MERRILL LYNCH
PENNSYLVANIA
MUNICIPAL
BOND FUND
FUND LOGO
Annual Report
July 31, 1997
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
Printed on post-consumer recycled paper
TO OUR SHAREHOLDERS
The Municipal Market Environment
During the six months ended July 31, 1997, a number of very
favorable factors combined to push both tax-exempt and taxable bond
yields to recent historic lows. A slowing domestic economy, a
continued benign, if not improving, inflationary environment, a
declining Federal budget deficit with resultant reduced Treasury
borrowing needs, and a successful Congressional budget accord all
resulted in significant declines in fixed-income yields. By the end
of July, 30-year US Treasury bond yields had declined approximately
50 basis points (0.50%) to 6.30%, their lowest level in over a year.
Similarly, as measured by the Bond Buyer Revenue Bond Index, long-
term municipal revenue bond yields fell over 50 basis points to end
the July 31, 1997 quarter at 5.49%, their lowest level since early
1994.
<PAGE>
The decline in tax-exempt yields in recent months has been even more
impressive given that the municipal market has lost much of the
technical support it had enjoyed for over a year. In previous
quarters, new tax-exempt bond issuance declined or remained stable.
During the six months ended July 31, 1997, approximately $100
billion in new long-term municipal securities was underwritten, an
increase of over 7.5% versus the comparable period in 1996. As tax-
exempt bond yields declined, many municipal bond issuers have taken
this opportunity to both issue new debt and refinance older, higher-
couponed debt with new, lower-yielding issues. This refinancing has
led to a surge in tax-exempt issuance in recent months. Over the
three months ended July 31, 1997, new long-term tax-exempt bond
issuance totaled approximately $55 billion, an increase of over 15%
versus the July 31, 1996 quarter.
The decline in municipal bond yields has also resulted in some
reduction in retail investor demand. In earlier episodes of rapidly
declining interest rates, individual investor demand initially fell
until investors became more acclimated to the current levels. Should
interest rates stabilize, we expect investor demand to return to
earlier levels. Also, this past June and July, municipal bond
investors received over $50 billion in assets from coupon income
payments, bond maturities, and the proceeds from early bond
redemptions. Despite the continued allure of the US equity market,
it is likely that much of these assets will be reallocated to the
municipal bond market as investors adjust to the new investment
environment.
Looking forward, given the extent of the recent bond market rally,
some retrenchment or at least a period of consolidation is likely.
However, the positive backdrop of modest economic growth and low
inflation suggests that any such adjustment is not likely to be
excessive. Despite recent increases in new bond issuance, supply for
all of 1997 is not expected to be materially different than earlier
estimates of approximately $175 billion. It is likely that the
recent increase in issuance has largely borrowed from that
originally scheduled for later this year. Additionally, any
significant increase in tax-exempt bond yields will prevent any
further bond refinancings, reducing future supply. Unless the
current positive economic fundamentals undergo immediate and
significant deterioration, any increase in municipal bond yields is
likely to be viewed as an opportunity to purchase more attractively
priced tax-exempt securities.
<PAGE>
Fiscal Year in Review
During the past 12 months, the municipal bond market was
characterized by tremendous price volatility within a narrow trading
range. We focused on purchasing long-term insured bonds as yields
approached 6.00% and selling these securities as yields rallied to
5.50%. The Fund was fully invested in long-term securities during
most of the fiscal year to seek to achieve an above industry average
current yield. The Fund's cash equivalent reserves fluctuated
between 5%--10% of total assets, and a large position of assets
committed to longer-term maturities currently have coupons
structured for income rather than price appreciation. This strategy
served the Fund well during this particularly volatile period for
the fixed-income markets in general, generating total return
performance comparable to the industry average as well as an above-
average yield.
Portfolio Matters
During the six months ended July 31, 1997, we maintained the
defensive position we had implemented in late 1996. Our chief
concern was that the strong economic growth seen in the fourth
quarter of 1996 would continue into 1997, causing the Federal
Reserve Board to raise interest rates so that growth would not
result in a significant increase in inflation. However, US economic
growth slowed in the second quarter of 1997 and inflation remained
subdued, allowing interest rates to decline. We believed the Fund's
structure would allow it to perform well during periods of market
improvement.
