, foreign investors have not participated in the
tax-exempt market. Consequently, municipal bond yields have not
declined dramatically as have taxable US Treasury securities. Long-term
municipal revenue bond yields, as measured by the Bond Buyer Revenue
Index, declined only 15 basis points to end the six-month period ended
January 31, 1998 at 5.33%. Nevertheless, tax-exempt bond yields have
not reached these levels since the mid-1970s.
The increase in new municipal bond issuance over the past six months has
also prevented the tax-exempt bond market from more closely mirroring
the yield declines exhibited by its taxable counterpart. During the last
six months, over $120 billion in new long-term municipal bonds were
underwritten, an increase of over 30% compared to the same six-month
period one year ago. As interest rates have continued to decline in
recent months, new tax-exempt bond issuance has remained strong. Over
$60 million in new long-term municipal securities were issued during the
last three months, an increase of over 20% compared to the same three-
month period ended January 31, 1997. During the past month, over $16
billion in new long-term municipal securities were underwritten,
representing an increase of over 40% compared to the January 1997 level.
In our opinion, the recent correction in world equity markets has
enhanced the near-term prospects for continued low, if not declining,
interest rates in the United States. It is likely that the recent
correction will result in slower US domestic growth in the coming
months. This decline should be generated in part by reduced US export
growth. Additionally, some decline in consumer spending can also be
expected because of reduced consumer confidence. Perhaps more
importantly, it is likely that, barring a dramatic and unexpected
resurgence in domestic growth, the Federal Reserve Board will be
unwilling to raise interest rates until the full impact of the equity
market's corrections can be established.
All of these factors suggest that over the near term, interest rates,
including tax-exempt bond yields, are unlikely to rise by any
appreciable amount. It is probable that municipal bond yields will
remain under some relative pressure because of continued strong
new-issue supply. However, the recent pace of municipal bond issuance
is likely to be unsustainable. Continued increases in bond issuance
will require lower and lower tax-exempt bond yields to generate the
economic savings necessary for additional municipal bond refinancings.
Preliminary estimates of 1998 total municipal bond issuance are
presently in the $195 billion -- $220 billion range. These estimates
suggest that recent supply pressures are likely to abate somewhat next
year, or at least exert only minimal technical pressure during 1998.
Additionally, municipal bond investors received approximately $23
billion in January coupon payments, bond maturities and proceeds from
early redemptions, which should serve to intensify investor demand in
the near future. With tax-exempt bond yields at already attractive
yield ratios relative to US Treasury bonds (approximately 90% at the
end of December 1997), any further pressure on the municipal market
may well represent an attractive investment opportunity.
Portfolio Strategy
Going into the second half of 1997, we maintained a slightly defensive
posture for the Fund. During the six months ended January 31, 1998,
several changes took place in the US economy which eased our concerns
for a higher interest rate environment. In November 1997, we adopted a
less defensive strategy in response to the Asian economic crisis and the
continued domestic low inflation environment. This change in structure
was obtained by maintaining a fully invested position and seeking out
interest rate sensitive issues when available.
While total municipal bond issuance increased by over 30% for the six
months ended January 31, 1998 compared to the same six-month period last
year, total Ohio municipal bond issuance increased by more than 50%
during 1997. More issues were brought in the form of current-coupon
bonds without attractive call protection. We did not participate in
these issues since they did not benefit the Fund's overall portfolio
structure. We expect issuance in Ohio to remain strong going into 1998.
Looking ahead, we look to maintain the Fund's fully invested position.
We believe that interest rates will stay within their current trading
range. We will look for periods of higher interest rates before adopting
a more aggressive investment strategy.
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/THEODORE R. JAECKEL JR.
Theodore R. Jaeckel Jr.
Vice President and Portfolio Manager
March 9, 1998
We are pleased to announce that Theodore R. Jaeckel Jr. is responsible
for the day-to-day management of Merrill Lynch Ohio Municipal Bond Fund.
