MERRILL LYNCH
PENNSYLVANIA
MUNICIPAL
BOND FUND
FUND LOGO
Annual Report
July 31, 1995
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
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Jerry Weiss, Secretary
<PAGE>
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Merrill Lynch Pennsylvania
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011
<PAGE>
TO OUR SHAREHOLDERS
In the July quarter, economic data generally showed evidence of
slowing activity. Gross domestic product growth for the first three
months of 1995 was reported at 2.7%, the weakest showing in the past
18 months. Other signs of a sluggish economy included lackluster
durable goods orders, slowing growth in the manufacturing sector,
and three consecutive months of declines in the Index of Leading
Economic Indicators, an occurrence which has often (but not always)
forecast recessions. As a result, concerns arose that the economic
"soft landing" could turn into an actual recession. However, at the
same time there were also expectations that a few months of very
slow or zero growth would be followed by a pickup in economic
activity later in the year. This view was supported by the stronger-
than-expected employment data for June and an upward revision in
May's employment figures, as well as improving housing activity
measures and consumer confidence surveys.
Thus far in 1995, economic developments have been very positive for
the US stock and bond markets, and most US stock market averages
recently have attained record levels. In contrast, the US dollar has
been persistently weak, especially relative to the yen. Following
the Federal Reserve Board's cut in short-term interest rates in
early July, continued signs of a moderating expansion and well-
contained inflationary pressures could provide further assurance
that the peak in US interest rates is behind us, creating a stronger
foundation for higher stock and bond prices. On the other hand,
indications of reaccelerating growth and increasing inflationary
pressures would likely suggest that higher interest rates are on the
horizon, a negative development for the US financial markets. The
outcome of the current deliberations on reducing the Federal budget
deficit will also play a role in the investment outlook for the US
capital markets.
The Municipal Market
Tax-exempt bond yields exhibited considerable volatility during the
three months ended July 31, 1995. Municipal bond yields initially
fell throughout May into early June as evidence of a slowing
domestic economy and moderate inflationary pressures accumulated. As
measured by the Bond Buyer Revenue Bond Index, yields of A-rated,
uninsured tax-exempt revenue bonds declined 35 basis points (0.35%)
to 5.94%. By late June, however, amid signs of a potentially
resurgent economy, particularly in the rebounding housing sector,
bond yields returned to their April quarter's levels of
approximately 6.30%. The lowering of short-term interest rates by
the Federal Reserve Board in early July temporarily restored
investor confidence and tax-exempt bond yields fell to 6.05%. As
additional economic indicators were released during July, investors
again saw signs that the economy was regaining momentum and that the
Federal Reserve Board action had been premature. Fears that an
expanding economy would have negative inflationary consequences
pushed municipal bond yields higher, ending the July 31, 1995
quarter essentially unchanged at 6.27%. US Treasury bond yields
exhibited a similar pattern of volatility during the July quarter.
However, US Treasury bond yields continued to decline, falling
approximately 50 basis points to 6.85%. Municipal bonds have
underperformed US Treasury securities for a number of reasons. The
record highs of the US equity market have continued to attract
retail investors seeking further capital gains. Investor demand has
also been diminished in recent months by the "sticker shock" effect
that periodically affects the municipal bond market. Investors who
had become accustomed to purchasing tax-exempt securities in the
6.50%--7.00% range six to seven months ago have demonstrated
understandable reluctance to purchase similar securities at current
levels. The strong fundamental structure of the municipal bond
market, however, suggests that such hesitancy may prove costly.
<PAGE>
However, the major reason by far for the tax-exempt market's recent
underperformance has been concerns regarding the implication for
municipal bonds' tax advantage resulting from various proposed tax
law changes (for example, flat tax, value-added tax or national
sales tax) that have reduced investor demand for tax-exempt
products. Such concerns are likely to quickly recede as investors
realize that such, if any, changes are unlikely to be enacted before
late 1996 at the earliest. Long-term investors will also recall 1986
when similar tax proposals were made, municipal bond yields
initially rose, in some instances, to over 100% of taxable yields.
Tax-exempt bond yields quickly declined as investors' fears proved
to be unfounded.
The municipal bond market's strong technical position has diminished
somewhat in recent months. New-issue supply over the last six months
has totaled approximately $71 billion, or a decline of over 20%
compared to the corresponding period in 1994. In recent months,
however, municipalities issued approximately $41 billion in new
securities, which represents only a 6% decline versus the same
period a year earlier. Investor demand has remained muted in recent
months despite significant funds available to investors. By the end
of July investors, both individual and institutional, are expected
to have received as much as $80 billion from tax-exempt bond
maturities, coupon payments and the proceeds of early bond
redemptions. Little new money has entered the municipal market in
recent months, largely in response to the factors mentioned above.
Consequently, much of the technical support the municipal market
enjoyed earlier this year has evaporated, causing municipal bond
yields to decline at a slower rate than their taxable counterparts.
However, the recent relative underperformance of municipal bonds has
made them particularly attractive to long-term investors. Tax-exempt
bonds currently yield well over 90% of US Treasury securities. In
some instances, A-rated, long-term revenue bonds have yielded almost
95% of US Treasury bonds. Analysts usually consider municipal bonds
yielding over 82% of US Treasury securities to be historically
attractive. With inflation-adjusted, "real" after-tax equivalent tax-
exempt yields of over 6.50%, municipal securities appear to
represent considerable value.