We generally maintained the Fund's cash reserves below 5% of net
assets in order to seek to enhance the Fund's dividend stream and in
response to the continued scarcity of attractively priced tax-exempt
Pennsylvania issues. During the last six months, approximately $5.2
billion in Pennsylvania municipal securities was underwritten, an
increase of more than 7% as compared to the same period a year ago.
However, the majority of recent issuance has been concentrated in
the intermediate-term securities with less desirable call
protection, which we believe would not have enhanced the Fund's
overall structure.
Looking forward, we expect to maintain our current strategy of
emphasizing higher-couponed issues over more interest rate-sensitive
securities. The generation of an optimal amount of tax-exempt income
will remain the primary investment strategy of the Fund. Should it
become evident that the economy is decelerating, we will adopt a
more aggressive portfolio structure. We expect to maintain the
Fund's fully-invested position.
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,
<PAGE>
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(William R. Bock)
William R. Bock
Vice President and Portfolio Manager
September 4, 1997
We are pleased to announce that William R. Bock is responsible for
the day-to-day management of Merrill Lynch Pennsylvania Municipal
Bond Fund. Mr. Bock has been employed by Merrill Lynch Asset
Management, L.P. (an affiliate of the Fund's investment adviser)
since 1989 as Vice President.
PERFORMANCE DATA
About Fund Performance
<PAGE>
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. Figures shown in the "Average Annual Total
Return" tables as well as the total returns and cumulative total
returns in the "Performance Summary" tables assume reinvestment of
all dividends and capital gains distributions at net asset value on
the payable date. Investment return and principal value of shares
will fluctuate so that shares, when redeemed, may be worth more or
less than their original cost. Dividends paid to each class of
shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
7/31/97 4/30/97 7/31/96 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $11.59 $11.15 $11.17 +3.96%(1) +3.95%
Class B Shares* 11.59 11.15 11.17 +3.96(1) +3.95
Class C Shares* 11.59 11.15 11.17 +3.96(1) +3.95
Class D Shares* 11.60 11.16 11.18 +3.95(1) +3.94
Class A Shares--Total Return* +9.72(2) +5.35(3)
Class B Shares--Total Return* +9.17(4) +5.22(5)
Class C Shares--Total Return* +9.06(6) +5.19(7)
Class D Shares--Total Return* +9.61(8) +5.32(9)
Class A Shares--Standardized 30-day Yield 4.56%
Class B Shares--Standardized 30-day Yield 4.25%
Class C Shares--Standardized 30-day Yield 4.15%
Class D Shares--Standardized 30-day Yield 4.47%
<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 $0.021 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.608 per share ordinary
income dividends and $0.021 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.152 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.551 per share ordinary
income dividends and $0.021 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.138 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.540 per share ordinary
income dividends and $0.021 per share capital gains distributions.
(7)Percent change includes reinvestment of $0.135 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.597 per share ordinary
income dividends and $0.021 per share capital gains distributions.
(9)Percent change includes reinvestment of $0.149 per share ordinary
income dividends.