Mr. Jaeckel has been employed by Merrill Lynch Asset Management, L.P.
(an affiliate of the Fund's investment adviser) since 1991 as Vice
President and Portfolio Manager.
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
1/31/98 10/31/97 1/31/97 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $11.29 $11.12 $10.85 +4.06% +1.53%
Class B Shares* 11.29 11.12 10.85 +4.06 +1.53
Class C Shares* 11.29 11.12 10.84 +4.15 +1.53
Class D Shares* 11.28 11.11 10.84 +4.06 +1.53
Class A Shares -- Total Return* +9.34(1) +2.77(2)
Class B Shares -- Total Return* +8.79(3) +2.64(4)
Class C Shares -- Total Return* +8.78(5) +2.61(6)
Class D Shares -- Total Return* +9.24(7) +2.74(8)
Class A Shares -- Standardized 30-day Yield 3.91%
Class B Shares -- Standardized 30-day Yield 3.56%
Class C Shares -- Standardized 30-day Yield 3.46%
Class D Shares -- Standardized 30-day Yield 3.81%
* 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 $0.547 per share ordinary income dividends.
(2) Percent change includes reinvestment of $0.136 per share ordinary income dividends.
(3) Percent change includes reinvestment of $0.491 per share ordinary income dividends.
(4) Percent change includes reinvestment of $0.122 per share ordinary income dividends.
(5) Percent change includes reinvestment of $0.480 per share ordinary income dividends.
(6) Percent change includes reinvestment of $0.119 per share ordinary income dividends.
(7) Percent change includes reinvestment of $0.536 per share ordinary income dividends.
(8) Percent change includes reinvestment of $0.133 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
1997 10.88 11.23 -- 0.549 + 8.50
1/1/98 -- 1/31/98 11.23 11.29 -- 0.038 + 0.95
Total $0.013 Total $3.394
Cumulative total return as of 1/31/98: +55.38%**
* 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
1997 10.88 11.23 -- 0.493 + 7.95
1/1/98 -- 1/31/98 11.23 11.29 -- 0.034 + 0.91
Total $0.013 Total $3.072
Cumulative total return as of 1/31/98: +50.78%**
* 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
1997 10.87 11.23 -- 0.482 + 7.94
1/1/98 -- 1/31/98 11.23 11.29 -- 0.033 + 0.90
Total $1.561
Cumulative total return as of 1/31/98: +29.51%**
* 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
1997 10.87 11.23 -- 0.538 + 8.49
1/1/98 -- 1/31/98 11.23 11.28 -- 0.037 + 0.85
Total $1.742
Cumulative total return as of 1/31/98: +31.60%**
* Figures may include short-term capital gains distributions.
** Figures 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 12/31/97 +8.50% +4.16%
Five Years Ended 12/31/97 +7.05 +6.18
Inception (2/28/92)
through 12/31/97 +7.66 +6.91
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/97 +7.95% +3.95%
Five Years Ended 12/31/97 +6.51 +6.51
Inception (2/28/92)
through 12/31/97 +7.12 +7.12
* 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 12/31/97 +7.94% +6.94%
Inception (10/21/94)
through 12/31/97 +8.13 +8.13
* 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 12/31/97 +8.49% +4.15%
Inception (10/21/94)
through 12/31/97 +8.69 +7.31
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
<TABLE>
<CAPTION>
Merrill Lynch Ohio Municipal Bond Fund January 31, 1998
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <C> <C> <C> <C>
Ohio -- 92.7%
NR* Baa1 $900 Ashtabula County, Ohio, IDR, Refunding (Ashland Oil Inc. Project),
Series A, 6.90% due 5/01/2010 $974
AAA Aaa 1,000 Avon, Ohio, Local School District, GO, UT, 6% due 12/01/2020 (b) 1,093
