MERRILL
LYNCH
PENNSYLVANIA
MUNICIPAL
BOND FUND
Semi-Annual Report January 31, 1994
This report is not authorized for use as an offer of sale or a solici-
tation of an offer to buy shares of the Fund unless accompanied or pre-
ceded 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.
Merrill Lynch
Pennsylvania
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, New Jersey
08543-9011
TO OUR SHAREHOLDERS
As 1993 drew to a close, the US economy showed signs of strong improvement.
The initial estimate for gross domestic product (GDP) growth in the final
quarter of 1993 was +5.9% in real terms, the strongest quarterly per-
formance since the fourth quarter of 1987. GDP growth was led by interest
rate-sensitive sectors, such as housing, durable goods orders and business
investment in capital equipment. Consumer confidence also improved after
remaining lackluster throughout most of 1993. While the exceptionally
robust rate of growth may not be sustainable in the first quarter of
1994 (especially considering the harsh winter weather experienced by
virtually half of the country in January), this strong showing suggests
that the US economy may at last be gaining momentum. This was supported
by the December increase in the Index of Leading Economic Indicators,
the fifth monthly rise in this indicator of future economic activity.
<PAGE>
At the same time, the rate of inflation remains in check. Nevertheless,
concerns arose late in 1993 that the rate of business activity might
increase inflationary pressures, which were reflected in an upturn of
longer-term interest rates. In January, Federal Reserve Board Chairman
Alan Greenspan indicated in Congressional testimony that continued strong
expansion of economic activity would lead the central bank to tighten
monetary policy in an effort to contain inflation. On February 4, 1994,
the central bank broke with tradition and publicly announced an increase
in short-term interest rates. In the weeks ahead, investors will continue
to gauge the pace of the economic expansion and watch for signs of an
overheating economy that could prompt successive Federal Reserve Board
actions to raise short-term interest rates.
The Municipal Market
Yields on tax-exempt securities generally declined over the three months
ended January 31, 1994. Long-term revenue bond yields, as measured by the
Bond Buyer Revenue Bond Index, declined an additional six basis points
(0.06%) to end the quarter at 5.50%. US Treasury bond yields, however,
rose approximately 25 basis points to end the period at approximately
6.20%. This outperformance by municipal securities is likely to be the
dominant theme for much of 1994.
During the January quarter, taxable yields remained volatile in reaction
to the inherent conflicts between the extremely strong economic recovery
seen during the last quarter of 1993 and continued low inflationary
pressures. Tax-exempt bond yields, however, reflected very positive
technical factors. During the 12 months ended January 31, 1994,
municipalities issued more than $288 billion in securities, an in-
crease of more than 21% versus one year ago. As we have discussed
in earlier reports to shareholders, much of this increase has been
the result of municipalities refinancing existing higher-couponed
debt. At current yield levels, few of these issues remain to be re-
funded. This has led to estimates of municipal bond issuance declining
to approximately $175 billion for all of 1994. More than $290 billion
in long-term tax-exempt securities was issued in 1993.
In addition to this dramatic decline in issuance, investor demand is
expected to increase in the coming year. Greater demand should be
generated by a number of factors, with the recent increases in marginal
Federal income tax rates the most important. Also, bond calls and early
redemptions are expected to increase significantly in the coming quarters
and last into early 1995, at least. The combination of declining new-
issue volume and increasing numbers of bonds redeemed prior to their
stated maturities will eventually lead to a net decline in the number
of bonds outstanding. In such a scenario, investor demand rises as
bondholders are forced to continually purchase new municipal bonds
to replace their previous holdings.
The outlook for the municipal bond market is very favorable. While the
historic declines in yields seen over the last year are unlikely to be
repeated, the strong technical framework within the tax-exempt market
would support further modest declines in tax-exempt yields. At the very
least, should interest rates rise in response to continued strong economic
growth and a resurgence in inflationary pressures, we believe that munici-
pal bond price deterioration will be limited in comparison to taxable in-
vestment alternatives.
<PAGE>
Portfolio Strategy
The Pennsylvania sector of the tax-exempt bond market outperformed the
general municipal market during much of the quarter ended January 31, 1994.
This can be attributed to the extremely favorable supply/demand balance
experienced by the Pennsylvania bond market during the past 6 months--9
months. While national issuance of tax-exempt debt increased by 3% as
compared to the same period last year, Pennsylvania issuance actually
decreased by 22.2%. The decrease in supply coupled with a seemingly
insatiable appetite for tax-exempt income created an environment wherein
Pennsylvania municipal bonds were among the tax-exempt market's best-
performing securities.
With such a positive backdrop in place, portfolio decisions enacted
during the January quarter were generally constructive in nature. We
kept cash reserves at minimal levels and directed assets toward issues
offering attractive levels of income. We also emphasized those securities
offering the potential for significant price appreciation as the cyclical
trend toward lower long-term interest rates continues.