<PAGE>
Current tax-exempt yield levels appear to be overcompensating for
any proposed changes in tax law that can reasonably be expected to
be enacted. As Congressional hearings on this matter would continue
into 1996, and the revenue losses resultant from such changes become
more apparent, the likelihood of any significant changes to tax
codes and the resultant decline of municipal bonds' inherent tax
advantage should decline. Under such a scenario, tax-exempt bond
yields would quickly decline and currently available municipal bond
yields would return to their normal historic relationship.
Fiscal Year in Review
During the fiscal year ended July 31, 1995, the bond market was very
volatile. As measured by the Bond Buyer Revenue Bond Index, long-
term tax-exempt bond yields ranged from a high of 7.37% on November
17, 1994 to a low of 5.94% on June 8, 1995. At July 31, 1995, the
Index was near the low for the period, yielding 6.27%. After rising
sharply for most of 1994, long-term interest rates rallied
significantly during the first half of 1995 as the US economy nearly
slowed to a halt. This slowdown in economic growth initially caused
the Federal Reserve Board to stop tightening monetary policy early
in 1995. Once the magnitude of the slowdown became apparent in July,
the Federal Reserve Board decreased the Federal Funds rate by .25%
to 5.75%.
We altered the portfolio strategy for Merrill Lynch Pennsylvania
Municipal Bond Fund during the past 12 months as market psychology
changed. The Fund entered the year defensively postured and
maintained that outlook through early 1995. This enabled the Fund to
limit the decline in total returns which all long-term municipal
bond funds experienced during this very difficult period. (Complete
performance information, including average annual total returns, can
be found on pages 3 through 5 of this report to shareholders.)
However, as evidence of a stagnant economy emerged early in 1995, we
started to become constructive on the market. Therefore, our
strategy centered on reducing cash reserves to a minimum and
restructuring the holdings to extend the average life and lower the
average coupon of the portfolio. This entailed selling par bonds
which have little upside potential, and buying discount coupon
bonds. Recently, the economy improved and we responded by raising
cash reserves and shortening the average life of the portfolio as a
precautionary measure. Because of our strategy, the Fund was able to
generate a positive total return and an attractive current yield to
our shareholders.
Sincerely,
<PAGE>
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
September 1, 1995
PERFORMANCE DATA
About Fund Performance
Since October 21, 1994, investors have been able to purchase shares
of the Fund through the Merrill Lynch Select Pricing SM System,
which offers four pricing alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees. Class A Shares are available only to eligible investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.25% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after approximately 10 years.
* Class C Shares are subject to a distribution fee of 0.35% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.10% (but no distribution fee).
<PAGE>
Performance data for all of the Fund's shares are presented in the
"Total Return Based on a $10,000 Investment" graphs on page 4 and
the "Recent Performance Results" table below. Data for the Fund's
Class A and Class B Shares are presented in the "Performance
Summary" and "Average Annual Total Return" tables on pages 4 and 5.
Data for Class C and Class D Shares are also presented in the
"Aggregate Total Return" tables on page 4. The "Recent Performance
Results" table shows investment results before the deduction of any
sales charges for Class A and Class B Shares for the 12-month and 3-
month periods ended July 31, 1995 and for Class C and Class D Shares
for the since inception and 3-month periods ended July 31, 1995. All
data in this table assume imposition of the actual total expenses
incurred by each class of shares during the relevant period.
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. Dividends paid to each class
of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
7/31/95 4/30/95 7/31/94++ % Change++ % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $11.07 $10.89 $11.00 + 0.64% +1.65%
Class B Shares* 11.07 10.89 11.00 + 0.64 +1.65
Class C Shares* 11.07 10.89 10.68 + 3.65 +1.65
Class D Shares* 11.08 10.90 10.68 + 3.75 +1.65
Class A Shares--Total Return* + 6.54(1) +3.07(2)
Class B Shares--Total Return* + 6.00(3) +2.94(4)
Class C Shares--Total Return* + 7.83(5) +2.91(6)
Class D Shares--Total Return* + 8.36(7) +3.04(8)
Class A Shares--Standardized 30-day Yield 5.01%
Class B Shares--Standardized 30-day Yield 4.71%
Class C Shares--Standardized 30-day Yield 4.60%
Class D Shares--Standardized 30-day Yield 4.92%
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
++Investment results shown for Class C and Class D Shares are since
inception (10/21/94).
(1)Percent change includes reinvestment of $0.617 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.154 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.562 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.140 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.418 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.137 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.461 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.152 per share ordinary
income dividends.
</TABLE>
<PAGE>
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment--Class A Shares and Class
B Shares
A line graph depicting the growth of an investment in the Fund's
Class A Shares and Class B Shares compared to growth of an
investment in the Lehman Brothers Municipal Bond Index. Beginning
and ending values are:
8/31/90** 7/31/95
ML Pennsylvania Municipal
Bond Fund++--Class A Shares* $ 9,600 $14,326
ML Pennsylvania Municipal
Bond Fund++--Class B Shares* $10,000 $14,736
Lehman Brother Municipal
Bond Index++++ $10,000 $15,010
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses including advisory fees.
**Commencement of Operations.
++ML Pennsylvania Municipal Bond Fund invests primarily in long-term
investment-grade obligations issued by or on the bahalf of the
Commonwealth of Pennsylvania, 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.