</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:
8/31/90** 7/97
ML Pennsylvania Municipal Bond Fund++--
Class A Shares* $ 9,600 $16,745
ML Pennsylvania Municipal Bond Fund++--
Class B Shares* $10,000 $16,844
<PAGE>
Lehman Brothers Municipal Bond
Index++++ $10,000 $17,641
Total Return Based on a $10,000 Investment-Class C Shares and
Class D Shares
A line graph depicting the growth of an investment in the Fund's
Class C Shares and Class D Shares compared to growth of an
investment in the Lehman Brothers Municipal Bond Index. Beginning
and ending values are:
10/21/94** 7/97
ML Pennsylvania Municipal Bond Fund++--
Class C Shares* $10,000 $12,451
ML Pennsylvania Municipal Bond Fund++--
Class D Shares* $ 9,600 $12,134
Lehman Brothers Municipal Bond
Index++++ $10,000 $13,054
[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,
prerefunded 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 6/30/97 +7.77% +3.46%
Five Years Ended 6/30/97 +6.97 +6.10
Inception (8/31/90)
through 6/30/97 +8.04 +7.40
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/97 +7.22% +3.22%
Five Years Ended 6/30/97 +6.43 +6.43
Inception (8/31/90)
through 6/30/97 +7.50 +7.50
[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 6/30/97 +7.11% +6.11%
Inception (10/21/94)
through 6/30/97 +7.42 +7.42
[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 6/30/97 +7.75% +3.44%
Inception (10/21/94)
through 6/30/97 +8.01 +6.38
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
PERFORMANCE DATA (continued)
<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
1996 11.57 11.27 0.021 0.611 + 3.03
1/1/97-7/31/97 11.27 11.59 -- 0.333 + 6.07
------ ------
Total $0.066 Total $4.380
Cumulative total return as of 7/31/97: +74.44%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charge; results would be lower if
sales charge was included.
</TABLE>
<TABLE>
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
1996 11.56 11.27 0.021 0.554 + 2.60
1/1/97-7/31/97 11.27 11.59 -- 0.302 + 5.76
------ ------
Total $0.066 Total $3.998
Cumulative total return as of 7/31/97: +68.44%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not reflect deduction of any sales charge; results
would be lower if sales charge was deducted.
</TABLE>
<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
1996 11.57 11.27 $0.021 0.543 + 2.41
1/1/97-7/31/97 11.27 11.59 -- 0.295 + 5.70
------ ------
Total $0.021 Total $1.497
Cumulative total return as of 7/31/97: +24.51%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not reflect deduction of any sales charge; results
would be lower if sales charge was deducted.
PERFORMANCE DATA (concluded)
</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
1996 11.58 11.28 $0.021 0.601 + 2.93
1/1/97-7/31/97 11.28 11.60 -- 0.327 + 6.01
------ ------
Total $0.021 Total $1.655
Cumulative total return as of 7/31/97: +26.40%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charge; results would be lower if
sales charge was included.
</TABLE>
IMPORTANT TAX INFORMATION (unaudited)
<PAGE>
All of the net investment income distributions paid monthly by
Merrill Lynch Pennsylvania Municipal Bond Fund during its taxable
year ended July 31, 1997 qualify as tax-exempt interest dividends
for Federal income tax purposes.
Additionally, the following summarizes the per share capital gains
distributions for each class of shares paid by the Fund during the
year:
Record Payable Short-Term Long-Term
Date Date Capital Gains Capital Gains