We appreciate your ongoing interest in Merrill Lynch Pennsylvania Municipal
Bond Fund, and we look forward to serving your investment needs and
objectives in the months and years to come.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
March 8, 1994
PERFORMANCE DATA
None of the past results shown should be considered a representation of
future performance. Investment return and principal value of Class A and
Class B Shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost.
<TABLE>
Recent Performance Results*
<CAPTION>
12 Month 3 Month
1/31/94 10/31/93 1/31/93 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $11.77 $11.72 $10.96 + 7.76%(1) +0.77%(1)
Class B Shares 11.77 11.72 10.96 + 7.76(1) +0.77(1)
Class A Shares--Total Return +13.87(2) +2.27(3)
Class B Shares--Total Return +13.30(4) +2.14(5)
Class A Shares--Standardized 30-day Yield 4.30%
Class B Shares--Standardized 30-day Yield 3.98%
<PAGE>
<FN>
*Investment results shown for the 3-month and 12-month periods are before the
deduction of any sales charges.
(1) Percent change includes reinvestment of $0.040 per share capital gains
distributions.
(2) Percent change includes reinvestment of $0.635 per share ordinary income
dividends and $0.040 per share capital gains distributions.
(3) Percent change includes reinvestment of $0.172 per share ordinary income
dividends and $0.040 per share capital gains distributions.
(4) Percent change includes reinvestment of $0.577 per share ordinary income
dividends and $0.040 per share capital gains distributions.
(5) Percent change includes reinvestment of $0.157 per share ordinary income
dividends and $0.040 per share capital gains distributions.
</TABLE>
PERFORMANCE DATA (concluded)
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
8/31/90-12/31/90 $10.00 $10.05 -- $0.237 + 2.90%
1991 10.05 10.61 -- 0.678 +12.75
1992 10.61 10.90 $0.005 0.660 + 9.31
1993 10.90 11.65 0.040 0.638 +13.39
1/1/94-1/31/94 11.65 11.77 -- 0.036 + 1.43
Total $0.045 Total $2.249
Cumulative total return as of 1/31/94: +45.86%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains distributions
at net asset value on the payable date, and do not include sales charge; results
would be lower if sales charge was included.
</TABLE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
8/31/90-12/31/90 $10.00 $10.05 -- $0.219 + 2.73%
1991 10.05 10.61 -- 0.626 +12.18
1992 10.61 10.90 $0.005 0.605 + 8.76
1993 10.90 11.65 0.040 0.580 +12.82
1/1/94-1/31/94 11.65 11.77 -- 0.033 + 1.40
Total $0.045 Total $2.063
Cumulative total return as of 1/31/94: +43.37%**
<PAGE>
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains distributions
at net asset value on the payable date, and do not reflect deduction of any
sales charge; results would be lower if sales
charge was deducted.
</TABLE>
Average Annual Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 12/31/93 +13.39% + 8.85%
Inception (8/31/90)
through 12/31/93 +11.50 +10.15
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 12/31/93 +12.82% + 8.82%
Inception (8/31/90)
through 12/31/93 +10.94 +10.70
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced
to 0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
PORTFOLIO OF ABBREVIATIONS
To simplify the listings of Merrill Lynch Pennsylvania
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
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
M/F Multi-Family
MVRICS Municipal Variable Rate Inverse Class Securities
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
S/F Single-Family
TAN Tax Anticipation Notes
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Pennsylvania--95.6%
<S> <S> <C> <S> <C>
Allegheny County, Pennsylvania, Airport Revenue Bonds (Greater Pittsburgh
International Airport), AMT:
AAA Aaa $1,000 Refunding, Series A, 5.625% due 1/01/2016 (c) $1,014
AAA Aaa 750 Refunding, Series B, 5.625% due 1/01/2019 (d) 761
AAA Aaa 500 Series C, 8.25% due 1/01/2016 (c)(k) 577
NR A 1,575 Allegheny County, Pennsylvania, Higher Education Building Authority
Revenue Bonds (Community College of Allegheny County), Series A, 5.80% due 6/01/2013 1,643