<PAGE>
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 6/30/95 +8.21% +3.88%
Inception (8/31/90)
through 6/30/95 +8.56 +7.65
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/95 +7.76% +3.76%
Inception (8/31/90) through 6/30/95 +8.29 +8.29
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced
to 0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
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:
<PAGE>
10/21/94** 7/31/95
ML Pennsylvania Municipal
Bond Fund++--Class C Shares* $10,000 $10,683
ML Pennsylvania Municipal
Bond Fund++--Class D Shares* $ 9,600 $10,402
Lehman Brother Municipal
Bond Index++++ $10,000 $11,107
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses including advisory fees.
**Commencement of Operations.
++ML Pennsylvania Municipal Bond Fund invests primarily in long-term
investment-grade obligations issued by or on the bahalf of the
Commonwealth of Pennsylvania, 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.
Aggregate Total Return
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Inception (10/21/94) through 6/30/95 +7.52% +6.52%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced
to 0% after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Inception (10/21/94) through 6/30/95 +8.00% +3.68%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
PERFORMANCE DATA (concluded)
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
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
1994 11.65 10.43 -- 0.606 - 5.35
1/1/95-7/31/95 10.43 11.07 -- 0.346 + 9.63
------ ------
Total $0.045 Total $3.165
Cumulative total return as of 7/31/95: +49.23%**
<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>
<PAGE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
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
1994 11.65 10.43 -- 0.551 - 5.82
1/1/95-7/31/95 10.43 11.07 -- 0.315 + 9.33
------ ------
Total $0.045 Total $2.896
Cumulative total return as of 7/31/95: +45.58%**
<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>
PORTFOLIO 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)
GO General Obligation Bonds
HFA Housing Finance Agency
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
LT Limited Tax
MVRICS Municipal Variable Rate Inverse Class Securities
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
S/F Single-Family
UPDATES Unit Price Demand Adjustable Tax-Exempt Securities
UT Unlimited Tax
VHA Veteran's Housing Authority
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--95.3%
<S> <S> <C> <S> <C>
AAA Aaa $ 500 Allegheny County, Pennsylvania, Airport Revenue Bonds (Great
Pittsburgh International Airport), AMT, Series C, 8.25% due
1/01/2016 (c)(k) $ 552
Allegheny County, Pennsylvania, Hospital Development Authority
Revenue Bonds:
A1+ VMIG1++ 100 (Presbyterian Health Center), VRDN, Series C, 3.80% due
3/01/2020 (a)(c) 100
NR* A 2,000 (South Hills Health System), Series A, 6.50% due 5/01/2014 2,007
AAA Aaa 4,785 Allegheny County, Pennsylvania, IDA, Revenue Refunding Bonds
(Commercial Development MPB Association Project), 7.70% due
12/01/2013 (h) 5,808
AAA Aaa 475 Allegheny County, Pennsylvania, Institutional District Bonds,
UT, Series 18, 7.30% due 4/01/2009 (c) 519
NR* Aaa 510 Allegheny County, Pennsylvania, Residential Finance Authority,
S/F Mortgage Revenue Bonds, Series L, 7.50% due 6/01/2015 (e) 543
AAA Aaa 750 Allegheny County, Pennsylvania, Sanitation Authority, Sewer Revenue
Bonds, Series C, 6.50% due 12/01/2001 (d)(f) 828
Beaver County, Pennsylvania, IDA, PCR, Refunding:
A1+ P1 300 (Duquesne Light Company--Beaver Valley), VRDN, 3.80% due 8/01/2020 (a) 300
AAA Aaa 500 (Ohio Edison Project), Series A, 7.75% due 9/01/2024 (d) 559
AAA Aaa 1,750 Bethlehem, Pennsylvania, Water Authority, Revenue Refunding Bonds,
5.30% due 11/15/2017 (c) 1,604
A- A3 1,000 Bradford County, Pennsylvania, IDA, Solid Waste Disposal Revenue Bonds
(International Paper Company Projects), AMT, Series A, 6.60% due 3/01/2019 1,017
AAA Aaa 2,000 Bristol Township, Pennsylvania, School District, GO, Series A, 6.625%
due 2/15/2002 (c)(f) 2,246
A A3 500 Dauphin County, Pennsylvania, IDA, Water Development Revenue Bonds
(Dauphin Consolidated Water Supply), AMT, Series A, 6.90% due 6/01/2024 550
AAA Aaa 575 Delaware County, Pennsylvania, College Authority Revenue Bonds
(Haverford College), 7.375% due 11/15/2000 (c)(f) 662
<PAGE>
A- NR* 2,350 Delaware County, Pennsylvania, Hospital Authority Revenue Bonds
(Riddle Memorial Hospital), 6.50% due 1/01/2022 2,344
