MERRILL LYNCH
PENNSYLVANIA
MUNICIPAL
BOND FUND
FUND LOGO
Semi-Annual Report
January 31, 1996
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.
<PAGE>
Merrill Lynch Pennsylvania
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011
TO OUR SHAREHOLDERS
Although the partial shutdown of the US Government curtailed the
release of most economic data in the latter part of the six-month
period ended January 31, 1996, it was nonetheless apparent that
gross domestic product (GDP) growth was losing momentum. Consumer
spending is barely growing, the industrial sector is at a virtual
standstill and, despite lower mortgage rates, there is little or no
pick-up in housing activity. With inflationary pressures subdued,
the Federal Reserve Board responded to the slowing economy by
continuing to modestly lower short-term interest rates.
Historically, it has taken some time for shifts in monetary policy
to have an impact on economic growth. Therefore, the Federal Reserve
Board's gradual shift to lowering interest rates, which began early
last year, may not be reflected in a pick-up in real economic growth
until later this year.
<PAGE>
The impasse between the Clinton Administration and Congress over the
Federal budget continues, although both sides have made concessions
since the debate began. It appears that investors are currently
focusing on the progress that has been made rather than on the
differences that remain. Initially, President Clinton proposed
deficits of about $190 billion annually through fiscal year 2002,
but now proposes balanced budgets, as do the Republicans. Current
indications are that a piecemeal budget accord is the most likely
outcome. Even without the proposed policy changes, it appears that
the US Federal budget deficit would remain stable at about 2% of GDP
for the rest of the decade. This would be far better than is the
case for most Group of Seven industrial nations, and for the United
States would represent a great improvement over the last 15 years.
Although this may fall short of investors' best expectations, it
appears that the Federal budget debate over the past year has
resulted in a trend toward a more conservative fiscal policy.
The Municipal Market
The municipal bond market rallied strongly over the six months ended
January 31, 1996. Long-term, tax-exempt revenue bond yields, as
measured by the Bond Buyer Revenue Bond Index, declined over 65
basis points (0.65%) to end the January period at 5.69%. Continued
weak economic conditions coupled with low inflation fostered a very
positive environment for almost all fixed-income investments during
the last three months of 1995. Long-term US Treasury bond yields
also declined approximately 65 basis points to 6.00% by January 31,
1996. Both US Treasury and long-term tax-exempt bond yields are near
their lowest levels in the past two years.
The municipal bond market had to contend with a number of
difficulties for much of 1995. Various tax reform proposals have
made the future tax advantage of municipal bonds uncertain. This
has, at a minimum, reduced the overall demand for tax-exempt
securities. At the same time, as municipal bond yields declined, tax-
exempt authorities have rushed to issue debt at near historic low
yield levels. During the six-month period ended January 31, 1996,
approximately $90 billion in municipal securities were underwritten,
an increase of over 30% compared to the same period last year.
However, as early 1995 issuance was significantly reduced, the last
12 months issuance of approximately $160 billion remained the same
as that issued a year earlier. Tax-exempt bond yields declined
throughout the six months ended January 31, 1996, despite investor
uncertainty and increased supply pressures.
<PAGE>
It is likely that the municipal market will regain much of the
technical support it enjoyed earlier in 1995. 1995 issuance remained
significantly below levels underwritten in 1993, when over $290
billion in long-term tax-exempt securities were issued. Also,
municipal investors received over $25 billion in bond maturities,
coupon income and early redemptions on January 1, 1996. This $25
billion is almost twice the average monthly issuance for 1995. The
amount of outstanding municipal securities will continue to decline
throughout 1996 and into early 1997. As the uncertainties
surrounding proposed tax reforms are resolved in 1996, the tax-
exempt bond market's renewed technical position should provide
support to municipal bond prices.
Many of the features that made tax-exempt products attractive to
investors last year are still in place. Long-term, A-rated municipal
revenue bonds continue to yield well over 90% of comparable US
Treasury bond yields. Historically, analysts have considered yields
in excess of 82% attractive for long-term investors. For example,
currently available tax-exempt bond yields generate taxable
equivalent yields in excess of 8.50% for an investor in the 36%
Federal income tax bracket. While the uncertainties regarding
potential changes in current tax law remain, it appears that, at
current price levels, bond investors have discounted at least some
of the uncertainty.
