<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 31, 1995
SECURITIES ACT FILE NO. 33-38834
INVESTMENT COMPANY ACT FILE NO. 811-5011
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [_]
POST-EFFECTIVE AMENDMENT NO. 5 [X]
(CHECK APPROPRIATE BOX OR BOXES)
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 80 [X]
(CHECK APPROPRIATE BOX OR BOXES)
----------------
CMA MICHIGAN MUNICIPAL MONEY FUND
OF CMA MULTI-STATE MUNICIPAL SERIES TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
800 SCUDDERS MILL ROAD 08536
PLAINSBORO, NEW JERSEY (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (609) 282-2800
ARTHUR ZEIKEL
CMA MULTI-STATE MUNICIPAL SERIES TRUST
800 SCUDDERS MILL ROAD, PLAINSBORO, NEW JERSEY
MAILING ADDRESS: P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011
(NAME AND ADDRESS OF AGENT FOR SERVICE)
----------------
COPIES TO:
COUNSEL FOR THE TRUST: PHILIP L. KIRSTEIN, ESQ.
BROWN & WOOD FUND ASSET MANAGEMENT, L.P.
ONE WORLD TRADE CENTER, P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011
NEW YORK, NEW ORK 10048-0557
ATTENTION: THOMAS R. SMITH, JR., ESQ.
KEVIN J. MOYNIHAN, ESQ.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
WORLD FINANCIAL CENTER, NORTH TOWER, NEW YORK, NEW YORK 10281
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
[X] immediately upon filing pursuant to paragraph (b), or
[_] on (date) pursuant to paragraph (b), or
[_] 60 days after filing pursuant to paragraph (a)(1), or
[_] on (date) pursuant to paragraph (a)(1), or
[_] 75 days after filing pursuant to paragraph (a)(2), or
[_] on (date) pursuant to paragraph (a)(2) of Rule 485.
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
[_] this post-effective amendment designates a new effective
date for a previously
filed post-effective amendment.
The Registrant has registered an indefinite number of its shares under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act
of 1940. The notice required by such Rule for the Registrant's most recent
fiscal year was filed on May 31, 1995.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT OF PROPOSED PROPOSED
SHARES MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SECURITIES BEING OFFERING PRICE AGGREGATE REGISTRATION
BEING REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE
<S> <C> <C> <C> <C>
Shares of Beneficial Interest
(par value
$.10 per share)................. 22,182,355 $1.00 $290,000* $100
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
*(1) The calculation of the maximum aggregate offering price is made pursuant
to Rule 24e-2 under the Investment Company Act of 1940.
(2) The total amount of securities redeemed or repurchased during the
Registrant's previous fiscal year was 951,561,384 shares of beneficial
interest.
(3) 929,669,029 of the shares described in (2) above have been used for
reduction pursuant to Rule 24e-2(a) or Rule 24f-2(c) under the Investment
Company Act of 1940 in previous filings during the Registrant's current
fiscal year.
(4) 21,892,355 of the shares redeemed during the Registrant's previous fiscal
year are being used for the reduction of the registration fee in this
amendment to the Registration Statement.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
CMA MICHIGAN MUNICIPAL MONEY FUND
CMA MULTI-STATE MUNICIPAL SERIES TRUST
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-
1A ITEM NO. LOCATION
----------- --------
<C> <S> <C>
PART A
Item 1. Cover Page................................. Cover Page
Item 2. Synopsis................................... Fee Table
Item 3. Condensed Financial Information............ Financial Highlights; Yield Information
Item 4. General Description of Registrant.......... Investment Objectives and Policies;
Organization of the Trust
Item 5. Management of the Fund..................... Fee Table; Management of the Trust;
Portfolio Transactions; Inside Back Cover Page
Item 5A. Management's Discussion of Fund
Performance............................... Not Applicable
Item 6. Capital Stock and Other Securities......... Organization of the Trust
Item 7. Purchase of Securities Being Offered....... Cover Page; Fee Table; Purchase of Shares;
Redemption of Shares; Inside Back Cover
Page
Item 8. Redemption or Repurchase................... Fee Table; Purchase of Shares; Redemption
of Shares
Item 9. Pending Legal Proceedings.................. Not Applicable
PART B
Item 10. Cover Page................................. Cover Page
Item 11. Table of Contents.......................... Cover Page
Item 12. General Information and History............ Not Applicable
Item 13. Investment Objectives and Policies......... Investment Objectives and Policies
Item 14. Management of the Fund..................... Management of the Trust
Item 15. Control Persons and Principal Holders of
Securities................................ Management of the Trust; General
Information- Additional Information
Item 16. Investment Advisory and Other
Services.................................. Management of the Trust; Purchase and
Redemption of Shares; General
Information
Item 17. Brokerage Allocation....................... Portfolio Transactions
Item 18. Capital Stock and Other Securities......... General Information--Description of Series
and Shares
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered.................. Purchase and Redemption of Shares;
Determination of Net Asset Value
Item 20. Tax Status................................. Taxes
Item 21. Underwriters............................... Purchase and Redemption of Shares
Item 22. Calculation of Performance Data............ Yield Information
Item 23. Financial Statements....................... Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
<PAGE>
CMA MULTI-STATE MUNICIPAL SERIES TRUST
CMA Arizona Municipal Money Fund CMA New Jersey Municipal Money Fund
CMA California Municipal Money Fund CMA New York Municipal Money Fund
CMA Connecticut Municipal Money Fund CMA North Carolina Municipal Money
Fund
CMA Massachusetts Municipal Money Fund CMA Ohio Municipal Money Fund
CMA Michigan Municipal Money Fund CMA Pennsylvania Municipal Money Fund
----------------
This document comprises the Prospectuses of CMA Arizona Municipal Money
Fund, CMA California Municipal Money Fund, CMA Connecticut Municipal Money
Fund, CMA Massachusetts Municipal Money Fund, CMA Michigan Municipal Money
Fund, CMA New Jersey Municipal Money Fund, CMA New York Municipal Money Fund,
CMA North Carolina Municipal Money Fund, CMA Ohio Municipal Money Fund and CMA
Pennsylvania Municipal Money Fund (the "CMA State Funds" or the "Funds"), ten
of the fourteen money market mutual funds (collectively, the "CMA Funds"), the
shares of which are offered to participants in the Cash Management Account (R)
("CMA account") financial service program of Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") to provide a medium for the investment of
free credit cash balances held in CMA accounts.
----------------
A CMA account is a conventional Merrill Lynch cash securities account or
margin securities account ("Securities Account") which is linked to the CMA
Funds, to money market deposit accounts maintained with depository
institutions and to a Visa (R) card/check account ("Visa Account"). Merrill
Lynch markets its margin account under the name Investor CreditLine SM
service. Subscribers to the CMA service may automatically invest free credit
balances held in their CMA accounts in shares of one of the CMA Funds, or such
balances may be deposited automatically with a depository institution through
the Insured SavingsSM Account (the "Insured Savings Account"). The CMA Funds
and the Insured Savings Account are collectively referred to as the "Money
Accounts".
Each CMA Fund is a no-load money market mutual fund seeking current income,
preservation of capital and liquidity available from investing in short-term
securities. The CMA Money Fund invests in money market securities generally;
the CMA Government Securities Fund invests in direct U.S. Government
obligations; the CMA Tax-Exempt Fund invests in tax-exempt securities and pays
dividends exempt from Federal income taxation; the CMA Treasury Fund invests
in U.S. Treasury securities; and each of the CMA State Funds invests in tax-
exempt securities and pays dividends exempt from Federal and a particular
state's (and, in certain instances, city's) income taxation.
Free credit balances held in CMA accounts will be invested automatically in
or deposited through the Money Account selected by the CMA subscriber as his
or her Primary Money Account. The subscriber may make manual investments in
any of the CMA Funds as described under "Purchase of Shares". The subscriber
may change the Primary Money Account designation at any time by following the
procedures set forth under "Purchase of Shares".
Merrill Lynch charges a program participation fee for the CMA service which
presently is $100 per year for individuals (an additional $25 annual program
fee is charged for participation in the CMA Visa (R) Gold Program described in
the CMA Program Description). A different fee may be charged to certain group
plans and special accounts. Merrill Lynch reserves the right to change the fee
for the CMA service or the CMA Visa Gold Program at any time. As described
under "Purchase of Shares", shares of the CMA Funds may be purchased directly
through the Funds' Transfer Agent by investors who are not subscribers to the
CMA program. Shareholders of the CMA Funds not subscribing to the CMA program
will not be charged the CMA program fee but will not receive any of the
additional services available to CMA program subscribers.
----------------
The information in this document should be read in conjunction with the
description of the Merrill Lynch Cash Management Account Program which is
furnished to all CMA subscribers. Reference is made to such description for
information with respect to the CMA program, including the fees related
thereto. Information concerning the other CMA Funds is contained in the
prospectus relating to each of such Funds and information concerning the
Insured Savings Account is contained in the Insured Savings Account Fact
Sheet. All CMA subscribers are furnished with the prospectuses of CMA Money
Fund, CMA Government Securities Fund, CMA Tax-Exempt Fund and CMA Treasury
Fund and the Insured Savings Account Fact Sheet. For more information about
the Merrill Lynch Cash Management Account program, call toll-free from
anywhere in the U.S., 1-800-CMA-INFO (1-800-262-4636).
<PAGE>
PROSPECTUS
JULY 31, 1995 CMA MULTI-STATE MUNICIPAL SERIES TRUST
CMA Arizona Municipal Money Fund CMA New Jersey Municipal Money Fund
CMA California Municipal Money Fund CMA New York Municipal Money Fund
CMA Connecticut Municipal Money Fund CMA North Carolina Municipal Money
Fund
CMA Massachusetts Municipal Money Fund CMA Ohio Municipal Money Fund
CMA Michigan Municipal Money Fund CMA Pennsylvania Municipal Money Fund
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 . PHONE NO. (609) 282-2800
CMA Multi-State Municipal Series Trust (the "Trust") consists of CMA Arizona
Municipal Money Fund (the "Arizona Fund"), CMA California Municipal Money Fund
(the "California Fund"), CMA Connecticut Municipal Money Fund (the
"Connecticut Fund"), CMA Massachusetts Municipal Money Fund (the
"Massachusetts Fund"), CMA Michigan Municipal Money Fund (the "Michigan
Fund"), CMA New Jersey Municipal Money Fund (the "New Jersey Fund"), CMA New
York Municipal Money Fund (the "New York Fund"), CMA North Carolina Municipal
Money Fund (the "North Carolina Fund"), CMA Ohio Municipal Money Fund (the
"Ohio Fund") and CMA Pennsylvania Municipal Money Fund (the "Pennsylvania
Fund") (together, the "Funds"). Each Fund is a non-diversified, no-load money
market mutual fund seeking current income exempt from Federal income taxes,
personal income taxes of the designated state and, in certain instances, local
income taxes, preservation of capital and liquidity. Each Fund seeks to
achieve its investment objectives by investing in a portfolio of short-term,
high quality obligations, the interest on which is exempt, in the opinion of
counsel to the issuer, from Federal income taxes, personal income taxes of the
designated state and, in certain instances, local income taxes. The Funds may
invest in certain tax-exempt securities classified as "private activity bonds"
that may subject certain investors in the Funds to an alternative minimum tax.
The Funds also may invest in derivative or synthetic municipal instruments.
See "Investment Objectives and Policies--Portfolio Investments--Derivative or
Synthetic Municipal Instruments". All of the investments of each Fund will be
in securities with remaining maturities of 397 days (13 months) or less. The
dollar-weighted average maturity of each Fund's portfolio will be 90 days or
less. Dividends are declared and reinvested daily in the form of additional
shares at net asset value. There can be no assurance that the investment
objectives of any Fund will be realized. For more information on the Funds'
investment objectives and policies, please see "Investment Objectives and
Policies" on page 9. AN INVESTMENT IN A FUND IS NEITHER INSURED NOR GUARANTEED
BY THE U.S. GOVERNMENT. EACH FUND SEEKS TO MAINTAIN A CONSTANT $1.00 PER SHARE
NET ASSET VALUE. THERE CAN BE NO ASSURANCE THAT ANY FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
Shares are offered at their net asset value. There is no minimum purchase
requirement for CMA program participants. Shares of a Fund also may be
purchased by individual investors maintaining accounts directly with the
Trust's Transfer Agent who do not subscribe to the CMA program. The minimum
initial purchase for non-CMA subscribers is $5,000 and the minimum subsequent
purchase is $1,000. Such investors will not receive any of the additional
services available to CMA program participants, such as the Visa Account or
the automatic investment of free credit balances. Each Fund has adopted a
distribution and shareholder servicing plan in compliance with Rule 12b-1
under the Investment Company Act of 1940, as amended (the "Investment Company
Act"). See "Purchase of Shares".
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
This Prospectus is a concise statement of information about the Trust and
each Fund that is relevant to making an investment in a Fund. This Prospectus
should be read carefully and retained for future reference. A statement
containing additional information about the Trust and each Fund, dated July
31, 1995 (the "Statement of Additional Information"), has been filed with the
Securities and Exchange Commission (the "Commission") and can be obtained
without charge by calling or writing to the Trust at the above telephone
number or address. The Statement of Additional Information is hereby
incorporated by reference into this Prospectus.
<PAGE>
UNLESS OTHERWISE INDICATED, THE INFORMATION SET FORTH IN THIS PROSPECTUS IS
APPLICABLE TO EACH FUND. MANAGEMENT OF THE TRUST HAS CONSIDERED THE POSSIBILITY
THAT THE USE OF A COMBINED PROSPECTUS MAY SUBJECT A FUND OR FUNDS TO LIABILITY
FOR AN ALLEGED MISSTATEMENT RELATING TO ANOTHER FUND OR FUNDS. MANAGEMENT
BELIEVES THIS POSSIBILITY IS REMOTE.
FEE TABLE
<TABLE>
<CAPTION>
NORTH
ARIZONA CALIFORNIA CONNECTICUT MASSACHUSETTS MICHIGAN NEW JERSEY NEW YORK CAROLINA OHIO PENNSYLVANIA
FUND FUND FUND FUND FUND FUND FUND FUND FUND FUND
------- ---------- ----------- ------------- -------- ---------- -------- -------- ---- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ANNUALIZED FUND
OPERATING
EXPENSES (AS A
PERCENTAGE OF
AVERAGE NET
ASSETS) FOR THE
FISCAL YEAR ENDED
MARCH 31, 1995:
Management
Fees(a)......... 0.50% 0.45% 0.50% 0.50% 0.50% 0.50% 0.47% 0.50% 0.50% 0.50%
Rule 12b-1
Fees(b)......... 0.13 0.13 0.13 0.13 0.13 0.13 0.13 0.13 0.13 0.13
Other Expenses:
Dividend and
Transfer Agency
Fees(c)........ 0.02 0.01 0.01 0.03 0.02 0.02 0.02 0.02 0.03 0.02
Other Fees...... 0.20 0.04 0.07 0.10 0.08 0.06 0.05 0.07 0.08 0.06
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total Other
Expenses....... 0.22 0.05 0.08 0.13 0.10 0.08 0.07 0.09 0.11 0.08
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total Fund
Operating
Expenses........ 0.85% 0.63% 0.71% 0.76% 0.73% 0.71% 0.67% 0.72% 0.74% 0.71%
==== ==== ==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
- --------
(a) See "Management of the Trust--Management and Advisory Arrangements"-- page
26.
(b) See "Purchase of Shares"-- page 19.
(c) See "Management of the Trust--Transfer Agency Services"-- page 27.
EXAMPLE:
An investor would pay the following expenses on a $1,000 investment, assuming
the operating expense ratio set forth above for each Fund and a 5% annual
return throughout the period:
<TABLE>
<CAPTION>
NORTH
UMULATIVE EXPENSESC ARIZONA CALIFORNIA CONNECTICUT MASSACHUSETTS MICHIGAN NEW JERSEY NEW YORK CAROLINA OHIO PENNSYLVANIA
PAYALE FOR THE PERIOD OF:B FUND FUND FUND FUND FUND FUND FUND FUND FUND FUND
- -------------------------- ------- ---------- ----------- ------------- -------- ---------- -------- -------- ---- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year........ $ 9 $ 6 $ 7 $ 8 $ 7 $ 7 $ 7 $ 7 $ 8 $ 7
3 years....... $ 27 $20 $23 $24 $23 $23 $21 $23 $24 $23
5 years....... $ 47 $35 $40 $42 $41 $40 $37 $40 $41 $40
10 years....... $105 $79 $88 $94 $91 $88 $83 $89 $92 $88
</TABLE>
As of March 31, 1995, Fund Asset Management, L.P. (the "Manager") was
voluntarily waiving a portion of its management fee. The Fee Table has been
restated to assume the absence of any waiver because the Manager may
discontinue or reduce such waiver at any time without notice. During the fiscal
year ended March 31, 1995, the Manager waived management fees totaling .31% and
.10% for the Arizona and North Carolina Funds, respectively, after which each
Fund's total expense ratio was .54% and .62%, respectively.
MERRILL LYNCH CHARGES AN ANNUAL PROGRAM PARTICIPATION FEE, PRESENTLY $100 FOR
INDIVIDUALS, FOR THE CMA SERVICE (AN ADDITIONAL FEE, PRESENTLY $25, IS CHARGED
FOR PARTICIPATION IN THE CMA VISA GOLD PROGRAM). SHAREHOLDERS OF THE FUNDS
WHOSE ACCOUNTS ARE MAINTAINED DIRECTLY WITH THE TRUST'S TRANSFER AGENT AND WHO
ARE NOT SUBSCRIBERS TO THE CMA PROGRAM WILL NOT BE CHARGED THE CMA PROGRAM FEE
BUT WILL NOT RECEIVE ANY OF THE ADDITIONAL SERVICES AVAILABLE TO CMA PROGRAM
SUBSCRIBERS.
2
<PAGE>
The foregoing Fee Table is intended to assist investors in understanding the
costs and expenses that shareholders in the Funds will bear directly or
indirectly. THE EXAMPLE SET FORTH ABOVE ASSUMES REINVESTMENT OF ALL DIVIDENDS
AND DISTRIBUTIONS. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE
ASSUMED FOR PURPOSES OF THE EXAMPLE.
FINANCIAL HIGHLIGHTS
Financial statements for the periods ended March 31, 1995 and the independent
auditor's report thereon for each Fund are included in the Statement of
Additional Information. The following per share data and ratios have been
derived from information provided in financial statements of the Funds audited
by Deloitte & Touche LLP, independent auditors.
<TABLE>
<CAPTION>
ARIZONA FUND
------------------------------
FOR THE
PERIOD
FOR THE FEBRUARY 8,
YEAR ENDED 1993+
MARCH 31, TO
----------------- MARCH 31,
1995 1994 1993
-------- ------- -----------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSET VALUE:
PER SHARE
OPERATING PERFORMANCE:
Net asset value,
beginning of
period.......... $1.00 $ 1.00 $ 1.00
-------- ------- -------
Investment
income--net..... .03 .02 .002
-------- ------- -------
Total from
investment
operations...... .03 .02 .002
-------- ------- -------
Less dividends:
Investment in-
come--net....... (.03) (.02) (.002)
-------- ------- -------
Net asset value,
end of period... $1.00 $ 1.00 $ 1.00
======== ======= =======
TOTAL INVESTMENT
RETURN.......... 2.83% 1.90% 1.78%*
======== ======= =======
RATIOS TO AVERAGE NET
ASSETS:
Expenses, net of
reimbursement
and excluding
distribution
fees............ .41% .47% .33%*
======== ======= =======
Expenses, net of
reimbursement... .54% .59% .46%*
======== ======= =======
Expenses........ .85% .98% 1.15%*
======== ======= =======
Investment
income--net..... 2.84% 1.89% 1.86%*
======== ======= =======
SUPPLEMENTAL DATA:
Net assets, end
of period (in
thousands)...... $103,717 $73,414 $41,437
======== ======= =======
<CAPTION>
CALIFORNIA FUND
-----------------------------------------------------------------------------------
FOR THE
PERIOD
JULY 5,
FOR THE YEAR ENDED 1988+
MARCH 31, TO
----------------------------------------------------------------------- MARCH 31,
1995 1994 1993 1992 1991 1990 1989
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSET VALUE:
PER SHARE
OPERATING PERFORMANCE:
Net asset value,
beginning of
period.......... $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ----------- ----------- ----------- ----------- ----------- -----------
Investment
income--net..... .03 .02 .02 .03 .05 .05 .04
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total from
investment
operations...... .03 .02 .02 .03 .05 05 .04
----------- ----------- ----------- ----------- ----------- ----------- -----------
Less dividends:
Investment in-
come--net....... (.03) (.02) (.02) (.03) (.05) (.05) (.04)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net asset value,
end of period... $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== =========== =========== =========== ===========
TOTAL INVESTMENT
RETURN.......... 2.66% 1.93% 2.25% 3.48% 4.96% 5.59% 5.41%*
=========== =========== =========== =========== =========== =========== ===========
RATIOS TO AVERAGE NET
ASSETS:
Expenses, net of
reimbursement
and excluding
distribution
fees............ .51% .50% .51% .51% .50% .52% .51%*
=========== =========== =========== =========== =========== =========== ===========
Expenses, net of
reimbursement... .63% .62% .63% .63% .62% .65% .64%*
=========== =========== =========== =========== =========== =========== ===========
Expenses........ .63% .62% .63% .63% .62% .65% .72%*
=========== =========== =========== =========== =========== =========== ===========
Investment
income--net..... 2.62% 1.91% 2.22% 3.42% 4.83% 5.44% 5.43%*
=========== =========== =========== =========== =========== =========== ===========
SUPPLEMENTAL DATA:
Net assets, end
of period (in
thousands)...... $1,168,234 $1,225,160 $1,014,800 $1,033,423 $1,163,288 $1,047,340 $702,698
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
- ----
* Annualized
+ Commencement of Operations
3
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
CONNECTICUT FUND MASSACHUSETTS FUND
--------------------------------------- -------------------------------------------------
FOR THE FOR THE
FOR THE PERIOD PERIOD
YEAR APRIL 29, JULY 30,
ENDED 1991+ FOR THE YEAR ENDED 1990+
MARCH 31, TO MARCH 31, TO
---------------------------- MARCH 31, -------------------------------------- MARCH 31,
1995 1994 1993 1992 1995 1994 1993 1992 1991
-------- -------- -------- --------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSET
VALUE:
PER SHARE
OPERATING PERFORMANCE:
Net asset value,
beginning of period..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------- -------- -------
Investment income--net.. .03 .02 .02 .03 .02 .02 .02 .04 .03
-------- -------- -------- -------- -------- -------- -------- -------- -------
Total from investment
operations.............. .03 .02 .02 .03 .02 .02 .02 .04 .03
-------- -------- -------- -------- -------- -------- -------- -------- -------
Less dividends:
Investment income--net.. (.03) (.02) (.02) (.03) (.02) (.02) (.02) (.04) (.03)
-------- -------- -------- -------- -------- -------- -------- -------- -------
Net asset value, end of
period.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== ======== ======== =======
TOTAL INVESTMENT RETURN. 2.54% 1.77% 2.20% 3.56%* 2.46% 1.74% 2.20% 3.66% 5.04%*
======== ======== ======== ======== ======== ======== ======== ======== =======
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of
reimbursement and
excluding distribution
fees.................... .58% .58% .51% .28%* .64% .66% .66% .73% .60%*
======== ======== ======== ======== ======== ======== ======== ======== =======
Expenses, net of
reimbursement........... .71% .70% .63% .41%* .76% .78% .78% .85% .72%*
======== ======== ======== ======== ======== ======== ======== ======== =======
Expenses................ .71% .70% .73% .81%* .76% .78% .78% .87% .97%*
======== ======== ======== ======== ======== ======== ======== ======== =======
Investment income--net.. 2.53% 1.76% 2.17% 3.46%* 2.43% 1.72% 2.15% 3.56% 4.92%*
======== ======== ======== ======== ======== ======== ======== ======== =======
SUPPLEMENTAL DATA:
Net assets, end of
period (in thousands)... $260,398 $250,038 $231,431 $197,895 $161,076 $150,804 $132,302 $116,340 $84,613
======== ======== ======== ======== ======== ======== ======== ======== =======
</TABLE>
- -----
* Annualized
+ Commencement of Operations
4
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
MICHIGAN FUND NEW JERSEY FUND
--------------------------------------- -------------------------------------------------
FOR THE FOR THE
PERIOD PERIOD
APRIL 29, JULY 30,
FOR THE YEAR ENDED 1991+ FOR THE YEAR ENDED 1990+
MARCH 31, TO MARCH 31, TO
---------------------------- MARCH 31, -------------------------------------- MARCH 31,
1995 1994 1993 1992 1995 1994 1993 1992 1991
-------- -------- -------- --------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSET VALUE:
PER SHARE
OPERATING PERFORMANCE:
Net asset value,
beginning of period..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------- -------- --------
Investment income--net.. .03 .02 .02 .03 .02 .02 .02 .03 .03
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations.............. .03 .02 .02 .03 .02 .02 .02 .03 .03
-------- -------- -------- -------- -------- -------- -------- -------- --------
Less dividends:
Investment income--net.. (.03) (.02) (.02) (.03) (.02) (.02) (.02) (.03) (.03)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
period.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN. 2.57% 1.81% 2.24% 3.62%* 2.52% 1.82% 2.21% 3.49% 4.95%*
======== ======== ======== ======== ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET
ASSETS:
Expenses, net of
reimbursement and
excluding distribution
fees.................... .60% .60% .53% .42%* .59% .58% .58% .62% .52%*
======== ======== ======== ======== ======== ======== ======== ======== ========
Expenses, net of
reimbursement........... .73% .72% .65% .54%* .71% .70% .70% .74% .64%*
======== ======== ======== ======== ======== ======== ======== ======== ========
Expenses................ .73% .72% .74% .80%* .71% .70% .70% .74% .76%*
======== ======== ======== ======== ======== ======== ======== ======== ========
Investment income--net.. 2.54% 1.79% 2.22% 3.53%* 2.51% 1.80% 2.16% 3.42% 4.74%*
======== ======== ======== ======== ======== ======== ======== ======== ========
SUPPLEMENTAL DATA:
Net assets, end of
period (in thousands)... $220,171 $236,435 $200,200 $194,433 $525,747 $441,846 $388,903 $350,058 $356,475
======== ======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
- -----
* Annualized
+ Commencement of Operations
5
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
NEW YORK FUND
---------------------------------------------------------------------
FOR THE
PERIOD
JULY 5,
FOR THE YEAR ENDED 1988+
MARCH 31, TO
---------------------------------------------------------- MARCH 31,
1995 1994 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
INCREASE
(DECREASE) IN
NET ASSET VALUE:
PER SHARE
OPERATING PERFORMANCE:
Net asset value,
beginning of
period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- --------
Investment
income--net..... .03 .02 .02 .03 .05 .05 .04
-------- -------- -------- -------- -------- -------- --------
Total from
investment
operations...... .03 .02 .02 .03 .05 .05 .04
-------- -------- -------- -------- -------- -------- --------
Less dividends:
Investment
income--net .... (.03) (.02) (.02) (.03) (.05) (.05) (.04)
-------- -------- -------- -------- -------- -------- --------
Net asset value,
end of period... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== ========
TOTAL INVESTMENT
RETURN.......... 2.59% 1.79% 2.19% 3.37% 4.86% 5.35% 5.04%*
======== ======== ======== ======== ======== ======== ========
RATIOS TO
AVERAGE NET
ASSETS:
Expenses, net of
reimbursement
and excluding
distribution
fees............ .54% .54% .55% .55% .57% .59% .58%*
======== ======== ======== ======== ======== ======== ========
Expenses, net of
reimbursement... .67% .67% .67% .68% .69% .71% .70%*
======== ======== ======== ======== ======== ======== ========
Expenses........ .67% .67% .67% .68% .69% .72% .79%*
======== ======== ======== ======== ======== ======== ========
Investment
income--net..... 2.59% 1.78% 2.16% 3.31% 4.73% 5.23% 5.14%*
======== ======== ======== ======== ======== ======== ========
SUPPLEMENTAL
DATA:
Net assets, end
of period
(in thousands).. $919,852 $772,760 $665,970 $625,768 $633,819 $544,197 $333,299
======== ======== ======== ======== ======== ======== ========
<CAPTION>
NORTH CAROLINA FUND
-----------------------------------------
FOR THE
PERIOD
MAY 28,
FOR THE YEAR ENDED 1991+
MARCH 31, TO
----------------------------- MARCH 31,
1995 1994 1993 1992
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
INCREASE
(DECREASE) IN
NET ASSET VALUE:
PER SHARE
OPERATING PERFORMANCE:
Net asset value,
beginning of
period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- -----------
Investment
income--net..... .03 .02 .02 .03
--------- --------- --------- -----------
Total from
investment
operations...... .03 .02 .02 .03
--------- --------- --------- -----------
Less dividends:
Investment
income--net .... (.03) (.02) (.02) (.03)
--------- --------- --------- -----------
Net asset value,
end of period... $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ===========
TOTAL INVESTMENT
RETURN.......... 2.61% 1.85% 2.25% 3.49%*
========= ========= ========= ===========
RATIOS TO
AVERAGE NET
ASSETS:
Expenses, net of
reimbursement
and excluding
distribution
fees............ .50% .48% .45% .33%*
========= ========= ========= ===========
Expenses, net of
reimbursement... .62% .61% .57% .45%*
========= ========= ========= ===========
Expenses........ .72% .71% .73% .83%*
========= ========= ========= ===========
Investment
income--net..... 2.58% 1.84% 2.20% 3.25%*
========= ========= ========= ===========
SUPPLEMENTAL
DATA:
Net assets, end
of period
(in thousands).. $278,704 $293,452 $235,384 $221,060
========= ========= ========= ===========
</TABLE>
- -----
* Annualized
+ Commencement of Operations
6
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
OHIO FUND PENNSYLVANIA FUND
--------------------------------------- --------------------------------------------------
FOR THE FOR THE
PERIOD PERIOD
APRIL 29, AUGUST 27,
FOR THE YEAR ENDED 1991+ FOR THE YEAR ENDED 1990+
MARCH 31, TO MARCH 31, TO
---------------------------- MARCH 31, -------------------------------------- MARCH 31,
1995 1994 1993 1992 1995 1994 1993 1992 1991
-------- -------- -------- --------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSET VALUE:
PER SHARE
OPERATING PERFORMANCE:
Net asset value,
beginning of period..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------- -------- --------
Investment income--net.. .03 .02 .02 .03 .03 .02 .02 .03 .03
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations.............. .03 .02 .02 .03 .03 .02 .02 .03 .03
-------- -------- -------- -------- -------- -------- -------- -------- --------
Less dividends:
Investment
income--net ............ (.03) (.02) (.02) (.03) (.03) (.02) (.02) (.03) (.03)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
period.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN. 2.65% 1.88% 2.27% 3.65%* 2.65% 1.87% 2.29% 3.58% 4.95%*
======== ======== ======== ======== ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET
ASSETS:
Expenses, net of
reimbursement and
excluding distribution
fees.................... .62% .59% .61% .44%* .59% .59% .60% .65% .63%*
======== ======== ======== ======== ======== ======== ======== ======== ========
Expenses, net of
reimbursement........... .74% .72% .74% .57%* .71% .72% .72% .77% .75%*
======== ======== ======== ======== ======== ======== ======== ======== ========
Expenses................ .74% .72% .74% .82%* .71% .72% .72% .77% .80%*
======== ======== ======== ======== ======== ======== ======== ======== ========
Investment income--net.. 2.64% 1.86% 2.24% 3.52%* 2.64% 1.85% 2.22% 3.47% 4.75%*
======== ======== ======== ======== ======== ======== ======== ======== ========
SUPPLEMENTAL DATA:
Net assets, end of
period (in thousands)... $237,655 $213,655 $187,344 $192,173 $353,635 $336,853 $318,954 $243,225 $225,622
======== ======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
- -----
* Annualized
+ Commencement of Operations
7
<PAGE>
YIELD INFORMATION
Set forth below are the annualized and compounded annualized yields for each
Fund for the indicated seven-day periods.
<TABLE>
<CAPTION>
ARIZONA CALIFORNIA CONNECTICUT MASSACHUSETTS MICHIGAN NEW JERSEY NEW YORK NORTH CAROLINA OHIO
FUND FUND FUND FUND FUND FUND FUND FUND FUND
------- ---------- ----------- ------------- -------- ---------- -------- -------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Seven-Day Period
Ended March 31, 1995
Annualized
Yield.. 3.67% 3.28% 3.18% 3.17% 3.32% 3.20% 3.31% 3.39% 3.46%
Compounded
Annualized
Yield.......... 3.74% 3.33% 3.23% 3.22% 3.38% 3.25% 3.37% 3.45% 3.52%
Average Maturity
of Portfolio at
End of Period.. 31 days 45 days 28 days 35 days 38 days 25 days 38 days 22 days 35 days
Seven-Day Period
Ended June 30, 1995
Annualized
Yield........... 3.78% 3.39% 3.22% 3.23% 3.44% 3.35% 3.41% 3.42% 3.56%
Compounded
Annualized
Yield.......... 3.85% 3.45% 3.27% 3.28% 3.50% 3.41% 3.47% 3.48% 3.62%
Average Maturity
of Portfolio at
End of Period.. 24 days 36 days 32 days 41 days 26 days 40 days 50 days 52 days 59 days
Thirty-Day Period
Ended June 30, 1995
Taxable Equiva-
lent Yield*.... 4.90% 4.47% 4.22% 4.17% 4.44% 4.26% 4.44% 4.40% 4.49%
<CAPTION>
PENNSYLVANIA
FUND
------------
<S> <C>
Seven-Day Period
Ended March 31, 1995
Annualized
Yield.. 3.34%
Compounded
Annualized
Yield.......... 3.40%
Average Maturity
of Portfolio at
End of Period.. 23 days
Seven-Day Period
Ended June 30, 1995
Annualized
Yield........... 3.56%
Compounded
Annualized
Yield.......... 3.62%
Average Maturity
of Portfolio at
End of Period.. 26 days
Thirty-Day Period
Ended June 30, 1995
Taxable Equiva-
lent Yield*.... 4.46%
</TABLE>
- --------
* Based upon a Federal income tax rate of 28%; does not take into account state
or local income taxes.
From time to time, each Fund may quote information regarding its yield for
certain seven-day periods and information as to the compounded annualized yield
for the same periods.
The yield of a Fund refers to the income generated by an investment in the
Fund over a stated seven-day period. This income is then annualized; that is,
the amount of income generated by the investment during that period is assumed
to be generated each seven-day period over a 52-week period and is shown as a
percentage of the investment. The compounded annualized yield is calculated
similarly but, when annualized, the income earned by an investment in a Fund is
assumed to be reinvested. The compounded annualized yield will be somewhat
higher than the yield because of the effect of the assumed reinvestment.
The yield on Fund shares normally will fluctuate on a daily basis. Therefore,
the yield for any given past period is not an indication or representation by
the Fund of future yields or rates of return on its shares. A Fund's yield is
affected by changes in interest rates on short-term tax-exempt securities,
average portfolio maturity, the types and quality of portfolio securities held
and operating expenses.
On occasion, each Fund may compare its yield to (i) the Donoghue's Tax-Free
Funds Average, an average compiled by Donoghue's Money Fund Report, a widely
recognized independent publication that monitors the performance of money
market mutual funds, (ii) the average yield reported by the Bank Rate Monitor
National Index(TM) for money market deposit accounts offered by the 100 leading
banks and thrift institutions in the ten largest standard metropolitan
statistical areas, (iii) yield data published by Lipper Analytical Services,
Inc., (iv) performance data published by Morningstar Publications, Inc., Money
Magazine, U.S. News & World Report, Business Week, CDA Investment Technology,
Inc., Forbes Magazine and Fortune Magazine, or (v) historical yield data
relating to other central asset accounts similar to the CMA program. As with
yield quotations, yield comparisons should not be considered indicative of a
Fund's yield
8
<PAGE>
or relative performance for any future period. Current yield information may
not provide a basis for comparison with bank deposits or other investments that
pay a fixed yield over a stated period of time. In addition, from time to time
a Fund may include its Morningstar risk-adjusted performance ratings in
advertisements or supplemental sales literature.
INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT OBJECTIVES
The investment objectives of each Fund are to seek current income exempt from
Federal and the designated state's personal income taxes, preservation of
capital and liquidity available from investing in a portfolio of short-term,
high quality tax-exempt securities. In addition to the investment objectives
stated above, the New York Fund also seeks income exempt from New York City
income taxes. Each Fund seeks to achieve its objectives by investing primarily
in a portfolio of obligations with remaining maturities of 397 days (13 months)
or less which are issued by or on behalf of the designated states, their
political subdivisions, agencies and instrumentalities, and obligations of
other qualifying issuers, such as issuers located in Puerto Rico, the Virgin
Islands and Guam and issuers of derivative or synthetic municipal instruments,
the interest from which is exempt, in the opinion of counsel to the issuer,
from Federal income taxation, the designated state's income taxation and, in
the case of the New York Fund, from New York City income taxation. Such
obligations are herein referred to as "State Municipal Securities". The
investment objectives of the Funds described in this paragraph are fundamental
policies of each Fund and may not be changed without a vote of the majority of
the outstanding shares of the respective Fund.
The Funds ordinarily do not intend to realize investment income not exempt
from Federal income taxes, the personal income taxes of the designated states
or, in the case of the New York Fund, New York City income taxes. However, to
the extent that suitable State Municipal Securities are not available for
investment by a Fund, that Fund may purchase high quality obligations with
remaining maturities of 397 days (13 months) or less which are issued by other
states, their agencies and instrumentalities and derivative or synthetic
municipal instruments, the interest income on which is exempt, in the opinion
of counsel to the issuer, from Federal taxation but not state or city taxation.
Such obligations, either separately or together with State Municipal
Securities, are herein referred to as "Municipal Securities".
Except during temporary defensive periods, each Fund will invest at least 65%
of its total assets in State Municipal Securities and at least 80% of its net
assets in Municipal Securities. The New Jersey Fund will invest at least 80% of
its total assets in New Jersey State Municipal Securities. However, interest
received on certain State Municipal Securities and Municipal Securities which
are classified as "private activity bonds" (in general, bonds that benefit non-
governmental entities) may be subject to an alternative minimum tax. The
percentage of each Fund's net assets invested in "private activity bonds" will
vary during the year. See "Taxes". Each Fund has the authority to invest as
much as 20% of its net assets in obligations that do not qualify as State
Municipal Securities or Municipal Securities. Such obligations include taxable
money market obligations, including repurchase agreements and purchase and sale
contracts, with maturities of 397 days (13 months) or less, and are referred to
herein as "Taxable Securities". In addition, each Fund except the New Jersey
Fund reserves the right as a defensive measure to invest temporarily more than
35% of its total assets in Municipal Securities other than its respective State
Municipal Securities and more than 20% of its net assets in Taxable Securities
when, in the opinion of the Manager, prevailing market or financial conditions
warrant. The New Jersey Fund reserves the right as a defensive measure to
invest temporarily more than 20% of its total assets in Municipal Securities
other than New Jersey Municipal Securities and more than 20% of its net assets
in Taxable Securities when, in the opinion of the Manager, prevailing market or
financial conditions warrant.
9
<PAGE>
As noted above, each Fund may invest a portion of its assets in certain
otherwise tax-exempt securities which are classified, under the Internal
Revenue Code of 1986, as amended (the "Code"), as "private activity bonds". A
Fund's policy with respect to investments in "private activity bonds" is not a
fundamental policy of that Fund and may be amended by the Trustees of the Trust
without the approval of the Fund's shareholders. Each Fund may invest more than
25% of its assets in Municipal Securities secured by bank letters of credit. In
view of this possible "concentration" in Municipal Securities with bank credit
enhancements, an investment in Fund shares should be made with an understanding
of the characteristics of the banking industry and the risks that such an
investment may entail. See "Other Factors".
The Funds are classified as non-diversified within the meaning of the
Investment Company Act, which means that a Fund is not limited by such Act in
the proportion of its assets that it may invest in obligations of a single
issuer. However, each Fund's investments will be limited so as to qualify as a
"regulated investment company" for purposes of the Code. See "Taxes". To
qualify, among other requirements, the Trust will limit each Fund's investments
so that, at the close of each quarter of the taxable year, (i) not more than
25% of the market value of each Fund's total assets will be invested in the
securities of a single issuer, and (ii) with respect to 50% of the market value
of each Fund's total assets, not more than 5% of the market value of such
assets will be invested in the securities of a single issuer and the respective
Fund will not own more than 10% of the outstanding voting securities of a
single issuer. A fund which elects to be classified as "diversified" under the
Investment Company Act must satisfy the foregoing 5% and 10% requirements with
respect to 75% of its total assets. To the extent that a Fund assumes large
positions in the obligations of a small number of issuers, the Fund's yield may
fluctuate to a greater extent than that of a diversified company as a result of
changes in the financial condition or in the market's assessment of the
issuers.
POTENTIAL BENEFITS
Investment in Fund shares offers several benefits. The Funds are investment
vehicles designed to be suitable for investors of designated states seeking
income exempt from income taxation by those states as well as Federal income
taxation and, in the case of the New York Fund, New York City income taxation.
Each Fund seeks to provide as high a double (or, in the case of the New York
Fund, triple) tax-exempt yield potential as is available from the short-term
State Municipal Securities in which it invests utilizing professional
management and block purchases of securities. The Funds also provide liquidity
because of their redemption features. The investor also is relieved of the
burdensome administrative details involved in managing a portfolio of municipal
securities. These benefits are at least partially offset by the expenses
involved in operating an investment company. Such expenses primarily consist of
the management fee, distribution fee and operational costs of each Fund.
PORTFOLIO INVESTMENTS
The State Municipal Securities in which the Funds invest include municipal
notes, municipal commercial paper, municipal bonds with a remaining maturity of
397 days (13 months) or less, variable rate demand obligations and
participations therein, and derivative or synthetic municipal instruments. The
Funds may invest in all types of municipal and tax-exempt instruments currently
outstanding or to be issued in the future which satisfy the short-term maturity
and quality standards of the Funds.
Certain of the instruments in which the Funds invest, including Variable Rate
Demand Obligations ("VRDOs") and derivative or synthetic short-term municipal
instruments ("Derivative Products"), effectively provide the Funds with
economic interests in long-term municipal bonds (or a portion of the income
derived therefrom), coupled with rights to demand payment of the principal
amounts of such instruments from designated persons (a "demand right"). Under
Commission rules, the Funds treat these instruments as having maturities
shorter than the stated maturity dates of the VRDOs or of the long-term bonds
underlying the Derivative Products (the "Underlying Bonds"). Such maturities
are sufficiently short-
10
<PAGE>
term to allow such instruments to qualify as eligible investments for money
market funds such as the Funds. A demand right is dependent on the financial
ability of the issuer of the demand right (or, if the instrument is subject to
credit enhancement, a bank or other financial institution issuing a letter of
credit or other credit enhancement supporting the demand right), to purchase
the instrument at its principal amount. In addition, the right of a Fund to
demand payment from the issuer of a demand right may be subject to certain
conditions, including the creditworthiness of the Underlying Bond. If the
issuer of a demand right is unable to purchase the instrument, or if, because
of conditions on the right of the Fund to demand payment, the issuer of a
demand right is not obligated to purchase the instrument on demand, the Fund
may be required to dispose of the instrument or the Underlying Bond in the open
market, which may be at a price which adversely affects the Fund.
Variable Rate Demand Obligations. VRDOs are tax-exempt obligations which
utilize a floating or variable interest rate adjustment formula and provide an
unconditional right of demand to receive payment of the unpaid principal
balance plus accrued interest on a short notice period. The interest on a VRDO
is adjustable at periodic intervals to a rate calculated to maintain the market
value of the VRDO at approximately the par value of the VRDO on the adjustment
date. The adjustment may be based on an interest rate adjustment index.
The Funds also may invest in VRDOs in the form of participation interests
("Participating VRDOs") in variable rate tax-exempt obligations held by
financial institutions, typically commercial banks ("institutions").
Participating VRDOs provide the Funds with specified undivided interests (up to
100%) in the underlying obligations and the right to demand payment of the
unpaid principal balance plus accrued interest on the Participating VRDOs from
the institutions on a specified number of days' notice, presently not to exceed
30 days. In addition, each Participating VRDO is backed by an irrevocable
letter of credit or similar commitment of the institution. The Funds have
undivided interests in the underlying obligations and thus participate on the
same basis as the institutions in such obligations except that the institutions
typically retain fees out of the interest paid on the obligations for servicing
the obligations, providing the letters of credit or issuing the repurchase
commitments.
VRDOs that contain an unconditional right of demand to receive payment of the
unpaid principal balance plus accrued interest on a notice period exceeding
seven days may be deemed to be illiquid securities. A VRDO with a demand notice
period exceeding seven days will therefore be subject to the Funds'
restrictions on illiquid investments unless, in the judgment of the Trustees,
such VRDO is liquid. The Trustees may adopt guidelines and delegate to the
Managers the daily function of determining and monitoring liquidity of such
VRDOs. The Trustees, however, will retain sufficient oversight and be
ultimately responsible for such determinations.
The Trust has been advised by its counsel that the Funds should be entitled
to treat the income received on Participating VRDOs as interest from tax-exempt
obligations provided that certain conditions are met. It is presently
contemplated that each Fund will not invest more than a limited amount (not
more than 20%) of its total assets in Participating VRDOs.
Derivative Products. The Funds may invest in a variety of Derivative
Products. Derivative Products are typically structured by a bank, broker-dealer
or other financial institution. A Derivative Product generally consists of a
trust or partnership through which a Fund holds an interest in one or more
Underlying Bonds coupled with a conditional right to sell ("put") that Fund's
interest in the Underlying Bonds at par plus
11
<PAGE>
accrued interest to a financial institution (a "Liquidity Provider").
Typically, a Derivative Product is structured as a trust or partnership which
provides for pass-through tax-exempt income. There are currently three
principal types of derivative structures: (1) "Tender Option Bonds", which are
instruments which grant the holder thereof the right to put an Underlying Bond
at par plus accrued interest at specified intervals to a Liquidity Provider;
(2) "Swap Products", in which the trust or partnership swaps the payments due
on an Underlying Bond with a swap counterparty who agrees to pay a floating
municipal money market interest rate; and (3) "Partnerships", which allocate to
the partners portions of income, expenses, capital gains and losses associated
with holding an underlying Bond in accordance with a governing agreement. The
Funds may also invest in other forms of short term Derivative Products eligible
for investment by money market funds.
Investments in Derivative Products raise certain tax, legal, regulatory and
accounting issues which may not be presented by investments in other municipal
bonds. There is some risk that certain issues could be resolved in a manner
which could adversely impact the performance of a Fund. For example, the tax-
exempt treatment of the interest paid to holders of Derivative Products is
premised on the legal conclusion that the holders of such Derivative Products
have an ownership interest in the Underlying Bonds. While each Fund receives an
opinion of legal counsel to the effect that the income from each Derivative
Product is tax-exempt to the same extent as the Underlying Bond, the Internal
Revenue Service (the "IRS") has not issued a ruling on this subject. Were the
IRS to issue an adverse ruling, there is a risk that the interest paid on such
Derivative Products would be deemed taxable.
Municipal Lease Obligations. Also included within the general category of the
State Municipal Securities are participation certificates in a lease, an
installment purchase contract or a conditional sales contract (hereinafter
collectively called "lease obligations") entered into by the designated state
or a political subdivision thereof to finance the acquisition or construction
of equipment, land or facilities. Although lease obligations do not constitute
general obligations of the issuer for which the lessee's unlimited taxing power
is pledged, a lease obligation is frequently backed by the lessee's covenant to
budget for, appropriate and make the payments due under the lease obligation.
However, certain lease obligations contain "nonappropriation" clauses which
provide that the lessee has no obligation to make lease or installment purchase
payments in future years unless money is appropriated for such purpose on a
yearly basis. Although "nonappropriation" lease obligations are secured by the
leased property, disposition of the property in the event of foreclosure might
prove difficult. These securities represent a relatively new type of financing
that has not yet developed the depth of marketability associated with more
conventional securities. Certain investments in lease obligations may be
illiquid. A Fund may not invest in illiquid lease obligations if such
investments, together with all other illiquid investments, would exceed 10% of
such Fund's net assets. A Fund may, however, invest without regard to such
limitation in lease obligations which the Manager, pursuant to guidelines which
have been adopted by the Board of Trustees and subject to the supervision of
the Board, determines to be liquid. Pursuant to Guidelines which apply to the
Funds and other funds managed by the Manager (which funds may be able to invest
in lower rated obligations than the Funds), the Manager will deem lease
obligations liquid if they are publicly offered and have received an investment
grade rating of Baa or better by Moody's Investors Service, Inc. ("Moody's"),
or BBB or better by Standard & Poor's Ratings Group ("Standard & Poor's") or
Fitch Investors Service, Inc. ("Fitch"). Unrated lease obligations will be
considered liquid if the obligations come to the market through an underwritten
public offering and at least two dealers are willing to give competitive bids.
In reference to the unrated lease obligations, the Manager must, among other
things, also review the creditworthiness of the municipality obligated to make
payment under the lease obligation and make certain specified determinations
based on such factors as the existence of a rating or credit
12
<PAGE>
enhancement such as insurance, the frequency of trades or quotes for the
obligation and the willingness of dealers to make a market in the obligation.
SHORT-TERM MATURITY STANDARDS
All of the investments of the Funds will be in securities with remaining
maturities of 397 days (13 months) or less. The dollar-weighted average
maturity of each Fund's portfolio will be 90 days or less. For purposes of this
investment policy, an obligation will be treated as having a maturity earlier
than its stated maturity date if such obligation has technical features which,
in the judgment of the Manager, will result in the obligation being valued in
the market as though it has such earlier maturity.
The maturities of VRDOs (including Participating VRDOs) are deemed to be the
longer of (i) the notice period required before a Fund is entitled to receive
payment of the principal amount of the VRDO on demand or (ii) the period
remaining until the VRDO's next interest rate adjustment. If not redeemed by
the Funds through the demand feature, VRDOs mature on a specified date which
may range up to 30 years from the date of issuance.
QUALITY STANDARDS
Each Fund's portfolio investments in municipal notes and short-term tax-
exempt commercial paper will be limited to those obligations which are rated,
or issued by issuers who have been rated, in one of the two highest rating
categories for short-term municipal debt obligations by a nationally recognized
statistical rating organization (an "NRSRO") or, if not rated, will be of
comparable quality as determined under procedures approved by the Trustees of
the Trust. Each Fund's investments in municipal bonds (which must have
maturities at the date of purchase of 397 days (13 months) or less) will be in
issuers who have received from the requisite NRSROs a rating, with respect to a
class of short-term debt obligations that is comparable in priority and
security with the investment, in one of the two highest rating categories for
short-term obligations or, if not rated, will be of comparable quality as
determined by the Trustees of the Trust. Currently, there are three NRSROs
which rate municipal obligations: Fitch, Moody's and Standard & Poor's. Certain
tax-exempt obligations (primarily VRDOs and Participating VRDOs) may be
entitled to the benefit of letters of credit or similar credit enhancements
issued by financial institutions. In such instances, in assessing the quality
of such instruments, the Trustees and the Manager will take into account not
only the creditworthiness of the issuers, but also the creditworthiness and
type of obligation of the financial institution. The type of obligation of the
financial institution concerns, for example, whether the letter of credit or
similar credit enhancement being issued is conditional or unconditional. The
Funds also may purchase other types of municipal instruments if, in the opinion
of the Trustees or the Manager (as determined in accordance with the procedures
established by the Trustees), such obligations are equivalent to securities
having the ratings described above.
Taxable Securities in which the Funds invest will be rated, or will be issued
by issuers who have been rated, in one of the two highest rating categories for
short-term debt obligations by an NRSRO or, if not rated, will be of comparable
quality as determined by the Trustees of the Trust. Currently, there are six
NRSROs that rate Taxable Securities: Fitch, Moody's, Standard & Poor's, Duff &
Phelps Credit Ratings Co., IBCA Limited and its affiliate, IBCA, Inc. and
Thomson Bankwatch, Inc. The Funds may not invest in any security issued by a
depository institution unless such institution is organized and operating in
the United States, has total assets of at least $1 billion and is Federally
insured.
Preservation of capital is a prime investment objective of the Funds, and,
while the types of Municipal Securities in which the Funds invest are not
completely risk free, such securities generally are considered by the Manager
to have low risk of the failure of issuers or credit enhancers to pay
principal, interest and
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repurchase price, if applicable. These securities have a lower payment risk
compared to lower rated obligations and generally to longer term obligations
which entail the risk of changing conditions over a longer period of time.
SPECIAL CONSIDERATIONS AND RISK FACTORS
Each Fund ordinarily will invest at least 65% (80% in the case of the New
Jersey Fund) of its total assets in its respective State Municipal Securities
and, therefore, it is more susceptible to factors adversely affecting issuers
of Municipal Securities in such state than is a tax-exempt mutual fund that is
not concentrated in issuers of State Municipal Securities to this degree.
Because each Fund's portfolio will be comprised primarily of short-term, high
quality securities, each Fund is expected to be less subject to market and
credit risks than a fund that invests in longer-term or lower quality State
Municipal Securities. Set forth below are special considerations and risk
factors specific to each Fund.
The Arizona Fund. Over the past several decades, the State's economy has
grown faster than most other regions of the country, as measured by nearly
every major indicator of economic growth, including population, employment, and
aggregate personal income. Although the rate of growth in these and other areas
slowed considerably during the late 1980s and early 1990s, the State's efforts
to diversify its economy have enabled it to realize, and then sustain, moderate
growth in more recent years. In 1994, however, Maricopa County, the State's
most populous county, incurred a $66.53 million budget deficit, leading Moody's
and Standard & Poor's to lower the County's rating from Aa1 to Aa and from AA
to A, respectively. In addition, several irrigation districts filed for
bankruptcy after failing to service their bonded debt, and the Arizona Supreme
Court ruled that the State's current system for financing public education was
unconstitutional, thus requiring the legislature to create a new system of
public school financing. The Manager does not believe that the current economic
conditions in Arizona will have a significant adverse effect on the Arizona
Fund's ability to invest in high quality Arizona State Municipal Securities.
See Appendix A, "Economic and Financial Conditions in Arizona" in the Statement
of Additional Information.
The California Fund. In 1994, all three of the rating agencies rating the
State of California's long-term debt lowered their ratings of the State's
general obligation bonds. Standard & Poor's lowered its rating from A+ to A,
Moody's lowered its rating from Aa to A1 and Fitch lowered its rating from AA
to A. No assurance can be given that such ratings will not be lowered in the
future. The Manager does not believe that the current economic conditions in
California will have a significant adverse effect on the California Fund's
ability to invest in high quality California State Municipal Securities. See
Appendix B, "Economic and Financial Conditions in California" in the Statement
of Additional Information.
The Connecticut Fund. Fiscal stress is reflected in the State's economic and
revenue forecasts, a rising debt burden that reflects a significant increase in
bond activity since fiscal 1987-88, a cumulative general fund deficit for
fiscal 1990-91 of over $965 million, and uncertainty concerning the solutions
for these imbalances. Accumulated surpluses in a budget stabilization fund
created in 1983 to protect against future deficit problems were exhausted in
1990. The lack of a contingency fund balance, combined with reduced revenue-
raising flexibility in the near term, places additional constraints on managing
these financial problems and any others that may arise. As a result of
recurring budgetary problems, Connecticut's general obligation bonds were
downgraded by Standard & Poor's from AA+ to AA in April 1990 and, in September
1991, to AA-; by Moody's from Aa1 to Aa in April 1990; and by Fitch from AA+ to
AA in March 1995. The
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Manager does not believe that the current economic conditions in Connecticut
will have a significant adverse effect on the Connecticut Fund's ability to
invest in high quality Connecticut State Municipal Securities. See Appendix C,
"Economic and Financial Conditions in Connecticut" in the Statement of
Additional Information.
The Massachusetts Fund. The Commonwealth of Massachusetts is experiencing a
moderate economic recovery. In fiscal 1992, revenues exceeded spending and the
Commonwealth ended fiscal 1992 with positive fund balances of $549.4 million.
The budgeted operating funds of the Commonwealth ended fiscal 1993 with a
surplus of revenues and other sources over expenditures and other uses, and
with aggregate ending fund balances of approximately $562.5 million. The
Commonwealth ended fiscal 1994 with a positive closing fund balance of $589.3
million. As of the date of this Prospectus and according to the Executive
Office for Administration and Finance, fiscal 1995 is expected to end with an
operating loss of $87.8 million, but with positive budgetary fund balances
totaling approximately $501.5 million, to be achieved through the use of the
prior year ending fund balances. Currently, Massachusetts' general obligation
bonds are rated by Standard & Poor's, Fitch and Moody's as A+, A+ and A-1,
respectively. Ratings have been lowered on short-term debt and some state
agency obligations. From time to time, the rating agencies may further change
their ratings in response to budgetary matters or other economic indicators.
The Manager does not believe that the current economic conditions in
Massachusetts will have a significant adverse effect on the Massachusetts
Fund's ability to invest in high quality Massachusetts State Municipal
Securities. See Appendix D, "Economic and Financial Conditions in
Massachusetts" in the Statement of Additional Information.
The Michigan Fund. The State of Michigan reported a balance in the General
Fund as of September 30, 1994 of $26.0 million after a transfer of $464 million
to the Michigan Budget Stabilization Fund, which after such transfer had an
accrued balance of $779 million. The State has improved financially after two
consecutive years of deficits in the 1989-90 and 1990-91 fiscal years and draws
on the Michigan Budget Stabilization Fund to balance the 1991-92 and succeeding
fiscal year budgets. Economically, the State remains closely tied to the
economic cycles of the automobile industry. Current increased automobile
production has led to an unemployment rate which, as of the date of this
Prospectus, is near the national average. Currently, Michigan's general
obligation bonds are rated A1 by Moody's, AA by Standard & Poor's and AA by
Fitch. The Manager does not believe that the current economic conditions in
Michigan will have a significant adverse effect on the Michigan Fund's ability
to invest in high quality Michigan State Municipal Securities. See Appendix E,
"Economic and Financial Conditions in Michigan" in the Statement of Additional
Information.
The New Jersey Fund. The State of New Jersey and certain of its public
authorities have undergone recent financial difficulties. Although there is
evidence that the State's economy is improving, a return to the economic boom
of the 1980s is unlikely and growth is likely to be slower than in the rest of
the nation. New Jersey is reliant on federal assistance and ranks high among
the states in the amount of Federal aid received. Currently, New Jersey State's
general obligation bonds are rated AA+ by Standard & Poor's, Aa1 by Moody's and
AA+ by Fitch. The Manager does not believe that the current economic conditions
in New Jersey will have a significant adverse effect on the New Jersey Fund's
ability to invest in high quality New Jersey State Municipal Securities. See
Appendix F, "Economic and Financial Conditions in New Jersey" in the Statement
of Additional Information.
The New York Fund. In recent years, New York State, New York City and other
New York public bodies have encountered financial difficulties which could have
an adverse effect with respect to the
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performance of the New York Fund. Currently, Moody's, Standard & Poor's and
Fitch rate New York State's general obligation bonds A, A- and A+,
respectively, and Moody's, Standard & Poor's and Fitch rate New York City's
general obligation bonds Baa1, BBB+ and A-, respectively. The Manager does not
believe that the current economic conditions in New York will have a
significant adverse effect on the New York Fund's ability to invest in high
quality New York State Municipal Securities. See Appendix G, "Economic and
Financial Conditions in New York" in the Statement of Additional Information.
The North Carolina Fund. Growth of North Carolina tax revenues slowed
considerably during fiscal 1990-92, requiring tax increases and budget
adjustments, including hiring freezes and restrictions, spending constraints,
changes in timing of certain collections and payments, and other short-term
budget adjustments, that were needed to comply with North Carolina's
constitutional mandate for a balanced budget. Fiscal years 1993 and 1994,
however, ended with a positive General Fund balance of approximately $500
million each year on a budgetary basis. By law, 25% of such positive fund
balance was required to be reserved in the General Fund of North Carolina as
part of a "Savings Reserve" (subject to a maximum reserve of 5% of the
preceding fiscal year's operating appropriation). An additional portion of such
positive fund balance was reserved in the General Fund as part of a "Reserve
for Repair and Renovation of State Facilities", leaving the remaining
unrestricted fund balance at the end of each such year available for future
appropriations. Currently, Moody's, Standard & Poor's and Fitch rate North
Carolina's general obligation bonds Aaa, AAA, and AAA, respectively. The
Manager does not believe that the current economic conditions in North Carolina
will have a significant adverse effect on the North Carolina Fund's ability to
invest in high quality North Carolina State Municipal Securities. See Appendix
H, "Economic and Financial Conditions in North Carolina" in the Statement of
Additional Information.
The Ohio Fund. The Ohio State General Revenue Fund had positive fund and cash
balances at the end of the 1995 Fiscal Year of $928.0 million and $1,312.2
million, respectively. Economic activity in Ohio, as in many other industrially
developed states, tends to be more cyclical than in some other states and in
the nation as a whole. Currently, Ohio's general obligation bonds are rated AA,
Aa and AA by Fitch, Moody's and Standard & Poor's, respectively. The Manager
does not believe that the current economic conditions in Ohio will have a
significant adverse effect on the Ohio Fund's ability to invest in high quality
Ohio Municipal Securities. See Appendix I, "Economic and Financial Conditions
in Ohio" in the Statement of Additional Information.
The Pennsylvania Fund. Many different social, environmental and economic
factors may affect the financial condition of Pennsylvania and its political
subdivisions. From time to time Pennsylvania and certain of its political
subdivisions have encountered financial difficulties which have adversely
affected their respective credit standings. For example, the financial
condition of the City of Philadelphia had impaired its ability to borrow and
resulted in its obligations generally being downgraded by the major rating
services (Moody's, Standard & Poor's and Fitch), below investment grade.
Currently, Pennsylvania's general obligation bonds are rated AA- by Standard &
Poor's and Fitch and A1 by Moody's. The Manager does not believe that the
current economic conditions in Pennsylvania will have a significant adverse
effect on the Pennsylvania Fund's ability to invest in high quality
Pennsylvania Municipal Securities. See Appendix J, "Economic and Financial
Conditions in Pennsylvania" in the Statement of Additional Information.
Under prior Pennsylvania law, in order for the Pennsylvania Fund to qualify
to pass through to investors income exempt from Pennsylvania personal income
tax, the Pennsylvania Fund was required to adhere to certain investment
restrictions. In order to comply with this and other Pennsylvania law
requirements
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previously in effect, the Pennsylvania Fund adopted, as a fundamental policy, a
requirement that it invest in securities for income earnings rather than
trading for profit and that, in accordance with such policy, it not vary its
portfolio investments except to: (i) eliminate unsafe investments or
investments not consistent with the preservation of capital or the tax status
of the investments of the Pennsylvania Fund; (ii) honor redemption orders, meet
anticipated redemption requirements and negate gains from discount purchases;
(iii) reinvest the earnings from portfolio securities in like securities; (iv)
defray normal administrative expenses; or (v) maintain a constant net asset
value pursuant to, and in compliance with, an order or rule of the United
States Securities & Exchange Commission. Pennsylvania has enacted legislation
which eliminates the necessity for the foregoing investment policies. Since
such policies are fundamental policies of the Pennsylvania Fund, which can only
be changed by the affirmative vote of a majority (as defined under the
Investment Company Act) of the outstanding shares, the Pennsylvania Fund
continues to be governed by such investment policies.
OTHER FACTORS
Management of the Funds will endeavor to be as fully invested as reasonably
practicable in order to maximize the yield on each Fund's portfolio. Not all
short-term municipal securities trade on the basis of same day settlements and,
accordingly, a portfolio of such securities cannot be managed on a daily basis
with the same flexibility as a portfolio of money market securities which can
be bought and sold on a same day basis. There may be times when a Fund has
uninvested cash resulting from an influx of cash due to large purchases of
shares or the maturing of portfolio securities. A Fund also may be required to
maintain cash reserves or incur temporary bank borrowings to make redemption
payments which are made on the same day the redemption request is received.
Such inability to be invested fully would lower the yield on such Fund's
portfolio.
A Fund may invest more than 25% of the value of its total assets in Municipal
Securities which are related in such a way that an economic, business or
political development or change affecting one such security also would affect
the other securities; for example, securities the interest upon which is paid
from revenues of similar types of projects. As a result, the Funds may be
subject to greater risk as compared to mutual funds that do not follow this
practice.
In view of the possible "concentration" of the Funds in Municipal Securities
secured by bank letters of credit or guarantees, an investment in a Fund should
be made with an understanding of the characteristics of the banking industry
and the risks which such an investment may entail. Banks are subject to
extensive governmental regulations which may limit both the amounts and types
of loans and other financial commitments which may be made and interest rates
and fees which may be charged. The profitability of the banking industry is
largely dependent on the availability and cost of capital funds for the purpose
of financing lending operations under prevailing money market conditions.
Furthermore, general economic conditions play an important part in the
operations of this industry and exposure to credit losses arising from possible
financial difficulties of borrowers might affect a bank's ability to meet its
obligations under a letter of credit.
Changes to the Internal Revenue Code limit the types and volume of securities
qualifying for the Federal income tax exemption of interest with the result
that the volume of new issues of Municipal Securities has declined
substantially. Such changes may affect the availability of Municipal Securities
for investment by the Funds, which could have a negative impact on the yield of
the portfolios. Each Fund reserves the right to suspend or otherwise limit
sales of its shares if, as a result of difficulties in acquiring portfolio
securities or otherwise, it is determined that it is not in the interests of
the Fund's shareholders to issue additional shares.
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WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
Municipal Securities at times may be purchased or sold on a delayed delivery
basis or on a when-issued basis. These transactions arise when securities are
purchased or sold by a Fund with payment and delivery taking place in the
future, often a month or more after the purchase. The payment obligation and
the interest rate are each fixed at the time the buyer enters into the
commitment. A Fund will make commitments to purchase such securities only with
the intention of actually acquiring the securities, but such Fund may sell
these securities prior to settlement date if it is deemed advisable. No new
when-issued commitments will be made if more than 40% of a Fund's net assets
would become so committed. Purchasing Municipal Securities on a when-issued
basis involves the risk that the yields available in the market when the
delivery takes place may actually be higher than those obtained in the
transaction itself; if yields so increase, the value of the when-issued
obligation generally will decrease. Each Fund will maintain a separate account
at the Trust's custodian consisting of cash or liquid Municipal Securities
(valued on a daily basis) equal at all times to the amount of the when-issued
commitment.
REPURCHASE AGREEMENTS
Each Fund may invest in Taxable Securities pursuant to repurchase agreements.
Repurchase agreements may be entered into only with a member bank of the
Federal Reserve System or a primary dealer in U.S. Government securities or an
affiliate thereof which meets the creditworthiness standards adopted by the
Trustees. Under such agreements, the bank or primary dealer or an affiliate
thereof agrees, upon entering into the contract, to repurchase the security at
a mutually agreed upon time and price, thereby determining the yield during the
term of the agreement. This results in a fixed rate of return insulated from
market fluctuations during such period.
INVESTMENT RESTRICTIONS
The Trust has adopted a number of restrictions and policies relating to the
investment of each Fund's assets and its activities which are fundamental
policies and may not be changed without the approval of the holders of a
majority of the respective Fund's outstanding shares as defined in the
Investment Company Act. Among the more significant restrictions, no Fund may:
(i) purchase any securities other than securities referred to under "Investment
Objectives and Policies" in the Statement of Additional Information or herein;
(ii) borrow amounts in excess of 20% of its total assets taken at market value
(including the amount borrowed), and then only from banks as a temporary
measure for extraordinary or emergency purposes. The Funds will not purchase
securities while borrowings are outstanding; (iii) mortgage, pledge,
hypothecate or in any manner transfer as security for indebtedness any
securities that it owns or holds except in connection with certain specified
transactions; (iv) invest in securities which cannot be readily resold because
of legal or contractual restrictions or which are not otherwise readily
marketable, including repurchase agreements maturing in more than seven days,
if, regarding all such securities, more than 10% of its total assets (taken at
market value at the time of each investment) would be invested in such
securities; and (v) invest more than 5% of its total assets (taken at market
value at the time of each investment) in industrial revenue bonds where the
entity supplying the revenues from which the issue is to be paid, including
predecessors, has a record of less than three years of continuous operation.
In addition, to comply with tax requirements for qualification as "regulated
investment companies", the Funds' investments will be limited in a manner such
that, at the close of each quarter of each fiscal year, (a) no more than 25% of
each Fund's total assets are invested in the securities of a single issuer, and
(b) with
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regard to at least 50% of each Fund's total assets, no more than 5% of its
total assets are invested in the securities of a single issuer. For purposes of
this restriction, the Funds will regard each state and each political
subdivision, agency or instrumentality of such state and each multi-state
agency of which such state is a member and each public authority which issues
securities on behalf of a private entity as a separate issuer, except that if
the security is backed only by the assets and revenues of a non-governmental
entity then the entity with the ultimate responsibility for the payment of
interest and principal may be regarded as the sole issuer. These tax-related
limitations may be changed by the Trustees of the Trust to the extent necessary
to comply with changes to the Federal tax requirements.
Investors are referred to the Statement of Additional Information for a
complete description of the Funds' investment restrictions.
PURCHASE OF SHARES
PURCHASE OF SHARES BY CMA SUBSCRIBERS
CMA Program. The shares of the Funds are offered to participants in the CMA
program to provide a medium for the investment of free credit balances held in
CMA accounts. Persons subscribing to the CMA program will have these balances
invested in shares of a CMA State Fund or CMA Money Fund, CMA Government
Securities Fund, CMA Tax-Exempt Fund or CMA Treasury Fund (collectively, the
"CMA National Funds" and together with the CMA State Funds, the "CMA Funds")
depending on which CMA Fund has been designated by the participant as the
primary investment account (the "Primary Money Account"). Alternatively,
subscribers may designate the Insured Savings Account as their Primary Money
Account. As described in the CMA Program Description, a subscriber to the CMA
Service may elect to have free credit balances in the CMA account deposited in
individual money market deposit accounts established for such subscriber at
designated depository institutions pursuant to the Insured Savings Account. The
CMA Funds and the Insured Savings Account are collectively referred to as the
"Money Accounts". However, this Prospectus does not purport to describe the
other CMA Funds or the Insured Savings Account and prospective participants in
such CMA Funds or Insured Savings Account are referred to the Prospectus with
respect to each such CMA Fund and the Fact Sheet with respect to the Insured
Savings Account. All CMA subscribers are furnished with the prospectuses of the
CMA National Funds and the Insured Savings Account Fact Sheet, as well as the
CMA Program Description. To the extent not inconsistent with information
contained herein, information set forth in the CMA Program Description with
respect to the CMA National Funds also is applicable to each CMA State Fund.
Shareholders of a CMA State Fund may also maintain positions in one or more of
the CMA National Funds or the Insured Savings Account but may not maintain
positions in more than one CMA State Fund at any given time.
Merrill Lynch charges a fee for the CMA service which presently is $100 per
year for individuals (an additional fee, presently $25, is charged for
participation in the CMA Visa Gold Program). A different fee may be charged to
certain group plans and special accounts. Merrill Lynch reserves the right to
change the fee for the CMA service or the CMA Visa Gold Program at any time.
Purchase of shares of a CMA Fund designated as the Primary Money Account will
be made pursuant to the CMA automatic purchase procedures described below.
Purchases of shares of the CMA Funds also may be made pursuant to the manual
procedures described below. If a Fund exercises its right to suspend or
otherwise limit sales of its shares, as discussed under "Investment Objectives
and Policies--Other Factors",
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amounts that would have been applied to the purchase of such Fund's shares will
be applied to the purchase of shares of one of the other CMA Funds or the
Insured Savings Account depending on which is designated by the participant as
the secondary investment account (the "Secondary Money Account"). However,
dividends declared on shares of the CMA Fund designated as the Primary Money
Account will continue to be reinvested in that Fund. If the participant has not
designated a Secondary Money Account, additional purchases through the CMA
program will be made in shares of CMA Tax-Exempt Fund rather than in shares of
the CMA Fund designated as the Primary Money Account.
Subscribers to the CMA service have the option to change the designation of
their Primary Money Account at any time by notifying their Merrill Lynch
financial consultants. At that time, a subscriber may instruct his or her
financial consultant to redeem shares of a CMA Fund designated as the Primary
Money Account and to transfer the proceeds to the newly-designated Primary
Money Account.
Merrill Lynch reserves the right to terminate a subscriber's participation in
the CMA program for any reason.
Shares of the Funds are offered continuously for sale by Merrill Lynch. The
purchase price for shares of each Fund is the net asset value per share
(normally $1.00) next determined after receipt by the Fund of an automatic or
manual purchase order in proper form. Shares purchased will receive the next
dividend declared after such shares are issued which will be immediately prior
to the 12 noon pricing on the following business day. A purchase order will not
be effective until cash in the form of Federal funds becomes available to the
Fund (see the next paragraph for information as to when free credit balances
held in CMA accounts become available to the Funds). There are no minimum
investment requirements for CMA subscribers other than for manual purchases.
Automatic Purchases of Fund Shares by CMA Subscribers. Free credit balances
arising in a CMA account are invested automatically in shares of the CMA Fund
designated as the Primary Money Account not later than the first business day
of each week on which either the New York Stock Exchange or New York banks are
open, which normally will be Monday. Free credit balances arising from the
following transactions will be invested automatically prior to the automatic
weekly sweeps. Free credit balances arising from the sale of securities which
do not settle on the day of the transaction (such as most common and preferred
stock transactions) and from principal repayments on debt securities become
available to such Fund and will be invested in shares on the business day
following receipt of the proceeds with respect thereto in the CMA account.
Proceeds from the sale of shares of Merrill Lynch Ready Assets Trust, Merrill
Lynch U.S.A. Government Reserves and Merrill Lynch U.S. Treasury Money Fund,
and from the sale of securities settling on a same day basis, also become
available to such Fund and will be invested in shares on the next business day
following receipt. Free credit balances of $1,000 or more arising from cash
deposits into a CMA account, dividend and interest payments or any other source
become available to such Fund and are invested in shares on the next business
day following receipt in the CMA account unless such balance results from a
cash deposit made after the cashiering deadline of the Merrill Lynch office in
which the deposit is made, in which case the resulting free credit balances are
invested on the second following business day. A CMA participant desiring to
make a cash deposit should contact his or her Merrill Lynch financial
consultant for information concerning the local office's cashiering deadline,
which is dependent on such office's arrangements with its commercial banks.
Free credit balances of less than $1,000 are invested in shares in the
automatic weekly sweep.
Manual Purchases by CMA Subscribers. A subscriber to the CMA service may make
manual investments of $1,000 or more at any time in shares of a CMA Fund not
selected as his or her Primary Money Account. Manual purchases shall be
effective on the day following the day the order is placed with Merrill
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Lynch, except that orders involving cash deposits made on the date of a manual
purchase shall become effective on the second business day thereafter if they
are placed after the cashiering deadline referred to in the preceding
paragraph. As a result, CMA customers who enter manual purchase orders which
include cash deposits made on that day after such cashiering deadline will not
receive the daily dividend which would have been received had their orders been
entered prior to the deadline. Since there is a three-day settlement period
applicable to the sale of most securities, delays may occur when an investor is
liquidating other investments for investment in a CMA Fund. In addition, manual
purchases of $500,000 or more can be made effective on the same day the order
is placed with Merrill Lynch provided that requirements as to timely
notification and transfer of a Federal funds wire in the proper amount are met.
CMA customers desiring further information on this method of purchasing shares
should contact their Merrill Lynch financial consultants.
All purchases of CMA Fund shares and dividend reinvestments will be confirmed
to CMA subscribers (rounded to the nearest share) in the CMA Account Statement
which is sent to all CMA participants monthly.
Merrill Lynch, in conjunction with another subsidiary of Merrill Lynch & Co.,
Inc. ("ML & Co."), has introduced a modified version of the CMA account which
has been designed for corporations and other businesses. This account, the
Working Capital Management SM account ("WCMA(R)"), provides participants with
the features of a regular CMA account and also optional lines of credit. A
brochure describing the WCMA program, as well as information concerning charges
for participation in the program, is available from Merrill Lynch.
Participants in the WCMA program are able to invest funds in one or more
designated CMA Funds. Checks and other funds transmitted to a WCMA account
generally will be applied first, to the payment of pending securities
transactions or other charges in the participant's securities account, second,
to reduce outstanding balances in the lines of credit available through such
program and third, to purchase shares of the designated CMA Fund. To the extent
not otherwise applied, funds transmitted by Federal funds wire or an automated
clearinghouse service will be invested in shares of the designated CMA Fund on
the business day following receipt of such funds by Merrill Lynch. Funds
received in a WCMA account from the sale of securities will be invested in the
designated CMA Fund as described above. The amount payable on a check received
in a WCMA account prior to the cashiering deadline referred to above will be
invested on the second business day following receipt of the check by Merrill
Lynch. Redemptions of CMA Fund shares will be effected as described below under
"Redemption of Shares--Redemption of Shares by CMA Subscribers--Automatic
Redemptions" to satisfy debit balances, such as those created by purchases of
securities or by checks written against a bank providing checking services to
WCMA participants. WCMA participants that have a line of credit will, however,
be permitted to maintain a minimum CMA Fund balance; for participants who elect
to maintain such a balance, debits from check usage will be satisfied through
the line of credit so that such balance is maintained. However, if the full
amount of available credit is not sufficient to satisfy the debit, it will be
satisfied from the minimum balance.
From time to time, Merrill Lynch also may offer the Funds to participants in
certain other programs sponsored by Merrill Lynch. Some or all of the features
of the CMA Account may not be available in such programs. For more information
on the services available under such programs, participants should contact
their financial consultants.
21
<PAGE>
PURCHASE OF SHARES BY NON-CMA SUBSCRIBERS
Shares of the Funds may be purchased by individual investors who are not
subscribers to the CMA program but who maintain accounts directly with Merrill
Lynch Financial Data Services, Inc., the Trust's transfer agent (the "Transfer
Agent"). Such shareholders will not be charged the CMA program fee, but will
not receive any of the additional services available to CMA program
participants such as the Visa Account or the automatic investment of free
credit balances. The minimum initial purchase for non-CMA subscribers is $5,000
and the minimum subsequent purchase is $1,000. Investors desiring to purchase
shares directly through the Transfer Agent as described below should contact
Merrill Lynch Financial Data Services, Inc., P.O. Box 45290, Jacksonville,
Florida 32232-5290 or call (800) 221-7210.
Payment to the Transfer Agent. Investors who are not subscribers to the CMA
program may submit purchase orders directly by mail or otherwise to the
Transfer Agent. Purchase orders by mail should be sent to Merrill Lynch
Financial Data Services, Inc., P.O. Box 45290, Jacksonville, Florida 32232-
5290. Purchase orders which are sent by hand should be delivered to Merrill
Lynch Financial Data Services, Inc., 4800 Deer Lake Drive East, Jacksonville,
Florida 32246-6484. Investors opening a new account must enclose a completed
Purchase Application which is available from the Transfer Agent. Existing
shareholders should enclose the detachable stub from a monthly account
statement which they have received. Checks should be made payable to Merrill
Lynch, Pierce, Fenner & Smith Incorporated. Certified checks are not necessary,
but checks are accepted subject to collection at full face value in U.S. funds
and must be drawn in U.S. dollars on a U.S. bank. Payments for the accounts of
corporations, foundations and other organizations may not be made by third
party checks. Since there is a three-day settlement period applicable to the
sale of most securities, delays may occur when an investor is liquidating other
investments for investment in one of the Funds.
The CMA Funds have been created for the purpose of being part of the CMA
program or as part of other Merrill Lynch central asset account programs, and
they do not offer certain typical money fund features such as exchange
privileges. There are money market funds which have investment objectives
similar to the CMA Funds and which offer check writing and exchange privileges,
including others sponsored by Merrill Lynch (Merrill Lynch, however, does not
sponsor money funds outside the CMA program which seek to provide income exempt
from state or city income taxes). Prior to making an investment in any such
money fund, an investor should obtain and read the prospectus of such money
market fund.
Shares of each Fund are offered continuously for sale by Merrill Lynch
without a sales load at a public offering price equal to the net asset value
(normally $1.00 per share) next determined after a purchase order becomes
effective. Share purchase orders are effective on the date Federal funds become
available to the selling Fund. If Federal funds are available to such Fund
prior to 12 noon on any business day, the order will be effective on that day.
Shares purchased will begin accruing dividends on the day following the date of
purchase.
----------------
The Trust has entered into a distribution agreement with Merrill Lynch, a
wholly-owned subsidiary of ML & Co. (the "Distribution Agreement"), pursuant to
which Merrill Lynch acts as the distributor for the Funds.
Each Fund has adopted a separate distribution and shareholder servicing plan
(each a "Distribution Plan") in compliance with Rule 12b-1 under the Investment
Company Act. Pursuant to each Distribution
22
<PAGE>
Plan, Merrill Lynch receives a distribution fee from each Fund at the end of
each month at the annual rate of 0.125% of average daily net assets of that
Fund attributable to subscribers to the CMA program and to investors
maintaining securities accounts at Merrill Lynch or maintaining accounts
directly with the Transfer Agent who are not subscribers to such program,
except that the value of Fund shares in accounts maintained directly with the
Transfer Agent which are not serviced by Merrill Lynch Financial Consultants
will be excluded. Each Distribution Plan reimburses Merrill Lynch only for
actual expenses of the respective Fund incurred during the fiscal year in
which the fee is paid. The distribution fees compensate Merrill Lynch
Financial Consultants and other directly involved branch office personnel for
selling shares of the Funds and for providing direct personal services to
shareholders.
Set forth below are the fees paid by each Fund to Merrill Lynch pursuant to
its Distribution Plan for the year ended March 31, 1995, each Fund's net
assets as of June 30, 1995 and the approximate annual distribution fee payable
by each Fund as of June 30, 1995.
<TABLE>
<CAPTION>
DISTRIBUTION FEES
----------------------------------------------------
AS OF JUNE 30, 1995
-------------------------------------
FEE PAID AT APPROXIMATE ANNUAL FEE
MARCH 31, 1995 NET ASSETS BASED ON NET ASSETS
-------------- -------------- ----------------------
<S> <C> <C> <C>
Arizona Fund............... $ 106,900 $ 105,190,136 $ 131,488
California Fund............ $1,492,270 $1,158,511,504 $1,448,139
Connecticut Fund........... $ 320,966 $ 270,207,603 $ 337,760
Massachusetts Fund......... $ 187,724 $ 155,161,828 $ 193,952
Michigan Fund.............. $ 277,622 $ 220,638,291 $ 275,798
New Jersey Fund............ $ 573,696 $ 513,119,683 $ 641,400
New York Fund.............. $1,013,471 $ 910,566,922 $1,138,209
North Carolina Fund........ $ 366,625 $ 253,306,828 $ 315,624
Ohio Fund.................. $ 268,476 $ 243,815,696 $ 304,770
Pennsylvania Fund.......... $ 420,594 $ 374,840,682 $ 468,551
</TABLE>
REDEMPTION OF SHARES
Each Fund is required to redeem for cash all full and fractional shares of
such Fund. The redemption price of a Fund is the net asset value per share
next determined after receipt by the Transfer Agent of proper notice of
redemption as described in accordance with either the automatic or manual
procedures set forth below. If such notice is received by the Transfer Agent
prior to the determination of net asset value at 12 noon, New York time, on
any day that the New York Stock Exchange or New York banks are open for
business, the redemption will be effective on such day. Payment of the
redemption proceeds will be made on the same day the redemption becomes
effective. If the notice is received after 12 noon, the redemption will be
effective on the next business day and payment will be made on such next day.
REDEMPTION OF SHARES BY CMA SUBSCRIBERS
Automatic Redemptions. Redemptions will be effected automatically by Merrill
Lynch to satisfy debit balances in the Securities Account created by activity
therein or to satisfy debit balances created by Visa card purchases, cash
advances or checks written against the Visa Account. Each CMA account will be
scanned automatically for debits each business day prior to 12 noon. After
application of any free credit balances in
23
<PAGE>
the account to such debits, shares of the designated Fund will be redeemed at
net asset value at the 12 noon pricing, and funds deposited pursuant to the
Insured Savings Account will be withdrawn, to the extent necessary to satisfy
any remaining debits in either the Securities Account or the Visa Account.
Automatic redemptions or withdrawals will be made first from the participant's
Primary Money Account and then, to the extent necessary, from Money Accounts
not designated as the Primary Money Account. Unless otherwise requested, in
those instances where shareholders request transactions that settle on a "same-
day" basis (such as Federal Funds wire redemptions, branch office checks,
transfers to other Merrill Lynch accounts and certain securities transactions)
the Fund shares necessary to effect such transactions will be deemed to have
been transferred to Merrill Lynch prior to the Fund's declaration of dividends
on that day. In such instances, shareholders will receive all dividends
declared and reinvested through the date immediately preceding the date of
redemption. Unless otherwise requested by the participant, redemptions or
withdrawals from non-Primary Money Accounts will be made in the order the Money
Accounts were established; thus, redemptions or withdrawals will first be made
from the non-Primary Money Account which the participant first established.
Margin loans through the Investor CreditLine SM service will be utilized to
satisfy debits remaining after the liquidation of all funds invested in or
deposited through Money Accounts, and shares of the Funds may not be purchased,
nor may deposits be made pursuant to the Insured Savings Account, until all
debits and margin loans in the account are satisfied.
As set forth in the current description of the CMA Program, it is expected
that participants whose Securities Accounts are margin accounts with or through
the Investor CreditLine SM service will be permitted to designate minimum
balances to be maintained in shares of a CMA Fund or in deposits made pursuant
to the Insured Savings Account (the "Minimum Money Accounts Balance"). If a
participant designates a Minimum Money Accounts Balance, the shares or deposits
representing such balance will not be redeemed or withdrawn until loans equal
to the available margin loan value of securities in the Securities Account have
been made. Participants considering the establishment of a Minimum Money
Accounts Balance should review the description of this service contained in the
description of the CMA program which is available from Merrill Lynch.
Manual Redemptions. Shareholders who are subscribers to the CMA program may
redeem shares of a Fund directly by submitting a written notice of redemption
directly to Merrill Lynch, which will submit the requests to the Transfer
Agent. Cash proceeds from the manual redemption of Fund shares ordinarily will
be mailed to the shareholder at his or her address of record or on request,
mailed or wired (if $10,000 or more) to his or her bank account. Redemption
requests should not be sent to a Fund or the Transfer Agent. If inadvertently
sent to a Fund or the Transfer Agent, such redemption requests will be
forwarded to Merrill Lynch. The notice requires the signatures of all persons
in whose name the shares are registered, signed exactly as their names appear
on their monthly statement. The signature(s) on the redemption request must be
guaranteed by an "eligible guarantor institution" as such is defined in Rule
17Ad-15 under the Securities Exchange Act of 1934, the existence and validity
of which may be verified by the Transfer Agent through the use of industry
publications. Notarized signatures are not sufficient. In certain instances,
additional documents such as, but not limited to, trust instruments, death
certificates, appointments as executor or administrator, or certificates of
corporate authority may be required. Shareholders desiring to effect manual
redemptions should contact their Merrill Lynch financial consultants.
All redemptions of Fund shares will be confirmed to CMA subscribers in the
CMA Account Statement which is sent to all CMA participants monthly.
24
<PAGE>
REDEMPTION OF SHARES BY NON-CMA SUBSCRIBERS
Shareholders may redeem shares of a Fund held in a Merrill Lynch securities
account directly as described above under "Redemption of Shares--Redemption of
Shares by CMA Subscribers--Manual Redemptions".
Shareholders maintaining an account directly with the Transfer Agent, who are
not CMA program participants, may redeem shares of a Fund by submitting a
written notice by mail directly to the Transfer Agent, Merrill Lynch Financial
Data Services, Inc., P.O. Box 45290, Jacksonville, Florida 32232-5290.
Redemption requests which are sent by hand should be delivered to Merrill Lynch
Financial Data Services, 4800 Deer Lake Drive East, Jacksonville, Florida
32246-6484. Cash proceeds from the manual redemption of Fund shares will be
mailed to the shareholder at his or her address of record. Redemption requests
should not be sent to a Fund or Merrill Lynch. If inadvertently sent to a Fund
or Merrill Lynch such redemption requests will be forwarded to the Transfer
Agent. The notice requires the signatures of all persons in whose name the
shares are registered, signed exactly as their names appear on their monthly
statement. The signature(s) on the redemption request must be guaranteed by an
"eligible guarantor institution" as such is defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934, the existence and validity of which may be
verified by the Transfer Agent through the use of industry publications.
Notarized signatures are not sufficient. In certain instances, additional
documents such as, but not limited to, trust instruments, death certificates,
appointments as executor or administrator, or certificates of corporate
authority may be required.
----------------
Shares of the Funds must be held in either a CMA account or through the
Transfer Agent. Shareholders who no longer maintain a CMA account will have
their shares automatically redeemed unless they elect to open an account for
such shares through the Transfer Agent. Such shareholders will no longer
receive any of the services available to CMA program participants.
At various times, a Fund may be requested to redeem shares, in manual or
automatic redemptions, with respect to which good payment has not yet been
received by Merrill Lynch. Such Fund may delay, or cause to be delayed, the
payment of the redemption proceeds until such time as it has assured itself
that good payment has been collected for the purchase of such shares. Normally,
this delay will not exceed 10 days. In addition, such Fund reserves the right
not to effect automatic redemptions where the shares to be redeemed have been
purchased by check within 15 days prior to the date the redemption request is
received.
MANAGEMENT OF THE TRUST
TRUSTEES
The Trustees of the Trust consist of six individuals, five of whom are not
"interested persons" of the Trust as defined in the Investment Company Act. The
Trustees of the Trust are responsible for the overall supervision of the
operations of the Funds and perform the various duties imposed on the directors
of investment companies by the Investment Company Act.
The Trustees of the Trust are:
Arthur Zeikel*--President of the Manager and Merrill Lynch Asset
Management, L.P. ("MLAM"); Executive Vice President of ML & Co.; Executive
Vice President of Merrill Lynch; President and Director of Princeton
Services, Inc. ("Princeton Services"); and Director of Merrill Lynch Funds
Distributor, Inc. (the "Distributor").
- --------
* Interested person, as defined in the Investment Company Act, of the Trust.
25
<PAGE>
Ronald W. Forbes--Professor of Finance, School of Business, State
University of New York at Albany.
Cynthia A. Montgomery--Professor of Finance, Harvard Business School.