A+ Aa3 1,000 Delaware County, Pennsylvania, IDA, Revenue Refunding Bonds (Resource
Recovery Project), Series A, 8.10% due 12/01/2013 1,054
A1 P1 200 Delaware County, Pennsylvania, IDA, Solid Waste Revenue Bonds (Scott
Paper Company), VRDN, Series A, 3.90% due 12/01/2018 (a) 200
Emmaus, Pennsylvania, General Authority Revenue Bonds, VRDN (a):
A1+ NR* 1,400 (Local Government), Series H, 3.90% due 3/01/2024 1,400
A1 NR* 900 Sub-Series B-10, 3.95% due 3/01/2024 900
A1 NR* 350 Sub-Series D-8, 3.95% due 3/01/2024 350
Erie County, Pennsylvania, IDA, PCR, Refunding (International
Paper Co.):
A- A3 1,000 7.15% due 9/01/2013 1,061
A- A3 425 Series A, 7.60% due 9/01/2010 458
AAA Aaa 1,155 Exeter Township, Pennsylvania, School District, GO, UT, 6.65% due
5/15/2010 (d) 1,219
A- NR* 4,990 Gettysburg, Pennsylvania, Municipal Authority, College Revenue
Refunding Bonds (Gettysburg College Project), 6.60% due 2/15/2012 5,213
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Pennsylvania (continued)
<S> <S> <C> <S> <C>
AAA Aaa $ 2,960 Hollidaysburg, Pennsylvania, Area School District, Improvement Bonds,
UT, 6.50% due 6/01/2020 (b) $ 3,103
NR* Baa1 1,500 Latrobe, Pennsylvania, IDA, College Revenue Bonds (Saint Vincent
College Project), 6.75% due 5/01/2024 1,507
BBB+ NR* 2,000 Lebanon County, Pennsylvania, Good Samaritan Hospital Authority,
Revenue Refunding Bonds (Good Samaritan Hospital Project), 6% due
11/15/2018 1,769
<PAGE>
Luzerne County, Pennsylvania, IDA, Exempt Facilities Revenue Refunding
Bonds (Pennsylvania Gas & Water Company Project), AMT, Series A:
BBB- Baa3 3,600 7.20% due 10/01/2017 3,677
AAA Aaa 2,000 7% due 12/01/2017 (b) 2,159
Montgomery County, Pennsylvania, Higher Education and Health Authority,
Hospital Revenue Bonds:
AAA Aaa 2,500 (Abington Hospital), MVRICS, Series A, 8.883% due 6/01/2011 (b)(i) 2,753
NR* NR* 225 (Jeanes Health System Project), 8.625% due 7/01/2000 (f) 269
NR* NR* 575 (Jeanes Health System Project), 8.75% due 7/01/2000 (f) 689
BBB NR* 1,435 (Northwestern Corporation), 7% due 6/01/2012 1,450
BBB+ NR* 1,250 (Pottstown Memorial Medical Center Project), 7.35% due 11/15/2005 1,304
BBB+ Baa2 2,665 Montgomery County, Pennsylvania, IDA, PCR, Refunding (Philadelphia
Electric Company), AMT, Series A, 7.60% due 4/01/2021 2,868
BBB+ NR* 475 Moon Transportation Authority, Pennsylvania, Highway Improvement
Revenue Bonds, 9.50% due 2/01/2016 521
A A2 3,000 New Morgan, Pennsylvania, IDA, Solid Waste Disposal Revenue Bonds
(New Morgan Landfill Company Inc. Project), AMT, 6.50% due 4/01/2019 3,013
AAA Aaa 3,300 North Penn, Pennsylvania, Water Authority Revenue Bonds, 7% due
11/01/2004 (d)(f) 3,779
AAA Aaa 4,000 North Wales, Pennsylvania, Water Authority Revenue Bonds, 7% due
11/01/2004 (d)(f) 4,631
BBB NR* 2,095 Northampton County, Pennsylvania, Higher Education Authority Revenue
Bonds (Moravian College), 8.20% due 6/01/2001 (f) 2,495
BBB NR* 1,500 Northeastern, Pennsylvania Hospital and Educational Authority,
University Revenue Refunding Bonds (Wilkes University), 5.625% due
10/01/2018 1,354
BBB- Baa 2,500 Pennsylvania Convention Center Authority, Revenue Refunding Bonds,
Series A, 6.75% due 9/01/2019 2,566
BBB- Baa2 1,500 Pennsylvania Economic Development Financing Authority, Exempt Facilities
Revenue Bonds (MacMillan Limited Partnership Project), AMT, 7.60%
due 12/01/2020 1,620
BBB+ Baa1 4,000 Pennsylvania Economic Development Financing Authority, Wastewater
Treatment Revenue Bonds (Sun Company Inc.--R&M Project), AMT,
Series A, 7.60% due 12/01/2024 4,322
Pennsylvania, HFA, RIB, AMT (i):
AA Aa 2,000 7.604% due 4/01/2025 1,837
AA Aa 1,000 Refunding, Series 1991-31C, 9.377% due 10/01/2023 1,060
NR* Aaa 2,000 Pennsylvania Intergovernmental Cooperative Authority, City of Philadelphia
Funding Program, Special Tax Revenue Bonds, 6.80% due 6/15/2002 (f) 2,247
<PAGE>
A NR* 2,000 Pennsylvania State Finance Authority, Revenue Refunding Bonds
(Municipal Capital Improvements Program), 6.60% due 11/01/2009 2,067
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Pennsylvania (continued)
<S> <S> <C> <S> <C>
Pennsylvania State, HFA, S/F Mortgage Revenue Bonds, AMT:
AA Aa $ 1,145 Series 28, 7.65% due 10/01/2023 $ 1,220
AA Aa 2,165 Series 40, 6.90% due 4/01/2025 2,237
AA Aa 1,500 Series 41-B, 6.65% due 4/01/2025 1,522
Pennsylvania State Higher Educational Assistance Agency, Student Loan
Revenue Bonds, VRDN, AMT (a):
A1 VMIG1++ 400 Series A, 3.90% due 1/01/2018 400
A1+ VMIG1++ 300 Series B, 3.90% due 7/01/2018 300
