MERRILL LYNCH
PENNSYLVANIA
MUNICIPAL
BOND FUND
FUND LOGO
Annual Report
July 31, 1996
Officers and Trustees
Arthur Zeikel, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Vincent R. Giordano, Senior Vice President
Donald C. Burke, Vice President
Kenneth A. Jacob, Vice President
William M. Petty, Vice President
Gerald M. Richard, Treasurer
Jerry Weiss, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
<PAGE>
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.
Statements and other information herein are as dated and are subject
to change.
Merrill Lynch Pennsylvania
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011
TO OUR SHAREHOLDERS
The Municipal Market Environment
Municipal bond yields rose dramatically during the six-month period
ended July 31, 1996. Investors became increasingly alarmed that
earlier forecasts of continued moderate growth were overly
optimistic. As indications of stronger growth were released,
particularly the strong employment reports released beginning in
March, fears of associated inflationary pressures mounted and yields
rose in response. By May and June, long-term municipal bond yields
rose into the 6.25%--6.30% range.
<PAGE>
However, in early July the combination of the Federal Reserve Board
suggesting that growth was expected to slow later in 1996 and a
temporary stock market correction allowed municipal bond yields to
fall as investors scrambled to purchase relatively scarce
securities. As measured by the Bond Buyer Revenue Bond Index, long-
term, A-rated uninsured tax-exempt bonds yielded 6.02% at July 31,
1996, an increase of over 30 basis points (0.30%) in the last six
months. Long-term US Treasury bond yields rose significantly over
the same period. By July 31, 1996, yields on US Treasury bonds
increased almost 100 basis points to end the six-month period at
6.97%.
The municipal bond market's recent outperformance as compared to its
taxable counterpart was largely the result of two principal factors.
First, much of the concern in the tax-exempt market regarding the
potential loss of the inherent tax-advantage of the municipal bonds
dissipated. For much of 1995, various tax proposals, such as the
flat tax or national sales tax, were put forward either to reduce
the national debt or reform the current tax system. Most of these
proposals would have severely limited the tax advantages enjoyed by
the municipal bond market. However, in February 1996, the Kemp
Commission released its findings regarding various tax reform
proposals. While noting that numerous changes should be made, no
mention of curtailing or stopping municipal bonds' current favored
tax status was made.
The second major factor leading to the municipal bond market's
recent outperformance was the return of a more favorable technical
environment. The rate of increase in new bond issuance recently
slowed. Over the last 12 months, approximately $175 billion in long-
term municipal securities were issued, an increase of over 27% as
compared to the same period a year earlier. Much of this increase
was the result of issuers seeking to refinance their existing higher-
couponed debt as interest rates declined in 1995 and early 1996. As
interest rates rose, these financings became increasingly
economically impractical and issuance declined. Over the last six
months, less than $70 billion in long-term tax-exempt securities
were underwritten, an increase of 20% versus the comparable period a
year earlier. Only $43 billion in tax-exempt securities were issued
in the last three months, a total essentially unchanged from the
comparable quarter in 1995. In July 1996, less than $10 billion in
long-term municipal bonds were issued, representing the lowest
issuance for the month of July since 1990.
At the same time investor demand remained consistently strong. With
nominal new-issue yields above 6%, retail investor interest was
steady. Additionally, investors received over $50 billion this June
and July in assets derived from coupon income, bond maturities and
proceeds from early redemptions. Annual new bond issuance has
declined in recent years and is expected to remain below levels seen
in the early 1990s. Consequently, as the higher-coupon bonds issued
in the early-to-mid 1980s were redeemed at their first optional call
dates, the total number of outstanding tax-exempt bonds has
declined. This combination of a declining net supply and significant
amounts of assets helped maintain investor demand in recent months.
<PAGE>
It is unlikely that the municipal bond market will continue to
significantly outperform US Treasury securities in the near future.
The tax-exempt bond market's recent performance led to the yield
ratio between long-term taxable and tax-exempt securities falling
from in excess of 90% to approximately 85%. While historically still
very attractive, some institutional investors, particularly short-
term traders, began to view the tax-exempt bond market's recent
outperformance as an opportunity to sell a relatively expensive
asset. However, to the long-term investor, such a sale would
represent the loss of an attractively priced asset which may not be
easily replaced given the relative scarcity of municipal bonds under
present supply conditions.