Looking ahead, it may be unreasonable to expect to duplicate the
double-digit returns produced by most tax-exempt issues in 1995,
given current municipal bond yields. Municipal bond yields would
have to decline to levels not seen since the 1960s in order to
generate such significant returns in the coming years. While the
current economic environment may still justify additional declines
in interest rates, it may be prudent to expect some period of
consolidation before the interest rate decline resumes. Tax-exempt
bond market performance in 1996 is likely to be generated more by
enhancing current income and limiting credit risk than by
significant interest rate declines.
Portfolio Strategy
We were constructive on the fixed-income market during the six
months ended January 31, 1996. Throughout the period we sought to
acquire new securities which we believed would perform well in an
environment of falling interest rates. This strategy was possible as
a result of a 32% increase in Pennsylvania municipal issuance for
the six-month period as compared to the corresponding period in
1995. At the same time, we elected to eliminate from the portfolio
those securities which we believed had poor performance
characteristics. As a result, the portfolio is positioned to be more
responsive to changes in interest rates.
Looking ahead, we remain positive on long-term interest rates in
response to a backdrop of slow economic growth, low inflation, tight
fiscal policy and the return of favorable technical conditions to
the Pennsylvania municipal market. Therefore, we will remain fully
invested to seek to enhance the tax-exempt income available to our
shareholders and will consider any significant decline in the market
as an opportunity to adopt a more aggressive investment strategy.
<PAGE>
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 ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President
(William M. Petty)
William M. Petty
Portfolio Manager
March 6, 1996
<PAGE>
We are pleased to announce that William M. Petty is responsible for
the day-to-day management of Merrill Lynch Pennsylvania Municipal
Bond Fund. Mr. Petty has been employed by Merrill Lynch Asset
Management, L.P. (an affiliate of the Fund's investment adviser)
since 1993 as Vice President and was Assistant Vice President from
1992 to 1993. Prior thereto, he was employed by J.J. Kenny Municipal
Bond Brokers as Municipal Bond Broker from 1990 to 1992.
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.
* 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>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/95 +17.26% +12.57%
Five Years Ended 12/31/95 + 9.18 + 8.29
Inception (8/31/90)
through 12/31/95 + 9.16 + 8.32
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/95 +16.57% +12.57%
Five Years Ended 12/31/95 + 8.61 + 8.61
Inception (8/31/90)
through 12/31/95 + 8.59 +8.59
[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 12/31/95 +16.55% +15.55%
Inception (10/21/94)
through 12/31/95 +12.44 +12.44
[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*
Year Ended 12/31/95 +17.13% +12.45%
Inception (10/21/94)
through 12/31/95 +13.10 + 9.30
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
PERFORMANCE DATA (continued)
<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
1/1/96-1/31/96 11.57 11.57 -- 0.035 + 0.39
------ ------
Total $0.045 Total $3.471
Cumulative total return as of 1/31/96: +60.24%**
<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
1995 10.43 11.56 -- 0.561 +16.57
1/1/96-1/31/96 11.56 11.57 -- 0.032 + 0.45
------ ------
Total $0.045 Total $3.174
Cumulative total return as of 1/31/96: +55.93%**
<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 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
1/1/96-1/31/96 11.57 11.58 -- 0.031 + 0.45
------
Total $0.690
Cumulative total return as of 1/31/96: +15.54%**
<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>
PERFORMANCE DATA (concluded)
<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
1/1/96-1/31/96 11.58 11.58 -- 0.035 + 0.39
------
Total $0.762
Cumulative total return as of 1/31/96: +16.29%**
<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
include sales charge; results would be lower if sales charge was
included.
</TABLE>
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
1/31/96 10/31/95 1/31/95 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $11.57 $11.26 $10.68 + 8.33% +2.75%
Class B Shares* 11.57 11.26 10.68 + 8.33 +2.75
Class C Shares* 11.58 11.26 10.68 + 8.43 +2.84
Class D Shares* 11.58 11.27 10.69 + 8.33 +2.75
Class A Shares--Total Return* +14.46(1) +4.12(2)
Class B Shares--Total Return* +13.89(3) +3.99(4)
Class C Shares--Total Return* +13.87(5) +4.06(6)
Class D Shares--Total Return* +14.34(7) +4.10(8)
Class A Shares--Standardized 30-day Yield 4.48%
Class B Shares--Standardized 30-day Yield 4.16%
Class C Shares--Standardized 30-day Yield 4.05%
Class D Shares--Standardized 30-day Yield 4.38%
<PAGE>
<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 $0.616 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.153 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.560 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.138 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.548 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.135 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.606 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.150 per share ordinary
income dividends.