Pennsylvania State Higher Educational Facilities Authority,
College and University Revenue Bonds:
AA- NR* 1,000 (Carnegie Mellon University), Regional Growth, 9% due 11/01/2009 1,033
NR* Baa 2,295 (Delaware Valley College of Science & Agriculture), 7% due 4/01/2022 2,354
AAA Aaa 270 (Drexel University), 1st Series, 7.70% due 5/01/2012 (c) 278
NR* NR* 1,030 (Pennsylvania College of Podiatric Medicine), 8.50% due 10/01/2014 1,107
BBB+ NR* 1,250 Refunding (Allegheny College Project), Series B, 6% due 11/01/2022 1,150
A+ Aa 2,000 Pennsylvania State Higher Educational Facilities Authority, Revenue
Refunding Bonds (Thomas Jefferson University), Series A, 6.625%
due 8/15/2009 2,113
Pennsylvania State, IDA, Economic Development Revenue Bonds:
AAA Aaa 1,300 Refunding, 5.50% due 1/01/2014 (b) 1,225
A- A 1,225 Series A, 7% due 7/01/2001 (f) 1,390
AAA Aaa 250 Pennsylvania State Turnpike Commission, Turnpike Revenue Bonds,
Series H, 7.40% due 12/01/2000 (d)(f) 288
Philadelphia, Pennsylvania, Authority for IDR:
AAA Aaa 375 (Conversion Project--PGH Development Corp.), 7% due 7/01/1999 (b)(f) 417
A+ NR* 1,895 (National Board of Medical Examiners Project), 6.75% due 5/01/2012 1,977
A1+ VMIG1++ 200 (Philadelphia Airport Hotel), AMT, UPDATES, 3.85% due 12/01/2017 (a) 200
<PAGE>
Philadelphia, Pennsylvania, Gas Works Revenue Bonds:
AAA Aaa 1,250 12th Series B, 7% due 5/15/2020 (c)(j) 1,470
AAA Aaa 750 13th Series, 7.70% due 6/15/2001 (f) 880
Philadelphia, Pennsylvania, Hospitals and Higher Education Facilities
Authority Revenue Bonds:
AA Aa 1,400 (Children's Hospital of Philadelphia Project), Series A, 5.50% due
2/15/2022 1,266
A- NR* 1,015 (Children's Seashore House), Series A, 7% due 8/15/2017 1,043
A- NR* 4,000 (Children's Seashore House), Series B, 7% due 8/15/2022 4,101
BBB NR* 3,100 (Northwestern Corp.), 7.125% due 6/01/2018 3,214
A- A 1,500 Refunding (Chestnut Hill Hospital), 6.50% due 11/15/2022 1,487
AAA Aaa 500 Refunding (Magee Rehabilitation Hospital), 7% due 12/01/2005 (b) 556
AAA Aaa 1,000 Refunding (Magee Rehabilitation Hospital), 7% due 12/01/2010 (b) 1,085
BBB+ A 420 Refunding (Pennsylvania Hospital), 7.25% due 7/01/2014 428
BBB+ NR* 900 Refunding (Philadelphia MR Project), 6.20% due 8/01/2011 867
A- NR* 3,000 Refunding (Presbyterian Medical Center), 6.65% due 12/01/2019 (j) 2,992
A- Baa1 3,500 Refunding (Temple University Hospital), Series A, 6.625% due
11/15/2023 3,514
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Pennsylvania (concluded)
<S> <S> <C> <S> <C>
Philadelphia, Pennsylvania, Municipal Authority, Revenue Refunding
Bonds (d)(f):
AAA Aaa $ 40 7.80% due 4/01/1998 $ 45
AAA Aaa 360 7.80% due 4/01/2000 408
BBB Baa 1,000 Philadelphia, Pennsylvania, Water and Sewer Revenue Bonds,
16th Series, 7.50% due 8/01/2001 (f) 1,159
Philadelphia, Pennsylvania, Water and Wastewater Revenue Bonds (c):
AAA Aaa 2,500 5.50% due 8/01/2014 2,368
AAA Aaa 2,000 5.60% due 8/01/2018 1,894
AAA Aaa 6,000 Pittsburgh, Pennsylvania, Water and Sewer Authority, Water and Sewer
Systems Revenue Bonds, Series B, 5.75% due 9/01/2025 (g) 5,736
AAA Aaa 1,000 Reading, Pennsylvania, Refunding Bonds, GO, UT, 6.50% due 11/15/2002
(b)(f) 1,111
<PAGE>
A1 Aaa 200 Sayre, Pennsylvania, Health Care Facilities Authority Revenue Bonds,
VHA (Pennsylvania Capital Financing Project), VRDN, Series B, 3.75%
due 12/01/2020 (a)(b) 200
A- NR* 1,750 Scranton-Lackawanna, Pennsylvania, Health and Welfare Authority,
Revenue Refunding Bonds (University of Scranton Project), Series A,
6.50% due 3/01/2013 1,826
A Aaa 2,000 York County, Pennsylvania, GO, LT, South Western School District,
6.40% due 6/15/2012 (d) 2,085
A1+ P1 300 York County, Pennsylvania, IDA, PCR, Refunding (Philadelphia Electric
Company), VRDN, Series A, 3.70% due 8/01/2016 (a) 300
Puerto Rico--3.2%
Puerto Rico Commonwealth, Aqueduct and Sewer Authority Revenue Bonds,
Series A:
A Baa1 2,150 7.875% due 7/01/2017 2,391
A Baa1 310 7% due 7/01/2019 333
A Baa1 800 Puerto Rico Commonwealth, Highway Authority, Highway Revenue Refunding
Bonds, Series R, 6.75% due 7/01/2005 858
AAA NR* 740 Puerto Rico Commonwealth, Public Improvement, GO, 7.70% due 7/01/2000 (f) 860
Puerto Rico Electric Power Authority, Power Revenue Bonds:
AAA NR* 100 Refunding, Series M, 8% due 7/01/1998 (f) 113
A- Baa1 190 Series O, 7.125% due 7/01/2014 203
Total Investments (Cost--$142,050)--98.5% 148,558
Other AssetsLess Liabilities--1.5% 2,240
--------
Net Assets--100.0% $150,798
========
<FN>
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at July 31, 1995.