Charles C. Reilly--Self-employed financial consultant; former President
and Chief Investment Officer of Verus Capital, Inc.; and former Senior Vice
President of Arnhold and S. Bleichroeder, Inc.
Kevin A. Ryan--Professor of Education, Boston University; founder and
current Director of the Boston University Center for the Advancement of
Ethics and Character.
Richard R. West--Professor of Finance and former Dean, New York
University Leonard N. Stern School of Business Administration.
MANAGEMENT AND ADVISORY ARRANGEMENTS
The Manager is owned and controlled by ML & Co., a financial services holding
company and the parent of Merrill Lynch. The Manager acts as investment adviser
for the Funds and provides the Funds with management services pursuant to a
management agreement with the Trust (the "Management Agreement"). The Manager
or MLAM, an affiliate of the Manager, acts as investment adviser for more than
130 registered investment companies and provides investment advisory services
to individual and institutional accounts. As of June 30, 1995, MLAM and the
Manager had a total of approximately $180.4 billion in investment company and
other portfolio assets under management, including accounts of certain
affiliates of MLAM.
The Management Agreement with the Manager provides that, subject to the
direction of the Trustees, the Manager is responsible for the actual management
of each Fund's portfolio and constantly reviews each Fund's holdings in light
of its own research analysis and that from other relevant sources. The
responsibility for making decisions to buy, sell or hold a particular security
rests with the Manager, subject to the review of the Board of Trustees. The
Manager performs certain of the other administrative services and provides all
of the office space, facilities, equipment and necessary personnel for
portfolio management of the Funds.
As compensation for its services under the Management Agreement, the Manager
receives a fee from each Fund at the end of each month at the annual rates of
0.50% of the first $500 million of average daily net assets of the Fund, 0.425%
of the average daily net assets in excess of $500 million but not exceeding $1
billion and 0.375% of the average daily net assets in excess of $1 billion.
The Management Agreement obligates each Fund to pay certain expenses incurred
in its operations, including, among other things, the management fee, legal and
audit fees, unaffiliated Trustees' fees and expenses, registration fees,
custodian and transfer agency fees, accounting and pricing costs and certain of
the costs of printing proxies, shareholder reports, prospectuses and statements
of additional information. Accounting services are provided to the Funds by the
Manager and each Fund reimburses the Manager for its costs in connection with
such services. The Manager may waive all or a portion of its management fee and
may voluntarily assume all or a portion of a Fund's expenses. The Manager may
discontinue or reduce the amount of such waiver or assumption of expenses at
any time without notice.
26
<PAGE>
Set forth in the chart below is certain management fee and expense
information for each Fund for the year ended March 31, 1995 and at June 30,
1995.
<TABLE>
<CAPTION>
NORTH
ARIZONA CALIFORNIA CONNECTICUT MASSACHUSETTS MICHIGAN NEW JERSEY NEW YORK CAROLINA
FUND FUND FUND FUND FUND FUND FUND FUND OHIO FUND
-------- ---------- ----------- ------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fee
for the Year
Ended March 31,
1995........... $430,110 $5,371,374 $1,290,608 $756,123 $1,117,988 $2,299,467 $3,831,293 $1,474,176 $1,078,893
Management Fee
Waived for the
Year Ended
March 31, 1995. $267,373 $ -- $ -- $ -- $ -- $ -- $ -- $ 294,835 $ --
Effective Fee
Rate as of
March 31, 1995
(in millions).. .50% .45% .50% .50% .50% .50% .47% .50% .50%
Net Assets at
June 30, 1995
(in millions).. $ 105.2 $ 1,158.5 $ 270.2 $ 155.2 $ 220.6 $ 513.1 $ 910.6 $ 253.3 $ 243.8
Approximate
Annual
Management Fee
as of June 30,
1995........... $525,951 $5,219,418 $1,351,038 $775,809 $1,103,191 $2,555,759 $4,244,909 $1,266,534 $1,219,078
Approximate
Effective Fee
Rate as of June
30, 1995....... .50% .45% .50% .50% .50% .50% .47% .50% .50%
Reimbursement
for Accounting
Services for
the Year Ended
March 31, 1995. $ 34,475 $ 147,332 $ 34,816 $ 23,525 $ 33,121 $ 86,286 $ 89,857 $ 57,506 $ 67,499
Ratio of
Operating
Expenses to
Average Net
Assets (Net of
Reimbursement
and excluding
Distribution
Fees) for the
Year Ended
March 31, 1995. .54% .63% .71% .76% .73% .71% .67% .62% .74%
<CAPTION>
PENNSYLVANIA
FUND
------------
<S> <C>
Management Fee
for the Year
Ended March 31,
1995........... $1,689,896
Management Fee
Waived for the
Year Ended
March 31, 1995. $ --
Effective Fee
Rate as of
March 31, 1995
(in millions).. .50%
Net Assets at
June 30, 1995
(in millions).. $ 374.8
Approximate
Annual
Management Fee
as of June 30,
1995........... $1,874,203
Approximate
Effective Fee
Rate as of June
30, 1995....... .50%
Reimbursement
for Accounting
Services for
the Year Ended
March 31, 1995. $ 35,994
Ratio of
Operating
Expenses to
Average Net
Assets (Net of
Reimbursement
and excluding
Distribution
Fees) for the
Year Ended
March 31, 1995. .71%
</TABLE>
TRANSFER AGENCY SERVICES
Merrill Lynch Financial Data Services, Inc. (the "Transfer Agent"), a wholly-
owned subsidiary of ML & Co., acts as the Trust's transfer agent pursuant to a
transfer agency, shareholder servicing agency and proxy agency agreement (the
"Transfer Agency Agreement"). Pursuant to the Transfer Agency Agreement, the
Transfer Agent is responsible for the issuance, transfer and redemption of
shares and the opening and maintenance of shareholder accounts. Pursuant to the
Transfer Agency Agreement, each Fund pays the Transfer Agent a fee of $10.00
per shareholder account and the Transfer Agent is entitled to reimbursement
from each Fund for out-of-pocket expenses incurred by the Transfer Agent under
the Transfer Agency Agreement.
27
<PAGE>
Set forth below are the fees paid by each Fund to the Transfer Agent pursuant
to the Transfer Agency Agreement for the year ended March 31, 1995 (during a
portion of which a lower fee schedule was in effect) and for the three months
ended June 30, 1995.
<TABLE>
<CAPTION>
TRANSFER AGENT FEES
-------------------------------------------
AS OF JUNE 30, 1995
------------------------
FOR THE YEAR ENDED NUMBER OF APPROXIMATE
MARCH 31, 1995 SHAREHOLDERS FEE
------------------ ------------ -----------
<S> <C> <C> <C>
Arizona Fund........................ $ 18,741 1,915 $ 19,150
California Fund..................... $186,485 16,954 $169,540
Connecticut Fund.................... $ 39,502 3,842 $ 38,420
Massachusetts Fund.................. $ 44,690 4,237 $ 42,370
Michigan Fund....................... $ 52,817 4,833 $ 48,330
New Jersey Fund..................... $ 99,854 5,903 $ 59,030
New York Fund....................... $179,256 9,998 $ 99,980
North Carolina Fund................. $ 68,413 17,020 $170,200
Ohio Fund........................... $ 46,965 4,664 $ 46,640
Pennsylvania Fund................... $101,396 8,741 $ 87,410
</TABLE>
PORTFOLIO TRANSACTIONS
The portfolio securities in which the Funds invest are traded primarily in
the over-the-counter market. Where possible, the Funds will deal directly with
the dealers who make a market in the securities involved, except in those
circumstances where better prices and execution are available elsewhere. Such
dealers usually are acting as principals for their own accounts. On occasion,
securities may be purchased directly from the issuer. Such portfolio securities
generally are traded on a net basis and normally do not involve either
brokerage commissions or transfer taxes. The cost of executing portfolio
transactions primarily will consist of dealer spreads and underwriting
commissions. Under the Investment Company Act, persons affiliated with a Fund
are prohibited from dealing with such Fund as a principal in the purchase and
sale of securities unless an exemptive order allowing such transaction is
obtained from the Commission. The Trust has obtained exemptive relief
permitting the Funds to engage in certain principal transactions with Merrill
Lynch involving high quality, short-term Municipal Securities subject to
certain conditions. In addition, the Trust may not purchase State Municipal
Securities for the Funds from any underwriting syndicate of which Merrill Lynch
is a member except pursuant to procedures approved by the Trustees of the Trust
which comply with rules adopted by the Commission. An affiliated person of the
Trust may serve as its broker in over-the-counter transactions on behalf of a
Fund conducted on an agency basis. In allocating portfolio transactions, the
Manager may take into consideration the sale of shares of such Fund.
28
<PAGE>
Set forth below are the number of transactions engaged in by each Fund with
Merrill Lynch and the amount of securities involved for the year ended March
31, 1995.
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE
TRANSACTIONS AMOUNT
------------ ------------
<S> <C> <C>
Arizona Fund.......................................... 3 $ 7,000,000
California Fund....................................... 191 $823,101,765
Connecticut Fund...................................... 0 $ 0
Massachusetts Fund.................................... 42 $ 54,800,000
Michigan Fund......................................... 6 $ 14,925,000
New Jersey Fund....................................... 6 $ 14,802,160
New York Fund......................................... 8 $153,482,763
North Carolina Fund................................... 14 $ 14,200,000
Ohio Fund............................................. 2 $ 2,400,000
Pennsylvania Fund..................................... 0 $ 0
</TABLE>
DIVIDENDS
All of the net income of each Fund is declared as dividends daily. Each
Fund's net income for dividend purposes is determined by the Manager at 12
noon, New York time, on each day during which the New York Stock Exchange or
New York banks are open for business immediately prior to the determination of
each Fund's net asset value on that day (see "Determination of Net Asset
Value"). Net income of each Fund (from the time of the immediately preceding
determination thereof) consists of interest accrued and/or original issue
discount earned, less amortization of premium and the estimated expenses of the
Fund (including the fees payable to the Manager and Merrill Lynch) applicable
to that dividend period. Dividends of each Fund are declared and reinvested
daily in the form of additional full and fractional shares of that Fund at net
asset value.
DETERMINATION OF NET ASSET VALUE
The net asset value of each Fund is determined by the Manager once daily,
immediately after the daily declaration of dividends, as of 12 noon, New York
time, on each day during which the New York Stock Exchange or New York banks
are open for business. It is anticipated that the net asset value of each Fund
will remain constant at $1.00 per share although this cannot be assured.
Each Fund values its portfolio securities based on their amortized cost. This
involves valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the impact
of fluctuating interest rates on the market value of the instrument.
TAXES
FEDERAL
The Trust intends to continue to qualify each Fund for the special tax
treatment afforded regulated investment companies ("RICs") under the Code. If a
Fund so qualifies, in any taxable year in which it distributes at least 90% of
its taxable net income and 90% of its tax-exempt net income (see below), the
Fund (but not its shareholders) will not be subject to Federal income tax to
the extent that it distributes its net investment income and net realized
capital gains. The Trust intends to cause the Funds to distribute substantially
all of such income.
29
<PAGE>
To the extent that the dividends distributed to a Fund's shareholders are
derived from interest income exempt from Federal tax under Code Section 103(a)
and are properly designated as "exempt-interest dividends" by the Trust, they
will be excludable from a shareholder's gross income for Federal income tax
purposes. Exempt-interest dividends are included, however, in determining the
portion, if any, of a person's social security benefits and railroad retirement
benefits subject to Federal income taxes. The Trust will inform shareholders
annually as to the portion of each Fund's distributions which constitutes
exempt-interest dividends. Interest on indebtedness incurred or continued to
purchase or carry shares of any of the Funds is not deductible for Federal
income tax purposes to the extent attributable to exempt-interest dividends.
Persons who may be "substantial users" (or "related persons" of substantial
users) of facilities financed by industrial development bonds or private
activity bonds held by a Fund should consult their tax advisers before
purchasing Fund shares.
To the extent that any Fund's distributions are derived from interest on its
taxable investments or from an excess of net short-term capital gains over net
long-term capital losses ("ordinary income dividends"), such distributions are
considered ordinary income for Federal income tax purposes. Such distributions
are not eligible for the dividends received deduction for corporations.
Distributions, if any, of net long-term capital gains from the sale of
securities ("capital gain dividends") are taxable as long-term capital gains
for Federal income tax purposes, regardless of the length of time the
shareholder has owned Fund shares. Under the Revenue Reconciliation Act of
1993, all or a portion of a Fund's gain from the sale or redemption of tax-
exempt obligations purchased at a market discount will be treated as ordinary
income rather than capital gain. This rule may increase the amount of ordinary
income dividends received by shareholders. Distributions in excess of a Fund's
earnings and profits will first reduce the adjusted tax basis of a holder's
shares and, after such adjusted tax basis is reduced to zero, will constitute
capital gains to such holder (assuming the shares are held as a capital asset).
Any loss upon the sale or exchange of shares held for six months or less will
be disallowed to the extent of any exempt-interest dividends received by the
shareholder. If a Fund pays a dividend in January which was declared in the
previous October, November or December to shareholders of record on a specified
date in one of such months, then such dividend will be treated for tax purposes
as being paid by the Fund and received by its shareholders on December 31 of
the year in which such dividend was declared.
The Code subjects interest received on certain otherwise tax-exempt
securities to an alternative minimum tax. The alternative minimum tax applies
to interest received on "private activity bonds" issued after August 7, 1986.
Private activity bonds are bonds which, although tax-exempt, are used for
purposes other than those generally performed by governmental units and which
benefit non-governmental entities (e.g., bonds used for industrial development
or housing purposes). Income received on such bonds is classified as an item of
"tax preference", which could subject investors in such bonds, including
shareholders of the Funds, to an alternative minimum tax. The Funds will
purchase such "private activity bonds", and the Trust will report to
shareholders within 60 days after each Fund's taxable year-end the portion of
its dividends declared during the year which constitutes an item of tax
preference for alternative minimum tax purposes. The Code further provides that
corporations are subject to an alternative minimum tax based, in part, on
certain differences between taxable income as adjusted for other tax
preferences and the corporation's "adjusted current earnings", which more
closely reflect a corporation's economic income. Because an exempt-interest
dividend paid by a Fund will be included in adjusted current earnings, a
corporate shareholder may be required to pay alternative minimum tax on exempt-
interest dividends paid by such Fund.
The Revenue Reconciliation Act of 1993 added new marginal tax brackets of 36%
and 39.6% for individuals and created a graduated structure of 26% and 28% for
the alternative minimum tax applicable
30
<PAGE>
to individual taxpayers. These rate increases may affect an individual
investor's after-tax return from an investment in a Fund as compared with such
investor's return from taxable investments.
A loss realized on a sale or exchange of shares of a Fund will be disallowed
if other Fund shares are acquired (whether through the automatic reinvestment
of dividends or otherwise) within a 61-day period beginning 30 days before and
ending 30 days after the date that the shares are disposed of. In such a case,
the basis of the shares acquired will be adjusted to reflect the disallowed
loss.
Under certain Code provisions some shareholders may be subject to a 31%
withholding tax on certain ordinary income dividends and on capital gain
dividends and redemption payments ("backup withholding"). Generally,
shareholders subject to backup withholding will be those for whom no certified
taxpayer identification number is on file with the Trust or who, to the Trust's
knowledge, have furnished an incorrect number. When establishing an account, an
investor must certify under penalty of perjury that such number is correct and
that such investor is not otherwise subject to backup withholding.
The Code provides that every person required to file a tax return must
include for information purposes on such return the amount of exempt-interest
dividends received from all sources (including any of the Funds) during the
taxable year.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections
and the Treasury regulations promulgated thereunder. The Code and the Treasury
regulations are subject to change by legislative or administrative action
either prospectively or retroactively.
Shareholders are urged to consult their tax advisers regarding specific
questions as to Federal or foreign taxes.
STATE
The State Municipal Securities in which each Fund invests consist of
obligations with remaining maturities of 397 days (13 months) or less which are
issued by or on behalf of the designated state, its political subdivisions,
agencies and instrumentalities and obligations of other qualifying issuers,
such as issuers located in Puerto Rico, the Virgin Islands and Guam and issuers
of derivative or synthetic municipal instruments, the interest from which is
exempt, in the opinion of counsel to the issuer, from Federal income taxation
and personal income taxation in the designated state. In the case of the New
York Fund, "State Municipal Securities" includes obligations as described in
the previous sentence, the interest from which is exempt, in the opinion of
counsel to the issuer, from Federal, New York State and New York City income
taxation.
Exempt-interest dividends attributable to interest income from State
Municipal Securities of a designated state generally will be exempt from income
taxation to shareholders otherwise subject to personal income taxation by such
designated state. Shareholders subject to income taxation by states other than
the Fund's designated state will realize a lower after-tax rate of return than
shareholders in that state since the dividends distributed by a Fund generally
will not be exempt, to any significant degree, from income taxation by any
state other than that Fund's designated state. The Trust will inform
shareholders annually as to the portion of a Fund's distributions which
constitutes exempt-interest dividends and the portion which is not subject to
state and, if applicable, city income or franchise taxes. Interest on
indebtedness incurred or continued to purchase or carry Fund shares generally
will not be deductible for state income tax purposes to the extent attributable
to interest income exempt from income taxation by the designated state. Further
limitations on the deductibility of such interest may apply in some states.
31
<PAGE>
The foregoing description relates generally to state personal income tax
issues; investors should consult with their tax advisers with respect to such
taxes and as to the availability of any exemptions from other state or local
taxes. Additional considerations relating to income taxation in the various
states is set forth under "Taxes" in the Statement of Additional Information.
ORGANIZATION OF THE TRUST
The Trust is an unincorporated business trust organized on February 6, 1987
under the laws of Massachusetts. It is an open-end management investment
company comprised of separate series ("Series"), each of which is a separate
portfolio offering a separate class of shares to selected groups of purchasers.
Each of the Series is to be managed independently in order to provide to
shareholders who are residents of the state to which such Series relates as
high a level of income exempt from Federal, state and (in certain instances)
local income taxes as is consistent with prudent investment management. At the
date of this Prospectus, the Arizona, California, Connecticut, Massachusetts,
Michigan, New Jersey, New York, North Carolina, Ohio and Pennsylvania Funds are
the only Series of the Trust offering their shares to the public. The Trustees
are authorized to create an unlimited number of Series and, with respect to
each Series, to issue an unlimited number of full and fractional shares of a
single class. Shareholder approval is not required for the authorization of
additional Series of the Trust.
Shareholders are entitled to one vote for each full share held and to
fractional votes for fractional shares held in the election of Trustees (to the
extent hereafter provided) and on other matters submitted to the vote of
shareholders. All shares have equal voting rights, except that only shares of
the respective Series are entitled to vote on matters concerning only that
Series. The Declaration of Trust does not require that the Trust hold annual
meetings of shareholders. However, the Trust will be required to call special
meetings of shareholders in accordance with the requirements of the Investment
Company Act to seek approval of new management and advisory arrangements, of a
material increase in distribution fees or of a change in the fundamental
policies, objectives or restrictions of the Trust. The Trust also would be
required to hold a special shareholders' meeting to elect new Trustees at such
time as less than a majority of the Trustees holding office have been elected
by shareholders. The Declaration of Trust provides that a shareholders' meeting
may be called for any reason at the request of 10% of the outstanding shares of
the Trust or by a majority of the Trustees. Except as set forth above, the
Trustees shall continue to hold office and appoint successor Trustees.
Each issued and outstanding share is entitled to participate equally in
dividends and distributions declared by the respective Series and in the net
assets of such Series on liquidation or dissolution remaining after
satisfaction of outstanding liabilities. The obligations and liabilities of a
particular Series are restricted to the assets of that Series and do not extend
to the assets of the Trust generally. The shares of each Series, when issued,
will be fully paid and non-assessable by the Trust.
The Declaration of Trust establishing the Trust refers to the Trustees under
the Declaration of Trust collectively as Trustees, but not as individuals or
personally; and except for his or her own bad faith, willful misfeasance, gross
negligence or reckless disregard of his or her other duties, no Trustee,
shareholder, officer, employee or agent of the Trust shall be held to any
personal liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim of the Trust but the "Trust Property"
(as defined in the Declaration of Trust) only shall be liable. A copy of the
Declaration of Trust, together with all amendments thereto, is on file in the
office of the Commonwealth of Massachusetts.
32
<PAGE>
SHAREHOLDER REPORTS AND INQUIRIES
SHAREHOLDER REPORTS
Only one copy of each shareholder report and certain shareholder
communications will be mailed to each identified shareholder regardless of the
number of accounts such shareholder has. If a shareholder wishes to receive
separate copies of each report and communication for each of the shareholder's
related accounts the shareholder should notify in writing:
Merrill Lynch Financial Data Services, Inc.
P.O. Box 45290
Jacksonville, FL 32232-5290
The written notification should include the shareholder's name, address, tax
identification number and Merrill Lynch and/or mutual fund account numbers. If
you have any questions regarding this please call your Merrill Lynch Financial
Consultant or Merrill Lynch Financial Data Services, Inc. at (800) 221-7210.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to a Fund at the address or telephone
number set forth on the cover page of this Prospectus.
33
<PAGE>
Manager
Fund Asset Management
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey
Mailing Address:
P.O. Box 9011
Princeton, New Jersey 08543-9011
Distributor
Merrill Lynch, Pierce, Fenner & Smith Incorporated
World Financial Center
North Tower
250 Vesey Street
New York, New York 10281
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, Massachusetts 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
Administrative Offices:
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
Mailing Address:
P.O. Box 45290
Jacksonville, Florida 32232-5290
Independent Auditors
Deloitte & Touche LLP
117 Campus Drive
Princeton, New Jersey 08540-6400
Counsel
Brown & Wood
One World Trade Center
New York, New York 10048-0557
Principal Office of the Trust
800 Scudders Mill Road
Plainsboro, New Jersey 08536
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fee Table.................................................................. 2
Financial Highlights....................................................... 3
Yield Information.......................................................... 8
Investment Objectives and Policies......................................... 9
Purchase of Shares......................................................... 20
Redemption of Shares....................................................... 24
Management of the Trust.................................................... 26
Portfolio Transactions..................................................... 29
Dividends.................................................................. 30
Determination of Net Asset Value........................................... 30
Taxes...................................................................... 30
Organization of the Trust.................................................. 33
Shareholder Reports and Inquiries.......................................... 34
</TABLE>
No person has been authorized to
give any information or to make any
representations, other than those
contained in this Prospectus, in
connection with the offers
contained therein, and, if given or
made, such other information or
representations must not be relied
upon as having been authorized by
the Fund, the Manager or Merrill
Lynch, Pierce, Fenner & Smith
Incorporated. This Prospectus does
not constitute an offering in any
state in which such offering may
not lawfully be made.
Code #16817-0795
LOGO CMA(R)
CMA MULTI-STATE
MUNICIPAL SERIES TRUST
. ARIZONA
. CALIFORNIA
. CONNECTICUT
. MASSACHUSETTS
. MICHIGAN
. NEW JERSEY
. NEW YORK
. NORTH CAROLINA
. OHIO
. PENNSYLVANIA
Prospectus
The enclosed prospectus describes ten fully managed municipal money market
funds. Shares of the Funds are offered to participants in the Cash Management
Account (R) ("CMA (R) Account") program of Merrill Lynch, Pierce, Fenner &
Smith Incorporated and to other individual investors who maintain accounts
directly with the Transfer Agent.
Investors should be aware that the Cash Management Account service is not a
bank account and that a shareholder's investment in a Fund is not insured by
any governmental agency. As with any investment in securities, the value of a
shareholder's investment in a Fund may fluctuate.
- --------------------------------------------------------------------------------
PRINCIPAL OFFICE OF THE TRUST:
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
JULY 31, 1995
LOGO MERRILL LYNCH
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
CMA MULTI-STATE MUNICIPAL SERIES TRUST
CMA Arizona Municipal Money Fund CMA New Jersey Municipal Money Fund
CMA California Municipal Money Fund CMA New York Municipal Money Fund
CMA Connecticut Municipal Money Fund CMA North Carolina Municipal Money
Fund
CMA Massachusetts Municipal Money Fund CMA Ohio Municipal Money Fund
CMA Michigan Municipal Money Fund CMA Pennsylvania Municipal Money Fund
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 . PHONE NO. (609) 282-2800
CMA Multi-State Municipal Series Trust (the "Trust") consists of CMA Arizona
Municipal Money Fund (the "Arizona Fund"), CMA California Municipal Money Fund
(the "California Fund"), CMA Connecticut Municipal Money Fund (the
"Connecticut Fund"), CMA Massachusetts Municipal Money Fund (the
"Massachusetts Fund"), CMA Michigan Municipal Money Fund (the "Michigan
Fund"), CMA New Jersey Municipal Money Fund (the "New Jersey Fund"), CMA New
York Municipal Money Fund (the "New York Fund"), CMA North Carolina Municipal
Money Fund (the "North Carolina Fund"), CMA Ohio Municipal Money Fund (the
"Ohio Fund") and CMA Pennsylvania Municipal Money Fund (the "Pennsylvania
Fund") (together, the "Funds"). Each Fund is a non-diversified, no-load money
market mutual fund seeking current income exempt from Federal income taxes,
and the designated state's personal income taxes and, in certain instances,
local income taxes, preservation of capital and liquidity available from
investing in a portfolio of short-term, high quality obligations, the interest
on which is exempt, in the opinion of counsel to the issuer, from Federal
income taxes, personal income taxes of the designated state and, in certain
instances, local taxes. The Funds may invest in certain tax-exempt securities
classified as "private activity bonds" that may subject certain investors in
the Funds to an alternative minimum tax. The Funds also may invest in
derivative or synthetic municipal instruments. The Funds' shares are offered
to participants in the Cash Management Account(R) ("CMA(R)") financial service
program of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch") to provide a medium for the investment of free credit balances held in
CMA accounts. A CMA account is a conventional Merrill Lynch cash securities or
margin securities account ("Securities Account") which is linked to the Funds
and certain other mutual funds (collectively, the "CMA Funds"), money market
deposit accounts maintained with depository institutions and to a Visa
card/check account ("Visa Account"). Merrill Lynch markets its margin account
under the name Investor CreditLine SM service.
A customer of Merrill Lynch may subscribe to the CMA program with a minimum
of $20,000 in securities or cash. Subject to the conditions described in the
prospectus referred to below, free credit balances in the Securities Account
of CMA participants may be invested periodically in shares of one of the CMA
Funds or deposited with a depository institution through the Insured
Savings SM Account (the "Insured Savings Account"). This permits the
subscriber to earn a return on such funds pending further investment in other
aspects of the CMA program or utilization of the Visa Account. The shares of
the Funds also may be purchased by individual investors maintaining accounts
directly with the Transfer Agent who do not subscribe to the CMA program. The
minimum initial purchase for non-CMA subscribers is $5,000 and subsequent
purchases must be $1,000 or more.
Merrill Lynch charges a program participation fee for the CMA service which
presently is $100 per year for individuals (an additional $25 annual program
fee is charged for participation in the CMA Visa (R) Gold Program described in
the CMA Program Description). A different fee may be charged to certain group
plans and special accounts. Merrill Lynch reserves the right to change the fee
for the CMA service or the CMA Visa Gold Program at any time.
This Statement of Additional Information of the Fund is not a prospectus and
should be read in conjunction with the prospectus of the Funds dated July 31,
1995 (the "Prospectus"), which has been filed with the Securities and Exchange
Commission (the "Commission") and can be obtained without charge by calling or
writing to the Funds at the above telephone number or address. This Statement
of Additional Information has been incorporated by reference into the
Prospectus.
----------------
THE DATE OF THIS STATEMENT OF ADDITIONAL INFORMATION IS JULY 31, 1995.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Each Fund is a non-diversified, no-load money market mutual fund investing
primarily in short-term, high quality obligations the interest on which is
exempt, in the opinion of counsel to the issuer, from Federal and the
designated state's personal income taxes and, in the case of the New York Fund,
from New York City income taxes. Reference is made to "Investment Objectives
and Policies" in the Prospectus of the Funds for a discussion of the investment
objectives and policies of each Fund.
Each Fund is classified as non-diversified within the meaning of the
Investment Company Act of 1940 as amended (the "Investment Company Act"), which
means that the Fund is not limited by such Act in the proportion of its assets
that it may invest in obligations of a single issuer. However, each Fund's
investments will be limited so as to qualify as a "regulated investment
company" for purposes of the Internal Revenue Code of 1986, as amended (the
"Code"). See "Taxes".
As discussed in the Prospectus, the Funds may invest in variable rate demand
obligations ("VRDOs"). VRDOs are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional
right of demand to receive payment of the unpaid principal balance plus accrued
interest on a short notice period. The interest on a VRDO is adjustable at
periodic intervals to a rate calculated to maintain the market value of the
VRDO at approximately the par value of the VRDO on adjustment date. The
adjustment may be based on an interest rate adjustment index.
The Funds also may invest in VRDOs in the form of participation interests
("Participating VRDOs") in variable rate tax-exempt obligations held by
financial institutions, typically commercial banks ("institutions").
Participating VRDOs provide the Funds with a specified undivided interest (up
to 100%) of the underlying obligation and the right to demand payment of the
unpaid principal balance plus accrued interest on the Participating VRDOs from
the institution on a specified number of days' notice, presently not to exceed
30 days. In addition, each Participating VRDO is backed by an irrevocable
letter of credit or similar commitment of the institution. A Fund that invests
in a VRDO has an undivided interest in an underlying obligation and thus
participates on the same basis as the institution in such obligation, except
that the institution typically retains fees out of the interest paid on the
obligation for servicing the obligation, providing the letter of credit or
issuing the repurchase commitment.
The Funds have been advised by counsel to the Trust that the interest
received on Participating VRDOs will be treated as interest from tax-exempt
obligations as long as it does not invest more than a limited amount (not more
than 20% each) of its total assets in such investments and certain other
conditions are met. It is contemplated that no Fund will invest more than a
limited amount of its total assets in Participating VRDOs.
The Funds can be expected to offer lower yields than longer-term municipal
bond funds because the types of securities in which the Funds will invest, as
described in the Prospectus (hereinafter referred to as "State Municipal
Securities" or "Municipal Securities"), have shorter maturities and therefore
tend to produce lower yields than longer-term municipal securities. Interest
rates in the short-term municipal securities market also may fluctuate more
widely from time to time than interest rates in the long-term municipal bond
market. Because the Funds invest solely in short-term securities, however, the
market value of each Fund's portfolio at any given time can be expected to
fluctuate less as a result of changes in interest rates. Because of the
interest rate adjustment formula on VRDOs (including Participating VRDOs), the
VRDOs are not comparable to fixed rate securities. A Fund's yield on VRDOs will
decline and its shareholders will forego the opportunity for capital
appreciation during periods when prevailing interest rates have declined. On
the other hand, during periods where prevailing interest rates have increased,
a Fund's yield on VRDOs will increase and its shareholders will have a reduced
risk of capital depreciation.
The Funds' portfolio investments in municipal notes and short-term tax-exempt
commercial paper will be limited to those obligations which are rated, or
issued by issuers who have been rated, in one of the two highest rating
categories for short-term municipal debt obligations by a nationally recognized
statistical rating
2
<PAGE>
organization (an "NRSRO") or, if not rated, will be of comparable quality as
determined by the Trustees of the Trust. The Funds' investments in municipal
bonds (which must have maturities at the date of purchase of 397 days (13
months) or less) will be in issuers who have received from the requisite NRSROs
a rating, with respect to a class of short-term debt obligations that is
comparable in priority and security with the investment, in one of the two
highest rating categories for short-term obligations or, if not rated, will be
of comparable quality as determined by the Trustees of the Trust. Currently,
there are three NRSROs which rate municipal obligations: Fitch Investors
Service, Inc., Moody's Investors Service, Inc. and Standard & Poor's Ratings
Group. Certain tax-exempt obligations (primarily VRDOs and Participating VRDOs)
may be entitled to the benefit of letters of credit or similar credit
enhancements issued by financial institutions and, in such instances, the Board
of Trustees and Fund Asset Management, (the "Manager") will take into account
the obligation of the financial institution in assessing the quality of such
instrument. The Funds also may purchase other types of tax-exempt instruments
if, in the opinion of the Trustees, such obligations are equivalent to
securities having the ratings described above. For a description of Municipal
Securities and ratings, see Appendix K-- "Information Concerning Municipal
Securities".
PURCHASE OF MUNICIPAL SECURITIES ON A DELAYED DELIVERY OR WHEN-ISSUED BASIS
Municipal Securities may at times be purchased or sold on a delayed delivery
basis or on a when-issued basis. These transactions arise when securities are
purchased or sold by a Fund with payment and delivery taking place in the
future, often a month or more after the purchase. The payment obligation and
the interest rate are each fixed at the time the buyer enters into the
commitment. The Fund will make commitments to purchase such securities only
with the intention of actually acquiring the securities, but the Fund may sell
these securities prior to settlement date if it is deemed advisable. No new
when-issued commitments will be made if more than 40% of a Fund's net assets
would become so committed. Purchasing Municipal Securities on a when-issued
basis involves the risk that the yields available in the market when the
delivery takes place may actually be higher than those obtained in the
transaction itself; if yields so increase, the value of the when-issued
obligation generally will decrease. The Funds will maintain separate accounts
at the Trust's custodian consisting of cash or liquid Municipal Securities
(valued on a daily basis) equal at all times to the amount of the when-issued
commitment.
TAXABLE MONEY MARKET SECURITIES
The Funds may invest in taxable money market securities subject to the
limitations set forth under "Investment Objectives and Policies" in the
Prospectus ("Taxable Securities"). The Taxable Securities in which the Funds
may invest consist of U.S. Government securities, U.S. Government agency
securities, domestic bank certificates of deposit and bankers' acceptances,
short-term corporate debt securities such as commercial paper and repurchase
agreements. These investments must have a stated maturity not in excess of 397
days (13 months) from the date of purchase.
The standards applicable to Taxable Securities in which the Funds invest are
essentially the same as those described above with respect to Municipal
Securities. The Funds may not invest in any security issued by a depository
institution unless such institution is organized and operating in the United
States, has total assets of at least $1 billion and is Federally insured.
The Funds may invest in Taxable Securities pursuant to repurchase agreements.
Repurchase agreements may be entered into only with a member bank of the
Federal Reserve System or primary dealer in U.S. Government securities or an
affiliate thereof which meet the creditworthiness standards adopted by the
Board of Trustees. Under such agreements, the bank or primary dealer or an
affiliate thereof agrees, upon entering into the contract, to repurchase the
security at a mutually agreed upon time and price, thereby determining the
yield during the term of the agreement. This results in a fixed rate of return
insulated from market fluctuations during such period. Repurchase agreements
may be construed to be collateralized loans by the purchaser to the seller
secured by the securities transferred to the purchaser. In the case of a
repurchase agreement, a Fund will require the seller to provide additional
collateral if the market value of the securities
3
<PAGE>
falls below the repurchase price at any time during the term of the repurchase
agreement. In the event of default by the seller under a repurchase agreement
construed to be a collateralized loan, the underlying securities are not owned
by the Fund but only constitute collateral for the seller's obligation to pay
the repurchase price. Therefore, such Fund may suffer time delays and incur
costs or possible losses in connection with the disposition of the collateral.
In the event of a default under a repurchase agreement that is construed to be
a collateralized loan, instead of the contractual fixed rate of return, the
rate of return to such Fund shall be dependent upon intervening fluctuations of
the market value of such security and the accrued interest on the security. In
such event, such Fund would have rights against the seller for breach of
contract with respect to any losses arising from market fluctuations following
the failure of the seller to perform.
In general, for Federal income tax purposes, repurchase agreements are
treated as collateralized loans secured by the securities "sold". Therefore,
amounts earned under such agreements, even if the underlying securities are
tax-exempt securities, will not be considered tax-exempt interest.
From time to time, the Funds also may invest in money market securities
pursuant to purchase and sale contracts. While purchase and sale contracts are
similar to repurchase agreements, purchase and sale contracts are structured so
as to be in substance more like a purchase and sale of the underlying security
than is the case with repurchase agreements.
INVESTMENT RESTRICTIONS
The Trust has adopted a number of restrictions and policies relating to the
investment of each Fund's assets and activities, which are fundamental policies
and may not be changed without the approval of the holders of a majority of the
respective Fund's outstanding shares (for this purpose a majority of the shares
means the lesser of (i) 67% of the shares represented at a meeting at which
more than 50% of the outstanding shares are represented or (ii) more than 50%
of the outstanding shares). No Fund may: (1) purchase any securities other than
securities referred to under "Investment Objectives and Policies" in the
Prospectus and herein; (2) invest more than 5% of its total assets (taken at
market value at the time of each investment) in industrial revenue bonds where
the entity supplying the revenues from which the issue is to be paid, including
predecessors, has a record of less than three years of continuous operation;
(3) make investments for the purpose of exercising control or management; (4)
purchase securities of other investment companies, except in connection with a
merger, consolidation, acquisition or reorganization; (5) purchase or sell real
estate (provided that such restriction shall not apply to Municipal Securities
secured by real estate or interests therein or issued by companies which invest
in real estate or interests therein), commodities or commodity contracts,
interests in oil, gas or other mineral exploration or development programs; (6)
purchase any securities on margin, except for use of short-term credit
necessary for clearance of purchases and sales of portfolio securities; (7)
make short sales of securities or maintain a short position or invest in put,
call, straddle, or spread options or combinations thereof; provided, however,
that each Fund shall have the authority to purchase Municipal Securities
subject to put options as set forth herein under "Investment Objectives and
Policies" and Appendix K--"Information Concerning Municipal Securities"; (8)
make loans to other persons, provided that each Fund may purchase a portion of
an issue of Municipal Securities (the acquisition of a portion of an issue of
Municipal Securities or bonds, debentures or other debt securities which are
not publicly distributed is considered to be the making of a loan under the
Investment Company Act); (9) borrow amounts in excess of 20% of its total
assets taken at market value (including the amount borrowed), and then only
from banks as a temporary measure for extraordinary or emergency purposes
including to meet redemptions and to settle securities transactions. [Usually
only "leveraged" investment companies may borrow in excess of 5% of their
assets; however, the Funds will not borrow to increase income but only to meet
redemption requests which might otherwise require untimely dispositions of
portfolio securities. The Funds will not purchase securities while borrowings
are outstanding except to honor prior commitments. Interest paid on such
borrowings will reduce net income.]; (10) mortgage, pledge, hypothecate or in
any manner transfer as security for indebtedness any securities owned or held
by the Fund except as may be necessary in connection with borrowings mentioned
in (9) above, and then such mortgaging, pledging or hypothecating may not
exceed 10% of its total assets, taken at market value; (11) invest in
securities with
4
<PAGE>
legal or contractual restrictions on resale for which no readily available
market exists, including repurchase agreements maturing in more than seven
days, if, regarding all such securities, more than 10% of its total assets
(taken at market value), would be invested in such securities; (12) act as an
underwriter of securities, except to the extent that the Fund technically may
be deemed an underwriter when engaged in the activities described in (8) above
or insofar as the Fund may be deemed an underwriter under the Securities Act of
1933 in selling portfolio securities; and (13) purchase or retain the
securities of any issuer, if those individual officers and Trustees of the
Trust, the Manager or any subsidiary thereof each owning beneficially more than
1/2 of 1% of the securities of such issuer own in the aggregate more than 5% of
the securities of such issuer. In addition to the foregoing, the Funds have
undertaken with the State of Texas that they will not invest in oil, gas or
mineral leases.
In addition, to comply with tax requirements for qualification as a
"regulated investment company", each Fund's investments will be limited in a
manner such that, at the close of each quarter of each fiscal year, (a) no more
than 25% of the Fund's total assets are invested in the securities of a single
issuer, and (b) with regard to at least 50% of the Fund's total assets, no more
than 5% of its total assets are invested in the securities of a single issuer.
For purposes of this restriction, the Funds will regard each state and each
political subdivision, agency or instrumentality of such state and each multi-
state agency of which such state is a member and each public authority which
issues securities on behalf of a private entity as a separate issuer, except
that if the security is backed only by the assets and revenues of a non-
government entity then the entity with the ultimate responsibility for the
payment of interest and principal may be regarded as the sole issuer. These
tax-related limitations may be changed by the Trustees of the Trust to the
extent necessary to comply with changes to the Federal tax requirements.
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS
The Trustees and executive officers of the Trust, their ages and their
principal occupations for at least the last five years are set forth below.
Unless otherwise noted, the address of each Trustee and executive officer is
P.O. Box 9011, Princeton, New Jersey 08543-9011.
Arthur Zeikel (63)--President and Trustee(1)(2)--President of the Manager
(which term as used herein includes its corporate predecessors) since 1977;
President of Merrill Lynch Asset Management, L.P. ("MLAM", which term as used
herein includes its corporate predecessors) since 1977; President and Director
of Princeton Services, Inc. ("Princeton Services") since 1993; Executive Vice
President of Merrill Lynch & Co., Inc. ("ML & Co.") since 1990; Executive Vice
President of Merrill Lynch since 1990 and Senior Vice President thereof from
1985 to 1990; Director of Merrill Lynch Funds Distributor, Inc. ("MLFD").
Ronald W. Forbes (54)--Trustee(2)--1400 Washington Avenue, Albany, New York
12222. Professor of Finance, School of Business, State University of New York
at Albany since 1989 and Associate Professor prior thereto; Member, Task Force
on Municipal Securities Markets, Twentieth Century Fund.
Cynthia A. Montgomery (42)--Trustee(2)--Harvard Business School, Soldiers
Field Road, Boston, Massachusetts 02163. Professor, Harvard Business School
since 1989; Associate Professor, J.L. Kellogg Graduate School of Management,
Northwestern University from 1985 to 1989; Assistant Professor, Graduate School
of Business Administration, The University of Michigan from 1979 to 1985;
Director, UNUM Corporation.
Charles C. Reilly (64)--Trustee(2)--9 Hampton Harbor Road, Hampton Bays, New
York 11946. Self-employed financial consultant since 1990; President and Chief
Investment Officer of Verus Capital, Inc. from 1979 to 1990; Senior Vice
President of Arnhold and S. Bleichroeder, Inc. from 1973 to 1990; Adjunct
Professor, Columbia University Graduate School of Business, 1990; Adjunct
Professor, Wharton School, The University of Pennsylvania, 1990, Partner, Small
Cities Cable Television since 1986.
Kevin A. Ryan (62)--Trustee(2)--127 Commonwealth Avenue, Chestnut Hill,
Massachusetts 02167. Founder, current Director and Professor of the Boston
University Center for the Advancement of Ethics &
5
<PAGE>
Character; Professor of Education at Boston University from 1982 until 1994;
formerly taught on the facilities of The University of Chicago, Stanford
University and Ohio State University.
Richard R. West (57)--Trustee(2)--482 Tepi Drive, Southbury, Connecticut
06488. Professor of Finance, and Dean from 1984 to 1993, New York University
Leonard N. Stern School of Business Administration; Professor of Finance, Amos
Tuck School of Business Administration from 1976 to 1984 and Dean from 1976 to
1983; Director, Vornado, Inc. (real estate investment trust), Bowne & Co., Inc.
(financial printer), Smith Corona Corporation (manufacturer of typewriters and
word processors) and Alexander's Inc. (real estate company).
Terry K. Glenn (54) --Executive Vice President(1)(2)--Executive Vice
President of the Manager and MLAM since 1983; Executive Vice President and
Director of Princeton Services since 1993; President of MLFD since 1986 and
Director thereof since 1991; President of Princeton Administrators, L.P. since
1988.
Vincent R. Giordano (50)--Senior Vice President and Portfolio Manager(1)(2)--
Senior Vice President of the Manager and MLAM since 1984 and Vice President
from 1980 to 1984.
Edward J. Andrews (35)--Vice President and Portfolio Manager(1)(2)--Vice
President of MLAM since 1991; investment officer in the Private Banking
Division of Citibank, N.A. from 1982 to 1991.
Donald C. Burke (35)--Vice President(1)(2)--Vice President and Director of
Taxation of MLAM since 1990; employee of Deloitte & Touche LLP from 1982 to
1990.
Peter J. Hayes (36)--Vice President and Portfolio Manager(1)(2)--Vice
President of MLAM since 1989 and Assistant Vice President from 1987 to 1989;
Assistant Vice President of Shawmut Bank, N.A. from 1985 to 1987.
Kenneth A. Jacob (44)--Vice President and Portfolio Manager(1)(2)--Vice
President of MLAM since 1984.
Kevin A. Schiatta (40)--Vice President and Portfolio Manager(1)(2)--Vice
President of MLAM since 1985.
Helen Marie Sheehan (35)--Vice President(1)(2)--Vice President of MLAM since
1991; Assistant Vice President of MLAM from 1989 to 1991; employee of MLAM
since 1985.
Gerald M. Richard (46)--Treasurer(1)(2)--Senior Vice President and Treasurer
of the Manager and MLAM since 1984; Senior Vice President and Treasurer of
Princeton Services since 1993; Vice President of MLFD since 1981 and Treasurer
since 1984.
Robert Harris (43)--Secretary(1)(2)--Vice President of MLAM since 1984;
Secretary of MLFD since 1982.
- --------
(1) Interested person, as defined in the Investment Company Act, of the Trust.
(2) Such Trustee or officer is a director or officer of certain other
investment companies for which the Manager or MLAM acts as investment
adviser.
At June 30, 1995, the Trustees and officers of the Trust as a group (16
persons) owned an aggregate of less than of 1% of the outstanding Common Stock
of ML & Co. At such date, Mr. Zeikel, an officer and Trustee of the Trust, and
the other officers of the Trust, owned less than 1% of the outstanding shares
of common stock of ML & Co.
COMPENSATION OF TRUSTEES
Pursuant to the terms of its management agreement with the Trust (the
"Management Agreement"), the Manager pays all compensation of officers and
employees of the Trust as well as the fees of all Trustees of the Trust who are
affiliated persons of ML & Co. or its subsidiaries. The Trust pays each
unaffiliated Trustee a fee of $4,000 per year plus a fee of $800 per meeting
attended and pays all Trustees' actual out-of-pocket expenses relating to
attendance at meetings. The Trust also pays an annual fee of $1,500 to members
of its audit committee, which consists of all of the non-affiliated Trustees,
and pays all Trustees' actual out-of-pocket expenses relating to attendance at
meetings.
6
<PAGE>
Set forth below is each Fund's share of the allocated fees and expenses paid
to the unaffiliated Trustees for the year ended March 31, 1995.
<TABLE>
<CAPTION>
ARIZONA CALIFORNIA CONNECTICUT MASSACHUSETTS MICHIGAN NEW JERSEY NEW YORK NORTH CAROLINA OHIO PENNSYLVANIA
FUND FUND FUND FUND FUND FUND FUND FUND FUND FUND
------- ---------- ----------- ------------- -------- ---------- -------- -------------- ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$1,019 $15,839 $3,428 $2,004 $3,082 $5,882 $10,348 $3,769 $2,895 $4,521
</TABLE>
The following table sets forth for the fiscal year ended March 31, 1995
compensation paid by the Funds to the non-interested Trustees and for the
calendar year ended December 31, 1994 the aggregate compensation paid by all
investment companies advised by MLAM and its affiliate, FAM ("MLAM/FAM Advised
Funds") to the non-interested Trustees.
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
FROM FUND AND
PENSION OR RETIREMENT MLAM/FAM ADVISED
COMPENSATION BENEFITS ACCRUED AS PART FUNDS PAID TO
NAME OF TRUSTEE FROM FUND OF FUND EXPENSE TRUSTEES(/1/)
--------------- ------------ ------------------------ ----------------
<S> <C> <C> <C>
Arizona Fund
- ------------
Ronald W. Forbes(/1/).. $ 185.71 None $154,400
Cynthia A. Montgom-
ery(/1/).............. $ 185.71 None $133,817
Charles C. Reilly(/1/). $ 185.71 None $276,900
Kevin A. Ryan(/1/)..... $ 185.71 None $154,400
Richard R. West(/1/)... $ 203.09 None $300,900
California Fund
- ---------------
Ronald W. Forbes(/1/).. $3,018.18 None $154,400
Cynthia A. Montgom-
ery(/1/).............. $3,018.18 None $133,817
Charles C. Reilly(/1/). $3,018.18 None $276,900
Kevin A. Ryan(/1/)..... $3,018.18 None $154,400
Richard R. West(/1/)... $3,319.19 None $300,900
Connecticut Fund
- ----------------
Ronald W. Forbes(/1/).. $ 645.02 None $154,400
Cynthia A. Montgom-
ery(/1/).............. $ 645.02 None $133,817
Charles C. Reilly(/1/). $ 645.02 None $276,900
Kevin A. Ryan(/1/)..... $ 645.02 None $154,400
Richard R. West(/1/)... $ 710.00 None $300,900
Massachusetts Fund
- ------------------
Ronald W. Forbes(/1/).. $ 380.52 None $154,400
Cynthia A. Montgom-
ery(/1/).............. $ 380.52 None $133,817
Charles C. Reilly(/1/). $ 380.52 None $276,900
Kevin A. Ryan(/1/)..... $ 380.52 None $154,400
Richard R. West(/1/)... $ 419.01 None $300,900
Michigan Fund
- -------------
Ronald W. Forbes(/1/).. $ 578.31 None $154,400
Cynthia A. Montgom-
ery(/1/).............. $ 578.31 None $133,817
Charles C. Reilly(/1/). $ 578.31 None $276,900
Kevin A. Ryan(/1/)..... $ 578.31 None $154,400
Richard R. West(/1/)... $ 637.96 None $300,900
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
FROM FUND AND
PENSION OR RETIREMENT MLAM/FAM ADVISED
COMPENSATION BENEFITS ACCRUED AS PART FUNDS PAID TO
NAME OF TRUSTEE FROM FUND OF FUND EXPENSE TRUSTEES(/1/)
--------------- ------------ ------------------------ ----------------
<S> <C> <C> <C>
New Jersey Fund
- ---------------
Ronald W. Forbes(/1/).. $1,116.60 None $154,400
Cynthia A. Montgom-
ery(/1/).............. $1,116.60 None $133,817
Charles C. Reilly(/1/). $1,116.60 None $276,900
Kevin A. Ryan(/1/)..... $1,116.60 None $154,400
Richard R. West(/1/)... $1,226.78 None $300,900
New York Fund
- -------------
Ronald W. Forbes(/1/).. $1,967.77 None $154,400
Cynthia A. Montgom-
ery(/1/).............. $1,967.77 None $133,817
Charles C. Reilly(/1/). $1,967.77 None $276,900
Kevin A. Ryan(/1/)..... $1,967.77 None $154,400
Richard R. West(/1/)... $2,163.31 None $300,900
North Carolina Fund
- -------------------
Ronald W. Forbes(/1/).. $ 712.58 None $154,400
Cynthia A. Montgom-
ery(/1/).............. $ 712.58 None $133,817
Charles C. Reilly(/1/). $ 712.58 None $276,900
Kevin A. Ryan(/1/)..... $ 712.58 None $154,400
Richard R. West(/1/)... $ 783.46 None $300,900
Ohio Fund
- ---------
Ronald W. Forbes(/1/).. $ 545.07 None $154,400
Cynthia A. Montgom-
ery(/1/).............. $ 545.07 None $133,817
Charles C. Reilly(/1/). $ 545.07 None $276,900
Kevin A. Ryan(/1/)..... $ 545.07 None $154,400
Richard R. West(/1/)... $ 600.10 None $300,900
Pennsylvania Fund
- -----------------
Ronald W. Forbes(/1/).. $ 850.24 None $154,400
Cynthia A. Montgom-
ery(/1/).............. $ 850.24 None $133,817
Charles C. Reilly(/1/). $ 850.24 None $276,900
Kevin A. Ryan(/1/)..... $ 850.24 None $154,400
Richard R. West(/1/)... $ 937.10 None $300,900
</TABLE>
- --------
(1) In addition to these Funds, the Trustees serve on the boards of other
MLAM/FAM Advised Funds as follows: Mr. Forbes (36 funds); Ms. Montgomery
(36 funds); Mr. Reilly (53 funds); Mr. Ryan (36 funds); and Mr. West (53
funds).
MANAGEMENT AND ADVISORY ARRANGEMENTS
Reference is made to "Management of the Trust--Management and Advisory
Arrangements" in the Prospectus of the Funds for certain information concerning
the management and advisory arrangements of the Funds.
Subject to the direction of the Trustees, the Manager is responsible for the
actual management of each Fund's portfolio and constantly reviews each Fund's
holdings in light of its own research analysis and that from other relevant
sources. The responsibility for making decisions to buy, sell or hold a
particular security rests with the Manager, subject to the review of the Board
of Trustees. The Manager performs certain of the other administrative services
and provides all of the office space, facilities, equipment and necessary
personnel for portfolio management of the Funds.
8
<PAGE>
Securities held by the Funds also may be held by, or be appropriate
investments for, other funds or clients (collectively referred to as "clients")
for which the Manager or MLAM acts as an investment adviser. Because of
different investment objectives or other factors, a particular security may be
bought for one or more clients when one or more clients are selling the
security. If purchases or sales of securities for a Fund or other clients arise
for consideration at or about the same time, transactions in such securities
will be made, insofar as feasible, for the respective clients in a manner
deemed equitable to all by the Manager or MLAM. To the extent that transactions
on behalf of more than one client of the Manager or MLAM during the same period
may increase the demand for securities being purchased or the supply of
securities being sold, there may be an adverse effect on price.
The Manager presently receives a fee from each Fund at the end of each month
at the annual rates of 0.50% of the first $500 million of average daily net
assets of the Fund, 0.425% of the average daily net assets in excess of $500
million but not exceeding $1 billion and 0.375% of the average daily net assets
in excess of $1 billion.
In the interest of minimizing expenses of the Funds, the Manager may agree
voluntarily to assume a portion of the expenses of a Fund. The Manager may
discontinue or reduce such assumption of expenses at any time without notice.
Set forth below are the total management fees paid by each Fund to the
Manager and total management fees waived by the Manager for the years ended
March 31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31,
--------------------------------------------------------------------------------
1995 1994 1993
-------------------------- -------------------------- --------------------------
TOTAL FEE VOLUNTARILY TOTAL FEE VOLUNTARILY TOTAL FEE VOLUNTARILY
MANAGEMENT WAIVED BY MANAGEMENT WAIVED BY MANAGEMENT WAIVED BY
FEE MANAGER FEE MANAGER FEE MANAGER
---------- --------------- ---------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Arizona Fund*........... $ 430,110 $267,373 $ 269,875 $209,036 $ 25,112 $ 25,112
California Fund......... $5,371,374 $ -- $4,979,676 $ -- $4,681,982 $ --
Connecticut Fund........ $1,290,608 $ -- $1,176,254 $ -- $1,017,077 $203,282
Massachusetts Fund...... $ 756,123 $ -- $ 721,970 $ -- $ 602,465 $ --
Michigan Fund........... $1,117,988 $ -- $1,067,163 $ -- $ 940,902 $163,597
New Jersey Fund......... $2,299,467 $ -- $2,007,881 $ -- $1,771,517 $ --
New York Fund........... $3,831,293 $ -- $3,347,951 $ -- $3,028,869 $ --
North Carolina Fund..... $1,474,176 $294,835 $1,193,861 $238,772 $1,112,762 $360,075
Ohio Fund............... $1,078,893 $ -- $ 955,932 $ -- $ 962,179 $ 12,153
Pennsylvania Fund....... $1,689,896 $ -- $1,587,756 $ -- $1,338,465 $ --
</TABLE>
- --------
*Commenced operations February 8, 1993.
The State of California imposes limitations on the expenses of the Funds.
These expense limitations require that the Manager reimburse each Fund in any
amount necessary to prevent the ordinary operating expenses of each Fund
(excluding interest, taxes, distribution fees, brokerage fees and commissions
and extraordinary charges such as litigation costs) from exceeding in any
fiscal year 2.5% of such 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
remaining average daily net assets. No fee payment will be made to the Manager
during the year which will cause such expenses to exceed the pro rata expense
limitation at the time of such payment. For the years ended March 31, 1995,
1994 and 1993, no reimbursement was made to any of the Funds on account of the
above-described expense limitation.
The Management Agreement obligates the Manager to provide investment advisory
services, to furnish administrative services, office space and facilities for
management of the affairs of the Trust and each Fund and to pay all
compensation of and furnish office space for officers and employees of the
Trust, as well as the fees of all Trustees of the Trust who are affiliated
persons of ML & Co. or any of its subsidiaries. Except for certain expenses
incurred by Merrill Lynch (see "Purchase and Redemption of Shares"), each Fund
pays all other expenses incurred in its operations and a portion of the Trust's
general administrative expenses allocated
9
<PAGE>
on the basis of the asset size of the respective Fund. Expenses that will be
borne directly by the Funds include redemption expenses, expenses of portfolio
transactions, expenses of registering the shares under Federal and state
securities laws, pricing costs (including the daily calculation of net asset
value), expenses of printing shareholder reports, prospectuses and statements
of additional information (except to the extent paid for by Merrill Lynch),
fees for legal and auditing services, Commission fees, interest, certain taxes,
and other expenses attributable to a particular Series. Expenses which will be
allocated on the basis of asset size of the respective Funds include fees and
expenses of unaffiliated Trustees, state franchise taxes, costs of printing
proxies and other expenses relating to shareholder meetings and other expenses
properly payable by the Trust. The organizational expenses of the Trust were
paid by the Trust and have been allocated among the Funds in a manner deemed
equitable by the Trustees. Depending upon the nature of a lawsuit, litigation
costs may be assessed to the specific Fund to which the lawsuit relates or
allocated on the basis of the asset size of the respective Funds. The Trustees
have determined that this is an appropriate method of allocation of expenses.
For information as to the distribution fee paid by the Funds to Merrill Lynch
pursuant to the Distribution Agreement, see "Purchase and Redemption of
Shares".
Duration and Termination
Unless earlier terminated as described below, each Management Agreement will
continue in effect from year to year if approved annually (a) by the Trustees
of the Trust or by a majority of the outstanding voting shares of the
respective Fund and (b) by a majority of the Trustees who are not parties to
such contract or interested persons (as defined in the Investment Company Act)
of any such party. Such contracts are not assignable and may be terminated
without penalty on 60 days' written notice at the option of either party
thereto or by the vote of the shareholders of the respective Fund.
PURCHASE AND REDEMPTION OF SHARES
Reference is made to "Purchase of Shares" and to "Redemption of Shares" in
the Prospectus of the Funds for certain information as to the purchase and
redemption of Fund shares.
The Trust has entered into separate distribution agreements on behalf of each
Fund with Merrill Lynch as distributor (each, a "Distribution Agreement"). Each
Distribution Agreement obligates Merrill Lynch to pay certain expenses in
connection with the offering of the shares of each Fund. After the
prospectuses, statements of additional information and periodic reports have
been prepared, set in type and mailed to shareholders, Merrill Lynch will pay
for the printing and distribution of copies thereof used in connection with the
offering to investors. Merrill Lynch also will pay for other supplementary
sales literature and advertising costs. The Distribution Agreements are subject
to the same renewal requirements and termination provisions as the Management
Agreements described above.
Each Fund has adopted a separate distribution and shareholder servicing plan
(each, a "Distribution Plan") in compliance with Rule 12b-1 under the
Investment Company Act. Pursuant to each Distribution Plan, Merrill Lynch
receives a monthly distribution fee from each Fund at the annual rate of 0.125%
of average daily net assets of each Fund attributable to subscribers to the CMA
program and to investors maintaining securities accounts with Merrill Lynch or
maintaining accounts directly with the Transfer Agent who are not subscribers
to such program, except that the value of Fund shares in accounts maintained
directly with the Transfer Agent which are not serviced by Merrill Lynch
financial consultants will be excluded. The Distribution Plans reimburse
Merrill Lynch only for actual expenses incurred in the fiscal year in which the
fees are paid. The distribution fees principally compensate Merrill Lynch
financial consultants and other Merrill Lynch personnel for selling shares of
the Funds and for providing direct and personal services to shareholders. The
distribution fees are not compensation for the administrative and operational
services rendered to the Funds or their shareholders by Merrill Lynch which are
covered by the Management Agreements (see "Management of the Trust--Management
and Advisory Arrangements") between the Trust
10
<PAGE>
on behalf of each Fund and the Manager. The Trustees believe that the Funds'
expenditures under the Distribution Plans benefit the Funds and their
shareholders by providing better shareholder services and by facilitating the
sale and distribution of Fund shares.
Set forth below are the distribution fees paid by each Fund to Merrill Lynch
pursuant to their respective Distribution Plans for the years ended March 31,
1995, 1994 and 1993. All of the amounts expended were allocated to Merrill
Lynch personnel and to related administrative costs.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31,
--------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Arizona Fund*...................... $ 106,900 $ 67,140 $ 6,372
California Fund.................... $1,492,270 $1,364,634 $1,260,633
Connecticut Fund................... $ 320,966 $ 292,733 $ 252,560
Massachusetts Fund................. $ 187,724 $ 179,349 $ 149,303
Michigan Fund...................... $ 277,622 $ 265,504 $ 233,124
New Jersey Fund.................... $ 573,696 $ 500,084 $ 438,570
New York Fund...................... $1,013,471 $ 872,640 $ 775,492
North Carolina Fund................ $ 366,625 $ 297,463 $ 276,477
Ohio Fund.......................... $ 268,476 $ 237,695 $ 238,453
Pennsylvania Fund.................. $ 420,594 $ 395,631 $ 332,278
</TABLE>
- --------
* Commenced operations February 8, 1993.
Among other things, the Distribution Plans provide that Merrill Lynch shall
provide and the Trustees of the Trust shall review quarterly reports of the
distribution expenses made by Merrill Lynch. The Distribution Plans further
provide that, so long as the Distribution Plans remain in effect, the selection
and nomination of Trustees of the Trust who are not "interested persons" of the
Trust as defined in the Investment Company Act ("Independent Trustees") shall
be committed to the discretion of the Independent Trustees then in office. A
Distribution Plan can be terminated at any time, without penalty, by the vote
of a majority of the Independent Trustees or by the vote of the holders of a
majority of the outstanding voting securities of the respective Fund. Finally,
a Distribution Plan cannot be amended to increase materially the amount to be
spent by the Fund thereunder without shareholder approval, and all material
amendments are required to be approved by vote of the Trustees of the Trust,
including a majority of the Independent Trustees, cast in person at a meeting
called for that purpose.
The right to receive payment with respect to any redemption of Fund shares
may be suspended by a Fund for a period of up to seven days. Suspensions of
more than seven days may not be made except (1) for any period (a) during which
the New York Stock Exchange is closed other than customary weekend and holiday
closings or (b) during which trading on the New York Stock Exchange is
restricted; (2) for any period during which an emergency exists as a result of
which (a) disposal by such Fund of securities owned by it is not reasonably
practicable or (b) it is not reasonably practicable for such Fund fairly to
determine the value of its net assets; or (3) for such other periods as the
Commission may by order permit for the protection of security holders of such
Fund. The Commission may determine the conditions under which (i) trading shall
be deemed to be restricted and (ii) an emergency shall be deemed to exist
within the meaning of clause (2) above.
Merrill Lynch has offered the CMA program since September, 1977. While no
significant problems have occurred to date, no predictions can be made as to
the rate of purchases and redemptions of shares which will result from the
automatic features of the CMA program. The portfolio securities of the Funds
are highly liquid and each Fund has the right to borrow up to 20% of its total
assets on a temporary basis to meet unexpected redemptions. Nevertheless, an
erratic redemption pattern could force the Manager to invest in securities or
maintain an average portfolio maturity which might lessen the yield that would
otherwise be available to the Funds.
11
<PAGE>
PORTFOLIO TRANSACTIONS
The Funds have no obligation to deal with any dealer or group of dealers in
the execution of transactions in portfolio securities. Subject to policies
established by the Trustees and officers of the Trust, the Manager is primarily
responsible for each Fund's portfolio decisions and the placing of each Fund's
portfolio transactions. In placing orders, it is the policy of the Trust to
obtain the best net results taking into account such factors as the price of
the securities and the firm's risk in positioning the securities involved.
While the Manager generally seeks reasonably competitive spreads or
commissions, the Funds will not necessarily be paying the lowest spread or
commission available. The Trust's policy of investing in securities with short
maturities will result in high portfolio turnover.
The securities in which the Funds invest are traded in the over-the-counter
market. Where possible, the Funds will deal directly with the dealers who make
a market in the securities involved except in those circumstances where better
prices and execution are available elsewhere. Such dealers usually are acting
as principals for their own accounts. On occasion, securities may be purchased
directly from the issuer. The Municipal Securities in which the Funds invest
generally are traded on a net basis and normally do not involve either
brokerage commissions or transfer taxes. The cost of executing portfolio
securities transactions of the Funds primarily will consist of dealer spreads
and underwriting commissions. Under the Investment Company Act, persons
affiliated with the Trust are prohibited from dealing with the Trust or any
Fund as a principal in the purchase and sale of securities unless an exemptive
order allowing such transactions is obtained from the Commission. Since over-
the-counter transactions are usually principal transactions, affiliated persons
of the Trust may not serve as the Funds' dealer in connection with such
transactions, except pursuant to the exemptive order described below. Without
the relief provided by the exemptive order described below, the Funds could
purchase municipal securities from underwriting syndicates of which Merrill
Lynch was a member under certain conditions in accordance with the provisions
of a rule adopted under the Investment Company Act. In 1987, the Commission
issued an exemptive order to one of the CMA Funds which permits the Funds to
engage in certain principal transactions with Merrill Lynch in tax-exempt
securities subject to certain conditions. An affiliated person of the Trust may
serve as its broker in over-the-counter transactions conducted on an agency
basis.
Set forth below are the number of principal transactions each Fund engaged in
with Merrill Lynch and the aggregate amount of those transactions during the
years ended March 31, 1995, 1994 and 1993.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31,
--------------------------------------------------------------------
1995 1994 1993
---------------------- ---------------------- ----------------------
NUMBER OF AGGREGATE NUMBER OF AGGREGATE NUMBER OF AGGREGATE
TRANSACTIONS AMOUNT* TRANSACTIONS AMOUNT* TRANSACTIONS AMOUNT*
------------ --------- ------------ --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Arizona Fund(1)......... 3 $ 7.0 -- $ -- -- $ --
California Fund......... 191 $823.1 174 $875.8 165 $ 948.6
Connecticut Fund........ 0 $ 0.0 3 $ 7.0 26 $ 62.9
Massachusetts Fund...... 42 $ 54.8 52 $ 95.3 13 $ 13.8
Michigan Fund........... 6 $ 14.9 10 $ 54.9 22 $ 88.3
New Jersey Fund......... 6 $ 14.8 7 $ 34.9 18 $ 51.5
New York Fund........... 8 $153.5 31 $155.2 46 $ 152.0
North Carolina Fund..... 14 $ 14.2 15 $ 23.6 77 $ 117.4
Ohio Fund............... 2 $ 2.4 13 $ 26.4 9 $ 13.0
Pennsylvania Fund....... 0 $ 0.0 2 $ 12.3 8 $ 26.6
</TABLE>
- --------
*in millions
(1) Commenced operations February 8, 1993.
The Trustees of the Trust have considered the possibility of recapturing for
the benefit of the Funds expenses of possible portfolio transactions, such as
dealers' spreads and underwriting commissions, by conducting such portfolio
transactions through affiliated entities, including Merrill Lynch. After
considering all factors deemed relevant, the Trustees made a determination not
to seek such recapture. The Trustees will
12
<PAGE>
reconsider this matter from time to time. The Manager has arranged for the
Trust's custodian to receive any tender offer solicitation fees on behalf of
each Fund payable with respect to portfolio securities of such Fund.
The Funds do not expect to use one particular dealer, but, subject to
obtaining the best execution, dealers who provide supplemental investment
research to the Manager may receive orders for transactions by the Funds.
Information so received will be in addition to and not in lieu of the services
required to be performed by the Manager under the Management Agreement and the
expenses of the Manager will not necessarily be reduced as a result of the
receipt of such supplemental information.
DETERMINATION OF NET ASSET VALUE
The net asset value of each Fund for the purpose of pricing orders for the
purchase and redemption of shares is determined by the Manager at 12 noon, New
York time, on each day the New York Stock Exchange or New York banks are open
for business, immediately after the daily declaration of dividends. As a result
of this procedure, net asset value is determined each day except for days on
which both the New York Stock Exchange and New York banks are closed. Both the
New York Stock Exchange and New York banks are closed on New Year's Day,
Presidents' Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. The net asset value of a Fund is determined by adding the
value of all securities and other assets in the portfolio, deducting its
liabilities and dividing by the number of shares outstanding. It is anticipated
that the net asset value per share of each Fund will remain constant at $1.00
per share, but no assurance can be offered in this regard.
Each Fund values its portfolio securities based on their amortized cost in
accordance with the terms of a rule adopted by the Commission. This involves
valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the impact
of fluctuating interest rates on the market value of the instrument. While this
method provides certainty in valuation, it may result in periods during which
value, as determined by amortized cost, is higher or lower than the price a
Fund would receive if it sold the instrument.
In accordance with the Commission's rule applicable to the valuation of its
portfolio securities, each Fund will maintain a dollar-weighted average
portfolio maturity of 90 days or less, purchase only instruments having
remaining maturities of 397 days (13 months) or less, and invest only in
securities determined by the Trustees to be of high quality with minimal credit
risks. In addition, the Trustees have established procedures designed to
stabilize, to the extent reasonably possible, each Fund's price per share as
computed for the purpose of sales and redemptions at $1.00. The Trustees will
review periodically each Fund's portfolio holdings to determine whether a
deviation exists between the net asset value calculated using market quotations
and that calculated on an amortized cost basis. In the event the Trustees
determine that a deviation exists in a Fund's portfolio which may result in
material dilution or other unfair results to investors or existing
shareholders, such Fund will take such corrective action which it regards as
necessary and appropriate, including the reduction of the number of outstanding
shares of the Fund by having each shareholder proportionately contribute shares
to the Fund's capital; the sale of portfolio instruments prior to maturity to
realize capital gains or losses or to shorten average portfolio maturity;
withholding dividends; or establishing a net asset value per share by using
available market quotations. If the number of outstanding shares is reduced in
order to maintain a constant net asset value of $1.00 per share, the
shareholders will contribute proportionately to such Fund's capital. Each
shareholder will be deemed to have agreed to such contribution by such
shareholder's investment in the Fund.
Since the net income of each Fund is determined and declared as a dividend
immediately prior to each time the net asset value of such Fund is determined,
the net asset value per share of each Fund normally remains at $1.00 per share
immediately after each such dividend declaration. Any increase in the value of
a shareholder's investment in a Fund, representing the reinvestment of dividend
income, is reflected by an increase in the number of shares of such Fund in the
account, and any decrease in the value of a shareholder's investment may be
reflected by a decrease in the number of shares in the account. See "Taxes"
below.
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<PAGE>
YIELD INFORMATION
Each Fund normally computes its annualized yield by determining the net
income for a seven-day base period for a hypothetical pre-existing account
having a balance of one share at the beginning of the base period, dividing the
net income by the net asset value of the account at the beginning of the base
period to obtain the base period return, multiplying the result by 365 and then
dividing by seven. Under this calculation, the yields on Fund shares reflect
realized gains and losses on portfolio securities. In accordance with
regulations adopted by the Commission, each Fund is required to disclose its
annualized yield for certain seven-day base periods in a standardized manner
which does not take into consideration any realized or unrealized gains or
losses on portfolio securities. The Commission also permits the calculation of
a standardized effective or compounded yield. This is computed by compounding
the unannualized base period return which is done by adding one to the base
period return, raising the sum to a power equal to 365, dividing by seven and
subtracting one from the result. This compounded yield calculation also
excludes realized and unrealized gains or losses on portfolio securities.
The yield on Fund shares normally will fluctuate on a daily basis. Therefore,
the yield for any given past period is not an indication or representation by a
Fund of future yields or rates of return on its shares. The yield is affected
by such factors as changes in interest rates on short-term Municipal
Securities, average portfolio maturity, the types and quality of portfolio
securities held and operating expenses.
TAXES
FEDERAL
The Trust intends to continue to qualify each Fund for the special tax
treatment afforded regulated investment companies ("RICs") under the Code. If a
Fund so qualifies, in any taxable year in which it distributes at least 90% of
its taxable net income and 90% of its tax-exempt net income (see below), the
Fund (but not its shareholders) will not be subject to Federal income tax to
the extent that it distributes its net investment income and net realized
capital gains. The Trust intends to cause the Funds to distribute substantially
all of such income.
As discussed in the Prospectus for the Funds, the Trust has a number of
Series each referred to herein as a Fund. Each Fund is treated as a separate
corporation for Federal income tax purposes, and therefore is considered to be
a separate entity in determining its treatment under the rules for RICs
described in the Prospectus. Losses in one Fund do not offset gains in another
Fund, and the requirements (other than certain organizational requirements) for
qualifying for RIC status will be determined at the Fund level rather than at
the Trust level.
The Code requires a RIC to pay a nondeductible 4% excise tax to the extent
the RIC does not distribute, during each calendar year, 98% of its ordinary
income, determined on a calendar year basis, and 98% of its capital gains,
determined, in general, on an October 31 year-end, plus certain undistributed
amounts from previous years. The required distributions, however, are based
only on the taxable income of a RIC. The excise tax, therefore, generally will
not apply to the tax-exempt income of RICs, such as the Funds, that pay exempt-
interest dividends. While each Fund intends to distribute its income and
capital gains in the manner necessary to avoid imposition of the 4% excise tax,
there can be no assurance that sufficient amounts of a Fund's taxable income
and capital gains will be distributed to avoid entirely the imposition of the
tax. In such event, a Fund will be liable for the tax only on the amount by
which it does not meet the foregoing distribution requirements.
The Trust intends to qualify each Fund to pay "exempt-interest dividends" as
defined in Section 852(b)(5) of the Code. Under such section if, at the close
of each quarter of a Fund's taxable year, at least 50% of the value of its
total assets consists of obligations exempt from Federal income tax ("tax-
exempt obligations") under Section 103(a) of the Code (relating generally to
obligations of a state or local
14
<PAGE>
governmental unit), the Fund shall be qualified to pay exempt-interest
dividends to its shareholders. Exempt-interest dividends are dividends or any
part thereof paid by a Fund which are attributable to interest on tax-exempt
obligations and designated by the Trust as exempt-interest dividends in a
written notice mailed to such Fund's shareholders within 60 days after the
close of the Fund's taxable year. To the extent that the dividends distributed
to a Fund's shareholders are derived from interest income exempt from Federal
income tax under Code Section 103(a) and are properly designated as exempt-
interest dividends, they will be excludable from a shareholder's gross income
for Federal income tax purposes. Exempt-interest dividends are included,
however, in determining the portion, if any, of a person's social security
benefits and railroad retirement benefits subject to Federal income taxes. The
Trust will inform shareholders annually regarding the portion of each Fund's
distributions which constitutes exempt-interest dividends. Interest on
indebtedness incurred or continued to purchase or carry shares of RICs paying
exempt-interest dividends, such as the Funds, will not be deductible by the
investor for Federal income tax purposes to the extent attributable to exempt-
interest dividends. Each shareholder is advised to consult a tax adviser with
respect to whether exempt-interest dividends retain the exclusion under Code
Section 103(a) if a shareholder would be treated as a "substantial user" or
"related person" under Code Section 147(a) with respect to property financed
with the proceeds of an issue of "industrial development bonds" or "private
activity bonds", if any, held by a Fund.
To the extent that any Fund's distributions are derived from interest on its
taxable investments or from an excess of net short-term capital gains over net
long-term capital losses ("ordinary income dividends"), such distributions are
considered ordinary income for Federal income tax purposes. Such distributions
are not eligible for the dividends received deduction for corporations.
Distributions, if any, of net long-term capital gains from the sale of
securities ("capital gain dividends") are taxable as long-term capital gains
for Federal income tax purposes, regardless of the length of time a shareholder
has owned a Fund's shares. Under the Revenue Reconciliation Act of 1993, all or
a portion of a Fund's gain from the sale or redemption of tax-exempt
obligations purchased at a market discount will be treated as ordinary income
rather than capital gain. This rule may increase the amount of ordinary income
dividends received by shareholders. Distributions in excess of a Fund's
earnings and profits will first reduce the adjusted tax basis of a holder's
shares and, after such adjusted tax basis is reduced to zero, will constitute
capital gains to such holder (assuming the shares are held as a capital asset).
Any loss upon the sale or exchange of shares held for six months or less will
be treated as long-term capital loss to the extent of any capital gain
dividends received by the shareholder. In addition, such loss will be
disallowed to the extent of any exempt-interest dividends received by the
shareholder. If a Fund pays a dividend in January which was declared in the
previous October, November or December to shareholders of record on a specified
date in one of such months, such dividend will be treated for tax purposes as
being paid by the Fund and received by its shareholders on December 31 of the
year in which such dividend was declared.
The Code subjects interest received on certain otherwise tax-exempt
securities to an alternative minimum tax. The alternative minimum tax applies
to interest received on "private activity bonds" issued after August 7, 1986.
Private activity bonds are bonds which, although tax-exempt, are used for
purposes other than those generally performed by governmental units and which
benefit non-governmental entities (e.g., bonds used for industrial development
or housing purposes). Income received on such bonds is classified as an item of
"tax preference", which could subject investors in such bonds, including
shareholders of a Fund, to an alternative minimum tax. The Funds will purchase
such "private activity bonds", and the Trust will report to shareholders within
60 days after each Fund's taxable year-end the portion of its dividends
declared during the year which constitutes an item of tax preference for
alternative minimum tax purposes. The Code further provides that corporations
are subject to an alternative minimum tax based, in part, on certain
differences between taxable income as adjusted for other tax preferences and
the corporation's "adjusted current earnings", which more closely reflect a
corporation's economic income. Because an exempt-interest dividend paid by a
Fund will be included in adjusted current earnings, a corporate shareholder may
be required to pay alternative minimum tax on exempt-interest dividends paid by
such Fund.
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<PAGE>
The Revenue Reconciliation Act of 1993 added new marginal tax brackets of 36%
and 39.6% for individuals and created a graduated structure of 26% and 28% for
the alternative minimum tax applicable to individual taxpayers. These rate
increases may affect an individual investor's after-tax return from an
investment in a Fund as compared with such investor's return from taxable
investments.
A loss realized on a sale or exchange of shares of a Fund will be disallowed
if other Fund shares are acquired (whether through the automatic reinvestment
of dividends or otherwise) within a 61-day period beginning 30 days before and
ending 30 days after the date that the shares are disposed of. In such a case,
the basis of the shares acquired will be adjusted to reflect the disallowed
loss.
Ordinary income dividends paid by a Fund to shareholders who are nonresident
aliens or foreign entities will be subject to a 30% United States withholding
tax under existing provisions of the Code applicable to foreign individuals and
entities unless a reduced rate of withholding or a withholding exemption is
provided under applicable treaty law. Nonresident shareholders are urged to
consult their own tax advisers concerning the applicability of the United
States withholding tax.
Under certain Code provisions, some shareholders may be subject to a 31%
withholding tax on certain ordinary income dividends and on capital gain
dividends and redemption payments ("backup withholding"). Generally,
shareholders subject to backup withholding will be those for whom no certified
taxpayer identification number is on file with the Trust or who, to the Trust's
knowledge, have furnished an incorrect number. When establishing an account, an
investor must certify under penalty of perjury that such number is correct and
that such investor is not otherwise subject to backup withholding.
The Code provides that every person required to file a tax return must
include for information purposes on such return the amount of exempt-interest
dividends received from all sources (including any of the Funds) during the
taxable year.
ENVIRONMENTAL TAX
The Code imposes a deductible tax (the "Environmental Tax") on a
corporation's modified alternative minimum taxable income (computed without
regard to the alternative tax net operating loss deduction and the deduction
for the Environmental Tax) at a rate of $12 per $10,000 (0.12%) of alternative
minimum taxable income in excess of $2,000,000. The Environmental Tax is
imposed for taxable years beginning after December 31, 1986 and before January
1, 1996. The Environmental Tax is imposed even if the corporation is not
required to pay an alternative minimum tax because the corporation's regular
income tax liability exceeds its minimum tax liability. The Code provides,
however, that RICs, such as the Funds, are not subject to the Environmental
Tax. However, exempt-interest dividends paid by the Funds that create
alternative minimum tax preferences for corporate shareholders (as described
above) may subject corporate shareholders of the Funds to the Environmental
Tax.
----------------
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the
pertinent Code sections and the Treasury regulations promulgated thereunder.
The Code and the Treasury regulations are subject to change by legislative or
administrative action either prospectively or retroactively.
Shareholders are urged to consult their tax advisers regarding specific
questions as to Federal or foreign taxes.
STATE
Arizona. Exempt-interest dividends will not be subject to Arizona income tax
for shareholders who are Arizona residents to the extent that the dividends are
attributable to interest earned on Arizona State
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<PAGE>
Municipal Securities. To the extent that the Arizona Fund's distributions are
derived from interest on its taxable investments or from an excess of net
short-term capital gains over net long-term capital losses, such distributions
are considered ordinary income for Arizona income tax purposes. Distributions,
if any, of net long-term capital gains from the sale of securities are taxable
as ordinary income for Arizona purposes.
California. Exempt-interest dividends will not be subject to California
personal income tax for California resident individuals to the extent
attributable to interest from California State Municipal Securities, and such
exempt-interest dividends will also be excludable from the income base used in
calculating the California corporate income tax to the extent attributable to
interest on California State Municipal Securities. Distributions of long-term
capital gains will be treated as capital gains which are taxed at ordinary
income tax rates for California state income tax purposes. Exempt-interest
dividends paid to a corporate shareholder subject to California state corporate
franchise tax will be taxable as ordinary income.
Connecticut. Dividends paid by the Connecticut Fund that qualify as exempt-
interest dividends for Federal income tax purposes are not subject to the
Connecticut personal income tax, on individuals, trusts and estates, to the
extent that they are derived from Connecticut State Municipal Securities. Other
Connecticut Fund dividends and distributions, whether received in cash or
additional shares, are subject to this tax, except that capital gain dividends
derived from obligations issued by or on behalf of the State of Connecticut or
its political subdivisions are not subject to the tax. Dividends and
distributions paid by the Connecticut Fund that constitute items of tax
preference for purposes of the Federal alternative minimum tax, other than any
derived from Connecticut State Municipal Securities, could cause liability for
the net Connecticut minimum tax, applicable to investors subject to the
Connecticut personal income tax who are required to pay the Federal alternative
minimum tax.
Dividends paid by the Fund, including those that qualify as exempt-interest
dividends for Federal income tax purposes, are taxable for purposes of the
Connecticut Corporation Business Tax. However, 70% (100% if the investor owns
at least 20% of the total voting power and value of the Fund's shares) of
amounts that are treated as dividends and not as exempt-interest dividends or
capital gain dividends for Federal income tax purposes are deductible for
purposes of this tax, but no deduction is allowed for expenses related thereto.
Massachusetts. Under existing Massachusetts law, as long as the Massachusetts
Fund qualifies as a separate "regulated investment company" under the Code, (i)
the Massachusetts Fund will not be liable for any personal income or corporate
excise tax in the Commonwealth of Massachusetts and (ii) shareholders of the
Massachusetts Fund who are subject to Massachusetts personal income taxation
will not be required to include in their Massachusetts taxable income that
portion of dividends paid by the Massachusetts Fund that is identified in a
year-end statement as (a) exempt-interest dividends directly attributable to
interest received by the Massachusetts Fund on Massachusetts State Municipal
Securities that is exempt from Massachusetts taxation, or (b) dividends
attributable to interest received by the Massachusetts Fund on obligations of
the United States that are exempt from state taxation.
Any capital gains distributed by the Massachusetts Fund (except for capital
gains on certain Massachusetts State Municipal Securities which are
specifically exempt by statute), or gains realized by a shareholder on a
redemption or sale of shares of the Massachusetts Fund, will be subject to
Massachusetts personal income taxation.
In the case of any corporate shareholder subject to the Massachusetts
corporate excise tax, distributions received from the Massachusetts Fund, and
any gain on the sale or other disposition of Massachusetts Fund shares, will be
includable in the corporation's Massachusetts gross income and taxed
accordingly.
Michigan. Shareholders who are subject to the Michigan income tax or single
business tax will not be subject to the Michigan income tax or single business
tax on exempt-interest dividends to the extent they are attributable to
interest on Michigan State Municipal Securities. To the extent the
distributions from the
17
<PAGE>
Michigan Fund are attributable to sources other than exempt-interest dividends,
such distributions, including, but not limited to, long- or short-term capital
gains, will not be exempt from Michigan income tax or the single business tax.
In 1986, the Michigan Department of Treasury issued a Bulletin stating that
holders of interests in regulated investment companies who are subject to the
Michigan intangibles tax will be exempt from the tax to the extent that such a
company's investment portfolio consists of items such as the Michigan State
Municipal Securities. In addition, shares owned by certain financial
institutions or by certain other persons subject to the Michigan single
business tax are not subject to the Michigan intangibles tax. The intangibles
tax is being phased out, with reductions of twenty-five percent (25%) in 1994
and 1995, fifty percent (50%) in 1996 and seventy-five percent (75%) in 1997,
with total repeal effective January 1, 1998.
New Jersey. To the extent distributions are derived from interest or gains on
New Jersey State Municipal Securities, such distributions will be exempt from
New Jersey personal income tax. In order to pass through tax-exempt interest
for New Jersey personal income tax purposes, the New Jersey Fund, among other
requirements, must have not less than 80% of the aggregate principal amount of
its investments invested in New Jersey State Municipal Securities at the close
of each quarter of the tax year (the "80% Test"). For purposes of calculating
whether the 80% Test is satisfied, financial options, futures, forward
contracts and similar financial instruments relating to interest-bearing
obligations are excluded from the principal amount of the New Jersey Fund's
investments. The New Jersey Fund intends to comply with this requirement so as
to enable it to pass through tax-exempt interest. In the event the New Jersey
Fund does not so comply, distributions by the New Jersey Fund will be taxable
to shareholders for New Jersey personal income tax purposes. Exempt-interest
dividends and gains paid to a corporate shareholder will be subject to the New
Jersey corporation business (franchise) tax and the New Jersey corporation
income tax.
Under present New Jersey law, a RIC, such as the New Jersey Fund, pays a flat
tax of $250 per year. The New Jersey Fund might be subject to the New Jersey
corporation business (franchise) tax for any taxable year in which it does not
qualify as a RIC.
New York. The portion of exempt-interest dividends equal to the proportion
which the New York Fund's interest on New York State Municipal Securities bears
to all of the New York Fund's tax-exempt interest (whether or not distributed)
will be exempt from New York State and New York City personal income taxes. To
the extent the New York Fund's distributions are derived from interest on
taxable investments or from gain from the sale of investments or are
attributable to the portion of the New York Fund's tax-exempt interest that is
not derived from New York State Municipal Securities, they will constitute
taxable income for New York State and New York City personal income tax
purposes. Distributions from investment income and capital gains of the New
York Fund, including exempt-interest dividends paid to a corporate shareholder,
will be subject to New York State corporate franchise and New York City
corporation income tax.
North Carolina. Distributions of exempt-interest dividends, to the extent
attributable to interest on North Carolina State Municipal Securities and to
interest on direct obligations of the United States (including territories
thereof), are not subject to North Carolina individual or corporate income tax.
Distributions of gains attributable to the disposition of certain obligations
of the State of North Carolina and its political subdivisions issued prior to
July 1, 1995 are not subject to North Carolina individual or corporate income
tax; however, for such obligations issued after June 30, 1995, distributions of
gains attributable to disposition will be subject to North Carolina individual
or corporate income tax. Any loss upon the sale or exchange of shares of the
North Carolina Fund held for six months or less will be disallowed for North
Carolina income tax purposes to the extent of any exempt-interest dividends
received by the shareholder, even though some portion of such dividends
actually may have been subject to North Carolina income tax. Except for income
exempted from North Carolina income tax as described herein, the North Carolina
Fund's distributions will generally constitute taxable income for taxpayers
subject to North Carolina income tax.
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<PAGE>
An investment in the North Carolina Fund by a corporate shareholder generally
would be included in the capital stock, surplus and undivided profits base in
computing the North Carolina franchise tax.
An investment in the North Carolina Fund prior to 1995 was potentially
subject to the North Carolina intangible personal property tax, subject to
certain exemptions. This tax, however, has been repealed by the North Carolina
General Assembly, effective for taxable years beginning on or after January 1,
1995.
Ohio. Exempt-interest dividends will not be subject to Ohio personal income
tax and will be excludable from the net income base used in calculating the
Ohio corporate franchise tax to the extent attributable to interest from Ohio
State Municipal Securities. To the extent that the Ohio Fund's distributions
are derived from interest on its taxable investments or, subject to certain
exceptions, from an excess of net short-term capital gains over net long-term
capital losses, such distributions are considered ordinary income subject to
the Ohio personal income tax and the Ohio corporate franchise tax. Subject to
certain exceptions, distributions, if any, of net long-term capital gains are
also subject to the Ohio personal income tax and the Ohio corporate franchise
tax.
Distributions treated as investment income or as capital gains for Federal
income tax purposes, including exempt-interest dividends, may be subject to
local taxes imposed by certain cities within Ohio. Additionally, the value of
shares of the Fund will be included in (i) the net worth measure of the issued
and outstanding shares of corporations and financial institutions for purposes
of computing the Ohio corporate franchise tax, (ii) the value of the property
included in the gross estate for purposes of the Ohio estate tax, (iii) the
value of capital and surplus for purposes of the Ohio domestic insurance
company franchise tax and (iv) the value of shares of and capital employed by
dealers in intangibles for purpose of the Ohio tax on dealers in intangibles.
Pennsylvania. To the extent distributions from the Pennsylvania Fund are
derived from interest on Pennsylvania State Municipal Securities, such
distributions will also be exempt from the Pennsylvania personal income tax. In
the case of residents of the City of Philadelphia, distributions which are
derived from interest on Pennsylvania State Municipal Securities will be exempt
from the Philadelphia School District investment income tax.
Shares of the Pennsylvania Fund will be exempt from the personal property
taxes imposed by various Pennsylvania municipalities to the extent the
Pennsylvania Fund's portfolio securities consist of Pennsylvania State
Municipal Securities on the annual assessment date.
At present, it is unclear whether an investment in the Pennsylvania Fund by a
corporate shareholder will be included in the Pennsylvania capital
stock/foreign franchise tax base by the Pennsylvania Department of Revenue. To
the extent exempt-interest dividends are excluded from taxable income for
Federal corporate income tax purposes (determined before net operating loss
carryovers and special deductions), they will not be subject to the
Pennsylvania corporate net income tax.