</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
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Pennsylvania--98.9%
<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) $ 544
Allegheny County, Pennsylvania, Hospital Development Authority Revenue Bonds:
A1+ VMIG1++ 200 (Presbyterian Health Center), VRDN, Series B, 3.15% due 3/01/2020 (a)(c) 200
A1+ VMIG1++ 700 (Presbyterian Health Center), VRDN, Series C, 3.15% due 3/01/2020 (a) 700
NR* VMIG1++ 100 (Presbyterian University Hospital), VRDN, Series B-1, 3.15% due 3/01/2018 (a) 100
NR* VMIG1++ 165 (Presbyterian University Hospital), VRDN, Series B-2, 3.15% due 3/01/2018 (a) 165
NR* A 2,000 (South Hills Health System), Series A, 6.50% due 5/01/2014 2,091
AAA Aaa 4,785 Allegheny County, Pennsylvania, IDA, Revenue Refunding Bonds (Commercial
Development MPB Association Project), 7.70% due 12/01/2013 (g) 6,230
AAA Aaa 475 Allegheny County, Pennsylvania, Institutional District Bonds, UT,
Series 18, 7.30% due 4/01/2009 (c) 526
NR* Aaa 495 Allegheny County, Pennsylvania, Residential Finance Authority, S/F Mortgage
Revenue Bonds, Series L, 7.50% due 6/01/2015 (e) 528
AAA Aaa 750 Allegheny County, Pennsylvania, Sanitation Authority, Sewer Revenue Bonds,
Series C, 6.50% due 12/01/2001 (d)(f) 840
Beaver County, Pennsylvania, IDA, PCR, Refunding:
AAA Aaa 500 (Ohio Edison Project), Series A, 7.75% due 9/01/2024 (d) 559
AAA Aaa 1,500 (Pennsylvania Power Company--Beaver Valley Project), 6% due 9/01/2028 (b) 1,586
AAA Aaa 1,430 Berks County, Pennsylvania, GO, UT, Second Series, 5.65%** due 5/15/2020 (d) 383
Bethlehem, Pennsylvania, Water Authority, Revenue Refunding Bonds (c):
AAA Aaa 1,000 4.875% due 11/15/2014 952
AAA Aaa 2,350 5.20% due 11/15/2021 2,294
AAA Aaa 2,000 Bristol Township, Pennsylvania, School District, GO, Series A, 6.625% due
2/15/2002 (c)(f) 2,281
AAA Aaa 3,550 Cambria County, Pennsylvania, GO, UT, Series A, 6.625% due 8/14/2014 (d) 3,983
AAA Aaa 3,000 Cumberland County, Pennsylvania, Municipal Authority College, Revenue
Refunding Bonds(Messiah College Project), 5.125% due 10/01/2015 (b) 2,929
A A3 500 Dauphin County, Pennsylvania, IDA, Water Development Revenue Bonds (Dauphin
Consolidated Water Supply), AMT, Series A, 6.90% due 6/01/2024 588
AAA NR* 4,000 Delaware County, Pennsylvania, College Authority Revenue Bonds (Neumann
College), 5.625% due 10/01/2025 4,019
</TABLE>
<PAGE>
<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>
A- NR* $2,350 Delaware County, Pennsylvania, Hospital Authority Revenue Bonds (Riddle
Memorial Hospital), 6.50% due 1/01/2022 $ 2,410
AA- Aa3 1,000 Delaware County, Pennsylvania, IDA, Revenue Refunding Bonds (Resource
Recovery Project), Series A, 8.10% due 12/01/2013 1,048
Emmaus, Pennsylvania, General Authority Revenue Bonds, VRDN (a):
A1 NR* 200 Sub-Series B-10, 3.25% due 3/01/2024 200
A1 NR* 200 Sub-Series B-12, 3.35% due 3/01/2024 200
A1 NR* 400 Sub-Series D-12, 3.20% due 3/01/2024 400
Erie County, Pennsylvania, IDA, PCR, Refunding (International Paper Co.):
A- A3 1,000 7.15% due 9/01/2013 1,082
A- A3 425 Series A, 7.60% due 9/01/2010 465
AAA Aaa 1,155 Exeter Township, Pennsylvania, School District, GO, UT, 6.65% due 5/15/2010 (d) 1,273
A- NR* 4,990 Gettysburg, Pennsylvania, Municipal Authority, College, Revenue Refunding