Looking ahead, no clear consensus for the direction of interest
rates currently exists. Perhaps, the primary focus going forward
will be the extent to which the increase in interest rates seen thus
far in 1996 will negatively impact future economic growth. Should
growth slow in the interest rate-sensitive sectors of the economy,
like housing, auto, and consumer spending, as many economists assert
is likely, then bond yields are likely to decline. Under such a
scenario, the municipal bond market's performance is likely to
closely mirror that of the US Treasury bond market.
Fiscal Year in Review
During the year ended July 31, 1996, the municipal bond market was
extremely volatile. As measured by the Bond Buyer Revenue Bond
Index, long-term tax-exempt bond yields ranged from a high of 6.44%
on August 17, 1995 to a low of 5.63% on January 4, 1996. At year-end
July 31, 1996, the Index was near the middle of the range for the
period, yielding 6.10%. After peaking in mid-August 1995, long-term
interest rates rallied significantly during the balance of 1995 as
economic growth slowed to a trickle while inflationary pressures, as
measured by the consumer price index, bottomed in December at 2.5%.
This combination of slow growth and low inflation prompted the
Federal Reserve Board to ease monetary policy by lowering the
Federal Funds target rate 0.25% at both the December 1995 and
January 1996 meetings. Ironically, the January monetary policy move
coincided with the trough in long-term interest rates as economic
growth rebounded sharply during the first half of 1996, pushing
interest rates higher.
Merrill Lynch Pennsylvania Municipal Bond Fund entered the fiscal
year in a neutral posture, and we maintained that strategy through
September 1995. By remaining fully invested, the Fund was able to
provide attractive dividends while seeking to limit interest rate
risk. By September we had become more constructive on the interest
rate environment and had begun to extend the duration of the
portfolio by purchasing securities which would seek to enhance total
returns to our shareholders in a period of declining interest rates.
<PAGE>
The Fund participated in the strong bond rally through January of
this year. However, strong job growth led an economic revival from
February through July, which forced a major change in investor
psychology. We shifted the portfolio to a defensive posture to help
protect the Fund's net asset values as yields on long-term municipal
bonds surged approximately 0.75% between January and mid-June. Since
peaking in June, interest rates have declined somewhat as the
economy showed early signs of cooling. We shifted the Fund to a more
neutral posture once again.
Looking ahead, we expect to maintain the Fund's neutral position
until there appears to be a clearer path for interest rates. We
expect this strategy to provide shareholders with attractive yields
while offering decreased sensitivity to changes in long-term
interest rates.
In Conclusion
We appreciate your ongoing interest in Merrill Lynch Pennsylvania
Municipal Bond Fund, and we look forward to assisting you with your
financial needs in the months and years to come.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(William M. Petty)
William M. Petty
Vice President and Portfolio Manager
<PAGE>
September 5, 1996
PERFORMANCE DATA
About Fund Performance
Investors are 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. (There is no initial
sales charge for automatic share conversions.)
*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).
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.
<PAGE>
<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
1995 10.43 11.57 -- 0.617 +17.26
1/1/96-7/31/96 11.57 11.17 -- 0.336 - 0.40
------ ------
Total $0.045 Total $3.772
Cumulative total return as of 7/31/96: +58.98%**
<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>
PERFORMANCE DATA (continued)
<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
1995 10.43 11.56 -- 0.561 +16.57
1/1/96-7/31/96 11.56 11.17 -- 0.305 - 0.60
------ ------
Total $0.045 Total $3.447
Cumulative total return as of 7/31/96: +54.29%**
<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>
<PAGE>
<TABLE>
Performance Summary--Class C Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94-12/31/94 $10.68 $10.43 -- $0.109 - 1.31%
1995 10.43 11.57 -- 0.550 +16.55
1/1/96-7/31/96 11.57 11.17 -- 0.298 - 0.75
------
Total $0.957
Cumulative total return as of 7/31/96: +14.17%**
<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>
<TABLE>
Performance Summary--Class D Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94-12/31/94 $10.68 $10.44 -- $0.120 - 1.10%
1995 10.44 11.58 -- 0.607 +17.13
1/1/96-7/31/96 11.58 11.18 -- 0.331 - 0.45
------
Total $1.058
Cumulative total return as of 7/31/96: +15.32%**
<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>
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:
<PAGE>
8/31/90** 7/96
ML Pennsylvania Municipal Bond Fund++--
Class A Shares* $ 9,600 $15,261
ML Pennsylvania Municipal Bond Fund++--
Class B Shares* $10,000 $15,429
Lehman Brothers Municipal Bond Index++++ $10,000 $16,001
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 B Shares and Class D Shares compared to growth of an
investment in the Lehman Brothers Municipal Bond Index. Beginning
and ending values are:
10/21/94** 7/96
ML Pennsylvania Municipal Bond Fund++--
Class C Shares* $10,000 $11,417
ML Pennsylvania Municipal Bond Fund++--
Class D Shares* $ 9,600 $11,070
Lehman Brothers Municipal Bond Index++++ $10,000 $11,840
[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 behalf 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,
prefunded bonds, general obligation bonds and insured bonds.