----------------
The foregoing is a general and abbreviated summary of the tax laws for the
designated states as presently in effect. For the complete provisions,
reference should be made to the applicable state tax laws. The state tax laws
described above are subject to change by legislative, judicial, or
administrative action either prospectively or retroactively. Shareholders of
each Fund should consult their tax advisers about other state and local tax
consequences of their investment in such Fund.
19
<PAGE>
GENERAL INFORMATION
DESCRIPTION OF SERIES AND SHARES
The Declaration of Trust provides that the Trust shall comprise separate
Series each of which will consist of a separate portfolio that will issue a
separate class of shares. Presently, the Arizona, California, Connecticut,
Massachusetts, Michigan, New Jersey, New York, North Carolina, Ohio and
Pennsylvania Funds are the only Series of the Trust offering their shares to
the public. The Trustees are authorized to create an unlimited number of full
and fractional shares of beneficial interest, par value $0.10 per share, of a
single class and to divide or combine the shares into a greater or lesser
number of shares without thereby changing the proportionate beneficial
interests in the Series. Shareholder approval is not necessary for the
authorization of additional Series of the Trust. All shares have equal voting
rights, except that only shares of the respective Series are entitled to vote
on the matters concerning only that Series. Each issued and outstanding share
is entitled to one vote and to participate equally in dividends and
distributions declared by the respective Series and in net assets of such
Series upon liquidation or dissolution remaining after satisfaction of
outstanding liabilities. There normally will be no meetings of shareholders for
the purpose of electing Trustees unless and until such time as less than a
majority of the Trustees holding office have been elected by shareholders'
meeting for the election of Trustees. Shareholders may, in accordance with the
terms of the Declaration of Trust, cause a meeting of shareholders to be held
for the purpose of voting on the removal of Trustees.
The obligations and liabilities of a particular Series are restricted to the
assets of that Series and do not extend to the assets of the Trust generally.
The shares of each Series, when issued, will be fully paid and nonassessable,
have no preference, preemptive, conversion, exchange or similar rights and will
be freely transferable. Holders of shares of any Series are entitled to redeem
their shares as set forth elsewhere herein and in the Prospectus. Shares do not
have cumulative voting rights and the holders of more than 50% of the shares of
the Trust voting for the election of Trustees can elect all of the Trustees if
they choose to do so and in such event the holders of the remaining shares
would not be able to elect any Trustees. No amendment may be made to the
Declaration of Trust without the affirmative vote of a majority of the
outstanding shares of the Trust.
The Manager provided the initial capital for each Fund by purchasing 100,000
shares of each Fund. Such shares were acquired for investment and can only be
disposed of by redemption. The organizational expenses of each Fund were paid
by the respective Fund and are or were amortized over a period not exceeding
five years. Estimated organizational expenses of each of the Funds and the
dates they commenced operations are set forth below:
<TABLE>
<CAPTION>
ORGANIZATIONAL COMMENCEMENT
EXPENSES OF OPERATIONS
-------------- -------------
<S> <C> <C>
Arizona Fund....................................... $35,700 2/08/93
California Fund.................................... 84,818 7/05/88
Connecticut Fund................................... 60,166 4/29/91
Massachusetts Fund................................. 56,913 7/30/90
Michigan Fund...................................... 58,354 4/29/91
New Jersey Fund.................................... 52,238 7/30/90
New York Fund...................................... 78,650 7/05/88
North Carolina Fund................................ 59,972 5/28/91
Ohio Fund.......................................... 62,090 4/29/91
Pennsylvania Fund.................................. 57,043 8/27/90
</TABLE>
The proceeds realized by the Manager on the redemption of any of the shares
initially purchased by it will be reduced by the proportionate amount of
unamortized organizational expenses which the number of shares redeemed bears
to the number of shares initially purchased.
20
<PAGE>
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company, P.O. Box 351, Boston, Massachusetts
02101 (the "Custodian"), acts as custodian of the Funds' assets. The Custodian
is responsible for safeguarding and controlling each Fund's cash and
securities, handling the receipt and delivery of securities and collecting
interest on each Fund's investments.
Merrill Lynch Financial Data Services, Inc. (the "Transfer Agent"), a
subsidiary of ML & Co., P.O. Box 45290, Jacksonville, Florida 32232-5290, acts
as the Trust's transfer agent. The Transfer Agent is responsible for the
issuance, transfer and redemption of shares and the opening, maintenance and
servicing of shareholder accounts.
INDEPENDENT AUDITORS
Deloitte & Touche LLP, 117 Campus Drive, Princeton, New Jersey 08540-6400,
has been selected as the independent auditors of the Trust. The independent
auditors are responsible for auditing the annual financial statements of the
Funds.
LEGAL COUNSEL
Brown & Wood, One World Trade Center, New York, New York 10048-0557, is
counsel for the Trust.
REPORTS TO SHAREHOLDERS
The fiscal year of each Fund ends on March 31 of each year. The Trust sends
to each Fund's shareholders at least semi-annually reports showing the
respective Fund's portfolio and other information. An annual report, containing
financial statements audited by independent auditors, is sent to shareholders
each year. After the end of each year, shareholders will receive Federal and
the designated state's (and, if applicable, city's) income tax information
regarding ordinary income dividends and capital gain dividends.
Only one copy of each shareholder report and certain shareholder
communications will be mailed to each identified shareholder regardless of the
number of accounts such shareholder has. If a shareholder wishes to receive
separate copies of each report and communication for each of the shareholder's
related accounts the shareholder should notify in writing:
Merrill Lynch Financial Data Services, Inc.
P.O. Box 45290
Jacksonville, FL 32232-5290
The written notification should include the shareholder's name, address, tax
identification number and Merrill Lynch and/or mutual fund account numbers. If
you have any questions regarding this please call your Merrill Lynch financial
consultant or Merrill Lynch Financial Data Services, Inc. at (800) 221-7210.
ADDITIONAL INFORMATION
The Prospectus and this Statement of Additional Information do not contain
all of the information set forth in the Registration Statement and the exhibits
relating thereto, which each Fund has filed with the Commission under the
Securities Act of 1933 and the Investment Company Act, to which reference is
hereby made.
The Declaration of Trust establishing the Trust refers to the Trustees under
the Declaration of Trust collectively as Trustees, but not as individuals or
personally; and except for his or her own bad faith, willful misfeasance, gross
negligence or reckless disregard of his or her other duties, no Trustee,
shareholder, officer, employee or agent of the Trust shall be held to any
personal liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim of the Trust but the "Trust Property"
(as defined in the Declaration of Trust) only shall be liable. A copy of the
Declaration of Trust, together with all amendments thereto, is on file in the
office of the Commonwealth of Massachusetts.
To the knowledge of the Funds, no person owned beneficially 5% or more of any
Fund's shares on July 1, 1995.
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<PAGE>
THE FOLLOWING APPENDICES CONTAIN CERTAIN INFORMATION REGARDING THE ECONOMIC
AND FINANCIAL CONDITIONS IN EACH DESIGNATED STATE AS OF THE DATE OF THIS
STATEMENT OF ADDITIONAL INFORMATION. THIS INFORMATION IS PROVIDED TO INVESTORS
IN EACH FUND IN VIEW OF EACH FUND'S CONCENTRATION OF INVESTMENTS IN SECURITIES
OF ISSUERS IN A SPECIFIC STATE.
APPENDIX A
ECONOMIC AND FINANCIAL CONDITIONS IN ARIZONA
THE FOLLOWING INFORMATION IS A BRIEF SUMMARY OF FACTORS AFFECTING THE ECONOMY
OF THE STATE AND DOES NOT PURPORT TO BE A COMPLETE DESCRIPTION OF SUCH FACTORS.
OTHER FACTORS WILL AFFECT ISSUERS. THE SUMMARY IS BASED PRIMARILY UPON ONE OR
MORE PUBLICLY AVAILABLE OFFERING STATEMENTS RELATING TO DEBT OFFERINGS OF STATE
ISSUERS, HOWEVER, IT HAS NOT BEEN UPDATED NOR WILL IT BE UPDATED DURING THE
YEAR. THE TRUST HAS NOT INDEPENDENTLY VERIFIED THE INFORMATION.
Over the past several decades, the State's economy has grown faster than that
of most other regions of the country, as measured by nearly every major
indicator of economic growth, including population, employment and aggregate
personal income. Although the rate of growth in these and other areas slowed
considerably during the late 1980s and early 1990s, the State's efforts to
diversify its economy have enabled it to realize, and then sustain, moderate
growth in more recent years. While jobs in industries such as mining and
agriculture have diminished in relative importance to the State's economy over
the past two decades, substantial growth has occurred in the areas of
aerospace, high technology, light manufacturing, and the service industry.
Other important industries that contributed to the State's growth in past years
such as construction and real estate, have rebounded from substantial declines
during the late 1980s and early 1990s, and, like the rest of the State, have
experienced positive growth.
Arizona's strong economy, warm climate and reasonable cost of living have
encouraged many people to move to the State in recent years. Between 1985 and
1990, the state ranked fifth in the country in population growth, and Maricopa
County, the State's most populous county, had the single largest population
inflow (in absolute terms) of any county in the country during that period.
Since 1991, as a result of both the State's relatively good economy and the
troubles experienced in surrounding areas like California, the State's
population has grown by approximately 287,000, or 7.6%. The net 115,000 who
came to the State in 1994 put the State's aggregate population over 4 million
for the first time. Population growth in 1995 is expected to equal or exceed
the 1994 levels.
Part of the State's popularity in recent years can be attributed to the
favorable job climate. Building upon the moderate job growth sustained since
the early 1990s, the State's employment figures reached near-record levels in
1994, rising 6.4% from 1993 as the State recorded more than 99,000 new jobs.
The industries that created the most jobs in 1994 included construction, where
employment rose 21.9%, and manufacturing (including the aircraft and missile
sectors), which was up 9.2%. Transportation, communications, public utilities,
trade, finance, insurance and real estate also experienced job growth. Overall,
the service sector of the economy, which represents more than 28% of all jobs
in the State, grew by 6.4%, while only the mining and government job sectors
showed declines. The 1994 results are not expected to be matched in 1995,
partly due to a decline in single-family home construction, but a relatively
sound United States economy, a potential economic upswing in California (which
historically has been a prime market for Arizona goods and services), and
continued growth in manufacturing and high technology should enable the State
to realize moderate gains in job growth in 1995. The 1994 unemployment rate was
6.3%.
The State's economic growth in recent times has enabled Arizonans to realize
substantial gains in personal income. While the State's per capita personal
income generally varies between 5% and 15% below the national average due to
such factors as the chronic poverty on the State's Indian reservations, the
State's relatively high numbers of retirees and children, and the State's below
average wage scale, the State's aggregate personal income grew nearly 22.8%
between 1991 and 1994 to approximately $77.094 billion, which translated into a
gain in real personal income of 14.8% to $60.980 billion. Among other things,
the gains in per capita personal income helped create a retail sales boom in
1994. According to Arizona
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Department of Revenue figures (which measure taxable retail sales in specified
categories), retail sales were up 12.3% in 1994, led by major gains in sales of
durable goods. The current rate of growth in the retail sales area may not be
sustainable over the long term, but continued strength in employment growth and
personal income should produce good, though more modest, results in 1995.
The State government's fiscal situation has improved substantially in recent
years. After experiencing several years of budget shortfalls requiring mid-year
adjustments, the State had budget surpluses of $86 million and $107 million in
fiscal years 1993 and 1994, respectively. So far in 1995, the State has
improved on this performance, at times achieving mid-year operating surpluses
of more than $1 billion. The positive economic outlook enabled the Legislature
to enact a two-year, $431 million tax cut, the largest in the State's history.
Signed into law in March 1995, the fiscal year 1996 budget and tax package
provides for a $200 million cut in personal income taxes this year and a $200
million cut in property taxes next year, and eliminates income taxes for
families of four making less than $20,000 per year. Businesses will also
receive some tax relief. While voter approval of Proposition 108 in November
1992, which requires a 2/3 majority vote in both houses of the Legislature to
enact a tax or fee increase, constrains the State's ability to raise additional
revenue, the State has placed some of its excess operating revenue in a rainy-
day fund, which has a current balance of more than $100 million.
In July 1994, a sharply divided Arizona Supreme Court ruled that the State's
current system for financing public education itself created substantial
disparities in facilities among school districts and therefore violated the
provisions of Article XI, (S) 1 of the Arizona Constitution, which requires the
Legislature to establish and maintain "a general and uniform public school
system". The Court remanded the case to the trial court "to determine whether,
within a reasonable time, legislative action has been taken [to correct this
situation]". In response to a subsequent motion for clarification, the Supreme
Court ordered that, pending such legislative action or further order of the
Supreme Court, "which would have prospective application only", the public
school system "continue under existing statutes, and the validity and
enforceability of past and future bond acts, bonded indebtedness and
obligations incurred under applicable statutes, as long as they are in force
and effect, is assured." In May 1995, a court dismissed a taxpayer's challenge
to a school district bond issue that was authorized at an election subsequent
to the Supreme Court decision on the ground that the decision contemplated and
approved such bond issues pending legislative action or further court order. A
joint legislative committee is expected to issue recommendations regarding a
new system of public school financing later in 1995.
Maricopa County is the State's most populous county. Within Maricopa County's
boundaries lie the City of Phoenix, the State's largest city and one of the ten
largest cities in the United States, and the Cities of Scottsdale, Tempe, Mesa,
Glendale, Chandler and Peoria, as well as the Towns of Paradise Valley and
Gilbert. Maricopa County accounts for 58% of the State's population, 63% of its
wage and salary employment, and 65% of its aggregate personal income. Between
1992 and 1994, Maricopa County's population rose more than 5.2% to
approximately 2,355,000; over the same period, the unemployment rate fell from
6.4% to 4.7%. These factors enabled Maricopa County residents to realize an
increase in aggregate personal income of 14.9% which, in turn, contributed to
significant increases in retail sales and construction.
Good transportation facilities, a substantial pool of available labor, a
variety of support industries and a warm climate have helped make Maricopa
County a major business center in the southwestern United States. Once
dependent primarily on agriculture, Maricopa County has substantially
diversified its economic base. Currently, the service sector, including
transportation, communications, public utilities, hospitality and
entertainment, trade, finance, insurance, real estate and government, is the
leading source of employment in Maricopa County, creating more than 14,000 new
jobs in 1994. In addition, several large, publicly-traded companies, such as
Dial Corp., Phelps Dodge, and MicroAge, have their headquarters in Maricopa
County, while others, such as Motorola, Intel and Honeywell, conduct major
operations there. Already home to a variety of professional sports teams,
including the Phoenix Suns and Arizona Cardinals, the County was recently
awarded one of two new major league baseball franchises. The Arizona
Diamondbacks are expected to begin play in 1998 upon completion of a new
stadium in downtown Phoenix.
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Despite the overall economic growth in recent years, the Maricopa County
government spent in excess of its revenues from 1990 through 1993, and ended
its fiscal 1994 year with a $66.53 million budget deficit, as compared to a
total County budget of approximately $1.2 billion. Recently, County officials
have indicated that savings brought about through budget cuts, a hiring freeze
and other restructuring moves undertaken since that time could enable the
County to pay off the deficit as early as the June 1995 fiscal year end.
Pima County is the State's second most populous county, and includes the City
of Tucson. Pima County is home to approximately 730,000 people, or 18% of the
State's population. Traditionally, Pima County's economy has been based
primarily upon manufacturing, mining, government, agriculture, tourism,
education and finance. Hughes Aircraft, which transferred its Hughes Missile
Systems division to Tucson from Canoga Park, California several years ago, and
several large mining companies, including Magma Copper, ASARCO and Phelps
Dodge, anchor the non-public sector of the Tucson economy, employing more than
14,000 people. More recently, the County, and Tucson in particular, has become
a base for more than 300 computer software companies, as well as a number of
companies operating in the areas of environmental technology, bioindustry and
telecommunications. The 16% growth in manufacturing employment during 1994 and
an unemployment rate of less than 5% reflect the County's current strong
economy.
In 1994, two special purpose irrigation districts, formed for the purpose of
issuing bonds to finance the purchase of Colorado River water from the Central
Arizona Project ("CAP"), filed for bankruptcy under Chapter 9 of the United
States Bankruptcy Code due to the districts' inability to collect tax revenue
in amounts and at times sufficient to service their bonded debt. The financial
problems that led to the districts' default arose from a combination of the
unexpectedly high cost of constructing the CAP and delivering the water to the
districts, plummeting land values associated the increased property taxes
assessed to finance the districts' debt, and the refusal by many land owners in
the districts to shoulder the increased tax burden. A third irrigation district
is expected to file for bankruptcy later in 1995.
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APPENDIX B
ECONOMIC AND FINANCIAL CONDITIONS IN CALIFORNIA
THE FOLLOWING INFORMATION IS A BRIEF SUMMARY OF FACTORS AFFECTING THE ECONOMY
OF THE STATE AND DOES NOT PURPORT TO BE A COMPLETE DESCRIPTION OF SUCH FACTORS.
OTHER FACTORS WILL AFFECT ISSUERS. THE SUMMARY IS BASED PRIMARILY UPON ONE OR
MORE PUBLICLY AVAILABLE OFFERING STATEMENTS RELATING TO DEBT OFFERINGS OF STATE
ISSUERS, HOWEVER, IT HAS NOT BEEN UPDATED NOR WILL IT BE UPDATED DURING THE
YEAR. THE TRUST HAS NOT INDEPENDENTLY VERIFIED THE INFORMATION.
ECONOMIC CONDITIONS
California's economy is the largest among the 50 states and one of the
largest in the world. Total employment is about 14 million, the majority of
which is in the service, trade and manufacturing sectors.
The State of California's (sometimes referred to as the "State") tax revenue
experience in the past few years clearly reflects sharp declines in employment,
income and retail sales on a scale not seen in over 50 years. The 1995-96
Governor's Budget, released January 10, 1995 (the "Governor's Budget"),
indicates the State has embarked on a steady economic recovery since late 1993,
somewhat sooner than predicted in the May 1994 Revision of the 1994-95
Governor's Budget. The following are excerpts from the Governor's Budget
discussion of economic conditions.
California. Revised employment data indicate that California's recession
ended in 1993, and following a period of stability, a recovery is now underway.
The State's unemployment rate fell last year, from 10.1 percent in January to
7.7 percent in October and November. The gap between the national and
California jobless rates narrowed from 3.4 percentage points at the beginning
of 1994 to an average of 2 percentage points in October and November. The
number of unemployed Californians fell by nearly 400,000 during the year, while
civilian employment increased more than 300,000.
Other indicators, including retail sales, homebuilding activity, existing
home sales and bank lending volume all confirm the State's recovery. U.S.
Department of Commerce survey data show retail sales up over 8 percent in
September and October 1994 from year-earlier data. Information from major
credit card companies and the leading check verification service suggest that
the 1994 holiday-season sales growth in California outpaced the national
performance. Despite rising interest rates, existing home sales were up 18
percent through the first ten months of last year, while permits to build new
homes rose 16 percent over the same period. Nonresidential construction has
stabilized, and office occupancy rates are moving up in most areas. Commercial
lending by the State's major banks is also on the rise after a three-year
decline.
Personal income was severely affected by the Northridge Earthquake, which
reduced the first quarter 1994 figure by $22 billion at an annual rate,
reflecting the uninsured damage to residences and unincorporated businesses. As
a result, personal income growth for all of 1994 was about 4.2 percent.
However, excluding the Northridge effects, growth would have been in excess of
5 percent. Moreover, after several years of accelerating income ahead of
promised Federal tax hikes, it appears that many individuals may have deferred
the recognition of income (including bonuses and stock options) into 1995,
given a strong possibility that the new Congress may enact tax cuts at the
Federal level.
Only nonfarm wage and salary employment figures have yet to confirm the
recovery. Federal figures indicate that jobs reached a low in December 1993 and
have shown little growth since then (although the November 1994 figure was up
slightly from the year-earlier level). However, State payroll tax data, which
will form the basis for the March 1995 revision in the California Employment
Development Department's ("EDD") wage and salary job figures, paint a brighter
picture. These tax-based data, reflecting the entire universe of employers,
indicate that employment bottomed in the spring of 1993, and after a period of
stability, began a sustained recovery later that year. Based on preliminary
second quarter payroll tax data, the Department of Finance estimates that
employment grew by more than 150,000 last year.
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The gap between the data compiled by the EDD on contract with the U.S. Bureau
of Labor Statistics ("BLS") and the State payroll tax data is because the EDD
survey on which these figures are based is unable to pick up new business
starts (only firms in operation prior to the first quarter of 1992 are
included) and samples only a fraction of smaller employers. On the other hand,
all very large firms--including most aerospace manufacturers, banks, utilities
and major retailers--are included in the EDD/BLS survey. These larger firms are
the source of most of the layoffs, down sizing and restructuring in the
economy. Thus, the survey reports the vast majority of layoffs, but understates
growth in small firms and misses entirely jobs created by new business.
Payroll tax data indicate employment growth is concentrated in services,
construction, and wholesale and retail trade. Manufacturing continues to be
affected by Federal defense spending cuts and the weak market for commercial
aircraft. Aerospace (aircraft, missiles and space equipment and search and
navigation instruments) lost 36,000 jobs last year, and employment is now down
by more than half from the 1988 peak. Electronics has stabilized and is showing
some growth particularly in the components industry. Excluding these high-
technology industries, manufacturing is now posting small employment gains.
Many of the new jobs in the service-producing sector are in high-wage
industries, including motion pictures, business services (which includes
computer software and consulting), and engineering and management consulting.
Much of the growth in wholesale trade is related to foreign trade. Dollar
volumes through California ports were up an estimated 16 percent last year,
considerably above the nationwide gain of about 9 percent. Job gains in these
high-wage service industries are helping to cushion the ongoing losses in
aerospace.
California should not be significantly affected by the prospective slowing of
U.S. economic growth. The State will benefit from continued strength in
business equipment sales--mainly computers, instruments and other high-tech
products--and from the ongoing recoveries overseas. The recent upswing in
Japan--California's largest trading partner--and faster than expected growth in
Western Europe are encouraging signs for California.
Homebuilding in the State has continued to recover despite the rise in fixed
rate mortgages since late 1993. Job growth seems to be the key: in a reversal
of traditional roles, the rest of the State's economy is pulling housing out of
the doldrums. Lower interest rates, which should appear on the horizon later
this year, will give homebuilding an extra boost in the second half of 1995 and
throughout 1996. Permit volume is forecast to rise from an estimated 96,000
units last year to 109,000 units in 1995 and over 150,000 new homes in 1996.
Following the addition of over 150,000 new jobs in 1994, this year should see
growth in the 220,000 range, led by services, construction and trade.
Manufacturing is expected to stabilize, despite the loss of another 20,000 or
more aerospace jobs. In 1996, job growth is projected to exceed 300,000, with
gains in all major sectors of the State's economy, again led by services and
construction.
Personal income is expected to grow 6.6 percent this year, well above the
quake-impacted 1994 estimate of 4.2 percent. Without the quake-related losses
in rental income, growth would have been 5.1 percent last year, and this year's
forecast gain would be 5.7 percent. In 1996, income is expected to grow by 6
percent.
The quality of income is also improving, with wages and salaries and
proprietors' incomes accelerating, while transfer payments--which include
welfare payments, unemployment compensation and social security--are slowing.
During the recession, transfer payments grew at a double-digit pace.
Inflation in California, which has traditionally run slightly above the
national average, is now lagging the U.S. by a considerable margin. The
California consumer price index (a weighted average of published indexes for
the five-county Los Angeles and ten-county San Francisco Bay regions) averaged
only a 1 1/2 percent rise last year, compared to a 2.7 percent estimate for the
nation. In 1995 and 1996, the California
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price measure should average 3 percent annual increases, still below the
expected national pace of 3 1/2 percent. Subtracting inflation from the rise in
personal income, real incomes rose 2.7 percent last year, and without the quake
the gain would have been 3.5 percent. In both 1995 and 1996, real income growth
is expected to exceed 3 percent.
The Department of Finance Bulletin for April 1995 reports on the State's
continued economic recovery. Despite wet weather, nonfarm employment in the
State increased by 17,000 in March and was up 127,500, or 1.1 percent, from
March 1994. Due to heavy rainstorms, construction employment decreased by 6,900
jobs in March after increasing by more than 35,000 in February. Even so, 22,500
new construction jobs were added since March 1994, a gain of almost 5 percent.
Most other major private industry groups posted gains for March, with services
gaining 18,500 jobs and durable goods factories adding 2,800, despite a drop of
700 jobs in aerospace industries. The State's unemployment rate rose slightly
in March to 7.6 percent from 7.3 percent in February, but was down from 8.8
percent in March 1994.
Home building in February (the most recent month for which information was
available) advanced strongly from the January level, which was depressed by
severe rains and flooding. On a year-over-year basis, building permits rose 4.9
percent, with the number of multi-family permits nearly doubling. Improvement
was also shown with respect to nonresidential construction, with valuation for
nonresidential building increasing 14.6 percent from February 1994.
Finally, the Mexican currency crisis is expected to have some mild dampening
effect on the California economy. The peso's devaluation will make California
exports much more expensive in Mexican markets. Although the economic impact of
this is unknown, an export reduction of 20 percent would reduce trade by
approximately $1.5 billion. This represents less than two percent of all
exports through California ports. San Diego, however, is likely to be more
severly affected due to substantial reductions in cross-border traffic.
Northridge Earthquake. On January 17, 1994, a major earthquake measuring an
estimated 6.8 on the Richter Scale struck the Los Angeles metropolitan area,
centered in the Northridge area of the City of Los Angeles. Significant
property damage to private and public-facilities occurred in a four-county area
including northern Los Angeles County, Ventura County, and parts of Orange and
San Bernardino Counties, which were declared as State and federal disaster
areas by January 18. Current estimates of total property damage (private and
public) are in the range of $20 billion, but these estimates are still subject
to change.
The State. From mid-1990 to late 1993, the State suffered a recession with
the worst economic, fiscal and budget conditions since the 1930s. Construction,
manufacturing (especially aerospace), and financial services, among others,
were all severely affected. Job losses were the worst of any post-war
recession. Employment levels stabilized by late 1993 and steady growth occurred
in 1994 and is expected to continue in 1995, but pre-recession job levels are
not expected to be reached until late 1996. Economic indicators show a steady
recovery underway in the State since the start of 1994.
The recession seriously affected State tax revenues, which basically mirror
economic conditions. It also caused increased expenditures for health and
welfare programs. The State has also been facing a structural imbalance in its
budget with the largest programs supported by the General Fund--K-12 schools
and community colleges, health and welfare, and corrections--growing at rates
higher than the growth rates for the principal revenue sources of the State
General Fund. As a result, the State experienced recurring budget deficits in
the late 1980s and early 1990s. The State Controller reports that expenditures
exceeded revenues for four of the five fiscal years ending with 1991-92; the
State had an operating surplus of about $109 million
in 1992-93 and $836 million in 1993-94. However, at June 30, 1994, according to
the Department of Finance, the State's Special Fund for Economic Uncertainties
still had an accumulated deficit, on a budget basis, of approximately $1.8
billion.
The accumulated budget deficits over the past several years, together with
expenditures for school funding which have not been reflected in the budget,
and reduction of available internal borrowable funds,
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have combined to significantly deplete the State's cash resources to pay its
ongoing expenses. In order to meet its cash needs, the State has had to rely
for several years on a series of external borrowings, including borrowings past
the end of a fiscal year. Such borrowings are expected to continue in future
fiscal years. To meet its cash flow needs in the 1994-95 Fiscal Year, the State
has issued, in July and August, 1994, $4.0 billion of revenue anticipation
warrants which mature on April 25, 1996, and $3.0 billion of revenue
anticipation notes maturing on June 28, 1995.
On July 15, 1994, all three of the rating agencies rating the State's long-
term debt lowered their ratings of the State's general obligation bonds.
Moody's Investors Service lowered its rating from Aa to A1, Standard & Poor's
Ratings Group lowered its rating from A+ to A and termed its outlook as
"stable," and Fitch Investors Service lowered its rating from AA to A.
The 1994-95 Fiscal Year represented the fourth consecutive year the Governor
and Legislature were faced with a very difficult budget environment to produce
a balanced budget. Many program cuts and budgetary adjustments had already been
made in the last three years. The Governor's Budget Proposal, as updated in May
and June, 1994, recognized that the accumulated deficit could not be repaid in
one year, and proposed a two-year solution. The budget proposal set forth
revenue and expenditure forecasts and revenue and expenditure proposals which
result in operating surpluses for the budget for both 1994-95 and 1995-96, and
lead to the elimination of the accumulated budget deficit, estimated at about
$1.8 billion at June 30, 1994, by June 30, 1996.
The 1995-96 Governor's Budget, issued January 10, 1995, contains a reforecast
of revenues and expenditures for the 1994-95 Fiscal Year. The Department of
Finance Bulletin for April 1995 reports that General Fund revenues for March
1995 were $28 million, or 1.1 percent, below forecast, and that year-to-date
General Fund revenues were $110 million, or 0.4 percent, below forecast. The
largest component of the decrease is attributable to personal income tax
receipts, which were $134 million, or 1.1 percent, below the year-to-date
forecast. In addition, sales and use tax receipts were $117 million, or 1.1
percent, below the year-to-date forecast. The sales and use tax revenues for
March alone were $91 million, or 8.0%, below forecast, but the Department of
Finance believes that the recent floods in the State could be the cause of this
shortfall. Retailers who were impacted by the floods were allowed to delay
their sales tax payments. In addition, the floods may have been the cause of a
temporary slump in sales, which could be recovered as the weather improves. The
April Bulletin also reported that year-to-date bank and corporation tax
receipts were as forecast, and that miscellaneous revenues were $141 million
above the year-to-date forecast. This gain is mostly attributable to revenues
such as those relating to trial courts, state lands, and unclaimed property.
The Department of Finance believes the gain in unclaimed property revenues ($40
million above forecast) to be real, and expects it to grow slightly by the end
of the fiscal year.
Initial analysis of the federal Fiscal Year 1995 budget by the Department of
Finance indicates that about $98 million was appropriated for California to
offset costs of incarceration of undocumented and refugee immigrants, less than
the $356 million which was assumed in the State's 1994-95 Budget Act. Because
of timing considerations in applying for these federal funds, the Department of
Finance estimates that about $33 million of these funds will be received during
the State's 1994-95 Fiscal Year, with the balance received in the following
fiscal year. It does not appear that the federal budget contains any of the
additional $400 million in funding for refugee assistance and health costs
which were also assumed in the 1994-95 Budget Act, but the Department of
Finance expects the State to continue its efforts to obtain some or all of
these federal funds.
Pursuant to the Budget Adjustment Law (the "Law," Government Code Section
12467), the State Controller was required to make a report by November 15, 1994
on whether the projected cash resources for the General Fund as of June 30,
1995 would decrease more than $430 million from the amount projected by the
State in its Official Statement in July, 1994 for the sale of $4,000,000,000 of
Revenue Anticipation Warrants. On November 15, 1994, the State Controller
issued the report on the State's cash position required by the Budget
Adjustment Law. The report indicated that the cash position of the General Fund
on June 30,
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1995 would be $581 million better than was estimated in the July, 1994 cash
flow projections and therefore, no budget adjustment procedures will be invoked
for the 1994-95 Fiscal Year. As explained earlier, the Law would only be
implemented if the State Controller estimated that borrowable resources on June
30, 1995 would be at least $430 million lower than projected.
The State Controller's report identified a number of factors which have led
to the improved cash position of the State. Estimated revenues and transfers
for the 1994-95 Fiscal Year other than federal reimbursement for immigration
costs were up about $650 million. The largest portion of this was in higher
bank and corporation tax receipts, but all major tax sources were above
original projections. However, most of the federal immigration aid revenues
projected in connection with the 1994-95 Budget Act and in the July, 1994 cash
flows will not be received, as indicated above, leaving a net increase in
revenues of $322 million.
On the expenditure side, the State Controller reported that estimated reduced
caseload growth in health and welfare programs, reduced school enrollment
growth, and an accounting adjustment reducing a transfer from the General Fund
to the Special Fund for Economic Uncertainties resulted in overall General Fund
expenditure reductions (again before adjusting for federal aid) of $672
million. However, the July, 1994 cash flows projected that General Fund health
and welfare and education expenditures would be offset by the anticipated
receipt of $407 million in federal aid for illegal immigrant costs. The State
Controller now estimates that none of these funds will be received, so the net
reduction in General Fund expenditures is $265 million.
Finally, the State Controller indicated that a review of balances in special
funds available for internal borrowing resulted in an estimated reduction of
such borrowable resources of $6 million. The combination of these factors
results in the estimated improvement of the General Fund's cash position of
$581 million. The State Controller's revised cash flow projections for 1994-95
have allocated this improvement to two line items: an increase from $0 to $427
million in the estimated ending cash balance of the General Fund on June 30,
1995, and an increase in unused borrowable resources of $154 million.
The State Controller's report indicated that there was no anticipated cash
impact in the 1994-95 Fiscal Year for recent initiatives on "three strikes"
criminal penalties and illegal immigration which were approved by voters on
November 8, 1994. At a hearing before a committee of the Legislature on
November 15, 1994, both the Legislative Analyst and the Department of Finance
concurred in the reasonableness of the State Controller' report. (The
Legislative Analyst had issued a preliminary analysis on November 1, 1994 which
reached a conclusion very close to that of the State Controller.) The State
Controller's report makes no projections about whether the Law may have to be
implemented in 1995-96. However, both the State Controller and the Legislative
Analyst in the November 15 hearing noted that the July, 1994 cash flows for the
1995-96 Fiscal Year place continued reliance on large amounts of federal
assistance for immigration costs, which did not materialize this year,
indicating significant budget pressures for next year. The Department of
Finance indicated that the budgetary issues identified in the hearing would be
addressed in the Governor's Budget proposal for the 1995-96 Fiscal Year.
1995-96 Budget Proposal. For the first time in four years, the State entered
the current fiscal year with strengthening revenues based on an improving
economy. On January 10, 1995, the Governor presented his 1995-96 Fiscal Year
Budget Proposal (the "Proposed Budget"). The Proposed Budget estimates General
Fund revenues and transfers of $42.5 billion (an increase of 0.2 percent over
1994-95). This nominal increase from the 1994-95 Fiscal Year reflects the
Governor's realignment proposal and the first year of his tax cut proposal (see
principal features of the Proposed Budget below for further discussions).
Without these two proposals, General Fund revenues would be projected at
approximately $43.8 billion, or an increase of 3.3 percent over 1994-95.
Expenditures are estimated at $41.7 billion (essentially unchanged from 1994-
95). Special Fund revenues are estimated at $13.5 billion (10.7 percent higher
than 1994-95) and Special Fund expenditures are estimated at $13.8 billion
(12.2 percent higher than 1994-95). The Proposed Budget projects that the
General Fund will end the fiscal year at June 30, 1996 with a budget surplus in
the Special Fund for
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Economic Uncertainties of about $92 million, or less than 1 percent of General
Fund expenditures, and will have repaid all of the accumulated budget deficits.
The 1995-96 Budget will be subject to the Budget Adjustment or "Trigger"
legislation enacted in June 1994. The Proposed Budget contains a cash flow
projection (based on all the assumptions described above) which shows about $1
billion of unused borrowable resources at June 30, 1996, providing this amount
of "cushion" before the budget "trigger" would have to be invoked.
However, a report issued by the Legislative Analyst in February 1995 notes
that the Proposed Budget (and hence the margin of cushion under the "trigger")
is subject to a number of major risks, including receipt of the expected
federal immigration aid and other federal actions to allow health and welfare
cuts, and the outcome of several lawsuits concerning previous budget actions
which the State has lost at the trial court level, and which are under appeal.
This Analyst's Report also estimates that, despite more favorable revenues, the
two-year budget estimates made in July 1994 are about $2 billion out of
balance, principally because federal immigration aid appears likely to be much
lower than previously estimated. This shortfall is much smaller than the State
has faced in recent years, and has been addressed in the Governor's Budget.
Orange County Bankruptcy. On December 6, 1994, Orange County, California (the
"County"), together with its pooled investment funds (the "Funds") filed for
protection under Chapter 9 of the federal Bankruptcy Code, after reports that
the Funds had suffered significant market losses in their investments, causing
a liquidity crisis for the Funds and the County. More than 180 other public
entities, most of which, but not all, are located in the County, were also
depositors in the Funds. As of mid-January, 1995, following a restructuring of
most of the Funds' assets to increase their liquidity and reduce their exposure
to interest rate increases, the County estimated the Funds' loss at about $1.69
billion, or about 23% of their initial deposits of approximately $7.5 billion.
Many of the entities which deposited moneys in the Funds, including the County,
are facing cash flow difficulties because of the bankruptcy filing and may be
required to reduce programs or capital projects. This may also affect their
ability to meet their outstanding obligations.
The State has no existing obligation with respect to any outstanding
obligations or securities of the County or any of the other participating
entities. However, in the event the County is unable to maintain county
administered State programs because of insufficient resources, it may be
necessary for the State to intervene, but the State cannot presently predict
what, if any, action may occur. As of mid-January, it appeared that school
districts may have collectively lost up to $230 million from the amounts they
had on deposit in the Funds.
On May 2, 1995, the United States Bankruptcy Court approved the Comprehensive
Settlement Agreement re Orange County Investment Pools. The agreement resulted
in school participants in the Funds receiving a cash distribution totalling
approximately 90 percent of the schools' investment balances.
Under existing legal precedent, the State is obligated to intervene when a
school district's fiscal problems would otherwise deny its students basic
educational equality. The State is not presently able to predict whether any
school districts will face insolvency because of their participation in the
Funds, and if so, the potential amount or form of aid which the State may have
to provide.
CONSTITUTIONAL AND STATUTORY LIMITATIONS; RECENT INITIATIVES; PENDING
LITIGATION
Article XIIIA of the California Constitution (which resulted from the voter-
approved Proposition 13 in 1978) limits the taxing powers of California public
agencies. Article XIIIA provides that the maximum ad valorem tax on real
property cannot exceed 1% of the "full cash value" of the property, and
effectively prohibits the levying of any other ad valorem property tax for
general purposes. However, on May 3, 1986, Proposition 46, an amendment to
Article XIIIA, was approved by the voters of the State of California, creating
a new exemption under Article XIIIA permitting an increase in ad valorem taxes
on real property in excess of 1% for bonded indebtedness approved by two-thirds
of the voters voting on the proposed
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indebtedness. "Full cash value" is defined as "the County Assessor's valuation
of real property as shown on the 1975-76 tax bill under "full cash value" or,
thereafter, the appraised value of real property when purchased, newly
constructed, or a change in ownership has occurred after the 1975 assessment."
The "full cash value" is subject to annual adjustment to reflect increases (not
to exceed 2%) or decreases in the consumer price index or comparable local
data, or to reflect reductions in property value caused by damage, destruction
or other factors.
Article XIIIB of the California Constitution limits the amount of
appropriations of the State and of local governments to the amount of
appropriations of the entity for the prior year, adjusted for changes in the
cost of living, population and the services that the local government has
financial responsibility for providing. To the extent the revenues of the State
and/or local government exceed its appropriations, the excess revenues must be
rebated to the public either directly or through a tax decrease. Expenditures
for voter-approved debt services are not included in the appropriations limit.
In 1986, California voters approved an initiative statute known as
Proposition 62. This initiative (i) required that any tax for general
governmental purposes imposed by local governments be approved by a majority of
the electorate of the government entity, (ii) required that any special tax
(defined as taxes levied for other than general government purposes) imposed by
a local government entity be approved by a two-thirds vote of the voters within
that jurisdiction, (iii) restricted the use of revenues from a special tax to
the purposes or for the service for which the special tax is imposed, (iv)
prohibited the imposition of ad valorem taxes on real property by local
governmental entities except as permitted by Article XIIIA, (v) prohibited the
imposition of transaction taxes and sales taxes on the sale of real property by
local governments, (vi) required that any tax imposed by a local government on
or after August 1, 1985 be ratified by a majority vote of the electorate within
two years of the adoption of the initiative or be terminated by November 15,
1988, (vii) required that, in the event a local government fails to comply with
the provisions of this measure, a reduction in the amount of property tax
revenues allocated to such local government occurs in an amount equal to the
revenues received by such entity attributable to the tax levied in violation of
the initiative, and (viii) permitted those provisions to be amended exclusively
by the voters of the State of California. While several recent decisions of the
California Courts of Appeal have held that all or portions of Proposition 62
are unconstitutional, the California Supreme Court has yet to consider the
matter.
At the November 9, 1988 general election, California voters approved an
initiative known as Proposition 98. This initiative amends Article XIIIB to
require that (i) the California Legislature establish a prudent state reserve
fund in an amount as it shall deem reasonable and necessary and (ii) revenues
in excess of amounts permitted to be spent and which would otherwise be
returned pursuant to Article XIIIB by revision of tax rates or fee schedules be
transferred and allocated (up to a maximum of 40%) to the State School Fund and
be expended solely for purposes of instructional improvement and
accountability. Proposition 98 also amends Article XVI to require that the
State of California provide a minimum level of funding for public schools and
community colleges. Commencing with the 1988-89 fiscal year, money to be
applied by the State for the support of school districts and community college
districts shall not be less than the greater of: (i) the amount which, as a
percentage of the State general fund revenues which may be appropriated
pursuant to Article XIIIB, equals the percentage of such State general fund
revenues appropriated for school districts and community college districts,
respectively, in fiscal year 1986-87 or (ii) the amount required to ensure that
the total allocations to school districts and community college districts from
the State general fund proceeds of taxes appropriated pursuant to Article XIIIB
and allocated local proceeds of taxes shall not be less than the total amount
from these sources in the prior year, adjusted for increases in enrollment and
adjusted for changes in the costs of living pursuant to the provisions of
Article XIIIB. The initiative permits the enactment of legislation, by a two-
thirds vote, to suspend the minimum funding requirement for one year. As a
result of Proposition 98, funds that the State might otherwise make available
to its political subdivisions may be allocated instead to satisfy such minimum
funding level.
On November 3, 1992, voters approved an initiative statute, Proposition 163,
which exempts certain food products, including candy and other snack foods,
from California's sales tax. The sales tax had been
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broadened to include those items as part of the 1991-92 budget legislation. The
State Legislative Analyst estimates a revenue reduction of $300 million per
year ($200 million in 1992-93).
Article XIIIA, Article XIIIB and a number of propositions were adopted
pursuant to California's constitutional initiative process. From time to time,
other initiative measures could be adopted by California voters. The adoption
of any such initiatives may cause California issuers to receive reduced
revenues, or to increase expenditures, or both.
Recent Initiatives. In July 1991, California increased taxes by adding two
new marginal tax rates, at 10% and 11%, effective for tax years 1991 through
1995. After 1995, the maximum personal income tax rate is scheduled to return
to 9.3%, and the alternative minimum tax rate is scheduled to drop from 8.5% to
7%. In addition, legislation in July 1991 raised the sales tax by 1.25%, of
which 0.5% was a permanent addition. This tax increase will be cancelled if a
court rules that such tax increase violates any constitutional requirements.
Although 0.5% of the State tax rate was scheduled to expire on June 30, 1993,
such amount was extended for six months for the benefit of counties and cities.
On November 2, 1993, voters approved extension of this 0.5% levy as a permanent
source of funding for local government.
PROPOSITION 187
On November 8, 1994 the voters approved Proposition 187, an initiative
statute ("Proposition 187"). Proposition 187 specifically prohibits public
funding of social services, health care services and public school education
for the benefit of any person not verified as either a United States citizen or
a person legally admitted to the United States. Among the provisions in
Proposition 187 the measure requires, commencing January 1, 1995, that every
school district in the state verify the legal status of every child enrolling
in the district for the first time. By January 1, 1996, each school district
must also verify the legal status of children already enrolled in the district
and of all parents or guardians of all students. If the district "reasonably
suspects" that a student, parent or guardian is not legally in the United
States, that district must report the student to the United States Immigration
and Naturalization Service and certain other parties. The Legislative Analyst
estimates that verification costs could be in the tens of millions of dollars
on a statewide level (including verification costs incurred by other local
governments) with first-year costs potentially in excess of $100 million.
The reporting requirements may violate the Family Educational Rights and
Privacy Act ("FERPA"), which generally prohibits schools that receive federal
funds from disclosing information in student records without parental consent.
Compliance with FERPA is a condition of receiving federal education funds,
which total $2.3 billion annually to California school districts. The Secretary
of the United States Department of Education has indicated that the reporting
requirement in Proposition 187 could jeopardize the ability of school districts
to receive these funds.
Opponents of Proposition 187 have filed at least eight lawsuits challenging
the constitutionality and validity of the measure. A United States District
Court judge overseeing four of the lawsuits has granted a preliminary
injunction enjoining the implementation of most of the provisions of
Proposition 187, pending a trial on the merits scheduled for Fall, 1995. A
United States Court of Appeals denied the State's request for termination of
the preliminary injunction and immediate enforcement of Proposition 187 on July
14, 1995.
Pending Litigation. The State is a party to numerous legal proceedings, many
of which normally recur in governmental operations. Some of the more
significant lawsuits pending against the State are described herein.
The State is a defendant in 12 lawsuits involving the exclusion of small
business stock gains from preference tax and in some cases, also from taxation.
The lead cases are Mervin Morris v. Franchise Tax Board and James Lennane v.
Franchise Tax Board. The majority of the remaining cases had been deferred
pending the outcome of the Morris and Lennane cases. The Supreme Court has
ruled against the State in Lennane
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but has not yet ruled in Morris. The State could be required to refund an
estimated $250 million and will not be able to collect previous assessments of
$250 million.
The State has lost several tax cases relating to the State's method of
determining the tax on gross health insurance premiums. The loss to the State
could amount to $200 million.
In Parr v. State of California, a complaint was filed in federal court
claiming that payment of wages in registered warrants violated the Fair Labor
Standards Act ("FLSA"). The federal court held that the issuance of registered
warrants does violate the FLSA. The next phase of the trial will focus on the
issue of damages and will attempt to determine whether there was a good faith
belief that the issuance of the registered warrants was not a violation of
FLSA. If the State loses, the maximum amount of damages will be approximately
$375 million.
The State is involved in a lawsuit seeking reimbursement for alleged state-
mandated costs. In Thomas Hayes v. Commission on State Mandates, the State
Director of Finance is appealing a 1984 decision by the State Board of Control.
The Board of Control decided in favor of local school districts' claims for
reimbursement for special education programs for handicapped students; however,
funds have not been appropriated. The amount of potential liability to the
State, if all potentially eligible school districts pursue timely claims, has
been estimated by the Department of Finance at over $1 billion.
In another case, the State is a defendant in Long Beach Unified School
District v. State of California. In this case, the school district seeks
reimbursement for voluntary desegregation costs incurred in the implementation
of California Department of Education guidelines. The years of reimbursement
are from fiscal year 1977-78 and each fiscal year thereafter to the present.
The district prevailed in a superior court, and the case has been decided by a
State appellate court against the State. A petition for review was denied and
the superior court judgment has become final, but the court retains
jurisdiction to oversee payment. The State anticipates that the unfavorable
outcome will affect pending claims by other school districts, and the total
loss could be in excess of $300 million.
A federal Court of Appeals in the case of Deanna Beno, et al. v. Donna
Shalala, et al., reversing a trial court ruling in favor of the State, recently
determined that the Secretary of the United States Department of Health and
Human Services violated the federal Administrative Procedure Act when she
approved California's Assistance Payment Demonstration Project, which, in part,
granted California a waiver from complying with requirements for state
participation in the federal program for medical assistance (Medicaid). The
waiver had allowed California to reduce payments under the Aid to Families with
Dependent Children program (AFDC) below 1988 payment levels without violating
Medicaid requirements relating to maintenance of AFDC payment levels.
California had relied, in part, on the waiver to reduce state AFDC payments in
1992, 1993 and 1994. The Court of Appeals remanded the case to the trial court
with instructions to remand the demonstration project to the Secretary for
additional consideration of objections raised by the plaintiffs. The effect of
the court's decision on California is uncertain at this time.
One of the features of the 1994-95 Budget Act is a 2.3 percent reduction in
AFDC payments. In Walsh v. Anderson, on August 19, 1994, the San Francisco
Superior Court issued a preliminary injunction against the California Director
of Social Services to prevent the 2.3 percent AFDC cuts from becoming effective
September 1, 1994. While September cuts were already in process and could not
be halted, the court ordered the cuts to be restored. The case has been
appealed, and the effect of the court's order cannot be determined until the
appellate process is complete.
The State is involved in two lawsuits related to contamination at the
Stringfellow toxic waste site. In one suit, the State is one of approximately
130 defendants in Penny Newman v. J. B. Stringfellow, et al. in which 3,800
plaintiffs are claiming damages of $850 million arising from contamination at
the Stringfellow toxic waste site. A conservative estimate of the State's
potential liability is $250 million to $550 million. The State is a defendant
because it chose the site and approved the deposit of toxic wastes. A group of
17 of the plaintiffs
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has received a verdict of $159,000 against the State. In a separate lawsuit,
United States, People of the State of California v. J. B. Stringfellow, Jr. et
al., the State is seeking recovery for past costs of cleanup of the site, a
declaration that the defendants are jointly and severally liable for future
costs, and an injunction ordering completion of the cleanup. The State has been
found liable on a counterclaim based on its selection of the site.
The State is a defendant in a coordinated action involving 3,000 plaintiffs
seeking recovery for damages caused by the Yuba River flood of February 1986.
The trial court has found liability in inverse condemnation and awarded damages
of $500,000 to 12 sample plaintiffs. Potential liability to the remaining 300
plaintiffs, from claims filed, ranges from $800 million to $1.5 billion. An
appeal has been filed.
The State is a defendant in California Teachers Association v. Russell S.
Gould, et al., where the petitioners are challenging a recharacterization of
$1.083 billion of appropriations for fiscal year 1991-92 and $190 million in
the 1992-93 fiscal year as emergency loans rather than Proposition 98 funds.
The petitioners are seeking a declaration that all appropriated funds are
Proposition 98 funds and, therefore, must be included in the minimum funding
guarantee for schools. A Sacramento Superior Court ruled that the
appropriations are not Proposition 98 funds and should not be included in the
minimum funding calculation in future years. These funds should be considered
excess appropriations in the respective fiscal year budget and the State cannot
receive credit and offset these excess appropriations against the following
years' guarantee.
The petitioners also challenged the characterization of an additional $973
million in the 1992-93 fiscal year and $787 million in the 1993-94 fiscal year
as "loans" rather than Proposition 98 funds. As loans, these funds would not be
included in the minimum funding guarantee. The court, however, ruled that these
appropriations should be considered Proposition 98 funds and as such must be
included in calculating the minimum funding guarantee in future years. The
State appealed this decision in the Third Appellate District Court.
The State is involved in a case concerning the default by Triad Healthcare on
a $167 million loan guaranteed by the Cal-Mortgage Loan Insurance Division of
the Office of Statewide Health Planning and Development (Cal-Mortgage). Monies
for the loan were raised through the sale of Certificates of Participation and
Cal-Mortgage insured the debt service payments. Since July 1993, Triad has
failed to make its monthly debt service payments; therefore, the reserve
account of the bonds has been used to make the payments. However, these funds
are only expected to last until February 1995. After that time, Cal-Mortgage
anticipates that additional debt service payments will be made from the Health
Facility Construction Loan Insurance Fund as they become due. However, if there
is any shortfall in this fund, the State's General Fund will be used to make up
the difference.
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APPENDIX C
ECONOMIC AND FINANCIAL CONDITIONS IN CONNECTICUT
THE FOLLOWING INFORMATION IS A BRIEF SUMMARY OF FACTORS AFFECTING THE ECONOMY
OF THE STATE AND DOES NOT PURPORT TO BE A COMPLETE DESCRIPTION OF SUCH FACTORS.
OTHER FACTORS WILL AFFECT ISSUERS. THE SUMMARY IS BASED PRIMARILY UPON ONE OR
MORE PUBLICLY AVAILABLE OFFERING STATEMENTS RELATING TO DEBT OFFERINGS OF STATE
ISSUERS, HOWEVER, IT HAS NOT BEEN UPDATED NOR WILL IT BE UPDATED DURING THE
YEAR. THE TRUST HAS NOT INDEPENDENTLY VERIFIED THE INFORMATION.
Manufacturing has historically been of prime economic importance to
Connecticut. The manufacturing industry is diversified, with transportation
equipment (primarily aircraft engines, helicopters and submarines) the dominant
industry, followed by non-electrical machinery, fabricated metal products, and
electrical machinery. From 1970 to 1993, however, there was a rise in
employment in service-related industries. During this period, manufacturing
employment declined 33.5%, while the number of persons employed in other non-
agricultural establishments (including government) increased 63.3%,
particularly in the service, trade and finance categories. In 1993,
manufacturing accounted for only 19.2% of total non-agricultural employment in
Connecticut. Defense-related business represents a relatively high proportion
of the manufacturing sector. On a per capita basis, defense awards to
Connecticut have traditionally been among the highest in the nation, and
reductions in defense spending have had a substantial adverse impact on
Connecticut's economy. Moreover, the State's largest defense contractors have
announced substantial planned labor force reductions scheduled to occur over
the next four years.
The annual average unemployment rate (seasonally adjusted) in Connecticut
decreased from 6.9% in 1982 to a low of 3.0% in 1988 but rose to 6.6% in 1993.
While these rates were lower than those recorded for the U.S. as a whole for
the same periods, as of May 1993, the estimated rate of unemployment in
Connecticut on a seasonably adjusted basis reached 7.4%, compared to 6.0% for
the nation as a whole, and pockets of significant unemployment and poverty
exist in some of Connecticut's cities and towns. Moreover, Connecticut is now
in a recession, the depth and duration of which are uncertain.
The State derives over 70% of its revenues from taxes imposed by the State.
The two major taxes have been the sales and use taxes and the corporation
business tax, each of which is sensitive to changes in the level of economic
activity in the State, but the Connecticut income tax on individuals, trusts,
and estates enacted in 1991 has superseded each of them in importance.
The State's General Fund budget for the 1986-87 fiscal year anticipated
appropriations and revenues of approximately $4,300,000,000. The General Fund
ended the 1986-87 fiscal year with an operating surplus of $365,200,000. The
General Fund budget for the 1987-88 fiscal year anticipated appropriations and
revenues of approximately $4,915,800,000. However, the General Fund ended the
1987-88 fiscal year with an operating deficit of $115,600,000. The General Fund
budget for the 1988-89 fiscal year anticipated that General Fund expenditures
of $5,551,000,000 and certain educational expenses of $206,700,000 not
previously paid through the General Fund would be financed in part from
surpluses of prior years and in part from higher tax revenues projected to
result from tax laws in effect for the 1987-88 fiscal year and stricter
enforcement thereof; a substantial deficit was projected during the third
quarter of the 1988-89 fiscal year, but, largely because of tax law changes
that took effect before the end of the fiscal year, the operating deficit was
kept to $28,000,000. The General Fund budget for the 1989-90 fiscal year
anticipated appropriations of approximately $6,224,500,000 and, by virtue of
tax increases enacted to take effect generally at the beginning of the fiscal
year, revenues slightly exceeding such amount. However, largely because of tax
revenue shortfalls, the General Fund ended the 1989-90 fiscal year with an
operating deficit for the year of $259,000,000, wiping out reserves for such
events built up in prior years. The General Fund budget for the 1990-91 fiscal
year anticipated expenditures of $6,433,000,000, but no significant new or
increased taxes were enacted. Primarily because of significant declines in tax
revenues and unanticipated expenditures reflective of economic adversity, the
General Fund ended the 1990-91 fiscal year alone with a further deficit of
$809,000,000. A General Fund budget was not enacted for the 1991-92 fiscal year
until August 22, 1991. This budget anticipated General
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Fund expenditures of $7,007,861,328 and revenues of $7,426,390,000. Anticipated
decreases in revenues resulting from a 25% reduction in the sales tax rate
effective October 1, 1991, the repeal of the taxes on the capital gains and
interest and dividend income of resident individuals for years starting after
1991, and the phase-out of the corporation business tax surcharge over two
years commencing with years starting after 1991 were expected to be more than
offset by a new general personal income tax imposed at effective rates not to
exceed 4.5% on the Connecticut taxable income of resident and non-resident
individuals, trusts, and estates. The General Fund ended the 1991-92 fiscal
year with an operating surplus of $110,000,000. The General Fund budget for the
1992-93 fiscal year anticipated General Fund expenditures of $7,372,062,859 and
revenues of $7,372,210,000, and the General Fund ended the 1992-93 fiscal year
with an operating surplus of $113,500,000. Balanced General Fund budgets for
the biennium ending June 30, 1995, were adopted in 1993 appropriating
expenditures of $7,829,000,000 for the 1993-94 fiscal year and $8,266,000,000
for the 1994-95 fiscal year. The General Fund ended the 1993-94 fiscal year
with an operating surplus of $19,700,000. In 1994 the budgeted General Fund
appropriations for the 1994-95 fiscal year were increased to $8,567,200,000.
General Fund budgets for the biennium ending June 30, 1997, were adopted in
1995 anticipating expenditures of $8,987,907,123 and revenues of $8,988,180,000
for the 1995-96 fiscal year and anticipating expenditures of $9,311,125,170 and
revenues of $9,311,700,000 for the 1996-97 fiscal year.
The primary method for financing capital projects by the State is through the
sale of the general obligation bonds of the State. These bonds are backed by
the full faith and credit of the State. As of March 1, 1995, there was a total
legislatively authorized bond indebtedness of $10,194,811,925, of which
$8,673,257,677 had been approved for issuance by the State Bond Commission and
$7,334,468,663 had been issued.
To fund operating cash requirements, prior to the 1991-92 fiscal year the
State borrowed up to $750,000,000 pursuant to authorization to issue commercial
paper and on July 29, 1991, it issued $200,000,000 General Obligation Temporary
Notes, none of which temporary borrowings were outstanding as of December 1,
1994. To fund the cumulative General Fund deficit for the 1989-90 and 1990-91
fiscal years, the legislation enacted on August 22, 1991 authorized the State
Treasurer to issue Economic Recovery Notes up to the aggregate amount of such
deficit, which must be payable no later than June 30, 1996; at least
$50,000,000 of such Notes, but not more than a cap amount, is to be retired
each fiscal year commencing with the 1991-92 fiscal year, and any
unappropriated surplus up to $205,000,000 in the General Fund at the end of
each of the three fiscal years commencing with the 1991-92 fiscal year must be
applied to retire such Notes as may remain outstanding at those times. On
September 25, 1991 and October 24, 1991, the State issued $640,710,000 and
$325,000,000, respectively, of such Economic Recovery Notes, of which
$455,610,000 were outstanding as of March 1, 1995.
To meet the need for reconstructing, repairing, rehabilitating and improving
the State transportation system (except Bradley International Airport), the
State adopted legislation which provides for, among other things, the issuance
of special tax obligation ("STO") bonds the proceeds of which will be used to
pay for improvements to the State's transportation system. The STO bonds are
special tax obligations of the State payable solely from specified motor fuel
taxes, motor vehicle receipts, and license, permit and fee revenues pledged
therefor and deposited in the special transportation fund. The cost of the
infrastructure program for the twelve years beginning in 1984, to be met from
federal, state, and local funds, was recently estimated at $9.4 billion. To
finance a portion of the State's $4.1 billion share of such cost, the State
expects to issue $3.7 billion of STO bonds over the twelve-year period.
As of March 1, 1995, the General Assembly has authorized STO bonds for the
program in the aggregate amount of $3,794,938,104, of which $3,144,650,752 had
been issued. It is anticipated that additional STO bonds will be authorized by
the General Assembly annually in an amount necessary to finance and to complete
the infrastructure program. Such additional bonds may have equal rank with the
outstanding bonds provided certain pledged revenue coverage requirements of the
STO indenture controlling the issuance of such bonds are met. The State expects
to continue to offer bonds for this program.
The State's budget problems led to the ratings of its general obligation
bonds being reduced by Standard and Poor's ("Standard & Poor's") from AA+ to AA
on March 29, 1990, and by Moody's Investors Service,
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Inc. from Aa1 to Aa on April 9, 1990. Because of concerns over Connecticut's
lack of a plan to deal during the current fiscal year with the accumulated
projected deficits in its General Fund, on September 13, 1991, Standard &
Poor's further reduced its ratings of the State's general obligation bonds and
certain other obligations that depend in part on the creditworthiness of the
State to AA-. On March 17, 1995, Fitch Investors Service, Inc. reduced its
ratings of the State's general obligation bonds from AA+ to AA.
The State, its officers and employees are defendants in numerous lawsuits.
According to the Attorney General's Office, an adverse decision in any of the
cases which are summarized herein could materially affect the State's financial
position: (i) an action by inmates of the Department of Correction seeking
damages and injunctive relief with respect to alleged violations of statutory
and constitutional rights as a result of the monitoring and recording of their
telephone calls from the State's correctional institutions; (ii) litigation on
behalf of black and Hispanic school children in the City of Hartford seeking
"integrated education" within the greater Hartford metropolitan area; (iii)
litigation involving claims by Indian tribes to less than 1/10 of 1% of the
State's land area; (iv) litigation challenging the State's method of financing
elementary and secondary public schools on the ground that it denies equal
access to education; (v) an action in which two retarded persons seek placement
outside a State hospital, new programs and damages on behalf of themselves and
all mentally retarded patients at the hospital; (vi) litigation involving
claims for refunds of taxes by several cable television companies; (vii) an
action on behalf of all persons with retardation or traumatic brain injury,
claiming that their constitutional rights are violated by placement in State
hospitals alleged not to provide adequate treatment and training, and seeking
placement in community residential settings with appropriate support services;
(viii) an action by the Connecticut Hospital Association and 33 hospitals
seeking to require the State to reimburse hospitals for in-patient medical
services on a basis more favorable to them; (ix) a class action by the
Connecticut Criminal Defense Lawyers Association claiming a campaign of illegal
surveillance activity and seeking damages and injunctive relief; (x) two
actions for monetary damages brought by a former patient at a State mental
hospital stemming from an attempted suicide that left her brain-damaged; (xi)
an action challenging the validity of the State's imposition of surcharges on
hospital charges to finance certain uncompensated care costs incurred by
hospitals; (xii) an action to enforce the spending cap provision of the State's
constitution by seeking to require that the General Assembly define certain
terms used therein and to enjoin certain increases in "general budget
expenditures" until this is done; (xiii) an action challenging the validity of
the State's imposition of gross earnings taxes on hospital revenues to finance
certain uncompensated care costs; and (xiv) negligence actions brought by two
former students of a State school who were severely burned in a fire there. In
addition, a number of corporate taxpayers have filed requests for refunds of
corporation business tax, asserting that interest on federal obligations may
not be included in the measure of that tax, on the grounds that to do so
allegedly violates federal law because interest on certain obligations of the
State is not included in the measure of the tax.
General obligation bonds issued by municipalities are usually payable from ad
valorem taxes on property subject to taxation by the municipality. Certain
Connecticut municipalities have experienced severe fiscal difficulties and have
reported operating and accumulated deficits in recent years. The most notable
of these is the City of Bridgeport, which filed a bankruptcy petition on June
7, 1991. The State opposed the petition. The United States Bankruptcy Court for
the District of Connecticut has held that Bridgeport has authority to file such
a petition but that its petition should be dismissed on the grounds that
Bridgeport was not insolvent when the petition was filed.
In addition to general obligation bonds backed by the full faith and credit
of the municipality, certain municipal authorities may issue bonds that are not
considered to be debts of the municipality. Such bonds may only be repaid from
the revenues of projects financed by the municipal authority, which revenues
may be insufficient to service the authority's debt obligations.
Regional economic difficulties, reductions in revenues, and increased
expenses could lead to further fiscal problems for the State and its political
subdivisions, authorities, and agencies. This could result in declines in the
value of their outstanding obligations, increases in their future borrowing
costs, and impairment of their ability to pay debt service on their
obligations.
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APPENDIX D
ECONOMIC AND FINANCIAL CONDITIONS IN MASSACHUSETTS
THE FOLLOWING INFORMATION IS A BRIEF SUMMARY OF FACTORS AFFECTING THE ECONOMY
OF THE STATE AND DOES NOT PURPORT TO BE A COMPLETE DESCRIPTION OF SUCH FACTORS.
OTHER FACTORS WILL AFFECT ISSUERS. THE SUMMARY IS BASED PRIMARILY UPON ONE OR
MORE PUBLICLY AVAILABLE OFFERING STATEMENTS RELATING TO DEBT OFFERINGS OF STATE
ISSUERS, HOWEVER, IT HAS NOT BEEN UPDATED NOR WILL IT BE UPDATED DURING THE
YEAR. THE TRUST HAS NOT INDEPENDENTLY VERIFIED THE INFORMATION.
Economic growth in the Commonwealth has slowed since 1988, particularly in
the construction, real estate, financial and manufacturing sectors, including
certain high technology areas. Economic conditions have improved somewhat,
since 1993. The unemployment rate in Massachusetts averaged 6.9% during 1993,
after rising steadily during the previous three years, from 3.4% at the
beginning of 1989. As of June, 1995, however, the Commonwealth's unemployment
rate was 5.6% as compared to a national average of 5.6%. Per capita personal
income in the Commonwealth is currently higher than the national average, but
is, however, growing at a rate lower than the national average.
Commonwealth spending exceeded revenues in each of the five fiscal years
commencing fiscal 1987 and the Commonwealth's tax revenues during this period
repeatedly failed to meet official forecasts. During the period, fund balances
in the budgeted operating funds declined from an opening balance of $1.072
billion in fiscal 1987 to an ending balance of negative $1.104 billion for
fiscal 1990. For fiscal 1991, these funds attained positive ending balances of
$237.1 million. Fiscal 1992 ended with positive fund balances of $549.4
million, after carrying forward the fund balances from fiscal 1991. Fiscal 1993
ended with positive fund balances of $562.5 million.
In fiscal 1994, which ended June 30, 1994, the total revenues of the budgeted
operating funds of the Commonwealth during such fiscal year increased by
approximately 5.7% over the prior fiscal year, to $15.550 billion. Expenditures
increased by 5.6% over the prior year, to $15.523 billion. As a result, the
Commonwealth ended fiscal 1994 with a positive closing fund balance of $589.3
million.
Standard & Poor's and Moody's have upgraded their ratings of the
Commonwealth's general obligation bonds from A and Baa, respectively, to A+ and
A1, respectively. Fitch has recently upgraded its rating of the Commonwealth's
bonds from A to A+. From time to time, the rating agencies may further change
their ratings.
Budgeted revenues and other sources in fiscal 1995, which ended June 30,
1995, are currently estimated by the Executive Office for Administration and
Finance to be approximately $16.311 billion, including estimated tax revenues
of $11.151 billion. It is estimated that fiscal 1995 budgeted expenditures will
be $16.399 billion.
Growth of tax revenues in the Commonwealth is limited by law. Tax revenues in
fiscal years 1988 through 1994 were lower than the limits set by law, and the
Executive Office for Administration and Finance estimates that state tax
revenues in fiscal 1995 and 1996 will not reach the limits imposed by law. In
addition, effective July 1, 1990, limitations were placed on the amount of
direct bonds the Commonwealth may have outstanding in a fiscal year, and the
amount of the total appropriation in any fiscal year that may be expended for
repayment of principal of and payment of interest on general obligation debt of
the Commonwealth was limited to 10 percent of such appropriation. Bonds in the
aggregate principal amount of $1.399 billion issued in October and December
1990, under Chapter 151 of the Acts of 1990 to meet the fiscal 1990 deficit are
excluded from the computation of these limitations, and principal of and
interest on such bonds are to be paid from up to 15% of the Commonwealth's
income tax receipts in each year that such principal or interest is payable.
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Furthermore, certain of the Commonwealth's cities and towns have at times
experienced serious financial difficulties which have adversely affected their
credit standing. The recurrence of such financial difficulties, or financial
difficulties of the Commonwealth, could adversely affect the market values and
marketability of outstanding obligations issued by the Commonwealth or its
public authorities or municipalities. In addition, the Massachusetts statutes
which limit the taxing authority of the Commonwealth or certain Massachusetts
governmental entities may impair the ability of issuers of some Massachusetts
obligations to pay debt service on their obligations.
In Massachusetts, the tax on personal property and real estate is virtually
the only source of tax revenues available to cities and towns to meet local
costs. "Proposition 2 1/2," an initiative petition adopted by the voters of the
Commonwealth of Massachusetts on November 4, 1980, limits the power of
Massachusetts cities and towns and certain tax-supported districts and public
agencies to raise revenue from property taxes to support their operations,
including the payment of certain debt service. Proposition 2 1/2 required many
cities and towns to reduce their property tax levels to a stated percentage of
the full and fair cash value of their taxable real estate and personal property
and limited the amount by which the total property taxes assessed by a city or
town might increase from year to year. Although the limitations of Proposition
2 1/2 on tax increases may be overridden and amounts for debt service and
capital expenditures excluded from such limitation by the voters of the
relevant municipality, Proposition 2 1/2 will continue to restrain
significantly the ability of cities and towns to pay for local services,
especially in light of cost increases due to an inflation rate generally
exceeding 2.5%.
To offset shortfalls experienced by local governments as a result of the
implementation of Proposition 2 1/2, the government of the Commonwealth
increased direct local aid from the 1981 level of $1.632 billion to the fiscal
1989 level of $2.961 billion. Direct local aid decreased from fiscal 1989 to
$2.328 billion in fiscal 1992, increased to $2.547 billion in fiscal 1993 and
increased to $2.727 billion in fiscal 1994. It is estimated that fiscal 1995
expenditures for direct local aid will be $2.982 billion.
The aggregate unfunded actuarial liabilities of the pension systems of the
Commonwealth and the unfunded liability of the Commonwealth related to local
retirement systems are significant--estimated to be approximately $9.651
billion as of January 1, 1993 (the last date that such liability was
calculated) on the basis of certain actuarial assumptions regarding, among
other things, future investment earnings, annual inflation rates, wage
increases and cost of living increases. No assurance can be given that these
assumptions will be realized. The legislature adopted a comprehensive pension
bill addressing the issue in January 1988, which requires the Commonwealth,
beginning in fiscal year 1989, to fund future pension liabilities currently and
amortize the Commonwealth's unfunded liabilities over 40 years in accordance
with funding schedules prepared by the Secretary for Administration and Finance
and approved by the legislature. The amounts required for funding of current
pension liabilities in fiscal years 1995, 1996, 1997 and 1998 are estimated to
be $959.9 million, $1.007 billion, $1.061 billion and $1.128 billion,
respectively.
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APPENDIX E
ECONOMIC AND FINANCIAL CONDITIONS IN MICHIGAN
THE FOLLOWING INFORMATION IS A BRIEF SUMMARY OF FACTORS AFFECTING THE ECONOMY
OF THE STATE AND DOES NOT PURPORT TO BE A COMPLETE DESCRIPTION OF SUCH FACTORS.
OTHER FACTORS WILL AFFECT ISSUERS. THE SUMMARY IS BASED PRIMARILY UPON ONE OR
MORE PUBLICLY AVAILABLE OFFERING STATEMENTS RELATING TO DEBT OFFERINGS OF STATE
ISSUERS, HOWEVER, IT HAS NOT BEEN UPDATED NOR WILL IT BE UPDATED DURING THE
YEAR. THE TRUST HAS NOT INDEPENDENTLY VERIFIED THE INFORMATION.
The State's Constitution limits the amount of total State revenues raised
from taxes and other sources. State revenues (excluding federal aid and
revenues for payment of principal and interest on general obligation bonds) in
any fiscal year are limited to a specified percentage of State personal income
in the prior calendar year or average of the prior three calendar years,
whichever is greater. The percentage is based upon the ratio of the 1978-79
fiscal year revenues to total 1977 State personal income. If any fiscal year
revenues exceed the revenue limitation by one percent, the entire amount
exceeding the limitation must be rebated in the following fiscal year's
personal income tax or single business tax. Annual excesses of less than one
percent may be transferred into the State's Budget Stabilization Fund. The
State may raise taxes in excess of the limit in emergency situations.
The State Constitution limits the purposes for which State general obligation
debt may be issued. Such debt is limited to short-term debt for State operating
purposes, short- and long-term debt for the purpose of making loans to school
districts and long-term debt for voter-approved purposes. The State's
Constitution also directs or restricts the use of certain revenues.
The State finances its operations through the State's General Fund and
special revenue funds. The General Fund receives revenues of the State that are
not specifically required to be included in the special revenue funds. General
Fund revenues are obtained approximately 59 percent from the payment of State
taxes and 41 percent from Federal and non-tax revenue sources. The majority of
the revenues from State taxes are from the State's personal income tax, single
business tax, use tax, sales tax and various other taxes. Approximately 60
percent of total General Fund expenditures are for State support of public
education and for social services programs. The Department of Education
provides general supervision over all public education in the State, including
general, audit and special education. The Department of Social Services
administers economic, social and medical programs in the State, including
Medicare, Medicaid and Aid to Families with Dependent Children. Other
significant expenditures from the General Fund provide funds for law
enforcement, general State government, debt service and capital outlays. The
State Constitution requires that any prior year's surplus or deficit in any
Fund must be included in the succeeding year's budget for that Fund.
In recent years, the State of Michigan has reported its financial results in
accordance with generally accepted accounting principles. For the fiscal years
ended September 30, 1990 and 1991, the State reported negative year-end General
Fund balances of $310.3 million and $169.4 million, respectively, but ended the
1992, 1993 and 1994 fiscal years with its General Fund in balance after
transfers in 1993 and 1994 from the General Fund to the Budget Stabilization
Fund of $283 million and $464 million, respectively. Those transfers raised the
balance in the Budget Stabilization Fund to $779 million as of September 30,
1994. A positive cash balance in the combined General Fund/School Aid Fund was
recorded at September 30, 1990. In each of the three prior fiscal years the
State had undertaken mid-year actions to address projected year-end budget
deficits, including expenditure cuts and deferrals and one-time expenditures or
revenue recognition adjustments. From 1991 through 1993 the State experienced
deteriorating cash balances which necessitated short-term borrowings and the
deferral of certain scheduled cash payments to local units of government. The
State borrowed between $500 million and $900 million for cash flow purposes in
the 1992 to 1993 fiscal years and $500 million in the 1995 fiscal year. The
State did not have to borrow for any short-term cash flow purposes for the
1993-94 fiscal year due to improved cash balances.
State law provides for distributions of certain State collected taxes or
portions thereof to local units having a certain level of population as
determined by census figures and authorizes levy of certain local taxes by
local units having a certain level of population. Reductions in population in
local units resulting from
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periodic census could result in a reduction in the amount of State collected
taxes returned to those local units and in reductions in levels of local tax
collections for such local units unless the impact of the census is changed by
State law. No assurance can be given that any such State law will be enacted.
In the 1991 fiscal year, the State deferred certain scheduled payments to
municipalities, school districts, universities and community colleges. While
such deferrals were made up at later dates, similar future deferrals could have
an adverse impact on the cash position of some local units. Additionally, the
State reduced revenue sharing payments to municipalities below that level
provided under formulas by $10.9 million in the 1991 fiscal year, $34.4 million
in the 1992 fiscal year, $45.5 million in the 1993 fiscal year, $54.5 million
in the 1994 fiscal year and $67.0 million (budgeted) in the 1995 fiscal year.
On March 15, 1994, the electors of the State voted to amend the State's
Constitution to increase the State sales tax rate from 4% to 6% and to place an
annual cap on property assessment increases for all property taxes. Companion
legislation also cut the State's income tax rate from 4.6% to 4.4%, reduced
some property taxes for school operating purposes and shifted the balance of
school funding sources among property taxes and state revenues, some of which
are being provided from new or increased State taxes. The legislation also
contains other provisions that may reduce or alter the revenues of local units
of government and tax increment bonds could be particularly affected. While the
ultimate impact of the constitutional amendment and related legislation cannot
yet be accurately predicted, investors should be alert to the potential effect
of such measures upon the operations and revenues of Michigan local units of
government, particularly school districts.
The State is a party to various legal proceedings seeking damages or
injunctive or other relief. In addition to routine litigation, certain of these
proceedings could, if unfavorably resolved from the point of view of the State,
substantially affect State or local programs or finances. These lawsuits
involve programs generally in the areas of corrections, highway maintenance,
social services, tax collection, commerce and budgetary reductions to school
districts and governmental units and court funding.
The health of the State's economy, and in particular its durable goods
manufacturing industry, is susceptible to a long-term increase in the cost of
energy and energy related products. As reflected in historical employment
figures, the State's economy has lessened its dependence upon durable goods
manufacturing. In 1960 employment in such industry accounted for 33% of the
State's workforce. This figure fell to 15.1% in 1993. However, manufacturing
(including auto-related manufacturing) continues to be an important part of the
State's economy. The State's economy could be affected by changes in the auto
industry, notably consolidation and plant closings resulting from competitive
pressures and overcapacity. The financial impact on the local units of
government in the areas in which plants are or have been closed could be more
severe than on the State as a whole. State appropriations and State economic
conditions in varying degrees affect the cash flow and budgets of local units
and agencies of the State, including school districts and municipalities and
the State itself.
Historically, the average monthly unemployment rate in the State has been
higher than the average figures for the United States. More recently, the
State's unemployment rate has remained near the national average. During 1994,
the average monthly unemployment rate in the State was 5.9% as compared to a
national average of 6.1% in the United States.
Currently, the State's general obligation bonds are rated A1 by Moody's, AA
by Standard & Poor's and AA by Fitch.
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APPENDIX F
ECONOMIC AND FINANCIAL CONDITIONS IN NEW JERSEY
THE FOLLOWING INFORMATION IS A BRIEF SUMMARY OF FACTORS AFFECTING THE ECONOMY
OF THE STATE AND DOES NOT PURPORT TO BE A COMPLETE DESCRIPTION OF SUCH FACTORS.
OTHER FACTORS WILL AFFECT ISSUERS. THE SUMMARY IS BASED PRIMARILY UPON ONE OR
MORE PUBLICLY AVAILABLE OFFERING STATEMENTS RELATING TO DEBT OFFERINGS OF STATE
ISSUERS, HOWEVER, IT HAS NOT BEEN UPDATED NOR WILL IT BE UPDATED DURING THE
YEAR. THE TRUST HAS NOT INDEPENDENTLY VERIFIED THE INFORMATION.
Effective January 1, 1994, personal income tax rates in the State of New
Jersey (the "State") were cut by 5% for all taxpayers. Effective January 1,
1995, the personal income tax rates were cut by an additional 10% for most
taxpayers. By a bill signed into law on July 4, 1995, New Jersey personal
income tax rates have been further reduced so that coupled with the prior rate
reductions, beginning with tax year 1996, personal income tax rates will be,
depending on a taxpayer's level of income and filing status, 30%, 15% or 9%
lower than 1993 rates. At this time the effect of the tax reduction cannot be
evaluated.
The State operates on a fiscal year beginning July 1 and ending June 30. For
example, "fiscal year 1995" refers to the State's fiscal year beginning July 1,
1994 and ending June 30, 1995.
The General Fund is the fund into which all State revenues not otherwise
restricted by statute are deposited and from which appropriations are made. The
largest part of the total financial operations of the State is accounted for in
the General Fund. Revenues received from taxes and unrestricted by statute,
most federal revenue and certain miscellaneous revenue items are recorded in
the General Fund.
The State's undesignated General Fund balance was $1.4 million for the fiscal
year 1991, $760.8 million for the fiscal year 1992, $937 million for the fiscal
year 1993, and $926 million (estimated), for the fiscal year 1994. For the
fiscal year 1995, the balance in the undesignated General Fund is estimated to
be $563 million.
The State finances capital projects primarily through the sale of general
obligation bonds of the State. These bonds are backed by the full faith and
credit of the State. State tax revenues and certain other fees are pledged to
meet the principal repayments and interest payments required to pay the debt
fully. No general obligation debt can be issued by the State without prior
voter approval, except that no voter approval is required for any law
authorizing the creation of a debt for the purpose of refinancing all or a
portion of outstanding debt of the State, so long as such law requires that the
refinancing provide a debt service savings. All appropriations for capital
projects and all proposals for State bond authorizations are subject to the
review and recommendation of the New Jersey Commission on Capital Budgeting and
Planning.
The State has extensive control over school districts, cities, counties and
local financing authorities. State laws impose specific limitations on local
appropriations, with exemptions subject to state approval. The State shares the
proceeds of a number of taxes, with funds going primarily for local education
programs, homestead rebates, medicaid and welfare programs. Certain bonds are
issued by localities, but supported by direct State payments. In addition, the
State participates in local wastewater treatment programs.
The State's economic base is diversified, consisting of a variety of
manufacturing, construction and service industries, supplemented by rural areas
with selective commercial agriculture. After enjoying an extraordinary boom
during the mid-1980s, New Jersey, as well as the rest of the Northeast, slipped
into a slowdown well before the onset of the national recession which
officially began in July 1990 (according to the National Bureau of Economic
Research). By the beginning of the national recession, construction activity
had already been declining in New Jersey for nearly two years. As the rapid
acceleration of real estate prices forced many would-be homeowners out of the
market and high non-residential vacancy rates reduced new commitments for
offices and commercial facilities, construction employment began to decline.
Also, growth had tapered off markedly in the service sectors and the long-term
downward trend of factory employment had accelerated, partly because of a
leveling off of industrial demand nationally. The onset of recession caused an
acceleration of New Jersey's job losses in construction and manufacturing, as
well as an employment
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downturn in such previously growing sectors as wholesale trade, retail trade,
finance, utilities and trucking and warehousing. The net effect was a decline
in the State's total non-farm wage and salary employment from a peak of
3,689,800 in March 1989 to a low of 3,445,000 in March 1992. This loss has been
followed by an employment gain of 118,700 from March 1992 to September 1994.
Reflecting the downturn, the rate of unemployment in the State rose from a
low of 3.6% during the first quarter of 1989 to a recessionary peak of 8.4%
during 1992 (according to the U.S. Bureau of Labor Statistics and the New
Jersey Department of Labor, Division of Labor Market and Demographic Research).
Since then, the unemployment rate fell to 6.9% during the first quarter of
1995.
Evidence of the State's improving economy can be found in increased
homebuilding, and other areas of construction activity, rising consumer
spending for new cars and light trucks and the decline in the unemployment
rate. One of the major reasons for cautious optimism is found in the
construction industry. Total construction contracts awarded in New Jersey have
turned around, rising by 11.8% in the first two months of 1995 compared with
1994. By far, the largest boost came from residential construction awards which
increased by 32.8% in 1995 compared with 1994. In addition, nonresidential
building construction awards have turned around, posting a 2.3% gain from 1994.
Nonbuilding construction awards increased approximately 12% in the first two
months of 1995 compared with the same period in 1994. In addition to increases
in construction contract awards, another reason for cautious optimism is rising
new light truck registrations. New passenger car registrations issued during
1994 were up 12% in New Jersey from a year earlier. However, registrations of
new light trucks and vans (up to 10,000 lbs.) advanced strongly in 1994,
increasing 19%. Retail sales for 1994 were up 7.5% compared to 1993. Prospects
for New Jersey are favorable, although a return to the pace of the 1980s is
highly unlikely. Although growth is likely to be slower than in the nation, the
locational advantages that have served New Jersey well for many years will
still be there. Structural changes that have been going on for years can be
expected to continue, with job creation concentrated most heavily in the
service sectors.
New Jersey Education Association et. al v. State of New Jersey et. al.
represents a challenge to amendments to the pension laws enacted on June 30,
1994 (P.L. 1994, Chapter 62), which concerned the funding of the Teachers
Pension and Annuity Fund (TPAF), the Public Employee's Retirement System
(PERS), the Police and Fireman's Retirement System (PFRS), the State Police
Retirement System (SPRS) and the Judicial Retirement System (JRS). The
complaint was filed in the United States District Court of New Jersey on
October 17, 1994. The statute, as enacted, made several changes affecting these
retirement systems including changing the actuarial funding method to projected
unit credit; continuing the prefunding of post-retirement medical benefits but
at a reduced level for TPAF and PERS; revising the employee member contribution
rate to a flat 5% for TPAF and PERS; extending the phase in period for the
revised TPAF actuarial assumptions; changing the phase-in period for funding of
cost-of-living adjustments and reducing the inflation assumption for the Cost
of Living Adjustment for all retirement systems; and decreasing the average
salary increase assumption for all retirement systems. Plaintiffs allege that
the changes resulted in lower employer contributions in order to reduce a
general budget deficit. The complaint further alleges that certain provisions
of Chapter 62 violate the contract, due process, and taking clauses of the
United States and New Jersey Constitutions, and further constitute a breach of
the State's fiduciary duty to participants in TPAF and PERS. Plaintiffs seek to
permanently enjoin the State from administering, enforcing or otherwise
implementing Chapter 62. An adverse determination against the State would have
a significant impact upon the fiscal year 1996 budget. The State has filed a
motion to dismiss and a motion for summary judgment. The State intends to
vigorously defend this action.
Currently, the State's general obligation bonds are rated AA+ by Standard &
Poor's, Aa1 by Moody's, and AA+ by Fitch.
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APPENDIX G
ECONOMIC AND FINANCIAL CONDITIONS IN NEW YORK
THE FOLLOWING INFORMATION IS A BRIEF SUMMARY OF FACTORS AFFECTING THE ECONOMY
OF THE STATE AND DOES NOT PURPORT TO BE A COMPLETE DESCRIPTION OF SUCH FACTORS.
OTHER FACTORS WILL AFFECT SPECIFIC ISSUERS. THE SUMMARY IS BASED PRIMARILY UPON
ONE OR MORE PUBLICLY AVAILABLE OFFERING STATEMENTS RELATING TO DEBT OFFERINGS
OF STATE ISSUERS; HOWEVER, IT HAS NOT BEEN UPDATED NOR WILL IT BE UPDATED
DURING THE YEAR. THE TRUST HAS NOT INDEPENDENTLY VERIFIED THE INFORMATION.
In recent years, New York State (the "State"), some of its agencies,
instrumentalities, and public authorities and certain of its municipalities
have faced serious financial difficulties that could have an adverse effect on
the sources of payment for or the market value of New York State Municipal
Securities in which the New York Fund invests.
NEW YORK CITY (THE "CITY")
General. More than any other municipality, the fiscal health of the City has
a significant effect on the fiscal health of the State. The national economic
downturn which began in July 1990 adversely affected the local economy, which
had been declining since late 1989. As a result, the City experienced job
losses in 1990 and 1991 and real Gross City Product ("GCP") fell in those two
years. Beginning in calendar year 1992, the improvement in the national economy
helped stabilize conditions in the City. Employment losses moderated toward
year-end and real GCP increased, boosted by strong wage gains. In 1993 and
1994, the City experienced job gains of 2,000 and 21,000, respectively. The
City now projects, and its current four-year financial plan assumes, that
economic growth will slow in calendar years 1995 and 1996 with local employment
increasing modestly.
For each of the 1981 through 1994 fiscal years, the City achieved balanced
operating results as reported in accordance with generally accepted accounting
principles ("GAAP"). The City was required to close substantial budget gaps in
recent fiscal years in order to maintain balanced operating results. For the
City's 1995 fiscal year, the City adopted a budget which halted the trend in
recent years of substantial increases in City spending from one year to the
next and the City budget for fiscal year 1996 reduces City-funded spending for
the second consecutive year. There can be no assurance that the City will
continue to maintain a balanced budget as required by State law without
additional reductions in City services or entitlement programs or tax or other
revenue increases which could adversely affect the City's economic base.
The Mayor is responsible for preparing the City's four-year financial plan,
including the City's current financial plan for the 1996 through 1999 fiscal
years (the "1996-1999 Financial Plan" or "City Financial Plan"). The City's
projections set forth in the City Financial Plan are based on various
assumptions and contingencies which are uncertain and which may not
materialize. Changes in major assumptions could significantly affect the City's
ability to balance its budget as required by State law and to meet its annual
cash flow and financing requirements. Such assumptions and contingencies
include, among others, the condition of the regional and local economies, the
impact on real estate tax revenues of the real estate market, wage increases
for City employees consistent with those assumed in the City Financial Plan,
employment growth, the ability to implement proposed reductions in City
personnel and other cost reduction initiatives, provision of State and federal
aid and mandate relief and the impact of proposed federal and State welfare
reforms on City revenues.
Implementation of the City Financial Plan is also dependent upon the City's
ability to market its securities successfully in the public credit markets. The
City's financing program for fiscal years 1996 through 1999 contemplates the
issuance of $9.3 billion of general obligation bonds primarily to reconstruct
and rehabilitate the City's infrastructure and physical assets and to make
capital investments. In addition, the City issues revenue notes and tax
anticipation notes to finance its seasonal working capital requirements. The
success of projected public sales of City bonds and notes will be subject to
prevailing market conditions. If the City were unable to sell its general
obligation bonds and notes, it would be prevented from meeting its planned
operating and capital expenditures.
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1996-1999 Financial Plan. In July 1995, the City published the City Financial
Plan for the 1996-1999 fiscal years. The 1996-1999 Financial Plan projects
revenues and expenditures for the 1996 fiscal year (July 1, 1995-June 30, 1996)
balanced in accordance with GAAP. The City Financial Plan sets forth proposed
actions to close a previously projected budget gap of approximately $3.1
billion for the 1996 fiscal year. Such gap-closing actions for the 1996 fiscal
year include, among others, substantial reductions in entitlement programs,
City service and personnel reductions, saving initiatives related to labor and
pension costs, increases in federal and State aid, the sale of certain City
assets and increases in certain lease and fee payments due the City.
The City Financial Plan also sets forth projections for the 1997 through 1999
fiscal years and outlines a proposed gap-closing program to close projected
budget gaps of $888 million, $1.46 billion and $1.44 billion for the 1997
through 1999 fiscal years, respectively, after the successful implementation of
the $3.1 billion gap-closing program for the 1996 fiscal year. Proposed gap-
closing actions for the 1997 through 1999 fiscal years include additional
service and expenditure reductions, labor productivity gains and fee
initiatives.
The City Financial Plan is subject to the ability of the City to implement
the proposed reductions in City services and personnel and entitlement
expenditures which are difficult to implement. The City Financial Plan also
assumes the successful renegotiation of certain lease payments due the City.
Certain initiatives included in the City Financial Plan are subject to
negotiation with the City's municipal labor unions and various actions are
subject to approval by the State and federal governments.