NR* NR* 4,000 Barberton, Ohio, Hospital Facilities Revenue Bonds
(Barberton Citizens Hospital Co. Project), 7.25% due 1/01/2002 (h) 4,514
Cleveland, Ohio, Public Power System, Revenue Refunding Bonds,
First Mortgage, Series 1 (d):
AAA Aaa 2,000 5% due 11/15/2020 1,968
AAA Aaa 3,000 5% due 11/15/2024 2,948
AAA Aaa 3,665 Cleveland, Ohio, Water Works Revenue Bonds, First Mortgage,
Series F-92 A, 6.25% due 1/01/2015 (b) 3,990
Cuyahoga County, Ohio, M/F Revenue Bonds (Dalebridge Apartments),
AMT (e):
NR* Aaa 1,000 6.50% due 10/20/2020 1,068
NR* Aaa 2,850 6.60% due 10/20/2030 3,043
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 1,087
A A 2,120 Erie County, Ohio, Hospital Improvement Revenue Refunding Bonds
(Firelands Community Hospital Project), 6.75% due 1/01/2015 2,312
AAA Aaa 1,200 Finneytown, Ohio, Local School District Revenue Bonds, UT,
5.80% due 12/01/2024 (c) 1,290
AAA Aaa 1,500 Hilliard, Ohio, School District, UT, Series A, 5% due 12/01/2020 (c) 1,478
AAA Aaa 1,200 Huron County, Ohio, Human Services, Building Revenue Bonds,
7.25% due 12/01/2013 (d) 1,434
NR* Aaa 3,030 Kent, Ohio, M/F Housing Mortgage Revenue Bonds (Silver Meadows),
AMT, 7.30% due 12/20/2036 (e) 3,394
AAA Aaa 1,740 Lakota, Ohio, Local School District, GO, UT, 7% due 12/01/2010 (b) 2,157
A NR* 1,660 Loveland, Ohio, City School District, GO, UT, 6.65% due 12/01/2015 1,841
NR* NR* 2,000 Lucas County, Ohio, Hospital Revenue Bonds (Flower Hospital),
6.125% due 12/01/2004 (h) 2,233
AAA Aaa 2,500 Mahoning County, Ohio, Hospital Facilities Revenue Refunding Bonds
(YHA Inc. Project), Series A, 7% due 10/15/2002 (d)(h) 2,808
A A3 2,000 Moraine, Ohio, Solid Waste Disposal Revenue Bonds (General Motors
Corp. Project), AMT, 6.75% due 7/01/2014 2,392
AAA Aaa 3,000 North Canton City, Ohio, School District Improvement Bonds, GO, UT,
6.70% due 12/01/2019 (b) 3,440
Ohio HFA, Residential Mortgage Revenue Bonds, AMT (e):
AAA NR* 1,750 Series A-1, 6.15% due 3/01/2029 1,853
AAA NR* 965 Series B-2, 6.70% due 3/01/2025 1,037
AAA Aaa 1,025 Ohio HFA, S/F Mortgage Revenue Bonds, AMT, RIB, Series B-4,
9.517% due 3/31/2031 (e)(g) 1,158
Ohio State Air Quality Development Authority, Revenue Refunding Bonds:
NR* Baa1 1,000 (Ashland Oil Inc. Project), 6.85% due 4/01/2010 1,064
AA- Aa3 4,200 (Coll - Dayton Power & Light Project), Series B, 6.40% due 8/15/2027 4,550
AAA Aaa 1,505 PCR (Ohio-Edison), Series B, 7.10% due 6/01/2018 (c) 1,627
Ohio State Higher Educational Facility, Commission Revenue Bonds:
AA Aa3 1,000 (Case Western Reserve University), Series D, 6.25% due 7/01/2014 1,166
NR* NR* 1,000 (University of Findlay Project), 6.125% due 9/01/2016 1,048
AA Aa 1,410 Ohio State Higher Educational Facility, Crossover Revenue Refunding
Bonds (Case Western Reserve University), 6.25% due 10/01/2016 1,664
A1+ P1 1,000 Ohio State, PCR, Refunding (Sohio Water Project - BP Petroleum),
VRDN, 3.60% due 5/01/2022 (a) 1,000
AAA Aaa 1,000 Ohio State Water Development Authority, Pollution Control Facilities
Revenue Bonds (Pennsylvania Power Co. Project), 6.15% due 8/01/2023 (b) 1,104
A A2 2,000 Ohio State Water Development Authority, Solid Waste Disposal
Revenue Bonds (North BHP Steel Project-Broken Hill), AMT,
6.45% due 9/01/2020 2,187
NR* Aa3 1,000 Toledo Lucas County, Ohio, Port Authority, Development Revenue
Refunding Bonds (Cargill Inc. Project), 5.90% due 12/01/2015 1,052