12/17/96 12/31/96 $.007013 $.021195
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)
<PAGE>
Pennsylvania--100.9%
<S> <S> <C> <S> <C>
Allegheny County, Pennsylvania, Hospital Development Authority Revenue
Bonds:
A1 VMIG1++ $ 100 (Presbyterian Health Center), VRDN, Series B, 3.65% due 3/01/2020 (a)(c) $ 100
NR* A3 2,000 (South Hills Health System), Series A, 6.50% due 5/01/2014 2,176
Allegheny County, Pennsylvania, IDA, Revenue Refunding Bonds:
AAA Aaa 4,785 (Commercial Development MPB Association Project), Mercy Hospital of
Pittsburgh, 7.70% due 12/01/2013 (e) 6,258
BBB- Baa3 2,000 (Environmental Improvement--USX Corporation Project), 6.10% due 7/15/2020 2,083
AAA Aaa 3,500 Allegheny County, Pennsylvania, Sanitation Authority, Sewer Revenue Bonds,
5.375% due 12/01/2024 (c) 3,514
AAA Aaa 1,430 Berks County, Pennsylvania, GO, UT, Second Series, 5.65%** due 5/15/2020 (d) 427
AAA Aaa 3,550 Cambria County, Pennsylvania, Refunding, GO, UT, Series A, 6.625% due
8/15/2014 (d) 4,016
BBB+ NR* 2,000 Cumberland County, Pennsylvania, Municipal Authority Revenue Bonds
(Presbyterian Homes Inc. Project), 6% due 12/01/2026 2,036
A- NR* 5,350 Delaware County, Pennsylvania, Hospital Authority Revenue Bonds
(Riddle Memorial Hospital), 6.50% due 1/01/2022 5,636
A1+ P1 6,500 Delaware County, Pennsylvania, IDA, PCR (BP Oil Inc. Project),
UPDATES, 3.65% due 12/01/2009 (a) 6,500
NR* NR* 920 Erie--Western Pennsylvania, Port Authority, General Revenue Bonds, 6.875%
due 6/15/2016 962
A- NR* 4,990 Gettysburg, Pennsylvania, Municipal Authority, College Revenue Refunding
Bonds (Gettysburg College Project), 6.60% due 2/15/2012 5,315
AAA Aaa 2,960 Hollidaysburg, Pennsylvania, Area School District, Improvement Bonds,
UT, 6.50% due 6/01/2020 (b) 3,266
NR* Baa1 3,000 Latrobe, Pennsylvania, IDA, College Revenue Bonds (Saint Vincent College
Project), 6.75% due 5/01/2024 3,247
AAA Aaa 3,000 Lehigh County, Pennsylvania, General Purpose Authority Revenue Bonds
(Saint Lukes Hospital--Bethlehem), 6.25% due 7/01/2022 (b) 3,213
Luzerne County, Pennsylvania, IDA, Exempt Facilities Revenue Refunding
Bonds (Pennsylvania Gas and Water Company Project), AMT, Series A:
BBB A3 3,600 7.20% due 10/01/2017 3,958
AAA Aaa 2,000 7% due 12/01/2017 (b) 2,273
NR* Aaa 2,900 Montgomery County, Pennsylvania, GO, UT, 5.40% due 9/15/2019 2,937
</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>
Montgomery County, Pennsylvania, Higher Education and Health Authority,
Hospital Revenue Bonds:
AAA Aaa $ 2,500 (Abington Hospital), MVRICS, Series A, 9.455% due 6/01/2011 (b)(g) $ 2,925
BBB NR* 2,835 (Northwestern Corporation), 7% due 6/01/2012 3,012
BBB+ Baa2 2,665 Montgomery County, Pennsylvania, IDA, PCR, Refunding (Philadelphia Electric
Company), AMT, Series A, 7.60% due 4/01/2021 2,911
NR* NR* 475 Moon Transportation Authority, Pennsylvania, Highway Improvement Revenue
Bonds, 9.50% due 2/01/1998 (f) 488
AAA Aaa 3,300 North Penn, Pennsylvania, Water Authority Revenue Bonds, 7% due 11/01/2004
(d)(f) 3,851
AAA Aaa 4,000 North Wales, Pennsylvania, Water Authority Revenue Bonds, 7% due 11/01/2004
(d)(f) 4,639
Pennsylvania Convention Center Authority, Revenue Refunding Bonds, Series A:
BBB Baa 1,555 6.70% due 9/01/2014 1,709
BBB Baa 2,500 6.75% due 9/01/2019 2,751
BBB- Baa2 1,500 Pennsylvania Economic Development Financing Authority, Exempt Facilities
Revenue Bonds (MacMillan Limited Partnership Project), AMT, 7.60% due
12/01/2020 1,740