BBB NR 500 Allegheny County, Pennsylvania, Hospital Development Authority, Health and Education
Revenue Bonds (Rehabilitation Institute of Pittsburgh), 7% due 6/01/2022 544
Allegheny County, Pennsylvania, Hospital Development Authority, Presbyterian Health
Center Revenue Bonds, VRDN (a)(c):
A1+ VMIG1 1,200 Series B, 2.15% due 3/01/2020 1,200
A1+ VMIG1 500 Series C, 2.15% due 3/01/2020 500
AAA Aaa 475 Allegheny County, Pennsylvania, Institutional District Bonds, UT, Series 18, 7.30%
due 4/01/2009 (c) 550
NR Aaa 605 Allegheny County, Pennsylvania, Residential Finance Authority, S/F Mortgage Revenue
Bonds, Series L, 7.50% due 6/01/2015 (e) 653
Allegheny County, Pennsylvania, Sanitation Authority, Sewer Revenue Bonds (d):
AAA Aaa 1,000 5.50% due 12/01/2008 1,052
AAA Aaa 5,265 Refunding, 6.10% due 12/01/2016 (j) 1,515
AAA Aaa 750 Series C, 6.50% due 12/01/2001 (f) 870
AAA Aaa 1,250 Beaver County, Pennsylvania, Hospital Authority Revenue Bonds (Medical
Center of Beaver, Pennsylvania, Inc.), Series A, 6.25% due 7/01/2022 (b) 1,375
AAA Aaa 500 Beaver County, Pennsylvania, IDA, PCR, Refunding (Ohio Edison Project),
Series A, 7.75% due 9/01/2024 (d) 588
AAA Aaa 2,000 Bethlehem, Pennsylvania, Water Authority Revenue Bonds, Series A, 6.30%
due 11/15/2002 (c)(f) 2,193
AAA Aaa 2,000 Bristol Township, Pennsylvania, School District, GO, Series A, 6.625%
due 2/15/2002 (c)(f) 2,327
AAA Aaa 1,000 Bucks County, Pennsylvania, IDA, Revenue Bonds (Grand View Hospital Project),
7% due 7/01/2001 (b)(f) 1,195
NR A1 750 Central Bucks County, Pennsylvania, School District, GO, 6.90% due 2/01/2008 841
AAA Aaa 815 Danville, Pennsylvania, Area School District, GO, 6% due 5/01/2007 (c) 848
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <S> <C> <S> <C>
Pennsylvania (continued)
A A2 $ 500 Dauphin County, Pennsylvania, IDA, Water Development Revenue Bonds (Dauphin
Consolidated Water Supply), AMT, Series A, 6.90% due 6/01/2024 $ 609
AAA Aaa 575 Delaware County, Pennsylvania, College Authority Revenue Bonds (Haverford College),
7.375% due 11/15/2000 (c)(f) 698
Delaware County, Pennsylvania, Hospital Authority Revenue Bonds:
AAA Aaa 2,500 (Crozer-Chester Medical Center), 5.30% due 12/15/2020 (c) 2,496
A1 NR 3,000 (Riddle Memorial Hospital), 6.50% due 1/01/2022 3,252
A+ Aa3 1,000 Delaware County, Pennsylvania, IDA, Revenue Refunding Bonds (Resources Recovery
Project), Series A, 8.10% due 12/01/2013 1,106
NR NR 500 Delaware County, Pennsylvania, University Authority Revenue
Bonds (Villanova University), 7.75% due 8/01/1998 (f) 590
AAA Aaa 2,450 Derry, Pennsylvania, Area School District, GO, 6.50% due 2/01/2001 (c)(f) 2,776
Erie County, Pennsylvania, IDA, PCR, Refunding (International Paper Co.):
A- A3 1,000 7.15% due 9/01/2013 1,127
A- A3 425 Series A, 7.60% due 9/01/2010 486
AAA Aaa 1,155 Exeter Township, Pennsylvania, School District, GO, UT, 6.65% due 5/15/2010 (d) 1,293
AAA Aaa 705 Gettysburg, Pennsylvania, Municipal Authority, Water Revenue Refunding Bonds, 6.25%
due 10/01/2009 (c)(l) 742
BBB+ NR 2,000 Lebanon County, Pennsylvania, Good Samaritan Hospital Authority, Revenue Refunding
Bonds (Good Samaritan Hospital Project), 6% due 11/15/2018 2,005
AAA Aaa 1,250 Lehigh County, Pennsylvania, GO, UT, Series A, 6% due 10/15/1999 (b)(f) 1,372
A1+ VMIG1 1,040 Lehigh County, Pennsylvania, Sewer Authority Revenue Bonds, Series B, VRDN,
2.40% due 3/15/2005 (a)(d) 1,040
A1+ Aaa 400 Lehigh County, Pennsylvania, Water Authority Revenue Bonds, VRDN,
2.40% due 11/01/2004 (a)(d) 400
AAA Aaa 1,000 Lewisburg, Pennsylvania, Area School District, GO, UT, 6.25% due 6/01/2018 (c) 1,081
Luzerne County, Pennsylvania, IDA, Exempt Facilities Revenue Bonds
(Pennsylvania Gas & Water Co. Project):
BBB- Baa3 2,100 Refunding, Series A, 6.05% due 1/01/2019 2,139
BBB- Baa3 1,500 Series B, AMT, 7.125% due 12/01/2022 1,658
NR Baa1 2,000 McKeesport, Pennsylvania, Hospital Authority Revenue Bonds (McKeesport
Hospital Project), 6.50% due 7/01/2008 2,109
Montgomery County, Pennsylvania, Higher Education and Health Authority,
Hospital Revenue Bonds:
AAA Aaa 2,500 (Abington Hospital), MVRICS, Series A, 10.755% due 6/01/2011 (b)(m) 3,103