Past performance is not predictive of future performance.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/96 +5.83% +1.60%
Five Years Ended 6/30/96 +7.86 +6.99
Inception (8/31/90)
through 6/30/96 +8.09 +7.33
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/96 +5.29% +1.29%
Five Years Ended 6/30/96 +7.32 +7.32
Inception (8/31/90)
through 6/30/96 +7.54 +7.54
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 6/30/96 +5.28% +4.28%
Inception (10/21/94)
through 6/30/96 +7.59 +7.59
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced
to 0% after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 6/30/96 +5.72% +1.50%
Inception (10/21/94)
through 6/30/96 +8.15 +5.57
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<PAGE>
PERFORMANCE DATA (concluded)
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
7/31/96 4/30/96 7/31/95 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $11.17 $11.10 $11.07 +0.90% +0.63%
Class B Shares* 11.17 11.10 11.07 +0.90 +0.63
Class C Shares* 11.17 11.10 11.07 +0.90 +0.63
Class D Shares* 11.18 11.11 11.08 +0.90 +0.63
Class A Shares--Total Return* +6.53(1) +2.01(2)
Class B Shares--Total Return* +5.98(3) +1.88(4)
Class C Shares--Total Return* +5.87(5) +1.86(6)
Class D Shares--Total Return* +6.42(7) +1.99(8)
Class A Shares--Standardized 30-day Yield 4.90%
Class B Shares--Standardized 30-day Yield 4.60%
Class C Shares--Standardized 30-day Yield 4.50%
Class D Shares--Standardized 30-day Yield 4.81%
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
(1)Percent change includes reinvestment of $0.607 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.150 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.550 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.136 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.539 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.134 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.597 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.148 per share ordinary
income dividends.
</TABLE>
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, 1996 qualify as tax-exempt interest dividends
for Federal income tax purposes.
<PAGE>
Additionally, there were no capital gains distributed by the Fund
during the year.
Please retain this information for your records.
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
MVRICS Municipal Variable Rate Inverse Class Securities
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
S/F Single-Family
UPDATES Unit Priced Demand Adjustable Tax-Exempt Securities
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Pennsylvania--94.0%
<S> <S> <C> <S> <C>
NR* A $2,000 Allegheny County, Pennsylvania, Hospital Development Authority Revenue
Bonds (South Hills Health System), Series A, 6.50% due 5/01/2014 $ 2,043
AAA Aaa 4,785 Allegheny County, Pennsylvania, IDA, Revenue Refunding Bonds (Commercial
Development MPB Association Project), 7.70% due 12/01/2013 (e) 5,899
AAA Aaa 475 Allegheny County, Pennsylvania, Institutional District Bonds, UT, Series 18,
7.30% due 4/01/2009 (c) 515
AAA Aaa 750 Allegheny County, Pennsylvania, Sanitation Authority, Sewer Revenue Bonds,
Series C, 6.50% due 12/01/2001 (d)(f)(k) 817
AAA Aaa 1,430 Berks County, Pennsylvania, GO, UT, Second Series, 5.65%** due 5/15/2020 (d) 341
AAA Aaa 3,500 Bethlehem, Pennsylvania, Water Authority, Revenue Refunding Bonds,
5.20% due 11/15/2021 (c) 3,227
<PAGE>
AAA Aaa 2,000 Bristol Township, Pennsylvania, School District, GO, Series A, 6.625%
due 2/15/2002 (c)(f) 2,217
AAA Aaa 3,550 Cambria County, Pennsylvania, Refunding, GO, UT, Series A, 6.625%
due 8/15/2014 (d) 3,826
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 NR* 3,500 Delaware County, Pennsylvania, College Authority Revenue Bonds (Neumann