BBB Baa3 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 4,625
AA Aa2 1,000 Pennsylvania, HFA, Refunding, RIB, AMT, Series 1991-31C, 9.712% due
10/01/2023 (g) 1,168
Pennsylvania, HFA, S/F Mortgage Revenue Bonds, AMT:
AA+ Aa 930 Series 28, 7.65% due 10/01/2023 983
AA+ Aa 2,165 Series 40, 6.90% due 4/01/2025 2,350
AA+ Aa 1,500 Series 41-B, 6.65% due 4/01/2025 1,607
A NR* 2,000 Pennsylvania State Finance Authority, Revenue Refunding Bonds
(Municipal Capital Improvements Program), 6.60% due 11/01/2009 2,198
<PAGE>
Pennsylvania State Higher Educational Facilities Authority,
College and University Revenue Bonds:
NR* Baa3 2,295 (Delaware Valley College of Science & Agriculture), 7% due 4/01/2022 2,459
NR* NR* 1,030 (Pennsylvania College of Podiatric Medicine), 8.50% due 10/01/2014 1,099
A1+ NR* 1,000 Refunding (Carnegie Mellon University), VRDN, Series D, 3.60% due
11/01/2030 (a) 1,000
BBB+ NR* 2,000 (Ursinus College), 5.90% due 1/01/2027 2,048
A+ Aa3 2,000 Pennsylvania State Higher Educational Facilities Authority, Revenue
Refunding Bonds (Thomas Jefferson University), Series A, 6.625% due
8/15/2009 2,207
NR* NR* 1,225 Pennsylvania State, IDA, Pooled Loan Revenue Bonds, Series A, 7% due
7/01/2001 (f) 1,368
AAA Aaa 2,000 Philadelphia, Pennsylvania, Airport Revenue Bonds (Philadelphia Airport
System), Series B, AMT, 5.40% due 6/15/2027 (d) 1,988
A+ NR* 1,895 Philadelphia, Pennsylvania, Authority for IDR (National Board of Medical
Examiners Project), 6.75% due 5/01/2012 2,079
AA Aa3 1,690 Philadelphia, Pennsylvania, Authority for Industrial Development, Industrial
and Commercial Revenue Bonds (Girard Estate Coal Mining Project), 5.50% due
11/15/2016 1,726
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Pennsylvania(concluded)
<S> <S> <C> <S> <C>
Philadelphia, Pennsylvania, Gas Works Revenue Bonds:
AAA Aaa $ 1,440 12th Series B, 7% due 5/15/2020 (c)(h) $ 1,729
AAA Aaa 750 13th Series, 7.70% due 6/15/2001 (f) 858
Philadelphia, Pennsylvania, Hospitals and Higher Education Facilities
Authority Revenue Bonds:
A1+ VMIG1++ 1,000 (Children's Hospital of Philadelphia Project), VRDN, 3.60% due
3/01/2027 (a) 1,000
A- NR* 1,015 (Children's Seashore House), Series A, 7% due 8/15/2017 1,106
A- NR* 3,000 (Children's Seashore House), Series B, 7% due 8/15/2022 3,248
BBB NR* 2,595 (Northwestern Corp.), 7.125% due 6/01/2018 2,801
A- Baa1 3,750 Refunding (Chestnut Hill Hospital), 6.50% due 11/15/2022 3,984
AAA NR* 3,000 Refunding (Presbyterian Medical Center), 6.65% due 12/01/2019 (h) 3,493
AAA Baa 1,000 Philadelphia, Pennsylvania, Water and Sewer Revenue Bonds, 16th Series,
7.50% due 8/01/2001 (f) 1,140
AAA Aaa 1,000 Reading, Pennsylvania, GO, Refunding, UT, 6.50% due 11/15/2002 (b)(f) 1,108
<PAGE>
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 1,872
AAA Aaa 3,000 University of Pittsburgh, Pennsylvania, Higher Educational Refunding
Bonds, Series B, 5% due 6/01/2021 (c) 2,906
AA Aa3 7,000 Upper Saint Clair Township, Pennsylvania, School District Refunding
Bonds, UT, 5.20% due 7/15/2027 6,989
Total Investments (Cost--$131,961)--100.9% 143,082
Liabilities in Excess of Other Assets--0.9% (1,340)
--------
Net Assets--100.0% $141,742
========
<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, 1997.
(b)AMBAC Insured.
(c)MBIA Insured.
(d)FGIC Insured.
(e)FSA Insured.
(f)Prerefunded.
(g)The interest rate is subject to change periodically and inversely
based upon prevailing rates. The interest rate shown is the rate in
effect at July 31, 1997.