Bonds (Gettysburg College Project), 6.60% due 2/15/2012 5,369
AAA Aaa 2,960 Hollidaysburg, Pennsylvania, Area School District, Improvement Bonds, UT,
6.50% due 6/01/2020 (b) 3,270
NR* Baa1 1,500 Latrobe, Pennsylvania, IDA, College Revenue Bonds (Saint Vincent College
Project), 6.75% due 5/01/2024 1,589
BBB+ NR* 2,000 Lebanon County, Pennsylvania, Good Samaritan Hospital Authority, Revenue
Refunding Bonds (Good Samaritan Hospital Project), 6% due 11/15/2018 1,914
A A 2,585 Lehigh County, Pennsylvania, General Purpose Authority Revenue Bonds
(Muhlenberg Hospital Center), Series A, 5.75% due 7/15/2010 2,585
AAA Aaa 1,500 Lehigh County, Pennsylvania, IDA, PCR, Refunding (Pennsylvania Power &
Light Company Project), Series A, 6.40% due 11/01/2021 (c) 1,615
<PAGE>
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 3,887
AAA Aaa 2,000 7% due 12/01/2017 (b) 2,273
Montgomery County, Pennsylvania, Higher Education and Health Authority,
Hospital Revenue Bonds:
AAA Aaa 2,500 (Abington Hospital), MVRICS, Series A, 9.09% due 6/01/2011 (b)(h) 2,934
NR* NR* 225 (Jeanes Health System Project), 8.625% due 7/01/2000 (f) 269
BBB NR* 1,435 (Northwestern Corporation), 7% due 6/01/2012 1,500
BBB+ Baa2 2,665 Montgomery County, Pennsylvania, IDA, PCR, Refunding (Philadelphia Electric
Company), AMT, Series A, 7.60% due 4/01/2021 2,916
BBB+ NR* 475 Moon Transportation Authority, Pennsylvania, Highway Improvement Revenue
Bonds, 9.50% due 2/01/2016 545
AAA Aaa 4,400 Norristown, Pennsylvania, Municipal Waste Authority, Sewer Revenue Bonds,
5.125% due 11/15/2023 (d) 4,239
AAA Aaa 3,300 North Penn, Pennsylvania, Water Authority Revenue Bonds, 7% due
11/01/2004 (d)(f) 3,929
AAA Aaa 4,000 North Wales, Pennsylvania, Water Authority Revenue Bonds, 7% due
11/01/2004 (d)(f) 4,735
AAA NR* 2,095 Northampton County, Pennsylvania, Higher Education Authority Revenue
Bonds (Moravian College), 8.20% due 6/01/2001 (f) 2,532
BBB NR* 1,500 Northeastern, Pennsylvania Hospital and Educational Authority, University
Revenue Refunding Bonds (Wilkes University), 5.625% due 10/01/2018 1,440
</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 Convention Center Authority, Revenue Refunding Bonds,
Series A:
BBB- Baa $1,555 6.70% due 9/01/2014 $ 1,694
BBB- Baa 2,500 6.75% due 9/01/2019 2,732
BBB- Baa2 1,500 Pennsylvania Economic Development Financing Authority, Exempt Facilities
Revenue Bonds(MacMillan Limited Partnership Project), AMT, 7.60%
due 12/01/2020 1,705
<PAGE>
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 4,510
Pennsylvania, HFA, RIB, AMT (h):
AA Aa 2,000 8.111% due 4/01/2025 2,060
AA Aa 1,000 Refunding, Series 1991-31C, 10.015% due 10/01/2023 1,112
NR* Aaa 2,000 Pennsylvania Intergovernmental Cooperative Authority, City of Philadelphia
Funding Program, Special Tax Revenue Bonds, 6.80% due 6/15/2002 (f) 2,281
A NR* 2,000 Pennsylvania State Finance Authority, Revenue Refunding Bonds (Municipal Capital
Improvements Program), 6.60% due 11/01/2009 2,178
Pennsylvania State, HFA, S/F Mortgage Revenue Bonds, AMT:
AA+ Aa 1,145 Series 28, 7.65% due 10/01/2023 1,223
AA+ Aa 2,165 Series 40, 6.90% due 4/01/2025 2,273
AA+ Aa 1,500 Series 41-B, 6.65% due 4/01/2025 1,555