College), 5.625% due 10/01/2025 (g) 3,315
A- NR* 2,350 Delaware County, Pennsylvania, Hospital Authority Revenue Bonds (Riddle
Memorial Hospital), 6.50% due 1/01/2022 2,365
A1+ P1 100 Delaware County, Pennsylvania, IDA, PCR (BP Oil Inc. Project), UPDATES,
3.60% due 12/01/2009 (a) 100
AA- Aa3 1,000 Delaware County, Pennsylvania, IDA, Revenue Refunding Bonds (Resource Recovery
Project), Series A, 8.10% due 12/01/2013 1,044
Emmaus, Pennsylvania, General Authority Revenue Bonds, VRDN (a):
SP1+ NR* 100 Series B, 3.15% due 3/01/2024 100
A1 NR* 100 Sub-Series B-10, 3.65% due 3/01/2024 100
A1 NR* 200 Sub-Series B-12, 3.65% due 3/01/2024 200
Erie County, Pennsylvania, IDA, PCR, Refunding (International Paper Co.):
A- A3 1,000 7.15% due 9/01/2013 1,059
A- A3 425 Series A, 7.60% due 9/01/2010 456
NR* NR* 920 Erie--Western Pennsylvania Port Authority, General Revenue Bonds, 6.875%
due 6/15/2016 (j) 934
</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 $1,155 Exeter Township, Pennsylvania, School District, GO, UT, 6.65% due 5/15/2002
(d)(f) $ 1,268
A1+ NR* 4,200 Geisinger, Pennsylvania, Health Systems Revenue Bonds, VRDN, Series B,
3.60% due 7/01/2022 (a) 4,200
<PAGE>
A- NR* 4,990 Gettysburg, Pennsylvania, Municipal Authority, College Revenue Refunding Bonds
(Gettysburg College Project), 6.60% due 2/15/2012 5,237
AAA Aaa 2,960 Hollidaysburg, Pennsylvania, Area School District, Improvement Bonds, UT,
6.50% due 6/01/2020 (b) 3,131
NR* Baa1 1,500 Latrobe, Pennsylvania, IDA, College Revenue Bonds (Saint Vincent College
Project), 6.75% due 5/01/2024 1,516
BBB+ NR* 2,000 Lebanon County, Pennsylvania, Good Samaritan Hospital Authority, Revenue
Refunding Bonds (Good Samaritan Hospital Project), 6% due 11/15/2018 1,852
A A 2,585 Lehigh County, Pennsylvania, General Purpose Authority, Revenue Refunding Bonds
(Muhlenberg Hospital Center), Series A, 5.75% due 7/15/2010 2,503
Luzerne County, Pennsylvania, IDA, Exempt Facilities Revenue Refunding Bonds
(Pennsylvania Gas and Water Company Project), AMT, Series A:
BBB- Baa3 3,600 7.20% due 10/01/2017 3,804
AAA Aaa 2,000 7% due 12/01/2017 (b) 2,205
Montgomery County, Pennsylvania, Higher Education and Health Authority,
Hospital Revenue Bonds:
AAA Aaa 2,500 (Abington Hospital), MVRICS, Series A, 9.445% due 6/01/2011 (b)(h) 2,825
NR* NR* 225 (Jeanes Health System Project), 8.625% due 7/01/2000 (f) 261
BBB NR* 1,435 (Northwestern Corporation), 7% due 6/01/2012 1,474
BBB+ Baa2 2,665 Montgomery County, Pennsylvania, IDA, PCR, Refunding (Philadelphia Electric
Company), AMT, Series A, 7.60% due 4/01/2021 2,844
BBB+ NR* 475 Moon Transportation Authority, Pennsylvania, Highway Improvement Revenue
Bonds, 9.50% due 2/01/2016 (j) 529
AAA Aaa 3,300 North Penn, Pennsylvania, Water Authority Revenue Bonds, 7% due 11/01/2004
(d)(f) 3,800
AAA Aaa 4,000 North Wales, Pennsylvania, Water Authority Revenue Bonds, 7% due 11/01/2004
(d)(f) 4,579
AAA NR* 2,095 Northampton County, Pennsylvania, Higher Education Authority Revenue Bonds
(Moravian College), 8.20% due 6/01/2001 (f) 2,452
Pennsylvania Convention Center Authority, Revenue Refunding Bonds, Series A:
BBB- Baa 1,555 6.70% due 9/01/2014 1,656
BBB- Baa 2,500 6.75% due 9/01/2019 2,669
BBB- Baa2 1,500 Pennsylvania Economic Development Financing Authority, Exempt Facilities
Revenue Bonds (MacMillan Limited Partnership Project), AMT, 7.60%
due 12/01/2020 1,648
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 4,402
<PAGE>
Pennsylvania, HFA, RIB, AMT (h):
AA Aa 2,000 8.414% due 4/01/2025 1,870
AA Aa 1,000 Refunding, Series 1991-31C, 10.074% due 10/01/2023 1,050
Pennsylvania Intergovernmental Cooperative Authority, City of Philadelphia
Funding Program, Special Tax Revenue Bonds:
NR* Aaa 2,500 6.80% due 6/15/2002 (f) 2,765
AAA Aaa 3,000 5.625% due 6/15/2023 (c) 2,862
AAA Aaa 1,000 Refunding, Series A, 5% due 6/15/2013 (c) 920
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Pennsylvania (concluded)
<S> <S> <C> <S> <C>
A NR* $2,000 Pennsylvania State Finance Authority, Revenue Refunding Bonds (Municipal
Capital Improvements Program), 6.60% due 11/01/2009 $ 2,123
AA- A1 2,285 Pennsylvania State, GO, UT, Second Series A, 6.60% due 11/01/2011 2,450
Pennsylvania State, HFA, S/F Mortgage Revenue Bonds, AMT:
AA+ Aa 1,145 Series 28, 7.65% due 10/01/2023 1,205
AA+ Aa 2,165 Series 40, 6.90% due 4/01/2025 2,254
AA+ Aa 1,500 Series 41-B, 6.65% due 4/01/2025 1,535
Pennsylvania State Higher Educational Facilities Authority, College and
University Revenue Bonds:
NR* Baa 2,295 (Delaware Valley College of Science & Agriculture), 7% due 4/01/2022 2,360
NR* NR* 1,030 (Pennsylvania College of Podiatric Medicine), 8.50% due 10/01/2014 1,111
BBB+ NR* 1,250 Refunding (Allegheny College Project), Series B, 6% due 11/01/2022 1,189
A+ Aa 2,000 Pennsylvania State Higher Educational Facilities Authority, Revenue
Refunding Bonds (Thomas Jefferson University), Series A, 6.625% due 8/15/2009 2,167
A- NR* 1,225 Pennsylvania State, IDA, Economic Development Revenue Bonds, Series A,
7% due 7/01/2001 (f) 1,367
A+ NR* 1,895 Philadelphia, Pennsylvania, Authority for IDR (National Board of Medical
Examiners Project), 6.75% due 5/01/2012 2,035
Philadelphia, Pennsylvania, Gas Works Revenue Bonds:
AAA Aaa 1,440 12th Series B, 7% due 5/15/2020 (c)(i) 1,660
AAA Aaa 750 13th Series, 7.70% due 6/15/2001 (f) 862
Philadelphia, Pennsylvania, Hospitals and Higher Education Facilities
Authority Revenue Bonds:
A- NR* 1,015 (Children's Seashore House), Series A, 7% due 8/15/2017 1,066
A- NR* 3,000 (Children's Seashore House), Series B, 7% due 8/15/2022 3,133
BBB NR* 3,100 (Northwestern Corp.), 7.125% due 6/01/2018 3,211
A- Baa1 1,500 Refunding (Chestnut Hill Hospital), 6.50% due 11/15/2022 1,510
AAA Aaa 1,000 Refunding (Magee Rehabilitation Hospital), 7% due 12/01/2010 (b) 1,092
AAA NR* 3,000 Refunding (Presbyterian Medical Center), 6.65% due 12/01/2019 (i) 3,348
<PAGE>
AAA Aaa 360 Philadelphia, Pennsylvania, Municipal Authority, Revenue Refunding Bonds,
7.80% due 4/01/2000 (d)(f) 400
AAA Aaa 1,770 Philadelphia, Pennsylvania, School District, Series B, 5.50% due 9/01/2025 (b) 1,698
AAA Baa 1,000 Philadelphia, Pennsylvania, Water and Sewer Revenue Bonds, 16th Series,
7.50% due 8/01/2001 (f) 1,144
AAA Aaa 2,250 Philadelphia, Pennsylvania, Water and Wastewater Revenue Bonds, 5.60% due
8/01/2018 (c) 2,200
AAA Aaa 4,000 Pittsburgh, Pennsylvania, Water and Sewer Authority, Water and Sewer System
Revenue Bonds, Series A, First Lien, 5.65% due 9/01/2025 (d) 3,921
AAA Aaa 1,000 Reading, Pennsylvania, GO, Refunding, UT, 6.50% due 11/15/2002 (b)(f) 1,097
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 1,835
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Puerto Rico--1.4%
<S> <S> <C> <S> <C>
AAA Baa1 $ 310 Puerto Rico Commonwealth, Aqueduct and Sewer Authority Revenue Bonds,
Series A, 7% due 7/01/1998 (f) $ 333
A Baa1 800 Puerto Rico Commonwealth, Highway Authority, Highway Revenue Refunding
Bonds, Series R, 6.75% due 7/01/2000 (f) 876
AAA NR* 740 Puerto Rico Commonwealth, Public Improvement, GO, 7.70% due 7/01/2000 (f) 840
AAA NR* 100 Puerto Rico Electric Power Authority, Revenue Refunding Bonds, Series M,
8% due 7/01/1998 (f) 109
Total Investments (Cost--$136,012)--95.4% 143,561
Variation Margin on Financial Futures Contracts--(0.1%)++ (103)
Other Assets Less Liabilities--4.7% 7,038
--------
Net Assets--100.0% $150,496
========
<PAGE>
<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, 1996.