The City depends on the State for State aid both to enable the City to
balance its budget and to meet its cash requirements. If the State experiences
revenue shortfalls or spending increases beyond its projections during its
1995-1996 fiscal year or subsequent fiscal years, such developments could
result in reductions in anticipated State aid to the City. In addition, State
budgets in future fiscal years may continue to be delayed beyond the April 1
statutory deadline and there may be adverse effects on the City's cash flow and
additional City expenditures as a result of such reductions or delays.
From time to time, various State and City entities issue reports regarding
the City Financial Plan and the City's financial condition. In July of 1995,
the City Comptroller, the New York State Financial Control Board and the Office
of the State Deputy Comptroller of New York each issued reports on the City
Financial Plan. The report issued by the City Comptroller concluded that budget
risks of up to $1 billion, $2.5 billion, $3.3 billion and $3.4 billion exist
for the City's 1996 through 1999 fiscal years, respectively. The Financial
Control Board identified budget risks of $873 million, $2.1 billion, $2.8
billion and $2.8 billion for the 1996 through 1999 fiscal years, respectively.
The State Deputy Comptroller's report stated that the City faces potential
budget shortfalls of $800 million, $1.5 billion, $2 billion and $1.8 billion
for the 1996 through 1999 fiscal years, respectively. In May 1995, the New York
City Comptroller issued two reports that noted the City's economy has weakened
during the previous six months and that, with no immediate prospect of a
recovery in the City's economy, and with retrenchment in Medicaid and public
assistance programs, the City's economic and budget problems will continue for
the next several fiscal years. It was also noted that the City's current fiscal
problems are as serious as those which the City faced in the mid-1970's, and
may be more difficult to solve, since the City's economy remains weak and the
State and federal governments are reducing support for the City. In May 1995,
the New York State Comptroller issued a report concluding that the City economy
has slowed significantly since 1994 and that proposed reductions in Medicaid
spending at the state and local levels could cause significant job displacement
in the City's health sector, and additional downsizing by utilities, banks and
other companies could further constrain job prospects. It is reasonable to
expect that such reports will continue to be issued and to engender public
comment.
Ratings. As of March 22, 1995, Moody's Investors Service, Inc. ("Moody's")
rated the City's general obligation bonds Baa1 and Fitch Investors Service,
Inc. ("Fitch") rated such bonds A-. On July 10, 1995, Standard & Poor's revised
downward its rating on City general obligation bonds from A- to BBB+. Standard
& Poor's stated that the downgrade was a reflection of the City's inability to
eliminate a structural budget imbalance due to persistent softness in the
City's economy, weak job growth, a trend of using nonrecurring
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budget devices, optimistic projections of State and federal aid and high levels
of debt service. Such ratings reflect only the view of Moody's, Standard &
Poor's and Fitch, from which an explanation of the significance of such ratings
may be obtained. There is no assurance that such ratings will continue for any
given period of time or that they will not be revised downward or withdrawn
entirely. Any such downward revision or withdrawal could have an adverse effect
on the market prices of City bonds.
Outstanding Indebtedness. As of March 31, 1995, the City had approximately
$24.5 billion of long-term debt and as of June 30, 1994, the New York City
Municipal Water Finance Authority (the "Water Authority") had approximately
$5.6 billion of long-term debt.
Debt service on Water Authority obligations is secured by fees and charges
collected from the users of the City's water and sewer system. State and
federal regulations require the City's water supply to meet certain standards
to avoid filtration. The City's water supply now meets all technical standards
and the City's current efforts are directed toward protection of the watershed
area. The City has taken the position that increased regulatory, enforcement
and other efforts to protect its water supply, relating to such matters as land
use and sewage treatment, will preserve the high quality of water in the
upstate water supply system and prevent the need for filtration. The U.S.
Environmental Protection Agency has granted the City a waiver of filtration
regulations through 1996. If filtration of the City's water supply is
ultimately required, the capital expenditure required could be between $4
billion and $5 billion. Such an expenditure could cause significant increases
in City water and sewer charges.
Litigation. The City is a defendant in a significant number of lawsuits.
While the outcome and fiscal impact, if any, of the proceedings and claims are
not currently predictable, adverse determinations might have a material adverse
effect upon the City's ability to carry out the City Financial Plan. As of June
30, 1994, the City estimated its potential future liability on account of all
outstanding claims to be approximately $2.6 billion.
NEW YORK STATE
Current Economic Outlook. The national economy began the current expansion in
1991 and has added over 7 million jobs since early 1992. Although the State has
added approximately 185,000 jobs since November 1992, employment growth in the
State has been hindered during recent years by significant cutbacks in the
computer and instrument manufacturing, utility, defense and banking industries.
The State expects New York's economy to continue to expand modestly during
1995, but there is expected to be a pronounced slow-down during the course of
the year. On an average annual basis, employment growth is expected to be about
the same as 1994. Both personal income and wages are expected to record
moderate gains in 1995.
State Financial Plan for the 1995-1996 Fiscal Year. The State's budget for
its 1995-1996 fiscal year (April 1, 1995-March 31, 1996) was enacted by the
State Legislature on June 7, 1995, more than two months after the start of the
fiscal year. Prior to adoption of the budget, the State Legislature enacted
appropriations for disbursements considered to be necessary for State
operations and other purposes, including all necessary appropriations for debt
service. The 1995-1996 fiscal year budget includes a planned three-year 20%
reduction in the State's personal income tax and is the first budget in over 50
years which projects a decline in General Fund disbursements and spending on
State operations. On June 20, 1995, the State published the State Financial
Plan for the 1995-1996 fiscal year (the "State Financial Plan") based on the
enacted 1995-1996 budget.
The State Financial Plan projects a General Fund balanced on a cash basis
with total projected receipts of $33.110 billion and total projected
disbursements of $33.055 billion. The State Financial Plan includes gap-closing
actions to offset a previously projected budget gap of $5 billion, the largest
in the State's history. Such gap-closing actions include, among others,
substantial reductions in social and medical entitlement
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programs, reductions in State services and capital programs and increased
lottery revenues. There can be no assurance that additional gap-closing
measures will not be required and there is no assurance that any such measures
will enable the State to achieve a balanced budget for its 1995-1996 fiscal
year.
The State Financial Plan and the 1995-1996 fiscal year budget are based upon
forecasts of national and State economic activity. Economic forecasts have
frequently failed to predict accurately the timing and magnitude of changes in
the national and State economies. Many uncertainties exist in forecasts of both
the national and State economies, including consumer attitudes toward spending,
federal financial and monetary policies, the availability of credit and the
condition of the world economy, which could have an adverse effect on the
State. There can be no assurance that the State economy will not experience
worse-than-predicted results in the 1995-1996 fiscal year with corresponding
material and adverse effects on the State's projections of receipts and
disbursements.
Owing to these and other factors, the State may face substantial potential
budget gaps in future years resulting from a significant disparity between tax
revenues projected from a lower recurring receipts base and the spending
required to maintain State programs at required levels. Any such recurring
imbalance would be exacerbated by the use by the State of nonrecurring
resources to achieve budgetary balance in a particular fiscal year. To correct
any recurring budgetary imbalance, the State would need to take significant
actions to align recurring receipts and disbursements in future fiscal years.
There can be no assurance, however, that the State's action will be sufficient
to preserve budget balances in the then current or future fiscal years.
The State Financial Plan contains actions that provide nonrecurring resources
or savings as well as actions that impose baseline losses of receipts. The
Division of the Budget estimates the net amount of nonrecurring resources used
in the State Financial Plan to be at least $600 million. In addition to these
nonrecurring actions, the adoption of the three-year 20% reduction in the
State's personal income tax in combination with business tax reductions enacted
in 1994 will reduce State tax receipts by $5.5 billion by the 1997-1998 fiscal
year.
The State anticipates that its capital programs will be financed, in part, by
State and public authorities borrowings in the 1995-1996 fiscal year. The State
expects to issue $248 million in general obligations bonds (including $70
million for purposes of redeeming outstanding Bond Anticipation Notes
("BANs")), $186 million in general obligation commercial paper and up to $47
million in certificates of participation during the State's fiscal year for
equipment purchases and capital purposes. Borrowings by public authorities
pursuant to lease-purchase and contractual-obligation financings for capital
programs of the State are projected to total $2.7 billion. Additionally, the
Local Government Assistance Corporation ("LGAC") issued net proceeds of $529
million during the 1995-1996 fiscal year.
Local Government Assistance Corporation. In 1990, as part of a state fiscal
reform program, legislation was enacted creating LGAC, a public benefit
corporation empowered to issue long-term obligations to fund certain payments
to local governments traditionally funded through the State's annual seasonal
borrowing. As of June 1995, LGAC has issued bonds to provide net proceeds of
$4.7 billion completing the program. The impact of LGAC's borrowing is that the
State is able to meet its cash flow needs without relying on short-term
seasonal borrowing.
Financing Activities. State financing activities include general obligation
debt of the State and State-guaranteed debt, to which the full faith and credit
of the State has been pledged, as well as lease-purchase and contractual-
obligation financings, moral obligation financings and other financings through
public authorities and municipalities, where the State's obligation to make
payments for debt service is generally subject to annual appropriation by the
State Legislature.
As of March 31, 1995, the total amount of outstanding general obligation debt
was approximately $5.181 billion, including $149 million in BANs, the total
amount of moral obligation debt was approximately $7.010 billion and $17.98
billion of bonds issued primarily in connection with lease-purchase and
contractual-obligation financing of State capital programs were outstanding.
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In 1994 and 1995, the State legislature passed a proposed constitutional
amendment on debt reform. The proposed amendment would permit the State to
issue non-voter approved revenue bonds secured by a pledge or certain tax
receipts, up to a cap equal to 5% of State personal income. If approved by the
voters in November 1995, such amendment would become effective January 1, 1996.
Public Authorities. The fiscal stability of the State is related, in part, to
the fiscal stability of its public authorities. Public authorities are not
subject to the constitutional restrictions on the incurrence of debt which
apply to the State itself, and may issue bonds and notes within the amounts of,
and as otherwise restricted by, their legislative authorization. As of
September 30, 1994, the latest data available, there were 18 public authorities
that had outstanding debt of $100 million or more and the aggregate outstanding
debt, including refunding bonds, of these 18 public authorities was $70.3
billion. The State's access to the public credit markets could be impaired and
the market price of its outstanding debt may be adversely affected, if any of
its public authorities were to default on their respective obligations.
Ratings. Currently, Moody's, Standard & Poor's and Fitch rate New York
State's outstanding general obligation bonds A, A- and A+, respectively.
Ratings reflect only the respective views of such organizations, and
explanation of the significance of such ratings must be obtained from the
rating agency furnishing the same. There is no assurance that a particular
rating will continue for any given period of time or that any such rating will
not be revised downward or withdrawn entirely if, in the judgment of the agency
originally establishing the rating, circumstances so warrant. A downward
revision or withdrawal of such ratings, or either of them, may have an effect
on the market price of the State Municipal Securities in which the New York
Fund invests.
Litigation. The State is a defendant in numerous legal proceedings including,
but not limited to, claims asserted against the State arising from alleged
torts, alleged breaches of contracts, condemnation proceedings and other
alleged violations of State and federal laws.
Under settlements of inter-state escheat disputes, New York has recently
agreed to make aggregate payments totalling $351.4 million. Annual payments
from the State to the various parties began in the State's 1994-1995 fiscal
year and will continue through the 2002-2003 fiscal year and will not exceed
$48.4 million for any fiscal year.
Several cases challenge the rationality and the retroactive application of
State regulations recalibrating nursing home Medicaid rates. In 1994, the New
York Court of Appeals held invalid the State Department of Health's retroactive
application to rate years 1989 through 1991 of the nursing home Medicaid
reimbursements rate recalibration adjustment. A case challenging the new
recalibration regulations for rate years commencing 1992 is pending.
Adverse developments in existing legal proceedings or the initiation of new
proceedings could affect the ability of the State to maintain a balanced State
Financial Plan. The State believes that the State Financial Plan includes
sufficient reserves for the payment of judgments that may be required during
the 1995-1996 fiscal year. There can be no assurance, however, that an adverse
decision in any of these proceedings would not exceed the amount of the State
Financial Plan reserves for the payment of judgments and, therefore, could
affect the ability of the State to maintain a balanced State Financial Plan.
Other Localities. Certain localities in addition to the City could have
financial problems leading to requests for additional State assistance during
the State's 1995-1996 fiscal year and thereafter. The potential impact on the
State of such actions by localities is not included in the projections of the
State receipts and disbursements in the State's 1995-1996 fiscal year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers") resulted
in the creation of the Financial Control Board for Yonkers (the "Yonkers
Board") by the State in 1984. The Yonkers Board is charged with oversight of
the fiscal affairs of Yonkers. Future actions taken by the Governor or the
State Legislature to assist Yonkers could result in allocation of State
resources in amounts that cannot yet be determined.
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APPENDIX H
ECONOMIC AND FINANCIAL CONDITIONS IN NORTH CAROLINA
THE FOLLOWING INFORMATION IS A BRIEF SUMMARY OF FACTORS AFFECTING THE ECONOMY
OF THE STATE AND DOES NOT PURPORT TO BE A COMPLETE DESCRIPTION OF SUCH FACTORS.
OTHER FACTORS WILL AFFECT ISSUERS. THE SUMMARY IS BASED PRIMARILY UPON ONE OR
MORE PUBLICLY AVAILABLE OFFERING STATEMENTS RELATING TO DEBT OFFERINGS OF STATE
ISSUERS, HOWEVER, IT HAS NOT BEEN UPDATED NOR WILL IT BE UPDATED DURING THE
YEAR. THE TRUST HAS NOT INDEPENDENTLY VERIFIED THE INFORMATION.
The State of North Carolina (the "State") has two major operating funds: the
General Fund and the Highway Fund. In addition, the 1989 General Assembly
created the Highway Trust Fund to provide funding for a major highway
construction program. The State derives most of its revenue from taxes,
including individual income tax, corporation income tax, sales and use taxes,
corporation franchise tax, alcoholic beverage tax, insurance tax, inheritance
tax, tobacco products tax and soft drink tax. The State receives other non-tax
revenues which are also deposited in the General Fund. The most important are
Federal funds collected by State agencies, university fees and tuitions,
interest earned by the State Treasurer on investments of General Fund moneys
and revenues from the judicial branch. The proceeds from the motor fuel tax,
highway use tax and motor vehicle license tax are deposited in the Highway Fund
and the Highway Trust Fund.
During the 1989-92 budget years, growth of North Carolina tax revenues slowed
considerably, requiring tax increases and budget adjustments, including hiring
freezes and restrictions, spending constraints, changes in timing of certain
collections and payments, and other short-term budget adjustments necessary to
comply with the State's constitutional mandate for a balanced budget. Many
areas of State government were affected. Reductions in capital spending, local
government aid, and the use of the budget stabilization reserve, combined with
other budget adjustments, brought the budget into balance. Tax increases in the
fiscal 1992 budget included a $.01 increase in the State sales tax and
increases in the personal and corporate income tax rates, as well as increases
in the tax on cigarettes and alcohol, among other items.
Fiscal year 1992 ended with a positive fund balance of approximately $164.8
million. By law, $41.2 million of such positive fund balance was required to be
reserved in the General Fund of North Carolina as part of a "Savings Reserve,"
leaving an unrestricted General Fund balance at June 30, 1992 of $123.6
million. Fiscal year 1993 ended with a positive General Fund balance of
approximately $537.3 million. Of this amount, $134.3 million was reserved in
the Savings Reserve and $57 million was reserved in a Reserve for Repair and
Renovation of State Facilities, leaving an unrestricted General Fund balance at
June 30, 1993 of $346 million. Fiscal year 1994 ended with a positive General
Fund balance of approximately $444.7 million. An additional $178 million was
available from a reserved fund balance. Of this aggregate amount, $155.7
million was reserved in the Savings Reserve (bringing the total reserve to
$210.6 million after prior withdrawals) and $60 million was reserved in a
Reserve for Repair and Renovation of State Facilities (bringing the total
reserve to $60 million after prior withdrawals), leaving an unrestricted
General Fund balance at June 30, 1994 of $407 million.
The foregoing results are presented on a budgetary basis. Accounting
principles applied to develop data on a budgetary basis differ significantly
from those principles used to present financial statements in conformity with
generally accepted accounting principles "GAAP". Based on a modified accrual
basis, the General Fund balance at June 30, 1993 and 1994 was $681.5 million
and $1,240.9 million, respectively.
In July 1994, the General Assembly reviewed and adjusted the 1994-95 budget
to add a $1.2 billion supplement, which included, among other appropriations,
pay raises for teachers and other State employees, increased funding for
education and human services, capital expenditures for the University of North
Carolina System, and the transfer of an additional $214 million to various
savings reserves.
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For the fiscal 1995 budget, the General Assembly reduced departmental
operating requirements by $357.6 million and authorized continuation funding of
$8,489.3 million. The savings reductions were based on recommendations from the
Governor, a Governmental Performance Audit Committee, and selective savings
identified by the General Assembly. After review of the continuation budget,
the General Assembly authorized funding for planned expansion to existing
programs and funded new initiatives for children, economic development,
education, human services, and environmental programs. Expansion funds of
$1,650.4 million for fiscal 1995 were approved. In addition to the transfers to
the Savings Reserve from the fiscal year-end credit balance, the General
Assembly in 1993 appropriated $66.7 million for the Savings Reserve. The
General Assembly authorized $189.4 million for capital improvements spending
and $60 million for the Reserve for Repair and Renovation of State Facilities
for fiscal 1995.
Under the State's constitutional and statutory scheme, the Governor is
required to prepare and propose a biennial budget to the General Assembly. The
General Assembly is responsible for considering the budget proposed by the
Governor and enacting the final budget. In enacting the final budget, the
General Assembly may modify the budget proposed by the Governor as it deems
necessary. The Governor is responsible for administering the budget enacted by
the General Assembly. The Governor has proposed a 1995-97 biennium budget,
which is currently under consideration by the General Assembly. The final
budget is expected to be enacted by the General Assembly during July 1995. The
General Assembly is also considering various other bills that, if enacted,
could have an impact on the State.
The State budget is based upon a number of existing and assumed State and
non-State factors, including State and national economic conditions,
international activity, Federal government policies and legislation and the
activities of the State's General Assembly. Such factors are subject to change
which may be material and affect the budget. The Congress of the United States
is considering a number of matters affecting the Federal government's
relationship with state governments that, if enacted into law, could affect
fiscal and economic policies of the states, including the State.
During recent years, the State has moved from an agricultural to a service
and goods-producing economy. According to the North Carolina Employment
Security Commission (the "Commission"), in November 1994, the State ranked
ninth among the states in non-agricultural employment and eighth in
manufacturing employment. The Commission estimated the State's seasonally
adjusted unemployment rate in March 1995 to be 3.9% of the labor force, as
compared with an unemployment rate of 5.5% nationwide. As part of its 1993-95
budget, the General Assembly provided major funding for economic initiatives in
an effort to create additional jobs.
The following are certain cases pending in which the State faces the risk of
either a loss of revenue or an unanticipated expenditure which, in the opinion
of the Department of State Treasurer, would not materially adversely affect the
State's ability to meet its financial obligations:
1. Swanson v. State of North Carolina--State Tax Refunds--Federal
Retirees. In Davis v. Michigan (1989), the United States Supreme Court ruled
that a Michigan income tax statute which taxed Federal retirement benefits
while exempting those paid by state and local governments violated the
constitutional doctrine of intergovernmental tax immunity. At the time of the
Davis decision, North Carolina law contained similar exemptions in favor or
state and local retirees. Those exemptions were repealed prospectively,
beginning with the 1989 tax year. All public pension and retirement benefits
are now entitled to a $4,000 annual exclusion.
Following Davis, Federal retirees filed a class action suit in Federal court
in 1989 seeking damages equal to the North Carolina income tax paid on Federal
retirement income by the class members. A companion suit was filed in state
court in 1990. The complaints alleged that the amount in controversy exceeded
$140 million. The North Carolina Department of Revenue estimate of refunds and
interest liability is $280.89 million as of June 30, 1994. In 1991, the North
Carolina Supreme Court ruled in favor of the State in the state court action,
concluding that Davis could only be applied prospectively and that the taxes
collected from
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the Federal retirees were thus not improperly collected. In 1993, the United
States Supreme Court vacated that decision and remanded the case back to the
North Carolina Supreme Court. The North Carolina Supreme Court then ruled in
favor of the State on the grounds that the Federal retirees had failed to
comply with state procedures for challenging unconstitutional taxes. Plaintiffs
petitioned the United States Supreme Court for review of that decision, and the
Supreme Court denied that petition. The United States District Court has ruled
in favor of the defendants in the companion Federal case, and a petition for
reconsideration was denied. Plaintiffs have appealed to the United States Court
of Appeals. Oral arguments were heard in the Court of Appeals in February 1995,
and its decision concurs with the lower court's ruling.
An additional lawsuit was recently filed in State Court by Federal pensioners
to recover State income taxes paid on Federal retirement benefits. This case
grew out of a claim by Federal pensioners in the original Federal court case in
Swanson. In the new lawsuit, the plaintiffs allege that when the State granted
an increase in retirement benefits to State retirees in the same legislation
that equalized tax treatment between state and Federal retirees, the increased
benefits to State retirees constituted an indirect violation of Davis. The
lawsuit seeks a refund of taxes paid by Federal retirees on Federal retirement
benefits received in the years 1989 through 1993 and refunds or monetary relief
sufficient to equalize the alleged on-going discriminatory treatment for those
years. An extension of time to answer the complaint has been filed by the North
Carolina Attorney General, who believes that sound legal authority and
arguments support the denial of this claim.
2. Bailey v. State of North Carolina--State Tax Refunds--State
Retirees. State and local governmental retirees filed a class action suit in
1990 as a result of the repeal of the income tax exemptions for state and local
government retirement benefits. The original suit was dismissed after the North
Carolina Supreme Court ruled in 1991 that the plaintiffs had failed to comply
with state law requirements for challenging unconstitutional taxes and the
United States Supreme Court denied review. In 1992, many of the same plaintiffs
filed a new lawsuit alleging essentially the same claims, including breach of
contract, unconstitutional impairment of contract rights by the State in taxing
benefits that were allegedly promised to be tax-exempt, and violation of
several state constitutional provisions.
On May 31, 1995 the Superior Court issue an order ruling in favor of the
plaintiffs. Under the terms of the order, the Superior Court found that the act
of the General Assembly that repealed the tax exemption on State and local
government retirement benefits is null, void, and unenforceable and that
retirement benefits which were vested before August 1989 are exempt from
taxation. The North Carolina Attorney General intends to pursue an appeal from
this order.
The North Carolina Attorney General's Office estimates that the amount in
controversy is approximately $40-$45 million annually for the tax years 1989
through 1991. In addition, it is anticipated that the decision reached in this
case will govern the resolution of tax refund claims made by retired state and
local government employees for taxes paid on retirement benefit income for tax
years after 1991. Furthermore, if the order of the Superior Court is upheld,
its provisions would apply prospectively to prevent future taxation of State
and local government retirement benefits that were vested before August 1989.
3. Fulton Corp. v. Justus. The State's intangible personal property tax
levied on certain shares of stock has been challenged by the plaintiff on
grounds that it violates the United States Constitution Commerce Clause by
discriminating against stock issued by corporations that do all or part of
their business outside of the State. The plaintiff in the action is a North
Carolina corporation that does all or part of its business outside of the
State. The plaintiff seeks to invalidate the tax in its entirety and to recover
tax paid on the value of its shares in other corporations. The North Carolina
Court of Appeals invalidated the taxable percentage deduction and excised it
from the statute beginning with the 1994 tax year. The effect of this ruling
was to increase collections by rendering all stock taxable on 100% of its
value. The North Carolina Supreme Court reversed the Court of Appeals and held
that the tax is valid and constitutional. The plaintiff's petition for review
by the United States Supreme Court was granted. Oral argument is expected in
Fall 1995 and a decision expected by mid-1996. Net collections from the tax for
the fiscal year ended June 30, 1993 amounted to $120.6 million. The North
Carolina Attorney General's Office believes that sound legal arguments support
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the State's position. In April 1995, the North Carolina General Assembly
repealed, effective for taxable years beginning on or after January 1, 1995,
the State's intangible personal property tax.
In October 1993, the State issued a total of $194.7 million in general
obligation bonds (consisting of $87.5 million in Prison and Youth Services
Facilities Bonds, $61 million in Public Improvement Refunding Bonds, $30.2
million in Highway Refunding Bonds, and $16 million in Clean Water Refunding
Bonds). An additional $67.5 million in general obligation bonds (Prison and
Youth Services Facilities Bonds) were issued in November 1993. On November 2,
1993, a total of $740 million in general obligation bonds (consisting of $310
million in University Improvement Bonds, $250 million in Community College
Bonds, $145 million in Clean Water Bonds, and $35 million in State Parks Bonds)
were approved by the voters of the State. Pursuant to this authorization, the
State issued $400 million in general obligation bonds (Capital Improvement
Bonds) in January 1994. The proceeds of these Capital Improvement Bonds may be
used for any purpose for which the proceeds of the University Improvement
Bonds, Community College Bonds, and State Parks Bonds may be used (none of such
proceeds may be used for Clean Water purposes). An additional $60 million in
general obligation bonds (Clean Water Bonds) were issued in September and
October 1994. The remaining $85 million in general obligation bonds (Clean
Water Bonds) were issued in June and July 1995. The offering of the remaining
$195 million of these authorized bonds is anticipated to occur over the next
two years.
Currently, Moody's, Standard & Poor's and Fitch rate North Carolina general
obligation bonds Aaa, AAA, and AAA, respectively.
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APPENDIX I
ECONOMIC AND FINANCIAL CONDITIONS IN OHIO
THE FOLLOWING INFORMATION IS A BRIEF SUMMARY OF FACTORS AFFECTING THE ECONOMY
OF THE STATE AND DOES NOT PURPORT TO BE A COMPLETE DESCRIPTION OF SUCH FACTORS.
OTHER FACTORS WILL AFFECT ISSUERS. THE SUMMARY IS BASED PRIMARILY UPON ONE OR
MORE PUBLICLY AVAILABLE OFFERING STATEMENTS RELATING TO DEBT OFFERINGS OF STATE
ISSUERS, HOWEVER, IT HAS NOT BEEN UPDATED NOR WILL IT BE UPDATED DURING THE
YEAR. THE TRUST HAS NOT INDEPENDENTLY VERIFIED THE INFORMATION.
The State of Ohio (the "State") operates on a fiscal biennium for its
appropriations and expenditures. The State finances the majority of its
operations through the State's General Revenue Fund (the "GRF"). The GRF is
funded mainly by the State's personal income tax, sales and use tax, various
other taxes and grants from the Federal government. The State is precluded by
law from ending a fiscal year or a biennium in a deficit position. In 1981 the
State created the Budget Stabilization Fund ("BSF") for purposes of cash
management.
The GRF ending fund and cash balances for the State's 1984-85 through 1994-95
bienniums were as follows:
<TABLE>
<CAPTION>
ENDING FUND ENDING CASH
BEGINNING ENDING BALANCE BALANCE
BIENNIUM JULY 1 JUNE 30 (IN THOUSANDS) (IN THOUSANDS)
-------- --------- ------- -------------- --------------
<S> <C> <C> <C> <C>
1984-85................... 1983 1985 $297,600 $849,900
1986-87................... 1985 1987 226,300 632,700
1988-89................... 1987 1989 475,100 784,268
1990-91................... 1989 1991 135,365 326,576
1992-93................... 1991 1993 111,013 393,634
1994-95................... 1993 1995 928,000 1,312,200
</TABLE>
Based on year-to-date financial results and a then current economic forecast
for the State, both in light of the continuing uncertain nationwide economic
situation, the State's Office of the Budget and Management ("OBM") projected a
Fiscal Year 1992 imbalance in GRF resources and expenditures which was
subsequently timely addressed. As an initial action, the Governor of the State
ordered most State agencies to reduce GRF appropriations spending in the final
six months of Fiscal Year 1992 by a total of approximately $184,000,000. (Debt
service and lease rental obligations were not affected by the order.) Then,
with General Assembly authorization, in June 1992 the entire $100,400,000 BSF
balance and additional amounts from certain other funds were transferred to the
GRF. Other administration revenue and spending actions resolved the remaining
GRF imbalance for Fiscal Year 1992.
As a first step toward addressing a projected Fiscal Year 1993 GRF shortfall,
then estimated by OBM at approximately $520,000,000, the Governor ordered,
effective July 1, 1992, selected reductions in Fiscal Year 1993 GRF
appropriations spending totaling $300,000,000. Those selected GRF reductions
included appropriations for higher education but expressly excluded
appropriations for debt service (including lease rental appropriations) and for
primary and secondary education. Subsequent executive and legislative actions--
including tax revisions that produced an additional $194,500,000 and additional
appropriations spending reductions totalling approximately $50,000,000--
provided for positive biennium-ending GRF balances and a better basis for
appropriations for the next biennium.
The GRF budget for the 1994-95 biennium provided for total GRF expenditures
of approximately $30.7 billion, with Fiscal Year 1994 expenditures 9.2% higher
than in Fiscal Year 1993, and Fiscal Year 1995 expenditures 6.6% higher than in
Fiscal Year 1994.
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As noted above, the GRF ended the 1994-95 biennium with a fund balance of
$928 million and cash balance of $1,312.2 million. As steps toward BSF
replenishment, OBM deposited $21 million in the BSF (being the amount of the
GRF ending balance as of June 30, 1993 in excess of $90 million), and
transferred another $260.3 million to the BSF at the end of Fiscal Year 1994
and $535.2 million in July 1995, for a July 1995 balance in the BSF of $828.3
million.
The General Appropriations Act for the 1996-97 biennium provides for total
GRF biennial expenditures of approximately $33.5 billion, an increase over
those for the 1994-95 fiscal biennium. Authorized expenditures in Fiscal Year
1996 are higher than in Fiscal Year 1995 and for Fiscal Year 1997 are higher
than in Fiscal Year 1996.
Necessary GRF debt service appropriations for the entire biennium were
requested in the budget document and incorporated in the related appropriations
bill as introduced and in the versions as passed by the House and the Senate
and in the act as passed and signed.
Because the schedule of GRF cash receipts and disbursements do not precisely
coincide, temporary GRF cash flow deficiencies may occur in some months of a
Fiscal Year. Statutory provisions provide for effective management of these
temporary GRF cash deficiencies by permitting the adjustment of payment
schedules and the use of a "Total Operating Fund" ("TOF"). The State has not
and does not do external revenue anticipation borrowing.
The TOF includes the total consolidated cash balances, revenues,
disbursements and transfers of the GRF and several other specified funds
(including the BSF). The TOF cash balance at June 30, 1994 was $3.1099 billion.
Those cash balances are consolidated only for the purpose of meeting cash flow
requirements, and, except for the GRF, a positive cash balance must be
maintained for each discrete fund included in the TOF. The GRF is permitted to
incur a temporary cash deficiency by drawing upon the available consolidated
cash balance in the TOF. The amount of that permitted GRF cash deficiency at
any time is limited to 10% of GRF revenues for the then preceding Fiscal Year
(raised from 7% by December 1992 legislation in order to better avoid the need
for even short delays in payments).
Cash flow deficiencies occurred in ten months of Fiscal Year 1992, with the
highest month requiring a drawdown of $743.14 million from the TOF, in ten
months of Fiscal Year 1993, with the highest month requiring a drawdown of
$768.64 million from the TOF, in six months of Fiscal Year 1994, with the
highest month requiring a drawdown of $500.64 million from the TOF, and in four
months of Fiscal Year 1995, with the highest month requiring a drawdown of
$337.96 million from the TOF.
All cash flow deficiencies have been within the TOF limitations discussed
above. Often, the GRF balancing steps described above ameliorated deficiencies
in later months of a Fiscal Year, significantly assisting in producing the
projected positive year-end GRF balances.
The State's Constitution directs or restricts the use of certain revenues.
Highway fees and excise taxes, including gasoline taxes, are limited in use to
highway-related purposes including the payment of interest on certain
securities issued for purposes related to the State's highways. Not less than
50% of the receipts from State income and estate and inheritance taxes must be
returned to the political subdivisions and school districts where such receipts
originated. Since 1987 all net State lottery profits are allocated to
elementary, secondary, vocational and special education program purposes.
Litigation contesting the State's system of school funding has been filed in
two county common pleas courts (with efforts being made to move one to federal
court). One case, brought by the Board of Education of the Cleveland City
School District is stated to be in the nature of a class action on behalf of
all similarly situated State school districts. Named as defendants in both
cases are the State and several State agencies and officials.
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Among other relief sought, the complaints essentially request a declaratory
judgment that the State's statutory system of funding public elementary and
secondary education violates various provisions of the Ohio Constitution; one
case also raises federal constitutional issues. As a remedy, the complaints
request decrees as may be required to compel the State and the General Assembly
to devise and enact a constitutionally acceptable system of school funding.
On July 1, 1994, the trial court in one of the cases ruled in favor of the
plaintiffs and ordered the State to revise its method of school funding; the
Governor has indicated that the State will appeal the trial court's decision.
Since one of these cases has not been tried, and since in any case the judgment
of the trial court is subject to appeal, it is not possible at this time to
state whether the suit will be successful or should plaintiffs prevail, the
effect on the State's present school funding system, including the amount of
and criteria for State basic aid allocations to school districts.
In prior litigation, the Ohio Supreme Court in 1979 upheld what was
essentially the then existing school funding system against similar claims that
the school funding system violated provisions of the Ohio Constitution. It
cannot be predicted if this prior decision will be determinative of any or all
of the issues raised in this new litigation.
Federal courts have ruled that the State shared joint liability with the
local school districts for segregation in public schools in Cincinnati,
Cleveland, Columbus, Dayton and Lorain. Subsequent trial court orders directed
that remedial costs be shared equally by the State and the respective local
districts. For that purpose $75,752,659 was expended in the 1992-93 biennium
and $119,382,294 was appropriated for the 1994-95 biennium.
The State's Constitution expressly provides that the State General Assembly
has no power to pass laws impairing the obligations of contracts.
At the present time, the State does not levy any ad valorem taxes on real or
tangible personal property. Local taxing districts and political subdivisions
currently levy such taxes. The State's Constitution limits the amount of the
aggregate levy of ad valorem property taxes, without a vote of the electors or
municipal charter provision, to 1% of true value in money. Statutes also limit
the amount of the aggregate levy, without a vote or charter provision.
Economic activity in the State, as in many other industrially developed
states, tends to be more cyclical than in some other states and in the nation
as a whole. Although manufacturing (including auto-related manufacturing)
remains an important part of the State's economy, the greatest growth in Ohio
employment in recent years, consistent with national trends, has been in the
nonmanufacturing area. Ohio ranked third in the nation in 1990 gross state
product derived from manufacturing. That income was 27.5% of total Ohio gross
state product, compared to 17.1% of that total being from "services". In
addition, agriculture and "agribusiness" continue as important elements of the
Ohio economy. Ohio continues as a major "headquarters" state. Of the top 500
corporations (based on 1994 sales) as reported in 1995 by Fortune magazine, 48
had headquarters in Ohio, placing Ohio fifth as a "headquarters" state for
corporations. Payroll employment in Ohio, in the diversifying employment base,
showed a steady upward trend until 1979, then decreased until 1982. It reached
an all-time high in the summer of 1993 after a slight decrease early in 1992
and then decreased slightly, but is now at a new high. Growth in recent years
has been concentrated among nonmanufacturing industries, with manufacturing
employment tapering off since its 1969 peak. Nonmanufacturing industries now
employ approximately 78.6% of all payroll workers (non-agricultural) in Ohio.
Historically, the average monthly unemployment rate in Ohio has been higher
than the average figures for the United States, although for 1994 the average
monthly unemployment rate in Ohio was 5.5% as compared to a national average of
6.1% in the United States.
Ohio's 1990 decennial census population of over 10,840,000 indicated a 0.5%
population growth since 1980 and Ohio as ranking seventh among the states in
population. In 1980 it ranked sixth. The State's 1993 population was estimated
at 11,091,000.
Currently, the State's general obligation bonds are rated Aa, AA and AA by
Moody's, Standard & Poor's and Fitch, respectively.
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APPENDIX J
ECONOMIC AND FINANCIAL CONDITIONS IN PENNSYLVANIA
THE FOLLOWING INFORMATION IS A BRIEF SUMMARY OF FACTORS AFFECTING THE ECONOMY
OF THE STATE AND DOES NOT PURPORT TO BE A COMPLETE DESCRIPTION OF SUCH FACTORS.
OTHER FACTORS WILL AFFECT ISSUERS. THE SUMMARY IS BASED PRIMARILY UPON ONE OR
MORE PUBLICLY AVAILABLE OFFERING STATEMENTS RELATING TO DEBT OFFERINGS OF STATE
ISSUERS, HOWEVER, IT HAS NOT BEEN UPDATED NOR WILL IT BE UPDATED DURING THE
YEAR. THE TRUST HAS NOT INDEPENDENTLY VERIFIED THE INFORMATION.
Many factors affect the financial condition of the Commonwealth of
Pennsylvania (the "Commonwealth") and its political subdivisions, such as
social, environmental and economic conditions, many of which are not within the
control of such entities. Pennsylvania and certain of its counties, cities and
school districts and public bodies have from time to time in the past
encountered financial difficulties which have adversely affected their
respective credit standings. Such difficulties could affect outstanding
obligations of such entities, including obligations held by the Fund. For
example, the financial condition of the City of Philadelphia had impaired its
ability to borrow and resulted in its obligations generally being downgraded by
the major rating services (Moody's, Standard & Poor's and Fitch) in some cases
below investment grade.
The General Fund, the Commonwealth's largest fund, receives all tax revenues,
non-tax revenues and Federal grants and entitlements that are not specified by
law to be deposited elsewhere. The majority of the Commonwealth's operating and
administrative expenses are payable from the General Fund. Debt service on all
bonded indebtedness of the Commonwealth, except that issued for highway
purposes or for the benefit of other special revenue funds, is payable from the
General Fund. For its fiscal year ended June 30, 1992, the General Fund
recorded a $1.1 billion operating surplus (determined on a generally accepted
accounting principles basis), resulting in an increase in the fund balance to
$87.5 million. The surplus was achieved through legislated tax rate increases
and tax base broadening measures enacted in August 1991, and by controlling
expenditures through numerous cost reduction measures implemented throughout
the fiscal year. Appropriation lapses contributed to the $8.8 million budget
surplus at June 30, 1992 (determined on a budgeting basis).
The General Fund balance increased by $611.4 million during fiscal 1993 and
the Fund balance at June 30, 1993 was $698.9 million (determined on a generally
accepted accounting principles basis). On a budgetary basis, the 1993 fiscal
year closed with revenues higher than anticipated and expenditures about as
projected, resulting in an ending unappropriated balance surplus of $242.3
million. Cash revenues totalled $14.633 billion (representing less than a 1%
increase over revenues for the 1992 fiscal year). A reduction in the personal
income tax rate in July 1992 and the one-time receipt of revenues from
retroactive corporate tax increases in fiscal 1992 were responsible, in part,
for the low revenue growth in fiscal 1993. Appropriations less lapses totalled
an estimated $13.870 billion representing a 1.1% increase over fiscal 1992
expenditures. The low growth in spending is a consequence of a low rate of
revenue growth, significant one-time expenses during fiscal 1992, increased tax
refund reserves to cushion against adverse decisions on pending litigations,
and the receipt of federal funds for expenditures previously paid out of
Commonwealth funds.
For fiscal 1994, the General Fund balance increased $194 million (determined
on a generally accepted accounting principles basis) due largely to an
increased reserve for encumbrances and an increase in other designated funds.
Revenues and other sources increased by 1.8% over the prior fiscal year while
expenditures and other uses increased by 4.3%. As a result, the operating
surplus declined to $179.4 million for fiscal 1994 from $686.3 million for
fiscal 1993. On a budgetary basis, Commonwealth revenues during the fiscal year
totalled $15.2 billion, $38.6 million above the fiscal year estimate, and an
increase of 3.9% over Commonwealth revenues during the prior fiscal year.
Expenditures (excluding pooled financing expenditures and net of appropriation
lapses) totalled $14.93 billion, representing a 7.2% increase over fiscal 1993
expenditures. Medical assistance and corrections spending contributed to the
rate of spending growth for the fiscal year.
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The approved fiscal 1995 budget provides for $15.7 billion of appropriations,
an increase of 4% over appropriations for fiscal 1994. The 1995 budget also
includes several tax reductions totalling an estimated $173.4 million (as
revised upward), including a reduction in the corporate net income tax rate
from 12.25% to 9.99% to be phased-in over a four-year period (which tax rate
reduction is accelerated pursuant to the fiscal 1996 budget) and reinstatement
of a corporate net income tax net operating loss provision to be phased-in over
three years with a $500,000 annual cap (which is increased to $1 million under
the fiscal 1996 budget). For the March, 1995 fiscal year-to-date period,
Commonwealth revenue collections were reportedly $301 million above the fiscal
year-to-date official estimate used for enactment of the budget.
The fiscal 1996 budget was passed by the Pennsylvania legislature on June 15,
1995 and signed by the Governor on June 30, 1995. It provides for spending of
approximately $16.16 billion. In addition, it includes tax reductions totalling
an estimated $282.9 million. The tax reductions include accelerating the
corporate net income tax rate reduction to 9.99% effective for taxable years
commencing in 1995 (the corporate net income tax rate was, pursuant to prior
legislation, scheduled to be reduced on a graduated schedule whereby the 9.99%
rate would have taken effect in tax years beginning in 1997), increasing the
net operating loss carryover deduction to $1 million (effective for losses
incurred in taxable years beginning in 1995), increasing the capital
stock/foreign franchise tax exemption to $100,000 (effective for taxable years
beginning in 1995), changing the formula by which sales are apportioned to
Pennsylvania for purposes of the corporate net income (tax effective for
taxable years beginning in 1995), repealing the 2% tax on annuity
considerations (effective for tax years beginning in 1996) and eliminating the
inheritance tax on transfers of non-jointly owned property from a decedent to a
surviving spouse (in the case of decedents dying on or after January 1, 1995).
A tax amnesty program is also instituted for delinquent taxes as of December
31, 1993.
The economy of Pennsylvania is composed of many diverse sectors including
manufacturing, mining, agriculture, services and wholesale and retail trade.
Certain industries traditionally strong in the Commonwealth, such as coal,
steel and railways, have declined and account for a decreasing share of total
employment. Service industries (including trade, health care, education and
finance) have grown, however, contributing increasingly to Pennsylvania's
economy and now exceed the manufacturing section as the largest single source
of employment.
Nonagricultural employment in the Commonwealth declined by 5.1% during the
recessionary period from 1980 to 1983. In 1984, the declining trend was
reversed as employment grew by 2.9% over 1983 levels. From 1983 to 1990,
Commonwealth employment continued to grow each year, increasing an additional
14.3 percent. For the last 3 years, employment in the Commonwealth has declined
1.2%. The unemployment rate in Pennsylvania in March, 1995 stood at a
seasonally adjusted rate of 6.0%. The seasonally adjusted national unemployment
rate for March, 1995 was 5.5%.
The current Constitutional provisions pertaining to Commonwealth debt permit
the issuance of the following types of debt: (i) debt to suppress insurrection
or rehabilitate areas affected by disaster, (ii) electorate approved debt,
(iii) debt for capital projects subject to an aggregate debt limit of 1.75
times the annual average tax revenues of the preceding five fiscal years and
(iv) tax anticipation notes payable in the fiscal year of issuance. All debt
except tax anticipation notes must be amortized in substantial and regular
amounts.
Debt service on all bonded indebtedness of Pennsylvania, except that issued
for highway purposes or the benefit of other special revenue funds, is payable
from Pennsylvania's General Fund, which receives all Commonwealth revenues that
are not specified by law to be deposited elsewhere. As of June 30, 1993, the
Commonwealth had $5.08 billion of general obligation debt outstanding.
Other state-related obligations include "moral obligations". Moral obligation
indebtedness may be issued by the Pennsylvania Housing Finance Agency ("PHFA"),
a state-created agency which provides financing for housing for lower and
moderate income families, and The Hospitals and Higher Education Facilities
Authority of Philadelphia, a municipal authority organized by the City of
Philadelphia to, among other things, acquire and prepare various sites for use
as intermediate care facilities for the mentally retarded. PHFA's bonds, but
not its notes, are partially secured by a capital reserve fund required to be
maintained by
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PHFA in an amount equal to the maximum annual debt service on its outstanding
bonds in any succeeding calendar year. PHFA is not permitted to borrow
additional funds as long as any deficiency exists in the capital reserve fund.
Certain state-created agencies have statutory authorization to incur debt for
which state appropriations to pay debt service thereon is not required. The
debt of these agencies is supported by assets of, or revenues derived from the
various projects financed and is not an obligation of the Commonwealth. Some of
these agencies, however, are indirectly dependent on Pennsylvania
appropriations. In addition, the Commonwealth maintains pension plans covering
state employees, public school employees and employees of certain state-related
organizations. The total unfunded actuarial accrued liability under these
pension plans for their fiscal year ended in 1994 was $3.8 billion.
The City of Philadelphia is the largest city in the Commonwealth with an
estimated population of 1,585,577 according to the 1990 Census.
Legislation providing for the establishment of Pennsylvania Intergovernmental
Cooperation Authority ("PICA") to assist Philadelphia in remedying fiscal
emergencies was enacted by the Pennsylvania General Assembly and approved by
the Governor in June, 1991. PICA is designed to provide assistance through the
issuance of funding debt and to make factual findings and recommendations to
Philadelphia concerning its budgetary and fiscal affairs. An intergovernmental
cooperation agreement between Philadelphia and PICA was approved by City
Council on January 3, 1992, and approved by the PICA Board and signed by the
Mayor on January 8, 1992. The Mayor's latest update of the 5-year financial
plan was approved by PICA on April 17, 1995.
To date, PICA has issued $1.42 billion of its Special Tax Revenue Bonds. This
financial assistance has included the refunding of certain general obligation
bonds, funding of capital projects and the liquidation of the cumulative
General Fund balance deficit as of June 30, 1992 of $224.9 million. The audited
General Fund balance of Philadelphia as of June 30, 1994 reflects a surplus of
approximately $15.4 million, up from approximately $3 million as of June 30,
1993.
There is various litigation pending against the Commonwealth, its officers
and employees. In 1978, the Pennsylvania General Assembly approved a limited
waiver of sovereign immunity. Damages for any loss are limited to $250,000 for
each person and $1 million for each accident. The Supreme Court held that this
limitation is constitutional. Approximately 3,500 suits against the
Commonwealth are pending.
The following are among the cases with respect to which the Office of
Attorney General and the Office of General Counsel have determined that an
adverse decision may have a material effect on government operations of the
Commonwealth:
Baby Neal v. Commonwealth, et al.
In 1990, the American Civil Liberties Union and other various named
plaintiffs filed an action against the Commonwealth in Federal court seeking an
order that would require the Commonwealth to provide additional funding for
child welfare services. No figures for the amount of funding sought are
available. However, a similar lawsuit filed in the Commonwealth Court of
Pennsylvania was resolved through a court approved settlement which provides,
among other things, for Commonwealth funding for such services in fiscal year
1991 and a commitment to pay Pennsylvania counties $30 million over five years.
In December 1994, the Third Circuit Court of Appeals reversed the District
Court's denial of the plaintiff's motion for class certification with respect
to the interests of 16 minor plaintiffs. As a result, the District Court has
recently certified the class and the parties have resumed discovery.
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County of Allegheny v. Commonwealth of Pennsylvania
On December 7, 1987, the Supreme Court of Pennsylvania held that the
statutory scheme for county funding of the judicial system is in conflict with
the Pennsylvania Constitution. However, judgment was stayed in order to afford
the General Assembly an opportunity to enact appropriate funding legislation
consistent with its opinion. Since that time, the Supreme Court has denied
various actions and motions by several Pennsylvania municipalities to compel
the Commonwealth to comply with the Supreme Court's 1987 decision or to restore
funding for local courts and district justices to levels existing in 1987. On
December 7, 1992, the State Association of County Commissioners filed a new
action in mandamus seeking to compel the Commonwealth to comply with the
Supreme Court's decision in County of Allegheny. The Commonwealth has filed a
response in opposition to the new action and a request was made by the counties
to continue the action until Spring, 1995. The Court has not apparently acted
on the new action and the General Assembly has yet to consider legislation
implementing the Supreme Court's decision.
Fidelity Bank v. Commonwealth of Pennsylvania
On November 30, 1989, Fidelity Bank, N.A. ("Fidelity") filed an action in
challenging the constitutional validity of a 1989 amendment increasing the bank
shares tax and related legislation. The Commonwealth Court ruled in favor of
the Commonwealth finding no constitutional deficiencies in the tax increase,
but invalidating one element of the legislation which provided a credit to new
banks (the "new bank tax credit"). Fidelity, the Commonwealth and certain
intervener banks appealed to the Pennsylvania Supreme Court. However, pursuant
to a Settlement Agreement dated as of April 21, 1995, the Commonwealth agreed
to enter a credit in favor of Fidelity in the amount of $4,100,000 in
settlement of the constitutional and non-constitutional issues. The credit
represents approximately 5% of the potential claim of Fidelity, had the
constitutional issues been resolved in its favor.
Pursuant to a separate Settlement Agreement dated as of April 21, 1995, the
Commonwealth also settled with the intervening banks with respect to issues
concerning the new bank tax credit.
Notwithstanding the foregoing settlements, other banks have filed protective
petitions which are currently pending at the various administrative agencies
challenging the validity of the 1989 tax increase. At least one of those cases
- -- Mellon Bank, N.A. -- has progressed to Commonwealth Court. Based upon the
favorable decision of the Commonwealth Court on the constitutional issues in
the Fidelity Bank litigation and the terms of the settlement with Fidelity, the
Commonwealth does not expect that substantial liability remains with respect to
the remaining cases.
Pennsylvania Association of Rural and Small Schools (PARSS) v. Casey
In January 1991, the Association of Rural and Small Schools and several other
parties filed a lawsuit against then Governor Robert P. Casey and former
Secretary of Education, Donald M. Carroll challenging the constitutionality of
the Commonwealth system for funding local school districts. The litigation
consists of two parallel cases, one in the Commonwealth Court of Pennsylvania
and one in the United States District Court for the Middle District of
Pennsylvania. The federal court case has been indefinitely stayed pending
resolution of the state court case. The state court case is currently in the
pre-trial discovery stage.
Austin v. Department of Corrections, et al.
In November 1990, the American Civil Liberties Union filed a class action
lawsuit in the United States District Court for the Eastern District of
Pennsylvania on behalf of inmate populations in various Pennsylvania
correctional institutions, challenging the conditions of confinement and
seeking injunctive relief. On January 17, 1995, the Court approved a Settlement
Agreement between the parties, pursuant to which the Commonwealth paid $1.3
million in attorneys' fees to the plaintiffs' attorneys, with an additional
$100,000 to be paid upon dismissal of a preliminary injunction relating to
certain health issues. The parties are presently complying with monitoring
provisions outlined in the Settlement Agreement.
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Scott v. Snider
In 1991, a consortium of public interest law firms filed a class action suit
in the U.S. District Court for the Eastern District of Pennsylvania against
various Commonwealth officers alleging that the Commonwealth had failed to
comply with the 1989 federal mandate to provide and pay for early and periodic
screening, diagnostic and treatment services for Medicaid-eligible children. If
the federal court were to grant all of the relief requested, the Commonwealth
would be obligated, among other things, to substantially revise the methods by
which it presently identifies children in need of treatment and to expand the
scope of services and treatment presently provided to such children, and to
increase fees paid to pediatric providers. The Court has denied the plaintiffs'
request to proceed as a class action and dismissed five of the eighteen
plaintiff organizations from the case. The parties have reached a tentative
settlement agreement which they have submitted to the Court for approval.
Pennsylvania Medical Society v. Karen F. Snider
As a result of litigation brought by the Pennsylvania Medical Society against
the Commonwealth in connection with the amount payable to medical assistance
clients who are also eligible for Medicare under the Commonwealth's medical
assistance program, the Commonwealth has implemented a new payment system,
effective January 23, 1995. Preliminary estimated costs to the Commonwealth are
approximately $50 million per year.
Envirotest/Synterra Partners
Envirotest Systems Corporation, Envirotest Partners ("Envirotest") and the
Commonwealth of Pennsylvania have entered into a Standstill Agreement pursuant
to which the parties will proceed to discuss resolution of claims which
Envirotest might have against the Commonwealth arising from the suspension of
an emissions testing program. Under the program, Envirotest entered into a
contract with the Commonwealth for the operation of emissions inspection
facilities and, incident thereto, acquired land to construct approximately 85
such facilities. The Standstill Agreement authorizes Envirotest to file a
Statement of Claim with the Pennsylvania Board of Claims to preserve its
position before the Board. Although a formal Statement of Claim has not been
filed and a formal demand has not been submitted, the Office of General Counsel
has been informed by representatives of Envirotest that it has expended
approximately $200 million to date to acquire land and construct and maintain
the inspection facilities.
Currently, Pennsylvania general obligation bonds are rated AA- by Standard &
Poor's and Fitch, and A1 by Moody's. There can be no assurance that the
economic conditions on which these ratings are based will continue or that
particular bond issues will not be adversely affected by changes in economic or
political conditions.
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APPENDIX K
INFORMATION CONCERNING MUNICIPAL SECURITIES
A. DESCRIPTION OF MUNICIPAL SECURITIES
Municipal Securities include debt obligations issued to obtain funds for
various public purposes, including construction of a wide range of public
facilities, refunding of outstanding obligations and obtaining of funds for
general operating expenses and loans to other public institutions and
facilities. In addition, certain types of industrial development bonds are
issued by or on behalf of public authorities to finance various facilities
operated for private profit. Such obligations are included within the term
Municipal Securities if the interest paid thereon is exempt from Federal income
tax.
The two principal classifications of Municipal Securities are "general
obligation" bonds and "revenue" or "special obligation" bonds. General
obligation bonds are secured by the issuer's pledge of its faith, credit, and
taxing power for the repayment of principal and the payment of interest.
Revenue or special obligation bonds are payable only from the revenues derived
from a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise tax or other specific revenue source such as from
the user of the facility being financed. Industrial development bonds are in
most cases revenue bonds and do not generally constitute the pledge of the
credit or taxing power of the issuer of such bonds. The repayment of the
principal of and the payment of interest on such industrial revenue bonds
depends solely on the ability of the user of the facilities financed by the
bonds to meet its financial obligations and the pledge, if any, of real and
personal property so financed as security for such payment. The Fund's
portfolio may include "moral obligation" bonds which are normally issued by
special purpose public authorities. If an issuer of moral obligation bonds is
unable to meet its debt service obligations from current revenues, it may draw
on a reserve fund, the restoration of which is a moral commitment but not a
legal obligation of a state or municipality.
Yields on Municipal Securities are dependent on a variety of factors,
including the general condition of the money market and of the municipal bond
market, the size of a particular offering, the maturity of the obligation, and
the rating of the issue. The ability of the Fund to achieve its investment
objective is also dependent on the continuing ability of the issuers of the
Municipal Securities in which the Fund invests to meet their obligations for
the payment of interest and the repayment of principal when due. There are
variations in the risks involved in holding Municipal Securities, both within a
particular classification and between classifications, depending on numerous
factors. Furthermore, the rights of holders of Municipal Securities and the
obligations of the issuers of such Municipal Securities may be subject to
applicable bankruptcy, insolvency and similar laws and court decisions
affecting the rights of creditors generally, and such laws, if any, which may
be enacted by Congress or state legislatures affecting specifically the rights
of holders of Municipal Securities.
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the Federal income tax exemption for
interest on Municipal Securities. Similar proposals may be introduced in the
future. If such a proposal were enacted, the ability of the Fund to pay
"exempt-interest dividends" would be affected adversely and the Fund would re-
evaluate its investment objective and policies and consider changes in its
structure. See "Taxes".
B. RATINGS OF MUNICIPAL SECURITIES
MUNICIPAL NOTES AND SHORT-TERM TAX-EXEMPT COMMERCIAL PAPER
Commercial paper with the greatest capacity for timely payment is rated A by
Standard & Poor's. Issues within this category are further redefined with
designations 1, 2 and 3 to indicate the relative degree of safety; A-1, the
highest of the three, indicates the degree of safety regarding timely payment
is strong; issues that possess extremely strong safety characteristics will be
denoted with a plus (+) sign; A-2 indicates that capacity for timely repayment
is satisfactory. A Standard & Poor's rating with respect to certain municipal
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note issues with a maturity of less than three years reflects the liquidity
concerns and market access risks unique to notes. SP-1, the highest note
rating, indicates a very strong, or strong, capacity to repay principal and pay
interest. Issues that possess overwhelming safety characteristics will be given
an SP-1 designation. SP-2, the second highest note rating, indicates a
satisfactory capacity to repay principal and pay interest.
Moody's employs the designations of Prime-1, Prime-2 and Prime-3 with respect
to commercial paper to indicate the relative capacity of the rated issuers (or
related supporting institutions) to repay punctually. Prime-1 issues have a
superior capacity for repayment. Prime-2 issues have a strong capacity for
repayment, but to a lesser degree than Prime-1. The two highest ratings of
Moody's for short-term notes and VRDOs are MIG1/VMIG1 and MIG2/VMIG2;
MIG1/VMIG1 denotes "best quality", enjoying "strong protection by established
cash flows" and MIG2/VMIG2 denotes "high quality" with margins of protection
that are ample although not so large as MIG1/VMIG1.
Fitch employs the rating F-1+ to indicate short-term debt issues regarded as
having the strongest degree of assurance for timely payment. The rating F-1
reflects an assurance of timely payment only slightly less in degree than
issues rated F-1+. The rating F-2 indicates a satisfactory degree of assurance
for timely payment, although the margin of safety is not as great as indicated
by the F-1+ and F-1 categories.
MUNICIPAL BONDS
Bonds rated AAA have the highest rating assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong. Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in a small degree. A
Standard & Poor's municipal debt rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers or
lessees.
Bonds rated Aaa by Moody's are judged to be of the best quality. Interest
payments are protected by a large or by an exceptionally stable margin and
principal is secure. Bonds rated Aa are judged to be of high quality by all
standards. They are rated lower than the best bonds because the margins of
protection may not be as large or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the long-
term risks appear somewhat larger than in Aaa securities. Moody's applies the
numerical modifier 1 to the classification Aa through B to indicate that
Moody's believes the issue possesses the strongest investment attributes in its
rating category. Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b) earnings
of projects unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting
condition attaches. Parenthetical rating denotes probable credit stature upon
completion of construction or elimination of basis of condition.
Bonds rated AAA by Fitch are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events. Bonds rated AA are considered to be investment grade and of
very high credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds rated AAA. The
ratings take into consideration special features of the issue, its relationship
to other obligations of the issuer, the current and prospective financial
condition and operative performance of the issuer and of any guarantor, as well
as the economic and political environment that might affect the issuer's future
financial strength and credit quality. Bonds that have the same rating are of
similar but not necessarily identical credit quality since the rating
categories do not fully reflect small differences in the degrees of credit
risk.
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CMA ARIZONA MUNICIPAL MONEY FUND
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
CMA Arizona Municipal Money Fund of
CMA Multi-State Municipal Series Trust:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of CMA Arizona
Municipal Money Fund of CMA Multi-State Municipal Series Trust as of
March 31, 1995, the related statements of operations for the year
then ended and changes in net assets for each of the years in the
two-year period then ended, and the financial highlights for each of
the years in the two-year period then ended and for the period
February 8, 1993 (commencement of operations) to March 31, 1993.
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 March
31, 1995 by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
CMA Arizona Municipal Money Fund of CMA Multi-State Municipal Series
Trust as of March 31, 1995, the results of its operations, the
changes in its net assets, and the financial highlights for the
respective stated periods in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
May 2, 1995
<PAGE>
Portfolio Abbreviations for CMA Arizona Municipal Money Fund
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
CP Commercial Paper
DATES Daily Adjustable Tax-Exempt Securities
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
TAN Tax Anticipation Notes
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
CMA ARIZONA MUNICIPAL MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
Arizona-- $ 4,300 Apache County, Arizona, IDA, PCR (Tucson Electric Power Co.
97.0% Project), VRDN, Series B, 4.25% due 10/01/2021 (a) $ 4,300
Arizona Educational Loan Marketing Corp., Educational Loan Revenue
Bonds, VRDN, AMT, Series A (a):
3,700 4.15% due 3/01/2015 3,700
1,300 4.15% due 12/01/2020 1,300
Arizona Health Facilities Authority Revenue Bonds (Arizona Voluntary
Hospital Federation), VRDN (a):
1,460 Series A, 4.05% due 10/01/2015 1,460
1,245 Series B, 4.05% due 10/01/2015 1,245
1,500 Casa Grande, Arizona, IDA, Revenue Bonds (Mayville Project),
VRDN, 4.05% due 7/01/2015 (a) 1,500
4,000 Chandler, Arizona, IDA, M/F Housing Revenue Refunding Bonds
(Southpark Apartments Project), VRDN, 4.05% due 12/01/2002 (a) 4,000
3,300 Cochise County, Arizona, Pollution Control Corp., Solid Waste Disposal
Revenue Bonds (Arizona Electric Power Cooperative, Inc. Project), AMT,
4.45% due 9/01/1995 3,300
3,700 Coconino County, Arizona, Pollution Control Corp., Arizona Public Service
Revenue Bonds (Navajo Project), VRDN, Series A, 4.55% due 10/01/2029 (a) 3,700
500 Flagstaff, Arizona, IDA, IDR (W.L. Gore & Associates), CP, 4.30%
due 6/06/1995 500
2,000 Glendale, Arizona, IDA, Hospital Revenue Bonds (West Valley Camelback),
VRDN, 4.05% due 11/01/2011 (a) 2,000
2,200 Glendale, Arizona, IDA, IDR (Superior Bedding Co. Project), VRDN, 4.30%
due 10/01/2014 (a) 2,200
Maricopa County, Arizona, IDA, M/F Housing Revenue Bonds, VRDN, AMT (a):
3,700 (Privado Park Apartments Project), Series A, 4.35% due 6/01/2034 3,700
4,000 (Vista Ventana Apartments Project), Series D, 4.35% due 6/01/2034 4,000
200 Maricopa County, Arizona, IDA, PCR (Motorola Inc. Project), VRDN, 4.15%
due 10/01/1995 (a) 200
Maricopa County, Arizona, Pollution Control Corp., PCR, CP, Southern
California Edison (Palo Verde Project):
500 Series D, 4.10% due 4/05/1995 500
600 Series E, 4.10% due 4/12/1995 600
3,700 Maricopa County, Arizona, Pollution Control Corp., PCR (El Paso
Electric Co.-Palo Verde Project), VRDN, Series E, 4.95% due 12/01/2014 (a) 3,700
15,500 Maricopa County, Arizona, TAN, UT, 5% due 7/28/1995 15,525
</TABLE>
<PAGE>
<TABLE>
CMA ARIZONA MUNICIPAL MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
Arizona Mesa, Arizona, Municipal Development Corp., Special Tax Obligations, CP:
(concluded) $ 2,500 4.15% due 4/25/1995 $ 2,500
2,000 3.80% due 5/10/1995 2,000
2,700 Mohave County, Arizona, IDA, IDR (Citizens Utilities), CP, AMT, 4.15%
due 5/01/1995 2,700
4,375 Phoenix, Arizona, IDA, M/F Housing Revenue Refunding Bonds (Lynwood
Apartments Project), VRDN, 4.25% due 10/01/2025 (a) 4,375
2,200 Phoenix, Arizona, UT, VRDN, Series 1, 4.25% due 6/01/2018 (a) 2,200
1,650 Pima County, Arizona, IDA, IDR, Refunding (Tucson Retirement Center),
VRDN, 4% due 1/01/2009 (a) 1,650
Pima County, Arizona, IDA, M/F Housing Revenue Bonds, VRDN, AMT (a):
5,200 (Quail Ridge Apartments), Series B, 4.35% due 6/01/2034 5,200
900 (Saguaro Crest Apartments), Series A, 4.35% due 6/01/2034 900
Pinal County, Arizona, IDA, PCR (Magma Copper/Newmont Mining Corp.) (a):
1,800 DATES, 4.25% due 12/01/2009 1,800
2,300 VRDN, 4.25% due 12/01/2009 2,300
3,800 Salt River Project, Arizona, Agricultural Improvements and Power
Distribution, Electric System Revenue Bonds, CP, 4.10% due 4/03/1995 3,800
1,200 Special Fund of Industrial Community, Arizona, Tax-Exempt COP,
Refunding Bonds, CP, 4.15% due 5/17/1995 1,200
1,000 Tempe, Arizona, IDA, M/F Housing Revenue Bonds (Elliots Crossing),
VRDN, 4.05% due 10/01/2008 (a) 1,000
1,765 Tucson, Arizona, IDA, IDR, Refunding (Santa Rita Hotel), VRDN, AMT,
Series B, 4.45% due 12/01/2016 (a) 1,765
1,155 Tucson, Arizona, IDA, M/F Housing Revenue Refunding Bonds (Lincoln
Garden Project), VRDN, 4.10% due 2/01/2006 (a) 1,155
Yavapai County, Arizona, IDA, IDR (Citizens Utilities), CP, AMT:
1,500 4.25% due 4/05/1995 1,500
1,200 4.15% due 5/01/1995 1,200
1,900 3.95% due 5/05/1995 1,900
3,500 Yavapai County, Arizona, IDA, IDR, Refunding (Kachina Pointe
Project), VRDN, 4% due 1/01/2009 (a) 3,500
500 Yuma, Arizona, IDA, IDR (Ardco Inc. Project), VRDN, 4.30%
due 7/01/2003 (a) 500
Puerto Rico-- 300 Puerto Rico Commonwealth Government Development Bank, Revenue
0.3% Refunding Bonds, VRDN, 4.10% due 12/01/2015 (a) 300
Total Investments (Cost--$100,875*)-- 97.3% 100,875
Other Assets Less Liabilities--2.7% 2,842
--------
Net Assets--100.0% $103,717
========
<FN>
(a)The interest rate is subject to change periodically based on
certain indexes. The interest rate shown is the rate in effect at
March 31, 1995.
*Cost for Federal income tax purposes.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CMA ARIZONA MUNICIPAL MONEY FUND
STATEMENT OF ASSETS AND LIABILITIES AS OF MARCH 31, 1995
<S> <C> <C>
Assets:
Investments, at value (identified cost--$100,874,722) (Note 1a) $ 100,874,722
Cash 152,519
Receivables:
Securities sold $ 1,906,754
Interest 864,205 2,770,959
-------------
Deferred organization expenses (Note 1d) 21,691
Prepaid registration fees and other assets (Note 1d) 2,155
-------------
Total assets 103,822,046
-------------
Liabilities:
Payables:
Distributor (Note 2) 28,947
Investment adviser (Note 2) 5,872 34,819
-------------
Accrued expenses and other liabilities 70,368
-------------
Total liabilities 105,187
-------------
Net Assets $ 103,716,859
=============
Net Assets Consist of:
Shares of beneficial interest, $.10 par value, unlimited number of shares
authorized $ 10,371,442
Paid-in capital in excess of par 93,342,983
Undistributed realized capital gains--net 2,434
-------------
Net Assets--Equivalent to $1.00 per share based on 103,714,424 shares of
beneficial interest outstanding $ 103,716,859
=============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CMA ARIZONA MUNICIPAL MONEY FUND
STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1995
<S> <C> <C>
Investment Income (Note 1c):
Interest and amortization of premium and discount earned $ 2,907,188
Expenses:
Investment advisory fees (Note 2) $ 430,110
Distribution fees (Note 2) 106,900
Professional fees 56,675
Registration fees (Note 1d) 37,065
Accounting services (Note 2) 34,475
Transfer agent fees (Note 2) 18,741
Printing and shareholder reports 15,542
Custodian fees 11,489
Amortization of organization expenses (Note 1d) 7,583
Pricing fees 6,041
Trustees' fees and expenses 1,019
Other 3,264
-------------
Total expenses before reimbursement 728,904
Reimbursement of expenses (Note 2) (267,373)
-------------
Total expenses after reimbursement 461,531
-------------
Investment income--net 2,445,657
Realized Gain on Investments--Net (Note 1c) 2,450
-------------
Net Increase in Net Assets Resulting from Operations $ 2,448,107
=============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CMA ARIZONA MUNICIPAL MONEY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year Ended March 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <C> <C>
Operations:
Investment income--net $ 2,445,657 $ 1,017,503
Realized gain on investments--net 2,450 --
------------- -------------
Net increase in net assets resulting from operations 2,448,107 1,017,503
------------- -------------
Dividends & Distributions to Shareholders (Note 1e):
Investment income--net (2,445,657) (1,017,503)
Realized gain on investments--net -- (330)
------------- -------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (2,445,657) (1,017,833)
------------- -------------
Beneficial Interest Transactions (Note 3):
Net proceeds from sale of shares 389,748,845 293,866,100
Net asset value of shares issued to shareholders in reinvestment of
dividends and distributions (Note 1e) 2,445,654 1,017,845
------------- -------------
392,194,499 294,883,945
Cost of shares redeemed (361,894,068) (262,907,118)
------------- -------------
Net increase in net assets derived from beneficial interest
transactions 30,300,431 31,976,827
------------- -------------
Net Assets:
Total increase in net assets 30,302,881 31,976,497
Beginning of year 73,413,978 41,437,481
------------- -------------
End of year $ 103,716,859 $ 73,413,978
============= =============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CMA ARIZONA MUNICIPAL MONEY FUND
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. For the Period
For the Year Ended March 31, Feb. 8, 1993++ to
Increase (Decrease) in Net Asset Value: 1995 1994 March 31, 1993
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00
------------- ------------- -------------
Investment income--net .03 .02 .002
------------- ------------- -------------
Total from investment operations .03 .02 .002
------------- ------------- -------------
Less dividends from investment income--net (.03) (.02) (.002)
------------- ------------- -------------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
============= ============= =============
Total Investment Return 2.83% 1.90% 1.78%*
============= ============= =============
Ratios to Average Net Assets:
Expenses, net of reimbursement and excluding
distribution fees .41% .47% .33%*
============= ============= =============
Expenses, net of reimbursement .54% .59% .46%*
============= ============= =============
Expenses .85% .98% 1.15%*
============= ============= =============
Investment income--net 2.84% 1.89% 1.86%*
============= ============= =============
Supplemental Data:
Net assets, end of period (in thousands) $ 103,717 $ 73,414 $ 41,437
============= ============= =============
<FN>
*Annualized.
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<PAGE>
CMA ARIZONA MUNICIPAL MONEY FUND
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
CMA Arizona Municipal Money Fund (the "Fund") is part of CMA
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 following
is a summary of significant accounting policies followed by the
Fund.
(a) Valuation of investments--Investments are valued at amortized
cost, which approximates market value. For the purpose of valuation,
the maturity of a variable rate demand instrument is deemed to be
the next coupon date on which the interest rate is to be adjusted.
In the case of a floating rate instrument, the remaining maturity is
the demand notice payment period.
(b) 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.
(c) Security transactions and investment
income--Security transactions are recorded on the dates the
transactions are entered into (the trade dates). Interest income
(including amortization of premium and discount) is recognized on
the accrual basis. Realized gains and losses on security
transactions are determined on the identified cost basis.
(d) 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.
(e) Dividends to shareholders--The Fund declares dividends daily and
reinvests daily such dividends (net of non-resident alien tax
withheld) in additional fund shares at net asset value. Dividends
are declared from the total of net investment income, excluding
discounts earned other than original issue discounts. Net realized
capital gains, if any, are normally distributed annually after
deducting prior years' loss carryforward. The Fund may distribute
capital gains more frequently than annually in order to maintain the
Fund's net asset value at $1.00 per share.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM" or "Adviser"). The general partner of
FAM is Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co. ("ML & Co."), which is the limited
partner.
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: 0.50%
of the first $500 million of average daily net assets; 0.425% of
average daily net assets in excess of $500 million but not exceeding
$1 billion; and 0.375% of average daily net assets in excess of $1
billion. For the year ended March 31, 1995, FAM earned fees of
$430,110, of which $267,373 was voluntarily waived.
The most restrictive annual expense limitation requires that the
Adviser reimburse the Fund to the extent the Fund's expenses
(excluding interest, taxes, distribution fees, brokerage fees and
commissions, and extraordinary items) exceed in any fiscal year 2.5%
of the Fund's first $30 million of average daily net assets, 2.0% of
the Fund's
<PAGE>
next $70 million of average daily net assets, and 1.5% of
the average daily net assets in excess thereof. No fee payment will
be made to the Adviser during any year which will cause such
expenses to exceed the pro rata expense limitation at the time of
such payment.
CMA ARIZONA MUNICIPAL MONEY FUND
NOTES TO FINANCIAL STATMENTS (CONCLUDED)
Pursuant to the Distribution and Shareholder Servicing Plan in
compliance with Rule 12b-1 under the Investment Company Act of 1940,
Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S") receives a
distribution fee from the Fund at the end of each month at the
annual rate of 0.125% of average daily net assets of the Fund. The
distribution fee is to compensate MLPF&S financial consultants and
other directly involved branch office personnel for selling shares
of the Fund and for providing direct personal services to
shareholders. The distribution fee is not compensation for the
administrative and operational services rendered to the Fund by
MLPF&S in processing share orders and administering shareholder
accounts.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, MLPF&S, FDS, and/or ML & Co.
3. Shares of Beneficial Interest:
The number of shares purchased and redeemed during the period
corresponds to the amounts included in the Statements of Changes in
Net Assets for net proceeds from sale of shares and cost of shares
redeemed, respectively, since shares are recorded at $1.00 per
share.
<PAGE>
CMA CALIFORNIA MUNICIPAL MONEY FUND
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
CMA California Municipal Money Fund of
CMA Multi-State Municipal Series Trust:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of CMA
California Municipal Money Fund of CMA Multi-State Municipal Series
Trust as of March 31, 1995, the related statements of operations for
the year then ended and changes in net assets for each of the years
in the two-year period then ended, and the financial highlights for
each of the years in the 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 March
31, 1995 by correspondence with the custodian and brokers. 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
CMA California Municipal Money Fund of CMA Multi-State Municipal
Series Trust as of March 31, 1995, the results of its operations,
the changes in its net assets, and the financial highlights for the
respective stated periods in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
April 28, 1995
<PAGE>
Portfolio Abbreviations for CMA California Municipal Money Fund
ACES SM Adjustable Convertible Extendable Securities
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
CP Commercial Paper
GO General Obligation Bonds
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RAN Revenue Anticipation Notes
RAW Revenue Anticipation Warrants
TRAN Tax Revenue Anticipation Notes
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
CMA CALIFORNIA MUNICIPAL MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
California-- $ 6,000 Alameda County, California, IDA, IDR, Refunding (Hoover University
92.9% Inc. Project), VRDN, 4.25% due 6/01/2004 (a) $ 6,000
2,500 Anaheim, California, M/F Housing Authority Revenue Bonds (Bel Age
Project), VRDN, AMT, Series A, 4.10% due 8/01/2020 (a) 2,500
2,500 Berkeley, California, TRAN, 4.25% due 7/11/1995 (b) 2,501
11,200 Big Bear Lake, California, IDR (Southwest Gas Corporation Project),
VRDN, AMT, Series A, 4.05% due 12/01/2028 (a) 11,200
California Health Facilities Financing Authority Revenue Bonds,
VRDN (a):
5,000 (Catholic Health Care), Series A, 3.95% due 7/01/2009 5,000
6,600 (Catholic Health Care), Series B, 3.95% due 7/01/2016 6,600
9,145 (Huntington Memorial Hospital), 3.90% due 11/01/2010 9,145
2,700 (Pooled Loan Program), 4.20% due 9/01/2020 2,700
1,000 (Saint Joseph Health System), Series B, 4.10% due 7/01/2009 1,000
4,100 (Scripps Memorial Hospital), Series B, 4.15% due 12/01/2015 4,100
California Pollution Control Financing Authority, PCR, Refunding
(Pacific Electric & Gas), CP:
19,130 AMT, Series A, 3.85% due 4/03/1995 19,130
6,000 AMT, Series A, 4.10% due 5/01/1995 6,000
15,000 AMT, Series A, 4% due 5/08/1995 15,000
14,100 AMT, Series B, 4.15% due 5/31/1995 14,100
12,175 Series C, 3.55% due 4/05/1995 12,175
5,000 Series E, 4% due 4/04/1995 5,000
2,000 Series E, 3.65% due 4/05/1995 2,000
7,600 Series E, 3.75% due 5/11/1995 7,600
11,000 Series F, 3.85% due 5/01/1995 11,000
11,500 Series F, 4% due 5/30/1995 11,500
California Pollution Control Financing Authority, PCR (Southern
California Edison):
4,900 CP, Series C, 3.80% due 4/03/1995 4,900
1,500 CP, Series C, 3.55% due 4/06/1995 1,500
1,350 CP, Series C, 3.95% due 5/19/1995 1,350
2,600 CP, Series D, 3.95% due 5/12/1995 2,600
27,300 VRDN, Series A, 4.25% due 2/28/2008 (a) 27,300
5,100 VRDN, Series B, 4.25% due 2/28/2008 (a) 5,100
14,000 VRDN, Series C, 4.25% due 2/28/2008 (a) 14,000
13,900 VRDN, Series D, 4.25% due 2/28/2008 (a) 13,900
</TABLE>
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<TABLE>
CMA CALIFORNIA MUNICIPAL MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (CONTINUED) (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
California California Pollution Control Financing Authority, Resource Recovery
(continued) Revenue Bonds, VRDN, AMT (a):
$ 6,200 (Atlantic Richfield Company Project), Series A, 4.50% due
12/01/2024 $ 6,200
12,500 (Delano Project), 4.25% due 8/01/2019 12,500
5,700 (Honey Lake Power Project), 4.25% due 9/01/2018 5,700
2,400 (Sanger Project), Series A, 4.05% due 9/01/2020 2,400
California Pollution Control Financing Authority, Solid Waste Disposal
Revenue Bonds (Shell Oil Co.--Martinez Project), VRDN, AMT (a):
11,700 Series A, 4.45% due 10/01/2024 11,700
3,100 Series B, 4.45% due 12/01/2024 3,100
25,000 California Public Capital Improvements Financing Authority Revenue
Bonds (Pooled Loan Program), Series D, 4.30% due 6/15/1995 25,000
California State:
84,750 RAN, Series A, 5% due 6/28/1995 84,871
30,000 RAW, Series C, 5.75% due 4/25/1996 30,259
7,500 California State Department of Water Resource Revenue Bonds (Central
Valley Project), VRDN, Series N-V2, 3.90% due 12/01/2025 (a) 7,500
3,800 California State Department of Water Resource Revenue Bonds, CP,
3.60% due 4/05/1995 3,800
10,000 California State GO, VRDN, 4.35% due 11/01/2020 (a) 10,000
3,200 California Statewide Community Development Authority, Revenue Refunding
Bonds (Saint Joseph Health System), VRDN, COP, 4% due 7/01/2008 (a) 3,200
Chula Vista, California, IDR (San Diego Electric & Gas), CP, AMT:
10,000 Series C, 4% due 5/19/1995 10,000
20,000 Series D, 3.95% due 5/09/1995 20,000
15,000 Series E, 4.25% due 4/11/1995 15,000
6,800 Contra Costa, California, Transportation Authority, Sales Tax Revenue
Bonds, VRDN, Series A, 3.90% due 3/01/2009 (a) 6,800
Eagle Tax Exempt Trust, VRDN (a):
9,500 4.30% due 2/01/2006 9,500
19,400 Series 1994 C-6, 4.30% due 8/01/2017 19,400
14,800 Series 1994 C-7, 4.25% due 8/01/2023 14,800
2,000 East Bay, Municipal Utility District, California, Wastewater Treatment
System Revenue Bonds, CP, 4.05% due 5/25/1995 2,000
20,560 Eastern Municipal Water District, California, Water and Sewer Revenue
Refunding Bonds, VRDN, COP, Series B, 4% due 7/01/2020 (a) 20,560
22,334 FB California Floating Trust Certificates, VRDN, Series 9, 4.35% due
4/25/1996 (a) 22,334
20,000 Floating Rate Trust Certificates, VRDN, Series 1992 H, 4.60% due
10/02/1998 (a) 20,000
8,050 Fontana, California, M/F Housing Revenue Bonds (Springtime Apartments
Project), VRDN, Series A, 4.05% due 12/01/2016 (a) 8,050
22,200 Fresno Unified School District, California, TRAN, 4.75% due 7/19/1995 (b) 22,251
7,500 Hemet, California, M/F Housing Revenue Bonds (Pacific Senior Estates),
VRDN, Series A, 4% due 7/01/2007 (a) 7,500
3,260 Kings County, California, Board of Education, TRAN, UT, 4.25% due
7/28/1995 (b) 3,261
</TABLE>
<PAGE>
<TABLE>
CMA CALIFORNIA MUNICIPAL MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (CONTINUED) (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
California Long Beach, California, Harbor Revenue Bonds, CP, AMT, Series A:
(continued) $15,000 4.10% due 4/11/1995 $ 15,000
15,000 4.10% due 4/12/1995 15,000
4,000 4.20% due 4/12/1995 4,000
23,000 3.90% due 5/08/1995 23,000
22,500 3.90% due 5/11/1995 22,500
8,700 Los Angeles, California, M/F Housing Revenue Bonds (Beverly Park
Apartments Project), VRDN, AMT, Series A, 4% due 8/01/2018 (a) 8,700
2,000 Los Angeles, California, Metropolitan Transportation Authority Revenue
Bonds (Union Station Gateway Project), VRDN, Series A, 4.10% due
7/01/2025 (a) 2,000
10,865 Los Angeles, California, Wastewater System Revenue Bonds, CP, 4.05% due
5/25/1995 10,865
9,200 Los Angeles County, California, Metropolitan Transportation Authority,
Sales Tax Revenue Refunding Bonds (Proposition C--Second Senior), VRDN,
Series A, 4% due 7/01/2020 (a) 9,200
3,660 Los Angeles County, California, TRAN, UT, 4.50% due 6/30/1995 3,660
Los Angeles County, California, Transportation Commission Sales Tax
Revenue Bonds, Series A:
6,200 CP, 4.10% due 4/07/1995 6,200
3,000 Refunding, VRDN, 3.90% due 7/01/2012 (a) 3,000
15,000 Marin County, California, TRAN, 4.25% due 7/06/1995 (b) 15,019
3,000 Monterey Penninsula, California, Water Management District, COP
(Wastewater Reclamation Project), VRDN, 4.10% due 7/01/2022 (a) 3,000
6,000 Moor Park, California, M/F Mortgage Revenue Refunding Bonds (Le Club
Apartments Project), VRDN, Series A, 4.10% due 11/01/2015 (a) 6,000
20,000 Oakland, California, TRAN, UT, 4.50% due 7/24/1995 (b) 20,031
Oxnard, California, Unified School District, TRAN:
1,280 4.50% due 7/13/1995 1,282
5,120 4.50% due 7/13/1995 (b) 5,129
Palm Springs, California, Community Redevelopment Agency, COP,
VRDN (a):
1,000 Headquarters Hotel 3, 4.10% due 12/01/2014 1,000
1,700 Headquarters Hotel 9, 4.10% due 12/01/2014 1,700
11,470 Pittsburg, California, Mortgage Obligation Bonds, VRDN, Series A,
4.25% due 12/30/2022 (a) 11,470
2,900 Redlands, California, M/F Housing Revenue Bonds (Orange Village
Apartments Project), VRDN, AMT, Series A, 4.05% due 8/01/2018 (a) 2,900
Riverside County, California, COP (Riverside County Public Facilities),
ACES, VRDN (a):
13,300 Series A, 4.15% due 12/01/2015 13,300
6,300 Series B, 4.15% due 12/01/2015 6,300
1,660 Series D, 4.15% due 12/01/2015 1,660
Riverside County, California, Housing Authority, M/F Mortgage Revenue
Bonds, VRDN (a):
3,850 (Emeritus Park), Series B, 4% due 8/01/2018 3,850
6,000 (Woodcreek Village), Series D, 4% due 8/01/2018 6,000
</TABLE>
<PAGE>
<TABLE>
CMA CALIFORNIA MUNICIPAL MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (CONCLUDED) (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
California $13,600 Roseville, California, Finance Authority, Hospital Lease Revenue
(concluded) Bonds (Roseville Hospital), VRDN, Series A, 4.05% due 10/01/2014 (a) $ 13,600
16,200 Sacramento Municipal Utility District, California, CP, 4% due
5/01/1995 16,200
6,110 San Bernardino County, California, Residential Mortgage Revenue
Refunding Bonds (Ramona Garden), VRDN, Series A, 4.10% due 2/01/2017 (a) 6,110
San Diego, California, M/F Housing Authority Revenue Bonds, VRDN (a):
6,035 (La Cima Apartments), Series K, 4.10% due 12/01/2008 6,035
18,000 (Nobel Court Apartments), 4.10% due 12/01/2008 18,000
San Diego County, California, Regional Transportation Commission Sales
Tax Revenue Bonds (Second Senior), VRDN, Series A (a):
32,500 3.90% due 4/01/2008 32,500
8,500 4.15% due 4/01/2008 8,500
10,000 San Leandro, California, M/F Revenue Bonds (Parkside Commons), VRDN,
Series A, 4% due 7/15/2018 (a) 10,000
39,940 San Mateo County, California, TRAN, GO, 4.50% due 7/13/1995 (b) 40,018
32,800 Santa Clara County, California, TRAN, UT, 4.25% due 7/07/1995 (b) 32,833
8,900 Santa Cruz County, California, TRAN, 4.50% due 8/01/1995 (b) 8,922
5,325 Santa Rosa, California, M/F Housing Revenue Bonds (Oak Creek Apartments
Project), VRDN, AMT, Series A, 4.05% due 6/01/2018 (a) 5,325
3,675 Simi Valley, California, Community Redevelopment Agency, M/F Housing
Revenue Bonds (Ashlee Manor Project), VRDN, AMT, Series A, 4.05% due
10/01/2017 (a) 3,675
8,900 Simi Valley, California, M/F Housing Revenue Refunding Bonds (Cochran
Street Project), Issue A, VRDN, 3.95% due 11/15/2004 (a) 8,900
14,000 Tulare County, California, TRAN, 4.75% due 8/25/1995 (b) 14,027
6,650 Ventura County, California, TRAN, 4.50% due 8/01/1995 (b) 6,633
Puerto Rico--6.8% Puerto Rico Commonwealth, Government Development Bank Revenue
Bonds, CP:
8,500 3.45% due 4/03/1995 8,500
10,800 3.75% due 4/06/1995 10,800
20,000 3.60% due 4/07/1995 20,000
10,000 3.85% due 4/11/1995 10,000
20,000 3.75% due 5/01/1995 20,000
10,000 3.70% due 5/09/1995 10,000
Total Investments (Cost--$1,164,931*)-- 99.7% 1,164,931
Other Assets Less Liabilities--0.3% 3,303
----------
Net Assets--100.0% $1,168,234
==========
<FN>
(a)The interest rate is subject to change periodically based on
certain indexes. The interest rate shown is the rate in effect at
March 31, 1995.
(b)MBIA Insured.
*Cost for Federal income tax purposes.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CMA CALIFORNIA MUNICIPAL MONEY FUND
STATEMENT OF ASSETS AND LIABILITIES AS OF MARCH 31, 1995
<S> <C> <C>
Assets:
Investments, at value (identified cost--$1,164,931,184) (Note 1a) $ 1,164,931,184
Cash 289,170
Receivables:
Interest $ 13,333,341
Beneficial interest sold 316,708 13,650,049
---------------
Prepaid registration fees and other assets (Note 1d) 210,582
---------------
Total assets 1,179,080,985
---------------
Liabilities:
Payables:
Securities purchased 9,837,365
Investment adviser (Note 2) 465,086
Distributor (Note 2) 386,769 10,689,220
---------------
Accrued expenses and other liabilities 157,346
---------------
Total liabilities 10,846,566
---------------
Net Assets $ 1,168,234,419
---------------
Net Assets Consist of:
Shares of beneficial interest, $.10 par value, unlimited number of shares
authorized $ 116,921,595
Paid-in capital in excess of par 1,052,294,357
Undistributed investment income--net 13,584
Accumulated realized capital losses--net (Note 4) (995,117)
---------------
Net Assets--Equivalent to $1.00 per share based on 1,169,215,952 shares of
beneficial interest outstanding $ 1,168,234,419
===============
</TABLE>
<TABLE>
CMA CALIFORNIA MUNICIPAL MONEY FUND
STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1995
<S> <C> <C>
Investment Income (Note 1c):
Interest and amortization of premium and discount earned $ 39,037,823
Expenses:
Investment advisory fees (Note 2) $ 5,371,374
Distribution fees (Note 2) 1,492,270
Transfer agent fees (Note 2) 186,485
Accounting services (Note 2) 147,332
Printing and shareholder reports 77,857
Custodian fees 75,602
Professional fees 54,972
Registration fees (Note 1d) 23,971
Trustees' fees and expenses 15,839
Pricing fees 12,877
Other 144,972
---------------
Total expenses 7,603,551
---------------
Investment income--net 31,434,272
Realized Loss on Investments--Net (Note 1c) (508,031)
---------------
Net Increase in Net Assets Resulting from Operations $ 30,926,241
===============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CMA CALIFORNIA MUNICIPAL MONEY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year Ended March 31,
1995 1994
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Investment income--net $ 31,434,272 $ 20,859,333
Realized loss on investments--net (508,031) (467,649)
--------------- ---------------
Net increase in net assets resulting from operations 30,926,241 20,391,684
--------------- ---------------
Dividends & Distributions to Shareholders (Note 1e):
Investment income--net (31,420,688) (20,855,158)
Realized gain on investments--net -- (100,764)
--------------- ---------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (31,420,688) (20,955,922)
--------------- ---------------
Beneficial Interest Transactions (Note 3):
Net proceeds from sale of shares 4,208,416,998 3,766,542,841
Net asset value of shares issued to shareholders in reinvestment of
dividends and distributions (Note 1e) 31,421,185 20,933,840
--------------- ---------------
4,239,838,183 3,787,476,681
Cost of shares redeemed (4,296,269,504) (3,576,552,548)
--------------- ---------------
Net increase (decrease) in net assets derived from beneficial interest
transactions (56,431,321) 210,924,133
Net Assets:
Total increase (decrease) in net assets (56,925,768) 210,359,895
Beginning of year 1,225,160,187 1,014,800,292
--------------- ---------------
End of year* $ 1,168,234,419 $ 1,225,160,187
=============== ===============
<FN>
*Undistributed investment income-- net $ 13,584 --
=============== ===============
</TABLE>
<TABLE>
CMA CALIFORNIA MUNICIPAL MONEY FUND
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements.