AAA Aaa 1,000 Upper Arlington, Ohio, City School District, UT, 5.25%
due 12/01/2022 (d) 1,007
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) 2,335
Puerto Rico -- 3.7%
A1+ Baa1 2,500 Puerto Rico Commonwealth, Highway and Transportation Authority,
Highway Revenue Bonds, RITES, Series X, 6.291% due 7/01/2004 (g) 2,756
----------
Total Investments (Cost -- $66,016) -- 96.4% 72,072
Other Assets Less Liabilities -- 3.6% 2,670
----------
Net Assets -- 100.0% $74,742
==========
(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, 1998.
(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, 1998.
(h) Prerefunded.
* Not Rated.
PORTFOLIO ABBREVIATIONS
To simplify the listings of Merrill Lynch Ohio Municipal Bond Fund's
portfolio holdings in the Schedule of Investments, we have abbreviated
the names of many of the securities according to the list below and
at right.
AMT Alternative Minimum Tax (subject to)
GO General Obligation Bonds
HFA Housing Finance Agency
IDR Industrial Development Revenue Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
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, 1998
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $66,015,933) (Note 1a) $72,072,026
Cash 504,309
Receivables:
Securities sold $1,359,692
Interest 946,911
Beneficial interest sold 190,551 2,497,154
-------------
Prepaid expenses and other assets 951
-------------
Total assets 75,074,440
-------------
Liabilities: Payables:
Beneficial interest redeemed 160,210
Dividends to shareholders (Note 1e) 54,640
Investment adviser (Note 2) 34,700
Distributor (Note 2) 26,332 275,882
-------------
Accrued expenses and other liabilities 56,823
-------------
Total liabilities 332,705
-------------
Net Assets: Net assets $74,741,735
=============
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited number of
Consist of: shares authorized $79,425
Class B Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 517,884
Class C Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 18,681
Class D Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 46,273
Paid-in capital in excess of par 68,722,379
Accumulated realized capital losses on investments -- net (Note 5) (699,000)
Unrealized appreciation on investments -- net 6,056,093
-------------
Net assets $74,741,735
=============
Net Asset Value: Class A -- Based on net assets of $8,964,199 and 794,247 shares
of beneficial interest outstanding $11.29
=============
Class B -- Based on net assets of $58,449,034 and 5,178,836 shares
of beneficial interest outstanding $11.29
=============
Class C -- Based on net assets of $2,108,215 and 186,811 shares
of beneficial interest outstanding $11.29
=============
Class D -- Based on net assets of $5,220,287 and 462,729 shares
of beneficial interest outstanding $11.28
=============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Six Months Ended
January 31, 1998
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned $2,140,767
(Note 1d):
Expenses: Investment advisory fees (Note 2) $205,853
Account maintenance and distribution fees -- Class B (Note 2) 148,244
Professional fees 26,664
Accounting services (Note 2) 24,089
Printing and shareholder reports 17,542
Transfer agent fees -- Class B (Note 2) 16,425
Registration fees (Note 1e) 9,279
Account maintenance and distribution fees -- Class C (Note 2) 6,708
Pricing fees 2,663
Custodian fees 2,349