(b)AMBAC Insured.
(c)MBIA Insured.
(d)FGIC Insured.
(e)FSA Insured.
(f)Prerefunded.
(g)Connie Lee Insured.
(h)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, 1996.
(i)Escrowed to maturity.
(j)Bank Qualified.
(k)All or a portion of security held as collateral in connection
with open financial futures contracts.
*Not Rated.
**Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of purchase by the Fund.
++Financial futures contracts sold as of July 31, 1996 (in
thousands) were as follows:
Number of Expiration Value
Contracts Issue Date (Notes 1a & 1b)
150 US Treasury Bonds September 1996 $ 16,368
Total Financial Futures Contracts Sold
(Total Contract Price--$16,327) $ 16,368
========
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of July 31, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$136,011,644) (Note 1a) $143,561,198
Cash 92,005
Receivables:
Securities sold $ 5,162,858
Interest 2,412,436
Beneficial interest sold 161,351 7,736,645
------------
Prepaid registration fees and other assets (Note 1e) 16,287
------------
Total assets 151,406,135
------------
<PAGE>
Liabilities: Payables:
Beneficial interest redeemed 389,367
Dividends to shareholders (Note 1f) 186,523
Variation margin (Note 1b) 103,125
Investment adviser (Note 2) 70,114
Distributor (Note 2) 53,791 802,920
------------
Accrued expenses and other liabilities 107,213
------------
Total liabilities 910,133
------------
Net Assets: Net assets $150,496,002
============
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited
Consist of: number of shares authorized $ 193,560
Class B Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 1,079,147
Class C Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 42,259
Class D Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 32,042
Paid-in capital in excess of par 143,650,698
Accumulated realized capital losses on investments--net (2,009,851)
Unrealized appreciation on investments--net 7,508,147
------------
Net assets $150,496,002
============
Net Asset Value: Class A--Based on net assets of $21,625,751 and 1,935,599 shares
of beneficial interest outstanding $ 11.17
============
Class B--Based on net assets of $120,565,055 and 10,791,465 shares
of beneficial interest outstanding $ 11.17
============
Class C--Based on net assets of $4,721,914 and 422,593 shares
of beneficial interest outstanding $ 11.17
============
Class D--Based on net assets of $3,583,282 and 320,418 shares
of beneficial interest outstanding $ 11.18
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
July 31, 1996
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 9,524,107
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 845,927
Account maintenance and distribution fees--Class B (Note 2) 621,816
Printing and shareholder reports 87,425
Transfer agent fees--Class B (Note 2) 68,958
Accounting services (Note 2) 62,902
Professional fees 62,775
Account maintenance and distribution fees--Class C (Note 2) 21,538
Registration fees (Note 1e) 12,130
Pricing fees 11,332
Transfer agent fees--Class A (Note 2) 10,301
Custodian fees 9,107
Trustees' fees and expenses 7,603
Account maintenance fees--Class D (Note 2) 3,286
Transfer agent fees--Class C (Note 2) 2,072
Transfer agent fees--Class D (Note 2) 1,523
Amortization of organization expenses (Note 1e) 1,244
Other 4,319
------------
Total expenses 1,834,258
------------
Investment income--net 7,689,849
------------
Realized & Realized gain on investments--net 415,112
Unrealized Change in unrealized appreciation on investments--net 999,490
Gain on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 9,104,451
(Notes 1b, 1d & 3): ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended July 31,
Increase (Decrease) in Net Assets: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 7,689,849 $ 7,974,336
Realized gain (loss) on investments--net 415,112 (2,162,672)
Change in unrealized appreciation on investments--net 999,490 2,862,358
------------ ------------
Net increase in net assets resulting from operations 9,104,451 8,674,022
------------ ------------
<PAGE>
Dividends to Investment income--net:
Shareholders Class A (1,225,179) (1,403,188)
(Note 1f): Class B (6,116,920) (6,445,060)
Class C (172,681) (36,471)
Class D (175,069) (89,617)
------------ ------------
Net decrease in net assets resulting from dividends to shareholders (7,689,849) (7,974,336)
------------ ------------
Beneficial Net decrease in net assets derived from beneficial
Interest interest transactions (1,716,500) (8,558,779)
Transactions ------------ ------------
(Note 4):
Net Assets: Total decrease in net assets (301,898) (7,859,093)
Beginning of year 150,797,900 158,656,993
------------ ------------
End of year $150,496,002 $150,797,900
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived Class A
from information provided in the financial statements.