(b)AMBAC Insured.
(c)MBIA Insured.
(d)FGIC Insured.
(e)GNMA Insured.
(f)Prerefunded.
(g)FSA Insured.
(h)Capital Guaranty.
(i)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, 1995.
(j)Escrowed to maturity.
(k)Partial 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.
<PAGE>
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of July 31, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$142,049,537) (Note 1a) $148,558,194
Cash 64,263
Receivables:
Interest $ 2,358,823
Beneficial interest sold 216,172 2,574,995
------------
Deferred organization expenses (Note 1e) 1,244
Prepaid registration fees and other assets (Note 1e) 22,657
------------
Total assets 151,221,353
------------
Liabilities: Payables:
Dividends to shareholders (Note 1f) 150,236
Beneficial interest redeemed 87,196
Investment adviser (Note 2) 66,529
Distributor (Note 2) 50,535 354,496
------------
Accrued expenses and other liabilities 68,957
------------
Total liabilities 423,453
------------
Net Assets: Net assets $150,797,900
============
<PAGE>
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited
Consist of: number of shares authorized $ 208,196
Class B Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 1,113,851
Class C Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 16,875
Class D Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 23,740
Paid-in capital in excess of par 145,351,545
Accumulated realized capital losses on investments--net (Note 5) (2,162,659)
Accumulated distribution in excess of realized capital gains--net (262,305)
Unrealized appreciation on investments--net 6,508,657
------------
Net assets $150,797,900
============
Net Asset Value: Class A--Based on net assets of $23,040,067 and 2,081,959 shares
of beneficial interest outstanding $ 11.07
============
Class B--Based on net assets of $123,260,463 and 11,138,512 shares
of beneficial interest outstanding $ 11.07
============
Class C--Based on net assets of $1,867,794 and 168,748 shares
of beneficial interest outstanding $ 11.07
============
Class D--Based on net assets of $2,629,576 and 237,400 shares
of beneficial interest outstanding $ 11.08
============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
July 31, 1995
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 9,772,807
(Note 1d):
<PAGE>
Expenses: Investment advisory fees (Note 2) $ 827,537
Account maintenance and distribution fees--Class B (Note 2) 618,190
Transfer agent fees--Class B (Note 2) 82,837
Professional fees 75,388
Printing and shareholder reports 69,818
Accounting services (Note 2) 40,065
Amortization of organization expenses (Note 1e) 16,208
Transfer agent fees--Class A (Note 2) 13,972
Pricing fees 13,380
Custodian fees 12,122
Registration fees (Note 1e) 7,500
Trustees' fees and expenses 7,393
Account maintenance and distribution fees--Class C (Note 2) 4,335
Account maintenance fees--Class D (Note 2) 1,586
Transfer agent fees--Class D (Note 2) 898
Transfer agent fees--Class C (Note 2) 514
Other 6,728
------------
Total expenses 1,798,471
------------
Investment income--net 7,974,336
------------
Realized & Realized loss on investments--net (2,162,672)
Unrealized Gain Change in unrealized appreciation on investments--net 2,862,358
(Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 8,674,022
(Notes 1b, 1d & 3): ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended July 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 7,974,336 $ 7,585,449
Realized gain (loss) on investments--net (2,162,672) 96,923
Change in unrealized appreciation on investments--net 2,862,358 (5,481,887)
------------ ------------
Net increase in net assets resulting from operations 8,674,022 2,200,485
------------ ------------
<PAGE>
Dividends & Investment income--net:
Distributions to Class A (1,403,188) (1,539,524)
Shareholders Class B (6,445,060) (6,045,925)
(Note 1f): Class C (36,471) --
Class D (89,617) --
Realized gain on investments--net:
Class A -- (111,974)
Class B -- (480,111)
In excess of realized gain on investments--net:
Class A -- (49,607)
Class B -- (212,698)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (7,974,336) (8,439,839)
------------ ------------
Beneficial Net increase (decrease) in net assets derived from
Interest beneficial interest transactions (8,558,779) 27,793,932
Transactions ------------ ------------
(Note 4):
Net Assets: Total increase (decrease) in net assets (7,859,093) 21,554,578
Beginning of year 158,656,993 137,102,415
------------ ------------
End of year $150,797,900 $158,656,993
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
Class A
For the
Period
The following per share data and ratios have been derived Aug. 31,
from information provided in the financial statements. 1990++ to
For the Year Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992 1991
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.00 $ 11.39 $ 11.04 $ 10.27 $ 10.00
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .62 .60 .63 .67 .61
Realized and unrealized gain (loss) on
investments--net .07 (.33) .36 .77 .27
-------- -------- -------- -------- --------
Total from investment operations .69 .27 .99 1.44 .88
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.62) (.60) (.63) (.67) (.61)
Realized gain on investments--net -- (.04) (.01) -- --
In excess of realized gain on
investments--net -- (.02) -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.62) (.66) (.64) (.67) (.61)
-------- -------- -------- -------- --------