(h)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 Services, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<PAGE>
<TABLE>
Statement of Assets and Liabilities as of July 31, 1997
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$131,960,502) (Note 1a) $143,081,650
Cash 87,568
Receivables:
Interest $ 1,991,617
Beneficial interest sold 391,510 2,383,127
------------
Prepaid registration fees and other assets (Note 1e) 16,854
------------
Total assets 145,569,199
------------
Liabilities: Payables:
Securities purchased 2,876,414
Beneficial interest redeemed 556,777
Dividends to shareholders (Note 1f) 185,308
Investment adviser (Note 2) 65,877
Distributor (Note 2) 49,776 3,734,152
------------
Accrued expenses and other liabilities 93,493
------------
Total liabilities 3,827,645
------------
Net Assets: Net assets $141,741,554
============
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 182,789
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 941,355
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 53,030
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 46,109
Paid-in capital in excess of par 129,854,667
Accumulated realized capital losses on investments--net (457,544)
Unrealized appreciation on investments--net 11,121,148
------------
Net assets $141,741,554
============
Net Asset Value: Class A--Based on net assets of $21,178,764 and 1,827,891
shares of beneficial interest outstanding $ 11.59
============
Class B--Based on net assets of $109,070,243 and 9,413,550
shares of beneficial interest outstanding $ 11.59
============
Class C--Based on net assets of $6,145,035 and 530,303
shares of beneficial interest outstanding $ 11.59
============
Class D--Based on net assets of $5,347,512 and 461,085
shares of beneficial interest outstanding $ 11.60
============
<PAGE>
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
July 31, 1997
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 8,858,592
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 798,487
Account maintenance and distribution fees--Class B (Note 2) 570,543
Accounting services (Note 2) 84,022
Professional fees 59,883
Transfer agent fees--Class B (Note 2) 58,782
Printing and shareholder reports 35,917
Account maintenance and distribution fees--Class C (Note 2) 31,881
Registration fees (Note 1e) 14,339
Transfer agent fees--Class A (Note 2) 8,936
Pricing fees 8,675
Custodian fees 8,659
Trustees' fees and expenses 7,472
Account maintenance fees--Class D (Note 2) 4,386
Transfer agent fees--Class C (Note 2) 2,754
Transfer agent fees--Class D (Note 2) 1,812
Other 2,847
------------
Total expenses 1,699,395
------------
Investment income--net 7,159,197
------------
Realized & Realized gain on investments--net 1,919,585
Unrealized Gain on Change in unrealized appreciation on investments--net 3,613,001
Investments--Net ------------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations $ 12,691,783
============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year
Ended July 31,
Increase (Decrease) in Net Assets: 1997 1996
<S> <S> <C> <C>
Operations: Investment income--net $ 7,159,197 $ 7,689,849
Realized gain on investments--net 1,919,585 415,112
Change in unrealized appreciation on investments--net 3,613,001 999,490
------------ ------------
Net increase in net assets resulting from operations 12,691,783 9,104,451
------------ ------------
Dividends & Investment income--net:
Distributions to Class A (1,144,917) (1,225,179)
Shareholders Class B (5,531,327) (6,116,920)
(Note 1f): Class C (252,297) (172,681)
Class D (230,656) (175,069)
Realized gain on investments--net:
Class A (52,975) --
Class B (290,647) --
Class C (13,183) --
Class D (10,473) --
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (7,526,475) (7,689,849)
------------ ------------
Beneficial Interest Net decrease in net assets derived from beneficial interest
Transactions transactions (13,919,756) (1,716,500)
(Note 4): ------------ ------------
Net Assets: Total decrease in net assets (8,754,448) (301,898)
Beginning of year 150,496,002 150,797,900
------------ ------------
End of year $141,741,554 $150,496,002
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<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: 1997 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 11.17 $ 11.07 $ 11.00 $ 11.39 $ 11.04
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .60 .61 .62 .60 .63
Realized and unrealized gain (loss) on
investments--net .45 .10 .07 (.33) .36
-------- -------- -------- -------- --------