Account maintenance fees -- Class D (Note 2) 2,300
Trustees' fees and expenses 2,094
Transfer agent fees -- Class A (Note 2) 2,011
Transfer agent fees -- Class D (Note 2) 1,060
Transfer agent fees -- Class C (Note 2) 634
Other 5,379
----------
Total expenses 473,294
----------
Investment income -- net 1,667,473
----------
Realized & Realized gain on investments -- net 263,281
Unrealized Gain on Change in unrealized appreciation on investments -- net 480,763
Investments -- Net ----------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations $2,411,517
==========
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
Jan. 31, July 31,
Increase (Decrease) in Net Assets: 1998 1997
<S> <C> <C> <C>
Operations: Investment income -- net $1,667,473 $3,524,772
Realized gain on investments -- net 263,281 803,076
Change in unrealized appreciation on investments -- net 480,763 2,393,293
------------- -------------
Net increase in net assets resulting from operations 2,411,517 6,721,141
------------- -------------
Dividends to Investment income -- net:
Shareholders Class A (212,951) (388,948)
(Note 1e): Class B (1,296,759) (2,827,393)
Class C (47,775) (113,014)
Class D (109,988) (195,417)
------------- -------------
Net decrease in net assets resulting from dividends to shareholders (1,667,473) (3,524,772)
------------- -------------
Beneficial Interest Net decrease in net assets derived from beneficial interest
Transactions transactions (1,302,381) (5,807,300)
(Note 4): ------------- -------------
Net Assets: Total decrease in net assets (558,337) (2,610,931)
Beginning of period 75,300,072 77,911,003
------------- -------------
End of period $74,741,735 $75,300,072
============= =============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Class A
For the Six
Months
The following per share data and ratios have been derived Ended
from information provided in the financial statements. Jan. 31, For the Year Ended July 31,
1998 1997 1996 1995 1994
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $11.17 $10.70 $10.56 $10.50 $11.02
Operating --------- --------- --------- --------- ---------
Performance: Investment income -- net .28 .55 .54 .55 .56
Realized and unrealized gain (loss) on
investments -- net .12 .47 .14 .06 (.43)
--------- --------- --------- --------- ---------
Total from investment operations .40 1.02 .68 .61 .13
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income -- net (.28) (.55) (.54) (.55) (.56)
In excess of realized gain on
investments -- net -- -- -- -- (.09)
--------- --------- --------- --------- ---------
Total dividends and distributions (.28) (.55) (.54) (.55) (.65)
========= ========= ========= ========= =========
Net asset value, end of period $11.29 $11.17 $10.70 $10.56 $10.50
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 3.60%++++ 9.80% 6.56% 6.03% 1.10%
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses, net of reimbursement .84%* .80% .87% .86% .65%
Net Assets: ========= ========= ========= ========= =========
Expenses .84%* .80% .87% .89% .89%
========= ========= ========= ========= =========
Investment income -- net 4.88%* 5.07% 5.03% 5.30% 5.12%
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $8,964 $8,506 $7,281 $7,270 $9,373
Data: ========= ========= ========= ========= =========
Portfolio turnover 19.39% 52.57% 118.21% 169.34% 44.83%
========= ========= ========= ========= =========
* Annualized.