Pennsylvania State Higher Educational Facilities Authority, College and
University Revenue Bonds:
A1+ NR* 5,300 (Carnegie Mellon University), VRDN, Series B, 3.85% due 11/01/2027 (a) 5,300
NR* Baa 2,295 (Delaware Valley College of Science & Agriculture), 7% due 4/01/2022 2,478
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 1,130
BBB+ NR* 1,250 Refunding (Allegheny College Project), Series B, 6% due 11/01/2022 1,248
A+ Aa 2,000 Pennsylvania State Higher Educational Facilities Authority, Revenue Refunding
Bonds(Thomas Jefferson University), Series A, 6.625% due 8/15/2009 2,201
A- A 1,225 Pennsylvania State, IDA, Economic Development Revenue Bonds, Series A, 7%
due 7/01/2001 (f) 1,402
A+ NR* 1,895 Philadelphia, Pennsylvania, Authority for IDR (National Board of Medical
Examiners Project), 6.75% due 5/01/2012 2,069
Philadelphia, Pennsylvania, Gas Works Revenue Bonds:
AAA Aaa 1,250 12th Series B, 7% due 5/15/2020 (c)(i) 1,544
AAA Aaa 750 13th Series, 7.70% due 6/15/2001 (f) 889
Philadelphia, Pennsylvania, Hospitals and Higher Education Facilities
Authority Revenue Bonds:
A1+ VMIG1++ 1,800 (Children's Hospital of Philadelphia Project), VRDN, 3.75%
due 3/01/2027 (a) 1,800
A- NR* 1,015 (Children's Seashore House), Series A, 7% due 8/15/2017 1,094
A- NR* 3,000 (Children's Seashore House), Series B, 7% due 8/15/2022 3,226
BBB NR* 3,100 (Northwestern Corp.), 7.125% due 6/01/2018 3,320
A- A 1,500 Refunding (Chestnut Hill Hospital), 6.50% due 11/15/2022 1,548
AAA Aaa 500 Refunding (Magee Rehabilitation Hospital), 7% due 12/01/2005 (b) 561
AAA Aaa 1,000 Refunding (Magee Rehabilitation Hospital), 7% due 12/01/2010 (b) 1,123
A- NR* 3,000 Refunding (Presbyterian Medical Center), 6.65% due 12/01/2019 (i) 3,591
A- Baa1 3,500 Refunding (Temple University Hospital), Series A, 6.625% due 11/15/2023 3,678
</TABLE>
<PAGE>
<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>
AAA Aaa $ 360 Philadelphia, Pennsylvania, Municipal Authority, Revenue Refunding
Bonds, 7.80% due 4/01/2000 (d)(f) $ 411
AAA Baa 1,000 Philadelphia, Pennsylvania, Water and Sewer Revenue Bonds, 16th Series,
7.50% due 8/01/2001 (f) 1,179
AAA Aaa 2,000 Philadelphia, Pennsylvania, Water and Wastewater Revenue Bonds, 5.60%
due 8/01/2018 (c) 2,015
AAA Aaa 1,000 Reading, Pennsylvania, Revenue Refunding Bonds, GO, UT, 6.50%
due 11/15/2002 (b)(f) 1,131
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 1,883
AAA Aaa 2,000 York County, Pennsylvania, GO, LT, South Western School District, 6.40%
due 6/15/2002 (d)(f) 2,175
Puerto Rico--1.5%
AAA Baa1 310 Puerto Rico Commonwealth, Aqueduct and Sewer Authority Revenue Bonds,
Series A, 7% due 7/01/1998 (f) 339
A Baa1 800 Puerto Rico Commonwealth, Highway Authority, Highway Revenue Refunding
Bonds,Series R, 6.75% due 7/01/2005 883
AAA NR* 740 Puerto Rico Commonwealth, Public Improvement, GO, 7.70% due 7/01/2000 (f) 864
Puerto Rico Electric Power Authority, Power Revenue Bonds:
AAA NR* 100 Refunding, Series M, 8% due 7/01/1998 (f) 112
A- Baa1 190 Series O, 7.125% due 7/01/2014 207
Total Investments (Cost--$146,528)--100.4% 159,119
Liabilities in Excess of Other Assets--(0.4%) (663)
--------
Net Assets--100.0% $158,456
========
<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 January 31, 1996.