Total from investment operations 1.05 .71 .69 .27 .99
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.60) (.61) (.62) (.60) (.63)
Realized gain on investments--net (.03) -- -- (.04) (.01)
In excess of realized gain on investments
--net -- -- -- (.02) --
-------- -------- -------- -------- --------
Total dividends and distributions (.63) (.61) (.62) (.66) (.64)
-------- -------- -------- -------- --------
Net asset value, end of year $ 11.59 $ 11.17 $ 11.07 $ 11.00 $ 11.39
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 9.72% 6.53% 6.54% 2.37% 9.30%
Return:* ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement .74% .76% .77% .75% .69%
Average ======== ======== ======== ======== ========
Net Assets: Expenses .74% .76% .77% .75% .81%
======== ======== ======== ======== ========
Investment income--net 5.36% 5.41% 5.72% 5.30% 5.70%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $ 21,179 $ 21,626 $ 23,040 $ 28,239 $ 27,639
Data: ======== ======== ======== ======== ========
Portfolio turnover 49.82% 58.33% 59.17% 37.73% 9.69%
======== ======== ======== ======== ========
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: 1997 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 11.17 $ 11.07 $ 11.00 $ 11.39 $ 11.04
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .55 .55 .56 .54 .58
Realized and unrealized gain (loss) on
investments--net .45 .10 .07 (.33) .36
-------- -------- -------- -------- --------
Total from investment operations 1.00 .65 .63 .21 .94
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.55) (.55) (.56) (.54) (.58)
Realized gain on investments--net (.03) -- -- (.04) (.01)
In excess of realized gain on investments
--net -- -- -- (.02) --
-------- -------- -------- -------- --------
Total dividends and distributions (.58) (.55) (.56) (.60) (.59)
-------- -------- -------- -------- --------
Net asset value, end of year $ 11.59 $ 11.17 $ 11.07 $ 11.00 $ 11.39
======== ======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share 9.17% 5.98% 6.00% 1.86% 8.75%
Return:* ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement 1.25% 1.27% 1.28% 1.25% 1.19%
Average ======== ======== ======== ======== ========
Net Assets: Expenses 1.25% 1.27% 1.28% 1.25% 1.32%
======== ======== ======== ======== ========
Investment income--net 4.85% 4.91% 5.21% 4.80% 5.19%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands). $109,070 $120,565 $123,260 $130,418 $109,463
Data: ======== ======== ======== ======== ========
Portfolio turnover 49.82% 58.33% 59.17% 37.73% 9.69%
======== ======== ======== ======== ========
<FN>
*Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class C Class D
<PAGE>
For the For the
Period Period
The following per share data and ratios have been derived For the Oct. 21, For the Oct. 21,
from information provided in the financial statements. Year Ended 1994++ to Year Ended 1994++ to
July 31, July 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of
Operating period $ 11.17 $ 11.07 $ 10.68 $ 11.18 $ 11.08 $ 10.68
Performance: -------- -------- -------- -------- -------- --------
Investment income--net .53 .54 .43 .59 .60 .47
Realized and unrealized gain on
investments--net .45 .10 .39 .45 .10 .40
-------- -------- -------- -------- -------- --------
Total from investment operations .98 .64 .82 1.04 .70 .87
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.53) (.54) (.43) (.59) (.60) (.47)
Realized gain on investments--net (.03) -- -- (.03) -- --
-------- -------- -------- -------- -------- --------
Total dividends and distributions (.56) (.54) (.43) (.62) (.60) (.47)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 11.59 $ 11.17 $ 11.07 $ 11.60 $ 11.18 $ 11.08
======== ======== ======== ======== ======== ========
Total Investment Based on net asset value per share 9.06% 5.87% 7.83%+++ 9.61% 6.42% 8.36%+++
Return:** ======== ======== ======== ======== ======== ========
Ratios to Average Expenses 1.35% 1.37% 1.38%* .84% .86% .87%*
Net Assets: ======== ======== ======== ======== ======== ========
Investment income--net 4.75% 4.80% 5.05%* 5.26% 5.31% 5.65%*
======== ======== ======== ======== ======== ========
Supplemental Net assets, end of period
Data: (in thousands) $ 6,145 $ 4,722 $ 1,868 $ 5,348 $ 3,583 $ 2,630
======== ======== ======== ======== ======== ========
Portfolio turnover 49.82% 58.33% 59.17% 49.82% 58.33% 59.17%
======== ======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Pennsylvania Municipal Bond Fund (the "Fund") is part
of Merrill Lynch Multi-State Municipal Series Trust (the "Trust").