BBB NR 225 (Jeanes Health System Project), 8.625% due 7/01/2000 (f) 286
BBB NR 575 (Jeanes Health System Project), 8.75% due 7/01/2000 (f) 735
BBB+ NR 1,250 (Pottstown Memorial Medical Center Project), 7.35% due 11/15/2005 1,430
BBB+ NR 475 Moon Transportation Authority, Pennsylvania, Highway Improvement
Revenue Bonds, 9.50% due 2/01/2016 558
BBB- NR 2,095 Northampton County, Pennsylvania, Higher Education Authority Revenue Bonds
(Moravian College), 8.20% due 6/01/2011 2,496
BBB NR 1,500 Northeastern Pennsylvania, Hospital & Education Authority, University
Revenue Refunding Bonds (Wilkes University), 5.625% due 10/01/2018 1,456
AAA Aaa 2,000 Pennsbury, Pennsylvania, School District, GO, 6.50% due 1/15/2012 (b)(l) 2,206
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <S> <C> <S> <C>
Pennsylvania (continued)
NR VMIG1 $ 550 Pennsylvania Energy Development Authority, Energy Development Revenue Bonds
(B&W Ebensburg Project), VRDN, AMT, 2.65% due 12/01/2011 (a) $ 550
AAA Aaa 2,000 Pennsylvania, HFA, Refunding, Rental Housing Bonds, 6.50% due 7/01/2023 (h) 2,147
AA Aa 2,000 Pennsylvania, HFA, RIB, AMT, 9.175% due 4/01/2025 (m) 2,098
AA Aa 1,000 Pennsylvania, HFA, RIB, Refunding, Series 1991-31C, AMT, 11.491% due 10/01/2023 (m) 1,151
Pennsylvania, HFA, S/F Mortgage Revenue Bonds:
AA Aa 4,400 Refunding, Series 37A, 5.45% due 10/01/2017 4,394
AA Aa 1,730 Series 27, AMT, 8.15% due 10/01/2021 1,961
AA Aa 1,145 Series 28, AMT, 7.65% due 10/01/2023 1,243
AA NR 500 Pennsylvania Infrastructure Investment Authority Revenue Bonds, Pennvest
Sub-Series B, 6.80% due 9/01/2010 568
<PAGE>
Pennsylvania Intergovernmental Cooperative Authority, City of Philadelphia
Funding Program, Special Tax Revenue Bonds:
A- Baa 2,000 6.80% due 6/15/2002 (f) 2,331
AAA Aaa 3,070 5.625% due 6/15/2023 (c) 3,143
Pennsylvania State, COP:
AAA Aaa 2,000 6.25% due 5/01/2016 (g) 2,179
AAA Aaa 3,000 Refunding, Series A, 5% due 7/01/2015 (b) 2,919
A NR 2,000 Pennsylvania State Finance Authority, Revenue Refunding Bonds (Municipal Capital
Improvements Program), 6.60% due 11/01/2009 2,156
AA- A1 1,300 Pennsylvania State, GO, Series A, 7% due 5/01/2010 1,479
A-1 VMIG1 1,500 Pennsylvania State Higher Education Assistance Agency, Student Loan Revenue Bonds,
Series A, AMT, VRDN, 2.35% due 1/01/2018 (a) 1,500
Pennsylvania State Higher Educational Facilities Authority, College and University
Revenue Bonds:
A+ NR 1,000 (Carnegie University), 9% due 11/01/2009 1,114
AAA Aaa 270 (Drexel University), 1st Series, 7.70% due 5/01/2012 (c) 296
NR NR 1,030 (Pennsylvania College of Podiatric Medicine), 8.50% due 10/01/2014 1,128
BBB+ NR 1,250 Refunding (Allegheny College Project), Series B, 6% due 11/01/2022 1,275
A+ Aa 2,000 Pennsylvania State Higher Educational Facilities Authority, Hospital Revenue Refunding
Bonds (Thomas Jefferson University), Series A, 6.625% due 8/15/2009 2,271
BBB+ NR 2,300 Pennsylvania State Higher Educational Facilities Authority, Revenue Refunding Bonds
(Drexel University), 6.375% due 5/01/2017 2,422
A- A 1,225 Pennsylvania State, IDA, Economic Development Revenue Bonds, Series A, 7%
due 1/01/2011 1,376
SP1+ MIG1++ 600 Pennsylvania State, TAN, UT, 1st Series, 3.25% due 6/30/1994 602
Pennsylvania State Turnpike Commission, Turnpike Revenue Bonds:
AAA Aaa 250 Series H, 7.40% due 12/01/2000 (d)(f) 302
AAA Aaa 1,500 Series J, 7.20% due 12/01/2001 (d)(f) 1,831
AAA Aaa 700 Series K, Custodian Receipts/Certificates, 7.50% due 12/01/1999 (f) 843
AAA Aaa 600 Series L, 6% due 6/01/2015 (c) 643
AA- A1 1,200 Pennsylvania State University Refunding Bonds, Series A, 5.10% due 3/01/2018 1,169
Philadelphia, Pennsylvania, Authority for IDR:
A-1 VMIG1 200 (Commercial-Development--Philadelphia Airport Hotel), VRDN, AMT,
2.40% due 12/01/2017 (a) 200
AAA Aaa 375 (Conversion Project--Pittsburgh Development Corp.), 7% due 7/01/1999 (b)(f) 434
A+ NR 1,895 (National Board of Medical Examiners Project), 6.75% due 5/01/2012 2,130
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <S> <C> <S> <C>
Pennsylvania (concluded)
Philadelphia, Pennsylvania, Gas Works Revenue Bonds:
AAA Aaa $ 370 11th Series A, 7.875% due 7/01/1997 (f) $ 427