(b)AMBAC Insured.
(c)MBIA Insured.
(d)FGIC Insured.
(e)GNMA Collateralized.
(f)Prerefunded.
(g)FSA Insured.
(h)The interest rate is subject to change periodically and inversely
based upon prevailing market rates. The interestrate shown is the
rate in effect at January 31, 1996.
(i)Escrowed to maturity.
*Not Rated.
**Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of purchase by the Fund.
++Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of January 31, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$146,527,863) (Note 1a) $159,119,489
Cash 3,237
Receivable
Interest $ 2,437,022
Beneficial interest sold 134,642 2,571,664
------------
Deferred organization expenses (Note 1e) 1,244
Prepaid registration fees and other assets (Note 1e) 24,375
------------
Total assets 161,720,009
------------
<PAGE>
Liabilities: Payables:
Securities purchased 2,566,531
Beneficial interest redeemed 319,000
Dividends to shareholders (Note 1f) 186,737
Investment adviser (Note 2) 71,133
Distributor (Note 2) 54,522 3,197,923
------------
Accrued expenses and other liabilities 66,560
------------
Total liabilities 3,264,483
------------
Net Assets: Net assets $158,455,526
============
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited
Consist of: number of shares authorized $ 198,080
Class B Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 1,111,878
Class C Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 32,343
Class D Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 26,749
Paid-in capital in excess of par 146,063,970
Accumulated realized capital losses on investments--net (Note 5) (1,569,120)
Unrealized appreciation on investments--net 12,591,626
------------
Net assets $158,455,526
============
Net Asset Value: Class A--Based on net assets of $22,926,235 and 1,980,797 shares
of beneficial interest outstanding $ 11.57
============
Class B--Based on net assets of $128,686,401 and 11,118,775 shares
of beneficial interest outstanding $ 11.57
============
Class C--Based on net assets of $3,744,009 and 323,433 shares
of beneficial interest outstanding $ 11.58
============
Class D--Based on net assets of $3,098,881 and 267,493 shares
of beneficial interest outstanding $ 11.58
============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
V
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months Ended
January 31, 1996
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 4,806,089
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 426,426
Account maintenance and distribution fees--Class B (Note 2) 314,969
Transfer agent fees--Class B (Note 2) 35,549
Printing and shareholder reports 33,216
Accounting services (Note 2) 30,990
Professional fees 30,619
Account maintenance and distribution fees--Class C (Note 2) 8,912
Pricing fees 6,498
Registration fees (Note 1e) 6,321
Transfer agent fees--Class A (Note 2) 5,419
Custodian fees 4,450
Trustees' fees and expenses 3,741
Account maintenance fees--Class D (Note 2) 1,431
Transfer agent fees--Class C (Note 2) 868
Transfer agent fees--Class D (Note 2) 667
Amortization of organization expenses (Note 1e) 613
Other 2,289
------------
Total expenses 912,978
------------
Investment income--net 3,893,111
------------
Realized & Realized gain on investments--net 855,844
Unrealized Gain on Change in unrealized appreciation on investments--net 6,082,969
Investments--Net ------------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations $ 10,831,924
============
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: Jan. 31, 1996 July 31, 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 3,893,111 $ 7,974,336
Realized gain (loss) on investments--net 855,844 (2,162,672)
Change in unrealized appreciation on investments--net 6,082,969 2,862,358
------------ ------------
Net increase in net assets resulting from operations 10,831,924 8,674,022
------------ ------------
Dividends to Investment income--net:
Shareholders Class A (633,424) (1,403,188)
(Note 1f): Class B (3,111,530) (6,445,060)
Class C (71,642) (36,471)
Class D (76,515) (89,617)
------------ ------------
Net decrease in net assets resulting from dividends to shareholders (3,893,111) (7,974,336)
------------ ------------
Beneficial Interest Net increase (decrease) in net assets derived from beneficial
Transactions interest transactions 718,813 (8,558,779)
(Note 4): ------------ ------------
Net Assets: Total increase (decrease) in net assets 7,657,626 (7,859,093)
Beginning of period 150,797,900 158,656,993
------------ ------------
End of period $158,455,526 $150,797,900
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
Class A
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
January 31, 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 period $ 11.07 $ 11.00 $ 11.39 $ 11.04 $ 10.27
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .31 .62 .60 .63 .67
Realized and unrealized gain (loss) on
investments--net .50 .07 (.33) .36 .77