Net asset value, end of period $ 11.07 $ 11.00 $ 11.39 $ 11.04 $ 10.27
======== ======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share 6.54% 2.37% 9.30% 14.53% 9.30%+++
Return:** ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement .77% .75% .69% .55% .39%*
Average ======== ======== ======== ======== ========
Net Assets: Expenses .77% .75% .81% .97% 1.57%*
======== ======== ======== ======== ========
Investment income--net 5.72% 5.30% 5.70% 6.33% 6.71%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 23,040 $ 28,239 $ 27,639 $ 17,144 $ 9,402
Data: ======== ======== ======== ======== ========
Portfolio turnover 59.17% 37.73% 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>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class B
For the
Period
The following per share data and ratios have been derived Aug. 31,
from information provided in the financial statements. 1990++ to
For the Year Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992 1991
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.00 $ 11.39 $ 11.04 $ 10.27 $ 10.00
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .56 .54 .58 .62 .57
Realized and unrealized gain (loss) on
investments--net .07 (.33) .36 .77 .27
-------- -------- -------- -------- --------
Total from investment operations .63 .21 .94 1.39 .84
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.56) (.54) (.58) (.62) (.57)
Realized gain on investments--net -- (.04) (.01) -- --
In excess of realized gain on
investments--net -- (.02) -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.56) (.60) (.59) (.62) (.57)
-------- -------- -------- -------- --------
Net asset value, end of period $ 11.07 $ 11.00 $ 11.39 $ 11.04 $ 10.27
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 6.00% 1.86% 8.75% 13.94% 8.81%+++
Return:** ======== ======== ======== ======== ========
Ratios to Expenses, excluding account maintenance
Average and distribution fees and net of
Net Assets: reimbursement .78% .75% .69% .56% .40%*
======== ======== ======== ======== ========
Expenses, net of reimbursement 1.28% 1.25% 1.19% 1.06% .90%*
======== ======== ======== ======== ========
Expenses 1.28% 1.25% 1.32% 1.48% 2.07%*
======== ======== ======== ======== ========
Investment income--net 5.21% 4.80% 5.19% 5.81% 6.21%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands). $123,260 $130,418 $109,463 $ 65,599 $ 30,435
Data: ======== ======== ======== ======== ========
Portfolio turnover 59.17% 37.73% 9.69% 4.14% --
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
<PAGE>
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. October 21, 1994++ to
July 31, 1995
Increase (Decrease) in Net Asset Value: Class C Class D
<S> <S> <C> <C>
Per Share Net asset value, beginning of period $ 10.68 $ 10.68
Operating -------- --------
Performance: Investment income--net .43 .47
Realized and unrealized gain on investments--net .39 .40
-------- --------
Total from investment operations .82 .87
-------- --------
Less dividends from investment income--net. (.43) (.47)
-------- --------
Net asset value, end of period $ 11.07 $ 11.08
======== ========
Total Investment Based on net asset value per share 7.83%+++ 8.36%+++
Return:** ======== ========
Ratios to Expenses, excluding account maintenance and distribution
Average fees and net of reimbursement .78%* .77%*
Net Assets: ======== ========
Expenses, net of reimbursement 1.38%* .87%*
======== ========
Expenses 1.38%* .87%*
======== ========
Investment income--net 5.05%* 5.65%*
======== ========
Supplemental Net assets, end of period (in thousands) $ 1,868 $ 2,630
Data: ======== ========
Portfolio turnover 59.17% 59.17%
======== ========
<PAGE>
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch 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 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.
<PAGE>
(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.
* Financial futures contracts--The Fund may purchase or sell interest
rate futures contacts and options on such futures contracts for the
purpose of hedging the market risk on existing securities or the
intended purchase of securities. Futures contracts are contracts for
delayed delivery of securities at a specific future date and at a
specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to
the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin
and are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a five-year period. Prepaid registration fees are
charged to expense as the related shares are issued.
(f) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates. Distributions in excess
of realized capital gains are due primarily to differing tax
treatments for futures transactions and post-October losses.
<PAGE>
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 the
limited partner. The Fund has 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. The Investment Advisory Agreement obligates
FAM to reimburse the Fund to the extent the Fund's expenses
(excluding interest, taxes, distribution fees, brokerage fees and
commissions, and extraordinary items) exceed 2.5% of the Fund's
first $30 million of average daily net assets, 2.0% of the next $70
million of average daily net assets, and 1.5% of the average daily
net assets in excess thereof. FAM's obligation to reimburse the Fund
is limited to the amount of the management fee. No fee payment will
be made to the Investment Adviser during any fiscal year which will
cause such expenses to exceed expense limitation at the time of
payment.