AAA Aaa 500 12th Series B, 7% due 5/15/2020 (c) 615
AAA Aaa 750 13th Series, 7.70% due 6/15/2001 (f) 925
BBB Baa1 2,925 Refunding, 14th Series A, 6.375% due 7/01/2014 3,148
BBB Baa1 3,000 Refunding, 14th Series A, 6.375% due 7/01/2026 3,228
AAA Aaa 1,650 Refunding, 15th Series, 4.875% due 8/01/2010 (b) 1,602
Philadelphia, Pennsylvania, Hospitals and Higher Education Facilities
Authority, Hospital Revenue Bonds:
NR UR* 1,400 (Children's Hospital Philadelphia Project), Series A, 6.50% due 2/15/2002 (f) 1,632
BBB+ NR 1,000 (Children's Seashore House), Series A, 7% due 8/15/2003 1,154
BBB+ NR 1,015 (Children's Seashore House), Series A, 7% due 8/15/2017 1,119
AAA Aaa 500 Refunding (Magee Rehabilitation Hospital), 7% due 12/01/2005 (b) 578
AAA Aaa 1,000 Refunding (Magee Rehabilitation Hospital), 7% due 12/01/2010 (b) 1,176
A A 420 Refunding (Pennsylvania Hospital), 7.25% due 7/01/2014 454
A- NR 3,000 Refunding (Presbyterian Medical Center), 6.65% due 12/01/2019 3,219
BBB+ Baa1 2,500 Refunding (Temple University Hospital), Series A, 6.625% due 11/15/2023 2,703
BBB+ NR 1,000 Philadelphia, Pennsylvania, Hospitals and Higher Education Facilities Authority,
Revenue Refunding Bonds (Philadelphia Project), 6.20% due 8/01/2011 1,026
Philadelphia, Pennsylvania, Municipal Authority, Revenue Refunding Bonds (d):
AAA Aaa 40 7.80% due 4/01/1998 (f) 47
AAA Aaa 360 7.80% due 4/01/2000 (f) 440
AAA Aaa 1,000 (Lease), Series C, 5.25% due 4/01/2018 996
NR Aaa 995 Philadelphia, Pennsylvania, Redevelopment Authority, M/F Housing Revenue Refunding
Bonds (Washington Square West), Series C, 6.95% due 11/15/2024 (h)(i) 1,061
Philadelphia, Pennsylvania, Water and Sewer Revenue Bonds:
AAA UR* 745 11th Series, Sub-Series B, 9.10% due 10/01/1995 (f) 831
BBB Baa 1,000 16th Series, 7.50% due 8/01/2010 1,156
Philadelphia, Pennsylvania, Water and Wastewaster Revenue Refunding Bonds:
BBB Baa 2,000 5.75% due 6/15/2013 2,023
AAA Aaa 3,000 (Capital Guaranty), 5.50% due 6/15/2015 3,031
AAA Aaa 2,000 Pittsburgh, Pennsylvania, Refunding Bonds, Series A, UT, 5.50% due 9/01/2014 (b) 2,106
AAA Aaa 2,000 Pittsburgh, Pennsylvania, Revenue Bonds, Series B, 6.25% due 9/01/2016 (c) 2,177
AAA Aaa 1,000 Reading, Pennsylvania, Refunding Bonds, GO, UT, 6.50% due 11/15/2002 (b)(f) 1,167
<PAGE>
Scranton-Lackawanna, Pennsylvania, Health and Welfare Authority Revenue Bonds
(University of Scranton Project):
A- NR 2,000 Refunding, Series A, 6.50% due 3/01/2013 2,174
NR NR 460 Series C, 7.50% due 6/15/2000 (f) 555
AAA Aaa 5,000 University Area Joint Authority, Pennsylvania, Sewer Refunding Bonds, 4.75%
due 11/01/2020 (c) 4,690
AAA Aaa 1,000 Washington County, Pennsylvania, Hospital Authority Revenue Bonds (The Washington
Hospital Project), 5.625% due 7/01/2023 (b) 1,024
NR VMIG1 500 Washington County, Pennsylvania, Leasing Authority Revenue Bonds (Higher Education
Pooled Equipment Lease), Series 1985-A, VRDN, 2.20% due 11/01/2005 (a) 500
AAA Aaa 1,000 York County, Pennsylvania, Hospital Authority Revenue Bonds (York Hospital), 7% due
1/01/2001 (b)(f) 1,178
AAA Aaa 2,000 York County, Pennsylvania, South Western School District, GO, UT, 6.40% due
6/15/2012 (d) 2,215
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <S> <C> <S> <C>
Puerto Rico--3.2%
BBB Baa $ 310 Puerto Rico Commonwealth, Aqueduct and Sewer Authority Revenue Bonds, Series A,
7% due 7/01/2019 $ 344
A Baa1 800 Puerto Rico Commonwealth, Highway Authority, Highway Revenue Refunding Bonds,
Series R, 6.75% due 7/01/2005 899
AAA NR 740 Puerto Rico Commonwealth, Public Improvement GO, 7.70% due 7/01/2000 (f) 905
Puerto Rico Electric Power Authority, Power Revenue Refunding Bonds:
A- Baa1 100 Series M, 8% due 7/01/2008 117
A- Baa1 525 Series O, 7.125% due 7/01/2014 595
A Baa1 2,365 Puerto Rico Public Buildings Authority, Guaranteed Public Education and Health
Facilities, Refunding Bonds, Series M, 5.50% due 7/01/2021 2,377
Total Investments (Cost--$148,700)--98.8% 162,964
Other Assets Less Liabilities--1.2% 1,930
--------
Net Assets--100.0% $164,894
<FN> ========
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in effect
at January 31, 1994.