For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 11.07 $ 11.00 $ 11.39 $ 11.04 $ 10.27
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .61 .62 .60 .63 .67
Realized and unrealized gain (loss) on
investments--net .10 .07 (.33) .36 .77
-------- -------- -------- -------- --------
Total from investment operations .71 .69 .27 .99 1.44
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.61) (.62) (.60) (.63) (.67)
Realized gain on investments--net -- -- (.04) (.01) --
In excess of realized gain on
investments--net -- -- (.02) -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.61) (.62) (.66) (.64) (.67)
-------- -------- -------- -------- --------
Net asset value, end of year $ 11.17 $ 11.07 $ 11.00 $ 11.39 $ 11.04
======== ======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share 6.53% 6.54% 2.37% 9.30% 14.53%
Return:* ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement .76% .77% .75% .69% .55%
Average ======== ======== ======== ======== ========
Net Assets: Expenses .76% .77% .75% .81% .97%
======== ======== ======== ======== ========
Investment income--net 5.41% 5.72% 5.30% 5.70% 6.33%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $ 21,626 $ 23,040 $ 28,239 $ 27,639 $ 17,144
Data: ======== ======== ======== ======== ========
Portfolio turnover 58.33% 59.17% 37.73% 9.69% 4.14%
======== ======== ======== ======== ========
<FN>
*Total investment returns exclude the effect of
sales loads.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
The following per share data and ratios have been derived Class B
from information provided in the financial statements.
For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 11.07 $ 11.00 $ 11.39 $ 11.04 $ 10.27
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .55 .56 .54 .58 .62
Realized and unrealized gain (loss) on
investments--net .10 .07 (.33) .36 .77
-------- -------- -------- -------- --------
Total from investment operations .65 .63 .21 .94 1.39
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.55) (.56) (.54) (.58) (.62)
Realized gain on investments--net -- -- (.04) (.01) --
In excess of realized gain on
investments--net -- -- (.02) -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.55) (.56) (.60) (.59) (.62)
-------- -------- -------- -------- --------
Net asset value, end of year $ 11.17 $ 11.07 $ 11.00 $ 11.39 $ 11.04
======== ======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share 5.98% 6.00% 1.86% 8.75% 13.94%
Return:* ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement 1.27% 1.28% 1.25% 1.19% 1.06%
Average ======== ======== ======== ======== ========
Net Assets: Expenses 1.27% 1.28% 1.25% 1.32% 1.48%
======== ======== ======== ======== ========
Investment income--net 4.91% 5.21% 4.80% 5.19% 5.81%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands). $120,565 $123,260 $130,418 $109,463 $ 65,599
Data: ======== ======== ======== ======== ========
Portfolio turnover 58.33% 59.17% 37.73% 9.69% 4.14%
======== ======== ======== ======== ========
<FN>
*Total investment returns exclude the effect of
sales loads.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION> Class C Class D
For the For the For the For the
The following per share data and ratios have been derived Year Period Year Period
from information provided in the financial statements. Ended Oct. 21, 1994++ Ended Oct. 21, 1994++
July 31, to July 31, July 31, to July 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1996 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.07 $ 10.68 $ 11.08 $ 10.68
Operating -------- -------- -------- --------
Performance: Investment income--net .54 .43 .60 .47
Realized and unrealized gain on investments--net .10 .39 .10 .40
-------- -------- -------- --------
Total from investment operations .64 .82 .70 .87
-------- -------- -------- --------
Less dividends from investment income--net. (.54) (.43) (.60) (.47)
-------- -------- -------- --------
Net asset value, end of period $ 11.17 $ 11.07 $ 11.18 $ 11.08
======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share 5.87% 7.83%+++ 6.42% 8.36%+++
Return:** ======== ======== ======== ========
Ratios to Expenses 1.37% 1.38%* .86% .87%*
Average Net ======== ======== ======== ========
Assets: Investment income--net 4.80% 5.05%* 5.31% 5.65%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 4,722 $ 1,868 $ 3,583 $ 2,630
Data: ======== ======== ======== ========
Portfolio turnover 58.33% 59.17% 58.33% 59.17%
======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effect 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.