For the Year Ended March 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ----------
Investment income--net .03 .02 .02 .03 .05
---------- ---------- ---------- ---------- ----------
Total from investment operations .03 .02 .02 .03 .05
---------- ---------- ---------- ---------- ----------
Less dividends from investment income--net (.03) (.02) (.02) (.03) (.05)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ==========
Total Investment Return 2.66% 1.93% 2.25% 3.48% 4.96%
========== ========== ========== ========== ==========
Ratios to Average Net Assets:
Expenses, net of reimbursement and excluding
distribution fees .51% .50% .51% .51% .50%
========== ========== ========== ========== ==========
Expenses .63% .62% .63% .63% .62%
========== ========== ========== ========== ==========
Investment income--net 2.62% 1.91% 2.22% 3.42% 4.83%
========== ========== ========== ========== ==========
Supplemental Data:
Net assets, end of year (in thousands) $1,168,234 $1,225,160 $1,014,800 $1,033,423 $1,163,288
========== ========== ========== ========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
CMA CALIFORNIA MUNICIPAL MONEY FUND
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
CMA California Municipal Money Fund (the "Fund") is part of CMA
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 following
is a summary of significant accounting policies followed by the
Fund.
(a) Valuation of investments--Investments are valued at amortized
cost, which approximates market value. For the purpose of valuation,
the maturity of a variable rate demand instrument is deemed to be
the next coupon date on which the interest rate is to be adjusted.
In the case of a floating rate instrument, the remaining maturity is
the demand notice payment period.
(b) 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.
(c) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income (including amortization of
premium and discount) is recognized on the accrual basis. Realized
gains and losses on security transactions are determined on the
identified cost basis.
(d) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(e) Dividends to shareholders--The Fund declares dividends daily and
reinvests daily such dividends (net of non-resident alien tax
withheld) in additional fund shares at net asset value. Dividends
are declared from the total of net investment income, excluding
discounts earned other than original issue discounts. Net realized
capital gains, if any, are normally distributed annually after
deducting prior years' loss carryforward. The Fund may distribute
capital gains more frequently than annually in order to maintain the
Fund's net asset value at $1.00 per share.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM" or "Adviser"). The general partner of
FAM is Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co. ("ML & Co."), which is the limited
partner.
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: 0.50%
of the first $500 million of average daily net assets; 0.425% of
average daily net assets in excess of $500 million but not exceeding
$1 billion; and 0.375% of average daily net assets in excess of $1
billion.
The most restrictive annual expense limitation requires that the
Adviser reimburse the Fund to the extent the Fund's expenses
(excluding interest, taxes, distribution fees, brokerage fees and
commissions, and extraordinary items) exceed in any fiscal year 2.5%
of the Fund's first $30 million of average daily net assets, 2.0% of
the Fund's next $70 million of average daily net assets, and 1.5% of
the average daily net assets in excess thereof. No fee payment will
be made to the Adviser during any year which will cause such
expenses to exceed the pro rata expense limitation at the time of
such payment.
<PAGE>
CMA CALIFORNIA MUNICIPAL MONEY FUND
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
Pursuant to the Distribution and Shareholder Servicing Plan in
compliance with Rule 12b-1 under the Investment Company Act of 1940,
Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S") receives a
distribution fee from the Fund at the end of each month at the
annual rate of 0.125% of average daily net assets of the Fund. The
distribution fee is to compensate MLPF&S financial consultants and
other directly involved branch office personnel for selling shares
of the Fund and for providing direct personal services to
shareholders. The distribution fee is not compensation for the
administrative and operational services rendered to the Fund by
MLPF&S in processing share orders and administering shareholder
accounts.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, MLPF&S, FDS, and/or ML & Co.
3. Shares of Beneficial Interest:
The number of shares purchased and redeemed during the period
corresponds to the amounts included in the Statements of Changes in
Net Assets for net proceeds from sale of shares and cost of shares
redeemed, respectively, since shares are recorded at $1.00 per
share.
4. Capital Loss Carryforward:
At March 31, 1995, the Fund had a net capital loss carryforward of
approximately $948,000, of which $472,000 expires in 2002, and
$476,000 expires in 2003. This amount will be available to offset
like amounts of any future taxable gains.
<PAGE>
CMA CONNECTICUT MUNICIPAL MONEY FUND
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
CMA Connecticut Municipal Money Fund of
CMA Multi-State Municipal Series Trust:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of CMA
Connecticut Municipal Money Fund of CMA Multi-State Municipal Series
Trust as of March 31, 1995, the related statements of operations for
the year then ended and changes in net assets for each of the years
in the two-year period then ended, and the financial highlights for
each of the years in the three-year period then ended and the period
April 29, 1991 (commencement of operations) to March 31, 1992. 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 March
31, 1995 by correspondence with the custodian and brokers. 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
CMA Connecticut Municipal Money Fund of CMA Multi-State Municipal
Series Trust as of March 31, 1995, the results of its operations,
the changes in its net assets, and the financial highlights for the
respective stated periods in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
April 28, 1995
<PAGE>
Portfolio Abbreviations for CMA Connecticut Municipal Money Fund
AMT Alternative Minimum Tax (subject to)
BAN Bond Anticipation Notes
CP Commercial Paper
GO General Obligation Bonds
HFA Housing Finance Agency
IDA Industrial Development Authority
PCR Pollution Control Revenue Bonds
UPDATES Unit Priced Demand Adjustable
Tax-Exempt Securities
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
CMA CONNECTICUT MUNICIPAL MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
Connecticut-- $ 2,000 Branford, Connecticut, BAN, UT, 4.50% due 8/22/1995 $ 2,004
88.8% 1,075 Bristol, Connecticut, BAN, UT, 3.72% due 5/18/1995 1,075
5,000 Cheshire, Connecticut, BAN, GO, 4.25% due 8/10/1995 5,009
4,500 Columbia, Connecticut, BAN, UT, 4.25% due 4/12/1995 4,501
12,900 Connecticut State Development Authority, Health Care Revenue Bonds
(Independent Living Project), VRDN, 4.05% due 7/01/2015 (a) 12,900
5,420 Connecticut State Development Authority, IDA, Revenue Bonds (Sealectro
Corporation Project), 4.625% due 12/01/1997 (a) 5,420
Connecticut State Development Authority, PCR, Refunding, VRDN (a):
4,100 (Connecticut Light & Power Co., Project), AMT, Series B, 4.25% due
9/01/2028 4,100
8,600 (Connecticut Light & Power Co., Project), Series A, 4.10% due 9/01/2028 8,600
7,700 (Western Massachusetts Electric Co.), Series A, 4.05% due 9/01/2028 7,700
Connecticut State Development Authority Revenue Bonds (Solid Waste Exeter
Project), VRDN, AMT (a):
3,000 Series A, 4.15% due 12/01/2019 3,000
400 Series C, 4.15% due 12/01/2019 400
24,600 Connecticut State Economic Recovery Notes, VRDN, Series B, 4.10% due
6/01/1996 (a) 24,600
700 Connecticut State GO, Series B, 5.50% due 5/15/1995 702
Connecticut State Health and Educational Facilities Authority Revenue Bonds,
VRDN (a):
1,400 (Kent School), Series A, 3.80% due 7/01/2023 1,400
3,815 (Yale-New Haven Hospital), Series E, 3.70% due 6/01/2012 3,815
5,250 Connecticut State Health and Educational Facilities Authority Revenue Bonds
(Windham Community Memorial Hospital), UPDATES, CP, 3.40% due
4/11/1995 (a) 5,250
Connecticut State Health and Educational Facilities Authority Revenue Bonds
(Yale University), CP:
5,075 Series L, 4.05% due 4/06/1995 5,075
3,050 Series L, 3.75% due 5/09/1995 3,050
4,900 Series M, 4.05% due 4/06/1995 4,900
5,800 Series N, 4.05% due 4/06/1995 5,800
200 Series O, 3.70% due 4/06/1995 200
1,450 Series O, 4.05% due 4/06/1995 1,450
5,000 Series P, 4.05% due 4/06/1995 5,000
</TABLE>
<PAGE>
<TABLE>
CMA CONNECTICUT MUNICIPAL MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (CONCLUDED) (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
Connecticut Connecticut State HFA (Housing Mortgage Finance Program):
(concluded) $ 9,365 CP, AMT, Series D, 4.20% due 4/06/1995 $ 9,365
1,800 CP, AMT, Series D, 4.10% due 4/11/1995 1,800
5,350 CP, AMT, Series D, 3.85% due 5/08/1995 5,350
1,975 Series A, 3.30% due 5/15/1995 1,975
4,100 Series G, Sub-Series G-1, 3.55% due 5/15/1995 4,100
2,775 Sub-Series D-2, 3.65% due 5/15/1995 2,775
13,000 Connecticut State Municipal Electric Energy Power Supply System Revenue
Bonds, CP, Series A, 3.75% due 5/05/1995 13,000
Connecticut State Special Assessment Unemployment Compensation, Advanced
Fund Revenue Bonds:
5,000 Series A, 3.60% due 5/15/1995 4,999
33,000 VRDN, Series B, 4.20% due 11/01/2001 (a) 33,000
9,800 Connecticut State Special Assessment Unemployment Compensation, Advanced
Fund Revenue Bonds (Connecticut Unemployment), Series C, 3.85% due
7/01/1995 9,800
Connecticut State Special Tax Obligation Revenue Bonds (Transportation
Infrastructure):
1,000 Series A, 4.75% due 4/01/1995 1,000
7,595 VRDN, Second Lien, Series 1, 4.35% due 12/01/2010 (a) 7,595
2,800 Groton City, Connecticut, BAN, 4.50% due 11/15/1995 2,808
1,000 Hartford, Connecticut, GO, UT, 6.50% due 6/15/1995 1,006
2,250 New Canaan, Connecticut, BAN, UT, 4.25% due 8/15/1995 2,252
1,000 Newtown, Connecticut, BAN, UT, 4.25% due 6/15/1995 1,000
4,085 Norwich, Connecticut, BAN, 4.50% due 10/05/1995 4,099
7,500 Stamford, Connecticut, Housing Authority Revenue Bonds (Morgan Street
Project), VRDN, 4.15% due 8/01/2024 (a) 7,500
1,700 Winchester, Connecticut, BAN, 4.375% due 5/10/1995 1,701
Puerto Rico-- 1,200 Puerto Rico Commonwealth Government Development Bank Revenue
14.1% Refunding Bonds, VRDN, 4.10% due 12/01/2015 (a) 1,200
5,000 Puerto Rico Commonwealth, Highway and Transportation Authority, Highway
Revenue Bonds, VRDN, Series X, 3.60% due 7/01/l999 (a) 5,000
775 Puerto Rico Commonwealth, Public Improvement Bonds, 9.375% due
7/01/1995 815
10,500 Puerto Rico Housing Finance Corporation, Medical Revenue Bonds, VRDN,
3.95% due 10/01/2011(a) 10,500
Puerto Rico Industrial, Medical and Environmental Pollution Control
Facilities, Financing Authority Revenue Bonds:
6,500 (Ana G. Mendez Educational Project), CP, 3.70% due 5/09/1995 6,500
2,250 (Reynolds Metals Co. Project), 4% due 9/01/1995 2,250
Puerto Rico Industrial, Tourist, Educational, Medical and Environmental
Control Facilities Financing Authority, Series A, CP:
6,000 3.65% due 4/06/1995 6,000
4,500 3.70% due 5/09/1995 4,500
Total Investments (Cost--$267,841*)--102.9% 267,841
Liabilities in Excess of Other Assets--(2.9%) (7,443)
--------
Net Assets--100.0% $260,398
========
<FN>
(a)The interest rate is subject to change periodically based on
certain indexes. The interest rate shown is the rate in effect at
March 31, 1995.
*Cost for Federal income tax purposes.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CMA CONNECTICUT MUNICIPAL MONEY FUND
STATEMENT OF ASSETS AND LIABILITIES AS OF MARCH 31, 1995
<S> <C> <C>
Assets:
Investments, at value (identified cost--$267,841,159) (Note 1a) $ 267,841,159
Cash 296,575
Interest receivable 1,603,077
Deferred organization expenses (Note 1d) 8,049
Prepaid registration fees and other assets (Note 1d) 17,559
--------------
Total assets 269,766,419
--------------
Liabilities:
Payables:
Securities purchased $ 9,108,107
Investment adviser (Note 2) 115,354
Distributor (Note 2) 84,004 9,307,465
--------------
Accrued expenses and other liabilities 60,678
--------------
Total liabilities 9,368,143
--------------
Net Assets $ 260,398,276
==============
Net Assets Consist of:
Shares of beneficial interest, $.10 par value, unlimited number of shares authorized $ 26,053,572
Paid-in capital in excess of par 234,482,149
Undistributed investment income--net 9,081
Accumulated realized capital losses--net (Note 4) (146,526)
--------------
Net Assets--Equivalent to $1.00 per share based on 260,535,721 shares of
beneficial interest outstanding $ 260,398,276
==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CMA CONNECTICUT MUNICIPAL MONEY FUND
STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1995
<S> <C> <C>
Investment Income (Note 1c):
Interest and amortization of premium and discount earned $ 8,348,335
Expenses:
Investment advisory fees (Note 2) $ 1,290,608
Distribution fees (Note 2) 320,966
Professional fees 46,726
Transfer agent fees (Note 2) 39,502
Registration fees (Note 1d) 36,737
Accounting services (Note 2) 34,816
Custodian fees 22,473
Printing and shareholder reports 15,530
Amortization of organization expenses (Note 1d) 7,475
Pricing fees 6,106
Trustees' fees and expenses 3,428
Other 6,016
--------------
Total expenses 1,830,383
--------------
Investment income--net 6,517,952
Realized Loss on Investments--Net (Note 1c) (31,149)
--------------
Net Increase in Net Assets Resulting from Operations $ 6,486,803
==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CMA CONNECTICUT MUNICIPAL MONEY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year Ended March 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <C> <C>
Operations:
Investment income--net $ 6,517,952 $ 4,135,741
Realized loss on investments--net (31,149) (18,319)
-------------- --------------
Net increase in net assets resulting from operations 6,486,803 4,117,422
-------------- --------------
Dividends to Shareholders (Note 1e):
Investment income--net (6,504,917) (4,132,578)
-------------- --------------
Net decrease in net assets resulting from dividends to shareholders (6,504,917) (4,132,578)
-------------- --------------
Beneficial Interest Transactions (Note 3):
Net proceeds from sale of shares 944,440,136 850,975,709
Net asset value of shares issued to shareholders in reinvestment of dividends
(Note 1e) 6,504,738 4,132,548
-------------- --------------
950,944,874 855,108,257
Cost of shares redeemed (940,566,013) (836,486,718)
-------------- --------------
Net increase in net assets derived from beneficial interest transactions 10,378,861 18,621,539
-------------- --------------
Net Assets:
Total increase in net assets 10,360,747 18,606,383
Beginning of year 250,037,529 231,431,146
-------------- --------------
End of year* $ 260,398,276 $ 250,037,529
============== ==============
<FN>
*Undistributed investment income--net (Note 1f) $ 9,081 $ 283
============== ==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CMA CONNECTICUT MUNICIPAL MONEY FUND
FINANCIAL HIGHLIGHTS
<CAPTION>
For the
Period
The following per share data and ratios have been derived April 29,
from information provided in the financial statements. 1991++ to
For the Year Ended March 31, March 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- --------
Investment income--net .03 .02 .02 .03
-------- -------- -------- --------
Total from investment operations .03 .02 .02 .03
-------- -------- -------- --------
Less dividends from investment income--net (.03) (.02) (.02) (.03)
-------- -------- -------- --------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ========
Total Investment Return 2.54% 1.77% 2.20% 3.56%*
======== ======== ======== ========
Ratios to Average Net Assets:
Expenses, net of reimbursement and excluding
distribution fees .58% .58% .51% .28%*
======== ======== ======== ========
Expenses, net of reimbursement .71% .70% .63% .41%*
======== ======== ======== ========
Expenses .71% .70% .73% .81%*
======== ======== ======== ========
Investment income--net 2.53% 1.76% 2.17% 3.46%*
======== ======== ======== ========
Supplemental Data:
Net assets, end of period (in thousands) $260,398 $250,038 $231,431 $197,895
======== ======== ======== ========
<FN>
*Annualized.
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<PAGE>
CMA CONNECTICUT MUNICIPAL MONEY FUND
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
CMA Connecticut Municipal Money Fund (the "Fund") is part of CMA
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
following is a summary of significant accounting policies followed
by the Fund.
(a) Valuation of investments--Investments are valued at amortized
cost, which approximates market value. For the purpose of valuation,
the maturity of a variable rate demand instrument is deemed to be
the next coupon date on which the interest rate is to be adjusted.
In the case of a floating rate instrument, the remaining maturity is
the demand notice payment period.
(b) 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.
(c) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income (including amortization of
premium and discount) is recognized on the accrual basis. Realized
gains and losses on security transactions are determined on the
identified cost basis.
(d) 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.
(e) Dividends to shareholders--The Fund declares dividends daily and
reinvests daily such dividends (net of non-resident alien tax
withheld) in additional fund shares at net asset value. Dividends
are declared from the total of net investment income, excluding
discounts earned other than original issue discounts. Net realized
capital gains, if any, are normally distributed annually after
deducting prior years' loss carryforward. The Fund may distribute
capital gains more frequently than annually in order to maintain the
Fund's net asset value at $1.00 per share.
(f) Reclassification--Generally accepted accounting principles
require that certain differences between undistributed net
investment income for financial reporting and tax purposes, if
permanent, be reclassified to accumulated net realized capital
losses. Accordingly, current year's permanent book/tax differences
of $4,237 have been reclassified from undistributed net investment
income to accumulated net realized capital losses. These
reclassifications have no effect on net assets or net asset value
per share.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM" or "Adviser"). 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.
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
<PAGE>
Fund pays a monthly fee based upon the average daily value of the Fund's
net assets, at the following annual rates: 0.50% of the first $500
million of average daily net assets; 0.425% of average daily net assets
in excess of $500 million but not exceeding $1 billion; and 0.375% of
average daily net assets in excess of $1 billion.
CMA CONNECTICUT MUNICIPAL MONEY FUND
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
The most restrictive annual expense limitation requires that the
Adviser reimburse the Fund to the extent the Fund's expenses
(excluding interest, taxes, distribution fees, brokerage fees and
commissions, and extraordinary items) exceed in any fiscal year 2.5%
of the Fund's first $30 million of average daily net assets, 2.0% of
the Fund's next $70 million of average daily net assets, and 1.5% of
the average daily net assets in excess thereof. No fee payment will
be made to the Adviser during any year which will cause such
expenses to exceed the pro rata expense limitation at the time of
such payment.
Pursuant to the Distribution and Shareholder Servicing Plan in
compliance with Rule 12b-1 under the Investment Company Act of 1940,
Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S") receives a
distribution fee from the Fund at the end of each month at the
annual rate of 0.125% of average daily net assets of the Fund. The
distribution fee is to compensate MLPF&S financial consultants and
other directly involved branch office personnel for selling shares
of the Fund and for providing direct personal services to
shareholders. The distribution fee is not compensation for the
administrative and operational services rendered to the Fund by
MLPF&S in processing share orders and administering shareholder
accounts.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, MLPF&S, FDS, and/or ML & Co.
3. Shares of Beneficial Interest:
The number of shares purchased and redeemed during the period
corresponds to the amounts included in the Statements of Changes in
Net Assets for net proceeds from sale of shares and cost of shares
redeemed, respectively, since shares are recorded at $1.00 per
share.
4. Capital Loss Carryforward:
At March 31, 1995, the Fund had a net capital loss carryforward of
approximately $147,000, of which $80,000 expires in 2000, $30,000
expires in 2001, $10,000 expires in 2002 and $27,000 expires in
2003. This amount will be available to offset like amounts of any
future taxable gains.
<PAGE>
CMA MASSACHUSETTS MUNICIPAL MONEY FUND
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
CMA Massachusetts Municipal Money Fund
of CMA Multi-State Municipal Series Trust:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of CMA
Massachusetts Municipal Money Fund of CMA Multi-State Municipal
Series Trust as of March 31, 1995, the related statements of
operations for the year then ended and changes in net assets for
each of the years in the two-year period then ended, and the
financial highlights for each of the years in the four-year period
then ended and the period July 30, 1990 (commencement of operations)
to March 31, 1991. These financial statements and the financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
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 March
31, 1995 by correspondence with the custodian and brokers. 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
CMA Massachusetts Municipal Money Fund of CMA Multi-State Municipal
Series Trust as of March 31, 1995, the results of its operations,
the changes in its net assets, and the financial highlights for the
respective stated periods in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
April 28, 1995
<PAGE>
<TABLE>
CMA MASSACHUSETTS MUNICIPAL MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
Massachusetts-- Boston, Massachusetts, Water and Sewer Commission Revenue Bonds, VRDN,
100.6% Series A (a):
$ 700 3.75% due 11/01/2015 $ 700
5,500 3.85% due 11/01/2024 5,500
2,450 Chicopee, Massachusetts, BAN, 4% due 8/01/1995 2,451
2,000 Clipper Tax Exempt Trust, Massachusetts, VRDN, Class A, 4.17% due
10/17/2002 (a) 2,000
4,000 Fitchburg, Massachusetts, Industrial Development Financing Authority
Revenue Bonds (Netstal Machinery Project), VRDN, AMT, 4.45% due
12/23/2007 (a) 4,000
2,000 Framingham, Massachusetts, BAN, 4.08% due 8/30/1995 2,000
5,800 Massachusetts Bay Transportation Authority Revenue Bonds (General
Transportation System), 1984 Series A, 4.40% due 9/01/1995 5,800
2,000 Massachusetts State GO, Refunding, VRDN, Series A, 4.37% due
2/01/2006 (a) 2,000
1,500 Massachusetts State GO, UT, Series A, 5% due 6/15/1995 1,502
Massachusetts State Health and Educational Facilities Authority Revenue
Bonds, CP:
7,000 (Boston University Hospital), Series H, Subseries 2, 3.90% due 4/07/1995 7,000
5,000 (Fallon Health Care System), Series 1, 4.05% due 4/10/1995 5,000
Massachusetts State Health and Educational Facilities Authority
Revenue Bonds, VRDN (a):
2,600 (Brigham and Woman's Hospital), Series A, 3.70% due 7/01/2017 2,600
700 (Capital Asset Program), Series A, 3.85% due 1/01/2001 700
1,300 (Capital Asset Program), Series B, 4.10% due 7/01/2005 1,300
3,200 (Capital Asset Program), Series C, 4.10% due 7/01/2005 3,200
2,000 (Capital Asset Program), Series E, 3.80% due 1/01/2035 2,000
1,700 (Harvard University), Series I, 3.75% due 8/01/2017 1,700
5,000 (Massachusetts Institute of Technology), Series G, 3.75% due 7/01/2021 5,000
2,300 (Newbury College), Series A, 3.90% due 11/01/2018 2,300
2,000 (Wellesley College), Series B, 3.80% due 7/01/2022 2,000
6,000 (Williams College), Series E, 4% due 8/01/2014 6,000
5,200 Massachusetts State HFA, S/F Housing Revenue Bonds, AMT, Series 34,
3.85% due 6/01/1995 5,200
2,500 Massachusetts State Industrial Finance Agency, Cultural, Health and
Educational Revenue Bonds (Berkshire Project), VRDN, 4.10% due
9/01/2020 (a) 2,500
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Portfolio Abbreviations for CMA Massachusetts Municipal Money Fund
<S> <C>
AMT Alternative Minimum Tax (subject to) RAN Revenue Anticipation Notes
BAN Bond Anticipation Notes S/F Single-Family
CP Commercial Paper UPDATES Unit Priced Demand Adjustable
GO General Obligation Bonds Tax-Exempt Securities
HFA Housing Finance Agency UT Unlimited Tax
PCR Pollution Control Revenue Bonds VRDN Variable Rate Demand Notes
</TABLE>
<PAGE>
<TABLE>
CMA MASSACHUSETTS MUNICIPAL MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (CONCLUDED) (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
Massachusetts $ 7,500 Massachusetts State Industrial Finance Agency, Health Care Facility
(concluded) Revenue Bonds (Beverly Enterprises, Inc.), VRDN, 4.20% due 4/01/2009 (a) $ 7,500
1,860 Massachusetts State Industrial Finance Agency, Industrial Revenue
Refunding Bonds (Easy Day Project), VRDN, Series A, 4.10% due 7/01/2006 (a) 1,860
4,000 Massachusetts State Industrial Finance Agency, PCR (Holyoke Water &
Power Company Project), VRDN, AMT, 4.25% due 12/01/2020 (a) 4,000
Massachusetts State Industrial Finance Agency, PCR, Refunding
(New England Power Company Project), CP:
4,300 4.15% due 4/07/1995 4,300
3,000 4.25% due 5/12/1995 3,000
6,700 Massachusetts State Industrial Finance Agency, Resource Recovery Revenue
Bonds (Ogden Haverhill), VRDN, AMT, Series B, 3.90% due 12/01/2011 (a) 6,700
Massachusetts State Industrial Finance Agency Revenue Bonds, VRDN (a):
800 (Hockomock YMCA), Series A, 3.95% due 6/01/2011 800
2,000 (New England Deaconess Project), Series B, 3.90% due 4/01/2023 2,000
4,500 (Williston-Northampton School Project), Series B, 4.15% due 4/01/2024 4,500
17,000 Massachusetts State Municipal Wholesale Electric Company, Power
Supply System, Revenue Bonds, VRDN, Series C, 4% due 7/01/2019 (a) 17,000
Massachusetts State, UPDATES, VRDN (a):
5,600 Series B, 4.35% due 12/01/1997 5,600
2,200 Series D, 4.35% due 6/01/1995 2,200
3,000 Series E, 4.35% due 12/01/1997 3,000
1,500 Montachusett, Massachusetts, Regional Transit Authority, RAN, 4.25% due
6/30/1995 1,502
2,440 Natick, Massachusetts, BAN, UT, 4.50% due 9/01/1995 2,445
New Bedford, Massachusetts:
2,600 BAN, UT, 4.75% due 8/11/1995 2,605
1,400 RAN, GO, 4.90% due 6/30/1995 1,403
1,000 North Adams, Massachusetts, BAN, UT, 4.25% due 6/30/1995 1,001
2,000 Peabody, Massachusetts, BAN, GO, 4.50% due 7/28/1995 2,003
4,500 Pioneer Valley Transit Authority, Massachusetts, RAN, 4.25% due
8/11/1995 4,506
1,500 Reading, Massachusetts, BAN, GO, 4.25% due 7/14/1995 1,501
3,500 Springfield, Massachusetts, RAN, GO, 5.10% due 6/30/1995 3,506
Worcester, Massachusetts, Regional Transit Authority, RAN:
4,000 4% due 6/23/1995 4,001
2,575 4.10% due 6/23/1995 2,577
Total Investments (Cost--$161,963*)--100.6% 161,963
Liabilities in Excess of Other Assets--(0.6%) (887)
-----------
Net Assets--100.0% $ 161,076
===========
<FN>
(a)The interest rate is subject to change periodically based on
certain indexes. The interest rate shown is the rate in effect at
March 31, 1995.
*Cost for Federal income tax purposes.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CMA MASSACHUSETTS MUNICIPAL MONEY FUND
STATEMENTS OF ASSETS AND LIABILITIES AS OF MARCH 31, 1995
<CAPTION>
<S> <C> <C>
Assets:
Investments, at value (identified cost--$161,963,008) (Note 1a) $ 161,963,008
Cash 170,688
Interest receivable 1,109,087
Deferred organization expenses (Note 1d) 3,282
Prepaid registration fees and other assets (Note 1d) 2,920
--------------
Total assets 163,248,985
--------------
Liabilities:
Payables:
Securities purchased $ 2,001,753
Investment adviser (Note 2) 67,725
Distributor (Note 2) 49,326 2,118,804
--------------
Accrued expenses and other liabilities 54,339
--------------
Total liabilities 2,173,143
--------------
Net Assets $ 161,075,842
==============
Net Assets Consist of:
Shares of beneficial interest, $.10 par value, unlimited number of shares
authorized $ 16,108,754
Paid-in capital in excess of par 144,978,788
Accumulated realized capital losses--net (Note 4) (11,700)
--------------
Net Assets--Equivalent to $1.00 per share based on 161,087,542 shares of
beneficial interest outstanding $ 161,075,842
==============
</TABLE>
<TABLE>
CMA MASSACHUSETTS MUNICIPAL MONEY FUND
STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1995
<CAPTION>
<S> <C> <C>
Investment Income (Note 1c):
Interest and amortization of premium and discount earned $ 4,833,524
Expenses:
Investment advisory fees (Note 2) $ 756,123
Distribution fees (Note 2) 187,724
Professional fees 51,526
Transfer agent fees (Note 2) 44,690
Registration fees (Note 1d) 29,405
Accounting services (Note 2) 23,525
Printing and shareholder reports 21,681
Custodian fees 15,762
Amortization of organization expenses (Note 1d) 9,982
Pricing fees 6,325
Trustees' fees and expenses 2,004
Other 3,920
--------------
Total expenses 1,152,667
--------------
Investment income--net 3,680,857
Realized Loss on Investments--Net (Note 1c) (622)
--------------
Net Increase in Net Assets Resulting from Operations $ 3,680,235
==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CMA MASSACHUSETTS MUNICIPAL MONEY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year Ended March 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <C> <C>
Operations:
Investment income--net $ 3,680,857 $ 2,487,097
Realized loss on investments--net (622) (7,077)
-------------- --------------
Net increase in net assets resulting from operations 3,680,235 2,480,020
-------------- --------------
Dividends to Shareholders (Note 1e):
Investment income-- net (3,680,587) (2,487,097)
-------------- --------------
Net decrease in net assets resulting from dividends to shareholders (3,680,587) (2,487,097)
-------------- --------------
Beneficial Interest Transactions (Note 3):
Net proceeds from sale of shares 566,759,318 770,729,466
Net asset value of shares issued to shareholders in reinvestment of
dividends (Note 1e) 3,680,721 2,487,010
-------------- --------------
570,440,039 773,216,476
Cost of shares redeemed (560,168,139) (754,707,003)
-------------- --------------
Net increase in net assets derived from beneficial interest
transactions 10,271,900 18,509,473
-------------- --------------
Net Assets:
Total increase in net assets 10,271,548 18,502,396
Beginning of year 150,804,294 132,301,898
-------------- --------------
End of year* $ 161,075,842 $ 150,804,294
============== ==============
<FN>
*Undistributed investment income--net (Note 1f) $ -- $ 7,020
============== ==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CMA MASSACHUSETTS MUNICIPAL MONEY FUND
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. July 30, 1990++
For the Year Ended March 31, to March 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
Investment income--net .02 .02 .02 .04 .03
--------- --------- --------- --------- ---------
Total from investment operations .02 .02 .02 .04 .03
--------- --------- --------- --------- ---------
Less dividends from investment income--net (.02) (.02) (.02) (.04) (.03)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Total Investment Return 2.46% 1.74% 2.20% 3.66% 5.04%*
========= ========= ========= ========= =========
Ratios to Average Net Assets:
Expenses, net of reimbursement and excluding
distribution fees .64% .66% .66% .73% .60%*
========= ========= ========= ========= =========
Expenses, net of reimbursement .76% .78% .78% .85% .72%*
========= ========= ========= ========= =========
Expenses .76% .78% .78% .87% .97%*
========= ========= ========= ========= =========
Investment income--net 2.43% 1.72% 2.15% 3.56% 4.92%*
========= ========= ========= ========= =========
Supplemental Data:
Net assets, end of period (in thousands) $ 161,076 $ 150,804 $ 132,302 $ 116,340 $ 84,613
========= ========= ========= ========= =========
<FN>
*Annualized.
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<PAGE>
CMA MASSACHUSETTS MUNICIPAL MONEY FUND
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
CMA Massachusetts Municipal Money Fund (the "Fund") is part of CMA
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 following
is a summary of significant accounting policies followed by the
Fund.
(a) Valuation of investments--Investments are valued at amortized
cost, which approximates market value. For the purpose of valuation,
the maturity of a variable rate demand instrument is deemed to be
the next coupon date on which the interest rate is to be adjusted.
In the case of a floating rate instrument, the remaining maturity is
the demand notice payment period.
(b) 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.
(c) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income (including amortization of
premium and discount) is recognized on the accrual basis. Realized
gains and losses on security transactions are determined on the
identified cost basis.
(d) 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.
(e) Dividends to shareholders--The Fund declares dividends daily and
reinvests daily such dividends (net of non-resident alien tax
withheld) in additional fund shares at net asset value. Dividends
are declared from the total of net investment income, excluding
discounts earned other than original issue discounts. Net realized
capital gains, if any, are normally distributed annually after
deducting prior years' loss carryforward. The Fund may distribute
capital gains more frequently than annually in order to maintain the
Fund's net asset value at $1.00 per share.
(f) Reclassifications--Generally accepted accounting principles
require that certain differences between undistributed net
investment income for financial reporting and tax purposes, if
permanent, be reclassified to accumulated net realized capital
losses. Accordingly, current year's permanent book/tax differences
of $7,290 have been reclassified from undistributed net investment
income to accumulated net realized capital losses. These
reclassifications have no effect on net assets or net asset value
per share.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM" or "Adviser"). The general partner
of FAM is Princeton Services, Inc. ("PSI"), an indirect
<PAGE>
wholly-owned subsidiary of Merrill Lynch & Co. ("ML & Co."), which is the
limited partner.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
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: 0.50%
of the first $500 million of average daily net assets; 0.425% of
average daily net assets in excess of $500 million but not exceeding
$1 billion; and 0.375% of average daily net assets in excess of $1
billion.
The most restrictive annual expense limitation requires that the
Adviser reimburse the Fund to the extent the Fund's expenses
(excluding interest, taxes, distribution fees, brokerage fees and
commissions, and extraordinary items) exceed in any fiscal year 2.5%
of the Fund's first $30 million of average daily net assets, 2.0% of
the Fund's next $70 million of average daily net assets, and 1.5% of
the average daily net assets in excess thereof. No fee payment will
be made to the Adviser during any year which will cause such
expenses to exceed the pro rata expense limitation at the time of
such payment.
Pursuant to the Distribution and Shareholder Servicing Plan in
compliance with Rule 12b-1 under the Investment Company Act of 1940,
Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S") receives a
distribution fee from the Fund at the end of each month at the
annual rate of 0.125% of average daily net assets of the Fund. The
distribution fee is to compensate MLPF&S financial consultants and
other directly involved branch office personnel for selling shares
of the Fund and for providing direct personal services to
shareholders. The distribution fee is not compensation for the
administrative and operational services rendered to the Fund by
MLPF&S in processing share orders and administering shareholder
accounts.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, MLPF&S, FDS, and/or ML & Co.
3. Shares of Beneficial Interest:
The number of shares purchased and redeemed during the period
corresponds to the amounts included in the Statements of Changes in
Net Assets for net proceeds from sale of shares and cost of shares
redeemed, respectively, since shares are recorded at $1.00 per
share.
4. Capital Loss Carryforward:
At March 31, 1995, the Fund had a net capital loss carryforward of
approximately $12,000, of which $4,000 expires in 2001, and $8,000
expires in 2002. This amount will be available to offset like
amounts of any future taxable gains.
<PAGE>
CMA MICHIGAN MUNICIPAL MONEY FUND
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
CMA Michigan Municipal Money Fund of
CMA Multi-State Municipal Series Trust:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of CMA Michigan
Municipal Money Fund of CMA Multi-State Municipal Series Trust as of
March 31, 1995, the related statements of operations for the year
then ended and changes in net assets for each of the years in the
two-year period then ended, and the financial highlights for the
three-year period then ended and the period April 29, 1991
(commencement of operations) to March 31, 1992. 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 March
31, 1995 by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
CMA Michigan Municipal Money Fund of CMA Multi-State Municipal
Series Trust as of March 31, 1995, the results of its operations,
the changes in its net assets, and the financial highlights for the
respective stated periods in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
April 28, 1995
<PAGE>
Portfolio Abbreviations for CMA Michigan Municipal Money Fund
AMT Alternative Minimum Tax (subject to)
CP Commercial Paper
GO General Obligation Bonds
IDR Industrial Development Revenue Bonds
M/F Multi-Family
RAN Revenue Anticipation Notes
VRDN Variable Rate Demand Notes
CMA MICHIGAN MUNICIPAL MONEY FUND
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (IN THOUSANDS)
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
Michigan-- $ 1,100 Bedford Township, Michigan, Economic Development Corp. Revenue
96.8% Bonds (Tech Steel Inc., Project), VRDN, 4.45% due 3/01/2010 (a) $ 1,100
6,600 Bruce Township, Michigan, Hospital Finance Authority, Health Care
System Revenue Bonds (Sisters Charity-Saint Joseph's), VRDN, Series A,
4% due 5/01/2018 (a) 6,600
1,000 Clinton Township, Michigan, Economic Development Corporation, Health
Care System Revenue Bonds (Sisters Charity-Saint Joseph's), VRDN, 4%
due 5/01/2013 (a) 1,000
Cornell Township, Michigan, Economic Development Corp., IDR, CP,
Refunding (Mead-Escambia Paper Co.):
2,100 4.10% due 4/04/1995 2,100
1,140 4.20% due 4/24/1995 1,140
1,000 4.10% due 5/10/1995 1,000
1,300 4.05% due 5/15/1995 1,300
5,060 Delta County, Michigan, Economic Development Corporation, Environmental
Improvement Revenue Bonds (Mead-Escambia Paper Co.), CP, Series B,
4.05% due 4/03/1995 5,060
1,700 Detroit, Michigan, Downtown Development Authority, Revenue Refunding
Bonds (Millender Center Project), VRDN, 4.25% due 12/01/2010 (a) 1,700
2,300 Detroit, Michigan, Tax Increment Finance Authority, Democratic Tax
Increment Revenue Bonds (Central Industrial Park Project), VRDN, 4.05%
due 10/01/2010 (a) 2,300
500 Detroit, Michigan, Tax Increment Finance Authority, Increment Reserve
Fund Revenue Bonds (Central Industrial Park Project), VRDN, 4.05% due
10/01/2010 (a) 500
4,000 Detroit, Michigan, Water Supply System Revenue Bonds, VRDN, 4.25% due
7/01/2013 (a) 4,000
3,600 East Detroit, Michigan, School District State Aid, 3.50% due 4/04/1995 3,600
3,300 Georgetown Charter Township, Michigan, IDR, Limited Obligation (J & F
Steel Corp.), VRDN, AMT, 4.30% due 2/01/2009 (a) 3,300
1,200 Grand Rapids, Michigan, Economic Development Corp., Economic Development
Revenue Refunding Bonds (Amway Hotel Corp. Project), VRDN, Series B,
4.20% due 8/01/2017 (a) 1,200
2,000 Grand Rapids, Michigan, IDR, Refunding (Etheridge Company Project),
VRDN, AMT, 4.30% due 7/01/2009 (a) 2,000
6,700 Grand Rapids, Michigan, Water Supply System Revenue Refunding Bonds,
VRDN, 4.30% due 1/01/2020 (a) 6,700
1,750 Melvindale, Michigan, Economic Development Corporation, Limited
Obligation Revenue Refunding Bonds (North American Steel Project),
VRDN, 4.20% due 6/01/1998 (a) 1,750
Michigan Higher Education Student Loan Authority Revenue Bonds, VRDN,
AMT (a):
1,000 Refunding, Series XII-B, 4.25% due 10/01/2013 1,000
500 Series XII-D, 4.25% due 10/01/2015 500
2,000 Series XII-F, 4.25% due 10/01/2020 2,000
20,250 Michigan Municipal Bond Authority, RAN, Series B, 4.75% due 7/20/1995 20,294
7,500 Michigan State Building Authority Revenue Bonds, CP, Series 1, 4.10%
due 4/27/1995 7,500
</TABLE>
<PAGE>
CMA MICHIGAN MUNICIPAL MONEY FUND
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995(CONCLUDED) (IN THOUSANDS)
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
Michigan $22,500 Michigan State GO Notes, 5% due 9/29/1995 $ 22,604
(concluded) 9,100 Michigan State Hospital Finance Authority Revenue Bonds (Providence
Hospital), VRDN, 4.25% due 11/01/2014 (a) 9,100
Michigan State Housing Development Authority, Limited Obligation
Revenue Bonds:
4,000 (Bloomfield), CP, Series 1, 4.25% due 5/19/1995 4,000
3,500 (Laurel Valley), VRDN, 4.10% due 12/01/2007 (a) 3,500
3,400 (Pine Ridge), VRDN, 4.10% due 10/01/2007 (a) 3,400
4,800 (Shoal Creek), VRDN, 4.10% due 10/01/2007 (a) 4,800
Michigan State Housing Development Authority, M/F Housing Revenue
Bonds, CP, AMT, Series A:
9,595 4.20% due 4/04/1995 9,595
1,000 4.15% due 4/11/1995 1,000
10,595 4.20% due 4/24/1995 10,595
1,700 4.20% due 4/25/1995 1,700
5,225 4.25% due 5/10/1995 5,225
4,500 Michigan State School Loan Notes, GO, Series B, 4.25% due 4/11/1995 4,500
2,000 Michigan State Strategic Fund, IDR (Norcer Manufacturing Project),
VRDN, 4% due 12/01/2000 (a) 2,000
3,200 Michigan State Strategic Fund, Limited Obligation, IDR (Baron Drawn
Steel), VRDN, AMT, 4.50% due 12/01/2006 (a) 3,200
10,000 Michigan State Strategic Fund, Limited Obligation Revenue Bonds,
CP (Dow Chemical Co. Project), AMT, 4.20% due 4/03/1995 10,000
Michigan State Strategic Fund, Limited Obligation Revenue Bonds,
VRDN (a):
3,000 (Midbrook Products Inc. Project), AMT, 4.30% due 10/01/2014 3,000
2,000 (Miller Inc. Project), AMT, 4.25% due 12/01/2009 2,000
8,800 Refunding (Consumers Power Company Project), Series A, 4.25% due
6/15/2010 8,800
4,850 Refunding (Lake Shore Inc.), AMT, 4.45% due 11/01/2019 4,850
640 Refunding (Park Village Pines Project), 4.20% due 5/01/2006 640
10,000 Michigan State Strategic Fund, Solid Waste Disposal Revenue Bonds
(Grayling Generating Project), VRDN, AMT, 4.25% due 1/01/2014 (a) 10,000
Michigan State Strategic Fund, Solid Waste Disposal Revenue Bonds
(S. D. Warren Company), CP:
1,000 Series A, 3.85% due 5/09/1995 1,000
1,000 Series B, 3.75% due 4/03/1995 1,000
1,000 Series C, 3.75% due 4/03/1995 1,000
7,100 Monroe County, Michigan, Economic Development Corporation, Limited
Obligation Revenue Refunding Bonds (Detroit Edison), VRDN, Series CC,
4.25% due 10/01/2024 (a) 7,100
800 University of Michigan, University Hospital Revenue Refunding Bonds,
VRDN, Series A, 4.20% due 12/01/2019 (a) 800
Puerto Rico-- Puerto Rico Commonwealth Government Development Bank Revenue Bonds:
2.5% 5,000 CP, 3.75% due 5/01/1995 5,000
600 Refunding, VRDN, 4.10% due 12/01/2015 (a) 600
Total Investments (Cost--$218,653*)-- 99.3% 218,653
Other Assets Less Liabilities--0.7% 1,518
--------
Net Assets--100.0% $220,171
========
<FN>
(a)The interest rate is subject to change periodically based on
certain indexes. The interest rate shown is the rate in effect at
March 31, 1995.
*Cost for Federal income tax purposes.
See Notes to Financial Statements.
</TABLE>
<PAGE>
CMA MICHIGAN MUNICIPAL MONEY FUND
STATEMENT OF ASSETS AND LIABILITIES AS OF MARCH 31, 1995
<TABLE>
<S> <C> <C>
Assets:
Investments, at value (identified cost--$218,653,090) (Note 1a) $ 218,653,090
Cash 149,574
Interest receivable 1,577,163
Deferred organization expenses (Note 1d) 7,670
Prepaid registration fees and other assets (Note 1d) 2,685
-------------
Total assets 220,390,182
-------------
Liabilities:
Payables:
Investment adviser (Note 2) $ 96,303
Distributor (Note 2) 72,652 168,955
-------------
Accrued expenses and other liabilities 50,557
-------------
Total liabilities 219,512
-------------
Net Assets $ 220,170,670
=============
Net Assets Consist of:
Shares of beneficial interest, $.10 par value, unlimited number of shares authorized $ 22,028,873
Paid-in capital in excess of par 198,259,857
Accumulated realized capital losses--net (Note 4) (118,060)
-------------
Net Assets--Equivalent to $1.00 per share based on 220,288,731 shares of
beneficial interest outstanding $ 220,170,670
=============
</TABLE>
See Notes to Financial Statements.
<PAGE>
CMA MICHIGAN MUNICIPAL MONEY FUND
STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1995
<TABLE>
<S> <C> <C>
Investment Income (Note 1c):
Interest and amortization of premium and discount earned $ 7,308,100
Expenses:
Investment advisory fees (Note 2) $ 1,117,988
Distribution fees (Note 2) 277,622
Transfer agent fees (Note 2) 52,817
Professional fees 47,923
Registration fees (Note 1d) 34,798
Accounting services (Note 2) 33,121
Printing and shareholder reports 21,503
Custodian fees 20,941
Pricing fees 7,296
Amortization of organization expenses (Note 1d) 7,124
Trustees' fees and expenses 3,082
Other 5,598
-------------
Total expenses 1,629,813
-------------
Investment income--net 5,678,287
Realized Loss on Investments--Net (Note 1c) (50,049)
-------------
Net Increase in Net Assets Resulting from Operations $ 5,628,238
=============
</TABLE>
See Notes to Financial Statements.
<PAGE>
CAM MICIGAN MUNICIPAL MONEY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Year Ended March 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <C> <C>
Operations:
Investment income--net $ 5,678,287 $ 3,826,822
Realized loss on investments--net (50,049) (7,009)
------------- -------------
Net increase in net assets resulting from operations 5,628,238 3,819,813
------------- -------------
Dividends to Shareholders (Note 1e):
Investment income--net (5,678,287) (3,824,891)
------------- -------------
Net decrease in net assets resulting from dividends to shareholders (5,678,287) (3,824,891)
------------- -------------
Beneficial Interest Transactions (Note 3):
Net proceeds from sale of shares 929,669,029 959,801,295
Net asset value of shares issued to shareholders in reinvestment of
dividends (Note 1e) 5,678,120 3,824,978
------------- -------------
935,347,149 963,626,273
Cost of shares redeemed (951,561,384) (927,386,005)
------------- -------------
Net increase (decrease) in net assets derived from beneficial interest
transactions (16,214,235) 36,240,268
------------- -------------
Net Assets:
Total increase (decrease) in net assets (16,264,284) 36,235,190
Beginning of year 236,434,954 200,199,764
------------- -------------
End of year $ 220,170,670 $ 236,434,954
============= =============
</TABLE>
See Notes to Financial Statements.
<PAGE>
CMA MICHIGAN MUNICIPAL MONEY FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For the
Period
The following per share data and ratios have been derived April 29,
from information provided in the financial statements. 1991++ to
For the Year Ended March 31, March 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- --------
Investment income--net .03 .02 .02 .03
Total from investment operations .03 .02 .02 .03
-------- -------- -------- --------
Less dividends from investment income--net (.03) (.02) (.02) (.03)
-------- -------- -------- --------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ========
Total Investment Return 2.57% 1.81% 2.24% 3.62%*
======== ======== ======== ========
Ratios to Average Net Assets:
Expenses, net of reimbursement and excluding distribution fees .60% .60% .53% .42%*
======== ======== ======== ========
Expenses, net of reimbursement .73% .72% .65% .54%*
======== ======== ======== ========
Expenses .73% .72% .74% .80%*
======== ======== ======== ========
Investment income--net 2.54% 1.79% 2.22% 3.53%*
======== ======== ======== ========
Supplemental Data:
Net assets, end of period (in thousands) $220,171 $236,435 $200,200 $194,433
======== ======== ======== ========
<FN>
*Annualized.
++Commencement of Operations.
</TABLE>
See Notes to Financial Statements.
<PAGE>
CMA MICHIGAN MUNICIPAL MONEY FUND
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
CMA Michigan Municipal Money Fund (the "Fund") is part of CMA
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
following is a summary of significant accounting policies followed
by the Fund.
(a) Valuation of investments--Investments are valued at amortized
cost, which approximates market value. For the purpose of valuation,
the maturity of a variable rate demand instrument is deemed to be
the next coupon date on which the interest rate is to be adjusted.
In the case of a floating rate instrument, the remaining maturity is
the demand notice payment period.
(b) 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.
(c) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income (including amortization of
premium and discount) is recognized on the accrual basis. Realized
gains and losses on security transactions are determined on the
identified cost basis.
(d) 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.
(e) Dividends to shareholders--The Fund declares dividends daily and
reinvests daily such dividends (net of non-resident alien tax
withheld) in additional fund shares at net asset value. Dividends
are declared from the total of net investment income, excluding
discounts earned other than original issue discounts. Net realized
capital gains, if any, are normally distributed annually after
deducting prior years' loss carryforward. The Fund may distribute
capital gains more frequently than annually in order to maintain the
Fund's net asset value at $1.00 per share.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM" or "Adviser"). The general partner of
FAM is Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co. ("ML & Co."), which is the limited
partner.
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: 0.50%
of the first $500 million of average daily net assets; 0.425% of
average daily net assets in excess of $500 million but not exceeding
$1 billion; and 0.375% of average daily net assets in excess of $1
billion.
The most restrictive annual expense limitation requires that the
Adviser reimburse the Fund to the extent the Fund's expenses
(excluding interest, taxes, distribution fees, brokerage fees and
commissions, and extraordinary items) exceed in any fiscal year 2.5%
of the Fund's first $30 million of average daily net assets, 2.0% of
the Fund's next
<PAGE>
$70 million of average daily net assets, and 1.5% of the average
daily net assets in excess thereof. No fee payment will be made
to the Adviser during any year which will cause such expenses to
exceed the pro rata expense limitation at the time of such
payment.
CMA MICHIGAN MUNICIPAL MONEY FUND
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
Pursuant to the Distribution and Shareholder Servicing Plan in
compliance with Rule 12b-1 under the Investment Company Act of 1940,
Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S") receives a
distribution fee from the Fund at the end of each month at the
annual rate of 0.125% of average daily net assets of the Fund. The
distribution fee is to compensate MLPF&S financial consultants and
other directly involved branch office personnel for selling shares
of the Fund and for providing direct personal services to
shareholders. The distribution fee is not compensation for the
administrative and operational services rendered to the Fund by
MLPF&S in processing share orders and administering shareholder
accounts.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, MLPF&S, FDS, and/or ML & Co.
3. Shares of Beneficial Interest:
The number of shares purchased and redeemed during the period
corresponds to the amounts included in the Statements of Changes in
Net Assets for net proceeds from sale of shares and cost of shares
redeemed, respectively, since shares are recorded at $1.00 per
share.
4. Capital Loss Carryforward:
At March 31, 1995, the Fund had a net capital loss carryforward of
approximately $118,000, of which $64,000 expires in 2001, $4,000
expires in 2002 and $50,000 expires in 2003. This amount will be
available to offset like amounts of any future taxable gains.
<PAGE>
CMA NEW JERSEY MUNICIPAL MONEY FUND
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
CMA New Jersey Municipal Money Fund of
CMA Multi-State Municipal Series Trust:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of CMA New
Jersey Municipal Money Fund of CMA Multi-State Municipal Series
Trust as of March 31, 1995, the related statements of operations for
the year then ended and changes in net assets for each of the years
in the two-year period then ended, and the financial highlights for
each of the years in the four-year period then ended and the period
July 30, 1990 (commencement of operations) to March 31, 1991. These
financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and the financial
highlights based on our audits.
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 March
31, 1995 by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
CMA New Jersey Municipal Money Fund of CMA Multi-State Municipal
Series Trust as of March 31, 1995, the results of its operations,
the changes in its net assets, and the financial highlights for the
respective stated periods in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
May 1, 1995
<PAGE>
Portfolio Abbreviations for CMA New Jersey Municipal Money Fund
ACES SM Adjustable Convertible Extendable Securities
AMT Alternative Minimum Tax (subject to)
BAN Bond Anticipation Notes
CP Commercial Paper
EDA Economic Development Authority
GO General Obligation Bonds
PCR Pollution Control Revenue Bonds
TAN Tax Anticipation Notes
TRAN Tax Revenue Anticipation Notes
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
CMA NEW JERSEY MUNICIPAL MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
New Jersey-- $ 3,800 Atlantic County, New Jersey, Improvement Authority Revenue Bonds (Pooled
93.3% Government Loan Program), ACES, 4.15% due 7/01/2026 (a) $ 3,800
1,400 Burlington Township, New Jersey, BAN, 4.25% due 6/30/1995 1,402
6,365 Camden County, New Jersey, BAN, Series A, 5.25% due 2/14/1996 6,389
17,500 Eagle Tax Exempt Trust, VRDN, Series 94C 3001, 4.25% due 10/01/2015 (a) 17,500
5,200 Elizabeth, New Jersey, BAN, 4.54% due 7/18/1995 5,202
Essex County, New Jersey, Improvement Authority Revenue Bonds (Pooled
Government Loan Program), ACES (a):
8,000 4.15% due 12/01/1998 8,000
14,650 4.15% due 7/01/2026 14,650
13,260 Floating Rate Trust Certificates, VRDN, Series 1994 D, 4.25% due
7/02/1999 (a) 13,260
9,000 Galloway Township, New Jersey, BAN, 4.25% due 7/12/1995 9,008
9,410 Hudson County, New Jersey, Improvement Authority Revenue Bonds (Pooled
Government Loan Program), VRDN, 4.35% due 7/15/2026 (a) 9,410
8,500 Jersey City, New Jersey, BAN, UT, 5% due 9/29/1995 8,524
5,700 Mercer County, New Jersey, Improvement Authority Revenue Bonds, VRDN,
4.15% due 11/01/1998 (a) 5,700
20,000 Mercer County, New Jersey, TAN, 4.375% due 4/12/1995 20,006
25,600 Monmouth County, New Jersey, Improvement Authority Revenue Bonds
(Pooled Government Loan Program), ACES, 4.15% due 8/01/2016 (a) 25,600
4,300 Morristown, New Jersey, BAN, UT, 4.50% due 5/25/1995 4,305
New Jersey EDA, Dock Facility Revenue Refunding Bonds (Bayonne IMTT
Project), Series A, VRDN (a):
9,100 4.20% due 12/01/2027 9,100
7,000 4.25% due 12/01/2027 7,000
New Jersey EDA, Economic Development Revenue Bonds, VRDN (a):
2,300 (400 International Drive Partners), 4.20% due 9/01/2005 2,300
9,625 (Benedictine Abbey of Newark), 4.10% due 12/01/2019 9,625
1,800 (Branch/Jersey Avenue Project), 4.05% due 5/01/2011 1,800
7,600 (Center for Aging, Applewood Estates Project), 4% due 12/01/2019 7,600
5,000 (Epitaxx, Inc. Project), AMT, 4.375% due 8/01/2016 5,000
1,850 (Office Courthouse Association Project), AMT, 4.20% due 4/01/2011 1,850
1,500 Refunding (Church & Dwight), 3.90% due 12/01/2008 1,500
2,500 Refunding (RJB Association Project), 4.15% due 8/01/2008 2,500
1,375 (Saint Peter's Preparatory School), 4.10% due 1/01/2010 1,375
</TABLE>
<PAGE>
<TABLE>
CMA NEW JERSEY MUNICIPAL MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995(CONTINUED) (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
New Jersey New Jersey EDA, Industrial and Economic Development Revenue
(continued) Bonds, VRDN (a):
$ 2,675 (East Meadow Corp.), Series A, 4.30% due 12/01/2006 $ 2,675
4,770 (East Meadow Corp.), Series B, 4.30% due 12/01/2006 4,770
1,200 (Elizabeth Realty Urban Renewal Associations-1986 Project),
AMT, 5% due 6/01/2000 1,200
3,200 (Marriott Corp. Project), 4% due 10/01/2014 3,200
4,100 (Seton Company Project), 3.95% due 9/01/2005 4,100
5,200 (Toys 'R' Us, Inc. Project), 3.70% due 4/01/2019 5,200
7,450 New Jersey EDA, PCR (Merck & Co.), VRDN, Series A, 4.375% due
10/01/2004 (a) 7,450
1,900 New Jersey EDA, Port Facility Revenue Bonds (Trailer Marine Crowle),
VRDN, 3.85% due 2/01/2002 (a) 1,900
New Jersey EDA Revenue Bonds:
1,625 (Akma, Inc.), VRDN, AMT, Series I, 4% due 8/01/2014 (a) 1,625
2,150 (Andy Boy), VRDN, AMT, Series H, 4% due 8/01/2004 (a) 2,150
9,000 (Chambers Cogeneration Project), CP, AMT, 4.05% due 4/12/1995 9,000
4,500 (Chambers Cogeneration Project), CP, AMT, 3.75% due 5/11/1995 4,500
1,305 (E.P. Henry Corp. Project), VRDN, 4.20% due 3/01/2005 (a) 1,305
10,900 (Hoffman-La Roche Inc. Project), VRDN, AMT, 4.10% due
11/01/2011 (a) 10,900
1,000 (Keystone Project), CP, 4.05% due 4/07/1995 1,000
2,000 (Peddie School Project), VRDN, Series B, 4.15% due 2/01/2019 (a) 2,000
38,100 New Jersey Sports and Exposition Authority State Contract Revenue
Bonds, VRDN, Series C, 4% due 9/01/2024 (a) 38,100
New Jersey State, GO:
2,500 7% due 4/01/1995 (b) 2,500
3,000 CP, 3.80% due 4/03/1995 3,000
20,000 CP, 3.55% due 4/12/1995 20,000
5,000 CP, 3.60% due 4/12/1995 5,000
17,000 TRAN, Series A, 5% due 6/15/1995 17,031
8,950 New Jersey State Turnpike Authority, Turnpike Revenue Refunding
Bonds, VRDN, Series D, 3.85% due 1/01/2018 (a) 8,950
1,500 North Brunswick Township, New Jersey, BAN, 5.04% due 7/26/1995 1,504
4,405 Paramus, New Jersey, BAN, 3.82% due 7/05/1995 4,405
6,000 Passaic County, New Jersey, BAN, UT, 4.50% due 7/06/1995 6,011
Port Authority of New York and New Jersey, CP, AMT:
405 3.80% due 5/05/1995 405
6,320 4% due 5/05/1995 6,320
3,540 3.75% due 5/10/1995 3,540
Port Authority of New York and New Jersey, Special Obligation
Revenue Bonds (Versatile Structure Obligation), VRDN (a):
52,000 Series 1, 4.40% due 8/01/2028 52,000
5,700 Series 2, 4.10% due 5/01/2019 5,700
3,000 Princeton Township, New Jersey, BAN, 4.50% due 8/31/1995 3,002
</TABLE>
<PAGE>
<TABLE>
CMA NEW JERSEY MUNICIPAL MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995(CONCLUDED) (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
New Jersey Rutgers State University of New Jersey, Revenue Bonds:
(concluded) $ 1,000 Series 1, 7.625% due 5/01/1995 (c) $ 1,023
1,355 Series A, 6.60% due 5/01/1995 (b) 1,359
Salem County, New Jersey, Industrial Pollution Control Financing
Authority Revenue Bonds:
7,300 (du Pont (E.I.) de Nemours), VRDN, Series A, 4% due 3/01/2012 (a) 7,300
3,200 (Philadelphia Electric), CP, Series A, 3.70% due 4/06/1995 3,200
1,760 Somerset County, New Jersey, GO, UT, 5.875% due 12/01/1995 1,773
5,000 South Brunswick Township, New Jersey, Board of Education Temporary
Notes, 4.625% due 4/28/1995 5,002
Union County, New Jersey, Industrial Pollution Control Financing
Authority, PCR, Refunding:
2,200 (Allied Signal Project), VRDN, 4.30% due 12/01/2020 (a) 2,200
6,000 (Exxon Project), CP, AMT, 3.95% due 5/10/1995 6,000
19,700 (Exxon Project), VRDN, 4.20% due 7/01/2033 (a) 19,700
Puerto Rico-- Puerto Rico Commonwealth, Government Development Bank Revenue
6.0% Bonds, CP:
12,500 3.70% due 5/09/1995 12,500
5,000 3.75% due 5/10/1995 5,000
3,400 Puerto Rico Commonwealth, Government Development Bank, Revenue
Refunding Bonds, VRDN, 4.10% due 12/01/2015 (a) 3,400
Puerto Rico Industrial, Medical and Environmental Pollution Control
Facilities, Financing Authority Revenue Bonds:
3,300 (Ana G. Mendez Educational Project), 3.65% due 4/06/1995 3,300
2,800 (Reynolds Metal Co. Project), VRDN, 4% due 9/01/1995 (a) 2,800
4,600 Puerto Rico Industrial, Tourist, Educational, Medical and Environmental
Control Facilities Financing Authority, CP, Series A, 3.65% due
4/06/1995 4,600
Total Investments (Cost--$522,006*)--99.3% 522,006
Other Assets Less Liabilities--0.7% 3,741
----------
Net Assets--100.0% $ 525,747
==========
<FN>
(a)The interest rate is subject to change periodically based on
certain indexes. The interest rate shown is the rate in effect at
March 31, 1995.
(b)Escrowed to maturity.
(c)Prerefunded.
*Cost for Federal income tax purposes.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CMA NEW JERSEY MUNICIPAL MONEY FUND
STATEMENT OF ASSETS AND LIABILITIES AS OF MARCH 31, 1995
<S> <C> <C>
Assets:
Investments, at value (identified cost--$522,005,944) (Note 1a) $ 522,005,944
Cash 254,444
Interest receivable 3,959,069
Deferred organization expenses (Note 1d) 2,912
Prepaid registration fees and other assets (Note 1d) 13,805
---------------
Total assets 526,236,174
---------------
Liabilities:
Payables:
Investment adviser (Note 2) $ 221,584
Distributor (Note 2) 155,108 376,692
---------------
Accrued expenses and other liabilities 112,276
---------------
Total liabilities 488,968
---------------
Net Assets $ 525,747,206
===============
Net Assets Consist of:
Shares of beneficial interest, $.10 par value, unlimited number of shares
authorized $ 52,581,909
Paid-in capital in excess of par 473,237,178
Accumulated realized capital losses--net (Note 4) (71,881)
---------------
Net Assets--Equivalent to $1.00 per share based on 525,819,087 shares of
beneficial interest outstanding $ 525,747,206
===============
</TABLE>
<TABLE>
CMA NEW JERSEY MUNICIPAL MONEY FUND
STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1995
<S> <C> <C>
Investment Income (Note 1c):
Interest and amortization of premium and discount earned $ 14,846,642
Expenses:
Investment advisory fees (Note 2) $ 2,299,467
Distribution fees (Note 2) 573,696
Transfer agent fees (Note 2) 99,854
Accounting services (Note 2) 86,286
Registration fees (Note 1d) 60,722
Professional fees 57,569
Printing and shareholder reports 46,936
Custodian fees 33,868
Amortization of organization expenses (Note 1d) 8,858
Pricing fees 8,204
Trustees' fees and expenses 5,882
Other 7,776
---------------
Total expenses 3,289,118
---------------
Investment income--net 11,557,524
Realized Loss on Investments--Net (Note 1c) (30,343)
---------------
Net Increase in Net Assets Resulting from Operations $ 11,527,181
===============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CMA NEW JERSEY MUNICIPAL MONEY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year Ended March 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <C> <C>
Operations:
Investment income--net $ 11,557,524 $ 7,209,946
Realized loss on investments--net (30,343) (33,363)
--------------- ---------------
Net increase in net assets resulting from operations 11,527,181 7,176,583
--------------- ---------------
Dividends & Distributions to Shareholders (Note 1e):
Investment income--net (11,550,666) (7,205,111)
Realized gain on investments--net -- (42,440)
--------------- ---------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (11,550,666) (7,247,551)
--------------- ---------------
Beneficial Interest Transactions (Note 3):
Net proceeds from sale of shares 1,629,827,901 1,451,838,155
Net asset value of shares issued to shareholders in reinvestment of
dividends and distributions (Note 1e) 11,550,723 7,227,727
--------------- ---------------
1,641,378,624 1,459,065,882
Cost of shares redeemed (1,557,454,149) (1,406,051,737)
--------------- ---------------
Net increase in net assets derived from beneficial interest transactions 83,924,475 53,014,145
--------------- ---------------
Net Assets:
Total increase in net assets 83,900,990 52,943,177
Beginning of year 441,846,216 388,903,039
--------------- ---------------
End of year* $ 525,747,206 $ 441,846,216
=============== ===============
<FN>
*Undistributed investment income--net (Note 1f) $ -- $ 657
=============== ===============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CMA NEW JERSEY MUNICIPAL MONEY FUND
FINANCIAL HIGHLIGHTS
<CAPTION>
For the
Period
The following per share data and ratios have been derived July 30,
from information provided in the financial statements. 1990++ to
For the Year Ended March 31, March 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
Investment income--net .02 .02 .02 .03 .03
--------- --------- --------- --------- ---------
Total from investment operations .02 .02 .02 .03 .03
--------- --------- --------- --------- ---------
Less dividends from investment income--net (.02) (.02) (.02) (.03) (.03)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Total Investment Return 2.52% 1.82% 2.21% 3.49% 4.95%*
========= ========= ========= ========= =========
Ratios to Average Net Assets:
Expenses, net of reimbursement and excluding
distribution fees .59% .58% .58% .62% .52%*
========= ========= ========= ========= =========
Expenses, net of reimbursement .71% .70% .70% .74% .64%*
========= ========= ========= ========= =========
Expenses .71% .70% .70% .74% .76%*
========= ========= ========= ========= =========
Investment income--net 2.51% 1.80% 2.16% 3.42% 4.74%*
========= ========= ========= ========= =========
Supplemental Data:
Net assets, end of period (in thousands) $ 525,747 $ 441,846 $ 388,903 $ 350,058 $ 356,475
========= ========= ========= ========= =========
<FN>
*Annualized.
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<PAGE>
CMA NEW JERSEY MUNICIPAL MONEY FUND
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
CMA New Jersey Municipal Money Fund (the "Fund") is part of CMA
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 following
is a summary of significant accounting policies followed by the
Fund.
(a) Valuation of investments--Investments are valued at amortized
cost, which approximates market value. For the purpose of valuation,
the maturity of a variable rate demand instrument is deemed to be
the next coupon date on which the interest rate is to be adjusted.
In the case of a floating rate instrument, the remaining maturity is
the demand notice payment period.
(b) 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.
(c) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income (including amortization of
premium and discount) is recognized on the accrual basis. Realized
gains and losses on security transactions are determined on the
identified cost basis.
(d) 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.
(e) Dividends to shareholders--The Fund declares dividends daily and
reinvests daily such dividends (net of non-resident alien tax
withheld) in additional fund shares at net asset value. Dividends
are declared from the total of net investment income, excluding
discounts earned other than original issue discounts. Net realized
capital gains, if any, are normally distributed annually after
deducting prior years' loss carryforward. The Fund may distribute
capital gains more frequently than annually in order to maintain the
Fund's net asset value at $1.00 per share.
(f) Reclassification--Generally accepted accounting principles
require that certain differences between undistributed net
investment income for financial reporting and tax purposes, if
permanent, be reclassified to accumulated net realized capital
losses. Accordingly, current year's permanent book/tax differences
of $7,515 have been reclassified from undistributed net investment
income to accumulated net realized capital losses. These
reclassifications have no effect on net assets or net asset value
per share.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"or "Adviser"). The general partner of
FAM is Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co. ("ML & Co."), which is the limited
partner.
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: 0.50%
of the first $500 million of average daily net assets; 0.425% of
average daily net assets in excess of $500 million but not exceeding
$1 billion; and 0.375% of average daily net assets in excess of $1
billion.
<PAGE>
CMA NEW JERSEY MUNICIPAL MONEY FUND
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
The most restrictive annual expense limitation requires that the
Adviser reimburse the Fund to the extent the Fund's expenses
(excluding interest, taxes, distribution fees, brokerage fees and
commissions, and extraordinary items) exceed in any fiscal year 2.5%
of the Fund's first $30 million of average daily net assets, 2.0% of
the Fund's next $70 million of average daily net assets, and 1.5% of
the average daily net assets in excess thereof. No fee payment will
be made to the Adviser during any year which will cause such
expenses to exceed the pro rata expense limitation at the time of
such payment.
Pursuant to the Distribution and Shareholder Servicing Plan in
compliance with Rule 12b-1 under the Investment Company Act of 1940,
Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S") receives a
distribution fee from the Fund at the end of each month at the
annual rate of 0.125% of average daily net assets of the Fund. The
distribution fee is to compensate MLPF&S financial consultants and
other directly involved branch office personnel for selling shares
of the Fund and for providing direct personal services to
shareholders. The distribution fee is not compensation for the
administrative and operational services rendered to the Fund by
MLPF&S in pro-cessing share orders and administering shareholder
accounts.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, MLPF&S, FDS, and/or ML & Co.
3. Shares of Beneficial Interest:
The number of shares purchased and redeemed during the period
corresponds to the amounts included in the Statements of Changes in
Net Assets for net proceeds from sale of shares and cost of shares
redeemed, respectively, since shares are recorded at $1.00 per
share.
4. Capital Loss Carryforward:
At March 31, 1995, the Fund had a net capital loss carryforward of
approximately $72,000, all of which expires in 2003. This amount
will be available to offset like amounts of any future taxable
gains.
<PAGE>
CMA NEW YORK MUNICIPAL MONEY FUND
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
CMA New York Municipal Money Fund of
CMA Multi-State Municipal Series Trust:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of CMA New York
Municipal Money Fund of CMA Multi-State Municipal Series Trust as of
March 31, 1995, the related statements of operations for the year
then ended and changes in net assets for each of the years in the
two-year period then ended, and the financial highlights for each of
the years in the 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 March
31, 1995 by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
CMA New York Municipal Money Fund of CMA Multi-State Municipal
Series Trust as of March 31, 1995, the results of its operations,
the changes in its net assets, and the financial highlights for the
respective stated periods in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
May 2, 1995
<PAGE>
Portfolio Abbreviations for CMA New York Municipal Money Fund
AMT Alternative Minimum Tax (subject to)
BAN Bond Anticipation Notes
CP Commercial Paper
GO General Obligation Bonds
HFA Housing Finance Agency
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RAN Revenue Anticipation Notes
TAN Tax Anticipation Notes
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
CMA NEW YORK MUNICIPAL MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
New York-- $22,250 Brentwood, New York, United Free School District, TAN, UT, 4.25% due
94.7% 6/30/1995 $ 22,271
3,000 Broome County, New York, BAN, UT, 3.75% due 4/20/1995 3,001
8,000 Buffalo, New York, RAN, Series A, 5% due 7/12/1995 8,018
7,500 Chautauqua County, New York, TAN, UT, 5.50% due 12/21/1995 7,534
Eagle Tax Exempt Trust, VRDN (a):
27,000 Series 1994-3201, 4.30% due 4/01/2034 27,000
7,200 Series 1994-C4, 4.30% due 8/01/2003 7,200
20,000 Series 1995-3201, 4.30% due 8/15/2024 20,000
3,500 Great Neck, North New York, Water Authority System, Revenue Refunding
Bonds, VRDN, Series A, 4% due 1/01/2020 (a) 3,500
34,900 Metropolitan Transit Authority, New York, Commuter Facilities Revenue
Bonds, VRDN, 3.90% due 7/01/2021 (a) 34,900
200 Monroe County, New York, GO, AMT, UT, Series B, 6.90% due 6/01/1995 201
2,425 Municipal Assistance Corporation, City of New York, New York, Series 54,
9% due 7/01/1995 (b) 2,503
16,600 Nassau County, New York, GO, RAN, 4% due 4/14/1995 16,602
New York City, New York, CP:
20,000 4.15% due 5/24/1995 20,000
24,400 4.40% due 8/22/1995 24,400
New York City, New York, CP, RAN, UT:
5,000 Series A, 4.50% due 4/12/1995 5,001
4,100 Series B, 4.75% due 6/30/1995 4,103
68,000 New York City, New York, Floating Notes, UT, 4.063% due 6/30/1995 (a) 68,000
New York City, New York, GO, VRDN, UT, Sub-series A-4 (a):
300 4.15% due 8/01/2021 300
1,400 4.15% due 8/01/2022 1,400
5,300 4.15% due 8/01/2023 5,300
5,600 New York City, New York, Housing Development Corporation, M/F Mortgage
Revenue Bonds (Tribecca Towers), VRDN, AMT, Series A, 4% due
12/15/2024 (a) 5,600
14,000 New York City, New York, Housing Development Corporation, Special
Obligation Revenue Bonds (East 96th Street Project), VRDN, Series A,
3.95% due 8/01/2015 (a) 14,000
</TABLE>
<PAGE>
<TABLE>
CMA NEW YORK MUNICIPAL MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995(CONTINUED) (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
New York New York City, New York, IDA, Civic Facilities Revenue Bonds, VRDN (a):
(continued) $ 3,550 (Children's Oncology Society/Ronald McDonald House), 3.90%
due 5/01/2021 $ 3,550
3,200 (Columbia Grammar School Project), 3.90% due 6/30/2014 3,200
New York City, New York, IDA, IDR, VRDN, AMT (a):
1,350 Composite XXV, Series E, 4.10% due 11/01/2010 1,350
1,850 Series K, 4.10% due 11/01/2010 1,850
New York City, New York, Municipal Water Finance Authority Revenue
Bonds, CP:
3,500 4.10% due 4/06/1995 3,500
15,000 4% due 4/07/1995 15,000
6,000 4% due 4/11/1995 6,000
21,000 3.90% due 5/09/1995 21,000
15,000 4.05% due 5/24/1995 15,000
New York City, New York, Trust Cultural Resource Revenue Bonds, VRDN (a):
2,600 (Museum of Broadcasting), 4.10% due 5/01/2014 2,600
9,000 Refunding (American Natural Museum), Series A, 3.90% due 4/01/2021 9,000
New York State Dormitory Authority Revenue Bonds (Memorial Sloan
Kettering), CP:
14,900 Series A, 4.15% due 4/21/1995 14,900
5,400 Series B, 4.15% due 4/21/1995 5,400
18,410 Series B, 4.15% due 4/28/1995 18,410
11,740 Series C, 4.05% due 4/12/1995 11,740
6,200 Series D, 4.05% due 4/12/1995 6,200
13,200 Series D, 4.15% due 4/21/1995 13,200
New York State Dormitory Authority Revenue Bonds, VRDN (a):
7,900 (Metropolitan Museum of Art), Series A, 3.85% due 7/01/2015 7,900
400 (Saint Francis Center at The Knolls), 4.15% due 7/01/2023 400
New York State Dormitory Authority, Special Obligation Revenue Bonds
(State University Educational Facilities):
1,000 Series A, 6.55% due 5/01/1995 1,003
200 Series B, 6.30% due 5/01/1995 200
15,700 New York State Energy Research and Development Authority, Electric
Facilities Revenue Bonds (Long Island Lighting Co.), VRDN, Series B,
3.85% due 11/01/2023 (a) 15,700
New York State Energy Research and Development Authority, PCR
(Central Hudson Gas & Electric Company Project), VRDN, Series A (a):
7,000 AMT, 3.70% due 6/01/2027 7,000
5,650 3.80% due 11/01/2020 5,650
New York State Energy Research and Development Authority, PCR:
13,325 (Long Island Lighting Co. Project), Series A, 4.70% due 3/01/1996 13,325
16,700 (Niagara Power Corporation Project), VRDN, AMT, Series B,
4.40% due 7/01/2027 (a) 16,700
7,900 Refunding (Central Hudson Gas & Electric Company Project), VRDN,
Series B, 3.55% due 6/01/2027 (a) 7,900
13,800 Refunding (Orange & Rockland Project), VRDN, Series A, 3.90% due
10/01/2014 (a) 13,800
</TABLE>
<PAGE>
<TABLE>
CMA NEW YORK MUNICIPAL MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995(CONTINUED) (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
New York New York State Energy Research and Development Authority, PCR
(continued) (New York State Electric & Gas Corporation Project), CP:
$16,800 3.85% due 4/17/1995 $ 16,800
5,000 Series D, 4% due 4/10/1995 5,000
9,000 Series D, 3.60% due 4/12/1995 9,000
New York State Environmental Facilities Corp., Solid Waste Disposal
Revenue Bonds (General Electric Company Project), CP, Series A:
3,300 3.95% due 4/07/1995 3,300
5,600 3.95% due 4/12/1995 5,600
2,500 Refunding, 4.10% due 5/23/1995 2,500
12,000 New York State Floating Rate Trust Certificates, VRDN, Series A, 4.25%
due 3/02/2003 (a) 12,000
18,500 New York State HFA Revenue Bonds (Normandie Court I), VRDN, 4.05% due
5/15/2015 (a) 18,500
300 New York State HFA, Special Obligation Revenue Bonds (Health Facilities
of New York City), Series A, 6.45% due 5/01/1995 301
New York State Job Development Authority, VRDN (a):
120 1984 Series C, 3.85% due 3/01/1999 120
1,220 1984 Series E, 3.85% due 3/01/1999 1,220
200 1984 Series F, 3.85% due 3/01/1999 200
15 1984 Series G, 3.85% due 3/01/1999 15
320 Series A, 3.80% due 3/01/2000 320
2,435 Series B, 3.80% due 3/01/2000 2,435
4,685 Series C, 3.80% due 3/01/2000 4,685
3,890 Series D, 3.05% due 3/01/2000 3,890
New York State Local Government Assistance Corporation Revenue Bonds,
VRDN (a):
20,500 Series A, 3.85% due 4/01/2022 20,500
200 Series B, 3.85% due 4/01/2023 200
New York State Medical Care Facilities, Finance Agency Revenue Bonds:
6,100 (Children's Hospital of Buffalo), VRDN, Series A, 3.95% due
11/01/2005 (a) 6,100
4,000 (Mt. Sinai Hospital), Series C, 8.875% due 1/15/1996 (b) 4,214
16,300 (Pooled Loan Equipment Program), VRDN, Series A, 4.10% due
11/01/2003 (a) 16,300
1,200 (Pooled Loan Equipment Program), VRDN, Series 1, 4.10% due
11/01/2015 (a) 1,200
New York State Power Authority, Revenue and General Purpose Bonds:
8,000 4.05% due 5/08/1995 8,000
7,800 3.95% due 6/08/1995 7,800
41,345 (Junior Lien), 4.40% due 9/01/1995 41,345
2,500 Niagara Falls, New York, Commission Toll Bridge Revenue Bonds, VRDN,
Series A, 3.95% due 10/01/2019 (a) 2,500
5,313 Oneida County, New York, BAN, 4.70% due 5/17/1995 5,314
7,250 Patchogue-Medford, New York, Unified Free School District, TAN, UT,
4.50% due 6/30/1995 7,255
</TABLE>
<PAGE>
<TABLE>
CMA NEW YORK MUNICIPAL MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995(CONCLUDED) (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
New York Port Authority of New York and New Jersey, CP:
(concluded) $ 3,345 4.10% due 4/12/1995 $ 3,345
3,415 4.05% due 4/13/1995 3,415
10,350 3.80% due 6/08/1995 10,350
9,500 Rochester, New York, RAN, 5.25% due 6/30/1995 9,516
2,145 Saint Lawrence County, New York, IDA, Civic Facility Revenue Bonds
(Clarkson University Project), VRDN, 4.25% due 10/01/2005 (a) 2,145
7,700 Saranac, New York, Central School District Revenue Bonds, BAN, 5% due
6/30/1995 7,708
3,335 South Huntington, New York, Unified Free School District, TAN, UT,
4.50%due 6/30/1995 3,340
29,100 Suffolk County, New York, IDA, IDR (Nissequogue Cogeneration Partners),
VRDN, 4.10% due 12/15/2023 (a) 29,100
41,000 Triborough Bridge and Tunnel Authority, New York Special Obligation
Revenue Bonds, VRDN, 3.80% due 1/01/2024 (a) 41,000
12,200 West Babylon, New York, Unified Free School District, TAN, 4.50% due
6/29/1995 12,213
Puerto Rico-- Puerto Rico Commonwealth, Government Development Bank Revenue Bonds:
4.7% 15,000 CP, 3.90% due 4/10/1995 15,000
5,000 CP, 4% due 4/10/1995 5,000
20,000 CP, 3.75% due 5/10/1995 20,000
3,000 Refunding, VRDN, 4.10% due 12/01/2015 (a) 3,000
Total Investments (Cost--$914,058*)-- 99.4% 914,058
Other Assets Less Liabilities--0.6% 5,794
----------
Net Assets--100.0% $ 919,852
==========
<FN>
(a)The interest rate is subject to change periodically based on
certain indexes. The interest rate shown is the rate in effect at
March 31, 1995.
(b)Prerefunded; to be called.
*Cost for Federal income tax purposes.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CMA NEW YORK MUNICIPAL MONEY FUND
STATEMENT OF ASSETS AND LIABILITIES AS OF MARCH 31, 1995
<S> <C> <C>
Assets:
Investments, at value (identified cost--$914,057,864) (Note 1a) $ 914,057,864
Cash 48,362
Interest receivable 6,567,679
Prepaid registration fees and other assets (Note 1d) 17,245
---------------
Total assets 920,691,150
---------------
Liabilities:
Payables:
Investment adviser (Note 2) $ 372,351
Distributor (Note 2) 274,983 647,334
---------------
Accrued expenses and other liabilities 191,576
---------------
Total liabilities 838,910
---------------
Net Assets $ 919,852,240
===============
Net Assets Consist of:
Shares of beneficial interest, $.10 par value, unlimited number of shares
authorized $ 92,074,474
Paid-in capital in excess of par 828,670,265
Accumulated realized capital losses--net (Note 4) (892,499)
---------------
Net Assets--Equivalent to $1.00 per share based on 920,744,739 shares of
beneficial interest outstanding $ 919,852,240
===============
</TABLE>
<TABLE>
CMA NEW YORK MUNICIPAL MONEY FUND
STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1995
<S> <C> <C>
Investment Income (Note 1c):
Interest and amortization of premium and discount earned $ 26,492,486
Expenses:
Investment advisory fees (Note 2) $ 3,831,293
Distribution fees (Note 2) 1,013,471
Transfer agent fees (Note 2) 179,256
Registration fees (Note 1d) 115,354
Accounting services (Note 2) 89,857
Printing and shareholder reports 60,555
Professional fees 55,368
Custodian fees 53,399
Pricing fees 10,756
Trustees' fees and expenses 10,348
Other 11,878
---------------
Total expenses 5,431,535
---------------
Investment income--net 21,060,951
Realized Loss on Investments--Net (Note 1c) (251,800)
---------------
Net Increase in Net Assets Resulting from Operations $ 20,809,151
===============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CMA NEW YORK MUNICIPAL MONEY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year Ended March 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <C> <C>
Operations:
Investment income--net $ 21,060,951 $ 12,427,056
Realized loss on investments--net (251,800) (358,449)
--------------- ---------------
Net increase in net assets resulting from operations 20,809,151 12,068,607
--------------- ---------------
Dividends to Shareholders (Note 1e):
Investment income--net (21,059,960) (12,413,890)
--------------- ---------------
Net decrease in net assets resulting from dividends to shareholders (21,059,960) (12,413,890)
--------------- ---------------
Beneficial Interest Transactions (Note 3):
Net proceeds from sale of shares 3,003,904,257 2,518,353,375
Net asset value of shares issued to shareholders in reinvestment of
dividends (Note 1e) 21,059,556 12,413,591
--------------- ---------------
3,024,963,813 2,530,766,966
Cost of shares redeemed (2,877,620,567) (2,423,631,596)
--------------- ---------------
Net increase in net assets derived from beneficial interest transactions 147,343,246 107,135,370
--------------- ---------------
Net Assets:
Total increase in net assets 147,092,437 106,790,087
Beginning of year 772,759,803 665,969,716
--------------- ---------------
End of year* $ 919,852,240 $ 772,759,803
=============== ===============
<FN>
*Undistributed investment income-- net (Note 1f) $ -- $ 12,534
=============== ===============
</TABLE>
<TABLE>
CMA NEW YORK MUNICIPAL MONEY FUND
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements.
For the Year Ended March 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
Investment income--net .03 .02 .02 .03 .05
--------- --------- --------- --------- ---------
Total from investment operations .03 .02 .02 .03 .05
--------- --------- --------- --------- ---------
Less dividends from investment income--net (.03) (.02) (.02) (.03) (.05)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Total Investment Return 2.59% 1.79% 2.19% 3.37% 4.86%
========= ========= ========= ========= =========
Ratios to Average Net Assets:
Expenses, net of reimbursement and excluding
distribution fees .54% .54% .55% .55% .57%
========= ========= ========= ========= =========
Expenses .67% .67% .67% .68% .69%
========= ========= ========= ========= =========
Investment income--net 2.59% 1.78% 2.16% 3.31% 4.73%
========= ========= ========= ========= =========
Supplemental Data:
Net assets, end of year (in thousands) $ 919,852 $ 772,760 $ 665,970 $ 625,768 $ 633,819
========= ========= ========= ========= =========
See Notes to Financial Statements.
</TABLE>
<PAGE>
CMA NEW YORK MUNICIPAL MONEY FUND
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
CMA New York Municipal Money Fund (the "Fund") is part of CMA 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 following is a summary of
significant accounting policies followed by the Fund.
(a) Valuation of investments--Investments are valued at amortized
cost, which approximates market value. For the purpose of valuation,
the maturity of a variable rate demand instrument is deemed to be
the next coupon date on which the interest rate is to be adjusted.
In the case of a floating rate instrument, the remaining maturity is
the demand notice payment period.
(b) 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.
(c) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income (including amortization of
premium and discount) is recognized on the accrual basis. Realized
gains and losses on security transactions are determined on the
identified cost basis.
(d) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(e) Dividends to shareholders--The Fund declares dividends daily and
reinvests daily such dividends (net of non-resident alien tax
withheld) in additional fund shares at net asset value. Dividends
are declared from the total of net investment income, excluding
discounts earned other than original issue discounts. Net realized
capital gains, if any, are normally distributed annually after de-
ducting prior years' loss carryforward. The Fund may distribute
capital gains more frequently than annually in order to maintain the
Fund's net asset value at $1.00 per share.
(f) Reclassification--Generally accepted accounting principles
require that certain differences between undistributed net
investment income for financial reporting and tax purposes, if
permanent, be reclassified to accumulated net realized capital
losses. Accordingly, current year's permanent book/tax differences
of $13,525 have been reclassified from undistributed net investment
income to accumulated net realized capital losses. These
reclassifications have no effect on net assets or net asset value
per share.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM" or "Adviser"). The general partner of
FAM is Princeton Serv-ices, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner.
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: 0.50%
of the first $500 million of average daily net assets; 0.425% of
average daily net assets in excess of $500 million but not exceeding
$1 billion; and 0.375% of average daily net assets in excess of $1
billion.
<PAGE>
CMA NEW YORK MUNICIPAL MONEY FUND
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
The most restrictive annual expense limitation requires that the
Adviser reimburse the Fund to the extent the Fund's expenses
(excluding interest, taxes, distribution fees, brokerage fees and
commissions, and extraordinary items) exceed in any fiscal year 2.5%
of the Fund's first $30 million of average daily net assets, 2.0% of
the Fund's next $70 million of average daily net assets, and 1.5% of
the average daily net assets in excess thereof. No fee payment will
be made to the Adviser during any year which will cause such
expenses to exceed the pro rata expense limitation at the time of
such payment.
Pursuant to the Distribution and Shareholder Servicing Plan in
compliance with Rule 12b-1 under the Investment Company Act of 1940,
Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S") receives a
distribution fee from the Fund at the end of each month at the
annual rate of 0.125% of average daily net assets of the Fund. The
distribution fee is to compensate MLPF&S financial consultants and
other directly involved branch office personnel for selling shares
of the Fund and for providing direct personal services to
shareholders. The distribution fee is not compensation for the
administrative and operational services rendered to the Fund by
MLPF&S in processing share orders and administering shareholder
accounts.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, MLPF&S, FDS, and/or ML & Co.
3. Shares of Beneficial Interest:
The number of shares purchased and redeemed during the period
corresponds to the amounts included in the Statements of Changes in
Net Assets for net proceeds from sale of shares and cost of shares
redeemed, respectively, since shares are recorded at $1.00 per
share.
4. Capital Loss Carryforward:
At March 31, 1995, the Fund had a net capital loss carryforward of
approximately $887,000, of which $87,000 expires in 1998, $203,000
expires in 2001, $293,000 expires in 2002, and $304,000 expires in
2003. This amount will be available to offset like amounts of any
future taxable gains.