(b)AMBAC Insured.
(c)MBIA Insured.
(d)FGIC Insured.
(e)GNMA Collateralized.
(f)Prerefunded.
(g)FSA Insured.
(h)FNMA Collateralized.
(i)FHA Insured.
(j)Represents the yield to maturity on this zero coupon issue.
(k)Partial Prerefunded.
(l)Bank Qualified.
(m)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, 1994.
++Highest short-term rating by Moody's Investors Service, Inc.
*Under Review.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Statement of Assets and Liabilities as of January 31, 1994
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$148,699,832) (Note 1a) $162,964,489
Receivables:
Securities sold $4,791,880
Interest 2,144,862
Beneficial interest sold 995,544 7,932,286
----------
Deferred organization expenses (Note 1e) 33,660
Prepaid registration fees and other assets (Note 1e) 23,313
------------
Total assets 170,953,748
------------
Liabilities: Payables:
Securities purchased 4,629,001
Dividends to shareholders (Note 1f) 149,241
Beneficial interest redeemed 96,734
Investment adviser (Note 2) 70,314
Distributor (Note 2) 51,948 4,997,238
----------
<PAGE> Accrued expenses and other liabilities 1,062,373
------------
Total liabilities 6,059,611
------------
Net Assets: Net assets $164,894,137
============
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 260,558
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 1,140,829
Paid-in capital in excess of par 149,074,466
Undistributed realized capital gains--net 153,627
Unrealized appreciation on investments--net 14,264,657
------------
Net assets $164,894,137
============
Net Asset Value: Class A--Based on net assets of $30,659,705 and 2,605,583 shares of
beneficial interest outstanding $ 11.77
============
Class B--Based on net assets of $134,234,432 and 11,408,289 shares of
beneficial interest outstanding $ 11.77
============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
<CAPTION>
Statement of Operations
For the Six Months
Ended January 31, 1994
<S> <S> <C>
Investment Income Interest and amortization of premium and discount earned $ 4,487,729
(Note 1d):
Expenses: Investment advisory fees (Note 2) 417,132
Distribution fees--Class B (Note 2) 305,757
Professional fees 29,633
Transfer agent fees--Class B (Note 2) 28,161
Accounting services (Note 2) 24,114
Printing and shareholder reports 19,583
Registration fees (Note 1e) 12,396
Custodian fees 8,338
Amortization of organization expenses (Note 1e) 7,910
Pricing fees 7,024
Transfer agent fees--Class A (Note 2) 5,840
Trustees' fees and expenses 3,055
Other 1,520
-----------
Total expenses 870,463
-----------
Investment income--net 3,617,266
-----------
Realized & Unreal- Realized gain on investments--net 512,854
ized Gain on Change in unrealized appreciation on investments--net 5,136,471
Investments--Net -----------
(Notes 1d & 3): Net Increase in Net Assets Resulting from Operations $ 9,266,591
===========
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the Year
Months Ended Ended
Increase (Decrease) in Net Assets: Jan. 31, 1994 July 31, 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 3,617,266 $ 5,696,106
Realized gain on investments--net 512,854 495,162
Change in unrealized appreciation on investments--net 5,136,471 3,612,233
------------- ------------
Net increase in net assets resulting from operations 9,266,591 9,803,501
------------- ------------
Dividends & Investment income--net:
Distributions to Class A (760,813) (1,219,822)
Shareholders Class B (2,856,453) (4,476,284)
(Note 1f): Realized gain on investments--net:
Class A (161,580) (10,105)
Class B (692,809) (44,305)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (4,471,655) (5,750,516)
------------ ------------
Beneficial Interest Net increase in net assets derived from beneficial
Transactions interest transactions 22,996,786 50,306,502
(Note 4): ------------ ------------
Net Assets: Net increase in net assets 27,791,722 54,359,487
Beginning of period 137,102,415 82,742,928
------------ ------------
End of period $164,894,137 $137,102,415
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
Class A
For the
For the Period
The following per share data and ratios have been derived Six Months For the Aug. 31,
from information provided in the financial statements. Ended Year Ended 1990++ to
Jan. 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1994 1993 1992 1991
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.39 $ 11.04 $ 10.27 $10.00
Operating ------- ------- ------- ------
Performance: Investment income--net .30 .63 .67 .61
Realized and unrealized gain on investments--net .44 .36 .77 .27
------- ------- ------- ------
Total from investment operations .74 .99 1.44 .88
------- ------- ------- ------
Less dividends and distributions:
Investment income--net (.30) (.63) (.67) (.61)
Realized gain on investments--net (.06) (.01) -- --
------- ------- ------- ------