** Total investment returns exclude the effects of sales loads.
++++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Class B
For the Six
Months
The following per share data and ratios have been derived Ended
from information provided in the financial statements. Jan. 31, For the Year Ended July 31,
1998 1997 1996 1995 1994
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $11.17 $10.70 $10.56 $10.50 $11.02
Operating --------- --------- --------- --------- ---------
Performance: Investment income -- net .25 .49 .49 .49 .50
Realized and unrealized gain (loss) on
investments -- net .12 .47 .14 .06 (.43)
--------- --------- --------- --------- ---------
Total from investment operations .37 .96 .63 .55 .07
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income -- net (.25) (.49) (.49) (.49) (.50)
In excess of realized gain on
investments -- net -- -- -- -- (.09)
--------- --------- --------- --------- ---------
Total dividends and distributions (.25) (.49) (.49) (.49) (.59)
--------- --------- --------- --------- ---------
Net asset value, end of period $11.29 $11.17 $10.70 $10.56 $10.50
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 3.34%++++ 9.25% 6.01% 5.49% .59%
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses, net of reimbursement 1.35%* 1.31% 1.38% 1.37% 1.16%
Net Assets: ========= ========= ========= ========= =========
Expenses 1.35%* 1.31% 1.38% 1.40% 1.39%
========= ========= ========= ========= =========
Investment income -- net 4.37%* 4.56% 4.52% 4.79% 4.61%
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $58,449 $60,072 $64,397 $64,068 $65,610
Data: ========= ========= ========= ========= =========
Portfolio turnover 19.39% 52.57% 118.21% 169.34% 44.83%
========= ========= ========= ========= =========
* Annualized.
** Total investment returns exclude the effects of sales loads.
++++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Class C
For For the
the Six Period
The following per share data and ratios have been derived Months For the Year Oct. 21,
from information provided in the financial statements. Ended Ended 1994+ to
Jan. 31, July 31, July 31,
1998 1997 1996 1995
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $11.17 $10.70 $10.56 $10.09
Operating --------- --------- --------- ---------
Performance: Investment income -- net .24 .48 .48 .37
Realized and unrealized gain on investments -- net .12 .47 .14 .47
--------- --------- --------- ---------
Total from investment operations .36 .95 .62 .84
--------- --------- --------- ---------
Less dividends from investment income -- net (.24) (.48) (.48) (.37)
--------- --------- --------- ---------
Net asset value, end of period $11.29 $11.17 $10.70 $10.56
========= ========= ========= =========
Total Investment Based on net asset value per share 3.28%++++ 9.14% 5.90% 8.50%++++
Return:** ========= ========= ========= =========
Ratios to Average Expenses 1.45%* 1.41% 1.49% 1.50%*
Net Assets: ========= ========= ========= =========
Investment income -- net 4.27%* 4.46% 4.42% 4.62%*
========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $2,108 $2,412 $2,720 $874
Data: ========= ========= ========= =========
Portfolio turnover 19.39% 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>
<TABLE>
<CAPTION>
Class D
For For the
the Six Period
The following per share data and ratios have been derived Months For the Year Oct. 21,
from information provided in the financial statements. Ended Ended 1994+ to
Jan. 31, July 31, July 31,
1998 1997 1996 1995
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $11.16 $10.70 $10.56 $10.09
Operating --------- --------- --------- ---------
Performance: Investment income -- net .27 .54 .53 .41
Realized and unrealized gain on investments -- net .12 .46 .14 .47
--------- --------- --------- ---------
Total from investment operations .39 1.00 .67 .88
--------- --------- --------- ---------
Less dividends from investment income -- net (.27) (.54) (.53) (.41)
--------- --------- --------- ---------
Net asset value, end of period $11.28 $11.16 $10.70 $10.56
========= ========= ========= =========
Total Investment Based on net asset value per share 3.55%++++ 9.60% 6.45% 8.93%++++
Return:** ========= ========= ========= =========
Ratios to Average Expenses .94%* .90% .97% .99%*
Net Assets: ========= ========= ========= =========
Investment income -- net 4.78%* 4.97% 4.93% 5.17%*
========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $5,221 $4,310 $3,513 $3,234
Data: ========= ========= ========= =========
Portfolio turnover 19.39% 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 January 31, 1998
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 Pricing SM System. Shares of Class A and Class D are sold with a
front-end sales charge. Shares of Class B and Class C may be subject to
a contingent deferred sales charge. All classes of shares have identical
voting, dividend, liquidation and other rights and the same terms and
conditions, except that Class B, Class C and Class D Shares bear certain
expenses related to the account maintenance of such shares, and Class B
and Class C Shares also bear certain expenses related to the
distribution of such shares. Each class has exclusive voting rights with
respect to matters relating to its account maintenance and distribution
expenditures. The following is a summary of significant accounting
policies followed by the Fund.