-------- -------- -------- -------- --------
Total from investment operations .81 .69 .27 .99 1.44
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.31) (.62) (.60) (.63) (.67)
Realized gain on investments--net -- -- (.04) (.01) --
In excess of realized gain on
investments--net -- -- (.02) -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.31) (.62) (.66) (.64) (.67)
-------- -------- -------- -------- --------
Net asset value, end of period $ 11.57 $ 11.07 $ 11.00 $ 11.39 $ 11.04
======== ======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share 7.38%+++ 6.54% 2.37% 9.30% 14.53%
Return:** ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement .75%* .77% .75% .69% .55%
Average ======== ======== ======== ======== ========
Net Assets: Expenses .75%* .77% .75% .81% .97%
======== ======== ======== ======== ========
Investment income--net 5.44%* 5.72% 5.30% 5.70% 6.33%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 22,926 $ 23,040 $ 28,239 $ 27,639 $ 17,144
Data: ======== ======== ======== ======== ========
Portfolio turnover 28.20% 59.17% 37.73% 9.69% 4.14%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class B
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
January 31, 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 period $ 11.07 $ 11.00 $ 11.39 $ 11.04 $ 10.27
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .28 .56 .54 .58 .62
Realized and unrealized gain (loss) on
investments--net .50 .07 (.33) .36 .77
-------- -------- -------- -------- --------
Total from investment operations .78 .63 .21 .94 1.39
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.28) (.56) (.54) (.58) (.62)
Realized gain on investments--net -- -- (.04) (.01) --
In excess of realized gain on
investments--net -- -- (.02) -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.28) (.56) (.60) (.59) (.62)
-------- -------- -------- -------- --------
Net asset value, end of period $ 11.57 $ 11.07 $ 11.00 $ 11.39 $ 11.04
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 7.11%+++ 6.00% 1.86% 8.75% 13.94%
Return:** ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement 1.26%* 1.28% 1.25% 1.19% 1.06%
Average ======== ======== ======== ======== ========
Net Assets: Expenses 1.26%* 1.28% 1.25% 1.32% 1.48%
======== ======== ======== ======== ========
Investment income--net 4.93%* 5.21% 4.80% 5.19% 5.81%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands). $128,687 $123,260 $130,418 $109,463 $ 65,599
Data: ======== ======== ======== ======== ========
Portfolio turnover 28.20% 59.17% 37.73% 9.69% 4.14%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<PAGE>
<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 Six Months Period Six Months Period
from information provided in the financial statements. Ended Oct. 21, 1994++ Ended Oct. 21, 1994++
Jan. 31, to July 31, Jan. 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 .27 .43 .30 .47
Realized and unrealized gain on investments--net .51 .39 .50 .40
-------- -------- -------- --------
Total from investment operations .78 .82 .80 .87
-------- -------- -------- --------
Less dividends from investment income--net. (.27) (.43) (.30) (.47)
-------- -------- -------- --------
Net asset value, end of period $ 11.58 $ 11.07 $ 11.58 $ 11.08
======== ======== ======== ========
Total Investment Based on net asset value per share 7.15%+++ 7.83%+++ 7.32%+++ 8.36%+++
Return:** ======== ======== ======== ========
Ratios to Expenses 1.36%* 1.38%* .85%* .87%*
Average Net ======== ======== ======== ========
Assets: Investment income--net 4.81%* 5.05%* 5.33%* 5.65%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 3,744 $ 1,868 $ 3,099 $ 2,630
Data: ======== ======== ======== ========
Portfolio turnover 28.20% 59.17% 28.20% 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.
NOTES TO FINANCIAL STATEMENTS
<PAGE>
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. These
unaudited financial statements reflect all adjustments which are, in
the opinion of management, necessary to a fair statement of the
results for the interim period presented. All such adjustments are
of a normal recurring nature. The Fund offers four classes of shares
under the Merrill Lynch Select Pricing SM System. Shares of Class A
and Class D are sold with a front-end sales charge. Shares of Class
B and Class C may be subject to a contingent deferred sales charge.
All classes of shares have identical voting, dividend, liquidation
and other rights and the same terms and conditions, except that
Class B, Class C and Class D Shares bear certain expenses related to
the account maintenance of such shares, and Class B and Class C
Shares also bear certain expenses related to the distribution of
such shares. Each class has exclusive voting rights with respect to
matters relating to its account maintenance and distribution
expenditures. The following is a summary of significant accounting
policies followed by the Fund.