Total dividends and distributions (.36) (.64) (.67) (.61)
------- ------- ------- ------
Net asset value, end of period $ 11.77 $ 11.39 $ 11.04 $10.27
======= ======= ======= ======
Total Investment Based on net asset value per share 6.61%+++ 9.30% 14.53% 9.30%+++
Return:** ======= ======= ======= ======
Ratios to Expenses, net of reimbursement .74%* .69% .55% .39%*
Average ======= ======= ======= ======
Net Assets: Expenses .74%* .81% .97% 1.57%*
======= ======= ======= ======
Investment income--net 5.18%* 5.70% 6.33% 6.71%*
======= ======= ======= ======
Supplemental Net assets, end of period (in thousands) $30,660 $27,639 $17,144 $9,402
Data: ======= ======= ======= ======
Portfolio turnover 11.71% 9.69% 4.14% --
======= ======= ======= ======
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class B
For the
For the Period
The following per share data and ratios have been derived Six Months For the Aug. 31,
from information provided in the financial statements. Ended Year Ended 1990++ to
Jan. 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1994 1993 1992 1991
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.39 $ 11.04 $ 10.27 $ 10.00
Operating -------- -------- ------- -------
Performance: Investment income--net .27 .58 .62 .57
Realized and unrealized gain on investments--net .44 .36 .77 .27
-------- -------- ------- -------
Total from investment operations .71 .94 1.39 .84
-------- -------- ------- -------
Less dividends and distributions:
Investment income--net (.27) (.58) (.62) (.57)
Realized gain on investments--net (.06) (.01) -- --
-------- -------- ------- -------
Total dividends and distributions (.33) (.59) (.62) (.57)
-------- -------- ------- -------
Net asset value, end of period $ 11.77 $ 11.39 $ 11.04 $ 10.27
======== ======== ======= =======
Total Investment Based on net asset value per share 6.34%+++ 8.75% 13.94% 8.81%+++
Return:** ======== ======== ======= =======
Ratios to Expenses, excluding distribution fees and net
Average of reimbursement .75%* .69% .56% .40%*
Net Assets: ======== ======== ======= =======
Expenses, net of reimbursement 1.25%* 1.19% 1.06% .90%*
======== ======== ======= =======
Expenses 1.25%* 1.32% 1.48% 2.07%*
======== ======== ======= =======
Investment income--net 4.67%* 5.19% 5.81% 6.21%*
======== ======== ======= =======
Supplemental Net assets, end of period (in thousands) $134,234 $109,463 $65,599 $30,435
Data: ======== ======== ======= =======
Portfolio turnover 11.71% 9.69% 4.14% --
======== ======== ======= =======
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Pennsylvania 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 both Class A and Class B Shares. Class A Shares are sold with
a front-end sales charge. Class B Shares may be subject to a contingent
deferred sales charge. Both classes of shares have identical voting,
dividend, liquidation and other rights and the same terms and conditions,
except that Class B Shares bear certain expenses related to the distribu-
tion of such shares and have exclusive voting rights with respect to
matters relating to such 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 munici-
pal 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 ex-
changes, are valued at their settlement prices as of the close of such ex-
changes. Short-term investments with a remaining maturity of sixty days or
less are valued on an amortized cost basis, which approximates market value.
Options, which are traded on exchanges, are valued at their last sale price
as of the close of such exchanges or, lacking any sales, at the last avail-
able bid price. 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) Financial futures contracts--The Fund may purchase or sell interest
rate futures contracts and options on such futures contracts for the pur-
pose of hedging the market risk on existing securities or the intended pur-
chase 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.
<PAGE>
(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 share-
holders. 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. Original issue 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 re-
corded 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"). Effective January 1, 1994, the investment advisory
business of FAM was reorganized from a corporation to a limited partnership.
Both prior to and after the reorganization, ultimate control of FAM was
vested with Merrill Lynch & Co., Inc. ("ML & Co."). The general partner
of FAM is Princeton Services, Inc., an indirect wholly-owned subsidiary
of ML & Co. The limited partners are ML & Co. and Merrill Lynch Investment
Management, Inc. ("MLIM"), which is also an indirect wholly-owned subsid-
iary of ML & Co. The Fund has also entered into Distribution Agreements and
a Distribution Plan with Merrill Lynch Funds Distributor, Inc. ("MLFD" or
"Distributor"), a wholly-owned subsidiary of MLIM.