The Fund is registered under the Investment Company Act of 1940 as a
non-diversified, open-end management investment company. The Fund
offers 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, includ-
ing 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.
<PAGE>
* Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures contracts
are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a
contract, the Fund deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is
effected. Pursuant to the contract, the Fund agrees to receive from
or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are
known as variation margin and are recorded by the Fund as unrealized
gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Prepaid registration fees--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.
NOTES TO FINANCIAL STATEMENTS (concluded)
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.
<PAGE>
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee based upon the average daily
value of the Fund's net assets at the following annual rates: 0.55%
of the Fund's average daily net assets not exceeding $500 million;
0.525% of average daily net assets in excess of $500 million but not
exceeding $1 billion; and 0.50% of average daily net assets in
excess of $1 billion.
Pursuant to the distribution plans (the "Distribution Plans")
adopted by the Fund in accordance with Rule 12b-1 under the
Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are
accrued daily and paid monthly at annual rates based upon the
average daily net assets of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.25%
Class C 0.25% 0.35%
Class D 0.10% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the year ended July 31, 1997, 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 $809 $8,173
Class D $225 $2,568
For the year ended July 31, 1997, MLPF&S received contingent
deferred sales charges of $171,892 and $1,630 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.
<PAGE>
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended July 31, 1997 were $69,058,161 and $79,278,809,
respectively.
Net realized and unrealized gains (losses) as of July 31, 1997 were
as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments. $ 2,366,210 $11,121,148
Financial futures contracts (446,625) --
----------- -----------
Total $ 1,919,585 $11,121,148
=========== ===========
As of July 31, 1997, net unrealized appreciation for Federal income
tax purposes aggregated $11,121,148, of which $11,156,569 related to
appreciated securities and $35,421 related to depreciated
securities. The aggregate cost of investments at July 31, 1997 for
Federal income tax purposes was $131,960,502.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest
transactions was $13,919,756 and $1,716,500 for the years ended July
31, 1997 and July 31, 1996, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
Shares sold 463,882 $ 5,214,824
Shares issued to share-
holders in reinvestment of
dividends and distributions 56,819 639,033
----------- -----------
Total issued 520,701 5,853,857
Shares redeemed (628,409) (7,047,455)
----------- -----------
Net decrease (107,708) $(1,193,598)
=========== ===========
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)
=========== ===========
<PAGE>
Class B Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
Shares sold 1,104,640 $ 12,428,694
Shares issued to share-
holders in reinvestment of
dividends and distributions 254,749 2,864,821
------------ ------------
Total issued 1,359,389 15,293,515
Automatic conversion of
shares (52,791) (595,361)
Shares redeemed (2,684,513) (30,214,153)
------------ ------------
Net decrease (1,377,915) $(15,515,999)
============ ============
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
Automatic conversion of
shares (44,290) (494,541)
Shares redeemed (2,176,649) (24,491,107)
----------- -----------
Net decrease (347,047) $(3,852,305)
=========== ===========
Class C Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
Shares sold 185,567 $ 2,085,866
Shares issued to share-
holders in reinvestment of
dividends and distributions 15,175 170,763
----------- -----------
Total issued 200,742 2,256,629
Shares redeemed (93,032) (1,044,842)
----------- -----------
Net increase 107,710 $ 1,211,787
=========== ===========
<PAGE>
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
=========== ===========
Class D Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
Shares sold 215,211 $ 2,406,083
Automatic conversion
of shares 52,734 595,361
Shares issued to share-
holders in reinvestment of
dividends and distributions 12,040 135,638
----------- -----------
Total issued 279,985 3,137,082
Shares redeemed (139,318) (1,559,028)
----------- -----------
Net increase 140,667 $ 1,578,054
=========== ===========
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
=========== ===========
<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, 1997, 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, 1997 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, 1997, 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, 1997
</AUDIT-REPORT>
<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
Vincent R. Giordano, Senior Vice President
Donald C. Burke, Vice President
Kenneth A. Jacob, Vice President
William M. Bock, Vice President
Gerald M. Richard, Treasurer
Robert E. Putney III, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