(a) Valuation of investments--Municipal bonds and other portfolio
securities in which the Fund invests are traded primarily in the
over-the-counter municipal bond and money markets and are valued at
the last available bid price in the over-the-counter market or on
the basis of yield equivalents as obtained from one or more dealers
that make markets in the securities. Financial futures contracts and
options thereon, which are traded on exchanges, are valued at their
settlement prices as of the close of such exchanges. Short-term
investments with remaining maturities of sixty days or less are
valued at amortized cost, which approximates market value.
Securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or
under the direction of the Board of Trustees of the Trust, including
valuations furnished by a pricing service retained by the Trust,
which may utilize a matrix system for valuations. The procedures of
the pricing service and its valuations are reviewed by the officers
of the Trust under the general supervision of the Trustees.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
*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.
<PAGE>
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a five-year period. Prepaid registration fees are
charged to expense as the related shares are issued.
(f) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is 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.
<PAGE>
Pursuant to the distribution plans (the "Distribution Plans")
adopted by the Fund in accordance with Rule 12b-1 under the
Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are
accrued daily and paid monthly at annual rates based upon the
average daily net assets of the shares as follows:
Account
Maintenance Distribution
Fee Fee
Class B 0.25% 0.25%
Class C 0.25% 0.35%
Class D 0.10% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the six months ended January 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 $263 $2,755
Class D $318 $3,444
For the six months ended January 31, 1996, MLPF&S received
contingent deferred sales charges of $105,452 and $359 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.
<PAGE>
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 six months ended January 31, 1996 were $41,689,230 and
$42,725,248, respectively.
Net realized and unrealized gains (losses) as of January 31, 1996
were as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments. $ 1,144,031 $12,591,626
Financial futures contracts (288,187) --
----------- -----------
Total $ 855,844 $12,591,626
=========== ===========
As of January 31, 1996, net unrealized appreciation for Federal
income tax purposes aggregated $12,591,626, of which $12,664,872
related to appreciated securities and $73,246 related to depreciated
securities. The aggregate cost of investments at January 31, 1996
for Federal income tax purposes was $146,527,863.
4. Beneficial Interest Transactions:
Net increase (decrease) in net assets derived from beneficial
interest transactions was $718,813 and $(8,558,779) for the six
months ended January 31, 1996 and for the year ended July 31, 1995,
respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Six Months Dollar
Ended January 31, 1996 Shares Amount
Shares sold 57,144 $ 641,479
Shares issued to share-
holders in reinvestment of
dividends 29,616 334,461
----------- -----------
Total issued 86,760 975,940
Shares redeemed (187,922) (2,129,437)
----------- -----------
Net decrease (101,162) $(1,153,497)
=========== ===========
<PAGE>
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 B Shares for the Six Months Dollar
Ended January 31, 1996 Shares Amount
Shares sold 946,581 $10,719,757
Shares issued to share-
holders in reinvestment of
dividends 134,252 1,516,122
----------- -----------
Total issued 1,080,833 12,235,879
Shares redeemed (1,094,362) (12,369,921)
Automatic conversion of
shares. (6,208) (71,143)
----------- -----------
Net decrease (19,737) $ (205,185)
=========== ===========
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)
=========== ===========
<PAGE>
Class C Shares for the Six Months Dollar
Ended January 31, 1996 Shares Amount
Shares sold 176,308 $ 1,982,402
Shares issued to share-
holders in reinvestment of
dividends 4,142 46,887
----------- -----------
Total issued 180,450 2,029,289
Shares redeemed (25,765) (292,522)
----------- -----------
Net increase 154,685 $ 1,736,767
=========== ===========
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
Six Months Ended Dollar
January 31, 1996 Shares Amount
Shares sold 42,564 $ 484,673
Automatic conversion of
shares. 6,203 71,143
Shares issued to share-
holders in reinvestment of
dividends 3,978 45,362
----------- -----------
Total issued 52,745 601,178
Shares redeemed (22,652) $ (260,450)
----------- -----------
Net increase 30,093 340,728
=========== ===========
<PAGE>
Class D Shares for the
Period Oct. 21, 1994++ to Dollar
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.
<PAGE>
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
William M. Petty, Portfolio Manager
Gerald M. Richard, Treasurer
Jerry Weiss, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, Massachusetts 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
</TABLE>