<PAGE>
(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 super-vision of the Trustees.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
* Financial futures contracts--The Fund may purchase or sell interest
rate futures contracts and options on such futures contracts for the
purpose of hedging the market risk on existing securities or the
intended purchase of securities. Futures contracts are contracts for
delayed delivery of securities at a specific future date and at a
specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to
the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin
and are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
<PAGE>
(e) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a five-year period. Prepaid registration fees are
charged to expense as the related shares are issued.
(f) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is 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 FAM 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% --
<PAGE>
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the year ended July 31, 1996, 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 $1,089 $12,100
Class D $1,544 $14,855
For the year ended July 31, 1996, MLPF&S received contingent
deferred sales charges of $195,896 and $2,273 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, 1996 were $85,452,752 and $92,800,165,
respectively.
NOTES TO FINANCIAL STATEMENTS(concluded)
Net realized and unrealized gains (losses) as of
July 31, 1996 were as follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Long-term investments. $ 1,337,856 $ 7,549,554
Financial futures contracts. (922,744) (41,407)
----------- -----------
Total $ 415,112 $ 7,508,147
=========== ===========
<PAGE>
As of July 31, 1996, net unrealized appreciation for Federal income
tax purposes aggregated $7,463,117, of which $7,918,251 related to
appreciated securities and $455,134 related to depreciated
securities. The aggregate cost of investments at July 31, 1996 for
Federal income tax purposes was $136,098,081.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest
transactions was $1,716,500 and $8,558,779 for the years ended July
31, 1996 and July 31, 1995, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 109,752 $ 1,229,333
Shares issued to share-
holders in reinvestment of
dividends 58,364 656,749
----------- -----------
Total issued 168,116 1,886,082
Shares redeemed (314,476) (3,540,925)
----------- -----------
Net decrease (146,360) $(1,654,843)
=========== ===========
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)
=========== ===========
<PAGE>
Class B Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 1,605,962 $18,118,584
Shares issued to share-
holders in reinvestment of
dividends 267,930 3,014,759
----------- -----------
Total issued 1,873,892 21,133,343
Shares redeemed (2,176,649) (24,491,107)
Automatic conversion of
shares (44,290) (494,541)
----------- -----------
Net decrease (347,047) $(3,852,305)
=========== ===========
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 C Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 310,698 $ 3,488,268
Shares issued to share-
holders in reinvestment of
dividends 10,054 113,133
----------- -----------
Total issued 320,752 3,601,401
Shares redeemed (66,907) (753,080)
----------- -----------
Net increase 253,845 $ 2,848,321
=========== ===========
<PAGE>
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.
Class D Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 174,458 $ 1,955,538
Automatic conversion of
shares 44,251 494,541
Shares issued to share-
holders in reinvestment of
dividends 10,521 118,715
----------- -----------
Total issued 229,230 2,568,794
Shares redeemed (146,212) (1,626,467)
----------- -----------
Net increase 83,018 $ 942,327
=========== ===========
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.
<PAGE>
<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, 1996, the related statements
of operations for the year then ended and changes in net assets for
each of the years in the two-year period then ended, and the
financial highlights for each of the years in the five-year period
then ended. These financial statements and the financial highlights
are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the
financial statements and the financial highlights are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned
at July 31, 1996 by correspondence with the custodian and broker. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch Pennsylvania Municipal Bond Fund of Merrill Lynch
Multi-State Municipal Series Trust as of July 31, 1996, the results
of its operations, the changes in its net assets, and the financial
highlights for the respective stated periods in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
September 5, 1996
</AUDIT-REPORT>