(a) Valuation of investments -- Municipal bonds and other portfolio
securities in which the Fund invests are traded primarily in the
over-the-counter municipal bond and money markets and are valued
at the last available bid price in the over-the-counter market or
on the basis of yield equivalents as obtained from one or more
dealers that make markets in the securities. Financial futures contracts
and options thereon, which are traded on exchanges, are valued at their
settlement prices as of the close of such exchanges. Short-term
investments with remaining maturities of sixty days or less are valued
at amortized cost, which approximates market value. Securities and
assets for which market quotations are not readily available are valued
at fair value as determined in good faith by or under the direction of
the Board of Trustees of the Trust, including valuations furnished by a
pricing service retained by the Trust, which may utilize a matrix system
for valuations. The procedures of the pricing service and its valuations
are reviewed by the officers of the Trust under the general supervision
of the Trustees.
(b) Derivative financial instruments -- The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses
may arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
[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) 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 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 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, 1998, 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 $16 $218
Class D $16 $255
For the six months ended January 31, 1998, MLPF&S received contingent
deferred sales charges of $39,506 and $2,494 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, 1998 were $13,692,282 and
$16,689,238, respectively.
Net realized and unrealized gains as of January 31, 1998 were as
follows:
Realized Unrealized
Gains Gains
Long-term investments $262,325 $6,056,093
Short-term investments 956 --
------------ ------------
Total $263,281 $6,056,093
============ ============
As of January 31, 1998, net unrealized appreciation for Federal income
tax purposes aggregated $6,056,093, of which $6,074,142 related to
appreciated securities and $18,049 related to depreciated securities.
The aggregate cost of investments at January 31, 1998 for Federal income
tax purposes was $66,015,933.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest transactions
was $1,302,381 and $5,807,300 for the six months ended January 31, 1998
and for the year ended July 31, 1997, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Six Dollar
Months Ended January 31, 1998 Shares Amount
Shares sold 93,071 $1,035,773
Shares issued to shareholders
in reinvestment of dividends 10,732 119,544
------------ ------------
Total issued 103,803 1,155,317
Shares redeemed (71,067) (790,102)
------------ ------------
Net increase 32,736 $365,215
============ ============
Class A Shares for the Dollar
Year 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 B Shares for the Six Dollar
Months Ended Jan. 31, 1998 Shares Amount
Shares sold 319,937 $3,569,009
Shares issued to shareholders
in reinvestment of dividends 61,718 687,077
------------ ------------
Total issued 381,655 4,256,086
Automatic conversion of shares (4,855) (54,534)
Shares redeemed (576,419) (6,409,218)
------------ ------------
Net decrease (199,619) $(2,207,666)
============ ============
Class B Shares for the Dollar
Year 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 C Shares for the Six Dollar
Months Ended Jan. 31, 1998 Shares Amount
Shares sold 7,859 $87,100
Shares issued to shareholders
in reinvestment of dividends 2,852 31,723
------------ ------------
Total issued 10,711 118,823
Shares redeemed (39,841) (439,998)
------------ ------------
Net decrease (29,130) $(321,175)
============ ============
Class C Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
Shares sold 102,395 $1,112,984
Shares issued to share-
holders 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 D Shares for the Six Dollar
Months Ended January 31, 1998 Shares Amount
Shares sold 121,595 $1,368,066
Automatic conversion
of shares 4,858 54,534
Shares issued to shareholders
in reinvestment of dividends 2,084 23,221
------------ ------------
Total issued 128,537 1,445,821
Shares redeemed (51,896) (584,576)
------------ ------------
Net increase 76,641 $861,245
============ ============
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 share-
holders 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
============ ============
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.
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
Theodore R. Jaeckel Jr., 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