<PAGE>
CMA NORTH CAROLINA MUNICIPAL MONEY FUND
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
CMA North Carolina Municipal Money Fund of
CMA Multi-State Municipal Series Trust:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of CMA North
Carolina Municipal Money Fund of CMA Multi-State Municipal Series
Trust as of March 31, 1995, the related statements of operations for
the year then ended and changes in net assets for each of the years
in the two-year period then ended, and the financial highlights for
the three-year period then ended and the period May 28, 1991
(commencement of operations) to March 31, 1992. 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 March
31, 1995 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
CMA North Carolina Municipal Money Fund of CMA Multi-State Municipal
Series Trust as of March 31, 1995, the results of its operations,
the changes in its net assets, and the financial highlights for the
respective stated periods in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
May 2, 1995
<PAGE>
Portfolio Abbreviations for CMA North Carolina Municipal Money Fund
ACES SM Adjustable Convertible Extendable Securities
AMT Alternative Minimum Tax (subject to)
BAN Bond Anticipation Notes
COP Certificates of Participation
CP Commercial Paper
DATES Daily Adjustable Tax-Exempt Securities
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
CMA NORTH CAROLINA MUNICIPAL MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
North $ 1,000 Beaufort County, North Carolina, Industrial Facilities and Pollution
Carolina--91.0% Control Financing Authority Revenue Bonds (Texasgulf, Inc. Project),
VRDN, 4.375% due 12/01/2000 (a) $ 1,000
3,000 Carteret County, North Carolina, Industrial Facilities and Pollution
Control Financing Authority, IDR (Texasgulf, Inc. Project), VRDN,
4.375% due 10/01/2005 (a) 3,000
12,300 Charlotte, North Carolina, Airport Revenue Refunding Bonds, VRDN,
Series A, 4.15% due 7/01/2016 (a) 12,300
1,071 Columbus County, North Carolina, Water and Sewer District No. 1, BAN,
4.50% due 7/12/1995 1,072
Craven County, North Carolina, Industrial Facilities and Pollution Control
Financing Authority Revenue Bonds (Cravenwood Energy Project), VRDN,
AMT (a):
2,840 Series A, 4.30% due 5/01/2011 2,840
5,600 Series B, 4.30% due 5/01/2011 5,600
5,000 Series C, 4.30% due 5/01/2011 5,000
Cumberland County, North Carolina, Industrial Facilities and Pollution
Control Financing Authority, Revenue Refunding Bonds (Monsanto Co. Project),
VRDN (a):
1,715 3.90% due 6/01/2012 1,715
600 3.90% due 10/01/2014 600
Durham County, North Carolina, Public Improvement Bonds, VRDN, UT (a):
1,000 4.05% due 5/01/2009 1,000
2,800 4.05% due 2/01/2010 2,800
1,000 4.05% due 5/01/2010 1,000
1,000 4.05% due 5/01/2011 1,000
1,800 Durham, North Carolina, Water and Sewer Utility System Revenue Bonds,
VRDN, 3.95% due 12/01/2015 (a) 1,800
2,800 Gaston County, North Carolina, Industrial Facilities and Pollution
Control Financing Authority Revenue Bonds (Mount Holly Enterprises/
Queens G.P. Inc.), VRDN, AMT, 4.45% due 5/01/2004 (a) 2,800
Granville County, North Carolina, Industrial Facilities and Pollution
Control Financing Authority Revenue Bonds, VRDN, AMT (a):
4,000 (Mayville Metal Production Project), 4.10% due 5/23/2020 4,000
2,375 (Tuscarora Plastics, Inc. Project), 4.45% due 12/01/2001 2,375
500 Greene County, North Carolina, Industrial Facilities and Pollution
Control Financing Authority, IDA, Revenue Bonds (Federal Paper Board
Company, Inc. Project), VRDN, AMT, 4.35% due 11/01/2009 (a) 500
Greensboro, North Carolina, Public Improvement Bonds, VRDN, Series B (a):
1,400 4.25% due 4/01/2007 1,400
1,450 4.25% due 4/01/2008 1,450
1,650 4.25% due 4/01/2010 1,650
1,950 4.25% due 4/01/2013 1,950
2,000 4.25% due 4/01/2014 2,000
</TABLE>
64
<PAGE>
<TABLE>
CMA NORTH CAROLINA MUNICIPAL MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995(CONTINUED) (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
North Carolina $16,800 Halifax County, North Carolina, Industrial Facilities and Pollution
(continued) Control Financing Authority Revenue Bonds (Exempt Facilities-Westmoreland),
VRDN, 4.35% due 12/01/2019 (a) $ 16,800
2,700 Haywood County, North Carolina, Industrial Facilities and Pollution
Control Financing Authority, Solid Waste Disposal Revenue Refunding
Bonds (Champion International Corporation Project), VRDN, 4.05% due
3/01/2020 (a) 2,700
3,727 Hoke County, North Carolina, BAN, 4.75% due 9/27/1995 3,735
8,300 Iredell County, North Carolina, Industrial Facilities and Pollution
Control Financing Authority Revenue Bonds (Rubbermaid Specialty Products,
Inc.), 3.85% due 6/01/1995 (a) 8,300
3,700 Lenoir County, North Carolina, Industrial Facilities and Pollution Control
Financing Authority Revenue Bonds (West Co. Nebraska, Inc. Project), VRDN,
4.15% due 10/01/2005 (a) 3,700
9,500 Lincoln County, North Carolina, Industrial Facilities and Pollution Control
Financing Authority Revenue Bonds (Hof Textiles Inc. Project), VRDN, AMT,
4.15% due 10/01/2011 (a) 9,500
Mecklenberg County, North Carolina, Industrial Facilities and Pollution
Control Financing Authority Revenue Bonds, VRDN (a):
2,000 (Edgecomb Metals Company Project), 4.25% due 12/01/2009 2,000
1,000 (Flawa Corporation Project), AMT, 4% due 12/01/2008 1,000
1,130 Mecklenburg County, North Carolina, Refunding Bonds, UT, 7% due
7/01/1995 (b) 1,144
2,000 New Hanover County, North Carolina, BAN, 3.80% due 6/21/1995 2,000
1,055 New Hanover County, North Carolina, Industrial Facilities and Pollution
Control Financing Authority Revenue Bonds (Interroll Corp. Project), VRDN,
4.45% due 11/01/2003 (a) 1,055
North Carolina Eastern Municipal Power Agency, Power System Revenue
Bonds, Series B, CP:
12,085 4.10% due 4/03/1995 12,085
7,300 4.25% due 4/03/1995 7,300
5,400 4.10% due 5/15/1995 5,400
7,000 4.30% due 5/17/1995 7,000
5,400 4.15% due 5/18/1995 5,400
1,600 3.80% due 5/22/1995 1,600
North Carolina Educational Facilities Finance Agency Revenue Bonds,
VRDN (a):
950 (Bowman Grey School of Medicine Project), 4.10% due 9/01/2020 950
3,900 (Duke University Project), Series A, 4.075% due 12/01/2017 3,900
1,500 (Duke University Project), Series A, 4.075% due 6/01/2027 1,500
4,300 (Duke University Project), Series B, 4.075% due 12/01/2021 4,300
2,700 (Wake Forest University Project), 3.95% due 1/01/2009 2,700
North Carolina Medical Care Commission, Hospital Revenue Bonds,
VRDN (a):
6,900 (Carol Woods Project), 4.30% due 4/01/2021 6,900
3,300 (Duke University Hospital), Series B, 4.075% due 6/01/2015 3,300
2,130 (Duke University Hospital), Series D, 4.075% due 6/01/2015 2,130
3,500 (North Carolina Baptist Hospital Project), Series B, 4.10% due
6/01/2022 3,500
13,200 (Park Ridge Hospital Project), 4.25% due 8/15/2018 13,200
7,100 (Pooled Equipment Financing Project), ACES, 4.20% due 12/01/2025 7,100
5,650 Refunding (Duke University Hospital Project), Series A, 4.075%
due 6/01/2023 5,650
3,300 Refunding (Moses H. Cone Memorial Hospital Project), 4.10% due
10/01/2023 3,300
1,100 Person County, North Carolina, Industrial Facilities and Pollution
Control Financing Authority, Solid Waste Disposal Revenue Bonds
(Carolina Power and Light Company), DATES, 4.40% due 11/01/2016 (a) 1,100
</TABLE>
<PAGE>
<TABLE>
CMA NORTH CAROLINA MUNICIPAL MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995(CONCLUDED) (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
North Carolina $ 1,000 Piedmont Triad Airport Authority, North Carolina, Special Facility
(concluded) Revenue Bonds (Purpose-Cessna Aircraft Company Project), VRDN, AMT,
4.45% due 10/01/2012 (a) $ 1,000
700 Rowan County, North Carolina, Industrial Facilities and Pollution
Control Financing Authority Revenue Bonds (Reynolds Metals Company
Project), 4.40% due 6/01/1995 (a) 700
7,000 Union County, North Carolina, Industrial Facilities and Pollution
Control Financing Authority, IDR, Refunding (Square D Co. Project),
VRDN, 4.125% due 3/01/2003 (a) 7,000
6,100 University of North Carolina, Chapel Hill Foundation, Inc., COP, CP,
4% due 4/07/1995 6,100
4,050 University of North Carolina, Chapel Hill Revenue Bonds (Kenan Memorial
Stadium), VRDN, 3.85% due 11/01/2007 (a) 4,050
University of North Carolina, Chapel Hill, School of Medicine and
Ambulatory Care Clinic Revenue Bonds:
3,900 CP, 4% due 4/07/1995 3,900
2,800 VRDN, 4.15% due 10/01/2002 (a) 2,800
Wake County, North Carolina, Industrial Facilities and Pollution
Control Financing Authority Revenue Bonds (Carolina Power and Light
Company Project) (a):
1,600 DATES, 4.45% due 3/01/2017 1,600
4,500 VRDN, Series C, 4.20% due 10/01/2015 4,500
2,000 Wayne County, North Carolina, Industrial Facilities and Pollution
Control Financing Authority, Revenue Refunding Bonds (General Signal),
VRDN, 4.125% due 12/01/2000 (a) 2,000
1,400 Wilson County, North Carolina, Industrial Facilities and Pollution
Control Financing Authority, IDR (North Carolina Chip Co. Project), VRDN,
4.45% due 1/01/2000 (a) 1,400
1,350 Winston-Salem, North Carolina, Urban Redevelopment Mortgage Revenue
Refunding Bonds (Summit Square Garden Apartments), CP, 4.10% due
4/03/1995 1,350
Winston-Salem, North Carolina, Water and Sewer System Revenue Bonds:
6,000 CP, 3.75% due 5/17/1995 6,000
2,100 VRDN, 4.10% due 6/01/2014 (a) 2,100
Puerto Rico-- Puerto Rico Commonwealth, Government Development Bank, Revenue Bonds:
9.0% 5,000 CP, 3.75% due 5/10/1995 5,000
600 Refunding, VRDN, 4.10% due 12/01/2015 (a) 600
5,000 Puerto Rico Commonwealth, Highway and Transportation Authority, Highway
Revenue Bonds, VRDN, Series X, 3.60% due 7/01/l999 (a) 5,000
Puerto Rico Industrial, Medical and Environmental Pollution Control
Facilities, Financing Authority Revenue Bonds:
2,000 (Ana G. Mendez Foundation), CP, 3.50% due 4/12/1995 2,000
12,500 (Reynolds Metals Co. Project), 4% due 9/01/1995 12,502
Total Investments (Cost--$278,703*)-- 100.0% 278,703
Other Assets Less Liabilities--0.0% 1
--------
Net Assets--100.0% $278,704
========
<FN>
(a)The interest rate is subject to change periodically based on
certain indexes. The interest rate shown is the rate in effect at
March 31, 1995.
(b)Prerefunded.
*Cost for Federal income tax purposes.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CMA NORTH CAROLINA MUNICIPAL MONEY FUND
STATEMENT OF ASSETS AND LIABILITIES AS OF MARCH 31, 1995
<S> <C> <C>
Assets:
Investments, at value (identified cost--$278,703,454) (Note 1a) $ 278,703,454
Cash 131,110
Interest receivable 1,171,294
Deferred organization expenses (Note 1d) 9,362
Prepaid registration fees and other assets (Note 1d) 14,212
-------------
Total assets 280,029,432
-------------
Liabilities:
Payables:
Securities purchased $ 1,072,050
Investment adviser (Note 2) 99,110
Distributor (Note 2) 93,745 1,264,905
-------------
Accrued expenses and other liabilities 60,549
-------------
Total liabilities 1,325,454
-------------
Net Assets $ 278,703,978
=============
Net Assets Consist of:
Shares of beneficial interest, $.10 par value, unlimited number of shares authorized $ 27,873,249
Paid-in capital in excess of par 250,859,243
Accumulated realized capital losses--net (Note 4) (28,514)
-------------
Net Assets--Equivalent to $1.00 per share based on 278,732,492 shares of
beneficial interest outstanding $ 278,703,978
=============
</TABLE>
<TABLE>
CMA NORTH CAROLINA MUNICIPAL MONEY FUND
STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1995
<S> <C> <C>
Investment Income (Note 1c):
Interest and amortization of premium and discount earned $ 9,431,728
Expenses:
Investment advisory fees (Note 2) $ 1,474,176
Distribution fees (Note 2) 366,625
Transfer agent fees (Note 2) 68,413
Accounting services (Note 2) 57,506
Professional fees 49,342
Registration fees (Note 1d) 36,158
Custodian fees 28,231
Printing and shareholder reports 27,124
Pricing fees 8,322
Amortization of organization expenses (Note 1d) 8,097
Trustees' fees and expenses 3,769
Other 6,319
-------------
Total expenses before reimbursement 2,134,082
Reimbursement of expenses (Note 2) (294,835)
-------------
Total expenses after reimbursement 1,839,247
-------------
Investment income--net 7,592,481
Realized Loss on Investments--Net (Note 1c) (13,460)
-------------
Net Increase in Net Assets Resulting from Operations $ 7,579,021
=============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CMA NORTH CAROLINA MUNICIPAL MONEY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year Ended March 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <C> <C>
Operations:
Investment income--net $ 7,592,481 $ 4,383,724
Realized loss on investments--net (13,460) (14,754)
------------- -------------
Net increase in net assets resulting from operations 7,579,021 4,368,970
------------- -------------
Dividends to Shareholders (Note 1e):
Investment income--net (7,592,405) (4,380,466)
------------- -------------
Net decrease in net assets resulting from dividends to shareholders (7,592,405) (4,380,466)
------------- -------------
Beneficial Interest Transactions (Note 3):
Net proceeds from sale of shares 924,263,338 819,514,191
Net asset value of shares issued to shareholders in reinvestment of dividends
(Note 1e) 7,592,507 4,380,479
------------- -------------
931,855,845 823,894,670
Cost of shares redeemed (946,590,315) (765,815,611)
------------- -------------
Net increase (decrease) in net assets derived from beneficial interest transactions (14,734,470) 58,079,059
------------- -------------
Net Assets:
Total increase (decrease) in net assets (14,747,854) 58,067,563
Beginning of year 293,451,832 235,384,269
------------- -------------
End of year* $ 278,703,978 $ 293,451,832
============= =============
<FN>
*Undistributed investment income--net (Note 1f) $ -- $ 298
============= =============
See Notes to Financial Sta tements.
</TABLE>
<PAGE>
<TABLE>
CMA NORTH CAROLINA MUNICIPAL MONEY FUND
FINANCIAL HIGHLIGHTS
<CAPTION>
For the
Period
The following per share data and ratios have been derived May 28,
from information provided in the financial statements. 1991++ to
For the Year Ended March 31, March 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- --------
Investment income--net .03 .02 .02 .03
-------- -------- -------- --------
Total from investment operations .03 .02 .02 .03
-------- -------- -------- --------
Less dividends from investment income--net (.03) (.02) (.02) (.03)
-------- -------- -------- --------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ========
Total Investment Return 2.61% 1.85% 2.25% 3.49%*
======== ======== ======== ========
Ratios to Average Net Assets:
Expenses, net of reimbursement and excluding
distribution fees .50% .48% .45% .33%*
======== ======== ======== ========
Expenses, net of reimbursement .62% .61% .57% .45%*
======== ======== ======== ========
Expenses .72% .71% .73% .83%*
======== ======== ======== ========
Investment income--net 2.58% 1.84% 2.20% 3.25%*
======== ======== ======== ========
Supplemental Data:
Net assets, end of period (in thousands) $278,704 $293,452 $235,384 $221,060
======== ======== ======== ========
<FN>
*Annualized.
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<PAGE>
CMA NORTH CAROLINA MUNICIPAL MONEY FUND
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
CMA North Carolina Municipal Money Fund (the "Fund") is part of CMA
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
following is a summary of significant accounting policies followed
by the Fund.
(a) Valuation of investments--Investments are valued at amortized
cost, which approximates market value. For the purpose of valuation,
the maturity of a variable rate demand instrument is deemed to be
the next coupon date on which the interest rate is to be adjusted.
In the case of a floating rate instrument, the remaining maturity is
the demand notice payment period.
(b) 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.
(c) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income (including amortization of
premium and discount) is recognized on the accrual basis. Realized
gains and losses on security transactions are determined on the
identified cost basis.
(d) 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.
(e) Dividends to shareholders--The Fund declares dividends daily and
reinvests daily such dividends (net of non-resident alien tax
withheld) in additional fund shares at net asset value. Dividends
are declared from the total of net investment income, excluding
discounts earned other than original issue discounts. Net realized
capital gains, if any, are normally distributed annually after
deducting prior years' loss carryforward. The Fund may distribute
capital gains more frequently than annually in order to maintain the
Fund's net asset value at $1.00 per share.
(f) Reclassification--Generally accepted accounting principles
require that certain differences between undistributed net
investment income for financial reporting and tax purposes, if
permanent, be reclassified to accumulated net realized capital
losses. Accordingly, current year's permanent book/tax differences
of $374 have been reclassified from undistributed net investment
income to accumulated net realized capital losses. These
reclassifications have no effect on net assets or net asset value
per share.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM" or "Adviser"). The general partner of
FAM is Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co. ("ML & Co."), which is the limited
partner.
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: 0.50% of the first $500 million
of average daily net assets; 0.425% of average daily net assets in excess
<PAGE>
CMA NORTH CAROLINA MUNICIPAL MONEY FUND
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
of $500 million but not exceeding $1 billion, and 0.375% of average daily
net assets in excess of $ l billion. For the year ended March 31, 1995,
FAM earned fees of $1,474,176, of which $294,835 was voluntarily waived.
The most restrictive annual expense limitation requires that the
Adviser reimburse the Fund to the extent the Fund's expenses
(excluding interest, taxes, distribution fees, brokerage fees and
commissions, and extraordinary items) exceed in any fiscal year 2.5%
of the Fund's first $30 million of average daily net assets, 2.0% of
the Fund's next $70 million of average daily net assets, and 1.5% of
the average daily net assets in excess thereof. No fee payment will
be made to the Adviser during any year which will cause such
expenses to exceed the pro rata expense limitation at the time of
such payment.
Pursuant to the Distribution and Shareholder Servicing Plan in
compliance with Rule 12b-1 under the Investment Company Act of 1940,
Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S") receives a
distribution fee from the Fund at the end of each month at the
annual rate of 0.125% of average daily net assets of the Fund. The
distribution fee is to compensate MLPF&S financial consultants and
other directly involved branch office personnel for selling shares
of the Fund and for providing direct personal services to
shareholders. The distribution fee is not compensation for the
administrative and operational services rendered to the Fund by
MLPF&S in processing share orders and administering shareholder
accounts.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, MLPF&S, FDS, and/or ML & Co.
3. Shares of Beneficial Interest:
The number of shares purchased and redeemed during the period
corresponds to the amounts included in the Statements of Changes in
Net Assets for net proceeds from sale of shares and cost of shares
redeemed, respectively, since shares are recorded at $1.00 per
share.
4. Capital Loss Carryforward:
At March 31, 1995, the Fund had a net capital loss carryforward of
approximately $28,000, of which $5,000 expires in 2001, $10,000
expires in 2002 and $13,000 expires in 2003. This amount will be
available to offset like amounts of any future taxable gains.
<PAGE>
CMA OHIO MUNICIPAL MONEY FUND
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
CMA Ohio Municipal Money Fund of
CMA Multi-State Municipal Series Trust:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of CMA Ohio
Municipal Money Fund of CMA Multi-State Municipal Series Trust as of
March 31, 1995, the related statements of operations for the year
then ended and changes in net assets for each of the years in the
two-year period then ended, and the financial highlights for each of
the years in the three-year period then ended and the period April
29, 1991 (commencement of operations) to March 31, 1992. 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 March
31, 1995 by correspondence with the custodian and brokers. 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
CMA Ohio Municipal Money Fund of CMA Multi-State Municipal Series
Trust as of March 31, 1995, the results of its operations, the
changes in its net assets, and the financial highlights for the
respective stated periods in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
May 3, 1995
<PAGE>
Portfolio Abbreviations for CMA Ohio Municipal Money Fund
AMT Alternative Minimum Tax (subject to)
BAN Bond Anticipation Notes
CP Commercial Paper
HFA Housing Finance Agency
IDR Industrial Development Revenue Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
UT Unlimited Tax
VRDN Variable Rate Demand Notes
CMA OHIO MUNICIPAL MONEY FUND
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (IN THOUSANDS)
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
Ohio--101.1% $ 2,000 Akron, Ohio, Sanitation Sewer System Revenue Bonds, VRDN, 4.15% due
12/01/2014 (a) $ 2,000
1,540 Allen County, Ohio, IDR (Nickles Bakery Project), VRDN, 4.90% due
1/02/2003 (a) 1,540
2,555 Ashtabula County, Ohio, IDR (Neff-Perkins Co. Project), VRDN,
AMT, 4.45% due 6/01/2005 (a) 2,555
2,000 Blue Ash, Ohio, BAN, 5% due 10/30/1995 2,010
Brooklyn Heights, Ohio, IDR, VRDN, AMT (a):
555 (ATC Nymold Inc.), 4.45% due 2/01/2002 555
3,350 (Keynote Office Center), 4.55% due 12/01/2009 3,350
Cincinnati and Hamilton Counties, Ohio, Port Authority,
IDR, VRDN (a):
3,500 (Multi-Color Corp. Project), 4% due 11/01/2000 3,500
425 Refunding (Schottenstein Stores), 4.20% due 9/01/1997 425
Cincinnati, Ohio, Student Loan Funding Corporation, Student Loan
Revenue Bonds, VRDN (a):
1,800 AMT, Series A-1, 4.30% due 1/01/2007 1,800
2,000 AMT, Series A-2, 4.30% due 1/01/2007 2,000
1,500 AMT, Series A-3, 4.30% due 1/01/2007 1,500
500 Series 1983A, 4.20% due 12/29/1998 500
2,600 Clermont County, Ohio, IDR (Southern Ohio Fabricator), VRDN, AMT,
Series A, 4.35% due 9/01/2005 (a) 2,600
2,100 Columbus, Ohio, Sewer Revenue Refunding Bonds, VRDN, 4.05% due
6/01/2011 (a) 2,100
8,000 Cuyahoga County, Ohio, Hospital Improvement Revenue Bonds (Cleveland
University Hospital), VRDN, 4.25% due 1/01/2016 (a) 8,000
Cuyahoga County, Ohio, IDR, VRDN (a):
1,000 (Allen Group Incorporated Project), 4.05% due 12/01/2015 1,000
1,000 (Athens Pastries Inc. Project), AMT, 4.45% due 6/03/2009 1,000
4,200 (Cleveland E Excel Ltd.), AMT, 4.45% due 3/01/2019 4,200
2,025 (Puritas Association Project), 4.55% due 12/01/2006 2,025
4,200 (Suburban Pavilion Inc. Project), AMT, 4.50% due 10/02/2006 4,200
1,770 Dawson-Bryant, Ohio, Local School District Construction and
Improvement Notes, UT, 4.25% due 6/01/1995 1,771
1,000 Dayton, Ohio, Special Facilities Revenue Bonds (Emery Air Freight
Project), VRDN, AMT, Series D, 4.80% due 10/01/2009 (a) 1,000
3,500 Dublin, Ohio, BAN, Series A, 5% due 9/20/1995 3,514
</TABLE>
<PAGE>
CMA OHIO MUNICIPAL MONEY FUND
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (continued) (IN THOUSANDS)
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
Ohio $ 500 Erie County, Ohio, IDR (Brighton Manor Company Project), VRDN, AMT,
(continued) 4.45% due 11/01/2016 (a) $ 500
1,915 Erie County, Ohio, IDR, Refunding (Huron Health Care Center Project),
VRDN, 4.30% due 8/01/2007 (a) 1,915
6,000 Franklin County, Ohio, Health System Revenue Bonds (Franciscan Sisters-
Saint Anthony Medical Facility), VRDN, Series B, 4.25% due 7/01/2015 (a) 6,000
Franklin County, Ohio, Hospital Revenue Bonds, VRDN (a):
5,300 (Children's Hospital Project), Series B, 4.40% due 12/01/2014 5,300
1,000 (Lutheran Senior City Inc. Project), 4.15% due 5/01/2015 1,000
Franklin County, Ohio, IDR, VRDN, AMT (a):
2,500 Refunding (Heekin Can Inc. Project), 4.35% due 5/01/2007 2,500
2,000 (Tigeropoly Manufacturing, Inc.), 4.25% due 7/01/1997 2,000
5,500 Franklin County, Ohio, M/F Housing Revenue Bonds (Colonial Courts
Project), VRDN, AMT, 4.65% due 12/01/2024 (a) 5,500
130 Geauga County, Ohio, IDR (Best Sand Corp. Project), VRDN, AMT, 4.55% due
4/01/l999 (a) 130
1,250 Grandview Heights, Ohio, City School District, BAN, 4.84% due 4/13/1995 1,250
3,000 Greene County, Ohio, Certificates of Indebtedness, Series B, 4.25% due
7/19/1995 3,002
3,400 Greene County, Ohio, IDR, Refunding (Apple Valley Association), VRDN,
4% due 8/01/2009 (a) 3,400
12,200 Hamilton County, Ohio, Health Systems Revenue Bonds (Franciscan Sisters
Poor Health), VRDN, Series A, 4.25% due 3/01/2017 (a) 12,200
1,850 Hancock County, Ohio, IDR (Quality Material Handling Equipment),
VRDN, AMT, 4.55% due 12/01/1998 (a) 1,850
8,000 Hilliard County, Ohio, School District, BAN, UT, 4.77% due 4/13/1995 8,002
1,250 Huber Heights, Ohio, IDR (Lasermike Inc. Project), VRDN, AMT, 4.45% due
12/01/2014 (a) 1,250
3,000 Kent, Ohio, IDR (Ravens Metal Products Project), VRDN, AMT, 4.35% due
12/01/2009 (a) 3,000
250 Lucas County, Ohio, Hospital Revenue Bonds (Sunshine Children's Home
Project), VRDN, 4.35% due 12/01/2007 (a) 250
Marion County, Ohio, Hospital Improvement Revenue Bonds (Pooled Lease
Program):
2,325 4.25% due 10/01/1995 2,325
1,615 VRDN, 4.30% due 5/01/2019 (a) 1,615
3,330 Mentor, Ohio, IDR (Metcor Partnership/Tridelt), VRDN, AMT, 4.45% due
12/01/2008 (a) 3,330
2,650 Moraine, Ohio, IDR, Refunding (Gray America Corporation Project), VRDN,
AMT, 4.45% due 12/01/2001 (a) 2,650
3,680 Morrow County, Ohio, BAN (Detention Facilities), 4.20% due 6/01/1995 3,682
2,455 Ohio HFA, M/F Housing Revenue Bonds (Kenwood Congregate Retirement
Program), VRDN, 4% due 12/01/2015 (a) 2,455
2,500 Ohio State Air Quality Development Authority, Pollution Control
Facilities, PCR (Duquesne Light), CP, AMT, 4.35% due 5/12/1995 2,500
1,115 Ohio State Coal Development, Series B, 5% due 8/01/1995 1,119
4,000 Ohio State Environmental Improvement Revenue Bonds (US Steel Corp.),
VRDN, 4.30% due 5/01/2011 (a) 4,000
2,910 Ohio State Higher Educational Facilities, Commission Revenue Bonds
(Mount Vernon), VRDN, 4.35% due 9/01/2009 (a) 2,910
</TABLE>
<PAGE>
CMA OHIO MUNICIPAL MONEY FUND
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (continued) (IN THOUSANDS)
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
Ohio $ 3,400 Ohio State Higher Educational Facilities Revenue Bonds (Kenyon
(continued) College Project), VRDN, 4.15% due 4/01/2022 (a) $ 3,400
2,150 Ohio State PCR, Refunding (Alcoa Project), VRDN, 4.15% due 10/01/2000 (a) 2,150
1,950 Ohio State University, General Receipts, VRDN, Series B, 4.15% due
12/01/2012 (a) 1,950
Ohio State Water Development Authority, Environmental Improvement Revenue
Bonds (Mead Corp. Project), CP, AMT:
2,500 4.25% due 4/13/1995 2,500
5,000 4.20% due 4/20/1995 5,000
1,500 4.10% due 5/18/1995 1,500
1,300 Ohio State Water Development Authority, Environmental Revenue Bonds
(Honda America), VRDN, 4.15% due 1/01/1997 (a) 1,300
Ohio State Water Development Authority, Pollution Control Facilities, PCR
(Duquesne Light), CP, AMT:
3,000 4.25% due 4/07/1995 3,000
1,000 4% due 5/11/1995 1,000
Ohio State Water Development Authority, Pollution Control Facilities
Revenue Bonds:
3,000 (Duquesne Light Co. Project), VRDN, AMT, 4.35% due 10/01/2023 (a) 3,000
4,500 (Ohio Edison Co. Project), Series B, 4.25% due 9/01/1995 4,500
2,200 Olentangy, Ohio, Local School District, BAN, UT, 4.90% due 4/13/1995 2,200
3,000 Olmsted Falls, Ohio, Local School District, BAN, 5% due 5/31/1995 3,004
800 Paulding County, Ohio, IDR, Refunding (Countrymark Cooperative Inc.
Project), VRDN, 4.20% due 3/01/l999 (a) 800
2,100 Portage County, Ohio, IDR (NCSP L.P. Project), VRDN, AMT, 4.45% due
7/01/2014 (a) 2,100
2,800 Portage County, Ohio, IDR (PM Property One, Ltd.), VRDN, AMT, 4.45%
due 11/01/2012 (a) 2,800
3,000 Richland County, Ohio, BAN, 4.85% due 9/14/1995 3,008
1,500 Rickenbacker, Ohio, Port Authority, IDR, Refunding (Rickenbacker
Holdings, Inc.), VRDN, 4.30% due 12/01/2010 (a) 1,500
1,300 Sandusky County, Ohio, IDR (Brighton Manor Co. Project), VRDN, AMT,
4.45% due 12/01/2016 (a) 1,300
425 Solon, Ohio, IDR (Tameran Project), VRDN, AMT, 4.45% due 11/01/2004 (a) 425
2,250 Strongsville, Ohio, IDR (E & E Properties/Dupli System Project),
VRDN, AMT, 4.50% due 2/01/2010 (a) 2,250
1,000 Summit County, Ohio, Hospital Facilities Revenue Bonds (Cuyahoga Falls
General Hospital), VRDN, AMT, Series B, 4.20% due 7/01/1999 (a) 1,000
Summit County, Ohio, IDR:
500 (Adjusted Forest Manufacturing Project), 4.50% due 11/01/2001 500
1,000 (Austin Printing Co. Inc. Project), VRDN, 4.50% due 8/01/2006 (a) 1,000
845 (Lucerne Production Project), VRDN, 4.45% due 6/01/2002 (a) 845
4,200 (Shin-Etsu Silicones Project), VRDN, 4.15% due 11/01/2004 (a) 4,200
1,465 (Sigma Properties Project), VRDN, 4.45% due 6/01/2008 (a) 1,465
750 (Struktol Project), VRDN, Series A, 4.45% due 6/01/2002 (a) 750
1,200 (Texler Inc. Project), 4.15% due 5/01/1995 1,200
Toledo, Ohio, City Services Special Assessment Notes:
4,000 4.80% due 7/27/1995 4,006
1,700 Refunding, 4.15% due 6/01/1995 1,701
</TABLE>
<PAGE>
CMA OHIO MUNICIPAL MONEY FUND
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (concluded) (IN THOUSANDS)
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
Ohio $ 1,250 Troy, Ohio, Economic Development Revenue Bonds (L&CP Corporation
(concluded) Project), AMT, 4.40% due 6/01/1995 $ 1,250
University of Cincinnati, Ohio, General Receipts, BAN:
5,465 Series S, 4.75% due 8/30/1995 5,480
3,000 Series S1, 5% due 3/21/1996 3,010
1,860 Vermilion, Ohio, IDR, Refunding (Landover Properties Ltd.), VRDN,
4.25% due 10/01/2004 (a) 1,860
Warren County, Ohio, IDR, VRDN (a):
4,000 (Johnson & Hardin Enterprises), AMT, Series A, 4.35% due 2/01/2010 4,000
2,080 (Kardol Quality Products Project), AMT, 4.35% due 12/01/2014 2,080
1,900 (Pioneer Industrial Components), 4.20% due 12/01/2005 1,900
3,700 West Clermont, Ohio, Local School District, BAN, UT, 5.25% due 8/09/1995 3,707
1,540 Williams County, Ohio, IDR (Letts Industries Inc. Project), VRDN, AMT,
4.20% due 11/01/2008 (a) 1,540
1,000 Willoughby, Ohio, BAN, 4.19% due 8/16/1995 1,001
2,650 Willoughby, Ohio, IDR (Malish Brush & Specialty), VRDN, AMT, 4.45% due
6/01/2009 (a) 2,650
3,260 Wood County, Ohio, Economic Development Revenue Bonds (Great Lakes
Window Project), AMT, 4.75% due 6/01/1995 3,260
4,465 Zanesville-Muskingum County, Ohio, Port Authority, IDR (B.E. Products
Inc. Project), VRDN, AMT, 4.45% due 9/01/2004 (a) 4,465
Total Investments (Cost--$240,337*)-- 101.1% 240,337
Liabilities in Excess of Other Assets--(1.1%) (2,682)
--------
Net Assets--100.0% $237,655
========
<FN>
(a)The interest rate is subject to change periodically based on
certain indexes. The interest rate shown is the rate in effect at
March 31, 1995.
*Cost for Federal income tax purposes.
</TABLE>
See Notes to Financial Statements.
<PAGE>
CMA OHIO MUNICIPAL MONEY FUND
STATEMENT OF ASSETS AND LIABILITIES AS OF MARCH 31, 1995
<TABLE>
<S> <C> <C>
Assets:
Investments, at value (identified cost--$240,336,954) (Note 1a) $ 240,336,954
Cash 31,031
Interest receivable 1,557,723
Deferred organization expenses (Note 1d) 8,399
Prepaid registration fees and other assets (Note 1d) 18,473
-------------
Total assets 241,952,580
-------------
Liabilities:
Payables:
Securities purchased $ 4,056,711
Investment adviser (Note 2) 101,184
Distributor (Note 2) 72,070 4,229,965
-------------
Accrued expenses and other liabilities 67,550
-------------
Total liabilities 4,297,515
-------------
Net Assets $ 237,655,065
=============
Net Assets Consist of:
Shares of beneficial interest, $.10 par value, unlimited number of shares authorized $ 23,768,662
Paid-in capital in excess of par 213,917,958
Accumulated realized capital losses--net (Note 4) (31,555)
-------------
Net Assets--Equivalent to $1.00 per share based on 237,686,620 shares of
beneficial interest outstanding $ 237,655,065
=============
</TABLE>
CMA OHIO MUNICIPAL MONEY FUND
STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1995
<TABLE>
<S> <C> <C>
Investment Income (Note 1c):
Interest and amortization of premium and discount earned $ 7,289,416
Expenses:
Investment advisory fees (Note 2) $ 1,078,893
Distribution fees (Note 2) 268,476
Accounting services (Note 2) 67,499
Professional fees 49,207
Transfer agent fees (Note 2) 46,965
Registration fees (Note 1d) 26,353
Custodian fees 20,300
Printing and shareholder reports 16,490
Pricing fees 11,063
Amortization of organization expenses (Note 1d) 7,801
Trustees' fees and expenses 2,895
Other 5,522
-------------
Total expenses 1,601,464
-------------
Investment income--net 5,687,952
Realized Loss on Investments--Net (Note 1c) (285)
-------------
Net Increase in Net Assets Resulting from Operations $ 5,687,667
=============
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
CMA OHIO MUNICIPAL MONEY FUND For the Year Ended March 31,
STATEMENTS OF CHANGES IN NET ASSETS 1995 1994
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Investment income--net $ 5,687,952 $ 3,547,011
Realized loss on investments--net (285) (3,204)
------------- -------------
Net increase in net assets resulting from operations 5,687,667 3,543,807
------------- -------------
Dividends to Shareholders (Note 1e):
Investment income--net (5,687,952) (3,547,011)
------------- -------------
Net decrease in net assets resulting from dividends to shareholders (5,687,952) (3,547,011)
------------- -------------
Beneficial Interest Transactions (Note 3):
Net proceeds from sale of shares 823,958,852 854,339,246
Net asset value of shares issued to shareholders in reinvestment of dividends
(Note 1e) 5,687,899 3,547,085
------------- -------------
829,646,751 857,886,331
Cost of shares redeemed (805,646,384) (831,571,902)
------------- -------------
Net increase in net assets derived from beneficial interest transactions 24,000,367 26,314,429
------------- -------------
Net Assets:
Total increase in net assets 24,000,082 26,311,225
Beginning of year 213,654,983 187,343,758
------------- -------------
End of year $ 237,655,065 $ 213,654,983
============= =============
</TABLE>
CMA OHIO MUNICIPAL MONEY FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For the
Period
The following per share data and ratios have been derived April 29,
from information provided in the financial statements. 1991++ to
For the Year Ended March 31, March 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- --------
Investment income--net .03 .02 .02 .03
-------- -------- -------- --------
Total from investment operations .03 .02 .02 .03
-------- -------- -------- --------
Less dividends from investment income--net (.03) (.02) (.02) (.03)
-------- -------- -------- --------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ========
Total Investment Return 2.65% 1.88% 2.27% 3.65%*
======== ======== ======== ========
Ratios to Average Net Assets:
Expenses, net of reimbursement and excluding distribution fees .62% .59% .61% .44%*
======== ======== ======== ========
Expenses, net of reimbursement .74% .72% .74% .57%*
======== ======== ======== ========
Expenses .74% .72% .74% .82%*
======== ======== ======== ========
Investment income--net 2.64% 1.86% 2.24% 3.52%*
======== ======== ======== ========
Supplemental Data:
Net assets, end of period (in thousands) $237,655 $213,655 $187,344 $192,173
======== ======== ======== ========
<FN>
*Annualized.
++Commencement of Operations.
</TABLE>
See Notes to Financial Statements.
<PAGE>
CMA OHIO MUNICIPAL MONEY FUND
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
CMA Ohio Municipal Money Fund (the "Fund") is part of CMA
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 following
is a summary of significant accounting policies followed by the
Fund.
(a) Valuation of investments--Investments are valued at amortized
cost, which approximates market value. For the purpose of valuation,
the maturity of a variable rate demand instrument is deemed to be
the next coupon date on which the interest rate is to be adjusted.
In the case of a floating rate instrument, the remaining maturity is
the demand notice payment period.
(b) 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.
(c) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income (including amortization of
premium and discount) is recognized on the accrual basis. Realized
gains and losses on security transactions are determined on the
identified cost basis.
(d) 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.
(e) Dividends to shareholders--The Fund declares dividends daily and
reinvests daily such dividends (net of non-resident alien tax
withheld) in additional fund shares at net asset value. Dividends
are declared from the total of net investment income, excluding
discounts earned other than original issue discounts. Net realized
capital gains, if any, are normally distributed annually after
deducting prior years' loss carryforward. The Fund may distribute
capital gains more frequently than annually in order to maintain the
Fund's net asset value at $1.00 per share.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM" or "Adviser"). 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.
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: 0.50%
of the first $500 million of average daily net assets; 0.425% of
average daily net assets in excess of $500 million but not exceeding
$1 billion; and 0.375% of average daily net assets in excess of
$1 billion.
The most restrictive annual expense limitation requires that the
Adviser reimburse the Fund to the extent the Fund's expenses
(excluding interest, taxes, distribution fees, brokerage fees
and commissions, and extraordinary items) exceed in any
<PAGE>
fiscal year 2.5% of the Fund's first $30 million of average daily
net assets, 2.0% of the Fund's next $70 million of average daily net
assets, and 1.5% of the average daily net assets in excess thereof.
No fee payment will be made to the Adviser during any year which
will cause such expenses to exceed the pro rata expense limitation
at the time of such payment.
CMA OHIO MUNICIPAL MONEY FUND
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
Pursuant to the Distribution and Shareholder Servicing Plan in
compliance with Rule 12b-1 under the Investment Company Act of 1940,
Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S") receives a
distribution fee from the Fund at the end of each month at the
annual rate of 0.125% of average daily net assets of the Fund. The
distribution fee is to compensate MLPF&S financial consultants and
other directly involved branch office personnel for selling shares
of the Fund and for providing direct personal services to
shareholders. The distribution fee is not compensation for the
administrative and operational services rendered to the Fund by
MLPF&S in processing share orders and administering shareholder
accounts.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, MLPF&S, FDS, and/or ML & Co.
3. Shares of Beneficial Interest:
The number of shares purchased and redeemed during the period
corresponds to the amounts included in the Statements of Changes in
Net Assets for net proceeds from sale of shares and cost of shares
redeemed, respectively, since shares are recorded at $1.00 per
share.
4. Capital Loss Carryforward:
At March 31, 1995, the Fund had a net capital loss carryforward of
approximately $32,000, of which $23,000 expires in 2000, $5,000
expires in 2001, and $4,000 expires in 2002. This amount will be
available to offset like amounts of any future taxable gains.
<PAGE>
CMA PENNSYLVANIA MUNICIPAL MONEY FUND
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
CMA Pennsylvania Municipal Money Fund
of CMA Multi-State Municipal Series Trust:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of CMA
Pennsylvania Municipal Money Fund of CMA Multi-State Municipal
Series Trust as of March 31, 1995, the related statements of
operations for the year then ended and changes in net assets for
each of the years in the two-year period then ended, and the
financial highlights for each of the years in the four-year period
then ended and the period August 27, 1990 (commencement of
operations) to March 31, 1991. These financial statements and the
financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our
audits.
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 March
31, 1995 by correspondence with the custodian and brokers. 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
CMA Pennsylvania Municipal Money Fund of CMA Multi-State Municipal
Series Trust as of March 31, 1995, the results of its operations,
the changes in its net assets, and the financial highlights for the
respective stated periods in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
May 1, 1995
<PAGE>
Portfolio Abbreviations for CMA Pennsylvania Municipal Money Fund
ACES SM Adjustable Convertible Extendable Securities
AMT Alternative Minimum Tax (subject to)
CP Commercial Paper
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
S/F Single-Family
TRAN Tax Revenue Anticipation Notes
UPDATES Unit Price Daily Adjustable Tax-Exempt Securities
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
CMA PENNSYLVANIA MUNICIPAL MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995 (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
Pennsylvania-- Allegheny County, Pennsylvania, Allegheny Hospital Development Authority
100.4% Revenue Bonds, VRDN (a):
$ 1,500 (Presbyterian University Health System), Series A, 4.20% due 3/01/2020 $ 1,500
4,700 (Presbyterian University Health System), Series B, 4.20% due 3/01/2020 4,700
6,900 (Presbyterian University Health System), Series C, 4.20% due 3/01/2020 6,900
1,400 (Presbyterian University Health System), Series D, 4.20% due 3/01/2020 1,400
3,000 Refunding (Harmarville Rehabilitation Center Project), 4.20% due
7/01/2007 3,000
6,500 Allegheny County, Pennsylvania, IDA, PCR (Duquesne Light Project),
CP, Series A, 4.75% due 12/07/1995 6,500
5,500 Allegheny County, Pennsylvania, IDA, Refunding (Commercial Development
Parkway Center Project), VRDN, Series A, 4.35% due 5/01/2009 (a) . 5,500
7,000 Allegheny County, Pennsylvania, Port Authority Grant Anticipation
Notes, 4.10% due 7/03/1995 7,000
Beaver County, Pennsylvania, IDA, PCR, CP (Duquesne Light Project),
AMT, Series A:
2,500 4.20% due 4/07/1995 2,500
2,100 4.25% due 4/07/1995 2,100
3,000 4.15% due 5/12/1995 3,000
Beaver County, Pennsylvania, IDA, PCR, Refunding (Duquesne Light
Project), VRDN (a):
900 (Beaver Valley), 4.25% due 8/01/2020 900
1,300 (Mansfield), Series B, 4.25% due 8/01/2009 1,300
2,000 Beaver County, Pennsylvania, IDA, PCR, Refunding (Toledo Edison
Project), CP, Series E, 4.20% due 5/03/1995 2,000
2,765 Berks County, Pennsylvania, IDA, IDR (Valley Forge Company, Inc.,
Project), VRDN, AMT, Series A, 4.75% due 9/01/2006 (a) 2,765
2,000 Bucks County, Pennsylvania, IDA, Revenue Bonds (Edgecomb Metal Co.),
VRDN, 4.25% due 10/01/2009 (a) 2,000
Carbon County, Pennsylvania, IDA, Resource Recovery Revenue Bonds
(Panther Creek Partners), CP, AMT:
2,000 Series A, 4.25% due 4/07/1995 2,000
2,600 Series A, 4.30% due 4/07/1995 2,600
1,600 Series A, 4.15% due 5/11/1995 1,600
2,550 Series B, 4.25% due 4/07/1995 2,550
7,500 Series B, 4.35% due 5/12/1995 7,500
1,900 Series B, 4.15% due 5/15/1995 1,900
4,235 Cumberland County, Pennsylvania, Municipal Authority, Revenue Refunding
Bonds (United Methodist Homes for the Aging), VRDN, 4.20% due
6/01/2019 (a) 4,235
6,100 Delaware County, Pennsylvania, Health Care Authority Revenue Bonds
(Capital Asset), VRDN, Series B, 4.25% due 7/01/2015 (a) 6,100
9,500 Delaware County, Pennsylvania, IDA, PCR (BP Oil Inc. Project),
UPDATES, 4.20% due 12/01/2009 (a) 9,500
</TABLE>
<PAGE>
<TABLE>
CMA PENNSYLVANIA MUNICIPAL MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995(CONTINUED) (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
Pennsylvania Delaware County, Pennsylvania, IDA, PCR, Refunding (Philadelphia
(continued) Electric Company), CP:
$ 4,000 Series A, 4.10% due 4/06/1995 $ 4,000
1,500 Series C, 4% due 4/28/1995 1,500
2,500 Series C, 4.35% due 5/24/1995 2,500
Eagle Tax Exempt Trust, Pennsylvania, VRDN (a):
4,300 Series 94, 4.35% due 5/01/2008 4,300
6,100 Series A, 4.15% due 7/01/2025 6,100
Emmaus, Pennsylvania, General Authority Revenue Bonds (Local
Government Pool), VRDN (a):
1,500 Series A, 4.25% due 3/01/2024 1,500
10,000 Series B, 4.25% due 3/01/2024 10,000
15,900 Series F, 4.25% due 3/01/2024 15,900
3,500 Erie County, Pennsylvania, IDA, Revenue Bonds (McInnes Steel Co.),
VRDN, AMT, 4.30% due 11/01/2001 (a) 3,500
1,800 Geisinger, Pennsylvania, Health Systems Revenue Bonds, VRDN, Series
E, 4.20% due 7/01/2022 (a) 1,800
300 Lehigh County, Pennsylvania, Sewer Authority Revenue Bonds, VRDN,
Series B, 4.10% due 3/15/2005 (a) 300
1,700 Montgomery County, Pennsylvania, IDA, Revenue Bonds (Merck & Co.
Project), VRDN, Series A, 4.625% due 10/01/2017 (a) 1,700
3,850 Montour County, Pennsylvania, IDA, PCR (Merck & Co. Project), VRDN,
Series A, 4.375% due 10/01/2003 (a) 3,850
Pennsylvania Economic Development Financing Authority, Economic
Development Revenue Bonds, VRDN (a):
1,000 AMT, Series A1, 4.35% due 8/01/2004 1,000
1,000 AMT, Series A4, 4.35% due 8/01/2001 1,000
3,000 AMT, Series B2, 4.35% due 12/01/2008 3,000
800 AMT, Series D4, 4.35% due 12/01/1997 800
900 AMT, Series D10, 4.35% due 7/01/2011 900
350 (Carson Industries Project), AMT, Series B2, 4.35% due 6/01/2000 350
2,000 (Erie Forge & Steel Project), Series B4, 4.35% due 12/01/1999 2,000
2,000 (Erie Plating Company Project), Series B5, 4.35% due 12/01/2004 2,000
1,400 (Kerner Co. Project), Series B4, 4.35% due 6/01/2007 1,400
2,100 (Kyowa America Project), Series B5, 4.35% due 6/01/2002 2,100
1,100 (Robert & Karen Wickerham Project), AMT, Series B7, 4.35% due
5/01/2005 1,100
450 (Winter Welding Project), Series B8, 4.35% due 6/01/2007 450
12,700 Pennsylvania Energy Development Authority, Energy Development Revenue
Bonds (B&W Ebensburg Project), VRDN, AMT, 4.25% due 12/01/2011 (a) 12,700
Pennsylvania Energy Development Authority, Energy Development Revenue
Bonds (Piney Creek Project), VRDN, AMT (a):
14,000 Series A, 4.25% due 12/01/2011 14,000
900 Series C, 4.25% due 12/01/2011 900
Pennsylvania State Higher Education Assistance Agency, Student Loan
Revenue Bonds, VRDN (a):
17,400 AMT, Series A, 4.20% due 1/01/2018 17,400
9,000 AMT, Series A, 4.20% due 12/01/2024 9,000
5,900 AMT, Series B, 4.20% due 7/01/2018 5,900
11,900 Series C, 4.20% due 7/01/2018 11,900
4,200 Series E, 4.20% due 7/01/2018 4,200
</TABLE>
<PAGE>
<TABLE>
CMA PENNSYLVANIA MUNICIPAL MONEY FUND
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1995(CONCLUDED) (IN THOUSANDS)
<CAPTION>
Face Value
State Amount Issue (Note 1a)
<S> <C> <S> <C>
Pennsylvania $ 7,000 Pennsylvania State Higher Education, University Funding Obligation
(concluded) Bonds (Temple University), 4.50% due 5/24/1995 $ 7,007
Pennsylvania State Higher Educational Facilities Authority, College and
University Revenue Bonds, VRDN (a):
3,000 (Carnegie-Mellon University), Series A, 4.10% due 11/01/2015 3,000
5,400 (Temple University), 4.20% due 10/01/2009 5,400
1,500 Pennsylvania State Higher Educational Facilities Authority, Health
Services Revenue Bonds (University of Pennsylvania), ACES, Series B,
4.20% due 1/01/2024 (a) 1,500
13,000 Pennsylvania State Higher Educational Facilities Authority, Revenue
Refunding Bonds (Thomas Jefferson University), ACES, Series B, 3.70%
due 6/01/1995 (a) 13,000
Philadelphia, Pennsylvania, Hospital and Higher Education Facilities
Authority, Hospital Revenue Bonds, VRDN (a):
3,600 (Children's Hospital of Philadelphia Project), 4.20% due 3/01/2027 3,600
2,400 (Friends Hospital), Series A, 4.20% due 3/01/2006 2,400
4,900 Refunding (Pennsylvania Hospital), Series C, 4% due 7/01/1995 4,900
6,400 Philadelphia, Pennsylvania, IDA, M/F Mortgage Revenue Refunding Bonds
(Harbor View Towers), VRDN, 4.20% due 11/01/2027 (a) 6,400
Philadelphia, Pennsylvania, IDA, Revenue Bonds, VRDN, AMT (a):
10,200 (30th Street Station Project), 3.50% due 1/01/2011 10,200
13,700 (Philadelphia Airport Hotel), 4.15% due 12/01/2017 13,700
8,000 Philadelphia, Pennsylvania, School District TRAN, UT, 4.75% due
6/30/1995 8,011
15,500 Philadelphia, Pennsylvania, TRAN, Series A, 4.75% due 6/15/1995 15,526
4,240 Pittsburgh, Pennsylvania, Urban Redevelopment Authority, S/F Mortgage
Revenue Bonds, AMT, Series C, 4.45% due 6/01/1995 4,240
2,000 Schuylkill County, Pennsylvania, IDA, Resource Recovery Revenue Bonds
(Northeastern Power Company), VRDN, 4.20% due 12/01/2011 (a) 2,000
Venango, Pennsylvania, IDA, Resource Recovery Revenue Bonds (Scrubgrass
Project):
2,915 AMT, Series 1993, 4.25% due 4/07/1995 2,915
2,950 AMT, Series A, 4.25% due 4/07/1995 2,950
2,550 AMT, Series A, 4.30% due 4/07/1995 2,550
2,000 AMT, Series A, 4.35% due 5/12/1995 2,000
2,750 Series A, 3.95% due 5/11/1995 2,750
1,000 York County, Pennsylvania, IDA, IDR (Edgecomb Metals Co. Project), VRDN,
4.25% due 7/01/2009 (a) 1,000
Total Investments (Cost--$355,149*)--100.4% 355,149
Liabilities in Excess of Other Assets--(0.4%) (1,514)
----------
Net Assets--100.0% $ 353,635
==========
<FN>
(a)The interest rate is subject to change periodically based on
certain indexes. The interest rate shown is the rate in effect at
March 31, 1995.
*Cost for Federal income tax purposes.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CMA PENNSYLVANIA MUNICIPAL MONEY FUND
STATEMENT OF ASSETS AND LIABILITIES AS OF MARCH 31, 1995
<S> <C> <C>
Assets:
Investments, at value (identified cost--$355,148,972) (Note 1a) $ 355,148,972
Cash 163,050
Interest receivable 2,697,993
Deferred organization expenses (Note 1d) 3,976
Prepaid registration fees and other assets (Note 1d) 13,999
---------------
Total assets 358,027,990
---------------
Liabilities:
Payables:
Securities purchased $ 4,047,134
Investment adviser (Note 2) 152,360
Distributor (Note 2) 111,396 4,310,890
---------------
Accrued expenses and other liabilities 82,271
---------------
Total liabilities 4,393,161
---------------
Net Assets $ 353,634,829
===============
Net Assets Consist of:
Shares of beneficial interest, $.10 par value, unlimited number of shares
authorized $ 35,366,117
Paid-in capital in excess of par 318,295,057
Accumulated realized capital losses--net (Note 4) (26,345)
---------------
Net Assets--Equivalent to $1.00 per share based on 353,661,174 shares of
beneficial interest outstanding $ 353,634,829
===============
</TABLE>
<TABLE>
CMA PENNSYLVANIA MUNICIPAL MONEY FUND
STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1995
<S> <C> <C>
Investment Income (Note 1c):
Interest and amortization of premium and discount earned $ 11,352,855
Expenses:
Investment advisory fees (Note 2) $ 1,689,896
Distribution fees (Note 2) 420,594
Transfer agent fees (Note 2) 101,396
Professional fees 50,204
Accounting services (Note 2) 35,994
Registration fees (Note 1d) 32,473
Custodian fees 28,028
Printing and shareholder reports 27,365
Amortization of organization expenses (Note 1d) 9,806
Pricing fees 9,007
Trustees' fees and expenses 4,521
Other 6,871
---------------
Total expenses 2,416,155
---------------
Investment income--net 8,936,700
Realized Loss on Investments--Net (Note 1c) (12,217)
---------------
Net Increase in Net Assets Resulting from Operations $ 8,924,483
===============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CMA PENNSYLVANIA MUNICIPAL MONEY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year Ended March 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <C> <C>
Operations:
Investment income--net $ 8,936,700 $ 5,863,031
Realized loss on investments--net (12,217) (3,224)
--------------- ---------------
Net increase in net assets resulting from operations 8,924,483 5,859,807
--------------- ---------------
Dividends to Shareholders (Note 1e):
Investment income--net (8,935,523) (5,863,031)
--------------- ---------------
Net decrease in net assets resulting from dividends to shareholders (8,935,523) (5,863,031)
--------------- ---------------
Beneficial Interest Transactions (Note 3):
Net proceeds from sale of shares 1,238,593,671 1,153,799,544
Net asset value of shares issued to shareholders in reinvestment of
dividends (Note 1e) 8,935,464 5,863,001
--------------- ---------------
1,247,529,135 1,159,662,545
Cost of shares redeemed (1,230,735,908) (1,141,760,453)
--------------- ---------------
Net increase in net assets derived from beneficial interest transactions 16,793,227 17,902,092
--------------- ---------------
Net Assets:
Total increase in net assets 16,782,187 17,898,868
Beginning of year 336,852,642 318,953,774
--------------- ---------------
End of year* $ 353,634,829 $ 336,852,642
=============== ===============
<FN>
*Undistributed investment income--net (Note 1f) $ -- $ --
=============== ===============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CMA PENNSYLVANIA MUNICIPAL MONEY FUND
FINANCIAL HIGHLIGHTS
<CAPTION>
For the
Period
The following per share data and ratios have been derived August 27,
from information provided in the financial statements. 1990++ to
For the Year Ended March 31, March 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
Investment income--net .03 .02 .02 .03 .03
--------- --------- --------- --------- ---------
Total from investment operations .03 .02 .02 .03 .03
--------- --------- --------- --------- ---------
Less dividends from investment income--net (.03) (.02) (.02) (.03) (.03)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Total Investment Return 2.65% 1.87% 2.29% 3.58% 4.95%*
========= ========= ========= ========= =========
Ratios to Average Net Assets:
Expenses, net of reimbursement and excluding
distribution fees .59% .59% .60% .65% .63%*
========= ========= ========= ========= =========
Expenses, net of reimbursement .71% .72% .72% .77% .75%*
========= ========= ========= ========= =========
Expenses .71% .72% .72% .77% .80%*
========= ========= ========= ========= =========
Investment income--net 2.64% 1.85% 2.22% 3.47% 4.75%*
========= ========= ========= ========= =========
Supplemental Data:
Net assets, end of period (in thousands) $ 353,635 $ 336,853 $ 318,954 $ 243,225 $ 225,622
========= ========= ========= ========= =========
<FN>
*Annualized.
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<PAGE>
CMA PENNSYLVANIA MUNICIPAL MONEY FUND
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
CMA Pennsylvania Municipal Money Fund (the "Fund") is part of CMA
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 following
is a summary of significant accounting policies followed by the
Fund.
(a) Valuation of investments--Investments are valued at amortized
cost, which approximates market value. For the purpose of valuation,
the maturity of a variable rate demand instrument is deemed to be
the next coupon date on which the interest rate is to be adjusted.
In the case of a floating rate instrument, the remaining maturity is
the demand notice payment period.
(b) 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.
(c) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income (including amortization of
premium and discount) is recognized on the accrual basis. Realized
gains and losses on security transactions are determined on the
identified cost basis.
(d) 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.
(e) Dividends to shareholders--The Fund declares dividends daily and
reinvests daily such dividends (net of non-resident alien tax
withheld) in additional fund shares at net asset value. Dividends
are declared from the total of net investment income, excluding
discounts earned other than original issue discounts. Net realized
capital gains, if any, are normally distributed annually after de-
ducting prior years' loss carryforward. The Fund may distribute
capital gains more frequently than annually in order to maintain the
Fund's net asset value at $1.00 per share.
(f) Reclassification--Generally accepted accounting principles
require that certain differences between undistributed net
investment income for financial reporting and tax purposes, if
permanent, be reclassified to accumulated net realized capital
losses. Accordingly, current year's permanent book/tax differences
of $1,177 have been reclassified from undistributed net investment
income to accumulated net realized capital losses. These
reclassifications have no effect on net assets or net asset value
per share.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM" or "Adviser"). The general partner of
FAM is Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co. ("ML & Co."), which is the limited
partner.
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: 0.50%
of the first $500 million of average daily net assets; 0.425% of
average daily net assets in excess of $500 million but not exceeding
$1 billion; and 0.375% of average daily net assets in excess of $1
billion.
The most restrictive annual expense limitation requires that the
Adviser reimburse the
<PAGE>
Fund to the extent the Fund's expenses (excluding interest, taxes,
distribution fees, brokerage fees and commissions, and extraordinary
items) exceed in any fiscal year 2.5% of the Fund's first $30 million of
average daily net assets, 2.0% of the Fund's next $70 million of average
daily net assets, and 1.5% of the average daily net assets in excess
thereof. No fee payment will be made to the Adviser during any year
which will cause such expenses to exceed the pro rata expense limitation
at the time of such payment.
CMA PENNSYLVANIA MUNICIPAL MONEY FUND
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
Pursuant to the Distribution and Shareholder Servicing Plan in
compliance with Rule 12b-1 under the Investment Company Act of 1940,
Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S") receives a
distribution fee from the Fund at the end of each month at the
annual rate of 0.125% of average daily net assets of the Fund. The
distribution fee is to compensate MLPF&S financial consultants and
other directly involved branch office personnel for selling shares
of the Fund and for providing direct personal services to
shareholders. The distribution fee is not compensation for the
administrative and operational services rendered to the Fund by
MLPF&S in processing share orders and administering shareholder
accounts.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, MLPF&S, FDS, and/or ML & Co.
3. Shares of Beneficial Interest:
The number of shares purchased and redeemed during the period
corresponds to the amounts included in the Statements of Changes in
Net Assets for net proceeds from sale of shares and cost of shares
redeemed, respectively, since shares are recorded at $1.00 per
share.
4. Capital Loss Carryforward:
At March 31, 1995, the Fund had a net capital loss carryforward of
approximately $26,000, of which $15,000 expires in 2002 and $11,000
expires in 2003. This amount will be available to offset like
amounts of any future taxable gains.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objectives and Policies......................................... 2
Management of the Trust.................................................... 5
Trustees and Officers..................................................... 5
Compensation of Trustees.................................................. 6
Management and Advisory Arrangements...................................... 8
Purchase and Redemption of Shares.......................................... 10
Portfolio Transactions..................................................... 12
Determination of Net Asset Value........................................... 13
Yield Information.......................................................... 14
Taxes...................................................................... 14
Federal................................................................... 14
Environmental Tax......................................................... 16
State..................................................................... 16
General Information........................................................ 20
Description of Series and Shares.......................................... 20
Custodian and Transfer Agent.............................................. 21
Independent Auditors...................................................... 21
Legal Counsel............................................................. 21
Reports to Shareholders................................................... 21
Additional Information.................................................... 21
Appendices................................................................. A-1
Financial Statements....................................................... FS-1
</TABLE>
Code #16818-0795
CMA MULTI-STATE
MUNICIPAL SERIES TRUST
. ARIZONA
. CALIFORNIA
. CONNECTICUT
. MASSACHUSETTS
. MICHIGAN
. NEW JERSEY
. NEW YORK
. NORTH CAROLINA
. OHIO
. PENNSYLVANIA
- --------------------------------------------------------------------------------
STATEMENT OF
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
LOGO CMA(R)
July 31, 1995
- --------------------------------------------------------------------------------
LOGO MERRILL LYNCH
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS:
Financial Statements contained in Part A:
Financial Highlights for the period April 29, 1991 (commencement of
operations) to March 31, 1992 and for each of the years in the three-
year period ended March 31, 1995.
Financial Statements contained in Part B:
Schedule of Investments as of March 31, 1995.
Statement of Assets and Liabilities as of March 31, 1995.
Statement of Operations for the year ended March 31, 1995.
Statements of Changes in Net Assets for each of the years in the two-
year period ended March 31, 1995.
Financial Highlights for the period April 29, 1991 (commencement of
operations) to March 31, 1992 and for each of the years in the three-
year period ended March 31, 1995.
(b)EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.(a) --Declaration of Trust of the Registrant dated February 6,
1987.(a)
(b) --Amendment to the Declaration of Trust.(a)
(c) --Instrument establishing CMA Michigan Municipal Money Fund (the
"Fund") as a series of the Registrant.(a)
2. --By-Laws of the Registrant.(a)
3. --None.
4. --Portion of the Declaration of Trust, Establishment and
Designation and By-Laws of the Registrant defining the rights of
holders of shares of the Fund as a series of the Registrant.(b)
5.(a) --Form of Management Agreement between the Registrant and Fund
Asset Management, L.P.(a)
(b) --Supplement to the Management Agreement with Fund Asset
Management, L.P.(c)
6. --Form of Distribution Agreement between the Registrant and
Merrill Lynch, Pierce, Fenner & Smith Incorporated.(a)
7. --None.
8. --Form of Custody Agreement between the Registrant and State
Street Bank and Trust Company.(a)
9.(a) --Amended Transfer Agency, Shareholder Servicing Agency and Proxy
Agency Agreement between the Registrant and Merrill Lynch
Financial Data Services, Inc.(a)
(b) --Form of Cash Management Account Agreement.(a)
10. --Opinion of Brown & Wood, counsel to the Registrant.
11. --Consent of Deloitte & Touche LLP, independent auditors for the
Registrant.
12. --None.
13. --Certificate of Fund Asset Management, L.P.(a)
14. --None.
15. --Form of Distribution and Shareholder Servicing Plan between the
Registrant and Merrill Lynch, Pierce, Fenner & Smith
Incorporated.(a)
16.(a) --Schedule for computation of each performance quotation provided
in the Registration Statement in response to Item 22.(a)
(b) --Schedule for computation of each performance quotation provided
in the Registration Statement in response to Item 22.
17. --Financial Data Schedule.
</TABLE>
- --------
(a) Refiled pursuant to the Electronic Data Gathering, Analysis and Retrieval
("EDGAR") phase-in requirements.
C-1
<PAGE>
(b) Reference is made to Article II, Section 2.3 and Articles III, V, VI, VIII,
IX, X and XI of the Registrant's Declaration of Trust, filed as Exhibit
1(a) to Post-Effective Amendment No. 5 to the Registrant's Registration
Statement under the Securities Act of 1933, as amended (the "Registration
Statement"); to the Certificate of Establishment and Designation
establishing the Fund as a series of the Registrant, filed as Exhibit 1(c)
to Post-Effective Amendment No. 5 to the Registration Statement; and to
Articles I, V and VI of the Registrant's By-Laws, filed as Exhibit 2 to
Post-Effective Amendment No. 5 to the Registration Statement.
(c) Filed on July 29, 1994 as an exhibit to Post-Effective Amendment No. 4 to
the Registration Statement.
Reference is made to the Registration Statements under the Securities Act of
1933 on Form N-1A in connection with exhibits relating to the CMA Arizona
Municipal Money Fund (File No. 33-54492), CMA California Municipal Money Fund
(File No. 33-20580), CMA Connecticut Municipal Money Fund (File No. 33-38833),
CMA Massachusetts Municipal Money Fund (File No. 33-34610), CMA New Jersey
Municipal Money Fund (File No. 33-34609), CMA New York Municipal Money Fund
(File No. 33-20463), CMA North Carolina Municipal Money Fund (File No. 33-
38780), CMA Ohio Municipal Money Fund (File No. 33-38835) and CMA Pennsylvania
Municipal Money Fund (File No. 33-34608).
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>
NUMBER OF
HOLDERS
TITLE OF CLASS AT JUNE 30, 1995
-------------- ----------------
<S> <C>
Shares of beneficial interest, par value $0.10 per
share.................................................. 4,833
</TABLE>
--------
Note: The number of holders shown above includes holders of record plus
beneficial owners, whose shares are held of record by Merrill
Lynch, Pierce, Fenner & Smith Incorporated.
ITEM 27. INDEMNIFICATION.
Section 5.3 of the Registrant's Declaration of Trust provides as follows:
"The Trust shall indemnify each of its Trustees, officers, employees, and
agents (including persons who serve at its request as directors, officers
or trustees of another organization in which it has any interest as a
shareholder, creditor or otherwise) against all liabilities and expenses
(including amounts paid in satisfaction of judgments, in compromise, as
fines and penalties, and as counsel fees) reasonably incurred by him in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, in which he may be involved or with
which he may be threatened, while in office or thereafter, by reason of his
being or having been such a trustee, officer, employee or agent, except
with respect to any matter as to which he shall have been adjudicated to
have acted in bad faith, willful misfeasance, gross negligence or reckless
disregard of his duties; provided, however, that as to any matter disposed
of by a compromise payment by such person, pursuant to a consent decree or
otherwise, no indemnification either for said payment or for any other
expenses shall be provided unless the Trust shall have received a written
opinion from independent legal counsel approved by the Trustees to the
effect that if either the matter of willful misfeasance, gross negligence
or reckless disregard of duty, or the matter of good faith and reasonable
belief as to the best interests of the Trust, had been adjudicated, it
would have been adjudicated in favor of such person. The rights accruing to
any person under these provisions shall not exclude any other right to
which he may be lawfully entitled; provided that no person may satisfy any
right of indemnity or reimbursement granted herein or in Section 5.1 or to
which he may be otherwise entitled except out of the property of the Trust,
and no Shareholder shall be personally liable to any person with respect to
any claim for indemnity or reimbursement or otherwise. The Trustees may
make advance payments in connection with indemnification under this Section
5.3, provided that
C-2
<PAGE>
the indemnified person shall have given a written undertaking to reimburse
the Trust in the event it is subsequently determined that he is not
entitled to such indemnification."
The Registrant's By-Laws provide that insofar as the conditional advancing of
indemnification moneys pursuant to Section 5.3 of the Declaration of Trust for
actions based upon the Investment Company Act of 1940 may be concerned, such
payments will be made only on the following conditions: (i) the advances must
be limited to amounts used, or to be used, for the preparation or presentation
of a defense to the action, including costs connected with the preparation of a
settlement; (ii) advances may be made only upon receipt of a written promise
by, or on behalf of, the recipient to repay that amount of the advance which
exceeds the amount to which it is ultimately determined that he is entitled to
receive from the Registrant by reason of indemnification; and (iii) (a) such
promise must be secured by a surety bond, other suitable insurance or an
equivalent form of security which assures that any repayments may be obtained
by the Registrant without delay or litigation, which bond, insurance or other
form of security must be provided by the recipient of the advance, or (b) a
majority of a quorum of the Registrant's disinterested, non-party Trustees, or
an independent legal counsel in a written opinion, shall determine, based upon
a review of readily available facts, that the recipient of the advance
ultimately will be found entitled to indemnification.
In Section 8 of the Distribution Agreement relating to the securities being
offered hereby, the Registrant agrees to indemnify the Distributor and each
person, if any, who controls the Distributor within the meaning of the
Securities Act of 1933 (the "Act"), against certain types of civil liabilities
arising in connection with the Registration Statement or Prospectus.
Insofar as indemnification for liabilities arising under the Act may be
permitted to Trustees, officers and controlling persons of the Registrant and
the principal underwriter pursuant to the foregoing provisions or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Trustee, officer, or controlling
person of the Registrant and the principal underwriter in connection with the
successful defense of any action, suit or proceeding) is asserted by such
Trustee, officer or controlling person or the principal underwriter in
connection with the shares being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Fund Asset Management, L.P. (the "Manager" or "FAM") acts as the investment
adviser for the following open-end investment companies: CBA Money Fund, CMA
Government Securities Fund, CMA Money Fund, CMA Multi-State Municipal Series
Trust, CMA Tax-Exempt Fund, CMA Treasury Fund, The Corporate Fund Accumulation
Program, Inc., Financial Institutions Series Trust, Merrill Lynch Basic Value
Fund, Inc., Merrill Lynch California Municipal Series Trust, Merrill Lynch
Corporate Bond Fund, Inc., Merrill Lynch Federal Securities Trust, Merrill
Lynch Funds for Institutions Series, Merrill Lynch Multi-State Limited Maturity
Municipal Series Trust, Merrill Lynch Multi-State Municipal Series Trust,
Merrill Lynch Municipal Bond Fund, Inc., Merrill Lynch Phoenix Fund, Inc.,
Merrill Lynch Special Value Fund, Inc., Merrill Lynch World Income Fund, Inc.
and The Municipal Fund Accumulation Program, Inc.; and the following closed-end
investment companies: Apex Municipal Fund, Inc., Corporate High Yield Fund,
Inc., Corporate High Yield Fund II, Inc., Emerging Tigers Fund, Inc., Income
Opportunities Fund 1999, Inc., Income Opportunities Fund 2000, Inc., MuniAssets
Fund, Inc., MuniEnhanced Fund, Inc.,
C-3
<PAGE>
MuniInsured Fund, Inc., MuniVest Fund, Inc., MuniVest Fund II, Inc., MuniVest
California Insured Fund, Inc., MuniVest Florida Fund, MuniVest Michigan Insured
Fund, Inc., MuniVest New Jersey Fund, Inc., MuniVest New York Insured Fund,
Inc., MuniVest Pennsylvania Insured Fund; MuniYield Arizona Fund, Inc.;
MuniYield California Fund, Inc., MuniYield California Insured Fund, Inc.,
MuniYield California Insured Fund II, Inc., MuniYield Florida Fund, MuniYield
Florida Insured Fund, MuniYield Fund, Inc., MuniYield Insured Fund, Inc.,
MuniYield Insured Fund II, Inc., MuniYield Michigan Fund, Inc., MuniYield
Michigan Insured Fund, Inc., MuniYield New Jersey Fund, Inc., MuniYield New
Jersey Insured Fund, Inc., MuniYield New York Insured Fund, Inc., MuniYield New
York Insured Fund II, Inc., MuniYield New York Insured Fund III, Inc.,
MuniYield Pennsylvania Fund, MuniYield Quality Fund, Inc., MuniYield Quality
Fund II, Inc., Senior High Income Portfolio, Inc., Senior High Income Portfolio
II, Inc., Senior Strategic Income Fund, Inc., Taurus MuniCalifornia Holdings,
Inc., Taurus MuniNewYork Holdings, Inc. and Worldwide DollarVest Fund, Inc.
Merrill Lynch Asset Management L.P., ("MLAM"), an affiliate of FAM, acts as
investment adviser for the following open-end investment companies: Merrill
Lynch Adjustable Rate Securities Fund, Inc., Merrill Lynch Americas Income
Fund, Inc., Merrill Lynch Asset Builder Program, Inc., Merrill Lynch Asset
Growth Fund, Inc., Merrill Lynch Asset Income Fund, Inc., Merrill Lynch
Balanced Fund for Investment and Retirement, Inc., Merrill Lynch Capital Fund,
Inc., Merrill Lynch Developing Capital Markets Fund, Inc., Merrill Lynch Dragon
Fund, Inc., Merrill Lynch EuroFund, Merrill Lynch Fundamental Growth Fund,
Inc., Merrill Lynch Fund for Tomorrow, Inc., Merrill Lynch Global Allocation
Fund, Inc., Merrill Lynch Global Bond Fund for Investment and Retirement,
Merrill Lynch Global Convertible Fund, Inc., Merrill Lynch Global Holdings,
Inc., Merrill Lynch Global Resources Trust, Merrill Lynch Global SmallCap Fund,
Inc., Merrill Lynch Global Utility Fund, Inc., Merrill Lynch Growth Fund for
Investment and Retirement, Merrill Lynch Healthcare Fund, Inc., Merrill Lynch
Institutional Intermediate Fund, Merrill Lynch International Equity Fund,
Merrill Lynch Latin America Fund, Inc., Merrill Lynch Middle East/Africa Fund,
Inc., Merrill Lynch Municipal Series Trust, Merrill Lynch Pacific Fund, Inc.,
Merrill Lynch Ready Assets Trust, Merrill Lynch Retirement Series Trust,
Merrill Lynch Series Fund, Inc., Merrill Lynch Short-Term Global Income Fund,
Inc., Merrill Lynch Strategic Dividend Fund, Merrill Lynch Technology Fund,
Inc., Merrill Lynch U.S.A. Government Reserves, Merrill Lynch U.S. Treasury
Money Fund, Merrill Lynch Utility Income Fund, Inc. and Merrill Lynch Variable
Series Fund, Inc.; and the following closed-end investment companies:
Convertible Holdings, Inc., Merrill Lynch High Income Municipal Bond Fund, Inc.
and Merrill Lynch Senior Floating Rate Fund, Inc. The address of each of these
investment companies is P.O. Box 9011, Princeton, New Jersey 08543-9011, except
that the address of Merrill Lynch Institutional Intermediate Fund and Merrill
Lynch Funds for Institutions Series is One Financial Center, 15th Floor,
Boston, Massachusetts 02111-2646. The address of the Manager and MLAM is also
P.O. Box 9011, Princeton, New Jersey 08543-9011. The address of Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and Merrill Lynch & Co.,
Inc. ("ML & Co.") is World Financial Center, North Tower, 250 Vesey Street, New
York, New York 10281. The address of Merrill Lynch Financial Data Services,
Inc. ("FDS") is 4800 Deer Lake Drive East, Jacksonville, Florida 32246-6484.
Set forth below is a list of each executive officer and partner of the
Manager indicating each business, profession, vocation or employment of a
substantial nature in which each such person or entity has been engaged since
April 1, 1993 for his or her or its own account or in the capacity of director,
officer, partner or trustee. In addition, Mr. Zeikel is President, Mr. Glenn is
Executive Vice President and Mr. Richard is Treasurer of all or substantially
all of the investment companies described in the preceding paragraph. Messrs.
Zeikel, Glenn and Richard also hold the same position with all or substantially
all of the investment companies advised by MLAM as they do with those advised
by the Manager and Messrs. Giordano, Harvey, Hewitt, Kirstein and Monagle are
directors or officers of one or more of such companies.
C-4
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) WITH OTHER SUBSTANTIAL BUSINESS,
NAME MANAGER PROFESSION, VOCATION OR EMPLOYMENT
---- ---------------- ----------------------------------
<S> <C> <C>
ML & Co................. Limited Partner Financial Services Holding Company,
Limited Partner of MLAM
Princeton Services, Inc.
("Princeton Services"). General Partner General Partner of MLAM
Arthur Zeikel........... President President of MLAM; President and
Director of Princeton Services;
Director of Merrill Lynch Funds
Distributor, Inc. ("MLFD"); Executive
Vice President of ML & Co.; Executive
Vice President of Merrill Lynch
Terry K. Glenn.......... Executive Vice President Executive Vice President of MLAM;
Executive Vice President and Director
of Princeton Services; President and
Director of MLFD; Director of FDS;
President of Princeton Administrators,
L.P.
Vincent R. Giordano..... Senior Vice President Senior Vice President of MLAM; Senior
Vice President of Princeton Services
Elizabeth Griffin....... Senior Vice President Senior Vice President of MLAM
Norman R. Harvey........ Senior Vice President Senior Vice President of MLAM; Senior
Vice President of Princeton Services
N. John Hewitt.......... Senior Vice President Senior Vice President of MLAM; Senior
Vice President of Princeton Services
Philip L. Kirstein...... Senior Vice President, Senior Vice President, General
General Counsel Counsel and Secretary of MLAM; Senior
and Secretary Vice President, General Counsel,
Director and Secretary of Princeton
Services; Director of MLFD
Ronald M. Kloss......... Senior Vice President Senior Vice President and Controller
and Controller of MLAM; Senior Vice President and
Controller of Princeton Services
Stephen M.M. Miller..... Senior Vice President Executive Vice President of Princeton
Administrators, L.P.
Joseph T. Monagle, Jr. . Senior Vice President Senior Vice President of MLAM; Senior
Vice President of Princeton Services
Richard L. Reller....... Senior Vice President First Vice President of MLAM; First Vice
President of Princeton Services
Gerald M. Richard....... Senior Vice President Senior Vice President and Treasurer
and Treasurer of MLAM; Senior Vice President and
Treasurer of Princeton Services; Vice
President and Treasurer of MLFD
Ronald L. Welburn....... Senior Vice President Senior Vice President of MLAM; Senior
Vice President of Princeton Services
Anthony Wiseman......... Senior Vice President Senior Vice President of MLAM; Senior
Vice President of Princeton Services
</TABLE>
C-5
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) Merrill Lynch acts as the principal underwriter for the Registrant.
Merrill Lynch also acts as the principal underwriter for each of the following
open-end investment companies referred to in the first paragraph of Item 28:
CBA Money Fund, nine other series of CMA Multi-State Municipal Series Trust,
CMA Money Fund, CMA Tax-Exempt Fund, CMA Treasury Fund, CMA Government
Securities Fund, The Corporate Fund Accumulation Program, Inc. and The
Municipal Fund Accumulation Program, Inc. and also acts as the principal
underwriter for each of the closed-end investment companies referred to in the
first paragraph of Item 28, and as the depositor of the following unit
investment trusts: The Corporate Income Fund, Municipal Investment Trust Fund,
The ML Trust for Government Guaranteed Securities and The Government Securities
Income Fund.
(b) With the exception of Arthur Zeikel, the President and a Trustee of the
Registrant who is an Executive Vice President of Merrill Lynch and ML & Co.,
none of the Trustees or officers of the Registrant is a director, officer or
employee of Merrill Lynch.
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940, as amended, and the rules
thereunder will be maintained at the offices of the Registrant, 800 Scudders
Mill Road, Plainsboro, New Jersey 08536 and FDS, 4800 Deer Lake Drive East,
Jacksonville, Florida 32246-6484.
ITEM 31. MANAGEMENT SERVICES.
Other than as set forth under the caption "Management of the Trust--
Management and Advisory Arrangements" in the Prospectus constituting Part A of
the Registration Statement and under the caption "Management of the Trust--
Management and Advisory Arrangements" in the Statement of Additional
Information constituting Part B of the Registration Statement, and in response
to Item 31 in Part C of the Registration Statements of CMA Arizona Municipal
Money Fund, CMA California Municipal Money Fund, CMA Connecticut Municipal
Money Fund, CMA Massachusetts Municipal Money Fund, CMA New Jersey Municipal
Money Fund, CMA New York Municipal Money Fund, CMA North Carolina Municipal
Money Fund, CMA Ohio Municipal Money Fund, and CMA Pennsylvania Municipal Money
Fund, the Registrant is not a party to any management-related services
contract.
ITEM 32. UNDERTAKINGS.
(a) Not applicable
(b) Not applicable
(c) Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders
upon request and without charge.
C-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT OF 1940, THE REGISTRANT CERTIFIES THAT IT MEETS ALL OF THE
REQUIREMENTS FOR EFFECTIVENESS OF THIS POST-EFFECTIVE AMENDMENT TO THE
REGISTRATION STATEMENT PURSUANT TO RULE 485(B) UNDER THE SECURITIES ACT OF 1933
AND HAS DULY CAUSED THIS POST-EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN
THE TOWNSHIP OF PLAINSBORO AND STATE OF NEW JERSEY, ON THE 26TH DAY OF JULY,
1995.
CMA Multi-state Municipal Series Trust
(Registrant)
By /s/ Terry K. Glenn
---------------------------------
(TERRY K. GLENN, EXECUTIVE VICE PRESIDENT)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT TO
THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
Arthur Zeikel*
- ------------------------------------ President (Principal
(ARTHUR ZEIKEL) Executive Officer)
and Trustee
Gerald M. Richard* Treasurer (Principal
- ------------------------------------ Financial and Accounting
(GERALD M. RICHARD) Officer)
Ronald W. Forbes* Trustee
- ------------------------------------
(RONALD W. FORBES)
Cynthia A. Montgomery* Trustee
- ------------------------------------
(CYNTHIA A. MONTGOMERY)
Charles C. Reilly* Trustee
- ------------------------------------
(CHARLES C. REILLY)
Kevin A. Ryan* Trustee
- ------------------------------------
(KEVIN A. RYAN)
Richard R. West* Trustee
- ------------------------------------
(RICHARD R. WEST)
*By /s/ Terry K. Glenn
-------------------------------- July 26, 1995
(TERRY K. GLENN, ATTORNEY-IN-FACT)
C-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.(a) --Declaration of Trust of the Registrant dated February 6,
1987.(a)
(b) --Amendment to the Declaration of Trust.(a)
(c) --Instrument establishing the Fund as a series of the
Registrant.(a)
2. --By-Laws of the Registrant.(a)
5. --Form of Management Agreement between the Registrant and
FAM.(a)
6. --Form of Distribution Agreement between the Registrant and
Merrill Lynch.(a)
8. --Form of Custody Agreement between the Registrant and State
Street Bank and Trust Company.(a)
9.(a) --Amended Transfer Agency Agreement between the Registrant and
FDS.(a)
(b) --Form of Cash Management Account Agreement.(a)
10. --Opinion of Brown & Wood, counsel to the Registrant.
11. --Consent of Deloitte & Touche LLP, independent auditors for
the Registrant.
13. --Certificate of FAM.(a)
15. --Form of Distribution and Shareholder Servicing Plan between
the Registrant and Merrill Lynch.(a)
16.(a) --Schedule for computation of each performance quotation
provided in the Registration Statement in response to Item
22.(a)
(b) --Schedule for computation of each performance quotation
provided in the Registration Statement in response to Item 22.
17. --Financial Data Schedule.
</TABLE>
- --------
(a) Refiled pursuant to the EDGAR phase-in requirements.
<PAGE>
EXHIBIT 99.1(a)
DECLARATION OF TRUST
OF
CMA MULTI-STATE TAX-EXEMPT
SERIES TRUST
THE DECLARATION OF TRUST of CMA Multi-State Tax-Exempt Series Trust is
made the 6th day of February, 1987 by the parties signatory hereto, as trustees
(such persons, so long as they shall continue in office in accordance with the
terms of this Declaration of Trust, and all other persons who at the time in
question have been duly elected or appointed as trustees in accordance with the
provisions of this Declaration of Trust and are then in office, being herein-
after called the "Trustees").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Trustees desire to form a trust fund under the laws of
Massachusetts for the Investment and reinvestment of funds contributed thereto;
and
WHEREAS, it is proposed that the beneficial interest in the trust assets
be divided into transferable shares of beneficial interest which may at the
discretion of the Trustees, be divided into separate series as hereinafter
provided;
NOW, THEREFORE, the Trustees hereby declare that they will hold in trust,
all money and property contributed to the trust fund to manage and dispose of
the same for the benefit of the holders from time to time of the shares of
beneficial interest issued hereunder and subject to the provisions hereof, to
wit:
<PAGE>
ARTICLE I
The Trust
---------
1.1. Name. The name of the trust created hereby (the "Trust", which term
----
shall be deemed to include any Series of the Trust when the context requires)
shall be "CMA Multi-State Tax-Exempt Series Trust", and so far as may be
practicable the Trustees shall conduct the activities of the Trust, execute all
documents and sue or be sued under that name, which name (and the word "Trust"
wherever hereinafter used) shall refer to the Trustees as Trustees, and not
individually, and shall not refer to the officers, agents, employees or
Shareholders of the Trust or any Series thereof. Each Series of the Trust which
shall be established and designated by the Trustees pursuant to Section 6.2
shall conduct its activities under such name as the Trustees shall determine and
set forth in the instrument establishing such Series. Should the Trustees
determine that the use of the name of the Trust or any Series is not advisable,
they may select such other name for the Trust or such Series as they deem proper
the Trust or Series may conduct its activities under such other name. Any name
and change shall be effective upon the execution by a majority of the then
Trustees of an instrument setting forth the new name. Any such instrument shall
have the status of an amendment to this Declaration.
1.2. Definitions. As used in this Declaration, the following terms shall
-----------
have the following meanings:
The terms "Affiliated Person", "Assignments", "Commission", "Interested
----------------- ----------- ---------- ----------
Person", "Majority Shareholder Vote" (the 67% or 50% requirement of the third
- ------ -------------------------
sentence of Section 2(a)(42) of the 1940 Act, whichever may be applicable) and
"Principal Underwriter" shall have the meanings given them in the 1940 Act.
---------------------
"Declaration" shall mean this Declaration of Trust as amended from time to
-----------
time. References in this Declaration to "Declaration", "hereof", "herein" and
----------- ------ ------
"hereunder" shall be deemed to refer to the Declaration rather than the article
---------
or section in which such words appear.
"Fundamental Policies" shall mean the investment restrictions set forth in
--------------------
Prospectus of any Series and designated as fundamental policies therein.
"Person" shall mean and include individuals, corporations, partnerships,
------
trusts, associations, joint ventures and other entities, whether or not legal
entities and governments and agencies and political subdivisions thereof.
"Prospectus" shall mean the currently effective Prospectus of any Series
----------
of the Trust under the Securities Act of 1933, as amended, including the
Statement of Additional Information incorporated by reference therein.
"Series" shall mean the separate series that may be established and
------
designated pursuant to Section 6.2.
2.
<PAGE>
"Shareholders" shall mean as of any particular time all holders of
------------
record of outstanding Shares at such time.
"Shares" shall mean the equal proportionate transferable units of
------
interest into which the beneficial interest in any Series of the Trust shall be
divided from time to time and includes fractions of Shares as well as whole
Shares. All references to Shares shall be deemed to be Shares of any or all
Series as the context may require.
"Trustees" shall mean the signatories to this Declaration of Trust, so
--------
long as they shall continue in office in accordance with the terms hereof, and
all other persons who at the time in question have been duly elected or
appointed and have qualified as trustees in accordance with the provisions
hereof and are then in office, are herein referred to as the "Trustees", and
reference in this Declaration of Trust to a Trustee or Trustees shall refer to
such person or persons in their capacity as Trustees hereunder.
"Trust Property" shall mean as of any particular time any and all prop-
--------------
erty, real or personal, tangible or intangible, which at such time is owned or
held by or for the account of the Trust, any Series thereof or the Trustees.
The "1940 Act" refers to the Investment Company Act of 1940 and the regu-
--------
lations promulgated thereunder, as amended from time to time.
3.
<PAGE>
ARTICLE II
Trustees
--------
2.1. Number and Qualification. The number of Trustees shall be fixed
------------------------
from time to time by written instrument signed by a majority of the Trustees
then in office, provided, however, that the number of Trustees shall in no event
be less than three or more than fifteen (except prior to the first public
Offering of Shares). Any vacancy created by an increase in Trustees may, to the
extent permitted by the 1940 Act, be filled by the appointment of an individual
having the qualifications described in this Article made by a written instrument
signed by a majority of the Trustees then in office. Any such appointment shall
not become effective, however, until the individual named in the written
instrument of appointment shall have accepted in writing such appointment and
agreed in writing to be bound by the terms of this Declaration of Trust. No
reduction in the number of Trustees shall have the effect of removing any
Trustee from office prior to the expiration of his term. Whenever a vacancy in
the number of Trustees shall occur, until such vacancy is filled as provided in
Section 2.3 hereof, the Trustees in office, regardless of their number, shall
have all the powers granted to the Trustees and shall discharge all the duties
imposed upon the Trustees by this Declaration of Trust. A Trustee shall be an
individual at least 21 years of age who is not under legal disability. Trustees
need not own Shares.
2.2. Term of Office. The Trustees shall hold office during the lifetime
--------------
of this Trust, and until its termination as hereinafter provided; except (a)
that any Trustee may resign his trust by written instrument signed by him and
delivered to the other Trustees, which shall take effect upon such delivery or
upon such later date as is specified therein; (b) that any trustee may be
removed at any time by written instrument, signed by at least two-thirds of the
number of Trustees prior to such removal, specifying the date when such removal
shall become effective; (c) that any Trustee who requests in writing to be
retired or, who had become incapacitated by illness or injury may be retired by
written instrument signed by a majority of the other Trustees, specifying the
date of his retirement; and (d) a Trustee may be removed at any special meeting
of the shareholders by a vote of two-thirds of the outstanding Shares. Upon the
resignation or removal of a Trustee, or his otherwise ceasing to be a Trustee,
he shall execute and deliver such documents as the remaining Trustees shall
require for the purpose of conveying to the Trust or the remaining Trustees any
Trust Property, held in the name of the resigning or removed Trustee. Upon the
incapacity, or death of any Trustee, his legal representative shall execute and
deliver on his behalf such documents as the remaining Trustees shall require as
provided in the preceding sentence.