Pursuant to the distribution plans ("the Distribution Plans")
adopted by the Fund in accordance with Rule 12b-1 under the
Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are
accrued daily and paid monthly at annual rates based upon the
average daily net assets of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.25%
Class C 0.25% 0.35%
Class D 0.10% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
<PAGE>
For the year ended July 31, 1995, 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 $1,289 $14,788
Class D 702 25,153
For the year ended July 31, 1995, MLPF&S received contingent
deferred sales charges of $302,369 and $621 relating to transactions
in Class B and Class C Shares, respectively.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, MLPF&S, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended July 31, 1995 were $83,480,248 and $85,623,359,
respectively.
NOTES TO FINANCIAL STATEMENTS (concluded)
Net realized and unrealized gains (losses) as of July 31, 1995 were
as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $(1,564,976) $ 6,508,657
Short-term investments 5 --
Financial futures contracts (597,701) --
----------- ------------
Total $(2,162,672) $ 6,508,657
=========== ============
<PAGE>
As of July 31, 1995, net unrealized appreciation for Federal income
tax purposes aggregated $6,508,657, of which $7,368,844 related to
appreciated securities and $860,187 related to depreciated
securities. The aggregate cost of investments at July 31, 1995 for
Federal income tax purposes was $142,049,537.
4. Beneficial Interest Transactions:
Net increase (decrease) in net assets derived from beneficial
interest transactions was $(8,558,779) and $27,793,932 for the years
ended July 31, 1995 and July 31, 1994, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Year Dollar
Ended July 31, 1995 Shares Amount
Shares sold 252,327 $ 2,701,007
Shares issued to share-
holders in reinvestment
of dividends 70,449 759,029
----------- ------------
Total issued 322,776 3,460,036
Shares redeemed (808,932) (8,690,691)
----------- ------------
Net decrease (486,156) $ (5,230,655)
=========== ============
Class A Shares for the Year Dollar
Ended July 31, 1994 Shares Amount
Shares sold 550,023 $ 6,297,702
Shares issued to share-
holders in reinvestment of
dividends and distributions 80,433 915,022
----------- ------------
Total issued 630,456 7,212,724
Shares redeemed (489,751) (5,530,577)
----------- ------------
Net increase 140,705 $ 1,682,147
=========== ============
<PAGE>
Class B Shares for the Year Dollar
Ended July 31, 1995 Shares Amount
Shares sold 1,773,889 $ 19,140,874
Shares issued to share-
holders in reinvestment
of dividends. 290,703 3,133,419
----------- ------------
Total issued 2,064,592 22,274,293
Shares redeemed (2,786,939) (29,948,409)
Automatic conversion of
shares (25) (252)
----------- ------------
Net decrease (722,372) $ (7,674,368)
=========== ============
Class B Shares for the Year Dollar
Ended July 31, 1994 Shares Amount
Shares sold 3,466,071 $ 39,679,393
Shares issued to share-
holders in reinvestment of
dividends and distributions 296,534 3,370,692
----------- ------------
Total issued 3,762,605 43,050,085
Shares redeemed (1,515,856) (16,938,300)
----------- ------------
Net increase 2,246,749 $ 26,111,785
=========== ============
Class C Shares for the Period Dollar
Oct. 21, 1994++ to July 31, 1995 Shares Amount
Shares sold 190,095 $ 2,057,684
Shares issued to share-
holders in reinvestment
of dividends 2,162 23,850
----------- ------------
Total issued 192,257 2,081,534
Shares redeemed (23,509) (258,434)
----------- ------------
Net increase 168,748 $ 1,823,100
=========== ============
[FN]
++Commencement of Operations.
<PAGE>
Class D Shares for the Period Dollar
Oct. 21, 1994++ to July 31, 1995 Shares Amount
Shares sold 241,043 $ 2,563,252
Automatic conversion of
shares 25 252
Shares issued to share-
holders in reinvestment
of dividends 6,269 67,928
----------- ------------
Total issued 247,337 2,631,432
Shares redeemed (9,937) (108,288)
----------- ------------
Net increase 237,400 $ 2,523,144
=========== ============
[FN]
++Commencement of Operations.
5. Capital Loss Carryforward:
At July 31, 1995, the Fund had a net capital loss carryforward of
approximately $970,000, all of which expires in 2003. This amount
will be available to offset like amounts of any future taxable
gains.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
Merrill Lynch Pennsylvania 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
Pennsylvania Municipal Bond Fund of Merrill Lynch Multi-State
Municipal Series Trust as of July 31, 1995, the related statements
of operations for the year then ended and changes in net assets for
each of the years in the two-year period then ended, and the
financial highlights for each of the years in the four-year period
then ended and for the period August 31, 1990 (commencement of
operations) to July 31, 1991. 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.
<PAGE>
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,
1995 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch Pennsylvania Municipal Bond Fund of Merrill Lynch
Multi-State Municipal Series Trust as of July 31, 1995, 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 1, 1995
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid monthly by
Merrill Lynch Pennsylvania Municipal Bond Fund during its taxable
year ended July 31, 1995 qualify as tax-exempt interest dividends
for Federal income tax purposes.
Additionally, there were no capital gains distributions during the
year.
Please retain this information for your records.