FAM is responsible for the management of the Fund's portfolio and provides
the necessary personnel, facilities, equipment and certain other services
necessary to the operations of the Fund.
For such services, the Fund pays a monthly fee based upon the average daily
value of the Fund's net assets at the following annual rates: 0.55% of the
Fund's average daily net assets not exceeding $500 million; 0.525% of
average daily net assets in excess of $500 million but not exceeding $1
billion; and 0.50% of average daily net assets in excess of $1 billion.
The Investment Advisory Agreement obligates FAM to reimburse the Fund to
the extent the Fund's expenses (excluding interest, taxes, distribution
fees, brokerage fees and commissions, and extraordinary items) exceed
2.5% of the Fund's first $30 million of average daily net assets, 2.0%
of the next $70 million of average daily net assets and 1.5% of the aver-
age daily net assets in excess thereof. FAM's obligation to reimburse the
Fund is limited to the amount of the management fee. No fee payment will
be made to the Investment Adviser during any fiscal year which will cause
such expenses to exceed expense limitations at the time of such payment.
<PAGE>
Pursuant to a distribution plan (the "Distribution Plan") adopted by the
Fund under Rule 12b-1 under the Investment Company Act of 1940, the Fund
pays the Distributor ongoing account maintenance and distribution fees
relating to Class B Shares which are accrued daily and paid monthly at
the annual rates of 0.25% and 0.25%, respectively, of the average daily
net assets of the Class B Shares of the Fund. Pursuant to a sub-agreement
with the Distributor, Merrill Lynch also provides account maintenance and
distribution services to the Fund. As authorized by the Plan, the Distribu-
tor has entered into an agreement with Merrill Lynch, Pierce, Fenner & Smith
Inc. ("MLPF&S"), an affiliate of FAM, which provides for the compensation
of MLPF&S for providing distribution-related services to the Fund. For the
six months ended January 31, 1994, MLFD earned underwriting discounts of
$5,294, and MLPF&S earned dealer concessions of $55,755 on sales of the
Fund's Class A Shares.
MLPF&S also received contingent deferred sales charges of $66,169 relating
to Class B Share transactions during the period.
Financial Data Services, Inc. ("FDS"), 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, MLIM, MLFD, FDS, MLPF&S, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for
the six months ended January 31, 1994 were $32,672,836 and $16,899,514,
respectively.
Net realized and unrealized gains (losses) as of January 31, 1994
were as follows:
Realized
Gains Unrealized
(Losses) Gains
Long-term investments $ 524,210 $ 14,263,723
Short-term investments -- 934
Financial futures contracts (11,356) --
---------- ------------
Total $ 512,854 $ 14,264,657
========== ============
As of January 31, 1994, net unrealized appreciation for Federal income
tax purposes aggregated $14,264,657, all of which related to appreciated
securities. The aggregate cost of investments at January 31, 1994 for
Federal income tax purposes was $148,699,832.
<PAGE>
4. Beneficial Interest Transactions:
Net increase in net assets derived from beneficial interest transactions
was $22,996,786 and $50,306,502 for the six months ended January 31, 1994
and the year ended July 31, 1993, respectively.
Transactions in shares of beneficial interest for Class A and
Class B Shares were as follows:
Class A Shares for the Six Months Dollar
Ended January 31,1994 Shares Amount
Shares sold 329,250 $3,839,396
Shares issued to shareholders in
reinvestment of dividends and
distributions 42,717 497,613
------- ----------
Total issued 371,967 4,337,009
Shares redeemed (193,794) (2,258,702)
------- ----------
Net increase 178,173 $2,078,307
======= ==========
Class A Shares for the Year Dollar
Ended July 31,1993 Shares Amount
Shares sold 979,613 $10,925,850
Shares issued to shareholders in
reinvestment of dividends and
distributions 55,368 613,668
--------- -----------
Total issued 1,034,981 11,539,518
Shares redeemed (161,016) (1,774,961)
--------- -----------
Net increase 873,965 $ 9,764,557
========= ===========
Class B Shares for the Six Months Dollar
Ended January 31,1994 Shares Amount
Shares sold 2,076,956 $24,215,291
Shares issued to shareholders in
reinvestment of dividends and
distributions 153,521 1,788,376
--------- ----------
Total issued 2,230,477 26,003,667
Shares redeemed (436,323) (5,085,188)
--------- -----------
Net increase 1,794,154 $20,918,479
========= ===========
<PAGE>
Class B Shares for the Year Dollar
Ended July 31,1993 Shares Amount
Shares sold 4,193,436 $46,355,142
Shares issued to shareholders in
reinvestment of dividends and
distributions 209,463 2,317,534
--------- -----------
Total issued 4,402,899 48,672,676
Shares redeemed (732,907) (8,130,731)
--------- -----------
Net increase 3,669,992 $40,541,945
========= ===========
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
Kenneth S. Axelson, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Jerry Weiss, Secretary
Custodian
National Westminster Bank NJ
10 Exchange Place
Jersey City, New Jersey 07302
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