2.3. Vacancies. The term of office of a Trustee shall terminate and a
---------
vacancy shall occur in the event of the death, resignation, bankruptcy ad-
judicated incompetence or other incapacity to perform the duties of the office,
or removal, of a Trustee. No such vacancy shall operate to annul this Declar-
ation of Trust or to revoke any existing agency created pursuant to the terms of
4.
<PAGE>
this Declaration of Trust. In the case of a vacancy, the Shareholders, acting
at any meeting of Shareholders held in accordance with Section 10.2 hereof, or
to the extent permitted by the 1940 Act, a majority of the Trustees continuing
office acting by written instrument or instruments, may fill such vacancy
and any Trustee so elected by the Trustees shall hold office as provided in this
Declaration.
2.4. Meetings. Meetings of the Trustees shall be held from time to time
--------
upon the call of the Chairman, if any, the President, the Secretary, or any, two
Trustees. Regular meetings of the Trustees may be held without call or notice
at a time and place fixed by the By-Laws or by resolution of the Trustees.
Notice of any other meeting shall be mailed or otherwise given not less than 48
hours before the meeting but may be waived in writing by any Trustee either
before or after such meeting. The attendance of a Trustee at a meeting shall
constitute a waiver of notice of such meeting except where a Trustee attends a
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting has not been lawfully called or convened. The
Trustees may act with or without a meeting. A quorum for all meetings of the
Trustees shall be a majority of the Trustees. Unless provided otherwise in this
Declaration of Trust, any action of the Trustees may be taken at a meeting by
vote of a majority of the Trustees present (a quorum being present) or without a
meeting by, written consents of a majority of the Trustees.
Any committee of the Trustees, including an executive committee, if any,
may act with or without a meeting. A quorum for all meetings of any such
committee shall be a majority of the members thereof. Unless provided otherwise
in this Declaration, any action of any such committee may be taken at a meeting
by vote of a majority of the members present (a quorum being present) or without
a meeting by written consent of a majority of the members.
With respect to actions of the Trustees and any committee of the Trustees,
Trustees who are Interested Persons of the Trust within the meaning of Section
1.2 hereof or otherwise interested in any action to be taken may be counted for
quorum purposes under this Section and shall be entitled to vote to the extent
permitted by the 1940 Act.
To the extent permitted by the 1940 Act, all or any one or more Trustees
may participate in a meeting of the Trustees or any committee thereof by means
of a conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other and participation
in a meeting pursuant to such communications systems shall constitute presence
in person at such meeting.
2.5. Officers. The Trustees shall annually elect a President, a Secretary
--------
and a Treasurer and may elect a Chairman. The Trustees may elect or appoint or
authorize the Chairman, if any, or President to appoint such other officers or
agents which such powers as the Trustees may deem to be advisable. The Chairman
and President shall be and the Secretary and Treasurer may, but need not, be a
Trustee.
5
<PAGE>
2.6. By-Laws. The Trustees may adopt and from time to time amend or
-------
repeal the By-Laws for the conduct of the business of the Trust.
6.
<PAGE>
ARTICLE III
Powers of Trustees
------------------
3.1. General. The Trustees shall have exclusive and absolute control over
-------
the Trust Property and over the business of the Trust or any Series thereof to
the same extent as if the Trustees were the sale owners of the Trust Property
and business in their own right, but with such powers of delegation as may be
permitted by this Declaration. The Trustees may perform such acts as in their
sole discretion are proper for conducting the business of the Trust or any
Series thereof. The enumeration of any specific power herein shall not be con-
strued as limiting the aforesaid power. Such powers of the Trustees may be
exercised without order of or resort to any court.
3.2. Investments. The Trustees shall have power, subject to the Funda-
-----------
mental Policies, to:
(a) conduct, operate and carry on the business of an investment
company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, assign, transfer, exchange, distribute or
otherwise deal in or dispose of negotiable or non-negotiable instruments
obligations, evidences of indebtedness, certificates of deposit or
indebtedness, commercial paper, repurchase agreements, reverse repurchase
agreements, options, futures contracts and options on futures contracts
and other securities, including, without limitation, those issued,
guaranteed or sponsored by any state, territory or possession of the
United States and the District of Columbia and their political sub-
divisions, agencies and instrumentalities, or by the United States
Government or its agencies or instrumentalities, or international instru-
mentalities, or by any bank, savings institution, corporation or other
business entity organized under the laws of the United States and, to the
extent provided in the Prospectus and not prohibited by the Fundamental
Policies, organized under foreign laws; and to exercise any and all
rights, powers and privileges of ownership or interest in respect of any
and all such investments of every kind and description, including, without
limitation, the right to consent and otherwise act with respect thereto,
with power to designate one or more persons, firms, associations or
corporations to exercise any of said rights, powers and privileges in
respect of any of said instruments; and the Trustees shall be deemed to
have the foregoing powers with respect to any additional securities in
which any Series of the Trust may invest should the investment policies
set forth in the Prospectus or the Fundamental Policies be amended.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust or any Series, nor shall the
Trustees be limited by any law limiting the investments which may be made by
fiduciaries.
7.
<PAGE>
3.3. Legal Title. Legal title to all the Trust Property shall be vested
-----------
in the Trustees as joint tenants except that the Trustees shall have power to
cause legal title to any Trust Property to be held by or in the name of one or
more of the Trustees, or in the name of the Trust or any Series thereof, or in
the name of any other Person as nominee, on such terms as the Trustees may
determine, provided that the interest of the Trust or any series thereof therein
is appropriately protected.
The right, title and interest of the Trustees in the Trust Property
shall vest automatically in each person who may hereafter become a Trustee upon
his due election and qualification. Upon the resignation, removal or death of a
Trustee he shall automatically cease to have any right, title or interest in any
of the Trust Property, and the right, title and interest of such Trustee in
vesting Trust Property shall vest automatically in the remaining Trustees. Such
the and cessation of title shall be effective whether or not conveyancing
documents have been executed and delivered.
3.4. Issuance and repurchase of Securities. The Trustees shall have the
-------------------------------------
power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell,
reissue, dispose of, transfer, and otherwise deal in, Shares, including shares
in fractional denominations, and, subject to the more detailed provisions set
forth in Articles VIII and IX, to apply to any such repurchase, redemption,
retirement, cancellation or acquisition of Shares any funds or property of the
applicable Series of the Trust whether capital or surplus or otherwise, to the
full extent now or hereafter permitted by the laws of the Commonwealth of
Massachusetts governing business corporations.
3.5. Borrow Money. Subject to the Fundamental Policies, the Trustees
------------
shall have power to borrow money or otherwise obtain credit and to secure the
same by mortgaging, pledging or otherwise subjecting as security the assets of
the Trust or any Series thereof, including the lending of portfolio securities,
and to endorse, guarantee, or undertake the performance of any obligation, con-
tract or engagement of any other person, firm, association or corporation.
3.6. Delegation; Committees. The Trustees shall have power, consistent
----------------------
with their continuing exclusive authority over the management of the Trust and
the Trust Property, to delegate from time to time to such of their number or to
officers, employees or agents of the Trust the doing of such things and the
execution of such instruments either in the name of the Trust or the names of
the Trustees or otherwise as the Trustees may deem expedient, to the same extent
as such delegation is permitted to directors of a Massachusetts business cor-
poration and is permitted by the 1940 Act.
3.7. Collection and Payment. The Trustees shall have power to collect all
----------------------
property due to the Trust or any Series thereof; to pay, all claims, including
taxes, against the Trust Property; to prosecute, defend, compromise or abandon
any claims relating to the Trust Property; to foreclose any security interest
securing any obligations, by virtue of which any property is owed to the Trust
or any Series thereof; and to enter into releases, agreements and other
instruments.
8.
<PAGE>
3.8. Expenses. The Trustees shall have power to incur and pay any expenses
--------
which in the opinion of the Trustees are necessary or incidental to carry out
any of the purposes of this Declaration of Trust, and to pay reasonable
compensation from the funds of the Trust to themselves as Trustees. The Trustees
shall fix the compensation of all officers, employees and Trustees. The Trustees
may pay themselves such compensation for special services including legal,
underwriting, syndicating and brokerage services, as they in good faith may deem
reasonable and reimbursement for expenses reasonably incurred by themselves on
behalf of the Trust.
3.9. Miscellaneous Powers. The Trustees shall have the power to: (a)
--------------------
employ or contract with such Persons as the Trustees may deem desirable for the
transaction of the business of the Trust or any Series thereof; (b) enter into
joint ventures, partnerships and any other combinations or associations; (c)
purchase, and pay for out of Trust Property, insurance policies insuring the
Shareholders, Trustees, officers, employees, agents, investment advisors,
distributors, selected dealers or independent contractors of the Trust or any
Series thereof against all claims arising by reason of holding any such position
or by reason of any action taken or omitted by any such Person in such capacity,
whether or not constituting negligence, or whether or not the Trust would have
the power to indemnify such Person against such liability; (d) establish
pension, profit-sharing, share purchase, and other retirement, incentive and
benefit plans for any Trustees, officers, employees and agents of the Trust; (e)
make donations, irrespective of benefit to the Trust, for charitable, religious,
educational, scientific, civic or similar purposes; (f) to the extent permitted
by law, indemnify any Person with whom the Trust or any Series thereof has
dealings, including any advisor, administrator, manager, distributor and
selected dealers with respect to any Series, to such extent as the Trustees
shall determine; (g) guarantee indebtedness or contractual obligations of
others; (h) determine and change the fiscal year of the Trust and the method in
which its accounts shall be kept; and (i) adopt a seal for the Trust but the
absence of such seal shall not impair the validity of any instrument executed on
behalf of the Trust.
3.10. Further Powers. The Trustees shall have power to conduct the
--------------
business of the Trust or any Series thereof and carry on its operations in any
and all of its branches and maintain offices both within and without the
Commonwealth of Massachusetts, in any and all states of the United States of
America, in the District of Columbia, and in any and all commonwealths,
territories, dependencies, colonies, possessions, agencies or instrumentalities
of the United States of America and of foreign governments, and to do all such
other things and execute all such instruments as they deem necessary, proper or
desirable in order to promote the interests of the Trust or any Series thereof
although such things are not herein specifically mentioned. Any determination as
to what is in the interests of the Trust or any Series thereof made by the
Trustees in good faith shall be conclusive. In construing the provisions of this
Declaration, the presumption shall be in favor of a grant of power to the
Trustees. The Trustees will not be required to obtain any court order to deal
with the Trust Property.
9
<PAGE>
ARTICLE IV
Advisory, Management and Distribution Arrangements
--------------------------------------------------
4.1. Advisory and Management Arrangements. Subject to a Majority Share-
------------------------------------
holder Vote of the applicable Series, as required by the 1940 Act, the Trustees
may in their discretion from time to time enter into advisory or management
contracts whereby the other party to such contract shall undertake to furnish
the Trustees such advisory and management services, with respect to a Series as
the Trustees shall from time to time consider desirable and all upon such terms
and conditions as the Trustees may in their discretion determine. Notwith-
standing any provisions of this Declaration of Trust, the Trustees may authorize
any advisor or manager (subject to such general or specific instructions as the
Trustees may from time to time adopt) to effect purchases, sales, loans or
exchanges of portfolio securities of any Series of the Trust on behalf of the
Trustees or may authorize any officer, employee or Trustee to effect such
purchases, sales, loans or exchanges pursuant to recommendations of any such
advisor, administrator or manager (and all without further action by the
Trustees). Any such purchases, sales, loans and exchanges shall be deemed to
have been authorized by all of the Trustees.
4.2. Distribution Arrangements. The Trustees may in their discretion from
-------------------------
time to time enter into a contract, providing for the sale of the Shares of the
Trust or any Series of the Trust to net the Trust not less than the par value
per share, whereby the Trust may either agree to sell the Shares to the other
party to the contract or appoint such other party its sales agent for such
Shares. In either case, the contract shall be on such terms and conditions as
the Trustees may in their discretion determine not inconsistent with the
provisions of this Article IV or the By-Laws; and such contract may also provide
for the repurchase or sale of Shares by such other party as principal or as
agent of the Trust and may provide that such other party may enter into selected
dealer agreements with registered securities dealers to further the purpose of
the distribution or repurchase of the Shares.
4.3. Parties to Contract. Any contract of the character described in
-------------------
Section 4.1 and 4.2 of this Article IV or in Article VII hereof may be entered
into with any corporation, firm, trust or association, although one or more of
the Trustees or officers of the Trust may be an officer, director, Trustee,
shareholder, or member of such other party to the contract, and no such contract
shall be invalidated or rendered voidable by reason of the existence of any such
relationship, nor shall any person holding such relationship be liable merely by
reason of such relationship for any loss or expense to the Trust under or by
reason of said contract or accountable for any profit realized directly or indi-
rectly therefrom, provided that the contract when entered into was reasonable
and fair and not inconsistent with the provisions of this Article IV or the By-
Laws. The same person (including a firm, corporation, trust, or association) may
be the other party to contracts entered into pursuant to Sections 4.1 and 4.2
above or Article VII, and any individual may be financially interested or
10
<PAGE>
otherwise affiliated with persons who are parties to any or all of the contracts
mentioned in this Section 4.3.
4.4. Provisions and Amendments. Any contract entered into pursuant to
-------------------------
Section 4.1 and 4.2 of this Article IV shall be consistent with and subject to
the requirements of Section 15 of the 1940 Act with respect to its continuance
in effect, its termination, and the method of authorization and approval of such
contract or renewal thereof, and no amendment to any contract entered into pur-
suant to Section 4.1 shall be effective unless assented to by a Majority Share-
holder Vote of the applicable Series.
11.
<PAGE>
ARTICLE V
Limitations of Liability of Shareholders,
Trustees and Others
-----------------------------------------
5.1. No Personal Liability of Shareholders, Trustees. etc. No Shareholder
----------------------------------------------------
shall be subject to any personal liability whatsoever to any Person in
connection with Trust Property or the acts, obligations or affairs of the Trust
or any Series thereof. No Trustee, officer, employee or agent of the Trust shall
be subject to any personal liability whatsoever to any Person, other than the
Trust or its Shareholders, in connection with Trust Property or the affairs of
the Trust or any Series thereof, save only that arising from his bad faith,
willful misfeasance, gross negligence or reckless disregard of his duty to such
person; and all such Persons shall look solely to the Trust Property for satis-
faction of claims of any nature arising in connection with the affairs of the
Trust or any Series thereof. If any Shareholder, Trustee, officer, employee, or
agent, as such, of the Trust, is made a party to any suit or proceeding to en-
force any such liability, he shall not on account thereof, be held to any per-
sonal liability. The Trust shall indemnify and hold each Shareholder harmless
from and against all claims and liabilities, to which such Shareholder may be-
come subject by reason of his being or having been a Shareholder, and shall
reimburse such Shareholder for all legal and other expenses reasonably incurred
by him in connection with any such claim or liability. The rights accruing to a
Shareholder under this Section 5.1 shall not exclude any other right to which
such Shareholder may be lawfully entitled, nor shall anything herein contained
restrict the right of the Trust to indemnify or reimburse a Shareholder in any
appropriate situation even though not specifically provided herein.
5.2. Non-Liability of Trustees, etc. No Trustee, officer, employee or
------------------------------
agent of the Trust shall be liable to the Trust, any Series, its Shareholders,
or to any Shareholder, Trustee, officer, employee, or agent thereof for any
action or failure to act (including without limitation the failure to compel in
any way any former or acting Trustee to redress any breach of trust) except for
his own bad faith, willful misfeasance, gross negligence or reckless disregard
of his duties.
5.3. Mandatory Indemnification. The Trust shall indemnify each of its
-------------------------
Trustees, officers, employees, and agents (including persons who serve at its
request as directors, officers or trustees of another organization in which it
has any interest, as a shareholder, creditor or otherwise) against all
liabilities and expenses (including amounts paid in satisfaction of judgments,
in compromise, as fines and penalties, and as counsel fees) reasonably incurred
by him in connection with the defense or disposition of any action, suit or
other proceeding, whether civil or criminal, in which he may be involved or with
which he may be threatened, while in office or thereafter, by reason of his
being or having been such a trustee, officer, employee or agent, except with
respect to any matter as to which he shall have been adjudicated to have acted
in bad faith, willful misfeasance, gross negligence or reckless disregard of his
duties; provided, however, that as to any matter disposed of by a compromise
12
<PAGE>
payment by such person, pursuant to a consent decree or otherwise, no indem-
nification either for said payment or for any other expenses shall be provided
unless the Trust shall have received a written opinion from independent legal
counsel approved by the Trustees to the effect that if either the matter of
willful misfeasance, gross negligence or reckless disregard of duty, or the
matter of good faith and reasonable belief as to the best interests of the
Trust, had been adjudicated, it would have been adjudicated in favor of such
person. The rights accruing to any Person under these provisions shall not
exclude any other right to which he may be lawfully entitled; provided that no
Person may satisfy any right of indemnity or reimbursement granted herein or in
Section 5.1 or to which he may be otherwise entitled except out of the property
of the Trust, and no Shareholder shall be personally liable to any Person with
respect to any claim for indemnity or reimbursement or otherwise. The Trustees
may make advance payments in connection with indemnification under this Section
5.3, provided that the indemnified person shall have given a written undertaking
to reimburse the Trust in the event it is subsequently determined that he is not
entitled to such indemnification.
5.4. No Bond Required of Trustees. No Trustee shall, as such, be obli-
----------------------------
gated to give any bond or security or other security for the performance of any
of his duties hereunder.
5.5. No Duty of Investigation; Notice in Trust Instruments, etc. No pur-
----------------------------------------------------------
chaser, lender, transfer agent or other person dealing with the Trustees or any
officer, employee or agent of the Trust shall be bound to make any inquiry
concerning the validity of any transaction purporting to be made by the Trustees
or by said officer, employee or agent or be liable for the application of money
or property paid, loaned, or delivered to or on the order of the Trustees or of
said officer, employee or agent. Every obligation, contract, undertaking,
instrument, certificate, Share, other security of the Trust or any Series, and
every other act or thing whatsoever executed in connection with the Trust or any
Series shall be conclusively taken to have been executed or done by the
executors thereof only in their capacity as Trustees under this Declaration of
Trust or in their capacity as officers, employees or agents of the Trust. Every
written obligation, contract, undertaking, instrument, certificate, Share, other
security of the Trust or any Series made or issued by the Trustees or by any
officers, employees or agents of the Trust, in their capacity as such, shall
contain an appropriate recital to the effect that the Shareholders, Trustees,
officers, employees and agents of the Trust shall not personally be bound by or
liable thereunder, nor shall resort be had to their private property for the
satisfaction of any obligation or claim thereunder, and appropriate references
shall be made therein to the Declaration of Trust, and may contain any further
recital which they may deem appropriate, but the omission of such recital shall
not operate to impose personal liability on any of the Trustees, Shareholders,
officers, employees or agents of the Trust. The Trustees may maintain insurance
for the protection of the Trust Property, its Shareholders, Trustees, officers,
employees and agents in such amount as the Trustees shall deem adequate to cover
possible tort liability, and such other insurance as the Trustees in their sole
judgment shall deem advisable.
13
<PAGE>
5.6. Reliance on Experts, etc. Each Trustee and Officer or employee of the
------------------------
Trust shall, in the performance of his duties, be fully and completely jus-
tified and protected with regard to any act or any failure to act resulting from
reliance in good faith upon the books of account or other records of the Trust,
upon an opinion of counsel, or upon reports made to the Trust by any of its
officers or employees or by any advisor, administrator, manager, distributor,
selected dealer, accountant, appraiser or other expert or consultant selected
with reasonable care by the Trustees, officers or employees of the Trust, re-
gardless of whether such counsel or expert may also be a Trustee.
14
<PAGE>
ARTICLE VI
Shares of Beneficial Interest
-----------------------------
6.1. Beneficial Interest. The interest of the beneficiaries hereunder
-------------------
shall be divided into transferable shares of beneficial interest with par value
$.10 per share. The number of such shares of beneficial interest authorized
hereunder is unlimited. All Shares issued hereunder including, without limi-
tation, Shares issued in connection with a dividend in Shares or a split of
Shares, shall be fully paid and nonassessable.
6.2. Series Designation. The Trustees, in their discretion from time to
------------------
time may authorize the division of Shares into two or more Series, each Series
relating to a separate portfolio of Investments. The different Series shall be
established and designated, and the variations in the relative rights and
references as between the different Series shall be fixed and determined, by the
Trustees; provided, that all Shares shall be identical except that there may be
variations between different Series as to purchase price, determination of net
asset value, the price, terms and manner of redemption, special and relative
rights as to dividends and on liquidation, conversion rights, and conditions
under which the several Series shall have separate voting rights. All refer-
ences to Shares in this Declaration shall be deemed to be shares of any or all
Series as the context may require.
If the Trustees shall divide the Shares into two or more Series, the fol-
lowing provisions shall be applicable:
(a) The number of Shares of each Series that may be issued shall be un-
limited. The Trustees may classify or reclassify any unissued Shares or any,
Shares previously issued and reacquired of any Series into one or more Series
that may be established and designated from time to time. The Trustees may hold
as treasury Shares (of the same or some other Series), reissue for such
consideration and on such terms as they may determine, or cancel any Shares of
any Series reacquired by the Trust at their discretion from time to time.
(b) The power of the Trustees to invest and reinvest the Trust Property of
each Series that may be established shall be governed by Section 3.2 of this
Declaration.
(c) All consideration received by the Trust for the issue or sale of
Shares of a particular Series, together with all assets in which such consid-
eration is invested or reinvested, all income, earnings, profits, and proceeds
thereof, including any proceeds derived from the sale exchange or liquidation of
such assets, and any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, shall irrevocably belong to that
Series for all purposes, subject only to the rights of creditors and shall be so
recorded upon the books of account of the Trust. In the event that there are any
assets, income, earnings, profits, and proceeds thereof, funds, or payments
which are not readily identifiable as belonging to any particular Series, the
15.
<PAGE>
Trustees shall allocate them among any one or more of the Series established and
designated from time to time in such manner and on such basis as they, in their
sole discretion, deem fair and equitable. Each such allocation by the Trustees
shall be conclusive and binding upon the shareholders of all Series for all
purposes.
(d) The assets belonging to each particular Series shall be charge with
the liabilities of the Trust in respect of that Series only and all expenses,
costs, charges and reserves attributable to that Series and shall not be charged
with the liabilities, expenses, costs, charges and reserves attributable to
other Series, and any general liabilities, expenses, costs, charges or reserves
of the Trust which are not readily identifiable as belonging to any particular
Series shall be allocated and charged by the Trustees to and among any one or
more of the Series established and designated from time to time in such manner
and on such basis as the Trustees in their sole discretion deem fair and
equitable. Each allocation of liabilities, expenses, costs, charges and reserves
by the Trustees shall be conclusive and binding upon the holders of all Series
for all purposes. The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items shall be treated as
income and which items as capital; and each such determination and allocation
shall be conclusive and binding upon the Shareholders.
(e) The power of the Trustees to pay dividends and make distributions with
respect to any one or more Series shall be governed by Section 9.2 of this
Trust. Dividends and distributions on Shares of a particular Series may be paid
with such frequency as the Trustees may determine, to the holders of Shares of
that Series, from such of the income and capital gains, accrued or realized,
from the assets belonging to that Series, as the Trustees may determine, after
providing for actual and accrued liabilities belonging to that Series. All
dividends and distributions on Shares of a particular Series shall be
distributed pro rata to the holders of that Series in proportion to the number
of Shares of that Series held by such holders at the date and time of record
established for the payment of such dividends or distributions.
The establishment and designation of any Series of Shares shall be effec-
tive upon the execution by a majority of the then Trustees of an instrument set-
ting forth the establishment and designation of such Series. Such instrument
shall also set forth any rights and preferences of such Series which are in
addition to the rights and preferences of Shares set forth in this Declaration.
At any time that there are no Shares outstanding of any particular Series
previously established and designated, the Trustees may by an instrument exe-
cuted by a majority of their number abolish that Series and the establishment
and designation thereof. Each instrument referred to in this paragraph shall
have the status of an amendment to this Declaration.
6.3. Rights of Shareholders. The ownership of the Trust Property of every
----------------------
description and the right to conduct any business hereinbefore described are
vested exclusively in the Trustees, and the Shareholders shall have no interest
therein other than the beneficial interest conferred by their Shares with
respect to a particular Series, and they shall have no right to call for any
16
<PAGE>
partition or division of any property, profits, rights or interests of the Trust
nor can they be called upon to share or assume any losses of the Trust or suffer
an assessment of any kind by virtue of their ownership of Shares. The Shares
shall be personal property giving only the rights in this Declaration
specifically set forth. The Shares shall not entitle the holder to preference,
preemptive, appraisal, conversion or exchange rights (except for rights of
appraisal specified in Section 11.4).
6.4. Trust Only. It is the intention of the Trustees to create only the
----------
relationship of Trustee and beneficiary between the Trustees and each Share-
holder from time to time. It is not the intention of the Trustees to create a
general partnership, limited partnership, joint stock association, corporation,
bailment or any form of legal relationship other than a trust. Nothing in this
Declaration of Trust shall be construed to make the Shareholders, either by
themselves or with the Trustees, partners or members of a joint stock asso-
ciation.
6.5. Issuance of Shares. The Trustees, in their discretion, may from time
------------------
to time without vote of the Shareholders issue Shares with respect to any Series
that may have been established pursuant to Section 6.2, in addition to the then
issued and outstanding Shares and Shares held in the treasury, to such party or
parties and for such amount not less than par value and type of consideration,
including cash or property, at such time or times (including, without
limitation, each business day in accordance with the maintenance of a constant
net asset value per share as set forth in Section 9.3 hereof), and on such terms
as the Trustees may deem best, and may in such manner acquire other assets
(including the acquisition of assets subject to, and in connection with the
assumption of, liabilities) and businesses. In connection with any issuance of
Shares, the Trustees may issue fractional Shares. The Trustees may from time to
time divide or combine the Shares of any Series into a greater or lesser number
without thereby changing the proportionate beneficial interests in such
Series of the Trust. Reductions in the number of outstanding Shares may be made
pursuant to the constant net asset value per share formula set forth in Section
9.3. Contributions to the Trust may be accepted for, and Shares shall be
redeemed as, whole Shares and/or 1/1,000ths of a Share or multiples thereof.
6.6. Register of Shares. A register shall be kept at the Trust or any
------------------
transfer agent duly appointed by the Trustees under the direction of the
Trustees which shall contain the names and addresses of the Shareholders and the
number of Shares (with respect to each Series that may have been established)
held by them respectively and a record of all transfers thereof. Separate reg-
isters shall be established and maintained for each Series of the Trust. Each
such register shall be conclusive as to who are the holders of the Shares of the
applicable Series and who shall be entitled to receive dividends or distri-
butions or otherwise to exercise or enjoy the rights of Shareholders. No Share-
holder shall be entitled to receive payment of any dividend or distribution, nor
to have notice given to him as herein provided, until he has given his
address to a transfer agent or such other officer or agent of the Trustees as
shall keep the register for entry thereon. It is not contemplated that
certificates will be issued for the Shares; however, the Trustees, in their
discretion, may au-
17
<PAGE>
thorize the issuance of share certificates and promulgate appropriate rules
and regulations as to their use.
6.7. Transfer Agent and Registrar. The Trustee shall have power to employ
----------------------------
a transfer agent or transfer agents, and a registrar or registrars, with respect
to the Shares of the various Series. The transfer agent or transfer agents may
keep the applicable register and record therein the original issues and
transfers, if any, of the said Shares of the applicable Series. Any such
transfer agent and registrars shall perform the duties usually performed by
transfer agents and registrars of certificates of stock in a corporation, except
as modified by the Trustees.
6.8. Transfer of Shares. Shares shall be transferable on the records of
------------------
the Trust only by the record holder thereof or by his agent thereto duly au-
thorized in writing, upon delivery to the Trustees or a transfer agent of the
Trust of a duly executed instrument of transfer, together with such evidence of
the genuineness of each such execution and authorization and of other matters as
may reasonably be required. Upon such delivery the transfer shall be recorded on
the applicable register of the Trust. Until such record is made, the Share-
holder of record shall be deemed to be the holder of such Shares for all pur-
poses hereof and neither the Trustees nor any transfer agent or registrar nor
any officer, employee or agent of the Trust shall be affected by any notice of
the proposed transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the applicable register of Shares as the holder of
such Shares upon production of the proper evidence thereof to the Trustees or a
transfer agent of the Trust, but until such record is made, the Shareholder of
record shall be deemed to be the holder of such Shares for all purposes hereof
and neither the Trustees nor any transfer agent or registrar nor any officer or
agent of the Trust shall be affected by any notice of such death, bankruptcy or
incompetence, or other operation of law.
6.9. Notices. Any and all notices to which any Shareholder hereunder may
-------
be entitled and any and all communications shall be deemed duly served or given
if mailed, postage prepaid, addressed to any Shareholder of record at his last
known address as recorded on the applicable register of the Trust.
18
<PAGE>
ARTICLE VII
Custodians
----------
7.1. Appointment and Duties. The Trustees shall at all times employ, a
----------------------
custodian or custodians, meeting the qualifications for custodians for portfolio
securities of investment companies contained in the 1940 Act, as custodian with
respect to each Series of the Trust. It is contemplated that separate cus-
todians may be employed for the different Series of the Trust. Any custodian,
acting with respect to one or more Series, shall have authority as agent of the
Trust or the Series with respect to which it is acting, but subject to such re-
strictions, limitations and other requirements, if any, as may be contained in
the By-Laws of the Trust and the 1940 Act:
(1) to hold the securities owned by the Trust or the Series and
deliver the same upon written order;
(2) to receive and receipt for any moneys due to the Trust or the
Series and deposit the same in its own banking department (if a bank) or
elsewhere as the Trustees may direct;
(3) to disburse such funds upon orders or vouchers;
(4) if authorized by the Trustees, to keep the books and accounts
of the Trust or the Series and furnish clerical and accounting services;
and
(5) if authorized to do so by the Trustees, to compute the net
income of the Trust or the Series,
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. If so directed by a Majority Shareholder Vote of the Series
with respect to which the custodian is acting, the custodian shall deliver and
pay over all property of the Trust held by it as specified in such vote.
The Trustees may also authorize each custodian to employ one or more sub-
custodians from time to time to perform such of the acts and services of the
custodian and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, provided that in
every case such sub-custodian shall meet the qualifications for custodians con-
tained in the 1940 Act.
7.2. Central Certificate System. Subject to such rules, regulations and
--------------------------
order as the Commission may adopt, the Trustees may direct the custodian to
deposit all or any part of the securities owned by the Trust or the Series in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with the 1940
19
<PAGE>
Act, pursuant to which system all securities of any particular class or series
of any issuer deposited within the system are treated as fungible and maybe
transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal or
upon the order of the Trust.
20
<PAGE>
ARTICLE VIII
Redemption
----------
8.1. Redemptions. All outstanding Shares of any Series of the Trust may be
-----------
redeemed at the option of the holders thereof, upon and subject to the terms and
conditions provided in this Article VIII. The Trust shall, upon application of
any Shareholder or pursuant to authorization from any Shareholder of a
particular Series, redeem or repurchase from such Shareholder outstanding Shares
of such Series for an amount per share determined by the application of a
formula adopted for such purpose by the Trustees with respect to such Series
(which formula shall be consistent with the 1940 Act); provided that (a) such
amount per share shall not exceed the cash equivalent of the proportionate
interest of each share in the assets of the Series of the Trust at the time of
the purchase or redemption and (b) if so authorized by the Trustees, the Trust
may, at any time and from time to time, charge fees for effecting such
redemption, at such rates as the Trustees may establish, as and to the extent
permitted under the 1940 Act, and may, at any time and from time to time,
pursuant to such Act, suspend such right of redemption. The procedures for
effecting redemption shall be as set forth in the Prospectus with respect to the
applicable Series from time to time.
8.2. Redemption of Shares; Disclosure of Holding. If the Trustees shall,
-------------------------------------------
at any time and in good faith, be of the opinion that direct or indirect
ownership of Shares or other securities of the Trust has or may become concen-
trated in any person to an extent which would disqualify the Trust as a regu-
lated investment company under the Internal Revenue Code, then the Trustees
shall have the power by lot or other means deemed equitable by them (i) to call
for redemption a number, or principal amount, of Shares or other securities of
the Trust sufficient, in the opinion of the Trustees, to maintain or bring the
direct or indirect ownership of Shares or other securities of the Trust into
conformity with the requirements for such qualification and (ii) to refuse to
transfer or issue Shares or other securities of the Trust to any Person whose
acquisition of the Shares or other securities of the Trust in question would in
the opinion of the Trustees result in such disqualification. The redemption
shall be effected at a redemption price determined in accordance with Section
8.1.
The holders of Shares or other securities of the Trust shall upon demand
disclose to the Trustees in writing such information with respect to direct and
indirect ownership of Shares or other securities of the Trust as the Trustees
deem necessary to comply with the provisions of the Internal Revenue Code, or to
comply with the requirements of any other taxing authority.
8.3. Redemptions of Accounts of Less than $1.000. Due to the relatively
-------------------------------------------
high cost of maintaining investment accounts of less than $1,000, the Trustees
shall have the power to redeem shares at a redemption price determined in
accordance with Section 8.1 if at any time the total investment in such account
does not have a value of at least $1,000; provided, however, that the Trustees
21
<PAGE>
may not exercise such power with respect to Shares of any Series if the
Prospectus of such Series does not describe such power. In the event the Trus-
tees determine to exercise their power to redeem Shares provided in this Section
8.3, shareholders shall be notified that the value of their account is less than
$1,000 and allowed 60 days to make an additional investment before redemption is
processed.
8.4. Redemptions Pursuant to Constant Net Asset Value Formula. The Trust
--------------------------------------------------------
may also reduce the number of outstanding Shares of any Series pursuant to the
provisions of Section 9.3.
22
<PAGE>
ARTICLE IX
Determination of Net Asset Value,
Net Income and Distributions
---------------------------------
9.1. Net Asset Value. The net asset value of each outstanding Share of
---------------
each Series of the Trust shall be determined at such time or times on such days
as the Trustees may determine, in accordance with the 1940 Act, with respect to
each Series. The method of determination of net asset value shall be determined
by the Trustees and shall be as set forth in the Prospectus with respect to the
applicable Series. The power and duty to make the daily calculations for any
Series may be delegated by the Trustees to the adviser, administrator, manager,
custodian, transfer agent or such other person as the Trustees may determine.
The Trustees may suspend the daily determination of net asset value to the
extent permitted by the 1940 Act.
9.2. Distributions to Shareholders. The Trustees shall from time to time
-----------------------------
distribute ratably among the Shareholders of any Series such proportion of the
net profits, surplus (including paid-in surplus), capital, or assets with re-
spect to such Series held by the Trustees as they may deem proper. Such distri-
bution may be made in cash or property (including without limitation any type of
obligations of the Trust or any assets thereof), and the Trustees may distribute
ratably among the Shareholders of any Series additional Shares of such Series in
such manner, at such times, and on such terms as the Trustees may deem proper.
Such distributions may be among the Shareholders of record at the time of
declaring a distribution or among the Shareholders of record at such later date
as the Trustees shall determine. The Trustees may always retain from the net
profits such amount as they may deem necessary to pay the debts or expenses of
the Trust or to meet obligations of the Trust, or as they may deem desirable to
use in the conduct of its affairs or to retain for future requirements or
extensions of the business. The Trustees may adopt and offer to Shareholders of
any Series such dividend reinvestment plans, cash dividend payout plans or
related plans as the Trustees shall deem appropriate for such Series.
Inasmuch as the computation of net income and gains for Federal income tax
purposes may vary from the computation thereof on the books, the above provi-
sions shall be interpreted to give the Trustees the power in their discretion to
distribute for any fiscal year as ordinary dividends and as capital gains dis-
tributions, respectively, additional amounts sufficient to enable the Trust to
avoid or reduce liability for taxes.
9.3. Constant Net Asset Value: Reduction of Outstanding Shares. The
---------------------------------------------------------
Trustees shall have the power to determine the net income of any Series of the
Trust on each day the net asset value of such Series is determined as provided
in Section 9.1 and at each such determination declare such net income for such
Series as dividends with the result that the net asset value per share of the
Series of the Trust shall remain at a constant dollar value. The determination
of net income and the resultant declaration of dividends shall be as set forth
in the Prospectus. In such event fluctuations in value may be reflected in the
23
<PAGE>
number of outstanding Shares in each Shareholder's account. It is expected that
each Series of the Trust will have a positive net income at the time of each
determination. If for any reason such net income is a negative amount, the Trust
may offset such amount against dividends accrued in the account of the
Shareholder of the applicable Series. If and to the extent such negative amount
exceeds such accrued dividends, the Trust shall have authority to reduce the
number of the outstanding Shares of the Series. Such reduction will be effected
by having each Shareholder proportionately contributing to the Series capital
the necessary Shares that represent the amount of the excess upon such
determination. Each Shareholder will be deemed to have agreed to such
contribution in these circumstances by his investment in the Series of the
Trust. This procedure will permit the net asset value per share of the Series of
the Trust to be maintained at a constant dollar value per share.
The Trustees, by resolution, may discontinue or amend the practice of
maintaining the net asset value per share at a constant dollar amount with re-
spect to any Series at any time and such modification shall be evidenced by
appropriate changes in the Prospectus.
9.4. Power to Modify Foregoing Procedures. Notwithstanding any of the
------------------------------------
foregoing provisions of this Article IX, the Trustees may prescribe, in their
absolute discretion, such other bases and times for determining the per share
net asset value of the Trust's Shares or net income, or the declaration and
payment of dividends and distributions as they may deem necessary or desirable
to enable the Trust to comply with any provision of the 1940 Act, or any se-
curities association registered under the Securities Exchange Act of 1934, or
any order of exemption issued by said Commission, all as in effect now or
hereafter amended or modified.
24
<PAGE>
ARTICLE X
Shareholders
------------
10.1. Voting Powers. The Shareholders shall have power to vote the (i) for
-------------
the removal of Trustees as provided in Section 2.2; (ii) with respect to any
advisory or management contract of a Series as provided in Section 4.1; (iii)
with respect to the amendment of this Declaration as provided in Section 11.3;
and (iv) with respect to such additional matters relating to the Trust as may be
required or authorized by the 1940 Act or other applicable law or by this
Declaration or by the By-Laws of the Trust.
10.2. Meetings of Shareholders. Special meetings of the Shareholder may be
------------------------
called at any time by a majority of the Trustees and shall be called by any
Trustee upon written request of Shareholders of any Series holding in the
aggregate not less than 10% of the outstanding Shares of such Series having
voting rights, such request specifying the purpose or purposes for which such
meeting is to be called. Any such meeting shall be held within or without the
Commonwealth of Massachusetts on such day and at such time as the Trustees shall
designate. The holders of one-third of outstanding Shares of each Series present
in person or by proxy shall constitute a quorum for the transaction of any
business, except as may otherwise be required by the 1940 Act or other
applicable law or by this Declaration or the By-Laws of the Trust. If a quorum
is present at a meeting of a particular Series, the affirmative vote of a
majority of the Shares of such Series represented at the meeting constitutes the
action of the Shareholders, unless the 1940 Act, other applicable law, this
Declaration or the By-Laws of the Trust requires a greater number of affirmative
votes.
10.3. Notice of Meetings. Notice of all meetings of the Shareholders,
------------------
stating the time, place and purposes of the meeting, shall be given by the
Trustees by mail to each Shareholder at his registered address, mailed at least
10 days and not more than 60 days before the meeting. Only the business stated
in the notice of the meeting shall be considered at such meeting. Any adjourned
meeting may be held as adjourned without further notice.
10.4. Record Date for Meetings. For the purposes of determining the
------------------------
Shareholders who are entitled to notice of and to vote at any meeting, or to
participate in any distribution, or for the purpose of any other action, the
Trustees may from time to time close the transfer books for such period, not
exceeding 30 days, as the Trustees may determine; or without closing the
transfer books the Trustees may fix a date not more than 60 days prior to the
date of any meeting of Shareholders or daily dividends or other action as a
record date for the determination of the Persons to be treated as Shareholders
of record for such purposes, except for dividend payments which is governed by
Section 9.2 hereof.
10.5. Proxies, etc. At any meeting of Shareholders, any holder of Shares
------------
entitled to vote thereat may vote by proxy, provided that no proxy shall be
voted at any meeting unless it shall have been placed on file with the sec-
25
<PAGE>
retary, or with such other officer or agent of the Trust as the Secretary may
direct, for verification prior to the time at which such vote shall be taken.
Pursuant to a resolution of a majority of the Trustees, proxies may be solicited
in the name of one or more Trustees or one or more of the officers of the Trust.
Only Shareholders of record shall be entitled to vote. Each full Share shall be
entitled to one vote and fractional Shares shall be entitled to a vote of such
fraction. When any Share is held jointly by several persons, any one of them may
vote at any meeting in person or by proxy in respect of such Share, but if more
than one of them shall be present at such meeting in person or by proxy, and
such joint owners or their proxies so present disagree as to any vote to be
cast, such vote shall not be received in respect of such Share. A proxy
purporting to be executed by or on behalf of a Shareholder shall be deemed valid
unless challenged at or prior to its exercise, and the burden of proving
invalidity shall rest on the challenger. If the holder of any such Share is a
minor or a person of unsound mind, and subject to guardianship or to the legal
control of any other person as regards the charge or management of such Share,
he may vote by his guardian or such other person appointed or having such
control, and such vote may be given in person or by proxy.
10.6. Reports. The Trustees shall cause to be prepared with respect to
-------
each Series at least annually a report of operations containing a balance sheet
and statement of income and undistributed income of the applicable Series of the
Trust prepared in conformity with generally accepted accounting principles and
an opinion of an independent public accountant on such financial statements. It
is contemplated that separate reports may be prepared for the various Series.
Copies of such reports shall be mailed to all Shareholders of record of the
applicable Series within the time required by the 1940 Act, and in any event
within a reasonable period preceding the annual meeting of Shareholders. The
Trustees shall, in addition, furnish to the Shareholders at least annually, in-
terim reports containing an unaudited balance sheet of the Series as of the end
of such period and an unaudited statement of income and surplus for the period
from the beginning of the current fiscal year to the end of such period.
10.7. Inspection of Records. The records of the Trust shall be open to
---------------------
inspection by Shareholders to the same extent as is permitted shareholders of a
Massachusetts business corporation.
10.8. Shareholder Action by Written Consent. Any action which may be taken
-------------------------------------
by Shareholders may be taken without a meeting if a majority of Shareholders of
each Series entitled to vote on the matter (or such larger proportion thereof as
shall be required by any express provision of this Declaration) consent to the
action in writing and the written consents are filed with the records of the
meetings of Shareholders. Such consent shall be treated for all purposes as a
vote taken at a meeting of Shareholders.
26
<PAGE>
ARTICLE XI
Duration; Termination of Trust;
Amendment; Mergers, Etc.
-------------------------------
11.1. Duration. Subject to possible termination in accordance with the
--------
provisions of Section 11.2 hereof, the Trust created hereby shall continue until
the expiration of 20 years after the death of the last survivor of the initial
Trustees named herein and the following named persons:
<TABLE>
<CAPTION>
Name Address Date of Birth
---- ------- -------------
<S> <C> <C>
Avery Moores Bruno 25 Rutgers Place September 19, 1983
Scarsdale, N.Y. 10583
Daryl Lian Kleiman 375 South End Avenue May 9, 1986
(Apt. 27U)
New York, N.Y. 10280
Angus Washburn Smith 12 Masterton Road October 15, 1982
Bronxville, N.Y. 10708
Elisabeth Lyon Smith 12 Masterton Road October 15, 1982
Bronxville, N.Y. 10708
</TABLE>
11.2. Termination.
-----------
(a) The Trust may be terminated by the affirmative vote of the
holders of not less than two-thirds of the Shares of each Series of the Trust at
any meeting of Shareholders or by an instrument in writing, without a meeting,
signed by a majority of the Trustees and consented to by the holders of not less
than two-thirds of such Shares. Any Series may be so terminated by vote or
written consent of not less than two-thirds of the Shares of such Series. Upon
the termination of the Trust or any Series,
(i) The Trust or such Series shall carry on no business except for
the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the Trust
or such Series and all of the powers of the Trustees under this
Declaration shall continue until the affairs of the Trust or such Series
shall have been wound up, including the power to fulfill or discharge the
contracts of the Trust or such Series, collect its assets, sell, convey,
assign, exchange, transfer or otherwise dispose of all or any part of the
remaining Trust Property to one or more persons at public or private sale
for consideration which may consist in whole or in part of cash, securi-
ties or other property of any kind, discharge or pay its liabilities, and
27
<PAGE>
do all other acts appropriate to liquidate its business; provided that any
sale, conveyance, assignment, exchange, transfer or other disposition of
all or substantially all the Trust Property shall require approval of the
principal terms of the transaction and the nature and amount of the
consideration by vote or consent of the holders of a majority of the
shares entitled to vote.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements, as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property of any Series, in cash or in kind
or partly each, among the Shareholders of such Series according to their
respective rights.
(b) After termination of the Trust or any Series and distribution
to the Shareholders as herein provided, a majority of the Trustees shall execute
and lodge among the records of the Trust and instrument in writing setting forth
the fact of such termination. Upon termination of the Trust, the Trustees shall
thereupon be discharged from all further liabilities and duties hereunder, and
the rights and interests of all Shareholders shall thereupon cease. Upon
termination of any Series, the Trustees shall thereunder be discharged from all
further liabilities and duties with respect to such Series, and the rights and
interests of all Shareholders of such Series shall thereupon cease.
11.3. Amendment Procedure.
-------------------
(a) This Declaration may be amended by the affirmative vote of the
holders of not less than a majority of the Shares at any meeting of Shareholders
or by an instrument in writing, without a meeting, signed by a majority of the
Trustees and consented to by the holders of not less than a majority of such
Shares. The Shareholders of each Series shall have the right to vote separately
on amendments to this Declaration to the extent provided by Section 10.1. The
Trustees may also amend this Declaration without the vote or consent of Share-
holders if they deem it necessary to conform this Declaration to the require-
ments of applicable federal laws or regulations or the requirements of the regu-
lated investment company provisions of the Internal Revenue Code, but the Trus-
tees shall not be liable for failing so to do.
(b) No amendment may be made, under Section 11.3 (a) above, which
would change any rights with respect to any Shares of the Trust by reducing the
amount payable thereon upon liquidation of the Trust or by diminishing or elim-
inating any voting rights pertaining thereto, except with the vote or consent of
the holders of two-thirds of the Shares of each Series. Nothing contained in
this Declaration shall permit the amendment of this Declaration to impair the
exemption from personal liability of the Shareholders, Trustees, officers, em-
ployees and agents of the Trust or to permit assessments upon Shareholders.
(c) A certification in recordable form signed by a majority of the
Trustees setting forth an amendment and reciting that it was duly adopted by the
Shareholders or by the Trustees as aforesaid or a copy of the Declaration, as
28
<PAGE>
amended, in recordable form, and executed by a majority of the Trustees, shall
ha] be conclusive evidence of such amendment when lodged among the records of
the Trust.
Notwithstanding any other provision hereof, until such time as a Regis-
tration Statement under the Securities Act of 1933, as amended, covering the
first public offering of Shares of the Trust shall have become effective, this
Declaration of Trust may be terminated or amended in any respect by the affir-
mative vote of a majority of the Trustees or by an instrument signed by a ma-
jority of the Trustees.
11.4. Merger, Consolidation and Sale of Assets. The Trust may merge or
----------------------------------------
consolidate with any other corporation, association, trust or other organization
or may sell, lease or exchange all or substantially all of the Trust Property,
including its good will, upon such terms and conditions and for such consid-
eration when and as authorized at any meeting of Shareholders called for the
purpose by the affirmative vote of the holders of not less than two-thirds of
the Shares of each Series, or by an instrument or instruments in writing without
a meeting, consented to by the holders of not less than two-thirds of such
Shares of each Series, and any such merger, consolidation, sale, lease or ex-
change shall be deemed for all purposes to have been accomplished under and
pursuant to the statutes of the Commonwealth of Massachusetts. Any Series may so
merge, consolidate or effect a sale or exchange of assets by the vote or written
consent of not less than two-thirds of the Shares of such Series. In respect of
any such merger, consolidation, sale or exchange of assets, any Shareholder
shall be entitled to rights of appraisal of his Shares to the same extent as a
shareholder of a Massachusetts business corporation in respect of a merger,
consolidation, sale or exchange Of assets of a Massachusetts business
corporation, and such rights shall be his exclusive remedy in respect of his
dissent from any such action.
11.5. Incorporation. With the approval of the holders of a majority of the
-------------
Shares, the Trustees may cause to be organized or assist in organizing a
corporation or corporations under the laws of any jurisdiction or any other
trust, partnership, association or other organization to take over all of the
Trust Property or to carry on any business in which the Trust shall directly or
indirectly have any interest, and to sell, convey and transfer the Trust
Property to any such corporation, trust, association or organization in exchange
for the Shares or securities thereof or otherwise, and to lend money to,
subscribe for the Shares or securities of, and enter into any contracts with any
such corporation, trust, partnership, association or organization, or any
corporation, partnership, trust, association or organization in which the Trust
holds or is about to acquire shares or any other interest. The Trustees may also
cause a merger or consolidation between the Trust or any successor thereto and
any such corporation, trust, partnership, association or other organization if
and to the extent permitted by law, as provided under the law then in effect.
Nothing contained herein shall be construed as requiring approval of
Shareholders for the Trustees to organize or assist in organizing one or more
corporations, trusts, partnerships, associations or other organizations and
29
<PAGE>
selling, conveying or transferring a portion of the Trust Property to such
organizations or entities.
30
<PAGE>
ARTICLE XII
Miscellaneous
-------------
12.1. Filing. This Declaration and any amendment hereto shall be filed in
------
the office of the Secretary of the Commonwealth of Massachusetts and in such
other places as may be required under the laws of Massachusetts and may also be
filed or recorded in such other places as the Trustees deem appropriate. Each
amendment so filed shall be accompanied by a certificate signed and acknowledged
by a Trustee stating that such action was duly taken in a manner provided
herein, and unless such amendment or such certificate sets forth some later time
for the effectiveness of such amendment, such amendment shall be effective upon
its filing. A restated Declaration, containing the original Declaration and all
amendments theretofore made, may be executed from time to time by a majority of
the Trustees and shall, upon filing with the Secretary of the Commonwealth of
Massachusetts, be conclusive evidence of all amendments contained therein and
may thereafter be referred to in lieu of the original Declaration and the
various amendments thereto.
12.2. Resident Agent. The Trust shall maintain a resident agent in the
--------------
Commonwealth of Massachusetts, which agent shall initially be CT Corporation
System, 10 Post Office Square, Boston, Massachusetts 02109. The Trustees may
designate a successor resident agent, provided, however, that such appointment
shall not become effective until written notice thereof is delivered to the
office of the Secretary of the Commonwealth.
12.3. Governing Law. This Declaration is executed by the Trustees and
-------------
delivered in the Commonwealth of Massachusetts and with reference to the laws
thereof, and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed according to the laws
of said State and reference shall be specifically made to the business
corporation law of the Commonwealth of Massachusetts as to the construction of
matters not specifically covered herein or as to which an ambiguity exists.
12.4. Counterparts. This Declaration may be simultaneously executed in
------------
several counterparts, each of which shall be deemed to be an original, and such
counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any such original counterpart.
12.5. Reliance by Third Parties. Any certificate executed by an indi-
-------------------------
vidual who, according to the records of the Trust, or of any recording office in
which this Declaration may be recorded, appears to be a Trustee hereunder,
certifying to: (a) the number or identity of Trustees or Shareholders, (b) the
name of the Trust or any Series thereof, (c) the establishment of any Series,
(d) the due authorization of the execution of any instrument or writing, (e) the
form of any vote passed at a meeting of Trustees or Shareholders, (f) the fact
that the number of Trustees or Shareholders present at any meeting or executing
any written instrument satisfies the requirements of this Declaration, (g) the
form of any By-Laws adopted by or the identity of any officers elected by the
31
<PAGE>
Trustees, or (h) the existence of any fact or facts which in any manner relate
to the affairs of the Trust or any Series, shall be conclusive evidence as to
the matters so certified in favor of any person dealing with the Trustees and
their successors.
12.6. Provisions in Conflict With Law or Regulations.
----------------------------------------------
(a) The provisions of this Declaration are severable, and if the
Trustees shall determine, with the advice of counsel, that any of such provi-
sions is in conflict with 1940 Act, the regulated investment company provisions
of the Internal Revenue Code or with other applicable laws and regulations, the
conflicting provision shall be deemed never to have constituted a part of this
Declaration; provided, however, that such determination shall not affect any of
the remaining provisions of this Declaration or render invalid or improper any
action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
IN WITNESS WHEREOF, the undersigned have caused these presents to be exe-
cuted as of the day and year first above written.
/s/ Philip L. Kirstein
-------------------------------
Philip L. Kirstein
79 West Shore Drive
Pennington, New Jersey 08534
/s/ Robert Harris
-------------------------------
Robert Harris
22 Zeloof Drive
Lawrenceville, New Jersey 08648
/s/ Michael J. Hennewinkel
-------------------------------
Michael J. Hennewinkel
1617 Lakeview Circle
Yardley, Pennsylvania 19067
/s/ William E. Aldrich
-------------------------------
William E. Aldrich
1ll Windsor Road
Needham, Massachusetts 02192
32
<PAGE>
EXHIBIT 99.1(b)
Apr 21, 1987
CMA MULTI-STATE TAX-EXEMPT SERIES TRUST
The undersigned, constituting a majority of the Trustees of
CMA Multi-State Tax-Exempt Series Trust (the "Trust"), a
Massachusetts business trust having no shareholders as of the
date hereof, hereby certify that the Trustees of the Trust have
duly adopted the following amendment to the Declaration of Trust
of the Trust dated the 6th day of February, 1987.
VOTED: That the Declaration of Trust, dated February 6, 1987,
be, and it hereby is, amended to change the name of the
Trust from "CMA Multi-State Tax-Exempt Series Trust" to
"CMA Multi-State Municipal Series Trust" in the following
manner:
1.1. Name. The name of the trust created hereby
----
(the "Trust", which term shall be deemed to include any
Series of the Trust when the context requires) shall be
"CMA Multi-State Municipal Series Trust", and so far as
may be practicable the Trustees shall conduct the
activities of the Trust, execute all documents and sue or
be sued under that name, which name (and the word "Trust"
wherever hereinafter used) shall refer to the Trustees as
Trustees, and not individually, and shall not refer to
the officers, agents, employees or Shareholders of the
Trust or any Series thereof. Each Series of the Trust
which shall be established and designated by the Trustees
pursuant to Section 6.2 shall conduct its activities
under such name as the Trustees shall determine and set
forth in the instrument establishing such Series. Should
the Trustees determine that the use of the name of the
Trust or any Series is not advisable, they may select
such other name for the Trust or such Series as they deem
proper and the Trust or Series may conduct its activities
under such other name. Any name change shall be
effective upon the execution by a majority of the then
Trustees of an instrument setting forth the new name.
Any such instrument shall have the status of an amendment
to this Declaration.
<PAGE>
IN WITNESS WHEREOF, the undersigned have signed this
Certificate in duplicate original counterparts and have caused a
duplicate original to be lodged among the records of the Trust as
required by Article XI, Section 11.3(c) of the Declaration of
Trust, as of the 21st day of April, 1987.
/s/ Arthur Zeikel /s/ Howard O. Colgan Jr.
------------------------------ ----------------------------
Arthur Zeikel Howard O. Colgan Jr.
279 Watchung Fork 650 Beach Road, Apt. 245
Westfield, New Jersey 07090 Vero Beach, Florida 32960
/s/ Ronald W. Forbes /s/ Richard R. West
------------------------------ ----------------------------
Ronald W. Forbes Richard R. West
1400 Washington Avenue 100 Trinity Place
Albany, New York 12222 New York, New York 10006
/s/ Thomas H. Lenagh /s/ Marc A. White
------------------------------ ----------------------------
Thomas H. Lenagh Marc A. White
Greenwich Office Park, OP-6 1050 Highland Road
Greenwich, Connecticut 06830 Ithaca, New York 14850
/s/ Richard T. O'Reilly
------------------------------
Richard T. O'Reilly
Rockwood Lane Spur
Greenwich, Connecticut 06830
2.
<PAGE>
EXHIBIT 99.2
================================================================================
BY-LAWS
OF
CMA MULTI-STATE MUNICIPAL SERIES TRUST
================================================================================
<PAGE>
CMA MULTI-STATE MUNICIPAL SERIES TRUST
--------------------------------------
BY-LAWS
-------
These By-Laws are made and adopted pursuant to Section 2.6 of the
Declaration of Trust establishing CMA MULTI-STATE MUNICIPAL SERIES TRUST, dated
February 6, 1987, as from time to time amended (the "Declaration"). All words
and terms capitalized in these By-Laws shall have the meaning or meanings set
forth for such words or terms in the Declaration.
ARTICLE I
---------
Shareholder Meetings
--------------------
Section 1.1. Chairman. The Chairman, if any, shall act as chairman at all
--------
meetings of the Shareholders; in his or her absence, the President shall act as
chairman; and in the absence of the Chairman and the President, the Trustee or
Trustees present at each meeting may elect a temporary chairman for the meeting,
who may be one of themselves.
Section 1.2. Proxies; Voting. Shareholders may vote either in person or
---------------
by duly executed proxy and each full share represented at the meeting shall have
one vote, all as provided in Article X of the Declaration. No proxy shall be
valid after eleven (11) months from the date of its execution, unless a longer
period is expressly stated in such proxy.
Section 1.3. Closing of Transfer Books and Fixing of Record Dates. For
----------------------------------------------------
the purpose of determining the Shareholders who are entitled to notice of or to
vote or act at any meeting, including any adjournment thereof, or who are
entitled to participate in
<PAGE>
any dividends, or for any other proper purpose, the Trustees from time to time
may close the transfer books or fix a record date in the manner provided in
Section 10.4 of the Declaration. If the Trustees do not, prior to any meeting of
Shareholders, so fix a record date or close the transfer books, then the date of
mailing notice of the meeting or the date upon which the dividend resolution is
adopted, as the case may be, shall be the record date.
Section 1.4. Inspectors of Election. In advance of any meeting of
----------------------
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the Chairman, if any, of any meeting of Shareholders may, and on the
request of any Shareholder or his or her proxy shall, appoint Inspectors of
Election of the meeting. The number of Inspectors shall be either one or three.
If appointed at the meeting on the request of one or more Shareholders or
proxies, a majority of Shares present shall determine whether one or three
Inspectors are to be appointed, but failure to allow such determination by the
Shareholders shall not affect the validity of the appointment of Inspectors of
Election. In case any person appointed as Inspector fails to appear or fails or
refuses to act, the vacancy may be filled by appointment made by the Trustees in
advance of the convening of the meeting or at the
-2-
<PAGE>
meeting by the person acting as chairman. The Inspectors of Election shall
determine the number of Shares outstanding, the Shares represented at the
meeting, the existence of a quorum, the authenticity, validity and effect of
proxies, shall receive votes, ballots or consents, shall hear and determine all
challenges and questions in any way arising in connection with the right to
vote, shall count and tabulate all votes or consents, determine the results, and
do such other acts as may be proper to conduct the election or vote with
fairness to all Shareholders. If there are three Inspectors of Election, the
decision, act or certificate of a majority is effective in all respects as the
decision, act or certificate of all. On request of the Chairman, if any, of the
meeting, or of any Shareholder or his or her proxy, the Inspectors of Election
shall make a report in writing of any challenge or question or matter determined
by them and shall execute a certificate of any facts found by them.
Section 1.5. Records at Shareholder Meetings. At each meeting of the
-------------------------------
Shareholders there shall be open for inspection the minutes of the last previous
Shareholder Meeting of the Trust and a list of the Shareholders of the Trust,
certified to be true and correct by the Secretary or other proper agent of the
Trust, as of the record date of the meeting or the date of closing of transfer
books, as the case may be. Such list of Shareholders shall contain the name of
each Shareholder in alphabetical order and the address of and number of Shares
owned by such Shareholder. Shareholders shall have such other rights and
procedures of inspection of the books and records of the Trust as
-3-
<PAGE>
are granted to shareholders of a Massachusetts business corporation.
ARTICLE II
----------
Trustees
--------
Section 2.1. Annual and Regular Meetings. The Trustees shall hold an
---------------------------
annual meeting for the election of officers and the transaction of other
business which may come before such meeting, on such date as shall be fixed by
the Trustees from time to time. Regular meetings of the Trustees may be held
without call or notice at such place or places and times as the Trustees by
resolution may provide from time to time.
Section 2.2. Special Meetings. Special Meetings of the Trustees shall be
----------------
held upon the call of the Chairman, if any, the President, the Secretary or any
two Trustees, at such time, on such day, and at such place, as shall be
designated in the notice of the meeting.
Section 2.3. Notice. Notice of a meeting shall be given by mail or by
------
telegram (which term shall include a cablegram) or delivered personally. If
notice is given by mail, it shall be mailed not later than 48 hours preceding
the meeting and if given by telegram or personally, such telegram shall be sent
or delivery made not later than 48 hours preceding the meeting. Notice by
telephone shall constitute personal delivery for these purposes. Notice of a
meeting of Trustees may be waived before or after any meeting by signed written
waiver. Neither the
-4-
<PAGE>
business to be transacted at, nor the purpose of, any meeting of the Board of
Trustees need be stated in the notice or waiver of notice of such meeting, and
no notice need be given of action proposed to be taken by unanimous written
consent. The attendance of a Trustee at a meeting shall constitute a waiver of
notice of such meeting except where a Trustee attends a meeting for the express
purpose of objecting to the transaction of any business on the ground that the
meeting has not been lawfully called or convened.
Section 2.4. Chairman; Records. The Chairman, if any, shall act as
-----------------
chairman at all meetings of the Trustees; in his or her absence, the President
shall act as chairman; and, in the absence of the Chairman and the President,
the Trustees present shall elect one of their number to act as temporary
chairman. The results of all actions taken at a meeting of the Trustees, or by
unanimous written consent of the Trustees, shall be recorded by the Secretary.
ARTICLE III
-----------
Officers
--------
Section 3.1. Officers of the Trust. The officers of the Trust shall
---------------------
consist of a Chairman, if any, a President, a Secretary, a Treasurer and such
other officers or assistant officers, including Vice Presidents, as may be
elected by the Trustees. Any two or more of the offices may be held by the same
person, except that the same person may not be both President and
-5-
<PAGE>
Secretary. The Trustees may designate a Vice President as an Executive Vice
President and may designate the order in which the other Vice Presidents may
act. The Chairman and the President shall be Trustees, but no other officer of
the Trust need be a Trustee.
Section 3.2. Election and Tenure. At the initial organizational meeting
-------------------
and thereafter at each annual meeting of the Trustees, the Trustees shall elect
the Chairman, if any, a President, a Secretary, a Treasurer and such other
officers as the Trustees shall deem necessary or appropriate in order to carry
out the business of the Trust. Such officers shall hold office until the next
annual meeting of the Trustees and until their successors have been duly elected
and qualified. The Trustees may fill any vacancy in office or add any
additional officers at any time.
Section 3.3. Removal of Officers. Any officer may be removed at any time,
-------------------
with or without cause, by action of a majority of the Trustees. This provision
shall not prevent the making of a contract of employment for a definite term
with any officer and shall have no effect upon any cause of action which any
officer may have as a result of removal in breach of a contract of employment.
Any officer may resign at any time by notice in writing signed by such officer
and delivered or mailed to the Chairman, if any, the President, or the
Secretary, and such resignation shall take effect immediately upon receipt by
-6-
<PAGE>
the Chairman, if any, President, or Secretary, or at a later date according to
the terms of such notice in writing.
Section 3.4. Bonds and Surety. Any officer may be required by the
----------------
Trustees to be bonded for the faithful performance of his or her duties in such
amount and with such sureties as the Trustees may determine.
Section 3.5. Chairman, President and Vice Presidents. The Chairman, if
---------------------------------------
any, if present, shall preside at all meetings of the Shareholders and of the
Trustees and shall exercise and perform such other powers and duties as from
time to time may be assigned to him or her by the Trustees. Subject to such
supervisory powers, if any, as may be given by the Trustees to the Chairman, if
any, the President shall be the chief executive officer of the Trust and,
subject to the control of the Trustees, shall have general supervision,
direction and control of the business of the Trust and of its employees and
shall exercise such general powers of management as usually are vested in the
office of President of a corporation. In the absence of the Chairman, if any,
the President shall preside at all meetings of the Shareholders and of the
Trustees. The President shall be, ex-officio, a member of all standing
committees, except as otherwise provided in the resolutions or instruments
creating any such committees. Subject to direction of the Trustees, the
Chairman, if any, and the President each shall have power in the name and on
behalf of the Trust to execute any and all loan documents, contracts,
agreements, deeds, mortgages and other
-7-
<PAGE>
instruments in writing, and to employ and discharge employees and agents of the
Trust. Unless otherwise directed by the Trustees, the Chairman, if any, and the
President each shall have full authority and power, on behalf of all of the
Trustees, to attend and to act and to vote, on behalf of the Trust at any
meetings of business organizations in which the Trust holds an interest, or to
confer such powers upon any other persons, by executing any proxies duly
authorizing such persons. The Chairman, if any, and the President shall have
such further authorities and duties as the Trustees from time to time shall
determine. In the absence or disability of the President, the Vice Presidents in
order of their rank as fixed by the Trustees or, if more than one and not
ranked, the Vice President designated by the Trustees, shall perform all of the
duties of the President, and when so acting shall have all the powers of, and be
subject to all of the restrictions upon, the President. Subject to the direction
of the Trustees and of the President, each Vice President shall have the power
in the name and on behalf of the Trust to execute any and all loan documents,
contracts, agreements, deeds, mortgages and other instruments in writing, and,
in addition, shall have such other duties and powers as shall be designated from
time to time by the Trustees or by the President.
Section 3.6. Secretary. The Secretary shall keep the minutes of all
---------
meetings of, and record all votes of, Shareholders, Trustees and the Executive
Committee, if any. He or she shall be custodian of the seal of the Trust, if
any, and
-8-
<PAGE>
he or she (and any other person so authorized by the Trustees) shall affix the
seal or, if permitted, a facsimile thereof, to any instrument executed by the
Trust which would be sealed by a Massachusetts business corporation executing
the same or a similar instrument and shall attest the seal and the signature or
signatures of the officer or officers executing such instrument on behalf of the
Trust. The Secretary also shall perform any other duties commonly incident to
such office in a Massachusetts business corporation, and shall have such other
authorities and duties as the Trustees from time to time shall determine.
Section 3.7. Treasurer. Except as otherwise directed by the Trustees, the
---------
Treasurer shall have the general supervision of the monies, funds, securities,
notes receivable and other valuable papers and documents of the Trust, and shall
have and exercise under the supervision of the Trustees and of the President
all powers and duties normally incident to his or her office. He or she may
endorse for deposit or collection all notes, checks and other instruments
payable to the Trust or to its order. He or she shall deposit all funds of the
Trust in such depositories as the Trustees shall designate. He or she shall be
responsible for such disbursement of the funds of the Trust as may be ordered by
the Trustees or the President. He or she shall keep accurate account of the
books of the Trust's transactions which shall be the property of the Trust, and
which together with all other property of the Trust in his or her possession,
shall be subject at all times to the inspection and
-9-
<PAGE>
control of the Trustees. Unless the Trustees otherwise shall determine, the
Treasurer shall be the principal accounting officer of the Trust and also shall
be the principal financial officer of the Trust. He or she shall have such other
duties and authorities as the Trustees from time to time shall determine.
Notwithstanding anything to the contrary herein contained, the Trustees may
authorize any adviser, administrator, manager or transfer agent to maintain bank
accounts and deposit and disburse funds of any Series of the Trust on behalf of
such Series.
Section 3.8. Other Officers and Duties. The Trustees may elect such other
-------------------------
officers and assistant officers as they from time to time shall determine to be
necessary or desirable in order to conduct the business of the Trust. Assistant
officers shall act generally in the absence of the officer whom they assist and
shall assist that officer in the duties of his or her office. Each officer,
employee and agent of the Trust shall have such other duties and authority as
may be conferred upon him or her by the Trustees or delegated to him or her by
the President.
ARTICLE IV
----------
Miscellaneous
-------------
Section 4.1. Custodians. In accordance with Section 7.1 of the
----------
Declaration, the funds of the Trust shall be deposited with such custodian or
custodians as the Trustees shall designate and shall be drawn out on checks,
drafts or other orders signed by such officer, officers, agent or agents
(including any adviser,
-10-
<PAGE>
administrator or manager), as the Trustees from time to time may authorize.
Section 4.2. Signatures. All contracts and other instruments shall be
----------
executed on behalf of the Trust by such officer, officers, agent or agents, as
provided in these By-Laws or as the Trustees from time to time by resolution may
provide.
Section 4.3. Seal. The seal of the Trust, if any, or any Series
----
of the Trust, if any, may be affixed to any document, and the seal and its
attestation may be lithographed, engraved or otherwise printed on any document
with the same force and effect as if it had been imprinted and attested manually
in the same manner and with the same effect as if done by a Massachusetts
business corporation.
ARTICLE V
---------
Share Certificates and Share Transfers
--------------------------------------
Section 5.1. Share Certificates. Certificates representing Shares of any
------------------
Series of the Trust shall not be issued.
Section 5.2. Transfer Agents, Registrars and the Like. As provided in
----------------------------------------
Section 6.7 of the Declaration, the Trustees shall have authority to employ and
compensate such transfer agents and registrars with respect to the Shares of the
various Series of the Trust as the Trustees shall deem necessary or desirable.
In addition, the Trustees shall have power to employ and compensate such
dividend disbursing agents, warrant agents and agents for the reinvestment of
dividends as they shall deem necessary or
-11-
<PAGE>
desirable. Any of such agents shall have such power and authority as is
delegated to any of them by the Trustees.
Section 5.3. Transfer of Shares. The Shares of the Trust shall be
------------------
transferable on the books of the Trust only upon delivery to the Trustees or a
transfer agent of the Trust of proper documentation as provided in Section 6.8
of the Declaration, and on surrender of the certificate or certificates, if
issued, for such Shares properly endorsed or accompanied by a duly executed
stock transfer power and the payment of all taxes thereon. The Trust, or its
transfer agents, shall be authorized to refuse any transfer unless and until
presentation of such evidence as reasonably may be required to show that the
requested transfer is proper.
Section 5.4. Registered Shareholders. The Trust may deem and treat the
-----------------------
holder of record of any Share as the absolute owner thereof for all purposes
and shall not be required to take any notice of any right or claim of right of
any other person.
Section 5.5. Regulations. The Trustees may make such
-----------
additional rules and regulations, not inconsistent with these By-Laws, as they
may deem expedient concerning the issue, transfer and registration of Shares of
the Trust.
ARTICLE VI
----------
Amendment of By-Laws
--------------------
Section 6.1. Amendment and Repeal of By-Laws. In accordance with Section
-------------------------------
2.6 of the Declaration, the Trustees
-12-
<PAGE>
shall have the power to alter, amend or repeal the By-Laws or adopt new By-Laws
at any time. Action by the Trustees with respect to the By-Laws shall be taken
by an affirmative vote of a majority of the Trustees. The Trustees in no event
shall adopt By-Laws which are in conflict with the Declaration, and any apparent
inconsistency shall be construed in favor of the related provisions in the
Declaration. The Declaration establishing CMA Multi-State Municipal Series
Trust, a copy of which, together with all amendments thereto, is on file in the
office of the Secretary of the Commonwealth of Massachusetts, provides that the
name "CMA Multi-State Municipal Series Trust" refers to the Trustees under the
Declaration collectively as Trustees, but not as individuals or personally; and
no Trustee, shareholder, officer, employee or agent of CMA Multi-State Municipal
Series Trust shall be held to any personal liability, nor shall resort be had to
their private property for the satisfaction of any obligation or claim or
otherwise in connection with the affairs of said CMA Multi-State Municipal
Series Trust but the "Trust Property" only (as defined in the Declaration) shall
be liable.
-13-
<PAGE>
EXHIBIT 99.5(a)
MANAGEMENT AGREEMENT
AGREEMENT made this th day of , 199 , by and between CMA Multi-
State Municipal Series Trust, a trust organized under the laws of Massachusetts
(the "Trust"), and FUND ASSET MANAGEMENT, INC., a Delaware corporation (the
"Manager");
W I T N E S S E T H:
--------------------
WHEREAS, the Trust is engaged in business as a non-diversified, open-end,
management investment company and is registered as such under the Investment
Company Act of 1940, as amended (the "Investment Company Act"); and
WHEREAS, the Trustees of the Trust are authorized to establish separate
series relating to separate portfolios of securities, each of which will offer a
separate class of shares; and
WHEREAS, the Trustees have established and designated the CMA [State]
Municipal Money Fund (the "Fund") as a series of the Trust; and
WHEREAS, the Manager is engaged principally in rendering management and
advisory services and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"); and
<PAGE>
WHEREAS, the Trust desires to retain the Manager to render investment
supervisory and corporate administrative services to the Trust and the Fund in
the manner and on the terms hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Trust and the Manager hereby agree as follows:
ARTICLE 1. Duties of the Manager. The Trust hereby employs the Manager to
---------------------
act as the manager of the Trust on behalf of the Fund to manage the investment
and reinvestment of the assets of the Fund and administer the affairs of the
Trust in respect of the Fund, subject to the supervision of the Trustees of the
Trust, for the period and on the terms and conditions set forth in this
Agreement. The Manager hereby accepts such employment and agrees during such
period, at its own expense, to render the services and to assume the obligations
herein set forth for the compensation provided for herein. The Manager shall
for all purposes herein be deemed to be an independent contractor and shall,
unless otherwise expressly provided or authorized, have no authority to act for
or represent the Trust or the Fund in any way or otherwise be deemed an agent of
the Trust or the Fund.
(a) Management Services. In acting as manager to the Trust for the Fund,
-------------------
the Manager shall regularly provide the Trust with such investment research,
advice and supervision as the Trust may from time to time consider necessary for
the proper supervision
2
<PAGE>
of the assets of the Fund, shall furnish continuously an investment program for
the Fund and shall determine from time to time what securities shall be
purchased, sold or exchanged and what portion of the assets of the Fund shall be
held in the various securities in which the Fund may invest, subject always to
the restrictions of the Declaration of Trust and By-Laws of the Trust, as
amended from time to time, the provisions of the Investment Company Act and the
statements relating to the Fund's investment objectives, investment policies and
investment restrictions as the same are set forth in the currently effective
prospectus and statement of additional information relating to the shares of the
Fund under the Securities Act of 1933, as amended (the "Prospectus" and
"Statement of Additional Information," respectively). The Manager shall also
make recommendations as to the manner in which voting rights, rights to consent
to corporate action and any other rights pertaining to the Fund's portfolio
securities shall be exercised. Should the Trustees of the Trust at any time,
however, make any definite determination as to investment policy and notify the
Manager thereof, the Manager shall be bound by such determination for the
period, if any, specified in such notice or until similarly notified that such
determination has been revoked. The Manager shall take, on behalf of the Trust,
all actions which it deems necessary to implement the investment policies of the
Fund determined as provided above, and in particular to place all
3
<PAGE>
orders for the purchase or sale of portfolio securities for the Fund's account
with brokers or dealers selected by the Trust. In connection with the selection
of such brokers or dealers and the placing of such orders, the Manager is
directed at all times to seek to obtain for the Fund the most favorable
execution and price within the meaning of such terms as determined by the
Trustees and set forth in the Prospectus. Subject to this requirement and the
provisions of the Investment Company Act, the Securities Exchange Act of 1934,
as amended (the "Securities Exchange Act"), and other applicable provisions of
law, nothing shall prohibit the Manager from selecting brokers or dealers with
which it or the Trust is affiliated.
(b) Administrative Services. In addition to the performance of management
-----------------------
services, the Manager shall perform, or supervise the performance of,
administrative services in connection with the management of the Fund. In this
connection, the Manager, on behalf of the Trust and the Fund, shall investigate,
select and conduct relations with custodians, transfer agents, dividend
disbursing agents, other shareholder service agents, accountants, attorneys,
brokers and dealers, insurers, banks and other persons necessary to the
operations of the Fund.
ARTICLE 2. Allocation of Charges and Expenses.
-----------------------------------
(a) The Manager. The Manager shall pay all compensation of and furnish
-----------
office space and facilities for officers and employees of the Trust in
connection with economic research,
4
<PAGE>
investment research, trading and investment management of the Fund which it is
obligated to perform under the Agreement. The Manager shall also pay the fees of
all Trustees of the Trust who are affiliated persons of Merrill Lynch & Co.,
Inc. or its subsidiaries.
(b) The Trust. The Trust assumes and shall pay or cause to be paid all
---------
other expenses of the Trust and the Fund (except for the expenses paid by the
Distributor), including general administrative expenses of the Trust which are
allocated among its separate series on the basis of their respective asset size.
The expenses to be paid by the Trust include, without limitation: taxes,
expenses for legal and auditing services, costs of printing stock certificates,
shareholder reports, prospectuses and statements of additional information,
costs of printing proxies and other expenses related to shareholder meetings,
charges of the custodian, any sub-custodian and transfer agent, expenses of
portfolio transactions, expenses of redemption of shares, Securities and
Exchange Commission fees, expenses of registering the shares under Federal,
state and foreign laws, fees and actual out-of-pocket expenses of Trustees who
are not affiliated persons of Merrill Lynch & Co., Inc. or its subsidiaries,
accounting and pricing costs (including the daily calculation of the net asset
value), insurance, interest, brokerage costs, litigation and other extraordinary
or nonrecurring expenses, and other expenses properly payable by the
5
<PAGE>
Trust. It is also understood that the Trust will reimburse the Manager for its
costs in providing accounting services to the Trust and the Fund. The
Distributor will pay certain of the expenses of the Fund incurred in connection
with the continuous offering of shares of beneficial interest in the Fund.
ARTICLE 3. Compensation of the Manager.
---------------------------
(a) Management Fee. For the services rendered, the facilities furnished and
--------------
expenses assumed by the Manager, the Trust shall pay to the Manager at the end
of each calendar month a fee based upon the average daily value of the net
assets of the Fund, as computed in accordance with the description of the
determination of net asset value set forth in the Prospectus and Statement of
Additional Information. The fee to be paid by the Trust to the Manager shall be
at the annual rates of 0.50% of the first $500 million of average daily net
assets of the Fund, 0.425% of average daily net assets in excess of $500 million
but not exceeding $1 billion, and 0.375% of average daily net assets in excess
of $1 billion, commencing on the day following effectiveness hereof.
During any period when the determination of net asset value is suspended by
the Trustees of the Trust, the value on a per share basis of the net assets of
the Fund
6
<PAGE>
as of the last business day prior to such suspension shall for this purpose be
deemed to be the value on a per share basis of the net assets of the Fund at the
close of each succeeding business day until it is again determined.
(b) Expense Limitations. In the event the operating expenses of the Fund,
-------------------
including the management fee payable to the Manager pursuant to subsection (a)
hereof, for any fiscal year ending on a date on which this Agreement is in
effect exceed the expense limitations applicable to the Fund imposed by state
securities laws or regulations thereunder, as such limitations may be raised or
lowered from time to time, the Manager shall reduce its management fee by the
extent of such excess and, if required pursuant to any such laws or regulations,
will reimburse the Fund in the amount of such excess; provided, however, to the
extent permitted by law, there shall be excluded from such expenses the amount
of any interest, taxes, distribution fees, brokerage fees and commissions and
extraordinary expenses (including but not limited to legal claims and
liabilities and litigation costs and any indemnification related thereto) paid
or payable by the Trust on account of the Fund. Whenever the expenses of the
Fund exceed a pro rata portion of the applicable annual expense limitations, the
estimated amount of reimbursement under such limitations shall be applicable as
an offset against the monthly payment of the management fee due to the Manager.
Should two or more such expense limitations be applicable as at the end of the
last business day of the month, that expense
7
<PAGE>
limitation which results in the largest reduction in the Manager's fee shall be
applicable.
ARTICLE 4. Limitation of Liability of the Manager. The Manager shall not
--------------------------------------
be liable for any error of judgment or mistake of law or for any loss suffered
by the Trust or Fund in connection with any investment policy or the purchase,
sale or redemption of any securities on the recommendation of the Manager.
Nothing herein contained shall be construed to protect the Manager against any
liability to the Trust or its security holders to which the Manager shall
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence in the performance of its duties on behalf of the Trust and the Fund,
reckless disregard of the Manager's obligations and duties under this Agreement
or the violation of any applicable law.
ARTICLE 5. Activities of the Manager. The services of the Manager under
-------------------------
this Agreement are not to be deemed exclusive, and the Manager shall be free to
render similar services to others so long as its services hereunder are not
impaired thereby. It is understood that Trustees, officers, employees and
shareholders of the Trust are or may become interested in the Manager, and
directors, officers, employees or shareholders of the Manager are or may become
similarly interested in the Trust, and that the Manager is or may become
interested in the Trust as shareholder or otherwise.
8
<PAGE>
ARTICLE 6. Duration and Termination of this Agreement. This Agreement
------------------------------------------
shall become effective as of the date first above written and shall remain in
force until , 199 and shall continue thereafter only so long as such
continuance is specifically approved at least annually by (i) the Trustees of
the Trust, or by the vote of a majority of the outstanding voting securities of
the Fund, and (ii) a majority of those Trustees who are not parties to this
Agreement or interested persons of any such party cast in person at a meeting
called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Fund, or by the Manager, on sixty days'
written notice to the other party. This Agreement shall automatically terminate
in the event of its assignment.
The terms "vote of a majority of the outstanding voting securities,"
"assignment," "affiliated person" and "interested person," when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
ARTICLE 7. Amendments of this Agreement. This Agreement may be amended by
----------------------------
the parties only if such amendment is specifically approved by (i) the Trustees
of the Trust, or by the vote of a majority of outstanding voting securities of
the Fund, and (ii) a majority of those Trustees of the Trust who are not
9
<PAGE>
parties to this Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval.
ARTICLE 8. Governing Law. The provisions of this Agreement shall be
-------------
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment Company
Act. To the extent that the applicable law of the State of New York or any of
the provisions herein conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
ARTICLE 9. Personal Liability. The Declaration of Trust establishing CMA
------------------
Multi-State Municipal Series Trust, dated February 6, 1987, a copy of which,
together with all amendments thereto (the "Declaration"), is on file in the
office of the Secretary of the Commonwealth of Massachusetts, provides that the
name of the Trust, "CMA Multi-State Municipal Series Trust," refers to the
Trustees under the Declaration collectively as Trustees, but not as individuals
or personally; and no Trustee, shareholder, officer, employee or agent of CMA
Multi-State Municipal Series Trust shall be held to any personal liability, nor
shall resort be had to their private property for the satisfaction of any
obligation or claim or otherwise in connection with the affairs of said CMA
Multi-State Municipal Series Trust, but the "Trust Property" only shall be
liable.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
CMA MULTI-STATE
MUNICIPAL SERIES TRUST
By
----------------------
ATTEST:
__________________
Secretary
FUND ASSET MANAGEMENT, INC.
By
-----------------------------
ATTEST:
____________________
Assistant Secretary
11
<PAGE>
EXHIBIT 99.6
DISTRIBUTION AGREEMENT
AGREEMENT made this th day of , 199 between CMA MULTI-STATE
MUNICIPAL SERIES TRUST, a trust organized under the laws of Massachusetts (the
"Trust"), and MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, a Delaware
corporation (the "Distributor" or "MLPF&S");
W I T N E S S E T H :
---------------------
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), as a non-diversified, open-end
investment company and it is affirmatively in the interest of the Trust to offer
its shares to participants in the Cash Management Account program (the "CMA
program") described in the currently effective prospectus under the Securities
Act of 1933 (the "Securities Act") of the Fund (defined below) and to other
prospective shareholders; and
WHEREAS, the Trustees of the Trust are authorized to establish separate
series relating to separate portfolios of securities, each of which will offer a
separate class of shares of beneficial interest par value $0.10 per share
(collectively referred to as "shares"), to participants in the CMA program and
to other prospective shareholders; and
WHEREAS, the Trustees have established and designated the CMA [State]
Municipal Money Fund (the "Fund") as a series of the Trust; and
WHEREAS, the Distributor is a securities firm engaged in the business of
selling shares of investment companies; and
<PAGE>
WHEREAS, the Trust and MLPF&S have entered into a Distribution and
Shareholder Servicing Plan (the "Plan") made as of , 199 , and
continued thereafter, pursuant to the provisions of Rule 12b-1 under the
Investment Company Act which provides that the Trust should make direct payments
to the Distributor for distribution to its financial consultants and other
directly involved MLPF&S personnel as compensation for selling shares and
providing shareholder services to shareholders of the Fund who are participants
in the CMA program or whose accounts are serviced by MLPF&S financial
consultants whether maintained through MLPF&S or directly with the Fund's
Transfer Agent (collectively such accounts being referred to herein as the
"MLPF&S Fund Accounts"; the term "MLPF&S Fund Accounts" does not include those
accounts maintained directly with the Fund's Transfer Agent which are not
serviced by MLPF&S financial consultants); and
WHEREAS, the Trust and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the shares of the Fund and
the Plan.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Trust hereby appoints the
------------------------------
Distributor as the exclusive distributor and representative of the Trust to sell
the shares of the Fund to participants in the CMA program and other prospective
shareholders ("investors") and the Distributor hereby accepts such appointment.
The Trust during the term of this Agreement
2
<PAGE>
shall sell the shares of the Fund to the Distributor upon the terms and
conditions set forth below.
Section 2. Purchase of Shares from the Trust.
---------------------------------
(a) The Distributor shall have the right to buy from the Trust the shares
of the Fund needed, but not more than the shares needed (except for clerical
errors in transmission), to fill unconditional orders for shares of the Trust
placed through the Distributor by investors. The price which the Distributor
shall pay for the shares so purchased from the Trust shall be the current public
offering price described below on which such orders were based.
(b) The public offering price of the shares of the Fund, i.e., the price
per share at which the Distributor may sell shares of the Fund to investors,
shall be the net asset value determined as set forth in the currently effective
prospectus and statement of additional information of the Fund under the
Securities Act (the "Prospectus" and "Statement of Additional Information,
respectively).
(c) The Trust, or any agent of the Trust designated in writing by it, shall
be promptly advised of all purchase orders for shares of the Fund received by
the Distributor. All issuances of shares of the Fund to investors shall be
deemed to be issued pursuant to Section 2 hereof. Any order may be rejected by
the Trust or the Distributor, provided, however, that neither will arbitrarily
or without reasonable cause refuse to accept or confirm orders for the purchase
of shares of the Trust.
3
<PAGE>
The Trust (or its agent) will confirm orders upon their
receipt, or in accordance with any exemptive order of the Securities and
Exchange Commission, and will make appropriate book entries pursuant to the
instructions of the Distributor. Purchase orders are effective when Federal
Funds become available to the Trust. The Distributor agrees to cause such
payment and such instructions to be delivered promptly to the Trust (or its
agent).
Section 3. Redemption of Shares by the Trust. Any of the outstanding
---------------------------------
shares of the Fund may be tendered for redemption at any time, and the Trust
shall redeem the shares so tendered in accordance with its obligations and
rights as set forth in its Declaration of Trust, and in accordance with the
applicable provisions set forth in the Prospectus of the Fund. The price to be
paid to redeem the shares shall be equal to the net asset value calculated in
accordance with the provisions of Section 2(b) hereof. Shares redeemed due to
an unauthorized use of a Visa card of a shareholder shall be reinstated by the
Trust at the cost of the Distributor as set forth in Section 5(d) hereof.
Section 4. Duties of the Trust.
-------------------
(a) The Trust shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of shares of the Fund, and
this shall include one certified copy, upon request by the Distributor, of all
financial statements prepared for the Trust by independent public
4
<PAGE>
accountants. The Trust shall make available to the Distributor such number of
copies of the Prospectus and Statement of Additional Information of the Fund as
the Distributor shall reasonably request.
(b) The Trust shall take, from time to time, all necessary action to
register shares of the Fund under the Securities Act to the end that there will
be available for sale such number of shares as investors may reasonably be
expected to purchase.
(c) The Trust shall use its best efforts to qualify and maintain the
qualification of an appropriate number of shares of the Fund for sale under the
securities laws of such states as the Distributor and the Trust may approve.
Any such qualification may be withheld, terminated or withdrawn by the Trust at
any time in its discretion. As provided in Section 7(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Trust. The
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Trust in connection with such
qualifications.
(d) The Trust will furnish, in reasonable quantities upon request by the
Distributor, copies of annual and interim reports of the Fund.
Section 5. Duties of the Distributor.
-------------------------
(a) The Distributor shall devote reasonable time and effort to effect sales
of shares of the Fund, but shall not be obligated to sell any specific number of
shares. The services of the
5
<PAGE>
Distributor hereunder are not to be deemed exclusive and nothing herein
contained shall prevent the Distributor from entering into distribution
arrangements with other investment companies so long as the performance of its
obligations hereunder is not impaired thereby.
(b) In selling the shares of the Fund, the Distributor shall use its best
efforts in all respects duly to conform with the requirements of all Federal and
state laws and regulations and the regulations of the National Association of
Securities Dealers, Inc. (the "NASD") relating to the sale of such securities.
Neither the Distributor nor any other person is authorized by the Trust to give
any information or to make any representations, other than those contained in
the registration statement or related Prospectus of the Fund and any sales
literature specifically approved by the Fund for use with respect to the Fund.
(c) The Distributor shall adopt and follow procedures, as approved by the
Trust, for the confirmation of sales of shares of the Fund to investors, the
collection of amounts payable by investors on such sales, and the cancellation
of unsettled transactions, as may be necessary to comply with the requirements
of the NASD, as such requirements may from time to time exist.
(d) Through the CMA program, the Fund is linked to a Merrill Lynch
securities account and a Visa account and automatic purchases and redemptions of
shares of the Fund by participants in the CMA program will be effected pursuant
to the CMA program.
6
<PAGE>
CMA customers may be liable for the unauthorized use of their Visa card in an
amount up to $50. The owner of a Visa card will not be liable for any
unauthorized use which occurs after the Visa processing agent has been notified
orally or in writing of loss, theft or possible unauthorized use. If shares of
the Fund are redeemed due to the unauthorized use of the Visa card, the Trust
agrees to reinstate such shares in the account of the shareholder as if never
sold and the Distributor agrees to indemnify the Trust against any losses caused
thereby and all costs associated therewith.
Section 6. Distribution Fee. The Trust shall pay the Distributor a
----------------
distribution fee at the end of each month at the annual rate of 0.125% of
average daily net asset value of the MLPF&S Fund Accounts. The fee is not
payable with respect to the asset value of shareholders who maintain their
accounts directly with the Fund's Transfer Agent and whose accounts are not
serviced by MLPF&S financial consultants. The Distributor is obligated to use
the entire amount of the distribution fee to compensate the Distributor's
financial consultants and other directly involved branch office personnel for
selling shares of the Fund to the MLPF&S Fund Accounts and for providing
services to shareholders with MLPF&S Fund Accounts, including furnishing
information as to the status of accounts of the Fund and handling purchase and
redemption orders for shares of the Fund. The distribution fee may not be used
to pay for other expenditures of the Distributor, such as sales contests,
special seminars and
7
<PAGE>
media advertising related to the Trust or the Fund. In the event that the
aggregate payments received by the Distributor under this Agreement in any
fiscal year of the Trust shall exceed the amount of the distribution
expenditures of the Distributor in such fiscal year, the Distributor shall be
required to reimburse the Trust the amount of such excess. The payment of the
distribution fee is being made pursuant to a Distribution and Shareholder
Servicing Plan (the "Plan") of the Fund adopted by the Trust pursuant to Rule
12b-1 of the Investment Company Act and payment of such fee shall be subject to
the terms and provisions of the Plan. The Distributor shall provide the Trust
for review by the Trustees, and the Trustees shall review at least quarterly, a
written report complying with the requirements of Rule 12b-1 regarding the
disbursement of the distribution fee during such period. The report shall
include an itemization of the distribution expenses incurred by the Distributor
on behalf of the Fund, the purpose of such expenditures and a description of the
benefits derived by the Fund therefrom.
Section 7. Payment of Expenses.
-------------------
(a) The Trust shall bear all costs and expenses of the Fund, including fees
and disbursements of its counsel and auditors, in connection with the
preparation and filing of any required registration statements and Prospectuses
and Statements of Additional Information under the Investment Company Act, the
Securities Act, and all amendments and supplements thereto, and the expense of
preparing, printing, mailing and otherwise
8
<PAGE>
distributing Prospectuses, annual or interim reports and proxy materials to the
Fund's shareholders.
(b) After the Prospectuses and annual and interim reports have been
prepared, set in type and mailed to shareholders, the Distributor shall bear the
costs and expenses of printing and distributing any copies thereof which are
used in connection with the offering of the shares of the Fund. The Distributor
shall bear the costs and expenses of preparing, printing and distributing any
supplementary sales literature used by the Distributor in connection with the
offering of the shares for sale. Any expenses of advertising incurred in
connection with such offering will also be the obligation of the Distributor.
(c) The Trust shall bear the cost and expenses of qualification of the
shares of the Trust for sale, and, if necessary or advisable in connection
therewith, of qualifying the Trust as a broker or dealer, in such states of the
United States or other jurisdictions as shall be selected by the Trust and the
Distributor, and the cost and expenses payable to each such state for continuing
qualification therein until the Trust decides to discontinue such qualification.
Section 8. Indemnification.
---------------
(a) The Trust shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
9
<PAGE>
fees incurred in connection therewith), arising by reason of any person
acquiring any shares of the Fund, which may be based upon the Securities Act, or
on any other statute or at common law, on the ground that the registration
statement or related Prospectus and Statement of Additional Information of the
Fund, as from time to time amended and supplemented, or an annual or interim
report to shareholders of the Fund includes an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading, unless such
statement or omission was made in reliance upon and in conformity with
information furnished to the Trust in connection therewith by or on behalf of
the Distributor; provided, however, that in no case (i) is the indemnity of the
Trust in favor of the Distributor and any such controlling persons to be deemed
to protect such Distributor or any such controlling persons thereof against any
liability to the Trust or its security holders to which the Distributor or any
such controlling persons would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of reckless disregard of its obligations and duties under this
Agreement, or (ii) is the Trust to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the
Distributor or any such controlling persons, unless the Distributor or such
controlling persons, as the case may be, shall have notified the Trust in
writing within a reasonable time
10
<PAGE>
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon the Distributor or such controlling
persons (or after the Distributor or such controlling persons shall have
received notice of such service on any designated agent), but failure to notify
the Trust of any such claim shall not relieve it from any liability which it may
have to the person against whom such action is brought otherwise than on account
of its indemnity agreement contained in this paragraph. The Trust will be
entitled to participate at its own expense in the defense or if it so elects, to
assume the defense of any suit brought to enforce any such liability, but if the
Trust elects to assume the defense, such defense shall be conducted by counsel
chosen by it and satisfactory to the Distributor or such controlling person or
persons, defendant or defendants in the suit. In the event the Trust elects to
assume the defense of any such suit and retain such counsel, the Distributor or
such controlling person or persons, defendant or defendants in the suit, shall
bear the fees and expenses of any additional counsel retained by them, but, in
case the Trust does not elect to assume the defense of any such suit, it will
reimburse the Distributor or such controlling person or persons, defendant or
defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Trust shall promptly notify the Distributor of the
commencement of any litigation or proceedings against it or any of its officers
or
11
<PAGE>
Trustees in connection with the issuance or sale of any of the shares of the
Fund.
(b) The Distributor shall indemnify and hold harmless the Fund and each of
its Trustees and officers and each person, if any, who controls the Trust
against any loss, liability, claim, damage or expense described in the foregoing
indemnity contained in subsection (a) of this Section, but only with respect to
statements or omissions made in reliance upon, and in conformity with,
information furnished to the Trust in writing by or on behalf of the Distributor
for use in connection with the registration statement or related Prospectus of
the Fund, as from time to time amended, or the annual or interim reports to
shareholders of the Fund. In case any action shall be brought against the Trust
or any person so indemnified, in respect of which indemnity may be sought
against the Distributor, the Distributor shall have the rights and duties given
to the Trust, and the Trust and each person so indemnified shall have the rights
and duties given to the Distributor by the provisions of subsection (a) of this
Section 8.
Section 9. Duration and Termination of this Agreement. This Agreement
------------------------------------------
shall become effective as of the date first above written and shall remain in
force until , 199 and shall continue thereafter only so long as such
continuance is specifically approved at least annually by (i) the Trustees of
the Trust and (ii) those Trustees who are not interested persons of the Trust
and have no direct or indirect financial interest in
12
<PAGE>
the operation of the Distribution and Shareholder Servicing Plan or in any
agreements related thereto (the "Rule 12b-1 Trustees") cast in person at a
meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Rule 12b-1 Trustees or by vote of a majority of the outstanding
voting securities of the Fund, or by the Distributor, on sixty days' written
notice to the other party. This Agreement shall automatically terminate in the
event of its assignment.
The terms "vote of a majority of the outstanding voting securities,"
"assignment," "affiliated person" and "interested person," when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 10. Governing Law. This Agreement shall be construed in
-------------
accordance with the laws of the State of New York and the applicable provisions
of the Investment Company to the extent the applicable law of the State of New
York, or a of the provisions herein, conflict with the applicable provisions of
the Investment Company Act, the latter shall control.
Section 11. Personal Liability. The Declaration of Trust establishing CMA
------------------
Multi-State Municipal Series Trust, dated February 6, 1987, a copy of which,
together with all amendments thereto (the "Declaration"), is on file in the
office of the Secretary of the Commonwealth of Massachusetts, provides that the
name of the Trust, "CMA Multi-State Municipal Series Trust,"
13
<PAGE>
refers to the Trustees under the Declaration collectively as Trustees, but not
as individuals or personally; and no Trustee, shareholder, officer, employee or
agent of CMA Multi-State Municipal Series Trust shall be held to any personal
liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim of said CMA Multi-State Municipal Series
Trust, but the Trust Property only shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written in New York, New York.
CMA MULTI-STATE MUNICIPAL SERIES TRUST
By
------------------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By
------------------------------------
14
<PAGE>
EXHIBIT 99.8
CUSTODIAN CONTRACT
------------------
This Contract between CMA Multi-State Municipal Series a business trust
organized and existing under the laws of Trust Massachusetts, having its
principal place of business at 800 Scudders Mill Road, Plainsboro, New Jersey,
08536 hereinafter called the "Fund", and State Street Bank and Trust Company, a
Massachusetts trust company, having its principal place of business at 225
Franklin Street, Boston, Massachusetts, 02110, hereinafter called the
"Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund intends to initially offer shares in two series, the CMA
California Tax-Exempt Money Fund, and CMA New York Tax-Exempt Money Fund (such
series together with all other series subsequently established by the Fund and
made subject to this Contract in accordance with paragraph 12, being herein
referred to as the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
<PAGE>
1. Employment of Custodian and Property to be Held by It
-----------------------------------------------------
The Fund hereby employs the Custodian as the custodian of the assets of the
Portfolios of the Fund pursuant to the provisions of the Declaration of Trust.
The Fund on behalf of Portfolio(s) agrees to deliver to the Custodian all
securities and cash of the Portfolios, and all payments of income, payments of
principal or capital distributions received by it with respect to all securities
owned by the Portfolio(s) from time to time, and the cash consideration received
by it for such new or treasury shares of beneficial interest of the Fund
representing interests in the Portfolios, ("Shares") as may be issued or sold
from time to time. The Custodian shall not be responsible for any property of a
Portfolio held or received by the Portfolio and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Section 2.17),
the Custodian shall on behalf of the applicable Portfolio(s) from time to time
employ one or more sub-custodians, but only in accordance with an applicable
vote by the Board of Trustees of the Fund on behalf of the applicable
Portfolio(s), and provided that the Custodian shall have no more or less
responsibility or liability to the Fund on account of any actions or omissions
of any sub-custodian so employed than any such sub-custodian has to the
Custodian.
2. Duties of the Custodian with Respect to Property of the Fund Held by the
------------------------------------------------------------------------
Custodian
- ---------
2
<PAGE>
2.1 Holding Securities. The Custodian shall hold and physically segregate for
------------------
the account of each Portfolio all non-cash property, including all
securities owned by such Portfolio, other than (a) securities which are
maintained pursuant to Section 2.12 in a clearing agency which acts as a
securities depository or in a book-entry system authorized by the U.S.
Department of the Treasury, collectively referred to herein 88 Securities
System and (b) commercial paper of an issuer for which State Street Bank
and Trust Company acts as issuing and paying agent ("Direct Paper") which
is deposited and/or maintained in the Direct Paper System of the Custodian
pursuant to Section 2.12A.
2.2 Delivery of Securities. The Custodian shall release and deliver securities
----------------------
owned by a Portfolio held by the Custodian or in a Securities System
account of the Custodian or in the Custodian's Direct Paper book entry
system account ("Direct Paper System Account") only upon receipt of Proper
Instructions from the Fund on behalf of the applicable Portfolio, which may
be continuing instructions when deemed appropriate by the parties, and only
in the following cases:
1) Upon sale of such securities for the account of the Portfolio and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Portfolio;
3
<PAGE>
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.12 hereof;
4) To the depository agent in connection with tender or other similar
offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any such
case, the cash or other consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of the
Portfolio or into the name of any nominee or nominees of the Custodian or
into the name or nominee name of any agent appointed pursuant to Section
2.11 or into the name or nominee name of any sub-custodian appointed
pursuant to Article 1; or for exchange for a different number of bonds,
certificates or other evidence representing the same aggregate face amount
or number of units; provided that any such case, the new securities are to
--------
be delivered to the Custodian;
7) Upon the sale of such securities for the account of the Portfolio, to
the broker or its clearing
4
<PAGE>
agent, against a receipt, for examination in accordance with "street
delivery" custom; provided that in any such case, the Custodian shall have
no responsibility or liability for any loss arising from the delivery of
such securities prior to receiving payment for such securities except as
may arise from the Custodian's own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions for
conversion contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new securities and cash, if
any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the surrender
thereof in the exercise of such warrants, rights or similar securities or
the surrender of interim receipts or temporary securities for definitive
securities; provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
5
<PAGE>
10) For delivery in connection with any loans of securities made by the
Portfolio, but only against receipt of adequate collateral as agreed upon
from time to time by the Custodian and the Fund on behalf of the Portfolio,
which may be in the form of cash or obligations issued by the United States
government, its agencies or instrumentalities, except that in connection
with any loans for which collateral is to be credited to the Custodian's
account in the book-entry system authorized by the U.S. Department of the
Treasury, the Custodian will not be held liable or responsible for the
delivery of securities owned by the Portfolio prior to the receipt of such
collateral;
11) For delivery as security in connection with any borrowings by the Fund
on behalf of the Portfolio requiring a pledge of assets by the Fund on
behalf of the Portfolio, but only against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any agreement among
the Fund on behalf of the Portfolio, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 (the Exchange Act")
and a member of The National Association of Securities Dealers, Inc.
6
<PAGE>
("NASD"), relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange or of any
similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Portfolio of the Fund;
13) For delivery in accordance with the provisions of any agreement among
the Fund on behalf of the Portfolio, the Custodian, and a Futures
Commission Merchant registered under the Commodity Exchange Act, relating
to compliance with the rules of the Commodity Futures Trading Commission
and/or any Contract Market, or any similar organization or organizations,
regarding account deposits in connection with transactions by the Portfolio
of the Fund;
14) Upon receipt of instructions from the transfer agent (Transfer Agent")
for the Fund, for delivery to such Transfer Agent or to the holders of
shares in connection with distributions in kind, as may be described from
time to time in the currently effective prospectus and statement of
additional information of the Fund, related to the Portfolio
("Prospectus"), in satisfaction of requests by
7
<PAGE>
holders of Shares for repurchase or redemption; and
15) For any other proper corporate purpose, but only upon receipt of, in
--------
addition to Proper Instructions from the Fund on behalf of the applicable
Portfolio, a certified copy of a resolution of the Board of Trustees or of
the Executive Committee signed by an officer of the Fund and certified by
the Secretary or an Assistant Secretary, specifying the securities of the
Portfolio to be delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such
securities shall be made.
2.3 Registration of Securities. Securities held by the Custodian (other than
--------------------------
bearer securities) shall be registered in the name of the Portfolio or in the
name of any nominee of the Fund on behalf of the Portfolio or of any nominee of
the Custodian which nominee shall be assigned exclusively to the Portfolio,
unless the Fund has authorized in writing the appointment of a nominee to be
used in common with other registered investment companies having the same
investment adviser as the Portfolio, or in the name or
8
<PAGE>
nominee name of any agent appointed pursuant to Section 2.11 or in the name or
nominee name of any sub-custodian appointed pursuant to Article 1. All
securities accepted by the Custodian on behalf of the Portfolio under the terms
of this Contract shall be "street name" or other good delivery form.
2.4 Bank Accounts The Custodian shall open and maintain a separate bank
-------------
account or accounts in the name of each Portfolio of the Fund, subject only to
draft or order by the Custodian acting pursuant to the terms of this Contract,
and shall hold in such account or accounts, subject to the provisions hereof,
from or for the account of the Portfolio, other than cash maintained by the
Portfolio in a bank account established and used in accordance with Rule 17f-3
under the Investment Company Act of 1940. Funds held by the Custodian for a
Portfolio may be deposited by it to its credit as Custodian in the Banking
Department of the Custodian or in such other banks or trust companies as it may
in its discretion deem necessary or desirable; provided, however, that every
--------
such bank or trust company shall be qualified to act as a custodian under the
Investment Company Act of 1940 and that each such bank or trust company and the
funds to be deposited with each such bank or trust company shall on behalf of
each applicable Portfolio be approved by vote of a majority of the Board of
Trustees of the Fund. Such funds shall be deposited by the Custodian in its
capacity as Custodian and shall be withdrawable by the Custodian only in that
capacity.
9
<PAGE>
2.5 Payments for Shares. The Custodian shall receive from the distributor for
-------------------
the Shares or from the Transfer Agent of the Fund and deposit into the account
of the appropriate Portfolio such payments as are received for Shares of that
Portfolio issued or sold from time to time by the Fund. The Custodian will
provide timely notification to the Fund on behalf of each such Portfolio and the
Transfer Agent of any receipt by it of payments for Shares of such Portfolio.
2.6 Availability of Federal Funds. Upon mutual agreement between the Fund on
-----------------------------
behalf of each applicable Portfolio and the Custodian, the Custodian shall, upon
the receipt of Proper Instructions from -the Fund on behalf of a Portfolio, make
federal funds available to such Portfolio as of specified times agreed upon from
time to time by the Fund and the Custodian in the amount of checks received in
payment for Shares of such Portfolio which are deposited into the Portfolio's
account.
2.7 Collection of Income. The Custodian shall collect on a timely basis all
--------------------
income and other payments with respect to registered securities held hereunder
to which each Portfolio shall be entitled either by law or pursuant to custom in
the securities business, and shall collect on a timely basis all income and
other payments with respect to bearer securities if on the date of payment by
the issuer, such securities are held by the Custodian or its agent thereof and
shall credit such income to such Portfolio's custodian account. Without
limiting the
10
<PAGE>
generality of the foregoing, the Custodian shall detach and present
for payment all coupons and other income items requiring presentation as and
when they become due and shall collect interest when due on securities held
hereunder. Income due each Portfolio on securities loaned pursuant to the
provisions of Section 2.2 (10) shall be the responsibility of the Fund. The
Custodian will have no duty or responsibility in connection therewith, other
than to provide the Fund with such information or data as may be necessary to
assist the Fund in arranging for the timely delivery to the Custodian of the
income to which the Portfolio 18 properly entitled.
2.8 Payment of Fund Monies. Upon receipt of Proper Instructions from the Fund
----------------------
on behalf of the applicable Portfolio, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall pay out monies of a
Portfolio in the following cases only:
1) Upon the purchase of securities, options, futures contracts or options
on futures contracts for the account of the Portfolio but only (a) against
the delivery of such securities or evidence of title to such options,
futures contracts or options on futures contract& to the Custodian (or any
bank, banking firm or trust company doing business in the United States or
abroad which is qualified under the Investment Company Act of 1940, as
11
<PAGE>
amended, to act as a custodian and has been designated by its agent for
this purpose) the Custodian as registered in the name of the Portfolio or
in the name of a nominee of the Custodian referred to in Section 2.3 hereof
or in proper form for transfer; (b) in the case of a purchase effected
through a Securities System, in accordance with the conditions set forth in
Section 2.12 hereof; (c) in the case of a purchase involving the Direct
Paper System, in accordance with the conditions set forth in Section 2.12A;
(d) in the case of repurchase agreements entered into between the Fund on
behalf of the Portfolio and the Custodian, or another bank, or a broker-
dealer which a member of NASD, (i) against delivery of the securities
either in certificate form or through an entry crediting the Custodian's
account at the Federal Reserve Bank with such securities or (ii) against
delivery of the receipt evidencing purchase by the Portfolio of securities
owned by the Custodian along with written evidence of the agreement by the
Custodian to repurchase such securities from the Portfolio or (e) for
transfer to a time deposit account of the Fund in any bank, whether
domestic or foreign; such
12
<PAGE>
transfer may be effected prior to receipt of a confirmation from a broker
and/or the applicable bank pursuant to Proper Instructions from the Fund as
defined in Section 2.17;
2) In connection with conversion, exchange or surrender of securities
owned by the Portfolio as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Portfolio as
set forth in Section 2.10 hereof;
4) For the payment of any expense or liability incurred by the Portfolio,
including but not limited to the following payments for the account of the
Portfolio: interest, taxes, management, accounting, transfer agent and
legal fees, and operating expenses of the Fund whether or not such expenses
are to be in whole or part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares of the Portfolio declared
pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short:
7) For any other proper purpose, but only upon receipt of, in addition to
--------
Proper Instructions
13
<PAGE>
from the Fund on behalf of the Portfolio certified copy of 8 resolution of
the Board of Trustees or of the Executive Committee of the Fund signed by
an officer of the Fund and certified by its Secretary or an Assistant
Secretary, specifying the amount of such payment, setting forth the purpose
for which such payment is to be made, declaring such purpose to be a proper
purpose, and naming the person or persons to whom such payment is to be
made.
2.9 Liability for Payment in Advance of Receipt of Securities Purchased.
-------------------------------------------------------------------
Except as specifically stated otherwise in this Contract, in any and every
case where purchase of securities for the account of a Portfolio is made by
the Custodian in advance of receipt of the securities purchased in the
absence of specific written instructions from the Fund on behalf of such
Portfolio so pay in advance, the Custodian shall be absolutely liable to
the Fund for such securities to the same extent as if the securities had
been received by the Custodian
2.10 Payments for Repurchases or Redemptions of Shares of the Fund. From
--------------------------------------------------------- ----
such funds as may be available for the purpose but subject to the limitations of
the Declaration of Trust and any applicable votes of the Board of Trustees of
the Fund pursuant thereto, the Custodian shall, upon receipt of
14
<PAGE>
instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of Shares of a Portfolio, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to funds to or through a commercial bank
designated by the redeeming shareholders. In connection with the redemption or
repurchase of Shares of the Fund, the Custodian shall honor checks drawn on the
Custodian by a holder of Shares, which checks have been furnished by the Fund to
the holder of Shares, when presented to the Custodian in accordance with such
procedures and controls as are mutually agreed upon from time to time between
the Fund and the Custodian.
2.11 Appointment of Agents. The Custodian may at any time or times in its
----------------------
discretion appoint (and may at any time remove) any other bank or trust company
which is itself qualified under the Investment Company Act of 1940, as amended,
to act as a custodian, as its agent to carry out such of the provisions of this
Article 2 as the Custodian may from time to time direct; provided, however, that
--------
the appointment of any agent shall not relieve the Custodian of its
responsibilities or liabilities hereunder.
2.12 Deposit of Fund Assets in Securities Systems. The Custodian may deposit
--------------------------------------------
and/or maintain securities owned by a Portfolio in a clearing agency registered
with the Securities and
15
<PAGE>
the Securities Exchange Commission under Section 17A of Exchange Act of 1934,
which acts as securities depository, or in the book-entry system authorized by
the U.S. Department of the Treasury and certain federal agencies, collectively
referred to herein as Securities System in accordance with Applicable Federal
Reserve Board and Securities and Exchange Commission rules and regulations, if
any, and subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a Securities
System provided that such securities are represented in an account
("Account") of the Custodian in the Securities System which shall not
include any assets of the Custodian other than assets held as
fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a Securities System shall identify
by book-entry those securities belonging to the Portfolio;
3) The Custodian shall pay for securities purchased for the account of
the Portfolio upon (i) receipt of advice from the Securities System
that such securities have been transferred to the Account, and (ii)
the making of an entry on the records of the Custodian to reflect such
payment and transfer for the account of the Portfolio. The Custodian
shall transfer securities sold for the account of the Portfolio upon
(1) receipt
16
<PAGE>
of advice from the Securities System that payment for such securities
has been transferred to the Account, and (11) the making of an entry
on the records of the Custodian to reflect such transfer and payment
for the account of the Portfolio. Copies of all advices from the
Securities System of transfers of securities for the account of the
Portfolio shall identify the Portfolio, be maintained for the
Portfolio by the Custodian and be provided to the Fund at its request.
Upon request, the Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the account of the
Portfolio in the form of a written advice or notice and shall furnish
to the Fund on behalf of the Portfolio copies of daily transaction
sheets reflecting each day's transactions in the Securities System for
the account of the Portfolio.
4) The Custodian shall provide the Fund for the Portfolio with any report
obtained by the Custodian on the SecuritIes System's accounting
system, internal accounting control and procedures for safeguarding
securities deposited in the Securities System;
5) The Custodian shall have received from the Fund on behalf of the
Portfolio the initial or annual
17
<PAGE>
certificate, as the case may be, required by Article 9 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the Portfolio
for any 1088 or damage to the Portfolio resulting from use of the
Securities System by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or of any of its or
their employees or from failure of the Custodian or any such agent to
enforce effectively such rights as it may have against the Securities
System; at the election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any claim
against the Securities System or any other person which the Custodian
may have as a consequence of any such loss or damage if and to the
extent that the Portfolio has not been made whole for any such loss or
damage.
2.12A Fund Assets Held in the Custodian's Direct Paper System. The Custodian
-------------------------------------------------------
may deposit and/or maintain securities owned by a Portfolio in the Direct Paper
System of the Custodian subject to the following provisions:
(1) No transaction relating to securities in the Direct Paper System will
be effected in the absence of Proper Instructions from the Fund on
behalf of the Portfolio;
18
<PAGE>
(2) The Custodian may keep securities of the Portfolio in the Direct Paper
System only if such Securities are represented in an account
("Account") of the Custodian in the Direct Paper System which shall
not include any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
(3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Portfolio:
(4) The Custodian shall pay for securities purchased for the account of
the Portfolio upon the making of an entry on the records of the
Custodian to reflect such payment and transfer of securities to the
account of the Portfolio. The Custodian shall transfer securities
sold for the account of the Portfolio upon the making of an entry on
the records of the Custodian to reflect such transfer and receipt of
payment for the account of the Portfolio;
(5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the Portfolio,
in the form of a written advice or notice, of Direct Paper on the nest
business day following such transfer and shall furnish to the Fund on
behalf of the Portfolio copies of daily
19
<PAGE>
transaction sheets reflecting each day's transaction in the Securities
System for the account of the Portfolio;
(6) The Custodian shall provide the Fund on behalf of the Portfolio with
any report on its system of internal accounting control as the Fund
may reasonably request from time to time.
2.13 Segregated Account. The Custodian shall upon receipt of Proper
------------------
Instructions from the Fund on behalf of each applicable Portfolio establish
and maintain a segregated account or accounts for and on behalf of each
such Portfolio, into which account or accounts may be transferred cash
and/or Securities, including securities maintained in an account by the
Custodian pursuant to Section 2.12 hereof, (i) in accordance with the
provisions of any agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or any registered
contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by
the Portfolio, (ii) for purposes of segregating cash or government
securities in
20
<PAGE>
connection with options purchased, sold or written by the Portfolio
or commodity futures contracts or options thereon purchased or
sold by the Portfolio, (iii) for the purposes of compliance by the
Portfolio with the procedures required by Investment Company Act Release
No. 10666, or any subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of segregated accounts by
registered investment Companies and (iv) for other proper corporate
purposes, but only, in the case of clause (iv), upon receipt of, in
--------
addition to Proper Instructions from the Fund on behalf of the applicable
Portfolio, a certified copy of a resolution of the Board of Trustees or of
the Executive Committee signed by an officer of the Fund and certified by
the Secretary or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such purposes to be
proper corporate purposes.
2.14 Ownership Certificates for Tax Purposes. The Custodian shall execute
---------------------------------------
ownership and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other payments with
respect to securities of each Portfolio held by it and in connection with
transfers of securities.
2.15 Proxies. The Custodian shall, with respect to the securities held
-------
hereunder, cause to be promptly executed by
21
<PAGE>
the registered holder of such securities, if the securities are registered
otherwise than in the name of the Portfolio or a nominee of the Portfolio,
all proxies, without indication of the manner in which such proxies are to
be voted, and shall promptly deliver to the Portfolio such proxies, all
prosy soliciting materials and all notices relating to such securities.
2.16 Communications Relating to Portfolio Securities.
-----------------------------------------------
The Custodian shall transmit promptly to the Fund for each Portfolio all
written information (including, without limitation, pendency of calls and
maturities of securities and expirations of rights in connection therewith
and notices of exercise of call and put options written by the Fund on
behalf of the Portfolio and the maturity of futures contracts purchased or
sold by the Portfolio) received by the Custodian from issuers of the
securities being held for the Portfolio. With respect to tender or
exchange offers, the Custodian shall transmit promptly to the Portfolio all
written information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the party (or his
agents) making the tender or exchange offer. If the Portfolio desires to
take action with respect to any tender offer, exchange offer or any other
similar transaction, the Portfolio
22
<PAGE>
shall notify the Custodian at least three business days prior to the date
on which the Custodian is to take such action.
2.17 Proper Instructions. Proper Instructions as used throughout this
-------------------
Article 2 means a writing signed or initialled by one or more person
or persons as the Board of Trustees shall have from time to time
authorized.
Each such writing shall set forth the specific transaction or type of
transaction involved, including a specific statement of the purpose for
which such action is requested. Oral instructions will be considered Proper
Instructions if the Custodian reasonably believes them to have been given
by a person authorized to give such instructions with respect to the
transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of Trustees of the
Fund accompanied by a detailed description of procedures approved by the
Board of Trustees, Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices provided that the
Board of Trustees and the Custodian are satisfied
23
<PAGE>
that such procedures afford adequate safeguards for the Portfolios' assets.
For purposes of this Section, Proper Instructions shall include
instructions received by the Custodian pursuant to any three-party
agreement which requires a segregated asset account in accordance with
Section 2.13.
2.18 Actions Permitted without Express Authority. The Custodian may in its
-------------------------------------------
discretion, without express authority from the Fund on behalf of each
applicable Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Contract, provided that all such payments shall be accounted for to the
--------
Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Portfolio, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection with
the sale, exchange, substitution,
24
<PAGE>
purchase, transfer and other dealings with the securities and property of
the Portfolio except as otherwise directed by the Board of Trustees of the
Fund.
2.19 Evidence of Authority. The Custodian shall be protected in acting upon
---------------------
any instructions, notice, request, consent, certificate or other instrument
or paper believed by it to be genuine and to have been properly executed by
or on behalf of the Fund. The Custodian may receive and accept a certified
copy of a vote of the Board of Trustees of the Fund as conclusive evidence
(a) of the authority of any person to act in accordance with such vote or
(b) of any determination or of any action by the Board of Trustees pursuant
to the Declaration of Trust as described in such vote, and such vote may be
considered as in full force and effect until receipt by the custodian of
written notice to the contrary.
3. Duties of Custodian with Respect to the Books of Account and Calculation of
---------------------------------------------------------------------------
Net Asset Value and Net Income.
-------------------------------
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board of Trustees of the Fund to keep the
books of account of each portfolio and/or compute the net asset value per share
of the outstanding shares of each Portfolio or, if directed in writing to do so
by the Fund on behalf of the Portfolio, shall itself
25
<PAGE>
keep such books of account and/or compute such net asset value per share. If so
directed, the Custodian shall also calculate daily the net income of the
Portfolio as described in the Fund's currently effective prospectus related to
such Portfolio and shall advise the Fund and the Transfer Agent daily of the
total amounts of such net income and, if instructed in writing by an officer of
the Fund to do so, shall advise the Transfer Agent periodically of the division
of such net income among its various components. The calculations of the net
asset value per share and the daily income of each Portfolio shall be made at
the time or times described from time to time in the Fund's currently effective
prospectus related to such Portfolio.
4. Records
-------
The Custodian shall with respect to each Portfolio create and maintain all
records relating to its activities and obligations under this Contract in such
manner as will meet the obligations of the Fund under the investment Company Act
of 1940, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder applicable federal and state tax laws and any other law or
administrative rules or procedures which may be applicable to the Fund. All
such records shall be the property of the Fund and shall at all times during the
regular business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Fund and employees and agents of
the Securities and Exchange Commission. The Custodian
26
<PAGE>
shall, at the Fund's request, supply the Fund with a tabulation of securities
owned by each Portfolio and held by the Custodian and shall, when requested to
do so by the Fund and for such compensation as shall be agreed upon between the
Fund and the Custodian, include certificate numbers in such tabulations.
5. Opinion of Fund's Independent Accountant
----------------------------------------
The Custodian shall take all reasonable action, as the Fund on behalf of
each applicable Portfolio may from time to time request, to obtain from year to
year favorable opinions from the Fund's independent accountants with respect to
its activities hereunder in connection with the preparation of the Fund's Form
N-1A, and Form N-SAR or other annual reports to the Securities and Exchange
Commission and with respect to any other requirements of such Commission.
6. Reports to Fund by Independent Public Accountants
-------------------------------------------------
The Custodian shall provide the Fund, on behalf of each of the Portfolios
at such times as the Fund may reasonably requires with reports by independent
public accountants on the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in Securities
System, relating to the services provided by the custodian under this Contract;
such reports, shall be of sufficient scope and in sufficient detail, as may
reasonably be required by the Fund to provide reasonable assurance that any
27
<PAGE>
material inadequacies would be disclosed by such examination, and, if there are
no such inadequacies, the reports shall so state.
7. Compensation of Custodian
-------------------------
The Custodian shall be entitled to reasonable compensation for its services
and expenses as Custodian, as agreed upon from time to time between the Fund on
behalf of each applicable Portfolio and the Custodian.
8. Responsibility of Custodian
---------------------------
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties, including any
futures commission merchant acting pursuant to the terms of a three-party
futures or options agreement. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Contract, but shall be
kept indemnified by and shall be without liability to the Fund for any action
taken or omitted by it in good faith without negligence. It shall be entitled
to rely on and may act upon advice of counsel (who may be counsel for the Fund)
on all matter, and shall be without liability for any action reasonably
28
<PAGE>
taken or omitted pursuant to such advice. Notwithstanding the foregoing, the
responsibility of the Custodian with respect to redemptions effected by check
shall be in accordance with a separate Agreement entered into between the
Custodian and the Fund.
If the Fund on behalf of a Portfolio requires the custodian to take any
action with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund or the Portfolio being liable for the payment
of money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it.
If the Fund requires the Custodian to advance cash or securities for any
purpose for the benefit of a Portfolio or in the event that the Custodian or its
nominee shall incur or be assessed any taxes, charges, expenses, assessments,
claims or liabilities in connection with the performance of this Contract,
except such as may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct, any Property at any time held
for the account of the applicable Portfolio shall be security therefor and
should the Fund fail to repay the Custodian promptly, the Custodian shall be
entitled to
29
<PAGE>
utilize available cash and to dispose of such Portfolio's assets the extent
necessary to obtain reimbursement.
9. Effective Period, Termination and Amendment
-------------------------------------------
This Contract shall become effective as of its execution, ball continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and say be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid to
the other party, such termination to take effect not sooner than thirty (30)
days after the date of such delivery or mailing; provided, however that the
--------
Custodian shall not with respect to a Portfolio act under Section 2.12 hereof in
the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Trustees of the Fund has approved the
initial use of a particular Securities System by such Portfolio and the receipt
of an annual certificate of the Secretary or an Assistant Secretary that the
Board of Trustees has relieved the use by such Portfolio of such Securities
System, as required in each case by Rule 17f-4 under the Investment Company Act
of 1940, as amended and that the Custodian shall not with respect to a Portfolio
act under Section 2.12A hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board of
Trustees has approved the initial use of the Direct Paper System by such
Portfolio and the receipt of an annual certificate of the Secretary or an
30
<PAGE>
Assistant Secretary that the Board of Trustees has reviewed the use by such
Portfolio of the Direct Paper System; provided further however, that the Fund
shall not amend or terminate this Contract in contravention of any applicable
federal or state regulations or any provision of the Declaration of Trust, and
further provided, that the Fund on behalf of one or more of the Portfolios may
at any time by action of its Board of Trustees (i) substitute another bank or
trust company for the Custodian by giving notice as described above to the
Custodian, or (ii) immediately terminate this Contract in the event of the
appointment of a conservator or receiver for the Custodian by the comptroller of
the Currency or upon the happening of a like event at the direction of an
appropriate regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
10. Successor Custodian
-------------------
If a successor custodian for the Fund, of one or more of the Portfolios
shall be appointed by the Board of Trustees of the Fund, the Custodian shall,
upon termination, deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all securities of each
applicable
31
<PAGE>
Portfolio then held by it hereunder and shall transfer to an account of the
successor custodian all of the securities of each such Portfolio held in a
Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy a vote of the Board of Trustees of
the Fund, deliver at the office of the Custodian and transfer such securities,
funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selections having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian on behalf of each applicable Portfolio and all
instruments held by the Custodian relative thereto and all other property held
by it under this Contract on behalf of each applicable Portfolio and to transfer
to an account of such successor custodian all of the securities of each such
Portfolio held in any Securities System. Thereafter, such bank or trust
32
<PAGE>
company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the Certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to duties and obligations of the
Custodian shall remain in full force and effect.
11. Interpretive and Additional Provisions
--------------------------------------
In connection with the operation of this Contract, the Custodian and the
Fund on behalf of each of the Portfolios, may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Contract as
may in their Joint opinion be consistent with the general tenor of this
Contract. Any such interpretive or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, provided that no such
--------
interpretive or additional provisions shall contravene any applicable federal or
state regulations or any provision of the Declaration of Trust of the Fund. No
interpretive or additional provisions made as provided in the
33
<PAGE>
preceding sentence shall be deemed to be an amendment of this Contract.
12. Additional Funds
----------------
In the event that the Fund establishes one or more series of Shares in
addition to CMA California Tax-Exempt Money Fund, and CMA New York Tax-Exempt
Money Fund with respect to which it desires to have the Custodian render
services as custodian under the terms hereof, it shall so notify the Custodian
in writing, and if the Custodian agrees in writing to provide such services,
such series of Shares shall become a Portfolio hereunder.
13. Massachusetts Law to Apply
--------------------------
This Contract shall be construed and the thereof interpreted under and in
accordance with Commonwealth of Massachusetts.
14. Prior Contracts
---------------
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund on behalf of each of the Portfolios and the Custodian
relating to the custody of the Fund's assets.
34
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 20th day of June,1988.
ATTEST CMA MULTI-STATE MUNICIPAL SERIES TRUST
/s/ Robert Harris By /s/ Gerald M. Richard
- ------------------- -----------------------------------
ATTEST STATE STREET BANK AND TRUST COMPANY
By
- ------------------- -----------------------------------
Assistant Secretary Vice President
35
<PAGE>
EXHIBIT 99.9(a)
AMENDED TRANSFER AGENCY, SHAREHOLDER SERVICING
AGENCY AND PROXY AGENCY AGREEMENT
THIS AGREEMENT made as of the 9th day of December, 1992 by and between CMA
Multi-State Municipal Series Trust (the "Trust"), an unincorporated business
trust organized under the laws of the Commonwealth of Massachusetts, and
Financial Data Services, Inc., a corporation organized and existing under the
laws of New Jersey (the "Transfer Agent").
W I T N E S S E T H:
--------------------
WHEREAS, the Trustees of the Trust are authorized to establish separate
series relating to separate portfolios of securities, each of which will offer a
separate class of shares; and
WHEREAS, the Trustees have established and designated the CMA Arizona
Municipal Money Fund, CMA California Municipal Money Fund, CMA Connecticut
Municipal Money Fund, CMA Massachusetts Municipal Money Fund, CMA Michigan
Municipal Money Fund, CMA New Jersey Municipal Money Fund, CMA New York
Municipal Money Fund, CMA North Carolina Municipal Money Fund, CMA Ohio
Municipal Money Fund and CMA Pennsylvania Municipal Money Fund (the "Funds") as
series of the Trust; and
WHEREAS, the Trust wishes to appoint the Transfer Agent to be the transfer
agent, shareholder servicing agent and proxy
<PAGE>
agent for the Funds upon, and subject to, the terms and provisions of this
Agreement, and the Transfer Agent is desirous of accepting such appointment
upon, and subject to, such terms and provisions;
NOW THEREFORE, in consideration of-the mutual covenants contained in this
Agreement, the Trust and the Transfer Agent agree as follows:
1. Appointment as Transfer Agent, Shareholder Servicing Agent and Proxy
--------------------------------------------------------------------
Agent for the Funds.
- -------------------
1.1. The Trust hereby appoints the Transfer Agent to act as the
transfer agent, shareholder servicing agent and proxy agent for the Funds upon,
and subject to, the terms and provisions of this Agreement.
1.2. The Transfer Agent hereby accepts the appointment as transfer
agent, shareholder servicing agent, and proxy agent for the Funds, and agrees to
act as such upon, and subject to, the terms and provisions of this Agreement.
The Transfer Agent hereby agrees to hire, purchase, develop and maintain such
dedicated personnel, facilities, equipment, software, resources and capabilities
as may be reasonably determined by the Trust to be necessary for the
satisfactory performance of the duties and responsibilities of the Transfer
Agent under this Agreement.
2. Definitions.
------------
In this Agreement:
2
<PAGE>
2.1. The term "Act" means the Investment Company Act of 1940, as amended
from time to time, and any applicable rule, regulation or order thereunder.
2.2. The term "Account" means any account of a Shareholder established in
connection with the Cash Management Account ("CMA") of Merrill Lynch, Pierce,
Fenner & Smith Incorporated.
2.3. The term "Custodian" means the bank duly appointed to act as
Custodian for the assets of each Fund and the term "Custodian Agreement" means
any agreement in effect between the Trust and the Custodian.
2.4. The term "Officer's Instruction" means an instruction given in
writing on behalf of the Trust to the Transfer Agent by the President, any Vice
President, the Secretary, the Treasurer or the Controller of the Trust.
2.5. The term "Prospectuses" means the prospectuses of the Funds from time
to time in effect.
2.6. The term "Shares" means the shares of the Funds.
2.7. The term "Shareholder" means the holder of record of Shares,
irrespective of the category of Account maintained in respect of such Shares.
2.8. The term "Statements of Additional Information" means the statements
of additional information of the Funds from time to time in effect.
3. Functions of Transfer Agent, Shareholder Servicing Agent and Proxy
------------------------------------------------------------------
Agent.
- -----
3
<PAGE>
3.1. Subject to the succeeding provisions of this Agreement, the Transfer
Agent hereby agrees to perform the following functions for the Funds on behalf
of the Trust:
3.1.1. Issuing, transferring and redeeming Shares.
3.1.2. Opening, maintaining, servicing and closing Accounts.
3.1.3. Acting as agent of the Trust and/or Shareholders in connection with
Accounts, upon the terms and subject to the conditions contained in the
Prospectuses and the Statements of Additional Information.
3.1.4. Causing the reinvestment in Accounts of dividends declared upon
Shares.
3.1.5. Processing liquidations.
3.1.6. Furnishing to Shareholders appropriate income tax information and
income tax forms duly completed.
3.1.7. Mailing to Shareholders annual, semi-annual, and quarterly reports
of the Funds prepared by or on behalf of the Trust, and mailing new Prospectuses
upon their issue to Shareholders whose Shares are held in Accounts.
3.1.8. Furnishing to the Trust such periodic statements of transactions
effected by the Transfer Agent, reconciliations, balances and summaries as set
forth in Exhibit A and as shall be necessary in connection with the CMA program.
3.1.9. Maintaining such books and records relating to transactions
effected by the Transfer Agent as are required by the Act or by any other
applicable provisions of law to be
4
<PAGE>
maintained by the Trust or the Transfer Agent with respect to such transactions,
and preserving, or causing to be preserved, any such books and records for such
periods as may be required by any law rule or regulation.
3.2. The Transfer Agent agrees to act as proxy agent in connection with
the holding of meetings of Shareholders, such services to include, but not be
limited to, mailing to Shareholders notices, proxies and proxy statements in
connection with the holding of such meetings, receiving and tabulating votes
cast by proxy, communicating to the Trust the results of such tabulation
accompanied by appropriate certificates, and preparing and furnishing to the
Trust certified lists of Shareholders, all of the foregoing in such form and
containing such information as may be required by the Trust to comply with any
provisions of law applicable to such meetings.
3.3. The Transfer Agent agrees to deal with, and answer, all
correspondence from or on behalf of Shareholders relating to the functions of
the Transfer Agent under this Agreement.
3.4. The Transfer Agent agrees to furnish to the Trust such information
and at such intervals as is necessary for the Trust to comply with the
registration and/or the reporting requirements of the Securities and Exchange
Commission, state securities authorities or other regulatory agencies.
3.5. The Transfer Agent agrees to provide to the Trust upon request such
information as may reasonably be required to
5
<PAGE>
enable the Trust to reconcile the number of outstanding Shares between the
Transfer Agent's records and the account books of the Trust in respect of each
of the Funds.
3.6. The parties hereto agree that, without prejudice to any other
provisions of this section 3, the functions of the Transfer Agent under this
section 3 will be performed in accordance with the Activities List set out in
Exhibit A to this Agreement.
3.7. Notwithstanding anything in the foregoing provisions of this
section 3, the Transfer Agent agrees to perform its functions hereunder subject
to such modification (whether in respect of particular cases or in any
particular class of cases) as may from time to time be contained in an Officer's
Instruction.
4. Compensation of Transfer Agent.
------------------------------
The charges for services described in this Agreement, including "out-
of-pocket" expenses will be established by a Fee Agreement between the Trust and
the Transfer Agent under separate cover.
5. Right to Inspect Records, etc., of Transfer Agent.
-------------------------------------------------
The Transfer Agent agrees that, upon request by any officer of the
Trust or by any officer of the Trust's accountant or investment adviser, the
Transfer Agent will make available to any such officer any books and records
(whether or not books and records to be preserved as required by law) which
relate to any transaction or function to be performed by the Transfer Agent
6
<PAGE>
under or pursuant to this Agreement and shall permit any such officer to
transcribe or to duplicate on equipment provided by the Transfer Agent any such
book or record, in whole or in part.
6. Confidential Relationships of the Transfer Agent etc.
----------------------------------------------------
The Transfer Agent agrees, on behalf of itself and its officers,
employees, vendors and agents, that each of the foregoing shall treat the
identity and all transactions of Shareholders, and all other transactions
contemplated by this Agreement, and all information germane thereto, as
confidential and not to be disclosed to any person (other than the Shareholder
concerned, or the Trust, or as may be disclosed in the examination of any books
or records by any person lawfully entitled to examine the same) except as may be
authorized by an Officer's Instruction. The Transfer Agent agrees to adopt
procedures for and written instructions to its officers, employees, vendors and
agents reasonably designed to implement the agreement established in this
section 6.
7. Standard of Care: Loss Caused by Impostors.
------------------------------------------
The Transfer Agent shall use its best efforts to insure the accuracy of
all services performed under this Agreement, but assumes no responsibility for,
and shall not be liable for, any loss or damage to any party unless the
negligence, bad faith or willful misconduct of the Transfer Agent is a proximate
cause of such loss or damage; provided, however, that losses due to the failure
of the Transfer Agent to detect payments made by it under this Agreement to
impostors shall be borne by the Transfer Agent.
7
<PAGE>
8. Termination of Appointment.
--------------------------
The appointment of the Transfer Agent provided by this Agreement shall
be in effect for one year from the date hereof and thereafter on a year-to-year
basis, each such term to expire on the anniversary of the date hereof. Any party
may terminate such appointment by delivering a written notice to that effect at
the principal place of business of the other party at least 60 days prior to the
expiration of the then-current term of the Agreement. In the event such
appointment shall be terminated, for whatever reason, the Transfer Agent will
provide the Trust without further charge with:
8.1. A complete and current computer-reproducible record, within 7 days
of the date of termination, of that file data which may reasonably be required
to establish transfer agency, shareholder servicing agency and proxy agency
services elsewhere.
8.2. All hard copy records in file containers or other acceptable
container for shipping to a new location.
8.3. A referral service, for a reasonable period of time, indicating to
Shareholders or potential Shareholders the next appropriate address for
inquiries or Shareholder information.
8.4. Any other services, including correction of errors or the costs of
such correction, as may be normal and necessary to effect the transfer of
Shareholder information in an orderly and timely manner, should the occasion
arise.
8
<PAGE>
Notwithstanding anything in the foregoing provisions of this section 8,
if it appears impracticable in the circumstances to effect an orderly delivery
of the necessary and appropriate records of the Transfer Agent to a successor
transfer agent, shareholder servicing agent, and/or proxy agent for the Funds
within the time specified in the notice of termination as aforesaid, the
Transfer Agent agrees that its appointment shall remain in force and effect for
such reasonable period as may be required to complete necessary arrangements
with a successor transfer agent, shareholder servicing agent, and/or proxy
agent.
9. Amendment, etc. of Agreement.
----------------------------
Except to the extent that the performance by the Transfer Agent of its
functions under this Agreement may from time to time be modified by an Officer's
Instruction, this Agreement may be amended or modified only by a further written
agreement between the parties.
10. No Personal Liability of Trustees, etc.
--------------------------------------
The Transfer Agent acknowledges that the Declaration of Trust
establishing the Trust, a copy of which, together with all amendments thereto
(the "Declaration"), is on file in the office of the Secretary of the
Commonwealth of Massachusetts, provides that the name of the Trust, "CMA Multi-
State Municipal Series Trust," refers to the trustees under the Declaration
collectively as trustees, but not as individuals or personally; and no trustee,
Shareholder, officer, employee or agent of the Trust shall be held to any
personal liability, nor shall resort be had
9
<PAGE>
to their private property for the satisfaction of any obligation or claim or
otherwise in connection with the affairs of said Trust but the Trust Property
only shall be liable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written by their respective officers
hereunto duly authorized.
CMA MULTI-STATE MUNICIPAL
SERIES TRUST
By /s/ Arthur Zeikel
-------------------
ATTEST
/s/ Robert Harris
- ---------------------------
Secretary
FINANCIAL DATA SERVICES, INC.
By
--------------------------
ATTEST:
- ---------------------------
Secretary
10
<PAGE>
EXHIBIT 99.9(b)
CASH MANAGEMENT ACCOUNT/(R)/ AGREEMENT
- --------------------------------------------------------------------------------
INTRODUCTION
This Agreement contains the terms governing the Cash Management Account/(R)/
financial service ("CMA/(R)/ Service"). I will read this Agreement and keep it
for my records because I know that by signing the CMA Application and Agreement
form or the CMA SubAccounts/(SM)/ Application and Agreement form (the
"Application and Agreement form(s)") I am agreeing to its terms.
DEFINITIONS
In this Agreement, "I," "me," "my" or "accountholder" means each person who
signs the CMA Application and Agreement form or the CMA SubAccount, Application
and Agreement form. "You," "your" or "MLPF&S" means Merrill Lynch, Pierce,
Fenner & Smith Incorporated. "MLB&T" means Merrill Lynch Bank & Trust Co. "BANK
ONE" means BANK ONE, COLUMBUS, N.A. "MLNF" means Merrill Lynch National
Financial. "CHASE" means the Chase Manhattan Bank, N.A. MLB&T, MLNF, CHASE and
BANK ONE are referred to collectively as "Banks." The "Issuer" means MLB&T or
MLNF, whichever issues the Visa Cards from time to time.
"Card/Check Account" means the account(s) established for me by the Banks.
"Checks" means checks issued to me by BANK ONE for use with my Card/Check
Account. "Card" or "Cards" means one or more Classic Visa/(R)/ cards issued to
me for use with my Card/Check Account. Unless the context requires otherwise,
"Card" or "Cards" also means one or more CMA Visa Gold Program cards issued to
me for use with my Card/Check Account if I subscribe to and am approved for the
CMA Visa Gold Program. The name of the issuer will appear on the Card. The
Card(s) issued to me if I subscribe to the CMA Visa Gold Program will also be
referred to as the "Visa Gold Program Card(s)." "Money Funds" means the CMA
money market funds. "Money Accounts" means the Money Funds and any FDIC-insured
money market deposit accounts opened for me through the Insured Savings/(SM)/
Account program.
For purposes of this Agreement, "securities and other property" means, but is
not limited to, money, securities, financial instruments and commodities of
every kind and nature and related contracts and options. This definition
includes securities or other property currently or hereafter held, carried or
maintained by you or by any of your affiliates, in your possession and control,
or in the possession and control of any such affiliate, for any purpose, in and
for any of my accounts now or hereafter opened, including any account in which I
may have an interest.
DESCRIPTION OF THE CMA/(R)/ SERVICE
1. The CMA Service consists of: (1) an MLPF&S securities account (referred to as
the "Securities Account"), which is either a cash account, or with the Investor
CreditLine/(SM)/ service, a margin account, (2) a choice of Money Accounts, (3)
if applicable, a Card/Check Account provided by the Banks and (4) if applicable,
optional CMA services as described in the Cash Management Account Program
Description.
DESCRIPTION OF THE CMA MASTER FINANCIAL/(SM)/ SERVICE
2. The CMA Master Financial/(SM)/ Service consists of: (1) a master account
("Master CMA Account") established with the full CMA Service as described above
and (2) one or more related CMA SubAccounts established by or with the consent
of a Master CMA Accountholder. Each CMA SubAccount is entitled to partial CMA
service consisting of: (1) a Securities Account, which is either a cash account
or, with the Investor CreditLine Service, a margin account, (2) a choice of
Money Accounts and (3) optional CMA services to the extent eligible. A CMA
SubAccount is not eligible for a Card/Check Account.
CMA SUBACCOUNT/(SM)/ AUTHORIZATIONS
3. By signing the CMA SubAccount Application and Agreement form, each CMA
SubAccountholder designates the Master CMA Accountholder as his or her agent for
the purpose of receiving monthly CMA account statements and any notices or other
communications and authorizes MLPF&S to mail them to the address designated by
the Master CMA Accountholder from time to time. If applicable, each CMA
SubAccountholder also authorizes MLPF&S (subject to account eligibility
requirements) to accept telephonic instructions from the Master CMA
Accountholder for the transfer of funds through the CMA Funds Transfer Service
to such CMA SubAccount from the Master CMA Account and/or from such CMA
SubAccount to the Master CMA Account, as selected in the CMA SubAccount
Application and Agreement form. In the event any erroneous transfers are made,
the Master CMA Accountholder and the CMA SubAccountholder authorize MLPF&S to
initiate appropriate corrections. The foregoing authorizations shall remain in
full force and effect until written notice of revocation is delivered to MLPF&S,
after which the CMA SubAccount shall remain subject to the terms of this
Agreement to the extent it receives the CMA Service in accordance with the
policies of MLPF&S.
AGREEMENT REGARDING CASH, MONEY ACCOUNT BALANCES AND OTHER ASSETS AND FEES
4. Available free credit balances in my Securities Account will automatically be
invested or deposited at least once a week into the Money Account that I have
designated as my Primary Money Account. I understand that you may reasonably
withhold access to my Money Account balances until you are satisfied that checks
credited to my Securities Account have been collected. You may satisfy amounts
that I owe in connection with my CMA Service account (such as debit balances in
the Securities Account, amounts owing in my Card/Check Account, or investments
or deposits made for me that are later reversed), from the assets in my Money
Accounts (including funds obtained by redeeming Money Funds shares) or from my
Securities Account (including, if applicable, by making loans to me). Certain
fees, including an annual fee, which are subject to change, will be charged to
my account for the financial services provided to me.
REPRESENTATIONS, ADDITIONAL TERMS AND AMENDMENTS
5. I have received a copy of the Money Funds' prospectuses, the insured Savings
Account Fact Sheet and the Cash Management Account Program Description. These
documents shall be referred to In this Agreement as the "Documents." The
Documents contain additional terms governing the CMA Service. I agree that these
Documents are incorporated into this Agreement as though they were fully set out
in this Agreement. Subject to applicable law, you and the Banks also have the
right to amend the Documents by so notifying me in writing. Unless the context
otherwise requires, the term "Agreement" shall include the Documents, as amended
from time to time.
I agree that you and the Banks shall have the right to amend this Agreement, by
modifying or rescinding any of its existing provisions or by adding any new
provision, at any time by sending notice of the amendment to me. Any such
amendment shall be effective as of a date to be established by you and the
Banks, subject to applicable law.
I understand there may be additional documentation required by applicable law or
the policies and procedures of MLPF&S or the Banks. I agree to promptly comply
with any such requests for additional documents.
HEADINGS ARE DESCRIPTIVE
6. The heading of each provision of this Agreement is for descriptive purposes
only and shall not be deemed to modify or qualify any of the rights or
obligations set forth in each such provision
JOINT ACCOUNTS AND JOINT AND SEVERAL LIABILITY
7. If more than one person signs this Agreement, each person shall be an
accountholder and their obligations under this Agreement shall be joint and
several. The legal ownership of the account shall be in such form as the
accountholders shall designate in the Application and Agreement form and as
reflected in the account title. In the event no designation is made, MLPF&S is
authorized to deal with the accountholders as tenants in common (without right
of survivorship).
Notwithstanding the choice of law provisions of Paragraph 11, which shall govern
the contractual obligations of the parties under this Agreement, the legal
ownership of the account shall be governed by and interpreted under the internal
laws of the state of permanent residence of accountholders who are U.S.
citizens. Non-resident aliens agree that the form of joint ownership designated
for the account shall be governed (notwithstanding the laws of any other
jurisdiction to the contrary) by the internal laws of the State of New York and,
for purposes of determining all matters with regard to the account, agree to
submit to the jurisdiction of the courts of New York and the Federal Courts in
the Southern District of New York and consent to service of process by certified
mail to the account's address of record.
All accountholders agree that each accountholder has authority to transact any
business on behalf of the account as fully and completely as if each
accountholder were the sole owner of the account. Subject to MLPF&S policies,
MLPF&S may accept orders and instructions, written or oral, with respect to the
account from each accountholder, without notice to any other accountholder, for
the receipt, transfer and withdrawal of funds by check, wire transfer or
otherwise and for the purchase, sale, exchange, transfer or other disposition of
securities and other property (including margin transactions and short sales if
the accountholders have selected the Investor CreditLine service). All
accountholders further agree that all securities and other property that MLPF&S
may be holding for any of them, either in this account or otherwise, shall be
subject to a lien for the discharge of the obligations of this account to
MLPF&S, such lien to be in addition to any rights and remedies MLPF&S may
otherwise have.
In the event of the death of an accountholder, divorce of married
accountholders, assignment of an accountholder's interest or other event that
causes a change in ownership of the account, all accountholders or the surviving
accountholder(s) as the case may be shall immediately give MLPF&S written notice
thereof, and MLPF&S may, in such event, take such action, including requiring
such documents or imposing such restrictions on the account, as MLPF&S may deem
necessary in the circumstances. The estate of a deceased accountholder and a
departing accountholder by assignment or divorce shall remain liable, jointly
and severally, with the remaining or surviving accountholder(s), for any
obligations of the account arising before MLPF&S receives such notice, or
incurred in liquidation of the account or the adjustment of the interests of the
accountholders.
In the event of any such change in ownership of the account, MLPF&S is
authorized to divide or retitle the account in accordance with the form of legal
ownership of the account as reflected on the records of MLPF&S, or by written
instructions of the remaining or surviving accountholder(s), or by obtaining a
court order, as MLPF&S may reasonably determine is appropriate in the
circumstances. Unless agreed otherwise among the accountholders in a writing
provided to MLPF&S joint accounts designated "with right of survivorship" (e.g.,
JTWROS) shall vest the interest of a deceased accountholder In the surviving
accountholder(s) and accounts designated "without right of survivorship" (e.g.,
TIC) shall entitle the estate of a deceased accountholder and the surviving
accountholder(s) to equal shares of the account. All accountholders agree to
indemnify MLPF&S against any liability, loss or expense incurred from acting in
accordance with this Agreement in the event of a change in ownership of the
account.
All statements, notices or other communications sent or given to one
accountholder by MLPF&S shall be considered notice to all accountholders. In the
event MLPF&S receives inconsistent instructions from two or more accountholders,
reasonably believes instructions received from one accountholder are not
mutually agreeable to all accountholders, or receives a court order with respect
to the account, MLPF&S may, but is not obligated to, restrict activity in the
account, require that all instructions be in writing signed by all
accountholders, suspend or terminate the CMA Service and/or file an interpleader
action in an appropriate court at the expense of the accountholders.
TERMINATION OF THE CMA SERVICE
8. The Banks, you or I may terminate my subscription to the CMA Service,
including the use of my Checks or Cards, if applicable, at any time. I shall
remain responsible for authorized charges which arise before or after
termination.
If my subscription is terminated, you may redeem all my Money Fund shares and,
unless I advise you otherwise, withdraw all my Money Account deposit balances.
Also, I shall promptly return all unused Checks and any Cards to you or the
Banks. My failure to do so may result in a delay in your complying with my
instructions regarding the disposition of my assets with you.
CREDIT INFORMATION
9. I authorize you, each of your affiliates, and the Banks, to request a
consumer report about me from one or more consumer reporting agencies for the
purposes of considering my subscription to the CMA Service, reviewing or
collecting any account opened for me, or for any other legitimate business
purpose. Upon my request, you will inform me of the name and address of each
consumer reporting agency from which you obtained a consumer report, if any, in
connection with my subscription or accounts. I also authorize you, each of your
affiliates, and the Banks to share any information you may have or obtain about
me for any legitimate business purpose.
AGREEMENT TO ARBITRATE CONTROVERSIES WITH MLPF&S
10. . Arbitration is final and binding on the parties.
. The parties are waiving their right to seek remedies in court, including
the right to jury trial.
. Pre-arbitration discovery is generally more limited than and different
from court proceedings.
. The arbitrators' award is not required to include factual findings or
legal reasoning and any party's right to appeal or to seek modification of
rulings by the arbitrators is strictly limited.
. The panel of arbitrators will typically include a minority of arbitrators
who were or are affiliated with the securities industry.
I agree that all controversies which may arise between us, including but not
limited to those involving any transaction or the construction, performance, or
breach of this or any other agreement between us, whether entered into prior, on
or subsequent to the date hereof, shall be determined by arbitration. Any
arbitration under this Agreement shall be conducted only before the New York
Stock Exchange, Inc., the American Stock Exchange, Inc., or an arbitration
facility provided by any other exchange, the National Association of Securities
Dealers, Inc., or the Municipal Securities Rulemaking Board, and in accordance
with its arbitration rules then in force. I may elect in the first instance
whether arbitration shall be conducted before the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc., other exchanges, the National Association of
Securities Dealers, Inc., or the Municipal Securities Rulemaking Board, but if I
fail to make such election, by registered letter or telegram addressed to you at
the office where I maintain my account, before the expiration of five days after
receipt of a written request from you to make such election, then you may make
such election. Judgment upon the award of the arbitrators may be entered in any
court, state or federal, having jurisdiction.
No person shall bring a putative or certified class action to arbitration, nor
seek to enforce any predispute arbitration agreement against any person who has
initiated in court a putative class action; or who is a member of a putative
class who has not opted out of the class with respect to any claims encompassed
by the putative class action until: (i) the class certification is denied; (ii)
the class is decertified; or (iii) the customer is excluded from the class by
the court. Such forbearance to enforce an agreement to arbitrate shall not
constitute a waiver of any rights under this Agreement to the extent stated
herein.
CLIENT COPY
RETAIN FOR YOUR RECORDS
DO NOT RETURN TO MERRILL LYNCH
Code #16453-0195
<PAGE>
CASH MANAGEMENT ACCOUNT/(R)/ AGREEMENT
- --------------------------------------------------------------------------------
APPLICABLE LAWS
11. This Agreement, with respect to all portions of the CMA Service, including
interest charges on loans you may make to me, will be governed by and
interpreted under the laws of the State of New York. The terms of my agreement
with MLB&T are governed by federal and New Jersey law. The terms of my agreement
with MLNF are governed by federal and Utah law. The terms of my agreement with
CHASE, including those relating to finance charges on overdrafts, are governed
by federal and New York law. The terms of my agreement with BANK ONE are
governed by Ohio law.
PRESUMPTION OF RECEIPT OF COMMUNICATIONS
12. Communications may be sent to me at my address or at such other address as I
give you in writing. All communications so sent, whether by mail, telegraph,
messenger or otherwise, will be considered to have been given to me personally
upon such sending, whether or not I actually receive them.
EXTRAORDINARY EVENTS
13. I agree that you and the Banks shall not be liable for loss caused directly
or indirectly by government restrictions, exchange or market rulings, suspension
of trading, war, strikes or other conditions beyond your and the Banks' control.
SEPARABILITY
14. If any provision of this Agreement is held to be invalid, illegal, void or
unenforceable, by reason of any law, rule, administrative order or judicial
decision, such determination will not affect the validity of the remaining
provisions of this Agreement.
LIABILITY FOR COSTS OF COLLECTION
15. To the extent permitted by the laws of the State of New York, I agree to pay
you the reasonable costs and expenses of collection including attorneys' fees,
for any debit balance and any unpaid deficiency, that I owe.
APPLICABLE RULES AND REGULATIONS
16. All transactions in my Securities Account shall be subject to the
constitution, rules, regulations, customs and usages of the exchange or market
and its clearing house, if any, on which such transactions are executed by you
or your agents, including your subsidiaries and affiliates.
PARAGRAPHS 17 THROUGH 25 BELOW APPLY ONLY IF I REQUEST THAT MY SECURITIES
ACCOUNT BE ESTABLISHED WITH THE INVESTOR CREDITLINE/(SM)/ SERVICE.
COLLATERAL REQUIREMENTS AND CREDIT CHARGES
17. I will maintain such securities and other property in my accounts as you
shall require from time to time. In accordance with your usual custom, the
monthly debit balance of such accounts shall be charged interest at a rate
permitted by the laws of the State of New York. Unless I pay the interest
charged to my Securities Account at the close of a charge period, it will be
added to the opening balance for the next charge period. Interest will then be
charged upon the entire opening balance of that next charge period which will,
therefore, include any such unpaid interest from the previous charge period.
CALLS FOR ADDITIONAL COLLATERAL-LIQUIDATION RIGHTS
18. a. You shall have the right to require additional collateral:
(1) in accordance with your general policies regarding your maintenance
requirements for the Investor CreditLine service, as such may be modified,
amended or supplemented from time to time; or
(2) if in your discretion you consider it necessary for your protection at
an earlier or later point in time than called for by said general policies;
or
(3) in the event that a petition in bankruptcy or for appointment of a
receiver is filed by or against me; or
(4) if an attachment is levied against my accounts; or
(5) in the event of my death.
b. If I do not provide you with additional collateral as you may require in
accordance with (a)(1) or (2), or should an event described in (a)(3), (4) or
(5) occur (whether or not you elect to require additional collateral), you shall
have the right:
(1) to sell any or all securities and other property in my accounts with you
or with any of your affiliates, whether carried individually or jointly with
others;
(2) to buy any or all securities and other property which may be short in
such accounts; and
(3) to cancel any open orders and to close any or all outstanding contracts.
You may exercise any or all of your rights under (b)(l), (2) and (3) without
further demand for additional collateral, or notice of sale or purchase, or
other notice or advertisement. Any such sales or purchases may be made at your
discretion on any exchange or other market where such business is usually
transacted, or at public auction or private sale, and you may be the purchaser
for your own account. I understand that your giving of any prior demand or call
or prior notice of the time and place of such sale or purchase shall not be
considered a waiver of your right to sell or buy without any such demand, call
or notice as provided in this Agreement.
PURPOSE OF CREDIT
19. I understand and agree that any credit extended by you to me in connection
with my Securities Account is primarily for investment or business purposes.
REPRESENTATIONS AS TO BENEFICIAL OWNERSHIP AND CONTROL
20. I represent that, with respect to securities against which credit is or may
be extended by you: (a) I am not the beneficial owner of more than three percent
(3%) of the number of outstanding shares of any class of equity securities, and
(b) I do not control, am not controlled by and am not under common control with
the issuer of any such securities. In the event that any of the foregoing
representations is inaccurate or becomes inaccurate, I will promptly so advise
you in writing.
SECURITY INTEREST IN FAVOR OF MLPF&S
21. All securities and other property shall be subject to a lien for the
discharge of all my indebtedness and any other obligations that I may owe to
you, and are to be held by you as security for the payment of any such
obligations or indebtedness to you in any account you maintain for me, including
any accounts in which I may have an interest. You shall have the right to
transfer securities and other property so held by you from or to any other of
such accounts whenever in your judgment you consider such a transfer necessary
for your protection. In enforcing your lien, you shall have the discretion to
determine which securities and property are to be sold and which contracts are
to be closed.
PAYMENT OF INDEBTEDNESS UPON DEMAND
22. I shall at all times be liable for the payment upon demand of any debit
balance or other obligations owing in any of my accounts with you. I shall be
liable to you for any deficiency remaining in any such accounts in the event of
the liquidation thereof, in whole or in part, by you or by me. I will pay such
obligations and indebtedness upon demand.
PLEDGE OF SECURITIES AND OTHER PROPERTY
23. Within the limitations imposed by applicable laws, rules and regulations,
all securities and other property may be pledged and repledged by you from time
to time, without notice to me, either separately or in common with other such
securities and other property, for any amount due in my accounts, or for any
greater amount. You may do so without retaining in your possession or under your
control for delivery a like amount of similar securities or other property.
LENDING AGREEMENT
24. In return for your extension or maintenance of any credit in my account, I
acknowledge and agree that the securities in my account, together with all
attendant rights of ownership, may be lent to you or lent out to others to the
extent not prohibited by applicable laws, rules and regulations. In connection
with such securities loans, you may receive and retain certain benefits to which
I will not be entitled. I understand that, in certain circumstances such loans
could limit my ability to exercise voting rights in whole or part, with respect
to the securities lent.
REPRESENTATION AS TO CAPACITY TO ENTER INTO AGREEMENT
25. I represent that no one except the person(s) signing this Agreement has an
interest in my account or accounts with you. If a natural person, I represent
that I am of full age, am not an employee of any exchange, nor of any
corporation of which any exchange owns a majority of the capital stock, nor of a
member of any exchange, nor of a member firm or member corporation registered on
any exchange, nor of a bank, trust company, insurance company or any
corporation, firm or individual engaged in the business of dealing either as
broker or as principal in securities, bills of exchange, acceptances or other
forms of commercial paper. If any of the foregoing representations is inaccurate
or becomes inaccurate, I will promptly so advise you in writing.
PARAGRAPHS 26 THROUGH 34 BELOW DO NOT APPLY TO CMA SUBACCOUNTS.
PARAGRAPHS 26 THROUGH 31 BELOW APPLY ONLY WHEN THE CARD/CHECK ACCOUNT IS USED,
INCLUDING WHEN CHECKS AND/OR CARDS ARE OBTAINED.
CARD OWNERSHIP
26. I certify that all information I have provided in the CMA Application and
Agreement, including in the CMA Check and Visa Information Form, is true and
correct and that you and the Banks may rely on and verify such information.
The Card remains the property of the Issuer and may be canceled by the Issuer at
any time without prior notice.
LIABILITY
27. I will be liable for all authorized transactions arising through the use of
the Card(s), and checks in connection with my Card/Check Account. I will be
responsible, on a continuing basis, for the safekeeping of my Card(s) and Checks
and shall not permit unauthorized persons to have access to my Card(s) or
Checks. I will also be responsible for reviewing my CMA Monthly Statement in
order to discover and report to MLPF&S the possible unauthorized use of my
Card(s) and Checks. I agree to notify MLPF&S immediately if I believe or have
reason to believe that my Card(s) or Checks have been or may be used by an
unauthorized person. Unless limited by law, I will be responsible for any and
all losses and damages that arise from any breach of my undertakings to
safeguard my Card(s) and Checks, to review my CMA Monthly Statement for possible
unauthorized activity and to promptly report any unauthorized activity to
MLPF&S.
I also agree to pay the reasonable costs and expenses of collection of any
unpaid balance due, including any accrued finance charges, as a result of any
overdraft(s), including but not limited to attorneys' fees, to the extent
allowed by law, involved in such collection. I understand that the Banks have
not taken a security interest in any of the assets in my Securities Account or
Money Accounts pursuant to this Agreement.
PURCHASING POWER
28. I agree that I will not incur charges to my Card/Check Account in excess of
my Purchasing Power. The Purchasing Power for my Card/Check Account will be the
total of any available free credit balance in my Securities Account, the
available balances in my Money Accounts, and, if applicable, the available loan
value of my securities in my Securities Account. I understand that my Purchasing
Power may fluctuate from day to day.
TRANSACTIONS EXCEEDING PURCHASING POWER
29. I understand that I will be in default if I incur charges in my Card/Check
Account that exceed my Purchasing Power. If I am in default, you may, among
other things terminate my subscription to the CMA Service. If I exceed my
Purchasing Power, CHASE may accept the transaction amount exceeding my
Purchasing Power as an overdraft and advance funds to you or the Banks in the
amount exceeding my Purchasing Power. If CHASE does so, I will be notified and I
agree that I will immediately pay CHASE the amount of the overdraft and any
applicable finance charge which is computed as described in this section.
In each overdraft statement cycle, finance charges are figured by applying a
Daily Periodic Rate to the Average Daily Balance of overdrafts and by
multiplying the resulting figure by the number of days in that statement cycle.
The Average Daily Balance of overdrafts is calculated each day by starting with
the beginning balance of amounts I owe, adding any new overdrafts and
subtracting any payments or credits received that day and unpaid finance
charges. This gives CHASE the daily balance of overdrafts. The Average Daily
Balance is calculated by adding all of the daily balances of overdrafts In that
statement cycle and dividing the total by the number of days in the overdraft
statement cycle. The Daily Periodic Rate that is applied is disclosed in the
Cash Management Account Program Description and is subject to change upon
notice. Finance charges accrue from the date CHASE accepts an overdraft until
the date payment is made.
Any payments that I make will be applied, as of the date of receipt by CHASE,
first to any accrued and unpaid finance charges and then to the balance of
overdrafts in the order in which they were incurred.
OVERDRAFT NOTICES
30. If CHASE extends an overdraft to me, I will be notified in writing. The
initial overdraft notice will inform me of the overdraft(s), which is due and
payable by me immediately, together with any accrued finance charges. Subsequent
overdraft notices from CHASE will detail among other disclosures, any
overdraft(s) plus finance charges imposed on such overdraft(s), payments and
credits and the balance due.
ACCOUNT INQUIRIES
31. I understand that inquiries and error allegations concerning my Card/Check
Account, any overdraft notices and my monthly statement should be directed
through MLPF&S.
PARAGRAPHS 32 THROUGH 34 BELOW APPLY ONLY IF I SUBSCRIBE TO THE CMA VISA/(R)/
GOLD PROGRAM.
AGREEMENT TO THE CMA VISA GOLD PROGRAM
32. In addition to the following paragraphs, I understand that paragraphs 1
through 16, 26 through 31 and, If my account is established with the Investor
CreditLine service, 17 through 25 also apply to the CMA Visa Gold Program.
In the event I am applying for the CMA Visa Gold Program but I am not approved
for participation in that program I apply for and authorize the Issuance of one
or more Classic Visa cards and checks for use with my CMA account. In addition,
if upon expiration of the Visa Gold Program Card(s) issued to me, I do not
qualify for reissue of such Card(s), I apply for and authorize the issuance of
Classic Visa Card(s) and Checks. If a Classic Visa Card(s) and Checks are issued
to me, I understand that this Agreement, with the exception of paragraphs 32
through 34 remain in full force and effect.
LIMITATIONS AND DIRECT DEBITING OF MY ACCOUNT
33. I agree to pay MLNF for the Card purchases posted to my Card/Check Account.
I authorize MLPF&S to pay MLNF from the assets in my Money Accounts (including
by redeeming Money Fund shares or withdrawing ISA account balances, if any),
and/or from my Securities Account (including, if applicable, by making loans to
me). On my behalf, MLPF&S will pay MLNF, pursuant to the terms of this Agreement
and the Documents, on the fourth Wednesday of each month for all Card purchases
posted to my Card/Check Account for that monthly period. However, if MLNF has
not received and accepted my signed Statement of Purpose form (Federal Reserve
Form FR U-l), I understand that the entire amount of the charges posted to my
Card/Check account will be debited from my account once the sum of my Visa card
purchases exceeds $100,000 in any monthly cycle. In addition, any subsequent
charges not exceeding $100,000 posted to my Card/Check account during the same
monthly cycle will be paid by direct debit to my account on the fourth Wednesday
of the month. I acknowledge that I have the right under applicable federal law
to receive advance notice of the varying amounts of the debit described above
but waive my right to do so, as long as the amount does not exceed five hundred
thousand dollars. If I choose, I may elect to have this payment made by another
means which is not otherwise incompatible with MLPF&S' operations. If I choose
to have this payment made by such other means, I will notify MLPF&S in writing
of my desire to do so.
AGREEMENT NOT TO DISPOSE OF ASSETS
34. By subscribing to the CMA Visa Gold Program, I agree that I will not dispose
of my assets in my CMA Service account or any other account I may have with
either MLPF&S or MLNF, if such disposal will negatively affect my ability to pay
MLNF for Card transactions. However, I may continue to trade securities in my
Securities Account.
CODE #16453-0195
<PAGE>
EXHIBIT 99.15
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN
OF
CMA [STATE] MUNICIPAL MONEY FUND
OF CMA MULTI-STATE MUNICIPAL SERIES TRUST
PURSUANT TO RULE 12b-1
WHEREAS, CMA Multi-State Municipal Series Trust (the "Trust") is a no-
load, open-end investment company registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"); and
WHEREAS, the Trustees of the Trust are authorized to establish
separate series relating to separate portfolios of securities, each of which
will offer a separate class of shares; and
WHEREAS, the Trustees have established and designated the CMA [State]
Municipal Money Fund (the "Fund") as a series of the Trust which operates as a
money market fund; and
WHEREAS, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S")
is a securities firm engaged in the business of selling shares of investment
companies to investors; and
WHEREAS, MLPF&S acts as the exclusive distributor and representative
of the Trust in the offer and sale of shares of the Fund pursuant to a
Distribution Agreement dated , 199 (the "Distribution Agreement");
and
WHEREAS, substantially all of the shareholders of the Fund are
participants in the Cash Management Account program (the "CMA program") of
MLPF&S and other investors whose Fund accounts are serviced by MLPF&S financial
consultants (collectively such counts being referred to herein as the "MLPF&S
Fund Accounts"; the term "MLPF&S Fund Accounts" does not include those accounts
<PAGE>
maintained directly with the Fund's Transfer Agent which are not serviced by
MLPF&S financial consultants); and
WHEREAS, MLPF&S financial consultants and other personnel offer and
sell shares to existing and prospective shareholders with MLPF&S Fund Accounts
and provide shareholder services to existing and prospective MLPF&S Fund
Accounts; and
WHEREAS, the Trust desires to adopt a Distribution and Shareholder
Servicing Plan for the Fund pursuant to Rule 12b-1 under the Investment Company
Act; and
WHEREAS, the Trustees of the Trust have determined that there is a
reasonable likelihood that adoption of this Distribution and Shareholder
Servicing Plan will benefit the Trust and the Fund's shareholders:
NOW, THEREFORE, the Trust hereby adopts this Distribution and
Shareholder Servicing Plan (the "Plan") in accordance with Rule 12b-1 under the
Investment Company Act on the following terms and conditions:
1. The Trust is hereby authorized to pay MLPF&S a distribution fee
under the Distribution Agreement at the end of each month at the annual rate of
0.125% of the average daily net asset value of the MLPF&S Fund Accounts. The
fee is not payable with respect to the asset value of shareholders who maintain
their accounts directly with the Fund's Transfer Agent and whose accounts are
not serviced by MLPF&S financial consultants. MLP&S is obligated to expend the
entire amount of the distribution fee for compensation to MLPF&S financial
consultants and other
2
<PAGE>
directly involved branch office personnel for selling shares of the Fund to
shareholders with MLPF&S Fund Accounts and for providing direct personal
services to such shareholders, including furnishing information as to the status
of Fund accounts and handling purchase and redemption orders for Fund shares.
The distribution fee may not be used to pay for other expenditures of MLPF&S
such as sales contests, special seminars and media advertising relating to the
Trust or the Fund. The distribution fee is not compensation for the
administrative and operational services rendered to the Trust by MLPF&S in
processing share orders and administering shareholder accounts.
2. MLPF&S shall provide the Trust for review by the Trustees, and the
Trustees shall review at least quarterly, a written report complying with the
requirements of Rule 12b-1 regarding the disbursement of the distribution fee of
the Fund during such period. The report shall include an itemization of the
distribution expenses incurred by MLPF&S in respect of the Fund, the purpose of
such expenditures and a description of the benefits derived by the Fund
therefrom.
3. In the event that the aggregate payments received by MLPF&S under
the Distribution Agreement in any fiscal year of the Trust shall exceed the
amount of the distribution expenditures of MLPF&S in respect of the Fund in such
fiscal year, MLPF&S shall be required to reimburse the Trust the amount of such
excess.
4. This Plan shall not take effect until it has been approved by a
vote of at least a majority, as defined in the
3
<PAGE>
Investment Company Act, of the outstanding voting securities of the Fund.
5. This Plan shall not take effect until it has been approved,
together with any related agreements, by votes of a majority of both (a) the
Trustees of the Trust and (b) those Trustees of the Trust who are not
"interested persons" of the Trust, as defined in the Investment Company Act, and
have no direct or indirect financial interest in the operation of this Plan or
any agreements related to it (the "Rule 12b-1 Trustees"), cast in person at a
meeting or meetings called for the purpose of voting on this Plan and such
related agreements.
6. This Plan, if approved pursuant to Paragraphs 4 and 5 hereof,
shall take effect on the first day of the month following approval of the Plan
pursuant to Paragraph 4 hereof.
7. This Plan shall continue in effect for so long as such continuance
is specifically approved at least annually in the manner provided for approval
of this Plan in Paragraph 5.
8. This Plan may be terminated at any time by vote of a majority of
the Rule 12b-1 Trustees, or by vote of a majority of the outstanding voting
securities of the Fund.
9. This Plan may not be amended to increase materially the rate of
distribution payments provided for in Paragraph 1 hereof unless such amendment
is approved in the manner provided for initial approval in Paragraphs 4 and 5
hereof, and no material amendment to the Plan shall be made unless approved in
the manner provided for approval and annual renewal in Paragraph 5 hereof.
4
<PAGE>
10. While this Plan is in effect, the selection and nomination of
Trustees who are not interested persons, as defined in the Investment Company
Act, of the Trust shall be committed to the discretion of the Trustees who are
not interested persons.
11. The Trust shall preserve copies of this Plan and any related
agreements and all reports made pursuant to Paragraph 2 hereof, for a period of
not less than six years from the date of this Plan or the date of the agreements
or such report, as the case may be, the first two years in an easily accessible
place.
12. The Declaration of Trust establishing CMA Multi-State Municipal
Series Trust, dated February 6, 1987, a copy of which, together with all
amendments thereto (the "Declaration"), is on file in the office of the
Secretary of the Commonwealth of Massachusetts, provides that the name of the
Trust, "CMA Multi-State Municipal Series Trust," refers to the Trustees under
the Declaration collectively as Trustees, but not as individuals or personally;
and no Trustee, shareholder, officer, employee or agent of CMA Multi-State
Municipal Series Trust shall be held to any personal liability, nor shall resort
be had to their private property for the satisfaction of any obligation or claim
of said CMA Multi-State Municipal Series Trust, but the Trust Property only
shall be liable.
5
<PAGE>
IN WITNESS WHEREOF, the Trust has executed this Distribution and
Shareholder Servicing Plan as of this th day of , 199 .
CMA MULTI-STATE
MUNICIPAL SERIES TRUST
By
---------------------
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
By
---------------------
6
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<PAGE>
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-START> APR-01-1994
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 218653090
<INVESTMENTS-AT-VALUE> 218653090
<RECEIVABLES> 1577163
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .73
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EXHIBIT 99.1(c)
CMA MULTI-STATE MUNICIPAL SERIES TRUST
Establishment and Designation
CMA Michigan Municipal Money Fund
The undersigned, being all of the Trustees of CMA Multi-
State Municipal Series Trust, a Massachusetts business trust (the
"Trust"), acting pursuant to Section 6.2 of the Declaration of
Trust, as amended, dated February 6, 1987 (the "Declaration"), of
the Trust, do hereby divide the shares of beneficial interest of
the Trust, par value $.10 per share ("Shares"), to create
separate Series, within the meaning of said Section 6.2, as
follows:
1. The Series is designated the "CMA Michigan Municipal
Money Fund" (referred to herein as the "Fund").
2. Shares of the Fund shall be entitled to all of the
rights and preferences accorded to Shares under the
Declaration.
3. The purchase price of Shares of the Fund, the method of
determination of net asset value of the Fund, the
price, terms and manner of redemption of Shares of the
Fund, and the relative dividend rights of holders of
Shares of the Fund shall be established by the Trustees
of the Trust in accordance with the provisions of the
Declaration and shall be set forth in the currently
effective prospectus and statement of additional
information relating to shares of the Fund, as amended
from time to time, under the Securities Act of 1933, as
amended.
<PAGE>
IN WITNESS WHEREOF, the undersigned have signed this
instrument in duplicate original counterparts and have caused a
duplicate original to be lodged among the records of the Trust
this 26th day of March, 1991.
/s/ Arthur Zeikel /s/ Howard 0. Colgan, Jr.
----------------------------- -----------------------------
Arthur Zeikel Howard 0. Colgan, Jr.
279 Watchung Fork 650 Beach Road, Apt. 245
Westfield, New Jersey 07090 Vero Beach, Florida 32960
/s/ Ronald W. Forbes /s/ Richard R. West
----------------------------- -----------------------------
Ronald W. Forbes Richard R. West
1400 Washington Avenue 100 Trinity Place
Albany, New York 12222 New York, New York 10006
/s/ Thomas H. Lenagh /s/ Charles C. Reilly
----------------------------- -----------------------------
Thomas H. Lenagh Charles C. Reilly
Greenwich Office Park, OP-6 9 Hampton Harbor Road
Greenwich, Connecticut 06830 Hampton Bays, New York 11946
/s/ Marc A. White
-----------------------------
Marc A. White
1050 Highland Road
Ithaca, New York 14850
The Declaration of Trust establishing CMA Multi-State
Municipal Series Trust, dated February 6, 1987, a copy of which,
together with all amendments thereto (the "Declaration"), is on
file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name of the Trust, "CMA Multi-
State Municipal Series Trust," refers to the Trustees under the
Declaration collectively as Trustees but not as individuals or
personally; and no Trustee, shareholder, officer, employee or
agent of CMA Multi-State Municipal Series Trust shall be held to
any personal liability, nor shall resort be had to their private
property for the satisfaction of any obligation or claim or
otherwise in connection with the affairs of said Trust but the
"Trust Property" only shall be liable.
- 2 -
<PAGE>
EXHIBIT 99.10
BROWN & WOOD
ONE WORLD TRADE CENTER
NEW YORK, NEW YORK 10048-0557
TELEPHONE: (212) 839-5300
FACSIMILE: (212) 839-5599
July 27, 1995
CMA Michigan Municipal Money Fund of
CMA Multi-State Municipal Series Trust
P.O. Box 9011
Princeton, New Jersey 08543-9011
Dear Sirs:
This opinion is furnished in connection with the registration by CMA Multi-
State Municipal Series Trust, a Massachusetts business trust (the "Trust"), of
22,182,355 shares of beneficial interest, par value $0.10 per share (the
"Shares"), of CMA Michigan Municipal Money Fund, a series of the Trust, under
the Securities Act of 1933 pursuant to a registration statement on Form N-1A
(File No. 33-38834), as amended (the "Registration Statement").
As counsel for the Trust, we are familiar with the proceedings taken by it
in connection with the authorization, issuance and sale of the Shares. In
addition, we have examined and are familiar with the Declaration of Trust of the
Trust, as amended, the By-Laws of the Trust and such other documents as we have
deemed relevant to the matters referred to in this opinion.
<PAGE>
Based upon the foregoing, we are of the opinion that the Shares, upon
issuance and sale in the manner referred to in the Registration Statement for
consideration not less than the par value thereof, will be legally issued, fully
paid and non-assessable shares of beneficial interest.
In rendering this opinion, we have relied as to matters of Massachusetts
law upon an opinion of Bingham, Dana & Gould rendered to the Trust.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the Prospectus and
Statement of Additional Information constituting parts thereof.
Very truly yours,
/s/ BROWN & WOOD
2
<PAGE>
EXHIBIT 99.11
INDEPENDENT AUDITORS' CONSENT
CMA Michigan Municipal Money Fund of
CMA Multi-State Municipal Series Trust
We consent to the use in Post-Effective Amendment No. 5 to Registration
Statement No. 33-38834 of our report dated April 28, 1995 appearing in the
Statement of Additional Information, which is a part of such Registration
Statement, and to the reference to us under the caption "Financial Highlights"
appearing in the Prospectus, which also is a part of such Registration
Statement.
DELOITTE & TOUCHE LLP
Princeton, New Jersey
July 27, 1995
<PAGE>
EXHIBIT 99.13
CERTIFICATE OF SOLE SHAREHOLDER
Fund Asset Management, Inc., the holder of 10,000 shares of
beneficial interest, par value $0.10 per share, of CMA
Michigan Municipal Money Fund (the "Fund"), a series of CMA
Multi-State Municipal Series Trust, a Massachusetts business
trust, (the "Trust"), does hereby confirm to the Trust its
representation that it purchased such shares for investment
purposes, with no present intention of redeeming or reselling any
portion hereof, and does further agree that if its redeems any
portion of such shares prior to the amortization of the Fund's
organizational expenses, the proceeds thereof will be reduced by
the proportionate amount of the unamortized organizational
expenses which the number of shares being redeemed bears to the
number of shares initially purchased.
FUND ASSET MANAGEMENT, INC.
By /s/ Arthur Zeikel
----------------------------
President
Dated: March 28, 1991
<PAGE>
EXHIBIT 99.16(a)
CMA MICHIGAN MUNICIPAL MONEY FUND
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
AS OF JULY 31, 1991
Base Period Return
------------------
<TABLE>
<CAPTION>
Including Excluding
gains and losses gains and losses
---------------- ----------------
<S> <C> <C>
Not Income of one share for a
seven-day base period .000771
Divided by
Not asset value of one share at
beginning of base period $1.00 $1.00
Equals
Base period return (unannualized) .000771
Annualized Return
-----------------
Base period return (unannualized) .000771
Divided by 7
Multiplied by 365
Equals .000110
Annualized return 4.02%
Effective or Compounded Yield
-----------------------------
Base period return (unannualized)* .000771
Divided by 7 .000110
Add
1
Equals 1.000110
Sum raised to 365th power 1.040965
---
Subtract
1 .040965
Equals
Effective or Compounded Yield 4.10%
</TABLE>
- ----------
* Calculated using base period return (unannualized) excluding gains
and losses.
<PAGE>
EXHIBIT 99.16(b)
<TABLE>
<CAPTION>
CMA Michigan
- ------------
30 Day Yield
6/1/95-6/30/95
--------------
<S> <C> <C>
Initial Investment...................... $ 10,000.00
Divided by Net Asset Value.............. 1.00
-----------
Equals Shares Purchased................. 10,000.00
Plus Shares Acquired through
Dividend Reinvestment................. 26.27
-----------
Equals Shares Held at 6/30/95........... 10,026.27
Multiplied by Net Asset Value at 6/30/95 1.00
-----------
Equals Ending Redeemable Value at
$1000 Investment (ERV) at 6/30/95..... 10,026.27
Divided by 10,000 (P)................... 1.002627
Subtract 1.............................. .002627
Annualize............................... 365/30
-----------
Expressed as a percentage equals the
yield for the Period.................. 3.20%
===========
Tax Rate................................ .28%
Minus 1................................. 1.00
----------
Divide.................................. .72%
----------
Tax Equivalent Rate..................... 4.44%
==========
</TABLE>
